-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FwbTuu/4PwmxoQF8qxUfsbpa/nolOuLHsQQBrexQFj2RdPnfvyhgps+fj0pH4rQn oyp9mF81VHd5CCQcXqmKmQ== 0000809593-05-000023.txt : 20050906 0000809593-05-000023.hdr.sgml : 20050905 20050906121809 ACCESSION NUMBER: 0000809593-05-000023 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050906 DATE AS OF CHANGE: 20050906 EFFECTIVENESS DATE: 20050906 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN BEACON FUNDS CENTRAL INDEX KEY: 0000809593 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04984 FILM NUMBER: 051069646 BUSINESS ADDRESS: STREET 1: 4151 AMON CARTER BOULEVARD STREET 2: MD 2450 CITY: FORT WORTH STATE: TX ZIP: 76155 BUSINESS PHONE: 8179673509 MAIL ADDRESS: STREET 1: 4151 AMON CARTER BOULEVARD STREET 2: MD 2450 CITY: FORT WORTH STATE: TX ZIP: 76155 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN AADVANTAGE FUNDS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN EAGLE FUNDS DATE OF NAME CHANGE: 19890813 N-CSRS 1 ncsr0605bea.txt BEACON FORM N-CSRS SEMI JUNE 2005 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, 2005 Date of reporting period: June 30, 2005 ITEM 1. REPORTS TO STOCKHOLDERS. G U I D A N C E | V I S I O N | E X P E R I E N C E [AMERICAN BEACON FUNDS LOGO] SEMI-ANNUAL REPORT [PHOTO] JUNE 30, 2005 S&P 500 INDEX FUND SMALL CAP INDEX FUND INTERNATIONAL EQUITY INDEX FUND Formerly known as the American AAdvantage Funds 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. Any opinions herein, including forecasts, reflect our judgement as of the end of the reporting period and are subject to change. Each adviser'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.
Contents -------------------------------------------- President's Message..................... 1 Performance Overviews................... 4 American Beacon Funds Statements of Assets and Liabilities....................... 11 Statements of Operations............. 12 Statements of Changes in Net Assets.. 13 Notes to Financial Statements........ 14 Financial Highlights................. 19 State Street Equity 500 Index Portfolio Portfolio of Investments............. 24 Statement of Assets and Liabilities.. 30 Statement of Operations.............. 31 Statements of Changes in Net Assets.. 32 Financial Highlights................. 33 Notes to Financial Statements........ 34 Master Small Cap Index Series Summary Schedule of Investments...... 38 Statement of Assets and Liabilities.. 44 Statement of Operations.............. 45 Statements of Changes in Net Assets.. 46 Financial Highlights................. 47 Notes to Financial Statements........ 48 Master International Index Series Summary Schedule of Investments...... 52 Statement of Assets and Liabilities.. 57 Statement of Operations.............. 58 Statements of Changes in Net Assets.. 59 Financial Highlights................. 60 Notes to Financial Statements........ 61 Additional Information.....Inside Back Cover
American Beacon Funds June 30, 2005 (BILL QUINN PICTURE) FELLOW SHAREHOLDERS, Enclosed please find the Semi-Annual Report for the American Beacon S&P 500, International Equity, and Small Cap Index Funds for the six months ended June 30, 2005. The first half of 2005 was marked by slight downturns, as the major market indices posted losses. The S&P 500 Index reported a decline of 0.81%, the MSCI EAFE Index decreased 1.17%, and the Dow Jones Industrial Average was down 3.65%. During the six-month period, the American Beacon S&P 500 Index Fund realized a decrease of 0.91%, the American Beacon Small Cap Index Fund declined 1.27%, and the American Beacon International Equity Index Fund recorded a reduction of 1.06%. Looking forward, each of these Funds will continue to pursue their objective to replicate the returns, before expenses, of each Fund's corresponding Index. Please review the enclosed portfolio listings and detailed financial data. As always, we welcome the opportunity to serve your financial needs. Should you have any questions about the enclosed information, please do not hesitate to contact us at 800-967-9009. You may also access Fund and account information 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 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 may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. 1 (This page intentionally left blank) (AMERICAN BEACON LOGO) 2 DOMESTIC EQUITY MARKET OVERVIEW June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- The year began with a slide after the strong fourth quarter of 2004, with cyclical and small capitalization stocks performing the worst out of the gate. January was characterized by mixed economic data, increasing interest rates, disappointing earnings reports, and climbing oil prices. In addition, gross domestic product growth for the fourth quarter of 2004 was released during January and it came in weaker than expected at 3.1%, primarily as a result of the foreign trade deficit. The markets were able to reverse course in February, even as the productivity report showed a continued slowdown in productivity growth and oil prices continued to climb. In March, the markets resumed their downward slide experienced in January due to the combination of the trade deficit, mixed economic news, high oil prices, and rising interest rates. April began on the heels of a March economic soft spot, as retail sales, payrolls, and consumer and business sentiment weakened. For most of April, equity markets were dogged by continuing inflation concerns as oil climbed above $57 per barrel. April closed with the announcement of one of the biggest jumps in the Consumer Price Index in several months, as the CPI rose 0.6% in March. May featured the announcement of slower-than-expected first quarter gross domestic product growth of 3.1%. Despite concerns around economic deceleration, slowing profit growth, and continued high oil prices, first quarter earnings reports remained strong. June brought a slowdown in the equity market rally that began in May as the specter of economic deceleration dampened markets. In addition, oil continued to pressure equity markets as the price climbed to a record high of $60 per barrel. As expected, interest rates moved considerably during the period as the yield curve flattened dramatically. The Federal Reserve through the Federal Open Market Committee ("FOMC") continued its "measured pace" of monetary tightening by raising the Federal Funds rate 0.25% four times during the period. This brought the Fed Funds rate to 3.25%. 3 PERFORMANCE OVERVIEW AMERICAN BEACON S&P 500 INDEX FUND+ June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- For the six months ended June 30, 2005, the total return of the Institutional Class of the American Beacon S&P 500 Index Fund was -0.91%. The Fund underperformed the S&P 500 Index return of -0.81% but performed in-line with the Lipper S&P 500 Objective Funds Index which returned -0.92%.
ANNUALIZED TOTAL RETURNS ------------------------------------- PERIODS ENDED 6/30/05 ------------------------------------- SINCE INCEPTION 1 YEAR 3 YEAR 5 YEAR (12/31/96) ------ ------ ------ ---------- Institutional Class(1)... 6.12% 8.01% -2.57% 7.22% PlanAhead Class(1, 2).... 5.68% 7.54% -2.97% 6.86% Lipper S&P 500 Index(3).. 6.07% 7.98% -2.65% 7.09% S&P 500 Index(3)......... 6.32% 8.28% -2.37% 7.39%
1. Past performance is not indicative of future performance. The investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance shown is as of date indicated and may differ from current performance. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. Fund performance for the since inception period represents the total returns achieved by the Institutional Class from 12/31/96 up to 3/2/98, the inception date of the PlanAhead Class, and the returns of the PlanAhead Class since its inception. Expenses of the PlanAhead Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the PlanAhead Class been in existence since 12/31/96. 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. Sector performance within the S&P 500 Index (the "Index") was mixed for the first half of 2005. Energy and Utility stocks held the starring roles over the period. Even though Energy companies gained just 2.0% for the full second quarter, they are enjoying ample pricing power, and the 19.9% year-to-date return for the sector made it the strongest in the Index. The income attraction of Utility stocks helped the group gain 15.2% since the start of the year, placing them second only to Energy stocks thus far in 2005. On the flip side, many companies in the Materials group continued to suffer from higher energy costs and a more challenging pricing environment. Materials stocks were the weakest group for the period, tumbling 7.5% year-to-date. Consumer Discretionary stocks, the second worst performing sector for the first half of 2005, declined 6.6% pressured by downturns in Time Warner as well as in the major auto stocks. At the security level, the top contributors to the Index's return for the six-month period ended June 30, 2005 were Exxon Mobil Corporation (+13.2%), ConocoPhillips (+33.9%) and Intel Corporation (+12.0%). The largest detractors from the Index's return were IBM (-24.4%), eBay, Inc. (-43.3%) and American International Group, Inc. (-11.2%). As of June 30, 2005, the Fund's largest sector weightings were Financials (20.3% of assets), Information Technology (15.1% of assets), and Health Care (13.4% of assets), consistent with the top sector weightings in the Index. 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* -------------- General Electric Co. 3.4% Exxon Mobil Corp. 3.4% Microsoft Corp. 2.3% Citigroup, Inc. 2.2% Pfizer, Inc. 1.9% Johnson & Johnson 1.8% Bank of America Corp. 1.7% Wal Mart Stores, Inc. 1.5% Intel Corp. 1.5% American Int'l Group, Inc. 1.4%
+ The S&P 500 Index Fund is not sponsored, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in this fund. S&P is a trademark of The McGraw-Hill Companies, Inc. and has been licensed for use. "Standard and Poor's(R)," "S&P(R)," "Standard & Poor's 500," "S&P500(R)" and "500" are all trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by State Street Bank and Trust Company. 4 PERFORMANCE OVERVIEW AMERICAN BEACON S&P 500 INDEX FUND -- CONTINUED June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- EQUITY SECTOR ALLOCATION
% OF EQUITIES* -------------- Financials 20.3% Information Technology 15.1% Health Care 13.4% Consumer Discretionary 11.5% Industrials 11.2% Consumer Staples 10.1% Energy 8.8% Utilities 3.5% Telecommunication Services 3.2% Materials 2.9%
* Percent of equity portion of State Street Equity 500 Index Portfolio 5 PERFORMANCE OVERVIEW AMERICAN BEACON SMALL CAP INDEX FUND(SM) June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- For the six months ended June 30, 2005, the total return of the Institutional Class of the American Beacon Small Cap Index Fund was -1.27%. The Fund's performance tracked closely to the Russell 2000(R) Index+ return of - -1.25%, and lagged the Lipper Small-Cap Core Funds Index return of -0.16%.
ANNUALIZED TOTAL RETURNS --------------------------- PERIODS ENDED 6/30/05 --------------------------- SINCE INCEPTION 1 YEAR 3 YEAR (7/31/00) ------ ------ --------- Institutional Class(1).............. 9.24% 12.63% 6.36% Lipper Small-Cap Core Index(2)...... 9.67% 12.44% 8.07% Russell 2000 Index(2)............... 9.45% 12.81% 6.51%
1. Past performance is not indicative of future performance. The investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance shown is as of date indicated and may differ from current performance. 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 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. Of the 12 Russell 2000 Index ("Index") sectors, 6 posted positive returns for the six-month period. The top-performing sector was Integrated Oils, returning an impressive 20.5%, followed by Other Energy and Utilities up 20.2% and 11.3%, respectively. The worst-performing sector for the six-month period was Technology, with a return of -11.7%, followed by Auto & Transportation, down 8.9%, and Materials & Processing, down 5.7%. As of June 30, 2005, the Fund's largest sector weightings were Financial Services (23.6% of assets), Consumer Discretionary (19.3% of assets), Technology (13.3% of assets) and Health Care (12.1% of assets), consistent with the top sector weightings in the Index. The top Index performers for the first half of the year were NutriSystem, Inc. (up 393%), Dynamic Materials Corp. (up 217%), and Momenta Pharmaceuticals, Inc. (up 190%). The bottom individual Index performers were Arbinet-thexchange, Inc. (down 72%), Eyetech Pharmaceuticals, Inc. (down 71%) and OCA, Inc. (down 70%). 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 match the characteristics of the Index. TOP TEN HOLDINGS
% OF EQUITIES* -------------- Cimarex Energy Co. 0.27% Amylin Pharmaceuticals, Inc. 0.20% Cal Dive International, Inc. 0.19% Valassis Communications, Inc. 0.17% Acxiom Corp. 0.17% Aeropostale, Inc. 0.16% Waste Connections, Inc. 0.16% BancorpSouth, Inc. 0.16% First Industrial Realty Trust, Inc. 0.16% SVB Financial Group 0.16%
EQUITY SECTOR ALLOCATION
% OF EQUITIES* -------------- Financial Services 23.6% Consumer Discretionary 19.3% Technology 13.3% Health Care 12.1% Materials & Processing 9.0% Producer Durables 7.7% Other Energy 5.0% Utilities 3.8% Autos and Transportation 3.4% Consumer Staples 2.1% Other 0.5% Integrated Oils 0.2%
* Percent of equity portion of Master Small Cap Index Series + Russell 2000 Index is a service mark of the Frank Russell Company. 6 INTERNATIONAL EQUITY MARKET OVERVIEW June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- The first quarter of 2005 was a negative period for international equity market indexes, as the MSCI EAFE returned -0.17%. January and March were negative months for international equity markets, while February was a positive month. Eight out of sixteen European MSCI Country Indexes experienced positive gains this quarter, as Norway and Denmark posted the strongest growth at approximately 4%. Ireland posted the largest loss at close to -9%. Japan experienced a reversal from the positive returns of the fourth quarter of 2004, returning slightly under -1.4%. Japanese manufacturers cut production in February for a second month in three as exports of electronics slowed. Hong Kong posted the largest loss for the Pacific region, returning slightly under -3.7%. The second quarter of 2005 was a negative period for international equity market indexes, as the MSCI EAFE returned -1.01%. Concerns about slowing growth and rising prices left international equity markets lower in April, while May and June were slightly positive months. European equity markets were hit the hardest, as only six out of sixteen European MSCI Country Indexes experienced positive gains this quarter. Finland and Norway posted the strongest European growth at approximately 7.5% and 6.2%, respectively. Portugal posted the largest European loss at close to -9%. G8 nations United Kingdom, France, Germany, and Italy faced slowing consumer demand during the quarter, returning -0.4%, -1.4%, - -1.9, and -4.8%, respectively. Despite a rise in confidence among its large manufacturers, Japan continued its downward trend that began in the first quarter of 2005, returning -3.6%. In a reversal from the first quarter of 2005, Hong Kong posted the largest gain for the Pacific region, returning 8%. The European Central Bank (ECB) decided to maintain interest rates at 2.00% throughout the first half of the year, the lowest level since 1999. In December 2004, the euro reached an all time high against the U.S. dollar as investors worried about the U.S. trade and budget deficits. However, the U.S. dollar has since rebounded on the back of positive U.S. economic data, a series of interest rate increases by the Federal Reserve, and political turmoil in Europe. At the close of the second quarter of 2005, the U.S. dollar hit a new 13 month high versus the euro and a new 10 month high versus the yen amid optimism about the U.S. economy and the prospect that U.S. credit policy would continue to tighten. Turning to sector performance, 5 of 10 MSCI EAFE sectors posted positive returns in U.S. dollars for the first half of 2005, led by Energy up 12.47%, Utilities up 3.36%, and Industrials up 1.59%. Lagging performers were Telecommunications Services down -9.37%, Information Technology down -5.90%, and Consumer Discretionary down -4.42%. 7 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM) June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- For the six months ended June 30, 2005, the Institutional Class of the American Beacon International Equity Index Fund posted a total return of -1.06%, slightly above the MSCI EAFE Index return of -1.17% and slightly below the Lipper International Funds Index return of -0.65%.
ANNUALIZED TOTAL RETURNS --------------------------- PERIODS ENDED 6/30/05 --------------------------- SINCE INCEPTION 1 YEAR 3 YEAR (7/31/00) ------ ------ --------- Institutional Class(1).............. 13.59% 12.03% 0.16% Lipper Int'l. Large-Cap Core Funds Index(2)........................... 13.04% 9.04% -1.80% MSCI EAFE Index(2).................. 13.65% 12.06% 0.35%
1. Past performance is not indicative of future performance. The investment return and principal value of an investment in the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance shown is as of date indicated and may differ from current performance. 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 Large-Cap Core Funds Index tracks the 30 largest mutual funds in the Lipper International Large-Cap Core 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. Of the 21 countries in the MSCI EAFE Index ("EAFE"), 11 posted positive returns for the six-month period. The top performer was Norway, up 12.6%, followed by Austria and Denmark, with respective returns of 7.6% and 7.1%, all in U.S. dollars. The worst performers for the first two quarters were Portugal, Ireland, and Japan with respective returns of -11.6%, -8.5%, and -5.8%. Turning to sector performance, five out of ten EAFE sectors posted positive returns for the first half of the year led by Energy (up 12.5%), Utilities (up 3.4%), and Industrials (up 1.6%). Lagging performers were Telecommunication Services (down 9.4%), Information Technology (down 5.9%), and Consumer Discretionary (down 4.4%). The top EAFE performers for the six-month period were SembCorp Marine Ltd. (up 101%), Chiyoda Corp. (up 84%) and Lundin Petroleum AB (up 76%). The bottom Index performers were Elan Corp. PLC (down 71%), Creative Technology Ltd. (down 55%), and Multiplex Group Ltd. (down 47%). As of June 30, 2005, the Fund's largest country weightings were the United Kingdom (25%) and Japan (22%), while the largest sector weightings were Financials (27%) and Consumer Discretionary (12%). The American Beacon International Equity Index 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 match the characteristics of the Index. TOP TEN HOLDINGS
% OF EQUITIES* -------------- BP plc 2.5% HSBC Holdings plc 2.0% Vodafone Group plc 1.8% GlaxoSmithKline plc 1.6% Royal Dutch Petroleum Co. 1.5% Total S.A. 1.5% Novartis AG 1.3% Nestle SA 1.2% Toyota Motor Corp. 1.1% Royal Bank of Scotland Group plc 1.1%
EQUITY SECTOR ALLOCATION
% OF EQUITIES* EAFE -------------- ----- Financials 27.3% 27.4% Consumer Discretionary 11.6% 11.8% Industrials 9.7% 9.7% Energy 9.0% 9.1% Consumer Staples 8.4% 8.3% Health Care 8.3% 8.2% Materials 7.2% 7.1% Telecommunication Services 6.7% 6.7% Information Technology 6.6% 6.5% Utilities 5.2% 5.2%
* Percent of equity portion of Master International Index Series 8 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM) -- CONTINUED June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- COUNTRY ALLOCATION (COUNTRY CHART)
% OF EQUITIES* EAFE -------------- ----- United Kingdom 25.0% 25.0% Japan 21.8% 21.8% France 9.6% 9.6% Switzerland 6.8% 6.8% Germany 6.8% 6.8% Australia 5.5% 5.5% Netherlands 4.9% 4.9% Spain 4.0% 4.0% Italy 3.9% 3.9% Sweden 2.4% 2.4% Hong Kong 1.8% 1.8% Finland 1.6% 1.5% Belgium 1.3% 1.3% Singapore 0.9% 0.9% Ireland 0.8% 0.8% Denmark 0.8% 0.8% Norway 0.7% 0.7% Greece 0.5% 0.6% Austria 0.4% 0.4% Portugal 0.3% 0.3% New Zealand 0.2% 0.2%
* Percent of equity portion of Master International Index Series 9 FUND EXPENSES June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- FUND EXPENSE EXAMPLE As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including redemption fees if applicable, 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 in each Class and held for the entire period from January 1, 2005 through June 30, 2005. 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 estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead and Institutional 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 S&P 500 INSTITUTIONAL CLASS INDEX INDEX EQUITY INDEX PLANAHEAD CLASS INDEX - ------------------- --------- --------- ------------- --------------- --------- Beginning Account Value 1/1/05....................... $1,000.00 $1,000.00 $1,000.00 Beginning Account Value 1/1/05............... $1,000.00 Ending Account Value 6/30/05...................... $ 990.86 $ 987.27 $ 989.35 Ending Account Value 6/30/05................. $ 989.00 Expenses Paid During Period* 1/1/05-6/30/05............... $ 0.73 $ 1.10 $ 1.14 Expenses Paid During Period* 1/1/05-6/30/05.. $ 3.04 Annualized Expense Ratio...... 0.15% 0.22% 0.23% Annualized Expense Ratio..................... 0.62%
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 PlanAhead and Institutional 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" 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. HYPOTHETICAL
S&P 500 SMALL CAP INTERNATIONAL S&P 500 INSTITUTIONAL CLASS INDEX INDEX EQUITY INDEX PLANAHEAD CLASS INDEX - ------------------- --------- --------- ------------- --------------- --------- Beginning Account Value 1/1/05....................... $1,000.00 $1,000.00 $1,000.00 Beginning Account Value 1/1/05............... $1,000.00 Ending Account Value 6/30/05...................... $1,024.06 $1,023.69 $1,023.65 Ending Account Value 6/30/05................. $1,021.74 Expenses Paid During Period* 1/1/05-6/30/05............... $ 0.75 $ 1.12 $ 1.16 Expenses Paid During Period* 1/1/05-6/30/05.. $ 3.09 Annualized Expense Ratio...... 0.15% 0.22% 0.23% Annualized Expense Ratio..................... 0.62%
- --------------- * Expenses are equal to the Fund's annualized expense ratios for the six-month period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period. 10 AMERICAN BEACON FUNDS STATEMENTS OF ASSETS AND LIABILITIES June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- (in thousands, except share and per share amounts)
S&P 500 SMALL CAP INTERNATIONAL INDEX INDEX EQUITY INDEX ----------- ---------- ------------- ASSETS: Investment in master portfolio, at value................ $ 276,807 $ 35,292 $ 56,927 Receivable for fund shares sold......................... 57 340 4 ----------- ---------- ---------- TOTAL ASSETS........................................ 276,864 35,632 56,931 ----------- ---------- ---------- LIABILITIES: Payable for fund shares redeemed........................ 1,808 -- 183 Administrative service fees payable (Note 2)............ 19 1 1 Other liabilities....................................... 59 15 8 ----------- ---------- ---------- TOTAL LIABILITIES................................... 1,886 16 192 ----------- ---------- ---------- NET ASSETS.................................................. $ 274,978 $ 35,616 $ 56,739 =========== ========== ========== ANALYSIS OF NET ASSETS: Paid-in capital......................................... $ 255,207 $ 28,579 $ 54,337 Undistributed net investment income..................... 1,282 167 911 Accumulated net realized gain (loss).................... (49,293) 688 4,307 Unrealized net appreciation (depreciation) of investments and futures contracts..................... 67,782 6,182 (2,816) ----------- ---------- ---------- NET ASSETS.................................................. $ 274,978 $ 35,616 $ 56,739 =========== ========== ========== SHARES OUTSTANDING (NO PAR VALUE): Institutional Class..................................... 14,041,409 2,869,097 6,109,904 =========== ========== ========== PlanAhead Class......................................... 2,958,141 N/A N/A =========== ========== ========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE: Institutional Class..................................... $ 16.21 $ 12.41 $ 9.29 =========== ========== ========== PlanAhead Class......................................... $ 16.00 N/A N/A =========== ========== ==========
See notes to financial statements. - -------------------------------------------------------------------------------- 11 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS For the Six Months Ended June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- (in thousands)
S&P 500 SMALL CAP INTERNATIONAL INDEX INDEX EQUITY INDEX ------- --------- ------------- INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIO: Portfolio income........................................ $2,536 $ 183 $ 1,064 Portfolio expenses...................................... (62) (13) (28) ------- ------- ------- NET INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIO......................................... 2,474 170 1,036 ------- ------- ------- FUND EXPENSES: Administrative service fees (Note 2): Institutional Class................................. 57 9 14 PlanAhead Class..................................... 57 -- -- Sub-administrative service fees Institutional Class................................. -- -- 4 Transfer agency fees: Institutional Class................................. 18 5 5 PlanAhead Class..................................... 7 -- -- Custody and Accounting fees............................. 4 4 6 Professional fees....................................... 8 1 1 Registration fees....................................... 14 1 1 Service fees - PlanAhead Class (Note 2)................. 57 -- -- Printing................................................ 20 4 4 Other expenses.......................................... 6 2 -- ------- ------- ------- TOTAL FUND EXPENSES................................. 248 26 35 ------- ------- ------- NET INVESTMENT INCOME....................................... 2,226 144 1,001 ------- ------- ------- REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED FROM MASTER PORTFOLIO: Net realized gain (loss) from investment transactions... (1,551) 1,468 143 Net realized loss on foreign currency transactions...... -- (9) -- Net realized loss from futures transactions............. (12) -- -- Net change in unrealized appreciation of investments and futures contracts..................................... (3,366) (2,248) (3,048) ------- ------- ------- NET GAIN ON INVESTMENTS............................. (4,929) (789) (2,905) ------- ------- ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $(2,703) $ (645) $(1,904) ======= ======= =======
See notes to financial statements. - -------------------------------------------------------------------------------- 12 AMERICAN BEACON FUNDS STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- (in thousands)
S&P 500 INDEX SMALL CAP INDEX INTERNATIONAL EQUITY INDEX -------------------------- -------------------------- -------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2005 2004 2005 2004 2005 2004 ----------- ------------ ----------- ------------ ----------- ------------ (UNAUDITED) (UNAUDITED) (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................ $ 2,226 $ 4,939 $ 144 $ 410 $ 1,001 $ 511 Net realized gain (loss) on investments and futures transactions....................... (1,563) (2,744) 1,459 1,654 143 5,436 Change in net unrealized appreciation (depreciation) of investments and futures contracts.................. (3,366) 26,225 (2,248) 2,795 (3,048) (739) -------- -------- ------- --------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................... (2,703) 28,420 (645) 4,859 (1,904) 5,208 -------- -------- ------- --------- -------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class.............. (964) (4,253) -- (409) -- (617) PlanAhead Class.................. (143) (670) -- -- -- -- Net realized gain from investments and futures transactions: Institutional Class.............. -- -- -- (1,785) -- -- -------- -------- ------- --------- -------- -------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS.................... (1,107) (4,923) -- (2,194) -- (617) -------- -------- ------- --------- -------- -------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares........ 28,053 46,823 4,018 101,166 69,569 62,034 Reinvestments of dividends and distributions...................... 1,099 4,893 -- 2,194 -- 617 Cost of shares redeemed.............. (41,376) (64,181) (6,953) (134,585) (34,082) (54,129) -------- -------- ------- --------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS.................... (12,224) (12,465) (2,935) (31,225) 35,487 8,522 -------- -------- ------- --------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS... (16,034) 11,032 (3,580) (28,560) 33,583 13,113 -------- -------- ------- --------- -------- -------- NET ASSETS: Beginning of period.................. 291,012 279,980 39,196 67,756 23,156 10,043 -------- -------- ------- --------- -------- -------- END OF PERIOD*....................... $274,978 $291,012 $35,616 $ 39,196 $ 56,739 $ 23,156 ======== ======== ======= ========= ======== ======== * Includes undistributed net investment income of............... $ 1,282 $ 128 $ 167 $ 21 $ 911 $ (32) ======== ======== ======= ========= ======== ========
See notes to financial statements. - -------------------------------------------------------------------------------- 13 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust"), formerly known as the American AAdvantage Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the "Act"), as amended, as a no load, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon S&P 500 Index Fund, the American Beacon Small Cap Index Fund and the American Beacon International Equity Index Fund (each a "Fund" and collectively, the "Funds"), each a series of the Trust. The Institutional Class of the S&P 500 Index Fund commenced operations on December 31, 1996, and the Fund commenced sale of a second class of shares, designated as "PlanAhead Class" shares, on March 2, 1998. The Institutional Class of the Small Cap Index and the International Equity Index Funds commenced operations on July 31, 2000. Each Fund invests all of its investable assets in a corresponding portfolio. The State Street Equity 500 Index Portfolio, Master Small Cap Index Series and the Master International Index Series (each a "Portfolio" and collectively the "Portfolios") are open-ended management investment companies registered under the Act. The value of such investment reflects each Fund's proportionate interest in the net assets of the corresponding Portfolio.
% OF PORTFOLIO HELD BY FUND AT AMERICAN BEACON: PORTFOLIOS: JUNE 30, 2005 - ---------------- ----------- --------------- S&P 500 Index Fund State Street Equity 500 Index Portfolio 11.6% Small Cap Index Fund Master Small Cap Index Series 10.0% International Equity Index Fund Master International Index Series 13.5%
The financial statements of the Portfolios are included elsewhere in this report and should be read in conjunction with the Funds' financial statements. American Beacon Advisors, Inc. (the "Manager"), formerly known as AMR Investment Services, Inc., is a wholly-owned subsidiary of AMR Corporation, the parent company of American Airlines, Inc. ("American"), and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. 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 between the classes:
CLASS: OFFERED TO: SERVICE FEES: - ------ ----------- ------------- INSTITUTIONAL CLASS Investors making an initial investment of $2 million Administrative Service 0.05% Fee -- PLANAHEAD CLASS General public and investors investing through an Administrative Service 0.25% intermediary Fee -- 0.25% Service Fee --
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. - -------------------------------------------------------------------------------- 14 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- 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. 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 and orders accepted or upon receipt of a redemption request. 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 investment 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 reported amounts in the financial statements. Actual results could differ from those estimates. 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. - -------------------------------------------------------------------------------- 15 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- 2. FEES AND TRANSACTIONS WITH AFFILIATES Administrative Services Agreement The Manager and the Trust entered into an Administrative Services Agreement that 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 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 Agreement The Manager and the Trust entered into a Service Agreement that obligates the Manager to oversee additional shareholder servicing of the PlanAhead Class of the S&P 500 Index Fund. As compensation for performing the duties required under the Service Agreement, the Manager receives 0.25% of the average daily net assets of the PlanAhead Class of the S&P 500 Index Fund. Other Certain officers or Trustees of the Trust are also current or former officers or employees of the Manager or American. The Trust makes no direct payments to its officers. Mr. Feld and the non-interested Trustees (other than Mr. O'Sullivan) and their spouses are provided free unlimited air transportation on American. Retired Trustees and their spouses are provided free transportation on American, up to a maximum annual value of $40,000. The Trust compensates each Trustee with payments in an amount equal to the Trustee's income tax on the value of this free airline travel. Mr. O'Sullivan, as a retiree of American, already receives flight benefits. This Trustee receives an annual retainer of $40,000 plus $1,250 for each Board meeting attended. At June 30, 2005, the employee benefit plans of AMR Corporation and its subsidiary companies owned 87.6% of the Institutional Class of the S&P 500 Index Fund, 98.2% of the Small Cap Index Fund and 39.3% of the International Equity Index Fund. 3. FEDERAL INCOME AND EXCISE TAXES It is the policy of each of the Funds to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income tax provision is required. Dividends are determined in accordance with federal income tax regulations which may treat certain transactions differently than United States 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 following percentages of fund dividends are eligible for the reduced rate attributed to qualified dividend income under the Jobs and Growth Tax Relief Reconciliation Act of 2003: S&P 500 Index 100%, Small Cap Index 31%, and International Equity Index 79%. - -------------------------------------------------------------------------------- 16 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- The tax character of distributions during the six months ended June 30, 2005 and the fiscal year ended December 31, 2004 were as follows (in thousands):
S&P 500 INDEX SMALL CAP INDEX INTERNATIONAL EQUITY INDEX ------------------------- ------------------------- --------------------------- SIX MONTHS SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2005 2004 2005 2004 2005 2004 ---------- ------------ ---------- ------------ ----------- ------------- Distributions paid from: Ordinary Income:* Institutional Class.... $ 964 $4,253 $ -- $1,104 $ -- $617 PlanAhead Class........ 143 670 -- -- -- -- Long-term capital gain Institutional Class.... -- -- -- 1,090 -- -- ------ ------ ----- ------ ----- ---- TOTAL TAXABLE DISTRIBUTIONS............. $1,107 $4,923 $ -- $2,194 $ -- $617 ====== ====== ===== ====== ===== ====
* For tax purposes short-term capital gains distributions are considered ordinary income distributions. At December 31, 2004, capital loss carryforward positions for federal income tax purposes were as follows (in thousands):
FUND 2005 2006 2007 2008 2009 2010 2011 2012 TOTAL - ---- ---- ---- ---- ------ ------ ------- ---- ------ ------- S&P 500 Index Fund................. $23 $815 $45 $8,848 $1,300 $11,516 $635 $1,060 $24,242 International Equity Index Fund.... -- -- -- -- 322 437 282 -- 1,041
Net capital loss carryovers utilized for the period ended December 31, 2004 are as follows: Small Cap Index Fund $245,227 and International Equity Index Fund $70,243. Net capital and foreign currency losses incurred after October 31, 2004 and within the taxable year are deemed to arise on the first business day of the Fund's next taxable year. For the year ended December 31, 2004, the S&P 500 Index Fund and Small Cap Index Fund, respectively, deferred $152,992 and $67,124, of capital losses to January 1, 2005. 4. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares of the Funds: S&P 500 INDEX FUND
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED JUNE 30, 2005 DECEMBER 31, 2004 ------------------------- ------------------------- INSTITUTIONAL CLASS SHARES AMOUNT SHARES AMOUNT - ------------------- ---------- ------------ ---------- ------------ Shares sold......................... 1,136,915 $ 18,314,427 1,938,941 $ 29,855,229 Reinvestment of dividends........... 60,476 961,570 269,604 4,244,506 Shares redeemed..................... (2,050,760) (33,165,343) (3,552,128) (54,721,190) ---------- ------------ ---------- ------------ Net decrease in capital shares outstanding....................... (853,369) $(13,889,346) (1,343,583) $(20,621,455) ========== ============ ========== ============
- -------------------------------------------------------------------------------- 17 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 (unaudited) - --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED JUNE 30, 2005 DECEMBER 31, 2004 ------------------------ ----------------------- PLANAHEAD CLASS SHARES AMOUNT SHARES AMOUNT - --------------- --------- ------------ --------- ----------- Shares sold.............................. 612,154 $ 9,739,005 1,111,634 $16,968,030 Reinvestment of dividends................ 8,741 137,234 41,362 648,294 Shares redeemed.......................... (518,081) (8,210,821) (618,975) (9,459,897) -------- ----------- --------- ----------- Net increase in capital shares outstanding............................ 102,814 $ 1,665,418 534,021 $ 8,156,427 ======== =========== ========= ===========
SMALL CAP INDEX FUND
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED JUNE 30, 2005 DECEMBER 31, 2004 ------------------------ --------------------------- INSTITUTIONAL CLASS SHARES AMOUNT SHARES AMOUNT - ------------------- --------- ------------ ----------- ------------- Shares sold......................... 334,860 $ 4,017,706 8,578,011 $ 101,165,598 Reinvestment of dividends........... -- -- 175,390 2,194,134 Shares redeemed..................... (583,314) (6,952,884) (11,648,975) (134,584,990) -------- ----------- ----------- ------------- Net decrease in capital shares outstanding....................... (248,454) $(2,935,178) (2,895,574) $ (31,225,258) ======== =========== =========== =============
INTERNATIONAL EQUITY INDEX FUND
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED JUNE 30, 2005 DECEMBER 31, 2004 ------------------------- ------------------------- INSTITUTIONAL CLASS SHARES AMOUNT SHARES AMOUNT - ------------------- ---------- ------------ ---------- ------------ Shares sold......................... 7,319,535 $ 69,568,908 7,529,578 $ 62,034,275 Reinvestment of dividends........... -- -- 67,124 616,868 Shares redeemed..................... (3,674,432) (34,081,538) (6,385,467) (54,128,524) ---------- ------------ ---------- ------------ Net increase in capital shares outstanding....................... 3,645,103 $ 35,487,370 1,211,235 $ 8,522,619 ========== ============ ========== ============
- -------------------------------------------------------------------------------- 18 AMERICAN BEACON S&P 500 INDEX FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout each period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS --------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ---------------------------------------------------------------- 2005 2004 2003 2002 2001 2000(B) ----------- -------- -------- -------- -------- -------- (UNAUDITED) NET ASSET VALUE, BEGINNING OF PERIOD.... $ 16.43 $ 15.10 $ 11.96 $ 15.62 $ 17.99 $ 20.05 -------- -------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS:(A) Net investment income............... 0.14 0.29 0.21 0.20 0.20 0.23 Net gains (losses) on securities (both realized and unrealized).... (0.29) 1.32 3.14 (3.66) (2.38) (2.05) -------- -------- -------- -------- -------- -------- Total from investment operations........ (0.15) 1.61 3.35 (3.46) (2.18) (1.82) -------- -------- -------- -------- -------- -------- LESS DISTRIBUTIONS: Dividends from net investment income............................ (0.07) (0.28) (0.21) (0.20) (0.19)(C) (0.24)(C) -------- -------- -------- -------- -------- -------- Total distributions..................... (0.07) (0.28) (0.21) (0.20) (0.19) (0.24) -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD.......... $ 16.21 $ 16.43 $ 15.10 $ 11.96 $ 15.62 $ 17.99 ======== ======== ======== ======== ======== ======== TOTAL RETURN............................ (0.91%)(D) 10.76% 28.26% (22.27%) (12.12%) (9.15%) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands)........................ $227,648 $244,668 $245,251 $195,368 $254,289 $321,805 Ratios to average net assets (annualized):(A) Net investment income.......... 1.70% 1.85% 1.63% 1.47% 1.22% 1.09% Expenses....................... 0.15% 0.17% 0.14% 0.14% 0.15% 0.16%
- --------------- (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 BT Equity 500 Index Portfolio prior to March 1, 2000, and the State Street Equity 500 Index Portfolio thereafter. (B) On March 1, 2000, the Fund invested all of its investable assets in the State Street Equity 500 Index Portfolio. Prior to March 1, 2000, the Fund invested all of its investable assets in the BT Equity 500 Index Portfolio. (C) Includes a tax return of capital distribution which amounts to less than $0.01 per share. (D) Not annualized. - -------------------------------------------------------------------------------- 19 AMERICAN BEACON S&P 500 INDEX FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout each period) - --------------------------------------------------------------------------------
PLANAHEAD CLASS ----------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------------------------------ 2005 2004 2003 2002 2001 2000(B) ----------- ------- ------- -------- -------- ------- (UNAUDITED) NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 16.23 $ 14.96 $ 11.85 $ 15.49 $ 17.99 $ 20.12 ------- ------- ------- -------- -------- ------- INCOME FROM INVESTMENT OPERATIONS:(A) Net investment income....... 0.10 0.21 0.15 0.14 0.14 0.13 Net gains (losses) on securities (both realized and unrealized)........... (0.28) 1.31 3.12 (3.64) (2.39) (2.00) ------- ------- ------- -------- -------- ------- Total from investment operations.................... (0.18) 1.52 3.27 (3.50) (2.25) (1.87) ------- ------- ------- -------- -------- ------- LESS DISTRIBUTIONS: Dividends from net investment income......... (0.05) (0.25) (0.16) (0.14) (0.25)(C) (0.26)(C) ------- ------- ------- -------- -------- ------- Total distributions............. (0.05) (0.25) (0.16) (0.14) (0.25) (0.26) ------- ------- ------- -------- -------- ------- NET ASSET VALUE, END OF PERIOD.. $ 16.00 $ 16.23 $ 14.96 $ 11.85 $ 15.49 $ 17.99 ======= ======= ======= ======== ======== ======= TOTAL RETURN.................... (1.10%)(E) 10.21% 27.65% (22.59%) (12.48%) (9.38%) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands)............ $47,330 $46,344 $34,729 $ 24,885 $ 32,284 $ 5,143 Ratios to average net assets (annualized):(A) Net investment income.. 1.24% 1.43% 1.16% 1.06% 0.89% 0.66% Expenses(D)............ 0.62% 0.62% 0.63% 0.55% 0.56% 0.54% Decrease reflected in above expense ratio due to absorption of expenses by American Beacon Advisors, Inc.(D).............. -- -- 0.01% 0.08% 0.05% 0.16%
- --------------- (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 BT Equity 500 Index Portfolio prior to March 1, 2000, and the State Street Equity 500 Index Portfolio thereafter. (B) On March 1, 2000, the Fund invested all of its investable assets in the State Street Equity 500 Index Portfolio. Prior to March 1, 2000, the Fund invested all of its investable assets in the BT Equity 500 Index Portfolio. (C) Includes a tax return of capital distribution which amounted to less than $0.01 per share. (D) American Beacon Advisors, Inc. agreed to reimburse the Class for a portion of its expenses through March 1, 2003. (E) Not annualized. - -------------------------------------------------------------------------------- 20 AMERICAN BEACON SMALL CAP INDEX FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout each period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JULY 31 TO JUNE 30, ----------------------------------------- DECEMBER 31, 2005 2004 2003 2002 2001 2000 ----------- ------- ------- -------- ------- ------------ (UNAUDITED) NET ASSET VALUE, BEGINNING OF PERIOD...................... $ 12.57 $ 11.27 $ 7.70 $ 9.79 $ 9.69 $ 10.00 ------- ------- ------- -------- ------- ------- INCOME FROM INVESTMENT OPERATIONS:(A) Net investment income..... 0.05 0.14 0.04 0.11 0.09 0.05 Net gains (losses) on securities (both realized and unrealized)............. (0.21) 1.87 3.57 (2.10) 0.11 (0.31) ------- ------- ------- -------- ------- ------- Total from investment operations.................. (0.16) 2.01 3.61 (1.99) 0.20 (0.26) ------- ------- ------- -------- ------- ------- LESS DISTRIBUTIONS: Dividends from net investment income....... -- (0.13) (0.04) (0.10) (0.09) (0.05) Distributions from net realized gain on investments............. -- (0.58) -- -- -- -- Tax return of capital..... -- -- -- -- (0.01) -- ------- ------- ------- -------- ------- ------- Total distributions........... -- (0.71) (0.04) (0.10) (0.10) (0.05) ------- ------- ------- -------- ------- ------- NET ASSET VALUE, END OF PERIOD...................... $ 12.41 $ 12.57 $ 11.27 $ 7.70 $ 9.79 $ 9.69 ======= ======= ======= ======== ======= ======= TOTAL RETURN.................. (1.27%)(B) 17.91% 46.90% (20.37%) 2.07% (2.59%)(B) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands).......... $35,616 $39,196 $67,756 $ 11,227 $11,803 $ 4,120 Ratios to average net assets (annualized):(A) Net investment income............. 0.83% 0.90% 1.04% 1.13% 1.36% 1.61% Expenses............. 0.22% 0.22% 0.24% 0.20% 0.19% 0.50%(C) Decrease reflected in above expense ratio due to absorption of expenses by American Beacon Advisors, Inc. .... -- -- -- -- -- 0.46%(C)
- --------------- (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) Not annualized. (C) American Beacon Advisors, Inc. agreed to reimburse the Fund for a portion of its expenses through December 31, 2000 such that the total expense ratio of the Fund would not exceed 0.50%. - -------------------------------------------------------------------------------- 21 AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout each period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS -------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JULY 31 TO JUNE 30, ------------------------------------------ DECEMBER 31, 2005 2004 2003 2002 2001 2000 ----------- ------- ------- -------- -------- ------------ (UNAUDITED) NET ASSET VALUE, BEGINNING OF PERIOD................. $ 9.39 $ 8.01 $ 5.86 $ 7.07 $ 9.21 $ 10.00 ------- ------- ------- -------- -------- ------- INCOME FROM INVESTMENT OPERATIONS:(A) Net investment income... 0.18 0.17 0.14 0.11 0.10 0.02 Net gains (losses) on securities (both realized and unrealized)........... (0.28) 1.44 2.13 (1.23) (2.12) (0.72) ------- ------- ------- -------- -------- ------- Total from investment operations................ (0.10) 1.61 2.27 (1.12) (2.02) (0.70) ------- ------- ------- -------- -------- ------- LESS DISTRIBUTIONS: Dividends from net investment income..... -- (0.23) (0.12) (0.09) (0.09) (0.03) Distributions from net realized gain on investments........... -- -- -- -- -- (0.05) Tax return of capital... -- -- -- -- (0.03) (0.01) ------- ------- ------- -------- -------- ------- Total distributions......... -- (0.23) (0.12) (0.09) (0.12) (0.09) ------- ------- ------- -------- -------- ------- NET ASSET VALUE, END OF PERIOD.................... $ 9.29 $ 9.39 $ 8.01 $ 5.86 $ 7.07 $ 9.21 ======= ======= ======= ======== ======== ======= TOTAL RETURN................ (1.06%)(B) 20.12% 38.87% (15.65%) (22.14%) (7.03%)(B) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands)............ $56,739 $23,156 $10,043 $ 4,912 $ 3,773 $ 3,542 Ratios to average net assets (annualized):(A) Net investment income........... 3.70% 2.16% 2.71% 1.97% 1.49% 0.63% Expenses........... 0.23% 0.26% 0.31% 0.25% 0.29% 0.60%(C) Decrease reflected in above expense ratio due to absorption of expenses by American Beacon Advisors, Inc. ............ -- -- -- -- -- 1.52%(C)
- --------------- (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) Not annualized. (C) American Beacon Advisors, Inc. agreed to reimburse the Fund for a portion of its expenses through December 31, 2000 such that the total expense ratio of the Fund did not exceed 0.60%. - -------------------------------------------------------------------------------- 22 (This page intentionally left blank) (AMERICAN BEACON LOGO) 23 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS June 30, 2005 (unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) COMMON STOCKS - 97.67% CONSUMER DISCRETIONARY - 11.07% AutoNation, Inc. (a)........... 48,800 $ 1,001 AutoZone, Inc. (a)............. 13,987 1,293 Bed Bath & Beyond, Inc. (a).... 63,114 2,637 Best Buy Co., Inc. ............ 63,621 4,361 Big Lots, Inc. (a)............. 24,438 324 Black & Decker Corp............ 17,033 1,530 Brunswick Corp. ............... 20,829 902 Carnival Corp. (b)............. 112,919 6,160 Centex Corp. (b)............... 26,976 1,906 Circuit City Stores, Inc. ..... 41,339 715 Clear Channel Communications, Inc. ........................ 108,865 3,367 Coach, Inc. (a)................ 81,400 2,733 Comcast Corp. (a).............. 471,067 14,462 Cooper Tire & Rubber Co. (b)... 12,537 233 Dana Corp. .................... 32,949 495 Darden Restaurants, Inc. ...... 31,910 1,052 Delphi Corp. (b)............... 121,567 565 Dillard's, Inc. Class A (b).... 15,253 357 Dollar General Corp. (b)....... 65,215 1,328 Dow Jones & Co., Inc. (b)...... 15,326 543 D.R. Horton, Inc. ............. 3,900 147 Eastman Kodak Co. ............. 60,837 1,634 eBay, Inc. (a)................. 261,920 8,646 Family Dollar Stores, Inc. .... 36,368 949 Federated Department Stores, Inc. ........................ 35,976 2,636 Ford Motor Co. (b)............. 390,255 3,996 Fortune Brands, Inc. .......... 30,866 2,741 Gannett Co., Inc. ............. 53,538 3,808 Gap, Inc. ..................... 161,830 3,196 General Motors Corp. (b)....... 121,173 4,120 Genuine Parts Co. ............. 37,793 1,553 Goodyear Tire & Rubber Co. (a)(b)....................... 37,942 565 Harley-Davidson, Inc. ......... 60,838 3,018 Harrah's Entertainment, Inc. ........................ 38,233 2,756 Hasbro, Inc. .................. 36,087 750 Hilton Hotels Corp. ........... 81,743 1,950 Home Depot, Inc. .............. 458,457 17,834 International Game Technology.. 73,352 2,065 Interpublic Group of Cos., Inc. (a).......................... 91,677 1,117 JC Penney & Co., Inc. ......... 56,188 2,954 Johnson Controls, Inc. ........ 41,196 2,321 Jones Apparel Group, Inc. ..... 26,679 828 KB HOME........................ 17,662 1,346 Knight-Ridder, Inc. ........... 16,291 999 Kohl's Corp. (a)............... 69,510 3,886 Leggett & Platt, Inc. ......... 41,354 1,099 Limited Brands................. 82,669 1,771 Liz Claiborne, Inc. ........... 23,541 936 Lowe's Cos., Inc. ............. 165,023 9,608 Marriott International, Inc. Class A...................... 42,839 2,923 Mattel, Inc. .................. 89,845 1,644 May Department Stores Co. ..... 65,567 2,633 Maytag Corp. (b)............... 17,529 275 McDonald's Corp. .............. 271,653 7,538 McGraw-Hill, Inc. ............. 80,026 3,541 Meredith Corp. ................ 9,847 483
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) New York Times Co. Class A..... 31,545 $ 983 Newell Rubbermaid, Inc. (b).... 59,621 1,421 News Corp. Class A............. 615,700 9,962 NIKE, Inc. Class B............. 49,113 4,253 Nordstrom, Inc. ............... 26,738 1,817 Office Depot, Inc. (a)......... 67,570 1,543 OfficeMax, Inc. (b)............ 14,319 426 Omnicom Group, Inc. ........... 39,217 3,132 Pulte Homes, Inc. ............. 25,236 2,126 Radioshack Corp. .............. 34,353 796 Reebok International, Ltd. .... 12,071 505 Reynolds American, Inc. (b).... 24,740 1,950 Sears Holdings Corp. (a)....... 21,952 3,290 Sherwin-Williams Co. .......... 27,370 1,289 Snap-On, Inc. (b).............. 12,548 430 Stanley Works.................. 16,332 744 Staples, Inc. ................. 158,325 3,376 Starbucks Corp. (a)............ 83,226 4,300 Starwood Hotels & Resorts Worldwide, Inc. Class B...... 47,312 2,771 Target Corp. .................. 188,657 10,265 Tiffany & Co. ................. 31,568 1,034 Time Warner, Inc. (a).......... 1,000,847 16,724 TJX Cos., Inc. ................ 100,513 2,448 Toys "R" Us, Inc. (a).......... 46,669 1,236 Tribune Co. ................... 63,455 2,232 Univision Communications, Inc. Class A (a).................. 63,118 1,739 V.F. Corp. .................... 21,588 1,235 Viacom, Inc. Class B........... 356,697 11,421 Visteon Corp. ................. 27,553 166 Walt Disney Co. ............... 437,373 11,013 Wendy's International, Inc. ... 24,567 1,171 Whirlpool Corp. ............... 14,466 1,014 Yum! Brands, Inc. ............. 62,122 3,235 ---------- 264,277 ---------- CONSUMER STAPLES - 9.81% Alberto Culver Co. Class B..... 18,258 791 Albertson's, Inc. (b).......... 79,613 1,646 Altria Group, Inc. ............ 444,464 28,739 Anheuser-Busch Cos., Inc. ..... 165,867 7,588 Archer-Daniels-Midland Co. .... 132,667 2,836 Avon Products, Inc. ........... 100,548 3,806 Brown-Forman Corp. Class B..... 19,582 1,184 Campbell Soup Co. ............. 69,283 2,132 Clorox Co. .................... 33,010 1,839 Coca-Cola Co. ................. 484,135 20,213 Coca-Cola Enterprises, Inc. ... 74,900 1,649 Colgate-Palmolive Co. ......... 111,735 5,577 ConAgra Foods, Inc. ........... 109,746 2,542 Constellation Brands, Inc. Class A (a).................. 3,700 110 Costco Wholesale Corp. ........ 103,551 4,641 CVS Corp. ..................... 175,484 5,101 General Mills, Inc. ........... 80,464 3,765 Gillette Co. .................. 214,844 10,878 H. J. Heinz Co. ............... 74,520 2,640 Hershey Foods Corp. ........... 46,608 2,894 Kellogg Co. ................... 74,829 3,325 Kimberly-Clark Corp. .......... 102,164 6,395 Kroger Co. (a)................. 155,822 2,965
See notes to financial statements. - -------------------------------------------------------------------------------- 24 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED June 30, 2005 (unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) McCormick & Co., Inc. ......... 29,400 $ 961 Molson Coors Brewing Co., Class B............................ 16,744 1,038 Pepsi Bottling Group, Inc. .... 41,853 1,197 PepsiCo, Inc. ................. 359,710 19,399 Procter & Gamble Co. .......... 531,122 28,017 Safeway, Inc. (a).............. 95,193 2,150 Sara Lee Corp. ................ 168,217 3,332 SuperValu, Inc. ............... 29,060 948 Sysco Corp. ................... 135,181 4,892 UST Corp. ..................... 35,747 1,632 Wal-Mart Stores, Inc. ......... 717,728 34,595 Walgreen Co. .................. 218,110 10,031 Wrigley Wm., Jr. Co............ 41,616 2,865 ---------- 234,313 ---------- ENERGY - 8.26% Amerada Hess Corp. ............ 18,402 1,960 Anadarko Petroleum Corp. ...... 50,654 4,161 Apache Corp. .................. 69,830 4,511 Ashland, Inc. ................. 14,480 1,041 Baker Hughes, Inc. ............ 72,080 3,688 BJ Services Co. ............... 34,955 1,834 Burlington Resources, Inc. .... 82,456 4,555 ChevronTexaco Corp. ........... 450,394 25,186 ConocoPhillips................. 297,382 17,097 Devon Energy Corp. ............ 101,222 5,130 EOG Resources, Inc. ........... 50,868 2,889 ExxonMobil Corp. .............. 1,364,402 78,412 Halliburton Co. ............... 107,586 5,145 Kerr-McGee Corp. .............. 24,721 1,886 Marathon Oil Corp. ............ 73,934 3,946 Nabors Industries, Ltd. (a).... 32,815 1,989 National Oilwell Varco, Inc. (a)(b)....................... 36,300 1,726 Noble Corp. ................... 29,323 1,804 Occidental Petroleum Corp. .... 85,123 6,549 Rowan Cos., Inc. (b)........... 23,239 690 Schlumberger, Ltd. ............ 125,907 9,561 Sunoco, Inc. .................. 14,928 1,697 Transocean, Inc. (a)........... 70,895 3,826 Unocal Corp. .................. 57,688 3,753 Valero Energy Corp. ........... 54,700 4,327 ---------- 197,363 ---------- FINANCIALS - 19.85% ACE, Ltd. ..................... 60,455 2,711 AFLAC, Inc. ................... 107,416 4,649 Allstate Corp. ................ 142,707 8,527 Ambac Financial Group, Inc. ... 23,047 1,608 American Express Co. .......... 250,573 13,338 American International Group, Inc. ........................ 556,783 32,349 AmSouth Bancorp................ 75,519 1,964 AON Corp. ..................... 68,523 1,716 Apartment Investment & Management Co. Class A....... 20,500 839 Archstone-Smith Trust.......... 42,400 1,638 Bank of America Corp. ......... 862,600 39,343 Bank of New York Co., Inc. .... 166,679 4,797 BB&T Corp. .................... 117,018 4,677 Bear Stearns Cos., Inc. ....... 24,099 2,505
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) Capital One Financial Corp. ... 54,815 $ 4,386 Charles Schwab Corp. .......... 244,493 2,758 Chubb Corp. ................... 42,539 3,642 Cincinnati Financial Corp. .... 35,405 1,401 CIT Group, Inc. ............... 44,800 1,925 Citigroup, Inc. ............... 1,115,371 51,564 Comerica, Inc. ................ 36,232 2,094 Compass Bancshares, Inc. (b)... 26,600 1,197 Countrywide Financial Corp. ... 127,386 4,918 E*Trade Financial Corp. (a).... 80,600 1,128 Equity Office Properties Trust........................ 85,841 2,841 Equity Residential............. 60,107 2,213 Fannie Mae..................... 206,729 12,073 Federal Home Loan Mortgage Corp. ....................... 148,846 9,709 Federated Investors, Inc. Class B............................ 20,700 621 Fifth Third Bancorp (b)........ 110,900 4,570 First Horizon National Corp. (b).......................... 26,717 1,127 Franklin Resources, Inc. ...... 42,144 3,244 Golden West Financial Corp. (b).......................... 60,222 3,877 Goldman Sachs Group, Inc. ..... 94,400 9,631 Hartford Financial Services Group, Inc. ................. 63,088 4,718 Huntington Bancshares, Inc. (b).......................... 50,054 1,208 J.P. Morgan Chase & Co. ....... 755,219 26,674 Janus Capital Group, Inc. ..... 48,419 728 Jefferson-Pilot Corp. ......... 29,560 1,490 KeyCorp........................ 86,509 2,868 Lehman Brothers Holdings, Inc. ........................ 58,918 5,849 Lincoln National Corp. ........ 37,731 1,770 Loews Corp. ................... 34,414 2,667 M & T Bank Corp. .............. 21,200 2,229 Marsh & McLennan Cos., Inc. ... 112,736 3,123 Marshall & Ilsley Corp. ....... 44,892 1,995 MBIA, Inc. .................... 28,958 1,718 MBNA Corp. .................... 270,802 7,084 Mellon Financial Corp. ........ 90,223 2,589 Merrill Lynch & Co., Inc. ..... 201,927 11,108 MetLife, Inc. ................. 156,407 7,029 MGIC Investment Corp. ......... 20,162 1,315 Moody's Corp. ................. 58,430 2,627 Morgan Stanley................. 234,043 12,280 National City Corp. ........... 126,691 4,323 North Fork Bancorp, Inc. ...... 104,435 2,934 Northern Trust Corp. .......... 43,940 2,003 Plum Creek Timber Co., Inc. ... 39,780 1,444 PNC Financial Services Group, Inc.......................... 60,247 3,281 Principal Financial Group, Inc. ........................ 62,750 2,629 Progressive Corp. (b).......... 42,447 4,194 ProLogis....................... 39,000 1,569 Providian Financial Corp. (a).......................... 63,473 1,119 Prudential Financial, Inc. .... 111,900 7,347 Regions Financial Corp. ....... 99,009 3,354 SAFECO Corp. .................. 27,464 1,492 Simon Property Group, Inc. .... 47,163 3,419 SLM Corp. ..................... 89,642 4,554 Sovereign Bancorp, Inc. ....... 77,900 1,740 St. Paul Travelers Cos., Inc. ........................ 143,425 5,670 State Street Corp. (c)......... 71,125 3,432 SunTrust Banks, Inc. .......... 72,672 5,250 Synovus Financial Corp. ....... 67,004 1,921
See notes to financial statements. - -------------------------------------------------------------------------------- 25 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED June 30, 2005 (unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) T. Rowe Price Group, Inc. ..... 26,790 $ 1,677 Torchmark Corp. ............... 22,276 1,163 U.S. Bancorp................... 391,461 11,431 UnumProvident Corp. (b)........ 64,235 1,177 Wachovia Corp. ................ 336,686 16,700 Washington Mutual, Inc. ....... 189,313 7,703 Wells Fargo Co. ............... 362,311 22,311 XL Capital, Ltd. Class A....... 29,532 2,198 Zions Bancorp.................. 19,419 1,428 ---------- 474,112 ---------- HEALTH CARE - 12.91% Abbott Laboratories............ 331,167 16,231 Aetna, Inc. ................... 62,064 5,140 Allergan, Inc. ................ 27,891 2,377 AmerisourceBergen Corp. ....... 22,816 1,578 Amgen, Inc. (a)................ 264,275 15,978 Applera Corp. - Applied Biosystems Group............. 42,467 835 Bausch & Lomb, Inc. ........... 11,625 965 Baxter International, Inc. .... 132,726 4,924 Becton, Dickinson & Co. ....... 53,829 2,824 Biogen Idec, Inc. (a).......... 75,423 2,600 Biomet, Inc. .................. 53,741 1,862 Boston Scientific Corp. (a).... 160,196 4,325 Bristol-Myers Squibb Co. ...... 417,317 10,425 C.R. Bard, Inc. ............... 22,694 1,509 Cardinal Health, Inc. ......... 91,466 5,267 Caremark Rx, Inc. (a).......... 96,908 4,314 Chiron Corp. (a)............... 31,244 1,090 CIGNA Corp. ................... 27,989 2,996 Eli Lilly & Co. ............... 241,997 13,482 Express Scripts, Inc. (a)...... 31,700 1,584 Forest Laboratories, Inc. (a).......................... 72,706 2,825 Genzyme Corp. (a).............. 55,005 3,305 Gilead Sciences, Inc. (a)...... 96,800 4,258 Guidant Corp. ................. 68,864 4,635 HCA, Inc. ..................... 90,759 5,143 Health Management Associates, Inc. Class A................. 52,698 1,380 Hospira, Inc. (a).............. 33,036 1,288 Humana, Inc. (a)............... 34,425 1,368 IMS Health, Inc. .............. 48,381 1,198 Johnson & Johnson.............. 637,746 41,453 King Pharmaceuticals, Inc. (a).......................... 52,332 545 Laboratory Corp. of America Holdings (a)................. 29,200 1,457 Manor Care, Inc. .............. 18,651 741 McKesson Corp. ................ 63,631 2,850 Medco Health Solutions, Inc. (a).......................... 58,672 3,131 MedImmune, Inc. (a)............ 53,965 1,442 Medtronic, Inc. ............... 258,402 13,383 Merck & Co., Inc. ............. 470,603 14,495 Millipore Corp. (a)............ 10,728 609 Mylan Laboratories Inc. ....... 58,200 1,120 Pfizer, Inc. .................. 1,594,574 43,978 Quest Diagnostics Inc. ........ 39,400 2,099 Schering-Plough Corp. ......... 316,124 6,025 St. Jude Medical, Inc. (a)..... 76,894 3,353 Stryker Corp. ................. 79,908 3,800 Tenet Healthcare Corp. (a)..... 101,109 1,238
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) UnitedHealth Group, Inc. ...... 270,468 $ 14,102 Watson Pharmaceuticals, Inc. (a).......................... 23,703 701 Wellpoint, Inc. (a)............ 132,078 9,198 Wyeth.......................... 288,031 12,817 Zimmer Holdings, Inc. (a)...... 52,720 4,016 ---------- 308,259 ---------- INDUSTRIALS - 11.12% 3M Co. ........................ 164,384 11,885 Allied Waste Industries, Inc. (a)(b)....................... 59,067 468 American Power Conversion Corp. ....................... 38,867 917 American Standard Cos., Inc. ........................ 38,221 1,602 Apollo Group, Inc. (a)......... 35,275 2,759 Avery Dennison Corp. .......... 22,070 1,169 Boeing Co. .................... 176,445 11,645 Burlington Northern Santa Fe Corp. ....................... 80,950 3,811 Caterpillar, Inc. ............. 73,185 6,975 Cendant Corp. ................. 225,922 5,054 Cintas Corp. .................. 32,282 1,246 Cooper Industries, Ltd. ....... 19,921 1,273 CSX Corp. ..................... 45,824 1,955 Cummins, Inc. (b).............. 9,173 684 Danaher Corp. ................. 58,626 3,069 Deere & Co. ................... 52,641 3,447 Delta Air Lines, Inc. (a)(b)... 30,193 114 Dover Corp. ................... 44,013 1,601 Eaton Corp. ................... 32,178 1,927 Emerson Electric Co. .......... 89,035 5,576 Equifax, Inc. ................. 27,769 992 FedEx Corp. ................... 64,546 5,229 Fluor Corp. ................... 18,106 1,043 General Dynamics Corp. ........ 42,806 4,689 General Electric Co. (d)....... 2,273,123 78,764 Goodrich Co. .................. 25,755 1,055 H&R Block, Inc. ............... 35,710 2,084 Honeywell International, Inc. ........................ 182,442 6,683 Illinois Tool Works, Inc. ..... 58,264 4,643 Ingersoll-Rand Co. Class A..... 36,050 2,572 ITT Industries, Inc. .......... 19,602 1,914 L-3 Communications Holdings, Inc. ........................ 24,900 1,907 Lockheed Martin Corp. ......... 85,971 5,577 Masco Corp. ................... 92,674 2,943 Monster Worldwide, Inc. (a).... 25,792 740 Navistar International Corp. (a).......................... 14,280 457 Norfolk Southern Corp. ........ 85,261 2,640 Northrop Grumman Corp. ........ 76,778 4,242 PACCAR, Inc. .................. 36,970 2,514 Pall Corp.(b).................. 26,774 813 Parker-Hannifin Corp. ......... 25,923 1,608 Pitney Bowes, Inc. ............ 49,139 2,140 R.R. Donnelley & Sons Co. ..... 46,660 1,610 Raytheon Co. .................. 96,614 3,780 Robert Half International, Inc. ........................ 35,014 874 Rockwell Automation, Inc. ..... 37,820 1,842 Rockwell Collins, Inc. ........ 38,219 1,822 Ryder Systems, Inc. ........... 13,980 512 Southwest Airlines Co. (b)..... 156,740 2,183 Textron, Inc. ................. 29,175 2,213
See notes to financial statements. - -------------------------------------------------------------------------------- 26 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED June 30, 2005 (unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) Tyco International, Ltd. ...... 434,548 $ 12,689 Union Pacific Corp. ........... 55,640 3,605 United Parcel Service, Inc. Class B...................... 237,900 16,453 United Technologies Corp. ..... 218,714 11,231 W.W. Grainger, Inc. ........... 18,109 992 Waste Management, Inc. ........ 121,179 3,434 ---------- 265,666 ---------- INFORMATION TECHNOLOGY - 14.96% ADC Telecommunications, Inc. (a)(b)....................... 25,018 545 Adobe Systems, Inc. ........... 103,742 2,969 Advanced Micro Devices, Inc. (a).......................... 83,484 1,448 Affiliated Computer Services, Inc. (a)..................... 27,400 1,400 Agilent Technologies, Inc. (a).......................... 91,927 2,116 Altera Corp. (a)............... 79,078 1,567 Analog Devices, Inc. .......... 79,361 2,961 Andrew Corp. (a)............... 34,827 444 Apple Computer, Inc. (a)....... 175,192 6,449 Applied Materials, Inc. ....... 351,161 5,682 Applied Micro Circuits Corp. (a).......................... 68,042 174 Autodesk, Inc. ................ 48,730 1,675 Automatic Data Processing, Inc. ........................ 124,938 5,244 Avaya, Inc. (a)................ 103,715 863 BMC Software, Inc. (a)......... 48,036 862 Broadcom Corp. (a)............. 61,846 2,196 CIENA Corp. (a)(b)............. 126,088 263 Cisco Systems, Inc. (a)........ 1,371,759 26,214 Citrix Systems, Inc. (a)(b).... 36,853 798 Computer Associates International, Inc. ......... 113,344 3,115 Computer Sciences Corp. (a).... 39,282 1,717 Compuware Corp. (a)............ 84,057 604 Comverse Technology, Inc. (a).. 42,838 1,013 Convergys Corp. (a)............ 30,805 438 Corning, Inc. (a).............. 310,585 5,162 Dell, Inc. (a)................. 519,991 20,545 Electronic Arts, Inc. (a)...... 65,600 3,714 Electronic Data Systems Corp. ....................... 111,386 2,144 EMC Corp. (a).................. 513,541 7,041 First Data Corp. .............. 166,304 6,675 Fiserv, Inc. (a)............... 40,847 1,754 Fisher Scientific International, Inc. (a)...... 25,400 1,648 Freescale Semiconductor, Inc. (a).......................... 86,808 1,839 Gateway, Inc. (a)(b)........... 65,065 215 Hewlett-Packard Co. ........... 616,519 14,494 Intel Corp. ................... 1,324,303 34,511 International Business Machines Corp. ....................... 346,318 25,697 Intuit, Inc. (a)............... 40,051 1,807 Jabil Circuit, Inc. (a)........ 38,813 1,193 JDS Uniphase Corp. (a)(b)...... 312,419 475 KLA-Tencor Corp. .............. 42,364 1,851 Lexmark International Group, Inc. Class A (a)............. 26,902 1,744 Linear Technology Corp. ....... 65,375 2,399 LSI Logic Corp. (a)(b)......... 84,935 721
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) Lucent Technologies, Inc. (a)(b)....................... 943,172 $ 2,745 Maxim Integrated Products, Inc. ........................ 69,556 2,658 Mercury Interactive Corp. (a).......................... 18,248 700 Micron Technology, Inc. (a).... 132,632 1,354 Microsoft Corp. (d)............ 2,154,304 53,513 Molex, Inc. (b)................ 36,210 943 Motorola, Inc. ................ 523,598 9,561 National Semiconductor Corp. ....................... 74,518 1,642 NCR Corp. (a).................. 40,384 1,418 Network Appliance, Inc. (a).... 77,867 2,201 Novell, Inc. (a)(b)............ 82,542 512 Novellus Systems, Inc. (a)..... 30,569 755 NVIDIA Corp. (a)............... 35,951 961 Oracle Corp. (a)............... 944,438 12,467 Parametric Technology Corp. (a).......................... 58,241 372 Paychex, Inc. ................. 75,627 2,461 PerkinElmer, Inc. ............. 28,357 536 PMC-Sierra, Inc. (a)(b)........ 38,624 360 QLogic Corp. (a)............... 20,045 619 QUALCOMM, Inc. ................ 348,878 11,516 Sabre Holdings Corp. Class A (b).......................... 28,424 567 Sanmina-SCI Corp. (a).......... 112,858 617 Scientific-Atlanta, Inc. ...... 32,168 1,070 Siebel Systems, Inc. (a)(b).... 110,658 985 Solectron Corp. (a)............ 210,214 797 Sun Microsystems, Inc. (a)..... 718,988 2,682 SunGard Data Systems, Inc. (a).......................... 61,450 2,161 Symantec Corp. (a)............. 151,200 3,287 Symbol Technologies, Inc. ..... 52,185 515 Tektronix, Inc. ............... 19,529 454 Tellabs, Inc. (a).............. 95,775 833 Teradyne, Inc. (a)(b).......... 42,792 512 Texas Instruments, Inc. ....... 356,203 9,999 Thermo Electron Corp. (a)...... 34,829 936 Unisys Corp. (a)............... 72,779 461 VERITAS Software Corp. (a)..... 89,783 2,191 Waters Corp. (a)............... 25,057 931 Xerox Corp. (a)................ 203,842 2,811 Xilinx, Inc. .................. 74,104 1,890 Yahoo!, Inc. (a)............... 282,780 9,798 ---------- 357,177 ---------- MATERIALS - 2.84% Air Products & Chemicals, Inc. ........................ 48,489 2,924 Alcoa, Inc. ................... 186,646 4,877 Allegheny Technologies, Inc. ........................ 19,329 426 Ball Corp. .................... 23,770 855 Bemis Co., Inc. ............... 23,128 614 Dow Chemical Co. .............. 205,999 9,173 E.I. Du Pont de Nemours & Co. ......................... 112,939 9,158 Eastman Chemical Co. .......... 16,862 930 Ecolab, Inc. .................. 46,826 1,515 Engelhard Corp. ............... 26,530 757 Freeport-McMoRan Copper & Gold, Inc. Class B................. 38,614 1,446 Georgia-Pacific Group.......... 55,940 1,779 Great Lakes Chemical Corp. .... 11,403 359 Hercules, Inc. (a)............. 24,698 349 International Flavors & Fragrances, Inc. ............ 19,104 692
See notes to financial statements. - -------------------------------------------------------------------------------- 27 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED June 30, 2005 (unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) International Paper Co. ....... 104,456 $ 3,156 Louisiana-Pacific Corp. ....... 23,859 586 MeadWestvaco Corp. ............ 39,988 1,121 Monsanto Co. .................. 56,746 3,568 Newmont Mining Corp. .......... 94,642 3,694 Nucor Corp. (b)................ 34,404 1,569 Pactiv Corp. (a)............... 32,164 694 Phelps Dodge Corp. ............ 20,505 1,897 PPG Industries, Inc. .......... 36,890 2,315 Praxair, Inc. ................. 68,720 3,202 Rohm & Haas Co. ............... 41,296 1,914 Sealed Air Corp. (a)........... 18,036 898 Sigma-Aldrich Corp. ........... 14,893 835 Temple-Inland, Inc. ........... 28,228 1,049 United States Steel Corp. (b).......................... 24,602 846 Vulcan Materials Co. .......... 22,096 1,436 Weyerhaeuser Co. .............. 51,724 3,292 ---------- 67,926 ---------- TELECOMMUNICATION SERVICES - 3.11% ALLTEL Corp. .................. 70,098 4,366 AT&T Corp. .................... 170,547 3,247 BellSouth Corp. ............... 391,228 10,395 CenturyTel, Inc. (b)........... 29,108 1,008 Citizens Communications Co. ... 72,677 977 Nextel Communications, Inc. Class A (a).................. 240,536 7,772 Qwest Communications International, Inc. (a)(b)... 354,222 1,314 SBC Communications, Inc. ...... 705,804 16,763 Sprint Corp. (Fon Group)....... 315,523 7,916 Verizon Communications, Inc. ........................ 591,898 20,450 ---------- 74,208 ---------- UTILITIES - 3.74% AES Corp. (a).................. 137,914 2,259 Allegheny Energy, Inc. (a)(b)....................... 33,899 855 Ameren Corp. .................. 43,542 2,408 American Electric Power Co., Inc.......................... 81,654 3,011 Calpine Corp. (a)(b)........... 115,752 394 CenterPoint Energy, Inc. (b)... 62,493 826 Cinergy Corp. ................. 41,358 1,854 CMS Energy Corp. (a)........... 46,605 702 Consolidated Edison, Inc. (b).......................... 51,622 2,418 Constellation Energy Group, Inc. ........................ 38,103 2,198 Dominion Resources, Inc. ...... 72,987 5,356 DTE Energy Co. (b)............. 37,646 1,761 Duke Energy Corp. (b).......... 197,977 5,886 Dynegy Inc. Class A (a)(b)..... 71,630 348 Edison International........... 69,362 2,813 El Paso Corp. ................. 138,994 1,601 Entergy Corp. ................. 45,443 3,433 Exelon Corp. (b)............... 142,578 7,319 FirstEnergy Corp. ............. 70,312 3,383 FPL Group, Inc. ............... 83,378 3,507 KeySpan Corp. ................. 38,506 1,567 Kinder Morgan, Inc. ........... 23,138 1,925 Nicor, Inc. (b)................ 9,913 408 NiSource, Inc. ................ 58,567 1,448
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) Peoples Energy Corp. (b)....... 8,131 $ 353 PG&ECorp....................... 80,823 3,034 Pinnacle West Capital Corp. ... 22,381 995 PPL Corp. ..................... 40,268 2,391 Progress Energy, Inc. ......... 52,608 2,380 Public Service Enterprise Group, Inc. ................. 50,722 3,085 Sempra Energy.................. 51,389 2,123 Southern Co. (b)............... 159,158 5,518 TECO Energy, Inc. (b).......... 43,276 818 TXUCorp........................ 51,248 4,258 Williams Cos., Inc. ........... 121,337 2,305 Xcel Energy, Inc. (b).......... 86,697 1,692 XTO Energy, Inc. .............. 77,400 2,631 ---------- 89,263 ---------- TOTAL COMMON STOCKS (COST $1,754,156,825).......... 2,332,564 ---------- PAR AMOUNT -------------- (IN THOUSANDS) U.S. GOVERNMENT SECURITIES - 0.18% United States Treasury Bill 2.94% due 09/08/05 (d)(e).... $ 4,299 4,275 ---------- TOTAL U.S. GOVERNMENT SECURITIES (COST $4,274,775).............. 4,275 ---------- SHARES -------------- (IN THOUSANDS) MONEY MARKET FUNDS - 4.38% AIM Short Term Investment Prime Portfolio.................... 47,010 47,010 Federated Money Market Obligations Trust............ 493 $ 493 State Street Navigator Securities Lending Prime Portfolio (c)(f)............. 57,114 57,114 ---------- TOTAL MONEY MARKET FUNDS (COST $104,616,509)...... $ 104,617 ---------- TOTAL INVESTMENTS - 102.23% (IDENTIFIED COST $1,863,048,109)......... 2,441,456 ---------- LIABILITIES IN EXCESS OF ASSETS - (2.23)%............. (53,194) ---------- NET ASSETS - 100.00%........... $2,388,262 ==========
SCHEDULE OF FUTURES CONTRACTS
NUMBER OF UNREALIZED CONTRACTS DEPRECIATION --------- ------------ (DOLLARS IN THOUSANDS) S&P 500 Financial Futures Contracts (long) Expiration Date 09/2005............... 326 $(554) ----- Total unrealized depreciation on open futures contracts purchased.................. $(554) =====
See notes to financial statements. - -------------------------------------------------------------------------------- 28 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- - --------------- (a) Non-income producing security. (b) All or a portion of these securities were on loan at June 30, 2005. (c) Affiliated issuer. See table that follows for more information. (d) Security held as collateral in relation to initial margin requirements on futures contracts. (e) Rate represents annualized yield at date of purchase. (f) Security represents investment made with cash collateral received from securities loaned.
