UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-04984
AMERICAN BEACON FUNDS
(Exact name of registrant as specified in charter)
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Address of principal executive offices)-(Zip code)
William F. Quinn, 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, 2008
Date of reporting period: June 30, 2008
ITEM 1. REPORTS TO STOCKHOLDERS.
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON FUNDS(SM) LOGO)
Semi-Annual Report
(GRAPHIC)
June 30, 2008
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.............................................. 2
American Beacon Funds
Statements of Assets and Liabilities............................ 10
Statements of Operations........................................ 11
Statements of Changes in Net Assets............................. 12
Notes to Financial Statements................................... 13
Financial Highlights............................................ 18
State Street Equity 500 Index Portfolio
Portfolio of Investments........................................ 22
Statements of Assets and Liabilities............................ 29
Statement of Operations......................................... 30
Statements of Changes in Net Assets............................. 31
Financial Highlights............................................ 32
Notes to Financial Statements................................... 33
Master Small Cap Index Series
Summary Schedule of Investments................................. 37
Statement of Assets and Liabilities............................. 44
Statement of Operations......................................... 45
Statements of Changes in Net Assets............................. 46
Financial Highlights............................................ 46
Notes to Financial Statements................................... 47
Master International Index Series
Summary Schedule of Investments................................. 51
Statements of Assets and Liabilities............................ 56
Statements of Operations........................................ 57
Statements of Changes in Net Assets............................. 58
Financial Highlights............................................ 58
Notes to Financial Statements................................... 59
Additional Information............................................. Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of
the reporting period and are subject to change. Each advisor's strategies and
each Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
American Beacon Funds June 30, 2008
(PHOTO OF WILLIAM F. QUINN)
FELLOW SHAREHOLDERS,
I am pleased to present to you the American Beacon S&P 500 Index Fund, Small Cap
Index Fund and International Equity Index Fund Semi-Annual Report for the six
months ended June 30, 2008.
The American Beacon S&P 500 Index Fund and Small Cap Index Fund, both
Institutional Class, reported a total return of -12.03% and -9.33%,
respectively, for this six-month period, with an expense ratio of 13 basis
points (0.13%) and 20 basis points (0.20%) for its most recent fiscal year. The
Institutional Class of the American Beacon International Equity Index Fund
reported a total return of -10.77% for this six-month period, with an expense
ratio of 19 basis points (0.19%) for its most recent fiscal year. This Fund beat
the MSCI EAFE Index return for the same period by 19 basis points (0.19%).
During the period, the sub-prime mortgage crisis continued to cause
uncertainties surrounding banks, investment banks and the entire financial
system, resulting in an extraordinary amount of volatility. The Federal Reserve
("Fed") was challenged to fulfill its dual mandate of balancing the risks to
both growth and inflation. Inflation concerns were mounting, but weak economic
growth and turmoil in the financial markets limited the Fed's ability to raise
interest rates in the near term to strengthen the U.S. dollar and counter
inflation. We believe the Fund's fundamental value investment philosophy and
lower than average expense ratio will continue to serve the Fund well over the
longer term.
Please review the enclosed market overview, portfolio listings and detailed
financial data. As always, we welcome the opportunity to serve your financial
needs. To obtain further details about the American Beacon Funds family or to
access your account information, please visit our website at
www.americanbeaconfunds.com. Thank you for your continued confidence in the
American Beacon Index Funds.
Sincerely,
/s/ William F. Quinn
William F. Quinn
President
American Beacon Funds
Investing in foreign equities entails additional risk not associated with
domestic equities, such as currency fluctuations, economic and political
instability and differences in accounting standards. Investing in the securities
of small capitalization companies involves greater risk and the possibility of
greater price volatility than investing in larger capitalization and more
established companies.
1
DOMESTIC MARKET OVERVIEW
JUNE 30, 2008 (UNAUDITED)
The continued financial industry turmoil and surging energy prices took
their toll on the U.S. equity markets. After experiencing positive results in
April and May, the markets resumed their downward spiral in June. The June
sell-off knocked 10% off the Dow Jones Industrial Average, its worst June return
since the Great Depression, as every member company posted negative returns.
Broader market measures fared somewhat better, but all are in the red
year-to-date.
Performance by market capitalization has been mixed all year. Following the
first quarter when return dispersion by market cap was very narrow, mid- and
small capitalization companies were the clear leaders in the second quarter.
Large company benchmarks fell hard as heavyweights like General Electric, AT&T
and Bank of America posted double-digit losses.
The general trends that have existed for some time at the sector level
continued. As commodity prices have risen, Energy companies produced the best
returns, followed by Utilities and Materials companies. On the flip side,
Financial companies continued to suffer from credit and banking issues.
Since mid-2007 when economic and equity market weakness became evident,
growth companies have outperformed value companies every quarter except for the
first quarter of 2008. The second quarter continued the theme of outperformance
by growth companies across the market capitalization range.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON S&P 500(R) INDEX FUND+
JUNE 30, 2008 (UNAUDITED)
For the six months ended June 30, 2008, the total return of the
Institutional Class of the American Beacon S&P 500 Index Fund was -12.03%,
slightly below the S&P 500 Index return of -11.91% and the Lipper S&P 500
Objective Funds Index return of -12.00%.
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 6/30/08
---------------------------------------
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS
--------- ------ ------- --------
Institutional Class(1,4) ..... -12.03% -13.24% 7.42% 2.73%
PlanAhead Class(1,2,4)........ -12.24% -13.69% 6.92% 2.29%
Lipper S&P 500 Objective Funds
Index (3) ................. -12.00% -13.29% 7.32% 2.61%
S&P 500 Index (3) ............ -11.91% -13.12% 7.59% 2.88%
* Not annualized
(1.) Performance shown is historical and may not be indicative of future
returns. Investment returns and principal value will vary, and shares may
be worth more or less at redemption than at original purchase. Performance
shown is as of date indicated, and current performance may be lower or
higher than the performance data quoted. To obtain performance as of the
most recent month end, please visit www.americanbeaconfunds.com or call
1-800-967-9009. Fund performance in the table above does not reflect the
deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
(2.) A portion of the fees charged to the 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
prospectus for the Institutional and PlanAhead Class shares were 0.13% and
0.63%, respectively. The expense ratios above may vary from the expense
ratios presented in other sections of this report which are based on
expenses incurred during the period covered by this report.
Eight of the 10 economic sectors in the S&P 500 Index (the "Index") lost
value during the first half of 2008. Energy stocks continued to be a bright
spot, rising 8.9%. Company earnings were strong in the sector, aided by rising
oil, natural gas and gasoline prices. Materials stocks managed a small gain of
1.2%. These companies were also assisted by strong commodity prices. Financials
bore the brunt of the pain in the first half of 2008, falling 29.7%. Losses were
widespread in the sector as the credit crunch and falling home prices took a
heavy toll. Many financial companies took multi-billion dollar losses on bad
loans and mortgage related instruments. Cyclical companies were also hit as
consumers reduced spending in response to high commodity prices and fears of
recession and inflation. Consumer Discretionary stocks fell 13.3% in the first
half. The Information Technology, Telecommunication Services, Industrial, and
Health Care sectors all took double digits falls as well.
The two best performing stocks in the Index during the first half of 2008
were Big Lots and Nabors Industries. Big Lots was able to post a gain of over
95% as shoppers' greater focus on price led to a strong return for the discount
retailer. Nabors owed its return of nearly 80% to the continued strong
performance within the Energy sector during the first part of 2008.
The two worst performing stocks during the first half of 2008 were Ambac
Financial Group and Bear Stearns. Ambac Financial Group had a decline of over
92% while Bear Stearns posted a return of -89%. Both stocks were hurt by the
continued credit crunch and concerns regarding mortgage losses.
As of June 30, 2008, the Fund's largest sector weightings were Information
Technology (16.4% of assets), Energy (16.2% of assets), and Financials (14.2% of
assets), consistent with the top sectorweightings in the index.
The investment manager continues to utilize a replication strategy,
typically owning all 500 names in the S&P 500 Index in approximately the same
weightings as the Index. Therefore, the Fund is expected to continue to meet its
objective of closely tracking, before expenses, the return of its benchmark, the
S&P 500 Index. Therefore,the
+ The S&P 500 Index Fund is not sponsored, sold or promoted by Standard &
Poor's, and Standard & Poor's makes no representation regarding the
advisability of investing in this fund.
S&P is a trademark of the McGraw-Hill Companies, Inc. and has been licensed for
use, "Standard and Poor's(R)", "S&P", "Standard & Poor's 500", "S&P 500" are all
trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by
State Street Bank and Trust Company.
Russell 1000, Russell 2000, Russell 1000 Growth, Russell 1000 Value, Russell
2000 Growth, and Russell 2000 Value Indexes are registered trademarks of Frank
Russell Company.
PERFORMANCE OVERVIEW
AMERICAN BEACON S&P 500(R) INDEX FUND
JUNE 30, 2008 (UNAUDITED)
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. .................................. 4.2%
General Electric Co. ............................... 2.4%
Microsoft Corp. .................................... 2.0%
AT&T, Inc. ......................................... 1.8%
Chevron Corp. ...................................... 1.8%
Procter & Gamble Co. ............................... 1.7%
Johnson & Johnson .................................. 1.6%
International Business Machines Corp. .............. 1.5%
Apple, Inc. ........................................ 1.3%
ConocoPhillips ..................................... 1.3%
* Percent of the equities of State Street Equity 500 Index Portfolio
EQUITY SECTOR ALLOCATION
% OF
EQUITIES*
---------
Information Technology.............................. 16.5%
Energy.............................................. 16.2%
Financials.......................................... 14.2%
Health Care......................................... 11.9%
Industrials......................................... 11.1%
Consumer Staples.................................... 10.8%
Consumer Discretionary.............................. 8.1%
Utilities........................................... 4.0%
Materials........................................... 3.9%
Telecommunication Services.......................... 3.3%
* Percent of the equities of State Street Equity 500 Index Portfolio
4
PERFORMANCE OVERVIEW
AMERICAN BEACON SMALL CAP INDEX FUND(SM)
JUNE 30, 2008 (UNAUDITED)
For the six months ended June 30, 2008, the total return of the
Institutional Class of the American Beacon Small Cap Index Fund was -9.33%. The
Fund's performance exceeded the Russell 2000(R) Index return of -9.37%, but
substantially lagged the Lipper Small-Cap Core Funds Index return of -7.04%.
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 6/30/08
----------------------------------------
SINCE
INCEPTION
6 MONTHS* 1 YEAR 5 YEARS (7/31/00)
--------- ------ ------- ---------
Institutional Class(1,3) ..... -9.33% -16.36% 10.07% 5.32%
Lipper Small-Cap Core Funds
Index(2) .................. -7.04% -13.50% 11.07% 6.93%
Russell 2000 Index(2) ........ -9.37% -16.19% 10.29% 5.47%
* Not annualized
(1.) Performance shown is historical and may not be indicative of future
returns. Investment returns and principal value will vary, and shares may
be worth more or less at redemption than at original purchase. Performance
shown is as of date indicated, and current performance may be lower or
higher than the performance data quoted. To obtain performance as of the
most recent month end, please visit www.americanbeaconfunds.com or call
1-800-967-9009. Fund performance in the table above does not reflect the
deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
(2.) The Lipper Small-Cap Core Funds Index tracks the results of the 30 largest
mutual funds in the Lipper Small-Cap Core Funds category. Lipper is an
independent mutual fund research and ranking service. The Russell 2000
Index is an unmanaged index comprising approximately 2,000
smaller-capitalization stocks from various industrial sectors. One cannot
invest directly in an index.
(3.) The total annual Fund operating expense ratio set forth in the most recent
prospectus for the Fund was 0.20%. The expense ratio above may vary from
the expense ratio presented in other sections of this report which is based
on expenses incurred during the period covered by this report.
Nine of the ten sectors in the Russell 2000 Index (the "Index") lost ground
during the semi-annual period. Only the Energy sector, up 45.4%, recorded a
positive return. Telecommunication Services, Consumer Discretionary, and
Financials were the weakest performing sectors, down 23.0%, 18.9% and 17.1%,
respectively.
The strongest performers among individual stocks in the Index included
Goodrich Petroleum Corp., Finish Line, Inc. and Clayton Williams Energy, Inc.,
which were up 266.6%, 259.5% and 252.9%, respectively. Conversely, Superior
Offshore International, down 95.0%, Fremont General Corp., down 94.6%, and Keryx
Biopharmaceuticals, Inc., down 94.3%, recorded the most notable losses for the
period.
The Fund will continue to strive to meet its objective of closely
replicating, before expenses, the return of its benchmark, the Russell 2000
Index. It does so by investing in a subset of the securities in the Index such
that the characteristics of the portfolio closely track the characteristics of
the Index.
TOP TEN HOLDINGS
% OF
EQUITIES*
---------
Comstock Resources, Inc. ............................ 0.4%
Alexion Pharmaceuticals, Inc. ....................... 0.3%
Compass Minerals International, Inc. ................ 0.3%
Energy Conversion Devices, Inc. ..................... 0.3%
EXCO Resources, Inc. ................................ 0.3%
GrafTech International Ltd. ......................... 0.3%
Penn Virginia Corp. ................................. 0.3%
W-H Energy Services, Inc. ........................... 0.3%
Berry Petroleum Co. (CI A)........................... 0.2%
ITC Holdings Corp. .................................. 0.2%
EQUITY SECTOR ALLOCATION
% OF
EQUITIES*
---------
Financials........................................... 18.3%
Information Technology............................... 17.5%
Industrials.......................................... 16.6%
Health Care.......................................... 13.4%
Consumer Discretionary............................... 12.3%
Energy............................................... 9.3%
Materials............................................ 4.6%
Utilities............................................ 3.5%
Consumer Staples..................................... 3.2%
Telecommunication Services........................... 1.3%
* Percent of equity portion of Master Small Cap Index Series
5
INTERNATIONAL MARKET OVERVIEW
JUNE 30, 2008 (UNAUDITED)
The euphoria world markets basked in following the Bear Stearns purchase in
mid-March evaporated by mid-May as investors realized that the sub-prime crisis
was not only not over, but had been joined by hawkish inflation warnings by
central bankers around the globe. June was the worst month of the period and
caused the developed foreign markets to fall for the third straight quarter. The
MSCI EAFE Index dropped by 11.0% for the six-month period. The U.S. dollar
strengthened slightly in the second quarter and the EAFE Index fell less than 1%
in local terms. However, for the six-month period, the EAFE Index was down 15.7%
in local terms.
The MSCI EAFE Growth Index outperformed the MSCI EAFE Value Index for the
six months. The Growth Index was flat for the second quarter, while the Value
Index dropped 4.6%. Asian markets outperformed European markets for the period.
Given the negative performance of the Index, only four of the 21 EAFE
markets produced positive returns in the second quarter, while only Norway (up
1.6%) was able to generate a positive return for the six-month period.
Of the major markets, Japan was the top market for the second quarter (up
2.5%) and the six-month period (down 5.5%). The Netherlands was the worst major
market for the second quarter (down 8.8%) and the six-month period (down 14.8%).
Energy (up 17.5%) and Materials (up 9.6%) were the only two sectors with
positive performance for the six-month period. Financials was the worst sector
for the second quarter (down 10.7%) and the six-month period (down 20.1%).
6
PERFORMANCE OVERVIEW
AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM)
JUNE 30, 2008 (UNAUDITED)
For the six months ended June 30, 2008, the Institutional Class of the
American Beacon International Equity Index Fund posted a total return of
- -10.77%, slightly above the MSCI EAFE Index (the "Index") return of -10.96% and
ahead of the Lipper International Funds Index return of -11.15%.
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 6/30/08
-------------------------------------------
SINCE
INCEPTION
6 MONTHS* 1 YEAR 5 YEARS (7/31/00)
--------- --------- ------- ---------
Institutional Class(1,3).............. -10.77% -10.76% 16.59% 4.77%
Lipper International Funds Index(2)... -11.15% -8.94% 16.91% 5.46%
MSCI EAFE Index(2).................... -10.96% -10.61% 16.65% 4.91%
* 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 set forth in the most recent
prospectus for the Fund was 0.19%. The expense ratio above may vary from
the expense ratio presented in other sections of this report, which is
based on expenses incurred during the period covered by this report.
Amid fears of economic recession resulting primarily from the threat of
inflation, record-high oil and gasoline prices and the continued fallout from
the troubled U.S. housing market, international equity markets generally lost
ground during the first six months of 2008. The strongest performing countries
were Bermuda, Luxembourg and Norway, up 29.0%, 26.5% and 1.3%, respectively.
Conversely Greece, down 26.7%, New Zealand, down 26.2%, and Portugal, down
24.7%, posted the lowest returns for the period.
Only two of the 10 sectors within the Index finished in positive territory.
The Materials sector gained 6.0% and the Energy sector gained 5.1%, while
Financials, Consumer Discretionary, and Telecommunication Services, down 19.8%,
16.5% and 15.9%, respectively, were the weakest performing sectors.
The strongest performers among individual stocks in the Index during the
period included K+S AG, Origin Energy Ltd., and Yara International ASA, which
posted respective gains of 144.1%, 101.7% and 93.1%. At the other end of the
spectrum, Babcock & Brown lost 69.3%, Yell Group plc was down 68.7% and Taylor
Wimpey plc declined 66.5% making these the worst performing stocks in the Index
for the semi-annual period.
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.
7
PERFORMANCE OVERVIEW
AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM)
JUNE 30, 2008 (UNAUDITED)
TOP TEN HOLDINGS
% OF
EQUITIES*
---------
BP plc ................................ 1.8%
HSBC Holdings plc ..................... 1.5%
Total S.A. ............................ 1.5%
Nestle S.A. ........................... 1.4%
Vodafone Group plc .................... 1.3%
BHP Billiton Ltd. ..................... 1.2%
Royal Dutch Shell plc (CI A) .......... 1.2%
E.ON AG ............................... 1.0%
Novartis AG ........................... 1.0%
Toyota Motor Corp. .................... 1.0%
EQUITY SECTOR ALLOCATION
% OF
EQUITIES* EAFE
--------- -----
Financials ............................ 25.1% 25.1%
Industrials ........................... 12.0% 12.0%
Materials ............................. 11.9% 11.8%
Consumer Discretionary ................ 9.7% 9.7%
Energy ................................ 9.3% 9.3%
Consumer Staples ...................... 8.1% 8.1%
Health Care ........................... 6.8% 6.8%
Utilities ............................. 6.4% 6.4%
Telecommunication Services ............ 5.6% 5.6%
Information Technology ................ 5.1% 5.2%
* Percent of equity portion of Master International Index Series
COUNTRY ALLOCATION
(PIE CHART)
United Kingdom ........................ 21.89%
Japan ................................. 21.42%
France ................................ 10.75%
Germany ............................... 9.11%
Switzerland ........................... 7.03%
Australia ............................. 6.87%
Spain ................................. 4.11%
Italy ................................. 3.80%
Netherlands ........................... 2.56%
Sweden ................................ 2.19%
Finland ............................... 1.56%
Hong Kong ............................. 2.14%
Belgium ............................... 1.02%
Norway ................................ 1.12%
Singapore ............................. 1.10%
Denmark ............................... 1.02%
Ireland ............................... 0.57%
Greece ................................ 0.66%
Austria ............................... 0.63%
Portugal .............................. 0.28%
New Zealand ........................... 0.09%
% OF
EQUITIES* EAFE
--------- -----
United Kingdom ........................ 21.9% 21.9%
Japan ................................. 21.4% 21.4%
France ................................ 10.7% 10.7%
Germany ............................... 9.1% 9.1%
Switzerland ........................... 7.0% 7.1%
Australia ............................. 6.9% 6.8%
Spain ................................. 4.1% 4.1%
Italy ................................. 3.8% 3.8%
Netherlands ........................... 2.6% 2.6%
Sweden ................................ 2.2% 2.2%
Hong Kong ............................. 2.1% 2.1%
Finland ............................... 1.6% 1.6%
Singapore ............................. 1.2% 1.2%
Norway ................................ 1.1% 1.1%
Belgium ............................... 1.0% 1.0%
Denmark ............................... 1.0% 1.0%
Greece ................................ 0.7% 0.7%
Austria ............................... 0.6% 0.6%
Ireland ............................... 0.6% 0.6%
Portugal .............................. 0.3% 0.3%
New Zealand ........................... 0.1% 0.1%
* Percent of equity portion of Master International Index Series
8
FUND EXPENSES
JUNE 30, 2008 (UNAUDITED)
FUND EXPENSE EXAMPLE
As a shareholder of a Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The examples below are intended to help you
understand the ongoing cost (in dollars) of investing in a particular Fund and
to compare these costs with the ongoing costs of investing in other mutual
funds. The examples are based on an investment of $1,000 invested at the
beginning of the period and held for the entire period from January 1, 2008
through June 30, 2008.
ACTUAL EXPENSES
The following table provides information about actual account values and
actual expenses. You may use the information in this table, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
"Expenses Paid During Period" row to estimate the expenses you paid on your
account during this period. Shareholders of the Institutional and PlanAhead
Classes that invest in a Fund through an IRA may be subject to a custodial IRA
fee of $12 that is typically deducted each December. If your account was subject
to a custodial IRA fee during the period, your costs would have been $12 higher.
ACTUAL
S&P 500 SMALL CAP INTERNATIONAL
INSTITUTIONAL CLASS INDEX INDEX EQUITY INDEX
- ------------------- --------- --------- -------------
Beginning Account Value 1/1/08 ................. $1,000.00 $1,000.00 $1,000.00
Ending Account Value 6/30/08 ................... $ 879.71 $ 906.74 $ 892.30
Expenses Paid During Period* 1/1/08 - 6/30/08 .. $ 0.57 $ 0.96 $ .87
Annualized Expense Ratio ....................... 0.12% 0.20% 0.19%
S&P 500
PLANAHEAD CLASS INDEX
- --------------- ---------
Beginning Account Value 1/1/08 ................. $1,000.00
Ending Account Value 6/30/08 ................... $ 877.65
Expenses Paid During Period* 1/1/08 - 6/30/08 .. $ 2.86
Annualized Expense Ratio ....................... 0.61%
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The following table provides information about hypothetical account values
and hypothetical expenses based on a Fund's actual expense ratio and an assumed
5% per year rate of return before expenses (not the Fund's actual return). You
may compare the ongoing costs of investing in a particular Fund with other funds
by contrasting this 5% hypothetical example and the 5% hypothetical examples
that appear in the shareholder reports of the other funds. The hypothetical
account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. Shareholders of the
Institutional and PlanAhead Classes that invest in a Fund through an IRA may be
subject to a custodial IRA fee of $12 that is typically deducted each December.
If your account was subject to a custodial IRA fee during the period, your costs
would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by a
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Expenses Paid During Period"
line of the table is useful in comparing ongoing costs only and will not help
you determine the relative total costs of owning different funds. If you were
subject to any transaction costs during the period, your costs would have been
higher.
HYPOTHETICAL
S&P 500 SMALL CAP INTERNATIONAL
INSTITUTIONAL CLASS INDEX INDEX EQUITY INDEX
- ------------------- --------- --------- -------------
Beginning Account Value 1/1/08 ................. $1,000.00 $1,000.00 $1,000.00
Ending Account Value 6/30/08 ................... $1,024.26 $1,023.86 $1,023.94
Expenses Paid During Period* 1/1/08 - 6/30/08 .. $ 0.61 $ 1.02 $ 0.94
Annualized Expense Ratio ....................... 0.12% 0.20% 0.19%
S&P 500
PLANAHEAD CLASS INDEX
- --------------- ---------
Beginning Account Value 1/1/08 ................. $1,000.00
Ending Account Value 6/30/08 ................... $1,021.82
Expenses Paid During Period* 1/1/08 - 6/30/08 .. $ 3.08
Annualized Expense Ratio ....................... 0.61%
- ----------
* 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 (182) by days in the year (366) to reflect the
half-year period.
9
AMERICAN BEACON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2008 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
INTERNATIONAL
S&P 500 INDEX SMALL CAP INDEX EQUITY INDEX
FUND FUND FUND
------------- --------------- -------------
ASSETS:
Investment in Portfolio, at value ........................... $ 300,651 $ 42,171 $ 327,005
Receivable for fund shares sold ............................. 210 18 297
Prepaid expenses ............................................ 16 -- 1
----------- ---------- -----------
TOTAL ASSETS ............................................. 300,877 42,189 327,303
----------- ---------- -----------
LIABILITIES:
Payable for fund shares redeemed ............................ 15 -- 296
Distribution fees payable (Note 2) .......................... 4 -- --
Administrative service and service fees payable (Note 2) .... 16 1 14
Prepaid expenses ............................................ -- 1 --
Other liabilities ........................................... 39 43 76
----------- ---------- -----------
TOTAL LIABILITIES ........................................ 74 45 386
----------- ---------- -----------
NET ASSETS .................................................. $ 300,803 $ 42,144 $ 326,917
=========== ========== ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital ............................................. 265,574 47,461 319,248
Undistributed net investment income (expense) ............... 1,710 240 6,167
Accumulated net realized gain (loss) ........................ (26,888) (1,398) (4,829)
Unrealized net appreciation (depreciation) of investments and
futures contracts ........................................ 60,407 (4,159) 6,331
----------- ---------- -----------
NET ASSETS ..................................................... $ 300,803 $ 42,144 $ 326,917
=========== ========== ===========
Shares outstanding (no par value):
Institutional Class ......................................... 16,355,600 3,440,735 27,396,671
=========== ========== ===========
PlanAhead Class ............................................. 966,928 -- --
=========== ========== ===========
Net asset value, offering and redemption price per share:
Institutional Class ......................................... $ 17.38 $ 12.25 $ 11.93
=========== ========== ===========
PlanAhead Class ............................................. $ 17.14 $ -- $ --
=========== ========== ===========
See accompanying notes
See accompanying Financial Statements of the respective
Master Portfolios attached
10
AMERICAN BEACON FUNDS
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2008 (IN THOUSANDS)(UNAUDITED)
INTERNATIONAL
S&P 500 INDEX SMALL CAP INDEX EQUITY INDEX
FUND FUND FUND
------------- --------------- -------------
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Dividend income ............................................ $ 3,150 $ 205 $ 6,760
Interest income ............................................ 97 30 64
Securities lending income .................................. -- 48 --
Portfolio expenses ......................................... (69) (15) (152)
Other income ............................................... -- -- 33
-------- ------- --------
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO .......... 3,178 268 6,705
-------- ------- --------
FUND EXPENSES:
Administrative service fees (Note 2):
Institutional Class ..................................... 73 11 73
PlanAhead Class ......................................... 21 -- --
Sub-administrative service fees:
Institutional Class ..................................... -- 2 25
Transfer agent fees:
Institutional Class ..................................... 1 1 3
PlanAhead Class ......................................... 4 -- --
Custody and accounting fees ................................ 4 3 2
Professional fees .......................................... 9 7 9
Registration fees .......................................... 14 -- --
Service fees - PlanAhead Class (Note 2) .................... 21 -- --
Printing ................................................... 8 1 4
Other expenses ............................................. 3 3 4
-------- ------- --------
TOTAL FUND EXPENSES ..................................... 158 28 120
-------- ------- --------
NET INVESTMENT INCOME ......................................... 3,020 240 6,585
-------- ------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED FROM
MASTER PORTFOLIO
Net realized gain (loss) from:
Investments ............................................. 2,062 (622) (2,982)
Foreign currency transactions ........................... -- -- 59
Futures contracts ....................................... (541) 27 (329)
Change in net unrealized appreciation or depreciation of:
Investments ............................................. (42,071) (6,133) (41,738)
Foreign currency transactions ........................... -- -- (15)
Futures contracts ....................................... (431) 1,531 (56)
-------- ------- --------
NET GAIN (LOSS) ON INVESTMENTS .......................... (40,981) (5,197) (45,061)
-------- ------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS ................................................. $(37,961) $(4,957) $(38,476)
======== ======= ========
See accompanying notes
See accompanying Financial Statements of the respective
Master Portfolios attached
11
AMERICAN BEACON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
INTERNATIONAL EQUITY
S&P 500 INDEX FUND SMALL CAP INDEX FUND INDEX FUND
-------------------------- -------------------------- -------------------------
Six Months Year ended Six Months Year ended Six Months Year ended
ended June December 31, ended June December 31, ended June December 31,
30, 2008 2007 30, 2008 2007 30, 2008 2007
----------- ------------ ----------- ------------ ---------- ------------
(unaudited) (unaudited) (unaudited)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ............. $ 3,020 $ 4,980 $ 240 $ 1,122 $ 6,585 $ 9,526
Net realized gain (loss) on
investments, foreign
currency, and futures
contracts ...................... 1,521 16,526 (595) 2,722 (3,252) 6,420
Change in net unrealized
appreciation or depreciation
of investments and futures
contracts ...................... (42,502) (8,818) (4,602) (2,345) (41,809) 19,978
-------- --------- -------- --------- --------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS ............. (37,961) 12,688 (4,957) 1,499 (38,476) 35,924
-------- --------- -------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class ............ (1,406) (4,560) -- (1,094) -- (10,259)
PlanAhead Class ................ (62) (286) -- -- -- --
Net realized gain on investments:
Institutional Class ............ -- -- -- (2,872) -- (3,968)
PlanAhead Class ................ -- -- -- -- -- --
Tax return of capital:
Institutional Class ............ -- -- -- (215) -- (252)
-------- --------- -------- --------- --------- ---------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS ............. (1,468) (4,846) -- (4,181) -- (14,479)
-------- --------- -------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ..... 66,870 171,408 4,184 11,780 184,735 369,147
Reinvestment of dividends and
distributions .................. 1,459 4,810 -- 4,181 -- 14,473
Cost of shares redeemed ........... (18,273) (132,948) (9,408) (112,832) (86,635) (299,885)
-------- --------- -------- --------- --------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS .......... 50,056 43,270 (5,224) (96,871) 98,100 83,735
-------- --------- -------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS ............................ 10,627 51,112 (10,181) (99,553) 59,624 105,180
-------- --------- -------- --------- --------- ---------
NET ASSETS:
Beginning of period ............... 290,176 239,064 52,325 151,878 267,293 162,113
-------- --------- -------- --------- --------- ---------
END OF PERIOD * ................... $300,803 $ 290,176 $ 42,144 $ 52,325 $ 326,917 $ 267,293
======== ========= ======== ========= ========= =========
*Includes undistributed net investment
income (loss) of .................. $ 1,710 $ 158 $ 240 $ -- $ 6,167 $ (418)
======== ========= ======== ========= ========= =========
See accompanying notes
See accompanying Financial Statements of the respective Master
Portfolios attached
12
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Funds (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940 (the
"Act"), as amended, as a no load, diversified, open-end management investment
company. These financial statements and notes to the financial statements relate
to the American Beacon S&P 500 Index Fund, the American Beacon Small Cap Index
Fund and the American Beacon International Equity Index Fund (each a "Fund" and
collectively, the "Funds"), each a series of the Trust.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned
subsidiary of AMR Corporation ("AMR") and was organized in 1986 to provide
business management, advisory, administrative and asset management consulting
services to the Trust and other investors.
On April 16, 2008, AMR, the parent company of the Manager, announced
that it had reached a definitive agreement to sell all of its interests in the
Manager to Lighthouse Holdings, Inc., which is owned by investment funds
affiliated with Pharos Capital Group, LLC and TPG Capital, L.P. AMR will acquire
a minority equity stake in the parent corporation of Lighthouse Holdings, Inc.
Completion of the sale would result in a change of control of the Manager, but
there are no anticipated material changes in the services to be provided by the
Manager or in the fee rate charged by the Manager to the Fund. The target
closing date for the proposed acquisition is expected to be no later than
September 30, 2008. Based in Dallas and Nashville, Pharos Capital Group, LLP
invests through private equity funds, primarily in companies seeking later stage
equity funding for internal growth, acquisitions, management buyouts or
recapitalizations across industry sectors. TPG Capital, L.P. is the global
buyout group of TPG, a leading private investment firm with more than $50
billion of assets under management. TPG Capital, L.P. has extensive experience
with global public and private investments executed through leveraged buyouts,
recapitalizations, spinouts, joint ventures and restructurings.
Each Fund invests all of its investable assets in a corresponding
portfolio. The State Street Equity 500 Index Portfolio, Master Small Cap Index
Series and the Master International Index Series (each a "Portfolio" and
collectively the "Portfolios") are open-ended management investment companies
registered under the Act. The value of such investment reflects each Fund's
proportionate interest in the net assets of the corresponding Portfolio.
% OF PORTFOLIO
HELD BY FUND AT
AMERICAN BEACON: PORTFOLIOS: JUNE 30, 2008
- ---------------- --------------------------------------- ---------------
S&P 500 Index Fund State Street Equity 500 Index Portfolio 14.7%
Small Cap Index Fund Master Small Cap Index Series 7.8%
International Equity Index Fund Master International Index Series 31.0%
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%
13
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
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
Portfolios' Notes to Financial Statements, which are included elsewhere in this
report.
The Portfolios adopted the provisions of Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), effective
with the beginning of the Portfolios' fiscal year. 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. The three levels of the hierarchy under FAS 157 are
described below:
Level 1 - Quoted prices in active markets for identical securities.
Level 2 - Prices determined using other significant observable inputs.
These may include quoted prices for similar securities, interest rates,
prepayment speeds, credit risk, and others.
Level 3 - Prices determined using significant unobservable inputs.
Unobservable inputs reflect the Portfolio's own assumptions about the
factors market participants would use in pricing an investment, and would
be based on the best information available.
The summary of inputs used to value the Portfolios' net assets as of
June 30, 2008 is discussed in the Portfolios' Notes to Financial Statements,
which are included elsewhere in this report.
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.
14
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
Use of Estimates
The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust's organizational documents, its officers and directors
are indemnified against certain liability arising out of the performance of
their duties to the Trust. In the normal course of business, the Trust enters
into contracts that provide indemnification to the other party or parties
against potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
2. FEES AND TRANSACTIONS WITH AFFILIATES
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services
Agreement which obligates the Manager to provide or oversee administrative and
management services to each Fund. As compensation for performing the duties
required under the Administrative Services Agreement, the Manager receives an
annualized fee of 0.05% of the average daily net assets of the Institutional
Class of the S&P 500 Index Fund, International Equity Index Fund and the Small
Cap Index Fund and an annualized fee of 0.25% of the average daily net assets of
the PlanAhead Class of the S&P 500 Index Fund.
Service Plans
The Manager and the Trust entered into a Service Plan that obligates
the Manager to oversee additional shareholder servicing of the PlanAhead Class
of S&P 500 Index Fund. As compensation for performing the duties required under
the Service Plan, the Manager receives 0.25% of the average daily net assets of
the PlanAhead Class of the S&P 500 Index Fund.
Subadministration Agreement
The Trust, the Manager and BlackRock Advisors, LLC ("BlackRock")
entered into a Subadministration Agreement that obligates BlackRock to provide
certain other administrative services to the Small Cap Index Fund and the
International Equity Index Fund. As compensation for performing these services,
BlackRock receives an annualized fee of 0.08% of the average daily net assets of
the Small Cap Index Fund and 0.12% of the average daily net assets of the
International Equity Index Fund; however, the fee of each is to be reduced by
the total expense ratio of its corresponding Portfolio, net of any fee waivers.
Other
At June 30, 2008, the employee benefit plans of AMR Corporation and
subsidiary companies owned 93.3% of the Institutional Class of the S&P 500 Index
Fund, 96.7% of the Small Cap Index Fund and 80.8% of the International Equity
Index Fund.
3. FEDERAL INCOME AND EXCISE TAXES
It is the policy of each of the Funds to comply with the requirements
of Subchapter M of the Internal Revenue Code and to distribute substantially all
net investment income as well as any net realized capital gains on the sale of
investments. Therefore, no federal income or excise tax provision is required.
15
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
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.
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 applicable, as
the income is earned or capital gains are recorded.
The tax character of distributions paid during the six months ended
June 30, 2008 and fiscal year ended December 31, 2007 were as follows (in
thousands):
INTERNATIONAL EQUITY
S&P 500 INDEX SMALL CAP INDEX INDEX
---------------------- ---------------------- ----------------------
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, DECEMBER JUNE 30, DECEMBER JUNE 30, DECEMBER
2008 31, 2007 2008 31, 2007 2008 31, 2007
----------- -------- ----------- -------- ----------- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME:*
Institutional Class ............ $1,406 $4,560 $-- $1,510 $-- $11,655
PlanAhead Class ................ 62 286 -- -- -- --
LONG-TERM CAPITAL GAIN:
Institutional Class ............ -- -- -- 2,456 -- 2,572
PlanAhead Class ................
RETURN OF CAPITAL:
Institutional Class ............ -- -- -- 215 -- 252
------ ------ --- ------ --- -------
TOTAL TAXABLE DISTRIBUTIONS .... $1,468 $4,846 $-- $4,181 $-- $14,479
====== ====== === ====== === =======
* For tax purposes, short-term capital gains are considered ordinary income
distributions.
At June 30, 2008 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
16
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Funds (shares and dollars in thousands):
Six Months ended June 30, 2008
INSTITUTIONAL CLASS PLANAHEAD CLASS
------------------- ----------------
S&P 500 INDEX FUND SHARES AMOUNT SHARES AMOUNT
- ------------------ ------ -------- ------ -------
Shares sold .......................... 3,467 $ 64,230 144 $ 2,640
Reinvestment of dividends ............ 76 1,406 3 53
Shares redeemed ...................... (880) (16,076) (120) (2,197)
----- -------- ---- -------
Net increase in shares outstanding ... 2,663 $ 49,560 27 $ 496
===== ======== ==== =======
INSTITUTIONAL CLASS
-------------------
SMALL CAP INDEX FUND SHARES AMOUNT
- -------------------- ------ -------
Shares sold .......................... 328 $ 4,184
Reinvestment of dividends ............ -- --
Shares redeemed ...................... (759) (9,408)
---- -------
Net (decrease) in shares outstanding.. (431) $(5,224)
==== =======
INSTITUTIONAL CLASS
-------------------
INTERNATIONAL EQUITY INDEX FUND SHARES AMOUNT
- ------------------------------- ------ --------
Shares sold .......................... 14,514 $184,735
Reinvestment of dividends ............ -- --
Shares redeemed ...................... (7,109) (86,635)
------ --------
Net increase in shares outstanding ... 7,405 $ 98,100
====== ========
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
======= =========
17
AMERICAN BEACON S&P 500 INDEX FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class
----------------------------------------------------------------------
Six Months Year Ended December 31,
ended June ------------------------------------------------------
30, 2008 2007 2006 2005 2004 2003
----------- -------- -------- -------- -------- --------
(unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 19.85 $ 19.19 $ 16.90 $ 16.43 $ 15.10 $ 11.96
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income:(A) ..................... 0.18 0.39 0.33 0.29 0.29 0.21
Net gain (loss) on investments, foreign
currency and futures transactions (both
realized and unrealized) ................... (2.56) 0.65 2.30 0.47 1.32 3.14
-------- -------- -------- -------- -------- --------
Total income (loss) from investment operations ... (2.38) 1.04 2.63 0.76 1.61 3.35
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... (0.09) (0.38) (0.34) (0.29) (0.28) (0.21)
Tax return of capital ......................... -- -- -- 0.00(B) -- --
-------- -------- -------- -------- -------- --------
Total distributions .............................. (0.09) (0.38) (0.34) (0.29) (0.28) (0.21)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ................... $ 17.38 $ 19.85 $ 19.19 $ 16.90 $ 16.43 $ 15.10
======== ======== ======== ======== ======== ========
TOTAL RETURN ..................................... -12.03%(C) 5.39% 15.69% 4.74% 10.76% 28.26%
======== ======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ...... $284,228 $271,746 $223,008 $225,857 $244,668 $245,251
Ratios to average net assets (annualized):(A)
Net investment income, net of waivers ...... 1.99% 1.89% 1.85% 1.75% 1.85% 1.63%
Net investment income, before waivers ...... 1.99% 1.89% 1.85% 1.75% 1.85% 1.63%
Expenses, including expenses of the
master portfolio, net of waivers ........ 0.12% 0.13% 0.14% 0.13% 0.17% 0.14%
Expenses, including expenses of the
master portfolio, before waivers ........ 0.12% 0.13% 0.14% 0.13% 0.17% 0.14%
- ----------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the State Street Equity 500 Index Portfolio.
(B) The tax return of capital is calculated based upon outstanding shares at
the time of distribution. Amounts are less than $0.01 per share.
(C) Not annualized.
(D) American Beacon Advisors, Inc. agreed to reimburse the Class for a portion
of its expenses through March 1, 2003.
18
PlanAhead Class
----------------------------------------------------------------------
Six Months Year Ended December 31,
ended June ------------------------------------------------------
30, 2008 2007 2006 2005 2004 2003
----------- ------- ------- ------- ------- -------
(unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 19.60 $ 18.97 $ 16.69 $ 16.23 $ 14.96 $ 11.85
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income:(A) ..................... 0.24 0.28 0.17 0.21 0.21 0.15
Net gain (loss) on investments, foreign
currency and futures transactions (both
realized and unrealized) ................... (2.63) 0.65 2.33 0.48 1.31 3.12
------- ------- ------- ------- ------- -------
Total income (loss) from investment operations ... (2.39) 0.93 2.50 0.69 1.52 3.27
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income .......... (0.07) (0.30) (0.22) (0.23) (0.25) (0.16)
Tax return of capital ......................... -- -- -- 0.00(B) -- --
------- ------- ------- ------- ------- -------
Total distributions .............................. (0.07) (0.30) (0.22) (0.23) (0.25) (0.16)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ................... $ 17.14 $ 19.60 $18.97 $ 16.69 $ 16.23 $ 14.96
======= ======= ======= ======= ======= =======
TOTAL RETURN ..................................... -12.24%(C) 4.88% 15.09% 4.32% 10.21% 27.65%
======= ======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ...... $16,575 $18,430 $16,056 $48,985 $46,344 $34,729
Ratios to average net assets (annualized):(A)
Net investment income, net of waivers ...... 1.50% 1.38% 1.37% 1.28% 1.43% 1.16%
Net investment income, before waivers ...... 1.50% 1.38% 1.37% 1.28% 1.43% 1.15%
Expenses, including expenses of the
master portfolio, net of waivers ........ 0.61% 0.63% 0.61% 0.61% 0.62% 0.63%(D)
Expenses, including expenses of the
master portfolio, before waivers ........ 0.61% 0.63% 0.61% 0.61% 0.62% 0.64%
19
AMERICAN BEACON SMALL CAP INDEX FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class
----------------------------------------------------------------------
Six Months Year Ended December 31,
ended June ------------------------------------------------------
30, 2008 2007 2006 2005 2004 2003
----------- -------- -------- -------- -------- --------
(unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 13.51 $ 14.89 $ 12.78 $ 12.57 $ 11.27 $ 7.70
------- ------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A) ...................... 0.06 0.32 0.17 0.16 0.14 0.04
Net gain (loss) on investments, foreign
currency and futures transactions (both
realized and unrealized) ................... (1.32) (0.53) 2.11 0.42 1.87 3.57
------- ------- -------- ------- ------- -------
Total income (loss) from investment operations ... (1.26) (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 ................... $ 12.25 $ 13.51 $ 14.89 $ 12.78 $ 12.57 $ 11.27
======= ======= ======== ======= ======= =======
TOTAL RETURN ..................................... -9.33%(C) -1.63% 17.85% 4.51% 17.91% 46.90%
======= ======= ======== ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ...... $42,144 $52,325 $151,878 $46,113 $39,196 $67,756
Ratios to average net assets (annualized):(A)
Net investment income ...................... 1.11% 1.49% 1.49% 1.12% 0.90% 1.04%
Expenses, including expenses of the
master portfolio ........................ 0.20% 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.
(C) Not annualized.
20
AMERICAN BEACON INSTITUTIONAL EQUITY INDEX FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class
----------------------------------------------------------------------
Six Months Year Ended December 31,
ended June --------------------------------------------------------
30, 2008 2007 2006 2005 2004 2003
----------- -------- -------- ------- ------- -------
(unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 13.37 $ 12.76 $ 10.33 $ 9.39 $ 8.01 $ 5.86
-------- -------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A) ...................... 0.28 0.52 0.23 0.21 0.17 0.14
Net gain (loss) on investments, foreign
currency and futures transactions (both
realized and unrealized) ................... (1.72) 0.85 2.50 1.06 1.44 2.13
-------- -------- -------- ------- ------- -------
Total income (loss) from investment operations ... (1.44) 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 ................... $ 11.93 $ 13.37 $ 12.76 $ 10.33 $ 9.39 $ 8.01
======== ======== ======== ======= ======= =======
TOTAL RETURN ..................................... -10.77%(C) 10.68% 26.52% 13.58% 20.12% 38.87%
======== ======== ======== ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ...... $326,917 $267,293 $162,113 $90,200 $23,156 $10,043
Ratios to average net assets (annualized):(A)
Net investment income ...................... 4.49% 2.96% 2.44% 2.49% 2.16% 2.71%
Expenses, including expenses of the
master portfolio ........................ 0.19% 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.
(C) Not annualized.
21
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
MARKET
VALUE
SHARES (000)
---------- ----------
COMMON STOCKS -- 97.6%
CONSUMER DISCRETIONARY -- 8.2%
Abercrombie & Fitch Co. 15,846 $ 993
Amazon.Com, Inc. (a) 54,892 4,025
Apollo Group, Inc. Class A (a) 24,529 1,086
AutoNation, Inc. (a) 23,063 231
AutoZone, Inc. (a) 7,864 952
Bed Bath & Beyond, Inc. (a) 46,645 1,311
Best Buy Co., Inc. 60,719 2,404
Big Lots, Inc. (a) 12,827 401
Black & Decker Corp. 10,037 577
Carnival Corp. 77,250 2,546
CBS Corp. Class B 120,203 2,343
Centex Corp. 24,082 322
Clear Channel Communications, Inc. 88,647 3,120
Coach, Inc. (a) 63,128 1,823
Comcast Corp. Class A 527,348 10,004
D.R. Horton, Inc. 45,576 495
Darden Restaurants, Inc. 25,688 820
Dillard's, Inc. Class A 12,294 142
DIRECTV Group, Inc. (a) 128,877 3,339
Eastman Kodak Co. 54,482 786
eBay, Inc. (a) 198,703 5,431
EW Scripps Co. Class A 16,835 699
Expedia, Inc. (a) 39,215 721
Family Dollar Stores, Inc. 27,158 542
Ford Motor Co. (a) 387,098 1,862
Fortune Brands, Inc. 27,745 1,732
GameStop Corp. (a) 29,000 1,172
Gannett Co., Inc. 42,074 912
Gap, Inc. 81,298 1,355
General Motors Corp. 98,645 1,134
Genuine Parts Co. 30,809 1,223
Goodyear Tire & Rubber Co. (a) 45,257 807
H&R Block, Inc. 58,415 1,250
Harley-Davidson, Inc. 43,201 1,566
Harman International Industries, Inc. 10,521 435
Hasbro, Inc. 25,825 922
Home Depot, Inc. 301,112 7,052
Host Hotels & Resorts, Inc. 91,365 1,247
International Game Technology 55,119 1,377
Interpublic Group of Cos., Inc. (a) 83,694 720
JC Penney & Co., Inc. 40,310 1,463
Johnson Controls, Inc. 105,286 3,020
Jones Apparel Group, Inc. 13,434 185
KB HOME 14,794 250
Kohl's Corp. (a) 53,533 2,143
Leggett & Platt, Inc. 32,898 552
Lennar Corp. Class A 27,931 345
Limited Brands 50,567 852
Liz Claiborne, Inc. 20,797 294
Lowe's Cos., Inc. 259,262 5,380
Macy's, Inc. 78,723 1,529
Marriot International, Inc. Class A 52,821 1,386
Mattel, Inc. 66,976 1,147
McDonald's Corp. 202,025 11,358
MARKET
VALUE
SHARES (000)
---------- ----------
McGraw-Hill, Inc. 56,766 $ 2,277
Meredith Corp. 7,889 223
New York Times Co. Class A 22,922 353
Newell Rubbermaid, Inc. 51,593 866
News Corp. Class A 410,409 6,173
NIKE, Inc. Class B 68,052 4,057
Nordstrom, Inc. 30,833 934
Office Depot, Inc. (a) 51,256 561
Omnicom Group, Inc. 56,541 2,538
Polo Ralph Lauren Corp. 10,615 666
Pulte Homes, Inc. 34,526 332
Radioshack Corp. 20,203 248
Sears Holdings Corp. (a) 12,674 934
Sherwin-Williams Co. 18,396 845
Snap-On, Inc. 9,512 495
Stanley Works 14,583 654
Staples, Inc. 123,933 2,943
Starbucks Corp. (a) 128,561 2,024
Starwood Hotels & Resorts Worldwide, Inc. 33,647 1,348
Target Corp. 139,316 6,477
Tiffany & Co. 22,280 908
Time Warner, Inc. 638,473 9,449
TJX Cos., Inc. 77,106 2,427
V.F. Corp. 15,193 1,081
Viacom, Inc. Class B (a) 113,922 3,479
Walt Disney Co. 338,745 10,569
Washington Post Co. 1,060 622
Wendy's International, Inc. 17,016 463
Whirlpool Corp. 13,761 849
Wyndham Worldwide Corp. 34,299 614
Yum! Brands, Inc. 84,192 2,954
----------
168,146
----------
CONSUMER STAPLES -- 10.5%
Altria Group, Inc. 376,299 7,737
Anheuser-Busch Cos., Inc. 127,403 7,914
Archer-Daniels-Midland Co. 114,424 3,862
Avon Products, Inc. 77,160 2,779
Brown-Forman Corp. Class B 15,624 1,181
Campbell Soup Co. 39,265 1,314
Clorox Co. 25,743 1,344
Coca-Cola Co. 357,511 18,583
Coca-Cola Enterprises, Inc. 53,901 932
Colgate-Palmolive Co. 90,901 6,281
ConAgra Foods, Inc. 85,775 1,654
Constellation Brands, Inc. Class A (a) 37,226 739
Costco Wholesale Corp. 77,289 5,421
CVS Corp. 255,832 10,123
Dean Foods Co. (a) 25,258 496
Estee Lauder Cos, Inc. Class A 20,552 955
General Mills, Inc. 60,132 3,654
H.J. Heinz Co. 55,669 2,664
Hershey Foods Corp. 29,582 970
Kellogg Co. 45,935 2,206
Kimberly-Clark Corp. 75,900 4,537
See notes to financial statements
22
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
MARKET
VALUE
SHARES (000)
---------- ----------
CONSUMER STAPLES -- (CONTINUED)
Kraft Foods, Inc. 269,122 $ 7,657
Kroger Co. 116,676 3,368
Lorillard, Inc. (a) 30,860 2,134
McCormick & Co., Inc. 22,353 797
Molson Coors Brewing Co., Class B 23,862 1,296
Pepsi Bottling Group, Inc. 22,953 641
PepsiCo, Inc. 283,156 18,006
Philip Morris International, Inc. 377,099 18,625
Procter & Gamble Co. 545,612 33,179
Reynolds American, Inc. 31,387 1,465
Safeway, Inc. 80,264 2,292
Sara Lee Corp. 129,634 1,588
SuperValu, Inc. 37,648 1,163
Sysco Corp. 106,809 2,938
Tyson Foods, Inc., Class A 46,035 688
UST Corp. 26,637 1,455
Wal-Mart Stores, Inc. 416,502 23,407
Walgreen Co. 176,718 5,745
Whole Foods Market, Inc. 25,433 602
Wrigley Wm., Jr. Co. 38,648 3,006
----------
215,398
----------
ENERGY -- 15.0%
Anadarko Petroleum Corp. 83,326 6,236
Apache Corp. 59,425 8,260
Baker Hughes, Inc. 54,878 4,793
BJ Services Co. 52,248 1,669
Cabot Oil & Gas Corp. 17,400 1,179
Cameron International Corp. (a) 38,000 2,103
Chesapeake Energy Corp. 85,982 5,671
ChevronTexaco Corp. 368,946 36,574
ConocoPhillips 276,030 26,054
Devon Energy Corp. 79,351 9,535
El Paso Corp. 123,192 2,678
ENSCO International, Inc. 26,077 2,105
EOG Resources, Inc. 44,317 5,814
ExxonMobil Corp. 943,272 83,131
Halliburton Co. 156,234 8,291
Hess Corp. 49,801 6,284
Marathon Oil Corp. 126,277 6,550
Murphy Oil Corp. 33,841 3,318
Nabors Industries, Ltd. (a) 48,904 2,408
National Oilwell Varco, Inc. (a) 73,557 6,526
Noble Corp. 47,918 3,113
Noble Energy, Inc. 31,210 3,139
Occidental Petroleum Corp. 146,944 13,204
Range Resources Corp. 27,200 1,783
Rowan Cos., Inc. 19,520 913
Schlumberger, Ltd. 212,675 22,848
Smith International, Inc. 35,334 2,938
Sunoco, Inc. 21,584 878
Tesoro Corp. 26,365 521
Transocean, Inc. (a) 56,635 8,631
Valero Energy Corp. 95,009 3,912
Weatherford International Ltd. (a) 120,910 5,996
MARKET
VALUE
SHARES (000)
---------- ----------
Williams Cos., Inc. 104,468 $ 4,211
XTO Energy, Inc. 90,821 6,222
----------
307,488
----------
FINANCIALS -- 14.0%
ACE, Ltd. 59,783 3,293
AFLAC, Inc. 84,490 5,306
Allstate Corp. 97,306 4,436
American Capital Strategies Ltd. 34,302 815
American Express Co. 206,364 7,774
American International Group, Inc. 479,966 12,700
Ameriprise Financial, Inc. 39,907 1,623
AON Corp. 54,747 2,515
Apartment Investment & Management Co. Class A 17,797 606
Assurant, Inc. 17,131 1,130
AvalonBay Communities, Inc. 13,353 1,191
Bank of America Corp. 795,098 18,979
Bank of New York Mellon Corp. 203,085 7,683
BB&T Corp. 96,670 2,201
Boston Properties, Inc. 21,667 1,955
Capital One Financial Corp. 66,063 2,511
CB Richard Ellis Group, Inc. Class A (a) 29,875 574
Charles Schwab Corp. 166,093 3,412
Chubb Corp. 65,575 3,214
Cincinnati Financial Corp. 28,114 714
CIT Group, Inc. 54,842 374
Citigroup, Inc. 974,402 16,331
CME Group, Inc. 9,641 3,694
Comerica, Inc. 27,144 696
Countrywide Financial Corp. 100,246 426
Developers Diversified Realty Corp. 20,024 695
Discover Financial Services 85,605 1,127
E*Trade Financial Corp. (a) 81,315 255
Equity Residential 49,057 1,877
Fannie Mae 189,550 3,698
Federal Home Loan Mortgage Corp. 117,439 1,926
Federated Investors, Inc. Class B 15,270 526
Fidelity National Information Services, Inc. 30,977 1,143
Fifth Third Bancorp 108,216 1,102
First Horizon National Corp. 38,372 285
Franklin Resources, Inc. 28,380 2,601
General Growth Properties, Inc. 48,893 1,713
Genworth Financial, Inc. Class A 79,351 1,413
Goldman Sachs Group, Inc. 70,570 12,343
Hartford Financial Services Group, Inc. 56,197 3,629
HCP, Inc. 43,100 1,371
Hudson City Bancorp, Inc. 95,292 1,590
Huntington Bancshares, Inc. 64,656 373
IntercontinentalExchange, Inc. (a) 12,680 1,446
J.P. Morgan Chase & Co. 618,015 21,204
Janus Capital Group, Inc. 26,407 699
KeyCorp 86,875 954
See notes to financial statements
23
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
MARKET
VALUE
SHARES (000)
---------- ----------
FINANCIALS -- (CONTINUED)
Kimco Realty Corp. 45,869 $ 1,583
Legg Mason, Inc. 26,342 1,148
Lehman Brothers Holdings, Inc. 127,128 2,518
Leucadia National Corp. 31,136 1,462
Lincoln National Corp. 46,692 2,116
Loews Corp. 63,731 2,989
M & T Bank Corp. 14,137 997
Marsh & McLennan Cos., Inc. 91,753 2,436
Marshall & Ilsley Corp. 45,493 697
MBIA, Inc. 41,484 182
Merrill Lynch & Co., Inc. 174,490 5,533
MetLife, Inc. 126,456 6,673
MGIC Investment Corp. 18,100 111
Moody's Corp. 35,466 1,221
Morgan Stanley 197,230 7,114
National City Corp. 145,254 693
Northern Trust Corp. 33,806 2,318
NYSE Euronext 48,100 2,437
Plum Creek Timber Co., Inc. 30,811 1,316
PNC Financial Services Group, Inc. 62,951 3,595
Principal Financial Group, Inc. 46,591 1,955
Progressive Corp. 121,701 2,278
ProLogis 45,591 2,478
Prudential Financial, Inc. 77,239 4,614
Public Storage, Inc. 22,787 1,841
Regions Financial Corp. 122,289 1,334
SAFECO Corp. 15,250 1,024
Simon Property Group, Inc. 39,600 3,560
SLM Corp. (a) 83,254 1,611
Sovereign Bancorp, Inc. 85,574 630
State Street Corp. (b) 75,725 4,846
SunTrust Banks, Inc. 62,218 2,254
T. Rowe Price Group, Inc. 47,075 2,658
Torchmark Corp. 15,621 916
Travelers Cos, Inc. 107,104 4,648
U.S. Bancorp 309,152 8,622
Unum Group 61,629 1,260
Vornado Realty Trust 23,734 2,089
Wachovia Corp. 379,778 5,898
Washington Mutual, Inc. 184,441 909
Wells Fargo Co. 589,093 13,991
Western Union Co. 130,185 3,218
XL Capital, Ltd. Class A 33,044 679
Zions Bancorp 17,953 565
----------
287,140
----------
HEALTH CARE -- 11.5%
Abbott Laboratories 276,406 14,641
Aetna, Inc. 88,050 3,569
Allergan, Inc. 54,092 2,816
AmerisourceBergen Corp. 29,893 1,195
Amgen, Inc. (a) 194,036 9,151
Applera Corp. - Applied Biosystems Group 29,573 990
Barr Pharmaceuticals, Inc. (a) 18,923 853
MARKET
VALUE
SHARES (000)
---------- ----------
Baxter International, Inc. 112,561 $ 7,197
Becton, Dickinson & Co. 43,597 3,544
Biogen Idec, Inc. (a) 51,431 2,875
Boston Scientific Corp. (a) 243,834 2,997
Bristol-Myers Squibb Co. 351,338 7,213
C.R. Bard, Inc. 17,597 1,548
Cardinal Health, Inc. 64,557 3,330
Celgene Corp. (a) 77,318 4,938
CIGNA Corp. 48,796 1,727
Coventry Health Care, Inc. (a) 27,603 840
Covidien Ltd. 88,504 4,239
Eli Lilly & Co. 175,675 8,109
Express Scripts, Inc. (a) 44,699 2,804
Forest Laboratories, Inc. (a) 54,802 1,904
Genzyme Corp. (a) 48,492 3,492
Gilead Sciences, Inc. (a) 165,799 8,779
Hospira, Inc. (a) 28,503 1,143
Humana, Inc. (a) 31,507 1,253
IMS Health, Inc. 34,732 809
Intuitive Surgical, Inc. (a) 6,900 1,859
Johnson & Johnson 502,649 32,340
King Pharmaceuticals, Inc. (a) 39,792 417
Laboratory Corp. of America Holdings (a) 19,222 1,338
McKesson Corp. 48,655 2,720
Medco Health Solutions, Inc. (a) 89,568 4,228
Medtronic, Inc. 200,578 10,380
Merck & Co., Inc. 382,019 14,398
Millipore Corp. (a) 9,535 647
Mylan Laboratories Inc. (a) 51,709 624
Patterson Cos., Inc. (a) 21,594 635
Pfizer, Inc. 1,209,271 21,126
Quest Diagnostics, Inc. 28,100 1,362
Schering-Plough Corp. 288,655 5,684
St. Jude Medical, Inc. (a) 60,726 2,483
Stryker Corp. 43,389 2,728
Tenet Healthcare Corp. (a) 76,270 424
Thermo Fisher Scientific, Inc. (a) 75,524 4,209
UnitedHealth Group, Inc. 217,996 5,722
Varian Medical Systems, Inc. (a) 22,860 1,185
Watson Pharmaceuticals, Inc. (a) 17,346 471
Wellpoint, Inc. (a) 93,138 4,439
Wyeth 238,987 11,462
Zimmer Holdings, Inc. (a) 42,152 2,868
----------
235,705
----------
INDUSTRIALS -- 11.1%
3M Co. 126,372 8,794
Allied Waste Industries, Inc. (a) 60,230 760
Avery Dennison Corp. 18,988 834
Boeing Co. 133,788 8,793
Burlington Northern Santa Fe Corp. 52,382 5,232
Caterpillar, Inc. 109,379 8,074
CH Robinson Worldwide, Inc. 30,461 1,671
Cintas Corp. 25,088 665
Cooper Industries, Ltd. 32,034 1,265
See notes to financial statements
24
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
MARKET
VALUE
SHARES (000)
---------- ----------
INDUSTRIALS -- (CONTINUED)
CSX Corp. 71,638 $ 4,500
Cummins, Inc. 35,358 2,317
Danaher Corp. 45,086 3,485
Deere & Co. 77,737 5,607
Domtar Corp. (a) (c) 11 --
Dover Corp. 34,295 1,659
Eaton Corp. 28,795 2,447
Emerson Electric Co. 140,348 6,940
Equifax, Inc. 23,683 796
Expeditors International Washington, Inc. 37,320 1,605
FedEx Corp. 55,100 4,341
Fluor Corp. (a) 15,630 2,908
General Dynamics Corp. 71,661 6,034
General Electric Co. 1,782,233 47,568
Goodrich Co. 22,145 1,051
Honeywell International, Inc. 132,781 6,676
Illinois Tool Works, Inc. 72,471 3,443
Ingersoll-Rand Co. Class A 55,057 2,061
ITT Industries, Inc. 33,292 2,108
Jacobs Engineering Group, Inc. (a) 21,700 1,751
L-3 Communications Holdings, Inc. 22,303 2,027
Lockheed Martin Corp. 59,852 5,905
Manitowoc Co., Inc. 24,000 781
Masco Corp. 67,523 1,062
Monster Worldwide, Inc. (a) 22,609 466
Norfolk Southern Corp. 66,755 4,184
Northrop Grumman Corp. 60,811 4,068
PACCAR, Inc. 64,874 2,714
Pall Corp. 22,209 881
Parker-Hannifin Corp. 29,603 2,111
Pitney Bowes, Inc. 36,727 1,252
Precision Castparts Corp. 25,307 2,439
R.R. Donnelley & Sons Co. 38,309 1,137
Raytheon Co. 75,882 4,271
Robert Half International, Inc. 26,240 629
Rockwell Automation, Inc. 27,505 1,203
Rockwell Collins, Inc. 29,731 1,426
Ryder Systems, Inc. 9,821 677
Southwest Airlines Co. 128,486 1,675
Terex Corp. (a) 17,435 896
Textron, Inc. 45,239 2,168
Total System Services, Inc. 37,575 835
Tyco Electronics Ltd. 86,204 3,088
Tyco International Ltd. 87,761 3,514
Union Pacific Corp. 92,568 6,989
United Parcel Service, Inc. Class B 181,846 11,178
United Technologies Corp. 173,078 10,679
W.W. Grainger, Inc. 12,169 995
Waste Management, Inc. 88,439 3,335
----------
225,970
----------
INFORMATION TECHNOLOGY -- 15.5%
Adobe Systems, Inc. (a) 93,857 3,697
Advanced Micro Devices, Inc. (a) 114,986 670
MARKET
VALUE
SHARES (000)
---------- ----------
Affiliated Computer Services, Inc. Class A (a) 16,737 $ 895
Agilent Technologies, Inc. (a) 63,768 2,266
Akamai Technologies, Inc. (a) 29,424 1,024
Altera Corp. 52,854 1,094
Analog Devices, Inc. 50,269 1,597
Apple Computer, Inc. (a) 157,484 26,369
Applied Materials, Inc. 240,707 4,595
Autodesk, Inc. (a) 41,876 1,416
Automatic Data Processing, Inc. 92,817 3,889
BMC Software, Inc. (a) 35,721 1,286
Broadcom Corp. Class A (a) 78,159 2,133
CA, Inc. 68,199 1,575
CIENA Corp. (a) 14,529 337
Cisco Systems, Inc. (a) 1,055,219 24,544
Citrix Systems, Inc. (a) 33,467 984
Cognizant Technology Solutions Corp. Class A (a) 50,084 1,628
Computer Sciences Corp. (a) 25,944 1,215
Compuware Corp. (a) 41,450 395
Convergys Corp. (a) 20,035 298
Corning, Inc. 280,676 6,470
Dell, Inc. (a) 363,550 7,954
Electronic Arts, Inc. (a) 55,800 2,479
Electronic Data Systems Corp. 91,816 2,262
EMC Corp. (a) 366,084 5,378
Fiserv, Inc. (a) 29,952 1,359
Google, Inc. Class A (a) 41,490 21,841
Hewlett-Packard Co. 440,316 19,466
IAC (a) 34,889 673
Intel Corp. 1,022,956 21,973
International Business Machines Corp. 245,442 29,092
Intuit, Inc. (a) 58,463 1,612
Jabil Circuit, Inc. 39,951 656
Juniper Networks, Inc. (a) 92,093 2,043
KLA-Tencor Corp. 30,405 1,238
Lexmark International Group, Inc. Class A (a) 15,842 530
Linear Technology Corp. 40,863 1,331
LSI Logic Corp. (a) 112,662 692
MEMC Electronic Materials, Inc. (a) 40,878 2,516
Microchip Technology, Inc. 33,189 1,014
Micron Technology, Inc. (a) 142,362 854
Microsoft Corp. 1,431,835 39,390
Molex, Inc. 24,805 606
Motorola, Inc. 399,965 2,936
National Semiconductor Corp. 41,596 854
NetApp, Inc. (a) 61,157 1,325
Novell, Inc. (a) 68,720 405
Novellus Systems, Inc. (a) 20,030 424
NVIDIA Corp. (a) 100,756 1,886
Oracle Corp. (a) 707,762 14,863
Paychex, Inc. 58,038 1,815
PerkinElmer, Inc. 21,118 588
QLogic Corp. (a) 24,322 355
See notes to financial statements
25
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
MARKET
VALUE
SHARES (000)
---------- ----------
INFORMATION TECHNOLOGY -- (CONTINUED)
QUALCOMM, Inc. 288,011 $ 12,779
SanDisk Corp. (a) 40,167 751
Sun Microsystems, Inc. (a) 144,741 1,575
Symantec Corp. (a) 152,663 2,954
Tellabs, Inc. (a) 73,830 343
Teradata Corp. (a) 33,520 776
Teradyne, Inc. (a) 27,649 306
Texas Instruments, Inc. 236,399 6,657
Unisys Corp. (a) 69,807 276
VeriSign, Inc. (a) 33,421 1,263
Waters Corp. (a) 16,965 1,094
Xerox Corp. 161,834 2,194
Xilinx, Inc. 52,602 1,328
Yahoo!, Inc. (a) 246,219 5,087
----------
316,170
----------
MATERIALS -- 4.3%
Air Products & Chemicals, Inc. 38,009 3,758
AK Steel Holding Corp. 20,000 1,380
Alcoa, Inc. 144,949 5,163
Allegheny Technologies, Inc. 17,528 1,039
Ashland, Inc. 10,700 516
Ball Corp. 17,562 838
Bemis Co., Inc. 17,262 387
Consol Energy, Inc. 32,073 3,604
Dow Chemical Co. 167,428 5,845
E.I. Du Pont de Nemours & Co. 160,412 6,880
Eastman Chemical Co. 14,204 978
Ecolab, Inc. 31,366 1,348
Freeport-McMoRan Copper & Gold, Inc. Class B 68,252 7,998
Hercules, Inc. 23,050 390
International Flavors & Fragrances, Inc. 14,331 560
International Paper Co. 76,311 1,778
Massey Energy Co. 14,300 1,341
MeadWestvaco Corp. 32,320 771
Monsanto Co. 97,955 12,385
Newmont Mining Corp. 80,406 4,194
Nucor Corp. 55,954 4,178
Pactiv Corp. (a) 23,915 508
Peabody Energy Corp. 48,324 4,255
PPG Industries, Inc. 29,871 1,714
Praxair, Inc. 55,711 5,250
Rohm & Haas Co. 21,706 1,008
Sealed Air Corp. 28,492 542
Sigma-Aldrich Corp. 23,834 1,284
Titanium Metals Corp. 16,600 232
United States Steel Corp. 20,978 3,876
Vulcan Materials Co. 19,361 1,157
Weyerhaeuser Co. 36,937 1,889
----------
87,046
----------
TELECOMMUNICATION SERVICES -- 3.3%
American Tower Corp. (a) 71,500 3,021
AT&T, Inc. 1,061,950 35,777
MARKET
VALUE
SHARES (000)
---------- ----------
CenturyTel, Inc. 20,441 $ 728
Citizens Communications Co. 60,384 685
Embarq Corp. 27,597 1,305
Fairpoint Communications, Inc. (c) 8 --
JDS Uniphase Corp. (a) 42,723 485
Qwest Communications International, Inc. 283,890 1,116
Sprint Nextel Corp. 504,565 4,793
Verizon Communications, Inc. 508,766 18,010
Windstream Corp. 79,613 982
----------
66,902
----------
UTILITIES -- 4.2%
AES Corp. (a) 117,495 2,257
Allegheny Energy, Inc. 30,759 1,541
Ameren Corp. 38,360 1,620
American Electric Power Co., Inc. 72,652 2,923
CenterPoint Energy, Inc. 57,611 925
CMS Energy Corp. 38,856 579
Consolidated Edison, Inc. 47,752 1,867
Constellation Energy Group, Inc. 31,414 2,579
Dominion Resources, Inc. 102,562 4,871
DTE Energy Co. 27,984 1,188
Duke Energy Corp. 224,120 3,895
Dynegy, Inc. (a) 82,690 707
Edison International 59,219 3,043
Entergy Corp. 34,098 4,108
Exelon Corp. 116,621 10,491
FirstEnergy Corp. 54,107 4,455
FPL Group, Inc. 72,421 4,749
Integrys Energy Group, Inc. 12,916 657
Nicor, Inc. 9,100 388
NiSource, Inc. 49,982 896
Pepco Holdings, Inc. 36,900 946
PG&E Corp. 64,726 2,569
Pinnacle West Capital Corp. 17,760 546
PPL Corp. 66,075 3,454
Progress Energy, Inc. 46,981 1,965
Public Service Enterprise Group, Inc. 90,124 4,139
Questar Corp. 30,268 2,150
Sempra Energy 43,786 2,472
Southern Co. 135,943 4,747
Southwestern Energy Co. (a) 61,200 2,914
Spectra Energy Corp. 111,598 3,207
TECO Energy, Inc. 35,651 766
Xcel Energy, Inc. 77,251 1,550
----------
85,164
----------
TOTAL COMMON STOCKS
(Cost $1,381,101,228) 1,995,129
----------
See notes to financial statements
26
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
PAR MARKET
AMOUNT VALUE
(000) (000)
---------- ----------
U.S. GOVERNMENT SECURITIES -- 0.1%
United States Treasury Bill
1.9% due 09/11/08 (d) (e) $ 2,936 $ 2,925
----------
TOTAL U.S. GOVERNMENT SECURITIES
(Cost $2,924,843) 2,925
----------
MARKET
SHARES VALUE
(000) (000)
---------- ----------
MONEY MARKET FUNDS -- 1.8%
AIM Short Term Investment
Prime Portfolio 36,185 $ 36,185
Federated Money Market
Obligations Trust 564 564
----------
TOTAL MONEY MARKET FUNDS
(Cost $36,749,196) 36,749
----------
TOTAL INVESTMENTS -- 99.5%
(Identified cost $1,420,775,267)(f) 2,034,803
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.5% 10,846
----------
NET ASSETS -- 100.0% $2,045,649
==========
(a) Non-income producing security.
