UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4984
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: December 31, 2007
ITEM 1. REPORT TO STOCKHOLDERS.
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON FUNDS(SM) LOGO)
ANNUAL REPORT
(GRAPHIC)
December 31, 2007
S&P 500 INDEX FUND
SMALL CAP INDEX FUND
INTERNATIONAL EQUITY INDEX 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
Performance Overviews ............................................. 3
American Beacon Funds
Statements of Assets and Liabilities ........................... 12
Statements of Operations ....................................... 13
Statements of Changes in Net Assets ............................ 14
Notes to Financial Statements .................................. 15
Financial Highlights ........................................... 22
State Street Equity 500 Index Portfolio
Portfolio of Investments ....................................... 31
Statements of Assets and Liabilities ........................... 38
Statement of Operations ........................................ 39
Statements of Changes in Net Assets ............................ 40
Financial Highlights ........................................... 41
Notes to Financial Statements .................................. 42
Master Small Cap Index Series
Summary Schedule of Investments ................................ 50
Statement of Assets and Liabilities ............................ 56
Statement of Operations ........................................ 57
Statements of Changes in Net Assets ............................ 58
Financial Highlights ........................................... 59
Notes to Financial Statements .................................. 60
Master International Index Series
Summary Schedule of Investments ................................ 69
Statements of Assets and Liabilities ........................... 74
Statements of Operations ....................................... 75
Statements of Changes in Net Assets ............................ 76
Financial Highlights ........................................... 77
Notes to Financial Statements .................................. 78
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 December 31, 2007
(PHOTO OF DOUGLAS G. HERRING)
FELLOW SHAREHOLDERS,
I am pleased to present to you the American Beacon S&P 500, Small Cap and
International Equity Index Funds Annual Report for the twelve months ended
December 31, 2007. Please review the enclosed material carefully, as it includes
important information about the Funds.
After a number of years of steady returns, volatility returned to the
U.S. equity markets toward the end of the year. The change in the investment
environment was led by a crisis in the housing sector, due to several years of
lax lending standards, which then spilled over into the financial sector during
the summer months. Despite the increased volatility, the S&P 500 Index reported
a positive return of 5.49% for the year, while the MSCI EAFE Index delivered a
positive return of 11.17%. The Russell 2000(R) Index reported a negative return
of -1.56% for the same period.
The turmoil in the U.S. equity markets continued after the close of
the Funds' fiscal year and is likely to continue over the shorter term. Looking
forward, the American Beacon S&P 500, Small Cap and International Equity Index
Funds will continue to meet their objective of replicating the returns, before
expenses, of their corresponding Indices.
As always, we appreciate the opportunity to serve your financial
needs. To obtain further details about the American Beacon Funds family or to
access your account information, please visit our website at
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
DOMESTIC MARKET OVERVIEW
DECEMBER 31, 2007 (UNAUDITED)
The year of 2007 began with a slowdown in U.S. growth occurring following
Federal Reserve Board ("Fed") credit tightening, rising oil prices, and the
beginning of concerns around credit and slowing U.S. consumer spending. Earnings
growth remained strong on the back of strong export growth, a declining dollar
and share buybacks. A transition in leadership from small, value and domestic to
large, growth and multinational became evident as the year began. During the
second half of the year, the benign fundamentals of 2003-2006--namely strong
global growth, rising profitability levels and falling risk premiums--were
replaced by credit stress, pressures on the capital position of the financial
system, questions about the sustainability of the business cycle, and rising
energy and food prices. Reflecting these woes, market prices moved considerably.
U.S. Government bond yields plummeted, the dollar fell faster than in earlier
years, credit spreads widened and equities turned volatile. The financials and
consumer discretionary sectors experienced drops of one-quarter to one-third.
Commodity and industrial related multinational companies performed best.
In 2007, the Fed moved from an attitude of vigilance about inflation
to one of providing liquidity and lowering rates to shore up the functioning of
credit markets and fight economic weakness. During the year, the Fed lowered the
target federal funds rate by 100 basis points (1.00%), bringing the target rate
from 5.25% to 4.25%. In a statement issued following its meeting on December 11,
2007, the Federal Open Market Committee ("FOMC") noted: "Incoming information
suggests that economic growth is slowing, reflecting the intensification of the
housing correction and some softening in business and consumer spending.
Moreover, strains in financial markets have increased in recent weeks." The FOMC
also stated its opinion that the rate reduction "combined with the [monetary]
policy actions taken earlier, should help promote moderate growth over time." In
a cautionary note, however, the FOMC indicated that "[readings] on core
inflation have improved modestly this year, but elevated energy and commodity
prices, among other factors, may put upward pressure on inflation. In this
context, the Committee judges that some inflation risks remain, and it will
continue to monitor inflation developments carefully."
The most recent data from the U.S. Department of Labor's Bureau of
Labor Statistics indicated that the U.S. unemployment rate rose to 5.0% in
December after holding steady at 4.7% in each of the previous three months.
Non-farm payroll employment posted a small increase of 18,000 for the month, and
total employment, at 146.2 million, was down following an increase in November.
Job declines in manufacturing and construction largely offset job growth in
several service industries.
The Consumer Price Index ("CPI") increased at a seasonally-adjusted
rate of 0.8% in November 2007, according to the Department of Labor, its largest
advance since a 1.2% rise in September 2005. The index for energy was up 5.7%,
led by a 9.5% rise in petroleum-based energy prices. The index for all items
less food and energy increased 0.3% in November, following advances of 0.2% in
each of the preceding five months. The overall CPI rose at an unadjusted rate of
2.3% over the previous 12 months.
The U.S. gross domestic product ("GDP") grew at an annualized rate of
4.9% in the third quarter of 2007 up significantly from the 3.8% annualized
growth rate for the second quarter of the year. According to the U.S. Department
of Commerce, the increase in real GDP during the quarter resulted from positive
contributions from exports, personal consumption expenditures, private inventory
investment, nonresidential structures, federal government spending, equipment
and software, and state and local government spending. A decrease in residential
fixed investment (purchases of private residential structures and residential
equipment that landlords rent to tenants) had a negative effect on the GDP.
Additionally, there was an increase in imports, which are a subtraction in the
calculation of the GDP.
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 2000 Index is a registered trademark of Frank Russell Company.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON S&P 500 INDEX FUND+
DECEMBER 31, 2007 (UNAUDITED)
For the twelve months ended December 31, 2007, the total return of the
Institutional Class of the American Beacon S&P 500 Index Fund was 5.39%,
slightly below the S&P 500 Index (the "Index") return of 5.49% and slightly in
excess of the Lipper S&P 500 Objective Funds Index return of 5.25%.
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 12/31/97 THROUGH 12/31/07
(PERFORMANCE GRAPH)
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 12/31/07
VALUE OF
$10,000
12/31/97-
1 YEAR 5 YEARS 10 YEARS 12/31/07
------ ------- -------- ---------
Institutional Class(1, 4) .. 5.39% 12.65% 5.76% $17,511
PlanAhead Class(1, 2, 4) ... 4.88% 12.12% 5.34% $16,817
Lipper S&P 500 Objective
Funds Index (3) ......... 5.25% 12.53% 5.62% $17,283
S&P 500 Index (3) .......... 5.49% 12.83% 5.91% $17,756
(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 12/31/97 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.
Eight of the ten economic sectors in the Index gained ground during
2007, with seven of the eight posting double-digit gains. Energy was far and
away the top sector, rising 34.2%, led by strong commodity prices and higher
company earnings. Materials stocks gained 22.5% during the year and Utilities
were the third strongest performing sector, rising 19.5%. Much like Energy
stocks, the Materials sector benefited from strong commodity prices and company
earnings. Utilities companies appeared to benefit from strong results and a
flight-to-safety in the second part of the year. Among the sectors with positive
performance, Health Care was the worst-performing, but it actually posted a nice
gain of 7.1%.
The top performing stocks for 2007 were National Oilwell Varco, up
140.1%, Amazon.com Inc., up 134.8%, and Apple, up 133.5%. National Oilwell Varco
benefited from improved margins and strong gains by Energy companies. Amazon.com
posted a very strong return, especially compared to its counterparts in the
Consumer Discretionary sector. Apple posted excellent results, boosted by i-Mac
sales and the strong introduction of i-Phone.
On the other end of the spectrum, Financial stocks were battered
during the year, falling 18.6%. These companies were hit hard by a crisis in the
credit markets, particularly in the area of sub-prime mortgages. Consumer
Discretionary stocks fell 13.3% as investors appeared to fear a recession in the
United States.
+ 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
PERFORMANCE OVERVIEW
AMERICAN BEACON S&P 500 INDEX FUND+
DECEMBER 31, 2007 (UNAUDITED)
Two of the bottom three performers came from Financials and both were
hard hit by the mortgage bond issues. E*trade, down 84.2%, experienced
significant losses from these bonds in its portfolio, while Countrywide (a large
mortgage originator), down 78.4%, struggled to keep afloat when its financing
came under pressure. The third worst performer was Circuit City Stores, down
77.5%, which experienced poor results during the year, causing some to question
the chain's long-term viability.
The investment manager continues to utilize a replication strategy,
owning all 500 names in the S&P 500 Index in approximately the same weightings
as the Index. Therefore, the Fund is expected to continue to meet its objective
of closely tracking, before expenses, the return of its benchmark, the S&P 500
Index.
TOP TEN HOLDINGS
% OF
EQUITIES*
---------
Exxon Mobil Corp. 4.0%
General Electric Co. 2.9%
Microsoft Corp. 2.2%
AT&T, Inc. 2.0%
Procter & Gamble Co. 1.8%
Chevron Corp. 1.5%
Johnson & Johnson 1.5%
Bank of America Corp. 1.4%
Apple, Inc. 1.3%
Cisco Systems, Inc. 1.3%
* Percent of the equities of State Street Equity 500 Index Portfolio
EQUITY SECTOR ALLOCATION
% OF
EQUITIES*
---------
Financials 17.6%
Information Technology 16.7%
Energy 12.9%
Health Care 12.0%
Industrials 11.5%
Consumer Staples 10.3%
Consumer Discretionary 8.5%
Telecommunication Services 3.6%
Utilities 3.6%
Materials 3.3%
* 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
PERFORMANCE OVERVIEW
AMERICAN BEACON SMALL CAP INDEX FUND(SM)
DECEMBER 31, 2007 (UNAUDITED)
For the twelve months ended December 31, 2007, the total return of the
Institutional Class of the American Beacon Small Cap Index Fund was (1.63%). The
Fund's performance slightly trailed the Russell 2000(R) Index return of (1.56%),
and lagged the Lipper Small-Cap Core Funds Index return of 1.92%.
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 7/31/00 THROUGH 12/31/07
(PERFORMANCE GRAPH)
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 12/31/07
VALUE OF
SINCE $10,000
INCEPTION 7/31/00
1 YEAR 5 YEARS (7/31/00) -12/31/07
------ ------- --------- ---------
Institutional
Class(1, 3).......... -1.63% 15.98% 7.09% $16,618
Lipper Small-Cap
Core Funds Index(2).. 1.92% 15.76% 8.47% $18,280
Russell 2000
Index(2)............. -1.56% 16.25% 7.27% $16,824
(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 comprised of 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.
Seven of the ten sectors in the Russell 2000 Index (the "Index")
recorded positive returns for the twelve-month period. The Materials sector was
the leading performer, advancing 26.0%, followed by Energy, up 14.4%, and Health
Care, which was up 13.4%. Conversely, the Financials, Consumer Discretionary and
Utilities sectors declined 19.5%, 14.8% and 0.1%, respectively.
The strongest performers among individual stocks in the Index during
the year included Onyx Pharmaceuticals, Inc., CF Industries Holdings, Inc., and
Terra Industries, Inc., which were up 425.7%, 330.0%, and 298.7%, respectively.
InPhonic, Inc., Delta Financial Corp., and American Home Mortgage Investment
Corp., a real estate investment trust recorded the lowest returns within the
Index for the year, down 99.8%, 99.7% and 99.5%, 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.
5
PERFORMANCE OVERVIEW
AMERICAN BEACON SMALL CAP INDEX FUND(SM)
DECEMBER 31, 2007 (UNAUDITED)
TOP TEN HOLDINGS
% OF
EQUITIES*
---------
Hologic, Inc. 0.7%
CF Industries Holdings, Inc. 0.5%
Exterran Holdings, Inc. 0.4%
Terra Industries, Inc. 0.4%
Priceline.com Inc. 0.3%
FLIR Systems, Inc. 0.3%
Chipotle Mexican Grille B 0.3%
Inverness Medical Innovations, Inc. 0.3%
Bucyrus International, Inc. (Cl A) 0.3%
Equinix, Inc. 0.3%
EQUITY SECTOR ALLOCATION
% OF
EQUITIES*
---------
Financials 18.8%
Information Technology 18.4%
Industrials 14.8%
Health Care 14.5%
Consumer Discretionary 13.6%
Energy 6.7%
Materials 5.6%
Utilities 3.1%
Consumer Staples 3.0%
Telecommunication Services 1.5%
* Percent of equity portion of Master Small Cap Index Series
6
INTERNATIONAL MARKET OVERVIEW
DECEMBER 31, 2007 (UNAUDITED)
In the Eurozone, consensus has grown more confident in its predictions
of a slowdown. While third quarter 2007 gross domestic product ("GDP") came in
at 2.8% annualized, December saw a continued deterioration of the major business
and consumer confidence surveys, and headline inflation took an alarming lurch
higher in recent months, with the year-on-year rate currently a full 100 basis
points (1%) above the 2% target. At the monthly European Central Bank meeting in
December, rates were left unchanged, as expected, at 4%. Earnings momentum in
the region finally began to fall, but might have further to go. Expectations for
earnings-per-share growth in 2007 hovered around 10%, with similar levels
anticipated for 2008. Restructuring remained positive, especially for some
previously out-of-favor sectors, such as telecommunication services.
In the U.K., GDP growth in the third quarter of 2007 remained over 3%,
clearly above the economy's long-term trend, with domestic and external demand
firm. Since that time, however, services and construction weakened, although the
Manufacturing sector held up better to date. The housing market and retail sales
growth both lost momentum. Additionally, the full impact of the tightening in
credit conditions was yet to be felt. Expectations were for additional signs of
weakness to become evident in the coming months, with growth slowing to below 2%
during 2008. In a unanimous vote, the Bank of England's Monetary Policy
Committee decided to cut rates to 5.5% at its December meeting, and the market
has priced in close to 50 basis points (0.50%) of further monetary easing for
2008. Profits growth in the U.K. slowed and faces significant headwinds ahead.
The consensus was for a modest outturn in earnings growth, down to only 5% for
2007. Much will depend on the global outlook, as more than 50% of U.K. profits
are derived from abroad.
In Japan, GDP growth in the year to the third quarter was 2%, somewhat
higher than the long-term trend; however, the economy remained very dependent on
exports. Personal consumption remained muted, capital spending growth slowed,
and residential investment temporarily collapsed in the wake of tighter planning
regulations. More recent data was mixed. Although small company business
confidence weakened sharply (most likely reflecting the construction downturn),
industrial output and business surveys sent somewhat stronger signals, despite
some moderation in export orders. Inflation rose sharply at the end of the year
to 0.6%, primarily reflecting higher food and energy prices. At its monetary
policy meeting held in December, the Bank of Japan decided to maintain the
target policy rate of approximately 0.50%. Corporate earnings growth over the
past year was close to zero. Expectations are for improvement in 2008, with
sell-side analysts projecting a rise of about 8%.
The U.S. dollar underperformed most major global currencies in 2007,
declining 1.7%, 9.8% and 6.2% versus the British pound, the euro and Japanese
yen, respectively.
7
PERFORMANCE OVERVIEW
AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM)
DECEMBER 31, 2007 (UNAUDITED)
For the twelve months ended December 31, 2007, the Institutional Class
of the American Beacon International Equity Index Fund posted a total return of
10.68%, lagging the MSCI EAFE Index (the "Index") return of 11.17% and below the
Lipper International Funds Index return of 14.25%.
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 7/31/00 THROUGH 12/31/07
(PERFORMANCE CHART)
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 12/31/07
SINCE VALUE OF
INCEPTION $10,000
1 YEAR 5 YEARS (7/31/00) 7/31/00-12/31/07
------ ------- --------- ----------------
Institutional Class(1, 3) ........... 10.68% 21.55% 6.72% $16,199
Lipper International Funds Index(2).. 14.25% 21.83% 7.54% $17,142
MSCI EAFE Index(2) .................. 11.17% 21.58% 6.91% $16,415
* 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.
Finland, Hong Kong and Germany, up 50.1%, 41.2% and 35.9%,
respectively, were the strongest-performing countries within the Index for the
year, while Ireland, Japan and Belgium, down 19.6%, 4.1% and 2.7%, respectively,
were the weakest performers in the Index.
With regards to sectors, nine of the ten sectors in the Index recorded
gains during the period. Materials, Telecommunication Services and Consumer
Staples were the top performers, up 32.0%, 28.8% and 24.5%, respectively.
Financials, down 1.4%, was the only sector with a negative return for the year.
The strongest performers among individual stocks in the Index during
the period included Leighton Holding Ltd., up 246.8%, WorleyParsons Ltd., up
179.3%, and Cosco Corp. (Singapore) Ltd., up 171.9%. Conversely, Centro
Properties Group, down 87.3%, Goodwill Group, Inc., down 84.1%, and C&C Group
plc, down 68.6%, recorded the lowest returns.
The Fund continues to pursue its objective of closely replicating,
before expenses, the return of its benchmark, the MSCI EAFE Index. It does so by
investing in a subset of the securities in the Index such that the
characteristics of the portfolio closely track the characteristics of the Index.
8
PERFORMANCE OVERVIEW
AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM)
DECEMBER 31, 2007 (UNAUDITED)
TOP TEN HOLDINGS
% OF
EQUITIES*
---------
BP plc 1.7%
Vodafone Group, plc 1.4%
HSBC Holdings plc 1.4%
Total S.A. 1.3%
Nestle S.A. 1.3%
Nokia Corp. 1.1%
Royal Dutch Shell plc 1.1%
Toyota Motor Corp. 1.1%
GlaxoSmithKline plc 1.0%
Telefonica S.A. 1.0%
EQUITY SECTOR ALLOCATION
% OF
EQUITIES* EAFE
--------- ----
Financials 26.8% 26.9%
Industrials 12.1% 12.1%
Consumer Discretionary 10.8% 10.9%
Materials 9.9% 9.9%
Consumer Staples 8.5% 8.5%
Energy 7.9% 7.8%
Health Care 6.3% 6.3%
Telecommunications 6.2% 6.2%
Utilities 6.0% 5.9%
Information Technology 5.5% 5.5%
* Percent of equity portion of Master International Index Series
COUNTRY ALLOCATION
(PIE CHART)
% OF
EQUITIES* EAFE
--------- ----
UNITED KINGDOM 22.2% 22.2%
JAPAN 19.9% 19.9%
FRANCE 10.9% 10.7%
GERMANY 9.5% 9.4%
SWITZERLAND 6.5% 6.7%
AUSTRALIA 6.4% 6.5%
SPAIN 4.4% 4.4%
ITALY 4.0% 4.0%
NETHERLANDS 2.8% 2.8%
HONG KONG 2.4% 2.4%
SWEDEN 2.3% 2.3%
FINLAND 1.9% 1.9%
BELGIUM 1.2% 1.2%
NORWAY 1.1% 1.1%
SINGAPORE 1.1% 1.1%
DENMARK 0.9% 0.9%
GREECE 0.8% 0.8%
AUSTRIA 0.6% 0.6%
IRELAND 0.6% 0.6%
PORTUGAL 0.4% 0.4%
NEW ZEALAND 0.1% 0.1%
* Percent of equity portion of Master International Index Series
9
FUND EXPENSES
DECEMBER 31, 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 July
1, 2007 through December 31, 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
SMALL CAP INTERNATIONAL
INSTITUTIONAL CLASS S&P 500 INDEX INDEX EQUITY INDEX
- ------------------- ------------- --------- -------------
Beginning Account Value 7/1/07.................. $1,000.00 $1,000.00 $1,000.00
Ending Account Value 12/31/07................... $ 986.29 $ 922.40 $1,000.17
Expenses Paid During Period* 7/1/07 - 12/31/07.. $ 0.65 $ 0.58 $ 1.56
Annualized Expense Ratio........................ 0.13% 0.12% 0.31%
S&P 500
PLANAHEAD CLASS INDEX
- --------------- ---------
Beginning Account Value 7/1/07.................. $1,000.00
Ending Account Value 12/31/07................... $ 983.41
Expenses Paid During Period* 7/1/07 - 12/31/07.. $ 3.15
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
SMALL CAP INTERNATIONAL
INSTITUTIONAL CLASS S&P 500 INDEX INDEX EQUITY INDEX
- ------------------- ------------- --------- -------------
Beginning Account Value 7/1/07.................. $1,000.00 $1,000.00 $1,000.00
Ending Account Value 12/31/07................... $1,024.55 $1,024.60 $1,023.64
Expenses Paid During Period* 7/1/07 - 12/31/07.. $ 0.66 $ 0.61 $ 1.58
Annualized Expense Ratio........................ 0.13% 0.12% 0.31%
S&P 500
PLANAHEAD CLASS INDEX
- --------------- ---------
Beginning Account Value 7/1/07.................. $1,000.00
Ending Account Value 12/31/07................... $1,022.03
Expenses Paid During Period* 7/1/07 - 12/31/07.. $ 3.21
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 (184) by days in the year (365) to reflect the
half-year period.
10
AMERICAN BEACON FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon Funds:
We have audited the accompanying statements of assets and liabilities of
American Beacon Funds, comprised of the American Beacon S&P 500 Index Fund, the
American Beacon Small Cap Index Fund, and the American Beacon International
Equity Index Fund (collectively, the "Funds") as of December 31, 2007, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Funds' internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Funds' internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2007, by correspondence with the Master
Portfolios. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Funds as of December 31, 2007, the results of their operations
for the year then ended, the changes in their net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
Dallas, Texas
February 28, 2008
11
AMERICAN BEACON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2007 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
INTERNATIONAL
S&P 500 INDEX SMALL CAP INDEX EQUITY INDEX
FUND FUND FUND
------------- --------------- -------------
ASSETS:
Investment in Portfolio, at value ... $ 289,675 $ 52,435 $ 271,035
Receivable for fund shares sold ..... 652 1 118
Prepaid expenses .................... 5 -- 1
----------- ---------- -----------
TOTAL ASSETS ..................... 290,332 52,436 271,154
----------- ---------- -----------
LIABILITIES:
Payable for fund shares redeemed .... 77 60 3,781
Administrative service and service
fees payable (Note 2) ............ 19 2 11
Other liabilities ................... 60 49 69
----------- ---------- -----------
TOTAL LIABILITIES ................ 156 111 3,861
----------- ---------- -----------
NET ASSETS .......................... $ 290,176 $ 52,325 $ 267,293
=========== ========== ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital ..................... 215,518 52,685 221,148
Undistributed net investment
income (expense) ................. 158 -- (418)
Accumulated net realized gain
(loss) ........................... (28,409) (803) (1,577)
Unrealized net appreciation
(depreciation) of investments
and futures contracts ............ 102,909 443 48,140
----------- ---------- -----------
NET ASSETS ............................. $ 290,176 $ 52,325 $ 267,293
=========== ========== ===========
Shares outstanding (no par value):
Institutional Class ................. 13,692,453 3,872,212 19,988,262
=========== ========== ===========
PlanAhead Class ..................... 940,175 -- --
=========== ========== ===========
Net asset value, offering and
redemption price per share:
Institutional Class ................. $ 19.85 $ 13.51 $ 13.37
=========== ========== ===========
PlanAhead Class ..................... $ 19.60 $ -- $ --
=========== ========== ===========
See accompanying notes
See accompanying Financial Statements of the respective Master
Portfolios attached
12
AMERICAN BEACON FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS)
INTERNATIONAL
S&P 500 INDEX SMALL CAP INDEX EQUITY INDEX
FUND FUND FUND
------------- --------------- -------------
INVESTMENT INCOME ALLOCATED FROM
PORTFOLIO:
Dividend income ..................... $ 5,153 $ 766 $ 9,732
Interest income ..................... 271 419 274
Securities lending income ........... -- 86 --
Portfolio expenses .................. (121) (46) (301)
Other income (loss) ................. -- (1) 139
------- ------ -------
NET INVESTMENT INCOME ALLOCATED
FROM PORTFOLIO ................ 5,303 1,224 9,844
------- ------ -------
FUND EXPENSES:
Administrative service fees (Note 2):
Institutional Class .............. 125 38 160
PlanAhead Class .................. 47 -- --
Sub-administrative service fees:
Institutional Class .............. -- 16 79
Transfer agent fees:
Institutional .................... 7 5 13
PlanAhead ........................ 9 -- --
Custody and accounting fees ......... 6 7 3
Professional fees ................... 18 18 24
Registration fees ................... 27 -- --
Service fees - PlanAhead Class
(Note 2) ......................... 47 -- --
Printing ............................ 13 7 7
Other expenses ...................... 24 11 32
------- ------ -------
TOTAL FUND EXPENSES .............. 323 102 318
------- ------ -------
NET INVESTMENT INCOME .................. 4,980 1,122 9,526
------- ------ -------
REALIZED AND UNREALIZED GAIN (LOSS)
ALLOCATED FROM MASTER PORTFOLIO
Net realized gain (loss) from:
Investments ...................... 16,649 3,098 5,654
Foreign currency transactions .... -- -- 540
Futures contracts ................ (123) (376) 226
Change in net unrealized
appreciation or depreciation of:
Investments ...................... (8,865) (2,348) 19,998
Foreign currency transactions .... -- -- 39
Futures contracts ................ 47 3 (59)
------- ------ -------
NET GAIN ON INVESTMENTS .......... 7,708 377 26,398
------- ------ -------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ..................... $12,688 $1,499 $35,924
======= ====== =======
See accompanying notes
See accompanying Financial Statements of the respective Master
Portfolios attached
13
AMERICAN BEACON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
INTERNATIONAL
S&P 500 INDEX FUND SMALL CAP INDEX FUND EQUITY INDEX FUND
Year Ended December 31, Year Ended December 31, Year Ended December 31,
----------------------- ----------------------- -----------------------
2007 2006 2007 2006 2007 2006
--------- --------- --------- --------- --------- ---------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ............... $ 4,980 $ 4,545 $ 1,122 $ 1,753 $ 9,526 $ 2,658
Net realized gain on investments,
foreign currency, and futures
contracts ........................ 16,526 816 2,722 5,769 6,420 1,943
Change in net unrealized
appreciation or depreciation
of investments and futures
contracts ........................ (8,818) 32,077 (2,345) (2,382) 19,978 22,488
--------- --------- --------- --------- --------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..... 12,688 37,438 1,499 5,140 35,924 27,089
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class ................. (4,560) (3,990) (1,094) (1,732) (10,259) (2,887)
PlanAhead Class ..................... (286) (517) -- -- -- --
Net realized gain on investments:
Institutional Class ................. -- -- (2,872) -- (3,968) (877)
PlanAhead Class ..................... -- -- -- -- -- --
Tax return of capital:
Institutional Class ................. -- -- (215) -- (252) --
--------- --------- --------- --------- --------- ---------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS .................. (4,846) (4,507) (4,181) (1,732) (14,479) (3,764)
--------- --------- --------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ....... 171,408 28,321 11,780 232,022 369,147 108,842
Reinvestment of dividends and
distributions .................... 4,810 4,484 4,181 1,732 14,473 3,764
Cost of shares redeemed ............. (132,948) (101,514) (112,832) (131,397) (299,885) (64,018)
--------- --------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS ............ 43,270 (68,709) (96,871) 102,357 83,735 48,588
--------- --------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS .. 51,112 (35,778) (99,553) 105,765 105,180 71,913
--------- --------- --------- --------- --------- ---------
NET ASSETS:
Beginning of period ................. 239,064 274,842 151,878 46,113 162,113 90,200
--------- --------- --------- --------- --------- ---------
END OF PERIOD * ..................... $ 290,176 $ 239,064 $ 52,325 $ 151,878 $ 267,293 $ 162,113
========= ========= ========= ========= ========= =========
*Includes undistributed net investment
income (loss) of .................... $ 158 $ 13 $ -- $ 24 $ (418) $ (243)
========= ========= ========= ========= ========= =========
See accompanying notes
See accompanying Financial Statements of the respective Master
Portfolios attached
14
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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 FUND AT
AMERICAN BEACON: PORTFOLIOS: DECEMBER 31, 2007
- ---------------- ----------- -----------------
S&P 500 Index Fund State Street Equity 500 Index Portfolio 12.0%
Small Cap Index Fund Master Small Cap Index Series 8.3%
International Equity Index Fund Master International Index Series 23.7%
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.
15
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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
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. As of December 31, 2007, the Manager does not believe
the adoption of FAS 157 will materially impact the amounts represented in the
financial statements; however, additional disclosures will be required about the
inputs used to develop the measurements of fair value.
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.
16
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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.
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 December 31, 2007, the employee benefit plans of AMR Corporation
and subsidiary companies owned 91.7% of the Institutional Class of the S&P 500
Index Fund, 97.0% of the Small Cap Index Fund and 74.6% of the International
Equity Index Fund.
3. FEDERAL INCOME AND EXCISE TAXES
It is the policy of the Funds to comply with the requirements of
Subchapter M of the Internal Revenue Code and to distribute substantially all
net investment income as well as any net realized capital gains on the sale of
investments. Therefore, no federal income or excise tax provision is required.
The Funds adopted the provisions of FASB Interpretation No. 48,
"Accounting for Uncertainties in Income Taxes" ("FIN 48"), on January 1, 2007.
FIN 48 sets forth a minimum threshold for financial statement recognition of the
benefit of a tax position taken or expected to be taken in a tax return. The
implementation of FIN 48 did not result in any unrecognized tax benefits in the
accompanying financial statements. Each of the tax years in the three year
period ended December 31, 2007, remains subject to examination by the Internal
Revenue Service. If applicable, the Funds recognize interest accrued related to
unrecognized tax benefits in interest expense and penalties in "Other expenses"
on the Statement of Operations.
Dividends are categorized in accordance with income tax regulations
which may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
17
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
The International Equity Index Fund may be subject to taxes imposed by
countries in which it invests. Such taxes are generally based on returns of
income earned or gains realized or repatriated. Taxes are accrued and applied to
net investment income, net realized capital gains and net unrealized
appreciation, as applicable, as the income is earned or capital gains are
recorded.
The tax character of distributions paid during the years ended
December 31, 2007 and December 31, 2006 were as follows (in thousands):
S&P 500 INDEX SMALL CAP INDEX INTERNATIONAL EQUITY INDEX
--------------------------- --------------------------- ---------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2007 2006 2007 2006 2007 2006
------------ ------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME:*
Institutional Class ...... $4,560 $3,990 $1,510 $1,732 $11,655 $2,887
PlanAhead Class .......... 286 517 -- -- -- --
LONG-TERM CAPITAL GAIN:
Institutional Class ...... -- -- 2,456 -- 2,572 877
PlanAhead Class .......... -- -- -- -- -- --
RETURN OF CAPITAL ........... -- -- 215 -- 252 --
------ ------ ------ ------ ------- ------
TOTAL TAXABLE DISTRIBUTIONS . $4,846 $4,507 $4,181 $1,732 $14,479 $3,764
====== ====== ====== ====== ======= ======
* For tax purposes, short-term capital gains are considered ordinary income
distributions.
As of December 31, 2007, the components of distributable earnings on a
tax basis we as follows (in thousands):
S&P 500 INDEX SMALL CAP INDEX INT'L EQUITY
FUND FUND INDEX FUND
------------- --------------- ------------
Cost basis of investments for federal income tax purposes .. $202,868 $52,727 $224,898
Unrealized appreciation ................................. 110,546 965 53,417
Unrealized depreciation ................................. (23,739) (1,257) (7,280)
-------- ------- --------
Net unrealized appreciation/depreciation ................ 86,807 (292) 46,137
Undistributed ordinary income ........................... 73 -- --
Undistributed long-term loss ............................ (12,142) -- --
Other temporary differences ............................. (80) (68) 8
-------- ------- --------
Distributable earnings ..................................... $ 74,658 $ (360) $ 46,145
======== ======= ========
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 wash sales, the realization for tax purposes of
unrealized gains/ (losses) on certain derivative instruments, reclassifications
of income from real estate investment securities, and the realization for tax
purposes on unrealized gains/ (losses) on investments in passive foreign
investment companies.
Due to the inherent differences in the recognition of income, expenses
and realized gains/(losses) under the U.S. generally accepted accounting
principles and federal income tax regulations, permanent differences between
book and tax reporting have been identified and appropriately reclassified on
the Statement of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent
differences derived from reclassifications of income from real estate investment
securities, futures, foreign currency, sales of
18
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
investments in passive foreign investment companies, dividend reclassifications
and partnership transactions that have been reclassified as of December 31, 2007
(in thousands):
S&P 500 INDEX SMALL CAP INDEX INT'L EQUITY
FUND FUND INDEX FUND
------------- --------------- ------------
Paid-in-capital ............................................ $ 465 $(270) $ 2,688
Undistributed net investment income ........................ 11 (52) 574
Accumulated net realized gain/(loss) ....................... (476) 322 (3,262)
Unrealized appreciation (depreciation) of investments,
futures contracts, and foreign currency -- -- --
At December 31, 2007 capital loss carry forward positions for federal
income tax purposes were as follows (in thousands):
FUND 2010 2011 2012 2013 2014 TOTAL
------ ---- ------ ------ ---- -------
S&P 500 Index $7,850 $635 $1,060 $2,311 $286 $12,142
For the period ended December 31, 2007, the S&P 500 Index and Small
Cap Index Funds utilized $13,859 and $220, respectively, of net capital loss
carryover.
4. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each
Class of the Funds (shares and dollars in thousands):
Year ended December 31, 2007
INSTITUTIONAL CLASS PLANAHEAD CLASS
------------------- -----------------
S&P 500 INDEX FUND SHARES AMOUNT SHARES AMOUNT
- ------------------ ------ ---------- ------ --------
Shares sold ........................... 8,415 $ 164,624 347 $ 6,784
Reinvestment of dividends ............. 227 4,560 13 250
Shares redeemed ....................... (6,573) (127,653) (266) (5,295)
----- --------- --- -------
Net increase in shares outstanding .... 2,069 $ 41,531 94 $ 1,739
===== ========= === =======
INSTITUTIONAL CLASS
-------------------
SMALL CAP INDEX FUND SHARES AMOUNT
- -------------------- ------ ----------
Shares sold ........................... 788 $ 11,780
Reinvestment of dividends ............. 302 4,181
Shares redeemed ....................... (7,415) (112,832)
------ ---------
Net (decrease) in shares outstanding .. (6,325) $ (96,871)
====== =========
INSTITUTIONAL CLASS
-------------------
INTERNATIONAL EQUITY INDEX FUND SHARES AMOUNT
- ------------------------------- ------- ---------
Shares sold ........................... 27,066 $ 369,147
Reinvestment of dividends ............. 1,093 14,473
Shares redeemed ....................... (20,878) (299,885)
------ ---------
Net increase in shares outstanding .... 7,281 $ 83,735
====== =========
19
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
Year Ended December 31,
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
===== ========
20
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21
AMERICAN BEACON S&P 500 INDEX FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class
Year Ended December 31,
------------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 19.19 $ 16.90 $ 16.43 $ 15.10 $ 11.96
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income:(A) ...................... 0.39 0.33 0.29 0.29 0.21
Net gain on investments, foreign currency
and futures transactions (both realized
and unrealized) ............................. 0.65 2.30 0.47 1.32 3.14
-------- -------- -------- -------- --------
Total income from investment operations ........... 1.04 2.63 0.76 1.61 3.35
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.38) (0.34) (0.29) (0.28) (0.21)
Tax return of capital .......................... -- -- 0.00(B) -- --
-------- -------- -------- -------- --------
Total distributions ............................... (0.38) (0.34) (0.29) (0.28) (0.21)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD .................... $ 19.85 $ 19.19 $ 16.90 $ 16.43 $ 15.10
======== ======== ======== ======== ========
TOTAL RETURN ...................................... 5.39% 15.69% 4.74% 10.76% 28.26%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ....... $271,746 $223,008 $225,857 $244,668 $245,251
Ratios to average net assets (annualized):(A)
Net investment income, net of waivers ....... 1.89% 1.85% 1.75% 1.85% 1.63%
Net investment income, before waivers ....... 1.89% 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) American Beacon Advisors, Inc. agreed to reimburse the Class for a portion
of its expenses through March 1, 2003.
22
AMERICAN BEACON S&P 500 INDEX FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PlanAhead Class
Year Ended December 31,
-------------------------------------------------
2007 2006 2005 2004 2003
------- ------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 18.97 $ 16.69 $ 16.23 $ 14.96 $ 11.85
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income:(A) ...................... 0.28 0.17 0.21 0.21 0.15
Net gain on investments, foreign currency
and futures transactions (both realized
and unrealized) ............................. 0.65 2.33 0.48 1.31 3.12
------- ------- ------- ------- -------
Total income from investment operations ........... 0.93 2.50 0.69 1.52 3.27
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.30) (0.22) (0.23) (0.25) (0.16)
Tax return of capital .......................... -- -- 0.00(B) -- --
------- ------- ------- ------- -------
Total distributions ............................... (0.30) (0.22) (0.23) (0.25) (0.16)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .................... $ 19.60 $ 18.97 $ 16.69 $ 16.23 $ 14.96
======= ======= ======= ======= =======
TOTAL RETURN ...................................... 4.88% 15.09% 4.32% 10.21% 27.65%
======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ....... $18,430 $16,056 $48,985 $46,344 $34,729
Ratios to average net assets (annualized):(A)
Net investment income, net of waivers ....... 1.38% 1.37% 1.28% 1.43% 1.16%
Net investment income, before waivers ....... 1.38% 1.37% 1.28% 1.43% 1.15%
Expenses, including expenses of the
master portfolio, net of waivers ......... 0.63% 0.61% 0.61% 0.62% 0.63%(C)
Expenses, including expenses of the
master portfolio, before waivers ......... 0.63% 0.61% 0.61% 0.62% 0.64%
23
AMERICAN BEACON SMALL CAP INDEX FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class
Year Ended December 31,
---------------------------------------------------
2007 2006 2005 2004 2003
------- -------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 14.89 $ 12.78 $ 12.57 $ 11.27 $ 7.70
------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A) ...................... 0.32 0.17 0.16 0.14 0.04
Net gain (loss) on investments, foreign
currency and futures transactions (both
realized and unrealized) .................... (0.53) 2.11 0.42 1.87 3.57
------- -------- ------- ------- -------
Total income (loss) from investment operations .... (0.21) 2.28 0.58 2.01 3.61
------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.31) (0.17) (0.17) (0.13) (0.04)
Distributions from net realized gains on
investments ................................. (0.80) -- (0.15) (0.58) --
Tax return of capital .......................... (0.06) -- (0.05)(B) -- --
------- -------- ------- ------- -------
Total distributions ............................... (1.17) (0.17) (0.37) (0.71) (0.04)
------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .................... $ 13.51 $ 14.89 $ 12.78 $ 12.57 $ 11.27
======= ======== ======= ======= =======
TOTAL RETURN ...................................... -1.63% 17.85% 4.51% 17.91% 46.90%
======= ======== ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ....... $52,325 $151,878 $46,113 $39,196 $67,756
Ratios to average net assets (annualized):(A)
Net investment income ....................... 1.49% 1.49% 1.12% 0.90% 1.04%
Expenses, including expenses of the
master portfolio ......................... 0.20% 0.18% 0.18% 0.22% 0.24%
- ----------
(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.
24
AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class
Year Ended December 31,
------------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 12.76 $ 10.33 $ 9.39 $ 8.01 $ 5.86
-------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A) ....................... 0.52 0.23 0.21 0.17 0.14
Net gain on investments, foreign currency
and futures transactions (both realized
and unrealized) ............................. 0.85 2.50 1.06 1.44 2.13
-------- -------- ------- ------- -------
Total income from investment operations ........... 1.37 2.73 1.27 1.61 2.27
-------- -------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.53) (0.23) (0.24) (0.23) (0.12)
Distributions from net realized gains on
investments ................................. (0.22) (0.07) -- -- --
Tax return of capital .......................... (0.01)(B) -- (0.09)(B) -- --
-------- -------- ------- ------- -------
Total distributions ............................... (0.76) (0.30) (0.33) (0.23) (0.12)
-------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .................... $ 13.37 $ 12.76 $ 10.33 $ 9.39 $ 8.01
======== ======== ======= ======= =======
TOTAL RETURN ...................................... 10.68% 26.52% 13.58% 20.12% 38.87%
======== ======== ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ....... $267,293 $162,113 $90,200 $23,156 $10,043
Ratios to average net assets (annualized):(A)
Net investment income ....................... 2.96% 2.44% 2.49% 2.16% 2.71%
Expenses, including expenses of the
master portfolio ......................... 0.19% 0.22% 0.23% 0.26% 0.31%
- ----------
(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.
25
AMERICAN BEACON FUNDS
TAX INFORMATION
FOR THE TAX YEAR ENDED DECEMBER 31, 2007 (UNAUDITED)
We are providing this information as required by the Internal Revenue
Code. The amounts shown may differ from those in other areas of this report
because of differences between tax and financial reporting requirements.
For corporate shareholders in the Funds, the percentage of ordinary
dividend income distributed for the year ended December 31, 2007, which is
designated as qualifying for the dividends-received deduction, is as follows:
S&P 500 Index Fund 91.82%
Small Cap Index Fund 35.11%
International Equity Index Fund 0.00%
For shareholders in the Funds, the percentage of dividend income
distributed for the year ended December 31, 2007, which designated as qualified
dividend income under the Jobs and Grown Tax relief Act of 2003, is as follows:
S&P 500 Index Fund 100.00%
Small Cap Index Fund 39.20%
International Equity Index Fund 81.27%
Pursuant to Section 852 of the Internal Revenue Code, The Funds
designate the following amounts as long-term capital gain dividends for their
taxable year ended December 31, 2007:
S&P 500 Index Fund $ 0
Small Cap Index Fund $2,456,009
International Equity Index Fund $2,571,708
Of the ordinary dividends distributed to shareholders during the tax
year ended December 31, 2007, the amount of income derived from Short-Term
Capital Gains is as follows:
S&P 500 Index Fund $ 0
Small Cap Index Fund $ 364,663
International Equity Index Fund $1,397,095
26
AMERICAN BEACON FUNDS
PRIVACY POLICY
(UNAUDITED)
PRIVACY POLICY
The American Beacon Funds recognizes and respects the privacy of our
shareholders. We are providing this notice to you so you will understand how
shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or
more of the following sources:
- information we receive from you on applications or other
forms;
- information about your transactions with us or our service
providers; and
- information we receive from third parties.
We do not disclose any nonpublic personal information about our
customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those
employees or service providers who need to know that information to provide
products or services to you. To ensure the confidentiality of your nonpublic
personal information, we maintain safeguards that comply with federal standards.
27
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
The Trustees and officers of the American Beacon Funds (the "Trust")
are listed below, together with their principal occupations during the past five
years. Unless otherwise indicated, the address of each person listed below is
4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee
oversees twenty-seven funds in the fund complex that includes the Trust, the
American Beacon Master Trust, the American Beacon Mileage Funds, and the
American Beacon Select Funds. The Trust's Statement of Additional Information
contains additional information about the Trustees and is available without
charge by calling 1-800-658-5811.
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- -------------------------- ------------------------ -------------------------------------------------
INTERESTED TRUSTEES
Term
Lifetime of Trust
until removal,
resignation or
retirement*
Douglas G. Herring** (50) Trustee since 2006 President (2006-Present) and CEO (2008-Present),
Executive Vice President American Beacon Advisors, Inc.; Vice President
from 2006 to 2007 and Controller, American Airlines, Inc.
President since 2007 (1998-2006); Chairman (2003-Present) and Director
(1995-Present), American Airlines Federal Credit
Union; Trustee, American Beacon Mileage Funds
(2006-Present); Trustee, American Beacon Select
Funds (2006-Present); Trustee, American Beacon
Master Trust (2006-Present); Director, American
Beacon Global Funds, SPC (2006-Present);
Director, American Beacon Global Funds plc
(2007-Present).
William F. Quinn** (59) Trustee Chairman (2006-Present), CEO (2006-2007),
since 1987 President (1986-2006), and Director
President from (2003-Present), American Beacon Advisors, Inc.;
1987 to 2007 Chairman (1989-2003) and Director (1979-1989,
Executive Vice 2003-Present), American Airlines Federal Credit
President Union; Director, Hicks Acquisition I, Inc.
since 2007 (2007-Present); Director, Crescent Real Estate
Equities, Inc.(1994-2007); Director, Pritchard,
Hubble & Herr, LLC (investment advisor)
(2001-2006); Director of Investment Committee,
Southern Methodist University Endowment Fund
(1996-Present); Member, Southern Methodist
University Cox School of Business Advisory Board
(1999-2002); Member, New York Stock Exchange
Pension Manager Committee (1997-1998, 2000-2002,
2006-Present); Chairman (2007-Present) and Vice
Chairman (2004-2007), Committee for the
Investment of Employee Benefits; Director, United
Way of Metropolitan Tarrant County (1988-2000,
2004-Present); Trustee, American Beacon Mileage
Funds (1995-Present); Trustee, American Beacon
Select Funds (1999-Present); Trustee, American
Beacon Master Trust (1995-Present); Director,
American Beacon Global Funds SPC (2002-Present);
Director, American Beacon Global Funds plc
(2007-Present).
Alan D. Feld** (71) Trustee since 1996 Partner, Akin, Gump, Strauss, Hauer & Feld, LLP
(law firm) (1960-Present); Director, Clear
Channel Communications (1984-Present); Trustee,
CenterPoint Properties (1994-2006); Member Board
of Trustees, Southern Methodist University;
Member, Board of Visitors, The University of
Texas M.D. Anderson Cancer Center; Member, Board
of Visitors, Zale Lipshy Hospital; Trustee,
American Beacon Mileage Funds (1996-Present);
Trustee, American Beacon Select Funds
(1999-Present); Trustee, American Beacon Master
Trust (1996-Present).
NON-INTERESTED TRUSTEES Term
Lifetime of Trust
until removal,
resignation or
retirement*
W. Humphrey Bogart (63) Trustee since 2004 Consultant, New River Canada Ltd. (mutual fund
servicing company) (1998-2003); Board Member,
Baylor University Medical Center Foundation
(1992-2004); President and CEO, Allmerica Trust
Company, NA (1996-1997); President and CEO,
Fidelity Investments Southwest Company
(1983-1995); Senior Vice President of Regional
Centers, Fidelity Investments (1988-1995);
Trustee, American Beacon Mileage Funds
(2004-Present); Trustee, American Beacon Select
Funds (2004-Present); Trustee, American Beacon
Master Trust (2004-Present).
28
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- -------------------------- ------------------------ -------------------------------------------------
NON-INTERESTED TRUSTEES
(CONT.)
Brenda A. Cline (47) Trustee since 2004 Executive Vice President, Chief Financial
Officer, Treasurer and Secretary, Kimbell Art
Foundation (1993-Present); Trustee, Texas
Christian University (1998-Present); Trustee,
W.I. Cook Foundation, Inc. (d/b/a Cook Children's
Health Foundation) (2001-2006); Director,
Christian Church Foundation (1999-2007); Trustee,
American Beacon Mileage Funds (2004-Present);
Trustee, American Beacon Select Funds
(2004-Present); Trustee, American Beacon Master
Trust (2004-Present).
Richard A. Massman (64) Trustee since 2004 Senior Vice President and General Counsel, Hunt
Consolidated, Inc. (holding company engaged in
oil and gas exploration and production, refining,
real estate, farming, ranching, and venture
capital activities) (1994-Present); Trustee,
American Beacon Mileage Funds (2004-Present);
Trustee, American Beacon Select Funds
(2004-Present); Trustee, American Beacon Master
Trust (2004-Present).
Stephen D. O'Sullivan (72) Trustee since 1987 Consultant (1994-Present); Trustee, American
Beacon Mileage Funds (1995-Present); Trustee,
American Beacon Select Funds (1999-Present);
Trustee, American Beacon Master Trust
(1995-Present).
R. Gerald Turner (62) Trustee since 2001 President, Southern Methodist University
225 Perkins Admin. Bldg. (1995-Present); Director, ChemFirst (1986-2002);
Southern Methodist Univ. Director, J.C. Penney Company, Inc.
Dallas, Texas 75275 (1996-Present); Director, California Federal
Preferred Capital Corp. (2001-2003); Director,
Kronus Worldwide Inc. (chemical manufacturing)
(2003-Present); Director, First Broadcasting
Investment Partners, LLC (2003-2007); Member,
Salvation Army of Dallas Board of Directors;
Member, Methodist Hospital Advisory Board;
Co-Chair, Knight Commission on Intercollegiate
Athletics; Trustee, American Beacon Mileage Funds
(2001-Present); Trustee, American Beacon Select
Funds (2001-Present); Trustee, American Beacon
Master Trust (2001-Present).
Kneeland Youngblood (52) Trustee since 1996 Managing Partner, Pharos Capital Group, LLC (a
100 Crescent Court Chairman since private equity firm) (1998-Present); Director,
Suite 1740 2005 Energy Future Holdings Corp. (2007-Present);
Dallas, Texas 75201 Director, Burger King Corporation (2004-Present);
Director, Gap, Inc. (2006-Present); Trustee, City
of Dallas, Texas Employee Retirement Fund
(2004-Present); Director, Starwood Hotels and
Resorts (2001-Present); Member, Council on
Foreign Relations (1995-Present); Trustee, St.
Mark's School of Texas (2002-Present); Trustee,
American Beacon Mileage Funds (1996- Present);
Trustee, American Beacon Select Funds
(1999-Present); Trustee, American Beacon Master
Trust (1996-Present).
29
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- -------------------------- ------------------------ -------------------------------------------------
OFFICERS
Term
One Year
Rosemary K. Behan (48) VP, Secretary and Vice President, Legal and Compliance, American
Chief Legal Beacon Advisors, Inc. (2006-Present); Assistant
Officer since 2006 General Counsel, First Command Financial
Planning, Inc. (2004-2006); Enforcement Attorney
(1995-2004), Securities and Exchange Commission.
Brian E. Brett (47) VP since 2004 Vice President, Director of Sales and Marketing,
American Beacon Advisors, Inc. (2004-Present);
Regional Vice President, Neuberger Berman, LLC
(investment advisor) (1996-2004).
Wyatt Crumpler (41) VP since 2007 Vice President, Trust Investments, American
Beacon Advisors, Inc. (2007-Present); Managing
Director of Corporate Accounting (2004-2007),
Director of IT Strategy and Finance (2002-2004),
American Airlines, Inc.
Michael W. Fields (53) VP since 1989 Vice President, Fixed Income Investments,
American Beacon Advisors, Inc. (1988-Present);
Director, American Beacon Global Funds SPC
(2002-Present); Director, American Beacon Global
Funds plc (2007-Present).
Rebecca L. Harris (41) Treasurer since Vice President, Finance, American Beacon
1995 Advisors, Inc. (1995-Present).
Christina E. Sears (36) Chief Compliance Chief Compliance Officer, American Beacon
Officer since 2004 Advisors, Inc. (2004-Present); Senior Compliance
and Asst. Analyst, American Beacon Advisors, Inc.
Secretary since (1998-2004).
1999
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
72, with the exception of Messrs. Quinn and O'Sullivan.
** Messrs. Quinn, Feld and Herring are deemed to be "interested persons" of
the Trust, as defined by the 1940 Act. Mr. Quinn is Chairman of the
Manager. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP has
provided legal services within the past two years to one or more of the
Trust's Investment advisors. Mr. Herring is President and CEO of the
Manager.