SHARES PURCHASED INCOME EARNED NUMBER OF FOR THE SIX SHARES SOLD FOR NUMBER OF FOR THE SIX SHARES HELD MONTHS ENDED THE SIX MONTHS SHARES HELD AT MONTHS ENDED REALIZED GAIN SECURITY DESCRIPTION 12/31/2004 6/30/05 ENDED 6/30/05 6/30/05 6/30/05 ON SHARES SOLD -------------------- ------------- ---------------- --------------- --------------- ------------- -------------- State Street Corp. .... 79,225 4,900 13,000 71,125 $27,005 $34,285 State Street Navigator Securities Lending Prime Portfolio...... 98,441,667 598,669,698 639,997,857 57,113,508 $55,134 --
See notes to financial statements. - -------------------------------------------------------------------------------- 29 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- (amounts in thousands) ASSETS: Investments in unaffiliated issuers at market (identified cost $1,803,603) - including $55,292 of securities loaned (Note 2)............................. $2,380,910 Investments in non-controlled affiliates at market (identified cost $59,445) (Note 4)..................... 60,546 ---------- 2,441,456 Receivables: Investment securities sold.......................... 8,196 Dividends and interest.............................. 2,921 ---------- TOTAL ASSETS........................................ 2,452,573 ---------- LIABILITIES: Payables: Investment securities purchased..................... 6,760 Daily variation margin on futures contracts......... 346 Due upon return of securities loaned................ 57,114 Management fees (Note 4)............................ 91 ---------- TOTAL LIABILITIES................................... 64,311 ---------- NET ASSETS:................................................. $2,388,262 ========== COMPOSITION OF NET ASSETS: Paid-in capital......................................... $1,810,408 Net unrealized appreciation on investments and futures contracts.............................................. 577,854 ---------- NET ASSETS.................................................. $2,388,262 ==========
See notes to financial statements. - -------------------------------------------------------------------------------- 30 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF OPERATIONS For the Six Months Ended June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- (amounts in thousands) INVESTMENT INCOME: Dividend income - unaffiliated issuers.................. $ 22,773 Dividend income - non-controlled affiliated issuer...... 27 Interest................................................ 720 Security lending income (Notes 2 and 4)................. 55 -------- TOTAL INVESTMENT INCOME............................. 23,575 EXPENSES: Management fees (Note 4)................................ $ 577 -------- TOTAL EXPENSES...................................... 577 -------- NET INVESTMENT INCOME....................................... 22,998 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments - unaffiliated issuers.................. (15,136) Investments - non-controlled affiliated issuer...... 34 Futures contracts................................... (43) -------- (15,145) -------- Net change in net unrealized depreciation on: Investments......................................... (38,334) Futures contracts................................... (1,627) -------- (39,961) -------- Net realized and unrealized loss............................ (55,106) -------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $(32,108) ========
See notes to financial statements. - -------------------------------------------------------------------------------- 31 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS) - --------------------------------------------------------------------------------
FOR THE SIX MONTHS FOR THE ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2005 2004 ----------- ------------ (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS: Net investment Income......................... $ 22,998 $ 52,658 Net realized loss on investments and futures contracts.................................... (15,145) (26,489) Net change in net unrealized appreciation (depreciation)............................... (39,961) 249,898 ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................. (32,108) 276,067 ---------- ---------- CAPITAL TRANSACTIONS: Proceeds from contributions................... 168,779 331,241 Fair value of withdrawals..................... (278,027) (481,557) Withdrawals in-kind........................... (237,848) (72,956) ---------- ---------- NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS.............................. (347,097) (223,272) ---------- ---------- TOTAL NET INCREASE (DECREASE) IN NET ASSETS....... (379,205) 52,795 NET ASSETS: Beginning of period........................... 2,767,467 2,714,672 ---------- ---------- END OF PERIOD................................. $2,388,262 $2,767,467 ========== ==========
See notes to financial statements. - -------------------------------------------------------------------------------- 32 STATE STREET EQUITY 500 INDEX PORTFOLIO FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The following table includes selected supplemental data and ratios to average net assets:
FOR THE SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------------- 2005 2004 2003 2002 2001 2000* ----------- ---------- ---------- ---------- ---------- ---------- (UNAUDITED) SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands)...... $2,388,262 $2,767,467 $2,714,672 $1,992,548 $2,692,298 $2,957,271 Ratios to average net assets: Operating expenses....................... 0.045%+ 0.045% 0.045% 0.045% 0.045% 0.045%+ Net Investment income.................... 1.79%+ 1.97% 1.74% 1.57% 1.34% 1.14%+ Portfolio turnover rate**..................... 5%++ 9% 12% 13% 14% 18%++ Total return (a).............................. (1.40)%++ 10.86% 28.62% (22.16)% (11.94)% (2.41)%++
- --------------- * The portfolio commenced operations on March 1, 2000. ** The portfolio turnover rate excludes in-kind security transactions. + Annualized. ++ Not Annualized. (a) Results represent past performance and are not indicative of future results. See notes to financial statements. - -------------------------------------------------------------------------------- 33 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION The State Street Master Funds (the "Trust") is a registered and diversified open-end investment company, as defined in the Investment Company Act of 1940, as amended (the "1940 Act"), that was organized as a business trust under the laws of the Commonwealth of Massachusetts on July 27, 1999. The Trust comprises seven 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 MSCI(R) EAFE(R) Index Portfolio, the State Street Aggregate Bond Index Portfolio, the State Street 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, 2004, only the Portfolio, State Street MSCI(R) EAFE(R) Index and State Street Money Market Portfolio had commenced operations. Pursuant to the Trust's Declaration of Trust, the Board of Trustees may 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 arc available are valued at the last sale price or official closing price (closing bid price if no sale has occurred) on the primary market or exchange on which they trade. Investments in other mutual funds are valued at the net asset value per share. Fixed-income securities and options are valued on the basis of the closing bid price. Futures contracts are valued on the basis of the last sale price. Money market instruments maturing within 60 days of the valuation date are valued at amortized cost, a method by which each money market instrument is initially valued at cost, and thereafter a constant accretion or amortization of any discount or premium is recorded until maturity of the security. The Portfolio may value securities for which market quotations are not readily available at "fair value," as determined in good faith pursuant to procedures established by the Board of Trustees. Securities transactions, investment income and expenses Securities transactions are recorded on a trade date basis. 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. - -------------------------------------------------------------------------------- 34 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- 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. Futures The Portfolio may enter into financial futures contracts as part of its strategy to track the performance of the S&P 500(R) Index. Upon entering into a futures contract, the Portfolio is required to deposit with the broker cash or securities in an amount equal to a certain percentage of the contract amount. Variation margin payments are made or received by the Portfolio each day, depending on the daily fluctuations in the value of the underlying security or index, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio. The Portfolio recognizes a realized gain or loss when the contract is closed. The Portfolio voluntarily segregates securities in an amount equal to the outstanding value of the open futures contracts in accordance with Securities and Exchange Commission (the "SEC") 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. Securities Lending The Trust, on behalf of the Portfolio, entered into a Securities Lending Agreement (the "Agreement") with State Street Bank and Trust Company ("State Street"). Under the terms of the Agreement, the Portfolio may lend portfolio securities to qualified borrowers in order to earn additional income. The Agreement requires that loans are secured at all times by cash, U.S. Government securities, sovereign debt, or irrevocable lines of credit in an amount at least equal to 102% of the market value of domestic securities loaned (105% in the case of foreign securities), plus accrued interest and dividends, determined on a daily basis. Proceeds collected by State Street on investment of cash collateral or any fee income is allocated as follows: 75% to the Portfolio and 25% to State Street. For the six months ended June 30, 2005, the earned income for the Portfolio and State Street was $55,134 and $18,378, respectively. The primary risk associated with securities lending is that if the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Portfolio could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. At June 30, 2005, the value of the securities loaned amounted to $55,291,766. The loans were collateralized with cash of $57,113,508, which the Portfolio then invested in the State Street Navigator Securities Lending Prime Portfolio (the "Prime Portfolio"), an affiliated investment company. - -------------------------------------------------------------------------------- 35 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- Use of Estimates The Portfolio's financial statements are prepared in accordance with U.S. generally accepted accounting principles that require the use of management estimates. Actual results could differ from those estimates. 3. SECURITIES TRANSACTIONS For the six months ended June 30, 2005, purchases and sales of investment securities, excluding short-term investments, futures contracts, and in-kind withdrawals, aggregated to $128,439,515 and $207,485,972, respectively. The aggregate value of in-kind withdrawals was $237,847,807. At June 30, 2005, the book cost of investments was $1,863,048,109 which approximates cost computed on a federal tax basis. The aggregate gross unrealized appreciation and gross unrealized depreciation was $710,637,366 and $132,229,246, respectively, resulting in net appreciation of $578,408,120 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"), a subsidiary of State Street Corp. and an affiliate of 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 fees expenses), 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 represent securities affiliated with State Street and SSgA FM. Investments made with cash collateral received from securities loaned were used to purchase shares of the Prime Portfolio, which is offered by State Street and advised by 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 each of these investments at June 30, 2005 is listed in the Portfolio of Investments. 5. INDEMNIFICATIONS Like many other companies, 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 in unknown as this could involve future claims against the Trust. - -------------------------------------------------------------------------------- 36 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 (unaudited) - -------------------------------------------------------------------------------- GENERAL INFORMATION (UNAUDITED) Proxy Voting Policies and Procedures and Record The Trust has adopted proxy voting procedures relating to portfolio securities held by the Portfolio. A description of the policies and procedures are available without charge, upon request, by (i) calling (877) 521-4083 or (ii) on the website of the Securities and Exchange Commission (the "SEC") at www.sec.gov. Information on how the Portfolio voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by August 31 (i) without charge, upon request, by (i) calling (877) 521-4083 or (ii) on the SEC's website at www.sec.gov. Quarterly Portfolio Schedule The Trust files a complete schedule of portfolio holdings with the SEC for the first and third quarters of its fiscal year (as of March and September of each year) on Form N-Q. The Trust's Form N-Q is available on the SEC's website at www.sec.gov. The Trust's Form 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. - -------------------------------------------------------------------------------- 37 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS June 30, 2005 - -------------------------------------------------------------------------------- This summary schedule of investments is presented to help investors focus on the Series' principal holdings. It includes the Series' 50 largest holdings and each investment of any issuer that exceeds 1% of the Series' net assets. "Other Securities" represent all issues not required to be disclosed under the rules adopted by the Securities and Exchange Commission. A complete schedule of investments is available without charge, upon request, by calling 800-637-3863 or on the Securities and Exchange Commission's Web site at http://www.sec.gov.
PERCENT OF INDUSTRY* SHARES HELD COMMON STOCKS VALUE NET ASSETS - --------- ----------- ------------- ------------ ---------- Advertising Agencies 16,000 Valassis Communications, Inc.(b) $ 592,800 0.2% Other Securities 1,701,401 0.5 ------------ ----- 2,294,201 0.7 ------------ ----- Aerospace Other Securities 1,651,656 0.5 Agriculture Fishing & Ranching Other Securities 694,494 0.2 Air Transport Other Securities 2,879,807 0.8 Aluminum Other Securities 346,221 0.1 Auto Parts: After Market Other Securities 685,159 0.2 Auto Parts: Original Equipment Other Securities 1,447,536 0.4 Auto Trucks & Parts Other Securities 544,221 0.1 Banks: New York City Other Securities 246,600 0.1 Banks: Outside New York City 23,500 Bancorpsouth, Inc. 554,600 0.2 13,762 Pacific Capital Bancorp 510,295 0.1 11,400 SVB Financial Group(b) 546,060 0.2 9,883 Westamerica Bancorporation 521,921 0.1 Other Securities 25,151,004 7.1 ------------ ----- 27,283,880 7.7 ------------ ----- Beverage: Brewers (Wineries) Other Securities 98,736 0.0 Beverage: Soft Drinks Other Securities 506,884 0.1 Biotechnology Research & Production 11,700 Neurocrine Biosciences, Inc.(b) 492,102 0.1 Other Securities 9,057,232 2.6 ------------ ----- 9,549,334 2.7 ------------ ----- Building Materials 18,600 Hughes Supply, Inc. 522,660 0.2 Other Securities 1,906,425 0.5 ------------ ----- 2,429,085 0.7 ------------ ----- Building: Air Conditioning Other Securities 767,267 0.2 Building: Cement 5,878 Eagle Materials, Inc. 544,244 0.1 Building: Heating & Plumbing Other Securities 375,142 0.1 Building: Miscellaneous Other Securities 359,797 0.1 Building: Roofing & Wallboard Other Securities 292,906 0.1 Cable Television Services Other Securities 498,667 0.1 Casinos & Gambling Other Securities 2,756,392 0.8 Chemicals 15,600 Great Lakes Chemical Corp. 490,932 0.1 Other Securities 3,704,081 1.1 ------------ ----- 4,195,013 1.2 ------------ ----- Coal Other Securities 501,733 0.1 Commercial Information Services Other Securities 1,252,997 0.4 Communications & Media Other Securities 392,252 0.1
See notes to financial statements. - -------------------------------------------------------------------------------- 38 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2005 - --------------------------------------------------------------------------------
PERCENT OF INDUSTRY* SHARES HELD COMMON STOCKS VALUE NET ASSETS - --------- ----------- ------------- ------------ ---------- Communications Technology Other Securities $ 8,822,489 2.5% Computer Services, Software & Systems 27,900 Acxiom Corp. 582,552 0.2 11,398 Micros Systems, Inc.(b) 510,061 0.1 84,700 Parametric Technology Corp.(b) 540,386 0.2 Other Securities 14,223,242 4.0 ------------ ----- 15,856,241 4.5 ------------ ----- Computer Technology Other Securities 5,854,915 1.7 Construction Other Securities 1,225,163 0.3 Consumer Electronics Other Securities 3,238,655 0.9 Consumer Products Other Securities 3,273,833 0.9 Containers & Packaging: Metals & Other Securities 616,318 0.2 Glass Containers & Packaging: Paper & Other Securities 167,865 0.0 Plastic Copper Other Securities 297,612 0.1 Cosmetics Other Securities 789,745 0.2 Diversified Financial Services Other Securities 1,506,184 0.4 Diversified Materials & Processing 16,710 Clarcor, Inc. 488,767 0.1 Other Securities 1,974,572 0.6 ------------ ----- 2,463,339 0.7 ------------ ----- Drug & Grocery Store Chains Other Securities 1,963,116 0.6 Drugs & Pharmaceuticals 32,500 Amylin Pharmaceuticals, Inc.(b) 680,225 0.2 29,700 Vertex Pharmaceuticals, Inc.(b) 500,148 0.1 Other Securities 9,041,233 2.6 ------------ ----- 10,221,606 2.9 ------------ ----- Education Services Other Securities 1,717,901 0.5 Electrical & Electronics Other Securities 1,007,606 0.3 Electrical Equipment & Components Other Securities 2,761,738 0.8 Electrical: Household Appliance Other Securities 413,120 0.1 Electronics Other Securities 1,546,836 0.4 Electronics: Instruments, Gauges & Other Securities 598,754 0.2 Meters Electronics: Medical Systems Other Securities 3,006,198 0.9 Electronics: 33,600 Fairchild Semiconductor International, Inc.(b) 495,600 0.1 Semi-Conductors/Components Other Securities 9,251,240 2.7 ------------ ----- 9,746,840 2.8 ------------ ----- Electronics: Technology Other Securities 2,650,451 0.8 Energy Equipment Other Securities 160,668 0.0 Energy Miscellaneous 155,600 Calpine Corp.(b) 529,040 0.1 Other Securities 1,700,704 0.5 2,229,744 0.6 Engineering & Contracting Services Other Securities 1,198,769 0.3 Entertainment 11,155 Gaylord Entertainment Co.(b) 518,596 0.1 Other Securities 548,909 0.2 ------------ ----- 1,067,505 0.3 ------------ ----- Fertilizers Other Securities 162,759 0.0 Finance Companies Other Securities 731,612 0.2 Finance: Small Loan Other Securities 450,009 0.1
See notes to financial statements. - -------------------------------------------------------------------------------- 39 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2005 - --------------------------------------------------------------------------------
PERCENT OF INDUSTRY* SHARES HELD COMMON STOCKS VALUE NET ASSETS - --------- ----------- ------------- ------------ ---------- Financial Data Processing Services & Other Securities $ 3,122,970 0.9% Systems Financial Information Services Other Securities 642,993 0.2 Financial Miscellaneous Other Securities 3,103,356 0.9 Foods Other Securities 3,659,949 1.0 Forest Products Other Securities 1,176,353 0.3 Forms & Bulk Printing Services Other Securities 182,814 0.1 Funeral Parlors & Cemeteries Other Securities 380,569 0.1 Glass Other Securities 165,996 0.0 Gold Other Securities 419,033 0.1 Health Care Facilities Other Securities 3,156,038 0.9 Health Care Management Services 7,000 Pediatrix Medical Group, Inc.(b) 514,780 0.1 Other Securities 2,106,980 0.6 ------------ ----- 2,621,760 0.7 ------------ ----- Health Care Services 15,500 Apria Healthcare Group, Inc.(b) 536,920 0.1 Other Securities 1,669,417 0.5 ------------ ----- 2,206,337 0.6 ------------ ----- Homebuilding Other Securities 636,103 0.2 Hotel/Motel Other Securities 200,818 0.1 Household Furnishings Other Securities 1,701,369 0.5 Identification Control & Filter 16,600 Flowserve Corp.(b) 502,316 0.2 Devices Other Securities 2,896,970 0.8 ------------ ----- 3,399,286 1.0 ------------ ----- Insurance: Life Other Securities 1,476,458 0.4 Insurance: Multi-Line Other Securities 1,836,382 0.5 Insurance: Property-Casualty Other Securities 4,278,225 1.2 Investment Management Companies Other Securities 1,928,297 0.5 Jewelry, Watches & Gemstones Other Securities 554,389 0.2 Leisure Time Other Securities 1,463,734 0.4 Machine Tools Other Securities 364,385 0.1 Machinery & Engineering Other Securities 289,318 0.1 Machinery: Agricultural Other Securities 688,235 0.2 Machinery: Construction & Handling Other Securities 970,644 0.3 Machinery: Engines 14,400 Briggs & Stratton Corp. 498,528 0.1 Machinery: Industrial/Specialty 11,403 Kennametal, Inc. 522,828 0.1 Other Securities 1,940,244 0.6 ------------ ----- 2,463,072 0.7 ------------ ----- Machinery: Oil Well 12,337 Cal Dive International, Inc.(b) 646,089 0.2 Equipment & Services Other Securities 3,830,784 1.1 ------------ ----- 4,476,873 1.3 ------------ ----- Machinery: Specialty Other Securities 1,652,035 0.5 Manufactured Housing Other Securities 364,027 0.1 Manufacturing Other Securities 373,120 0.1 Medical & Dental 20,500 Steris Corp. 528,285 0.2 Instruments & Supplies Other Securities 9,580,615 2.7 ------------ ----- 10,108,900 2.9 ------------ ----- Medical Services Other Securities 953,799 0.3 Metal Fabricating Other Securities 3,892,712 1.1 Metals & Minerals Miscellaneous Other Securities 1,570,219 0.4
See notes to financial statements. - -------------------------------------------------------------------------------- 40 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2005 - --------------------------------------------------------------------------------
PERCENT OF INDUSTRY* SHARES HELD COMMON STOCKS VALUE NET ASSETS - --------- ----------- ------------- ------------ ---------- Milling: Fruit & Grain Processing 22,478 Corn Products International, Inc. $ 534,077 0.2% Miscellaneous Health Care Other Securities 414,625 0.1 Miscellaneous Materials & Commodities Other Securities 626,182 0.2 Miscellaneous Materials & Processing Other Securities 907,505 0.3 Miscellaneous Producer Durables Other Securities 359,201 0.1 Multi-Sector Companies Other Securities 1,852,132 0.5 Office Furniture & Business Equipment Other Securities 436,997 0.1 Offshore Drilling Other Securities 263,615 0.1 Oil: Crude Producers 15,711 Cabot Oil & Gas Corp. Class A 545,172 0.2 24,093 Cimarex Energy Co.(b) 937,459 0.3 17,430 Frontier Oil Corp. 511,570 0.1 18,352 St. Mary Land & Exploration Co. 531,841 0.2 Other Securities 6,849,021 1.9 ------------ ----- 9,375,063 2.7 ------------ ----- Oil: Integrated Domestic Other Securities 702,515 0.2 Paints & Coatings Other Securities 650,668 0.2 Paper 15,700 Bowater, Inc. 508,209 0.1 Other Securities 1,074,971 0.3 ------------ ----- 1,583,180 0.4 ------------ ----- Plastics Other Securities 143,361 0.0 Pollution Control & Environmental Other Securities 706,572 0.2 Services Power Transmission Equipment Other Securities 237,683 0.1 Printing & Copying Services Other Securities 384,350 0.1 Production Technology Equipment Other Securities 4,740,752 1.3 Publishing: Miscellaneous 31,100 The Reader's Digest Association, Inc. Class A 513,150 0.2 Other Securities 1,489,430 0.4 ------------ ----- 2,002,580 0.6 ------------ ----- Publishing: Newspapers Other Securities 909,831 0.3 Radio & TV Broadcasters Other Securities 2,543,971 0.7 Railroad Equipment Other Securities 443,705 0.1 Railroads Other Securities 1,121,200 0.3 Real Estate Other Securities 1,186,279 0.3 Real Estate Investment Trusts (REIT) 11,884 Colonial Properties Trust 522,896 0.2 13,700 First Industrial Realty Trust, Inc. 546,630 0.2 16,700 Highwoods Properties, Inc. 496,992 0.1 55,100 La Quinta Corp.(b) 514,083 0.1 21,359 Nationwide Health Properties, Inc. 504,286 0.1 15,208 Taubman Centers, Inc. 518,441 0.1 Other Securities 20,598,809 5.9 ------------ ----- 23,702,137 6.7 ------------ ----- Recreational Vehicles & Boats Other Securities 1,180,793 0.3 Rental & Leasing Services: Commercial Other Securities 1,063,716 0.3 Rental & Leasing Services: Consumer Other Securities 1,082,879 0.3 Restaurants Other Securities 5,550,150 1.6
See notes to financial statements. - -------------------------------------------------------------------------------- 41 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2005 - --------------------------------------------------------------------------------
PERCENT OF INDUSTRY* SHARES HELD COMMON STOCKS VALUE NET ASSETS - --------- ----------- ------------- ------------ ---------- Retail 16,650 Aeropostale, Inc.(b) $ 559,440 0.2% 54,300 Blockbuster, Inc. Class A 495,216 0.1 21,400 Pacific Sunwear of California, Inc.(b) 491,986 0.1 10,500 Tractor Supply Co.(b) 515,550 0.2 16,300 Zale Corp.(b) 516,547 0.2 Other Securities 14,517,821 4.1 ------------ ----- 17,096,560 4.9 ------------ ----- Savings & Loan 34,653 First Niagara Financial Group, Inc. 505,241 0.1 Other Securities 7,485,021 2.2 ------------ ----- 7,990,262 2.3 ------------ ----- Scientific Equipment & Suppliers Other Securities 568,453 0.2 Securities Brokerage & Services Other Securities 1,951,725 0.6 Services: Commercial 14,918 Waste Connections, Inc.(b) 556,292 0.2 Other Securities 10,304,777 2.9 ------------ ----- 10,861,069 3.1 ------------ ----- Shipping Other Securities 540,361 0.2 Shoes Other Securities 1,441,014 0.4 Steel Other Securities 1,794,039 0.5 Synthetic Fibers Other Securities 101,064 0.0 Telecommunications Equipment 13,799 Plantronics, Inc. 501,732 0.2 Other Securities 2,547,840 0.7 ------------ ----- 3,049,572 0.9 ------------ ----- Textile Products Other Securities 228,016 0.1 Textiles Apparel Manufacturers Other Securities 1,854,305 0.5 Tires & Rubber Other Securities 539,877 0.2 Tobacco Other Securities 905,183 0.3 Toys Other Securities 238,554 0.1 Transportation Miscellaneous Other Securities 627,463 0.2 Truckers Other Securities 2,027,532 0.6 Utilities: Cable TV & Radio Other Securities 127,095 0.0 Utilities: Electrical Other Securities 4,784,976 1.4 Utilities: Gas Distributors 13,200 Nicor, Inc. 543,444 0.2 11,400 Peoples Energy Corp. 495,444 0.1 14,900 WGL Holdings, Inc. 501,236 0.1 Other Securities 1,660,217 0.5 ------------ ----- 3,200,341 0.9 ------------ ----- Utilities: Gas Pipelines Other Securities 144,176 0.0 Utilities: Miscellaneous Other Securities 233,928 0.1 Utilities: Telecommunications Other Securities 4,210,096 1.2 Utilities: Water Other Securities 660,578 0.2 Wholesale & International Trade Other Securities 173,584 0.0 Wholesalers 9,969 United Stationers, Inc.(b) 489,478 0.2 Other Securities 424,991 0.1 ------------ ----- 914,469 0.3 ------------ ----- TOTAL COMMON STOCKS (COST - $285,282,848) 346,290,922 98.4 ------------ -----
See notes to financial statements. - -------------------------------------------------------------------------------- 42 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2005 - --------------------------------------------------------------------------------
PERCENT OF INDUSTRY* SHARES HELD MUTUAL FUNDS VALUE NET ASSETS - --------- ----------- ------------ ------------ ---------- Investment Management Companies Other Securities $ 114,660 0.0% ------------ ----- TOTAL MUTUAL FUNDS (COST - $104,653) 114,660 0.0 ------------ ----- OTHER INTERESTS(A) ------------------ Oil: Crude Producers Other Securities 0 0.0 ------------ ----- TOTAL OTHER INTERESTS (COST - $0) 0 0.0 ------------ ----- BENEFICIAL INTERESTS SHORT-TERM SECURITIES ----------- --------------------- $5,908,632 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I(c) 5,908,632 1.7 9,657,003 Merrill Lynch Liquidity Series, LLC Money Market Series(c)(d) 9,657,003 2.7 ------------ ----- TOTAL SHORT-TERM SECURITIES (COST - $15,565,635) 15,565,635 4.4 ------------ ----- TOTAL INVESTMENTS (COST - $300,953,136**) 361,971,217 102.8 LIABILITIES IN EXCESS OF OTHER ASSETS (9,912,721) (2.8) ------------ ----- NET ASSETS $352,058,496 100.0% ============ =====
- --------------- "Other Securities" represent issues that are not identified as the 50 largest holdings of the Series and issues not exceeding 1% of the net assets. * For Series compliance purposes, "Industry" means 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 such industry sub-classifications for reporting ease. ** The cost and unrealized appreciation (depreciation) of investments as of June 30, 2005, as computed for federal income tax purposes, were as follows: Aggregate cost.............................................. $304,527,759 ------------ Gross unrealized appreciation............................... $ 80,768,989 Gross unrealized depreciation............................... (23,325,531) ------------ Net unrealized appreciation................................. $ 57,443,458 ============
(a) Other interests represent beneficial interest in liquidation trusts and other reorganization entities and are non-income producing. (b) Non-income producing security. (c) Investments in companies considered to be an affiliate of the Series (such companies are defined as "Affiliated Companies" in Section 2(a)(3) of the Investment Company Act of 1940) were as follows:
INTEREST AFFILIATE NET ACTIVITY INCOME --------- ------------ -------- Merrill Lynch Liquidity Series, LLC Cash Sweep Series I..... $(3,080,958) $123,857 Merrill Lynch Liquidity Series, LLC Money Market Series..... $(1,995,385) $ 75,809
(d) Security was purchased with the cash proceeds from securities loans. Financial futures contracts purchased as of June 30, 2005 were as follows:
NUMBER OF EXPIRATION UNREALIZED CONTRACTS ISSUE DATE FACE VALUE APPRECIATION --------- ----- -------------- ---------- ------------ 17 Russell 2000 Index September 2005 $5,427,948 $38,402
See notes to financial statements. - -------------------------------------------------------------------------------- 43 MASTER SMALL CAP INDEX SERIES STATEMENT OF ASSETS AND LIABILITIES As of June 30, 2005 - -------------------------------------------------------------------------------- ASSETS: Investments in unaffiliated securities, at value (including securities loaned of $9,283,944) (identified cost - $285,387,501)................................... $346,405,582 Investments in affiliated securities, at value (identified cost - $15,565,635)........................ 15,565,635 Cash on deposit for financial futures contracts......... 229,500 Receivables: Contributions......................................... $ 650,451 Dividends............................................. 381,285 Interest from affiliates.............................. 35,464 Securities lending.................................... 14,249 1,081,449 ---------- Prepaid expenses........................................ 641,779 ------------ TOTAL ASSETS........................................ 363,923,945 ------------ LIABILITIES: Collateral on securities loaned, at value............... 9,657,003 Payables: Custodian bank........................................ 1,712,737 Withdrawals........................................... 446,645 Variation margin...................................... 9,775 Other affiliates...................................... 3,689 Investment adviser.................................... 2,581 2,175,427 ---------- Accrued expenses........................................ 33,019 ------------ TOTAL LIABILITIES................................... 11,865,449 ------------ NET ASSETS.................................................. $352,058,496 ============ NET ASSETS CONSIST OF: Investors' capital...................................... $291,002,013 Unrealized appreciation - net........................... 61,056,483 ------------ NET ASSETS.................................................. $352,058,496 ============
See notes to financial statements. - -------------------------------------------------------------------------------- 44 MASTER SMALL CAP INDEX SERIES STATEMENT OF OPERATIONS For the Six Months Ended June 30, 2005 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends (net of $534 foreign withholding tax)......... $ 1,613,480 Interest from affiliates................................ 123,857 Securities lending - net................................ 75,809 ------------ TOTAL INCOME........................................ 1,813,146 ------------ EXPENSES: Professional fees....................................... $ 53,843 Accounting services..................................... 26,939 Custodian fees.......................................... 21,142 Investment advisory fees................................ 17,097 Printing and shareholder reports........................ 2,329 Trustees' fees and expenses............................. 1,964 Other................................................... 4,541 ------------ TOTAL EXPENSES BEFORE WAIVER........................ 127,855 Waiver of expenses...................................... (65) ------------ TOTAL EXPENSES AFTER WAIVER......................... 127,790 ------------ INVESTMENT INCOME - NET..................................... 1,685,356 ------------ REALIZED & UNREALIZED GAIN (LOSS) - NET: Realized gain (loss) on: Investments - net..................................... 15,201,837 Futures contracts - net............................... (629,027) 14,572,810 ------------ Change in unrealized appreciation on: Investments - net..................................... (20,975,660) Futures contracts - net............................... (67,793) (21,043,453) ------------ ------------ TOTAL REALIZED AND UNREALIZED LOSS - NET............ (6,470,643) ------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ (4,785,287) ============
See notes to financial statements. - -------------------------------------------------------------------------------- 45 MASTER SMALL CAP INDEX SERIES STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
FOR THE SIX MONTHS FOR THE ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2005 2004 -------------- -------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Investment income - net................................. $ 1,685,356 $ 3,882,942 Realized gain - net..................................... 14,572,810 14,493,934 Change in unrealized appreciation - net................. (21,043,453) 37,873,933 ------------ ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................................. (4,785,287) 56,250,809 ------------ ------------- CAPITAL TRANSACTIONS: Proceeds from contributions............................. 78,497,192 309,457,896 Fair value of withdrawals............................... (87,314,686) (335,706,893) ------------ ------------- NET DECREASE IN NET ASSETS DERIVED FROM CAPITAL TRANSACTIONS........................................... (8,817,494) (26,248,997) ------------ ------------- NET ASSETS: Total increase (decrease) in net assets................. (13,602,781) 30,001,812 Beginning of period..................................... 365,661,277 335,659,465 ------------ ------------- END OF PERIOD........................................... $352,058,496 $ 365,661,277 ============ =============
See notes to financial statements. - -------------------------------------------------------------------------------- 46 MASTER SMALL CAP INDEX SERIES FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The following ratios have been derived from information provided in the financial statements.
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, JUNE 30, ----------------------------------------- 2005 2004 2003 2002 2001 ---------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN..................... (1.16%)+ 18.15% 47.11% (20.19%) 2.37% -------- -------- -------- -------- -------- RATIOS TO AVERAGE NET ASSETS: Expenses, net of waiver................. .07%* .08% .09% .08% .08% -------- -------- -------- -------- -------- Expenses................................ .07%* .08% .10% .14% .13% -------- -------- -------- -------- -------- Investment income - net................. .99%* 1.11% 1.13% 1.26% 1.45% -------- -------- -------- -------- -------- SUPPLEMENTAL DATA: Net assets, end of period (in thousands)............................ $352,058 $365,661 $335,659 $181,915 $182,968 -------- -------- -------- -------- -------- Portfolio turnover...................... 20.20% 37.74% 28.57% 39.00% 48.50% -------- -------- -------- -------- --------
- --------------- * Annualized. + Aggregate total investment return. See notes to financial statements. - -------------------------------------------------------------------------------- 47 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS June 30, 2005 - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES: Master Small Cap Index Series (the "Series") is part of Quantitative Master Series Trust (the "Trust"). The Trust is registered under the Investment Company Act of 1940, as amended, and is organized as a Delaware statutory trust. The Declaration of Trust permits the Trustees to issue nontransferable interests in the Trust, subject to certain limitations. The Series' financial statements are prepared in conformity with U.S. generally accepted accounting principles, which may require the use of management accruals and estimates. Actual results may differ from these estimates. These unaudited financial statements reflect all adjustments, which are, in the opinion of management, necessary to present a fair statement of the results for the interim period. All such adjustments are of a normal, recurring nature. The following is a summary of significant accounting policies followed by the Series. (a) Valuation of investments Equity securities that are held by the Series that are traded on stock exchanges or the Nasdaq National Market are valued at the last sale price or official close price on the exchange, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price for long positions, and at the last available asked price for short positions. In cases where equity securities are traded on more than one exchange, the securities are valued on the exchange designated as the primary market by or under the authority of the Board of Trustees of the Trust. Long positions traded in the over-the-counter ("OTC") market, Nasdaq Small Cap or Bulletin Board are valued at the last available bid price or yield equivalent obtained from one or more dealers or pricing services approved by the Board of Trustees of the Trust. Short positions traded in the OTC market are valued at the last available asked price. Portfolio securities that are traded both in the OTC market and on a stock exchange are valued according to the broadest and most representative market. Options written are valued at the last sale price in the case of exchange-traded options or, in the case of options traded in the OTC market, the last asked price. Options purchased are valued at their last sale price in the case of exchange-traded options or, in the case of options traded in the OTC market, the last bid price. Swap agreements are valued daily based upon quotations from market makers. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their last sale price as of the close of such exchanges. Obligations with remaining maturities of 60 days or less are valued at amortized cost unless the Investment Adviser believes that this method no longer produces fair valuations. Repurchase agreements are valued at cost plus accrued interest. The Series employs pricing services to provide certain securities prices for the Series. Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of Trustees of the Trust, including valuations furnished by the pricing services retained by the Series, which may use a matrix system for valuations. The procedures of a pricing service and its valuations are reviewed by the officers of the Series under the general supervision by the Board of Trustees of the Trust. Such valuations and procedures will be reviewed periodically by the Board of Trustees of the Trust. Generally, trading in foreign securities, as well as U.S. government securities and money market instruments, 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 - -------------------------------------------------------------------------------- 48 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 - -------------------------------------------------------------------------------- assets of the Series are determined as of such times. Foreign currency exchange rates also are generally determined prior to 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 of Trustees of the Trust or by the Investment Adviser using a pricing service and/or procedures approved by the Board of Trustees of the Trust. (b) Derivative financial instruments The Series may engage in various portfolio investment strategies both to increase the return of the Series and to hedge, or protect, its exposure to interest rate movements and movements in the securities markets. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. - Financial futures contracts - The Series may purchase or sell financial futures contracts and options on such futures contracts. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specified price or yield. Upon entering into a contract, the Series deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Series agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Series as unrealized gains or losses. When the contract is closed, the Series records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. - Options - The Series may purchase and write call and put options. When the Series writes an option, an amount equal to the premium received by the Series is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Series enters into a closing transaction), the Series realizes a gain or loss on the option to the extent of the premiums received or paid (or a gain or loss to the extent that the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. (c) Income taxes The Series is classified as a partnership for federal income tax purposes. As such, each investor in the Series is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Series. Therefore, no federal income tax provision is required. Under the applicable foreign tax law, a withholding tax may be imposed on interest, dividends and capital gains at various rates. It is intended that the Series' assets will be managed so an investor in the Series can satisfy the requirements of subchapter M of the Internal Revenue Code. - -------------------------------------------------------------------------------- 49 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 - -------------------------------------------------------------------------------- (d) Security transactions and investment income Security transactions are accounted for on the date the securities are purchased or sold (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Interest income is recognized on the accrual basis. (e) Securities lending The Series may lend securities to financial institutions that provide cash or securities issued or guaranteed by the U.S. government as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Series and any additional required collateral is delivered to the Series on the next business day. Where the Series receives securities as collateral for the loaned securities, it collects a fee from the borrower. The Series typically receives the income on the loaned securities but does not receive the income on the collateral. Where the Series receives cash collateral, it may invest such collateral and retain the amount earned on such investment, net of any amount rebated to the borrower. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within five business days. The Series may pay reasonable finder's, lending agent, administrative and custodial fees in connection with its loans. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Series could experience delays and costs in gaining access to the collateral. The Series also could suffer a loss where the value of the collateral falls below the market value of the borrowed securities, in the event of borrower default or in the event of losses on investments made with cash collateral. (f) Custodian bank The Series recorded an amount payable to the custodian bank reflecting an overnight overdraft, which resulted from a failed trade that settled the next day. 2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES: The Trust has entered into an Investment Advisory Agreement with Fund Asset Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc. ("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. FAM is responsible for the management of the Series' portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Series. For such services, the Series pays a monthly fee at an annual rate of .01% of the average daily value of the Series' net assets. FAM has entered into a contractual arrangement with the Series under which all expenses incurred by the Series will not exceed .08%.This arrangement has a one-year term and is renewable. FAM earned fees of $17,097, of which $65 was waived. Merrill Lynch Trust Company ("MLTC"), an indirect, wholly-owned subsidiary of ML & Co., is the Series' custodian. The Trust has received an exemptive order from the Securities and Exchange Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM, or its affiliates. As of June 30, 2005, the Series lent securities with a - -------------------------------------------------------------------------------- 50 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 - -------------------------------------------------------------------------------- value of $85,863 to MLPF&S or its affiliates. Pursuant to that order, the Trust also has retained Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate of FAM, as the securities lending agent for a fee based on a share of the returns on investment of cash collateral. MLIM, LLC may, on behalf of the Trust and the Series, invest cash collateral received by the Series for such loans, among other things, in a private investment company managed by MLIM, LLC or in registered money market Series advised by FAM or its affiliates. For the six months ended June 30, 2005, MLIM, LLC received $32,358 in securities lending agent fees from the Series. For the six months ended June 30, 2005, the Series reimbursed FAM $3,925 for certain accounting services. Certain officers and/or trustees of the Trust are officers and/or directors of FAM, PSI, MLTC, ML & Co., and/or MLIM, LLC. 3. INVESTMENTS: Purchases and sales of investments, excluding short-term securities, for the six months ended June 30, 2005 were $68,445,135 and $73,588,549, respectively. 4. SHORT-TERM BORROWINGS: The Trust, on behalf of the Series, along with certain other funds managed by FAM and its affiliates, is a party to a $500,000,000 credit agreement with a group of lenders, which expires November 2005. The Series may borrow under the credit agreement to fund shareholder redemptions and for other lawful purposes other than for leverage. The Series may borrow up to the maximum amount allowable under the Series' current prospectus and statement of additional information, subject to various other legal, regulatory or contractual limits. The Series pays a commitment fee of .07% per annum based on the Series' pro rata share of the unused portion of the credit agreement. Amounts borrowed under the credit agreement bear interest at a rate equal to, at each Series' election, the federal funds rate plus .50% or a base rate as defined in the credit agreement. The Series did not borrow under the credit agreement during the six months ended June 30, 2005. - -------------------------------------------------------------------------------- 51 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS June 30, 2005 - -------------------------------------------------------------------------------- This summary schedule of investments is presented to help investors focus on the Series' principal holdings. It includes the Series' 50 largest holdings and each investment of any issuer that exceeds 1% of the Series' net assets. "Other Securities" represent all issues not required to be disclosed under the rules adopted by the Securities and Exchange Commission. A complete schedule of investments is available without charge, upon request, by calling 800-637-3863 or on the Securities and Exchange Commission's Web site at http://www.sec.gov.
