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: December 31, 2008
ITEM 1. REPORTS TO STOCKHOLDERS.
GUIDANCE l VISION l EXPERIENCE
(AMERICAN BEACON FUNDS(SM) LOGO)
Annual Report
(GRAPHIC)
December 31, 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 ............................................. 3
American Beacon Funds
Statements of Assets and Liabilities ........................... 12
Statements of Operations ....................................... 13
Statements of Changes in Net Assets ............................ 14
Notes to Financial Statements .................................. 15
Financial Highlights ........................................... 21
State Street Equity 500 Index Portfolio
Portfolio of Investments ....................................... 31
Statement of Assets and Liabilities ............................ 37
Statement of Operations ........................................ 38
Statements of Changes in Net Assets ............................ 39
Financial Highlights ........................................... 40
Notes to Financial Statements .................................. 41
Master Small Cap Index Series
Summary Schedule of Investments ................................ 51
Statement of Assets and Liabilities ............................ 57
Statement of Operations ........................................ 58
Statements of Changes in Net Assets ............................ 59
Financial Highlights ........................................... 59
Notes to Financial Statements .................................. 60
Master International Index Series
Summary Schedule of Investments ................................ 68
Statement of Assets and Liabilities ............................ 74
Statement of Operations ........................................ 75
Statements of Changes in Net Assets ............................ 76
Financial Highlights ........................................... 76
Notes to Financial Statements .................................. 77
Additional Information ............................................ Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of
the reporting period and are subject to change. Each advisor's strategies and
each Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
American Beacon Funds December 31, 2008
(PHOTO OF WILLIAM F. QUINN)
FELLOW SHAREHOLDERS,
Enclosed is the Annual Report for the American Beacon S&P 500, Small Cap
and International Equity Index Funds for the twelve months ended December 31,
2008.
During the past twelve months, we experienced unprecedented market turmoil
in all asset classes. Initially, the sub-prime mortgage crisis and rising oil
and food prices contributed to an economic slowdown that culminated into a
market-wide credit crisis and squeeze on liquidity. The situation reached crisis
proportions in mid-September with the bankruptcy of Lehman Brothers, the
resulting losses incurred by investors in money market funds, and the
unprecedented government intervention in the financial system. The S&P 500 Index
finished the year -37.00%, while the Russell 2000(R) Index and the MSCI EAFE
Index finished -33.79% and -43.38%, respectively, for the period.
The American Beacon S&P 500 Index Fund and American Beacon Small Cap Index
Fund reported competitive returns of -37.08% and -33.58%, respectively, for the
period. The American Beacon International Equity Index Fund reported returns of
- -41.85%, which was 1.53% better than the corresponding Index return.
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 Funds.
Sincerely,
/s/ William F. Quinn
William F. Quinn
President
American Beacon Funds
1
DOMESTIC MARKET OVERVIEW
DECEMBER 31, 2008 (UNAUDITED)
Equity markets in 2008 will be reviewed and studied for years to come, but
the memories of the year will not be cherished. The S&P 500 fell 37% during the
year. It was the worst showing in U.S. equity markets since the 1930's. There
were many headlines during the year and much of the news concerning the stock
market was not good. The year started with an unauthorized futures position
costing Societe Generale billions of dollars in losses. Stress in the debt
markets created ripple effects into the stock market and the broad economy. In
March, Bear Stearns was rescued from the brink of bankruptcy when the government
arranged a takeover by JPMorgan Chase.
As summer approached, commodity prices continued to skyrocket. Oil hovered
near $140 per barrel at the end of June and inflation and recession fears were
rampant in the market. Liquidity in fixed income and money markets was poor
throughout the period, but the worst was yet to come. In early September, the
markets began one of the wildest periods in history. In the span of a few weeks:
Lehman Brothers went bankrupt; Merrill Lynch entered a hastily arranged merger
with Bank of America; Fannie Mae and Freddie Mac were nationalized; Morgan
Stanley and Goldman Sachs became bank holding companies; AIG received a huge
government loan ($85 Billion at announcement, later ballooning well over $100
Billion;) and Washington Mutual, one of the country's largest banks, was taken
over by the FDIC. During the same period, the money market effectively froze and
the flight to quality was such a rush that T-Bills actually traded with negative
yields.
Governments across the globe responded with multiple policies to restore
confidence in the markets. Capital was invested into banks, money market funds
were temporarily guaranteed, FDIC insurance was increased, short-term debt
facilities were created to increase liquidity and confidence, interest rates
were slashed to historic lows, money supplies were dramatically increased, and
fiscal stimulus plans were launched.
In December equity markets improved off their lows and credit markets
improved somewhat. Then markets ended the year with news of an alleged Ponzi
scheme involving a very large hedge fund. While this news did not directly
impact capital markets, it was another blow to already weary investors. All in
all, 2008 will go down in history as a very challenging year, one that tested
the stamina of even the most seasoned long-term investor.
S&P is a trademark of the McGraw-Hill Companies, Inc. and has been licensed for
use, "Standard and Poor's(R)", "S&P", "Standard & Poor's 500", "S&P 500" are all
trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by
State Street Bank and Trust Company.
Russell 2000 Index is a registered trademark of Frank Russell Company.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON S&P 500 INDEX FUND+
DECEMBER 31, 2008 (UNAUDITED)
For the twelve months ended December 31, 2008, the total return of the
Institutional Class of the American Beacon S&P 500 Index Fund was -37.08%,
slightly below the S&P 500 Index (the "Index") return of -37.00% and even with
the Lipper S&P 500 Objective Funds Index return of -37.08%.
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 12/31/98 THROUGH 12/31/08
(PERFORMANCE GRAPH)
ANNUALIZED TOTAL RETURNS VALUE OF
PERIODS ENDED 12/31/08 $10,000
--------------------------- 12/31/98-
1 YEAR 5 YEARS 10 YEARS 12/31/08
------ ------- -------- ---------
Institutional
Class(1, 4) ...... -37.08% -2.30% -1.55% $8,550
PlanAhead
Class(1, 2, 4) ... -37.35% -2.76% -1.97% $8,193
Lipper S&P 500
Objective Funds
Index (3) ........ -37.08% -2.41% -1.64% $8,473
S&P 500 Index (3) ... -37.00% -2.19% -1.38% $8,700
(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
Fund prospectus for the Institutional and PlanAhead Class shares was 0.13%
and 0.63%, respectively. The expense ratios above may vary from the expense
ratios presented in other sections of this report that are based on
expenses incurred during the period covered by this report.
All ten sectors within the Index lost value during the year. Consumer
Staples, historically known as a defensive sector, was the top performing
sector, falling only 15.5%. The other "defensive" sectors, Health Care (down
22.8%) and Utilities (down 29.0%) managed to keep losses below 30%. The
remaining seven sectors lost 30% or more. Given the year's headlines, it is no
surprise that Financials took the biggest losses during the year. The sector
fell 55.3%, as once mighty institutions took huge losses and a number of
bankruptcies hit the sector. The Materials and Information Technology sectors,
down 45.7% and 43.2%, respectively, also suffered mightily during the year.
These sectors have historically been more sensitive to economic cycles, and the
Materials sector was also hit by crashing commodity prices in the second half of
the year.
At the security level, there were some individual bright spots during the
year. Discount retailers Family Dollar Stores and Wal-Mart rose 38.6% and 20.0%,
respectively. These companies benefitted from a shift in consumer preferences
toward low cost retailers. Amgen and Barr Pharmaceuticals, up 24.4% and 23.9%,
respectively, fared well as the Health Care sector is less vulnerable to changes
in economic conditions. Financial institutions took five of the bottom six spots
on the return scale for the year. Lehman Brothers, Washington Mutual, Fannie
Mae, Freddie Mac, and AIG posted some of the worst returns in 2008. Lehman
Brothers and Washington Mutual went bankrupt and lost over 99% of their value.
Fannie Mae and Freddie Mac were nationalized and lost 98%. AIG was rescued by a
huge government package and lost over 97% of its equity value. There were many
other companies posting significant losses on equity value as the pain was
+ The S&P 500 Index Fund is not sponsored, sold or promoted by Standard &
Poor's, and Standard & Poor's makes no representation regarding the
advisability of investing in this fund.
3
PERFORMANCE OVERVIEW
AMERICAN BEACON S&P 500 INDEX FUND+
DECEMBER 31, 2008 (UNAUDITED)
widespread, but particularly acute in the Financial sector.
The investment manager continues to utilize a replication strategy, owning
all 500 names in the S&P 500 Index in approximately the same weightings as the
Index. Therefore, the Fund is expected to continue to meet its objective of
closely tracking, before expenses, the return of its benchmark, the S&P 500
Index.
TOP TEN HOLDINGS
% OF
EQUITIES*
---------
Exxon Mobil Corp. 5.2%
Procter & Gamble Co. 2.4%
General Electric Co. 2.2%
AT&T, Inc. 2.1%
Johnson & Johnson 2.1%
Chevron Corp. 1.9%
Microsoft Corp. 1.9%
Wal-Mart Stores, Inc. 1.6%
Pfizer, Inc. 1.5%
JPMorgan Chase and Company 1.5%
* Percent of the equities of State Street Equity 500 Index Portfolio
EQUITY SECTOR ALLOCATION
% OF
EQUITIES*
---------
Information Technology 15.3%
Health Care 14.8%
Energy 13.3%
Financials 13.3%
Consumer Staples 12.8%
Industrials 11.1%
Consumer Discretionary 8.4%
Utilities 4.2%
Telecommunication Services 3.8%
Materials 3.0%
* Percent of the equities of State Street Equity 500 Index Portfolio
+ The S&P 500 Index Fund is not sponsored, sold or promoted by Standard &
Poor's, and Standard & Poor's makes no representation regarding the
advisability of investing in this fund.
4
PERFORMANCE OVERVIEW
AMERICAN BEACON SMALL CAP INDEX FUND(SM)
DECEMBER 31, 2008 (UNAUDITED)
For the twelve months ended December 31, 2008, the total return of the
Institutional Class of the American Beacon Small Cap Index Fund was -33.58%. The
Fund's performance exceeded the Russell 2000(R) Index (the "Index") return of
- -33.79% and also the Lipper Small-Cap Core Funds Index return of -35.59%.
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 7/31/00 THROUGH 12/31/08
(PERFORMANCE GRAPH)
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 12/31/08
-------------------------- VALUE OF
SINCE $10,000
5 INCEPTION 7/31/00-
1 YEAR YEARS (7/31/00) 12/31/08
------ ----- --------- --------
Institutional
Class(1, 3) ........... -33.58% -1.04% 1.18% $11,036
Lipper Small-Cap
Core Funds Index(2) ... -35.59% -1.02% 1.96% $11,774
Russell 2000
Index(2) .............. -33.79% -0.93% 1.29% $11,139
(1.) Performance shown is historical and may not be indicative of future
returns. Investment returns and principal value will vary, and shares may
be worth more or less at redemption than at original purchase. Performance
shown is as of date indicated, and current performance may be lower or
higher than the performance data quoted. To obtain performance as of the
most recent month end, please visit www.americanbeaconfunds.com or call
1-800-967-9009. Fund performance in the table above does not reflect the
deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
(2.) The Lipper Small-Cap Core Funds Index tracks the results of the 30 largest
mutual funds in the Lipper Small-Cap Core Funds category. Lipper is an
independent mutual fund research and ranking service. The Russell 2000
Index is an unmanaged index comprised of approximately 2,000
smaller-capitalization stocks from various industrial sectors. One cannot
invest directly in an index.
(3.) The total annual Fund operating expense ratio set forth in the most recent
prospectus for the Fund was 0.20%. The expense ratio above may vary from
the expense ratio presented in other sections of this report that is based
on expenses incurred during the period covered by this report.
All ten sectors within the Index posted negative returns for the twelve
months. From a sector perspective, losses were most prominent in
Telecommunication Services, which was down 49.7%. The Energy and Consumer
Discretionary sectors were also hit hard, declining 49.5% and 47.7%,
respectively. At the top were the defensive Utilities and Consumer Staples
sectors, which posted comparatively small losses of 11.3% and 17.9%,
respectively.
The highest individual stock returns in the Index were generated by
Emergent BioSolutions, Inc., up 416.0%, Crawford & Co., up 250.4%, and Star
Scientific, Inc., up 219.2%. By contrast, there were several stocks within the
Index that essentially lost all of their value during the period, including
VeraSun Energy Corp., LandAmerica Financial Group, Inc., and Downey Financial
Corp.
The Fund will continue to strive to meet its objective of closely
replicating, before expenses, the return of its benchmark, the Russell 2000
Index. It does so by investing in a subset of the securities in the Index such
that the characteristics of the portfolio closely track the characteristics of
the Index.
5
PERFORMANCE OVERVIEW
AMERICAN BEACON SMALL CAP INDEX FUND(SM)
DECEMBER 31, 2008 (UNAUDITED)
TOP TEN HOLDINGS
% OF
EQUITIES*
---------
Ralcorp Holdings, Inc. 0.4%
Myraid Genetics, Inc. 0.4%
Alexion Pharmaceuticals, Inc. 0.4%
Waste Connections, Inc. 0.3%
Realty income Corp. 0.3%
Piedmont Natural Gas Co. 0.3%
OSI Pharmaceuticals, Inc. 0.3%
Comstock Resources, Inc. 0.3%
Westar Energy, Inc. 0.3%
ITC Holdings, Corp. 0.3%
EQUITY SECTOR ALLOCATION
% OF
EQUITIES*
---------
Financials 23.4%
Industrials 16.9%
Information Technology 15.8%
Health Care 15.3%
Consumer Discretionary 11.0%
Energy 4.4%
Utilities 4.4%
Consumer Staples 3.9%
Materials 3.7%
Telecommunication Services 1.2%
* Percent of equity portion of Master Small Cap Index Series
6
INTERNATIONAL MARKET OVERVIEW
DECEMBER 31, 2008 (UNAUDITED)
2008 turned out to be a year investors would like to forget, but instead
will vividly remember. For much of the first half of the year, equity markets
held together as the hope of global decoupling (meaning that some markets could
be insulated from the effects of the U.S.-centered economic and credit problems)
kept investors from panicking. The seminal event appears to have been Lehman
Brothers' bankruptcy declaration in September, which drove fear higher and
confidence lower, while causing a massive decline in economic activity in the
United States and around the world.
In a stark reversal of prior years' trends, non-U.S. markets noticeably
underperformed their U.S. counterparts for the 12-month period, with the MSCI
EAFE Index losing 43.4% versus the 37.0% decline of the S&P 500 Index. Non-U.S.
stocks started off the year stronger, but quickly lost ground as the credit
crisis revealed itself to be global in nature and as the worldwide economy
turned south. European stocks declined sharply in the second half of the year,
and for 2008 as a whole, U.K. markets lost 31.0% and markets in Continental
Europe were off more than 40%. In Japan, the Nikkei 225 fell 40.1%. In one of
the headline stories of 2008, the decoupling theory was put to rest as emerging
markets failed to hold up amid the global downturn. Key markets in China and
Russia lost more than 60% and the MSCI Emerging Markets Index as a whole was
down 53.3%.
Amid all the economic and market gloom, one of the primary concerns that
dominated sentiment earlier in the year - the escalation in commodity prices -
dissipated. After peaking at $150 per barrel in July, oil prices collapsed to
below $40, less than half of where they started the year.
The U.S. dollar displayed mixed performance against most major global
currencies during 2008, advancing 38.5% and 5.2% versus the British pound and
euro, respectively, while declining 18.9% versus the yen.
7
PERFORMANCE OVERVIEW
AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM)
DECEMBER 31, 2008 (UNAUDITED)
For the twelve months ended December 31, 2008, the Institutional Class of
the American Beacon International Equity Index Fund posted a total return of
- -41.85%, exceeding the MSCI EAFE Index (the "Index") return of -43.38% and the
Lipper International Funds Index return of -43.63%.
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 7/31/00 THROUGH 12/31/08
(PERFROMANCE GRAPH))
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 12/31/08
---------------------------- VALUE OF
SINCE $10,000
INCEPTION 7/31/00-
1 YEAR 5 YEARS (7/31/00) 12/31/08
------ ------- --------- --------
Institutional Class(1, 3) ............ -41.85% 2.13% -0.71% $9,420
Lipper International Funds Index(2) .. -43.63% 2.15% -0.41% $9,663
MSCI EAFE Index(2) ................... -43.38% 1.66% -0.86% $9,294
* Not annualized
(1.) Performance shown is historical and may not be indicative of future
returns. Investment returns and principal value will vary, and shares may
be worth more or less at redemption than at original purchase. Performance
shown is as of date indicated, and current performance may be lower or
higher than the performance data quoted. To obtain performance as of the
most recent month end, please visit www.americanbeaconfunds.com or call
1-800-967-9009. Fund performance in the table above does not reflect the
deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
(2.) The Lipper International Funds Index tracks the results of the 30 largest
mutual funds in the Lipper International Funds category. Lipper is an
independent mutual fund research and ranking service. The MSCI EAFE Index
is a market capitalization weighted index of international stock
performance composed of equities from developed markets excluding the U.S.
and Canada. Performance is that of the MSCI EAFE Index through 9/30/01, the
MSCI Provisional EAFE Index from 10/1/01 through 5/31/02, and the MSCI EAFE
Index thereafter. One cannot invest directly in an index.
(3.) The total annual Fund operating expense ratio in the most recent prospectus
for the Fund was 0.19%. The expense ratio above may vary from the expense
ratio presented in other sections of this report that is based on expenses
incurred during the period covered by this report.
All ten sectors and 21 countries represented in the Index recorded negative
returns for the twelve months. At the country level, Japan and Switzerland, down
29.2% and 30.5%, respectively, fared considerably better than other regions. The
equity markets in Ireland, Austria, and Belgium, down 71.9%, 68.4% and 66.5%,
respectively, posted the lowest returns.
From a sector perspective, losses were most prominent in Financials, which
lost 54.9% for the year amid unprecedented difficulties in the banking and
credit systems. Materials and Consumer Discretionary were also hit hard,
declining 52.5% and 45.2%, respectively. At the top was the defensive Health
Care sector which posted a comparatively small loss of 18.7%.
On an individual-stock basis, firms Acom Co. Ltd and Fast Retailing Co.
Ltd. were the strongest performers, up 122.8% and 103.4%, respectively. By
contrast, Financial companies Immoeast AB. (down 96.4%), Anglo Irish Bank Corp.
(down 98.5%), and Babcock & Brown Ltd. (down 99.5%) were the most notable
laggards within the Index.
The Fund continues to pursue its objective of closely replicating, before
expenses, the return of its benchmark, the MSCI EAFE Index. It does so by
investing in a subset of the securities in the Index such that the
characteristics of the portfolio closely track the characteristics of the Index.
8
PERFORMANCE OVERVIEW
AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM)
DECEMBER 31, 2008 (UNAUDITED)
TOP TEN HOLDINGS
% OF
EQUITIES*
---------
Nestle S.A. 1.9%
BP plc 1.8%
Novartis AG 1.5%
Total S.A. 1.5%
HSBC Holdings plc 1.5%
Roche Holdings AG 1.4%
Vodafone Group, plc 1.4%
GlaxoSmithKline plc 1.3%
Telefonica S.A. 1.2%
Royal Dutch Shell plc 1.2%
EQUITY SECTOR ALLOCATION
% OF
EQUITIES* EAFE
--------- -----
Financials 22.6% 22.6%
Industrials 11.5% 11.5%
Consumer Staples 10.3% 10.3%
Health Care 9.7% 9.8%
Consumer Discretionary 9.6% 9.6%
Energy 8.6% 8.5%
Materials 7.9% 7.9%
Utilities 7.7% 7.7%
Telecommunication Services 7.0% 7.0%
Information Technology 5.1% 5.1%
* Percent of equity portion of Master International Index Series
COUNTRY ALLOCATION
(PIE CHART)
% OF
EQUITIES* EAFE
--------- -----
JAPAN 25.3% 25.3%
UNITED KINGDOM 19.9% 12.9%
FRANCE 10.9% 10.9%
GERMANY 8.8% 8.7%
SWITZERLAND 8.3% 8.4%
AUSTRALIA 6.0% 6.0%
SPAIN 4.6% 4.5%
ITALY 3.7% 3.7%
NETHERLANDS 2.4% 2.4%
HONG KONG 2.0% 2.0%
SWEDEN 2.0% 2.0%
FINLAND 1.4% 1.4%
SINGAPORE 1.1% 1.1%
DENMARK 0.8% 0.8%
BELGIUM 0.7% 0.8%
NORWAY 0.6% 0.6%
GREECE 0.5% 0.5%
AUSTRIA 0.3% 0.3%
IRELAND 0.3% 0.3%
PORTUGAL 0.3% 0.3%
NEW ZEALAND 0.1% 0.1%
* Percent of equity portion of Master International Index Series
9
FUND EXPENSES
DECEMBER 31, 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 July 1, 2008 through
December 31, 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 7/1/08 ...... $1,000.00 $1,000.00 $1,000.00
Ending Account Value 12/31/08 ....... $ 715.27 $ 732.56 $ 651.17
Expenses Paid During Period* 7/1/08 -
12/31/08 ......................... $ 0.56 $ 0.83 $ 0.79
Annualized Expense Ratio ............ 0.13% 0.19% 0.19%
S&P 500
PLANAHEAD CLASS INDEX
- --------------- ---------
Beginning Account Value 7/1/08 ...... $1,000.00
Ending Account Value 12/31/08 ....... $ 713.80
Expenses Paid During Period* 7/1/08 -
12/31/08 ......................... $ 2.76
Annualized Expense Ratio ............ 0.64%
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 7/1/08 ...... $1,000.00 $1,000.00 $1,000.00
Ending Account Value 12/31/08 ....... $1,024.48 $1,024.18 $1,024.18
Expenses Paid During Period* 7/1/08 -
12/31/08 ......................... $ 0.66 $ 0.97 $ 0.97
Annualized Expense Ratio ............ 0.13% 0.19% 0.19%
S&P 500
PLANAHEAD CLASS INDEX
- --------------- ---------
Beginning Account Value 7/1/08 ...... $1,000.00
Ending Account Value 12/31/08 ....... $1,021.92
Expenses Paid During Period* 7/1/08 -
12/31/08 ......................... $ 3.25
Annualized Expense Ratio ............ 0.64%
- ----------
* Expenses are equal to each Fund's annualized expense ratio for the
six-month period multiplied by the average account value over the period,
multiplied by the number derived by dividing the number of days in the most
recent fiscal half-year (184) by days in the year (366) to reflect the
half-year period.
10
AMERICAN BEACON FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon Funds:
We have audited the accompanying statements of assets and liabilities of
American Beacon Funds, comprised of the American Beacon S&P 500 Index Fund, the
American Beacon Small Cap Index Fund, and the American Beacon International
Equity Index Fund (collectively, the "Funds") as of December 31, 2008, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Funds' internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Funds' internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2008, by correspondence with the Master
Portfolios. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Funds at December 31, 2008, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
Dallas, Texas
February 27, 2009
11
AMERICAN BEACON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2008 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
INTERNATIONAL
S&P 500 SMALL CAP EQUITY INDEX
INDEX FUND INDEX FUND FUND
----------- ---------- -------------
ASSETS:
Investment in Portfolio, at value ......................... $ 236,359 $ 31,773 $ 184,586
Receivable for fund shares sold ........................... 1,198 20 1,315
Prepaid expenses .......................................... 7 -- 1
----------- ---------- -----------
TOTAL ASSETS ........................................... 237,564 31,793 185,902
----------- ---------- -----------
LIABILITIES:
Payable for fund shares redeemed .......................... 7 201 1
Distribution fees payable (Note 2) ........................ 3 -- --
Administrative service and service fees payable (Note 2) .. 11 1 6
Other liabilities ......................................... 45 39 35
----------- ---------- -----------
TOTAL LIABILITIES ...................................... 66 241 42
----------- ---------- -----------
NET ASSETS ................................................ $ 237,498 $ 31,552 $ 185,860
=========== ========== ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital ........................................... 320,116 47,304 280,932
Undistributed net investment income (expense) ............. 200 -- 199
Accumulated net realized gain (loss) ...................... (57,898) (2,005) (17,665)
Unrealized net appreciation (depreciation) of investments
and futures contracts .................................. (24,920) (13,747) (77,606)
----------- ---------- -----------
NET ASSETS ................................................... $ 237,498 $ 31,552 $ 185,860
=========== ========== ===========
Shares outstanding (no par value):
Institutional Class ....................................... 18,389,270 3,944,761 24,925,743
=========== ========== ===========
PlanAhead Class ........................................... 1,070,885 -- --
=========== ========== ===========
Net asset value, offering and redemption price per share:
Institutional Class ....................................... $ 12 .21 $ 8.00 $ 7.46
=========== ========== ===========
PlanAhead Class ........................................... $ 12 .06 $ -- $ --
=========== ========== ===========
See accompanying notes
See accompanying Financial Statements of the respective Master
Portfolios attached
12
AMERICAN BEACON FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2008 (IN THOUSANDS)
INTERNATIONAL
S&P 500 SMALL CAP EQUITY INDEX
INDEX FUND INDEX FUND FUND
---------- ---------- -------------
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Dividend income ........................................... $ 6,561 $ 544 $ 9,342
Interest income ........................................... 163 49 93
Securities lending income ................................. -- 105 --
Portfolio expenses ........................................ (128) (29) (266)
Other income .............................................. -- -- 40
--------- -------- ---------
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ......... 6,596 669 9,209
--------- -------- ---------
FUND EXPENSES:
Administrative service fees (Note 2):
Institutional Class .................................... 135 20 126
PlanAhead Class ........................................ 39 -- --
Sub-administrative service fees:
Institutional Class .................................... -- 2 35
Transfer agent fees:
Institutional Class .................................... 5 1 5
PlanAhead Class ........................................ 7 -- --
Custody and accounting fees ............................... 8 7 4
Professional fees ......................................... 18 14 17
Registration fees ......................................... 29 -- 1
Service fees - PlanAhead Class (Note 2) ................... 39 -- --
Printing .................................................. 23 2 6
Other expenses ............................................ 9 4 10
--------- -------- ---------
TOTAL FUND EXPENSES .................................... 312 50 204
--------- -------- ---------
NET INVESTMENT INCOME ........................................ 6,284 619 9,005
--------- -------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED FROM MASTER
PORTFOLIO
Net realized gain (loss) from:
Investments ............................................ (190) (2,190) (10,620)
Foreign currency transactions .......................... -- -- (796)
Futures contracts ...................................... (3,158) (773) (2,634)
Change in net unrealized appreciation or depreciation of:
Investments ............................................ (128,008) (14,546) (126,068)
Foreign currency transactions .......................... -- -- 171
Futures contracts ...................................... 180 356 151
--------- -------- ---------
NET LOSS ON INVESTMENTS ................................ (131,176) (17,153) (139,796)
--------- -------- ---------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ......... $(124,892) $(16,534) $(130,791)
========= ======== =========
See accompanying notes
See accompanying Financial Statements of the respective Master
Portfolios attached
13
AMERICAN BEACON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
INTERNATIONAL EQUITY
S&P 500 INDEX FUND SMALL CAP INDEX FUND INDEX FUND
--------------------- -------------------- ---------------------
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
--------------------- -------------------- ---------------------
2008 2007 2008 2007 2008 2007
--------- --------- -------- --------- --------- ---------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ........... $ 6,284 $ 4,980 $ 619 $ 1,122 $ 9,005 $ 9,526
Net realized gain (loss) on
investments, foreign
currency, and futures
contracts .................... (3,348) 16,526 (2,963) 2,722 (14,050) 6,420
Change in net unrealized
appreciation or depreciation
of investments and futures
contracts .................... (127,828) (8,818) (14,190) (2,345) (125,746) 19,978
--------- --------- -------- --------- --------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS ........... (124,892) 12,688 (16,534) 1,499 (130,791) 35,924
--------- --------- -------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class .......... (5,882) (4,560) (601) (1,094) (7,110) (10,259)
PlanAhead Class .............. (267) (286) -- -- -- --
Net realized gain on investments:
Institutional Class .......... -- -- (2,145) (2,872) -- (3,968)
PlanAhead Class .............. -- -- -- -- -- --
Tax return of capital:
Institutional Class .......... -- -- (456) (215) -- (252)
--------- --------- -------- --------- --------- ---------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS .............. (6,149) (4,846) (3,202) (4,181) (7,110) (14,479)
--------- --------- -------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ... 104,131 171,408 11,693 11,780 227,499 369,147
Reinvestment of dividends and
distributions ................ 6,122 4,810 3,202 4,181 7,110 14,473
Cost of shares redeemed ......... (31,890) (132,948) (15,932) (112,832) (178,141) (299,885)
--------- --------- -------- --------- --------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS ........ 78,363 43,270 (1,037) (96,871) 56,468 83,735
--------- --------- -------- --------- --------- ---------
NET INCREASE (DECREASE) IN NET
ASSETS .......................... (52,678) 51,112 (20,773) (99,553) (81,433) 105,180
--------- --------- -------- --------- --------- ---------
NET ASSETS:
Beginning of period ............. 290,176 239,064 52,325 151,878 267,293 162,113
--------- --------- -------- --------- --------- ---------
END OF PERIOD * ................. $ 237,498 $ 290,176 $ 31,552 $ 52,325 $ 185,860 $ 267,293
========= ========= ======== ========= ========= =========
*Includes undistributed net
investment income (loss) of ..... $ 200 $ 158 $ -- $ -- $ 199 $ (418)
========= ========= ======== ========= ========= =========
See accompanying notes
See accompanying Financial Statements of the respective Master
Portfolios attached
14
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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, as
amended, (the "Act") 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.
Effective September 12, 2008, American Beacon Advisors, Inc. (the
"Manager") became a wholly-owned subsidiary of Lighthouse Holdings, Inc., which
is indirectly owned by investment funds affiliated with Pharos Capital Group,
LLC and TPG Capital, L.P., two private equity firms. Prior to September 12, the
Manager was a wholly-owned subsidiary of AMR Corporation, the parent company of
American Airlines, Inc. which retained a minority interest in the parent company
of Lighthouse Holdings, Inc.
Each Fund invests all of its investable assets in a corresponding
portfolio. The State Street Equity 500 Index Portfolio, Master Small Cap Index
Series and the Master International Index Series (each a "Portfolio" and
collectively the "Portfolios") are open-ended management investment companies
registered under the Act. The value of such investment reflects each Fund's
proportionate interest in the net assets of the corresponding Portfolio.
% OF PORTFOLIO
HELD BY FUND AT
AMERICAN BEACON: PORTFOLIOS: DECEMBER 31, 2008
- ---------------- --------------------------------------- -----------------
S&P 500 Index Fund State Street Equity 500 Index Portfolio 15.5%
Small Cap Index Fund Master Small Cap Index Series 9.2%
International Equity Index Fund Master International Index Series 26.1%
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:
- ------ --------------------------------------------------------------
INSTITUTIONAL CLASS Investors making an initial investment of $2 million
PLANAHEAD CLASS General public and investors investing through an intermediary
Administrative service fees and service fees vary amongst the classes as
described more fully in footnote 2.
Investment income, net capital gains (losses) and all expenses incurred by
the S&P 500 Index Fund are allocated based on the relative net assets of each
class, except for service fees and certain other fees and expenses related
solely to one class of shares.
Valuation of Investments
Valuation of securities by each Portfolio is discussed in the Portfolio's
Notes to Financial Statements, which are included elsewhere in this report.
15
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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
December 31, 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.
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.
16
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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.
3. FEDERAL INCOME AND EXCISE TAXES
It is the policy of the Funds to comply with the requirements of Subchapter
M of the Internal Revenue Code and to distribute substantially all net
investment income as well as any net realized capital gains on the sale of
investments. Therefore, no federal income or excise tax provision is required.
For FASB Interpretation No. 48, "Accounting for Uncertainties in Income
Taxes" ("FIN 48") purposes, there are no unrecognized tax benefits as of
December 31, 2008 included in the accompanying financial statements. Each of the
tax years in the four year period ended December 31, 2008, 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. For the year ended
December 31, 2008, the Funds recognized $0 in interest and penalties.
Dividends are categorized in accordance with income tax regulations which
may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
17
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
The International Equity Index Fund may be subject to taxes imposed by
countries in which it invests. Such taxes are generally based on returns of
income earned or gains realized or repatriated. Taxes are accrued and applied to
net investment income, net realized capital gains and net unrealized
appreciation, as applicable, as the income is earned or capital gains are
recorded.
The tax character of distributions paid during the years ended December 31,
2008 and December 31, 2007 were as follows (in thousands):
S&P 500 INDEX SMALL CAP INDEX INTERNATIONAL EQUITY INDEX
--------------------------- --------------------------- ----------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2008 2007 2008 2007 2008 2007
------------ ------------ ------------ ------------ ------------ -------------
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME:*
Institutional Class ........ $ 5,882 $ 4,560 $ 646 $ 1,510 $ 7,110 $11,655
PlanAhead Class ............ 267 286 -- -- -- --
LONG-TERM CAPITAL GAIN:
Institutional Class ........ -- -- 2,100 2,456 -- 2,572
PlanAhead Class ............ -- -- -- -- -- --
RETURN OF CAPITAL
Institutional Class ........ -- -- 456 215 -- 252
------- ------- ------- ------- ------- -------
TOTAL TAXABLE DISTRIBUTIONS ... $ 6,149 $ 4,846 $ 3,202 $ 4,181 $ 7,110 $14,479
======= ======= ======= ======= ======= =======
* For tax purposes, short-term capital gains are considered ordinary income
distributions.
As of December 31, 2008, the components of distributable earnings on a tax
basis we as follows (in thousands):
S&P 500 SMALL CAP INT'L EQUITY
INDEX FUND INDEX FUND INDEX FUND
---------- ---------- ------------
Cost basis of investments for federal income tax purposes $ 277,291 $ 47,038 $ 266,221
Unrealized appreciation .............................. 230,374 4,278 17,377
Unrealized depreciation .............................. (271,306) (19,543) (99,012)
--------- --------- ----------
Net unrealized depreciation .......................... (40,932) (15,264) (81,635)
Undistributed ordinary income ........................ 136 -- 462
Capital and other accumulated losses ................. (41,683) (267) (13,797)
Other temporary differences .......................... (139) (220) (102)
--------- --------- ----------
Distributable earnings .................................. $ (82,618) $ (15,751) $ (95,072)
========= ========= =========
Financial reporting records are adjusted for permanent book/tax differences
to reflect tax character. Financial records are not adjusted for temporary
differences. The temporary differences between financial reporting and tax-basis
reporting of unrealized appreciation/ (depreciation) are attributable primarily
to the tax deferral of wash sales, the realization for tax purposes of
unrealized gains/ (losses) on certain derivative instruments, reclassifications
of income from real estate investment securities, and the realization for tax
purposes on unrealized gains/ (losses) on investments in passive foreign
investment companies.
Due to the inherent differences in the recognition of income, expenses and
realized gains/(losses) under the U.S. generally accepted accounting principles
and federal income tax regulations, permanent differences between book and tax
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent
differences derived from reclassifications of income from real estate investment
securities, futures, foreign currency, sales of
18
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
investments in passive foreign investment companies, dividend reclassifications
and partnership transactions that have been reclassified as of December 31, 2008
(in thousands):
S&P 500 SMALL CAP INT'L EQUITY
INDEX FUND INDEX FUND INDEX FUND
---------- ---------- ------------
Paid-in-capital .............................................. $ 26,235 $(4,344) $ 3,316
Undistributed net investment income .......................... (93) (18) (1,278)
Accumulated net realized gain/(loss) ......................... (26,141) 4,362 (2,038)
Unrealized appreciation (depreciation) of investments, futures
contracts, and foreign currency ........................... (1) -- --
At December 31, 2008 capital loss carry forward positions for federal
income tax purposes were as follows (in thousands):
FUND 2010 2011 2012 2013 2014 2015 2016 TOTAL
- ---- ------- ------- ------- ------- ------- ---- ------- -------
S&P 500 Index ............... $7,852 $635 $1,060 $2,311 $286 $-- $11,180 $23,324
International Equity Index .. -- -- -- -- -- -- $ 9,746 $ 9,746
Net capital and foreign currency losses incurred after October 31, 2008 and
within the taxable year are deemed to arise on the first business day of the
Fund's next taxable year. For the period ended December 31, 2008 (in thousands),
the S&P 500 Index Fund deferred $18,359 of capital losses, the Small Cap Index
Fund deferred $267 of capital losses and the International Equity Index Fund
deferred $4,051 of capital losses to January 1, 2009.
4. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Funds (shares and dollars in thousands):
Year ended December 31, 2008
INSTITUTIONAL CLASS PLANAHEAD CLASS
------------------- -----------------
S&P 500 INDEX FUND SHARES AMOUNT SHARES AMOUNT
- ------------------ ------- --------- ------ --------
Shares sold .......................... 5,952 $ 97,796 427 $ 6,335
Reinvestment of dividends ............ 385 5,882 16 240
Shares redeemed ...................... (1,640) (27,201) (312) (4,689)
------ -------- ---- -------
Net increase in shares outstanding ... 4,697 $ 76,477 131 $ 1,886
====== ======== ==== =======
INSTITUTIONAL CLASS
-------------------
SMALL CAP INDEX FUND SHARES AMOUNT
- -------------------- ------- --------
Shares sold .................................. 1,023 $11,693
Reinvestment of dividends .................... 428 3,202
Shares redeemed .............................. (1,378) (15,932)
------- -------
Net increase (decrease) in shares
outstanding ............................... 73 $(1,037)
======= =======
INSTITUTIONAL CLASS
-------------------
INTERNATIONAL EQUITY INDEX FUND SHARES AMOUNT
- ------------------------------- ------- --------
Shares sold .................................. 19,770 $227,499
Reinvestment of dividends .................... 1,003 7,110
Shares redeemed .............................. (15,836) (178,141)
------- --------
Net increase in shares outstanding ........... 4,937 $ 56,468
======= ========
19
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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
======= =========
20
AMERICAN BEACON S&P 500 INDEX FUND(SM)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class
Year Ended December 31,
---------------------------------------------------------
2008 2007 2006 2005 2004
-------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 19.85 $ 19.19 $ 16.90 $ 16.43 $ 15.10
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income:(A) ................... 0.35 0.39 0.33(C) 0.29 0.29
Net gain (loss) on investments, foreign
currency and futures transactions (both
realized and unrealized) ................. (7.64) 0.65 2.30 0.47 1.32
-------- -------- -------- -------- --------
Total income (loss) from investment
operations .................................. (7.29) 1.04 2.63 0.76 1.61
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income ........ (0.35) (0.38) (0.34) (0.29) (0.28)
Tax return of capital ....................... -- -- -- 0.00(B) --
-------- -------- -------- -------- --------
Total distributions ............................ (0.35) (0.38) (0.34) (0.29) (0.28)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ................. $ 12.21 $ 19.85 $ 19.19 $ 16.90 $ 16.43
======== ======== ======== ======== ========
TOTAL RETURN ................................... (37.08)% 5.39% 15.69% 4.74% 10.76%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .... $224,583 $271,746 $223,008 $225,857 $244,668
Ratios to average net assets (annualized):(A)
Net investment income, net of waivers .... 2.23% 1.89% 1.85% 1.75% 1.85%
Net investment income, before waivers .... 2.23% 1.89% 1.85% 1.75% 1.85%
Expenses, including expenses of the
master portfolio, net of waivers ...... 0.13% 0.13% 0.14% 0.13% 0.17%
Expenses, including expenses of the
master portfolio, before waivers ...... 0.13% 0.13% 0.14% 0.13% 0.17%
- ----------
(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) Based upon average shares outstanding.
21
AMERICAN BEACON S&P 500 INDEX FUND(SM)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PlanAhead Class
Year Ended December 31,
--------------------------------------------------------
2008 2007 2006 2005 2004
------- ------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 19.60 $ 18.97 $ 16.69 $ 16.23 $ 14.96
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A) .................... 0.33 0.31(B) 0.27(B,D) 0.21 0.23(B)
Net gain (loss) on investments, foreign
currency and futures transactions (both
realized and unrealized) ................. (7.60) 0.62(B) 2.23(B) 0.48 1.29(B)
------- ------- ------- ------- -------
Total income (loss) from investment
operations .................................. (7.27) 0.93 2.50 0.69 1.52
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ........ (0.27) (0.30) (0.22) (0.23) (0.25)
Tax return of capital ....................... -- -- -- 0.00(C) --
------- ------- ------- ------- -------
Total distributions ............................ (0.27) (0.30) (0.22) (0.23) (0.25)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ................. $ 12.06 $ 19.60 $ 18.97 $ 16.69 $ 16.23
======= ======= ======= ======= =======
TOTAL RETURN ................................... (37.35)% 4.88% 15.09% 4.32% 10.21%
======= ======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .... $12,915 $18,430 $16,056 $48,985 $46,344
Ratios to average net assets (annualized):(A)
Net investment income .................... 1.73% 1.38% 1.37% 1.28% 1.43%
Expenses, including expenses of the
master portfolio ...................... 0.62% 0.63% 0.61% 0.61% 0.62%
- ----------
(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.
(B) For the years ended December 31, 2004, 2006 and 2007 the net investment
income and net gains on securities (both realized and unrealized) have been
restated from 0.21 and 1.31, 0.17 and 2.33, and 0.28 and 0.65,
respectively.
(C) The tax return of capital is calculated based upon outstanding shares at
the time of distribution. Amounts are less than $0.01 per share.
(D) Based upon average shares outstanding.
22
AMERICAN BEACON SMALL CAP INDEX FUND(SM)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class
Year Ended December 31,
---------------------------------------------------------
2008 2007 2006 2005 2004
------- -------- -------- ------- --------
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 13.51 $ 14.89 $ 12.78 $12.57 $ 11.27
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A) .................... 0.18 0.32 0.17 0.16 0.14
Net gain (loss) on investments, foreign
currency and futures transactions (both
realized and unrealized) .............. (4.78) (0.53) 2.11 0.42 1.87
------- ------- -------- ------- -------
Total income (loss) from investment operations.. (4.60) (0.21) 2.28 0.58 2.01
------- ------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ........ (0.17) (0.31) (0.17) (0.17) (0.13)
Distributions from net realized gains on
investments .............................. (0.61) (0.80) -- (0.15) (0.58)
Tax return of capital(B) .................... (0.13) (0.06) -- (0.05) --
------- ------- -------- ------- -------
Total distributions ............................ (0.91) (1.17) (0.17) (0.37) (0.71)
------- ------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD ................. $ 8.00 $ 13.51 $ 14.89 $12.78 $ 12.57
======= ======= ======== ======= =======
TOTAL RETURN ................................... (33.58)% (1.63)% 17.85% 4.51% 17.91%
======= ======= ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .... $31,552 $52,325 $151,878 $46,113 $39,196
Ratios to average net assets (annualized):(A)
Net investment income .................... 1.54% 1.49% 1.49% 1.12% 0.90%
Expenses, including expenses of the
master portfolio ......................... 0.20% 0.20% 0.18% 0.18% 0.22%
- ----------
(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.
23
AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class
Year Ended December 31,
---------------------------------------------------------
2008 2007 2006 2005 2004
-------- -------- -------- ------- --------
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 13.37 $ 12.76 $ 10.33 $ 9.39 $ 8.01
-------- -------- -------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(A) .................... 0.39 0.52 0.23 0.21 0.17
Net gain (loss) on investments, foreign
currency and futures transactions (both
realized and unrealized) ................. (6.00) 0.85 2.50 1.06 1.44
Total income (loss) from investment operations.. (5.61) 1.37 2.73 1.27 1.61
-------- -------- -------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income ........ (0.30) (0.53) (0.23) (0.24) (0.23)
Distributions from net realized gains on
investments .............................. -- (0.22) (0.07) -- --
Tax return of capital ....................... -- (0.01)(B) -- (0.09)(B) --
-------- -------- -------- ------- -------
Total distributions ............................ (0.30) (0.76) (0.30) (0.33) (0.23)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD ................. $ 7.46 $ 13.37 $ 12.76 $ 10.33 $ 9.39
-------- -------- -------- ------- -------
TOTAL RETURN ................................... (41.85)% 10.68% 26.52% 13.58% 20.12%
======== ======== ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .... $185,860 $267,293 $162,113 $90,200 $23,156
Ratios to average net assets (annualized):(A)
Net investment income .................... 3.58% 2.96% 2.44% 2.49% 2.16%
Expenses, including expenses of the
master portfolio ...................... 0.19% 0.19% 0.22% 0.23% 0.26%
- ----------
(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.
24
AMERICAN BEACON FUNDS
TAX INFORMATION
FOR THE TAX YEAR ENDED DECEMBER 31, 2008 (UNAUDITED)
We are providing this information as required by the Internal Revenue Code.
The amounts shown may differ from those in other areas of this report because of
differences between tax and financial reporting requirements.
For corporate shareholders in the Funds, the percentage of ordinary
dividend income distributed for the year ended December 31, 2008, which is
designated as qualifying for the dividends-received deduction, is as follows:
S&P 500 Index Fund 96.4%
Small Cap Index Fund 65.1%
International Equity Index Fund 0.0%
For shareholders in the Funds, the percentage of dividend income
distributed for the year ended December 31, 2008, which designated as qualified
dividend income under the Jobs and Grown Tax relief Act of 2003, is as follows:
S&P 500 Index Fund 100.0%
Small Cap Index Fund 71.0%
International Equity Index Fund 100.0%
Pursuant to Section 852 of the Internal Revenue Code, The Funds designate
the following amounts as long-term capital gain dividends for their taxable year
ended December 31, 2008 (in thousands):
S&P 500 Index Fund $ 0
Small Cap Index Fund $2,100
International Equity Index Fund $ 0
Of the ordinary dividends distributed to shareholders during the tax year
ended December 31, 2008, the amount of income derived from short-term capital
gains is as follows (in thousands):
S&P 500 Index Fund $ 0
Small Cap Index Fund $27
International Equity Index Fund $ 0
25
AMERICAN BEACON FUNDS
PRIVACY POLICY
(UNAUDITED)
PRIVACY POLICY
The American Beacon Funds recognizes and respects the privacy of our
shareholders. We are providing this notice to you so you will understand how
shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of
the following sources:
- information we receive from you on applications or other forms;
- information about your transactions with us or our service
providers; and
- information we receive from third parties.
We do not disclose any nonpublic personal information about our customers
or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those
employees or service providers who need to know that information to provide
products or services to you. To ensure the confidentiality of your nonpublic
personal information, we maintain safeguards that comply with federal standards.
26
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
The Trustees and officers of the American Beacon Funds (the "Trust") are
listed below, together with their principal occupations during the past five
years. Unless otherwise indicated, the address of each person listed below is
4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee
oversees twenty-three funds in the fund complex that includes the Trust, the
American Beacon Master Trust, the American Beacon Mileage Funds, and the
American Beacon Select Funds. The Trust's Statement of Additional Information
contains additional information about the Trustees and is available without
charge by calling 1-800-658-5811.
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ------------------- --------------------------------------------------------
INTERESTED TRUSTEES
Term
Lifetime of Trust
until removal,
resignation or
retirement*
Alan D. Feld** (72) Trustee since 1996 Sole Shareholder of a professional corporation which is
a Partner in the law firm of Akin, Gump, Strauss, Hauer
& Feld, LLP (1960-Present); Director, Clear Channel
Communications (1984-Present); Trustee, CenterPoint
Properties (1994- 2006); Member, Board of Trustees,
Southern Methodist University; Member, Board of
Visitors, M.D. Anderson Hospital; Board of Visitors,
Zale/Lipshy Hospital
NON-INTERESTED TRUSTEES
Term
W. Humphrey Bogart (64) Trustee since 2004 Board Member, Baylor University Medical Center
Foundation (1992-2004); Consultant, New River Canada
Ltd. (mutual fund servicing company) (1998-2003);
President and CEO, Allmerica Trust Company, NA
(1996-1997); President and CEO, Fidelity Investments
Southwest Company (1983-1995); Senior Vice President of
Regional Centers, Fidelity Investments (1988-1995)
Brenda A. Cline (48) Trustee since 2004 Executive Vice President, Chief Financial Officer,
Treasurer and Secretary, Kimbell Art Foundation
(1993-Present); Trustee, Texas Christian University
(1998- Present); Trustee, W.I. Cook Foundation, Inc.
(d/b/a Cook Children's Health Foundation) (2001-2006);
Director, Christian Church Foundation (1999-2007)
Eugene J. Duffy (54) Trustee since 2008 Principal and Executive Vice President, Paradigm Asset
Management (1994- Present); Director, Sunrise Bank of
Atlanta (2008-Present); Chairman, Special Contributions
Fund Board of Trustees, National Association for the
Advancement of Colored People (2007-Present); Trustee,
National Association for the Advancement of Colored
People (2000-Present); Board of Visitors, Emory
University (2006-Present); Trustee, Atlanta Botanical
Garden (2006-Present); Board Member, Willie L. Brown Jr.
Institute on Politics and Public Service (2001-
Present); Chair, National Association of Securities
Professionals (2000-2002); Deputy Chief Administrative
Officer, City of Atlanta (1985-1990)
Thomas M. Dunning (65) Trustee since 2008 Consultant, (2008-Present); Chairman (1998-2008) and
Chief Executive Officer (1998-2007), Lockton Dunning
Benefits (consulting firm in employee benefits);
Director, Oncor Electric Delivery Company LLC
(2007-Present); Immediate Past Chairman and Board
Member, Dallas (2003-Present), Dallas Citizens Council;
Director, Baylor Health Care System Foundation
(2007-Present); Vice Chair, State Fair of Texas
(1987-Present); Board Member, Southwestern Medical
Foundation (1994-Present)
Richard A. Massman (65) Trustee since 2004 Senior Vice President and General Counsel, Hunt
Chairman since 2008 Consolidated, Inc. (holding company engaged in oil and
gas exploration and production, refining, real estate,
farming, ranching and venture capital activities)
(1994-Present). Chairman (2007- Present) and Director
(2005-Present), The Dallas Opera Foundation; Chairman
(2006-Present) and Director (2005-Present), Temple
Emanu-El Foundation; Trustee, Presbyterian Healthcare
Foundation (2006-Present)
27
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ------------------- --------------------------------------------------------
NON-INTERESTED
TRUSTEES (CONT.)
R. Gerald Turner (63) Trustee since 2001 President, Southern Methodist University (1995-Present);
225 Perkins Admin. Bldg. Director, ChemFirst (1986-2002); Director, J.C. Penney
Southern Methodist Univ. Company, Inc. (1996-Present); Director, California
Dallas, Texas 75275 Federal Preferred Capital Corp. (2001-2003); Director,
Kronus Worldwide Inc. (chemical manufacturing)
(2003-Present); Director, First Broadcasting Investment
Partners, LLC (2003-2007); Member, Salvation Army of
Dallas Board of Directors; Member, Methodist Hospital
Advisory Board; Co-Chair, Knight Commission on
Intercollegiate Athletics.
Paul J. Zucconi,CPA (67) Trustee since 2008 Director, Affirmative Insurance Holdings, Inc. (producer
of nonstandard automobile insurance) (2004-present);
Director, Titanium Metals Corporation (producer of
titanium melted and mill products and sponge) (2002-
present); Director, Torchmark Corporation (life and
health insurance products) (2002- present); Director,
National Kidney Foundation serving North Texas (2003-
Present); Director, Dallas Chapter of National
Association of Corporate Directors (2004-Present);
Partner, KPMG (1976-2001).
OFFICERS
Term
One Year
William F. Quinn (60) President from Chairman (2006-Present) and CEO (2006-2007 and 2008
1987 to 2007 Present), President (1986- 2006) and Director
and 2008 to Present (2003-Present), American Beacon Advisors, Inc.; Chairman
Executive Vice (1989-2003) and Director (1979-1989, 2003-Present),
President from American Airlines Federal Credit Union; Director,
2007 to 2008 Crescent Real Estate Equities, Inc.(1994-2007);
Trustee from Director, Pritchard, Hubble & Herr, LLC (investment
1987 to 2008 advisor) (2001-2006); Director of Investment Committee,
Southern Methodist University Endowment Fund (1996-
Present); Member, Southern Methodist University Cox
School of Business Advisory Board (1999-2002); Member,
New York Stock Exchange Pension Manager Committee
(1997-1998, 2000-2002, 2006-Present); Chairman
(2007-Present) and Vice Chairman (2004-2007), Committee
for the Investment of Employee Benefits; Director,
United Way of Metropolitan Tarrant County (1988-2000,
2004-Present); Trustee, American Beacon Mileage Funds
(1995-2008); Trustee, American Beacon Select Funds
(1999-2008); Trustee, American Beacon Master Trust
(1995-2008).
Rosemary K. Behan (49) VP, Secretary and Vice President, Legal and Compliance, American Beacon
Chief Legal Advisors, Inc. (2006- Present); Assistant General
Officer since 2006 Counsel, First Command Financial Planning, Inc.
(2004-2006); Enforcement Attorney (2002-2004) and Branch
Chief (2000-2002), Securities and Exchange Commission.
Brian E. Brett (48) VP since 2004 Vice President, Director of Sales and Marketing,
American Beacon Advisors, Inc. (2004-Present); Regional
Vice President, Neuberger Berman, LLC (investment
advisor) (1996-2004).
Wyatt Crumpler (42) VP since 2007 Vice President, Trust Investments, American Beacon
Advisors, Inc. (2007- Present); Managing Director of
Corporate Accounting (2004-2007), Director of IT
Strategy and Finance (2002-2004), American Airlines,
Inc.
28
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ------------------- --------------------------------------------------------
Michael W. Fields (54) VP since 1989 Vice President, Fixed Income Investments, American
Beacon Advisors, Inc. (1988- Present).
Rebecca L. Harris (42) Treasurer since Vice President, Finance, American Beacon Advisors, Inc.
1995 (1995-Present).
Christina E. Sears (37) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc.
Officer since 2004 (2004-Present); Senior Compliance Analyst, American
and Asst. Beacon Advisors, Inc. (1998-2004).
Secretary since
1999
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
72, provided, however, that the Board may determine to grant one or more
annual exemptions to this requirement.
** Mr. Feld is deemed to be an "interested person" of the Trusts, as defined
by the 1940 Act. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld
LLP has provided legal services within the past two fiscal years to the
Manager and one or more of the Trust's sub-advisors.