30
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2007
MARKET
VALUE
SHARES (000)
--------- ---------
COMMON STOCKS -- 98.1%
CONSUMER DISCRETIONARY -- 8.7%
Abercrombie & Fitch Co. 15,846 $ 1,267
Amazon.Com, Inc. (a) 56,092 5,196
Apollo Group, Inc. Class A (a) 26,529 1,861
AutoNation, Inc. (a) 23,063 361
AutoZone, Inc. (a) 7,864 943
Bed Bath & Beyond, Inc. (a) 50,745 1,491
Best Buy Co., Inc. 64,119 3,376
Big Lots, Inc. (a) 17,227 275
Black & Decker Corp. 11,837 824
Brunswick Corp. 18,586 317
Carnival Corp. 80,250 3,570
CBS Corp. Class B 125,903 3,431
Centex Corp. 24,082 608
Circuit City Stores, Inc. 28,732 121
Clear Channel Communications, Inc. 92,847 3,205
Coach, Inc. (a) 68,028 2,080
Comcast Corp. Class A (a) 568,201 10,375
D.R. Horton, Inc. 53,476 704
Darden Restaurants, Inc. 25,688 712
Dillard's, Inc. Class A 12,294 231
DIRECTV Group, Inc. (a) 128,877 2,980
Eastman Kodak Co. 54,482 1,192
eBay, Inc. (a) 210,566 6,989
EW Scripps Co. Class A 16,835 758
Expedia, Inc. (a) 35,655 1,127
Family Dollar Stores, Inc. 27,158 522
Ford Motor Co. (a) 383,580 2,581
Fortune Brands, Inc. 27,745 2,008
GameStop Corp. (a) 29,000 1,801
Gannett Co., Inc. 42,074 1,641
Gap, Inc. 91,398 1,945
General Motors Corp. 103,845 2,585
Genuine Parts Co. 31,409 1,454
Goodyear Tire & Rubber Co. (a) 45,757 1,291
H&R Block, Inc. 58,415 1,085
Harley-Davidson, Inc. 46,901 2,191
Harman International Industries, Inc. 10,521 775
Harrah's Entertainment, Inc. 33,588 2,981
Hasbro, Inc. 25,825 661
Home Depot, Inc. 312,409 8,416
Host Hotels & Resorts, Inc. 92,665 1,579
International Game Technology 56,319 2,474
Interpublic Group of Cos., Inc. (a) 83,694 679
JC Penney & Co., Inc. 40,310 1,773
Johnson Controls, Inc. 109,486 3,946
Jones Apparel Group, Inc. 13,434 215
KB HOME 14,794 320
Kohl's Corp. (a) 56,933 2,608
Leggett & Platt, Inc. 34,398 600
Lennar Corp. Class A 27,931 500
Limited Brands 58,467 1,107
Liz Claiborne, Inc. 20,797 423
Lowe's Cos., Inc. 267,062 6,041
Macy's, Inc. 78,723 2,037
MARKET
VALUE
SHARES (000)
--------- ---------
Marriot International, Inc. Class A 56,821 $ 1,942
Mattel, Inc. 66,976 1,275
McDonald's Corp. 218,804 12,890
McGraw-Hill, Inc. 60,766 2,662
Meredith Corp. 7,889 434
New York Times Co. Class A 29,122 511
Newell Rubbermaid, Inc. 51,593 1,335
News Corp. Class A 428,209 8,774
NIKE, Inc. Class B 70,852 4,552
Nordstrom, Inc. 34,633 1,272
Office Depot, Inc. (a) 51,256 713
OfficeMax, Inc. 15,131 313
Omnicom Group, Inc. 59,941 2,849
Polo Ralph Lauren Corp. 10,615 656
Pulte Homes, Inc. 42,826 451
Radioshack Corp. 27,503 464
Sears Holdings Corp. (a) 14,174 1,446
Sherwin-Williams Co. 20,596 1,195
Snap-On, Inc. 9,512 459
Stanley Works 14,583 707
Staples, Inc. 130,833 3,018
Starbucks Corp. (a) 136,861 2,802
Starwood Hotels & Resorts Worldwide, Inc. 36,747 1,618
Target Corp. 153,204 7,660
Tiffany & Co. 25,080 1,154
Time Warner, Inc. 667,238 11,016
TJX Cos., Inc. 81,106 2,330
V.F. Corp. 16,893 1,160
Viacom, Inc. Class B (a) 123,909 5,442
Walt Disney Co. 356,571 11,510
Washington Post Co. 1,060 839
Wendy's International, Inc. 17,016 440
Whirlpool Corp. 13,761 1,123
Wyndham Worldwide Corp. 34,299 808
Yum! Brands, Inc. 95,392 3,651
---------
209,704
---------
CONSUMER STAPLES -- 10.0%
Altria Group, Inc. 389,107 29,409
Anheuser-Busch Cos., Inc. 135,496 7,092
Archer-Daniels-Midland Co. 118,424 5,498
Avon Products, Inc. 80,660 3,188
Brown-Forman Corp. Class B 15,624 1,158
Campbell Soup Co. 41,465 1,482
Clorox Co. 25,743 1,678
Coca-Cola Co. 367,217 22,536
Coca-Cola Enterprises, Inc. 53,901 1,403
Colgate-Palmolive Co. 94,376 7,358
ConAgra Foods, Inc. 91,275 2,171
Constellation Brands, Inc. Class A (a) 37,226 880
Costco Wholesale Corp. 80,837 5,639
CVS Corp. 272,152 10,818
Dean Foods Co. 25,258 653
Estee Lauder Cos, Inc. Class A 20,552 896
General Mills, Inc. 62,732 3,576
See notes to Financial Statements
31
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2007
MARKET
VALUE
SHARES (000)
--------- ---------
CONSUMER STAPLES -- (CONTINUED)
H.J. Heinz Co. 58,369 $ 2,725
Hershey Foods Corp. 29,582 1,166
Kellogg Co. 48,435 2,539
Kimberly-Clark Corp. 76,800 5,325
Kraft Foods, Inc. 289,941 9,461
Kroger Co. 129,276 3,453
McCormick & Co., Inc. 22,353 847
Molson Coors Brewing Co., Class B 23,962 1,237
Pepsi Bottling Group, Inc. 26,453 1,044
PepsiCo, Inc. 296,067 22,471
Procter & Gamble Co. 573,613 42,115
Reynolds American, Inc. 31,887 2,103
Safeway, Inc. 80,264 2,746
Sara Lee Corp. 129,134 2,074
SuperValu, Inc. 37,648 1,413
Sysco Corp. 112,209 3,502
Tyson Foods, Inc., Class A 52,935 811
UST Corp. 28,137 1,542
Wal-Mart Stores, Inc. 439,955 20,911
Walgreen Co. 183,684 6,995
Whole Foods Market, Inc. 25,433 1,038
Wrigley Wm., Jr. Co. 39,748 2,327
---------
243,280
---------
ENERGY -- 12.3%
Anadarko Petroleum Corp. 85,626 5,625
Apache Corp. 61,311 6,593
Baker Hughes, Inc. 57,578 4,670
BJ Services Co. 54,548 1,323
Chesapeake Energy Corp. 82,282 3,225
ChevronTexaco Corp. 390,310 36,428
ConocoPhillips 294,567 26,010
Devon Energy Corp. 82,412 7,327
El Paso Corp. 130,592 2,251
ENSCO International, Inc. 26,077 1,555
EOG Resources, Inc. 44,917 4,009
ExxonMobil Corp. 1,008,814 94,516
Halliburton Co. 160,734 6,093
Hess Corp. 51,487 5,193
Marathon Oil Corp. 130,790 7,960
Murphy Oil Corp. 35,241 2,990
Nabors Industries, Ltd. (a) 52,404 1,435
National Oilwell Varco, Inc. (a) 65,557 4,816
Noble Corp. 48,918 2,764
Noble Energy, Inc. 31,210 2,482
Occidental Petroleum Corp. 152,638 11,752
Range Resources Corp. 27,200 1,397
Rowan Cos., Inc. 19,520 770
Schlumberger, Ltd. 221,006 21,740
Smith International, Inc. 37,534 2,772
Sunoco, Inc. 21,584 1,564
Tesoro Corp. 26,365 1,258
Transocean, Inc. 58,799 8,417
Valero Energy Corp. 101,906 7,137
Weatherford International Ltd. (a) 62,555 4,291
MARKET
VALUE
SHARES (000)
--------- ---------
Williams Cos., Inc. 110,168 $ 3,942
XTO Energy, Inc. 89,221 4,582
---------
296,887
---------
FINANCIALS -- 17.4%
ACE, Ltd. 60,483 3,737
AFLAC, Inc. 90,470 5,666
Allstate Corp. 105,579 5,514
Ambac Financial Group, Inc. 20,232 521
American Capital Strategies Ltd. 34,302 1,131
American Express Co. 217,379 11,308
American International Group, Inc. 469,749 27,386
Ameriprise Financial, Inc. 43,007 2,370
AON Corp. 54,747 2,611
Apartment Investment & Management Co. Class A 16,714 580
Assurant, Inc. 17,131 1,146
AvalonBay Communities, Inc. 14,753 1,389
Bank of America Corp. 819,839 33,827
Bank of New York Mellon Corp. 209,203 10,201
BB&T Corp. 101,370 3,109
Bear Stearns Cos., Inc. 21,168 1,868
Boston Properties, Inc. 21,667 1,989
Capital One Financial Corp. 70,163 3,316
CB Richard Ellis Group, Inc. Class A (a) 37,475 808
Charles Schwab Corp. 174,693 4,463
Chubb Corp. 72,375 3,950
Cincinnati Financial Corp. 31,514 1,246
CIT Group, Inc. 35,142 844
Citigroup, Inc. 919,107 27,059
CME Group, Inc. 10,141 6,957
Comerica, Inc. 27,144 1,182
Commerce Bancorp, Inc. 34,174 1,303
Countrywide Financial Corp. 100,246 896
Developers Diversified Realty Corp. 23,024 882
Discover Financial Services 85,605 1,291
E*Trade Financial Corp. (a) 81,315 289
Equity Residential 49,057 1,789
Fannie Mae 181,144 7,242
Federal Home Loan Mortgage Corp. 123,039 4,192
Federated Investors, Inc. Class B 15,270 629
Fidelity National Information Services, Inc. 30,977 1,288
Fifth Third Bancorp 95,716 2,405
First Horizon National Corp. 25,172 457
Franklin Resources, Inc. 29,680 3,396
General Growth Properties, Inc. 45,893 1,890
Genworth Financial, Inc. Class A 80,451 2,047
Goldman Sachs Group, Inc. 74,399 16,000
Hartford Financial Services Group, Inc. 57,297 4,996
Hudson City Bancorp, Inc. 95,292 1,431
Huntington Bancshares, Inc. 64,656 954
IntercontinentalExchange, Inc. (a) 12,680 2,441
J.P. Morgan Chase & Co. 619,837 27,056
See notes to Financial Statements
32
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2007
MARKET
VALUE
SHARES (000)
--------- ---------
FINANCIALS -- (CONTINUED)
Janus Capital Group, Inc. 29,407 $ 966
KeyCorp 70,475 1,653
Kimco Realty Corp. 45,869 1,670
Legg Mason, Inc. 25,142 1,839
Lehman Brothers Holdings, Inc. 98,213 6,427
Leucadia National Corp. 31,736 1,495
Lincoln National Corp. 49,592 2,887
Loews Corp. 81,290 4,092
M & T Bank Corp. 14,137 1,153
Marsh & McLennan Cos., Inc. 100,753 2,667
Marshall & Ilsley Corp. 49,593 1,313
MBIA, Inc. 21,584 402
Merrill Lynch & Co., Inc. 158,458 8,506
MetLife, Inc. 137,145 8,451
MGIC Investment Corp. 16,800 377
Moody's Corp. 38,966 1,391
Morgan Stanley 195,948 10,407
National City Corp. 115,554 1,902
Northern Trust Corp. 34,306 2,627
NYSE Euronext 48,600 4,266
Plum Creek Timber Co., Inc. 30,811 1,419
PNC Financial Services Group, Inc. 63,251 4,152
Principal Financial Group, Inc. 49,491 3,407
Progressive Corp. 135,501 2,596
ProLogis 47,891 3,035
Prudential Financial, Inc. 83,039 7,726
Public Storage, Inc. 23,087 1,695
Regions Financial Corp. 128,789 3,046
SAFECO Corp. 16,950 944
Simon Property Group, Inc. 41,100 3,570
SLM Corp. 73,899 1,488
Sovereign Bancorp, Inc. 65,974 752
State Street Corp. (b) 70,325 5,710
SunTrust Banks, Inc. 64,818 4,050
Synovus Financial Corp. 57,585 1,387
T. Rowe Price Group, Inc. 48,675 2,963
Torchmark Corp. 17,921 1,085
Travelers Cos, Inc. 118,604 6,381
U.S. Bancorp 317,331 10,072
Unum Group 63,629 1,514
Vornado Realty Trust 25,134 2,211
Wachovia Corp. 364,322 13,855
Washington Mutual, Inc. 159,441 2,170
Wells Fargo Co. 621,744 18,770
Western Union Co. 143,985 3,496
XL Capital, Ltd. Class A 33,044 1,662
Zions Bancorp 20,553 960
---------
421,659
---------
HEALTH CARE -- 11.6%
Abbott Laboratories 285,708 16,043
Aetna, Inc. 94,397 5,450
Allergan, Inc. 56,592 3,635
AmerisourceBergen Corp. 29,493 1,323
Amgen, Inc. (a) 199,895 9,283
MARKET
VALUE
SHARES (000)
--------- ---------
Applera Corp. - Applied Biosystems Group 33,273 $ 1,129
Barr Pharmaceuticals, Inc. (a) 18,923 1,005
Baxter International, Inc. 116,561 6,766
Becton, Dickinson & Co. 45,297 3,786
Biogen Idec, Inc. (a) 52,931 3,013
Boston Scientific Corp. (a) 244,634 2,845
Bristol-Myers Squibb Co. 363,616 9,643
C.R. Bard, Inc. 19,097 1,810
Cardinal Health, Inc. 66,957 3,867
Celgene Corp. (a) 70,418 3,254
CIGNA Corp. 51,496 2,767
Coventry Health Care, Inc. (a) 27,603 1,635
Covidien Ltd. 92,404 4,093
Eli Lilly & Co. 181,443 9,687
Express Scripts, Inc. (a) 47,299 3,453
Forest Laboratories, Inc. (a) 58,602 2,136
Genzyme Corp. (a) 48,492 3,610
Gilead Sciences, Inc. (a) 172,094 7,918
Hospira, Inc. (a) 28,503 1,215
Humana, Inc. (a) 30,047 2,263
IMS Health, Inc. 34,732 800
Johnson & Johnson 529,940 35,347
King Pharmaceuticals, Inc. (a) 49,292 505
Laboratory Corp. of America Holdings (a) 21,122 1,595
McKesson Corp. 54,455 3,567
Medco Health Solutions, Inc. (a) 48,834 4,952
Medtronic, Inc. 208,511 10,482
Merck & Co., Inc. 402,238 23,374
Millipore Corp. (a) 9,535 698
Mylan Laboratories Inc. 58,709 825
Patterson Cos., Inc. (a) 25,094 852
Pfizer, Inc. 1,257,294 28,578
Quest Diagnostics, Inc. 28,100 1,486
Schering-Plough Corp. 299,884 7,989
St. Jude Medical, Inc. (a) 60,894 2,475
Stryker Corp. 43,489 3,250
Tenet Healthcare Corp. (a) 95,470 485
Thermo Fisher Scientific, Inc. (a) 76,824 4,431
UnitedHealth Group, Inc. 238,346 13,872
Varian Medical Systems, Inc. (a) 22,860 1,192
Watson Pharmaceuticals, Inc. (a) 17,346 471
Wellpoint, Inc. (a) 105,770 9,279
Wyeth 247,016 10,916
Zimmer Holdings, Inc. (a) 44,052 2,914
---------
281,964
---------
INDUSTRIALS -- 11.4%
3M Co. 131,560 11,093
Allied Waste Industries, Inc. (a) 51,430 567
Avery Dennison Corp. 20,488 1,089
Boeing Co. 143,954 12,590
Burlington Northern Santa Fe Corp. 55,082 4,584
Caterpillar, Inc. 117,740 8,543
CH Robinson Worldwide, Inc. 30,461 1,649
See notes to Financial Statements
33
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2007
MARKET
VALUE
SHARES (000)
--------- ---------
INDUSTRIALS -- (CONTINUED)
Cintas Corp. 25,088 $ 843
Cooper Industries, Ltd. 34,434 1,821
CSX Corp. 80,738 3,551
Cummins, Inc. 18,529 2,360
Danaher Corp. 46,986 4,123
Deere & Co. 82,162 7,651
Domtar Corp. (a) (c) 11 0
Dover Corp. 36,195 1,668
Eaton Corp. 26,595 2,578
Emerson Electric Co. 145,740 8,258
Equifax, Inc. 23,683 861
Expeditors International Washington, Inc. 37,820 1,690
FedEx Corp. 57,339 5,113
Fluor Corp. 16,530 2,409
General Dynamics Corp. 74,748 6,652
General Electric Co. 1,866,192 69,180
Goodrich Co. 22,145 1,564
Honeywell International, Inc. 138,282 8,514
Illinois Tool Works, Inc. 75,471 4,041
Ingersoll-Rand Co. Class A 51,321 2,385
ITT Industries, Inc. 33,792 2,232
Jacobs Engineering Group, Inc. (a) 22,600 2,161
L-3 Communications Holdings, Inc. 22,503 2,384
Lockheed Martin Corp. 64,312 6,769
Manitowoc Co., Inc. 24,000 1,172
Masco Corp. 67,523 1,459
Monster Worldwide, Inc. (a) 22,609 733
Norfolk Southern Corp. 71,955 3,629
Northrop Grumman Corp. 63,511 4,995
PACCAR, Inc. 68,474 3,730
Pall Corp. 22,209 895
Parker-Hannifin Corp. 32,403 2,440
Pitney Bowes, Inc. 40,827 1,553
Precision Castparts Corp. 25,307 3,510
R.R. Donnelley & Sons Co. 40,209 1,517
Raytheon Co. 80,756 4,902
Robert Half International, Inc. 31,140 842
Rockwell Automation, Inc. 27,505 1,897
Rockwell Collins, Inc. 30,231 2,176
Ryder Systems, Inc. 9,821 462
Southwest Airlines Co. 138,886 1,694
Terex Corp. (a) 19,035 1,248
Textron, Inc. 45,639 3,254
Tyco Electronics Ltd. 91,104 3,383
Tyco International Ltd. 90,861 3,603
Union Pacific Corp. 48,084 6,040
United Parcel Service, Inc. Class B 192,650 13,624
United Technologies Corp. 182,024 13,932
W.W. Grainger, Inc. 12,169 1,065
Waste Management, Inc. 96,739 3,160
---------
275,838
---------
INFORMATION TECHNOLOGY -- 15.9%
Adobe Systems, Inc. (a) 108,757 4,647
MARKET
VALUE
SHARES (000)
--------- ---------
Advanced Micro Devices, Inc. (a) 114,986 $ 862
Affiliated Computer Services, Inc. Class A (a) 19,337 872
Agilent Technologies, Inc. (a) 69,168 2,541
Akamai Technologies, Inc. (a) 29,424 1,018
Altera Corp. 59,454 1,149
Analog Devices, Inc. 57,869 1,835
Apple Computer, Inc. (a) 161,217 31,934
Applied Materials, Inc. 254,707 4,524
Autodesk, Inc. (a) 41,876 2,084
Automatic Data Processing, Inc. 97,217 4,329
BMC Software, Inc. (a) 35,721 1,273
Broadcom Corp. Class A (a) 85,359 2,231
CA, Inc. 68,899 1,719
CIENA Corp. (a) 14,529 496
Cisco Systems, Inc. (a) 1,120,801 30,340
Citrix Systems, Inc. (a) 33,467 1,272
Cognizant Technology Solutions Corp. Class A (a) 54,284 1,842
Computer Sciences Corp. (a) 30,744 1,521
Compuware Corp. (a) 54,650 485
Convergys Corp. (a) 27,935 460
Corning, Inc. 291,844 7,001
Dell, Inc. (a) 417,763 10,239
Electronic Arts, Inc. (a) 57,100 3,335
Electronic Data Systems Corp. 91,816 1,903
EMC Corp. (a) 388,642 7,202
Fiserv, Inc. (a) 29,952 1,662
Google, Inc. Class A (a) 42,771 29,575
Hewlett-Packard Co. 476,394 24,048
IAC (a) 34,889 939
Intel Corp. 1,080,236 28,799
International Business Machines Corp. 253,729 27,428
Intuit, Inc. (a) 61,163 1,933
Jabil Circuit, Inc. 39,951 610
Juniper Networks, Inc. (a) 94,093 3,124
KLA-Tencor Corp. 33,505 1,614
Lexmark International Group, Inc. Class A (a) 15,842 552
Linear Technology Corp. 40,863 1,301
LSI Logic Corp. (a) 138,462 735
MEMC Electronic Materials, Inc. (a) 42,578 3,768
Microchip Technology, Inc. 37,989 1,194
Micron Technology, Inc. (a) 142,362 1,032
Microsoft Corp. 1,485,833 52,896
Molex, Inc. 24,805 677
Motorola, Inc. 418,265 6,709
National Semiconductor Corp. 41,596 942
Network Appliance, Inc. (a) 66,057 1,649
Novell, Inc. (a) 68,720 472
Novellus Systems, Inc. (a) 20,030 552
NVIDIA Corp. (a) 100,756 3,428
Oracle Corp. (a) 728,972 16,460
Paychex, Inc. 61,738 2,236
PerkinElmer, Inc. 21,118 550
See notes to Financial Statements
34
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2007
MARKET
VALUE
SHARES (000)
--------- ---------
INFORMATION TECHNOLOGY -- (CONTINUED)
QLogic Corp. (a) 24,322 $ 345
QUALCOMM, Inc. 307,534 12,102
SanDisk Corp. (a) 40,167 1,332
Sun Microsystems, Inc. (a) 148,641 2,695
Symantec Corp. (a) 164,763 2,659
Tellabs, Inc. (a) 85,030 556
Teradata Corp. (a) 33,520 919
Teradyne, Inc. (a) 27,649 286
Texas Instruments, Inc. 258,656 8,639
Unisys Corp. (a) 69,807 330
VeriSign, Inc. (a) 40,321 1,517
Waters Corp. (a) 18,865 1,492
Xerox Corp. 171,534 2,777
Xilinx, Inc. 52,602 1,151
Yahoo!, Inc. (a) 243,219 5,657
---------
384,456
---------
MATERIALS -- 3.5%
Air Products & Chemicals, Inc. 39,609 3,907
Alcoa, Inc. 159,562 5,832
Allegheny Technologies, Inc. 18,128 1,566
Ashland, Inc. 10,700 507
Ball Corp. 17,562 790
Bemis Co., Inc. 17,262 473
Consol Energy, Inc. 33,573 2,401
Dow Chemical Co. 174,930 6,896
E.I. Du Pont de Nemours & Co. 166,474 7,340
Eastman Chemical Co. 15,004 917
Ecolab, Inc. 30,766 1,575
Freeport-McMoRan Copper & Gold, Inc. Class B 70,723 7,245
Hercules, Inc. 23,050 446
International Flavors & Fragrances, Inc. 14,331 690
International Paper Co. 78,611 2,545
MeadWestvaco Corp. 32,320 1,012
Monsanto Co. 100,225 11,194
Newmont Mining Corp. 83,206 4,063
Nucor Corp. 52,454 3,106
Pactiv Corp. (a) 23,915 637
Peabody Energy Corp. 48,324 2,979
PPG Industries, Inc. 29,871 2,098
Praxair, Inc. 59,114 5,244
Rohm & Haas Co. 23,906 1,269
Sealed Air Corp. 28,492 659
Sigma-Aldrich Corp. 24,234 1,323
Titanium Metals Corp. 16,600 439
United States Steel Corp. 21,578 2,609
Vulcan Materials Co. 20,361 1,610
Weyerhaeuser Co. 39,537 2,915
---------
84,287
---------
TELECOMMUNICATION SERVICES -- 3.6%
American Tower Corp. (a) 75,200 3,204
AT&T, Inc. 1,120,152 46,553
CenturyTel, Inc. 20,441 847
MARKET
VALUE
SHARES (000)
--------- ---------
Citizens Communications Co. 60,384 $ 769
Embarq Corp. 27,597 1,367
JDS Uniphase Corp. (a) 42,723 568
Qwest Communications International, Inc. (a) 283,890 1,990
Sprint Nextel Corp. 523,943 6,879
Verizon Communications, Inc. 531,829 23,236
Windstream Corp. 89,913 1,171
---------
86,584
---------
UTILITIES -- 3.7%
AES Corp. (a) 124,995 2,674
Allegheny Energy, Inc. 30,759 1,957
Ameren Corp. 36,960 2,004
American Electric Power Co., Inc. 73,152 3,406
CenterPoint Energy, Inc. 57,611 987
CMS Energy Corp. 38,856 675
Consolidated Edison, Inc. 50,752 2,479
Constellation Energy Group, Inc. 33,014 3,385
Dominion Resources, Inc. 108,424 5,145
DTE Energy Co. 30,584 1,344
Duke Energy Corp. 233,920 4,718
Dynegy, Inc. (a) 95,490 682
Edison International 59,819 3,193
Entergy Corp. 35,998 4,302
Exelon Corp. 123,974 10,121
FirstEnergy Corp. 56,007 4,052
FPL Group, Inc. 75,121 5,092
Integrys Energy Group, Inc. 12,916 668
Nicor, Inc. 9,100 385
NiSource, Inc. 49,982 944
Pepco Holdings, Inc. 36,900 1,082
PG&E Corp. 64,726 2,789
Pinnacle West Capital Corp. 17,760 753
PPL Corp. 71,275 3,713
Progress Energy, Inc. 46,981 2,275
Public Service Enterprise Group, Inc. 47,212 4,638
Questar Corp. 32,468 1,756
Sempra Energy 49,286 3,050
Southern Co. 140,787 5,455
Spectra Energy Corp. 113,198 2,923
TECO Energy, Inc. 35,651 614
Trane, Inc. 31,030 1,449
Xcel Energy, Inc. 77,251 1,744
---------
90,454
---------
TOTAL COMMON STOCKS
(Cost $1,442,132,115) 2,375,113
---------
See notes to Financial Statements
35
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2007
PAR MARKET
AMOUNT VALUE
(000) (000)
--------- ----------
U.S. GOVERNMENT SECURITIES -- 0.2%
United States Treasury Bill
3.0% due 03/06/08 (d) (e) $ 4,299 $ 4,276
----------
TOTAL U.S. GOVERNMENT SECURITIES
(Cost $4,275,869) 4,276
----------
MARKET
SHARES VALUE
(000) (000)
--------- ----------
MONEY MARKET FUNDS -- 2.0%
AIM Short Term Investment Prime Portfolio 48,722 $ 48,722
Federated Money Market Obligations Trust 554 554
----------
TOTAL MONEY MARKET FUNDS
(Cost $49,275,442) 49,276
----------
TOTAL INVESTMENTS -- 100.3%
(identified cost $1,495,683,426) 2,428,665
LIABILITIES IN EXCESS OF ASSETS -- (0.3)% (6,288)
----------
NET ASSETS -- 100.0% $2,422,377
==========
(a) Non-income producing security.
(b) Affiliated issuer. See table that follows for more information.
(c) Amount 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
36
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2007
SCHEDULE OF FUTURES CONTRACTS
UNREALIZED
NUMBER OF APPRECIATION
CONTRACTS (000)
--------- ------------
S&P 500 Financial Futures Contracts
(long) Expiration Date 03/2008 677 $675
----
Total unrealized depreciation on
open futures contracts purchased $675
====
AFFILIATE TABLE
Income
Earned
Shares for the year Realized
Number of purchased for Shares sold for Number of Value at ended Gain on
Security shares held at the year ended the year ended shares held at 12/31/07 12/31/07 shares sold
Description 12/31/2006 12/31/07 12/31/07 12/31/07 (000) (000) (000)
- ------------------ -------------- -------------- --------------- -------------- -------- ------------ -----------
State Street Corp. 69,744 18,900 18,319 70,325 $5,710 62 $573
See notes to Financial Statements
37
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2007 (AMOUNTS IN THOUSANDS)
ASSETS
Investments in unaffiliated issuers at market
(identified cost $1,492,789) .................. $2,422,955
Investments in non-controlled affiliates at market
(identified cost $2,894) (Note 4) ............. 5,710
----------
2,428,665
Cash ............................................. 143
Receivables:
Investment securities sold ................. 548
Dividends and interest ..................... 3,648
----------
TOTAL ASSETS ............................ 2,433,004
----------
LIABILITIES
Payables:
Investment securities purchased ............ 10,140
Daily variation margin on futures contracts 291
Management fees (Note 4) ................... 196
TOTAL LIABILITIES ....................... 10,627
----------
NET ASSETS ....................................... $2,422,377
==========
See notes to Financial Statements
38
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF OPERATIONS
DECEMBER 31, 2007 (AMOUNTS IN THOUSANDS)
INVESTMENT INCOME
Dividend income - unaffiliated issuers..................... $ 51,567
Dividend income - non-controlled affiliated issuer......... 62
Interest 2,709
--------
TOTAL INVESTMENT INCOME................................. 54,338
--------
EXPENSES
Management fees (Note 4)................................... $ 1,221
--------
TOTAL EXPENSES.......................................... 1,221
--------
NET INVESTMENT INCOME......................................... 53,117
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments - unaffiliated issuers......................... 169,491
Investments - non-controlled affiliated issuer............. 573
Futures contracts.......................................... (853)
--------
169,211
--------
Net change in net unrealized appreciation (depreciation) on:
Investments................................................ (67,144)
Futures contracts.......................................... 663
-------- --------
(66,481)
--------
Net realized and unrealized gain.............................. 102,730
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $155,847
========
See notes to Financial Statements
39
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31,
2007 2006
----------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income ..................................... $ 53,117 $ 49,532
Net realized gain on investments and futures contracts .... 169,211 9,894
Net change in net unrealized appreciation (depreciation) .. (66,481) 318,596
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... 155,847 378,022
---------- ----------
CAPITAL TRANSACTIONS
Proceeds from contributions ............................... 328,812 310,574
Contributions in-kind ..................................... -- 8,054
Fair value of withdrawals ................................. (765,322) (383,063)
Withdrawals in-kind ....................................... (63,656) --
---------- ----------
NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS ... (500,166) (64,435)
---------- ----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS .................. (344,319) 313,587
NET ASSETS
Beginning of period .......................................... 2,766,696 2,453,109
---------- ----------
End of period ................................................ $2,422,377 $2,766,696
========== ==========
See notes to Financial Statements
40
STATE STREET EQUITY 500 INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected supplemental data and ratios to average
net assets:
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
12/31/2007 12/31/2006 12/31/2005 12/31/2004 12/31/2003
---------- ---------- ---------- ---------- ----------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in
thousands) .................. $2,422,377 $2,766,696 $2,453,109 $2,767,467 $2,714,672
Ratios to average net assets:
Operating expenses ............. 0.045% 0.045% 0.045% 0.045% 0.045%
Net investment income .......... 1.96% 1.94% 1.84% 1.97% 1.74%
Portfolio turnover rate* .......... 12% 10% 8% 9% 12%
Total return (a) .................. 5.49% 15.75% 4.87% 10.86% 28.62%
- ----------
* The portfolio turnover rate excludes in-kind security transactions.
(a) Results represent past performance and are not indicative of future
results.
41
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
1. ORGANIZATION
State Street Master Funds (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company, and was organized as a business trust under the
laws of The Commonwealth of Massachusetts on July 27, 1999. The Trust comprises
eleven investment portfolios: the State Street Equity 500 Index Portfolio, the
State Street Equity 400 Index Portfolio, the State Street Equity 2000 Index
Portfolio, the State Street Aggregate Bond Index Portfolio, the State Street
Money Market Portfolio, the State Street Tax Free Money Market Portfolio, the
State Street Tax Free Limited Duration Bond Portfolio, the State Street Limited
Duration Bond Portfolio, the State Street Treasury Money Market Portfolio, the
State Street Treasury Plus Money Market Portfolio and the State Street U.S.
Government Money Market Portfolio. Information presented in these financial
statements pertains only to the State Street Equity 500 Index Portfolio (the
"Portfolio"). At December 31, 2007, only the 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 Treasury Money
Market Portfolio, the State Street Treasury Plus Money Market Portfolio and the
State Street U.S. Government Money Market Portfolio were in operation. The
Portfolio is authorized to issue an unlimited number of non-transferable
beneficial interests.
The Portfolio's investment objective is to replicate, as closely as
possible, before expenses, the performance of the Standard & Poor's 500
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.
42
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
Federal income taxes:
The Portfolio is not required to pay federal income taxes on its net
investment income and net capital gains because it is treated as a partnership
for federal income tax purposes. All interest, dividends, gains and losses of
the Portfolio are deemed to have been "passed through" to the Portfolio's
partners in proportion to their holdings in the Portfolio, regardless of whether
such items have been distributed by the Portfolio. Each partner is responsible
for tax liability based on its distributive share; therefore, no provision has
been made for federal income taxes.
The Portfolio adopted the provisions of Financial Accounting Standards
Board Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income
Taxes", on June 29, 2007. As of and during the period ended December 31, 2007,
the Portfolio did not have a liability for any unrecognized tax expenses. The
Portfolio recognizes interest and penalties, if any, related to tax liabilities
as income tax expense in the Statement of Operations. As of December 31, 2007,
tax years 2004 through 2007 remain subject to examination by the portfolio's
major tax jurisdictions, which include the United States of America and the
Commonwealth of Massachusetts.
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 year ended December 31, 2007, purchases and sales of
investment securities, excluding short-term investments, futures contracts, and
contributions in-kind and fair value of withdrawals, aggregated to $312,810,297
and $728,958,796, respectively. The aggregate value of withdrawals in-kind was
$63,655,791. The realized gain associated with the withdrawal in-kind was
$19,063,455.
At December 31, 2007, the book cost of investments was $1,495,683,426
which approximates cost computed on a federal tax basis. The aggregate gross
unrealized appreciation and gross unrealized depreciation was $1,001,447,866 and
$68,465,885, respectively, resulting in net appreciation of $932,981,981 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.
43
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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), 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 December
31, 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.
Management does not expect anything significant.
7. NEW ACCOUNTING PRONOUNCEMENTS
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 has evaluated the application of SFAS 157 to the
Portfolio and believes the impact will be limited to expanded disclosures in the
Portfolio's Financial Statements resulting from adoption of this pronouncement.
44
STATE STREET EQUITY 500 INDEX PORTFOLIO
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of State Street Master Funds and
Owners of Beneficial Interest of State Street Equity 500 Index Portfolio:
We have audited the accompanying statement of assets and liabilities of the
State Street Equity 500 Index Portfolio (one of the portfolios constituting
State Street Master Funds) (the Portfolio), including the portfolio of
investments, as of December 31, 2007, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Portfolio's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Portfolio's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2007, by correspondence with the
custodian and brokers or by other appropriate auditing where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of State
Street Equity 500 Index Portfolio of State Street Master Funds at December 31,
2007, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended, in conformity
with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 25, 2008
45
STATE STREET EQUITY 500 INDEX PORTFOLIO
GENERAL INFORMATION
DECEMBER 31, 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 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.
ADVISORY AGREEMENT RENEWAL
The Board of Trustees of the Trust met on November 29, 2007 (the
"Meeting") to consider the renewal of the investment advisory agreement for the
Portfolio (the "Advisory Agreement"). In preparation for considering the
Advisory Agreement, the Trustees had reviewed the renewal materials provided by
the Adviser, which they had requested through independent counsel. In deciding
whether to renew the Advisory Agreement, the Trustees considered various
factors, including (i) the nature, extent and quality of the services provided
by SSgA Funds Management, Inc. (the "Adviser") under the Advisory Agreement,
(ii) the investment performance of the Portfolio, (iii) the costs to the Adviser
of its services and the profits realized by the Adviser and its affiliates from
their relationship with the Trust, (iv) the extent to which economies of scale
would be realized if and as the Trust grows and whether the fee levels in the
Advisory Agreement reflect these economies of scale, and (v) any additional
benefits to the Adviser from its relationship with the Trust.
In considering the nature, extent and quality of the services provided
by the Adviser, the Trustees relied on their prior direct experience as Trustees
of the Trust as well as on the materials provided at the Meeting. The Board
reviewed the Adviser's responsibilities under the Advisory Agreement and noted
the experience and expertise that would be appropriate to expect of an adviser
to the Portfolio, which is an index fund. The Trustees reviewed the background
and experience of the Adviser's senior management, including those individuals
responsible for the investment and compliance operations relating to the
investments of the Portfolio, and the responsibilities of the latter with
respect to the Portfolio. They also considered the resources, operational
structures and practices of the Adviser in managing the Portfolio's investments,
in monitoring and securing the Portfolio's compliance with its investment
objective and policies with respect to its investments and with applicable laws
and regulations, and in seeking best execution of portfolio transactions. The
Trustees also considered information about the Adviser's overall investment
management business, noting that the Adviser manages assets for a variety of
institutional investors and that the Adviser and its affiliates had over $1.99
trillion in assets under management as of September 30, 2007, including over
$140 billion managed by the Adviser. They reviewed information regarding State
Street's business continuity and disaster recovery program. Drawing upon the
materials provided and their general knowledge of the business of the Adviser,
the Trustees determined that they were satisfied with the experience, resources
and strength of the Adviser in the management of index products. As discussed
more fully below, they also determined that the advisory fee for the Portfolio
was fair and reasonable and that its performance and expense ratio was
satisfactory. On the basis of this review, the Trustees determined that the
nature and extent of the services provided by the Adviser to the Portfolio was
appropriate, had been of uniformly high quality, and could be expected to remain
so.
46
STATE STREET EQUITY 500 INDEX PORTFOLIO
GENERAL INFORMATION
DECEMBER 31, 2007 (UNAUDITED)
The Trustees noted that, in view of the investment objective of the
Portfolio, the investment performance was satisfactory. The Trustees noted that
the performance of the Portfolio in absolute terms was not of the importance
that normally attaches to that of actively-managed funds. Of more importance to
the Trustees was the extent to which the Portfolio achieved its objective of
replicating, before expenses, the total return of the S&P 500 Index. Drawing
upon information provided at the Meeting and upon reports provided to the
Trustees by the Adviser throughout the preceding year, they determined that the
Portfolio had in fact tracked the index within an acceptable range of tracking
error. They concluded that the performance the Portfolio was satisfactory.
The Trustees considered the profitability to the Adviser and its
affiliate, State Street, of the advisory relationships with the Trust. The
Trustees had been provided with data regarding the profitability to the Adviser
and its affiliated service providers with respect to the Portfolio individually,
and on an aggregate basis, for the year ended June 30, 2007. Having discussed
with representatives of the Adviser the methodologies used in computing the
costs that formed the bases of the profitability calculations, they concluded
that these methodologies were reasonable and turned to the data provided. After
discussion and analysis they concluded that, to the extent that the Adviser's
and State Street's relationships with the Trust had been profitable during the
period for which information had been provided, the profitability was in no case
such as to render the advisory fee excessive.
In order better to evaluate the Portfolio's advisory fee, the Trustees
had requested comparative information from Lipper Inc. with respect to fees paid
by, and expense ratios of, similar funds. The Trustees found that that the
Portfolio's advisory fee and total expense ratio were lower than the average for
its peer group. The Board determined that the Adviser's fees were fair and
reasonable.
In considering whether the Adviser benefits in other ways from its relationship
with the Trust, the Trustees also considered whether the Adviser's affiliates
may benefit from the Trust' relationship with State Street as fund
administrator, custodian and transfer agent and the Portfolios' use of State
Street Global Markets to perform certain brokerage services. They noted that the
Adviser utilizes no soft-dollar arrangements in connection with the Portfolio's
brokerage transactions. The Trustees concluded that, to the extent that the
Adviser or its affiliates derive other benefits from their relationships with
the Trust, those benefits are not so significant as to render the Adviser's fees
excessive.
The Board also considered the extent to which economies of scale may
be realized by the Portfolio as assets grow and whether the Portfolio's fee
levels reflect such economies of scale, if any, for the benefit of investors. In
considering the matter, the Board determined that, to the extent economies of
scale were in fact realized, such economies of scale were shared with the
Portfolio by virtue of advisory fees of comparatively low levels that subsumed
economies of scale in the fees themselves. The Trustees also recognized,
however, that should sustained, substantial asset growth be realized in the
future, it might be necessary to consider additional measures.
47
STATE STREET EQUITY 500 INDEX PORTFOLIO
TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED)
The table below includes information about the Trustees and Executive Officers
of the State Street Master Funds, including their:
- business addresses and ages;
- principal occupations during the past five years; and
- other directorships of publicly traded companies or funds.
NUMBER OF
FUNDS IN
FUND
COMPLEX
TERM OF OFFICE OVERSEEN
NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION BY OTHER DIRECTORSHIPS HELD BY
AND DATE OF BIRTH ("DOB") WITH TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE* TRUSTEE
- ------------------------- ---------------- ---------------- ---------------------- --------- ---------------------------------
INDEPENDENT TRUSTEES
Michael F. Holland Trustee and Term: Indefinite Chairman, Holland & 22 Trustee, State Street
Holland & Company, LLC Chairman of the Company L.L.C. Institutional Investment Trust;
375 Park Avenue Board Elected: 7/99 (investment adviser) Director, the Holland Series Fund,
New York, NY 10152 (1995 - present). Inc.; Director, The China Fund,
Inc.; Chairman and Trustee,
DOB: July 7, 1944 Scottish Widows Investment
Partnership Trust; and Director,
Reaves Utility Income Fund
William L. Boyan Trustee Term: Indefinite Trustee of Old Mutual 22 Trustee, State Street
State Street Master Funds South Africa Master Institutional Investment Trust;
P.O. Box 5049 Elected: 7/99 Trust (investments) and Trustee, Old Mutual South
Boston, MA 02206 (1995 - present); Africa Master Trust
Chairman emeritus,
DOB: January 20, 1937 Children's Hospital
(1984 - present);
Director, Boston Plan
For Excellence
(non-profit) (1994 -
present); President
and Chief Operations
Officer, John Hancock
Mutual Life Insurance
Company (1959 - 1999).
Mr. Boyan retired in
1999.
Rina K. Spence Trustee Term: Indefinite President of 22 Trustee, State Street
State Street Master Funds SpenceCare Institutional Investment Trust;
P.O. Box 5049 Elected: 7/99 International LLC Director, Berkshire Life
Boston, MA 02206 (1998 - present); Insurance Company of America; and
Member of the Advisory Director, IEmily.com
DOB: October 24, 1948 Board, Ingenium Corp.
(technology company)
(2001 - present);
Chief Executive
Officer, IEmily.com
(internet company)
(2000 - 2001); Chief
Executive Officer of
Consensus
Pharmaceutical, Inc.
(1998 - 1999);
Founder, President and
Chief Executive
Officer of Spence
Center for Women's
Health (1994 - 1998);
Trustee, Eastern
Enterprise (utilities)
(1988 - 2000).
Douglas T. Williams Trustee Term: Indefinite Executive Vice 22 Trustee, State Street
State Street Master Funds President of Chase Institutional Investment Trust
P.O. Box 5049 Elected: 7/99 Manhattan Bank (1987 -
Boston, MA 02206 1999). Mr. Williams
retired in 1999.
DOB: December 23, 1940
* The "Fund Complex" consists of eleven series of the Trust and eleven series
of State Street Institutional Investment Trust.
48
STATE STREET EQUITY 500 INDEX PORTFOLIO
TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED)
NUMBER OF
FUNDS IN
FUND
COMPLEX
TERM OF OFFICE OVERSEEN
NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION BY OTHER DIRECTORSHIPS HELD BY
AND DATE OF BIRTH ("DOB") WITH TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE* TRUSTEE
- ------------------------- ---------------- ---------------- ---------------------- --------- ---------------------------------
INTERESTED TRUSTEES(1)
James E. Ross Trustee/ Term: Indefinite President, SSgA Funds 22 Trustee, State Street
SSgA Funds President Management, Inc. (2005 Institutional Investment Trust;
Management, Inc. Elected - present); Principal, Trustee, SPDR(R) Series Trust;
State Street Trustee: 2/07 SSgA Funds Management, Trustee, SPDR(R) Index Shares
Financial Center Inc. (2001 - 2005); Trust and Trustee, Select Sector
One Lincoln Street Elected Senior Managing SPDR(R) Trust
Boston, MA 02111-2900 President: 4/05 Director, State Street
Global Advisors (March
2006 - present);
DOB: June 24, 1965 Principal, State
Street Global Advisers
(2000 - 2006).
OFFICERS
Gary L. French Treasurer Term: Indefinite Senior Vice President -- --
State Street Bank and of State Street Bank
Trust Company Elected: 5/05 and Trust Company
2 Avenue de Lafayette (2002 - present);
Boston, MA 02111 Managing Director,
Deutsche Bank
DOB: July 4, 1951 (including its
predecessor, Scudder
Investments), Fund
Operations Unit (2001
- 2002); President,
UAM Fund Services
(1995 - 2001).
Julie Piatelli Interim Chief Term: Indefinite Principal and Senior -- --
SSgA Funds Compliance Compliance and Risk
Management, Inc. Officer Elected: 7/07 Management Officer,
State Street Financial SSgA Funds Management,
Center Inc. (2004-present),
One Lincoln Street Vice President State
Boston, MA 02111 Street Global Advisors
(2004-present);
Manager,
PricewaterhouseCoopers
LLP (1999-2004).
DOB: August 5, 1967
Nancy L. Conlin Secretary Term: Indefinite Vice President and -- --
State Street Bank and Managing Counsel,
Trust Company Elected: 9/07 State Street Bank and
2 Avenue de Lafayette Trust Company (2007 -
Boston, MA 02111 present); General
Counsel to Plymouth
Rock Companies
(2004-2007); and U.S.
Chief Counsel to Sun
Life Financial (2002 -
2004).
DOB: December 11, 1953
(1) Mr. Ross is an Interested Trustee because of his employment by SSgA Funds
Management, Inc., an affiliate of the Trust.
The Statement of Additional Information includes additional information about
the Trustees and is available, without charge, upon request, by calling (toll
free) 877-521-4083.
49
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
This summary schedule of investments is presented to help investors focus on the
Series' principal holdings. It includes the Series'50 largest holdings, each
investment of any issuer that exceeds 1% of the Series' net assets and
affiliated issues. "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 website at
http://www.sec.gov.
PERCENT
OF NET
INDUSTRY SHARES HELD COMMON STOCKS VALUE ASSETS
- -------- ------------ ------------------------ ------------ -------
Advertising Agencies Other Securities $ 2,728,6270 0.4%
Aerospace Other Securities 4,763,033 0.8
Agriculture, Fishing & Ranching Other Securities 419,000 0.2
Air Transport Other Securities 4,495,267 0.7
Aluminum Other Securities 1,302,854 0.2
Auto Parts: After Market Other Securities 643,495 0.1
Auto Parts: Original Equipment Other Securities 3,254,638 0.5
Auto, Trucks & Parts Other Securities 710,402 0.1
Banks: New York City Other Securities 543,912 0.1
Banks: Outside New York City Other Securities 32,026,967 5.1
Beverage: Brewers (Wineries) Other Securities 176,955 0.0
Beverage: Soft Drinks Other Securities 851,326 0.1
Biotechnology Research & Production 16,980 Alexion Pharmaceuticals,
Inc.(a) 1,274,009 0.2
26,800 OSI Pharmaceuticals,
Inc.(a) 1,300,068 0.2
Other Securities 14,041,789 2.2
------------ -----
16,615,866 2.6
------------ -----
Building Materials Other Securities 3,201,191 0.5
Building: Cement Other Securities 57,276 0.0
Building: Heating & Plumbing Other Securities 383,350 0.1
Building: Miscellaneous Other Securities 1,103,150 0.2
Building: Roofing & Wallboard Other Securities 189,075 0.0
Cable Television Services Other Securities 652,385 0.1
Casinos & Gambling 24,500 Bally Technologies, Inc.
(a) 1,218,140 0.2
Other Securities 2,818,047 0.4
------------ ------
4,036,187 0.6
------------ -----
Chemicals 25,500 CF Industries Holdings,
Inc. 2,806,530 0.4
54,300 Hercules, Inc. 1,050,705 0.2
Other Securities 8,542,282 1.4
------------ -----
12,399,517 2.0
------------ -----
Coal Other Securities 1,367,331 0.2
Commercial Information Services Other Securities 1,011,999 0.2
Communications & Media Other Securities 945,209 0.1
Communications Technology 67,500 Foundry Networks,
Inc.(a) 1,182,600 0.2
Other Securities 15,324,146 2.4
------------ -----
16,506,746 2.6
------------ -----
Computer Services, Software & Systems 36,064 Ansys, Inc.(a) 1,495,213 0.2
16,700 Equinix, Inc.(a)(g) 1,687,869 0.3
18,798 Micros Systems, Inc.(a) 1,318,868 0.2
67,495 Nuance Communications,
Inc.(a) 1,260,807 0.2
75,339 SAIC, Inc.(a) 1,515,821 0.2
42,500 Sybase, Inc.(a) 1,108,825 0.2
Other Securities 28,297,111 4.5
------------ -----
36,684,514 5.8
------------ -----
Computer Technology Other Securities 5,620,994 0.9
Construction Other Securities 1,874,246 0.3
Consumer Electronics Other Securities 5,445,177 0.9
Consumer Products Other Securities 3,263,801 0.5
Containers & Packaging: Metals & Glass 32,200 AptarGroup, Inc. 1,317,302 0.2
Other Securities 1,884,525 0.3
------------ -----
3,201,827 0.5
------------ -----
Containers & Packaging: Paper & Plastic Other Securities 386,317 0.1
Copper Other Securities 466,217 0.1
Cosmetics Other Securities 1,107,539 0.2
See notes to Financial Statements
50
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PERCENT
OF NET
INDUSTRY SHARES HELD COMMON STOCKS VALUE ASSETS
- -------- ------------ ------------------------ ------------ -------
Diversified Financial Services Other Securities $ 4,261,213 0.7%
Diversified Materials & Processing 43,862 Hexcel Corp.(a) 1,064,969 0.2
Other Securities 4,554,140 0.7
------------ -----
5,619,109 0.9
------------ -----
Drug & Grocery Store Chains Other Securities 3,628,904 0.6
Drugs & Pharmaceuticals 43,048 BioMarin
Pharmaceuticals,
Inc.(a) 1,523,899 0.3
37,000 MGI Pharma, Inc.(a) 1,499,610 0.2
24,820 Onyx Pharmaceuticals,
Inc.(a) 1,380,488 0.2
35,715 Perrigo Co. 1,250,382 0.2
Other Securities 14,329,127 2.3
------------ -----
19,983,506 3.2
------------ -----
Education Services 27,800 DeVry, Inc. 1,444,488 0.2
6,720 Strayer Education, Inc. 1,146,298 0.2
Other Securities 1,688,070 0.3
------------ -----
4,278,856 0.7
------------ -----
Electrical & Electronics Other Securities 1,884,584 0.3
Electrical Equipment & Components1 2,816 Genlyte Group, Inc.(a) 1,220,083 0.2
Other Securities 5,134,991 0.8
------------ -----
6,355,074 1.0
------------ -----
Electrical: Household Appliance Other Securities 102,687 0.0
Electronics 61,400 Flir Systems, Inc.(a)(g) 1,921,820 0.3
Other Securities 2,874,730 0.5
------------ -----
4,796,550 0.8
------------ -----
Electronics: Instruments, Gauges & Meters 13,602 Itron, Inc.(a)(g) 1,305,384 0.2
Other Securities 580,382 0.1
------------ -----
1,885,766 0.3
------------ -----
Electronics: Medical Systems 55,720 Hologic, Inc.(a) 3,824,621 0.6
24,864 Illumina, Inc.(a) 1,473,441 0.2
Other Securities 5,069,639 0.8
------------ ------
10,367,701 1.6
------------ -----
Electronics: Semi-Conductors/Components Other Securities 12,771,830 2.0
Electronics: Technology Other Securities 3,139,301 0.5
Energy Miscellaneous Other Securities 4,747,794 0.7
Engineering & Contracting Services Other Securities 2,159,633 0.3
Entertainment Other Securities 1,870,208 0.3
Fertilizers 43,000 Terra Industries,
Inc.(a) 2,053,680 0.3
Finance Companies Other Securities 680,987 0.1
Finance: Small Loan Other Securities 708,749 0.1
Financial Data Processing Services & Systems Other Securities 4,767,287 0.8
Financial Information Services Other Securities 2,118,294 0.3
Financial Miscellaneous 29,036 Sotheby's Holdings, Inc.
Class A 1,132,942 0.2
Other Securities 2,899,541 0.4
------------ -----
4,032,483 0.6
------------ -----
Foods Other Securities 6,911,198 1.1
Forest Products Other Securities 471,053 0.1
Forms & Bulk Printing Services Other Securities 462,527 0.1
Funeral Parlors & Cemeteries Other Securities 400,714 0.1
Glass Other Securities 239,540 0.0
Gold 211,900 Coeur d'Alene Mines
Corp.(a)(g) 1,046,786 0.1
Other Securities 442,016 0.1
------------ -----
1,488,802 0.2
------------ -----
Health Care Facilities Other Securities 3,631,051 0.6
Health Care Management Services Other Securities 5,523,584 0.9
Health Care Services Other Securities 4,826,867 0.8
Homebuilding Other Securities 674,741 0.1
Hotel/Motel Other Securities 366,094 0.1
Household Furnishings Other Securities 2,524,333 0.4
Identification Control & Filter Devices Other Securities 3,986,459 0.6
Industrial Products Other Securities 143,451 0.0
Insurance: Life Other Securities 2,710,464 0.4
Insurance: Multi-Line Other Securities 6,904,069 1.1
See notes to Financial Statements
51
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PERCENT
OF NET
INDUSTRY SHARES HELD COMMON STOCKS VALUE ASSETS
- -------- ------------ ------------------------ ------------ -------
Insurance: Property-Casualty 41,000 Aspen Insurance Holdings
Ltd. $ 1,182,440 0.2%
Other Securities 9,914,033 1.6
------------ -----
11,096,473 1.8
------------ -----
Investment Management Companies 39,200 Waddell & Reed
Financial, Inc.
Class A 1,414,728 0.2
Other Securities 4,408,431 0.7
------------ -----
5,823,159 0.9
------------ -----
Jewelry, Watches & Gemstones Other Securities 1,083,344 0.2
Leisure Time Other Securities 2,802,955 0.4
Machine Tools Other Securities 117,855 0.0
Machinery & Engineering Other Securities 545,286 0.1
Machinery: Agricultural Other Securities 427,351 0.1
Machinery: Construction & Handling Other Securities 687,744 0.1
Machinery: Engines Other Securities 718,762 0.1
Machinery: Industrial/Specialty Other Securities 5,042,725 0.8
Machinery: Oil Well Equipment & Services 27,972 Exterran Holdings,
Inc.(a) 2,288,110 0.4
Other Securities 7,689,714 1.2
------------ -----
9,977,824 1.6
------------ -----
Machinery: Specialty 17,400 Bucyrus International,
Inc. 1,729,386 0.3
Other Securities 651,526 0.1
------------ -----
2,380,912 0.4
------------ -----
Manufactured Housing Other Securities 502,108 0.1
Manufacturing Other Securities 350,127 0.1
Medical & Dental Instruments & Supplies 32,043 Immucor, Inc.(a) 1,089,142 0.2
31,230 Inverness Medical
Innovations, Inc.(a) 1,754,501 0.3
12,060 Ventana Medical Systems,
Inc.(a) 1,051,994 0.1
Other Securities 15,124,673 2.4
------------ -----
19,020,310 3.0
------------ -----
Medical Services Other Securities 1,980,529 0.3
Metal Fabricating Other Securities 6,136,545 1.0
Metals & Minerals Miscellaneous Other Securities 4,650,783 0.7
Milling: Fruit & Grain Processing Other Securities 49,926 0.0
Miscellaneous Business & Consumer Discretionary Other Securities 129,240 0.0
Miscellaneous Consumer Staples Other Securities 240,445 0.0
Miscellaneous Health Care Other Securities 45,510 0.0
Miscellaneous Materials & Commodities Other Securities 1,028,898 0.2
Miscellaneous Materials & Processing Other Securities 1,590,450 0.3
Miscellaneous Producer Durables Other Securities 351,812 0.1
Miscellaneous Technology Other Securities 1,262,595 0.2
Multi-Sector Companies Other Securities 2,576,879 0.4
Office Furniture & Business Equipment Other Securities 1,895,252 0.3
Offshore Drilling 12,254 Atwood Oceanics, Inc.(a) 1,228,341 0.2
Other Securities 1,055,742 0.2
------------ -----
2,284,083 0.4
------------ -----
Oil: Crude Producers 76,062 PetroHawk Energy
Corp.(a) 1,316,633 0.2
19,610 Whiting Petroleum
Corp.(a) 1,130,713 0.2
Other Securities 14,525,155 2.3
------------ -----
16,972,501 2.7
------------ -----
Oil: Integrated Domestic Other Securities 765,919 0.
Oil: Integrated International Other Securities 119,505 0.0
Paints & Coatings Other Securities 1,054,877 0.2
Paper Other Securities 2,526,225 0.4
Photography Other Securities 61,230 0.0
Plastics Other Securities 215,081 0.0
Pollution Control & Environmental Services Other Securities 1,576,172 0.2
Power Transmission Equipment Other Securities 649,572 0.1
Printing & Copying Services Other Securities 1,652,220 0.3
Production Technology Equipment Other Securities 7,204,415 1.1
Publishing: Miscellaneous Other Securities 1,332,752 0.2
Publishing: Newspapers Other Securities 1,643,523 0.3
Radio & TV Broadcasters Other Securities 1,990,850 0.3
Railroad Equipment Other Securities 1,170,329 0.2
Railroads Other Securities 369,197 0.1
See notes to Financial Statements
52
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PERCENT
OF NET
INDUSTRY SHARES HELD COMMON STOCKS VALUE ASSETS
- -------- ------------ ------------------------ ------------ -------
Real Estate Other Securities $ 1,497,879 0.2%
Real Estate Investment Trusts (REITs) 14,876 Alexandria Real Estate
Equities, Inc. 1,512,443 0.2
29,600 Anthracite Capital,
Inc.(c)(e) 214,304 0.0
41,859 Nationwide Health
Properties, Inc. 1,313,117 0.2
45,300 Realty Income Corp.(g) 1,224,006 0.2
Other Securities 29,429,964 4.7
------------ -----
33,693,834 5.3
------------ -----
Recreational Vehicles & Boats Other Securities 1,406,916 0.2
Rental & Leasing Services: Commercial Other Securities 555,968 0.1
Rental & Leasing Services: Consumer Other Securities 1,532,664 0.2
Restaurants 14,800 Chipotle Mexican
Grill,Inc.Class B (a) 1,821,140 0.3
Other Securities 6,544,740 1.0
------------ -----
8,365,880 1.3
------------ -----
Retail 17,516 Priceline.com, Inc.(a) 2,011,888 0.3
Other Securities 16,232,956 2.6
------------ -----
18,244,844 2.9
------------ -----
Savings & Loan Other Securities 6,668,020 1.1
Scientific Equipment & Suppliers Other Securities 1,155,098 0.2
Securities Brokerage & Services Other Securities 3,262,926 0.5
Services: Commercial 21,741 FTI Consulting, Inc.(a) 1,340,115 0.2
Other Securities 19,209,518 3.1
------------ -----
20,549,633 3.3
------------ -----
Shipping Other Securities 4,288,465 0.7
Shoes Other Securities 3,332,108 0.5
Steel Other Securities 1,851,699 0.3
Sugar Other Securities 90,096 0.0
Telecommunications Equipment 40,900 Polycom, Inc.(a) 1,136,202 0.2
Other Securities 2,935,316 0.4
------------ ------
4,071,518 0.6
------------ -----
Textile Products Other Securities 419,767 0.1
Textiles Apparel Manufacturers Other Securities 4,648,888 0.7
Tires & Rubber Other Securities 807,392 0.1
Tobacco Other Securities 1,334,287 0.2
Toys Other Securities 1,062,116 0.2
Transportation Miscellaneous Other Securities 1,226,959 0.2
Truckers Other Securities 2,326,912 0.4
Utilities: Cable TV & Radio Other Securities 130,815 0.0
Utilities: Electrical 19,800 ITC Holdings Corp. 1,117,116 0.2
44,600 Westar Energizing. 1,156,924 0.2
Other Securities 8,104,134 1.3
------------ -----
10,378,174 1.7
------------ -----
Utilities: Gas Distributors Other Securities 5,327,629 0.9
Utilities: Miscellaneous Other Securities 612,466 0.1
Utilities: Telecommunications 67,200 Time Warner Telecom,
Inc. Class A (a)(g) 1,363,488 0.2
Other Securities 6,470,911 1.0
------------ -----
7,834,399 1.2
------------ -----
Utilities: Water Other Securities 1,179,339 0.2
Wholesale & International Trade Other Securities 953,964 0.2
Wholesalers 52,400 LKQ Corp.(a) 1,101,448 0.2
Other Securities 1,324,150 0.2
------------ -----
2,425,598 0.4
------------ -----
TOTAL COMMON STOCKS
(COST -- $525,261,156) 587,256,036 93.2
------------ -----
See notes to Financial Statements
53
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PERCENT
OF NET
INDUSTRY SHARES HELD EXCHANGE-TRADED FUNDS VALUE ASSETS
- -------- ------------ ------------------------ ------------ -------
169,590 iShares Russell 2000
Index Fund (g) $ 12,915,974 2.0%
TOTAL EXCHANGE-TRADED
FUNDS
------------ -----
(COST -- $12,334,264) 12,915,974 2.0
------------ -----
MUTUAL FUNDS
2,900 BlackRock Kelso Capital
Corp.(c) 44,312 0.0
Other Securities 763,142 0.1
TOTAL MUTUAL FUNDS
------------ -----
(COST -- $983,037) 807,454 0.1
------------ -----
RIGHTS
Chemicals Other Securities 0 0.0
TOTAL RIGHTS
------------- -----
(COST -- $0)
0 0.0
------------ -----
OTHER INTERESTS (b)
Oil: Crude Producers Other Securities 0 0.0
--------------------
TOTAL OTHER INTERESTS
(COST -- $0)
0 0.0
------------ -----
BENEFICIAL
INTEREST SHORT-TERM SECURITIES
------------ ------------------------
$ 33,226,793 BlackRock Liquidity
Series, LLC Cash
Sweep
Series,5.04% (c)(f) 33,226,793 5.3
83,808,817 BlackRock Liquidity
Series, LLC Money
Market
Series,4.78% (c)(d)(f) 83,808,817 13.3
TOTAL SHORT-TERM
SECURITIES
------------ -----
(COST -- $117,035,610) 117,035,610 18.6
TOTAL INVESTMENTS
(COST -- $655,614,067*) 718,015,074 113.9
LIABILITIES IN EXCESS OF OTHER ASSETS (87,620,790) (13.9)
NET ASSETS ------------ -----
$630,394,284 100.0%
============ =====
* The cost and unrealized appreciation (depreciation) of investments, as of
December 31, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost $661,516,435
Net unrealized appreciation ------------
Gross unrealized appreciation $122,933,165
Gross unrealized depreciation (66,434,526)
Net unrealized appreciation ------------
$ 56,498,639
============
(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/
AFFILIATE PURCHASE COST SALE COST REALIZED LOSS DIVIDEND INCOME
- --------- ------------- ------------ ------------- ---------------
BlackRock Liquidity Series, LLC Cash Sweep Series -- $(75,586,157)** -- $3,154,441
BlackRock Liquidity Series, LLC Money Market Series $ 49,642,337* -- -- $ 828,965
Anthracite Capital, Inc. $ 79,398 $ 8,674 $(719) $ 30,528
BlackRock Kelso Capital Corp. $ 42,004 -- -- $ 946
* Represents net purchase cost.
** Represents net sale cost.
(d) Security was purchased with the cash proceeds from securities loans.
(e) Security held as collateral in connection with open financial futures
contracts.
See notes to Financial Statements
54
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
(f) Represents the current yield as of December 31, 2007.
(g) Security, or a portion of security, is on loan.
- "Other Securities" represent 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 of, in this category
are either held as collateral in connection with open financial
futures contracts or are out on loan.
- 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. Industries are
shown as a percent of net assets. These industry classifications
are unaudited.
- Financial futures contracts purchased as of December 31, 2007,
were as follows:
UNREALIZED
NUMBER OF CONTRACTS ISSUE EXPIRATION DATE FACE VALUE APPRECIATION
- ------------------- ------------------ --------------- ----------- ------------
74 Russell 2000 Index March 2008 $28,101,735 $469,605
See notes to Financial Statements
55
MASTER SMALL CAP INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2007
ASSETS:
Investments in unaffiliated securities, at value
(including securities loaned of $79,098,563)
(identified cost -- $538,209,313 .............. $600,720,848
Investments in affiliated securities, at value
(identified cost -- $117,404,754 .............. 117,294,226
Receivables:
Securities .................................... $ 3,056,557
Contributions ................................. 2,291,452
Dividends ..................................... 906,596
Securities lending ............................ 86,699 6,341,304
------------
Prepaid expenses and other assets ................ 22,910
------------
TOTAL ASSETS ..................................... 724,379,288
------------
LIABILITIES:
Collateral on securities loaned, at value ........ 83,808,817
Bank overdraft ................................... 70,793
Payables:
Withdrawals ................................... 7,976,744
Securities purchased .......................... 1,964,209
Variation margin .............................. 62,238
Other affiliates .............................. 5,932
Investment adviser ............................ 579 10,009,702
-----------
Accrued expenses and other liabilities ........... 95,692
------------
TOTAL LIABILITIES ................................ 93,985,004
------------
NET ASSETS:
Net Assets ....................................... $630,394,284
============
NET ASSETS CONSIST OF
Investors' capital ............................... $567,523,672
Unrealized appreciation -- net ................... 62,870,612
------------
NET ASSETS ....................................... $630,394,284
============
See notes to Financial Statements
56
MASTER SMALL CAP INDEX SERIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
INVESTMENT INCOME:
Dividends (net of $2,176 foreign withholding tax
and $31,474 from affiliates) ..................... $ 7,305,905
Interest from affiliates ............................ 3,154,441
Securities lending -- net ........................... 828,965
------------
TOTAL INCOME ........................................... 11,289,311
EXPENSES:
Accounting services ................................. $ 115,617
Professional fees ................................... 109,527
Custodian fees ...................................... 72,998
Investment advisory fees ............................ 64,480
Directors' fees and expenses ........................ 9,617
Printing and shareholder reports .................... 888
Pricing fees ........................................ 120
Other ............................................... 11,536
------------
Total expenses before reimbursement .................... 384,783
Reimbursement of expenses ........................... (4,886)
------------
TOTAL EXPENSES AFTER REIMBURSEMENT ..................... 379,897
------------
INVESTMENT INCOME -- NET ............................... 10,909,414
------------
REALIZED & UNREALIZED GAIN (LOSS) -- NET:
Realized gain (loss) on:
Investments (including $(719) from affiliates)
-- net ........................................... 24,927,695
Financial futures contracts -- net .................. (3,895,727) 21,031,968
------------
Change in unrealized appreciation/depreciation on:
Investments -- net .................................. (46,314,707)
Financial futures contracts -- net .................. 999,848 (45,314,859)
------------ ------------
TOTAL REALIZED AND UNREALIZED LOSS -- NET .............. (24,282,891)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $(13,373,477)
============
See notes to Financial Statements
57
MASTER SMALL CAP INDEX SERIES
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended
December 31,
-----------------------------
2007 2006
------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS
Investment income -- net ...................................... $ 10,909,414 $ 7,477,587
Realized gain -- net .......................................... 21,031,968 25,599,413
Change in unrealized appreciation/depreciation -- net ......... (45,314,859) 31,237,076
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... (13,373,477) 64,314,076
------------- -------------
CAPITAL TRANSACTIONS
Proceeds from contributions ................................... 443,692,332 555,696,889
Fair value of withdrawals ..................................... (361,297,148) (428,783,737)
------------- -------------
NET INCREASE IN NET ASSETS DERIVED FROM CAPITAL TRANSACTIONS ..... 82,395,184 126,913,152
------------- -------------
NET ASSETS
Total increase in net assets .................................. 69,021,707 191,227,228
Beginning of year ............................................. 561,372,577 370,145,349
------------- -------------
END OF YEAR ................................................... $ 630,394,284 $ 561,372,577
============= =============
See notes to Financial Statements
58
MASTER SMALL CAP INDEX SERIES
FINANCIAL HIGHLIGHTS
THE FOLLOWING RATIOS HAVE BEEN DERIVED FROM INFORMATION PROVIDED IN THE
FINANCIAL STATEMENTS.
For the Year Ended December 31,
----------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN ................... (1.46%) 18.13% 4.63% 18.15% 47.11%
-------- -------- -------- -------- --------
Ratios to Average Net Assets
Expenses, net of reimbursement ......... .06% .07% .07% .08% .09%
-------- -------- -------- -------- --------
Expenses ............................... .06% .07% .08% .08% .10%
-------- -------- -------- -------- --------
Investment income -- net ............... 1.69% 1.55% 1.17% 1.11% 1.13%
-------- -------- -------- -------- --------
Supplemental Data
Net assets, end of year (in thousands).. $630,394 $561,373 $370,145 $365,661 $335,659
-------- -------- -------- -------- --------
Portfolio turnover ..................... 26% 40% 37% 38% 29%
-------- -------- -------- -------- --------
59
MASTER SMALL CAP INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
1. SIGNIFICANT ACCOUNTING POLICIES:
Master Small Cap Index Series (the "Series"), a non-diversified
management investment company, is part of Quantitative Master Series LLC (the
"Master LLC"). The Master LLC is registered under the Investment Company Act of
1940, as amended, and is organized as a Delaware limited liability company.
Prior to June 15, 2007, the Master LLC was organized as a Delaware statutory
trust. The Limited Liability Company Agreement permits the Directors (and prior
to June 15, 2007, the Declaration of Trust permitted the Trustees) to issue
non-transferable interests in the Master LLC subject to certain limitations.
Throughout this report the Trust and the Master LLC are referred to as the
Master LLC and the Board of Trustees of the Trust and the Board of Directors of
the Master LLC are referred to as the Board of Directors. The financial
statements of the Series are prepared in conformity with U.S. generally accepted
accounting principles, which may require the use of management accruals and
estimates. Actual results may differ from these estimates. 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.
Effective September 4, 2007, exchange-traded options are valued at the
mean between the last bid and ask prices at the close of the options market in
which the options trade and previously were valued at the last sales price as of
close of options trading on applicable exchanges. Options traded in the OTC
market are valued at the last asked price (options written) and the last bid
price (options purchased). Swap agreements are valued based upon quoted fair
valuations 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, including valuations furnished by the
pricing services retained by the Master LLC, 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 of the Board of
Directors. Such valuations and procedures will be reviewed periodically by the
Board of Directors.
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 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
60
MASTER SMALL CAP INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
(for example, a company announcement, market volatility or a natural disaster)
occur during such periods that are expected to materially affect the value of
such securities, those securities will be valued at their fair value as
determined in good faith by the Board of Directors or by BlackRock Advisors, LLC
(the "Manager"), an indirect, wholly owned subsidiary of BlackRock, Inc., using
a pricing service and/or procedures approved by the Board of Directors.
(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 due to an unfavorable change
in the price of the underlying security or index, or if the counterparty does
not perform under the contract. The counterparty, for certain instruments, may
pledge cash or securities as collateral.
- 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.
(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.
61
MASTER SMALL CAP INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
(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 mount 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 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) Bank overdraft
The Series recorded a bank overdraft which resulted from failed
trades.
(g) 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 Series, and has determined that the
adoption of FIN 48 does not have a material impact on the Series' financial
statements. The Series files U.S. federal and various state and local tax
returns. No income tax returns are currently under examination. The statute of
limitations on the Series' U.S. federal tax returns remains open for the years
ended December 31, 2004 through December 31, 2006. The statute of limitations on
the Series' state and local tax returns may remain open for an additional year
depending upon the jurisdiction.
In September 2006, Statement of Financial Accounting Standards No.157,
"Fair Value Measurements" ("FAS 157"), was issued and is effective for fiscal
years beginning after November 15, 2007. FAS 157 defines fair value, establishes
a framework for measuring fair value and expands disclosures about fair value
measurements. The impact on the Series' financial statement disclosures, if any,
is currently being assessed.
In addition, in February 2007, Statement of Financial Accounting
Standards No.159, "The Fair Value Option for Financial Assets and Financial
Liabilities" ("FAS 159"), was issued and is effective for fiscal years beginning
after November 15, 2007. Early adoption is permitted as of the beginning of a
fiscal year that begins on or before November 15, 2007, provided the entity also
elects to apply the provisions of FAS 157. FAS159 permits entities to choose to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value. FAS 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. The impact on the Series' financial
statement disclosures, if any, is currently being assessed.
62
MASTER SMALL CAP INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES:
The Master LLC, on behalf of the Series, has entered into an
Investment Advisory Agreement with the Manager. Merrill Lynch & Co., Inc.
("Merrill Lynch") and The PNC Financial Services Group, Inc. are the principal
owners of BlackRock, Inc.
The Manager is responsible for the management of the Series'
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 0.01% 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 0.08%. This arrangement has a one-year term and is
renewable. For the year ended December 31, 2007, the Manager earned $64,480, of
which $4,886 was waived.
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 the sub-adviser for services it provides a fee that
is a percentage of the management fee paid by the Series to the Manager.
The Master LLC, on behalf of the Series, has received an exemptive
order from the Securities and Exchange Commission permitting it to lend
portfolio securities to Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"), a wholly owned subsidiary of Merrill Lynch, or its affiliates. As of
December 31, 2007, the Series loaned securities with a value of $336,134 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
year ended December 31, 2007, BIM received $251,767 in securities lending agent
fees. Merrill Lynch Trust Co., an indirect, wholly owned subsidiary of Merrill
Lynch, was the Series' custodian. Effective July 17, 2007, State Street Bank and
Trust Co. became the Series' custodian. For the year ended December 31, 2007,
the Series reimbursed the Manager $11,726 for certain accounting services.
Certain officers and/or directors of the Master LLC are officers and/or
directors of BlackRock, Inc. or its affiliates.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities,
for the year ended December 31, 2007 were $322,261,614, and$150,670,484.
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 a party to a $500,000,000
credit agreement with a group of lenders. The Series may borrow under the credit
agreement to fund shareholder redemptions and for other lawful purposes other
than for leverage. The Series may borrow up to the maximum amount allowable
under the Series' current prospectus and statement of additional information,
subject to various other legal, regulatory or contractual limits. The Series
pays a commitment fee of 0.06% per annum based on the Series' pro rata share of
the unused portion of the credit agreement. Amounts borrowed under the credit
agreement bear interest at a rate equal to, at each fund's election, the federal
funds rate plus 0.35%or a base rate as defined in the credit agreement. The
Series did not borrow under the credit agreement during the year ended December
31, 2007. On November 21, 2007, the credit agreement was renewed for one year
under substantially the same terms.
63
MASTER SMALL CAP INDEX SERIES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Investors and Board of Directors of Quantitative Master Series LLC:
We have audited the accompanying statement of assets and liabilities,
including the summary schedule of investments, of Master Small Cap Index Series,
one of the portfolios constituting Quantitative Master Series LLC(the "Master
LLC") (formerly Quantitative Master Series Trust) as of December 31,2007, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Master LLC's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Master LLC is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Master
LLC's internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2007, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Master Small Cap Index Series of Quantitative Master Series LLC as
of December 31,2007, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America.