(b) Affiliated issuer. See table that follows for more information.
(c) Amount is less than $1,000.
(d) Security held as collateral in relation to initial margin requirements on
futures contracts.
(e) Rate represents annualized yield at date of purchase.
(f) Cost of investments shown approximates cost for federal income tax
purposes.
See notes to financial statements
27
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
SCHEDULE OF FUTURES CONTRACTS
UNREALIZED
NUMBER OF APPRECIATION
CONTRACTS (000)
--------- ------------
S&P 500 Financial Futures Contracts (long) Expiration Date 09/2008 791 $(2,706)
-------
Total unrealized depreciation on open futures contracts purchased $(2,706)
=======
AFFILIATE TABLE
Income Earned
Shares Shares for the
Number of purchased for sold for Number of Value at 6 months ended Realized Gain
Security shares held at the 6 months the 6 months shares 6/30/08 6/30/08 on shares sold
Description 12/31/2007 ended 6/30/08 ended 6/30/08 held at 6/30/08 (000) (000) (000)
- ------------------ -------------- ------------- ------------- --------------- -------- -------------- --------------
State Street Corp. 70,325 9,100 3,700 75,725 $4,846 $34 $59
See notes to financial statements
28
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2008 (UNAUDITED) (AMOUNTS IN THOUSANDS)
ASSETS
Investments in unaffiliated issuers at market (identified cost $1,417,431)............... $2,029,957
Investments in non-controlled affiliates at market (identified cost $3,344) (Note 4)..... 4,846
----------
2,034,803
Receivables:
Investment securities sold......................................................... 9,502
Daily variation margin on futures contracts........................................ 40
Dividends and interest............................................................. 2,763
----------
TOTAL ASSETS.................................................................... 2,047,108
----------
LIABILITIES
Payables:
Investment securities purchased.................................................... 1,380
Management fees (Note 4)........................................................... 79
----------
TOTAL LIABILITIES............................................................... 1,459
----------
NET ASSETS............................................................................... $2,045,649
==========
See notes to financial statements
29
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF OPERATIONS
JUNE 30, 2007 (UNAUDITED) (AMOUNTS IN THOUSANDS)
INVESTMENT INCOME
Dividend income - unaffiliated issuers .............................. $ 22,512
Dividend income - non-controlled affiliated issuer .................. 34
Interest ............................................................ 700
---------
TOTAL INVESTMENT INCOME .......................................... 23,246
---------
EXPENSES
Management fees (Note 4) ............................................ $ 495
---------
TOTAL EXPENSES ................................................... 495
---------
NET INVESTMENT INCOME .................................................. 22,751
---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments - unaffiliated issuers .................................. 16,145
Investments - non-controlled affiliated issuer ...................... 59
Futures contracts ................................................... (3,936)
---------
---------
12,268
---------
Net change in net unrealized depreciation on:
Investments ......................................................... (318,954)
Futures contracts ................................................... (3,381)
---------
(322,335)
---------
Net realized and unrealized loss ....................................... (310,067)
---------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ................... $(287,316)
=========
See notes to financial statements
30
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
---------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income ............................................... $ 22,751 $ 53,117
Net realized gain on investments and futures contracts .............. 12,268 169,211
Net change in net unrealized appreciation (depreciation) ............ (322,335) (66,481)
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .. (287,316) 155,847
---------- ----------
CAPITAL TRANSACTIONS
Proceeds from contributions ......................................... 159,368 328,812
Withdrawals in kind ................................................. -- (63,656)
Fair value of withdrawals ........................................... (248,780) (765,322)
---------- ----------
NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS ............. (89,412) (500,166)
---------- ----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS ............................ (376,728) (344,319)
NET ASSETS
Beginning of period .................................................... 2,422,377 2,766,696
---------- ----------
END OF PERIOD .......................................................... $2,045,649 $2,422,377
========== ==========
See notes to financial statements
31
STATE STREET EQUITY 500 INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected supplemental data and ratios to average
net assets:
SIX MONTHS YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
6/30/2008 12/31/2007 12/31/2006 12/31/2005 12/31/2004 12/31/2003
---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) ... $2,045,649 $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% 0.045%
Net investment income ...................... 2.07%+ 1.96% 1.94% 1.84% 1.97% 1.74%
Portfolio turnover rate* ...................... 6%++ 12% 10% 8% 9% 12%
Total return (a) .............................. (11.98%)++ 5.49% 15.75% 4.87% 10.86% 28.62%
- ----------
* The portfolio turnover rate excludes in-kind security transactions.
+ Annualized
++ Not Annualized
(a) Results represent past performance and are not indicative of future
results.
32
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
1. ORGANIZATION
State Street Master Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company, and was organized as a business trust under the laws of The
Commonwealth of Massachusetts on July 27, 1999. The Trust comprises eleven
investment portfolios: the State Street Equity 500 Index Portfolio, the State
Street Equity 400 Index Portfolio, the State Street Equity 2000 Index Portfolio,
the State Street Aggregate Bond Index Portfolio, the State Street Money Market
Portfolio, the State Street Tax Free Money Market Portfolio, the State Street
Short-Term Tax Exempt Bond Portfolio, the State Street Limited Duration Bond
Portfolio, the State Street Treasury Money Market Portfolio, the State Street
Treasury Plus Money Market Portfolio and the State Street U.S. Government Money
Market Portfolio. Information presented in these financial statements pertains
only to the State Street Equity 500 Index Portfolio (the "Portfolio"). At June
30, 2008, only the Portfolio, the State Street Money Market Portfolio, the State
Street Tax Free Money Market Portfolio, the State Street Short-Term Tax Exempt
Bond Portfolio, the State Street Treasury Money Market Portfolio, the State
Street Treasury Plus Money Market Portfolio and the State Street U.S. Government
Money Market Portfolio 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.
The Portfolio adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157"),
effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years. In accordance
with FAS 157, fair value is defined as the price that the portfolio would
receive upon selling an investment in a timely transaction to an independent
buyer in the principal or most advantageous market of the investment. Various
inputs are used in determining the value of the Fund's investments. FAS 157
established a three tier hierarchy of inputs to establish a classification of
fair value measurements and disclosure. The three tier hierarchy of inputs is
summarized below:
- Level 1 - quoted prices in active markets for identical securities
See notes to financial statements
33
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds, credit
risk, etc.)
- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication
of the risk associated with investing in those securities.
The following is a summary of the inputs used, as of June 30, 2008, in
valuing the Fund's assets carried at fair value:
INVESTMENTS IN OTHER FINANCIAL
VALUATION INPUTS SECURITIES INSTRUMENTS*
- ---------------- -------------- ---------------
Level 1 - Quoted Prices $1,995,129,310 $(2,705,707)
Level 2 - Other Significant Observable Inputs 39,674,039 --
Level 3 - Significant Unobservable Inputs -- --
-------------- -----------
TOTAL $2,034,803,349 $(2,705,707)
============== ===========
* Other financial instruments include futures contracts.
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.
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 June 30, 2008, 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 June 30, 2008, 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
See notes to financial statements
34
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007 (UNAUDITED)
losses by the Portfolio. The Portfolio recognizes a realized gain or loss when
the contract is closed. The Portfolio voluntarily segregates securities in an
amount equal to the outstanding value of the open futures contracts in
accordance with Securities and Exchange Commission requirements.
The primary risks associated with the use of futures contracts are an
imperfect correlation between the change in market value of the securities held
by the Portfolio and the prices of futures contracts and the possibility of an
illiquid market.
Use of Estimates:
The Portfolio's financial statements are prepared in accordance with U.S.
generally accepted accounting principles that require the use of management
estimates. Actual results could differ from those estimates.
3. SECURITIES TRANSACTIONS
For the six months June 30, 2008, purchases and sales of investment
securities, excluding short-term investments, futures contracts, and
contributions in-kind and fair value of withdrawals, aggregated to $126,676,195
and $203,832,247, respectively.
At June 30, 2008, the book cost of investments was $1,420,775,267 which
approximates cost computed on a federal tax basis. The aggregate gross
unrealized appreciation and gross unrealized depreciation was $761,630,535 and
$147,602,453, respectively, resulting in net appreciation of $614,028,082 for
all securities as computed on a federal income tax basis.
The differences between book and tax cost amounts are primarily due to wash
sale loss deferrals.
4. RELATED PARTY FEES AND TRANSACTIONS
The Portfolio has entered into an investment advisory agreement with SSgA
Funds Management, Inc. ("SSgA FM" or the "Adviser"), a subsidiary of State
Street Corp. and an affiliate of State Street Bank and Trust Company ("State
Street"), under which SSgA FM directs the investments of the Portfolio in
accordance with its investment objective, policies, and limitations. The Trust
has contracted with State Street to provide custody, administration and transfer
agent services to the Portfolio. In compensation for SSgA FM's services as
investment adviser and for State Street's services as administrator, custodian
and transfer agent (and for assuming ordinary operating expenses of the
Portfolio, including ordinary legal, audit and trustees expense), State Street
receives a unitary fee, calculated daily, at the annual rate of 0.045% of the
Portfolio's average daily net assets.
Certain investments made by the Portfolio were made in securities
affiliated with State Street and SSgA FM. Investments in State Street Corp., the
holding company of State Street, were made according to its representative
portion of the S&P 500(R) Index. The market value of this investment at June 30,
2008 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.
35
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
6. INDEMNIFICATIONS
The Trust's organizational documents provide that its officers and trustees
are indemnified against certain liabilities arising out of the performance of
their duties to the Trust. In addition, both in some of its principal service
contracts and in the normal course of its business, the Trust enters into
contracts that provide indemnifications to other parties for certain types of
losses or liabilities. The Trust's maximum exposure under these arrangements is
unknown as this could involve future claims against the Trust. Management does
not expect any significant claims.
7. NEW ACCOUNTING PRONOUNCEMENTS
In March 2008, the Financial Accounting Standards board ("FASB") issued
Statement of Financial Accounting Standards No. 161, "Disclosures about
Derivative Instruments and Hedging Activities" ("SFAS 161"). SFAS 161 is
effective for fiscal years and interim periods beginning after November 15,
2008. SFAS 161 requires enhanced disclosures about Funds' derivative and hedging
activities. Management is currently evaluating the impact the adoption of SFAS
161 will have on the Funds' financial statement disclosures.
GENERAL INFORMATION (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES AND RECORD
The Trust has adopted proxy voting procedures relating to portfolio
securities held by the Portfolio. A description of the policies and procedures
are available (i) without charge, upon request, by calling (877) 521-4083 or
(ii) on the website of the Securities and Exchange Commission (the "SEC") at
www.sec.gov. Information on how the Portfolio voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
available by August 31 (i) without charge, upon request, by (i) calling (877)
521-4083 or (ii) on the SEC's website at www.sec.gov.
QUARTERLY PORTFOLIO SCHEDULE
The Trust files a complete schedule of portfolio holdings with the SEC for
the first and third quarters of its fiscal year (as of March and September of
each year) on Form N-Q. The Trust's Forms N-Q are available on the SEC's website
at www.sec.gov. The Trust's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. and information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330. The most
recent Form N-Q is available without charge, upon request, by calling (877)
521-4083.
See notes to financial statements
36
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
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.
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT
- -------- ------------------------------------------ ------ ----------- -------
ADVERTISING AGENCIES Other Securities $ 2,369,420 0.4%
AEROSPACE Curtiss-Wright Corp. 21,068 942,582 0.2
Other Securities 3,769,108 0.7
----------- ---
4,711,690 0.9
----------- ---
AGRICULTURE, FISHING & RANCHING Other Securities 764,315 0.1
AIR TRANSPORT Other Securities 3,154,435 0.6
ALUMINUM Other Securities 396,122 0.1
AUTO PARTS: AFTER MARKET Other Securities 549,017 0.1
AUTO PARTS: ORIGINAL EQUIPMENT Other Securities 2,585,846 0.5
AUTO,TRUCKS & PARTS Other Securities 581,475 0.1
BANKS: NEW YORK CITY Other Securities 376,096 0.1
BANKS: OUTSIDE NEW YORK CITY Other Securities 24,764,625 4.6
BEVERAGE: BREWERS (WINERIES) Other Securities 170,856 0.0
BEVERAGE: SOFT DRINKS Other Securities 574,564 0.1
BIOTECHNOLOGY RESEARCH & PRODUCTION Alexion Pharmaceuticals, Inc. (a) 18,180 1,318,050 0.2
Myriad Genetics, Inc. (a) 21,100 960,472 0.2
OSI Pharmaceuticals, Inc. (a) 27,000 1,115,640 0.2
Other Securities 13,560,243 2.5
----------- ---
16,954,405 3.1
----------- ---
BUILDING MATERIALS Other Securities 3,150,759 0.6
BUILDING: CEMENT Other Securities 77,112 0.0
BUILDING: HEATING & PLUMBING Other Securities 378,774 0.1
BUILDING: MISCELLANEOUS Other Securities 728,407 0.1
BUILDING: ROOFING & WALLBOARD Other Securities 320,063 0.1
CABLE TELEVISION SERVICES Other Securities 538,322 0.1
CASINOS & GAMBLING Other Securities 2,413,136 0.4
CHEMICALS Energy Conversion Devices, Inc. (a) 19,164 1,411,237 0.3
Hercules, Inc. 53,300 902,369 0.2
Other Securities 7,867,862 1.4
----------- ---
10,181,468 1.9
----------- ---
COAL Other Securities 1,695,304 0.3
COMMERCIAL INFORMATION SERVICES Other Securities 973,705 0.2
COMMUNICATIONS & MEDIA Other Securities 270,735 0.1
COMMUNICATIONS TECHNOLOGY Other Securities 14,101,690 2.6
COMPUTER SERVICES SOFTWARE & SYSTEMS Micros Systems, Inc. (a) 38,496 1,173,743 0.2
Parametric Technology Corp. (a) 54,360 906,181 0.2
Sybase, Inc. (a) 37,400 1,100,308 0.2
Other Securities 25,931,503 4.8
----------- ---
29,111,735 5.4
----------- ---
COMPUTER TECHNOLOGY Other Securities 5,540,819 1.0
See notes to financial statements
37
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT
- -------- ------------------------------------------ ------ ----------- -------
CONSTRUCTION EMCOR Group, Inc. (a) 31,972 $ 912,161 0.2%
Other Securities 1,212,154 0.2
----------- ---
2,124,315 0.4
----------- ---
CONSUMER ELECTRONICS Take-Two Interactive Software, Inc. (a)(b) 36,300 928,191 0.2
Other Securities 2,865,677 0.5
----------- ---
3,793,868 0.7
----------- ---
CONSUMER PRODUCTS Tupperware Corp. 29,274 1,001,756 0.2
Other Securities 1,840,101 0.3
----------- ---
2,841,857 0.5
----------- ---
CONTAINERS & PACKAGING: METALS &
GLASS Other Securities 958,476 0.2
CONTAINERS & PACKAGING: PAPER &
PLASTIC Other Securities 286,783 0.1
COPPER Other Securities 566,140 0.1
COSMETICS Other Securities 979,060 0.2
DIVERSIFIED FINANCIAL SERVICES Other Securities 2,972,690 0.5
DIVERSIFIED MATERIALS & PROCESSING Acuity Brands, Inc. 19,160 921,213 0.2
Olin Corp. 35,214 921,903 0.2
Other Securities 3,638,419 0.6
----------- ---
5,481,535 1.0
----------- ---
DRUG & GROCERY STORE CHAINS Other Securities 3,532,921 0.6
DRUGS & PHARMACEUTICALS Onyx Pharmaceuticals, Inc. (a) 26,220 933,432 0.2
United Therapeutics Corp. (a) 10,646 1,040,647 0.2
Other Securities 10,824,899 2.0
----------- ---
12,798,978 2.4
----------- ---
EDUCATION SERVICES Other Securities 1,596,799 0.3
ELECTRICAL & ELECTRONICS Other Securities 2,165,856 0.4
ELECTRICAL EQUIPMENT & COMPONENTS Other Securities 4,976,052 0.9
ELECTRICAL: HOUSEHOLD APPLIANCE Other Securities 196,892 0.0
ELECTRONICS Other Securities 2,649,925 0.5
ELECTRONICS: INSTRUMENTS,
GAUGES & METERS Other Securities 487,631 0.1
ELECTRONICS: MEDICAL SYSTEMS Other Securities 5,346,929 1.0
ELECTRONICS: OTHER Other Securities 51,100 0.0
ELECTRONICS: SEMI-CONDUCTORS/ Microsemi Corp. (a) 37,090 933,926 0.2
COMPONENTS Other Securities 9,608,237 1.7
----------- ---
10,542,163 1.9
----------- ---
ELECTRONICS: TECHNOLOGY Other Securities 3,373,293 0.6
ENERGY EQUIPMENT & SERVICES Other Securities 451,181 0.1
ENERGY MISCELLANEOUS Concho Resources, Inc. (a) 23,600 880,280 0.2
Penn Virginia Corp. 19,616 1,479,439 0.3
Other Securities 3,859,640 0.7
----------- ---
6,219,359 1.2
----------- ---
ENGINEERING & CONTRACTING SERVICES Other Securities 2,059,060 0.4
ENTERTAINMENT Other Securities 1,153,091 0.2
FINANCE COMPANIES Other Securities 705,539 0.1
FINANCE: SMALL LOAN Other Securities 520,005 0.1
FINANCIAL DATA PROCESSING Other Securities 4,128,932 0.8
SERVICES & SYSTEMS
See notes to financial statements
38
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT
- -------- ------------------------------------------ ------ ----------- -------
FINANCIAL INFORMATION SERVICES Other Securities $ 1,082,287 0.2%
FINANCIAL MISCELLANEOUS Other Securities 3,824,921 0.7
FOODS Flowers Foods, Inc. 36,476 1,033,730 0.2
Other Securities 6,288,312 1.2
----------- ---
7,322,042 1.4
----------- ---
FOREST PRODUCTS Other Securities 917,050 0.2
FORMS & BULK PRINTING SERVICES Other Securities 448,278 0.1
FUNERAL PARLORS & CEMETERIES Other Securities 289,613 0.1
GLASS Other Securities 221,392 0.0
GOLD Other Securities 1,327,624 0.2
HEALTH CARE FACILITIES Psychiatric Solutions, Inc. (a) 26,200 991,408 0.2
Other Securities 2,307,377 0.4
----------- ---
3,298,785 0.6
----------- ---
HEALTH CARE MANAGEMENT Other Securities 4,669,392 0.9
HEALTH CARE SERVICES Other Securities 3,837,532 0.7
HOMEBUILDING Other Securities 1,088,607 0.2
HOTEL/MOTEL Other Securities 333,112 0.1
HOUSEHOLD FURNISHINGS Other Securities 1,467,119 0.3
IDENTIFICATION CONTROL & FILTER
DEVICES Other Securities 4,276,840 0.8
INDUSTRIAL PRODUCTS Other Securities 145,536 0.0
INSURANCE: LIFE Other Securities 1,896,275 0.4
INSURANCE: MULTI-LINE Other Securities 5,477,654 1.0
INSURANCE: PROPERTY-CASUALTY Aspen Insurance Holdings Ltd. (c) 40,300 953,901 0.2
Other Securities 8,848,372 1.6
----------- ---
9,802,273 1.8
----------- ---
INVESTMENT MANAGEMENT COMPANIES Apollo Investment Corp. (b) 67,146 962,202 0.2
Other Securities 2,350,762 0.4
----------- ---
3,312,964 0.6
----------- ---
JEWELRY,WATCHES & GEMSTONES Other Securities 847,047 0.2
LEISURE TIME Other Securities 2,208,867 0.4
MACHINE TOOLS Other Securities 186,863 0.0
MACHINERY & ENGINEERING Other Securities 485,575 0.1
MACHINERY: AGRICULTURAL Other Securities 729,774 0.1
MACHINERY: CONSTRUCTION & HANDLING Other Securities 466,079 0.1
MACHINERY: ENGINES Other Securities 552,917 0.1
MACHINERY: INDUSTRIAL/SPECIALTY Nordson Corp. 15,910 1,159,680 0.2
Woodward Governor Co. 27,758 989,850 0.2
Other Securities 3,901,546 0.7
----------- ---
6,051,076 1.1
----------- ---
MACHINERY: OIL WELL Dril-Quip, Inc. (a) 14,576 918,288 0.2
EQUIPMENT & SERVICES W-H Energy Services, Inc. (a) 14,657 1,403,261 0.3
Other Securities 8,194,236 1.5
----------- ---
10,515,785 2.0
----------- ---
MACHINERY: SPECIALTY Other Securities 518,767 0.1
MANUFACTURED HOUSING Other Securities 429,760 0.1
See notes to financial statements
39
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT
- -------- ------------------------------------------ ------ ----------- -------
MANUFACTURING Other Securities $ 569,346 0.1%
MEDICAL & DENTAL Owens & Minor, Inc. 19,398 886,295 0.2
INSTRUMENTS & SUPPLIES Other Securities 14,298,900 2.6
----------- ---
15,185,195 2.8
----------- ---
MEDICAL SERVICES Other Securities 2,256,029 0.4
METAL FABRICATING Other Securities 4,305,209 0.8
METALS & MINERALS MISCELLANEOUS Compass Minerals International, Inc. 15,300 1,232,568 0.2
GrafTech International Ltd. (a) 48,744 1,307,802 0.2
Other Securities 2,859,184 0.5
----------- ---
5,399,554 0.9
----------- ---
MISCELLANEOUS BUSINESS &
CONSUMER DISCRETIONARY Other Securities 112,660 0.0
MISCELLANEOUS CONSUMER STAPLES Other Securities 116,280 0.0
MISCELLANEOUS HEALTH CARE Other Securities 102,300 0.0
MISCELLANEOUS MATERIALS &
COMMODITIES Other Securities 883,101 0.2
MISCELLANEOUS MATERIALS & PROCESSING Other Securities 555,328 0.1
MISCELLANEOUS PRODUCER DURABLES Other Securities 267,705 0.1
MISCELLANEOUS TECHNOLOGY Other Securities 572,222 0.1
MULTI-SECTOR COMPANIES Other Securities 1,716,748 0.3
OFFICE FURNITURE & BUSINESS
EQUIPMENT Other Securities 1,806,563 0.3
OFFSHORE DRILLING Other Securities 218,790 0.0
OIL: CRUDE PRODUCERS Berry Petroleum Co. Class A 20,202 1,189,494 0.2
Bill Barrett Corp. (a) 17,300 1,027,793 0.2
Carrizo Oil & Gas, Inc. (a) 12,900 878,361 0.2
Comstock Resources, Inc. (a) 21,557 1,820,057 0.3
EXCO Resources, Inc. (a) 35,200 1,299,232 0.2
Stone Energy Corp. (a) 13,478 888,335 0.2
Swift Energy Co. (a) 14,417 952,387 0.2
Other Securities 14,584,867 2.7
----------- ---
22,640,526 4.2
----------- ---
OIL: INTEGRATED DOMESTIC Other Securities 1,400,052 0.3
OIL: INTEGRATED INTERNATIONAL Other Securities 238,007 0.0
PAINTS & COATINGS Other Securities 961,933 0.2
PAPER Other Securities 2,272,123 0.4
PLASTICS Other Securities 133,472 0.0
POLLUTION CONTROL &
ENVIRONMENTAL SERVICES Other Securities 2,222,252 0.4
POWER TRANSMISSION EQUIPMENT Other Securities 732,032 0.1
PRINTING & COPYING SERVICES Other Securities 1,005,603 0.2
PRODUCTION TECHNOLOGY EQUIPMENT Other Securities 6,162,503 1.1
PUBLISHING: MISCELLANEOUS Other Securities 1,045,411 0.2
PUBLISHING: NEWSPAPERS Other Securities 1,065,028 0.2
RADIO & TV BROADCASTERS Other Securities 1,342,749 0.2
RAILROAD EQUIPMENT Westinghouse Air Brake Technologies 22,839 1,110,432 0.2
Other Securities 417,548 0.1
----------- ---
1,527,980 0.3
----------- ---
See notes to financial statements
40
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT
- -------- ------------------------------------------ ------ ----------- -------
RAILROADS Other Securities $ 482,234 0.1%
REAL ESTATE Other Securities 1,463,088 0.3
REAL ESTATE INVESTMENT TRUSTS Anthracite Capital, Inc. (c)(d) 26,600 187,264 0.0
(REIT'S) Realty Income Corp. 47,800 1,087,928 0.2
Other Securities 27,130,860 5.0
----------- ----
28,406,052 5.2
----------- ----
RECREATIONAL VEHICLES & BOATS Other Securities 872,367 0.2
RENTAL & LEASING SERVICES:
COMMERCIAL Other Securities 704,808 0.1
RENTAL & LEASING SERVICES: CONSUMER Other Securities 1,604,088 0.3
RESTAURANTS Other Securities 5,876,063 1.1
RETAIL Aeropostale, Inc. (a)(c) 31,575 989,245 0.2
Other Securities 14,280,895 2.6
----------- ----
15,270,140 2.8
----------- ----
SAVINGS & LOAN Other Securities 5,071,259 0.9
SCIENTIFIC EQUIPMENT & SUPPLIERS Other Securities 920,907 0.2
SECURITIES BROKERAGE & SERVICES Other Securities 2,688,476 0.5
SERVICES: COMMERCIAL Waste Connections, Inc. (a) 31,327 1,000,271 0.2
Watson Wyatt Worldwide, Inc. 20,115 1,063,882 0.2
Other Securities 14,849,257 2.7
----------- ----
16,913,410 3.1
----------- ----
SHIPPING Other Securities 4,911,822 0.9
SHOES Other Securities 3,641,676 0.7
STEEL Other Securities 1,557,466 0.3
SUGAR Other Securities 85,415 0.0
TELECOMMUNICATIONS EQUIPMENT Polycom, Inc. (a) 41,500 1,010,940 0.2
Other Securities 2,566,262 0.5
----------- ----
3,577,202 0.7
----------- ----
TEXTILE PRODUCTS Other Securities 365,908 0.1
TEXTILES APPAREL MANUFACTURERS The Warnaco Group, Inc. (a) 21,500 947,505 0.2
Other Securities 3,346,853 0.6
----------- ----
4,294,358 0.8
----------- ----
TIRES & RUBBER Other Securities 677,450 0.1
TOBACCO Other Securities 1,215,372 0.2
TOYS Other Securities 1,154,101 0.2
TRANSPORTATION MISCELLANEOUS Other Securities 1,561,081 0.3
TRUCKERS Other Securities 3,223,990 0.6
UTILITIES: CABLE TV & RADIO Other Securities 116,412 0.0
UTILITIES: ELECTRICAL ITC Holdings Corp. 23,300 1,190,863 0.2
Westar Energy, Inc. 49,500 1,064,745 0.2
Other Securities 7,469,315 1.4
----------- ----
9,724,923 1.8
----------- ----
UTILITIES: GAS DISTRIBUTORS Nicor, Inc. 21,300 907,167 0.2
Piedmont Natural Gas Co. (b) 34,600 905,136 0.1
Other Securities 3,855,390 0.7
----------- ----
5,667,693 1.0
----------- ----
UTILITIES: MISCELLANEOUS Other Securities 667,290 0.1
See notes to financial statements
41
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT
- -------- ---------------------------------------------------- ---------- ------------ -------
UTILITIES: TW Telecom, Inc. 69,500 $ 1,114,085 0.2%
TELECOMMUNICATIONS (a)(b) Other 4,881,990 0.9
Securities
------------ -----
5,996,075 1.1
------------ -----
UTILITIES: WATER Other Securities 1,225,110 0.2
WHOLESALERS Other Securities 1,185,216 0.2
------------ -----
TOTAL COMMON STOCKS 496,365,284 91.5
============ =====
EXCHANGE-TRADED FUNDS
iShares Russell 2000 Index Fund (b) 67,164 4,636,331 0.9
------------ -----
TOTAL EXCHANGE-TRADED FUNDS 4,636,331 0.9
============ =====
MUTUAL FUNDS
BlackRock Kelso Capital Corp. (d) 4,100 38,786 0.0
Other Securities 670,600 0.1
------------ -----
TOTAL MUTUAL FUNDS 709,386 0.1
============ =====
WARRANTS (E)
COMMUNICATIONS
TECHNOLOGY Other Securities 0 0.0
------------ -----
TOTAL WARRANTS 0 0.0
============ =====
OTHER INTERESTS (F)
OIL: CRUDE PRODUCERS Other Securities 0 0.0
------------ -----
TOTAL OTHER INTERESTS 0 0.0
============ =====
TOTAL LONG-TERM INVESTMENTS (COST -- $493,391,561) 501,711,001 92.5
============ =====
BENEFICIAL
INTEREST
SHORT-TERM SECURITIES (000)
---------------------------------------------------- ----------
BlackRock Liquidity Series, LLC Cash Sweep Series,
2.56% $34,422 34,421,562 6.3
BlackRock Liquidity Series, LLC Money Market Series,
2.70% (d)(g)(h) 64,589 64,588,600 11.9
------------ -----
TOTAL SHORT-TERM SECURITIES (COST -- $99,010,162) --
18.2% 99,010,162 18.2
============ =====
TOTAL INVESTMENTS (COST -- $592,401,723*) 600,721,163 110.7
LIABILITIES IN EXCESS OF OTHER ASSETS (57,908,928) (10.7)
------------ -----
NET ASSETS $542,812,235 100.0%
============ =====
See notes to financial statements
42
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
* The cost and unrealized appreciation (depreciation) of investments, as of
June 30, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate Cost.................................................. $598,304,091
------------
Gross unrealized appreciation................................... $ 79,863,244
Gross unrealized depreciation................................... (77,446,172)
------------
Net unrealized appreciation..................................... $ 2,417,072
============
(a) Non-income producing security.
(b) Security, or a portion of security, is on loan.
(c) All or a portion of the security has been pledged as collateral in
connection with open financial futures contracts.
(d) Investments in companies considered to be an affiliate of the Series, for
purposes of Section 2 (a)(3) of the Investment Company Act of 1940, were as
follows:
PURCHASE INTEREST/DIVIDEND
AFFILIATED COST SALE COST REALIZED LOSS INCOME
- ---------- ---------- ----------- ------------- -----------------
Anthracite Capital, Inc. $ -- $ 120,735 $(48,521) $ 17,439
BlackRock Kelso Capital Corp. 15,517 6,168 (524) 2,279
BlackRock Liquidity Series, LLC Cash Sweep Series 1,194,769* -- -- 378,995
BlackRock Liquidity Series, LLC Money Market Series -- 19,220,217** -- 597,824
* Represents net purchase cost.
** Represents net sale cost.
(e) Warrants entitle the Series to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number of
shares are subject to adjustment under certain conditions until the
expiration date.
(f) Other interests represent beneficial interest in liquidation trusts and
other reorganization entities and are non-income producing.
(g) Represents the current yield as of report date.
(h) Security was purchased with the cash proceeds from securities loans.
- - 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.
- - Financial futures contracts purchased as of June 30, 2008, were as follows:
NUMBER OF UNREALIZED
CONTRACTS ISSUE EXPIRATION DATE FACE VALUE DEPRECIATION
- --------- ------------------ --------------- ----------- ------------
603 Russell 2000 Index September 2008 $43,948,831 $(2,239,321)
- - Effective January 1, 2008, the Series adopted Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" ("FAS 157"). FAS 157 clarifies the definition of fair
value, establishes a framework for measuring fair values and requires
additional disclosures about the use of fair value measurements. Various
inputs are used in determining the fair value of investments, which are as
follows:
- Level 1 -- price quotations in active markets/exchanges for identical
securities
- Level 2 -- other observable inputs (including, but not limited to:
quoted prices for similar assets or liabilities in markets that are
not active, inputs other than quoted prices that are observable for
the assets or liabilities (such as interest rates, yield curves,
volatilities, prepayment speeds, loss severities, credit risks, and
default rates) or other market-corroborated inputs)
- Level 3 -- unobservable inputs based on the best information available
in the circumstance, to the extent observable inputs are not available
(including the Series' own assumption used in determining the fair
value of investments)
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. For
information about the Series' policy regarding valuation of investments and
other significant accounting policies, please refer to Note 1 of the Notes to
Financial Statements.
The following table summarizes the inputs used as of June 30, 2008 in
determining the fair valuation of the Series' investments:
INVESTMENTS IN OTHER FINANCIAL
VALUATION INPUTS SECURITIES INSTRUMENTS*
- ---------------- -------------- ---------------
Level 1.................................... $501,711,001 $(2,239,321)
Level 2.................................... 99,010,162 --
Level 3.................................... -- --
------------ -----------
Total...................................... $600,721,163 $(2,239,321)
============ ===========
* Other financial instruments are futures.
See notes to financial statements
43
MASTER SMALL CAP INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2008 (UNAUDITED)
ASSETS
Investments at value -- unaffiliated (including securities loaned of $54,110,838)
(cost -- $493,080,503) ........................................................... $501,484,951
Investments at value -- affiliated (cost -- $99,321,220) ............................ 99,236,212
Cash ................................................................................ 876,888
Investments sold receivable ......................................................... 83,594,388
Contributions receivable from Investors ............................................. 1,376,705
Dividends receivable ................................................................ 539,407
Securities lending income receivable ................................................ 92,177
Receivable from advisor ............................................................. 1,541
Prepaid expenses .................................................................... 17,103
Other assets ........................................................................ 5,713
------------
Total assets ........................................................................ 687,225,085
------------
LIABILITIES
Collateral on securities loaned -- at value ......................................... 64,588,600
Investments purchased payable ....................................................... 79,342,102
Margin variation payable ............................................................ 434,749
Other affiliates payable ............................................................ 4,343
Officer's and Directors' fees payable ............................................... 117
Other accrued expenses payable ...................................................... 41,556
Other liabilities payable ........................................................... 1,383
------------
Total liabilities ................................................................... 144,412,850
------------
NET ASSETS
Net assets .......................................................................... $542,812,235
============
NET ASSETS CONSIST OF
Investors' capital .................................................................. $536,732,116
Net unrealized appreciation/depreciation ............................................ 6,080,119
------------
Net assets .......................................................................... $542,812,235
============
See notes to financial statements
44
MASTER SMALL CAP INDEX SERIES
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
INVESTMENT INCOME
Dividends (net of $1,058 foreign withholding tax and $19,718 from affiliates)..... $ 2,578,195
Interest from affiliates.......................................................... 378,995
Securities lending -- net......................................................... 597,824
------------
Total income......................................................................... 3,555,014
------------
EXPENSES
Custodian fees.................................................................... 63,851
Accounting services............................................................... 49,000
Professional fees................................................................. 42,254
Investment advisory............................................................... 26,865
Officers and Directors............................................................ 11,359
Printing.......................................................................... 528
Miscellaneous..................................................................... 6,260
------------
Total expenses....................................................................... 200,117
Less fees waived by advisor....................................................... (8,848)
Less fees paid indirectly......................................................... (775)
------------
Total expenses after fees waived and paid indirectly................................. 190,494
------------
Net investment income................................................................ 3,364,520
------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments (including $(49,045) from affiliates)................................. 8,191,176
In-kind redemption................................................................ (11,422,101)
Futures........................................................................... 496,632
------------
2,734,293
------------
Net change in unrealized appreciation/depreciation on:
Investments....................................................................... (54,081,567)
Futures........................................................................... (2,708,926)
------------
(56,790,493)
------------
Total realized and unrealized loss................................................... (59,524,786)
============
Net Decrease in Net Assets Resulting from Operations................................. $(56,160,266)
============
See notes to financial statements
45
MASTER SMALL CAP INDEX SERIES
STATEMENTS OF CHANGES IN NET ASSETS
SIX
MONTHS ENDED
JUNE 30, YEAR ENDED
2008 DECEMBER
(UNAUDITED) 31, 2008
------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS
Net investment income ................................................ $ 3,364,520 $ 10,909,414
Net realized gain (loss) ............................................. (2,734,293) 21,031,968
Net change in unrealized appreciation/depreciation ................... (56,790,493) (45,314,859)
------------- -------------
Net decrease in net assets resulting from operations ................. (56,160,266) (13,373,477)
------------- -------------
CAPITAL TRANSACTIONS
Proceeds from contributions .......................................... 170,373,581 443,692,332
Fair value of withdrawals ............................................ (201,795,364) (361,297,148)
------------- -------------
Increase (decrease) in net assets derived from capital transactions .. (31,421,783) 82,395,184
------------- -------------
NET ASSETS
Total increase (decrease) in net assets .............................. (87,582,049) 69,021,707
Beginning of period .................................................. 630,394,284 561,372,577
------------- -------------
End of period ........................................................ $ 542,812,235 $ 630,394,284
============= =============
FINANCIAL HIGHLIGHTS
SIX
MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2008 -----------------------------------------------------
(UNAUDITED) 2007 2006 2005 2004 2003
------------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN
Total investment return ............................... (9.27)%(1) (1.46)% 18.13% 4.63% 18.15% 47.11%
-------- -------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Total expenses after fees waived and paid indirectly .. 0.07%(2) 0.06% 0.07% 0.07% 0.08% 0.09%
-------- -------- -------- -------- -------- --------
Total expenses after fees waived and before paid
indirectly ......................................... 0.07%(2) 0.06% 0.07% 0.07% 0.08% 0.09%
-------- -------- -------- -------- -------- --------
Total expenses ........................................ 0.07%(2) 0.06% 0.07% 0.08% 0.08% 0.10%
-------- -------- -------- -------- -------- --------
Net investment income ................................. 1.25%(2) 1.69% 1.55% 1.17% 1.11% 1.13%
-------- -------- -------- -------- -------- --------
SUPPLEMENTAL DATA
Net assets, end of period (000) ....................... $542,812 $630,394 $561,373 $370,145 $365,661 $335,659
-------- -------- -------- -------- -------- --------
Portfolio turnover .................................... 34% 26% 40% 37% 38% 29%
-------- -------- -------- -------- -------- --------
(1) Aggregate total investment return.
(2) Annualized.
See notes to financial statements
46
MASTER SMALL CAP INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
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 (the "1940 Act"), and is organized as a Delaware limited liability
company. The Limited Liability Company Agreement permits the Directors to issue
non-transferable interests in the Master LLC, subject to certain limitations.
The Series' financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America, which may require
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:
Valuation of Investments:
Equity investments traded on a recognized securities exchange or the NASDAQ
Global Market System are valued at the last reported sale price that day or the
NASDAQ official closing price, if applicable. For equity investments traded on
more than one exchange, the last reported sale price on the exchange where the
stock is primarily traded is used. Equity investments traded on a recognized
exchange for which there were no sales on that day are valued at the last
available bid price. If no bid price is available the prior day's price will be
used, unless it is determined that such prior day's price no longer reflects the
fair value of the security. Investments in open-end investment companies are
valued at net asset value each business day. Financial futures contracts traded
on exchanges are valued at their last sale price.
In the event that application of these methods of valuation results in a
price for an investment which is deemed not to be representative of the market
value of such investment, the investment will be valued by a method approved by
the Board of Directors (the "Board") as reflecting fair value ("Fair Value
Assets"). When determining the price for Fair Value Assets, the investment
advisor and/or sub-advisor seeks to determine the price that the Series might
reasonably expect to receive from the current sale of that asset in an
arm's-length transaction. Fair value determinations shall be based upon all
available factors that the investment advisor and/or sub-advisor deems relevant.
The pricing of all Fair Value Assets is subsequently reported to the Board or a
committee thereof.
Derivative Financial Instruments:
The Series may engage in various portfolio investment strategies 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 if the value of the contract decreases due to an unfavorable change in the
price of the underlying security, or if the counterparty does not perform under
the contract.
- 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 margin variation and
are recognized by the Series as unrealized gains or losses. When the
contract is closed, the Series records a realized gain or loss equal
to the difference between the value of the contract at the time it was
opened and the value at the time it was closed.
Segregation:
In cases in which the 1940 Act and the interpretive positions of the
Securities and Exchange Commission ("SEC") require that the Series segregates
assets in connection with certain investments (e.g., futures), the Series will,
consistent with certain interpretive letters issued by the SEC, designate on its
books and records cash or other
47
MASTER SMALL CAP INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
liquid debt securities having a market value at least equal to the amount that
would otherwise be required to be physically segregated.
Investment Transactions and Investment Income:
Investment transactions are recorded on the dates the transactions are
entered into (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.
Securities lending:
The Series may lend securities to financial institutions that provide cash
or securities issued or guaranteed by the U.S. government as collateral, which
will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. The market value of the loaned
securities is determined at the close of business of the Series and any
additional required collateral is delivered to the Series on the next business
day. Where the Series receives securities as collateral for the loaned
securities, it collects a fee from the borrower. The Series typically receives
the income on the loaned securities but does not receive the income on the
collateral. Where the Series receives cash collateral, it may invest such
collateral and retain the amount earned on such investment, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities within five
business days. The Series may pay reasonable finder's, lending agent,
administrative and custodial fees in connection with its loans. In the event
that the borrower defaults on its obligation to return borrowed securities
because of insolvency or for any other reason, the Series could experience
delays and costs in gaining access to the collateral. The Series also could
suffer a loss where the value of the collateral falls below the market value of
the borrowed securities, in the event of borrower default or in the event of
losses on investments made with cash collateral.
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
shares of the net assets, income, expenses and realized and unrealized gains and
losses of the Series. Therefore, no federal income tax provision is required. It
is intended that the Master LLC's assets will be managed so an investor in the
Master LLC can satisfy the requirements of Subchapter M of the Internal Revenue
Code. Under the applicable foreign tax laws, a withholding tax may be imposed on
interest dividend, and capital gains at various rates.
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 statutes of limitations on the
Series' state and local tax returns may remain open for an additional year
depending upon the jurisdiction.
Recent Accounting Pronouncement:
In March 2008, Statement of Financial Accounting Standards No. 161,
"Disclosures about Derivative Instruments and Hedging Activities -- an amendment
of FASB Statement No. 133" ("FAS 161") was issued and is effective for fiscal
years beginning after November 15, 2008. FAS 161 is intended to improve
financial reporting for derivative instruments by requiring enhanced disclosure
that enables investors to understand how and why an entity uses derivatives, how
derivatives are accounted for, and how derivative instruments affect an entity's
results of operations and financial position. The impact of the Series'
financial statement disclosures, if any, is currently being assessed.
48
MASTER SMALL CAP INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
Other:
Expenses directly related to the Series are charged to that Series. Other
operating expenses shared by several funds are pro-rated among those funds on
the basis of relative net assets or other appropriate methods.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES:
The Master LLC, on behalf of the Series, has entered into an Investment
Advisory Agreement with BlackRock Advisors, LLC (the "Advisor"), an indirect,
wholly owned subsidiary of BlackRock, Inc., to provide investment advisory and
administration services. Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC
Financial Services Group, Inc. are principal owners of BlackRock, Inc.
The Advisor 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 the Advisor a monthly fee at an annual rate of 0.01% of the average
daily value of the Series' net assets.
The Advisor has entered into a contractual arrangement with the Master LLC
with respect to the Series under which the Advisor will waive its fees or
reimburse expenses so that the total operating expenses incurred by the Series
will not exceed 0.08% of the Series' average daily net assets. This arrangement
has a one-year term and is renewable. This amount is shown on the Statement of
Operations as fees waived by the Advisor.
The Advisor has entered into a separate sub-advisory agreement with
BlackRock Investment Management, LLC ("BIM"), an affiliate of the Advisor, under
which the Advisor pays BIM, for services it provides, a monthly fee that is a
percentage of the investment advisory fee paid by the Series to the Advisor.
For the six months ended June 30, 2008, the Series reimbursed the Advisor
$4,043 for certain accounting services, which is included in accounting services
in the Statement of Operations.
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 June 30,
2008, the Series lent securities with a value of $2,416,233 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 Advisor or in registered money market
funds advised by the Advisor or its affiliates. For the six months ended June
30, 2008, BIM received $148,155 in securities lending agent fees.
Pursuant to the terms of the custody agreement, custodian fees may be
reduced by amounts calculated on uninvested cash balances ("custody credits"),
which are shown on the Statement of Operations as fees paid indirectly.
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 six months ended June 30, 2008 were $174,555,892, and $215,406,565,
respectively.
49
MASTER SMALL CAP INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
4. SHORT-TERM BORROWINGS:
The Master LLC, on behalf of the Series, along with certain other funds
managed by the Advisor 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. On November
21, 2007, the credit agreement was renewed for one year under substantially the
same terms. 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, which is
included in miscellaneous expenses in the Statement of Operations. 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 six months ended June 30, 2008.
50
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
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.
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT
- -------- ------------------------------------- --------- -------------- -------
AEROSPACE & DEFENSE Other Securities $ 6,477,955 0.6%
AIR FREIGHT & LOGISTICS Other Securities 3,767,596 0.4
AIRLINES Other Securities 2,481,451 0.2
AUTO COMPONENTS Other Securities 7,687,699 0.7
AUTOMOBILES DaimlerChrysler AG 75,625 4,690,714 0.4
Honda Motor Co., Ltd. 139,800 4,770,908 0.5
Toyota Motor Corp. 225,800 10,658,665 1.0
Other Securities 14,028,865 1.3
-------------- ------
34,149,152 3.2
-------------- ------
BEVERAGES Other Securities 13,886,140 1.3
BIOTECHNOLOGY Other Securities 2,410,776 0.2
BUILDING PRODUCTS Other Securities 5,591,469 0.5
CAPITAL MARKETS UBS AG (a) 247,404 5,155,464 0.5
Other Securities 18,204,064 1.7
-------------- ------
23,359,528 2.2
-------------- ------
CHEMICALS BASF SE 80,438 5,543,913 0.5
Bayer AG 64,499 5,426,846 0.5
Other Securities 26,338,452 2.5
-------------- ------
37,309,211 3.5
-------------- ------
COMMERCIAL BANKS BNP Paribas SA 67,732 6,097,042 0.6
Banco Bilbao Vizcaya Argentaria SA 297,839 5,674,971 0.5
Banco Santander SA 521,062 9,506,325 0.9
Commonwealth Bank of Australia Ltd. 108,474 4,182,715 0.4
HSBC Holdings Plc 991,430 15,265,566 1.4
Mitsubishi UFJ Financial Group, Inc. 874,618 7,729,388 0.7
Royal Bank of Scotland Group Plc 1,341,311 5,710,136 0.6
Sumitomo Mitsui Financial Group, Inc. 543 4,083,473 0.4
Unicredit SpA 959,229 5,835,610 0.6
Other Securities 76,004,073 7.2
-------------- ------
140,089,299 13.3
-------------- ------
COMMERCIAL SERVICES & SUPPLIES Other Securities 7,700,134 0.7
COMMUNICATIONS EQUIPMENT Nokia Oyj 334,503 8,176,242 0.8
Other Securities 3,829,801 0.3
-------------- ------
12,006,043 1.1
-------------- ------
COMPUTERS & PERIPHERALS Other Securities 4,793,664 0.5
CONSTRUCTION & ENGINEERING Other Securities 10,656,169 1.0
CONSTRUCTION MATERIALS Other Securities 6,377,682 0.6
CONSUMER FINANCE Other Securities 2,191,133 0.2
CONTAINERS & PACKAGING Other Securities 1,009,455 0.1
DISTRIBUTORS Other Securities 940,163 0.1
DIVERSIFIED CONSUMER SERVICES Other Securities 186,305 0.0
DIVERSIFIED FINANCIAL SERVICES ING Groep NV CVA 158,275 5,004,296 0.5
Other Securities 11,158,479 1.0
-------------- ------
16,162,775 1.5
-------------- ------
See notes to financial statements
51
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT
- -------- ------------------------------------- --------- -------------- -------
DIVERSIFIED TELECOMMUNICATION
SERVICES France Telecom SA 151,335 $ 4,438,218 0.4%
Telefonica SA 357,958 9,472,939 0.9
Other Securities 25,007,589 2.4
-------------- ------
38,918,746 3.7
-------------- ------
ELECTRIC UTILITIES E.ON AG 53,136 10,709,279 1.0
Other Securities 28,616,239 2.7
-------------- ------
39,325,518 3.7
-------------- ------
ELECTRICAL EQUIPMENT ABB Ltd. 184,739 5,229,195 0.5
Other Securities 11,816,261 1.1
-------------- ------
17,045,456 1.6
-------------- ------
ELECTRONIC EQUIPMENT & INSTRUMENTS Other Securities 11,311,271 1.1
ENERGY EQUIPMENT & SERVICES Other Securities 5,934,962 0.6
FOOD & STAPLES RETAILING Tesco Plc 652,982 4,776,106 0.4
Other Securities 16,617,656 1.6
-------------- ------
21,393,762 2.0
-------------- ------
FOOD PRODUCTS Nestle SA Registered Shares 332,370 14,978,145 1.4
Other Securities 15,332,800 1.5
-------------- ------
30,310,945 2.9
-------------- ------
GAS UTILITIES Other Securities 4,955,653 0.5
HEALTH CARE EQUIPMENT & SUPPLIES Other Securities 6,378,191 0.6
HEALTH CARE PROVIDERS & SERVICES Other Securities 2,109,808 0.2
HOTELS, RESTAURANTS & LEISURE Other Securities 8,294,680 0.8
HOUSEHOLD DURABLES Other Securities 10,980,411 1.0
HOUSEHOLD PRODUCTS Other Securities 4,369,977 0.4
IT SERVICES Other Securities 2,801,370 0.3
INDEPENDENT POWER PRODUCERS &
ENERGY TRADERS Other Securities 2,002,089 0.2
INDUSTRIAL CONGLOMERATES Siemens AG 72,270 8,011,879 0.8
Other Securities 9,508,381 0.9
-------------- ------
17,520,260 1.7
-------------- ------
INSURANCE Allianz AG Registered Shares 37,418 6,581,962 0.6
Other Securities 40,838,856 3.9
-------------- ------
47,420,818 4.5
-------------- ------
INTERNET & CATALOG RETAIL Other Securities 790,368 0.1
INTERNET SOFTWARE & SERVICES Other Securities 740,160 0.1
LEISURE EQUIPMENT & PRODUCTS Other Securities 2,060,759 0.2
LIFE SCIENCES TOOLS & SERVICES Other Securities 541,736 0.1
MACHINERY Other Securities 22,146,199 2.1
MARINE Other Securities 5,335,474 0.5
MEDIA Other Securities 14,932,731 1.4
METALS & MINING Anglo American Plc 110,084 7,731,603 0.7
ArcelorMittal 72,665 7,141,154 0.7
BHP Billiton Ltd. 278,546 11,855,039 1.1
BHP Billiton Plc 184,422 7,072,581 0.7
Rio Tinto Ltd. 23,469 3,036,599 0.3
Rio Tinto Plc Registered Shares 83,246 10,025,058 0.9
Xstrata Plc 53,315 4,247,091 0.4
Other Securities 23,870,761 2.3
-------------- ------
74,979,886 7.1
-------------- ------
See notes to financial statements
52
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT
- -------- ------------------------------------- --------- -------------- -------
MULTI-UTILITIES RWE AG 36,869 $ 4,654,941 0.4%
Suez SA 86,754 5,880,853 0.6
Other Securities 8,439,349 0.8
-------------- ------
18,975,143 1.8
-------------- ------
MULTILINE RETAIL Other Securities 3,099,631 0.3
OFFICE ELECTRONICS Canon, Inc. 88,200 4,540,176 0.4
Other Securities 2,319,383 0.2
-------------- ------
6,859,559 0.6
-------------- ------
OIL, GAS & CONSUMABLE FUELS BG Group Plc 278,189 7,229,421 0.7
BP Plc 1,577,445 18,283,499 1.7
Eni SpA 216,899 8,057,887 0.8
Royal Dutch Shell Plc 297,074 12,177,494 1.2
Royal Dutch Shell Plc Class B 230,059 9,212,270 0.9
Statoilhydro ASA 108,294 4,040,423 0.4
Total SA 179,986 15,320,161 1.4
Other Securities 14,921,976 1.4
-------------- ------
89,243,131 8.5
-------------- ------
PAPER & FOREST PRODUCTS Other Securities 2,752,871 0.3
PERSONAL PRODUCTS Other Securities 3,316,540 0.3
PHARMACEUTICALS AstraZeneca Plc 120,974 5,143,607 0.5
GlaxoSmithKline Plc 456,019 10,080,644 1.0
Novartis AG Registered Shares 195,789 10,774,699 1.0
Roche Holding AG 59,298 10,660,139 1.0
Sanofi-Aventis 85,065 5,652,487 0.5
Other Securities 16,309,554 1.5
-------------- ------
58,621,130 5.5
-------------- ------
REAL ESTATE INVESTMENT TRUSTS (REITS) Other Securities 11,905,537 1.1
REAL ESTATE MANAGEMENT & DEVELOPMENT Other Securities 16,141,405 1.5
ROAD & RAIL Other Securities 8,705,794 0.8
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT Other Securities 4,545,430 0.4
SOFTWARE Nintendo Co., Ltd. 8,200 4,650,002 0.4
Other Securities 5,288,544 0.5
-------------- ------
9,938,546 0.9
-------------- ------
SPECIALTY RETAIL Other Securities 5,924,607 0.6
TEXTILES, APPAREL & LUXURY GOODS Other Securities 9,555,769 0.9
TOBACCO British American Tobacco Plc 125,553 4,330,801 0.4
Other Securities 5,195,419 0.5
-------------- ------
9,526,220 0.9
-------------- ------
TRADING COMPANIES & DISTRIBUTORS Other Securities 12,418,880 1.2
TRANSPORTATION INFRASTRUCTURE Other Securities 3,676,856 0.4
WATER UTILITIES Other Securities 512,930 0.1
WIRELESS TELECOMMUNICATION SERVICES Vodafone Group Plc 4,437,083 13,073,020 1.2
Other Securities 5,681,633 0.6
-------------- ------
18,754,653 1.8
-------------- ------
TOTAL COMMON STOCKS 1,026,309,661 97.2
-------------- ------
See notes to financial statements
53
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
EXCHANGE-TRADED FUNDS SHARES VALUE PERCENT
------------------------------------- --------- -------------- -------
iShares MSCI EAFE Index Fund 580,230 $ 39,861,801 3.8%
-------------- ------
TOTAL EXCHANGE-TRADED FUNDS 39,861,801 3.8
-------------- ------
INDUSTRY PREFERRED STOCKS
- -------- -------------------------------------
AUTOMOBILES Other Securities 1,254,469 0.1
HOUSEHOLD PRODUCTS Other Securities 607,358 0.1
MEDIA Other Securities 46,726 0.0
MULTI-UTILITIES Other Securities 263,966 0.0
-------------- ------
TOTAL PREFERRED STOCKS 2,172,519 0.2
-------------- ------
RIGHTS
-------------------------------------
COMMERCIAL BANKS Other Securities 49,023 0.0
TOTAL RIGHTS 49,023 0.0
-------------- ------
TOTAL LONG-TERM SECURITIES
(COST -- $921,272,409) 1,068,393,004 101.2
-------------- ------
BENEFICIAL
INTEREST
SHORT-TERM SECURITIES (000)
------------------------------------- ---------
BlackRock Liquidity Series, LLC Cash
Sweep Series, 2.56% (b)(c) $ 7,111 $ 7,110,912 0.7
-------------- ------
TOTAL SHORT-TERM SECURITIES
(COST -- $7,110,912) 7,110,912 0.7
============== ======
TOTAL INVESTMENTS
(COST -- $928,383,321*) 1,075,503,916 101.9
LIABILITIES IN EXCESS OF OTHER ASSETS (19,567,874) (1.9)
NET ASSETS
-------------- ------
$1,055,936,042 100.0%
============== ======
* The cost and unrealized appreciation (depreciation of investments, as of
June 30, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate Cost .................................................. $941,324,811
------------
Gross unrealized appreciation ................................... 204,863,295
Gross unrealized depreciation ................................... (70,684,190)
------------
Net unrealized appreciation ..................................... $134,179,105
------------
(a) Non-income producing security.