29
RESULTS OF SHAREHOLDER MEETING
(UNAUDITED)
A special meeting of shareholders of each of the portfolios of the American
Beacon Funds (the "Trust") was held on August 22, 2008. The shareholders of the
S&P 500 Index, Small Cap Index and International Equity Index Funds (the
"Funds") approved a new investment management agreement between American Beacon
Advisors, Inc. and the Funds. This proposal required a majority of shareholders
of each Fund to achieve a quorum. The following are the results of the
shareholder votes for this proposal:
FUND FOR AGAINST ABSTAIN NON-VOTING
- ---- --------------- ----------- ---------- --------------
S&P 500 Index 289,431,895.014 155,950.625 10,519.062 12,202,590.957
Small Cap Index 42,704,591.148 -0- -0- 261,197.760
International Equity Index 341,526,620.125 -0- -0- 18,572.641.920
The shareholders of the Trust also approved the re-election of five of the
current Trustees to the Board of the Trust and the election of three additional
Trustees to the Board. This proposal required a majority of the shareholders of
the Trust to vote to achieve a quorum. The following are the results of the
election of each Trustee:
ALAN D. FELD
Affirmative ................................................ 12,634,553,751.62
Withhold ................................................... 519,818,259.90
W. HUMPHREY BOGART
Affirmative ................................................ 12,999,746,162.82
Withhold ................................................... 154,625,848.70
BRENDA A. CLINE
Affirmative ................................................ 13,009,050,779.42
Withhold ................................................... 145,321,232.10
RICHARD A. MASSMAN
Affirmative ................................................ 13,004,756,096.42
Withhold ................................................... 149,615,915.10
R. GERALD TURNER
Affirmative ................................................ 13,004,259,224.92
Withhold ................................................... 150,112,786.60
THOMAS M. DUNNING
Affirmative ................................................ 13,003,350,236.48
Withhold ................................................... 151,021,775.04
EUGENE J. DUFFY
Affirmative ................................................ 12,985,296,316.39
Withhold ................................................... 169,075,695.13
PAUL J. ZUCCONI
Affirmative ................................................ 12,983,378,136.76
Withhold ................................................... 170,993,874.76
30
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2008
MARKET
SHARES VALUE (000)
--------- -----------
COMMON STOCKS - 97.3%
CONSUMER DISCRETIONARY - 8.4%
Abercrombie & Fitch Co. Class A 15,846 $ 366
Amazon.Com, Inc. (a) 59,892 3,071
Apollo Group, Inc. Class A (a) 20,329 1,558
AutoNation, Inc. (a) 23,063 228
AutoZone, Inc. (a) 7,864 1,097
Bed Bath & Beyond, Inc. (a) 49,845 1,267
Best Buy Co., Inc. 62,919 1,769
Big Lots, Inc. (a) 16,227 235
Black & Decker Corp. 11,937 499
Carnival Corp. 80,550 1,959
CBS Corp. Class B 130,703 1,070
Centex Corp. 24,082 256
Coach, Inc. (a) 63,228 1,313
Comcast Corp. Class A 547,948 9,249
D.R. Horton, Inc. 52,876 374
Darden Restaurants, Inc. 25,688 724
DIRECTV Group, Inc. (a) 104,377 2,391
Eastman Kodak Co. 54,482 358
eBay, Inc. (a) 206,503 2,883
Expedia, Inc. (a) 39,215 323
Family Dollar Stores, Inc. 26,858 700
Ford Motor Co. (a) 462,398 1,059
Fortune Brands, Inc. 27,745 1,145
GameStop Corp. (a) 29,000 628
Gannett Co., Inc. 42,074 337
Gap, Inc. 87,698 1,174
General Motors Corp. 122,645 392
Genuine Parts Co. 30,509 1,155
Goodyear Tire & Rubber Co. (a) 45,257 270
H&R Block, Inc. 62,615 1,423
Harley-Davidson, Inc. 43,201 733
Harman International Industries, Inc. 10,521 176
Hasbro, Inc. 24,425 712
Home Depot, Inc. 318,512 7,332
Host Hotels & Resorts, Inc. 100,665 762
International Game Technology 55,119 655
Interpublic Group of Cos., Inc. (a) 83,694 331
JC Penney Co., Inc. 40,310 794
Johnson Controls, Inc. 110,886 2,014
Jones Apparel Group, Inc. 13,434 79
KB HOME 14,794 202
Kohl's Corp. (a) 56,033 2,028
Leggett & Platt, Inc. 27,898 424
Lennar Corp. Class A 27,931 242
Limited Brands 48,767 490
Lowe's Cos., Inc. 274,062 5,898
Macy's, Inc. 76,523 792
Marriot International, Inc. Class A 57,321 1,115
Mattel, Inc. 66,976 1,072
MARKET
SHARES VALUE (000)
--------- -----------
McDonald's Corp. 210,525 $ 13,093
McGraw-Hill, Inc. 60,266 1,398
Meredith Corp. 7,889 135
New York Times Co. Class A 22,922 168
Newell Rubbermaid, Inc. 51,593 505
News Corp. Class A 431,009 3,918
NIKE, Inc. Class B 73,252 3,736
Nordstrom, Inc. 27,033 360
Office Depot, Inc. (a) 51,256 153
Omnicom Group, Inc. 59,741 1,608
Polo Ralph Lauren Corp. 10,615 482
Pulte Homes, Inc. 41,426 453
Radioshack Corp. 26,203 313
Scripps Networks Interactive, Inc. Class A 16,835 370
Sears Holdings Corp. (a) 10,274 399
Sherwin-Williams Co. 18,396 1,099
Snap-On, Inc. 11,612 457
Stanley Works 14,583 497
Staples, Inc. 132,933 2,382
Starbucks Corp. (a) 136,061 1,287
Starwood Hotels & Resorts Worldwide, Inc. 33,647 602
Target Corp. 141,816 4,897
Tiffany & Co. 22,280 526
Time Warner, Inc. 672,173 6,762
TJX Cos., Inc. 77,406 1,592
V.F. Corp. 16,793 920
Viacom, Inc. Class B (a) 115,622 2,204
Walt Disney Co. 349,345 7,927
Washington Post Co. Class B 1,060 414
Whirlpool Corp. 13,761 569
Wyndham Worldwide Corp. 34,299 225
Wynn Resorts, Ltd. (a) 12,200 516
Yum! Brands, Inc. 87,192 2,747
----------
127,838
----------
CONSUMER STAPLES - 12.5%
Altria Group, Inc. 385,299 5,803
Archer-Daniels-Midland Co. 121,724 3,509
Avon Products, Inc. 80,660 1,938
Brown-Forman Corp. Class B 18,655 961
Campbell Soup Co. 39,265 1,178
Clorox Co. 25,643 1,425
Coca-Cola Co. 375,311 16,990
Coca-Cola Enterprises, Inc. 62,501 752
Colgate-Palmolive Co. 95,001 6,512
ConAgra Foods, Inc. 84,075 1,387
Constellation Brands, Inc. Class A (a) 37,426 590
Costco Wholesale Corp. 81,089 4,257
CVS Corp. 269,032 7,732
Dean Foods Co. (a) 29,658 533
Dr Pepper Snapple Group, Inc. (a) 45,800 744
Estee Lauder Cos, Inc. Class A 20,552 636
See notes to Financial Statements
31
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2008
MARKET
SHARES VALUE (000)
--------- -----------
CONSUMER STAPLES - (CONTINUED)
General Mills, Inc. 62,932 $ 3,823
H.J. Heinz Co. 57,769 2,172
Kellogg Co. 45,935 2,014
Kimberly-Clark Corp. 77,200 4,072
Kraft Foods, Inc. 277,909 7,462
Kroger Co. 121,476 3,208
Lorillard, Inc. 32,461 1,829
McCormick & Co., Inc. 24,853 792
Molson Coors Brewing Co., Class B 28,562 1,397
Pepsi Bottling Group, Inc. 26,753 602
PepsiCo, Inc. 292,856 16,040
Philip Morris International, Inc. 381,699 16,608
Procter & Gamble Co. 562,619 34,781
Reynolds American, Inc. 31,387 1,265
Safeway, Inc. 80,364 1,910
Sara Lee Corp. 130,834 1,281
SuperValu, Inc. 37,648 550
Sysco Corp. 111,909 2,567
The Hershey Company 31,782 1,104
The J.M. Smucker Co. 22,760 987
Tyson Foods, Inc., Class A 57,835 507
UST Corp. 27,837 1,931
Wal-Mart Stores, Inc. 421,502 23,630
Walgreen Co. 184,018 4,540
Whole Foods Market, Inc. 25,433 240
----------
190,259
----------
ENERGY - 12.6%
Anadarko Petroleum Corp. 88,126 3,397
Apache Corp. 62,325 4,645
Baker Hughes, Inc. 57,578 1,847
BJ Services Co. 52,248 610
Cabot Oil & Gas Corp. 20,300 528
Cameron International Corp. (a) 41,400 849
Chesapeake Energy Corp. 97,582 1,578
Chevron Corp. (e) 383,846 28,393
ConocoPhillips 281,330 14,573
Devon Energy Corp. 82,951 5,451
El Paso Corp. 132,492 1,037
ENSCO International, Inc. 26,077 740
EOG Resources, Inc. 46,717 3,110
Equitable Resources, Inc. 24,300 815
ExxonMobil Corp. (e) 957,872 76,467
Halliburton Co. 170,334 3,097
Hess Corp. 52,501 2,816
Marathon Oil Corp. 133,077 3,641
Murphy Oil Corp. 35,641 1,581
Nabors Industries, Ltd. (a) 51,604 618
National Oilwell Varco, Inc. (a) 78,157 1,910
Noble Corp. 50,818 1,123
Occidental Petroleum Corp. 152,144 9,127
Pioneer Natural Resources Co. 21,600 349
MARKET
SHARES VALUE (000)
--------- -----------
Range Resources Corp. 29,400 $ 1,011
Rowan Cos., Inc. 19,520 310
Schlumberger, Ltd. 224,675 9,511
Smith International, Inc. 39,634 907
Sunoco, Inc. 21,584 938
Tesoro Corp. 26,365 347
Valero Energy Corp. 99,109 2,145
Weatherford International Ltd. (a) 127,010 1,374
Williams Cos., Inc. 109,968 1,592
XTO Energy, Inc. 109,552 3,864
----------
191,852
----------
FINANCIALS - 13.1%
AFLAC, Inc. 88,890 4,075
American Capital Ltd. 39,402 128
American Express Co. 216,164 4,010
American International Group, Inc. 483,466 759
Ameriprise Financial, Inc. 39,907 932
AON Corp. 52,147 2,382
Apartment Investment & Management Co. Class A 24,281 280
Assurant, Inc. 21,431 643
AvalonBay Communities, Inc. 14,653 888
Bank of America Corp. 947,062 13,335
Bank of New York Mellon Corp. 214,285 6,071
BB&T Corp. 102,870 2,825
Boston Properties, Inc. 22,967 1,263
Capital One Financial Corp. 74,963 2,391
CB Richard Ellis Group, Inc. Class A (a) 47,275 204
Charles Schwab Corp. 175,393 2,836
Chubb Corp. 67,475 3,441
Cincinnati Financial Corp. 31,214 907
CIT Group, Inc. 54,842 249
Citigroup, Inc. 1,030,602 6,915
CME Group, Inc. 12,391 2,579
Comerica, Inc. 27,144 539
Developers Diversified Realty Corp. 22,824 111
Discover Financial Services 85,605 816
E*Trade Financial Corp. (a) 81,315 94
Equity Residential 51,457 1,534
Federated Investors, Inc. Class B 15,270 259
Fidelity National Information Services, Inc. 36,777 598
Fifth Third Bancorp 107,116 885
First Horizon National Corp. 40,272 426
Franklin Resources, Inc. 28,180 1,797
Genworth Financial, Inc. Class A 79,351 225
Goldman Sachs Group, Inc. 83,700 7,063
Hartford Financial Services Group, Inc. 58,297 957
HCP, Inc. 46,700 1,297
Hudson City Bancorp, Inc. 95,992 1,532
Huntington Bancshares, Inc. 64,656 495
IntercontinentalExchange, Inc. (a) 13,980 1,152
Invesco Ltd. 69,400 1,002
J.P. Morgan Chase & Co. 703,715 22,188
See notes to Financial Statements
32
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2008
MARKET
SHARES VALUE (000)
--------- -----------
FINANCIALS - (CONTINUED)
Janus Capital Group, Inc. 26,407 $ 212
KeyCorp 93,575 797
Kimco Realty Corp. 41,069 751
Legg Mason, Inc. 26,342 577
Leucadia National Corp. (a) 31,136 616
Lincoln National Corp. 46,692 880
Loews Corp. 69,031 1,950
M & T Bank Corp. 14,137 812
Marsh & McLennan Cos., Inc. 94,753 2,300
Marshall & Ilsley Corp. 45,493 621
Mastercard, Inc. Class A 13,600 1,944
MBIA, Inc. (a) 31,984 130
Merrill Lynch & Co., Inc. 304,490 3,544
MetLife, Inc. 150,396 5,243
Moody's Corp. 35,466 712
Morgan Stanley 205,330 3,293
NASDAQ OMX Group, Inc. (a) 24,600 608
National City Corp. 384,354 696
Northern Trust Corp. 41,706 2,175
NYSE Euronext 48,800 1,336
People's United Financial Inc. 63,600 1,134
Plum Creek Timber Co., Inc. 33,011 1,147
PNC Financial Services Group, Inc. 64,051 3,138
Principal Financial Group, Inc. 46,591 1,052
Progressive Corp. 127,401 1,887
ProLogis 48,091 668
Prudential Financial, Inc. 81,039 2,452
Public Storage, Inc. 23,887 1,899
Regions Financial Corp. 129,789 1,033
Simon Property Group, Inc. 42,400 2,253
SLM Corp. (a) 83,254 741
Sovereign Bancorp, Inc. (a) 105,974 316
State Street Corp. (b) 81,725 3,214
SunTrust Banks, Inc. 66,618 1,968
T. Rowe Price Group, Inc. 48,075 1,704
Torchmark Corp. 15,621 698
Travelers Cos, Inc. 110,204 4,981
U.S. Bancorp 331,752 8,297
Unum Group 66,529 1,237
Vornado Realty Trust 26,034 1,571
Wachovia Corp. 399,078 2,211
Wells Fargo Co. 714,593 21,066
Western Union Co. 134,085 1,923
XL Capital, Ltd. Class A 54,468 202
Zions Bancorp 21,753 533
----------
199,947
----------
HEALTH CARE - 14.3%
Abbott Laboratories 292,706 15,622
Aetna, Inc. 89,650 2,555
Allergan, Inc. 58,392 2,354
AmerisourceBergen Corp. 29,893 1,066
Amgen, Inc. (a) 200,036 11,552
MARKET
SHARES VALUE (000)
--------- -----------
Baxter International, Inc. 117,361 $ 6,289
Becton, Dickinson & Co. 45,197 3,091
Biogen Idec, Inc. (a) 55,031 2,621
Boston Scientific Corp. (a) 283,034 2,191
Bristol-Myers Squibb Co. 369,638 8,594
C.R. Bard, Inc. 18,697 1,575
Cardinal Health, Inc. 67,557 2,329
Celgene Corp. (a) 85,618 4,733
Cephalon, Inc. (a) 12,400 955
CIGNA Corp. 53,596 903
Coventry Health Care, Inc. (a) 27,603 411
Covidien Ltd. 95,704 3,468
DaVita, Inc. (a) 20,300 1,006
Dentsply International Inc. 27,200 768
Eli Lilly & Co. 187,675 7,558
Express Scripts, Inc. (a) 46,299 2,546
Forest Laboratories, Inc. (a) 58,202 1,482
Genzyme Corp. (a) 49,892 3,311
Gilead Sciences, Inc. (a) 173,899 8,893
Hospira, Inc. (a) 28,503 765
Humana, Inc. (a) 32,007 1,193
IMS Health, Inc. 34,832 528
Intuitive Surgical, Inc. (a) 7,500 953
Johnson & Johnson 522,149 31,240
King Pharmaceuticals, Inc. (a) 48,592 516
Laboratory Corp. of America Holdings (a) 20,622 1,328
Life Technologies Corp. (a) 31,287 729
McKesson Corp. 50,655 1,962
Medco Health Solutions, Inc. (a) 94,468 3,959
Medtronic, Inc. 210,278 6,607
Merck & Co., Inc. 401,219 12,197
Millipore Corp. (a) 9,535 491
Mylan Laboratories Inc. (a) 60,109 595
Patterson Cos., Inc. (a) 18,294 343
Pfizer, Inc. 1,271,271 22,514
Quest Diagnostics, Inc. 29,800 1,547
Schering-Plough Corp. 306,055 5,212
St. Jude Medical, Inc. (a) 63,126 2,081
Stryker Corp. 46,089 1,841
Tenet Healthcare Corp. (a) 66,670 77
Thermo Fisher Scientific, Inc. (a) 78,524 2,675
UnitedHealth Group, Inc. 226,996 6,038
Varian Medical Systems, Inc. (a) 22,860 801
Watson Pharmaceuticals, Inc. (a) 20,646 549
Wellpoint, Inc. (a) 95,838 4,038
Wyeth 248,887 9,336
Zimmer Holdings, Inc. (a) 41,652 1,684
----------
217,672
----------
INDUSTRIALS - 10.9%
3M Co. 130,572 7,513
Avery Dennison Corp. 18,988 621
Boeing Co. 138,988 5,931
Burlington Northern Santa Fe Corp. 52,982 4,011
See notes to Financial Statements
33
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2008
MARKET
SHARES VALUE (000)
--------- -----------
INDUSTRIALS - (CONTINUED)
Caterpillar, Inc. 114,479 $ 5,114
CH Robinson Worldwide, Inc. 31,961 1,759
Cintas Corp. 25,088 583
Cooper Industries, Ltd. Class A 32,034 936
CSX Corp. 75,538 2,453
Cummins, Inc. 37,258 996
Danaher Corp. 47,386 2,683
Deere & Co. 80,637 3,090
Domtar Corp. (a),(c) 11 --
Dover Corp. 34,295 1,129
Eaton Corp. 30,295 1,506
Emerson Electric Co. 144,148 5,277
Equifax, Inc. 23,683 628
Expeditors International Washington, Inc. 40,120 1,335
Fastenal Co. 23,200 809
FedEx Corp. 58,100 3,727
Ffir Systems, Inc. (a) 26,100 803
Flowserve Corp. 10,300 530
Fluor Corp. 33,460 1,501
General Dynamics Corp. 74,961 4,317
General Electric Co. (e) 1,979,233 32,064
Goodrich Co. 24,445 905
Honeywell International, Inc. 140,381 4,609
Illinois Tool Works, Inc. 75,071 2,631
Ingersoll-Rand Co. Class A 58,457 1,014
ITT Industries, Inc. 33,492 1,540
Jacobs Engineering Group, Inc. (a) 23,400 1,126
L-3 Communications Holdings, Inc. 22,303 1,646
Lockheed Martin Corp. 62,652 5,268
Manitowoc Co., Inc. 24,000 208
Masco Corp. 67,523 752
Monster Worldwide, Inc. (a) 22,609 273
Norfolk Southern Corp. 69,355 3,263
Northrop Grumman Corp. 62,811 2,829
PACCAR, Inc. 67,874 1,941
Pall Corp. 22,209 631
Parker-Hannifin Corp. 31,803 1,353
Pitney Bowes, Inc. 40,027 1,020
Precision Castparts Corp. 25,507 1,517
R.R. Donnelley & Sons Co. 38,309 520
Raytheon Co. 77,482 3,955
Republic Services, Inc. 61,603 1,527
Robert Half International, Inc. 30,640 638
Rockwell Automation, Inc. 27,505 887
Rockwell Collins, Inc. 30,231 1,182
Ryder Systems, Inc. 9,821 381
Southwest Airlines Co. 136,186 1,174
Ryder Systems, Inc. 9,821 381
Southwest Airlines Co. 136,186 1,174
Stericycle, Inc. (a) 15,600 812
Textron, Inc. 45,239 627
MARKET
SHARES VALUE (000)
--------- -----------
Total System Services, Inc. 37,775 $ 529
Tyco Electronics Ltd. 86,204 1,397
Tyco International Ltd. 87,961 1,900
Union Pacific Corp. 94,368 4,511
United Parcel Service, Inc. Class B 189,246 10,439
United Technologies Corp. 181,078 9,706
W.W. Grainger, Inc. 12,169 959
Waste Management, Inc. 92,139 3,053
----------
166,039
----------
INFORMATION TECHNOLOGY - 14.4%
Adobe Systems, Inc. (a) 99,657 2,122
Advanced Micro Devices, Inc. (a) 114,986 248
Affiliated Computer Services, Inc. Class A (a) 18,737 861
Agilent Technologies, Inc. (a) 68,068 1,064
Akamai Technologies, Inc. (a) 29,424 444
Altera Corp. 58,354 975
Amphenol Corp. Class A 31,900 765
Analog Devices, Inc. 54,669 1,040
Apple Computer, Inc. (a) 167,684 14,312
Applied Materials, Inc. 248,807 2,520
Autodesk, Inc. (a) 41,676 819
Automatic Data Processing, Inc. 94,317 3,710
BMC Software, Inc. (a) 35,621 959
Broadcom Corp. Class A (a) 83,259 1,413
CA, Inc. 73,599 1,364
CIENA Corp. (a) 14,529 97
Cisco Systems, Inc. (a) 1,106,619 18,038
Citrix Systems, Inc. (a) 33,467 789
Cognizant Technology Solutions Corp. Class A (a) 54,884 991
Computer Sciences Corp. (a) 28,244 992
Compuware Corp. (a) 51,350 347
Convergys Corp. (a) 20,035 128
Corning, Inc. 297,476 2,835
Dell, Inc. (a) 322,450 3,302
Dun & Bradstreet Corp. 9,900 764
Electronic Arts, Inc. (a) 58,200 934
EMC Corp. (a) 388,384 4,066
Fiserv, Inc. (a) 29,952 1,089
Google, Inc. Class A (a) 45,190 13,903
Harris Corp. 24,100 917
Hewlett-Packard Co. 462,016 16,767
Intel Corp. 1,053,556 15,445
International Business Machines Corp. 253,242 21,313
Intuit, Inc. (a) 58,463 1,391
Jabil Circuit, Inc. 39,951 270
Juniper Networks, Inc. (a) 100,793 1,765
KLA-Tencor Corp. 34,105 743
Lexmark International Group, Inc Class A (a) 15,842 426
Linear Technology Corp. 40,863 904
LSI Corp. (a) 112,662 371
McAfee, Inc. (a) 28,700 992
MEMC Electronic Materials, Inc. (a) 40,878 584
See notes to Financial Statements
34
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2008
MARKET
SHARES VALUE (000)
--------- -----------
INFORMATION TECHNOLOGY - (CONTINUED)
Microchip Technology, Inc. 33,189 $ 648
Micron Technology, Inc. (a) 142,362 376
Microsoft Corp. (e) 1,441,835 28,029
Molex, Inc. 24,805 359
Motorola, Inc. 417,065 1,848
National Semiconductor Corp. 39,396 397
NetApp, Inc. (a) 61,157 854
Novell, Inc. (a) 68,720 267
Novellus Systems, Inc. (a) 20,030 247
NVIDIA Corp. (a) 100,756 813
Oracle Corp. (a) 733,462 13,004
Paychex, Inc. 61,038 1,604
PerkinElmer, Inc. 21,118 294
QLogic Corp. (a) 24,322 327
QUALCOMM, Inc. 312,711 11,204
Salesforce.com, Inc. (a) 18,600 595
SanDisk Corp. (a) 40,167 386
Sun Microsystems, Inc. (a) 142,341 544
Symantec Corp. (a) 159,663 2,159
Tellabs, Inc. (a) 73,830 304
Teradata Corp. (a) 33,520 497
Teradyne, Inc. (a) 27,649 117
Texas Instruments, Inc. 247,399 3,840
VeriSign, Inc. (a) 37,521 716
Waters Corp. (a) 18,665 684
Xerox Corp. 161,834 1,290
Xilinx, Inc. 53,002 944
Yahoo!, Inc. (a) 260,319 3,176
----------
218,302
----------
MATERIALS - 3.1%
Air Products & Chemicals, Inc. 40,009 2,011
AK Steel Holding Corp. 20,000 186
Alcoa, Inc. 152,249 1,714
Allegheny Technologies, Inc. 17,528 447
Ball Corp. 17,562 730
Bemis Co., Inc. 17,262 409
CF Industries Holdings, Inc. 10,150 499
Consol Energy, Inc. 33,273 951
Dow Chemical Co. 173,228 2,614
E.I. Du Pont de Nemours & Co. 168,412 4,261
Eastman Chemical Co. 14,204 450
Ecolab, Inc. 33,566 1,180
Freeport-McMoRan Copper & Gold, Inc. Class B 70,752 1,729
International Flavors & Fragrances, Inc. 14,331 426
International Paper Co. 82,811 977
Massey Energy Co. 14,300 197
MeadWestvaco Corp. 32,320 362
Monsanto Co. 103,355 7,271
Newmont Mining Corp. 86,206 3,509
Nucor Corp. 58,554 2,705
Owens-Illinois, Inc. (a) 31,400 858
Pactiv Corp. (a) 23,915 595
MARKET
SHARES VALUE (000)
--------- -----------
Peabody Energy Corp. 50,924 $ 1,159
PPG Industries, Inc. 29,871 1,267
Praxair, Inc. 59,011 3,503
Rohm & Haas Co. 23,006 1,422
Sealed Air Corp. 28,492 426
Sigma-Aldrich Corp. 23,934 1,011
Titanium Metals Corp. 16,600 146
United States Steel Corp. 20,978 780
Vulcan Materials Co. 20,861 1,452
Weyerhaeuser Co. 38,837 1,189
----------
46,436
----------
TELECOMMUNICATION SERVICES - 3.7%
American Tower Corp. Class A (a) 74,300 2,179
AT&T, Inc. 1,110,550 31,651
CenturyTel, Inc. 19,441 531
Embarq Corp. 27,397 985
Fairpoint Communications, Inc. (c) 8 --
Frontier Communications Corp. 60,384 528
JDS Uniphase Corp. (a) 42,723 156
Qwest Communications International, Inc. 283,890 1,033
Sprint Nextel Corp. (a) 517,465 947
Verizon Communications, Inc. 532,566 18,054
Windstream Corp. 79,613 732
----------
56,796
----------
UTILITIES - 4.3%
AES Corp. (a) 12,395 1,058
Allegheny Energy, Inc. 30,759 1,042
Ameren Corp. 38,360 1,276
American Electric Power Co., Inc. 75,952 2,528
CenterPoint Energy, Inc. 65,611 828
CMS Energy Corp. 38,856 393
Consolidated Edison, Inc. 50,152 1,952
Constellation Energy Group, Inc. 34,414 863
Dominion Resources, Inc. 108,262 3,880
DTE Energy Co. 30,484 1,087
Duke Energy Corp. 236,920 3,556
Dynegy, Inc. (a) 82,690 165
Edison International 62,119 1,995
Entergy Corp. 36,198 3,009
Exelon Corp. 123,321 6,858
FirstEnergy Corp. 56,507 2,745
FPL Group, Inc. 76,721 3,861
Integrys Energy Group, Inc. 14,716 633
Nicor, Inc. 7,400 257
NiSource, Inc. 49,982 548
Pepco Holdings, Inc. 41,700 741
PG&E Corp. 67,626 2,618
Pinnacle West Capital Corp. 17,760 571
PPL Corp. 69,075 2,120
Progress Energy, Inc. 49,081 1,956
Public Service Enterprise Group, Inc. 96,324 2,810
Questar Corp. 32,968 1,078
SCANA Corp. 22,200 789
See notes to Financial Statements
35
STATE STREET EQUITY 500 INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2008
MARKET
SHARES VALUE (000)
--------- -----------
UTILITIES - (CONTINUED)
Sempra Energy 45,686 $ 1,948
Southern Co. 144,743 5,355
Southwestern Energy Co. (a) 64,000 1,854
Spectra Energy Corp. 113,398 1,785
TECO Energy, Inc. 42,151 521
Wisconsin Energy Corp. 21,200 890
Xcel Energy, Inc. 83,951 1,557
----------
65,127
----------
TOTAL COMMON STOCKS (COST $1,445,363,525) 1,480,268
PAR
AMOUNT MARKET
(000) VALUE (000)
--------- -----------
U.S. GOVERNMENT SECURITIES - 0.3%
United States Treasury
Bill(d)(e) 0.2% due 6/11/09 195 $ 195
United States Treasury
Bill(d)(e) 0.2% due 6/11/09 4,620 4,616
------
TOTAL U.S. GOVERNMENT SECURITIES
(COST $4,810,923) 4,811
------
SHARES MARKET
(000) VALUE (000)
--------- -----------
MONEY MARKET FUNDS - 2.3%
AIM Short Term Investment Prime Portfolio 35,121 $ 35,121
Federated Money Market Obligations Trust 571 571
----------
TOTAL MONEY MARKET FUNDS
(Cost $35,692,807) 35,692
----------
TOTAL INVESTMENTS # - 99.9%
(identified cost $1,485,867) 1,520,771
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.1% 1,437
----------
NET ASSETS - 100.0% $1,522,208
==========
NUMBER UNREALIZED
OF APPRECIATION
CONTRACTS (000)
--------- ------------
Schedule of Futures Contracts
S&P 500 Financial Futures Contracts (long)
Expiration Date 03/2009 924 $951
----
Total unrealized depreciation on open futures
contracts purchased $951
----
(a) Non-income producing security.
(b) Affiliated issuer. See table that follows for more information.
(c) Amount is less than $1,000.
(d) Rate represents annualized yield at date of purchase.
(e) All or part of this security has been designated as collateral for futures contracts.
# See Note 2 of the Notes to Financial Statements.
AFFILIATE TABLE
Certain investments made by the Portfolio were made in securities affiliated
with State Street and SSgA FM. Investments in State Street Corp., the holding
company of State Street, were made according to its representative portion of
the S&P 500(R) Index. The market value of this investment at December 31, 2008
is listed in the Portfolio of Investments.
Income
Earned Realized
Number of Shares Number of for the year Gain on
shares held purchased for Shares sold for shares held Value at ended shares
Security at the year ended the year ended at 12/31/08 12/31/08 sold
Description 12/31/2007 12/31/08 12/31/08 12/31/08 (000) (000) (000)
- ------------------ ----------- -------------- --------------- ----------- -------- ------------ --------
State Street Corp. 70,325 19,000 7,600 81,725 $3,214 $72 $(8)
See notes to Financial Statements
36
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2008 (AMOUNTS IN THOUSANDS)
ASSETS
Investments in unaffiliated issuers at market (identified cost $1,482,293) ......... $1,517,557
Investments in non-controlled affiliates at market (identified cost $3,574)
(Note 4) ........................................................................ 3,214
----------
Total investments at market (identified cost $1,485,867) ..................... 1,520,771
Cash ............................................................................... 8
Receivables:
Daily variation margin on futures contracts .................................. 545
Dividends and interest ....................................................... 3,390
----------
TOTAL ASSETS .............................................................. 1,524,714
----------
LIABILITIES
Payables:
Investment securities purchased .............................................. 2,450
Management fees (Note 4) ..................................................... 56
TOTAL LIABILITIES ......................................................... 2,506
----------
NET ASSETS ......................................................................... $1,522,208
==========
See notes to Financial Statements
37
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2008 (AMOUNTS IN THOUSANDS)
INVESTMENT INCOME
Dividend income - unaffiliated issuers .................. $ 45,238
Dividend income - non-controlled affiliated issuer ...... 72
Interest ................................................ 1,146
---------
TOTAL INVESTMENT INCOME .............................. 46,456
---------
EXPENSES
Management fees (Note 4) ................................ $ 893
---------
TOTAL EXPENSES ....................................... 893
---------
NET INVESTMENT INCOME ...................................... 45,563
---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments - unaffiliated issuers ...................... 1,264
Investments - non-controlled affiliated issuer .......... (8)
Futures contracts ....................................... (21,109)
--------- ---------
(19,853)
---------
Net change in net unrealized appreciation (depreciation) on:
Investments ............................................. (898,078)
Futures contracts ....................................... 276
---------
(897,802)
---------
Net realized and unrealized loss ........................... (917,655)
---------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $(872,092)
=========
See notes to Financial Statements
38
STATE STREET EQUITY 500 INDEX PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31,
2008 2007
----------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income ................................................ $ 45,563 $ 53,117
Net realized gain (loss) on investments and futures contracts ........ (19,853) 169,211
Net change in net unrealized appreciation (depreciation) ............. (897,802) (66,481)
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ... (872,092) 155,847
---------- ----------
CAPITAL TRANSACTIONS
Proceeds from contributions .......................................... 288,497 328,812
Fair value of withdrawals ............................................ (316,574) (765,322)
Withdrawals in-kind .................................................. -- (63,656)
---------- ----------
NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS .............. (28,077) (500,166)
---------- ----------
TOTAL NET DECREASE IN NET ASSETS ........................................ (900,169) (344,319)
NET ASSETS
Beginning of period ..................................................... 2,422,377 2,766,696
---------- ----------
END OF PERIOD ........................................................... $1,522,208 $2,422,377
========== ==========
See notes to Financial Statements
39
STATE STREET EQUITY 500 INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
The following table includes selected supplemental data and ratios to average
net assets:
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
12/31/2008 12/31/2007 12/31/2006 12/31/2005 12/31/2004
---------- ---------- ---------- ---------- ----------
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in
thousands) ............... $1,522,208 $2,422,377 $2,766,696 $2,453,109 $2,767,467
Ratios to average net assets:
Operating expenses .......... 0.045% 0.045% 0.045% 0.045% 0.045%
Net investment income ....... 2.30% 1.96% 1.94% 1.84% 1.97%
Portfolio turnover rate* ....... 14% 12% 10% 8% 9%
Total return (a) ............... (37.02)% 5.49% 15.75% 4.87% 10.86%
- ----------
* The portfolio turnover rate excludes in-kind security transactions.
(a) Results represent past performance and are not indicative of future
results.
40
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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
December 31, 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 Portfolio's investments. FAS 157
established a three tier hierarchy of inputs to establish a classification of
fair value measurement and disclosure. The three tier hierarchy of inputs is
summarized below:
Level 1 - quoted prices in active markets for identical securitites
41
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 - significant unobservable inputs (including the Portfolio's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication
of the risk associated with investing in those securities.
The following is a summary of the inputs used, as of December 31, 2008, in
valuing the Portfolio's assets carried at fair value:
Investments in Other Financial
Valuation Inputs Securities Instruments*
- ------------------------------------------------- -------------- ---------------
Level 1 - Quoted Prices ......................... $1,515,960,091 $950,935
Level 2 - Other significant observable inputs ... 4,810,926 --
Level 3 - Significant unobservable inputs ....... -- --
-------------- --------
Total ........................................... $1,520,771,017 $950,935
* Other financial instruments include futures contracts.
Securities transactions, investment income and expenses:
Securities transactions are recorded on a trade date basis for fmancial
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 has reviewed the tax positions for open years as of and
during the year ended December 31, 2008, and determined it did not have a
liability for any unrecognized tax expenses. The Portfolio recognizes interest
and penalties, if any, related to tax liabilities as income tax expense in the
Statement of Operations. As of December 31, 2008, tax years 2005 through 2008
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
42
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
payments are made or received by the Portfolio each day, depending on the daily
fluctuations in the value of the underlying security or index, and are recorded
for financial statement purposes as unrealized gains or losses by the Portfolio.
The Portfolio recognizes a realized gain or loss when the contract is closed.
The Portfolio voluntarily segregates securities in an amount equal to the
outstanding value of the open futures contracts in accordance with Securities
and Exchange Commission requirements.
The primary risks associated with the use of futures contracts are an
imperfect correlation between the change in market value of the securities held
by the Portfolio and the prices of futures contracts and the possibility of an
illiquid market.
Use of Estimates:
The Portfolio's financial statements are prepared in accordance with U.S.
generally accepted accounting principles that require the use of management
estimates. Actual results could differ from those estimates.
3. SECURITIES TRANSACTIONS
For the year ended December 31, 2008, purchases and sales of investment
securities, excluding short-term investments, futures contracts, and
contributions in-kind and fair value of withdrawals, aggregated to $307,643,773
and $281,597,781, respectively.
At December 31, 2008, the book cost of investments was $1,485,867,258 which
approximates cost computed on a federal tax basis. The aggregate gross
unrealized appreciation and gross unrealized depreciation was $357,487,087 and
$322,583,328, respectively, resulting in net appreciation of $34,903,759 for all
securities as computed on a federal income tax basis.
4. RELATED PARTY FEES AND TRANSACTIONS
The Portfolio has entered into an investment advisory agreement with SSgA
Funds Management, Inc. ("SSgA FM" or the "Adviser"), a subsidiary of State
Street Corp. and an affiliate of State Street Bank and Trust Company ("State
Street"), under which SSgA FM directs the investments of the Portfolio in
accordance with its investment objective, policies, and limitations. The Trust
has contracted with State Street to provide custody, administration and transfer
agent services to the Portfolio. In compensation for SSgA FM's services as
investment adviser and for State Street's services as administrator, custodian
and transfer agent (and for assuming ordinary operating expenses of the
Portfolio, including ordinary legal, audit and trustees expense), State Street
receives a unitary fee, calculated daily, at the annual rate of 0.045% of the
Portfolio's average daily net assets.
Certain investments made by the Portfolio were made in securities
affiliated with State Street and SSgA FM. Investments in State Street Corp., the
holding company of State Street, were made according to its representative
portion of the S&P 500(R) Index. The market value of this investment at December
31, 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.
43
STATE STREET EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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
On March 19, 2008, the FASB released Statement of Financial Accounting
Standards No. 161, "Disclosures about Derivative Instruments and Hedging
Activities" ("FAS 161"). FAS 161 requires qualitative disclosures about
objectives and strategies for using derivatives, quantitative disclosures about
fair value amounts of and gains and losses on derivative instruments, and
disclosures about credit-risk related contingent features in derivative
agreements. The application of FAS 161 is required for fiscal years beginning
after November 15, 2008 and interim periods within those fiscal years. At this
time, management is evaluating the implications of FAS 161 and believes the
impact of adopting FAS 161 will be limited to additional disclosures.
44
STATE STREET EQUITY 500 INDEX PORTFOLIO
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of State Street Master Funds and
Owners of Beneficial Interest of State Street Equity 500 Index Portfolio:
We have audited the accompanying statement of assets and liabilities of the
State Street Equity 500 Index Portfolio (one of the portfolios constituting
State Street Master Funds) (the "Portfolio"), including the portfolio of
investments, as of December 31, 2008, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Portfolio's internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Portfolio's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2008, by correspondence with the
custodian and brokers. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of State
Street Equity 500 Index Portfolio of State Street Master Funds at December 31,
2008, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended, in conformity
with U.S. generally accepted accounting principles.
(/s/ Ernst & Young LLP)
Boston, Massachusetts
February 23, 2009
45
STATE STREET EQUITY 500 INDEX PORTFOLIO
GENERAL INFORMATION
DECEMBER 31, 2008 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES AND RECORD
The Trust has adopted proxy voting procedures relating to portfolio
securities held by the Portfolio. A description of the policies and procedures
are available (i) without charge, upon request, by calling (877) 521-4083 or
(ii) on the website of the Securities and Exchange Commission (the "SEC") at
www.sec.gov. Information on how the Portfolio voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
available by August 31 (i) without charge, upon request, by calling (877)
521-4083 or (ii) on the SEC's website at www.sec.gov.
QUARTERLY PORTFOLIO SCHEDULE
The Trust files a complete schedule of portfolio holdings with the SEC for
the first and third quarters of its fiscal year (as of March and September of
each year) on Form N-Q. The Trust's Forms N-Q are available on the SEC's website
at www.sec.gov. The Trust's Forms N-Q may be reviewed and copied at the SEC's
Public Reference Room in Washington, D.C. and information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330. The most
recent Form N-Q is available without charge, upon request, by calling (877)
521-4083.
ADVISORY AGREEMENT RENEWAL
The Board of Trustees of the Trust met on November 20, 2008 (the "Meeting")
to consider the renewal of the investment advisory agreement for the Portfolio
(the "Advisory Agreement"). In preparation for considering the Advisory
Agreement, the Trustees had thoroughly reviewed the renewal materials provided
by the investment adviser, which they had requested through independent counsel.
In deciding whether to renew the Advisory Agreement, the Trustees considered
various factors, including (i) the nature, extent and quality of the services
provided by the SSgA Funds Management, Inc. (the "Adviser") under the Advisory
Agreement, (ii) the investment performance of the Portfolio, (iii) the costs to
the Adviser of its services and the profits realized by the Adviser and its
affiliates from their relationship with the Trust, (iv) the extent to which
economies of scale would be realized if and as the Trust grows and whether the
fee levels in the Advisory Agreement reflect these economies of scale, and (v)
any additional benefits to the Adviser from its relationship with the Trust.
In considering the nature, extent and quality of the services provided by
the Adviser, the Trustees relied on their prior direct experience as Trustees of
the Trust as well as on the materials provided at the Meeting. The Board
reviewed the Adviser's responsibilities under the Advisory Agreement and noted
the experience and expertise that would be appropriate to expect of an adviser
to the Portfolio, which is an index fund. The Trustees reviewed the background
and experience of the Adviser's senior management, including those individuals
responsible for the investment and compliance operations relating to the
investments of the Portfolio, and the responsibilities of the latter with
respect to the Portfolio. They also considered the resources, operational
structures and practices of the Adviser in managing the Portfolio's investments,
in monitoring and securing the Portfolio's compliance with its investment
objective and policies with respect to its investments and with applicable laws
and regulations, and in seeking best execution of portfolio transactions. The
Trustees also considered information about the Adviser's overall investment
management business, noting that the Adviser manages assets for a variety of
institutional investors and that the Adviser and its affiliates had over $1.69
trillion in assets under management as of September 30, 2008, including over
$157 billion managed by the Adviser. They reviewed information regarding State
Street's business continuity and disaster recovery program. Drawing upon the
materials provided and their general knowledge of the business of the Adviser,
the Trustees determined that the experience, resources and strength of the
Adviser in the management of index products are exceptional. As discussed more
fully below, they also determined that the advisory fee for the Portfolio was
fair and reasonable and that its performance and expense ratio were
satisfactory. On the basis of this review, the Trustees determined that the
nature and extent of the services provided by the Adviser to the Portfolio was
appropriate, had been of uniformly high quality, and could be expected to remain
so.
46
STATE STREET EQUITY 500 INDEX PORTFOLIO
GENERAL INFORMATION
DECEMBER 31, 2008 (UNAUDITED)
The Trustees noted that, in view of the investment objective of the
Portfolio, the investment performance was satisfactory. The Trustees noted that
the performance of the Portfolio in absolute terms was not of the importance
that normally attaches to that of actively-managed funds. Of more importance to
the Trustees was the extent to which the Portfolio achieved its objective of
replicating, before expenses, the total return of the S&P 500 Index. Drawing
upon information provided at the Meeting and upon reports provided to the
Trustees by the Adviser throughout the preceding year, they determined that the
Portfolio had in fact tracked the index within an acceptable range of tracking
error. They concluded that the performance the Portfolio was satisfactory.
The Trustees considered the profitability to the Adviser and its affiliate,
State Street, of the advisory relationships with the Trust. The Trustees had
been provided with data regarding the profitability to the Adviser and its
affiliated service providers with respect to the Portfolio individually, and on
an aggregate basis, for the year ended June 30, 2008. Having discussed with
representatives of the Adviser the methodologies used in computing the costs
that formed the bases of the profitability calculations, they concluded that
these methodologies were reasonable and turned to the data provided. After
discussion and analysis they concluded that, to the extent that the Adviser's
and State Street's relationships with the Trust had been profitable during the
period for which information had been provided, the profitability was in no case
such as to render the advisory fee excessive.
In order better to evaluate the Portfolio's advisory fee, the Trustees had
requested comparative information from Lipper Inc. with respect to fees paid by,
and expense ratios of, similar funds. The Trustees found that that the
Portfolio's advisory fee and total expense ratio were lower than the average for
its peer group; after discussion, they concluded that the data available
provided confirmation of the reasonableness of the Adviser's fee. The Board
determined that the Adviser's fee was fair and reasonable.
In considering whether the Adviser benefits in other ways from its
relationship with the Trust, the Trustees also considered whether the Adviser's
affiliates may benefit from the Trust's relationship with State Street as fund
administrator, custodian and transfer agent. They noted that the Adviser
utilizes no soft-dollar arrangements in connection with the Portfolio's
brokerage transactions. The Trustees concluded that, to the extent that the
Adviser or its affiliates derive other benefits from their relationships with
the Trust, those benefits are not so significant as to render the Adviser's fee
excessive.
The Board also considered the extent to which economies of scale may be
realized by the Portfolio as assets grow and whether the Portfolio's fee levels
reflect such economies of scale, if any, for the benefit of investors. In
considering the matter, the Board determined that, to the extent economies of
scale were in fact realized, such economies of scale were shared with the
Portfolio by virtue of an advisory fee of a comparatively low level that
subsumed economies of scale in the fee itself. The Trustees also recognized,
however, that should sustained, substantial asset growth be realized in the
future, it might be necessary to consider additional measures.
On the basis of the foregoing discussions and determinations, without any
one factor being dispositive, the Board decided to approve the continuance of
the Advisory Agreement
47
STATE STREET EQUITY 500 INDEX PORTFOLIO
TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED)
The table below includes information about the Trustees and Executive Officers
of the State Street Master Funds, including their:
- business addresses and ages;
- principal occupations during the past five years; and
- other directorships of publicly traded companies or funds.
NUMBER OF
FUNDS IN
FUND
COMPLEX
NAME, ADDRESS, POSITION(S) TERM OF OFFICE OVERSEEN
AND DATE OF BIRTH HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION BY OTHER DIRECTORSHIPS
("DOB") TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE* HELD BY TRUSTEE
- ------------------- ----------- ---------------- -------------------------------------- --------- -----------------------------
INDEPENDENT
TRUSTEES
Michael F. Holland Trustee and Term: Indefinite Chairman, Holland & Company L.L.C. 22 Trustee, State Street
Holland & Company, Chairman of (investment adviser) (1995 - present). Institutional Investment
LLC the Board Elected: 7/99 Trust; Director, the
375 Park Avenue Holland Series Fund, Inc.;
New York, NY 10152 Director, The China Fund,
DOB: 1944 Inc.; Chairman and
Trustee, Scottish Widows
Investment Partnership
Trust; and Director,
Reaves Utility Income
Fund
William L. Boyan Trustee Term: Indefinite Trustee of Old Mutual South Africa 22 Trustee, State Street
State Street Master Trust (investments) (1995 - Institutional Investment
Master Funds Elected: 7/99 present); Chairman emeritus, Trust; and Trustee, Old
P.O. Box 5049 Children's Hospital (1984 - present); Mutual South Africa Master
Boston, MA 02206 Director, Boston Plan For Excellence Trust
DOB 1937 (non-profit) (1994 - present);
President and Chief Operations
Officer, John Hancock Mutual Life
Insurance Company (1959 - 1999). Mr.
Boyan retired in 1999.
Rina K. Spence Trustee Term: Indefinite President of SpenceCare International 22 Trustee, State Street
State Street LLC (1998 - present); Member of the Institutional Investment
Master Funds Elected: 7/99 Advisory Board, Ingenium Corp. Trust; Director, Berkshire
P.O. Box 5049 (technology company) (2001 - Life Insurance Company of
Boston, MA 02206 present); Chief Executive Officer, America; and Director,
DOB: 1948 IEmily.com (internet company) (2000 - IEmily.com
2001); Chief Executive Officer of
Consensus Pharmaceutical, Inc. (1998 -
1999); Founder, President and Chief
Executive Officer of Spence Center for
Women's Health (1994 - 1998); Trustee,
Eastern Enterprise (utilities) (1988 -
2000).
Douglas T. Williams Trustee Term: Indefinite Executive Vice President of Chase 22 Trustee, State Street
State Street Master Manhattan Bank (1987 - 1999). Mr. Institutional Investment
Funds Elected: 7/99 Williams retired in 1999. Trust
P.O. Box 5049
Boston, MA 02206
DOB: 1940
* The "Fund Complex" consists of eleven series of the Trust and eleven series
of State Street Institutional Investment Trust.
48
STATE STREET EQUITY 500 INDEX PORTFOLIO
TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED)
NUMBER OF
FUNDS IN
FUND
COMPLEX
NAME, ADDRESS, POSITION(S) TERM OF OFFICE OVERSEEN
AND DATE OF BIRTH HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION BY OTHER DIRECTORSHIPS
("DOB") TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE* HELD BY TRUSTEE
- ------------------- ----------- ---------------- -------------------------------------- --------- -----------------------------
INTERESTED
TRUSTEES(1)
James E. Ross Trustee/ Term: Indefinite President, SSgA Funds Management, 22 Trustee, State Street
SSgA Funds President Inc. (2005 - present); Principal, SSgA Institutional Investment
Management, Inc. Elected Trustee: Funds Management, Inc. (2001 - Trust; Trustee, SPDR(R)
State Street 2/07 2005); Senior Managing Director, State Series Trust; Trustee,
Financial Center Street Global Advisors (March 2006 - SPDR(R) Index Shares TrusT
One Lincoln Street present); Principal, State Street and Trustee, Select Sector
Boston, MA Elected Global Advisers (2000 - 2006). SPDR(R) Trust
02111-2900 President: 4/05
DOB: 1965
OFFICERS
Gary L. French Treasurer Term: Indefinite Senior Vice President of State Street -- --
State Street Bank Bank and Trust Company (2002 -
and Trust Company Elected: 5/05 present).
2 Avenue de
Lafayette Boston,
MA 02111
DOB: 1951
Laura F. Healy Assistant Term: Indefinite Vice President of State Street Bank -- --
State Street Bank Treasurer Elected: 11/08 and Trust Company (prior to July 2,
and Trust Company 3008, Investors Financial Corporation)
2 Avenue de since 2002.
Lafayette Boston,
MA 02111
DOB: 1964
Brian D. O'Sullivan Assistant Term: Indefinite Vice President of State Street Bank -- --
State Street Bank Treasurer and Trust Company (2007 - present)
and Trust Company Elected: 11/08 with which he has been affiliated with
801 Pennsylvania since 1997.
Ave. Kansas City,
MO 64105
DOB: 1975
Peter T. Sattelmair Assistant Term: Indefinite Director of Fund Administration of -- --
State Street Bank Treasurer State Street Bank and Trust Company
and Trust Company Elected: 11/08 (2007 - present) with which he has
801 Pennsylvania been affiliated with since 1999.
Ave. Kansas City,
MO 64105
DOB: 1977
* The "Fund Complex" consists of eleven series of the Trust and eleven series
of State Street Institutional Investment Trust.
(1) Mr. Ross is an interested Trustee because of his employment by SSgA Funds
Management, Inc., an affiliate of the Trust.
Julie Piatelli Chief Term: Indefinite Principal and Senior Compliance and -- --
SSgA Funds Compliance Risk Management Officer, SSgA Funds
Management, Inc. Officer Elected: 7/07 Management, Inc. (2004-present),
State Street Vice President State Street Global
Financial Center Advisors (2004-present).
One Lincoln Street
Boston, MA 02111
DOB: 1967
49
STATE STREET EQUITY 500 INDEX PORTFOLIO
TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED)
NUMBER OF
FUNDS IN
FUND
COMPLEX
NAME, ADDRESS, POSITION(S) TERM OF OFFICE OVERSEEN
AND DATE OF BIRTH HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION BY OTHER DIRECTORSHIPS
("DOB") TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE* HELD BY TRUSTEE
- ------------------- ----------- ---------------- -------------------------------------- --------- -----------------------------
Nancy L. Conlin Secretary Term: Indefinite Vice President and Managing Counsel, -- --
State Street Bank State Street Bank and Trust Company
and Trust Company Elected: 2/09 (2007 - present); General Counsel to
2 Avenue de Plymouth Rock Companies (2004-
Lafayette Boston, 2007).
MA 02111
DOB: 1953
Brian C. Poole Assistant Term: Indefinite Vice President and Counsel (2008- -- --
State Street Bank Secretary present) and Associate Counsel (2004-
and Trust Company Elected: 9/08 2007), State Street Bank and Trust
4 Copley Place Company (formerly Investors Bank
Boston, MA 02116 and Trust Company); Legal Product
DOB: 1971 Manager, Fidelity Investments (2000-
2004).
* The "Fund Complex" consists of eleven series of the Trust and eleven series
of State Street Institutional Investment Trust.
The Statement of Additional Information includes additional information about
the Trustees and is available, without charge, upon request, by calling (toll
free) 877-521-4083.
50
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2008
This summary schedule of investments is presented to help investors focus on the
Series' principal holdings. It includes the Series' 50 largest holdings, each
investment of any issuer that exceeds 1% of the Series' net assets and
affiliated issues. "Other Securities" represent all issues not required to be
disclosed under the rules adopted by the Securities and Exchange Commission. A
complete schedule of investments is available without charge, upon request, by
calling (800) 441-7762 or on the Securities and Exchange Commission's website at
http://www.sec.gov.
PERCENT
OF NET
INDUSTRY COMMON STOCKS SHARES VALUE ASSETS
- -------- ----------------------------------------- ------- ------------ -------
ADVERTISING AGENCIES Other Securities $ 856,963 0.3%
AEROSPACE Curtiss-Wright Corp. 18,468 616,647 0.2
Moog, Inc. Class A (a) 17,613 644,107 0.2
Teledyne Technologies, Inc. (a) 14,634 651,945 0.2
Other Securities 1,779,852 0.5
------------ -----
3,692,551 1.1
------------ -----
AGRICULTURE, FISHING & RANCHING Other Securities 337,315 0.1
AIR TRANSPORT Other Securities 3,890,238 1.1
ALUMINUM Other Securities 139,624 0.0
AUTO PARTS: AFTER MARKET Other Securities 309,186 0.1
AUTO PARTS: ORIGINAL EQUIPMENT Other Securities 613,863 0.2
AUTO, TRUCKS & PARTS Other Securities 358,447 0.1
BANKS: NEW YORK CITY Other Securities 424,612 0.1
BANKS: NON U.S. BANKS Other Securities 162,268 0.0
BANKS: OUTSIDE NEW YORK CITY FirstMerit Corp. 34,000 700,060 0.2
UMB Financial Corp. 13,052 641,375 0.2
Westamerica Bancorp. 12,183 623,160 0.2
Other Securities 23,510,673 6.8
------------ -----
25,475,268 7.4
------------ -----
BEVERAGE: BREWERS (WINERIES) Other Securities 99,400 0.0
BEVERAGE: SOFT DRINKS Other Securities 584,603 0.2
BIOTECHNOLOGY RESEARCH & PRODUCTION Alexion Pharmaceuticals, Inc. (a)(i) 32,160 1,163,870 0.3
Myriad Genetics, Inc. (a) 18,700 1,239,062 0.4
OSI Pharmaceuticals, Inc. (a) 24,000 937,200 0.3
Other Securities 9,012,788 2.6
------------ -----
12,352,920 3.6
------------ -----
BUILDING MATERIALS Other Securities 1,934,147 0.6
BUILDING: CEMENT Other Securities 54,432 0.0
BUILDING: HEATING & PLUMBING Other Securities 262,502 0.1
BUILDING: MISCELLANEOUS Other Securities 546,544 0.2
BUILDING: ROOFING & WALLBOARD Other Securities 277,804 0.1
CABLE TELEVISION SERVICES Other Securities 404,521 0.1
CASINOS & GAMBLING Other Securities 1,704,403 0.5
CHEMICALS Other Securities 4,513,774 1.3
COAL Other Securities 357,362 0.1
COMMERCIAL INFORMATION SERVICES Other Securities 373,719 0.1
COMMUNICATIONS & MEDIA Other Securities 98,592 0.0
COMMUNICATIONS TECHNOLOGY Other Securities 8,596,701 2.5
COMPUTER SERVICES SOFTWARE & SYSTEMS Parametric Technology Corp.(a) 48,360 611,754 0.2
Sybase, Inc. (a) 33,300 824,841 0.2
Other Securities 16,156,112 4.7
------------ -----
17,592,707 5.1
------------ -----
COMPUTER TECHNOLOGY Other Securities 3,179,823 0.9
CONSTRUCTION EMCOR Group, Inc. (a) 28,472 638,627 0.2
Granite Construction, Inc. 13,871 609,353 0.2
Other Securities 670,714 0.2
------------ -----
1,918,694 0.6
------------ -----
CONSUMER ELECTRONICS Other Securities 1,877,777 0.5
CONSUMER PRODUCTS Other Securities 1,698,048 0.5
CONTAINERS & PACKAGING: METALS & GLASS Other Securities 731,896 0.2
CONTAINERS & PACKAGING: PAPER & PLASTIC Other Securities 205,110 0.1
COSMETICS Other Securities 674,318 0.2
51
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2008
PERCENT
OF NET
INDUSTRY COMMON STOCKS SHARES VALUE ASSETS
- -------- ----------------------------------------- ------- ------------ -------
DIVERSIFIED FINANCIAL SERVICES Other Securities $ 2,378,073 0.7%
DIVERSIFIED MATERIALS & PROCESSING Clarcor, Inc. 20,810 690,476 0.2
Other Securities 2,610,215 0.8
------------ -----
3,300,691 1.0
------------ -----
DRUG & GROCERY STORE CHAINS Other Securities 2,284,787 0.7
DRUGS & PHARMACEUTICALS Onyx Pharmaceuticals, Inc. (a) 23,320 796,611 0.2
Valeant Pharmaceuticals International
(a)(b) 26,700 611,430 0.2
Other Securities 8,065,321 2.3
------------ -----
9,473,362 2.7
------------ -----
EDUCATION SERVICES Other Securities 1,595,653 0.5
ELECTRICAL & ELECTRONICS Other Securities 1,215,231 0.4
ELECTRICAL EQUIPMENT & COMPONENTS Other Securities 3,238,471 0.9
ELECTRICAL: HOUSEHOLD APPLIANCE Other Securities 185,658 0.1
ELECTRONICS Other Securities 1,524,301 0.4
ELECTRONICS: INSTRUMENTS, Other Securities 234,638 0.1
GAUGES & METERS
ELECTRONICS: MEDICAL SYSTEMS Haemonetics Corp. (a) 10,772 608,618 0.2
Other Securities 3,307,858 0.9
------------ -----
3,916,476 1.1
------------ -----
ELECTRONICS: OTHER Other Securities 45,087 0.0
ELECTRONICS: Other Securities 4,795,470 1.4
SEMI-CONDUCTORS/COMPONENTS
ELECTRONICS: TECHNOLOGY Other Securities 1,836,291 0.5
ENERGY EQUIPMENT Other Securities 140,775 0.0
ENERGY MISCELLANEOUS Other Securities 2,332,626 0.7
ENGINEERING & CONTRACTING SERVICES Other Securities 1,254,649 0.4
ENTERTAINMENT Other Securities 549,114 0.2
FINANCE COMPANIES Other Securities 444,171 0.1
FINANCE: SMALL LOAN Other Securities 315,523 0.1
FINANCIAL DATA PROCESSING Jack Henry & Associates, Inc. 31,300 607,533 0.2
SERVICES & SYSTEMS Other Securities 1,957,471 0.5
------------ -----
2,565,004 0.7
------------ -----
FINANCIAL INFORMATION SERVICES Other Securities 855,442 0.2
FINANCIAL MISCELLANEOUS Other Securities 2,391,320 0.7
FOODS Flowers Foods, Inc. 32,476 791,115 0.2
Ralcorp Holdings, Inc. (a) 23,595 1,377,948 0.4
Other Securities 4,215,668 1.3
------------ -----
6,384,731 1.9
------------ -----
FOREST PRODUCTS Other Securities 453,034 0.1
FORMS & BULK PRINTING SERVICES Other Securities 269,046 0.1
FUNERAL PARLORS & CEMETERIES Other Securities 103,917 0.0
GLASS Other Securities 127,428 0.0
GOLD Other Securities 899,599 0.3
HEALTH CARE FACILITIES Psychiatric Solutions, Inc. (a) 23,300 648,905 0.2
Other Securities 1,128,158 0.3
------------ -----
1,777,063 0.5
------------ -----
HEALTH CARE MANAGEMENT SERVICES AMERIGROUP Corp. (a) 22,500 664,200 0.2
Other Securities 3,825,787 1.1
------------ -----
4,489,987 1.3
------------ -----
HEALTH CARE SERVICES Other Securities 2,667,230 0.8
HOMEBUILDING Other Securities 683,878 0.2
HOTEL/MOTEL Other Securities 201,988 0.1
HOUSEHOLD FURNISHINGS Other Securities 731,947 0.2
IDENTIFICATION CONTROL & FILTER DEVICES Other Securities 2,301,398 0.7
INDUSTRIAL PRODUCTS Other Securities 158,244 0.0
INSURANCE: LIFE Other Securities 1,347,609 0.4
INSURANCE: MULTI-LINE Montpelier Re Holdings Ltd. 39,100 656,489 0.2
Platinum Underwriters Holdings Ltd. 20,600 743,248 0.2
Other Securities 2,389,968 0.7
------------ -----
3,789,705 1.1
------------ -----
52
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2008
PERCENT
OF NET
INDUSTRY COMMON STOCKS SHARES VALUE ASSETS
- -------- ----------------------------------------- ------- ------------ -------
INSURANCE: PROPERTY-CASUALTY Aspen Insurance Holdings Ltd. 35,800 $ 868,150 0.3%
ProAssurance Corp. (a) 13,523 713,744 0.2
Validus Holdings Ltd. 26,600 695,856 0.2
Other Securities 6,375,254 1.8
------------ -----
8,653,004 2.5
------------ -----
INVESTMENT MANAGEMENT COMPANIES Other Securities 1,561,805 0.5
JEWELRY, WATCHES & GEMSTONES Other Securities 404,314 0.1
LEAD & ZINC Other Securities 71,440 0.0
LEISURE TIME Other Securities 1,256,235 0.4
MACHINE TOOLS Other Securities 71,385 0.0
MACHINERY & ENGINEERING Other Securities 330,911 0.0
MACHINERY: AGRICULTURAL Other Securities 243,225 0.1
MACHINERY: CONSTRUCTION & HANDLING Other Securities 331,680 0.1
MACHINERY: ENGINES Other Securities 456,024 0.1
MACHINERY: INDUSTRIAL/SPECIALTY Other Securities 2,620,302 0.8
MACHINERY: OIL WELL EQUIPMENT &
SERVICES Other Securities 2,576,349 0.7
MACHINERY: SPECIALTY Other Securities 261,283 0.1
MANUFACTURED HOUSING Other Securities 174,021 0.1
MANUFACTURING Other Securities 264,841 0.1
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES Immucor, Inc. (a) 29,343 779,937 0.2
Owens & Minor, Inc. 17,298 651,270 0.2
Thoratec Corp. (a) 22,847 742,299 0.2
Other Securities 9,194,626 2.7
------------ -----
11.368.132 3.3
------------ -----
MEDICAL SERVICES Magellan Health Services, Inc. (a) 17,000 665,720 0.2
Other Securities 941,711 0.3
------------ -----
1,607,431 0.5
------------ -----
METAL FABRICATING Other Securities 3,120,324 0.9
METALS & MINERALS MISCELLANEOUS Compass Minerals International, Inc. (i) 13,600 797,776 0.2
Other Securities 1,031,148 0.3
------------ -----
1,828,924 0.5
------------ -----
MISCELLANEOUS BUSINESS & Other Securities 332,279 0.1
CONSUMER DISCRETIONARY
MISCELLANEOUS CONSUMER STAPLES Other Securities 10,656 0.0
MISCELLANEOUS HEALTH CARE Other Securities 100,740 0.0
MISCELLANEOUS MATERIALS & COMMODITIES Other Securities 538,603 0.2
MISCELLANEOUS MATERIALS & PROCESSING Other Securities 442,568 0.1
MISCELLANEOUS PRODUCER DURABLES Other Securities 170,762 0.1
MISCELLANEOUS TECHNOLOGY Other Securities 241,175 0.1
MULTI-SECTOR COMPANIES Other Securities 1,054,867 0.3
OFFICE FURNITURE & BUSINESS EQUIPMENT Other Securities 1,004,673 0.3
OIL: CRUDE PRODUCERS Comstock Resources, Inc. (a) 19,057 900,443 0.3
Other Securities 5,345,917 1.5
------------ -----
6,246,360 1.8
------------ -----
OIL: INTEGRATED DOMESTIC Other Securities 315,744 0.1
OIL: INTEGRATED INTERNATIONAL Other Securities 186,744 0.1
PAINTS & COATINGS Other Securities 462,706 0.1
PAPER Other Securities 1,364,303 0.4
PLASTICS Other Securities 79,214 0.0
POLLUTION CONTROL & Other Securities 925,709 0.3
ENVIRONMENTAL SERVICES
POWER TRANSMISSION EQUIPMENT Other Securities 509,253 0.2
PRINTING & COPYING SERVICES Other Securities 565,976 0.2
PRODUCTION TECHNOLOGY EQUIPMENT Other Securities 3,092,187 0.9
PUBLISHING: MISCELLANEOUS Other Securities 375,185 0.1
PUBLISHING: NEWSPAPERS Other Securities 234,468 0.1
RADIO & TV BROADCASTERS Other Securities 532,673 0.2
RAILROAD EQUIPMENT Westinghouse Air Brake Technologies Corp. 20,339 808,475 0.2
Other Securities 177,801 0.1
------------ -----
986,276 0.3
------------ -----
RAILROADS Other Securities 392,688 0.1
53
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2008
PERCENT
OF NET
INDUSTRY COMMON STOCKS SHARES VALUE ASSETS
- -------- ----------------------------------------- ------- ------------ -------
REAL ESTATE Other Securities $ 854,938 0.3%
REAL ESTATE INVESTMENT TRUSTS (REITS) Anthracite Capital, Inc. (b)(c) 24,500 54,635 0.0
Highwoods Properties, Inc. 26,700 730,512 0.2
Realty Income Corp. (b) 42,500 983,875 0.3
Senior Housing Properties Trust 47,914 858,619 0.2
Washington Real Estate Investment Trust 22,065 624,440 0.2
Other Securities 15,026,977 4.4
------------ -----
18,279,058 5.3
------------ -----
RECREATIONAL VEHICLES & BOATS Other Securities 491,782 0.1
RENTAL & LEASING SERVICES: COMMERCIAL Other Securities 453,023 0.1
RENTAL & LEASING SERVICES: CONSUMER Other Securities 1,311,045 0.4
RESTAURANTS Wendy's 165,652 818,321 0.3
Other Securities 3,563,503 1.0
------------ -----
4,381,824 1.3
------------ -----
RETAIL Other Securities 8,696,576 2.5
SAVINGS & LOAN First Niagara Financial Group, Inc. 49,853 806,123 0.2
Other Securities 4,008,991 1.2
------------ -----
4,815,114 1.4
------------ -----
SECURITIES BROKERAGE & SERVICES Knight Capital Group, Inc. Class A (a) 39,500 637,925 0.2
Other Securities 1,226,496 0.3
------------ -----
1,864,421 0.5
------------ -----
SERVICES: COMMERCIAL Waste Connections, Inc. (a) 33,427 1,055,290 0.3
Watson Wyatt Worldwide, Inc. 17,915 856,695 0.2
Other Securities 9,958,418 2.9
------------ -----
11,870,403 3.4
------------ -----
SHIPPING Other Securities 1,926,274 0.5
SHOES Other Securities 2,168,556 0.6
STEEL Other Securities 151,254 0.0
SUGAR Other Securities 74,568 0.0
TELECOMMUNICATIONS EQUIPMENT Other Securities 2,124,104 0.6
TEXTILE PRODUCTS Other Securities 156,603 0.0
TEXTILES APPAREL MANUFACTURERS Other Securities 2,101,467 0.6
TIRES & RUBBER Other Securities 268,694 0.1
TOBACCO Other Securities 856,228 0.2
TOYS Marvel Entertainment, Inc. (a) 20,500 630,375 0.2
Other Securities 289,125 0.1
------------ -----
919,500 0.3
------------ -----
TRANSPORTATION MISCELLANEOUS Other Securities 850,543 0.2
TRUCKERS Other Securities 2,307,856 0.7
UTILITIES: ELECTRICAL ITC Holdings Corp. 20,600 899,808 0.3
Westar Energy, Inc. 43,900 900,389 0.3
Other Securities 6,076,930 1.7
------------ -----
7,877,127 2.3
------------ -----
UTILITIES: GAS DISTRIBUTORS New Jersey Resources Corp. 17,661 694,960 0.2
Nicor, Inc. 18,900 656,586 0.2
Piedmont Natural Gas Co. 30,600 969,102 0.3
WGL Holdings, Inc. 20,700 676,683 0.2
Other Securities 1,937,330 0.5
------------ -----
4,934,661 1.4
------------ -----
UTILITIES: TELECOMMUNICATIONS Other Securities 3,249,984 0.9
UTILITIES: WATER Other Securities 1,073,422 0.3
WHOLESALERS Other Securities 781,901 0.2
------------ -----
TOTAL COMMON STOCKS 311,768,114 90.4
------------ -----
INVESTMENT COMPANIES
BlackRock Kelso Capital Corp. (c) 4,400 43,384 0.0
Other Securities 412,452 0.1
------------ -----
TOTAL INVESTMENT COMPANIES 455,836 0.1
------------ -----
54
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2008
PERCENT
OF NET
INDUSTRY COMMON STOCKS SHARES VALUE ASSETS
- -------- ----------------------------------------- ------- ------------ -------
WARRANTS (d)
COMMUNICATIONS TECHNOLOGY OTHER SECURITIES $ 0 0.0%
ENERGY MISCELLANEOUS GreenHunter Energy, Inc. (expires 8/27/11) 180
(b)(e) 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 -- $404,884,567) 312,223,950 90.5
------------ -----
BENEFICIAL
SHORT-TERM SECURITIES INTEREST
(000)
----------
BlackRock Liquidity Series, LLC
Cash Sweep $33,515 33,514,609 9.7
Series, 1.64% (c)(g)
BlackRock Liquidity Series, LLC
Money Market 24,644 24,644,202 7.2
------------ -----
Series, 0.80% (c)(g)(h)
TOTAL SHORT-TERM SECURITIES
(COST -- $58,158,811) 58,158,811 16.9
------------ -----
TOTAL INVESTMENTS (COST - $463,043,378*) 370,382,761 107.4
LIABILITIES IN EXCESS OF OTHER ASSETS (25,662,641) (7.4)
------------ -----
NET ASSETS $344,720,120 100.0%
============ =====
* The cost and unrealized appreciation (depreciation) of investments, as of
December 31, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 484,047,076
-------------
Gross unrealized appreciation $ 35,373,591
Gross unrealized depreciation (149,037,906)
-------------
Net unrealized appreciation $(113,664,315)
=============
(a) Non-income producing security.
(b) "Other interests" represent beneficial interest in liquidation trusts and
other reorganization entities and are non-income producing.
(c) Investments in companies considered to be an affiliate of the Series, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940,were as
follows:
INTEREST/
DIVIDEND
AFFILIATE PURCHASE COST SALE COST REALIZED LOSS INCOME
- --------- ------------- ----------- ------------- ----------
Anthracite Capital, Inc. $ 62,886 $ 166,460 $(68,727) $ 24,910
BlackRock Kelso Capital Corp. 18,400 6,168 (524) 5,848
BlackRock Liquidity Series, LLC Cash Sweep Series 287,816* -- -- 580,110
BlackRock Liquidity Series, LLC Money Market Series -- 59,164,615** -- 1,200,163
* Represents net purchase cost.
** Represents net sale cost.
(d) 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.
(e) Restricted security as to resale, representing 0.0% of net assets, were as
follows:
Issue Acquisition Date Cost Value
- ----- ---------------- ---- -----
GreenHunter Energy, Inc. 6/27/08 $-- $--
(f) Other interest represent beneficial interest in liquidation trust and other
reorganization entities and are non-income producing.
(g) Represents the current yield as of December 31, 2008.
(h) Security was purchased with the cash proceeds from securities loans.
55
MASTER SMALL CAP INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2008
(i) All or a portion of the security has been pledged as collateral in
connection with open financial futures contracts.
- For Series compliance purposes, the Series' industry
classifications refer to any one or more of the industry
sub-classifications used by one or more widely recognized market
indexes, or ratings group indexes, and/or as defined by Series
management. This definition may not apply for purposes of this
report, which may combine industry sub-classifications for
reporting ease. Industries are shown as a percent of net assets.
These industry classifications are unaudited.
- Other securities represent issues that are not identified as the
50 largest holdings of the Series and issues not exceeding 1% of
net assets. Some securities, or a portion of, in this category
are either held as collateral in connection with open financial
futures contracts or are out on loan.
- Financial futures contracts purchased as of December 31, 2008,
were as follows:
NUMBER OF UNREALIZED
CONTRACTS ISSUE EXPIRATION DATE FACE VALUE APPRECIATION
- --------- ------------------ --------------- ----------- ------------
683 Russell 2000 Index March 2009 $31,631,628 $2,374,942
- - Effective January 1, 2008, the Series adopted Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements,"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 December 31, 2008 in
determining the fair valuation of the Series' investments:
INVESTMENTS OTHER FINANCIAL
IN SECURITIES INSTRUMENTS*
VALUATION INPUTS ASSETS ASSETS
- ---------------- ------------- ---------------
Level 1 ........................... $312,223,950 $2,374,942
Level 2 ........................... 58,158,811 --
Level 3 ........................... -- --
------------ ----------
TOTAL ............................. $370,382,761 $2,374,942
============ ==========
* Other financial instruments are futures.