Deloitte & Touche LLP
Princeton, New Jersey
February 22, 2008
64
MASTER SMALL CAP INDEX SERIES
PROXY RESULTS (UNAUDITED)
During the six-month period ended December 31, 2007, the holders of interests of
Master Small Cap Index Series of Quantitative Master Series LLC voted on the
following proposal, which was approved at a special meeting on September 7,
2007. This proposal was a part of the reorganization of the Board of Directors
of Quantitative Master Series LLC that took effect on November 1, 2007. A
description of the proposal and number of shares voted for each Director are as
follows:
UNITS OF INTEREST UNITS OF INTEREST
VOTED FOR WITHHELD FROM VOTING
----------------- --------------------
To elect the Board of Directors of David O. Beim, Richard S. Davis, Ronald W.
Quantitative master Series LLC: Forbes, Henry Gabbay, Dr. Matina Horner,
Rodney D. Johnson, Herbert I. London,
Cynthia A. Montgomery, Joseph P. Platt,
Jr., Robert C. Robb, Jr., Toby Rosenblatt,
Kenneth L. Urish and Frederick W. Winter 125,557,799 0
65
MASTER SMALL CAP INDEX SERIES
OFFICERS AND DIRECTORS (UNAUDITED)
NUMBER OF
BLACKROCK-
ADVISED
POSITION(S) LENGTH OF FUNDS AND
NAME, ADDRESS HELD WITH TIME PORTFOLIOS PUBLIC
AND YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS OVERSEEN DIRECTORSHIPS
- ----------------- ------------ --------- ------------------------------------------------- ------------- ---------------
NON-INTERESTED DIRECTORS*
DAVID O. BEIM Director 2007 to Professor of Finance and Economics at the 35 Funds None
40 East 52nd Street New present Columbia University Graduate School of Business 81 Portfolios
York, NY 10022 1940 since 1991; Chairman of Outward Bound USA from
1997 to 2001; Chairman of Wave Hill, Inc. from
1990 to 2006; Trustee of Phillips Exeter Academy
from 2002 to present.
RONALD W. FORBES Director and 2007 to Professor Emeritus of Finance, School of Business, 35 Funds None
40 East 52nd Street Co-Chairman present State University of New York at Albany since 2000 81 Portfolios
New York, NY 10022 1940 of the Board and Professor thereof from 1989 to 2000;
of Directors International Consultant, Urban Institute,
Washington, D.C. from 1995 to 1999.
DR. MATINA HORNER Director 2007 to Executive Vice President of Teachers Insurance 35 Funds NSTAR (electric
40 East 52nd Street present and Annuity Association and College Retirement 81 Portfolios and gas utility)
New York, NY 10022 Equities Fund from 1989 to 2003.
1939
RODNEY D. JOHNSON Director and 2007 to President, Fairmount Capital Advisors, Inc. since 35 Funds None
40 East 52nd Street Co-Chairman present 1987; Director, Fox Chase Cancer Center since 81 Portfolios
New York, NY 10022 1941 of the Board 2002; Member of the Archdiocesan Investment
of Directors Committee of the Archdiocese of Philadelphia
since 2003.
HERBERT I. LONDON Director and 2007 to Professor Emeritus, New York University since 35 Funds AIMS Worldwide,
40 East 52nd Street New Member of present 2005; John M. Olin Professor of Humanities, New 81 Portfolios Inc.
York, NY 10022 1939 the Audit York University from 1993 to 2005 and Professor (marketing)
Committee thereof from 1980 to 2005; President, Hudson
Institute since 1997 and Director thereof since
1980; Dean, Gallatin Division of New York
University from 1976 to 1993; Distinguished
Fellow, Herman Kahn Chair, Hudson Institute from
1984 to 1985; Chairman of the Board of Directors
of Vigilant Research, Inc. since 2006; Member of
the Board of Directors for Grantham University
since 2006; Director of AIMS Worldwide, Inc.
since 2006; Director of Reflex Security since
2006; Director of InnoCentive, Inc. since 2006;
Director of Cerego, LLC since 2005; Director,
Damon Corp. from 1991 to 1995; Overseer, Center
for Naval Analyses from 1983 to 1993.
CYNTHIA A. MONTGOMERY Director 2007 to Professor, Harvard Business School since 1989; 35 Funds Newell
40 East 52nd Street New present Associate Professor, J.L. Kellogg Graduate School 81 Portfolios Rubbermaid,
York, NY 10022 1952 of Management, Northwestern University from 1985 Inc.
to 1989; Associate Professor, Graduate School of (manufacturing)
Business Administration, University of Michigan
from 1979 to 1985; Director, Harvard Business
School Publishing since 2005; Director, McLean
Hospital since 2005.
JOSEPH P. PLATT, JR. Director 2007 to Partner, Amarna Corporation, LLC (private 35 Funds Greenlight
40 East 52nd Street present investment company) since 2002; Director, Jones 81 Portfolios Capital Re,
New York, NY 10022 and Brown (Canadian insurance broker) since 1998; Ltd.
1947 Director, Greenlight Capital Re, Ltd. (reinsurance
(reinsurance company) since 2004; Partner, Amarna company)
Financial Company (private investment company)
since 2005; Director and Executive Vice
President, Johnson and Higgins (insurance
brokerage) from 1990 to 1997.
* Directors serve until their resignation, removal or death, or until
December 31 of the year in which they turn 72.
66
MASTER SMALL CAP INDEX SERIES
OFFICERS AND DIRECTORS (UNAUDITED)
NUMBER OF
BLACKROCK-
ADVISED
POSITION(S) LENGTH OF FUNDS AND
NAME, ADDRESS HELD WITH TIME PORTFOLIOS PUBLIC
AND YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS OVERSEEN DIRECTORSHIPS
- ----------------- ------------ --------- ------------------------------------------------- ------------- ---------------
NON-INTERESTED DIRECTORS* (CONCLUDED)
ROBERT C. ROBB, JR. Director 2007 to Partner, Lewis, Eckert, Robb and Company 35 Funds None
40 East 52nd Street present (management and financial consulting firm) since 81 Portfolios
New York, NY 10022 1945 1981; Trustee, Medical College of Pennsylvania/
Hahnemann University from 1998 to 2002; Trustee,
EQK Realty Investors from 1994 to 2000; Director,
Tamaqua Cable Products Company from 1981 to 1998;
Director, Brynwood Partners from 1984 to 1998;
Director, The PNC Bank from 1994 to 1998;
Director, Provident National Bank from 1983 to
1993; Director Brinks, Inc. from 1981 to 1986.
TOBY ROSENBLATT Director and 2007 TO President since 1999 and Vice President -- 35 Funds A.P. Pharma,
40 East 52nd Street Vice present General Partner since 1990, Founders Investments 81 Portfolios Inc.(speciality
New York, NY 10022 1938 Chairman of Ltd. (private investments); Director, Forward pharmaceuticals)
the Management, LLC since 2007; Trustee, SSR Funds
Performance from 1990 to 2005; Trustee, Metropolitan Series
Oversight Funds, Inc. from 2001 to 2005.
Committee
KENNETH L. URISH Director and 2007 to Managing Partner, Urish Popeck & Co., LLC 35 Funds None
40 East 52nd Street New Chairman of present (certified public accountants and consultants) 81 Portfolios
York, NY 10022 1951 the Audit since 1976; External Advisory Board, The
Committee Pennsylvania State University Accounting
Department since 2001; Trustee, The Holy Family
Foundation since 2001; President and Trustee,
Pittsburgh Catholic Publishing Associates since
2003; Former Trustee, Inter-Tel from 2006 to
2007.
FREDERICK W. WINTER Director and 2007 to Professor and Dean Emeritus of the Joseph M. Katz 35 Funds None
40 East 52nd Street Member of present School of Business-- University of Pittsburgh 81 Portfolios
New York, NY 10022 the Audit since 2005 and Dean thereof from 1997 to 2005;
1945 Committee Director, Alkon Corporation (pneumatics) since
1992; Director, Indotronix International (IT
service) since 2004; Director, Tippman Sports
(recreation) since 2005.
* Directors serve until their resignation, removal or death, or until
December 31 of the year in which they turn 72.
INTERESTED DIRECTORS*
RICHARD S. DAVIS Director 2007 to Managing Director, BlackRock, Inc. since 2005; 184 Funds None
40 East 52nd Street New present Chief Executive Officer, State Street Research & 289
York, NY 10022 1945 Management Company from 2000 to 2005; Chairman of Portfolios
the Board of Trustees, State Street Research
mutual funds ("SSR Funds") from 2000 to 2005;
Senior Vice President, Metropolitan Life
Insurance Company from 1999 to 2000; Chairman,
SSR Realty from 2000 to 2004.
HENRY GABBAY Director 2007 to Consultant, BlackRock, Inc. since 2007; Managing 183 Funds None
40 East 52nd Street New present Director, BlackRock, Inc. from 1989 to June 2007; 288
York, NY 10022 1947 Chief Administrative Officer, BlackRock Advisors, Portfolios
LLC from 1998 to 2007; President of BlackRock
Funds and BlackRock Bond Allocation Target Shares
from 2005 to 2007; Treasurer of certain
closed-end funds in the BlackRock Fund complex
from 1989 to 2006.
* Messrs. Davis and Gabbay are both "interested persons," as defined in the
Investment Company Act of 1940, of the Master LLC based on their positions
with BlackRock, Inc. and its affiliates. Directors serve until their
resignation, removal or death, or until December 31 of the year in which
they turn 72.
67
MASTER SMALL CAP INDEX SERIES
OFFICERS AND DIRECTORS (UNAUDITED)
NUMBER OF
BLACKROCK-
ADVISED
POSITION(S) LENGTH OF FUNDS AND
NAME, ADDRESS HELD WITH TIME PORTFOLIOS PUBLIC
AND YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS OVERSEEN DIRECTORSHIPS
- ----------------- ------------ --------- ------------------------------------------------- ------------- ---------------
ADVISORY BOARD MEMBER
DAVID R.WILMERDING, JR.* Advisory 2007 Chairman, Wilmerding & Associates, Inc. 35 Funds Chestnut Street
40 East 52nd Street New Board Member (investment advisers) from1989 to 2005; Chairman, 81 Portfolios Exchange Fund,
York, NY 10022 1935 Coho Partners, Ltd. (investment advisers) from (open-end
2003 to 2005; Director, Beaver Management investment
Corporation. company)
* David R.Wilmerding, Jr. resigned from the Advisory Board of the Master LLC,
effective December 31, 2007.
POSITION(S) LENGTH OF
NAME, ADDRESS HELD WITH TIME
AND YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ----------------- ------------ --------- ----------------------------------------------------------------------------------
MASTER LLC OFFICERS*
DONALD C. BURKE Fund 2007 to Managing Director of BlackRock, Inc. since 2006; Formerly Managing Director of
40 East 52nd Street New President present Merrill Lynch Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P.
York, NY 10022 1960 and Chief ("FAM") in 2006; First Vice President thereof from 1997 to 2005; Treasurer thereof
Executive from 1999 to 2006 and Vice President thereof from 1990 to 1997.
Officer
ANNE F. ACKERLEY Vice 2007 to Managing Director of BlackRock, Inc. since 2000 and First Vice President and Chief
40 East 52nd Street New President present Operating Officer of Mergers and Acquisitions Group from 1997 to 2000; First Vice
York, NY 10022 1962 President and Chief Operating Officer of Public Finance Group thereof from 1995 to
1997; First Vice President of Emerging Markets Fixed Income Research of Merrill
Lynch & Co., Inc. from 1994 to 1995.
NEAL J. ANDREWS Chief 2007 to Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice President
40 East 52nd Street New Financial present and Line of Business Head of Fund Accounting and Administration at PFPC Inc. from
York, NY 10022 1966 Officer 1992 to 2006.
JAY M. FIFE Treasurer 2007 to Managing Director of BlackRock, Inc. since 2007 and Director since 2006; Formerly
40 East 52nd Street New present Assistant Treasurer of the MLIM/FAM advised funds from 2005 to 2006; Director of
York, NY 10022 MLIM Fund Services Group from 2001 to 2006.
1970
BRIAN P. KINDELAN Chief 2007 to Chief Compliance Officer of the Funds since 2007; Managing Director and Senior
40 East 52nd Street New Compliance present Counsel thereof since January 2005; Director and Senior Counsel of BlackRock
York, NY 10022 1959 Officer Advisors, Inc. from 2001 to 2004 and Vice President and Senior Counsel thereof
from 1998 to 2000; Senior Counsel of The PNC Bank Corp. from 1995 to 1998.
HOWARD SURLOFF Secretary 2007 to Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at
40 East 52nd Street New present BlackRock, Inc. since 2006; Formerly General Counsel (U.S.) of Goldman Sachs Asset
York, NY 10022 Management, L.P. from 1993 to 2006.
1965
* Officers of the Master LLC serve at the pleasure of the Board of Directors.
Further information about the Master LLC's Officers and Directors is
available in the Master LLC's Statement of Additional Information, which
can be obtained without charge by calling 1-800-441-7762.
INDEPENDENT REGISTERED
CUSTODIAN ACCOUNTING AGENT PUBLIC ACCOUNTING FIRM LEGAL COUNSEL
- --------- ---------------- ---------------------- -------------
State Street Bank and State Street Bank and Deloitte & Touche LLP Sidley Austin LLP
Trust Company Trust Company Princeton, NJ 08540 New York, NY 10019
North Quincy, MA 02171 Princeton, NJ 08540
68
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
This summary schedule of investments is presented to help investors focus on the
Series' principal holdings. It includes the Series' 50 largest holdings, each
investment of any issuer that exceeds 1% of the Series' net assets and
affiliated issues. "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 website at
http://www.sec.gov.
PERCENT OF
INDUSTRY SHARES HELD COMMON STOCKS VALUE NET ASSETS
- --------------------------------------- ----------- ------------------------------------------ -------------- ----------
Aerospace & Defense Other Securities $ 7,692,434 0.7%
Air Freight & Logistics Other Securities 4,572,587 0.4
Airlines Other Securities 2,996,203 0.3
Other Securities 8,898,372 0.8
Automobiles 71,898 DaimlerChrysler AG 6,968,357 0.6
214,000 Toyota Motor Corp. 11,397,364 1.0
Other Securities 16,882,011 1.5
------------ ----
35,247,732 3.1
------------ ----
Beverages Other Securities 15,712,051 1.4
Biotechnology Other Securities 1,782,724 0.2
Building Products Other Securities 6,666,148 0.6
Capital Markets 84,380 Credit Suisse Group 5,079,301 0.4
39,145 Deutsche Bank AG Registered Shares 5,111,363 0.4
162,085 UBS AG 7,473,367 0.7
Other Securities 10,905,634 1.0
------------ ----
28,569,665 2.5
------------ ----
Chemicals 37,627 BASF AG 5,579,794 0.5
55,633 Bayer AG 5,087,673 0.4
Other Securities 25,275,281 2.2
------------ ----
35,942,748 3.1
------------ ----
Commercial Banks 64,161 BNP Paribas SA 6,961,475 0.6
285,794 Banco Bilbao Vizcaya Argentaria SA 6,957,420 0.6
480,675 Banco Santander SA 10,381,617 0.9
527,057 Barclays Plc 5,322,917 0.4
104,821 Commonwealth Bank of Australia Ltd. 5,404,442 0.5
922,258 HSBC Holdings Plc 15,535,003 1.4
687,629 Mitsubishi UFJ Financial Group, Inc. 6,484,291 0.6
784,325 Royal Bank of Scotland Group Plc 6,925,178 0.6
701,256 UniCredito Italiano SpA 5,767,100 0.5
Other Securities 85,062,747 7.4
------------ ----
154,802,190 13.5
------------ ----
Commercial Services & Supplies Other Securities 9,168,267 0.8
Communications Equipment 301,553 Nokia Oyj 11,584,870 1.0
Other Securities 4,359,164 0.4
------------ ----
15,944,034 1.4
------------ ----
Computers & Peripherals Other Securities 4,503,778 0.4
Construction & Engineering Other Securities 10,251,987 0.9
Construction Materials Other Securities 7,131,517 0.6
Consumer Finance Other Securities 2,321,598 0.2
Containers & Packaging Other Securities 1,126,356 0.1
Distributors Other Securities 1,291,365 0.1
Diversified Consumer Services Other Securities 425,682 0.0
Diversified Financial Services 143,436 ING Group NV CVA 5,589,044 0.5
Other Securities 14,188,976 1.2
------------ ----
19,778,020 1.7
------------ ----
Diversified Telecommunication Services 217,200 Deutsche Telekom AG 4,780,446 0.4
138,273 France Telecom SA 4,959,959 0.4
329,719 Telefonica SA 10,688,282 1.0
Other Securities 24,226,418 2.1
------------ ----
44,655,105 3.9
------------ ----
Electric Utilities 47,712 E.ON AG 10,143,245 0.9
Other Securities 26,904,874 2.3
------------ ----
37,048,119 3.2
------------ ----
See notes to Financial Statements
69
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PERCENT OF
INDUSTRY SHARES HELD COMMON STOCKS VALUE NET ASSETS
- -------- ----------- ------------- -------------- ----------
Electrical Equipment 170,320 ABB Ltd. $ 4,910,631 0.4%
Other Securities 11,546,907 1.0
----------- ---
16,457,538 1.4
----------- ---
Electronic Equipment & Instruments Other Securities 12,341,464 1.1
Energy Equipment & Services Other Securities 4,436,496 0.4
Food & Staples Retailing 616,389 Tesco Plc 5,863,427 0.5
Other Securities 17,350,760 1.5
----------- ---
23,214,187 2.0
----------- ---
Food Products 31,297 Nestle SA Registered Shares 14,371,279 1.3
131,620 Unilever NV 4,835,823 0.4
Other Securities 13,611,876 1.2
----------- ---
32,818,978 2.9
----------- ---
Gas Utilities Other Securities 4,554,983 0.4
Health Care Equipment & Supplies Other Securities 6,516,002 0.6
Health Care Providers & Services Other Securities 2,321,644 0.2
Health Care Technology Other Securities 178,539 0.0
Hotels, Restaurants & Leisure Other Securities 10,366,424 0.9
Household Durables Other Securities 13,856,878 1.2
Household Products Other Securities 4,494,104 0.4
IT Services Other Securities 3,090,596 0.3
Independent Power Producers &
Energy Traders Other Securities 1,544,297 0.1
Industrial Conglomerates 65,334 Siemens AG 10,388,270 0.9
Other Securities 11,066,650 1.0
----------- ---
21,454,920 1.9
----------- ---
Insurance 117,504 AXA SA 4,684,764 0.4
34,467 Allianz AG Registered Shares 7,425,560 0.6
Other Securities 39,812,467 3.5
----------- ---
51,922,791 4.5
----------- ---
Internet & Catalog Retail Other Securities 766,398 0.1
Internet Software & Services Other Securities 1,135,845 0.1
Leisure Equipment & Products Other Securities 2,131,639 0.2
Life Sciences Tools & Services Other Securities 722,212 0.1
Machinery Other Securities 23,293,341 2.0
Marine Other Securities 4,309,972 0.4
Media Other Securities 19,929,650 1.7
Metals & Mining 103,812 Anglo American Plc 6,301,536 0.5
69,987 ArcelorMittal 5,434,698 0.5
265,166 BHP Billiton Ltd. 9,269,681 0.8
180,451 BHP Billiton Plc 5,502,561 0.5
78,068 Rio Tinto Plc Registered Shares 8,216,068 0.7
Other Securities 25,784,432 2.3
----------- ---
60,508,976 5.3
----------- ---
Multi-Utilities 34,092 RWE AG 4,780,056 0.4
77,516 Suez SA 5,276,207 0.5
Other Securities 9,423,851 0.8
----------- ---
19,480,114 1.7
----------- ---
Multiline Retail Other Securities 4,869,160 0.4
Office Electronics Other Securities 5,869,228 0.5
Oil, Gas & Consumable Fuels 263,695 BG Group Plc 6,050,102 0.5
1,493,200 BP Plc 18,247,282 1.6
200,844 Eni SpA 7,330,081 0.6
284,525 Royal Dutch Shell Plc 12,011,215 1.1
216,157 Royal Dutch Shell Plc Class B 9,010,661 0.8
161,867 Total SA 13,402,661 1.2
Other Securities 13,960,652 1.2
----------- ---
80,012,654 7.0
----------- ---
Paper & Forest Products Other Securities 3,411,709 0.3
Personal Products Other Securities 3,951,119 0.3
See notes to Financial Statements
70
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PERCENT OF
INDUSTRY SHARES HELD COMMON STOCKS VALUE NET ASSETS
- -------- ----------- ------------- -------------- ----------
Pharmaceuticals 116,048 AstraZeneca Plc $ 4,995,039 0.4%
441,993 GlaxoSmithKline Plc 11,225,109 1.0
183,604 Novartis AG Registered Shares 10,040,813 0.9
55,612 Roche Holding AG 9,613,411 0.8
76,807 Sanofi-Aventis 7,030,945 0.6
Other Securities 14,963,589 1.3
-------------- -----
57,868,906 5.0
-------------- -----
Real Estate Investment Trusts (REITs) Other Securities 13,208,339 1.2
Real Estate Management & Development Other Securities 18,971,417 1.7
Road & Rail Other Securities 9,076,814 0.8
Semiconductors &Semiconductor Equipment Other Securities 5,843,567 0.5
Software Other Securities 10,091,154 0.9
Specialty Retail Other Securities 8,086,335 0.7
Textiles, Apparel & Luxury Goods Other Securities 10,170,591 0.9
Tobacco 119,338 British American Tobacco Plc 4,665,295 0.4
Other Securities 7,158,604 0.6
-------------- -----
11,823,899 1.0
-------------- -----
Trading Companies & Distributors Other Securities 11,335,508 1.0
Transportation Infrastructure Other Securities 4,272,958 0.4
Water Utilities Other Securities 1,140,308 0.1
Wireless Telecommunication Services 4,153,856 Vodafone Group Plc 15,593,248 1.4
Other Securities 6,801,333 0.6
-------------- -----
22,394,581 2.0
-------------- -----
TOTAL COMMON STOCKS
(COST -- $797,004,493) 1,080,774,917 94.5
-------------- -----
EXCHANGE TRADED FUNDS
288,947 iShares MSCI EAFE Index Fund (c) 22,708,345 2.0
Total Exchange-Traded Funds
(Cost -- $19,661,875) 22,708,345 2.0
-------------- -----
PREFERRED STOCKS
Automobiles Other Securities 1,246,695 0.1
Household Products Other Securities 886,330 0.1
Media Other Securities 119,809 0.0
Multi-Utilities Other Securities 314,051 0.0
Total Preferred Stocks
(Cost -- $1,272,423) 2,566,885 0.2
-------------- -----
RIGHTS
Metals & Mining Other Securities 0 0.0
Real Estate Management & Development Other Securities 14,770 0.0
Total Rights (Cost -- $0) 14,770 0.0
-------------- -----
BENEFICIAL
INTEREST SHORT-TERM SECURITIES
USD BlackRock Liquidity Series, LLC Cash Sweep
13,529,338 Series, 5.04% (a)(b) 13,529,338 1.2
Total Short-Term Securities
(Cost -- $13,529,338) 13,529,338 1.2
-------------- -----
TOTAL INVESTMENTS
(COST -- $831,468,129*) 1,119,594,255 97.9
OTHER ASSETS LESS LIABILITIES 23,577,306 2.1
-------------- -----
NET ASSETS $1,143,171,561 100.0%
============== =====
See notes to Financial Statements
71
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
* The cost and unrealized appreciation (depreciation) of investments as of
December 31, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost ................................................ $ 844,409,619
--------------
Gross unrealized appreciation ................................. 305,352,070
Gross unrealized depreciation ................................. (30,167,434)
--------------
Net unrealized appreciation ................................... $ 275,184,636
==============
(a) 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
AFFILIATE NET ACTIVITY INCOME
- --------- ------------ --------
BlackRock Liquidity Series, LLC Cash Sweep Series $(12,221,959) $981,689
(b) Represents the current yield as of December 31, 2007.
(c) All or a portion of security held as collateral in connection with open
financial futures contracts.
- "Other Securities" represent 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 of, in this category are held in
connection with open financial futures 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 or ratings group indexes,
and/or as defined by Series management. This definition may not apply
for purposes of this report, which may combine industry
sub-classifications for reporting ease. Industries are shown as a
percent of net assets. These industry classifications are unaudited.
- Financial futures contracts purchased as of December 31, 2007 were as
follows:
UNREALIZED
NUMBER OF APPRECIATION
CONTRACTS ISSUE EXCHANGE EXPIRATION DATE FACE VALUE (DEPRECIATION)
- --------- ---------------------- --------- --------------- ----------- --------------
4 Hang Seng Index Future Hong Kong January 2008 $ 703,945 $ 11,935
49 OMX Stock Index Future Stockholm January 2008 $ 812,340 9,293
30 CAC40 10 Euro Future MATIF March 2008 $ 2,458,577 26,400
311 DJ Euro Stoxx 50 Eurex March 2008 $19,949,983 215,887
63 FTSE 100 Index Future LIFFE March 2008 $ 7,980,053 115,038
10 SPI 200 Index Future Sydney March 2008 $ 1,379,492 13,970
58 TOPIX Index Future Tokyo March 2008 $ 7,885,858 (253,938)
---------
TOTAL UNREALIZED APPRECIATION -- NET $ 138,585
=========
See notes to Financial Statements
72
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
- - Forward foreign exchange contracts as of December 31, 2007 were as follows:
UNREALIZED
FOREIGN CURRENCY FOREIGN CURRENCY SETTLEMENT APPRECIATION
PURCHASED SOLD DATE (DEPRECIATION)
- ---------------- ---------------- ---------- --------------
AUD 3,668,400 USD 3,216,436 2/12/08 $ (3,449)
CHF 3,317,500 USD 2,951,653 2/12/08 (13,477)
DKK 1,549,100 USD 304,230 2/12/08 (315)
EUR 8,296,000 USD 12,139,443 2/12/08 (2,413)
GBP 3,709,300 USD 7,504,118 2/12/08 (129,329)
HKD 5,901,300 USD 758,953 2/12/08 (837)
JPY 562,900,000 USD 5,081,239 2/12/08 (18,293)
NOK 2,334,500 USD 426,560 2/12/08 2,873
NZD 18,200 USD 13,887 2/12/08 47
SEK 5,898,000 USD 918,736 2/12/08 (5,817)
SGD 398,800 USD 276,923 2/12/08 983
USD 1,945,468 AUD 2,204,000 2/12/08 15,084
USD 1,471,670 CHF 1,644,000 2/12/08 15,645
USD 117,544 DKK 595,800 2/12/08 655
USD 5,029,644 EUR 3,424,000 2/12/08 20,340
USD 3,643,681 GBP 1,794,000 2/12/08 76,870
USD 481,051 HKD 3,742,000 2/12/08 331
USD 1,751,762 JPY 195,050,000 2/12/08 (2,595)
USD 143,367 NOK 780,000 2/12/08 (114)
USD 11,599 NZD 15,000 2/12/08 115
USD 345,843 SEK 2,204,358 2/12/08 4,642
USD 122,039 SGD 175,300 2/12/08 (120)
--------
TOTAL UNREALIZED DEPRECIATION ON FORWARD
FOREIGN EXCHANGE CONTRACTS -- NET $(39,174)
--------
- Currency Abbreviations:
AUD Australian Dollar
CHF Swiss Franc
DKK Danish Krone
EUR Euro
GBP British Pound
HKD Hong Kong Dollar
JPY Japanese Yen
NOK Norwegian Krone
NZD New Zealand Dollar
SEK Swedish Krona
SGD Singapore Dollar
USD U.S. Dollar
See notes to Financial Statements
73
MASTER INTERNATIONAL INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2007
ASSETS:
Investments in unaffiliated securities, at value (identified
cost -- $817,938,791)......................................... $1,106,064,917
Investments in affiliated securities, at value (identified
cost -- $13,529,338).......................................... 13,529,338
Foreign cash (cost -- $17,212,445)............................... 17,263,524
Unrealized appreciation on forward foreign exchange contracts.... 137,585
Receivables:
Contributions................................................. $13,818,236
Securities sold............................................... 5,915,884
Dividends .................................................... 3,168,772
Investment adviser............................................ 8,666 22,911,558
-----------
Prepaid expenses and other assets................................ 32,122
--------------
TOTAL ASSETS..................................................... 1,159,939,044
--------------
LIABILITIES:
Unrealized depreciation on forward foreign exchange contracts.... 176,759
Bank overdraft .................................................. 1,156,797
Payables:
Securities purchased.......................................... 9,098,125
Withdrawals................................................... 5,647,739
Variation margin.............................................. 304,540
Other affiliates.............................................. 10,356 15,060,760
-----------
Accrued expenses and other liabilities........................... 373,167
--------------
TOTAL LIABILITIES................................................ 16,767,483
--------------
NET ASSETS:
Net Assets....................................................... $1,143,171,561
==============
NET ASSETS CONSIST OF
Investors' capital............................................... $ 854,669,789
Unrealized appreciation -- net................................... 288,501,772
--------------
NET ASSETS....................................................... $1,143,171,561
==============
See notes to Financial Statements
74
MASTER INTERNATIONAL INDEX SERIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007
INVESTMENT INCOME:
Dividends (net of $2,925,220 foreign withholding tax)......... $ 32,791,613
Interest (including $981,689 from affiliates.................. 985,172
------------
TOTAL INCOME..................................................... 33,776,785
------------
EXPENSES:
Custodian fees................................................ $ 610,971
Accounting services........................................... 184,231
Investment advisory fees...................................... 114,233
Professional fees............................................. 87,698
Pricing fees.................................................. 76,438
Directors' fees and expenses.................................. 12,834
Printing and shareholder reports.............................. 1,574
Other......................................................... 25,036
-----------
Total expenses before reimbursement.............................. 1,113,015
Reimbursement of expenses..................................... (38,870)
-----------
TOTAL EXPENSES AFTER REIMBURSEMENT............................... 1,074,145
------------
INVESTMENT INCOME -- NET......................................... 32,702,640
------------
REALIZED & UNREALIZED GAIN (LOSS) -- NET:
Realized gain on:
Investments -- net............................................ 18,774,995
Financial futures contracts -- net............................ 734,254
Foreign currency transactions -- net.......................... 1,833,471 21,342,720
-----------
Change in unrealized appreciation/depreciation on:
Investments -- net............................................ 61,219,919
Financial futures contracts -- net............................ (526,818)
Foreign currency transactions -- net.......................... (231,704) 60,461,397
----------- ------------
TOTAL REALIZED AND UNREALIZED LOSS -- NET........................ 81,804,117
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $114,506,757
============
See notes to Financial Statements
75
MASTER INTERNATIONAL INDEX SERIES
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended
December 31,
-----------------------------
2007 2006
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS
Investment income -- net...................................... $ 32,702,640 $ 17,659,987
Realized gain -- net.......................................... 21,342,720 12,066,140
Change in unrealized appreciation/depreciation -- net......... 60,461,397 126,438,123
-------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.. 114,506,757 156,164,250
-------------- -------------
CAPITAL TRANSACTIONS
Proceeds from contributions................................... 740,944,038 517,743,669
Fair value of withdrawals..................................... (542,265,015) (367,077,433)
-------------- -------------
NET INCREASE IN NET ASSETS DERIVED FROM CAPITAL TRANSACTIONS..... 198,679,023 150,666,236
-------------- -------------
NET ASSETS
Total increase in net assets.................................. 313,185,780 306,830,486
Beginning of year............................................. 829,985,781 523,155,295
-------------- -------------
END OF YEAR................................................... $1,143,171,561 $ 829,985,781
============== =============
See notes to Financial Statements
76
MASTER INTERNATIONAL INDEX SERIES
FINANCIAL HIGHLIGHTS
THE FOLLOWING RATIOS HAVE BEEN DERIVED FROM INFORMATION PROVIDED IN THE
FINANCIAL STATEMENTS.
For the Year Ended December 31,
---------------------------------------------------
2007 2006 2005 2004 2003
---------- -------- -------- --------- --------
TOTAL INVESTMENT RETURN.......................................... 10.80% 26.61% 13.64% 20.32% 38.97%
---------- -------- -------- --------- --------
Ratios to Average Net Assets
Expenses, net of reimbursement................................ .09% .10% .10% .09% .09%
---------- -------- -------- --------- --------
Expenses...................................................... .10% .11% .10% .10% .10%
---------- -------- -------- --------- --------
Investment income -- net...................................... 2.86% 2.70% 2.53% 2.55% 2.23%
---------- -------- -------- --------- --------
Supplemental Data
Net assets, end of year (in thousands)........................ $1,143,172 $829,986 $523,155 $322,067 $553,129
---------- -------- -------- --------- --------
Portfolio turnover............................................ 30% 23% 11% 14% 9%
---------- -------- -------- --------- --------
77
MASTER INTERNATIONAL INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
1. SIGNIFICANT ACCOUNTING POLICIES:
Master International Index Series (the "Series"), a non-diversified
management investment company, is part of Quantitative Master Series LLC (the
"Master LLC"). The Master LLC is registered under the Investment Company Act of
1940, as amended, and is organized as a Delaware limited liability company.
Prior to June 15, 2007, the Master LLC was organized as a Delaware statutory
trust (the "Trust"). The Limited Liability Company Agreement permits the
Directors (and prior to June 15, 2007, the Declaration of Trust permitted the
Trustees) to issue non-transferable interests 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 of the Trust and the Board of
Directors of the Master LLC are referred to as the Board of Directors. The
financial statements of the Series are prepared in conformity with U.S.
generally accepted accounting principles, which may require the use of
management accruals and estimates. Actual results may differ from these
estimates. 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. 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.
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.
Effective September 4, 2007, exchange-traded options are valued at the
mean between the last bid and ask prices at the close of the options market in
which the options trade and previously were valued at the last sales price as of
the close of options trading on applicable exchanges. Options traded in the OTC
market are valued at the last asked price (options written) or the last bid
price (options purchased). Swap agreements are valued based upon quoted fair
valuations received daily by the Series from a pricing service or counterparty.
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, including valuations furnished by the
pricing services retained by the Master LLC, 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 of the Board of
Directors. Such valuations and procedures will be reviewed periodically by the
Board of Directors.
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 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
78
MASTER INTERNATIONAL INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
are expected to materially affect the value of such securities, those securities
will be valued at their fair value as determined in good faith by the Board of
Directors or by BlackRock Advisors, LLC ("the Manager"), an indirect, wholly
owned subsidiary of BlackRock, Inc., using a pricing service and/or procedures
approved by the Board of Directors.
(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.
- 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
79
MASTER INTERNATIONAL INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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 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 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. federal and various state and local tax returns. No income tax
returns are currently under examination. The statute of limitations on the
Series' U.S. federal tax returns remains open for the years ended December 31,
2004 through December 31, 2006. The statute of limitations on the Series' state
and local tax returns may remain open for an additional year depending upon the
jurisdiction.
80
MASTER INTERNATIONAL INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
In September 2006, Statement of Financial Accounting Standards No.
157, "Fair Value Measurements" ("FAS 157"), was issued and is effective for
fiscal years beginning after November 15, 2007. FAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. The impact on the Series' financial statement
disclosures, if any, is currently being assessed.
In addition, in February 2007, Statement of Financial Accounting
Standards No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" ("FAS 159"), was issued and is effective for fiscal years beginning
after November 15, 2007. Early adoption is permitted as of the beginning of a
fiscal year that begins on or before November 15, 2007, provided the entity also
elects to apply the provisions of FAS 157. FAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value. FAS 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. The impact on the Series' financial
statement disclosures, if any, is currently being assessed.
(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, on behalf of the Series, has entered into an
Investment Advisory Agreement with the Manager. Merrill Lynch & Co., Inc.
("Merrill Lynch") and The PNC Financial Services Group, Inc. are the principal
owners of BlackRock, Inc.
The Manager is responsible for the management of the Series'
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 0.01% 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 0.12%. 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, an affiliate of the Manager, under
which the Manager pays the sub-adviser 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 year ended December 31, 2007, the Series reimbursed the
Manager $20,941 for certain accounting services.
In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated, a
wholly owned subsidiary of Merrill Lynch, received $69,153 in commissions on the
execution of portfolio security transactions for the Series for the year ended
December 31, 2007.
Certain officers and/or directors of the Master LLC are officers
and/or directors of BlackRock, Inc. or its affiliates.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities,
for the year ended December 31, 2007 were $556,679,431 and $329,787,155,
respectively.
81
MASTER INTERNATIONAL INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
4. SHORT-TERM BORROWINGS:
The Master LLC, on behalf of the Series, along with certain other
funds managed by the Manager and its affiliates, is party to a $500,000,000
credit agreement with a group of lenders. The Series may borrow under the credit
agreement to fund shareholder redemptions and for other lawful purposes other
than for leverage. The Series may borrow up to the maximum amount allowable
under the Series' current prospectus and statement of additional information,
subject to various other legal, regulatory or contractual limits. The Series
pays a commitment fee of 0.06% per annum based on the Series' pro rata share of
the unused portion of the credit agreement. Amounts borrowed under the credit
agreement bear interest at a rate equal to, at each fund's election, the federal
funds rate plus 0.35% or a base rate as defined in the credit agreement. The
Series did not borrow under the credit agreement during the year ended December
31, 2007. On November 21, 2007, the credit agreement was renewed for one year
under substantially the same terms.
82
MASTER INTERNATIONAL INDEX SERIES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Investors and Board of Directors of
Quantitative Master Series LLC:
We have audited the accompanying statement of assets and liabilities,
including the summary schedule of investments, of Master International Index
Series, one of the portfolios constituting Quantitative Master Series LLC
(formerly Quantitative Master Series Trust) (the "Master LLC") as of December
31, 2007, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Master LLC's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Master LLC is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Master
LLC's internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2007, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Master International Index Series of Quantitative Master Series LLC
as of December 31, 2007, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
February 22, 2008
83
MASTER INTERNATIONAL INDEX SERIES
OFFICERS AND DIRECTORS (UNAUDITED)
NUMBER OF
BLACKROCK-
ADVISED FUNDS
POSITION(S) LENGTH OF AND
NAME, ADDRESS AND HELD WITH TIME PRINCIPAL OCCUPATION(S) DURING PORTFOLIOS PUBLIC
YEAR OF BIRTH MASTER LLC SERVED PAST FIVE YEARS OVERSEEN DIRECTORSHIPS
- -------------------- ---------------- --------- ----------------------------------- -------------- --------------------
NON-INTERESTED
DIRECTORS*
DAVID O. BEIM Director 2007 to Professor of Finance and Economics 35 Funds None
40 East 52nd Street present at the Columbia University 81 Portfolios
New York, NY 10022 Graduate School of Business since
1940 1991; Chairman of Outward Bound
USA from 1997 to 2001;
Chairman of Wave Hill, Inc.
from 1990 to 2006; Trustee
of Phillips Exeter Academy
from 2002 to present.
RONALD W. FORBES Director and 2007 to Professor Emeritus of Finance, 35 Funds None
40 East 52nd Street Co-Chairman of present School of Business, State 81 Portfolios
New York, NY the Board of University of New York at Albany
10022 1940 Directors since 2000 and Professor
thereof from 1989 to 2000;
International Consultant,
Urban Institute,
Washington, D.C. from 1995
to 1999.
DR. MATINA HORNER Director 2007 to Executive Vice President of 35 Funds NSTAR (electric and
40 East 52nd Street present Teachers Insurance and Annuity 81 Portfolios gas utility)
New York, NY 10022 Association and College Retirement
1939 Equities Fund from 1989 to 2003.
RODNEY D. JOHNSON Director and 2007 to President, Fairmount Capital 35 Funds None
40 East 52nd Street Co-Chairman of present Advisors, Inc. since 1987; 81 Portfolios
New York, NY 10022 the Board of Director, Fox Chase Cancer Center
1941 Directors since 2002; Member of the
Archdiocesan Investment
Committee of the
Archdiocese of Philadelphia
since 2003.
HERBERT I. LONDON Director and 2007 to Professor Emeritus, New York 35 Funds AIMS Worldwide, Inc.
40 East 52nd Street Member of present University since 2005; John M. 81 Portfolios (marketing)
New York, NY 10022 the Audit Olin Professor of Humanities, New
1939 Committee York University from 1993 to 2005
and Professor thereof from
1980 to 2005; President,
Hudson Institute since 1997
and Director thereof since
1980; Dean, Gallatin
Division of New York
University from 1976 to
1993; Distinguished Fellow,
Herman Kahn Chair, Hudson
Institute from 1984 to
1985; Chairman of the Board
of Directors of Vigilant
Research, Inc. since 2006;
Member of the Board of
Directors for Grantham
University since 2006;
Director of AIMS Worldwide,
Inc. since 2006; Director
of Reflex Security since
2006; Director of
InnoCentive, Inc. since
2006; Director of Cerego,
LLC since 2005; Director,
Damon Corp. from 1991 to
1995; Overseer, Center for
Naval Analyses from 1983 to
1993.
CYNTHIA A. Director 2007 to Professor, Harvard Business School 35 Funds Newell Rubbermaid,
MONTGOMERY present since 1989; Associate Professor, 81 Portfolios Inc. (manufacturing)
40 East 52nd Street J.L. Kellogg Graduate School of
New York, NY 10022 Management, Northwestern
1952 University from 1985 to
1989; Associate Professor,
Graduate School of Business
Administration, University
of Michigan from 1979 to
1985; Director, Harvard
Business School Publishing
since 2005; Director,
McLean Hospital since 2005.
JOSEPH P. PLATT, JR. Director 2007 to Partner, Amarna Corporation, LLC 35 Funds Greenlight Capital
40 East 52nd Street present (private investment company) since 81 Portfolios Re, Ltd.
New York, NY 10022 2002; Director, Jones and Brown (reinsurance
1947 (Canadian insurance broker) since company)
1998; Director, Greenlight
Capital Re, Ltd.
(reinsurance company) since
2004; Partner, Amarna
Financial Company (private
investment company) since
2005; Director and
Executive Vice President,
Johnson and Higgins
(insurance brokerage) from
1990 to 1997.
* Directors serve until their resignation, removal or death, or until
December 31 of the year in which they turn 72.
84
MASTER INTERNATIONAL INDEX SERIES
OFFICERS AND DIRECTORS (UNAUDITED)
NUMBER OF
BLACKROCK-
ADVISED FUNDS
POSITION(S) LENGTH OF AND
NAME, ADDRESS AND HELD WITH TIME PRINCIPAL OCCUPATION(S) DURING PORTFOLIOS PUBLIC
YEAR OF BIRTH MASTER LLC SERVED PAST FIVE YEARS OVERSEEN DIRECTORSHIPS
- -------------------- ---------------- --------- ----------------------------------- -------------- --------------------
NON-INTERESTED DIRECTORS* (CONCLUDED)
ROBERT C. ROBB, JR. Director 2007 to Partner, Lewis, Eckert, Robb and 35 Funds None
40 East 52nd Street present Company (management and financial 81 Portfolios
New York, NY 10022 consulting firm) since 1981;
1945 Trustee, Medical College of
Pennsylvania/ Hahnemann
University from 1998 to
2002; Trustee, EQK Realty
Investors from 1994 to
2000; Director, Tamaqua
Cable Products Company from
1981 to 1998; Director,
Brynwood Partners from 1984
to 1998; Director, The PNC
Bank from 1994 to 1998;
Director, Provident
National Bank from 1983 to
1993; Director Brinks, Inc.
from 1981 to 1986.
TOBY ROSENBLATT Director and 2007 TO President since 1999 and Vice 35 Funds A.P. Pharma,
40 East 52nd Street Vice Chairman present President -- General Partner since 81 Portfolios Inc.(speciality
New York, NY 10022 of the 1990, Founders Investments Ltd. pharmaceuticals)
1938 Performance (private investments); Director,
Oversight Forward Management, LLC since
Committee 2007; Trustee, SSR Funds from 1990
to 2005; Trustee, Metropolitan
Series Funds, Inc. from 2001 to
2005.
KENNETH L. URISH Director and 2007 to Managing Partner, Urish Popeck & 35 Funds None
40 East 52nd Street Chairman of the present Co., LLC (certified public 81 Portfolios
New York, NY 10022 Audit Committee accountants and consultants) since
1951 1976; External Advisory
Board, The Pennsylvania
State University Accounting
Department since 2001;
Trustee, The Holy Family
Foundation since 2001;
President and Trustee,
Pittsburgh Catholic
Publishing Associates since
2003; Former Trustee,
Inter-Tel from 2006 to
2007.
FREDERICK W. WINTER Director and 2007 to Professor and Dean Emeritus of the 35 Funds None
40 East 52nd Street Member of the present Joseph M. Katz School of Business-- 81 Portfolios
New York, NY 10022 Audit Committee University of Pittsburgh since
1945 2005 and Dean thereof from 1997 to
2005; Director, Alkon
Corporation (pneumatics)
since 1992; Director,
Indotronix International
(IT service) since 2004;
Director, Tippman Sports
(recreation) since 2005.
INTERESTED DIRECTORS*
RICHARD S. DAVIS Director 2007 to Managing Director, BlackRock, Inc. 184 Funds None
40 East 52nd Street present since 2005; Chief Executive 289
New York, NY 10022 Officer, State Street Research & Portfolios
1945 Management Company from 2000 to
2005; Chairman of the Board
of Trustees, State Street
Research mutual funds ("SSR
Funds") from 2000 to 2005;
Senior Vice President,
Metropolitan Life Insurance
Company from 1999 to 2000;
Chairman, SSR Realty from
2000 to 2004.
HENRY GABBAY Director 2007 to Consultant, BlackRock, Inc. since 183 Funds None
40 East 52nd Street present 2007; Managing Director, 288 Portfolios
New York, NY 10022 BlackRock, Inc. from 1989 to June
1947 2007; Chief Administrative
Officer, BlackRock
Advisors, LLC from 1998 to
2007; President of
BlackRock Funds and
BlackRock Bond Allocation
Target Shares from 2005 to
2007; Treasurer of certain
closed-end funds in the
BlackRock Fund complex from
1989 to 2006.
* Messrs. Davis and Gabbay are both "interested persons," as defined in the
Investment Company Act of 1940, of the Master LLC based on their positions
with BlackRock, Inc. and its affiliates. Directors serve until their
resignation, removal or death, or until December 31 of the year in which
they turn 72.
85
MASTER INTERNATIONAL INDEX SERIES
PROXY RESULTS (UNAUDITED)
NUMBER OF
BLACKROCK-
ADVISED FUNDS
POSITION(S) LENGTH OF AND
NAME, ADDRESS AND HELD WITH TIME PRINCIPAL OCCUPATION(S) DURING PORTFOLIOS PUBLIC
YEAR OF BIRTH MASTER LLC SERVED PAST FIVE YEARS OVERSEEN DIRECTORSHIPS
- -------------------- ---------------- --------- ----------------------------------- -------------- --------------------
ADVISORY BOARD MEMBER
DAVID R. WILMERDING, Advisory Board 2007 Chairman, Wilmerding & Associates, 35 Funds Chestnut Street
JR.* Member Inc. (investment advisers) 81 Portfolios Exchange Fund,
40 East 52nd Street from1989 to 2005; Chairman, Coho (open-end investment
New York, NY 10022 Partners, Ltd. (investment company)
1935 advisers) from 2003 to 2005;
Director, Beaver Management
Corporation.
* David R.Wilmerding, Jr. resigned from the Advisory Board of the Master LLC,
effective December 31, 2007.
POSITION(S) LENGTH OF
NAME, ADDRESS AND HELD WITH TIME
YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- -------------------- ---------------- --------- -------------------------------------------------------------------------------
MASTER LLC OFFICERS*
DONALD C. BURKE Fund President 2007 to Managing Director of BlackRock, Inc. since 2006; Formerly Managing Director of
40 East 52nd Street and Chief present Merrill Lynch Investment Managers, L.P. ("MLIM") and Fund Asset Management,
New York, NY 10022 Executive L.P. ("FAM") in 2006; First Vice President thereof from 1997 to 2005;
1960 Officer Treasurer thereof from 1999 to 2006 and Vice President thereof from 1990 to1997.
ANNE F. ACKERLEY Vice President 2007 to Managing Director of BlackRock, Inc. since 2000 and First Vice President and
40 East 52nd Street present Chief Operating Officer of Mergers and Acquisitions Group from 1997 to 2000;
New York, NY 10022 First Vice President and Chief Operating Officer of Public Finance Group
1962 thereof from 1995 to 1997; First Vice President of Emerging Markets Fixed
Income Research of Merrill Lynch & Co., Inc. from 1994 to 1995.
NEAL J. ANDREWS Chief 2007 to Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice
40 East 52nd Street Financial present President and Line of Business Head of Fund Accounting and Administration at
New York, NY 10022 Officer PFPC Inc. from 1992 to 2006.
1966
JAY M. FIFE Treasurer 2007 to Managing Director of BlackRock, Inc. since 2007 and Director since 2006;
40 East 52nd Street present Formerly Assistant Treasurer of the MLIM/FAM advised funds from 2005 to 2006;
New York, NY 10022 Director of MLIM Fund Services Group from 2001 to 2006.
1970
BRIAN P. KINDELAN Chief 2007 to Chief Compliance Officer of the Funds since 2007; Managing Director and Senior
40 East 52nd Street Compliance present Counsel thereof since January 2005; Director and Senior Counsel of BlackRock
New York, NY 10022 Officer Advisors, Inc. from 2001 to 2004 and Vice President and Senior Counsel thereof
1959 from 1998 to 2000; Senior Counsel of The PNC Bank Corp. from 1995 to 1998.
HOWARD SURLOFF Secretary 2007 to Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at
40 East 52nd Street present BlackRock, Inc. since 2006; Formerly General Counsel (U.S.) of Goldman Sachs
New York, NY 10022 Asset Management, L.P. from 1993 to 2006.
1965
* Officers of the Master LLC serve at the pleasure of the Board of Directors.
Further information about the Master LLC's Officers and Directors is available
in the Master LLC's Statement of Additional Information, which can be obtained
without charge by calling 1-800-441-7762.
INDEPENDENT REGISTERED PUBLIC
CUSTODIAN ACCOUNTING AGENT ACCOUNTING FIRM LEGAL COUNSEL
- -------------------------------------- --------------------- ----------------------------- --------------------------------
JPMorgan Chase Bank, N.A. State Street Bank and Deloitte & Touche LLP Sidley Austin LLP
Brooklyn, NY 11245 Trust Company Princeton, NJ 08540 New York, NY 10019 Princeton, NJ
08540
86
MASTER INTERNATIONAL INDEX SERIES
PROXY RESULTS (UNAUDITED)
During the six-month period ended December 31, 2007, the holders of interest of
Master International Index Series of Quantitative Master Series LLC voted on the
following proposal, which was approved at a special meeting on September 7,
2007.This proposal was a part of the reorganization of the Board of Directors of
Quantitative Master Series LLC that took effect on November 1, 2007.A
description of the proposal and number of shares voted are\as follows:
UNITS OF
INTEREST VOTED UNITS OF INTEREST
FOR WITHHELD FROM VOTING
-------------- --------------------
To elect the Board of Directors David O. Beim, Richard S. Davis, Ronald W. Forbes, 377,583,324 0
of Quantitative Master Series Henry Gabbay, Dr. Matina Horner, Rodney D.
LLC: Johnson, Herbert I. London, Cynthia A. Montgomery,
Joseph P. Platt, Jr., Robert C. Robb, Jr., Toby
Rosenblatt, Kenneth L. Uris and Frederick W.
Winter
87
[This page intentionally left blank.]
88
[This page intentionally left blank.]
89
(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:
(GRAPHIC) (GRAPHIC)
BY E-MAIL: ON THE INTERNET:
american_beacon.funds@ambeacon.com Visit our website at
www.americanbeaconfunds.com
(GRAPHIC) (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 AVAILABILITY OF PROXY
PORTFOLIO SCHEDULES VOTING POLICY 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 relating
Fund files a complete schedule of its to portfolio securities is available in
portfolio holdings with the each Fund's Statement of Additional
Securities and Exchange Commission Information, which may be obtained free
("SEC") on Form N-Q as of the first of charge by calling 1-800-967-9009 or
and third fiscal quarters. The Fund's by accessing the SEC's website at
Forms N-Q are available on the SEC's www.sec.gov. Each Fund's proxy voting
website at www.sec.gov. The Forms N-Q record for the most recent year ended
may also be reviewed and copied at June 30 is filed annually with the SEC
the SEC's Public Reference Room, 450 on Form N-PX. The Fund's Forms N-PX are
Fifth Street, NW, Washington, DC available on the SEC's website at
20549. Information regarding the www.sec.gov. The Fund's proxy voting
operation of the SEC's Public record may also be obtained by calling
Reference Room may be obtained by 1-800-967-9009.
calling 1-800-SEC-0330. A complete
schedule of the Fund's portfolio
holdings is also available on the
Funds' website
(www.americanbeaconfunds.com)
approximately thirty days after the
end of each fiscal quarter.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES
Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP Portland, Maine
Dallas, Texas
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
American Airlines, Inc. is not responsible for investments made in the American
Beacon Funds. 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.
AR 12/07
541486
GUIDANCE - VISION - EXPERIENCE
(AMERICAN BEACON FUNDS (SM) LOGO)
ANNUAL REPORT
December 31, 2007
TREASURY INFLATION PROTECTED SECURITIES FUND
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............................................ 7
Financial Highlights............................................... 16
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 December 31, 2007
(PHOTO OF DOUGLAS G. HERRING)
FELLOW SHAREHOLDERS,
I am pleased to present to you the American Beacon Treasury Inflation
Protected Securities Fund Annual Report for the twelve months ended December 31,
2007. Please review the enclosed material carefully, as it includes important
information about the Fund.
Renewed volatility affected the fixed income markets during the second half of
the year. The change in the investment environment was led by a crisis in the
housing sector, due to several years of lax lending standards, which then
spilled over into the financial sector during the summer months. U.S. inflation
concerns and a flight to quality during the year due to the heightened economic
uncertainty led to strong performance in the TIPS sector.
For 2007, the American Beacon Treasury Inflation Protected Securities Fund
returned 11.22%, outperforming the Lipper TIPS Index by 70 basis points (0.70%).
The turmoil in the U.S. markets continued after the close of the Fund's fiscal
year and is likely to continue over the shorter term. However, we believe the
Fund's fundamental investment philosophy and lower than average expense ratio
will continue to provide inflation protection over the longer term.
As always, we appreciate the opportunity to serve your financial needs. To
obtain further details about the American Beacon Funds family or to access your
account information, please visit our website at www.americanbeaconfunds.com.
Thank you for your continued confidence in the American Beacon Treasury
Inflation Protected Securities Fund.
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
MARKET OVERVIEW
DECEMBER 31, 2007 (UNAUDITED)
It was a tale of two fixed income markets in 2007. Early in the year,
Treasury yields stayed within relatively narrow ranges, credit spreads were
stable, and Federal Reserve ("Fed") policymakers left their target federal funds
interest rate unchanged at 5.25%. From about mid-June through year-end, however,
Treasury yields declined sharply, credit spreads widened, and the Federal Open
Market Committee ("FOMC") lowered the overnight lending rate by 100 basis points
(1.00%), while making it clear it was prepared to lower the rate further in
2008. An economic slowdown, precipitated in no small part by problems in the
housing market, and a sharp contraction in market liquidity, led to the
increased volatility and monetary policy action by the Fed.
While the economy was slowing, inflation as measured by the Consumer
Price Index ("CPI") remained higher than the FOMC would have liked. Sharp
increases in the price of crude oil, as well as increases in the prices of
agricultural and other commodities, suggested that unwanted inflationary
pressures had likely not yet been purged. For example, in December, CPI
increased at a 4.1% year-over-year pace, while Core CPI (CPI excluding food and
energy) increased at a 2.4% year-over-year pace. Fed officials have repeatedly
expressed a desire for Core CPI to be in the 1% to 2% annual range.
Declining real Treasury interest rates and higher-than-expected CPI
readings contributed to strong positive total returns for treasury inflation
protected securities ("TIPS"). The Lehman Brothers U.S. TIPS Index returned
11.63% in 2007, while the Lehman Brothers 1-10 Year U.S. TIPS Index returned
11.45%.
Inflation expectations as evidenced by breakeven inflation rates (the
spread between similar maturity nominal and inflation-protected securities)
ranged approximately 35 basis points (0.35%) from high to low in 2007. In early
April, breakevens peaked for the year at 2.48%, while in late August they
troughed, at 2.16%. At year-end, 10-year breakevens were approximately 2.30%.
The U.S. Treasury appears committed to the TIPS market, with $57
billion of new supply auctioned in 2007. At year-end, the total outstanding
market value of TIPS was approximately $463 billion.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM)
DECEMBER 31, 2007 (UNAUDITED)
The Institutional Class of the Fund returned 11.22% for the period
from January 1, 2007 through December 31, 2007, trailing the Lehman Brothers
1-10 Yr U.S. TIPS Index (the "Index") return of 11.45%. The Fund outperformed
the Lipper TIPS Funds Index return of 10.52% for the same time period.
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 6/30/04 THROUGH 12/31/07
(LINE GRAPH)
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 12/31/07
VALUE OF
SINCE $10,000
INCEPTION 6/30/04-
1 YEAR 3 YEARS 6/30/04 12/31/07
------ ------- --------- --------
Institutional Class(1,3) .................... 11.22% 4.61% 5.09% $11,899
Lehman Bros. 1-10 Yr. U.S. TIPS Index(2) .... 11.45% 4.87% 5.61% $12,104
Lehman Bros. U.S. TIPS Index(2) ............. 11.63% 4.85% 6.02% $12,271
Lipper TIPS Funds Index(2) .................. 10.52% 4.29% 5.66% $12,126
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 twelve-month period by 23
basis points (0.23%). The underperformance can be attributed to Fund expenses
and sub-advisor performance in the first three quarters of the year, although a
large cash flow into the Fund in late November allowed the Fund to outperform
its Index in the fourth quarter (the cash was deployed after the TIPS market had
fallen a significant amount).
Three factors contributed to most of the value lost relative to the
Index in the first three quarters: 1) 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 early in the year and non-U.S. government
inflation-linked bonds continued to underperform the Index; 2) an overweight
position in intermediate-term TIPS subtracted value as the TIPS yield curve
flattened during the second quarter; and 3) 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.
3
MARKET OVERVIEW
DECEMBER 31, 2007 (UNAUDITED)
TOP TEN HOLDINGS
% OF
NET ASSETS
----------
U.S. Treasury Note, 2.000%, Due 1/15/2014 14.3%
U.S. Treasury Note, 0.875%, Due 4/15/2010 11.9%
U.S. Treasury Note, 2.500%, Due 7/15/2016 10.7%
U.S. Treasury Note, 3.375%, Due 1/15/2012 10.4%
U.S. Treasury Note, 1.625%, Due 1/15/2015 10.3%
U.S. Treasury Note, 1.875%, Due 7/15/2015 6.6%
U.S. Treasury Note, 2.375%, Due 4/15/2011 5.8%
U.S. Treasury Note, 3.000%, Due 7/15/2012 5.3%
U.S. Treasury Note, 2.375%, Due 1/15/2017 3.9%
U.S. Treasury Note, 4.250%, Due 1/15/2010 3.4%
PORTFOLIO DIVERSIFICATION
% OF
FIXED INCOME
------------
A 0.0%
AA 0.0%
AAA 100.0%
(BAR GRAPH)
4
FUND EXPENSES
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM)
DECEMBER 31, 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 July 1, 2007 through December 31,
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. Shareholders of the
Institutional 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" 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. Shareholders
of the Institutional 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" 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.
Expenses Paid
Beginning Account Ending Account During Period*
Value 7/1/07 Value 12/31/07 7/1/07-12/31/07
----------------- -------------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,089.34 $2.37
Hypothetical $1,000.00 $1,022.94 $2.29
(5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.45% 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 (184) by
days in the year (365) to reflect the half year period.
5
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon Treasury Inflation Protected Securities Fund:
We have audited the accompanying statement of assets and liabilities of American
Beacon Treasury Inflation Protected Securities Fund (the "Fund"), a separate
fund comprising the American Beacon Funds, including the schedule of
investments, as of December 31, 2007, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2007, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Treasury Inflation Protected Securities Fund as of December 31,
2007, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein, in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Dallas, Texas
February 27, 2008
See accompanying notes
6
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN THOUSANDS)
U.S. TREASURY OBLIGATIONS - 95.56%
3.875%, Due 1/15/2009 ++ ................... $ 4,108 $ 4,230
4.25%, Due 1/15/2010 ++ .................... 7,196 7,678
0.875%, Due 4/15/2010 ++ ................... 26,820 26,730
3.50%, Due 1/15/2011 ++ .................... 2,119 2,279
2.375%, Due 4/15/2011 ++ ................... 12,505 13,034
3.375%, Due 1/15/2012 ++ ................... 21,332 23,270
2.00%, Due 4/15/2012 ++ .................... 1,699 1,761
3.00%, Due 7/15/2012 ++ .................... 10,876 11,779
1.875%, Due 7/15/2013 ++ ................... 4,277 4,407
2.00%, Due 1/15/2014 ++ .................... 31,009 32,029
2.00%, Due 7/15/2014 ++ .................... 6,883 7,112
1.625%, Due 1/15/2015 ++ ................... 23,010 23,102
1.875%, Due 7/15/2015 ++ ................... 14,420 14,698
2.00%, Due 1/15/2016 ++ .................... 5,368 5,509
2.50%, Due 7/15/2016 ++ .................... 22,407 23,896
2.375%, Due 1/15/2017 ++ ................... 8,262 8,718
2.625%, Due 7/15/2017 ++ ................... 3,271 3,529
--------
TOTAL U.S. TREASURY OBLIGATIONS ............... 213,761
--------
SHARES
----------
SHORT TERM INVESTMENTS - 2.00%
American Beacon Money Market Select Fund # .... 4,476,103 4,476
--------
TOTAL INVESTMENTS - 97.56% (COST $216,593) ....... $218,237
OTHER ASSETS, NET OF LIABILITIES - 2.44% ......... 5,460
--------
TOTAL NET ASSETS - 100.00% ....................... $223,697
========
Percentages are stated as a percent of net assets.
++ Inflation-Indexed Note.