(b) Represents the current yield as of the report date.
(c) Investments in companies considered to be an affiliate of the Series, for
purposes of Section 2 (a)(3) of the Investment Company Act of 1940, were as
follows:
AFFILIATED NET ACTIVITY (000) INTEREST INCOME
- ---------- ------------------ ---------------
BlackRock Liquidity Series, LLC Cash Sweep Series $(6,418) $233,820
- - 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.
See notes to financial statements
54
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
JUNE 30, 2008 (UNAUDITED)
- Financial futures contracts purchased as of June 30, 2008, were as
follows:
NUMBER OF UNREALIZED
CONTRACTS ISSUE EXCHANGE EXPIRATION DATE FACE VALUE DEPRECIATION
- --------- ---------------------- --------- --------------- ---------- ------------
43 OMX Stock Index Future Stockholm July 2008 $ 681,701 $ (65,880)
108 DJ Euro Stoxx 50 Eurex September 2008 5,955,728 (208,334)
45 FTSE 100 Index Future LIFFE September 2008 5,163,908 (101,434)
22 SPI 200 Index Future Sydney September 2008 2,836,241 (98,183)
48 TOPIX Index Future Tokyo September 2008 6,252,247 (292,083)
---------
TOTAL $(765,944)
=========
- Forward foreign currency contracts as of June 30, 2008 were as
follows:
UNREALIZED
SETTLEMENT APPRECIATION
CURRENCY PURCHASED CURRENCY SOLD DATE (DEPRECIATION)
------------------ ------------------- ---------- --------------
AUD 3,186,150 USD 2,987,612 8/14/08 $ 47,781
CHF 1,813,000 USD 1,737,942 8/14/08 37,724
EUR 10,821,500 USD 16,745,401 8/14/08 252,441
EUR 620,000 USD 966,856 8/14/08 7,008
EUR 53,000 USD 81,915 8/14/08 1,334
GBP 301,000 USD 597,612 8/14/08 (206)
GBP 4,440,000 USD 8,633,170 8/14/08 179,075
JPY 87,113,000 USD 816,306 8/14/08 6,180
JPY 1,363,174,000 USD 13,085,321 8/14/08 (214,789)
SEK 4,841,000 USD 802,622 8/14/08 (836)
USD 1,618,334 AUD 1,715,000 8/14/08 (15,519)
USD 1,106,877 CHF 1,147,000 8/14/08 (16,504)
USD 196,463 CHF 203,000 8/14/08 (2,357)
USD 427,888 EUR 276,000 8/14/08 (5,638)
USD 13,332,680 EUR 8,586,000 8/14/08 (153,756)
USD 390,860 GBP 200,000 8/14/08 (6,088)
USD 6,040,685 GBP 3,085,000 8/14/08 (82,238)
USD 10,281,351 JPY 1,070,553,000 8/14/08 173,627
USD 294,678 JPY 1,780,000 8/14/08 (132)
---------
TOTAL $ 207,107
=========
- Currency Abbreviations:
AUD Australian Dollar
CHF Swiss Franc
EUR Euro
GBP British Pound
JPY Japanese Yen
SEK Swedish Krona
- - Effective January 1, 2008, the Series adopted Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" ("FAS 157"). FAS 157 clarifies the definition of fair
value, establishes a framework for measuring fair values and requires
additional disclosures about the use of fair value measurements. Various
inputs are used in determining the fair value of investments, which are as
follows:
- Level 1 -- price quotations in active markets/exchanges for identical
securities
- Level 2 -- other observable inputs (including, but not limited to:
quoted prices for similar assets or liabilities in markets that are
not active, inputs other than quoted prices that are observable for
the assets or liabilities (such as interest rates, yield curves,
volatilities, prepayment speeds, loss severities, credit risks, and
default rates) or other market-corroborated inputs)
- Level 3 -- unobservable inputs based on the best information available
in the circumstance, to the extent observable inputs are not available
(including the Series' own assumption used in determining the fair
value of investments)
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. For
information about the Series' policy regarding valuation of investments and
other significant accounting policies, please refer to Note 1 of the Notes to
Financial Statements.
The following table summarizes the inputs used as of June 30, 2008 in
determining the fair valuation of the Series' investments:
INVESTMENTS IN OTHER FINANCIAL
VALUATION INPUTS SECURITIES INSTRUMENTS*
- ---------------- -------------- ---------------
Level 1 ........ $ 41,426,133 $(765,944)
Level 2 ........ 1,034,077,783 207,107
Level 3 ........ -- --
-------------- ---------
TOTAL .......... $1,075,503,916 $(588,837)
============== =========
* Other financial instruments are futures and forward foreign currency
contracts.
See notes to financial statements
55
MASTER INTERNATIONAL INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2008 (UNAUDITED)
ASSETS
Investments at value -- unaffiliated (cost --$921,272,409) ..... $1,068,393,004
Investments at value -- affiliated (cost --$7,110,912) ......... 7,110,912
Cash ........................................................... 1,241,800
Cash on deposit for financial futures contracts ................ 4,499,000
Foreign currency at value (cost --$6,094,021) .................. 6,143,946
Unrealized appreciation on forward foreign currency contracts .. 705,170
Dividends receivable ........................................... 4,942,237
Investments sold receivable .................................... 188,571
Prepaid expenses ............................................... 31,186
--------------
Total assets ................................................... 1,093,255,826
--------------
LIABILITIES
Unrealized depreciation on forward foreign currency contracts .. 498,063
Investments purchased payable .................................. 413,252
Withdrawals payable to the Investors ........................... 36,000,501
Margin variation payable ....................................... 134,770
Investment advisory fees payable ............................... 2,855
Other affiliates payable ....................................... 8,803
Officer's and Directors' fees payable .......................... 209
Other accrued expenses payable ................................. 261,331
--------------
Total liabilities .............................................. 37,319,784
--------------
NET ASSETS
Net assets ..................................................... $1,055,936,042
==============
NET ASSETS CONSIST OF
Investors' capital ............................................. $ 908,998,040
Net unrealized appreciation/depreciation ....................... 146,938,002
--------------
Net assets ..................................................... $1,055,936,042
==============
See notes to financial statements
56
MASTER INTERNATIONAL INDEX SERIES
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED)
INVESTMENT INCOME
Dividends (net of $2,573,398 foreign withholding tax) .. $ 23,793,681
Interest from affiliates ............................... 233,820
-------------
Total income ........................................... 24,027,501
-------------
EXPENSES
Custodian .............................................. 311,407
Accounting services .................................... 82,696
Investment advisory .................................... 53,046
Professional ........................................... 33,220
Officer and Directors .................................. 12,780
Printing ............................................... 785
Miscellaneous .......................................... 53,786
-------------
Total expenses ......................................... 547,720
Less fees waived by advisor ............................ (6,728)
-------------
Total expenses after waiver ............................ 540,992
-------------
Net investment income .................................. 23,486,509
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments ......................................... (9,341,626)
In-kind redemption .................................. (1,719,947)
Futures ............................................. (1,916,406)
Foreign currency .................................... 234,913
-------------
(12,743,066)
-------------
Net change in unrealized appreciation/depreciation on:
Investments ......................................... (141,005,531)
Futures ............................................. (904,529)
Foreign currency .................................... 346,290
-------------
(141,563,770)
-------------
Total realized and unrealized loss ..................... (154,306,836)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $(130,820,327)
=============
See notes to financial statements
57
MASTER INTERNATIONAL INDEX SERIES
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2008 DECEMBER 31,
(UNAUDITED) 2007
---------------- --------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS
Net investment income ............................................ $ 23,486,509 $ 32,702,640
Net realized gain (loss) ......................................... (12,743,066) 21,342,720
Net change in unrealized appreciation/depreciation ............... (141,563,770) 60,461,397
-------------- --------------
Net increase (decrease) in net assets resulting from operations .. (130,820,327) 114,506,757
-------------- --------------
CAPITAL TRANSACTIONS
Proceeds from contributions ...................................... 389,573,397 740,944,038
Fair value of withdrawals ........................................ (345,988,589) (542,265,015)
-------------- --------------
Net increase in net assets derived from capital transactions ..... 43,584,808 198,679,023
-------------- --------------
NET ASSETS
Total increase (decrease) in net assets .......................... (87,235,519) 313,185,780
Beginning of period .............................................. 1,143,171,561 829,985,781
-------------- --------------
End of period .................................................... $1,055,936,042 $1,143,171,561
============== ==============
FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
2008 ------------------------------------------------------
(UNAUDITED) 2007 2006 2005 2004 2003
----------- ---------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN
Total investment return .......... (10.80)%(1) 10.80% 26.61% 13.64% 20.32% 38.97%
---------- ---------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Total expenses after waiver ...... 0.10%(2) 0.09% 0.10% 0.10% 0.09% 0.09%
---------- ---------- -------- -------- -------- --------
Total expenses ................... 0.10%(2) 0.10% 0.11% 0.10% 0.10% 0.10%
---------- ---------- -------- -------- -------- --------
Net investment income ............ 4.42%(2) 2.86% 2.70% 2.53% 2.55% 2.23%
---------- ---------- -------- -------- -------- --------
SUPPLEMENTAL DATA
Net assets, end of period (000) .. $1,055,936 $1,143,172 $829,986 $523,155 $322,067 $553,129
---------- ---------- -------- -------- -------- --------
Portfolio turnover ............... 16% 30% 23% 11% 14% 9%
---------- ---------- -------- -------- -------- --------
(1) Aggregate total investment return.
(2) Annualized.
See notes to financial statements
58
MASTER INTERNATIONAL INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
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 (the "1940 Act"), and is organized as a Delaware limited
liability company. The Master LLC's Limited Liability Company Agreement permits
the Directors to issue non-transferable interests in the Series subject to
certain limitations. The Series' financial statements are prepared in conformity
with accounting principles generally accepted in the United States of America,
which may require the use of management accruals and estimates. Actual results
may differ from these estimates.
(a) Valuation of investments
Equity investments traded on a recognized securities exchange or the NASDAQ
Global Market System are valued at the last reported sale price that day or the
NASDAQ official closing price, if applicable. For equity investments traded on
more than one exchange, the last reported sale price on the exchange where the
stock is primarily traded is used. Equity investments traded on a recognized
exchange for which there were no sales on that day are valued at the last
available bid price. If no bid price is available, the prior day's price will be
used, unless it is determined that such prior day's price no longer reflects the
fair value of the security. Financial futures contracts traded on exchanges are
valued at their last sale price. Investments in open-end investment companies
are valued at net asset value each business day. Short-term securities are
valued at amortized cost.
In the event that application of these methods of valuation results in a
price for an investment which is deemed not to be representative of the market
value of such investment, the investment will be valued by a method approved by
the Board of Directors (the "Board") as reflecting fair value ("Fair Value
Assets"). When determining the price for Fair Value Assets, the investment
advisor and/or sub-advisor seeks to determine the price that the Series might
reasonably expect to receive from the current sale of that asset in an
arm's-length transaction. Fair value determinations shall be based upon all
available factors that the investment advisor and/or sub-advisor deems relevant.
The pricing of all Fair Value Assets is subsequently reported to the Board or a
committee thereof.
Generally, trading in foreign 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 be determined as of the close of business on the NYSE. Occasionally,
events affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of business on the
NYSE that may not be reflected in the computation of the Series' net assets. If
events (for example, a company announcement, market volatility or a natural
disaster) occur during such periods that are expected to materially affect the
value of such securities, those securities will be valued at their fair value as
determined in good faith by the Board or by the investment advisor using a
pricing service and/or procedures approved by the Board.
(b) Derivative financial instruments
The Series may engage in various portfolio investment strategies 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 if the value of the contract decreases due to an unfavorable change in the
price of the underlying security or if the counterparty does not perform under
the contract.
- Forward foreign currency contracts -- The Series may enter into
forward foreign currency contracts as a hedge against either specific
transactions or portfolio positions. Forward currency contracts, when
used by the Series, help to manage the overall exposure to the foreign
currency backing some of the investments held by the Series. The
contract is marked-to-market daily and the change in market value is
recorded by the Series as an unrealized gain or loss. When the
contract is closed, the Series records a realized gain or loss equal
to the difference between the value at the time it was opened and the
value at the time it was closed.
59
MASTER INTERNATIONAL INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
- Financial futures contracts -- The Series may purchase or sell
financial futures contracts and options on such futures contracts.
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 margin variation 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.
- Foreign currency options and futures -- The Series may also purchase
or sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as a
short or long hedges 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
Foreign currency amounts are translated into United States dollars on the
following basis: (i) market value of investment securities, assets and
liabilities at the current rate of exchange; and (ii) purchases and sales of
investment securities, income and expenses at the rates of exchange prevailing
on the respective dates of such transactions.
The Series reports foreign currency related transactions as components of
realized gains for financial reporting purposes, whereas such components are
treated as ordinary income for federal income tax purposes.
(d) Preferred stock
The Series may invest in preferred stocks. Preferred stock has a preference
over common stock in liquidation (and generally in receiving dividends as well)
but is subordinated to the liabilities of the issuer in all respects. As a
general rule, the market value of preferred stock with a fixed dividend rate and
no conversion element varies inversely with interest rates and perceived credit
risk, while the market price of convertible preferred stock generally also
reflects some element of conversion value. Because preferred stock is junior to
debt securities and other obligations of the issuer, deterioration in the credit
quality of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar stated yield
characteristics. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer's board of directors.
Preferred stock also may be subject to optional or mandatory redemption
provisions.
(e) Segregation
In cases in which the 1940 Act and the interpretive positions of the
Securities and Exchange Commission ("SEC") require that the Series segregates
assets in connection with certain investments (e.g., futures), the Series will,
consistent with certain interpretive letters issued by the SEC, designate on its
books and records cash or other liquid debt securities having a market value at
least equal to the amount that would otherwise be required to be physically
segregated.
(f) Investment transactions and investment income
Investment transactions are recorded on the dates the transactions are
entered into (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.
60
MASTER INTERNATIONAL INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
(g) Dividends and distributions
Dividends and distributions paid by the Series are recorded on the
ex-dividend dates.
(h) 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.
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 statutes of limitations on the
Series' state and local tax returns may remain open for an additional year
depending upon the jurisdiction.
(i) Recent accounting pronouncement
Recent Accounting Pronouncement: In March 2008, Statement of Financial
Accounting Standards No. 161, "Disclosures about Derivative Instruments and
Hedging Activities -- an amendment of FASB Statement No. 133" ("FAS 161"), was
issued and is effective for fiscal years beginning after November 15, 2008. FAS
161 is intended to improve financial reporting for derivative instruments by
requiring enhanced disclosure that enables investors to understand how and why
an entity uses derivatives, how derivatives are accounted for, and how
derivative instruments affect an entity's results of operations and financial
position. The impact on the Series financial statement disclosures, if any, is
currently being assessed.
2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES:
The Master LLC, on behalf of the Series, entered into an Investment
Advisory Agreement with BlackRock Advisors, LLC (the "Advisor"), an indirect,
wholly owned subsidiary of BlackRock, Inc., to provide investment advisory and
administration services. Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC
Financial Services Group, Inc. ("PNC") are principal owners of BlackRock, Inc.
The Advisor is responsible for the management of the Series' portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Series. For such services, the
Series pays the Advisor a monthly fee at an annual rate of 0.01% of the average
daily value of the Series' net assets.
The Advisor has entered into a contractual arrangement with the Master LLC
with respect to the Series under which the Advisor will waive its fees or
reimburse expenses so that the total operating expenses incurred by the Series
will not exceed 0.12% of the Series' average daily net assets. This arrangement
has a one-year term and is renewable. This amount is shown on the Statement of
Operations as fees waived by the advisor.
The Advisor has entered into a sub-advisory agreement with BlackRock
Investment Management, LLC ("BIM"), an affiliate of the Advisor, under which the
Advisor pays BIM, for services it provides, a monthly fee that is equal to a
percentage of the investment advisory fee paid by the Series to the Advisor.
For the six months ended June 30, 2008, the Series reimbursed the Advisor
$7,617 for certain accounting services, which is included in accounting services
in the Statement of Operations.
In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"),
a wholly owned subsidiary of Merrill Lynch, received $25,149 in commissions on
the execution of portfolio security transactions for the Series for the six
months ended June 30, 2008.
61
MASTER INTERNATIONAL INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
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 six months ended June 30, 2008 were $283,039,338 and $168,644,084,
respectively.
4. SHORT-TERM BORROWINGS:
The Master LLC, on behalf of the Series, along with certain other funds
managed by the Advisor 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. On November
21, 2007, the credit agreement was renewed for one year under substantially the
same terms. 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, which is
included in miscellaneous in the Statement of Operations. 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 six
months ended June 30, 2008.
5. COMMITMENTS:
At June 30, 2008, the Series had entered into foreign exchange contracts,
in addition to the contracts listed on the Schedule of Investments, under which
it had agreed to buy various foreign securities with approximate values of
$52,000.
62
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED)
At its May 21, 2008 meeting, the Board of Trustees ("Board" or "Trustees")
considered the renewal of the existing Management Agreement (the "Current
Agreement") between the Manager and the American Beacon Funds (collectively, the
"Funds"). In preparation for the Board's consideration to renew the Current
Agreement, the Board and its Investment Committee undertook steps to gather and
consider information furnished by the Manager and Lipper, Inc. ("Lipper"). The
Board, with the assistance of independent legal counsel, requested and received
certain relevant information from the Manager.
In addition, the Board's Investment Committee worked with Lipper to obtain
relevant comparative information regarding the performance, fees and expenses of
the Funds. The Investment Committee held a separate meeting on May 9, 2008 to
consider the information provided by Lipper. Further, the Board took into
consideration information furnished for the Board's review and consideration
throughout the year at regular Board and Investment Committee meetings, as well
as information specifically prepared in connection with the renewal process.
On May 21, May 22 and June 4, 2008, the Board met to determine, among other
matters, whether to approve a new investment management agreement ("New
Agreement") between the Manager and the Funds. The New Agreement is necessary
because, on April 16, 2008, AMR Corporation ("AMR"), the parent company of the
Manager, entered into an agreement with Lighthouse Holdings, Inc. ("Lighthouse")
pursuant to which Lighthouse will acquire all of the capital stock of the
Manager ("Transaction") in exchange for cash and 10% of the capital stock of the
parent corporation of Lighthouse. Upon the closing of the Transaction
("Closing"), the Manager will cease to be a wholly owned subsidiary of AMR and
will become a subsidiary of Lighthouse. This change in control is deemed to be
an "assignment" under the Investment Company Act of 1940 ("1940 Act") of the
Funds' Current Agreement with the Manager. As required by the 1940 Act, the
Funds' Current Agreement provides for its automatic termination in the event of
an assignment, and it will, therefore, terminate upon the Closing.
To provide for the continuity of management for the Funds, the Board met to
consider the New Agreement with the Manager. The New Agreement for each Fund
will reflect substantially the same terms as the Current Agreement for each
Fund. In addition, the Current Agreement has been updated and modernized. As
part of this process, the primary administrative services provided by the
Manager to the Funds will be transferred to one single administrative services
agreement ("New Administrative Services Agreement"). The aggregate fee rates for
each Fund under the New Agreement and the New Administrative Services Agreement
will be the same as the fee rates imposed under the Current Agreement and the
Administrative Services Agreement between the Funds and the Manager (the
"Current Administrative Services Agreement").
The New Agreement is subject to shareholder approval. If approved by the
shareholders of the Funds, the New Agreement will become effective upon the
Closing or, if the Closing is not consummated, the New Agreement will become
effective on or about January 1, 2009. The Manager and Lighthouse anticipate
that the Closing will occur in the third calendar quarter of 2008.
Upon the Closing, Lighthouse directly will control the Manager. Lighthouse
currently does not anticipate any changes to the organization or structure of
the Funds, to the service providers or to the aggregate fee rates under the
Current Agreement. In addition, the portfolio managers at the Manager that
currently manage the Funds are expected to continue to manage the Funds after
the Closing. In that regard, the Manager and Lighthouse have entered into or
will enter into employment contracts that will take effect upon the Closing with
certain key personnel performing or overseeing the Funds' investment programs.
However, there can be no assurance that these personnel will choose to remain
employed by the Manager before or after the Closing. The Manager and the Funds
will continue to operate under their existing names. Potential benefits to the
Funds as a result of the Transaction include Lighthouse's intention to devote
additional resources to product development and distribution of Fund shares. Any
resulting growth of Fund assets may produce economies of scale that could
benefit shareholders of the Funds.
In addition, under the Current Agreement, the Manager may retain
subadvisors to provide investment advisory services for all or a portion of the
assets of a Fund. Pursuant to an exemptive order issued by the Securities and
Exchange Commission ("SEC"), the Manager is permitted to enter into new or
modified
63
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED)
investment advisory agreements with existing or new subadvisors ("New Investment
Advisory Agreements") without approval of a Fund's shareholders, but subject to
the approval of a Fund's Board.
In preparation for the Board's consideration to approve the New Agreement,
the Board held preliminary conference call meetings on April 15, 16 and 21,
2008, to discuss the New Agreement and the effect that approving the New
Agreement and would have on the Funds. The Board, with the assistance of
independent legal counsel, received a memorandum and related advice from their
legal counsel detailing the Board's responsibilities in considering the New
Agreement.
In connection with Board's consideration of the Current Agreement and New
Agreement, the Trustees considered, among other materials, responses by the
Manager to inquiries requesting:
- a description of the Transaction, the effects of the Transaction on
the Funds and the Board, and any proposed changes to the Funds, their
service providers or fee structure and other information;
- a description of any significant changes (actual or anticipated) to
principal activities, personnel, services provided to the Funds, or
any other area, including how these changes might affect the Funds;
- a copy of the firm's Form ADV registration statement with the SEC;
- a summary of any material past, pending or anticipated litigation or
regulatory proceedings involving the firm or its personnel, including
the results of any recent regulatory examination or independent audit;
- a profit/loss analysis of the firm and any actual or anticipated
economies of scale in relation to the services it provides to each
Fund;
- a description of any payments by the firm to support the Funds'
marketing efforts;
- an analysis of compensation, including a comparison with fees charged
to other clients for which similar services are provided, any proposed
changes to the fee schedule and the effect of any fee waivers;
- an evaluation of other benefits to the firm or Funds as a result of
their relationship, if any;
- confirmation that the firm's financial condition does not raise
concerns that the firm would be unable to continue providing the same
scope and quality of services to the Funds;
- a description of the scope of portfolio management services provided
to the Funds and the firm's other clients, including other registered
investment companies, whether such services differ, and any advantages
or disadvantages that might accrue to the Funds due to the firm's
involvement in other activities;
- a description of the personnel who are assigned primary responsibility
for managing the Funds, including any changes during the past year,
and a discussion of the adequacy of current and projected staffing
levels to service the Funds;
- a description of the basis upon which portfolio managers are
compensated, including any "incentive" arrangements;
- a discussion regarding the firm's participation in "soft dollar"
arrangements, if any, or other brokerage allocation policies with
respect to Fund transactions, including the firm's methodology for
obtaining the most favorable execution and the use of any affiliated
broker-dealers;
- a discussion of whether the firm receives, with respect to the Funds,
other compensation, including any payment for order flow or ECN
liquidity rebates;
- a description of any actual or potential conflicts of interest
anticipated in managing Fund assets;
- a summary of any material changes to the firm's compliance program
with regard to federal, state, corporate and Fund requirements and a
certification regarding the reasonable design of the compliance
program;
- a discussion of any material compliance problems and remedial actions;
- information regarding the firm's code of ethics, insider trading
policy and disaster recovery plan, including a description of any
material changes thereto;
- a description of the firm's affiliation with any broker-dealer;
- a discussion of any anticipated change in the firm's controlling
persons;
- verification of the firm's insurance coverage with regard to the
services provided to the Funds;
64
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED)
- a comparison of the performance of each Fund to comparable investment
companies and appropriate indices, including comments on the relative
performance of each Fund versus the respective peer group average;
- a discussion, if applicable, of any underperformance by a Fund
relative to its peer group and what, if any, remedial measures the
Manager has or intends to take;
- a comparison of advisory fees and expense ratios for comparable mutual
funds;
- an analysis of any material complaints received from Fund
shareholders;
- a description of the Manager's securities lending practices and the
fees received from such practices;
- a description of any revenue sharing activities with respect to the
Funds;
- a discussion of any rebate arrangements between the Manager and a
service provider to the Funds pursuant to which the Manager receives
direct or indirect benefits from the service provider;
- a description of the portfolio turnover rate and average execution
costs for each Fund; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
In connection with the Current Agreement and New Agreement, the Board also
obtained an analysis provided by Lipper that compared: (i) investment
performance of each Fund versus comparable investment companies and appropriate
indices; (ii) total Fund expenses of each Fund versus comparable mutual funds,
and (iii) each Fund's investment advisory fees versus comparable mutual funds.
For each Fund with more than one class of shares, the class of shares used for
comparative purposes was the class with the longest performance history, which
in most cases was the Institutional Class. References below to each Fund's
Lipper peer group are to the group of comparable mutual funds included in the
analysis provided by Lipper. The Current Agreement and New Agreement are each
referenced to herein as an "Agreement" and collectively, the "Agreements."
The Trustees also received memoranda from their legal counsel detailing the
Board's responsibilities pertaining to the approval of each Agreement. These
memoranda explained the regulatory requirements surrounding the Trustees'
process for evaluating investment advisors and the terms of the contracts.
In connection with the Board's consideration of the New Agreement, the
Trustees considered, among other information, the following factors, in addition
to other factors noted in the Proxy Statement:
(1) The manner in which each Fund's assets are managed will not change as a
result of the Transaction, and the same people who currently manage the
Fund's assets are expected to continue to do so after the Transaction;
(2) The aggregate fee rates payable by each Fund under the New Agreement and
the New Administrative Services Agreement are the same as the fee rates
payable under the Current Agreement and the Current Administrative Services
Agreement;
(3) The material terms regarding advisory services pursuant to the New
Agreement are substantially the same as the terms of the Current Agreement;
(4) The qualifications of the Manager's personnel who will provide advisory and
administrative services to the Funds are not expected to change;
(5) The Manager's financial condition and the post-Closing capitalization of
Lighthouse;
(6) The impact of the Transaction on the Manager's day-to-day operations;
(7) The capabilities, experience, corporate structure and capital resources of
Lighthouse;
(8) The long-term business goals of Lighthouse with regard to the Manager and
the Trusts;
(9) Fund shareholders will not bear any costs in connection with the
Transaction, inasmuch as AMR and Lighthouse will bear equally the costs,
fees and expenses incurred by the Funds in connection with the Proxy
Statement, the fees and expenses of accountants and attorneys relating to
the Transaction and
65
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED)
Proxy Statement, the fees and expenses incurred by the Funds in connection
with the Transaction, and the meeting fees of the Boards for meetings held
in connection with the Transaction;
(10) The Funds may realize benefits as a result of the Transaction, including
long-term economies of scale; and
(11) The potential for increased costs to the Funds in order to satisfy existing
obligations under the current Trustees' retirement plan.
Provided below is an overview of the other primary factors the Board
considered at its May 21, May 22 and June 4, 2008 meetings. The Board did not
identify any particular information that was most relevant to its consideration
to renew the Current Agreement and approve the New Agreement, and each Trustee
may have afforded different weight to the various factors. Legal counsel to the
Non-interested Trustees provided the Board with memoranda regarding its
responsibilities pertaining to the renewal of the Current Agreement and approval
of the New Agreement. Based on its evaluation, the Board unanimously concluded
that the terms of the Current Agreement were reasonable and fair and that the
renewal of each Current Agreement was in the best interests of each Fund and its
shareholders. The Board also unanimously concluded that the terms of the New
Agreement were reasonable and fair and that the approval of the New Agreement
was in the best interests of each Fund and its shareholders.
CONSIDERATIONS WITH RESPECT TO ALL FUNDS
In determining whether to renew the Current Agreement and approve the New
Agreement, the Trustees considered the best interests of each Fund separately.
While the Current Agreement for all of the Funds was considered at the Board
meetings on May 21, 2008, and the New Agreement for all of the Funds was
considered at the meetings on May 21, May 22 and June 4, 2008, the Board
considered each Fund's investment management relationships separately. In each
instance, the Board considered, among other things, the following factors: (1)
the nature and quality of the services provided; (2) the investment performance
of a Fund; (3) the costs incurred by the Manager in rendering its services and
its resulting profits or losses; (4) the extent to which economies of scale have
been taken into account in setting each fee schedule; (5) whether fee levels
reflect these economies of scale for the benefit of Fund investors; (6)
comparisons of services and fees with contracts entered into by the Manager with
other clients (such as pension funds and other institutional funds); and (7) any
other benefits derived or anticipated to be derived by the Manager from its
relationship with a Fund. The Trustees posed questions to various management
personnel of the Manager and Lighthouse regarding certain key aspects of the
materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of each
Fund's Current Agreement and the approval of each Fund's New Agreement, the
Board considered: the background and experience of key investment personnel and
the Manager's ability to retain them; the Manager's disciplined investment
approach and goal to provide consistent above average long-term performance at a
low cost; the Manager's continuing efforts to add new series and share classes
to enhance the Funds' product line; the Manager's record in building improved
compliance, control and credit functions that reduce risks to the Funds; the
addition of personnel to manage the Funds, promote sales and improve services,
including the addition of a separate new information technology (IT) department
at the Manager; the high rankings received by the Funds in service surveys; and
the active role played by the Manager in monitoring and, as appropriate,
recommending replacements for the master portfolios.
Based on the foregoing information, the Board concluded that the nature,
extent and quality of the management and advisory services provided by the
Manager were appropriate for each Fund and, thus, determined to renew the
Current Agreement and approve the New Agreement for each Fund.
Investment Performance. The Board evaluated the comparative information
provided by Lipper and the Manager regarding each Fund's investment performance
relative to its benchmark index(es) and peer group. The Board considered the
information provided by Lipper regarding its independent peer selection
methodology to select all peer groups and universes. The Board also considered
the performance reports and
66
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED)
discussions with management at Board and Committee meetings throughout the year.
A discussion regarding the Board's considerations with respect to each Fund's
performance appears below under "Additional Considerations and Conclusions with
Respect to Each Fund."
Costs of the Services to be Provided to the Funds and the Projected Profits
to be Realized by the Manager from its Relationship with the Funds. In analyzing
the cost of services and profitability of the Manager by Fund, the Board
considered the revenues earned and the expenses incurred by the Manager. The
profits or losses were noted at both an individual Fund level and at an
aggregate level for all Funds. The Board also considered that the Current and
New Agreements for the Funds stipulate that, to the extent that a Fund invests
all of its investable assets in another registered investment company (i.e., is
a Feeder Fund), the Fund will not pay the Manager a management fee. The index
series of the Funds operate under a master-feeder structure, but each of these
series invests in a master portfolio that is not managed by the Manager. As
such, the Board considered that the Manager does not receive a management fee
with respect to the International Equity Index, S&P 500 Index, or Small Cap
Index Funds.
The Board also noted that the Manager proposed to continue the expense
waivers and reimbursements for certain Funds and classes that were in place
during the last fiscal year. The Board considered that the Manager receives
service and administrative fees to compensate the Manager for providing
administrative services to the Funds and to compensate third-party
administrators and broker-dealers for services to Fund shareholders. The Board
also noted that certain classes of the Funds maintain higher expense ratios in
order to compensate third-party distributors.
Based on the foregoing information, the Board concluded that the
profitability levels were reasonable in light of the services performed by the
Manager. A discussion regarding the Board's considerations with respect to each
Fund's fee rates is set forth below under "Additional Considerations and
Conclusions with Respect to Each Fund."
Economies of Scale. In considering the reasonableness of the management
fees, the Board considered whether economies of scale will be realized as the
Funds grow and whether fee levels reflect these economies of scale for the
benefit of Fund shareholders. The Board noted that certain Funds have grown
their shareholder base, which has spread fixed costs over a larger shareholder
and asset base.
The Board also considered the Manager's representations that its costs have
increased due primarily to greater service provider and regulatory costs. The
Manager also represented that it anticipates further economies of scale would be
largely offset by higher costs of adding and retaining qualified personnel,
improving technology and increasing demands on its advisory business.
Based on the foregoing information, the Board concluded that the Manager
fee schedules for each Fund provides for a reasonable sharing of benefits from
any economies of scale with the Funds.
Benefits Derived from the Relationship with the Funds. The Board considered
the "fall-out" or ancillary benefits that accrue to the Manager as a result of
the advisory relationships with the Funds, including greater exposure in the
marketplace with respect to the Manager's investment process and expanding the
level of assets under management by the Manager. In addition, the Board noted
that the Manager provides services to the Funds at a relatively low cost. In
this regard, the Board considered that the benefit plans of AMR have invested
substantial assets in the Funds, which helps reduce costs for other Fund
shareholders, just as the investment of other Fund shareholders helps to reduce
costs for AMR's benefit plans.
Based on the foregoing information, the Board concluded that the potential
benefits accruing to the Manager by virtue of its relationships with the Funds
appear to be fair and reasonable.
67
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED)
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO EACH FUND
The performance comparisons below were made versus each Fund's Lipper peer
universe median. References to the Lipper expense group below are to the group
of comparable mutual funds included in the analysis provided to the Trustees by
Lipper, Inc.
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE S&P 500 INDEX FUND
In considering the renewal of the Current Agreement and the approval of the
New Agreement, the Trustees considered the following additional factors: (1) the
Fund's master portfolio outperformed the peer universe median for the one-,
three-, five- and ten-year periods ended March 31, 2008 and (2) the Fund's
expense ratio was lower than its Lipper expense group median.
Based on these and other considerations, the Trustees concluded that the
fees paid to the Manager under the Agreements are fair and reasonable,
determined that the S&P 500 Index Fund and its shareholders would benefit from
the Manager's continued management of the Fund, approved the renewal of the
Current Agreement and approved the New Agreement with respect to the S&P 500
Index Fund.
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE SMALL CAP INDEX
FUND
In considering the renewal of the Current Agreement and the approval of the
New Agreement, the Trustees considered the following additional factors: (1) the
Fund's master portfolio outperformed the peer universe median for the one-,
three- and five-year periods ended March 31, 2008 and (2) the Fund's expense
ratio was lower than its Lipper expense group median.
Based on these and other considerations, the Trustees concluded that the
fees paid to the Manager under the Agreements are fair and reasonable,
determined that the Small Cap Index Fund and its shareholders would benefit from
the Manager's continued management of the Fund, approved the renewal of the
Current Agreement and approved the New Agreement with respect to the Small Cap
Index Fund.
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE INTERNATIONAL
EQUITY INDEX FUND
In considering the renewal of the Current Agreement and approval of the New
Agreement, the Trustees considered the following additional factors: (1) the
performance of the Fund's master portfolio underperformed its peer universe
median for the one-year period but outperformed for the three- and five-year
periods ended March 31, 2008 and (2) the Fund's expense ratio was lower than the
Lipper expense group median.
Based on these and other considerations, the Trustees concluded that the
fees paid to the Manager under the Agreements are fair and reasonable,
determined that the International Equity Index Fund and its shareholders would
benefit from the Manager's continued management of the Fund, approved the
renewal of the Current Agreement and approved the New Agreement with respect to
the International Equity Index Fund.
68
This page intentionally left blank.
69
(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 PORTFOLIO AVAILABILITY OF PROXY VOTING POLICY
SCHEDULES AND RECORDS
In addition to the Schedule of A description of the policies and
Investments provided in each procedures that the Funds use to
semi-annual and annual report, each determine how to vote proxies
Fund files a complete schedule of its relating to portfolio securities
portfolio holdings with the is available in each Fund's Statement
Securities and Exchange Commission of Additional Information, which may
("SEC") on Form N-Q as of the first be obtained free of charge by calling
and third fiscal quarters. The Fund's 1-800-967-9009 or by accessing the
Forms N-Q are available on the SEC's SEC's website at www.sec.gov. Each
website at www.sec.gov. The Forms N-Q Fund's proxy voting record for the
may also be reviewed and copied at most recent year ended June 30 is
the SEC's Public Reference Room, 450 filed annually with the SEC on Form
Fifth Street, NW, Washington, DC N-PX. The Fund's Forms N-PX are
20549. Information regarding the available on the SEC's website at
operation of the SEC's Public www.sec.gov. The Fund's proxy voting
Reference Room may be obtained by record may also be obtained by
calling 1-800-SEC-0330. A complete calling 1-800-967-9009.
schedule of the Fund's portfolio
holdings is also available on the
Funds' website
(www.americanbeaconfunds.com)
approximately thirty days after the
end of each fiscal quarter.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES
TRUST SERVICES ERNST & YOUNG LLP Portland, Maine
Boston, Massachusetts Kansas City, Missouri 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. PlanAhead Class is a registered service mark of American Beacon
Advisors, Inc. American Beacon Funds, American Beacon Small Cap Index Fund, and
American Beacon International Equity Index Fund are service marks of American
Beacon Advisors, Inc.
SAR 6/08
62517
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON FUNDS(SM) LOGO)
Semi-Annual Report
(GRAPHIC)
June 30, 2008
TREASURY INFLATION PROTECTED SECURITIES 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
Market and Performance Overview 2
Schedule of Investments 5
Additional Information Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of
the reporting period and are subject to change. Each advisor's strategies and
the Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
American Beacon Funds June 30, 2008
(PHOTO OF WILLIAM F. QUINN)
Fellow Shareholders,
I am pleased to present to you the Semi-Annual Report for the American Beacon
Treasury Inflation Protected Securities Fund for the six months ended June 30,
2008.
The Institutional Class of the Fund reported a total return of 5.80% for
this six-month period with an expense ratio of 43 basis points (0.43%) for its
most recent fiscal year. The Fund outperformed the Lipper TIPS Index return by
143 basis points (1.43%).
During the period, the sub-prime mortgage crisis continued to cause
uncertainties surrounding banks, investment banks and the entire financial
system, resulting in an extraordinary amount of volatility. The Federal Reserve
("Fed") was challenged to fulfill its dual mandate of balancing the risks to
both growth and inflation. Inflation concerns were mounting, but weak economic
growth and turmoil in the financial markets limited the Fed's ability to raise
interest rates in the near term to strengthen the U.S. dollar and counter
inflation. We feel the Funds' strategy of inflation protection combined with
lower than average expense ratios will continue to benefit the Fund's yield
while protecting the Fund's liquidity for the long term.
Please review the enclosed market overview, portfolio listings and detailed
financial data. As always, we welcome the opportunity to serve your financial
needs. To obtain further details about the American Beacon Funds family or to
access your account information, please visit our website at
www.americanbeaconfunds.com. Thank you for your continued confidence in the
Fund.
Sincerely,
/s/ William F. Quinn
William F. Quinn
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
JUNE 30, 2008 (UNAUDITED)
The three-fold predicament of financial market stress, below-trend
economic growth, and higher-than-desired inflation put official policymakers in
a difficult spot in the first half of 2008. This predicament also led to as
turbulent a fixed income market environment as has been seen in recent memory.
Over the first half of 2008, the Treasury yield curve steepened as short rates
declined while long rates rose, while securities linked with seemingly any kind
of credit - corporate, mortgage, consumer receivable, and even municipal -
performed poorly. Market liquidity deteriorated, underwriting standards
tightened, and banks and broker dealers took massive writedowns. In the first
half of 2008, monetary and fiscal policymakers lowered official interest rates,
passed fiscal stimulus measures, engineered a buyout of Bear Stearns, and
instituted new liquidity mechanisms for market participants.
Inflation as measured by the Consumer Price Index ("CPI") is higher
than policymakers want. Sharp increases in the price of crude oil (the crude oil
futures contract traded at $96 per barrel at the end of December 2007, and $140
per barrel at the end of June 2008), as well as increases in the prices of food
and other commodities, suggested that unwanted price pressures remained. For
example, in June, the CPI increased at a 5.0% year-over-year pace, while the CPI
excluding energy increased at a 2.4% year-over-year pace. Federal Reserve Board
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") in the first half of 2008. Over this period, the
Lehman Brothers U. S. TIPS Index returned 4.88%, while Lehman's Intermediate
(1-10 year maturity) TIPS Index returned 5.94%.
Inflation expectations as evidenced by breakeven inflation rates (the
spread between similar maturity nominal and inflation-protected securities)
ranged approximately 39 basis points (0.39%) from high to low in the first two
quarters of 2008. In early March, breakevens reached their high for the period,
at 2.62%, while in late January they bottomed, at 2.23%. On June 30, 10-year
breakevens were approximately 2.57%.
The U.S. Treasury continues to be committed to the TIPS market, with
$30 billion of new supply auctioned in the first half of 2008. At year-end 2007,
the total outstanding market value of TIPS was approximately $500 billion.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM)
JUNE 30, 2008 (UNAUDITED)
The Institutional Class of the Fund returned 5.80% for the period from
January 1, 2008 through June 30, 2008, trailing the Lehman Brothers 1-10 Yr U.S.
TIPS Index (the "Index") return of 5.94%. The Fund outperformed the Lipper TIPS
Index return of 4.37% for the same time period.
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 6/30/08
-------------------------
SINCE
6 INCEPTION
MONTHS* 1 YEAR 3 YEARS 6/30/04
------ ------ ------- ---------
Institutional Class(1, 3) ....... 5.80% 15.25% 6.02% 5.92%
Lehman Bros. 1 - 10 Yr. U.S. TIPS
Index(2) ..................... 5.94% 15.20% 6.36% 6.41%
Lehman Bros. U.S. TIPS Index(2).. 4.88% 15.09% 5.59% 6.51%
Lipper TIPS Index(2) ............ 4.37% 13.77% 4.83% 6.07%
* NOT ANNUALIZED
1. Performance shown is historical and may not be indicative of future
returns. Investment returns and principal value will vary, and shares may
be worth more or less at redemption than at original purchase. Performance
shown is as of date indicated, and current performance may be lower or
higher than the performance data quoted. To obtain performance as of the
most recent month end, please visit www.americanbeaconfunds.com or call
1-800-967-9009. Fund performance in the table above does not reflect the
deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
2. The Lehman Bros. 1-10 Yr. U.S. TIPS Index is an unmanaged market index
comprising U.S. Treasury inflation-indexed securities with maturities
between one and ten years while the Lehman Bros. U.S. TIPS Index includes
all maturities. The Lipper TIPS Index tracks the results of the 30 largest
mutual funds in the Lipper TIPS category. Lipper is an independent mutual
fund research and ranking service. One cannot directly invest in an index.
3. The total annual Fund operating expense ratio set forth in the most recent
prospectus for the Fund was 0.43%. After contractual expense reimbursements
through February 28, 2009, the net expense ratio disclosed in the most
recent prospectus was 0.35%. The expense ratio above may vary from the
expense ratios presented in other sections of this report that is based on
expenses incurred during the period covered by this report.
The Fund underperformed the Index for the six-month period by 14 basis
points (0.14%). Much of the Fund's underperformance can be attributed to Fund
expenses.
Nearly all of the Fund's performance occurred in the 1st quarter,
specifically in January and February. The unexpected spike in inflation over the
last part of 2007 and into 2008 led investors into TIPS, causing real yields to
fall sharply.
The Fund maintained a duration neutral position relative to the Index. From
a yield curve positioning standpoint, the Fund was underweight the 2010-2013
maturities and overweight the 2014-2018 maturities. As the real yield curve
steepened during the period, the Fund's overweight in the longer maturity TIPS
allowed the Fund's holdings to outperform relative to the Index before the
application of Fund expenses.
The Fund remains focused on investing primarily in TIPS to provide
inflation protection and income to its shareholders.
TOP TEN HOLDINGS
% OF
NET
ASSETS
------
U.S. Treasury Note, 2.000%, Due 1/15/2014 .. 9.2%
U.S. Treasury Note, 0.875%, Due 4/15/2010 .. 8.7%
U.S. Treasury Note, 1.625%, Due 1/15/2015 .. 8.4%
U.S. Treasury Note, 3.000%, Due 7/15/2012 .. 8.3%
U.S. Treasury Note, 2.375%, Due 4/15/2011 .. 7.5%
U.S. Treasury Note, 1.875%, Due 7/15/2013 .. 7.3%
U.S. Treasury Note, 2.375%, Due 1/15/2017 .. 6.6%
U.S. Treasury Note, 2.000%, Due 7/15/2014 .. 6.2%
U.S. Treasury Note, 2.625%, Due 7/15/2017 .. 5.7%
U.S. Treasury Note, 1.875%, Due 7/15/2015 .. 5.6%
SECTOR ALLOCATION
% OF
FIXED INCOME
------------
US TREASURY OBLIGATIONS ... 100.0%
3
FUND EXPENSES
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM)
JUNE 30, 2008 (UNAUDITED)
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The examples below are intended to help you
understand the ongoing cost (in dollars) of investing in the Fund and to compare
these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period and held for the entire period from January 1, 2008 through June
30, 2008.
ACTUAL EXPENSES
The "Actual" line of the table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" line of the table provides information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" line of the
table is useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
Expenses
Beginning Ending Paid During
Account Account Period*
Value Value 1/1/08-
1/1/08 6/30/08 6/30/08
--------- --------- -----------
INSTITUTIONAL CLASS
Actual .......................... $1,000.00 $1,057.96 $1.51
Hypothetical (5% return before
expenses) .................... $1,000.00 $1,023.39 $1.49
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.30% 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 (182) by
days in the year (366) to reflect the half year period.
4
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
SCHEDULE OF INVESTMENTS
June 30, 2008 (Unaudited)
PAR
AMOUNT VALUE
---------- --------
(DOLLARS IN
THOUSANDS)
U.S. TREASURY OBLIGATIONS - 95.49%
4.25%, Due 1/15/2010 ++ ...................... $ 11,228 $ 12,042
0.875%, Due 4/15/2010 ++ ..................... 27,005 27,472
3.50%, Due 1/15/2011 ++ ...................... 3,659 3,983
2.375%, Due 4/15/2011 ++ ..................... 22,378 23,712
3.375%, Due 1/15/2012 ++ ..................... 6,205 6,850
2.00%, Due 4/15/2012 ++ ...................... 6,509 6,867
3.00%, Due 7/15/2012 ++ ...................... 23,724 26,054
0.625%, Due 4/15/2013 ++ ..................... 5,182 5,163
1.875%, Due 7/15/2013 ++ ..................... 21,821 23,069
2.00%, Due 1/15/2014 ++ ...................... 27,461 29,154
2.00%, Due 7/15/2014 ++ ...................... 18,299 19,433
1.625%, Due 1/15/2015 ++ ..................... 25,680 26,520
1.875%, Due 7/15/2015 ++ ..................... 16,977 17,777
2.00%, Due 1/15/2016 ++ ...................... 15,907 16,755
2.50%, Due 7/15/2016 ++ ...................... 15,910 17,385
2.375%, Due 1/15/2017 ++ ..................... 19,304 20,895
2.625%, Due 7/15/2017 ++ ..................... 16,161 17,850
--------
TOTAL U.S. TREASURY OBLIGATIONS ................. 300,981
--------
SHARES
----------
SHORT TERM INVESTMENTS - 0.39%
American Beacon Money Market Select
Fund # ................................. 1,220,135 1,220
--------
TOTAL INVESTMENTS - 95.88% (Cost $296,277) ... $302,201
OTHER ASSETS, NET OF LIABILITIES - 4.12% ..... 12,995
--------
TOTAL NET ASSETS - 100.00% ................... $315,196
========
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
5
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2008 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS:
Investments in unaffiliated securities, at value A ..... $ 300,981
Investments in affiliated securities, at value B ....... 1,220
Dividends and interest receivable ...................... 2,590
Receivable for fund shares sold ........................ 10,619
Prepaid expenses ....................................... 5
-----------
TOTAL ASSETS ........................................ 315,415
-----------
LIABILITIES:
Management and investment advisory fees payable
(Note 2) ............................................ 157
Administrative service and service fees payable ........ 23
Other liabilities ...................................... 39
-----------
TOTAL LIABILITIES ................................... 219
-----------
NET ASSETS ................................................ $ 315,196
===========
ANALYSIS OF NET ASSETS:
Paid-in-capital ........................................ 299,339
Undistributed net investment income .................... 11,553
Accumulated net realized loss .......................... (1,619)
Unrealized appreciation of investments, futures
contracts, and foreign currency ..................... 5,923
-----------
NET ASSETS ................................................ $ 315,196
===========
SHARES OUTSTANDING (NO PAR VALUE):
Institutional Class .................................... 29,255,123
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
Institutional Class .................................... $ 10.77
===========
- ----------
A Cost of investments in unaffiliated securities .......... $ 295,057
B Cost of investments in affiliated securities ............ $ 1,220
See accompanying notes
6
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) (IN THOUSANDS)
INVESTMENT INCOME:
Dividend income from affiliated securities ................ $ 63
Interest income ........................................... 12,101
-------
TOTAL INVESTMENT INCOME ................................ 12,164
-------
EXPENSES:
Management and investment advisory fees (Note 2) .......... 333
Administrative service fees (Note 2):
Institutional Class .................................... 206
Transfer agent fees:
Institutional Class .................................... 30
Custody and fund accounting fees .......................... 24
Professional fees ......................................... 13
Registration fees and expenses ............................ --
Prospectus and shareholder reports ........................ 2
Other expenses ............................................ 4
-------
TOTAL EXPENSES ......................................... 612
-------
Net fees waived and expenses reimbursed by Manager
(Note 2) ............................................... (1)
-------
NET EXPENSES ........................................... 611
-------
NET INVESTMENT INCOME ........................................ 11,553
-------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments ............................................ (105)
Change in net unrealized appreciation or depreciation of:
Investments ............................................ 4,279
-------
NET GAIN ON INVESTMENTS ................................ 4,174
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......... $15,727
=======
See accompanying notes
7
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six Months
Ended Year Ended
June 30, December
2008 31, 2007
----------- ----------
(unaudited)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ..................................... $ 11,553 $ 2,643
Net realized loss on investments, futures contracts, and
foreign currency transactions .......................... (105) (72)
Change in net unrealized appreciation or (depreciation) of
investments, futures contracts, and foreign currency
translations ........................................... 4,279 1,889
--------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... 15,727 4,460
--------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class .................................... -- (2,630)
Net realized gain on investments:
Institutional Class .................................... -- (19)
--------- --------
NET DISTRIBUTIONS TO SHAREHOLDERS ...................... -- (2,649)
--------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ............................. 358,393 207,597
Reinvestment of dividends and distributions ............... -- 2,649
Cost of shares redeemed ................................... (282,621) (22,152)
--------- --------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE
TRANSACTIONS ........................................ 75,772 188,094
--------- --------
NET INCREASE IN NET ASSETS ................................... 91,499 189,905
--------- --------
NET ASSETS:
Beginning of period ....................................... 223,697 33,792
--------- --------
END OF PERIOD * ........................................... $ 315,196 $223,697
========= ========
*Includes undistributed net investment income of ............. $ 11,553 $ --
========= ========
See accompanying notes
8
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Funds (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940 (the
"Act"), as amended, as a no load, diversified, open-end management investment
company. These financial statements and notes to the financial statements relate
to the American Beacon Treasury Inflation Protected Securities Fund (the
"Fund"), a series of the Trust.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation ("AMR"), the parent company of American Airlines, Inc.
("American"), and was organized in 1986 to provide business management,
advisory, administrative and asset management consulting services to the Trust
and other investors.
On April 16, 2008, AMR, the parent company of the Manager, announced that
it had reached a definitive agreement to sell all of its interests in the
Manager to Lighthouse Holdings, Inc., which is owned by investment funds
affiliated with Pharos Capital Group, LLC and TPG Capital, L.P. AMR will acquire
a minority equity stake in the parent corporation of Lighthouse Holdings, Inc.
Completion of the sale would result in a change of control of the Manager, but
there are no anticipated material changes in the services to be provided by the
Manager or in the fee rate charged by the Manager to the Fund. The target
closing date for the proposed acquisition is expected to be no later than
September 30, 2008. Based in Dallas and Nashville, Pharos Capital Group, LLP
invests through private equity funds, primarily in companies seeking later stage
equity funding for internal growth, acquisitions, management buyouts or
recapitalizations across industry sectors. TPG Capital, L.P. is the global
buyout group of TPG, a leading private investment firm with more than $50
billion of assets under management. TPG Capital, L.P. has extensive experience
with global public and private investments executed through leveraged buyouts,
recapitalizations, spinouts, joint ventures and restructurings.
Valuation of Investments
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 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").
The Fund adopted the provisions of Statement of Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"), effective with the
beginning of the Fund's fiscal year. 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. The three levels of the hierarchy under FAS 157 are described
below:
Level 1 - Quoted prices in active markets for identical securities.
9
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
Level 2 - Prices determined using other significant observable inputs.
These may include quoted prices for similar securities, interest rates,
prepayment speeds, credit risk, and others.
Level 3 - Prices determined using significant unobservable inputs.
Unobservable inputs reflect the Fund's own assumptions about the factors
market participants would use in pricing an investment, and would be based
on the best information available.
A summary of the inputs used to value the Fund's net assets as of June 30, 2008
is as follows (in thousands):
Investments
Valuation Inputs in Securities
---------------- -------------
Level 1 - Quoted Prices ........................ $302,201
Level 2 - Other significant observable inputs .. --
Level 3 - Significant unobservable inputs ...... --
--------
Total .......................................... $302,201
The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities. For
example, money market securities are valued using amortized cost, in accordance
with rules under the Investment Company Act of 1940. Generally, amortized cost
approximates the current fair value of a security, but since the value is not
obtained from a quoted price in an active market, such securities are reflected
as Level 2.
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.
Dividends to Shareholders
Dividends from net investment income of the Fund normally will be declared
and paid at least semi-annually. Distributions, if any, of net realized capital
gains are generally paid at least annually and recorded on the ex-dividend date.
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
10
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
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.
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory, and fund management. Investment assets of the Fund may be
managed by multiple investment advisors which have entered into separate
investment advisory agreements with the Manager. As compensation for performing
the duties required under the Management Agreement, the Manager receives from
the Fund an annualized fee equal to 0.10% of the average daily net assets plus
amounts paid by the Manager to the investment advisors hired by the Manager to
direct investment activities of the Fund. Management fees paid during the six
months ended June 30, 2008 were as follows:
AMOUNTS PAID TO NET AMOUNTS RETAINED
MANAGEMENT FEE RATE MANAGEMENT FEE INVESTMENT ADVISORS BY MANAGER
- ------------------- -------------- ------------------- --------------------
0.15% - 0.19% $333,204 $127,332 $205,872
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.
11
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
Investment in Affiliated Funds
The Fund is permitted, pursuant to an exemptive order by the Securities and
Exchange Commission ("SEC") and procedures approved by the Board, to invest up
to 25% of its total assets in the American Beacon Money Market Select Fund (the
"Select Fund"). The Fund and the Select Fund have the same investment advisor
and, therefore, are considered to be affiliated. The Manager serves as
investment advisor to the Select Fund and receives from the Select Fund an
annualized fee equal to 0.10% of the Select Fund's average daily net assets.
During the six months ended June 30, 2008, fees earned by the Manager from the
Select Fund were $1,726.
Interfund Lending Program
Pursuant to an exemptive order by the SEC, the Fund, along with other
registered investment companies having management contracts with the Manager,
may participate in an interfund lending program as a borrower. This program
provides an alternative credit facility allowing the Fund to borrow from other
participating Funds. For the six months ended June 30, 2008, the Fund did not
utilize the credit facility.
Reimbursement of Expenses
The Manager agreed to reimburse the Fund to the extent that total annual
fund operating expenses exceed the Fund's expense cap. For the six months ended
June 30, 2008, the Manager waived or reimbursed expenses of $1,279.
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.
For the six months ended June 30, 2008, the Fund was able to recoup prior
year fee waivers totaling $27,929.
3. FEDERAL INCOME AND EXCISE TAXES
It is the policy of the Fund to comply with the requirements of Subchapter
M of the Internal Revenue Code and to distribute substantially all net
investment income as well as any net realized capital gains on the sale of
investments. Therefore, no federal income or excise tax provision is required.
The Fund 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 the 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
12
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
investment income, net realized capital gains and net unrealized appreciation,
as applicable, as the income is earned or capital gains are recorded.
The tax character of distributions paid during the six months ended June
30, 2008 and the fiscal year ended December 31, 2007 were as follows (in
thousands):
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2008 2007
----------- ------------
(Unaudited)
DISTRIBUTIONS PAID FROM:
Ordinary income* .......... $-- $2,630
Tax return of capital ..... -- 19
--- ------
TOTAL TAXABLE DISTRIBUTIONS .. $-- $2,649
=== ======
* For tax purposes, short-term capital gains distributions are considered
ordinary income distributions.
As of June 30, 2008, the components of distributable earnings on a tax
basis were as follows (in thousands):
Cost basis of investments for federal income tax purposes .. $296,527
Unrealized appreciation .................................... 5692
Unrealized depreciation .................................... (18)
--------
Net unrealized appreciation/(depreciation) ................. 5,674
Undistributed ordinary income .............................. 11,553
Undistributed long-term gain/(loss) ........................ (1,370)
--------
Distributable earnings ..................................... $ 15,857
========
Financial reporting records are adjusted for permanent book/tax differences
to reflect tax character. Financial records are not adjusted for temporary
differences. The temporary differences between financial reporting and tax-basis
reporting of unrealized appreciation/(depreciation) are attributable primarily
to the tax deferral of losses from wash.
Due to inherent differences in the recognition of income, expenses and
realized gains/(losses) under U.S. generally accepted accounting principles and
federal income tax regulations, permanent differences between book and tax
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities.
At June 30, 2008, the capital loss carry forward positions for federal
income tax purposes were $144,311, $974,237, $110,477, and $141,206, expiring in
2013, 2014, 2015, and 2016, respectively.
4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of Investment transactions for the six
months ended June 30, 2008, excluding short-term investments, were $343,090,248
and $267,911,007, respectively. The Fund had purchases and sales of U.S.
Government securities of $343,090,248 and $267,911,007, respectively.
A summary of the Fund's transactions in the Select Fund for the six months
ended June 30, 2008 is set forth below:
JUNE 30, 2008
DECEMBER 31, 2007 SHARES/MARKET
AFFILIATE SHARES/MARKET VALUE PURCHASES SALES VALUE
- --------- ------------------- ----------- ----------- -------------
Select Fund .. $4,476,103 $60,250,054 $63,506,022 $1.220,135
13
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
5. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares (dollars and
shares in thousands):
Six Months Ended June 30, 2008
INSTITUTIONAL CLASS
-------------------
SHARES AMOUNT
------- ---------
Shares sold ......................... 34,040 $ 358,393
Reinvestment of dividends ........... -- --
Shares redeemed ..................... (26,756) (282,621)
------- ---------
Net increase in shares outstanding .. 7,284 $ 75,772
======= =========
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
====== =========
14
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Institutional Class
------------------------------------------------------------------
Six
Months
Ended Year Ended December 31, June 30 to
June 30, ----------------------------------- December
2008 2007(B) 2006 2005 31, 2004(A)
----------- -------- ------- ------- -----------
(unaudited)
Net asset value, beginning of period ........... $ 10.18 $ 9.53 $ 9.75 $ 10.16 $ 10.00
-------- -------- ------- ------- -------
Income from investment operations:
Net investment income ....................... 0.40 0.45 0.29 0.56(C) 0.18(C)
Net gains (losses) on securities (both
realized and unrealized) ................. 0.19 0.59 (0.19) (0.37) 0.21
-------- -------- ------- ------- -------
Total income (loss) from investment
operations .................................. 0.59 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(D)
Tax return of capital ....................... -- 0.00(D, E) (0.03)(E) -- --
-------- -------- ------- ------- -------
Total distributions ............................ -- (0.39) (0.32) (0.60) (0.23)
-------- -------- ------- ------- -------
Net asset value, end of period ................. $ 10.77 $ 10.18 $ 9.53 $ 9.75 $ 10.16
======== ======== ======= ======= =======
Total return ................................... 5.80%(F) 11.22% 1.05% 1.86% 3.94%(F)
======== ======== ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) .... $315,196 $223,697 $33,792 $30,584 $20,943
Ratios to average net assets (annualized):
Expenses, after expense reimbursements
(recoupments) ......................... 0.30% 0.43% 0.49% 0.44% 0.46%
Expenses, before expense reimbursements
(recoupments) ......................... 0.30% 0.43% 0.49% 0.39% 0.62%
Net investment income, after expense
reimbursements (recoupements) ......... 5.58% 4.74% 2.94% 5.45% 3.34%
Net investment income, before expense
reimbursements (recoupments) .......... 5.58% 4.74% 2.94% 5.50% 3.18%
Portfolio turnover rate ..................... 69%(F) 139% 259% 355% 190%(F)
(A) The American Beacon Treasury Inflation Protected Securities Fund commenced
active operations on June 30, 2004.
(B) Brown Brothers Harriman & Co. resigned as an investment advisor to the
Treasury Inflation Protected Securities Fund on November 30, 2007.
(C) Based on average shares outstanding.
(D) Amount represents less than $0.01 per share.
(E) The tax return of capital is calculated based on outstanding shares at the
time of distribution.
(F) Not annualized.