56
MASTER SMALL CAP INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2008
ASSETS:
Investments at value - unaffiliated (including securities loaned of $23,975,661)
(cost - $404,606,765) ............................................................ $312,125,931
Investments at value - affiliated (cost - $58,436,613) .............................. 58,256,830
Cash ................................................................................ 1,156,226
Margin variation receivable - affiliated ............................................ 972,195
Dividends receivable ................................................................ 494,666
Investments sold receivable ......................................................... 255,872
Securities lending income receivable - affiliated ................................... 185,400
Prepaid expenses .................................................................... 13,361
Other assets ........................................................................ 5,208
Investment advisor receivable ....................................................... 1,235
------------
TOTAL ASSETS ........................................................................ 373,466,924
------------
LIABILITIES:
Collateral at value - securities loaned ............................................. 24,644,202
Investments purchased payable ....................................................... 3,424,491
Withdrawls payable from investors ................................................... 615,391
Other accrued expenses payable ...................................................... 60,633
Other affiliates payable ............................................................ 1,998
Officer's and Directors' fees payable ............................................... 89
------------
TOTAL LIABILITIES ................................................................... 28,746,804
------------
NET ASSETS .......................................................................... $344,720,120
============
NET ASSETS CONSIST OF
Investors' capital .................................................................. $435,005,795
Unrealized appreciation/depreciation ................................................ (90,285,675)
------------
NET ASSETS .......................................................................... $344,720,120
============
See notes to Financial Statements
57
MASTER SMALL CAP INDEX SERIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2008
INVESTMENT INCOME:
Dividends ................................................... $ 6,083,383
Foreign taxes withheld ...................................... (2,011)
Income - affiliated ......................................... 611,275
Securities lending - affiliated ............................. 1,200,163
-------------
TOTAL INCOME ................................................ 7,892,810
-------------
EXPENSES:
Custodian ................................................... 134,965
Accounting services ......................................... 96,677
Professional ................................................ 64,069
Investment advisory ......................................... 47,115
Officers and Directors ...................................... 22,623
Printing .................................................... 1,393
Other ....................................................... 12,324
-------------
Total expenses .............................................. 379,166
Less fees waived by advisor ................................. (26,007)
Less fees paid indirectly ................................... (2,122)
-------------
Total expenses after fees waived and paid indirectly ........ 351,037
-------------
INVESTMENT INCOME ........................................... 7,541,773
-------------
REALIZED & UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments - unaffiliated ............................... 2,219,093
Investments - affiliated ................................. (69,251)
In-kind redemptions ...................................... (22,495,309)
Futures .................................................. (8,083,531)
-------------
(28,428,998)
-------------
Net change in unrealized appreciation/depreciation on:
Investments .............................................. (155,061,624)
Futures .................................................. 1,905,337
-------------
(153,156,287)
-------------
TOTAL REALIZED AND UNREALIZED LOSS .......................... (181,585,285)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $(174,043,512)
=============
See notes to Financial Statements
58
MASTER SMALL CAP INDEX SERIES
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31,
-------------------------------
2008 2007
------------- --------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS
Net investment income ................................. $ 7,541,773 $ 10,909,414
Net realized gain (loss) .............................. (28,428,998) 21,031,968
Net change in unrealized appreciation/depreciation .... (153,156,287) (45,314,859)
------------- -------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... (174,043,512) (13,373,477)
------------- -------------
CAPITAL TRANSACTIONS
Proceeds from contributions ........................... 277,100,847 443,692,332
Fair value of withdrawals ............................. (388,791,499) (361,297,148)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL
TRANSACTIONS .......................................... (111,630,652) 82,395,184
------------- -------------
NET ASSETS
Total increase (decrease) in net assets ............... (285,674,164) 69,021,707
Beginning of year ..................................... 630,394,284 561,372,577
------------- -------------
END OF YEAR ........................................... $ 344,720,120 $ 630,394,284
============= =============
FINANCIAL HIGHLIGHTS
For the Year Ended December 31,
--------------------------------------------------------
2008 2007 2006 2005 2004
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN
Total investment return .................................. (33.57)% (1.46)% 18.13% 4.63% 18.15%
-------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Total expenses after waiver and fees paid indirectly .. 0.07% 0.06% 0.07% 0.07% 0.08%
-------- -------- -------- -------- --------
Total expenses after waiver and before fees paid
indirectly ......................................... 0.07% 0.06% 0.07% 0.07% 0.08%
-------- -------- -------- -------- --------
Total expenses ........................................ 0.08% 0.06% 0.07% 0.08% 0.08%
-------- -------- -------- -------- --------
Net investment income ................................. 1.60% 1.69% 1.55% 1.17% 1.11%
-------- -------- -------- -------- --------
SUPPLEMENTAL DATA
Net assets, end of year (000) ......................... $344,720 $630,394 $561,373 $370,145 $365,661
-------- -------- -------- -------- --------
Portfolio turnover .................................... 42% 26% 40% 37% 38%
-------- -------- -------- -------- --------
See notes to Financial Statements
59
MASTER SMALL CAP INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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 Board of Directors
(the "Board") to issue nontransferable 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. Financial futures contracts traded on exchanges are
valued at their last sale price. Short-term securities with maturities less than
60 days are valued at amortized cost, which approximates fair value. Investments
in open-end investment companies are valued at net asset value each business
day. The Series values its investments in Cash Sweep Series and Money Market
Series, each of the BlackRock Liquidity Series, LLC, at fair value, which is
ordinarily based upon their pro-rata ownership in the net assets of the
underlying fund.
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 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 both to
increase the return of the Series and to hedge, or protect, its exposure to
interest rate movements and movements in the securities markets. Losses may
arise 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 financial futures contracts
for investment purposes or to manage its interest rate risk. Futures
are contracts for delayed delivery of securities at a specific future
date and at a specific price or yield. Pursuant to the contract, the
Series agrees to receive from or pay to the broker an amount of cash
equal to the daily fluctuation in value of the contract. Such receipts
or payments are known as margin variation and are recognized by the
Series as unrealized gains or losses. When the contract is closed, the
Series records a realized gain or loss equal to the difference between
the value of the contract at the time it was opened and the value at
the time it was closed. The use of futures transactions involves the
risk of an imperfect correlation in the movements in the price of
futures contracts, interest rates and the underlying assets, and the
possible inability of counter-parties to meet the terms of their
contracts.
60
MASTER SMALL CAP INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
Segregation and Collateralization
In cases in which the 1940 Act and the interpretive positions of the
Securities and Exchange Commission ("SEC") require that the Series segregate
assets in connection with certain investments (e.g., financial futures
contracts), the Series will, consistent with certain interpretive letters issued
by the SEC, designate on its books and records cash or other liquid securities
having a market value at least equal to the amount that would otherwise be
required to be physically segregated. Furthermore, based on requirements and
agreements with certain exchanges and third party broker-dealers, the Series may
also be required to deliver or deposit securities as collateral for certain
investments (e.g., financial futures contracts).
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. Upon notification from issuers, some of the
dividend income received from a real estate investment trust may be redesignated
as a reduction of cost of the related investment and/or realized gain. Interest
income is recognized on the accrual basis.
Securities Lending
The Series may lend securities to financial institutions that provide cash
or securities issued or guaranteed by the US 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. 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. The Series may receive a
flat fee for its loans. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities within the
standard time period for settlement of securities transactions. The Series may
pay reasonable lending agent, administrative and custodial fees in connection
with its loans. In the event that the borrower defaults on its obligation to
return borrowed securities because of insolvency or for any other reason, the
Series could experience delays and costs in gaining access to the collateral.
The Series also could suffer a loss where the value of the invested collateral
falls below the market value of the borrowed securities either in the event of
borrower default or in the event of losses on investments made with cash
collateral. For the year ended December 31, 2008, the Series received only cash
collateral for any securities loaned.
Income taxes
The Series is classified as a "pass-through entity" 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. The Series is disregarded as an entity from its owner for tax
purposes, therefore it is not required to file tax returns. Under the applicable
foreign tax laws, a withholding tax may be imposed on interest, dividend and
capital gains at various rates.
The Series files US federal and various state and local tax returns. No
income tax returns are currently under examination. The statute of limitations
on the Series' US federal tax returns remains open for the years ended December
31, 2005 through December 31, 2007. The statutes of limitations on the Series'
state and local tax returns may remain open for an additional year depending
upon the jurisdiction.
61
MASTER SMALL CAP INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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. FAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008.The impact of the Fund's financial statement disclosures, if any, is
currently being assessed.
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 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 the largest stockholders of BlackRock, Inc.
As of December 31, 2008, Merrill Lynch and PNC are affiliates 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 net assets of the Series.
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 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 year ended December 31, 2008, the Series reimbursed the Advisor $8,365 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 SEC 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 the report date, the Series lent
securities with a value of $1,175,816 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. The share of income earned by the Series on such
investments is shown as securities lending - affiliated on the Statement of
Operations. For the year ended December 31, 2008, BIM received $298,692 in
securities lending agent fees.
The Series may earn income on positive cash balances in demand deposit
accounts. For the year ended December 31,2008, the Series earned $407, which is
included in income - affiliated in the Statement of Operations.
62
MASTER SMALL CAP INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
Pursuant to the terms of the custody agreement, custodian fees may be
reduced by amounts calculated on uninvested cash balances, 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. The Series reimburses the
Advisor for its allocated share of compensation paid to the Master LLC's Chief
Compliance Officer.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 2008 were $191,017,169 and $303,329,787, respectively.
4. SHORT-TERM BORROWINGS:
The Master LLC, on behalf of the Series, along with certain other funds
managed by the Manager and its affiliates, is a party to a $500,000,000 credit
agreement with a group of lenders, which expired November 2008 and was
subsequently renewed until November 2009.The Series may borrow under the credit
agreement to fund shareholder redemptions and for other lawful purposes other
than for leverage. The Series may borrow up to the maximum amount allowable
under the Series' current Prospectus and Statement of Additional Information,
subject to various other legal, regulatory or contractual limits. The Series
paid its pro rata share of a 0.02% upfront fee on the aggregate commitment
amount based on its net assets as of October 31, 2008. The Series pays a
commitment fee of 0.08% 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 the higher of the (a) federal funds effective rate
and (b) reserve adjusted one month LIBOR, plus, in each case, the higher of (i)
1.50% and (ii) 50% of the CDX Index (as defined in the credit agreement) in
effect from time to time. The Series did not borrow under the credit agreement
during the year ended December31, 2008.
5. MARKET AND CREDIT RISK:
In the normal course of business, the Series invests in securities and
enters into transactions where risks exist due to fluctuations in the market
(market risk) or failure of the issuer of a security to meet all its obligations
(credit risk). The value of securities held by the Series may decline in
response to certain events, including those directly involving the companies
whose securities are owned by the Series; conditions affecting the general
economy; overall market changes; local, regional or global political, social or
economic instability; and currency and interest rate and price fluctuations.
Similar to credit risk, the Series may be exposed to counter-party risk, or the
risk that an entity with which the Series has unsettled or open transactions may
default. Financial assets, which potentially expose the Series to credit and
counterparty risks, consist principally of investments and cash due from
counterparties. The extent of the Series' exposure to credit and counterparty
risks with respect to these financial assets is approximated by their value
recorded in the Series' Statement of Assets and Liabilities.
The Series invests a significant portion of its assets in the financial
services industry. Please see the Summary Schedule of Investments for these
securities. Changes in economic conditions affecting the financial services
industry would have a greater impact on the Series, and could affect the value,
income and/or liquidity of positions in such securities.
6. SUBSEQUENT EVENT:
On January 1, 2009, Bank of America Corporation announced that it had
completed its acquisition of Merrill Lynch, one of the largest stockholders of
BlackRock, Inc.
63
MASTER SMALL CAP INDEX SERIES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Investors and Board of Directors of Quantitative Master Series LLC:
We have audited the accompanying statement of assets and liabilities,
including the summary schedule of investments, of Master Small Cap Index Series,
one of the portfolios constituting Quantitative Master Series LLC (the "Master
LLC") as of December 31,2008, and the related statement of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Master LLC's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Master LLC is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Master
LLC's internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2008, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Master Small Cap Index Series of Quantitative Master Series LLC as of December
31, 2008, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Princeton, New Jersey
February 25, 2009
64
MASTER SMALL CAP INDEX SERIES
OFFICERS AND DIRECTORS (UNAUDITED)
NUMBER OF
LENGTH BLACKROCK-
OF TIME ADVISED
POSITION(S) SERVED FUNDS AND
NAME, ADDRESS AND HELD WITH AS A PORTFOLIOS PUBLIC
YEAR OF BIRTH MASTER LLC DIRECTOR(2) PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS OVERSEEN DIRECTORSHIPS
- ----------------- ------------- ----------- --------------------------------------------------- ------------- -----------------
NON-INTERESTED DIRECTORS(1)
RONALD W. FORBES Co-Chair of Since Professor Emeritus of Finance, School of Business, 34 Funds None
40 East 52nd Street the Board of 2007 State University of New York at Albany since 2000. 81 Portfolios
New York, NY 10022 Directors and
1940 Director
RODNEY D. JOHNSON Co-Chair of Since President, Fairmount Capital Advisors, Inc. since 34 Funds None
40 East 52nd Street the Board of 2007 1987; Director, Fox Chase Cancer Center since 81 Portfolios
New York, NY 10022 Directors and 2002; Member of the Archdiocesan Investment
1941 Director Committee of the Archdiocese of Philadelphia since
2003; Director The Committee of Seventy (civic)
since 2006.
DAVID O. BEIM Director Since Professor of Finance and Economics at the 34 Funds None
40 East 52nd Street 2007 Columbia University Graduate School of Business 81 Portfolios
New York, NY 10022 since 1991; Trustee of Phillips Exeter Academy
1940 since 2002; Formerly Chairman, Wave Hill Inc.
(public garden and cultural center) from 1990 to
2006.
DR. MATINA HORNER Director Since Formerly Executive Vice President of Teachers 34 Funds NSTAR (electric
40 East 52nd Street 2007 Insurance and Annuity Association and College 81 Portfolios and gas utility)
New York, NY 10022 Retirement Equities Fund from 1989 to 2003.
1939
HERBERT I. LONDON Director and Since Professor Emeritus, New York University since 2005; 34 Funds AIMS Worldwide,
40 East 52nd Street Member of 2007 John M. Olin Professor of Humanities, New York 81 Portfolios Inc. (marketing)
New York, NY 10022 the Audit University from 1993 to 2005 and Professor thereof
1939 Committee from 1980 to 2005; President, Hudson Institute
(policy research organizations) since 1997 and
Trustee thereof since 1980; Chairman of the Board
of Trustees for Grantham University since 2006;
Director of InnoCentive, Inc. (strategic solutions
company) since 2005; Director of Cerego, LLC
(software development and design) since 2005.
CYNTHIA A. MONTGOMERY Director Since Professor, Harvard Business School since 34 Funds Newell
2007 1989;Director, Harvard Business School Publishing 81 Portfolios Rubbermaid,
40 East 52nd Street since 2005; Director, McLean Hospital since 2005. Inc.
New York, NY 10022 (manufacturing)
1952
JOSEPH P. PLATT, JR. Director Since Director,The West Penn Allegheny Health System (a 34 Funds Greenlight
40 East 52nd Street 2007 not-for-profit health system) since 2008; Director, 81 Portfolios Capital Re, Ltd.
New York, NY 10022 Jones and Brown (Canadian insurance broker) since (reinsurance
1947 1998; General Partner, Thorn Partners, LP (private company)
investment) since 1998; Formerly Partner, Amarna
Corporation, LLC (private investment company) from
2002 to 2008.
ROBERT C. ROBB, JR. Director Since Partner, Lewis, Eckert, Robb and Company 34 Funds None
40 East 52nd Street 2007 (management and financial consulting firm) since 81 Portfolios
New York, NY 10022 1981.
1945
TOBY ROSENBLATT Director Since President, Founders Investments Ltd. (private 34 Funds A.P. Pharma,
40 East 52nd Street 2007 investments) since 1999; Director of Forward 81 Portfolios Inc.(speciality
New York, NY 10022 Management, LLC since 2007; Director,The James Pharmaceuticals)
1938 Irvine Foundation (philanthropic foundation) since
1997; Formerly Trustee, State Street Research
Mutual Funds from 1990 to 2005; Formerly Trustee,
Metropolitan Series Funds, Inc. from 2001 to 2005.
65
MASTER SMALL CAP INDEX SERIES
OFFICERS AND DIRECTORS (UNAUDITED)
NUMBER OF
BLACKROCK-
ADVISED
POSITION(S) LENGTH FUNDS AND
NAME, ADDRESS AND HELD WITH OF TIME PORTFOLIOS PUBLIC
YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS OVERSEEN DIRECTORSHIPS
- ----------------- ------------- ----------- --------------------------------------------------- ------------- -----------------
NON-INTERESTED DIRECTORS(1) (CONCLUDED)
KENNETH L. URISH Director and Since Managing Partner, Urish Popeck & Co., LLC 34 Funds None
40 East 52nd Street Chairman of 2007 (certified public accountants and consultants) 81 Portfolios
New York, NY 10022 the Audit since 1976; Member of External Advisory Board, The
1951 Committee Pennsylvania State University Accounting Department
since 2001; Trustee, The Holy Family Foundation
since 2001; Committee Member/ Professional Ethics
Committee of the Pennsylvania Institute of
Certified Public Accountants since 2007; Formerly
President and Trustee, Pittsburgh Catholic
Publishing Associates from 2003 to 2008; Formerly
Director, Inter-Tel from 2006 to 2007.
FREDERICK W. Director and Since Professor and Dean Emeritus of the Joseph M. Katz 34 Funds None
WINTER 40 East 52nd Member of 2007 School of Business, University of Pittsburgh since 81 Portfolios
Street New York, NY the Audit 2005 and Dean thereof from 1997 to 2005.
10022 Committee Director,Alkon Corporation (pneumatics) since 1992;
1945 Formerly Director, Indotronix International (IT
services) from 2004 to 2008; Director,Tippman
Sports (recreation) since 2005.
(1) Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
(2) Following the combination of Merrill Lynch Investment Managers, L.P. ("MLIM") and BlackRock, Inc. ("BlackRock") in September
2006, the various legacy MLIM and legacy BlackRock Fund boards were realigned and consolidated into three new Fund boards in
2007.As a result, although the chart shows directors as joining the Master LLC's board in 2007, each director first became a
member of the board of directors of other legacy MLIM or legacy BlackRock Funds as follows: David O. Beim since 1998; Ronald W.
Forbes since 1977; Matina Horner since 2004; Rodney D. Johnson since 1995; Herbert I. London since 1987; Cynthia A. Montgomery
since 1994; Joseph P. Platt since 1999; Robert C. Robb, Jr. since 1999; Toby Rosenblatt since 2005; Kenneth L. Urish since
1999; and Frederick W. Winter since 1999.
INTERESTED DIRECTORS(3)
RICHARD S. DAVIS Director Since Managing Director, BlackRock, Inc. since 2005; 174 Funds None
40 East 52nd Street 2007 Formerly Chief Executive Officer, State Street 286 Portfolios
New York, NY 10022 Research & Management Company from 2000 to
1945 2005; Formerly Chairman of the Board of Trustees,
State Street Research Mutual Funds from 2000 to
2005; Formerly Chairman, SSR Realty from 2000 to
2004
HENRY GABBAY Director Since Formerly Consultant, BlackRock, Inc. from 2007 to 174 Funds None
40 East 52nd Street 2007 2008; Formerly Managing Director, BlackRock, Inc. 286 Portfolios
New York, NY 10022 from 1989 to 2007; Formerly Chief Administrative
1947 Officer, BlackRock Advisors, LLC from 1998 to 2007;
Formerly President of BlackRock Funds and
BlackRock Bond Allocation Target Shares from 2005
to 2007 and Treasurer of certain closed-end funds
in the BlackRock Fund complex from 1989 to 2006.
(3) Mr. Davis is an "interested person," as defined in the Investment Company Act of 1940, of the Master LLC based on his position
with BlackRock, Inc. and its affiliates. Mr. Gabbay is an "interested person" of the Master LLC based on his former positions
with BlackRock, Inc. and its affiliates, as well as his ownership of BlackRock, Inc. and PNC securities. Directors serve until
their resignation, removal or death, or until December 31 of the year in which they turn 72.
66
MASTER SMALL CAP INDEX SERIES
OFFICERS AND DIRECTORS (UNAUDITED)
POSITION(S) LENGTH
NAME, ADDRESS AND HELD WITH OF TIME
YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ----------------- ------------- ----------- -----------------------------------------------------------------------------------
MASTER LLC OFFICERS(1)
DONALD C. BURKE Master LLC Since Managing Director of BlackRock, Inc. since 2006; Formerly Managing Director of
40 East 52nd Street President and 2007 Merrill Lynch Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P.
New York, NY 10022 Chief ("FAM") in 2006; First Vice President thereof from 1997 to 2005; Treasurer thereof
1960 Executive from 1999 to 2006 and Vice President thereof from 1990 to 1997.
Officer
ANNE F. ACKERLEY Vice Since Managing Director of BlackRock, Inc. since 2000 Chief Operating Officer of
40 East 52nd Street President 2007 BlackRock's US Retain Group since 2006; Formerly Head of BlackRock's Mutual
New York, NY 10022 Fund Group from 2000 to 2006.
1962
NEAL J. ANDREWS Chief Since Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice President and
40 East 52nd Street Financial 2007 Line of Business Head of Fund Accounting and Administration at PNC Global
New York, NY 10022 Officer Investment Servicing (US) Inc. (formerly PFPC Inc.) from 1992 to 2006.
1966
JAY M. FIFE Treasurer Since Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Formerly
40 East 52nd Street 2007 Assistant Treasurer of the MLIM/FAM advised funds from 2005 to 2006; Director of
New York, NY 10022 MLIM Fund Services Group from 2001 to 2006.
1970
BRIAN P. KINDELAN Chief Since Chief Compliance Officer of the BlackRock-advised Funds since 2007; Managing
40 East 52nd Street Compliance 2007 Director and Senior Counsel of BlackRock, Inc. since 2005; Formerly Director and
New York, NY 10022 Officer Senior Counsel of BlackRock Advisors, Inc. from 2001 to 2004.
1959
HOWARD SURLOFF Secretary Since Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at
40 East 52nd Street 2007 BlackRock, Inc. since 2006; Formerly General Counsel (US) of Goldman Sachs Asset
New York, NY 10022 Management, L.P. from 1993 to 2006.
1965
(1) Officers of the Master LLC serve at the pleasure of the Board of Directors.
Further information about the Master LLC's Officers and Directors is available in the Master LLC's Statement of Additional
Information, which can be obtained without charge by calling 1-800-441-7762.
INDEPENDENT REGISTERED PUBLIC
CUSTODIAN ACCOUNTING AGENT ACCOUNTING FIRM LEGAL COUNSEL
- --------- --------------------- ----------------------------- -------------
State Street Bank and State Street Bank and Deloitte & Touche LLP Sidley Austin LLP
Trust Company Trust Company Princeton, NJ 08540 New York, NY 10019
North Quincy, MA 02171 Princeton, NJ 08540
67
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2008
This summary schedule of investments is presented to help investors focus on the
Series' principal holdings. It includes the Series' 50 largest holdings, each
investment of any issuer that exceeds 1% of the Series' net assets and
affiliated issues. "Other Securities" represent all issues not required to be
disclosed under the rules adopted by the Securities and Exchange Commission. A
complete schedule of investments is available without charge, upon request, by
calling 800-441-7762 or on the Securities and Exchange Commission's website at
http://www.sec.gov.
PERCENT OF
INDUSTRY COMMON STOCKS SHARES HELD VALUE NET ASSETS
- -------- ------------------------------------ ----------- ------------- ----------
AEROSPACE & DEFENSE Other Securities $ 4,546,560 0.6%
AIR FREIGHT & LOGISTICS Other Securities 2,540,547 0.4
AIRLINES Other Securities 1,804,705 0.3
AUTO COMPONENTS Other Securities 4,873,656 0.7
AUTOMOBILES DaimlerChrysler AG 70,599 2,689,951 0.4
Honda Motor Co., Ltd. 136,500 2,907,271 0.4
Toyota Motor Corp. 228,200 7,543,910 1.0
Volkswagen AG 9,578 3,331,346 0.5
Other Securities 4,853,744 0.7
-------------
21,326,222 3.0
-------------
BEVERAGES Diageo Plc 210,498 2,957,677 0.4
Other Securities 7,255,328 1.0
-------------
10,213,005 1.4
-------------
BIOTECHNOLOGY Other Securities 1,826,053 0.3
BUILDING PRODUCTS Other Securities 3,653,714 0.5
CAPITAL MARKETS UBS AG (a) 245,571 3,572,900 0.5
Other Securities 9,554,396 1.4
-------------
13,127,296 1.9
-------------
CHEMICALS BASF SE 78,772 3,060,578 0.4
Other Securities 15,350,353 2.2
-------------
18,410,931 2.6
-------------
COMMERCIAL BANKS BNP Paribas SA 68,178 2,942,866 0.4
Banco Bilbao Vizcaya Argentaria SA 295,581 3,662,358 0.5
Banco Santander SA 652,338 6,295,854 0.9
HSBC Holdings Plc 991,572 9,704,709 1.4
Mitsubishi UFJ Financial Group, Inc. 904,674 5,686,011 0.8
Westpac Banking Corp. 232,966 2,794,129 0.4
Other Securities 46,270,359 6.6
-------------
77,356,286 11.0
-------------
COMMERCIAL SERVICES & SUPPLIES Other Securities 3,701,343 0.5
COMMUNICATIONS EQUIPMENT Nokia Oyj 317,753 4,986,297 0.7
Other Securities 2,427,824 0.3
-------------
7,414,121 1.0
-------------
COMPUTERS & PERIPHERALS Other Securities 2,839,458 0.4
CONSTRUCTION & ENGINEERING Other Securities 6,505,751 0.9
CONSTRUCTION MATERIALS Other Securities 3,952,025 0.6
CONSUMER FINANCE Other Securities 1,133,074 0.2
CONTAINERS & PACKAGING Other Securities 736,317 0.1
DISTRIBUTORS Other Securities 443,728 0.1
DIVERSIFIED CONSUMER SERVICES Other Securities 236,310 0.0
DIVERSIFIED FINANCIAL SERVICES Other Securities 6,951,431 1.0
DIVERSIFIED TELECOMMUNICATION
SERVICES Deutsche Telekom AG 229,735 3,473,430 0.5
France Telecom SA 150,246 4,187,757 0.6
Telefonica SA 350,872 7,919,764 1.1
Other Securities 14,936,900 2.1
-------------
30,517,851 4.3
-------------
ELECTRIC UTILITIES E.ON AG 158,040 6,205,782 0.9
The Tokyo Electric Power Co., Inc. 102,100 3,408,277 0.5
Other Securities 20,739,937 2.9
-------------
30,353,996 4.3
-------------
ELECTRICAL EQUIPMENT ABB Ltd. 189,024 2,882,643 0.4
Other Securities 6,599,483 0.9
-------------
9,482,126 1.3
-------------
See notes to Financial Statements
68
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2008
PERCENT OF
INDUSTRY COMMON STOCKS SHARES HELD VALUE NET ASSETS
- -------- ------------------------------------ ----------- ------------- ----------
ELECTRONIC EQUIPMENT &
INSTRUMENTS Other Securities $ 7,269,774 1.0%
ENERGY EQUIPMENT & SERVICES Other Securities 2,133,717 0.3
FOOD & STAPLES RETAILING Tesco Plc 654,003 3,405,414 0.5
Other Securities 12,865,885 1.8
-------------
16,271,299 2.3
-------------
FOOD PRODUCTS Nestle SA Registered Shares 324,020 12,830,590 1.8
Unilever NV 134,383 3,257,169 0.5
Other Securities 9,752,645 1.4
-------------
25,840,404 3.7
-------------
GAS UTILITIES Other Securities 3,474,775 0.5
HEALTH CARE EQUIPMENT & SUPPLIES Other Securities 4,559,824 0.6
HEALTH CARE PROVIDERS & SERVICES Other Securities 1,682,555 0.2
HOTELS, RESTAURANTS & LEISURE Other Securities 5,154,618 0.7
HOUSEHOLD DURABLES Other Securities 5,955,129 0.8
HOUSEHOLD PRODUCTS Other Securities 3,740,759 0.5
IT SERVICES Other Securities 1,919,999 0.3
INDEPENDENT POWER PRODUCERS
& ENERGY TRADERS Other Securities 1,509,842 0.2
INDUSTRIAL CONGLOMERATES Siemens AG 71,711 5,398,644 0.8
Other Securities 5,119,223 0.7
-------------
10,517,867 1.5
-------------
INSURANCE AXA SA 129,232 2,900,688 0.4
Allianz AG Registered Shares 36,947 3,931,184 0.5
Muenchener Rueckversicherungs 17,317 2,688,423 0.4
AG Registered Shares
Other Securities 23,216,877 3.3
-------------
32,737,172 4.6
-------------
INTERNET & CATALOG RETAIL Other Securities 643,692 0.1
INTERNET SOFTWARE & SERVICES Other Securities 600,113 0.1
LEISURE EQUIPMENT & PRODUCTS Other Securities 1,273,665 0.2
LIFE SCIENCES TOOLS & SERVICES Other Securities 421,373 0.1
MACHINERY Other Securities 12,652,601 1.8
MARINE Other Securities 2,639,730 0.4
MEDIA Vivendi SA 97,557 3,179,773 0.5
Other Securities 8,252,973 1.2
-------------
11,432,746 1.7
-------------
METALS & MINING BHP Billiton Ltd. 280,586 5,960,817 0.8
BHP Billiton Plc 184,260 3,573,834 0.5
Other Securities 16,964,972 2.4
-------------
26,499,623 3.7
MULTI-UTILITIES GDF Suez 90,797 4,506,895 0.6
RWE AG 37,100 3,295,108 0.5
Other Securities 5,810,506 0.8
-------------
13,612,509 1.9
-------------
MULTILINE RETAIL Other Securities 2,003,499 0.3
OFFICE ELECTRONICS Canon, Inc. 87,300 2,766,064 0.4
Other Securities 1,366,519 0.2
-------------
4,132,583 0.6
-------------
OIL, GAS & CONSUMABLE FUELS BG Group Plc 278,300 3,852,113 0.5
BP Plc 1,544,898 11,925,745 1.7
Eni SpA 215,550 5,186,917 0.7
Royal Dutch Shell Plc 291,305 7,653,486 1.1
Royal Dutch Shell Plc Class B 223,973 5,677,368 0.8
Total SA 177,470 9,757,146 1.4
Other Securities 9,730,837 1.4
-------------
53,783,612 7.6
-------------
PAPER & FOREST PRODUCTS Other Securities 2,223,049 0.3
PERSONAL PRODUCTS Other Securities 2,757,703 0.4
See notes to Financial Statements
69
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2008
PERCENT OF
INDUSTRY COMMON STOCKS SHARES HELD VALUE NET ASSETS
- -------- ------------------------------------ ----------- ------------- ----------
PHARMACEUTICALS AstraZeneca Plc 120,741 $ 4,939,567 0.7%
Bayer AG 63,337 3,690,546 0.5
GlaxoSmithKline Plc 433,752 8,066,813 1.2
Novartis AG Registered Shares 200,847 10,058,710 1.4
Roche Holding AG 58,996 9,133,591 1.3
Sanofi-Aventis 86,580 5,537,927 0.8
Takeda Pharmaceutical Co., Ltd. 68,300 3,559,954 0.5
Other Securities 10,524,500 1.5
-------------
55,511,608 7.9
-------------
PROFESSIONAL SERVICES Other Securities 2,217,546 0.3
REAL ESTATE INVESTMENT TRUSTS
(REITS) Other Securities 7,009,570 1.0
REAL ESTATE MANAGEMENT &
DEVELOPMENT Other Securities 10,260,671 1.4
ROAD & RAIL Other Securities 7,871,885 1.1
SEMICONDUCTORS & Other Securities 2,659,634 0.4
SEMICONDUCTOR EQUIPMENT
SOFTWARE Nintendo Co., Ltd. 8,100 3,095,429 0.4
Other Securities 3,960,332 0.6
-------------
7,055,761 1.0
-------------
SPECIALTY RETAIL Other Securities 5,059,225 0.7
TEXTILES, APPAREL & LUXURY GOODS Other Securities 5,332,533 0.8
TOBACCO British American Tobacco Plc 156,974 4,094,960 0.6
Other Securities 3,745,625 0.5
-------------
7,840,585 1.1
-------------
TRADING COMPANIES & DISTRIBUTORS Other Securities 6,075,353 0.9
TRANSPORTATION INFRASTRUCTURE Other Securities 2,672,582 0.4
WATER UTILITIES Other Securities 326,778 0.0
WIRELESS TELECOMMUNICATION
SERVICES Vodafone Group Plc 4,354,451 8,916,407 1.3
Other Securities 5,962,912 0.8
-------------
14,879,319 2.1
-------------
TOTAL COMMON STOCKS 656,163,788 92.9
-------------
EXCHANGE TRADED FUNDS
iShares MSCI EAFE Index Fund (c) 617,845 27,722,705 3.9
Total Exchange-Traded Funds 27,722,705 3.9
------------- -----
PREFERRED STOCKS
Automobiles Other Securities 457,206 0.1
Household Products Other Securities 460,595 0.1
Multi-Utilities Other Securities 197,995 0.0
Total Preferred Stocks 1,115,796 0.2
------------- -----
RIGHTS
Commercial Banks Other Securities 97,466 0.0
Diversified Financial Services Other Securities 3 0.0
Metals & Mining Other Securities -- 0.0
-------------
Total Rights 97,469 0.0
------------- -----
Total Long-Term Securities
(Cost - $ 865,585,207) 685,099,758
BENEFICIAL
INTEREST
(000)
-----------
SHORT-TERM SECURITIES
BlackRock Liquidity Series, LLC Cash
Sweep Series, 1.64% (c)(d) $ 11,260 11,259,665 1.6
Total Short-Term Securities
(Cost -- $11,259,665) 11,259,665 1.6
------------- -----
TOTAL INVESTMENTS
(COST -- $876,844,872*) 696,359,423 98.6
OTHER ASSETS LESS LIABILITIES 9,759,975 1.4
------------- -----
NET ASSETS $ 706,119,398 100.0%
============= =====
See notes to Financial Statements
70
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2008
* The cost and unrealized appreciation (depreciation) of investments as of
December 31, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost .................. $ 895,944,370
-------------
Gross unrealized appreciation.... 44,690,983
Gross unrealized depreciation.... (244,275,930)
-------------
Net unrealized depreciation ..... $(199,584,947)
=============
(a) Non-income producing security.
(b) All or a portion of security has been pledged as collateral in connection
with open financial futures contracts.
(c) Represents the current yield as of report date.
(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
AFFILIATE NET ACTIVITY INCOME
- --------- ------------ --------
BlackRock Liquidity Series, LLC Cash Sweep Series $(2,269,973) $347,498
- 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. These industry classifications
are unaudited.
- Financial futures contracts purchased as of December 31, 2008 were as
follows:
UNREALIZED
NUMBER OF APPRECIATION
CONTRACTS ISSUE EXCHANGE EXPIRATION DATE FACE VALUE (DEPRECIATION)
- --------- ---------------------- ----------------- --------------- ---------- --------------
4 Hang Seng Index Future Hong Kong January 2009 $ 364,962 $ 6,770
1 IPEX 35 Plus Eurex January 2009 $ 128,154 (1,479)
62 OMX Stock Index Future Stockholm January 2009 $ 528,796 (12,126)
1 Dax Index 25 Euro Eurex Deutschland March 2009 $ 166,557 1,448
159 DJ Euro Stoxx 50 Eurex March 2009 $5,465,643 (50,714)
69 FTSE 100 Index Future LIFFE March 2009 $4,255,013 100,083
1 S&P MIB Index Eurex March 2009 $ 136,511 (1,524)
21 SPI 200 Index Future Sydney March 2009 $1,288,532 82,615
56 TOPIX Index Future Tokyo March 2009 $5,045,773 279,324
--------
TOTAL $404,397
--------
See notes to Financial Statements
71
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2008
- Forward foreign exchange contracts as of December 31, 2008 were as follows:
UNREALIZED
FOREIGN CURRENCY FOREIGN SETTLEMENT APPRECIATION
PURCHASED CURRENCY SOLD DATE (DEPRECIATION)
- ----------------- ----------------- ---------- --------------
AUD 2,905,650 USD 1,889,627 2/12/09 $ 126,948
AUD 427,000 USD 294,124 2/12/09 2,222
USD 1,343,567 AUD 2,073,650 2/12/09 (95,585)
CHF 698,300 USD 589,627 2/12/09 66,746
USD 584,084 CHF 698,300 2/12/09 (72,288)
CHF 233,000 USD 220,812 2/12/09 (1,802)
EUR 7,325,700 USD 9,176,794 2/12/09 988,533
EUR 1,047,000 USD 1,405,492 2/12/09 47,352
EUR 444,100 USD 554,487 2/12/09 61,757
USD 8,950,183 EUR 7,051,300 2/12/09 (834,380)
USD 254,738 EUR 181,600 2/12/09 2,746
GBP 3,413,500 USD 5,244,862 2/12/09 (342,615)
GBP 615,300 USD 912,473 2/12/09 (28,819)
GBP 484,300 USD 709,222 2/12/09 (13,702)
USD 457,851 GBP 307,900 2/12/09 15,665
USD 4,956,738 GBP 3,302,600 2/12/09 213,758
USD 326,195 GBP 224,000 2/12/09 4,500
JPY 521,967,400 USD 5,391,039 2/12/09 372,100
JPY 105,760,000 USD 1,131,019 2/12/09 36,697
JPY 21,045,000 USD 232,921 2/12/09 (559)
USD 479,549 JPY 45,436,000 2/12/09 (22,119)
USD 3,688,263 JPY 354,702,500 2/12/09 (228,074)
USD 138,335 JPY 13,360,600 2/12/09 (9,181)
SEK 4,806,100 USD 594,468 2/12/09 12,836
USD 398,679 SEK 3,204,300 2/12/09 (6,220)
---------
TOTAL $ 296,516
---------
* Currency Abbreviations:
AUD Australian Dollar
CHF Swiss Franc
EUR Euro
GBP British Pound
JPY Japanese Yen
SEK Swedish Krona
USD U.S. Dollar
See notes to Financial Statements
72
MASTER INTERNATIONAL INDEX SERIES
SUMMARY SCHEDULE OF INVESTMENTS
DECEMBER 31, 2008
- - 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
the Financial Statements.
The following table summarizes the inputs used as of December 31, 2008 in
determining the fair valuation of the Series' investments:
INVESTMENTS
VALUATION INPUTS IN SECURITIES OTHER FINANCIAL INSTRUMENTS*
- ---------------- ------------- ----------------------------
ASSETS ASSETS LIABILITIES
------------- ------------ -------------
Level 1 ........ $ 40,464,760 $ 470,240 $ (65,843)
Level 2 ........ 655,868,163 1,951,860 (1,655,344)
Level 3 ........ 26,500 -- --
------------ ---------- -----------
TOTAL .......... $696,359,423 $2,422,100 $(1,721,187)
============ ========== ===========
* Other financial instruments are futures and foreign currency exchange
contracts.
The following is a reconciliation of investments for unobservable inputs (Level
3) used in determining fair value:
Investment in
Securities
-------------
Balance, as of January 1, 2008 ....................... --
Realized gain (loss) ................................. --
Change in unrealized appreciation (depreciation)(1)... $(661,574)
Net purchase (sales) ................................. --
Net transfers in/out of Level 3 ...................... 688,074
---------
Balance, as of December 31, 2008 ..................... $ 26,500
=========
(1) Included in the related net change in unrealized appreciation/depreciation
on the Statement of Operations.
See notes to Financial Statements
73
MASTER INTERNATIONAL INDEX SERIES
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2008
ASSETS:
Investments at value - unaffiliated (cost-- $865,585,207) ....... $ 685,099,758
Investments at value - affiliated (cost-- $11,259,665) .......... 11,259,665
Unrealized appreciation on foreign currency exchange contracts... 1,951,860
Foreign currency at value (cost - $8,721,925) ................... 8,868,747
Dividends receivable ............................................ 3,121,399
Contributions receivable from investors ......................... 1,416,877
Investments sold receivable ..................................... 538,023
Margin variation receivable ..................................... 383,364
Prepaid expenses ................................................ 24,472
-------------
TOTAL ASSETS .................................................... 712,664,165
-------------
LIABILITIES:
Unrealized depreciation on foreign currency exchange contracts... 1,655,344
Investments purchased payable ................................... 4,575,322
Withdrawls payable to investors ................................. 118,681
Investment advisory fees payable ................................ 5,532
Other affiliates payable ........................................ 2,870
Officer's and Directors' fees payable ........................... 280
Other accrued expenses payable .................................. 186,738
-------------
TOTAL LIABILITIES ............................................... 6,544,767
-------------
NET ASSETS ...................................................... $ 706,119,398
=============
NET ASSETS CONSIST OF
Investors' capital .............................................. 885,713,794
Unrealized appreciation/depreciation ............................ (179,594,396)
-------------
NET ASSETS ...................................................... 706,119,398
=============
See notes to Financial Statements
74
MASTER INTERNATIONAL INDEX SERIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2008
INVESTMENT INCOME:
Dividends ............................................... $ 36,817,766
Foreign withholding tax ................................. (3,154,735)
Income - affiliated ..................................... 347,827
-------------
TOTAL INCOME ............................................ 34,010,858
-------------
EXPENSES:
Custodian ............................................... 546,663
Accounting services ..................................... 174,017
Investment advisory ..................................... 93,067
Pricing ................................................. 84,257
Professional ............................................ 82,083
Officers and Directors .................................. 28,137
Printing ................................................ 2,360
Miscellaneous ........................................... 40,583
-------------
Total expenses .......................................... 1,051,137
Less fees waived by advisor ............................. (79,741)
-------------
Total expenses after waiver ............................. 971,396
-------------
NET INVESTMENT INCOME ................................... 33,039,462
-------------
REALIZED & UNREALIZED GAIN (LOSS)
Net realized loss from:
Investments .......................................... (33,152,715)
Futures .............................................. (10,835,635)
In-kind redemptions .................................. (5,277,022)
Foreign currency ..................................... (3,044,473)
-------------
(52,309,895)
-------------
Net change in unrealized appreciation/depreciation on:
Investments .......................................... (468,611,575)
Futures .............................................. 265,812
Foreign currency ..................................... 249,595
-------------
(468,096,168)
-------------
TOTAL REALIZED AND UNREALIZED LOSS ...................... (520,406,063)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS .... $(487,366,601)
=============
See notes to Financial Statements
75
MASTER INTERNATIONAL INDEX SERIES
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31,
----------------------------------
2008 2007
---------------- ---------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS
Net investment income ............................................. $ 33,039,462 $ 32,702,640
Net realized gain (loss) .......................................... (52,309,895) 21,342,720
Net change in unrealized appreciation/depreciation ................ (468,096,168) 60,461,397
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...... (487,366,601) 114,506,757
--------------- ---------------
CAPITAL TRANSACTIONS
Proceeds from contributions ....................................... 589,551,495 740,944,038
Fair value of withdrawals ......................................... (539,237,057) (542,265,015)
--------------- ---------------
NET INCREASE IN NET ASSETS DERIVED FROM CAPITAL TRANSACTIONS ......... 50,314,438 198,679,023
--------------- ---------------
NET ASSETS
Total increase (decrease) in net assets ........................... (437,052,168) 313,185,780
Beginning of year ................................................. 1,143,171,561 829,985,781
--------------- ---------------
END OF YEAR ....................................................... $ 706,119,398 $ 1,143,171,561
=============== ===============
FINANCIAL HIGHLIGHTS
For the Year Ended December 31,
-----------------------------------------------------------------
2008 2007 2006 2005 2004
----------- ------------ ---------- ---------- ---------
TOTAL INVESTMENT RETURN ............. (41.94)% 10.80% 26.61% 13.64% 20.32%
--------- ----------- --------- --------- ---------
Ratios to Average Net Assets
Total expenses after waiver ...... .10% .09% .10% .10% .09%
--------- ----------- --------- --------- ---------
Total expenses ................... .11% .10% .11% .10% .10%
--------- ----------- --------- --------- ---------
Net investment income ............ 3.54% 2.86% 2.70% 2.53% 2.55%
--------- ----------- --------- --------- ---------
Supplemental Data
Net assets, end of year (000) .... $ 706,119 $ 1,143,172 $ 829,986 $ 523,155 $ 322,067
--------- ----------- --------- --------- ---------
Portfolio turnover ............... 30% 30% 23% 11% 14%
--------- ----------- --------- --------- ---------
See notes to Financial Statements
76
MASTER INTERNATIONAL INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
1. ORGANIZATION AND 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.
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. Financial futures contracts traded on exchanges are
valued at their last sale price. Short-term securities with maturities less than
60 days are valued at amortized cost, which approximates fair value. The Series
values its investment in BlackRock Liquidity Series, LLC Cash Sweep Series at
fair value, which is ordinarily based upon their pro-rata ownership in the net
assets of the underlying fund.
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 may 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. Foreign currency
exchange contracts and forward foreign currency exchange contracts are valued at
the mean between the bid and ask prices. Interpolated values are derived when
the settlement date of the contract is an interim date for which quotations are
not available.
Derivative financial instruments
The Series may engage in various portfolio investment strategies both to
increase the return of the Series and to hedge, or protect, its exposure to
interest rate movements and movements in the securities markets. Losses may
arise 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.
77
MASTER INTERNATIONAL INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
- - Financial futures contracts -- The Series may purchase or sell financial
futures contracts and options on futures contracts. Futures contracts are
contracts for delayed delivery of securities at a specific future date and
at a specific price or yield. Pursuant to the contract, the Series agrees
to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known
as margin variation and are 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. The use of futures
transactions involves the risk of an imperfect correlation in the movements
in the price of futures contracts, interest rates and the underlying
assets, and the possible inability of counter-parties to meet the terms of
their contracts.
- - Foreign currency contracts -- A forward currency contract is an agreement
between two parties to buy and sell a currency at a set exchange rate on a
future date. The Series may enter into foreign currency contracts as a
hedge against either specific transactions or portfolio positions. Foreign
currency exchange 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. The use of forward foreign currency
contracts involves the risk that counterparties may not meet the terms of
the agreement and market risk of unanticipated movements in the value of a
foreign currency relative to the US dollar.
- - 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
hedge against possible variations in foreign exchange rates. When foreign
currency is purchased or sold through an exercise of a foreign currency
option, the related premium paid (or received) is added to (or deducted
from) the basis of the foreign currency acquired or deducted from (or added
to) the proceeds of the foreign currency sold. Such transactions may be
effected with respect to hedges on non-US 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.
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.
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 vanes 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.
78
MASTER INTERNATIONAL INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
Segregation and Collateralization
In cases in which the 1940 Act and the interpretive positions of the
Securities and Exchange Commission ("SEC") require that the Series segregates
assets in connection with certain investments (e.g., forward foreign currency
contracts and financial futures contracts), the Series will, consistent with
certain interpretive letters issued by the SEC, designate on its books and
records cash or other liquid securities having a market value at least equal to
the amount that would otherwise be required to be physically segregated.
Furthermore, based on requirements and agreements with certain exchanges and
third party broker-dealers, the Series may also be required to deliver or
deposit securities as collateral for certain investments (e.g., financial
futures contracts).
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 dates. Upon notification from issuers some of the
dividend income received from a real estate investment trust may be redesignated
as of reduction of cost of the related investment and/or realized gain. Interest
income is recognized on the accrual basis.
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 US federal and various state and local tax returns. No
income tax returns are currently under examination. The statute of limitations
on the Series' US federal tax returns remains open for the years ended December
31, 2005 through December 31, 2007. 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. 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. FAS 161 is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. The impact on the Series' financial statement
disclosures, if any, is currently being assessed.
Other
Expenses directly related to the Series are charged to the Series. Other
operating expenses shared by several funds are pro-rated among those funds on
the basis of relative net assets or other appropriate methods.
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.
79
MASTER INTERNATIONAL INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
("PNC") are the largest stockholders of BlackRock, Inc. As of December 31, 2008,
Merrill Lynch and PNC are affiliates 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 0.12% 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 a percentage of
the investment advisory fee paid by the Series to the Advisor.
For the year ended December 31,2008, the Series reimbursed the Advisor
$15,835 for certain accounting services, which is included in accounting
services in the Statement of Operations.
In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly
owned subsidiary of Merrill Lynch, received $41,908 in commissions on the
execution of portfolio security transactions for the Series for the year ended
December 31, 2008.
The Series may earn income on positive cash balances in demand deposit
accounts. For the year ended December 31, 2008, the Series earned $329, which is
included in income -- affiliated in the Statement of Operations.
Certain officers and/or directors of the Master LLC are officers and/or
directors of BlackRock, Inc. or its affiliates. The Series reimburses the
Advisor for compensation paid to the Master LLC's Chief Compliance Officer.
3. INVESTMENTS:
Purchases and sales of investments, excluding short-term securities, for
the year ended December 31, 2008 were $358,428,019 and $272,733,058,
respectively.
4. SHORT-TERM BORROWINGS:
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, which expired November 2008 and was subsequently renewed until November
2009.The Series may borrow under the credit agreement to fund shareholder
redemptions and for other lawful purposes other than for leverage. The Series
may borrow up to the maximum amount allowable under the Series' current
Prospectus and Statement of Additional Information, subject to various other
legal, regulatory or contractual limits. The Series paid its pro rata share of a
0.02% upfront fee on the aggregate commitment amount based on its net assets as
of October 31, 2008. The Series pays a commitment fee of 0.08% 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 the higher
of the (a) federal funds effective rate and (b) reserve adjusted one month
LIBOR, plus, in each case, the higher of (i) 1.50% and (ii) 50% of the CDX Index
(as defined in the credit agreement) in effect from time to time. The Series did
not borrow under the credit agreement during the year ended December 31, 2008.
80
MASTER INTERNATIONAL INDEX SERIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
5. MARKET AND CREDIT RISK:
In the normal course of business, the Series invests in securities and
enters into transactions where risks exist due to fluctuations in the market
(market risk) or failure of the issuer of a security to meet all its obligations
(credit risk). The value of securities held by the Series may decline in
response to certain events, including those directly involving the companies
whose securities are owned by the Series; conditions affecting the general
economy; overall market changes; local, regional or global political, social or
economic instability; and currency and interest rate and price fluctuations.
Similar to credit risk, the Series may be exposed to counterparty risk, or the
risk that an entity with which the Series has unsettled or open transactions may
default. Financial assets, which potentially expose the Series to credit and
counterparty risks, consist principally of investments and cash due from
counterparties. The extent of the Series' exposure to credit and counterparty
risks with respect to these financial assets is approximated by their value
recorded in the Series' Statement of Assets and Liabilities.
The Series invests from time to time a substantial amount of its assets in
issuers located in a single country or a limited number of countries. When the
Series concentrates its investments in this manner, it assumes the risk that
economic, political and social conditions in those countries may have a
significant impact on its investment performance. Please see the Summary
Schedule of Investments for concentrations in specific countries.
6. SUBSEQUENT EVENT:
On January 1, 2009, Bank of America Corporation announced that it had
completed its acquisition of Merrill Lynch, one of the largest stockholders of
BlackRock, Inc.
81
MASTER INTERNATIONAL INDEX SERIES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Investors and Board of Directors of
Quantitative Master Series LLC:
We have audited the accompanying statement of assets and liabilities,
including the summary schedule of investments, of Master International Index
Series, one of the portfolios constituting Quantitative Master Series LLC (the
"Master LLC") as of December 31, 2008, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Master LLC's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States).Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Master LLC is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Master
LLC's internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31,2008, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Master International Index Series of Quantitative Master Series LLC as of
December 31, 2008, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America
Deloitte & Touche LLP
Princeton, New Jersey
February 25, 2009
82
MASTER INTERNATIONAL INDEX SERIES
OFFICERS AND DIRECTORS (UNAUDITED)
NUMBER OF
LENGTH BLACKROCK-
OF TIME ADVISED
POSITION(S) SERVED FUNDS AND
NAME, ADDRESS AND HELD WITH AS A PORTFOLIOS PUBLIC
YEAR OF BIRTH MASTER LLC DIRECTOR(2) PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS OVERSEEN DIRECTORSHIPS
- ------------------- ------------ ----------- --------------------------------------------------- ------------- ----------------
NON-INTERESTED DIRECTORS(1)
RONALD W. FORBES Co-Chair of Since Professor Emeritus of Finance, School of Business, 34 Funds None
40 East 52nd Street the Board of 2007 State University of New York at Albany since 2000. 81 Portfolios
New York, NY 10022 Directors
1940 and Director
RODNEY D. JOHNSON Co-Chair of Since President, Fairmount Capital Advisors, Inc. since 34 Funds None
40 East 52nd Street the Board of 2007 1987; Director, Fox Chase Cancer Center since 81 Portfolios
New York, NY 10022 Directors 2002; Member of the Archdiocesan Investment
1941 and Director Committee of the Archdiocese of Philadelphia since
2003; Director The Committee of Seventy (civic)
since 2006.
DAVID O. BEIM Director Since Professor of Finance and Economics at the 34 Funds None
40 East 52nd Street 2007 Columbia University Graduate School of Business 81 Portfolios
New York, NY 10022 since 1991; Trustee of Phillips Exeter Academy
1940 since 2002; Formerly Chairman, Wave Hill Inc.
(public garden and cultural center) from 1990 to
2006.
DR. MATINA HORNER Director Since Formerly Executive Vice President of Teachers 34 Funds NSTAR (electric
40 East 52nd Street 2007 Insurance and Annuity Association and College 81 Portfolios and gas utility)
New York, NY 10022 Retirement Equities Fund from 1989 to 2003.
1939
HERBERT I. LONDON Director Since Professor Emeritus, New York University since 2005; 34 Funds AIMS Worldwide,
40 East 52nd Street and Member 2007 John M. Olin Professor of Humanities, New York 81 Portfolios Inc. (marketing)
New York, NY 10022 of the Audit University from 1993 to 2005 and Professor thereof
1939 Committee from 1980 to 2005; President, Hudson Institute
(policy research organizations) since 1997 and
Trustee thereof since 1980; Chairman of the Board
of Trustees for Grantham University since 2006;
Director of InnoCentive, Inc. (strategic solutions
company) since 2005; Director of Cerego, LLC
(software development and design) since 2005.
CYNTHIA A. Director Since Professor, Harvard Business School since 34 Funds Newell
MONTGOMERY 2007 1989;Director, Harvard Business School Publishing 81 Portfolios Rubbermaid,
40 East 52nd Street since 2005; Director, McLean Hospital since 2005. Inc.
New York, NY 10022 (manufacturing)
1952
JOSEPH P. PLATT, JR. Director Since Director,The West Penn Allegheny Health System (a 34 Funds Greenlight
40 East 52nd Street 2007 not-for-profit health system) since 2008; Director, 81 Portfolios Capital Re, Ltd.
New York, NY 10022 Jones and Brown (Canadian insurance broker) since (reinsurance
1947 1998; General Partner, Thorn Partners, LP (private company
investment) since 1998; Formerly Partner, Amarna
Corporation, LLC (private investment company) from
2002 to 2008.
ROBERT C. ROBB, JR. Director Since Partner, Lewis, Eckert, Robb and Company 34 Funds None
40 East 52nd Street 2007 (management and financial consulting firm) since 81 Portfolios
New York, NY 10022 1981.
1945
TOBY ROSENBLATT Director Since President, Founders Investments Ltd. (private 34 Funds A.P. Pharma,
40 East 52nd Street 2007 investments) since 1999; Director of Forward 81 Portfolios Inc.(speciality
New York, NY 10022 Management, LLC since 2007; Director,The James Pharmaceuticals)
1938 Irvine Foundation (philanthropic foundation) since
1997; Formerly Trustee, State Street Research
Mutual Funds from 1990 to 2005; Formerly Trustee,
Metropolitan Series Funds, Inc. from 2001 to 2005.
83
MASTER INTERNATIONAL INDEX SERIES
OFFICERS AND DIRECTORS (UNAUDITED)
NUMBER OF
BLACKROCK-
ADVISED
POSITION(S) LENGTH FUNDS AND
NAME, ADDRESS AND HELD WITH OF TIME PORTFOLIOS PUBLIC
YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS OVERSEEN DIRECTORSHIPS
- ------------------- ------------ ----------- --------------------------------------------------- -------------- ---------------
NON-INTERESTED DIRECTORS(1) (CONCLUDED)
KENNETH L. URISH Director and Since Managing Partner, Urish Popeck & Co., LLC 34 Funds None
40 East 52nd Street Chairman of 2007 (certified public accountants and consultants) 81 Portfolios
New York, NY 10022 the Audit since 1976; Member of External Advisory Board, The
1951 Committee Pennsylvania State University Accounting Department
since 2001; Trustee, The Holy Family Foundation
since 2001; Committee Member/ Professional Ethics
Committee of the Pennsylvania Institute of
Certified Public Accountants since 2007; Formerly
President and Trustee, Pittsburgh Catholic
Publishing Associates from 2003 to 2008; Formerly
Director, Inter-Tel from 2006 to 2007.
FREDERICK W. Director and Since Professor and Dean Emeritus of the Joseph M. Katz 34 Funds None
WINTER 40 East 52nd Member of 2007 School of Business, University of Pittsburgh since 81 Portfolios
Street New York, NY the Audit 2005 and Dean thereof from 1997 to 2005. Director,
10022 Committee Alkon Corporation (pneumatics) since 1992;
1945 Formerly Director, Indotronix International (IT
services) from 2004 to 2008; Director,Tippman
Sports (recreation) since 2005.
(1) Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
(2) Following the combination of Merrill Lynch Investment Managers, L.P. ("MLIM") and BlackRock, Inc. ("BlackRock") in September
2006, the various legacy MLIM and legacy BlackRock Fund boards were realigned and consolidated into three new Fund boards in
2007.As a result, although the chart shows directors as joining the Master LLC's board in 2007, each director first became a
member of the board of directors of other legacy MLIM or legacy BlackRock Funds as follows: David O. Beim since 1998; Ronald W.
Forbes since 1977; Matina Horner since 2004; Rodney D. Johnson since 1995; Herbert I. London since 1987; Cynthia A. Montgomery
since 1994; Joseph P. Platt since 1999; Robert C. Robb, Jr. since 1999; Toby Rosenblatt since 2005; Kenneth L. Urish since
1999; and Frederick W. Winter since 1999.
INTERESTED DIRECTORS(3)
RICHARD S. DAVIS Director Since Managing Director, BlackRock, Inc. since 2005; 174 Funds None
40 East 52nd Street 2007 Formerly Chief Executive Officer, State Street 286 Portfolios
New York, NY 10022 Research & Management Company from 2000 to
1945 2005; Formerly Chairman of the Board of Trustees,
State Street Research Mutual Funds from 2000 to
2005; Formerly Chairman, SSR Realty from 2000 to
2004
HENRY GABBAY Director Since Formerly Consultant, BlackRock, Inc. from 2007 to 174 Funds None
40 East 52nd Street 2007 2008; Formerly Managing Director, BlackRock, Inc. 286 Portfolios
New York, NY 10022 from 1989 to 2007; Formerly Chief Administrative
1947 Officer, BlackRock Advisors, LLC from 1998 to 2007;
Formerly President of BlackRock Funds and
BlackRock Bond Allocation Target Shares from 2005
to 2007 and Treasurer of certain closed-end funds
in the BlackRock Fund complex from 1989 to 2006.
(3) Mr. Davis is an "interested person," as defined in the Investment Company Act of 1940, of the Master LLC based on his
position with BlackRock, Inc. and its affiliates. Mr. Gabbay is an "interested person" of the Master LLC based on his former
positions with BlackRock, Inc. and its affiliates, as well as his ownership of BlackRock, Inc. and PNC securities. Directors
serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
84
MASTER INTERNATIONAL INDEX SERIES
OFFICERS AND DIRECTORS (UNAUDITED)
POSITION(S) LENGTH
NAME, ADDRESS AND HELD WITH OF TIME
YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------- -------------- ------- --------------------------------------------------------------------------------------
MASTER LLC OFFICERS(1)
DONALD C. BURKE Master LLC Since Managing Director of BlackRock, Inc. since 2006; Formerly Managing Director of Merrill
40 East 52nd Street President and 2007 Lynch Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P. ("FAM") in
New York, NY 10022 Chief 2006; First Vice President thereof from 1997 to 2005; Treasurer thereof from 1999 to
1960 Executive 2006 and Vice President thereof from 1990 to 1997.
Officer
ANNE F. ACKERLEY Vice President Since Managing Director of BlackRock, Inc. since 2000 Chief Operating Officer of BlackRock's
40 East 52nd Street 2007 US Retain Group since 2006; Formerly Head of BlackRock's Mutual Fund Group from 2000
New York, NY 10022 to 2006.
1962
NEAL J. ANDREWS Chief Since Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice President and
40 East 52nd Street Financial 2007 Line of Business Head of Fund Accounting and Administration at PNC Global Investment
New York, NY 10022 Officer Servicing (US) Inc. (formerly PFPC Inc.) from 1992 to 2006.
1966
JAY M. FIFE Treasurer Since Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Formerly
40 East 52nd Street 2007 Assistant Treasurer of the MLIM/FAM advised funds from 2005 to 2006; Director of MLIM
New York, NY 10022 Fund Services Group from 2001 to 2006.
1970
BRIAN P. KINDELAN Chief Since Chief Compliance Officer of the BlackRock-advised Funds since 2007; Managing Director
40 East 52nd Street Compliance 2007 and Senior Counsel of BlackRock, Inc. since 2005; Formerly Director and Senior Counsel
New York, NY 10022 Officer of BlackRock Advisors, Inc. from 2001 to 2004.
1959
HOWARD SURLOFF Secretary Since Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at BlackRock,
40 East 52nd Street 2007 Inc. since 2006; Formerly General Counsel (US) of Goldman Sachs Asset Management, L.P.
New York, NY 10022 from 1993 to 2006.
1965
(1) Officers of the Master LLC serve at the pleasure of the Board of Directors.
Further information about the Master LLC's Officers and Directors is available in the Master LLC's Statement of Additional
Information, which can be obtained without charge by calling 1-800-441-7762.
INDEPENDENT REGISTERED PUBLIC
CUSTODIAN ACCOUNTING AGENT ACCOUNTING FIRM LEGAL COUNSEL
- --------- --------------------- ----------------------------- ------------------
JP Morgan Chase Bank, N.A. State Street Bank and Deloitte & Touche LLP Sidley Austin LLP
Brooklyn, NY 11245 Trust Company Princeton, NJ 08540 New York, NY 10019
Princeton, NJ 08540
85
(AMERICAN BEACON 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 SCHEDULES
In addition to the Schedule of Investments provided in each semi-annual and
annual report, each Fund files a complete schedule of its portfolio holdings
with the Securities and Exchange Commission ("SEC") on Form N-Q as of the first
and third fiscal quarters. The Fund's Forms N-Q are available on the SEC's
website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549.
Information regarding the operation of the SEC's Public Reference Room may be
obtained by calling 1-800-SEC-0330. A complete schedule of the Fund's portfolio
holdings is also available on the Funds' website (www.americanbeaconfunds.com)
approximately thirty days after the end of each fiscal quarter.
AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
A description of the policies and procedures that the Funds use to determine how
to vote proxies relating to portfolio securities is available in each Fund's
Statement of Additional Information, which may be obtained free of charge by
calling 1-800-967-9009 or by accessing the SEC's website at www.sec.gov. Each
Fund's proxy voting record for the most recent year ended June 30 is filed
annually with the SEC on Form N-PX. The Fund's Forms N-PX are available on the
SEC's website at www.sec.gov. The Fund's proxy voting record may also be
obtained by calling 1-800-967-9009.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES
SERVICES Portland, Maine
Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP
Dallas, Texas
THIS REPORT IS PREPARED FOR SHAREHOLDERS OF THE AMERICAN BEACON FUNDS AND MAY BE
DISTRIBUTED TO OTHERS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
AMERICAN AIRLINES, INC. IS NOT RESPONSIBLE FOR INVESTMENTS MADE IN THE AMERICAN
BEACON FUNDS. AMERICAN BEACON FUNDS IS A SERVICE MARK OF AMR CORPORATION.
AMERICAN BEACON SMALL CAP INDEX FUND AND AMERICAN BEACON INTERNATIONAL EQUITY
INDEX FUND ARE SERVICE MARKS OF AMERICAN BEACON ADVISORS, INC.
AR 12/08
00065948
GUIDANCE | VISION | EXPERIENCE
(AMERICAN BEACON FUNDS(SM) LOGO)
Annual Report
(GRAPHIC)
December 31, 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 ........................................... 7
Financial Highlights .............................................. 17
Additional Information ............................................ Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of
the reporting period and are subject to change. Each advisor's strategies and
the Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
American Beacon Funds December 31, 2008
(PHOTO OF WILLIAM F. QUINN)
FELLOW SHAREHOLDERS,
Enclosed is the Annual Report for the American Beacon Treasury Inflation
Protected Securities Fund for the twelve months ended December 31, 2008.