# The Fund/Trust is affiliated by having the same investment advisor.
See accompanying notes
7
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2007 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS:
Investments in unaffiliated securities, at value (A) ................................ $ 213,761
Investments in affiliated securities, at value (B) .................................. 4,476
Dividends and interest receivable ................................................... 1,995
Receivable for fund shares sold ..................................................... 4,835
-----------
TOTAL ASSETS ..................................................................... 225,067
-----------
LIABILITIES:
Payable for fund shares redeemed .................................................... 1,239
Payable under excess expense reimbursement plan ..................................... 28
Management and investment advisory fees payable (Note 2) ............................ 47
Administrative service and service fees payable ..................................... 16
Other liabilities ................................................................... 40
-----------
TOTAL LIABILITIES ................................................................ 1,370
-----------
NET ASSETS ............................................................................. $ 223,697
===========
ANALYSIS OF NET ASSETS:
Paid-in-capital ..................................................................... 223,567
Accumulated net realized loss ....................................................... (1,514)
Unrealized appreciation of investments, futures contracts, and foreign currency ..... 1,644
-----------
NET ASSETS ............................................................................. $ 223,697
===========
SHARES OUTSTANDING (NO PAR VALUE):
Institutional Class ................................................................. 21,971,512
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
Institutional Class ................................................................. $ 10.18
===========
- ----------
(A) Cost of investments in unaffiliated securities ..................................... $ 212,117
(B) Cost of investments in affiliated securities ....................................... $ 4,476
See accompanying notes
8
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS)
INVESTMENT INCOME:
Dividend income from affiliated securities ................. $ 64
Interest income ............................................ 2,820
------
TOTAL INVESTMENT INCOME ................................. 2,884
------
EXPENSES:
Management and investment advisory fees (Note 2) ........... 122
Administrative service fees (Note 2):
Institutional Class ..................................... 55
Transfer agent fees:
Institutional Class ..................................... 2
Custody and fund accounting fees ........................... 6
Professional fees .......................................... 32
Registration fees and expenses ............................. 12
Prospectus and shareholder reports ......................... 4
Other expenses ............................................. 8
------
TOTAL EXPENSES .......................................... 241
------
NET INVESTMENT INCOME ......................................... 2,643
------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments ............................................. (74)
Foreign currency transactions ........................... 2
Change in net unrealized appreciation or depreciation of:
Investments ............................................. 1,889
------
NET GAIN ON INVESTMENTS .............................. 1,817
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......... $4,460
======
See accompanying notes
9
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Year Ended Year Ended
December December
31, 2007 31, 2006
---------- ----------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ....................................................... $ 2,643 $ 926
Net realized loss on investments, futures contracts, and foreign
currency transactions .................................................... (72) (975)
Change in net unrealized appreciation or (depreciation) of investments,
futures contracts, and foreign currency translations ..................... 1,889 357
-------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..................... 4,460 308
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class ...................................................... (2,630) (952)
Tax return of capital:
Institutional Class ...................................................... (19) (95)
-------- --------
NET DISTRIBUTIONS TO SHAREHOLDERS ..................................... (2,649) (1,047)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ............................................... 207,597 16,407
Reinvestment of dividends and distributions ................................. 2,649 1,048
Cost of shares redeemed ..................................................... (22,152) (13,508)
-------- --------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ............... 188,094 3,947
-------- --------
NET INCREASE IN NET ASSETS ..................................................... 189,905 3,208
-------- --------
NET ASSETS:
Beginning of period ......................................................... 33,792 30,584
-------- --------
END OF PERIOD * ............................................................. $223,697 $ 33,792
======== ========
* Includes undistributed net investment income of .............................. $ -- $ --
======== ========
See accompanying notes
10
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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.
11
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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
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. As of December 31, 2007, the Manager does not believe
the adoption of FAS 157 will materially impact the amounts represented in the
financial statements; however, additional disclosures will be required about the
inputs used to develop the measurements of the fair value.
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 TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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 year
ended December 31, 2007 were as follows:
AMOUNTS PAID NET AMOUNTS
TO INVESTMENT RETAINED BY
MANAGEMENT FEE RATE MANAGEMENT FEE ADVISORS MANAGER
- ------------------- -------------- ------------- -----------
0.15%-0.25% $121,667 $66,456 $55,211
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 year ended December 31, 2007, fees earned by the Manager from
the Select Fund were $1,263.
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 year ended December 31, 2007, the Fund did not
utilize the credit facility.
Reimbursement of Expenses
The Manager contractually agreed to reimburse the Fund to the extent
that total annual fund operating expenses exceed the Fund's expense cap of
0.35%. For the year ended December 31, 2007, the Manager waived or reimbursed
expenses of $31,833.
The Fund has adopted an Expense Reimbursement Plan whereby the Manager
may seek repayment of fees waived or expenses reimbursed for a period of up to
three years. However, reimbursement will occur only if the Class's average net
assets have grown or expenses have declined sufficiently to allow reimbursement
without causing its expense ratio to exceed the previously agreed upon
contractual expense limit.
13
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
As a result of the significant increase in the Class's average net
assets during the year ended December 31, 2007, it was determined that all of
the previously reimbursed expenses noted above will likely be recouped by the
Manager. As of December 31, 2007, $3,904 was recouped. The remaining reimbursed
expenses of $27,929 are subject to potential recovery through 2010 and are
recorded as a liability.
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.
The Fund adopted the provisions of FASB Interpretation No. 48,
"Accounting for Uncertainties in Income Taxes" ("FIN 48"), on January 1, 2007.
FIN 48 sets forth a minimum threshold for financial statement recognition of the
benefit of a tax position taken or expected to be taken in a tax return. The
implementation of FIN 48 did not result in any unrecognized tax benefits in the
accompanying financial statements. Each of the tax years in the three year
period ended December 31, 2007, remains subject to examination by the Internal
Revenue Service. If applicable, the Fund recognizes interest accrued related to
unrecognized tax benefits in interest expense and penalties in "Other expenses"
on the Statement of Operations.
Dividends are categorized in accordance with income tax regulations
which may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
The Fund may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on returns on income earned or gains
realized or repatriated. Taxes are accrued and applied to net investment income,
net realized capital gains and net unrealized appreciation, as applicable, as
the income is earned or capital gains are recorded.
The tax character of distributions paid during the fiscal years ended
December 31, 2007 and December 31, 2006 were as follows (in thousands):
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2007 2006
------------ ------------
DISTRIBUTIONS PAID FROM:
Ordinary income*............................... $2,630 $ 952
Tax return of capital.......................... 19 95
------ ------
TOTAL TAXABLE DISTRIBUTIONS....................... $2,649 $1,047
====== ======
* For tax purposes, short-term capital gains distributions are considered
ordinary income distributions.
As of December 31, 2007, the components of distributable earnings on a
tax basis were as follows (in thousands):
Cost basis of investments for federal income tax purposes .......... $216,878
Unrealized appreciation ............................................ 1,377
Unrealized depreciation ............................................ (18)
--------
Net unrealized appreciation/(depreciation) ......................... 1,359
Undistributed ordinary income ...................................... --
Undistributed long-term gain/(loss) ................................ (1,228)
--------
Distributable earnings ............................................. $ 131
========
14
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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.
Due to inherent differences in the recognition of income, expenses and
realized gains/(losses) under U.S. generally accepted accounting principles and
federal income tax regulations, permanent differences between book and tax
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent
differences derived from foreign currency transactions and return of capital
that have been reclassified as of December 31, 2007 (in thousands):
Paid-in-capital ....................................................... $(19)
Undistributed net investment income ................................... 6
Accumulated net realized gain (loss) .................................. 13
Unrealized appreciation (depreciation) of investments, futures
contracts and foreign currency ..................................... --
At December 31, 2007, the capital loss carry forward positions for
federal income tax purposes were $144,311, $974,237 and $110,477, expiring in
2013, 2014 and 2015, respectively.
4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of Investment transactions for the
year ended December 31, 2007, excluding short-term investments, were
$264,293,811 and $85,886,075, respectively. The Fund had purchases and sales of
U.S. Government securities of $263,728,468 and $84,411,089, respectively.
A summary of the Fund's transactions in the Select Fund for the year
ended December 31, 2007 is set forth below:
DECEMBER 31, 2006 DECEMBER 31, 2007
AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE
- --------- ------------------- ----------- ----------- -------------------
Select Fund...................... $1,430,704 $40,557,963 $37,512,564 $4,476,103
5. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares (dollars and
shares in thousands):
Year Ended December 31, 2007
INSTITUTIONAL CLASS
-------------------
SHARES AMOUNT
------ --------
Shares sold ............................ 20,422 $207,597
Reinvestment of dividends .............. 271 2,649
Shares redeemed ........................ (2,267) (22,152)
------ --------
Net increase in shares outstanding ..... 18,426 $188,094
====== ========
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
====== ========
15
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Institutional Class
---------------------------------------------------
Year Ended December 31, June 30 to
----------------------------------- December
2007(F) 2006 2005 31, 2004(A)
-------- ------- ------- -----------
Net asset value, beginning of period .................. $ 9.53 $ 9.75 $ 10.16 $ 10.00
-------- ------- ------- -------
Income from investment operations:
Net investment income .............................. 0.45 0.29 0.56(B) 0.18(B)
Net gains (losses) on securities (both realized
and unrealized) ................................. 0.59 (0.19) (0.37) 0.21
-------- ------- ------- -------
Total income (loss) from investment operations ........ 1.04 0.10 0.19 0.39
-------- ------- ------- -------
Less distributions:
Dividends from net investment income ............... (0.39) (0.29) (0.55) (0.23)
Distributions from net realized gains on
securities ...................................... -- (0.05) 0.00(C)
Tax return of capital .............................. 0.00(C,D) (0.03)(D) -- --
-------- ------- ------- -------
Total distributions ................................... (0.39) (0.32) (0.60) (0.23)
-------- ------- ------- -------
Net asset value, end of period ........................ $ 10.18 $ 9.53 $ 9.75 $ 10.16
======== ======= ======= =======
Total return .......................................... 11.22% 1.05% 1.86% 3.94%(E)
======== ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ........... $223,697 $33,792 $30,584 $20,943
Ratios to average net assets (annualized):
Expenses, after expense reimbursements
(recoupments) ................................ 0.43% 0.49% 0.44% 0.46%
Expenses, before expense reimbursements
(recoupments) ................................ 0.43% 0.49% 0.39% 0.62%
Net investment income, after expense
reimbursements (recoupements) ................ 4.74% 2.94% 5.45% 3.34%
Net investment income, before expense
reimbursements (recoupments) ................. 4.74% 2.94% 5.50% 3.18%
Portfolio turnover rate ............................ 139% 259% 355% 190%(E)
(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) The tax return of capital is calculated based on outstanding shares at the
time of distribution.
(E) Not annualized.
(F) Brown Brothers Harriman & Co. was removed as an investment advisor to the
Treasury Inflation Protected Securities Fund on November 30, 2007.
16
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
PRIVACY POLICY & FEDERAL TAX INFORMATION
(UNAUDITED)
PRIVACY POLICY
The American Beacon Funds recognizes and respects the privacy of our
shareholders. We are providing this notice to you so you will understand how
shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or
more of the following sources:
- information we receive from you on applications or other
forms;
- information about your transactions with us or our service
providers; and
- information we receive from third parties.
We do not disclose any nonpublic personal information about our
customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those
employees or service providers who need to know that information to provide
products or services to you. To ensure the confidentiality of your nonpublic
personal information, we maintain safeguards that comply with federal standards.
FEDERAL TAX INFORMATION
We are providing this information as required by the Internal Revenue
Code. The amounts shown may differ from those in other areas of this report
because of differences between tax and financial reporting requirements.
The Fund's distributions to shareholders did not include any
short-term capital gains.
Of the ordinary dividends paid to shareholders during the tax year
ended December 31, 2007, 97.11% were derived from U.S. Treasury Obligations.
17
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
The Trustees and officers of the American Beacon Funds (the "Trust")
are listed below, together with their principal occupations during the past five
years. Unless otherwise indicated, the address of each person listed below is
4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee
oversees twenty-seven funds in the fund complex that includes the Trust, the
American Beacon Master Trust, the American Beacon Mileage Funds, and the
American Beacon Select Funds. The Trust's Statement of Additional Information
contains additional information about the Trustees and is available without
charge by calling 1-800-658-5811.
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
--------------------- --------------------------- ------------------------------------------------------------------------
INTERESTED TRUSTEES
Term
Lifetime of Trust
until removal,
resignation or
retirement*
Douglas G. Herring** (50) Trustee since 2006 President (2006-Present) and CEO (2008-Present), American Beacon
Executive Vice Advisors, Inc.; Vice President and Controller, American Airlines, Inc.
President from 2006 to 2007 (1998-2006); Chairman (2003-Present) and Director (1995-Present),
President since 2007 American Airlines Federal Credit Union; Trustee, American Beacon Mileage
Funds (2006-Present); Trustee, American Beacon Select Funds
(2006-Present); Trustee, American Beacon Master Trust (2006-Present);
Director, American Beacon Global Funds SPC (2006-Present); Director,
American Beacon Global Funds plc (2007-Present).
William F. Quinn** (59) Trustee Chairman (2006-Present), CEO (2006-2007), President (1986-2006), and
since 1987 Director (2003-Present), American Beacon Advisors, Inc.; Chairman
President from (1989-2003) and Director (1979-1989, 2003-Present), American Airlines
1987 to 2007 Federal Credit Union; Director, Hicks Acquisition I, Inc. (2007-Present);
Executive Vice Director, Crescent Real Estate Equities, Inc.(1994-2007); Director,
President Pritchard, Hubble & Herr, LLC (investment advisor) (2001-2006); Director
since 2007 of Investment Committee, Southern Methodist University Endowment Fund
(1996-Present); Member, Southern Methodist University Cox School of
Business Advisory Board (1999-2002); Member, New York Stock Exchange
Pension Manager Committee (1997-1998, 2000-2002, 2006-Present); Chairman
(2007-Present) and Vice Chairman (2004-2007), Committee for the
Investment of Employee Benefits; Director, United Way of Metropolitan
Tarrant County (1988-2000, 2004-Present); Trustee, American Beacon
Mileage Funds (1995-Present); Trustee, American Beacon Select Funds
(1999-Present); Trustee, American Beacon Master Trust (1995-Present);
Director, American Beacon Global Funds SPC (2002-Present); Director,
American Beacon Global Funds plc (2007-Present).
Alan D. Feld** (71) Trustee since 1996 Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (law firm)
(1960-Present); Director, Clear Channel Communications (1984-Present);
Trustee, CenterPoint Properties (1994-2006); Member Board of Trustees,
Southern Methodist University; Member, Board of Visitors, The University
of Texas M.D. Anderson Cancer Center; Member, Board of Visitors, Zale
Lipshy Hospital; Trustee, American Beacon Mileage Funds (1996-Present);
Trustee, American Beacon Select Funds (1999-Present); Trustee, American
Beacon Master Trust (1996-Present).
NON-INTERESTED TRUSTEES Term
Lifetime of Trust
until removal,
resignation or
retirement*
W. Humphrey Bogart (63) Trustee since 2004 Consultant, New River Canada Ltd. (mutual fund servicing company)
(1998-2003); Board Member, Baylor University Medical Center Foundation
(1992-2004); President and CEO, Allmerica Trust Company, NA (1996-1997);
President and CEO, Fidelity Investments Southwest Company (1983-1995);
Senior Vice President of Regional Centers, Fidelity Investments
(1988-1995); Trustee, American Beacon Mileage Funds (2004-Present);
Trustee, American Beacon Select Funds (2004-Present); Trustee, American
Beacon Master Trust (2004-Present).
18
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
--------------------- --------------------------- ------------------------------------------------------------------------
NON-INTERESTED TRUSTEES (CONT.)
Brenda A. Cline (47) Trustee since 2004 Executive Vice President, Chief Financial Officer, Treasurer and
Secretary, Kimbell Art Foundation (1993-Present); Trustee, Texas
Christian University (1998-Present); Trustee, W.I. Cook Foundation, Inc.
(d/b/a Cook Children's Health Foundation) (2001-2006); Director,
Christian Church Foundation (1999-2007); Trustee, American Beacon Mileage
Funds (2004-Present); Trustee, American Beacon Select Funds
(2004-Present); Trustee, American Beacon Master Trust (2004-Present).
Richard A. Massman (64) Trustee since 2004 Senior Vice President and General Counsel, Hunt Consolidated, Inc.
(holding company engaged in oil and gas exploration and production,
refining, real estate, farming, ranching, and venture capital activities)
(1994-Present); Trustee, American Beacon Mileage Funds (2004-Present);
Trustee, American Beacon Select Funds (2004-Present); Trustee, American
Beacon Master Trust (2004-Present).
Stephen D. O'Sullivan (72) Trustee since 1987 Consultant (1994-Present); Trustee, American Beacon Mileage Funds
(1995-Present); Trustee, American Beacon Select Funds (1999-Present);
Trustee, American Beacon Master Trust (1995-Present).
R. Gerald Turner (62) Trustee since 2001 President, Southern Methodist University (1995-Present); Director,
225 Perkins Admin. Bldg. ChemFirst (1986-2002); Director, J.C. Penney Company, Inc.
Southern Methodist Univ. (1996-Present); Director, California Federal Preferred Capital Corp.
Dallas, Texas 75275 (2001-2003); Director, Kronus Worldwide Inc. (chemical manufacturing)
(2003-Present); Director, First Broadcasting Investment Partners, LLC
(2003-2007); Member, Salvation Army of Dallas Board of Directors; Member,
Methodist Hospital Advisory Board; Co-Chair, Knight Commission on
Intercollegiate Athletics; Trustee, American Beacon Mileage Funds
(2001-Present); Trustee, American Beacon Select Funds (2001-Present);
Trustee, American Beacon Master Trust (2001-Present).
Kneeland Youngblood (52) Trustee since 1996 Managing Partner, Pharos Capital Group, LLC (a private equity firm)
100 Crescent Court Chairman since (1998-Present); Director, Energy Future Holdings Corp. (2007-Present);
Suite 1740 2005 Director, Burger King Corporation (2004-Present); Director, Gap, Inc.
Dallas, Texas 75201 (2006-Present); Trustee, City of Dallas, Texas Employee Retirement Fund
(2004-Present); Director, Starwood Hotels and Resorts (2001-Present);
Member, Council on Foreign Relations (1995-Present); Trustee, St. Mark's
School of Texas (2002-Present); Trustee, American Beacon Mileage Funds
(1996- Present); Trustee, American Beacon Select Funds (1999-Present);
Trustee, American Beacon Master Trust (1996-Present).
19
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
--------------------- --------------------------- ------------------------------------------------------------------------
OFFICERS
Term
One Year
Rosemary K. Behan (48) VP, Secretary and Vice President, Legal and Compliance, American Beacon Advisors, Inc.
Chief Legal (2006-Present); Assistant General Counsel, First Command Financial
Officer since 2006 Planning, Inc. (2004-2006); Enforcement Attorney (1995-2004), Securities
and Exchange Commission.
Brian E. Brett (47) VP since 2004 Vice President, Director of Sales and Marketing, American Beacon
Advisors, Inc. (2004-Present); Regional Vice President, Neuberger Berman,
LLC (investment advisor) (1996-2004).
Wyatt Crumpler (41) VP since 2007 Vice President, Trust Investments, American Beacon Advisors, Inc.
(2007-Present); Managing Director of Corporate Accounting (2004-2007),
Director of IT Strategy and Finance (2002-2004), American Airlines, Inc.
Michael W. Fields (53) VP since 1989 Vice President, Fixed Income Investments, American Beacon Advisors, Inc.
(1988-Present); Director, American Beacon Global Funds SPC
(2002-Present); Director, American Beacon Global Funds plc
(2007-Present).
Rebecca L. Harris (41) Treasurer since Vice President, Finance, American Beacon Advisors, Inc. (1995-Present).
1995
Christina E. Sears (36) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present);
Officer since 2004 Senior Compliance Analyst, American Beacon Advisors, Inc. (1998-2004).
and Asst.
Secretary since
1999
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
72, with the exception of Messrs. Quinn and O'Sullivan.
** Messrs. Quinn, Feld and Herring are deemed to be "interested persons" of
the Trust, as defined by the 1940 Act. Mr. Quinn is Chairman of the
Manager. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP has
provided legal services within the past two years to one or more of the
Trust's Investment advisors. Mr. Herring is President and CEO of the
Manager.
20
[This page intentionally left blank.]
21
(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:
(GRAPHIC) (GRAPHIC)
BY E-MAIL: ON THE INTERNET:
american_beacon.funds@ambeacon.com Visit our website at
www.americanbeaconfunds.com
(GRAPHIC) (GRAPHIC)
BY TELEPHONE: BY MAIL:
Call (800) 658-5811 American Beacon Funds
P.O. Box 219643
Kansas City, MO 64121-9643
AVAILABILITY OF AVAILABILITY OF
QUARTERLY PORTFOLIO SCHEDULES PROXY VOTING POLICY AND 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
STATE STREET BANK AND
TRUST
Boston, Massachusetts
TRANSFER AGENT
BOSTON FINANCIAL DATA
SERVICES
Kansas City, Missouri
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
ERNST & YOUNG LLP
Dallas, Texas
DISTRIBUTOR
FORESIDE FUND SERVICES
Portland, Maine
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
American Airlines, Inc. is not responsible for investments made in the American
Beacon Funds. 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
AR 12/07
541500
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON FUNDS(SM) LOGO)
Annual Report
December 31, 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.............................................. 17
U.S. Government Money Market Fund.............................. 21
Schedule of Investments
Money Market Portfolio......................................... 24
U.S. Government Money Market Portfolio......................... 28
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.
December 31, 2007
American Beacon Funds
(PHOTO OF DOUGLAS G. HERRING)
Fellow Shareholders,
I am pleased to present to you the American Beacon Money Market Funds
Annual Report for the twelve months ended December 31, 2007. Please review the
enclosed material carefully, as it includes important information about the
Funds.
Renewed volatility affected the fixed income markets during the second
half of the year. The change in the investment environment was led by a crisis
in the housing sector, due to several years of lax lending standards, which then
spilled over into the financial sector during the summer months. By design,
American Beacon's conservative credit review process allowed us to avoid many of
the pitfalls of the more toxic asset classes.
Even with this conservative approach, both the Institutional Class and
Cash Management Class of the American Beacon Money Market Fund posted one-year
returns of 5.24% and 5.28%, outperforming the Lipper Institutional Money Market
Average by 26 basis points (0.26%) and 30 basis points (0.30%), respectively.
The American Beacon U.S. Government Money Market Fund - Cash Management Class
also outperformed its benchmark, with a one-year total return of 5.13% versus
the Lipper Institutional U.S. Government Money Market Average of 4.86%.
The turmoil in the U.S. credit markets continued after the close of
the Funds' fiscal year and is likely to continue over the shorter term. However,
we believe the Funds' fundamental investment philosophy, proven credit selection
process and lower than average expense ratio will continue to serve the Funds
well over the longer term.
As always, we appreciate the opportunity to serve your financial
needs. To obtain further details about the American Beacon Funds family or to
access your account information, please visit our website at
www.americanbeaconfunds.com. Thank you for your continued confidence in the
American Beacon Money Market Funds.
Sincerely,
/s/ Douglas G. Herring
Douglas G. Herring
President
American Beacon Funds
1
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
DECEMBER 31, 2007 (UNAUDITED)
The year of 2007 began with a slowdown in U.S. growth occurring
following Federal Reserve Board ("Fed") credit tightening, rising oil prices,
and the beginning of concerns around credit and slowing U.S. consumer spending.
Earnings growth remained strong on the back of strong export growth, a declining
dollar and share buybacks. A transition in leadership from small, value and
domestic to large, growth and multinational became evident as the year began.
During the second half of the year, the benign fundamentals of 2003-2006--namely
strong global growth, rising profitability levels and falling risk
premiums--were replaced by credit stress, pressures on the capital position of
the financial system, questions about the sustainability of the business cycle,
and rising energy and food prices. Reflecting these woes, market prices moved
considerably. U.S. Government bond yields plummeted, the dollar fell faster than
in earlier years, credit spreads widened and equities turned volatile. The
financials and consumer discretionary sectors experienced drops of one-quarter
to one-third. Commodity and industrial related multinational companies performed
best.
In 2007, the Fed moved from an attitude of vigilance about inflation
to one of providing liquidity and lowering rates to shore up the functioning of
credit markets and fight economic weakness. During the year, the Fed lowered the
target federal funds rate by 100 basis points (1.00%), bringing the target rate
from 5.25% to 4.25%. In a statement issued following its meeting on December 11,
2007, the Federal Open Market Committee ("FOMC") noted: "Incoming information
suggests that economic growth is slowing, reflecting the intensification of the
housing correction and some softening in business and consumer spending.
Moreover, strains in financial markets have increased in recent weeks." The FOMC
also stated its opinion that the rate reduction "combined with the [monetary]
policy actions taken earlier, should help promote moderate growth over time." In
a cautionary note, however, the FOMC indicated that "[r]eadings on core
inflation have improved modestly this year, but elevated energy and commodity
prices, among other factors, may put upward pressure on inflation. In this
context, the Committee judges that some inflation risks remain, and it will
continue to monitor inflation developments carefully."
The most recent data from the U.S. Department of Labor's Bureau of
Labor Statistics indicated that the U.S. unemployment rate rose to 5.0% in
December after holding steady at 4.7% in each of the previous three months.
Non-farm payroll employment posted a small increase of 18,000 for the month, and
total employment, at 146.2 million, was down following an increase in November.
Job declines in manufacturing and construction largely offset job growth in
several service industries.
The Consumer Price Index ("CPI") increased at a seasonally-adjusted
rate of 0.8% in November 2007, according to the Department of Labor, its largest
advance since a 1.2% rise in September 2005. The index for energy was up 5.7%,
led by a 9.5% rise in petroleum-based energy prices. The index for all items
less food and energy increased 0.3% in November, following advances of 0.2% in
each of the preceding five months. The overall CPI rose at an unadjusted rate of
2.3% over the previous 12 months.
The U.S. gross domestic product ("GDP") grew at an annualized rate of
4.9% in the third quarter of 2007 up significantly from the 3.8% annualized
growth rate for the second quarter of the year. According to the U.S. Department
of Commerce, the increase in real GDP during the quarter resulted from positive
contributions from exports, personal consumption expenditures, private inventory
investment, nonresidential structures, federal government spending, equipment
and software, and state and local government spending. A decrease in residential
fixed investment (purchases of private residential structures and residential
equipment that landlords rent to tenants) had a negative effect on the GDP.
Additionally, there was an increase in imports, which are a subtraction in the
calculation of the GDP.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
DECEMBER 31, 2007 (UNAUDITED)
As the economy began to show signs of weakening during the year, the
Federal Reserve ("Fed") started its series of easing monetary policy in
September. Since then the Fed has reduced the fed funds rate at each Federal
Open Market Committee ("FOMC") meeting, resulting in a 4.25% fed funds rate by
year end. These were moves of 50 basis points (0.50%) for the September FOMC
meeting followed by 25 basis points (0.25%) at each of the remaining two
meetings of the year. In response to the events that caused the Fed to ease, the
American Beacon Money Market Fund's weighted-average maturity was maintained
around 30 days towards the end of the year. The primary strategy of the Fund for
the year was to buy variable-rate securities, short-dated commercial paper and
overnight investments. The strategies implemented during the year enabled the
Fund to outperform its Lipper peer group.
For the twelve months ended December 31, 2007, the total return of the
Cash Management Class of the American Beacon Money Market Fund was 5.28%. The
Fund outperformed the Lipper Institutional Money Market Average return of 4.98%
by 30 basis points (0.30%). Based on annualized total returns, Lipper Inc.
ranked the Cash Management Class of the Fund 41 among 382, 25 among 321 and 19
among 264 Institutional Money Market Funds for the one-year, three-year, and
five-year periods ended December 31, 2007, respectively.
(BAR CHART)
ANNUALIZED TOTAL RETURNS
AS OF 12/31/2007
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Cash Mgmt Class(1, 2, 5)......... 5.28% 3.17% 3.88%
Institutional Class (1, 3, 5).... 5.24% 3.08% 3.83%
PlanAhead Class (1, 5)........... 4.94% 2.80% 3.54%
BBH Comset Class (1, 4, 5)....... 5.28% 3.17% 3.88%
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 represents the total
returns achieved by the Institutional Class from 1/1/98 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 1/1/98. 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 1/1/98 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)
DECEMBER 31, 2007 (UNAUDITED)
PORTFOLIO STATISTICS AS OF DECEMBER 31, 2007
CASH BBH
MANAGEMENT INSTITUTIONAL PLANAHEAD COMSET
CLASS CLASS CLASS CLASS
---------- ------------- --------- -------
7-day Current Yield* 4.78% 4.75% 4.47% 4.78%
7-day Effective Yield* 4.89% 4.86% 4.57% 4.89%
30-day Yield* 4.78% 4.75% 4.47% 4.78%
Weighted Avg. Maturity 26 Days 26 Days 26 Days 26 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 DECEMBER 31, 2007
% OF
NET ASSETS**
------------
General Electric Capital Corp. 5.8%
Royal Bank of Scotland plc 4.8%
Bank of America 4.5%
Deutsche Bank 4.5%
Goldman Sachs 4.5%
Lehman Brothers 4.5%
Barclays Capital, Inc. 4.5%
Citigroup 4.5%
Societe Generale NA, Inc. 4.2%
BNP Paribas 3.4%
** Percent of net assets of American Beacon Master Money Market Portfolio.
ASSET ALLOCATION AS OF DECEMBER 31, 2007
% OF
NET ASSETS**
------------
Corporate Notes 30.0%
Bank CDs, TDs and Notes 22.2%
Repurchase Agreements 19.4%
Commercial Paper 18.4%
S/T Investments 9.6%
Liabilities, Net of Other Assets 0.4%
** Percent of net assets of American Beacon Master Money Market Portfolio.
4
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
DECEMBER 31, 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 July 1, 2007 through
December 31, 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
Account Account Expenses Paid
Value Value During Period*
7/1/07 12/31/07 7/1/07-12/31/07
--------- --------- ---------------
CASH MANAGEMENT CLASS
Actual..................................... $1,000.00 $1,025.92 $0.77
Hypothetical (5% return before expenses)... $1,000.00 $1,024.45 $0.77
INSTITUTIONAL CLASS
Actual..................................... $1,000.00 $1,025.75 $0.87
Hypothetical (5% return before expenses)... $1,000.00 $1,024.35 $0.87
PLANAHEAD CLASS
Actual..................................... $1,000.00 $1,024.18 $2.50
Hypothetical (5% return before expenses)... $1,000.00 $1,022.74 $2.50
BBH COMSET CLASS
Actual..................................... $1,000.00 $1,025.92 $0.77
Hypothetical (5% return before expenses)... $1,000.00 $1,024.45 $0.77
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.15%, 0.17%, 0.49% and 0.15% for the Cash Management,
Institutional, PlanAhead, and BBHComSet 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 (184) by
days in the year (365) to reflect the half-year period .
5
PERFORMANCE OVERVIEW
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM)
DECEMBER 31, 2007 (UNAUDITED)
As the economy began to show signs of weakening during the year, the
Federal Reserve ("Fed") started its series of easing monetary policy in
September. Since then the Fed has reduced the fed funds rate at each Federal
Open Market Committee ("FOMC") meeting, resulting in a 4.25% fed funds rate by
year end. These were moves of 50 basis points (0.50%) for the September FOMC
meeting followed by 25 basis points (0.25%) at each of the remaining two
meetings of the year. In response to the events that caused the Fed to ease, the
American Beacon U.S. Government Money Market Fund's weighted-average maturity
was maintained around 10 days towards the end of the year. The primary strategy
of the Fund for the year was to buy variable-rate securities, short-dated
fixed-rate securities and overnight investments. The strategies implemented
during the year enabled the Fund to outperform its Lipper peer group.
For the twelve months ended December 31, 2007, the total return of the
Cash Management Class of the American Beacon U.S. Government Money Market Fund
was 5.13%. The Fund outperformed the Lipper Institutional U.S. Government Money
Market Average return of 4.86% by 27 basis points (0.27%). Based on annualized
total returns, Lipper Inc. ranked the Cash Management Class of the Fund 8 among
163, 7 among 111 and 7 among 76 Institutional U.S. Government Money Market Funds
for the one-year, five-year, and ten-year periods ended December 31, 2007,
respectively.
(BAR CHART)
ANNUALIZED TOTAL RETURNS
AS OF 12/31/2007
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Cash Management Class (1, 2, 4).. 5.13% 3.08% 3.79%
PlanAhead Class (1, 3, 4)........ 4.65% 2.65% 3.39%
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
and PlanAhead 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 DECEMBER 31, 2007
CASH MANAGEMENT CLASS PLANAHEAD CLASS
--------------------- ---------------
7-day Current Yield* 4.43% 4.06%
7-day Effective Yield* 4.53% 4.14%
30-day Yield* 4.41% 4.03%
Weighted Avg. Maturity 11 Days 11 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)
DECEMBER 31, 2007 (UNAUDITED)
ASSET ALLOCATION AS OF DECEMBER 31, 2007
% OF
NET ASSETS**
------------
Repurchase Agreements 81.0%
Government Securities 18.9%
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 July 1, 2007 through
December 31, 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
Account Account Expenses Paid
Value Value During Period*
7/1/07 12/31/07 7/1/07-12/31/07
--------- --------- ---------------
CASH MANAGEMENT CLASS
Actual..................................... $1,000.00 $1,024.73 $0.77
Hypothetical (5% return before expenses)... $1,000.00 $1,024.45 $0.77
PLANAHEAD CLASS
Actual..................................... $1,000.00 $1,022.51 $2.96
Hypothetical (5% return before expenses)... $1,000.00 $1,022.28 $2.96
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.15% and 0.58% 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 (184) by days in the year (365) to reflect
the half-year period.
7
AMERICAN BEACON FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon Funds:
We have audited the accompanying statements of assets and liabilities of
American Beacon Funds, comprised of the American Beacon Money Market Fund and
the American Beacon U.S. Government Money Market Fund (collectively, the
"Funds") as of December 31, 2007, and the related statements of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Funds' internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Funds' internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Funds as of December 31, 2007, the results of their operations
for the year then ended, the changes in their net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein, in conformity with U.S. generally accepted accounting
principles.
/s/ Ernst & Young LLP
Dallas, Texas
February 27, 2008
8
AMERICAN BEACON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2007 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
-------------- ---------------
ASSETS:
Investment in Portfolio, at value ............................ $ 2,345,276 $ 18,103
Receivable for fund shares sold .............................. 53 --
Receivable from Manager for expense reimbursement (Note 2) ... 117 2
Prepaid expenses ............................................. 23 19
-------------- -----------
TOTAL ASSETS .............................................. 2,345,469 18,124
-------------- -----------
LIABILITIES:
Payable for fund shares redeemed ............................. 7 --
Dividends payable ............................................ 6,458 39
Administrative service and service fees payable (Note 2) ..... 172 1
Other liabilities ............................................ 56 23
-------------- -----------
TOTAL LIABILITIES ......................................... 6,693 63
-------------- -----------
NET ASSETS ................................................... $ 2,338,776 $ 18,061
============== ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital .............................................. 2,338,776 18,061
-------------- -----------
NET ASSETS ...................................................... $ 2,338,776 $ 18,061
============== ===========
SHARES OUTSTANDING (NO PAR VALUE):
Cash Management Class ........................................ 349,248,723 16,432,346
============== ===========
Institutional Class .......................................... 450,661,969 N/A
============== ===========
PlanAhead Class .............................................. 112,278,266 1,628,248
============== ===========
BBH ComSet Class ............................................. 1,426,587,073 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
See accompanying Financial Statements of the American Beacon Master Portfolios
9
AMERICAN BEACON FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
-------------- ---------------
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Interest income .............................................. $91,208 $ 533
Portfolio expenses ........................................... (1,839) (12)
------- -----
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ............ 89,369 521
------- -----
FUND EXPENSES:
Administrative service fees (Note 2):
Cash Management Class ..................................... 442 5
Institutional Class ....................................... 264 --
PlanAhead Class ........................................... 128 2
Platinum Class (Note 1) ................................... 80 10
BBH ComSet Class .......................................... 552 --
Transfer agent fees:
Cash Management Class ..................................... 51 1
Institutional Class ....................................... 18 --
PlanAhead Class ........................................... 13 4
Platinum Class (Note 1) ................................... -- 1
BBH ComSet Class .......................................... 5 --
Professional fees ............................................ 29 14
Registration fees and expenses ............................... 114 29
Service fees - PlanAhead Class (Note 2) ...................... 319 5
Distribution fees - Platinum Class (Note 1) .................. 31 4
Prospectus and shareholder reports ........................... 41 --
Other expenses ............................................... 22 5
------- -----
TOTAL FUND EXPENSES ....................................... 2,109 80
------- -----
Less waiver and reimbursement of expenses (Note 2) .............. (776) (53)
------- -----
NET FUND EXPENSES ......................................... 1,333 27
------- -----
NET INVESTMENT INCOME ........................................... 88,036 494
------- -----
REALIZED GAIN ALLOCATED FROM PORTFOLIO:
Net realized gain on investments ............................. 10 --
------- -----
NET GAIN ON INVESTMENTS ................................... 10 --
------- -----
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $88,046 $ 494
------- -----
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolios
10
AMERICAN BEACON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
DECEMBER 31, 2007 (IN THOUSANDS)
MONEY MARKET U.S. GOVERNMENT MONEY MARKET
Year Ended December 31, Year Ended December 31,
-------------------------- ----------------------------
2007 2006 2007 2006
------------ ----------- --------- --------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ........................... $ 88,036 $ 36,739 $ 494 $ 607
Net realized gain (loss) on investments ......... 10 1 -- --
------------ ----------- --------- --------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ................................ 88,046 36,740 494 607
------------ ----------- --------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Cash Management Class ........................ (32,696) (21,235) (334) (304)
Institutional Class .......................... (13,567) (4,754) -- --
PlanAhead Class .............................. (6,183) (9,290) (94) (114)
Platinum Class (Note 1) ...................... (543) (1,460) (66) (189)
BBH ComSet Class ............................. (35,047) -- -- --
Net realized gain on investments:
Cash Management Class ........................ (6) -- -- --
Institutional Class .......................... (3) -- -- --
PlanAhead Class .............................. (1) (1) -- --
Platinum Class (Note 1) ...................... -- -- -- --
BBH ComSet Class ............................. -- -- -- --
------------ ----------- --------- --------
DISTRIBUTIONS TO SHAREHOLDERS ............. (88,046) (36,740) (494) (607)
------------ ----------- --------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ................... 11,962,330 5,755,911 145,717 39,131
Reinvestment of dividends and distributions ..... 44,661 32,640 157 225
Cost of shares redeemed ......................... (10,878,697) (5,091,891) (137,451) (58,084)
------------ ----------- --------- --------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS ................ 1,128,294 696,660 8,423 (18,728)
------------ ----------- --------- --------
NET INCREASE (DECREASE) IN NET ASSETS .............. 1,128,294 696,660 8,423 (18,728)
------------ ----------- --------- --------
NET ASSETS:
Beginning of period ............................. 1,210,482 513,822 9,638 28,366
------------ ----------- --------- --------
END OF PERIOD ................................... $ 2,338,776 $ 1,210,482 $ 18,061 $ 9,638
============ =========== ========= ========
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolios
11
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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 (17.8% and 1.3% at December 31, 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 investment of $10 million for Administrative Service Fee - 0.07%
Money Market and $2 million for U.S. Government Money Market,
or investors investing through an intermediary
INSTITUTIONAL CLASS Investors making an initial investment of $2 million Administrative Service Fee - 0.10%
PLANAHEAD CLASS General public and investors investing through an intermediary Administrative Service Fee - 0.10%
Service Fee - 0.25%
BBH COMSET Investors making an initial investment of at least $10 million Administrative Service Fee - 0.08%
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.
12
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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
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. As of December 31, 2007, the Manager does not believe
the adoption of FAS 157 will materially impact the amounts represented in the
financial statements; however, additional disclosures will be required about the
inputs used to develop the measurements of fair value.
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
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.
13
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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%** $ 97,463
Money Market Fund........................... Cash Management 0.15% 253,808
U.S. Government Money Market Fund........... Cash Management 0.15%* 5,778
U.S. Government Money Market Fund........... PlanAhead 0.65% 1,799
* 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 $417,784 to the BBH ComSet Class of the Money Market Fund
during the year ended December 31, 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 table below excludes amounts previously reimbursed to the Platinum
Classes of the Funds. The following waived fees or reimbursed expenses are
subject to potential recovery expiring in:
U.S. GOVERNMENT
YEAR MONEY MARKET MONEY MARKET
- ---- ------------ ---------------
2008........................................ 293,487 54,846
2009........................................ 260,591 65,678
2010........................................ 769,055 7,577
The Funds have not recorded a liability for this potential
reimbursement due to the current assessment that a reimbursement is unlikely.
14
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
3. FEDERAL INCOME TAXES
It is the policy of the Funds to comply with the requirements of
Subchapter M of the Internal Revenue Code and to distribute substantially all
net investment income as well as any net realized capital gains on the sale of
investments. Therefore, no federal income or excise tax provision is required.
The Funds adopted the provisions of FASB Interpretation No. 48,
"Accounting for Uncertainties in Income Taxes" ("FIN 48"), on January 1, 2007.
FIN 48 sets forth a minimum threshold for financial statement recognition of the
benefit of a tax position taken or expected to be taken in a tax return. The
implementation of FIN 48 did not result in any unrecognized tax benefits in the
accompanying financial statements. Each of the tax years in the three year
period ended December 31, 2007, remains subject to examination by the Internal
Revenue Service. If applicable, the Funds recognize interest accrued related to
unrecognized tax benefits in interest expense and penalties in "Other expenses"
on the Statements of Operations.
Dividends are categorized in accordance with income tax regulations
which may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
The tax character of distributions paid for the years ended December
31, 2007 and December 31, 2006 were as follows (in thousands):
MONEY MARKET U.S. GOVERNMENT MONEY MARKET
--------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2007 2006 2007 2006
------------ ------------ ------------ ------------
DISTRIBUTIONS PAID FROM ORDINARY INCOME:*
Cash Management Class.................... $32,702 $21,235 $334 $304
Institutional Class...................... 13,570 4,754 -- --
PlanAhead Class.......................... 6,184 9,291 94 114
Platinum Class........................... 543 1,460 66 189
BBH ComSet Class......................... 35,047 -- -- --
------- ------- ---- ----
TOTAL DISTRIBUTIONS PAID.................... $88,046 $36,740 $494 $607
======= ======= ==== ====
* For tax purposes short-term capital gains distributions are considered
ordinary income distributions.
As of December 31, 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 December 31,
2007.
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:
Year Ended December 31, 2007
Cash
Management Institutional PlanAhead Platinum
Class Class Class Class
---------- ------------- --------- --------
Money Market Fund
Shares sold ................................. 4,891,367 1,043,210 631,312 14,014
Reinvestment of dividends ................... 28,101 12,166 3,889 502
Share redeemed .............................. (5,072,125) (1,109,117) (693,440) (48,172)
---------- ---------- -------- -------
Net (decrease) in shares outstanding ........ (152,657) (53,741) (58,239) (33,656)
========== ========== ======== =======
15
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
BBH ComSet Class
----------------
Money Market Fund
Shares sold ...................................... 5,382,427
Reinvestment of dividends ........................ 3
Shares redeemed .................................. (3,955,843)
----------
Net increase in shares outstanding ............... 1,426,587
==========
Cash
Management PlanAhead Platinum
Class Class Class
---------- --------- --------
U.S. Government Money Market Fund
Shares sold ...................................... 132,887 8,531 4,299
Reinvestment of dividends ........................ 81 14 62
Shares redeemed .................................. (120,104) (8,974) (8,373)
-------- -------- -------
Net increase (decrease) in shares outstanding .... 12,864 (429) (4,012)
======== ======== =======
Year Ended December 31, 2006
Cash
Management Institutional PlanAhead Platinum
Class Class Class Class
---------- ------------- --------- --------
Money Market Fund
Shares sold ...................................... 3,868,924 1,325,652 515,550 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 (66,386) (6,832)
========== ========= ======== =======
Cash
Management PlanAhead Platinum
Class Class Class
---------- --------- --------
U.S. Government Money Market Fund
Shares sold ...................................... 20,647 8,290 10,194
Reinvestment of dividends ........................ 0 36 189
Shares redeemed .................................. (39,597) (8,201) (10,286)
------- ------ -------
Net increase (decrease) in shares outstanding .... (18,950) 125 97
======= ====== =======
16
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Cash Management Class
Year Ended December 31,
----------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income(A) ................................. 0.05 0.05 0.03 0.01 0.01
Net realized gain on investments(B) ...................... -- -- -- -- --
-------- -------- -------- -------- --------
Total income from investment operations ..................... 0.05 0.05 0.03 0.01 0.01
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ..................... (0.05) (0.05) (0.03) (0.01) (0.01)
Distributions from net realized gains on investments(B) .. -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions ......................................... (0.05) (0.05) (0.03) (0.01) (0.01)
-------- -------- -------- -------- --------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return ................................................ 5.28% 5.05% 3.19% 1.30% 1.08%
======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $349,249 $501,905 $200,010 $434,587 $117,395
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.15% 0.15% 0.15% 0.15% 0.16%
Expenses, before waivers .............................. 0.19% 0.20% 0.23% 0.23% 0.24%
Net investment income, net of waivers ................. 5.18% 5.04% 3.08% 1.34% 1.03%
Net investment income, before waivers ................. 5.14% 4.99% 3.00% 1.26% 0.95%
- ----------
(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.
17
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Institutional Class
Year Ended December 31,
--------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- ------- ------- --------
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- ------- ------- --------
Income from investment operations:
Net investment income(A) ................................. 0.05 0.05 0.03 0.01 0.01
Net realized gain on investments(B) ...................... -- -- -- -- --
-------- -------- ------- ------- --------
Total income from investment operations ..................... 0.05 0.05 0.03 0.01 0.01
-------- -------- ------- ------- --------
Less distributions:
Dividends from net investment income ..................... (0.05) (0.05) (0.03) (0.01) (0.01)
Distributions from net realized gains on investments(B) .. -- -- -- -- --
-------- -------- ------- ------- --------
Total distributions ......................................... (0.05) (0.05) (0.03) (0.01) (0.01)
-------- -------- ------- ------- --------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======= ======= ========
Total return ................................................ 5.24% 4.99% 3.06% 1.20% 0.97%
======== ======== ======= ======= ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $450,662 $504,403 $36,421 $34,146 $159,092
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.18% 0.19% 0.28% 0.24% 0.27%
Expenses, before waivers .............................. 0.22% 0.23% 0.28% 0.24% 0.27%
Net investment income, net of waivers ................. 5.13% 5.06% 3.07% 1.05% 1.00%
Net investment income, before waivers ................. 5.10% 5.02% 3.07% 1.05% 1.00%
- ----------
(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.
18
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
PlanAhead Class
Year Ended December 31,
----------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income(A) ................................. 0 .05 0 .05 0 .03 0 .01 0 .01
Net realized gain on investments(B) ...................... -- -- -- -- --
-------- -------- -------- -------- --------
Total income from investment operations ..................... 0.05 0.05 0.03 0.01 0.01
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ..................... (0.05) (0.05) (0.03) (0.01) (0.01)
Distributions from net realized gains on investments(B) .. -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions ......................................... (0.05) (0.05) (0.03) (0.01) (0.01)
-------- -------- -------- -------- --------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return ................................................ 4.94% 4.69% 2.82% 0.93% 0.70%
======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $112,278 $170,518 $236,903 $132,438 $126,972
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.47% 0.49% 0.51% 0.51% 0.54%
Expenses, before waivers .............................. 0.47% 0.49% 0.51% 0.51% 0.54%
Net investment income, net of waivers ................. 4.85% 4.59% 2.83% 0.94% 0.71%
Net investment income, before waivers ................. 4.84% 4.59% 2.83% 0.94% 0.71%
- ----------
(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.
19
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
BBH
ComSet Class
April 2 to
December
31, 2007
------------
Net asset value, beginning of period ........................ $ 1.00
----------
Income from investment operations:
Net investment income(A) ................................. 0 .04
Net realized gain on investments(B) ...................... --
----------
Total income from investment operations ..................... 0.04
----------
Less distributions:
Dividends from net investment income ..................... (0.04)
Distributions from net realized gains on investments(B) .. --
----------
Total distributions ......................................... (0.04)
----------
Net asset value, end of period .............................. $ 1.00
==========
Total return ................................................ 3.92%(C)
==========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $1,426,587
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.15%
Expenses, before waivers .............................. 0.21%
Net investment income, net of waivers ................. 5.10%
Net investment income, before waivers ................. 5.03%
- ----------
(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.
20
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Cash Management Class
Year Ended December 31,
----------------------------------------------
2007 2006 2005 2004 2003
------- ------ ------- ------- -------
Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------ ------- ------- -------
Income from investment operations:
Net investment income(A) ................................. 0.05 0.05 0.03 0.01 0.01
Net realized gain on investments(B) ...................... -- -- -- -- --
------- ------ ------- ------- -------
Total income from investment operations ..................... 0.05 0.05 0.03 0.01 0.01
------- ------ ------- ------- -------
Less distributions:
Dividends from net investment income ..................... (0.05) (0.05) (0.03) (0.01) (0.01)
Distributions from net realized gains on investments(B) .. -- -- -- -- --
------- ------ ------- ------- -------
Total distributions ......................................... (0.05) (0.05) (0.03) (0.01) (0.01)
------- ------ ------- ------- -------
Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ====== ======= ======= =======
Total return ................................................ 5.13% 4.97% 3.12% 1.22% 1.04%
======= ====== ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ................. $16,433 $3,568 $22,518 $28,591 $22,060
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .............................. 0.15% 0.19% 0.19% 0.19% 0.19%
Expenses, before waivers .............................. 0.60% 0.64% 0.38% 0.29% 0.37%
Net investment income, net of waivers ................. 4.87% 4.60% 2.99% 1.21% 1.04%
Net investment income, before waivers ................. 4.42% 4.16% 2.80% 1.11% 0.86%
- ----------
(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 U.S. Government Master Money Market Portfolio.
(B) Amount is less than $0.01 per share.
21
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
PlanAhead Class
Year Ended December 31,
---------------------------------------------
2007 2006 2005 2004 2003
------ ------ ------ ------ -------
Net asset value, beginning of period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ -------
Income from investment operations:
Net investment income(A) .............................. 0.05 0.04 0.03 0.00(B) 0 .01
Net realized gain on investments(B) ...................... -- -- -- -- --
------ ------ ------ ------ -------
Total income from investment operations .................. 0.05 0.04 0.03 -- 0.01
------ ------ ------ ------ -------
Less distributions:
Dividends from net investment income .................. (0.05) (0.04) (0.03) 0.00(B) (0.01)
Distributions from net realized gains on investments(B) .. -- -- -- -- --
------ ------ ------ ------ -------
Total distributions ...................................... (0.05) (0.04) (0.03) -- (0.01)
------ ------ ------ ------ -------
Net asset value, end of period ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== =======
Total return ............................................. 4.65% 4.51% 2.71% 0.85% 0.61%
====== ====== ====== ====== =======
Ratios and supplemental data:
Net assets, end of period (in thousands) .............. $1,628 $2,058 $1,933 $5,370 $26,785
Ratios to average net assets (annualized):(A)
Expenses, net of waivers ........................... 0.61% 0.63% 0.58% 0.56% 0.58%
Expenses, before waivers ........................... 1.20% 1.02% 0.61% 0.57% 0.62%
Net investment income, net of waivers .............. 4.56% 4.39% 2.47% 0.68% 0.72%
Net investment income, before waivers .............. 3.97% 4.00% 2.44% 0.67% 0.68%
- ----------
(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 U.S. Government Master Money Market Portfolio.
(B) Amount is less than $0.01 per share.
22
AMERICAN BEACON MASTER TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon Master Trust:
We have audited the accompanying statements of assets and liabilities of
American Beacon Master Trust, comprised of the American Beacon Money Market
Portfolio and the American Beacon U.S. Government Money Market Portfolio
(collectively, the "Portfolios"), including the schedules of investments, as of
December 31, 2007, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Portfolios' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Portfolios' internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Portfolios' internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2007, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Master Trust as of December 31, 2007, the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Dallas, Texas
February 27, 2008
23
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
MEDIUM-TERM NOTES - 26.60%
ABN Amro Bank NV, 5.259%, Due 4/18/2008 ++# ................ $ 132,050 $ 132,081
American Honda Finance Corp.,
5.171%, Due 1/23/2008 ++# ............................... 40,000 40,001
5.075%, Due 2/22/2008 ++# ............................... 33,200 33,204
4.866%, Due 5/9/2008 ++# ................................ 15,000 15,000
ASIF Global Financing XXI, 5.408%, Due 3/14/2008 ++ # ...... 32,650 32,674
ASIF Global Financing XXXII, 5.08%, Due 2/25/2008 ++ # ..... 206,600 206,626
Bank of America Corp., 5.308%, Due 5/5/2008 ++ ............. 32,000 32,050
Bank of New York Mellon Corp., 4.966%, Due 6/16/2008 ++ .... 17,645 17,645
Bank of Scotland plc, 5.214%, Due 7/17/2008 ++ # ........... 125,800 125,818
Berkshire Hathaway Finance Corp.,
5.299%, Due 1/11/2008 ++ ................................ 131,885 131,888
4.938%, Due 5/16/2008 ++ ................................ 23,750 23,760
Citigroup, Inc., 4.944%, Due 5/2/2008 ++ ................... 199,700 199,755
Commonwealth Bank of Australia, 4.96%, Due 1/31/2008 ++ # .. 175,000 175,005
Credit Suisse USA, Inc., 5.234%, Due 6/2/2008 ++ ........... 27,303 27,319
General Electric Capital Corp.,
5.29%, Due 1/3/2008 ++ .................................. 211,500 211,501
5.293%, Due 1/15/2008 ++ ................................ 324,455 324,466
5.171%, Due 3/4/2008 ++ ................................. 40,886 40,891
5.303%, Due 4/15/2008 ++ ................................ 65,000 65,018
4.955%, Due 5/19/2008 ++ ................................ 20,000 20,007
HSBC Finance Corp., 4.982%, Due 5/21/2008 ++ ............... 162,770 162,784
JPMorgan Chase & Co., 5.154%, Due 1/25/2008 ++ ............. 295,000 295,016
Merrill Lynch & Co., Inc.,
4.90%, Due 2/14/2008 ++ ................................. 61,300 61,305
5.091%, Due 6/16/2008 ++ ................................ 93,350 93,404
Morgan Stanley, 5.334%, Due 1/18/2008 ++ ................... 68,900 68,905
Royal Bank of Scotland plc,
5.259%, Due 4/11/2008 ++# ............................... 435,500 435,549
5.19%, Due 4/21/2008 ++ # ............................... 50,000 50,006
4.942%, Due 8/20/2008 ++ # .............................. 150,000 150,000
Toyota Motor Credit Corp.,
5.233%, Due 4/15/2008 ++ ................................ 100,000 100,008
4.961%, Due 6/17/2008 ++ ................................ 24,000 24,002
5.213%, Due 7/7/2008 ++ ................................. 60,500 60,504
Wells Fargo & Co., 5.108%, Due 8/20/2008 ++ ................ 150,000 150,000
-----------
TOTAL MEDIUM-TERM NOTES .................................... 3,506,192
-----------
PROMISSORY NOTES - 3.41%
Goldman Sachs Group, Inc., 4.889%, Due 5/9/2008 ++ ......... 450,000 450,000
-----------
CERTIFICATES OF DEPOSIT AND BANK NOTES - 19.14%
Bank of America, NA, 5.084%, Due 7/25/2008 ++ .............. 18,300 18,303
See accompanying notes
24
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
Bank of Scotland N.Y., 5.05%, Due 3/14/2008 ................ $ 155,600 $ 155,638
BNP Paribas N.Y.,
5.00%, Due 3/13/2008 .................................... 200,000 200,000
5.11%, Due 3/13/2008 .................................... 50,000 50,011
5.00%, Due 3/17/2008 .................................... 100,000 100,000
4.93%, Due 3/27/2008 .................................... 100,000 100,000
Credit Suisse N.Y., 5.00%, Due 2/26/2008 ++ ................ 250,000 250,000
Deutsche Bank N.Y., 4.941%, Due 6/19/2008 ++ ............... 280,000 280,040
HSBC Bank USA, 5.061%, Due 7/28/2008 ++ .................... 71,000 71,033
M&I Marshall & Ilsley Bank, 4.839%, Due 2/15/2008 ++ ....... 196,500 196,501
Nordea Bank Finland N.Y., 4.991%, Due 5/28/2008 ++ ......... 21,600 21,596
Royal Bank of Canada N.Y., 4.896%, Due 3/20/2008 ++ ........ 10,000 10,000
Societe Generale N.Y.,
5.00%, Due 3/7/2008 ..................................... 250,000 250,000
4.68%, Due 3/28/2008 .................................... 200,000 200,000
Suntrust Bank, 5.309%, Due 4/2/2008 ++ ..................... 53,020 53,035
Toronto Dominion Bank N.Y., 4.66%, Due 3/28/2008 ........... 250,000 249,999
US Bank, NA, 5.20%, Due 1/3/2008 ++ ........................ 221,500 221,500
Wachovia Bank, NA, 4.976%, Due 6/20/2008 ++ ................ 50,000 50,020
Westpac Bank N.Y., 5.203%, Due 1/15/2008 ++ ................ 46,000 46,000
-----------
TOTAL CERTIFICATES OF DEPOSIT AND BANK NOTES ............... 2,523,676
-----------
COMMERCIAL PAPER - 18.39%
Ciesco LLC, 4.92%, Due 1/28/2008 # ......................... 225,000 224,170
Danske Corp., 4.64%, Due 1/31/2008 # ....................... 100,000 99,613
Edison Asset Securitization LLC, 4.84%, Due 2/20/2008 # .... 150,000 148,992
General Electric Capital Corp., 4.83%, Due 2/15/2008 ....... 100,000 99,396
GOVCO, Inc.,
4.73%, Due 1/22/2008 # .................................. 100,000 99,724
4.73%, Due 1/23/2008 # .................................. 150,000 149,566
ING US Funding LLC,
4.64%, Due 1/23/2008 .................................... 11,950 11,916
4.89%, Due 1/25/2008 .................................... 35,000 34,886
4.83%, Due 1/28/2008 .................................... 150,000 149,455
Jupiter Securitization, LLC,
5.80%, Due 1/18/2008 # .................................. 55,000 54,849
5.20%, Due 1/22/2008 # .................................. 119,615 119,252
Kitty Hawk Funding Corp.,
4.84%, Due 1/18/2008 # .................................. 24,258 24,203
4.78%, Due 1/28/2008 # .................................. 72,628 72,368
Long Lane Master Trust IV,
4.97%, Due 1/22/2008 # .................................. 120,000 119,659
4.78%, Due 1/24/2008 # .................................. 27,000 26,918
5.60%, Due 1/25/2008 # .................................. 110,787 110,402
4.78%, Due 1/28/2008 # .................................. 10,297 10,260
See accompanying notes
25
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
Societe Generate NA, Inc., 4.745%, Due 1/29/2008 ........... $ 100,000 $ 99,631
Three Rivers Funding Corp., 5.00%, Due 1/2/2008 # .......... 450,000 449,937
Toyota Motor Credit Corp., 4.76%, Due 2/22/2008 ............ 200,000 198,625
UBS Finance Delaware LLC, 4.77%, Due 1/24/2008 ............. 53,500 53,337
Variable Funding Capital Corp.,
5.35%, Due 1/17/2008 # .................................. 17,606 17,564
5.35%, Due 1/18/2008 # .................................. 50,000 49,874
-----------
TOTAL COMMERCIAL PAPER ..................................... 2,424,597
-----------
TIME DEPOSITS - 3.03%
Danske Bank, 5.00%, Due 1/2/2008 ........................... 400,000 400,000
-----------
SHARES
------------
SHORT TERM INVESTMENTS - 9.64%
BlackRock Temp Fund ........................................ 630,638,084 630,638
Dreyfus Institutional Cash Advantage Fund .................. 640,000,000 640,000
-----------
TOTAL SHORT TERM INVESTMENTS ............................... 1,270,638
-----------
PAR
AMOUNT
------------
REPURCHASE AGREEMENTS - 19.42%
Bank of America, NA, 4.68%, Due 1 /2/2008 (Held at Bank of
New York, Collateralized by Mortgage Loan Obligations
valued at $577,800, 2/23/2036) .......................... $ 540,000 540,000
Barclays Bank plc, 4.65%, Due 1/2/2008 (Held at Bank of
New York, Collateralized by Equity Securities valued at
$619,500, 1/1/2049) ..................................... 590,000 590,000
Citigroup, Inc., 4.68%, Due 1/2/2008 (Held at Chase NYC,
Collateralized by Mortgage Loan Obligations valued at
$433,771, 2/28/2037 - 11/29/2037) ....................... 390,000 390,000
Deutsche Bank Securities, Inc., 4.68%, Due 1/2/2008 (Held at
Bank of New York, Collateralized by Equity Securities
valued at $325,500, 1/1/2049) ........................... 310,000 310,000
Goldman Sachs Group, Inc., 4.75%, Due 1 /2/2008 (Held at
Bank of New York, Collateralized by Mortgage Loan
Obligations valued at $144,200, 1/1/2010 - 1/1/2020) .... 140,000 140,000
Lehman Brothers, Inc., 4.70%, Due 1 /2/2008 (Held at Chase
NYC, Collateralized by Corporate Obligations valued at
$55,611, 5.125% - 6.75%, 9/13/2016 - 7/15/2027 and U.S.
Government Agency Obligations valued at $546,108, 5.5% -
6.5%, 11/1/2036 -9/1/2037) .............................. 590,000 590,000
-----------
TOTAL REPURCHASE AGREEMENTS ................................ 2,560,000
-----------
TOTAL INVESTMENTS - 99.63% (COST $13,135,103) ................. $13,135,103
OTHER ASSETS, NET OF LIABILITIES - 0.37% ...................... 48,896
-----------
TOTAL NET ASSETS - 100.00% .................................... $13,183,999
===========
See accompanying notes
26
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
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 $3,173,315 or 24.07% of net
assets. The Fund has no right to demand registration of these securities.
See accompanying notes
27
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
U.S. AGENCY OBLIGATIONS - 18.88%
FEDERAL HOME LOAN BANK - 8.84%
4.56%, Due 3/17/2008 .................................... $ 7,500 $ 7,428
4.27%, Due 3/26/2008 .................................... 20,000 19,798
4.775%, Due 8/15/2008 ++ ................................ 35,000 35,014
4.841%, Due 9/17/2008 ++ ................................ 25,000 24,992
5.074%, Due 1/5/2009 ++ ................................. 35,000 34,998
-----------
122,230
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 5.94%
4.25%, Due 1/28/2008 .................................... 29,000 28,907
4.29%, Due 3/24/2008 .................................... 18,382 18,200
4.55%, Due 4/7/2008 ..................................... 10,072 9,948
4.767%, Due 2/11/2009 ++ ................................ 25,000 24,994
-----------
82,049
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.10%
4.45%, Due 2/6/2008 ..................................... 17,736 17,657
4.27%, Due 3/19/2008 .................................... 15,085 14,946
4.28%, Due 3/26/2008 .................................... 20,044 19,842
4.47%, Due 4/9/2008 ..................................... 4,199 4,147
-----------
56,592
-----------
TOTAL U.S. AGENCY OBLIGATIONS .............................. 260,871
-----------
REPURCHASE AGREEMENTS - 81.06%
Banc of America Securities LLC, 4.62%, Due 1/2/2008 (Held at
Bank New York, Collateralized by U.S. Government Agency
Obligations valued at $408,000, 5.0%, 6/1/2035) ......... 400,000 400,000
Barclays Capital, Inc., 4.65%, Due 1/2/2008 (Held at Bank of
New York, Collateralized by U.S. Government Agency
Obligations valued at $306,000, 4.5% - 6.0%, 1/1/2018 -
5/1/2047) ............................................... 300,000 300,000
Goldman Sachs, 4.75%, Due 1/2/2008 (Held at Bank of New
York, Collateralized by U.S. Government Agency
Obligations valued at $428,682, 4.5% - 7.0%, 7/1/2010 -
12/1/2037) .............................................. 420,276 420,276
-----------
TOTAL REPURCHASE AGREEMENTS ................................ 1,120,276
-----------
TOTAL INVESTMENTS - 99.94% (COST $1,381,147) .................. $ 1,381,147
OTHER ASSETS, NET OF LIABILITIES - 0.06% ...................... 837
-----------
TOTAL NET ASSETS - 100.00% .................................... $ 1,381,984
===========
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.