15
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
At its May 21, 2008 meeting, the Board of Trustees ("Board" or "Trustees")
considered the renewal of the existing Management Agreement (the "Current
Agreement") between the Manager and the American Beacon Funds (the "Funds") and
each Investment Advisory Agreement between the Manager and a subadvisor
("Current Investment Advisory Agreement"). In preparation for the Board's
consideration to renew these Current Agreements, the Board and its Investment
Committee undertook steps to gather and consider information furnished by the
Manager, the subadvisors and Lipper, Inc. ("Lipper"). The Board, with the
assistance of independent legal counsel, requested and received certain relevant
information from the Manager and each subadvisor.
In addition, the Board's Investment Committee worked with Lipper to obtain
relevant comparative information regarding the performance, fees and expenses of
the Funds. The Investment Committee held a separate meeting on May 9, 2008 to
consider the information provided by Lipper. Further, the Board took into
consideration information furnished for the Board's review and consideration
throughout the year at regular Board and Investment Committee meetings, as well
as information specifically prepared in connection with the renewal process.
On May 21, May 22 and June 4, 2008, the Board met to determine, among other
matters, whether to approve a new investment management agreement ("New
Agreement") between the Manager and the Funds. The New Agreement is necessary
because, on April 16, 2008, AMR Corporation ("AMR"), the parent company of the
Manager, entered into an agreement with Lighthouse Holdings, Inc. ("Lighthouse")
pursuant to which Lighthouse will acquire all of the capital stock of the
Manager ("Transaction") in exchange for cash and 10% of the capital stock of the
parent corporation of Lighthouse. Upon the closing of the Transaction
("Closing"), the Manager will cease to be a wholly owned subsidiary of AMR and
will become a subsidiary of Lighthouse. This change in control is deemed to be
an "assignment" under the Investment Company Act of 1940 ("1940 Act") of each
Fund's Current Agreement with the Manager. As required by the 1940 Act, each
Fund's Current Agreement provides for its automatic termination in the event of
an assignment, and each will, therefore, terminate upon the Closing.
To provide for the continuity of management for the Funds, the Board met to
consider the New Agreement with the Manager. The New Agreement for each Fund
will reflect substantially the same terms as the Current Agreement for each
Fund. In addition, the Current Agreement has been updated and modernized. As
part of this process, the primary administrative services provided by the
Manager to the Funds will be transferred to one single administrative services
agreement ("New Administrative Services Agreement"). The aggregate fee rates for
each Fund under the New Agreement and the New Administrative Services Agreement
will be the same as the fee rates imposed under the Current Agreement and the
Administrative Services Agreement between the Funds and the Manager (the
"Current Administrative Services Agreement").
The New Agreement is subject to shareholder approval. If approved by the
shareholders of the Funds, the New Agreement will become effective upon the
Closing or, if the Closing is not consummated, the New Agreement will become
effective on or about January 1, 2009. The Manager and Lighthouse anticipate
that the Closing will occur in the third calendar quarter of 2008.
Upon the Closing, Lighthouse directly will control the Manager. Lighthouse
currently does not anticipate any changes to the organization or structure of
the Funds, to the service providers or to the aggregate fee rates under any
Current Agreement. In addition, the portfolio managers at the Manager that
currently manage the Funds are expected to continue to manage the Funds after
the Closing. In that regard, the Manager and Lighthouse have entered into or
will enter into employment contracts that will take effect upon the Closing with
certain key personnel performing or overseeing the Funds' investment programs.
However, there can be no assurance that these personnel will choose to remain
employed by the Manager before or after the Closing. The Manager and the Funds
will continue to operate under their existing names. Potential benefits to the
Funds as a result of the Transaction include Lighthouse's intention to devote
additional resources to product development and distribution of Fund shares. Any
resulting growth of Fund assets may produce economies of scale that could
benefit shareholders of the Funds.
16
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
In addition, under the Current Agreement, the Manager may retain
subadvisors to provide investment advisory services for all or a portion of the
assets of a Fund. With respect to certain Funds, the Manager has entered into
Current Investment Advisory Agreements with various subadvisors on behalf of
those Funds. Upon the Closing, these Current Investment Advisory Agreements will
terminate automatically upon the termination of each Current Agreement. Pursuant
to an exemptive order issued by the Securities and Exchange Commission ("SEC"),
the Manager is permitted to enter into new or modified investment advisory
agreements with existing or new subadvisors ("New Investment Advisory
Agreements") without approval of a Fund's shareholders, but subject to the
approval of a Fund's Board. Each New Investment Advisory Agreement will reflect
substantially the same terms as the Current Investment Advisory Agreement for
each applicable Fund. The New Investment Advisory Agreements will become
effective concurrent with the effectiveness of the New Agreement.
In preparation for the Board's consideration to approve the New Agreement
and New Investment Advisory Agreements, the Board held preliminary conference
call meetings on April 15, 16 and 21, 2008, to discuss the New Agreement and New
Investment Advisory Agreements and the effect that approving the New Agreement
and New Investment Advisory Agreements would have on the Funds. The Board, with
the assistance of independent legal counsel, received a memorandum and related
advice from their legal counsel detailing the Board's responsibilities in
considering the New Agreement and New Investment Advisory Agreements.
In connection with Board's consideration of the Current Agreement, Current
Investment Advisory Agreements, New Agreement and New Investment Advisory
Agreements, the Trustees considered, among other materials, responses by the
Manager and the subadvisors to inquiries requesting:
- a description of the Transaction, the effects of the Transaction on
the Trusts and the Board, and any proposed changes to the Trusts,
their service providers or fee structure and other information;
- a description of any significant changes (actual or anticipated) to
principal activities, personnel, services provided to the Funds, or
any other area, including how these changes might affect the Funds;
- a copy of the firm's Form ADV registration statement with the SEC;
- a summary of any material past, pending or anticipated litigation or
regulatory proceedings involving the firm or its personnel, including
the results of any recent regulatory examination or independent audit;
- a profit/loss analysis of the firm and any actual or anticipated
economies of scale in relation to the services it provides to each
Fund;
- a description of any payments by the firm to support the Funds'
marketing efforts;
- an analysis of compensation, including a comparison with fees charged
to other clients for which similar services are provided, any proposed
changes to the fee schedule and the effect of any fee waivers;
- an evaluation of other benefits to the firm or Funds as a result of
their relationship, if any;
- confirmation that the firm's financial condition does not raise
concerns that the firm would be unable to continue providing the same
scope and quality of services to the Funds;
- a description of the scope of portfolio management services provided
to the Funds and the firm's other clients, including other registered
investment companies, whether such services differ, and any advantages
or disadvantages that might accrue to the Funds due to the firm's
involvement in other activities;
- a description of the personnel who are assigned primary responsibility
for managing the Funds, including any changes during the past year,
and a discussion of the adequacy of current and projected staffing
levels to service the Funds;
- a description of the basis upon which portfolio managers are
compensated, including any "incentive" arrangements;
- a discussion regarding the firm's participation in "soft dollar"
arrangements, if any, or other brokerage allocation policies with
respect to Fund transactions, including the firm's methodology for
obtaining the most favorable execution and the use of any affiliated
broker-dealers;
17
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
- a discussion of whether the firm receives, with respect to the Funds,
other compensation, including any payment for order flow or ECN
liquidity rebates;
- a description of any actual or potential conflicts of interest
anticipated in managing Fund assets;
- a summary of any material changes to the firm's compliance program
with regard to federal, state, corporate and Fund requirements and a
certification regarding the reasonable design of the compliance
program;
- a discussion of any material compliance problems and remedial actions;
- information regarding the firm's code of ethics, insider trading
policy and disaster recovery plan, including a description of any
material changes thereto;
- a description of the firm's affiliation with any broker-dealer;
- a discussion of any anticipated change in the firm's controlling
persons; and verification of the firm's insurance coverage with regard
to the services provided to the Funds.
In addition to the foregoing, the Manager provided the following information
specific to the renewal of each Fund's Current Agreement and the approval of
each Fund's New Agreement:
- a comparison of the performance of each Fund to comparable investment
companies and appropriate indices, including comments on the relative
performance of each subadvisor and each Fund versus the respective
peer group average;
- a discussion, if applicable, of any underperformance by a subadvisor
relative to its peer group and what, if any, remedial measures the
Manager has or intends to take;
- a comparison of advisory fees and expense ratios for comparable mutual
funds;
- an analysis of any material complaints received from Fund
shareholders;
- a description of the Manager's securities lending practices and the
fees received from such practices;
- a description of any revenue sharing activities with respect to the
Funds;
- a discussion of any rebate arrangements between the Manager and a
service provider to the Funds pursuant to which the Manager receives
direct or indirect benefits from the service provider;
- a description of the portfolio turnover rate and average execution
costs for each Fund and each subadvisor to a Fund; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
In connection with the Current Agreements, Current Investment Advisory
Agreements, New Agreement and New Investment Advisory Agreements, the Board also
obtained an analysis provided by Lipper that compared: (i) investment
performance of each Fund versus comparable investment companies and appropriate
indices; (ii) total Fund expenses of each Fund versus comparable mutual funds,
and (iii) each Fund's investment advisory fees versus comparable mutual funds.
For each Fund with more than one class of shares, the class of shares used for
comparative purposes was the class with the longest performance history, which
in most cases was the Institutional Class. References below to each Fund's
Lipper peer group are to the group of comparable mutual funds included in the
analysis provided by Lipper. The Current Agreements, Current Investment Advisory
Agreements, New Agreement and New Investment Advisory Agreements are each
referenced to herein as an "Agreement" and collectively, the "Agreements."
The Trustees also received memoranda from their legal counsel detailing the
Board's responsibilities pertaining to the approval of each Agreement. These
memoranda explained the regulatory requirements surrounding the Trustees'
process for evaluating investment advisors and the terms of the contracts.
In connection with the Board's consideration of the New Agreement and each
New Investment Advisory Agreement, the Trustees considered, among other
information, the following factors, in addition to other factors noted in the
Proxy Statement:
1. The manner in which each Fund's assets are managed will not change as a
result of the Transaction, and the same people who currently manage the
Fund's assets are expected to continue to do so after the Transaction;
18
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
2. The aggregate fee rates payable by each Fund under the New Agreement and
the New Administrative Services Agreement are the same as the fee rates
payable under the Current Agreement and the Current Administrative Services
Agreement;
3. The material terms regarding advisory services pursuant to the New
Agreement are substantially the same as the terms of the Current Agreement;
4. The qualifications of the Manager's personnel who will provide advisory and
administrative services to the Funds are not expected to change;
5. The Manager's financial condition and the post-Closing capitalization of
Lighthouse;
6. The impact of the Transaction on the Manager's day-to-day operations;
7. The capabilities, experience, corporate structure and capital resources of
Lighthouse;
8. The long-term business goals of Lighthouse with regard to the Manager and
the Trusts;
9. Fund shareholders will not bear any costs in connection with the
Transaction, inasmuch as AMR and Lighthouse will bear equally the costs,
fees and expenses incurred by the Funds in connection with the Proxy
Statement, the fees and expenses of accountants and attorneys relating to
the Transaction and Proxy Statement, the fees and expenses incurred by the
Funds in connection with the Transaction, and the meeting fees of the
Boards for meetings held in connection with the Transaction;
10. The Funds may realize benefits as a result of the Transaction, including
long-term economies of scale;
11. The potential for increased costs to the Funds in order to satisfy existing
obligations under the current Trustees' retirement plan; and
12. The advisory relationship with each subadvisor would continue in the same
manner as before the Transaction and that each New Investment Advisory
Agreement will be substantially the same as each Current Investment
Advisory Agreement.
Provided below is an overview of the other primary factors the Board
considered at its May 21, May 22 and June 4, 2008 meetings. The Board did not
identify any particular information that was most relevant to its consideration
to renew the Current Agreement and Current Investment Advisory Agreements and
approve the New Agreement and New Investment Advisory Agreements, and each
Trustee may have afforded different weight to the various factors. Legal counsel
to the Non-interested Trustees provided the Board with memoranda regarding its
responsibilities pertaining to the renewal of the Current Agreement and Current
Investment Advisory Agreements and approval of the New Agreement and New
Investment Advisory Agreements. Based on its evaluation, the Board unanimously
concluded that the terms of the Current Agreement and Current Investment
Advisory Agreements were reasonable and fair and that the renewal of the Current
Agreement and each Current Investment Advisory Agreement was in the best
interests of each Fund and its shareholders. The Board also unanimously
concluded that the terms of the New Agreement and New Investment Advisory
Agreements were reasonable and fair and that the approval of the New Agreement
and each New Investment Advisory Agreement was in the best interests of each
Fund and its shareholders.
CONSIDERATIONS WITH RESPECT TO ALL FUNDS
In determining whether to renew the Current Agreement and the Current
Investment Advisory Agreements and approve the New Agreement and New Investment
Advisory Agreements, the Trustees considered the best interests of each Fund
separately. While the Current Agreement and Current Investment Advisory
Agreements for all of the Funds were considered at the Board meetings on May 21,
2008, and the New Agreement and New Investment Advisory Agreements for all of
the Funds were considered at the meetings on May 21, May 22 and June 4, 2008,
the Board considered each Fund's investment management and subadvisory
relationships separately. In each instance, the Board considered, among other
things, the following factors: (1) the nature and quality of the services
provided; (2) the investment performance of a Fund and, as applicable, each
subadvisor for a Fund; (3) the costs incurred by the Manager and (to the extent
provided) the
19
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
subadvisors in rendering their services and their resulting profits or losses;
(4) the extent to which economies of scale have been taken into account in
setting each fee schedule; (5) whether fee levels reflect these economies of
scale for the benefit of Fund investors; (6) comparisons of services and fees
with contracts entered into by the Manager or a subadvisor or their affiliates
with other clients (such as pension funds and other institutional funds); and
(7) any other benefits derived or anticipated to be derived by the Manager or a
subadvisor from their relationship with a Fund. The Trustees posed questions to
various management personnel of the Manager and Lighthouse regarding certain key
aspects of the materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of each
Fund's Current Agreement and the approval of each Fund's New Agreement, the
Board considered: the background and experience of key investment personnel and
the Manager's ability to retain them; the Manager's disciplined investment
approach and goal to provide consistent above average long-term performance at a
low cost; the Manager's continuing efforts to add new series and share classes
to enhance the Funds' product line; the Manager's record in building improved
compliance, control and credit functions that reduce risks to the Funds; the
addition of personnel to manage the Funds, promote sales and improve services,
including the addition of a separate new information technology (IT) department
at the Manager; the high rankings received by the Funds in service surveys; and
the active role played by the Manager in monitoring and, as appropriate,
recommending replacements for the investment subadvisors and master portfolios.
With respect to the renewal of the Current Investment Advisory Agreements
and the approval of the New Investment Advisory Agreements, the Trustees
considered the background and experience of each subadvisor's investment
personnel responsible for managing the Funds, the size of the subadvisor and
their ability to continue to attract and retain qualified investment personnel.
Based on the foregoing information, the Board concluded that the nature,
extent and quality of the management and advisory services provided by the
Manager and each subadvisor were appropriate for each Fund and, thus, determined
to renew the Current Agreement and Current Investment Advisory Agreements, and
approve the New Agreement and New Investment Advisory Agreements for each Fund.
Investment Performance. The Board evaluated the comparative information
provided by Lipper and the Manager regarding each Fund's investment performance
relative to its benchmark index(es) and peer group. The Board considered the
information provided by Lipper regarding its independent peer selection
methodology to select all peer groups and universes. The Board also considered
the performance reports and discussions with management at Board and Committee
meetings throughout the year. The Manager also noted that it generally was
satisfied with the performance of the subadvisors. A discussion regarding the
Board's considerations with respect to each Fund's performance appears below
under "Additional Considerations and Conclusions with Respect to Each Fund."
Costs of the Services to be Provided to the Funds and the Projected Profits
to be Realized by the Manager from its Relationship with the Funds. In analyzing
the cost of services and profitability of the Manager and a subadvisor by Fund,
the Board considered the revenues earned and the expenses incurred by the
Manager. The profits or losses were noted at both an individual Fund level and
at an aggregate level for all Funds.
The Board also noted that the Manager proposed to continue the expense
waivers and reimbursements for certain Funds and classes that were in place
during the last fiscal year. The Board further considered that each subadvised
Fund pays the Manager the amounts due to its subadvisors, and the Manager remits
these amounts directly to the applicable subadvisors. The Board considered that
the Manager receives service and administrative fees to compensate the Manager
for providing administrative services to the Funds and to compensate third-party
administrators and broker-dealers for services to Fund shareholders. In
addition, the Board considered that the Manager receives management fees for
overseeing the securities lending
20
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
relationships on behalf of various Funds. The Board also noted that certain
classes of the Funds maintain higher expense ratios in order to compensate
third-party distributors.
In analyzing the cost of services and profitability of each subadvisor in
connection with its investment advisory services to a Fund, the Board considered
that, in many cases, the Manager has negotiated the lowest subadvisory fee a
subadvisor charges for any comparable client accounts. The Board gave less
weight to profitability considerations or did not view this data as imperative
to its deliberations given the arm's-length nature of the relationship between
the Manager and the subadvisors with respect to the negotiation of subadvisory
fees.
Based on the foregoing information, the Board concluded that the
profitability levels were reasonable in light of the services performed by the
Manager and the subadvisors. A discussion regarding the Board's considerations
with respect to each Fund's fee rates is set forth below under "Additional
Considerations and Conclusions with Respect to Each Fund."
Economies of Scale. In considering the reasonableness of the management and
investment advisory fees, the Board considered whether economies of scale will
be realized as the Funds grow and whether fee levels reflect these economies of
scale for the benefit of Fund shareholders. In this regard, the Board considered
that the Manager has negotiated breakpoints in many subadvisory fee rates. The
Board also noted that, for purposes of determining the fee rates chargeable to
the Funds, many subadvisors have agreed to take into account other assets of AMR
and its pension plans that are managed by the subadvisors. Thus, the Funds are
able to receive lower effective fee rates. The Board also noted that certain
Funds have grown their shareholder base, which has spread fixed costs over a
larger shareholder and asset base.
The Board also considered the Manager's representations that its costs have
increased due primarily to greater service provider and regulatory costs. The
Manager also represented that it anticipates further economies of scale would be
largely offset by higher costs of adding and retaining qualified personnel,
improving technology and increasing demands on its advisory business.
Based on the foregoing information, the Board concluded that the Manager
and subadvisor fee schedules for each Fund provides for a reasonable sharing of
benefits from any economies of scale with the Funds.
Benefits Derived from the Relationship with the Funds. The Board considered
the "fall-out" or ancillary benefits that accrue to the Manager and/or the
subadvisors as a result of the advisory relationships with the Funds, including
greater exposure in the marketplace with respect to the Manager's or
subadvisor's investment process and expanding the level of assets under
management by the Manager and the subadvisors. In addition, the Board noted that
the Manager provides services to the Funds at a relatively low cost. In this
regard, the Board considered that the benefit plans of AMR have invested
substantial assets in the Funds, which helps reduce costs for other Fund
shareholders, just as the investment of other Fund shareholders helps to reduce
costs for AMR's benefit plans. In addition, the Board considered that certain of
the subadvisors reimburse the Manager for certain of its costs relating to
distribution activities for the Funds. The Board also considered that Funds did
not pay commissions to any affiliated broker-dealer of the Manager during the
most recent fiscal years ended October 31, and December 31, 2007, though during
that period certain Funds did pay commissions to affiliated broker-dealers of
the relevant subadvisor, as set forth in the following table.
FUND BROKER AFFILIATED WITH COMMISSION
- ---- -------------------- ------------------------- ----------
American Beacon Large Goldman Sachs Asset
Cap Growth Fund Goldman, Sachs & Co. Management, L.P. $1,020
American Beacon Emerging JM Morgan Stanley Morgan Stanley Investment
Markets Fund Securities Limited Management Inc. $ 326
The percentage of total commissions of the American Beacon Large Cap Growth
Fund and Emerging Markets Fund paid to affiliated broker-dealers in 2007 was
4.13% and 0.07%, respectively.
21
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT
AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND
(UNAUDITED)
Based on the foregoing information, the Board concluded that the potential
benefits accruing to the Manager and the subadvisors by virtue of its
relationships with the Funds appear to be fair and reasonable.
Additional Considerations and Conclusions with Respect to the Treasury Inflation
Protected Securities Fund
The performance comparisons below were made versus the Fund's Lipper peer
universe median. References to the Lipper expense group below are to the group
of comparable mutual funds included in the analysis provided to the Trustees by
Lipper, Inc.
In considering the renewal of the Current Agreement and the approval of the
New Agreement, the Trustees considered the following additional factors: (1) the
Treasury Inflation Protected Securities Fund outperformed the peer universe
median for the one- and three-year periods ended March 31, 2008; and (2) the
expense ratio of the Institutional Class of Fund shares was lower than its
Lipper expense group median.
In considering the renewal of the Current Investment Advisory Agreement and
the approval of the New Investment Advisory Agreement with NISA Investment
Advisors LLC ("NISA"), the Trustees considered the following additional factors:
(1) NISA underperformed the peer universe median for the one-year period ended
March 31, 2008, but outperformed the peer universe median for the three-year
period and (2) the Manager's recommendation to continue to retain NISA.
Based on these and other considerations, the Trustees concluded that the
fees paid to the Manager and the subadvisor under the Agreements are fair and
reasonable, determined that the Treasury Inflation Protected Securities Fund and
its shareholders would benefit from the Manager's and subadvisor's continued
management of the Fund, approved the renewal of the Current Agreement and
Current Investment Advisory Agreement and approved the New Agreement and New
Investment Advisory Agreement with respect to the Treasury Inflation Protected
Securities Fund.
22
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23
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24
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25
(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 QUARTERLY PORTFOLIO SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
In addition to the Schedule of Investments A description of the policies and procedures the
provided in each semi-annual and annual report, Fund uses to determine how to vote proxies
the Fund files a complete schedule of its relating to portfolio securities is available in
portfolio holdings with the Securities and the Fund's Statement of Additional Information,
Exchange Commission ("SEC") on Form N-Q as of is available free of charge on the Fund's
the first and third fiscal quarters. The Fund's website (www.americanbeaconfunds.com) and by
Forms N-Q are available on the SEC's website at calling 1-800-967-9009 or by accessing the SEC's
www.sec.gov. The Forms N-Q may also be reviewed website at www.sec.gov. The Fund's proxy voting
and copied at the SEC's Public Reference Room, record for the most recent year ended June 30 is
450 Fifth Street, NW, Washington, DC 20549. filed annually with the SEC on Form N-PX. The
Information regarding the operation of the SEC's Fund's Forms N-PX are available on the SEC's
Public Reference Room may be obtained by calling website at www.sec.gov. The Fund's proxy voting
1-800-SEC-0330. A complete schedule of the record may also be obtained by calling
Fund's portfolio holdings is also available on 1-800-967-9009.
the Funds' website (www.americanbeaconfunds.com)
approximately thirty days after the end of each
month.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES
TRUST SERVICES ERNST & YOUNG LLP Portland, Maine
Boston, Massachusetts Kansas City, Missouri 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 is not responsible for investments made in the American Beacon
Funds. American Beacon Funds and American Beacon Treasury Inflation Protected
Securities Fund are service marks of American Beacon Advisors, Inc
SAR 6/08
62521
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON FUNDS(SM) LOGO)
Semi-Annual Report
(GRAPHIC)
June 30, 2008
MONEY MARKET FUND
U.S. GOVERNMENT MONEY MARKET FUND
ABOUT AMERICAN BEACON ADVISORS
Since 1986, American Beacon Advisors has offered a variety of products and
investment advisory services to numerous institutional and retail clients,
including a variety of mutual funds, corporate cash management, and separate
account management.
Our clients include defined benefit plans, defined contribution plans,
foundations, endowments, corporations, financial planners, and other
institutional investors. With American Beacon Advisors, you can put the
experience of a multi-billion dollar asset management firm to work for your
company.
CONTENTS
President's Message ............................................... 1
Financial Highlights
Money Market Fund .............................................. 16
U.S. Government Money Market Fund .............................. 20
Schedules of Investments
Money Market Portfolio ......................................... 22
U.S. Government Money Market Portfolio ......................... 25
Additional Information ............................................ Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of
the reporting period and are subject to change. Each advisor's strategies and
each Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
American Beacon Funds June 30, 2008
(PHOTO OF WILLIAM F. QUINN)
Fellow Shareholders,
I am pleased to present to you the Semi-Annual Report for the American
Beacon Money Market Fund and the U.S. Government Money Market Fund for the six
months ended June 30, 2008.
The American Beacon Money Market Fund reported a total return of 1.63% and
1.64% for this six-month period for the Institutional and Cash Management
classes with expense ratios of 23 basis points (0.23%) and 20 basis points
(0.20%), respectively, for their most recent fiscal year. Both classes
outperformed the Lipper Institutional Money Market Funds Average return of
1.49%.
The American Beacon U.S. Government Money Market Fund - Cash Management
Class reported a total return of 1.41% for this same period with an expense
ratio of 60 basis points (0.60%) for its most recent fiscal year, outperforming
the Lipper Institutional U.S. Government Money Market Funds Average return by 9
basis points (0.09%).
During the period, the sub-prime mortgage crisis continued to cause
uncertainties surrounding banks, investment banks and the entire financial
system, resulting in an extraordinary amount of volatility. The Federal Reserve
("Fed") was challenged to fulfill its dual mandate of balancing the risks to
both growth and inflation. Inflation concerns were mounting, but weak economic
growth and turmoil in the financial markets limited the Fed's ability to raise
interest rates in the near term to strengthen the U.S. dollar and counter
inflation. We feel the Funds' strategy of investing in high credit quality
securities combined with lower than average expense ratios will continue to
benefit the Funds' yields while protecting the Funds' liquidity for the long
term.
Please review the enclosed market overview, portfolio listings and detailed
financial data. As always, we welcome the opportunity to serve your financial
needs. To obtain further details about the American Beacon Funds family or to
access your account information, please visit our website at
www.americanbeaconfunds.com. Thank you for your continued confidence in the
American Beacon Money Market Funds.
Sincerely,
/s/ William F. Quinn
William F. Quinn
President
American Beacon Funds
1
ECONOMIC OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
JUNE 30, 2008 (UNAUDITED)
The Federal Open Market Committee ("Fed") left the rates unchanged at 2.00%
at the June 25th meeting, ending a 225 basis point (2.25%) easing cycle that
began in September 2007. In addition, the Fed shifted its bias toward inflation
risk, opening the door to the possibility that the next move could be a rate
hike. However, inflation was not the Fed's only concern. They have also had to
contend with a softening labor market, declining house prices, and continued
strain in the financial markets.
Headline producer and consumer prices both surprised to the upside in June.
Thus far, waning consumer demand limited companies' ability to pass on higher
raw materials costs, but this trend began to reverse as corporate profits
eroded. Although inflation was on the rise, sluggish economic growth remained a
chief concern for the Fed. Nonfarm payrolls declined by 438,000 for the first
half of 2008, resulting in a rise in the unemployment rate to 5.5%. This
combined with continued declines in home prices caused consumer confidence to
drop to the lowest levels on record. Although the fiscal stimulus package is
expected to buoy second quarter gross domestic product, the economic slowdown
may deepen in the second half of 2008 as the impact of federal tax rebates fade.
The Fed continued to address financial market instability. Although
measures taken by the Fed to increase liquidity have eased short-term funding
pressures somewhat, financial markets remained volatile. In response to renewed
concerns over the health of the nation's financial system, Fed Chairman Ben
Bernanke recently announced that the central bank may extend its emergency loan
program for investment banks into 2009. The program was created in March and was
set to potentially expire in mid-September. Bernanke stated that the Fed is
"currently monitoring developments in financial markets closely and considering
several options, including extending the duration of our facilities for primary
dealers beyond year-end, should the current unusual and exigent circumstances
continue in dealer funding markets."
Given all of the above, the Fed was challenged to fulfill its dual mandate
of balancing the risks to both growth and inflation. Inflation concerns mounted,
but weak economic growth and turmoil in the financial markets limited the Fed's
ability to raise interest rates in the near term. Bernanke stated, "Given the
high degree of uncertainty, monetary policy makers will need to carefully assess
incoming information bearing on the outlook for both inflation and growth".
2
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
JUNE 30, 2008 (UNAUDITED)
As the economy continued to show signs of weakening during the first half
of the year, the Federal Reserve ("Fed") continued its series of easing monetary
policy. The year began with an overnight target rate of 4.25% before the Fed
eased by 75 basis points (0.75%) inter-meeting on January 22nd. The Fed
continued to cut rates at the following three Federal Open Market Committee
("FOMC") meetings, resulting in a 2.00% fed funds target by the April 30th FOMC
meeting. The Fed has remained on hold the last two meetings, expressing concern
for both inflation and slow growth. In response to the events that caused the
Fed to ease, the American Beacon Money Market Fund's weighted-average maturity
was maintained around 40 days. With credit quality a priority, the primary
strategy of the Fund for the first half of the year was to buy high-quality,
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 six months ended June 30, 2008, the total return of the Cash
Management Class of the American Beacon Money Market Fund was 1.64%. The Fund
outperformed the Lipper Institutional Money Market Average return of 1.49% by 15
basis points (0.15%). Based on annualized total returns, Lipper Inc. ranked the
Cash Management Class of the Fund 74 among 386, 29 among 337 and 17 among 271
Institutional Money Market Funds for the one-year, three-year, and five-year
periods ended June 30, 2008, respectively.
(BAR CHART)
ANNUALIZED TOTAL RETURNS
AS OF 6/30/2008
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Cash Mgmt Class(1,2,5) ........ 4.27% 3.38% 3.77%
Institutional Class (1,3,5) ... 4.25% 3.30% 3.72%
PlanAhead Class (1,5) ......... 3.93% 3.02% 3.42%
BBH ComSet Class (1,4,5) ...... 4.27% 3.38% 3.77%
(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 ten-year period represents the total returns
achieved by the Institutional Class from 7/1/98 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 the Cash Management Class would have realized in the same period. A
portion of the fees charged to the Cash Management Class of the Fund has
been waived. Performance prior to waiving fees was lower than the actual
returns shown.
(3.) A portion of the fees charged to the Institutional Class of the Fund has
been waived since 2006. Performance prior to waiving fees was lower than
the actual returns shown for periods since 2006.
(4.) Fund performance represents the total returns achieved by the Institutional
Class from 7/1/98 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 ratios set forth in the most recent
Fund prospectus for the Cash Management, Institutional, PlanAhead and the
BBH ComSet Class shares were 0.20%, 0.23%, 0.48% and 0.22%, 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, which are based on expenses incurred during the period
covered by this report.
3
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
JUNE 30, 2008 (UNAUDITED)
PORTFOLIO STATISTICS AS OF JUNE 30, 2008
CASH BBH
MANAGEMENT INSTITUTIONAL PLANAHEAD COMSET
CLASS CLASS CLASS CLASS
---------- ------------- --------- -------
7-day Current
Yield* ........ 2.60% 2.57% 2.28% 2.60%
7-day
Effective
Yield* ........ 2.63% 2.60% 2.30% 2.63%
30-day Yield* .... 2.58% 2.55% 2.25% 2.58%
Weighted Avg.
Maturity ...... 34 Days 34 Days 34 Days 34 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 7-day
yield. Yield is a more accurate reflection of the Fund's current earnings
than total returns.
TOP TEN ISSUERS AS OF JUNE 30, 2008
% OF
NET ASSETS**
------------
General Electric Capital Corp. .. 5.3%
Rabobank Nederland N.Y. ......... 5.1%
Westpac Banking Corp. ........... 4.7%
Nordea Bank Finland N.Y. ........ 4.3%
Toronto Dominion Bank N.Y. ...... 4.3%
US Bank, NA ..................... 4.3%
BNP Paribas N.Y. ................ 4.1%
Barclays Bank plc ............... 3.9%
Toyota Motor Credit Corp. ....... 3.6%
Bank of Nova Scotia N.Y. ........ 3.5%
** Percent of net assets of American Beacon Master Money Market Portfolio.
ASSET ALLOCATION AS OF JUNE 30, 2008
% OF
NET ASSETS**
------------
Bank CDs, TDs and Notes ........... 49.1%
Commercial Paper .................. 25.9%
Corporate Notes ................... 10.2%
Short-Term Investments ............ 9.0%
Repurchase Agreements ............. 7.1%
Liabilities, Net of Other Assets .. -1.3%
** Percent of net assets of American Beacon Master Money Market Portfolio.
4
FUND EXPENSES
AMERICAN BEACON MONEY MARKET FUND(SM)
JUNE 30, 2008 (UNAUDITED)
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The examples below are intended to help you
understand the ongoing cost (in dollars) of investing in the Fund and to compare
these costs with the ongoing costs of investing in other mutual funds. The
examples are based on an investment of $1,000 invested at the beginning of the
period and held for the entire period from January 1, 2008 through June 30,
2008.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in these lines, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the "Actual" line under the heading "Expenses Paid During Period" for the
applicable Class to estimate the expenses you paid on your account during this
period. Shareholders of the PlanAhead Class that invest in the Fund through an
IRA may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead Class that invest in the Fund through an IRA may be subject to
a custodial IRA fee of $12 that is typically deducted each December. If your
account was subject to a custodial IRA fee during the period, your costs would
have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the
table are useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
Beginning Ending Expenses
Account Account Paid During
Value Value Period*
1/1/08 6/30/08 1/1/08-6/30/08
--------- --------- --------------
CASH MANAGEMENT CLASS
Actual ................. $1,000.00 $1,016.37 $0.75
Hypothetical (5%
return before
expenses) ........... $1,000.00 $1,024.12 $0.76
INSTITUTIONAL CLASS
Actual ................. $1,000.00 $1,016.29 $0.89
Hypothetical (5%
return before
expenses) ........... $1,000.00 $1,023.97 $0.89
PLANAHEAD CLASS
Actual ................. $1,000.00 $1,014.75 $2.37
Hypothetical (5%
return before
expenses) ........... $1,000.00 $1,022.51 $2.38
BBH COMSET CLASS
Actual ................. $1,000.00 $1,016.37 $0.75
Hypothetical (5%
return before
expenses) ........... $1,000.00 $1,024.12 $0.76
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.15%, 0.18%, 0.47% and 0.15% for the Cash Management,
Institutional, PlanAhead and BBH ComSet 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 (182) by
days in the year (366) to reflect the half-year period.
5
PERFORMANCE OVERVIEW
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM)
JUNE 30, 2008 (UNAUDITED)
As the economy continued to show signs of weakening during the first half
of the year, the Federal Reserve ("Fed") continued its series of easing monetary
policy. The year began with an overnight target rate of 4.25% before the Fed
eased by 75 basis points (0.75%) inter-meeting on January 22nd. The Fed
continued to cut rates at the following three Federal Open Market Committee
("FOMC") meetings, resulting in a 2.00% fed funds target by the April 30th FOMC
meeting. The Fed has remained on hold the last two meetings, expressing concern
for both inflation and slow growth. 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 20 days. With the ongoing
volatility in the market, the primary strategy of the Fund for the first half of
the year was to buy short-dated, fixed-rate agencies and overnight investments.
The strategies implemented during the year enabled the Fund to outperform its
Lipper peer group.
For the six months ended June 30, 2008, the total return of the Cash
Management Class of the American Beacon U.S. Government Money Market Fund was
1.41%. The Fund outperformed the Lipper Institutional U.S. Government Money
Market Average return of 1.32% by 9 basis points (0.09%). Based on annualized
total returns, Lipper Inc. ranked the Cash Management Class of the Fund 30 among
171, 9 among 116 and 6 among 71 Institutional U.S. Government Money Market Funds
for the one-year, five-year, and ten-year periods ended June 30, 2008,
respectively.
(BAR CHART)
ANNUALIZED TOTAL RETURNS
AS OF 6/30/2008
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Cash Management Class (1,2,4) .... 3.92% 3.26% 3.65%
PlanAhead Class (1,3,4) .......... 3.44% 2.81% 3.25%
(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 ratios set forth in the most recent
Fund prospectus for the Cash Management and the PlanAhead Class shares were
0.60% and 1.20%, respectively. After expense reimbursement, the net expense
ratio set forth in the most recent Fund prospectus for the Cash Management
and PlanAhead Class shares were 0.15% and 0.65%, respectively. The expense
ratios above may vary from the expense ratios presented in other sections
of this report, which are based on expenses incurred during the period
covered by this report.
PORTFOLIO STATISTICS AS OF JUNE 30, 2008
CASH
MANAGEMENT PLANAHEAD
CLASS CLASS
---------- ---------
7-day Current Yield* .... 2.19% 1.69%
7-day Effective Yield* .. 2.22% 1.71%
30-day Yield* ........... 2.16% 1.66%
Weighted Avg. Maturity .. 15 Days 15 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 7-day
yield. Yield is a more accurate reflection of the Fund's current earnings
than total returns.
6
PERFORMANCE OVERVIEW AND FUND EXPENSES
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM)
JUNE 30, 2008 (UNAUDITED)
ASSET ALLOCATION AS OF JUNE 30, 2008
% OF
NET ASSETS**
------------
Repurchase Agreements ....................... 71.1%
Government Securities ....................... 28.8%
Other Assets, Net of Liabilities ............ 0.1%
TOP ISSUERS AS OF JUNE 30, 2008
% OF
NET ASSETS**
------------
Federal Home Loan Bank ...................... 21.2%
Federal Home Loan Mortgage Corporation ...... 4.7%
Federal National Mortgage Association ....... 2.9%
** Percent of net assets of the American Beacon Master U.S. Government Money
Market Portfolio.
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The examples below are intended to help you
understand the ongoing cost (in dollars) of investing in the Fund and to compare
these costs with the ongoing costs of investing in other mutual funds. The
examples are based on an investment of $1,000 invested at the beginning of the
period and held for the entire period from January 1, 2008 through June 30,
2008.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in these lines, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the "Actual" line under the heading "Expenses Paid During Period" for the
applicable Class to estimate the expenses you paid on your account during this
period. Shareholders of the PlanAhead Class that invest in the Fund through an
IRA may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead Class that invest in the Fund through an IRA may be subject to
a custodial IRA fee of $12 that is typically deducted each December. If your
account was subject to a custodial IRA fee during the period, your costs would
have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the
table are useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
Beginning Ending Expenses
Account Account Paid During
Value Value Period*
1/1/08 6/30/08 1/1/08-6/30/08
--------- --------- --------------
CASH MANAGEMENT CLASS
Actual ........................... $1,000.00 $1,014.09 $0.75
Hypothetical (5% return before
expenses) ..................... $1,000.00 $1,024.12 $0.75
PLANAHEAD CLASS
Actual ........................... $1,000.00 $1,011.64 $3.15
Hypothetical (5% return before
expenses) ..................... $1,000.00 $1,021.73 $3.17
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.15% and 0.63% 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 (182) by days in the year (366) to reflect
the half-year period.
7
AMERICAN BEACON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2008 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
-------------- ---------------
ASSETS:
Investment in Portfolio, at value ..... $ 2,538,318 $ 32,749
Receivable for fund shares sold ....... 3 7
Receivable from Manager for expense
reimbursement (Note 2) ............. 102 8
Prepaid expenses ...................... 18 24
-------------- -----------
TOTAL ASSETS ....................... 2,538,441 32,788
-------------- -----------
LIABILITIES:
Payable for fund shares redeemed ...... 6 --
Dividends payable ..................... 3,893 30
Administrative service and service fees
payable (Note 2) ................... 195 2
Distribution fees payable (Note 2) .... 1 --
Other liabilities ..................... 36 19
-------------- -----------
TOTAL LIABILITIES .................. 4,131 51
-------------- -----------
NET ASSETS ............................ $ 2,534,310 $ 32,737
============== ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital .................... 2,534,310 32,737
-------------- -----------
NET ASSETS ............................... $ 2,534,310 $ 32,737
============== ===========
SHARES OUTSTANDING (NO PAR VALUE):
Cash Management Class ................. 790,500,052 30,395,128
============== ===========
Institutional Class ................... 564,940,638 N/A
============== ===========
PlanAhead Class ....................... 86,004,736 2,342,237
============== ===========
BBH ComSet Class ...................... 1,092,864,925 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
8
AMERICAN BEACON FUNDS
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Interest income ........................ $44,061 $358
Portfolio expenses ..................... (1,389) (14)
------- ----
NET INVESTMENT INCOME ALLOCATED FROM
PORTFOLIO ........................ 42,672 344
------- ----
FUND EXPENSES:
Administrative service fees (Note 2):
Cash Management Class ............... 229 8
Institutional Class ................. 174 --
PlanAhead Class ..................... 54 1
BBH ComSet Class .................... 596 --
Transfer agent fees:
Cash Management Class ............... 8 1
Institutional Class ................. 9 --
PlanAhead Class ..................... 4 2
BBH ComSet Class .................... 16 --
Professional fees ...................... 13 5
Registration fees and expenses ......... 33 18
Service fees - PlanAhead Class
(Note 2) ............................ 135 3
Prospectus and shareholder reports ..... 12 2
Other expenses ......................... 54 2
------- ----
TOTAL FUND EXPENSES ................. 1,337 42
------- ----
Less waiver and reimbursement of expenses
(Note 2) ............................... (551) (31)
------- ----
NET FUND EXPENSES ................... 786 11
------- ----
NET INVESTMENT INCOME ..................... 41,886 333
------- ----
REALIZED GAIN ALLOCATED FROM PORTFOLIO:
Net realized gain on investments ....... -- --
------- ----
NET GAIN ON INVESTMENTS ............. -- --
------- ----
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ............................. $41,886 $333
------- ----
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolios
9
AMERICAN BEACON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
MONEY MARKET U.S. GOVERNMENT MONEY MARKET
------------------------------- -------------------------------
Year ended Year ended
Six Months ended December 31, Six Months ended December 31,
June 30, 2008 2007 June 30, 2008 2007
---------------- ------------ ---------------- ------------
(unaudited) (unaudited)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ..................... $ 41,886 $ 88,036 $ 333 $ 494
Net realized gain (loss) on investments ... -- 10 -- --
----------- ------------ -------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .................. 41,886 88,046 333 494
----------- ------------ -------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Cash Management Class .................. (10,361) (32,696) (304) (334)
Institutional Class .................... (5,814) (13,567) -- --
PlanAhead Class ........................ (1,613) (6,183) (29) (94)
Platinum Class ......................... -- (543) -- (66)
BBH ComSet Class ....................... (24,098) (35,047) -- --
Net realized gain on investments:
Cash Management Class .................. -- (6) -- --
Institutional Class .................... -- (3) -- --
PlanAhead Class ........................ -- (1) -- --
BBH ComSet Class ....................... -- -- -- --
----------- ------------ -------- ---------
DISTRIBUTIONS TO SHAREHOLDERS ....... (41,886) (88,046) (333) (494)
----------- ------------ -------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ............. 7,566,309 11,962,330 38,932 145,717
Reinvestment of dividends and
distributions .......................... 12,267 44,661 168 157
Cost of shares redeemed ................... (7,383,042) (10,878,697) (24,424) (137,451)
----------- ------------ -------- ---------
NET INCREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS .................. 195,534 1,128,294 14,676 8,423
=========== ============ ======== =========
NET INCREASE IN NET ASSETS ................... 195,534 1,128,294 14,676 8,423
----------- ------------ -------- ---------
NET ASSETS:
Beginning of period ....................... 2,338,776 1,210,482 18,061 9,638
----------- ------------ -------- ---------
END OF PERIOD ............................. $ 2,534,310 $ 2,338,776 $ 32,737 $ 18,061
=========== ============ ======== =========
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolios
10
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Funds (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940 (the
"Act"), as amended, as a diversified, 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").
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation ("AMR") and was organized in 1986 to provide business
management, advisory, administrative and asset management consulting services to
the Trust and other investors.
On April 16, 2008, AMR, the parent company of the Manager, announced that
it had reached a definitive agreement to sell all of its interests in the
Manager to Lighthouse Holdings, Inc., which is owned by investment funds
affiliated with Pharos Capital Group, LLC and TPG Capital, L.P. AMR will acquire
a minority equity stake in the parent corporation of Lighthouse Holdings, Inc.
Completion of the sale would result in a change of control of the Manager, but
there are no anticipated material changes in the services to be provided by the
Manager or in the fee rate charged by the Manager to the Fund. The target
closing date for the proposed acquisition is expected to be no later than
September 30, 2008. Based in Dallas and Nashville, Pharos Capital Group, LLP
invests through private equity funds, primarily in companies seeking later stage
equity funding for internal growth, acquisitions, management buyouts or
recapitalizations across industry sectors. TPG Capital, L.P. is the global
buyout group of TPG, a leading private investment firm with more than $50
billion of assets under management. TPG Capital, L.P. has extensive experience
with global public and private investments executed through leveraged buyouts,
recapitalizations, spinouts, joint ventures and restructurings.
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 (20.0%
and 4.5% at June 30, 2008 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.
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:
11
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
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 Administrative Service Fee - 0.10%
intermediary Service Fee - 0.25%
BBH COMSET Investors making an initial investment of at least $10 Administrative Service Fee - 0.08%
million in BBH ComSet(SM) who meet the eligibility
requirements established by Brown Brothers Harriman & Co.
Valuation of Investments
The Funds record their investment in the Portfolios at fair value.
Valuation of securities by the Portfolios is discussed in Note 1 of the
Portfolios' Notes to Financial Statements, which are included elsewhere in this
report.
The Portfolios adopted the provisions of Statement of Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"), effective with the
beginning of the American Beacon Portfolios' fiscal year. 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. The three levels of the hierarchy under FAS
157 are described below:
Level 1 - Quoted prices in active markets for identical securities.
Level 2 - Prices determined using other significant observable inputs.
These may include quoted prices for similar securities, interest rates,
prepayment speeds, credit risk, and others.
Level 3- Prices determined using significant unobservable inputs.
Unobservable inputs reflect the Portfolio's own assumptions about the
factors market participants would use in pricing an investment, and would
be based on the best information available.
The summary of inputs used to value the Portfolios' net assets as of June
30, 2008 is discussed in the Portfolios' Notes to Financial Statements, which
are included elsewhere in this report.
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.
12
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
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 ComSet Class of the Money Market Fund and
0.07% of the Cash Management Class of the Funds.
Distribution Plan
The Trust has adopted a "defensive" Distribution Plan (the "Plan") in
accordance with Rule 12b-1 under the Act, pursuant to which no fees may be
charged to the Funds for distribution purposes. However, the Plan authorizes the
fees received by the Manager to be used for distribution purposes. Under this
plan, the Trust does not intend to compensate the Manager or any other party,
either directly or indirectly, for the distribution of Trust shares.
Service Agreement
The Manager and the Trust entered into a Service Agreement which obligates
the Manager to oversee additional shareholder servicing of the PlanAhead Class.
As compensation for performing the duties required under the Service Agreement,
the Manager receives 0.25% based on the daily net assets of the PlanAhead Class.
Reimbursement and Waiver of Expenses
The Manager contractually agreed to reimburse the following Funds for
distribution and other expenses through February 28, 2009 to the extent total
annual fund operating expenses exceed the following amounts:
FUND CLASS EXPENSE CAP AMOUNT
- ---- --------------- ----------- --------
Money Market Fund .................. Institutional 0.18% $ 73,330
Money Market Fund .................. Cash Management 0.15% 124,672
Money Market Fund .................. BBH ComSet* 0.15% 352,445
U.S. Government Money Market Fund .. Cash Management 0.15% 29,021
U.S. Government Money Market Fund .. PlanAhead 0.65% 2,434
* Prior to March 1, 2008, fees were voluntarily waived by the Manager to
arrive at expense cap.
13
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
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 .... 150,253 26,231
2009 .... 260,591 65,678
2010 .... 769,055 7,577
2011 .... 569,563 31,455
The Funds have not recorded a liability for this potential reimbursement
due to the current assessment that a reimbursement is unlikely.
3. FEDERAL INCOME TAXES
It is the policy of 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 six months ended June 30,
2008 and the fiscal year ended December 31, 2007 were as follows (in thousands):
MONEY MARKET U.S. GOVERNMENT MONEY MARKET
---------------------------- ----------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED DECEMBER 31, ENDED DECEMBER 31,
JUNE 30, 2008 2007 JUNE 30, 2008 2007
------------- ------------ ------------- ------------
(Unaudited) (Unaudited)
DISTRIBUTIONS PAID FROM ORDINARY INCOME:*
Cash Management Class ................ $10,361 $32,702 $304 $334
Institutional Class .................. 5,814 13,570 -- --
PlanAhead Class ...................... 1,613 6,184 29 94
Platinum Class ....................... -- 543 -- 66
BBH ComSet Class ..................... 24,098 35,047 -- --
------- ------- ---- ----
TOTAL DISTRIBUTIONS PAID ................ $41,886 $88,046 $333 $494
======= ======= ==== ====
* For tax purposes short-term capital gains distributions are considered
ordinary income distributions.
As of June 30, 2008, 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.
14
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
The Funds do not have capital loss carry forwards as of June 30, 2008.
4. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each class of
the Funds (in thousands). Each share is valued at $1.00:
Six Months Ended June 30, 2008
Cash
Management Class Institutional Class PlanAhead Class
---------------- ------------------- ---------------
Money Market Beacon Fund
Shares sold .................................... 1,645,628 1,269,084 149,996
Reinvestment of dividends ...................... 9,582 2,099 586
Shares redeemed ................................ (1,213,959) (1,156,904) (176,855)
---------- ---------- --------
Net increase (decrease) in shares outstanding .. 441,251 114,279 (26,273)
========== ========== ========
BBH ComSet Class
----------------
Money Market Beacon Fund
Shares sold .................................... 4,501,601
Reinvestment of dividends ...................... --
Shares redeemed ................................ (4,835,324)
----------
Net (decrease) in shares outstanding ........... (333,723)
==========
Cash
Management Class PlanAhead Class
---------------- ---------------
U.S. Government Money Market Beacon Fund
Shares sold .................................... 26,268 12,664
Reinvestment of dividends ...................... 163 5
Shares redeemed ................................ (12,469) (11,955)
------- -------
Net increase in shares outstanding ............. 13,962 714
======= =======
Year Ended December 31, 2007
Cash
Management Class Institutional Class PlanAhead Class Platinum Class
---------------- ------------------- --------------- --------------
Money Market Beacon Fund
Shares sold .................................... 4,891,367 1,043,210 631,312 14,014
Reinvestment of dividends ...................... 28,101 12,166 3,889 502
Shares redeemed ................................ (5,072,125) (1,109,117) (693,440) (48,172)
---------- ---------- -------- -------
Net (decrease) in shares outstanding ........... (152,657) (53,741) (58,239) (33,656)
========== ========== ======== =======
BBH ComSet Class
----------------
Money Market Beacon 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 Class PlanAhead Class Platinum Class
---------------- --------------- --------------
U.S. Government Money Market Beacon Fund
Shares sold .................................... 132,887 8,530 4,299
Reinvestment of dividends ...................... 81 14 62
Shares redeemed ................................ (120,104) (8,973) (8,373)
-------- ------ ------
Net increase (decrease) in shares outstanding .. 12,864 (429) (4,012)
======== ====== ======
15
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Cash Management Class
--------------------------------------------------------------------
Six Months Year Ended December 31,
Ended June ----------------------------------------------------
30, 2008 2007 2006 2005 2004 2003
----------- -------- -------- -------- -------- --------
(Unaudited)
Net asset value, beginning of period ............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income(A) ..................... 0.02 0.05 0.05 0.03 0.01 0.01
Net realized gain on investments(B) .......... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total income from investment operations ......... 0.02 0.05 0.05 0.03 0.01 0.01
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ......... (0.02) (0.05) (0.05) (0.03) (0.01) (0.01)
Distributions from net realized gains on
investments(B) ............................ -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions ............................. (0.02) (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 $ 1.00
======== ======== ======== ======== ======== ========
Total return .................................... 1.64%(C) 5.28% 5.05% 3.19% 1.30% 1.08%
======== ======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ..... $790,500 $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% 0.15% 0.16%
Expenses, before waivers .................. 0.19% 0.19% 0.20% 0.23% 0.23% 0.24%
Net investment income, net of waivers ..... 3.16% 5.18% 5.04% 3.08% 1.34% 1.03%
Net investment income, before waivers ..... 3.12% 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.
(C) Not annualized.
16
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Institutional Class
--------------------------------------------------------------------
Six Months Year Ended December 31,
Ended June ----------------------------------------------------
30, 2008 2007 2006 2005 2004 2003
----------- -------- -------- -------- -------- --------
(Unaudited)
Net asset value, beginning of period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- ------- ------- --------
Income from investment operations:
Net investment income(A). ............................... 0.02 0.05 0.05 0.03 0.01 0.01
Net realized gain on investments(B) ..................... -- -- -- -- -- --
-------- -------- -------- ------- ------- --------
Total income from investment operations .................... 0.02 0.05 0.05 0.03 0.01 0.01
-------- -------- -------- ------- ------- --------
Less distributions:
Dividends from net investment income .................... (0.02) (0.05) (0.05) (0.03) (0.01) (0.01)
Distributions from net realized gains on
investments(B) ....................................... -- -- -- -- -- --
-------- -------- -------- ------- ------- --------
Total distributions ........................................ (0.02) (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 $ 1.00
======== ======== ======== ======= ======= ========
Total return ............................................... 1.63%(C) 5.24% 4.99% 3.06% 1.20% 0.97%
======== ======== ======== ======= ======= ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................ $564,940 $450,662 $504,403 $36,421 $34,146 $159,092
Ratios to average net assets (annualized):(A)
Expenses, net of waivers ............................. 0.18% 0.18% 0.19% 0.28% 0.24% 0.27%
Expenses, before waivers ............................. 0.22% 0.22% 0.23% 0.28% 0.24% 0.27%
Net investment income, net of waivers ................ 3.33% 5.13% 5.06% 3.07% 1.05% 1.00%
Net investment income, before waivers ................ 3.29% 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.
(C) Not annualized.
17
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
PlanAhead Class
--------------------------------------------------------------------
Six Months Year Ended December 31,
Ended June ----------------------------------------------------
30, 2008 2007 2006 2005 2004 2003
----------- -------- -------- -------- -------- --------
(Unaudited)
Net asset value, beginning of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income(A) .................... 0.01 0.05 0.05 0.03 0.01 0.01
Net realized gain on investments(B) ......... -- -- -- -- -- --
------- -------- -------- -------- -------- --------
Total income from investment operations ........ 0.01 0.05 0.05 0.03 0.01 0.01
------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ........ (0.01) (0.05) (0.05) (0.03) (0.01) (0.01)
Distributions from net realized gains on
investments(B) ........................... -- -- -- -- -- --
------- -------- -------- -------- -------- --------
Total distributions ............................ (0.01) (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 $ 1.00
======= ======== ======== ======== ======== ========
Total return ................................... 1.48%(C) 4.94% 4.69% 2.82% 0.93% 0.70%
======= ======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) .... $86,005 $112,278 $170,518 $236,903 $132,438 $126,972
Ratios to average net assets (annualized):(A)
Expenses, net of waivers ................. 0.47% 0.47% 0.49% 0.51% 0.51% 0.54%
Expenses, before waivers ................. 0.47% 0.47% 0.49% 0.51% 0.51% 0.54%
Net investment income, net of waivers .... 2.98% 4.85% 4.59% 2.83% 0.94% 0.71%
Net investment income, before waivers .... 2.98% 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.
(C) Not annualized.
18
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
BBH ComSet Class
---------------------------
Six Months April 2 to
Ended June December
30, 2008 31, 2007
----------- ----------
(Unaudited)
Net asset value, beginning of period ....................... $ 1.00 $ 1.00
---------- ----------
Income from investment operations:
Net investment income(A) ................................ 0.02 0.04
Net realized gain on investments(B) ..................... -- --
---------- ----------
Total income from investment operations .................... 0.02 0.04
---------- ----------
Less distributions:
Dividends from net investment income .................... (0.02) (0.04)
Distributions from net realized gains on
investments(B) ....................................... -- --
---------- ----------
Total distributions ........................................ (0.02) (0.04)
---------- ----------
Net asset value, end of period ............................. $ 1.00 $ 1.00
========== ==========
Total return ............................................... 1.64%(C) 3.92%(C)
========== ==========
Ratios and supplemental data:
Net assets, end of period (in thousands) ................ $1,092,865 $1,426,587
Ratios to average net assets (annualized):(A)
Expenses, net of waivers ............................. 0.15% 0.15%
Expenses, before waivers ............................. 0.20% 0.21%
Net investment income, net of waivers ................ 3.22% 5.10%
Net investment income, before waivers ................ 3.18% 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.
19
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Cash Management Class
------------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ----------------------------------------------
2008 2007 2006 2005 2004 2003
----------- ------- ------ ------- ------- -------
(Unaudited)
Net asset value, beginning of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------ ------- ------- -------
Income from investment operations:
Net investment income(A) ............................. 0.01 0.05 0.05 0.03 0.01 0.01
Net realized gain on investments(B) .................. -- -- -- -- -- --
------- ------- ------ ------- ------- -------
Total income from investment operations ................. 0.01 0.05 0.05 0.03 0.01 0.01
------- ------- ------ ------- ------- -------
Less distributions:
Dividends from net investment income ................. (0.01) (0.05) (0.05) (0.03) (0.01) (0.01)
Distributions from net realized gains on
investments (B) ................................... -- -- -- -- -- --
------- ------- ------ ------- ------- -------
Total distributions ..................................... (0.01) (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 $ 1.00
======= ======= ====== ======= ======= =======
Total return ............................................ 1.41%(C) 5.13% 4.97% 3.12% 1.22% 1.04%
======= ======= ====== ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ............. $30,395 $16,433 $3,568 $22,518 $28,591 $22,060
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .......................... 0.15% 0.15% 0.19% 0.19% 0.19% 0.19%
Expenses, before waivers .......................... 0.41% 0.60% 0.64% 0.38% 0.29% 0.37%
Net investment income, net of waivers ............. 2.69% 4.87% 4.60% 2.99% 1.21% 1.04%
Net investment income, before waivers ............. 2.44% 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 Master U.S. Government 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)
PlanAhead Class
-----------------------------------------------------------
Six
Months
Ended Year Ended December 31,
June 30, ---------------------------------------------
2008 2007 2006 2005 2004 2003
----------- ------ ------ ------ ------ -------
(Unaudited)
Net asset value, beginning of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ -------
Income from investment operations:
Net investment income(A) ............................. 0.01 0.05 0.04 0.03 0.00(B) 0.01
Net realized gain on investments(B) .................. -- -- -- -- -- --
------ ------ ------ ------ ------ -------
Total income from investment operations ................. 0.01 0.05 0.04 0.03 -- 0.01
------ ------ ------ ------ ------ -------
Less distributions:
Dividends from net investment income ................. (0.01) (0.05) (0.04) (0.03) 0.00(B) (0.01)
Distributions from net realized gains on
investments (B) ................................... -- -- -- -- -- --
------ ------ ------ ------ ------ -------
Total distributions ..................................... (0.01) (0.05) (0.04) (0.03) -- (0.01)
------ ------ ------ ------ ------ -------
Net asset value, end of period .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== =======
Total return ............................................ 1.16%(C) 4.65% 4.51% 2.71% 0.85% 0.61%
====== ====== ====== ====== ====== =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ............. $2,342 $1,628 $2,058 $1,933 $5,370 $26,785
Ratios to average net assets (annualized):(A)
Expenses, net of waivers .......................... 0.63% 0.61% 0.63% 0.58% 0.56% 0.58%
Expenses, before waivers .......................... 0.82% 1.20% 1.02% 0.61% 0.57% 0.62%
Net investment income, net of waivers ............. 2.29% 4.56% 4.39% 2.47% 0.68% 0.72%
Net investment income, before waivers ............. 2.09% 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 Master U.S. Government Money Market Portfolio.
(B) Amount is less than $0.01 per share.
(C) Not annualized.