Growing unemployment, low consumer confidence, rising foreclosures and bank
failures all contributed to a growing uncertainty that permeated every aspect of
the economy in 2008. The Federal Reserve Board ("Fed") lowered the Fed Funds
rate on December 16th to a record low target range of 0.00-0.25% and noted that
"weak economic conditions are likely to warrant exceptionally low levels of the
Fed Funds rate for some time."
Even with the government bailouts and liquidity programs, short-term credit
markets were under great strain as banks continued to report substantial losses.
A weak economic environment limited the Fed's ability to raise interest rates.
In this environment of low inflation expectations, the American Beacon Treasury
Inflation Protected Securities Fund reported a very competitive return of -2.09%
for the period compared to the Lipper TIPS Index return of -4.08%.
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 Funds.
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
DECEMBER 31, 2008 (UNAUDITED)
Treasury yields plunged in 2008. On December 31, 2008, the 30-year Treasury
yielded a remarkably low 2.69%, while the 3-month Treasury bill yielded an
equally remarkable 0.08%. Credit spreads widened significantly throughout 2008,
ending the year over 300 basis points (3.00%) wider than their year-ago level.
Equity markets posted their worst annual returns since the 1930's. Energy prices
plummeted in the second half of 2008, after skyrocketing in the first half. The
nearly 50% increase in crude oil prices the first six months of the year was
followed by a 68% decline over the second half.
Inflation, as measured by the Consumer Price Index ("CPI"), had a bumpy
ride, increasing in the first half of the year and then sharply moving downward
in the second half of 2008. The prices of crude oil, agricultural and other
commodities fell sharply in the second half of 2008 on concerns about rapidly
slowing demand. For example, in December, the CPI increased at a 0.1%
year-over-year pace (vs. 5.0% in June), while the Core CPI (CPI excluding food
and energy) increased at a 1.8% year-over-year pace (vs. 2.4% in June).
Increasing real Treasury interest rates and lower-than-expected CPI
readings contributed to negative total returns for Treasury Inflation Protected
Securities ("TIPS"). The Barclays Capital U.S. TIPS Index returned -2.35% in
2008, while the Intermediate (1-10 year maturity) TIPS Index returned -2.43%.
Inflation expectations as evidenced by breakeven inflation rates (the
spread between similar maturity nominal and inflation-protected securities)
ranged approximately 300 basis points (3.00%) from their high to low in 2008. In
early July, breakevens peaked for the year at 2.6%, while in late November, they
troughed at -0.30%. At year-end, 10-year breakevens were approximately -0.06%.
The U.S. Treasury appears committed to the TIPS market, with $56 billion of new
supply auctioned in 2008. At year-end, the total outstanding market value of
TIPS was approximately $479 billion.
2
PERFORMANCE OVERVIEW
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM)
DECEMBER 31, 2008 (UNAUDITED)
The Institutional Class of the Fund returned -2.09% for the period from
January 1, 2008 through December 31, 2008, leading the Barclays Capital 1-10
Year U.S. TIPS Index (the "Index") return of -2.43%. The Fund also outperformed
the Lipper TIPS Index return of -4.08% for the same time period.
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 6/30/04 THROUGH 12/31/08
(PERFORMANCE GRAPH)
(PLOT POINTS TO COME)
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 12/31/2008
VALUE OF
SINCE $10,000
INCEPTION 6/30/04-
1 YEAR 3 YEARS 6/30/04 12/31/08
------ ------- --------- --------
Institutional Class(1, 3) ...................... -2.09% 3.24% 3.45% $11,650
Barclays Capital 1-10 Yr. U.S. TIPS Index(2) ... -2.43% 3.37% 3.76% $11,810
Barclays Capital U.S. TIPS Index(2) ............ -2.35% 3.06% 4.10% $11,982
Lipper TIPS Funds Index(2) ..................... -4.08% 1.94% 3.42% $11,631
(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 Barclays Capital 1-10 Yr. U.S. TIPS Index is an unmanaged market index
comprising U.S. Treasury inflation-indexed securities with maturities
between one and ten years while the Barclays Capital U.S. TIPS Index
includes all maturities. The Lipper TIPS Funds Index tracks the results of
the 30 largest mutual funds in the Lipper TIPS Fund category. Lipper is an
independent mutual fund research and ranking service. One cannot directly
invest in an index.
(3.) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus was 0.43%. After contractual expense reimbursements through
February 28, 2008, the net expense ratio disclosed in the most recent
prospectus was 0.35%. The expense ratios above may vary from the expense
ratios presented in other sections of this report that are based on
expenses incurred during the period covered by this report.
The Fund outperformed the Index for the twelve-month period by 34 basis
points (0.34%). While the Fund outperformed the Index on a relative basis, the
Fund posted a negative absolute return for the year as a result of market
activity in the 3rd and 4th quarters. The fall in oil and commodity prices
contributed to deflation over the last part of 2008, which led investors away
from TIPS, causing real yields to rise sharply.
For the one-year period, the Fund maintained a duration neutral position
relative to the Index, and from a yield curve positioning standpoint, the Fund
was underweight the 2010-2014 maturities and overweight the 2015-2018
maturities. As the real yield curve flattened during the period, the Fund's
overweight in the longer maturity TIPS allowed the Fund's holdings to outperform
relative to the Index.
The Fund remains focused on investing primarily in TIPS to provide
inflation protection and income to its shareholders.
3
PERFORMANCE OVERVIEW
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM)
DECEMBER 31, 2008 (UNAUDITED)
TOP TEN HOLDINGS
% OF
NET
ASSETS
------
U.S. Treasury Note, 0.875%, Due 4/15/2010 ... 9.7%
U.S. Treasury Note, 3.000%, Due 7/15/2012 ... 7.7%
U.S. Treasury Note, 1.625%, Due 1/15/2015 ... 7.2%
U.S. Treasury Note, 2.000%, Due 1/15/2014 ... 7.0%
U.S. Treasury Note, 1.875%, Due 7/15/2013 ... 6.4%
U.S. Treasury Note, 2.500%, Due 7/15/2016 ... 5.9%
U.S. Treasury Note, 2.000%, Due 1/15/2016 ... 5.5%
U.S. Treasury Note, 2.375%, Due 4/15/2011 ... 5.3%
U.S. Treasury Note, 2.000%, Due 7/15/2014 ... 4.7%
U.S. Treasury Note, 2.375%, Due 1/15/2017 ... 4.7%
PORTFOLIO DIVERSIFICATION
% OF
FIXED INCOME
------------
A ..... 0.0%
AA .... 0.0%
AAA ... 100.0%
(PERFORMANCE GRAPH)
U.S. Government Treasury Obligations 99.8%
Short-Term Investments 0.2%
4
FUND EXPENSES
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM)
DECEMBER 31, 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 July 1, 2008 through December
31, 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. Shareholders of the
Institutional Class that invest in the Fund through an IRA may be subject to a
custodial IRA fee of $12 that is typically deducted each December. If your
account was subject to a custodial IRA fee during the period, your costs would
have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" line of the table provides information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the Institutional Class that invest in the Fund through an IRA may be subject
to a custodial IRA fee of $12 that is typically deducted each December. If your
account was subject to a custodial IRA fee during the period, your costs would
have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" line of the
table is useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
Beginning Ending
Account Account Expenses Paid
Value Value During Period*
7/1/08 12/31/08 7/1/08-12/31/08
--------- --------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $ 924.30 $0.82
Hypothetical $1,000.00 $1,024.28 $0.87
(5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratio for the six-month
period of 0.17% for the Institutional Class, multiplied by the average
account value over the period, multiplied by the number derived by dividing
the number of days in the most recent fiscal half-year (184) by days in the
year (366) to reflect the half year period.
5
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon Treasury Inflation Protected Securities Fund:
We have audited the accompanying statement of assets and liabilities of American
Beacon Treasury Inflation Protected Securities Fund (the "Fund"), a separate
fund comprising the American Beacon Funds, including the schedule of
investments, as of December 31, 2008, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2008, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Treasury Inflation Protected Securities Fund at December 31,
2008, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein, in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Dallas, Texas
February 25, 2009
See accompanying notes
6
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
SCHEDULE OF INVESTMENTS
December 31, 2008
PAR
AMOUNT VALUE
-------- --------
(DOLLARS IN THOUSANDS)
----------------------
U.S. TREASURY OBLIGATIONS - 99.72%
4.25%, Due 1/15/2010 ++ ...................... $ 5,144 $ 5,052
0.875%, Due 4/15/2010 ++ ..................... 14,432 13,564
3.50%, Due 1/15/2011 ++ ...................... 4,749 4,661
2.375%, Due 4/15/2011 ++ ..................... 7,619 7,441
3.375%, Due 1/15/2012 ++ ..................... 2,843 2,812
2.00%, Due 4/15/2012 ++ ...................... 6,673 6,507
3.00%, Due 7/15/2012 ++ ...................... 11,037 10,817
0.625%, Due 4/15/2013 ++ ..................... 6,304 6,027
1.875%, Due 7/15/2013 ++ ..................... 9,566 9,006
2.00%, Due 1/15/2014 ++ ...................... 10,289 9,748
2.00%, Due 7/15/2014 ++ ...................... 7,022 6,641
1.625%, Due 1/15/2015 ++ ..................... 10,926 10,132
1.875%, Due 7/15/2015 ++ ..................... 6,544 6,181
2.00%, Due 1/15/2016 ++ ...................... 8,077 7,735
2.50%, Due 7/15/2016 ++ ...................... 8,287 8,222
2.375%, Due 1/15/2017 ++ ..................... 6,687 6,635
2.625%, Due 7/15/2017 ++ ..................... 6,162 6,315
1.625%, Due 1/15/2018 ++ ..................... 6,773 6,429
1.375%, Due 7/15/2018 ++ ..................... 6,279 5,872
--------
TOTAL U.S. TREASURY OBLIGATIONS .................. 139,797
--------
SHARES
--------
SHORT TERM INVESTMENTS - 0.22%
Columbia Government Reserve Fund ............. 304,597 305
--------
TOTAL INVESTMENTS - 99.94% (COST $147,290) ....... $140,102
OTHER ASSETS, NET OF LIABILITIES - 0.06% ......... 87
--------
TOTAL NET ASSETS - 100.00% ....................... $140,189
========
Percentages are stated as a percent of net assets.
++ Inflation-Indexed Note.
See accompanying notes
7
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2008 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS:
Investments in unaffiliated securities, at value (A) ......... $ 140,102
Dividends and interest receivable ............................ 1,269
Receivable for fund shares sold .............................. 64
Receivable for expense reimbursement ......................... 13
Prepaid expenses ............................................. 4
-----------
TOTAL ASSETS .............................................. 141,452
-----------
LIABILITIES:
Payable for fund shares redeemed ............................. 1,162
Management and investment advisory fees payable (Note 2) ..... 48
Administrative service and service fees payable .............. 18
Other liabilities ............................................ 35
-----------
TOTAL LIABILITIES ......................................... 1,263
-----------
NET ASSETS ...................................................... $ 140,189
===========
ANALYSIS OF NET ASSETS:
Paid-in-capital .............................................. 171,128
Undistributed net investment income .......................... 45
Accumulated net realized loss ................................ (23,795)
Unrealized depreciation of investments, futures contracts, and
foreign currency .......................................... (7,189)
-----------
NET ASSETS ...................................................... $ 140,189
===========
SHARES OUTSTANDING (NO PAR VALUE):
Institutional Class .......................................... 15,241,067
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE:
Institutional Class .......................................... $ 9.20
===========
- ----------
A- Cost of investments in unaffiliated securities $ 147,290
See accompanying notes
8
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2008 (IN THOUSANDS)
INVESTMENT INCOME:
Dividend income from affiliated securities ...................... $ 75
Interest income ................................................. 18,469
--------
TOTAL INVESTMENT INCOME ................................... 18,544
--------
EXPENSES:
Management and investment advisory fees (Note 2) ................ 489
Administrative service fees (Note 2):
Institutional Class .......................................... 374
Transfer agent fees:
Institutional Class .......................................... 13
Custody and fund accounting fees ................................ 41
Professional fees ............................................... 30
Prospectus and shareholder reports .............................. 11
Other expenses .................................................. 22
--------
TOTAL EXPENSES ............................................ 980
--------
Net fees waived and expenses reimbursed by Manager (Note 2) ..... (136)
--------
NET EXPENSES .............................................. 844
--------
NET INVESTMENT INCOME .............................................. 17,700
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investments .................................................. (22,281)
Change in net unrealized appreciation or depreciation of:
Investments .................................................. (8,833)
--------
NET LOSS ON INVESTMENTS ................................... (31,114)
--------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ............... $(13,414)
========
See accompanying notes
9
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Year Ended Year Ended
December December
31, 2008 31, 2007
---------- ----------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................................... $ 17,700 $ 2,643
Net realized loss on investments, futures contracts, and foreign currency
transactions ......................................................... (22,281) (72)
Change in net unrealized appreciation or (depreciation) of investments,
futures contracts, and foreign currency translations ................. (8,833) 1,889
--------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...... (13,414) 4,460
--------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class .................................................. (17,654) (2,630)
Net realized gain on investments:
Institutional Class .................................................. -- (19)
--------- --------
NET DISTRIBUTIONS TO SHAREHOLDERS .................................... (17,654) (2,649)
--------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ........................................... 406,774 207,597
Reinvestment of dividends and distributions ............................. 17,654 2,649
Cost of shares redeemed ................................................. (476,868) (22,152)
--------- --------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE
TRANSACTIONS ...................................................... (52,440) 188,094
--------- --------
NET INCREASE (DECREASE) IN NET ASSETS ...................................... (83,508) 189,905
--------- --------
NET ASSETS:
Beginning of period ..................................................... 223,697 33,792
--------- --------
END OF PERIOD * ......................................................... $ 140,189 $223,697
========= ========
* Includes undistributed net investment income of .......................... $ 45 $ --
========= ========
See accompanying notes
10
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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, as
amended, (the "Act") 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.
Effective September 12, 2008, American Beacon Advisors, Inc. (the
"Manager") became a wholly-owned subsidiary of Lighthouse Holdings, Inc., which
is indirectly owned by investment funds affiliated with Pharos Capital Group,
LLC and TPG Capital, L.P., two private equity firms. Prior to September 12, the
Manager was a wholly-owned subsidiary of AMR Corporation, the parent company of
American Airlines, Inc. which retained a minority interest in the parent company
of Lighthouse Holdings, Inc.
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.
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 investments as of
December 31, 2008 is as follows (in thousands):
11
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
Investments in
Valuation Inputs Securities
---------------- --------------
Level 1 - Quoted Prices ...................................... $140,102
Level 2 - Other significant observable inputs ................ --
Level 3 - Significant unobservable inputs .................... --
--------
Total ........................................................ $140,102
The inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with investing in those
securities.
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 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.
12
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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 are
managed by a sub-advisor which has entered into a separate investment advisory
agreement 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 the amount paid by the Manager to the sub-advisor hired by the
Manager plus, through September 11, 2008, 0.10% of the average daily net assets,
and from September 12, 2008, 0.05% of the average daily net assets. Management
fees paid during the year ended December 31, 2008 were as follows:
AMOUNT PAID NET AMOUNT
MANAGEMENT MANAGEMENT TO INVESTMENT RETAINED BY
FEE RATE FEE SUB-ADVISOR MANAGER
- ---------- ---------- ------------- -----------
0.15%-0.19% $488,851 $307,620 $181,231
Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services
Agreement which obligates the Manager to provide or oversee administrative
services to the Fund. As compensation for performing the duties required under
the Administrative Services Agreement, the Manager received through September
11, 2008, an annualized fee of 0.10% of the average daily net assets of the
Fund. From September 12, 2008, the Manager receives an annualized fee of 0.15%
of the average daily net assets of the Fund.
Investment in Affiliated Funds
The Fund is permitted, pursuant to an exemptive order by the
Securities and Exchange Commission ("SEC") and procedures approved by the Board,
to invest up to 25% of its total assets in the American Beacon Money Market
Select Fund (the "Select Fund"). The Fund and the Select Fund have the same
investment advisor and, therefore, are considered to be affiliated. The Manager
serves as investment advisor to the Select Fund and receives from the Select
Fund an annualized fee up to 0.10% of the Select Fund's average daily net
assets. During the year ended December 31, 2008, fees earned by the Manager from
the Select Fund were $2,203.
13
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
Interfund Lending Program
Pursuant to an exemptive order by the SEC, the Fund, along with other
registered investment companies having management contracts with the Manager,
may participate in an interfund lending program as a borrower. This program
provides an alternative credit facility allowing the Fund to borrow from other
participating Funds. For the year ended December 31, 2008, the Fund did not
utilize the credit facility.
Reimbursement of Expenses
The Manager contractually agreed to reimburse the Fund to the extent
that total annual fund operating expenses exceeded the Fund's expense cap of
0.35%. Expenses totaling $1,279 were reimbursed under the contractual agreement.
Subsequently the expense ratio of the Fund decreased below the expense cap.
Beginning July 1, the Manager voluntarily agreed to waive a portion of its
Management and Administrative Service fees. The Manager waived fees of $135,078
from July 1 to December 31, 2008.
The Fund has adopted an Expense Reimbursement Plan whereby the Manager
may seek repayment of fees waived or expenses reimbursed for a period of up to
three years. However, reimbursement will occur only if the Class's average net
assets have grown or expenses have declined sufficiently to allow reimbursement
without causing its expense ratio to exceed the previously agreed upon
contractual expense limit. The Fund has not recorded a liability for potential
reimbursement, due to the current assessment that a reimbursement is unlikely.
3. FEDERAL INCOME TAXES
It is the policy of the Fund to comply with the requirements of
Subchapter M of the Internal Revenue Code and to distribute substantially all
net investment income as well as any net realized capital gains on the sale of
investments. Therefore, no federal income or excise tax provision is required.
For FASB Interpretation No. 48, "Accounting for Uncertainties in
Income Taxes" ("FIN 48") purposes, there are no unrecognized tax benefits as of
December 31, 2008 included in the accompanying financial statements. Each of the
tax years in the four year period ended December 31, 2008, 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. For the year ended
December 31, 2008, the Fund recognized $0 in interest and penalties.
Dividends are categorized in accordance with income tax regulations
which may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
The Fund may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on returns on income earned or gains
realized or repatriated. Taxes are accrued and applied to net investment income,
net realized capital gains and net unrealized appreciation, as applicable, as
the income is earned or capital gains are recorded.
14
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
The tax character of distributions paid during the fiscal years ended
December 31, 2008 and December 31, 2007 were as follows (in thousands):
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2008 2007
------------ ------------
DISTRIBUTIONS PAID FROM:
Ordinary income* ............................................. $17,654 $2,630
Tax return of capital ........................................ -- 19
------- ------
TOTAL TAXABLE DISTRIBUTIONS ..................................... $17,654 $2,649
======= ======
* For tax purposes, short-term capital gains distributions are considered
ordinary income distributions.
As of December 31, 2008, the components of distributable earnings on a
tax basis were as follows (in thousands):
Cost basis of investments for federal income tax purposes ....... $148,491
Unrealized appreciation ......................................... 514
Unrealized depreciation ......................................... (8,903)
--------
Net unrealized appreciation/(depreciation) ...................... (8,389)
Undistributed ordinary income ................................... 45
Undistributed long-term gain/(loss) ............................. (15,241)
--------
Distributable earnings .......................................... $(23,585)
========
Financial reporting records are adjusted for permanent book/tax
differences to reflect tax character. Financial records are not adjusted for
temporary differences. The temporary differences between financial reporting and
tax-basis reporting of unrealized appreciation/ (depreciation) are attributable
primarily to the tax deferral of losses from wash sales.
Due to inherent differences in the recognition of income, expenses and
realized gains/(losses) under U.S. generally accepted accounting principles and
federal income tax regulations, permanent differences between book and tax
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent
differences derived from foreign currency transactions and return of capital
that have been reclassified as of December 31, 2008 (in thousands):
Paid-in-capital ...................................... $ 1
Undistributed net investment income .................. (1)
Accumulated net realized gain (loss) ................. --
Unrealized appreciation (depreciation) of investments,
futures contracts and foreign currency ............ --
At December 31, 2008, the capital loss carry forward positions for
federal income tax purposes were (in thousands) $144, $974, $111 and $14,012,
expiring in 2013, 2014, 2015 and 2016 respectively.
4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of Investment transactions for the
year ended December 31, 2008, excluding short-term investments, were
$413,160,474 and $468,944,899, respectively. The Fund had purchases and sales of
U.S. Government securities of $413,160,474 and $468,944,899, respectively.
A summary of the Fund's transactions in the Select Fund for the year
ended December 31, 2008 is set forth below:
DECEMBER 31, 2007 DECEMBER 31, 2008
SHARES/MARKET SHARES/MARKET
AFFILIATE VALUE PURCHASES SALES VALUE
- --------- ----------------- ----------- ----------- -----------------
Select Fund .................... $4,476,103 $72,717,221 $77,193,324 $--
15
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
5. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares (dollars and
shares in thousands):
Year Ended December 31, 2008
INSTITUTIONAL CLASS
-------------------
SHARES AMOUNT
------ ---------
Shares sold ............................. 38,729 $ 406,774
Reinvestment of dividends ............... 1,772 17,654
Shares redeemed ......................... (47,232) (476,868)
------- ---------
Net (decrease) in shares outstanding .... (6,731) $ (52,440)
======= =========
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
====== ========
16
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Institutional Class
------------------------------------------------------------
June
Year Ended December 31, 30 to
--------------------------------------------- December
2008 2007(B) 2006 2005 31, 2004(A)
-------- -------- ------- ------- -----------
Net asset value, beginning of period ................. $ 10.18 $ 9.53 $ 9.75 $ 10.16 $ 10.00
-------- -------- ------- ------- -------
Income from investment operations:
Net investment income ............................. 0.80 0.45 0.29 0.56(C) 0.18(C)
Net gains (losses) on securities (both realized and
unrealized) .................................... (0.98) 0.59 (0.19) (0.37) 0.21
-------- -------- ------- ------- -------
Total income (loss) from investment operations ....... (0.18) 1.04 0.10 0.19 0.39
-------- -------- ------- ------- -------
Less distributions:
Dividends from net investment income .............. (0.80) (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 .................................. (0.80) (0.39) (0.32) (0.60) (0.23)
-------- -------- ------- ------- -------
Net asset value, end of period ....................... $ 9.20 $ 10.18 $ 9.53 $ 9.75 $ 10.16
======== ======== ======= ======= =======
Total return ......................................... (2.09)% 11.22% 1.05% 1.86% 3.94%(F)
Ratios and supplemental data:
Net assets, end of period (in thousands) .......... $140,189 $223,697 $33,792 $30,584 $20,943
Ratios to average net assets (annualized):
Expenses, after expense reimbursements
(recoupments) ............................... 0.25% 0.43% 0.49% 0.44% 0.46%
Expenses, before expense reimbursements
(recoupments) ............................... 0.29% 0.43% 0.49% 0.39% 0.62%
Net investment income, after expense
reimbursements (recoupements) ............... 5.19% 4.74% 2.94% 5.45% 3.34%
Net investment income, before expense
reimbursements (recoupments) ................ 5.15% 4.74% 2.94% 5.50% 3.18%
Portfolio turnover rate .............................. 128% 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. was removed 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.
17
AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND
PRIVACY POLICY & FEDERAL TAX INFORMATION
(UNAUDITED)
PRIVACY POLICY
The American Beacon Funds recognizes and respects the privacy of our
shareholders. We are providing this notice to you so you will understand how
shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of
the following sources:
- information we receive from you on applications or other forms;
- information about your transactions with us or our service
providers; and
- information we receive from third parties.
We do not disclose any nonpublic personal information about our customers
or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those
employees or service providers who need to know that information to provide
products or services to you. To ensure the confidentiality of your nonpublic
personal information, we maintain safeguards that comply with federal standards.
FEDERAL TAX INFORMATION
We are providing this information as required by the Internal Revenue Code.
The amounts shown may differ from those in other areas of this report because of
differences between tax and financial reporting requirements.
The Fund's distributions to shareholders did not include any short-term
capital gains.
Of the ordinary dividends paid to shareholders during the tax year ended
December 31, 2008, 99.62% were derived from U.S. Treasury Obligations.
18
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
The Trustees and officers of the American Beacon Funds (the "Trust") are
listed below, together with their principal occupations during the past five
years. Unless otherwise indicated, the address of each person listed below is
4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee
oversees twenty-three funds in the fund complex that includes the Trust, the
American Beacon Master Trust, the American Beacon Mileage Funds, and the
American Beacon Select Funds. The Trust's Statement of Additional Information
contains additional information about the Trustees and is available without
charge by calling 1-800-658-5811.
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
--------------------- ------------------ ------------------------------------------------------
INTERESTED
TRUSTEES
Term
Lifetime of Trust
until removal,
resignation or
retirement*
Alan D. Feld** (72) Trustee since 1996 Sole Shareholder of a professional corporation which
is a Partner in the law firm of Akin, Gump, Strauss,
Hauer & Feld, LLP (1960-Present); Director, Clear
Channel Communications (1984-2008); Trustee,
CenterPoint Properties (1994-2006); Member, Board of
Trustees, Southern Methodist University; Member,
Board of Visitors, M.D. Anderson Hospital; Board of
Visitors, Zale/Lipshy Hospital; American Beacon
Mileage Funds (1996-Present); American Beacon Master
Trust (1996-Present); American Beacon Select Funds
(1999-Present)
NON-INTERESTED
TRUSTEES Term
W. Humphrey Bogart (64) Trustee since 2004 Board Member, Baylor University Medical Center
Foundation (1992-2004); Consultant, New River Canada
Ltd. (mutual fund servicing company) (1998-2003);
President and CEO, Allmerica Trust Company, NA
(1996-1997); President and CEO, Fidelity Investments
Southwest Company (1983-1995); Senior Vice President
of Regional Centers, Fidelity Investments (1988-1995);
American Beacon Mileage Funds (2004-Present); American
Beacon Master Trust (2004-Present); American Beacon
Select Funds (2004-Present)
Brenda A. Cline (48) Trustee since 2004 Executive Vice President, Chief Financial Officer,
Treasurer and Secretary, Kimbell Art Foundation
(1993-Present); Trustee, Texas Christian University
(1998- Present); Trustee, W.I. Cook Foundation, Inc.
(d/b/a Cook Children's Health Foundation) (2001-2006);
Director, Christian Church Foundation (1999-2007);
American Beacon Mileage Funds (2004-Present); American
Beacon Master Trust (2004-Present); American Beacon
Select Funds (2004-Present)
Eugene J. Duffy (54) Trustee since 2008 Principal and Executive Vice President, Paradigm Asset
Management (1994-Present); Director, Sunrise Bank of
Atlanta (2008-Present); Chairman, Special
Contributions Fund Board of Trustees, National
Association for the Advancement of Colored People
(2007-Present); Trustee, National Association for the
Advancement of Colored People (2000-Present); Board of
Visitors, Emory University (2006-Present); Trustee,
Atlanta Botanical Garden (2006-Present); Board Member,
Willie L. Brown Jr. Institute on Politics and Public
Service (2001- Present); Chair, National Association
of Securities Professionals (2000-2002); Deputy Chief
Administrative Officer, City of Atlanta (1985-1990);
American Beacon Mileage Funds (2008-Present); American
Beacon Master Trust (2008-Present); American Beacon
Select Funds (2008-Present)
Thomas M. Dunning (65) Trustee since 2008 Consultant, (2008-Present); Chairman (1998-2008) and
Chief Executive Officer (1998-2007), Lockton Dunning
Benefits (consulting firm in employee benefits);
Director, Oncor Electric Delivery Company LLC
(2007-Present); Immediate Past Chairman and Board
Member (2003-Present), Dallas Citizens Council;
Director, Baylor Health Care System Foundation
(2007-Present); Vice Chair, State Fair of Texas
(1987-Present); Board Member, Southwestern Medical
Foundation (1994-Present); American Beacon Mileage
Funds (2008-Present); American Beacon Master Trust
(2008-Present); American Beacon Select Funds
(2008-Present)
19
TRUSTEE AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
--------------------- ------------------ ------------------------------------------------------
NON-INTERESTED
TRUSTEES (CONT.)
Richard A. Massman (65) Richard A. Massman Senior Vice President and General Counsel, Hunt
(65) Consolidated, Inc. (holding company engaged in oil and
gas exploration and production, refining, real estate,
farming, ranching and venture capital activities)
(1994-Present). Chairman (2007-Present) and Director
(2005-Present), The Dallas Opera Foundation;
Chairman (2006-Present) and Director (2005-Present),
Temple Emanu-El Foundation; Trustee, Presbyterian
Hospital Foundation (2006-Present); American Beacon
Mileage Funds (2004-Present); American Beacon Master
Trust (2004-Present); American Beacon Select Funds
(2004-Present)
R. Gerald Turner (63) Trustee since 2001 President, Southern Methodist University
225 Perkins Admin. Bldg. (1995-Present); Director, ChemFirst (1986-2002);
Southern Methodist Univ. Director, J.C. Penney Company, Inc. (1996-Present);
Dallas, Texas 75275 Director, California Federal Preferred Capital Corp.
(2001-2003); Director, Kronus Worldwide Inc. (chemical
manufacturing) (2003-Present); Director, First
Broadcasting Investment Partners, LLC (2003-2007);
Member, Salvation Army of Dallas Board of Directors;
Member, Methodist Healthcare Advisory Board; Co-
Chair, Knight Commission on Intercollegiate Athletics;
American Beacon Mileage Funds (2001-Present); American
Beacon Master Trust (2001-Present); American Beacon
Select Funds (2001-Present)
Paul J. Zucconi,CPA (67) Trustee since 2008 Director, Affirmative Insurance Holdings, Inc.
(producer of nonstandard automobile insurance)
(2004-present); Director, Titanium Metals Corporation
(producer of titanium melted and mill products and
sponge) (2002-present); Director, Torchmark
Corporation (life and health insurance products)
(2002-present); Director, National Kidney Foundation
serving North Texas (2003-Present); Director,
Dallas Chapter of National Association of Corporate
Directors (2004-Present); Partner, KPMG (1976-2001);
American Beacon Mileage Funds (2008-Present); American
Beacon Master Trust (2008-Present); American Beacon
Select Funds (2008-Present)
OFFICERS
Term
One Year
William F. Quinn (60) President from Chairman (2006-Present) and CEO (2006-2007), President
1987 to 2007 and (1986-2006) and Director (2003-Present), American
2008 to Present Beacon Advisors, Inc.; Chairman (1989-2003) and
Executive Vice Director (1979-1989, 2003-Present), American Airlines
President from Federal Credit Union; Director, Crescent Real Estate
2007 to 2008 Equities, Inc.(1994-2007); Director, Pritchard, Hubble
Trustee from & Herr, LLC (investment advisor) (2001-2006); Director
1987 to 2008 of Investment Committee, Southern Methodist University
Endowment Fund (1996-Present); Member, Southern
Methodist University Cox School of Business Advisory
Board (1999-2002); Member, New York Stock Exchange
Pension Manager Committee (1997-1998, 2000-2002,
2006-Present); Chairman (2007-Present) and Vice
Chairman (2004-2007), Committee for the Investment of
Employee Benefits; Director, United Way of
Metropolitan Tarrant County (1988-2000, 2004-Present);
Trustee, American Beacon Mileage Funds (1995-2008);
Trustee, American Beacon Select Funds (1999-2008);
Trustee, American Beacon Master Trust (1995-2008).
Rosemary K. Behan (49) VP, Secretary and Vice President, Legal and Compliance, American Beacon
Chief Legal Advisors, Inc. (2006-Present); Assistant General
Officer since 2006 Counsel, First Command Financial Planning, Inc.
(2004-2006); Enforcement Attorney (2002-2004) and
Branch Chief (2000-2002), Securities and Exchange
Commission.
Brian E. Brett (48) VP since 2004 Vice President, Director of Sales and Marketing,
American Beacon Advisors, Inc. (2004-Present);
Regional Vice President, Neuberger Berman, LLC
(investment advisor) (1996-2004).
20
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
--------------------- ------------------ ------------------------------------------------------
Wyatt Crumpler (42) VP since 2007 Vice President, Trust Investments, American Beacon
Advisors, Inc. (2007-Present); Managing Director of
Corporate Accounting (2004-2007), Director of IT
Strategy and Finance (2002-2004), American Airlines,
Inc.
Michael W. Fields (54) VP since 1989 Vice President, Fixed Income Investments, American
Beacon Advisors, Inc. (1988-Present).
Rebecca L. Harris (42) Treasurer since Vice President, Finance, American Beacon Advisors,
1995 Inc. (1995-Present).
Christina E. Sears (37) Chief Compliance Chief Compliance Officer, American Beacon Advisors,
Officer since 2004 Inc. (2004-Present); Senior Compliance Analyst,
and Asst. American Beacon Advisors, Inc. (1998-2004).
Secretary
since 1999
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
72, provided, however, that the Board may determine to grant one or more
annual exemptions to this requirement.
** Mr. Feld is deemed to be an "interested person" of the Trust, as defined by
the 1940 Act. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP
has provided legal services within the past two fiscal years to the Manager
and one or more of the Trust's s sub-advisors.
21
RESULTS OF SHAREHOLDER MEETING
(UNAUDITED)
A special meeting of shareholders of each of the portfolios of the American
Beacon Funds (the "Trust") was held on August 22, 2008. The shareholders of the
Treasury Inflation Protected Securities Fund (the "Fund") approved a new
investment management agreement between American Beacon Advisors, Inc. and the
Fund. This proposal required a majority of shareholders of the Fund to achieve a
quorum. The following are the results of the shareholder votes for this
proposal:
FUND FOR AGAINST ABSTAIN NON-VOTING
---- --------------- ---------- ------- -------------
Treasury Inflation Protected
Securities Fund 298,651,456.304 15,976.759 -0- 1,631,132.257
The shareholders of the Trust also approved the re-election of five of the
current Trustees to the Board of the Trust and the election of three additional
Trustees to the Board. This proposal required a majority of the shareholders of
the Trust to vote to achieve a quorum. The following are the results of the
election of each Trustee:
ALAN D. FELD
Affirmative ...... 12,634,553,751.62
Withhold ......... 519,818,259.90
W. HUMPHREY BOGART
Affirmative ...... 12,999,746,162.82
Withhold ......... 154,625,848.70
BRENDA A. CLINE
Affirmative ...... 13,009,050,779.42
Withhold ......... 145,321,232.10
RICHARD A. MASSMAN
Affirmative ...... 13,004,756,096.42
Withhold ......... 149,615,915.10
R. GERALD TURNER
Affirmative ...... 13,004,259,224.92
Withhold ......... 150,112,786.60
THOMAS M. DUNNING
Affirmative ...... 13,003,350,236.48
Withhold ......... 151,021,775.04
EUGENE J. DUFFY
Affirmative ...... 12,985,296,316.39
Withhold ......... 169,075,695.13
PAUL J. ZUCCONI
Affirmative ...... 12,983,378,136.76
Withhold ......... 170,993,874.76
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 AVAILABILITY OF PROXY VOTING POLICY AND
SCHEDULES RECORDS
In addition to the Schedule of A description of the policies and
Investments provided in each procedures the Fund uses to determine
semi-annual and annual report, the how to vote proxies relating to
Fund files a complete schedule of its portfolio securities is available in the
portfolio holdings with the Fund's Statement of Additional
Securities and Exchange Commission Information, is available free of charge
("SEC") on Form N-Q as of the first on the Fund's website
and third fiscal quarters. The Fund's (www.americanbeaconfunds.com) and by
Forms N-Q are available on the SEC's calling 1-800-967-9009 or by accessing
website at www.sec.gov. The Forms N-Q the SEC's website at www.sec.gov. The
may also be reviewed and copied at Fund's proxy voting record for the most
the SEC's Public Reference Room, 450 recent year ended June 30 is filed
Fifth Street, NW, Washington, DC annually with the SEC on Form N-PX. The
20549. Information regarding the Fund's Forms N-PX are available on the
operation of the SEC's Public SEC's website at www.sec.gov. The Fund's
Reference Room may be obtained by proxy voting record may also be obtained
calling 1-800-SEC-0330. A complete by calling 1-800-967-9009.
schedule of the Fund's portfolio
holdings is also available on the
Funds' website
(www.americanbeaconfunds.com)
approximately thirty days after the
end of each month.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FORESIDE FUND SERVICES
TRUST SERVICES FIRM Portland, Maine
Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP
Dallas, Texas
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
American Airlines, Inc. is not responsible for investments made in the American
Beacon Funds. American Beacon Funds and the American Beacon Treasury Inflation
Protected Securities Fund are service marks of American Beacon Advisors, Inc.
AR 12/08
00065962
GUIDANCE | VISION | EXPERIENCE
(GRAPHIC)(AMERICAN BEACON FUNDS(SM) LOGO)
Annual Report
December 31, 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 .............................. 19
Schedule of Investments
Money Market Portfolio ......................................... 22
U.S. Government Money Market Portfolio ......................... 254
Additional Information ............................................ Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of
the reporting period and are subject to change. Each advisor's strategies and
each Fund's portfolio composition will change depending on economic and market
conditions. This report is not a complete analysis of market conditions and
therefore, should not be relied upon as investment advice. Although economic and
market information has been compiled from reliable sources, American Beacon
Advisors, Inc. makes no representation as to the completeness or accuracy of the
statements contained herein.
American Beacon Funds December 31, 2008
(GRAPHIC)
Fellow Shareholders,
Enclosed is the Annual Report for the American Beacon Money Market Fund and the
U.S. Government Money Market Fund for the twelve months ended December 31, 2008.
Growing unemployment, low consumer confidence, rising foreclosures and bank
failures all contributed to a growing uncertainty that permeated every aspect of
the economy in 2008. The Federal Reserve Board ("Fed") lowered the Fed Funds
rate on December 16th to a record low target range of 0.00-0.25% and noted that
"weak economic conditions are likely to warrant exceptionally low levels of the
Fed Funds rate for some time."
Even with the government bailouts and liquidity programs, short-term credit
markets were under great strain as banks continued to report substantial losses.
A weak economic environment limited the Fed's ability to raise interest rates
resulting in lower yields for fixed income investments. These conditions
prompted the most extreme "flight to quality" seen in decades.
Even with portfolio holdings of the highest quality, on September 19th, the
impact of those events in the securities markets and concerns regarding limited
marketability of securities held by many money market funds caused the American
Beacon Money Market Fund to temporarily suspend the practice of providing
payments for redemption of shares entirely in cash. This procedure was
implemented to prevent redemptions from forcing the sale of securities in an
unfavorable market that may have had an adverse impact on the Fund and its
shareholders. This redemption-in-kind policy was successful in protecting the
Fund and was lifted on December 12th. Since that time all redemptions have been
made in cash.
Despite this unprecedented environment, the American Beacon Money Market
Fund reported a 2008 total return of 2.68% and 2.71% for the Institutional and
Cash Management classes, respectively. Both classes outperformed the Lipper
Institutional Money Market Average of 2.50%.
The American Beacon U.S. Government Money Market Fund - Cash Management
Class reported a total return of 2.29% for the same period, outperforming the
Lipper Institutional U.S. Government Money Market Average of 2.10%.
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 Funds.
Sincerely,
/s/ William F. Quinn
William F. Quinn
President
American Beacon Funds
1
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
DECEMBER 31, 2008 (UNAUDITED)
2008 was a year marked by highs and lows, none of which were good. The year
ended with the highest unemployment rate in sixteen years and the lowest
consumer confidence levels since records began in 1967. The supply of homes for
sale hit a two-decade high during the year even as home prices fell to the
lowest levels they've been in four years. Flight to quality resulted in record
lows for short-term Treasuries, while corporate spreads widened to Depression
era highs. The U.S. economy is in the midst of the longest recession in a
quarter-century, and further contraction is expected as tight credit conditions,
declining home prices and cutbacks in consumer and business spending continue
unabated.
2008 was also a year marked by unprecedented government bailouts and
liquidity programs. Under the Troubled Asset Relief Program alone, the U.S.
Treasury has already channeled $350 billion in funds to recapitalize banks and
rescue companies like AIG and Citigroup. Despite these actions, short-term
funding markets remained strained and banks continued to report massive write
downs. As a result, Bernanke stated, "More capital injections and guarantees may
become necessary to ensure stability and the normalization of credit markets."
With the pace of economic deterioration accelerating, the Federal Reserve
Board ("Fed") pulled out all stops and adopted a Zero Interest Rate Policy at
the December 16th meeting. In an unprecedented move, the Federal Open Market
Committee ("FOMC") cut rates to the lowest levels ever, announcing a target
range for the Federal Funds rate of 0.00-0.25%. The Fed noted that "weak
economic conditions are likely to warrant exceptionally low levels of the
Federal Funds rate for some time." In addition, the FOMC announced that it would
purchase Government Sponsored Enterprises debt and agency-guaranteed
Mortgage-Backed Securities to provide support to the mortgage and housing
markets. The Fed declared that it will "employ all available tools to promote
the resumption of sustainable economic growth and to preserve price stability."
As the economy showed signs of weakness during the year, the Fed continued
its series of easing monetary policy that started in September 2007. The Fed
reduced the Fed Funds target by 400 basis points (4.00%) during 2008, resulting
in a 0% to 0.25% fed funds target by year end. With credit quality a priority,
the American Beacon Money Market Fund's primary strategy for the year was to buy
high-quality, short-dated commercial paper, certificates of deposit and
overnight investments. This strategy was implemented in an effort to improve
liquidity as well as credit quality. The strategies implemented during the year
enabled the Fund to outperform its Lipper peer group.
For the twelve months ended December 31, 2008, the total return of the Cash
Management Class of the American Beacon Money Market Fund was 2.71%. The Fund
outperformed the Lipper Institutional Money Market Average return of 2.50% by 21
basis points (0.21%). Based on annualized total returns, Lipper Analytical
Services ranked the Cash Management Class of the Fund 140 among 375, 66 among
338 and 36 among 275 Institutional Money Market Funds for the one-year,
three-year, and five-year periods ended December 31, 2008, respectively.
The Lipper Institutional Money Market Average is calculated by taking an
arithmetic average of the returns of the mutual funds in the Lipper
Institutional Money Market Funds category. Lipper is an independent mutual fund
research and ranking service that ranks mutual funds in various categories by
making comparative calculations using total returns.
(BAR CHART)
ANNUALIZED TOTAL RETURNS
AS OF 12/31/2008
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Cash Mgmt Class(1, 2, 4) ........ 2.71% 3.50% 3.60%
Institutional Class (1, 3, 4) ... 2.68% 3.42% 3.54%
PlanAhead Class (1, 4) .......... 2.35% 3.14% 3.25%
2
PERFORMANCE OVERVIEW
AMERICAN BEACON MONEY MARKET FUND(SM)
DECEMBER 31, 2008 (UNAUDITED)
(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 1/1/99 to 12/1/01, the inception
date of the Cash Management Class, and the returns of the Cash Management
Class thereafter. Expenses of the Cash Management Class are lower than
those of the Institutional Class. Therefore, total returns shown are lower
than they would have been had the Cash Management Class been in place since
1/1/99. 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.) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Cash Management, Institutional, and PlanAhead Class
shares was 0.20%, 0.23%, and 0.48%, respectively. After expense
reimbursement, the net expense ratio set forth in the most recent Fund
prospectus for the Cash Management and Institutional Class shares was 0.15%
and 0.18%, respectively. The expense ratios above may vary from the expense
ratios presented in other sections of this report that are based on
expenses incurred during the period covered by this report.
PORTFOLIO STATISTICS AS OF DECEMBER 31, 2008
CASH
MANAGEMENT INSTITUTIONAL PLANAHEAD
CLASS CLASS CLASS
---------- ------------- ---------
7-day Current Yield* .... 0.73% 0.70% 0.28%
7-day Effective Yield* .. 0.73% 0.70% 0.28%
30-day Yield* ........... 0.74% 0.71% 0.30%
Weighted Avg. Maturity .. 25 Days 25 Days 25 Days
S&P Rating .............. AAAm N/A N/A
* Annualized. You may call 1-800-388-3344 to obtain the Fund's current
seven-day yield. Yield is a more accurate reflection of the Fund's current
earnings than total returns.
TOP TEN ISSUERS AS OF DECEMBER 31, 2008
% OF
NET ASSETS**
------------
Societe Generale N.Y. ................ 5.2%
Bank of Nova Scotia N.Y. ............. 4.7%
Variable Funding Capital Co. LLC ..... 4.7%
Dexia Credit Local S.A. .............. 4.2%
Commonwealth Bank of Australia N.Y. .. 3.1%
DNB NOR Bank ASA N.Y. ................ 3.1%
Lloyds Bank N.Y. ..................... 3.1%
Surrey Funding Corp. ................. 3.1%
Svenska Handelsbanken AB N.Y. ........ 3.1%
Toyota Motor Credit Corp. ............ 3.1%
** Percent of net assets of American Beacon Master Money Market Portfolio.
ASSET ALLOCATION AS OF DECEMBER 31, 2008
% OF
NET ASSETS**
------------
Commercial Paper ..................... 38.91%
Repurchase Agreements ................ 29.27%
Bank CDs, TDs and Notes .............. 21.83%
Short Term Investments ............... 9.97%
Other Assets, Net of Liabilities ..... 0.02%
** Percent of net assets of American Beacon Master Money Market Portfolio.
3
FUND EXPENSES
AMERICAN BEACON MONEY MARKET FUND(SM)
DECEMBER 31, 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 July 1, 2008 through December 31,
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 Paid
Account Account During
Value Value Period*
7/1/08 12/31/08 7/1/08-12/31/08
--------- --------- ---------------
CASH MANAGEMENT CLASS
Actual .............. $1,000.00 $1,010.45 $0.76
Hypothetical (5%
return before
expenses) ........ $1,000.00 $1,024.38 $0.76
INSTITUTIONAL CLASS
Actual .............. $1,000.00 $1,010.30 $0.86
Hypothetical (5%
return before
expenses) ........ $1,000.00 $1,024.28 $0.87
PLANAHEAD CLASS
Actual .............. $1,000.00 $1,008.61 $2.47
Hypothetical (5%
return before
expenses) ........ $1,000.00 $1,022.67 $2.49
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.15%, 0.17%,and 0.49% for the Cash Management,
Institutional, and PlanAhead Classes respectively, multiplied by the
average account value over the period, multiplied by the number derived by
dividing the number of days in the most recent fiscal half-year (184) by
days in the year (366) to reflect the half-year period.
4
PERFORMANCE OVERVIEW AND FUND EXPENSES
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM)
DECEMBER 31, 2008 (UNAUDITED)
As the economy showed signs of weakness during the year, the Federal
Reserve Board ("Fed") continued its series of easing monetary policy that
started in September 2007. The Fed reduced the Fed Funds target by 400 basis
points (4.00%) during 2008, resulting in a 0% to 0.25% Fed Funds target by year
end. In response to the events that caused the Fed to ease, the American Beacon
U.S. Government Money Market Fund's primary strategy for the year was to buy
short-dated agencies and overnight investments. This strategy was implemented in
an effort to maintain a high level of liquidity during volatile market
conditions. The strategies implemented during the year enabled the Fund to
outperform its Lipper peer group.
For the twelve months ended December 31, 2008, the total return of the Cash
Management Class of the American Beacon U.S. Government Money Market Fund was
2.29%. The Fund outperformed the Lipper Institutional U.S. Government Money
Market Average return of 2.10% by 19 basis points (0.19%). Based on annualized
total returns, Lipper Analytical Services ranked the Cash Management Class of
the Fund 46 among 171, 12 among 121 and 7 among 76 Institutional U.S. Government
Money Market Funds for the one-year, five-year, and ten-year periods ended
December 31, 2008, respectively.
The Lipper Institutional U.S. Government Money Market Funds Average is
calculated by taking the arithmetic average of the returns of the mutual funds
in the Lipper Institutional U.S. Government Funds category. Lipper is an
independent mutual fund research and ranking service that ranks mutual funds in
various categories by making comparative calculations using total returns.
(BAR CHART)
ANNUALIZED TOTAL RETURNS
AS OF 12/31/2008
---------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Cash Management Class (1, 2, 4) ... 2.29% 3.34% 3.48%
PlanAhead Class (1, 3, 4) ......... 1.90% 2.91% 3.08%
(1) Performance shown is historical and may not be indicative of future
returns. Investment returns will vary, and shares may be worth more or less
at redemption than at original purchase. An investment in this Fund is
neither insured nor guaranteed by the Federal Deposit Insurance Corporation
or any other government agency. Although the Fund seeks to preserve the
value of an investment at $1.00 per share it is possible to lose money by
investing in the Fund. Fund performance in the table above does not reflect
the deduction of taxes a shareholder would pay on distributions or the
redemption of shares.
(2) Prior to December 1, 2001, the Cash Management Class of the Fund was known
as the Institutional Class. A portion of the fees charged to the Cash
Management Class of the Fund has been waived since 2002. Performance prior
to waiving fees was lower than actual returns shown for periods since 2002.
(3) A portion of the fees charged to the PlanAhead Class of the Fund has been
waived since 2003. Performance prior to waiving fees was lower than the
actual returns shown for periods since 2003.
(4) The total annual Fund operating expense ratio set forth in the most recent
Fund prospectus for the Cash Management and the PlanAhead Class shares was
0.60% 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 shares was 0.15% and 0.65%, respectively. The expense ratios
above may vary from the expense ratios presented in other sections of this
report that are based on expenses incurred during the period covered by
this report.
PORTFOLIO STATISTICS AS OF DECEMBER 31, 2008
CASH
MANAGEMENT PLANAHEAD
CLASS CLASS
---------- ----------
7-day Current Yield* .......... 0.67% 1.00%
7-day Effective Yield* ........ 0.67% 1.00%
30-day Yield* ................. 0.88% 1.08%
Weighted Avg. Maturity ........ 38 Days 38 Days
Moody's Rating ................ Aaa N/A
S&P Rating .................... AAAm N/A
* Annualized. You may call 1-800-388-3344 to obtain the Fund's current
seven-day yield. Yield is a more accurate reflection of the Fund's current
earnings than total returns.
5
PERFORMANCE OVERVIEW AND FUND EXPENSES
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM)
DECEMBER 31, 2008 (UNAUDITED)
ASSET ALLOCATION AS OF DECEMBER 31, 2008
% OF
NET ASSETS**
------------
Repurchase Agreements ....................... 49.47%
Government Securities ....................... 40.83%
Short Term Investments ...................... 9.63%
Net Other Assets ............................ 0.07%
** Percent of net assets of the American Beacon Master U.S. Government Money
Market Portfolio.
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The examples below are intended to help you
understand the ongoing cost (in dollars) of investing in the Fund and to compare
these costs with the ongoing costs of investing in other mutual funds. The
examples are based on an investment of $1,000 invested at the beginning of the
period and held for the entire period from July 1, 2008 through December 31,
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 Paid
Account Account During
Value Value Period*
7/1/08 12/31/08 7/1/08-12/31/08
--------- --------- ---------------
CASH MANAGEMENT CLASS
Actual.................... $1,000.00 $1,008.63 $0.76
Hypothetical (5%
return before
expenses).............. $1,000.00 $1,024.38 $0.76
PLANAHEAD CLASS
Actual.................... $1,000.00 $1,007.24 $2.98
Hypothetical (5%
return before
expenses).............. $1,000.00 $1,022.17 $3.00
* Expenses are equal to the Fund's annualized expense ratios for the
six-month period of 0.15% and 0.59% for the Cash Management and PlanAhead
Classes respectively, multiplied by the average account value over the
period, multiplied by the number derived by dividing the number of days in
the most recent fiscal half-year (184) by days in the year (366) to reflect
the half-year period.
6
AMERICAN BEACON FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon Funds:
We have audited the accompanying statements of assets and liabilities of
American Beacon Funds comprised of the American Beacon Money Market Fund and the
American Beacon U.S. Government Money Market Fund (collectively, the "Funds"),
as of December 31, 2008, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Funds' internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Funds' internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Funds at December 31, 2008, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
Dallas, Texas
February 25, 2009
7
AMERICAN BEACON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2008 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
ASSETS:
Investment in Portfolio, at value ........................ $ 114,484 $ 19,769
Receivable for fund shares sold .......................... 29 --
Receivable from Manager for expense reimbursement (Note 2) 85 68
Prepaid expenses ......................................... 15 8
------------ -----------
TOTAL ASSETS .......................................... 114,613 19,845
------------ -----------
LIABILITIES:
Payable for fund shares redeemed ......................... 3 --
Dividends payable ........................................ 8 17
Administrative service and service fees payable (Note 2).. 47 2
Other liabilities ........................................ 85 18
------------ -----------
TOTAL LIABILITIES ..................................... 143 37
------------ -----------
NET ASSETS ............................................... $ 114,470 $ 19,808
============ ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital ....................................... 114,470 19,808
------------ -----------
NET ASSETS .................................................. $ 114,470 $ 19,808
============ ===========
SHARES OUTSTANDING (NO PAR VALUE):
Cash Management Class .................................... 104,847,002 19,371,675
============ ===========
Institutional Class ...................................... 3,317,148 N/A
============ ===========
PlanAhead Class .......................................... 6,306,014 435,924
============ ===========
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
============ ===========
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolios
8
AMERICAN BEACON
FUNDS STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2008 (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Dividend income .................................... $ 6,599 $ 48
Interest income .................................... $64,144 617
Portfolio expenses ................................. (2,566) (32)
------- ----
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO .. 68,177 633
------- ----
FUND EXPENSES:
Administrative service fees (Note 2):
Cash Management Class ........................... 428 19
Institutional Class ............................. 305 --
PlanAhead Class ................................. 82 2
BBH ComSet Class ................................ 1,105 --
Transfer agent fees:
Cash Management Class ........................... 21 2
Institutional Class ............................. 20 --
PlanAhead Class ................................. 7 3
BBH ComSet Class ................................ 57 --
Professional fees .................................. 28 8
Registration fees and expenses ..................... 50 41
Service fees - PlanAhead Class (Note 2) ............ 204 5
Prospectus and shareholder reports ................. 18 2
Treasury Guaranty Program Insurance ................ 171 6
Other expenses ..................................... 129 16
------- ----
TOTAL FUND EXPENSES ............................. 2,625 104
------- ----
Less waiver and reimbursement of expenses (Note 2) .... (1,281) (83)
------- ----
NET FUND EXPENSES ............................... 1,344 21
------- ----
NET INVESTMENT INCOME ................................. 66,833 612
------- ----
REALIZED GAIN ALLOCATED FROM PORTFOLIO:
Net realized gain on investments ................... 46 12
------- ----
NET GAIN ON INVESTMENTS ......................... 46 12
------- ----
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .. $66,879 $624
------- ----
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolios
9
AMERICAN BEACON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
DECEMBER 31, 2008 (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
---------------------------- -----------------------
Year Ended December 31, Year Ended December 31,
---------------------------- -----------------------
2008 2007 2008 2007
------------- ------------ --------- ----------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ............................. $ 66,833 $ 88,036 $ 612 $ 494
Net realized gain (loss) on investments ........... 46 10 12 --
------------- ------------ --------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS .................................. 66,879 88,046 624 494
------------- ------------ --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Cash Management Class .......................... (16,912) (32,696) (572) (334)
Institutional Class ............................ (8,944) (13,567) -- --
PlanAhead Class ................................ (2,162) (6,183) (40) (94)
Platinum Class ................................. -- (543) -- (66)
BBH ComSet Class ............................... (38,815) (35,047) -- --
Net realized gain on investments:
Cash Management Class .......................... (14) (6) (12) --
Institutional Class ............................ (4) (3) -- --
PlanAhead Class ................................ (1) (1) -- --
Platinum Class ................................. -- -- -- --
BBH ComSet Class ............................... (27) -- -- --
------------- ------------ --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS ............... (66,879) (88,046) (624) (494)
------------- ------------ --------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares .................... 12,096,832 11,962,330 138,859 145,717
Reinvestment of dividends and distributions ....... 17,438 44,661 271 157
Cost of shares redeemed ........................... (14,338,576) (10,878,697) (137,383) (137,451)
------------- ------------ --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS ............... (2,224,306) 1,128,294 1,747 8,423
------------- ------------ --------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ................ (2,224,306) 1,128,294 1,747 8,423
------------- ------------ --------- ---------
NET ASSETS:
Beginning of period ............................... 2,338,776 1,210,482 18,061 9,638
------------- ------------ --------- ---------
END OF PERIOD ..................................... $ 114,470 $ 2,338,776 $ 19,808 $ 18,061
============= ============ ========= =========
See accompanying notes
See accompanying Financial Statements of the American Beacon Master Portfolios
10
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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 (the "Money Market Fund") and American Beacon U.S.
Government Money Market (the "Government Fund") Funds (each a "Fund" and
collectively, the "Funds").
The BBH Comset Class of the Money Market Fund commenced operations on April
2, 2007 and fully liquidated on December 15, 2008. The Platinum Class of the
Funds was fully liquidated effective May 31, 2007.
Effective September 12, 2008, American Beacon Advisors, Inc. (the
"Manager") became a wholly-owned subsidiary of Lighthouse Holdings, Inc., which
is indirectly owned by investment funds affiliated with Pharos Capital Group,
LLC and TPG Capital, L.P., two private equity firms. Prior to September 12, the
Manager was a wholly-owned subsidiary of AMR Corporation, the parent company of
American Airlines, Inc. which retained a minority interest in the parent company
of Lighthouse Holdings, Inc.
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) INVEST 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 (11.9%
and 5.0% at December 31, 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:
CLASS: OFFERED TO:
- ------ --------------------------------------------------------
CASH MANAGEMENT CLASS Investors making an initial investment of $10 million
for Money Market and $2 million for U.S. Government
Money Market, or investors investing through an
intermediary
INSTITUTIONAL CLASS Investors making an initial investment of $2 million
PLANAHEAD CLASS General public and investors investing through an
intermediary
Administrative service fees, service fees and distribution fees vary
amongst the classes as described more fully in Note 2.
Valuation of Investments
The Funds record their investment in the Portfolios at fair value.
Valuation of securities by the Portfolios is discussed in Note 1 of the
Portfolios' Notes to Financial Statements, which are included elsewhere in this
report.
11
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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' investments as of
December 31, 2008 is discussed in the Portfolios' Notes to Financial Statements,
which are included elsewhere in this report.
Redemption in Kind
Beginning September 19, 2008, proceeds from redemption requests exceeding
$250,000 were made in pro rata payments of cash and in-kind distributions of
securities held by the Money Market Portfolio. The Money Market Portfolio, and
the Beacon Fund implemented this procedure to prevent redemptions from forcing
the sale of securities below their economic value, which would have resulted in
a material adverse impact on the Money Market Portfolio and the remaining
shareholders. The policy was lifted on December 12, 2008. During this time
redemptions by class were as follows (in thousands):
Pro rata One time
Total securities cash
Distribution and cash distribution
------------ ---------- ------------
Institutional Class..... $90,307 $89,807 $500
Cash Management Class... 18,952 18,452 500
BBH Comset Class........ 23,989 23,885 104
Investment Income and Dividends to Shareholders
Each Fund records its share of net investment income (loss) and realized
gain (loss) in its corresponding Portfolio each day. All net investment income
(loss) and realized gain (loss) of each Portfolio are allocated pro rata among
the corresponding Fund and other investors in each Portfolio at the time of such
determination. The Funds generally declare dividends daily from net investment
income and net short-term capital gain, if any, payable monthly.
Dividends to shareholders are determined in accordance with federal income
tax principles that may treat certain transactions differently than U.S.
generally accepted accounting principles.
Allocation of Income, Expenses, Gains and Losses
Income, expenses (other than those attributable to a specific class), gains
and losses are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses directly
attributable to a specific class are charged against the operations of that
class.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
12
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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, 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 an annual fee of 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. The following
amounts have been waived through December 31, 2008:
EXPENSE
FUND CLASS CAP AMOUNT
- ---- --------------- ------- --------
Money Market Fund.................... Institutional 0.18% $177,487
Money Market Fund.................... Cash Management 0.15% 295,662
Money Market Fund.................... BBH ComSet* 0.15% 808,104
U.S. Government Money Market Fund.... Cash Management 0.15% 77,808
U.S. Government Money Market Fund.... PlanAhead 0.65% 4,722
* Class closed December 15, 2008.
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:
13
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
U.S.
GOVERNMENT
MONEY MONEY
YEAR MARKET MARKET
- ---- --------- ----------
2009..... 260,591 65,678
2010..... 769,055 7,577
2011..... 1,281,253 82,530
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.
For FASB Interpretation No. 48, "Accounting for Uncertainties in Income
Taxes" ("FIN 48") purposes, there are no unrecognized tax benefits as of
December 31, 2008 included in the accompanying financial statements. Each of the
tax years in the four year period ended December 31, 2008, 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. For the year
ended December 31, 2008, the Funds recognized $0 in interest and penalties.
Dividends are categorized in accordance with income tax regulations which
may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
The tax character of distributions paid for the years ended December 31,
2008 and December 31, 2007 were as follows (in thousands):
MONEY MARKET U.S. GOVERNMENT MONEY MARKET
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2008 2007 2008 2007
------------- ------------ ------------ ------------
DISTRIBUTIONS PAID FROM ORDINARY
INCOME:*
Cash Management Class............. $16,925 $32,702 $584 $334
Institutional Class............... 8,949 13,570 -- --
PlanAhead Class................... 2,163 6,184 40 94
Platinum Class.................... -- 543 -- 66
BBH ComSet Class.................. 38,842 35,047 -- --
------- ------- ---- ----
TOTAL DISTRIBUTIONS PAID............. $66,879 $88,046 $624 $494
======= ======= ==== ====
* For tax purposes short-term capital gains distributions are considered
ordinary income distributions.
As of December 31, 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.
The Funds do not have capital loss carry forwards as of December 31, 2008.
14
AMERICAN BEACON FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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:
Year Ended December 31, 2008
Cash
Management Institutional PlanAhead
Class Class Class
---------- ------------- -----------
Money Market Beacon Fund
Shares sold ............................ 2,264,926 1,825,044 486,450
Reinvestment of dividends .............. 14,139 2,487 812
Shares redeemed ........................ (2,523,467) (2,274,876) (593,234)
---------- ---------- --------
Net (decrease) in shares outstanding ... (244,402) (447,345) (105,972)
========== ========== ========
BBH ComSet
Class
----------
Money Market Beacon Fund
Shares sold ............................ 7,520,412
Reinvestment of dividends .............. --
Shares redeemed ........................ (8,946,999)
----------
Net (decrease) in shares outstanding ... (1,426,587)
==========
Cash
Management PlanAhead
Class Class
---------- ---------
U.S. Government Money Market Beacon Fund
Shares sold ..................................... 124,678 14,181
Reinvestment of dividends ....................... 264 7
Shares redeemed ................................. (122,002) (15,381)
-------- -------
Net increase (decrease) in shares outstanding ... 2,940 (1,193)
======== =======
Year Ended December 31, 2007
Cash
Management Institutional PlanAhead Platinum
Class Class Class 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 PlanAhead Platinum
Class Class Class
---------- --------- --------
U.S. Government Money Market Beacon Fund
Shares sold .................................... 132,887 8,531 4,299
Reinvestment of dividends ...................... 81 14 62
Shares redeemed ................................ (120,104) (8,974) (8,373)
-------- ------ ------
Net increase (decrease) in shares outstanding .. 12,864 (429) (4,012)
======== ====== ======
15
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Cash Management Class
Year Ended December 31,
----------------------------------------------------
2008 2007 2006 2005 2004
-------- -------- -------- -------- --------
Net asset value, beginning of period ........... $ 1 .00 $ 1 .00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income(A) .................... 0 .03 0 .05 0.05 0.03 0.01
Net realized gain on investments(B) ......... -- -- -- -- --
-------- -------- -------- -------- --------
Total income from investment operations ........ 0 .03 0 .05 0.05 0.03 0.01
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ........ (0 .03) (0 .05) (0.05) (0.03) (0.01)
Distributions from net realized gains on
investments (B)........................... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions ............................ (0 .03) (0 .05) (0.05) (0.03) (0.01)
-------- -------- -------- -------- --------
Net asset value, end of period ................. $ 1 .00 $ 1 .00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return ................................... 2.71% 5.28% 5.05% 3.19% 1.30%
======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) .... $104,847 $349,249 $501,905 $200,010 $434,587
Ratios to average net assets (annualized):(A)
Expenses, net of waivers ................. 0.15% 0.15% 0.15% 0.15% 0.15%
Expenses, before waivers ................. 0.20% 0.19% 0.20% 0.23% 0.23%
Net investment income, net of waivers .... 2.77% 5.18% 5.04% 3.08% 1.34%
Net investment income, before waivers .... 2.72% 5.14% 4.99% 3.00% 1.26%
- ----------
(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 corresponding American Beacon Master Portfolio.