See accompanying notes
28
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2007 (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
ASSETS:
Investment in securities at value (cost - $10,575,103 and $260,871,
respectively)........................................................... $10,575,103 $ 260,871
Repurchase agreement (cost - $2,560,000 and $1,120,276, respectively)... 2,560,000 1,120,276
Dividends and interest receivable....................................... 50,408 1,008
Prepaid expenses........................................................ 8 --
----------- ----------
TOTAL ASSETS......................................................... 13,185,519 1,382,155
----------- ----------
LIABILITIES:
Management and investment advisory fees payable (Note 2)................ 1,302 107
Other liabilities....................................................... 218 64
----------- ----------
TOTAL LIABILITIES.................................................... 1,520 171
----------- ----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS................... $13,183,999 $1,381,984
=========== ==========
See accompanying notes
29
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS)
U.S. Government
Money Market Money Market
------------ ---------------
INVESTMENT INCOME:
Interest income..................................... $841,750 $48,251
-------- -------
TOTAL INVESTMENT INCOME.......................... 841,750 48,251
-------- -------
EXPENSES:
Management and investment advisory fees (Note 2).... 15,926 947
Custodian fees...................................... 443 27
Professional fees................................... 177 43
Other expenses...................................... 381 31
-------- -------
TOTAL EXPENSES................................... 16,927 1,048
-------- -------
NET INVESTMENT INCOME.................................. 824,823 47,203
-------- -------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.................... 127 3
-------- -------
NET GAIN ON INVESTMENTS.......................... 127 3
-------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $824,950 $47,206
======== =======
See accompanying notes
30
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
Year Ended December 31, Year Ended December 31,
---------------------------- -------------------------
2007 2006 2007 2006
------------ ------------- ----------- -----------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income....................... $ 824,823 $ 530,893 $ 47,203 $ 17,197
Net realized gain on investments............ 127 12 3 1
------------ ------------- ----------- -----------
TOTAL INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... 824,950 530,905 47,206 17,198
------------ ------------- ----------- -----------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions............................... 35,059,358 131,682,048 5,041,893 3,002,184
Withdrawals................................. (35,428,478) (126,270,825) (4,270,511) (2,695,546)
------------ ------------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTERESTS....... (369,120) 5,411,223 771,382 306,638
------------ ------------- ----------- -----------
NET INCREASE IN NET ASSETS............... 455,830 5,942,128 818,588 323,836
------------ ------------- ----------- -----------
NET ASSETS:
Beginning of period......................... 12,728,169 6,786,041 563,396 239,560
------------ ------------- ----------- -----------
END OF PERIOD............................... $ 13,183,999 $ 12,728,169 $ 1,381,984 $ 563,396
============ ============= =========== ===========
See accompanying notes
31
AMERICAN BEACON MASTER TRUST PORTFOLIOS
FINANCIAL HIGHLIGHTS
Money Market
Year Ended December 31,
--------------------------------
2007 2006 2005 2004 2003
---- ---- ---- ---- ----
Total return................................. 5.33% 5.09% 3.25% 1.34% 1.13%
Ratios to average net assets (annualized):...
Expenses.................................. 0.11% 0.11% 0.11% 0.11% 0.11%
Net investment income..................... 5.19% 5.03% 3.20% 1.30% 1.14%
U.S. Government Money Market
Year Ended December 31,
--------------------------------
2007 2006 2005 2004 2003
---- ---- ---- ---- ----
Total return................................. 5.18% 5.04% 3.19% 1.30% 1.11%
Ratios to average net assets (annualized):...
Expenses.................................. 0.11% 0.12% 0.12% 0.11% 0.12%
Net investment income..................... 4.98% 4.97% 3.15% 1.30% 1.13%
32
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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 government
securities for the Portfolios. Additionally, repurchase agreements in the Money
Market Portfolio may be collateralized by non-government securities. All
collateral is valued at cost, which approximates market value and 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.
33
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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 Portfolios' 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
Portfolios file tax returns with the U.S. Internal Revenue Service. Generally,
the tax authorities can examine all tax returns filed for the last three years.
The Portfolios may be subject to taxes imposed by countries in which it invests.
Such taxes are generally based on returns on income earned or gains realized or
repatriated. Taxes are accrued and applied to net investment income, net
realized capital gains and net unrealized appreciation, as applicable, as the
income is earned or capital gains are recorded. If applicable, the Portfolios
recognize interest accrued related to unrecognized tax benefits in interest
expense and penalties in "Other expenses" on the Statements of Operations. The
Portfolios 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. As of December 31, 2007, the Manager does not believe
the adoption of FAS 157 will materially impact the amounts represented in the
financial statements; however, additional disclosures will be required about the
inputs used to develop the measurements of fair value.
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
34
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2007
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.
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 year ended December 31, 2007, the Money Market Portfolio
earned $8,708 under the credit facility. This amount is included in interest
income on the financial statements.
35
AMERICAN BEACON FUNDS
PRIVACY POLICY & FEDERAL TAX INFORMATION
DECEMBER 31, 2007 (UNAUDITED)
PRIVACY POLICY
The American Beacon Funds recognizes and respects the privacy of our
shareholders. We are providing this notice to you so you will understand how
shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or
more of the following sources:
- information we receive from you on applications or other
forms;
- information about your transactions with us or our service
providers; and
- information we receive from third parties.
We do not disclose any nonpublic personal information about our
customers or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those
employees or service providers who need to know that information to provide
products or services to you. To ensure the confidentiality of your nonpublic
personal information, we maintain safeguards that comply with federal standards.
FEDERAL TAX INFORMATION
We are providing this information as required by the Internal Revenue
Code. The amounts shown may differ from those in other areas of this report
because of differences between tax and financial reporting requirements.
The distributions to shareholders during the tax year ended December
31, 2007 include short-term capital gains of $9,550 and $24 for the Money Market
Fund and U.S. Government Money Market Fund, respectively.
We are required by Internal Revenue Code to advise you within 60 days
of the Funds' fiscal year end as to the federal tax status of dividends paid by
the Funds during its fiscal year ended December 31, 2007. For purposes of
preparing your annual federal income tax returns, you should report the amounts
reflected on your Form 1099-DIV, Box 1a. Of the ordinary dividends paid, the
percentage of income exempt from federal income taxes is 0% for both the Money
Market Fund and the U.S. Government Money Market Fund.
Of the ordinary dividends paid to shareholders of the U.S. Government
Money Market Fund during the tax year ended December 31, 2007, 8.1% were derived
from U.S. Treasury Obligations.
Pursuant to Section 852 of the Internal Revenue Code, the Money Market
Fund designated $621 as long-term capital gain dividends for the taxable year
ended December 31, 2007.
36
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
The Trustees and officers of the American Beacon Funds (the "Trust")
are listed below, together with their principal occupations during the past five
years. Unless otherwise indicated, the address of each person listed below is
4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee
oversees twenty-seven funds in the fund complex that includes the Trust, the
American Beacon Master Trust, the American Beacon Mileage Funds, and the
American Beacon Select Funds. The Trust's Statement of Additional Information
contains additional information about the Trustees and is available without
charge by calling 1-800-658-5811.
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- --------------------- --------------------- ---------------------------------------------------------
INTERESTED TRUSTEES
Term
Lifetime of Trust
until removal,
resignation or
retirement*
Douglas G. Herring** (50) Trustee since 2006 President (2006-Present) and CEO (2008-Present), American
Executive Vice Beacon Advisors, Inc.; Vice President and Controller,
President from American Airlines, Inc. (1998-2006); Chairman
2006 to 2007 (2003-Present) and Director (1995-Present), American
President since 2007 Airlines Federal Credit Union; Trustee, American Beacon
Mileage Funds (2006-Present); Trustee, American Beacon
Select Funds (2006-Present); Trustee, American Beacon
Master Trust (2006-Present); Director, American Beacon
Global Funds SPC (2007-Present); Director, American
Beacon Global Funds plc (2007-Present).
William F. Quinn** (59) Trustee Chairman (2006-Present), CEO (2006-2007), President
since 1987 (1986-2006), and Director (2003-Present), American Beacon
President from Advisors, Inc.; Chairman (1989-2003) and Director
1987 to 2007 (1979-1989, 2003-Present), American Airlines Federal
Executive Vice Credit Union; Director, Hicks Acquisition I, Inc.
President (2007-Present); Director, Crescent Real Estate Equities,
since 2007 Inc.(1994-2007); Director, Pritchard, Hubble & Herr, LLC
(investment advisor) (2001-2006); Director of Investment
Committee, Southern Methodist University Endowment Fund
(1996-Present); Member, Southern Methodist University Cox
School of Business Advisory Board (1999-2002); Member,
New York Stock Exchange Pension Manager Committee
(1997-1998, 2000-2002, 2006-Present); Chairman
(2007-Present) and Vice Chairman (2004-2007), Committee
for the Investment of Employee Benefits; Director, United
Way of Metropolitan Tarrant County (1988-2000,
2004-Present); Trustee, American Beacon Mileage Funds
(1995-Present); Trustee, American Beacon Select Funds
(1999-Present); Trustee, American Beacon Master Trust
(1995-Present); Director, American Beacon Global Funds
SPC (2002-Present); Director, American Beacon Global
Funds plc (2007-Present).
Alan D. Feld** (71) Trustee since 1996 Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (law
firm) (1960-Present); Director, Clear Channel
Communications (1984-Present); Trustee, CenterPoint
Properties (1994-2006); Member Board of Trustees,
Southern Methodist University; Member, Board of Visitors,
The University of Texas M.D. Anderson Cancer Center;
Member, Board of Visitors, Zale Lipshy Hospital; Trustee,
American Beacon Mileage Funds (1996-Present); Trustee,
American Beacon Select Funds (1999-Present); Trustee,
American Beacon Master Trust (1996-Present).
NON-INTERESTED TRUSTEES Term
Lifetime of Trust
until removal,
resignation or
retirement*
W. Humphrey Bogart (63) Trustee since 2004 Consultant, New River Canada Ltd. (mutual fund servicing
company) (1998-2003); Board Member, Baylor University
Medical Center Foundation (1992-2004); President and CEO,
Allmerica Trust Company, NA (1996-1997); President and
CEO, Fidelity Investments Southwest Company (1983-1995);
Senior Vice President of Regional Centers, Fidelity
Investments (1988-1995); Trustee, American Beacon Mileage
Funds (2004-Present); Trustee, American Beacon Select
Funds (2004-Present); Trustee, American Beacon Master
Trust (2004-Present).
37
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- --------------------- --------------------- ---------------------------------------------------------
NON-INTERESTED TRUSTEES
(CONT.)
Brenda A. Cline (47) Trustee since 2004 Executive Vice President, Chief Financial Officer,
Treasurer and Secretary, Kimbell Art Foundation
(1993-Present); Trustee, Texas Christian University
(1998-Present); Trustee, W.I. Cook Foundation, Inc.
(d/b/a Cook Children's Health Foundation) (2001-2006);
Director, Christian Church Foundation (1999-2007);
Trustee, American Beacon Mileage Funds (2004-Present);
Trustee, American Beacon Select Funds (2004-Present);
Trustee, American Beacon Master Trust (2004-Present).
Richard A. Massman (64) Trustee since 2004 Senior Vice President and General Counsel, Hunt
Consolidated, Inc. (holding company engaged in oil and
gas exploration and production, refining, real estate,
farming, ranching, and venture capital activities)
(1994-Present); Trustee, American Beacon Mileage Funds
(2004-Present); Trustee, American Beacon Select Funds
(2004-Present); Trustee, American Beacon Master Trust
(2004-Present).
Stephen D. O'Sullivan (72) Trustee since 1987 Consultant (1994-Present); Trustee, American Beacon
Mileage Funds (1995-Present); Trustee, American Beacon
Select Funds (1999-Present); Trustee, American Beacon
Master Trust (1995-Present).
R. Gerald Turner (62) Trustee since 2001 President, Southern Methodist University (1995-Present);
225 Perkins Admin. Bldg. Director, ChemFirst (1986-2002); Director, J.C. Penney
Southern Methodist Univ. Company, Inc. (1996-Present); Director, California
Dallas, Texas 75275 Federal Preferred Capital Corp. (2001-2003); Director,
Kronus Worldwide Inc. (chemical manufacturing)
(2003-Present); Director, First Broadcasting Investment
Partners, LLC (2003-2007); Member, Salvation Army of
Dallas Board of Directors; Member, Methodist Hospital
Advisory Board; Co-Chair, Knight Commission on
Intercollegiate Athletics; Trustee, American Beacon
Mileage Funds (2001-Present); Trustee, American Beacon
Select Funds (2001-Present); Trustee, American Beacon
Master Trust (2001-Present).
Kneeland Youngblood (52) Trustee since 1996 Managing Partner, Pharos Capital Group, LLC (a private
100 Crescent Court Chairman since equity firm) (1998-Present); Director, Energy Future
Suite 1740 2005 Holdings Corp. (2007-Present); Director, Burger King
Dallas, Texas 75201 Corporation (2004-Present); Director, Gap, Inc.
(2006-Present); Trustee, City of Dallas, Texas Employee
Retirement Fund (2004-Present); Director, Starwood Hotels
and Resorts (2001-Present); Member, Council on Foreign
Relations (1995-Present); Trustee, St. Mark's School of
Texas (2002-Present); Trustee, American Beacon Mileage
Funds (1996- Present); Trustee, American Beacon Select
Funds (1999-Present); Trustee, American Beacon Master
Trust (1996-Present).
38
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- --------------------- --------------------- ---------------------------------------------------------
OFFICERS
Term
One Year
Rosemary K. Behan (48) VP, Secretary and Vice President, Legal and Compliance, American Beacon
Chief Legal Advisors, Inc. (2006-Present); Assistant General Counsel,
Officer since 2006 First Command Financial Planning, Inc. (2004-2006);
Enforcement Attorney (1995-2004), Securities and Exchange
Commission.
Brian E. Brett (47) VP since 2004 Vice President, Director of Sales and Marketing, American
Beacon Advisors, Inc. (2004-Present); Regional Vice
President, Neuberger Berman, LLC (investment advisor)
(1996-2004).
Wyatt Crumpler (41) VP since 2007 Vice President, Trust Investments, American Beacon
Advisors, Inc. (2007-Present); Managing Director of
Corporate Accounting (2004-2007), Director of IT Strategy
and Finance (2002-2004), American Airlines, Inc.
Michael W. Fields (53) VP since 1989 Vice President, Fixed Income Investments, American Beacon
Advisors, Inc. (1988-Present); Director, American Beacon
Global Funds SPC (2002-Present); Director, American
Beacon Global Funds plc (2007-Present).
Rebecca L. Harris (41) Treasurer since 1995 Vice President, Finance, American Beacon Advisors, Inc.
(1995-Present).
Christina E. Sears (36) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc.
Officer since 2004 (2004-Present); Senior Compliance Analyst, American
and Asst. Secretary Beacon Advisors, Inc. (1998-2004).
since 1999
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
72, with the exception of Messrs. Quinn and O'Sullivan.
** Messrs. Quinn, Feld and Herring are deemed to be "interested persons" of
the Trust, as defined by the 1940 Act. Mr. Quinn is Chairman of the
Manager. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP has
provided legal services within the past two years to one or more of the
Trust's Investment advisors. Mr. Herring is President and CEO of the
Manager.
39
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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:
(GRAPHIC) (GRAPHIC)
BY E-MAIL: ON THE INTERNET:
american_beacon.funds@ambeacon.com Visit our website at
www.americanbeaconfunds.com
(GRAPHIC) (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
STATE STREET BANK AND TRUST
Boston, Massachusetts
TRANSFER AGENT
BOSTON FINANCIAL DATA SERVICES
Kansas City, Missouri
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ERNST & YOUNG LLP
Dallas, Texas
DISTRIBUTOR
FORESIDE FUND SERVICES
Portland, Maine
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
American Airlines, Inc. is not responsible for investments made in the American
Beacon Funds. 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.
AR 12/07
541497
ITEM 2. CODE OF ETHICS.
The Trust has adopted a code of ethics that applies to its principal executive
and financial officers (the "Code"). The Trust did not amend 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. The Code is filed herewith as
Exhibit 99.CODE ETH.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Trust's Board of Trustees has determined that Brenda Cline, a member
of the Trust's Audit and Compliance Committee, is an "audit committee financial
expert" as defined in Form N-CSR. Ms. Cline is "independent" as defined
in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a)
<Table>
<Caption>
Audit Fees Fiscal Year Ended
- ---------- -----------------
$265,722 10/31/2006 Revised
$92,179 12/31/2006
$280,229 10/31/2007
$85,006 12/31/2007
</Table>
(b)
<Table>
<Caption>
Audit-Related Fees Fiscal Year Ended
- ------------------ -----------------
$23,164* 10/31/2006
$0 12/31/2006
$8,750* 10/31/2006
$0 12/31/2006
</Table>
<FN>
* Attestation services related to Interfund Lending Program
</FN>
(c)
<Table>
<Caption>
Tax Fees Fiscal Year Ended
- -------- -----------------
$0 10/31/2006
$0 12/31/2006
$29,199 10/31/2007
$11,141 12/31/2007
</Table>
(d)
<Table>
<Caption>
All Other Fees Fiscal Year Ended
- -------------- -----------------
$0 10/31/2006
$0 12/31/2006
$0 10/31/2007
$0 12/31/2007
</Table>
(e)(1) Pursuant to its charter, the Trust's Audit and Compliance Committee
shall have the following duties and powers pertaining to pre-approval
of audit and non-audit services provided by the Trust's principal
accountant:
- to approve, prior to appointment, the engagement of auditors to
annually audit and provide their opinion on the Trusts' financial
statements, and, in connection therewith, reviewing and evaluating
matters potentially affecting the independence and capabilities of
the auditors;
- to approve, prior to appointment, the engagement of the auditors to
provide non-audit services to the Trusts, an investment adviser to
any series of the Trusts or any entity controlling, controlled by,
or under common control with an investment adviser ("adviser
affiliate") that provides ongoing services to the Trusts, if the
engagement relates directly to the operations and financial
reporting of the Trusts;
- to consider whether the non-audit services provided by a Trust's
auditor to an investment adviser or any adviser affiliate that
provides ongoing services to a series of the Trusts, which services
were not pre-approved by the Committee, are compatible with
maintaining the auditor's independence;
- to review the arrangements for and scope of the annual audit and any
special audits; and
- to review and approving the fees proposed to be charged to the
Trusts by the auditors for each audit and non-audit service.
The Audit and Compliance Committee may delegate any portion of its authority,
including the authority to grant pre-approvals of audit and permitted
non-audit services, to a subcommittee of one or more members. Any decisions
of the subcommittee to grant pre-approvals shall be presented to the full
audit committee at its next regularly scheduled meeting.
(e)(2) None of the fees disclosed in paragraphs (b) through (d) above were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g)
<Table>
<Caption>
Aggregate Non-Audit Fees for Services Rendered to the:
- ------------------------------------------------------
Adviser's Affiliates Providing
Registrant Adviser Ongoing Services to Registrant Fiscal Year Ended
- ---------- ------- ------------------------------ -----------------
$23,164 $0 N/A 10/31/2006
$0 $0 N/A 12/31/2006
$29,199 $0 N/A 10/31/2007
$11,141 $0 N/A 12/31/2007
</Table>
(h) 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 of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
Advertising Agencies - 0.4% 7,600 DG FastChannel, Inc. (a) $ 194,864
11,700 Greenfield Online, Inc. (a) 170,937
14,600 inVentiv Health, Inc. (a) 452,016
12,200 Marchex, Inc. Class B (i) 132,492
19,770 National CineMedia, Inc. 498,402
22,600 Valassis Communications, Inc. (a) 264,194
46,380 ValueClick, Inc. (a) 1,015,722
---------------
2,728,627
- ----------------------------------------------------------------------------------------------------------------------------------
Aerospace - 0.8% 3,000 AeroVironment, Inc. (a) 72,600
6,400 Argon ST, Inc. (a) 118,784
20,568 Curtiss-Wright Corp. 1,032,514
11,726 Heico Corp. (i) 638,832
6,900 Ladish Co., Inc. (a) 298,011
3,500 MTC Technologies, Inc. (a) 82,250
16,713 Moog, Inc. Class A (a) 765,623
27,735 Orbital Sciences Corp. (a) 680,062
16,334 Teledyne Technologies, Inc. (a) 871,092
4,500 TransDigm Group, Inc. (a) 203,265
---------------
4,763,033
- ----------------------------------------------------------------------------------------------------------------------------------
Agriculture, Fishing & 1,200 Alico, Inc. (i) 43,800
Ranching - 0.1% 6,500 The Andersons, Inc. 291,200
4,000 Cadiz, Inc. (a) 84,000
---------------
419,000
- ----------------------------------------------------------------------------------------------------------------------------------
Air Transport - 0.7% 16,368 AAR Corp. (a)(g) 622,475
23,100 ABX Holdings, Inc. (a) 96,558
39,820 AirTran Holdings, Inc. (a) 285,111
18,398 Alaska Air Group, Inc. (a) 460,134
1,600 Allegiant Travel Co. (a) 51,424
6,500 Atlas Air Worldwide Holdings, Inc. (a) 352,430
9,185 Bristow Group, Inc. (a) 520,330
17,500 ExpressJet Holdings, Inc. (a) 43,400
83,400 JetBlue Airways Corp. (a)(i) 492,060
9,800 Midwest Air Group, Inc. (a) 145,040
7,100 PHI, Inc. (a) 220,242
10,200 Pinnacle Airlines Corp. (a) 155,550
14,700 Republic Airways Holdings, Inc. (a) 287,973
28,400 SkyWest, Inc. 762,540
---------------
4,495,267
- ----------------------------------------------------------------------------------------------------------------------------------
Aluminum - 0.2% 13,692 Century Aluminum Co. (a) 738,546
7,100 Kaiser Aluminum Corp. 564,308
---------------
1,302,854
- ----------------------------------------------------------------------------------------------------------------------------------
Auto Parts: After 10,343 Aftermarket Technology Corp. (a) 281,950
Market - 0.1% 8,450 Commercial Vehicle Group, Inc. (a) 122,525
4,800 Standard Motor Products, Inc. 39,168
10,999 Superior Industries International, Inc. (i) 199,852
---------------
643,495
- ----------------------------------------------------------------------------------------------------------------------------------
Auto Parts: Original 21,100 American Axle & Manufacturing Holdings, Inc. 392,882
Equipment - 0.5% 10,800 Amerigon Inc. (a) 227,448
33,600 ArvinMeritor, Inc. 394,128
47,500 Hayes Lemmerz International, Inc. (a) 217,075
35,680 Lear Corp. (a) 986,909
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
6,900 Noble International Ltd. $ 112,539
3,873 Sauer-Danfoss, Inc. 97,019
3,900 Stoneridge, Inc. (a) 31,356
20,200 Tenneco, Inc. (a) 526,614
61,200 Visteon Corp. (a) 268,668
---------------
3,254,638
- ----------------------------------------------------------------------------------------------------------------------------------
Auto, Trucks & Parts - 0.1% 8,400 Accuride Corp. (a) 66,024
31,900 Force Protection, Inc. (a)(i) 148,973
4,000 Miller Industries, Inc. (a) 54,760
13,394 Modine Manufacturing Co. 221,135
15,400 Spartan Motors, Inc. (i) 117,656
13,245 Wabash National Corp. 101,854
---------------
710,402
- ----------------------------------------------------------------------------------------------------------------------------------
Banks: New York City - 0.1% 6,600 Northfield Bancorp, Inc. (a) 71,412
14,000 Signature Bank (a) 472,500
---------------
543,912
- ----------------------------------------------------------------------------------------------------------------------------------
Banks: Outside 4,684 1st Source Corp. 81,080
New York City - 5.1% 7,480 Abington Bancorp, Inc. 70,312
7,421 Alabama National Bancorp. 577,428
11,718 Amcore Financial, Inc. 265,998
8,350 AmericanWest Bancorp (i) 147,210
5,900 Ameris Bancorp 99,415
2,990 Bancfirst Corp. 128,121
10,600 Banco Latinoamericano de Exportaciones, SA 172,886
6,915 The Bancorp, Inc. (a) 93,076
6,700 Bank of the Ozarks, Inc. 175,540
10,100 BankFinancial Corp. 159,782
8,013 Banner Corp. 230,213
13,600 Beneficial Mutual Bancorp, Inc. (a) 132,192
17,233 Boston Private Financial Holdings, Inc. 466,669
31,365 CVB Financial Corp. 324,314
4,821 Capital City Bank Group, Inc. (i) 136,048
4,800 Capital Corp. of the West 93,264
7,000 Capitol Bancorp Ltd. 140,840
12,025 Cascade Bancorp (i) 167,388
23,944 Cathay General Bancorp 634,276
24,000 Centennial Bank Holdings, Inc. (a) 138,720
5,700 Center Financial Corp. 70,224
14,648 Central Pacific Financial Corp. 270,402
11,748 Chemical Financial Corp. 279,485
20,282 Chittenden Corp. 722,445
35,687 Citizens Banking Corp. 517,818
8,593 City Holding Co. 290,787
6,598 CityBank 147,135
2,400 Clifton Savings Bancorp, Inc. 23,520
10,426 CoBiz Financial, Inc. 155,035
8,541 Columbia Banking System, Inc. 253,924
5,200 Community Bancorp (a) 90,324
14,300 Community Bank System, Inc. 284,141
7,323 Community Trust Bancorp, Inc. 201,602
18,604 Corus Bankshares, Inc. (i) 198,505
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
3,500 Enterprise Financial Services Corp. (i) $ 83,335
39,200 First BanCorp 285,768
4,136 First Bancorp 78,129
13,214 First Busey Corp. (i) 262,430
15,123 First Charter Corp. 451,573
34,840 First Commonwealth Financial Corp. (i) 371,046
11,111 First Community Bancorp, Inc. 458,218
3,694 First Community Bancshares, Inc. 117,802
14,387 First Financial Bancorp 164,012
9,753 First Financial Bankshares, Inc. 367,200
5,744 First Financial Corp. 162,785
7,046 First Merchants Corp. 153,885
21,800 First Midwest Bancorp, Inc. 667,080
3,600 First Regional Bancorp (a) 68,004
2,600 First South Bancorp, Inc. (i) 57,694
11,500 First State Bancorp. 159,850
35,400 FirstMerit Corp. 708,354
14,300 Franklin Bank Corp. (a) 61,633
18,466 Frontier Financial Corp. (i) 342,914
24,764 Glacier Bancorp, Inc. (i) 464,077
5,500 Greene County Bancshares, Inc. 105,600
12,554 Hancock Holding Co. 479,563
19,504 Hanmi Financial Corp. 168,124
14,736 Harleysville National Corp. 214,704
4,300 Heartland Financial USA, Inc. (i) 79,851
4,700 Heritage Commerce Corp. 86,433
3,900 Home Bancshares, Inc. 81,783
7,545 Independent Bank Corp./MA 205,375
13,345 Independent Bank Corp./MI 126,778
10,774 Integra Bank Corp. 152,021
22,010 International Bancshares Corp. 460,889
21,300 Investors Bancorp, Inc. (a) 301,182
10,148 Irwin Financial Corp. 74,588
6,705 Lakeland Bancorp, Inc. 77,711
4,100 Lakeland Financial Corp. 85,690
17,083 MB Financial, Inc. 526,669
7,827 Macatawa Bank Corp. (i) 67,234
6,719 MainSource Financial Group, Inc. 104,548
10,780 Midwest Banc Holdings, Inc. 133,888
15,513 NBT Bancorp, Inc. 354,007
10,900 Nara Bancorp, Inc. 127,203
23,147 National Penn Bancshares, Inc. (i) 350,446
31,395 Old National Bancorp 469,669
5,922 Old Second Bancorp, Inc. 158,650
6,141 Omega Financial Corp. (i) 179,686
11,318 Oriental Financial Group 151,774
22,162 Pacific Capital Bancorp 446,121
5,715 Park National Corp. (i) 368,618
4,110 Peoples Bancorp, Inc. 102,298
6,800 Pinnacle Financial Partners, Inc. (a) 172,856
8,600 Piper Jaffray Cos. (a) 398,352
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
4,550 Preferred Bank $ 118,391
9,496 PrivateBancorp, Inc. (i) 310,044
16,700 Prosperity Bancshares, Inc. 490,813
15,724 Provident Bankshares Corp. 336,336
10,198 Renasant Corp. 219,971
2,954 Republic Bancorp, Inc. Class A 48,830
1,333 Royal Bancshares of Pennsylvania Class A 14,663
11,663 S&T Bancorp, Inc. 322,365
3,263 SCBT Financial Corp. 103,339
15,100 SVB Financial Group (a) 761,040
4,430 SY Bancorp, Inc. 106,054
7,514 Sandy Spring Bancorp, Inc. 209,039
1,403 Santander BanCorp 12,150
8,858 Seacoast Banking Corp. of Florida (i) 91,060
8,200 Security Bank Corp. (i) 74,948
3,800 Sierra Bancorp 94,582
5,400 Simmons First National Corp. Class A 143,100
34,700 The South Financial Group, Inc. 542,361
4,680 Southside Bancshares, Inc. 95,753
8,200 Southwest Bancorp, Inc. 150,306
35,814 Sterling Bancshares, Inc. 399,684
13,302 Sterling Financial Corp. 218,419
4,900 Suffolk Bancorp 150,479
5,270 Sun Bancorp, Inc. (a) 83,161
19,700 Superior Bancorp (a) 105,789
39,756 Susquehanna Bancshares, Inc. 733,097
3,000 Taylor Capital Group, Inc. 61,200
11,961 Texas Capital Bancshares, Inc. (a) 218,288
2,840 Tompkins Trustco, Inc. 110,192
4,978 Trico Bancshares 96,075
36,461 TrustCo Bank Corp. NY (i) 361,693
22,927 Trustmark Corp. 581,429
43,700 UCBH Holdings, Inc. 618,792
13,652 UMB Financial Corp. 523,691
28,780 Umpqua Holdings Corp. 441,485
4,700 Union Bankshares Corp. 99,358
18,000 United Bankshares, Inc. 504,360
19,600 United Community Banks, Inc. 309,680
2,200 United Security Bancshares (i) 33,616
4,550 Univest Corp. of Pennsylvania (i) 96,051
7,554 Virginia Commerce Bancorp (a)(i) 88,608
5,000 Washington Trust Bancorp, Inc. 126,150
11,963 WesBanco, Inc. 246,438
7,600 West Coast Bancorp 140,600
13,083 Westamerica Bancorp. (i) 582,848
9,100 Western Alliance Bancorp (a)(i) 170,807
7,300 Wilshire Bancorp, Inc. 57,305
11,600 Wintrust Financial Corp. 384,308
---------------
32,026,967
- ----------------------------------------------------------------------------------------------------------------------------------
Beverage: Brewers 4,700 Boston Beer Co., Inc. Class A (a) 176,955
(Wineries) - 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
Beverage: Soft Drinks - 0.1% 2,287 Coca-Cola Bottling Co. Consolidated $ 134,659
1,810 Farmer Bros. Co. 41,612
8,400 Green Mountain Coffee Roasters, Inc. (a) 341,880
12,900 Jones Soda Co. (a)(i) 95,976
3,108 National Beverage Corp. 24,988
7,300 Peet's Coffee & Tea, Inc. (a)(i) 212,211
---------------
851,326
- ----------------------------------------------------------------------------------------------------------------------------------
Biotechnology Research & 7,860 AMAG Pharmaceuticals, Inc. (a) 472,622
Production - 2.6% 15,600 Acadia Pharmaceuticals, Inc. (a) 172,692
10,500 Acorda Therapeutics, Inc. (a) 230,580
11,587 Albany Molecular Research, Inc. (a) 166,621
16,980 Alexion Pharmaceuticals, Inc. (a) 1,274,009
22,200 Allos Therapeutics, Inc. (a) 139,638
16,300 Alnylam Pharmaceuticals, Inc. (a)(i) 474,004
10,300 Altus Pharmaceuticals, Inc. (a) 53,354
22,700 American Oriental Bioengineering, Inc. (a)(i) 251,516
2,900 Amicus Therapeutics, Inc. (a) 31,175
35,800 Applera Corp. - Celera Genomics Group (a)(g) 568,146
34,000 Arena Pharmaceuticals, Inc. (a) 266,220
34,819 Ariad Pharmaceuticals, Inc. (a) 147,981
18,800 Arqule, Inc. (a) 109,040
22,200 Array Biopharma, Inc. (a) 186,924
12,120 ArthroCare Corp. (a)(i) 582,366
1,400 Biodel, Inc. (a) 32,522
12,700 Bionovo, Inc. (a)(i) 21,717
38,424 Cell Genesys, Inc. (a) 88,375
25,867 Cubist Pharmaceuticals, Inc. (a) 530,532
17,500 Cypress Bioscience, Inc. (a) 193,200
11,800 Cytokinetics, Inc. (a) 55,814
41,000 Discovery Laboratories, Inc. (a) 88,150
38,096 Encysive Pharmaceuticals, Inc. (a)(i) 32,382
22,100 Enzon Pharmaceuticals, Inc. (a) 210,613
48,718 Exelixis, Inc. (a) 420,436
40,500 GenVec, Inc. (a) 59,535
5,300 Genomic Health, Inc. (a)(i) 119,992
34,429 Geron Corp. (a)(i) 195,557
26,800 Halozyme Therapeutics, Inc. (a) 190,548
62,600 Human Genome Sciences, Inc. (a) 653,544
6,800 Idenix Pharmaceuticals, Inc. (a)(i) 18,360
18,200 Immunomedics, Inc. (a) 42,224
39,324 Incyte Corp. (a) 395,206
8,500 Integra LifeSciences Holdings Corp. (a) 356,405
14,214 InterMune, Inc. (a) 189,473
6,200 Kendle International, Inc. (a) 303,304
6,200 Kensey Nash Corp. (a) 185,504
20,700 Keryx Biopharmaceuticals, Inc. (a)(i) 173,880
14,700 Kosan Biosciences, Inc. (a) 52,920
21,750 MannKind Corp. (a)(i) 173,130
15,100 Martek Biosciences Corp. (a)(i) 446,658
9,901 Maxygen, Inc. (a) 79,505
10,500 Medivation, Inc. (a) 151,200
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
6,900 Metabolix, Inc. (a) $ 164,220
11,900 Momenta Pharmaceuticals, Inc. (a) 84,966
20,000 Myriad Genetics, Inc. (a) 928,400
26,354 Nabi Biopharmaceuticals (a) 95,138
1,800 Nanosphere, Inc. (a) 25,182
13,200 Nastech Pharmaceutical Co., Inc. (a)(i) 50,160
19,200 Neurocrine Biosciences, Inc. (a)(i) 87,168
8,900 Neurogen Corp. (a) 30,705
7,200 Novacea, Inc. (a) 21,456
26,800 OSI Pharmaceuticals, Inc. (a) 1,300,068
6,500 Omrix Biopharmaceuticals, Inc. (a) 225,810
3,700 Orexigen Therapeutics, Inc. (a) 52,725
4,600 Osiris Therapeutics, Inc. (a)(i) 55,292
8,950 PharmaNet Development Group, Inc. (a) 350,930
14,800 Poniard Pharmaceuticals, Inc. (a)(i) 65,268
12,100 Progenics Pharmaceuticals, Inc. (a) 218,647
5,260 Protalix BioTherapeutics, Inc. (a) 17,884
15,600 Regeneration Technologies, Inc. (a) 135,408
13,070 Rigel Pharmaceuticals, Inc. (a)(i) 331,847
23,428 Savient Pharmaceuticals, Inc. (a) 538,141
23,000 Seattle Genetics, Inc. (a) 262,200
800 Sucampo Pharmaceuticals, Inc. Class A (a) 14,672
2,900 Synta Pharmaceuticals Corp. (a) 19,430
24,932 Telik, Inc. (a)(i) 86,514
12,400 Tercica, Inc. (a)(i) 84,072
13,900 Vanda Pharmaceuticals, Inc. (a) 95,632
32,800 ViroPharma, Inc. (a) 260,432
62,300 XOMA Ltd. (a) 211,197
18,400 ZymoGenetics, Inc. (a) 214,728
---------------
16,615,866
- ----------------------------------------------------------------------------------------------------------------------------------
Building Materials - 0.5% 4,300 Ameron International Corp. 396,245
3,200 BlueLinx Holdings, Inc. (i) 12,576
14,600 Building Material Holding Corp. (i) 80,738
9,712 LSI Industries, Inc. 176,758
9,568 NCI Building Systems, Inc. (a) 275,463
1,300 PGT, Inc. (a) 6,188
15,832 Simpson Manufacturing Co., Inc. (i) 420,973
12,705 Texas Industries, Inc. 890,621
5,209 Trex Co., Inc. (a)(i) 44,329
10,765 Watsco, Inc. 395,721
11,700 Zoltek Cos., Inc. (a)(i) 501,579
---------------
3,201,191
- ----------------------------------------------------------------------------------------------------------------------------------
Building: Cement - 0.0% 17,200 U.S. Concrete, Inc. (a) 57,276
- ----------------------------------------------------------------------------------------------------------------------------------
Building: Heating & 6,850 Aaon, Inc. 135,767
Plumbing - 0.1% 11,300 Interline Brands, Inc. (a) 247,583
---------------
383,350
- ----------------------------------------------------------------------------------------------------------------------------------
Building: Miscellaneous - 0.2% 7,800 Builders FirstSource, Inc. (a)(i) 56,316
17,800 Comfort Systems USA, Inc. 227,484
8,600 Drew Industries, Inc. (a) 235,640
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
16,000 Goodman Global, Inc. (a) $ 392,640
15,347 Griffon Corp. (a) 191,070
---------------
1,103,150
- - ---------------------------------------------------------------------------------------------------------------------------------
Building: Roofing & 22,250 Beacon Roofing Supply, Inc. (a)(i) 187,345
Wallboard - 0.0% 200 China Architectural Engineering, Inc. (a) 1,730
---------------
189,075
- ----------------------------------------------------------------------------------------------------------------------------------
Cable Television 193,000 Charter Communications, Inc. Class A (a)(i) 225,810
Services - 0.1% 6,998 Crown Media Holdings, Inc. Class A (a)(i) 45,487
45,694 TiVo, Inc. (a)(i) 381,088
---------------
652,385
- ----------------------------------------------------------------------------------------------------------------------------------
Casinos & Gambling - 0.6% 11,900 Ameristar Casinos, Inc. 327,726
24,500 Bally Technologies, Inc. (a) 1,218,140
3,832 Churchill Downs, Inc. 206,813
7,805 Dover Downs Gaming & Entertainment, Inc. 87,806
6,875 Isle of Capri Casinos, Inc. (a) 94,669
11,200 Lakes Entertainment, Inc. (a) 77,616
11,300 MTR Gaming Group, Inc. (a) 76,727
17,474 Magna Entertainment Corp. Class A (a)(i) 16,950
5,300 Monarch Casino & Resort, Inc. (a) 127,624
13,100 Multimedia Games, Inc. (a)(i) 109,254
26,194 Pinnacle Entertainment, Inc. (a) 617,131
3,900 Riviera Holdings Corp. (a) 120,120
17,500 Shuffle Master, Inc. (a)(i) 209,825
16,500 Trump Entertainment Resorts, Inc. (a)(i) 70,950
18,418 WMS Industries, Inc. (a) 674,836
---------------
4,036,187
- ----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 2.0% 13,506 A. Schulman, Inc. 291,054
7,033 American Vanguard Corp. (i) 122,022
11,456 Arch Chemicals, Inc. 421,008
6,900 Balchem Corp. 154,422
25,500 CF Industries Holdings, Inc. 2,806,530
11,200 Cabot Microelectronics Corp. (a)(i) 402,192
19,401 Calgon Carbon Corp. (a)(i) 308,282
12,485 Cambrex Corp. 104,624
11,100 EnerSys (a) 277,056
17,364 Energy Conversion Devices, Inc. (a)(i) 584,299
31,800 Exide Technologies (a)(i) 254,400
17,537 Georgia Gulf Corp. (i) 116,095
54,300 Hercules, Inc. 1,050,705
10,000 Innophos Holdings, Inc. 148,800
10,400 Innospec, Inc. 178,464
7,700 LSB Industries, Inc. (a)(i) 217,294
10,500 Landec Corp. (a) 140,700
11,741 Medis Technologies Ltd. (a)(i) 181,164
3,134 NL Industries, Inc. 35,822
7,000 NewMarket Corp. 389,830
6,665 Nuco2, Inc. (a) 165,959
13,400 OM Group, Inc. (a) 771,036
39,267 PolyOne Corp. (a) 258,377
6,600 Polypore International, Inc. (a) 115,500
15,200 Rockwood Holdings, Inc. (a) 504,944
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
16,100 Senomyx, Inc. (a) $ 120,589
11,700 ShengdaTech, Inc. (a)(i) 169,065
3,155 Stepan Co. 102,632
9,400 Tronox, Inc. Class A (i) 83,660
6,800 Tronox, Inc. Class B 58,820
23,300 UAP Holding Corp. 899,380
31,300 W.R. Grace & Co. (a) 819,434
10,480 Zep, Inc. (a) 145,358
---------------
12,399,517
- ----------------------------------------------------------------------------------------------------------------------------------
Coal - 0.2% 30,200 Alpha Natural Resources, Inc. (a) 980,896
54,400 International Coal Group, Inc. (a)(i) 291,584
8,100 US BioEnergy Corp. (a) 94,851
---------------
1,367,331
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Information 12,258 Arbitron, Inc. 509,565
Services - 0.2% 2,600 HSW International, Inc. (a) 16,198
12,061 infoUSA, Inc. 107,705
13,100 LECG Corp. (a) 197,286
12,900 LoopNet, Inc. (a)(i) 181,245
---------------
1,011,999
- ----------------------------------------------------------------------------------------------------------------------------------
Communications & 32,900 Entravision Communications Corp. Class A (a) 257,607
Media - 0.1% 116,800 Gemstar-TV Guide International, Inc. (a) 555,968
10,300 Knology, Inc. (a) 131,634
---------------
945,209
- ----------------------------------------------------------------------------------------------------------------------------------
Communications 173,300 3Com Corp. (a) 783,316
Technology - 2.6% 10,700 Acme Packet, Inc. (a) 134,713
27,600 Adtran, Inc. 590,088
8,922 Anaren, Inc. (a) 147,124
13,672 Anixter International, Inc. (a) 851,355
4,300 Aruba Networks, Inc. (a) 64,113
25,700 Atheros Communications, Inc. (a) 784,878
93,500 Avanex Corp. (a)(i) 93,500
23,650 Avocent Corp. (a) 551,281
5,159 Bel Fuse, Inc. 151,004
6,600 BigBand Networks, Inc. (a) 33,924
8,588 Black Box Corp. 310,628
1,800 CPI International, Inc. (a) 30,780
18,100 CSG Systems International, Inc. (a) 266,432
9,100 Cbeyond Communications, Inc. (a) 354,809
23,300 Cogent Communications Group, Inc. (a) 552,443
9,400 Comtech Group, Inc. (a) 151,434
10,825 Comtech Telecommunications Corp. (a) 584,658
8 CycleLogic, Inc. 0
9,700 Digi International, Inc. (a) 137,643
13,900 Ditech Networks, Inc. (a) 48,233
7,400 EMS Technologies, Inc. (a) 223,776
14,313 Echelon Corp. (a)(i) 295,420
56,200 Extreme Networks, Inc. (a) 198,948
111,100 Finisar Corp. (a)(i) 161,095
67,500 Foundry Networks, Inc. (a) 1,182,600
8,300 GeoEye, Inc. (a) 279,295
40,896 Harmonic, Inc. (a) 428,590
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
10,050 Harris Stratex Networks, Inc. Class A (a) $ 167,835
2,400 Hughes Communications, Inc. (a) 131,064
6,100 Infinera Corp. (a) 90,524
21,900 InterDigital, Inc. (a) 510,927
18,500 InterVoice, Inc. (a) 147,815
17,029 Ixia (a) 161,435
23,100 j2 Global Communications, Inc. (a) 489,027
4,500 Loral Space & Communications Ltd. (a) 154,125
16,200 NETGEAR, Inc. (a) 577,854
10,000 Network Equipment Technologies, Inc. (a) 84,200
9,800 Nextwave Wireless, Inc. (a) 52,724
14,600 Novatel Wireless, Inc. (a) 236,520
10,702 Oplink Communications, Inc. (a) 164,276
7,900 Optium Corp. (a)(i) 62,252
10,900 SeaChange International, Inc. (a) 78,807
22,138 Secure Computing Corp. (a) 212,525
2,600 Shoretel, Inc. (a) 36,322
124,400 Sonus Networks, Inc. (a)(i) 725,252
10,910 Standard Microsystems Corp. (a) 426,254
6,300 Starent Networks Corp. (a) 114,975
6,200 Switch and Data Facilities Co., Inc. (a) 99,324
87,300 Sycamore Networks, Inc. (a) 335,232
13,100 Syniverse Holdings, Inc. (a) 204,098
88,900 TIBCO Software, Inc. (a) 717,423
28,900 Tekelec (a) 361,250
25,830 Terremark Worldwide, Inc. (a)(i) 167,895
50,900 UTStarcom, Inc. (a)(i) 139,975
11,401 Viasat, Inc. (a) 392,536
31,400 Vonage Holdings Corp. (a)(i) 72,220
---------------
16,506,746
- ----------------------------------------------------------------------------------------------------------------------------------
Computer Services 1,700 3PAR, Inc. (a) 21,760
Software & Systems - 5.8% 17,485 ACI Worldwide, Inc. (a) 332,914
28,700 Actuate Corp. (a) 222,999
14,100 American Reprographics Co. (a) 232,368
8,100 Ansoft Corp. (a) 209,385
36,064 Ansys, Inc. (a) 1,495,213
36,680 Ariba, Inc. (a) 408,982
60,400 Art Technology Group, Inc. (a) 260,928
15,000 AsiaInfo Holdings, Inc. (a) 165,000
38,988 Aspen Technology, Inc. (a) 632,385
95,100 BearingPoint, Inc. (a) 269,133
20,626 Blackbaud, Inc. 578,353
13,400 Blackboard, Inc. (a) 539,350
1,900 BladeLogic, Inc. (a) 56,183
14,400 Blue Coat Systems, Inc. (a) 473,328
35,767 Borland Software Corp. (a) 107,658
10,500 Bottomline Technologies, Inc. (a) 147,000
14,400 CACI International, Inc. Class A (a) 644,688
22,880 CMGI, Inc. (a) 299,499
8,500 COMSYS IT Partners, Inc. (a) 134,130
16,240 Chordiant Software, Inc. (a) 138,852
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
23,602 Ciber, Inc. (a) $ 144,208
2,100 ComScore, Inc. (a) 68,523
17,000 Commvault Systems, Inc. (a) 360,060
1,500 Compellent Technologies, Inc. (a) 18,045
2,900 Comverge, Inc. (a) 91,321
20,000 Concur Technologies, Inc. (a) 724,200
2,400 Constant Contact, Inc. (a) 51,600
16,700 DealerTrack Holdings, Inc. (a) 558,949
2,500 Deltek, Inc. 38,075
19,100 Digital River, Inc. (a) 631,637
11,100 DivX, Inc. (a)(i) 155,400
4,100 Double-Take Software, Inc. (a) 89,052
12,917 EPIQ Systems, Inc. (a) 224,885
26,639 Electronics for Imaging, Inc. (a) 598,845
27,400 Epicor Software Corp. (a) 322,772
16,700 Equinix, Inc. (a)(i) 1,687,869
32,279 Gartner, Inc. Class A (a) 566,819
7,500 i2 Technologies, Inc. (a)(i) 94,500
7,400 iGate Corp. (a) 62,678
3,800 Imergent, Inc. (i) 40,242
40,900 Informatica Corp. (a) 737,018
15,400 Information Services Group, Inc. (a)(i) 105,490
3,191 Integral Systems, Inc. 74,223
6,200 Interactive Intelligence, Inc. (a) 163,370
15,900 Internet Capital Group, Inc. (a) 186,666
20,625 Interwoven, Inc. (a) 293,288
12,108 JDA Software Group, Inc. (a) 247,730
11,900 Kenexa Corp. (a) 231,098
5,000 Keynote Systems, Inc. (a) 70,250
57,800 Lawson Software, Inc. (a) 591,872
5,700 Limelight Networks, Inc. (a) 39,273
29,500 Lionbridge Technologies, Inc. (a) 104,725
14,900 LivePerson, Inc. (a) 79,417
19,200 MSC.Software Corp. (a) 249,408
22,800 Macrovision Corp. (a) 417,924
19,700 Magma Design Automation, Inc. (a) 240,537
12,739 Manhattan Associates, Inc. (a) 335,800
9,200 Mantech International Corp. Class A (a) 403,144
41,900 Mentor Graphics Corp. (a) 451,682
7,100 Mercadolibre, Inc. (a) 524,548
10,856 Mercury Computer Systems, Inc. (a) 174,890
4,100 MicroStrategy, Inc. Class A (a) 389,910
18,798 Micros Systems, Inc. (a) 1,318,868
3,500 Monotype Imaging Holdings, Inc. (a) 53,095
14,900 Ness Technologies, Inc. (a) 137,527
3,200 Netezza Corp. (a) 44,160
67,495 Nuance Communications, Inc. (a) 1,260,807
16,000 Omniture, Inc. (a) 532,640
65,500 On2 Technologies, Inc. (a)(i) 66,810
28,400 OpenTV Corp. (a)(i) 37,488
42,733 Openwave Systems, Inc. (i) 111,106
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
11,100 PDF Solutions, Inc. (a) $ 100,011
2,400 PROS Holdings, Inc. (a) 47,088
18,907 Packeteer, Inc. (a) 116,467
53,460 Parametric Technology Corp. (a) 954,261
3,900 Pegasystems, Inc. 46,527
19,008 Progress Software Corp. (a) 640,189
3,600 QAD, Inc. 33,624
32,000 Quest Software, Inc. (a) 590,080
45,300 RealNetworks, Inc. (a) 275,877
8,600 RightNow Technologies, Inc. (a) 136,310
75,339 SAIC, Inc. (a) 1,515,821
12,880 SAVVIS, Inc. (a) 358,966
5,700 SI International, Inc. (a) 156,579
8,689 SPSS, Inc. (a) 312,022
19,400 SRA International, Inc. Class A (a) 571,330
14,361 SYKES Enterprises, Inc. (a) 258,498
5,900 SYNNEX Corp. (a) 115,640
40,192 Sapient Corp. (a) 354,092
13,200 Sigma Designs, Inc. (a) 728,640
12,700 Smith Micro Software, Inc. (a) 107,569
12,100 Solera Holdings, Inc. (a) 299,838
30,441 SonicWALL, Inc. (a) 326,328
700 Sourcefire, Inc. (a) 5,838
39,700 Sourceforge, Inc. (a) 97,265
2,900 Stanley, Inc. (a) 92,858
2,900 SuccessFactors, Inc. (a) 34,278
42,500 Sybase, Inc. (a) 1,108,825
8,700 Synchronoss Technologies, Inc. (a) 308,328
5,983 Syntel, Inc. 230,465
8,100 Taleo Corp. Class A (a) 241,218
2,200 TechTarget, Inc. (a) 32,516
21,408 The TriZetto Group, Inc. (a) 371,857
16,900 Tyler Technologies, Inc. (a) 217,841
11,700 Ultimate Software Group, Inc. (a) 368,199
2,400 Unica Corp. (a) 22,200
12,500 VASCO Data Security International, Inc. (a) 349,000
200 Veraz Networks, Inc. (a) 964
13,180 Vignette Corp. (a) 192,560
700 Virtusa Corp. (a) 12,131
9,800 Visual Sciences, Inc. (a) 181,104
21,202 Websense, Inc. (a) 360,010
35,200 Wind River Systems, Inc. (a) 314,336
23,208 Zoran Corp. (a) 522,412
---------------
36,684,514
- ----------------------------------------------------------------------------------------------------------------------------------
Computer Technology - 0.9% 56,600 Adaptec, Inc. (a) 191,308
16,800 Advanced Analogic Technologies, Inc. (a) 189,504
18,200 Cray, Inc. (a) 109,018
3,300 Data Domain, Inc. (a) 86,922
39,900 Emulex Corp. (a) 651,168
16,009 FalconStor Software, Inc. (a) 180,261
11,017 Hutchinson Technology, Inc. (a) 289,967
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
16,600 Imation Corp. $ 348,600
14,300 Immersion Corp. (a) 185,185
28,309 Intermec, Inc. (a)(i) 574,956
1,800 Isilon Systems, Inc. (a) 9,144
44,188 Palm, Inc. (i) 280,152
37,900 Perot Systems Corp. Class A (a) 511,650
81,700 Quantum Corp. (a) 219,773
14,500 Rackable Systems, Inc. (a)(i) 145,000
12,600 Radiant Systems, Inc. (a) 217,098
10,942 Radisys Corp. (a) 146,623
4,900 Rimage Corp. (a) 127,155
15,500 STEC, Inc. (a) 135,470
44,600 Safeguard Scientifics, Inc. (a) 80,280
1,800 Silicon Graphics, Inc. (a) 32,904
10,300 Stratasys, Inc. (a) 266,152
11,200 Synaptics, Inc. (a) 460,992
27,700 Trident Microsystems, Inc. (a) 181,712
---------------
5,620,994
- ----------------------------------------------------------------------------------------------------------------------------------
Construction - 0.3% 5,251 Brookfield Homes Corp. (i) 82,966
29,672 EMCOR Group, Inc. (a) 701,149
15,971 Granite Construction, Inc. 577,831
2,700 Great Lakes Dredge & Dock Corp. 23,544
11,800 Perini Corp. (a) 488,756
---------------
1,874,246
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Electronics - 0.9% 70,700 CNET Networks, Inc. (a) 646,198
8,600 DTS, Inc. (a) 219,902
57,800 EarthLink, Inc. (a) 408,646
200 Glu Mobile, Inc. (a) 1,044
15,600 InfoSpace, Inc. 293,280
23,090 Internap Network Services Corp. (a) 192,340
21,800 Ipass, Inc. (a)(i) 88,508
9,100 LoJack Corp. (a) 152,971
11,274 Midway Games, Inc. (a)(i) 31,116
15,300 NIC, Inc. 129,132
21,900 NetFlix, Inc. (a)(i) 582,978
1,000 Protection One, Inc. (a) 11,890
12,200 Sohu.com, Inc. (a) 665,144
29,537 THQ, Inc. (a) 832,648
31,900 Take-Two Interactive Software, Inc. (a)(i) 588,555
31,350 United Online, Inc. 370,557
6,886 Universal Electronics, Inc. (a) 230,268
---------------
5,445,177
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Products - 0.5% 23,900 American Greetings Corp. Class A 485,170
12,400 Blyth, Inc. 272,056
3,791 CSS Industries, Inc. 139,130
7,200 Citi Trends, Inc. (a)(i) 111,168
7,100 Mannatech, Inc. (i) 44,872
13,873 Matthews International Corp. Class A 650,228
15,663 Nautilus, Inc. (i) 75,966
9,013 RC2 Corp. (a) 252,995
14,200 Smith & Wesson Holding Corp. (a)(i) 86,620
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
21,100 Spectrum Brands, Inc. (a)(i) $ 112,463
27,574 Tupperware Corp. 910,769
3,300 USANA Health Sciences, Inc. (a)(i) 122,364
---------------
3,263,801
- ----------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging: 32,200 AptarGroup, Inc. 1,317,302
Metals & Glass - 0.5% 14,750 Greif, Inc. 964,208
17,142 Mobile Mini, Inc. (a) 317,813
11,600 Silgan Holdings, Inc. 602,504
---------------
3,201,827
- ----------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging: 2,800 AEP Industries, Inc. (a) 89,628
Paper & Plastic - 0.1% 25,300 Graphic Packaging Corp. (a) 93,357
14,052 Myers Industries, Inc. 203,332
---------------
386,317
- ----------------------------------------------------------------------------------------------------------------------------------
Copper - 0.1% 16,082 Mueller Industries, Inc. 466,217
- ----------------------------------------------------------------------------------------------------------------------------------
Cosmetics - 0.2% 11,593 Elizabeth Arden, Inc. (a) 235,918
14,900 Helen of Troy Ltd. (a) 255,386
2,800 Inter Parfums, Inc. 50,316
23,726 Nu Skin Enterprises, Inc. Class A 389,818
79,475 Revlon, Inc. Class A (a) 93,781
4,800 Ulta Salon Cosmetics & Fragrance, Inc. (a) 82,320
---------------
1,107,539
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial 22,000 Aldabra 2 Acquisition Corp. (a) 214,280
Services - 0.7% 2,700 Clayton Holdings, Inc. (a) 13,959
3,400 Duff & Phelps Corp. (a) 66,912
21,450 Euronet Worldwide, Inc. (a)(i) 643,500
3,200 Evercore Partners, Inc. Class A 68,960
28,400 F.N.B. Corp. (i) 417,480
4,500 FCStone Group, Inc. (a) 207,135
8,000 Greenhill & Co., Inc. (i) 531,840
21,000 Heckmann Corp. (a) 154,350
22,500 Hicks Acquisition Co. I, Inc. (a) 206,775
8,700 Huron Consulting Group, Inc. (a) 701,481
17,400 Interactive Brokers Group, Inc. Class A (a) 562,368
13,900 Marathon Acquisition Corp. (a) 108,142
16,100 NRDC Acquisition Corp. (a) 147,637
3,400 Oritani Financial Corp. (a) 41,820
19,100 Triplecrown Acquisition Corp. (a) 174,574
---------------
4,261,213
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Materials & 19,260 Acuity Brands, Inc. 866,700
Processing - 0.9% 21,514 Barnes Group, Inc. 718,352
22,294 Brady Corp. 782,296
23,710 Clarcor, Inc. 900,269
43,862 Hexcel Corp. (a) 1,064,969
8,300 Koppers Holdings, Inc. 358,892
34,414 Olin Corp. 665,223
13,345 Tredegar Corp. 214,588
3,000 Valhi, Inc. 47,820
---------------
5,619,109
- -----------------------------------------------------------------------------------------------------------------------------------
Drug & Grocery 432 Arden Group, Inc. Class A 66,826
Store Chains - 0.6% 23,607 Casey's General Stores, Inc. 699,003
9,927 The Great Atlantic & Pacific Tea Co., Inc. (a) 311,013
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
6,364 Ingles Markets, Inc. Class A $ 161,582
15,083 Longs Drug Stores Corp. 708,901
6,577 Nash Finch Co. 232,037
19,169 Ruddick Corp. 664,589
10,800 Spartan Stores, Inc. 246,780
1,000 Village Super Market, Inc. Class A 50,890
5,400 Weis Markets, Inc. 215,676
16,100 Winn-Dixie Stores, Inc. (a) 271,607
---------------
3,628,904
- ----------------------------------------------------------------------------------------------------------------------------------
Drugs & Pharmaceuticals - 3.2% 16,600 Adams Respiratory Therapeutics, Inc. (a) 991,684
1,100 Affymax, Inc. (a) 24,596
27,500 Akorn, Inc. (a) 201,850
6,900 Alexza Pharmaceuticals, Inc. (a) 55,821
46,900 Alkermes, Inc. (a)(g) 731,171
20,325 Alpharma, Inc. Class A (a) 409,549
14,700 Auxilium Pharmaceuticals, Inc. (a) 440,853
16,000 Beijing Med-Pharm Corp. (a)(i) 175,680
7,400 Bentley Pharmaceuticals, Inc. (a) 111,666
2,200 BioForm Medical, Inc. (a) 15,026
43,048 BioMarin Pharmaceuticals, Inc. (a) 1,523,899
5,500 Bradley Pharmaceuticals, Inc. (a) 108,350
28,200 CV Therapeutics, Inc. (a) 255,210
7,900 Cadence Pharmaceuticals, Inc. (a) 117,394
3,600 Caraco Pharmaceutical Laboratories Ltd. (a) 61,740
7,500 Chattem, Inc. (a) 566,550
41,600 CytRx Corp. (a)(i) 117,728
35,200 Dendreon Corp. (a)(i) 218,944
31,000 Durect Corp. (a) 199,330
100 Emergent Biosolutions, Inc. (a) 506
12,695 Enzo Biochem, Inc. (a) 161,734
6,400 GTx, Inc. (a)(i) 91,840
29,000 Indevus Pharmaceuticals, Inc. (a) 201,550
40,489 Isis Pharmaceuticals, Inc. (a)(i) 637,702
22,600 Javelin Pharmaceuticals, Inc. (a) 84,524
4,000 Jazz Pharmaceuticals, Inc. (a) 58,800
16,600 K-V Pharmaceutical Co. Class A (a) 473,764
35,300 Ligand Pharmaceuticals, Inc. Class B 170,499
1,500 MAP Pharmaceuticals, Inc. (a) 26,265
37,000 MGI Pharma, Inc. (a) 1,499,610
58,600 Medarex, Inc. (a) 610,612
24,227 Medicines Co. (a) 464,189
24,400 Medicis Pharmaceutical Corp. Class A 633,668
100 Molecular Insight Pharmaceuticals, Inc. (a) 906
43,200 Nektar Therapeutics (a) 289,872
12,631 Noven Pharmaceuticals, Inc. (a) 175,318
2,800 Obagi Medical Products, Inc. (a) 51,212
24,820 Onyx Pharmaceuticals, Inc. (a) 1,380,488
17,600 Pain Therapeutics, Inc. (a)(i) 186,560
14,500 Par Pharmaceutical Cos., Inc. (a) 348,000
13,600 Penwest Pharmaceuticals Co. (a) 79,560
35,715 Perrigo Co. 1,250,382
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
11,700 Pharmion Corp. (a) $ 735,462
13,300 Pozen, Inc. (a)(i) 159,600
12,500 Quidel Corp. (a) 243,375
29,619 Regeneron Pharmaceuticals, Inc. (a) 715,299
22,700 Salix Pharmaceuticals Ltd. (a)(i) 178,876
31,400 Santarus, Inc. (a) 86,350
16,500 Sciele Pharma, Inc. (a)(i) 337,425
3,200 Sirtris Pharmaceuticals, Inc. (a) 43,808
8,200 Somaxon Pharmaceuticals, Inc. (a)(i) 42,722
26,882 SuperGen, Inc. (a) 98,119
2,000 Trubion Pharmaceuticals, Inc. (a)(i) 20,000
9,246 United Therapeutics Corp. (a) 902,872
44,400 Valeant Pharmaceuticals International (a) 531,468
23,000 Vivus, Inc. (a)(i) 119,140
10,100 Xenoport, Inc. (a) 564,388
---------------
19,983,506
- ----------------------------------------------------------------------------------------------------------------------------------
Education Services - 0.7% 1,900 American Public Education, Inc. (a) 79,382
12,304 Bright Horizons Family Solutions, Inc. (a) 424,980
5,100 Capella Education Co. (a) 333,846
40,400 Corinthian Colleges, Inc. (a) 622,160
27,800 DeVry, Inc. 1,444,488
300 Lincoln Educational Services Corp. (a) 4,416
2,349 Renaissance Learning, Inc. 32,886
6,720 Strayer Education, Inc. 1,146,298
11,200 Universal Technical Institute, Inc. (a) 190,400
---------------
4,278,856
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical & Electronics - 0.3% 32,829 Benchmark Electronics, Inc. (a) 582,058
5,300 Coleman Cable, Inc. (a) 50,085
7,000 OSI Systems, Inc. (a) 185,290
21,598 Plexus Corp. (a) 567,163
20,000 TTM Technologies, Inc. (a) 233,200
12,907 Universal Display Corp. (a)(i) 266,788
---------------
1,884,584
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment & 9,381 A.O. Smith Corp. 328,804
Components - 1.0% 4,600 AZZ Inc. (a) 130,410
18,800 American Superconductor Corp. (a)(i) 513,992
21,401 Baldor Electric Co. 720,357
16,768 CTS Corp. 166,506
11,018 Cohu, Inc. 168,575
9,160 Franklin Electric Co., Inc. (i) 350,553
12,816 Genlyte Group, Inc. (a) 1,220,083
10,760 Littelfuse, Inc. (a) 354,650
23,800 MKS Instruments, Inc. (a) 455,532
3,531 Powell Industries, Inc. (a) 155,611
30,500 Power-One, Inc. (a) 121,695
11,100 Sonic Solutions, Inc. (a) 115,329
29,000 Taser International, Inc. (a)(i) 415,860
17,661 Technitrol, Inc. 504,751
7,679 Triumph Group, Inc. 632,366
---------------
6,355,074
- ----------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical: Household 1,950 National Presto Industries, Inc. $ 102,687
Appliance - 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Electronics - 0.8% 13,063 Agilysys, Inc. 197,512
20,800 Arrowhead Research Corp. (a) 78,624
19,400 Avid Technology, Inc. (a) 549,796
14,898 Daktronics, Inc. (g) 336,248
61,400 Flir Systems, Inc. (a)(i) 1,921,820
11,172 II-VI, Inc. (a) 341,305
63,966 MRV Communications, Inc. (a) 148,401
18,380 Methode Electronics, Inc. 302,167
2,700 Multi-Fineline Electronix, Inc. (a) 46,818
9,549 Park Electrochemical Corp. 269,664
26,900 Semtech Corp. (a) 417,488
5,967 Supertex, Inc. (a) 186,707
---------------
4,796,550
- ----------------------------------------------------------------------------------------------------------------------------------
Electronics: Instruments, 7,900 Faro Technologies, Inc. (a) 214,722
Gauges & Meters - 0.3% 13,602 Itron, Inc. (a)(i) 1,305,384
5,500 Measurement Specialties, Inc. (a) 121,550
1,900 OYO Geospace Corp. (a) 143,184
8,100 Zygo Corp. (a) 100,926
---------------
1,885,766
- ----------------------------------------------------------------------------------------------------------------------------------
Electronics: Medical 7,900 Accuray, Inc. (a) 120,238
Systems - 1.6% 30,300 Affymetrix, Inc. (a)(i) 701,142
5,672 Analogic Corp. 384,108
8,500 Aspect Medical Systems, Inc. (a)(i) 119,000
28,387 Bruker BioSciences Corp. (a) 377,547
2,900 Cynosure, Inc. Class A (a) 76,734
5,570 Datascope Corp. 202,748
19,850 eResearch Technology, Inc. (a) 234,627
9,700 Greatbatch, Inc. (a) 193,903
12,372 Haemonetics Corp. (a) 779,683
55,720 Hologic, Inc. (a) 3,824,621
24,864 Illumina, Inc. (a) 1,473,441
17,051 Luminex Corp. (a)(i) 276,908
5,700 Masimo Corp. (a) 224,865
27,600 Minrad International, Inc. (a) 89,700
11,300 Natus Medical, Inc. (a) 218,655
10,800 NxStage Medical, Inc. (a) 163,836
8,100 Quality Systems, Inc. 246,969
7,300 Sirona Dental Systems, Inc. (a)(i) 244,404
5,700 Tomotherapy, Inc. (a) 111,492
6,800 Visicu, Inc. (a) 80,716
8,322 Zoll Medical Corp. (a) 222,364
---------------
10,367,701
- ----------------------------------------------------------------------------------------------------------------------------------
Electronics: Semi- 31,800 AMIS Holdings, Inc. (a) 318,636
Conductors/Components - 2.0% 11,516 Actel Corp. (a) 157,309
46,100 Amkor Technology, Inc. (a)(g) 393,233
27,700 Anadigics, Inc. (a) 320,489
33,300 Applied Micro Circuits Corp. (a) 291,042
2,200 AuthenTec, Inc. (a) 31,966
3,400 Cavium Networks, Inc. (a) 78,268
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
41,900 Cirrus Logic, Inc. (a) $ 221,232
231,400 Conexant Systems, Inc. (a)(i) 192,062
15,583 DSP Group, Inc. (a) 190,113
14,012 Diodes, Inc. (a) 421,341
21,327 Exar Corp. (a) 169,976
6,273 Excel Technology, Inc. (a) 169,998
22,300 Formfactor, Inc. (a) 738,130
14,700 Genesis Microchip, Inc. (a) 125,979
6,900 Hittite Microwave Corp. (a) 329,544
3,300 IPG Photonics Corp. (a) 65,967
14,493 IXYS Corp. (a) 116,234
56,600 Lattice Semiconductor Corp. (a) 183,950
21,000 MIPS Technologies, Inc. (a) 104,160
26,900 Micrel, Inc. 227,305
35,590 Microsemi Corp. (a)(i) 787,963
23,800 Microtune, Inc. (a) 155,414
11,300 Monolithic Power Systems, Inc. (a) 242,611
8,000 Netlogic Microsystems, Inc. (a)(i) 257,600
112,800 ON Semiconductor Corp. (a)(i) 1,001,664
23,700 Omnivision Technologies, Inc. (a) (i) 370,905
10,400 PLX Technology, Inc. (a) 96,720
99,600 PMC-Sierra, Inc. (a) 651,384
12,393 Pericom Semiconductor Corp. (a) 231,749
123,184 RF Micro Devices, Inc. (a) 703,381
2,000 Rubicon Technology, Inc. (a) 47,500
26,700 SiRF Technology Holdings, Inc. (a)(i) 670,971
42,676 Silicon Image, Inc. (a) 192,896
39,458 Silicon Storage Technology, Inc. (a) 117,979
74,633 Skyworks Solutions, Inc. (a) 634,381
43,100 Spansion LLC Class A (a) 169,383
19,700 Syntax-Brillian Corp. (a)(i) 60,676
5,200 Techwell, Inc. (a) 57,252
22,300 Tessera Technologies, Inc. (a) 927,680
65,336 TriQuint Semiconductor, Inc. (a) 433,178
10,300 Volterra Semiconductor Corp. (a) 113,609
---------------
12,771,830
- ----------------------------------------------------------------------------------------------------------------------------------
Electronics: Technology - 0.5% 7,400 3D Systems Corp. (a)(i) 114,256
14,400 Acacia Research - Acacia Technologies (a) 129,312
3,900 American Science & Engineering, Inc. 221,325
17,123 Checkpoint Systems, Inc. (a) 444,855
20,600 Cogent, Inc. (a) 229,690
6,552 Cubic Corp. 256,838
4,500 Eagle Test Systems, Inc. (a) 57,510
11,400 Gerber Scientific, Inc. (a) 123,120
36,346 ION Geophysical Corp. (a) 573,540
6,450 Innovative Solutions & Support, Inc. (a)(i) 62,501
15,500 Ionatron, Inc. (a)(i) 44,330
39,900 Kemet Corp. (a) 264,537
12,100 ScanSource, Inc. (a) 391,435
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
21,000 Smart Modular Technologies WWH, Inc. (a) $ 213,780
1,600 Super Micro Computer, Inc. (a) 12,272
---------------
3,139,301
- ----------------------------------------------------------------------------------------------------------------------------------
Energy Miscellaneous - 0.7% 5,600 Alon USA Energy, Inc. 152,208
1,900 Approach Resources, Inc. (a) 24,434
14,440 Aventine Renewable Energy Holdings, Inc. (a)(i) 184,254
8,200 CVR Energy, Inc. (a) 204,508
5,800 Clean Energy Fuels Corp. (a) 87,812
9,100 Concho Resources, Inc. (a) 187,551
16,100 Crosstex Energy, Inc. (i) 599,564
3,100 Dawson Geophysical Co. (a) 221,526
2,000 EnerNOC, Inc. (a) 98,200
43,000 Evergreen Energy, Inc. (a)(i) 95,890
38,000 Evergreen Solar, Inc. (a)(i) 656,260
28,426 FuelCell Energy, Inc. (a)(i) 281,986
3,600 GeoMet, Inc. (a) 18,720
2,420 MarkWest Hydrocarbon, Inc. 151,613
12,500 Matrix Service Co. (a) 272,750
7,200 Nova Biosource Fuels, Inc. (a)(i) 20,880
6,500 Ormat Technologies, Inc. 357,565
14,100 Pacific Ethanol, Inc. (a)(i) 115,479
18,116 Penn Virginia Corp. 790,401
83,400 Rentech, Inc. (a)(i) 150,954
15,078 Verenium Corp. (a)(i) 75,239
---------------
4,747,794
- ----------------------------------------------------------------------------------------------------------------------------------
