-----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, M5He6Nbjv8R50hcgjMyPN0ndSrw88CX/crMhXKAFa7EnOP4RTE9J92HmdQ3dUloP GVyEWAMEJcmUYbvQvGMo+g== 0000809593-06-000033.txt : 20060908 0000809593-06-000033.hdr.sgml : 20060908 20060908123215 ACCESSION NUMBER: 0000809593-06-000033 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060630 FILED AS OF DATE: 20060908 DATE AS OF CHANGE: 20060908 EFFECTIVENESS DATE: 20060908 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: 061081087 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 0000809593 S000001820 American Beacon Treasury Inflation Protected Securities Fund C000004773 Institutional Class ATPIX 0000809593 S000001822 American Beacon Money Market Fund C000004775 Institutional Class AADXX C000004776 PlanAhead Class APAXX C000004777 Platinum Class AAPXX C000004778 Cash Management Class AAEXX 0000809593 S000001823 American Beacon Municipal Money Market Fund C000004779 PlanAhead Class APLXX C000004780 Platinum Class AEPXX 0000809593 S000001824 American Beacon U.S. Government Money Market Fund C000004781 PlanAhead Class AUPXX C000004782 Platinum Class AMPXX C000004783 Cash Management Class AAUXX 0000809593 S000001827 American Beacon S&P 500 Index Fund C000004791 Institutional Class AASPX C000004792 PlanAhead Class AAFPX 0000809593 S000001828 American Beacon Small Cap Index Fund C000004793 Institutional Class ASCIX 0000809593 S000001829 American Beacon International Equity Index Fund C000004794 Institutional Class AIIIX N-CSRS 1 ncsr0606bea.txt AMBEACON N-CSR 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, 2006 Date of reporting period: June 30, 2006 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, 2006 S&P 500 INDEX FUND SMALL CAP INDEX FUND INTERNATIONAL EQUITY INDEX FUND About American Beacon Advisors - -------------------------------- Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management. Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company. 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....................... 10 Statements of Operations............. 11 Statements of Changes in Net Assets.. 12 Notes to Financial Statements........ 13 Financial Highlights................. 18 State Street Equity 500 Index Portfolio Portfolio of Investments............. 22 Statement of Assets and Liabilities.. 28 Statement of Operations.............. 29 Statements of Changes in Net Assets.. 30 Financial Highlights................. 31 Notes to Financial Statements........ 32 Master Small Cap Index Series Summary Schedule of Investments...... 35 Statement of Assets and Liabilities.. 42 Statement of Operations.............. 43 Statements of Changes in Net Assets.. 44 Financial Highlights................. 45 Notes to Financial Statements........ 46 Master International Index Series Summary Schedule of Investments...... 50 Statement of Assets and Liabilities.. 56 Statement of Operations.............. 57 Statements of Changes in Net Assets.. 58 Financial Highlights................. 59 Notes to Financial Statements........ 60 Additional Information............Back Cover
American Beacon Funds June 30, 2006 (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, 2006. As investors faced soaring gasoline prices, rising interest rates and a slowdown in the housing market, most financial markets experienced growth. For the six months ended June 30, 2006, the Dow Jones Industrial Average posted gains of 5.22%, the S&P 500 Index increased by 2.71%, and the MSCI EAFE Index returned 10.16%. Additionally, the Federal Reserve increased the Fed Funds Rate to 5.25%, up 100 basis points from the beginning of the year. During the six-month period, the American Beacon S&P 500 Index Fund increased by 2.65%, the American Beacon Small Cap Index Fund returned 8.06%, and the American Beacon International Equity Index Fund recorded gains of 10.26%. 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 DOMESTIC MARKET OVERVIEW June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- The U.S. economy entered 2006, its fifth consecutive year of expansion, with an impressive first three months. Equity markets trumped the preceding quarter's gains, delivering the best first quarter in several years. The second quarter of 2006 was a difficult period for investors, with most equity markets posting losses. As was the case in the first quarter, market volatility continued throughout the second quarter, but this time leaning in a negative direction. Profit taking and concerns over the medium-term strength of the economy weighed on stock prices. Moreover, equity markets came under pressure from the intensifying headwinds of higher interest rates, inflation on the upswing, a weakening in personal consumption and the housing market, record energy prices and ongoing unease about the excessive levels of consumer debt, all of which had been present for some time. The impetus behind the U.S. market climb in the first quarter was a robust U.S. economy, which rebounded sharply following the pause in the last quarter of 2005. Economic growth resiliently forged ahead despite well-publicized headwinds such as rising interest rates, a slowdown in the housing market and wild cards such as bird flu, turbulence in the Middle East and volatile energy markets. Following solid returns in January, equity markets cooled in February. Consumer spending slowed to the weakest pace in six months and incomes grew at the slowest rate since November of 2005. Nonetheless, an improvement in the trade deficit in February was a positive indicator of an ongoing economic recovery during the first quarter. In March, consumer confidence edged higher, spurred by rising wages and a jobless rate near a four-year low. However, retail sales experienced its slowest growth in more than a year in March, as cold weather and higher gasoline prices limited spending. Manufacturing growth also moderated in March as prices rose. On the encouraging side, the unemployment rate in March dropped to 4.7% from 4.8% in the previous month, matching a four-year low and capping the best first quarter for hiring since 2000. A vigorous economy extended into April as markets opened the second quarter in the same way the first quarter ended, posting impressive gains. By early May, the Dow Jones Industrial Average climbed to within 100 points of its all-time high. During the month, U.S. equity markets continued to weather the headwinds of multi-year record prices for commodities, increasing interest rates, poorer consumption and residential investment, and escalating geopolitical tensions. Notable financial news for April included the yield on the bellwether 10-year U.S. Treasury moving above the 5% mark for the first time in almost four years, oil prices breaking the $75 per barrel mark to reach all-time highs, and gold prices surging to a 25-year peak at above $650 per ounce. In May, the unemployment rate progressed from 4.7% in April to 4.6%, the lowest level since the summer of 2001. However, equity markets lost ground during the month amid concerns of moderating economic growth, mostly due to weaker trends in housing and personal consumption. Consumer confidence, which had struck a four-year high in April, dipped in May to the lowest level since September of 2005. Furthermore, the core rate of inflation (excluding food and energy prices) edged upward 0.3% in May, compared to the more modest gain of 0.1% in April. As widely expected, the U.S. Federal Reserve (the Fed) carried out its 16th consecutive 0.25% hike on May 10, boosting the short-term interest rate to 5%, the highest mark in more than five years. Following the Fed's rate hike in May, equity markets came under a correction via a significant sell off, driven by interest rate concerns and a resurgence in inflation fears, as well as the likelihood of subdued corporate earnings growth for the second half of the year. For June, equity markets ended the month flat, as signs of moderating economic growth mounted amid a worsening slide in consumer senti- 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. Russell 2000 Index is a service mark of the Frank Russell Company. 2 DOMESTIC MARKET OVERVIEW -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- ment and the housing market. Interest rates on 30-year home mortgages reached a four-year peak. However, the unemployment rate remained at 4.6%. In June, the Fed carried out its 17th consecutive 0.25% hike to 5.25%. The accompanying statement by the Fed, which omitted the phrase "the committee judges that some further tightening may yet be needed," led many to believe that the current cycle of interest rate hikes may be close to an end. The Fed noted that recent indicators suggested that "economic growth is moderating from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices." Furthermore, the Fed's statement included the phrase "readings on core inflation have been elevated in recent months," stoking investor worries over inflation. Yet, the structural forces that have kept a lid on prices over the past several years were still intact as of quarter-end: globalization, competition and a technology-driven surge in productivity. 3 PERFORMANCE OVERVIEW AMERICAN BEACON S&P 500 INDEX FUND+ June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- For the six months ended June 30, 2006, the total return of the Institutional Class of the American Beacon S&P 500 Index Fund was 2.65%, slightly below the S&P 500 Index return of 2.71% and slightly in excess of the Lipper S&P 500 Objective Funds Index return of 2.58%.
ANNUALIZED TOTAL RETURNS ------------------------------------------------- PERIODS ENDED 06/30/06 ------------------------------------------------- SINCE INCEPTION 6 MONTH* 1 YEAR 3 YEAR 5 YEAR (12/31/96) -------- ------ ------ ------- ---------- Institutional Class(1)............... 2.65% 8.50% 11.04% 2.29% 7.35% PlanAhead Class(1, 2)... 2.39% 8.00% 10.53% 1.82% 6.98% Lipper S&P 500 Index(3)............... 2.58% 8.36% 10.91% 2.20% 7.23% S&P 500 Index(3)........ 2.71% 8.63% 11.22% 2.49% 7.52%
* Not Annualized 1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more of less at redemption than at original purchase.. Performance shown is as of date indicated, and current performance may be lower or higher than the performance quoted. To obtain performance as 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. One cannot invest directly in an index. Eight out of ten sectors in the S&P 500 Index (the "Index") had positive returns for the first six months of 2006. The strongest performing sectors were Telecommunication Services and Energy, each up 13.8% during this period. No other S&P sectors achieved anything close to double digits. The weakest sector in the first half of 2006 was Information Technology, which tumbled 5.9%. The only other sector in the red on a year-to-date basis was Health Care, which declined 4.2% over the period. The best overall performers in the Index for the six-month period were Allegheny Technologies, up 92.6%, Archer-Daniels-Midland, up 68.3% and Nucor, which gained 65.6%. The worst performers for the same time period were Dana Corp., down 62.1%, KB HOME, down 36.4% and Goodyear Tire & Rubber, down 36.1%. As of June 30, 2006, the Fund's largest sector weightings were Financials (21.4% of assets), Information Technology (14.6% of assets), and Health Care (12.2% 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* -------------- Exxon Mobil Corp. 3.2% General Electric Co. 3.0% Citigroup, Inc. 2.1% Bank of America Corp. 1.9% Microsoft Corp. 1.8% Procter & Gamble Co. 1.6% Johnson & Johnson 1.5% Pfizer, Inc. 1.5% American International Group, Inc. 1.3% Altria Group, Inc. 1.3%
* Percent of equity portion of State Street Equity 500 Index Portfolio EQUITY SECTOR ALLOCATION
% OF EQUITIES* -------------- Financials 21.4% Information Technology 14.6% Health Care 12.2% Industrials 11.7% Consumer Discretionary 10.5% Energy 10.1% Consumer Staples 9.6% Utilities 3.4% Telecommunication Services 3.4% Materials 3.1%
* Percent of equity portion of State Street Equity 500 Index Portfolio + The S&P 500 Index Fund is not sponsored, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in this fund. 4 PERFORMANCE OVERVIEW AMERICAN BEACON SMALL CAP INDEX FUND(SM) June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- For the six months ended June 30, 2006, the total return of the Institutional Class of the American Beacon Small Cap Index Fund was 8.06%. The Fund's performance lagged the Russell 2000(R) Index return of 8.21%, but substantially exceeded the Lipper Small-Cap Core Funds Index return of 6.30%.
ANNUALIZED TOTAL RETURNS ----------------------------------------------- PERIODS ENDED 06/30/06 ----------------------------------------------- SINCE INCEPTION 6 MONTH* 1 YEAR 3 YEAR 5 YEAR (7/31/00) -------- ------ ------ ------ --------- Institutional Class(1)............... 8.06% 14.39% 18.42% 8.39% 7.68% Lipper Small-Cap Core Index(2)............... 6.30% 14.52% 18.59% 9.12% 9.13% Russell 2000 Index(2)... 8.21% 14.58% 18.70% 8.50% 7.83%
* Not Annualized 1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and share may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance quoted. To obtain performance as 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. One cannot invest directly in an index. All 12 sectors in the Russell 2000 Index ("Index") posted positive returns for the semi-annual period. The top-performing sector was Materials and Processing, returning an impressive 17.5%, followed by Other Energy and Utilities up 15.7% and 15.2%, respectively. The worst-performing sector for the six-month period was Health Care, with a return of only 0.4%, followed by Consumer Discretionary (up 2.4%) and Technology (up 5.3%). The top individual performers in the Index for the first half of the year were Medifast, Inc. (up 241.0%), Zoltek Cos. (up 240.4%), and Insteel Industries (up 192.9%). The bottom performers were Neurocrine Biosciences, Inc. (down 83.1%), Anadys Pharmaceuticals (down 66.8%), and PortalPlayer, Inc. (down 65.4%). As of June 30, 2006, the Fund's largest sector weightings were Financial Services (23.5% of assets), Consumer Discretionary (19.1% of assets), Technology (13.6% of assets), and Health Care (11.7% of assets), consistent with the top sector weightings in the Index. The Fund will continue to strive to meet its objective of closely replicating, before expenses, the return of its benchmark, the Russell 2000 Index. It does so by investing in a subset of the securities in the Index such that the characteristics of the portfolio closely track the characteristics of the Index. TOP TEN HOLDINGS
% OF EQUITIES* -------------- Maverick Tube Corp. ...................... 0.2% Hologic, Inc. ............................ 0.2% JetBlue Airways Corp. .................... 0.2% Phillips-Van Heusen Corp. ................ 0.2% 3Com Corp. ............................... 0.2% RSA Security, Inc. ....................... 0.2% Alexandria Real Estate Equities, Inc. .... 0.2% FormFactor, Inc. ......................... 0.2% Highwoods Properties, Inc. ............... 0.2% American Commercial Lines, Inc. .......... 0.2%
EQUITY SECTOR ALLOCATION
% OF EQUITIES* -------------- Financial Services........................ 23.5% Consumer Discretionary.................... 19.1% Technology................................ 13.6% Health Care............................... 11.7% Materials & Processing.................... 9.3% Producer Durables......................... 7.2% Other Energy.............................. 4.8% Autos and Transportation.................. 4.1% Utilities................................. 3.9% Consumer Staples.......................... 2.1% Integrated Oils........................... 0.4% Other..................................... 0.3%
* Percent of equity portion of Master Small Cap Index Series 5 INTERNATIONAL MARKET OVERVIEW June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- International equity markets generated positive performance over the semi-annual period ended June 30, 2006 as European economic growth continued to strengthen. During the reporting period, international equity markets outperformed U.S. equity markets. As evidence mounted of moderating economic growth elsewhere, the euro zone continued to demonstrate resilience. European companies were the leaders in analysts' upgrades. Both business and consumer confidence hit five-year highs during the second quarter. Government reports and industry surveys showed accelerating economic growth across the region, as increased exports spurred investment and hiring. All 16 of the MSCI Europe country indexes posted positive returns for the semi-annual period, with a majority exceeding the MSCI Europe's 13.6% gain. Norway (22.7%), Portugal (21.8%), and Spain (16.5%) were the leading regional performers, respectively; at the other end of the spectrum were Switzerland and Denmark (10.0% each), the Netherlands (10.7%), and Austria (11.1%). March was the most eventful month of the first quarter for Europe in terms of financial news. Early in the month, the European Central Bank (ECB) raised interest rates by 0.25% to 2.5%, following December's first hike in five years. Consumer confidence in the regional economy rose to the highest level in almost five years as export revenue sparked domestic spending. June was the most eventful month of the second quarter for Europe in terms of financial news. Early in the month, in an effort to counter inflation, which had edged up to 2.5% in May from 2.4% in April, the ECB raised interest rates by 0.25% to 2.75%. In Germany, the region's largest economy, business confidence reached an all-time high since the country's reunification in 1991. The German economy is estimated to have expanded at the fastest pace in more than five years in the second quarter, at 0.7%, led by construction and industrial output. In addition, unemployment improved for a third straight month to its best level since 2004. The Asia/Pacific Basin region was a laggard among the developed regions, with the MSCI Pacific Index posting only 3.5% for the semi-annual period. In the Asia/Pacific Basin region, Singapore posted the strongest gain over the period with 11.4%. Japan posted positive, but relatively weak, returns of 1.9% over the same timeframe. New Zealand was the only country of the developed MSCI country indexes that ended in negative territory for the period (-11.6%). In Singapore, gross domestic product expanded for a fourth straight quarter, at a 1.2% annualized pace in the first quarter. This expansion followed a 12.5% increase in the previous quarter and added to evidence that global demand for digital music players and laptop computers manufactured in Asia was fueling regional growth. In Japan, stocks suffered mainly from the likelihood of the first interest rate increase in more than 10 years. Of 33 industry groups in the Topix Index, brokerages -- such as Nomura Holdings, the nation's largest securities firm -- posted the steepest losses. Turning to global currencies, the major currencies traded in relatively narrow ranges over the course of the first quarter. The U.S. dollar, which outperformed most major currencies in 2005, gained 2.6% against the euro, rose 1.0% with respect to the pound, and ended flat versus the yen. In the second quarter, the U.S. dollar continued its out-performance against most major currencies, registering gains of 5.7%, 6.6%, and 3.2% against the euro, pound, and yen, respectively. 6 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM) June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- For the six months ended June 30, 2006, the Institutional Class of the American Beacon International Equity Index Fund posted a total return of 10.26%, slightly above the MSCI EAFE Index return of 10.16% and well above the Lipper International Funds Index return of 9.30%.