(B) Amount is less than $0.01 per share.
16
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Institutional Class
Year Ended December 31,
---------------------------------------------
2008 2007 2006 2005 2004
------- -------- -------- ------- -------
Net asset value, beginning of period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- -------- -------- ------- -------
Income from investment operations:
Net investment income(A) ...................... 0.03 0.05 0.05 0.03 0.01
Net realized gain on investments(B) ........... -- -- -- -- --
------- -------- -------- ------- -------
Total income from investment operations .......... 0.03 0.05 0.05 0.03 0.01
------- -------- -------- ------- -------
Less distributions:
Dividends from net investment income .......... (0.03) (0.05) (0.05) (0.03) (0.01)
Distributions from net realized gains on
investments(B) ................................ -- -- -- -- --
------- -------- -------- ------- -------
Total distributions .............................. (0.03) (0.05) (0 .05) (0 .03) (0 .01)
------- -------- -------- ------- -------
Net asset value, end of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======== ======== ======= =======
Total return ..................................... 2.68% 5.24% 4.99% 3.06% 1.20%
======= ======== ======== ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ...... $ 3,317 $450,662 $504,403 $36,421 $34,146
Ratios to average net assets (annualized):(A)
Expenses, net of waivers ................... 0.17% 0.18% 0.19% 0.28% 0.24%
Expenses, before waivers ................... 0.23% 0.22% 0.23% 0.28% 0.24%
Net investment income, net of waivers ...... 2.93% 5.13% 5.06% 3.07% 1.05%
Net investment income, before waivers ...... 2.87% 5.10% 5.02% 3.07% 1.05%
- ----------
(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 corresponding American Beacon Master Portfolio.
(B) Amount is less than $0.01 per share.
17
AMERICAN BEACON MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
PlanAhead Class
Year Ended December 31,
---------------------------------------------------
2008 2007 2006 2005 2004
------- -------- -------- -------- --------
Net asset value, beginning of period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ -------- -------- -------- --------
Income from investment operations:
Net investment income(A) ...................... 0.02 0.05 0.05 0.03 0.01
Net realized gain on investments(B) ........... -- -- -- -- --
------ -------- -------- -------- --------
Total income from investment operations .......... 0.02 0.05 0.05 0.03 0.01
------ -------- -------- -------- --------
Less distributions:
Dividends from net investment income .......... (0.02) (0.05) (0.05) (0.03) (0.01)
Distributions from net realized gains on
investments(B) ............................. -- -- -- -- --
------ -------- -------- -------- --------
Total distributions .............................. (0.02) (0.05) (0.05) (0.03) (0.01)
------ -------- -------- -------- --------
Net asset value, end of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ======== ======== ======== ========
Total return ..................................... 2.35% 4.94% 4.69% 2.82% 0.93%
====== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands) ...... $6,306 $112,278 $170,518 $236,903 $132,438
Ratios to average net assets (annualized):(A)
Expenses, net of waivers ................... 0.48% 0.47% 0.49% 0.51% 0.51%
Expenses, before waivers ................... 0.48% 0.47% 0.49% 0.51% 0.51%
Net investment income, net of waivers ...... 2.65% 4.85% 4.59% 2.83% 0.94%
Net investment income, before waivers ...... 2.65% 4.84% 4.59% 2.83% 0.94%
(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 corresponding American Beacon Master Portfolio.
(B) Amount is less than $0.01 per share.
18
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Cash Management Class
Year Ended December 31,
----------------------------------------------
2008 2007 2006 2005 2004
------- ------- ------ ------- -------
Net asset value, beginning of period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------ ------- -------
Income from investment operations:
Net investment income(A) ...................... 0.02 0.05 0.05 0.03 0.01
Net realized gain on investments(B) ........... -- -- -- -- --
------- ------- ------ ------- -------
Total income from investment operations .......... 0.02 0.05 0.05 0.03 0.01
------- ------- ------ ------- -------
Less distributions:
Dividends from net investment income .......... (0.02) (0.05) (0.05) (0.03) (0.01)
Distributions from net realized gains on
investments (B) ............................ -- -- -- -- --
------- ------- ------ ------- -------
Total distributions .............................. (0.02) (0.05) (0.05) (0.03) (0.01)
------- ------- ------ ------- -------
Net asset value, end of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ====== ======= =======
Total return ..................................... 2.29% 5.13% 4.97% 3.12% 1.22%
======= ======= ====== ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands) ...... $19,372 $16,433 $3,568 $22,518 $28,591
Ratios to average net assets (annualized):(A)
Expenses, net of waivers ................... 0.15% 0.15% 0.19% 0.19% 0.19%
Expenses, before waivers ................... 0.44% 0.60% 0.64% 0.38% 0.29%
Net investment income, net of waivers ...... 2.10% 4.87% 4.60% 2.99% 1.21%
Net investment income, before waivers ...... 1.81% 4.42% 4.16% 2.80% 1.11%
(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 corresponding American Beacon Master Portfolio.
(B) Amount is less than $0.01 per share.
19
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
PlanAhead Class
Year Ended December 31,
------------------------------------------
2008 2007 2006 2005 2004
------ ------ ------ ------ ------
Net asset value, beginning of period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment income(A) ...................... 0.02 0.05 0.04 0.03 0.00(B)
Net realized gain on investments(B) ........... -- -- -- -- --
------ ------ ------ ------ ------
Total income from investment operations .......... 0.02 0.05 0.04 0.03 0.00
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income .......... (0.02) (0.05) (0.04) (0.03) 0.00(B)
Distributions from net realized gains on
investments(B) ............................. -- -- -- -- --
------ ------ ------ ------ ------
Total distributions .............................. (0.02) (0.05) (0.04) (0.03) 0.00
------ ------ ------ ------ ------
Net asset value, end of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return ..................................... 1.90% 4.65% 4.51% 2.71% 0.85%
====== ====== ====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in thousands) ...... $ 436 $1,628 $2,058 $1,933 $5,370
Ratios to average net assets (annualized):(A)
Expenses, net of waivers ................... 0.61% 0.61% 0.63% 0.58% 0.56%
Expenses, before waivers ................... 0.85% 1.20% 1.02% 0.61% 0.57%
Net investment income, net of waivers ...... 2.02% 4.56% 4.39% 2.47% 0.68%
Net investment income, before waivers ...... 1.79% 3.97% 4.00% 2.44% 0.67%
(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 corresponding American Beacon Master Portfolio.
(B) Amount is less than $0.01 per share.
20
AMERICAN BEACON MASTER TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of
American Beacon Master Trust:
We have audited the accompanying statements of assets and liabilities of
American Beacon Master Trust, comprised of the American Beacon Money Market
Portfolio and the American Beacon U.S. Government Money Market Portfolio
(collectively, the "Portfolios"), including the schedules of investments, as of
December 31, 2008, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Portfolios' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Portfolios' internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Portfolios' internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2008, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
American Beacon Master Trust as of December 31, 2008, the results of their
operations for the year then ended, the changes in their net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Dallas, Texas
February 25, 2009
21
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 2008
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
CERTIFICATES OF DEPOSIT AND BANK NOTES - 17.67%
Commonwealth Bank of Australia N.Y., 0.90%, Due 2/18/2009 ................... $ 30,000 $ 30,000
DNB NOR Bank ASA N.Y., 0.73%, Due 2/20/2009 ................................. 30,000 30,000
Lloyds TSB Bank N.Y., 1.60%, Due 2/10/2009 .................................. 30,000 30,000
Societe Generale N.Y., 0.85%, Due 3/12/2009 ++ .............................. 50,000 50,000
Svenska Handelsbanken AB N.Y., 1.50%, Due 2/9/2009 .......................... 30,000 30,000
-----------
TOTAL CERTIFICATES OF DEPOSIT AND BANK NOTES ................................ 170,000
-----------
COMMERCIAL PAPER - 38.91%
Alpine Securitization Corp., 0.95%, Due 1/28/2009 # ......................... 30,000 29,979
Bank of Nova Scotia N.Y., 0.50%, Due 2/12/2009 .............................. 45,000 44,960
BNP Paribas Finance Inc., 1.25%, Due 2/17/2009 .............................. 30,000 29,951
Danske Corp., 1.49%, Due 2/17/2009 # ........................................ 30,000 29,942
Gemini Securitization Corp. LLC, 1.25%, Due 3/11/2009 # ..................... 30,000 29,928
National Australia Funding (Del) Inc., 1.25%, Due 2/13/2009 # ............... 30,000 29,955
Nordea North America, Inc., 1.10%, Due 3/9/2009 ............................. 30,000 29,938
Surrey Funding Corp., 1.50%, Due 1/12/2009 # ................................ 30,000 29,986
Toyota Motor Credit Corp.,
0.55%, Due 1/14/2009 ..................................................... 15,000 14,997
0.95%, Due 1/15/2009 ..................................................... 30,000 29,989
Variable Funding Capital Co. LLC, 1.60%, Due 3/26/2009 # .................... 45,000 44,832
Windmill Funding Corp., 1.20%, Due 3/9/2009 # ............................... 30,000 29,933
-----------
TOTAL COMMERCIAL PAPER ...................................................... 374,390
-----------
TIME DEPOSITS - 4.16%
Dexia Credit Local S.A., 0.35%, Due 1/2/2009 ................................ 40,000 40,000
-----------
SHARES
------------
SHORT TERM INVESTMENTS - 9.97%
OTHER SHORT-TERM INVESTMENTS - 9.97%
Goldman Sachs Financial Square Government Fund .............................. 48,000,000 48,000
JP Morgan U.S. Government Money Market Fund ................................. 48,000,000 48,000
-----------
TOTAL SHORT TERM INVESTMENTS ................................................ 96,000
-----------
PAR
AMOUNT
------------
REPURCHASE AGREEMENTS - 29.27%
Bank of America, NA, 0.24%, Due 1/2/2009 (Held at Bank of New York Mellon,
Collateralized by Mortgage Obligations valued at $51,360, 2/23/2036) ..... $ 48,000 48,000
Barclays Capital, Inc., 0.29%, Due 1/2/2009 (Held at Bank of New York Mellon,
Collateralized by Equity Securities valued at $50,400) ................... 48,000 48,000
Credit Suisse Securities (USA) LLC, 0.29%, Due 1/2/2009 (Held at JPMorgan
Chase, Collateralized by Equity Securities valued at $49,500) ............ 45,000 45,000
Deutsche Bank Securities, Inc., 0.24%, Due 1/2/2009 (Held at Bank of New York
Mellon, Collateralized by Equity Securities valued at $52,800) ........... 48,000 48,000
See accompanying notes
22
AMERICAN BEACON MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 2008
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
Goldman Sachs & Co., 0.04%, Due 1/2/2009 (Held at Bank of New York Mellon,
Collateralized by U.S. Government Agency Obligations valued at $2,711,
4.0% - 10.5%, 3/1/2010 - 11/1/2036) ...................................... $ 2,658 $ 2,658
JP Morgan Chase & Co., 0.29%, Due 1/2/2009 (Held at JPMorgan Chase,
Collateralized by Equity Securities valued at $47,249) ................... 45,000 45,000
Morgan Stanley & Co., 0.39%, Due 1/2/2009 (Held at JPMorgan Chase,
Collateralized by Equity Securities valued at $49,500) ................... 45,000 45,000
-----------
TOTAL REPURCHASE AGREEMENTS ................................................. 281,658
-----------
TOTAL INVESTMENTS - 99.98% (COST $962,048) ..................................... $ 962,048
OTHER ASSETS, NET OF LIABILITIES - 0.02% ....................................... 240
-----------
TOTAL NET ASSETS - 100.00% ..................................................... $ 962,288
===========
Percentages are stated as a percent of net assets.
++ Obligation is subject to an unconditional put back to the issuer with one
business day notice.
# 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 $224,555 or 23.34% of net
assets. The Fund has no right to demand registration of these securities.
See accompanying notes
23
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 2008
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
U.S. AGENCY OBLIGATIONS - 40.83%
FEDERAL HOME LOAN BANK - 12.67%
4.12%, Due 1/9/2009 ...................................................... $ 25,000 $ 25,001
3.346%, Due 1/28/2009 .................................................... 25,000 25,000
-----------
50,001
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 18.96%
0.22%, Due 2/13/2009 ..................................................... 6,700 6,698
1.80%, Due 3/3/2009 ...................................................... 10,000 9,970
1.75%, Due 3/6/2009 ...................................................... 5,000 4,984
1.75%, Due 3/16/2009 ..................................................... 10,000 9,964
1.65%, Due 4/1/2009 ...................................................... 10,000 9,959
0.35%, Due 4/14/2009 ..................................................... 13,335 13,322
1.405%, Due 6/2/2009 ..................................................... 5,000 4,970
1.05%, Due 6/24/2009 ..................................................... 10,000 9,949
1.05%, Due 7/10/2009 ..................................................... 5,000 4,972
-----------
74,788
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 9.20%
1.60%, Due 3/13/2009 ..................................................... 6,500 6,480
1.20%, Due 5/5/2009 ...................................................... 5,000 4,979
1.49%, Due 5/13/2009 ..................................................... 5,000 4,973
1.28%, Due 6/22/2009 ..................................................... 5,000 4,969
0.35%, Due 7/1/2009 ...................................................... 5,000 4,991
1.08%, Due 10/1/2009 ..................................................... 10,000 9,918
-----------
36,310
-----------
TOTAL U.S. AGENCY OBLIGATIONS ............................................... 161,099
-----------
SHARES
------------
SHORT TERM INVESTMENTS - 9.63%
OTHER SHORT-TERM INVESTMENTS - 9.63%
Goldman Sachs Financial Square Government Fund .............................. 19,000,000 19,000
JP Morgan U.S. Government Money Market Fund ................................. 19,000,000 19,000
-----------
TOTAL SHORT TERM INVESTMENTS ................................................ 38,000
-----------
PAR
AMOUNT
------------
REPURCHASE AGREEMENTS - 49.47%
Banc of America Securities LLC, 0.10%, Due 1/2/2009 (Held at Bank of New York
Mellon, Collateralized by U.S. Government Agency Obligations valued at
$91,800, 5.0%, 1/1/2035) ................................................. $ 90,000 90,000
Barclays Capital, Inc., 0.03%, Due 1/2/2009 (Held at Bank of New York Mellon,
Collateralized by U.S. Government Agency Obligations valued at $45,900,
4.0% - 5.5%, 9/1/2023 - 2/1/2038) ........................................ 45,000 45,000
Credit Suisse Securities (USA) LLC, 0.07%, Due 1/2/2009 (Held at JPMorgan
Chase, Collateralized by U.S. Government Agency Obligations valued at
$51,002, 4.0% - 8.5%, 8/1/2009 - 1/1/2039) ............................... 50,000 50,000
See accompanying notes
24
AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 2008
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
Goldman Sachs & Co., 0.04%, Due 1/2/2009 (Held at Bank of New York Mellon,
Collateralized by U.S. Government Agency Obligations valued at $10,425,
4.0% - 11.5%, 12/1/2011 - 11/1/2038) ..................................... $ 10,221 $ 10,221
-----------
TOTAL REPURCHASE AGREEMENTS ................................................. 195,221
-----------
TOTAL INVESTMENTS - 99.93% (COST $394,320) ..................................... $ 394,320
OTHER ASSETS, NET OF LIABILITIES - 0.07% ....................................... 284
-----------
TOTAL NET ASSETS - 100.00% ..................................................... $ 394,604
===========
Percentages are stated as a percent of net assets.
See accompanying notes
25
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2008 (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------ ---------------
ASSETS:
Investment in securities at value (cost - $680,390 and $199,099,
respectively) ................................................. $680,390 $199,099
Repurchase agreements (cost - $281,658 and $195,221,
respectively) ................................................. 281,658 195,221
Dividends and interest receivable ................................ 432 429
Prepaid expenses ................................................. 160 9
-------- --------
TOTAL ASSETS .................................................. 962,640 394,758
-------- --------
LIABILITIES:
Management and investment advisory fees payable (Note 2) ......... 230 33
Other liabilities ................................................ 122 121
-------- --------
TOTAL LIABILITIES ............................................. 352 154
-------- --------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS ............ $962,288 $394,604
======== ========
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2008 (IN THOUSANDS)
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
--------------- ---------------
INVESTMENT INCOME:
Dividend income .................................... $ 31,989 $ 1,475
Interest income .................................... $310,930 $19,060
-------- -------
TOTAL INVESTMENT INCOME ......................... 342,919 20,535
-------- -------
EXPENSES:
Management and investment advisory fees (Note 2) ... 11,068 725
Custodian fees ..................................... 383 25
Professional fees .................................. 100 27
Other expenses ..................................... 534 51
-------- -------
TOTAL EXPENSES .................................. 12,085 828
-------- -------
Less reimbursement of fund expense (Note 2) ........ -- (20)
-------- -------
NET EXPENSES .................................... 12,085 808
-------- -------
NET INVESTMENT INCOME ................................. 330,834 19,727
-------- -------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ................... 197 132
-------- -------
NET GAIN ON INVESTMENTS ......................... 197 132
-------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .. $331,031 $19,859
======== =======
See accompanying notes
26
AMERICAN BEACON MASTER TRUST PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
U.S. GOVERNMENT MONEY
MONEY MARKET MARKET
Year Ended December 31, Year Ended December 31,
----------------------------- -------------------------
2008 2007 2008 2007
------------- ------------- ----------- -----------
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income ................... $ 330,834 $ 824,823 $ 19,727 $ 47,203
Net realized gain on investments ........ 197 127 132 3
------------- ------------- ----------- -----------
TOTAL INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................... 331,031 824,950 19,859 47,206
------------- ------------- ----------- -----------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions ........................... 125,022,264 202,886,002 6,267,108 8,639,093
Withdrawals (137,575,006) (203,255,122) (7,274,347) (7,867,711)
------------- ------------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTERESTS ...... (12,552,742) (369,120) (1,007,239) 771,382
------------- ------------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS ... (12,221,711) 455,830 (987,380) 818,588
------------- ------------- ----------- -----------
NET ASSETS:
Beginning of period ..................... 13,183,999 12,728,169 1,381,984 563,396
------------- ------------- ----------- -----------
END OF PERIOD ........................... $ 962,288 $ 13,183,999 $ 394,604 $ 1,381,984
============= ============= =========== ===========
FINANCIAL HIGHLIGHTS
Money Market
Year Ended December 31,
------------------------------------
2008 2007 2006 2005 2004
----- ----- ----- ----- ----
Total return ............................. 2.75% 5.33% 5.09% 3.25% 1.34%
Ratios to average net assets (annualized):
Expenses .............................. 0.11% 0.11% 0.11% 0.11% 0.11%
Net investment income ................. 2.94% 5.19% 5.03% 3.20% 1.30%
U.S. Government Money Market
Year Ended December 31,
------------------------------------
2008 2007 2006 2005 2004
----- ----- ----- ----- ----
Total return ............................. 2.34% 5.18% 5.04% 3.19% 1.30%
Ratios to average net assets (annualized):
Expenses .............................. 0.11% 0.11% 0.12% 0.12% 0.11%
Net investment income ................. 2.68% 4.98% 4.97% 3.15% 1.30%
See accompanying notes
27
AMERICAN BEACON MASTER TRUST PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
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. 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.
Effective September 12, 2008, American Beacon Advisors, Inc. (the
"Manager") became a wholly-owned subsidiary of Lighthouse Holdings, Inc., which
is indirectly owned by investment funds affiliated with Pharos Capital Group,
LLC and TPG Capital, L.P., two private equity firms. Prior to September 12, the
Manager was a wholly-owned subsidiary of AMR Corporation, the parent company of
American Airlines, Inc. which retained a minority interest in the parent company
of Lighthouse Holdings, Inc.
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.
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' investments as of
December 31, 2008 is as follows (in thousands):
28
AMERICAN BEACON MASTER TRUST PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
Investments in Securities
------------------------------
U.S. Government
Valuation Inputs Money Market Money Market
---------------- ------------ ---------------
Level 1 - Quoted Prices ........................ $ 96,000 $ 38,000
Level 2 - Other significant observable inputs .. 866,048 356,320
Level 3 - Significant unobservable inputs ...... -- --
-------- --------
Total $962,048 $394,320
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.
Redemption in Kind
Beginning September 19, 2008, proceeds from redemption requests exceeding
$250,000 were made in pro rata payments of cash and in-kind distributions of
securities held by the Money Market Portfolio. The Money Market Portfolio and
feeder funds of the Money Market Portfolio implemented this procedure to prevent
redemptions from forcing the sale of securities below their economic value,
which would have resulted in a material adverse impact on the Money Market
Portfolio and the remaining shareholders. The policy was lifted on December 12,
2008. During this time, beneficial interests of the Portfolio totaling 938,602
(in thousands) were redeemed.
Federal Income Taxes
The Portfolios will be treated as partnerships for federal income tax
purposes. As such, each investor in a Portfolio will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that each
Portfolio's assets will be managed in such a way that an investor in the
Portfolio will be able to satisfy the requirements of subchapter M of the
Internal Revenue Code.
For FASB Interpretation No. 48, "Accounting for Uncertainties in Income
Taxes" ("FIN 48") purposes, there are no unrecognized tax benefits as of
December 31, 2008 included in the accompanying financial statements. Each of the
tax years in the four year period ended December 31, 2008, remains subject to
examination by the Internal Revenue Service. 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. For
the year ended December 31, 2008, the Portfolios recognized $0 in interest and
penalties.
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
29
AMERICAN BEACON MASTER TRUST PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2008
government securities or 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. Certain
prior year amounts have been reclassed in order to be consistent with current
year presentation.
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Trust enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Trust's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Trust has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement that
obligates the Manager to provide or oversee the provision of all investment
advisory and portfolio management services. The Manager serves as the sole
investment advisor to the Portfolios. As compensation for performing the duties
required under the Management Agreement, the Manager received from each
Portfolio 0.10% of its average daily net assets through September 11, 2008. From
September 12, 2008 the Manager receives 0.09% of the average daily net asset of
each Portfolio.
Administrative Services Agreement
Beginning September 12, 2008, the Manager and the Trust entered into an
Administrative Services Agreement that obligates the Manager to provide or
oversee administrative and management services to the Portfolios. As
compensation for performing the duties required under the Administrative
Services Agreement, the Manager receives an annualized fee of 0.01% of the
average daily net assets of each Portfolio.
Interfund Lending Program
Pursuant to an exemptive order by the Securities and Exchange Commission,
the Portfolios, along with other registered investment companies having
management contracts with the Manager, may participate in an interfund lending
program. This program provides an alternative credit facility allowing the Money
Market Portfolio to lend money to other participating series managed by the
Manager. For the year ended December 31, 2008, the credit facility was not
utilized.
Reimbursement of Expenses
The Manager voluntarily waived a portion of its fee for the U.S. Government
Portfolio. Fees totaling $19,659 were waived for the year ended December 31,
2008.
30
AMERICAN BEACON FUNDS
PRIVACY POLICY & FEDERAL TAX INFORMATION
DECEMBER 31, 2008 (UNAUDITED)
PRIVACY POLICY
The American Beacon Funds recognizes and respects the privacy of our
shareholders. We are providing this notice to you so you will understand how
shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of
the following sources:
- information we receive from you on applications or other forms;
- information about your transactions with us or our service
providers; and
- information we receive from third parties.
We do not disclose any nonpublic personal information about our customers
or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those
employees or service providers who need to know that information to provide
products or services to you. To ensure the confidentiality of your nonpublic
personal information, we maintain safeguards that comply with federal standards.
FEDERAL TAX INFORMATION
We are providing this information as required by the Internal Revenue Code.
The amounts shown may differ from those in other areas of this report because of
differences between tax and financial reporting requirements.
The distributions to shareholders during the tax year ended December 31, 2008
include short-term capital gains of $45,566 and $11,938 for the Money Market
Fund and U.S. Government Money Market Fund, respectively.
We are required by Internal Revenue Code to advise you within 60 days of the
Funds' fiscal year end as to the federal tax status of dividends paid by the
Funds during its fiscal year ended December 31, 2008. For purposes of preparing
your annual federal income tax returns, you should report the amounts reflected
on your Form 1099-DIV, Box 1a.
Of the ordinary dividends paid to shareholders of the U.S. Government Money
Market Fund during the tax year ended December, 2008, 29.4% were derived from
U.S. Treasury Obligations.
31
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
The Trustees and officers of the American Beacon Funds (the "Trust") are
listed below, together with their principal occupations during the past five
years. Unless otherwise indicated, the address of each person listed below is
4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee
oversees twenty-three funds in the fund complex that includes the Trust, the
American Beacon Master Trust, the American Beacon Mileage Funds, and the
American Beacon Select Funds. The Trust's Statement of Additional Information
contains additional information about the Trustees and is available without
charge by calling 1-800-658-5811.
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ------------------ ----------------------------------------------------
INTERESTED
TRUSTEES Term
Lifetime of Trust
until removal,
resignation or
retirement*
Alan D. Feld** (72) Trustee since 1996 Sole Shareholder of a professional corporation which
is a Partner in the law firm of Akin, Gump, Strauss,
Hauer & Feld, LLP (1960-Present); Director, Clear
Channel Communications (1984-2008); Trustee,
CenterPoint Properties (1994- 2006); Member, Board
of Trustees, Southern Methodist University ; Member,
Board of Visitors, M.D. Anderson Hospital; Board of
Visitors, Zale/Lipshy Hospital; American Beacon
Mileage Funds (1996-Present); American Beacon Master
Trust (1996-Present); American Beacon Select Funds
(1999-Present)
NON-INTERESTED
TRUSTEES Term
W. Humphrey Bogart (64) Trustee since 2004 Board Member, Baylor University Medical Center
Foundation (1992-2004); Consultant, New River Canada
Ltd. (mutual fund servicing company) (1998-2003);
President and CEO, Allmerica Trust Company, NA
(1996-1997); President and CEO, Fidelity Investments
Southwest Company (1983-1995); Senior Vice President
of Regional Centers, Fidelity Investments
(1988-1995); American Beacon Mileage Funds
(2004-Present); American Beacon Master Trust
(2004-Present); American Beacon Select Funds
(2004-Present)
Brenda A. Cline (48) Trustee since 2004 Executive Vice President, Chief Financial Officer,
Treasurer and Secretary, Kimbell Art Foundation
(1993-Present); Trustee, Texas Christian University
(1998- Present); Trustee, W.I. Cook Foundation, Inc.
(d/b/a Cook Children's Health Foundation)
(2001-2006); Director, Christian Church Foundation
(1999-2007); American Beacon Mileage Funds
(2004-Present); American Beacon Master Trust
(2004-Present); American Beacon Select Funds
(2004-Present)
Eugene J. Duffy (54) Trustee since 2008 Principal and Executive Vice President, Paradigm
Asset Management (1994- Present); Director, Sunrise
Bank of Atlanta (2008-Present); Chairman, Special
Contributions Fund Board of Trustees, National
Association for the Advancement of Colored People
(2007-Present); Trustee, National Association for
the Advancement of Colored People (2000-Present);
Board of Visitors, Emory University (2006-Present);
Trustee, Atlanta Botanical Garden (2006-Present);
Board Member, Willie L. Brown Jr. Institute on
Politics and Public Service (2001- Present); Chair,
National Association of Securities Professionals
(2000-2002); Deputy Chief Administrative Officer,
City of Atlanta (1985-1990); American Beacon Mileage
Funds (2008-Present); American Beacon Master Trust
(2008- Present); American Beacon Select Funds
(2008-Present)
Thomas M. Dunning (65) Trustee since 2008 Consultant, (2008-Present); Chairman (1998-2008) and
Chief Executive Officer (1998-2007), Lockton Dunning
Benefits (consulting firm in employee benefits);
Director, Oncor Electric Delivery Company LLC
(2007-Present); Immediate Past Chairman and Board
Member (2003-Present), Dallas Citizens Council;
Director, Baylor Health Care System Foundation
(2007-Present); Vice Chair, State Fair of Texas
(1987-Present); Board Member, Southwestern Medical
Foundation (1994- Present); American Beacon Mileage
Funds (2008-Present); American Beacon Master Trust
(2008-Present); American Beacon Select Funds
(2008-Present)
32
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ------------------ ----------------------------------------------------
NON-INTERESTED
TRUSTEES (CONT.)
Richard A. Massman (65) Trustee since 2004 Senior Vice President and General Counsel, Hunt
Chairman since 2008 Consolidated, Inc. (holding company engaged in oil
and gas exploration and production, refining, real
estate, farming, ranching and venture capital
activities) (1994-Present). Chairman (2007- Present)
and Director (2005-Present), The Dallas Opera
Foundation; Chairman (2006-Present) and Director
(2005-Present), Temple Emanu-El Foundation; Trustee,
Presbyterian Hospital Foundation (2006-Present);
American Beacon Mileage Funds (2004-Present);
American Beacon Master Trust (2004-Present);
American Beacon Select Funds (2004-Present)
R. Gerald Turner (63) Trustee since 2001 President, Southern Methodist University
225 Perkins Admin. Bldg. (1995-Present); Director, ChemFirst (1986-2002);
Southern Methodist Univ. Director, J.C. Penney Company, Inc. (1996-Present);
Dallas, Texas 75275 Director, California Federal Preferred Capital Corp.
(2001-2003); Director, Kronus Worldwide Inc.
(chemical manufacturing) (2003-Present); Director,
First Broadcasting Investment Partners, LLC
(2003-2007); Member, Salvation Army of Dallas Board
of Directors; Member, Methodist Healthcare Advisory
Board; Co- Chair, Knight Commission on
Intercollegiate Athletics; American Beacon Mileage
Funds (2001-Present); American Beacon Master Trust
(2001-Present); American Beacon Select Funds
(2001-Present)
Paul J. Zucconi,CPA (67) Trustee since 2008 Director, Affirmative Insurance Holdings, Inc.
(producer of nonstandard automobile insurance)
(2004-present); Director, Titanium Metals
Corporation (producer of titanium melted and mill
products and sponge) (2002- present); Director,
Torchmark Corporation (life and health insurance
products) (2002- present); Director, National Kidney
Foundation serving North Texas (2003- Present);
Director, Dallas Chapter of National Association of
Corporate Directors (2004-Present); Partner, KPMG
(1976-2001); American Beacon Mileage Funds
(2008-Present); American Beacon Master Trust
(2008-Present); American Beacon Select Funds
(2008-Present)
OFFICERS
Term
One Year
William F. Quinn (60) President from Chairman (2006-Present) and CEO (2006-2007),
1987 to 2007 President (1986-2006) and Director (2003-Present),
and 2008 to Present American Beacon Advisors, Inc.; Chairman (1989-2003)
Executive Vice and Director (1979-1989, 2003-Present), American
President from Airlines Federal Credit Union; Director, Crescent
2007 to 2008 Real Estate Equities, Inc.(1994-2007); Director,
Trustee from Pritchard, Hubble & Herr, LLC (investment advisor)
1987 to 2008 (2001-2006); Director of Investment Committee,
Southern Methodist University Endowment Fund
(1996-Present); Member, Southern Methodist
University Cox School of Business Advisory Board
(1999-2002); Member, New York Stock Exchange Pension
Manager Committee (1997-1998, 2000-2002,
2006-Present); Chairman (2007-Present) and Vice
Chairman (2004-2007), Committee for the Investment
of Employee Benefits; Director, United Way of
Metropolitan Tarrant County (1988-2000,
2004-Present); Trustee, American Beacon Mileage
Funds (1995-2008); Trustee, American Beacon Select
Funds (1999-2008); Trustee, American Beacon Master
Trust (1995-2008).
Rosemary K. Behan (49) VP, Secretary and Vice President, Legal and Compliance, American
Chief Legal Beacon Advisors, Inc. (2006- Present); Assistant
Officer since 2006 General Counsel, First Command Financial Planning,
Inc. (2004-2006); Enforcement Attorney (2002-2004)
and Branch Chief (2000-2002), Securities and
Exchange Commission.
Brian E. Brett (48) VP since 2004 Vice President, Director of Sales and Marketing,
American Beacon Advisors, Inc. (2004-Present);
Regional Vice President, Neuberger Berman, LLC
(investment advisor) (1996-2004).
33
TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS
(UNAUDITED)
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ------------------ ----------------------------------------------------
Wyatt Crumpler (42) VP since 2007 Vice President, Trust Investments, American Beacon
Advisors, Inc. (2007- Present); Managing Director of
Corporate Accounting (2004-2007), Director of IT
Strategy and Finance (2002-2004), American Airlines,
Inc.
Michael W. Fields (54) VP since 1989 Vice President, Fixed Income Investments, American
Beacon Advisors, Inc. (1988-Present).
Rebecca L. Harris (42) Treasurer since Vice President, Finance, American Beacon Advisors,
1995 Inc. (1995-Present).
Christina E. Sears (37) Chief Compliance Chief Compliance Officer, American Beacon Advisors,
Officer since 2004 Inc. (2004-Present); Senior Compliance Analyst,
and Asst. American Beacon Advisors, Inc. (1998-2004).
Secretary since
1999
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
72, provided, however, that the Board may determine to grant one or more
annual exemptions to this requirement.
** Mr. Feld is deemed to be an "interested person" of the Trust, as defined by
the 1940 Act. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP
has provided legal services within the past two fiscal years to the Manager
and one or more of the Trust's sub-advisors.
34
RESULTS OF SHAREHOLDER MEETING
(UNAUDITED)
A special meeting of shareholders of each of the portfolios of the American
Beacon Funds (the "Beacon Trust"), the American Beacon Select Funds (the "Select
Trust"), and the American Beacon Mileage Funds (the "Mileage Trust") was held on
August 22, 2008. The shareholders of the Money Market and the U.S. Government
Money Market Funds (the "Funds") approved a new investment management agreement
between American Beacon Advisors, Inc. and the Funds. This proposal required a
majority of shareholders of each Fund to achieve a quorum. The following are the
results of the shareholder votes for this proposal:
FUND FOR AGAINST ABSTAIN NON-VOTING
---- ----------------- ------------- ------------- ---------------
Money Market Fund 1,476,635,057.525 3,700.000 3,828,338.210 759,108,024.320
U.S. Govt. Money Market Fund 30,926,226.210 -0- -0- -0-
Money Market Select fund 4,647,553,318.330 -0- 301,904.000 990,879,183.230
U.S. Govt. Select Fund 376,578,304.880 86,995.210 -0- -0-
Money Market Mileage Fund 31,003,631.310 6,775,050.300 456,806.870 -0-
The shareholders of the Beacon Trust, Select Trust, and Mileage Trust
(collectively, the "Trusts") also approved the re-election of five of the
current Trustees to the Board of the Trusts and the election of three additional
Trustees to the Board. This proposal required a majority of the shareholders of
the Trusts to vote to achieve a quorum. The following are the results of the
election of each Trustee:
BEACON TRUST SELECT TRUST MILEAGE TRUST
----------------- ---------------- -------------
ALAN D. FELD
Affirmative ......... 12,634,553,751.62 5,579,522,662.80 30,648,100.70
Withhold ............ 519,818,259.90 435,877,042.85 7,587,387.78
W. HUMPHREY BOGART
Affirmative ......... 12,999,746,162.82 6,013,838,886.28 30,717,064.11
Withhold ............ 154,625,848.70 1,560,819.37 7,518,424.37
BRENDA A. CLINE
Affirmative ......... 13,009,050,779.42 6,015,104,773.65 31,044,304.34
Withhold ............ 145,321,232.10 294,932.00 7,191,184.14
RICHARD A. MASSMAN
Affirmative ......... 13,004,756,096.42 5,971,204,773.65 30,618,827.22
Withhold ............ 149,615,915.10 44,194,932.00 7,616,661.26
R. GERALD TURNER
Affirmative ......... 13,004,259,224.92 6,015,104,773.65 30,262,464.39
Withhold ............ 150,112,786.60 294,932.00 7,973,024.09
THOMAS M. DUNNING
Affirmative ......... 13,003,350,236.48 6,013,838,886.28 30,548,724.44
Withhold ............ 151,021,775.04 1,560,819.37 7,686,764.04
EUGENE J. DUFFY
Affirmative ......... 12,985,296,316.39 6,013,838,886.28 30,573,632.38
Withhold ............ 169,075,695.13 1,560,819.37 7,661,856.10
PAUL J. ZUCCONI
Affirmative ......... 12,983,378,136.76 6,013,838,886.28 32,956,909.20
Withhold ............ 170,993,874.76 1,560,819.37 5,278,579.28
35
(GRAPHIC)
(THIS PAGE INTENTIONALLY LEFT BLANK)
36
(GRAPHIC)
(THIS PAGE INTENTIONALLY LEFT BLANK)
37
(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, is
Exchange Commission ("SEC") on Form N-Q as of available free of charge on the Fund's website
the first and third fiscal quarters. The Fund's (www.americanbeaconfunds.com) and by calling
Forms N-Q are available on the SEC's website at 1-800-967-9009 or by accessing the SEC's website
www.sec.gov. The Forms N-Q may also be reviewed at www.sec.gov. The Fund's proxy voting record for
and copied at the SEC's Public Reference Room, the most recent year ended June 30 is filed
450 Fifth Street, NW, Washington, DC 20549. annually with the SEC on Form N-PX. The Fund's
Information regarding the operation of the Forms N-PX are available on the SEC's website at
SEC's Public Reference Room may be obtained by www.sec.gov. The Fund's proxy voting record may
calling 1-800-SEC-0330. A complete schedule of also be obtained by calling 1-800-967-9009.
the Fund's portfolio holdings is also available
on the Funds' website
(www.americanbeaconfunds.com) approximately
thirty days after the end of each month.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR
STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FORESIDE FUND SERVICES
TRUST SERVICES FIRM Portland, Maine
Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP
Dallas, Texas
This report is prepared for shareholders of the American Beacon Funds and may be
distributed to others only if preceded or accompanied by a current prospectus.
American Airlines, Inc. is not responsible for investments made in the American
Beacon Funds. American Beacon Funds, PlanAhead Class, American Beacon Money
Market Fund, and American Beacon U.S. Government Money Market Fund are service
marks of American Beacon Advisors, Inc.
AR 12/08
00065945
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.
The Trust's Board of Trustees has determined that Mr. Paul J. Zucconi, CPA, a
member of the Trust's Audit and Compliance Committee, is an "audit committee
financial expert" as defined in Form N-CSR. Mr. Paul J. Zucconi is
"independent" as defined in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a)
<Table>
<Caption>
Audit Fees Fiscal Year Ended
- ---------- -----------------
$280,229 10/31/2007
$85,006 12/31/2007
$294,836 10/31/2008
$88,878 12/31/2008
</Table>
(b)
<Table>
<Caption>
Audit-Related Fees Fiscal Year Ended
- ------------------ -----------------
$8,750 10/31/2007
$6,250* 12/31/2007 (revised)
$0 10/31/2008
$0 12/31/2008
<FN>
* Review of N-1A filings
</Table>
(c)
<Table>
<Caption>
Tax Fees Fiscal Year Ended
- -------- -----------------
$29,199** 10/31/2007
$11,141 12/31/2007
$12,698* 10/31/2008
$6,095 12/31/2008
<FN>
* For review of 2007 tax returns
</FN>
**2005 and 2006 tax compliance and tax advice related to International Equity
Fund reorganization
</Table>
(d)
<Table>
<Caption>
All Other Fees Fiscal Year Ended
- -------------- -----------------
$0 10/31/2007
$0 12/31/2007
$0 10/31/2008
$0 12/31/2008
</Table>
(e)(1) Pursuant to its charter, the Trust's Audit and Compliance Committee
shall have the following duties and powers pertaining to pre-approval
of audit and non-audit services provided by the Trust's principal
accountant:
- to approve, prior to appointment, the engagement of auditors to
annually audit and provide their opinion on the Trusts' financial
statements, and, in connection therewith, reviewing and evaluating
matters potentially affecting the independence and capabilities of
the auditors;
- to approve, prior to appointment, the engagement of the auditors to
provide non-audit services to the Trusts, an investment adviser to
any series of the Trusts or any entity controlling, controlled by,
or under common control with an investment adviser ("adviser
affiliate") that provides ongoing services to the Trusts, if the
engagement relates directly to the operations and financial
reporting of the Trusts;
- to consider whether the non-audit services provided by a Trust's
auditor to an investment adviser or any adviser affiliate that
provides ongoing services to a series of the Trusts, which services
were not pre-approved by the Committee, are compatible with
maintaining the auditor's independence;
- to review the arrangements for and scope of the annual audit and any
special audits; and
- to review and approving the fees proposed to be charged to the
Trusts by the auditors for each audit and non-audit service.
The Audit and Compliance Committee may delegate any portion of its authority,
including the authority to grant pre-approvals of audit and permitted
non-audit services, to a subcommittee of one or more members. Any decisions
of the subcommittee to grant pre-approvals shall be presented to the full
audit committee at its next regularly scheduled meeting.
(e)(2) None of the fees disclosed in paragraphs (b) through (d) above were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g)
<Table>
<Caption>
Aggregate Non-Audit Fees for Services Rendered to the:
- ------------------------------------------------------
Adviser's Affiliates Providing
Registrant Adviser Ongoing Services to Registrant Fiscal Year Ended
- ---------- ------- ------------------------------ -----------------
$37,949 $0 N/A 10/31/2007
$11,141 $0 N/A 12/31/2007
$12,698 $0 N/A 10/31/2008
$6,095 $0 N/A 12/31/2008
</Table>
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedules of investments for each series of the Trust are included in the
shareholder report presented in Item 1. The shareholder report for the S&P
500 Index Fund, the Small Cap Index Fund and the International Equity Index
Fund presented in Item 1 includes a summary schedule of investments for the
Master International Index Series and the Master Small Cap Index Series, both
of which are series of the Master Quantitative Series 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 DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
ADVERTISING AGENCIES - 0.3% DG FastChannel, Inc. (a) 6,800 $ 84,864
Harte-Hanks, Inc. 15,200 94,848
inVentiv Health, Inc. (a) 13,700 158,098
Marchex, Inc. Class B 9,800 57,134
National CineMedia, Inc. 17,370 176,132
R.H. Donnelley Corp. (a)(b) 28,000 10,360
Valassis Communications, Inc. (a) 19,700 26,004
ValueClick, Inc. (a) 36,480 249,523
---------------
856,963
---------------
AEROSPACE - 1.1% AeroVironment, Inc. (a) 4,400 161,964
Argon ST, Inc. (a) 5,400 101,844
Ascent Solar Technologies, Inc. (a) 3,200 12,032
Curtiss-Wright Corp. 18,468 616,647
Ducommun, Inc. 4,600 76,820
Heico Corp. (b) 9,326 362,129
LMI Aerospace, Inc. (a) 3,600 40,932
Ladish Co., Inc. (a) 6,000 83,100
Moog, Inc. Class A (a) 17,613 644,107
Orbital Sciences Corp. (a) 24,635 481,122
Teledyne Technologies, Inc. (a) 14,634 651,945
TransDigm Group, Inc. (a) 13,700 459,909
---------------
3,692,551
---------------
AGRICULTURE, FISHING & AgFeed Industries, Inc. (a) 10,100 16,261
RANCHING - 0.1% Alico, Inc. 1,500 61,485
The Andersons, Inc. 7,700 126,896
Cadiz, Inc. (a) 4,900 61,299
Calavo Growers, Inc. 4,300 49,450
HQ Sustainable Maritime Industries, Inc. (a) 2,800 21,924
---------------
337,315
---------------
AIR TRANSPORT - 1.1% AAR Corp. (a)(c) 16,368 301,335
AirTran Holdings, Inc. (a)(b) 49,420 219,425
Alaska Air Group, Inc. (a) 15,098 441,616
Allegiant Travel Co. (a) 5,800 281,706
Atlas Air Worldwide Holdings, Inc. (a) 5,600 105,840
Bristow Group, Inc. (a) 10,185 272,856
Hawaiian Holdings, Inc. (a) 18,500 118,030
JetBlue Airways Corp. (a) 72,700 516,170
PHI, Inc. (a) 5,600 78,456
Republic Airways Holdings, Inc. (a) 14,400 153,648
SkyWest, Inc. 24,100 448,260
UAL Corp. 52,800 581,856
US Airways Group, Inc. (a)(b) 48,000 371,040
---------------
3,890,238
---------------
ALUMINUM - 0.0% Kaiser Aluminum Corp. 6,200 139,624
---------------
AUTO PARTS: AFTER MARKET - 0.1% ATC Technology Corp. (a)(c) 8,743 127,910
Commercial Vehicle Group, Inc. (a) 8,850 8,231
1
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Dorman Products, Inc. (a) 5,300 $ 69,960
Superior Industries International, Inc. (b) 9,799 103,085
---------------
309,186
---------------
AUTO PARTS: American Axle & Manufacturing Holdings, Inc. 19,000 54,910
ORIGINAL EQUIPMENT - 0.2% Amerigon Inc. (a) 9,200 29,992
ArvinMeritor, Inc. 31,500 89,775
Dana Holding Corp. (a) 40,900 30,266
Fuel Systems Solutions, Inc. (a) 5,100 167,076
Hayes Lemmerz International, Inc. (a) 41,700 18,765
Lear Corp. (a) 20,580 29,018
Quantum Fuel Systems Technologies Worldwide,
Inc. (a) 28,600 24,310
Sauer-Danfoss, Inc. 4,473 39,139
Stoneridge, Inc. (a) 6,000 27,360
Tenneco, Inc. (a) 20,500 60,475
Visteon Corp. (a) 53,900 18,865
Wonder Auto Technology, Inc. (a) 6,100 23,912
---------------
613,863
---------------
AUTO, TRUCKS & PARTS - 0.1% Force Protection, Inc. (a) 29,000 173,420
Modine Manufacturing Co. 13,294 64,742
Spartan Motors, Inc. 13,400 63,382
Wabash National Corp. 12,645 56,903
---------------
358,447
---------------
BANKS: NEW YORK CITY - 0.1% Signature Bank (a) 14,800 424,612
---------------
BANKS: NON U.S. BANKS - 0.0% Banco Latinoamericano de Exportaciones, SA 'E' 11,300 162,268
---------------
BANKS: 1st Source Corp. 5,684 134,313
OUTSIDE NEW YORK CITY - 7.4% Abington Bancorp, Inc. 10,080 93,240
Amcore Financial, Inc. 9,525 34,480
Ameris Bancorp 6,400 75,840
Ames National Corp. 3,100 82,274
Arrow Financial Corp. 3,800 95,532
BancTrust Financial Group, Inc. 8,100 119,556
Bancfirst Corp. 2,990 158,231
Bank of the Ozarks, Inc. 5,300 157,092
BankFinancial Corp. 8,100 82,539
Banner Corp. 6,013 56,582
Beneficial Mutual Bancorp, Inc. (a) 13,500 151,875
Boston Private Financial Holdings, Inc. 23,233 158,914
Bryn Mawr Bank Corp. 3,000 60,300
CVB Financial Corp. 27,965 332,783
Camden National Corp. 3,200 86,336
Capital City Bank Group, Inc. 4,721 128,600
Capitol Bancorp Ltd. 5,900 46,020
Cardinal Financial Corp. 10,000 56,900
Cascade Bancorp (b) 9,225 62,269
Cathay General Bancorp (b) 20,744 492,670
Centerstate Banks of Florida, Inc. 4,200 71,358
2
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Central Pacific Financial Corp. 12,248 $ 122,970
Chemical Financial Corp. 9,848 274,562
Citizens & Northern Corp. 4,300 84,925
Citizens Banking Corp. 48,787 145,385
City Holding Co. 6,893 239,739
CityBank 5,698 29,630
Clifton Savings Bancorp, Inc. 3,100 36,766
CoBiz Financial, Inc. 8,726 84,991
The Colonial BancGroup, Inc. (b) 84,500 174,915
Columbia Banking System, Inc. 7,441 88,771
Community Bank System, Inc. 13,800 336,582
Community Trust Bancorp, Inc. 6,223 228,695
Corus Bankshares, Inc. (b) 15,504 17,209
East-West Bancorp, Inc. 26,700 426,399
Encore Bancshares, Inc. (a) 2,800 30,800
Enterprise Financial Services Corp. (b) 4,200 64,008
Farmers Capital Bank Corp. 2,700 65,934
Financial Institutions, Inc. 4,500 64,575
First BanCorp, Puerto Rico 29,400 327,516
First Bancorp, Inc. 3,800 75,582
First Bancorp, North Carolina 5,236 96,081
First Busey Corp. (b) 10,514 191,775
First Commonwealth Financial Corp. 35,740 442,461
First Community Bancshares, Inc. 3,794 132,297
First Financial Bancorp 15,487 191,884
First Financial Bankshares, Inc. 8,753 483,253
First Financial Corp. 4,644 190,358
First Merchants Corp. 7,546 167,597
First Midwest Bancorp, Inc. 20,400 407,388
First South Bancorp, Inc. (b) 3,800 47,728
FirstMerit Corp. 34,000 700,060
Fox Chase Bancorp, Inc. (a) 2,500 27,500
Frontier Financial Corp. (b) 19,466 84,872
Glacier Bancorp, Inc. 25,564 486,227
Greene County Bancshares, Inc. 5,450 73,793
Guaranty Bancorp (a) 21,100 42,200
Hancock Holding Co. 10,854 493,423
Hanmi Financial Corp. 17,004 35,028
Harleysville National Corp. 17,636 254,664
Heartland Financial USA, Inc. 4,800 98,832
Heritage Commerce Corp. 5,100 57,324
Home Bancshares, Inc. 5,060 136,367
Independent Bank Corp./MA 6,945 181,681
Integra Bank Corp. 8,574 11,746
International Bancshares Corp. 21,310 465,197
Investors Bancorp, Inc. (a) 18,200 244,426
3
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Lakeland Bancorp, Inc. 7,605 $ 85,632