Engineering & Contracting 18,900 Aecom Technology Corp. (a) 539,973
Services - 0.3% 7,000 Clean Harbors, Inc. (a) 361,900
18,002 Dycom Industries, Inc. (a) 479,753
9,300 ENGlobal Corp. (a)(i) 105,648
7,000 Integrated Electrical Services, Inc. (a) 131,530
7,900 Layne Christensen Co. (a) 388,759
3,700 Michael Baker Corp. (a) 152,070
---------------
2,159,633
- ----------------------------------------------------------------------------------------------------------------------------------
Entertainment - 0.3% 7,000 Carmike Cinemas, Inc. 50,820
11,000 Cinemark Holdings, Inc. 187,000
19,155 Gaylord Entertainment Co. (a) 775,203
34,300 Live Nation, Inc. (a) 498,036
10,872 Lodgenet Entertainment Corp. (a) 189,608
5,455 Speedway Motorsports, Inc. 169,541
---------------
1,870,208
- ----------------------------------------------------------------------------------------------------------------------------------
Fertilizers - 0.3% 43,000 Terra Industries, Inc. (a) 2,053,680
- ----------------------------------------------------------------------------------------------------------------------------------
Finance Companies - 0.1% 5,800 Asta Funding, Inc. (i) 153,352
2,169 Credit Acceptance Corp. (a)(i) 44,833
12,600 MVC Capital, Inc. (i) 203,364
5,400 NewStar Financial, Inc. (a) 44,712
8,700 World Acceptance Corp. (a) 234,726
---------------
680,987
- ----------------------------------------------------------------------------------------------------------------------------------
Finance: Small Loan - 0.1% 28,400 Advance America, Cash Advance Centers, Inc. 288,544
7,600 Dollar Financial Corp. (a) 233,244
9,400 Encore Capital Group, Inc. (a) 90,992
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
6,400 Nelnet, Inc. Class A $ 81,344
1,300 QC Holdings, Inc. 14,625
---------------
708,749
- ----------------------------------------------------------------------------------------------------------------------------------
Financial Data Processing 8,200 Advent Software, Inc. (a)(i) 443,620
Services & Systems - 0.8% 2,315 Cass Information Systems, Inc. 77,344
9,889 CompuCredit Corp. (a)(i) 98,692
29,964 CyberSource Corp. (a) 532,460
24,200 Deluxe Corp. 795,938
11,623 eSpeed, Inc. Class A (a) 131,340
9,400 ExlService Holdings, Inc. (a) 216,952
6,400 Heartland Payment Systems, Inc. (i) 171,520
29,200 Hypercom Corp. (a) 145,416
36,700 Jack Henry & Associates, Inc. 893,278
14,100 Online Resources Corp. (a) 168,072
12,000 TNS, Inc. 213,000
15,200 TradeStation Group, Inc. (a) 215,992
18,700 Wright Express Corp. (a) 663,663
---------------
4,767,287
- ----------------------------------------------------------------------------------------------------------------------------------
Financial Information 4,700 Bankrate, Inc. (a)(i) 226,023
Services - 0.3% 24,540 INVESTools, Inc. (a) 435,340
15,600 Interactive Data Corp. 514,956
5,800 Morningstar, Inc. (a) 450,950
45,400 Move, Inc. (a) 111,230
26,922 S1 Corp. (a) 196,531
10,500 TheStreet.com, Inc. 167,160
400 Value Line, Inc. 16,104
---------------
2,118,294
- ----------------------------------------------------------------------------------------------------------------------------------
Financial Miscellaneous - 0.6% 17,750 Advanta Corp. Class B 143,242
7,400 Asset Acceptance Capital Corp. 77,034
12,919 Cash America International, Inc. 417,284
5,000 Federal Agricultural Mortgage Corp. Class B 131,600
13,100 Financial Federal Corp. 291,999
12,100 First Cash Financial Services, Inc. (a) 177,628
17,100 Global Cash Access, Inc. (a) 103,626
6,499 LandAmerica Financial Group, Inc. (i) 217,392
7,700 Portfolio Recovery Associates, Inc. (i) 305,459
11,700 RAM Holdings Ltd. (a) 57,798
5,900 Sanders Morris Harris Group, Inc. 60,475
29,736 Sotheby's Holdings, Inc. Class A 1,132,942
10,816 Sterling Bancorp 147,530
8,222 Stewart Information Services Corp. 214,512
6,433 Stifel Financial Corp. (a) 338,183
3,176 Triad Guaranty, Inc. (a)(i) 31,125
3,091 WSFS Financial Corp. 155,168
2,300 Wauwatosa Holdings, Inc. (a) 29,486
---------------
4,032,483
- ----------------------------------------------------------------------------------------------------------------------------------
Foods - 1.1% 1,800 American Dairy, Inc. (a) 23,310
6,500 Cal-Maine Foods, Inc. (i) 172,445
19,900 Chiquita Brands International, Inc. (a)(i) 365,961
35,776 Flowers Foods, Inc. 837,516
14,400 Fresh Del Monte Produce, Inc. (a) 483,552
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
18,557 Hain Celestial Group, Inc. (a) $ 593,824
5,400 J&J Snack Foods Corp. 168,912
14,700 Lance, Inc. 300,174
5,300 M&F Worldwide Corp. (a) 285,405
2,463 Maui Land & Pineapple Co., Inc. (a) 71,698
16,600 Performance Food Group Co. (a) 446,042
17,600 Pilgrim's Pride Corp. (i) 509,520
12,295 Ralcorp Holdings, Inc. (a) 747,413
6,950 Sanderson Farms, Inc. 234,771
142 Seaboard Corp. 208,740
21,957 Sensient Technologies Corp. 620,944
1,400 Synutra International, Inc. (a)(i) 42,280
16,803 Tootsie Roll Industries, Inc. 460,738
14,700 TreeHouse Foods, Inc. (a) 337,953
---------------
6,911,198
- ----------------------------------------------------------------------------------------------------------------------------------
Forest Products - 0.1% 4,609 Deltic Timber Corp. 237,317
7,934 Universal Forest Products, Inc. 233,736
---------------
471,053
- - ---------------------------------------------------------------------------------------------------------------------------------
Forms & Bulk Printing 10,100 Ennis, Inc. 181,800
Services - 0.1% 11,100 Innerworkings, Inc. (a)(i) 191,586
7,645 The Standard Register Co. 89,141
---------------
462,527
- ----------------------------------------------------------------------------------------------------------------------------------
Funeral Parlors & 45,024 Stewart Enterprises, Inc. Class A 400,714
Cemeteries - 0.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Glass - 0.0% 14,000 Apogee Enterprises, Inc. 239,540
- ----------------------------------------------------------------------------------------------------------------------------------
Gold - 0.2% 211,900 Coeur d'Alene Mines Corp. (a)(i) 1,046,786
12,000 Royal Gold, Inc. (i) 366,240
25,600 US Gold Corp. (a) 75,776
---------------
1,488,802
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Facilities - 0.6% 28,600 Assisted Living Concepts, Inc. (a) 214,500
10,800 Capital Senior Living Corp. (a) 107,244
4,600 Emeritus Corp. (a) 115,690
400 The Ensign Group, Inc. 5,760
12,190 Kindred Healthcare, Inc. (a) 304,506
9,250 LCA-Vision, Inc. (i) 184,723
5,600 MedCath Corp. (a) 137,536
2,600 National Healthcare Corp. 134,420
25,300 Psychiatric Solutions, Inc. (a) 822,250
6,500 Radiation Therapy Services, Inc. (a) 200,915
11,200 Res-Care, Inc. (a) 281,792
11,800 Skilled Healthcare Group, Inc. Class A (a) 172,634
20,300 Sun Healthcare Group, Inc. (a) 348,551
19,574 Sunrise Senior Living, Inc. (a) 600,530
---------------
3,631,051
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Management 24,600 AMERIGROUP Corp. (a) 896,670
Services - 0.9% 24,641 Allscripts Healthcare Solutions, Inc. (a)(i) 478,528
3,200 American Dental Partners, Inc. (a) 32,096
14,700 Amsurg Corp. (a) 397,782
2,700 athenahealth, Inc. (a) 97,200
20,400 Centene Corp. (a) 559,776
5,000 Computer Programs & Systems, Inc. 113,700
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
3,785 Corvel Corp. (a) $ 87,131
21,431 Eclipsys Corp. (a) 542,419
9,900 HMS Holdings Corp. (a) 328,779
13,500 HealthExtras, Inc. (a) 352,080
20,600 HealthSpring, Inc. (a) 392,430
6,500 Molina Healthcare, Inc. (a) 251,550
15,800 Omnicell, Inc. (a) 425,494
19,300 Phase Forward, Inc. (a) 419,775
8,200 Vital Images, Inc. (a) 148,174
---------------
5,523,584
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Services - 0.8% 12,300 Alliance Imaging, Inc. (a) 118,326
11,566 Amedisys, Inc. (a) 561,182
18,600 Apria Healthcare Group, Inc. (a) 401,202
5,500 Bio-Reference Labs, Inc. (a) 179,740
3,600 Emergency Medical Services Corp. (a) 105,408
14,012 Gentiva Health Services, Inc. (a) 266,788
36,600 HealthSouth Corp. (a)(i) 768,600
19,837 Healthcare Services Group, Inc. 420,148
16,300 Healthways, Inc. (a) 952,572
18,800 Hythiam, Inc. (a)(i) 55,084
7,000 LHC Group, Inc. (a) 174,860
10,500 Matria Healthcare, Inc. (a) 249,585
10,000 Nighthawk Radiology Holdings, Inc. (a)(i) 210,500
14,700 Odyssey HealthCare, Inc. (a) 162,582
12,969 PharMerica Corp. (a) 180,010
1,000 Virtual Radiologic Corp. (a) 20,280
---------------
4,826,867
- ----------------------------------------------------------------------------------------------------------------------------------
Homebuilding - 0.1% 18,700 Beazer Homes USA, Inc. (i) 138,941
17,300 Hovnanian Enterprises, Inc. Class A (a)(i) 124,041
6,100 M/I Homes, Inc. (i) 64,050
12,500 Meritage Homes Corp. (a)(i) 182,125
31,600 Standard-Pacific Corp. (i) 105,860
15,800 WCI Communities, Inc. (a)(i) 59,724
---------------
674,741
- ----------------------------------------------------------------------------------------------------------------------------------
Hotel/Motel - 0.1% 6,600 Lodgian, Inc. (a) 74,316
7,779 Marcus Corp. 120,186
8,900 Morgans Hotel Group Co. (a) 171,592
---------------
366,094
- ----------------------------------------------------------------------------------------------------------------------------------
Household Furnishings - 0.4% 6,100 American Woodmark Corp. (i) 110,898
11,100 Ethan Allen Interiors, Inc. 316,350
22,100 Furniture Brands International, Inc. (i) 222,326
9,936 Haverty Furniture Cos., Inc. 89,325
2,800 hhgregg, Inc. (a) 38,528
5,500 Hooker Furniture Corp. 110,550
21,100 La-Z-Boy, Inc. (i) 167,323
7,000 Libbey, Inc. 110,880
6,500 Lifetime Brands, Inc. (i) 84,370
18,000 Sealy Corp. (i) 201,420
22,200 Select Comfort Corp. (a) 155,622
35,300 Tempur-Pedic International, Inc. (i) 916,741
---------------
2,524,333
- ----------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
Identification Control & 16,912 Advanced Energy Industries, Inc. (a) $ 221,209
Filter Devices - 0.6% 21,441 Asyst Technologies, Inc. (a) 69,897
5,900 Badger Meter, Inc. 265,205
12,032 ESCO Technologies, Inc. (a) 480,558
5,697 The Gorman-Rupp Co. 177,746
27,028 L-1 Identity Solutions, Inc. (a)(g) 485,153
13,126 Mine Safety Appliances Co. (i) 680,846
6,612 Robbins & Myers, Inc. 500,066
5,650 Sun Hydraulics, Inc. 142,550
14,827 Veeco Instruments, Inc. (a) 247,611
7,096 Vicor Corp. 110,627
14,836 Watts Water Technologies, Inc. Class A 442,113
14,017 X-Rite, Inc. (a) 162,878
---------------
3,986,459
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Products - 0.0% 6,300 TAL International Group, Inc. 143,451
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance: Life - 0.4% 27,200 American Equity Investment Life Holding Co. 225,488
18,400 Citizens, Inc. (a)(i) 101,752
20,305 Delphi Financial Group, Inc. Class A 716,360
1,442 Kansas City Life Insurance Co. 62,338
862 National Western Life Insurance Co. Class A 178,753
52,100 The Phoenix Cos., Inc. 618,426
11,593 Presidential Life Corp. 202,993
25,300 Scottish Re Group Ltd. (a) 18,343
22,900 Universal American Financial Corp. (a) 586,011
---------------
2,710,464
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance: Multi-Line - 1.1% 13,640 Alfa Corp. 295,579
35,700 Assured Guaranty Ltd. 947,478
6,186 CNA Surety Corp. (a) 122,421
11,009 Crawford & Co. Class B (a) 45,687
6,400 eHealth, Inc. (a) 205,504
2,600 EMC Insurance Group, Inc. 61,542
5,725 FBL Financial Group, Inc. Class A 197,684
4,100 Flagstone Reinsurance Holdings Ltd. 56,990
17,206 Hilb Rogal & Hobbs Co. 698,047
20,368 Horace Mann Educators Corp. 385,770
1,240 Independence Holding Co. 15,686
28,100 Max Capital Group Ltd. 786,519
11,600 Meadowbrook Insurance Group, Inc. (a) 109,156
48,000 Montpelier Re Holdings Ltd. 816,480
7,297 Pico Holdings, Inc. (a) 245,325
27,200 Platinum Underwriters Holdings Ltd. 967,232
17,800 Primus Guaranty Ltd. (a)(i) 124,778
11,800 Security Capital Assurance Ltd. (i) 45,902
17,355 Zenith National Insurance Corp. 776,289
---------------
6,904,069
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance: 13,200 AmTrust Financial Services, Inc. 181,764
Property-Casualty - 1.8% 4,856 American Physicians Capital, Inc. 201,329
10,400 Amerisafe, Inc. (a) 161,304
12,679 Argo Group International Holdings Ltd. (a) 534,166
41,000 Aspen Insurance Holdings Ltd. 1,182,440
4,032 Baldwin & Lyons, Inc. Class B 110,718
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
1,100 CastlePoint Holdings, Ltd. $ 13,200
23,100 Commerce Group, Inc. 831,138
3,400 Darwin Professional Underwriters, Inc. (a) 82,178
4,344 Donegal Group, Inc. Class A 74,586
23,280 Employers Holdings, Inc. 389,009
3,000 Enstar Group Ltd. (a) 367,260
4,800 FPIC Insurance Group, Inc. (a) 206,304
3,977 First Acceptance Corp. (a) 16,783
6,900 First Mercury Financial Corp. (a) 168,360
32,500 Fremont General Corp. (a)(i) 113,750
6,400 Greenlight Capital Re Ltd. (a) 133,056
3,600 Hallmark Financial Services, Inc. (a) 57,096
5,962 Harleysville Group, Inc. 210,936
28,200 IPC Holdings, Ltd. 814,134
6,700 Infinity Property & Casualty Corp. 242,071
4,058 The Midland Co. 262,512
3,700 NYMAGIC, Inc. 85,581
3,300 National Interstate Corp. 109,230
6,400 Navigators Group, Inc. (a) 416,000
12,200 Odyssey Re Holdings Corp. 447,862
14,206 PMA Capital Corp. Class A (a) 116,773
15,123 ProAssurance Corp. (a) 830,555
9,854 RLI Corp. 559,609
7,700 Safety Insurance Group, Inc. 281,974
11,400 SeaBright Insurance Holdings, Inc. (a) 171,912
25,708 Selective Insurance Group, Inc. 591,027
5,512 State Auto Financial Corp. 144,966
9,900 Tower Group, Inc. 330,660
9,800 United America Indemnity, Ltd. (a) 195,216
10,400 United Fire & Casualty Co. 302,536
6,100 Validus Holdings Ltd. (a) 158,478
---------------
11,096,473
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Management 22,100 Alternative Asset Management Acquisition Corp. (a) 202,215
Companies - 0.9% 6,100 Ampal-American Israel Corp. Class A (a) 45,079
55,546 Apollo Investment Corp. 947,059
32,639 Ares Capital Corp. 477,509
10,600 Calamos Asset Management, Inc. Class A 315,668
1,300 Capital Southwest Corp. 153,920
7,200 Cohen & Steers, Inc. (i) 215,784
7,600 Cowen Group, Inc. (a) 72,276
5,600 Epoch Holding Corp. 81,984
11,700 FBR Capital Markets Corp. (a) 112,086
2,496 GAMCO Investors, Inc. Class A 172,723
6,200 Kohlberg Capital Corp. 74,400
27,200 MCG Capital Corp. 315,248
9,923 NGP Capital Resources Co. (i) 155,096
16,800 National Financial Partners Corp. 766,248
17,000 NexCen Brands, Inc. (a) 82,280
1,000 Pzena Investment Management, Inc. Class A 11,400
9,400 TICC Capital Corp. 86,762
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
4,300 U.S. Global Investors, Inc. (i) $ 71,638
9,600 W.P. Stewart & Co. Ltd. (i) 49,056
39,200 Waddell & Reed Financial, Inc. Class A 1,414,728
---------------
5,823,159
- ----------------------------------------------------------------------------------------------------------------------------------
Jewelry, Watches & 3,500 FGX International Holdings Ltd. (a) 41,475
Gemstones - 0.2% 20,300 Fossil, Inc. (a) 852,194
7,500 Movado Group, Inc. 189,675
---------------
1,083,344
- ----------------------------------------------------------------------------------------------------------------------------------
Leisure Time - 0.4% 32,100 Callaway Golf Co. (g) 559,503
14,900 Great Wolf Resorts, Inc. (a) 146,169
14,700 Life Time Fitness, Inc. (a)(i) 730,296
15,100 Premier Exhibitions, Inc. (a)(i) 165,194
34,900 Six Flags, Inc. (a)(i) 70,847
3,800 Steinway Musical Instruments, Inc. 104,766
11,100 Sturm Ruger & Co., Inc. (a) 91,908
9,500 Town Sports International Holdings, Inc. (a) 90,820
14,156 Vail Resorts, Inc. (a) 761,734
9,100 West Marine, Inc. (a) 81,718
---------------
2,802,955
- ----------------------------------------------------------------------------------------------------------------------------------
Machine Tools - 0.0% 2,700 Hurco Companies, Inc. (a) 117,855
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery & 18,790 Applied Industrial Technologies, Inc. 545,286
Engineering - 0.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery: Agricultural - 0.1% 4,550 Gehl Co. (a) 72,982
5,013 Lindsay Manufacturing Co. (i) 354,369
---------------
427,351
- - ---------------------------------------------------------------------------------------------------------------------------------
Machinery: Construction & 8,800 A.S.V., Inc. (a)(d)(i) 121,880
Handling - 0.1% 8,817 Astec Industries, Inc. (a) 327,904
2,387 NACCO Industries, Inc. Class A 237,960
---------------
687,744
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery: Engines - 0.1% 23,200 Briggs & Stratton Corp. (i) 525,712
13,000 Raser Technologies, Inc. (a)(i) 193,050
---------------
718,762
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery: 24,700 Actuant Corp. Class A 840,047
Industrial/Specialty - 0.8% 3,500 Altra Holdings, Inc. (a) 58,205
6,800 Chart Industries, Inc. (a) 210,120
9,000 Columbus McKinnon Corp. (a) 293,580
9,700 EnPro Industries, Inc. (a) 297,305
5,500 Hardinge, Inc. 92,290
7,270 Kadant, Inc. (a) 215,701
6,400 Middleby Corp. (a) 490,368
15,710 Nordson Corp. 910,552
7,928 Tecumseh Products Co. Class A (a) 185,594
7,274 Tennant Co. 322,165
2,500 Twin Disc, Inc. 176,925
13,979 Woodward Governor Co. 949,873
---------------
5,042,725
- ---------------------------------------------------------------------------------------------------------------------------------
Machinery: Oil Well 10,200 Allis-Chalmers Energy, Inc. (a) 150,450
Equipment & Services - 1.6% 17,400 Basic Energy Services, Inc. (a)(i) 381,930
9,602 CARBO Ceramics, Inc. 357,194
17,375 Cal Dive International, Inc. (a)(i) 230,045
20,200 Complete Production Services, Inc. (a) 362,994
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
12,476 Dril-Quip, Inc. (a) $ 694,414
27,972 Exterran Holdings, Inc. (a) 2,288,110
8,600 Flotek Industries, Inc. (a)(i) 309,944
5,817 Gulf Island Fabrication, Inc. 184,457
9,940 Hornbeck Offshore Services, Inc. (a) 446,803
7,100 Lufkin Industries, Inc. 406,759
8,700 NATCO Group, Inc. Class A (a) 471,105
42,820 Newpark Resources, Inc. (a) 233,369
23,000 Oil States International, Inc. (a) 784,760
49,481 Parker Drilling Co. (a) 373,582
14,000 RPC, Inc. (i) 163,940
16,100 Sulphco, Inc. (a)(i) 84,042
5,500 Superior Offshore International, Inc. (a) 27,610
7,600 Superior Well Services, Inc. (a) 161,272
2,900 T-3 Energy Services, Inc. (a) 136,329
4,600 Trico Marine Services, Inc. (a) 170,292
6,000 Union Drilling, Inc. (a) 94,620
14,257 W-H Energy Services, Inc. (a) 801,386
17,300 Willbros Group, Inc. (a) 662,417
---------------
9,977,824
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery: Specialty - 0.4% 17,400 Bucyrus International, Inc. 1,729,386
5,100 Cascade Corp. 236,946
17,800 Flow International Corp. (a) 165,896
9,641 Semitool, Inc. (a)(i) 83,684
10,000 TurboChef Technologies, Inc. (a) 165,000
---------------
2,380,912
- - ---------------------------------------------------------------------------------------------------------------------------------
Manufactured Housing - 0.1% 36,127 Champion Enterprises, Inc. (a) 340,316
4,205 Palm Harbor Homes, Inc. (a)(i) 44,363
4,001 Skyline Corp. 117,429
---------------
502,108
- ----------------------------------------------------------------------------------------------------------------------------------
Manufacturing - 0.1% 22,759 Federal Signal Corp. 255,356
5,431 Standex International Corp. 94,771
---------------
350,127
- ----------------------------------------------------------------------------------------------------------------------------------
Medical & Dental 9,900 Abaxis, Inc. (a) 355,014
Instruments & Supplies - 3.0% 12,600 Abiomed, Inc. (a) 195,804
27,700 Align Technology, Inc. (a) 462,036
33,700 American Medical Systems Holdings, Inc. (a)(i) 487,302
9,100 AngioDynamics, Inc. (a) 173,264
8,300 Bio-Rad Laboratories, Inc. Class A (a) 860,046
6,100 BioMimetic Therapeutics, Inc. (a) 105,957
13,428 CONMED Corp. (a) 310,321
3,700 Cantel Medical Corp. (a) 53,946
25,700 Cepheid, Inc. (a) 677,195
13,900 Conceptus, Inc. (a)(i) 267,436
8,800 CryoLife, Inc. (a) 69,960
6,200 Cutera, Inc. (a) 97,340
10,669 Cyberonics, Inc. (a)(i) 140,404
21,932 ev3, Inc. (a) 278,756
4,600 Hansen Medical, Inc. (a)(i) 137,724
8,300 I-Flow Corp. (a)(i) 130,974
6,550 ICU Medical, Inc. (a) 235,866
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
32,043 Immucor, Inc. (a) $ 1,089,142
3,900 Insulet Corp. (a) 91,572
13,622 Invacare Corp. 343,274
31,230 Inverness Medical Innovations, Inc. (a) 1,754,501
4,378 Landauer, Inc. 226,999
15,800 LifeCell Corp. (a) 681,138
6,050 Medical Action Industries, Inc. (a) 126,143
14,744 Mentor Corp. (i) 576,490
18,600 Meridian Bioscience, Inc. 559,488
13,110 Merit Medical Systems, Inc. (a) 182,229
7,900 Micrus Endovascular Corp. (a) 155,472
9,600 Northstar Neuroscience, Inc. (a) 89,280
16,100 NuVasive, Inc. (a) 636,272
22,059 OraSure Technologies, Inc. (a) 196,105
7,800 Orthofix International NV (a) 452,166
18,898 Owens & Minor, Inc. 801,842
31,473 PSS World Medical, Inc. (a) 615,927
8,800 Palomar Medical Technologies, Inc. (a) 134,816
14,400 Sonic Innovations, Inc. (a) 111,168
7,915 SonoSite, Inc. (a) 266,498
15,300 Spectranetic Corp. (a) 234,549
12,500 Stereotaxis, Inc. (a) 152,750
30,400 Steris Corp. 876,736
7,283 SurModics, Inc. (a)(i) 395,248
14,500 Symmetry Medical, Inc. (a) 252,735
25,147 Thoratec Corp. (a) 457,424
1,900 Trans1, Inc (a) 31,293
12,060 Ventana Medical Systems, Inc. (a) 1,051,994
4,324 Vital Signs, Inc. 221,043
11,600 Volcano Corp. (a) 145,116
15,476 West Pharmaceutical Services, Inc. 628,171
15,200 Wright Medical Group, Inc. (a) 443,384
---------------
19,020,310
- ----------------------------------------------------------------------------------------------------------------------------------
Medical Services - 0.3% 5,100 Air Methods Corp. (a) 253,317
2,000 Genoptix, Inc. (a) 61,400
18,200 Magellan Health Services, Inc. (a) 848,666
12,997 Parexel International Corp. (a) 627,755
8,395 RehabCare Group, Inc. (a) 189,391
---------------
1,980,529
- ----------------------------------------------------------------------------------------------------------------------------------
Metal Fabricating - 1.0% 3,500 Ampco-Pittsburgh Corp. 133,455
7,700 CIRCOR International, Inc. 356,972
300 Compx International, Inc. 4,386
5,700 Dynamic Materials Corp. 336,072
11,150 Encore Wire Corp. 177,508
5,000 Haynes International, Inc. (a) 347,500
9,000 Insteel Industries, Inc. 105,570
12,426 Kaydon Corp. 677,714
4,400 L.B. Foster Co. Class A (a) 227,612
53,660 Mueller Water Products, Inc. Series A (i) 510,843
4,900 Northwest Pipe Co. (a) 191,786
16,510 Quanex Corp. 856,869
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
10,000 RBC Bearings, Inc. (a) $ 434,600
10,513 RTI International Metals, Inc. (a) 724,661
9,700 Superior Essex, Inc. (a) 232,800
4,400 Trimas Corp. (a) 46,596
8,658 Valmont Industries, Inc. 771,601
---------------
6,136,545
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Minerals 5,600 A.M. Castle & Co. 152,264
Miscellaneous - 0.7% 10,973 AMCOL International Corp. 395,357
27,500 Apex Silver Mines Ltd. (a)(i) 419,100
9,211 Brush Engineered Materials, Inc. (a) 340,991
15,100 Compass Minerals International, Inc. 619,100
23,800 General Moly, Inc. (a) 277,746
46,644 GrafTech International Ltd. (a) 827,931
56,100 Hecla Mining Co. (a) 524,535
1,400 Horsehead Holding Corp. (a) 23,758
8,953 Minerals Technologies, Inc. 599,403
17,064 Stillwater Mining Co. (a) 164,838
24,500 Uranium Resources, Inc. (a) 305,760
---------------
4,650,783
- ----------------------------------------------------------------------------------------------------------------------------------
Milling: Fruit & Grain 5,300 MGP Ingredients, Inc. (i) 49,926
Processing - 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Business & 4,500 Core-Mark Holdings Co., Inc. (a) 129,240
Consumer Discretionary - 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Consumer 9,500 Reddy Ice Holdings, Inc. 240,445
Staples - 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Health 3,700 Animal Health International, Inc. (a) 45,510
Care - 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Materials & 12,050 Ceradyne, Inc. (a) 565,506
Commodities - 0.2% 17,379 Symyx Technologies Inc. (a) 133,471
8,689 WD-40 Co. 329,921
---------------
1,028,898
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Materials & 14,038 Insituform Technologies, Inc. Class A (a) 207,762
Processing - 0.3% 12,000 Metal Management, Inc. 546,360
7,655 Rogers Corp. (a) 331,997
50,259 USEC, Inc. (a)(i) 452,331
10,000 Xerium Technologies, Inc. 52,000
---------------
1,590,450
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Producer 19,200 Blount International, Inc. (a) 236,352
Durables - 0.1% 4,600 Park-Ohio Holdings Corp. (a) 115,460
---------------
351,812
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous 5,300 Dice Holdings, Inc. (a) 42,347
Technology - 0.2% 14,500 IHS, Inc. Class A (a) 878,120
6,700 iRobot Corp. (a)(i) 121,136
6,400 Vocus, Inc. (a) 220,992
---------------
1,262,595
- ----------------------------------------------------------------------------------------------------------------------------------
Multi-Sector Companies - 0.4% 11,600 Compass Diversified Holdings 172,840
26,571 GenCorp, Inc. (a) 309,818
3,700 GenTek Inc. (a) 108,299
11,594 Kaman Corp. Class A 426,775
10,699 Lancaster Colony Corp. 424,750
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
6,900 Raven Industries, Inc. $ 264,891
24,200 Walter Industries, Inc. 869,506
---------------
2,576,879
- ----------------------------------------------------------------------------------------------------------------------------------
Office Furniture & 25,300 ACCO Brands Corp. (a) 405,812
Business Equipment - 0.3% 29,600 Herman Miller, Inc. 958,744
10,674 Kimball International, Inc. Class B 146,234
23,400 Knoll, Inc. 384,462
---------------
1,895,252
- ----------------------------------------------------------------------------------------------------------------------------------
Offshore Drilling - 0.4% 12,254 Atwood Oceanics, Inc. (a) 1,228,341
6,800 Bois d'Arc Energy, Inc. (a) 134,980
38,720 Hercules Offshore, Inc. (a) 920,762
---------------
2,284,083
- ----------------------------------------------------------------------------------------------------------------------------------
Oil: Crude Producers - 2.7% 1,365 APCO Argentina, Inc. 37,455
11,100 ATP Oil & Gas Corp. (a)(g) 560,994
14,300 Arena Resources, Inc. (a) 596,453
10,525 Atlas America, Inc. 622,869
24,700 BPZ Resources, Inc. (a)(i) 276,146
18,402 Berry Petroleum Co. Class A 817,969
14,500 Bill Barrett Corp. (a) 607,115
22,100 Brigham Exploration Co. (a) 166,192
12,500 Bronco Drilling Co., Inc. (a) 185,625
9,800 Callon Petroleum Co. (a) 161,210
11,400 Carrizo Oil & Gas, Inc. (a) 624,150
3,300 Clayton Williams Energy, Inc. (a) 102,828
20,757 Comstock Resources, Inc. (a) 705,738
6,500 Contango Oil & Gas Co. (a) 330,785
4,200 Delek US Holdings, Inc. 84,966
26,300 EXCO Resources, Inc. (a) 407,124
15,500 Edge Petroleum Corp. (a)(i) 91,915
24,800 Encore Acquisition Co. (a) 827,576
13,000 Energy Infrastructure Acquisition Corp. (a) 131,820
15,037 Energy Partners Ltd. (a) 177,587
19,600 FX Energy, Inc. (a) 111,328
19,400 GeoGlobal Resources, Inc. (a)(i) 96,030
4,200 Geokinetics, Inc. (a) 81,690
7,800 Goodrich Petroleum Corp. (a)(i) 176,436
87,043 Grey Wolf, Inc. (a) 463,939
10,100 Gulfport Energy Corp. (a) 184,426
16,700 Harvest Natural Resources, Inc. (a)(i) 208,750
38,600 Mariner Energy, Inc. (a) 883,168
17,600 McMoRan Exploration Co. (a) 230,384
38,911 Meridian Resource Corp. (a) 70,429
10,600 NTR Acquisition Co. (a) 100,700
59,400 Oilsands Quest, Inc. (a)(i) 242,352
18,200 Parallel Petroleum Corp. (a) 320,866
76,062 PetroHawk Energy Corp. (a) 1,316,633
7,100 Petroleum Development Corp. (a) 419,823
19,800 Petroquest Energy, Inc. (a) 283,140
21,700 Pioneer Drilling Co. (a) 257,796
5,249 Resource America, Inc. Class A 77,003
6,500 Rex Energy Corp. (a) 77,545
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
23,900 Rosetta Resources, Inc. (a) $ 473,937
12,378 Stone Energy Corp. (a) 580,652
14,017 Swift Energy Co. (a) 617,169
16,700 TXCO Resources, Inc. (a) 201,402
9,600 Toreador Resources Corp. (a)(i) 67,104
5,200 Venoco, Inc. (a) 103,636
18,910 VeraSun Energy Corp. (a)(i) 288,945
27,600 Warren Resources, Inc. (a) 389,988
19,610 Whiting Petroleum Corp. (a) 1,130,713
---------------
16,972,501
- ----------------------------------------------------------------------------------------------------------------------------------
Oil: Integrated 30,700 Delta Petroleum Corp. (a)(i) 578,695
Domestic - 0.1% 5,800 GMX Resources Inc. (a)(i) 187,224
---------------
765,919
- ----------------------------------------------------------------------------------------------------------------------------------
Oil: Integrated 25,700 Vaalco Energy, Inc. (a) 119,505
International - 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Paints & Coatings - 0.2% 20,676 Ferro Corp. 428,613
26,580 H.B. Fuller Co. 596,721
1,693 Kronos Worldwide, Inc. 29,543
---------------
1,054,877
- ----------------------------------------------------------------------------------------------------------------------------------
Paper - 0.4% 25,144 AbitibiBowater, Inc. (i) 518,218
13,074 Albany International Corp. Class A 485,045
15,598 Buckeye Technologies, Inc. (a) 194,975
8,892 Chesapeake Corp. 46,149
11,700 Mercer International, Inc.-Sbi (a)(i) 91,611
2,650 Multi-Color Corp. 72,796
7,600 Neenah Paper, Inc. 221,540
21,301 P.H. Glatfelter Co. 326,118
15,580 Rock-Tenn Co. Class A 395,888
19,342 Wausau Paper Corp. 173,885
---------------
2,526,225
- ----------------------------------------------------------------------------------------------------------------------------------
Photography - 0.0% 2,600 CPI Corp. 61,230
- ----------------------------------------------------------------------------------------------------------------------------------
Plastics - 0.0% 15,254 Spartech Corp. 215,081
- ----------------------------------------------------------------------------------------------------------------------------------
Pollution Control & 7,800 American Ecology Corp. 183,144
Environmental Services - 0.2% 34,600 Darling International, Inc. (a) 399,976
12,600 EnergySolutions, Inc. (a) 340,074
7,000 Fuel Tech, Inc. (a)(i) 158,550
18,746 Headwaters, Inc. (a)(i) 220,078
7,500 Team, Inc. (a) 274,350
---------------
1,576,172
- ----------------------------------------------------------------------------------------------------------------------------------
Power Transmission 14,451 Regal-Beloit Corp. 649,572
Equipment - 0.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Printing & Copying 14,282 Bowne & Co., Inc. 251,363
Services - 0.3% 25,200 Cenveo, Inc. (a) 440,244
6,400 Schawk, Inc. 99,328
20,100 VistaPrint Ltd. (a) 861,285
---------------
1,652,220
- ----------------------------------------------------------------------------------------------------------------------------------
Production Technology 16,157 ATMI, Inc. (a)(g) 521,063
Equipment - 1.1% 44,200 Axcelis Technologies, Inc. (a) 203,320
33,178 Brooks Automation, Inc. (a) 438,281
20,856 Cognex Corp. 420,248
40,468 Credence Systems Corp. (a) 97,933
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
15,000 Cymer, Inc. (a)(g) $ 583,950
8,931 Dionex Corp. (a) 740,023
12,661 Electro Scientific Industries, Inc. (a) 251,321
54,399 Entegris, Inc. (a) 469,463
13,690 Esterline Technologies Corp. (a) 708,458
17,655 FEI Co. (a) 438,374
10,900 Intevac, Inc. (a) 158,486
27,656 Kulicke & Soffa Industries, Inc. (a) 189,720
33,103 LTX Corp. (a) 105,268
8,600 MTS Systems Corp. 366,962
22,899 Mattson Technology, Inc. (a) 196,015
17,479 Photronics, Inc. (a) 217,963
14,200 Rofin-Sinar Technologies, Inc. (a) 683,162
13,973 Rudolph Technologies, Inc. (a) 158,174
9,300 Ultra Clean Holdings, Inc. (a) 113,460
12,590 Ultratech, Inc. (a) 142,771
---------------
7,204,415
- ----------------------------------------------------------------------------------------------------------------------------------
Publishing: 4,600 Consolidated Graphics, Inc. (a) 219,972
Miscellaneous - 0.2% 4,050 Courier Corp. 133,691
11,040 GateHouse Media, Inc. (i) 96,931
13,782 Martha Stewart Living Omnimedia, Inc. Class A (a)(i) 127,759
11,207 Playboy Enterprises, Inc. Class B (a) 102,208
22,300 Primedia, Inc. 189,550
13,260 Scholastic Corp. (a) 462,641
---------------
1,332,752
- ----------------------------------------------------------------------------------------------------------------------------------
Publishing: 39,600 Belo Corp. Class A 690,624
Newspapers - 0.3% 4,300 Dolan Media Co. (a) 125,431
21,100 Journal Communications, Inc. Class A 188,634
22,400 Lee Enterprises, Inc. 328,160
10,600 Media General, Inc. Class A 225,250
38,829 Sun-Times Media Group, Inc. (a) 85,424
---------------
1,643,523
- ----------------------------------------------------------------------------------------------------------------------------------
Radio & TV 18,600 CKX, Inc. (a) 223,200
Broadcasters - 0.3% 86,430 Citadel Broadcasting Corp. (i) 178,046
14,400 Cox Radio, Inc. Class A (a) 174,960
16,600 Cumulus Media, Inc. Class A (a) 133,464
19,200 Emmis Communications Corp. Class A (a) 73,920
15,600 Entercom Communications Corp. 213,564
2,200 Fisher Communications, Inc. (a) 83,512
18,200 Gray Television, Inc. 145,964
11,800 Lin TV Corp. Class A (a) 143,606
5,600 Nexstar Broadcasting Group, Inc. Class A (a) 51,184
38,000 Radio One, Inc. Class D (a) 90,060
3,383 Salem Communications Corp. Class A 22,294
23,564 Sinclair Broadcast Group, Inc. Class A (i) 193,460
17,484 Spanish Broadcasting System, Inc. Class A (a)(i) 32,345
35,400 Westwood One, Inc. 70,446
10,896 World Wrestling Entertainment, Inc. 160,825
---------------
1,990,850
- ----------------------------------------------------------------------------------------------------------------------------------
Railroad Equipment - 0.2% 3,800 American Railcar Industries, Inc. (i) 73,150
5,800 Freightcar America, Inc. 203,000
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
7,000 Greenbrier Cos., Inc. (i) $ 155,820
21,439 Westinghouse Air Brake Technologies Corp. 738,359
---------------
1,170,329
- ----------------------------------------------------------------------------------------------------------------------------------
Railroads - 0.1% 15,275 Genesee & Wyoming, Inc. Class A (a) 369,197
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate - 0.2% 800 AMREP Corp. (i) 24,440
2,800 Avatar Holdings, Inc. (a)(i) 117,096
7,000 Bluegreen Corp. (a) 50,330
2,500 Consolidated-Tomoka Land Co. 156,700
15,000 Dupont Fabros Technology, Inc. 294,000
10,300 Grubb & Ellis Co. 66,023
7,100 HFF, Inc. Class A (a) 54,954
22,672 Hilltop Holdings, Inc. (a) 247,578
4,700 Quadra Realty Trust, Inc. 37,788
8,100 Resource Capital Corp. 75,411
1,500 Stratus Properties, Inc. (a) 50,910
4,415 Tejon Ranch Co. (a) 180,353
13,200 Thomas Properties Group, Inc. 142,296
---------------
1,497,879
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment 15,501 Acadia Realty Trust 396,981
Trusts (REITs) - 5.3% 3,800 Agree Realty Corp. 114,380
22,700 Alesco Financial, Inc. (i) 74,456
867 Alexander's, Inc. (a) 306,268
14,876 Alexandria Real Estate Equities, Inc. 1,512,443
12,850 American Campus Communities, Inc. 345,023
56,600 American Financial Realty Trust (g) 453,932
29,600 Anthracite Capital, Inc. (c)(g) 214,304
22,600 Anworth Mortgage Asset Corp. 186,676
7,000 Arbor Realty Trust, Inc. 112,770
49,980 Ashford Hospitality Trust, Inc. (g) 359,356
9,900 Associated Estates Realty Corp. 93,456
3,800 BRT Realty Trust (i) 58,140
28,720 BioMed Realty Trust, Inc. (i) 665,442
10,100 CBRE Realty Finance, Inc. 53,934
17,400 CapLease, Inc. 146,508
6,000 Capital Trust, Inc. (i) 183,900
21,100 Cedar Shopping Centers, Inc. 215,853
13,900 Chimera Investment Corp. 248,532
18,300 Corporate Office Properties Trust (g) 576,450
19,100 Cousins Properties, Inc. (i) 422,110
9,900 Crystal River Capital, Inc.(i) 142,956
76,010 DCT Industrial Trust, Inc. 707,653
20,900 Deerfield Capital Corp. (i) 167,200
44,150 DiamondRock Hospitality Co. 661,367
26,340 Digital Realty Trust, Inc. 1,010,666
11,127 Eastgroup Properties, Inc. 465,665
15,300 Education Realty Trust, Inc. 171,972
13,080 Entertainment Properties Trust 614,760
9,494 Equity Lifestyle Properties, Inc. 433,591
17,200 Equity One, Inc. 396,116
30,350 Extra Space Storage, Inc. 433,702
29,270 FelCor Lodging Trust, Inc. 456,319
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
21,200 First Industrial Realty Trust, Inc. (i) $ 733,520
12,500 First Potomac Realty Trust 216,125
25,300 Franklin Street Properties Corp. 374,440
63,600 Friedman Billings Ramsey Group, Inc. Class A 199,704
15,690 GMH Communities Trust 86,609
6,800 Getty Realty Corp. 181,424
17,856 Glimcher Realty Trust 255,162
10,550 Gramercy Capital Corp. (i) 256,471
23,700 Healthcare Realty Trust, Inc. 601,743
17,700 Hersha Hospitality Trust 168,150
26,500 Highwoods Properties, Inc. 778,570
15,520 Home Properties, Inc. 696,072
40,300 IMPAC Mortgage Holdings, Inc. (i) 22,568
27,400 Inland Real Estate Corp. 387,984
23,100 Investors Real Estate Trust (i) 207,207
12,700 JER Investors Trust, Inc. (i) 136,779
9,940 Kite Realty Group Trust 151,784
9,600 LTC Properties, Inc. 240,480
18,720 LaSalle Hotel Properties 597,168
30,992 Lexington Corporate Properties Trust 450,624
20,300 Luminent Mortgage Capital, Inc. (i) 15,834
57,300 MFA Mortgage Investments, Inc. 530,025
16,600 Maguire Properties, Inc. (i) 489,202
24,700 Medical Properties Trust, Inc. 251,693
16,480 Meruelo Maddux Properties, Inc. (a) 65,920
11,929 Mid-America Apartment Communities, Inc. 509,965
6,000 Mission West Properties, Inc. 57,060
9,629 National Health Investors, Inc. 268,649
32,375 National Retail Properties, Inc. 756,928
41,859 Nationwide Health Properties, Inc. 1,313,117
20,300 Newcastle Investment Corp. (i) 263,088
26,700 NorthStar Realty Finance Corp. (i) 238,164
100 Novastar Financial, Inc. (a)(i) 289
29,200 Omega Healthcare Investors, Inc. 468,660
6,708 PS Business Parks, Inc. 352,505
7,504 Parkway Properties, Inc. 277,498
15,132 Pennsylvania Real Estate Investment Trust 449,118
19,186 Post Properties, Inc. 673,812
18,247 Potlatch Corp. 810,897
29,810 RAIT Investment Trust (i) 256,962
9,400 Ramco-Gershenson Properties Trust 200,878
45,300 Realty Income Corp. (i) 1,224,006
10,795 Redwood Trust, Inc. (i) 369,621
5,422 Saul Centers, Inc. 289,697
39,414 Senior Housing Properties Trust 893,910
9,180 Sovran Self Storage, Inc. 368,118
34,800 Strategic Hotel Capital, Inc. 582,204
8,343 Sun Communities, Inc. 175,787
29,200 Sunstone Hotel Investors, Inc. 534,068
14,622 Tanger Factory Outlet Centers, Inc. 551,396
2,875 Tarragon Corp. (a)(i) 4,313
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
22,170 U-Store-It Trust $ 203,077
5,727 Universal Health Realty Income Trust 202,965
9,200 Urstadt Biddle Properties, Inc. Class A 142,600
21,065 Washington Real Estate Investment Trust 661,652
17,900 Winthrop Realty Trust, Inc. 94,691
---------------
33,693,834
- ----------------------------------------------------------------------------------------------------------------------------------
Recreational Vehicles & 6,043 Arctic Cat, Inc. 72,153
Boats - 0.2% 27,799 Fleetwood Enterprises, Inc. (a)(i) 166,238
2,075 Marine Products Corp. 14,546
13,024 Monaco Coach Corp. 115,653
15,800 Polaris Industries, Inc. (i) 754,766
13,490 Winnebago Industries, Inc. (i) 283,560
---------------
1,406,916
- - ---------------------------------------------------------------------------------------------------------------------------------
Rental & Leasing Services: 5,853 Electro Rent Corp. 86,917
Commercial - 0.1% 8,600 H&E Equipment Services, Inc. (a) 162,368
11,910 McGrath RentCorp 306,683
---------------
555,968
- ----------------------------------------------------------------------------------------------------------------------------------
Rental & Leasing Services: 19,693 Aaron Rents, Inc. (g) 378,893
Consumer - 0.2% 4,600 Amerco, Inc. (a)(i) 302,128
10,695 Dollar Thrifty Automotive Group, Inc. (a) 253,258
9,500 RSC Holdings, Inc. (a) 119,225
33,000 Rent-A-Center, Inc. (a) 479,160
---------------
1,532,664
- ----------------------------------------------------------------------------------------------------------------------------------
Restaurants - 1.3% 13,400 AFC Enterprises, Inc. (a) 151,688
7,900 BJ's Restaurants, Inc. (a) 128,454
3,400 Benihana, Inc. Class A (a) 43,350
16,280 Bob Evans Farms, Inc. 438,420
7,550 Buffalo Wild Wings, Inc. (a) 175,311
10,400 CBRL Group, Inc. 336,856
13,050 CEC Entertainment, Inc. (a) 338,778
26,200 CKE Restaurants, Inc. 345,840
14,950 California Pizza Kitchen, Inc. (a) 232,771
4,300 Carrols Restaurant Group, Inc. (a) 41,194
14,800 Chipotle Mexican Grill, Inc. Class B (a) 1,821,140
47,100 Denny's Corp. (a) 176,625
20,850 Domino's Pizza, Inc. 275,846
7,148 IHOP Corp. (i) 261,474
27,536 Jack in the Box, Inc. (a) 709,603
27,500 Jamba, Inc. (a)(i) 101,750
28,200 Krispy Kreme Doughnuts, Inc. (a)(i) 89,112
6,096 Landry's Restaurants, Inc. (i) 120,091
7,200 McCormick & Schmick's Seafood Restaurants, Inc. (a) 85,896
5,500 Morton's Restaurant Group, Inc. (a) 51,315
12,184 O'Charleys, Inc. 182,516
10,508 P.F. Chang's China Bistro, Inc. (a)(i) 240,003
10,896 Papa John's International, Inc. (a) 247,339
6,800 Red Robin Gourmet Burgers, Inc. (a) 217,532
24,700 Ruby Tuesday, Inc. 240,825
9,500 Ruth's Chris Steak House, Inc. (a) 84,930
29,220 Sonic Corp. (a) 639,918
10,728 The Steak n Shake Co. (a) 116,935
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
21,500 Texas Roadhouse, Inc. Class A (a) $ 237,790
26,550 Triarc Cos. 232,578
---------------
8,365,880
- ----------------------------------------------------------------------------------------------------------------------------------
Retail - 2.9% 13,024 1-800-FLOWERS.COM, Inc. Class A (a) 113,700
22,400 99 Cents Only Stores (a) 178,304
9,800 A.C. Moore Arts & Crafts, Inc. (a) 134,750
12,300 Asbury Automotive Group, Inc. 185,115
31,375 Aeropostale, Inc. (a) 831,438
10,900 Big 5 Sporting Goods Corp. 157,178
9,600 bebe Stores, Inc. 123,456
86,200 Blockbuster, Inc. Class A (a)(i) 336,180
5,800 Blue Nile, Inc. (a)(i) 394,748
5,200 The Bon-Ton Stores, Inc. (i) 49,348
8,800 Books-A-Million, Inc. 104,896
24,700 Borders Group, Inc. 263,055
19,127 Brown Shoe Co., Inc. 290,156
5,673 The Buckle, Inc. 187,209
6,300 Build-A-Bear Workshop, Inc. (a) 87,885
20,334 CSK Auto Corp. (a) 101,873
18,400 Cabela's, Inc. Class A (a)(i) 277,288
7,050 Cache, Inc. (a) 65,847
15,700 Casual Male Retail Group, Inc. (a) 81,326
12,995 The Cato Corp. Class A 203,501
33,234 Central Garden & Pet Co. Class A (a) 178,134
12,000 Charlotte Russe Holding, Inc. (a) 193,800
57,240 Charming Shoppes, Inc. (a) 309,668
9,585 The Children's Place Retail Stores, Inc. (a) 248,539
15,728 Christopher & Banks Corp. 180,086
30,200 Collective Brands, Inc. (a) 525,178
5,900 Conn's, Inc. (a)(i) 100,949
22,890 Dress Barn, Inc. (a) 286,354
10,900 Eddie Bauer Holdings, Inc. (a) 69,215
16,100 Ezcorp, Inc. (a) 181,769
9,400 FTD Group, Inc. 121,072
19,135 Fred's, Inc. 184,270
9,700 GSI Commerce, Inc. (a) 189,150
8,200 Gaiam, Inc. (a) 243,376
5,800 Gander Mountain Co. (a)(i) 28,594
10,738 Genesco, Inc. (a) 405,896
11,132 Group 1 Automotive, Inc. 264,385
12,258 Gymboree Corp. (a) 373,379
15,175 Hibbett Sports, Inc. (a) 303,197
23,181 Hot Topic, Inc. (a) 134,913
22,598 Insight Enterprises, Inc. (a) 412,188
12,205 Jo-Ann Stores, Inc. (a) 159,641
7,533 Jos. A. Bank Clothiers, Inc. (a)(i) 214,314
1,788 Lawson Products, Inc. 67,801
6,800 Lithia Motors, Inc. Class A 93,364
7,700 MarineMax, Inc. (a)(i) 119,350
25,300 Men's Wearhouse, Inc. 682,594
10,800 New York & Co. (a) 68,904
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
7,800 Overstock.com, Inc. (a)(i) $ 121,134
2,600 PC Connection, Inc. (a) 29,510
30,600 Pacific Sunwear of California, Inc. (a) 431,766
10,800 The Pantry, Inc. (a) 282,204
19,310 The Pep Boys - Manny, Moe & Jack 221,679
11,500 PetMed Express, Inc. (a) 139,150
42,199 Pier 1 Imports, Inc. (a) 220,701
5,400 PriceSmart, Inc. 162,324
17,516 Priceline.com, Inc. (a) 2,011,888
9,000 Retail Ventures, Inc. (a) 45,810
14,500 Rush Enterprises, Inc. Class A (a) 263,610
6,647 Russ Berrie & Co., Inc. (a) 108,745
40,000 Sally Beauty Co., Inc. (a) 362,000
10,054 School Specialty, Inc. (a) 347,366
6,900 Shutterfly, Inc. (a) 176,778
14,700 Sonic Automotive, Inc. 284,592
18,250 Stage Stores, Inc. 270,100
8,803 Stamps.com, Inc. (a) 107,221
13,724 Stein Mart, Inc. 65,052
1,500 Syms Corp. 22,650
3,800 Systemax, Inc. (i) 77,216
11,100 The Talbots, Inc. (i) 131,202
14,590 Tuesday Morning Corp. 73,971
10,766 Tween Brands, Inc. (a) 285,084
20,080 United Natural Foods, Inc. (a) 636,938
17,256 ValueVision Media, Inc. Class A (a) 108,540
7,000 Volcom, Inc. (a) 154,210
41,200 The Wet Seal, Inc. Class A (a) 95,996
18,700 Zale Corp. (a)(i) 300,322
8,200 Zumiez, Inc. (a)(i) 199,752
---------------
18,244,844
- ----------------------------------------------------------------------------------------------------------------------------------
Savings & Loan - 1.1% 9,337 Anchor Bancorp Wisconsin, Inc. 219,606
26,738 Bank Mutual Corp. 282,620
21,542 BankAtlantic Bancorp, Inc. Class A 88,322
16,973 BankUnited Financial Corp. Class A (i) 117,114
5,300 Berkshire Hills Bancorp, Inc. 137,800
31,387 Brookline Bancorp, Inc. 318,892
13,649 Dime Community Bancshares, Inc. 174,298
10,000 Downey Financial Corp. (i) 311,100
5,826 First Financial Holdings, Inc. 159,749
6,600 First Indiana Corp. 211,200
49,053 First Niagara Financial Group, Inc. 590,598
8,600 First Place Financial Corp. 120,314
5,900 FirstFed Financial Corp. (a)(i) 211,338
21,350 Flagstar Bancorp, Inc. (i) 148,810
10,275 Flushing Financial Corp. 164,914
3,378 Great Southern Bancorp, Inc. 74,181
6,150 Horizon Financial Corp. 107,256
5,850 IBERIABANK Corp. 273,488
3,700 Imperial Capital Bancorp, Inc. 67,710
11,000 KNBT Bancorp, Inc. 169,620
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
7,400 Kearny Financial Corp. $ 88,134
700 NASB Financial, Inc. 18,214
53,000 NewAlliance Bancshares, Inc. 610,560
7,267 Northwest Bancorp, Inc. 193,084
13,965 Ocwen Financial Corp. (a) 77,366
11,011 PFF Bancorp, Inc. 132,572
29,058 Provident Financial Services, Inc. 419,016
18,789 Provident New York Bancorp 242,754
3,500 Rockville Financial, Inc. 42,700
2,700 Roma Financial Corp. 42,363
24,343 Sterling Financial Corp. 408,719
9,300 TierOne Corp. 205,995
9,061 United Community Financial Corp. 50,017
5,800 ViewPoint Financial Group 95,874
39,633 W Holding Co., Inc. (i) 47,956
4,512 Westfield Financial, Inc. 43,766
---------------
6,668,020
- ----------------------------------------------------------------------------------------------------------------------------------
Scientific Equipment & 17,635 Newport Corp. (a) 225,552
Suppliers - 0.2% 14,235 Varian, Inc. (a) 929,546
---------------
1,155,098
- ----------------------------------------------------------------------------------------------------------------------------------
Securities Brokerage & 22,145 Centerline Holding Co. (i) 168,745
Services - 0.5% 7,300 GFI Group, Inc. (a) 698,756
12,400 KBW, Inc. (a) 317,316
46,500 Knight Capital Group, Inc. Class A (a)(g) 669,600
20,500 LaBranche & Co., Inc. (a) 103,320
49,900 Ladenburg Thalmann Financial Services, Inc. (a)(i) 105,788
13,500 MarketAxess Holdings, Inc. (a) 173,205
20,400 optionsXpress Holdings, Inc. 689,928
5,200 Penson Worldwide, Inc. (a) 74,620
9,706 SWS Group, Inc. 122,975
10,100 Thomas Weisel Partners Group, Inc. (a) 138,673
---------------
3,262,926
- ----------------------------------------------------------------------------------------------------------------------------------
Services: Commercial - 3.3% 20,370 ABM Industries, Inc. 415,344
16,405 AMN Healthcare Services, Inc. (a) 281,674
10,961 Administaff, Inc. 309,977
8,500 The Advisory Board Co. (a) 545,615
8,300 Ambassadors Group, Inc. 151,973
5,400 Ambassadors International, Inc. (i) 78,732
4,400 Barrett Business Services, Inc. 79,244
22,753 CBIZ, Inc. (a) 223,207
7,001 CDI Corp. 169,844
5,600 CRA International, Inc. (a) 266,616
10,978 Casella Waste Systems, Inc. (a) 143,153
11,172 Chemed Corp. 624,291
9,050 CoStar Group, Inc. (a) 427,613
13,092 Coinstar, Inc. (a) 368,540
5,200 Cornell Cos., Inc. (a) 121,264
16,000 Cross Country Healthcare, Inc. (a) 227,840
13,800 Diamond Management & Technology
Consultants, Inc. 100,326
12,200 DynCorp. International, Inc. (a) 327,936
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
7,704 Exponent, Inc. (a) $ 208,316
21,741 FTI Consulting, Inc. (a) 1,340,115
4,200 First Advantage Corp. Class A (a) 69,174
5,881 Forrester Research, Inc. (a) 164,786
10,177 G&K Services, Inc. Class A 381,841
23,500 The Geo Group, Inc. (a) 658,000
13,300 Gevity HR, Inc. 102,277
9,620 Global Sources Ltd. (a) 271,476
23,700 Harris Interactive, Inc. (a) 100,962
8,558 Heidrick & Struggles International, Inc. 317,587
21,200 Home Solutions of America, Inc. (a)(i) 21,200
12,300 Hudson Highland Group, Inc. (a) 103,443
4,400 ICT Group, Inc. (a) 52,580
47,000 IKON Office Solutions, Inc. 611,940
14,000 Jackson Hewitt Tax Service, Inc. 444,500
11,168 Kelly Services, Inc. Class A 208,395
13,100 Kforce, Inc. (a) 127,725
13,200 The Knot, Inc. (a) 210,408
20,968 Korn/Ferry International (a) 394,618
4,600 Liquidity Services, Inc. (a) 59,340
7,604 MAXIMUS, Inc. 293,590
44,605 MPS Group, Inc. (a) 487,979
7,242 Midas, Inc. (a) 106,168
8,750 Monro Muffler, Inc. 170,538
22,523 Navigant Consulting, Inc. (a) 307,889
19,100 Net 1 UEPS Technologies, Inc. (a) 560,776
17,100 On Assignment, Inc. (a) 119,871
13,400 Orbitz Worldwide, Inc. (a) 113,900
23,164 PHH Corp. (a) 408,613
11,300 People Support, Inc. (a) 154,584
13,900 Perficient, Inc. (a) 218,786
4,560 Pre-Paid Legal Services, Inc. (a) 252,396
5,600 The Providence Service Corp. (a) 157,584
20,700 Regis Corp. 578,772
23,032 Resources Connection, Inc. 418,261
18,453 Rollins, Inc. 354,298
23,000 Source Interlink Cos., Inc. (a)(i) 66,240
24,529 Spherion Corp. (a) 178,571
1,700 Standard Parking Corp. (a) 82,433
7,800 Steiner Leisure Ltd. (a) 344,448
19,589 TeleTech Holdings, Inc. (a) 416,658
27,231 Tetra Tech, Inc. (a) 585,467
3,700 Travelzoo, Inc. (a) 50,616
21,122 TrueBlue, Inc. (a) 305,847
5,800 Unifirst Corp. 220,400
9,600 Viad Corp. 303,168
6,138 Volt Information Sciences, Inc. (a) 112,080
32,027 Waste Connections, Inc. (a) 989,634
2,600 Waste Industries USA, Inc. 94,380
8,233 Waste Services, Inc. (a) 70,557
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
19,915 Watson Wyatt Worldwide, Inc. $ 924,255
13,400 World Fuel Services Corp. 389,002
---------------
20,549,633
- ----------------------------------------------------------------------------------------------------------------------------------
Shipping - 0.7% 24,200 American Commercial Lines, Inc. (a)(g) 393,008
4,700 Arlington Tankers Ltd. (i) 104,011
10,400 Double Hull Tankers, Inc. 127,296
21,900 Eagle Bulk Shipping, Inc. 581,445
9,400 Genco Shipping & Trading Ltd. 514,744
12,000 General Maritime Corp. (i) 293,400
16,400 Golar LNG Ltd. 362,768
10,800 Gulfmark Offshore, Inc. (a) 505,332
15,800 Horizon Lines, Inc. Class A 294,512
9,000 Knightsbridge Tankers Ltd. (i) 217,350
12,900 Nordic American Tanker Shipping Ltd. (i) 423,378
14,500 Ship Finance International Ltd. (i) 401,795
2,100 TBS International Ltd. (a) 69,426
---------------
4,288,465
- ----------------------------------------------------------------------------------------------------------------------------------
Shoes - 0.5% 6,500 DSW, Inc. Class A (a)(i) 121,940
5,700 Deckers Outdoor Corp. (a) 883,842
20,966 The Finish Line, Inc. Class A 50,738
2,800 Heelys, Inc. (a)(i) 19,488
23,700 Iconix Brand Group, Inc. (a) 465,942
12,296 K-Swiss, Inc. Class A 222,558
4,992 Kenneth Cole Productions, Inc. Class A 87,310
5,400 Shoe Carnival, Inc. (a) 76,194
9,355 Skechers U.S.A., Inc. Class A (a) 182,516
9,968 Steven Madden Ltd. (a) 199,360
20,600 Timberland Co. Class A (a) 372,448
2,400 Weyco Group, Inc. 66,000
23,808 Wolverine World Wide, Inc. 583,772
---------------
3,332,108
- ----------------------------------------------------------------------------------------------------------------------------------
Steel - 0.3% 5,100 Claymont Steel, Inc. (a) 119,085
4,400 Esmark, Inc. (a) 62,172
9,834 Gibraltar Industries, Inc. 151,640
3,300 Olympic Steel, Inc. 104,643
10,250 Schnitzer Steel Industries, Inc. Class A 708,583
3,600 Universal Stainless & Alloy Products, Inc. (a) 128,052
32,300 Worthington Industries, Inc. 577,524
---------------
1,851,699
- ----------------------------------------------------------------------------------------------------------------------------------
Sugar - 0.0% 4,800 Imperial Sugar Co. New Shares (i) 90,096
- ----------------------------------------------------------------------------------------------------------------------------------
Telecommunications 400 Airvana, Inc. (a) 2,172
Equipment - 0.6% 70,190 Arris Group, Inc. (a) 700,502
7,285 Audiovox Corp. Class A (a) 90,334
20,961 Belden, Inc. 932,764
17,500 Mastec, Inc. (a) 177,975
6,300 OpNext, Inc. (a) 55,755
22,499 Plantronics, Inc. 584,974
40,900 Polycom, Inc. (a) 1,136,202
61,477 Powerwave Technologies, Inc. (a)(i) 247,752
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
600 Preformed Line Products Co. $ 35,700
22,800 Symmetricom, Inc. (a) 107,388
---------------
4,071,518
- ----------------------------------------------------------------------------------------------------------------------------------
Textile Products - 0.1% 25,721 Interface, Inc. Class A 419,767
- ----------------------------------------------------------------------------------------------------------------------------------
Textiles Apparel 27,300 Carter's, Inc. (a) 528,255
Manufacturers - 0.7% 4,200 Cherokee, Inc. (i) 135,534
6,600 Columbia Sportswear Co. 290,994
7,300 G-III Apparel Group, Ltd. (a) 107,821
18,170 J. Crew Group, Inc. (a) 875,976
11,282 Kellwood Co. 187,732
6,100 Lululemon Athletica, Inc. (a) 288,957
11,200 Maidenform Brands, Inc. (a) 151,536
7,042 Oxford Industries, Inc. 181,472
6,450 Perry Ellis International, Inc. (a) 99,201
54,200 Quiksilver, Inc. (a) 465,036
5,500 True Religion Apparel, Inc. (a)(i) 117,425
10,700 Under Armour, Inc. Class A (a)(i) 467,269
21,600 The Warnaco Group, Inc. (a) 751,680
---------------
4,648,888
- ----------------------------------------------------------------------------------------------------------------------------------
Tires & Rubber - 0.1% 28,900 Cooper Tire & Rubber Co. 479,162
10,500 Titan International, Inc. 328,230
---------------
807,392
- ----------------------------------------------------------------------------------------------------------------------------------
Tobacco - 0.2% 45,555 Alliance One International, Inc. (a) 185,409
7,520 Schweitzer-Mauduit International, Inc. 194,843
12,656 Universal Corp. 648,240
15,244 Vector Group Ltd. (i) 305,795
---------------
1,334,287
- ----------------------------------------------------------------------------------------------------------------------------------
Toys - 0.2% 13,430 Jakks Pacific, Inc. (a) 317,082
16,246 Leapfrog Enterprises, Inc. (a) 109,336
23,800 Marvel Entertainment, Inc. (a) 635,698
---------------
1,062,116
- ----------------------------------------------------------------------------------------------------------------------------------
Transportation 13,100 Celadon Group, Inc. (a) 119,996
Miscellaneous - 0.2% 4,600 Dynamex, Inc. (a) 124,476
18,200 HUB Group, Inc. Class A (a) 483,756
22,000 Odyssey Marine Exploration, Inc. (a) 136,180
16,400 Pacer International, Inc. 239,440
1,800 Textainer Group Holdings Ltd. 26,154
5,700 Ultrapetrol Bahamas Ltd. (a) 96,957
---------------
1,226,959
- ----------------------------------------------------------------------------------------------------------------------------------
Truckers - 0.4% 9,041 Arkansas Best Corp. 198,359
14,132 Forward Air Corp. 440,494
25,173 Heartland Express, Inc. (i) 356,953
26,962 Knight Transportation, Inc. (i) 399,307
5,450 Marten Transport Ltd. (a) 76,028
14,025 Old Dominion Freight Line, Inc. (a) 324,118
400 Patriot Transportation Holding, Inc. (a) 36,892
6,181 Saia, Inc. (a) 82,207
1,800 Universal Truckload Services, Inc. (a) 34,488
22,200 Werner Enterprises, Inc. 378,066
---------------
2,326,912
- ----------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities: Cable 28,500 Mediacom Communications Corp. Class A (a)(i) $ 130,815
TV & Radio - 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities: Electrical - 1.7% 12,066 Allete, Inc. 477,572
24,775 Avista Corp. 533,653
17,600 Black Hills Corp. 776,160
7,489 CH Energy Group, Inc. 333,560
5,000 Central Vermont Public Service Corp. 154,200
27,867 Cleco Corp. 774,702
21,408 El Paso Electric Co. (a) 547,403
14,068 The Empire District Electric Co. 320,469
20,500 IDACORP, Inc. 722,010
19,800 ITC Holdings Corp. 1,117,116
9,045 MGE Energy, Inc. 320,826
15,500 NorthWestern Corp. 457,250
12,786 Otter Tail Corp. 442,396
35,800 PNM Resources, Inc. 767,910
6,600 Pike Electric Corp. (a) 110,616
14,400 Portland General Electric Co. 400,032
11,967 UIL Holdings Corp. 442,181
16,583 Unisource Energy Corp. 523,194
44,600 Westar Energy, Inc. 1,156,924
---------------
10,378,174
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities: Gas 2,900 EnergySouth, Inc. 168,200
Distributors - 0.9% 9,348 The Laclede Group, Inc. 320,076
13,074 New Jersey Resources Corp. 653,961
19,900 Nicor, Inc. 842,765
12,599 Northwest Natural Gas Co. 613,067
34,800 Piedmont Natural Gas Co. (i) 910,368
13,832 South Jersey Industries, Inc. 499,197
19,690 Southwest Gas Corp. 586,171
22,400 WGL Holdings, Inc. 733,824
---------------
5,327,629
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities: Miscellaneous - 0.1% 164,200 Aquila, Inc. (a) 612,466
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities: 21,100 Alaska Communications Systems Group, Inc. 316,500
Telecommunications - 1.2% 5,200 Atlantic Tele-Network, Inc. 175,656
11,826 Centennial Communications Corp. (a) 109,863
116,000 Cincinnati Bell, Inc. (a) 551,000
9,000 Consolidated Communications Holdings, Inc. 179,100
15,400 FairPoint Communications, Inc. 200,508
54,550 FiberTower Corp. (a)(i) 124,374
25,539 General Communication, Inc. Class A (a) 223,466
16,700 Global Crossing Ltd. (a)(i) 368,235
6,300 Globalstar, Inc. (a)(i) 50,400
7,292 Golden Telecom, Inc. (a)(f) 736,127
50,500 ICO Global Communications Holdings Ltd. (a) 160,590
22,900 IDT Corp. Class B 193,505
11,400 Ibasis, Inc. 58,482
14,400 Iowa Telecommunications Services, Inc. 234,144
8,100 iPCS, Inc. 291,519
13,100 NTELOS Holdings Corp. 388,939
2,000 Neutral Tandem, Inc. (a) 38,040
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
9,521 North Pittsburgh Systems, Inc. $ 235,105
8,900 ORBCOMM, Inc. (a) 55,981
31,820 PAETEC Holding Corp. (a) 310,245
29,000 Premiere Global Services, Inc. (a) 430,650
13,500 RCN Corp. (a) 210,465
5,100 Rural Cellular Corp. Class A (a) 224,859
9,600 Shenandoah Telecom Co. 230,208
7,000 SureWest Communications 119,700
67,200 Time Warner Telecom, Inc. Class A (a)(i) 1,363,488
11,120 USA Mobility, Inc. (a) 159,016
10,600 Virgin Mobile USA, Inc. (a) 94,234
---------------
7,834,399
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities: Water - 0.2% 8,285 American States Water Co. 312,179
9,296 California Water Service Group 344,138
5,600 Consolidated Water Co., Inc. 141,064
6,148 SJW Corp. 213,151
13,483 Southwest Water Co. (i) 168,807
---------------
1,179,339
- ----------------------------------------------------------------------------------------------------------------------------------
Wholesale & International 16,425 Central European Distribution Corp. (a) 953,964
Trade - 0.2%
- ----------------------------------------------------------------------------------------------------------------------------------
Wholesalers - 0.4% 23,830 Brightpoint, Inc. (a) 366,029
8,000 Houston Wire & Cable Co. (i) 113,120
52,400 LKQ Corp. (a) 1,101,448
4,000 MWI Veterinary Supply, Inc. (a) 160,000
16,400 Prestige Brands Holdings, Inc. (a) 122,672
12,169 United Stationers, Inc. (a) 562,329
---------------
2,425,598
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks
(Cost - $525,261,156) - 93.2% 587,256,036
- ----------------------------------------------------------------------------------------------------------------------------------
Exchange-Traded Funds
- ----------------------------------------------------------------------------------------------------------------------------------
169,590 iShares Russell 2000 Index Fund (i) 12,915,974
- ----------------------------------------------------------------------------------------------------------------------------------
Total Exchange-Traded Funds (Cost - $12,334,264) - 2.0% 12,915,974
- ----------------------------------------------------------------------------------------------------------------------------------
Mutual Funds
- ----------------------------------------------------------------------------------------------------------------------------------
2,900 BlackRock Kelso Capital Corp. (c) 44,312
7,000 Gladstone Capital Corp. (i) 119,000
15,200 Hercules Technology Growth Capital, Inc. 188,784
3,200 Kayne Anderson Energy Development Co. 73,312
11,600 Patriot Capital Funding, Inc. 117,044
11,600 Pennantpark Investment Corp. 116,232
11,400 Prospect Capital Corp. 148,770
- ----------------------------------------------------------------------------------------------------------------------------------
Total Mutual Funds
(Cost - $983,037) - 0.1% 807,454
- ----------------------------------------------------------------------------------------------------------------------------------
Rights
- ----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.0% 1,174 Medis Technologies Ltd. (a)(e) 0
- ----------------------------------------------------------------------------------------------------------------------------------
Total Rights
(Cost - $0) - 0.0% 0
- ----------------------------------------------------------------------------------------------------------------------------------
Other Interests
- ----------------------------------------------------------------------------------------------------------------------------------
Oil: Crude Producers - 0.0% 500 PetroCorp Inc. (Escrow Shares) (b) 0
- ----------------------------------------------------------------------------------------------------------------------------------
Total Other Interests
(Cost - $0) - 0.0% 0
- ----------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007
Beneficial
Interest Short-Term Securities Value
- ----------------------------------------------------------------------------------------------------------------------------------
$ 33,226,793 BlackRock Liquidity Series, LLC Cash Sweep Series, 5.04% (c)(h) $ 33,226,793
83,808,817 BlackRock Liquidity Series, LLC Money Market Series, 4.78% (c)(d)(h) 83,808,817
- ----------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost - $117,035,610) - 18.6% 117,035,610
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost - $655,614,067*) - 113.9% 718,015,074
Liabilities in Excess of Other Assets - (13.9%) (87,620,790)
---------------
Net Assets - 100.0% $ 630,394,284
---------------
* The cost and unrealized appreciation (depreciation) of investments, as of
December 31, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 661,516,435
=============
Gross unrealized appreciation $ 122,933,165
Gross unrealized depreciation (66,434,526)
-------------
Net unrealized appreciation $ 56,498,639
=============
(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 Loss Income
--------------------------------------------------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series - $(75,586,157)** - $ 3,154,441
BlackRock Liquidity Series, LLC
Money Market Series $ 49,642,337* - - $ 828,965
Anthracite Capital, Inc. $ 79,398 $ 8,674 $ (719) $ 30,528
BlackRock Kelso Capital Corp. $ 42,004 - - $ 946
--------------------------------------------------------------------------------------------------------------------
* Represents net purchase cost.