21
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2008 (Unaudited)
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
MEDIUM-TERM NOTES - 10.12%
American Honda Finance Corp., 3.013%,
Due 9/18/2008 ++ # ......................................... $ 20,900 $ 20,905
Bank of Scotland plc, 2.716%, Due 7/17/2008 ++ # .............. 125,800 125,801
Goldman Sachs Group, Inc., 3.013%, Due 7/29/2008 ++ ........... 178,775 178,781
Royal Bank of Scotland plc,
2.868%, Due 7/21/2008 ++ # ................................. 50,000 50,000
2.511%, Due 8/20/2008 ++ # ................................. 150,000 150,000
Toyota Motor Credit Corp., 2.698%, Due 7/7/2008 ++ ............ 60,500 60,500
US Bank, NA,
2.65%, Due 9/16/2008 ....................................... 250,000 250,000
2.83%, Due 10/20/2008 ...................................... 100,000 100,000
2.70%, Due 11/17/2008 ...................................... 200,000 200,000
Wells Fargo & Co., 2.551%, Due 8/20/2008 ++ # ................. 150,000 150,000
-----------
TOTAL MEDIUM-TERM NOTES ....................................... 1,285,987
-----------
CERTIFICATES OF DEPOSIT AND BANK NOTES - 45.23%
Bank of America, NA, 2.92%, Due 7/25/2008 ++ .................. 27,300 27,300
Bank of Nova Scotia N.Y.,
2.57%, Due 8/13/2008 ....................................... 150,000 150,000
2.61%, Due 8/13/2008 ....................................... 100,000 100,000
2.60%, Due 9/2/2008 ........................................ 200,000 200,000
Barclays Bank plc,
2.75%, Due 7/2/2008 ........................................ 200,000 200,000
2.87%, Due 7/30/2008 ....................................... 100,000 100,000
2.70%, Due 8/19/2008 ....................................... 200,000 200,000
BNP Paribas N.Y.,
2.84%, Due 8/4/2008 ........................................ 175,000 175,000
2.89%, Due 8/15/2008 ....................................... 100,000 100,000
2.65%, Due 8/28/2008 ....................................... 50,000 50,000
3.01%, Due 8/29/2008 ....................................... 50,000 50,000
2.74%, Due 9/25/2008 ....................................... 150,000 150,000
Commonwealth Bank of Australia N.Y.,
2.60%, Due 8/20/2008 ....................................... 100,000 100,000
2.60%, Due 9/4/2008 ........................................ 100,000 100,000
Dexia Credit Local S.A., 2.75%, Due 7/15/2008 ................. 200,000 200,000
HSBC Bank USA, 2.957%, Due 7/28/2008 ++ ....................... 77,000 77,004
Lloyds Bank N.Y., 2.62%, Due 8/12/2008 ........................ 150,000 150,000
National Australia Bank Ltd., 2.61%, Due 9/8/2008 ............. 200,000 200,000
Nordea Bank Finland N.Y.,
2.90%, Due 7/28/2008 ....................................... 150,000 150,000
2.88%, Due 7/29/2008 ....................................... 150,000 150,000
2.76%, Due 8/11/2008 ....................................... 150,000 150,000
2.54%, Due 8/15/2008 ....................................... 100,000 100,000
Rabobank Nederland N.Y.,
2.60%, Due 7/8/2008 ........................................ 300,000 300,000
See accompanying notes
22
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2008 (Unaudited)
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
Rabobank Nederland N.Y.,
2.62%, Due 8/19/2008 ....................................... $ 50,000 $ 50,005
2.61%, Due 8/25/2008 ....................................... 100,000 100,000
2.85%, Due 9/26/2008 ....................................... 200,000 200,000
Royal Bank of Canada N.Y.,
2.62%, Due 8/18/2008 ....................................... 100,000 100,000
2.63%, Due 8/20/2008 ....................................... 225,000 225,030
Royal Bank of Scotland plc, 2.83%, Due 7/8/2008 ............... 200,000 200,000
Societe Generale N.Y.,
3.00%, Due 7/10/2008 ....................................... 250,000 250,000
2.75%, Due 8/6/2008 ........................................ 100,000 100,000
Svenska Handelsbanken AB, 2.60%, Due 9/3/2008 ................. 200,000 200,000
Toronto Dominion Bank N.Y.,
2.85%, Due 8/29/2008 ....................................... 200,000 200,000
2.81%, Due 9/5/2008 ........................................ 150,000 150,000
2.76%, Due 9/24/2008 ....................................... 150,000 150,000
2.72%, Due 10/20/2008 ...................................... 50,000 50,000
Westpac Banking Corp.,
2.82%, Due 8/1/2008 ........................................ 100,000 100,015
2.74%, Due 8/4/2008 ........................................ 94,225 94,232
2.62%, Due 8/14/2008 ....................................... 200,000 200,000
2.61%, Due 9/9/2008 ........................................ 200,000 200,000
-----------
TOTAL CERTIFICATES OF DEPOSIT AND BANK NOTES .................. 5,748,586
-----------
COMMERCIAL PAPER - 25.92%
Concord Minutemen Capital Co. LLC, 3.00%, Due 7/1/2008 # ...... 394,026 394,026
Elysian Funding LLC, 3.10%, Due 7/1/2008 # .................... 350,000 350,000
Fountain Square Commercial Funding, 3.75%, Due 7/1/2008 # ..... 300,000 300,000
Gemini Securitization Corp. LLC,
2.77%, Due 7/25/2008 ....................................... 95,219 95,043
2.75%, Due 7/28/2008 ....................................... 198,750 198,355
General Electric Capital Corp.,
2.78%, Due 7/11/2008 ....................................... 175,000 174,865
2.76%, Due 7/15/2008 ....................................... 50,000 49,946
2.72%, Due 7/30/2008 ....................................... 50,000 49,890
2.78%, Due 7/31/2008 ....................................... 50,000 49,884
2.86%, Due 8/15/2008 ....................................... 100,000 99,643
2.46%, Due 10/27/2008 ...................................... 200,000 198,387
2.55%, Due 10/31/2008 ...................................... 46,000 45,603
ING (US) Funding LLC, 2.65%, Due 9/30/2008 .................... 300,000 297,990
Kitty Hawk Funding Corp., 2.77%, Due 8/7/2008 ................. 74,985 74,772
Lexington Parker Capital Co. LLC, 3.05%, Due 7/1/2008 # ....... 494,301 494,301
Salisbury Receivables Co., 3.00%, Due 7/1/2008 ................ 23,785 23,785
Toyota Motor Credit Corp.,
2.92%, Due 7/3/2008 ........................................ 50,000 49,992
See accompanying notes
23
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2008 (Unaudited)
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
Toyota Motor Credit Corp.,
2.76%, Due 8/21/2008 ....................................... $ 75,000 $ 74,707
2.76%, Due 8/22/2008 ....................................... 275,000 273,904
-----------
TOTAL COMMERCIAL PAPER ........................................ 3,295,093
-----------
TIME DEPOSITS - 3.93%
BNP Paribas N.Y., 2.75%, Due 7/1/2008 ......................... 75,000 75,000
Deutsche Bank N.Y., 2.75%, Due 7/1/2008 ....................... 225,000 225,000
Societe Generale N.Y., 2.563%, Due 7/1/2008 ................... 200,000 200,000
-----------
TOTAL TIME DEPOSITS ........................................... 500,000
-----------
SHARES
------------
SHORT TERM INVESTMENTS - 9.04%
OTHER SHORT-TERM INVESTMENTS - 9.04%
BlackRock Temp Fund ........................................... 529,063,351 529,063
Dreyfus Institutional Preferred Money Market Fund ............. 620,262,421 620,263
-----------
TOTAL SHORT TERM INVESTMENTS .................................. 1,149,326
-----------
PAR
AMOUNT
------------
REPURCHASE AGREEMENTS - 7.08%
Bank of America, NA, 2.75%, Due 7/1/2008 (Held at Bank of
New York, Collateralized by Mortgage Obligations valued at
$588,500, 2/23/2036) ....................................... $ 550,000 550,000
Barclays Bank plc, 2.75%, Due 7/1/2008 (Held at Bank of New
York, Collateralized by Equity Securities valued at
$105,000) .................................................. 100,000 100,000
Citigroup, Inc., 2.80%, Due 7/1/2008 (Held at Chase NYC,
Collateralized by Mortgage Obligations valued at $303,279,
3/14/2036 - 6/23/2038) ..................................... 250,000 250,000
-----------
TOTAL REPURCHASE AGREEMENTS ................................... 900,000
-----------
TOTAL INVESTMENTS - 101.32% (COST $12,878,992) ................... $12,878,992
LIABILITIES, NET OF OTHER ASSETS - (1.32%) ....................... (168,355)
-----------
TOTAL NET ASSETS - 100.00% ....................................... $12,710,637
===========
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 $2,035,033 or 16.01% of net
assets. The Fund has no right to demand registration of these securities.
See accompanying notes
24
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2008 (Unaudited)
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
U.S. AGENCY OBLIGATIONS - 28.77%
FEDERAL HOME LOAN BANK - 21.19%
2.17%, Due 8/6/2008 ........................................ $ 7,579 $ 7,562
2.589%, Due 8/15/2008 ++ ................................... 35,000 35,003
2.65%, Due 9/17/2008 ++ .................................... 25,000 24,998
2.616%, Due 12/15/2008 ++ .................................. 35,000 35,006
2.51%, Due 1/9/2009 ++ ..................................... 25,000 25,025
2.737%, Due 1/28/2009 ++ ................................... 25,000 24,997
-----------
152,591
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 4.67%
2.16%, Due 7/21/2008 ....................................... 23,731 23,702
1.004%, Due 11/8/2008 ...................................... 10,000 9,964
-----------
33,666
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.91%
2.27%, Due 7/30/2008 ....................................... 10,000 9,982
2.30%, Due 8/1/2008 ........................................ 11,000 10,978
-----------
20,960
-----------
TOTAL U.S. AGENCY OBLIGATIONS ................................. 207,217
-----------
SHARES
------------
SHORT TERM INVESTMENTS - 0.03%
OTHER SHORT-TERM INVESTMENTS - 0.03%
Goldman Sachs Financial Square Government Fund ................ 24,748 25
Morgan Stanley Government Portfolio ........................... 193,229 193
-----------
TOTAL SHORT TERM INVESTMENTS .................................. 218
-----------
PAR
AMOUNT
------------
REPURCHASE AGREEMENTS - 71.13%
Banc of America Securities LLC, 2.52%, Due 7/1/2008 (Held at
Bank of New York, Collateralized by U.S. Government Agency
Obligations valued at $253,820, 5.5% - 6.0%, 6/1/2033 -
5/1/2038) .................................................. $ 250,000 250,000
Barclays Capital, Inc., 2.60%, Due 7/1/2008 (Held at Bank of
New York, Collateralized by U.S. Government Agency
Obligations valued at $192,952, 4.44% - 6.43%, 8/1/2035 -
4/1/2038) .................................................. 190,000 190,000
Goldman Sachs Group, Inc., 2.45%, Due 7/1/2008 (Held at Bank
of New York, Collateralized by U.S. Government Agency
Obligations valued at $73,448, 4.0% - 8.0%, 9/20/2010 -
6/1/2038) .................................................. 72,365 72,365
-----------
TOTAL REPURCHASE AGREEMENTS ................................... 512,365
-----------
TOTAL INVESTMENTS - 99.93% (COST $719,800) ....................... $ 719,800
OTHER ASSETS, NET OF LIABILITIES - 0.07% ......................... 510
-----------
TOTAL NET ASSETS - 100.00% ....................................... $ 720,310
===========
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
25
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2008 (UNAUDITED) (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
ASSETS:
Investment in securities at value (cost - $11,978,992 and $207,435, respectively) .. $11,978,992 $207,435
Repurchase agreement (cost - $900,000 and $512,365, respectively) .................. 900,000 512,365
Dividends and interest receivable .................................................. 31,127 595
Prepaid expenses ................................................................... 115 14
----------- --------
TOTAL ASSETS .................................................................... 12,910,234 720,409
----------- --------
LIABILITIES:
Management and investment advisory fees payable (Note 2) ........................... 1,083 54
Other liabilities .................................................................. 198,514 45
TOTAL LIABILITIES ----------- --------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS .............................. 199,597 99
----------- --------
$12,710,637 $720,310
=========== ========
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
INVESTMENT INCOME:
Interest income .................................................................... $234,691 $16,340
-------- -------
TOTAL INVESTMENT INCOME ......................................................... 234,691 16,340
-------- -------
EXPENSES:
Management and investment advisory fees (Note 2) 6,844 518
Custodian fees ..................................................................... 183 17
Professional fees .................................................................. 76 12
Other expenses ..................................................................... 195 24
-------- -------
TOTAL EXPENSES .................................................................. 7,298 571
-------- -------
NET INVESTMENT INCOME ................................................................. 227,393 15,769
-------- -------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ................................................... 0 6
-------- -------
NET GAIN ON INVESTMENTS ......................................................... 0 6
-------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................................. $227,393 $15,775
======== =======
See accompanying notes
26
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
U.S. GOVERNMENT MONEY
MONEY MARKET MARKET
----------------------------- --------------------------
Six Months Year Ended Six Months Year Ended
Ended June 30, December 31, Ended June December 31,
2008 2007 30, 2008 2007
-------------- ------------ ----------- ------------
(unaudited) (unaudited)
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income ......................................... $ 227,393 $ 824,823 $ 15,769 $ 47,203
Net realized gain on investments .............................. 0 127 6 3
----------- ------------ ----------- -----------
TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... 227,393 824,950 15,775 47,206
----------- ------------ ----------- -----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions ................................................. 89,239,048 35,059,358 3,942,000 5,041,893
Withdrawals ................................................... (89,939,803) (35,428,478) (4,619,449) (4,270,511)
----------- ------------ ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS ......... (700,755) (369,120) (677,449) 771,382
----------- ------------ ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS ...................... (473,362) 455,830 (661,674) 818,588
----------- ------------ ----------- -----------
NET ASSETS:
Beginning of period ........................................... 13,183,999 12,728,169 1,381,984 563,396
----------- ------------ ----------- -----------
END OF PERIOD ................................................. $12,710,637 $ 13,183,999 $ 720,310 $ 1,381,984
=========== ============ =========== ===========
FINANCIAL HIGHLIGHTS
MONEY MARKET
----------------------------------------------
Six Months Year Ended December 31,
Ended June --------------------------------
30, 2008 2007 2006 2005 2004 2003
----------- ---- ---- ---- ---- ----
(unaudited)
Total return ..................................................... 1.66%(A) 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% 0.11%
Net investment income ......................................... 3.31% 5.19% 5.03% 3.20% 1.30% 1.14%
U.S. GOVERNMENT MONEY MARKET
----------------------------------------------
Six Months Year Ended December 31,
Ended June --------------------------------
30, 2008 2007 2006 2005 2004 2003
----------- ---- ---- ---- ---- ----
(unaudited)
Total return ..................................................... 1.43%(A) 5.18% 5.04% 3.19% 1.30% 1.11%
Ratios to average net assets (annualized): .......................
Expenses....................................................... 0.11% 0.11% 0.12% 0.12% 0.11% 0.12%
Net investment income.......................................... 3.04% 4.98% 4.97% 3.15% 1.30% 1.13%
(A) Not annualized
See accompanying notes
27
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American Beacon Master Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a no load, open-end management
investment company that was organized as a trust under the laws of the
Commonwealth of Massachusetts pursuant to a Declaration of Trust dated as of
November 1, 2004. Prior to November 1, 2004, the Trust was organized as a trust
under the laws of the State of New York. Beneficial interests in the Trust are
divided into separate series, each having distinct investment objectives and
policies. These financial statements relate to the American Beacon Master Money
Market Portfolio and American Beacon Master U.S. Government Money Market
Portfolio (each a "Portfolio" and collectively the "Portfolios"). The objective
of each Portfolio is current income, liquidity and the maintenance of a stable
price of $1.00 per share. The assets of each Portfolio belong only to that
Portfolio, and the liabilities of each Portfolio are borne solely by that
Portfolio and no other.
American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation ("AMR") and was organized in 1986 to provide business
management, advisory, administrative and asset management consulting services to
the Trust and other investors.
On April 16, 2008, AMR, the parent company of the Manager, announced that
it had reached a definitive agreement to sell all of its interests in the
Manager to Lighthouse Holdings, Inc., which is owned by investment funds
affiliated with Pharos Capital Group, LLC and TPG Capital, L.P. AMR will acquire
a minority equity stake in the parent corporation of Lighthouse Holdings, Inc.
Completion of the sale would result in a change of control of the Manager, but
there are no anticipated material changes in the services to be provided by the
Manager or in the fee rate charged by the Manager to the Fund. The target
closing date for the proposed acquisition is expected to be no later than
September 30, 2008. Based in Dallas and Nashville, Pharos Capital Group, LLP
invests through private equity funds, primarily in companies seeking later stage
equity funding for internal growth, acquisitions, management buyouts or
recapitalizations across industry sectors. TPG Capital, L.P. is the global
buyout group of TPG, a leading private investment firm with more than $50
billion of assets under management. TPG Capital, L.P. has extensive experience
with global public and private investments executed through leveraged buyouts,
recapitalizations, spinouts, joint ventures and restructurings.
The following is a summary of the significant accounting policies followed
by the Portfolios.
Valuation of Investments
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.
The Portfolios adopted the provisions of Statement of Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"), effective with the
beginning of the Portfolios' fiscal year. 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. The three levels of the hierarchy under FAS 157 are described
below:
Level 1 - Quoted prices in active markets for identical securities.
Level 2 - Prices determined using other significant observable inputs.
These may include quoted prices for similar securities, interest rates,
prepayment speeds, credit risk, and others.
28
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
Level 3 - Prices determined using significant unobservable inputs.
Unobservable inputs reflect the Portfolio's own assumptions about the
factors market participants would use in pricing an investment, and would
be based on the best information available.
A summary of the inputs used to value the Portfolios' net assets as of June 30,
2008 is as follows (in thousands):
Investments in Securities
------------------------------
U.S. Government
Valuation Inputs Money Market Money Market
- ---------------- ------------ ---------------
Level 1 - Quoted Prices............................... $ 1,149,326 $ 218
Level 2 - Other significant observable inputs......... 11,729,666 719,582
Level 3 - Significant unobservable inputs............. -- --
----------- --------
Total................................................. $12,878,992 $719,800
The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities. For
example, money market securities are valued using amortized cost, in accordance
with rules under the Investment Company Act of 1940. Generally, amortized cost
approximates the current fair value of a security, but since the value is not
obtained from a quoted price in an active market, such securities are reflected
as Level 2.
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 and Excise 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.
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
29
AMERICAN BEACON MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008 (UNAUDITED)
meet the more likely than not threshold, and therefore there have been no
adjustments to the Portfolios' net asset value per share.
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.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory and portfolio management services. The Manager serves as the
sole investment advisor to each of the Portfolios. As compensation for
performing the duties required under the Management Agreement, the Manager
receives from the Portfolios 0.10% of the average daily net assets of each of
the Portfolios.
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission,
the Portfolios, along with other registered investment companies having
management contracts with the Manager, may participate in an interfund lending
program. This program provides an alternative credit facility allowing the Money
Market Portfolio to lend money to other participating series managed by the
Manager. For the six months ended June 30, 2008, the credit facility was not
utilized.
30
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS
(UNAUDITED)
At its May 21, 2008 meeting, the Board of Trustees ("Board" or "Trustees")
considered the renewal of each existing Management Agreement (each, a "Current
Agreement" and collectively, the "Current Agreements") between the Manager and
the American Beacon Funds ("Beacon Trust"), American Beacon Mileage Funds
("Mileage Trust"), American Beacon Select Funds ("Select Trust") or American
Beacon Master Trust ("Master Trust") (collectively, the "Funds"). In preparation
for the Board's consideration to renew these Current Agreements, the Board and
its Investment Committee undertook steps to gather and consider information
furnished by the Manager and Lipper, Inc. ("Lipper"). The Board, with the
assistance of independent legal counsel, requested and received certain relevant
information from the Manager.
In addition, the Board's Investment Committee worked with Lipper to obtain
relevant comparative information regarding the performance, fees and expenses of
the Funds. The Investment Committee held a separate meeting on May 9, 2008 to
consider the information provided by Lipper. Further, the Board took into
consideration information furnished for the Board's review and consideration
throughout the year at regular Board and Investment Committee meetings, as well
as information specifically prepared in connection with the renewal process.
On May 21, May 22 and June 4, 2008, the Board met to determine, among other
matters, whether to approve a new investment management agreement ("New
Agreement") between the Manager and the Funds. The New Agreement is necessary
because, on April 16, 2008, AMR Corporation ("AMR"), the parent company of the
Manager, entered into an agreement with Lighthouse Holdings, Inc. ("Lighthouse")
pursuant to which Lighthouse will acquire all of the capital stock of the
Manager ("Transaction") in exchange for cash and 10% of the capital stock of the
parent corporation of Lighthouse. Upon the closing of the Transaction
("Closing"), the Manager will cease to be a wholly owned subsidiary of AMR and
will become a subsidiary of Lighthouse. This change in control is deemed to be
an "assignment" under the Investment Company Act of 1940 ("1940 Act") of each
Fund's Current Agreement with the Manager. As required by the 1940 Act, each
Fund's Current Agreement provides for its automatic termination in the event of
an assignment, and each will, therefore, terminate upon the Closing.
To provide for the continuity of management for the Funds, the Board met to
consider the New Agreement with the Manager. The New Agreement for each Fund
will reflect substantially the same terms as the Current Agreement for each
Fund. In addition, the Current Agreements have been updated and modernized. As
part of this process, the primary administrative services provided by the
Manager to the Funds will be transferred to one single administrative services
agreement ("New Administrative Services Agreement"). Currently, the Manager
provides administrative services to the Funds in Mileage Trust, Select Trust and
Master Trust pursuant to their Current Agreements and to the Funds in Beacon
Trust pursuant to its Current Agreement and an Administrative Services Agreement
("Current Administrative Services Agreement"). The aggregate fee rates for each
Fund under the New Agreement and the New Administrative Services Agreement will
be the same as the fee rates imposed under the existing agreements which they
replace.
The New Agreement is subject to shareholder approval. If approved by the
shareholders of the Funds, the New Agreement will become effective upon the
Closing or, if the Closing is not consummated, the New Agreement will become
effective on or about January 1, 2009. The Manager and Lighthouse anticipate
that the Closing will occur in the third calendar quarter of 2008.
Upon the Closing, Lighthouse directly will control the Manager. Lighthouse
currently does not anticipate any changes to the organization or structure of
the Funds, to the service providers or to the aggregate fee rates under any
Current Agreement. In addition, the portfolio managers at the Manager that
currently manage the Funds are expected to continue to manage the Funds after
the Closing. In that regard, the Manager and Lighthouse have entered into or
will enter into employment contracts that will take effect
31
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS
(UNAUDITED)
upon the Closing with certain key personnel performing or overseeing the Funds'
investment programs. However, there can be no assurance that these personnel
will choose to remain employed by the Manager before or after the Closing. The
Manager and the Funds will continue to operate under their existing names.
Potential benefits to the Funds as a result of the Transaction include
Lighthouse's intention to devote additional resources to product development and
distribution of Fund shares. Any resulting growth of Fund assets may produce
economies of scale that could benefit shareholders of the Funds.
In addition, under the Current Agreements, the Manager may retain
subadvisors to provide investment advisory services for all or a portion of the
assets of a Fund. Pursuant to an exemptive order issued by the Securities and
Exchange Commission ("SEC"), the Manager is permitted to enter into new or
modified investment advisory agreements with existing or new subadvisors ("New
Investment Advisory Agreements") without approval of a Fund's shareholders, but
subject to the approval of a Fund's Board.
In preparation for the Board's consideration to approve the New Agreement,
the Board held preliminary conference call meetings on April 15, 16 and 21,
2008, to discuss the New Agreement and the effect that approving the New
Agreement would have on the Funds. The Board, with the assistance of independent
legal counsel, received a memorandum and related advice from their legal counsel
detailing the Board's responsibilities in considering the New Agreement.
In connection with Board's consideration of the Current Agreement and New
Agreement, the Trustees considered, among other materials, responses by the
Manager to inquiries requesting:
- a description of the Transaction, the effects of the Transaction on
the Trusts and the Board, and any proposed changes to the Trusts,
their service providers or fee structure and other information;
- a description of any significant changes (actual or anticipated) to
principal activities, personnel, services provided to the Funds, or
any other area, including how these changes might affect the Funds;
- a copy of the firm's Form ADV registration statement with the SEC;
- a summary of any material past, pending or anticipated litigation or
regulatory proceedings involving the firm or its personnel, including
the results of any recent regulatory examination or independent audit;
- a profit/loss analysis of the firm and any actual or anticipated
economies of scale in relation to the services it provides to each
Fund;
- a description of any payments by the firm to support the Funds'
marketing efforts;
- an analysis of compensation, including a comparison with fees charged
to other clients for which similar services are provided, any proposed
changes to the fee schedule and the effect of any fee waivers;
- an evaluation of other benefits to the firm or Funds as a result of
their relationship, if any;
- confirmation that the firm's financial condition does not raise
concerns that the firm would be unable to continue providing the same
scope and quality of services to the Funds;
- a description of the scope of portfolio management services provided
to the Funds and the firm's other clients, including other registered
investment companies, whether such services differ, and any advantages
or disadvantages that might accrue to the Funds due to the firm's
involvement in other activities;
- a description of the personnel who are assigned primary responsibility
for managing the Funds, including any changes during the past year,
and a discussion of the adequacy of current and projected staffing
levels to service the Funds;
- a description of the basis upon which portfolio managers are
compensated, including any "incentive" arrangements;
- a discussion regarding the firm's participation in "soft dollar"
arrangements, if any, or other brokerage allocation policies with
respect to Fund transactions, including the firm's methodology for
obtaining the most favorable execution and the use of any affiliated
broker-dealers;
32
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS
(UNAUDITED)
- a discussion of whether the firm receives, with respect to the Funds,
other compensation, including any payment for order flow or ECN
liquidity rebates;
- a description of any actual or potential conflicts of interest
anticipated in managing Fund assets;
- a summary of any material changes to the firm's compliance program
with regard to federal, state, corporate and Fund requirements and a
certification regarding the reasonable design of the compliance
program;
- a discussion of any material compliance problems and remedial actions;
- information regarding the firm's code of ethics, insider trading
policy and disaster recovery plan, including a description of any
material changes thereto;
- a description of the firm's affiliation with any broker-dealer;
- a discussion of any anticipated change in the firm's controlling
persons;
- verification of the firm's insurance coverage with regard to the
services provided to the Funds;
- a comparison of the performance of each Fund to comparable investment
companies and appropriate indices, including comments on the relative
performance of each Fund versus the respective peer group average;
- a discussion, if applicable, of any underperformance by a Fund
relative to its peer group and what, if any, remedial measures the
Manager has or intends to take;
- a comparison of advisory fees and expense ratios for comparable mutual
funds;
- an analysis of any material complaints received from Fund
shareholders;
- a description of the Manager's securities lending practices and the
fees received from such practices;
- a description of any revenue sharing activities with respect to the
Funds;
- a discussion of any rebate arrangements between the Manager and a
service provider to the Funds pursuant to which the Manager receives
direct or indirect benefits from the service provider;
- a description of the portfolio turnover rate and average execution
costs for each Fund; and
- a description of how expenses that are not readily identifiable to a
particular Fund are allocated.
In connection with the Current Agreements and New Agreement, the Board also
obtained an analysis provided by Lipper that compared: (i) investment
performance of each Fund versus comparable investment companies and appropriate
indices; (ii) total Fund expenses of each Fund versus comparable mutual funds,
and (iii) each Fund's investment advisory fees versus comparable mutual funds.
For each Fund with more than one class of shares, the class of shares used for
comparative purposes was the class with the longest performance history, which
in most cases was the Institutional Class. References below to each Fund's
Lipper peer group are to the group of comparable mutual funds included in the
analysis provided by Lipper. The Current Agreements and New Agreement are each
referenced to herein as an "Agreement" and collectively, the "Agreements."
The Trustees also received memoranda from their legal counsel detailing the
Board's responsibilities pertaining to the approval of each Agreement. These
memoranda explained the regulatory requirements surrounding the Trustees'
process for evaluating investment advisors and the terms of the contracts.
In connection with the Board's consideration of the New Agreement, the
Trustees considered, among other information, the following factors, in addition
to other factors noted in the Proxy Statement:
(1) The manner in which each Fund's assets are managed will not change as a
result of the Transaction, and the same people who currently manage the
Fund's assets are expected to continue to do so after the Transaction;
(2) The aggregate fee rates payable by each Fund under the New Agreement and
the New Administrative Services Agreement are the same as the fee rates
payable under the Current Agreements and, in the case of the Beacon Trust,
under the Current Agreement and the Current Administrative Services
Agreement;
33
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS
(UNAUDITED)
(3) The material terms regarding advisory services pursuant to the New
Agreement are substantially the same as the terms of the Current
Agreements;
(4) The qualifications of the Manager's personnel who will provide advisory and
administrative services to the Funds are not expected to change;
(5) The Manager's financial condition and the post-Closing capitalization of
Lighthouse;
(6) The impact of the Transaction on the Manager's day-to-day operations;
(7) The capabilities, experience, corporate structure and capital resources of
Lighthouse;
(8) The long-term business goals of Lighthouse with regard to the Manager and
the Trusts;
(9) Fund shareholders will not bear any costs in connection with the
Transaction, inasmuch as AMR and Lighthouse will bear equally the costs,
fees and expenses incurred by the Funds in connection with the Proxy
Statement, the fees and expenses of accountants and attorneys relating to
the Transaction and Proxy Statement, the fees and expenses incurred by the
Funds in connection with the Transaction, and the meeting fees of the
Boards for meetings held in connection with the Transaction;
(10) The Funds may realize benefits as a result of the Transaction, including
long-term economies of scale; and
(11) The potential for increased costs to the Trusts in order to satisfy
existing obligations under the current Trustees' retirement plan.
Provided below is an overview of the other primary factors the Board
considered at its May 21, May 22 and June 4, 2008 meetings. The Board did not
identify any particular information that was most relevant to its consideration
to renew the Current Agreements and approve the New Agreement, and each Trustee
may have afforded different weight to the various factors. Legal counsel to the
Non-interested Trustees provided the Board with memoranda regarding its
responsibilities pertaining to the renewal of the Current Agreements and
approval of the New Agreement. Based on its evaluation, the Board unanimously
concluded that the terms of each Current Agreement were reasonable and fair and
that the renewal of each Current Agreement was in the best interests of each
Fund and its shareholders. The Board also unanimously concluded that the terms
of the New Agreement were reasonable and fair and that the approval of the New
Agreement was in the best interests of each Fund and its shareholders.
CONSIDERATIONS WITH RESPECT TO ALL FUNDS
In determining whether to renew the Current Agreement and approve the New
Agreement, the Trustees considered the best interests of each Fund separately.
While the Current Agreements for all of the Funds were considered at the Board
meetings on May 21, 2008, and the New Agreement for all of the Funds was
considered at the meetings on May 21, May 22 and June 4, 2008, the Board
considered each Fund's investment management relationships separately. In each
instance, the Board considered, among other things, the following factors: (1)
the nature and quality of the services provided; (2) the investment performance
of a Fund; (3) the costs incurred by the Manager in rendering its services and
its resulting profits or losses; (4) the extent to which economies of scale have
been taken into account in setting each fee schedule; (5) whether fee levels
reflect these economies of scale for the benefit of Fund investors; (6)
comparisons of services and fees with contracts entered into by the Manager with
other clients (such as pension funds and other institutional funds); and (7) any
other benefits derived or anticipated to be derived by the Manager from its
relationship with a Fund. The Trustees posed questions to various management
personnel of the Manager and Lighthouse regarding certain key aspects of the
materials submitted in support of the renewal.
Nature, Extent and Quality of Services. With respect to the renewal of each
Fund's Current Agreement and the approval of each Fund's New Agreement, the
Board considered: the background and experience of key investment personnel and
the Manager's ability to retain them; the Manager's disciplined investment
approach and goal to provide consistent above average long-term performance at a
low cost; the Manager's continuing
34
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS
(UNAUDITED)
efforts to add new series and share classes to enhance the Funds' product line;
the Manager's record in building improved compliance, control and credit
functions that reduce risks to the Funds; the addition of personnel to manage
the Funds, promote sales and improve services, including the addition of a
separate new information technology (IT) department at the Manager; the high
rankings received by the Funds in service surveys.
Based on the foregoing information, the Board concluded that the nature,
extent and quality of the management and advisory services provided by the
Manager were appropriate for each Fund and, thus, determined to renew the
Current Agreements and approve the New Agreement for each Fund.
Investment Performance. The Board evaluated the comparative information
provided by Lipper and the Manager regarding each Fund's investment performance
relative to its benchmark index(es) and peer group. The Board considered the
information provided by Lipper regarding its independent peer selection
methodology to select all peer groups and universes. The Board also considered
the performance reports and discussions with management at Board and Committee
meetings throughout the year. A discussion regarding the Board's considerations
with respect to each Fund's performance appears below under "Additional
Considerations and Conclusions with Respect to Each Fund."
Costs of the Services to be Provided to the Funds and the Projected Profits
to be Realized by the Manager from its Relationship with the Funds. In analyzing
the cost of services and profitability of the Manager by Fund, the Board
considered the revenues earned and the expenses incurred by the Manager. The
profits or losses were noted at both an individual Fund level and at an
aggregate level for all Funds. The Board also considered that the Current and
New Agreements for the Beacon Trust, Mileage Trust and Select Trust stipulate
that, to the extent that a Fund invests all of its investable assets in another
registered investment company (i.e., is a Feeder Fund), the Fund will not pay
the Manager a management fee. Because the money market series of the Beacon
Trust, Mileage Trust and Select Trust operate as Feeder Funds with respect to
the Master Trust, the Manager only receives a management fee from the Master
Trust. With respect to the Money Market Funds, the Board also considered the
Manager's advisory fees for services provided by the Manager to institutional
separate accounts with similar investment strategies. Although the Board noted
that, in certain cases, the fee rates paid by other clients is lower than the
fee rates paid by the Funds, the difference reflects the greater level of
responsibility and regulatory requirements associated with managing the Funds.
The Board also noted that the Manager proposed to continue the expense
waivers and reimbursements for certain Funds and classes that were in place
during the last fiscal year. The Board considered that the Manager receives
service and administrative fees to compensate the Manager for providing
administrative services to the Funds and to compensate third-party
administrators and broker-dealers for services to Fund shareholders. The Board
also noted that certain classes of the Funds maintain higher expense ratios in
order to compensate third-party distributors.
Based on the foregoing information, the Board concluded that the
profitability levels were reasonable in light of the services performed by the
Manager. A discussion regarding the Board's considerations with respect to each
Fund's fee rates is set forth below under "Additional Considerations and
Conclusions with Respect to Each Fund."
Economies of Scale. In considering the reasonableness of the management
fees, the Board considered whether economies of scale will be realized as the
Funds grow and whether fee levels reflect these economies of scale for the
benefit of Fund shareholders. The Board noted that certain Funds have grown
their shareholder base, which has spread fixed costs over a larger shareholder
and asset base. With respect to the Money Market Funds, the Board also noted
that, although the fee schedules for these Funds do not have breakpoints, the
effective advisory fee rates are low by industry standards and the performance
of these Funds has been highly competitive and, in many cases, among the top
performers among similar funds.
The Board also considered the Manager's representations that its costs have
increased due primarily to greater service provider and regulatory costs. The
Manager also represented that it anticipates further
35
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS
(UNAUDITED)
economies of scale would be largely offset by higher costs of adding and
retaining qualified personnel, improving technology and increasing demands on
its advisory business.
Based on the foregoing information, the Board concluded that the Manager
fee schedules for each Fund provides for a reasonable sharing of benefits from
any economies of scale with the Fund.
Benefits Derived from the Relationship with the Funds. The Board considered
the "fall-out" or ancillary benefits that accrue to the Manager as a result of
the advisory relationships with the Funds, including greater exposure in the
marketplace with respect to the Manager's investment process and expanding the
level of assets under management by the Manager. The Board also considered that
the Manager's relationship with the Funds and, in particular the money market
funds, continues to be a significant factor in attracting separate account
assets for the Manager. In addition, the Board noted that the Manager provides
services to each Trust at a relatively low cost. The Board also considered that
Funds did not pay commissions to any affiliated broker-dealer of the Manager
during the most recent fiscal year ended December 31, 2007.
Based on the foregoing information, the Board concluded that the potential
benefits accruing to the Manager by virtue of its relationships with the Funds
appear to be fair and reasonable.
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO EACH FUND
The performance comparisons below were made versus each Fund's respective
Lipper Average, which includes all comparable funds in the Lipper category, and
the Lipper Index, which includes the 30 largest funds in the Lipper category.
References to the Lipper expense group below are to the group of comparable
mutual funds included in the analysis provided to the Trustees by Lipper, Inc.
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE MONEY MARKET FUND
In considering the renewal of the Current Agreement and the approval of the
New Agreement, the Trustees considered the following additional factors: (1) the
Institutional Class of the Beacon Trust slightly underperformed the Lipper Index
and outperformed the Lipper Average for all reported periods ended March 31,
2008; (2) the total expense ratio and contractual management fees of the
Institutional Class of Beacon Trust shares were both lower than its Lipper
expense group average; (3) the Manager is subject to a high degree of risk of
financial responsibility should the Fund be unable to maintain a stable $1.00
per share net asset value; (4) the Manager's explanation that fee schedule
"breakpoints" were not warranted due to, among other factors, the low base
management fee charged to the Fund; and (5) the Manager has contractually agreed
to waive fees and/or reimburse Fund expenses to the extent necessary to maintain
a competitive total expense ratio for the Institutional, Cash Management and BBH
ComSet Classes of the Beacon Trust.
Based on these and other considerations, the Trustees (1) concluded that
the fees paid to the Manager under the Agreements are fair and reasonable, (2)
determined that the Fund and its shareholders would benefit from the Manager's
continued management of the Fund, (3) approved the renewal of the Current
Agreement and (4) approved the New Agreement with respect to the Fund.
ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE U.S. GOVERNMENT
MONEY MARKET FUND
In considering the renewal of the Current Agreement and the approval of the
New Agreement, the Trustees considered the following additional factors: (1) the
U.S. Government Money Market Fund was ranked as the 16th best institutional U.S.
Government money market fund among 170 funds for the one year ending March 31,
2008 according to Lipper Analytical Services; (2) the Fund's total return of
4.69% outperformed the Lipper Institutional U.S. Government Money Fund Average
return of 4.44%; (3) the Fund was ranked in the first quartile for the one,
three and five year period ended March 31, 2008; and (4) similar to the Money
Market Fund, and for the same reasons, this Fund maintained a relatively short
weighted-average maturity throughout
36
DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE
MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS
(UNAUDITED)
2007. This strategy was accomplished primarily by purchasing short-dated fixed
rate agencies, variable rate agencies and overnight repurchase agreements.
Based on these and other considerations, the Trustees (1) concluded that
the fees paid to the Manager under the Agreements are fair and reasonable, (2)
determined that the Fund and its shareholders would benefit from the Manager's
continued management of the Fund, (3) approved the renewal of the Current
Agreement and (4) approved the New Agreement with respect to the Fund.
37
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38
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39
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40
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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 SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
In addition to the Schedule of Investments A description of the policies and procedures the
provided in each semi-annual and annual report, Fund uses to determine how to vote proxies
the Fund files a complete schedule of its relating to portfolio securities is available in
portfolio holdings with the Securities and the Fund's Statement of Additional Information,
Exchange Commission ("SEC") on Form N-Q as of is available free of charge on the Fund's
the first and third fiscal quarters. The Fund's website (www.americanbeaconfunds.com) and by
Forms N-Q are available on the SEC's website at calling 1-800-967-9009 or by accessing the SEC's
www.sec.gov. The Forms N-Q may also be reviewed website at www.sec.gov. The Fund's proxy voting
and copied at the SEC's Public Reference Room, record for the most recent year ended June 30 is
450 Fifth Street, NW, Washington, DC 20549. filed annually with the SEC on Form N-PX. The
Information regarding the operation of the SEC's Fund's Forms N-PX are available on the SEC's
Public Reference Room may be obtained by calling website at www.sec.gov. The Fund's proxy voting
1-800-SEC-0330. A complete schedule of the record may also be obtained by calling
Fund's portfolio holdings is also available on 1-800-967-9009.
the Funds' website (www.americanbeaconfunds.com)
approximately thirty days after the end of each
month.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES
TRUST SERVICES ERNST & YOUNG LLP Portland, Maine
Boston, Massachusetts Kansas City, Missouri 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. PlanAhead Class is a registered service mark of American Beacon
Advisors, Inc. American Beacon Funds, American Beacon Money Market Fund, and
American Beacon U.S. Government Money Market Fund are service marks of American
Beacon Advisors, Inc.
SAR 6/08
62519
42
ITEM 2. CODE OF ETHICS.
The Trust did not amend the code of ethics that applies to its principal
executive and financial officers (the "Code") nor did it grant any waivers to
the provisions of the Code during the period covered by the shareholder report
presented in Item 1.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedules of investments for each series of the Trust are included in the
shareholder report presented in Item 1. The shareholder report for the S&P
500 Index Fund, the Small Cap Index Fund and the International Equity Index
Fund presented in Item 1 includes a summary schedule of investments for the
Master International Index Series and the Master Small Cap Index Series, both
of which are series of the Master Quantitative Series LLC. 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 June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Advertising Agencies - 0.4% DG FastChannel, Inc. (a) 7,000 $ 120,750
Greenfield Online, Inc. (a) 12,100 180,532
Harte-Hanks, Inc. 18,700 214,115
inVentiv Health, Inc. (a) 15,700 436,303
Marchex, Inc. Class B (b) 11,300 139,216
National CineMedia, Inc. 19,070 203,286
R.H. Donnelley Corp. (a) 35,600 106,800
Valassis Communications, Inc. (a) 22,800 285,456
ValueClick, Inc. (a) 45,080 682,962
-------------
2,369,420
- ----------------------------------------------------------------------------------------------------------------------------------
Aerospace - 0.9% AeroVironment, Inc. (a) 5,400 146,772
Argon ST, Inc. (a) 6,200 153,760
Ascent Solar Technologies, Inc. (a) 3,100 32,085
Curtiss-Wright Corp. 21,068 942,582
Ducommun, Inc. (a) 5,500 126,280
Heico Corp. (b) 10,626 345,770
LMI Aerospace, Inc. (a) 4,600 80,822
Ladish Co., Inc. (a) 6,900 142,071
Moog, Inc. Class A (a) 20,113 749,008
Orbital Sciences Corp. (a) 27,535 648,725
Teledyne Technologies, Inc. (a) 16,734 816,452
TransDigm Group, Inc. (a) 15,700 527,363
-------------
4,711,690
- ----------------------------------------------------------------------------------------------------------------------------------
Agriculture, Fishing & Ranching - 0.1% AgFeed Industries, Inc. (a) 10,100 151,197
Alico, Inc. 1,500 51,990
The Andersons, Inc. 8,900 362,319
Cadiz, Inc. (a) 5,700 91,884
Calavo Growers, Inc. 5,700 69,825
HQ Sustainable Maritime Industries, Inc. (a) 2,800 37,100
-------------
764,315
- ----------------------------------------------------------------------------------------------------------------------------------
Air Transport - 0.6% AAR Corp. (a) 18,968 256,637
AirTran Holdings, Inc. (a)(b) 47,720 97,349
Alaska Air Group, Inc. (a) 17,298 265,351
Allegiant Travel Co. (a) 6,900 128,271
Atlas Air Worldwide Holdings, Inc. (a) 6,200 306,652
Bristow Group, Inc. (a) 9,485 469,413
Hawaiian Holdings, Inc. (a) 20,300 141,085
JetBlue Airways Corp. (a)(b) 82,100 306,233
PHI, Inc. (a) 6,500 261,105
Republic Airways Holdings, Inc. (a) 15,200 131,632
SkyWest, Inc. 27,700 350,405
UAL Corp. 61,600 321,552
US Airways Group, Inc. (a) 47,500 118,750
-------------
3,154,435
- ----------------------------------------------------------------------------------------------------------------------------------
Aluminum - 0.1% Kaiser Aluminum Corp. 7,400 396,122
- ----------------------------------------------------------------------------------------------------------------------------------
Auto Parts: After Market - 0.1% ATC Technology Corp. (a) 10,043 233,801
Commercial Vehicle Group, Inc. (a) 10,050 93,967
Dorman Products, Inc. (a) 6,300 50,778
Superior Industries International, Inc. (b) 10,099 170,471
-------------
549,017
- ----------------------------------------------------------------------------------------------------------------------------------
1
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Auto Parts: Original Equipment - 0.5% American Axle & Manufacturing Holdings, Inc. 20,500 $ 163,795
Amerigon Inc. (a) 10,100 71,609
ArvinMeritor, Inc. 35,600 444,288
Dana Holding Corp. (a) 46,500 248,775
Fuel Systems Solutions, Inc. (a) 6,000 231,000
Hayes Lemmerz International, Inc. (a) 48,000 136,320
Lear Corp. (a) 29,780 422,280
Quantum Fuel Systems Technologies Worldwide, Inc. (a) 30,800 94,864
Sauer-Danfoss, Inc. 4,473 139,334
Stoneridge, Inc. (a) 6,700 114,302
Tenneco, Inc. (a) 22,100 299,013
Visteon Corp. (a) 62,100 163,323
Wonder Auto Technology, Inc. (a) 8,100 56,943
-------------
2,585,846
- ----------------------------------------------------------------------------------------------------------------------------------
Auto, Trucks & Parts - 0.1% Accuride Corp. (a) 18,500 78,625
Force Protection, Inc. (a)(b) 32,400 107,244
Modine Manufacturing Co. 14,094 174,343
Spartan Motors, Inc. 14,900 111,303
Wabash National Corp. 14,545 109,960
-------------
581,475
- ----------------------------------------------------------------------------------------------------------------------------------
Banks: New York City - 0.1% Signature Bank (a) 14,600 376,096
- ----------------------------------------------------------------------------------------------------------------------------------
Banks: Outside New York City - 4.6% 1st Source Corp. 5,584 89,902
Abington Bancorp, Inc. 12,980 118,378
Amcore Financial, Inc. 10,653 60,293
Ameris Bancorp 6,400 55,680
Ames National Corp. 3,700 61,346
Arrow Financial Corp. 5,000 90,650
BancTrust Financial Group, Inc. 9,900 65,241
Bancfirst Corp. 2,990 127,972
Banco Latinoamericano de Exportaciones, SA 'E' 12,600 203,994
Bank of the Ozarks, Inc. 5,800 86,188
BankFinancial Corp. 10,800 140,508
Banner Corp. 7,213 63,907
Beneficial Mutual Bancorp, Inc. (a) 14,100 156,087
Boston Private Financial Holdings, Inc. 18,333 103,948
Bryn Mawr Bank Corp. 3,000 52,500
CVB Financial Corp. 30,265 285,701
Camden National Corp. 4,200 97,776
Capital City Bank Group, Inc. (b) 4,721 102,729
Capitol Bancorp Ltd. (b) 6,700 60,099
Cardinal Financial Corp. 13,200 82,632
Cascade Bancorp (b) 10,525 80,727
Cathay General Bancorp (b) 23,144 251,575
Centerstate Banks of Florida, Inc. 4,200 46,326
Central Pacific Financial Corp. 13,648 145,488
Chemical Financial Corp. 11,348 231,499
Citizens & Northern Corp. 5,000 82,550
Citizens Banking Corp. 41,487 116,993
CityBank 6,398 55,023
2
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
City Holding Co. 7,793 $ 317,721
Clifton Savings Bancorp, Inc. 2,600 25,324
CoBiz Financial, Inc. 8,826 58,075
The Colonial BancGroup, Inc. 98,700 436,254
Columbia Banking System, Inc. 8,541 165,097
Community Bank System, Inc. 14,200 292,804
Community Trust Bancorp, Inc. 7,023 184,424
Corus Bankshares, Inc. (b) 17,904 74,481
East-West Bancorp, Inc. 32,000 225,927
Encore Bancshares, Inc. (a) 2,800 43,820
Enterprise Financial Services Corp. (b) 4,200 79,170
Farmers Capital Bank Corp. 2,700 47,574
Financial Institutions, Inc. 6,100 97,966
First BanCorp, Inc. (b) 43,136 332,987
First Busey Corp. (b) 11,214 148,249
First Commonwealth Financial Corp. (b) 33,640 313,861
First Community Bancshares, Inc. 4,294 121,091
First Financial Bancorp 19,187 176,520
First Financial Bankshares, Inc. 10,153 465,109
First Financial Corp. 5,344 163,580
First Merchants Corp. 8,446 153,295
First Midwest Bancorp, Inc. 22,700 423,355
First South Bancorp, Inc. (b) 3,800 48,944
FirstMerit Corp. 38,100 621,411
Fox Chase Bancorp, Inc. (a) 2,500 25,650
Frontier Financial Corp. (b) 23,766 202,486
Glacier Bancorp, Inc. (b) 25,264 403,971
Greene County Bancshares, Inc. 5,400 75,708
Guaranty Bancorp (a) 21,100 75,960
Hancock Holding Co. 12,154 477,531
Hanmi Financial Corp. 17,704 92,238
Harleysville National Corp. (b) 14,836 165,570
Heartland Financial USA, Inc. 4,800 87,312
Heritage Commerce Corp. 6,200 61,380
Home Bancshares, Inc. 4,500 101,160
Independent Bank Corp./MA 7,745 184,641
Integra Bank Corp. 9,774 76,530
International Bancshares Corp. 23,910 510,957
Investors Bancorp, Inc. (a) 20,900 272,954
Lakeland Bancorp, Inc. 7,605 92,629
Lakeland Financial Corp. 5,700 108,756
MASSBANK Corp. 2,200 87,076
MB Financial, Inc. 17,083 383,855
MainSource Financial Group, Inc. 8,819 136,695
Midwest Banc Holdings, Inc. 10,380 50,551
NBT Bancorp, Inc. 14,713 303,235
Nara Bancorp, Inc. 10,600 113,738
3
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
National Penn Bancshares, Inc. (b) 37,365 $ 496,207
Northfield Bancorp, Inc. (a)(b) 7,000 75,250
Old National Bancorp (b) 32,295 460,527
Old Second Bancorp, Inc. 6,522 75,786
Oriental Financial Group 12,218 174,229
PacWest Bancorp 11,611 172,772
Pacific Capital Bancorp 21,862 301,258
Pacific Continental Corp. 4,700 51,653
Park National Corp. (b) 5,415 291,869
Peapack-Gladstone Financial Corp. 4,500 98,865
Pennsylvania Commerce Bancorp, Inc. (a) 3,000 72,150
Peoples Bancorp, Inc. 4,910 93,192
Pinnacle Financial Partners, Inc. (a) 10,700 214,963
Piper Jaffray Cos. (a) 8,300 243,439
Premierwest Bancorp 10,900 63,765
PrivateBancorp, Inc. (b) 8,896 270,260
Prosperity Bancshares, Inc. 18,400 491,832
Provident Bankshares Corp. 15,724 100,319
Renasant Corp. 9,798 144,325
Republic Bancorp, Inc. Class A 3,354 82,508
S&T Bancorp, Inc. 11,463 333,115
SCBT Financial Corp. 3,963 113,183
SVB Financial Group (a) 14,200 683,162
SY Bancorp, Inc. 7,030 150,161
Sandy Spring Bancorp, Inc. 7,814 129,556
Santander BanCorp 1,203 12,764
Seacoast Banking Corp. of Florida (b) 7,058 54,770
Security Bank Corp. (b) 1 6
Shore Bancshares, Inc. 4,600 86,112
Sierra Bancorp 3,500 57,750
Simmons First National Corp. Class A 5,700 159,429
Smithtown Bancorp, Inc. 5,400 87,750
The South Financial Group, Inc. (b) 39,300 154,056
Southside Bancshares, Inc. 5,649 104,168
Southwest Bancorp, Inc. 6,800 78,200
State Bancorp, Inc. 7,700 96,250
StellarOne Corp. 11,700 170,820
Sterling Bancshares, Inc. 34,714 315,550
Suffolk Bancorp 4,700 138,086
Sun Bancorp, Inc. (a) 5,728 58,134
Susquehanna Bancshares, Inc. 40,456 553,843
Texas Capital Bancshares, Inc. (a) 11,361 181,776
Tompkins Trustco, Inc. 3,040 113,088
Towne Bank 10,700 161,142
Trico Bancshares 6,578 72,029
TrustCo Bank Corp. NY (b) 34,961 259,411
Trustmark Corp. 24,227 427,607
UCBH Holdings, Inc. (b) 56,500 127,125
UMB Financial Corp. 14,652 751,208
4
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Umpqua Holdings Corp. (b) 28,480 $ 345,462
Union Bankshares Corp. 4,700 69,983
United Bankshares, Inc. 17,900 410,805
United Community Banks, Inc. (b) 20,900 178,277
United Financial Bancorp, Inc. 9,700 108,349
United Security Bancshares (b) 2,800 40,712
Univest Corp. of Pennsylvania 5,050 100,293
Washington Trust Bancorp, Inc. 5,400 106,380
WesBanco, Inc. 13,363 229,175
Westamerica Bancorp (b) 13,783 724,848
West Bancorp., Inc. 9,800 85,260
West Coast Bancorp 7,400 64,158
Western Alliance Bancorp (a)(b) 7,800 60,528
Wilshire Bancorp, Inc. 7,800 66,846
Wintrust Financial Corp. 11,200 267,120
Yardkin Valley Financial Corp. 6,500 77,675
-------------
24,764,625
- ----------------------------------------------------------------------------------------------------------------------------------
Beverage: Brewers (Wineries) - 0.0% Boston Beer Co., Inc. Class A (a) 4,200 170,856
- ----------------------------------------------------------------------------------------------------------------------------------
Beverage: Soft Drinks - 0.1% Coca-Cola Bottling Co. Consolidated 1,987 73,479
Farmer Bros. Co. 2,010 42,512
Green Mountain Coffee Roasters, Inc. (a) 8,200 308,074
National Beverage Corp. 2,708 19,687
Peet's Coffee & Tea, Inc. (a) 6,600 130,812
-------------
574,564
- ----------------------------------------------------------------------------------------------------------------------------------
Biotechnology Research & AMAG Pharmaceuticals, Inc. (a) 8,060 274,846
Production - 3.1% Acadia Pharmaceuticals, Inc. (a) 14,300 52,767
Accelrys, Inc. (a) 14,500 70,035
Acorda Therapeutics, Inc. (a) 15,800 518,714
Albany Molecular Research, Inc. (a) 11,087 147,124
Alexion Pharmaceuticals, Inc. (a) 18,180 1,318,050
Allos Therapeutics, Inc. (a) 26,500 183,115
Alnylam Pharmaceuticals, Inc. (a)(b) 16,700 446,391
American Oriental Bioengineering, Inc. (a) 28,700 283,269
Amicus Therapeutics, Inc. (a)(b) 2,300 24,564
Applera Corp. - Applied Biosystems, Inc. (a)(c) 38,900 441,904
Arena Pharmaceuticals, Inc. (a) 35,100 182,169
Ariad Pharmaceuticals, Inc. (a) 33,119 79,486
Arqule, Inc. (a) 18,800 61,100
Array Biopharma, Inc. (a) 22,100 103,870
ArthroCare Corp. (a)(b) 12,620 515,022
Avant Immunotherapeutics, Inc. (a) 7,800 113,568
Biodel, Inc. (a) 5,700 74,100
Caliper Life Sciences, Inc. (a) 25,900 67,081
Cell Genesys, Inc. (a)(b) 40,024 104,062
Cougar Biotechnology, Inc. (a) 7,500 178,725
Cubist Pharmaceuticals, Inc. (a) 26,767 478,059
Cypress Bioscience, Inc. (a) 17,800 126,914
Cytokinetics, Inc. (a) 11,900 44,149
Cytori Therapeutics, Inc. (a) 8,700 56,376
5
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Discovery Laboratories, Inc. (a)(b) 45,900 $ 75,735
Dyax Corp. (a) 24,900 77,190
Enzon Pharmaceuticals, Inc. (a) 21,200 150,944
Exelixis, Inc. (a) 49,918 249,590
Genomic Health, Inc. (a)(b) 6,300 120,645
Geron Corp. (a)(b) 36,929 127,405
Halozyme Therapeutics, Inc. (a) 28,900 155,482
Human Genome Sciences, Inc. (a) 65,800 342,818
Idenix Pharmaceuticals, Inc. (a)(b) 11,900 86,513
Idera Pharmaceuticals, Inc. (a) 10,400 151,944
Immunomedics, Inc. (a) 27,400 58,362
Incyte Corp. (a) 32,024 243,703
Integra LifeSciences Holdings Corp. (a) 8,400 373,632
InterMune, Inc. (a) 15,614 204,856
Kendle International, Inc. (a) 6,200 225,246
Kensey Nash Corp. (a) 3,600 115,380
Lexicon Genetics, Inc. (a) 42,900 68,640
Life Sciences Research, Inc. (a) 3,600 101,664
MannKind Corp. (a)(b) 22,750 68,250
Marshall Edwards, Inc. (a) 6,400 16,448
Martek Biosciences Corp. (a) 15,600 525,876
Maxygen, Inc. (a) 9,701 32,886
Medivation, Inc. (a)(b) 12,800 151,424
Metabolix, Inc. (a) 9,800 96,040
Momenta Pharmaceuticals, Inc. (a) 10,300 126,690
Myriad Genetics, Inc. (a) 21,100 960,472
NPS Pharmaceuticals, Inc. (a) 21,300 94,785
Nabi Biopharmaceuticals (a) 27,054 106,593
Nanosphere, Inc. (a) 5,500 43,230
Neurocrine Biosciences, Inc. (a)(b) 18,200 76,258
OMRIX Biopharmaceuticals, Inc. (a) 6,800 107,032
OSI Pharmaceuticals, Inc. (a) 27,000 1,115,640
Opko Health, Inc. (a) 28,500 43,320
Orexigen Therapeutics, Inc. (a) 10,600 83,634
Osiris Therapeutics, Inc. (a)(b) 5,700 73,245
PDL BioPharma, Inc. 56,600 601,092