Lakeland Financial Corp. 5,100 121,482
MB Financial, Inc. 14,383 402,005
MainSource Financial Group, Inc. 7,719 119,645
Midwest Banc Holdings, Inc. 10,380 14,532
NBT Bancorp, Inc. 13,213 369,435
Nara Bancorp, Inc. 9,400 92,402
National Penn Bancshares, Inc. (b) 32,865 476,871
Northfield Bancorp, Inc. 7,000 78,750
Old National Bancorp 27,895 506,573
Old Second Bancorp, Inc. (b) 5,722 66,375
Oriental Financial Group 10,618 64,239
PacWest Bancorp 10,311 277,366
Pacific Capital Bancorp (b) 19,462 328,519
Pacific Continental Corp. 4,700 70,359
Park National Corp. (b) 4,515 323,951
Peapack-Gladstone Financial Corp. 3,400 90,576
Pennsylvania Commerce Bancorp, Inc. (a) 2,600 69,316
Peoples Bancorp, Inc. 4,210 80,537
Pinnacle Financial Partners, Inc. (a) 9,300 277,233
Piper Jaffray Cos. (a) 7,900 314,104
Premierwest Bancorp 9,300 62,217
PrivateBancorp, Inc. 9,096 295,256
Prosperity Bancshares, Inc. 16,500 488,235
Provident Bankshares Corp. 14,024 135,472
Renasant Corp. 8,698 148,127
Republic Bancorp, Inc. Class A 3,454 93,949
S&T Bancorp, Inc. 10,063 357,237
SCBT Financial Corp. 4,263 147,074
SVB Financial Group (a) 12,600 330,498
SY Bancorp, Inc. 5,530 152,075
Sandy Spring Bancorp, Inc. 6,814 148,750
Santander BanCorp 1,203 15,025
Seacoast Banking Corp. of Florida 6,358 41,963
Shore Bancshares, Inc. 4,000 95,960
Sierra Bancorp 3,500 73,500
Simmons First National Corp. Class A 5,700 167,979
Smithtown Bancorp, Inc. 4,100 65,723
The South Financial Group, Inc. 30,100 130,032
Southside Bancshares, Inc. 5,049 118,652
Southwest Bancorp, Inc. 6,000 77,760
State Bancorp, Inc. 5,900 57,466
StellarOne Corp. 9,300 157,170
Sterling Bancshares, Inc. 31,114 189,173
Suffolk Bancorp 4,000 143,720
Sun Bancorp, Inc. (a) 5,728 42,903
4
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Susquehanna Bancshares, Inc. 36,056 $ 573,651
Texas Capital Bancshares, Inc. (a) 11,761 157,127
Tompkins Trustco, Inc. 2,440 141,398
Towne Bank 8,600 213,194
Trico Bancshares 5,778 144,277
TrustCo Bank Corp. NY 31,261 297,292
Trustmark Corp. 20,827 449,655
UCBH Holdings, Inc. 46,600 320,608
UMB Financial Corp. 13,052 641,375
Umpqua Holdings Corp. (b) 25,280 365,802
Union Bankshares Corp. 5,200 128,960
United Bankshares, Inc. 16,000 531,520
United Community Banks, Inc. (b) 16,856 228,900
United Financial Bancorp, Inc. 7,700 116,578
United Security Bancshares (b) 2,828 32,748
Univest Corp. of Pennsylvania 5,050 162,307
Washington Trust Bancorp, Inc. 5,000 98,750
WesBanco, Inc. 10,963 298,303
West Bancorp., Inc. 7,600 93,100
West Coast Bancorp 7,400 48,766
Westamerica Bancorp. 12,183 623,160
Western Alliance Bancorp (a)(b) 8,000 80,720
Wilshire Bancorp, Inc. 8,300 75,364
Wintrust Financial Corp. 10,000 205,700
Yardkin Valley Financial Corp. 5,500 78,375
---------------
25,475,268
---------------
BEVERAGE: Boston Beer Co., Inc. Class A (a) 3,500 99,400
---------------
BREWERS (WINERIES) - 0.0%
BEVERAGE: SOFT DRINKS - 0.2% Coca-Cola Bottling Co. Consolidated 1,687 77,535
Farmer Bros. Co. 2,310 57,611
Green Mountain Coffee Roasters, Inc. (a)(b) 7,300 282,510
National Beverage Corp. (a) 3,308 29,772
Peet's Coffee & Tea, Inc. (a) 5,900 137,175
---------------
584,603
---------------
BIOTECHNOLOGY RESEARCH & AMAG Pharmaceuticals, Inc. (a)(c) 7,160 256,686
PRODUCTION - 3.6% Acadia Pharmaceuticals, Inc. (a) 13,500 12,150
Accelrys, Inc. (a) 13,400 58,424
Acorda Therapeutics, Inc. (a)(c) 15,600 319,956
Albany Molecular Research, Inc. (a) 9,687 94,351
Alexion Pharmaceuticals, Inc. (a)(c) 32,160 1,163,870
Allos Therapeutics, Inc. (a) 21,900 134,028
Alnylam Pharmaceuticals, Inc. (a)(b) 15,000 370,950
American Oriental Bioengineering, Inc. (a) 26,100 177,219
Amicus Therapeutics, Inc. (a) 2,300 18,354
Arena Pharmaceuticals, Inc. (a) 31,400 130,938
Ariad Pharmaceuticals, Inc. (a) 30,419 25,856
5
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Arqule, Inc. (a) 18,800 $ 79,336
Array Biopharma, Inc. (a) 19,600 79,380
ArthroCare Corp. (a)(b) 11,120 53,042
Biodel, Inc. (a) 5,100 24,582
Caliper Life Sciences, Inc. (a) 23,200 22,504
Celera Corp. (a) 33,000 367,290
Cell Genesys, Inc. (a) 35,324 7,771
Celldex Therapeutics, Inc. (a) 6,200 49,104
Cougar Biotechnology, Inc. (a) 6,200 161,200
Cubist Pharmaceuticals, Inc. (a) 23,667 571,795
Cypress Bioscience, Inc. (a) 16,100 110,124
Cytokinetics, Inc. (a) 11,900 33,915
Cytori Therapeutics, Inc. (a) 8,200 29,602
Discovery Laboratories, Inc. (a) 41,900 46,928
Dyax Corp. (a) 22,900 83,356
Enzon Pharmaceuticals, Inc. (a)(b) 19,200 111,936
Exelixis, Inc. (a)(b) 44,418 222,978
Facet Biotech Corp. (a) 9,980 95,708
Genomic Health, Inc. (a) 5,900 114,932
Geron Corp. (a)(b) 33,129 154,712
Halozyme Therapeutics, Inc. (a) 25,100 140,560
Human Genome Sciences, Inc. (a) 58,100 123,172
Idenix Pharmaceuticals, Inc. (a) 10,300 59,637
Idera Pharmaceuticals, Inc. (a) 8,500 65,280
Immunomedics, Inc. (a) 27,400 46,580
Incyte Corp. (a) 32,624 123,645
Integra LifeSciences Holdings Corp. (a) 7,500 266,775
InterMune, Inc. (a)(b) 13,414 141,920
Kendle International, Inc. (a) 5,500 141,460
Kensey Nash Corp. (a) 3,200 62,112
Lexicon Genetics, Inc. (a) 33,100 46,340
Life Sciences Research, Inc. (a) 3,600 33,840
MannKind Corp. (a)(b) 21,150 72,545
Marshall Edwards, Inc. (a) 6,400 4,480
Martek Biosciences Corp. (a) 13,800 418,278
Maxygen, Inc. (a) 10,801 96,345
Medivation, Inc. (a) 10,700 155,899
Metabolix, Inc. (a)(b) 8,100 103,032
Momenta Pharmaceuticals, Inc. (a) 10,900 126,440
Myriad Genetics, Inc. (a) 18,700 1,239,062
NPS Pharmaceuticals, Inc. (a) 20,200 125,442
Nabi Biopharmaceuticals (a) 21,454 71,871
Nanosphere, Inc. (a) 5,500 26,180
Neurocrine Biosciences, Inc. (a) 16,700 53,440
OSI Pharmaceuticals, Inc. (a) 24,000 937,200
Opko Health, Inc. (a)(b) 19,700 31,914
6
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Orexigen Therapeutics, Inc. (a) 8,300 $ 46,314
Osiris Therapeutics, Inc. (a)(b) 5,700 109,212
PDL BioPharma, Inc. 49,900 308,382
PharmaNet Development Group, Inc. (a) 8,650 7,872
Progenics Pharmaceuticals, Inc. (a) 11,300 116,503
Protalix BioTherapeutics, Inc. (a) 4,560 8,390
RTI Biologics, Inc. (a) 22,200 61,272
Repligen Corp. (a) 12,800 48,384
Rexahn Pharmaceuticals, Inc. (a) 12,400 11,036
Rigel Pharmaceuticals, Inc. (a) 15,570 124,560
Sangamo Biosciences, Inc. (a)(b) 16,200 56,376
Savient Pharmaceuticals, Inc. (a) 23,128 133,911
Seattle Genetics, Inc. (a) 25,000 223,500
Sequenom, Inc. (a) 25,500 505,920
Sucampo Pharmaceuticals, Inc. Class A (a) 4,200 24,150
Synta Pharmaceuticals Corp. (a) 6,900 42,228
Targacept, Inc. (a) 7,500 26,700
VNUS Medical Technologies, Inc. (a) 5,600 90,832
ViroPharma, Inc. (a) 33,100 430,962
XOMA Ltd. (a) 54,500 33,790
ZymoGenetics, Inc. (a) 15,400 46,200
---------------
12,352,920
---------------
BUILDING MATERIALS - 0.6% Ameron International Corp. 3,900 245,388
LSI Industries, Inc. 7,712 52,981
NCI Building Systems, Inc. (a) 8,368 136,398
Quanex Building Products Corp. 15,310 143,455
Simpson Manufacturing Co., Inc. 15,332 425,616
Texas Industries, Inc. (b) 9,805 338,273
Trex Co., Inc. (a)(b) 6,509 107,138
Watsco, Inc. 9,865 378,816
Zoltek Cos., Inc. (a)(b) 11,800 106,082
---------------
1,934,147
---------------
BUILDING: CEMENT - 0.0% U.S. Concrete, Inc. (a) 16,200 54,432
---------------
BUILDING: HEATING & Aaon, Inc. 5,750 120,060
PLUMBING - 0.1% Interline Brands, Inc. (a) 13,400 142,442
---------------
262,502
---------------
BUILDING: MISCELLANEOUS - 0.2% Builders FirstSource, Inc. (a)(b) 6,600 10,098
Comfort Systems USA, Inc. 16,900 180,154
Drew Industries, Inc. (a) 8,100 97,200
Griffon Corp. (a) 18,555 173,118
Orion Marine Group, Inc. (a) 8,900 85,974
---------------
546,544
---------------
BUILDING: Beacon Roofing Supply, Inc. (a)(b) 18,650 258,862
ROOFING & WALLBOARD - 0.1% China Architectural Engineering, Inc. (a) 7,700 18,942
---------------
277,804
---------------
7
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
CABLE TELEVISION SERVICES - 0.1% Charter Communications, Inc. Class A (a) 168,400 $ 13,775
Crown Media Holdings, Inc. Class A (a) 4,498 12,819
Mediacom Communications Corp. Class A (a) 16,300 70,090
TiVo, Inc. (a) 42,994 307,837
---------------
404,521
---------------
CASINOS & GAMBLING - 0.5% Ameristar Casinos, Inc. 10,500 90,720
Bally Technologies, Inc. (a)(c) 23,000 552,690
Churchill Downs, Inc. 3,932 158,931
Dover Downs Gaming & Entertainment, Inc. 5,805 18,460
Elixir Gaming Technologies, Inc. (a)(b) 38,000 4,940
Isle of Capri Casinos, Inc. (a)(b) 6,475 20,720
Monarch Casino & Resort, Inc. (a) 5,200 60,580
Pinnacle Entertainment, Inc. (a) 24,794 190,418
Riviera Holdings Corp. (a) 4,100 12,300
Shuffle Master, Inc. (a) 20,000 99,200
WMS Industries, Inc. (a) 18,418 495,444
---------------
1,704,403
---------------
CHEMICALS - 1.3% Aceto Corp. 10,100 101,101
American Vanguard Corp. 7,533 88,136
Arch Chemicals, Inc. (c) 10,256 267,374
Balchem Corp. 7,500 186,825
Cabot Microelectronics Corp. (a) 9,900 258,093
Calgon Carbon Corp. (a) 22,801 350,223
Cambrex Corp. (a) 12,685 58,605
China BAK Battery, Inc. (a) 12,500 20,250
EnerSys (a) 11,700 128,700
Energy Conversion Devices, Inc. (a)(b) 18,964 478,082
Exide Technologies (a) 31,100 164,519
ICO Inc. (a) 11,400 36,024
Innophos Holdings, Inc. 4,500 89,145
Innospec, Inc. 9,700 57,133
LSB Industries, Inc. (a) 7,600 63,232
Landec Corp. (a) 9,300 61,194
Medis Technologies Ltd. (a)(b) 10,641 4,788
NL Industries, Inc. 2,834 37,976
NewMarket Corp. 5,600 195,496
OM Group, Inc. (a) 12,900 272,319
Penford Corp. 3,800 38,456
PolyOne Corp. (a) 38,567 121,486
Polypore International, Inc. (a) 6,600 49,896
Quaker Chemical Corp. 4,700 77,315
Rockwood Holdings, Inc. (a) 17,200 185,760
Schulman A, Inc. 11,506 195,602
ShengdaTech, Inc. (a)(b) 12,300 43,296
Solutia, Inc. (a) 37,700 169,650
Stepan Co. 2,655 124,758
8
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Ultralife Batteries, Inc. (a) 5,400 $ 72,414
Valence Technology, Inc. (a)(b) 20,800 37,856
W.R. Grace & Co. (a) 29,800 177,906
Westlake Chemical Corp. 7,900 128,691
Zep, Inc. 8,880 171,473
---------------
4,513,774
---------------
COAL - 0.1% International Coal Group, Inc. (a)(b) 52,500 120,750
James River Coal Co. (a) 11,600 177,828
National Coal Corp. (a)(b) 12,200 15,494
Westmoreland Coal Co. (a) 3,900 43,290
---------------
357,362
---------------
COMMERCIAL INFORMATION Arbitron, Inc. 11,658 154,818
SERVICES - 0.1% HSW International, Inc. (a) 11,600 4,408
infoGROUP, Inc. 12,261 58,117
LECG Corp. (a) 10,600 71,126
LoopNet, Inc. (a) 12,500 85,250
---------------
373,719
---------------
COMMUNICATIONS & MEDIA - 0.0% Entravision Communications Corp. Class A (a) 24,500 38,220
Knology, Inc. (a) 11,700 60,372
---------------
98,592
---------------
COMMUNICATIONS 3Com Corp. (a) 166,500 379,620
TECHNOLOGY - 2.5% Acme Packet, Inc. (a) 11,200 58,912
Adtran, Inc. 23,600 351,168
Anaren, Inc. (a) 6,322 75,548
Anixter International, Inc. (a) 12,472 375,657
Aruba Networks, Inc. (a) 21,600 55,080
Atheros Communications, Inc. (a) 25,000 357,750
Avanex Corp. (a) 5,320 5,586
Avocent Corp. (a) 18,850 337,603
Bel Fuse, Inc. 4,859 103,011
BigBand Networks, Inc. (a) 14,200 78,384
Black Box Corp. 7,188 187,751
CPI International, Inc. (a) 3,700 32,042
CSG Systems International, Inc. (a) 14,800 258,556
Cbeyond Communications, Inc. (a) 10,200 162,996
Cogent Communications Group, Inc. (a)(b) 19,700 128,641
Cogo Group, Inc. (a) 11,200 54,432
Comtech Telecommunications Corp. (a) 10,225 468,510
Digi International, Inc. (a) 10,600 85,966
EMS Technologies, Inc. (a) 6,400 165,568
Echelon Corp. (a) 12,213 99,536
Entrust, Inc. (a) 25,200 39,816
Extreme Networks, Inc. (a) 41,100 96,174
Finisar Corp. (a) 163,819 62,251
GeoEye, Inc. (a) 7,700 148,071
Globecomm Systems Inc. (a) 8,300 45,567
9
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Harmonic, Inc. (a) 39,396 $ 221,012
Harris Stratex Networks, Inc. Class A (a) 10,250 52,890
Hughes Communications, Inc. (a) 3,000 47,820
Infinera Corp. (a)(b) 38,300 343,168
InterDigital, Inc. (a) 19,100 525,250
Ixia (a) 17,329 100,162
j2 Global Communications, Inc. (a) 18,300 366,732
Loral Space & Communications Ltd. (a) 4,400 63,932
NETGEAR, Inc. (a) 14,900 170,009
Nextwave Wireless, Inc. (a) 19,900 1,791
Novatel Wireless, Inc. (a) 13,900 64,496
Oplink Communications, Inc. (a) 8,602 73,977
SeaChange International, Inc. (a) 13,200 95,172
Shoretel, Inc. (a) 17,900 80,371
Sonus Networks, Inc. (a) 84,100 132,878
Standard Microsystems Corp. (a) 9,310 152,125
Starent Networks Corp. (a) 12,300 146,739
Switch and Data Facilities Co., Inc. (a) 8,900 65,771
Sycamore Networks, Inc. (a) 78,900 212,241
Syniverse Holdings, Inc. (a) 21,500 256,710
TIBCO Software, Inc. (a) 78,400 406,896
Tekelec (a) 27,300 364,182
Terremark Worldwide, Inc. (a) 21,830 84,919
UTStarcom, Inc. (a) 45,600 84,360
Viasat, Inc. (a) 10,501 252,864
Vonage Holdings Corp. (a)(b) 24,300 16,038
---------------
8,596,701
---------------
COMPUTER SERVICES SOFTWARE & 3PAR, Inc. (a) 11,200 85,456
SYSTEMS - 5.1% ACI Worldwide, Inc. (a) 14,485 230,311
Actuate Corp. (a) 25,000 74,000
Acxiom Corp. 25,200 204,372
American Reprographics Co. (a) 15,000 103,500
American Software Class A 11,600 54,520
ArcSight, Inc. (a) 1,600 12,816
Ariba, Inc. (a) 35,280 254,369
Art Technology Group, Inc. (a) 53,100 102,483
AsiaInfo Holdings, Inc. (a) 14,400 170,496
Blackbaud, Inc. 18,426 248,751
Blackboard, Inc. (a) 13,000 340,990
Blue Coat Systems, Inc. (a) 14,200 119,280
Bottomline Technologies, Inc. (a) 9,100 64,610
CACI International, Inc. Class A (a)(c) 12,700 572,643
COMSYS IT Partners, Inc. (a) 6,000 13,440
Callidus Software Inc. (a) 13,400 40,066
China Fire & Security Group, Inc. (a) 5,800 39,498
China Information Security Technology, Inc. (a) 9,500 34,200
10
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Chordiant Software, Inc. (a) 12,440 $ 33,090
Ciber, Inc. (a) 22,102 106,311
ComScore, Inc. (a) 7,400 94,350
CommVault Systems, Inc. (a) 18,100 242,721
Compellent Technologies, Inc. (a) 5,800 56,434
Comverge, Inc. (a) 9,600 47,040
Concur Technologies, Inc. (a) 18,100 594,042
Constant Contact, Inc. (a)(b) 8,400 111,300
DealerTrack Holdings, Inc. (a) 17,300 205,697
Delrek, Inc. (a) 4,100 19,024
DemandTec, Inc. (a) 8,100 65,367
Digimarc Corp. (a) 2,657 26,623
Digital River, Inc. (a) 15,600 386,880
DivX, Inc. (a) 11,000 57,530
Double-Take Software, Inc. (a) 7,500 67,275
EPIQ Systems, Inc. (a) 14,617 244,250
Ebix, Inc. (a) 2,600 62,140
Electronics for Imaging, Inc. (a) 21,939 209,737
Ener1, Inc. (a)(b) 15,700 112,255
Epicor Software Corp. (a) 24,500 117,600
Gartner, Inc. Class A (a) 24,579 438,244
Guidance Software, Inc. (a) 3,800 15,504
The Hackett Group, Inc. (a) 17,000 49,640
i2 Technologies, Inc. (a) 6,500 41,535
iGate Corp. (a) 8,000 52,080
Informatica Corp. (a) 37,000 508,010
Integral Systems, Inc. (a) 7,282 87,748
Interactive Intelligence, Inc. (a) 5,700 36,537
Internet Brands, Inc. Class A (a) 9,200 53,544
Internet Capital Group, Inc. (a) 16,700 91,015
Interwoven, Inc. (a) 19,225 242,235
JDA Software Group, Inc. (a) 10,608 139,283
Kenexa Corp. (a) 9,800 78,204
Keynote Systems, Inc. (a) 5,700 43,947
Lawson Software, Inc. (a) 51,100 242,214
Limelight Networks, Inc. (a) 9,200 22,540
MSC.Software Corp. (a) 18,600 124,248
Macrovision Solutions Corp. (a) 34,708 439,056
Magma Design Automation, Inc. (a) 19,200 19,584
Manhattan Associates, Inc. (a) 10,539 166,622
Mantech International Corp. Class A (a) 8,600 466,034
Mentor Graphics Corp. (a) 37,500 193,875
Mercadolibre, Inc. (a)(b) 10,800 177,228
Mercury Computer Systems, Inc. (a) 9,356 59,036
MicroStrategy, Inc. Class A (a) 3,800 141,094
Micros Systems, Inc. (a) 33,996 554,815
11
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Moduslink Global Solutions, Inc. (a) 20,280 $ 58,609
Monotype Imaging Holdings, Inc. (a) 6,200 35,960
Ness Technologies, Inc. (a) 16,200 69,336
NetScout Systems, Inc. (a) 12,200 105,164
NetSuite, Inc. (a) 2,500 21,100
Netezza Corp. (a) 16,300 108,232
Omniture, Inc. (a) 26,202 278,789
OpenTV Corp. (a) 41,200 50,676
Opnet Technologies, Inc. (a) 5,400 53,244
PC-Tel, Inc. 8,600 56,502
PROS Holdings, Inc. (a) 5,300 30,475
Parametric Technology Corp. (a) 48,360 611,754
Pegasystems, Inc. 5,200 64,272
Progress Software Corp. (a) 17,108 329,500
QAD, Inc. 3,400 14,246
Quest Software, Inc. (a) 30,500 383,995
Rackspace Hosting, Inc. (a) 5,700 30,666
RealNetworks, Inc. (a) 37,400 132,022
RightNow Technologies, Inc. (a) 11,500 88,895
SAVVIS, Inc. (a) 15,480 106,657
SPSS, Inc. (a) 7,589 204,599
SRA International, Inc. Class A (a) 17,600 303,600
SYKES Enterprises, Inc. (a) 13,961 266,934
SYNNEX Corp. (a) 7,200 81,576
Sapient Corp. (a) 36,292 161,136
Sigma Designs, Inc. (a)(b) 11,400 108,300
Smith Micro Software, Inc. (a) 12,600 70,056
Solera Holdings, Inc. (a) 21,700 522,970
SonicWALL, Inc. (a) 23,741 94,489
Sourcefire, Inc. (a) 8,700 48,720
Stanley, Inc. (a) 3,600 130,392
SuccessFactors, Inc. (a) 9,400 53,956
SupportSoft, Inc. (a) 19,000 42,370
Sybase, Inc. (a) 33,300 824,841
Synchronoss Technologies, Inc. (a) 9,100 97,006
Syntel, Inc. 5,283 122,143
Taleo Corp. Class A (a) 11,000 86,130
TechTarget, Inc. (a) 5,700 24,624
TeleCommunication Systems, Inc. Class A (a) 14,400 123,696
Tyler Technologies, Inc. (a) 16,200 194,076
Ultimate Software Group, Inc. (a) 10,400 151,840
Unica Corp. (a) 4,600 25,208
VASCO Data Security International, Inc. (a) 11,100 114,663
VeriFone Holdings, Inc. (a) 28,900 141,610
Vignette Corp. (a) 10,580 99,558
Virtusa Corp. (a) 3,600 20,304
12
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Web.Com Group, Inc. (a) 11,400 $ 41,724
Websense, Inc. (a) 19,102 285,957
Wind River Systems, Inc. (a) 29,300 264,579
Zoran Corp. (a) 21,408 146,217
---------------
17,592,707
---------------
COMPUTER TECHNOLOGY - 0.9% Adaptec, Inc. (a) 49,900 164,670
Advanced Analogic Technologies, Inc. (a) 18,900 57,078
Cray, Inc. (a) 15,300 31,824
Data Domain, Inc. (a)(b) 14,000 263,200
Emulex Corp. (a) 34,300 239,414
FalconStor Software, Inc. (a) 15,809 43,949
Hutchinson Technology, Inc. (a) 10,717 37,295
Imation Corp. 11,700 158,769
Immersion Corp. (a) 13,200 77,748
Intermec, Inc. (a) 25,409 337,432
Isilon Systems, Inc. (a) 11,400 37,506
NCI, Inc. Class A (a) 2,800 84,364
Palm, Inc. (a)(b) 45,688 140,262
Perot Systems Corp. Class A (a) 35,700 488,019
Phoenix Technologies Ltd. (a) 11,400 39,900
Quantum Corp. (a) 84,800 30,528
Rackable Systems, Inc. (a)(b) 13,100 51,614
Radiant Systems, Inc. (a) 11,400 38,418
Radisys Corp. (a) 9,742 53,873
Rimage Corp. (a) 4,600 61,686
Riverbed Technology, Inc. (a) 23,700 269,943
STEC, Inc. (a) 13,200 56,232
Safeguard Scientifics, Inc. (a) 45,100 31,119
Stratasys, Inc. (a) 8,900 95,675
Synaptics, Inc. (a)(b) 14,400 238,464
Trident Microsystems, Inc. (a) 26,900 50,841
---------------
3,179,823
---------------
CONSTRUCTION - 0.6% Brookfield Homes Corp. 3,851 16,636
EMCOR Group, Inc. (a) 28,472 638,627
Granite Construction, Inc. 13,871 609,353
Great Lakes Dredge & Dock Corp. 16,400 68,060
Perini Corp. (a) 21,100 493,318
Sterling Construction Co., Inc. (a) 5,000 92,700
---------------
1,918,694
---------------
CONSUMER ELECTRONICS - 0.5% DTS, Inc. (a) 7,600 139,460
EarthLink, Inc. (a) 46,000 310,960
InfoSpace, Inc. 14,200 107,210
Internap Network Services Corp. (a) 20,790 51,975
Midway Games, Inc. (a)(b) 7,774 1,477
NIC, Inc. 16,500 75,900
NetFlix, Inc. (a)(b) 17,000 508,130
13
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
ParkerVision, Inc. (a)(b) 9,500 $ 23,465
Protection One, Inc. (a) 1,200 5,736
THQ, Inc. (a) 27,937 117,056
Take-Two Interactive Software, Inc. (a) 32,100 242,676
United Online, Inc. 32,128 195,017
Universal Electronics, Inc. (a) 6,086 98,715
---------------
1,877,777
---------------
CONSUMER PRODUCTS - 0.5% American Greetings Corp. Class A 19,800 149,886
Blyth, Inc. 10,100 79,184
CSS Industries, Inc. 3,191 56,608
Citi Trends, Inc. (a) 6,100 89,792
Mannatech, Inc. (b) 7,600 18,620
Matthews International Corp. Class A 12,873 472,182
Nautilus, Inc. (a) 9,363 20,692
RC2 Corp. (a) 7,513 80,164
Smith & Wesson Holding Corp. (a) 17,000 38,590
Tupperware Corp. 25,974 589,610
USANA Health Sciences, Inc. (a)(b) 3,000 102,720
---------------
1,698,048
---------------
CONTAINERS & PACKAGING: Bway Holding Co. (a) 3,500 27,860
METALS & GLASS - 0.2% Mobile Mini, Inc. (a) 14,342 206,812
Silgan Holdings, Inc. 10,400 497,224
---------------
731,896
---------------
CONTAINERS & PACKAGING: AEP Industries, Inc. (a) 2,500 43,950
PAPER & PLASTIC - 0.1% Graphic Packaging Holding Co. (a) 59,600 67,944
Myers Industries, Inc. 11,652 93,216
---------------
205,110
---------------
COSMETICS - 0.2% Elizabeth Arden, Inc. (a) 10,293 129,795
Helen of Troy Ltd. (a) 12,500 217,000
Inter Parfums, Inc. 5,850 44,928
Nu Skin Enterprises, Inc. Class A 20,426 213,043
Ulta Salon Cosmetics & Fragrance, Inc. (a) 8,400 69,552
---------------
674,318
---------------
DIVERSIFIED FINANCIAL BGC Partners, Inc. 12,023 33,183
SERVICES - 0.7% Broadpoint Securities Group, Inc. (a) 9,100 27,027
Cardtronics, Inc. (a) 3,800 4,902
China Direct, Inc. (a) 2,600 3,770
Doral Financial Corp. (a) 2,200 16,500
Duff & Phelps Corp. (a) 4,600 87,952
Euronet Worldwide, Inc. (a) 19,950 231,620
Evercore Partners, Inc. Class A 4,400 54,956
F.N.B. Corp. 36,097 476,480
FCStone Group, Inc. (a) 10,300 45,629
Greenhill & Co., Inc. (b) 7,300 509,321
Huron Consulting Group, Inc. (a) 8,700 498,249
Interactive Brokers Group, Inc. Class A (a) 17,100 305,919
14
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Oritani Financial Corp. (a) 4,900 $ 82,565
---------------
2,378,073
---------------
DIVERSIFIED MATERIALS & Acuity Brands, Inc. (c) 17,060 595,565
PROCESSING - 1.0% Barnes Group, Inc. 19,714 285,853
Brady Corp. 20,994 502,806
Clarcor, Inc. 20,810 690,476
Hexcel Corp. (a) 39,662 293,102
Koppers Holdings, Inc. 8,600 185,932
Olin Corp. 31,314 566,157
Tredegar Corp. 9,945 180,800
---------------
3,300,691
---------------
DRUG & GROCERY STORE Arden Group, Inc. Class A 432 54,432
CHAINS - 0.7% Casey's General Stores, Inc. 21,407 487,437
The Great Atlantic & Pacific Tea Co., Inc. (a) 15,127 94,846
Ingles Markets, Inc. Class A 5,164 90,835
Nash Finch Co. 5,377 241,374
Ruddick Corp. 17,369 480,253
Spartan Stores, Inc. 9,300 216,225
Susser Holdings Corp. (a) 3,200 42,528
Village Super Market, Inc. Class A 1,100 63,129
Weis Markets, Inc. 4,600 154,698
Winn-Dixie Stores, Inc. (a) 22,300 359,030
---------------
2,284,787
---------------
DRUGS & PHARMACEUTICALS - 2.7% Acura Pharmaceuticals, Inc. (a) 3,400 24,956
Adolor Corp. (a) 19,900 33,034
Affymax, Inc. (a) 4,300 42,957
Akorn, Inc. (a) 23,300 53,590
Alexza Pharmaceuticals, Inc. (a) 9,700 30,749
Alkermes, Inc. (a) 40,200 428,130
Ardea Biosciences, Inc. (a) 4,500 53,865
Auxilium Pharmaceuticals, Inc. (a)(b) 17,300 492,012
BMP Sunstone Corp. (a)(b) 9,600 53,472
BioForm Medical, Inc. (a) 9,000 8,190
CV Therapeutics, Inc. (a) 25,700 236,697
Cadence Pharmaceuticals, Inc. (a) 8,400 60,732
Caraco Pharmaceutical Laboratories Ltd. (a) 3,700 21,904
Chattem, Inc. (a)(b) 7,200 515,016
China Sky One Medical, Inc. (a)(b) 3,200 51,168
Columbia Laboratories, Inc. (a) 19,300 24,511
Dendreon Corp. (a)(b) 39,500 180,910
Depomed, Inc. (a) 20,200 33,330
Durect Corp. (a) 31,300 106,107
Emergent Biosolutions, Inc. (a) 5,800 151,438
Enzo Biochem, Inc. (a) 13,295 65,013
GTx, Inc. (a)(b) 7,700 129,668
15
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
ImmunoGen, Inc. (a) 18,800 $ 80,652
Indevus Pharmaceuticals, Inc. (a) 28,900 90,746
Inspire Pharmaceuticals, Inc. (a) 17,300 62,280
Isis Pharmaceuticals, Inc. (a)(b) 37,889 537,266
Javelin Pharmaceuticals, Inc. (a) 20,200 25,250
Jazz Pharmaceuticals, Inc. (a)(b) 3,100 5,983
K-V Pharmaceutical Co. Class A (a) 13,100 37,728
Ligand Pharmaceuticals, Inc. Class B (a) 42,800 117,272
MAP Pharmaceuticals, Inc. (a) 2,200 15,356
Medarex, Inc. (a) 53,800 300,204
Medicines Co. (a) 21,727 320,039
Medicis Pharmaceutical Corp. Class A 23,800 330,820
MiddleBrook Pharmaceuticals, Inc. (a)(b) 14,700 22,050
Molecular Insight Pharmaceuticals, Inc. (a) 7,700 33,110
Nektar Therapeutics (a) 39,300 218,508
Novavax, Inc. (a) 21,400 40,446
Noven Pharmaceuticals, Inc. (a) 10,531 115,841
Obagi Medical Products, Inc. (a) 7,300 54,458
Onyx Pharmaceuticals, Inc. (a) 23,320 796,611
Optimer Pharmaceuticals, Inc. (a)(b) 11,000 133,210
Pain Therapeutics, Inc. (a) 14,600 86,432
Par Pharmaceutical Cos., Inc. (a) 14,600 195,786
Pharmasset, Inc. (a) 7,100 93,081
Pozen, Inc. (a) 11,100 55,944
Questcor Pharmaceuticals, Inc. (a) 22,100 205,751
Quidel Corp. (a) 12,000 156,840
Regeneron Pharmaceuticals, Inc. (a) 25,619 470,365
Salix Pharmaceuticals Ltd. (a) 20,300 179,249
Theravance, Inc. (a) 21,800 270,102
United Therapeutics Corp. (a) 9,446 590,847
Valeant Pharmaceuticals International (a)(b) 26,700 611,430
Vivus, Inc. (a) 29,400 156,408
Xenoport, Inc. (a) 10,600 265,848
---------------
9,473,362
---------------
EDUCATION SERVICES - 0.5% American Public Education, Inc. (a) 4,700 174,793
Capella Education Co. (a) 6,000 352,560
Corinthian Colleges, Inc. (a) 35,800 586,046
Grand Canyon Education, Inc. (a) 3,400 63,852
K12, Inc. (a) 2,300 43,125
Learning Tree International, Inc. (a) 3,700 31,524
Lincoln Educational Services Corp. (a) 900 11,925
The Princeton Review, Inc. (a) 5,500 27,115
Renaissance Learning, Inc. 3,049 27,411
Thinkorswim Group, Inc. (a) 21,540 121,055
Universal Technical Institute, Inc. (a) 9,100 156,247
---------------
1,595,653
---------------
16
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
ELECTRICAL & ELECTRONICS - 0.4% Benchmark Electronics, Inc. (a) 27,629 $ 352,822
Coleman Cable, Inc. (a) 3,800 17,214
OSI Systems, Inc. (a) 6,500 90,025
Plexus Corp. (a) 16,998 288,116
Power Integrations, Inc. 12,900 256,452
TTM Technologies, Inc. (a) 18,100 94,301
Universal Display Corp. (a) 12,307 116,301
---------------
1,215,231
---------------
ELECTRICAL EQUIPMENT & A.O. Smith Corp. 8,281 244,455
COMPONENTS - 0.9% AZZ Inc. (a)(c) 5,200 130,520
American Superconductor Corp. (a)(b) 17,700 288,687
Axsys Technologies, Inc. (a) 3,700 202,982
Baldor Electric Co. 19,001 339,168
Beacon Power Corp. (a)(b) 36,500 19,345
CTS Corp. 13,868 76,413
Cohu, Inc. 9,518 115,644
Franklin Electric Co., Inc. 9,460 265,921
Fushi Copperweld, Inc. (a) 6,000 31,620
GrafTech International Ltd. (a) 50,144 417,198
Littelfuse, Inc. (a) 8,960 148,736
MKS Instruments, Inc. (a) 20,600 304,674
Orion Energy Systems, Inc. (a) 2,600 14,066
Powell Industries, Inc. (a) 3,231 93,764
Power-One, Inc. (a) 35,400 42,126
Sonic Solutions, Inc. (a) 9,200 16,192
Taser International, Inc. (a) 26,600 140,448
Technitrol, Inc. 16,861 58,676
Triumph Group, Inc. 6,779 287,836
---------------
3,238,471
---------------
ELECTRICAL: National Presto Industries, Inc. 1,950 150,150
HOUSEHOLD APPLIANCE - 0.1% Rex Stores Corp. (a) 4,400 35,508
---------------
185,658
---------------
ELECTRONICS - 0.4% Agilysys, Inc. 9,863 42,312
Avid Technology, Inc. (a) 12,700 138,557
Daktronics, Inc. 13,498 126,341
II-VI, Inc. (a) 10,072 192,274
Kopin Corp. (a) 28,400 57,936
MRV Communications, Inc. (a) 60,666 46,713
Methode Electronics, Inc. 15,680 105,683
Multi-Fineline Electronix, Inc. (a) 3,600 42,084
Newport Corp. (a) 14,835 100,581
Park Electrochemical Corp. 8,449 160,193
Sanmina-SCI Corp. (a) 219,200 103,024
Semtech Corp. (a) 26,100 294,147
Supertex, Inc. (a) 4,767 114,456
---------------
1,524,301
---------------
17
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
ELECTRONICS: INSTRUMENTS, GAUGES Faro Technologies, Inc. (a) 7,100 $ 119,706
& METERS - 0.1% Measurement Specialties, Inc. (a) 6,000 41,700
OYO Geospace Corp. (a) 1,700 29,699
Zygo Corp. (a) 6,300 43,533
---------------
234,638
---------------
ELECTRONICS: Accuray, Inc. (a) 14,900 76,884
MEDICAL SYSTEMS - 1.1% Affymetrix, Inc. (a) 29,500 88,205
Analogic Corp. 5,572 152,004
Bruker BioSciences Corp. (a) 20,887 84,383
Cynosure, Inc. Class A (a) 4,300 39,259
Datascope Corp. 5,470 285,753
eResearch Technology, Inc. (a) 18,450 122,324
Greatbatch, Inc. (a) 9,700 256,662
Haemonetics Corp. (a) 10,772 608,618
Luminex Corp. (a) 16,751 357,801
Masimo Corp. (a) 19,300 575,719
Natus Medical, Inc. (a) 11,600 150,220
NxStage Medical, Inc. (a) 9,700 25,899
Quality Systems, Inc. (b) 7,400 322,788
Sirona Dental Systems, Inc. (a) 7,000 73,500
Somanetics Corp. (a) 5,200 85,852
Tomotherapy, Inc. (a) 17,700 42,126
Varian, Inc. (a) 11,935 399,942
Zoll Medical Corp. (a) 8,922 168,537
---------------
3,916,476
---------------
ELECTRONICS: OTHER - 0.0% ICx Technologies, Inc. (a) 5,700 45,087
ELECTRONICS: SEMI- Actel Corp. (a) 10,816 126,764
CONDUCTORS/COMPONENTS - 1.4% Advanced Battery Technologies, Inc. (a) 17,400 46,284
Amkor Technology, Inc. (a) 45,000 98,100
Anadigics, Inc. (a) 27,100 40,108
Applied Micro Circuits Corp. (a) 27,800 109,254
AuthenTec, Inc. (a) 11,800 19,706
Bookham, Inc. (a) 41,500 18,675
Cavium Networks, Inc. (a)(b) 12,800 134,528
Ceva, Inc. (a) 8,300 58,100
Cirrus Logic, Inc. (a) 27,500 73,700
DSP Group, Inc. (a) 10,083 80,866
Diodes, Inc. (a) 12,512 75,823
Entropic Communications, Inc. (a) 700 350
Exar Corp. (a) 15,427 102,898
Formfactor, Inc. (a) 20,200 294,920
Hittite Microwave Corp. (a) 8,300 244,518
IPG Photonics Corp. (a) 7,900 104,122
IXYS Corp. 9,993 82,542
Lattice Semiconductor Corp. (a) 49,200 74,292
MIPS Technologies, Inc. (a) 18,200 20,202
18
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Micrel, Inc. 20,500 $ 149,855
Microsemi Corp. (a) 33,190 419,522
Microtune, Inc. (a) 21,100 43,044
Monolithic Power Systems, Inc. (a) 11,100 139,971
NVE Corp. (a) 2,000 52,260
Netlogic Microsystems, Inc. (a) 7,300 160,673
Omnivision Technologies, Inc. (a) 21,500 112,875
PLX Technology, Inc. (a) 11,600 19,952
PMC-Sierra, Inc. (a) 91,600 445,176
Pericom Semiconductor Corp. (a) 9,093 49,830
RF Micro Devices, Inc. (a) 110,384 86,100
Rubicon Technology, Inc. (a) 5,500 23,430
SiRF Technology Holdings, Inc. (a) 25,100 32,128
Silicon Image, Inc. (a) 31,176 130,939
Silicon Storage Technology, Inc. (a) 34,458 78,909
Skyworks Solutions, Inc. (a) 68,633 380,227
Spansion LLC Class A (a) 52,600 9,957
Techwell, Inc. (a) 6,300 40,950
Tessera Technologies, Inc. (a) 20,000 237,600
Transmeta Corp. (a) 5,200 94,640
TriQuint Semiconductor, Inc. (a) 59,436 204,460
Volterra Semiconductor Corp. (a) 10,800 77,220
---------------
4,795,470
---------------
ELECTRONICS: TECHNOLOGY - 0.5% 3D Systems Corp. (a) 7,400 58,756
American Science & Engineering, Inc. 3,800 281,048
Checkpoint Systems, Inc. (a) 16,423 161,602
China Security & Surveillance Technology, Inc.
(a)(b) 11,100 49,173
Cogent, Inc. (a) 17,400 236,118
Coherent, Inc. (a) 9,800 210,308
Cubic Corp. 6,452 175,494
Gerber Scientific, Inc. (a) 9,800 50,078
Herley Industries, Inc. (a) 5,600 68,768
ION Geophysical Corp. (a) 37,946 130,155
Kemet Corp. (a) 34,600 9,342
LaBarge, Inc. (a) 5,000 71,750
Maxwell Technologies, Inc. (a) 7,500 38,025
ScanSource, Inc. (a) 10,900 210,043
Smart Modular Technologies WWH, Inc. (a) 18,200 28,028
Super Micro Computer, Inc. (a) 9,100 57,603
---------------
1,836,291
---------------
ENERGY EQUIPMENT - 0.0% Capstone Turbine Corp. (a) 62,600 52,584
GT Solar International, Inc. (a) 10,900 31,501
Plug Power, Inc. (a) 33,000 33,660
PowerSecure International, Inc. (a) 7,000 23,030
---------------
140,775
---------------
19
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
ENERGY MISCELLANEOUS - 0.7% Akeena Solar, Inc. (a)(b) 8,600 $ 14,792
Alon USA Energy, Inc. (b) 4,500 41,175
Approach Resources, Inc. (a) 3,500 25,585
Aventine Renewable Energy Holdings, Inc. (a) 12,140 7,891
CVR Energy, Inc. (a) 9,500 38,000
Clean Energy Fuels Corp. (a)(b) 10,700 64,628
Concho Resources, Inc. (a) 22,700 518,014
Crosstex Energy, Inc. (b) 16,600 64,740
Dawson Geophysical Co. (a) 3,400 60,554
EnerNOC, Inc. (a) 4,400 32,736
Evergreen Energy, Inc. (a)(b) 36,900 10,701
Evergreen Solar, Inc. (a)(b) 60,500 192,995
FuelCell Energy, Inc. (a)(b) 29,426 114,173
GeoMet, Inc. (a) 6,300 10,836
GreenHunter Energy, Inc. (a)(b) 1,800 8,856
Matrix Service Co. (a) 10,700 82,069
Ormat Technologies, Inc. 7,400 235,838
Pacific Ethanol, Inc. (a) 17,300 7,612
Penn Virginia Corp. 17,416 452,468
Rentech, Inc. (a)(b) 68,400 46,512
Teekay Tankers Ltd. Class A 5,900 74,930
US Geothermal, Inc. (a) 25,500 21,165
USEC, Inc. (a)(b) 45,959 206,356
---------------
2,332,626
---------------
ENGINEERING & CONTRACTING Clean Harbors, Inc. (a) 8,300 526,552
SERVICES - 0.4% Dycom Industries, Inc. (a) 16,902 138,934
ENGlobal Corp. (a) 11,200 36,400
Furmamite Corp. (a) 15,000 80,850
Hill International, Inc. (a) 9,700 68,288
Integrated Electrical Services, Inc. (a) 3,200 28,032
Layne Christensen Co. (a) 8,100 194,481
Michael Baker Corp. (a) 3,100 114,421
VSE Corp. 1,700 66,691
---------------
1,254,649
---------------
ENTERTAINMENT - 0.2% Cinemark Holdings, Inc. 12,200 90,646
Dover Motorsports, Inc. 8,800 11,440
Gaylord Entertainment Co. (a)(b) 16,855 182,708
Live Nation, Inc. (a) 31,300 179,662
Speedway Motorsports, Inc. 5,255 84,658
---------------
549,114
---------------
FINANCE COMPANIES - 0.1% Credit Acceptance Corp. (a) 2,169 29,715
MVC Capital, Inc. 10,000 109,700
NewStar Financial, Inc. (a) 8,500 33,915
Riskmetrics Group, Inc. (a) 8,900 132,521
World Acceptance Corp. (a) 7,000 138,320
---------------
444,171
---------------
20
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
FINANCE: SMALL LOAN - 0.1% Advance America, Cash Advance Centers, Inc. 18,300 $ 34,587
Dollar Financial Corp. (a) 10,400 107,120
Encore Capital Group, Inc. (a) 5,700 41,040
The First Marblehead Corp. (a) 28,500 36,765
Nelnet, Inc. Class A 6,700 96,011
---------------
315,523
---------------
FINANCIAL DATA PROCESSING Advent Software, Inc. (a)(b) 7,100 141,787
SERVICES & SYSTEMS - 0.7% Cass Information Systems, Inc. 2,515 76,607
CompuCredit Corp. (a)(b) 7,189 39,755
CyberSource Corp. (a) 29,064 348,477
Deluxe Corp. 21,300 318,648
ExlService Holdings, Inc. (a) 5,900 50,563
Fair Isaac Corp. 20,100 338,886
Heartland Payment Systems, Inc. (b) 10,300 180,250
Hypercom Corp. (a) 22,100 23,868
Jack Henry & Associates, Inc. 31,300 607,533
Online Resources Corp. (a) 11,900 56,406
TNS, Inc. (a) 10,100 94,839
TradeStation Group, Inc. (a) 13,300 85,785
Wright Express Corp. (a) 16,000 201,600
---------------
2,565,004
---------------
FINANCIAL INFORMATION Bankrate, Inc. (a)(b) 5,400 205,200
SERVICES - 0.2% Interactive Data Corp. 15,100 372,366
Move, Inc. (a) 52,900 84,640
S1 Corp. (a) 20,422 161,130
TheStreet.com, Inc. 7,500 21,750
Value Line, Inc. 300 10,356
---------------
855,442
---------------
FINANCIAL MISCELLANEOUS - 0.7% AMBAC Financial Group, Inc. (b) 121,500 157,950
Advanta Corp. Class B 15,850 33,126
Asset Acceptance Capital Corp. (a)(b) 6,200 31,682
Cash America International, Inc. 12,319 336,925
Federal Agricultural Mortgage Corp. Class B 4,500 15,750
Financial Federal Corp. 10,800 251,316
First Cash Financial Services, Inc. (a) 8,400 160,104
Global Cash Access, Inc. (a) 16,600 36,852
Harris & Harris Group, Inc. (a) 9,600 37,920
Medallion Financial Corp. 6,100 46,543
Portfolio Recovery Associates, Inc. (a)(b) 6,400 216,576
Radian Group, Inc. 34,000 125,120
Sanders Morris Harris Group, Inc. 6,700 40,133
Sterling Bancorp 7,516 105,449
Stewart Information Services Corp. 7,222 169,645
Stifel Financial Corp. (a) 10,749 492,842
WSFS Financial Corp. 2,591 124,342
Waterstone Financial, Inc. (a) 2,700 9,045
---------------
2,391,320
---------------
21
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
FOODS - 1.9% American Dairy, Inc. (a) 2,300 $ 34,592
B&G Foods, Inc. Class A 8,300 44,820
Cal-Maine Foods, Inc. (b) 5,500 157,850
Chiquita Brands International, Inc. (a) 18,300 270,474
Diamond Foods, Inc. 6,800 137,020
Flowers Foods, Inc. 32,476 791,115
Fresh Del Monte Produce, Inc. (a) 17,300 387,866
Hain Celestial Group, Inc. (a) 17,057 325,618
J&J Snack Foods Corp. 5,800 208,104
Lance, Inc. 11,400 261,516
Lifeway Foods, Inc. (a) 1,900 17,062
M&F Worldwide Corp. (a) 5,100 78,795
Maui Land & Pineapple Co., Inc. (a) 1,963 26,363
Omega Protein Corp. (a) 8,000 32,080
Ralcorp Holdings, Inc. (a) 23,595 1,377,948
Sanderson Farms, Inc. 8,550 295,488
Schiff Nutrition International, Inc. (a) 5,700 34,029
Seaboard Corp. 142 169,548
Sensient Technologies Corp. 20,157 481,349
Smart Balance, Inc. (a) 26,600 180,880
Synutra International, Inc. (a) 4,300 47,386
Tootsie Roll Industries, Inc. (b) 9,835 251,874
TreeHouse Foods, Inc. (a) 13,200 359,568
United Natural Foods, Inc. (a) 18,080 322,186
Zhongpin, Inc. (a) 7,600 91,200
---------------
6,384,731
---------------
FOREST PRODUCTS - 0.1% Deltic Timber Corp. 4,309 197,137
Louisiana-Pacific Corp. 42,700 66,612
Universal Forest Products, Inc. 7,034 189,285
---------------
453,034
---------------
FORMS & BULK PRINTING Ennis, Inc. 10,600 128,366
SERVICES - 0.1% Innerworkings, Inc. (a)(b) 13,100 85,805
The Standard Register Co. 6,145 54,875
---------------
269,046
---------------
FUNERAL PARLORS &
CEMETERIES - 0.0% Stewart Enterprises, Inc. Class A 34,524 103,917
---------------
GLASS - 0.0% Apogee Enterprises, Inc. 12,300 127,428
---------------
GOLD - 0.3% Allied Nevada Gold Corp. (a) 18,600 94,116
Coeur d'Alene Mines Corp. (a)(b) 227,500 200,200
Royal Gold, Inc. 12,300 605,283
---------------
899,599
---------------
HEALTH CARE FACILITIES - 0.5% Assisted Living Concepts, Inc. (a) 22,700 94,205
Capital Senior Living Corp. (a) 9,200 27,416
Emeritus Corp. (a) 8,500 85,255
The Ensign Group, Inc. 3,400 56,916
Five Star Quality Care, Inc. (a) 16,300 24,939
22
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
IPC The Hospitalist Co., Inc. (a) 2,000 $ 33,660
Kindred Healthcare, Inc. (a) 11,590 150,902
MedCath Corp. (a) 6,600 68,904
National Healthcare Corp. 3,500 177,240
Psychiatric Solutions, Inc. (a) 23,300 648,905
Res-Care, Inc. (a) 10,200 153,204
Skilled Healthcare Group, Inc. Class A (a) 7,200 60,768
Sun Healthcare Group, Inc. (a) 18,100 160,185
Sunrise Senior Living, Inc. (a) 20,574 34,564
---------------
1,777,063
---------------
HEALTH CARE MANAGEMENT AMERIGROUP Corp. (a) 22,500 664,200
SERVICES - 1.3% Amsurg Corp. (a) 13,000 303,420
athenahealth, Inc. (a) 8,700 327,294
Catalyst Health Solutions, Inc. (a) 13,800 336,030
Centene Corp. (a) 18,000 354,780
Computer Programs & Systems, Inc. 4,000 107,200
Corvel Corp. (a) 3,285 72,204
Eclipsys Corp. (a) 21,931 311,201
HMS Holdings Corp. (a) 10,500 330,960
HealthSpring, Inc. (a) 20,800 415,376
Inter Allscripts - Misys Healthcare Solutions, Inc. 59,941 594,615
Molina Healthcare, Inc. (a) 6,000 105,660
National Research Corp. 600 17,376
Omnicell, Inc. (a) 13,600 166,056
Phase Forward, Inc. (a) 17,700 221,604
Triple-S Management Corp. (a) 5,500 63,250
Vital Images, Inc. (a) 7,100 98,761
---------------
4,489,987
---------------
HEALTH CARE SERVICES - 0.8% Alliance Imaging, Inc. (a) 10,500 83,685
Amedisys, Inc. (a) 11,166 461,602
Bio-Reference Labs, Inc. (a) 4,900 128,527
CardioNet, Inc. (a) 1,900 46,835
Emergency Medical Services Corp. (a) 4,000 146,440
Gentiva Health Services, Inc. (a) 10,712 313,433
HealthSouth Corp. (a) 36,800 403,328
Healthcare Services Group, Inc. 17,737 282,550
Healthways, Inc. (a) 14,900 171,052
LHC Group, Inc. (a) 6,200 223,200
Nighthawk Radiology Holdings, Inc. (a) 10,300 50,058
Odyssey HealthCare, Inc. (a) 13,900 128,575
PharMerica Corp. (a) 12,869 201,657
Virtual Radiologic Corp. (a) 3,100 26,288
---------------
2,667,230
---------------
HOMEBUILDING - 0.2% Beazer Homes USA, Inc. (a)(b) 17,000 26,860
Hovnanian Enterprises, Inc. Class A (a)(b) 19,800 34,056
M/I Homes, Inc. 6,100 64,294
23
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Meritage Homes Corp. (a) 13,100 $ 159,427
Ryland Group, Inc. 17,900 316,293
Standard-Pacific Corp. (a) 46,600 82,948
---------------
683,878
---------------
HOTEL/MOTEL - 0.1% Lodgian, Inc. (a) 6,700 14,271
Marcus Corp. 8,379 135,991
Morgans Hotel Group Co. (a) 11,100 51,726
---------------
201,988
---------------
HOUSEHOLD FURNISHINGS - 0.2% American Woodmark Corp. 4,400 80,212
Ethan Allen Interiors, Inc. 10,400 149,448
Furniture Brands International, Inc. 17,600 38,896
Haverty Furniture Cos., Inc. 7,736 72,177
hhgregg, Inc. (a) 4,200 36,456
Hooker Furniture Corp. 4,100 31,406
La-Z-Boy, Inc. 21,200 46,004
Libbey, Inc. 6,700 8,375
Sealy Corp. (b) 17,900 44,929
Tempur-Pedic International, Inc. (b) 31,600 224,044
---------------
731,947
---------------
IDENTIFICATION CONTROL & FILTER Advanced Energy Industries, Inc. (a) 13,912 138,424
DEVICES - 0.7% Asyst Technologies, Inc. (a) 20,541 5,135
Badger Meter, Inc. 6,200 179,924
ESCO Technologies, Inc. (a) 10,932 447,665
Energy Recovery, Inc. (a) 5,000 37,900
Flanders Corp. (a) 6,600 30,954
The Gorman-Rupp Co. 5,897 183,515
L-1 Identity Solutions, Inc. (a) 28,628 192,953
Mine Safety Appliances Co. 12,826 306,670
PMFG, Inc. (a) 5,400 51,624
Robbins & Myers, Inc. 11,624 187,960
Sun Hydraulics, Inc. 4,950 93,258
Veeco Instruments, Inc. (a) 13,727 87,029
Vicor Corp. 7,996 52,854
Watts Water Technologies, Inc. Class A 12,236 305,533
---------------
2,301,398
---------------
INDUSTRIAL PRODUCTS - 0.0% A.M. Castle & Co. 6,800 73,644
TAL International Group, Inc. 6,000 84,600
---------------
158,244
---------------
INSURANCE: LIFE - 0.4% American Equity Investment Life Holding Co. 22,600 158,200
Citizens, Inc. (a) 15,400 149,380
Delphi Financial Group, Inc. Class A 17,105 315,416
Kansas City Life Insurance Co. 1,642 71,181
Life Partners Holdings, Inc. (b) 2,500 109,100
National Western Life Insurance Co. Class A 933 157,836
The Phoenix Cos., Inc. 47,300 154,671
Presidential Life Corp. 8,993 88,941
24
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Universal American Financial Corp. (a) 16,200 $ 142,884
---------------
1,347,609
---------------
INSURANCE: MULTI-LINE - 1.1% Assured Guaranty Ltd. 23,000 262,200
CNA Surety Corp. (a) 6,386 122,611
Crawford & Co. Class B (a) 10,009 145,531
EMC Insurance Group, Inc. 2,200 56,430
eHealth, Inc. (a) 10,600 140,768
FBL Financial Group, Inc. Class A 5,325 82,271
Flagstone Reinsurance Holdings Ltd. 12,400 121,148
Horace Mann Educators Corp. 16,768 154,098
Independence Holding Co. 1,440 5,198
Maiden Holdings Ltd. 20,300 63,539
Max Capital Group Ltd. 23,300 412,410
Meadowbrook Insurance Group, Inc. 22,752 146,523
Montpelier Re Holdings Ltd. 39,100 656,489
Pico Holdings, Inc. (a) 6,697 178,006
Platinum Underwriters Holdings Ltd. 20,600 743,248
Primus Guaranty Ltd. (a)(b) 12,700 14,478
Zenith National Insurance Corp. 15,355 484,757
---------------
3,789,705
---------------
INSURANCE: AmTrust Financial Services, Inc. 6,500 75,400
PROPERTY-CASUALTY - 2.5% American Physicians Capital, Inc. 3,556 171,044
American Safety Insurance Holdings Ltd. (a) 4,400 58,124
Amerisafe, Inc. (a) 8,000 164,240
Argo Group International Holdings Ltd. (a) 12,779 433,464
Aspen Insurance Holdings Ltd. 35,800 868,150
Baldwin & Lyons, Inc. Class B 3,432 62,428
CastlePoint Holdings, Ltd. 13,800 187,128
Donegal Group, Inc. Class A 4,544 76,203
Employers Holdings, Inc. 20,380 336,270
Enstar Group Ltd. (a) 2,200 130,108
FPIC Insurance Group, Inc. (a)(b) 3,600 157,608
First Acceptance Corp. (a) 3,777 10,953
First Mercury Financial Corp. (a) 6,300 89,838
Greenlight Capital Re Ltd. (a) 11,900 154,581
Hallmark Financial Services, Inc. (a) 2,400 21,048
Harleysville Group, Inc. 5,362 186,222
IPC Holdings, Ltd. 19,800 592,020
Infinity Property & Casualty Corp. 6,200 289,726
NYMAGIC, Inc. 1,800 34,290
National Interstate Corp. 2,500 44,675
Navigators Group, Inc. (a) 5,600 307,496
Odyssey Re Holdings Corp. 9,400 487,014
PMA Capital Corp. Class A (a) 13,106 92,790
The PMI Group, Inc. 34,900 68,055
ProAssurance Corp. (a) 13,523 713,744
25
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
RLI Corp. 7,854 $ 480,351
Safety Insurance Group, Inc. 6,700 255,002
SeaBright Insurance Holdings, Inc. (a) 8,800 103,312
Selective Insurance Group, Inc. 22,008 504,643
State Auto Financial Corp. 5,612 168,697
Tower Group, Inc. 8,300 234,143
United America Indemnity, Ltd. (a) 8,300 106,323
United Fire & Casualty Co. 9,400 292,058
Validus Holdings Ltd. 26,600 695,856
---------------
8,653,004
---------------
INVESTMENT MANAGEMENT Ampal-American Israel Corp. Class A (a) 6,000 3,480
COMPANIES - 0.5% Apollo Investment Corp. (b) 58,946 548,787
Ares Capital Corp. 40,172 254,289
Calamos Asset Management, Inc. Class A 8,300 61,420
Capital Southwest Corp. 1,200 129,792
Cohen & Steers, Inc. (b) 6,900 75,831
Epoch Holding Corp. 4,800 36,432
FBR Capital Markets Corp. (a) 11,300 54,918
Fifth Street Finance Corp. 3,000 22,650
GAMCO Investors, Inc. Class A 3,296 90,047
Kohlberg Capital Corp. 7,100 25,844
MCG Capital Corp. 31,200 22,152
NGP Capital Resources Co. 8,623 72,175
National Financial Partners Corp. 14,000 42,560
Pzena Investment Management, Inc. Class A 4,100 17,302
Resource America, Inc. Class A 4,049 16,196
U.S. Global Investors, Inc. 5,200 25,428
Westwood Holdings Group Inc. 2,200 62,502
---------------
1,561,805
---------------
JEWELRY, WATCHES & Fossil, Inc. (a) 19,000 317,300
GEMSTONES - 0.1% Fuqi International, Inc. (a) 4,000 25,040
Movado Group, Inc. 6,600 61,974
---------------
404,314
---------------
LEAD & ZINC - 0.0% Horsehead Holding Corp. (a) 15,200 71,440
---------------
LEISURE TIME - 0.4% Callaway Golf Co. 27,400 254,546
Great Wolf Resorts, Inc. (a) 12,800 19,712
Life Time Fitness, Inc. (a)(b) 14,600 189,070
Pool Corp. (b) 20,100 361,197
Rick's Cabaret International, Inc. (a) 3,100 12,369
Six Flags, Inc. (a) 34,500 10,695
Steinway Musical Instruments, Inc. (a) 2,800 49,028
Town Sports International Holdings, Inc. (a) 7,200 22,968
Vail Resorts, Inc. (a)(b) 12,656 336,650
---------------
1,256,235
---------------
MACHINE TOOLS - 0.0% Hurco Companies, Inc. (a) 2,800 33,600
Thermadyne Holdings Corp. (a) 5,500 37,785
---------------
71,385
---------------
26
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
MACHINERY & ENGINEERING - 0.0% Applied Industrial Technologies, Inc. (c) 17,490 $ 330,911
---------------
MACHINERY: AGRICULTURAL - 0.1% Alamo Group, Inc. 2,600 38,870
Lindsay Manufacturing Co. (b) 5,013 159,363
Titan Machinery, Inc. (a) 3,200 44,992
---------------
243,225
---------------
MACHINERY: Astec Industries, Inc. (a) 7,617 238,641
CONSTRUCTION & HANDLING - 0.1% NACCO Industries, Inc. Class A 2,487 93,039
---------------
331,680
---------------
MACHINERY: ENGINES - 0.1% Briggs & Stratton Corp. (b) 20,800 365,872
Harbin Electric, Inc. (a)(b) 2,600 20,774
Raser Technologies, Inc. (a)(b) 18,600 69,378
---------------
456,024
---------------
MACHINERY: Actuant Corp. Class A (c) 23,500 446,970
INDUSTRIAL/SPECIALTY - 0.8% Altra Holdings, Inc. (a) 10,900 86,219
Chart Industries, Inc. (a) 12,100 128,623
Colfax Corp. (a) 8,900 92,471
Columbus McKinnon Corp. (a) 7,800 106,470
DXP Enterprises, Inc. (a) 3,200 46,752
EnPro Industries, Inc. (a) 8,500 183,090
Graham Corp. 4,400 47,608
Kadant, Inc. (a) 5,770 77,780
Middleby Corp. (a)(b) 7,000 190,890
Nordson Corp. 13,910 449,154
Tecumseh Products Co. Class A (a) 7,128 68,286
Tennant Co. 6,874 105,860
Twin Disc, Inc. 3,600 24,804
Woodward Governor Co. 24,558 565,325
---------------
2,620,302
---------------
MACHINERY: OIL WELL EQUIPMENT & Allis-Chalmers Energy, Inc. (a) 12,500 68,750
SERVICES - 0.7% Basic Energy Services, Inc. (a) 17,000 221,680
Bolt Technology Corp. (a) 3,900 27,144
CARBO Ceramics, Inc. 8,702 309,182
Cal Dive International, Inc. (a) 18,274 118,964
Complete Production Services, Inc. (a) 19,900 162,185
Dril-Quip, Inc. (a) 12,976 266,138
Flotek Industries, Inc. (a)(b) 9,400 23,688
Gulf Island Fabrication, Inc. 5,017 72,295
Hornbeck Offshore Services, Inc. (a) 9,840 160,786
Lufkin Industries, Inc. 6,200 213,900
Mitcham Industries, Inc. (a) 4,000 15,880
NATCO Group, Inc. Class A (a) 8,300 125,994
Natural Gas Services Group (a) 5,300 53,689
Newpark Resources, Inc. (a) 37,120 137,344
Parker Drilling Co. (a) 46,681 135,375
Precision Drilling Trust 1,428 11,984
RPC, Inc. 12,000 117,120
27
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Sulphco, Inc. (a)(b) 19,500 $ 18,330
Superior Well Services, Inc. (a) 7,100 71,000
T-3 Energy Services, Inc. (a) 5,300 50,032
Trico Marine Services, Inc. (a)(b) 5,600 25,032
Union Drilling, Inc. (a) 5,800 30,102
Willbros Group, Inc. (a) 16,500 139,755
---------------
2,576,349
---------------
MACHINERY: SPECIALTY - 0.1% Cascade Corp. 3,700 110,482
Flow International Corp. (a) 16,400 39,688
Key Technology Inc. (a) 2,300 43,447
Semitool, Inc. (a) 8,341 25,440
TurboChef Technologies, Inc. (a) 8,600 42,226
---------------
261,283
---------------
MANUFACTURED HOUSING - 0.1% Cavco Industries, Inc. (a) 2,700 72,603
Champion Enterprises, Inc. (a) 33,027 18,495
Palm Harbor Homes, Inc. (a)(b) 4,605 22,933
Skyline Corp. 3,001 59,990
---------------
174,021
---------------
MANUFACTURING - 0.1% Federal Signal Corp. 19,859 163,042
Standex International Corp. 5,131 101,799
---------------
264,841
---------------
MEDICAL & DENTAL INSTRUMENTS & Abaxis, Inc. (a)(c) 9,200 147,476
SUPPLIES - 3.3% Abiomed, Inc. (a)(c) 14,400 236,448
Align Technology, Inc. (a) 25,600 224,000
Alphatec Holdings, Inc. (a) 10,300 24,205
American Medical Systems Holdings, Inc. (a) 30,100 270,599
AngioDynamics, Inc. (a) 10,000 136,900
Atrion Corp. 600 58,260
Bio-Rad Laboratories, Inc. Class A (a)(c) 7,800 587,418
BioMimetic Therapeutics, Inc. (a) 5,400 49,788
CONMED Corp. (a) 11,828 283,162
Cantel Medical Corp. (a) 5,400 79,218
Cardiac Science Corp. (a) 8,000 60,000
Cepheid, Inc. (a) 24,000 249,120
Clinical Data, Inc. (a) 4,300 38,270
Conceptus, Inc. (a) 12,800 194,816
CryoLife, Inc. (a) 11,900 115,549
Cyberonics, Inc. (a) 10,069 166,843
DexCom, Inc. (a) 12,100 33,396
ev3, Inc. (a) 29,032 177,095
Exactech, Inc. (a) 3,300 55,572
Hansen Medical, Inc. (a) 7,000 50,540
I-Flow Corp. (a) 8,900 42,720
ICU Medical, Inc. (a) 4,750 157,415
IRIS International, Inc. (a) 7,600 105,944
Immucor, Inc. (a) 29,343 779,937
28
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Insulet Corp. (a) 8,000 $ 61,760
Invacare Corp. 13,522 209,861
Landauer, Inc. 3,878 284,257
Medical Action Industries, Inc. (a) 5,850 58,500
Mentor Corp. 14,244 440,567
Meridian Bioscience, Inc. 16,600 422,802
Merit Medical Systems, Inc. (a) 11,710 209,960
Micrus Endovascular Corp. (a) 6,700 77,787
Neogen Corp. (a) 6,100 152,378
NuVasive, Inc. (a) 14,900 516,285
OraSure Technologies, Inc. (a) 19,259 70,873
Orthofix International NV (a) 7,300 111,909
Orthovita, Inc. (a) 27,300 92,547
Owens & Minor, Inc. 17,298 651,270
PSS World Medical, Inc. (a) 26,073 490,694
Palomar Medical Technologies, Inc. (a) 7,900 91,087
SonoSite, Inc. (a) 7,215 137,662
Spectranetic Corp. (a) 13,900 36,279
Stereotaxis, Inc. (a)(b) 11,300 49,720
Steris Corp. 24,600 587,694
SurModics, Inc. (a)(b) 6,483 163,825
Symmetry Medical, Inc. (a) 14,700 117,159
Synovis Life Technologies, Inc. (a) 5,400 101,196
Thoratec Corp. (a) 22,847 742,299
Trans1, Inc. (a) 5,000 36,050
Vision-Sciences Inc. (a) 6,900 10,557
Volcano Corp. (a) 19,500 292,500
West Pharmaceutical Services, Inc. 13,376 505,212
Wright Medical Group, Inc. (a) 15,700 320,751
---------------
11,368,132
---------------
MEDICAL SERVICES - 0.5% Air Methods Corp. (a) 4,700 75,153
Almost Family, Inc. (a)(b) 2,700 121,446
Genoptix, Inc. (a) 3,600 122,688
Hanger Orthopedic Group, Inc. (a) 12,200 177,022
Magellan Health Services, Inc. (a) 17,000 665,720
Parexel International Corp. (a) 23,994 232,982
RadNet, Inc. (a) 8,800 29,480
RehabCare Group, Inc. (a) 7,495 113,624
US Physical Therapy, Inc. (a) 5,200 69,316
---------------
1,607,431
---------------
METAL FABRICATING - 0.9% Ampco-Pittsburgh Corp. 3,400 73,780
CIRCOR International, Inc. 6,700 184,250
Dynamic Materials Corp. 5,400 104,274
Encore Wire Corp. (b) 7,750 146,940
Gibraltar Industries, Inc. 11,334 135,328
Haynes International, Inc. (a) 5,100 125,562
29
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Insteel Industries, Inc. 7,600 $ 85,804
Kaydon Corp. 14,426 495,533
L.B. Foster Co. Class A (a) 4,600 143,888
Mueller Industries, Inc. 15,282 383,273
Mueller Water Products, Inc. Series A 48,460 407,064
NN, Inc. 6,900 15,801
Northwest Pipe Co. (a) 3,900 166,179
Omega Flex, Inc. 1,200 25,128
RBC Bearings, Inc. (a) 9,000 182,520
RTI International Metals, Inc. (a) 9,813 140,424
Trimas Corp. (a) 4,300 5,934
Worthington Industries, Inc. 27,100 298,642
---------------
3,120,324
---------------
METALS & MINERALS AMCOL International Corp. 10,673 223,599
MISCELLANEOUS - 0.5% Apex Silver Mines Ltd. (a) 24,900 24,402
Brush Engineered Materials, Inc. (a) 8,711 110,804
Compass Minerals International, Inc. (c) 13,600 797,776
General Moly, Inc. (a) 28,400 33,512