VALUE PERCENT OF INDUSTRY* SHARES HELD COMMON STOCKS (IN U.S. DOLLARS) NET ASSETS - --------- ----------- ------------- ----------------- ---------- Aerospace & Defense Other Securities $ 2,514,022 0.6% Air Freight & Logistics Other Securities 1,835,267 0.5 Airlines Other Securities 995,507 0.3 Auto Components Other Securities 3,335,686 0.8 Automobiles 38,817 DaimlerChrysler AG 1,578,057 0.4 32,400 Honda Motor Co., Ltd. 1,599,386 0.4 126,200 Toyota Motor Corp. 4,521,379 1.0 Other Securities 2,946,205 0.7 ------------ ----- 10,645,027 2.5 ------------ ----- Beverages 137,468 Diageo Plc 2,027,893 0.5 Other Securities 3,083,578 0.7 ------------ ----- 5,111,471 1.2 ------------ ----- Biotechnology Other Securities 696,939 0.2 Building Products Other Securities 2,672,917 0.6 Capital Markets 55,312 Credit Suisse Group 2,182,516 0.5 23,327 Deutsche Bank AG Registered Shares 1,827,470 0.4 51,492 UBS AG Registered Shares 4,019,358 1.0 Other Securities 3,900,636 0.9 ------------ ----- 11,929,980 2.8 ------------ ----- Chemicals Other Securities 11,498,146 2.7 Commercial Banks 82,104 ABN AMRO Holding NV 2,022,780 0.5 34,066 BNP Paribas 2,338,429 0.6 144,754 Banco Bilbao Vizcaya Argentaria SA 2,236,151 0.5 252,454 Banco Santander Central Hispano SA 2,931,034 0.7 286,690 Barclays Plc 2,854,567 0.7 174,059 HBOS Plc 2,684,671 0.6 501,464 HSBC Holdings Plc 7,999,695 1.9 237,696 Lloyds TSB Group Plc 2,015,239 0.5 Mitsubishi Tokyo Financial Group, 202 Inc. 1,715,387 0.4 367 Mizuho Financial Group, Inc. 1,662,612 0.4 144,105 Royal Bank of Scotland Group Plc 4,354,921 1.0 15,863 Societe Generale 1,616,067 0.4 Other Securities 26,954,303 6.4 ------------ ----- 61,385,856 14.6 ------------ ----- Commercial Services & Supplies Other Securities 3,423,895 0.8 Communications Equipment 195,105 Nokia Oyj 3,271,434 0.8 627,423 Telefonaktiebolaget LM Ericsson 2,016,701 0.5 Other Securities 1,016,495 0.2 ------------ ----- 6,304,630 1.5 ------------ ----- Computers & Peripherals Other Securities 1,958,617 0.5 Construction & Engineering Other Securities 3,439,194 0.8 Construction Materials Other Securities 3,875,321 0.9 Consumer Finance Other Securities 2,157,110 0.5 Containers & Packaging Other Securities 543,107 0.1 Distributors Other Securities 363,246 0.1
See notes to financial statements. - -------------------------------------------------------------------------------- 52 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2005 - --------------------------------------------------------------------------------
VALUE PERCENT OF INDUSTRY* SHARES HELD COMMON STOCKS (IN U.S. DOLLARS) NET ASSETS - --------- ----------- ------------- ----------------- ---------- Diversified Consumer Services Other Securities $ 64,254 0.0% Diversified Financial Services 55,909 Fortis 1,553,404 0.4 81,060 ING Groep NV CVA 2,293,429 0.5 Other Securities 1,924,374 0.5 ------------ ----- 5,771,207 1.4 ------------ ----- Diversified Telecommunication 116,148 Deutsche Telekom AG 2,151,410 0.5 Services 65,044 France Telecom SA 1,902,498 0.4 196,291 Telefonica SA 3,217,646 0.8 Other Securities 10,125,787 2.4 ------------ ----- 17,397,341 4.1 ------------ ----- Electric Utilities 25,987 E.On AG 2,318,066 0.5 Other Securities 10,817,272 2.6 ------------ ----- 13,135,338 3.1 ------------ ----- Electrical Equipment Other Securities 2,972,478 0.7 Electronic Equipment & Instruments Other Securities 4,580,796 1.1 Energy Equipment & Services Other Securities 388,000 0.1 Food & Staples Retailing 339,896 Tesco Plc 1,941,958 0.5 Other Securities 6,335,656 1.5 ------------ ----- 8,277,614 2.0 ------------ ----- Food Products 18,873 Nestle SA Registered Shares 4,832,054 1.2 27,472 Unilever NV 1,784,350 0.4 Other Securities 5,345,360 1.3 ------------ ----- 11,961,764 2.9 ------------ ----- Gas Utilities Other Securities 2,353,016 0.6 Health Care Equipment & Supplies Other Securities 2,117,249 0.5 Health Care Providers & Services Other Securities 786,949 0.2 Hotels, Restaurants & Leisure Other Securities 4,597,329 1.1 Household Durables 61,680 Koninklijke Philips Electronics NV 1,560,668 0.4 Other Securities 6,046,109 1.4 ------------ ----- 7,606,777 1.8 ------------ ----- Household Products Other Securities 1,681,005 0.4 IT Services Other Securities 1,800,718 0.4 Independent Power Producers & Energy Other Securities Traders 575,504 0.1 Industrial Conglomerates 33,194 Siemens AG 2,424,850 0.6 Other Securities 2,641,933 0.6 ------------ ----- 5,066,783 1.2 ------------ ----- Insurance 66,599 AXA 1,666,588 0.4 14,372 Allianz AG Registered Shares 1,652,432 0.4 Other Securities 13,584,511 3.2 ------------ ----- 16,903,531 4.0 ------------ ----- Internet & Catalog Retail Other Securities 943,920 0.2 Internet Software & Services Other Securities 896,604 0.2 Leisure Equipment & Products Other Securities 1,487,708 0.4 Machinery Other Securities 6,212,507 1.5 Marine Other Securities 1,364,494 0.3 Media Other Securities 9,489,774 2.3 Metals & Mining 65,309 Anglo American Plc 1,532,344 0.4 152,379 BHP Billiton Ltd. 2,108,118 0.5 Other Securities 7,989,778 1.9 ------------ ----- 11,630,240 2.8 ------------ ----- Multi-Utilities Other Securities 4,655,703 1.1
See notes to financial statements. - -------------------------------------------------------------------------------- 53 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2005 - --------------------------------------------------------------------------------
VALUE PERCENT OF INDUSTRY* SHARES HELD COMMON STOCKS (IN U.S. DOLLARS) NET ASSETS - --------- ----------- ------------- ----------------- ---------- Multiline Retail Other Securities $ 1,715,803 0.4% Office Electronics 31,900 Canon, Inc. 1,681,220 0.4 Other Securities 994,145 0.3 ------------ ----- 2,675,365 0.7 ------------ ----- Oil, Gas & Consumable Fuels 932,720 BP Plc 9,713,395 2.3 3,849 BP Plc(b) 240,101 0.1 101,171 ENI SpA 2,610,114 0.6 89,924 Royal Dutch Petroleum Co. 5,878,809 1.4 432,470 Shell Transport & Trading Co. Plc 4,207,261 1.0 24,776 Total SA 5,828,059 1.4 4,140 Total SA(a) 50 0.0 Other Securities 6,599,624 1.5 ------------ ----- 35,077,413 8.3 ------------ ----- Paper & Forest Products Other Securities 1,753,772 0.4 Personal Products Other Securities 1,309,751 0.3 Pharmaceuticals 72,371 AstraZeneca Plc 2,997,838 0.7 260,871 GlaxoSmithKline Plc 6,317,202 1.5 800 GlaxoSmithKline Plc(b) 38,808 0.0 112,915 Novartis AG Registered Shares 5,380,892 1.3 33,803 Roche Holding AG 4,279,796 1.0 45,455 Sanofi-Aventis 3,736,555 0.9 38,000 Takeda Pharmaceutical Co., Ltd. 1,886,111 0.4 Other Securities 4,896,032 1.2 ------------ ----- 29,533,234 7.0 ------------ ----- Real Estate Other Securities 9,768,170 2.3 Road & Rail Other Securities 3,446,109 0.8 Semiconductors & Semiconductor Other Securities Equipment 2,936,998 0.7 Software 9,286 SAP AG 1,618,979 0.4 Other Securities 1,826,464 0.4 ------------ ----- 3,445,443 0.8 ------------ ----- Specialty Retail Other Securities 3,366,317 0.8 Textiles, Apparel & Luxury Goods Other Securities 3,395,636 0.8 Thrifts & Mortgage Finance Other Securities 219,744 0.1 Tobacco Other Securities 4,154,177 1.0 Trading Companies & Distributors Other Securities 3,363,499 0.8 Transportation Infrastructure Other Securities 2,707,790 0.6 Water Utilities Other Securities 498,373 0.1 Wireless Telecommunication 2,759,271 Vodafone Group Plc 6,726,310 1.6 Services 12,490 Vodafone Group Plc(b) 303,757 0.1 Other Securities 2,296,703 0.5 ------------ ----- 9,326,770 2.2 ------------ ----- TOTAL INVESTMENTS IN COMMON STOCKS (COST - $353,576,514) 398,098,905 94.6 ------------ ----- EXCHANGE TRADED FUNDS --------------------- Other Securities.................... 313,860 0.1 ------------ ----- TOTAL INVESTMENTS IN EXCHANGE TRADED FUNDS (COST - $232,840)............. 313,860 0.1 ------------ ----- PREFERRED STOCKS ---------------- Automobiles Other Securities 516,487 0.1 Chemicals Other Securities 253,424 0.1 Health Care Providers & Services Other Securities 37,796 0.0 Media Other Securities 94,959 0.0
See notes to financial statements. - -------------------------------------------------------------------------------- 54 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2005 - --------------------------------------------------------------------------------
VALUE PERCENT OF SHARES HELD PREFERRED STOCKS (IN U.S. DOLLARS) NET ASSETS ----------- ---------------- ----------------- ---------- Multi-Utilities Other Securities $ 116,368 0.0% ------------ ----- TOTAL INVESTMENTS IN PREFERRED STOCKS (COST - $835,332) 1,019,034 0.2 ------------ ----- WARRANTS(C) ----------- Food & Staples Retailing Other Securities 8 0.0 ------------ ----- TOTAL INVESTMENTS IN WARRANTS (COST - $802) 8 0.0 ------------ ----- RIGHTS ------ Commercial Banks Other Securities 27,978 0.0 Construction & Engineering Other Securities 3,756 0.0 Real Estate Other Securities 10,045 0.0 ------------ ----- TOTAL INVESTMENTS IN RIGHTS (COST - $1,690) 41,779 0.0 ------------ ----- BENEFICIAL INTEREST SHORT-TERM SECURITIES ----------- --------------------- Merrill Lynch Liquidity Series, LLC USD 8,676,684.. Cash Sweep Series I(d) 8,676,684 2.1 ------------ ----- TOTAL INVESTMENTS IN SHORT-TERM SECURITIES (COST - $8,676,684)...... 8,676,684 2.1 ------------ ----- TOTAL INVESTMENTS (COST - $363,323,862**) 408,150,270 97.0 OTHER ASSETS LESS LIABILITIES 12,808,549 3.0 ------------ ----- NET ASSETS $420,958,819 100.0% ============ =====
- --------------- "Other Securities" represent issues that are not identified as the 50 largest holdings of the Series and issues not exceeding 1% of the net assets. * For Series compliance purposes, "Industry" means 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 such industry sub-classifications for reporting ease. ** The cost and unrealized appreciation (depreciation) of investments as of June 30, 2005, as computed for federal income tax purposes, were as follows: Aggregate cost.............................................. $366,241,147 ------------ Gross unrealized appreciation............................... $ 53,183,487 Gross unrealized depreciation............................... (11,274,364) ------------ Net unrealized appreciation................................. $ 41,909,123 ============
(a) Non-income producing security. (b) Depositary Receipts. (c) 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. (d) Investments in companies considered to be an affiliate of the Series (such companies are defined as "Affiliated Companies" in Section 2(a)(3) of the Investment Company Act of 1940) were as follows:
NET INTEREST AFFILIATE ACTIVITY INCOME --------- ---------- -------- Merrill Lynch Liquidity Series, LLC Cash Sweep Series I..... $5,915,777 $129,823
See notes to financial statements. - -------------------------------------------------------------------------------- 55 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2005 - -------------------------------------------------------------------------------- Financial futures contracts purchased as of June 30, 2005 were as follows:
UNREALIZED NUMBER OF APPRECIATION CONTRACTS ISSUE EXCHANGE EXPIRATION DATE FACE VALUE (DEPRECIATION) --------- ----- -------- --------------- ---------- -------------- 134 DJ Euro Stoxx 50 Eurex September 2005 $5,106,999 $ 81,040 49 FTSE 100 Index Future LIFFE September 2005 $4,429,961 68,219 18 Hang Seng Index Future Hong Kong July 2005 $1,649,318 (4,302) 58 OMX Stock Index Future Tokyo July 2005 $ 608,281 2,621 1 S&P/MIB Index Eurex September 2005 $ 196,232 (463) 30 SPI 200 Index Future Sydney September 2005 $2,428,404 14,408 59 TOPIX Index Future Tokyo September 2005 $6,099,249 154,293 -------- TOTAL UNREALIZED APPRECIATION - NET $315,816 ========
Forward foreign exchange contracts as of June 30, 2005 were as follows:
UNREALIZED FOREIGN CURRENCY SETTLEMENT APPRECIATION PURCHASED DATE (DEPRECIATION) ---------------- ---------- -------------- AUD 475,000 July 2005 $ (2,505) CHF 1,760,000 July 2005 (31,898) EUR 3,250,000 July 2005 (41,415) GBP 1,680,000 July 2005 (59,493) HKD 550,000 July 2005 56 JPY 356,600,000 July 2005 (107,129) SEK 975,000 July 2005 (4,379) --------- TOTAL UNREALIZED DEPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS - NET (USD COMMITMENT - $12,345,557) $(246,763) =========
UNREALIZED FOREIGN CURRENCY SETTLEMENT APPRECIATION SOLD DATE (DEPRECIATION) ---------------- ---------- -------------- AUD 145,000 July 2005 $ 880 CHF 170,000 July 2005 2,264 EUR 575,000 July 2005 5,645 GBP 280,000 July 2005 8,354 HKD 550,000 July 2005 (49 JPY 48,000,000 July 2005 12,725 SEK 450,000 July 2005 1,575 ------- TOTAL UNREALIZED APPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS - NET (USD COMMITMENT - $2,034,589) $31,394 =======
CURRENCY DENOMINATIONS AUD Australian Dollar CHF Swiss Franc EUR Euro GBP British Pound Sterling HKD Hong Kong Dollar JPY Japanese Yen SEK Swedish Krona USD U.S. Dollar
See notes to financial statements. - -------------------------------------------------------------------------------- 56 MASTER INTERNATIONAL INDEX SERIES STATEMENT OF ASSETS AND LIABILITIES As of June 30, 2005 - -------------------------------------------------------------------------------- ASSETS: Investments in unaffiliated securities, at value (including securities loaned of $669,726) (identified cost - $354,647,178)................................... $399,473,586 Investments in affiliated securities, at value (identified cost - $8,676,684).............................. 8,676,684 Cash held as collateral for loaned securities........... 709,389 Cash on deposit for financial futures contracts......... 622,670 Cash.................................................... 2,002 Foreign cash (cost - $9,241,742)........................ 9,105,688 Unrealized appreciation on forward foreign exchange contracts................................................... 31,499 Receivables: Dividends............................................. $1,383,415 Variation margin...................................... 1,359,532 Contributions......................................... 1,039,883 Securities sold....................................... 135,107 Interest from affiliates.............................. 17,645 3,935,582 ---------- Prepaid expenses........................................ 3,465 ------------ TOTAL ASSETS........................................ 422,560,565 ------------ LIABILITIES: Collateral on securities loaned, at value............... 709,389 Unrealized depreciation on forward foreign exchange contracts................................................... 246,868 Payables: Withdrawals........................................... 504,907 Securities purchased.................................. 83,201 Other affiliates...................................... 3,747 Investment adviser.................................... 3,101 594,956 ---------- Accrued expenses and other liabilities.................. 50,533 ------------ TOTAL LIABILITIES................................... 1,601,746 ------------ NET ASSETS.................................................. $420,958,819 ============ NET ASSETS CONSIST OF: Investors' capital...................................... $376,239,356 Unrealized appreciation - net........................... 44,719,463 ------------ NET ASSETS.................................................. $420,958,819 ============
See notes to financial statements. - -------------------------------------------------------------------------------- 57 MASTER INTERNATIONAL INDEX SERIES STATEMENT OF OPERATIONS For the Six Months Ended June 30, 2005 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends (net of $605,330 foreign withholding tax)..... $ 6,580,038 Interest (including $129,823 from affiliates)........... 148,406 Securities lending - net................................ 5,627 ------------ TOTAL INCOME........................................ 6,734,071 ------------ EXPENSES: Custodian fees.......................................... $ 91,880 Professional fees....................................... 37,258 Pricing fees............................................ 26,255 Accounting services..................................... 26,093 Investment advisory fees................................ 19,029 Printing and shareholder reports........................ 1,994 Trustees' fees and expenses............................. 1,766 Other................................................... 6,818 ------------ TOTAL EXPENSES BEFORE WAIVER........................ 211,093 Waiver of expenses...................................... (13,001) ------------ TOTAL EXPENSES AFTER WAIVER......................... 198,092 ------------ INVESTMENT INCOME - NET..................................... 6,535,979 ------------ REALIZED & UNREALIZED GAIN (LOSS) - NET: Realized gain (loss) on: Investments - net..................................... 944,522 Futures contracts - net............................... 674,183 Foreign currency transactions - net................... (829,164) 789,541 ------------ Change in unrealized appreciation/depreciation on: Investments - net..................................... (12,106,523) Futures contracts - net............................... 187,215 Foreign currency transactions - net................... (527,131) (12,446,439) ------------ ------------ TOTAL REALIZED AND UNREALIZED LOSS - NET............ (11,656,898) ------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ (5,120,919) ============
See notes to financial statements. - -------------------------------------------------------------------------------- 58 MASTER INTERNATIONAL INDEX SERIES STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
FOR THE SIX MONTHS FOR THE ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2005 2004 ------------ -------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Investment income - net................................. $ 6,535,979 $ 12,027,122 Realized gain - net..................................... 789,541 51,628,797 Change in unrealized appreciation/depreciation - net.... (12,446,439) 3,768,597 ------------ ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................................. (5,120,919) 67,424,516 ------------ ------------- CAPITAL TRANSACTIONS: Proceeds from contributions............................. 170,806,208 167,759,330 Fair value of withdrawals............................... (66,793,334) (466,245,952) ------------ ------------- NET INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL TRANSACTIONS................................... 104,012,874 (298,486,622) ------------ ------------- NET ASSETS: Total increase (decrease) in net assets................. 98,891,955 (231,062,106) Beginning of period..................................... 322,066,864 553,128,970 ------------ ------------- END OF PERIOD........................................... $420,958,819 $ 322,066,864 ============ =============
See notes to financial statements. - -------------------------------------------------------------------------------- 59 MASTER INTERNATIONAL INDEX SERIES FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The following ratios have been derived from information provided in the financial statements.
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, JUNE 30, ----------------------------------------- 2005 2004 2003 2002 2001 ---------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN................................. (1.03%)+ 20.32% 38.97% (15.81%) (21.77%) -------- -------- -------- -------- -------- RATIOS TO AVERAGE NET ASSETS: Expenses, net of waiver............................. .10%* .09% .09% .08% .08% -------- -------- -------- -------- -------- Expenses............................................ .11%* .10% .10% .16% .39% -------- -------- -------- -------- -------- Investment income - net............................. 3.43%* 2.55% 2.23% 2.21% 1.20% -------- -------- -------- -------- -------- SUPPLEMENTAL DATA: Net assets, end of period (in thousands)............ $420,959 $322,067 $553,129 $166,820 $195,512 -------- -------- -------- -------- -------- Portfolio turnover.................................. 11.11% 13.50% 8.55% 19.52% 30.19% -------- -------- -------- -------- --------
- --------------- * Annualized. + Aggregate total investment return. See notes to financial statements. - -------------------------------------------------------------------------------- 60 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS June 30, 2005 - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES: Master International Index Series (the "Series") is part of Quantitative Master Series Trust (the "Trust"). The Trust is registered under the Investment Company Act of 1940, as amended, and is organized as a Delaware statutory trust. The Declaration of Trust permits the Trustees to issue nontransferable interests in the Series, subject to certain limitations. The Series' financial statements are prepared in conformity with U.S. generally accepted accounting principles, which may require the use of management accruals and estimates. Actual results may differ from these estimates. These unaudited financial statements reflect all adjustments, which are, in the opinion of management, necessary to present a fair statement of the results for the interim period. All such adjustments are of a normal, recurring nature. The following is a summary of significant accounting policies followed by the Series. (a) Valuation of investments Equity securities that are held by the Series that are traded on stock exchanges or the Nasdaq National Market are valued at the last sale price or official close price on the exchange, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price for long positions, and at the last available asked price for short positions. In cases where equity securities are traded on more than one exchange, the securities are valued on the exchange designated as the primary market by or under the authority of the Board of Trustees of the Trust. Long positions traded in the over-the-counter ("OTC") market, Nasdaq Small Cap or Bulletin Board are valued at the last available bid price or yield equivalent obtained from one or more dealers or pricing services approved by the Board of Trustees of the Trust. Short positions traded in the OTC market are valued at the last available asked price. Portfolio securities that are traded both in the OTC market and on a stock exchange are valued according to the broadest and most representative market. Options written are valued at the last sale price in the case of exchange-traded options or, in the case of options traded in the OTC market, the last asked price. Options purchased are valued at their last sale price in the case of exchange-traded options or, in the case of options traded in the OTC market, the last bid price. Swap agreements are valued daily based upon quotations from market makers. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their last sale price as of the close of such exchanges. Obligations with remaining maturities of 60 days or less are valued at amortized cost unless the Investment Adviser believes that this method no longer produces fair valuations. Repurchase agreements are valued at cost plus accrued interest. The Series employs pricing services to provide certain securities prices for the Series. Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of Trustees of the Trust, including valuations furnished by the pricing services retained by the Series, which may use a matrix system for valuations. The procedures of a pricing service and its valuations are reviewed by the officers of the Series under the general supervision of the Trust's Board of Trustees. Such valuations and procedures will be reviewed periodically by the Board of Trustees of the Trust. Generally, trading in foreign securities, as well as U.S. government securities and money market instruments, 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 - -------------------------------------------------------------------------------- 61 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 - -------------------------------------------------------------------------------- assets of the Portfolio are determined as of such times. Foreign currency exchange rates also are generally determined prior to 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 Trust's Board of Trustees or by the Investment Adviser using a pricing service and/or procedures approved by the Trust's Board of Trustees. (b) Derivative financial instruments The Series may engage in various portfolio investment strategies to provide liquidity or as a proxy for a direct investment in securities underlying the Series' index. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. - Financial futures contracts - The Series may purchase or sell financial futures contracts and options on such futures contracts. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Series deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Series agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Series as unrealized gains or losses. When the contract is closed, the Series records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. - Options - The Series may purchase and write call and put options. When the Series writes an option, an amount equal to the premium received by the Series is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Series enters into a closing transaction), the Series realizes a gain or loss on the option to the extent of the premiums received or paid (or a gain or loss to the extent that the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. - Forward foreign exchange contracts - The Series may enter into forward foreign exchange contracts as a hedge against either specific transactions or portfolio positions. The contract is marked-to-market daily and the change in market value is recorded by the Series as an unrealized gain or loss. When the contract is closed, the Series records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. - Foreign currency options and futures - The Series may also purchase or sell listed or 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. - -------------------------------------------------------------------------------- 62 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 - -------------------------------------------------------------------------------- Such transactions may be effected with respect to hedges on non-U.S. dollar-denominated securities owned by the Series, sold by the Series but not yet delivered, or committed or anticipated to be purchased by the Series. (c) Foreign currency transactions Transactions denominated in foreign currencies are recorded at the exchange rate prevailing when recognized. Assets and liabilities denominated in foreign currencies are valued at the exchange rate at the end of the period. Foreign currency transactions are the result of settling (realized) or valuing (unrealized) assets or liabilities expressed in foreign currencies into U.S. dollars. Realized and unrealized gains or losses from investments include the effects of foreign exchange rates on investments. (d) Income taxes The Series is classified as a partnership for federal income tax purposes. As such, each investor in the Series is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Series. Therefore, no federal income tax provision is required. Under the applicable foreign tax law, a withholding tax may be imposed on interest, dividends and capital gains at various rates. It is intended that the Series' assets will be managed so an investor in the Series can satisfy the requirements of subchapter M of the Internal Revenue Code. (e) Security transactions and investment income Security transactions are accounted for on the date the securities are purchased or sold (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Series has determined the ex-dividend date. Interest income is recognized on the accrual basis. (f) Securities lending The Series may lend securities to financial institutions that provide cash or securities issued or guaranteed by the U.S. government as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Series and any additional required collateral is delivered to the Series on the next business day. Where the Series receives securities as collateral for the loaned securities, it collects a fee from the borrower. The Series typically receives the income on the loaned securities but does not receive the income on the collateral. Where the Series receives cash collateral, it may invest such collateral and retain the amount earned on such investment, net of any amount rebated to the borrower. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within five business days. The Series may pay reasonable finder's, lending agent, administrative and custodial fees in connection with its loans. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Series also could suffer a loss where the value of the collateral falls below the market value of the borrowed securities, in the event of borrower default or in the event of losses on investments made with cash collateral. - -------------------------------------------------------------------------------- 63 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 - -------------------------------------------------------------------------------- 2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES: The Trust has entered into an Investment Advisory Agreement with Fund Asset Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc. ("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. FAM is responsible for the management of the Series' portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Series. For such services, the Series pays a monthly fee at an annual rate of .01% of the average daily value of the Series' net assets. FAM has entered into a contractual arrangement with the Series under which the expenses incurred by the Series will not exceed .12%. This arrangement has a one-year term and is renewable. For the six months ended June 30, 2005, FAM earned fees of $19,029, of which $13,001 was waived. For the six months ended June 30, 2005, the Series reimbursed FAM $3,786 for certain accounting services. Certain officers and/or trustees of the Series are officers and/or directors of FAM, PSI, and/or ML & Co. 3. INVESTMENTS: Purchases and sales of investments, excluding short-term securities, for the six months ended June 30, 2005 were $132,867,925 and $40,265,274, respectively. 4. COMMITMENTS: At June 30, 2005, the Series had entered into foreign exchange contracts, in addition to the contracts listed in the Schedule of Investments, under which it had agreed to sell various foreign currencies with an approximate value of $1,024,000. 5. SHORT-TERM BORROWINGS: The Trust, on behalf of the Series, along with certain other funds managed by FAM and its affiliates, is a party to a $500,000,000 credit agreement with a group of lenders, which expires November 2005. The Series may borrow under the credit agreement to fund shareholder redemptions and for other lawful purposes other than for leverage. The Series may borrow up to the maximum amount allowable under the Series current prospectus and statement of additional information, subject to various other legal, regulatory or contractual limits. The Series pays a commitment fee of .07% per annum based on the Series pro rata share of the unused portion of the credit agreement. Amounts borrowed under the credit agreement bear interest at a rate equal to, at each Series election, the federal funds rate plus .50% or a base rate as defined in the credit agreement. The Series did not borrow under the credit agreement during the six months ended June 30, 2005. - -------------------------------------------------------------------------------- 64 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (unaudited) - -------------------------------------------------------------------------------- RENEWAL OF MANAGEMENT AGREEMENT At their February 23, 2005 meeting, the Trustees considered the renewal of the existing Management Agreement between the Manager and the Funds. As part of the renewal process, legal counsel to the Trusts and the independent Trustees sent an information request letter to the Manager seeking certain relevant information. The Manager's response was provided to the Trustees for their review prior to their meeting, and the Trustees were provided with the opportunity to request any additional materials. The Trustees considered, among other materials, responses by the Manager to inquiries requesting: - a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; - a copy of the Manager's most recent audited or unaudited financial statements as well as Parts I and II of its Form ADV; - a summary of any material past, pending or anticipated litigation or regulatory proceedings involving the Manager or its personnel, including the results of any recent regulatory examination or independent audit; - a cost/profitability analysis of the Manager and any actual or anticipated economies of scale in relation to the services it provides to the Funds, if available; - an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; - an evaluation of any other benefits to the Manager or Funds as a result of their relationship, if any; - a description of the scope of portfolio management services provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies; - a description of the personnel who are assigned primary responsibility for managing the Fund, including any changes during the past year; - a description of the basis upon which portfolio managers are compensated, including any "incentive" arrangements; - a discussion regarding the Manager's participation in "soft dollar" arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the Manager's methodology for obtaining the most favorable execution and the use of any affiliated broker-dealers; - a description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a discussion of the Manager's compliance program with regard to federal, state, corporate and Fund requirements; - information regarding the Manager's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto; - a description of the Manager's affiliation with any broker-dealer; - a discussion of any anticipated change in the Manager's controlling persons; - verification of the Manager's insurance coverage with regards to the services provided to the Funds; - a table comparing the performance of each Fund to appropriate indices, including comments on the relative performance of each Fund versus comparable indices; 65 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (unaudited) - -------------------------------------------------------------------------------- - a discussion of any underperformance by a Fund relative to its peer group; - an analysis of any material complaints received from Fund shareholders; - a discussion of the Manager's compliance program; - a description of the Manager's securities lending practices and the fees received from such practices; - a description of the portfolio turnover rate and average execution costs for each Fund; - a discussion of whether the Manager receives, with respect to trade execution for the Funds, other special compensation, including any payment for order flow; - a description of how expenses that are not readily identifiable to a particular Fund are allocated; and - any ideas for the future growth and efficient operation of the Funds. The Trustees were also provided with an analysis provided by Lipper, Inc., which compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds, and (iii) each Fund's investment advisory fees versus comparable mutual funds. Legal counsel provided the Trustees with a memorandum detailing their responsibilities pertaining to the renewal of the Management Agreement. This memorandum explained the regulatory requirements surrounding the Trustees' process for evaluating investment advisors and the terms of the contracts. CONSIDERATIONS WITH RESPECT TO ALL FUNDS In determining whether to approve the renewal of the Management Agreement, the Trustees considered the best interests of each Fund separately. In each instance, the Trustees considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of the Fund and the investment advisor; (3) the Manager's cost for providing the services and the profitability of the advisory business to the Manager; (4) the extent to which economies of scale have been taken into account in setting the fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) the Manager's ability to retain key investment personnel and to provide an active client service program; (7) the Manager's goal to continue to provide consistent above average long-term performance at low cost; (8) the continuing efforts by the Manager to add new Funds so as to enhance the Trusts' product line; (9) the Manager's record in building improved compliance, control and credit functions that reduce risks to the Funds; (10) the addition of personnel to manage the Funds, promote sales and improve services; and (11) the active role played by the Manager in monitoring and, as appropriate, recommending replacements for the master portfolios. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the material submitted in support of the renewal. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE INTERNATIONAL EQUITY INDEX FUND In considering the renewal of the Management Agreement, the Trustees considered the following additional factors: (1) the unaffiliated master-feeder structure of the Fund and that the Fund invests all of its investable assets in a master portfolio; (2) the Manager monitors the performance of the master portfolio; (3) the Fund substantially outperformed its peers for all periods since inception, as of December 31, 2004; (4) the Fund's expense ratio is lower than its peer group average and other comparable Funds; (5) the Manager incurred a loss on the services it provided to the Fund; and (6) the Manager provides high-quality services at a low cost to investors, manages the Fund's assets and provides a comprehensive compliance program for the Fund. 66 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (unaudited) - -------------------------------------------------------------------------------- Based on these considerations and those noted above with respect to all Funds, the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the International Equity Index Fund and its shareholders would benefit from the Manager's continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the International Equity Index Fund. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE S&P 500 INDEX FUND In considering the renewal of the Management Agreement, the Trustees considered the following additional factors: (1) the unaffiliated master-feeder structure of the Fund and that the Fund invests all of its investable assets in a master portfolio; (2) the Manager monitors the performance of the master portfolio; (3) the Fund outperformed its peer group for all periods since inception, as of December 31, 2004; (4) the Fund's expense ratio is lower than its peer group average and other comparable Funds; and (5) the Manager provides high-quality services at a low cost to investors, manages the Fund's assets and provides a comprehensive compliance program for the Fund. Based on these considerations and those noted above with respect to all Funds, the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the S&P 500 Index Fund and its shareholders would benefit from the Manager's continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the S&P 500 Index Fund. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE SMALL CAP INDEX FUND In considering the renewal of the Management Agreement, the Trustees considered the following additional factors: (1) the unaffiliated master-feeder structure of the Fund and that the Fund invests all of its investable assets in a master portfolio; (2) the Manager monitors the performance of the master portfolio; (3) the Fund slightly underperformed its peer group for the one-year period ended December 31, 2004, but outperformed its peers for the three-year period; (4) the Fund's expense ratio is lower than its peer group average and other comparable Funds; (5) the Manager incurred a loss on the services it provided to the Fund; and (6) the Manager provides high-quality services at a low cost to investors, manages the Fund's assets and provides a comprehensive compliance program for the Fund. Based on these considerations and those noted above with respect to all Funds, the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the Small Cap Index Fund and its shareholders would benefit from the Manager's continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the Small Cap Index Fund. 67 (This page intentionally left blank) (AMERICAN BEACON LOGO) (AMERICAN BEACON FUNDS 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 Funds 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 FUNDS: (KEYBOARD GRAPHIC) (MOUSE GRAPHIC) BY E-MAIL: ON THE INTERNET: american-beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com
- -------------------------------------------------------------------------------- (TELEPHONE GRAPHIC) (MAILBOX GRAPHIC) BY TELEPHONE: BY MAIL: Institutional Class American Beacon Funds Call (800) 658-5811 4151 Amon Carter Blvd., MD 2450 PlanAhead Class(R) 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 provided in each A description of the policies and procedures that the Funds semi-annual and annual report, each Fund files a complete use to determine how to vote proxies relating to portfolio schedule of its portfolio holdings with the Securities and securities is available in each Fund's Statement of Exchange Commission ("SEC") on Form N-Q as of the first and Additional Information, which may be obtained free of charge third fiscal quarters. The Funds' Forms N-Q are available on by calling 1-800-967-9009 or by accessing the SEC's website the SEC's website at www.sec.gov. The Forms N-Q may also be at www.sec.gov. Each Fund's proxy voting record for the most reviewed and copied at the SEC's Public Reference Room, 450 recent year ended June 30 is filed annually with the SEC on Fifth Street, NW, Washington, DC 20549. Information Form N-PX. The Funds' Forms N-PX are available on the SEC's regarding the operation of the SEC's Public Reference Room website at www.sec.gov. Each Fund's proxy voting record may may be obtained by calling 1-800-SEC-0330. A complete also be obtained by calling 1-800-967-9009. schedule of each Fund's portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each fiscal quarter.
FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT DISTRIBUTOR STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES REGISTERED PUBLIC FORESIDE FUND SERVICES Boston, Massachusetts Kansas City, Missouri ACCOUNTING FIRM Portland, Maine ERNST & YOUNG LLP Chicago, Illinois
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 registered 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. [AMERICAN BEACON FUNDS LOGO] 4151 Amon Carter Blvd. MD 2450 Fort Worth, TX 76155 1.800.967.9009 817.931.4331 fax www.americanbeaconfunds.com SAR 06/05 534554 ================================================================================ G U I D A N C E | V I S I O N | E X P E R I E N C E [LOGO OF AMERICAN BEACON] AMERICAN BEACON FUNDS(SM) SEMI-ANNUAL REPORT [GRAPHIC OF AMERICAN BEACON FUND] JUNE 30, 2005 TREASURY INFLATION PROTECTED SECURITIES FUND Formerly known as the American AAdvantage Funds ================================================================================ 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 SCHEDULE OF INVESTMENTS ....................................... 5 FINANCIAL HIGHLIGHTS .......................................... 14 ADDITIONAL INFORMATION ......................... INSIDE BACK COVER
- -------------------------------------------------------------------------------- Any opinions herein, including forecasts, reflect our judgement as of the end of the reporting period and are subject to change. Each advisor's strategies and each Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. - -------------------------------------------------------------------------------- American Beacon Funds June 30, 2005 [GRAPHIC OF AMERICAN BEACON ADVISORS] FELLOW SHAREHOLDERS: Enclosed please find the Semi-Annual Report for the American Beacon Treasury Inflation Protected Securities Fund for the six-month period ended June 30, 2005. The year started with a short-term interest rate of 2.25%; however, the Federal Reserve Board subsequently raised the rate four times with increases of 25 basis points each time to end the six-month period at 3.25%. These widely expected moves were a continuation of the Fed's stated process of removing monetary policy accommodation at a "measured" pace. Additionally, the benchmark 10-year U.S. Treasury note ended June yielding approximately 3.92%. The American Beacon Treasury Inflation Protected Securities Fund realized a return of 1.64% for the six-month period. Looking forward, the Treasury Inflation Protected Securities Fund will continue to seek inflation protection and income by investing primarily in inflation-indexed debt securities. Please review the enclosed portfolio listings and detailed financial data. As always, we welcome the opportunity to serve your financial needs. Should you have any questions about the enclosed information, please do not hesitate to contact us at 800-967-9009. You may also access Fund and account information 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 MARKET OVERVIEW (Unaudited) ================================================================================ The accumulation of economic data, both in the U.S. abroad, suggests that economic activity accelerated early in the period on a global basis, from already strong levels. Signs abound that U.S. corporate investment spending remains firm, supported by strong profit growth and the never-ending requirement to ramp up productivity. Meanwhile, rising employment and income, as well as record household wealth levels, are lifting consumer spending in spite of higher energy prices and lofty debt levels. Later in the period, despite "frothy" real estate markets, abysmally low savings rates, high energy prices, indebted consumers, and rising interest rates, the economy, as evidenced by recent statistical releases, continued to perform extremely well. However, market interest rates (real and nominal) appear to be looking beyond current economic statistical readings and responding to reduced expectations for future economic growth. The Lehman U.S. TIPS Index returned 2.71% for the six month time period outperforming the shorter Lehman U.S. 1-10 yr TIPS Index, which gained 1.54%, and the Lehman Aggregate Index, which posted a return of 2.51%. Given the strong economic back-drop early in the period, real yields rose 2 to 14 basis points and TIPS investors were faced with negative total rates of return. During the second quarter, real yields were mixed with short rates increasing 75 basis points and intermediate/long rates falling 10 to 15 basis points. Short real yields were driven higher by two Fed rate hikes (5/3/05 and 6/30/05) and the prospect that future inflation accruals will be less than current accruals. In the context of continued above-trend economic growth, broad-based commodity price pressures, and a jump in oil prices, inflation expectations were clearly on the rise. The rise in inflation expectations led to strong relative performance for TIPS versus other fixed income alternatives. Break-even inflation rates (difference between nominal Treasury and TIPS yield), which began the quarter at 2.60% on 10-year maturities, fell 10 basis points in Januarybefore rising 30 basis points during the Februaryand Marchperiods. In all, break-even inflation rates for 10-year maturities rose almost 20 basis points during the first quarter. However in the second quarter, inflation expectations fell along with predictions for future economic growth. Break-even inflation rates, as measured by the spread between TIPS and nominal bonds, fell 25 to 90 basis points during the period with the largest moves occurring in the shortest maturities. The Treasury issued $10 billion of a new 10-year maturity TIP and $10 billion of the current 20-year TIP in January. Both auctions were met with less than stellar demand. In April, the U.S. Treasury reopened both the 5-year and 10-year TIPS for $9 billion each. With the new supply, the market value of TIPS outstanding is approaching $350 billion. 2 PERFORMANCE OVERVIEW AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND June 30, 2005 (Unaudited) ================================================================================ The Institutional Class of the Fund returned 1.64% for the period from January 1, 2005 through June 30, 2005, exceeding the Lehman Brothers 1-10 Yr U.S. TIPS Index (the "Index") return of 1.54%. The Fund trailed the Lipper TIPS Index return of 2.78% for the same time period. The Fund outperformed the Index for the six-month time period by 10 basis points with most of the value added occurring in the first quarter of the year. In the first quarter, the Fund outperformed by maintaining a small allocation to nominal bonds as break-even rates narrowed. In addition, the Fund benefited early in the period by reducing its exposure to areas of the yield curve where new supply was auctioned. While the Fund had a small percentage of its assets in non-TIPS during the period, the vast majority of its assets (over 90%) was invested in TIPS. The Fund remains focused on investing primarily in TIPS to provide inflation protection and income to its shareholders.
TOTAL RETURNS ======================================== PERIODS ENDED 6/30/05 ---------------------------------------- 3 Mos. 6 Mos. 1 Yr. ------ ------ ----- Institutional Class (1) ................ 2.39% 1.64% 5.65% Lehman Bros. 1-10 Yr. U.S. TIPS Index ..................... 2.36% 1.54% 6.58% Lehman Bros. U.S. TIPS Index ............................... 3.05% 2.71% 9.34% Lipper TIPS Index ...................... 3.04% 2.78% 9.87%
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 may differ from current performance. To obtain performance information 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. PORTFOLIO DIVERSIFICATION
% OF RATING FIXED INCOME - ------ ------------ A 0.7% AA 1.6% AAA 97.7%
[CHART OF PORTFOLIO DIVERSIFICATION] Sovereign Obligations 1.3% U.S. Government Sponsored Agency Instruments 1.7% Corporate Obligations 1.0% U.S. Government Treasury Obligations 96.0%
[END CHART] The bar chart above represents the Fund's portfolio as of June 30, 2005. The Fund's portfolio is actively managed, and its portfolio composition, credit quality breakdown, and other portfolio characteristics will vary from time to time. U.S. Treasury Inflation Protected Securities are unrated, but are backed by the full faith and credit of the government of the United States of America and are therefore considered by the Fund's investment advisor to be comparable to bonds rated AAA/Aaa. 3 PERFORMANCE OVERVIEW AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND - CONTINUED June 30, 2005 (Unaudited) ================================================================================ FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1)transaction costs and (2)ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2005 through June 30, 2005. ACTUAL EXPENSES The "Actual" lines of the table provide 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" 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 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" 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 ACCOUNT ENDING ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 1/1/05 6/30/05 1/1/05 - 6/30/05 ----------------- -------------- ---------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,016.43 $1.85 Hypothetical (5% return before expenses) $1,000.00 $1,022.96 $1.86
*Expenses are equal to the Fund's annualized expense ratio for the six-month period of 0.37%, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period. 4 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND SCHEDULE OF INVESTMENTS June 30, 2005 (Unaudited) ================================================================================
PAR/SHARES VALUE ---------- -------- (DOLLAR IN THOUSANDS) U.S. GOVERNMENT SPONSORED AGENCY INSTRUMENTS - 1.71% Federal Home Loan Bank, 4.491%, Due 2/20/2007 ................................. $ 100 $ 103 Federal National Mortgage Association, 4.29%, Due 2/17/2009 ................... 100 99 Tennessee Valley Authority, 3.375%, Due 1/15/2007 ............................. 246 253 ------- TOTAL U.S. GOVERNMENT SPONSORED AGENCY INSTRUMENTS ......................... 455 ------- U.S. GOVERNMENT TREASURY OBLIGATIONS - 96.55% U.S. Inflation Protected Treasury Bonds, 5.375%, Due 2/15/2031 ....................................................... 700 826 U.S. Inflation Protected Treasury Notes, 0.875%, Due 4/15/2010 ....................................................... 2,978 2,905 1.625%, Due 1/15/2015 ....................................................... 1,564 1,558 1.875%, Due 7/15/2013 ....................................................... 2,330 2,380 2.00%, Due 1/15/2014 ........................................................ 2,517 2,592 2.00%, Due 7/15/2014 ........................................................ 1,228 1,266 3.00%, Due 7/15/2012 ........................................................ 3,003 3,298 3.375%, Due 1/15/2007 ....................................................... 1,412 1,457 3.375%, Due 1/15/2012 ....................................................... 3,227 3,603 3.50%, Due 1/15/2011 ........................................................ 743 824 3.625%, Due 1/15/2008 ....................................................... 1,560 1,650 3.875%, Due 1/15/2009 ....................................................... 1,566 1,704 4.25%, Due 1/15/2010 ........................................................ 1,457 1,640 ------- TOTAL U.S. GOVERNMENT TREASURY OBLIGATIONS ................................. 25,703 ------- VARIABLE RATE CORPORATE OBLIGATIONS - 1.04% (NOTE B) FINANCIAL - 1.04% Allstate Life Global Funding, 4.20%, Due 3/1/2010 .............................. 100 98 Lehman Brothers Holdings, Incorporated, 4.78%, Due 6/2/2009 .................... 80 79 SLM Corporation, 5.27%, Due 1/31/2014 .......................................... 100 100 ------- TOTAL FINANCIAL ............................................................ 277 ------- TOTAL VARIABLE RATE CORPORATE OBLIGATIONS .................................. 277 ------- SOVEREIGN OBLIGATIONS - 1.27% Italian Republic, 2.15%, Due 9/15/2014 ......................................... 260 338 ------- TOTAL SOVEREIGN OBLIGATIONS ................................................ 338 ------- SHORT TERM INVESTMENTS - 1.23% American Beacon Money Market Select Fund (Note A)............................... 327,515 328 ------- TOTAL SHORT TERM INVESTMENTS ............................................... 328 ------- TOTAL INVESTMENTS - 101.80% (COST $27,113) ..................................... 27,101 ------- LIABILITIES, NET OF OTHER ASSETS - (1.80%)...................................... (480) ------- TOTAL NET ASSETS - 100% ........................................................ $26,621 =======
- ---------------- (A) The Fund is affiliated by having the same investment advisor. (B) Variable rate instrument. Interest rates change on specific dates (such as a coupon or interest payment date). The rate shown represents the June 30, 2005 coupon rate. See accompanying notes - -------------------------------------------------------------------------------- 5 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND SCHEDULE OF INVESTMENTS - CONTINUED June 30, 2005 (Unaudited) ================================================================================ FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS Amounts in $000's
SETTLEMENT CONTRACT MARKET UNREALIZED CONTRACT DESCRIPTION DATE AMOUNT VALUE GAIN/(LOSS) ---------- -------- ------ ----------- CONTRACTS TO DELIVER - -------------------- Euro Currency ................................... 07/28/2005 546 EUR $661 $(1) ---- --- TOTAL CONTRACTS TO DELIVER (RECEIVABLE AMOUNT $660) ..................... $661 $(1) ==== === CONTRACTS TO RECEIVE - -------------------- Euro Currency ................................... 07/28/2005 281 EUR $340 $1 ---- -- TOTAL CONTRACTS TO RECEIVE (PAYABLE AMOUNT $339) ........................ $340 $1 ==== ==
See accompanying notes - -------------------------------------------------------------------------------- 6 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF ASSETS AND LIABILITIES June 30, 2005 (Unaudited) (in thousands, except share and per share amounts) ================================================================================ ASSETS: Investments in unaffiliated securities, at value(A) ............................ $ 26,773 Investments in affiliated securities, at value(B) .............................. 328 Dividends and interest receivable .............................................. 304 Receivable for investments sold ................................................ 389 Receivable for fund shares sold ................................................ 13 Other assets ................................................................... 1 ---------- TOTAL ASSETS ................................................................ 27,808 ---------- LIABILITIES: Payable for investments purchased .............................................. 880 Payable for fund shares redeemed ............................................... 288 Dividends payable .............................................................. 1 Management and investment advisory fees payable (Note 2) ....................... 11 Administrative service and service fees payable ................................ 2 Other liabilities .............................................................. 5 ---------- TOTAL LIABILITIES ........................................................... 1,187 ---------- NET ASSETS ........................................................................ $ 26,621 ========== ANALYSIS OF NET ASSETS: Paid-in-capital ................................................................ 26,013 Undistributed net investment income ............................................ 646 Accumulated net realized gain (loss) ........................................... (26) Unrealized appreciation (depreciation) of investments and foreign currency ...... (12) ---------- NET ASSETS ........................................................................ $ 26,621 ========== Shares outstanding (no par value): Institutional Class ............................................................ 2,585,312 ========== Net asset value, offering and redemption price per share: Institutional Class ............................................................ $ 10.30 ========== - -------------- (A) Cost of investments in unaffiliated securities $ 26,785 (B) Cost of investments in affiliated securities $ 328
See accompanying notes - -------------------------------------------------------------------------------- 7 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF OPERATIONS Six Months Ended June 30, 2005(Unaudited)(inthousands) ================================================================================ INVESTMENT INCOME: Interest income ................................................................ $ 685 Dividend income from affiliated securities ..................................... 14 ----- TOTAL INVESTMENT INCOME ..................................................... 699 ----- EXPENSES: Management and investment advisory fees (Note 2) ............................... 27 Administrative service fees (Note 2) ........................................... 13 Transfer agent fees ............................................................ 3 Fund accounting fees ........................................................... 3 Professional fees .............................................................. 3 Registration fees and expenses ................................................. 1 Organizational costs ........................................................... - Other expenses ................................................................. 3 ----- TOTAL EXPENSES .............................................................. 53 ----- LESS FEES WAIVED (NOTE 2) ......................................................... 4 ----- NET EXPENSES ................................................................ 49 ----- NET INVESTMENT INCOME ............................................................. 650 ----- REALIZED AND UNREALIZED GAIN (LOSS)ON INVESTMENTS: Net realized gain (loss) on: Investments ................................................................. (131) Foreign currency transactions ............................................... 24 Change in net unrealized appreciation or depreciation of: Investments ................................................................. (87) Foreign currency contracts .................................................. (23) ----- NET GAIN (LOSS)ON INVESTMENTS ............................................. (217) ----- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............................. $ 433 =====
See accompanying notes - -------------------------------------------------------------------------------- 8 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENTS OF CHANGES IN NET ASSETS (in thousands) ================================================================================
SIX MONTHS SIX MONTHS ENDED ENDED JUNE 30, DECEMBER 31, 2005 2004(A) ---------- ------------ (UNAUDITED) INCREASE IN NET ASSETS: OPERATIONS: Net investment income ....................................................... $ 650 $ 292 Net realized gain (loss) on investments ..................................... (107) 247 Change in net unrealized appreciation or depreciation of investments and foreign currency contracts ........................................... (110) 98 -------- ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................. 433 637 -------- ------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income ....................................................... (56) (292) Net realized gain on investments ............................................ - (114) -------- ------- NET DISTRIBUTIONS TO SHAREHOLDERS ..................................... (56) (406) -------- ------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares ............................................... 30,040 28,766 Reinvestment of dividends and distributions ................................. 56 405 Cost of shares redeemed ..................................................... (24,795) (8,459) -------- ------- NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ............ 5,301 20,712 -------- ------- NET INCREASE IN NET ASSETS ....................................... .... 5,678 20,943 -------- ------- NET ASSETS: Beginning of period ......................................................... 20,943 - -------- ------- END OF PERIOD* .............................................................. $ 26,621 $20,943 ======== ======= *Includes undistributed net investment income of ............................ $ 646 $ - ======== =======