ANNUALIZED TOTAL RETURNS ----------------------------------------------- PERIODS ENDED 06/30/06 ----------------------------------------------- SINCE INCEPTION 6 MONTH* 1 YEAR 3 YEAR 5 YEAR (7/31/00) -------- ------ ------ ------ --------- Institutional Class(1)............ 10.26% 26.58% 23.88% 9.96% 4.20% Lipper Int'l. Funds Index(2)............ 9.30% 27.26% 23.16% 10.13% 4.57% MSCI EAFE Index(2)... 10.16% 26.56% 23.94% 10.06% 4.37%
* Not Annualized 1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and share may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance quoted. To obtain performance as the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. The Lipper International Funds Index tracks the 30 largest mutual funds in the Lipper International Funds category. Lipper is an independent mutual fund research and ranking service. The MSCI EAFE Index is a market capitalization weighted index of international stock performance composed of equities from developed markets excluding the U.S. and Canada. Performance is that of the MSCI EAFE Index through 9/30/01, the MSCI Provisional EAFE Index from 10/1/01 through 5/31/02, and the MSCI EAFE Index thereafter. One cannot invest directly in an index. Of the 21 countries in the MSCI EAFE Index ("EAFE"), 20 posted positive returns for the six-month period. The top performer was Norway, up 22.7%, followed by Portugal and Spain, with respective returns of 21.8% and 16.5%, all in U.S. dollars. The worst performers for the first half of 2006 were New Zealand, Japan, and Hong Kong with returns of -11.6%, 1.9%, and 7.0%, respectively. With regards to sector performance, all 10 sectors in EAFE posted positive returns for the semi-annual period. Utilities led with an impressive 17.8% return, followed by Materials, up 15.3%, and Health Care, up 13.1%. Lagging sectors were Information Technology, up 2.2%, Telecommunication Services, up 4.4%, and Consumer Discretionary, up 7.0%. The top three returning individual securities for the semi-annual period were Boliden AB, up 128.1%, Vallourec SA, up 119.1%, and Paladin Resources, up 110.8%. The worst performers for the period were SBI E*Trade, down 47.7%, Softbank Corporation, down 46.8%, and Index Holdings, down 45.5%. As of June 30, 2006, the Fund's largest country weightings were Japan (25%) and the United Kingdom (24%), while the largest sector weightings were Financials (30%) and Consumer Discretionary (12%). The Fund continues to pursue its objective of closely replicating, before expenses, the return of its benchmark, the MSCI EAFE Index. It does so by investing in a subset of the securities in the Index such that the characteristics of the portfolio closely track the characteristics of the Index. TOP TEN HOLDINGS
% OF EQUITIES* -------------- BP plc...................................... 2.2% HSBC Holdings plc........................... 1.8% GlaxoSmithKline plc......................... 1.5% Total S.A. ................................. 1.3% Toyota Motor Corp. ......................... 1.3% Royal Dutch Shell plc....................... 1.2% Vodafone Group plc.......................... 1.2% Novartis AG................................. 1.1% Nestle S.A. ................................ 1.1% Mitsubishi UFJ Financial Group Inc. ........ 1.1%
7 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM) -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- EQUITY SECTOR ALLOCATION
% OF EQUITIES* EAFE -------------- ----- Financials.......................... 29.8% 29.8% Consumer Discretionary.............. 12.0% 12.0% Industrials......................... 10.6% 10.6% Energy.............................. 8.3% 8.2% Materials........................... 8.3% 8.5% Health Care......................... 7.7% 7.7% Consumer Staples.................... 7.0% 7.0% Information Technology.............. 6.1% 6.2% Telecommunication Services.......... 5.1% 5.0% Utilities........................... 5.1% 5.0%
* Percent of equity portion of Master International Index Series COUNTRY ALLOCATION (COUNTRY CHART)
% OF EQUITIES* EAFE --------- ----- Japan..................................... 24.5% 24.4% United Kingdom............................ 24.2% 24.2% France.................................... 9.9% 9.8% Germany................................... 7.0% 7.0% Switzerland............................... 6.7% 6.8% Australia................................. 5.3% 5.3% Italy..................................... 3.9% 3.8% Spain..................................... 3.8% 3.8% Netherlands............................... 3.3% 3.3% Sweden.................................... 2.4% 2.4% Hong Kong................................. 1.7% 1.7% Finland................................... 1.5% 1.5% Belgium................................... 1.1% 1.2% Norway.................................... 0.9% 0.9% Ireland................................... 0.8% 0.8% Singapore................................. 0.8% 0.8% Denmark................................... 0.7% 0.7% Greece.................................... 0.6% 0.6% Austria................................... 0.5% 0.6% Portugal.................................. 0.3% 0.3% New Zealand............................... 0.1% 0.1%
* Percent of equity portion of Master International Index Series 8 FUND EXPENSES June 30, 2006 (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, 2006 through June 30, 2006. ACTUAL EXPENSES The following table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid During Period" row to estimate the expenses you paid on your account during this period. Shareholders of the 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 1/1/06....................... $1,000.00 $1,000.00 $1,000.00 Beginning Account Value 1/1/06............... $1,000.00 Ending Account Value 6/30/06...................... $1,026.51 $1,080.59 $1,102.61 Ending Account Value 6/30/06................. $1,023.90 Expenses Paid During Period* 1/1/06-6/30/06............... $ 0.67 $ 0.78 $ 1.11 Expenses Paid During Period* 1/1/06-6/30/06.. $ 3.04 Annualized Expense Ratio...... 0.13% 0.15% 0.21% Annualized Expense Ratio..................... 0.60%
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 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 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 1/1/06....................... $1,000.00 $1,000.00 $1,000.00 Beginning Account Value 1/1/06............... $1,000.00 Ending Account Value 6/30/06...................... $1,024.13 $1,024.04 $1,023.74 Ending Account Value 6/30/06................. $1,021.79 Expenses Paid During Period* 1/1/06-6/30/06............... $ 0.67 $ 0.76 $ 1.07 Expenses Paid During Period* 1/1/06-6/30/06.. $ 3.03 Annualized Expense Ratio...... 0.13% 0.15% 0.21% Annualized Expense Ratio..................... 0.60%
- --------------- * Expenses are equal to each Fund's annualized expense ratio for the six-month period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period. 9 AMERICAN BEACON FUNDS STATEMENTS OF ASSETS AND LIABILITIES June 30, 2006 (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................ $ 246,006 $ 125,558 $ 91,223 Receivable for fund shares sold......................... 401 -- 134 ----------- ---------- ---------- TOTAL ASSETS........................................ 246,407 125,558 91,357 ----------- ---------- ---------- LIABILITIES: Payable for fund shares redeemed........................ 238 4,923 5 Administrative service fees payable (Note 2)............ 18 9 3 Other liabilities....................................... 30 10 34 ----------- ---------- ---------- TOTAL LIABILITIES................................... 286 4,942 42 ----------- ---------- ---------- NET ASSETS.................................................. $ 246,121 $ 120,616 $ 91,315 =========== ========== ========== ANALYSIS OF NET ASSETS: Paid-in capital......................................... $ 206,776 $ 116,191 $ 77,838 Undistributed net investment income..................... 1,140 1,087 1,230 Accumulated net realized gain (loss).................... (47,152) 4,863 (14) Unrealized net appreciation (depreciation) of investments and futures contracts..................... 85,357 (1,525) 12,261 ----------- ---------- ---------- NET ASSETS.................................................. $ 246,121 $ 120,616 $ 91,315 =========== ========== ========== SHARES OUTSTANDING (NO PAR VALUE): Institutional Class..................................... 11,675,226 8,737,095 8,017,691 =========== ========== ========== PlanAhead Class......................................... 2,610,029 N/A N/A =========== ========== ========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE: Institutional Class..................................... $ 17.27 $ 13.81 $ 11.39 =========== ========== ========== PlanAhead Class......................................... $ 17.03 N/A N/A =========== ========== ==========
See notes to financial statements. - -------------------------------------------------------------------------------- 10 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS For the Six Months Ended June 30, 2006 (Unaudited) (in thousands) - --------------------------------------------------------------------------------
S&P 500 SMALL CAP INTERNATIONAL INDEX INDEX EQUITY INDEX ------- --------- ------------- INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIO: Dividend income......................................... $2,456 $ 613 $1,560 Interest income......................................... 140 530 56 Securities lending income............................... -- 55 1 Portfolio expenses...................................... (59) (46) (38) ------- ------- ------ NET INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIO......................................... 2,537 1,152 1,579 ------- ------- ------ FUND EXPENSES: Administrative service fees (Note 2): Institutional Class................................. 53 36 24 PlanAhead Class..................................... 63 -- -- Sub-administrative service fees Institutional Class................................. -- 13 19 Transfer agency fees: Institutional Class................................. 7 3 5 PlanAhead Class..................................... 7 -- -- Custody and Accounting fees............................. 3 3 5 Professional fees....................................... 5 4 4 Registration fees....................................... 18 5 -- Service fees - PlanAhead Class (Note 2)................. 63 -- -- Printing................................................ 15 1 6 Other expenses.......................................... 2 -- -- ------- ------- ------ TOTAL FUND EXPENSES................................. 236 65 63 ------- ------- ------ NET INVESTMENT INCOME....................................... 2,301 1,087 1,516 ------- ------- ------ REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED FROM MASTER PORTFOLIO: Net realized gain (loss) from investment transactions... (429) 5,197 563 Net realized loss on foreign currency transactions...... -- -- 278 Net realized loss from futures transactions............. (143) -- -- Net change in unrealized appreciation of investments and futures contracts..................................... 5,704 (6,691) 6,522 ------- ------- ------ NET GAIN (LOSS) ON INVESTMENTS...................... 5,132 (1,494) 7,363 ------- ------- ------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $7,433 $ (407) $8,879 ======= ======= ======
See notes to financial statements. - -------------------------------------------------------------------------------- 11 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, 2006 2005 2006 2005 2006 2005 ----------- ------------ ----------- ------------ ----------- ------------ (UNAUDITED) (UNAUDITED) (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................ $ 2,301 $ 4,606 $ 1,087 $ 592 $ 1,516 $ 1,582 Net realized gain (loss) on investments, foreign currency and futures transactions............... (572) (651) 5,197 1,052 841 589 Change in net unrealized appreciation (depreciation) of investments and futures contracts.................. 5,704 8,505 (6,691) (3,264) 6,522 5,507 -------- -------- -------- --------- ------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................... 7,433 12,460 (407) (1,620) 8,879 7,678 -------- -------- -------- --------- ------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class.............. (993) (4,029) -- (606) -- (2,005) PlanAhead Class.................. (179) (677) -- -- -- -- Net realized gain from investments, foreign currency and futures transactions: Institutional Class.............. -- -- -- (521) -- -- Tax return of capital: Institutional Class.............. -- (59) -- (167) -- (778) PlanAhead Class.................. -- (11) -- -- -- -- -------- -------- -------- --------- ------- -------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS.................... (1,172) (4,776) -- (1,294) -- (2,783) -------- -------- -------- --------- ------- -------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares........ 13,166 45,216 146,092 132,413 50,311 102,863 Reinvestments of dividends and distributions...................... 1,165 4,749 -- 1,291 -- 2,783 Cost of shares redeemed.............. (49,313) (73,819) (71,182) (123,873) (58,075) (43,497) -------- -------- -------- --------- ------- -------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS.................... (34,982) (23,854) 74,910 9,831 (7,764) 62,149 -------- -------- -------- --------- ------- -------- NET INCREASE (DECREASE) IN NET ASSETS... (28,721) (16,170) 74,503 6,917 1,115 67,044 -------- -------- -------- --------- ------- -------- NET ASSETS: Beginning of period.................. 274,842 291,012 46,113 39,196 90,200 23,156 -------- -------- -------- --------- ------- -------- END OF PERIOD*....................... $246,121 $274,842 $120,616 $ 46,113 $91,315 $ 90,200 ======== ======== ======== ========= ======= ======== * Includes undistributed net investment income of............... $ 1,140 $ 11 $ 1,087 $ -- $ 1,230 $ (286) ======== ======== ======== ========= ======= ========
See notes to financial statements. - -------------------------------------------------------------------------------- 12 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the "Act"), as amended, as a no load, diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon S&P 500 Index Fund, the American Beacon Small Cap Index Fund and the American Beacon International Equity Index Fund (each a "Fund" and collectively, the "Funds"), each a series of the Trust. 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, 2006 - ---------------- ----------- --------------- S&P 500 Index Fund State Street Equity 500 Index Portfolio 10.1% Small Cap Index Fund Master Small Cap Index Series 24.5% International Equity Index Fund Master International Index Series 14.6%
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. 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. 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. - -------------------------------------------------------------------------------- 13 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- Investment Income Each Fund records its share of net investment income and realized and unrealized gains and losses from the security transactions of its corresponding Portfolio each day. All net investment income and realized and unrealized gains (losses) of each Portfolio are allocated pro rata among the investors in that Portfolio at the time of such determination. Dividends to Shareholders Dividends from net investment income of the Small Cap Index and International Equity Index Funds normally will be declared and paid annually. The S&P 500 Index Fund normally will declare and pay dividends quarterly. Distributions, if any, of net realized capital gains are generally paid annually and recorded on the ex-dividend date. Dividends are determined in accordance with income tax principles that may treat certain transactions differently than generally accepted accounting principles. Allocation of Income, Expenses, Gains and Losses Income, expenses (other than those attributable to a specific class), gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. Valuation of Shares The price per share is calculated on each day on which shares are offered for sale 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. 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 compensa- - -------------------------------------------------------------------------------- 14 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- tion 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. 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. 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 plus a fee for each Board meeting attended. At June 30, 2006, the employee benefit plans of AMR Corporation and its subsidiary companies owned 77.5% of the Institutional Class of the S&P 500 Index Fund, 99.2% of the Small Cap Index Fund and 80.0% 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 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. - -------------------------------------------------------------------------------- 15 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- The tax character of distributions during the six months ended June 30, 2006 and December 31, 2005 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, 2006 2005 2006 2005 2006 2005 ----------- ------------ ----------- ------------ ----------- ------------ (UNAUDITED) (UNAUDITED) (UNAUDITED) Distributions paid from: Ordinary Income:* Institutional Class............. $ 993 $4,029 $ -- $ 606 $ -- $2,005 PlanAhead Class..... 179 677 -- -- -- -- Long-term capital gain Institutional Class............. -- -- -- 521 -- -- Return of capital Institutional Class............. -- 59 -- 167 -- 778 PlanAhead Class..... -- 11 -- -- -- -- ------ ------ ------ ------ ------ ------ TOTAL TAXABLE DISTRIBUTIONS.......... $1,172 $4,776 $ 0 $1,294 $ 0 $2,783 ====== ====== ====== ====== ====== ======
* For tax purposes short-term capital gains distributions are considered ordinary income distributions. At December 31, 2005, capital loss carryforward positions and expiration dates for federal income tax purposes were as follows (in thousands):
FUND 2006 2007 2008 2009 2010 2011 2012 2013 TOTAL - ---- ---- ---- ------ ------ ------- ---- ------ ------ ------- S&P 500 Index Fund............... $815 $45 $8,848 $1,300 $11,516 $635 $1,060 $2,311 $26,530 International Equity Index Fund........................... -- -- -- -- 224 282 -- -- 506
4. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares of the Funds (shares and dollars in thousands): S&P 500 INDEX FUND
FOR THE SIX MONTHS FOR THE YEAR ENDED ENDED JUNE 30, 2006 DECEMBER 31, 2005 ------------------- ------------------- INSTITUTIONAL CLASS SHARES AMOUNT SHARES AMOUNT - ------------------- ------- --------- ------- --------- Shares sold......................................... 352 $ 6,101 1,805 $ 29,463 Reinvestment of dividends........................... 57 993 248 4,086 Shares redeemed..................................... (2,095) (36,504) (3,587) (58,696) ------ -------- ------ -------- Net increase/(decrease) in capital shares outstanding....................................... (1,686) $(29,410) (1,534) $(25,147) ====== ======== ====== ========
- -------------------------------------------------------------------------------- 16 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
FOR THE SIX MONTHS FOR THE YEAR ENDED ENDED JUNE 30, 2006 DECEMBER 31, 2005 ------------------- ------------------ PLANAHEAD CLASS SHARES AMOUNT SHARES AMOUNT - --------------- ------- --------- ------ -------- Shares sold.......................................... 413 $ 7,065 978 $ 15,753 Reinvestment of dividends............................ 10 172 41 663 Shares redeemed...................................... (748) (12,809) (938) (15,123) ---- -------- ---- -------- Net increase/(decrease) in capital shares outstanding........................................ (325) $ (5,572) 81 $ 1,293 ==== ======== ==== ========
SMALL CAP INDEX FUND
FOR THE SIX MONTHS FOR THE YEAR ENDED ENDED JUNE 30, 2006 DECEMBER 31, 2005 ------------------- ------------------ INSTITUTIONAL CLASS SHARES AMOUNT SHARES AMOUNT - ------------------- ------- --------- ------ --------- Shares sold....................................... 10,452 $146,092 10,087 $ 132,413 Reinvestment of dividends......................... -- -- 100 1,291 Shares redeemed................................... (5,324) (71,182) (9,695) (123,873) ------ -------- ------ --------- Net increase/(decrease) in capital shares outstanding..................................... 5,128 $ 74,910 492 $ 9,831 ====== ======== ====== =========
INTERNATIONAL EQUITY INDEX FUND
FOR THE SIX MONTHS FOR THE YEAR ENDED ENDED JUNE 30, 2006 DECEMBER 31, 2005 ------------------- ------------------- INSTITUTIONAL CLASS SHARES AMOUNT SHARES AMOUNT - ------------------- ------- --------- ------- --------- Shares sold......................................... 4,483 $ 50,311 10,624 $102,863 Reinvestment of dividends........................... -- -- 268 2,783 Shares redeemed..................................... (5,198) (58,075) (4,624) (43,497) ------ -------- ------ -------- Net increase/(decrease) in capital shares outstanding....................................... (715) $ (7,764) 6,268 $ 62,149 ====== ======== ====== ========
- -------------------------------------------------------------------------------- 17 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, ---------------------------------------------------------------- 2006 2005 2004 2003 2002 2001 ----------- -------- -------- -------- -------- -------- (UNAUDITED) NET ASSET VALUE, BEGINNING OF PERIOD.... $ 16.90 $ 16.43 $ 15.10 $ 11.96 $ 15.62 $ 17.99 -------- -------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS:(A) Net investment income............... 0.07 0.29 0.29 0.21 0.20 0.20 Net gains (losses) on investments, foreign currency and futures transactions (both realized and unrealized)....................... 0.38 0.47 1.32 3.14 (3.66) (2.38) -------- -------- -------- -------- -------- -------- Total from investment operations........ 0.45 0.76 1.61 3.35 (3.46) (2.18) -------- -------- -------- -------- -------- -------- LESS DISTRIBUTIONS: Dividends from net investment income............................ (0.08) (0.29) (0.28) (0.21) (0.20) (0.19) Tax return of capital............... -- --(B) -- -- -- --(B) -------- -------- -------- -------- -------- -------- Total distributions..................... (0.08) (0.29) (0.28) (0.21) (0.20) (0.19) -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD.......... $ 17.27 $ 16.90 $ 16.43 $ 15.10 $ 11.96 $ 15.62 ======== ======== ======== ======== ======== ======== TOTAL RETURN............................ 2.65%(C) 4.74% 10.76% 28.26% (22.27%) (12.12%) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands)........................ $201,676 $225,857 $244,668 $245,251 $195,368 $254,289 Ratios to average net assets (annualized):(A) Net investment income.......... 1.83% 1.75% 1.85% 1.63% 1.47% 1.22% Expenses, including expenses of the master portfolio......... 0.13% 0.13% 0.17% 0.14% 0.14% 0.15%