PharmaNet Development Group, Inc. (a) 9,150 144,296
Progenics Pharmaceuticals, Inc. (a) 12,800 203,136
Protalix BioTherapeutics, Inc. (a) 4,560 12,358
RTI Biologics, Inc. (a) 26,500 231,875
Repligen Corp. (a) 13,700 64,664
Rexahn Pharmaceuticals, Inc. (a) 12,400 40,176
Rigel Pharmaceuticals, Inc. (a) 17,270 391,338
Sangamo Biosciences, Inc. (a) 18,500 184,075
Savient Pharmaceuticals, Inc. (a) 25,528 645,858
Seattle Genetics, Inc. (a) 29,700 251,262
Sequenom, Inc. (a) 22,300 355,908
Sucampo Pharmaceuticals, Inc. Class A (a) 5,200 55,796
Synta Pharmaceuticals Corp. (a)(b) 9,300 56,730
6
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Targacept, Inc. (a) 7,900 $ 57,433
Tercica, Inc. (a) 8,500 75,055
Third Wave Technologies, Inc. (a) 20,600 229,896
ViroPharma, Inc. (a) 33,200 367,192
Vnus Medical Technologies, Inc. (a) 6,700 134,067
XOMA Ltd. (a) 62,800 106,132
ZymoGenetics, Inc. (a)(b) 17,700 149,034
-------------
16,954,405
- ----------------------------------------------------------------------------------------------------------------------------------
Building Materials - 0.6% Ameron International Corp. 4,400 527,912
LSI Industries, Inc. 8,512 69,117
Lumber Liquidators, Inc. (a) 5,100 66,300
NCI Building Systems, Inc. (a) 9,368 344,087
Quanex Building Products Corp. 17,610 261,685
Simpson Manufacturing Co., Inc. (b) 17,432 413,836
Texas Industries, Inc. 10,905 612,098
Trex Co., Inc. (a)(b) 7,209 84,562
Watsco, Inc. (b) 10,965 458,337
Zoltek Cos., Inc. (a)(b) 12,900 312,825
-------------
3,150,759
- ----------------------------------------------------------------------------------------------------------------------------------
Building: Cement - 0.0% U.S. Concrete, Inc. (a) 16,200 77,112
- ----------------------------------------------------------------------------------------------------------------------------------
Building: Heating & Plumbing - 0.1% Aaon, Inc. 6,350 122,301
Interline Brands, Inc. (a) 16,100 256,473
-------------
378,774
- ----------------------------------------------------------------------------------------------------------------------------------
Building: Miscellaneous - 0.1% Builders FirstSource, Inc. (a)(b) 7,500 39,825
Comfort Systems USA, Inc. 19,000 255,360
Drew Industries, Inc. (a) 9,900 157,905
Griffon Corp. (a) 13,847 121,300
Orion Marine Group, Inc. (a) 10,900 154,017
-------------
728,407
- ----------------------------------------------------------------------------------------------------------------------------------
Building: Roofing & Wallboard - 0.1% Beacon Roofing Supply, Inc. (a) 21,050 223,340
China Architectural Engineering, Inc. (a) 9,900 96,723
-------------
320,063
- ----------------------------------------------------------------------------------------------------------------------------------
Cable Television Services - 0.1% Charter Communications, Inc. Class A (a)(b) 193,600 203,280
Crown Media Holdings, Inc. Class A (a) 5,998 28,430
TiVo, Inc. (a) 49,694 306,612
-------------
538,322
- ----------------------------------------------------------------------------------------------------------------------------------
Casinos & Gambling - 0.4% Ameristar Casinos, Inc. 10,500 145,110
Bally Technologies, Inc. (a) 25,800 872,040
Churchill Downs, Inc. 4,232 147,570
Dover Downs Gaming & Entertainment, Inc. 9,505 61,022
Elixir Gaming Technologies, Inc. (a) 38,000 45,600
Isle of Capri Casinos, Inc. (a) 7,875 37,721
Monarch Casino & Resort, Inc. (a) 5,700 67,260
Pinnacle Entertainment, Inc. (a) 28,494 298,902
Riviera Holdings Corp. (a) 4,100 41,615
Shuffle Master, Inc. (a) 16,700 82,498
WMS Industries, Inc. (a) 20,618 613,798
-------------
2,413,136
- ----------------------------------------------------------------------------------------------------------------------------------
7
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 1.9% Aceto Corp. 12,300 $ 93,972
American Vanguard Corp. 7,533 92,656
Arch Chemicals, Inc. 12,156 402,971
Balchem Corp. 8,200 189,666
Cabot Microelectronics Corp. (a) 10,800 358,020
Calgon Carbon Corp. (a)(b) 19,901 307,669
Cambrex Corp. (a) 13,385 78,570
China BAK Battery, Inc. (a) 13,300 62,643
EnerSys (a) 12,900 441,567
Energy Conversion Devices, Inc. (a) 19,164 1,411,237
Exide Technologies (a) 35,400 593,304
Hercules, Inc. 53,300 902,369
ICO, Inc. (a) 14,600 87,892
Innophos Holdings, Inc. 5,100 162,945
Innospec, Inc. 11,000 207,020
LSB Industries, Inc. (a) 8,700 172,260
Landec Corp. (a) 9,300 60,171
Medis Technologies Ltd. (a)(b) 10,641 35,860
NL Industries, Inc. 3,234 30,820
NewMarket Corp. 6,500 430,495
OM Group, Inc. (a) 14,500 475,455
Penford Corp. 6,100 90,768
PolyOne Corp. (a) 42,567 296,692
Polypore International, Inc. (a) 6,700 169,711
Quaker Chemical Corp. 5,300 141,298
Rockwood Holdings, Inc. (a) 19,700 685,560
Schulman A, Inc. 12,906 297,225
ShengdaTech, Inc. (a)(b) 12,300 122,139
Solutia, Inc. (a) 29,700 380,754
Stepan Co. 2,955 134,807
Ultralife Batteries, Inc. (a) 6,800 72,692
Valence Technology, Inc. (a) 26,600 117,306
W.R. Grace & Co. (a) 34,000 798,660
Westlake Chemical Corp. 8,800 130,768
Zep, Inc. 9,780 145,526
-------------
10,181,468
- ----------------------------------------------------------------------------------------------------------------------------------
Coal - 0.3% International Coal Group, Inc. (a)(b) 59,900 781,695
James River Coal Co. (a) 12,000 704,280
National Coal Corp. (a) 11,700 103,779
Westmoreland Coal Co. (a) 5,000 105,550
-------------
1,695,304
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Information Services - 0.2% Arbitron, Inc. 12,958 615,505
HSW International, Inc. (a) 11,600 33,640
infoGROUP, Inc. 12,261 53,826
LECG Corp. (a) 12,100 105,754
LoopNet, Inc. (a)(b) 14,600 164,980
-------------
973,705
- -----------------------------------------------------------------------------------------------------------------------------------
8
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Communications & Media - 0.1% Entravision Communications Corp. Class A (a) 28,800 $ 115,776
Knology, Inc. (a) 14,100 154,959
-------------
270,735
- ----------------------------------------------------------------------------------------------------------------------------------
Communications Technology - 2.6% 3Com Corp. (a) 194,800 412,976
Acme Packet, Inc. (a) 14,000 108,640
Adtran, Inc. (c) 26,400 629,376
Anaren, Inc. (a) 7,022 74,222
Anixter International, Inc. (a) 14,172 843,092
Aruba Networks, Inc. (a) 26,500 138,595
Atheros Communications, Inc. (a) 28,000 840,000
Avanex Corp. (a)(b) 79,800 90,174
Avocent Corp. (a) 21,250 395,250
Bel Fuse, Inc. 5,559 137,363
BigBand Networks, Inc. (a) 17,200 81,356
Black Box Corp. 8,288 225,351
CPI International, Inc. (a) 3,700 45,510
CSG Systems International, Inc. (a) 18,200 200,564
Cbeyond Communications, Inc. (a) 11,900 190,638
Cogent Communications Group, Inc. (a) 23,200 310,880
Cogo Group, Inc. (a) 13,100 119,341
Comtech Telecommunications Corp. (a) 11,525 564,725
Digi International, Inc. (a) 11,700 91,845
EMS Technologies, Inc. (a) 7,200 157,248
Echelon Corp. (a)(b) 14,113 153,832
Entrust, Inc. (a) 32,000 94,080
Extreme Networks, Inc. (a) 55,200 156,768
Finisar Corp. (a)(b) 153,000 182,070
Foundry Networks, Inc. (a) 68,800 813,216
GeoEye, Inc. (a) 8,500 150,535
Globecomm Systems, Inc. (a) 10,000 82,600
Harmonic, Inc. (a) 45,496 432,667
Harris Stratex Networks, Inc. Class A (a) 10,250 97,273
Hughes Communications, Inc. (a) 3,000 147,270
Infinera Corp. (a) 43,700 385,434
InterDigital, Inc. (a)(b) 21,500 522,880
InterVoice, Inc. (a) 17,900 102,030
Ixia (a) 17,329 120,437
j2 Global Communications, Inc. (a) 21,100 485,300
Loral Space & Communications Ltd. (a) 4,400 77,528
NETGEAR, Inc. (a) 16,200 224,532
Nextwave Wireless, Inc. (a)(b) 25,000 101,000
Novatel Wireless, Inc. (a) 15,000 166,950
Oplink Communications, Inc. (a) 9,702 93,139
Optium Corp. (a) 6,500 47,320
SeaChange International, Inc. (a) 13,800 98,808
Secure Computing Corp. (a) 25,138 104,071
Shoretel, Inc. (a) 22,400 99,008
Sonus Networks, Inc. (a)(b) 97,900 334,818
Standard Microsystems Corp. (a) 10,710 290,777
9
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Starent Networks Corp. (a) 13,800 $ 173,604
Switch and Data Facilities Co., Inc. (a) 10,300 174,997
Sycamore Networks, Inc. (a) 94,500 304,290
Syniverse Holdings, Inc. (a) 24,100 390,420
TIBCO Software, Inc. (a) 88,500 677,025
Tekelec (a) 30,600 450,126
Terremark Worldwide, Inc. (a)(b) 22,230 121,376
UTStarcom, Inc. (a)(b) 54,000 295,380
Viasat, Inc. (a) 12,501 252,645
Vonage Holdings Corp. (a)(b) 24,300 40,338
-------------
14,101,690
- ----------------------------------------------------------------------------------------------------------------------------------
Computer Services Software & 3PAR, Inc. (a) 14,000 109,760
Systems - 5.4% ACI Worldwide, Inc. (a) 16,285 286,453
Actuate Corp. (a) 28,000 109,480
Acxiom Corp. 28,800 330,912
American Reprographics Co. (a) 17,900 298,035
American Software Class A 12,300 69,372
Ansoft Corp. (a) 7,000 254,800
ArcSight, Inc. (a) 1,300 11,440
Ariba, Inc. (a) 40,080 589,577
Art Technology Group, Inc. (a) 60,700 194,240
AsiaInfo Holdings, Inc. (a) 15,200 179,664
BearingPoint, Inc. (a) 99,500 80,595
Blackbaud, Inc. 21,826 467,076
Blackboard, Inc. (a) 14,700 561,981
Blue Coat Systems, Inc. (a) 15,700 221,527
Bottomline Technologies, Inc. (a) 10,100 98,273
CACI International, Inc. Class A (a) 14,200 649,934
CMGI, Inc. (a) 23,280 246,768
COMSYS IT Partners, Inc. (a) 6,900 62,928
Callidus Software Inc. (a) 13,400 67,000
China Fire & Security Group, Inc. (a) 6,100 49,044
China Information Security Technology, Inc. (a) 10,000 56,600
Chordiant Software, Inc. (a) 14,240 71,200
Ciber, Inc. (a) 25,402 157,746
ComScore, Inc. (a) 9,000 196,380
CommVault Systems, Inc. (a) 20,800 346,112
Compellent Technologies, Inc. (a) 7,400 83,916
Comverge, Inc. (a) 11,100 155,178
Concur Technologies, Inc. (a)(b) 20,300 674,569
Constant Contact, Inc. (a) 10,200 192,270
DealerTrack Holdings, Inc. (a) 20,800 293,488
Delrek, Inc. (a) 4,100 31,078
DemandTec, Inc. (a) 10,400 78,104
Digimarc Corp. (a) 9,300 131,688
Digital River, Inc. (a) 17,500 675,150
DivX, Inc. (a) 11,000 80,740
Double-Take Software, Inc. (a) 8,800 120,912
EPIQ Systems, Inc. (a) 17,617 250,161
10
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Ebix, Inc. (a) 1,000 $ 77,720
Electronics for Imaging, Inc. (a) 25,339 369,949
Ener1, Inc. (a) 18,400 136,528
Epicor Software Corp. (a) 28,200 194,862
Gartner, Inc. Class A (a) 27,579 571,437
Guidance Software, Inc. (a) 5,300 50,615
The Hackett Group, Inc. (a) 21,200 121,688
i2 Technologies, Inc. (a) 7,300 90,739
iGate Corp. (a) 8,000 65,040
Informatica Corp. (a) 41,700 627,168
Integral Systems, Inc. 3,991 154,452
Interactive Intelligence, Inc. (a) 6,200 72,168
Internet Brands, Inc. Class A (a) 11,900 78,897
Internet Capital Group, Inc. (a) 17,700 136,821
Interwoven, Inc. (a) 22,325 268,123
JDA Software Group, Inc. (a) 12,208 220,965
Kenexa Corp. (a) 10,700 201,588
Keynote Systems, Inc. (a) 6,600 85,008
Lawson Software, Inc. (a) 59,100 429,657
Limelight Networks, Inc. (a) 9,200 35,144
MSC Software Corp. (a) 20,800 228,384
Macrovision Solutions Corp. (a) 38,808 580,568
Magma Design Automation, Inc. (a) 19,900 120,793
Manhattan Associates, Inc. (a) 11,739 278,566
Mantech International Corp. Class A (a) 9,600 461,952
Mentor Graphics Corp. (a) 42,700 674,660
Mercadolibre, Inc. (a) 12,000 413,880
Mercury Computer Systems, Inc. (a) 10,756 80,993
MicroStrategy, Inc. Class A (a) 4,400 284,900
Micros Systems, Inc. (a) 38,496 1,173,743
Monotype Imaging Holdings, Inc. (a) 7,900 96,222
Ness Technologies, Inc. (a) 19,700 199,364
NetScout Systems, Inc. (a) 14,800 158,064
NetSuite, Inc. (a)(b) 2,500 51,175
Netezza Corp. (a) 19,500 223,860
Omniture, Inc. (a) 29,402 545,995
OpenTV Corp. (a) 41,200 53,972
Opnet Technologies, Inc. (a) 7,400 66,600
PC-Tel, Inc. 10,900 104,531
PROS Holdings, Inc. (a) 6,800 76,364
Parametric Technology Corp. (a) 54,360 906,181
Pegasystems, Inc. 5,200 69,992
Progress Software Corp. (a) 19,708 503,934
QAD, Inc. 3,400 23,018
Quest Software, Inc. (a) 34,000 503,540
RealNetworks, Inc. (a) 42,900 283,140
RightNow Technologies, Inc. (a) 13,800 188,646
SAVVIS, Inc. (a)(b) 18,480 238,392
SI International, Inc. (a) 6,200 129,828
11
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
SPSS, Inc. (a) 8,489 $ 308,745
SRA International, Inc. Class A (a) 19,900 446,954
SYKES Enterprises, Inc. (a) 15,561 293,480
SYNNEX Corp. (a) 8,700 218,283
Sapient Corp. (a) 42,992 276,009
Sigma Designs, Inc. (a)(b) 12,700 176,403
Smith Micro Software, Inc. (a) 13,900 79,230
Solera Holdings, Inc. (a) 24,400 674,904
SonicWALL, Inc. (a) 27,941 180,219
Sourcefire, Inc. (a) 10,300 79,619
Stanley, Inc. (a) 3,800 127,376
SuccessFactors, Inc. (a) 11,600 127,020
SupportSoft, Inc. (a) 24,600 79,950
Sybase, Inc. (a) 37,400 1,100,308
Synchronoss Technologies, Inc. (a) 11,300 102,039
Syntel, Inc. 5,883 198,375
Taleo Corp. Class A (a) 11,200 219,408
TechTarget, Inc. (a) 7,400 78,144
TeleCommunication Systems, Inc. Class A (a) 15,000 69,450
The TriZetto Group, Inc. (a) 20,508 438,461
Tyler Technologies, Inc. (a) 18,000 244,260
Ultimate Software Group, Inc. (a) 12,000 427,560
Unica Corp. (a) 4,600 36,984
VASCO Data Security International, Inc. (a) 12,800 134,784
VeriFone Holdings, Inc. (a) 32,300 385,985
Vignette Corp. (a) 12,280 147,360
Virtusa Corp. (a) 5,000 50,650
Websense, Inc. (a) 22,002 370,514
Website Pros, Inc. (a) 14,300 119,119
Wind River Systems, Inc. (a) 34,900 380,061
Zoran Corp. (a) 25,308 296,104
-------------
29,111,735
- ----------------------------------------------------------------------------------------------------------------------------------
Computer Technology - 1.0% Adaptec, Inc. (a) 55,400 177,280
Advanced Analogic Technologies, Inc. (a) 23,400 96,642
Cray, Inc. (a) 15,300 70,992
Data Domain, Inc. (a)(b) 15,500 361,615
Emulex Corp. (a) 39,600 461,340
FalconStor Software, Inc. (a) 19,209 136,000
Hutchinson Technology, Inc. (a) 11,917 160,164
Imation Corp. 14,200 325,464
Immersion Corp. (a) 14,100 96,021
Intermec, Inc. (a) 29,009 611,510
Isilon Systems, Inc. (a) 13,700 60,828
NCI, Inc. Class A (a) 3,500 80,080
Palm, Inc. (b) 52,188 281,293
Perot Systems Corp. Class A (a) 40,700 610,907
Phoenix Technologies Ltd. (a) 14,000 154,000
Quantum Corp. (a) 85,900 115,965
Rackable Systems, Inc. (a)(b) 14,100 188,940
12
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Radiant Systems, Inc. (a) 12,200 $ 130,906
Radisys Corp. (a) 10,642 96,417
Rimage Corp. (a) 4,600 56,994
Riverbed Technology, Inc. (a) 26,500 363,580
STEC, Inc. (a) 14,600 149,942
Safeguard Scientifics, Inc. (a) 45,100 55,924
Stratasys, Inc. (a) 9,800 180,908
Synaptics, Inc. (a) 10,900 411,257
Trident Microsystems, Inc. (a) 29,000 105,850
-------------
5,540,819
- ----------------------------------------------------------------------------------------------------------------------------------
Construction - 0.4% Brookfield Homes Corp. (b) 4,551 55,886
EMCOR Group, Inc. (a) 31,972 912,161
Granite Construction, Inc. 15,271 481,495
Great Lakes Dredge & Dock Corp. 20,400 124,644
Perini Corp. (a) 13,100 432,955
Sterling Construction Co., Inc. (a) 5,900 117,174
-------------
2,124,315
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Electronics - 0.7% DTS, Inc. (a) 8,400 263,088
EarthLink, Inc. (a) 53,000 458,450
InfoSpace, Inc. 16,300 135,779
Internap Network Services Corp. (a) 23,890 111,805
Midway Games, Inc. (a)(b) 9,674 21,283
NIC, Inc. 16,700 114,061
NetFlix, Inc. (a)(b) 19,100 497,937
ParkerVision, Inc. (a) 11,800 117,174
Protection One, Inc. (a)(b) 1,200 10,080
THQ, Inc. (a) 31,637 640,966
Take-Two Interactive Software, Inc. (a)(b) 36,300 928,191
United Online, Inc. 33,550 336,507
Universal Electronics, Inc. (a) 7,586 158,547
-------------
3,793,868
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Products - 0.5% American Greetings Corp. Class A 23,900 294,926
Blyth, Inc. 11,600 139,548
CSS Industries, Inc. 3,691 89,396
Citi Trends, Inc. (a) 6,800 154,088
Mannatech, Inc. (b) 7,600 41,344
Matthews International Corp. Class A 14,673 664,100
Nautilus, Inc. 14,063 71,440
RC2 Corp. (a) 8,513 158,001
Smith & Wesson Holding Corp. (a)(b) 14,500 75,545
Spectrum Brands, Inc. (a)(b) 18,400 46,920
Tupperware Corp. 29,274 1,001,756
USANA Health Sciences, Inc. (a)(b) 3,900 104,793
-------------
2,841,857
- ----------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging: Metals & Bway Holding Co. (a) 3,000 25,830
Glass - 0.2% Mobile Mini, Inc. (a) 16,442 328,840
Silgan Holdings, Inc. 11,900 603,806
-------------
958,476
- ----------------------------------------------------------------------------------------------------------------------------------
13
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging: AEP Industries, Inc. (a) 2,500 $ 43,425
Paper & Plastic - 0.1% Graphic Packaging Holding Co. (a) 66,200 133,724
Myers Industries, Inc. 13,452 109,634
-------------
286,783
- ----------------------------------------------------------------------------------------------------------------------------------
Copper - 0.1% Mueller Industries, Inc. 17,582 566,140
- ----------------------------------------------------------------------------------------------------------------------------------
Cosmetics - 0.2% Elizabeth Arden, Inc. (a) 11,593 175,982
Helen of Troy Ltd. (a) 15,000 241,800
Inter Parfums, Inc. 6,150 92,250
Nu Skin Enterprises, Inc. Class A 23,526 351,008
Ulta Salon Cosmetics & Fragrance, Inc. (a) 10,500 118,020
-------------
979,060
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.5% BGC Partners, Inc. (a) 3,523 26,599
Broadpoint Securities Group, Inc. (a) 9,100 18,200
Cardtronics, Inc. (a) 3,800 33,706
China Direct, Inc. (a) 2,600 19,084
Clayton Holdings, Inc. (a) 2,700 16,119
Doral Financial Corp. (a) 3,200 43,328
Duff & Phelps Corp. (a) 4,400 72,864
Euronet Worldwide, Inc. (a) 22,950 387,855
Evercore Partners, Inc. Class A 4,700 44,650
F.N.B. Corp. 40,397 475,877
FCStone Group, Inc. (a) 10,700 298,851
Greenhill & Co., Inc. (b) 8,000 430,880
Huron Consulting Group, Inc. (a) 9,100 412,594
Interactive Brokers Group, Inc. Class A (a) 19,100 613,683
Oritani Financial Corp. (a) 4,900 78,400
-------------
2,972,690
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Materials & Processing - 1.0% Acuity Brands, Inc. 19,160 921,213
Barnes Group, Inc. 22,514 519,848
Brady Corp. 23,694 818,154
Clarcor, Inc. 23,810 835,731
Hexcel Corp. (a) 45,262 873,557
Koppers Holdings, Inc. 10,100 422,887
Olin Corp. 35,214 921,903
Tredegar Corp. 11,445 168,242
-------------
5,481,535
- ----------------------------------------------------------------------------------------------------------------------------------
Drug & Grocery Store Chains - 0.6% Arden Group, Inc. Class A 332 42,078
Casey's General Stores, Inc. 24,607 570,144
The Great Atlantic & Pacific Tea Co., Inc. (a) 16,527 377,146
Ingles Markets, Inc. Class A 5,964 139,140
Longs Drug Stores Corp. 14,683 618,301
Nash Finch Co. 6,177 211,686
Ruddick Corp. 19,769 678,274
Spartan Stores, Inc. 9,900 227,700
Susser Holdings Corp. (a) 4,500 43,560
Village Super Market, Inc. Class A 900 34,722
Weis Markets, Inc. 5,200 168,844
Winn-Dixie Stores, Inc. (a) 26,300 421,326
-------------
3,532,921
- ----------------------------------------------------------------------------------------------------------------------------------
14
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Drugs & Pharmaceuticals - 2.4% Acura Pharmaceuticals, Inc. (a) 4,900 $ 38,808
Adolor Corp. (a) 23,600 129,328
Affymax, Inc. (a) 5,500 87,505
Akorn, Inc. (a) 23,300 77,123
Alexza Pharmaceuticals, Inc. (a) 9,700 38,218
Alkermes, Inc. (a)(c) 45,300 559,908
Alpharma, Inc. Class A (a) 21,525 484,958
Ardea Biosciences, Inc. (a) 4,700 60,254
Auxilium Pharmaceuticals, Inc. (a) 19,400 652,228
BMP Sunstone Corp. (a)(b) 11,000 62,700
Bentley Pharmaceuticals, Inc. (a) 8,900 143,735
BioForm Medical, Inc. (a) 9,800 39,592
CV Therapeutics, Inc. (a) 28,800 237,024
Cadence Pharmaceuticals, Inc. (a) 9,600 58,464
Caraco Pharmaceutical Laboratories Ltd. (a) 3,700 48,840
Chattem, Inc. (a) 8,200 533,410
China Sky One Medical, Inc. (a) 3,100 34,503
Columbia Laboratories, Inc. (a) 20,800 68,640
Dendreon Corp. (a)(b) 44,200 196,690
Depomed, Inc. (a) 21,400 68,694
Durect Corp. (a) 35,100 128,817
Emergent Biosolutions, Inc. (a) 7,300 72,489
Enzo Biochem, Inc. (a) 14,295 160,390
GTx, Inc. (a)(b) 7,900 113,365
ImmunoGen, Inc. (a) 18,700 57,222
Indevus Pharmaceuticals, Inc. (a) 28,200 44,274
Inspire Pharmaceuticals, Inc. (a) 22,100 94,588
Isis Pharmaceuticals, Inc. (a)(b) 42,789 583,214
Javelin Pharmaceuticals, Inc. (a) 23,300 54,056
Jazz Pharmaceuticals, Inc. (a)(b) 3,100 22,971
K-V Pharmaceutical Co. Class A (a) 15,900 307,347
Ligand Pharmaceuticals, Inc. Class B (a) 35,300 91,780
MAP Pharmaceuticals, Inc. (a) 2,200 22,726
Medarex, Inc. (a) 59,800 395,278
Medicines Co. (a) 25,227 499,999
Medicis Pharmaceutical Corp. Class A 26,500 550,670
MiddleBrook Pharmaceuticals, Inc. (a) 19,500 65,910
Molecular Insight Pharmaceuticals, Inc. (a) 7,700 42,427
Nektar Therapeutics (a) 43,900 147,065
Novavax, Inc. (a) 22,600 56,274
Noven Pharmaceuticals, Inc. (a) 11,831 126,473
Obagi Medical Products, Inc. (a) 9,300 79,515
Onyx Pharmaceuticals, Inc. (a) 26,220 933,432
Optimer Pharmaceuticals, Inc. (a) 10,900 88,399
Pain Therapeutics, Inc. (a)(b) 16,600 131,140
Par Pharmaceutical Cos., Inc. (a) 16,400 266,172
Pharmasset, Inc. (a) 7,900 149,152
Pozen, Inc. (a)(b) 11,900 129,472
Questcor Pharmaceuticals, Inc. (a) 24,600 114,144
15
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Quidel Corp. (a) 13,100 $ 216,412
Regeneron Pharmaceuticals, Inc. (a) 28,619 413,258
Salix Pharmaceuticals Ltd. (a) 22,700 159,581
Sciele Pharma, Inc. (b) 16,600 321,210
Theravance, Inc. (a) 25,400 301,498
United Therapeutics Corp. (a) 10,646 1,040,647
Valeant Pharmaceuticals International (a)(b) 32,500 556,075
Vivus, Inc. (a)(b) 27,000 180,360
Xenoport, Inc. (a) 11,800 460,554
-------------
12,798,978
- ----------------------------------------------------------------------------------------------------------------------------------
Education Services - 0.3% American Public Education, Inc. (a) 5,500 214,720
Capella Education Co. (a) 6,700 399,655
Corinthian Colleges, Inc. (a) 40,400 469,044
K12, Inc. (a) 2,300 49,289
Learning Tree International, Inc. (a) 4,800 82,080
Lincoln Educational Services Corp. (a) 300 3,489
The Princeton Review, Inc. (a) 7,700 52,052
Renaissance Learning, Inc. 2,449 27,453
Thinkorswim Group, Inc. (a) 24,740 174,417
Universal Technical Institute, Inc. (a) 10,000 124,600
-------------
1,596,799
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical & Electronics - 0.4% Benchmark Electronics, Inc. (a) 31,729 518,452
Coleman Cable, Inc. (a) 3,800 39,216
OSI Systems, Inc. (a) 7,000 149,940
Plexus Corp. (a) 20,298 561,849
Power Integrations, Inc. (a) 15,000 474,150
TTM Technologies, Inc. (a) 20,300 268,163
Universal Display Corp. (a)(b) 12,507 154,086
-------------
2,165,856
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment & A.O. Smith Corp. 9,481 311,261
Components - 0.9% AZZ Inc. (a) 5,300 211,470
American Superconductor Corp. (a)(b) 19,800 709,830
Axsys Technologies, Inc. (a) 4,400 228,976
Baldor Electric Co. 21,701 759,101
CTS Corp. 15,868 159,473
Cohu, Inc. 10,918 160,276
Franklin Electric Co., Inc. (b) 11,160 432,785
Littelfuse, Inc. (a) 10,160 320,548
MKS Instruments, Inc. (a) 23,400 512,460
Orion Energy Systems, Inc. (a) 2,600 26,000
Powell Industries, Inc. (a) 3,531 177,998
Power-One, Inc. (a)(b) 35,400 66,906
Sonic Solutions, Inc. (a) 10,500 62,580
Taser International, Inc. (a)(b) 29,700 147,312
Technitrol, Inc. 18,161 308,555
Triumph Group, Inc. 8,079 380,521
-------------
4,976,052
- ----------------------------------------------------------------------------------------------------------------------------------
16
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical: Household Appliance - 0.0% National Presto Industries, Inc. 2,150 $ 137,987
Rex Stores Corp. (a) 5,100 58,905
-------------
196,892
- ----------------------------------------------------------------------------------------------------------------------------------
Electronics - 0.5% Agilysys, Inc. 10,963 124,320
Avid Technology, Inc. (a)(b) 14,600 248,054
Daktronics, Inc. (c) 15,998 322,680
II-VI, Inc. (a) 11,472 400,602
Kopin Corp. (a) 35,800 102,746
MRV Communications, Inc. (a) 60,666 72,193
Methode Electronics, Inc. 18,080 188,936
Multi-Fineline Electronix, Inc. (a) 3,600 99,612
Park Electrochemical Corp. 9,649 234,567
Sanmina-SCI Corp. (a) 259,600 332,288
Semtech Corp. (a) 28,500 400,995
Supertex, Inc. (a) 5,267 122,932
-------------
2,649,925
- ----------------------------------------------------------------------------------------------------------------------------------
Electronics: Instruments, Gauges & Faro Technologies, Inc. (a) 7,500 188,775
Meters - 0.1% Measurement Specialties, Inc. (a) 6,600 116,094
OYO Geospace Corp. (a) 1,900 111,986
Zygo Corp. (a) 7,200 70,776
-------------
487,631
- ----------------------------------------------------------------------------------------------------------------------------------
Electronics: Medical Systems - 1.0% Accuray, Inc. (a) 18,200 132,678
Affymetrix, Inc. (a) 33,800 347,802
Analogic Corp. 6,572 414,496
Bruker BioSciences Corp. (a) 23,087 296,668
Cynosure, Inc. Class A (a) 3,800 75,316
Datascope Corp. 6,470 304,090
eResearch Technology, Inc. (a) 21,050 367,112
Greatbatch, Inc. (a) 10,900 188,570
Haemonetics Corp. (a) 12,172 675,059
Luminex Corp. (a)(b) 17,951 368,893
Masimo Corp. (a) 21,800 748,830
Natus Medical, Inc. (a) 13,600 284,784
NxStage Medical, Inc. (a) 9,700 37,248
Quality Systems, Inc. (b) 8,300 243,024
Sirona Dental Systems, Inc. (a)(b) 8,000 207,360
Somanetics Corp. (a) 5,900 125,080
Tomotherapy, Inc. (a) 20,800 185,744
Zoll Medical Corp. (a) 10,222 344,175
-------------
5,346,929
- ----------------------------------------------------------------------------------------------------------------------------------
Electronics: Other - 0.0% ICx Technologies, Inc. (a) 7,000 51,100
- ----------------------------------------------------------------------------------------------------------------------------------
Electronics: Semi-Conductors/ Actel Corp. (a) 12,016 202,469
Components - 1.9% Advanced Battery Technologies, Inc. (a) 20,300 117,131
Amkor Technology, Inc. (a)(c) 51,200 532,992
Anadigics, Inc. (a)(b) 29,700 292,545
Applied Micro Circuits Corp. (a) 30,700 262,792
AuthenTec, Inc. (a) 12,800 133,376
Bookham, Inc. (a) 45,400 76,726
Cavium Networks, Inc. (a) 14,200 298,200
17
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Ceva, Inc. (a) 10,700 $ 85,279
Cirrus Logic, Inc. (a) 31,500 175,140
DSP Group, Inc. (a) 12,683 88,781
Diodes, Inc. (a) 13,612 376,236
Entropic Communications, Inc. (a) 700 3,325
Exar Corp. (a) 19,027 143,464
Excel Technology, Inc. (a) 5,373 119,925
Formfactor, Inc. (a) 23,600 434,948
Hittite Microwave Corp. (a) 9,100 324,142
IPG Photonics Corp. (a) 9,700 182,457
IXYS Corp. (a) 11,493 137,226
Lattice Semiconductor Corp. (a) 53,400 167,142
MIPS Technologies, Inc. (a) 20,500 76,875
Micrel, Inc. 25,200 230,580
Microsemi Corp. (a) 37,090 933,926
Microtune, Inc. (a) 21,100 73,006
Monolithic Power Systems, Inc. (a) 12,800 276,736
NVE Corp. (a) 2,500 78,975
Netlogic Microsystems, Inc. (a)(b) 8,400 278,880
Omnivision Technologies, Inc. (a) 24,800 299,832
PLX Technology, Inc. (a) 13,400 102,242
PMC-Sierra, Inc. (a) 103,100 788,715
Pericom Semiconductor Corp. (a) 11,593 172,040
RF Micro Devices, Inc. (a) 124,884 362,164
Rubicon Technology, Inc. (a) 6,700 136,144
SiRF Technology Holdings, Inc. (a) 28,100 121,392
Silicon Image, Inc. (a) 37,076 268,801
Silicon Storage Technology, Inc. (a) 39,658 109,853
Skyworks Solutions, Inc. (a) 76,733 757,355
Spansion LLC Class A (a) 63,900 143,775
Techwell, Inc. (a) 6,500 80,080
Tessera Technologies, Inc. (a) 23,400 383,058
Transmeta Corp. (a) 5,400 74,574
TriQuint Semiconductor, Inc. (a) 69,536 421,388
Volterra Semiconductor Corp. (a) 12,600 217,476
-------------
10,542,163
- ----------------------------------------------------------------------------------------------------------------------------------
Electronics: Technology - 0.6% 3D Systems Corp. (a)(b) 8,200 77,900
American Science & Engineering, Inc. 4,300 221,579
Checkpoint Systems, Inc. (a) 19,323 403,464
China Security & Surveillance Technology, Inc. (a) 12,500 168,500
Cogent, Inc. (a) 19,500 221,715
Coherent, Inc. (a) 11,700 349,713
Cubic Corp. 6,452 143,750
Eagle Test Systems, Inc. (a) 6,000 67,200
Gerber Scientific, Inc. (a) 11,000 125,180
Herley Industries, Inc. (a) 7,100 94,288
ION Geophysical Corp. (a) 39,846 695,313
Kemet Corp. (a) 39,900 129,276
LaBarge, Inc. (a) 5,400 70,200
18
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Maxwell Technologies, Inc. (a) 9,500 $ 100,890
ScanSource, Inc. (a) 12,800 342,528
Smart Modular Technologies WWH, Inc. (a) 19,700 75,451
Super Micro Computer, Inc. (a) 11,700 86,346
-------------
3,373,293
- ----------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.1% Capstone Turbine Corp. (a) 71,700 300,423
Plug Power, Inc. (a) 41,600 97,760
PowerSecure International, Inc. (a) 7,300 52,998
-------------
451,181
- ----------------------------------------------------------------------------------------------------------------------------------
Energy Miscellaneous - 1.2% Akeena Solar, Inc. (a) 9,000 50,310
Alon USA Energy, Inc. (b) 5,100 60,996
Approach Resources, Inc. (a) 3,500 93,765
Aventine Renewable Energy Holdings, Inc. (a)(b) 13,940 61,336
CVR Energy, Inc. (a) 10,700 205,975
Clean Energy Fuels Corp. (a)(b) 11,400 130,986
Concho Resources, Inc. (a) 23,600 880,280
Crosstex Energy, Inc. (b) 18,900 655,074
Dawson Geophysical Co. (a) 3,700 220,002
EnerNOC, Inc. (a)(b) 5,100 91,545
Evergreen Energy, Inc. (a)(b) 36,900 64,206
Evergreen Solar, Inc. (a) 49,700 481,593
FuelCell Energy, Inc. (a)(b) 33,726 239,455
GeoMet, Inc. (a) 6,300 59,724
GreenHunter Energy, Inc. (a) 2,500 34,150
Matrix Service Co. (a) 12,300 283,638
Ormat Technologies, Inc. 8,400 413,112
Pacific Ethanol, Inc. (a) 17,300 31,140
Penn Virginia Corp. 19,616 1,479,439
Rentech, Inc. (a) 75,000 142,500
Teekay Tankers Ltd. Class A 5,600 129,976
US Geothermal, Inc. (a) 27,300 80,262
USEC, Inc. (a)(b) 54,259 329,895
-------------
6,219,359
- ----------------------------------------------------------------------------------------------------------------------------------
Engineering & Contracting Clean Harbors, Inc. (a) 9,300 660,858
Services - 0.4% Dycom Industries, Inc. (a) 19,002 275,909
ENGlobal Corp. (a) 13,500 192,240
Furmamite Corp. (a) 18,500 147,630
Hill International, Inc. (a) 11,800 193,992
Integrated Electrical Services, Inc. (a) 4,000 68,800
Layne Christensen Co. (a) 9,100 398,489
Michael Baker Corp. (a) 3,400 74,392
VSE Corp. 1,700 46,750
-------------
2,059,060
- ----------------------------------------------------------------------------------------------------------------------------------
Entertainment - 0.2% Cinemark Holdings, Inc. 12,200 159,332
Dover Motorsports, Inc. 9,200 46,828
Gaylord Entertainment Co. (a) 19,155 458,954
Live Nation, Inc. (a) 36,000 380,880
Speedway Motorsports, Inc. 5,255 107,097
-------------
1,153,091
- ----------------------------------------------------------------------------------------------------------------------------------
19
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Finance Companies - 0.1% Credit Acceptance Corp. (a)(b) 2,169 $ 55,440
MVC Capital, Inc. (b) 10,800 147,852
NewStar Financial, Inc. (a) 8,500 50,235
Riskmetrics Group, Inc. (a) 9,300 182,652
World Acceptance Corp. (a) 8,000 269,360
-------------
705,539
- ----------------------------------------------------------------------------------------------------------------------------------
Finance: Small Loan - 0.1% Advance America, Cash Advance 22,500 114,300
Centers, Inc.
Dollar Financial Corp. (a) 12,000 181,320
Encore Capital Group, Inc. (a)(b) 6,500 57,395
The First Marblehead Corp. 35,700 91,749
Nelnet, Inc. Class A 6,700 75,241
-------------
520,005
- ----------------------------------------------------------------------------------------------------------------------------------
Financial Data Processing Services & Advent Software, Inc. (a) 7,900 285,032
Systems - 0.8% Cass Information Systems, Inc. 2,515 80,555
CompuCredit Corp. (a)(b) 8,489 50,934
CyberSource Corp. (a) 32,464 543,123
Deluxe Corp. 24,100 429,462
ExlService Holdings, Inc. (a) 7,000 98,210
Fair Isaac Corp. 23,000 477,710
Heartland Payment Systems, Inc. (b) 12,100 285,560
Hypercom Corp. (a) 25,300 111,320
Jack Henry & Associates, Inc. 35,500 768,220
Online Resources Corp. (a) 13,300 111,055
TNS, Inc. (a) 11,600 277,936
TradeStation Group, Inc. (a) 16,100 163,415
Wright Express Corp. (a) 18,000 446,400
-------------
4,128,932
- ----------------------------------------------------------------------------------------------------------------------------------
Financial Information Services - 0.2% Bankrate, Inc. (a)(b) 6,300 246,141
Interactive Data Corp. 17,100 429,723
Move, Inc. (a) 64,300 149,819
S1 Corp. (a) 23,722 179,576
TheStreet.com, Inc. 10,300 67,053
Value Line, Inc. 300 9,975
-------------
1,082,287
- ----------------------------------------------------------------------------------------------------------------------------------
Financial Miscellaneous - 0.7% AMBAC Financial Group, Inc. 141,500 189,610
Advanta Corp. Class B 17,250 108,502
Asset Acceptance Capital Corp. 7,100 86,762
Cash America International, Inc. 13,819 428,389
Federal Agricultural Mortgage Corp. Class B 4,800 118,944
Financial Federal Corp. 12,300 270,108
First Cash Financial Services, Inc. (a) 9,600 143,904
Global Cash Access, Inc. (a) 16,900 115,934
Harris & Harris Group, Inc. (a) 12,500 75,000
LandAmerica Financial Group, Inc. 8,099 179,717
Medallion Financial Corp. 8,200 77,244
Portfolio Recovery Associates, Inc. (a)(b) 7,200 270,000
Radian Group, Inc. 42,500 61,625
Sanders Morris Harris Group, Inc. 6,500 44,070
20
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Sotheby's Holdings, Inc. Class A (b) 31,736 $ 836,878
Sterling Bancorp 8,816 105,351
Stewart Information Services Corp. 8,122 157,079
Stifel Financial Corp. (a) 11,449 393,731
WSFS Financial Corp. 2,991 133,399
Wauwatosa Holdings, Inc. (a) 2,700 28,674
-------------
3,824,921
- ----------------------------------------------------------------------------------------------------------------------------------
Foods - 1.4% American Dairy, Inc. (a) 2,000 15,680
B&G Foods, Inc. Class A 10,800 100,872
Cal-Maine Foods, Inc. (b) 6,100 201,239
Chiquita Brands International, Inc. (a) 21,200 321,604
Diamond Foods, Inc. 8,100 186,624
Flowers Foods, Inc. 36,476 1,033,730
Fresh Del Monte Produce, Inc. (a) 19,700 464,329
Hain Celestial Group, Inc. (a) 19,557 459,198
J&J Snack Foods Corp. 6,500 178,165
Lance, Inc. 13,100 245,887
Lifeway Foods, Inc. (a) 1,900 22,591
M&F Worldwide Corp. (a) 6,300 247,653
Maui Land & Pineapple Co., Inc. (a) 2,163 63,700
Omega Protein Corp. (a) 9,400 140,530
Pilgrim's Pride Corp. 20,200 262,398
Ralcorp Holdings, Inc. (a) 12,095 597,977
Sanderson Farms, Inc. 9,950 343,474
Schiff Nutrition International, Inc. 6,000 33,600
Seaboard Corp. 142 220,242
Sensient Technologies Corp. 22,857 643,653
Smart Balance, Inc. (a) 31,000 223,510
Synutra International, Inc. (a)(b) 4,800 155,136
Tootsie Roll Industries, Inc. (b) 11,435 287,362
TreeHouse Foods, Inc. (a) 14,400 349,344
United Natural Foods, Inc. (a) 20,780 404,794
Zhongpin, Inc. (a) 9,500 118,750
-------------
7,322,042
- ----------------------------------------------------------------------------------------------------------------------------------
Forest Products - 0.2% Deltic Timber Corp. 5,009 268,031
Louisiana-Pacific Corp. 48,800 414,312
Universal Forest Products, Inc. 7,834 234,707
-------------
917,050
- ----------------------------------------------------------------------------------------------------------------------------------
Forms & Bulk Printing Services - 0.1% Ennis, Inc. 11,300 176,845
Innerworkings, Inc. (a)(b) 15,800 188,968
The Standard Register Co. 8,745 82,465
-------------
448,278
- ----------------------------------------------------------------------------------------------------------------------------------
Funeral Parlors & Cemeteries - 0.1% Stewart Enterprises, Inc. Class A 40,224 289,613
- ----------------------------------------------------------------------------------------------------------------------------------
Glass - 0.0% Apogee Enterprises, Inc. 13,700 221,392
- ----------------------------------------------------------------------------------------------------------------------------------
Gold - 0.2% Allied Nevada Gold Corp. (a) 21,400 126,046
Coeur d'Alene Mines Corp. (a)(b) 259,700 753,130
Royal Gold, Inc. 14,300 448,448
-------------
1,327,624
- ----------------------------------------------------------------------------------------------------------------------------------
21
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Facilities - 0.6% Assisted Living Concepts, Inc. (a) 24,900 $ 136,950
Capital Senior Living Corp. (a) 10,600 79,924
Emeritus Corp. (a) 9,900 144,738
The Ensign Group, Inc. 4,700 54,050
Five Star Quality Care, Inc. (a) 16,800 79,464
IPC The Hospitalist Co., Inc. (a) 1,700 31,994
Kindred Healthcare, Inc. (a) 12,690 364,964
MedCath Corp. (a) 8,100 145,638
National Healthcare Corp. 4,300 197,069
Psychiatric Solutions, Inc. (a) 26,200 991,408
Res-Care, Inc. (a) 11,800 209,804
Skilled Healthcare Group, Inc. Class A (a) 8,300 111,386
Sun Healthcare Group, Inc. (a) 20,400 273,156
Sunrise Senior Living, Inc. (a) 21,274 478,240
-------------
3,298,785
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Management AMERIGROUP Corp. (a) 25,200 524,160
Services - 0.9% athenahealth, Inc. (a)(b) 10,200 313,752
Allscripts Healthcare Solutions, Inc. (a)(b) 27,741 344,266
Amsurg Corp. (a) 15,500 377,425
Centene Corp. (a) 20,600 345,874
Computer Programs & Systems, Inc. 4,400 76,252
Corvel Corp. (a) 3,785 128,198
Eclipsys Corp. (a) 25,531 468,749
HMS Holdings Corp. (a) 12,300 264,081
HealthExtras, Inc. (a) 15,500 467,170
HealthSpring, Inc. (a) 24,100 406,808
Molina Healthcare, Inc. (a) 6,900 167,946
National Research Corp. 600 15,882
Omnicell, Inc. (a) 15,600 205,608
Phase Forward, Inc. (a) 20,800 373,776
Triple-S Management Corp. (a) 5,500 89,925
Vital Images, Inc. (a) 8,000 99,520
-------------
4,669,392
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Services - 0.7% Alliance Imaging, Inc. (a) 12,000 104,040
Amedisys, Inc. (a) 12,466 628,536
Apria Healthcare Group, Inc. (a) 20,800 403,312
Bio-Reference Labs, Inc. (a) 5,200 116,012
CardioNet, Inc. (a) 2,400 63,912
Emergency Medical Services Corp. (a) 4,400 99,572
Gentiva Health Services, Inc. (a) 12,712 242,164
HealthSouth Corp. (a)(b) 37,200 618,636
Healthcare Services Group, Inc. 21,137 321,494
Healthways, Inc. (a) 16,700 494,320
LHC Group, Inc. (a) 6,800 158,100
Nighthawk Radiology Holdings, Inc. (a) 10,000 70,800
Odyssey HealthCare, Inc. (a) 15,700 152,918
PharMerica Corp. (a) 14,869 335,891
Virtual Radiologic Corp. (a) 2,100 27,825
-------------
3,837,532
- ----------------------------------------------------------------------------------------------------------------------------------
22
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Homebuilding - 0.2% Beazer Homes USA, Inc. (b) 17,900 $ 99,703
Hovnanian Enterprises, Inc. Class A (a)(b) 22,000 120,560
M/I Homes, Inc. 6,700 105,391
Meritage Homes Corp. (a)(b) 14,600 221,482
Ryland Group, Inc. 20,100 438,381
Standard-Pacific Corp. 30,500 103,090
-------------
1,088,607
- ----------------------------------------------------------------------------------------------------------------------------------
Hotel/Motel - 0.1% Lodgian, Inc. (a) 7,700 60,291
Marcus Corp. 8,879 132,741
Morgans Hotel Group Co. (a) 13,600 140,080
-------------
333,112
- ----------------------------------------------------------------------------------------------------------------------------------
Household Furnishings - 0.3% American Woodmark Corp. (b) 5,100 107,763
Ethan Allen Interiors, Inc. (b) 11,700 287,820
Furniture Brands International, Inc. (b) 20,000 267,200
hhgregg, Inc. (a) 4,200 42,000
Haverty Furniture Cos., Inc. 9,336 93,733
Hooker Furniture Corp. 4,700 81,404
La-Z-Boy, Inc. (b) 22,100 169,065
Libbey, Inc. 6,700 49,848
Sealy Corp. (b) 17,900 102,746
Tempur-Pedic International, Inc. (b) 34,000 265,540
-------------
1,467,119
- ----------------------------------------------------------------------------------------------------------------------------------
Identification Control & Advanced Energy Industries, Inc. (a) 16,312 223,474
Filter Devices - 0.8% Asyst Technologies, Inc. (a) 23,541 84,041
Badger Meter, Inc. (b) 7,200 363,816
Beacon Power Corp. (a)(b) 39,300 82,530
ESCO Technologies, Inc. (a) 12,332 578,617
Flanders Corp. (a) 6,900 41,745
The Gorman-Rupp Co. 6,297 250,872
L-1 Identity Solutions, Inc. (a) 30,928 411,961
Mine Safety Appliances Co. (b) 14,626 584,894
Peerless Manufacturing Co. (a) 3,300 154,671
Robbins & Myers, Inc. 13,124 654,494
Sun Hydraulics, Inc. 5,150 166,191
Veeco Instruments, Inc. (a) 15,127 243,242
Vicor Corp. 9,196 91,776
Watts Water Technologies, Inc. Class A 9 (b) 13,836 344,516
-------------
4,276,840
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Products - 0.0% TAL International Group, Inc. 6,400 145,536
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance: Life - 0.4% American Equity Investment Life Holding Co. 28,300 230,645
Citizens, Inc. (a)(b) 17,500 107,275
Delphi Financial Group, Inc. Class A 19,705 455,974
Kansas City Life Insurance Co. 1,542 64,301
Life Partners Holdings, Inc. 3,200 63,936
National Western Life Insurance Co. Class A 935 204,298
The Phoenix Cos., Inc. 55,600 423,116
Presidential Life Corp. 9,893 152,550
Universal American Financial Corp. (a) 19,000 194,180
-------------
1,896,275
- ----------------------------------------------------------------------------------------------------------------------------------
23
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance: Multi-Line - 1.0% Assured Guaranty Ltd. 25,800 $ 464,142
CNA Surety Corp. (a) 6,186 78,191
Crawford & Co. Class B (a) 11,509 91,957
eHealth, Inc. (a) 12,300 217,218
EMC Insurance Group, Inc. 2,200 52,976
FBL Financial Group, Inc. Class A 5,625 111,825
Flagstone Reinsurance Holdings Ltd. 14,500 170,955
Hilb Rogal & Hobbs Co. 17,106 743,427
Horace Mann Educators Corp. 19,568 274,343
Independence Holding Co. 1,040 10,161
Maiden Holdings Ltd. 25,000 158,500
Max Capital Group Ltd. 26,800 571,644
Meadowbrook Insurance Group, Inc. 13,700 72,610
Montpelier Re Holdings Ltd. 42,400 625,400
Pico Holdings, Inc. (a) 7,997 347,470
Platinum Underwriters Holdings Ltd. 23,100 753,291
Primus Guaranty Ltd. (a)(b) 12,600 36,666
Quanta Capital Holdings Ltd. 31,500 83,160
Zenith National Insurance Corp. 17,455 613,718
-------------
5,477,654
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance: Property-Casualty - 1.8% AmCOMP, Inc. (a) 7,200 69,984
AmTrust Financial Services, Inc. 7,800 98,280
American Physicians Capital, Inc. 4,156 201,317
American Safety Insurance Holdings Ltd. (a) 5,800 83,404
Amerisafe, Inc. (a) 8,900 141,866
Argo Group International Holdings Ltd. (a) 14,579 489,271
Aspen Insurance Holdings Ltd. (c) 40,300 953,901
Baldwin & Lyons, Inc. Class B 3,432 59,991
CastlePoint Holdings, Ltd. 17,200 156,348
Darwin Professional Underwriters, Inc. (a) 2,900 89,320
Donegal Group, Inc. Class A 4,544 72,113
Employers Holdings, Inc. 24,180 500,526
Enstar Group Ltd. (a) 2,500 218,750
FPIC Insurance Group, Inc. (a) 4,200 190,344
First Acceptance Corp. (a) 3,377 10,806
First Mercury Financial Corp. (a) 5,900 104,076
Greenlight Capital Re Ltd. (a) 14,400 329,184
Hallmark Financial Services, Inc. (a) 2,800 27,076
Harleysville Group, Inc. 6,762 228,758
IPC Holdings, Ltd. 25,400 674,370
Infinity Property & Casualty Corp. 7,700 319,704
NYMAGIC, Inc. 3,000 57,480
National Interstate Corp. 2,800 51,464
Navigators Group, Inc. (a) 6,300 340,515
Odyssey Re Holdings Corp. 11,500 408,250
PMA Capital Corp. Class A (a) 15,206 140,047
The PMI Group, Inc. 41,600 81,120
ProAssurance Corp. (a) 15,223 732,379
Procentury Corp. 6,100 96,624
24
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
RLI Corp. 8,854 $ 438,007
SCPIE Holdings, Inc. (a) 4,600 128,754
Safety Insurance Group, Inc. 7,700 274,505
SeaBright Insurance Holdings, Inc. (a) 9,700 140,456
Selective Insurance Group, Inc. 25,308 474,778
State Auto Financial Corp. 5,612 134,295
Tower Group, Inc. 9,600 203,424
United America Indemnity, Ltd. (a) 9,600 128,352
United Fire & Casualty Co. 11,300 304,309
Validus Holdings Ltd. 30,500 648,125
-------------
9,802,273
- ----------------------------------------------------------------------------------------------------------------------------------
Investment Management Ampal-American Israel Corp. Class A (a)(b) 6,000 27,060
Companies - 0.6% Apollo Investment Corp. (b) 67,146 962,202
Ares Capital Corp. 45,872 462,390
Calamos Asset Management, Inc. Class A 9,800 166,894
Capital Southwest Corp. 1,200 125,076
Cohen & Steers, Inc. (b) 8,000 207,760
Epoch Holding Corp. 4,800 43,776
FBR Capital Markets Corp. (a) 11,300 56,839
GAMCO Investors, Inc. Class A 3,796 188,358
Kohlberg Capital Corp. 7,800 78,000
MCG Capital Corp. 40,000 159,200
NGP Capital Resources Co. 8,623 132,880
National Financial Partners Corp. (b) 19,200 380,544
Pzena Investment Management, Inc. Class A 4,200 53,592
Resource America, Inc. Class A 6,349 59,173
U.S. Global Investors, Inc. (b) 5,600 93,800
Westwood Holdings Group Inc. 2,900 115,420
-------------
3,312,964
- ----------------------------------------------------------------------------------------------------------------------------------
Jewelry, Watches & Gemstones - 0.2% Bidz.com, Inc. (a) 3,600 31,176
Fossil, Inc. (a) 21,300 619,191
Fuqi International, Inc. (a) 5,500 48,180
Movado Group, Inc. 7,500 148,500
-------------
847,047
- ----------------------------------------------------------------------------------------------------------------------------------
Leisure Time - 0.4% Callaway Golf Co. 31,300 370,279
Great Wolf Resorts, Inc. (a) 12,800 55,936
Life Time Fitness, Inc. (a)(b) 16,400 484,620
Pool Corp. 23,400 415,584
Rick's Cabaret International, Inc. (a) 2,600 43,654
Six Flags, Inc. (a)(b) 34,500 39,675
Steinway Musical Instruments, Inc. (a) 3,500 92,400
Town Sports International Holdings, Inc. (a) 8,000 74,720
Vail Resorts, Inc. (a)(b) 14,756 631,999
-------------
2,208,867
- ----------------------------------------------------------------------------------------------------------------------------------
Machine Tools - 0.0% Hurco Companies, Inc. (a) 2,700 83,403
Thermadyne Holdings Corp. (a) 7,000 103,460
-------------
186,863
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery & Engineering - 0.1% Applied Industrial Technologies, Inc. 20,090 485,575
- ----------------------------------------------------------------------------------------------------------------------------------
25
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery: Agricultural - 0.1% Alamo Group, Inc. 3,400 $ 70,006
Gehl Co. (a) 4,950 73,211
Lindsay Manufacturing Co. 5,613 476,937
Titan Machinery, Inc. (a) 3,500 109,620
-------------
729,774
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery: Construction & Astec Industries, Inc. (a) 8,517 273,736
Handling - 0.1% NACCO Industries, Inc. Class A 2,587 192,343
-------------
466,079
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery: Engines - 0.1% Briggs & Stratton Corp. (b) 22,400 284,032
Harbin Electric, Inc. (a) 3,500 49,735
Raser Technologies, Inc. (a)(b) 22,500 219,150
-------------
552,917
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery: Industrial/Specialty - 1.1% Actuant Corp. Class A 26,300 824,505
Altra Holdings, Inc. (a) 13,200 221,892
Chart Industries, Inc. (a) 13,400 651,776
Colfax Corp. (a) 10,700 268,463
Columbus McKinnon Corp. (a) 8,800 211,904
DXP Enterprises, Inc. (a) 1,900 79,116
EnPro Industries, Inc. (a) 9,700 362,198
Graham Corp. 2,500 185,275
Kadant, Inc. (a) 6,470 146,222
Middleby Corp. (a) 8,300 364,453
Nordson Corp. 15,910 1,159,680
Tecumseh Products Co. Class A (a) 8,028 263,158
Tennant Co. 7,874 236,771
Twin Disc, Inc. 4,100 85,813
Woodward Governor Co. 27,758 989,850
-------------
6,051,076
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery: Oil Well Equipment & Allis-Chalmers Energy, Inc. (a)(b) 13,000 231,400
Services - 2.0% Basic Energy Services, Inc. (a) 19,400 611,100
Bolt Technology Corp. (a) 4,500 101,565
CARBO Ceramics, Inc. 9,602 560,277
Cal Dive International, Inc. (a) 20,574 294,002
Complete Production Services, Inc. (a) 22,600 823,092
Dril-Quip, Inc. (a) 14,576 918,288
Exterran Holdings, Inc. (a) 1 71
Flotek Industries, Inc. (a)(b) 10,800 222,696
Gulf Island Fabrication, Inc. 6,017 294,412
Hornbeck Offshore Services, Inc. (a) 10,940 618,219
Lufkin Industries, Inc. 6,900 574,632
Mitcham Industries, Inc. (a) 5,200 88,816
NATCO Group, Inc. Class A (a) 9,700 528,941
Natural Gas Services Group (a) 6,100 185,928
Newpark Resources, Inc. (a) 42,620 334,993
Parker Drilling Co. (a) 54,681 547,357
RPC, Inc. 13,700 230,160
Sulphco, Inc. (a)(b) 19,500 44,265
Superior Well Services, Inc. (a) 8,200 260,022
T-3 Energy Services, Inc. (a) 6,100 484,767
26
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- -----------------------------------------------------------------------------------------------------------------------------------
Trico Marine Services, Inc. (a)(b) 5,900 $ 214,878
Union Drilling, Inc. (a) 6,500 140,920
W-H Energy Services, Inc. (a) 14,657 1,403,261
Willbros Group, Inc. (a) 18,300 801,723
-------------
10,515,785
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery: Specialty - 0.1% Cascade Corp. 4,400 186,208
Flow International Corp. (a) 17,100 133,380
Key Technology Inc. (a) 3,000 95,430
Semitool, Inc. (a) 8,341 62,641
TurboChef Technologies, Inc. (a) 8,600 41,108
-------------
518,767
- ----------------------------------------------------------------------------------------------------------------------------------
Manufactured Housing - 0.1% Cavco Industries, Inc. (a) 3,400 111,282
Champion Enterprises, Inc. (a) 36,827 215,438
Palm Harbor Homes, Inc. (a)(b) 4,605 25,466
Skyline Corp. 3,301 77,574
-------------
429,760
- ----------------------------------------------------------------------------------------------------------------------------------
Manufacturing - 0.1% Federal Signal Corp. 22,759 273,108
Fushi Copperweld, Inc. (a) 7,300 173,229
Standex International Corp. 5,931 123,009
-------------
569,346
- ----------------------------------------------------------------------------------------------------------------------------------
Medical & Dental Instruments & Abaxis, Inc. (a) 10,600 255,778
Supplies - 2.8% Abiomed, Inc. (a) 15,000 266,250
Align Technology, Inc. (a) 29,400 308,406
Alphatec Holdings, Inc. (a) 10,700 43,656
American Medical Systems Holdings, Inc. (a)(b) 34,500 515,775
AngioDynamics, Inc. (a) 12,100 164,802
Atrion Corp. 700 67,074
Bio-Rad Laboratories, Inc. Class A (a) 8,900 719,921
BioMimetic Therapeutics, Inc. (a) 5,400 64,368
CONMED Corp. (a) 14,028 372,443
Cantel Medical Corp. (a) 4,500 45,540
Cardiac Science Corp. (a) 8,600 70,520
Cepheid, Inc. (a) 26,800 753,616
Clinical Data, Inc. (a) 4,600 65,642
Conceptus, Inc. (a) 14,900 275,501
CryoLife, Inc. (a) 14,000 160,160
Cyberonics, Inc. (a) 11,269 244,537
DexCom, Inc. (a) 11,800 71,272
ev3, Inc. (a) 32,932 312,195
Exactech, Inc. (a) 3,800 97,698
Hansen Medical, Inc. (a)(b) 8,300 138,776
I-Flow Corp. (a) 9,200 93,380
ICU Medical, Inc. (a) 5,950 136,136
IRIS International, Inc. (a) 9,300 145,545
Immucor, Inc. (a) 33,043 855,153
Insulet Corp. (a) 9,200 144,716
Invacare Corp. 15,822 323,402
Landauer, Inc. 4,278 240,595
Medical Action Industries, Inc. (a) 6,550 67,924
27
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Mentor Corp. (b) 16,044 $ 446,344
Meridian Bioscience, Inc. 18,900 508,788
Merit Medical Systems, Inc. (a) 12,610 185,367
Micrus Endovascular Corp. (a) 7,200 100,944
Neogen Corp. (a) 7,300 167,097
NuVasive, Inc. (a) 16,800 750,288
OraSure Technologies, Inc. (a) 22,259 83,249
Orthofix International NV (a) 8,100 234,495
Orthovita, Inc. (a) 28,800 59,040
Owens & Minor, Inc. 19,398 886,295
PSS World Medical, Inc. (a) 29,373 478,780
Palomar Medical Technologies, Inc. (a) 8,700 86,826
SonoSite, Inc. (a) 8,015 224,500
Spectranetic Corp. (a) 14,800 145,928
Stereotaxis, Inc. (a)(b) 12,400 66,464
Steris Corp. 27,300 785,148
SurModics, Inc. (a)(b) 7,583 340,022
Symmetry Medical, Inc. (a) 16,800 272,496
Synovis Life Technologies, Inc. (a) 6,400 120,512
Thoratec Corp. (a) 25,847 449,479
Trans1, Inc. (a)(b) 6,400 96,448
Vision-Sciences Inc. (a) 6,900 25,806
Vital Signs, Inc. 3,824 217,127
Volcano Corp. (a) 23,100 281,820
West Pharmaceutical Services, Inc. 15,176 656,817
Wright Medical Group, Inc. (a) 17,400 494,334
-------------
15,185,195
- ----------------------------------------------------------------------------------------------------------------------------------
Medical Services - 0.4% Air Methods Corp. (a) 5,100 127,500
Almost Family, Inc. (a) 3,400 90,440
Genoptix, Inc. (a) 4,200 132,510
Hanger Orthopedic Group, Inc. (a) 11,600 191,284
Magellan Health Services, Inc. (a) 19,100 707,273
Parexel International Corp. (a) 26,894 707,581
RadNet, Inc. (a) 9,400 58,280
RehabCare Group, Inc. (a) 8,595 137,778
US Physical Therapy, Inc. (a) 6,300 103,383
-------------
2,256,029
- ----------------------------------------------------------------------------------------------------------------------------------
Metal Fabricating - 0.8% Ampco-Pittsburgh Corp. 4,100 182,368
CIRCOR International, Inc. 8,300 406,617
Dynamic Materials Corp. 6,000 197,700
Encore Wire Corp. 8,850 187,532
Haynes International, Inc. (a) 5,800 333,790
Insteel Industries, Inc. 8,000 146,480
Kaydon Corp. 13,026 669,667
L.B. Foster Co. Class A (a) 5,200 172,640
Mueller Water Products, Inc. Series A (b) 55,760 449,983
NN, Inc. 8,400 117,096
Northwest Pipe Co. (a) 4,100 228,780
Omega Flex, Inc. 1,200 18,240
28
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
RBC Bearings, Inc. (a) 10,600 $ 353,192
RTI International Metals, Inc. (a) 11,113 395,845
Superior Essex, Inc. (a) 9,400 419,522
Trimas Corp. (a) 4,300 25,757
-------------
4,305,209
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Minerals Miscellaneous - 0.9% A.M. Castle & Co. 8,200 234,602
AMCOL International Corp. 12,573 357,828
Apex Silver Mines Ltd. (a)(b) 28,000 137,480
Brush Engineered Materials, Inc. (a) 9,411 229,817
Compass Minerals International, Inc. 15,300 1,232,568
General Moly, Inc. (a) 29,100 229,017
GrafTech International Ltd. (a) 48,744 1,307,802
Hecla Mining Co. (a) 60,500 560,230
Horsehead Holding Corp. (a) 17,400 211,584
Minerals Technologies, Inc. 8,953 569,321
Stillwater Mining Co. (a)(b) 18,664 220,795
United States Lime & Minerals Inc. (a) 700 27,699
Uranium Resources, Inc. (a)(b) 21,900 80,811
-------------
5,399,554
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Business & Consumer Core-Mark Holdings Co., Inc. (a) 4,300 112,660
Discretionary - 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Consumer Staples - 0.0% Reddy Ice Holdings, Inc. 8,500 116,280
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Health Care - 0.0% MedAssets, Inc. (a) 6,000 102,300
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Materials & Ceradyne, Inc. (a) 12,450 427,035
Commodities - 0.2% Lydall, Inc. (a) 8,600 107,930
Symyx Technologies, Inc. (a) 15,979 111,533
WD-40 Co. 8,089 236,603
-------------
883,101
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Materials & Insituform Technologies, Inc. Class A (a) 13,138 200,092
Processing - 0.1% Rogers Corp. (a) 8,755 329,100
Xerium Technologies, Inc. (b) 6,600 26,136
-------------
555,328
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Producer Durables - 0.1% Blount International, Inc. (a) 18,100 210,141
Park-Ohio Holdings Corp. (a) 3,900 57,564
-------------
267,705
- ----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous Technology - 0.1% iRobot Corp. (a)(b) 9,200 126,408
Microvision, Inc. (a) 25,400 69,850
TerreStar Corp. (a) 29,800 118,604
Vocus, Inc. (a) 8,000 257,360
-------------
572,222
- ----------------------------------------------------------------------------------------------------------------------------------
Multi-Sector Companies - 0.3% Brunswick Corp. 42,800 453,680
Compass Diversified Holdings 12,400 141,732
GenCorp, Inc. (a) 27,071 193,828
GenTek Inc. (a) 3,500 94,115
Kaman Corp. Class A 12,394 282,087
Lancaster Colony Corp. 9,599 290,658
Raven Industries, Inc. 7,600 249,128
United Capital Corp. (a) 600 11,520
-------------
1,716,748
- ----------------------------------------------------------------------------------------------------------------------------------
29
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Office Furniture & Business ACCO Brands Corp. (a) 24,600 $ 276,258
Equipment - 0.3% HNI Corp. 21,900 386,754
Herman Miller, Inc. 26,600 662,074
Kimball International, Inc. Class B 16,474 136,405
Knoll, Inc. 22,400 272,160
Presstek, Inc. (a) 14,700 72,912
-------------
1,806,563
- ----------------------------------------------------------------------------------------------------------------------------------
Offshore Drilling - 0.0% Bois d'Arc Energy, Inc. (a) 9,000 218,790
- ----------------------------------------------------------------------------------------------------------------------------------
Oil: Crude Producers - 4.2% APCO Argentina, Inc. 2,000 57,900
ATP Oil & Gas Corp. (a) 13,100 517,057
Abraxas Petroleum Corp. (a) 21,700 117,397
American Oil & Gas, Inc. (a) 16,300 63,896
Arena Resources, Inc. (a) 16,600 876,812
Atlas America, Inc. 16,287 733,729
BMB Munai, Inc. (a) 19,400 115,236
BPZ Resources, Inc. (a)(b) 28,400 834,960
Berry Petroleum Co. Class A 20,202 1,189,494
Bill Barrett Corp. (a) 17,300 1,027,793
Brigham Exploration Co. (a) 22,500 356,175
Bronco Drilling Co., Inc. (a) 12,000 220,560
Callon Petroleum Co. (a) 9,900 270,864
Cano Petroleum, Inc. (a) 17,900 142,126
Carrizo Oil & Gas, Inc. (a) 12,900 878,361
Cheniere Energy, Inc. (a) 25,000 109,250
Clayton Williams Energy, Inc. (a) 2,600 285,870
Comstock Resources, Inc. (a) 21,557 1,820,057
Contango Oil & Gas Co. (a) 6,200 576,104
Delek US Holdings, Inc. 4,600 42,366
Double Eagle Pete & Mining Co. (a) 3,600 65,628
EXCO Resources, Inc. (a) 35,200 1,299,232
Endeavour International Corp. (a) 53,200 115,444
Energy Partners Ltd. (a) 15,737 234,796
Energy XXI Bermuda Ltd. (a) 34,700 239,777
FX Energy, Inc. (a) 17,800 93,806
Gasco Energy, Inc. (a) 47,000 195,050
GeoGlobal Resources, Inc. (a)(b) 16,300 34,719
GeoResources, Inc. (a) 2,400 44,208
Geokinetics, Inc. (a) 2,600 47,086
Goodrich Petroleum Corp. (a)(b) 9,500 787,740
Gran Tierra Energy, Inc. (a) 45,200 360,244
Grey Wolf, Inc. (a) 84,843 766,132
Gulfport Energy Corp. (a) 13,000 214,110
Harvest Natural Resources, Inc. (a) 16,700 184,702
Houston American Energy Corp. (a) 6,500 72,930
McMoRan Exploration Co. (a)(b) 23,800 654,976
Meridian Resource Corp. (a) 36,811 108,592
Northern Oil And Gas, Inc. (a) 10,000 132,800
Oilsands Quest, Inc. (a) 77,500 503,750
Panhandle Oil & Gas Inc. 3,800 128,668
30
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Parallel Petroleum Corp. (a) 20,100 $ 404,613
Petroleum Development Corp. (a) 7,000 465,430
Petroquest Energy, Inc. (a) 20,600 554,140
Pioneer Drilling Co. (a) 24,100 453,321
PrimeEnergy Corp. (a) 300 16,089
Quest Resource Corp. (a) 10,400 118,664
Rex Energy Corp. (a) 8,300 219,120
Rosetta Resources, Inc. (a) 24,200 689,700
Stone Energy Corp. (a) 13,478 888,335
Swift Energy Co. (a) 14,417 952,387
TXCO Resources, Inc. (a) 15,700 184,632
Toreador Resources Corp. (a)(b) 7,500 63,975
Tri-Valley Corp. (a) 11,800 87,674
Venoco, Inc. (a) 9,400 218,174
VeraSun Energy Corp. (a)(b) 50,980 210,547
Warren Resources, Inc. (a) 28,400 416,912
Western Refining, Inc. 14,900 176,416
-------------
22,640,526
- ----------------------------------------------------------------------------------------------------------------------------------
Oil: Integrated Domestic - 0.3% Delta Petroleum Corp. (a)(b) 29,500 752,545
GMX Resources Inc. (a)(b) 7,100 526,110
Ram Energy Resources, Inc. (a) 19,300 121,397
-------------
1,400,052
- ----------------------------------------------------------------------------------------------------------------------------------
Oil: Integrated International - 0.0% Vaalco Energy, Inc. (a) 28,100 238,007
- ----------------------------------------------------------------------------------------------------------------------------------
Paints & Coatings - 0.2% Ferro Corp. 21,276 399,138
H.B. Fuller Co. 25,080 562,795
-------------
961,933
- -----------------------------------------------------------------------------------------------------------------------------------
Paper - 0.4% AbitibiBowater, Inc. (b) 26,044 242,990
Albany International Corp. Class A 14,574 422,646
Boise, Inc. (a)(b) 15,800 60,830
Buckeye Technologies, Inc. (a) 16,598 140,419
Kapstone Paper and Packaging Corp. (a) 10,200 68,034
Mercer International, Inc. (a)(b) 14,300 106,964
Multi-Color Corp. 3,950 82,911
Neenah Paper, Inc. 6,900 115,299
P.H. Glatfelter Co. 19,801 267,512
Rock-Tenn Co. Class A 17,880 536,221
Verso Paper Corp. (a) 7,900 66,834
Wausau Paper Corp. 20,942 161,463
-------------
2,272,123
- ----------------------------------------------------------------------------------------------------------------------------------
Plastics - 0.0% Spartech Corp. 14,154 133,472
- ----------------------------------------------------------------------------------------------------------------------------------
Pollution Control & Environmental American Ecology Corp. 7,600 224,428
Services - 0.4% Darling International, Inc. (a) 38,300 632,716
EnergySolutions, Inc. 15,500 346,425
Fuel Tech, Inc. (a)(b) 8,400 148,008
Headwaters, Inc. (a) 20,646 243,003
Met-Pro Corp. 8,000 106,800
Metalico, Inc. (a) 12,100 211,992
Team, Inc. (a) 9,000 308,880
-------------
2,222,252
- ----------------------------------------------------------------------------------------------------------------------------------
31
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Power Transmission Equipment - 0.1% Regal-Beloit Corp. 15,151 $ 640,130
Synthesis Energy Systems, Inc. (a) 10,200 91,902
-------------
732,032
- ----------------------------------------------------------------------------------------------------------------------------------
Printing & Copying Services - 0.2% Bowne & Co., Inc. 12,782 162,970
Cenveo, Inc. (a) 22,800 222,756
Schawk, Inc. 5,500 65,945
VistaPrint Ltd. (a)(b) 20,700 553,932
-------------
1,005,603
- ----------------------------------------------------------------------------------------------------------------------------------
Production Technology ATMI, Inc. (a) 15,757 439,935
Equipment - 1.1% Axcelis Technologies, Inc. (a) 44,800 218,624
Brooks Automation, Inc. (a) 30,078 248,745
Cognex Corp. 19,856 457,681
Cymer, Inc. (a) 14,800 397,824
Dionex Corp. (a) 8,731 579,476
Electro Scientific Industries, Inc. (a) 12,861 182,240
Emcore Corp. (a) 36,200 226,612
Entegris, Inc. (a) 50,499 330,768
Esterline Technologies Corp. (a) 13,890 684,221
FEI Co. (a) 17,755 404,459
Intevac, Inc. (a) 10,300 116,184
K-Tron International, Inc. (a) 1,300 168,480
Kulicke & Soffa Industries, Inc. (a) 25,356 184,845
LTX Corp. (a) 29,703 65,347
MTS Systems Corp. 8,300 297,804
Mattson Technology, Inc. (a) 23,399 111,379
Photon Dynamics, Inc. (a) 9,300 140,244
Photronics, Inc. (a) 19,079 134,316
Rofin-Sinar Technologies, Inc. (a) 14,100 425,820
Rudolph Technologies, Inc. (a) 13,473 103,742
Ultra Clean Holdings, Inc. (a) 9,000 71,640
Ultratech, Inc. (a) 11,090 172,117
-------------
6,162,503
- ----------------------------------------------------------------------------------------------------------------------------------
Publishing: Miscellaneous - 0.2% Consolidated Graphics, Inc. (a) 4,900 241,423
Courier Corp. 3,750 75,300
GateHouse Media, Inc. (b) 10,640 26,174
Idearc, Inc. 73,600 172,960
Martha Stewart Living Omnimedia, Inc. 11,982 88,667
Class A (a)(b)
Playboy Enterprises, Inc. Class B (a) 10,107 49,929
Primedia, Inc. 12,800 59,648
Scholastic Corp. (a) 11,560 331,310
-------------
1,045,411
- ----------------------------------------------------------------------------------------------------------------------------------
Publishing: Newspapers - 0.2% AH Belo Corp. 7,980 45,486
Belo Corp. Class A 44,000 321,640
Dolan Media Co. (a) 11,000 200,200
Journal Communications, Inc. Class A 20,000 96,400
Lee Enterprises, Inc. (b) 21,300 84,987
32
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