- -------------- (A) American Beacon Treasury Inflation Protected Securities Fund commenced active operations on June 30, 2004. See accompanying notes - -------------------------------------------------------------------------------- 9 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS June 30, 2005 (Unaudited) ================================================================================ 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust"), formerly known as the American AAdvantage Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as a no load, open-end management investment company. The American Beacon Treasury Inflation Protected Securities Fund (the "Fund") is a series of the Trust and commenced active operations on June 30, 2004. American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary of AMR Corporation, the parent company of American Airlines, Inc. ("American"), and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. The following is a summary of the significant accounting policies followed by the Fund. Security Valuation Net asset value per share is calculated as of the close of business on the New York Stock Exchange, normally 4:00 p.m. Eastern Time. Debt securities (other than short-term securities) normally are valued on the basis of prices provided by a 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. In some cases, 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. Securities for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are valued at fair value, as determined in good faith and pursuant to procedures approved by the Trust's Board of Trustees (the "Board"). Security Transactions and Investment Income Security transactions are recorded on the trade date of the security purchase or sale. Dividend income is recorded on the ex-dividend date. Interest income is earned from settlement date, recorded on an 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. Dividends to Shareholders The Fund generally declares dividends from net investment income daily, payable quarterly. Distributions, if any, of net realized capital gains are generally paid annually and recorded on the ex-dividend date. - -------------------------------------------------------------------------------- 10 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2005 (Unaudited) ================================================================================ 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 into U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and is reported with all other foreign currency gains and losses in the Fund's Statement of Operations. Forward Foreign Currency Exchange Contracts The Fund may enter into forward foreign currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of Fund securities denominated in foreign currencies. Forward foreign currency contracts are valued at the forward exchange rate prevailing on the day of valuation. The Fund bears the market risk that arises from changes in foreign exchange rates, and accordingly, the unrealized gain (loss) on these contracts is reflected in the accompanying financial statements. The Fund also bears the credit risk if the counterparty fails to perform under the contract. 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. 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, fund management and securities lending services. Investment assets of the Fund are managed by multiple investment advisors that have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Fund an annualized fee equal to 0.10% of the Fund's average daily net assets plus amounts paid by the Manager to the investment advisors of the Fund. During the period ended June 30, 2005, the management fee range, including fees paid to investment advisors, was from 0.15% to 0.25%, depending upon assets under management. Total management fees were $26,818, of which $13,489 was paid to investment advisors and $13,329 was retained by the Manager. - -------------------------------------------------------------------------------- 11 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2005 (Unaudited) ================================================================================ Administrative Services Agreement 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 Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.10% of the average daily net assets of the Fund. Investment in Affiliated Fund The Fund may invest in the American Beacon Money Market Select Fund (the "Select Fund"). The Manager serves as investment advisor to the Select Fund and receives from the Select Fund an annualized fee equal to 0.10% of the Select Fund's average daily net assets. During the period, fees earned by the Manager from the Fund's investment in the Select Fund were $529. Other Certain officers or Trustees of the Trust are also current or former officers or employees of the Manager or American. The Trust makes no direct payments to its officers. Mr. Feld and the non-interested Trustees (other than Mr. O'Sullivan) and their spouses are provided unlimited air transportation on American. Retired Trustees and their spouses are provided free transportation on American, up to a maximum annual value of $40,000. The Trust compensates each Trustee with payments in an amount equal to the Trustee's income tax on the value of this free airline travel. Mr. O'Sullivan, as a retiree of American, already receives flight benefits. Mr. O'Sullivan receives an annual retainer of $40,000 plus $1,250 for each Board meeting attended. Reimbursement of Expenses The Manager voluntarily reimbursed a portion of its fees received from the Fund during the period ended June 30, 2005 to the extent that total Fund operating expenses exceeded 0.46%. The Manager reimbursed expenses totaling $4,096 during the period. 3. FEDERAL INCOME AND EXCISE TAXES It is the policy of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income tax provision is required. Dividends are determined in accordance with federal income tax regulations that 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 during the six months ended June 30, 2005 and the fiscal year ended December 31, 2004 were as follows (in thousands):
SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, 2005 2004 ------------- ------------ Distributions paid from: Ordinary income* ........................... $56 $406
* For tax purposes, short-term capital gains distributions are considered ordinary income distributions. - -------------------------------------------------------------------------------- 12 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2005 (Unaudited) ================================================================================ For the six months ended June 30, 2005, the components of distributable earnings were as follows (in thousands): Cost basis of investments for federal income tax purposes ........ $27,182 Unrealized appreciation .......................................... 95 Unrealized depreciation .......................................... (176) ------- Net unrealized appreciation (depreciation) ....................... (81) Undistributed ordinary income .................................... 550 ------- Distributable earnings ........................................... $ 469 =======
4. INVESTMENT TRANSACTIONS Purchases and redemptions of investments for the period ended June 30, 2005, excluding short-term investments, were $59,674,640 and $53,095,001, respectively. The Fund had purchases and sales of U.S. government securities of $58,236,755 and $51,812,428, respectively. A summary of the Fund's direct transactions in the Select Fund for the six months ended June 30, 2005 is as follows:
DECEMBER 31, 2004 JUNE 30, 2005 SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE - ------------------- ----------- ----------- ------------------- $754,424 $26,876,375 $27,303,284 $327,514
5. CAPITAL SHARE TRANSACTIONS The table below summarizes the activity in capital shares (in thousands): Period ended June 30, 2005 - -------------------------
SHARES AMOUNT -------- -------- Shares sold ...................................... 2,951 $ 30,040 Reinvestment of dividends ........................ 6 56 Shares redeemed .................................. (2,433) (24,795) ------ -------- Net increase in shares outstanding ............... 524 $ 5,301 ====== ========
Period ended December 31, 2004 - ------------------------------
SHARES AMOUNT -------- -------- Shares sold ...................................... 2,858 $28,766 Reinvestment of dividends ........................ 40 405 Shares redeemed .................................. (836) (8,459) ----- ------- Net increase in shares outstanding ............... 2,062 $20,712 ===== =======
- -------------------------------------------------------------------------------- 13 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) ================================================================================
SIX MONTHS SIX MONTHS ENDED ENDED JUNE 30, DECEMBER 31, 2005 2004(A) ---------- ------------ (UNAUDITED) Net asset value, beginning of period .......................................... $ 10.16 $ 10.00 ------- ------- Income from investment operations: Net investment income .................................................... 0.26 0.18(B) Net gains (loss) on securities (both realized and unrealized) ............ (0.09) 0.21 ------- ------- Total income from investment operations ....................................... 0.17 0.39 ------- ------- Less distributions: Dividends from net investment income ..................................... (0.03) (0.23) Distributions from net realized gains on securities ...................... - - ------- ------- Total distributions ........................................................... (0.03) (0.23) ------- ------- Net asset value, end of period ................................................ $ 10.30 $ 10.16 ======= ======= Total return .................................................................. 1.64%(C) 3.94%(C) ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands) ................................. $26,621 $20,943 Ratios to average net assets (annualized): Expenses .............................................................. 0.37% 0.46% Net investment income ................................................. 4.87% 3.34% Decrease reflected in above expense ratio due to absorption of expenses by the Manager ............................................ 0.03% 0.16% Portfolio turnover rate .................................................. 210%(C) 190%(C)
- -------------- (A) The American Beacon Treasury Inflation Protected Securities Fund commenced active operations on June 30, 2004. (B) Based on average shares outstanding. (C) Not annualized. - -------------------------------------------------------------------------------- 14 RENEWAL OF MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS (Unaudited) ================================================================================ At their February 23, 2005 meeting, the Trustees considered the renewal of the existing Management Agreement between the Manager and the Fund and each Investment Advisory Agreement between the Fund and the sub-advisors. As part of the renewal process, legal counsel to the Trust and the independent Trustees sent information request letters to the Manager and each sub-advisor seeking certain relevant information. The responses by the Manager and sub-advisors were provided to the Trustees for their review prior to their meeting, and the Trustees were provided with the opportunity to request any additional materials. The Trustees considered, among other materials, responses by the Manager and the sub-advisors to inquiries requesting: o a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Fund, or any other area, including how these changes might affect the Fund; o a copy of the firm's most recent audited or unaudited financial statements as well as Parts I and II of its Form ADV; o a summary of any material past, pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit; o a comparison of the performance of that portion of Fund assets managed by each firm with performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any remedial measures if the firm's performance was materially below that of the peer group; o a cost/profitability analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to the Fund, if available; o an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; o an evaluation of any other benefits to the firm or Fund as a result of their relationship, if any; o a description of the scope of portfolio management services provided to the Fund, including whether such services differ from the services provided to other clients, including other registered investment companies; o a description of the personnel who are assigned primary responsibility for managing the Fund, including any changes during the past year; o a description of the basis upon which portfolio managers are compensated, including any "incentive" arrangements; o a discussion regarding the firm's participation in "soft dollar" arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the firm's methodology for obtaining the most favorable execution and the use of any affiliated broker-dealers; - -------------------------------------------------------------------------------- 15 RENEWAL OF MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS (Unaudited) - (Continued) ================================================================================ o a description of any actual or potential conflicts of interest anticipated in managing Fund assets; o a discussion of the firm's compliance program with regard to federal, state, corporate and Fund requirements; o information regarding the firm's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto; o a description of the firm's affiliation with any broker-dealer; o a discussion of any anticipated change in the firm's controlling persons; and o verification of the firm's insurance coverage with regards to the services provided to the Fund. In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement: o a table comparing the performance of the Fund to appropriate indices, including comments on the relative performance of each sub-advisor and the Fund versus comparable indices; o a discussion of any underperformance by a sub-advisor relative to its peer group and whether (and if so, why) such sub-advisor should have its contract renewed; o a table detailing the Manager's profitability with respect to the Fund; o an analysis of any material complaints received from Fund shareholders; o a discussion of the Manager's compliance program; o a description of the Manager's securities lending practices and the fees received from such practices; o a description of the portfolio turnover rate and average execution costs for the Fund and each sub-advisor to the Fund; o a discussion of whether the Manager receives, with respect to trade execution for the Fund, other special compensation, including any payment for order flow; o a description of how expenses that are not readily identifiable to the Fund are allocated; and o any ideas for the future growth and efficient operation of the Fund. The Trustees were also provided with an analysis provided by Lipper, Inc., which compared: (i) investment performance of the Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of the Fund versus comparable mutual funds, and (iii) the Fund's investment advisory fees versus comparable mutual funds. Legal counsel provided the Trustees with a memorandum detailing their responsibilities pertaining to the renewal of the Management and Investment Advisory Agreements. This memorandum explained the regulatory requirements surrounding the Trustees' process for evaluating investment advisors and the terms of the contracts. - -------------------------------------------------------------------------------- 16 RENEWAL OF MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS (Unaudited) - (Continued) ================================================================================ CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE FUND - -------------------------------------------------------------------------------- In determining whether to approve the continuance of the Management Agreement and each Investment Advisory Agreement, the Trustees considered the best interests of the Fund separately from other series of the Trust. In each instance, the Trustees considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of the series and the investment advisor; (3) the Manager's or sub-advisor's cost for providing the services and the profitability of the advisory business to the Manager or sub-advisor; (4) the extent to which economies of scale have been taken into account in setting the fee schedule; and (5) whether fee levels reflect these economies of scale for the benefit of Trust investors. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the material submitted in support of the renewal. With respect to the renewal of the Management Agreement, the Trustees considered: the Manager's ability to retain key investment personnel and to provide consistent performance and an active client service program; the Manager's goal to continue to provide consistent above average long-term performance at low cost; the continuing efforts by the Manager to add new series of the Trust so as to enhance the Trust's product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Trust; the addition of personnel to manage the series of the Trust, promote sales and improve services; and the active role played by the Manager in monitoring and, as appropriate, recommending replacements for the investment sub-advisors. In considering the renewal of the Management Agreement, the Trustees considered the following additional factors: (1) the Manager provides high-quality services at a low cost to investors, allocates the Fund's assets among sub-advisors, monitors and evaluates the performance of the Fund's two sub-advisors, and provides a comprehensive compliance program for the Fund; (2) the Treasury Inflation Protected Securities Fund underperformed its benchmark index and peer group for the six-month period ended December 31, 2004, primarily due to cash flow issues during the Fund's initial month of operation; (3) the expense ratio of the Institutional Class of Fund shares was lower than the industry average; (4) the Manager has contractually agreed to continue to waive fees and/or reimburse Fund expenses to the extent necessary to maintain a competitive total expense ratio for the Institutional Class of shares of the Fund; and (5) the Manager incurred a loss on the services it provided to the Fund. With respect to the renewal of the Investment Advisory Agreements, the Trustees noted that the Manager had negotiated the lowest sub-advisory fee the sub-advisors charge for any comparable client accounts. Where applicable, for purposes of determining the fee charged to the Fund, the fee schedule to each Investment Advisory Agreement specifies that all other assets managed by the sub-advisors on behalf of AMR Corporation and its subsidiaries and affiliated entities shall be considered. Thus, the Fund is able to receive the lowest possible fee due to economies of scale resulting from the sub-advisors' management of a larger pool of assets. In considering the renewal of the Investment Advisory Agreements with Brown Brothers Harriman & Co. and NISA Investment Advisors LLC, the Trustees considered the following additional factors: (1) although each sub-advisor underperformed its benchmark index for the six-month period with respect to its allocated portion of the Fund's assets, the performance records are too short to be meaningful, and (2) the Manager's recommendation to continue to retain each sub-advisor. - -------------------------------------------------------------------------------- 17 RENEWAL OF MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS (Unaudited) - (Continued) ================================================================================ Based on these considerations, the Trustees (1) concluded that the fees paid to the Manager and the sub-advisors under the Management and Investment Advisory Agreements are fair and reasonable, (2) determined that the Treasury Inflation Protected Securities Fund and its shareholders would benefit from the Manager's and sub-advisors' continued management of the Fund, and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the Treasury Inflation Protected Securities Fund. - -------------------------------------------------------------------------------- 18 (This page intentionally left blank) (This page intentionally left blank) [LOGO OF AMERICAN BEACON] AMERICAN BEACON FUNDS(SM) ================================================================================ 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 Funds through a financial institution, you may be able to receive the Funds' 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 institutions name or contact your financial institution directly. TO OBTAIN MORE INFORMATION ABOUT THE FUNDS: [LOGO OF E-MAIL] [LOGO OF INTERNET] BY E-MAIL: ON THE INTERNET: American_Beacon.Funds@ambeacon.com Visit our website at www.americanbeaconfunds.com - ---------------------------------------------------------------------------------------------- [LOGO OF TELEPHONE] [LOGO OF MAIL] BY TELEPHONE: BY MAIL: Call (800) 658-5811 American Beacon Funds P.O. Box 219643 Kansas City, MO 64121-9643
- -------------------------------------------------------------------------------- AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES In addition to the Schedule of Investments provided in each semiannual 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 Funds' 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 each Fund's portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each 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 Funds' Forms N-PX are available on the SEC's website at www.sec.gov. Each 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 SERVICES PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP Portland, Maine Chicago, Illinois
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus. ================================================================================ American Airlines, Inc. is not responsible for investments made in the American Beacon Funds. American Beacon Funds is a service mark of AMR Corporation. American Beacon Treasury Inflation Protected Securities Fund is a service mark of American Beacon Advisors, Inc. [LOGO OF AMERICAN BEACON] AMERICAN BEACON FUNDS(SM) 4151 Amon Carter Blvd. MD 2450 Fort Worth, TX 76155 1.800.658.5811 www.americanbeaconfunds.com ================================================================================ G U I D A N C E | V I S I O N | E X P E R I E N C E [LOGO OF AMERICAN BEACON FUNDS] AMERICAN BEACON FUNDS(SM) SEMI-ANNUAL REPORT [GRAPHIC OF AMERICAN BEACON FUNDS] June 30, 2005 MONEY MARKET FUND U.S. GOVERNMENT MONEY MARKET FUND MUNICIPAL MONEY MARKET FUND Formerly known as the American AAdvantage Funds ================================================================================ 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 ................................. 22 U.S. Government Money Market Fund ................................. 24 Municipal Money Market Fund ................................. 26 Schedule of Investments Money Market Portfolio ............................ 28 U.S. Government Money Market Portfolio ............................ 30 Municipal Money Market Portfolio ............................ 31 Additional Information ................ Inside Back Cover
- -------------------------------------------------------------------------------- Any opinions herein, including forecasts, reflect our judgement as of the end of the reporting period and are subject to change. Each advisor's strategies and each Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. - -------------------------------------------------------------------------------- American Beacon Funds June 30, 2005 [GRAPHIC OF AMERICAN BEACON ADVISORS] FELLOW SHAREHOLDERS: Enclosed please find the Semi-Annual Report for the American Beacon Funds for the six months ended June 30, 2005. During this time, the money market series of the American Beacon Funds performed well against their respective peer groups. The year started with a short-term interest rate of 2.25%; however, the Federal Reserve Board subsequently raised the rate four times with increases of 25 basis points each time to end the six-month period at 3.25%. These widely expected moves were a continuation of the Fed's stated process of removing monetary policy accommodation at a "measured" pace. The Federal Open Market Committee ("FOMC") has now boosted the target rate a quarter percentage point at each of their last nine meetings. The FOMC stated that, even after these actions, "the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. Although energy prices have risen further, the expansion remains firm and labor market conditions continue to improve gradually. Pressures on inflation have stayed elevated, but longer-term inflation expectations remain well contained." The Cash Management Class of the American Beacon Funds produced strong relative returns for the period. The Money Market Fund-Cash Management Class returned 1.32% for the six months, outperforming the Lipper Institutional Money Market Average return of 1.14%. The U.S. Government Money Market - Cash Management Class outpaced the Lipper Institutional U.S. Government Money Market Average with a return of 1.28% versus 1.14% for the Average. Despite rising rates, both Funds surpassed their respective Lipper peer groups over all time periods. Looking forward, expectations are that the FOMC will vote to hike the overnight federal funds rate another 25 basis points at their upcoming meetings in August and September. During this rising rate environment, we will monitor the duration and quality of the money market portfolios as we evaluate economic growth, inflation, and the direction of interest rates. Please review the enclosed portfolio listings and detailed financial data. As always, we welcome the opportunity to serve your financial needs. Should you have any questions about the enclosed information, please do not hesitate to contact us at 800-967-9009. You may also access Fund and account information 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 ECONOMIC OVERVIEW (Unaudited) ================================================================================ Much like 2004, the financial markets have been keenly focused on the "Non-Farm Payroll" numbers in 2005. With employment demonstrating solid growth and concerns about inflation building, the Federal Reserve has raised overnight borrowing rates at nine consecutive Federal Open Market Committee (FOMC) meetings since June 2004. Over the past six months, the economy has shown significant growth across all sectors, particularly in housing, given single-family housing starts averaged more than 1.65 million units annually. With the economy expanding at a moderate pace, housing activity at high levels and business investment and manufacturing stronger, the Federal Reserve is predicted to continue raising the Fed Funds rate to at least 4.00% (according to economists' forecasts and the Fed Funds futures contracts) by December 2005. The yield curve flattened throughout the first six months of 2005, which led Federal Reserve Chairman Greenspan to label the flattening and potential inversion a "conundrum." Credit spreads remained at or near historically tight levels with little evidence of widening. Steady growth in the labor market and significant price increases in oil have changed the focus of the FOMC toward inflation. Higher employment typically puts pressure on labor costs that lead to higher prices for consumers. Core prices rose rapidly in the first half of the year, elevated by the indirect effects of higher energy prices on business costs and increases in non-oil import prices that reflect past dollar depreciation and the surge in global prices for primary commodities. The FOMC has consistently reiterated its stance that the tightening cycle would occur at a "measured" pace, and policymakers signaled that they will respond to changes in economic conditions in order to maintain their goal of price stability. 2 PERFORMANCE OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) (Unaudited) ================================================================================ The U.S. economy continued to grow at a solid pace as Gross Domestic Product (GDP) for the first quarter of 2005 was revised upward to 3.8%. Although nonfarm payroll growth came in below consensus expectations, the unemployment rate dropped to 5.0% in June, its lowest point since September 2001. Crude oil prices remained elevated, approaching $60 per barrel, leading to concerns of reduced consumer spending and lower corporate profit margins. Still, GDP growth remains steady as estimates for the full year 2005 are in the 3.5-4% range. The American Beacon Money Market Fund continued to maintain the strategy of purchasing 3-month LIBOR-based variable rate securities in addition to short-dated commercial paper in this rising interest rate environment. The FOMC raised overnight rates by 25 basis points at both the May and June meetings, resulting in a Fed Funds target rate of 3.25%. The FOMC maintained its "measured" policy adjustment posture at the June meeting, ending speculation that they were done raising rates. "Although energy prices have risen further, the expansion remains firm and labor market conditions continue to improve gradually," the FOMC said in its statement accompanying the decision. Although the Fed characterized inflation pressures as "elevated," the headline Personal Consumption Expenditure deflator was a benign 2.2% at its May reading and the Consumer Price Index (CPI) was unchanged in June. Currently, with the Eurodollar futures market pricing in a Fed Funds rate of 4.00% by the end of the year, the Money Market Fund will maintain its weighted-average maturity relatively short. However, the Fund's investment advisor will continue to monitor economic trends and adjust the Fund's duration posture accordingly. For the six months ended June 30, 2005, the total return of the Cash Management Class of the American Beacon Money Market Fund was 1.32%. The Fund outperformed the Lipper Institutional Money Market Average return of 1.14% by 18 basis points. Lipper Inc. ranked the Cash Management Class of the Fund 11th among 291 and 20th among 259 Institutional Money Market Funds for the one-year and three-years ended June 30, 2005, respectively(1). The Lipper Institutional Money Market Average is calculated by taking an arithmetic average of the returns of the mutual funds in the Lipper Institutional Money Market Funds category. Lipper is an independent mutual fund research and ranking service that ranks mutual funds in various categories by making comparative calculations using total returns. CASH MANAGEMENT CLASS TOTAL RETURNS AS OF JUNE 30, 2005 [CHART OF CASH MANAGEMENT CLASS TOTAL RETURNS]
AMERICAN BEACON LIPPER INSTITUTIONAL MONEY MARKET FUND MONEY MARKET FUND AVERAGE - ------------------------------------------------------------------------ 1 Year 2.14% 1.79% 3 Years* 1.50% 1.21% 5 Years* 2.58% 2.33% 10 Years* 4.07% 3.86% - ------------------------------------------------------------------------
*Annualized [END CHART]
ANNUALIZED TOTAL RETURNS =================================== AS OF 6/30/05 ----------------------------------- 1 YEAR 5 YEARS 10 YEARS ------ ------- --------- Cash Management Class (1,3) ......... 2.14% 2.58% 4.07% Institutional Class (1) ............. 2.02% 2.51% 4.04% PlanAhead Class (1) ................. 1.78% 2.23% 3.73% Platinum Class (1,2) ................ 1.29% 1.79% 3.33%
1 Past performance is not indicative of future performance. An investment in the American Beacon Money Market 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 this Fund. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 Fund performance for the ten-year period represents the total returns achieved by the Institutional Class from 7/1/95 up to 11/8/95, the inception date of the Platinum Class, and the returns of the Platinum Class since inception of the Class. Expenses of the Platinum Class are higher than those of the Institutional Class. Therefore, total returns shown are higher than they would have been had the Platinum Class been in place since 7/1/95. 3 Fund performance for the five and ten-year periods represents the total returns achieved by the Institutional Class from 7/1/95 up to 12/1/01, the inception date of the Cash Management Class and the returns of the Cash Management Class since its inception. Expenses of the Cash Management Class are lower than those of the Institutional Class. Therefore, total returns shown are lower than they would have been had the Cash Management Class been in place since 7/1/95. 3 PERFORMANCE OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) -- CONTINUED (Unaudited) ================================================================================ PORTFOLIO STATISTICS AS OF JUNE 30, 2005
CASH MANAGEMENT INSTITUTIONAL PLANAHEAD PLATINUM CLASS CLASS CLASS CLASS ---------- ------------- --------- --------- 7-day Current Yield* 3.10% 2.98% 2.75% 2.26% 7-day Effective Yield* 3.15% 3.02% 2.79% 2.28% 30-day Yield* 3.02% 2.90% 2.67% 2.18% Weighted Average Maturity 33 Days 33 Days 33 Days 33 Days Moody's Rating Aaa N/A N/A N/A S&P Rating AAAm N/A N/A N/A
* Annualized. You may call 1-800-388-3344 to obtain the Funds' current seven day yield. Yield is a more accurate reflection of the Funds' current earnings than total returns. TOP TEN HOLDINGS AS OF JUNE 30, 2005
% OF NET ASSETS* ----------- Wells Fargo and Company 5.3% General Electric Capital Corporation 4.4% Goldman Sachs Group 4.2% Toyota Motor Credit Corporation 4.1% Morgan Stanley Group, Incorporated 3.9% Credit Suisse First Boston Corporation 3.9% Fifth Third Bank 3.8% Unicredito Italiano 3.7% SunTrust Bank 2.9% Household Finance Corporation 2.9%
* Percent of net assets portion of American Beacon Master Money Market Portfolio. ASSET ALLOCATION AS OF JUNE 30, 2005
% OF NET ASSETS* ----------- Bank CDs, TDs, and Notes 42.2% Corporate Notes 37.9% Repurchase Agreements 16.8% Funding Agreements 2.1% Commercial Paper 0.7% Net Other Assets 0.3%
* Percent of net assets portion of American Beacon Master 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 in each Class and held for the entire period from January 1, 2005 through June 30, 2005. ACTUAL EXPENSES The "Actual" lines of the table provide 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 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 4 PERFORMANCE OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) -- CONTINUED (Unaudited) ================================================================================ subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 1/1/05 6/30/05 1/1/05-6/30/05 --------- ------- --------------- CASH MANAGEMENT CLASS Actual $1,000.00 $1,013.20 $0.75 Hypothetical (5% return before expenses) $1,000.00 $1,024.05 $0.75 INSTITUTIONAL CLASS Actual $1,000.00 $1,012.61 $1.32 Hypothetical (5% return before expenses) $1,000.00 $1,023.48 $1.33 PLANAHEAD CLASS Actual $1,000.00 $1,011.46 $2.48 Hypothetical (5% return before expenses) $1,000.00 $1,022.33 $2.50 PLATINUM CLASS Actual $1,000.00 $1,009.00 $4.93 Hypothetical (5% return before expenses) $1,000.00 $1,019.89 $4.95
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.15%, 0.27%, 0.50%, and 0.99% for the Cash Management, Institutional, PlanAhead, and Platinum Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period. 5 PERFORMANCE OVERVIEW AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM) (Unaudited) ================================================================================ The U.S. economy continued to grow at a solid pace as GDP for the first quarter of 2005 was revised upward to 3.8%. Although nonfarm payroll growth came in below consensus expectations, the unemployment rate dropped to 5.0% in June, its lowest point since September 2001. Crude oil prices remained elevated, approaching $60 per barrel, leading to concerns of reduced consumer spending and lower corporate profit margins. Still, GDP growth remains steady as estimates for the full year 2005 are in the 3.5-4% range. The American Beacon U.S. Government Money Market Fund continued to maintain the strategy of purchasing 3-month LIBOR-based variable rate agencies in addition to short-dated agency discount notes and coupons in this rising interest rate environment. The FOMC raised over-night rates by 25 basis points at both the May and June meetings, resulting in a Fed Funds target rate of 3.25%. The FOMC maintained its "measured" policy adjustment posture at the June meeting, ending speculation that they were done raising rates. "Although energy prices have risen further, the expansion remains firm and labor market conditions continue to improve gradually," the FOMC said in its statement accompanying the decision. Although the Fed characterized inflation pressures as "elevated," the headline Personal Consumption Expenditure deflator was a benign 2.2% at its May reading and the Consumer Price Index (CPI) was unchanged in June. Currently, with the Eurodollar futures market pricing in a Fed Funds rate of 4.00% by the end of the year, the U.S. Government Money Market Fund will maintain its weighted-average maturity relatively short. However, the Fund's investment advisor will continue to monitor economic trends and adjust the Fund's duration posture accordingly. For the six months ended June 30, 2005, the total return of the Cash Management Class of the American Beacon U.S. Government Money Market Fund was 1.28%. The Fund outperformed the Lipper Institutional U.S. Government Money Market Average return of 1.14% by 14 basis points. Lipper Inc. ranked the Cash Management Class of the Fund 8th among 136, 11th among 105, and 12th among 60 Institutional U.S. Government Money Market Funds for the one-year, five-years and ten-years ended June 30, 2005, respectively(1). The Lipper Institutional U.S. Government Money Market Average is calculated by taking an arithmetic average of the returns of the mutual funds in the Lipper Institutional U.S. Government Money Market Funds category. Lipper is an independent mutual fund research and ranking service that ranks mutual funds in various categories by making comparative calculations using total returns. CASH MANAGEMENT CLASS TOTAL RETURNS AS OF JUNE 30, 2005 [CHART OF CASH MANAGEMENT CLASS TOTAL RETURNS]
AMERICAN BEACON LIPPER INSTITUTIONAL U.S. GOVERNMENT MONEY U.S. GOVERNMENT MONEY MARKET FUND MARKET FUND AVERAGE 1 Year 2.06% 1.79% 3 Years* 1.44% 1.20% 5 Years* 2.51% 2.27% 10 Years* 3.94% 3.77%
*Annualized [END CHART]
ANNUALIZED TOTAL RETURNS ================================== AS OF 6/30/05 ---------------------------------- 1 YEAR 5 YEARS 10 YEARS ------ ------- --------- Cash Management Class (1,3) ......... 2.06% 2.51% 3.94% PlanAhead Class (1) ................. 1.68% 2.14% 3.58% Platinum Class (1,2) ................ 1.25% 1.74% 3.19%
1 Past performance is not indicative of future performance. An investment in the American Beacon U.S. Government Money Market 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 this 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 Cash Management Class from 7/1/95 up to 11/8/95, the inception date of the Platinum Class, and the returns of the Platinum Class since inception of the Class. Expenses of the Platinum Class are higher than those of the Cash Management Class. Therefore, total returns shown are higher than they would have been had the Platinum Class been in existence since 7/1/95. 3 Prior to December 1, 2001, the Cash Management Class of the Fund was known as the Institutional Class. 6 PERFORMANCE OVERVIEW AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM) -- CONTINUED (Unaudited) ================================================================================ PORTFOLIO STATISTICS AS OF JUNE 30, 2005
CASH MANAGEMENT PLANAHEAD PLATINUM CLASS CLASS CLASS ---------- --------- --------- 7-day Current Yield* 3.01% 2.62% 2.21% 7-day Effective Yield* 3.05% 2.66% 2.23% 30-day Yield* 2.91% 2.53% 2.11% Weighted Average Maturity 16 Days 16 Days 16 Days Moody's Rating Aaa N/A N/A S&P Rating AAAm N/A N/A
* Annualized. You may call 1-800-388-3344 to obtain the Funds' current seven day yield. Yield is a more accurate reflection of the Funds' current earnings than total returns. ASSET ALLOCATION AS OF JUNE 30, 2005
% OF NET ASSETS* ----------- Government Securities 51.4% Repurchase Agreements 48.4% Net Other Assets 0.2%
* Percent of net assets portion of 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 in each Class and held for the entire period from January 1, 2005 through June 30, 2005. ACTUAL EXPENSES The "Actual" lines of the table provide 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 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. 7 PERFORMANCE OVERVIEW AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM) -- CONTINUED (Unaudited) ================================================================================
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 1/1/05 6/30/05 1/1/05-6/30/05 --------- ------- --------------- CASH MANAGEMENT CLASS Actual $1,000.00 $1,012.81 $0.95 Hypothetical (5% return before expenses) $1,000.00 $1,023.85 $0.95 PLANAHEAD CLASS Actual $1,000.00 $1,010.94 $2.78 Hypothetical (5% return before expenses) $1,000.00 $1,022.03 $2.79 PLATINUM CLASS Actual $1,000.00 $1,008.81 $4.93 Hypothetical (5% return before expenses) $1,000.00 $1,019.89 $4.96
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.19%, 0.56%, and 0.99% for the Cash Management, PlanAhead, and Platinum Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period. 8 PERFORMANCE OVERVIEW AMERICAN BEACON MUNICIPAL MONEY MARKET FUND(SM) (Unaudited) ================================================================================ The American Beacon Municipal Money Market Fund maintained a relatively short average maturity in the first half of 2005. The variable rate demand note (VRDN) market provided the most attractive investment option throughout the period. Rates on these securities remained appealing, as short-term interest rates were increased at nine consecutive FOMC meetings since June 2004. In the current interest rate environment, the Fund will continue to focus on attractively priced VRDNs backed by letters of credit or bond insurance in anticipation of further "measured" rate hikes by the Federal Reserve. For the six months ended June 30, 2005, the total return of the PlanAhead Class of the American Beacon Municipal Money Market Fund was 0.65% as compared to the Lipper Tax-Exempt Money Market Average return of 0.73%. The Lipper Tax-Exempt Money Market Average is calculated by taking an arithmetic average of the returns of the mutual funds in the Lipper Tax-Exempt Money Market Funds category. Lipper is an independent mutual fund research and ranking service that ranks mutual funds in various categories by making comparative calculations using total returns. PLANAHEAD CLASS TOTAL RETURNS AS OF JUNE 30, 2005 [CHART OF PLANAHEAD CLASS TOTAL RETURNS]
AMERICAN BEACON LIPPER TAX-EXEMPT MUNICIPAL MONEY MARKET FUND MONEY MARKET FUND AVERAGE 1 Year 0.89% 1.11% 3 Years* 0.58% 0.72% 5 Years* 1.27% 1.33$ 10 Years* 2.20% 2.19%
*Annualized [END CHART]
ANNUALIZED TOTAL RETURNS ======================== AS OF 6/30/05 ------------------------ 1 YEAR 5 YEARS 10 YEARS ------ ------- -------- PlanAhead Class (1) ................ 0.89% 1.27% 2.20% Platinum Class (1,2) ............... 0.89% 1.03% 1.90%
1 Past performance is not indicative of future performance. An investment in the American Beacon Municipal Money Market 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 this 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, a former Class of the Fund, from 7/1/95 up to 11/8/95, the inception date of the Platinum Class, and the returns of the Platinum Class since inception of the Class. Expenses of the Platinum Class are higher than those of the Institutional Class. Therefore, total returns shown are higher than they would have been had the Platinum Class been in place since 7/1/95. PORTFOLIO STATISTICS AS OF JUNE 30, 2005
PLANAHEAD PLATINUM CLASS CLASS --------- -------- 7-day Current Yield* 1.52% 1.52% 7-day Effective Yield* 1.53% 1.53% 30 day Yield* 1.43% 1.43% Weighted Average Maturity 5 Days 5 Days
* Annualized. You may call 1-800-388-3344 to obtain the Funds' current seven day yield. Yield is a more accurate reflection of the Funds' current earnings than total returns. TOP TEN HOLDINGS AS OF JUNE 30, 2005
% OF NET ASSETS* ----------- Moffat County, Colorado Pollution Control 10.5% County of Breckinridge, Kentucky Association of Counties Leasing Trust 7.6% Orange County Health Facilities Authority 6.3% Alachua County, Florida Housing Financial Authority 5.8% Village of Richton Park, Illinois-Industrial Development Revenue Bonds 5.7% Michigan State Housing Development Authority 5.6% Ohio Water Development Authority 5.4% Montgomery County, Maryland Variable Rate Housing Revenue Bonds 5.3% Mansfield Texas Industrial Development Corporation 5.1% New York State Housing Finance Agency 5.1%
* Percent of net assets portion of American Beacon Master Municipal Money Market Portfolio. 9 PERFORMANCE OVERVIEW AMERICAN BEACON MUNICIPAL MONEY MARKET FUND(SM) -- CONTINUED (Unaudited) ================================================================================ ASSET ALLOCATION AS OF JUNE 30, 2005
% OF NET ASSETS* ----------- Municipal Obligations 96.2% Other Investments 3.5% Net Other Assets 0.3%
* Percent of net assets portion of American Beacon Master Municipal 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 in each Class and held for the entire period from January 1, 2005 through June 30, 2005. ACTUAL EXPENSES The "Actual" lines of the table provide 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 PlanAhead Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 1/1/05 6/30/05 1/1/05-6/30/05 --------- ------- -------------- PLANAHEAD CLASS Actual $1,000.00 $1,006.46 $4.83 Hypothetical (5% return before expenses) $1,000.00 $1,019.98 $4.86 PLATINUM CLASS Actual $1,000.00 $1,006.38 $4.92 Hypothetical (5% return before expenses) $1,000.00 $1,019.89 $4.96
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.97% and 0.99% for the PlanAhead and Platinum Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period. 10 AMERICAN BEACON FUNDS STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2005 (Unaudited) ================================================================================
U.S. GOVERNMENT MUNICIPAL MONEY MARKET MONEY MARKET MONEY MARKET ============ =============== ============ (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ASSETS: Investment in Portfolio, at value ............... $ 837,832 $ 30,525 $ 4,839 Receivable for fund shares sold ................. 22 - - Receivable from Manager for expense reimbursement (Note 2) ....................... 22 4 2 Prepaid expenses ................................ 95 27 15 ------------ ----------- ---------- TOTAL ASSETS ............................... 837,971 30,556 4,856 ------------ ----------- ---------- LIABILITIES: Payable for fund shares redeemed ................ 15 - - Dividends payable ............................... 179 56 - Administrative service and service fees payable (Note 2) ...................................... 120 4 3 Distribution fees payable (Note 2) .............. 10 - 1 Other liabilities ............................... 36 16 4 ------------ ----------- ---------- TOTAL LIABILITIES .......................... 360 76 8 ------------ ----------- ---------- NET ASSETS .......................................... $ 837,611 $ 30,480 $ 4,848 ============ =========== ========== ANALYSIS OF NET ASSETS: Paid-in-capital ................................. 837,611 30,480 4,848 ------------ ----------- ---------- NET ASSETS .......................................... $ 837,611 $ 30,480 $ 4,848 ============ =========== ========== Shares outstanding (no par value): Cash Management Class ........................... 478,641,479 21,545,481 N/A ============ =========== ========== Institutional Class ............................. 38,747,246 N/A N/A ============ =========== ========== PlanAhead Class ................................. 278,308,064 2,913,860 1,502,367 ============ =========== ========== Platinum Class .................................. 41,914,548 6,020,703 3,346,063 ============ =========== ========== Net asset value per share, offering and redemption price per share: Cash Management Class ........................... $ 1.00 $ 1.00 N/A ============ =========== ========== Institutional Class ............................. $ 1.00 N/A N/A ============ =========== ========== PlanAhead Class ................................. $ 1.00 $ 1.00 $ 1.00 ============ =========== ========== Platinum Class .................................. $ 1.00 $ 1.00 $ 1.00 ============ =========== ==========
See accompanying notes - -------------------------------------------------------------------------------- 11 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS Six Months Ended June 30, 2005 (Unaudited) ================================================================================
U.S. GOVERNMENT MUNICIPAL MONEY MARKET MONEY MARKET MONEY MARKET ============ =============== ============ (IN THOUSANDS) INVESTMENT INCOME ALLOCATED FROM PORTFOLIO: Interest income ......................................... $10,115 $478 $90 Portfolio expenses ...................................... (401) (20) (4) ------- ---- --- NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ..... 9,714 458 86 ------- ---- --- FUND EXPENSES: Administrative service fees (Note 2): Cash Management Class ................................. 138 8 - Institutional Class ................................... 24 - - PlanAhead Class ....................................... 116 3 1 Platinum Class ........................................ 153 20 18 Transfer agent fees: Cash Management Class ................................. 11 3 - Institutional Class ................................... 8 - - PlanAhead Class ....................................... 18 - 3 Platinum Class ........................................ 5 2 2 Professional fees ....................................... 13 - - Registration fees and expenses .......................... 29 13 12 Distribution fees - Platinum Class (Note 2) ............. 59 8 7 Service Fees - PlanAhead Class (Note 2) ................. 289 7 2 Other expenses .......................................... 33 5 1 ------- ---- --- TOTAL FUND EXPENSES ................................ 896 69 46 ------- ---- --- LESS WAIVER AND REIMBURSEMENT OF EXPENSES (NOTE 2) ......... 128 20 13 ------- ---- --- NET FUND EXPENSES .................................. 768 49 33 ------- ---- --- NET INVESTMENT INCOME ...................................... 8,946 409 53 ------- ---- --- REALIZED GAIN ALLOCATED FROM PORTFOLIO: Net realized gain on investments ....................... 2 1 - ------- ---- --- NET GAIN ON INVESTMENTS ............................ 2 1 - ------- ---- --- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $ 8,948 $410 $53 ======= ==== ===
See accompanying notes - -------------------------------------------------------------------------------- 12 (This page intentionally left blank) AMERICAN BEACON FUNDS STATEMENTS OF CHANGES IN NET ASSETS ================================================================================
MONEY MARKET =============================== SIX MONTHS ENDED YEAR ENDED JUNE 30, 2005 DECEMBER 31, (UNAUDITED) 2004 ------------- ------------ (IN THOUSANDS) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ......................... $ 8,946 $ 4,352 Net realized gain on investments .............. 2 15 ---------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... 8,948 4,367 ---------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Cash Management Class ....................... (5,225) (1,707) Institutional Class ......................... (613) (883) PlanAhead Class ............................. (2,683) (1,553) Platinum Class .............................. (425) (209) Net realized gain on investments: Cash Management Class ....................... (2) (5) Institutional Class ......................... - (3) PlanAhead Class ............................. - (5) Platinum Class .............................. - (2) ---------- ----------- DISTRIBUTIONS TO SHAREHOLDERS:............ (8,948) (4,367) ---------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares ................. 2,406,537 2,055,052 Reinvestment of dividends and distributions ... 8,218 4,040 Cost of shares redeemed ....................... (2,223,273) (1,865,342) ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ...... 191,482 193,750 ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS ............ 191,482 193,750 NET ASSETS: Beginning of period ........................... 646,129 452,379 ---------- ----------- END OF PERIOD ................................. $ 837,611 $ 646,129 ========== ===========
See accompanying notes - -------------------------------------------------------------------------------- 14 ================================================================================
U.S. GOVERNMENT MONEY MARKET MUNICIPAL MONEY MARKET ============================ ====================== SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED JUNE 30, 2005 DECEMBER 31, JUNE 30, 2005 DECEMBER 31, (UNAUDITED) 2004 (UNAUDITED) 2004 - ------------- ------------ ------------- ------------ (IN THOUSANDS) $ 409 $ 418 $ 53 $ 19 1 3 - - --------- --------- -------- -------- 410 421 53 19 --------- --------- -------- -------- (289) (297) - - - - - - (65) (93) (13) (7) (55) (28) (40) (12) (1) (2) - - - - - - - (1) - - - - - - --------- --------- -------- -------- (410) (421) (53) (19) --------- --------- -------- -------- 94,491 163,517 10,779 16,442 70 48 53 19 (104,657) (178,586) (11,162) (17,626) --------- --------- -------- -------- (10,096) (15,021) (330) (1,165) --------- --------- -------- -------- (10,096) (15,021) (330) (1,165) 40,576 55,597 5,178 6,343 --------- --------- -------- -------- $ 30,480 $ 40,576 $ 4,848 $ 5,178 ========= ========= ======== ========
See accompanying notes - -------------------------------------------------------------------------------- 15 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS June 30, 2005 (Unaudited) ================================================================================ 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust"), formerly known as the American AAdvantage Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the "Act"), as amended, as a no-load, open-end management investment company with separate series. The following series are included in this report: American Beacon Money Market, American Beacon U.S. Government Money Market and American Beacon Municipal Money Market Funds (each a "Fund" and collectively, the "Funds"). Each Fund has multiple classes of shares designed to meet the needs of different groups of investors. Differences between the classes include the services offered to and the expenses borne by each class. Investment income, net capital gains (losses) and all expenses incurred by the Funds are allocated based on relative net assets of each class, except for service fees and certain other fees and expenses related solely to one class of shares. Effective October 9, 2003, the Institutional Class of the Municipal Money Market Fund was no longer offered. 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: -> INVESTS ASSETS IN -> AMERICAN BEACON MASTERTRUST: - ----------------- ---------------------------- Money Market Fund Money Market Portfolio U.S. Government Money U.S. Government Money Market Market Fund Portfolio Municipal Money Market Fund Municipal Money Market Portfolio
Each American Beacon Master Trust Portfolio has the same investment objectives as its corresponding Fund. The value of such investment reflects each Fund's proportionate interest in the net assets of the corresponding portfolio (11.59%, 15.87% and 15.33% at June 30, 2005 of the American Beacon Master Trust Money Market, U.S. Government Money Market and Municipal Money Market Portfolios, respectively) (each a "Portfolio" and collectively the "Portfolios"). The financial statements of the Portfolios are included elsewhere in this report and should be read in conjunction with the Funds' financial statements. American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary of AMR Corporation, the parent company of American Airlines, Inc. ("American"), and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. The following is a summary of the significant accounting policies followed by the Funds. 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. Investment Income and Dividends to Shareholders Each Fund records its share of net investment income (loss) and realized gain (loss) in the Portfolio each day. All net investment income (loss) and realized gain (loss) of each Portfolio are allocated pro rata - -------------------------------------------------------------------------------- 16 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 (Unaudited) ================================================================================ 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. Federal Income and Excise Taxes It is the policy of each of the Funds to comply with the requirements of subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income tax provision is required. All dividends paid by the Municipal Money Market Fund were "exempt-interest dividends" and therefore are 100% free of any regular federal income tax. Approximately 22% of interest earned was derived from investments in certain private activity bonds for purposes of the federal alternative minimum tax calculation. 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 separately for each class of each Fund on each day on which shares are offered for sale and orders accepted or upon receipt of a redemption request. With respect to a class of a Fund, price per share is computed by dividing the value of the class' pro rata allocation of the Fund's investments and other assets, less liabilities, by the number of class shares outstanding. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated. Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust's maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement. - -------------------------------------------------------------------------------- 17 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 (Unaudited) ================================================================================ 2. TRANSACTIONS WITH AFFILIATES Administrative Services Agreement 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 Funds. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.10% of the average daily net assets of each of the Institutional, PlanAhead and Platinum Classes of the Funds. The Trust has adopted an Administrative Services Plan with respect to the Platinum Class of the Funds. As compensation for providing administrative services, the Manager receives an annualized fee of 0.55% of the average daily net assets of the Platinum Class of each Fund. A separate Administrative Services Plan has been adopted for the Cash Management Class of the Funds. As compensation for providing administrative services, the Manager receives an annualized fee of 0.07% of the average daily net assets of the Cash Management Class of each Fund. Distribution Plan The Trust, except for the Platinum Class of the Funds, 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. A separate Distribution Plan (the "Distribution Plan") has been adopted pursuant to Rule 12b-1 under the Act for the Platinum Class of the Funds. Under the Distribution Plan, as compensation for distribution assistance, the Manager receives an annualized fee of 0.25% of the average daily net assets of the Platinum class of each Fund. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance. Service Agreement The Manager and the Trust entered into a Service Agreement which obligates the Manager to oversee additional shareholder servicing of the PlanAhead Class. As compensation for performing the duties required under the Service Agreement, the Manager receives 0.25% based on the daily net assets of the PlanAhead Class. Reimbursement and Waiver of Expenses The Manager contractually agreed to reimburse each Cash Management Class Fund for other expenses through February 28, 2006 to the extent that total annual fund operating expenses exceed 0.15% and 0.19% for the Money Market and U.S. Government Money Market Funds, respectively. The Manager contractually agreed to reimburse the Platinum Class of each Fund for other expenses through February 28, 2006 to the extent that total annual fund operating expenses exceed 0.99%. In addition, the Manager agreed to voluntarily waive additional fees to the extent necessary to preserve a certain - -------------------------------------------------------------------------------- 18 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 (Unaudited) ================================================================================ minimum level of returns for PlanAhead and Platinum Class Fund shareholders. During the six months ended June 30, 2005, the Manager waived or reimbursed expenses as follows:
FUND AMOUNT - ---- -------- Money Market Fund Cash Management Class ..................................... $113,011 Platinum Class ............................................ 15,167 U.S. Government Money Market Fund Cash Management Class ..................................... 13,553 Platinum Class ............................................ 6,136 Municipal Money Market Fund PlanAhead Class ........................................... 1,264 Platinum Class ............................................ 11,914
Expense Reimbursement Plan The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class' average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. The following waived fees or reimbursed expenses are subject to potential recovery expiring in:
U.S. GOVERNMENT MUNICIPAL YEAR MONEY MARKET MONEY MARKET MONEY MARKET - ---- ------------ --------------- ------------ 2006 $ 83,552 $77,375 $18,920 2007 140,252 38,411 27,596 2008 128,178 19,689 13,178
Other Certain officers or Trustees of the Trust are also current or former officers or employees of the Manager or American. The Trust makes no direct payments to its officers. Mr. Feld and the non-interested Trustees (other than Mr. O'Sullivan) and their spouses are provided free unlimited air transportation on American. Retired Trustees and their spouses are provided free transportation on American, up to a maximum annual value of $40,000. The Trust compensates each Trustee with payments in an amount equal to the Trustee's income tax on the value of this free airline travel. Mr. O'Sullivan, as a retiree of American, already receives flight benefits. This Trustee receives an annual retainer of $40,000 plus $1,250 for each Board meeting attended. - -------------------------------------------------------------------------------- 19 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 (Unaudited) ================================================================================ 3. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares for each class of the Funds (in thousands). Each share is valued at $1.00: Six Months Ended June 30, 2005 - ------------------------------
CASH MANAGEMENT MONEY MARKET FUND CLASS INSTITUTIONAL CLASS PLANAHEAD CLASS PLATINUM CLASS - ----------------- --------------- ------------------- --------------- -------------- Shares sold ............................ 1,757,169 102,275 512,839 34,254 Reinvestment of dividends .............. 5,138 376 2,279 425 Shares redeemed ........................ (1,718,252) (98,050) (369,248) (37,723) ---------- ------- -------- ------- Net increase (decrease) in shares outstanding ......................... 44,055 4,601 145,870 (3,044) ========== ======= ======== ======= CASH MANAGEMENT U.S. GOVERNMENT MONEY MARKET FUND CLASS PLANAHEAD CLASS PLATINUM CLASS - --------------------------------- --------------- --------------- -------------- Shares sold ............................ 38,941 54,099 1,451 Reinvestment of dividends .............. - 15 55 Shares redeemed ........................ (45,986) (56,570) (2,101) --------- -------- ------- Net decrease in shares outstanding ..... (7,045) (2,456) (595) ========= ======== ======= MUNICIPAL MONEY MARKET FUND PLANAHEAD CLASS PLATINUM CLASS - --------------------------- --------------- -------------- Shares sold ............................ 1,911 8,868 Reinvestment of dividends .............. 13 40 Shares redeemed ........................ (2,128) (9,034) -------- ------- Net decrease in shares outstanding ..... (204) (126) ======== ======= Year Ended December 31, 2004 - ---------------------------- CASH MANAGEMENT MONEY MARKET FUND CLASS INSTITUTIONAL CLASS PLANAHEAD CLASS PLATINUM CLASS - ----------------- --------------- ------------------- --------------- -------------- Shares sold ............................ 1,085,469 466,560 437,252 65,771 Reinvestment of dividends .............. 1,712 710 1,407 211 Shares redeemed ........................ (769,990) (592,216) (433,193) (69,943) --------- -------- -------- ------- Net increase (decrease) in shares outstanding ......................... 317,191 (124,946) 5,466 (3,961) ========= ======== ======== ======= CASH MANAGEMENT U.S. GOVERNMENT MONEY MARKET FUND CLASS PLANAHEAD CLASS PLATINUM CLASS - --------------------------------- --------------- --------------- -------------- Shares sold ............................ 90,815 68,510 4,192 Reinvestment of dividends .............. - 20 28 Shares redeemed ........................ 84,284) (89,944) (4,358) --------- -------- ------- Net increase (decrease) in shares outstanding ......................... 6,531 (21,414) (138) ======== ======== ======= MUNICIPAL MONEY MARKET FUND PLANAHEAD CLASS PLATINUM CLASS - --------------------------- --------------- -------------- shares sold ............................ 5,961 10,481 Reinvestment of dividends .............. 7 12 Shares redeemed ........................ (7,335) (10,291) -------- ------- Net increase (decrease) in shares outstanding ......................... (1,367) 202 ======== =======
- -------------------------------------------------------------------------------- 20 (This page intentionally left blank) AMERICAN BEACON MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) ================================================================================
CASH MANAGEMENT CLASS ======================================================== SIX MONTHS ONE MONTH ENDED YEAR ENDED DECEMBER 31, ENDED JUNE 30, ============================ DECEMBER 31, 2005 2004 2003 2002 2001(B) ----------- -------- -------- ------ ------------ (UNAUDITED) Net asset value, beginning of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- ------ ------- Net investment income(A): ........................... 0.01 0.01 0.01 0.02 -(D) Less dividends from net investment income ........... (0.01) (0.01) (0.01) (0.02) -(D) -------- -------- -------- ------ ------- Net asset value, end of period .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ====== ======= Total return ............................................ 1.32%(C) 1.30% 1.08% 1.73% 0.19%(C) ======== ======== ======== ====== ======= Ratios and supplemental data: Net assets, end of period (in thousands) ............ $478,641 $434,587 $117,395 $6,641 $15,006 Ratios to average net assets (annualized)(A): Expenses .......................................... 0.15% 0.15% 0.16% 0.19% 0.19% Net investment income ............................. 2.65% 1.34% 1.03% 1.73% 1.96% Decrease reflected in above expense ratio due to absorption of expenses by the Manager ......... 0.06% 0.08% 0.08% 0.03% - INSTITUTIONAL CLASS ================================================================ SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, =================================================== 2005 2004 2003 2002 2001 2000 ----------- ------- -------- -------- -------- -------- (UNAUDITED) Net asset value, beginning of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- -------- -------- -------- -------- Net investment income(A): ........................... 0.01 0.01 0.01 0.02 0.04 0.06 Less dividends from net investment income ........... (0.01) (0.01) (0.01) (0.02) (0.04) (0.06) ------- ------- -------- -------- -------- -------- Net asset value, end of period .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======== ======== ======== ======== Total return ............................................ 1.26%(C) 1.20% 0.97% 1.67% 4.15% 6.45% ======= ======= ======== ======== ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands) ............ $38,747 $34,146 $159,092 $474,922 $805,843 $886,608 Ratios to average net assets (annualized)(A): Expenses .......................................... 0.27% 0.24% 0.27% 0.24% 0.25% 0.24% Net investment income ............................. 2.56% 1.05% 1.00% 1.68% 4.13% 6.17% Decrease reflected in above expense ratio due to absorption of expenses by the Manager ........... - - - - - -