- --------------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the State Street Equity 500 Index Portfolio. (B) The tax return of capital is calculated based upon outstanding shares at the time of distribution. Amounts are less than $0.01 per share. (C) Not annualized. - -------------------------------------------------------------------------------- 18 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, ------------------------------------------------------- 2006 2005 2004 2003 2002 2001 ----------- ------- ------- ------- -------- -------- (UNAUDITED) NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 16.69 $ 16.23 $ 14.96 $ 11.85 $ 15.49 $ 17.99 ------- ------- ------- ------- -------- -------- INCOME FROM INVESTMENT OPERATIONS:(A) Net investment income....... 0.02 0.21 0.21 0.15 0.14 0.14 Net gains (losses) on investments, foreign currency and futures transactions (both realized and unrealized)............... 0.38 0.48 1.31 3.12 (3.64) (2.39) ------- ------- ------- ------- -------- -------- Total from investment operations.................... 0.40 0.69 1.52 3.27 (3.50) (2.25) ------- ------- ------- ------- -------- -------- LESS DISTRIBUTIONS: Dividends from net investment income......... (0.06) (0.23) (0.25) (0.16) (0.14) (0.25) Tax return of capital....... -- --(B) -- -- -- --(B) ------- ------- ------- ------- -------- -------- Total distributions............. (0.06) (0.23) (0.25) (0.16) (0.14) (0.25) ------- ------- ------- ------- -------- -------- NET ASSET VALUE, END OF PERIOD.. $ 17.03 $ 16.69 $ 16.23 $ 14.96 $ 11.85 $ 15.49 ======= ======= ======= ======= ======== ======== TOTAL RETURN.................... 2.39%(D) 4.32% 10.21% 27.65% (22.59%) (12.48%) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands)............ $44,445 $48,985 $46,344 $34,729 $ 24,885 $ 32,284 Ratios to average net assets (annualized):(A) Net investment income, net of waivers....... 1.36% 1.28% 1.43% 1.16% 1.06% 0.89% Net investment income, before waivers....... 1.36% 1.28% 1.43% 1.15% 0.98% 0.84% Expenses, including expenses of the master portfolio, net of waivers(C)........ 0.60% 0.61% 0.62% 0.63% 0.55% 0.56% Expenses, including expenses of the master portfolio, before waivers....... 0.60% 0.61% 0.62% 0.64% 0.63% 0.61%
- --------------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the State Street Equity 500 Index Portfolio. (B) The tax return of capital is calculated based upon outstanding shares at the time of distribution. Amounts are less than $0.01 per share. (C) American Beacon Advisors, Inc. agreed to reimburse the Class for a portion of its expenses through March 1, 2003. (D) Not annualized. - -------------------------------------------------------------------------------- 19 AMERICAN BEACON SMALL CAP INDEX FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout each period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ----------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------------------------------ 2006 2005 2004 2003 2002 2001 ----------- ------- ------- ------- -------- ------- (UNAUDITED) NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 12.78 $ 12.57 $ 11.27 $ 7.70 $ 9.79 $ 9.69 -------- ------- ------- ------- -------- ------- INCOME FROM INVESTMENT OPERATIONS:(A) Net investment income........... 0.12 0.16 0.14 0.04 0.11 0.09 Net gains (losses) on investments, foreign currency and futures transactions (both realized and unrealized)...... 0.91 0.42 1.87 3.57 (2.10) 0.11 -------- ------- ------- ------- -------- ------- Total from investment operations.... 1.03 0.58 2.01 3.61 (1.99) 0.20 -------- ------- ------- ------- -------- ------- LESS DISTRIBUTIONS: Dividends from net investment income........................ -- (0.17) (0.13) (0.04) (0.10) (0.09) Distributions from net realized gain on investments........... -- (0.15) (0.58) -- -- -- Tax return of capital........... -- (0.05)(B) -- -- -- (0.01)(B) -------- ------- ------- ------- -------- ------- Total distributions................. -- (0.37) (0.71) (0.04) (0.10) (0.10) -------- ------- ------- ------- -------- ------- NET ASSET VALUE, END OF PERIOD...... $ 13.81 $ 12.78 $ 12.57 $ 11.27 $ 7.70 $ 9.79 ======== ======= ======= ======= ======== ======= TOTAL RETURN........................ 8.06%(C) 4.51% 17.91% 46.90% (20.37%) 2.07% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands).................... $120,616 $46,113 $39,196 $67,756 $ 11,227 $11,803 Ratios to average net assets (annualized):(A) Net investment income...... 1.49% 1.12% 0.90% 1.04% 1.13% 1.36% Expenses, including expenses of the master portfolio................ 0.15% 0.18% 0.22% 0.24% 0.20% 0.19%
- --------------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the Master Small Cap Index Series. (B) The tax return of capital is calculated based upon outstanding shares at the time of distribution. (C) Not annualized. - -------------------------------------------------------------------------------- 20 AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout each period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS --------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ---------------------------------------------------- 2006 2005 2004 2003 2002 2001 ----------- ------- ------- ------- -------- -------- (UNAUDITED) NET ASSET VALUE, BEGINNING OF PERIOD....................... $ 10.33 $ 9.39 $ 8.01 $ 5.86 $ 7.07 $ 9.21 ------- ------- ------- ------- -------- -------- INCOME FROM INVESTMENT OPERATIONS:(A) Net investment income...... 0.18 0.21 0.17 0.14 0.11 0.10 Net gains (losses) on investments, foreign currency and futures transactions (both realized and unrealized).............. 0.88 1.06 1.44 2.13 (1.23) (2.12) ------- ------- ------- ------- -------- -------- Total from investment operations................... 1.06 1.27 1.61 2.27 (1.12) (2.02) ------- ------- ------- ------- -------- -------- LESS DISTRIBUTIONS: Dividends from net investment income........ -- (0.24) (0.23) (0.12) (0.09) (0.09) Tax return of capital...... -- (0.09)(B) -- -- -- (0.03)(B) ------- ------- ------- ------- -------- -------- Total distributions............ -- (0.33) (0.23) (0.12) (0.09) (0.12) ------- ------- ------- ------- -------- -------- NET ASSET VALUE, END OF PERIOD....................... $ 11.39 $ 10.33 $ 9.39 $ 8.01 $ 5.86 $ 7.07 ======= ======= ======= ======= ======== ======== TOTAL RETURN................... 10.26%(C) 13.58% 20.12% 38.87% (15.65%) (22.14%) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands)........... $91,315 $90,200 $23,156 $10,043 $ 4,912 $ 3,773 Ratios to average net assets (annualized):(A) Net investment income.............. 3.21% 2.49% 2.16% 2.71% 1.97% 1.49% Expenses, including expenses of the master portfolio.... 0.21% 0.23% 0.26% 0.31% 0.25% 0.29%
- --------------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the Master International Index Series. (B) The tax return of capital is calculated based upon outstanding shares at the time of distribution. (C) Not annualized. - -------------------------------------------------------------------------------- 21 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) COMMON STOCKS - 98.2% CONSUMER DISCRETIONARY - 10.3% Amazon.Com, Inc. (a)........... 64,300 $ 2,487 Apollo Group, Inc. (a)......... 29,475 1,523 AutoNation, Inc. (a)........... 30,136 646 AutoZone, Inc. (a)............. 11,387 1,004 Bed Bath & Beyond, Inc. (a).... 59,014 1,958 Best Buy Co., Inc. ............ 84,281 4,622 Big Lots, Inc. (a)............. 24,438 417 Black & Decker Corp. .......... 16,033 1,354 Brunswick Corp. ............... 19,929 663 Carnival Corp. ................ 90,619 3,782 CBS Corp. ..................... 161,898 4,379 Centex Corp. .................. 25,776 1,297 Circuit City Stores, Inc. ..... 31,439 856 Clear Channel Communications, Inc. ........................ 104,465 3,233 Coach, Inc. (a)................ 80,700 2,413 Comcast Corp. (a).............. 439,767 14,398 Cooper Tire & Rubber Co. ...... 12,537 140 D.R. Horton, Inc. ............. 56,700 1,351 Darden Restaurants, Inc. ...... 27,410 1,080 Dillard's, Inc. Class A........ 13,653 435 Dollar General Corp. .......... 64,115 896 Dow Jones & Co., Inc. ......... 12,526 439 Eastman Kodak Co. ............. 60,837 1,447 eBay, Inc. (a)................. 240,520 7,045 EW Scripps Co. ................ 18,000 777 Family Dollar Stores, Inc. .... 33,068 808 Federated Department Stores, Inc. ........................ 115,880 4,241 Ford Motor Co. ................ 388,655 2,693 Fortune Brands, Inc. .......... 30,466 2,163 Gannett Co., Inc. ............. 49,938 2,793 Gap, Inc. ..................... 113,930 1,982 General Motors Corp. .......... 117,773 3,508 Genuine Parts Co. ............. 35,493 1,479 Goodyear Tire & Rubber Co. (a).......................... 37,942 421 H&R Block, Inc. ............... 68,820 1,642 Harley-Davidson, Inc. ......... 55,738 3,059 Harman International Industries, Inc. ............ 13,900 1,187 Harrah's Entertainment, Inc. ........................ 38,433 2,736 Hasbro, Inc. .................. 36,787 666 Hilton Hotels Corp. ........... 68,543 1,938 Home Depot, Inc. .............. 430,257 15,399 International Game Technology.. 70,352 2,669 Interpublic Group of Cos., Inc. (a).......................... 88,477 739 JC Penney & Co., Inc. ......... 49,188 3,321 Johnson Controls, Inc. ........ 40,396 3,321 Jones Apparel Group, Inc. ..... 23,979 762 KB HOME........................ 15,862 727 Kohl's Corp. (a)............... 70,710 4,180 Leggett & Platt, Inc. ......... 38,254 956 Lennar Corp. Class A........... 28,700 1,273 Limited Brands................. 70,969 1,816 Liz Claiborne, Inc. ........... 22,041 817
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) Lowe's Cos., Inc. ............. 161,423 $ 9,794 Marriot International, Inc. Class A...................... 67,678 2,580 Mattel, Inc. .................. 81,445 1,345 McDonald's Corp. .............. 259,253 8,711 McGraw-Hill, Inc. ............. 74,326 3,733 Meredith Corp. ................ 8,947 443 New York Times Co. Class A..... 30,745 755 Newell Rubbermaid, Inc. ....... 57,721 1,491 News Corp. Class A............. 492,200 9,440 NIKE, Inc. Class B............. 39,513 3,201 Nordstrom, Inc. ............... 44,576 1,627 Office Depot, Inc. (a)......... 59,670 2,267 OfficeMax, Inc. ............... 14,319 584 Omnicom Group, Inc. ........... 35,617 3,173 Pulte Homes, Inc. ............. 44,872 1,292 Radioshack Corp. .............. 28,653 401 Sears Holdings Corp. (a)....... 20,152 3,120 Sherwin-Williams Co. .......... 23,570 1,119 Snap-On, Inc. ................. 12,548 507 Stanley Works.................. 14,432 682 Staples, Inc. ................. 152,125 3,700 Starbucks Corp. (a)............ 159,552 6,025 Starwood Hotels & Resorts Worldwide, Inc. Class B...... 45,212 2,728 Target Corp. .................. 179,657 8,780 Tiffany & Co. ................. 30,068 993 Time Warner, Inc. ............. 891,447 15,422 TJX Cos., Inc. ................ 94,713 2,165 Tribune Co. ................... 54,955 1,782 Univision Communications, Inc. Class A (a).................. 46,818 1,568 V.F. Corp. .................... 18,488 1,256 Viacom, Inc. (a)............... 150,698 5,401 Walt Disney Co. ............... 456,873 13,706 Wendy's International, Inc. ... 23,967 1,397 Whirlpool Corp. ............... 16,262 1,344 Yum! Brands, Inc. ............. 56,422 2,836 ---------- 251,306 ---------- CONSUMER STAPLES - 9.4% Alberto Culver Co. Class B..... 16,058 782 Altria Group, Inc. ............ 434,864 31,932 Anheuser-Busch Cos., Inc. ..... 161,167 7,348 Archer-Daniels-Midland Co. .... 136,567 5,637 Avon Products, Inc. ........... 94,448 2,928 Brown-Forman Corp. Class B..... 17,182 1,228 Campbell Soup Co. ............. 38,183 1,417 Clorox Co. .................... 31,310 1,909 Coca-Cola Co. ................. 426,735 18,358 Coca-Cola Enterprises, Inc. ... 64,300 1,310 Colgate-Palmolive Co. ......... 107,035 6,411 ConAgra Foods, Inc. ........... 108,046 2,389 Constellation Brands, Inc. Class A (a).................. 40,600 1,015 Costco Wholesale Corp.......... 97,951 5,596 CVS Corp....................... 170,484 5,234 Dean Foods Co. (a)............. 28,400 1,056
See notes to financial statements. - -------------------------------------------------------------------------------- 22 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) Estee Lauder Cos, Inc.......... 25,400 $ 982 General Mills, Inc............. 74,364 3,842 H.J. Heinz Co.................. 70,320 2,899 Hershey Foods Corp............. 37,308 2,055 Kellogg Co..................... 50,529 2,447 Kimberly-Clark Corp............ 95,564 5,896 Kroger Co...................... 152,022 3,323 McCormick & Co., Inc........... 27,400 919 Molson Coors Brewing Co., Class B............................ 12,244 831 Pepsi Bottling Group, Inc...... 28,353 911 PepsiCo, Inc................... 344,110 20,660 Procter & Gamble Co............ 683,457 38,000 Reynolds American, Inc......... 17,840 2,057 Safeway, Inc................... 93,693 2,436 Sara Lee Corp.................. 158,717 2,543 SuperValu, Inc................. 43,003 1,320 Sysco Corp..................... 129,281 3,951 Tyson Foods, Inc., Class A..... 53,800 799 UST Corp....................... 33,547 1,516 Wal-Mart Stores, Inc........... 520,628 25,079 Walgreen Co.................... 210,210 9,426 Whole Foods Market, Inc........ 29,000 1,875 Wrigley Wm., Jr. Co............ 45,670 2,072 ---------- 230,389 ---------- ENERGY - 9.9% Anadarko Petroleum Corp........ 96,108 4,583 Apache Corp.................... 69,030 4,711 Baker Hughes, Inc.............. 70,880 5,802 BJ Services Co................. 67,510 2,515 Chesapeake Energy Corp......... 80,900 2,447 ChevronTexaco Corp............. 461,588 28,646 ConocoPhillips................. 343,696 22,522 Devon Energy Corp.............. 91,422 5,523 El Paso Corp................... 145,394 2,181 EOG Resources, Inc............. 50,568 3,506 ExxonMobil Corp................ 1,260,302 77,320 Halliburton Co................. 107,386 7,969 Hess Corp...................... 50,106 2,648 Kerr-McGee Corp................ 47,142 3,269 Kinder Morgan, Inc............. 21,938 2,191 Marathon Oil Corp.............. 75,357 6,277 Murphy Oil Corp................ 34,800 1,944 Nabors Industries, Ltd. (a).... 64,330 2,174 National Oilwell Varco, Inc. (a).......................... 36,300 2,299 Noble Corp..................... 28,523 2,123 Occidental Petroleum Corp...... 89,123 9,140 Rowan Cos., Inc................ 23,239 827 Schlumberger, Ltd.............. 245,614 15,992 Sunoco, Inc.................... 27,956 1,937 Transocean, Inc. (a)........... 67,495 5,421 Valero Energy Corp............. 128,000 8,515 Weatherford International Ltd. (a).......................... 72,800 3,612 Williams Cos., Inc............. 123,737 2,891 XTO Energy, Inc................ 75,800 3,356 ---------- 242,341 ----------
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) FINANCIALS - 21.0% ACE, Ltd....................... 68,155 $ 3,448 AFLAC, Inc..................... 103,616 4,803 Allstate Corp.................. 132,107 7,230 Ambac Financial Group, Inc..... 22,047 1,788 American Express Co............ 256,773 13,665 American International Group, Inc.......................... 540,983 31,945 Ameriprise Financial, Inc...... 50,594 2,260 AmSouth Bancorp................ 72,519 1,918 AON Corp....................... 66,023 2,299 Apartment Investment & Management Co. Class A....... 20,500 891 Archstone-Smith Trust.......... 44,300 2,254 Bank of America Corp........... 950,428 45,716 Bank of New York Co., Inc...... 161,179 5,190 BB&T Corp...................... 115,018 4,784 Bear Stearns Cos., Inc......... 25,299 3,544 Boston Properties, Inc......... 19,100 1,727 Capital One Financial Corp..... 63,015 5,385 Charles Schwab Corp............ 214,993 3,436 Chubb Corp..................... 86,778 4,330 Cincinnati Financial Corp...... 36,505 1,716 CIT Group, Inc................. 42,000 2,196 Citigroup, Inc................. 1,035,371 49,946 Comerica, Inc.................. 33,832 1,759 Commerce Bancorp, Inc.......... 38,300 1,366 Compass Bancshares, Inc........ 27,100 1,507 Countrywide Financial Corp..... 127,286 4,847 E*Trade Financial Corp. (a).... 89,400 2,040 Equity Office Properties Trust........................ 75,941 2,773 Equity Residential............. 60,907 2,724 Fannie Mae..................... 201,429 9,689 Federal Home Loan Mortgage Corp......................... 143,746 8,195 Federated Investors, Inc. Class B............................ 18,100 570 Fifth Third Bancorp............ 116,000 4,286 First Horizon National Corp.... 26,117 1,050 Franklin Resources, Inc........ 31,744 2,756 Genworth Financial, Inc........ 75,700 2,637 Golden West Financial Corp..... 53,622 3,979 Goldman Sachs Group, Inc....... 89,900 13,524 Hartford Financial Services Group, Inc................... 63,088 5,337 Huntington Bancshares, Inc..... 50,554 1,192 J.P. Morgan Chase & Co......... 723,619 30,392 Janus Capital Group, Inc. ..... 44,919 804 KeyCorp 83,709 2,987 Kimco Realty Corp. ............ 44,300 1,616 Legg Mason, Inc. .............. 27,600 2,747 Lehman Brothers Holdings, Inc. ........................ 111,336 7,253 Lincoln National Corp. ........ 59,492 3,358 Loews Corp. ................... 84,942 3,011 M & T Bank Corp. .............. 16,300 1,922 Marsh & McLennan Cos., Inc. ... 113,936 3,064 Marshall & Ilsley Corp. ....... 47,192 2,159 MBIA, Inc. .................... 27,758 1,625 Mellon Financial Corp. ........ 86,323 2,972 Merrill Lynch & Co., Inc. ..... 192,327 13,378
See notes to financial statements. - -------------------------------------------------------------------------------- 23 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) MetLife, Inc. ................. 157,807 $ 8,081 MGIC Investment Corp. ......... 18,362 1,193 Moody's Corp. ................. 51,030 2,779 Morgan Stanley................. 222,943 14,092 National City Corp. ........... 112,691 4,078 North Fork Bancorp, Inc. ...... 96,535 2,912 Northern Trust Corp. .......... 38,840 2,148 Plum Creek Timber Co., Inc. ... 38,580 1,370 PNC Financial Services Group, Inc. ........................ 61,847 4,340 Principal Financial Group, Inc. ........................ 58,150 3,236 Progressive Corp. ............. 162,588 4,180 ProLogis....................... 51,200 2,669 Prudential Financial, Inc. .... 102,800 7,988 Public Storage, Inc. .......... 17,200 1,305 Regions Financial Corp. ....... 95,609 3,167 SAFECO Corp. .................. 24,664 1,390 Simon Property Group, Inc. .... 38,363 3,182 SLM Corp. ..................... 85,342 4,516 Sovereign Bancorp, Inc. ....... 77,805 1,580 St. Paul Travelers Cos., Inc. ........................ 145,225 6,474 State Street Corp. (b)......... 69,525 4,039 SunTrust Banks, Inc. .......... 75,572 5,763 Synovus Financial Corp. ....... 67,604 1,810 T. Rowe Price Group, Inc. ..... 55,580 2,101 Torchmark Corp. ............... 20,676 1,255 U.S. Bancorp................... 370,461 11,440 UnumProvident Corp. ........... 62,935 1,141 Vornado Realty Trust........... 24,700 2,409 Wachovia Corp. ................ 334,886 18,111 Washington Mutual, Inc. ....... 199,913 9,112 Wells Fargo Co. ............... 349,811 23,466 XL Capital, Ltd. Class A....... 37,732 2,313 Zions Bancorp.................. 22,219 1,732 ---------- 513,362 ---------- HEALTH CARE - 12.0% Abbott Laboratories............ 317,667 13,853 Aetna, Inc. ................... 118,528 4,733 Allergan, Inc. ................ 31,991 3,431 AmerisourceBergen Corp. ....... 43,432 1,821 Amgen, Inc. (a)................ 245,475 16,012 Applera Corp. -- Applied Biosystems Group............. 38,367 1,241 Barr Pharmaceuticals, Inc. (a).......................... 22,400 1,068 Bausch & Lomb, Inc. ........... 11,325 555 Baxter International, Inc. .... 136,126 5,004 Becton, Dickinson & Co. ....... 51,829 3,168 Biogen Idec, Inc. (a).......... 71,673 3,321 Biomet, Inc. .................. 51,841 1,622 Boston Scientific Corp. (a).... 254,012 4,278 Bristol-Myers Squibb Co. ...... 409,217 10,582 C.R. Bard, Inc. ............... 21,594 1,582 Cardinal Health, Inc. ......... 86,866 5,588 Caremark Rx, Inc. ............. 91,908 4,583 CIGNA Corp. ................... 24,989 2,462 Coventry Health Care, Inc. (a).......................... 33,600 1,846 Eli Lilly & Co. ............... 235,197 12,999
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) Express Scripts, Inc. (a)...... 30,600 $ 2,195 Fisher Scientific International, Inc. (a)...... 25,900 1,892 Forest Laboratories, Inc. (a).......................... 68,306 2,643 Genzyme Corp. (a).............. 54,105 3,303 Gilead Sciences, Inc. (a)...... 94,600 5,597 HCA, Inc. ..................... 85,459 3,688 Health Management Associates, Inc. Class A................. 50,398 993 Hospira, Inc. (a).............. 32,236 1,384 Humana, Inc. (a)............... 34,425 1,849 IMS Health, Inc. .............. 41,881 1,125 Johnson & Johnson.............. 616,646 36,949 King Pharmaceuticals, Inc. (a).......................... 49,932 849 Laboratory Corp. of America Holdings (a)................. 26,300 1,637 Manor Care, Inc. .............. 16,651 781 McKesson Corp. ................ 63,831 3,018 Medco Health Solutions, Inc. (a).......................... 62,672 3,590 MedImmune, Inc. (a)............ 52,465 1,422 Medtronic, Inc. ............... 251,202 11,786 Merck & Co., Inc. ............. 454,303 16,550 Millipore Corp. (a)............ 10,728 676 Mylan Laboratories Inc. ....... 43,200 864 Patterson Cos., Inc. (a)....... 29,500 1,030 Pfizer, Inc. .................. 1,525,974 35,815 Quest Diagnostics Inc. ........ 33,800 2,025 Schering-Plough Corp. ......... 309,224 5,885 St. Jude Medical, Inc. (a)..... 74,794 2,425 Stryker Corp. ................. 60,908 2,565 Tenet Healthcare Corp. (a)..... 99,009 691 Thermo Electron Corp. (a)...... 33,929 1,230 UnitedHealth Group, Inc. ...... 280,368 12,555 Watson Pharmaceuticals, Inc. (a).......................... 22,003 512 Wellpoint, Inc. (a)............ 132,678 9,655 Wyeth.......................... 280,131 12,441 Zimmer Holdings, Inc. (a)...... 51,620 2,928 ---------- 292,297 ---------- INDUSTRIALS - 11.5% 3M Co.......................... 156,884 12,672 Allied Waste Industries, Inc. (a).......................... 50,667 576 American Power Conversion Corp. ....................... 36,667 715 American Standard Cos., Inc. ........................ 37,321 1,615 Avery Dennison Corp. .......... 22,970 1,334 Boeing Co. .................... 166,445 13,634 Burlington Northern Santa Fe Corp. ....................... 76,250 6,043 Caterpillar, Inc. ............. 139,370 10,380 Cendant Corp. ................. 207,622 3,382 Cintas Corp. .................. 28,482 1,132 Cooper Industries, Ltd. ....... 19,121 1,777 CSX Corp. ..................... 45,824 3,228 Cummins, Inc. ................. 9,573 1,170 Danaher Corp. ................. 49,426 3,179 Deere & Co. ................... 48,741 4,069