Hecla Mining Co. (a) 71,900 201,320
Minerals Technologies, Inc. 7,953 325,278
Stillwater Mining Co. (a) 16,364 80,838
United States Lime & Minerals Inc. (a) 700 16,765
Uranium Resources, Inc. (a) 19,000 14,630
---------------
1,828,924
---------------
MISCELLANEOUS BUSINESS & Core-Mark Holdings Co., Inc. (a) 3,900 83,928
CONSUMER DISCRETIONARY - 0.1% Sotheby's Holdings, Inc. Class A (b) 27,936 248,351
---------------
332,279
---------------
MISCELLANEOUS CONSUMER Reddy Ice Holdings, Inc. 7,400 10,656
---------------
STAPLES - 0.0%
MISCELLANEOUS MedAssets, Inc. (a) 6,900 100,740
---------------
HEALTH CARE - 0.0%
MISCELLANEOUS MATERIALS & Ceradyne, Inc. (a) 11,050 224,426
COMMODITIES - 0.2% Lydall, Inc. (a) 6,900 39,675
Symyx Technologies Inc. (a) 13,879 82,441
WD-40 Co. 6,789 192,061
---------------
538,603
---------------
MISCELLANEOUS MATERIALS & Insituform Technologies, Inc. Class A (a) 11,738 231,121
PROCESSING - 0.1% Rogers Corp. (a) 7,455 207,025
Xerium Technologies, Inc. (a) 6,700 4,422
---------------
442,568
---------------
MISCELLANEOUS PRODUCER Blount International, Inc. (a) 15,800 149,784
DURABLES - 0.1% Park-Ohio Holdings Corp. (a) 3,400 20,978
---------------
170,762
---------------
MISCELLANEOUS iRobot Corp. (a) 7,400 66,822
TECHNOLOGY - 0.1% Microvision, Inc. (a)(b) 23,300 39,144
TerreStar Corp. (a) 23,900 9,560
30
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Vocus, Inc. (a) 6,900 $ 125,649
---------------
241,175
---------------
MULTI-SECTOR COMPANIES - 0.3% Brunswick Corp. 37,300 157,033
Compass Diversified Holdings 9,800 110,250
GenCorp, Inc. (a) 24,471 90,053
GenTek Inc. (a) 3,500 52,675
Kaman Corp. Class A 10,494 190,256
Lancaster Colony Corp. 8,299 284,656
Raven Industries, Inc. 6,600 159,060
United Capital Corp. (a) 600 10,884
---------------
1,054,867
---------------
OFFICE FURNITURE & BUSINESS ACCO Brands Corp. (a) 22,200 76,590
EQUIPMENT - 0.3% HNI Corp. (b) 18,400 291,456
Herman Miller, Inc. 23,500 306,205
Kimball International, Inc. Class B 13,174 113,428
Knoll, Inc. 20,000 180,400
Presstek, Inc. (a) 11,400 36,594
---------------
1,004,673
---------------
OIL: CRUDE PRODUCERS - 1.8% APCO Argentina, Inc. 1,600 42,608
ATP Oil & Gas Corp. (a) 11,800 69,030
Abraxas Petroleum Corp. (a) 17,300 12,456
American Oil & Gas, Inc. (a) 15,100 12,080
Arena Resources, Inc. (a)(c) 15,900 446,631
Atlas America, Inc. 14,287 212,162
BMB Munai, Inc. (a) 15,400 21,406
BPZ Resources, Inc. (a)(b) 25,400 162,560
Berry Petroleum Co. Class A 18,102 136,851
Bill Barrett Corp. (a) 15,400 325,402
Brigham Exploration Co. (a) 20,200 64,640
Bronco Drilling Co., Inc. (a) 12,000 77,520
Callon Petroleum Co. (a) 10,000 26,000
Cano Petroleum, Inc. (a) 16,100 7,084
Carrizo Oil & Gas, Inc. (a) 11,600 186,760
Cheniere Energy, Inc. (a)(b) 21,300 60,705
Clayton Williams Energy, Inc. (a) 2,200 99,968
Comstock Resources, Inc. (a)(c) 19,057 900,443
Contango Oil & Gas Co. (a) 5,500 309,650
Delek US Holdings, Inc. 4,600 24,334
Double Eagle Pete & Mining Co. (a) 3,400 23,868
EXCO Resources, Inc. (a) 62,500 566,250
Endeavour International Corp. (a) 46,900 23,450
Energy Partners Ltd. (a) 13,837 18,680
Energy XXI Bermuda Ltd. 46,200 36,498
FX Energy, Inc. (a) 16,600 46,314
Gasco Energy, Inc. (a) 38,600 15,054
GeoGlobal Resources, Inc. (a)(b) 16,300 26,080
31
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
GeoResources, Inc. (a) 2,300 $ 19,987
Geokinetics, Inc. (a) 2,600 6,422
Goodrich Petroleum Corp. (a) 9,500 284,525
Gran Tierra Energy, Inc. (a)(b) 88,500 247,800
Gulfport Energy Corp. (a) 10,800 42,660
Harvest Natural Resources, Inc. (a) 15,000 64,500
Houston American Energy Corp. 6,200 20,956
McMoRan Exploration Co. (a) 25,300 247,940
Meridian Resource Corp. (a) 31,911 18,189
Northern Oil And Gas, Inc. (a) 8,100 21,060
Oilsands Quest, Inc. (a) 68,100 49,713
Panhandle Oil & Gas Inc. 3,000 54,000
Parallel Petroleum Corp. (a) 17,100 34,371
Petroleum Development Corp. (a) 6,100 146,827
Petroquest Energy, Inc. (a)(b) 18,500 125,060
Pioneer Drilling Co. (a) 20,600 114,742
PrimeEnergy Corp. (a) 300 15,585
Quest Resource Corp. (a) 9,800 4,312
Rex Energy Corp. (a) 6,900 20,286
Rosetta Resources, Inc. (a) 21,200 150,096
Stone Energy Corp. (a) 13,298 146,544
Swift Energy Co. (a) 12,417 208,730
TXCO Resources, Inc. (a) 15,000 22,350
Toreador Resources Corp. (a) 7,000 38,430
Tri-Valley Corp. (a)(b) 9,300 16,740
Venoco, Inc. (a) 8,400 22,764
Warren Resources, Inc. (a) 24,100 47,959
Western Refining, Inc. (b) 12,800 99,328
---------------
6,246,360
---------------
OIL: INTEGRATED DOMESTIC - 0.1% Delta Petroleum Corp. (a)(b) 25,700 122,332
GMX Resources Inc. (a) 7,100 179,772
Ram Energy Resources, Inc. (a) 15,500 13,640
---------------
315,744
---------------
OIL: Vaalco Energy, Inc. (a) 25,100 186,744
---------------
INTEGRATED INTERNATIONAL - 0.1%
PAINTS & COATINGS - 0.1% Ferro Corp. 18,376 129,551
H.B. Fuller Co. 20,680 333,155
---------------
462,706
---------------
PAPER - 0.4% AbitibiBowater, Inc. (a)(b) 21,944 10,314
Albany International Corp. Class A 12,274 157,598
Boise, Inc. (a) 14,600 6,278
Buckeye Technologies, Inc. (a) 16,198 58,961
Clearwater Paper Corp. (a) 4,699 39,426
Kapstone Paper and Packaging Corp. (a) 7,400 17,612
Mercer International, Inc.-Sbi (a) 12,400 23,808
Multi-Color Corp. 3,950 62,489
32
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Neenah Paper, Inc. 6,000 $ 53,040
P.H. Glatfelter Co. 18,701 173,919
Rock-Tenn Co. Class A 15,980 546,196
Verso Paper Corp. 5,800 5,974
Wausau Paper Corp. 18,242 208,688
---------------
1,364,303
---------------
PLASTICS - 0.0% Spartech Corp. 12,654 79,214
---------------
POLLUTION CONTROL & American Ecology Corp. 6,700 135,541
ENVIRONMENTAL SERVICES - 0.3% Darling International, Inc. (a) 34,500 189,405
EnergySolutions, Inc. 13,700 77,405
Fuel Tech, Inc. (a)(b) 8,200 86,838
Headwaters, Inc. (a) 17,946 121,136
Met-Pro Corp. 6,200 82,584
Metalico, Inc. (a)(b) 10,800 16,740
Team, Inc. (a) 7,800 216,060
---------------
925,709
---------------
POWER TRANSMISSION Regal-Beloit Corp. 13,251 503,405
EQUIPMENT - 0.2% Synthesis Energy Systems, Inc. (a) 8,600 5,848
---------------
509,253
---------------
PRINTING & COPYING Bowne & Co., Inc. 11,682 68,690
SERVICES - 0.2% Cenveo, Inc. (a) 19,800 88,110
Schawk, Inc. 5,500 63,030
VistaPrint Ltd. (a) 18,600 346,146
---------------
565,976
---------------
PRODUCTION TECHNOLOGY ATMI, Inc. (a)(c) 13,257 204,556
EQUIPMENT - 0.9% Axcelis Technologies, Inc. (a) 44,800 22,848
Brooks Automation, Inc. (a) 26,178 152,094
Cognex Corp. 17,156 253,909
Cymer, Inc. (a) 12,800 280,448
Dionex Corp. (a) 7,731 346,735
Electro Scientific Industries, Inc. (a) 11,161 75,783
Emcore Corp. (a) 31,200 40,560
Entegris, Inc. (a) 47,199 103,366
Esterline Technologies Corp. (a) 12,190 461,879
FEI Co. (a) 15,055 283,937
Intevac, Inc. (a) 9,000 45,630
K-Tron International, Inc. (a) 1,000 79,900
Kulicke & Soffa Industries, Inc. (a) 22,156 37,665
LTX-Credence Corp. (a) 57,003 15,391
MTS Systems Corp. 7,200 191,808
Mattson Technology, Inc. (a) 21,099 29,750
Photronics, Inc. (a) 17,279 33,694
Rofin-Sinar Technologies, Inc. (a) 12,300 253,134
Rudolph Technologies, Inc. (a) 12,673 44,736
Ultra Clean Holdings, Inc. (a) 8,000 16,080
Ultratech, Inc. (a) 9,890 118,284
---------------
3,092,187
---------------
33
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
PUBLISHING: Consolidated Graphics, Inc. (a) 4,300 $ 97,352
MISCELLANEOUS - 0.1% Courier Corp. 3,750 67,125
Martha Stewart Living Omnimedia, Inc. Class A (a) 10,982 28,553
Playboy Enterprises, Inc. Class B (a) 10,107 21,831
Primedia, Inc. 10,300 22,351
Scholastic Corp. 10,160 137,973
---------------
375,185
---------------
PUBLISHING: NEWSPAPERS - 0.1% AH Belo Corp. 7,980 17,396
Belo Corp. Class A 36,800 57,408
Dolan Media Co. (a) 11,100 73,149
Journal Communications, Inc. Class A 17,400 42,630
Lee Enterprises, Inc. (b) 19,500 7,995
McClatchy Co. Class A (b) 24,300 19,440
Media General, Inc. Class A (b) 9,400 16,450
---------------
234,468
---------------
RADIO & TV BROADCASTERS - 0.2% CKX, Inc. (a) 23,500 86,245
Citadel Broadcasting Corp. (a) 74,730 11,957
Cox Radio, Inc. Class A (a) 8,800 52,888
Cumulus Media, Inc. Class A (a) 13,900 34,611
Entercom Communications Corp. 10,600 13,038
Fisher Communications, Inc. 2,800 57,792
Gray Television, Inc. 19,500 7,800
Lin TV Corp. Class A (a) 11,000 11,990
Outdoor Channel Holdings, Inc. (a) 6,600 49,434
RHI Entertainment, Inc. (a) 4,800 38,976
Sinclair Broadcast Group, Inc. Class A 21,664 67,158
World Wrestling Entertainment, Inc. 9,096 100,784
---------------
532,673
---------------
RAILROAD EQUIPMENT - 0.3% American Railcar Industries, Inc. 3,600 37,908
Freightcar America, Inc. 5,100 93,177
Greenbrier Cos., Inc. 6,800 46,716
Westinghouse Air Brake Technologies Corp. 20,339 808,475
---------------
986,276
---------------
RAILROADS - 0.1% Genesee & Wyoming, Inc. Class A (a) 12,875 392,688
---------------
REAL ESTATE - 0.3% AMREP Corp. (a)(b) 700 21,896
Avatar Holdings, Inc. (a) 2,500 66,300
Bluegreen Corp. (a) 5,300 16,589
Cogdell Spencer, Inc. 5,300 49,608
Consolidated-Tomoka Land Co. 2,200 84,018
FX Real Estate and Entertainment, Inc. (a) 3,220 483
Forestar Group, Inc. (a) 15,200 144,704
Griffin Land & Nurseries, Inc. 1,400 51,604
Grubb & Ellis Co. 14,200 17,608
Hilltop Holdings, Inc. (a) 18,572 180,891
Meruelo Maddux Properties, Inc. (a) 17,380 21,551
Resource Capital Corp. 8,800 33,704
34
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Stratus Properties, Inc. (a) 2,100 $ 26,166
Tejon Ranch Co. (a) 4,615 114,175
Thomas Properties Group, Inc. 9,900 25,641
---------------
854,938
---------------
REAL ESTATE INVESTMENT TRUSTS Acadia Realty Trust 13,301 189,805
(REITS) - 5.3% Agree Realty Corp. 3,400 61,642
Alexander's, Inc. 867 220,998
American Campus Communities, Inc. 17,803 364,605
American Capital Agency Corp. 4,300 91,848
Anthracite Capital, Inc. (b)(d) 24,500 54,635
Anworth Mortgage Asset Corp. 35,800 230,194
Arbor Realty Trust, Inc. (b) 5,900 17,405
Ashford Hospitality Trust, Inc. 44,880 51,612
Associated Estates Realty Corp. 6,000 54,780
BioMed Realty Trust, Inc. 33,720 395,198
CapLease, Inc. 18,500 32,005
Capital Trust, Inc. 6,900 24,840
Capstead Mortgage Corp. 23,800 256,326
Care Investment Trust, Inc. 5,500 42,845
Cedar Shopping Centers, Inc. 15,800 111,864
Chimera Investment Corp. 54,000 186,300
Colonial Properties Trust 20,100 167,433
Corporate Office Properties Trust 17,700 543,390
Cousins Properties, Inc. (b) 18,700 258,995
DCT Industrial Trust, Inc. 72,210 365,383
DiamondRock Hospitality Co. 40,050 203,054
Dupont Fabros Technology, Inc. 4,900 10,143
Eastgroup Properties, Inc. 10,527 374,551
Education Realty Trust, Inc. 11,800 61,596
Entertainment Properties Trust 13,780 410,644
Equity Lifestyle Properties, Inc. 8,594 329,666
Equity One, Inc. (b) 13,600 240,720
Extra Space Storage, Inc. 34,550 356,556
FelCor Lodging Trust, Inc. 27,970 51,465
First Industrial Realty Trust, Inc. (b) 18,800 141,940
First Potomac Realty Trust 10,500 97,650
Franklin Street Properties Corp. 24,900 367,275
Friedman Billings Ramsey Group, Inc. Class A (a) 60,800 10,336
Getty Realty Corp. 7,200 151,632
Glimcher Realty Trust 16,456 46,241
Gramercy Capital Corp. 17,202 22,019
Hatteras Financial Corp. 6,600 175,560
Healthcare Realty Trust, Inc. 24,700 579,956
Hersha Hospitality Trust 17,100 51,300
Highwoods Properties, Inc. 26,700 730,512
Home Properties, Inc. 13,320 540,792
35
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Inland Real Estate Corp. 23,700 $ 307,626
Investors Real Estate Trust 23,700 253,827
JER Investors Trust, Inc. 9,400 8,742
Kite Realty Group Trust 8,340 46,370
LTC Properties, Inc. 9,500 192,660
LaSalle Hotel Properties (b) 17,020 188,071
Lexington Corporate Properties Trust 31,892 159,460
MFA Financial, Inc. 80,300 472,967
Maguire Properties, Inc. 17,600 25,696
Medical Properties Trust, Inc. 28,100 177,311
Mid-America Apartment Communities, Inc. 11,929 443,282
Mission West Properties, Inc. 8,100 61,965
Monmouth Real Estate Investment Corp. Class A 8,200 57,400
National Health Investors, Inc. 9,229 253,151
National Retail Properties, Inc. 32,875 565,121
Newcastle Investment Corp. 21,800 18,312
NorthStar Realty Finance Corp. (b) 23,600 92,276
Omega Healthcare Investors, Inc. 33,200 530,204
One Liberty Properties, Inc. 3,300 29,040
PS Business Parks, Inc. 6,208 277,249
Parkway Properties, Inc. 6,504 117,072
Pennsylvania Real Estate Investment Trust (b) 15,032 111,988
Post Properties, Inc. 18,586 306,669
Potlatch Corp. 16,547 430,387
RAIT Investment Trust (b) 25,610 66,586
Ramco-Gershenson Properties Trust 6,500 40,170
Realty Income Corp. (b) 42,500 983,875
Redwood Trust, Inc. (b) 13,895 207,174
Saul Centers, Inc. 3,922 154,919
Senior Housing Properties Trust 47,914 858,619
Sovran Self Storage, Inc. 9,180 330,480
Strategic Hotel Capital, Inc. 32,900 55,272
Sun Communities, Inc. 7,043 98,602
Sunstone Hotel Investors, Inc. 21,900 135,561
Tanger Factory Outlet Centers, Inc. 13,322 501,174
U-Store-It Trust 20,470 91,092
Universal Health Realty Income Trust 4,927 162,148
Urstadt Biddle Properties, Inc. Class A 7,900 125,847
Washington Real Estate Investment Trust 22,065 624,440
Winthrop Realty Trust 3,740 40,542
---------------
18,279,058
---------------
RECREATIONAL VEHICLES & Fleetwood Enterprises, Inc. (a) 26,499 2,650
BOATS - 0.1% Marine Products Corp. 3,175 17,844
Polaris Industries, Inc. (b) 13,800 395,370
Winnebago Industries, Inc. (b) 12,590 75,918
---------------
491,782
---------------
36
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
RENTAL & LEASING SERVICES: Aircastle Ltd. 19,300 $ 92,254
COMMERCIAL - 0.1% Electro Rent Corp. 8,853 98,799
H&E Equipment Services, Inc. (a) 6,800 52,428
McGrath RentCorp 9,810 209,542
---------------
453,023
---------------
RENTAL & LEASING SERVICES: Aaron Rents, Inc. (c) 19,093 508,256
CONSUMER - 0.4% Amerco, Inc. (a) 3,900 134,667
Dollar Thrifty Automotive Group, Inc. (a) 7,195 7,843
RSC Holdings, Inc. (a) 19,700 167,844
Rent-A-Center, Inc. (a) 27,900 492,435
---------------
1,311,045
---------------
RESTAURANTS - 1.3% AFC Enterprises, Inc. (a) 10,400 48,776
BJ's Restaurants, Inc. (a) 7,300 78,621
Bob Evans Farms, Inc. 13,080 267,224
Buffalo Wild Wings, Inc. (a)(b) 7,550 193,657
CEC Entertainment, Inc. (a) 8,550 207,337
CKE Restaurants, Inc. 21,600 187,488
California Pizza Kitchen, Inc. (a) 9,050 97,016
The Cheesecake Factory, Inc. (a) 25,200 254,520
Cracker Barrel Old Country Store, Inc. 9,400 193,546
Denny's Corp. (a) 39,100 77,809
DineEquity, Inc. (b) 7,148 82,631
Domino's Pizza, Inc. (a) 16,250 76,538
Einstein Noah Restaurant Group, Inc. (a) 1,600 9,200
Jack in the Box, Inc. (a) 24,736 546,418
Krispy Kreme Doughnuts, Inc. (a)(b) 23,300 39,144
Landry's Restaurants, Inc. 5,496 63,754
Luby's, Inc. (a) 8,900 37,291
O'Charleys, Inc. 7,484 14,968
P.F. Chang's China Bistro, Inc. (a) 10,208 213,756
Papa John's International, Inc. (a) 9,296 171,325
Red Robin Gourmet Burgers, Inc. (a) 6,600 111,078
Ruby Tuesday, Inc. (a) 21,400 33,384
Ruth's Hospitality Group, Inc. (a) 9,200 12,696
Sonic Corp. (a) 25,320 308,144
The Steak n Shake Co. (a) 11,728 69,782
Texas Roadhouse, Inc. Class A (a) 21,600 167,400
Wendy's 165,652 818,321
---------------
4,381,824
---------------
RETAIL - 2.5% 1-800-FLOWERS.COM, Inc. Class A (a) 10,824 41,348
99 Cents Only Stores (a) 19,900 217,507
America's Car Mart, Inc. (a) 4,400 60,764
Asbury Automotive Group, Inc. 13,200 60,324
Aeropostale, Inc. (a) 28,075 452,007
bebe Stores, Inc. 15,900 118,773
Bidz.com, Inc. (a)(b) 2,800 12,880
37
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Big 5 Sporting Goods Corp. 9,000 $ 46,890
Blockbuster, Inc. Class A (a)(b) 75,600 95,256
Blue Nile, Inc. (a)(b) 5,700 139,593
Borders Group, Inc. 25,000 10,000
Brown Shoe Co., Inc. 17,527 148,454
The Buckle, Inc. 9,809 214,032
Build-A-Bear Workshop, Inc. (a) 7,500 36,450
Cabela's, Inc. Class A (a)(b) 16,200 94,446
Cache, Inc. (a) 4,650 9,393
Casual Male Retail Group, Inc. (a) 14,500 7,540
The Cato Corp. Class A 11,395 172,065
Central Garden & Pet Co. Class A (a) 26,634 157,141
Charlotte Russe Holding, Inc. (a) 9,100 59,059
Charming Shoppes, Inc. (a) 48,540 118,438
Chico's FAS, Inc. (a) 74,400 310,992
The Children's Place Retail Stores, Inc. (a) 9,885 214,307
Christopher & Banks Corp. 14,928 83,597
Coldwater Creek, Inc. (a) 23,500 66,975
Collective Brands, Inc. (a) 26,700 312,924
Conn's, Inc. (a)(b) 4,000 33,920
Dillard's, Inc. Class A (b) 22,200 88,134
Dress Barn, Inc. (a) 18,890 202,879
drugstore.com, Inc. (a) 34,400 42,656
Ezcorp, Inc. (a) 16,200 246,402
FGX International Holdings Ltd. (a) 5,700 78,318
Fred's, Inc. 16,935 182,221
GSI Commerce, Inc. (a) 10,100 106,252
Gaiam, Inc. (a) 7,400 34,188
Genesco, Inc. (a) 8,238 139,387
Group 1 Automotive, Inc. 9,632 103,737
Gymboree Corp. (a) 11,958 311,984
Hibbett Sports, Inc. (a) 12,075 189,698
Hot Topic, Inc. (a) 18,581 172,246
Insight Enterprises, Inc. (a) 19,398 133,846
Jo-Ann Stores, Inc. (a) 10,805 167,369
Jos. A. Bank Clothiers, Inc. (a) 7,733 202,218
Lawson Products, Inc. 1,888 43,141
Lumber Liquidators, Inc. (a) 4,200 44,352
MarineMax, Inc. (a) 6,800 23,052
Men's Wearhouse, Inc. 21,700 293,818
New York & Co. (a) 9,300 21,576
Overstock.com, Inc. (a) 6,400 68,992
PC Connection, Inc. (a) 2,900 14,848
PC Mall, Inc. (a) 4,600 18,446
Pacific Sunwear of California, Inc. (a) 28,200 44,838
The Pantry, Inc. (a) 9,400 201,630
38
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
The Pep Boys - Manny, Moe & Jack 17,410 $ 71,903
PetMed Express, Inc. (a) 10,100 178,063
Pier 1 Imports, Inc. (a) 36,699 13,579
PriceSmart, Inc. 6,000 123,960
Retail Ventures, Inc. (a) 11,800 40,946
Rush Enterprises, Inc. Class A (a) 13,900 119,123
Russ Berrie & Co., Inc. (a) 6,147 18,257
Sally Beauty Co., Inc. (a) 39,000 221,910
School Specialty, Inc. (a) 8,154 155,904
Shutterfly, Inc. (a) 8,100 56,619
Sonic Automotive, Inc. 10,800 42,984
Stage Stores, Inc. 15,850 130,763
Stamps.com, Inc. (a) 6,303 61,958
Stein Mart, Inc. (a) 10,424 11,779
Syms Corp. (a) 2,700 23,976
Systemax, Inc. 4,600 49,542
The Talbots, Inc. (b) 10,100 24,139
Tractor Supply Co. (a) 14,000 505,960
Tuesday Morning Corp. (a) 12,390 20,196
Tween Brands, Inc. (a) 10,666 46,077
Volcom, Inc. (a) 7,800 85,020
The Wet Seal, Inc. Class A (a) 39,500 117,315
Zale Corp. (a)(b) 13,500 44,955
Zumiez, Inc. (a) 8,100 60,345
---------------
8,696,576
---------------
SAVINGS & LOAN - 1.4% Anchor Bancorp Wisconsin, Inc. 8,337 23,010
Bank Mutual Corp. 19,938 230,085
Berkshire Hills Bancorp, Inc. 4,600 141,956
Brookline Bancorp, Inc. 24,587 261,852
Brooklyn Federal Bancorp, Inc. 2,400 33,720
Danvers Bancorp, Inc. 7,700 102,949
Dime Community Bancshares, Inc. 9,749 129,662
ESSA Bancorp, Inc. 7,400 104,562
First Financial Holdings, Inc. 4,826 97,678
First Financial Northwest, Inc. 9,400 87,796
First Niagara Financial Group, Inc. 49,853 806,123
First Place Financial Corp. 7,500 28,725
FirstFed Financial Corp. (a)(b) 5,900 10,325
Flagstar Bancorp, Inc. (a) 18,150 12,887
Flushing Financial Corp. 8,875 106,145
Guaranty Financial Group, Inc. (a)(b) 33,900 88,479
Home Federal Bancorp, Inc. 2,700 28,944
IBERIABANK Corp. 6,750 324,000
Kearny Financial Corp. 7,300 93,440
Meridian Interstate Bancorp, Inc. (a) 4,300 39,775
NASB Financial, Inc. 1,100 29,700
39
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
NewAlliance Bancshares, Inc. 45,700 $ 601,869
Northwest Bancorp, Inc. 7,067 151,092
OceanFirst Financial Corp. 3,700 61,420
Ocwen Financial Corp. (a) 13,665 125,445
Provident Financial Services, Inc. 25,258 386,447
Provident New York Bancorp 16,589 205,704
Rockville Financial, Inc. 3,000 41,910
Roma Financial Corp. 3,200 40,288
Sterling Financial Corp. 21,743 191,338
United Community Financial Corp. 9,314 8,383
ViewPoint Financial Group 4,600 73,830
W Hldg Co., Inc. 996 10,259
Westfield Financial, Inc. 13,112 135,316
---------------
4,815,114
---------------
SECURITIES BROKERAGE & Diamond Hill Investments Group 800 52,000
SERVICES - 0.5% GFI Group, Inc. 27,300 96,642
Gladstone Investment Corp. 11,000 54,010
International Assets Holding Corp., Inc. (a) 1,700 14,586
KBW, Inc. (a)(b) 10,800 248,400
Knight Capital Group, Inc. Class A (a) 39,500 637,925
LaBranche & Co., Inc. (a) 21,100 101,069
Ladenburg Thalmann Financial Services, Inc. (a) 42,000 30,240
MarketAxess Holdings, Inc. (a) 12,800 104,448
optionsXpress Holdings, Inc. (c) 17,500 233,800
Penson Worldwide, Inc. (a) 6,900 52,578
SWS Group, Inc. 10,306 195,299
Thomas Weisel Partners Group, Inc. (a) 9,200 43,424
---------------
1,864,421
---------------
SERVICES: COMMERCIAL - 3.4% ABM Industries, Inc. (c) 18,070 344,233
AMN Healthcare Services, Inc. (a) 14,005 118,482
Administaff, Inc. 9,161 198,610
The Advisory Board Co. (a) 7,000 156,100
Ambassadors Group, Inc. 7,900 72,680
CBIZ, Inc. (a) 18,453 159,618
CDI Corp. 5,501 71,183
CRA International, Inc. (a) 4,700 126,571
Casella Waste Systems, Inc. (a) 9,278 37,854
Chemed Corp. 9,472 376,701
CoStar Group, Inc. (a)(b) 8,250 271,755
Coinstar, Inc. (a) 11,792 230,062
Cornell Cos., Inc. (a) 4,800 89,232
Cross Country Healthcare, Inc. (a) 12,700 111,633
Dice Holdings, Inc. (a) 6,500 26,520
DynCorp. International, Inc. (a) 10,200 154,734
Exponent, Inc. (a) 6,104 183,608
First Advantage Corp. Class A (a) 4,200 59,430
40
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Forrester Research, Inc. (a) 6,581 $ 185,650
G&K Services, Inc. Class A 8,177 165,339
The Geo Group, Inc. (a) 21,500 387,645
Gevity HR, Inc. 11,400 17,214
Global Sources Ltd. (a) 5,898 32,144
Global Traffic Network, Inc. (a) 4,900 28,616
Heidrick & Struggles International, Inc. 7,358 158,491
Hudson Highland Group, Inc. (a) 10,300 34,505
ICF International, Inc. (a) 2,900 71,253
ICT Group, Inc. (a) 4,100 18,778
Jackson Hewitt Tax Service, Inc. 12,000 188,280
Kelly Services, Inc. Class A 10,868 141,393
Kforce, Inc. (a) 12,700 97,536
The Knot, Inc. (a) 11,700 97,344
Korn/Ferry International (a) 19,168 218,899
Liquidity Services, Inc. (a) 6,000 49,980
MAXIMUS, Inc. 7,504 263,465
MPS Group, Inc. (a) 39,005 293,708
Midas, Inc. (a) 5,742 60,234
Monro Muffler, Inc. 6,950 177,225
Navigant Consulting, Inc. (a) 20,323 322,526
Net 1 UEPS Technologies, Inc. (a) 20,100 275,370
Nutri/System, Inc. (b) 12,900 188,211
On Assignment, Inc. (a) 15,300 86,751
Orbitz Worldwide, Inc. (a) 14,600 56,648
PHH Corp. (a) 22,864 291,059
PRG-Schultz International, Inc. (a) 6,200 25,296
Perficient, Inc. (a) 13,200 63,096
Pre-Paid Legal Services, Inc. (a) 3,260 121,565
The Providence Service Corp. (a) 5,000 7,250
Regis Corp. 17,800 258,634
Resources Connection, Inc. (a) 19,132 313,382
Rollins, Inc. 17,153 310,126
Spherion Corp. (a) 22,629 50,010
Standard Parking Corp. (a) 3,600 69,624
Steiner Leisure Ltd. (a) 6,700 197,784
TeleTech Holdings, Inc. (a) 16,189 135,178
Tetra Tech, Inc. (a) 24,731 597,254
TrueBlue, Inc. (a) 18,822 180,127
Unifirst Corp. 5,900 175,171
Viad Corp. 8,600 212,764
Volt Information Sciences, Inc. (a) 5,538 40,040
Waste Connections, Inc. (a) 33,427 1,055,290
Waste Services, Inc. (a) 8,533 56,147
Watson Wyatt Worldwide, Inc. 17,915 856,695
World Fuel Services Corp. 12,100 447,700
---------------
11,870,403
---------------
41
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
SHIPPING - 0.5% American Commercial Lines, Inc. (a) 15,200 $ 74,480
DHT Maritime, Inc. 17,000 94,180
Eagle Bulk Shipping, Inc. (b) 19,900 135,718
Genco Shipping & Trading Ltd. (b) 10,400 153,920
General Maritime Corp. 20,240 218,592
Golar LNG Ltd. 14,600 98,696
Gulfmark Offshore, Inc. (a) 8,900 211,731
Horizon Lines, Inc. Class A (b) 12,400 43,276
International Shipholding Corp. 2,500 63,325
Knightsbridge Tankers Ltd. 7,300 106,945
Nordic American Tanker Shipping Ltd. 14,400 486,000
Ship Finance International Ltd. (b) 17,400 192,270
TBS International Ltd. (a) 4,700 47,141
---------------
1,926,274
---------------
SHOES - 0.6% Crocs, Inc. (a)(b) 37,100 46,004
DSW, Inc. Class A (a) 5,800 72,268
Deckers Outdoor Corp. (a) 5,500 439,285
The Finish Line, Inc. Class A 18,080 101,248
Iconix Brand Group, Inc. (a) 24,200 236,676
K-Swiss, Inc. Class A 10,696 121,934
Kenneth Cole Productions, Inc. Class A 3,692 26,139
Shoe Carnival, Inc. (a) 3,700 35,335
Skechers U.S.A., Inc. Class A (a) 13,555 173,775
Steven Madden Ltd. (a) 7,468 159,218
Timberland Co. Class A (a) 19,700 227,535
Weyco Group, Inc. 2,700 89,235
Wolverine World Wide, Inc. 20,908 439,904
---------------
2,168,556
---------------
STEEL - 0.0% China Precision Steel, Inc. (a) 7,100 8,875
General Steel Holdings, Inc. (a)(b) 3,800 14,972
Olympic Steel, Inc. 3,900 79,443
Sutor Technology Group Ltd. (a) 3,200 7,392
Universal Stainless & Alloy Products, Inc. (a) 2,800 40,572
---------------
151,254
---------------
SUGAR - 0.0% Imperial Sugar Co. New Shares 5,200 74,568
---------------
TELECOMMUNICATIONS Airvana, Inc. (a) 10,000 61,200
EQUIPMENT - 0.6% Applied Signal Technology, Inc. 5,400 96,876
Arris Group, Inc. (a) 51,600 410,220
Audiovox Corp. Class A (a) 6,585 32,991
Belden, Inc. 18,961 395,906
Mastec, Inc. (a) 17,700 204,966
OpNext, Inc. (a) 7,900 13,825
Plantronics, Inc. 20,199 266,627
Polycom, Inc. (a) 36,800 497,168
Powerwave Technologies, Inc. (a) 55,677 27,839
Preformed Line Products Co. 900 41,436
42
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Symmetricom, Inc. (a) 19,000 $ 75,050
---------------
2,124,104
---------------
TEXTILE PRODUCTS - 0.0% Interface, Inc. Class A 22,021 102,177
Unifi, Inc. (a) 19,300 54,426
---------------
156,603
---------------
TEXTILES APPAREL American Apparel, Inc. (a)(b) 14,000 27,860
MANUFACTURERS - 0.6% Carter's, Inc. (a) 23,800 458,388
Cherokee, Inc. 3,100 53,785
Columbia Sportswear Co. (b) 4,800 169,776
G-III Apparel Group, Ltd. (a) 5,900 37,701
J. Crew Group, Inc. (a) 17,970 219,234
Lululemon Athletica, Inc. (a)(b) 7,400 58,682
Maidenform Brands, Inc. (a) 9,300 94,395
Oxford Industries, Inc. 6,242 54,742
Perry Ellis International, Inc. (a) 5,350 33,919
Quiksilver, Inc. (a) 52,100 95,864
True Religion Apparel, Inc. (a) 7,300 90,812
Under Armour, Inc. Class A (a)(b) 13,900 331,376
The Warnaco Group, Inc. (a) 19,100 374,933
---------------
2,101,467
---------------
TIRES & RUBBER - 0.1% Cooper Tire & Rubber Co. 24,300 149,688
Titan International, Inc. 14,425 119,006
---------------
268,694
---------------
TOBACCO - 0.2% Alliance One International, Inc. (a) 39,655 116,586
Schweitzer-Mauduit International, Inc. 6,520 130,530
Star Scientific, Inc. (a) 27,600 105,708
Universal Corp. 10,656 318,295
Vector Group Ltd. (b) 13,591 185,109
---------------
856,228
---------------
TOYS - 0.3% Jakks Pacific, Inc. (a) 11,530 237,864
Leapfrog Enterprises, Inc. (a) 14,646 51,261
Marvel Entertainment, Inc. (a) 20,500 630,375
---------------
919,500
---------------
TRANSPORTATION CAI International, Inc. (a) 3,000 9,510
MISCELLANEOUS - 0.2% Celadon Group, Inc. (a) 9,500 81,035
Dynamex, Inc. (a) 3,800 56,050
HUB Group, Inc. Class A (a) 15,600 413,868
Odyssey Marine Exploration, Inc. (a) 19,100 61,502
Pacer International, Inc. 14,700 153,321
Textainer Group Holdings Ltd. 4,000 42,400
Ultrapetrol Bahamas Ltd. (a) 10,300 32,857
---------------
850,543
---------------
TRUCKERS - 0.7% Arkansas Best Corp. 9,541 287,280
Forward Air Corp. 12,232 296,871
Heartland Express, Inc. 23,573 371,510
Knight Transportation, Inc. 24,162 389,491
43
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Marten Transport Ltd. (a) 6,550 $ 124,188
Old Dominion Freight Line, Inc. (a) 11,625 330,848
Patriot Transportation Holding, Inc. (a) 500 35,035
Saia, Inc. (a) 5,881 63,868
Universal Truckload Services, Inc. (a) 1,900 26,904
Werner Enterprises, Inc. 18,000 312,120
YRC Worldwide, Inc. (a)(b) 24,300 69,741
---------------
2,307,856
---------------
UTILITIES: ELECTRICAL - 2.3% Allete, Inc. 10,966 353,873
Avista Corp. 21,875 423,937
Black Hills Corp. 16,200 436,752
CH Energy Group, Inc. (c) 6,489 333,470
Central Vermont Public Service Corp. 5,000 119,300
Cleco Corp. 25,067 572,280
El Paso Electric Co. (a) 18,508 334,810
The Empire District Electric Co. 13,968 245,837
IDACORP, Inc. 19,100 562,495
ITC Holdings Corp. 20,600 899,808
MGE Energy, Inc. 9,145 301,785
NorthWestern Corp. 15,600 366,132
Otter Tail Corp. 14,786 344,957
PNM Resources, Inc. 34,700 349,776
Pike Electric Corp. (a) 6,900 84,870
Portland General Electric Co. 26,200 510,114
UIL Holdings Corp. 10,367 311,321
Unisource Energy Corp. 14,483 425,221
Westar Energy, Inc. 43,900 900,389
---------------
7,877,127
---------------
UTILITIES: Chesapeake Utilities Corp. 2,800 88,144
GAS DISTRIBUTORS - 1.4% The Laclede Group, Inc. 9,148 428,492
New Jersey Resources Corp. 17,661 694,960
Nicor, Inc. 18,900 656,586
Northwest Natural Gas Co. 10,899 482,063
Piedmont Natural Gas Co. 30,600 969,102
South Jersey Industries, Inc. 12,232 487,445
Southwest Gas Corp. 17,890 451,186
WGL Holdings, Inc. 20,700 676,683
---------------
4,934,661
---------------
UTILITIES: Alaska Communications Systems Group, Inc. (b) 18,300 171,654
TELECOMMUNICATIONS - 0.9% Atlantic Tele-Network, Inc. 3,900 103,545
Centennial Communications Corp. (a) 27,826 224,278
Cincinnati Bell, Inc. (a) 100,400 193,772
Consolidated Communications Holdings, Inc. 9,535 113,276
FairPoint Communications, Inc. 37,793 123,961
FiberTower Corp. (a) 46,850 7,496
General Communication, Inc. Class A (a) 18,639 150,790
44
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
Global Crossing Ltd. (a) 10,800 $ 85,752
Globalstar, Inc. (a) 18,000 3,600
Hungarian Telephone & Cable Corp. (a) 1,300 11,180
ICO Global Communications Holdings Ltd. (a) 42,700 48,251
IDT Corp. Class B (a) 18,200 7,280
Ibasis, Inc. (a) 10,600 14,946
Iowa Telecommunications Services, Inc. 13,600 194,208
iPCS, Inc. (a) 7,100 48,706
NTELOS Holdings Corp. 12,300 303,318
Neutral Tandem, Inc. (a) 6,900 111,918
ORBCOMM, Inc. (a)(b) 12,200 26,352
PAETEC Holding Corp. (a) 51,020 73,469
Premiere Global Services, Inc. (a) 25,600 220,416
RCN Corp. (a) 15,500 91,450
Shenandoah Telecom Co. 9,700 272,085
TW Telecom, Inc. (a) 61,800 523,446
USA Mobility, Inc. 10,020 115,931
Virgin Mobile USA, Inc. (a) 10,600 8,904
---------------
3,249,984
---------------
UTILITIES: WATER - 0.3% American States Water Co. 7,285 240,259
California Water Service Group 8,296 385,183
Connecticut Water Service, Inc. 3,500 82,635
Consolidated Water Co., Inc. 6,000 75,000
Middlesex Water Co. 5,500 94,765
SJW Corp. 5,448 163,113
Southwest Water Co. 10,083 32,467
---------------
1,073,422
---------------
WHOLESALERS - 0.2% Brightpoint, Inc. (a) 20,630 89,740
Chindex International Inc. (a) 4,900 38,955
Houston Wire & Cable Co. 7,400 68,894
MWI Veterinary Supply, Inc. (a) 4,400 118,624
Prestige Brands Holdings, Inc. (a) 14,400 151,920
United Stationers, Inc. (a) 9,369 313,768
---------------
781,901
---------------
TOTAL COMMON STOCKS - 90.4% 311,768,114
---------------
INVESTMENT COMPANIES
BlackRock Kelso Capital Corp. (d) 4,400 43,384
Gladstone Capital Corp. (b) 8,700 70,383
Hercules Technology Growth Capital, Inc. 13,600 107,712
Kayne Anderson Energy Development Co. 4,200 31,542
Patriot Capital Funding, Inc. 9,800 35,672
Pennantpark Investment Corp. 8,500 30,685
Prospect Capital Corp. (b) 11,400 136,458
---------------
TOTAL INVESTMENT COMPANIES - 0.1% 455,836
---------------
45
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY WARRANTS (e) SHARES VALUE
- -------------------------------- --------------------------------------------------- -------------- ---------------
COMMUNICATIONS
TECHNOLOGY - 0.0% Lantronix, Inc. (expires 2/09/11) 138 $ 0
---------------
ENERGY MISCELLANEOUS - 0.0% GreenHunter Energy, Inc. (expires 8/27/11) (b)(f) 180 0
---------------
TOTAL WARRANTS - 0.0% 0
---------------
OTHER INTERESTS (G)
OIL: CRUDE PRODUCERS - 0.0% PetroCorp Inc. (Escrow Shares) (h) 500 0
---------------
TOTAL OTHER INTERESTS - 0.0% 0
---------------
TOTAL LONG-TERM INVESTMENTS (COST - $404,884,567)
- 90.5% 312,223,950
---------------
BENEFICIAL
INTEREST
SHORT-TERM SECURITIES (000)
--------------------------------------------------- --------------
BlackRock Liquidity Series, LLC Cash Sweep Series,
1.64% (d)(i) $ 33,515 33,514,609
BlackRock Liquidity Series, LLC Money Market
Series, 0.80% (d)(i)(j) 24,644 24,644,202
---------------
TOTAL SHORT-TERM SECURITIES (COST - $58,158,811)
- 16.9% 58,158,811
---------------
TOTAL INVESTMENTS (COST - $463,043,378*) - 107.4% 370,382,761
LIABILITIES IN EXCESS OF OTHER ASSETS - (7.4)% (25,662,641)
---------------
NET ASSETS - 100.0% $ 344,720,120
===============
* The cost and unrealized appreciation (depreciation) of investments as of
December 31, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 484,047,076
=============
Gross unrealized appreciation $ 35,373,591
Gross unrealized depreciation (149,037,906)
-------------
Net unrealized depreciation $(113,664,315)
=============
(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 SALE REALIZED
AFFILIATE COST COST LOSS INCOME
- --------- -------- ----------- -------- ----------
Anthracite Capital, Inc. $ 62,886 $ 166,460 $(68,727) $ 24,910
BlackRock Kelso Capital Corp. $ 18,400 $ 6,168 $ (524) $ 5,848
BlackRock Liquidity Series, LLC Cash Sweep Series $287,816* -- -- $ 580,110
BlackRock Liquidity Series, LLC Money Market Series -- $59,164,615** -- $1,200,163
* 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) Restricted security as to resale, representing 0.0% of net assets, was as
follows:
ACQUISITION
ISSUE DATE COST VALUE
- ----- ----------- ---- -----
GreenHunter Energy, Inc. 6/27/08 $-- $--
46
MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(g) Other interests represent beneficial interest in liquidation trusts and
other reorganization entities and are non-income producing.
(h) Security is fair valued in accordance with the Series' fair valuation
policy.
(i) Represents the current yield as of report date.
(j) 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. Industries are shown as a percent of net assets. These industry
classifications are unaudited.
- - Financial futures contracts purchased as of December 31, 2008 were as
follows:
EXPIRATION FACE UNREALIZED
CONTRACTS ISSUE DATE VALUE APPRECIATION
- --------- ------------------ ---------- ----------- ------------
683 Russell 2000 Index March 2009 $31,631,628 $2,374,942
- - 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 December 31, 2008 in
determining the fair valuation of the Series' investments:
INVESTMENTS IN OTHER FINANCIAL
VALUATION SECURITIES INSTRUMENTS*
INPUTS ASSETS ASSETS
- --------- -------------- ---------------
Level 1 $312,223,950 $2,374,942
Level 2 58,158,811 --
Level 3 -- --
------------ ----------
TOTAL $370,382,761 $2,374,942
============ ==========
* Other financial instruments are futures.
47
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
AUSTRALIA - 5.4%
AIR FREIGHT & LOGISTICS - 0.0% Toll Holdings Ltd. 56,456 $ 243,921
---------------
AIRLINES - 0.0% Qantas Airways Ltd. 71,345 131,439
---------------
BEVERAGES - 0.2% Coca-Cola Amatil Ltd. 47,908 307,862
Foster's Group Ltd. 166,479 640,291
Lion Nathan Ltd. 17,836 102,464
---------------
1,050,617
---------------
BIOTECHNOLOGY - 0.2% CSL Ltd. 49,786 1,174,045
---------------
CAPITAL MARKETS - 0.1% Macquarie Group Ltd. 25,214 511,727
Perpetual Trustees Australia Ltd. 1,777 46,477
---------------
558,204
---------------
CHEMICALS - 0.1% Incitec Pivot Ltd. 143,533 251,593
Nufarm Ltd. 7,277 53,655
Orica Ltd. 27,591 270,760
---------------
576,008
---------------
COMMERCIAL BANKS - 1.4% Australia & New Zealand Banking Group Ltd. 170,965 1,845,773
Bendigo and Adelaide Bank Ltd. 20,287 156,949
Commonwealth Bank of Australia Ltd. 123,368 2,538,358
National Australia Bank Ltd. 158,209 2,325,934
Westpac Banking Corp. 232,966 2,794,129
---------------
9,661,143
---------------
COMMERCIAL SERVICES & SUPPLIES - 0.1% Brambles Ltd. 118,982 618,176
---------------
CONSTRUCTION & ENGINEERING - 0.0% Leighton Holdings Ltd. 11,839 230,043
---------------
CONSTRUCTION MATERIALS - 0.0% Boral Ltd. 46,639 151,048
James Hardie Industries NV 31,616 103,544
---------------
254,592
---------------
CONTAINERS & PACKAGING - 0.0% Amcor Ltd. 71,378 290,066
---------------
DIVERSIFIED FINANCIAL SERVICES - 0.0% Australian Stock Exchange Ltd. 13,605 318,021
---------------
DIVERSIFIED TELECOMMUNICATION Telstra Corp. Ltd. 354,396 948,731
---------------
SERVICES - 0.1%
ENERGY EQUIPMENT & SERVICES - 0.0% WorleyParsons Ltd. 13,235 132,032
---------------
FOOD & STAPLES RETAILING - 0.4% Metcash Ltd. 58,380 178,746
Wesfarmers Ltd. NPV 50,712 640,079
Wesfarmers Ltd. NPV PPS 12,455 157,126
Woolworths Ltd. 103,023 1,920,988
---------------
2,896,939
---------------
FOOD PRODUCTS - 0.0% Goodman Fielder Ltd. 77,271 71,832
---------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.0% Cochlear Ltd. 3,890 150,696
---------------
HEALTH CARE PROVIDERS & SERVICES - 0.0% Sonic Healthcare Ltd. 31,035 316,185
---------------
HOTELS, RESTAURANTS & LEISURE - 0.1% Aristocrat Leisure Ltd. 22,855 62,186
Crown Ltd. 33,445 140,094
Tabcorp Holdings Ltd. 40,947 200,337
Tatts Group Ltd. 98,432 192,195
---------------
594,812
---------------
IT SERVICES - 0.0% Computershare Ltd. 33,896 185,213
---------------
INDUSTRIAL CONGLOMERATES - 0.0% CSR Ltd. 92,805 114,789
---------------
INSURANCE - 0.5% AMP Ltd. 158,343 603,728
1
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
AXA Asia Pacific Holdings Ltd. 60,500 $ 210,289
Insurance Australia Group Ltd. 147,253 401,312
QBE Insurance Group Ltd. 84,374 1,524,918
Suncorp-Metway Ltd. 75,710 446,258
---------------
3,186,505
---------------
MEDIA - 0.0% Fairfax Media Ltd. 105,523 121,075
---------------
METALS & MINING - 1.2% Alumina Ltd. 100,776 101,530
BHP Billiton Ltd. 280,586 5,960,817
BlueScope Steel Ltd. 59,588 146,402
Fortescue Metals Group Ltd. (a) 109,670 149,543
Newcrest Mining Ltd. 37,808 899,938
OZ Mineral Ltd. (b) 230,335 26,497
OneSteel Ltd. 66,281 114,616
Rio Tinto Ltd. 24,427 654,589
Sims Metal Management Ltd. 11,875 145,343
---------------
8,199,275
---------------
MULTI-UTILITIES - 0.1% AGL Energy Ltd. 37,661 401,527
---------------
MULTILINE RETAIL - 0.0% Harvey Norman Holdings Ltd. 44,194 82,017
---------------
OIL, GAS & CONSUMABLE FUELS - 0.4% Caltex Australia Ltd. 12,081 61,049
Origin Energy Ltd. 74,071 835,411
Santos Ltd. 51,987 544,716
Woodside Petroleum Ltd. 40,622 1,051,188
---------------
2,492,364
---------------
REAL ESTATE INVESTMENT TRUSTS CFS Retail Property Trust 148,618 195,358
(REITS) - 0.4% DB RREEF Trust 198,135 113,456
General Property Trust 404,333 263,655
Goodman Group 180,246 92,816
Macquarie Office Trust 106,454 18,285
Mirvac Group 104,197 93,255
Stockland 114,066 324,482
Westfield Group 149,494 1,357,218
---------------
2,458,525
---------------
REAL ESTATE MANAGEMENT & Lend Lease Corp., Ltd. 27,961 140,895
DEVELOPMENT - 0.0%
---------------
ROAD & RAIL - 0.0% Asciano Group 48,559 51,692
---------------
TEXTILES, APPAREL & LUXURY GOODS - 0.0% Billabong International Ltd. 8,070 44,318
---------------
TRANSPORTATION INFRASTRUCTURE - 0.1% Macquarie Airports Group 51,082 85,987
Macquarie Infrastructure Group 207,733 249,012
Transurban Group 95,317 360,550
---------------
695,549
---------------
TOTAL COMMON STOCKS IN AUSTRALIA 38,391,246
---------------
AUSTRIA - 0.3%
BUILDING PRODUCTS - 0.0% Wienerberger AG 7,093 120,993
---------------
COMMERCIAL BANKS - 0.1% Erste Bank der Oesterreichischen Sparkassen 16,166 376,407
Raiffeisen International Bank Holding AG 4,465 124,123
---------------
500,530
---------------
CONSTRUCTION & ENGINEERING - 0.0% Strabag SE 4,955 115,778
---------------
2
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
DIVERSIFIED TELECOMMUNICATION Telekom Austria AG 28,456 $ 414,038
---------------
SERVICES - 0.1%
ELECTRIC UTILITIES - 0.0% Verbund - Oesterreichische
Elektrizitaetswirtschafts AG 5,715 264,248
---------------
INSURANCE - 0.0% Vienna Insurance Group 2,331 80,986
---------------
METALS & MINING - 0.0% Voestalpine AG 10,194 220,240
---------------
OIL, GAS & CONSUMABLE FUELS - 0.1% OMV AG 13,921 369,901
---------------
TOTAL COMMON STOCKS IN AUSTRIA 2,086,714
---------------
BELGIUM - 0.7%
BEVERAGES - 0.1% Anheuser-Busch Inbev NV 39,608 919,824
Anheuser-Busch Inbev NV VVPR STRIP(a) 24,374 136
---------------
919,960
---------------
CHEMICALS - 0.1% Solvay SA 4,893 363,337
Umicore SA 11,341 224,104
---------------
587,441
---------------
COMMERCIAL BANKS - 0.1% Dexia NV 42,737 193,762
KBC Bancassurance Holding 13,180 396,089
---------------
589,851
---------------
DIVERSIFIED FINANCIAL SERVICES - 0.2% Fortis 184,182 242,873
Groupe Bruxelles Lambert SA 6,501 520,803
KBC Ancora 3,067 53,206
Nationale A Portefeuille 3,872 188,830
---------------
1,005,712
---------------
DIVERSIFIED TELECOMMUNICATION Belgacom SA 13,949 533,248
---------------
SERVICES - 0.1%
FOOD & STAPLES RETAILING - 0.1% Colruyt SA 1,343 288,593
Delhaize Group 8,278 511,718
---------------
800,311
---------------
PHARMACEUTICALS - 0.0% UCB SA 8,700 283,779
WIRELESS TELECOMMUNICATION Mobistar SA 2,394 172,690
SERVICES - 0.0%
---------------
TOTAL COMMON STOCKS IN BELGIUM 4,892,992
---------------
BERMUDA - 0.0%
ENERGY EQUIPMENT & SERVICES - 0.0% SeaDrill Ltd. 26,734 217,882
---------------
MARINE - 0.0% Pacific Basin Shipping Ltd. 110,713 50,965
---------------
OIL, GAS & CONSUMABLE FUELS - 0.0% Mongolia Energy Co. Ltd. (a) 244,297 75,990
---------------
TEXTILES, APPAREL & LUXURY GOODS - 0.0% Yue Yuen Industrial Holdings Ltd. 33,785 67,078
---------------
TOTAL COMMON STOCKS IN BERMUDA 411,915
---------------
CAYMAN ISLANDS - 0.0%
COMMUNICATIONS EQUIPMENT - 0.0% Foxconn International Holdings Ltd. (a) 148,529 49,835
---------------
MULTILINE RETAIL - 0.0% Lifestyle International Holdings Ltd. 32,013 32,693
---------------
TOTAL COMMON STOCKS IN THE CAYMAN ISLANDS 82,528
---------------
DENMARK - 0.8%
---------------
BEVERAGES - 0.0% Carlsberg A/S 5,874 192,019
---------------
CHEMICALS - 0.1% Novozymes A/S Class B 4,067 326,182
---------------
COMMERCIAL BANKS - 0.1% Danske Bank A/S 39,851 401,459
3
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
Jyske Bank (a) 3,300 $ 77,026
---------------
478,485
---------------
CONSTRUCTION & ENGINEERING - 0.0% FLS Industries A/S Class B 4,367 153,284
---------------
ELECTRICAL EQUIPMENT - 0.1% Vestas Wind Systems A/S (a) 16,259 956,790
---------------
FOOD PRODUCTS - 0.0% Danisco A/S 4,513 184,314
---------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.0% Coloplast A/S Class B 1,521 105,181
William Demant Holding (a) 1,330 55,685
---------------
160,866
---------------
INSURANCE - 0.1% Topdanmark A/S (a) 1,551 203,123
TrygVesta A/S 2,219 139,841
---------------
342,964
---------------
MARINE - 0.1% A P Moller - Maersk A/S Class A 50 273,635
A P Moller - Maersk A/S Class B 91 489,717
---------------
763,352
---------------
PHARMACEUTICALS - 0.3% Novo-Nordisk A/S Class B 37,952 1,957,712
---------------
ROAD & RAIL - 0.0% Dsv A/S 15,808 172,033
---------------
TOTAL COMMON STOCKS IN DENMARK 5,688,001
---------------
FINLAND - 1.2%
AUTO COMPONENTS - 0.0% Nokian Renkaat Oyj 8,515 96,745
---------------
COMMUNICATIONS EQUIPMENT - 0.7% Nokia Oyj 317,753 4,986,297
---------------
DIVERSIFIED FINANCIAL SERVICES - 0.0% OKO Bank 6,121 85,131
---------------
DIVERSIFIED TELECOMMUNICATION Elisa Corp. 13,141 228,770
---------------
SERVICES - 0.0%
ELECTRIC UTILITIES - 0.1% Fortum Oyj 36,645 796,490
---------------
FOOD & STAPLES RETAILING - 0.0% Kesko Oyj Class B 6,235 157,105
---------------
INSURANCE - 0.1% Sampo Oyj 38,401 726,830
---------------
MACHINERY - 0.1% Kone Oyj Class B 12,704 284,871
Metso Oyj 11,856 145,296
Wartsila Oyj 7,230 218,463
---------------
648,630
---------------
MEDIA - 0.0% Sanoma Oyj 4,060 52,732
---------------
METALS & MINING - 0.0% Outokumpu Oyj 9,768 116,230
Rautaruukki Oyj 7,096 123,934
---------------
240,164
---------------
OIL, GAS & CONSUMABLE FUELS - 0.0% Neste Oil Oyj 10,559 158,936
PAPER & FOREST PRODUCTS - 0.2% Stora Enso Oyj Class R 53,245 421,781
---------------
UPM-Kymmene Oyj 46,654 598,045
---------------
1,019,826
PHARMACEUTICALS - 0.0% Orion Oyj 4,698 79,902
---------------
TOTAL COMMON STOCKS IN FINLAND 9,277,558
---------------
FRANCE - 9.8%
AEROSPACE & DEFENSE - 0.2% European Aeronautic Defense and Space Co. 26,785 453,613
Safran SA 15,605 210,693
Thales SA 7,177 300,595
Zodiac SA 3,520 128,528
---------------
1,093,429
---------------
AIRLINES - 0.0% Air France-KLM 11,113 143,316
---------------
4
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
AUTO COMPONENTS - 0.1% Compagnie Generale des Etablissements 12,919 $ 682,558
Valeo SA 6,460 96,234
---------------
778,792
---------------
AUTOMOBILES - 0.1% Peugeot SA 13,684 233,951
Renault SA 14,516 378,810
---------------
612,761
---------------
BEVERAGES - 0.1% Pernod-Ricard SA 14,425 1,071,602
---------------
BUILDING PRODUCTS - 0.2% Cie de Saint-Gobain SA 24,417 1,153,708
---------------
CHEMICALS - 0.3% Air Liquide 20,763 1,901,462
---------------
COMMERCIAL BANKS - 0.8% BNP Paribas SA 68,178 2,942,866
Credit Agricole SA 69,667 782,508
Natixis 80,926 143,556
Societe Generale SA 39,264 1,991,977
---------------
5,860,907
---------------
COMMERCIAL SERVICES & SUPPLIES - 0.1% Societe BIC SA 1,668 95,967
Suez Environnement SA (a) 22,304 376,684
---------------
472,651
---------------
COMMUNICATIONS EQUIPMENT - 0.1% Alcatel SA 198,597 429,884
---------------
CONSTRUCTION & ENGINEERING - 0.4% Bouygues 20,139 854,366
Eiffage 3,519 184,495
Vinci SA 35,134 1,482,641
---------------
2,521,502
---------------
CONSTRUCTION MATERIALS - 0.1% Imerys SA 2,195 100,323
Lafarge SA 11,452 700,420
---------------
800,743
---------------
DIVERSIFIED FINANCIAL SERVICES - 0.0% Eurazeo 2,508 117,950
---------------
DIVERSIFIED TELECOMMUNICATION France Telecom SA 150,246 4,187,757
SERVICES - 0.6% Iliad SA 1,114 96,715
---------------
4,284,472
---------------
ELECTRIC UTILITIES - 0.1% Electricite de France SA 16,545 962,287
---------------
ELECTRICAL EQUIPMENT - 0.4% Alstom 17,533 1,044,873
Legrand Promesses 9,435 180,687
Schneider Electric SA 18,786 1,398,688
---------------
2,624,248
---------------
ENERGY EQUIPMENT & SERVICES - 0.1% Compagnie Generale de Geophysique SA (a) 10,727 160,569
Technip SA 8,422 258,588
---------------
419,157
---------------
FOOD & STAPLES RETAILING - 0.3% Carrefour SA 52,655 2,035,347
Casino Guichard Perrachon SA 3,591 273,686
---------------
2,309,033
---------------
FOOD PRODUCTS - 0.3% Groupe Danone 36,628 2,213,055
---------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.1% Cie Generale d'Optique Essilor International 17,775 834,980
---------------
HOTELS, RESTAURANTS & LEISURE - 0.2% Accor SA 16,723 823,767
Sodexho Alliance SA 7,849 436,222
---------------
1,259,989
---------------
IT SERVICES - 0.1% Atos Origin SA 5,609 141,179
5
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
Cap Gemini SA 12,634 $ 488,518
---------------
629,697
---------------
INDEPENDENT POWER PRODUCERS & ENERGY EDP Renovaveis SA (a) 13,128 91,821
TRADERS - 0.0%
---------------
INDUSTRIAL CONGLOMERATES - 0.0% Wendel 2,216 110,857
---------------
INSURANCE - 0.5% AXA SA 129,232 2,900,688
CNP Assurances 3,055 221,972
Scor SE 13,521 312,381
---------------
3,435,041
---------------
MACHINERY - 0.1% Vallourec SA 4,556 518,017
---------------
MEDIA - 0.6% Eutelsat Communications 8,923 210,751
JC Decaux SA 5,607 96,979
Lagardere S.C.A. 10,889 442,401
M6-Metropole Television SA 3,026 58,666
PagesJaunes Groupe SA 10,464 103,111
Publicis Groupe 10,822 279,293
Societe Television Francaise 1 9,437 138,266
Vivendi SA 97,557 3,179,773
---------------
4,509,240
---------------
METALS & MINING - 0.0% Eramet 426 83,099
---------------
MULTI-UTILITIES - 0.8% GDF Suez 90,797 4,506,895
Veolia Environnement SA 31,705 1,000,067
---------------
5,506,962
---------------
MULTILINE RETAIL - 0.1% Pinault-Printemps-Redoute 6,346 415,506
---------------
OFFICE ELECTRONICS - 0.0% Neopost SA 2,619 237,643
---------------
OIL, GAS & CONSUMABLE FUELS - 1.4% Total SA 177,470 9,757,146
---------------
PERSONAL PRODUCTS - 0.2% L'Oreal SA 19,820 1,729,709
---------------
PHARMACEUTICALS - 0.8% Sanofi-Aventis 86,580 5,537,927
---------------
PROFESSIONAL SERVICES - 0.0% Bureau Veritas SA 4,034 162,183
---------------
REAL ESTATE INVESTMENT TRUSTS Gecina SA 839 58,336
(REITS) - 0.2% ICADE 1,182 98,229
Klepierre 6,884 169,292
Unibail - Rodamco 7,161 1,069,814
---------------
1,395,671
---------------
SEMICONDUCTORS & SEMICONDUCTOR STMicroelectronics NV 58,053 389,341
EQUIPMENT - 0.1%
---------------
SOFTWARE - 0.0% Dassault Systemes SA 5,132 232,670
---------------
TEXTILES, APPAREL & LUXURY GOODS - 0.3% Christian Dior SA 4,485 253,578
Hermes International 5,692 796,895
LVMH Moet Hennessy Louis Vuitton SA 20,592 1,380,045
---------------
2,430,518
---------------
TRANSPORTATION INFRASTRUCTURE - 0.0% Aeroports de Paris 2,398 163,249
Societe Des Autoroutes Paris-Rhin-Rhone 1,437 100,226
---------------
263,475
---------------
TOTAL COMMON STOCKS IN FRANCE 69,302,451
---------------
GERMANY - 8.3%
AIR FREIGHT & LOGISTICS - 0.2% Deutsche Post AG 69,745 1,179,641
---------------
6
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
AIRLINES - 0.0% Deutsche Lufthansa AG 18,828 $ 309,605
---------------
AUTO COMPONENTS - 0.2% Continental AG (a) 12,383 1,247,939
---------------
AUTOMOBILES - 1.1% Bayerische Motoren Werke AG 28,700 881,239
Bayerische Motoren Werke AG
(Preference Shares) 5,309 103,699
DaimlerChrysler AG 70,599 2,689,951
Porsche Automobil Holding SE
(Preference Shares) 7,884 617,118
Volkswagen AG 9,578 3,331,346
---------------
7,623,353
---------------
CAPITAL MARKETS - 0.3% Deutsche Bank AG Registered Shares 45,872 1,814,062
---------------
CHEMICALS - 0.7% BASF SE 78,772 3,060,578
K+S AG 12,851 734,481
Linde AG 11,059 928,165
Wacker Chemie AG 1,287 137,816
---------------
4,861,040
---------------
COMMERCIAL BANKS - 0.1% Commerzbank AG 56,690 538,618
Deutsche Postbank AG 6,769 146,500
Hypo Real Estate Holding AG 13,286 58,701
---------------
743,819
---------------
CONSTRUCTION & ENGINEERING - 0.0% Hochtief AG 3,455 178,162
---------------
CONSTRUCTION MATERIALS - 0.0% HeidelbergCement AG 2,346 102,630
---------------
DIVERSIFIED FINANCIAL SERVICES - 0.2% Deutsche Boerse AG 16,259 1,176,321
---------------
DIVERSIFIED TELECOMMUNICATION Deutsche Telekom AG 229,735 3,473,430
SERVICES - 0.5%
ELECTRIC UTILITIES - 0.9% E.ON AG 158,040 6,205,782
ELECTRICAL EQUIPMENT - 0.0% Q-Cells AG (a) 4,977 186,054
Solarworld AG 6,748 151,020
---------------
337,074
---------------
FOOD & STAPLES RETAILING - 0.1% Metro AG 9,362 372,313
HEALTH CARE EQUIPMENT & SUPPLIES - 0.1% Fresenius AG 2,764 139,491
Fresenius AG (Preference Shares) 6,253 366,958
---------------
506,449
---------------
HEALTH CARE PROVIDERS & SERVICES - 0.1% Celesio AG 7,048 190,702
Fresenius Medical Care AG 16,082 739,317
---------------
930,019
---------------
HOTELS, RESTAURANTS & LEISURE - 0.0% TUI AG 17,565 208,667
---------------
HOUSEHOLD PRODUCTS - 0.0% Henkel KGaA 11,896 310,073
---------------
INDUSTRIAL CONGLOMERATES - 0.8% Siemens AG 71,711 5,398,644
---------------
INSURANCE - 1.0% Allianz AG Registered Shares 36,947 3,931,184
Hannover Rueckversicherung AG
Registered Shares 4,957 157,636
Muenchener Rueckversicherungs AG
Registered Shares 17,317 2,688,423
---------------
6,777,243
---------------
INTERNET SOFTWARE & SERVICES - 0.0% United Internet AG 11,411 103,223
---------------
MACHINERY - 0.1% GEA Group AG 12,377 214,929
7
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
MAN AG 8,972 $ 503,273
---------------
718,202
---------------
METALS & MINING - 0.2% Salzgitter AG 3,391 263,532
ThyssenKrupp AG 30,495 848,922
---------------
1,112,454
---------------
MULTI-UTILITIES - 0.5% RWE AG 37,100 3,295,108
---------------
PERSONAL PRODUCTS - 0.1% Beiersdorf AG 7,287 431,612
---------------
PHARMACEUTICALS - 0.6% Bayer AG 63,337 3,690,546
Merck KGaA 5,332 477,002
---------------
4,167,548
---------------
SEMICONDUCTORS & SEMICONDUCTOR Infineon Technologies AG (a) 61,658 82,985
EQUIPMENT - 0.0%
SOFTWARE - 0.4% SAP AG 72,430 2,628,269
---------------
TEXTILES, APPAREL & LUXURY GOODS - 0.1% Adidas-Salomon AG 16,799 640,371
Puma AG Rudolf Dassler Sport 573 114,192
---------------
754,563
---------------
TRANSPORTATION INFRASTRUCTURE - 0.0% Fraport AG 2,921 132,173
Hamburger Hafen und Logistik AG 2,544 85,174
---------------
217,347
---------------
TOTAL COMMON STOCKS IN GERMANY 57,267,577
---------------
GREECE - 0.4%