- ------------------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon Master Money Market Portfolio. (B) The Money Market Fund commenced sales of a fourth class of shares designated as "Cash Management Class" on December 1, 2001. (C) Not annualized. (D) Amount is less than $0.01 per share. - -------------------------------------------------------------------------------- 22
================================================================= PLANAHEAD CLASS ================================================================= SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ==================================================== 2005 2004 2003 2002 2001 2000 - ----------- -------- -------- -------- -------- -------- (UNAUDITED) $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - -------- -------- -------- -------- -------- -------- 0.01 0.01 0.01 0.01 0.04 0.06 (0.01) (0.01) (0.01) (0.01) (0.04) (0.06) - -------- -------- -------- -------- -------- -------- $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== ======== 1.15%(C) 0.93% 0.70% 1.37% 3.83% 6.14% ======== ======== ======== ======== ======== ======== $278,308 $132,438 $126,972 $155,535 $163,825 $299,304 0.50% 0.51% 0.54% 0.54% 0.55% 0.54% 2.32% 0.94% 0.71% 1.36% 3.83% 5.95% - - - - - - =================================================================== PLATINUM CLASS =================================================================== SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ====================================================== 2005 2004 2003 2002 2001 2000 - ----------- ------- ------- -------- -------- -------- (UNAUDITED) $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- -------- -------- -------- 0.01 -(D) -(D) 0.01 0.03 0.06 (0.01) -(D) -(D) (0.01) (0.03) (0.06) ------- ------- ------- -------- -------- -------- $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======== ======== ======== 0.90%(C) 0.46% 0.25% 0.98% 3.45% 5.69% ======= ======= ======= ======== ======== ======== $41,915 $44,958 $48,920 $913,240 $868,395 $800,196 0.99% 0.99% 0.96% 0.93% 0.93% 0.97% 1.81% 0.43% 0.38% 0.97% 3.36% 5.54% 0.06% 0.07% 0.13% 0.01% - -
- -------------------------------------------------------------------------------- 23 AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) ================================================================================
CASH MANAGEMENT CLASS ============================================================== SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ================================================= 2005 2004 2003 2002 2001(B) 2000 ----------- ------- ------- ------- --------- ------- (UNAUDITED) Net asset value, beginning of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- ------- ------- ------- Net investment income(A) ............................ 0.01 0.01 0.01 0.02 0.04 0.06 Less dividends from net investment income ........... (0.01) (0.01) (0.01) (0.02) (0.04) (0.06) ------- ------- ------- ------- ------- ------- Net asset value, end of period .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======= ======= ======= Total return ............................................ 1.28%(D) 1.22% 1.04% 1.67% 4.09% 6.31% ======= ======= ======= ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands) ............ $21,545 $28,591 $22,060 $38,310 $66,302 $36,391 Ratios to average net assets (annualized)(A): Expenses .......................................... 0.19% 0.19% 0.19% 0.19% 0.25% 0.26% Net investment income ............................. 2.55% 1.21% 1.04% 1.69% 3.74% 6.16% Decrease reflected in above expense ratio due to absorption of expenses by the Manager ........... 0.12% 0.10% 0.18% 0.04% - -
- ------------------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon Master U.S. Government Money Market Portfolio. (B) Prior to December 1, 2001, the Cash Management Class of the American Beacon U.S. Government Money Market Fund was known as the Institutional Class of the American Beacon U.S. Government Money Market Fund. The Institutional Class had a higher expense structure than the Cash Management Class. (C) Amount is less than $0.01 per share. (D) Not annualized. - -------------------------------------------------------------------------------- 24
================================================================================================================================== PLANAHEAD CLASS PLATINUM CLASS =============================================================== ==================================================== SIX MONTHS SIX MONTHS ENDED YEAR ENDED DECEMBER 31, ENDED YEAR ENDED DECEMBER 31, JUNE 30, ================================================== JUNE 30, ==================================================== 2005 2004 2003 2002 2001 2000 2005 2004 2003 2002 2001 2000 - ----------- ------ ------- -------- ------- ------- ----------- ------ ------ -------- -------- ------- (UNAUDITED) (UNAUDITED) $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------- -------- ------- ------- ------ ------ ------ -------- -------- ------- 0.01 -(C) 0.01 0.01 0.04 0.06 0.01 -(C) -(C) 0.01 0.03 0.05 (0.01) -(C) (0.01) (0.01) (0.04) (0.06) (0.01) -(C) -(C) (0.01) (0.03) (0.05) ------ ------ ------- -------- ------- ------- ------ ------ ------ -------- -------- ------- $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ======= ======== ======= ======= ====== ====== ====== ======== ======== ======= 1.09%(D) 0.85% 0.61% 1.30% 3.79% 5.95% 0.88%(D) 0.42% 0.24% 0.90% 3.37% 5.53% ====== ====== ======= ======== ======= ======= ====== ====== ====== ======== ======== ======= $2,914 $5,370 $26,785 $175,115 $78,934 $65,795 $6,021 $6,615 $6,752 $119,833 $112,670 $78,857 0.56% 0.56% 0.58% 0.55% 0.55% 0.60% 0.99% 0.98% 1.00% 0.95% 0.95% 1.00% 2.17% 0.68% 0.72% 1.25% 3.59% 5.81% 1.76% 0.40% 0.31% 0.88% 3.20% 5.40% - 0.01% 0.04% - - - 0.20% 0.17% 0.20% 0.03% - -
- -------------------------------------------------------------------------------- 25 AMERICAN BEACON MUNICIPAL MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) ================================================================================
PLANAHEAD CLASS ========================================================== SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ============================================== 2005 2004 2003 2002 2001 2000 ----------- ------ ------ ------ ------ ------ (UNAUDITED) Net asset value, beginning of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ ------ Net investment income(A): ........................... 0.01 -(B) -(B) 0.01 0.02 0.04 Less dividends from net investment income ........... (0.01) -(B) -(B) (0.01) (0.02) (0.04) ------ ------ ------ ------ ------ ------ Net asset value, end of period .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== ====== Total return ............................................ 0.65%(C) 0.31% 0.32% 0.93% 2.25% 3.61% ====== ====== ====== ====== ====== ====== Ratios and supplemental data: Net assets, end of period (in thousands): ........... $1,502 $1,706 $3,072 $7,346 $3,669 $5,175 Ratios to average net assets (annualized)(A): Expenses .......................................... 0.97% 0.94% 0.81% 0.57% 0.58% 0.63% Net investment income ............................. 1.36% 0.24% 0.36% 0.94% 2.30% 3.48% Decrease reflected in above expense ratio due to absorption of expenses by the Manager ........... 0.13% 0.10% 0.12% - - -
- ------------------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon Master Municipal Money Market Portfolio. (B) Amount is less than $0.01 per share. (C) Not annualized. - -------------------------------------------------------------------------------- 26
================================================================= PLATINUM CLASS ================================================================= SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ==================================================== 2005 2004 2003 2002 2001 2000 - ----------- ------ ------ ------- ------- ------- (UNAUDITED) $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------- ------- ------- 0.01 -(B) -(B) -(B) 0.02 0.03 (0.01) -(B) -(B) -(B) (0.02) (0.03) ------ ------ ------ ------- ------- ------- $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ======= ======= ======= 0.64%(C) 0.31% 0.20% 0.51% 1.82% 3.21% ====== ====== ====== ======= ======= ======= $3,346 $3,472 $3,271 $71,132 $59,427 $89,602 0.99% 0.97% 1.01% 0.99% 1.00% 1.02% 1.42% 0.29% 0.21% 0.52% 1.87% 3.17% 0.43% 0.61% 0.34% 0.02% - -
- -------------------------------------------------------------------------------- 27 AMERICAN BEACON MASTER MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS June 30, 2005 (Unaudited) ================================================================================
PAR AMOUNT VALUE -------- ---------- (DOLLARS IN THOUSANDS) REPURCHASE AGREEMENTS (NOTE B) - 16.81% Barclays Capital, Incorporated, 3.42%, Due 7/1/2005 .................... $450,000 $ 450,000 Goldman Sachs, 3.43%, Due 7/1/2005 ..................................... 765,000 765,000 ---------- TOTAL REPURCHASE AGREEMENTS ...................................... 1,215,000 ---------- EURODOLLAR TIME DEPOSITS - 12.07% ABN AMRO Bank, 3.36%, Due 7/1/2005 ..................................... 325,000 325,000 National City Bank, 3.29%, Due 7/1/2005 ................................ 272,296 272,296 Societe Generale, 3.344%, Due 7/1/2005 ................................. 275,000 275,000 ---------- TOTAL EURODOLLAR TIME DEPOSITS ................................... 872,296 ---------- VARIABLE RATE CERTIFICATES OF DEPOSIT AND BANK NOTES (NOTE D) - 30.13% Barclays Bank, 3.38%, Due 9/29/2005 .................................... 75,000 49,989 BNP Paribas, 3.204%, Due 8/23/2005 ............................................... 72,000 71,994 3.105%, Due 1/30/2006 ............................................... 88,000 87,977 Credit Lyonnais, 3.305%, Due 9/12/2005 ................................. 97,000 96,987 Credit Suisse First Boston, 3.28%, Due 11/10/2005 ............................................... 100,000 100,006 3.50%, Due 12/29/2005 ............................................... 20,400 20,404 3.24%, Due 2/6/2006 ................................................. 10,000 10,002 3.48%, Due 5/10/2006 ................................................ 150,000 150,049 Fifth Third Bank, 3.188%, Due 11/14/2005 ............................... 197,000 196,960 ForeningsSparbanken AB, 3.13%, Due 7/29/2005 ........................... 75,000 74,998 HSBC Bank USA, 3.22%, Due 5/4/2006 ..................................... 85,000 85,030 JP Morgan Chase Bank, NA, 3.31%, Due 5/1/2006 ................................................. 10,000 10,011 3.319%, Due 5/5/2006 ................................................ 25,000 25,029 Nordea Bank Finland, PLC, 3.10%, Due 10/27/2005 ........................ 25,000 24,994 Royal Bank of Scotland, 3.24%, Due 7/21/2006 ........................... 150,000 150,000 Societe Generale, 3.105%, Due 1/30/2006 ................................ 50,000 49,975 SouthTrust Bank, 3.19%, Due 8/12/2005 ................................................ 150,000 149,995 3.35%, Due 12/14/2005 ............................................... 40,000 39,995 SunTrust Bank, 3.529%, Due 10/3/2005 ............................................... 62,230 62,235 3.20%, Due 5/12/2006 ................................................ 150,000 150,000 Toronto Dominion Bank, 3.30%, Due 9/12/2005 ............................ 100,000 99,986 UBS AG, 3.09%, Due 1/30/2006 ........................................... 50,000 49,975 Unicredito Italiano, 3.07%, Due 10/20/2005 ............................................... 100,000 99,985 3.367%, Due 12/19/2005 .............................................. 166,000 165,959 US Bank, NA, 3.415%, Due 12/29/2005 .............................................. 125,000 124,985 3.335%, Due 3/8/2006 ................................................ 30,000 29,999 ---------- TOTAL VARIABLE RATE CERTIFICATES OF DEPOSIT AND BANK NOTES ....... 2,177,519 ---------- VARIABLE RATE PROMISSORY NOTES (NOTE D) - 4.15% Goldman Sachs Group, 3.288%, Due 5/10/2006 ............................. 300,000 300,000 ---------- TOTAL VARIABLE RATE PROMISSORY NOTES ............................. 300,000 ---------- VARIABLE RATE FUNDING AGREEMENTS (NOTES A AND D) - 2.08% Metropolitan Life Insurance Company, 6.81%, Due 12/1/2005 .............. 150,000 150,000 ---------- TOTAL VARIABLE RATE FUNDING AGREEMENTS ........................... 150,000 ---------- ASSET-BACKED COMMERCIAL PAPER, 144A (NOTES C AND E) - 0.67% Galaxy Funding, Incorporated, 3.45%, Due 9/29/2005 ..................... 49,000 48,580 ---------- TOTAL ASSET-BACKED COMMERCIAL PAPER .............................. 48,580 ---------- VARIABLE RATE MEDIUM-TERM NOTES (NOTE D) - 33.80% American Honda Finance Corporation, 144A (Note C) 3.62%, Due 10/7/2005 ................................................ 25,000 25,006 3.47%, Due 2/6/2006 ................................................. 13,000 13,021
See accompanying notes - -------------------------------------------------------------------------------- 28 AMERICAN BEACON MASTER MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2005 (Unaudited) ================================================================================
PAR AMOUNT VALUE -------- ---------- (DOLLARS IN THOUSANDS) 3.22%, Due 2/13/2006 ................................................ $ 25,000 $ 25,000 3.334%, Due 2/21/2006 ............................................... 35,120 35,138 3.32%, Due 3/7/2006 ................................................. 25,000 25,000 Bayerische Landesbank Girozentrale, 3.46%, Due 2/1/2006 ................ 24,000 24,042 Caterpillar Financial Services, 3.328%, Due 8/15/2005 .................. 71,000 71,008 Citigroup, Incorporated, 3.555%, Due 3/20/2006 ......................... 37,000 37,045 Citigroup Global Markets Holdings, Incorporated, 3.44%, Due 12/12/2005 ............................................... 18,000 18,007 3.424%, Due 3/16/2006 ............................................... 50,585 50,600 3.49%, Due 6/6/2006 ................................................. 25,000 25,040 Fifth Third Bank, 3.041%, Due 11/1/2005 ................................ 75,000 74,989 General Electric Capital Corporation, 3.41%, Due 2/3/2006 ................................................. 97,544 97,679 3.42%, Due 2/6/2006 ................................................. 30,275 30,320 3.42%, Due 5/12/2006 ................................................ 10,983 11,003 3.34%, Due 7/17/2006 ................................................ 180,000 180,000 General Electric Company, 3.211%, Due 10/24/2005 ....................... 43,975 43,985 Halifax Bank of Scotland plc, 144A (Note C) 3.16%, Due 1/12/2006 ................................................ 106,000 106,028 3.20%, Due 1/26/2006 ................................................ 23,000 23,008 Household Finance Corporation, 3.37%, Due 8/18/2005 .................... 211,250 211,284 Merrill Lynch & Company, Incorporated, 3.471%, Due 3/17/2006 ........... 45,000 45,027 Metropolitan Life Global Funding I, 3.441%, Due 3/17/2006, 144A (Note C) ....................................................... 22,000 22,009 Monumental Global Funding II, 144A (Note C) 3.70%, Due 7/1/2005 ................................................. 102,000 102,000 3.15%, Due 7/6/2005 ................................................. 65,700 65,700 JP Morgan Chase & Company, 3.39%, Due 10/31/2005 ....................... 10,000 10,007 Morgan Stanley Group, Incorporated, 3.75%, Due 3/27/2006 ............... 284,100 284,724 Paccar Financial Corporation, 3.07%, Due 7/11/2005 ................................................ 50,000 50,000 3.361%, Due 9/16/2005 ............................................... 40,000 39,998 Toyota Motor Credit Corporation, 3.53%, Due 10/7/2005 ................................................ 70,000 70,003 3.24%, Due 11/18/2005 ............................................... 50,000 50,001 3.11%, Due 7/14/2006 ................................................ 175,000 175,034 US Bancorp, 3.564%, Due 9/16/2005 ...................................... 20,095 20,102 Wells Fargo and Company, 3.51%, Due 9/29/2005 ................................................ 76,580 76,591 3.45%, Due 3/3/2006 ................................................. 86,613 86,694 3.48%, Due 6/12/2006 ................................................ 67,500 67,589 3.19%, Due 7/15/2006, 144A (Note C) ................................. 150,000 150,000 ---------- TOTAL VARIABLE RATE MEDIUM-TERM NOTES ............................ 2,442,682 ---------- TOTAL INVESTMENTS - 99.71% (Cost $7,206,077) ........................... 7,206,077 ---------- OTHER ASSETS, NET OF LIABILITIES - 0.29% ............................... 19,942 ---------- TOTAL NET ASSETS - 100% ................................................ $7,226,019 ==========
- ------------------- Based on the cost of investments of $7,206,077 for federal income tax purposes at June 30, 2005, there was no unrealized appreciation or depreciation of investments. (A) Obligation is subject to an unconditional put back to the issuer with ninety calendar days notice. (B) Collateral held at Bank of New York for Barclays, 4.00% - 7.50%, Due 12/1/2008 - 7/1/2035, Total Value - $459,000; and for Goldman Sachs, 3.553% - 6.50%, Due 6/1/2018 - 12/1/2044 Total Value - $780,300. (C) 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 $640,490 or 8.86% of net assets. (D) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. (E) Rates associated with money market securities represent discount rate at time of purchase. See accompanying notes - -------------------------------------------------------------------------------- 29 AMERICAN BEACON MASTER U.S. GOVERNMENT MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS June 30, 2005 (Unaudited) ================================================================================
PAR AMOUNT VALUE ------- -------- (DOLLARS IN THOUSANDS) REPURCHASE AGREEMENTS (Note A) - 48.37% Banc of America Securities, LLC, 3.42%, Due 7/1/2005 ...................................... $10,000 $ 10,000 Barclays Capital, Incorporated, 3.42%, Due 7/1/2005 ....................................... 40,000 40,000 Goldman Sachs, 3.43%, Due 7/1/2005 ........................................................ 43,046 43,046 -------- TOTAL REPURCHASE AGREEMENTS ......................................................... 93,046 -------- U.S. GOVERNMENT AGENCY INSTRUMENTS - 51.42% Federal Home Loan Bank, Variable Rate Note, 3.224%, Due 7/26/2005 (Note C) ..................................... 15,000 15,000 Variable Rate Note, 3.045%, Due 8/2/2005 (Note C) ...................................... 15,000 15,000 Variable Rate Note, 3.003%, Due 10/5/2005 (Note C) ..................................... 5,000 4,999 Federal Home Loan Mortgage Corporation, Variable Rate Note, 3.34%, Due 12/27/2006 (Note B) ..................................... 10,000 9,991 Variable Rate Note, 7.00%, Due 7/15/2005 (Note B) ...................................... 5,000 5,008 Variable Rate Note, 1.085%, Due 9/9/2005 (Note C) ...................................... 5,000 5,000 Federal National Mortgage Association, Discount Note, 3.35%, Due 9/14/2005 (Note B) ........................................... 2,662 2,643 Variable Rate Note, 3.314%, Due 12/22/2006 (Note C) .................................... 10,000 9,991 Variable Rate Note, 3.39%, Due 10/3/2005 (Note C) ...................................... 16,300 16,297 Variable Rate Note, 3.064%, Due 12/9/2005 (Note C) ..................................... 15,000 14,996 -------- TOTAL U.S. GOVERNMENT AGENCY INSTRUMENTS ............................................ 98,625 -------- TOTAL INVESTMENTS - 99.79% (Cost $191,971) ................................................ 191,971 -------- OTHER ASSETS, NET OF LIABILITIES - 0.21% .................................................. 406 -------- TOTAL NET ASSETS - 100% ................................................................... $192,377 ========
- ------------------- Based on the cost of investments of $191,971 for federal income tax purposes at June 30, 2005, there was no unrealized appreciation or depreciation of investments. (A) Collateral held at Bank of New York for Banc of America Securities, LLC, 5.50%, Due 7/1/2020, Total Value - $10,200; and Barclays Capital, Incorporated, 4.13% - 6.50%, Due 6/1/2019 - 6/1/2035, Total Value - $40,800; and Goldman Sachs, 5.50%, Due 6/1/2035, Total Value - $43,907. (B) Rates represent discount rate. (C) The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. See accompanying notes - -------------------------------------------------------------------------------- 30 AMERICAN BEACON MASTER MUNICIPAL MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS June 30, 2005 (Unaudited) ================================================================================
PAR AMOUNT VALUE ------- -------- (DOLLARS IN THOUSANDS) MUNICIPAL OBLIGATIONS (Note A) - 96.24% COLORADO - 10.46% Moffat County, Colorado Pollution Control Revenue Bonds, Series 1984 (Ute Electric Company Project), Bond Insurance - Ambac Assurance Corporation, 2.65%, Due 7/1/2010, SPA Societe Generale ...................................................... $3,300 $ 3,300 ------- TOTAL COLORADO ....................................................................... 3,300 ------- FLORIDA - 12.13% Alachua County, Florida Housing Financial Authority, Multifamily Housing Revenue Bonds, Series 2001 (University Cove Apartment Project), 2.34%, Due 6/15/2034, LOC SouthTrust Bank, NA .................................................. 1,830 1,830 Orange County Health Facilities Authority, Variable Rate Demand Revenue Bonds, Series 1992 (Adventist Health System/Sunbelt, Inc.) 2.32%, Due 11/15/2014, LOC - Suntrust Bank ..................................................... 2,000 2,000 ------- TOTAL FLORIDA ........................................................................ 3,830 ------- ILLINOIS - 5.70% Village of Richton Park, Illinois-Industrial Development Revenue Bonds-Series 1997 (Avatar Corporation Project), 2.19%, Due 4/1/2027, LOC Fifth Third Bank ................. 1,800 1,800 ------- TOTAL ILLINOIS ....................................................................... 1,800 ------- INDIANA - 3.17% Fort Wayne, Indiana Industrial Economic Development Revenue Bonds, Series 1989 (ND-Tech Corporation Project), 2.40%, Due 7/1/2009, LOC Societe Generale ................ 1,000 1,000 ------- TOTAL INDIANA ........................................................................ 1,000 ------- KENTUCKY - 11.10% Carroll County, Kentucky Solid Waste Disposal Revenue Bonds, Series 2001 (North American Stainless, L.P.) 2.01%, Due 5/1/2031, LOC Fifth Third Bank .............. 1,100 1,100 County of Breckinridge, Kentucky Association of Counties Leasing Trust, Lease Program Revenue Bonds, Series 2001A, 2.00%, Due 2/1/2031, LOC US Bank ............. 2,405 2,405 ------- TOTAL KENTUCKY ....................................................................... 3,505 ------- MARYLAND - 5.32% Montgomery County, Maryland Variable Rate Housing Revenue Bonds, Series 1997, Issue I (The Grand), 2.01%, Due 6/1/2030, LOC Federal National Mortgage Association ............. 1,680 1,680 ------- TOTAL MARYLAND ....................................................................... 1,680 ------- MICHIGAN - 8.81% Michigan Higher Education Student Loan Authority, Student Loan Revenue Bonds, Series XII-X, Bond Insurance - Ambac Assurance Corporation, 2.03%, Due 9/1/2031, SPA Lloyds TSB ....... 1,000 1,000 Michigan State Housing Development Authority Variable Rate Limited Obligation Multifamily Housing Revenue Refunding Bonds, 2.03%, Due 6/1/2018, LOC Bank of New York .............. 1,780 1,780 ------- TOTAL MICHIGAN ....................................................................... 2,780 ------- NEVADA - 3.17% Nevada Housing Divison-Variable Rate Demand Multi-Unit Housing Revenue Bonds-Series 2004 (Sundance Village Apartments), 2.00%, Due 10/1/2035, LOC Citibank ....................... 1,000 1,000 ------- TOTAL NEVADA ......................................................................... 1,000 ------- NEW YORK - 7.60% New York City Housing Development Corporation, Multi-Family Mortgage Revenue Bonds, 2002A (First Avenue Development), 2.25%, Due 10/15/2035, LOC Bank of New York Series .... 800 800 New York State Housing Finance Agency, 66 West 38th Sreet Housing Revenue Bonds, Series 2000A, 2.29%, Due 5/15/2033, LOC Bank of New York ................................ 1,600 1,600 ------- TOTAL NEW YORK ....................................................................... 2,400 -------
See accompanying notes - -------------------------------------------------------------------------------- 31 AMERICAN BEACON MASTER MUNICIPAL MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2005 (Unaudited) ================================================================================
PAR AMOUNT VALUE ------- -------- (DOLLARS IN THOUSANDS) OHIO - 5.39% Ohio Water Development Authority, Environmental Improvement Revenue Bonds, Series 2000B (Waste Management, Incorporated Project), 2.45%, Due 7/1/2020, LOC Fleet National Bank ...... $1,700 $ 1,700 ------- TOTAL OHIO ............................................................................... 1,700 ------- PENNSYLVANIA - 6.13% Berks County Industrial Development Authority Manufacturing Facilities Revenue Bonds, Series 1995 (Grafika Commerial Printing Inc.), 2.39%, Due 9/1/2010, LOC First Union National Bank ............................................................... 1,035 1,035 Chartiers Valley, Pennsylvania Industrial and Commercial Development Authority Commercial Development Bonds (William Penn Plaza Project), 2.75%, Due 12/1/2016, LOC PNC Bank, NA ............................................................. 900 900 ------- TOTAL PENNSYLVANIA ....................................................................... 1,935 ------- TEXAS - 8.87% City of Midlothian, Texas Industrial Development Corporation, Environmental Facilities Revenue Bonds, Series 1999 (Holnam Texas Limited Partnership Project) 2.03%, Due 9/1/2031, LOC Bank One .................................................................. 1,200 1,200 Mansfield Texas Industrial Development Corporation, Variable Rate Demand Revenue Bonds, Series 1986, 2.30%, Due 11/1/2026, LOC - Bank of New York ................................... 1,600 1,600 ------- TOTAL TEXAS .............................................................................. 2,800 ------- UTAH - 3.64% Morgan County, Utah Solid Waste Disposal Revenue Bonds, Series 1996 (Holman, Inc. Project), 2.05%, Due 8/1/2031, LOC Wachovia Bank, NA .......................... 1,150 1,150 ------- TOTAL UTAH ............................................................................... 1,150 ------- WYOMING - 4.75% Sweetwater County, Wyoming Pollution Control Revenue Refunding Bonds, Series 1990A (Pacificorp Project), 2.28%, Due 7/1/2015, LOC First National Bank ............. 1,500 1,500 ------- TOTAL WYOMING ............................................................................ 1,500 ------- TOTAL MUNICIPAL OBLIGATIONS .............................................................. 30,380 ------- SHARES ---------- OTHER INVESTMENTS - 3.47% Dreyfus Municipal Cash Management Plus, Inc. ................................................... 12 - Federated Municipal Obligations Fund ........................................................... 932,882 933 BlackRock Provident MuniCash Fund .............................................................. 162,133 162 ------- TOTAL OTHER INVESTMENTS .................................................................. 1,095 ------- TOTAL INVESTMENTS - 99.71% (Cost $31,475) ...................................................... 31,475 ------- OTHER ASSETS, NET OF LIABILITIES - 0.29% ....................................................... 92 ------- TOTAL NET ASSETS - 100% ........................................................................ $31,567 =======
- ------------------- Based on the cost of investments of $31,475 for federal income tax purposes at June 30, 2005, there was no unrealized appreciation or depreciation of investments. (A) Rates associated with money market securities represent yield to maturity or yield to next reset date. See accompanying notes - -------------------------------------------------------------------------------- 32 AMERICAN BEACON MASTER TRUST PORTFOLIOS STATEMENTS OF ASSETS AND LIABILITIES June 30, 2005 (Unaudited) ================================================================================
U.S. GOVERNMENT MUNICIPAL MONEY MARKET MONEY MARKET MONEY MARKET ============ =============== ============ (IN THOUSANDS) ASSETS: Investments in securities at value (cost - $5,991,077, $98,925 and $31,475, respectively) ............................ $5,991,077 $ 98,925 $31,475 Repurchase agreements (cost - $1,215,000, $93,046 and $0 respectively) .................................. 1,215,000 93,046 - Receivable from interfund lending ................................ 1,964 - - Dividends and interest receivable ................................ 18,641 421 100 Prepaid expenses ................................................. 136 12 1 ---------- -------- ------- TOTAL ASSETS .................................................. 7,226,818 192,404 31,576 ---------- -------- ------- LIABILITIES: Management and investment advisory fees payable (Note 2) ......... 640 19 4 Other liabilities ................................................ 159 8 5 ---------- -------- ------- TOTAL LIABILITIES ............................................. 799 27 9 ---------- -------- ------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS ............ $7,226,019 $192,377 $31,567 ========== ======== =======
See accompanying notes - -------------------------------------------------------------------------------- 33 AMERICAN BEACON MASTER TRUST PORTFOLIOS STATEMENTS OF OPERATIONS Six Months Ended June 30, 2005 (Unaudited) ================================================================================
U.S. GOVERNMENT MUNICIPAL MONEY MARKET MONEY MARKET MONEY MARKET ============ =============== ============ (IN THOUSANDS) INVESTMENT INCOME: Interest income ................................................ $91,846 $3,381 $452 ------- ------ ---- TOTAL INVESTMENT INCOME .................................. 91,846 3,381 452 ------- ------ ---- EXPENSES: Management and investment advisory fees (Note 2) ............... 3,262 123 20 Custodian fees ................................................. 190 7 1 Professional fees. ............................................. 80 4 - Other expenses ................................................. 91 5 1 ------- ------ ---- TOTAL EXPENSES ........................................... 3,623 139 22 ------- ------ ---- NET INVESTMENT INCOME ............................................... 88,223 3,242 430 ------- ------ ---- REALIZED GAIN ON INVESTMENTS: Net realized gain on investments ............................... 13 6 - ------- ------ ---- NET GAIN ON INVESTMENTS .................................. 13 6 - ------- ------ ---- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $88,236 $3,248 $430 ======= ====== ====
See accompanying notes - -------------------------------------------------------------------------------- 34 AMERICAN BEACON MASTER TRUST PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS ================================================================================
U.S. GOVERNMENT MONEY MARKET MONEY MARKET ============================ ============================= SIX MONTHS SIX MONTHS ENDED ENDED JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED 2005 DECEMBER 31, 2005 DECEMBER 31, (UNAUDITED) 2004 (UNAUDITED) 2004 ------------- ------------ ------------- ------------- (IN THOUSANDS) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ............................. $ 88,223 $ 70,915 $ 3,242 $ 3,441 Net realized gain on investments .................. 13 208 6 15 ------------ ------------ --------- ----------- TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................... 88,236 71,123 3,248 3,456 ------------ ------------ --------- ----------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Contributions ..................................... 51,533,535 59,602,193 701,467 1,351,736 Withdrawals ....................................... (49,802,173) (59,216,512) (761,857) (1,340,743) ------------ ------------ --------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS ....... 1,731,362 385,681 (60,390) 10,993 ------------ ------------ --------- ----------- NET INCREASE (DECREASE) IN NET ASSETS ....... 1,819,598 456,804 (57,142) 14,449 ------------ ------------ --------- ----------- NET ASSETS: Beginning of period ............................... 5,406,421 4,949,617 249,519 235,070 ------------ ------------ --------- ----------- END OF PERIOD ..................................... $ 7,226,019 $ 5,406,421 $ 192,377 $ 249,519 ============ ============ ========= =========== MUNICIPAL MONEY MARKET ==================================== SIX MONTHS ENDED JUNE 30, YEAR ENDED 2005 DECEMBER 31, (UNAUDITED) 2004 ------------ ------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: $ 430 $ 464 Net investment income ............................. Net realized gain on investments .................. - - -------- -------- TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................... 430 464 -------- -------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Contributions ..................................... 43,164 56,379 Withdrawals ....................................... (47,321) (61,336) -------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS ....... (4,157) (4,957) -------- -------- NET INCREASE (DECREASE) IN NET ASSETS ....... (3,727) (4,493) -------- -------- NET ASSETS: Beginning of period ............................... 35,294 39,787 -------- -------- END OF PERIOD ..................................... $ 31,567 $ 35,294 ======== ========
See accompanying notes - -------------------------------------------------------------------------------- 35 AMERICAN BEACON MASTER TRUST PORTFOLIOS FINANCIAL HIGHLIGHTS ================================================================================
MONEY MARKET =============================================================================== SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ================================================================ 2005 2004 2003 2002 2001 2000 ------------ ---------- ---------- ---------- --------- -------- (UNAUDITED) Total return ................................... 1.34%(A) 1.34% 1.13% 1.81% 4.30% N/A Ratios to average net assets (annualized): Expenses .................................. 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% Net investment income ..................... 2.70% 1.30% 1.14% 1.81% 3.95% 6.40%
- ------------------- (A) Not annualized. - -------------------------------------------------------------------------------- 36
================================================================================ U.S. GOVERNMENT MONEY MARKET ================================================================================ SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ================================================================= 2005 2004 2003 2002 2001 2000 - ------------ ---------- ---------- ----------- ----------- ---------- (UNAUDITED) 1.33%(A) 1.30% 1.11% 1.74% 4.24% N/A 0.11% 0.11% 0.12% 0.12% 0.11% 0.13% 2.63% 1.30% 1.13% 1.71% 3.99% 6.27% ================================================================================ MUNICIPAL MONEY MARKET ================================================================================ SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ================================================================= 2005 2004 2003 2002 2001 2000 - ------------ ---------- ---------- ----------- ----------- ---------- (UNAUDITED) 1.08%(A) 1.18% 1.08% 1.39% 2.71% N/A 0.11% 0.11% 0.12% 0.12% 0.13% 0.13% 2.20% 1.14% 1.05% 1.39% 2.71% 4.05%
- -------------------------------------------------------------------------------- 37 AMERICAN BEACON MASTER TRUST NOTES TO FINANCIAL STATEMENTS June 30, 2005 (Unaudited) ================================================================================ 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Master Trust (the "Trust"), formerly known as AMR Investment Services Trust, is registered under the Investment Company Act of 1940, as amended, as a no load, open-end management investment company that was organized as a trust under the laws of the Commonwealth of Massachusetts pursuant to a Declaration of Trust dated as of November 1, 2004. Prior to November 1, 2004, the Trust was organized as a trust under the laws of the State of New York. Beneficial interests in the Trust are divided into separate series, each having distinct investment objectives and policies. These financial statements relate to the American Beacon Master Money Market Portfolio, American Beacon Master U.S. Government Money Market Portfolio and American Beacon Master Municipal Money Market Portfolio (each a "Portfolio" and collectively the "Portfolios"). The assets of each Portfolio belong only to that Portfolio, and the liabilities of each Portfolio are borne solely by that Portfolio and no other. American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary of AMR Corporation, the parent company of American Airlines, Inc. ("American"), and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services. The following is a summary of the significant accounting policies followed by the Portfolios. Security Valuation Securities of the Portfolios are valued at fair value, which approximates amortized cost. In the event that a deviation of 1/2 of 1% or more exists between the $1.00 per share price of the Portfolios, calculated at amortized cost, and the price per share calculated by reference to market quotations, or if there is any other deviation that the Trust's Board of Trustees (the "Board") believes would result in a material dilution to shareholders or purchasers, the Board will promptly consider the appropriate action that should be initiated. Security Transactions and Investment Income Security transactions are recorded on the trade date of the security purchase or sale. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for amortization of premiums or accretion of discounts on investment grade short-term securities and zero coupon instruments. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification. Federal Income and Excise Taxes The Portfolios will be treated as partnerships for federal income tax purposes. As such, each investor in a Portfolio will be taxed on its share of the Portfolio's ordinary income and capital gains. It is intended that each Portfolio's assets will be managed in such a way that an investor in the Portfolio will be able to satisfy the requirements of subchapter M of the Internal Revenue Code. Repurchase Agreements Under the terms of a repurchase agreement, securities are acquired by a Portfolio from a securities dealer or a bank that are subject to resale at a later date. Repurchase agreements are fully collateralized by U.S. Treasury or U.S. Government agency securities. All collateral is held at the Portfolio's custodian bank, State Street Bank and Trust Company, or at subcustodian banks. 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. - -------------------------------------------------------------------------------- 38 AMERICAN BEACON MASTER TRUST NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2005 (Unaudited) ================================================================================ Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated. Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust's maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement. 2. TRANSACTIONS WITH AFFILIATES Management Agreement The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all administrative, investment advisory and portfolio management services. The Manager serves as the sole investment advisor to each of the Portfolios. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Portfolios 0.10% of the average daily net assets of each of the Portfolios. Interfund Lending Program Pursuant to an exemptive order by the Securities and Exchange Commission, the Portfolios, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Portfolios to lend money to other participating series managed by the Manager. For the six months ended June 30, 2005, the Money Market Portfolio earned $703 under the credit facility. This amount is included in interest income on the financial statements. Other Certain officers or Trustees of the Trust are also current or former officers or employees of the Manager or American. The Trust makes no direct payments to its officers. Mr. Feld and the non-interested Trustees (other than Mr. O'Sullivan) and their spouses are provided free unlimited air transportation on American. Retired Trustees and their spouses are provided free air transportation on American, up to a maximum annual value of $40,000. The Trust compensates each Trustee with payments in an amount equal to the Trustee's income tax on the value of this free airline travel. Mr. O'Sullivan as a retiree of American, already receives flight benefits. Mr. O'Sullivan receives an annual retainer of $40,000 plus $1,250 for each Board meeting attended. - -------------------------------------------------------------------------------- 39 RENEWAL OF MANAGEMENT AGREEMENT (Unaudited) ================================================================================ At their February 23, 2005 meeting, the Trustees considered the renewal of the existing Management Agreement between the Manager and the Funds. As part of the renewal process, legal counsel to the Trusts and the independent Trustees sent information request letters to the Manager seeking certain relevant information. The response by the Manager was provided to the Trustees for their review prior to their meeting, and the Trustees were provided with the opportunity to request any additional materials. The Trustees considered, among other materials, response by the Manager to inquiries requesting: o a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; o a copy of the most recent audited or unaudited financial statements as well as Parts I and II of its Form ADV; o a summary of any material past, pending or anticipated litigation or regulatory proceedings involving the Manager or its personnel, including the results of any recent regulatory examination or independent audit; o a comparison of the performance of each Fund with performance of other similar accounts managed by the Manager, including a discussion of relative performance versus a peer group average and any remedial measures if the Manager's performance was materially below that of the peer group; o a cost/profitability analysis of the Manager and any actual or anticipated economies of scale in relation to the services it provides to the Funds, if available; o an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; o an evaluation of any other benefits to the Manager or Funds as a result of their relationship, if any; o a description of the scope of portfolio management services provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies; o description of the personnel who are assigned primary responsibility for managing the Fund, including any changes during the past year; o a description of the basis upon which portfolio managers are compensated, including any "incentive" arrangements; o a description of any actual or potential conflicts of interest anticipated in managing Fund assets; o a discussion regarding the Manager's participation in "soft dollar" arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the Manager's methodology for obtaining the most favorable execution and the use of any affiliated broker-dealers; o a description of trade allocation procedures among accounts managed by the Manager; o a discussion of the Manager's compliance program with regard to federal, state, corporate and Fund requirements; o information regarding the Manager's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto; o a description of the Manager's affiliation with any broker-dealer; - -------------------------------------------------------------------------------- 40 RENEWAL OF MANAGEMENT AGREEMENT (Unaudited) - (Continued) ================================================================================ o a discussion of any anticipated change in the Manager's controlling persons; o verification of the Manager's insurance coverage with regards to the services provided to the Funds; o a table comparing the performance of each Fund to appropriate indices, including comments on each Fund's relative performance; o a table detailing the Manager's profitability with respect to each Fund; o an analysis of any material complaints received from Fund shareholders; o a description of how expenses that are not readily identifiable to a particular Fund are allocated; and o any ideas for the future growth and efficient operation of the Funds. The Trustees were also provided with an analysis provided by Lipper, Inc., which compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total expenses of each Fund versus comparable mutual funds, and (iii) each Fund's investment advisory fees versus comparable mutual funds. Legal counsel provided the Trustees with a memorandum detailing their responsibilities pertaining to the renewal of the Management Agreement. This memorandum explained the regulatory requirements surrounding the Trustees' process for evaluating investment advisors and the terms of the contracts. CONSIDERATIONS WITH RESPECT TO ALL FUNDS - ---------------------------------------- In determining whether to approve the continuance of the Management Agreement, the Trustees considered the best interests of each Fund separately. In each instance, the Trustees considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of the Fund and the Manager; (3) the Manager's cost for providing the services and the profitability of the advisory business to the Manager; (4) the extent to which economies of scale have been taken into account in setting the fee schedule; and (5) whether fee levels reflect these economies of scale for the benefit of Fund investors. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the material submitted in support of the renewal. With respect to the renewal of the Management Agreement, the Trustees considered: the Manager's ability to retain key investment personnel and to provide consistent performance and an active client service program; the Manager's goal to continue to provide consistent above average long-term performance at low cost; the continuing efforts by the Manager to add new series so as to enhance the Trust's product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Funds; and the addition of personnel to manage the Funds, promote sales and improve services. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE MONEY MARKET FUND - ------------------------------------------------------------------------------- In considering the renewal of the Management Agreement, the Trustees considered the following additional factors: (1) the Institutional Class of the Money Market Fund underperformed its peer group for all reported periods ended December 31, 2004 due to the relatively higher expense ratio of the Fund in a low interest rate environment; (2) the total expense ratio of the Institutional Class of Fund shares was higher than its peer group average, although contractual management fees were among the lowest of its peer group; (3) the management fees for the Money Market Fund were lower than the average of the Fund's peer group and other comparable funds, although the total expense ratio of the Platinum Class was - -------------------------------------------------------------------------------- 41 RENEWAL OF MANAGEMENT AGREEMENT (Unaudited) - (Continued) ================================================================================ higher than its peers; (4) the Trustees deemed the profit made by the Manager on the services it provided to the Fund to be reasonable in light of the fact that the Manager provides high-quality services at a low cost to investors, manages the Fund's assets, is subject to a high degree of risk of financial responsibility should the Fund be unable to maintain its stable $1.00 per share net asset value and provides a comprehensive compliance program for the Fund; (5) the Manager's explanation that fee schedule "breakpoints" were not warranted due to, among other factors, the low, base management fee charged to the Fund; and (6) the Manager has contractually agreed to continue to waive fees and/or reimburse Fund expenses to the extent necessary to maintain a competitive total expense ratio for the Cash Management and Platinum Classes of shares of the Fund. Based on these considerations and those noted above with respect to all Funds, the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the Money Market Fund and its shareholders would benefit from the Manager's continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the Money Market Fund. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE MUNICIPAL MONEY - ----------------------------------------------------------------------------- MARKET FUND - ----------- In considering the renewal of the Management Agreement, the Trustees considered the following additional factors: (1) the PlanAhead Class of the Municipal Money Market Fund underperformed its peer group for all periods ended December 31, 2004, primarily due to its low asset size and relatively higher total expense ratio; (2) the expense ratio of the PlanAhead Class of Fund shares was higher than its peer group average, although the management fee portion of the expense ratio was substantially below its peer group and the broader universe of comparable funds; (3) the management fees for the Municipal Money Market Fund were lower than the average of the Fund's peer group and other comparable funds, although the total expense ratio was higher than its peers; (4) the Manager incurred a loss on the services it provided to the Fund; (5) the Manager provides high-quality services at a low cost to investors, manages the Fund's assets, is subject to a high degree of risk of financial responsibility should the Fund be unable to maintain its stable $1.00 per share net asset value and provides a comprehensive compliance program for the Fund; (6) the Manager's explanation that fee schedule "breakpoints" were not warranted due to, among other factors, the low, base management fee charged to the Fund; and (7) the Manager has contractually agreed to continue to waive fees and/or reimburse Fund expenses to the extent necessary to maintain a competitive total expense ratio for the PlanAhead and Platinum Classes of shares of the Fund. Based on these considerations and those noted above with respect to all Funds, the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the Municipal Money Market Fund and its shareholders would benefit from the Manager's continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the Municipal Money Market Fund. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE U.S. GOVERNMENT - ----------------------------------------------------------------------------- MONEY MARKET FUND - ----------------- In considering the renewal of the Management Agreement, the Trustees considered the following additional factors: (1) the Cash Management Class of the U.S. Government Money Market Fund had substantially above-average performance for all reported periods ended December 31, 2004; (2) the management fees for the U.S. Government Money Market Fund were lower than the average of the Fund's peer group and other comparable funds, although the total expense ratio of the Platinum Class was higher than - -------------------------------------------------------------------------------- 42 RENEWAL OF MANAGEMENT AGREEMENT (Unaudited) - (Continued) ================================================================================ its peers; (3) the expense ratio of the Cash Management Class of Fund shares was lower than its peer group average and other comparable funds; (4) the Manager incurred a loss on the services it provided to the Fund; (5) the Manager provides high-quality services at a low cost to investors, manages the Fund's assets, is subject to a high degree of risk of financial responsibility should the Fund be unable to maintain its stable $1.00 per share net asset value and provides a comprehensive compliance program for the Fund; (6) the Manager's explanation that fee schedule "breakpoints" were not warranted due to, among other factors, the low, base management fee charged to the Fund; and (7) the Manager has contractually agreed to continue to waive fees and/or reimburse Fund expenses to the extent necessary to maintain a competitive total expense ratio for the Cash Management and Platinum Classes of shares of the Fund. Based on these considerations and those noted above with respect to all Funds, the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the U.S. Government Money Market Fund and its shareholders would benefit from the Manager's continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the U.S. Government Money Market Fund. - -------------------------------------------------------------------------------- 43 (This page intentionally left blank) [LOGO OF AMERICAN BEACON FUND] AMERICAN BEACON FUNDS(SM) ================================================================================ 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 Funds through a financial institution, you may be able to receive the Funds' 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 FUNDS: [LOGO OF KEYBOARD] [LOGO OF MOUSE] BY E-MAIL: ON THE INTERNET: American_Beacon.Funds@ambeacon.com Visit our website at www.americanbeaconfunds.com - ---------------------------------------------------------------------------------------------------------------------------------- [LOGO OF TELEPHONE:] [LOGO OF MAIL] BY TELEPHONE: BY MAIL: Cash Management Class PlanAhead Class(R) Cash Management Class PlanAhead Class(R) Institutional Class ------------------ Institutional Class ------------------ ------------------- Call (800) 388-3344 Platinum Class(sm) American Beacon Funds Call (800) 658-5811 ------------------ P.O. Box 219643 American Beacon Funds Kansas City, MO 64121-9643 Platinum Class(sm) 4151 Amon Carter Blvd., MD 2450 ------------------ Fort Worth, TX 76155 Call (800) 967-9009 - ----------------------------------------------------------------------------------------------------------------------------------
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES In addition to the Schedule of Investments provided in each semiannual 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 Funds' 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 each 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 Funds' Forms N-PX are available on the SEC's website at www.sec.gov. Each 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 SERVICES PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP Portland, Maine Chicago, Illinois
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 aservice mark of AMR Corporation. PlanAhead Class is a registered service mark of American Beacon Advisors, Inc. Platinum Class, American Beacon Money Market Fund, American Beacon U.S. Government Money Market Fund, and American Beacon Municipal Money Market Fund are service marks of American Beacon Advisors, Inc. [LOGO OF AMERICAN BEACON FUNDS] AMERICAN BEACON FUNDS(SM) 4151 Amon Carter Blvd. MD 2450 Fort Worth, TX 76155 1.800.658.5811 www.americanbeaconfunds.com 534553 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 reports presented in Item 1. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not Applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not Applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not Applicable. ITEM 6. SCHEDULE OF INVESTMENTS. The schedules of investments for each series of the Trust are included in the shareholder reports presented in Item 1. The shareholder report for the S&P 500 Index Fund, the Small Cap Index Fund and the International Equity Index Fund presented in Item 1 includes a summary schedule of investments for the Master International Index Series and the Master Small Cap Index Series, both of which are series of the Master Quantitative Series Trust. A complete schedule of investments for each of these two series follows. MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ Australia - 4.9% Airlines - 0.0% 32,602 Qantas Airways Ltd. $ 83,747 -------------------------------------------------------------------------------------------------------------- BEVERAGES - 0.1% 26,064 Coca-Cola Amatil Ltd. 156,752 86,856 Foster's Group Ltd. 352,215 ------------- 508,967 -------------------------------------------------------------------------------------------------------------- BIOTECHNOLOGY - 0.1% 11,970 CSL Ltd. 307,665 -------------------------------------------------------------------------------------------------------------- CAPITAL MARKETS - 0.1% 11,468 Macquarie Bank Ltd. 522,302 -------------------------------------------------------------------------------------------------------------- CHEMICALS - 0.1% 13,503 Orica Ltd. 183,209 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 1.3% 74,757 Australia & New Zealand Banking Group Ltd. 1,239,398 51,438 Commonwealth Bank of Australia 1,487,962 64,791 National Australia Bank Ltd. 1,519,138 81,489 Westpac Banking Corp. 1,239,190 ------------- 5,485,688 -------------------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES - 0.1% 53,780 Brambles Industries Ltd. 334,918 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING - 0.0% 7,743 Leighton Holdings Ltd. 67,874 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS - 0.2% 19,286 Boral Ltd. 95,261 36,728 CSR Ltd. 75,029 3,992 James Hardie Industries NV 23,095 41,326 Rinker Group Ltd. 441,009 ------------- 634,394 -------------------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING - 0.1% 41,043 Amcor Ltd. 209,609 -------------------------------------------------------------------------------------------------------------- DISTRIBUTORS - 0.0% 65,581 Pacific Brands Ltd. 113,475 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES - 0.1% 1,250 Australian Stock Exchange Ltd. 22,038 23,490 Challenger Financial Services Group Ltd. 55,864 16,417 SFE Corp. Ltd. 133,272 23,405 Suncorp-Metway Ltd. 358,770 ------------- 569,944 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1% 112,683 Telstra Corp. Ltd. 434,615 -------------------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING - 0.2% 60,420 Coles Myer Ltd. 426,469 44,968 Woolworths Ltd. 565,909 ------------- 992,378 -------------------------------------------------------------------------------------------------------------- GAS UTILITIES - 0.1% 20,590 Australian Gas Light Co., Ltd. 223,335 -------------------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES - 0.0% 7,344 Ansell Ltd. 56,203 -------------------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES - 0.1% 40,746 Mayne Group Ltd. 147,217 2,368 Sonic Healthcare Ltd. 22,689 ------------- 169,906 -------------------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 0.1% 4,629 Aristocrat Leisure Ltd. 40,930 23,453 TABCORP Holdings Ltd. 293,183 14,689 UNiTAB Ltd. 159,552 ------------- 493,665 -------------------------------------------------------------------------------------------------------------- IT SERVICES - 0.0% 11,639 Computershare Ltd. 51,989 -------------------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES - 0.1% 15,471 Wesfarmers Ltd. 471,827 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.3% 75,906 AMP Ltd. 374,349 45,366 AXA Asia Pacific Holdings Ltd. 151,461 69,692 Insurance Australia Group Ltd. 319,266
1 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ 27,875 QBE Insurance Group Ltd. $ 340,600 ------------- 1,185,676 -------------------------------------------------------------------------------------------------------------- MEDIA - 0.1% 73,935 John Fairfax Holdings Ltd. 242,334 6,114 Publishing & Broadcasting Ltd. 69,207 ------------- 311,541 -------------------------------------------------------------------------------------------------------------- METALS & MINING - 0.8% 52,998 Alumina Ltd. 225,015 152,378 BHP Billiton Ltd. 2,108,118 18,416 BlueScope Steel Ltd. 115,529 30,834 Iluka Resources Ltd. 176,979 14,132 Newcrest Mining Ltd. 187,219 23,360 OneSteel Ltd. 47,186 15,304 Rio Tinto Ltd. 522,845 ------------- 3,382,891 -------------------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS - 0.2% 11,923 Caltex Australia Ltd. 144,049 24,197 Origin Energy Ltd. 140,360 34,877 Santos Ltd. 300,941 15,563 Woodside Petroleum Ltd. 346,989 ------------- 932,339 -------------------------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS - 0.0% 5,300 PaperlinX Ltd. 12,160 -------------------------------------------------------------------------------------------------------------- REAL ESTATE - 0.5% 113,352 CFS Gandel Retail Trust 144,724 14,559 Centro Properties Group/New 65,365 57,330 Commonwealth Property Office Fund 55,280 79,688 General Property Trust 221,708 85,226 ING Industrial Fund 135,773 31,118 Investa Property Group 46,016 18,025 Lend Lease Corp., Ltd. 178,064 20,878 Macquire Goodman Group 64,930 46,448 Mirvac Group 126,395 62,720 Stockland 263,901 71,700 Westfield Group 969,547 ------------- 2,271,703 -------------------------------------------------------------------------------------------------------------- ROAD & RAIL - 0.0% 15,996 Toll Holdings Ltd. 159,239 -------------------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE - 0.1% 102,562 Macquarie Infrastructure Group 325,219 16,500 Patrick Corp. Ltd. 70,306 10,811 Transurban Group 61,393 ------------- 456,918 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN AUSTRALIA 20,628,177 - ------------------------------------------------------------------------------------------------------------------------------------ AUSTRIA - 0.5% BUILDING PRODUCTS - 0.1% 3,535 Wienerberger AG 164,211 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 0.1% 1,063 Bank Austria Creditanstalt AG 110,984 7,239 Erste Bank der Oesterreichischen Sparkassen AG 362,563 ------------- 473,547 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS - 0.0% 53 RHI AG (a) 1,445 -------------------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING - 0.0% 568 Mayr-Melnhof Karton AG 78,736 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1% 19,827 Telekom Austria AG 385,738 -------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES - 0.0% 47 Verbund - Oesterreichische Elektrizitaetswirtschafts AG 12,973 -------------------------------------------------------------------------------------------------------------- MACHINERY - 0.0% 1,316 Andritz AG 125,625 --------------------------------------------------------------------------------------------------------------
2 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ METALS & MINING - 0.0% 906 Boehler-Uddeholm AG $ 119,996 -------------------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS - 0.1% 447 OMV AG 194,813 -------------------------------------------------------------------------------------------------------------- REAL ESTATE - 0.0% 5,877 IMMOFINANZ Immobilien Anlagen AG (a) 53,861 -------------------------------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS - 0.1% 105,980 Hagemeyer NV - Registered Shares 251,478 -------------------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE - 0.0% 1,169 Flughafen Wien AG 75,858 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN AUSTRIA 1,938,281 - ------------------------------------------------------------------------------------------------------------------------------------ BELGIUM - 1.4% BEVERAGES - 0.1% 5,910 InBev NV 200,124 -------------------------------------------------------------------------------------------------------------- CHEMICALS - 0.1% 2,818 Solvay SA 289,817 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 0.3% 25,528 Dexia 562,790 10,019 KBC Bancassurance Holding 792,059 ------------- 1,354,849 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING - 0.0% 4,785 Suez SA (a) 58 -------------------------------------------------------------------------------------------------------------- DISTRIBUTORS - 0.0% 222 D'ieteren SA 45,959 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES - 0.5% 55,909 Fortis 1,553,404 3,292 Groupe Bruxelles Lambert SA 285,360 ------------- 1,838,764 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1% 9,883 Belgacom SA 338,008 -------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES - 0.1% 1,263 Electrabel 552,142 -------------------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 0.0% 1,022 Bekaert SA 76,836 -------------------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.0% 520 Barco NV 37,111 -------------------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING - 0.1% 1,003 Colruyt SA 136,850 1,314 Delhaize Group 78,904 950 Delhaize Group (b) 56,525 ------------- 272,279 -------------------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES - 0.0% 1,608 Omega Pharma SA 83,125 -------------------------------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS - 0.0% 2,040 AGFA-Gevaert NV 56,433 -------------------------------------------------------------------------------------------------------------- MARINE - 0.0% 1,790 CMB CIE MARITIME BELGE 55,824 -------------------------------------------------------------------------------------------------------------- METALS & MINING - 0.0% 1,724 Umicore 138,484 52 Umicore (a) 6 ------------- 138,490 -------------------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS - 0.0% 1,790 Euronav Sa 52,551 -------------------------------------------------------------------------------------------------------------- PHARMACEUTICALS - 0.1% 4,095 UCB SA 199,247 -------------------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES - 0.0% 900 Mobistar SA 75,291 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN BELGIUM 5,666,908 - ------------------------------------------------------------------------------------------------------------------------------------ BERMUDA - 0.0% TEXTILES, APPAREL & LUXURY GOODS - 0.0% 21,785 Yue Yuen Industrial Holdings 66,700 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN BERMUDA 66,700 - ------------------------------------------------------------------------------------------------------------------------------------