See notes to financial statements. - -------------------------------------------------------------------------------- 24 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) Dover Corp. ................... 42,713 $ 2,111 Eaton Corp. ................... 30,978 2,336 Emerson Electric Co. .......... 85,335 7,152 Equifax, Inc. ................. 26,769 919 FedEx Corp. ................... 63,446 7,414 Fluor Corp. ................... 18,106 1,683 General Dynamics Corp. ........ 83,912 5,493 General Electric Co. .......... 2,165,923 71,389 Goodrich Co. .................. 25,755 1,038 Honeywell International, Inc. ........................ 172,142 6,937 Illinois Tool Works, Inc. ..... 86,828 4,124 Ingersoll-Rand Co. Class A..... 68,600 2,935 ITT Industries, Inc. .......... 38,404 1,901 L-3 Communications Holdings, Inc. ........................ 25,200 1,901 Lockheed Martin Corp. ......... 73,571 5,278 Masco Corp. ................... 83,074 2,462 Monster Worldwide, Inc. (a).... 26,192 1,117 Navistar International Corp. (a).......................... 13,180 324 Norfolk Southern Corp. ........ 86,861 4,623 Northrop Grumman Corp. ........ 71,478 4,579 PACCAR, Inc. .................. 34,570 2,848 Pall Corp. .................... 26,774 750 Parker-Hannifin Corp. ......... 25,223 1,957 Pitney Bowes, Inc. ............ 45,939 1,897 R.R. Donnelley & Sons Co. ..... 45,660 1,459 Raytheon Co. .................. 93,114 4,150 Robert Half International, Inc. ........................ 36,214 1,521 Rockwell Automation, Inc. ..... 37,120 2,673 Rockwell Collins, Inc. ........ 35,419 1,979 Ryder Systems, Inc. ........... 12,780 747 Southwest Airlines Co. ........ 147,740 2,418 Textron, Inc. ................. 26,975 2,487 Tyco International, Ltd. ...... 423,848 11,656 Union Pacific Corp. ........... 56,340 5,237 United Parcel Service, Inc. Class B...................... 225,800 18,590 United Technologies Corp. ..... 210,414 13,344 W.W. Grainger, Inc. ........... 16,109 1,212 Waste Management, Inc. ........ 113,279 4,064 ---------- 279,611 ---------- INFORMATION TECHNOLOGY - 14.4% ADC Telecommunications, Inc. (a).......................... 25,018 422 Adobe Systems, Inc. ........... 125,242 3,802 Advanced Micro Devices, Inc. (a).......................... 100,184 2,447 Affiliated Computer Services, Inc. (a)..................... 24,600 1,270 Agilent Technologies, Inc. (a).......................... 89,297 2,818 Altera Corp. (a)............... 75,978 1,333 Analog Devices, Inc. .......... 74,861 2,406 Andrew Corp. (a)............... 34,827 309 Apple Computer, Inc. (a)....... 176,992 10,110 Applied Materials, Inc. ....... 325,061 5,292 Autodesk, Inc. ................ 48,430 1,669 Automatic Data Processing, Inc. ........................ 120,238 5,453 Avaya, Inc. (a)................ 87,415 998
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) BMC Software, Inc. (a)......... 44,636 $ 1,067 Broadcom Corp. (a)............. 95,769 2,878 CA, Inc. ...................... 95,129 1,955 CIENA Corp. (a)................ 126,088 607 Cisco Systems, Inc. (a)........ 1,271,159 24,826 Citrix Systems, Inc. (a)....... 38,153 1,531 Computer Sciences Corp. (a).... 39,182 1,898 Compuware Corp. (a)............ 78,557 526 Comverse Technology, Inc. (a).. 42,838 847 Convergys Corp. (a)............ 28,605 558 Corning, Inc. (a).............. 325,585 7,876 Dell, Inc. (a)................. 472,791 11,541 Electronic Arts, Inc. (a)...... 63,400 2,729 Electronic Data Systems Corp. ....................... 107,786 2,593 EMC Corp. (a).................. 491,541 5,392 First Data Corp. .............. 159,204 7,171 Fiserv, Inc. (a)............... 36,347 1,649 Freescale Semiconductor, Inc. (a).......................... 84,108 2,473 Gateway, Inc. (a).............. 65,065 124 Google, Inc. (a)............... 42,910 17,993 Hewlett-Packard Co. ........... 580,819 18,400 Intel Corp. ................... 1,211,203 22,952 International Business Machines Corp. ....................... 322,818 24,799 Intuit, Inc. (a)............... 35,351 2,135 Jabil Circuit, Inc. ........... 36,613 937 JDS Uniphase Corp. (a)......... 352,519 892 Juniper Networks, Inc. (a)..... 117,100 1,872 KLA-Tencor Corp................ 41,864 1,740 Lexmark International Group, Inc. Class A (a)............. 21,702 1,212 Linear Technology Corp......... 63,675 2,132 LSI Logic Corp. (a)............ 81,935 733 Lucent Technologies, Inc. (a).......................... 931,672 2,255 Maxim Integrated Products, Inc.......................... 67,156 2,156 Micron Technology, Inc. (a).... 151,532 2,282 Microsoft Corp................. 1,827,204 42,574 Molex, Inc..................... 29,510 991 Motorola, Inc.................. 513,998 10,357 National Semiconductor Corp.... 70,318 1,677 NCR Corp. (a).................. 38,184 1,399 Network Appliance, Inc. (a).... 78,067 2,756 Novell, Inc. (a)............... 68,842 456 Novellus Systems, Inc. (a)..... 27,369 676 NVIDIA Corp. (a)............... 73,902 1,573 Oracle Corp. (a)............... 810,519 11,744 Parametric Technology Corp. New (a).......................... 23,296 296 Paychex, Inc................... 69,527 2,710 PerkinElmer, Inc............... 27,257 570 PMC-Sierra, Inc. (a)........... 43,224 406 QLogic Corp. (a)............... 34,290 591 QUALCOMM, Inc.................. 348,878 13,980 Sabre Holdings Corp. Class A... 28,424 625 SanDisk Corp. (a).............. 40,800 2,080 Sanmina-SCI Corp. (a).......... 112,858 519 Solectron Corp. (a)............ 187,214 640 Sun Microsystems, Inc. (a)..... 732,888 3,042
See notes to financial statements. - -------------------------------------------------------------------------------- 25 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) Symantec Corp. (a)............. 214,834 $ 3,339 Symbol Technologies, Inc....... 52,185 563 Tektronix, Inc................. 16,729 492 Tellabs, Inc. (a).............. 93,575 1,245 Teradyne, Inc. (a)............. 41,392 577 Texas Instruments, Inc......... 324,203 9,820 Unisys Corp. (a)............... 72,779 457 VeriSign, Inc. (a)............. 51,300 1,189 Waters Corp. (a)............... 21,857 970 Xerox Corp. (a)................ 190,442 2,649 Xilinx, Inc.................... 72,204 1,635 Yahoo!, Inc. (a)............... 262,080 8,649 ---------- 350,307 ---------- MATERIALS - 3.1% Air Products & Chemicals, Inc.......................... 46,489 2,972 Alcoa, Inc..................... 180,846 5,852 Allegheny Technologies, Inc.... 18,029 1,248 Ashland, Inc................... 14,980 999 Ball Corp...................... 21,670 803 Bemis Co., Inc................. 21,628 662 Consol Energy, Inc............. 38,300 1,789 Dow Chemical Co................ 200,999 7,845 E.I. Du Pont de Nemours & Co... 191,639 7,972 Eastman Chemical Co............ 16,862 911 Ecolab, Inc.................... 38,226 1,551 Freeport-McMoRan Copper & Gold, Inc. Class B................. 39,514 2,189 Hercules, Inc. (a)............. 24,698 377 International Flavors & Fragrances, Inc.............. 16,204 571 International Paper Co......... 102,856 3,322 Louisiana-Pacific Corp......... 21,959 481 MeadWestvaco Corp.............. 37,588 1,050 Monsanto Co.................... 56,246 4,735 Newmont Mining Corp............ 94,042 4,978 Nucor Corp..................... 64,808 3,516 Pactiv Corp. (a)............... 29,764 737 Phelps Dodge Corp.............. 42,510 3,493 PPG Industries, Inc............ 34,490 2,276 Praxair, Inc................... 67,420 3,641 Rohm & Haas Co................. 29,896 1,498 Sealed Air Corp................ 17,036 887 Sigma-Aldrich Corp............. 13,793 1,002 Temple-Inland, Inc............. 22,928 983 United States Steel Corp....... 22,802 1,599 Vulcan Materials Co............ 20,996 1,638 Weyerhaeuser Co................ 51,624 3,214 ---------- 74,791 ---------- TELECOMMUNICATION SERVICES - 3.3% ALLTEL Corp.................... 80,898 5,164 AT&T, Inc...................... 809,553 22,578 BellSouth Corp................. 376,528 13,630 CenturyTel, Inc................ 23,808 884 Citizens Communications Co..... 68,877 899
SHARES VALUE --------- ---------- (DOLLARS IN THOUSANDS) Embarq Corp. (a)............... 31,045 $ 1,273 Qwest Communications International, Inc. (a)...... 325,122 2,630 Sprint Corp. (Fon Group)....... 620,000 12,394 Verizon Communications, Inc.... 607,410 20,342 ---------- 79,794 ---------- UTILITIES - 3.3% AES Corp. (a).................. 137,914 2,545 Allegheny Energy, Inc. (a)..... 33,899 1,257 Ameren Corp.................... 42,542 2,148 American Electric Power Co., Inc.......................... 82,254 2,817 CenterPoint Energy, Inc........ 63,893 799 CMS Energy Corp. (a)........... 46,605 603 Consolidated Edison, Inc....... 51,122 2,272 Constellation Energy Group, Inc.......................... 37,103 2,023 Dominion Resources, Inc........ 72,587 5,429 DTE Energy Co.................. 36,946 1,505 Duke Energy Corp............... 256,899 7,545 Dynegy Inc. Class A (a)........ 77,330 423 Edison International........... 67,762 2,643 Entergy Corp................... 43,243 3,059 Exelon Corp.................... 139,078 7,904 FirstEnergy Corp............... 68,812 3,730 FPL Group, Inc................. 84,078 3,479 KeySpan Corp................... 35,806 1,447 Nicor, Inc..................... 9,313 386 NiSource, Inc.................. 57,867 1,264 Peoples Energy Corp............ 8,131 292 PG&E Corp...................... 72,023 2,829 Pinnacle West Capital Corp..... 20,581 821 PPL Corp....................... 79,236 2,559 Progress Energy, Inc........... 52,408 2,247 Public Service Enterprise Group, Inc................... 52,422 3,466 Sempra Energy.................. 53,789 2,446 Southern Co.................... 154,958 4,966 TECO Energy, Inc............... 43,276 647 TXU Corp....................... 96,496 5,770 Xcel Energy, Inc............... 83,797 1,607 ---------- 80,928 ---------- TOTAL COMMON STOCKS (COST $1,666,913,046).......... ......... 2,395,126 ---------- PAR AMOUNT -------------- (IN THOUSANDS) U.S. GOVERNMENT SECURITIES - 0.2% United States Treasury Bill 4.70% due 09/07/06 (c)(d).... $ 4,299 4,261 ---------- TOTAL U.S. GOVERNMENT SECURITIES (COST $4,260,834).............. ........... 4,261 ----------
See notes to financial statements. - -------------------------------------------------------------------------------- 26 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
SHARES VALUE -------------- ---------- (DOLLARS IN THOUSANDS) MONEY MARKET FUNDS - 0.9% AIM Short Term Investment Prime Portfolio.................... 21,566 $ 21,566 Federated Money Market Obligations Trust............ 513 513 ---------- TOTAL MONEY MARKET FUNDS (COST $22,078,843)....... 22,079 ---------- TOTAL INVESTMENTS - 99.3% (IDENTIFIED COST $1,693,252,723).............. 2,421,466 ---------- OTHER ASSETS IN EXCESS OF LIABILITIES - 0.7%........... 16,265 ---------- NET ASSETS - 100.0%............ $2,437,731 ==========
SCHEDULE OF FUTURES CONTRACTS
NUMBER OF UNREALIZED CONTRACTS DEPRECIATION --------- ------------ (DOLLARS IN THOUSANDS) S&P 500 Financial Futures Contracts (long) Expiration Date 09/2006............... 666 $1,041 ------ Total unrealized appreciation on open futures contracts purchased.................. $1,041 ======
- --------------- (a) Non-income producing security. (b) Affiliated issuer. (c) Security held as collateral in relation to initial margin requirements on futures contracts. (d) Rate represents annualized yield at date of purchase. AFFILIATE TABLE
SHARES PURCHASED INCOME EARNED NUMBER OF FOR THE SIX SHARES SOLD FOR NUMBER OF FOR THE SIX REALIZED GAIN SHARES HELD MONTHS ENDED THE SIX MONTHS SHARES HELD AT MONTHS ENDED ON SHARES SOLD SECURITY DESCRIPTION 12/31/2005 6/30/06 ENDED 6/30/06 6/30/06 6/30/06 (000) (000) - -------------------- ----------- ---------------- --------------- -------------- ------------- -------------- State Street Corp. 70,325 1,200 2,000 69,525 $27 $42
See notes to financial statements. - -------------------------------------------------------------------------------- 27 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES June 30, 2006 (Unaudited) (Amounts in thousands) - -------------------------------------------------------------------------------- ASSETS Investments in unaffiliated issuers at market (identified cost $1,690,939).......................... $2,417,427 Investments in non-controlled affiliates at market (identified cost $2,314) (Note 4)..................... 4,039 ---------- 2,421,466 Receivables: Investment securities sold........................ 13,639 Dividends and interest............................ 2,921 ---------- TOTAL ASSETS...................................... 2,438,026 ---------- LIABILITIES Payables: Daily variation margin on futures contracts....... 110 Management fees (Note 4).......................... 185 ---------- TOTAL LIABILITIES................................. 295 ---------- NET ASSETS.................................................. $2,437,731 ==========
See notes to financial statements. - -------------------------------------------------------------------------------- 28 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF OPERATIONS For the Six Months Ended June 30, 2006 (Unaudited) (Amounts in thousands) - -------------------------------------------------------------------------------- INVESTMENT INCOME Dividend income -- unaffiliated issuers................ $22,997 Dividend income -- non-controlled affiliated issuer.... 27 Interest............................................... 1,312 ------- TOTAL INVESTMENT INCOME........................... 24,336 ------- EXPENSES Management fees (Note 4)............................... $ 557 ------- TOTAL EXPENSES.................................... 557 ------- NET INVESTMENT INCOME....................................... 23,779 ------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments -- unaffiliated issuers............... (4,121) Investments -- non-controlled affiliated issuer... 42 Futures contracts................................. (1,439) ------- (5,518) Net change in net unrealized appreciation (depreciation) on: Investments....................................... 45,905 Futures contracts................................. 1,807 ------- 47,712 ------- Net realized and unrealized gain............................ 42,194 ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $65,973 =======
See notes to financial statements. - -------------------------------------------------------------------------------- 29 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, 2006 2005 ----------- ------------ (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net Investment Income.................................. $ 23,779 $ 45,936 Net realized loss on investments and futures contracts............................................. (5,518) (7,186) Net change in net unrealized appreciation (depreciation)................................. 47,712 63,727 ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................................... 65,973 102,477 ---------- ---------- CAPITAL TRANSACTIONS Proceeds from contributions............................ 117,084 278,352 Fair value of withdrawals.............................. (198,435) (457,339) Withdrawals in-kind.................................... -- (237,848) ---------- ---------- NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS................................... (81,351) (416,835) ---------- ---------- TOTAL NET DECREASE IN NET ASSETS............................ (15,378) (314,358) NET ASSETS Beginning of period.................................... 2,453,109 2,767,467 ---------- ---------- END OF PERIOD.......................................... $2,437,731 $2,453,109 ========== ==========
See notes to financial statements. - -------------------------------------------------------------------------------- 30 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 YEAR ENDED DECEMBER 31, ENDED -------------------------------------------------------------- 6/30/06 2005 2004 2003 2002 2001 ----------- ---------- ---------- ---------- ---------- ---------- (UNAUDITED) SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands)................. $2,437,731 $2,453,109 $2,767,467 $2,714,672 $1,992,548 $2,692,298 Ratios to average net assets: Operating expenses....... 0.045%+ 0.045% 0.045% 0.045% 0.045% 0.045% Net investment income.... 1.92%+ 1.84% 1.97% 1.74% 1.57% 1.34% Portfolio turnover rate*..... 4%++ 8% 9% 12% 13% 14% Total return(a).............. 2.69%++ 4.87% 10.86% 28.62% (22.16)% (11.94)%
- --------------- * 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. - -------------------------------------------------------------------------------- 31 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION The State Street Master Funds (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company, and was organized as a business trust under the laws of the Commonwealth of Massachusetts on July 27, 1999. The Trust comprises six investment portfolios: the State Street Equity 500 Index Portfolio, the State Street Equity 400 Index Portfolio, the State Street Equity 2000 Index Portfolio, the State Street Aggregate Bond Index Portfolio, the State Street Money Market Portfolio, and the State Street U.S. Government Money Market Portfolio. Information presented in these financial statements pertains only to the State Street Equity 500 Index Portfolio (the "Portfolio"). At June 30, 2006, only the Portfolio and State Street Money Market Portfolio were in operation. The Portfolio is authorized to issue an unlimited number of non-transferable beneficial interests. The Portfolio's investment objective is to replicate, as closely as possible, before expenses, the performance of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500(R) Index"). The Portfolio uses a passive management strategy designed to track the performance of the S&P 500(R) Index. The S&P 500(R) Index is a well-known, unmanaged, stock index that includes common stocks of 500 companies from several industrial sectors representing a significant portion of the market value of all stocks publicly traded in the United States. There is no assurance that the Portfolio will achieve its objective. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies consistently followed by the Portfolio in the preparation of its financial statements. Security valuation The Portfolio's investments are valued each business day by independent pricing services. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price if no sale has occurred) on the primary market or exchange on which they trade. Investments in other mutual funds are valued at the net asset value per share. Fixed-income securities and options are valued on the basis of the closing bid price. Futures contracts are valued on the basis of the last sale price. Money market instruments maturing within 60 days of the valuation date are valued at amortized cost, a method by which each money market instrument is initially valued at cost, and thereafter a constant accretion or amortization of any discount or premium is recorded until maturity of the security. The Portfolio may value securities for which market quotations are not readily available at "fair value," as determined in good faith pursuant to procedures established by the Board of Trustees. Securities transactions, investment income and expenses Securities transactions are recorded on a trade date basis. 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. - -------------------------------------------------------------------------------- 32 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2006 (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. 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, 2006, purchases and sales of investment securities, excluding short-term investments, futures contracts, and in-kind withdrawals, aggregated to $94,209,892 and $139,808,353, respectively. The aggregate value of in-kind withdrawals was $0. At June 30, 2006, the book cost of investments was $1,693,252,723 which approximates cost computed on a federal tax basis. The aggregate gross unrealized appreciation and gross unrealized depreciation was $821,744,395 and $93,531,438, respectively, resulting in net appreciation of $728,212,957 for all securities as computed on a federal income tax basis. 4. RELATED PARTY FEES AND TRANSACTIONS The Portfolio has entered into an investment advisory agreement with SSgA Funds Management, Inc. ("SSgA FM" or the "Adviser"), a subsidiary of State Street Corp. and an affiliate of State Street, - -------------------------------------------------------------------------------- 33 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- 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), State Street receives a unitary fee, calculated daily, at the annual rate of 0.045% of the Portfolio's average daily net assets. Certain investments made by the Portfolio were made in securities affiliated with State Street and SSgA FM. Investments in State Street Corp., the holding company of State Street, were made according to its representative portion of the S&P 500(R) Index. The market value of this investment at June 30, 2006 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 GENERAL INFORMATION (UNAUDITED) Proxy Voting Policies and Procedures and Record The Trust has adopted proxy voting procedures relating to portfolio securities held by the Portfolio. A description of the policies and procedures are available (i) without charge, upon request, by calling (877) 521-4083 or (ii) on the website of the Securities and Exchange Commission (the "SEC") at www.sec.gov. Information on how the Portfolio voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by August 31 (i) without charge, upon request, by (i) calling (877) 521-4083 or (ii) on the SEC's website at www.sec.gov. Quarterly Portfolio Schedule The Trust files a complete schedule of portfolio holdings with the SEC for the first and third quarters of its fiscal year (as of March and September of each year) on Form N-Q. The Trust's Forms N-Q are available on the SEC's website at www.sec.gov. The Trust's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The most recent Form N-Q is available without charge, upon request, by calling (877) 521-4083. - -------------------------------------------------------------------------------- 34 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- This summary schedule of investments is presented to help investors focus on the Series' principal holdings. It includes the Series' 50 largest holdings and each investment of any issuer that exceeds 1% of the Series' net assets. "Other Securities" represent all issues not required to be disclosed under the rules adopted by the Securities and Exchange Commission. A complete schedule of investments is available without charge, upon request, by calling 800-637-3863 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 25,400 aQuantive, Inc. (a) $ 643,382 0.1% Other Securities 2,177,885 0.5 ------------ ----- 2,821,267 0.6 ------------ ----- Aerospace Other Securities 2,630,482 0.5 Agriculture, Fishing & Ranching Other Securities 949,400 0.2 Air Transport 65,800 JetBlue Airways Corp. (a) 798,812 0.2 Other Securities 4,207,986 0.8 ------------ ----- 5,006,798 1.0 ------------ ----- Aluminum Other Securities 774,675 0.2 Auto Parts: After Market Other Securities 777,544 0.2 Auto Parts: Original Equipment Other Securities 2,149,742 0.4 Auto, Trucks & Parts Other Securities 1,101,829 0.2 Banks: New York City Other Securities 391,798 0.1 Banks: Outside New York City 19,644 Cathay General Bancorp 714,649 0.2 18,900 First Midwest Bancorp, Inc. 700,812 0.2 31,100 FirstMerit Corp. 651,234 0.1 13,600 SVB Financial Group (a) 618,256 0.1 17,113 Texas Regional Bancshares, Inc. Class A 648,925 0.1 Other Securities 29,847,302 5.8 ------------ ----- 33,181,178 6.5 ------------ ----- Beverage: Brewers (Wineries) Other Securities 591,278 0.1 Biotechnology Research & Production 21,600 OSI Pharmaceuticals, Inc. (a) 711,936 0.1 Other Securities 11,623,460 2.3 ------------ ----- 12,335,396 2.4 ------------ ----- Building Materials 10,665 Watsco, Inc. 637,980 0.1 Other Securities 2,366,527 0.5 ------------ ----- 3,004,507 0.6 ------------ ----- Building: Cement Other Securities 166,855 0.0 Building: Heating & Plumbing Other Securities 455,804 0.1 Building: Miscellaneous Other Securities 772,267 0.2 Building: Roofing & Wallboard Other Securities 629,866 0.1 Cable Television Services Other Securities 431,090 0.1 Casinos & Gambling 12,091 Aztar Corp. (a) 628,248 0.1 Other Securities 2,885,896 0.6 ------------ ----- 3,514,144 0.7 ------------ ----- Chemicals Other Securities 6,284,751 1.2 Coal Other Securities 791,734 0.2 Commercial Information Services Other Securities 1,171,903 0.2