McClatchy Co. Class A 28,500 $ 193,230
Media General, Inc. Class A (b) 10,300 123,085
-------------
1,065,028
- ----------------------------------------------------------------------------------------------------------------------------------
Radio & TV Broadcasters - 0.2% CKX, Inc. (a) 24,400 213,500
Citadel Broadcasting Corp. (a)(b) 85,130 103,858
Cox Radio, Inc. Class A (a) 12,100 142,780
Cumulus Media, Inc. Class A (a) 14,300 56,342
Entercom Communications Corp. 14,800 103,896
Fisher Communications, Inc. (a) 3,000 103,320
Gray Television, Inc. 19,500 55,965
Lin TV Corp. Class A (a) 12,700 75,692
Outdoor Channel Holdings, Inc. (a) 9,100 63,518
Sinclair Broadcast Group, Inc. Class A 26,264 199,606
Westwood One, Inc. (a) 33,700 41,788
World Wrestling Entertainment, Inc. 11,796 182,484
-------------
1,342,749
- ----------------------------------------------------------------------------------------------------------------------------------
Railroad Equipment - 0.3% American Railcar Industries, Inc. 3,600 60,408
Freightcar America, Inc. 5,600 198,800
Greenbrier Cos., Inc. 7,800 158,340
Westinghouse Air Brake Technologies Corp. 22,839 1,110,432
-------------
1,527,980
- ----------------------------------------------------------------------------------------------------------------------------------
Railroads - 0.1% Genesee & Wyoming, Inc. Class A (a) 14,175 482,234
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate - 0.3% AMREP Corp. (b) 800 38,072
Avatar Holdings, Inc. (a)(b) 2,700 81,783
Bluegreen Corp. (a) 6,100 36,905
Cogdell Spencer, Inc. 5,900 95,875
Consolidated-Tomoka Land Co. 2,600 109,356
FX Real Estate and Entertainment, Inc. (a) 3,220 6,118
Forestar Real Estate Group, Inc. (a) 17,500 333,375
Griffin Land & Nurseries, Inc. 1,400 42,980
Grubb & Ellis Co. 15,100 58,135
Hilltop Holdings, Inc. (a) 21,372 220,345
Meruelo Maddux Properties, Inc. (a) 17,380 37,888
Resource Capital Corp. 10,100 72,821
Stratus Properties, Inc. (a) 2,000 34,780
Tejon Ranch Co. (a) 5,115 184,447
Thomas Properties Group, Inc. 11,200 110,208
-------------
1,463,088
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Acadia Realty Trust 15,901 368,108
Trusts (REITs) - 5.2% Agree Realty Corp. 3,700 81,585
Alexander's, Inc. (a) 867 269,290
American Campus Communities, Inc. 18,903 526,264
American Capital Agency Corp. 5,300 88,192
Anthracite Capital, Inc. (c)(d) 26,600 187,264
Anworth Mortgage Asset Corp. 39,100 254,541
Arbor Realty Trust, Inc. 6,500 58,305
Ashford Hospitality Trust, Inc. (c) 58,780 271,564
Associated Estates Realty Corp. 6,900 73,899
BioMed Realty Trust, Inc. 33,820 829,605
33
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
CapLease, Inc. 20,200 $ 151,298
Capital Trust, Inc. (b) 7,900 151,759
Capstead Mortgage Corp. 26,400 286,440
Care Investment Trust, Inc. 7,600 71,668
Cedar Shopping Centers, Inc. 20,300 237,916
Chimera Investment Corp. 15,800 142,358
Colonial Properties Trust 23,300 466,466
Corporate Office Properties Trust 18,300 628,239
Cousins Properties, Inc. (b) 21,900 505,890
DCT Industrial Trust, Inc. 80,810 669,107
DiamondRock Hospitality Co. 44,450 484,061
Dupont Fabros Technology, Inc. 5,900 109,976
Eastgroup Properties, Inc. 12,127 520,248
Education Realty Trust, Inc. 13,100 152,615
Entertainment Properties Trust 14,380 710,947
Equity Lifestyle Properties, Inc. 9,694 426,536
Equity One, Inc. 14,600 300,030
Extra Space Storage, Inc. 36,950 567,552
FelCor Lodging Trust, Inc. 30,970 325,185
First Industrial Realty Trust, Inc. (b) 21,000 576,870
First Potomac Realty Trust 11,600 176,784
Franklin Street Properties Corp. 25,800 326,112
Friedman Billings Ramsey Group, Inc. Class A 60,800 91,200
Getty Realty Corp. 8,200 118,162
Glimcher Realty Trust 17,956 200,748
Gramercy Capital Corp. (b) 19,802 229,505
Hatteras Financial Corp. 5,900 135,641
Healthcare Realty Trust, Inc. 23,800 565,726
Hersha Hospitality Trust 16,000 120,800
Highwoods Properties, Inc. 27,000 848,340
Home Properties, Inc. 15,020 721,861
Inland Real Estate Corp. 26,400 380,688
Investors Real Estate Trust (b) 27,300 260,442
JER Investors Trust, Inc. (b) 10,800 68,040
Kite Realty Group Trust 9,440 118,000
LTC Properties, Inc. 10,900 278,604
LaSalle Hotel Properties 19,020 477,973
Lexington Corporate Properties Trust 23,192 316,107
MFA Mortgage Investments, Inc. 71,100 463,572
Maguire Properties, Inc. 18,200 221,494
Medical Properties Trust, Inc. 32,800 331,936
Mid-America Apartment Communities, Inc. 12,329 629,272
Mission West Properties, Inc. 9,300 101,928
Monmouth Real Estate Investment Corp. Class A 11,600 74,240
National Health Investors, Inc. 9,629 274,523
National Retail Properties, Inc. 34,575 722,618
Newcastle Investment Corp. (b) 26,400 185,064
NorthStar Realty Finance Corp. (b) 28,100 233,792
Omega Healthcare Investors, Inc. 32,900 547,785
34
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
One Liberty Properties, Inc. 4,700 $ 76,657
PS Business Parks, Inc. 6,708 346,133
Parkway Properties, Inc. 7,304 246,364
Pennsylvania Real Estate Investment Trust 17,332 401,062
Post Properties, Inc. 20,786 618,384
Potlatch Corp. 18,547 836,841
RAIT Investment Trust (b) 29,410 218,222
Ramco-Gershenson Properties Trust 8,800 180,752
Realty Income Corp. (b) 47,800 1,087,928
Redwood Trust, Inc. (b) 15,395 350,852
Saul Centers, Inc. 4,522 212,489
Senior Housing Properties Trust 44,814 875,217
Sovran Self Storage, Inc. 10,680 443,861
Strategic Hotel Capital, Inc. 32,700 306,399
Sun Communities, Inc. 7,843 142,978
Sunstone Hotel Investors, Inc. 28,600 474,760
Tanger Factory Outlet Centers, Inc. 14,822 532,554
U-Store-It Trust 24,670 294,807
Universal Health Realty Income Trust 5,427 162,810
Urstadt Biddle Properties, Inc. Class A 7,900 115,814
Washington Real Estate Investment Trust 23,265 699,113
Winthrop Realty Trust, Inc. 18,700 67,320
-------------
28,406,052
- ----------------------------------------------------------------------------------------------------------------------------------
Recreational Vehicles & Boats - 0.2% Fleetwood Enterprises, Inc. (a)(b) 30,499 79,907
Marine Products Corp. 3,175 20,955
Polaris Industries, Inc. (b) 15,500 625,890
Winnebago Industries, Inc. (b) 14,290 145,615
-------------
872,367
- ----------------------------------------------------------------------------------------------------------------------------------
Rental & Leasing Services: Aircastle Ltd. 23,400 196,794
Commercial - 0.1% Electro Rent Corp. 11,053 138,604
H&E Equipment Services, Inc. (a) 7,800 93,756
McGrath RentCorp 11,210 275,654
-------------
704,808
- ----------------------------------------------------------------------------------------------------------------------------------
Rental & Leasing Services: Aaron Rents, Inc. (c) 20,593 459,842
Consumer - 0.3% Amerco, Inc. (a) 4,100 195,488
Dollar Thrifty Automotive Group, Inc. (a) 10,295 97,288
RSC Holdings, Inc. (a) 22,200 205,572
Rent-A-Center, Inc. (a) 31,400 645,898
-------------
1,604,088
- ----------------------------------------------------------------------------------------------------------------------------------
Restaurants - 1.1% AFC Enterprises, Inc. (a) 12,000 95,880
BJ's Restaurants, Inc. (a) 8,000 77,840
Bob Evans Farms, Inc. 15,180 434,148
Buffalo Wild Wings, Inc. (a) 8,850 219,745
CBRL Group, Inc. 10,600 259,806
CEC Entertainment, Inc. (a) 10,350 289,903
CKE Restaurants, Inc. 24,100 300,527
California Pizza Kitchen, Inc. (a) 11,550 129,244
The Cheesecake Factory, Inc. (a) 31,800 505,938
Denny's Corp. (a) 45,100 128,084
35
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
DineEquity, Inc. (b) 8,248 $ 308,145
Domino's Pizza, Inc. (a) 19,250 221,375
Einstein Noah Restaurant Group, Inc. (a) 1,600 17,712
Jack in the Box, Inc. (a) 27,836 623,805
Krispy Kreme Doughnuts, Inc. (a)(b) 29,900 149,201
Landry's Restaurants, Inc. (b) 5,496 98,763
Luby's, Inc. (a) 12,000 73,200
O'Charleys, Inc. 10,384 104,463
P.F. Chang's China Bistro, Inc. (a)(b) 11,508 257,089
Papa John's International, Inc. (a) 10,396 276,430
Red Robin Gourmet Burgers, Inc. (a) 8,000 221,920
Ruby Tuesday, Inc. 27,500 148,500
Ruth's Hospitality Group, Inc. (a) 9,200 47,656
Sonic Corp. (a) 28,420 420,616
The Steak n Shake Co. (a) 11,428 72,339
Texas Roadhouse, Inc. Class A (a) 24,100 216,177
Triarc Cos. 28,050 177,557
-------------
5,876,063
- ----------------------------------------------------------------------------------------------------------------------------------
Retail - 2.8% 1-800-FLOWERS.COM, Inc. Class A (a) 11,624 74,975
99 Cents Only Stores (a) 22,300 147,180
America's Car Mart, Inc. (a) 5,400 96,768
Asbury Automotive Group, Inc. 16,000 205,600
Aeropostale, Inc. (a)(c) 31,575 989,245
bebe Stores, Inc. 19,200 184,512
Big 5 Sporting Goods Corp. 10,600 80,242
Blockbuster, Inc. Class A (a)(b) 87,000 217,500
Blue Nile, Inc. (a)(b) 6,300 267,876
Borders Group, Inc. (b) 31,200 187,200
Brown Shoe Co., Inc. 20,127 272,721
The Buckle, Inc. 7,273 332,594
Build-A-Bear Workshop, Inc. (a) 7,500 54,525
CSK Auto Corp. (a) 20,134 211,004
Cabela's, Inc. Class A (a)(b) 16,600 182,766
Cache, Inc. (a) 5,350 57,245
Casual Male Retail Group, Inc. (a) 14,500 44,225
The Cato Corp. Class A 13,095 186,473
Central Garden & Pet Co. Class A (a) 30,534 125,189
Charlotte Russe Holding, Inc. (a) 10,500 186,480
Charming Shoppes, Inc. (a)(b) 53,740 246,667
Chico's FAS, Inc. (a) 83,500 448,395
The Children's Place Retail Stores, Inc. (a) 11,285 407,389
Christopher & Banks Corp. 16,728 113,750
Circuit City Stores, Inc. 83,300 240,737
Coldwater Creek, Inc. (a) 28,800 152,064
Collective Brands, Inc. (a) 28,900 336,107
Conn's, Inc. (a)(b) 4,600 73,922
Dillard's, Inc. Class A 26,900 311,233
Dress Barn, Inc. (a) 21,390 286,198
drugstore.com, Inc. (a) 44,100 83,790
36
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Ezcorp, Inc. (a) 18,900 $ 240,975
FGX International Holdings Ltd. (a) 5,700 45,828
FTD Group, Inc. 9,000 119,970
Fred's, Inc. 18,635 209,457
GSI Commerce, Inc. (a) 11,700 159,471
Gaiam, Inc. (a) 8,400 113,484
Genesco, Inc. (a) 11,238 346,917
Group 1 Automotive, Inc. 10,632 211,258
Gymboree Corp. (a) 13,558 543,269
Hibbett Sports, Inc. (a) 13,775 290,653
Hot Topic, Inc. (a) 20,781 112,425
Insight Enterprises, Inc. (a) 22,198 260,383
Jo-Ann Stores, Inc. (a) 11,905 274,172
Jos. A. Bank Clothiers, Inc. (a)(b) 8,633 230,933
Lawson Products, Inc. 1,988 49,263
MarineMax, Inc. (a) 7,600 54,492
Men's Wearhouse, Inc. 25,000 407,250
New York & Co. (a) 9,300 84,909
Overstock.com, Inc. (a)(b) 7,600 197,220
PC Connection, Inc. (a) 2,900 26,999
PC Mall, Inc. (a) 5,900 80,004
Pacific Sunwear of California, Inc. (a) 32,200 274,666
The Pantry, Inc. (a) 10,500 111,930
The Pep Boys - Manny, Moe & Jack 20,010 174,487
PetMed Express, Inc. (a) 11,900 145,775
Pier 1 Imports, Inc. (a) 42,299 145,509
PriceSmart, Inc. 6,000 118,680
Retail Ventures, Inc. (a) 11,800 54,280
Rush Enterprises, Inc. Class A (a) 15,900 190,959
Russ Berrie & Co., Inc. (a) 6,147 48,992
Sally Beauty Co., Inc. (a) 41,600 268,736
School Specialty, Inc. (a) 9,654 287,013
Shutterfly, Inc. (a) 10,000 122,100
Sonic Automotive, Inc. 13,400 172,726
Stage Stores, Inc. 18,150 211,811
Stamps.com, Inc. (a) 7,803 97,381
Stein Mart, Inc. 12,024 54,228
Syms Corp. 3,700 50,320
Systemax, Inc. 5,100 90,015
The Talbots, Inc. (b) 13,000 150,670
Tractor Supply Co. (a) 15,800 458,832
Tuesday Morning Corp. (a) 14,290 58,732
Tween Brands, Inc. (a) 12,266 201,898
Volcom, Inc. (a) 9,000 215,370
The Wet Seal, Inc. Class A (a) 45,600 217,512
Zale Corp. (a)(b) 17,000 321,130
Zumiez, Inc. (a)(b) 9,800 162,484
-------------
15,270,140
- ----------------------------------------------------------------------------------------------------------------------------------
37
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Savings & Loan - 0.9% Anchor Bancorp Wisconsin, Inc. 9,037 $ 63,349
Bank Mutual Corp. 22,838 229,293
Berkshire Hills Bancorp, Inc. 5,000 118,250
Brookline Bancorp, Inc. 28,387 271,096
Brooklyn Federal Bancorp, Inc. 2,600 31,330
Danvers Bancorp, Inc. (a) 9,400 103,400
Dime Community Bancshares, Inc. 11,449 189,023
Downey Financial Corp. (b) 10,000 27,700
ESSA Bancorp, Inc. 9,200 115,184
First Financial Holdings, Inc. 5,626 96,655
First Financial Northwest, Inc. 12,100 120,153
First Niagara Financial Group, Inc. 51,653 664,258
First Place Financial Corp. 7,900 74,260
FirstFed Financial Corp. (a)(b) 6,500 52,260
Flagstar Bancorp, Inc. (b) 20,550 61,856
Flushing Financial Corp. 9,775 185,236
Guaranty Financial Group, Inc. (a) 19,400 104,178
Home Federal Bancorp, Inc. 4,400 43,384
IBERIABANK Corp. 6,450 286,832
IndyMac Bancorp, Inc. 55,100 34,162
Kearny Financial Corp. 7,900 86,900
Meridian Interstate Bancorp, Inc. (a) 6,200 60,264
NASB Financial, Inc. 800 14,224
NewAlliance Bancshares, Inc. 51,400 641,472
Northwest Bancorp, Inc. 7,267 158,566
OceanFirst Financial Corp. 5,000 90,250
Ocwen Financial Corp. (a) 13,265 61,682
Provident Financial Services, Inc. 28,158 394,494
Provident New York Bancorp 18,989 210,018
Rockville Financial, Inc. 3,000 37,680
Roma Financial Corp. 3,200 41,920
Sterling Financial Corp. 23,843 98,710
United Community Financial Corp. 9,061 33,979
ViewPoint Financial Group 5,200 76,544
W Holding Co., Inc. (b) 49,833 42,358
Westfield Financial, Inc. 16,612 150,339
-------------
5,071,259
- ----------------------------------------------------------------------------------------------------------------------------------
Scientific Equipment & Suppliers - 0.2% Newport Corp. (a) 17,935 204,280
Varian, Inc. (a) 14,035 716,627
-------------
920,907
- ----------------------------------------------------------------------------------------------------------------------------------
Securities Brokerage & Services - 0.5% Diamond Hill Investments Group (a) 1,000 83,500
GFI Group, Inc. 30,700 276,607
Gladstone Investment Corp. 12,100 77,803
International Assets Holding Corp., Inc. (a) 1,800 54,108
KBW, Inc. (a)(b) 12,400 255,192
Knight Capital Group, Inc. Class A (a) 44,600 801,908
LaBranche & Co., Inc. (a) 24,300 172,044
Ladenburg Thalmann Financial Services, Inc. (a)(b) 42,900 64,779
MarketAxess Holdings, Inc. (a) 13,200 99,792
38
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
optionsXpress Holdings, Inc. 20,100 $ 449,034
Penson Worldwide, Inc. (a) 8,700 103,965
SWS Group, Inc. 12,006 199,420
Thomas Weisel Partners Group, Inc. (a) 9,200 50,324
-------------
2,688,476
- ----------------------------------------------------------------------------------------------------------------------------------
Services: Commercial - 3.1% ABM Industries, Inc. 21,270 473,258
AMN Healthcare Services, Inc. (a) 16,005 270,805
Administaff, Inc. 10,261 286,179
The Advisory Board Co. (a) 8,200 322,506
Ambassadors Group, Inc. 9,700 144,724
Angelica Corp. 3,300 70,191
CBIZ, Inc. (a) 21,253 168,961
CDI Corp. 6,301 160,297
CRA International, Inc. (a) 5,200 187,980
Casella Waste Systems, Inc. (a) 10,578 128,946
Chemed Corp. 11,272 412,668
CoStar Group, Inc. (a) 9,550 424,498
Coinstar, Inc. (a) 13,292 434,781
Cornell Cos., Inc. (a) 5,000 120,550
Cross Country Healthcare, Inc. (a) 14,700 211,827
Dice Holdings, Inc. (a) 7,500 61,950
DynCorp. International, Inc. (a) 10,600 160,590
Exponent, Inc. (a) 7,004 219,996
First Advantage Corp. Class A (a) 5,500 87,175
Forrester Research, Inc. (a) 6,581 203,221
G&K Services, Inc. Class A 9,377 285,623
The Geo Group, Inc. (a) 24,200 544,500
Gevity HR, Inc. 11,600 62,408
Global Sources Ltd. (a) 8,020 121,744
Global Traffic Network, Inc. (a) 5,100 45,594
Heidrick & Struggles International, Inc. 8,258 228,251
Hudson Highland Group, Inc. (a) 11,700 122,499
ICF International, Inc. (a) 3,700 61,494
ICT Group, Inc. (a) 4,100 33,620
IKON Office Solutions, Inc. 38,400 433,152
Jackson Hewitt Tax Service, Inc. 13,100 160,082
Kelly Services, Inc. Class A 13,068 252,604
Kforce, Inc. (a) 14,500 123,105
The Knot, Inc. (a) 13,400 131,052
Korn/Ferry International (a) 21,268 334,546
Liquidity Services, Inc. (a) 7,700 88,781
MAXIMUS, Inc. 8,504 296,109
MPS Group, Inc. (a) 45,705 485,844
Midas, Inc. (a) 6,842 92,367
Monro Muffler, Inc. 7,550 116,950
Navigant Consulting, Inc. (a) 23,423 458,154
Net 1 UEPS Technologies, Inc. (a) 21,100 512,730
Nutri/System, Inc. 15,100 213,514
On Assignment, Inc. (a) 16,400 131,528
39
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Orbitz Worldwide, Inc. (a) 14,600 $ 73,146
PHH Corp. (a) 26,364 404,687
PRG-Schultz International, Inc. (a) 8,100 76,221
People Support, Inc. (a) 10,200 86,700
Perficient, Inc. (a) 14,500 140,070
Pre-Paid Legal Services, Inc. (a) 3,760 152,731
The Providence Service Corp. (a) 5,700 120,327
Regis Corp. 20,400 537,540
Resources Connection, Inc. 22,032 448,351
Rollins, Inc. 19,653 291,257
Spherion Corp. (a) 26,029 120,254
Standard Parking Corp. (a)(b) 4,100 74,620
Steiner Leisure Ltd. (a) 7,400 209,790
TeleTech Holdings, Inc. (a) 18,489 369,040
Tetra Tech, Inc. (a) 27,731 627,275
TrueBlue, Inc. (a) 21,022 277,701
Unifirst Corp. 6,600 294,756
Viad Corp. 9,400 242,426
Volt Information Sciences, Inc. (a) 6,038 71,913
Waste Connections, Inc. (a) 31,327 1,000,271
Waste Services, Inc. (a) 8,533 60,072
Watson Wyatt Worldwide, Inc. 20,115 1,063,882
World Fuel Services Corp. 12,900 283,026
-------------
16,913,410
- ----------------------------------------------------------------------------------------------------------------------------------
Shipping - 0.9% American Commercial Lines, Inc. (a)(c) 17,300 189,089
Arlington Tankers Ltd. 6,000 139,320
Double Hull Tankers, Inc. 19,900 199,597
Eagle Bulk Shipping, Inc. 22,000 650,540
Genco Shipping & Trading Ltd. (b) 10,500 684,600
General Maritime Corp. 12,800 332,544
Golar LNG Ltd. 16,800 260,232
Gulfmark Offshore, Inc. (a) 9,600 558,528
Horizon Lines, Inc. Class A (b) 14,200 141,290
International Shipholding Corp. (a) 3,300 77,352
Knightsbridge Tankers Ltd. 7,900 254,459
Nordic American Tanker Shipping Ltd. (b) 16,200 628,884
Ship Finance International Ltd. (b) 19,900 587,647
TBS International Ltd. (a) 5,200 207,740
-------------
4,911,822
- ----------------------------------------------------------------------------------------------------------------------------------
Shoes - 0.7% Crocs, Inc. (a) 40,800 326,808
DSW, Inc. Class A (a)(b) 7,500 88,350
Deckers Outdoor Corp. (a) 6,100 849,120
The Finish Line, Inc. Class A (a) 22,480 195,578
Iconix Brand Group, Inc. (a) 28,100 339,448
K-Swiss, Inc. Class A 11,896 174,871
Kenneth Cole Productions, Inc. Class A 4,292 54,508
Shoe Carnival, Inc. (a) 4,200 49,518
Skechers U.S.A., Inc. Class A (a) 16,055 317,247
Steven Madden Ltd. (a) 9,068 166,670
40
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Timberland Co. Class A (a) 23,300 $ 380,955
Weyco Group, Inc. 2,600 68,978
Wolverine World Wide, Inc. 23,608 629,625
-------------
3,641,676
- ----------------------------------------------------------------------------------------------------------------------------------
Steel - 0.3% China Precision Steel, Inc. (a) 9,900 43,164
Esmark, Inc. (a) 7,200 137,664
General Steel Holdings, Inc. (a) 3,800 59,736
Gibraltar Industries, Inc. 13,334 212,944
Olympic Steel, Inc. 4,400 334,048
Sutor Technology Group Ltd. (a) 4,800 33,936
Universal Stainless & Alloy Products, Inc. (a) 3,100 114,824
Worthington Industries, Inc. 30,300 621,150
-------------
1,557,466
- ----------------------------------------------------------------------------------------------------------------------------------
Sugar - 0.0% Imperial Sugar Co. New Shares 5,500 85,415
- ----------------------------------------------------------------------------------------------------------------------------------
Telecommunications Equipment - 0.7% Airvana, Inc. (a) 13,200 70,752
Applied Signal Technology, Inc. 6,700 91,522
Arris Group, Inc. (a) 58,200 491,790
Audiovox Corp. Class A (a) 6,585 64,665
Belden, Inc. 20,761 703,383
Mastec, Inc. (a) 18,800 200,408
OpNext, Inc. (a) 9,100 48,958
Plantronics, Inc. 22,999 513,338
Polycom, Inc. (a) 41,500 1,010,940
Powerwave Technologies, Inc. (a)(b) 62,377 265,102
Preformed Line Products Co. 800 32,248
Symmetricom, Inc. (a) 21,900 84,096
-------------
3,577,202
- ----------------------------------------------------------------------------------------------------------------------------------
Textile Products - 0.1% Interface, Inc. Class A 25,321 317,272
Unifi, Inc. (a) 19,300 48,636
-------------
365,908
- ----------------------------------------------------------------------------------------------------------------------------------
Textiles Apparel Manufacturers - 0.8% American Apparel, Inc. (a) 17,400 115,710
Carter's, Inc. (a) 26,400 364,848
Cherokee, Inc. 3,600 72,540
Columbia Sportswear Co. (b) 6,300 231,525
G-III Apparel Group, Ltd. (a) 6,200 76,508
J. Crew Group, Inc. (a) 19,970 659,210
Lululemon Athletica, Inc. (a)(b) 8,400 244,104
Maidenform Brands, Inc. (a) 10,600 143,100
Oxford Industries, Inc. 6,542 125,279
Perry Ellis International, Inc. (a) 5,250 111,405
Quiksilver, Inc. (a) 59,200 581,344
True Religion Apparel, Inc. (a)(b) 8,400 223,860
Under Armour, Inc. Class A (a)(b) 15,500 397,420
The Warnaco Group, Inc. (a) 21,500 947,505
-------------
4,294,358
- ----------------------------------------------------------------------------------------------------------------------------------
Tires & Rubber - 0.1% Cooper Tire & Rubber Co. 27,800 217,952
Titan International, Inc. 12,900 459,498
-------------
677,450
- ----------------------------------------------------------------------------------------------------------------------------------
41
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Tobacco - 0.2% Alliance One International, Inc. (a) 45,955 $ 234,830
Schweitzer-Mauduit International, Inc. 7,420 125,027
Star Scientific, Inc. (a) 27,600 33,120
Universal Corp. 12,856 581,348
Vector Group Ltd. (b) 14,944 241,047
-------------
1,215,372
- ----------------------------------------------------------------------------------------------------------------------------------
Toys - 0.2% Jakks Pacific, Inc. (a) 13,030 284,706
Leapfrog Enterprises, Inc. (a) 15,646 130,175
Marvel Entertainment, Inc. (a) 23,000 739,220
-------------
1,154,101
- ----------------------------------------------------------------------------------------------------------------------------------
Transportation Miscellaneous - 0.3% CAI International, Inc. (a) 4,000 69,600
Celadon Group, Inc. (a) 10,400 103,896
Dynamex, Inc. (a) 4,400 117,964
HUB Group, Inc. Class A (a) 17,500 597,275
Odyssey Marine Exploration, Inc. (a)(b) 19,100 75,827
Pacer International, Inc. 16,500 354,915
Textainer Group Holdings Ltd. 4,300 83,979
Ultrapetrol Bahamas Ltd. (a) 12,500 157,625
-------------
1,561,081
- ----------------------------------------------------------------------------------------------------------------------------------
Truckers - 0.6% Arkansas Best Corp. 11,041 404,542
Forward Air Corp. 13,632 471,667
Heartland Express, Inc. 26,473 394,712
Knight Transportation, Inc. (b) 26,862 491,575
Marten Transport Ltd. (a) 6,850 109,395
Old Dominion Freight Line, Inc. (a) 13,125 394,013
Patriot Transportation Holding, Inc. (a) 500 40,000
Saia, Inc. (a) 6,381 69,681
Universal Truckload Services, Inc. (a) 1,800 39,636
Werner Enterprises, Inc. 21,200 393,896
YRC Worldwide, Inc. (a) 27,900 414,873
-------------
3,223,990
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities: Cable TV & Radio - 0.0% Mediacom Communications Corp. Class A (a) 21,800 116,412
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities: Electrical - 1.8% Allete, Inc. 12,266 515,172
Avista Corp. 25,875 555,277
Black Hills Corp. 18,100 580,286
CH Energy Group, Inc. 7,489 266,384
Central Vermont Public Service Corp. 4,800 92,976
Cleco Corp. 28,567 666,468
El Paso Electric Co. (a) 21,208 419,918
The Empire District Electric Co. 15,968 296,047
IDACORP, Inc. 21,300 615,357
ITC Holdings Corp. 23,300 1,190,863
MGE Energy, Inc. 10,845 353,764
NorthWestern Corp. 19,000 482,980
Otter Tail Corp. 14,086 546,959
PNM Resources, Inc. 36,500 436,540
Pike Electric Corp. (a) 6,900 114,609
Portland General Electric Co. 29,600 666,592
UIL Holdings Corp. 11,967 351,949
42
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Unisource Energy Corp. 16,383 $ 508,037
Westar Energy, Inc. 49,500 1,064,745
-------------
9,724,923
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities: Gas Distributors - 1.0% Chesapeake Utilities Corp. 3,800 97,736
EnergySouth, Inc. 2,900 142,274
The Laclede Group, Inc. 10,748 433,897
New Jersey Resources Corp. 19,861 648,462
Nicor, Inc. 21,300 907,167
Northwest Natural Gas Co. 12,499 578,204
Piedmont Natural Gas Co. (b) 34,600 905,136
South Jersey Industries, Inc. 14,432 539,180
Southwest Gas Corp. 20,390 606,195
WGL Holdings, Inc. 23,300 809,442
-------------
5,667,693
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities: Miscellaneous - 0.1% Aquila, Inc. (a) 177,000 667,290
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities: Telecommunications - 1.1% Alaska Communications Systems Group, Inc. (b) 20,600 245,964
Atlantic Tele-Network, Inc. 4,400 121,044
Centennial Communications Corp. (a) 33,326 232,949
Cincinnati Bell, Inc. (a) 115,300 458,894
Consolidated Communications Holdings, Inc. 10,735 159,844
FairPoint Communications, Inc. 42,293 304,933
FiberTower Corp. (a)(b) 46,850 65,590
General Communication, Inc. Class A (a) 23,739 163,087
Global Crossing Ltd. (a)(b) 12,700 227,838
Globalstar, Inc. (a)(b) 22,800 64,524
Hungarian Telephone & Cable Corp. (a) 1,200 21,888
ICO Global Communications Holdings Ltd. (a)(b) 46,400 151,264
IDT Corp. Class B 18,200 30,940
Ibasis, Inc. 10,600 34,768
Iowa Telecommunications Services, Inc. 15,200 267,672
iPCS, Inc. (a) 8,100 240,003
NTELOS Holdings Corp. 14,000 355,180
Neutral Tandem, Inc. (a) 8,400 147,000
ORBCOMM, Inc. (a) 12,200 69,540
PAETEC Holding Corp. (a) 57,920 367,792
Premiere Global Services, Inc. (a) 29,000 422,820
RCN Corp. 18,700 201,586
Rural Cellular Corp. Class A (a) 6,300 280,413
Shenandoah Telecom Co. 10,300 134,106
TW Telecom, Inc. (a)(b) 69,500 1,114,085
USA Mobility, Inc. 11,020 83,201
Virgin Mobile USA, Inc. (a) 10,600 29,150
-------------
5,996,075
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities: Water - 0.2% American States Water Co. 8,185 285,984
California Water Service Group 9,196 301,353
Connecticut Water Service, Inc. 4,600 103,040
Consolidated Water Co., Inc. 6,700 132,660
Middlesex Water Co. 7,100 117,789
43
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
SJW Corp. 6,448 $ 170,227
Southwest Water Co. (b) 11,383 114,057
-------------
1,225,110
- ----------------------------------------------------------------------------------------------------------------------------------
Wholesalers - 0.2% Brightpoint, Inc. (a) 23,630 172,498
Chindex International Inc. (a) 5,800 85,086
Houston Wire & Cable Co. (b) 8,900 177,110
MWI Veterinary Supply, Inc. (a) 5,200 172,172
Prestige Brands Holdings, Inc. (a) 14,500 154,570
United Stationers, Inc. (a) 11,469 423,780
-------------
1,185,216
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks - 91.5% 496,365,284
- ----------------------------------------------------------------------------------------------------------------------------------
Exchange-Traded Funds
- ----------------------------------------------------------------------------------------------------------------------------------
iShares Russell 2000 Index Fund (b) 67,164 4,636,331
- ----------------------------------------------------------------------------------------------------------------------------------
Total Exchange-Traded Funds - 0.9% 4,636,331
- ----------------------------------------------------------------------------------------------------------------------------------
Mutual Funds
- ----------------------------------------------------------------------------------------------------------------------------------
BlackRock Kelso Capital Corp. (d) 4,100 38,786
Gladstone Capital Corp. (b) 9,600 146,304
Hercules Technology Growth Capital, Inc. 15,200 135,736
Kayne Anderson Energy Development Co. 4,700 107,865
Patriot Capital Funding, Inc. 9,800 61,250
Pennantpark Investment Corp. 8,500 61,285
Prospect Capital Corp. 12,000 158,160
- ----------------------------------------------------------------------------------------------------------------------------------
Total Mutual Funds - 0.1% 709,386
- ----------------------------------------------------------------------------------------------------------------------------------
Warrants (e)
- ----------------------------------------------------------------------------------------------------------------------------------
Communications Technology - 0.0% Lantronix, Inc. (expires 2/09/11) 138 --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Warrants - 0.0% --
- ----------------------------------------------------------------------------------------------------------------------------------
Other Interests (f)
- ----------------------------------------------------------------------------------------------------------------------------------
Oil: Crude Producers - 0.0% PetroCorp Inc. (Escrow Shares) (a)(g) 500 --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Other Interests - 0.0% --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments
(Cost - $493,391,561) - 92.5% 501,711,001
- ----------------------------------------------------------------------------------------------------------------------------------
Beneficial
Interest
Short-Term Securities (000)
- ----------------------------------------------------------------------------------------------------------------------------------
BlackRock Liquidity Series, LLC Cash Sweep
Series, 2.56% (d)(h) $ 34,422 34,421,562
BlackRock Liquidity Series, LLC
Money Market Series, 2.70% (d)(h)(i) 64,589 64,588,600
- ----------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost - $99,010,162) - 18.2% 99,010,162
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investments
(Cost - $592,401,723*) - 110.7% 600,721,163
Liabilities in Excess of Other Assets - (10.7%) (57,908,928)
-------------
Net Assets - 100.0% $ 542,812,235
=============
44
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
* The cost and unrealized appreciation (depreciation) of investments, as of
June 30, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 598,304,091
=============
Gross unrealized appreciation $ 79,863,244
Gross unrealized depreciation (77,446,172)
-------------
Net unrealized appreciation $ 2,417,072
=============
(a) Non-income producing security.
(b) Security, or a portion of security, is on loan.
(c) All or a portion of security pledged as collateral in connection with open
financial futures contracts.
(d) 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
-----------------------------------------------------------------------------------------------
Anthracite Capital, Inc. -- $ 120,735 $ (48,521) $ 17,439
BlackRock Kelso Capital Corp. $ 15,517 $ 6,168 $ (524) $ 2,279
BlackRock Liquidity Series, LLC
Cash Sweep Series $ 1,194,769* -- -- $ 378,995
BlackRock Liquidity Series, LLC
Money Market Series -- $19,220,217** -- $ 597,824
-----------------------------------------------------------------------------------------------
* Represents net purchase cost.
** Represents net sale cost.
(e) Warrants entitle the Series to purchase a predetermined number of shares
of common stock and are non-income producing. The purchase price and
number of shares are subject to adjustment under certain conditions until
the expiration date.
(f) Other interests represent beneficial interest in liquidation trusts and
other reorganization entities and are non-income producing.
(g) Security is fair valued.
(h) Represents the current yield as of report date.
(i) Security was purchased with the cash proceeds from securities loans.
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.
o Financial futures contracts purchased as of June 30, 2008, were as
follows:
--------------------------------------------------------------------------------------
Expiration Face Unrealized
Contracts Issue Date Value Depreciation
--------------------------------------------------------------------------------------
603 Russell 2000 Index September 2008 $43,948,831 $ (2,239,321)
--------------------------------------------------------------------------------------
45
Master Small Cap Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
o Effective January 1, 2008, the Series adopted Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" ("FAS 157"). FAS 157 clarifies the definition of fair
value, establishes a framework for measuring fair values and requires
additional disclosures about the use of fair value measurements. Various
inputs are used in determining the fair value of investments, which are as
follows:
o Level 1 - price quotations in active markets/exchanges for
identical securities
o Level 2 - other observable inputs (including, but not limited
to: quoted prices for similar assets or liabilities in markets
that are not active, inputs other than quoted prices that are
observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss
severities, credit risks, and default rates) or other
market-corroborated inputs)
o Level 3 - unobservable inputs based on the best information
available in the circumstance, to the extent observable inputs
are not available (including the Series' own assumption used
in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities.
For information about the Series' policy regarding valuation of
investments and other significant accounting policies, please refer to the
Series' most recent financial statements as contained in its semiannual
report.
The following table summarizes the inputs used as of June 30, 2008 in
determining the fair valuation of the Series' investments:
--------------------------------------------------------------------
Valuation Investments in Other Financial
Inputs Securities Instruments*
--------------------------------------------------------------------
Level 1 $ 501,711,001 $ (2,239,321)
Level 2 99,010,162 --
Level 3 -- --
--------------------------------------------------------------------
Total $ 600,721,163 $ (2,239,321)
====================================================================
* Other financial instruments are futures.
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Australia - 6.6%
- ----------------------------------------------------------------------------------------------------------------------------------
Air Freight & Logistics - 0.0% Toll Holdings Ltd. 51,423 $ 297,563
- ----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.0% Qantas Airways Ltd. 78,155 227,753
- ----------------------------------------------------------------------------------------------------------------------------------
Beverages - 0.1% Coca-Cola Amatil Ltd. 47,908 321,956
Foster's Group Ltd. 163,017 792,499
Lion Nathan Ltd. 15,978 130,888
-------------
1,245,343
- ----------------------------------------------------------------------------------------------------------------------------------
Biotechnology - 0.2% CSL Ltd. 46,221 1,582,193
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 0.1% Macquarie Group Ltd. 23,007 1,071,104
Perpetual Trustees Australia Ltd. 1,777 72,848
-------------
1,143,952
- ----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.2% Incitec Pivot Ltd. 5,084 900,226
Orica Ltd. 26,833 753,138
-------------
1,653,364
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.4% Australia & New Zealand Banking Group Ltd. 161,110 2,895,576
Bendigo and Adelaide Bank Ltd. 20,287 212,594
Commonwealth Bank of Australia Ltd. 108,474 4,182,715
National Australia Bank Ltd. 134,118 3,405,466
St. George Bank Ltd. 49,425 1,286,054
Westpac Banking Corp. 157,278 3,020,841
-------------
15,003,246
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - Brambles Ltd. 118,200 989,327
0.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.1% Boart Longyear Group 92,485 197,758
Leighton Holdings Ltd. 11,587 564,227
-------------
761,985
- ----------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% Boral Ltd. 36,024 195,145
James Hardie Industries NV 31,616 128,365
-------------
323,510
- ----------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.0% Amcor Ltd. 73,767 357,365
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.1% Australian Stock Exchange Ltd. 14,370 432,680
Babcock & Brown Ltd. 19,766 141,912
-------------
574,592
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.1% Telstra Corp. Ltd. 356,892 1,450,188
- ----------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.1% WorleyParsons Ltd. 12,182 441,398
- ----------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.5% Metcash Ltd. 77,470 274,837
Wesfarmers Ltd. 65,311 2,337,879
Woolworths Ltd. 101,743 2,384,338
-------------
4,997,054
- ----------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.0% Goodman Fielder Ltd. 77,271 104,114
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 0.0% Cochlear Ltd. 3,403 142,927
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Providers & Services - 0.0% Sonic Healthcare Ltd. 28,196 393,734
- ----------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 0.1% Aristocrat Leisure Ltd. 22,855 140,375
Crown Ltd. 33,445 297,507
Tabcorp Holdings Ltd. 44,270 416,248
Tatts Group Ltd. 98,432 222,059
-------------
1,076,189
- ----------------------------------------------------------------------------------------------------------------------------------
IT Services - 0.0% Computershare Ltd. 33,896 298,778
- ----------------------------------------------------------------------------------------------------------------------------------
1
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.0% CSR Ltd. 92,805 $ 217,693
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.5% AMP Ltd. 157,866 1,010,844
AXA Asia Pacific Holdings Ltd. 60,500 271,264
Insurance Australia Group Ltd. 155,117 516,884
QBE Insurance Group Ltd. 74,439 1,600,526
Suncorp-Metway Ltd. 78,601 984,960
-------------
4,384,478
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.0% Fairfax Media Ltd. 118,923 334,087
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 1.9% Alumina Ltd. 96,761 439,251
BHP Billiton Ltd. 278,546 11,855,039
BlueScope Steel Ltd. 63,171 686,410
Fortescue Metals Group Ltd. (a) 103,496 1,175,824
Newcrest Mining Ltd. 38,108 1,057,612
OneSteel Ltd. 59,500 424,122
Oxiana Ltd. 116,557 291,900
Oxiana Ltd. (a) 133,006 332,791
Rio Tinto Ltd. 23,469 3,036,599
Sims Group Ltd. 13,146 525,683
-------------
19,825,231
- ----------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.1% AGL Energy Ltd. 37,478 513,388
- ----------------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.0% Harvey Norman Holdings Ltd. 44,194 130,789
- ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.5% Caltex Australia Ltd. 12,081 150,952
Origin Energy Ltd. 73,855 1,142,657
Paladin Resources Ltd. (a) 37,373 228,183
Santos Ltd. 49,605 1,021,742
Woodside Petroleum Ltd. 40,426 2,612,989
-------------
5,156,523
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts (REITs) - 0.4% CFS Retail Property Trust 125,236 222,196
DB RREEF Trust 198,135 262,298
General Property Trust 180,508 384,637
Goodman Group 132,736 393,226
Macquarie Office Trust 106,454 79,432
Mirvac Group 91,272 259,217
Stockland 124,859 645,622
Westfield Group 147,043 2,297,645
-------------
4,544,273
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Management & Development - 0.0% Lend Lease Corp., Ltd. 31,385 287,561
- ----------------------------------------------------------------------------------------------------------------------------------
Road & Rail - 0.0% Asciano Group 48,559 161,524
- ----------------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 0.0% Billabong International Ltd. 8,070 83,456
- ----------------------------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 0.1% Macquarie Airports Group 62,088 122,807
Macquarie Infrastructure Group 211,459 470,501
Transurban Group 91,476 371,885
-------------
965,193
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Australia 69,668,771
- ----------------------------------------------------------------------------------------------------------------------------------
Austria - 0.6%
- ----------------------------------------------------------------------------------------------------------------------------------
Building Products - 0.0% Wienerberger AG 7,093 296,577
- ----------------------------------------------------------------------------------------------------------------------------------
2
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.2% Erste Bank der Oesterreichischen
Sparkassen AG 16,354 $ 1,011,441
Raiffeisen International Bank Holding AG 4,676 594,093
-------------
1,605,534
- ----------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.0% Strabag SE 4,955 384,972
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.1% Telekom Austria AG 29,835 646,488
- ----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.0% Verbund - Oesterreichische
Elektrizitaetswirtschafts AG 5,715 510,318
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.0% Vienna Insurance Group 2,331 153,600
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery - 0.0% Andritz AG 3,293 206,552
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.1% Voestalpine AG 9,930 812,626
- ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.1% OMV AG 14,158 1,106,170
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Management & Development - 0.1% IMMOFINANZ Immobilien Anlagen AG 40,164 413,531
Immoeast Immobilien Anlagen AG (a) 29,872 264,172
Meinl European Land Ltd. (a) 21,504 241,097
-------------
918,800
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Austria 6,641,637
- ----------------------------------------------------------------------------------------------------------------------------------
Belgium - 1.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Beverages - 0.1% InBev NV 15,827 1,094,298
- ----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.1% Solvay SA 5,101 664,561
Umicore SA 10,698 526,167
-------------
1,190,728
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.2% Dexia NV 45,572 725,592
KBC Bancassurance Holding 13,661 1,510,110
-------------
2,235,702
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.4% Fortis 176,293 2,800,321
Groupe Bruxelles Lambert SA 6,949 823,927
KBC Ancora 3,067 267,067
Nationale A Portefeuille 3,872 289,051
-------------
4,180,366
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.1% Belgacom SA 14,630 627,654
- ----------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.1% Colruyt SA 1,112 293,125
Delhaize Group 8,553 572,867
-------------
865,992
- ----------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.0% UCB SA 8,700 320,957
- ----------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 0.0% Mobistar SA 2,394 193,239
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Belgium 10,708,936
- ----------------------------------------------------------------------------------------------------------------------------------
Bermuda - 0.2%
- ----------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.1% SeaDrill Ltd. 24,080 734,996
- ----------------------------------------------------------------------------------------------------------------------------------
Marine - 0.0% Pacific Basin Shipping Ltd. 110,713 158,417
- ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.1% Mongolia Energy Co. Ltd. (a) 317,000 612,561
- ----------------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 0.0% C C Land Holdings Ltd. 74,888 46,623
Yue Yuen Industrial Holdings Ltd. 33,785 80,268
-------------
126,891
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Bermuda 1,632,865
- ----------------------------------------------------------------------------------------------------------------------------------
Cayman Islands - 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Communications Equipment - 0.0% Foxconn International Holdings Ltd. (a) 148,529 144,112
- ----------------------------------------------------------------------------------------------------------------------------------
3
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.0% Lifestyle International Holdings Ltd. 32,013 $ 45,087
- ----------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.0% Lee & Man Paper Manufacturing Ltd. 38,000 56,694
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in the Cayman Islands 245,893
- ----------------------------------------------------------------------------------------------------------------------------------
Denmark - 1.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Beverages - 0.1% Carlsberg A/S 6,199 597,148
- ----------------------------------------------------------------------------------------------------------------------------------
Building Products - 0.0% Rockwool International AS 388 49,674
- ----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.0% Novozymes A/S Class B 4,067 366,139
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.1% Danske Bank A/S 39,051 1,124,464
Jyske Bank (a) 3,300 196,360
Sydbank A/S 4,047 153,810
-------------
1,474,634
- ----------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.1% FLS Industries A/S Class B 4,667 509,899
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.2% Vestas Wind Systems A/S (a) 15,709 2,045,264
- ----------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.0% Danisco A/S 4,513 289,341
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 0.0% Coloplast A/S Class B 1,521 132,121
William Demant Holding (a) 1,330 87,347
-------------
219,468
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.0% Topdanmark A/S (a) 1,551 233,379
TrygVesta A/S 2,219 156,623
-------------
390,002
- ----------------------------------------------------------------------------------------------------------------------------------
Marine - 0.2% A P Moller - Maersk A/S 145 1,769,526
- ----------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.3% Novo-Nordisk A/S B 39,027 2,569,168
- ----------------------------------------------------------------------------------------------------------------------------------
Road & Rail - 0.0% Dsv A/S 17,556 418,818
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Denmark 10,699,081
- ----------------------------------------------------------------------------------------------------------------------------------
Finland - 1.5%
- ----------------------------------------------------------------------------------------------------------------------------------
Auto Components - 0.1% Nokian Renkaat Oyj 9,015 427,600
- ----------------------------------------------------------------------------------------------------------------------------------
Communications Equipment - 0.8% Nokia Oyj 334,503 8,176,242
- ----------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.0% YIT Oyj 9,716 242,618
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.0% OKO Bank 6,121 105,669
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.0% Elisa Corp. 13,141 274,269
- ----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.2% Fortum Oyj 37,845 1,915,549
- ----------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.0% Kesko Oyj Class B 6,235 200,625
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.1% Sampo Oyj 36,901 926,980
- -----------------------------------------------------------------------------------------------------------------------------------
Machinery - 0.1% Cargotec Corp. Class B 1,911 66,116
Kone Oyj Class B 12,064 421,708
Metso Oyj 11,056 500,405
Wartsila Oyj 7,230 451,461
-------------
1,439,690
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.0% SanomaWSOY Oyj (Class B) 4,060 89,822
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.1% Outokumpu Oyj 10,968 381,142
Rautaruukki Oyj 7,296 331,193
-------------
712,335
- ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.0% Neste Oil Oyj 11,159 327,069
- ----------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.1% Stora Enso Oyj Class R 49,845 464,390
UPM-Kymmene Oyj 45,154 735,737
-------------
1,200,127
- ----------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.0% Orion Oyj 4,698 93,306
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Finland 16,131,901
- ----------------------------------------------------------------------------------------------------------------------------------
4
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
France - 9.7%
- ----------------------------------------------------------------------------------------------------------------------------------
Aerospace & Defense - 0.1% European Aeronautic Defense and Space Co. 27,823 $ 524,225
Safran SA 13,512 260,610
Thales SA 7,784 442,769
Zodiac SA 3,520 161,036
-------------
1,388,640
- ----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.0% Air France-KLM 11,791 281,249
- ----------------------------------------------------------------------------------------------------------------------------------
Auto Components - 0.1% Compagnie Generale des Etablissements Michelin 12,241 875,307
Valeo SA 6,460 206,770
-------------
1,082,077
- ----------------------------------------------------------------------------------------------------------------------------------
Automobiles - 0.2% Peugeot SA 13,117 708,477
Renault SA 15,630 1,272,075
-------------
1,980,552
- ----------------------------------------------------------------------------------------------------------------------------------
Beverages - 0.1% Pernod-Ricard SA 14,007 1,429,347
- ----------------------------------------------------------------------------------------------------------------------------------
Building Products - 0.1% Cie de Saint-Gobain SA 23,631 1,463,487
- ----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.3% Air Liquide 20,934 2,755,994
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.1% BNP Paribas SA 67,732 6,097,042
Credit Agricole SA 75,125 1,525,072
Natixis 39,544 435,296
Societe Generale SA 38,449 3,333,498
-------------
11,390,908
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 0.0% Bureau Veritas SA 4,034 239,112
Societe BIC SA 1,668 87,079
-------------
326,191
- ----------------------------------------------------------------------------------------------------------------------------------
Communications Equipment - 0.1% Alcatel SA 188,710 1,139,216
- ----------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.4% Bouygues 21,148 1,395,280
Eiffage 3,519 240,332
Vinci SA 34,773 2,123,381
-------------
3,758,993
- ----------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.2% Imerys SA 2,195 158,503
Lafarge SA 12,451 1,898,624
-------------
2,057,127
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.0% Eurazeo 2,508 266,877
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.4% France Telecom SA 151,335 4,438,218
- ----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.2% Electricite de France SA 17,700 1,676,740
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.4% Alstom 9,099 2,086,457
Legrand Promesses 9,435 237,419
Schneider Electric SA 18,556 1,996,226
-------------
4,320,102
- ----------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.1% Compagnie Generale de Geophysique SA (a) 11,135 525,719
Technip SA 8,673 800,341
-------------
1,326,060
- ----------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.3% Carrefour SA 53,842 3,034,962
Casino Guichard Perrachon SA 3,867 436,698
-------------
3,471,660
- ----------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.3% Groupe Danone 35,856 2,508,997
- ----------------------------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% Gaz de France SA 15,449 989,178
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 0.1% Cie Generale d'Optique Essilor International SA 16,807 1,025,217
- ----------------------------------------------------------------------------------------------------------------------------------
5
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 0.2% Accor SA 16,758 $ 1,113,234
Sodexho Alliance SA 8,226 538,143
-------------
1,651,377
- ----------------------------------------------------------------------------------------------------------------------------------
IT Services - 0.1% Atos Origin SA 5,960 328,304
Cap Gemini SA 12,105 709,686
-------------
1,037,990
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.0% Wendel 2,643 267,591
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.4% AXA SA 127,617 3,760,353
CNP Assurances 3,217 362,707
Scor SE 12,592 286,719
-------------
4,409,779
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery - 0.2% Vallourec SA 4,610 1,612,259
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.5% Eutelsat Communications 8,923 247,525
JC Decaux SA 5,607 142,129
Lagardere S.C.A. 10,378 587,070
M6-Metropole Television SA 2,542 54,696
PagesJaunes Groupe SA 10,464 153,050
Publicis Groupe 12,245 395,079
Societe Television Francaise 1 11,261 187,464
Vivendi SA 96,342 3,632,710
-------------
5,399,723
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.0% Eramet 485 479,355
- ----------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.8% Suez SA 86,754 5,880,853
Veolia Environnement SA 32,523 1,815,672
-------------
7,696,525
- ----------------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.1% Pinault-Printemps-Redoute 6,585 726,936
- ----------------------------------------------------------------------------------------------------------------------------------
Office Electronics - 0.0% Neopost SA 2,619 276,121
- ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 1.4% Total SA 179,986 15,320,161
- ----------------------------------------------------------------------------------------------------------------------------------
Personal Products - 0.2% L'Oreal SA 20,048 2,174,536
- ----------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.5% Sanofi-Aventis 85,065 5,652,487
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts (REITs) - 0.2% Gecina SA 839 101,400
ICADE 1,182 137,849
Klepierre 6,044 303,007
Unibail - Rodamco 7,132 1,642,340
-------------
2,184,596
- ----------------------------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor Equipment - 0.1% STMicroelectronics NV 58,516 605,385
- ----------------------------------------------------------------------------------------------------------------------------------
Software - 0.0% Dassault Systemes SA 5,132 311,549
- ----------------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 0.4% Christian Dior SA 5,025 516,182
Hermes International 5,893 925,312
LVMH Moet Hennessy Louis Vuitton SA 20,614 2,150,392
-------------
3,591,886
- ----------------------------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 0.0% Aeroports de Paris 2,398 223,761
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in France 102,698,847
- ----------------------------------------------------------------------------------------------------------------------------------
Germany - 8.7%
- ----------------------------------------------------------------------------------------------------------------------------------
Air Freight & Logistics - 0.2% Deutsche Post AG 73,022 1,906,545
- ----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.0% Deutsche Lufthansa AG 21,078 454,144
- ----------------------------------------------------------------------------------------------------------------------------------
Auto Components - 0.1% Continental AG 13,141 1,352,592
- -----------------------------------------------------------------------------------------------------------------------------------
Automobiles - 1.0% Bayerische Motoren Werke AG 29,270 1,406,328
Bayerische Motoren Werke AG (Preference Shares) 5,309 210,895
6
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
DaimlerChrysler AG 75,625 $ 4,690,714
Porsche Automobil Holding SE (Preference Shares) 7,432 1,144,373
Volkswagen AG 12,193 3,521,939
-------------
10,974,249
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 0.3% Deutsche Bank AG Registered Shares 41,763 3,605,193
- ----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 1.4% BASF SE 80,438 5,543,913
Bayer AG 64,499 5,426,846
K+S AG 3,152 1,814,800
Linde AG 11,564 1,624,288
Wacker Chemie AG 1,462 305,426
-------------
14,715,273
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.2% Commerzbank AG 53,339 1,584,589
Deutsche Postbank AG 7,089 623,223
Hypo Real Estate Holding AG 12,644 355,769
-------------
2,563,581
- ----------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.1% Bilfinger Berger AG 3,103 269,073
Hochtief AG 3,582 363,338
-------------
632,411
- ----------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% HeidelbergCement AG 2,346 340,227
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.2% Deutsche Boerse AG 16,830 1,902,471
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.4% Deutsche Telekom AG 234,290 3,840,074
- ----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 1.0% E.ON AG 53,136 10,709,279
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.1% Q-Cells AG (a) 5,381 545,103
Solarworld AG 7,042 335,112
-------------
880,215
- ----------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.1% Metro AG 9,612 613,196
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 0.1% Fresenius AG 2,764 239,318
Fresenius AG (Preference Shares) 7,120 615,165
-------------
854,483
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Providers & Services - 0.1% Celesio AG 5,644 203,853
Fresenius Medical Care AG 16,184 891,693
-------------
1,095,546
- ----------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 0.0% TUI AG 18,404 426,052
- ----------------------------------------------------------------------------------------------------------------------------------
Household Products - 0.0% Henkel KGaA 11,896 446,067
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.8% Rheinmetall AG 3,381 244,057
Siemens AG 72,270 8,011,879
-------------
8,255,936
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.9% Allianz AG Registered Shares 37,418 6,581,962
Hannover Rueckversicherung AG
Registered Shares 5,981 294,613
Muenchener Rueckversicherungs AG
Registered Shares 17,074 2,994,681
-------------
9,871,256
- ----------------------------------------------------------------------------------------------------------------------------------
Internet Software & Services - 0.0% United Internet AG 12,467 245,622
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery - 0.2% MAN AG 9,016 999,737
MG Technologies AG 13,751 485,511
-------------
1,485,248
- ----------------------------------------------------------------------------------------------------------------------------------
7
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.3% Salzgitter AG 3,503 $ 641,707
ThyssenKrupp AG 30,739 1,928,403
-------------
2,570,110
- ----------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.4% RWE AG 36,869 4,654,941
- ----------------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.0% KarstadtQuelle AG (a) 5,125 59,661
- ----------------------------------------------------------------------------------------------------------------------------------
Personal Products - 0.1% Beiersdorf AG 6,815 500,328
- ----------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.1% Merck KGaA 5,518 784,120
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Management & Development - 0.0% IVG Immobilien AG 8,435 166,141
- ----------------------------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor Equipment - 0.1% Infineon Technologies AG (a) 67,051 581,974
- ----------------------------------------------------------------------------------------------------------------------------------
Software - 0.4% SAP AG 72,131 3,775,158
- ----------------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 0.1% Adidas-Salomon AG 17,332 1,091,447
Puma AG Rudolf Dassler Sport 573 191,892
-------------
1,283,339
- ----------------------------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 0.0% Fraport AG 3,687 249,889
Hamburger Hafen und Logistik AG 2,544 197,603
-------------
447,492
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Germany 91,992,924
- ----------------------------------------------------------------------------------------------------------------------------------
Greece - 0.6%
- ----------------------------------------------------------------------------------------------------------------------------------
Beverages - 0.0% Coca-Cola Hellenic Bottling Co. SA 12,150 330,567
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 0.0% Marfin Investment Group SA 61,994 490,465
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.4% Alpha Bank AE 32,468 982,924
EFG Eurobank Ergasias SA 27,217 648,057
National Bank of Greece SA 43,101 1,939,843
Piraeus Bank SA 27,775 755,935
-------------
4,326,759
- ----------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% Titan Cement Co. SA 3,439 136,568
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.1% Hellenic Telecommunications Organization SA 23,011 579,677
- ----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.0% Public Power Corp. 9,295 322,398
- ----------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 0.1% OPAP SA 19,276 674,447
- ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.0% Hellenic Petroleum SA 6,553 90,061
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Greece 6,950,942
- ----------------------------------------------------------------------------------------------------------------------------------
Hong Kong - 2.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.0% Cathay Pacific Airways Ltd. 121,263 230,965
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.3% BOC Hong Kong Holdings Ltd. 315,900 837,365
Bank of East Asia Ltd. 121,339 659,716
CITIC International Financial Holdings Ltd. 216,000 165,310
Hang Seng Bank Ltd. 65,553 1,384,094
Wing Hang Bank Ltd. 10,500 139,055
Wing Lung Bank 9,000 176,786
-------------
3,362,326
- ----------------------------------------------------------------------------------------------------------------------------------
Distributors - 0.1% Li & Fung Ltd. 191,990 579,322
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.1% Hong Kong Exchanges and Clearing Ltd. 87,348 1,279,536
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.0% PCCW Ltd. 364,195 220,570
- ----------------------------------------------------------------------------------------------------------------------------------
8
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.2% CLP Holdings Ltd. 181,687 $ 1,558,112
Cheung Kong Infrastructure Holdings Ltd. 28,500 120,760
HongKong Electric Holdings Ltd. 119,000 712,057
-------------
2,390,929
- ----------------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Instruments - 0.0% Kingboard Chemical Holdings Ltd. 50,647 233,854
- ----------------------------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% The Hong Kong & China Gas Ltd. 340,290 809,743
- ----------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 0.0% Shangri-La Asia Ltd. 84,990 199,136
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.2% Hutchison Whampoa Ltd. 182,176 1,837,118
NWS Holdings Ltd. 79,000 206,298
-------------
2,043,416
- ----------------------------------------------------------------------------------------------------------------------------------
Marine - 0.0% Orient Overseas International Ltd. 17,057 85,433
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.0% Television Broadcasts Ltd. 12,000 69,313
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts (REITs) - 0.1% The Link REIT 184,414 420,196
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Management & Development - 0.8% Cheung Kong Holdings Ltd. 117,835 1,593,485
Chinese Estates Holdings Limited 96,000 147,903
Hang Lung Group Ltd. 83,000 370,182
Hang Lung Properties Ltd. 177,000 568,235
Henderson Land Development Co., Ltd. 92,491 578,277
Hysan Development Co. Ltd. 56,791 156,279
Kerry Properties Ltd. 55,000 289,250
New World Development Ltd. 206,484 421,761
Shun Tak Holdings Ltd. 60,000 56,241
Sino Land Co. 160,421 319,259
Sun Hung Kai Properties Ltd. 120,324 1,635,693
Swire Pacific Ltd. Class A 70,577 722,415
Wharf Holdings Ltd. 118,870 497,665
Wheelock and Company, Limited 91,000 244,510
-------------
7,601,155
- ----------------------------------------------------------------------------------------------------------------------------------
Road & Rail - 0.0% MTR Corp. 121,500 382,782
- ----------------------------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor Equipment - 0.0% ASM Pacific Technology Ltd. 12,504 94,506
- ----------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.1% Esprit Holdings Ltd. 90,300 940,250