3 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ DENMARK - 0.8% BEVERAGES - 0.0% 356 Carlsberg A/S $ 18,276 -------------------------------------------------------------------------------------------------------------- CHEMICALS - 0.0% 2,267 Novozymes A/S Class B 112,332 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 0.1% 17,488 Danske Bank A/S 526,319 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING - 0.0% 1,417 FLS Industries A/S Class B 28,776 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1% 11,049 TDC A/S 473,890 -------------------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 0.0% 5,696 Vestas Wind Systems A/S (a) 94,620 -------------------------------------------------------------------------------------------------------------- FOOD PRODUCTS - 0.1% 2,482 Danisco A/S 161,292 2,039 East Asiatic Co., Ltd. A/S 144,098 ------------- 305,390 -------------------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES - 0.1% 186 Coloplast AS Class B 10,803 5,043 GN Store Nord 57,146 1,530 William Demant Holding (a) 76,186 ------------- 144,135 -------------------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES - 0.0% 464 Bang & Olufsen A/S Class B 32,603 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.0% 907 Topdanmark A/S (a) 66,161 -------------------------------------------------------------------------------------------------------------- MACHINERY - 0.0% 820 NKT Holding A/S 30,707 -------------------------------------------------------------------------------------------------------------- MARINE - 0.1% 51 AP Moller - Maersk A/S 487,190 -------------------------------------------------------------------------------------------------------------- PHARMACEUTICALS - 0.2% 3,519 H Lundbeck A/S 88,614 13,315 Novo-Nordisk A/S B 678,156 ------------- 766,770 -------------------------------------------------------------------------------------------------------------- ROAD & RAIL - 0.1% 1,730 DSV A/S 146,994 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN DENMARK 3,234,163 - ------------------------------------------------------------------------------------------------------------------------------------ FINLAND - 1.6% AUTO COMPONENTS - 0.0% 6,710 Nokian Renkaat Oyj 122,340 -------------------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT - 0.8% 195,105 Nokia Oyj 3,271,434 1,270 Nokia Oyj (b) 21,133 ------------- 3,292,567 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1% 5,791 Elisa Corp. 90,721 34,753 TeliaSonera AB 165,350 ------------- 256,071 -------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES - 0.1% 23,140 Fortum Oyj 371,192 -------------------------------------------------------------------------------------------------------------- IT SERVICES - 0.1% 6,175 Tietoenator Oyj 188,390 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.1% 6,594 Pohjola Group Plc Class D 95,797 22,588 Sampo Oyj 352,220 ------------- 448,017 -------------------------------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS - 0.0% 5,904 Amer Sports Corp. 112,219 -------------------------------------------------------------------------------------------------------------- MACHINERY - 0.1% 2,211 Cargotec Corp. Class B 61,753 2,211 Kone Oyj Class B 132,499 9,256 Metso Oyj 201,929 231 Wartsila Oyj 6,673 ------------- 402,854 -------------------------------------------------------------------------------------------------------------- METALS & MINING - 0.0% 447 Outokumpu Oyj 5,763 8,196 Rautaruukki Oyj 122,543 ------------- 128,306 -------------------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS - 0.1% 7,259 Neste Oil Oyj 188,066 --------------------------------------------------------------------------------------------------------------
4 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ PAPER & FOREST PRODUCTS - 0.2% 33,345 Stora Enso Oyj Class R $ 427,107 30,054 UPM-Kymmene Oyj 577,430 ------------- 1,004,537 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN FINLAND 6,514,559 - ------------------------------------------------------------------------------------------------------------------------------------ FRANCE - 9.1% AEROSPACE & DEFENSE - 0.2% 10,187 European Aeronautic Defense and Space Co. 324,973 7,590 Sagem SA 157,405 4,303 Thales SA 174,985 2,174 Zodiac SA 116,833 ------------- 774,196 -------------------------------------------------------------------------------------------------------------- AIRLINES - 0.0% 3,419 Air France-KLM 51,989 -------------------------------------------------------------------------------------------------------------- AUTO COMPONENTS - 0.1% 6,148 Compagnie Generale des Etablissements Michelin 374,760 4,494 Valeo SA 201,849 ------------- 576,609 -------------------------------------------------------------------------------------------------------------- AUTOMOBILES - 0.3% 7,721 Peugeot SA 457,838 8,205 Renault SA 724,146 ------------- 1,181,984 -------------------------------------------------------------------------------------------------------------- BEVERAGES - 0.1% 3,026 Pernod-Ricard 483,574 -------------------------------------------------------------------------------------------------------------- BUILDING PRODUCTS - 0.2% 12,487 Cie de Saint-Gobain 693,739 -------------------------------------------------------------------------------------------------------------- CHEMICALS - 0.2% 4,953 Air Liquide 844,888 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 1.1% 34,066 BNP Paribas 2,338,429 26,219 Credit Agricole SA 665,315 15,863 Societe Generale 1,616,067 ------------- 4,619,811 -------------------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES - 0.0% 1,954 Societe BIC SA 116,649 -------------------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT - 0.1% 56,865 Alcatel SA (a) 624,414 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING - 0.1% 7,294 Vinci SA 607,539 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS - 0.2% 1,192 Imerys SA 82,185 8,850 Lafarge SA 807,321 ------------- 889,506 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.5% 65,044 France Telecom SA 1,902,498 -------------------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 0.2% 289,843 Alstom (a) 287,738 9,721 Schneider Electric SA 733,783 ------------- 1,021,521 -------------------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES - 0.1% 4,872 Technip SA 226,259 -------------------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING - 0.3% 26,539 Carrefour SA 1,288,395 1,834 Casino Guichard Perrachon SA 128,891 ------------- 1,417,286 -------------------------------------------------------------------------------------------------------------- FOOD PRODUCTS - 0.2% 11,304 Groupe Danone 994,916 -------------------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES - 0.1% 5,173 Cie Generale d'Optique Essilor International SA 353,843 -------------------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 0.2% 10,544 Accor SA 494,904 5,111 Sodexho Alliance SA 158,466 ------------- 653,370
5 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ HOUSEHOLD DURABLES - 0.1% 11,782 Thomson $ 282,426 -------------------------------------------------------------------------------------------------------------- IT SERVICES - 0.1% 2,452 Atos Origin (a) 155,551 8,123 Cap Gemini SA (a) 258,441 ------------- 413,992 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.4% 66,599 AXA 1,666,588 775 CNP Assurances 49,634 52,526 SCOR 105,561 ------------- 1,821,783 -------------------------------------------------------------------------------------------------------------- MEDIA - 0.5% 6,788 Lagardere S.C.A. 503,347 2,124 PagesJaunes Groupe SA 49,654 4,855 Publicis Groupe 143,593 3,105 Societe Television Francaise 1 82,625 40,712 Vivendi Universal SA 1,284,449 6,053 Vivendi Universal SA (b) 189,640 ------------- 2,253,308 -------------------------------------------------------------------------------------------------------------- METALS & MINING - 0.1% 24,838 Arcelor 487,739 -------------------------------------------------------------------------------------------------------------- MULTI-UTILITIES - 0.4% 38,436 Suez SA 1,043,728 12,051 Veolia Environnement 453,299 ------------- 1,497,027 -------------------------------------------------------------------------------------------------------------- MULTILINE RETAIL - 0.1% 2,713 Pinault-Printemps-Redoute 280,168 -------------------------------------------------------------------------------------------------------------- OFFICE ELECTRONICS - 0.1% 1,925 Neopost SA 169,544 -------------------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS - 1.4% 24,776 Total SA 5,828,059 4,140 Total SA (a) 50 ------------- 5,828,109 -------------------------------------------------------------------------------------------------------------- PERSONAL PRODUCTS - 0.2% 13,565 L'Oreal SA 974,676 -------------------------------------------------------------------------------------------------------------- PHARMACEUTICALS - 0.9% 45,455 Sanofi-Aventis 3,736,555 -------------------------------------------------------------------------------------------------------------- REAL ESTATE - 0.1% 535 Gecina SA 60,754 1,537 Klepierre 146,722 1,964 Unibail 252,277 ------------- 459,753 -------------------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.1% 28,134 STMicroelectronics NV 451,643 -------------------------------------------------------------------------------------------------------------- SOFTWARE - 0.1% 2,821 Business Objects SA (a) 75,580 2,849 Dassault Systemes SA 138,139 ------------- 213,719 -------------------------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS - 0.2% 189 Hermes International 38,143 10,625 LVMH Moet Hennessy Louis Vuitton SA 821,958 ------------- 860,101 -------------------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE - 0.0% 2,314 Autoroutes du Sud de la France 132,509 -------------------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES - 0.1% 10,321 Bouygues 428,084 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN FRANCE 38,325,727 - ------------------------------------------------------------------------------------------------------------------------------------ GERMANY - 6.3% AIR FREIGHT & LOGISTICS - 0.2% 28,277 Deutsche Post AG 661,394 -------------------------------------------------------------------------------------------------------------- AIRLINES - 0.0% 14,866 Deutsche Lufthansa AG 182,855 -------------------------------------------------------------------------------------------------------------- AUTO COMPONENTS - 0.1% 7,622 Continental AG 549,873 -------------------------------------------------------------------------------------------------------------- AUTOMOBILES - 0.5% 38,817 DaimlerChrysler AG 1,578,057 9,403 Volkswagen AG 430,534 ------------- 2,008,591 --------------------------------------------------------------------------------------------------------------
6 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ BIOTECHNOLOGY - 0.0% 4,938 Qiagen NV (a) $ 57,809 -------------------------------------------------------------------------------------------------------------- CAPITAL MARKETS - 0.5% 23,327 Deutsche Bank AG Registered Shares 1,827,470 3,609 MLP AG 67,505 ------------- 1,894,975 -------------------------------------------------------------------------------------------------------------- CHEMICALS - 0.7% 22,046 BASF AG 1,467,954 32,758 Bayer AG 1,094,181 3,872 Linde AG 261,665 ------------- 2,823,800 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 0.3% 28,262 Bayerische Hypo-und Vereinsbank AG (a) 735,975 18,868 Commerzbank AG 410,253 15,198 Depfa Bank Plc 243,610 ------------- 1,389,838 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS - 0.0% 2,634 HeidelbergCement AG 189,705 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES - 0.1% 6,409 Deutsche Boerse AG 502,323 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.5% 116,148 Deutsche Telekom AG 2,151,410 -------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES - 0.5% 25,987 E.ON AG 2,318,066 -------------------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.0% 2,386 Epcos AG (a) 29,926 -------------------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING - 0.1% 6,372 Metro AG 316,363 -------------------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES - 0.1% 1,654 Celesio AG 130,137 1,747 Fresenius Medical Care AG 149,468 ------------- 279,605 -------------------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 0.1% 8,795 TUI AG 218,171 -------------------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES - 0.6% 33,194 Siemens AG 2,424,850 860 Siemens AG (b) 62,479 ------------- 2,487,329 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.6% 14,372 Allianz AG Registered Shares 1,652,432 8,375 Muenchener Rueckversicherungs AG Registered Shares 893,469 ------------- 2,545,901 -------------------------------------------------------------------------------------------------------------- MACHINERY - 0.1% 8,694 MAN AG 361,338 -------------------------------------------------------------------------------------------------------------- METALS & MINING - 0.1% 13,676 ThyssenKrupp AG 238,254 -------------------------------------------------------------------------------------------------------------- MULTI-UTILITIES - 0.3% 19,392 RWE AG 1,253,202 -------------------------------------------------------------------------------------------------------------- PERSONAL PRODUCTS - 0.0% 572 Beiersdorf AG 64,229 -------------------------------------------------------------------------------------------------------------- PHARMACEUTICALS - 0.2% 4,588 Altana AG 262,894 2,378 Merck KGaA 189,635 9,424 Schering AG 580,500 ------------- 1,033,029 -------------------------------------------------------------------------------------------------------------- REAL ESTATE - 0.0% 2,589 IVG Immobilien AG 48,113 -------------------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.1% 30,054 Infineon Technologies AG (a) 280,892 -------------------------------------------------------------------------------------------------------------- SOFTWARE - 0.4% 9,286 SAP AG 1,618,979 -------------------------------------------------------------------------------------------------------------- SPECIALTY RETAIL - 0.0% 1,160 Douglas Holding AG 41,990 -------------------------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS - 0.2% 2,776 Adidas-Salomon AG 465,501 1,129 Puma AG Rudolf Dassler Sport 279,762 ------------- 745,263 - ------------------------------------------------------------------------------------------------------------------------------------
7 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ THRIFTS & MORTGAGE FINANCE - 0.0% 5,764 Hypo Real Estate Holding AG $ 219,744 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN GERMANY 26,512,967 - ------------------------------------------------------------------------------------------------------------------------------------ GREECE - 0.6% BEVERAGES - 0.1% 5,327 Coca Cola Hellenic Bottling Co. SA 145,106 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 0.3% 13,229 Alpha Bank AE 352,026 8,873 EFG Eurobank Ergasias SA 271,561 1,938 Emporiki Bank of Greece SA 57,389 15,426 National Bank of Greece SA 528,518 3,787 Piraeus Bank SA 70,880 ------------- 1,280,374 -------------------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT - 0.0% 13,744 Intracom SA 69,219 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING - 0.0% 9,858 Technical Olympic SA 59,434 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS - 0.0% 2,682 Titan Cement Co. SA 82,863 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.0% 6,542 Hellenic Telecommunications Organization SA (a) 126,563 -------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES - 0.0% 5,616 Public Power Corp. 140,604 -------------------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 0.1% 6,153 OPAP SA 177,290 -------------------------------------------------------------------------------------------------------------- METALS & MINING - 0.0% 4,057 Viohalco, Hellenic Copper and Aluminum Industry SA 26,130 -------------------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES - 0.1% 11,074 Cosmote Mobile Telecommunications SA 200,565 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN GREECE 2,308,148 - ------------------------------------------------------------------------------------------------------------------------------------ HONG KONG - 1.4% AIRLINES - 0.0% 2,263 Cathay Pacific Airways Ltd. 4,119 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 0.2% 100,400 BOC Hong Kong Holdings Ltd. 189,865 29,739 Bank of East Asia Ltd. 87,802 26,153 Hang Seng Bank Ltd. 356,633 ------------- 634,300 -------------------------------------------------------------------------------------------------------------- DISTRIBUTORS - 0.0% 52,719 Li & Fung Ltd. 109,530 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES - 0.0% 20,000 Hong Kong Exchanges and Clearing Ltd. 51,715 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.0% 71,195 PCCW Ltd. 44,421 -------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES - 0.2% 71,187 CLP Holdings Ltd. 408,442 56,000 HongKong Electric Holdings 255,747 ------------- 664,189 -------------------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 0.0% 94,328 Johnson Electric Holdings Ltd. 86,764 -------------------------------------------------------------------------------------------------------------- GAS UTILITIES - 0.1% 104,240 Hong Kong & China Gas 211,878 -------------------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 0.0% 24,990 Shangri-La Asia Ltd. (f) 38,578 -------------------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES - 0.0% 16,560 Techtronic Industries Co. 41,862 -------------------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES - 0.2% 98,176 Hutchison Whampoa Ltd. 887,250 -------------------------------------------------------------------------------------------------------------- MEDIA - 0.0% 34,025 SCMP Group Ltd. 14,882 -------------------------------------------------------------------------------------------------------------- REAL ESTATE - 0.6% 76,735 Cheung Kong Holdings Ltd. 747,774 12,000 Hang Lung Properties Ltd. 17,676 32,491 Henderson Land Development Co., Ltd. 155,489
8 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ 48,485 New World Development Ltd. $ 59,567 48,421 Sino Land Co. 51,702 68,324 Sun Hung Kai Properties Ltd. 674,600 48,077 Swire Pacific Ltd. Class A 425,211 56,107 Wharf Holdings Ltd. 197,049 ------------- 2,329,068 -------------------------------------------------------------------------------------------------------------- ROAD & RAIL - 0.0% 24,500 MTR Corp. 47,277 -------------------------------------------------------------------------------------------------------------- SEMICONDUCTORS & 5,004 ASM Pacific Technology 23,432 SEMICONDUCTOR EQUIPMENT - 0.0% -------------------------------------------------------------------------------------------------------------- SPECIALTY RETAIL - 0.1% 52,000 Esprit Holdings Ltd. 376,288 132,394 Giordano International Ltd. 91,121 ------------- 467,409 -------------------------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS - 0.0% 65,353 Texwinca Holdings Ltd. 54,228 -------------------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE - 0.0% 18,465 Hopewell Holdings 47,390 -------------------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES - 0.0% 47,000 Hutchison Telecommunications International Ltd. 46,557 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN HONG KONG 5,804,849 - ------------------------------------------------------------------------------------------------------------------------------------ IRELAND - 0.8% AIRLINES - 0.1% 27,680 Ryanair Holdings Plc (a) 214,135 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 0.4% 39,526 Allied Irish Banks Plc 846,986 47,958 Bank of Ireland 776,007 ------------- 1,622,993 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS - 0.2% 936 CRH Plc 24,658 26,953 CRH Plc 716,245 ------------- 740,903 -------------------------------------------------------------------------------------------------------------- FOOD PRODUCTS - 0.0% 22,780 Greencore Group Plc 97,629 4,710 Kerry Group Plc 116,324 ------------- 213,953 -------------------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES - 0.0% 61,080 Waterford Wedgewood Restricted Shares 4,289 -------------------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES - 0.0% 3,189 DCC Plc 63,394 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.0% 12,684 Irish Life & Permanent Plc 222,200 -------------------------------------------------------------------------------------------------------------- MEDIA - 0.1% 21,817 Independent News & Media Plc 67,353 -------------------------------------------------------------------------------------------------------------- PHARMACEUTICALS - 0.0% 15,345 Elan Corp. Plc (a) 104,963 -------------------------------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS - 0.0% 2,786 Grafton Group Plc 32,278 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN IRELAND 3,286,461 - ------------------------------------------------------------------------------------------------------------------------------------ ITALY - 3.8% AEROSPACE & DEFENSE - 0.1% 312,371 Finmeccanica SpA 292,139 -------------------------------------------------------------------------------------------------------------- AUTOMOBILES - 0.1% 38,723 Fiat SpA (a) 281,562 -------------------------------------------------------------------------------------------------------------- CAPITAL MARKETS - 0.1% 10,234 Banca Fideuram SpA 48,605 22,588 Mediobanca SpA 423,593 17,230 Mediolanum SpA 107,844 ------------- 580,042 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 1.1% 13,927 Banca Antonveneta SpA 450,183 132,677 Banca Intesa SpA 607,969 36,404 Banca Intesa SpA (RNC) 155,973 52,096 Banca Monte dei Paschi di Siena SpA 184,039 85,292 Banca Nazionale del Lavoro SpA (a) 294,598
9 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ 16,065 Banca Popolare di Milano SCRL $ 158,705 16,381 Banche Popolari Unite Scrl 325,240 13,238 Banco Popolare di Verona e Novara Scrl 225,655 72,957 Capitalia SpA 408,683 53,193 Sanpaolo IMI SpA 731,565 179,778 UniCredito Italiano SpA 950,690 ------------- 4,493,300 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS - 0.0% 5,565 Italcementi SpA 86,978 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES - 0.0% 4,347 FinecoGroup SpA 39,139 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.5% 444,029 Telecom Italia SpA 1,389,068 258,085 Telecom Italia SpA (RNC) 671,771 ------------- 2,060,839 -------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES - 0.4% 167,101 Enel SpA 1,456,570 21,454 Terna SpA 55,635 ------------- 1,512,205 -------------------------------------------------------------------------------------------------------------- GAS UTILITIES - 0.1% 45,149 Snam Rete Gas SpA 241,815 -------------------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 0.0% 4,473 Autogrill SpA 59,043 -------------------------------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 0.0% 16,589 Edison SpA 36,954 -------------------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES - 0.0% 119,974 Pirelli & C SpA 125,203 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.4% 23,052 Alleanza Assicurazioni SpA 250,614 40,590 Assicurazioni Generali SpA 1,267,823 16,268 Riunione Adriatica di Sicurta SpA 316,891 ------------- 1,835,328 -------------------------------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES - 0.0% 47,870 Telecom Italia Media SpA (a) 23,100 2,170 Tiscali SpA (a) 6,192 ------------- 29,292 -------------------------------------------------------------------------------------------------------------- MEDIA - 0.1% 5,198 Arnoldo Mondadori Editore SpA 49,557 13,547 Gruppo Editoriale L'Espresso SpA 74,082 26,201 Mediaset SpA 308,956 171,874 Seat Pagine Gialle SpA 71,788 ------------- 504,383 -------------------------------------------------------------------------------------------------------------- MULTILINE RETAIL - 0.0% 5,245 Rinascente SpA (a) 3,175 5,245 Rozzano 0 ------------- 3,175 -------------------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE 101,171 ENI SpA 2,610,114 FUELS - 0.7% 1,875 ENI SpA (b) 240,375 ------------- 2,850,489 -------------------------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS - 0.1% 5,296 Benetton Group SpA 48,857 9,894 Bulgari SpA 110,978 4,858 Luxottica Group SpA 100,748 ------------- 260,583 -------------------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE - 0.1% 17,309 Autostrade SpA 460,176 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN ITALY 15,752,645 - ------------------------------------------------------------------------------------------------------------------------------------
10 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ Japan - 20.2% Air Freight & Logistics - 0.1% 23,000 Yamato Transport Co., Ltd. $ 319,646 -------------------------------------------------------------------------------------------------------------- AIRLINES - 0.0% 28,000 Japan Airlines Corp. 75,553 -------------------------------------------------------------------------------------------------------------- AUTO COMPONENTS - 0.5% 9,900 Aisin Seiki Co., Ltd. 214,868 26,000 Bridgestone Corp. 500,948 20,600 Denso Corp. 469,407 1,000 NGK Spark Plug Co., Ltd. 11,542 7,000 NOK Corp. 195,831 29,000 Sanden Corp. 122,218 7,000 Stanley Electric Co., Ltd. 113,708 1,000 Toyoda Gosei Co., Ltd. 16,118 8,000 Toyota Industries Corp. 218,753 ------------- 1,863,393 -------------------------------------------------------------------------------------------------------------- AUTOMOBILES - 1.7% 32,400 Honda Motor Co., Ltd. 1,599,386 89,500 Nissan Motor Co., Ltd. 886,842 126,200 Toyota Motor Corp. 4,521,379 9,000 Yamaha Motor Co., Ltd. 165,283 ------------- 7,172,890 -------------------------------------------------------------------------------------------------------------- BEVERAGES - 0.1% 9,000 Asahi Breweries Ltd. 107,373 25,000 Kirin Brewery Co., Ltd. 242,307 27,000 Sapporo Holdings Ltd. 130,358 13,000 Takara Holdings, Inc. 81,067 ------------- 561,105 -------------------------------------------------------------------------------------------------------------- BUILDING PRODUCTS - 0.3% 36,000 Asahi Glass Co., Ltd. 378,811 2,000 Central Glass Co., Ltd. 12,508 12,000 Daikin Industries Ltd. 300,514 11,000 JS Group Corp. 186,427 24,000 Nippon Sheet Glass Co., Ltd. 93,999 30,000 Sanwa Shutter Corp. 172,999 9,000 Toto Ltd. 71,230 ------------- 1,216,488 -------------------------------------------------------------------------------------------------------------- CAPITAL MARKETS - 0.4% 43,000 Daiwa Securities Group, Inc. 266,203 1,100 Jafco Co., Ltd. 58,569 56,000 Nikko Cordial Corp. 246,620 90,000 Nomura Holdings, Inc. 1,077,791 ------------- 1,649,183 -------------------------------------------------------------------------------------------------------------- CHEMICALS - 1.0% 53,000 Asahi Kasei Corp. 252,540 3,000 Daicel Chemical Industries Ltd. 15,811 30,000 Dainippon Ink and Chemicals, Inc. 96,110 3,000 Denki Kagaku Kogyo Kabushiki Kaisha 10,802 2,500 Hitachi Chemical Co., Ltd. 45,912 63,000 Ishihara Sangyo Kaisha Ltd. 139,292 4,000 JSR Corp. 84,469 13,000 Kaneka Corp. 146,061 25,000 Kuraray Co., Ltd. 237,118 42,000 Mitsubishi Chemical Corp. 123,184 18,000 Mitsubishi Gas Chemical Co., Inc. 92,266 49,000 Mitsubishi Rayon Co., Ltd. 203,411 13,000 Mitsui Chemicals, Inc. 76,374 31,000 Nippon Kayaku Co., Ltd. 186,599
11 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ 12,000 Nissan Chemical Industries Ltd. $ 129,302 7,910 Nitto Denko Corp. 453,999 19,500 Shin-Etsu Chemical Co., Ltd. 740,863 18,000 Showa Denko KK 42,722 14,000 Sumitomo Bakelite Co., Ltd. 90,714 54,000 Sumitomo Chemical Co., Ltd. 248,534 52,000 Teijin Ltd. 241,675 49,000 Toray Industries, Inc. 232,596 38,000 Tosoh Corp. 158,090 57,000 Ube Industries Ltd. 116,253 ------------- 4,164,697 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 1.9% 12,000 The 77 Bank Ltd. 73,964 31,000 The Bank of Fukuoka Ltd. 183,801 41,000 The Bank of Yokohama Ltd. 237,172 31,000 The Chiba Bank Ltd. 204,503 13,000 The Gunma Bank Ltd. 78,251 46,000 Hokuhoku Financial Group, Inc. 141,143 23,000 The Joyo Bank Ltd. 112,499 202 Mitsubishi Tokyo Financial Group, Inc. 1,715,387 23,000 Mitsui Trust Holdings, Inc. 236,621 367 Mizuho Financial Group, Inc. 1,662,612 223,000 Resona Holdings, Inc. 416,578 69,000 Shinsei Bank Ltd. 372,367 26,000 The Shizuoka Bank Ltd. 223,608 169 Sumitomo Mitsui Financial Group, Inc. 1,143,850 48,000 The Sumitomo Trust & Banking Co., Ltd. 292,392 4,000 Suruga Bank Ltd. 32,632 176 UFJ Holdings, Inc. 918,040 ------------- 8,045,420 -------------------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES - 0.3% 26,000 Dai Nippon Printing Co., Ltd. 419,294 5,000 Kokuyo Co., Ltd. 67,503 500 Meitec Corp. 15,387 12,000 Secom Co., Ltd. 516,560 15,000 Toppan Printing Co., Ltd. 159,056 ------------- 1,177,800 -------------------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT - 0.0% 8,000 Uniden Corp. 126,776 -------------------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS - 0.4% 84,000 Fujitsu Ltd. 441,188 13,000 Mitsumi Electric Company, Ltd. 134,094 84,000 NEC Corp. 454,833 4,300 Seiko Epson Corp. 143,579 151,000 Toshiba Corp. 602,310 ------------- 1,776,004 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING - 0.3% 9,457 COMSYS Holdings Corp. 87,478 15,000 Chiyoda Corp. 186,129 16,000 JGC Corp. 196,950 46,000 Kajima Corp. 170,201 9,000 Kinden Corp. 66,600
12 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ 41,000 Nishimatsu Construction Co., Ltd. $ 148,001 25,000 Obayashi Corp. 134,690 15,000 Okumura Corp. 84,875 16,000 Shimizu Corp. 74,650 54,000 Taisei Corp. 182,258 3,000 Toda Corp. 12,833 ------------- 1,344,665 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS - 0.1% 34,000 Sumitomo Osaka Cement Co., Ltd. 90,515 47,000 Taiheiyo Cement Corp. 125,548 ------------- 216,063 -------------------------------------------------------------------------------------------------------------- CONSUMER FINANCE - 0.5% 3,100 Acom Co., Ltd. 198,908 500 Aeon Credit Service Co., Ltd. 31,315 2,775 Aiful Corp. 207,105 8,200 Credit Saison Co., Ltd. 273,062 4,100 ORIX Corp. 615,685 3,550 Promise Co., Ltd. 227,782 5,620 Takefuji Corp. 380,381 ------------- 1,934,238 -------------------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING - 0.0% 5,000 Toyo Seikan Kaisha Ltd. 79,099 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES - 0.0% 2,000 Benesse Corp. 64,254 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.2% 239 Nippon Telegraph & Telephone Corp. 1,024,501 -------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES - 0.8% 26,500 Chubu Electric Power Co., Inc. 636,134 6,000 Hokkaido Electric Power Co., Inc. 122,913 28,200 The Kansai Electric Power Co., Inc. 567,512 16,400 Kyushu Electric Power Co., Inc. 356,683 17,600 Tohoku Electric Power Co., Inc. 375,634 57,300 The Tokyo Electric Power Co., Inc. 1,367,733 ------------- 3,426,609 -------------------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 0.2% 21,000 Fujikura Ltd. 102,716 30,000 Furukawa Electric Co., Ltd. 116,415 13,873 Matsushita Electric Works Ltd. 115,681 68,000 Mitsubishi Electric Corp. 360,834 29,000 Sumitomo Electric Industries Ltd. 297,302 3,000 Ushio, Inc. 53,470 ------------- 1,046,418 -------------------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.0% 12,000 Alps Electric Co., Ltd. 183,882 19,000 Anritsu Corp. 116,082 4,000 Citizen Watch Co., Ltd. 36,242 15,000 Dainippon Screen Manufacturing Co., Ltd. 101,119 1,500 Hirose Electric Co., Ltd. 165,283 129,000 Hitachi Ltd. 784,640 4,200 Hoya Corp. 485,155 1,000 Keyence Corp. 224,348 8,900 Kyocera Corp. 681,094 1,200 Mabuchi Motor Co., Ltd. 69,200 8,400 Murata Manufacturing Co., Ltd. 428,301
13 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ 1,900 Nidec Corp. $ 201,300 33,000 Oki Electric Industry Co., Ltd. 116,443 10,000 Omron Corp. 220,648 6,200 TDK Corp. 422,994 3,000 Yokogawa Electric Corp. 37,118 ------------- 4,273,849 -------------------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING - 0.5% 32,000 Aeon Co., Ltd. 488,331 3,900 FamilyMart Co., Ltd. 111,921 18,000 Ito-Yokado Co., Ltd. 597,780 2,400 Lawson, Inc. 83,819 3,200 Matsumotokiyoshi Co., Ltd. 87,212 19,000 Seven-Eleven Japan Co., Ltd. 528,111 4,000 UNY Co., Ltd. 45,519 ------------- 1,942,693 -------------------------------------------------------------------------------------------------------------- FOOD PRODUCTS - 0.2% 32,000 Ajinomoto Co., Inc. 356,647 4,700 Ariake Japan Co., Ltd. 108,158 3,000 Kikkoman Corp. 26,559 40,000 Nichirei Corp. 155,943 2,000 Nippon Meat Packers, Inc. 23,265 11,000 Nisshin Seifun Group, Inc. 114,259 5,300 Nissin Food Products Co., Ltd. 136,075 3,000 Yakult Honsha Co., Ltd. 54,147 7,000 Yamazaki Baking Co., Ltd. 60,455 ------------- 1,035,508 -------------------------------------------------------------------------------------------------------------- GAS UTILITIES - 0.1% 86,000 Osaka Gas Co., Ltd. 270,860 93,000 Tokyo Gas Co., Ltd. 348,299 ------------- 619,159 -------------------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES - 0.1% 6,000 Olympus Corp. 115,333 5,600 Terumo Corp. 161,718 ------------- 277,051 -------------------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES - 0.0% 200 Nichii Gakkan Co. 4,873 1,000 Suzuken Co., Ltd. 25,223 ------------- 30,096 -------------------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 0.0% 1,900 Oriental Land Co., Ltd. 112,824 2,000 Skylark Co., Ltd. 30,467 ------------- 143,291 -------------------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES - 1.1% 2,000 Casio Computer Co., Ltd. 26,171 2,000 Daito Trust Construction Co., Ltd. 74,903 13,000 Daiwa House Industry Co., Ltd. 149,111 1,000 Makita Corp. 19,673 97,000 Matsushita Electric Industrial Co., Ltd. 1,473,251 11,800 Pioneer Corp. 178,794 41,000 Sanyo Electric Co., Ltd. 104,711 20,000 Sekisui Chemical Co., Ltd. 137,894 24,000 Sekisui House Ltd. 242,794 43,000 Sharp Corp. 672,882 42,800 Sony Corp. 1,475,463 ------------- 4,555,647 --------------------------------------------------------------------------------------------------------------
14 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ Household Products - 0.2% 28,000 Kao Corp. $ 660,771 2,400 Uni-Charm Corp. 96,598 ------------- 757,369 -------------------------------------------------------------------------------------------------------------- IT SERVICES - 0.2% 3,100 CSK Corp. 121,974 400 Itochu Techno-Science Corp. 14,042 47 NET One Systems Co., Ltd. 121,307 57 NTT Data Corp. 194,955 1,500 Nomura Research Institute Ltd. 149,986 100 Obic Co., Ltd. 16,993 400 TIS, Inc. 13,681 ------------- 632,938 -------------------------------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 0.1% 7,800 Electric Power Development Co. 225,954 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.5% 64 Millea Holdings, Inc. 860,572 70,000 Mitsui Sumitomo Insurance Co., Ltd. 631,080 29,000 Sompo Japan Insurance, Inc. 293,114 7,250 T&D Holdings, Inc. 341,531 ------------- 2,126,297 -------------------------------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL - 0.0% 130 Rakuten, Inc. 104,296 -------------------------------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES - 0.2% 201 eAccess Ltd. 135,500 12,000 Softbank Corp. 471,077 124 Yahoo! Japan Corp. 260,735 ------------- 867,312 -------------------------------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS - 0.3% 2,100 Bandai Co., Ltd. 42,451 24,000 Fuji Photo Film Co., Ltd. 773,215 6,000 Nikon Corp. 68,008 1,400 Sankyo Co., Ltd. (Gunma) 65,193 2,732 Sega Sammy Holdings, Inc. 167,653 3,500 Shimano, Inc. 99,495 6,600 Yamaha Corp. 103,041 ------------- 1,319,056 -------------------------------------------------------------------------------------------------------------- MACHINERY - 0.7% 20,000 Amada Co., Ltd. 136,269 15,000 Amano Corp. 178,955 22,000 Ebara Corp. 84,776 8,200 Fanuc Ltd. 521,704 5,000 Hino Motors Ltd. 29,014 92,000 Ishikawajima-Harima Heavy Industries Co., Ltd. 133,670 26,000 Kawasaki Heavy Industries Ltd. 49,977 39,000 Komatsu Ltd. 303,032 8,000 Koyo Seiko Co., Ltd. (f) 107,210 47,000 Kubota Corp. 257,883 3,000 Kurita Water Industries Ltd. 46,377 25,000 Minebea Co., Ltd. 101,074 101,000 Mitsubishi Heavy Industries Ltd. 264,326 50,000 Mitsui Engineering & Shipbuilding Co., Ltd. 97,915 3,000 NGK Insulators Ltd. 29,266 14,000 NSK Ltd. 71,889 15,000 NTN Corp. 80,679
15 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ 1,400 SMC Corp. $ 152,874 32,000 Sumitomo Heavy Industries Ltd. 153,921 3,700 THK Co., Ltd. 76,464 9,000 Takuma Co., Ltd. 63,920 ------------- 2,941,195 -------------------------------------------------------------------------------------------------------------- MARINE - 0.2% 29,000 Kawasaki Kisen Kaisha Ltd. 172,205 50,000 Mitsui OSK Lines Ltd. 309,088 49,000 Nippon Yusen Kabushiki Kaisha 282,123 ------------- 763,416 -------------------------------------------------------------------------------------------------------------- MEDIA - 0.1% 600 Asatsu-DK, Inc. 16,731 33 Dentsu, Inc. 81,599 64 Fuji Television Network, Inc. 124,177 5,000 Toho Co., Ltd. 72,196 4,000 Tokyo Broadcasting System, Inc. 66,276 ------------- 360,979 -------------------------------------------------------------------------------------------------------------- METALS & MINING - 0.6% 40,000 DAIDO STEEL CO. LTD. 180,489 7,000 Dowa Mining Co., Ltd. 46,747 27,600 JFE Holdings, Inc. 682,465 54,000 Kobe Steel Ltd. 101,850 10,000 Mitsubishi Materials Corp. 23,644 22,000 Mitsui Mining & Smelting Co., Ltd. 103,438 323,000 Nippon Steel Corp. 752,044 40,000 Nisshin Steel Co., Ltd. 100,713 208,000 Sumitomo Metal Industries Ltd. 356,647 32,000 Sumitomo Metal Mining Co., Ltd. 219,764 ------------- 2,567,801 -------------------------------------------------------------------------------------------------------------- MULTILINE RETAIL - 0.0% 9,000 Daimaru, Inc. 79,921 6,000 Hankyu Department Stores 38,011 1,000 Isetan Co., Ltd. 12,571 7,000 Marui Co., Ltd. 94,441 16,000 Mitsukoshi Ltd. 72,196 1,800 Ryohin Keikaku Co., Ltd. 89,017 4,000 Takashimaya Co., Ltd. 35,845 ------------- 422,002 -------------------------------------------------------------------------------------------------------------- OFFICE ELECTRONICS - 0.6% 31,900 Canon, Inc. 1,681,220 26,000 Konica Minolta Holdings, Inc. 243,083 37,000 Ricoh Co., Ltd. 578,657 ------------- 2,502,960 -------------------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS - 0.2% 21,000 Nippon Mining Holdings, Inc. 119,204 66,000 Nippon Oil Corp. 448,497 6,000 Showa Shell Sekiyu KK 60,103 17,000 Teikoku Oil Co., Ltd. 126,721 10,000 TonenGeneral Sekiyu KK 108,293 ------------- 862,818 -------------------------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS - 0.1% 39 Nippon Paper Group, Inc. 143,245 31,000 OJI Paper Co., Ltd. 161,980 ------------- 305,225 --------------------------------------------------------------------------------------------------------------
16 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ Personal Products - 0.1% 6,100 Aderans Co., Ltd. $ 144,504 10,000 Shiseido Co., Ltd. 126,342 ------------- 270,846 -------------------------------------------------------------------------------------------------------------- PHARMACEUTICALS - 1.1% 17,300 Chugai Pharmaceutical Co., Ltd. 267,283 14,100 Daiichi Pharmaceutical Co., Ltd. 312,386 10,000 Eisai Co., Ltd. 336,612 11,000 Kaken Pharmaceutical Co., Ltd. 75,643 11,000 Kyowa Hakko Kogyo Co., Ltd. 71,374 15,100 Sankyo Co., Ltd. 290,254 5,500 Santen Pharmaceutical Co., Ltd. 125,575 18,000 Shionogi & Co., Ltd. 232,452 7,000 Taisho Pharmaceutical Co., Ltd. 136,450 38,000 Takeda Pharmaceutical Co., Ltd. 1,886,111 27,600 Yamanouchi Pharmaceutical Co., Ltd. 943,994 ------------- 4,678,134 -------------------------------------------------------------------------------------------------------------- REAL ESTATE - 0.5% 27 Japan Prime Realty Investment Corp. 79,921 14 Japan Real Estate Investment Corp. (f) 119,015 13 Japan Retail Fund Investment Corp. 111,569 2,300 Leopalace21 Corp. 38,254 54,000 Mitsubishi Estate Co., Ltd. 595,019 41,000 Mitsui Fudosan Co., Ltd. 460,653 16 Nippon Building Fund, Inc. 144,391 24 Nomura Real Estate Office Fund, Inc. 182,366 24,000 Sumitomo Realty & Development Co., Ltd. 269,434 24,000 Tokyo Tatemono Co., Ltd. 161,357 26,000 Tokyu Land Corp. 122,715 ------------- 2,284,694 -------------------------------------------------------------------------------------------------------------- ROAD & RAIL - 0.7% 41 Central Japan Railway Co. 317,092 175 East Japan Railway Co. 900,189 15,000 Keihin Electric Express Railway Co., Ltd. 91,779 19,000 Keio Electric Railway Co., Ltd. 102,707 38,000 Keisei Electric Railway Co., Ltd. 190,326 72,000 Kintetsu Corp. (f) 219,619 37,000 Nippon Express Co., Ltd. 160,942 25,000 Odakyu Electric Railway Co., Ltd. 132,208 42,000 Tobu Railway Co., Ltd. 152,369 41,000 Tokyu Corp. 184,261 98 West Japan Railway Co. 336,071 ------------- 2,787,563 -------------------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR 3,500 Advantest Corp. 258,686 EQUIPMENT - 0.3% 2,100 Elpida Memory, Inc. 67,846 1,200 NEC Electronics Corp. 54,147 4,000 Rohm Co., Ltd. 386,247 8,000 Sanken Electric Co., Ltd. 104,467 9,200 Tokyo Electron Ltd. 487,357 ------------- 1,358,750 -------------------------------------------------------------------------------------------------------------- SOFTWARE - 0.3% 4,400 Fuji Soft ABC, Inc. 140,565 7,300 Hitachi Software Engineering Co., Ltd. 124,181
17 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ 3,600 Konami Corp. $ 76,022 9,000 Namco Ltd. 119,881 5,400 Nintendo Co., Ltd. 565,292 900 Oracle Corp. Japan 34,031 5,500 Trend Micro, Inc. 196,056 ------------- 1,256,028 -------------------------------------------------------------------------------------------------------------- SPECIALTY RETAIL - 0.2% 2,800 Aoyama Trading Co., Ltd. 70,625 4,500 Autobacs Seven Co., Ltd. 151,476 3,500 Fast Retailing Co., Ltd. 181,933 600 Shimachu Co., Ltd. 15,107 600 Shimamura Co., Ltd. 50,681 700 USS Co., Ltd. 44,662 4,200 Yamada Denki Co., Ltd. (f) 241,819 ------------- 756,303 -------------------------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS - 0.1% 36,000 Gunze Ltd. 161,790 1,000 Nisshinbo Industries, Inc. 8,194 8,000 Onward Kashiyama Co., Ltd. 101,363 2,000 Toyobo Co., Ltd. 4,675 5,000 Wacoal Corp. 63,352 1,600 World Co., Ltd. 56,024 ------------- 395,398 -------------------------------------------------------------------------------------------------------------- TOBACCO - 0.2% 49 Japan Tobacco, Inc. 654,453 -------------------------------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS - 0.5% 53,000 Itochu Corp. 268,324 80,000 Marubeni Corp. 275,065 58,000 Mitsubishi Corp. 789,315 47,000 Mitsui & Co., Ltd. 445,357 23,100 Sojitz Holdings Corp. 99,855 38,000 Sumitomo Corp. 304,864 ------------- 2,182,780 -------------------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE - 0.0% 2,000 Kamigumi Co., Ltd. 15,450 8,000 Mitsubishi Logistics Corp. 81,942 ------------- 97,392 -------------------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES - 0.4% 115 KDDI Corp. 532,398 685 NTT DoCoMo, Inc. 1,013,807 ------------- 1,546,205 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN JAPAN 85,190,260 - ------------------------------------------------------------------------------------------------------------------------------------ NETHERLANDS - 4.7% AIR FREIGHT & LOGISTICS - 0.1% 18,370 TNT NV 465,922 -------------------------------------------------------------------------------------------------------------- BEVERAGES - 0.1% 11,714 Heineken NV 362,198 -------------------------------------------------------------------------------------------------------------- CHEMICALS - 0.2% 11,211 Akzo Nobel NV 442,197 5,120 DSM NV 350,838 ------------- 793,035 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 0.5% 82,104 ABN AMRO Holding NV 2,022,780 -------------------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES - 0.0% 1,086 Randstad Holdings NV 37,550 7,896 Vedior NV 111,462 ------------- 149,012 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES - 0.6% 6,281 Euronext NV 212,839 81,060 ING Groep NV CVA 2,293,429 ------------- 2,506,268 --------------------------------------------------------------------------------------------------------------
18 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ DIVERSIFIED TELECOMMUNICATION SERVICES - 0.2% 105,076 Royal KPN NV $ 882,842 -------------------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES - 0.0% 228 IHC Caland NV 15,651 -------------------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING - 0.1% 70,445 Koninklijke Ahold NV (a) 579,935 -------------------------------------------------------------------------------------------------------------- FOOD PRODUCTS - 0.5% 6,433 Royal Numico NV 257,632 27,472 Unilever NV 1,784,350 ------------- 2,041,982 -------------------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES - 0.4% 61,680 Koninklijke Philips Electronics NV 1,560,668 -------------------------------------------------------------------------------------------------------------- IT SERVICES - 0.0% 3,377 Getronics NV 39,906 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.2% 60,535 Aegon NV 784,903 -------------------------------------------------------------------------------------------------------------- MEDIA - 0.2% 39,460 Reed Elsevier NV 550,338 10,501 VNU NV 293,291 8,647 Wolters Kluwer NV 165,612 ------------- 1,009,241 -------------------------------------------------------------------------------------------------------------- OFFICE ELECTRONICS - 0.0% 194 OCE NV 2,861 -------------------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS - 1.4% 89,924 Royal Dutch Petroleum Co. 5,878,809 -------------------------------------------------------------------------------------------------------------- REAL ESTATE - 0.1% 1,655 Corio NV 92,508 1,648 Rodamco Europe NV 135,172 332 Wereldhave NV 35,431 ------------- 263,111 -------------------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.1% 24,471 ASML Holding NV (a) 385,729 -------------------------------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS - 0.0% 30,280 Hagemeyer NV (a) 71,851 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN THE NETHERLANDS 19,816,704 - ------------------------------------------------------------------------------------------------------------------------------------ NEW ZEALAND - 0.2% COMMERCIAL SERVICES & SUPPLIES - 0.0% 23,708 Waste Management NZ Ltd. 111,018 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS - 0.0% 20,926 Fletcher Building Ltd. 100,611 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1% 68,034 Telecom Corp. of New Zealand Ltd. 284,501 -------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES - 0.1% 22,289 Contact Energy Ltd. 119,416 -------------------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES - 0.0% 45,575 Fisher & Paykel Healthcare Corp. 103,378 -------------------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES - 0.0% 30,232 Fisher & Paykel Appliances Holdings Ltd. 70,468 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.0% 9,996 Tower Ltd. (a) 14,954 -------------------------------------------------------------------------------------------------------------- MULTILINE RETAIL - 0.0% 16,257 Warehouse Group Ltd. 45,246 -------------------------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS - 0.0% 5,644 Carter Holt Harvey Ltd. 8,954 1 Tenon Ltd. 3 ------------- 8,957 -------------------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE - 0.0% 64,800 Auckland International Airport Ltd. 107,760 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN NEW ZEALAND 966,309 - ------------------------------------------------------------------------------------------------------------------------------------ NORWAY - 0.7% AIRLINES - 0.0% 2,392 SAS AB 20,489 -------------------------------------------------------------------------------------------------------------- CHEMICALS - 0.0% 8,336 Yara International ASA 132,605 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 0.1% 19,915 DNB NOR ASA 207,898 --------------------------------------------------------------------------------------------------------------
19 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL SERVICES & SUPPLIES - 0.0% 2,598 Tomra Systems ASA $ 10,729 -------------------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT - 0.0% 9,463 Tandberg ASA 101,320 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1% 15,995 Telenor ASA 127,832 8,900 Telenor ASA (b) 213,600 ------------- 341,432 -------------------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES - 0.0% 3,691 Smedvig ASA Class A (f) 74,805 7,800 Stolt Offshore SA (a) 71,285 ------------- 146,090 -------------------------------------------------------------------------------------------------------------- FOOD PRODUCTS - 0.1% 8,570 Orkla ASA 315,912 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.0% 8,611 Storebrand ASA 80,673 -------------------------------------------------------------------------------------------------------------- MEDIA - 0.0% 3,568 Schibsted ASA 98,235 -------------------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS - 0.4% 3,444 Frontline Ltd. 138,017 7,859 Norsk Hydro ASA 721,252 37,653 Statoil ASA 768,863 ------------- 1,628,132 -------------------------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS - 0.0% 3,089 Norske Skogindustrier ASA 50,910 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN NORWAY 3,134,425 - ------------------------------------------------------------------------------------------------------------------------------------ PORTUGAL - 0.3% COMMERCIAL BANKS - 0.1% 25,668 Banco BPI SA 97,886 88,715 Banco Comercial Portugues SA Registered Shares 227,695 6,793 Banco Espirito Santo SA Registered Shares 106,007 ------------- 431,588 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS - 0.0% 15,305 Cimpor Cimentos de Portugal SA 85,975 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1% 31,051 Portugal Telecom SGPS SA Registered Shares 294,721 -------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES - 0.1% 57,220 Energias de Portugal SA (f) 144,089 -------------------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING - 0.0% 4,098 Jeronimo Martins 58,791 -------------------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES - 0.0% 38,364 Sonae SGPS SA 52,948 -------------------------------------------------------------------------------------------------------------- MEDIA - 0.0% 4,230 PT Multimedia Servicos de Telecomunicacoes e Multimedia SGPS SA 44,502 -------------------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE - 0.0% 7,477 Brisa-Auto Estradas de Portugal SA Private Shares 58,748 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN PORTUGAL 1,171,362 - ------------------------------------------------------------------------------------------------------------------------------------ SINGAPORE - 0.8% AEROSPACE & DEFENSE - 0.0% 56,213 Singapore Technologies Engineering Ltd. 80,623 -------------------------------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS - 0.0% 138,954 Singapore Post Ltd. 81,941 -------------------------------------------------------------------------------------------------------------- AIRLINES - 0.1% 17,582 Singapore Airlines Ltd. 116,706 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 0.3% 58,109 DBS Group Holdings Ltd. 492,478 36,598 Oversea-Chinese Banking Corp. 251,607 64,572 United Overseas Bank Ltd. 543,426 ------------- 1,287,511 -------------------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS - 0.0% 5,907 Creative Technology Ltd. 38,860 -------------------------------------------------------------------------------------------------------------- DISTRIBUTORS - 0.0% 3,331 Jardine Cycle & Carriage Ltd. 26,256 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES - 0.0% 82,000 Singapore Exchange Ltd. 102,542 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1% 266,803 Singapore Telecommunications Ltd. 436,423 --------------------------------------------------------------------------------------------------------------
20 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ Electronic Equipment & Instruments - 0.0% 5,000 Venture Corp. Ltd. $ 47,413 -------------------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES - 0.0% 83,000 Parkway Holdings Ltd. 92,479 -------------------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 0.0% 2,631 Overseas Union Enterprise Ltd. 14,190 -------------------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES - 0.1% 3,836 Fraser and Neave Ltd. 35,693 1,766 Haw Par Corp. Ltd. 5,390 41,914 Keppel Corp. Ltd. 310,511 22,704 SembCorp Industires Ltd. 35,927 ------------- 387,521 -------------------------------------------------------------------------------------------------------------- MACHINERY - 0.1% 107,427 SembCorp Marine Ltd. 167,447 -------------------------------------------------------------------------------------------------------------- MARINE - 0.0% 50,501 Cosco Corp. Singapore Ltd. 58,064 -------------------------------------------------------------------------------------------------------------- MEDIA - 0.0% 36,116 Singapore Press Holdings Ltd. 92,040 -------------------------------------------------------------------------------------------------------------- REAL ESTATE - 0.1% 126,833 CapitaLand Ltd. (f) 178,903 29,535 City Developments Ltd. 131,282 6,457 United Overseas Land Ltd. 8,725 ------------- 318,910 -------------------------------------------------------------------------------------------------------------- ROAD & RAIL - 0.0% 104,816 ComfortDelgro Corp. Ltd. 104,984 -------------------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.0% 89,002 Chartered Semiconductor Manufacturing Ltd.(a) 70,155 1,120 Chartered Semiconductor Manufacturing Ltd. (a)(b) 8,613 ------------- 78,768 -------------------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE - 0.0% 36,085 SembCorp Logistics Ltd. 36,784 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN SINGAPORE 3,569,462 - ------------------------------------------------------------------------------------------------------------------------------------ SOUTH AFRICA - 0.1% BEVERAGES - 0.1% 35,782 SABMiller Plc 558,953 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN SOUTH AFRICA 558,953 - ------------------------------------------------------------------------------------------------------------------------------------ SPAIN - 3.8% AIRLINES - 0.0% 31,929 Iberia Lineas Aereas de Espana 91,612 -------------------------------------------------------------------------------------------------------------- BIOTECHNOLOGY - 0.0% 15,416 Zeltia SA (f) 104,515 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 1.4% 144,754 Banco Bilbao Vizcaya Argentaria SA 2,236,151 48,525 Banco Popular Espanol SA (a) 586,882 252,454 Banco Santander Central Hispano SA 2,931,034 ------------- 5,754,067 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING - 0.2% 13,307 ACS Actividades de Construccion y Servicios, SA 372,789 446 Acciona SA 44,276 2,428 Fomento de Construcciones y Contratas SA 136,950 3,360 Grupo Ferrovial SA 216,814 5,086 Sacyr Vallehermoso SA 120,007 ------------- 890,836 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION 196,291 Telefonica SA 3,217,646 SERVICES - 0.8% 1,124 Telefonica SA (b) 54,975 ------------- 3,272,621 -------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES - 0.6% 47,745 Endesa SA 1,121,950 35,281 Iberdrola SA 931,999 8,894 Union Fenosa SA 271,450 ------------- 2,325,399 -------------------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 0.0% 5,077 Gamesa Corp. Tecnologica SA 68,902 --------------------------------------------------------------------------------------------------------------
21 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ Gas Utilities - 0.1% 7,543 Gas Natural SDG SA $ 222,637 -------------------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 0.0% 7,812 NH Hoteles SA 107,344 -------------------------------------------------------------------------------------------------------------- IT SERVICES - 0.1% 15,396 Amadeus Global Travel Distribution SA A 134,762 11,782 Indra Sistemas SA 233,500 ------------- 368,262 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.0% 8,309 Corporacion Mapfre SA 124,434 -------------------------------------------------------------------------------------------------------------- MEDIA - 0.1% 6,752 Antena 3 de Television SA 135,203 664 Sogecable SA (a) 23,626 10,902 Telefonica Publicidad e Informacion, SA 95,426 ------------- 254,255 -------------------------------------------------------------------------------------------------------------- METALS & MINING - 0.0% 10,980 Acerinox SA (f) 149,812 -------------------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS - 0.2% 41,133 Repsol YPF SA 1,053,722 -------------------------------------------------------------------------------------------------------------- REAL ESTATE - 0.0% 1,852 Metrovacesa SA 109,237 -------------------------------------------------------------------------------------------------------------- SPECIALTY RETAIL - 0.0% 7,341 Inditex SA (f) 189,124 -------------------------------------------------------------------------------------------------------------- TOBACCO - 0.1% 15,199 Altadis SA 637,953 -------------------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE - 0.2% 6,404 Abertis Infraestructuras SA 163,356 6,800 Cintra Concesiones de Infraestructuras de Transporte SA 79,937 ------------- 243,293 -------------------------------------------------------------------------------------------------------------- WATER UTILITIES - 0.0% 3,530 Sociedad General de Aguas de Barcelona SA Class A 76,156 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN SPAIN 16,044,181 - ------------------------------------------------------------------------------------------------------------------------------------ SWEDEN - 2.2% AIRLINES - 0.0% 1,680 SAS AB 14,329 -------------------------------------------------------------------------------------------------------------- AUTO COMPONENTS - 0.0% 6,944 Trelleborg AB Class B 103,151 -------------------------------------------------------------------------------------------------------------- BUILDING PRODUCTS - 0.1% 18,498 Assa Abloy AB B 238,066 -------------------------------------------------------------------------------------------------------------- COMMERCIAL BANKS - 0.4% 103,373 Nordea Bank AB 939,881 24,798 Skandinaviska Enskilda Banken AB Class A 412,826 19,957 Svenska Handelsbanken Class A 407,627 ------------- 1,760,334 -------------------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES - 0.1% 18,496 Securitas AB 309,098 -------------------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT - 0.5% 627,423 Telefonaktiebolaget LM Ericsson 2,016,701 1,407 Telefonaktiebolaget LM Ericsson (b) 44,954 ------------- 2,061,655 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING - 0.0% 17,922 Skanska AB Class B 221,473 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES - 0.0% 1,010 OMX AB 11,511 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1% 18,966 Tele2 AB 178,513 53,260 TeliaSonera AB 254,400 ------------- 432,913 -------------------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES - 0.0% 2,151 Getinge AB Class B 29,336 -------------------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES - 0.0% 4,167 Gambro AB Class A 55,763 3,981 Gambro AB Class B 53,274 ------------- 109,037 --------------------------------------------------------------------------------------------------------------
22 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ Household Durables - 0.1% 15,168 Electrolux AB Series B $ 323,407 -------------------------------------------------------------------------------------------------------------- IT SERVICES - 0.0% 4,275 WM-data AB Class B 10,785 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.1% 55,968 Skandia Forsakrings AB 307,471 -------------------------------------------------------------------------------------------------------------- MACHINERY - 0.5% 5,967 Alfa Laval AB 86,346 13,962 Atlas Copco AB Class A 221,706 8,016 Atlas Copco AB Class B 115,483 26,500 SKF AB Class B 271,483 11,547 Sandvik AB 429,559 3,295 Scania AB Class B 121,522 3,880 Volvo AB Class A 153,035 12,629 Volvo AB Class B 514,285 ------------- 1,913,419 -------------------------------------------------------------------------------------------------------------- MEDIA - 0.0% 5,496 Eniro AB 62,639 2,810 Modern Times Group AB Class B (a) 86,183 ------------- 148,822 -------------------------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS - 0.1% 277 Billerud AB 3,317 945 Holmen AB Class B 25,534 10,718 Svenska Cellulosa AB Class B 343,132 ------------- 371,983 -------------------------------------------------------------------------------------------------------------- SPECIALTY RETAIL - 0.2% 19,602 Hennes & Mauritz AB B Shares 690,304 -------------------------------------------------------------------------------------------------------------- TOBACCO - 0.0% 20,550 Swedish Match AB 233,554 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN SWEDEN 9,290,648 - ------------------------------------------------------------------------------------------------------------------------------------ SWITZERLAND - 6.7% BIOTECHNOLOGY - 0.1% 355 Serono SA 226,950 -------------------------------------------------------------------------------------------------------------- BUILDING PRODUCTS - 0.0% 90 Geberit AG Registered Shares 57,607 -------------------------------------------------------------------------------------------------------------- CAPITAL MARKETS - 1.5% 55,312 Credit Suisse Group 2,182,516 51,492 UBS AG Registered Shares 4,019,358 ------------- 6,201,874 -------------------------------------------------------------------------------------------------------------- CHEMICALS - 0.3% 3,446 Ciba Specialty Chemicals AG Registered Shares 200,934 10,389 Clariant AG 138,266 198 Givaudan 115,221 2,482 Lonza Group AG Registered Shares 137,458 5,443 Syngenta AG 560,403 ------------- 1,152,282 -------------------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES - 0.1% 4,763 Adecco SA Registered Shares 217,125 218 SGS SA 149,831 ------------- 366,956 -------------------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS - 0.0% 4,470 Logitech International SA 143,754 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS - 0.1% 7,704 Holcim Ltd. 469,059 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.1% 1,364 Swisscom AG 445,049 -------------------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT - 0.1% 88,063 ABB Ltd. 577,417 -------------------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.0% 2,650 Kudelski SA 97,014 -------------------------------------------------------------------------------------------------------------- FOOD PRODUCTS - 1.2% 18,873 Nestle SA Registered Shares 4,832,054 -------------------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES - 0.1% 850 Nobel Biocare Holding AG 172,508 2,889 Phonak Holding AG Registered Shares 108,470 207 Straumann Holding AG Registered Shares 43,142 2,128 Synthes, Inc. 233,713 ------------- 557,833 --------------------------------------------------------------------------------------------------------------
23 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ HOTELS, RESTAURANTS & LEISURE - 0.0% 35 Kuoni Reisen Holding AG Registered Shares $ 14,220 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.5% 16,617 Swiss Reinsurance Registered Shares 1,022,106 6,392 Zurich Financial Services AG 1,101,673 ------------- 2,123,779 -------------------------------------------------------------------------------------------------------------- MACHINERY - 0.0% 40 Schindler Holding AG Participation Certificates 14,456 282 Sulzer AG 116,445 ------------- 130,901 -------------------------------------------------------------------------------------------------------------- PHARMACEUTICALS - 2.3% 112,915 Novartis AG Registered Shares 5,380,892 33,803 Roche Holding AG 4,279,796 ------------- 9,660,688 -------------------------------------------------------------------------------------------------------------- REAL ESTATE - 0.0% 2,445 PSP Swiss Property AG 106,114 -------------------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.1% 1,719 Micronas Semiconductor Holding AG Registered Shares 65,078 880 Unaxis Holding AG 120,896 ------------- 185,974 -------------------------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS - 0.2% 21,608 Compagnie Financiere Richemont AG 726,957 1,575 Swatch Group AG B 221,294 2,276 Swatch Group AG Registered Shares 65,112 ------------- 1,013,363 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN SWITZERLAND 28,362,888 - ------------------------------------------------------------------------------------------------------------------------------------ UNITED KINGDOM - 23.7% AEROSPACE & DEFENSE - 0.3% 157,764 BAE Systems Plc 811,584 3,528 Cobham Plc 89,481 5,374 Meggitt Plc 27,236 85,217 Rolls-Royce Group Plc 438,763 ------------- 1,367,064 -------------------------------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS - 0.1% 20,132 Exel Plc 306,364 -------------------------------------------------------------------------------------------------------------- AIRLINES - 0.0% 29,636 British Airways Plc (a) 139,973 -------------------------------------------------------------------------------------------------------------- AUTO COMPONENTS - 0.0% 26,018 GKN Plc 120,320 -------------------------------------------------------------------------------------------------------------- AUTOMOBILES - 0.0% 1,025 TI Automotive Ltd. A (a) 0 -------------------------------------------------------------------------------------------------------------- BEVERAGES - 0.5% 137,468 Diageo Plc 2,027,893 29,507 Scottish & Newcastle Plc 245,275 ------------- 2,273,168 -------------------------------------------------------------------------------------------------------------- BUILDING PRODUCTS - 0.1% 19,884 BPB Plc 188,540 53,235 Pilkington Plc 114,266 ------------- 302,806 -------------------------------------------------------------------------------------------------------------- CAPITAL MARKETS - 0.3% 27,983 3i Group Plc 340,069 26,671 Amvescap Plc 159,194 2,797 Close Brothers Group Plc 36,924 12,596 ICAP Plc 67,055 16,296 Man Group Plc 422,662 4,105 Schroders Plc 55,700 ------------- 1,081,604 -------------------------------------------------------------------------------------------------------------- CHEMICALS - 0.2% 25,167 BOC Group Plc 452,907 1 Filtrona Plc 2 55,975 Imperial Chemical Industries Plc 254,842 8,117 Johnson Matthey Plc 155,240 ------------- 862,991 --------------------------------------------------------------------------------------------------------------