See notes to financial statements. - -------------------------------------------------------------------------------- 35 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
PERCENT OF INDUSTRY SHARES HELD COMMON STOCKS VALUE NET ASSETS - -------- ----------- ------------- ------------ ---------- Communications & Media Other Securities $ 458,234 0.1% Communications Technology 145,600 3Com Corp. (a) 745,472 0.1 100,600 Brocade Communications Systems, Inc. (a) 617,684 0.1 Other Securities 11,617,732 2.3 ------------ ----- 12,980,888 2.5 ------------ ----- Computer Services Software & Systems 14,898 Micros Systems, Inc. (a) 650,745 0.1 Other Securities 21,457,551 4.2 ------------ ----- 22,108,296 4.3 ------------ ----- Computer Technology 27,962 RSA Security, Inc. (a) 760,287 0.2 Other Securities 6,880,043 1.3 ------------ ----- 7,640,330 1.5 ------------ ----- Construction Other Securities 2,087,603 0.4 Consumer Electronics Other Securities 3,872,547 0.8 Consumer Products Other Securities 3,221,222 0.6 Containers & Packaging: Metal & Glass Other Securities 2,008,729 0.4 Copper Other Securities 405,674 0.1 Cosmetics Other Securities 597,151 0.1 Diversified Financial Services Other Securities 2,352,456 0.5 Diversified Materials & Processing Other Securities 3,007,538 0.6 Drug & Grocery Store Chains Other Securities 2,501,935 0.5 Drugs & Pharmaceuticals 29,000 MGI Pharma, Inc. (a) 623,500 0.1 33,400 Nektar Therapeutics (a) (e) 612,556 0.1 Other Securities 10,890,656 2.2 ------------ ----- 12,126,712 2.4 ------------ ----- Education Services Other Securities 2,086,461 0.4 Electrical & Electronics Other Securities 1,713,076 0.3 Electrical Equipment & Components Other Securities 4,416,467 0.9 Electrical: Household Appliance Other Securities 81,034 0.0 Electronics Other Securities 3,342,558 0.7 Electronics: Instruments, Gauges & Other Securities 939,246 0.2 Meters Electronics: Medical Systems 16,700 Hologic, Inc. (a) 824,312 0.1 Other Securities 3,924,454 0.8 ------------ ----- 4,748,766 0.9 ------------ ----- Electronics: Semi- 15,700 Formfactor, Inc. (a) 700,691 0.1 Conductors/Components Other Securities 8,545,174 1.7 ------------ ----- 9,245,865 1.8 ------------ ----- Electronics: Technology Other Securities 3,199,799 0.6 Energy Equipment Other Securities 245,600 0.1 Energy Miscellaneous 13,497 Veritas DGC, Inc. (a) 696,175 0.1 Other Securities 2,509,805 0.5 ------------ ----- 3,205,980 0.6 ------------ ----- Engineering & Contracting Services Other Securities 897,447 0.2 Entertainment Other Securities 1,510,067 0.3 Fertilizers Other Securities 201,929 0.0
See notes to financial statements. - -------------------------------------------------------------------------------- 36 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
PERCENT OF INDUSTRY SHARES HELD COMMON STOCKS VALUE NET ASSETS - -------- ----------- ------------- ------------ ---------- Finance Companies Other Securities $ 1,465,200 0.3% Finance: Small Loan Other Securities 462,934 0.1 Financial Data Processing Other Securities 4,533,837 0.9 Services & Systems Financial Information Services Other Securities 1,127,634 0.2 Financial Miscellaneous Other Securities 4,101,729 0.8 Foods Other Securities 4,596,469 0.9 Forest Products Other Securities 608,316 0.1 Forms and Bulk Printing Services Other Securities 265,280 0.1 Funeral Parlors & Cemeteries Other Securities 475,774 0.1 Glass Other Securities 192,570 0.0 Gold Other Securities 727,883 0.1 Health Care Facilities Other Securities 3,131,303 0.6 Health Care Management Services Other Securities 3,089,914 0.6 Health Care Services 13,000 Healthways, Inc. (a) 684,320 0.1 Other Securities 2,298,389 0.5 ------------ ----- 2,982,709 0.6 ------------ ----- Homebuilding Other Securities 1,509,334 0.3 Hotel/Motel Other Securities 359,504 0.1 Household Furnishings Other Securities 2,504,679 0.5 Identification Control & Filter Other Securities 2,597,933 0.5 Devices Industrial Producers Other Securities 153,940 0.0 Insurance: Life Other Securities 1,898,432 0.4 Insurance: Multi-Line Other Securities 2,252,576 0.4 Insurance: Property-Casualty 21,515 Ohio Casualty Corp. 639,641 0.1 Other Securities 5,922,847 1.2 ------------ ----- 6,562,488 1.3 ------------ ----- Investment Management Companies Other Securities 2,872,355 0.6 Jewelry, Watches & Gemstones Other Securities 499,269 0.1 Leisure Time Other Securities 1,746,095 0.3 Machinery & Engineering Other Securities 361,976 0.1 Machinery: Agricultural Other Securities 240,303 0.1 Machinery: Construction & Handling Other Securities 588,238 0.1 Machinery: Engines Other Securities 572,250 0.1 Machinery: Industrial/Specialty Other Securities 2,236,839 0.4 Machinery: Oil Well Equipment & 33,743 Hanover Compressor Co. (a)(e) 633,694 0.1 Services 9,826 Universal Compression Holdings, Inc. (a) 618,743 0.1 Other Securities 4,830,956 1.0 ------------ ----- 6,083,393 1.2 ------------ ----- Machinery: Specialty Other Securities 1,111,050 0.2 Manufactured Housing Other Securities 554,843 0.1 Manufacturing Other Securities 368,509 0.1 Medical & Dental Instruments & 14,844 Mentor Corp. (e) 645,714 0.1 Supplies Other Securities 12,394,551 2.4 ------------ ----- 13,040,265 2.5 ------------ -----
See notes to financial statements. - -------------------------------------------------------------------------------- 37 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
PERCENT OF INDUSTRY SHARES HELD COMMON STOCKS VALUE NET ASSETS - -------- ----------- ------------- ------------ ---------- Medical Services 14,300 Magellan Health Services, Inc. (a) $ 647,933 0.1% Other Securities 735,315 0.2 ------------ ----- 1,383,248 0.3 ------------ ----- Metal Fabricating 11,758 Lone Star Technologies, Inc. (a) 635,167 0.1 13,463 Maverick Tube Corp. (a) 850,727 0.2 Other Securities 4,011,150 0.8 ------------ ----- 5,497,044 1.1 ------------ ----- Metals & Minerals Miscellaneous 8,218 Cleveland-Cliffs, Inc. 651,605 0.2 Other Securities 1,633,871 0.3 ------------ ----- 2,285,476 0.5 ------------ ----- Milling: Fruit and Grain Processing Other Securities 106,812 0.0 Miscellaneous Business & Consumer Other Securities 93,080 0.0 Discretionary Miscellaneous Consumer Staples Other Securities 160,765 0.0 Miscellaneous Materials & Commodities Other Securities 1,033,243 0.2 Miscellaneous Materials & Processing Other Securities 1,211,235 0.2 Miscellaneous Producer Durables 28,900 BE Aerospace, Inc. (a) 660,654 0.1 Other Securities 133,422 0.1 ------------ ----- 794,076 0.2 ------------ ----- Miscellaneous Technology Other Securities 259,771 0.1 Multi-Sector Companies Other Securities 1,328,343 0.3 Office Furniture & Business Equipment Other Securities 1,316,919 0.3 Offshore Drilling Other Securities 737,668 0.1 Oil: Crude Producers 11,083 Houston Exploration Co. (a) 678,169 0.1 Other Securities 9,721,717 1.9 ------------ ----- 10,399,886 2.0 ------------ ----- Oil: Integrated Domestic Other Securities 1,352,136 0.3 Oil: Integrated International Other Securities 240,096 0.1 Paints & Coatings Other Securities 832,097 0.2 Paper Other Securities 1,947,004 0.4 Plastics Other Securities 619,184 0.1 Pollution Control & Environmental Other Securities 798,014 0.2 Services Power Transmission Equipment Other Securities 452,582 0.1 Printing & Copying Services Other Securities 629,678 0.1 Production Technology Equipment 19,113 Varian Semiconductor Equipment Associates, Inc. (a) 623,275 0.1 Other Securities 5,706,523 1.1 ------------ ----- 6,329,798 1.2 ------------ ----- Publishing: Miscellaneous Other Securities 2,000,111 0.4 Publishing: Newspapers Other Securities 1,771,267 0.3 Radio & TV Broadcasters Other Securities 2,500,439 0.5 Railroad Equipment Other Securities 1,066,066 0.2 Railroads Other Securities 1,143,820 0.2 Real Estate Other Securities 1,193,776 0.2 Real Estate Investment Trusts (REITs) 8,556 Alexandria Real Estate Equities, Inc. 758,746 0.2
See notes to financial statements. - -------------------------------------------------------------------------------- 38 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
PERCENT OF INDUSTRY SHARES HELD COMMON STOCKS VALUE NET ASSETS - -------- ----------- ------------- ------------ ---------- 20,600 Highwoods Properties, Inc. $ 745,308 0.2% 13,120 Home Properties, Inc. 728,291 0.1 13,320 LaSalle Hotel Properties 616,716 0.1 28,559 Nationwide Health Properties, Inc. 642,863 0.1 14,286 Post Properties, Inc. 647,727 0.1 Other Securities 27,265,495 5.3 ------------ ----- 31,405,146 6.1 ------------ ----- Recreational Vehicles & Boats Other Securities 1,401,860 0.3 Rental & Leasing Services: Commercial Other Securities 747,941 0.1 Rental & Leasing Services: Consumer Other Securities 1,656,009 0.3 Restaurants Other Securities 8,415,948 1.6 Retail 42,300 Big Lots, Inc. (a) 722,484 0.1 Other Securities 17,969,347 3.5 ------------ ----- 18,691,831 3.6 ------------ ----- Savings & Loan Other Securities 10,172,554 2.0 Scientific Equipment & Suppliers Other Securities 647,190 0.1 Securities Brokerage & Services Other Securities 2,334,511 0.5 Services: Commercial 17,500 Regis Corp. 623,175 0.1 17,018 Waste Connections, Inc. (a) 619,455 0.1 Other Securities 14,976,201 3.0 ------------ ----- 16,218,831 3.2 ------------ ----- Shipping 11,900 American Commercial Lines, Inc. (a) 716,975 0.1 Other Securities 363,534 0.1 ------------ ----- 1,080,509 0.2 ------------ ----- Shoes Other Securities 2,751,292 0.5 Steel 8,545 Chaparral Steel Co. (a) 615,411 0.1 12,500 Oregon Steel Mills, Inc. (a) 633,250 0.1 Other Securities 1,860,103 0.4 ------------ ----- 3,108,764 0.6 ------------ ----- Sugar Other Securities 123,344 0.0 Telecommunications Equipment 20,100 Interdigital Communications Corp. (a) 701,691 0.1 31,900 Polycom, Inc. (a) 699,248 0.1 Other Securities 2,869,907 0.6 ------------ ----- 4,270,846 0.8 ------------ ----- Textile Products Other Securities 195,351 0.0 Textiles Apparel Manufacturers 20,854 Phillips-Van Heusen Corp. 795,789 0.1 Other Securities 3,406,798 0.7 ------------ ----- 4,202,587 0.8 ------------ ----- Tires & Rubber Other Securities 492,902 0.1 Tobacco Other Securities 920,136 0.2 Toys Other Securities 726,720 0.1 Transportation Miscellaneous Other Securities 1,253,203 0.2 Truckers Other Securities 2,707,389 0.5 Utilities: Cable TV & Radio Other Securities 118,993 0.0
See notes to financial statements. - -------------------------------------------------------------------------------- 39 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
PERCENT OF INDUSTRY SHARES HELD COMMON STOCKS VALUE NET ASSETS - -------- ----------- ------------- ------------ ---------- Utilities: Electrical 29,200 Westar Energy, Inc. $ 614,660 0.1% Other Securities 6,269,615 1.2 ------------ ----- 6,884,275 1.3 ------------ ----- Utilities: Gas Distributors 15,600 Nicor, Inc. (e) 647,400 0.1 25,500 Piedmont Natural Gas Co. 619,650 0.1 Other Securities 3,007,326 0.6 ------------ ----- 4,274,376 0.8 ------------ ----- Utilities: Gas Pipelines Other Securities 159,530 0.0 Utilities: Miscellaneous Other Securities 507,305 0.1 Utilities: Telecommunications Other Securities 5,489,182 1.1 Utilities: Water Other Securities 685,376 0.1 Wholesale & International Trade Other Securities 317,645 0.1 Wholesalers Other Securities 1,163,651 0.2 ------------ ----- TOTAL COMMON STOCKS (COST - $374,034,401) 449,622,572 87.7 ------------ ----- EXCHANGE-TRADED FUNDS --------------------- 169,590 iShares Russell 2000 Index Fund (e) 12,159,603 2.4 ------------ ----- TOTAL EXCHANGE-TRADED FUNDS (COST - $12,341,064) 12,159,603 2.4 ------------ ----- MUTUAL FUNDS ------------ Investment Management Companies Other Securities 94,116 0.0 ------------ ----- TOTAL MUTUAL FUNDS (COST - $92,876) 94,116 0.0 ------------ ----- OTHER INTERESTS (B) ------------------- Oil: Crude Producers Other Securities 0 0.0 ------------ ----- TOTAL OTHER INTERESTS (COST - $0) 0 0.0 ------------ ----- BENEFICIAL INTEREST SHORT-TERM SECURITIES ----------- --------------------- $46,332,365 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I, 4.78% (c)(f).... 46,332,365 9.0 36,252,065 Merrill Lynch Liquidity Series, LLC Money Market Series, 5.22% (c)(d)(f)............................ 36,252,065 7.1 ------------ ----- TOTAL SHORT-TERM SECURITIES (COST - $82,584,430)................. 82,584,430 16.1 ------------ ----- TOTAL INVESTMENTS (COST - $469,052,771*) 544,460,721 106.2 LIABILITIES IN EXCESS OF OTHER ASSETS (31,816,511) (6.2) ------------ ----- NET ASSETS - 100.0% $512,644,210 100.0% ============ =====
See notes to financial statements. - -------------------------------------------------------------------------------- 40 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- - --------------- * The cost and unrealized appreciation (depreciation) of investments, as of June 30, 2006, as computed for federal income tax purposes, were as follows: Aggregate cost.............................................. $472,784,415 ------------ Gross unrealized appreciation............................... $ 93,085,630 Gross unrealized depreciation............................... (21,409,324) ------------ Net unrealized appreciation................................. $ 71,676,306 ============
(a) Non-income producing security. (b) Other interests represent beneficial interest in liquidation trusts and other reorganization entities and are non-income producing. (c) Investments in companies considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
INTEREST AFFILIATE NET ACTIVITY INCOME --------- ------------ ---------- Merrill Lynch Liquidity Series, LLC Cash Sweep Series I..... $45,690,690 $1,655,673 Merrill Lynch Liquidity Series, LLC Money Market Series..... $22,787,010 $ 185,901
(d) Security was purchased with the cash proceeds from securities loans. (e) Security, or a portion of security, is on loan. (f) Represents the current yield as of 6/30/2006. -- "Other Securities" represent issues that are not identified as the 50 largest holdings of the Series and issues not exceeding 1% of net assets. -- For Series compliance purposes, the Series' industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Series management. This definition may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease. Industries are shown as a percent of net assets. -- Financial futures contracts purchased as of June 30, 2006, were as follows:
NUMBER OF EXPIRATION UNREALIZED CONTRACTS ISSUE DATE FACE VALUE APPRECIATION --------- ----- -------------- ---------- ------------ 133 Russell 2000 Index September 2006 $46,934,608 $1,710,142
See notes to financial statements. - -------------------------------------------------------------------------------- 41 MASTER SMALL CAP INDEX SERIES STATEMENT OF ASSETS AND LIABILITIES As of June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- ASSETS: Investments in unaffiliated securities, at value (including securities loaned of $35,300,162) (identified cost - $386,468,341)....................... $461,876,291 Investments in affiliated securities, at value (identified cost - $82,584,430)............................. 82,584,430 Cash.................................................... 235,786 Cash on deposit for financial futures contracts......... 2,092,500 Receivables: Securities sold....................................... $81,675,732 Contributions......................................... 2,241,230 Variation margin...................................... 671,651 Dividends............................................. 613,302 Securities lending.................................... 27,629 85,229,544 ----------- Prepaid expenses and other assets....................... 6,364 ------------ TOTAL ASSETS........................................ 632,024,915 ------------ LIABILITIES: Collateral on securities loaned, at value............... 36,252,065 Payables: Securities purchased.................................. 77,575,202 Withdrawals........................................... 5,327,839 Investment adviser.................................... 3,993 Other affiliates...................................... 3,924 82,910,958 ----------- Accrued expenses and other liabilities.................. 217,682 ------------ TOTAL LIABILITIES................................... 119,380,705 ------------ NET ASSETS: Net assets.............................................. $512,644,210 ============ NET ASSETS CONSIST OF Investors' capital...................................... $435,526,118 Unrealized appreciation - net........................... 77,118,092 ------------ NET ASSETS.................................................. $512,644,210 ============
See notes to financial statements. - -------------------------------------------------------------------------------- 42 MASTER SMALL CAP INDEX SERIES STATEMENT OF OPERATIONS For the Six Months Ended June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends (net of $1,162 foreign withholding tax)....... $ 2,143,381 Interest from affiliates................................ 1,655,673 Securities lending - net................................ 185,901 ----------- TOTAL INCOME........................................ 3,984,955 ----------- EXPENSES: Professional fees....................................... $ 59,545 Accounting services..................................... 36,018 Custodian fees.......................................... 33,454 Investment advisory fees................................ 25,199 Trustees' fees and expenses............................. 1,802 Printing and shareholder reports........................ 128 Pricing fees............................................ 47 Other................................................... 3,613 ----------- TOTAL EXPENSES BEFORE REIMBURSEMENT................. 159,806 Waiver of expenses...................................... (92) ----------- TOTAL EXPENSES AFTER REIMBURSEMENT.................. 159,714 ----------- INVESTMENT INCOME - NET..................................... 3,825,241 ----------- REALIZED & UNREALIZED GAIN (LOSS) - NET: Realized gain (loss) on: Investments - net..................................... 29,811,057 In-kind redemption - net.............................. (1,199,610) Financial futures contracts - net..................... (5,851,887) 22,759,560 ----------- Change in unrealized appreciation/depreciation on: Investments - net..................................... (1,541,293) Financial futures contracts - net..................... 1,710,990 169,697 ----------- ----------- TOTAL REALIZED AND UNREALIZED GAIN - NET............ 22,929,257 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $26,754,498 ===========
See notes to financial statements. - -------------------------------------------------------------------------------- 43 MASTER SMALL CAP INDEX SERIES STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
FOR THE SIX MONTHS FOR THE ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2006 2005 ------------- -------------- (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Investment income - net................................. $ 3,825,241 $ 4,325,603 Realized gain - net..................................... 22,759,560 13,549,496 Change in unrealized appreciation/depreciation - net.... 169,697 (5,151,541) ------------- ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... 26,754,498 12,723,558 ------------- ------------- CAPITAL TRANSACTIONS: Proceeds from contributions............................. 365,892,683 267,164,255 Fair value of withdrawals............................... (250,148,320) (275,403,741) ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL TRANSACTIONS................................... 115,744,363 (8,239,486) ------------- ------------- NET ASSETS: Total increase in net assets............................ 142,498,861 4,484,072 Beginning of period..................................... 370,145,349 365,661,277 ------------- ------------- END OF PERIOD........................................... $ 512,644,210 $ 370,145,349 ============= =============