** Represents net sale cost.
(d) Security was purchased with the cash proceeds from securities loans.
(e) The rights may be exercised until January 7, 2008.
(f) Depositary receipts.
(g) Security held as collateral in connection with open financial futures
contracts.
(h) Represents the current yield as of December 31, 2007.
(i) Security, or a portion of security, is on loan.
o For Series compliance purposes, the Series' industry classifications refer
to any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Series management. This definition may not apply for purposes
of this report, which may combine industry sub-classifications for
reporting ease. Industries are shown as a percent of net assets. These
industry classifications are unaudited.
o Financial futures contracts purchased as of December 31, 2007, were as
follows:
--------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Date Value Appreciation
--------------------------------------------------------------------------
74 Russell 2000 Index March 2008 $ 28,101,735 $ 469,605
--------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON DETAILED SCHEDULE OF
INVESTMENTS
To the Investors and Board of Directors of
Quantitative Master Series LLC:
We have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the financial statements of Master
Small Cap Index Series ("the Series"), one of the portfolios constituting
Quantitative Master Series LLC (formerly Quantitative Master Series Trust) (the
"Master LLC") as of December 31, 2007, and for the year then ended and have
issued our report thereon dated February 22, 2008 which report and financial
statements are included in Item 1 of this Certified Shareholder Report on Form
N-CSR. Our audit also included the Series' schedule of investments in securities
(the "Schedule") as of December 31, 2007 appearing in Item 6 of this Form N-CSR.
This Schedule is the responsibility of the Master LLC's management. Our
responsibility is to express an opinion based on our audit. In our opinion, the
Schedule referred to above, when considered in relation to the basic financial
statements taken as a whole of the Series referred to above, presents fairly, in
all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
February 22, 2008
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
Australia - Air Freight & Logistics - 0.1% 49,700 Toll Holdings Ltd. $ 496,210
6.2%
----------------------------------------------------------------------------------------------------------------
Airlines - 0.0% 82,665 Qantas Airways Ltd. 392,769
----------------------------------------------------------------------------------------------------------------
Beverages - 0.1% 43,836 Coca-Cola Amatil Ltd. 362,482
156,558 Foster's Group Ltd. 895,583
15,527 Lion Nathan Ltd. 130,374
--------------
1,388,439
----------------------------------------------------------------------------------------------------------------
Biotechnology - 0.1% 43,419 CSL Ltd. 1,375,508
----------------------------------------------------------------------------------------------------------------
Capital Markets - 0.1% 20,151 Macquarie Group Ltd. 1,348,248
1,184 Perpetual Trustees Australia Ltd. 68,518
--------------
1,416,766
----------------------------------------------------------------------------------------------------------------
Chemicals - 0.1% 27,954 Orica Ltd. 773,391
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.6% 145,546 Australia & New Zealand Banking Group Ltd. 3,483,128
21,750 Bendigo Bank Ltd. 280,581
104,821 Commonwealth Bank of Australia Ltd. 5,404,442
128,876 National Australia Bank Ltd. 4,245,113
18,349 St. George Bank Ltd. 504,886
148,698 Westpac Banking Corp. 3,615,884
--------------
17,534,034
----------------------------------------------------------------------------------------------------------------
Commercial Services & 111,885 Brambles Ltd. 1,123,439
Supplies - 0.1% 7,609 Downer EDI Ltd. 35,732
--------------
1,159,171
----------------------------------------------------------------------------------------------------------------
Construction & 72,939 Boart Longyear Group (b) 148,948
Engineering - 0.1% 9,875 Leighton Holdings Ltd. 522,518
--------------
671,466
----------------------------------------------------------------------------------------------------------------
Construction 32,839 Boral Ltd. 175,124
Materials - 0.0% 33,896 James Hardie Industries NV 190,400
--------------
365,524
----------------------------------------------------------------------------------------------------------------
Containers & 55,191 Amcor Ltd. 333,087
Packaging - 0.0%
----------------------------------------------------------------------------------------------------------------
Distributors - 0.0% 50,712 Pacific Brands Ltd. 144,018
----------------------------------------------------------------------------------------------------------------
Diversified Consumer 41,900 ABC Learning Centres Ltd. 188,926
Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Diversified Financial 12,193 Australian Stock Exchange Ltd. 641,859
Services - 0.1% 21,814 Babcock & Brown Ltd. 513,116
40,299 Challenger Financial Services Group Ltd. 174,556
--------------
1,329,531
----------------------------------------------------------------------------------------------------------------
Diversified 220,405 Telstra Corp. Ltd. 903,246
Telecommunication 117,168 Telstra Corp. Ltd. Installment Receipts 323,995
Services - 0.1% --------------
1,227,241
----------------------------------------------------------------------------------------------------------------
Energy Equipment 9,755 WorleyParsons Ltd. 439,457
& Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Food & Staples 13,354 Wesfarmers Ltd. 477,226
Retailing - 0.5% 42,806 Wesfarmers Ltd. (b) 1,512,976
97,179 Woolworth's Ltd. 2,881,942
--------------
4,872,144
----------------------------------------------------------------------------------------------------------------
Food Products - 0.0% 61,294 Futuris Corp. Ltd. 114,976
82,843 Goodman Fielder Ltd. 136,951
--------------
251,927
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ---------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment 6,833 Ansell Ltd. $ 71,947
& Supplies - 0.0% 3,234 Cochlear Ltd. 211,428
--------------
283,375
----------------------------------------------------------------------------------------------------------------
Health Care Providers & 48,146 Mayne Group Ltd. 167,392
Services - 0.1% 30,229 Sonic Healthcare Ltd. 441,109
--------------
608,501
----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 23,055 Aristocrat Leisure Ltd. 225,893
& Leisure - 0.1% 35,857 Crown Ltd. (b) 423,462
44,237 Tabcorp Holdings Ltd. 571,937
105,531 Tatts Group Ltd. 367,649
--------------
1,588,941
----------------------------------------------------------------------------------------------------------------
IT Services - 0.0% 34,681 Computershare Ltd. 299,175
----------------------------------------------------------------------------------------------------------------
Industrial 99,498 CSR Ltd. 269,425
Conglomerates - 0.0%
----------------------------------------------------------------------------------------------------------------
Insurance - 0.5% 154,726 AMP Ltd. 1,342,738
53,968 AXA Asia Pacific Holdings Ltd. 347,185
149,879 Insurance Australia Group Ltd. 539,437
68,168 QBE Insurance Group Ltd. 1,979,106
73,294 Suncorp-Metway Ltd. 1,081,820
--------------
5,290,286
----------------------------------------------------------------------------------------------------------------
Media - 0.1% 113,673 Fairfax Media Ltd. 464,192
36,612 Macquarie Communications Infrastructure Group 173,274
--------------
637,466
----------------------------------------------------------------------------------------------------------------
Metals & Mining - 1.4% 106,550 Alumina Ltd. 589,853
265,166 BHP Billiton Ltd. 9,269,681
58,610 BlueScope Steel Ltd. 491,989
114,370 Fortescue Metals Group Ltd. (b) 753,168
28,055 Iluka Resources Ltd. 112,697
36,312 Newcrest Mining Ltd. 1,047,057
42,672 OneSteel Ltd. 228,860
91,474 Oxiana Ltd. 275,571
22,206 Rio Tinto Ltd. 2,583,296
37,874 Zinifex Ltd. 406,264
--------------
15,758,436
----------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.0% 28,965 AGL Energy Ltd. 337,184
----------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.0% 31,607 Harvey Norman Holdings Ltd. 186,806
----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 10,809 Caltex Australia Ltd. 182,525
Fuels - 0.3% 58,406 Origin Energy Ltd. 450,930
36,005 Paladin Resources Ltd. (b) 210,386
53,148 Santos Ltd. 653,095
37,671 Woodside Petroleum Ltd. 1,651,186
--------------
3,148,122
----------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.0% 5,919 PaperlinX Ltd. 13,715
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment 114,334 CFS Retail Property Trust $ 233,838
Trusts (REITs) - 0.5% 80,903 Centro Properties Group 70,765
87,890 Centro Retail Trust 72,691
123,474 Commonwealth Property Office Fund 166,640
174,595 DB RREEF Trust 304,783
99,888 Goodman Group 425,117
77,729 ING Industrial Fund 172,214
114,131 Macquarie Office Trust 139,535
70,450 Mirvac Group 368,177
122,330 Stockland Corp., Ltd. 897,883
138,089 Westfield Group 2,524,615
--------------
5,376,258
----------------------------------------------------------------------------------------------------------------
Real Estate Management & 162,144 General Property Trust 570,687
Development - 0.1% 22,466 Lend Lease Corp., Ltd. 339,235
--------------
909,922
----------------------------------------------------------------------------------------------------------------
Road & Rail - 0.0% 57,500 Asciano Group 350,479
----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & 5,609 Billabong International Ltd. 72,617
Luxury Goods - 0.0%
----------------------------------------------------------------------------------------------------------------
Transportation 30,724 Macquarie Airports Group 108,517
Infrastructure - 0.1% 184,082 Macquarie Infrastructure Group 486,877
98,073 Transurban Group 585,626
--------------
1,181,020
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Australia 70,671,337
- ------------------------------------------------------------------------------------------------------------------------------------
Austria - 0.6% Building Products - 0.0% 6,223 Wienerberger AG 342,876
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.1% 15,184 Erste Bank der Oesterreichischen Sparkassen AG 1,072,114
2,739 Raiffeisen International Bank Holding AG 411,662
--------------
1,483,776
----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% 2,326 RHI AG (b) 95,052
----------------------------------------------------------------------------------------------------------------
Containers & 1,018 Mayr-Melnhof Karton AG 110,177
Packaging - 0.0%
----------------------------------------------------------------------------------------------------------------
Diversified 27,080 Telekom Austria AG 747,841
Telecommunication
Services - 0.1%
----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.1% 5,222 Verbund - Oesterreichische
Elektrizitaetswirtschafts AG 362,995
----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 3,077 BetandWin.com Interactive Entertainment AG (b) 119,438
& Leisure - 0.0%
----------------------------------------------------------------------------------------------------------------
Insurance - 0.0% 1,596 Wiener Staedtische Allgemeine Versicherung AG 127,940
----------------------------------------------------------------------------------------------------------------
Machinery - 0.0% 3,531 Andritz AG 212,115
----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.1% 9,070 Voestalpine AG 650,035
----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 12,855 OMV AG 1,037,710
Fuels - 0.1%
----------------------------------------------------------------------------------------------------------------
Real Estate Management & 37,119 IMMOFINANZ Immobilien Anlagen AG 374,975
Development - 0.1% 30,380 Immoeast Immobilien Anlagen AG (b) 326,104
23,055 Meinl European Land Ltd. (b) 317,080
--------------
1,018,159
----------------------------------------------------------------------------------------------------------------
Transportation 1,050 Flughafen Wien AG 121,286
Infrastructure - 0.0%
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Austria 6,429,400
- ------------------------------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Belgium - 1.2% Beverages - 0.1% 14,553 InBev NV $ 1,209,805
----------------------------------------------------------------------------------------------------------------
Chemicals - 0.1% 4,760 Solvay SA 665,745
2,305 Umicore SA 571,188
--------------
1,236,933
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.3% 41,350 Dexia NV 1,038,182
15,092 KBC Bancassurance Holding 2,124,265
--------------
3,162,447
----------------------------------------------------------------------------------------------------------------
Distributors - 0.0% 204 D'ieteren SA 73,308
----------------------------------------------------------------------------------------------------------------
Diversified Financial 166,827 Fortis 4,367,320
Services - 0.5% 6,092 Groupe Bruxelles Lambert SA 779,104
402 KBC Ancora 45,692
343 Nationale A Portefeuille 24,673
--------------
5,216,789
----------------------------------------------------------------------------------------------------------------
Diversified 13,195 Belgacom SA 650,109
Telecommunication
Services - 0.1%
----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.0% 927 Bekaert SA 124,476
----------------------------------------------------------------------------------------------------------------
Electronic Equipment & 1,006 Barco NV 76,831
Instruments - 0.0%
----------------------------------------------------------------------------------------------------------------
Food & Staples 921 Colruyt SA 216,547
Retailing - 0.1% 7,045 Delhaize Group 618,468
--------------
835,015
----------------------------------------------------------------------------------------------------------------
Health Care Equipment & 1,461 Omega Pharma SA 100,547
Supplies - 0.0%
----------------------------------------------------------------------------------------------------------------
Health Care 11,702 AGFA-Gevaert NV 178,539
Technology - 0.0%
----------------------------------------------------------------------------------------------------------------
Marine - 0.0% 1,243 Compagnie Maritime Belge SA (CMB) 107,533
----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 1,612 Euronav SA 57,046
Fuels - 0.0%
----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.0% 9,950 UCB SA 451,717
----------------------------------------------------------------------------------------------------------------
Real Estate Investment 199 Cofinimmo SA 37,474
Trusts (REITs) - 0.0%
----------------------------------------------------------------------------------------------------------------
Wireless Telecommunication 1,464 Mobistar SA 133,547
Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Belgium 13,652,116
- ------------------------------------------------------------------------------------------------------------------------------------
Bermuda - 0.0% Energy Equipment 17,858 SeaDrill Ltd. (b) 430,989
& Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Marine - 0.0% 105,832 Pacific Basin Shipping Ltd. 167,928
----------------------------------------------------------------------------------------------------------------
Paper & Forest 69 Citic Resources Holdings Ltd. (b) 40
Products - 0.0%
----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & 80,289 C C Land Holdings Ltd. 114,838
Luxury Goods - 0.0% 19,785 Yue Yuen Industrial Holdings Ltd. 70,853
--------------
185,691
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Bermuda 784,648
- ------------------------------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Cayman Communications 150,416 Foxconn International Holdings Ltd. (b) $ 334,499
Islands - 0.0% Equipment - 0.0%
----------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.0% 21,932 Lifestyle International Holdings Ltd. 58,666
----------------------------------------------------------------------------------------------------------------
Paper & Forest 16,000 Lee & Man Paper Manufacturing Ltd. 69,754
Products - 0.0%
----------------------------------------------------------------------------------------------------------------
Real Estate Management & 195,250 Shui On Land Ltd. 225,426
Development - 0.0%
----------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.0% 210,518 Belle International Holdings Ltd. 314,943
----------------------------------------------------------------------------------------------------------------
Total Common Stocks
in the Cayman Islands 1,003,288
- ------------------------------------------------------------------------------------------------------------------------------------
Denmark - 0.9% Beverages - 0.0% 2,762 Carlsberg A/S 332,508
----------------------------------------------------------------------------------------------------------------
Building Products - 0.0% 314 Rockwool International AS 72,830
----------------------------------------------------------------------------------------------------------------
Chemicals - 0.0% 3,817 Novozymes A/S Class B 433,058
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.2% 35,951 Danske Bank A/S 1,405,236
3,350 Jyske Bank (b) 263,063
4,339 Sydbank A/S 185,788
--------------
1,854,087
----------------------------------------------------------------------------------------------------------------
Construction 3,667 FLS Industries A/S Class B 373,928
& Engineering - 0.0%
----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.2% 15,164 Vestas Wind Systems A/S (b) 1,637,421
----------------------------------------------------------------------------------------------------------------
Food Products - 0.1% 4,813 Danisco A/S 340,074
1,960 East Asiatic Co., Ltd. A/S 151,725
--------------
491,799
----------------------------------------------------------------------------------------------------------------
Health Care Equipment & 1,471 Coloplast A/S Class B 127,060
Supplies - 0.0% 17,000 GN Store Nord A/S (b) 133,171
1,430 William Demant Holding (b) 131,345
--------------
391,576
----------------------------------------------------------------------------------------------------------------
Household Durables - 0.0% 796 Bang & Olufsen A/S Class B 74,393
----------------------------------------------------------------------------------------------------------------
Insurance - 0.0% 1,651 Topdanmark A/S (b) 235,888
1,391 TrygVesta A/S 105,476
--------------
341,364
----------------------------------------------------------------------------------------------------------------
Machinery - 0.0% 1,620 NKT Holding A/S 145,524
----------------------------------------------------------------------------------------------------------------
Marine - 0.1% 87 AP Moller - Maersk A/S 929,100
14 AP Moller - Maersk A/S 148,078
--------------
1,077,178
----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 1,800 D/S Torm A/S 62,796
Fuels - 0.0%
----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.3% 4,919 H Lundbeck A/S 132,181
38,452 Novo-Nordisk A/S Class B 2,510,200
--------------
2,642,381
----------------------------------------------------------------------------------------------------------------
Road & Rail - 0.0% 17,794 Dsv A/S 389,306
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Denmark 10,320,149
- ------------------------------------------------------------------------------------------------------------------------------------
Finland - 1.8% Auto Components - 0.0% 9,415 Nokian Renkaat Oyj 326,848
----------------------------------------------------------------------------------------------------------------
Building Products - 0.0% 3,128 Asko Oyj 78,149
----------------------------------------------------------------------------------------------------------------
Communications 301,553 Nokia Oyj 11,584,870
Equipment - 1.0%
----------------------------------------------------------------------------------------------------------------
Construction 10,417 YIT Oyj 226,761
& Engineering - 0.0%
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Diversified Financial 4,380 OKO Bank $ 83,531
Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Diversified 13,341 Elisa Corp. 407,994
Telecommunication
Services - 0.1%
----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.2% 35,245 Fortum Oyj 1,583,226
----------------------------------------------------------------------------------------------------------------
Food & Staples 6,735 Kesko Oyj Class B 368,181
Retailing - 0.0%
----------------------------------------------------------------------------------------------------------------
IT Services - 0.0% 2,895 TietoEnator Oyj 64,755
----------------------------------------------------------------------------------------------------------------
Insurance - 0.1% 34,301 Sampo Oyj 905,311
----------------------------------------------------------------------------------------------------------------
Leisure Equipment & 6,404 Amer Sports Corp. 172,617
Products - 0.0%
----------------------------------------------------------------------------------------------------------------
Machinery - 0.1% 2,051 Cargotec Corp. Class B 94,761
4,889 KCI Konecranes Oyj 166,541
5,362 Kone Oyj Class B 374,359
10,056 Metso Oyj 545,194
5,530 Wartsila Oyj 418,510
--------------
1,599,365
----------------------------------------------------------------------------------------------------------------
Media - 0.0% 3,180 SanomaWSOY Oyj (Class B) 90,733
----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.1% 9,368 Outokumpu Oyj 287,985
6,996 Rautaruukki Oyj 299,018
--------------
587,003
----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 10,159 Neste Oil Oyj 358,803
Fuels - 0.0%
----------------------------------------------------------------------------------------------------------------
Paper & Forest 45,945 Stora Enso Oyj Class R 685,862
Products - 0.2% 41,854 UPM-Kymmene Oyj 846,899
--------------
1,532,761
----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.0% 3,919 Orion Oyj 91,835
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Finland 20,062,743
- ------------------------------------------------------------------------------------------------------------------------------------
France - 9.9% Aerospace & Defense - 0.2% 27,386 European Aeronautic Defense and Space Co. 874,035
9,174 Safran SA 188,105
8,345 Thales SA 497,098
2,001 Zodiac SA 127,923
--------------
1,687,161
----------------------------------------------------------------------------------------------------------------
Airlines - 0.0% 10,781 Air France-KLM 376,780
----------------------------------------------------------------------------------------------------------------
Auto Components - 0.1% 11,399 Compagnie Generale des Etablissements Michelin 1,303,231
6,926 Valeo SA 284,794
--------------
1,588,025
----------------------------------------------------------------------------------------------------------------
Automobiles - 0.3% 13,188 Peugeot SA 999,321
14,608 Renault SA 2,071,745
--------------
3,071,066
----------------------------------------------------------------------------------------------------------------
Beverages - 0.1% 7,245 Pernod-Ricard SA 1,672,016
----------------------------------------------------------------------------------------------------------------
Building Products - 0.2% 21,753 Cie de Saint-Gobain SA 2,049,966
----------------------------------------------------------------------------------------------------------------
Chemicals - 0.2% 18,476 Air Liquide 2,748,754
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.1% 64,161 BNP Paribas SA 6,961,475
50,024 Credit Agricole SA 1,687,626
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
9,914 Natixis $ 190,512
27,190 Societe Generale SA 3,932,468
--------------
12,772,081
----------------------------------------------------------------------------------------------------------------
Commercial Services 1,788 Societe BIC SA 128,059
& Supplies - 0.0%
----------------------------------------------------------------------------------------------------------------
Communications 166,842 Alcatel SA 1,213,686
Equipment - 0.1%
----------------------------------------------------------------------------------------------------------------
Construction 931 Eiffage 91,686
& Engineering - 0.2% 31,742 Vinci SA 2,347,506
--------------
2,439,192
----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.2% 1,346 Imerys SA 110,822
12,053 Lafarge SA 2,188,677
--------------
2,299,499
----------------------------------------------------------------------------------------------------------------
Diversified Financial 793 Eurazeo 101,573
Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Diversified 138,273 France Telecom SA 4,959,959
Telecommunication 1,238 Neuf Cegetel 62,616
Services - 0.4% --------------
5,022,575
----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.1% 7,679 Electricite de France SA 914,664
----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.4% 8,259 Alstom 1,773,977
1,890 Legrand Promesses 64,511
15,858 Schneider Electric SA 2,147,870
--------------
3,986,358
----------------------------------------------------------------------------------------------------------------
Energy Equipment 2,101 Compagnie Generale de Geophysique SA 594,287
& Services - 0.1% 8,034 Technip SA 639,035
--------------
1,233,322
----------------------------------------------------------------------------------------------------------------
Food & Staples 44,422 Carrefour SA 3,457,494
Retailing - 0.3% 4,146 Casino Guichard Perrachon SA 451,014
--------------
3,908,508
----------------------------------------------------------------------------------------------------------------
Food Products - 0.3% 32,461 Groupe Danone 2,909,278
----------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% 14,651 Gaz de France SA 856,750
----------------------------------------------------------------------------------------------------------------
Health Care Equipment & 16,773 Cie Generale d'Optique Essilor
Supplies - 0.1% International SA 1,069,913
----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 16,330 Accor SA 1,305,433
& Leisure - 0.1% 6,609 Sodexho Alliance SA 405,768
--------------
1,711,201
----------------------------------------------------------------------------------------------------------------
Household Durables - 0.0% 23,755 Thomson 335,891
----------------------------------------------------------------------------------------------------------------
IT Services - 0.1% 6,356 Atos Origin SA (b) 328,398
10,162 Cap Gemini SA 638,486
--------------
966,884
----------------------------------------------------------------------------------------------------------------
Industrial 681 Wendel 98,318
Conglomerates - 0.0%
----------------------------------------------------------------------------------------------------------------
Insurance - 0.5% 117,504 AXA SA 4,684,764
2,829 CNP Assurances 368,094
11,575 Scor SE 296,186
--------------
5,349,044
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Machinery - 0.1% 3,979 Vallourec SA $ 1,076,171
----------------------------------------------------------------------------------------------------------------
Media - 0.6% 3,127 JC Decaux SA 122,731
10,972 Lagardere S.C.A. 821,697
1,796 M6-Metropole Television SA 47,201
7,450 PagesJaunes Groupe SA 149,124
13,176 Publicis Groupe 515,487
12,073 Societe Television Francaise 1 321,889
87,147 Vivendi SA 4,001,188
--------------
5,979,317
----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.5% 69,987 ArcelorMittal 5,434,698
----------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.7% 77,516 Suez SA 5,276,207
27,914 Veolia Environnement SA 2,542,651
--------------
7,818,858
----------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.1% 6,575 Pinault-Printemps-Redoute 1,056,138
----------------------------------------------------------------------------------------------------------------
Office Electronics - 0.0% 1,892 Neopost SA 194,903
----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 161,867 Total SA 13,402,661
Fuels - 1.2%
----------------------------------------------------------------------------------------------------------------
Personal Products - 0.2% 18,840 L'Oreal SA 2,697,842
----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.6% 76,807 Sanofi-Aventis 7,030,945
----------------------------------------------------------------------------------------------------------------
Real Estate Investment 492 Gecina SA 77,188
Trusts (REITs) - 0.1% 987 ICADE 147,126
4,302 Klepierre 219,883
5,475 Unibail - Rodamco 1,199,742
--------------
1,643,939
----------------------------------------------------------------------------------------------------------------
Semiconductors & 57,917 STMicroelectronics NV 828,448
Semiconductor
Equipment - 0.1%
----------------------------------------------------------------------------------------------------------------
Software - 0.1% 8,701 Business Objects SA (b) 531,429
3,307 Dassault Systemes SA 195,735
--------------
727,164
----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & 1,454 Christian Dior SA 191,080
Luxury Goods - 0.3% 5,108 Hermes International 645,376
18,417 LVMH Moet Hennessy Louis Vuitton SA 2,225,682
--------------
3,062,138
----------------------------------------------------------------------------------------------------------------
Transportation 2,184 Aeroports de Paris 223,428
Infrastructure - 0.0% 1,173 Societe Des Autoroutes Paris-Rhin-Rhone 115,005
--------------
338,433
----------------------------------------------------------------------------------------------------------------
Wireless 18,480 Bouygues 1,535,561
Telecommunication
Services - 0.1%
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in France 113,337,780
- ------------------------------------------------------------------------------------------------------------------------------------
Germany - 8.6% Air Freight & Logistics - 0.2% 61,925 Deutsche Post AG 2,126,303
----------------------------------------------------------------------------------------------------------------
Airlines - 0.0% 18,121 Deutsche Lufthansa AG 483,042
----------------------------------------------------------------------------------------------------------------
Auto Components - 0.1% 12,152 Continental AG 1,590,102
----------------------------------------------------------------------------------------------------------------
Automobiles - 1.1% 11,753 Bayerische Motoren Werke AG 729,211
71,898 DaimlerChrysler AG 6,968,357
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
681 Porsche Automobil Holding SE (Preference
Shares) (b) $ 1,375,240
12,501 Volkswagen AG 2,873,573
--------------
11,946,381
----------------------------------------------------------------------------------------------------------------
Capital Markets - 0.5% 39,145 Deutsche Bank AG Registered Shares 5,111,363
3,332 MLP AG 52,696
--------------
5,164,059
----------------------------------------------------------------------------------------------------------------
Chemicals - 1.1% 6,338 Altana AG 153,217
37,627 BASF AG 5,579,794
55,633 Bayer AG 5,087,673
2,464 K+S AG 587,762
9,553 Linde AG 1,265,795
322 Wacker Chemie AG 92,882
--------------
12,767,123
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.3% 48,752 Commerzbank AG 1,854,853
7,451 Deutsche Postbank AG 662,919
17,581 Hypo Real Estate Holding AG 928,691
--------------
3,446,463
----------------------------------------------------------------------------------------------------------------
Computers & 1,694 Wincor Nixdorf AG 160,408
Peripherals - 0.0%
----------------------------------------------------------------------------------------------------------------
Construction 2,333 Bilfinger Berger AG 178,404
& Engineering - 0.1% 3,840 Hochtief AG 515,834
--------------
694,238
----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% 558 HeidelbergCement AG 85,871
----------------------------------------------------------------------------------------------------------------
Diversified Financial 15,284 Deutsche Boerse AG 3,016,518
Services - 0.3%
----------------------------------------------------------------------------------------------------------------
Diversified 217,200 Deutsche Telekom AG 4,780,446
Telecommunication
Services - 0.4%
----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.9% 47,712 E.ON AG 10,143,245
----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.1% 3,319 Q-Cells AG (b) 471,017
7,781 Solarworld AG 472,319
--------------
943,336
----------------------------------------------------------------------------------------------------------------
Food & Staples 12,825 Metro AG 1,079,647
Retailing - 0.1%
----------------------------------------------------------------------------------------------------------------
Food Products - 0.0% 131 Suedzucker AG 3,108
----------------------------------------------------------------------------------------------------------------
Health Care Equipment & 1,988 Fresenius AG (Preference Shares) 165,145
Supplies - 0.0%
----------------------------------------------------------------------------------------------------------------
Health Care Providers & 5,439 Celesio AG 336,494
Services - 0.1% 16,501 Fresenius Medical Care AG 886,056
--------------
1,222,550
----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 18,924 TUI AG (b) 528,562
& Leisure - 0.1%
----------------------------------------------------------------------------------------------------------------
Household Products - 0.0% 6,982 Henkel KGaA 356,758
----------------------------------------------------------------------------------------------------------------
Industrial 3,625 Rheinmetall AG 288,026
Conglomerates - 0.9% 65,334 Siemens AG 10,388,270
--------------
10,676,296
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.9% 34,467 Allianz AG Registered Shares $ 7,425,560
15,854 Muenchener Rueckversicherungs AG
Registered Shares 3,078,988
--------------
10,504,548
----------------------------------------------------------------------------------------------------------------
Life Sciences Tools 10,345 Quiagen NV (b) 224,957
& Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Machinery - 0.2% 2,865 Heidelberger Druckmaschinen AG 95,680
9,538 MAN AG 1,583,158
10,497 MG Technologies AG (b) 365,950
--------------
2,044,788
----------------------------------------------------------------------------------------------------------------
Media - 0.0% 7,941 Premiere AG (b) 149,808
----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.2% 3,101 Salzgitter AG 463,461
28,502 ThyssenKrupp AG 1,604,238
--------------
2,067,699
----------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.4% 34,092 RWE AG 4,780,056
----------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.0% 2,978 KarstadtQuelle AG (b) 71,198
----------------------------------------------------------------------------------------------------------------
Personal Products - 0.0% 5,837 Beiersdorf AG 452,318
----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.1% 5,128 Merck KGaA 663,192
----------------------------------------------------------------------------------------------------------------
Real Estate Management & 9,043 IVG Immobilien AG 309,101
Development - 0.0%
----------------------------------------------------------------------------------------------------------------
Semiconductors & 64,934 Infineon Technologies AG (b) 765,448
Semiconductor
Equipment - 0.1%
----------------------------------------------------------------------------------------------------------------
Software - 0.3% 66,774 SAP AG 3,437,083
----------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.0% 2,768 Douglas Holding AG 160,041
----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & 16,350 Adidas-Salomon AG 1,215,661
Luxury Goods - 0.1% 691 Puma AG Rudolf Dassler Sport 273,254
--------------
1,488,915
----------------------------------------------------------------------------------------------------------------
Transportation 156 Fraport AG 12,284
Infrastructure - 0.0%
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Germany 98,511,037
- ------------------------------------------------------------------------------------------------------------------------------------
Greece - 0.8% Beverages - 0.0% 10,280 Coca-Cola Hellenic Bottling Co. SA 443,630
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.5% 33,467 Alpha Bank AE 1,211,931
26,235 EFG Eurobank Ergasias SA 920,670
32,084 National Bank of Greece SA 2,200,165
26,167 Piraeus Bank SA 1,017,810
--------------
5,350,576
----------------------------------------------------------------------------------------------------------------
Construction 3,355 Hellenic Technodomiki Tev SA 47,926
& Engineering - 0.0%
----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% 2,911 Titan Cement Co. SA 132,198
----------------------------------------------------------------------------------------------------------------
Diversified Financial 4,760 Hellenic Exchanges SA 166,948
Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Diversified 23,245 Hellenic Telecommunications Organization SA 850,318
Telecommunication
Services - 0.1%
----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.1% 9,295 Public Power Corp. 487,675
----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 17,514 OPAP SA 700,227
& Leisure - 0.1%
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.0% 4,010 Viohalco, Hellenic Copper and Aluminum
Industry SA $ 57,929
----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 4,739 Hellenic Petroleum SA 77,717
Fuels - 0.0% 3,114 Motor Oil Hellas Corinth Refineries SA 71,866
--------------
149,583
----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & 2,620 Folli - Follie SA Registered Shares 97,284
Luxury Goods - 0.0%
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Greece 8,484,294
- ------------------------------------------------------------------------------------------------------------------------------------
Hong Kong - 2.2% Airlines - 0.0% 86,263 Cathay Pacific Airways Ltd. 224,597
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.3% 331,400 BOC Hong Kong Holdings Ltd. 918,881
124,939 Bank of East Asia Ltd. 846,565
65,353 Hang Seng Bank Ltd. 1,337,756
9,000 Wing Hang Bank Ltd. 133,973
--------------
3,237,175
----------------------------------------------------------------------------------------------------------------
Distributors - 0.1% 195,990 Li & Fung Ltd. 781,358
----------------------------------------------------------------------------------------------------------------
Diversified Financial 86,848 Hong Kong Exchanges and Clearing Ltd. 2,434,678
Services - 0.2%
----------------------------------------------------------------------------------------------------------------
Diversified 182,195 PCCW Ltd. 107,685
Telecommunication
Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.1% 117,187 CLP Holdings Ltd. 796,171
17,500 Cheung Kong Infrastructure Holdings Ltd. 64,960
93,500 HongKong Electric Holdings Ltd. 535,084
--------------
1,396,215
----------------------------------------------------------------------------------------------------------------
Electronic Equipment 34,147 Kingboard Chemical Holdings Ltd. 201,731
& Instruments - 0.0%
----------------------------------------------------------------------------------------------------------------
Food Products - 0.0% 80,000 Tingyi (Cayman Islands) Holding Corp. 127,708
----------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% 322,264 The Hong Kong & China Gas Ltd. 981,657
----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 64,990 Shangri-La Asia Ltd. 202,125
& Leisure - 0.0%
----------------------------------------------------------------------------------------------------------------
Industrial 173,176 Hutchison Whampoa Ltd. 1,950,879
Conglomerates - 0.2% 56,773 Melco International Development Ltd. 84,819
12,000 NWS Holdings Ltd. 38,058
--------------
2,073,756
----------------------------------------------------------------------------------------------------------------
Internet Software 59,407 Tencent Holdings Ltd. 443,703
& Services - 0.1%
----------------------------------------------------------------------------------------------------------------
Marine - 0.0% 9,557 Orient Overseas International Ltd. 70,017
----------------------------------------------------------------------------------------------------------------
Media - 0.0% 4,000 Television Broadcasts Ltd. 23,909
----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.0% 194,741 Fosun International (b) 180,259
----------------------------------------------------------------------------------------------------------------
Real Estate Investment 208,414 The Link REIT 448,734
Trusts (REITs) - 0.1%
----------------------------------------------------------------------------------------------------------------
Real Estate Management & 120,835 Cheung Kong Holdings Ltd. 2,207,590
Development - 0.8% 10,000 Chinese Estates Holdings Limited 18,012
17,000 Hang Lung Group Ltd. 91,859
184,000 Hang Lung Properties Ltd. 822,122
78,491 Henderson Land Development Co., Ltd. 728,956
28,791 Hysan Development Co. Ltd. 81,317
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
39,000 Kerry Properties Ltd. $ 310,105
210,484 New World Development Ltd. 736,907
64,000 Shun Tak Holdings Ltd. 100,032
88,421 Sino Land Co. 309,632
112,324 Sun Hung Kai Properties Ltd. 2,359,203
72,577 Swire Pacific Ltd. Class A 994,531
86,107 Wharf Holdings Ltd. (b) 445,433
5,000 Wheelock and Company, Limited 15,310
--------------
9,221,009
----------------------------------------------------------------------------------------------------------------
Road & Rail - 0.1% 136,000 MTR Corp. 495,801
----------------------------------------------------------------------------------------------------------------
Semiconductors & 5,004 ASM Pacific Technology Ltd. 36,373
Semiconductor
Equipment - 0.0%
----------------------------------------------------------------------------------------------------------------
Speciality Retail - 0.1% 84,600 Esprit Holdings Ltd. 1,245,757
230,394 Giordano International Ltd. 109,903
--------------
1,355,660
----------------------------------------------------------------------------------------------------------------
Transportation 2,400 Hong Kong Aircraft Engineering Company Ltd. 64,778
Infrastructure - 0.0% 36,349 Hopewell Holdings Ltd. 166,656
--------------
231,434
----------------------------------------------------------------------------------------------------------------
Wireless 169,647 Hutchison Telecommunications
Telecommunication International Ltd. 255,722
Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Hong Kong 24,531,306
- ------------------------------------------------------------------------------------------------------------------------------------
Ireland - 0.6% Airlines - 0.0% 35,968 Ryanair Holdings Plc (b) 246,905
----------------------------------------------------------------------------------------------------------------
Building Products - 0.0% 6,310 Kingspan Group Plc 94,870
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.3% 72,428 Allied Irish Banks Plc 1,660,925
24,122 Anglo Irish Bank Corp. Plc 385,089
80,768 Bank of Ireland 1,202,132
--------------
3,248,146
----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.1% 43,238 CRH Plc 1,501,628
----------------------------------------------------------------------------------------------------------------
Containers & 5,262 Smurfit Kappa Plc (b) 86,302
Packaging - 0.0%
----------------------------------------------------------------------------------------------------------------
Food Products - 0.0% 20,458 Greencore Group Plc 134,545
5,153 Iaws Group Plc 113,935
7,105 Kerry Group Plc 226,879
--------------
475,359
----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 2,377 Paddy Power Plc 77,663
& Leisure - 0.0%
----------------------------------------------------------------------------------------------------------------
Industrial 2,954 DCC Plc 83,913
Conglomerates - 0.0%
----------------------------------------------------------------------------------------------------------------
Insurance - 0.1% 24,915 Irish Life & Permanent Plc 426,246
----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.1% 37,376 Elan Corp. Plc (b) 817,824
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Ireland 7,058,856
- ------------------------------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Italy - 3.7% Aerospace & Defense - 0.1% 26,776 Finmeccanica SpA $ 859,083
----------------------------------------------------------------------------------------------------------------
Automobiles - 0.1% 59,430 Fiat SpA 1,529,003
----------------------------------------------------------------------------------------------------------------
Capital Markets - 0.1% 42,528 Mediobanca SpA 874,004
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.3% 580,816 Banca Intesa SpA 4,570,775
64,173 Banca Intesa SpA (RNC) 467,855
77,015 Banca Monte dei Paschi di Siena SpA 411,353
39,570 Banca Popolare di Milano Scrl 536,930
57,246 Banco Popolare SPA (b) 1,265,105
701,256 UniCredito Italiano SpA 5,767,100
51,354 Unione Di Banche Italiane SPCA 1,411,137
--------------
14,430,255
----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% 6,019 Italcementi SpA 128,876
----------------------------------------------------------------------------------------------------------------
Diversified Financial 5,710 IFIL-Investments SpA 53,493
Services - 0.0% 2,087 Instituto Finanziario Industriale SpA
(Preference Shares) (b) 70,591
--------------
124,084
----------------------------------------------------------------------------------------------------------------
Diversified 822,031 Telecom Italia SpA 2,548,549
Telecommunication 478,015 Telecom Italia SpA (RNC) 1,133,479
Services - 0.3% --------------
3,682,028
----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.4% 328,027 Enel SpA 3,900,598
113,079 Terna SpA 455,529
--------------
4,356,127
----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.0% 8,179 Prysmian SpA (b) 202,396
----------------------------------------------------------------------------------------------------------------
Energy Equipment 8,542 Saipem SpA 340,866
& Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Food Products - 0.0% 122,230 Parmalat SpA 471,932
----------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% 84,550 Snam Rete Gas SpA 539,929
----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 4,375 Autogrill SpA 74,413
& Leisure - 0.0% 8,091 Lottomatica SpA 296,716
--------------
371,129
----------------------------------------------------------------------------------------------------------------
Industrial 286,056 Pirelli & C SpA (b) 314,229
Conglomerates - 0.0%
----------------------------------------------------------------------------------------------------------------
Insurance - 0.4% 39,029 Alleanza Assicurazioni SpA 506,965
79,204 Assicurazioni Generali SpA 3,585,256
6,967 Fondiaria-Sai SpA 285,794
33,249 Mediolanum SpA 265,938
39,092 Unipol SpA (Preference Shares) 123,618
--------------
4,767,571
----------------------------------------------------------------------------------------------------------------
Media - 0.1% 10,724 Arnoldo Mondadori Editore SpA 88,084
68,133 Mediaset SpA 686,369
158,897 Seat Pagine Gialle SpA 62,594
--------------
837,047
----------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.0% 14,097 A2A SpA 64,530
----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 200,844 Eni SpA 7,330,081
Fuels - 0.7%
----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & 9,077 Bulgari SpA 127,476
Luxury Goods - 0.0% 8,388 Luxottica Group SpA 266,804
--------------
394,280
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation 21,098 Autostrade SpA $ 801,437
Infrastructure - 0.1%
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Italy 42,418,887
- ------------------------------------------------------------------------------------------------------------------------------------
Japan - 18.8% Air Freight & Logistics - 0.1% 37,000 Yamato Transport Co., Ltd. 531,849
----------------------------------------------------------------------------------------------------------------
Airlines - 0.0% 31,000 All Nippon Airways Co., Ltd. 114,235
104,000 Japan Airlines Corp. (b) 235,847
--------------
350,082
----------------------------------------------------------------------------------------------------------------
Auto Components - 0.4% 17,200 Aisin Seiki Co., Ltd. 712,119
47,700 Bridgestone Corp. 842,145
38,100 Denso Corp. 1,550,451
15,000 NGK Spark Plug Co., Ltd. 260,093
3,000 NHK Spring Co., Ltd. 27,383
11,400 NOK Corp. 239,863
11,900 Stanley Electric Co., Ltd. 295,561
21,700 Sumitomo Rubber Industries, Ltd. 190,082
2,100 Tokai Rika Co., Ltd. 64,745
3,100 Toyoda Gosei Co., Ltd. 109,258
3,100 Toyota Boshoku Corp. 99,726
13,700 Toyota Industries Corp. 555,450
--------------
4,946,876
----------------------------------------------------------------------------------------------------------------
Automobiles - 1.6% 4,000 Fuji Heavy Industries Ltd. 18,528
123,000 Honda Motor Co., Ltd. 4,063,286
42,000 Isuzu Motors Ltd. 188,557
20,000 Mazda Motor Corp. 98,988
120,000 Mitsubishi Motors Corp. (b) 201,071
181,200 Nissan Motor Co., Ltd. 1,977,706
11,000 Suzuki Motor Corp. 329,782
214,000 Toyota Motor Corp. 11,397,364
17,800 Yamaha Motor Co., Ltd. 426,000
--------------
18,701,282
----------------------------------------------------------------------------------------------------------------
Beverages - 0.2% 32,700 Asahi Breweries Ltd. 551,583
200 Coca-Cola West Holdings Co., Ltd. 4,415
6,200 Ito En, Ltd. 117,959
64,000 Kirin Holdings Co., Ltd. 938,918
25,000 Sapporo Holdings Ltd. 201,305
20,000 Takara Holdings, Inc. 119,942
--------------
1,934,122
----------------------------------------------------------------------------------------------------------------
Building Products - 0.3% 73,100 Asahi Glass Co., Ltd. 966,776
2,000 Central Glass Co., Ltd. 7,546
20,900 Daikin Industries Ltd. 1,165,720
16,300 JS Group Corp. 260,066
59,000 Nippon Sheet Glass Co., Ltd. 297,835
27,000 Sanwa Holdings Corp. 132,555
21,000 Toto Ltd. 166,348
--------------
2,996,846
----------------------------------------------------------------------------------------------------------------
Capital Markets - 0.4% 115,000 Daiwa Securities Group, Inc. 1,032,430
1,000 Jafco Co., Ltd. 32,753
10,300 Matsui Securities Co., Ltd. 80,443
33,000 Nikko Cordial Corp. 490,946
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------------
136,300 Nomura Holdings, Inc. $ 2,283,687
180 SBI E*trade Securities Co. Ltd. 163,274
954 SBI Holdings, Inc. 256,521
43,300 Shinko Securities Co., Ltd. 177,102
--------------
4,517,156
----------------------------------------------------------------------------------------------------------------
Chemicals - 0.9% 84,000 Asahi Kasei Corp. 554,356
4,000 Daicel Chemical Industries Ltd. 23,919
32,000 Dainippon Ink and Chemicals, Inc. 159,537
19,000 Denki Kagaku Kogyo Kabushiki Kaisha 82,126
5,300 Hitachi Chemical Co., Ltd. 121,788
17,100 JSR Corp. 437,790
13,000 Kaneka Corp. 107,182
4,000 Kansai Paint Co., Ltd. 28,873
35,000 Kuraray Co., Ltd. 422,251
86,500 Mitsubishi Chemical Holdings Corp. 659,967
22,000 Mitsubishi Gas Chemicals Co., Inc. 214,020
56,000 Mitsubishi Rayon Co., Ltd. 269,960
41,000 Mitsui Chemicals, Inc. 266,166
16,000 Nippon Kayaku Co., Ltd. 103,840
15,000 Nippon Sanso Corp. 140,938
17,000 Nissan Chemical Industries Ltd. 221,742
13,110 Nitto Denko Corp. 689,021
32,400 Shin-Etsu Chemical Co., Ltd. 2,014,995
111,000 Showa Denko KK 394,223
135,000 Sumitomo Chemical Co., Ltd. 1,195,510
91,000 Teijin Ltd. 387,835
21,000 Tokuyama Corp. 209,529
106,700 Toray Industries, Inc. 830,467
53,000 Tosoh Corp. 225,922
95,000 Ube Industries Ltd. 321,554
15,000 Zeon Corp. 89,475
--------------
10,172,986
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.8% 4,000 Aozora Bank Ltd. 11,615
13,000 The 77 Bank Ltd. 80,889
15,000 The Bank of Kyoto Ltd. 177,450
104,000 The Bank of Yokohama Ltd. 724,610
52,000 The Chiba Bank Ltd. 418,411
54,000 Chuo Mitsui Trust Holdings, Inc. 411,808
72,000 Fukuoka Financial Group, Inc. 420,482
17,000 The Gunma Bank Ltd. 111,780
23,000 The Hachijuni Bank Ltd. 154,537
24,000 The Hiroshima Bank Ltd. 129,540
78,100 Hokuhoku Financial Group, Inc. 225,777
37,000 The Joyo Bank Ltd. 206,787
687,629 Mitsubishi UFJ Financial Group, Inc. 6,484,291
785 Mizuho Financial Group, Inc. 3,739,306
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
34,000 The Nishi-Nippon City Bank Ltd. $ 84,212
481 Resona Holdings, Inc. 852,646
14 Sapporo Hokuyo Holdings, Inc. 124,369
139,000 Shinsei Bank Ltd. 504,638
53,000 The Shizuoka Bank Ltd. 581,327
523 Sumitomo Mitsui Financial Group, Inc. 3,870,345
89,000 The Sumitomo Trust & Banking Co., Ltd. 586,576
9,000 Suruga Bank Ltd. 97,909
13,000 The Yasuda Trust & Banking Co., Ltd. 23,971
--------------
20,023,276
----------------------------------------------------------------------------------------------------------------
Commercial Services 55,000 Dai Nippon Printing Co., Ltd. 805,568
& Supplies - 0.2% 84 The Goodwill Group, Inc. (b) 10,801
4,500 Kokuyo Co., Ltd. 40,663
4,100 Meitec Corp. 123,335
16,400 Secom Co., Ltd. 895,339
48,000 Toppan Printing Co., Ltd. 470,729
--------------
2,346,435
----------------------------------------------------------------------------------------------------------------
Computers & 134,000 Fujitsu Ltd. 896,389
Peripherals - 0.3% 6,300 Mitsumi Electric Co., Ltd. 210,774
177,000 NEC Corp. 813,004
8,000 Seiko Epson Corp. 170,391
235,000 Toshiba Corp. 1,734,291
--------------
3,824,849
----------------------------------------------------------------------------------------------------------------
Construction 8,457 COMSYS Holdings Corp. 68,835
& Engineering - 0.2% 17,000 Chiyoda Corp. 191,720
20,000 JGC Corp. 342,924
94,800 Kajima Corp. 307,691
8,000 Kinden Corp. 62,542
38,000 Nishimatsu Construction Co., Ltd. 105,512
68,000 Obayashi Corp. 339,610
13,000 Okumura Corp. 63,102
34,000 Shimizu Corp. 147,582
100,000 Taisei Corp. 268,957
3,000 Toda Corp. 14,382
--------------
1,912,857
----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% 61,000 Sumitomo Osaka Cement Co., Ltd. 115,326
78,000 Taiheiyo Cement Corp. 184,253
--------------
299,579
----------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.2% 3,550 Acom Co., Ltd. 71,717
10,800 Aeon Credit Service Co., Ltd. 159,073
4,100 Aiful Corp. 72,031
15,700 Credit Saison Co., Ltd. 427,683
7,430 ORIX Corp. 1,249,631
3,750 Promise Co., Ltd. 92,332
6,920 Takefuji Corp. 166,209
--------------
2,238,676
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Containers & 7,700 Toyo Seikan Kaisha Ltd. $ 136,532
Packaging - 0.0%
----------------------------------------------------------------------------------------------------------------
Distributors - 0.0% 1,500 Canon Marketing Japan Inc. 27,871
----------------------------------------------------------------------------------------------------------------
Diversified Consumer 3,400 Benesse Corp. 143,871
Service - 0.0%
----------------------------------------------------------------------------------------------------------------
Diversified Financial 1,100 Diamond Lease Co., Ltd. 36,378
Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Diversified 405 Nippon Telegraph & Telephone Corp. 2,013,227
Telecommunication
Services - 0.2%
----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.7% 55,600 Chubu Electric Power Co., Inc. 1,445,318
6,800 Chugoku Electric Power Co 132,193
9,900 Hokkaido Electric Power Co., Inc. 213,405
3,000 Hokuriku Electric Power Co. 62,379
64,000 The Kansai Electric Power Co., Inc. 1,490,747
27,300 Kyushu Electric Power Co., Inc. 670,185
4,000 Shikoku Electric Power Co., Inc. 107,049
37,100 Tohoku Electric Power Co., Inc. 834,618
97,700 The Tokyo Electric Power Co., Inc. 2,529,087
--------------
7,484,981
----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.3% 18,800 Fuji Electric Holdings Co., Ltd. 64,981
40,000 Fujikura Ltd. 202,100
41,000 Furukawa Electric Co., Ltd. 157,958
21,873 Matsushita Electric Works Ltd. 239,229
155,000 Mitsubishi Electric Corp. 1,605,362
55,000 Sumitomo Electric Industries Ltd. 867,435
5,600 Ushio, Inc. 122,235
--------------
3,259,300
----------------------------------------------------------------------------------------------------------------
Electronic Equipment & 19,000 Alps Electric Co., Ltd. 245,463
Instruments - 1.0% 34,700 Citizens Holding Co. Ltd. 336,983
39,700 Fuji Photo Film Co., Ltd. 1,661,664
1,600 Hirose Electric Co., Ltd. 183,616
277,000 Hitachi Ltd. 2,057,930
35,300 Hoya Corp. 1,116,862
10,200 Ibiden Co., Ltd. 705,318
2,600 Keyence Corp. 638,481
12,700 Kyocera Corp. 1,122,353
1,100 Mabuchi Motor Co., Ltd. 66,033
16,800 Murata Manufacturing Co., Ltd. 964,734
7,400 Nidec Corp. 534,666
30,500 Nippon Electric Glass Co. 496,145
63,000 Oki Electric Industry Co., Ltd. (b) 98,104
13,700 Omron Corp. 322,545
10,900 TDK Corp. 802,817
13,000 Taiyo Yuden Co., Ltd. 207,688
12,000 Yaskawa Electric Corp. 161,880
9,500 Yokogawa Electric Corp. 104,309
--------------
11,827,591
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Food & Staples 53,400 Aeon Co., Ltd. $ 778,949
Retailing - 0.3% 200 Circle K Sunkus Co., Ltd. 2,956
3,600 FamilyMart Co., Ltd. 112,733
7,400 Lawson, Inc. 262,176
3,000 Matsumotokiyoshi Holdings Co. Ltd. (b) 73,043
62,800 Seven & I Holdings Co. Ltd. 1,824,493
4,000 UNY Co., Ltd. 33,787
--------------
3,088,137
----------------------------------------------------------------------------------------------------------------
Food Products - 0.2% 60,000 Ajinomoto Co., Inc. 679,037
100 House Foods Corp. 1,680
18,000 Kikkoman Corp. 246,214
40,000 Meiji Dairies Corp. 203,773
26,000 Nichirei Corp. 107,063
6,000 Nippon Meat Packers, Inc. 60,553
11,000 Nisshin Seifun Group, Inc. 110,598
8,000 Nissin Food Products Co., Ltd. 258,064
12,500 QP Corp. 130,019
10,000 Toyo Suisan Kaisha, Ltd. 179,866
5,100 Yakult Honsha Co., Ltd. 117,203
6,000 Yamazaki Baking Co., Ltd. 58,561
--------------
2,152,631
----------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% 163,000 Osaka Gas Co., Ltd. 641,312
197,000 Tokyo Gas Co., Ltd. 920,252
--------------
1,561,564
----------------------------------------------------------------------------------------------------------------
Health Care Equipment & 16,000 Olympus Corp. 652,080
Supplies - 0.1% 15,200 Terumo Corp. 792,418
--------------
1,444,498
----------------------------------------------------------------------------------------------------------------
Health Care Providers & 900 Alfresa Holdings Corp. 54,263
Services - 0.0% 8,600 Mediceo Paltac Holdings Co., Ltd. 126,924
2,600 Suzuken Co., Ltd. 92,545
--------------
273,732
----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 2,800 Oriental Land Co., Ltd. 168,502
& Leisure - 0.0% 39 ROUND ONE Corp. 77,294
--------------
245,796
----------------------------------------------------------------------------------------------------------------
Household Durables - 1.0% 23,800 Casio Computer Co., Ltd. 276,751
4,300 Daito Trust Construction Co., Ltd. 235,907
38,000 Daiwa House Industry Co., Ltd. 485,495
58,000 HASEKO Corp. (b) 99,043
10,800 Makita Corp. 451,516
154,000 Matsushita Electric Industrial Co., Ltd. 3,155,595
19,200 Pioneer Corp. 172,581
162,000 Sanyo Electric Co., Ltd. (b) 222,075
21,000 Sekisui Chemical Co., Ltd. 140,270
46,000 Sekisui House Ltd. 491,665
78,000 Sharp Corp. 1,391,376
78,400 Sony Corp. 4,271,457
--------------
11,393,731
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Household Products - 0.1% 44,000 Kao Corp. $ 1,322,770
2,200 Uni-Charm Corp. 138,839
--------------
1,461,609
----------------------------------------------------------------------------------------------------------------
IT Services - 0.1% 6,700 CSK Holdings Corp. 215,930
700 Itochu Techno-Science Corp. 23,387
80 NTT Data Corp. 354,332
11,400 Nomura Research Institute Ltd. 372,955
100 Obic Co., Ltd. 18,406