BEVERAGES - 0.0% Coca-Cola Hellenic Bottling Co. SA 12,150 176,669
---------------
CAPITAL MARKETS - 0.0% Marfin Investment Group SA 53,258 213,080
---------------
COMMERCIAL BANKS - 0.2% Alpha Bank AE 30,594 286,225
EFG Eurobank Ergasias SA 27,217 216,761
National Bank of Greece SA 43,816 813,689
Piraeus Bank SA 27,189 242,702
---------------
1,559,377
---------------
CONSTRUCTION MATERIALS - 0.0% Titan Cement Co. SA 3,439 66,754
---------------
DIVERSIFIED TELECOMMUNICATION Hellenic Telecommunications
SERVICES - 0.1% Organization SA 22,722 377,499
---------------
ELECTRIC UTILITIES - 0.0% Public Power Corp. 8,606 138,309
---------------
HOTELS, RESTAURANTS & LEISURE - 0.1% OPAP SA 17,998 517,953
---------------
OIL, GAS & CONSUMABLE FUELS - 0.0% Hellenic Petroleum SA 6,553 48,534
---------------
TOTAL COMMON STOCKS IN GREECE 3,098,175
---------------
HONG KONG - 1.7%
AIRLINES - 0.0% Cathay Pacific Airways Ltd. 106,263 120,025
---------------
COMMERCIAL BANKS - 0.2% BOC Hong Kong Holdings Ltd. 304,900 348,985
Bank of East Asia Ltd. 117,139 247,090
Hang Seng Bank Ltd. 63,053 832,464
Wing Hang Bank Ltd. 10,500 61,080
---------------
1,489,619
---------------
DISTRIBUTORS - 0.0% Li & Fung Ltd. 183,990 317,971
---------------
DIVERSIFIED FINANCIAL SERVICES - 0.1% Hong Kong Exchanges and Clearing Ltd. 89,927 863,383
---------------
DIVERSIFIED TELECOMMUNICATION PCCW Ltd. 364,195 174,853
SERVICES - 0.0%
ELECTRIC UTILITIES - 0.3% CLP Holdings Ltd. 169,187 1,150,256
8
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
Cheung Kong Infrastructure Holdings Ltd. 28,500 $ 107,626
HongKong Electric Holdings Ltd. 117,000 658,709
---------------
1,916,591
---------------
ELECTRONIC EQUIPMENT & Kingboard Chemical Holdings Ltd. 50,647 91,806
INSTRUMENTS - 0.0%
GAS UTILITIES - 0.1% The Hong Kong & China Gas Ltd. 323,290 490,258
---------------
HOTELS, RESTAURANTS & LEISURE - 0.0% Shangri-La Asia Ltd. 84,990 98,307
---------------
INDUSTRIAL CONGLOMERATES - 0.1% Hutchison Whampoa Ltd. 176,176 889,375
NWS Holdings Ltd. 79,000 118,346
---------------
1,007,721
---------------
MARINE - 0.0% Orient Overseas International Ltd. 17,057 38,247
---------------
MEDIA - 0.0% Television Broadcasts Ltd. 15,000 49,174
---------------
REAL ESTATE INVESTMENT TRUSTS The Link REIT 184,414 306,774
(REITS) - 0.1%
---------------
REAL ESTATE MANAGEMENT & Cheung Kong Holdings Ltd. 114,835 1,095,483
DEVELOPMENT - 0.7% Chinese Estates Holdings Ltd. 96,000 109,836
Hang Lung Group Ltd. 83,000 253,552
Hang Lung Properties Ltd. 167,000 366,660
Henderson Land Development Co., Ltd. 86,491 323,491
Hopewell Holdings Ltd. 56,349 186,946
Hysan Development Co. Ltd. 56,791 92,339
Kerry Properties Ltd. 55,000 147,956
New World Development Ltd. 195,484 200,160
Sino Land Co. 160,421 167,999
Sun Hung Kai Properties Ltd. 116,324 978,813
Swire Pacific Ltd. Class A 68,077 471,584
Wharf Holdings Ltd. 112,870 312,442
Wheelock and Co., Ltd. 91,000 200,539
---------------
4,907,800
---------------
ROAD & RAIL - 0.0% MTR Corp. 115,000 267,827
---------------
SEMICONDUCTORS & SEMICONDUCTOR ASM Pacific Technology Ltd. 12,504 41,212
EQUIPMENT - 0.0%
---------------
SPECIALTY RETAIL - 0.1% Esprit Holdings Ltd. 87,200 496,901
---------------
TRANSPORTATION INFRASTRUCTURE - 0.0% Hong Kong Aircraft Engineering Company Ltd. 3,200 26,432
---------------
WIRELESS TELECOMMUNICATION Hutchison Telecommunications
SERVICES - 0.0% International Ltd. 158,647 42,782
---------------
TOTAL COMMON STOCKS IN HONG KONG 12,747,683
---------------
IRELAND - 0.3%
AIRLINES - 0.0% Ryanair Holdings Plc (a) 35,968 152,864
---------------
COMMERCIAL BANKS - 0.1% Allied Irish Banks Plc 72,617 173,702
Anglo Irish Bank Corp. Plc 62,641 15,080
Bank of Ireland 82,478 95,728
---------------
284,510
---------------
CONSTRUCTION MATERIALS - 0.2% CRH Plc 44,247 1,130,579
---------------
FOOD PRODUCTS - 0.0% Kerry Group Plc 10,288 187,557
---------------
PHARMACEUTICALS - 0.0% Elan Corp. Plc (a) 37,704 222,533
---------------
TOTAL COMMON STOCKS IN IRELAND 1,978,043
---------------
9
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
ITALY - 3.5%
AEROSPACE & DEFENSE - 0.1% Finmeccanica SpA 34,599 $ 535,901
---------------
AUTO COMPONENTS - 0.0% Pirelli & C. SpA 204,382 77,190
---------------
AUTOMOBILES - 0.1% Fiat SpA 64,040 428,692
---------------
CAPITAL MARKETS - 0.1% Mediobanca SpA 40,577 417,280
---------------
COMMERCIAL BANKS - 1.0% Banca Carige SpA 61,682 150,118
Banca Monte dei Paschi di Siena SpA 204,231 445,967
Banca Popolare di Milano Scrl 34,459 207,131
Banco Popolare SpA 54,523 386,582
Intesa Sanpaolo SpA 636,412 2,311,885
Intesa Sanpaolo SpA (Non-Convertible
Savings Shares) 68,618 177,506
Unicredit SpA 943,627 2,399,193
Unione Di Banche Italiane ScpA 51,394 753,757
---------------
6,832,139
---------------
CONSTRUCTION MATERIALS - 0.0% Italcementi SpA 6,190 80,435
Italcementi SpA (Non-Convertible
Savings Shares) 10,722 74,765
---------------
155,200
---------------
DIVERSIFIED FINANCIAL SERVICES - 0.0% IFIL-Investments SpA 31,121 80,545
---------------
DIVERSIFIED TELECOMMUNICATION Telecom Italia SpA 833,858 1,371,839
SERVICES - 0.3% Telecom Italia SpA (Non-Convertible
Savings Shares) 497,057 565,929
---------------
1,937,768
---------------
ELECTRIC UTILITIES - 0.4% Enel SpA 361,832 2,330,774
Terna SpA 102,837 339,360
---------------
2,670,134
---------------
ELECTRICAL EQUIPMENT - 0.0% Prysmian SpA 8,885 140,703
---------------
ENERGY EQUIPMENT & SERVICES - 0.1% Saipem SpA 23,126 394,427
---------------
FOOD PRODUCTS - 0.0% Parmalat SpA 140,552 235,789
---------------
GAS UTILITIES - 0.1% Snam Rete Gas SpA 64,373 359,587
---------------
HOTELS, RESTAURANTS & LEISURE - 0.0% Autogrill SpA 8,807 67,484
Lottomatica SpA 6,535 162,665
---------------
230,149
---------------
INSURANCE - 0.4% Alleanza Assicurazioni SpA 34,823 286,234
Assicurazioni Generali SpA 86,256 2,381,482
Fondiaria-Sai SpA 6,498 118,617
Mediolanum SpA 27,409 119,106
Unipol SpA 54,783 85,860
Unipol SpA (Preference Shares) 53,172 58,617
---------------
3,049,916
---------------
MEDIA - 0.1% Mediaset SpA 63,163 363,946
---------------
MULTI-UTILITIES - 0.0% A2A SpA 103,091 185,338
---------------
OIL, GAS & CONSUMABLE FUELS - 0.7% Eni SpA 215,550 5,186,917
Saras SpA 19,965 68,100
---------------
5,255,017
---------------
TEXTILES, APPAREL & LUXURY GOODS - 0.0% Bulgari SpA 12,838 81,810
10
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
Luxottica Group SpA 11,420 $ 208,900
---------------
290,710
---------------
TRANSPORTATION INFRASTRUCTURE - 0.1% Autostrade SpA 19,679 369,168
---------------
TOTAL COMMON STOCKS IN ITALY 24,009,599
---------------
JAPAN - 23.7%
AIR FREIGHT & LOGISTICS - 0.1% Yamato Transport Co., Ltd. 35,000 457,688
---------------
AIRLINES - 0.1% All Nippon Airways Co., Ltd. 41,000 161,588
Japan Airlines Corp. (a) 87,000 205,219
---------------
366,807
---------------
AUTO COMPONENTS - 0.4% Aisin Seiki Co., Ltd. 15,400 220,569
Bridgestone Corp. 52,700 790,479
Denso Corp. 38,900 659,136
NGK Spark Plug Co., Ltd. 15,000 120,511
NHK Spring Co., Ltd. 9,000 33,248
NOK Corp. 10,600 74,639
Stanley Electric Co., Ltd. 11,100 117,202
Sumitomo Rubber Industries, Ltd. 17,100 148,842
Toyoda Gosei Co., Ltd. 5,300 62,407
Toyota Boshoku Corp. 3,800 30,963
Toyota Industries Corp. 15,400 331,732
---------------
2,589,728
---------------
AUTOMOBILES - 1.8% Daihatsu Motor Co., Ltd. 20,000 176,736
Fuji Heavy Industries Ltd. 47,000 129,162
Honda Motor Co., Ltd. 136,500 2,907,271
Isuzu Motors Ltd. 100,000 129,216
Mazda Motor Corp. 74,000 125,512
Mitsubishi Motors Corp. (a) 280,000 383,522
Nissan Motor Co., Ltd. 181,000 651,171
Suzuki Motor Corp. 31,800 444,454
Toyota Motor Corp. 228,200 7,543,910
Yamaha Motor Co., Ltd. 16,200 170,462
---------------
12,661,416
---------------
BEVERAGES - 0.2% Asahi Breweries Ltd. 34,200 591,320
Coca-Cola West Holdings Co., Ltd. 3,300 71,350
Ito En, Ltd. 5,800 85,621
Kirin Holdings Co., Ltd. 63,000 837,609
Sapporo Holdings Ltd. 23,000 145,680
---------------
1,731,580
---------------
BUILDING PRODUCTS - 0.2% Asahi Glass Co., Ltd. 81,100 462,295
Daikin Industries Ltd. 22,500 591,716
JS Group Corp. 19,300 298,238
Nippon Sheet Glass Co., Ltd. 58,000 192,024
Toto Ltd. 22,000 139,029
---------------
1,683,302
---------------
CAPITAL MARKETS - 0.3% Daiwa Securities Group, Inc. 107,000 642,355
Jafco Co., Ltd. 1,900 48,557
Matsui Securities Co., Ltd. 7,900 66,008
11
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
Nomura Holdings, Inc. 146,800 $ 1,222,304
SBI Holdings, Inc. 1,486 229,408
Shinko Securities Co., Ltd. 40,300 88,424
---------------
2,297,056
---------------
CHEMICALS - 0.9% Asahi Kasei Corp. 94,000 414,921
DIC Corp. 30,000 63,293
Daicel Chemical Industries Ltd. 14,000 66,316
Denki Kagaku Kogyo Kabushiki Kaisha 25,000 61,563
Hitachi Chemical Co., Ltd. 8,700 90,377
JSR Corp. 14,500 163,129
Kaneka Corp. 17,000 108,591
Kansai Paint Co., Ltd. 14,000 71,927
Kuraray Co., Ltd. 26,500 207,626
Mitsubishi Chemical Holdings Corp. 103,000 456,403
Mitsubishi Gas Chemical Co., Inc. 31,000 127,200
Mitsubishi Rayon Co., Ltd. 57,000 172,645
Mitsui Chemicals, Inc. 55,000 204,384
Nippon Sanso Corp. 18,000 138,941
Nissan Chemical Industries Ltd. 16,000 155,091
Nitto Denko Corp. 13,010 249,061
Shin-Etsu Chemical Co., Ltd. 34,900 1,610,690
Showa Denko KK 93,000 134,700
Sumitomo Chemical Co., Ltd. 126,000 431,934
Teijin Ltd. 85,000 241,444
Tokuyama Corp. 20,000 169,568
Toray Industries, Inc. 117,700 598,995
Tosoh Corp. 49,000 120,940
Ube Industries Ltd. 81,000 227,541
---------------
6,287,280
---------------
COMMERCIAL BANKS - 2.4% The 77 Bank Ltd. 21,000 114,306
Aozora Bank Ltd. 70,000 65,765
The Bank of Kyoto Ltd. 26,000 291,394
The Bank of Yokohama Ltd. 104,000 613,472
The Chiba Bank Ltd. 65,000 406,500
The Chugoku Bank Ltd. 16,000 247,217
Chuo Mitsui Trust Holdings, Inc. 84,000 413,004
Fukuoka Financial Group, Inc. 67,000 292,856
The Gunma Bank Ltd. 26,000 166,443
The Hachijuni Bank Ltd. 28,000 161,013
The Hiroshima Bank Ltd. 31,000 135,658
Hokuhoku Financial Group, Inc. 84,100 199,084
The Iyo Bank Ltd. 23,000 286,281
The Joyo Bank Ltd. 50,000 284,357
Mitsubishi UFJ Financial Group, Inc. 904,674 5,686,011
Mizuho Financial Group, Inc. 812 2,308,355
The Nishi-Nippon City Bank Ltd. 48,000 139,610
Resona Holdings, Inc. 447 661,254
12
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
Sapporo Hokuyo Holdings, Inc. 17 $ 65,450
Seven Bank Ltd. 40 152,888
Shinsei Bank Ltd. 122,000 193,092
The Shizuoka Bank Ltd. 51,000 592,661
Sumitomo Mitsui Financial Group, Inc. 562 2,331,076
The Sumitomo Trust & Banking Co., Ltd. 125,000 738,906
Suruga Bank Ltd. 15,000 149,019
Yamaguchi Financial Group, Inc. 21,000 236,174
The Yasuda Trust & Banking Co., Ltd. 145,000 183,963
---------------
17,115,809
---------------
COMMERCIAL SERVICES & SUPPLIES - 0.3% Dai Nippon Printing Co., Ltd. 47,000 519,566
Secom Co., Ltd. 18,200 939,165
Toppan Printing Co., Ltd. 41,000 316,738
---------------
1,775,469
---------------
COMPUTERS & PERIPHERALS - 0.4% Fujitsu Ltd. 155,000 753,610
Mitsumi Electric Co., Ltd. 7,400 129,580
NEC Corp. 154,000 521,006
Seiko Epson Corp. 10,300 163,893
Toshiba Corp. 256,000 1,053,386
---------------
2,621,475
---------------
CONSTRUCTION & ENGINEERING - 0.2% JGC Corp. 18,000 269,387
Kajima Corp. 67,800 238,804
Kinden Corp. 7,000 63,313
Obayashi Corp. 54,000 322,753
Shimizu Corp. 48,000 281,781
Taisei Corp. 93,000 256,356
---------------
1,432,394
---------------
CONSTRUCTION MATERIALS - 0.0% Taiheiyo Cement Corp. 73,000 140,728
---------------
CONSUMER FINANCE - 0.2% Acom Co., Ltd. 4,160 175,820
Aeon Credit Service Co., Ltd. 8,900 93,836
Credit Saison Co., Ltd. 15,900 220,728
ORIX Corp. 7,360 420,263
Promise Co., Ltd. 5,900 149,653
Takefuji Corp. 8,870 72,774
---------------
1,133,074
---------------
CONTAINERS & PACKAGING - 0.0% Toyo Seikan Kaisha Ltd. 10,600 183,739
---------------
DISTRIBUTORS - 0.0% Canon Marketing Japan Inc. 4,700 75,684
---------------
DIVERSIFIED CONSUMER SERVICES - 0.0% Benesse Corp. 5,400 236,310
---------------
DIVERSIFIED FINANCIAL SERVICES - 0.0% Diamond Lease Co., Ltd. 3,720 94,808
---------------
DIVERSIFIED TELECOMMUNICATION
SERVICES - 0.3% Nippon Telegraph & Telephone Corp. 418 2,158,014
---------------
ELECTRIC UTILITIES - 1.5% Chubu Electric Power Co., Inc. 54,000 1,644,723
Chugoku Electric Power Co. 21,700 571,370
Hokkaido Electric Power Co., Inc. 14,800 374,183
Hokuriku Electric Power 16,000 452,608
The Kansai Electric Power Co., Inc. 62,200 1,801,685
Kyushu Electric Power Co., Inc. 30,300 804,393
13
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
Shikoku Electric Power Co., Inc. 16,200 $ 546,185
Tohoku Electric Power Co., Inc. 34,100 922,447
The Tokyo Electric Power Co., Inc. 102,100 3,408,277
---------------
10,525,871
---------------
ELECTRICAL EQUIPMENT - 0.3% Fuji Electric Holdings Co., Ltd. 31,800 47,911
Furukawa Electric Co., Ltd. 52,000 253,765
Mitsubishi Electric Corp. 155,000 971,347
Panasonic Electric Works Ltd. 32,873 293,127
Sumitomo Electric Industries Ltd. 60,200 466,020
Ushio, Inc. 7,000 92,486
---------------
2,124,656
---------------
ELECTRONIC EQUIPMENT & Alps Electric Co., Ltd. 17,700 87,297
INSTRUMENTS - 1.0% Citizens Holding Co., Ltd. 32,400 116,792
Fuji Photo Film Co., Ltd. 42,100 939,845
Hirose Electric Co., Ltd. 2,300 232,716
Hitachi High-Technologies Corp. 4,300 68,860
Hitachi Ltd. 287,000 1,113,824
Hoya Corp. 33,100 578,131
Ibiden Co., Ltd. 10,900 225,999
Keyence Corp. 3,000 616,536
Kyocera Corp. 14,200 1,028,049
Mabuchi Motor Co., Ltd. 1,600 66,328
Murata Manufacturing Co., Ltd. 17,200 674,437
Nidec Corp. 9,200 359,806
Nippon Electric Glass Co. 27,500 145,162
Omron Corp. 14,500 194,820
Shimadzu Corp. 26,000 163,667
TDK Corp. 11,300 417,497
Yaskawa Electric Corp. 16,000 64,625
Yokogawa Electric Corp. 12,700 83,577
---------------
7,177,968
---------------
FOOD & STAPLES RETAILING - 0.5% Aeon Co., Ltd. 51,000 513,606
FamilyMart Co., Ltd. 5,700 247,542
Lawson, Inc. 6,500 374,864
Seven & I Holdings Co., Ltd. 68,800 2,364,766
UNY Co., Ltd. 16,000 177,058
---------------
3,677,836
---------------
FOOD PRODUCTS - 0.3% Ajinomoto Co., Inc. 55,000 600,277
Kikkoman Corp. 16,000 190,130
Meiji Dairies Corp. 29,000 156,125
Nippon Meat Packers, Inc. 18,000 273,995
Nisshin Seifun Group, Inc. 11,000 145,268
Nissin Foods Holdings Co., Ltd. 7,500 261,363
Toyo Suisan Kaisha, Ltd. 9,000 259,348
Yakult Honsha Co., Ltd. 6,800 145,500
Yamazaki Baking Co., Ltd. 8,000 123,069
2,155,075
14
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
GAS UTILITIES - 0.3% Osaka Gas Co., Ltd. 163,000 $ 753,751
Toho Gas Co., Ltd. 45,000 296,938
Tokyo Gas Co., Ltd. 198,000 1,003,638
---------------
2,054,327
---------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.1% Olympus Corp. 18,000 360,335
Terumo Corp. 14,800 693,313
---------------
1,053,648
---------------
HEALTH CARE PROVIDERS & SERVICES - 0.0% Alfresa Holdings Corp. 1,900 91,074
Mediceo Paltac Holdings Co., Ltd. 9,400 113,065
Suzuken Co., Ltd. 4,600 137,136
---------------
341,275
---------------
HOTELS, RESTAURANTS & LEISURE - 0.1% Oriental Land Co., Ltd. 3,900 320,188
---------------
HOUSEHOLD DURABLES - 0.8% Casio Computer Co., Ltd. 19,000 119,897
HASEKO Corp. 108,000 115,149
Makita Corp. 9,800 219,266
Panasonic Corp. 150,000 1,843,835
Sanyo Electric Co., Ltd. (a) 154,000 288,082
Sekisui Chemical Co., Ltd. 29,000 181,049
Sekisui House Ltd. 37,000 326,431
Sharp Corp. 88,000 634,347
Sony Corp. 84,800 1,854,738
---------------
5,582,794
---------------
HOUSEHOLD PRODUCTS - 0.2% Kao Corp. 44,000 1,336,515
Uni-Charm Corp. 3,600 270,834
---------------
1,607,349
---------------
IT SERVICES - 0.1% Itochu Techno-Science Corp. 1,300 31,761
NTT Data Corp. 113 455,285
Nomura Research Institute Ltd. 8,700 165,963
Obic Co., Ltd. 430 70,223
Otsuka Shokai Co., Ltd. 700 31,882
---------------
755,114
---------------
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS - 0.1% Electric Power Development Co. 11,300 444,161
---------------
INDUSTRIAL CONGLOMERATES - 0.1% Hankyu Hanshin Holdings, Inc. 94,000 542,874
---------------
INSURANCE - 0.7% Aioi Insurance Co., Ltd. 45,000 235,403
Mitsui Sumitomo Insurance Group Holdings, 30,557 971,748
Nipponkoa Insurance Co., Ltd. 53,000 412,330
Nissay Dowa General Insurance Co., Ltd. 8,000 49,754
Sompo Japan Insurance, Inc. 66,800 494,633
Sony Financial Holdings, Inc. 70 267,151
T&D Holdings, Inc. 15,650 662,400
Tokio Marine Holdings, Inc. 57,500 1,703,692
---------------
4,797,111
---------------
INTERNET & CATALOG RETAIL - 0.1% Dena Co. Ltd. 24 77,732
Rakuten, Inc. (a) 539 343,178
---------------
420,910
---------------
INTERNET SOFTWARE & SERVICES - 0.1% Yahoo! Japan Corp. 1,211 496,890
---------------
15
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
LEISURE EQUIPMENT & PRODUCTS - 0.2% Namco Bandai Holdings, Inc. 16,700 $ 183,040
Nikon Corp. 28,000 336,072
Sankyo Co., Ltd. (Gunma) 4,300 216,929
Sega Sammy Holdings, Inc. 17,632 205,605
Shimano, Inc. 5,600 220,453
Yamaha Corp. 12,000 111,566
---------------
1,273,665
---------------
MACHINERY - 1.0% Amada Co., Ltd. 28,000 136,182
Fanuc Ltd. 15,300 1,096,578
Hino Motors Ltd. 22,000 45,346
Hitachi Construction Machinery Co., Ltd. 11,300 135,117
IHI Corp. 98,000 125,011
JTEKT Corp. 15,600 121,574
The Japan Steel Works, Ltd. 32,000 448,027
Kawasaki Heavy Industries Ltd. 142,000 286,643
Komatsu Ltd. 77,400 987,354
Kubota Corp. 87,000 629,914
Kurita Water Industries Ltd. 10,600 286,557
Minebea Co., Ltd. 29,000 100,358
Mitsubishi Heavy Industries Ltd. 275,200 1,229,938
Mitsui Engineering & Shipbuilding Co., Ltd. 58,000 97,702
NGK Insulators Ltd. 21,000 237,966
NSK Ltd. 35,000 132,182
NTN Corp. 26,000 78,567
SMC Corp. 4,600 473,879
Sumitomo Heavy Industries Ltd. 55,000 220,017
THK Co., Ltd. 9,200 96,820
---------------
6,965,732
---------------
MARINE - 0.2% Kawasaki Kisen Kaisha Ltd. 49,000 229,813
Mitsui OSK Lines Ltd. 101,000 624,209
Nippon Yusen Kabushiki Kaisha 100,000 616,474
---------------
1,470,496
---------------
MEDIA - 0.1% Dentsu, Inc. 170 331,936
Fuji Media Holdings, Inc. 54 77,249
Hakuhodo DY Holdings, Inc. 1,140 62,194
Jupiter Telecommunications Co., Ltd. 159 165,494
Toho Co., Ltd. 7,400 159,237
Tokyo Broadcasting System, Inc. 3,500 53,399
---------------
849,509
---------------
METALS & MINING - 0.7% Daido Steel Co., Ltd. 24,000 72,803
Dowa Mining Co., Ltd. (b) 16,000 59,142
Hitachi Metals Ltd. 13,000 60,463
JFE Holdings, Inc. 41,800 1,110,868
Kobe Steel Ltd. 208,000 382,121
Maruichi Steel Tube Ltd. 4,400 122,761
Mitsubishi Materials Corp. 93,000 235,392
Mitsui Mining & Smelting Co., Ltd. 63,000 133,647
16
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
Nippon Steel Corp. 434,000 $ 1,426,247
Nisshin Steel Co., Ltd. 49,000 100,988
Osaka Titanium Technologies Co. 1,500 37,807
Sumitomo Metal Industries Ltd. 316,000 780,558
Sumitomo Metal Mining Co., Ltd. 49,000 524,182
Tokyo Steel Manufacturing Co., Ltd. 9,700 101,776
Yamato Kogyo Co. Ltd. 3,500 94,725
---------------
5,243,480
---------------
MULTILINE RETAIL - 0.1% Isetan Mitsukoshi Holdings Ltd. 30,105 259,802
J Front Retailing Co. Ltd. 34,600 143,176
Marui Group Co. Ltd. 26,700 155,996
Takashimaya Co., Ltd. 24,000 182,398
---------------
741,372
---------------
OFFICE ELECTRONICS - 0.6% Brother Industries Ltd. 23,000 137,211
Canon, Inc. 87,300 2,766,064
Konica Minolta Holdings, Inc. 38,500 299,562
Ricoh Co., Ltd. 54,000 692,103
---------------
3,894,940
---------------
OIL, GAS & CONSUMABLE FUELS - 0.3% Cosmo Oil Co., Ltd. 33,000 102,733
Idemitsu Kosan Co., Ltd. 2,000 128,803
Inpex Corp. 65 518,184
Japan Petrolleum Explora 3,000 131,898
Nippon Mining Holdings, Inc. 69,500 301,571
Nippon Oil Corp. 104,000 527,318
Showa Shell Sekiyu KK 19,900 197,208
TonenGeneral Sekiyu KK 25,000 250,504
---------------
2,158,219
---------------
PAPER & FOREST PRODUCTS - 0.1% Nippon Paper Group, Inc. 85 335,687
OJI Paper Co., Ltd. 69,000 405,662
---------------
741,349
---------------
PERSONAL PRODUCTS - 0.1% Shiseido Co., Ltd. 29,000 596,382
---------------
PHARMACEUTICALS - 1.5% Astellas Pharma, Inc. 40,600 1,661,852
Chugai Pharmaceutical Co., Ltd. 18,000 349,898
Daiichi Sankyo Co., Ltd. 56,400 1,333,768
Dainippon Pharma Co., Ltd. 17,000 159,165
Eisai Co., Ltd. 22,000 918,051
Hisamitsu Pharmaceutical Co., Ltd. 6,300 257,530
Kyowa Hakko Kirin Co. Ltd. 20,000 209,962
Mitsubishi Tanabe Pharma Corp. 20,000 301,876
Ono Pharmacecutical Co., Ltd. 7,600 393,994
Santen Pharmaceutical Co., Ltd. 4,900 148,887
Shionogi & Co., Ltd. 26,000 671,452
Taisho Pharmaceutical Co., Ltd. 11,000 234,323
Takeda Pharmaceutical Co., Ltd. 68,300 3,559,954
Tsumura & Co. 5,500 204,148
---------------
10,404,860
---------------
17
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
REAL ESTATE INVESTMENT TRUSTS Japan Prime Realty Investment Corp. 62 $ 147,173
(REITS) - 0.2% Japan Real Estate Investment Corp. 34 303,727
Japan Retail Fund Investment Corp. 37 159,816
Nippon Building Fund, Inc. 41 450,662
Nomura Real Estate Office Fund, Inc. 20 130,133
---------------
1,191,511
---------------
REAL ESTATE MANAGEMENT Aeon Mall Co. Ltd. 3,600 69,594
& DEVELOPMENT - 0.7% Daito Trust Construction Co., Ltd. 6,500 341,213
Daiwa House Industry Co., Ltd. 41,000 401,988
Leopalace21 Corp. 11,400 115,510
Mitsubishi Estate Co., Ltd. 99,000 1,635,370
Mitsui Fudosan Co., Ltd. 72,000 1,200,401
NTT Urban Development Co. 63 68,227
Nomura Real Estate Holdings, Inc. 3,000 59,852
Sumitomo Realty & Development Co., Ltd. 33,000 496,061
Tokyo Tatemono Co., Ltd. 22,000 100,824
Tokyu Land Corp. 35,000 134,157
---------------
4,623,197
---------------
ROAD & RAIL - 1.0% Central Japan Railway Co. 126 1,092,754
East Japan Railway Co. 286 2,173,789
Keihin Electric Express Railway Co., Ltd. 31,000 273,765
Keio Electric Railway Co., Ltd. 41,000 246,699
Keisei Electric Railway Co., Ltd. 31,000 193,800
Kintetsu Corp. 125,000 575,068
Nippon Express Co., Ltd. 70,000 295,058
Odakyu Electric Railway Co., Ltd. 53,000 466,661
Tobu Railway Co., Ltd. 66,000 394,323
Tokyu Corp. 91,000 458,808
West Japan Railway Co. 148 674,352
---------------
6,845,077
---------------
SEMICONDUCTORS & SEMICONDUCTOR Advantest Corp. 14,800 241,255
EQUIPMENT - 0.2% Elpida Memory, Inc. (a) 14,400 89,076
NEC Electronics Corp. (a) 1,200 11,362
Rohm Co., Ltd. 8,100 408,944
Shinko Electric Industries 2,100 17,148
Sumco Corp. 11,300 143,560
Tokyo Electron Ltd. 15,300 538,615
---------------
1,449,960
---------------
SOFTWARE - 0.6% Konami Corp. 9,800 254,064
Nintendo Co., Ltd. 8,100 3,095,429
Oracle Corp. Japan 2,400 103,952
Square Enix Holdings Co., Ltd. 4,000 129,070
Trend Micro, Inc. (a) 9,500 333,668
---------------
3,916,183
---------------
SPECIALTY RETAIL - 0.2% Abc-Mart Inc 1,600 58,509
Fast Retailing Co., Ltd. 4,200 616,278
Hikari Tsushin, Inc. 800 15,206
18
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
Nitori Co., Ltd. 3,450 $ 268,482
Shimamura Co., Ltd. 1,500 115,808
USS Co., Ltd. 1,440 76,412
Yamada Denki Co., Ltd. 6,920 483,720
---------------
1,634,415
---------------
TEXTILES, APPAREL & LUXURY GOODS - 0.0% Asics Corp. 12,000 97,236
Nisshinbo Industries, Inc. 13,000 99,101
Onward Holdings Co. Ltd. 7,000 55,795
---------------
252,132
---------------
TOBACCO - 0.2% Japan Tobacco, Inc. 364 1,205,692
---------------
TRADING COMPANIES & DISTRIBUTORS - 0.8% Itochu Corp. 125,000 630,637
Marubeni Corp. 146,000 558,970
Mitsubishi Corp. 109,400 1,549,548
Mitsui & Co., Ltd. 147,000 1,511,214
Sojitz Corp. 99,900 166,952
Sumitomo Corp. 90,200 800,009
Toyota Tsusho Corp. 16,700 179,789
---------------
5,397,119
---------------
TRANSPORTATION INFRASTRUCTURE - 0.0% Kamigumi Co., Ltd. 17,000 151,041
Mitsubishi Logistics Corp. 9,000 114,104
---------------
265,145
---------------
WIRELESS TELECOMMUNICATION KDDI Corp. 248 1,770,794
SERVICES - 0.8% NTT DoCoMo, Inc. 1,279 2,517,476
Softbank Corp. 64,600 1,173,213
---------------
5,461,483
---------------
TOTAL COMMON STOCKS IN JAPAN 165,702,326
---------------
KAZAKHSTAN - 0.0%
METALS & MINING - 0.0% Eurasian Natural Resources Corp. 25,222 120,682
---------------
TOTAL COMMON STOCKS IN KAZAKHSTAN 120,682
---------------
LUXEMBOURG - 0.4%
ENERGY EQUIPMENT & SERVICES - 0.1% Tenaris SA 37,664 391,463
---------------
MEDIA - 0.1% SES Global 24,363 472,167
---------------
METALS & MINING - 0.2% ArcelorMittal 70,618 1,711,735
---------------
TOTAL COMMON STOCKS IN LUXEMBOURG 2,575,365
---------------
NETHERLANDS - 2.3%
AIR FREIGHT & LOGISTICS - 0.1% TNT NV 33,940 659,297
---------------
BEVERAGES - 0.1% Heineken Holding NV 10,233 292,302
Heineken NV 20,204 618,580
---------------
910,882
---------------
CHEMICALS - 0.2% Akzo Nobel NV 21,126 871,400
Koninklijke DSM NV 11,225 288,047
---------------
1,159,447
---------------
DIVERSIFIED FINANCIAL SERVICES - 0.3% ING Groep NV CVA 159,098 1,751,020
SNS Reaal 12,764 70,156
---------------
1,821,176
---------------
DIVERSIFIED TELECOMMUNICATION Koninklijke KPN NV 152,062 2,210,743
SERVICES - 0.3%
---------------
19
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
ENERGY EQUIPMENT & SERVICES - 0.0% Fugro NV 4,637 $ 133,281
SBM Offshore NV 12,600 165,536
---------------
298,817
---------------
FOOD & STAPLES RETAILING - 0.2% Koninklijke Ahold NV 100,527 1,238,784
---------------
FOOD PRODUCTS - 0.5% Unilever NV 134,383 3,257,169
---------------
INDUSTRIAL CONGLOMERATES - 0.2% Koninklijke Philips Electronics NV 86,074 1,706,564
---------------
INSURANCE - 0.1% Aegon NV 115,294 727,807
---------------
MEDIA - 0.2% Reed Elsevier NV 54,412 646,926
Wolters Kluwer NV 23,939 453,896
---------------
1,100,822
---------------
PROFESSIONAL SERVICES - 0.0% Randstad Holdings NV 7,691 156,956
---------------
REAL ESTATE INVESTMENT TRUSTS Corio NV 2,933 135,060
(REITS) - 0.0%
---------------
SEMICONDUCTORS & SEMICONDUCTOR ASML Holding NV 38,616 696,136
EQUIPMENT - 0.1%
---------------
TRANSPORTATION INFRASTRUCTURE - 0.0% Koninklijke Boskalis Westminster NV 4,333 101,090
---------------
TOTAL COMMON STOCKS IN THE NETHERLANDS 16,180,750
---------------
NEW ZEALAND - 0.1%
CONSTRUCTION MATERIALS - 0.0% Fletcher Building Ltd. 44,823 151,023
---------------
DIVERSIFIED TELECOMMUNICATION Telecom Corp. of New Zealand Ltd. 149,831 201,377
SERVICES - 0.1%
---------------
ELECTRIC UTILITIES - 0.0% Contact Energy Ltd. 18,866 81,102
---------------
HOTELS, RESTAURANTS & LEISURE - 0.0% Sky City Ltd. 27,722 50,718
---------------
TRANSPORTATION INFRASTRUCTURE - 0.0% Auckland International Airport Ltd. 55,023 52,207
---------------
TOTAL COMMON STOCKS IN NEW ZEALAND 536,427
---------------
NORWAY - 0.6%
CHEMICALS - 0.1% Yara International ASA 17,600 387,143
---------------
COMMERCIAL BANKS - 0.0% DnB NOR ASA 60,599 240,435
---------------
DIVERSIFIED TELECOMMUNICATION Telenor ASA 52,995 357,525
SERVICES - 0.1% Telenor ASA (c) 5,999 122,980
---------------
480,505
---------------
ELECTRICAL EQUIPMENT - 0.0% Renewable Energy Corp. ASA (a) 12,198 116,842
---------------
ENERGY EQUIPMENT & SERVICES - 0.0% Aker Solutions ASA 13,243 87,584
---------------
INDUSTRIAL CONGLOMERATES - 0.1% Orkla ASA 69,967 465,540
---------------
METALS & MINING - 0.0% Norsk Hydro ASA 57,044 232,420
---------------
OIL, GAS & CONSUMABLE FUELS - 0.3% Frontline Ltd. 4,600 135,047
Statoilhydro ASA 108,294 1,811,195
---------------
1,946,242
---------------
TOTAL COMMON STOCKS IN NORWAY 3,956,711
---------------
PORTUGAL - 0.3%
COMMERCIAL BANKS - 0.1% Banco Comercial Portugues SA
Registered Shares 193,098 220,443
Banco Espirito Santo SA Registered Shares 17,884 166,568
---------------
387,011
---------------
CONSTRUCTION MATERIALS - 0.0% Cimpor Cimentos de Portugal SA 26,806 130,160
---------------
DIVERSIFIED TELECOMMUNICATION Portugal Telecom SGPS SA Registered Shares 53,624 458,905
SERVICES - 0.1%
---------------
ELECTRIC UTILITIES - 0.1% Energias de Portugal SA 154,384 580,789
---------------
20
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
FOOD & STAPLES RETAILING - 0.0% Jeronimo Martins SGPS SA 17,014 $ 94,496
MEDIA - 0.0% Zon Multimedia Servicos de
---------------
Telecomunicacoes e Multimedia SGPS SA 15,808 82,007
---------------
OIL, GAS & CONSUMABLE FUELS - 0.0% Galp Energia SGPS SA 15,896 159,599
---------------
TRANSPORTATION INFRASTRUCTURE - 0.0% Brisa-Auto Estradas de Portugal SA
Private Shares 20,401 152,917
---------------
TOTAL COMMON STOCKS IN PORTUGAL 2,045,884
---------------
SINGAPORE - 0.9%
AEROSPACE & DEFENSE - 0.0% Singapore Technologies Engineering Ltd. 114,213 189,137
---------------
AIRLINES - 0.1% Singapore Airlines Ltd. 44,009 346,128
---------------
COMMERCIAL BANKS - 0.3% DBS Group Holdings Ltd. 93,605 551,369
Oversea-Chinese Banking Corp. 206,914 719,457
United Overseas Bank Ltd. 101,572 917,909
---------------
2,188,735
---------------
DISTRIBUTORS - 0.0% Jardine Cycle & Carriage Ltd. 7,529 50,073
---------------
DIVERSIFIED FINANCIAL SERVICES - 0.1% Singapore Exchange Ltd. 81,000 288,537
---------------
DIVERSIFIED TELECOMMUNICATION Singapore Telecommunications Ltd. 656,132 1,169,263
SERVICES - 0.2%
---------------
FOOD & STAPLES RETAILING - 0.0% Olam International Ltd. 115,900 93,431
---------------
FOOD PRODUCTS - 0.0% Golden Agri-Resources Ltd. 409,497 67,481
Wilmar International Ltd. 68,670 134,548
---------------
202,029
---------------
HEALTH CARE PROVIDERS & SERVICES - 0.0% Parkway Holdings Ltd. 109,706 95,076
---------------
HOTELS, RESTAURANTS & LEISURE - 0.0% Genting International PLC (a) 149,388 46,887
---------------
INDUSTRIAL CONGLOMERATES - 0.1% Fraser and Neave Ltd. 68,096 140,795
Keppel Corp. Ltd. 119,616 363,165
SembCorp Industries Ltd. 81,590 133,100
---------------
637,060
---------------
MACHINERY - 0.0% Cosco Corp. (Singapore) Ltd. 75,002 50,139
Sembcorp Marine Ltd. 87,197 102,773
---------------
152,912
---------------
MARINE - 0.0% Neptune Orient Lines Ltd. 44,200 34,734
---------------
MEDIA - 0.0% Singapore Press Holdings Ltd. 130,316 282,567
---------------
REAL ESTATE INVESTMENT TRUSTS Ascendas Real Estate Investment Trust 117,152 112,704
(REITS) - 0.0% CapitaMall Trust 83,000 92,361
---------------
205,065
---------------
REAL ESTATE MANAGEMENT & CapitaLand Ltd. 159,833 348,745
DEVELOPMENT - 0.1% City Developments Ltd. 46,535 208,195
UOL Group Ltd. 20,457 31,839
---------------
588,779
---------------
ROAD & RAIL - 0.0% ComfortDelgro Corp. Ltd. 115,816 117,321
---------------
TRADING COMPANIES & DISTRIBUTORS - 0.0% Noble Group Ltd. 175,720 125,862
---------------
TOTAL COMMON STOCKS IN SINGAPORE 6,813,596
---------------
SPAIN - 4.0%
AIRLINES - 0.0% Iberia Lineas Aereas de Espana 40,744 114,915
---------------
BIOTECHNOLOGY - 0.0% Grifols SA 10,517 184,275
---------------
COMMERCIAL BANKS - 1.6% Banco Bilbao Vizcaya Argentaria SA 295,581 3,662,358
---------------
21
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
Banco de Sabadell SA 75,496 $ 516,832
Banco de Valencia SA 14,005 149,825
Banco Popular Espanol SA 68,136 590,983
Banco Santander SA 652,338 6,295,854
Bankinter SA 20,987 189,830
---------------
11,405,682
---------------
CONSTRUCTION & ENGINEERING - 0.2% ACS Actividades de Construccion y Servicios, 15,955 740,893
Acciona SA 2,303 292,830
Fomento de Construcciones y Contratas SA 3,759 125,007
Grupo Ferrovial SA 5,192 144,829
Sacyr Vallehermoso SA 6,339 57,471
---------------
1,361,030
---------------
DIVERSIFIED FINANCIAL SERVICES - 0.0% Criteria Caixacorp. SA 69,161 275,907
---------------
DIVERSIFIED TELECOMMUNICATION Telefonica SA 350,872 7,919,764
SERVICES - 1.1%
---------------
ELECTRIC UTILITIES - 0.6% Iberdrola SA 283,581 2,643,453
Red Electrica de Espana 9,950 507,218
Union Fenosa SA 32,135 805,155
---------------
3,955,826
---------------
ELECTRICAL EQUIPMENT - 0.1% Gamesa Corp. Tecnologica SA 16,408 299,170
---------------
GAS UTILITIES - 0.0% Enagas 14,730 325,257
Gas Natural SDG SA 9,017 245,346
---------------
570,603
---------------
IT SERVICES - 0.0% Indra Sistemas SA 9,965 228,724
---------------
INDEPENDENT POWER PRODUCERS & ENERGY Iberdrola Renovables (a) 69,701 303,872
TRADERS - 0.0%
---------------
INSURANCE - 0.0% Corp. Mapfre SA 57,592 196,413
---------------
MACHINERY - 0.0% Zardoya Otis SA 8,675 155,923
---------------
MEDIA - 0.0% Gestevision Telecinco SA 10,684 115,086
---------------
METALS & MINING - 0.0% Acerinox SA 11,741 190,847
---------------
OIL, GAS & CONSUMABLE FUELS - 0.2% Repsol YPF SA 61,765 1,318,693
---------------
SPECIALTY RETAIL - 0.1% Inditex SA 17,909 797,502
---------------
TRANSPORTATION INFRASTRUCTURE - 0.1% Abertis Infraestructuras SA 20,325 364,272
Cintra Concesiones de Infraestructuras de
Transporte SA 21,741 164,980
---------------
529,252
---------------
TOTAL COMMON STOCKS IN SPAIN 29,923,484
---------------
SWEDEN - 1.8%
BUILDING PRODUCTS - 0.1% Assa Abloy AB Series B 29,377 341,627
---------------
COMMERCIAL BANKS - 0.3% Nordea Bank AB 165,351 1,178,570
Skandinaviska Enskilda Banken AB Class A 40,953 330,583
Svenska Handelsbanken Class A 36,512 603,771
Swedbank AB-A Shares 34,000 200,828
---------------
2,313,752
---------------
COMMERCIAL SERVICES & SUPPLIES - 0.0% Loomis AB (a) 1 4
22
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
Securitas AB 29,048 $ 244,553
---------------
244,557
---------------
COMMUNICATIONS EQUIPMENT - 0.3% Telefonaktiebolaget LM Ericsson 249,889 1,948,105
---------------
CONSTRUCTION & ENGINEERING - 0.0% Skanska AB Class B 30,205 309,804
---------------
DIVERSIFIED FINANCIAL SERVICES - 0.1% Investor AB 36,400 555,209
---------------
DIVERSIFIED TELECOMMUNICATION Tele2 AB 24,366 220,498
SERVICES - 0.2% TeliaSonera AB 173,701 874,762
---------------
1,095,260
---------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.0% Getinge AB (a) 1,414 16,316
Getinge AB Class B 12,727 154,434
---------------
170,750
---------------
HOUSEHOLD DURABLES - 0.0% Electrolux AB 25,175 220,283
Husqvarna AB 19,458 104,689
---------------
324,972
---------------
MACHINERY - 0.4% Alfa Laval AB 30,393 271,336
Atlas Copco AB Class A 60,148 529,211
Atlas Copco AB Class B 31,386 245,742
SKB AB 36,016 366,503
Sandvik AB 80,267 515,580
Scania AB 28,889 293,955
Volvo AB A Shares 30,061 173,388
Volvo AB B Shares 86,159 490,314
---------------
2,886,029
---------------
MEDIA - 0.0% Modern Times Group AB 4,332 94,839
---------------
METALS & MINING - 0.0% SSAB Svenskt Stal AB Series A 14,420 127,878
SSAB Svenskt Stal AB Series B 6,267 52,252
---------------
180,130
---------------
OIL, GAS & CONSUMABLE FUELS - 0.0% Lundin Petroleum AB (a) 15,302 82,121
---------------
PAPER & FOREST PRODUCTS - 0.1% Holmen AB Class B 3,145 78,701
Svenska Cellulosa AB 44,132 383,173
---------------
461,874
---------------
SPECIALTY RETAIL - 0.2% Hennes & Mauritz AB B Shares 41,755 1,660,810
---------------
TOBACCO - 0.1% Swedish Match AB 23,550 339,988
---------------
WIRELESS TELECOMMUNICATION Millicom International Cellular SA (c) 6,052 285,957
SERVICES - 0.0%
---------------
TOTAL COMMON STOCKS IN SWEDEN 13,295,784
---------------
SWITZERLAND - 8.0%
BIOTECHNOLOGY - 0.1% Actelion Ltd. (a) 8,268 467,733
---------------
BUILDING PRODUCTS - 0.1% Geberit AG 3,274 354,084
---------------
CAPITAL MARKETS - 1.0% Credit Suisse Group AG 89,642 2,512,179
EFG International AG 2,886 51,573
Julius Baer Holding AG Class B 17,498 678,176
UBS AG (a) 245,571 3,572,900
---------------
6,814,828
---------------
CHEMICALS - 0.3% Givaudan SA 538 425,125
Syngenta AG 8,395 1,630,859
---------------
2,055,984
---------------
23
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
COMPUTERS & PERIPHERALS - 0.0% Logitech International SA (a) 13,890 $ 217,983
---------------
CONSTRUCTION MATERIALS - 0.1% Holcim Ltd. 17,616 1,019,616
---------------
DIVERSIFIED FINANCIAL SERVICES - 0.0% Pargesa Holding SA 2,669 178,374
---------------
DIVERSIFIED TELECOMMUNICATION Swisscom AG 1,952 633,199
SERVICES - 0.1%
---------------
ELECTRIC UTILITIES - 0.0% BKW FMB Energie AG 995 96,088
---------------
ELECTRICAL EQUIPMENT - 0.4% ABB Ltd. 189,024 2,882,643
---------------
FOOD PRODUCTS - 1.9% Aryzta AG (a) 7,200 231,352
Lindt & Spruengli AG 53 99,167
Lindt & Spruengli AG 'R' 8 172,100
Nestle SA Registered Shares 324,020 12,830,590
---------------
13,333,209
---------------
HEALTH CARE EQUIPMENT & Nobel Biocare Holding AG 9,625 198,754
SUPPLIES - 0.2% Sonova Holding AG 3,914 237,883
Straumann Holding AG Registered Shares 806 142,878
Synthes, Inc. 4,898 621,096
---------------
1,200,611
---------------
INSURANCE - 0.7% Baloise Holding AG 4,219 318,612
Swiss Life Holding 2,886 200,125
Swiss Reinsurance Co. Registered Shares 29,388 1,439,001
Zurich Financial Services AG 12,199 2,665,249
---------------
4,622,987
---------------
LIFE SCIENCES TOOLS & SERVICES - 0.1% Lonza Group AG Registered Shares 4,545 421,373
---------------
MACHINERY - 0.0% OC Oerlikon Corp. AG (a) 611 40,861
Schindler Holding AG 3,443 157,964
Sulzer AG 2,539 146,519
---------------
345,344
---------------
MARINE - 0.0% Kuehne & Nagel International AG 4,353 281,936
---------------
PHARMACEUTICALS - 2.7% Novartis AG Registered Shares 200,847 10,058,710
Roche Holding AG 58,996 9,133,591
---------------
19,192,301
---------------
PROFESSIONAL SERVICES - 0.1% Adecco SA Registered Shares 10,618 363,497
SGS SA 387 404,746
---------------
768,243
---------------
TEXTILES, APPAREL & LUXURY GOODS - 0.2% Compagnie Financiere Richemont SA 46,224 880,747
The Swatch Group Ltd. Bearer Shares 2,613 368,531
The Swatch Group Ltd. Registered Shares 4,656 128,311
---------------
1,377,589
---------------
TOTAL COMMON STOCKS IN SWITZERLAND 56,264,125
---------------
UNITED KINGDOM - 18.4%
AEROSPACE & DEFENSE - 0.4% BAE Systems Plc 296,941 1,615,995
Cobham Plc 79,850 238,682
Meggitt Plc 59,138 137,309
Rolls-Royce Group Plc 148,028 724,139
Rolls-Royce Group Plc (a) 8,323,801 11,968
---------------
2,728,093
---------------
AIRLINES - 0.0% British Airways Plc 45,251 119,606
---------------
24
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
AUTO COMPONENTS - 0.0% GKN Plc 59,800 $ 83,262
---------------
BEVERAGES - 0.6% Diageo Plc 210,498 2,957,677
SABMiller Plc 71,578 1,201,999
---------------
4,159,676
---------------
CAPITAL MARKETS - 0.1% 3i Group Plc 30,759 120,455
ICAP Plc 41,753 176,249
Investec Plc 25,570 105,580
Man Group Plc 137,152 471,824
Schroders Plc 11,024 138,678
---------------
1,012,786
---------------
CHEMICALS - 0.0% Johnson Matthey Plc 16,900 268,944
---------------
COMMERCIAL BANKS - 2.2% Barclays Plc 682,849 1,552,041
HBOS Plc 430,039 445,165
HSBC Holdings Plc 991,572 9,704,709
Lloyds TSB Group Plc 475,646 900,266
Royal Bank of Scotland Group Plc 1,501,988 1,105,656
Standard Chartered Plc 156,036 1,996,645
---------------
15,704,482
---------------
COMMERCIAL SERVICES & SUPPLIES - 0.1% Group 4 Securicor Plc 99,341 295,832
Serco Group Plc 45,013 294,658
---------------
590,490
---------------
CONSTRUCTION & ENGINEERING - 0.0% Balfour Beatty Plc 42,120 203,754
---------------
CONTAINERS & PACKAGING - 0.0% Rexam Plc 51,289 262,512
---------------
DIVERSIFIED FINANCIAL SERVICES - 0.0% London Stock Exchange Group Plc 12,046 90,357
---------------
DIVERSIFIED TELECOMMUNICATION BT Group Plc 656,479 1,320,249
SERVICES - 0.3% Cable & Wireless Plc 220,100 497,763
---------------
1,818,012
---------------
ELECTRIC UTILITIES - 0.3% British Energy Group Plc 82,572 925,297
Scottish & Southern Energy Plc 70,056 1,235,182
---------------
2,160,479
---------------
ENERGY EQUIPMENT & SERVICES - 0.0% Amec Plc 26,645 192,355
---------------
FOOD & STAPLES RETAILING - 0.7% J Sainsbury Plc 93,560 446,470
Tesco Plc 654,003 3,405,414
William Morrison Supermarkets Plc 192,228 779,167
---------------
4,631,051
---------------
FOOD PRODUCTS - 0.6% Associated British Foods Plc 28,555 300,608
Cadbury Plc 116,149 1,026,345
Tate & Lyle Plc 34,772 202,606
Unilever Plc 107,568 2,470,816
---------------
4,000,375
---------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.1% Smith & Nephew Plc 75,444 481,824
---------------
HOTELS, RESTAURANTS & LEISURE - 0.3% Carnival Plc 15,326 338,460
Compass Group Plc 147,980 738,078
Intercontinental Hotels Group Plc 20,773 171,380
Ladbrokes Plc 53,298 143,157
TUI Travel Plc 39,184 132,817
Thomas Cook Group Plc 28,091 71,834
25
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
Whitbread Plc 17,348 $ 231,222
---------------
1,826,948
---------------
HOUSEHOLD DURABLES - 0.0% Berkeley Group Holdings Plc 3,735 47,363
---------------
HOUSEHOLD PRODUCTS - 0.3% Reckitt Benckiser Plc 48,660 1,823,337
---------------
IT SERVICES - 0.0% LogicaCMG Plc 120,610 121,251
---------------
INDEPENDENT POWER PRODUCERS & ENERGY Drax Group Plc 27,189 220,714
TRADERS - 0.1% International Power Plc 128,927 449,274
---------------
669,988
---------------
INDUSTRIAL CONGLOMERATES - 0.1% Smiths Group Plc 30,529 392,297
Tomkins Plc 78,603 141,521
---------------
533,818
---------------
INSURANCE - 0.7% Admiral Group Plc 13,207 174,331
Aviva Plc 212,278 1,202,872
Friends Provident Plc 186,698 238,643
Legal & General Group Plc 484,369 541,389
Old Mutual Plc 397,492 319,482
Prudential Plc 214,012 1,299,104
Royal & Sun Alliance Insurance Group 259,900 517,908
Standard Life Plc 171,156 499,640
---------------
4,793,369
---------------
INTERNET & CATALOG RETAIL - 0.0% Home Retail Group 72,181 222,782
---------------
MACHINERY - 0.0% IMI Plc 24,844 98,681
Invensys Plc (a) 64,547 163,131
---------------
261,812
---------------
MEDIA - 0.5% British Sky Broadcasting Plc 90,532 639,330
Daily Mail & General Trust 24,362 96,143
ITV Plc 287,054 165,625
Pearson Plc 70,844 667,730
Reed Elsevier Plc 95,363 700,140
Thomson Reuters Plc 17,001 378,849
United Business Media Ltd. 15,334 113,294
WPP Plc 98,929 578,471
---------------
3,339,582
---------------
METALS & MINING - 1.3% Anglo American Plc 108,786 2,538,753
Antofagasta Plc 31,691 198,516
BHP Billiton Plc 184,260 3,573,834
Kazakhmys Plc 17,122 58,446
Lonmin Plc 12,492 166,502
Rio Tinto Plc Registered Shares 81,903 1,820,425
Vedanta Resources Plc 11,572 103,912
Xstrata Plc 53,937 504,709
---------------
8,965,097
---------------
MULTI-UTILITIES - 0.6% Centrica Plc 428,206 1,648,512
National Grid Plc 205,696 2,032,576
United Utilities Group Plc 59,745 542,486
---------------
4,223,574
---------------
MULTILINE RETAIL - 0.1% Marks & Spencer Group Plc 139,616 437,632
26
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE
- --------------------------------------- -------------------------------------------- -------------- ---------------
Next Plc 18,727 $ 294,279
---------------
731,911
---------------
OIL, GAS & CONSUMABLE FUELS - 4.2% BG Group Plc 278,300 3,852,113
BP Plc 1,544,898 11,925,745
Cairn Energy Plc (a) 10,300 301,669
Royal Dutch Shell Plc 291,305 7,653,486
Royal Dutch Shell Plc Class B 223,973 5,677,368
Tullow Oil Plc 57,495 550,469
---------------
29,960,850
---------------
PHARMACEUTICALS - 1.9% AstraZeneca Plc 120,741 4,939,567
GlaxoSmithKline Plc 433,752 8,066,813
Shire Ltd. 44,716 658,666
---------------
13,665,046
---------------
PROFESSIONAL SERVICES - 0.2% Capita Group Plc 49,791 534,106
Experian Group Ltd. 80,535 507,770
Hays Plc 87,373 88,288
---------------
1,130,164
---------------
REAL ESTATE INVESTMENT TRUSTS British Land Co. Plc 40,216 322,221
(REITS) - 0.2% Hammerson Plc 22,750 176,234
Land Securities Group Plc 41,117 552,791
Liberty International Plc 20,162 139,595
Segro Plc 35,377 126,123
---------------
1,316,964
---------------
ROAD & RAIL - 0.1% Firstgroup Plc 38,694 244,704
National Express Group Plc 12,431 89,389
Stagecoach Group Plc 40,760 83,842
---------------
417,935
---------------
SOFTWARE - 0.0% Sage Group Plc 112,528 278,639
---------------
SPECIALTY RETAIL - 0.1% The Carphone Warehouse Plc 32,874 43,080
Kingfisher Plc 216,514 426,517
---------------
469,597
---------------
TEXTILES, APPAREL & LUXURY GOODS - 0.0% Burberry Group Plc 35,712 115,625
---------------
TOBACCO - 0.9% British American Tobacco Plc 156,974 4,094,960
Imperial Tobacco Group Plc 82,361 2,199,945
---------------
6,294,905
---------------
TRADING COMPANIES & DISTRIBUTORS - 0.1% Bunzl Plc 30,014 256,120
Wolseley Plc 53,182 296,252
---------------
552,372
---------------
WATER UTILITIES - 0.0% Severn Trent Plc 18,856 326,778
---------------
WIRELESS TELECOMMUNICATION Vodafone Group Plc 4,354,451 8,916,407
SERVICES - 1.3%
---------------
TOTAL COMMON STOCKS IN THE UNITED KINGDOM 129,514,172
---------------
TOTAL COMMON STOCKS - 92.9% 656,163,788
---------------
27
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
EXCHANGE-TRADED FUNDS SHARES VALUE
-------------------------------------------- -------------- ---------------
UNITED STATES - 3.9%
iShares MSCI EAFE Index Fund (d) 617,845 $ 27,722,705
---------------
TOTAL EXCHANGE-TRADED FUNDS - 3.9% 27,722,705
---------------
INDUSTRY PREFERRED STOCKS
GERMANY - 0.2%
AUTOMOBILES - 0.1% Volkswagen AG, 4.35% 8,482 457,206
---------------
HOUSEHOLD PRODUCTS - 0.1% Henkel KGaA, 1.75% 14,702 460,595
---------------
MULTI-UTILITIES - 0.0% RWE AG, 3.50% 2,624 197,995
---------------
TOTAL PREFERRED STOCKS - 0.2% 1,115,796
---------------
RIGHTS
BELGIUM - 0.0%
DIVERSIFIED FINANCIAL SERVICES - 0.0% Fortis (b)(e) 184,182 3
---------------
TOTAL RIGHTS IN BELGIUM 3
---------------
JAPAN - 0.0%
METALS & MINING - 0.0% Dowa Mining Co., Ltd. (b)(f) 7,000 --
---------------
TOTAL RIGHTS IN JAPAN --
---------------
SINGAPORE - 0.0%
COMMERCIAL BANKS - 0.0% DBS Goup Holdings Ltd. (g) 46,803 97,454
---------------
TOTAL RIGHTS IN SINGAPORE 97,454
---------------
UNITED KINGDOM - 0.0%
COMMERCIAL BANKS - 0.0% HBOS Plc (h) 595,130 9
Lloyds TSB Group Plc (h) 206,763 3
---------------
TOTAL RIGHTS IN THE UNITED KINGDOM 12
---------------
TOTAL RIGHTS - 0.0% 97,466
---------------
TOTAL LONG-TERM INVESTMENTS
(COST - $865,585,207) - 97.0% 685,099,758
---------------
BENEFICIAL
INTEREST
SHORT-TERM SECURITIES (000)
-------------------------------------------- --------------
BlackRock Liquidity Series, LLC
Cash Sweep Series, 1.64% (i)(j) USD 11,260 11,259,665
---------------
TOTAL SHORT-TERM SECURITIES
(COST - $11,259,665) - 1.6% 11,259,665
---------------
TOTAL INVESTMENTS
(COST - $876,844,872*) - 98.6% 696,359,423
OTHER ASSETS LESS LIABILITIES - 1.4% 9,759,975
---------------
NET ASSETS - 100.0% $ 706,119,398
===============
* The cost and unrealized appreciation (depreciation) of investments, as of
December 31, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 895,944,370
=============
Gross unrealized appreciation $ 44,690,983
Gross unrealized depreciation (244,275,930)
-------------
Net unrealized depreciation $(199,584,947)
=============
(a) Non-income producing security.
(b) Security is valued in accordance with the Series' fair valuation policy.
(c) Depositary receipts.
(d) All or a portion of security has been pledged as collateral in connection
with open financial futures contracts.
(e) The rights may be exercised until 7/01/14
(f) The rights may be exercised until 1/29/10.
28
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
(g) The rights may be exercised until 1/20/09.
(h) The rights may be exercised until 1/09/09.
(i) Represents the current yield as of report date.
(j) 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
AFFILIATE ACTIVITY INCOME
- --------- -------------- --------
BlackRock Liquidity Series, LLC Cash Sweeps Series USD (2,269,673) $347,498
- - 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. These industry classifications are unaudited.
- - Financial futures contracts purchased as of December 31, 2008 were as
follows:
UNREALIZED
EXPIRATION FACE APPRECIATION
CONTRACTS ISSUE EXCHANGE DATE VALUE (DEPRECIATION)
- --------- ---------------------- ----------------- ------------ ---------- --------------
1 IBEX 35 Plus Eurex January 2009 $ 128,154 $ (1,479)
4 Hang Seng Index Future Hong Kong January 2009 364,962 6,770
62 OMX Stock Index Future Stockholm January 2009 528,796 (12,126)
1 Dax Index 25 Euro Eurex Deutschland March 2009 166,557 1,448
1 S&P MIB Index Eurex March 2009 136,511 (1,524)
159 DJ Euro Stoxx 50 Eurex March 2009 5,465,643 (50,714)
69 FTSE 100 Index Future LIFFE March 2009 4,255,013 100,083
21 SPI 200 Index Future Sydney March 2009 1,288,532 82,615
56 TOPIX Index Future Tokyo March 2009 5,045,773 279,324
TOTAL $404,397
- - Foreign currency exchange contracts as of December 31, 2008 were as
follows:
UNREALIZED
CURRENCY CURRENCY SETTLEMENT APPRECIATION
PURCHASED SOLD DATE (DEPRECIATION)
- --------------- --------------- ---------- --------------
AUD 2,905,650 USD 1,889,627 2/12/09 $ 126,948
AUD 427,000 USD 294,124 2/12/09 2,222
USD 1,343,567 AUD 2,073,650 2/12/09 (95,585)
CHF 698,300 USD 589,627 2/12/09 66,746
USD 584,084 CHF 698,300 2/12/09 (72,288)
CHF 233,000 USD 220,812 2/12/09 (1,802)
EUR 7,325,700 USD 9,176,794 2/12/09 988,533
EUR 1,047,000 USD 1,405,492 2/12/09 47,352
EUR 444,100 USD 554,487 2/12/09 61,757
USD 8,950,183 EUR 7,051,300 2/12/09 (834,380)
USD 254,738 EUR 181,600 2/12/09 2,746
GBP 3,413,500 USD 5,244,862 2/12/09 (342,615)
GBP 615,300 USD 912,473 2/12/09 (28,819)
GBP 484,300 USD 709,222 2/12/09 (13,702)
USD 457,851 GBP 307,900 2/12/09 15,665
29
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
Foreign currency exchange contracts as of December 31, 2008 were as follows
(concluded):
UNREALIZED
CURRENCY CURRENCY SETTLEMENT APPRECIATION
PURCHASED SOLD DATE (DEPRECIATION)
- --------------- --------------- ---------- --------------
USD 4,956,738 GBP 3,302,600 2/12/09 $ 213,758
USD 326,195 GBP 224,000 2/12/09 4,500
JPY 521,967,400 USD 5,391,039 2/12/09 372,100
JPY 105,760,000 USD 1,131,019 2/12/09 36,697
JPY 21,045,000 USD 232,921 2/12/09 (559)
USD 479,549 JPY 45,436,000 2/12/09 (22,119)
USD 3,688,263 JPY 354,702,500 2/12/09 (228,074)
USD 138,335 JPY 13,360,600 2/12/09 (9,181)
SEK 4,806,100 USD 594,468 2/12/09 12,836
USD 398,679 SEK 3,204,300 2/12/09 (6,220)
---------
TOTAL $ 296,516
=========
CURRENCY ABBREVIATIONS:
AUD Australian Dollar
CHF Swiss Franc
EUR Euro
GBP British Pound
JPY Japanese Yen
SEK Swedish Krona
USD US Dollar
- - 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 December 31,
2008 in determining the fair valuation of the Series'
investments:
OTHER FINANCIAL
INVESTMENTS IN INSTRUMENTS*
VALUATION SECURITIES ------------------------
INPUTS ASSETS ASSETS LIABILITIES
- --------- -------------- ---------- -----------
Level 1 $ 40,464,760 $ 470,240 $ (65,843)
Level 2 655,868,163 1,951,860 (1,655,344)
Level 3 26,500 -- --
------------ ---------- -----------
TOTAL $696,359,423 $2,422,100 $(1,721,187)
============ ========== ===========
* Other financial instruments are futures and foreign currency exchange
contracts.
30
MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC
SCHEDULE OF INVESTMENTS DECEMBER 31, 2008
The following is a reconciliation of investments for unobservable inputs
Level 3 were used in determining fair value:
INVESTMENTS
IN
SECURITIES
-----------
Balance, as of January 1, 2008 --
Realized gain (loss) --
Change in unrealized appreciation (depreciation)(1) $(661,574)
Net purchases (sales) --
Net transfers in/out of Level 3 688,074
---------
Balance, as of December 31, 2008 $ 26,500
=========
(1) Included in the related net change in unrealized appreciation/depreciation
on the Statement of Operations.
31
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Trust has made no material changes to the procedures by which shareholders
may recommend nominees to the Trust's Board of Trustees since the Trust last
disclosed such procedures in Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon an evaluation within 90 days of the filing date of this
report, the principal executive and financial officers concluded that
the disclosure controls and procedures of the Trust are effective.
(b) There were no changes in the Trust's internal control over financial
reporting during the second fiscal quarter of the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, the Trust's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) Filed herewith as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the Trust as required by Rule
30a-2(a) under the Investment Company Act of 1940 is attached
hereto as EX-99.CERT.
(a)(3) Not Applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment
Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American Beacon Funds
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: March 6, 2009
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: March 6, 2009
By /s/ Rebecca L. Harris
---------------------
Rebecca L. Harris
Treasurer
Date: March 6, 2009