See notes to financial statements. - -------------------------------------------------------------------------------- 44 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, ----------------------------------------- 2006 2005 2004 2003 2002 ----------- -------- -------- -------- -------- (UNAUDITED) TOTAL INVESTMENT RETURN................................. 8.19%+ 4.63% 18.15% 47.11% (20.19%) -------- -------- -------- -------- -------- RATIOS TO AVERAGE NET ASSETS: Expenses, net of reimbursement...................... .06% .07% .08% .09% .08% -------- -------- -------- -------- -------- Expenses............................................ .06% .08% .08% .10% .14% -------- -------- -------- -------- -------- Investment income - net............................. 1.52% 1.17% 1.11% 1.13% 1.26% -------- -------- -------- -------- -------- SUPPLEMENTAL DATA: Net assets, end of period (in thousands)............ $512,644 $370,145 $365,661 $335,659 $181,915 -------- -------- -------- -------- -------- Portfolio turnover.................................. 29.38% 36.63% 37.74% 28.57% 39.00% -------- -------- -------- -------- --------
- --------------- + Aggregate total investment return. See notes to financial statements. - -------------------------------------------------------------------------------- 45 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES: Master Small Cap Index Series (the "Series"), a non-diversified investment company, 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 based upon quoted fair valuations received daily by the Series from a pricing service or counterparty. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their last sale price as of the close of such exchanges. 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. Valuation of other short-term investment vehicles is generally based on net asset value of the underlying investment vehicle or amortized cost. Repurchase agreements are valued at cost plus accrued interest. The Series employs pricing services to provide certain securities prices for the Series. Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of 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 Trust 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. - -------------------------------------------------------------------------------- 46 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- Generally, trading in foreign securities, as well as U.S. government securities, money market instruments and certain fixed income securities, is substantially completed each day at various times prior to the close of business on the New York Stock Exchange ("NYSE"). The values of such securities used in computing the net assets of the Series are determined as of such times. Foreign currency exchange rates 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 - -------------------------------------------------------------------------------- 47 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- required. Under the applicable foreign tax law, a withholding tax may be imposed on interest, dividends and capital gains at various rates. It is intended that the Series' assets will be managed so an investor in the Series can satisfy the requirements of Subchapter M of the Internal Revenue Code. (d) Security transactions and investment income Security transactions are accounted for on the date the securities are purchased or sold (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Interest income is recognized on the accrual basis. (e) Securities lending The Series may lend securities to financial institutions that provide cash or securities issued or guaranteed by the U.S. government as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Series and any additional required collateral is delivered to the Series on the next business day. Where the Series receives securities as collateral for the loaned securities, it collects a fee from the borrower. The Series typically receives the income on the loaned securities but does not receive the income on the collateral. Where the Series receives cash collateral, it may invest such collateral and retain the amount earned on such investment, net of any amount rebated to the borrower. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within five business days. The Series may pay reasonable finder's, lending agent, administrative and custodial fees in connection with its loans. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Series could experience delays and costs in gaining access to the collateral. The Series also could suffer a loss where the value of the collateral falls below the market value of the borrowed securities, in the event of borrower default or in the event of losses on investments made with cash collateral. 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 reimbursed the Series for the amount of $92. 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, 2006, the Series lent securities with a value of $92,016 to MLPF&S or its affiliates. Pursuant to that order, the Trust also has retained Merrill - -------------------------------------------------------------------------------- 48 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- 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 funds advised by Merrill Lynch Investment Managers, L.P. ("MLIM"), an affiliate of FAM. For the six months ended June 30, 2006, MLIM, LLC received $79,192 in securities lending agent fees. In addition, MLPF&S received $208 in commissions on the execution of portfolio security transactions for the Series for the six months ended June 30, 2006. For the six months ended June 30, 2006, the Series reimbursed FAM $3,808 for certain accounting services. Certain officers and/or trustees of the Trust are officers and/or directors of FAM, PSI, MLTC, ML & Co., MLIM, and/or MLIM, LLC. In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to contribute ML & Co.'s investment management business, including FAM, to the investment management business of BlackRock, Inc. The transaction is expected to close at the end of the third quarter of 2006. 3. INVESTMENTS: Purchases and sales (including in-kind redemptions) of investments, excluding short-term securities, for the six months ended June 30, 2006 were $193,153,094 and $126,684,470, 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 2006. 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, 2006. - -------------------------------------------------------------------------------- 49 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- This summary schedule of investments is presented to help investors focus on the Series' principal holdings. It includes the Series' 50 largest holdings and each investment of any issuer that exceeds 1% of the Series' net assets. "Other Securities" represent all issues not required to be disclosed under the rules adopted by the Securities and Exchange Commission. A complete schedule of investments is available without charge, upon request, by calling 800-637-3863 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 - -------- ----------- ------------- ------------ -------------- Aerospace & Defense Other Securities $ 3,498,278 0.6% Air Freight & Logistics Other Securities 2,418,070 0.4 Airlines Other Securities 1,489,956 0.2 Auto Components Other Securities 4,399,792 0.7 Automobiles 48,144 DaimlerChrysler AG 2,378,051 0.4 80,500 Honda Motor Co., Ltd. 2,556,226 0.4 145,300 Toyota Motor Corp. 7,613,585 1.2 Other Securities 4,061,185 0.6 ------------ ----- 16,609,047 2.6 ------------ ----- Beverages 153,488 Diageo Plc 2,581,932 0.4 Other Securities 5,074,479 0.8 ------------ ----- 7,656,411 1.2 ------------ ----- Biotechnology Other Securities 842,602 0.1 Building Products Other Securities 3,515,967 0.6 Capital Markets 63,432 Credit Suisse Group 3,541,836 0.6 26,296 Deutsche Bank AG Registered Shares 2,958,876 0.5 55,029 UBS AG Registered Shares 6,019,499 0.9 Other Securities 7,340,984 1.2 ------------ ----- 19,861,195 3.2 ------------ ----- Chemicals Other Securities 17,404,467 2.8 Commercial Banks 91,876 ABN AMRO Holding NV 2,512,854 0.4 42,556 BNP Paribas 4,072,930 0.6 181,006 Banco Bilbao Vizcaya Argentaria SA 3,721,632 0.6 306,300 Banco Santander Central Hispano SA 4,472,676 0.7 346,680 Barclays Plc 3,940,201 0.6 204,250 HBOS Plc 3,551,057 0.6 594,963 HSBC Holdings Plc 10,470,477 1.7 301,627 Lloyds TSB Group Plc 2,965,113 0.5 437 Mitsubishi UFJ Financial Group, Inc. 6,116,433 1.0 490 Mizuho Financial Group, Inc. 4,153,523 0.7 164,849 Royal Bank of Scotland Group Plc 5,421,080 0.9 17,830 Societe Generale 2,621,824 0.4 300 Sumitomo Mitsui Financial Group, Inc. 3,175,436 0.5 393,632 UniCredito Italiano SpA 3,081,832 0.5 Other Securities 34,818,591 5.5 ------------ ----- 95,095,659 15.2 ------------ -----
See notes to financial statements. - -------------------------------------------------------------------------------- 50 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
PERCENT OF INDUSTRY SHARES HELD COMMON STOCKS VALUE NET ASSETS - -------- ----------- ------------- ------------ -------------- Commercial Services & Supplies Other Securities $ 5,097,171 0.8% Communications Equipment 223,091 Nokia Oyj 4,552,703 0.7 714,376 Telefonaktiebolaget LM Ericsson 2,360,279 0.4 Other Securities 1,614,285 0.3 ------------ ----- 8,527,267 1.4 ------------ ----- Computers & Peripherals Other Securities 2,924,504 0.5 Construction & Engineering Other Securities 5,195,393 0.8 Construction Materials Other Securities 4,840,749 0.8 Consumer Finance Other Securities 2,647,322 0.4 Containers & Packaging Other Securities 670,533 0.1 Distributors Other Securities 388,003 0.1 Diversified Consumer Services Other Securities 239,970 0.0 Diversified Financial Services 96,491 ING Groep NV CVA 3,791,436 0.6 Other Securities 5,387,461 0.9 ------------ ----- 9,178,897 1.5 ------------ ----- Diversified Telecommunication 233,917 Telefonica SA 3,894,280 0.6 Services Other Securities 15,810,690 2.5 ------------ ----- 19,704,970 3.1 ------------ ----- Electric Utilities 33,498 E.ON AG 3,855,780 0.6 Other Securities 14,071,469 2.3 ------------ ----- 17,927,249 2.9 ------------ ----- Electrical Equipment Other Securities 5,914,104 0.9 Electronic Equipment & Other Securities 6,059,149 1.0 Instruments Energy Equipment & Services Other Securities 1,530,735 0.2 Food & Staples Retailing 398,904 Tesco Plc 2,464,238 0.4 Other Securities 8,261,731 1.3 ------------ ----- 10,725,969 1.7 ------------ ----- Food Products 21,394 Nestle SA Registered Shares 6,706,364 1.1 Other Securities 9,046,259 1.4 ------------ ----- 15,752,623 2.5 ------------ ----- Gas Utilities Other Securities 2,007,207 0.3 Health Care Equipment & Supplies Other Securities 3,058,093 0.5 Health Care Providers & Services Other Securities 1,024,549 0.2 Hotels, Restaurants & Leisure Other Securities 5,970,400 0.9 Household Durables Other Securities 11,593,824 1.9 Household Products Other Securities 2,183,588 0.3 IT Services Other Securities 2,133,835 0.3 Independent Power Producers & Other Securities 737,484 0.1 Energy Traders Industrial Conglomerates 42,682 Siemens AG 3,712,783 0.6 Other Securities 4,014,511 0.6 ------------ ----- 7,727,294 1.2 ------------ ----- Insurance 87,501 AXA 2,870,940 0.5 20,777 Allianz AG Registered Shares 3,281,516 0.5 Other Securities 20,484,261 3.3 ------------ ----- 26,636,717 4.3 ------------ ----- Internet & Catalog Retail Other Securities 1,117,660 0.2
See notes to financial statements. - -------------------------------------------------------------------------------- 51 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
PERCENT OF INDUSTRY SHARES HELD COMMON STOCKS VALUE NET ASSETS - -------- ----------- ------------- ------------ -------------- Internet Software & Services Other Securities $ 552,550 0.1% Leisure Equipment & Products Other Securities 2,312,276 0.4 Life Sciences Tools & Services Other Securities 62,512 0.0 Machinery Other Securities 11,830,827 1.9 Marine Other Securities 1,751,889 0.3 Media Other Securities 12,415,888 2.0 Metals & Mining 72,979 Anglo American Plc 2,993,830 0.5 178,905 BHP Billiton Ltd. 3,854,594 0.6 133,948 BHP Billiton Plc 2,598,839 0.4 56,351 Rio Tinto Plc Registered Shares 2,979,775 0.5 Other Securities 11,748,961 1.9 ------------ ----- 24,175,999 3.9 ------------ ----- Multi-Utilities Other Securities 8,671,007 1.4 Multiline Retail Other Securities 3,042,245 0.5 Office Electronics 56,400 Canon, Inc. 2,767,826 0.4 Other Securities 1,176,098 0.2 ------------ ----- 3,943,924 0.6 ------------ ----- Oil, Gas & Consumable Fuels 193,718 BG Group Plc 2,588,663 0.4 1,068,495 BP Plc 12,460,209 2.0 3,749 BP Plc (b) 260,968 0.0 111,634 ENI SpA 3,284,486 0.5 204,390 Royal Dutch Shell Plc 6,880,164 1.1 143,015 Royal Dutch Shell Plc Class B 5,001,967 0.8 115,027 Total SA 7,567,276 1.2 Other Securities 8,311,905 1.4 ------------ ----- 46,355,638 7.4 ------------ ----- Paper & Forest Products Other Securities 2,280,824 0.4 Personal Products Other Securities 1,896,752 0.3 Pharmaceuticals 84,007 AstraZeneca Plc 5,071,464 0.8 304,144 GlaxoSmithKline Plc 8,499,854 1.4 800 GlaxoSmithKline Plc (b) 44,640 0.0 123,337 Novartis AG Registered Shares 6,665,232 1.1 37,298 Roche Holding AG 6,153,409 1.0 52,111 Sanofi-Aventis 5,084,033 0.8 46,600 Takeda Pharmaceutical Co., Ltd. 2,902,436 0.4 Other Securities 5,919,897 0.9 ------------ ----- 40,340,965 6.4 ------------ ----- Real Estate Investment Trusts Other Securities 4,760,097 0.8 (REITs) Real Estate Management & Other Securities 10,879,985 1.7 Development Road & Rail Other Securities 5,172,990 0.8 Semiconductors & Semiconductor Other Securities 4,536,589 0.7 Equipment Software Other Securities 4,455,545 0.7 Specialty Retail Other Securities 4,620,449 0.7 Textiles, Apparel & Luxury Goods Other Securities 5,276,692 0.8 Thrifts & Mortgage Finance Other Securities 408,365 0.1 Tobacco Other Securities 5,787,667 0.9 Trading Companies & Distributors Other Securities 5,992,141 1.0
See notes to financial statements. - -------------------------------------------------------------------------------- 52 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - --------------------------------------------------------------------------------
PERCENT OF INDUSTRY SHARES HELD COMMON STOCKS VALUE NET ASSETS - -------- ----------- ------------- ------------ -------------- Transportation Infrastructure Other Securities $ 1,947,103 0.3% Water Utilities Other Securities 712,756 0.1 Wireless Telecommunication 3,120,505 Vodafone Group Plc 6,651,714 1.1 Services 4,178 Vodafone Group Plc (b) 88,991 0.0 Other Securities 3,942,793 0.6 ------------ ----- 10,683,498 1.7 ------------ ----- TOTAL COMMON STOCKS (COST - $440,955,183) 579,173,876 92.4 ------------ ----- EXCHANGE-TRADED FUNDS --------------------- Diversified Financial Services 284,277 iShares MSCI EAFE Index Fund 18,537,703 3.0 ------------ ----- TOTAL EXCHANGE-TRADED FUNDS (COST - $17,644,632) 18,537,703 3.0 ------------ ----- PREFERRED STOCKS ---------------- Automobiles Other Securities 735,751 0.1 Chemicals Other Securities 307,933 0.1 Media Other Securities 125,136 0.0 Multi-Utilities Other Securities 140,736 0.0 ------------ ----- TOTAL PREFERRED STOCKS (COST - $821,955) 1,309,556 0.2 ------------ ----- RIGHTS ------ Chemicals Other Securities 21,165 0.0 Machinery Other Securities 6,435 0.0 ------------ ----- TOTAL RIGHTS (COST - $0) 27,600 0.0 ------------ ----- BENEFICIAL INTEREST SHORT-TERM SECURITIES -------------- --------------------- USD$12,041,829 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I, 4.78% (a)(c)........................... 12,041,829 1.9 ------------ ----- TOTAL SHORT-TERM SECURITIES (COST - $12,041,829)............. 12,041,829 1.9 ------------ ----- TOTAL INVESTMENTS (COST - $471,463,599*) 611,090,564 97.5 OTHER ASSETS LESS LIABILITIES 15,502,170 2.5 ------------ ----- NET ASSETS $626,592,734 100.0% ============ =====
- --------------- * The cost and unrealized appreciation (depreciation) of investments as of June 30, 2006, as computed for federal income tax purposes, were as follows: Aggregate cost.............................................. $476,995,253 ------------ Gross unrealized appreciation............................... $143,003,774 Gross unrealized depreciation............................... (8,908,463) ------------ Net unrealized appreciation................................. $134,095,311 ============
(a) Represents the current yield as of 6/30/2006. (b) Depositary receipts. See notes to financial statements. - -------------------------------------------------------------------------------- 53 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- (c) Investments in companies considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
INTEREST AFFILIATE NET ACTIVITY INCOME --------- ------------ -------- Merrill Lynch Liquidity Series, LLC Cash Sweep Series I..... $(8,287,046) $358,356
-- "Other Securities" represent issues that are not identified as the 50 largest holdings of the Series and issues not exceeding 1% of net assets. -- For Series compliance purposes, the Series' industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Series management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percent of net assets. -- Financial futures contracts purchased as of June 30, 2006 were as follows:
NUMBER OF EXPIRATION UNREALIZED CONTRACTS ISSUE EXCHANGE DATE FACE VALUE APPRECIATION --------- ----- -------- -------------- ---------- ------------ 15 Hang Seng Index Future Hong Kong July 2006 $1,531,094 $ 44,514 63 OMX Stock Index Future Stockholm July 2006 $ 801,261 36,369 2 DAX Index 25 Euro Future Eurex September 2006 $ 355,419 10,693 114 DJ Euro Stoxx 50 Eurex September 2006 $5,102,330 235,658 36 FTSE 100 Index Future LIFFE September 2006 $3,773,687 104,834 1 S&P/MIB Index Future Eurex September 2006 $ 230,699 3,749 28 SPI 200 Index Future Sydney September 2006 $2,543,440 98,482 73 TOPIX Index Future Tokyo September 2006 $9,816,395 333,935 -------- TOTAL UNREALIZED APPRECIATION - NET $868,234 ========
Forward foreign exchange contracts purchased as of June 30, 2006 were as follows:
UNREALIZED FOREIGN CURRENCY SETTLEMENT APPRECIATION PURCHASED DATE (DEPRECIATION) ---------------- ----------- -------------- AUD 3,222,700 August 2006 $ (56,513) CHF 4,526,600 August 2006 (17,435) EUR 13,231,800 August 2006 18,608 GBP 5,051,600 August 2006 (41,744) HKD 3,680,000 August 2006 (1,142) JPY 1,630,758,700 August 2006 (372,110) SEK 8,668,900 August 2006 11,550 SGD 80,800 August 2006 150 --------- TOTAL UNREALIZED DEPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS - NET (USD COMMITMENT - $48,976,148) $(458,636) =========
See notes to financial statements. - -------------------------------------------------------------------------------- 54 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- - - Forward foreign exchange contracts sold as of June 30, 2006 were as follows:
UNREALIZED FOREIGN CURRENCY SETTLEMENT APPRECIATION SOLD DATE (DEPRECIATION) ---------------- ----------- -------------- AUD 2,240,900 August 2006 $ 32,899 CHF 3,092,500 August 2006 28,178 EUR 8,444,400 August 2006 (10,655) GBP 4,177,200 August 2006 81,067 HKD 3,680,000 August 2006 808 JPY 979,262,000 August 2006 266,062 SEK 5,478,000 August 2006 (14,060) SGD 80,800 August 2006 (145) -------- TOTAL UNREALIZED APPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS - NET (USD COMMITMENT - $33,057,761) $384,154 ========
CURRENCY ABBREVIATIONS: AUD Australian Dollar CHF Swiss Franc EUR Euro GBP British Pound HKD Hong Kong Dollar JPY Japanese Yen SEK Swedish Krona SGD Singapore Dollar USD U.S. Dollar
See notes to financial statements. - -------------------------------------------------------------------------------- 55 MASTER INTERNATIONAL INDEX SERIES STATEMENT OF ASSETS AND LIABILITIES As of June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- ASSETS: Investments in unaffiliated securities,at value (identified cost - $459,421,770)....................... $599,048,735 Investments in affiliated securities,at value (identified cost - $12,041,829)........................ 12,041,829 Cash on deposit for financial futures contracts......... 1,995,570 Foreign cash (cost - $8,001,968)........................ 7,952,577 Unrealized appreciation on forward foreign exchange contracts.............................................. 439,322 Receivables: Dividends............................................. $2,054,400 Securities sold....................................... 1,673,636 Variation margin...................................... 1,347,995 Contributions......................................... 1,339,010 6,415,041 ---------- Prepaid expenses........................................ 5,708 ------------ TOTAL ASSETS........................................ 627,898,782 ------------ LIABILITIES: Unrealized depreciation on forward foreign exchange contracts.............................................. 513,804 Payables: Withdrawals........................................... 510,933 Securities purchased.................................. 222,920 Other affiliates...................................... 5,358 Investment adviser.................................... 3,196 742,407 ---------- Accrued expenses and other liabilities.................. 49,837 ------------ TOTAL LIABILITIES................................... 1,306,048 ------------ NET ASSETS: Net assets.............................................. $626,592,734 ============ NET ASSETS CONSIST OF: Investors' capital...................................... $486,071,616 Unrealized appreciation - net........................... 140,521,118 ------------ NET ASSETS.................................................. $626,592,734 ============
See notes to financial statements. - -------------------------------------------------------------------------------- 56 MASTER INTERNATIONAL INDEX SERIES STATEMENT OF OPERATIONS For the Six Months Ended June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends (net of $944,972 foreign withholding tax)..... $10,376,817 Interest (including $358,356 from affiliates)........... 412,440 Securities lending - net................................ 19 ----------- TOTAL INCOME........................................ 10,789,276 ----------- EXPENSES: Custodian fees.......................................... $ 132,318 Accounting services..................................... 32,574 Investment advisory fees................................ 30,551 Professional fees....................................... 25,898 Pricing fees............................................ 18,227 Trustees' fees and expenses............................. 1,733 Other................................................... 5,893 ----------- TOTAL EXPENSES BEFORE REIMBURSEMENT................. 247,194 Reimbursement of expenses............................... (1,502) ----------- TOTAL EXPENSES AFTER REIMBURSEMENT.................. 245,692 ----------- INVESTMENT INCOME - NET..................................... 10,543,584 ----------- REALIZED & UNREALIZED GAIN (LOSS) - NET: Realized gain (loss) on: Investments - net..................................... 4,157,993 In-kind redemption - net.............................. (76,039) Financial futures contracts - net..................... (297,314) Foreign currency transactions - net................... 1,952,006 5,736,646 ----------- Change in unrealized appreciation/depreciation on: Investments - net..................................... 38,299,823 Financial futures contracts - net..................... 302,239 Foreign currency transactions - net................... 316,804 38,918,866 ----------- ----------- TOTAL REALIZED AND UNREALIZED GAIN - NET............ 44,655,512 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $55,199,096 ===========