- ----------------------------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 0.0% Hong Kong Aircraft Engineering Company Ltd. 3,200 49,352
Hopewell Holdings Ltd. 56,349 200,305
-------------
249,657
- ----------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 0.0% Hutchison Telecommunications
International Ltd. (a) 158,647 224,655
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Hong Kong 21,417,744
- ----------------------------------------------------------------------------------------------------------------------------------
Ireland - 0.6%
- ----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.0% Ryanair Holdings Plc (a) 35,968 157,805
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.3% Allied Irish Banks Plc 75,387 1,161,785
Anglo Irish Bank Corp. Plc 68,518 649,632
Bank of Ireland 85,948 736,352
-------------
2,547,769
- ----------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.1% CRH Plc 46,326 1,292,115
- ----------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.0% Smurfit Kappa Plc 6,205 51,365
- ----------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.0% Kerry Group Plc 9,542 281,654
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.0% Irish Life & Permanent Plc 23,239 239,131
- ----------------------------------------------------------------------------------------------------------------------------------
9
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.2% Elan Corp. Plc (a) 37,704 $ 1,357,605
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Ireland 5,927,444
- ----------------------------------------------------------------------------------------------------------------------------------
Italy - 3.7%
- ----------------------------------------------------------------------------------------------------------------------------------
Aerospace & Defense - 0.1% Finmeccanica SpA 25,432 664,627
- ----------------------------------------------------------------------------------------------------------------------------------
Auto Components - 0.0% Pirelli & C SpA 266,815 183,055
- ----------------------------------------------------------------------------------------------------------------------------------
Automobiles - 0.1% Fiat SpA 60,439 983,953
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 0.1% Mediobanca SpA 42,973 728,262
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.2% Banca Carige SpA 61,682 216,941
Banca Intesa SpA 635,968 3,615,885
Banca Intesa SpA (RNC) 68,618 353,631
Banca Monte dei Paschi di Siena SpA 169,369 477,395
Banca Popolare di Milano Scrl 36,005 336,054
Banco Popolare SpA 54,473 962,339
Unicredit SpA 959,229 5,835,610
Unione Di Banche Italiane ScpA 51,570 1,204,969
-------------
13,002,824
- ----------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% Italcementi SpA 6,190 102,383
Italcementi SpA (RNC) 10,722 124,401
-------------
226,784
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.0% IFIL-Investments SpA 31,121 201,020
Instituto Finanziario Industriale SpA
(Preference Shares) (a) 2,994 59,340
-------------
260,360
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.2% Telecom Italia SpA 842,694 1,685,472
Telecom Italia SpA (RNC) 515,663 832,475
-------------
2,517,947
- ----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.4% Enel SpA 358,306 3,398,482
Terna SpA 104,203 440,170
-------------
3,838,652
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.0% Prysmian SpA 9,535 240,716
- ----------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.1% Saipem SpA 23,693 1,107,358
- ----------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.0% Parmalat SpA 136,122 354,106
- ----------------------------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.0% Snam Rete Gas SpA 67,784 462,099
- ----------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 0.0% Autogrill SpA 8,807 105,302
Lottomatica SpA 6,535 194,714
-------------
300,016
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.4% Alleanza Assicurazioni SpA 36,649 396,419
Assicurazioni Generali SpA 87,230 3,333,803
Fondiaria-Sai SpA 6,498 214,147
Mediolanum SpA 31,013 128,449
Unipol SpA 71,519 167,922
Unipol SpA (Preference Shares) 53,172 102,168
-------------
4,342,908
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.1% Mediaset SpA 66,086 434,707
- ----------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.1% A2A SpA 117,578 429,387
- ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.8% Eni SpA 216,899 8,057,887
- ----------------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 0.0% Bulgari SpA 12,838 129,057
Luxottica Group SpA 12,147 283,466
-------------
412,523
- ----------------------------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 0.1% Autostrade SpA 19,679 594,361
- ----------------------------------------------------------------------------------------------------------------------------------
10
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Italy $ 39,142,532
- ----------------------------------------------------------------------------------------------------------------------------------
Japan - 20.8%
- ----------------------------------------------------------------------------------------------------------------------------------
Air Freight & Logistics - 0.1% Yamato Transport Co., Ltd. 33,000 460,645
- ----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.0% All Nippon Airways Co., Ltd. 32,000 119,680
Japan Airlines Corp. (a) 91,000 191,133
-------------
310,813
- ----------------------------------------------------------------------------------------------------------------------------------
Auto Components - 0.4% Aisin Seiki Co., Ltd. 16,500 542,003
Bridgestone Corp. 51,800 794,662
Denso Corp. 41,100 1,415,541
NGK Spark Plug Co., Ltd. 15,000 172,656
NHK Spring Co., Ltd. 9,000 71,827
NOK Corp. 10,600 168,692
Stanley Electric Co., Ltd. 11,100 269,106
Sumitomo Rubber Industries, Ltd. 20,200 151,094
Tokai Rika Co. Ltd. 2,000 41,412
Toyoda Gosei Co., Ltd. 5,300 155,102
Toyota Boshoku Corp. 3,800 101,897
Toyota Industries Corp. 15,400 494,447
-------------
4,378,439
- ----------------------------------------------------------------------------------------------------------------------------------
Automobiles - 1.9% Daihatsu Motor Co., Ltd. 20,000 229,330
Fuji Heavy Industries Ltd. 59,000 289,446
Honda Motor Co., Ltd. 139,800 4,770,908
Isuzu Motors Ltd. 115,000 553,783
Mazda Motor Corp. 87,000 452,899
Mitsubishi Motors Corp. (a) 324,000 589,773
Nissan Motor Co., Ltd. 190,800 1,584,685
Suzuki Motor Corp. 31,800 753,169
Toyota Motor Corp. 225,800 10,658,665
Yamaha Motor Co., Ltd. 17,500 327,740
-------------
20,210,398
- ----------------------------------------------------------------------------------------------------------------------------------
Beverages - 0.2% Asahi Breweries Ltd. 34,500 644,927
Coca-Cola West Holdings Co., Ltd. 3,300 77,014
Ito En, Ltd. 5,800 91,364
Kirin Holdings Co., Ltd. 67,000 1,047,699
Sapporo Holdings Ltd. 23,000 161,029
-------------
2,022,033
- ----------------------------------------------------------------------------------------------------------------------------------
Building Products - 0.3% Asahi Glass Co., Ltd. 86,100 1,042,408
Daikin Industries Ltd. 22,500 1,137,664
JS Group Corp. 19,300 307,291
Nippon Sheet Glass Co., Ltd. 52,000 257,726
Toto Ltd. 22,000 155,007
-------------
2,900,096
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 0.4% Daiwa Securities Group, Inc. 113,000 1,039,125
Jafco Co., Ltd. 1,400 47,933
Nomura Holdings, Inc. 148,500 2,199,043
SBI Holdings, Inc. 890 194,789
SBI Securities Co. Ltd. 168 129,318
Shinko Securities Co., Ltd. 40,300 118,821
-------------
3,729,029
- ----------------------------------------------------------------------------------------------------------------------------------
11
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.8% Asahi Kasei Corp. 102,000 $ 534,776
DIC Corp. 30,000 87,059
Daicel Chemical Industries Ltd. 11,000 61,963
Denki Kagaku Kogyo Kabushiki Kaisha 25,000 92,711
Hitachi Chemical Co., Ltd. 8,700 179,549
JSR Corp. 15,900 315,985
Kaneka Corp. 15,000 102,179
Kansai Paint Co., Ltd. 14,000 96,943
Kuraray Co., Ltd. 32,500 387,783
Mitsubishi Chemical Holdings Corp. 113,500 660,911
Mitsubishi Gas Chemical Co., Inc. 31,000 223,325
Mitsubishi Rayon Co., Ltd. 47,000 148,249
Mitsui Chemicals, Inc. 55,000 271,601
Nippon Sanso Corp. 14,000 116,812
Nissan Chemical Industries Ltd. 16,000 196,891
Nitto Denko Corp. 14,110 542,394
Shin-Etsu Chemical Co., Ltd. 34,700 2,153,311
Showa Denko KK 104,000 276,108
Sumitomo Chemical Co., Ltd. 134,000 844,211
Teijin Ltd. 85,000 291,654
Tokuyama Corp. 20,000 149,037
Toray Industries, Inc. 111,700 599,491
Tosoh Corp. 49,000 200,623
Ube Industries Ltd. 89,000 315,245
-------------
8,848,811
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 2.2% The 77 Bank Ltd. 17,000 106,899
Aozora Bank Ltd. 70,000 160,124
The Bank of Kyoto Ltd. 23,000 240,409
The Bank of Yokohama Ltd. 107,000 739,935
The Chiba Bank Ltd. 64,000 449,392
The Chugoku Bank Ltd. 17,000 246,990
Chuo Mitsui Trust Holdings, Inc. 66,000 393,109
Fukuoka Financial Group, Inc. 67,000 302,876
The Gunma Bank Ltd. 22,000 146,665
The Hachijuni Bank Ltd. 25,000 162,204
The Hiroshima Bank Ltd. 26,000 115,928
Hokuhoku Financial Group, Inc. 80,100 232,348
The Iyo Bank Ltd. 25,000 292,716
The Joyo Bank Ltd. 46,000 224,020
Mitsubishi UFJ Financial Group, Inc. 874,618 7,729,388
Mizuho Financial Group, Inc. 816 3,796,713
The Nishi-Nippon City Bank Ltd. 45,000 134,206
Resona Holdings, Inc. 432 663,522
Sapporo Hokuyo Holdings, Inc. 15 101,499
Shinsei Bank Ltd. 87,000 298,248
The Shizuoka Bank Ltd. 52,000 531,421
Sumitomo Mitsui Financial Group, Inc. 543 4,083,473
The Sumitomo Trust & Banking Co., Ltd. 124,000 866,279
Suruga Bank Ltd. 15,000 195,297
12
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
The Yasuda Trust & Banking Co., Ltd. 145,000 $ 249,940
Yamaguchi Financial Group, Inc. 21,000 290,661
-------------
22,754,262
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 0.2% Dai Nippon Printing Co., Ltd. 51,000 750,830
Secom Co., Ltd. 17,900 871,877
Toppan Printing Co., Ltd. 47,000 517,730
-------------
2,140,437
- ----------------------------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 0.4% Fujitsu Ltd. 157,000 1,165,854
Mitsumi Electric Co., Ltd. 8,400 187,278
NEC Corp. 162,000 850,574
Seiko Epson Corp. 10,300 283,083
Toshiba Corp. 259,000 1,910,783
-------------
4,397,572
- ----------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.1% JGC Corp. 17,000 334,758
Kajima Corp. 76,800 268,686
Kinden Corp. 7,000 70,666
Obayashi Corp. 54,000 244,743
Shimizu Corp. 48,000 227,448
Taisei Corp. 93,000 221,836
-------------
1,368,137
- ----------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% Taiheiyo Cement Corp. 73,000 146,671
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.2% Acom Co., Ltd. 5,260 162,811
Aeon Credit Service Co., Ltd. 9,400 117,794
Aiful Corp. 6,550 75,772
Credit Saison Co., Ltd. 14,600 306,259
Nippon Shinpan Co., Ltd. 38,000 125,714
ORIX Corp. 7,780 1,114,306
Promise Co., Ltd. 5,900 164,957
Takefuji Corp. 8,870 123,517
-------------
2,191,130
- ----------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.0% Toyo Seikan Kaisha Ltd. 9,900 174,771
- ----------------------------------------------------------------------------------------------------------------------------------
Distributors - 0.0% Canon Marketing Japan Inc. 4,700 82,674
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Consumer Services - 0.0% Benesse Corp. 4,600 186,305
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.0% Diamond Lease Co., Ltd. 3,720 161,638
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.2% Nippon Telegraph & Telephone Corp. 434 2,141,476
- ----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.8% Chubu Electric Power Co., Inc. 56,100 1,370,296
Chugoku Electric Power Co. 25,700 548,398
Hokkaido Electric Power Co., Inc. 12,600 256,605
Hokuriku Electric Power 16,800 399,531
The Kansai Electric Power Co., Inc. 65,000 1,522,778
Kyushu Electric Power Co., Inc. 32,300 675,870
Shikoku Electric Power Co., Inc. 17,300 475,686
Tohoku Electric Power Co., Inc. 36,400 792,847
The Tokyo Electric Power Co., Inc. 102,500 2,639,212
-------------
8,681,223
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.3% Fuji Electric Holdings Co., Ltd. 31,800 112,436
Furukawa Electric Co., Ltd. 38,000 165,403
Matsushita Electric Works Ltd. 32,873 335,451
Mitsubishi Electric Corp. 163,000 1,762,987
13
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Sumitomo Electric Industries Ltd. 63,900 $ 811,501
Ushio, Inc. 5,800 94,978
-------------
3,282,756
- ----------------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Instruments - 1.1% Alps Electric Co., Ltd. 17,700 183,074
Citizens Holding Co. Ltd. 32,400 247,176
Fuji Photo Film Co., Ltd. 41,300 1,422,600
Hirose Electric Co., Ltd. 2,000 200,957
Hitachi High-Technologies Corp. 4,300 99,777
Hitachi Ltd. 284,000 2,045,219
Hoya Corp. 35,100 812,993
Ibiden Co., Ltd. 11,600 422,426
Keyence Corp. 3,200 762,794
Kyocera Corp. 13,800 1,301,801
Mabuchi Motor Co., Ltd. 1,000 54,309
Murata Manufacturing Co., Ltd. 18,200 858,650
Nidec Corp. 9,300 619,467
Nippon Electric Glass Co. 29,500 512,769
Omron Corp. 14,500 312,952
Shimadzu Corp. 26,000 259,252
TDK Corp. 10,500 628,301
Yaskawa Electric Corp. 16,000 157,013
Yokogawa Electric Corp. 11,300 103,527
-------------
11,005,057
- ----------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.3% Aeon Co., Ltd. 54,400 673,398
FamilyMart Co., Ltd. 3,400 139,170
Lawson, Inc. 6,500 316,681
Seven & I Holdings Co. Ltd. 67,900 1,944,188
UNY Co., Ltd. 16,000 157,726
-------------
3,231,163
- ----------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.2% Ajinomoto Co., Inc. 56,000 530,541
Kikkoman Corp. 17,000 207,669
Meiji Dairies Corp. 31,000 159,065
Nippon Meat Packers, Inc. 16,000 216,806
Nisshin Seifun Group, Inc. 10,500 131,975
Nissin Food Products Co., Ltd. 7,500 251,463
Toyo Suisan Kaisha, Ltd. 9,000 203,693
Yakult Honsha Co., Ltd. 6,200 174,656
Yamazaki Baking Co., Ltd. 6,000 66,031
-------------
1,941,899
- ----------------------------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.2% Osaka Gas Co., Ltd. 169,000 619,941
Toho Gas Co., Ltd. 50,000 274,181
Tokyo Gas Co., Ltd. 199,000 804,056
-------------
1,698,178
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 0.1% Olympus Corp. 21,000 711,926
Terumo Corp. 14,200 726,570
-------------
1,438,496
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Providers & Services - 0.0% Alfresa Holdings Corp. 1,700 121,671
Mediceo Paltac Holdings Co. Ltd. 8,500 156,530
Suzuken Co., Ltd. 4,200 155,144
-------------
433,345
- ----------------------------------------------------------------------------------------------------------------------------------
14
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 0.0% Oriental Land Co., Ltd. 3,200 $ 191,183
- ----------------------------------------------------------------------------------------------------------------------------------
Household Durables - 1.0% Casio Computer Co., Ltd. 19,000 216,191
HASEKO Corp. 72,000 96,341
Makita Corp. 10,600 433,803
Matsushita Electric Industrial Co., Ltd. 153,000 3,273,248
Pioneer Corp. 14,100 113,430
Sanyo Electric Co., Ltd. (a) 144,000 334,792
Sekisui Chemical Co., Ltd. 26,000 177,318
Sekisui House Ltd. 42,000 392,670
Sharp Corp. 85,000 1,385,608
Sony Corp. 82,900 3,633,812
-------------
10,057,213
- ----------------------------------------------------------------------------------------------------------------------------------
Household Products - 0.1% Kao Corp. 44,000 1,155,107
Uni-Charm Corp. 3,600 256,081
-------------
1,411,188
- ----------------------------------------------------------------------------------------------------------------------------------
IT Services - 0.1% CSK Holdings Corp. 6,200 122,153
Itochu Techno-Science Corp. 700 22,747
NTT Data Corp. 109 426,730
Nomura Research Institute Ltd. 10,600 248,532
Obic Co., Ltd. 430 72,309
Otsuka Shokai Co., Ltd. 600 41,437
-------------
933,908
- ----------------------------------------------------------------------------------------------------------------------------------
Independent Power Producers & Energy Electric Power Development Co. 10,600 393,538
Traders - 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.0% Hankyu Hanshin Holdings, Inc. 84,000 352,971
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.6% Aioi Insurance Co., Ltd. 45,000 240,241
Mitsui Sumitomo Insurance Group Holdings, Inc. 30,696 1,060,904
Nipponkoa Insurance Co., Ltd. 61,000 529,778
Sompo Japan Insurance, Inc. 71,800 675,101
Sony Financial Holdings, Inc. 70 281,814
T&D Holdings, Inc. 16,650 1,026,981
Tokio Marine Holdings, Inc. 58,500 2,280,044
-------------
6,094,863
- ----------------------------------------------------------------------------------------------------------------------------------
Internet & Catalog Retail - 0.0% Dena Co. Ltd. 30 176,708
Rakuten, Inc. 567 285,703
-------------
462,411
- ----------------------------------------------------------------------------------------------------------------------------------
Internet Software & Services - 0.1% Yahoo! Japan Corp. 1,284 494,538
- ----------------------------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products - 0.2% Namco Bandai Holdings, Inc. 16,700 189,363
Nikon Corp. 29,000 848,924
Sankyo Co., Ltd. (Gunma) 5,200 338,817
Sega Sammy Holdings, Inc. 19,432 170,104
Shimano, Inc. 5,600 281,503
Yamaha Corp. 12,000 232,048
-------------
2,060,759
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery - 1.0% Amada Co., Ltd. 28,000 221,507
Fanuc Ltd. 16,200 1,584,316
Hino Motors Ltd. 22,000 136,640
Hitachi Construction Machinery Co., Ltd. 9,300 260,734
IHI Corp. 98,000 198,509
JTEKT Corp. 17,000 270,074
15
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
The Japan Steel Works, Ltd. 29,000 $ 564,044
Kawasaki Heavy Industries Ltd. 131,000 349,903
Komatsu Ltd. 75,600 2,111,216
Kubota Corp. 94,000 675,568
Kurita Water Industries Ltd. 10,800 400,719
Minebea Co., Ltd. 29,000 165,846
Mitsubishi Heavy Industries Ltd. 271,200 1,295,326
Mitsui Engineering & Shipbuilding Co., Ltd. 61,000 193,460
NGK Insulators Ltd. 23,000 448,400
NSK Ltd. 38,000 332,957
NTN Corp. 26,000 173,369
OKUMA Corp. 16,000 159,287
SMC Corp. 4,900 537,805
Sumitomo Heavy Industries Ltd. 48,000 325,556
THK Co., Ltd. 10,300 200,423
-------------
10,605,659
- ----------------------------------------------------------------------------------------------------------------------------------
Marine - 0.3% Kawasaki Kisen Kaisha Ltd. 52,000 488,678
Mitsui OSK Lines Ltd. 98,000 1,397,673
Nippon Yusen Kabushiki Kaisha 94,000 905,390
-------------
2,791,741
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.1% Dentsu, Inc. 170 360,752
Fuji Television Network, Inc. 54 81,508
Hakuhodo DY Holdings, Inc. 800 42,702
Jupiter Telecommunications Co., Ltd. 133 103,173
Toho Co., Ltd. 6,000 122,629
Tokyo Broadcasting System, Inc. 3,500 66,482
-------------
777,246
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.9% Daido Steel Co., Ltd. 24,000 134,291
Dowa Mining Co., Ltd. 16,000 116,881
Hitachi Metals Ltd. 17,000 279,117
JFE Holdings, Inc. 43,600 2,198,234
Kobe Steel Ltd. 226,000 647,180
Maruichi Steel Tube Ltd. 4,400 137,689
Mitsubishi Materials Corp. 99,000 423,361
Mitsui Mining & Smelting Co., Ltd. 63,000 186,029
Nippon Steel Corp. 425,000 2,303,344
Nisshin Steel Co., Ltd. 49,000 166,796
Osaka Titanium Technologies Co. 1,500 78,783
Sumitomo Metal Industries Ltd. 322,000 1,417,705
Sumitomo Metal Mining Co., Ltd. 47,000 718,927
Toho Titanium Co. Ltd. 700 13,727
Tokyo Steel Manufacturing Co., Ltd. 9,700 112,347
Yamato Kogyo Co. Ltd. 3,500 167,139
-------------
9,101,550
- ----------------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.1% Isetan Mitsukoshi Holdings Ltd. 32,505 348,055
J Front Retailing Co. Ltd. 24,600 130,240
Marui Group Co. Ltd. 28,500 221,883
Takashimaya Co., Ltd. 24,000 218,053
-------------
918,231
- ----------------------------------------------------------------------------------------------------------------------------------
16
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Office Electronics - 0.6% Brother Industries Ltd. 23,000 $ 317,121
Canon, Inc. 88,200 4,540,176
Konica Minolta Holdings, Inc. 41,000 694,479
Ricoh Co., Ltd. 57,000 1,031,662
-------------
6,583,438
- ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.3% Cosmo Oil Co., Ltd. 30,000 108,694
Idemitsu Kosan Co. Ltd. 2,000 177,867
Inpex Holdings, Inc. 70 883,983
Japan Petrolleum Explora 3,000 214,181
Nippon Mining Holdings, Inc. 75,500 474,034
Nippon Oil Corp. 113,000 761,318
Showa Shell Sekiyu KK 21,300 233,844
TonenGeneral Sekiyu KK 25,000 227,105
-------------
3,081,026
- ----------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.1% Nippon Paper Group, Inc. 90 246,219
OJI Paper Co., Ltd. 69,000 324,493
-------------
570,712
- ----------------------------------------------------------------------------------------------------------------------------------
Personal Products - 0.1% Shiseido Co., Ltd. 28,000 641,676
- ----------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 1.0% Astellas Pharma, Inc. 41,700 1,773,300
Chugai Pharmaceutical Co., Ltd. 24,000 383,754
Daiichi Sankyo Co., Ltd. 59,000 1,625,356
Dainippon Pharma Co., Ltd. 18,000 145,598
Eisai Co., Ltd. 21,500 759,465
Hisamitsu Pharmaceutical Co., Ltd. 6,800 296,106
Kyowa Hakko Kogyo Co., Ltd. 25,000 256,319
Mitsubishi Tanabe Pharma Corp. 20,000 261,431
Ono Pharmacecutical Co. Ltd. 9,000 494,668
Santen Pharmaceutical Co., Ltd. 4,700 117,514
Shionogi & Co., Ltd. 25,000 494,996
Taisho Pharmaceutical Co., Ltd. 11,000 204,637
Takeda Pharmaceutical Co., Ltd. 69,900 3,555,078
-------------
10,368,222
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts (REITs) - 0.1% Japan Prime Realty Investment Corp. 62 183,438
Japan Real Estate Investment Corp. 36 380,231
Japan Retail Fund Investment Corp. 37 213,336
Nippon Building Fund, Inc. 44 518,876
Nomura Real Estate Office Fund, Inc. 20 150,626
-------------
1,446,507
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Management & Development - 0.6% Aeon Mall Co. Ltd. 3,600 106,493
Daito Trust Construction Co., Ltd. 6,900 334,658
Daiwa House Industry Co., Ltd. 44,000 414,204
Leopalace21 Corp. 11,400 163,536
Mitsubishi Estate Co., Ltd. 99,000 2,266,568
Mitsui Fudosan Co., Ltd. 71,000 1,519,612
NTT Urban Development Co. 63 82,592
Nomura Real Estate Holdings, Inc. 2,000 42,259
Sumitomo Realty & Development Co., Ltd. 33,000 656,472
Tokyo Tatemono Co., Ltd. 27,000 174,869
Tokyu Land Corp. 35,000 199,298
-------------
5,960,561
- ----------------------------------------------------------------------------------------------------------------------------------
17
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Road & Rail - 0.6% Central Japan Railway Co. 132 $ 1,454,965
East Japan Railway Co. 286 2,329,559
Keihin Electric Express Railway Co., Ltd. 24,000 148,759
Keio Electric Railway Co., Ltd. 34,000 172,065
Keisei Electric Railway Co., Ltd. 31,000 158,685
Kintetsu Corp. 111,000 348,195
Nippon Express Co., Ltd. 70,000 336,183
Odakyu Electric Railway Co., Ltd. 53,000 344,483
Tobu Railway Co., Ltd. 52,000 246,505
Tokyu Corp. 93,000 482,561
West Japan Railway Co. 145 711,699
-------------
6,733,659
- ----------------------------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor Equipment - 0.2% Advantest Corp. 15,000 316,171
Elpida Memory, Inc. (a) 8,200 262,982
NEC Electronics Corp. (a) 1,200 29,987
Rohm Co., Ltd. 8,700 502,332
Shinko Electric Industries 2,100 25,987
Sumco Corp. 11,300 250,362
Tokyo Electron Ltd. 14,600 841,953
-------------
2,229,774
- ----------------------------------------------------------------------------------------------------------------------------------
Software - 0.5% Konami Corp. 7,900 276,312
Nintendo Co., Ltd. 8,200 4,650,002
Oracle Corp. Japan 1,600 65,229
Square Enix Co. Ltd. 3,300 97,657
Trend Micro, Inc. 9,000 296,794
-------------
5,385,994
- ----------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.1% Fast Retailing Co., Ltd. 4,500 426,929
Hikari Tsushin, Inc. 800 26,391
Nitori Co., Ltd. 2,100 107,878
Shimamura Co., Ltd. 1,100 67,826
USS Co., Ltd. 900 59,466
Yamada Denki Co., Ltd. 7,410 527,950
-------------
1,216,440
- ----------------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 0.0% Asics Corp. 12,000 131,156
Nisshinbo Industries, Inc. 13,000 154,710
Onward Holdings Co. Ltd. 7,000 73,602
-------------
359,468
- ----------------------------------------------------------------------------------------------------------------------------------
Tobacco - 0.2% Japan Tobacco, Inc. 379 1,616,381
- ----------------------------------------------------------------------------------------------------------------------------------
Trading Companies & Distributors - 1.1% Itochu Corp. 127,000 1,354,045
Marubeni Corp. 139,000 1,159,398
Mitsubishi Corp. 111,900 3,687,186
Mitsui & Co., Ltd. 143,000 3,156,166
Sojitz Corp. 106,500 355,269
Sumitomo Corp. 96,900 1,273,098
Toyota Tsusho Corp. 18,300 429,526
-------------
11,414,688
- ----------------------------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 0.0% Kamigumi Co., Ltd. 12,000 90,980
Mitsubishi Logistics Corp. 7,000 76,671
-------------
167,651
- ----------------------------------------------------------------------------------------------------------------------------------
18
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 0.4% KDDI Corp. 251 $ 1,553,043
NTT DoCoMo, Inc. 1,348 1,977,165
Softbank Corp. 63,700 1,074,169
-------------
4,604,377
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Japan 219,345,027
- ----------------------------------------------------------------------------------------------------------------------------------
Kazakhstan - 0.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.1% Eurasian Natural Resources Corp. (a) 27,283 718,843
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Kazakhstan 718,843
- ----------------------------------------------------------------------------------------------------------------------------------
Luxembourg - 0.8%
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.1% SES Global 27,500 694,679
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.7% ArcelorMittal 72,665 7,141,154
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Luxembourg 7,835,833
- ----------------------------------------------------------------------------------------------------------------------------------
Netherlands - 2.5%
- ----------------------------------------------------------------------------------------------------------------------------------
Air Freight & Logistics - 0.1% TNT NV 32,404 1,102,843
- ----------------------------------------------------------------------------------------------------------------------------------
Beverages - 0.2% Heineken Holding NV 10,233 468,368
Heineken NV 21,017 1,070,265
-------------
1,538,633
- ----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.2% Akzo Nobel NV 23,219 1,588,966
Koninklijke DSM NV 11,763 689,452
-------------
2,278,418
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 0.0% Randstad Holdings NV 7,204 250,713
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.5% ING Groep NV CVA 158,275 5,004,296
SNS Reaal 12,764 246,618
-------------
5,250,914
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.3% Koninklijke KPN NV 155,421 2,657,210
- ----------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.1% Fugro NV 4,637 394,849
SBM Offshore NV 11,316 416,381
-------------
811,230
- ----------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.1% Koninklijke Ahold NV 101,602 1,362,038
- ----------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.4% Unilever NV 136,647 3,864,194
- ----------------------------------------------------------------------------------------------------------------------------------
Household Durables - 0.0% TomTom NV (a) 5,394 154,097
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.3% Koninklijke Philips Electronics NV 90,991 3,081,452
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.1% Aegon NV 116,938 1,537,354
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.1% Reed Elsevier NV 53,247 891,134
Wolters Kluwer NV 23,939 557,202
-------------
1,448,336
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts (REITs) - 0.0% Corio NV 2,933 228,450
- ----------------------------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor Equipment - 0.1% ASML Holding NV 35,348 865,192
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in the Netherlands 26,431,074
- ----------------------------------------------------------------------------------------------------------------------------------
New Zealand - 0.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% Fletcher Building Ltd. 44,823 216,805
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.1% Telecom Corp. of New Zealand Ltd. 162,744 442,238
- ----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.0% Contact Energy Ltd. 18,866 114,820
- ----------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 0.0% Sky City Ltd. 27,722 64,649
- ----------------------------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 0.0% Auckland International Airport Ltd. 55,023 81,806
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in New Zealand 920,318
- ----------------------------------------------------------------------------------------------------------------------------------
19
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Norway - 1.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.1% Yara International ASA 16,300 $ 1,439,545
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.1% DnB NOR ASA 63,199 802,889
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.1% Telenor ASA 49,695 932,882
Telenor ASA (b) 7,399 417,491
-------------
1,350,373
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.0% Renewable Energy Corp. ASA (a) 12,876 332,438
- ----------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.1% Acergy SA 15,590 347,379
Aker Solutions ASA 14,369 338,579
Petroleum Geo-Services ASA (a) 13,650 334,268
-------------
1,020,226
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.1% Orkla ASA 71,270 913,216
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.0% Storebrand ASA 32,887 243,521
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.1% Norsk Hydro ASA 61,718 899,936
- ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.4% Statoilhydro ASA 108,294 4,040,423
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Norway 11,042,567
- ----------------------------------------------------------------------------------------------------------------------------------
Portugal - 0.3%
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.1% Banco BPI SA 26,361 108,764
Banco Comercial Portugues SA Registered Shares 202,251 436,232
Banco Espirito Santo SA Registered Shares 19,851 308,766
-------------
853,762
- ----------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% Cimpor Cimentos de Portugal SA 26,806 179,747
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.1% Portugal Telecom SGPS SA Registered Shares 57,427 649,530
- ----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.1% Energias de Portugal SA 157,249 817,682
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.0% Sonae SGPS SA 29,281 35,078
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.0% Zon Multimedia Servicos de Telecomunicacoes
e Multimedia SGPS SA
15,808 131,117
- ----------------------------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 0.0% Brisa-Auto Estradas de Portugal SA Private Shares 20,401 235,037
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Portugal 2,901,953
- ----------------------------------------------------------------------------------------------------------------------------------
Singapore - 1.2%
- ----------------------------------------------------------------------------------------------------------------------------------
Aerospace & Defense - 0.0% Singapore Technologies Engineering Ltd. 114,213 231,218
- ----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.1% Singapore Airlines Ltd. 47,009 508,790
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.4% DBS Group Holdings Ltd. 97,605 1,357,975
Oversea-Chinese Banking Corp. 212,914 1,282,436
United Overseas Bank Ltd. 103,572 1,421,866
-------------
4,062,277
- ----------------------------------------------------------------------------------------------------------------------------------
Distributors - 0.0% Jardine Cycle & Carriage Ltd. 7,529 94,360
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.0% Singapore Exchange Ltd. 75,000 382,590
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.2% Singapore Telecommunications Ltd. 680,132 1,813,052
- ----------------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Venture Corp. Ltd. 10,000 72,360
Instruments - 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.0% Olam International Ltd. 115,900 206,742
- ----------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.1% Golden Agri-Resources Ltd. 486,000 320,808
Wilmar International Ltd. 78,900 293,179
-------------
613,987
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Providers & Services - 0.0% Parkway Holdings Ltd. 109,706 187,183
- ----------------------------------------------------------------------------------------------------------------------------------
20
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 0.0% Genting International Plc (a) 149,388 $ 63,761
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.2% Fraser and Neave Ltd. 68,096 227,183
Keppel Corp. Ltd. 112,616 923,729
SembCorp Industries Ltd. 81,590 250,459
-------------
1,401,371
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery - 0.1% Cosco Corp. (Singapore) Ltd. 75,002 176,985
SembCorp Marine Ltd. 87,197 259,923
-------------
436,908
- ----------------------------------------------------------------------------------------------------------------------------------
Marine - 0.0% Neptune Orient Lines Ltd. 44,200 105,128
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.0% Singapore Press Holdings Ltd. 130,316 407,460
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts (REITs) - 0.0% Ascendas Real Estate Investment Trust 117,152 189,946
Capita Commercial Trust 38,000 53,434
CapitaMall Trust 76,000 167,628
-------------
411,008
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Management & Development - 0.1% CapitaLand Ltd. 149,833 629,611
City Developments Ltd. 46,535 372,486
Keppel Land Ltd. 39,182 143,108
UOL Group Ltd. 20,457 51,049
Yanlord Land Group Ltd. 8,000 10,933
-------------
1,207,187
- ----------------------------------------------------------------------------------------------------------------------------------
Road & Rail - 0.0% ComfortDelgro Corp. Ltd. 106,816 118,082
- ----------------------------------------------------------------------------------------------------------------------------------
Trading Companies & Distributors - 0.0% Noble Group Ltd. 105,720 185,042
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Singapore 12,508,506
- ----------------------------------------------------------------------------------------------------------------------------------
Spain - 4.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.0% Iberia Lineas Aereas de Espana 40,744 97,004
- ----------------------------------------------------------------------------------------------------------------------------------
Biotechnology - 0.0% Grifols SA 11,995 382,044
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 1.6% Banco Bilbao Vizcaya Argentaria SA 297,839 5,674,971
Banco de Sabadell SA 82,738 697,396
Banco Popular Espanol SA 67,496 930,133
Banco Santander SA 521,062 9,506,325
Bankinter SA 25,077 284,423
-------------
17,093,248
- ----------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.2% ACS Actividades de Construccion y Servicios, SA 16,589 830,097
Acciona SA 2,451 579,388
Fomento de Construcciones y Contratas SA 4,036 238,783
Grupo Ferrovial SA 5,895 363,169
Sacyr Vallehermoso SA 5,917 180,631
-------------
2,192,068
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.1% Criteria Caixacorp SA 76,967 459,276
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.9% Telefonica SA 357,958 9,472,939
- ----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.5% Iberdrola SA 288,776 3,847,604
Red Electrica de Espana 9,318 604,859
Union Fenosa SA 10,924 634,820
-------------
5,087,283
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.1% Gamesa Corp. Tecnologica SA 14,600 714,770
- ----------------------------------------------------------------------------------------------------------------------------------
21
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% Enagas 15,448 $ 436,067
Gas Natural SDG SA 9,650 560,388
-------------
996,455
- ----------------------------------------------------------------------------------------------------------------------------------
IT Services - 0.0% Indra Sistemas SA 11,124 288,394
- ----------------------------------------------------------------------------------------------------------------------------------
Independent Power Producers & Iberdrola Renovables (a) 66,924 515,596
Energy Traders - 0.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.0% Corp. Mapfre SA 64,801 309,336
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery - 0.0% Zardoya Otis SA 8,218 170,037
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.0% Gestevision Telecinco SA 10,684 136,054
Promotora de Informaciones SA 4,647 49,538
-------------
185,592
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.0% Acerinox SA 13,595 311,939
- ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.2% Repsol YPF SA 61,310 2,406,079
- ----------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.1% Inditex SA 18,581 851,770
- ----------------------------------------------------------------------------------------------------------------------------------
Transportation Infrastructure - 0.1% Abertis Infraestructuras SA 20,326 480,887
Cintra Concesiones de Infraestructuras de Transporte SA 20,706 231,011
-------------
711,898
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Spain 42,245,728
- ----------------------------------------------------------------------------------------------------------------------------------
Sweden - 2.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Building Products - 0.0% Assa Abloy AB Series B 26,377 379,514
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.4% Nordea Bank AB 170,351 2,334,237
Skandinaviska Enskilda Banken AB Class A 39,253 724,181
Svenska Handelsbanken Class A 38,912 921,841
Swedbank AB-A Shares 32,500 624,456
-------------
4,604,715
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 0.0% Securitas AB 23,048 266,602
- ----------------------------------------------------------------------------------------------------------------------------------
Communications Equipment - 0.2% Telefonaktiebolaget LM Ericsson 244,889 2,546,473
- ----------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.1% Skanska AB Class B 31,605 450,761
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.1% Investor AB 40,800 856,572
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.2% Tele2 AB 27,266 530,232
TeliaSonera AB 186,701 1,380,279
-------------
1,910,511
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 0.0% Getinge AB Class B 12,727 310,298
- ----------------------------------------------------------------------------------------------------------------------------------
Household Durables - 0.0% Electrolux AB 21,644 275,025
Husqvarna AB 19,458 169,252
-------------
444,277
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery - 0.5% Alfa Laval AB 31,868 492,342
Atlas Copco AB A Shares 56,777 830,384
Atlas Copco AB B Shares 33,679 445,403
SKB AB 35,213 548,800
Sandvik AB 86,550 1,175,913
Scania AB 30,821 419,634
Volvo AB B Shares 91,479 1,113,945
-------------
5,026,421
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.0% Modern Times Group AB 3,610 211,324
- ----------------------------------------------------------------------------------------------------------------------------------
22
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.1% Boliden AB 24,234 $ 195,668
SSAB Svenskt Stal AB Series A 15,102 484,341
SSAB Svenskt Stal AB Series B 6,267 177,095
-------------
857,104
- ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.0% Lundin Petroleum AB (a) 15,302 225,172
- ----------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.1% Holmen AB Class B 2,345 68,560
Svenska Cellulosa AB 47,900 673,986
-------------
742,546
- ----------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.2% Hennes & Mauritz AB B Shares 43,380 2,340,364
- ----------------------------------------------------------------------------------------------------------------------------------
Tobacco - 0.1% Swedish Match AB 22,550 459,561
- ----------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 0.1% Millicom International Cellular SA (b) 6,405 659,362
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Sweden 22,291,577
- ----------------------------------------------------------------------------------------------------------------------------------
Switzerland - 7.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Biotechnology - 0.1% Actelion Ltd. (a) 8,371 446,539
- ----------------------------------------------------------------------------------------------------------------------------------
Building Products - 0.1% Geberit AG 3,420 502,121
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 1.0% Credit Suisse Group AG 88,099 4,010,002
EFG International AG 2,886 78,542
Julius Baer Holding AG Class B 19,020 1,275,538
UBS AG (a) 247,404 5,155,464
-------------
10,519,546
- ----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.3% Givaudan SA 579 516,127
Syngenta AG 8,870 2,873,638
-------------
3,389,765
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 0.1% Adecco SA Registered Shares 10,606 524,276
SGS SA 387 551,881
-------------
1,076,157
- ----------------------------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 0.0% Logitech International SA (a) 14,816 396,092
- ----------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.1% Holcim Ltd. 18,039 1,458,128
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.0% Pargesa Holding SA 2,669 295,921
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.1% Swisscom AG 1,946 648,142
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.5% ABB Ltd. 184,739 5,229,195
- ----------------------------------------------------------------------------------------------------------------------------------
Food Products - 1.4% Lindt & Spruengli AG 46 126,765
Nestle SA Registered Shares 332,370 14,978,145
-------------
15,104,910
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 0.2% Nobel Biocare Holding AG 10,423 338,895
Sonova Holding AG 3,914 323,022
Straumann Holding AG Registered Shares 806 192,673
Synthes, Inc. 5,092 700,366
-------------
1,554,956
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.6% Baloise Holding AG 4,953 519,491
Swiss Life Holding 2,970 790,078
Swiss Reinsurance Co. Registered Shares 29,988 1,987,958
Zurich Financial Services AG 12,266 3,126,048
-------------
6,423,575
- ----------------------------------------------------------------------------------------------------------------------------------
Life Sciences Tools & Services - 0.1% Lonza Group AG Registered Shares 3,920 541,736
- ----------------------------------------------------------------------------------------------------------------------------------
23
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery - 0.1% Schindler Holding AG 3,443 $ 255,745
Sulzer AG 2,630 332,271
-------------
588,016
- ----------------------------------------------------------------------------------------------------------------------------------
Marine - 0.0% Kuehne & Nagel International AG 4,494 425,229
- ----------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 2.0% Novartis AG Registered Shares 195,789 10,774,699
Roche Holding AG 59,298 10,660,139
-------------
21,434,838
- ----------------------------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor Equipment - 0.0% OC Oerlikon Corp. AG (a) 611 168,599
- ----------------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 0.3% Compagnie Financiere Richemont AG 44,496 2,469,340
The Swatch Group Ltd. Bearer Shares 2,711 674,110
The Swatch Group Ltd. Registered Shares 4,656 217,190
-------------
3,360,640
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Switzerland 73,564,105
- ----------------------------------------------------------------------------------------------------------------------------------
United Kingdom - 21.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Aerospace & Defense - 0.4% BAE Systems Plc 295,934 2,597,502
Cobham Plc 77,230 303,122
Meggitt Plc 59,138 249,477
Rolls-Royce Group Plc 154,373 1,043,369
-------------
4,193,470
- ----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.0% British Airways Plc 49,991 212,928
- ----------------------------------------------------------------------------------------------------------------------------------
Auto Components - 0.0% GKN Plc 59,800 263,936
- ----------------------------------------------------------------------------------------------------------------------------------
Beverages - 0.5% Diageo Plc 212,442 3,892,184
SABMiller Plc 76,010 1,736,587
-------------
5,628,771
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 0.3% 3i Group Plc 32,473 531,195
ICAP Plc 44,606 477,785
Investec Plc 23,724 144,451
Man Group Plc 144,903 1,790,032
Schroders Plc 11,024 199,618
-------------
3,143,081
- ----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.1% Johnson Matthey Plc 18,342 671,174
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 3.1% Alliance & Leicester Plc 36,611 213,667
Barclays Plc 560,307 3,178,883
HBOS Plc 314,882 1,723,918
HSBC Holdings Plc 991,430 15,265,566
Lloyds TSB Group Plc 467,080 2,865,653
Royal Bank of Scotland Group Plc 1,341,311 5,710,136
Standard Chartered Plc 121,720 3,447,040
-------------
32,404,863
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 0.3% Capita Group Plc 52,132 711,149
Experian Group Ltd. 87,238 645,204
Group 4 Securicor Plc 105,831 425,082
Hays Plc 87,373 156,646
Rentokil Initial Plc 159,006 313,187
Serco Group Plc 45,013 399,439
-------------
2,650,707
- ----------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.0% Balfour Beatty Plc 42,120 354,325
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.0% Cattles Plc 1 3
- ----------------------------------------------------------------------------------------------------------------------------------
24
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.1% Rexam Plc 55,448 $ 425,954
- ----------------------------------------------------------------------------------------------------------------------------------
Distributors - 0.0% Inchcape Plc 29,040 183,807
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.0% London Stock Exchange Group Plc 12,046 185,993
- ----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 0.3% BT Group Plc 657,348 2,604,202
Cable & Wireless Plc 212,106 633,988
-------------
3,238,190
- ----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.3% British Energy Group Plc 87,231 1,227,166
Scottish & Southern Energy Plc 72,982 2,033,479
-------------
3,260,645
- ----------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 0.1% Amec Plc 28,017 493,694
- ----------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.6% J Sainsbury Plc 86,825 548,107
Tesco Plc 652,982 4,776,106
William Morrison Supermarkets Plc 212,662 1,121,079
-------------
6,445,292
- ----------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.5% Associated British Foods Plc 32,549 490,280
Cadbury Plc 114,256 1,433,166
Tate & Lyle Plc 34,772 274,002
Unilever Plc 107,360 3,050,295
-------------
5,247,743
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 0.1% Smith & Nephew Plc 75,865 832,346
- ----------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 0.3% Carnival Plc 13,913 441,717
Compass Group Plc 156,263 1,175,399
Enterprise Inns Plc 43,183 347,514
Intercontinental Hotels Group Plc 22,874 304,866
Ladbrokes Plc 53,298 270,808
Mitchells & Butlers Plc 32,230 130,883
Punch Taverns Plc 23,685 147,199
TUI Travel Plc 39,184 159,233
Thomas Cook Group Plc 28,091 130,234
Whitbread Plc 15,737 383,764
William Hill Plc 24,638 156,253
-------------
3,647,870
- ----------------------------------------------------------------------------------------------------------------------------------
Household Durables - 0.0% Berkeley Group Holdings Plc 3,735 50,429
Persimmon Plc 26,158 163,723
Taylor Wimpey Plc 90,344 110,672
-------------
324,824
- ----------------------------------------------------------------------------------------------------------------------------------
Household Products - 0.2% Reckitt Benckiser Plc 49,749 2,512,722
- ----------------------------------------------------------------------------------------------------------------------------------
IT Services - 0.0% LogicaCMG Plc 113,156 242,300
- ----------------------------------------------------------------------------------------------------------------------------------
Independent Power Producers & International Power Plc 127,582 1,092,955
Energy Traders - 0.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.1% Smiths Group Plc 33,240 716,210
Tomkins Plc 78,603 235,326
-------------
951,536
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 0.8% Aviva Plc 220,953 2,190,549
Friends Provident Plc 211,595 427,873
Legal & General Group Plc 523,156 1,038,111
Old Mutual Plc 425,976 781,977
25
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Prudential Plc 208,046 $ 2,194,414
Royal & Sun Alliance Insurance Group 277,691 691,327
Standard Life Plc 185,164 769,784
-------------
8,094,035
- ----------------------------------------------------------------------------------------------------------------------------------
Internet & Catalog Retail - 0.0% Home Retail Group 75,895 327,957
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery - 0.1% IMI Plc 24,844 214,544
Invensys Plc 69,841 360,865
-------------
575,409
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.4% British Sky Broadcasting Plc 96,602 905,417
Daily Mail & General Trust 24,362 151,352
ITV Plc 287,054 254,175
Pearson Plc 68,799 838,386
Reed Elsevier Plc 93,359 1,063,871
Thomson Reuters Plc 17,404 464,167
United Business Media Plc (a) 15,334 165,405
WPP Group Plc 94,871 906,552
-------------
4,749,325
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 3.0% Anglo American Plc 110,084 7,731,603
Antofagasta Plc 35,808 465,601
BHP Billiton Plc 184,422 7,072,581
Kazakhmys Plc 18,478 582,608
Lonmin Plc 13,820 872,125
Rio Tinto Plc Registered Shares 83,246 10,025,058
Vedanta Resources Plc 12,806 553,036
Xstrata Plc 53,315 4,247,091
-------------
31,549,703
- ----------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.5% Centrica Plc 310,775 1,911,416
National Grid Plc 209,935 2,751,880
United Utilities Plc 74,780 1,017,606
-------------
5,680,902
- ----------------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.1% Marks & Spencer Group Plc 136,343 886,573
Next Plc 17,289 332,354
-------------
1,218,927
- ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 4.6% BG Group Plc 278,189 7,229,421
BP Plc 1,577,445 18,283,499
Cairn Energy Plc (a) 11,821 758,672
Royal Dutch Shell Plc 297,074 12,177,494
Royal Dutch Shell Plc Class B 230,059 9,212,270
Tullow Oil Plc 60,972 1,158,643
-------------
48,819,999
- ----------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.0% Mondi Plc 31,143 182,792
- ----------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 1.5% AstraZeneca Plc 120,974 5,143,607
GlaxoSmithKline Plc 456,019 10,080,644
Shire Ltd. 49,927 816,176
-------------
16,040,427
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts (REITs) - 0.3% British Land Co. Plc 43,680 614,248
Hammerson Plc 24,993 442,685
Land Securities Group Plc 39,450 962,696
26
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Industry Common Stocks Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
Liberty International Plc 21,929 $ 374,258
Segro Plc 35,377 276,620
-------------
2,670,507
- ----------------------------------------------------------------------------------------------------------------------------------
Road & Rail - 0.1% Firstgroup Plc 41,732 430,354
National Express Group Plc 12,431 234,497
Stagecoach Group Plc 40,760 226,078
-------------
890,929
- ----------------------------------------------------------------------------------------------------------------------------------
Software - 0.1% Sage Group Plc 112,528 465,845
- ----------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.1% The Carphone Warehouse Plc 32,874 129,181
Kingfisher Plc 201,445 446,602
-------------
575,783
- ----------------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 0.0% Burberry Group Plc 37,532 337,566
- ----------------------------------------------------------------------------------------------------------------------------------
Tobacco - 0.7% British American Tobacco Plc 125,553 4,330,801
Imperial Tobacco Group Plc 83,973 3,119,477
-------------
7,450,278
- ----------------------------------------------------------------------------------------------------------------------------------
Trading Companies & Distributors - 0.1% Bunzl Plc 30,014 389,842
Wolseley Plc 57,619 429,308
-------------
819,150
- ----------------------------------------------------------------------------------------------------------------------------------
Water Utilities - 0.1% Severn Trent Plc 20,157 512,930
- ----------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 1.2% Vodafone Group Plc 4,437,083 13,073,020
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks in the United Kingdom 222,644,613
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks - 97.2% 1,026,309,661
- ----------------------------------------------------------------------------------------------------------------------------------
Exchange-Traded Funds
- ----------------------------------------------------------------------------------------------------------------------------------
United States - 3.8%
- ----------------------------------------------------------------------------------------------------------------------------------
iShares MSCI EAFE Index Fund 580,230 39,861,801
- ----------------------------------------------------------------------------------------------------------------------------------
Total Exchange-Traded Funds - 3.8% 39,861,801
- ----------------------------------------------------------------------------------------------------------------------------------
Preferred Stocks
- ----------------------------------------------------------------------------------------------------------------------------------
Germany - 0.2%
- ----------------------------------------------------------------------------------------------------------------------------------
Automobiles - 0.1% Volkswagen AG, 4.35% 8,663 1,254,469
- ----------------------------------------------------------------------------------------------------------------------------------
Household Products - 0.1% Henkel KGaA, 1.75% 15,284 607,358
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 0.0% ProSieben SAT.1 Media AG, 2.24% 4,674 46,726
- ----------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.0% RWE AG, 3.50% 2,624 263,966
- ----------------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks - 0.2% 2,172,519
- ----------------------------------------------------------------------------------------------------------------------------------
Rights
- ----------------------------------------------------------------------------------------------------------------------------------
Japan - 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.0% Dowa Mining Co., Ltd. (c)(d) 7,000 0
- ----------------------------------------------------------------------------------------------------------------------------------
Total Rights in Japan 0
- ----------------------------------------------------------------------------------------------------------------------------------
United Kingdom - 0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.0% Barclays Plc (e) 116,551 22,054
HBOS Plc (f) 125,952 26,969
- ----------------------------------------------------------------------------------------------------------------------------------
Total Rights in the United Kingdom 49,023
- ----------------------------------------------------------------------------------------------------------------------------------
Total Rights - 0.0 % 49,023
- ----------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Investments
(Cost - $921,272,409) - 101.2% 1,068,393,004
- ----------------------------------------------------------------------------------------------------------------------------------
27
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
(Percentages shown are based on Net Assets)
- ----------------------------------------------------------------------------------------------------------------------------------
Beneficial
Interest
Short-Term Securities (000) Value
- ----------------------------------------------------------------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series, 2.56% (g)(h) $ 7,111 $ 7,110,912
- ----------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost - $7,110,912) - 0.7% 7,110,912
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost - $928,383,321*) - 101.9% 1,075,503,916
Liabilities in Excess of Other Assets - (1.9%) (19,567,874)
--------------
Net Assets - 100.0% $1,055,936,042
==============
* The cost and unrealized appreciation (depreciation) of investments as of
June 30, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 941,324,811
=============
Gross unrealized appreciation $ 204,863,295
Gross unrealized depreciation (70,684,190)
-------------
Net unrealized appreciation $ 134,179,105
=============
(a) Non-income producing security.
(b) Depositary receipts.
(c) Security is fair valued.
(d) The rights may be exercised until January 29, 2010.
(e) The rights may be exercised until July 14, 2008.
(f) The rights may be exercised until July 18, 2008.
(g) Represents the current yield as of report date.
(h) 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
Activity Interest
Affiliate (000) Income
-------------------------------------------------------------------------
BlackRock Liquidity Series, LLC Cash Sweep Series $ (6,418) $ 233,820
-------------------------------------------------------------------------
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.
o Financial futures contracts purchased as of June 30, 2008 were as follows:
--------------------------------------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Exchange Date Value Depreciation
--------------------------------------------------------------------------------------------------------
43 OMX Stock Index Future Stockholm July 2008 $ 681,701 $ (65,880)
108 DJ Euro Stoxx 50 Eurex September 2008 $ 5,955,728 (208,334)
45 FTSE 100 Index Future LIFFE September 2008 $ 5,163,908 (101,464)
22 SPI 200 Index Future Sydney September 2008 $ 2,836,241 (98,183)
48 TOPIX Index Future Tokyo September 2008 $ 6,252,247 (292,083)
--------------------------------------------------------------------------------------------------------
Total $ (765,944)
============
28
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
o Forward foreign currency contracts as of June 30, 2008 were as follows:
-------------------------------------------------------------------------
Unrealized
Currency Currency Settlement Appreciation
Purchased Sold Date (Depreciation)
-------------------------------------------------------------------------
AUD 3,186,150 $ 2,987,612 8/14/08 $ 47,781
CHF 1,813,000 $ 1,737,942 8/14/08 37,724
EUR 10,821,500 $ 16,745,401 8/14/08 252,441
EUR 620,000 $ 966,856 8/14/08 7,008
EUR 53,000 $ 81,915 8/14/08 1,334
GBP 301,000 $ 597,612 8/14/08 (206)
GBP 4,440,000 $ 8,633,170 8/14/08 179,075
JPY 87,113,000 $ 816,306 8/14/08 6,180
JPY 1,363,174,000 $ 13,085,321 8/14/08 (214,789)
SEK 4,841,000 $ 802,622 8/14/08 (836)
$ 1,618,334 AUD 1,715,000 8/14/08 (15,519)
$ 1,106,877 CHF 1,147,000 8/14/08 (16,504)
$ 196,463 CHF 203,000 8/14/08 (2,357)
$ 427,888 EUR 276,000 8/14/08 (5,638)
$ 13,332,680 EUR 8,586,000 8/14/08 (153,756)
$ 390,860 GBP 200,000 8/14/08 (6,088)
$ 6,040,685 GBP 3,085,000 8/14/08 (82,238)
$ 10,281,351 JPY 1,070,553,000 8/14/08 173,627
$ 294,678 JPY 1,780,000 8/14/08 (132)
-------------------------------------------------------------------------
Total $ 207,107
=========
o Currency Abbreviations:
AUD Australian Dollar GBP British Pound
CHF Swiss Franc JPY Japanese Yen
EUR Euro SEK Swedish Krona
29
Master International Index Series of Quantitative Master Series LLC
Schedule of Investments June 30, 2008 (Unaudited)
o Effective January 1, 2008, the Series adopted Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" ("FAS 157"). FAS 157 clarifies the definition of fair
value, establishes a framework for measuring fair values and requires
additional disclosures about the use of fair value measurements. Various
inputs are used in determining the fair value of investments, which are as
follows:
o Level 1 - price quotations in active markets/exchanges for
identical securities
o Level 2 - other observable inputs (including, but not limited
to: quoted prices for similar assets or liabilities in markets
that are not active, inputs other than quoted prices that are
observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss
severities, credit risks, and default rates) or other
market-corroborated inputs)
o Level 3 - unobservable inputs based on the best information
available in the circumstance, to the extent observable inputs
are not available (including the Series' own assumption used
in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily
an indication of the risk associated with investing in those securities.
For information about the Series' policy regarding valuation of
investments and other significant accounting policies, please refer to the
Series' most recent financial statements as contained in its semiannual
report.
The following table summarizes the inputs used as of June 30, 2008 in
determining the fair valuation of the Series' investments:
-------------------------------------------------------------------
Valuation Investments in Other Financial
Inputs Securities Instruments*
-------------------------------------------------------------------
Level 1 $ 41,426,133 $ (765,944)
Level 2 1,034,077,783 207,107
Level 3 -- --
-------------------------------------------------------------------
Total $1,075,503,916 $ (558,837)
===================================================================
* Other financial instruments are futures and forward foreign
currency contracts.
30
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Trust has made no material changes to the procedures by which shareholders
may recommend nominees to the Trust's Board of Trustees since the Trust last
disclosed such procedures in Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon an evaluation within 90 days of the filing date of this
report, the principal executive and financial officers concluded that
the disclosure controls and procedures of the Trust are effective.
(b) There were no changes in the Trust's internal control over financial
reporting during the second fiscal quarter of the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, the Trust's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) Not Applicable.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the Trust as required by Rule
30a-2(a) under the Investment Company Act of 1940 is attached
hereto as EX-99.CERT.
(a)(3) Not Applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment
Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American Beacon Funds
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: September 5, 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/ William F. Quinn
--------------------
William F. Quinn
President
Date: September 5, 2008
By /s/ Rebecca L. Harris
---------------------
Rebecca L. Harris
Treasurer
Date: September 5, 2008