600 Otsuka Shokai Co., Ltd. 51,249
4,900 TIS, Inc. 84,265
--------------
1,120,524
----------------------------------------------------------------------------------------------------------------
Independent Power 11,400 Electric Power Development Co. 424,108
Producers & Energy
Traders - 0.0%
----------------------------------------------------------------------------------------------------------------
Industrial 79,000 Hankyu Hanshin Holdings, Inc. 340,999
Conglomerates - 0.0%
----------------------------------------------------------------------------------------------------------------
Insurance - 0.4% 9,000 Aioi Insurance Co., Ltd. 42,479
60,100 Millea Holdings, Inc. 2,017,705
104,000 Mitsui Sumitomo Insurance Co., Ltd. 1,006,943
18,000 Nipponkoa Insurance Co., Ltd. 163,420
59,800 Sompo Japan Insurance, Inc. 536,270
56 Sony Financial Holdings, Inc. (b) 214,045
17,050 T&D Holdings, Inc. 867,527
--------------
4,848,389
----------------------------------------------------------------------------------------------------------------
Internet & Catalog 645 Rakuten, Inc. (b) 314,821
Retail - 0.0%
----------------------------------------------------------------------------------------------------------------
Internet Software 27 Access Co. Ltd. (b) 121,618
& Service - 0.1% 167 eAccess Ltd. 103,616
1,047 Yahoo! Japan Corp. 466,908
--------------
692,142
----------------------------------------------------------------------------------------------------------------
Leisure Equipment 11,900 Namco Bandai Holdings, Inc. 184,600
& Products - 0.2% 26,000 Nikon Corp. 884,476
6,200 Sankyo Co., Ltd. (Gunma) 286,458
20,832 Sega Sammy Holdings, Inc. 257,985
3,200 Shimano, Inc. 115,057
10,100 Yamaha Corp. 230,446
--------------
1,959,022
----------------------------------------------------------------------------------------------------------------
Machinery - 0.9% 21,000 Amada Co., Ltd. 182,145
8,500 Daifuku Co., Ltd. 119,819
53,000 Ebara Corp. 179,914
16,000 Fanuc Ltd. 1,551,170
3,000 GLORY Ltd. 68,938
5,000 Hino Motors Ltd. 32,315
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
10,500 Hitachi Construction Machinery Co., Ltd. $ 311,692
79,000 IHI Corp. 163,120
9,600 JTEKT Corp. 171,578
28,000 The Japan Steel Works, Ltd. 406,013
111,000 Kawasaki Heavy Industries Ltd. 324,753
72,000 Komatsu Ltd. 1,930,980
98,000 Kubota Corp. 659,494
11,600 Kurita Water Industries Ltd. 349,877
31,000 Minebea Co., Ltd. 198,603
264,200 Mitsubishi Heavy Industries Ltd. 1,122,675
71,000 Mitsui Engineering & Shipbuilding Co., Ltd. 272,806
24,000 NGK Insulators Ltd. 643,471
24,000 NSK Ltd. 246,010
21,000 NTN Corp. 182,050
19,000 OKUMA Corp. 201,070
900 OSG Corp. 9,775
3,900 SMC Corp. 463,958
41,000 Sumitomo Heavy Industries Ltd. 373,821
6,000 THK Co., Ltd. 121,269
--------------
10,287,316
----------------------------------------------------------------------------------------------------------------
Marine - 0.2% 45,000 Kawasaki Kisen Kaisha Ltd. 436,856
83,000 Mitsui OSK Lines Ltd. 1,049,311
97,000 Nippon Yusen Kabushiki Kaisha 764,165
--------------
2,250,332
----------------------------------------------------------------------------------------------------------------
Media - 0.1% 600 Asatsu-DK, Inc. 16,707
117 Dentsu, Inc. 307,779
58 Fuji Television Network, Inc. 95,381
600 Hakuhodo DY Holdings, Inc. 33,416
52 Jupiter Telecommunications Co., Ltd. (b) 43,749
4,700 Toho Co., Ltd. 104,992
3,700 Tokyo Broadcasting System, Inc. 79,267
--------------
681,291
----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.8% 26,000 DAIDO STEEL CO., LTD. 193,747
17,000 Dowa Mining Co., Ltd. 118,065
45,800 JFE Holdings, Inc. 2,296,604
233,000 Kobe Steel Ltd. 751,158
103,000 Mitsubishi Materials Corp. 434,924
68,000 Mitsui Mining & Smelting Co., Ltd. 270,660
63,800 Nippon Light Metal Co., Ltd. 110,477
450,000 Nippon Steel Corp. 2,754,423
47,000 Nisshin Steel Co., Ltd. 162,392
1,600 Osaka Titanium Technologies Co. 117,098
320,000 Sumitomo Metal Industries Ltd. 1,463,345
41,000 Sumitomo Metal Mining Co., Ltd. 693,167
800 Toho Titanium Co. Ltd. 23,726
7,500 Tokyo Steel Manufacturing Co., Ltd. 82,930
1,700 Yamato Kogyo Co Ltd 68,828
--------------
9,541,544
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.1% 6,000 H20 Retailing Corp. $ 46,656
21,400 Isetan Co., Ltd. 288,270
24,600 J Front Retailing Co. Ltd. (b) 217,341
30,600 Marui Group Co. Ltd. 301,929
48,000 Mitsukoshi Ltd. 217,140
2,000 Ryohin Keikaku Co., Ltd. 120,057
30,000 Takashimaya Co., Ltd. 361,530
--------------
1,552,923
----------------------------------------------------------------------------------------------------------------
Office Electronics - 0.5% 3,400 Brother Industries Ltd. 43,772
83,500 Canon, Inc. 3,821,510
42,500 Konica Minolta Holdings, Inc. 745,068
58,000 Ricoh Co., Ltd. 1,058,868
--------------
5,669,218
----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 24,000 Cosmo Oil Co., Ltd. 88,713
Fuels - 0.3% 1,000 Idemitsu Kosan Co. Ltd. 105,325
58 Inpex Holdings, Inc. 629,449
3,200 Japan Petrolleum Explora 232,836
77,500 Nippon Mining Holdings, Inc. 491,551
109,000 Nippon Oil Corp. 881,197
22,800 Showa Shell Sekiyu KK 251,693
14,000 TonenGeneral Sekiyu KK 137,663
--------------
2,818,427
----------------------------------------------------------------------------------------------------------------
Paper & Forest 97 Nippon Paper Group, Inc. 292,192
Products - 0.0% 49,000 OJI Paper Co., Ltd. 240,737
--------------
532,929
----------------------------------------------------------------------------------------------------------------
Personal Products - 0.1% 6,200 Aderans Co., Ltd. 97,521
25,000 Shiseido Co., Ltd. 589,939
--------------
687,460
----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.9% 40,600 Astellas Pharma, Inc. 1,760,847
22,100 Chugai Pharmaceutical Co., Ltd. 316,070
56,200 Daiichi Sankyo Co. Ltd. 1,729,212
21,900 Eisai Co., Ltd. 857,118
33,000 Kyowa Hakko Kogyo Co., Ltd. 352,442
13,000 Mitsubishi Tanabe Pharma Corp. 120,760
2,000 Ono Pharmacecutical Co. Ltd. 92,288
5,000 Santen Pharmaceutical Co., Ltd. 122,408
27,000 Shionogi & Co., Ltd. 478,685
7,000 Taisho Pharmaceutical Co., Ltd. 134,707
67,100 Takeda Pharmaceutical Co., Ltd. 3,920,039
--------------
9,884,576
----------------------------------------------------------------------------------------------------------------
Real Estate Investment 70 Japan Prime Realty Investment Corp. 279,969
Trusts (REITs) - 0.2% 38 Japan Real Estate Investment Corp. 471,617
42 Japan Retail Fund Investment Corp. 297,829
43 Nippon Building Fund, Inc. 600,487
21 Nomura Real Estate Office Fund, Inc. 197,618
--------------
1,847,520
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate Management & 2,100 Aeon Mall Co. Ltd. $ 55,111
Development - 0.5% 82 KK DaVinci Advisors (b) 71,041
8,100 Leopalace21 Corp. 217,629
95,000 Mitsubishi Estate Co., Ltd. 2,263,370
64,000 Mitsui Fudosan Co., Ltd. 1,380,253
51 NTT Urban Development Co. 81,647
600 Nomura Real Estate Holdings, Inc. 14,376
28,000 Sumitomo Realty & Development Co., Ltd. 684,770
29,000 Tokyo Tatemono Co., Ltd. 272,007
28,000 Tokyu Land Corp. 239,577
9,400 Urban Corp. 124,061
--------------
5,403,842
----------------------------------------------------------------------------------------------------------------
Road & Rail - 0.6% 124 Central Japan Railway Co. 1,054,004
266 East Japan Railway Co. 2,187,992
19,000 Keihin Electric Express Railway Co., Ltd. 116,554
31,000 Keio Electric Railway Co., Ltd. 187,743
33,000 Keisei Electric Railway Co., Ltd. 176,048
100,000 Kintetsu Corp. 310,088
72,000 Nippon Express Co., Ltd. 367,352
36,000 Odakyu Electric Railway Co., Ltd. 229,024
13,000 Seino Holdings Corp. 87,474
50,000 Tobu Railway Co., Ltd. 232,796
100,000 Tokyu Corp. 652,869
152 West Japan Railway Co. 754,039
--------------
6,355,983
----------------------------------------------------------------------------------------------------------------
Semiconductors & 12,500 Advantest Corp. 353,445
Semiconductor 6,000 Elpida Memory, Inc. (b) 205,139
Equipment - 0.2% 1,300 NEC Electronics Corp. (b) 30,808
7,600 Rohm Co., Ltd. 659,350
17,000 Sanken Electric Co., Ltd. 90,386
2,300 Shinko Electric Industries 46,417
7,600 Sumco Corp. 216,165
12,700 Tokyo Electron Ltd. 771,799
3,900 Tokyo Seimitsu Co. Ltd. 94,602
--------------
2,468,111
----------------------------------------------------------------------------------------------------------------
Software - 0.5% 4,900 Fuji Soft, Inc. 77,199
5,000 Konami Corp. 163,993
7,900 Nintendo Co., Ltd. 4,638,501
900 Oracle Corp. Japan 39,516
1,500 Square Enix Co. Ltd. 45,667
9,500 Trend Micro, Inc. 337,902
--------------
5,302,778
----------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.1% 2,600 Aoyama Trading Co., Ltd. 67,336
3,900 Autobacs Seven Co., Ltd. 78,572
200 EDION Corp. 2,140
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
3,300 Fast Retailing Co., Ltd. $ 236,028
1,200 Nitori Co., Ltd. 57,510
4,800 Shimachu Co., Ltd. 135,236
800 Shimamura Co., Ltd. 67,644
680 USS Co., Ltd. 42,231
7,580 Yamada Denki Co., Ltd. 855,064
--------------
1,541,761
----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & 13,000 Asics Corp. 186,240
Luxury Goods - 0.1% 22,000 Gunze Ltd. 96,231
14,000 Nisshinbo Industries, Inc. 170,708
7,000 Onward Holdings Co. Ltd. 71,611
11,000 Wacoal Holdings Corp. 143,406
--------------
668,196
----------------------------------------------------------------------------------------------------------------
Tobacco - 0.2% 362 Japan Tobacco, Inc. 2,140,414
----------------------------------------------------------------------------------------------------------------
Trading Companies & 1,400 Hitachi High-Technologies Corp. 30,396
Distributors - 0.9% 128,000 Itochu Corp. 1,235,154
123,000 Marubeni Corp. 861,862
105,900 Mitsubishi Corp. 2,866,150
133,000 Mitsui & Co., Ltd. 2,777,391
94,100 Sojitz Corp. 335,607
83,300 Sumitomo Corp. 1,165,482
13,900 Toyota Tsusho Corp. 374,788
--------------
9,646,830
----------------------------------------------------------------------------------------------------------------
Transportation 8,000 Kamigumi Co., Ltd. 57,731
Infrastructure - 0.0% 7,000 Mitsubishi Logistics Corp. 78,074
--------------
135,805
----------------------------------------------------------------------------------------------------------------
Wireless 191 KDDI Corp. 1,413,223
Telecommunication 1,256 NTT DoCoMo, Inc. 2,067,765
Services - 0.4% 56,600 Softbank Corp. 1,160,852
--------------
4,641,840
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Japan 215,107,421
- ------------------------------------------------------------------------------------------------------------------------------------
Luxembourg - 0.0% Media - 0.0% 8,368 SES Global 219,878
----------------------------------------------------------------------------------------------------------------
Personal Products - 0.0% 1,783 Oriflame Cosmetics SA 113,499
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Luxembourg 333,377
- ------------------------------------------------------------------------------------------------------------------------------------
Netherlands - 2.7% Air Freight & 31,802 TNT NV 1,319,460
Logistics - 0.1%
----------------------------------------------------------------------------------------------------------------
Beverages - 0.1% 2,755 Heineken Holding NV 156,356
19,518 Heineken NV 1,260,527
--------------
1,416,883
----------------------------------------------------------------------------------------------------------------
Chemicals - 0.2% 21,375 Akzo Nobel NV 1,720,734
11,618 Koninklijke DSM NV 548,898
--------------
2,269,632
----------------------------------------------------------------------------------------------------------------
Commercial Services 5,832 Corporate Express NV 45,383
& Supplies - 0.1% 3,129 Randstad Holdings NV 122,285
17,976 Vedior NV 457,536
--------------
625,204
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Diversified Financial 143,436 ING Groep NV CVA $ 5,589,044
Services - 0.5%
----------------------------------------------------------------------------------------------------------------
Diversified 149,896 Koninklijke KPN NV 2,730,899
Telecommunication
Services - 0.2%
----------------------------------------------------------------------------------------------------------------
Energy Equipment 3,390 Fugro NV 261,820
& Services - 0.1% 13,640 SBM Offshore NV 430,042
--------------
691,862
----------------------------------------------------------------------------------------------------------------
Food & Staples 102,772 Koninklijke Ahold NV (b) 1,423,275
Retailing - 0.1%
----------------------------------------------------------------------------------------------------------------
Food Products - 0.4% 131,620 Unilever NV 4,835,823
----------------------------------------------------------------------------------------------------------------
Household Durables - 0.0% 3,423 TomTom NV (b) 258,528
----------------------------------------------------------------------------------------------------------------
Industrial 86,666 Koninklijke Philips Electronics NV (b) 3,713,662
Conglomerates - 0.4%
----------------------------------------------------------------------------------------------------------------
Insurance - 0.2% 112,170 Aegon NV 1,978,494
----------------------------------------------------------------------------------------------------------------
Media - 0.2% 57,466 Reed Elsevier NV 1,140,434
23,059 Wolters Kluwer NV 758,537
--------------
1,898,971
----------------------------------------------------------------------------------------------------------------
Office Electronics - 0.0% 283 OCE NV 5,107
----------------------------------------------------------------------------------------------------------------
Real Estate Investment 1,928 Corio NV 155,971
Trusts (REITs) - 0.0% 1,694 Wereldhave NV 184,733
--------------
340,704
----------------------------------------------------------------------------------------------------------------
Semiconductors & 32,754 ASML Holding NV (b) 1,034,171
Semiconductor
Equipment - 0.1%
----------------------------------------------------------------------------------------------------------------
Trading Companies & 32,722 Hagemeyer NV 223,820
Distributors - 0.0%
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in the Netherlands 30,355,539
- ------------------------------------------------------------------------------------------------------------------------------------
New Zealand - 0.1% Construction Materials - 0.0% 32,024 Fletcher Building Ltd. 282,575
----------------------------------------------------------------------------------------------------------------
Diversified 145,114 Telecom Corp. of New Zealand Ltd. 484,759
Telecommunication
Services - 0.1%
----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.0% 20,226 Contact Energy Ltd. 128,035
----------------------------------------------------------------------------------------------------------------
Health Care Equipment & 41,926 Fisher & Paykel Healthcare Corp. 112,320
Supplies - 0.0%
----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 29,721 Sky City Ltd. 105,005
& Leisure - 0.0%
----------------------------------------------------------------------------------------------------------------
Household Durables - 0.0% 27,665 Fisher & Paykel Appliances Holdings Ltd. 72,872
----------------------------------------------------------------------------------------------------------------
Media - 0.0% 241 Sky Network Television Ltd. 1,110
----------------------------------------------------------------------------------------------------------------
Real Estate Investment 12,534 Kiwi Income Property Trust 12,886
Trusts (REITs) - 0.0%
----------------------------------------------------------------------------------------------------------------
Transportation 58,991 Auckland International Airport Ltd. 131,537
Infrastructure - 0.0%
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in New Zealand 1,331,099
- ------------------------------------------------------------------------------------------------------------------------------------
Norway - 1.0% Chemicals - 0.1% 13,800 Yara International ASA 634,620
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.1% 57,999 DnB NOR ASA 882,280
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial Services 15,929 Tomra Systems ASA $ 112,130
& Supplies - 0.0%
----------------------------------------------------------------------------------------------------------------
Communications 4,141 Tandberg ASA 85,502
Equipment - 0.0%
----------------------------------------------------------------------------------------------------------------
Diversified 42,395 Telenor ASA 1,005,990
Telecommunication 8,033 Telenor ASA (a) 575,862
Services - 0.2% --------------
1,581,852
----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.1% 13,685 Renewable Energy Corp. AS (b) 686,420
----------------------------------------------------------------------------------------------------------------
Energy Equipment 13,390 Acergy SA 294,591
& Services - 0.1% 12,991 Aker Kvaerner ASA 342,865
14,865 Ocean RIG ASA (b) 107,836
11,223 Petroleum Geo-Services ASA (b) 323,190
9,094 ProSafe ASA 157,331
5,442 TGS Nopec Geophysical Co. ASA (b) 74,187
--------------
1,300,000
----------------------------------------------------------------------------------------------------------------
Food Products - 0.0% 312,427 Marine Harvest (b) 199,224
----------------------------------------------------------------------------------------------------------------
Industrial 65,821 Orkla ASA 1,260,265
Conglomerates - 0.1%
----------------------------------------------------------------------------------------------------------------
Insurance - 0.0% 32,487 Storebrand ASA 337,034
----------------------------------------------------------------------------------------------------------------
Marine - 0.0% 400 Stolt-Nielsen SA 12,135
----------------------------------------------------------------------------------------------------------------
Media - 0.0% 3,218 Schibsted ASA 138,902
----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.1% 56,828 Norsk Hydro ASA 809,168
----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 70,332 DNO International ASA (b) 129,133
Fuels - 0.3% 1,944 Frontline Ltd. 92,772
101,844 Statoilhydro ASA 3,141,969
--------------
3,363,874
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Norway 11,403,406
- ------------------------------------------------------------------------------------------------------------------------------------
Portugal - 0.4% Commercial Banks - 0.1% 23,822 Banco BPI SA 185,647
163,650 Banco Comercial Portugues SA Registered Shares 697,538
13,508 Banco Espirito Santo SA Registered Shares 295,730
--------------
1,178,915
----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% 13,841 Cimpor Cimentos de Portugal SA 120,936
----------------------------------------------------------------------------------------------------------------
Diversified 60,384 Portugal Telecom SGPS SA Registered Shares 792,003
Telecommunication
Services - 0.1%
----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.1% 159,158 Energias de Portugal SA 1,043,026
----------------------------------------------------------------------------------------------------------------
Food & Staples 18,295 Jeronimo Martins SGPS SA 145,351
Retailing - 0.0%
----------------------------------------------------------------------------------------------------------------
Industrial 96,264 Sonae SGPS SA 277,449
Conglomerates - 0.0%
----------------------------------------------------------------------------------------------------------------
Media - 0.1% 23,393 PT Multimedia Servicos de Telecomunicacoes e
Multimedia SGPS SA 325,919
----------------------------------------------------------------------------------------------------------------
Paper & Forest 9,059 Sonae Industria SGPS SA (b) 87,272
Products - 0.0%
----------------------------------------------------------------------------------------------------------------
Transportation 17,438 Brisa-Auto Estradas de Portugal SA Private
Infrastructure - 0.0% Shares 255,805
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Portugal 4,226,676
- -----------------------------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- - ----------------------------------------------------------------------------------------------------------------------------------
Singapore - 1.1% Aerospace & Defense - 0.0% 82,213 Singapore Technologies Engineering Ltd. $ 212,043
----------------------------------------------------------------------------------------------------------------
Air Freight & Logistics - 0.0% 127,954 Singapore Post Ltd. 98,765
----------------------------------------------------------------------------------------------------------------
Airlines - 0.0% 36,009 Singapore Airlines Ltd. 432,584
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.4% 93,605 DBS Group Holdings Ltd. 1,328,534
214,914 Oversea-Chinese Banking Corp. 1,224,903
95,572 United Overseas Bank Ltd. 1,308,890
--------------
3,862,327
----------------------------------------------------------------------------------------------------------------
Distributors - 0.0% 4,529 Jardine Cycle & Carriage Ltd. 67,626
----------------------------------------------------------------------------------------------------------------
Diversified Financial 69,000 Singapore Exchange Ltd. 632,077
Services - 0.1%
----------------------------------------------------------------------------------------------------------------
Diversified 651,132 Singapore Telecommunications Ltd. 1,791,440
Telecommunication
Services - 0.2%
----------------------------------------------------------------------------------------------------------------
Electronic Equipment & 7,000 Venture Corp. Ltd. 61,394
Instruments - 0.0%
----------------------------------------------------------------------------------------------------------------
Food & Staples 16,000 Olam International Ltd. 31,474
Retailing - 0.0%
----------------------------------------------------------------------------------------------------------------
Food Products - 0.0% 11,273 Wilmar International Ltd. 41,890
----------------------------------------------------------------------------------------------------------------
Health Care Providers & 79,800 Parkway Holdings Ltd. 216,861
Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 52,238 Genting International PLC (b) 24,659
& Leisure - 0.0%
----------------------------------------------------------------------------------------------------------------
Industrial 50,096 Fraser and Neave Ltd. 202,949
Conglomerates - 0.1% 1,766 Haw Par Corp. Ltd. 8,619
98,616 Keppel Corp. Ltd. 878,735
44,590 SembCorp Industries Ltd. 177,226
--------------
1,267,529
----------------------------------------------------------------------------------------------------------------
Machinery - 0.0% 100,197 SembCorp Marine Ltd. 277,175
----------------------------------------------------------------------------------------------------------------
Marine - 0.0% 76,002 Cosco Corp. (Singapore) Ltd. 300,050
5,200 Neptune Orient Lines Ltd. 13,979
--------------
314,029
----------------------------------------------------------------------------------------------------------------
Media - 0.1% 133,316 Singapore Press Holdings Ltd. 413,920
----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 16,194 Singapore Petroleum Co. Ltd. 84,542
Fuels - 0.0%
----------------------------------------------------------------------------------------------------------------
Real Estate Investment 125,152 Ascendas Real Estate Investment Trust 211,872
Trusts (REITs) - 0.0% 12,000 Capita Commercial Trust 20,117
51,000 CapitaMall Trust 120,926
--------------
352,915
----------------------------------------------------------------------------------------------------------------
Real Estate Management & 147,000 Allgreen Properties Ltd. 149,774
Development - 0.2% 135,833 CapitaLand Ltd. 584,408
49,535 City Developments Ltd. 482,412
42,182 Keppel Land Ltd. 211,055
7,457 UOL Group Ltd. 23,136
57,110 Wing Tai Holdings Ltd. 105,610
--------------
1,556,395
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- - ----------------------------------------------------------------------------------------------------------------------------------
Road & Rail - 0.0% 95,816 ComfortDelgro Corp. Ltd. $ 120,414
----------------------------------------------------------------------------------------------------------------
Semiconductors & 1,000 Chartered Semiconductor Manufacturing Ltd. (b) 663
Semiconductor
Equipment - 0.0%
----------------------------------------------------------------------------------------------------------------
Trading Companies & 54,100 Noble Group Ltd. 90,005
Distributors - 0.0%
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Singapore 11,950,727
- - ----------------------------------------------------------------------------------------------------------------------------------
South Paper & Forest 1 Mondi Ltd. (a) 8
Africa - 0.0% Products - 0.0%
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in South Africa 8
- - ----------------------------------------------------------------------------------------------------------------------------------
Spain - 4.0% Airlines - 0.0% 53,218 Iberia Lineas Aereas de Espana 231,038
----------------------------------------------------------------------------------------------------------------
Biotechnology - 0.0% 14,047 Zeltia SA 123,674
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.7% 285,794 Banco Bilbao Vizcaya Argentaria SA 6,957,420
64,720 Banco Popular Espanol SA 1,103,077
480,675 Banco Santander SA 10,381,617
31,092 Banco de Sabadell SA 336,289
6,140 Bankinter SA 112,132
--------------
18,890,535
----------------------------------------------------------------------------------------------------------------
Construction 16,756 ACS Actividades de Construccion y
& Engineering - 0.2% Servicios, SA 992,334
2,030 Acciona SA 639,594
4,587 Fomento de Construcciones y Contratas SA 342,720
4,971 Grupo Ferrovial SA 347,564
6,344 Sacyr Vallehermoso SA 244,208
--------------
2,566,420
----------------------------------------------------------------------------------------------------------------
Diversified 329,719 Telefonica SA 10,688,282
Telecommunication
Services - 0.9%
----------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.5% 69,345 Iberdrola Renovables (b) 572,831
282,940 Iberdrola SA 4,290,525
518 Iberdrola SA (a) 31,505
7,061 Red Electrica de Espana 445,769
9,776 Union Fenosa SA 659,914
--------------
6,000,544
----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.1% 15,284 Gamesa Corp. Tecnologica SA 707,200
----------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% 10,537 Gas Natural SDG SA 615,083
----------------------------------------------------------------------------------------------------------------
IT Services - 0.0% 11,926 Indra Sistemas SA 323,430
----------------------------------------------------------------------------------------------------------------
Insurance - 0.0% 42,475 Corp. Mapfre SA 186,355
----------------------------------------------------------------------------------------------------------------
Machinery - 0.0% 6,638 Zardoya Otis SA 186,332
----------------------------------------------------------------------------------------------------------------
Media - 0.0% 8,518 Antena 3 de Television SA 130,074
11,454 Gestevision Telecinco SA 291,163
673 Promotora de Informaciones SA 12,507
1,844 Sogecable SA (b) 73,654
--------------
507,398
----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.0% 15,326 Acerinox SA 375,404
----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 58,862 Repsol YPF SA 2,099,797
Fuels - 0.2%
----------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.1% 17,098 Inditex SA 1,034,600
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- - ----------------------------------------------------------------------------------------------------------------------------------
Tobacco - 0.1% 21,546 Altadis SA $ 1,563,362
----------------------------------------------------------------------------------------------------------------
Transportation 17,370 Abertis Infraestructuras SA 554,450
Infrastructure - 0.1% 23,413 Cintra Concesiones de Infraestructuras
de Transporte SA 351,645
--------------
906,095
----------------------------------------------------------------------------------------------------------------
Water Utilities - 0.0% 3,245 Sociedad General de Aguas de
Barcelona SA Class A 130,509
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Spain 47,136,058
- - ----------------------------------------------------------------------------------------------------------------------------------
Sweden - 2.2% Airlines - 0.0% 4,009 SAS AB (b) 51,200
----------------------------------------------------------------------------------------------------------------
Building Products - 0.1% 28,977 Assa Abloy AB Series B 581,096
----------------------------------------------------------------------------------------------------------------
Capital Markets - 0.0% 6,238 D Carnegie AB 120,861
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.5% 11,100 ForeningsSparbanken AB 312,372
167,551 Nordea Bank AB 2,807,971
34,153 Skandinaviska Enskilda Banken AB Class A 871,857
40,412 Svenska Handelsbanken Class A 1,291,821
--------------
5,284,021
----------------------------------------------------------------------------------------------------------------
Commercial Services 24,648 Securitas AB 342,790
& Supplies - 0.0% 23,048 Securitas Systems AB 81,420
--------------
424,210
----------------------------------------------------------------------------------------------------------------
Communications 1,164,446 Telefonaktiebolaget LM Ericsson 2,725,477
Equipment - 0.2%
----------------------------------------------------------------------------------------------------------------
Construction 29,605 Skanska AB Class B 554,055
& Engineering - 0.1%
----------------------------------------------------------------------------------------------------------------
Diversified Consumer 23,048 Securitas Direct AB (b) 92,885
Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Diversified Financial 13,800 Investor AB 312,371
Services - 0.0% 4,910 OMX AB 199,315
--------------
511,686
----------------------------------------------------------------------------------------------------------------
Diversified 22,466 Tele2 AB 447,089
Telecommunication 175,201 TeliaSonera AB 1,636,829
Services - 0.2% --------------
2,083,918
----------------------------------------------------------------------------------------------------------------
Food & Staples 20 Axfood AB 803
Retailing - 0.0%
----------------------------------------------------------------------------------------------------------------
Health Care Equipment & 7,749 Elekta AB 128,876
Supplies - 0.0% 9,720 Getinge AB Class B 259,862
--------------
388,738
----------------------------------------------------------------------------------------------------------------
Household Durables - 0.1% 19,955 Electrolux AB 330,981
20,861 Husqvarna AB 247,097
--------------
578,078
----------------------------------------------------------------------------------------------------------------
Machinery - 0.5% 7,167 Alfa Laval AB 402,423
26,954 Atlas Copco AB 367,358
52,644 Atlat Copco AB 782,464
30,410 SKB AB 512,576
74,406 Sandvik AB 1,276,009
30,020 Scania AB 712,493
6,544 Trelleborg AB Class B 136,572
35,571 Volvo AB A Shares 591,738
82,548 Volvo AB B Shares 1,381,207
--------------
6,162,840
- - ----------------------------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- - ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.0% 14,690 Eniro AB $ 130,530
2,986 Modern Times Group AB 207,221
--------------
337,751
----------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.1% 22,731 Boliden AB 282,727
2,520 Hoganas AB 53,331
17,900 SSAB Svenskt Stal AB Series A 483,073
2,858 SSAB Svenskt Stal AB Series B 69,663
--------------
888,794
----------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 12,702 Lundin Petroleum AB (b) 131,973
Fuels - 0.0%
----------------------------------------------------------------------------------------------------------------
Paper & Forest 6,721 Billerud AB 69,001
Products - 0.1% 1,645 Holmen AB Class B 60,875
44,166 Svenska Cellulosa AB 780,008
--------------
909,884
----------------------------------------------------------------------------------------------------------------
Real Estate Management & 3,889 Castellum AB 40,240
Development - 0.0% 3,636 Fabege AB 36,976
4,960 Kungsleden AB 54,958
6,033 Wihlborgs Fastigheter AB 107,232
--------------
239,406
----------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.2% 37,155 Hennes & Mauritz AB B Shares 2,244,370
4,266 Nobia AB 37,661
--------------
2,282,031
----------------------------------------------------------------------------------------------------------------
Tobacco - 0.1% 24,550 Swedish Match AB 584,490
----------------------------------------------------------------------------------------------------------------
Wireless 2,063 Millicom International Cellular SA (a)(b) 234,663
Telecommunication
Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Sweden 25,168,860
- - ----------------------------------------------------------------------------------------------------------------------------------
Switzerland - 6.4% Auto Components - 0.0% 234 Rieter Holding AG 103,276
----------------------------------------------------------------------------------------------------------------
Biotechnology - 0.0% 6,207 Actelion Ltd. (b) 283,542
----------------------------------------------------------------------------------------------------------------
Building Products - 0.0% 3,300 Geberit AG 449,515
----------------------------------------------------------------------------------------------------------------
Capital Markets - 1.2% 84,380 Credit Suisse Group 5,079,301
1,327 EFG International AG 53,471
7,393 Julius Baer Holding AG Class B 606,634
162,085 UBS AG 7,473,367
--------------
13,212,773
----------------------------------------------------------------------------------------------------------------
Chemicals - 0.3% 6,646 Ciba Specialty Chemicals AG
Registered Shares 307,310
621 Givaudan SA 599,328
8,098 Syngenta AG 2,054,951
--------------
2,961,589
----------------------------------------------------------------------------------------------------------------
Commercial Services & 10,739 Adecco SA Registered Shares 577,275
Supplies - 0.1% 301 SGS SA 358,846
--------------
936,121
----------------------------------------------------------------------------------------------------------------
Computers & 14,198 Logitech International SA (b) 518,521
Peripherals - 0.1%
----------------------------------------------------------------------------------------------------------------
Construction Materials - 0.2% 17,071 Holcim Ltd. 1,819,779
----------------------------------------------------------------------------------------------------------------
Diversified Financial 248 Pargesa Holding SA 27,703
Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- - ----------------------------------------------------------------------------------------------------------------------------------
Diversified 2,044 Swisscom AG $ 797,887
Telecommunication
Services - 0.1%
----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.4% 170,320 ABB Ltd. 4,910,631
----------------------------------------------------------------------------------------------------------------
Electronic Equipment & 4,444 Kudelski SA 87,545
Instruments - 0.0%
----------------------------------------------------------------------------------------------------------------
Food Products - 1.3% 39 Lindt & Spruengli AG 134,375
31,297 Nestle SA Registered Shares 14,371,279
--------------
14,505,654
----------------------------------------------------------------------------------------------------------------
Health Care Equipment & 1,926 Nobel Biocare Holding AG 512,933
Supplies - 0.1% 2,994 Sonova Holding AG 336,146
864 Straumann Holding AG Registered Shares 237,180
4,117 Synthes, Inc. 511,882
--------------
1,598,141
----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 83 Kuoni Reisen Holding AG Registered Shares 43,186
& Leisure - 0.0%
----------------------------------------------------------------------------------------------------------------
Insurance - 0.5% 2,667 Swiss Life Holding (b) 665,527
27,816 Swiss Reinsurance Co. Registered Shares 1,967,825
11,736 Zurich Financial Services AG 3,444,358
--------------
6,077,710
----------------------------------------------------------------------------------------------------------------
Life Sciences Tools 4,087 Lonza Group AG Registered Shares 494,286
& Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Machinery - 0.1% 2,369 Schindler Holding AG 152,022
282 Sulzer AG 414,697
--------------
566,719
----------------------------------------------------------------------------------------------------------------
Marine - 0.0% 3,237 Kuehne & Nagel International AG 310,820
----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 1.7% 183,604 Novartis AG Registered Shares 10,040,813
55,612 Roche Holding AG 9,613,411
--------------
19,654,224
----------------------------------------------------------------------------------------------------------------
Real Estate Management & 1,750 PSP Swiss Property AG (b) 88,157
Development - 0.0%
----------------------------------------------------------------------------------------------------------------
Semiconductors & 655 OC Oerlikon Corp. AG (b) 273,217
Semiconductor
Equipment - 0.0%
----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & 41,317 Compagnie Financiere Richemont AG 2,822,816
Luxury Goods - 0.3% 2,854 The Bearer Shares Swatch Group Ltd. 857,986
2,160 The Registered Shares Swatch Group Ltd. 127,298
--------------
3,808,100
----------------------------------------------------------------------------------------------------------------
Total Common Stocks in Switzerland 73,529,096
- - ----------------------------------------------------------------------------------------------------------------------------------
United Aerospace & Defense - 0.4% 266,693 BAE Systems Plc 2,646,637
Kingdom - 75,689 Cobham Plc 314,988
21.3% 63,403 Meggitt Plc 419,604
143,073 Rolls-Royce Group Plc (b) 1,552,918
--------------
4,934,147
----------------------------------------------------------------------------------------------------------------
Airlines - 0.0% 33,898 British Airways Plc (b) 207,206
----------------------------------------------------------------------------------------------------------------
Auto Components - 0.0% 61,413 GKN Plc 343,245
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- - ----------------------------------------------------------------------------------------------------------------------------------
Beverages - 0.6% 205,651 Diageo Plc $ 4,414,350
72,571 SABMiller Plc 2,036,757
58,875 Scottish & Newcastle Plc 863,541
--------------
7,314,648
----------------------------------------------------------------------------------------------------------------
Capital Markets - 0.3% 34,376 3i Group Plc 680,623
4,359 Close Brothers Group Plc 82,721
46,779 ICAP Plc 674,115
21,059 Investec Plc 187,292
126,687 Man Group Plc 1,438,119
5,199 Schroders Plc 133,394
7,338 Tullett Prebon Plc 67,782
--------------
3,264,046
----------------------------------------------------------------------------------------------------------------
Chemicals - 0.2% 92,487 Imperial Chemical Industries Plc 1,233,504
19,052 Johnson Matthey Plc 711,158
--------------
1,944,662
----------------------------------------------------------------------------------------------------------------
Commercial Banks - 3.3% 7,670 Alliance & Leicester PLC 95,951
527,057 Barclays Plc 5,322,917
292,541 HBOS Plc 4,253,853
922,258 HSBC Holdings Plc 15,535,003
446,447 Lloyds TSB Group Plc 4,204,060
784,325 Royal Bank of Scotland Group Plc 6,925,178
50,000 Standard Chartered Plc 1,824,834
--------------
38,161,796
----------------------------------------------------------------------------------------------------------------
Commercial Services 15,192 Aggreko Plc 159,486
& Supplies - 0.3% 29,284 Biffa Plc 190,512
42,255 Capita Group Plc 585,799
3,467 Davis Service Group Plc 35,234
8,421 De La Rue Plc 163,714
75,806 Experian Group Ltd. 598,746
109,578 Group 4 Securicor Plc 535,636
86,430 Hays Plc 199,922
9,359 Intertek Group Plc 184,763
142,104 Rentokil Initial Plc 338,927
48,259 Serco Group Plc 444,198
--------------
3,436,937
----------------------------------------------------------------------------------------------------------------
Construction & 31,376 Amec Plc 524,562
Engineering - 0.1% 24,322 Balfour Beatty Plc 240,582
--------------
765,144
----------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.0% 14,252 Cattles Plc 82,922
----------------------------------------------------------------------------------------------------------------
Containers & 55,278 Rexam Plc 460,258
Packaging - 0.0%
----------------------------------------------------------------------------------------------------------------
Distributors - 0.0% 26,225 Inchcape Plc 197,184
----------------------------------------------------------------------------------------------------------------
Diversified Financial 12,915 London Stock Exchange Group Plc 507,480
Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Diversified 634,403 BT Group Plc 3,427,083
Telecommunication 213,436 Cable & Wireless Plc 787,518
Services - 0.4% --------------
4,214,601
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- - ----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.3% 85,474 British Energy Group Plc $ 935,974
67,819 Scottish & Southern Energy Plc 2,211,412
--------------
3,147,386
----------------------------------------------------------------------------------------------------------------
Electronic Equipment & 17,536 Electrocomponents Plc 72,203
Instruments - 0.0% 4,873 Premier Farnell Plc 14,169
--------------
86,372
----------------------------------------------------------------------------------------------------------------
Food & Staples 128,957 J Sainsbury Plc 1,086,567
Retailing - 0.7% 616,389 Tesco Plc 5,863,427
80,082 William Morrison Supermarkets PLC 511,658
--------------
7,461,652
----------------------------------------------------------------------------------------------------------------
Food Products - 0.7% 8,781 Associated British Foods PLC 156,638
164,779 Cadbury Schweppes Plc 2,014,735
37,280 Tate & Lyle Plc 331,962
102,635 Unilever Plc 3,849,310
--------------
6,352,645
----------------------------------------------------------------------------------------------------------------
Health Care Equipment & 3,701 SSL International Plc 39,262
Supplies - 0.1% 80,405 Smith & Nephew Plc 922,487
--------------
961,749
----------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 13,158 Carnival Plc 578,603
& Leisure - 0.4% 162,100 Compass Group Plc 989,129
40,342 Enterprise Inns Plc 391,135
20,878 Intercontinental Hotels Group Plc 363,829
49,711 Ladbrokes Plc 317,310
30,315 Mitchells & Butlers Plc 253,877
132,999 PartyGaming Plc (b) 76,750
20,831 Punch Taverns Plc 317,020
55,408 Rank Group Plc 100,388
58,338 TUI Travel Plc (b) 341,126
28,262 Thomas Cook Group Plc (b) 156,919
17,688 Whitbread Plc 486,421
26,415 William Hill Plc 275,985
--------------
4,648,492
----------------------------------------------------------------------------------------------------------------
Household Durables - 0.1% 23,009 Barratt Developments Plc 206,939
4,004 Berkeley Group Holdings Plc (b) 107,661
9,500 Bovis Homes Group Plc 115,664
22,497 Persimmon Plc 358,395
88,076 Taylor Wimpey Plc 354,726
--------------
1,143,385
----------------------------------------------------------------------------------------------------------------
Household Products - 0.2% 46,046 Reckitt Benckiser Plc 2,675,737
----------------------------------------------------------------------------------------------------------------
IT Services - 0.0% 135,116 LogicaCMG Plc 315,828
----------------------------------------------------------------------------------------------------------------
Independent Power 124,268 International Power Plc 1,120,189
Producers &
Energy Traders - 0.1%
----------------------------------------------------------------------------------------------------------------
Industrial 14,609 Cookson Group Plc 202,607
Conglomerates - 0.1% 27,401 Smiths Group Plc 549,738
92,890 Tomkins Plc 326,734
--------------
1,079,079
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- - ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.9% 203,377 Aviva Plc $ 2,710,499
145,613 Friends Provident Plc 474,848
507,133 Legal & General Group Plc 1,317,220
413,662 Old Mutual Plc 1,378,217
193,321 Prudential Plc 2,722,117
49,562 Resolution Plc 701,538
227,193 Royal & Sun Alliance Insurance Group 663,651
162,594 Standard Life Plc 814,409
--------------
10,782,499
----------------------------------------------------------------------------------------------------------------
Internet & 69,483 Home Retail Group 451,577
Catalog Retail - 0.0%
----------------------------------------------------------------------------------------------------------------
Life Sciences Tools 3,124 Lighthouse Caledonia ASA (b) 2,969
& Services - 0.0%
----------------------------------------------------------------------------------------------------------------
Machinery - 0.1% 8,103 Charter Plc (b) 127,643
10,160 FKI Plc 11,955
33,055 IMI Plc 259,313
74,878 Invensys Plc (b) 336,085
--------------
734,996
----------------------------------------------------------------------------------------------------------------
Media - 0.7% 89,101 British Sky Broadcasting Plc 1,096,014
17,377 Daily Mail & General Trust 171,744
21,515 Emap Plc 392,756
282,651 ITV Plc 478,994
63,244 Pearson Plc 915,892
99,614 Reed Elsevier Plc 1,337,878
99,693 Reuters Group Plc 1,260,479
25,643 Trinity Mirror Plc 176,545
16,440 United Business Media Plc 212,193
89,849 WPP Group Plc 1,151,066
61,820 Yell Group Plc 492,669
--------------
7,686,230
----------------------------------------------------------------------------------------------------------------
Metals & Mining - 2.1% 103,812 Anglo American Plc 6,301,536
8,690 Antofagasta PLC 123,199
180,451 BHP Billiton Plc 5,502,561
4,729 Kazakhmys Plc 127,946
4,617 Lonmin Plc 282,757
78,068 Rio Tinto Plc Registered Shares 8,216,068
3,389 Vedanta Resources PLC Wi 137,495
49,400 Xstrata Plc 3,466,445
--------------
24,158,007
----------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.6% 288,111 Centrica Plc 2,052,249
204,468 National Grid Plc 3,391,043
68,950 United Utilities Plc 1,036,194
--------------
6,479,486
----------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.2% 130,949 Marks & Spencer Group Plc 1,449,537
15,333 Next Plc 493,892
--------------
1,943,429
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- - ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 263,695 BG Group Plc $ 6,050,102
Fuels - 4.0% 1,493,200 BP Plc 18,247,282
284,525 Royal Dutch Shell Plc 12,011,215
216,157 Royal Dutch Shell Plc Class B 9,010,661
49,889 Tullow Oil Plc 647,979
--------------
45,967,239
----------------------------------------------------------------------------------------------------------------
Paper & Forest 31,709 Mondi Plc 265,346
Products - 0.0%
----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 1.5% 116,048 AstraZeneca Plc 4,995,039
441,993 GlaxoSmithKline Plc 11,225,109
17,920 Shire Plc 412,064
--------------
16,632,212
----------------------------------------------------------------------------------------------------------------
Real Estate Investment 40,281 British Land Co. Plc 755,374
Trusts (REITs) - 0.3% 8,381 Brixton Plc 48,689
4,736 Great Portland Estates Plc 44,128
22,761 Hammerson Plc 463,870
36,475 Land Securities Group Plc 1,093,064
19,762 Liberty International Plc 422,228
34,456 Segro Plc 320,556
--------------
3,147,909
----------------------------------------------------------------------------------------------------------------
Road & Rail - 0.1% 12,232 Arriva Plc 190,446
37,235 Firstgroup Plc 601,042
13,327 National Express Group Plc 327,794
43,699 Stagecoach Group Plc 245,549
--------------
1,364,831
----------------------------------------------------------------------------------------------------------------
Semiconductors & 115,101 ARM Holdings Plc 283,868
Semiconductor 12,891 CSR Plc (b) 153,268
Equipment - 0.0% --------------
437,136
----------------------------------------------------------------------------------------------------------------
Software - 0.1% 43,411 Misys Plc 157,952
102,053 Sage Group Plc 466,177
--------------
624,129
----------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.1% 26,867 The Carphone Warehouse Plc 182,796
143,393 DSG International Plc 283,493
24,803 Galiform Plc (b) 43,931
50,995 Kesa Electricals Plc 235,513
183,471 Kingfisher Plc 526,114
90,190 Signet Group Plc 125,452
--------------
1,397,299
----------------------------------------------------------------------------------------------------------------
Textiles, Apparel & 34,804 Burberry Group Plc 393,370
Luxury Goods - 0.0%
----------------------------------------------------------------------------------------------------------------
Tobacco - 0.7% 119,338 British American Tobacco Plc 4,665,295
53,069 Imperial Tobacco Group Plc 2,870,338
--------------
7,535,633
----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares
Country Industry Held Common Stocks Value
- - ----------------------------------------------------------------------------------------------------------------------------------
Trading Companies & 32,178 Bunzl Plc $ 455,032
Distributors - 0.1% 6,634 Travis Perkins Plc 158,399
51,790 Wolseley Plc 761,422
--------------
1,374,853
----------------------------------------------------------------------------------------------------------------
Transportation 38,537 BBA Aviation Plc 157,822
Infrastructure - 0.0%
----------------------------------------------------------------------------------------------------------------
Water Utilities - 0.1% 21,239 Kelda Group Plc 457,988
18,144 Severn Trent Plc 551,811
--------------
1,009,799
----------------------------------------------------------------------------------------------------------------
Wireless 4,153,856 Vodafone Group Plc 15,593,248
Telecommunication
Services - 1.4%
----------------------------------------------------------------------------------------------------------------
Total Common Stocks
in the United Kingdom 242,966,809
- - ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks
(Cost - $797,004,493) - 94.5% 1,080,774,917
- - ----------------------------------------------------------------------------------------------------------------------------------
Exchange-Traded Funds
- - ----------------------------------------------------------------------------------------------------------------------------------
United States - 2.0% 288,947 iShares MSCI EAFE Index Fund (g) 22,708,345
- - ----------------------------------------------------------------------------------------------------------------------------------
Total Exchange-Traded Funds
(Cost - $19,661,875) - 2.0% 22,708,345
- - ----------------------------------------------------------------------------------------------------------------------------------
Preferred Stocks
- - ----------------------------------------------------------------------------------------------------------------------------------
Germany - 0.2% Automobiles - 0.1% 8,484 Volkswagen AG, 4.35% 1,246,695
----------------------------------------------------------------------------------------------------------------
Household Products - 0.1% 15,771 Henkel KGaA, 1.75% 886,330
----------------------------------------------------------------------------------------------------------------
Media - 0.0% 5,011 ProSieben SAT.1 Media AG, 2.24% 119,809
----------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.0% 2,583 RWE AG, 3.50% 314,051
----------------------------------------------------------------------------------------------------------------
Total Preferred Stocks
(Cost - $1,272,423) - 0.2% 2,566,885
- - ----------------------------------------------------------------------------------------------------------------------------------
Rights
- - ----------------------------------------------------------------------------------------------------------------------------------
Hong Kong - 0.0% Real Estate Management & 10,763 Wharf Holdings Ltd. (e) 14,770
Development - 0.0%
----------------------------------------------------------------------------------------------------------------
Total Rights in Hong Kong 14,770
- - ----------------------------------------------------------------------------------------------------------------------------------
Japan - 0.0% Metals & Mining - 0.0% 7,000 Dowa Mining Co., Ltd. (f) 0
----------------------------------------------------------------------------------------------------------------
Total Rights in Japan 0
- - ----------------------------------------------------------------------------------------------------------------------------------
Total Rights (Cost - $0) - 0.0% 14,770
- - ----------------------------------------------------------------------------------------------------------------------------------
Beneficial
Interest Short-Term Securities
- - ----------------------------------------------------------------------------------------------------------------------------------
USD 13,529,338 BlackRock Liquidity Series, LLC
Cash Sweep Series, 5.04% (c)(d) 13,529,338
- - ----------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost - $13,529,338) - 1.2% 13,529,338
- - ----------------------------------------------------------------------------------------------------------------------------------
Total Investments
(Cost - $831,468,129*) - 97.9% 1,119,594,255
Other Assets Less Liabilities - 2.1% 23,577,306
--------------
Net Assets - 100.0% $1,143,171,561
==============
* The cost and unrealized appreciation (depreciation) of investments as of
December 31, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 844,409,619
=============
Gross unrealized appreciation $ 305,352,070
Gross unrealized depreciation (30,167,434)
-------------
Net unrealized appreciation $ 275,184,636
=============
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
(a) Depositary receipts.
(b) Non-income producing security.
(c) Investments in companies considered to be an affiliate of the Series, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
-------------------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
-------------------------------------------------------------------------------------
BlackRock Liquidity Series, LLC Cash Sweep Series $ (12,221,959) $ 981,689
-------------------------------------------------------------------------------------
(d) Represents the current yield as of December 31, 2007.
(e) The rights may be exercised until April 1, 2008.
(f) The rights may be exercised until January 29, 2010.
(g) All or a portion of security held as collateral in connection with open
financial futures contracts.
o For Series compliance purposes, the Series' industry classifications refer
to any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Series management. This definition may not apply for purpose of
this report, which may combine industry sub-classifications for reporting
ease. Industries are shown as a percent of net assets. These industry
classifications are unaudited.
o Financial futures contracts purchased as of December 31, 2007 were as
follows:
----------------------------------------------------------------------------------------------------------
Unrealized
Number of Appreciation
Contracts Issue Exchange Expiration Date Face Value (Depreciation)
----------------------------------------------------------------------------------------------------------
4 Hang Seng Index Future Hong Kong January 2008 $ 703,945 $ 11,935
49 OMX Stock Index Future Stockholm January 2008 $ 812,340 9,293
30 CAC40 10 Euro Future MATIF March 2008 $ 2,458,577 26,400
311 DJ Euro Stoxx 50 Eurex March 2008 $19,949,983 215,887
63 FTSE 100 Index Future LIFFE March 2008 $ 7,980,053 115,038
10 SPI 200 Index Future Sydney March 2008 $ 1,379,492 13,970
58 TOPIX Index Future Tokyo March 2008 $ 7,885,858 (253,938)
----------------------------------------------------------------------------------------------------------
Total Unrealized Appreciation - Net $ 138,585
============
o Forward foreign exchange contracts as of December 31, 2007 were as
follows:
-----------------------------------------------------------------------------------------
Unrealized
Foreign Appreciation
Currency Purchased Foreign Currency Sold Settlement Date (Depreciation)
-----------------------------------------------------------------------------------------
AUD 3,668,400 USD 3,216,436 2/12/2008 $ (3,449)
CHF 3,317,500 USD 2,951,653 2/12/2008 (13,477)
DKK 1,549,100 USD 304,230 2/12/2008 (315)
EUR 8,296,000 USD 12,139,443 2/12/2008 (2,413)
GBP 3,709,300 USD 7,504,118 2/12/2008 (129,329)
HKD 5,901,300 USD 758,953 2/12/2008 (837)
JPY 562,900,000 USD 5,081,239 2/12/2008 (18,293)
NOK 2,334,500 USD 426,560 2/12/2008 2,873
NZD 18,200 USD 13,887 2/12/2008 47
SEK 5,898,000 USD 918,736 2/12/2008 (5,817)
SGD 398,800 USD 276,923 2/12/2008 983
USD 1,945,468 AUD 2,204,000 2/12/2008 15,084
USD 1,471,670 CHF 1,644,000 2/12/2008 15,645
USD 117,544 DKK 595,800 2/12/2008 655
USD 5,029,644 EUR 3,424,000 2/12/2008 20,340
USD 3,643,681 GBP 1,794,000 2/12/2008 76,870
USD 481,051 HKD 3,742,000 2/12/2008 331
USD 1,751,762 JPY 195,050,000 2/12/2008 (2,595)
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Unrealized
Foreign Appreciation
Currency Purchased Foreign Currency Sold Settlement Date (Depreciation)
--------------------------------------------------------------------------------------------
USD 143,367 NOK 780,000 2/12/2008 $ (114)
USD 11,599 NZD 15,000 2/12/2008 115
USD 345,843 SEK 2,204,358 2/12/2008 4,642
USD 122,039 SGD 175,300 2/12/2008 (120)
--------------------------------------------------------------------------------------------
Total Unrealized Depreciation on Forward Foreign
Exchange Contracts - Net $ (39,174)
==========
o Currency Abbreviations:
AUD Australian Dollar
CHF Swiss Franc
DKK Danish Krone
EUR Euro
GBP British Pound
HKD Hong Kong Dollar
JPY Japanese Yen
NOK Norwegian Krone
NZD New Zealand Dollar
SEK Swedish Krona
SGD Singapore Dollar
USD U.S. Dollar
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON DETAILED SCHEDULE OF
INVESTMENTS
To the Investors and Board of Directors of Quantitative Master Series LLC:
We have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the financial statements of Master
International Index Series ("the Series"), one of the portfolios constituting
Quantitative Master Series LLC (formerly Quantitative Master Series Trust) (the
"Master LLC") as of December 31, 2007, and for the year then ended and have
issued our report thereon dated February 22, 2008 which report and financial
statements are included in Item 1 of this Certified Shareholder Report on Form
N-CSR. Our audit also included the Series' schedule of investments in securities
(the "Schedule") as of December 31, 2007 appearing in Item 6 of this Form N-CSR.
This Schedule is the responsibility of the Master LLC's management. Our
responsibility is to express an opinion based on our audit. In our opinion, the
Schedule referred to above, when considered in relation to the basic financial
statements taken as a whole of the Series referred to above, presents fairly, in
all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
February 22, 2008
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) Filed herewith as EX-99.CODE ETH.
(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: March 7, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By /s/ Douglas G. Herring
--------------------
Douglas G. Herring
President
Date: March 7, 2008
By /s/ Rebecca L. Harris
---------------------
Rebecca L. Harris
Treasurer
Date: March 7, 2008