24 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL BANKS - 4.8% 286,690 Barclays Plc $ 2,854,567 174,059 HBOS Plc 2,684,671 501,464 HSBC Holdings Plc 7,999,695 237,696 Lloyds TSB Group Plc 2,015,239 2,530 Lloyds TSB Group Plc (b) 86,146 144,105 Royal Bank of Scotland Group Plc 4,354,921 ------------- 19,995,239 -------------------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES - 0.2% 44,302 Brambles Industries Plc 242,990 24,611 Capita Group Plc 162,338 26,991 Group 4 Securicor Plc 71,118 64,193 Hays Plc 149,005 1,493 Intertek Group Plc 18,786 67,222 Rentokil Initial Plc 192,485 2,405 Serco Group Plc 10,993 ------------- 847,715 -------------------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT - 0.0% 5,298 Marconi Corp. Plc (a) 28,679 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING - 0.1% 12,050 Amec Plc 71,276 24,840 Balfour Beatty Plc 147,263 ------------- 218,539 -------------------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS - 0.1% 39,289 Hanson Plc 377,819 -------------------------------------------------------------------------------------------------------------- CONSUMER FINANCE - 0.1% 7,713 Cattles Plc 42,581 14,009 Provident Financial Plc 180,291 ------------- 222,872 -------------------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING - 0.0% 20,343 Rexam Plc 175,663 -------------------------------------------------------------------------------------------------------------- DISTRIBUTORS - 0.0% 1,845 Inchcape Plc 68,026 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES - 0.0% 16,913 London Stock Exchange Plc 149,001 -------------------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES - 0.4% 900 BT Group Plc 37,440 353,190 BT Group Plc 1,456,062 117,864 Cable & Wireless Plc 314,783 ------------- 1,808,285 -------------------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES - 0.4% 45,161 Scottish & Southern Energy Plc 820,005 77,881 Scottish Power Plc 693,098 993 Scottish Power Plc (b) 35,351 ------------- 1,548,454 -------------------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS 18,858 Electrocomponents Plc 81,293 - 0.0% 4,902 Premier Farnell Plc 14,190 ------------- 95,483 -------------------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING - 0.6% 42,893 Boots Group Plc 468,217 56,272 J Sainsbury Plc 287,714 339,896 Tesco Plc 1,941,958 ------------- 2,697,889 -------------------------------------------------------------------------------------------------------------- FOOD PRODUCTS - 0.6% 95,046 Cadbury Schweppes Plc 908,039 24,308 Tate & Lyle Plc 207,831 114,603 Unilever Plc 1,106,179 ------------- 2,222,049 -------------------------------------------------------------------------------------------------------------- GAS UTILITIES - 0.2% 200,818 Centrica Plc 834,192 --------------------------------------------------------------------------------------------------------------
25 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE EQUIPMENT & SUPPLIES - 0.1% 3,902 SSL International Plc $ 19,793 49,872 Smith & Nephew Plc 492,552 ------------- 512,345 -------------------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES - 0.0% 6,950 Alliance Unichem Plc 105,826 -------------------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE - 0.6% 9,132 Carnival Plc 518,391 121,886 Compass Group Plc 512,319 13,810 Enterprise Inns Plc 206,445 68,118 Hilton Group Plc 349,503 27,519 Intercontinental Hotels Group Plc 347,503 30,006 Mitchells & Butlers Plc 179,772 6,594 Punch Taverns Plc 86,636 21,215 Rank Group Plc 102,291 9,436 Whitbread Plc 161,354 22,125 William Hill Plc 213,953 ------------- 2,678,167 -------------------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES - 0.2% 9,646 Barratt Developments Plc 123,882 788 Bellway Plc 12,189 2,907 Berkeley Group Holdings Plc 47,677 10,998 Persimmon Plc 153,960 38,566 Taylor Woodrow Plc 233,477 20,870 Wimpey George Plc 164,222 ------------- 735,407 -------------------------------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS - 0.2% 31,325 Reckitt Benckiser Plc 923,636 -------------------------------------------------------------------------------------------------------------- IT SERVICES - 0.0% 30,199 LogicaCMG Plc 94,456 -------------------------------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 0.1% 84,659 International Power Plc 312,596 -------------------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES - 0.1% 26,012 Smiths Group Plc 428,482 34,739 Tomkins Plc 162,829 ------------- 591,311 -------------------------------------------------------------------------------------------------------------- INSURANCE - 0.8% 111,671 Aviva Plc 1,245,015 70,102 Friends Provident Plc 228,689 249,729 Legal & General Group Plc 514,767 119,956 Prudential Plc 1,067,004 106,903 Royal & Sun Alliance Insurance Group 160,479 ------------- 3,215,954 -------------------------------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL - 0.2% 53,200 GUS Plc 839,624 -------------------------------------------------------------------------------------------------------------- MACHINERY - 0.0% 9,108 FKI Plc 15,877 11,268 IMI Plc 84,222 206,804 Invensys Plc (a) 38,922 ------------- 139,021 -------------------------------------------------------------------------------------------------------------- MEDIA - 1.0% 82,068 Aegis Group Plc 146,366 65,694 British Sky Broadcasting Plc 621,143 11,034 Daily Mail & General Trust 130,039 42,821 EMI Group Plc 194,955 9,612 Emap Plc 134,041 175,600 ITV Plc 387,145 39,399 Pearson Plc 464,328
26 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ------------------------------------------------------------------------------------------------------------------------------------ 61,545 Reed Elsevier Plc $ 589,636 75,204 Reuters Group Plc 532,453 11,407 Trinity Mirror Plc 126,358 15,879 United Business Media Plc 141,032 62,287 WPP Group Plc 641,403 25,811 Yell Group Plc 196,740 ------------- 4,305,639 -------------------------------------------------------------------------------------------------------------- METALS & MINING - 1.1% 65,309 Anglo American Plc 1,532,344 104,765 BHP Billiton Plc 1,337,026 194,761 Corus Group Plc (a) 146,621 49,431 Rio Tinto Plc Registered Shares 1,513,320 ------------- 4,529,311 -------------------------------------------------------------------------------------------------------------- MULTI-UTILITIES - 0.5% 152,630 National Grid Transco Plc 1,480,065 27,711 United Utilities Plc 327,823 16,498 United Utilities Plc Class A 97,586 ------------- 1,905,474 -------------------------------------------------------------------------------------------------------------- MULTILINE RETAIL - 0.2% 83,957 Marks & Spencer Group Plc 542,508 15,628 Next Plc 422,704 ------------- 965,212 -------------------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS - 3.7% 175,855 BG Group Plc 1,446,808 932,720 BP Plc 9,713,395 3,849 BP Plc (b) 240,101 432,470 Shell Transport & Trading Co. Plc 4,207,261 ------------- 15,607,565 -------------------------------------------------------------------------------------------------------------- PHARMACEUTICALS - 2.2% 72,371 AstraZeneca Plc 2,997,838 260,871 GlaxoSmithKline Plc 6,317,202 800 GlaxoSmithKline Plc (b) 38,808 ------------- 9,353,848 -------------------------------------------------------------------------------------------------------------- REAL ESTATE - 0.4% 30,295 British Land Co. Plc 475,684 11,899 Hammerson Plc 189,714 20,624 Land Securities Group Plc 513,844 9,912 Liberty International Plc 172,070 18,432 Slough Estates Plc 172,294 ------------- 1,523,606 -------------------------------------------------------------------------------------------------------------- ROAD & RAIL - 0.1% 16,203 Firstgroup Plc 95,624 2,119 National Express Group Plc 34,525 33,050 Stagecoach Group Plc 69,903 ------------- 200,052 -------------------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.0% 84,638 ARM Holdings Plc 171,810 -------------------------------------------------------------------------------------------------------------- SOFTWARE - 0.1% 21,437 Misys Plc 91,450 66,142 Sage Group Plc 265,267 ------------- 356,717 -------------------------------------------------------------------------------------------------------------- SPECIALTY RETAIL - 0.3% 72,099 Dixons Group Plc 202,896 3,700 HMV Group Plc 15,685 32,023 Kesa Electricals Plc 160,431 128,975 Kingfisher Plc 568,701 24,999 MFI Furniture Plc 49,626
27 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD COMMON STOCKS VALUE - ---------------------------------------------------------------------------------------------------------------------------------- 79,661 Signet Group Plc $ 155,281 2,201 Travis Perkins Plc 68,567 ------------- 1,221,187 -------------------------------------------------------------------------------------------------------------- TOBACCO - 0.6% 77,395 British American Tobacco Plc 1,492,687 22,911 Gallaher Group Plc 340,441 29,513 Imperial Tobacco Group Plc 795,089 ------------- 2,628,217 -------------------------------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS - 0.2% 21,500 Bunzl Plc 200,781 29,669 Wolseley Plc 624,331 ------------- 825,112 -------------------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE - 0.2% 11,911 Associated British Ports Holdings Plc 105,254 58,413 BAA Plc 649,150 12,221 BBA Group Plc 67,578 29,716 The Peninsular and Oriental Steam Navigation Co. 168,980 ------------- 990,962 -------------------------------------------------------------------------------------------------------------- WATER UTILITIES - 0.1% 15,133 Kelda Group Plc 189,468 12,768 Severn Trent Plc 232,749 ------------- 422,217 -------------------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES - 1.7% 2,759,271 Vodafone Group Plc 6,726,310 12,490 Vodafone Group Plc (b) 303,757 ------------- 7,030,067 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN THE UNITED KINGDOM 99,929,534 - ------------------------------------------------------------------------------------------------------------------------------------ UNITED STATES - 0.1% -------------------------------------------------------------------------------------------------------------- MEDIA - 0.0% 1,520 News Corp. Class A 24,594 -------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS IN THE UNITED STATES 24,594 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS IN COMMON STOCKS (COST - $353,576,514) - 94.6% 398,098,905 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ EXCHANGE-TRADED FUNDS - ------------------------------------------------------------------------------------------------------------------------------------ United States - 0.1% 6,000 iShares MSCI EAFE Index Fund 313,860 -------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN EXCHANGE-TRADED FUNDS (COST - $232,840) - 0.1% 313,860 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS - ------------------------------------------------------------------------------------------------------------------------------------ Germany - 0.2% Automobiles - 0.1% 428 Porsche AG, .73% 322,109 5,476 Volkswagen AG, 4.35% 194,378 ------------- 516,487 -------------------------------------------------------------------------------------------------------------- CHEMICALS - 0.1% 2,828 Henkel KGaA, 1.75% 253,424 -------------------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES - 0.0% 542 Fresenius Medical Care AG, 2.30% 37,796 -------------------------------------------------------------------------------------------------------------- MEDIA - 0.0% 5,512 ProSieben SAT.1 Media AG, 2.24% 94,959 -------------------------------------------------------------------------------------------------------------- MULTI-UTILITIES - 0.0% 2,033 RWE AG, 3.50% 116,368 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS IN PREFERRED STOCKS 1,019,034 (COST - $835,332) - 0.2% - ------------------------------------------------------------------------------------------------------------------------------------
28 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 (IN U.S. DOLLARS) - --------------------------------------------------------------------------------
SHARES COUNTRY INDUSTRY* HELD WARRANTS (C) VALUE - ------------------------------------------------------------------------------------------------------------------------------------ France - 0.0% Food & Staples 133 Casino Guichard Perrachon SA Retailing - 0.0% (expires 12/15/2005) $ 8 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS IN WARRANTS (COST - $802) - 0.0% 8 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ RIGHTS - ------------------------------------------------------------------------------------------------------------------------------------ Singapore - 0.0% Commercial Banks - 0.0% 7,319 Oversea-Chinese Banking Corp. (h) 27,978 -------------------------------------------------------------------------------------------------------------- TOTAL RIGHTS IN SINGAPORE 27,978 - ------------------------------------------------------------------------------------------------------------------------------------ SPAIN - 0.0% CONSTRUCTION & ENGINEERING - 0.0% 5,086 Sacyr Vallehermoso SA (d) 3,756 -------------------------------------------------------------------------------------------------------------- REAL ESTATE - 0.0% 1,852 Metrovacesa SA (g) 10,045 -------------------------------------------------------------------------------------------------------------- TOTAL RIGHTS IN SPAIN 13,801 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS IN RIGHTS (COST - $1,690) - 0.0% 41,779 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ BENEFICIAL INTEREST SHORT-TERM SECURITIES - ------------------------------------------------------------------------------------------------------------------------------------ USD 8,676,684 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I (e) 8,676,684 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS IN SHORT-TERM SECURITIES (COST - $8,676,684) - 2.1% 8,676,684 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS (COST - $363,323,862**) - 97.0% 408,150,270 OTHER ASSETS LESS LIABILITIES - 3.0% 12,808,549 ------------- NET ASSETS - 100.0% $420,958,819 =============
* For Series compliance purposes, "Industry" means 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 such industry sub-classifications for reporting ease. ** The cost and unrealized appreciation (depreciation) of investments as of June 30, 2005, as computed for federal income tax purposes, were as follows: Aggregate cost $ 366,241,147 ============== Gross unrealized appreciation $ 53,183,487 Gross unrealized depreciation (11,274,364) -------------- Net unrealized appreciation $ 41,909,123 ==============
(a) Non-income producing security. (b) Depositary Receipts. (c) 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. (d) The rights may be exercised until 7/12/2005. (e) Investments in companies considered to be an affiliate of the Series (such companies are defined as "Affiliated Companies" in Section 2(a)(3) of the Investment Company Act of 1940) were as follows:
---------------------------------------------------------------------------------------- AFFILIATE NET ACTIVITY INTEREST INCOME ---------------------------------------------------------------------------------------- Merrill Lynch Liquidity Series, LLC Cash Sweep Series I $ 5,915,777 $ 129,823 ----------------------------------------------------------------------------------------
(f) Security, or a portion of security, is on loan. (g) The rights may be exercised until 7/11/2005. (h) The rights may be exercised until 7/01/2005. 29 MASTER INTERNATIONAL INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - -------------------------------------------------------------------------------- Financial futures contracts purchased as of June 30, 2005 were as follows:
- ------------------------------------------------------------------------------------------------------------------- UNREALIZED NUMBER OF EXPIRATION FACE APPRECIATION CONTRACTS ISSUE EXCHANGE DATE VALUE (DEPRECIATION) - ------------------------------------------------------------------------------------------------------------------- 134 DJ Euro Stoxx 50 Eurex September 2005 $ 5,106,999 $ 81,040 49 FTSE 100 Index Future LIFFE September 2005 $ 4,429,961 68,219 18 Hang Seng Index Future Hong Kong July 2005 $ 1,649,318 (4,302) 58 OMX Stock Index Future Tokyo July 2005 $ 608,281 2,621 1 S&P/MIB Index Eurex September 2005 $ 196,232 (463) 30 SPI 200 Index Future Sydney September 2005 $ 2,428,404 14,408 59 TOPIX Index Future Tokyo September 2005 $ 6,099,249 154,293 - ------------------------------------------------------------------------------------------------------------------- TOTAL UNREALIZED APPRECIATION - NET $ 315,815 =========
Forward foreign exchange contracts as of June 30, 2005 were as follows:
- ----------------------------------------------------------------------------------------------------------------------------- UNREALIZED FOREIGN CURRENCY APPRECIATION PURCHASED SETTLEMENT DATE (DEPRECIATION - ----------------------------------------------------------------------------------------------------------------------------- AUD 475,000 July 2005 $ (2,505) CHF 1,760,000 July 2005 (31,898) EUR 3,250,000 July 2005 (41,415) GBP 1,680,000 July 2005 (59,493) HKD 550,000 July 2005 56 JPY 356,600,000 July 2005 (107,129) SEK 975,000 July 2005 (4,379) - --------------------------------------------------------------------------------------------------------------------------- TOTAL UNREALIZED DEPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS - NET (USD COMMITMENT - $12,345,557) $ (246,763) ============
- ------------------------------------------------------------------------------------------------------------------------------ UNREALIZED FOREIGN APPRECIATION CURRENCY SOLD SETTLEMENT DATE (DEPRECIATION) - ------------------------------------------------------------------------------------------------------------------------------ AUD 145,000 July 2005 $ 880 CHF 170,000 July 2005 2,264 EUR 575,000 July 2005 5,645 GBP 280,000 July 2005 8,354 HKD 550,000 July 2005 (49) JPY 48,000,000 July 2005 12,725 SEK 450,000 July 2005 1,575 - ------------------------------------------------------------------------------------------------------------------------------ TOTAL UNREALIZED APPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS - NET (USD COMMITMENT - $2,034,589) $ 31,394 ============
Currency Denominations: AUD Australian Dollar CHF Swiss Franc EUR Euro GBP British Pound Sterling HKD Hong Kong Dollar JPY Japanese Yen SEK Swedish Krona USD U.S. Dollar 30 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- ADVERTISING AGENCIES - 0.7% 10,235 Advo, Inc. $ 325,985 17,000 aQuantive, Inc. (d) 301,240 15,600 Catalina Marketing Corp. 396,396 5,100 Greenfield Online, Inc. (d) 61,965 5,700 Intermix Media, Inc. (d) 47,709 4,700 Marchex, Inc. Class B (d) 70,688 16,000 Valassis Communications, Inc. (d) 592,800 25,800 Valueclick, Inc. (d) 318,114 9,300 Ventiv Health, Inc. (d) 179,304 ------------------ 2,294,201 - ----------------------------------------------------------------------------------------------------------------------------------- AEROSPACE - 0.5% 1,800 ARGON ST, Inc. (d) 63,900 6,434 Curtiss-Wright Corp. 347,114 6,426 Heico Corp. 150,433 2,000 MTC Technologies, Inc. (d) 73,660 11,313 Moog, Inc. Class A (d) 356,246 16,635 Orbital Sciences Corp. (d) 164,687 10,934 Teledyne Technologies, Inc. (d) 356,230 3,900 United Industrial Corp. 139,386 ------------------ 1,651,656 - ----------------------------------------------------------------------------------------------------------------------------------- AGRICULTURE FISHING & RANCHING - 0.2% 1,100 Alico, Inc. 56,573 1,100 The Andersons, Inc. 39,391 11,828 Delta & Pine Land Co. 296,410 14,000 Gold Kist, Inc. (d) 302,120 ------------------ 694,494 - ----------------------------------------------------------------------------------------------------------------------------------- AIR TRANSPORT - 0.8% 11,268 AAR Corp. (d) 177,020 14,100 ABX Air, Inc. (d) 114,915 25,820 Airtran Holdings, Inc. (d) 238,319 8,399 Alaska Air Group, Inc. (d) 249,870 10,700 America West Holdings Corp. Class B (b)(d) 64,200 9,100 Aviall, Inc. (d) 287,469 20,600 Continental Airlines, Inc. Class B (b)(d) 273,568 37,700 Delta Air Lines, Inc. (b)(d) 141,752 11,495 EGL, Inc. (d) 233,578 10,000 ExpressJet Holdings, Inc. (d) 85,100 12,055 Frontier Airlines, Inc. (d) 124,528 100 MAIR Holdings, Inc. (d) 884 9,056 Mesa Air Group, Inc. (b)(d) 60,766 26,100 Northwest Airlines Corp. (b)(d) 119,016 7,185 Offshore Logistics, Inc. (d) 235,955 4,900 Pinnacle Airlines Corp. (d) 42,091 1,600 Republic Airways Holdings, Inc. (d) 23,120 19,200 Skywest, Inc. 349,056 5,000 World Air Holdings, Inc. (d) 58,600 ------------------ 2,879,807 - ----------------------------------------------------------------------------------------------------------------------------------- ALUMINUM - 0.1% 9,200 Aleris International, Inc. (d) 207,460 6,802 Century Aluminum Co. (d) 138,761 ------------------ 346,221 - ----------------------------------------------------------------------------------------------------------------------------------- AUTO PARTS: AFTER MARKET - 0.2% 5,343 Aftermarket Technology Corp. (d) 93,128 2,450 Commercial Vehicle Group, Inc. (d) 43,487 6,000 Keystone Automotive Industries, Inc. (d) 148,380 1,000 R&B, Inc. (d) 14,040 3,300 Standard Motor Products, Inc. 43,560
1 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 6,899 Superior Industries International (b) $ 163,506 6,600 TBC Corp. (d) 179,058 ------------------ 685,159 - ----------------------------------------------------------------------------------------------------------------------------------- AUTO PARTS: ORIGINAL EQUIPMENT - 0.4% 11,500 American Axle & Manufacturing Holdings, Inc. 290,605 21,300 ArvinMeritor, Inc. 378,927 14,200 Hayes Lemmerz International, Inc. (d) 101,104 2,200 Noble International Ltd. 51,810 17,200 Quantum Fuel Systems Technologies Worldwide, Inc. (d) 86,000 2,273 Sauer-Danfoss, Inc. 40,391 800 Strattec Security Corp. (d) 43,568 13,400 Tenneco Automotive, Inc. (d) 222,976 38,500 Visteon Corp. 232,155 ------------------ 1,447,536 - ----------------------------------------------------------------------------------------------------------------------------------- AUTO TRUCKS & PARTS - 0.1% 1,200 Accuride Corp. (d) 12,756 9,294 Modine Manufacturing Co. 302,613 9,445 Wabash National Corp. 228,852 ------------------ 544,221 - ----------------------------------------------------------------------------------------------------------------------------------- BANKS: NEW YORK CITY - 0.1% 10,289 Provident New York Bancorp 124,600 5,000 Signature Bank (d) 122,000 ------------------ 246,600 - ----------------------------------------------------------------------------------------------------------------------------------- BANKS: OUTSIDE NEW YORK CITY - 7.7% 3,540 1st Source Corp. 81,208 3,600 ABC Bancorp 65,088 3,621 Alabama National Bancorporation 236,705 7,518 Amcore Financial, Inc. 224,638 20,104 Amegy Bancorp, Inc. 449,928 4,950 AmericanWest Bancorp (d) 98,752 500 Ames National Corp. 54,500 2,626 Arrow Financial Corp. 73,108 900 The Banc Corp. (d) 9,522 1,200 BancTrust Financial Group, Inc. 22,980 945 Bancfirst Corp. 82,206 2,715 The Bancorp Inc. (d) 47,350 23,500 Bancorpsouth, Inc. 554,600 3,986 Bank of Granite Corp. 76,292 3,100 Bank of the Ozarks, Inc. 101,804 3,113 Banner Corp. 87,195 9,893 Boston Private Financial Holdings, Inc. 249,304 13,960 CVB Financial Corp. 274,733 1,600 Camden National Corp. 52,400 2,577 Capital City Bank Group, Inc. 104,111 2,700 Capital Corp. of the West 74,925 2,900 Capital Crossing Bank (d) 98,890 2,600 Capitol Bancorp Ltd. 87,386 5,500 Cascade Bancorp 115,500 13,644 Cathay General Bancorp 459,939 4,700 Center Financial Corp. 116,701 3,482 Central Coast Bancorp (d) 63,024 9,548 Central Pacific Financial Corp. 339,909 7,548 Chemical Financial Corp. 249,914 13,882 Chittenden Corp. 377,590 1,300 Citizens & Northern Corp. 39,884
2 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 13,500 Citizens Banking Corp. $ 407,970 2,299 City Bank 69,844 5,593 City Holding Co. 204,256 1,800 Clifton Savings Bancorp, Inc. 19,008 3,926 CoBiz, Inc. 71,178 500 Colony Bankcorp, Inc. 15,020 1,800 Columbia Bancorp 65,610 6,141 Columbia Banking System, Inc. 151,191 500 Commercial Bankshares, Inc. 19,405 2,700 Community Bancorp (d) 83,754 8,300 Community Bank System, Inc. 202,437 3,177 Community Banks, Inc. 82,348 3,623 Community Trust Bancorp, Inc. 118,545 4,952 Corus Bankshares, Inc. 274,786 27,300 Doral Financial Corp. 451,542 700 Enterprise Financial Services Corp. 16,555 1,600 EuroBancshares, Inc. (d) 25,680 1,900 FNB Corporation 53,200 1,785 Farmers Capital Bank Corp. 60,690 1,700 Financial Institutions, Inc. 30,634 11,200 First BanCorp. 449,680 3,036 First Bancorp 67,187 4,014 First Busey Corp. 77,510 9,123 First Charter Corp. 200,432 1,847 First Citizens BancShares, Inc. Class A 266,984 20,940 First Commonwealth Financial Corp. 286,878 4,700 First Community Bancorp, Inc. 223,250 2,894 First Community Bancshares, Inc. 94,055 10,087 First Financial Bancorp 190,644 5,553 First Financial Bankshares, Inc. 187,914 4,344 First Financial Corp. 124,803 5,546 First Merchants Corp. 137,818 13,700 First Midwest Bancorp, Inc. 481,829 1,150 First Oak Brook Bancshares, Inc. 32,453 200 First Regional Bancorp (d) 13,230 400 First South Bancorp, Inc. 12,752 6,500 First State Bancorporation 125,385 5,400 Franklin Bank Corp. (d) 101,304 7,111 Frontier Financial Corp. 179,624 2,200 GB&T Bancshares, Inc. 52,272 8,843 Glacier Bancorp, Inc. 231,068 14,322 Gold Banc Corp., Inc. 208,385 15,500 Greater Bay Bancorp 408,735 3,200 Greene County Bancshares, Inc. 87,424 8,054 Hancock Holding Co. 277,058 9,804 Hanmi Financial Corp. 163,727 8,360 Harleysville National Corp. 193,618 3,000 Heartland Financial USA, Inc. 58,590 5,500 Heritage Commerce Corp. 100,980 12,400 Hudson United Bancorp 447,640 4,645 Independent Bank Corp. - Maine 131,035
3 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 7,081 Independent Bank Corp. - Michigan $ 201,384 4,974 Integra Bank Corp. 112,512 5,100 Interchange Financial Services Corp. 93,585 5,448 Irwin Financial Corp. 120,891 3,998 Lakeland Bancorp, Inc. 62,409 1,700 Lakeland Financial Corp. 69,156 5,950 MB Financial, Inc. 236,989 3,477 MBT Financial Corp. 66,932 3,078 Macatawa Bank Corp. 106,776 4,456 Main Street Banks, Inc. 113,450 5,166 MainSource Financial Group, Inc. 93,453 2,980 Mercantile Bank Corp. 131,031 1 Mercantile Bankshares Corp. 52 7,750 Mid-State Bancshares 215,218 3,380 Midwest Banc Holdings, Inc. 65,200 2,029 NBC Capital Corp. 49,386 9,713 NBT Bancorp, Inc. 229,615 7,300 Nara Bancorp, Inc. 107,164 9,162 National Penn Bancshares, Inc. 228,867 1,200 Northern Empire Bancshares (d) 37,128 22,195 Old National Bancorp 474,973 4,176 Old Second Bancorp, Inc. 121,480 2,541 Omega Financial Corp. 78,898 7,718 Oriental Financial Group 117,777 13,762 Pacific Capital Bancorp 510,295 3,615 Park National Corp. 399,458 2,198 Peapack Gladstone Financial Corp. 60,885 1,761 Pennrock Financial Services Corp. 63,202 200 Pennsylvania Commerce Bancorp, Inc. (d) 6,550 4,210 Peoples Bancorp, Inc. 112,618 3,600 Pinnacle Financial Partners, Inc. (d) 86,400 6,200 Piper Jaffray Cos. (d) 188,666 1,250 Placer Sierra Bancshares 34,088 400 Preferred Bank 15,880 1,700 Premierwest Bancorp (d) 24,701 5,696 PrivateBancorp, Inc. 201,524 5,300 Prosperity Bancshares, Inc. 151,633 11,024 Provident Bankshares Corp. 351,776 9,711 R-G Financial Corp. Class B 171,788 2,432 Renasant Corp. 74,808 21,009 Republic Bancorp, Inc. 314,715 2,608 Republic Bancorp, Inc. Class A 56,620 1,344 Royal Bancshares of Pennsylvania Class A 31,920 7,863 S&T Bancorp, Inc. 283,854 2,446 SCBT Financial Corp. 77,416 11,400 SVB Financial Group (d) 546,060 2,800 SY Bancorp, Inc. 63,980 4,414 Sandy Spring Bancorp, Inc. 154,622 1,603 Santander BanCorp 40,171 3,458 Seacoast Banking Corp. of Florida 68,088 1,400 Security Bank Corp. 32,060
4 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 100 Sierra Bancorp $ 2,268 4,300 Simmons First National Corp. Class A 116,573 2,975 Southside Bancshares, Inc. 60,988 5,900 Southwest Bancorp, Inc. 120,832 2,168 State Bancorp, Inc. 49,040 1,800 State Financial Services Corp. Class A 72,468 15,176 Sterling Bancshares, Inc. 236,139 8,702 Sterling Financial Corp. 185,440 3,400 Suffolk Bancorp 109,786 1,100 Summit Bancshares, Inc. 19,030 400 Summit Financial Group, Inc. 13,008 3,357 Sun Bancorp, Inc. (d) 69,389 13,716 Susquehanna Bancshares, Inc. 337,276 200 Taylor Capital Group, Inc. 7,850 6,661 Texas Capital Bancshares, Inc. (d) 131,488 13,576 Texas Regional Bancshares, Inc. Class A 413,796 2,782 Tompkins Trustco, Inc. 120,739 3,400 Trico Bancshares 75,956 22,561 TrustCo Bank Corp. 294,647 14,227 Trustmark Corp. 416,282 29,500 UCBH Holdings, Inc. 479,080 4,976 UMB Financial Corp. 283,781 3,330 USB Holding Co., Inc. 77,922 14,850 Umpqua Holdings Corp. 349,569 2,500 Union Bankshares Corp. 96,550 12,300 United Bankshares, Inc. 438,003 8,700 United Community Banks, Inc. 226,374 600 United Security Bancshares 18,198 2,850 Univest Corp. of Pennsylvania 85,386 7,219 Unizan Financial Corp. 193,397 3,400 Vineyard National Bancorp 107,304 2,912 Virginia Commerce Bancorp (b)(d) 70,849 2,100 Virginia Financial Group, Inc. 73,689 4,200 Washington Trust Bancorp, Inc. 116,214 6,763 WesBanco, Inc. 203,025 4,790 West Bancorporation, Inc. 90,052 4,400 West Coast Bancorp 107,404 9,883 Westamerica Bancorporation 521,921 1,920 Western Sierra Bancorp (d) 64,992 4,600 Wilshire Bancorp, Inc. 65,918 7,000 Wintrust Financial Corp. 366,450 3,600 Yardville National Bancorp 128,700 ------------------ 27,283,880 - ----------------------------------------------------------------------------------------------------------------------------------- BEVERAGE: BREWERS (WINERIES) - 0.0% 4,400 Boston Beer Co., Inc. Class A (d) 98,736 - ----------------------------------------------------------------------------------------------------------------------------------- BEVERAGE: SOFT DRINKS - 0.1% 987 Coca-Cola Bottling Co. Consolidated 49,883 1,710 Farmer Bros Co. 38,065 600 Green Mountain Coffee Roasters, Inc. (d) 20,358 2,500 Hansen Natural Corp. (b)(d) 211,800 2,290 National Beverage Corp. (d) 18,274 5,100 Peet's Coffee & Tea, Inc. (d) 168,504 ------------------ 506,884 - -----------------------------------------------------------------------------------------------------------------------------------
5 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- BIOTECHNOLOGY RESEARCH & PRODUCTION - 2.7% 37,100 Aastrom Biosciences, Inc. (d) $ 115,752 27,800 Abgenix, Inc. (d) 238,524 9,087 Albany Molecular Research, Inc. (d) 127,218 8,380 Alexion Pharmaceuticals, Inc. (d) 193,075 9,013 Antigenics, Inc. (b)(d) 48,760 22,300 Applera Corp. - Celera Genomics Group (d) 244,631 13,500 Arena Pharmaceuticals, Inc. (d) 92,070 17,519 Ariad Pharmaceuticals, Inc. (d) 116,677 6,500 Arqule, Inc. (d) 42,120 5,800 Array Biopharma, Inc. (d) 36,540 8,120 Arthrocare Corp. (d) 283,713 3,000 Barrier Therapeutics, Inc. (d) 23,790 9,300 Bioenvision, Inc. (d) 67,704 4,000 Caliper Life Sciences, Inc. (d) 22,400 13,924 Cell Genesys, Inc. (b)(d) 74,493 24,331 Cell Therapeutics, Inc. (b)(d) 65,937 18,457 Corixa Corp. (d) 80,842 1,700 Cotherix, Inc. (d) 17,323 15,967 Cubist Pharmaceuticals, Inc. (d) 210,285 13,000 CuraGen Corp. (b)(d) 66,820 9,700 Curis, Inc. (d) 37,830 9,100 Cypress Bioscience, Inc. (d) 119,847 16,300 deCODE genetics, Inc. (d) 153,057 4,324 Digene Corp. (d) 119,688 16,000 Discovery Laboratories, Inc. (d) 116,640 6,978 Diversa Corp. (d) 36,355 8,000 Dov Pharmaceutical, Inc. (d) 149,280 17,696 Encysive Pharmaceuticals, Inc. (d) 191,294 16,100 Enzon Pharmaceuticals, Inc. (d) 104,328 19,818 Exelixis, Inc. (d) 147,248 5,200 Genitope Corp. (d) 66,768 16,629 Geron Corp. (b)(d) 128,708 41,600 Human Genome Sciences, Inc. (d) 481,728 17,900 ICOS Corp. (d) 378,943 2,400 Idenix Pharmaceuticals Inc. (d) 52,032 24,924 Incyte Corp. (d) 178,207 6,900 Integra LifeSciences Holdings Corp. (d) 201,480 9,214 InterMune, Inc. (d) 120,151 8,700 Introgen Therapeutics, Inc. (d) 56,028 3,900 Kensey Nash Corp. (d) 117,936 5,600 Keryx Biopharmaceuticals, Inc. (d) 73,920 18,605 Lexicon Genetics, Inc. (d) 91,909 2,650 MannKind Corp. (d) 26,633 300 Marshall Edwards, Inc. (b)(d) 2,142 9,900 Martek Biosciences Corp. (d) 375,705 6,901 Maxygen, Inc. (d) 47,341 3,600 Momenta Pharmaceuticals Inc. (d) 71,172 2,600 Myogen, Inc. (b)(d) 18,174 9,400 Myriad Genetics, Inc. (d) 147,110 12,923 NPS Pharmaceuticals, Inc. (d) 146,676 17,654 Nabi Biopharmaceuticals (d) 268,870
6 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 19,600 Nanogen, Inc. (b)(d) $ 75,264 6,900 Nastech Pharmaceutical Co, Inc. (d) 98,187 11,700 Neurocrine Biosciences, Inc. (d) 492,102 5,600 Neurogen Corp. (d) 38,192 7,000 Northfield Laboratories, Inc. (d) 100,170 11,200 Nuvelo, Inc. (d) 86,576 5,500 Orchid Cellmark, Inc. (d) 59,455 2,300 PRA International (d) 61,594 4,300 Progenics Pharmaceuticals, Inc. (d) 89,698 4,770 Rigel Pharmaceuticals, Inc. (d) 95,018 23,300 Savient Pharmaceuticals, Inc. (d) 102,753 7,800 Seattle Genetics, Inc. (d) 41,808 10,472 Serologicals Corp. (d) 222,530 23,400 StemCells, Inc. (d) 98,280 8,245 Tanox, Inc. (d) 96,631 16,832 Telik, Inc. (d) 273,688 900 Tercica, Inc. (d) 7,821 9,340 Transkaryotic Therapies, Inc. (d) 341,657 5,638 Trimeris, Inc. (d) 56,267 4,400 ViaCell, Inc. (d) 46,860 17,306 Vicuron Pharmaceuticals, Inc. (d) 482,837 28,900 ViroLogic, Inc. (d) 71,672 6,500 Zymogenetics, Inc. (d) 114,400 ------------------ 9,549,334 - ----------------------------------------------------------------------------------------------------------------------------------- BUILDING MATERIALS - 0.7% 2,500 Ameron International Corp. 93,500 2,900 BlueLinx Holdings, Inc. 30,682 4,600 Building Material Holding Corp. 318,734 18,600 Hughes Supply, Inc. 522,660 1,600 Huttig Building Products, Inc. (d) 17,456 6,312 LSI Industries, Inc. 87,989 6,368 NCI Building Systems, Inc. (d) 208,870 10,832 Simpson Manufacturing Co., Inc. 330,918 7,345 Texas Industries, Inc. 413,009 3,409 Trex Co., Inc. (d) 87,611 6,165 Watsco, Inc. 262,629 4,900 Zoltek Cos., Inc. (d) 55,027 ------------------ 2,429,085 - ----------------------------------------------------------------------------------------------------------------------------------- BUILDING: AIR CONDITIONING - 0.2% 14,635 Lennox International, Inc. 309,823 12,038 York International Corp. 457,444 ------------------ 767,267 - ----------------------------------------------------------------------------------------------------------------------------------- BUILDING: CEMENT - 0.1% 5,878 Eagle Materials, Inc. 544,244 - ----------------------------------------------------------------------------------------------------------------------------------- BUILDING: HEATING & PLUMBING - 0.1% 1,800 Aaon, Inc. (d) 32,022 3,700 Interline Brands Inc. (d) 73,260 25,150 Jacuzzi Brands, Inc. (d) 269,860 ------------------ 375,142 - ----------------------------------------------------------------------------------------------------------------------------------- BUILDING: MISCELLANEOUS - 0.1% 9,300 Comfort Systems USA, Inc. (d) 61,194 2,300 Drew Industries, Inc. (d) 104,420 8,747 Griffon Corp. (d) 194,183 ------------------ 359,797 - -----------------------------------------------------------------------------------------------------------------------------------
7 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- BUILDING: ROOFING & WALLBOARD - 0.1% 3,700 Beacon Roofing Supply, Inc. (d) $ 97,310 6,851 ElkCorp 195,596 ------------------ 292,906 - ----------------------------------------------------------------------------------------------------------------------------------- CABLE TELEVISION SERVICES - 0.1% 100,000 Charter Communications, Inc. Class A (b)(d) 118,000 5,698 Crown Media Holdings, Inc. Class A (d) 53,732 17,500 Insight Communications Company, Inc. 193,375 19,994 Tivo, Inc. (b)(d) 133,560 ------------------ 498,667 - ----------------------------------------------------------------------------------------------------------------------------------- CASINOS & GAMBLING - 0.8% 15,300 Alliance Gaming Corp. (d) 214,506 8,200 Ameristar Casinos, Inc. 213,938 8,025 Argosy Gaming Co. (d) 374,045 10,791 Aztar Corp. (d) 369,592 1,632 Churchill Downs, Inc. 69,344 2,815 Dover Downs Gaming & Entertainment, Inc. 37,327 5,375 Isle of Capri Casinos, Inc. (d) 140,825 5,900 Lakes Entertainment, Inc. (d) 90,860 8,800 MTR Gaming Group, Inc. (d) 102,432 11,700 Magna Entertainment Corp. Class A (d) 65,988 8,200 Mikohn Gaming Corp. (d) 120,745 1,600 Monarch Casino & Resort, Inc. (d) 35,264 9,000 Multimedia Games, Inc. (b)(d) 99,090 12,364 Pinnacle Entertainment, Inc. (d) 241,840 1,600 Riviera Holdings Corp. (d) 36,240 11,700 Shuffle Master, Inc. (b)(d) 327,951 6,412 WMS Industries, Inc. (b)(d) 216,405 ------------------ 2,756,392 - ----------------------------------------------------------------------------------------------------------------------------------- CHEMICALS - 1.2% 3,000 American Vanguard Corp. 62,730 6,456 Arch Chemicals, Inc. 161,142 1,200 Balchem Corp. 36,060 7,100 Cabot Microelectronics Corp. (d) 205,829 11,201 Calgon Carbon Corp. 99,129 7,385 Cambrex Corp. 140,684 11,400 EnerSys (d) 155,382 5,864 Energy Conversion Devices, Inc. (d) 131,236 10,937 Georgia Gulf Corp. 339,594 15,600 Great Lakes Chemical Corp. 490,932 34,400 Hercules, Inc. (d) 486,760 8,267 MacDermid, Inc. 257,600 5,841 Medis Technologies Ltd. (b)(d) 96,961 2,534 NL Industries 38,998 4,200 NewMarket Corp. (d) 62,118 2,000 Nuco2, Inc. (d) 51,340 9,500 OM Group, Inc. (d) 234,555 3,500 Octel Corp. 63,000 4,300 Pioneer Cos., Inc. (d) 94,557 29,567 PolyOne Corp. (d) 195,734 11,106 Schulman A, Inc. 198,686 5,000 Senomyx, Inc. (d) 82,550 1,555 Stepan Co. 34,366 7,700 UAP Holding Corp. 127,820 5,500 Ultralife Batteries, Inc. (d) 88,825
8 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 12,500 Valence Technology, Inc. (b)(d) $ 35,250 20,000 WR Grace & Co. (d) 155,800 2,750 Westlake Chemical Corp. 67,375 ------------------ 4,195,013 - ----------------------------------------------------------------------------------------------------------------------------------- COAL - 0.1% 8,800 Alpha Natural Resources, Inc. (d) 210,144 7,100 Foundation Coal Holdings, Inc. 184,174 3,100 James River Coal Co. (d) 107,415 ------------------ 501,733 - ----------------------------------------------------------------------------------------------------------------------------------- COMMERCIAL INFORMATION SERVICES - 0.4% 10,258 Arbitron, Inc. 440,068 133,800 CMGI, Inc. (d) 252,882 8,561 infoUSA, Inc. 100,164 4,400 LECG Corp. (d) 93,544 7,574 ProQuest Co. (d) 248,351 5,953 Sourcecorp (d) 117,988 ------------------ 1,252,997 - ----------------------------------------------------------------------------------------------------------------------------------- COMMUNICATIONS & MEDIA - 0.1% 19,200 Entravision Communications Corp. Class A (d) 149,568 67,600 Gemstar-TV Guide International, Inc. (d) 242,684 ------------------ 392,252 - ----------------------------------------------------------------------------------------------------------------------------------- COMMUNICATIONS TECHNOLOGY - 2.5% 108,400 3Com Corp. (d) 394,576 18,600 Adtran, Inc. 461,094 7,422 Anaren, Inc. (d) 97,599 9,572 Anixter International, Inc. (d) 355,791 2,000 Arbinet-Thexchange Inc. (d) 13,400 13,500 Aspect Communications Corp. (d) 151,605 8,000 Atheros Communications Inc. (d) 64,480 13,900 Avocent Corp. (d) 363,346 3,159 Bel Fuse, Inc. 96,539 5,088 Black Box Corp. 180,115 15,450 Broadwing Corp. (b)(d) 71,379 79,400 Brocade Communications Systems, Inc. (d) 308,072 16,700 CSG Systems International (d) 316,966 1,672 Catapult Communications Corp. (d) 28,524 163,000 Ciena Corp. (d) 340,670 16,988 CommScope, Inc. (d) 295,761 6,525 Comtech Telecommunications Corp. (d) 212,911 8 CycleLogic, Inc. (d) 0 5,000 Digi International, Inc. (d) 59,300 12,600 Ditech Communications Corp. (d) 81,774 9,013 Echelon Corp. (d) 62,009 2,500 EndWare Corp. (d) 119,000 22,500 Entrust, Inc. (d) 107,775 36,500 Extreme Networks (d) 149,650 50,500 Finisar Corp. (b)(d) 53,025 34,000 Foundry Networks, Inc. (d) 293,420 25,300 Glenayre Technologies, Inc. (d) 95,381 24,296 Harmonic, Inc. (d) 117,350 5,800 InPhonic, Inc. (d) 89,204 6,377 Inter-Tel, Inc. 118,676 11,300 InterVoice, Inc. (d) 97,519 8,729 Ixia (d) 169,692
9 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 7,100 j2 Global Communications, Inc. (d) $ 244,524 10,700 Netgear, Inc. (d) 199,020 10,300 Novatel Wireless, Inc. (d) 128,441 30,819 Oplink Communications, Inc. (d) 52,700 4,483 Optical Communication Products, Inc. (d) 8,518 9,600 Redback Networks, Inc. (d) 61,248 10,508 Seachange International, Inc. (d) 73,766 12,588 Secure Computing Corp. (d) 136,957 70,400 Sonus Networks, Inc. (d) 336,512 7,710 Standard Microsystems Corp. (d) 180,260 52,900 Sycamore Networks, Inc. (d) 182,505 5,300 Syniverse Holdings, Inc. (d) 74,200 61,700 TIBCO Software, Inc. (d) 403,518 6,480 Talx Corp. 187,337 16,900 Tekelec (d) 283,920 14,600 Telkonet, Inc. (d) 71,978 8,030 Terremark Worldwide, Inc. (d) 56,210 2,640 Ulticom, Inc. (d) 28,010 27,400 UTStarcom, Inc. (d) 205,226 6,501 Viasat, Inc. (d) 132,165 9,931 WebEx Communications, Inc. (d) 262,278 16,200 Westell Technologies, Inc. Class A (d) 96,876 14,975 Zhone Technologies, Inc. (d) 49,717 ------------------ 8,822,489 - ----------------------------------------------------------------------------------------------------------------------------------- COMPUTER SERVICES, SOFTWARE & SYSTEMS - 4.5% 7,800 AMICAS, Inc. (d) 35,334 27,900 Acxiom Corp. 582,552 16,802 Agile Software Corp. (d) 105,853 6,600 Altiris, Inc. (d) 96,888 4,000 American Reprographics Co. (d) 64,360 1,000 Ansoft Corp. (d) 24,160 10,432 Ansys, Inc. (d) 370,440 7,600 Anteon International Corp. (d) 346,712 13,000 Applied Digital Solutions, Inc. (d) 42,640 19,780 Ariba, Inc. (d) 114,724 14,697 AsiaInfo Holdings, Inc. (d) 80,980 16,208 Aspen Technology, Inc. (d) 84,282 8,300 Audible, Inc. (d) 144,171 52,000 BearingPoint, Inc. (d) 381,160 1,000 Blackbaud, Inc. 13,500 4,300 Blackboard, Inc. (d) 102,856 3,900 Blue Coat Systems, Inc. (d) 116,532 26,867 Borland Software Corp. (d) 184,308 2,300 Bottomline Technologies, Inc. (d) 34,431 2,500 COMSYS IT Partners, Inc. (d) 42,650 16,402 Ciber, Inc. (d) 130,888 3,300 Click Commerce, Inc. (d) 75,801 8,000 Concur Technologies, Inc. (d) 84,240 2,000 Constellation 3D, Inc. (d) 0 7,600 Covansys Corp. (d) 97,660 11,964 Dendrite International, Inc. (d) 165,103 10,200 Digital River, Inc. (d) 323,850
10 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 24,307 Digitas, Inc. (d) $ 277,343 24,380 E.piphany, Inc. (d) 84,842 5,300 eCollege.com, Inc. (d) 63,070 4,245 EPIQ Systems, Inc. (d) 69,448 16,639 Electronics for Imaging (d) 350,085 3,000 Emageon, Inc. (d) 42,030 15,900 Epicor Software Corp. (d) 209,880 4,100 Equinix, Inc. (b)(d) 177,694 16,779 Gartner, Inc. Class A (d) 178,193 2,600 Gartner, Inc. Class B (d) 27,534 7,700 Infocrossing, Inc. (d) 96,019 25,500 Informatica Corp. (d) 213,945 1,800 Integral Systems, Inc. 40,734 14,200 Internet Capital Group, Inc. (d) 104,086 11,700 Internet Security Systems (d) 237,393 4,400 Intervideo, Inc. (d) 63,272 14,425 Interwoven, Inc. (d) 108,620 4,300 iGate Corp. (d) 15,394 9,908 JDA Software Group, Inc. (d) 112,753 6,100 Jupitermedia Corp. (d) 104,493 6,200 Kanbay International, Inc. (d) 143,282 16,058 Keane, Inc. (d) 219,995 4,438 Keynote Systems, Inc. (d) 51,791 15,200 Lawson Software, Inc. (b)(d) 78,280 12,800 Lionbridge Technologies (d) 86,784 5,974 MRO Software, Inc. (d) 87,280 15,100 Macrovision Corp. (d) 340,354 8,200 Magma Design Automation, Inc. (d) 68,552 9,139 Manhattan Associates, Inc. (d) 175,560 4,700 Mantech International Corp. Class A (d) 145,888 6,200 Mapinfo Corp. (d) 65,162 15,997 Matrixone, Inc. (d) 79,985 23,300 Mentor Graphics Corp. (d) 238,825 7,356 Mercury Computer Systems, Inc. (d) 201,334 4,900 Merge Technologies, Inc. (d) 91,875 4,900 MicroStrategy, Inc. Class A (d) 259,896 26,500 Micromuse, Inc. (d) 149,990 11,398 Micros Systems, Inc. (d) 510,061 8,900 Motive, Inc. (d) 88,377 3,200 Ness Technologies, Inc. (d) 33,984 16,774 NetIQ Corp. (d) 190,385 5,185 Netscout Systems, Inc. (d) 34,169 1,900 Niku Corp. (d) 39,387 5,700 Online Resources Corp. (d) 64,467 7,100 Open Solutions, Inc. (d) 144,201 20,533 Openwave Systems, Inc. (d) 336,741 18,400 Opsware, Inc. (d) 94,208 1,800 PAR Technology Corp. (d) 57,600 3,900 PDF Solutions, Inc. (d) 51,168 10,507 Packeteer, Inc. (d) 148,149 84,700 Parametric Technology Corp. (d) 540,386
11 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 1,400 Pegasystems, Inc. (d) $ 8,260 21,791 Pinnacle Systems, Inc. (d) 119,851 11,108 Progress Software Corp. (d) 334,906 3,500 QAD, Inc. 26,950 17,200 Quest Software, Inc. (d) 234,436 33,200 RealNetworks, Inc. (b)(d) 165,004 5,100 RightNow Technologies, Inc. (d) 61,302 2,100 SI International, Inc. (d) 62,916 3,989 SPSS, Inc. (d) 76,629 5,600 SS&C Technologies, Inc. 177,408 500 SSA Global Techonologies, Inc. (d) 6,000 7,761 SYKES Enterprises, Inc. (d) 73,574 1,100 SYNNEX Corp. (d) 19,261 7,399 SafeNet, Inc. (d) 252,010 26,592 Sapient Corp. (d) 210,875 25,995 ScanSoft, Inc. (d) 98,261 15,127 Seebeyond Technology Corp. (d) 63,231 8,997 Serena Software, Inc. (d) 173,642 16,041 SonicWALL, Inc. (d) 86,461 6,700 Stellent, Inc. (d) 50,250 12,900 SupportSoft, Inc. (d) 66,951 1,583 Syntel, Inc. 25,375 12,585 Transaction Systems Architects, Inc. Class A (d) 309,969 11,008 Trizetto Group (d) 154,222 10,600 Tyler Technologies, Inc. (d) 80,136 6,500 Ultimate Software Group, Inc. (d) 106,600 5,400 Vasco Data Security International (d) 52,110 6,100 VeriFone Holdings, Inc. (d) 99,125 3,100 Verint Systems, Inc. (d) 99,696 11,267 Verity, Inc. (d) 98,812 9,280 Vignette Corp. (d) 104,400 7,151 Websense, Inc. (d) 343,606 22,800 Wind River Systems, Inc. (d) 357,504 7,800 Witness Systems, Inc. (d) 142,194 17,220 webMethods, Inc. (d) 96,432 13,308 Zoran Corp. (d) 176,863 ------------------ 15,856,241 - ----------------------------------------------------------------------------------------------------------------------------------- COMPUTER TECHNOLOGY - 1.7% 38,200 Adaptec, Inc. (d) 148,216 22,034 Advanced Digital Information Corp. (d) 167,458 4,300 Cyberguard Corp. (b)(d) 25,563 17,100 Dot Hill Systems Corp. (d) 89,604 25,200 Emulex Corp. (d) 460,152 9,809 FalconStor Software, Inc. (b)(d) 64,053 5,100 Fargo Electronics, Inc. (d) 101,949 12,882 Filenet Corp. (d) 323,853 71,300 Gateway, Inc. (d) 235,290 7,517 Hutchinson Technology, Inc. (d) 289,480 10,100 Imation Corp. 391,779 9,496 Intergraph Corp. (d) 327,232 9,500 Komag, Inc. (d) 269,515 24,674 Lexar Media, Inc. (b)(d) 121,149
12 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 72,400 Maxtor Corp. (d) $ 376,480 35,700 McData Corp. (d) 142,800 6,400 Mobility Electronics, Inc. (d) 58,560 12,794 PalmOne, Inc. (d) 380,877 24,500 Perot Systems Corp. Class A (d) 348,390 4,700 Phoenix Technologies Ltd. (d) 36,566 53,000 Quantum Corp. (d) 157,410 21,062 RSA Security, Inc. (d) 241,792 6,200 Radiant Systems, Inc. (d) 70,680 5,942 Radisys Corp. (d) 95,963 4,200 Rimage Corp. (d) 89,166 3,100 Stratasys, Inc. (d) 101,308 7,500 Synaptics, Inc. (d) 160,200 7,100 Trident Microsystems, Inc. (d) 161,099 15,709 UNOVA, Inc. (d) 418,331 ------------------ 5,854,915 - ----------------------------------------------------------------------------------------------------------------------------------- CONSTRUCTION - 0.3% 4,500 Brookfield Homes Corp. 205,200 4,818 EMCOR Group, Inc. (d) 235,600 10,171 Granite Construction, Inc. 285,805 3,900 Perini Corp. (d) 64,038 8,500 Washington Group International, Inc. (d) 434,520 ------------------ 1,225,163 - ----------------------------------------------------------------------------------------------------------------------------------- CONSUMER ELECTRONICS - 0.9% 13,867 Alloy, Inc. (b)(d) 71,276 7,653 Atari Inc. (d) 21,275 41,000 CNET Networks, Inc. (d) 481,340 4,700 DTS, Inc. (d) 83,801 35,100 DoubleClick, Inc. (d) 294,489 38,300 Earthlink, Inc. (d) 331,678 9,900 Infospace, Inc. (d) 326,007 13,000 Ipass, Inc. (d) 78,780 10,800 iVillage, Inc. (d) 64,584 4,300 Jamdat Mobile, Inc. (d) 119,024 2,700 Lifeline Systems, Inc. (d) 86,724 6,200 LoJack Corp. (d) 108,872 7,674 Midway Games, Inc. (b)(d) 84,107 9,500 NIC, Inc. (d) 43,890 7,700 Navarre Corp. (b)(d) 61,562 12,200 NetFlix, Inc. (d) 200,202 8,500 Sohu.com, Inc. (d) 186,320 11,825 THQ, Inc. (d) 346,118 16,650 United Online, Inc. 180,819 4,086 Universal Electronics, Inc. (d) 67,787 ------------------ 3,238,655 - ----------------------------------------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS - 0.9% 9,200 Blyth, Inc. 258,060 5,400 CNS, Inc. 123,390 1,891 CSS Industries, Inc. 63,991 2,600 Citi Trends, Inc. (d) 47,008 8,800 Jarden Corp. (d) 474,496 5,900 Mannatech, Inc. 112,218 9,573 Matthews International Corp. Class A 372,964
13 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 9,963 Nautilus, Inc. $ 283,946 7,300 Oakley, Inc. 124,319 10,376 Playtex Products, Inc. (d) 111,646 5,400 RC2 Corp. (d) 202,878 11,491 The Topps Co., Inc. 115,255 16,274 Tupperware Corp. 380,323 3,100 USANA Health Sciences, Inc. (b)(d) 131,130 1,900 Water Pik Technologies, Inc. (d) 36,195 13,583 Yankee Candle Co., Inc. 436,014 ------------------ 3,273,833 - ----------------------------------------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING: METALS & GLASS - 0.2% 4,075 Greif, Inc. 248,982 5,271 Mobile Mini, Inc. (d) 181,744 3,300 Silgan Holdings, Inc. 185,592 ------------------ 616,318 - ----------------------------------------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING: PAPER & PLASTIC - 0.0% 19,100 Graphic Packaging Corp. (d) 69,715 7,852 Myers Industries, Inc. 98,150 ------------------ 167,865 - ----------------------------------------------------------------------------------------------------------------------------------- COPPER - 0.1% 10,982 Mueller Industries, Inc. 297,612 - ----------------------------------------------------------------------------------------------------------------------------------- COSMETICS - 0.2% 7,593 Elizabeth Arden, Inc. (d) 177,600 1,700 Inter Parfums, Inc. 32,963 17,426 Nu Skin Enterprises, Inc. Class A 406,026 1,500 Parlux Fragrances, Inc. (b)(d) 41,505 42,883 Revlon, Inc. Class A (d) 131,651 ------------------ 789,745 - ----------------------------------------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES - 0.4% 8,400 Euronet Worldwide, Inc. (d) 244,188 15,000 F.N.B. Corp. 294,750 3,000 Greenhill & Co., Inc. 121,530 900 Huron Consulting Group, Inc. (d) 21,195 10,308 Jones Lang LaSalle, Inc. (d) 455,923 12,100 The Nasdaq Stock Market, Inc. (d) 228,206 10,900 USI Holdings Corp. (d) 140,392 ------------------ 1,506,184 - ----------------------------------------------------------------------------------------------------------------------------------- DIVERSIFIED MATERIALS & PROCESSING - 0.7% 13,560 Acuity Brands, Inc. 348,356 9,516 Armor Holdings, Inc. (d) 376,929 5,257 Barnes Group, Inc. 174,007 11,094 Brady Corp. 343,914 16,710 Clarcor, Inc. 488,767 12,462 Hexcel Corp. (d) 210,857 21,314 Olin Corp. 388,767 8,445 Tredegar Corp. 131,742 ------------------ 2,463,339 - ----------------------------------------------------------------------------------------------------------------------------------- DRUG & GROCERY STORE CHAINS - 0.6% 432 Arden Group, Inc. Class A 34,249 16,907 Casey's General Stores, Inc. 335,097 5,731 Great Atlantic & Pacific Tea Co. (d) 166,543 5,664 Ingles Markets, Inc. Class A 77,993 9,183 Longs Drug Stores Corp. 395,328 4,577 Nash Finch Co. 168,159 9,342 Pathmark Stores, Inc. (d) 81,836 10,769 Ruddick Corp. 274,933
14 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 3,929 Smart & Final, Inc. (d) $ 48,130 7,700 Spartan Stores, Inc. (d) 112,959 4,300 Weis Markets, Inc. 166,797 8,829 Wild Oats Markets, Inc. (d) 101,092 ------------------ 1,963,116 - ----------------------------------------------------------------------------------------------------------------------------------- DRUGS & PHARMACEUTICALS - 2.9% 25,100 AVANIR Pharmaceuticals Class A (d) 70,280 2,300 Acadia Pharmaceuticals, Inc. (d) 19,320 13,100 Adolor Corp. (d) 121,175 27,100 Alkermes, Inc. (d) 358,262 11,025 Alpharma, Inc. Class A 159,532 32,500 Amylin Pharmaceuticals, Inc. (d) 680,225 20,600 Andrx Corp. (d) 418,386 12,500 Atherogenics Inc. (b)(d) 199,750 4,000 Bentley Pharmaceuticals, Inc. (d) 43,800 21,648 BioMarin Pharmaceuticals, Inc. (d) 162,144 5,810 Bone Care International, Inc. (d) 191,556 11,900 CV Therapeutics, Inc. (d) 266,798 1,300 Caraco Pharmaceutical Laboratories Ltd. (d) 11,154 5,900 Chattem, Inc. (d) 244,260 10,902 Connetics Corp. (d) 192,311 18,000 Dendreon Corp. (b)(d) 94,140 15,300 Durect Corp. (b)(d) 77,877 7,200 Dusa Pharmaceuticals, Inc. (d) 66,960 7,695 Enzo Biochem, Inc. (d) 137,971 11,800 Eyetech Pharmaceuticals, Inc. (d) 149,152 9,400 First Horizon Pharmaceutical Corp. (d) 178,976 300 GTx, Inc. (d) 2,982 2,200 Hi-Tech Pharmacal Co., Inc. (d) 70,092 13,127 Immunogen, Inc. (d) 76,005 16,000 Impax Laboratories, Inc. (d) 251,200 12,800 Inspire Pharmaceuticals, Inc. (d) 107,776 21,989 Isis Pharmaceuticals, Inc. (d) 85,977 6,600 Ista Pharmaceuticals, Inc. (d) 54,912 10,800 KV Pharmaceutical Co. Class A (d) 180,900 23,116 Ligand Pharmaceuticals, Inc. Class B (d) 160,656 20,300 MGI Pharma, Inc. (d) 441,728 33,200 Medarex, Inc. (d) 276,556 14,827 Medicines Co. (d) 346,804 15,300 Medicis Pharmaceutical Corp. Class A 485,469 24,300 Nektar Therapeutics (d) 409,212 6,245 Neopharm, Inc. (d) 62,388 1,100 New River Pharmaceuticals, Inc. (d) 33,022 5,900 NitroMed, Inc. (d) 114,755 8,331 Noven Pharmaceuticals, Inc. (d) 145,626 11,300 Onyx Pharmaceuticals, Inc. (d) 269,844 9,500 Pain Therapeutics, Inc. (d) 64,125 10,200 Par Pharmaceutical Cos., Inc. (d) 324,462 8,200 Penwest Pharmaceuticals Co. (d) 96,924 23,215 Perrigo Co. 323,617 6,500 Pharmion Corp. (d) 150,865 8,200 Pozen, Inc. (d) 67,240
15 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 9,700 Priority Healthcare Corp. (d) $ 245,992 10,419 Regeneron Pharmaceuticals, Inc. (d) 87,415 7,100 Renovis, Inc. (d) 108,417 4,850 SFBC International, Inc. (d) 187,356 12,100 Salix Pharmaceuticals Ltd. (d) 213,686 14,682 SuperGen, Inc. (d) 72,529 7,446 United Therapeutics Corp. (d) 358,897 29,700 Vertex Pharmaceuticals, Inc. (d) 500,148 ------------------ 10,221,606 - ----------------------------------------------------------------------------------------------------------------------------------- EDUCATION SERVICES - 0.5% 8,104 Bright Horizons Family Solutions, Inc. (d) 329,995 25,700 Corinthian Colleges, Inc. (d) 328,189 16,300 DeVry, Inc. (d) 324,370 3,400 Educate, Inc. (d) 48,110 5,030 Learning Tree International, Inc. (d) 60,461 2,249 Renaissance Learning, Inc. 45,655 4,620 Strayer Education, Inc. 398,521 5,500 Universal Technical Institute, Inc. (d) 182,600 ------------------ 1,717,901 - ----------------------------------------------------------------------------------------------------------------------------------- ELECTRICAL & ELECTRONICS - 0.3% 12,786 Benchmark Electronics, Inc. (d) 388,950 2,200 LeCroy Corp. (d) 30,250 4,100 OSI Systems, Inc. (d) 64,739 12,998 Plexus Corp. (d) 184,962 8,832 Power Integrations, Inc. (d) 190,506 11,900 TTM Technologies, Inc. (d) 90,559 5,607 Universal Display Corp. (d) 57,640 ------------------ 1,007,606 - ----------------------------------------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT & COMPONENTS - 0.8% 5,281 AO Smith Corp. 141,056 7,100 American Superconductor Corp. (d) 64,965 9,971 Baldor Electric Co. 242,495 11,208 CTS Corp. 137,746 8,418 Cohu, Inc. 168,781 2,100 Color Kinetics, Inc. (d) 22,344 5,660 Franklin Electric Co., Inc. 218,759 13,490 General Cable Corp. (d) 200,057 7,216 Genlyte Group, Inc. (d) 351,708 6,760 Littelfuse, Inc. (d) 188,266 10,100 MKS Instruments, Inc. (d) 170,589 2,031 Powell Industries, Inc. (d) 38,325 19,500 Power-One, Inc. (d) 123,045 7,300 Sonic Solutions, Inc. (d) 135,780 5,500 Spatialight, Inc. (b)(d) 30,965 20,200 Taser International, Inc. (b)(d) 202,808 12,161 Technitrol, Inc. 171,835 4,379 Triumph Group, Inc. (d) 152,214 ------------------ 2,761,738 - ----------------------------------------------------------------------------------------------------------------------------------- ELECTRICAL: HOUSEHOLD APPLIANCE - 0.1% 22,300 Maytag Corp. 349,218 1,450 National Presto Industries, Inc. 63,902 ------------------ 413,120 - -----------------------------------------------------------------------------------------------------------------------------------
16 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- ELECTRONICS - 0.4% 22,312 Aeroflex, Inc. (d) $ 187,421 10,263 Agilysys, Inc. 161,129 3,532 BEI Technologies, Inc. 94,234 4,399 Daktronics, Inc. 88,024 6,872 II-VI, Inc. (d) 126,376 22,500 Kopin Corp. (d) 114,750 35,566 MRV Communications, Inc. (d) 77,178 11,380 Methode Electronics, Inc. 135,081 1,300 Multi-Fineline Electronix, Inc. (d) 23,920 6,649 Park Electrochemical Corp. 167,555 20,100 Semtech Corp. (d) 334,665 2,067 Supertex, Inc. (d) 36,503 ------------------ 1,546,836 - ----------------------------------------------------------------------------------------------------------------------------------- ELECTRONICS: INSTRUMENTS, GAUGES & METERS - 0.2% 3,400 Faro Technologies, Inc. (d) 92,684 7,482 Itron, Inc. (d) 334,296 3,801 Keithley Instruments, Inc. 58,573 2,500 Measurement Specialties, Inc. (d) 58,025 4,400 Metrologic Instruments, Inc. (d) 55,176 ------------------ 598,754 - ----------------------------------------------------------------------------------------------------------------------------------- ELECTRONICS: MEDICAL SYSTEMS - 0.9% 4,372 Analogic Corp. 219,999 4,800 Aspect Medical Systems, Inc. (d) 142,752 6,087 Bruker BioSciences Corp. (d) 24,287 6,400 Candela Corp. (d) 66,880 4,170 Datascope Corp. 139,069 9,500 EPIX Pharmaceuticals, Inc. (d) 84,075 15,150 eResearch Technology, Inc. (d) 202,858 7,772 Haemonetics Corp. (d) 315,854 8,400 HealthTronics, Inc. (d) 109,116 6,600 Hologic, Inc. (d) 262,350 9,100 Illumina, Inc. (d) 109,837 5,200 IntraLase Corp. (d) 102,024 10,381 Intuitive Surgical, Inc. (d) 484,170 7,051 Luminex Corp. (d) 69,382 2,900 Neurometrix, Inc. (d) 58,087 7,088 Possis Medical, Inc. (d) 71,801 2,800 Quality Systems, Inc. 132,664 4,200 Somanetics Corp. (d) 93,786 7,132 TriPath Imaging, Inc. (d) 61,050 6,500 Wilson Greatbatch Technologies, Inc. (d) 155,350 3,961 Zoll Medical Corp. (d) 100,807 ------------------ 3,006,198 - ----------------------------------------------------------------------------------------------------------------------------------- ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS - 2.8% 10,700 AMIS Holdings, Inc. (d) 142,738 9,716 Actel Corp. (d) 135,052 34,000 Amkor Technology, Inc. (d) 153,000 84,200 Applied Micro Circuits Corp. (d) 215,552 117,500 Atmel Corp. (d) 278,475 11,400 Bell Microproducts, Inc. (d) 107,160 25,200 Cirrus Logic, Inc. (d) 133,812 128,100 Conexant Systems, Inc. (d) 206,241 37,700 Cypress Semiconductor Corp. (d) 474,643
17 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 9,783 DSP Group, Inc. (d) $ 233,520 3,750 Diodes, Inc. (d) 117,000 14,827 Exar Corp. (d) 220,774 3,173 Excel Technology, Inc. (d) 77,104 33,600 Fairchild Semiconductor International, Inc. (d) 495,600 8,900 Formfactor, Inc. (d) 235,138 11,300 Genesis Microchip, Inc. (d) 208,598 5,893 IXYS Corp. (d) 83,563 22,600 Integrated Circuit Systems, Inc. (d) 466,464 31,900 Integrated Device Technology, Inc. (d) 342,925 11,138 Integrated Silicon Solutions, Inc. (d) 82,533 11,200 International DisplayWorks, Inc. (d) 89,600 34,000 Lattice Semiconductor Corp. (d) 150,960 2,700 Leadis Technology, Inc. (d) 21,735 10,500 MIPS Technologies, Inc. (d) 75,600 20,300 Micrel, Inc. (d) 233,856 19,490 Microsemi Corp. (d) 366,412 15,600 Microtune, Inc. (d) 78,234 2,900 Monolithic Power Systems, Inc. (d) 25,752 4,400 Netlogic Microsystems, Inc. (d) 78,012 40,100 ON Semiconductor Corp. (d) 184,460 17,300 Omnivision Technologies, Inc. (b)(d) 235,107 7,000 PLX Technology, Inc. (d) 71,120 51,100 PMC - Sierra, Inc. (d) 476,763 6,993 Pericom Semiconductor Corp. (d) 56,923 13,964 Pixelworks, Inc. (d) 119,811 5,700 Portalplayer, Inc. (d) 118,674 60,300 RF Micro Devices, Inc. (d) 327,429 28,300 Rambus, Inc. (d) 378,654 9,800 Sigmatel, Inc. (d) 168,168 23,776 Silicon Image, Inc. (d) 243,942 11,900 Silicon Laboratories, Inc. (d) 311,899 26,358 Silicon Storage Technology, Inc. (d) 106,223 12,300 Sirf Technology Holdings, Inc. (d) 217,464 47,233 Skyworks Solutions, Inc. (d) 348,107 12,400 Tessera Technologies, Inc. (d) 414,284 40,000 Transwitch Corp. (d) 82,000 41,536 Triquint Semiconductor, Inc. (d) 138,315 2,200 Virage Logic Corp. (d) 22,660 70,400 Vitesse Semiconductor Corp. (d) 147,136 3,200 Volterra Semiconductor Corp. (d) 47,648 ------------------ 9,746,840 - ----------------------------------------------------------------------------------------------------------------------------------- ELECTRONICS: TECHNOLOGY - 0.8% 2,700 3D Systems Corp. (d) 64,962 3,000 American Science & Engineering, Inc. (d) 133,080 13,023 Checkpoint Systems, Inc. (d) 230,507 10,080 Coherent, Inc. (d) 362,981 4,652 Cubic Corp. 82,526 8,174 DRS Technologies, Inc. 419,163 5,726 EDO Corp. 171,265 4,100 Essex Corp. (d) 93,808 5,750 Herley Industries, Inc. (d) 104,880
18 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 30,430 Identix, Inc. (d) $ 153,063 3,500 Innovative Solutions & Support, Inc. (d) 117,495 9,384 Intermagnetics General Corp. (d) 288,652 4,900 Ionatron, Inc. (d) 42,091 25,900 Kemet Corp. (d) 163,170 2,500 LaBarge, Inc. (d) 45,375 3,700 Scansource, Inc. (d) 158,878 1,500 Sypris Solutions, Inc. 18,555 ------------------ 2,650,451 - ----------------------------------------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT - 0.0% 8,900 Global Power Equipment Group, Inc. (d) 70,755 13,126 Plug Power, Inc. (b)(d) 89,913 ------------------ 160,668 - ----------------------------------------------------------------------------------------------------------------------------------- ENERGY MISCELLANEOUS - 0.6% 155,600 Calpine Corp. (b)(d) 529,040 1,000 Crosstex Energy, Inc. 48,300 9,000 Evergreen Solar, Inc. (d) 57,870 14,426 FuelCell Energy, Inc. (b)(d) 147,289 6,400 Holly Corp. 298,688 16,100 KFX, Inc. (b)(d) 230,069 200 Markwest Hydrocarbon, Inc. 4,640 5,058 Penn Virginia Corp. 225,941 13,600 Syntroleum Corp. (d) 139,536 7,291 Tetra Technologies, Inc. (d) 232,218 11,397 Veritas DGC, Inc. (d) 316,153 ------------------ 2,229,744 - ----------------------------------------------------------------------------------------------------------------------------------- ENGINEERING & CONTRACTING SERVICES - 0.3% 5,400 Clean Harbors, Inc. (d) 117,072 14,602 Dycom Industries, Inc. (d) 289,266 1,300 Infrasource Services, Inc. (d) 13,546 2,900 Layne Christensen Co. (d) 57,609 34,100 Quanta Services, Inc. (d) 300,080 11,277 URS Corp. (d) 421,196 ------------------ 1,198,769 - ----------------------------------------------------------------------------------------------------------------------------------- ENTERTAINMENT - 0.3% 3,000 Carmike Cinemas, Inc. 92,040 5,040 Dover Motorsports, Inc. 30,240 11,155 Gaylord Entertainment Co. (d) 518,596 3,472 Lodgenet Entertainment Corp. (d) 57,600 8,215 Movie Gallery, Inc. 217,122 4,155 Speedway Motorsports, Inc. 151,907 ------------------ 1,067,505 - ----------------------------------------------------------------------------------------------------------------------------------- FERTILIZERS - 0.0% 23,900 Terra Industries, Inc. (d) 162,759 - ----------------------------------------------------------------------------------------------------------------------------------- FINANCE COMPANIES - 0.2% 5,800 Accredited Home Lenders Holding Co. (d) 255,200 3,900 Asta Funding, Inc. 108,342 1,300 Credit Acceptance Corporation (d) 19,357 800 Delta Financial Corp. 7,608 2,300 International Securities Exchange, Inc. (d) 57,753 3,050 MortgageIT Holdings, Inc. 55,663 1,400 United PanAm Financial Corp. (d) 38,374 6,300 World Acceptance Corp. (d) 189,315 ------------------ 731,612 - -----------------------------------------------------------------------------------------------------------------------------------
19 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- FINANCE: SMALL LOAN - 0.1% 20,400 Advance America Cash Advance $ 326,400 2,450 Collegiate Funding Services LLC (d) 35,721 5,000 Encore Capital Group, Inc. (d) 85,000 200 QC Holdings, Inc. (d) 2,888 ------------------ 450,009 - ----------------------------------------------------------------------------------------------------------------------------------- FINANCIAL DATA PROCESSING SERVICES & SYSTEMS - 0.9% 8,000 Advent Software, Inc. (d) 162,080 995 CCC Information Services Group (d) 23,830 5,689 CompuCredit Corp. (d) 195,019 8,000 Cybersource Corp. (d) 58,480 11,330 Digital Insight Corp. (d) 271,014 22,400 E-Loan, Inc. (d) 74,816 15,288 eFunds Corp. (d) 275,031 8,623 eSpeed, Inc. Class A (d) 76,831 15,900 Hypercom Corp. (d) 102,873 4,300 iPayment, Inc. (d) 157,036 19,800 Jack Henry & Associates, Inc. 362,538 9,182 John H. Harland Co. 348,916 10,349 Kronos, Inc. (d) 417,996 12,164 NDCHealth Corp. 218,587 15,313 PRG-Schultz International, Inc. (d) 43,183 2,600 TNS, Inc. (d) 60,762 6,100 TradeStation Group, Inc. (d) 52,338 12,000 Wright Express Corp. (d) 221,640 ------------------ 3,122,970 - ----------------------------------------------------------------------------------------------------------------------------------- FINANCIAL INFORMATION SERVICES - 0.2% 1,700 Bankrate, Inc. (d) 34,238 9,950 Factset Research Systems, Inc. 356,608 44,100 Homestore, Inc. (d) 89,523 1,200 Morningstar, Inc. (d) 33,780 24,022 S1 Corp. (d) 113,144 400 Value Line, Inc. 15,700 ------------------ 642,993 - ----------------------------------------------------------------------------------------------------------------------------------- FINANCIAL MISCELLANEOUS - 0.9% 3,400 ACE Cash Express, Inc. (d) 86,904 5,700 Advanta Corp. Class B 160,512 1,400 Asset Acceptance Capital Corp. (d) 36,274 9,419 Cash America International, Inc. 189,510 400 Enstar Group, Inc. (d) 27,112 4,700 Federal Agricultural Mortgage Corp. Class B 103,635 5,267 Financial Federal Corp. 203,517 5,200 First Cash Financial Services, Inc. (d) 111,124 6,900 Harris & Harris Group, Inc. 82,179 5,499 LandAmerica Financial Group, Inc. 326,476 15,600 Metris Cos., Inc. (d) 225,576 24,200 MoneyGram International, Inc. 462,704 5,500 Portfolio Recovery Associates, Inc. (d) 231,110 3,800 Sanders Morris Harris Group, Inc. 65,360 13,936 Sotheby's Holdings Class A (d) 190,923 4,692 Sterling Bancorp 100,174 5,122 Stewart Information Services Corp. 215,124 1,033 Stifel Financial Corp. (d) 24,957
20 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 2,676 Triad Guaranty, Inc. (d) $ 134,844 2,291 WSFS Financial Corp. 125,341 ------------------ 3,103,356 - ----------------------------------------------------------------------------------------------------------------------------------- FOODS - 1.0% 4,934 American Italian Pasta Co. Class A 103,713 11,400 Chiquita Brands International, Inc. 313,044 11,056 Flowers Foods, Inc. 390,940 8,757 Hain Celestial Group, Inc. (d) 170,761 2,300 J&J Snack Foods Corp. 120,405 2,300 John B. Sanfilippo & Son, Inc. (d) 53,038 10,100 Lance, Inc. 173,821 3,100 M&F Worldwide Corp. (d) 41,416 963 Maui Land & Pineapple Co., Inc. (d) 36,671 15,700 NBTY, Inc. (d) 407,258 4,500 Natures Sunshine Prods, Inc. 78,480 13,300 Performance Food Group Co. (d) 401,793 1,500 Provide Commerce, Inc. (d) 32,385 9,795 Ralcorp Holdings, Inc. (d) 403,064 5,550 Sanderson Farms, Inc. 252,192 112 Seaboard Corp. 186,368 15,057 Sensient Technologies Corp. 310,325 6,300 Tootsie Roll Industries, Inc. 184,275 ------------------ 3,659,949 - ----------------------------------------------------------------------------------------------------------------------------------- FOREST PRODUCTS - 0.3% 3,209 Deltic Timber Corp. 122,038 16,521 Longview Fibre Co. 339,507 9,197 Potlatch Corp. 481,279 5,634 Universal Forest Products, Inc. 233,529 ------------------ 1,176,353 - ----------------------------------------------------------------------------------------------------------------------------------- FORMS & BULK PRINTING SERVICES - 0.1% 5,600 Ennis, Inc. 101,472 5,145 The Standard Register Co. 81,342 ------------------ 182,814 - ----------------------------------------------------------------------------------------------------------------------------------- FUNERAL PARLORS & CEMETERIES - 0.1% 12,000 Alderwoods Group, Inc. (d) 172,440 31,824 Stewart Enterprises, Inc. Class A 208,129 ------------------ 380,569 - ----------------------------------------------------------------------------------------------------------------------------------- GLASS - 0.0% 10,800 Apogee Enterprises, Inc. 165,996 - ----------------------------------------------------------------------------------------------------------------------------------- GOLD - 0.1% 78,300 Coeur d'Alene Mines Corp. (d) 284,229 6,700 Royal Gold, Inc. 134,804 ------------------ 419,033 - ----------------------------------------------------------------------------------------------------------------------------------- HEALTH CARE FACILITIES - 0.9% 10,000 American Healthways, Inc. (d) 422,700 35,026 Beverly Enterprises, Inc. (d) 446,231 5,700 Genesis HealthCare Corp. (d) 263,796 7,900 Kindred Healthcare, Inc. (d) 312,919 5,950 LCA-Vision, Inc. 288,337 2,100 Medcath Corp. (d) 58,359 1,900 National Healthcare Corp. 67,089 17,400 PainCare Holdings, Inc. (d) 75,342 6,700 Psychiatric Solutions, Inc. (d) 326,357 2,500 Radiation Therapy Services, Inc. (d) 66,375 4,200 Res-Care, Inc. (d) 56,952 1,824 Specialty Laboratories, Inc. (d) 15,340
21 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 5,037 Sunrise Senior Living, Inc. (d) $ 271,897 9,300 United Surgical Partners International, Inc. (d) 484,344 ------------------ 3,156,038 - ----------------------------------------------------------------------------------------------------------------------------------- HEALTH CARE MANAGEMENT SERVICES - 0.7% 5,800 Allied Healthcare International, Inc. (d) 41,064 9,441 Allscripts Healthcare Solutions, Inc. (d) 156,815 1,200 American Dental Partners, Inc. (d) 29,292 10,100 Amsurg Corp. (d) 279,669 7,400 Bioscript, Inc. (d) 44,400 13,500 Centene Corp. (d) 453,330 3,100 Computer Programs & Systems, Inc. 115,537 1,957 Corvel Corp. (d) 49,160 11,331 Eclipsys Corp. (d) 159,427 17,097 Hooper Holmes, Inc. 70,953 2,000 Horizon Health Corp. (d) 46,780 2,800 Molina Healthcare, Inc. (d) 123,928 22,900 OCA, Inc. (b)(d) 43,052 7,000 Pediatrix Medical Group, Inc. (d) 514,780 7,898 Per-Se Technologies, Inc. (d) 166,016 9,900 Phase Forward, Inc. (d) 67,320 5,200 Vital Images, Inc. (d) 93,340 4,700 WellCare Health Plans, Inc. (d) 166,897 ------------------ 2,621,760 - ----------------------------------------------------------------------------------------------------------------------------------- HEALTH CARE SERVICES - 0.6% 2,800 Adeza Biomedical Corp. (d) 47,544 2,500 Alliance Imaging, Inc. (d) 26,150 5,500 Amedisys, Inc. (d) 202,290 6,800 America Retirement Corp. (d) 99,416 15,500 Apria Healthcare Group, Inc. (d) 536,920 3,000 Bio-Reference Labs, Inc. (d) 41,640 7,012 Gentiva Health Services, Inc. (d) 125,234 9,625 Healthcare Services Group 193,270 6,427 IDX Systems Corp. (d) 193,710 6,100 LabOne, Inc. (d) 242,841 5,300 Matria Healthcare, Inc. (d) 170,819 10,300 Odyssey HealthCare, Inc. (d) 148,526 3,900 Symbion, Inc. (d) 93,015 4,600 VistaCare, Inc. Class A (d) 84,962 ------------------ 2,206,337 - ----------------------------------------------------------------------------------------------------------------------------------- HOMEBUILDING - 0.2% 2,100 Comstock Homebuilding Cos., Inc. Class A (d) 50,862 4,960 Levitt Corp. Class A 148,403 4,200 M/I Homes, Inc. 227,220 700 Orleans Homebuilders, Inc. 16,422 3,562 Technical Olympic USA, Inc. 86,485 1,100 William Lyon Homes, Inc. (d) 106,711 ------------------ 636,103 - -----------------------------------------------------------------------------------------------------------------------------------
22 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- HOTEL/MOTEL - 0.1% 7,200 Lodgian, Inc. (d) $ 73,944 5,979 Marcus Corp. 126,874 ------------------ 200,818 - ----------------------------------------------------------------------------------------------------------------------------------- HOUSEHOLD FURNISHINGS - 0.5% 3,300 American Woodmark Corp. 99,033 3,200 Bassett Furniture Industries, Inc. 60,352 11,400 The Bombay Co., Inc. (d) 64,980 9,800 Ethan Allen Interiors, Inc. 328,398 15,300 Furniture Brands International, Inc. 330,633 5,036 Haverty Furniture Cos., Inc. 74,432 1,700 Hooker Furniture Corp. 29,563 16,400 La-Z-Boy, Inc. 238,948 4,488 Libbey, Inc. 70,955 2,300 Lifetime Hoan Corp. 44,919 10,800 Select Comfort Corp. (d) 231,444 5,200 Stanley Furniture Co., Inc. 127,712 ------------------ 1,701,369 - ----------------------------------------------------------------------------------------------------------------------------------- IDENTIFICATION CONTROL & FILTER DEVICES - 1.0% 6,812 Advanced Energy Industries, Inc. (d) 53,542 12,967 Artesyn Technologies, Inc. (d) 112,813 16,741 Asyst Technologies Inc. (d) 74,665 900 Badger Meter, Inc. 37,170 7,594 C&D Technologies, Inc. 69,789 5,631 CUNO, Inc. (d) 402,279 14,200 Crane Co. 373,460 4,066 ESCO Technologies, Inc. (d) 409,853 4,200 Flanders Corp. (d) 37,800 16,600 Flowserve Corp. (d) 502,316 1,875 The Gorman-Rupp Co. 40,144 7,926 Mine Safety Appliances Co. 366,181 10,482 Paxar Corp. (d) 186,056 3,312 Robbins & Myers, Inc. 71,241 2,000 Sun Hydraulics, Inc. 72,780 8,727 Veeco Instruments, Inc. (d) 142,076 5,696 Vicor Corp. 77,466 9,200 Viisage Technology, Inc. (d) 41,216 7,636 Watts Water Technologies, Inc. Class A 255,730 6,317 X-Rite, Inc. 72,709 ------------------ 3,399,286 - ----------------------------------------------------------------------------------------------------------------------------------- INSURANCE: LIFE - 0.4% 11,800 American Equity Investment Life Holding Co. 140,184 6,700 Ceres Group, Inc. (d) 40,736 8,008 Citizens, Inc. (b)(d) 48,849 8,370 Delphi Financial Group Class A 369,535 2,680 Great American Financial Resources, Inc. 53,091 1,142 Kansas City Life Insurance Company 53,251 662 National Western Life Insurance Co. Class A (d) 128,355 28,500 The Phoenix Cos., Inc. 339,150 6,093 Presidential Life Corp. 104,251 8,800 Universal American Financial Corp. (d) 199,056 ------------------ 1,476,458 - -----------------------------------------------------------------------------------------------------------------------------------
23 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- INSURANCE: MULTI-LINE - 0.5% 9,740 Alfa Corp. $ 143,373 3,186 CNA Surety Corp. (d) 47,312 7,009 Crawford & Co. Class B 52,007 300 EMC Insurance Group, Inc. 5,424 3,425 FBL Financial Group, Inc. Class A 94,564 6,400 HealthExtras, Inc. (d) 128,448 9,206 Hilb Rogal & Hobbs Co. 316,686 14,868 Horace Mann Educators Corp. 279,816 1,340 Independence Holding Co. 23,651 3,400 KMG America Corp (d) 33,796 2,397 Pico Holdings, Inc. (d) 71,335 11,839 UICI 352,447 4,237 Zenith National Insurance Corp. 287,523 ------------------ 1,836,382 - ----------------------------------------------------------------------------------------------------------------------------------- INSURANCE: PROPERTY-CASUALTY - 1.2% 8,700 21st Century Insurance Group 129,108 4,650 Affirmative Insurance Holdings, Inc. 73,702 3,271 American Physicians Capital, Inc. (d) 121,518 9,066 Argonaut Group, Inc. (d) 209,334 3,732 Baldwin & Lyons, Inc. Class B 89,941 3,400 Bristol West Holdings, Inc. 62,220 15,030 Danielson Holdings Corp. (d) 182,915 6,300 Direct General Corp. 117,243 2,533 Donegal Group, Inc. Class A 50,559 2,800 FPIC Insurance Group, Inc. (d) 82,124 3,700 First Acceptance Corp. (d) 35,002 18,100 Fremont General Corp. 440,373 5,662 Harleysville Group, Inc. 118,279 6,200 Infinity Property & Casualty Corp. 216,256 2,058 The Midland Company 72,421 2,600 Navigators Group, Inc. (d) 89,882 2,000 Odyssey Re Holdings Corp. 49,360 19,115 Ohio Casualty Corp. 462,201 9,506 PMA Capital Corp. Class A (d) 83,938 8,423 ProAssurance Corp. (d) 351,744 6,454 RLI Corp. 287,848 3,000 Safety Insurance Group, Inc. 101,280 9,254 Selective Insurance Group 458,536 3,312 State Auto Financial Corp. 102,804 2,900 Tower Group, Inc. 45,327 5,500 United Fire & Casualty Co. 244,310 ------------------ 4,278,225 - ----------------------------------------------------------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANIES - 0.5% 18,700 Apollo Investment Corp. 344,641 5,100 Ares Capital Corp. 90,933 7,100 Calamos Asset Management, Inc. Class A 193,404 500 Capital Southwest Corp. 44,835 1,500 Cohen & Steers, Inc. 30,915 1,696 Gabelli Asset Management, Inc. Class A 74,946 16,400 MCG Capital Corp. 280,112
24 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 2,900 NGP Capital Resources Co. $ 43,297 10,600 National Financial Partners Corp. 414,884 1,600 Technology Investment Capital Corp. 23,680 20,900 Waddell & Reed Financial, Inc. Class A 386,650 ------------------ 1,928,297 - ----------------------------------------------------------------------------------------------------------------------------------- JEWELRY, WATCHES & GEMSTONES - 0.2% 4,620 Charles & Colvard Ltd. 113,421 15,600 Fossil, Inc. (d) 354,120 4,600 Movado Group, Inc. 86,848 ------------------ 554,389 - ----------------------------------------------------------------------------------------------------------------------------------- LEISURE TIME - 0.4% 22,600 Callaway Golf Co. 348,718 1,400 Escalade, Inc. 19,362 6,600 Great Wolf Resorts, Inc. (d) 134,904 12,100 K2, Inc. (d) 153,428 6,000 Life Time Fitness, Inc. (d) 196,860 7,300 Majesco Entertainment Co. (d) 47,742 26,900 Six Flags, Inc. (d) 125,085 2,100 Steinway Musical Instruments (d) 61,656 6,678 Sturm Ruger & Co., Inc. 55,895 7,856 Vail Resorts, Inc. (d) 220,754 5,500 West Marine, Inc. (d) 99,330 ------------------ 1,463,734 - ----------------------------------------------------------------------------------------------------------------------------------- MACHINE TOOLS - 0.1% 10,992 Lincoln Electric Holdings, Inc. 364,385 - ----------------------------------------------------------------------------------------------------------------------------------- MACHINERY & ENGINEERING - 0.1% 8,960 Applied Industrial Technologies, Inc. 289,318 - ----------------------------------------------------------------------------------------------------------------------------------- MACHINERY: AGRICULTURAL - 0.2% 25,200 AGCO Corp. (d) 481,824 400 Alamo Group, Inc. 7,468 2,800 Gehl Co. (d) 109,032 3,813 Lindsay Manufacturing Co. 89,911 ------------------ 688,235 - ----------------------------------------------------------------------------------------------------------------------------------- MACHINERY: CONSTRUCTION & HANDLING - 0.3% 2,600 ASV, Inc. (d) 105,404 4,517 Astec Industries, Inc. (d) 104,749 9,211 Manitowoc Co. 377,835 1,387 NACCO Industries, Inc. Class A 148,714 10,324 Stewart & Stevenson Services 233,942 ------------------ 970,644 - ----------------------------------------------------------------------------------------------------------------------------------- MACHINERY: ENGINES - 0.1% 14,400 Briggs & Stratton Corp. 498,528 - ----------------------------------------------------------------------------------------------------------------------------------- MACHINERY: INDUSTRIAL/SPECIALTY - 0.7% 8,200 Actuant Corp. Class A (d) 393,108 6,300 EnPro Industries, Inc. (d) 181,881 7,557 Gardner Denver, Inc. (d) 265,100 3,370 Kadant, Inc. (d) 73,904 11,403 Kennametal, Inc. 522,828 1,500 Middleby Corp. (d) 79,290 8,310 Nordson Corp. 284,867 6,028 Tecumseh Products Co. Class A 165,408 2,637 Tennant Co. 93,376 3,799 Thomas Industries, Inc. 151,808 2,993 Woodward Governor Co. 251,502 ------------------ 2,463,072 - -----------------------------------------------------------------------------------------------------------------------------------
25 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- MACHINERY: OIL WELL EQUIPMENT & SERVICES - 1.3% 3,868 CARBO Ceramics, Inc. $ 305,417 12,337 Cal Dive International, Inc. (d) 646,089 1,688 Dril-Quip, Inc. (d) 48,969 28,100 Global Industries Ltd. (d) 238,850 3,717 Gulf Island Fabrication, Inc. 73,894 23,200 Hanover Compressor Co. (d) 267,032 3,000 Hornbeck Offshore Services, Inc. (d) 81,270 5,649 Hydril (d) 307,023 20,146 Input/Output, Inc. (b)(d) 126,517 4,200 Lufkin Industries, Inc. 151,116 27,020 Newpark Resources (d) 202,650 8,404 Oceaneering International, Inc. (d) 324,815 10,700 Oil States International, Inc. (d) 269,319 30,281 Parker Drilling Co. (d) 212,270 4,800 RPC, Inc. 81,216 5,508 SEACOR Holdings, Inc. (d) 354,164 21,305 Superior Energy Services (d) 379,229 4,726 Universal Compression Holdings, Inc. (d) 171,270 9,457 W-H Energy Services, Inc. (d) 235,763 ------------------ 4,476,873 - ----------------------------------------------------------------------------------------------------------------------------------- MACHINERY: SPECIALTY - 0.5% 5,100 Applied Films Corp. (d) 130,560 5,400 Bucyrus International, Inc. 205,092 3,700 Cascade Corp. 160,025 12,387 Engineered Support Systems, Inc. 443,826 9,561 Helix Technology Corp. 126,970 16,398 JLG Industries, Inc. 450,617 4,941 Semitool, Inc. (d) 47,137 4,900 TurboChef Technologies, Inc. (d) 87,808 ------------------ 1,652,035 - ----------------------------------------------------------------------------------------------------------------------------------- MANUFACTURED HOUSING - 0.1% 22,627 Champion Enterprises, Inc. (d) 224,912 4,205 Palm Harbor Homes, Inc. (b)(d) 79,180 1,501 Skyline Corp. 59,935 ------------------ 364,027 - ----------------------------------------------------------------------------------------------------------------------------------- MANUFACTURING - 0.1% 16,759 Federal Signal Corp. 261,440 3,931 Standex International Corp. 111,680 ------------------ 373,120 - ----------------------------------------------------------------------------------------------------------------------------------- MEDICAL & DENTAL INSTRUMENTS & SUPPLIES - 2.9% 4,700 Abaxis, Inc. (d) 51,136 3,800 Abiomed, Inc. (d) 32,490 5,550 Advanced Neuromodulation Systems, Inc. (d) 220,224 16,200 Align Technology, Inc. (d) 119,394 20,700 American Medical Systems Holdings, Inc. (d) 427,455 2,900 Animas Corp. (d) 58,435 5,808 Arrow International, Inc. 185,275 5,200 Bio-Rad Laboratories, Inc. Class A (d) 307,892 5,549 Biosite, Inc. (d) 305,140 1,800 Cantel Medical Corp. (d) 29,448 13,300 Cepheid, Inc. (d) 97,622 9,228 Conmed Corp. (d) 283,946 2,500 Conor Medsystems, Inc. (d) 38,375 5,969 Cyberonics, Inc. (d) 258,995
26 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 5,500 DJ Orthopedics, Inc. (d) $ 150,865 100 DexCom, Inc. (d) 1,249 6,800 Diagnostic Products Corp. 321,844 8,400 Encore Medical Corp. (d) 46,620 4,900 Foxhollow Technologies, Inc. (d) 187,523 4,800 I-Flow Corp. (d) 79,872 4,150 ICU Medical, Inc. (d) 133,506 6,000 IRIS International, Inc. (d) 106,800 13,562 Immucor, Inc. (d) 392,620 9,122 Invacare Corp. 404,652 4,240 Inverness Medical Innovations, Inc. (d) 115,752 7,700 Kyphon, Inc. (d) 267,883 2,678 Landauer, Inc. 139,015 6,100 Laserscope (d) 252,784 10,200 Lifecell Corp. (d) 161,262 10,544 Mentor Corp. 437,365 2,000 Meridian Bioscience, Inc. 37,900 7,810 Merit Medical Systems, Inc. (d) 120,352 6,437 Molecular Devices Corp. (d) 139,232 6,200 NuVasive, Inc. (d) 103,044 15,459 OraSure Technologies, Inc. (d) 154,435 12,598 Owens & Minor, Inc. 407,545 22,073 PSS World Medical, Inc. (d) 274,809 6,000 Palomar Medical Technologies, Inc. (d) 143,520 8,614 PolyMedica Corp. 307,175 4,615 SonoSite, Inc. (d) 143,250 1,000 Stereotaxis, Inc. (d) 8,030 20,500 Steris Corp. 528,285 5,183 SurModics, Inc. (d) 224,787 12,000 Sybron Dental Specialties, Inc. (d) 451,440 2,500 Symmetry Medical, Inc. (d) 58,850 10,700 ThermoGenesis Corp. (d) 46,224 14,447 Thoratec Corp. (d) 221,617 9,160 Ventana Medical Systems (d) 368,507 9,300 Viasys Healthcare, Inc. (d) 210,087 1,624 Vital Signs, Inc. 70,352 8,676 West Pharmaceutical Services, Inc. 243,362 7,800 Wright Medical Group, Inc. (d) 208,260 600 Young Innovations, Inc. 22,398 ------------------ 10,108,900 - ----------------------------------------------------------------------------------------------------------------------------------- MEDICAL SERVICES - 0.3% 4,400 America Service Group, Inc. (d) 69,740 9,100 Magellan Health Services, Inc. (d) 321,321 8,471 Option Care, Inc. 119,441 9,197 Parexel International Corp. (d) 182,560 6,095 RehabCare Group, Inc. (d) 162,919 5,100 US Physical Therapy, Inc. (d) 97,818 ------------------ 953,799 - ----------------------------------------------------------------------------------------------------------------------------------- METAL FABRICATING - 1.1% 3,500 CIRCOR International, Inc. 86,345 18,556 Commercial Metals Co. 442,004 1,300 Dynamic Materials Corp. 50,115
27 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 4,750 Encore Wire Corp. (d) $ 55,052 9,426 Kaydon Corp. 262,514 9,358 Lone Star Technologies (d) 425,789 13,763 Maverick Tube Corp. (d) 410,137 7,000 Metals USA, Inc. (d) 133,140 5,565 NN, Inc. 70,564 5,955 NS Group, Inc. (d) 193,597 8,207 Quanex Corp. 435,053 6,613 RTI International Metals, Inc. (d) 207,714 8,547 Reliance Steel & Aluminum Co. 316,837 2,000 Roanoke Electric Steel Corp. 33,040 8,993 Ryerson Tull, Inc. 128,330 22,000 The Shaw Group, Inc. (d) 473,220 3,500 Superior Essex, Inc. (d) 61,985 4,158 Valmont Industries, Inc. 107,276 ------------------ 3,892,712 - ----------------------------------------------------------------------------------------------------------------------------------- METALS & MINERALS MISCELLANEOUS - 0.4% 1,600 AM Castle & Co. (d) 24,736 6,473 AMCOL International Corp. 121,628 5,511 Brush Engineered Materials, Inc. (d) 78,587 6,518 Cleveland-Cliffs, Inc. 376,480 4,500 Compass Minerals International, Inc. 105,300 30,244 GrafTech International Ltd. (d) 130,049 39,200 Hecla Mining Co. (d) 178,752 6,353 Minerals Technologies, Inc. 391,345 12,064 Stillwater Mining Co. (d) 89,515 1,300 Titanium Metals Corp. (d) 73,827 ------------------ 1,570,219 - ----------------------------------------------------------------------------------------------------------------------------------- MILLING: FRUIT & GRAIN PROCESSING - 0.2% 22,478 Corn Products International, Inc. 534,077 - ----------------------------------------------------------------------------------------------------------------------------------- MISCELLANEOUS HEALTH CARE - 0.1% 12,500 NeighborCare, Inc. (d) 414,625 - ----------------------------------------------------------------------------------------------------------------------------------- MISCELLANEOUS MATERIALS & COMMODITIES - 0.2% 7,350 Ceradyne, Inc. (d) 176,914 9,779 Symyx Technologies (d) 273,616 6,289 WD-40 Co. 175,652 ------------------ 626,182 - ----------------------------------------------------------------------------------------------------------------------------------- MISCELLANEOUS MATERIALS & PROCESSING - 0.3% 8,838 Insituform Technologies, Inc. Class A (d) 141,673 7,800 Metal Management, Inc. 150,930 5,455 Rogers Corp. (d) 221,200 25,759 USEC, Inc. 377,112 1,400 Xerium Technologies, Inc. (d) 16,590 ------------------ 907,505 - ----------------------------------------------------------------------------------------------------------------------------------- MISCELLANEOUS PRODUCER DURABLES - 0.1% 15,400 BE Aerospace, Inc. (d) 240,702 7,100 Blount International, Inc. (d) 118,499 ------------------ 359,201 - ----------------------------------------------------------------------------------------------------------------------------------- MULTI-SECTOR COMPANIES - 0.5% 16,071 GenCorp, Inc. (d) 309,527 7,294 Kaman Corp. Class A 131,584 8,199 Lancaster Colony Corp. 351,901 4,700 Raven Industries, Inc. 110,074 1,465 Sequa Corp. Class A (d) 96,939 12,050 Trinity Industries, Inc. 385,962 300 United Capital Corp. (d) 7,785 11,402 Walter Industries, Inc. 458,360 ------------------ 1,852,132 - -----------------------------------------------------------------------------------------------------------------------------------
28 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- OFFICE FURNITURE & BUSINESS EQUIPMENT - 0.1% 1,000 General Binding Corp. (d) $ 21,920 5,124 Imagistics International, Inc. (d) 143,472 7,174 Kimball International, Inc. Class B 94,697 3,300 Knoll, Inc. 56,463 10,640 Presstek, Inc. (d) 120,445 ------------------ 436,997 - ----------------------------------------------------------------------------------------------------------------------------------- OFFSHORE DRILLING - 0.1% 3,827 Atwood Oceanics, Inc. (d) 235,590 1,900 Bois d'Arc Energy, Inc. (d) 28,025 ------------------ 263,615 - ----------------------------------------------------------------------------------------------------------------------------------- OIL: CRUDE PRODUCERS - 2.7% 4,500 ATP Oil & Gas Corp. (d) 105,300 1,500 Atlas America, Inc. (b)(d) 55,785 4,901 Berry Petroleum Co. Class A 259,165 3,900 Bill Barrett Corp. (d) 115,362 7,600 Brigham Exploration Co. (d) 69,388 15,711 Cabot Oil & Gas Corp. Class A 545,172 5,300 Callon Petroleum Co. (d) 78,334 7,000 Carrizo Oil & Gas, Inc. (d) 119,420 14,300 Cheniere Energy, Inc. (d) 444,730 24,093 Cimarex Energy Co. (b)(d) 937,459 1,700 Clayton Williams Energy, Inc. (d) 50,983 10,957 Comstock Resources, Inc. (d) 277,103 7,100 Edge Petroleum Corp. (d) 110,902 9,000 Encore Acquisition Co. (d) 369,000 11,000 Endeavour International Corp. (d) 39,930 8,700 Energy Partners Ltd. (d) 228,027 12,400 FX Energy, Inc. (b)(d) 136,772 17,430 Frontier Oil Corp. 511,570 13,500 Gasco Energy, Inc. (d) 49,950 4,300 Goodrich Petroleum Corp. (d) 88,494 57,143 Grey Wolf, Inc. (d) 423,430 13,800 Harvest Natural Resources, Inc. (d) 150,834 7,883 Houston Exploration Co. (d) 418,193 7,400 McMoRan Exploration Co. (b)(d) 144,374 25,911 Meridian Resource Corp. (d) 123,855 12,000 Parallel Petroleum Corp. (d) 106,200 9,800 PetroHawk Energy Corp. (d) 105,840 6,000 Petroleum Development Corp. (d) 191,100 15,600 Petroquest Energy, Inc. (d) 102,492 4,000 Pioneer Drilling Co. (d) 61,040 7,220 Remington Oil & Gas Corp. (d) 257,754 4,549 Resource America, Inc. Class A 175,273 6,987 Spinnaker Exploration Co. (d) 247,969 18,352 St. Mary Land & Exploration Co. 531,841 7,878 Stone Energy Corp. (d) 385,234 8,917 Swift Energy Co. (d) 319,407 15,600 Todco Class A (d) 400,452 5,100 Toreador Resources Corp. (d) 123,879 5,100 Tri-Valley Corp. (d) 71,043 3,800 W&T Offshore, Inc. 91,466 5,400 Warren Resources, Inc. (d) 56,430 8,100 Whiting Petroleum Corp. (d) 294,111 ------------------ 9,375,063 - -----------------------------------------------------------------------------------------------------------------------------------
29 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- OIL: INTEGRATED DOMESTIC - 0.2% 11,100 Delta Petroleum Corp. (d) $ 156,066 4,800 Giant Industries, Inc. (d) 172,800 15,200 KCS Energy, Inc. (d) 264,024 12,500 Mission Resources Corp. (d) 100,875 1,400 Tipperary Corp. (d) 8,750 ------------------ 702,515 - ----------------------------------------------------------------------------------------------------------------------------------- PAINTS & COATINGS - 0.2% 13,676 Ferro Corp. 271,605 9,540 H.B. Fuller Company 324,932 1,793 Kronos Worldwide, Inc. 54,131 ------------------ 650,668 - ----------------------------------------------------------------------------------------------------------------------------------- PAPER - 0.4% 8,026 Albany International Corp. Class A 257,715 15,700 Bowater, Inc. 508,209 7,398 Buckeye Technologies, Inc. (d) 58,962 10,974 Caraustar Industries, Inc. (d) 115,227 5,092 Chesapeake Corp. 106,626 10,201 Glatfelter 126,492 5,000 Mercer International, Inc.-Sbi (d) 36,450 3,300 Neenah Paper, Inc. 102,201 7,580 Rock-Tenn Co. Class A 95,887 14,642 Wausau Paper Corp. 175,411 ------------------ 1,583,180 - ----------------------------------------------------------------------------------------------------------------------------------- PLASTICS - 0.0% 8,054 Spartech Corp. 143,361 - ----------------------------------------------------------------------------------------------------------------------------------- POLLUTION CONTROL & ENVIRONMENTAL SERVICES - 0.2% 5,500 American Ecology Corp. 98,450 16,300 Darling International, Inc. (d) 61,125 4,100 Duratek, Inc. (d) 95,038 13,146 Headwaters, Inc. (d) 451,959 ------------------ 706,572 - ----------------------------------------------------------------------------------------------------------------------------------- POWER TRANSMISSION EQUIPMENT - 0.1% 8,151 Regal-Beloit Corp. 237,683 - ----------------------------------------------------------------------------------------------------------------------------------- PRINTING & COPYING SERVICES - 0.1% 10,882 Bowne & Co., Inc. 157,354 12,300 Cenveo, Inc. (d) 92,988 2,400 Schawk, Inc. 60,000 4,400 TRM Corp. (d) 74,008 ------------------ 384,350 - ----------------------------------------------------------------------------------------------------------------------------------- PRODUCTION TECHNOLOGY EQUIPMENT - 1.3% 4,000 ADE Corp. (d) 112,200 10,857 ATMI, Inc. (d) 314,962 5,400 August Technology Corp. (d) 62,910 31,300 Axcelis Technologies, Inc. (d) 214,718 14,688 Brooks Automation, Inc. (d) 218,117 13,656 Cognex Corp. 357,651 25,868 Credence Systems Corp. (d) 234,105 10,700 Cymer, Inc. (d) 281,945 6,031 Dionex Corp. (d) 263,012 10,061 Electro Scientific Industries, Inc. (d) 179,891 6,800 Emcore Corp. (d) 28,084 14,200 Entegris, Inc. (d) 140,580 7,490 Esterline Technologies Corp. (d) 300,199 7,155 FEI Co. (d) 163,206 4,300 Intevac, Inc. (d) 45,021 18,356 Kulicke & Soffa Industries, Inc. (d) 145,196 18,403 LTX Corp. (d) 91,279
30 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 6,800 MTS Systems Corp. $ 228,344 11,099 Mattson Technology, Inc. (d) 79,469 12,600 Mykrolis Corp. (d) 179,046 6,062 Photon Dynamics, Inc. (d) 124,938 9,879 Photronics, Inc. (d) 230,576 4,500 Rofin-Sinar Technologies, Inc. (d) 147,600 4,273 Rudolph Technologies, Inc. (d) 61,232 6,990 Ultratech, Inc. (d) 127,917 11,042 Varian Semiconductor Equipment Associates, Inc. (d) 408,554 ------------------ 4,740,752 - ----------------------------------------------------------------------------------------------------------------------------------- PUBLISHING: MISCELLANEOUS - 0.6% 8,194 Banta Corp. 371,680 3,400 Consolidated Graphics, Inc. (d) 138,618 1,950 Courier Corp. 74,899 7,382 Martha Stewart Living Omnimedia Class A (b)(d) 215,407 5,407 Playboy Enterprises, Inc. Class B (d) 69,967 44,200 Primedia, Inc. (d) 179,010 31,100 The Reader's Digest Association, Inc. Class A 513,150 9,660 Scholastic Corp. (d) 372,393 3,100 Thomas Nelson, Inc. 67,456 ------------------ 2,002,580 - ----------------------------------------------------------------------------------------------------------------------------------- PUBLISHING: NEWSPAPERS - 0.3% 17,729 Hollinger International, Inc. Class A 177,467 8,100 Journal Communications, Inc. Class A 136,080 12,233 Journal Register Co. (d) 214,200 5,900 Media General, Inc. Class A 382,084 ------------------ 909,831 - ----------------------------------------------------------------------------------------------------------------------------------- RADIO & TV BROADCASTERS - 0.7% 1,633 Beasley Broadcasting Group, Inc. Class A (d) 23,662 10,100 Citadel Broadcasting Corp. (d) 115,645 9,200 Cox Radio, Inc. Class A (d) 144,900 14,900 Cumulus Media, Inc. Class A (d) 175,522 16,600 Emmis Communications Corp. Class A (b)(d) 293,322 9,700 Entercom Communications Corp. (d) 322,913 1,500 Fisher Communications, Inc. (d) 70,935 13,000 Gray Television, Inc. 156,780 5,054 Liberty Corp. 186,038 10,500 Lin TV Corp. Class A (d) 145,845 26,700 Radio One, Inc. Class D (d) 340,959 10,171 Regent Communications, Inc. (d) 59,704 5,033 Saga Communications, Inc. Class A (d) 70,462 2,883 Salem Communications Corp. Class A (d) 57,199 16,464 Sinclair Broadcast Group, Inc. Class A 149,493 14,684 Spanish Broadcasting System Class A (d) 146,693 2,800 WPT Enterprises, Inc. (d) 54,572 2,568 World Wrestling Entertainment, Inc. 29,327 ------------------ 2,543,971 - ----------------------------------------------------------------------------------------------------------------------------------- RAILROAD EQUIPMENT - 0.1% 4,100 Freightcar America, Inc. (d) 81,303 2,800 Greenbrier Cos., Inc. 75,880 13,339 Westinghouse Air Brake Technologies Corp. 286,522 ------------------ 443,705 - -----------------------------------------------------------------------------------------------------------------------------------
31 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- RAILROADS - 0.3% 8,881 Florida East Coast Industries $ 384,547 5,750 Genesee & Wyoming, Inc. Class A (d) 156,457 22,676 Kansas City Southern (d) 457,602 10,302 RailAmerica, Inc. (d) 122,594 ------------------ 1,121,200 - ----------------------------------------------------------------------------------------------------------------------------------- REAL ESTATE - 0.3% 1,500 Avatar Holdings, Inc. (b)(d) 75,405 5,000 Bluegreen Corp. (d) 87,050 1,400 California Coastal Communities, Inc. (d) 48,118 1,700 Consolidated-Tomoka Land Co. 146,200 7,500 Sunterra Corp. (b)(d) 121,575 1,975 Tarragon Corp. (d) 49,869 1,915 Tejon Ranch Co. (d) 98,565 10,000 Trammell Crow Co. (d) 242,400 9,900 WCI Communities, Inc. (d) 317,097 ------------------ 1,186,279 - ----------------------------------------------------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REIT) - 6.7% 7,740 AMLI Residential Properties Trust 241,952 12,300 Aames Investment Corp. 119,556 10,301 Acadia Realty Trust 192,114 7,300 Affordable Residential Communities 97,455 1,100 Agree Realty Corp. 33,275 567 Alexander's, Inc. (d) 141,041 6,256 Alexandria Real Estate Equities, Inc. 459,503 5,450 American Campus Communities, Inc. 123,606 10,197 American Home Mortgage Investment Corp. 356,487 16,300 Anthracite Capital, Inc. 193,155 14,300 Anworth Mortgage Asset Corp. 140,712 2,600 Arbor Realty Trust, Inc. 74,620 13,900 Ashford Hospitality Trust, Inc. 150,120 5,899 Bedford Property Investors 135,795 3,800 Bimini Mortgage Management, Inc. Class A 53,580 7,750 BioMed Realty Trust, Inc. 184,838 8,200 Boykin Lodging Co. (d) 109,880 15,547 Brandywine Realty Trust 476,516 9,748 CRT Properties, Inc. 266,120 12,650 Capital Automotive REIT 482,851 10,400 Capital Lease Funding, Inc. 112,840 2,500 Capital Trust, Inc. 83,525 6,000 Cedar Shopping Centers, Inc. 88,500 11,884 Colonial Properties Trust 522,896 15,675 Commercial Net Lease Realty 320,867 8,700 Corporate Office Properties Trust 256,215 3,300 Correctional Properties Trust 93,390 11,000 Cousins Properties, Inc. 325,380 3,100 Criimi MAE, Inc. (d) 67,735 10,600 DiamondRock Hospitality Co. 119,780 400 Digital Realty Trust, Inc. 6,952 17,100 ECC Capital Corp. 113,886 7,427 Eastgroup Properties 312,751 6,000 Education Realty Trust, Inc. 109,800 8,480 Entertainment Properties Trust 390,080 16,140 Equity Inns, Inc. 214,662
32 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 6,194 Equity Lifestyle Properties, Inc. $ 246,273 9,400 Equity One, Inc. 213,380 6,650 Extra Space Storage, Inc. 95,295 15,570 FelCor Lodging Trust, Inc. (d) 225,454 14,600 Fieldstone Investment Corp. 210,240 13,700 First Industrial Realty Trust, Inc. 546,630 3,400 First Potomac Realty Trust 84,320 9,100 GMH Communities Trust 126,035 9,382 Gables Residential Trust 405,584 5,200 Getty Realty Corp. 144,040 9,639 Glenborough Realty Trust, Inc. 198,467 11,356 Glimcher Realty Trust 315,129 10,100 Government Properties Trust, Inc. 98,172 2,550 Gramercy Capital Corp. 62,373 7,800 Heritage Property Investment Trust 273,156 9,800 Hersha Hospitality Trust 93,492 8,600 Highland Hospitality Corp. 89,870 16,700 Highwoods Properties, Inc. 496,992 10,220 Home Properties, Inc. 439,664 13,000 HomeBanc Corp. 118,170 23,100 IMPAC Mortgage Holdings, Inc. 430,815 17,900 Inland Real Estate Corp. 287,832 12,792 Innkeepers USA Trust 191,112 13,700 Investors Real Estate Trust 132,342 8,678 Kilroy Realty Corp. 412,118 3,500 Kite Realty Group Trust 52,500 4,700 LTC Properties, Inc. 97,290 55,100 La Quinta Corp. (d) 514,083 9,020 LaSalle Hotel Properties 295,946 14,642 Lexington Corporate Properties Trust 355,947 11,500 Luminent Mortgage Capital, Inc. 124,085 26,100 MFA Mortgage Investments, Inc. 194,445 9,900 Maguire Properties, Inc. 280,566 24,658 Meristar Hospitality Corp. (d) 212,059 5,629 Mid-America Apartment Communities, Inc. 255,669 6,929 National Health Investors, Inc. 194,497 200 National Health Realty, Inc. 3,722 21,359 Nationwide Health Properties, Inc. 504,286 12,400 Newcastle Investment Corp. 373,860 2,600 NorthStar Realty Finance Corp. 27,274 8,400 Novastar Financial, Inc. 328,860 15,600 Omega Healthcare Investors, Inc. 200,616 4,000 One Liberty Properties, Inc. 82,840 5,200 Origen Financial, Inc. 38,480 4,308 PS Business Parks, Inc. 191,491 4,004 Parkway Properties, Inc. 200,240 10,132 Pennsylvania Real Estate Investment Trust 481,270 12,886 Post Properties, Inc. 465,313 13,250 Prentiss Properties Trust 482,830 8,800 RAIT Investment Trust 263,560 4,300 Ramco-Gershenson Properties 125,904 5,895 Redwood Trust, Inc. 304,182
33 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 4,122 Saul Centers, Inc. $ 149,835 14,600 Saxon Capital Inc. 249,222 16,414 Senior Housing Properties Trust 310,389 2,800 Sizeler Property Investors 36,960 4,604 Sovran Self Storage, Inc. 209,298 20,300 Spirit Finance Corp. 238,525 11,000 Strategic Hotel Capital, Inc. 198,000 4,843 Sun Communities, Inc. 180,111 8,600 Sunstone Hotel Investors, Inc. 208,636 9,622 Tanger Factory Outlet Centers, Inc. 259,120 15,208 Taubman Centers, Inc. 518,441 6,563 The Town & Country Trust 187,111 17,300 Trustreet Properties, Inc. 287,353 8,400 U-Store-It Trust 160,020 4,527 Universal Health Realty Income Trust 172,524 6,000 Urstadt Biddle Properties, Inc. Class A 103,920 12,565 Washington Real Estate Investment Trust 392,028 7,055 Winston Hotels, Inc. 79,439 ------------------ 23,702,137 - ----------------------------------------------------------------------------------------------------------------------------------- RECREATIONAL VEHICLES & BOATS - 0.3% 5,543 Arctic Cat, Inc. 113,798 4,207 Coachmen Industries, Inc. 52,714 17,299 Fleetwood Enterprises, Inc. (d) 175,585 2,175 Marine Products Corp. 31,646 8,824 Monaco Coach Corp. 151,685 11,484 Thor Industries, Inc. 360,942 8,990 Winnebago Industries 294,423 ------------------ 1,180,793 - ----------------------------------------------------------------------------------------------------------------------------------- RENTAL & LEASING SERVICES: COMMERCIAL - 0.3% 3,753 Electro Rent Corp. (d) 54,569 13,200 GATX Corp. 455,400 900 Interpool, Inc. 19,242 1,900 Marlin Business Services, Inc. (d) 38,190 4,910 McGrath Rentcorp 116,367 18,800 United Rentals, Inc. (d) 379,948 ------------------ 1,063,716 - ----------------------------------------------------------------------------------------------------------------------------------- RENTAL & LEASING SERVICES: CONSUMER - 0.3% 11,593 Aaron Rents, Inc. 288,550 2,500 Amerco, Inc. (d) 133,875 8,195 Dollar Thrifty Automotive Group (d) 311,246 7,878 Rent-Way, Inc. (d) 77,520 8,658 WESCO International, Inc. (d) 271,688 ------------------ 1,082,879 - ----------------------------------------------------------------------------------------------------------------------------------- RESTAURANTS - 1.6% 3,400 AFC Enterprises (d) 44,812 3,300 BJ's Restaurants, Inc. (d) 67,122 12,180 Bob Evans Farms, Inc. 284,038 3,025 Buffalo Wild Wings, Inc. (d) 94,380 11,450 CEC Entertainment, Inc. (d) 481,930 16,300 CKE Restaurants, Inc. 226,896 7,100 California Pizza Kitchen, Inc. (d) 193,617 3,400 Dave & Buster's, Inc. (d) 62,696 22,600 Denny's Corp. (d) 112,322 7,950 Domino's Pizza, Inc. 176,967 6,048 Ihop Corp. 262,423
34 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 11,818 Jack in the Box, Inc. (d) $ 448,139 16,200 Krispy Kreme Doughnuts, Inc. (b)(d) 112,752 6,096 Landry's Restaurants, Inc. 183,429 5,354 Lone Star Steakhouse & Saloon 162,815 9,200 Luby's, Inc. (d) 109,940 400 McCormick & Schmick's Seafood Restaurants, Inc. (d) 6,316 8,284 O'Charleys, Inc. (d) 146,295 7,408 PF Chang's China Bistro, Inc. (d) 436,924 4,148 Papa John's International, Inc. (d) 165,796 10,577 Rare Hospitality International, Inc. (d) 322,281 4,700 Red Robin Gourmet Burgers, Inc. (d) 291,306 17,900 Ruby Tuesday, Inc. 463,610 15,000 Ryan's Restaurant Group, Inc. (d) 210,150 7,028 The Steak n Shake Co. (d) 130,861 5,200 Texas Roadhouse, Inc. Class A (d) 180,700 11,550 Triarc Cos. 171,633 ------------------ 5,550,150 - ----------------------------------------------------------------------------------------------------------------------------------- RETAIL - 4.9% 1,700 1-800 Contacts, Inc. (d) 32,929 11,224 1-800-FLOWERS.COM, Inc. Class A (d) 79,017 12,700 99 Cents Only Stores (d) 161,417 4,300 AC Moore Arts & Crafts, Inc. (d) 135,923 16,650 Aeropostale, Inc. (d) 559,440 2,650 America's Car Mart, Inc. (d) 59,651 2,600 Asbury Automotive Group, Inc. (d) 40,066 5,600 Big 5 Sporting Goods Corp. 158,928 31,700 Big Lots, Inc. (d) 419,708 2,500 Blair Corp. 98,750 54,300 Blockbuster, Inc. Class A 495,216 3,500 Blue Nile, Inc. (b)(d) 114,415 2,500 The Bon-Ton Stores, Inc. 48,375 6,650 Brookstone, Inc. (d) 125,552 5,979 Brown Shoe Co., Inc. 234,078 1,449 The Buckle, Inc. 64,249 4,000 Build-A-Bear Workshop, Inc. (d) 93,800 5,492 Burlington Coat Factory Warehouse Corp. 234,179 13,534 CSK Auto Corp. (d) 225,747 7,600 Cabela's, Inc. Class A (d) 162,336 5,050 Cache, Inc. (d) 83,931 9,800 Casual Male Retail Group, Inc. (b)(d) 71,638 9,596 The Cato Corp. Class A 198,147 5,400 Central Garden and Pet Co. (d) 265,248 4,500 Charlotte Russe Holding, Inc. (d) 56,070 36,040 Charming Shoppes (d) 336,253 5,785 Childrens Place (d) 269,986 12,128 Christopher & Banks Corp. 221,457 10,845 Coldwater Creek, Inc. (d) 270,149 600 Conn's, Inc. (d) 14,682 7,676 Cost Plus, Inc. (d) 191,439 500 DEB Shops, Inc. 14,485 2,000 Design Within Reach, Inc. (d) 36,200 8,045 Dress Barn, Inc. (d) 182,058 15,800 Drugstore.Com (d) 65,886
35 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 3,931 Electronics Boutique Holdings Corp. (d) $ 249,579 4,000 FTD Group, Inc. (d) 45,400 11,935 Fred's, Inc. 197,882 7,800 GSI Commerce, Inc. (d) 130,650 13,600 GameStop Corp. Class B (d) 406,640 16 Gander Mountain Co. (d) 182 7,038 Genesco, Inc. (d) 261,039 7,800 Global Imaging Systems, Inc. (d) 248,508 5,600 Goody's Family Clothing, Inc. 41,300 5,532 Group 1 Automotive, Inc. (d) 132,989 8,239 Guitar Center, Inc. (d) 480,910 9,458 Gymboree Corp. (d) 129,196 14,181 Hot Topic, Inc. (d) 271,141 7,761 Handleman Co. 128,134 6,750 Hibbett Sporting Goods, Inc. (d) 255,420 16,197 Insight Enterprises, Inc. (d) 326,876 6,862 The J. Jill Group, Inc. (d) 94,353 6,905 Jo-Ann Stores, Inc. (d) 182,223 3,887 Jos. A. Bank Clothiers, Inc. (b)(d) 168,307 1,647 Lawson Products 63,937 13,518 Linens 'N Things, Inc. (d) 319,836 4,600 Lithia Motors, Inc. Class A 132,710 3,000 MarineMax, Inc. (d) 93,750 1 Men's Wearhouse, Inc. (d) 17 2,600 New York & Co. (d) 54,756 3,700 Overstock.com, Inc. (b)(d) 131,720 17,910 PEP Boys-Manny Moe & Jack 242,501 21,400 Pacific Sunwear of California, Inc. (d) 491,986 4,400 The Pantry, Inc. (d) 170,412 3,500 Party City Corp. (d) 42,000 20,100 Payless Shoesource, Inc. (d) 385,920 16,300 Petco Animal Supplies, Inc. (d) 477,916 23,399 Pier 1 Imports, Inc. 332,032 7,516 Priceline.com, Inc. (b)(d) 175,348 9,900 Restoration Hardware, Inc. (d) 80,982 3,200 Retail Ventures, Inc. (d) 43,648 8,300 Rush Enterprises Inc. Class A (d) 110,722 3,547 Russ Berrie & Co., Inc. 45,437 7,054 School Specialty, Inc. (d) 328,011 5,000 Sharper Image Corp. (d) 63,650 9,098 ShopKo Stores, Inc. (d) 221,172 8,800 Sonic Automotive, Inc. 187,088 7,726 The Sports Authority, Inc. (d) 245,687 6,200 Stage Stores, Inc. (d) 270,320 5,203 Stamps.com, Inc. (d) 97,556 6,824 Stein Mart, Inc. 150,128 5,800 Talbots, Inc. 188,326 10,666 Too, Inc. (d) 249,264 10,500 Tractor Supply Co. (d) 515,550 7,830 Trans World Entertainment (d) 92,629 7,490 Tuesday Morning Corp. 236,085
36 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 6,831 United Auto Group, Inc. $ 203,564 12,980 United Natural Foods, Inc. (d) 394,203 8,156 Valuevision Media, Inc. Class A (d) 97,954 2,800 Wilsons The Leather Experts (d) 18,592 16,300 Zale Corp. (d) 516,547 1,800 Zumiez, Inc. (d) 52,470 ------------------ 17,096,560 - ----------------------------------------------------------------------------------------------------------------------------------- SAVINGS & LOAN - 2.3% 6,837 Anchor Bancorp Wisconsin, Inc. 206,888 9,550 BFC Financial Corp. (d) 81,461 17,138 Bank Mutual Corp. 189,546 15,142 BankAtlantic Bancorp, Inc. Class A 286,941 9,173 Bankunited Financial Corp. Class A 248,038 2,400 Berkshire Hills Bancorp, Inc. 79,968 1,900 Beverly Hills Bancorp, Inc. 20,805 18,487 Brookline Bancorp, Inc. 300,599 500 Charter Financial Corp. 17,470 4,275 Coastal Financial Corp. 62,458 13,226 Commercial Capital Bancorp, Inc. 221,006 12,527 Commercial Federal Corp. 421,909 10,349 Dime Community Bancshares 157,305 6,722 Fidelity Bankshares, Inc. 178,267 900 First Defiance Financial Corp. 24,021 4,026 First Financial Holdings, Inc. 120,418 3,240 First Indiana Corp. 96,131 34,653 First Niagara Financial Group, Inc. 505,241 3,000 First Place Financial Corp. 60,270 6,450 First Republic Bank 227,878 5,000 FirstFed Financial Corp. (d) 298,050 8,550 Flagstar Bancorp, Inc. 161,851 5,175 Flushing Financial Corp. 95,220 3,078 Great Southern Bancorp, Inc. 96,311 7,017 Harbor Florida Bancshares, Inc. 262,716 3,000 Horizon Financial Corp. 66,600 2,500 IBERIABANK Corp. 154,025 2,400 ITLA Capital Corp. (d) 129,360 8,100 KNBT Bancorp, Inc. 122,229 6,500 Kearny Financial Corp. 76,700 9,660 MAF Bancorp, Inc. 411,806 300 NASB Financial, Inc. 12,738 17,911 Netbank, Inc. 166,931 31,600 NewAlliance Bancshares, Inc. 443,980 4,667 Northwest Bancorp, Inc. 99,220 2,696 OceanFirst Financial Corp. 60,687 10,265 Ocwen Financial Corp. (d) 69,391 7,111 PFF Bancorp, Inc. 215,392 11,428 Partners Trust Financial Group, Inc. 122,051 2,700 Pennfed Financial Services, Inc. 45,576 1,450 Provident Financial Holdings, Inc. 40,760 21,758 Provident Financial Services, Inc. 382,288 4,100 Rockville Financial, Inc. (d) 50,102 1,100 Sound Federal Bancorp, Inc. 17,776
37 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 7,969 Sterling Financial Corp. (d) $ 298,041 6,900 TierOne Corp. 187,197 8,061 United Community Financial Corp. 88,187 29,233 W Holding Co., Inc. 298,761 400 Westfield Financial, Inc. 9,696 ------------------ 7,990,262 - ----------------------------------------------------------------------------------------------------------------------------------- SCIENTIFIC EQUIPMENT & SUPPLIERS - 0.2% 12,835 Newport Corp. (d) 177,893 10,335 Varian, Inc. (d) 390,560 ------------------ 568,453 - ----------------------------------------------------------------------------------------------------------------------------------- SECURITIES BROKERAGE & SERVICES - 0.6% 8,850 Archipelago Holdings, Inc. (b)(d) 345,061 2,900 BKF Capital Group, Inc. 109,939 13,745 CharterMac 301,840 1,800 GFI Group, Inc. (d) 64,080 13,500 Investment Technology Group, Inc. (d) 283,770 35,600 Knight Capital Group, Inc. Class A (d) 271,272 19,300 LaBranche & Co., Inc. (d) 121,590 8,700 MarketAxess Holdings, Inc. (d) 98,310 8,161 NCO Group, Inc. (d) 176,522 6,200 optionsXpress Holdings, Inc. 94,240 4,804 SWS Group, Inc. 82,533 200 ZipRealty, Inc. (d) 2,568 ------------------ 1,951,725 - ----------------------------------------------------------------------------------------------------------------------------------- SERVICES: COMMERCIAL - 3.1% 3,963 4Kids Entertainment, Inc. (d) 78,784 12,070 ABM Industries, Inc. 235,365 5,305 AMN Healthcare Services, Inc. (d) 79,734 6,761 Administaff, Inc. 160,641 5,300 The Advisory Board Co. (d) 258,322 2,500 Ambassadors Group, Inc. 92,975 3,000 Angelica Corp. 73,530 12,500 Autobytel, Inc. (d) 60,375 3,801 CDI Corp. 83,318 3,600 CRA International, Inc. (d) 193,860 5,778 Casella Waste Systems, Inc. (d) 69,336 5,685 Central Parking Corp. 78,169 18,253 Century Business Services, Inc. (d) 73,925 7,472 Chemed Corp. 305,455 4,800 Clark, Inc. 68,784 5,800 Cogent, Inc. (d) 165,590 7,692 Coinstar, Inc. (d) 174,531 11,694 Corrections Corp. of America (d) 458,989 5,550 CoStar Group, Inc. (d) 241,980 8,300 Cross Country Healthcare, Inc. (d) 141,100 7,400 DiamondCluster International, Inc. Class A (d) 83,620 2,402 Exponent, Inc. (d) 68,649 12,941 FTI Consulting, Inc. (d) 270,467 2,300 First Advantage Corp. Class A (d) 53,613 3,881 Forrester Research, Inc. (d) 69,198 6,277 G&K Services, Inc. Class A 236,831 2,900 The Geo Group, Inc. (d) 72,645 7,000 Gevity HR, Inc. 140,210
38 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 2,000 Greg Manning Auctions, Inc. (b)(d) $ 23,900 15,300 Harris Interactive, Inc. (d) 74,511 6,758 Heidrick & Struggles International, Inc. (d) 176,249 6,200 Hudson Highland Group, Inc. (d) 96,658 31,100 IKON Office Solutions, Inc. 295,761 11,300 Jackson Hewitt Tax Service, Inc. 267,132 5,768 Kelly Services, Inc. Class A 165,196 6,800 Kforce, Inc. (d) 57,528 10,868 Korn/Ferry International (d) 192,907 14,022 Labor Ready, Inc. (d) 326,853 5,404 MAXIMUS, Inc. 190,707 31,105 MPS Group, Inc. (d) 293,009 5,742 Midas, Inc. (d) 132,066 2,900 Monro Muffler, Inc. 85,579 15,123 Navigant Consulting, Inc. (d) 267,072 4,811 Navigant International, Inc. (d) 70,674 3,717 Netratings, Inc. (d) 50,551 5,200 Nutri/System, Inc. (d) 76,752 14,364 PHH Corp. (d) 369,442 8,739 Pegasus Solutions, Inc. (d) 97,440 3,660 Pre-Paid Legal Services, Inc. 163,419 1,600 The Providence Service Corp. (d) 39,728 12,500 Regis Corp. 488,500 14,232 Resources Connection, Inc. (d) 330,609 9,402 Rollins, Inc. 188,416 4,700 Sirva, Inc. (d) 39,997 12,100 Source Interlink Cos., Inc. (d) 149,677 21,029 Spherion Corp. (d) 138,791 4,740 Startek, Inc. 77,831 12,289 TeleTech Holdings, Inc. (d) 100,155 15,631 Tetra Tech, Inc. (d) 211,487 700 Travelzoo, Inc. (b)(d) 22,981 2,800 Unifirst Corp. 113,512 2,400 Vertrue, Inc. (d) 93,504 5,400 Viad Corp. 153,036 1,759 Volt Information Sciences, Inc. (d) 41,741 14,918 Waste Connections, Inc. (d) 556,292 13,300 Waste Services, Inc. (d) 51,072 9,825 Watson Wyatt & Co. Holdings 251,815 14,113 Wireless Facilities, Inc. (d) 89,335 6,800 World Fuel Services Corp. 159,188 ------------------ 10,861,069 - ----------------------------------------------------------------------------------------------------------------------------------- SHIPPING - 0.2% 4,300 Gulfmark Offshore, Inc. (d) 117,433 7,030 Kirby Corp. (d) 317,053 2,500 Maritrans, Inc. 67,625 1,800 Seabulk International, Inc. (d) 38,250 ------------------ 540,361 - ----------------------------------------------------------------------------------------------------------------------------------- SHOES - 0.4% 4,000 Deckers Outdoor Corp. (b)(d) 98,400 11,066 Finish Line Class A 209,369 6,996 K-Swiss, Inc. Class A 226,251
39 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 1,892 Kenneth Cole Productions, Inc. Class A $ 58,879 2,200 Shoe Carnival, Inc. (d) 47,872 6,655 Skechers U.S.A., Inc. Class A (d) 94,900 3,912 Steven Madden Ltd. (d) 69,477 12,935 Stride Rite Corp. 178,374 300 Weyco Group, Inc. 5,912 18,808 Wolverine World Wide, Inc. 451,580 ------------------ 1,441,014 - ----------------------------------------------------------------------------------------------------------------------------------- STEEL - 0.5% 34,827 AK Steel Holding Corp. (d) 223,241 7,326 Carpenter Technology 379,487 7,234 Gibraltar Industries, Inc. 134,118 10,400 Oregon Steel Mills, Inc. (d) 178,984 7,650 Schnitzer Steel Industries, Inc. Class A 181,305 11,097 Steel Dynamics, Inc. 291,296 4,700 Steel Technologies, Inc. 79,430 2,100 Wheeling-Pittsburgh Corp. (d) 32,298 18,600 Worthington Industries 293,880 ------------------ 1,794,039 - ----------------------------------------------------------------------------------------------------------------------------------- SYNTHETIC FIBERS - 0.0% 9,918 Wellman, Inc. 101,064 - ----------------------------------------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS EQUIPMENT - 0.9% 4,500 Applied Signal Technology, Inc. 85,680 25,400 Arris Group, Inc. (d) 221,234 6,885 Audiovox Corp. Class A (d) 106,717 15,761 Belden CDT, Inc. 334,133 14,834 C-COR, Inc. (d) 101,613 17,000 Interdigital Communications Corp. (d) 297,500 5,700 Mastec, Inc. (d) 50,160 13,799 Plantronics, Inc. 501,732 27,700 Polycom, Inc. (d) 413,007 29,877 Powerwave Technologies, Inc. (b)(d) 305,343 200 Preformed Line Products Co. 8,160 23,700 SBA Communications Corp. Class A (d) 319,950 6,380 Spectralink Corp. 67,118 16,000 Symmetricom, Inc. (d) 165,920 23,076 Terayon Corp. (d) 71,305 ------------------ 3,049,572 - ----------------------------------------------------------------------------------------------------------------------------------- TEXTILE PRODUCTS - 0.1% 7,400 DHB Industries, Inc. (d) 62,530 1,500 Dixie Group, Inc. (d) 26,415 11,600 Innovo Group, Inc. (d) 24,592 14,221 Interface, Inc. Class A (d) 114,479 ------------------ 228,016 - ----------------------------------------------------------------------------------------------------------------------------------- TEXTILES APPAREL MANUFACTURERS - 0.5% 4,900 Carter's, Inc. (d) 286,062 2,100 Cherokee, Inc. 72,702 3,585 Guess?, Inc. (d) 59,439 4,900 Hartmarx Corp. (d) 49,343 8,482 Kellwood Co. 228,166 3,702 Oshkosh B'Gosh, Inc. Class A 96,215 4,142 Oxford Industries, Inc. 178,313 4,400 Perry Ellis International, Inc. (d) 102,916
40 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 7,954 Phillips-Van Heusen $ 260,016 10,817 Russell Corp. 221,208 12,900 The Warnaco Group, Inc. (d) 299,925 ------------------ 1,854,305 - ----------------------------------------------------------------------------------------------------------------------------------- TIRES & RUBBER - 0.2% 3,374 Bandag, Inc. 155,373 19,200 Cooper Tire & Rubber Co. 356,544 2,000 Titan International, Inc. 27,960 ------------------ 539,877 - ----------------------------------------------------------------------------------------------------------------------------------- TOBACCO - 0.3% 25,955 Alliance One International, Inc. 155,990 5,720 Schweitzer-Mauduit International, Inc. 178,064 11,800 Star Scientific, Inc. (b)(d) 52,746 7,856 Universal Corp. 343,936 9,394 Vector Group Ltd. 174,447 ------------------ 905,183 - ----------------------------------------------------------------------------------------------------------------------------------- TOYS - 0.1% 7,830 Jakks Pacific, Inc. (d) 150,414 7,800 Leapfrog Enterprises, Inc. (b)(d) 88,140 ------------------ 238,554 - ----------------------------------------------------------------------------------------------------------------------------------- TRANSPORTATION MISCELLANEOUS - 0.2% 1,600 Dynamex, Inc. (d) 27,264 5,400 HUB Group, Inc. Class A (d) 135,270 14,400 Odyssey Marine Exploration, Inc. (d) 71,712 10,400 Pacer International, Inc. (d) 226,616 6,081 SCS Transportation, Inc. (d) 108,242 4,900 US Xpress Enterprises, Inc. Class A (d) 58,359 ------------------ 627,463 - ----------------------------------------------------------------------------------------------------------------------------------- TRUCKERS - 0.6% 6,441 Arkansas Best Corp. 204,888 4,900 Covenant Transport, Inc. Class A (d) 64,680 9,432 Forward Air Corp. 266,643 2,000 Frozen Food Express Industries (d) 22,640 15,580 Heartland Express, Inc. 302,719 11,175 Knight Transportation, Inc. 271,888 1,300 Marten Transport Ltd. (d) 27,287 5,050 Old Dominion Freight Line (d) 135,492 7,800 Overnite Corp. 335,244 1,200 PAM Transportation Services (d) 20,172 2,600 USA Truck, Inc. (d) 64,350 1,700 Universal Truckload Services, Inc. (d) 28,713 14,400 Werner Enterprises, Inc. 282,816 ------------------ 2,027,532 - ----------------------------------------------------------------------------------------------------------------------------------- UTILITIES: CABLE TV & RADIO - 0.0% 18,500 Mediacom Communications Corp. Class A (d) 127,095 - ----------------------------------------------------------------------------------------------------------------------------------- UTILITIES: ELECTRICAL - 1.4% 6,866 Allete, Inc. 342,613 16,275 Avista Corp. 302,552 9,800 Black Hills Corp. 361,130 5,089 CH Energy Group, Inc. 247,478 3,803 Central Vermont Public Service Corp. 70,355 15,367 Cleco Corp. 331,466 23,200 Duquesne Light Holdings, Inc. 433,376 16,008 El Paso Electric Co. (d) 327,364 9,268 The Empire District Electric Co. 222,061 12,800 Idacorp, Inc. 392,064
41 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 5,645 MGE Energy, Inc. $ 205,365 9,400 NorthWestern Corp. 296,288 8,486 Otter Tail Corp. 231,922 36,477 Sierra Pacific Resources (b)(d) 454,139 4,600 UIL Holdings Corp. 247,526 10,383 Unisource Energy Corp. 319,277 ------------------ 4,784,976 - ----------------------------------------------------------------------------------------------------------------------------------- UTILITIES: GAS DISTRIBUTORS - 0.9% 5,222 Cascade Natural Gas Corp. 107,051 2,700 EnergySouth, Inc. 74,817 6,348 The Laclede Group, Inc. 201,612 8,374 New Jersey Resources Corp. 404,046 13,200 Nicor, Inc. 543,444 8,299 Northwest Natural Gas Co. 317,354 11,400 Peoples Energy Corp. 495,444 4,666 South Jersey Industries, Inc. 285,186 10,590 Southwest Gas Corp. 270,151 14,900 WGL Holdings, Inc. 501,236 ------------------ 3,200,341 - ----------------------------------------------------------------------------------------------------------------------------------- UTILITIES: GAS PIPELINES - 0.0% 13,731 Transmontaigne, Inc. (d) 144,176 - ----------------------------------------------------------------------------------------------------------------------------------- UTILITIES: MISCELLANEOUS - 0.1% 64,800 Aquila, Inc. (d) 233,928 - ----------------------------------------------------------------------------------------------------------------------------------- UTILITIES: TELECOMMUNICATIONS - 1.2% 6,800 Alaska Communications Systems Group, Inc. 67,388 5,655 CT Communications, Inc. 73,798 4,926 Centennial Communications Corp. (d) 68,373 73,600 Cincinnati Bell, Inc. (d) 316,480 7,233 Commonwealth Telephone Enterprises, Inc. 303,135 38,900 Dobson Communications Corp. Class A (b)(d) 165,714 8,000 FairPoint Communications, Inc. 129,200 16,639 General Communication Class A (d) 164,227 12,500 GlobeTel Communications Corp. (d) 34,875 5,392 Golden Telecom, Inc. (a) 165,427 14,800 IDT Corp. Class B (d) 194,768 6,700 Intrado, Inc. (d) 100,232 8,600 Iowa Telecommunications Services, Inc. 161,250 217,100 Level 3 Communications, Inc. (d) 440,713 4,421 North Pittsburgh Systems, Inc. 86,475 18,500 Premiere Global Services, Inc. (d) 208,865 14,389 Price Communications Corp. (d) 248,930 5,800 RCN Corp. (d) 133,922 1,300 Shenandoah Telecom Co. 51,675 4,400 SureWest Communications 112,860 10,233 Talk America Holdings, Inc. (d) 102,432 18,500 Time Warner Telecom, Inc. Class A (d) 109,520 35,300 US Unwired, Inc. Class A (d) 204,034 8,020 USA Mobility, Inc. (d) 235,467 25,600 Ubiquitel, Inc. (d) 208,896 8,800 Valor Communications Group, Inc. 121,440 ------------------ 4,210,096 - ----------------------------------------------------------------------------------------------------------------------------------- UTILITIES: WATER - 0.2% 4,985 American States Water Co. 146,409 5,196 California Water Service Group 195,058 2,389 Connecticut Water Service, Inc. 59,701
42 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - --------------------------------------------------------------------------------
SHARES INDUSTRY* HELD COMMON STOCKS VALUE - ----------------------------------------------------------------------------------------------------------------------------------- 3,382 Middlesex Water Co. $ 65,678 1,974 SJW Corp. 92,798 8,532 Southwest Water Co. 100,934 ------------------ 660,578 - ----------------------------------------------------------------------------------------------------------------------------------- WHOLESALE & INTERNATIONAL TRADE - 0.0% 4,650 Central European Distribution Corp. (d) 173,584 - ----------------------------------------------------------------------------------------------------------------------------------- WHOLESALERS - 0.3% 6,400 Brightpoint, Inc. (d) 142,016 3,000 Earle M Jorgensen Co. (d) 24,150 3,500 LKQ Corp. (d) 95,025 8,400 Prestige Brands Holdings, Inc. (d) 163,800 9,969 United Stationers, Inc. (d) 489,478 ------------------ 914,469 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (COST - $285,282,848) - 98.4% 346,290,922 - -----------------------------------------------------------------------------------------------------------------------------------
MUTUAL FUNDS - ----------------------------------------------------------------------------------------------------------------------------------- INVESTMENT MANAGEMENT COMPANIES - 0.0% 4,900 Gladstone Capital Corp. 114,660 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL MUTUAL FUNDS (COST - $104,653) - 0.0% 114,660 - -----------------------------------------------------------------------------------------------------------------------------------
OTHER INTERESTS (C) - ----------------------------------------------------------------------------------------------------------------------------------- OIL: CRUDE PRODUCERS - 0.0% $ 500 PetroCorp Inc. (Escrow Shares) 0 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL OTHER INTERESTS (COST - $0) - 0.0% 0 - -----------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST SHORT-TERM SECURITIES - ----------------------------------------------------------------------------------------------------------------------------------- $5,908,632 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I (e) 5,908,632 9,657,003 Merrill Lynch Liquidity Series, LLC Money Market Series (e)(f) 9,657,003 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL SHORT-TERM SECURITIES (COST - $15,565,635) - 4.4% 15,565,635 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS (COST - $300,953,136**) - 102.8% 361,971,217 LIABILITIES IN EXCESS OF OTHER ASSETS - (2.8%) (9,912,721) ------------------ NET ASSETS - 100.0% $ 352,058,496 ==================
* For Series compliance purposes, "Industry" means 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 such industry sub-classifications for reporting ease. ** The cost and unrealized appreciation (depreciation) of investments as of June 30, 2005, as computed for federal income tax purposes, were as follows: Aggregate cost $ 304,527,759 ============= Gross unrealized appreciation $ 80,768,989 Gross unrealized depreciation (23,325,531) ------------- Net unrealized appreciation $ 57,443,458 ============
(a) Depositary Receipts. (b) Security, or a portion of security, is on loan. (c) Other interests represent beneficial interest in liquidation trusts and other reorganization entities and are non-income producing. (d) Non-income producing security. 43 MASTER SMALL CAP INDEX SERIES SCHEDULE OF INVESTMENTS AS OF JUNE 30, 2005 - -------------------------------------------------------------------------------- (e) Investments in companies considered to be an affiliate of the Series (such companies are defined as "Affiliated Companies" in Section 2(a)(3) of the Investment Company Act of 1940) were as follows:
AFFILIATE NET ACTIVITY INTEREST INCOME ------------------------------------------------------------------------------------------------------- Merrill Lynch Liquidity Series, LLC Cash Sweep Series I $(3,080,958) $ 123,857 Merrill Lynch Liquidity Series, LLC Money Market Series $(1,995,385) $ 75,809 -------------------------------------------------------------------------------------------------------
(f) Security was purchased with the cash proceeds from securities loans. Financial futures contracts purchased as of June 30, 2005 were as follows:
NUMBER OF UNREALIZED CONTRACTS ISSUE EXPIRATION DATE FACE VALUE APPRECIATION ------------------------------------------------------------------------------------------------------- 17 Russell 2000 Index September 2005 $5,427,948 $ 38,402 -------------------------------------------------------------------------------------------------------
44 ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not Applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not Applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust's Board of Trustees since the Trust last disclosed such procedures in Schedule 14A. ITEM 11. CONTROLS AND PROCEDURES. (a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective. (b) There were no changes in the Trust's internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Not Applicable. (a)(2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT. (a)(3) Not Applicable. (b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): American Beacon Funds By /s/ William F. Quinn -------------------- William F. Quinn President Date: September 2, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ William F. Quinn -------------------- William F. Quinn President Date: September 2, 2005 By /s/ Rebecca L. Harris --------------------- Rebecca L. Harris Treasurer Date: September 2, 2005 EX-99.CERT 2 ex99cert-05.txt CERTIFICATIONS For period ended 06/30/2005 Registrant Name: American Beacon Funds File Number: 811-4984 EXHIBIT 99.CERT I, Rebecca L. Harris, certify that: 1. I have reviewed this report on Form N-CSR of American Beacon Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 2, 2005 /s/ Rebecca L. Harris ----------------- --------------------- Rebecca L. Harris Treasurer American Beacon Funds I, William F. Quinn, certify that: 1. I have reviewed this report on Form N-CSR of American Beacon Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 2, 2005 /s/ William F. Quinn ----------------- -------------------- William F. Quinn President American Beacon Funds EX-99.906 CERT 3 ex906cert-05.txt SOX CERTIFICATION For period ended 06/30/2005 Registrant Name: American Beacon Funds File Number: 811-04984 EX-99.906CERT William F. Quinn and Rebecca L. Harris, respectively, the President and Treasurer of the American Beacon Funds (the "Registrant"), each certify to the best of his or her knowledge and belief that: 1. the Registrant's report on Form N-CSR for the period ended June 30, 2005 (the "Form N-CSR") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. /s/ William F. Quinn /s/ Rebecca L. Harris - -------------------- --------------------- William F. Quinn Rebecca L. Harris President Treasurer American Beacon Funds American Beacon Funds Date: September 2, 2005 A signed original of this written statement required by Section 906 has been provided to American Beacon Funds and will be retained by American Beacon Funds and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----