See notes to financial statements. - -------------------------------------------------------------------------------- 57 MASTER INTERNATIONAL INDEX SERIES STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
FOR THE SIX FOR THE MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2006 2005 ------------- -------------- (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Investment income - net................................. $ 10,543,584 $ 10,676,216 Realized gain - net..................................... 5,736,646 3,554,079 Change in unrealized appreciation/depreciation - net.... 38,918,866 44,436,350 ------------- ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... 55,199,096 58,666,645 ------------- ------------- CAPITAL TRANSACTIONS: Proceeds from contributions............................. 285,565,783 274,141,104 Fair value of withdrawals............................... (237,327,440) (131,719,318) ------------- ------------- NET INCREASE IN NET ASSETS DERIVED FROM CAPITAL TRANSACTIONS.......................................... 48,238,343 142,421,786 ------------- ------------- NET ASSETS: Total increase in net assets............................ 103,437,439 201,088,431 Beginning of period..................................... 523,155,295 322,066,864 ------------- ------------- END OF PERIOD........................................... $626,592,734 $ 523,155,295 ============= =============
See notes to financial statements. - -------------------------------------------------------------------------------- 58 MASTER INTERNATIONAL INDEX SERIES FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The following ratios have been derived from information provided in the financial statements.
FOR THE SIX FOR THE YEAR ENDED DECEMBER 31, MONTHS ENDED ----------------------------------------- JUNE 30, 2006 2005 2004 2003 2002 ------------- -------- -------- -------- -------- (UNAUDITED) TOTAL INVESTMENT RETURN............................. 10.29%+ 13.64% 20.32% 38.97% (15.81%) -------- -------- -------- -------- -------- RATIOS TO AVERAGE NET ASSETS: Expenses, net of reimbursement.................. .08%* .10% .09% .09% .08% -------- -------- -------- -------- -------- Expenses........................................ .08%* .10% .10% .10% .16% -------- -------- -------- -------- -------- Investment income - net......................... 3.45%* 2.53% 2.55% 2.23% 2.21% -------- -------- -------- -------- -------- SUPPLEMENTAL DATA: Net assets, end of period (in thousands)........ $626,593 $523,155 $322,067 $553,129 $166,820 -------- -------- -------- -------- -------- Portfolio turnover.............................. 19.89% 11.33% 13.50% 8.55% 19.52% -------- -------- -------- -------- --------
- --------------- * Annualized. + Aggregated total investment return. See notes to financial statements. - -------------------------------------------------------------------------------- 59 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES: Master International Index Series (the "Series"), a non-diversified investment company, 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 and forward foreign exchange contracts are valued daily based upon quoted fair valuations received daily by the Series from a pricing service or counterparty. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their last sale price as of the close of such exchanges. 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. Valuation of other short-term investment vehicles is generally based on the net asset value of the underlying investment vehicle or amortized cost. Repurchase agreements are valued at cost plus accrued interest. The Series employs pricing services to provide certain securities prices for the Series. Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of 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 and certain fixed income securities, is substantially completed each day at various times prior to the close of business on the New York Stock Exchange ("NYSE"). The values of such - -------------------------------------------------------------------------------- 60 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- securities used in computing the net 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 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 OTC foreign currency options, foreign currency futures and related options on foreign currency futures as a short or long hedge against possible variations in foreign exchange rates. Such - -------------------------------------------------------------------------------- 61 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- transactions may be effected with respect to hedges on non-U.S. dollar-denominated securities owned by the Series, sold by the Series but not yet delivered, or committed or anticipated to be purchased by the Series. (c) Foreign Currency Transactions Transactions denominated in foreign currencies are recorded at the exchange rate prevailing when recognized. Assets and liabilities denominated in foreign currencies are valued at the exchange rate at the end of the period. Foreign currency transactions are the result of settling (realized) or valuing (unrealized) assets or liabilities expressed in foreign currencies into U.S. dollars. Realized and unrealized gains or losses from investments include the effects of foreign exchange rates on investments. The Series invests in foreign securities,which may involve a number of risk factors and special considerations, not present with investments in securities of U.S. corporations. (d) Income Taxes The Series is classified as a partnership for federal income tax purposes. As such, each investor in the Series is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Series. Therefore, no federal income tax provision is required. Under the applicable foreign tax law, a withholding tax may be imposed on interest, dividends and capital gains at various rates. It is intended that the Series' assets will be managed so an investor in the Series can satisfy the requirements of Subchapter M of the Internal Revenue Code. (e) Security Transactions and Investment Income Security transactions are accounted for on the date the securities are purchased or sold (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Series has determined the ex-dividend date. Interest income is recognized on the accrual basis. (f) Securities Lending The Series may lend securities to financial institutions that provide cash or securities issued or guaranteed by the U.S. government as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Series and any additional required collateral is delivered to the Series on the next business day. Where the Series receives securities as collateral for the loaned securities, it collects a fee from the borrower. The Series typically receives the income on the loaned securities 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. - -------------------------------------------------------------------------------- 62 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED June 30, 2006 (Unaudited) - -------------------------------------------------------------------------------- 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, 2006, FAM reimbursed the Series in the amount of $1,502. In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of FAM, received $16,197 in commissions on the execution of portfolio security transactions for the Series for the six months ended June 30, 2006. For the six months ended June 30, 2006, the Series reimbursed FAM $3,935 for certain accounting services. Certain officers and/or trustees of the Series are officers and/or directors of FAM, PSI, and/or ML & Co. In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to contribute ML & Co.'s investment management business, including FAM, to the investment management business of BlackRock, Inc. The transaction is expected to close at the end of the third quarter of 2006. 3. INVESTMENTS: Purchases and sales (including in-kind redemptions) of investments, excluding short-term securities, for the six months ended June 30, 2006 were $182,814,349 and $115,477,218, respectively. 4. COMMITMENTS: At June 30, 2006, the Series had entered into foreign exchange contracts, in addition to the contracts listed on the Schedule of Investments, under which it had agreed to buy various foreign currencies with an approximate value of $24,000. 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 2006. 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, 2006. - -------------------------------------------------------------------------------- 63 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (Unaudited) - -------------------------------------------------------------------------------- At its February 17, 2006 meeting, the Board of Trustees (the "Board") considered the renewal of the existing Management Agreement (the "Agreement") between the Manager and the American Beacon Funds (the "Funds"), on behalf of the American Beacon International Equity Index Fund, American Beacon S&P 500 Index Fund, and the American Beacon Small Cap Index Fund. In preparation for the Board's consideration to renew the Agreement, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager and Lipper, Inc. ("Lipper"). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager. In addition, the Board's Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee held separate meetings on December 8, 2005, February 8, 2006 and February 17, 2006 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board's review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process. The Board 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; - confirmation that the Manager's financial condition does not raise concerns that it would be unable to continue providing the same scope and quality of services to the Funds; - a description of the scope of portfolio management services provided to the Funds, 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 Funds, 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; - a description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a description of trade allocation procedures among accounts managed by the firm; - -------------------------------------------------------------------------------- 64 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS -- CONTINUED (Unaudited) - -------------------------------------------------------------------------------- - a summary of any material changes to the Manager's compliance program with regard to federal, state, corporate and Fund requirements; - a discussion of any material compliance problems and remedial actions; - information regarding the Manager's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto; - a description of the Manager's affiliation with any broker-dealer; - a discussion of any anticipated change in the Manager's controlling persons; - verification of the Manager's insurance coverage with regards to the services provided to the Funds; - a comparison of the performance of each Fund to appropriate indices, including comments on the relative performance of each Fund versus comparable indices; - a discussion, if applicable, of any underperformance by a Fund relative to its peer group; - an analysis of any material complaints received from Fund shareholders; - a description of the Manager's securities lending practices and the fees received from such practices; - a description of 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; and - a description of how expenses that are not readily identifiable to a particular Fund are allocated. The Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds, and (iii) each Fund's investment advisory fees versus comparable mutual funds. For each Fund, the class used for comparative purposes was the Institutional Class because it has the longest performance history. References below to each Fund's Lipper peer group are to the group of comparable mutual funds included in the analysis provided by Lipper. The Trustees also received a memorandum from their legal counsel detailing the Board's responsibilities pertaining to the renewal of the Agreement. This memorandum explained the regulatory requirements surrounding the Board's process for evaluating investment advisors and the terms of the contracts. Provided below is an overview of the primary factors the Board considered at its February 2006 meeting. The Board did not identify any particular information that was most relevant to its consideration to renew the Agreement, and each Trustee may have afforded different weight to the various factors. CONSIDERATIONS WITH RESPECT TO ALL FUNDS In determining whether to approve the continuance of the Agreement, the Board considered the best interests of each Fund separately. In addition, while the Agreement for all of the Funds was considered at the same Board meeting, the Board considered each Fund's investment management relationship separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of the Fund and the investment advisor; (3) the Manager's cost for providing the services and the profitability of the advisory business to the Manager; (4) the extent to which economies of scale have been taken into account in setting the fee schedule; and (5) whether fee levels reflect these economies of scale for the benefit of Fund investors. The Trustees posed questions to - -------------------------------------------------------------------------------- 65 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS -- CONTINUED (Unaudited) - -------------------------------------------------------------------------------- various management personnel of the Manager regarding certain key aspects of the material submitted in support of the renewal. Nature, Extent and Quality of Services With respect to the renewal of the Agreement, the Board 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 provide consistent above average long-term performance at low cost; the continuing efforts by the Manager to add new Funds so as to enhance the Trusts' product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Funds; the addition of personnel to manage the Funds, promote sales and improve services; and the active role played by the Manager in monitoring and, as appropriate, recommending replacements for the master portfolios. Based on this information, the Board concluded that the nature, extent and quality of the management services provided by the Manager were appropriate for each Fund and, thus, supported a decision to renew the Agreement. Investment Performance The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund's investment performance relative to its benchmark index(es) and peer group. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. Discussions regarding the Board's considerations with respect to each Fund's performance are below under "Additional Considerations and Conclusions with Respect to each Fund." Cost of Services and Profits Realized In analyzing the cost of services and profitability of the Manager in connection with its investment advisory services to a Fund, the Board considered the Manager's operations and low cost structure. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. Discussions regarding the Board's considerations with respect to each Fund's fee rates are set forth below under "Additional Considerations and Conclusions with Respect to each Fund." Economies of Scale In considering the reasonableness of the management fees, the Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. With respect to the management fee, the Board acknowledged the Manager's low cost structure and the increasing costs of personnel, technology and operations. Based on these considerations, the Board concluded that the Funds' fee structures are reasonably designed to pass on economies of scale to Fund shareholders. Benefits to be Derived from the Relationship with the Funds The Board considered the "fall-out" or ancillary benefits that accrue to the Manager as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager's investment process and expanding the level of assets under management by the Manager. After consideration of this information, the Board concluded that the potential benefits accruing to the Manager by virtue of its relationships with the Funds appear to be fair and reasonable. - -------------------------------------------------------------------------------- 66 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS -- CONTINUED (Unaudited) - -------------------------------------------------------------------------------- ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO EACH FUND The target indices referred to below represent the respective index the performance of which each Fund seeks to match before the deduction of Fund expenses. Each Lipper Index includes up to the 30 largest funds in the respective Lipper category where the Fund is classified by Lipper. Additional Considerations and Conclusions with Respect to the International Equity Index Fund In considering the renewal of the Agreement with the Fund, the Board considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 1st quintile for all relevant periods except the five-year period where its performance was in the 2nd quintile compared to the returns of a peer group of mutual funds identified by Lipper as having an investment objective similar to the Fund ("Lipper Universe"); (2) the performance of the Fund's master portfolio was higher than its target index for all relevant periods; (3) the Fund outperformed the Lipper International Multi-Cap Core Index for all relevant periods except the one-year period, but the Lipper Index is comprised of funds with an active management style versus the Fund's passive management style. In addition, the Board considered the fees payable under the Agreement. In this regard, they considered that: (1) the Institutional Class total expenses and actual management fees (including administrative fees) were in the 1st quintile compared to the expenses and fees of a peer group of similar funds classified by Lipper ("Fee Universe") where the 1st quintile represents the lowest fees or expenses among the group, and (2) the Manager's profitability analysis indicated that it incurred a loss on the services it provided to the Fund. Based on these considerations and those noted above with respect to all Funds, the Board: (1) concluded that the fees paid to the Manager under the Agreement are fair and reasonable; (2) concluded that the profits to the Manager are reasonable in light of the quality of services provided to the Fund; (3) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund; and (4) approved the renewal of the Agreement with respect to the Fund. Additional Considerations and Conclusions with Respect to the S&P 500 Index Fund In considering the renewal of the Agreement with the Fund, the Board considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 1st quintile for all relevant periods except the five-year period where its performance was in the 2nd quintile compared to the Lipper Universe; (2) the Fund's master portfolio equaled the performance of its target index for the one-, three- and five-year and since inception periods; and (3) the Fund outperformed the Lipper S&P 500 Index Objective Index for all relevant periods. In addition, the Board considered the fees payable under the Agreement. In this regard, they considered that the Institutional Class total expenses and actual management fees (including administrative fees) were in the 1st quintile compared to the Fee Universe where the 1st quintile represents the lowest fees or expenses among the group. Based on these considerations and those noted above with respect to all Funds, the Board: (1) concluded that the fees paid to the Manager under the Agreement are fair and reasonable; (2) concluded that the profits to the Manager are reasonable in light of the quality of services provided to the Fund; (3) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund; and (4) approved the renewal of the Agreement with respect to the Fund. - -------------------------------------------------------------------------------- 67 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS -- CONTINUED (Unaudited) - -------------------------------------------------------------------------------- Additional Considerations and Conclusions with Respect to the Small Cap Index Fund In considering the renewal of the Agreement with the Fund, the Board considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 2nd quintile for the three-year period, the 3rd quintile for the one-, four-and five-year periods and the 4th quintile for the two-year period compared to the Lipper Universe; (2) the Fund's master portfolio equaled or outperformed the performance of its target index for the one-, three- and five-year and since inception periods; and (3) the Fund underperformed the Lipper Small-Cap Core Index for all relevant periods except the three-year period, but the Lipper Index is comprised of funds with an active management style versus the Fund's passive management style. In addition, the Board considered the fees payable under the Agreement. In this regard, they considered that: (1) the Institutional Class total expenses and actual management fees (including administrative fees) were in the 1st quintile compared to the Fee Universe where the 1st quintile represents the lowest fees or expenses among the group, and (2) the Manager's profitability analysis indicated that it incurred a loss on the services it provided to the Fund. Based on these considerations and those noted above with respect to all Funds, the Board: (1) concluded that the fees paid to the Manager under the Agreement are fair and reasonable; (2) concluded that the profits to the Manager are reasonable in light of the quality of services provided to the Fund; (3) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund; and (4) approved the renewal of the Agreement with respect to the Fund. - -------------------------------------------------------------------------------- 68 (This page intentionally left blank) (LIGHTHOUSE LOGO) - -------------------------------------------------------------------------------- 69 (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. SAR 06/06 537884 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, 2006 TREASURY INFLATION PROTECTED SECURITIES FUND About American Beacon Advisors - -------------------------------------------------------------------------------- Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management. Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company. Contents - -------------------------------------------------------------------------------- President's Message........................... 1 Schedule of Investments....................... 5 Financial Highlights.......................... 15 Additional Information...................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, 2006 FELLOW SHAREHOLDERS: Enclosed please find the Semi-Annual Report for the American Beacon Treasury Inflation Protected Securities Fund for the six months ended June 30, 2006. The Federal Reserve (the "Fed") raised overnight rates four times during the period, resulting in a Fed Funds target rate of 5.25% as of June 30, 2006. In its June statement, the Fed acknowledged that economic growth is moderating but remained concerned that "the high levels of resource utilization and the prices of energy and other commodities have the potential to sustain inflation pressures." The American Beacon Treasury Inflation Protected Securities Fund realized a slight decline of 0.21% for the six-month period, outperforming the Lipper TIPS Index, which declined 2.16%. 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 (BILL QUINN PHOTO) 1 MARKET OVERVIEW JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- Economic data released during the first half of 2006 suggests that we have entered a more mature phase of the business cycle where consumers take a back seat, while the corporate sector drives the economy forward. Consumer spending and housing activity are gradually slowing, but production activity, business investment, and government spending are proving to be powerful engines of growth. For the period, the year-over-year change in the Consumer Price Index ("CPI") rose from 3.4% in December 2005 to 4.3% in June 2006. Overall, continued economic strength, hints of increased inflation expectations, and uncertainty over the path of monetary policy all played a part in driving interest rates higher during the period. In the first half of 2006, we clearly entered a period of tighter monetary policy on a global scale. In the month of June alone, central banks in Canada, Europe, Switzerland, Sweden, China, India, Korea, Thailand, Australia, Colombia, South Africa, and of course the U.S. have all tightened policy. The early months of Fed Chairman Bernanke's leadership of the Fed have brought a great deal of uncertainty relative to the path of monetary policy tightening here in the U.S. Early comments about a desire to "pause" were followed by tough talk on inflation readings ("an unwelcome development"), which were followed by a dovish communique following the June 29 Federal Open Market Committee ("FOMC") meeting. As a direct result, the September 2006 Eurodollar futures contract, an indicator of short term market sentiment, fluctuated across a wider than usual range in June and break-even inflation rates (the yield differential between Treasury inflation-protected securities ("TIPS") and nominal bonds of similar maturity) were volatile. During the first half of the year, the Fed lifted short term interest rates 1.00% with the Fed Funds rate settling at 5.25% on June 30, 2006. TIPS performance in the first half of 2006 was a good news -- bad news story. Intermediate maturity TIPS produced a negative return for the period when looked at in absolute terms (Lehman 1-10 Year TIPS Index at -0.09%) but managed to deliver positive results when evaluated in relative terms (TIPS outperformed similar maturity nominal bonds). Overall, yields on intermediate maturity TIPS rose 0.40% to 0.50%, and the yield curve steepened marginally. The strong relative performance of TIPS was driven by strong demand and was reflected in rising break-even inflation rates. For the period, break-even inflation rates for 5-year maturities rose 0.36% to close at 2.70%. The strong demand for TIPS was directly attributable to the inflation storm clouds that had gathered throughout the period and peaked in May. The catalysts included a classic brew of rising utilization rates, a surge in metal and energy prices, growing geopolitical tension, a weakening U.S. Dollar, and increased concerns about the inflation fighting backbone of the Bernanke Fed -- all very supportive of TIPS relative to nominal bonds. As we closed the period, 5-year and 10-year TIPS were yielding 2.43% and 2.54%, respectively. 2 PERFORMANCE OVERVIEW AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM) JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- The Institutional Class of the Fund returned -0.21% for the period from January 1, 2006 through June 30, 2006, trailing the Lehman Brothers 1-10 Yr U.S. TIPS Index (the "Index") return of -0.09%. The Fund outperformed the Lipper TIPS Index return of -2.16% for the same time period.
TOTAL RETURNS ------------------------- PERIODS ENDED 06/30/06 ------------------------- 3 MOS. 6 MOS. 1 YR. ------ ------ ----- Institutional Class(1)......... 0.93% (0.21)% 0.01% Lehman Bros. 1-10 Yr. U.S. TIPS Index(2)..................... 1.15% (0.09)% 0.24% Lehman Bros. U.S. TIPS Index(2)..................... 0.49% (1.77)% (1.64)% Lipper TIPS Index(2)........... 0.22% (2.16)% (2.21)%
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 purchases Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as the most recent month end, please visit www.americanbeaconfunds.com or call 1-800- 967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. The Lehman Bros. 1-10 Yr. U.S. TIPS Index is an unmanaged market index comprised of U.S. Treasury Inflation-indexed securities with maturities between one and ten years while the Lehman Bros. U.S. TIPS index includes all maturities. The Lipper TIPS Index tracks the results of the 30 largest mutual funds in the Lipper TIPS Fund category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. The Fund underperformed the Index for the six-month period by 0.12%. Although the Fund modestly outperformed on a gross basis, the sub-advisors' excess returns were not sufficient to fully offset Fund expenses. The Fund outperformed in January, underperformed in April and posted returns similar to the Index during the other four months in the six-month period. In January, the Fund added value by reducing its exposure to areas of the yield curve where new supply was auctioned (10 and 20 year securities) and by overweighting the 1-8 year sector. However, in April, a steepening of the yield curve and a widening of break-even inflation rates hurt performance as the Fund held longer maturity TIPS and had an exposure to nominal bonds. The Fund remains focused on investing primarily in TIPS to provide inflation protection and income to its shareholders. PORTFOLIO DIVERSIFICATION
% OF RATING FIXED INCOME - ------ ------------ A 1.1% AA 0.3% AAA 98.6%
(Bar Chart) U.S. Government Sponsored Agency Instruments........................... 0.7% Corporate Obligations................... 1.4% U.S. Government Treasury Obligations.... 97.9%
3 PERFORMANCE OVERVIEW AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM) -- CONTINUED JUNE 30, 2006 (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, 2006 through June 30, 2006. ACTUAL EXPENSES The "Actual" line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders of the Institutional Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" 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 ENDING EXPENSES PAID ACCOUNT ACCOUNT DURING PERIOD * VALUE VALUE 1/1/06- 1/1/06 6/30/06 6/30/06 --------- --------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $ 997.95 $2.04 Hypothetical (5% return before expenses) $1,000.00 $1,022.75 $2.07
* Expenses are equal to the Fund's annualized expense ratio for the six- month period of 0.41%, 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, 2006 (Unaudited)
PAR AMOUNT VALUE ------------ ------------ (DOLLARS IN THOUSANDS) CORPORATE OBLIGATIONS - 1.42% FINANCE - 1.42% Allstate Life Global Funding, 4.41%, Due 3/1/2010 ++ .......... $ 100 $ 95 Lehman Brothers Holdings, Inc., 4.82%, Due 6/2/2009 ++ ........ 80 77 SLM Corp., 5.48%, Due 1/31/2014 ++ ............................ 167 158 Toyota Motor Credit Corp., 5.61%, Due 2/5/2016 ++ ............. 100 98 ------------ TOTAL CORPORATE OBLIGATIONS ................................... 428 ------------ U.S. AGENCY OBLIGATIONS - 0.66% FEDERAL HOME LOAN BANK - 0.34% ------------ 6.045%, Due 2/20/2007 ++ ..................................... 100 100 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.32% ------------ 4.503%, Due 2/17/2009 ++ ..................................... 100 97 ------------ TOTAL U.S. AGENCY OBLIGATIONS ................................. 197 ------------ U.S. TREASURY OBLIGATIONS - 96.53% U.S. TREASURY NOTES - 96.53% 3.625%, Due 1/15/2008 # ...................................... 1,241 1,262 3.875%, Due 1/15/2009 # ...................................... 891 922 4.25%, Due 1/15/2010 # ....................................... 2,095 2,226 0.875%, Due 4/15/2010 # ...................................... 3,966 3,741 3.50%, Due 1/15/2011 # ....................................... 1,331 1,392 2.375%, Due 4/15/2011 # ...................................... 974 970 3.375%, Due 1/15/2012 # ...................................... 1,974 2,068 3.00%, Due 7/15/2012 # ....................................... 4,790 4,932 1.875%, Due 7/15/2013 # ...................................... 2,051 1,970 2.00%, Due 1/15/2014 # ....................................... 1,494 1,442 4.00%, Due 2/15/2014 ......................................... 500 465 2.00%, Due 7/15/2014 # ....................................... 347 335 1.625%, Due 1/15/2015 # ...................................... 1,883 1,756 1.875%, Due 7/15/2015 # ...................................... 787 747 2.00%, Due 1/15/2016 # ....................................... 4,263 4,071 5.125%, Due 5/15/2016 ........................................ 750 747 ------------ TOTAL U.S. TREASURY OBLIGATIONS ............................... 29,046 ------------ SHARES ------------ SHORT TERM INVESTMENTS - 4.09% ------------ American Beacon Money Market Select Fund ss. .................. 1,231,933 1,232 ------------ TOTAL INVESTMENTS - 102.70% (COST $31,449) ....................... $ 30,903 LIABILITIES, NET OF OTHER ASSETS - (2.70%) ....................... (812) ------------ TOTAL NET ASSETS - 100.00% ....................................... $ 30,091 ============
See accompanying notes 5 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND SCHEDULE OF INVESTMENTS - CONTINUED June 30, 2006 (Unaudited) Percentages are stated as a percent of net assets. ++ The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. # U.S. Treasury Inflation-Indexed Note ss. The Fund/Trust is affiliated by having the same investment advisor. See accompanying notes 6 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2006 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) - -------------------------------------------------------------------------------- ASSETS: Investments in unaffiliated securities, at value(A)................... $ 29,671 Investments in affiliated securities, at value(B)..................... 1,232 Dividends and interest receivable..................................... 325 Receivable for investments sold....................................... 8 Prepaid expenses...................................................... 18 ---------- TOTAL ASSETS..................................................... 31,254 ---------- LIABILITIES: Payable for investments purchased..................................... 753 Payable for fund shares redeemed...................................... 373 Payable under excess expense reimbursement plan....................... 15 Management and investment advisory fees payable (Note 2).............. 12 Administrative service fees payable................................... 2 Other liabilities..................................................... 8 ---------- TOTAL LIABILITIES................................................ 1,163 ---------- NET ASSETS................................................................. $ 30,091 ========== ANALYSIS OF NET ASSETS: Paid-in-capital....................................................... 31,230 Undistributed net investment income (loss)............................ 604 Accumulated net realized gain (loss).................................. (1,198) Unrealized appreciation (depreciation) of investments and foreign currency............................................................ (545) ---------- NET ASSETS................................................................. $ 30,091 ========== SHARES OUTSTANDING (NO PAR VALUE): Institutional Class................................................... 3,095,553 ========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE: Institutional Class................................................... $ 9.72 ========== - -------- (A) Cost of investments in unaffiliated securities......................... $ 30,217 (B) Cost of investments in affiliated securities........................... $ 1,232
See accompanying notes 7 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED) (IN THOUSANDS) - -------------------------------------------------------------------------------- INVESTMENT INCOME: Interest income.......................................................... $ 621 Dividend income from affiliated securities............................... 19 ----- TOTAL INVESTMENT INCOME............................................. 640 ----- EXPENSES: Management and investment advisory fees (Note 2)......................... 33 Administrative service fees (Note 2)..................................... 15 Transfer agent fees...................................................... 3 Custodian and fund accounting fees....................................... 3 Professional fees........................................................ 5 Registration fees and expenses........................................... 1 Other expenses........................................................... 2 ----- TOTAL EXPENSES...................................................... 62 ----- NET INVESTMENT INCOME......................................................... 578 ----- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on: Investments............................................................ (718) Change in net unrealized appreciation or depreciation of: Investments............................................................ 56 ----- NET GAIN (LOSS) ON INVESTMENTS...................................... (662) ----- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............... $ (84) =====
See accompanying notes 8 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) - --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2006 2005 ----------- ------------ (UNAUDITED) INCREASE IN NET ASSETS: OPERATIONS: Net investment income......................................... $ 578 $ 1,561 Net realized gain (loss) on investments....................... (718) (413) Change in net unrealized appreciation or depreciation of investments and foreign currency contracts.................. 56 (699) ------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................................. (84) 449 ------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income......................................... -- (1,588) Net realized gain on investments.............................. -- (147) ------- -------- NET DISTRIBUTIONS TO SHAREHOLDERS........................ -- (1,735) ------- -------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares................................. 6,299 44,770 Reinvestment of dividends and distributions................... -- 1,735 Cost of shares redeemed....................................... (6,708) (35,578) ------- -------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS).......................................... (409) 10,927 ------- -------- NET INCREASE (DECREASE) IN NET ASSETS.............................. (493) 9,641 NET ASSETS: Beginning of period........................................... 30,584 20,943 ------- -------- END OF PERIOD*................................................ $30,091 $ 30,584 ======= ======== * Includes undistributed net investment income (loss) of...... $ 604 $ 25 ======= ========
See accompanying notes 9 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust"), is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as a diversified, 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. The Fund's investment objective is to provide inflation protection and income. 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 market prices are not readily available or are not reflective of the fair value of the security, will be priced at a fair value following procedures approved by the Board of Trustees (the "Board"). Issuer specific events, market trends, valuations of similar securities and other market data may be reviewed in the course of making a good faith determination of a security's fair value. In light of the judgement involved in fair value decisions, there can be no assurance that a fair value assigned to a particular security is accurate. 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. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond is recorded as interest income, even though principal is not received until maturity. Dividends to Shareholders The Fund declares and pays dividends from net investment income 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, 2006 (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 six months ended June 30, 2006, the management fee rate, including fees paid to investment advisors, was 22%. Total management fees were $33,022, of which $18,072 was paid to investment advisors and $14,950 was retained by the Manager. 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. 11 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- 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 $406. 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 plus a fee for each Board meeting attended. Expense Reimbursement Plan The Fund has adopted an expense reimbursement Plan whereby the Manager may seek recoupment of fees waived or expenses reimbursed for a period of up to three years. However, recoupment will only occur if the Funds' average net assets have grown or expenses have declined sufficiently to allow recoupment without causing its expense ratio to exceed the previously agreed upon contractual expense limit. During the year ended December 31, 2005, due to asset growth and a reduction of expenses in the latter part of the year, the Manager recouped $4,096 for expenses previously waived earlier in the year and $14,537 for expenses waived during 2004. Interfund Lending Program Pursuant to an Exemptive Order by the SEC, the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from, or lend money to, other participating Funds. The Fund did not utilize the credit facility during the six months ended June 30, 2006. 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 years ended June 30, 2006 and December 31, 2005 were as follows (in thousands):
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2006 2005 ---------- ------------ DISTRIBUTIONS PAID FROM: Ordinary income*............................................... $-- $1,735
* 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, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- For the year ended June 30, 2006, the components of distributable earnings were as follows (in thousands): Cost basis of investments for federal income tax purposes.................... $31,715 Unrealized appreciation...................................................... -- Unrealized depreciation...................................................... (812) ------- Net unrealized appreciation (depreciation)................................... (812) Undistributed ordinary income................................................ 604 Undistributed long-term gain (loss).......................................... (946) ------- Distributable earnings....................................................... $(1,154) =======
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of wash sales and current recognition of unrealized appreciation/(depreciation) on open foreign currency transactions. Due to the inherent differences in the recognition of income, expenses and realized gains/(losses) under U.S. generally accepted accounting principles and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities without impacting the net assets of the Fund. These differences are due primarily to the recognition of certain foreign currency gains/(losses) as ordinary income for tax purposes. Accordingly, the following amounts represent current year permanent differences that have been reclassified as of June 30, 2006 (in thousands): Paid-in-capital................................................................. $-- Undistributed net investment income............................................. 1 Accumulated net realized gain (loss)............................................ (1) Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency.............................................................. --
At June 30, 2006, the Fund had capital loss carryovers of $144,311 and $801,330 expiring in 2013 and 2014, respectively. 4. INVESTMENT TRANSACTIONS Purchases and redemptions of investments for the six months ended June 30, 2006, excluding short-term investments, were $46,045,737 and $46,128,045, respectively. The Fund had purchases and sales of U.S. government securities of $45,729,450 and $45,541,596, respectively. A summary of the Fund's direct transactions in the Select Fund for the six months ended June 30, 2006 is as follows:
DECEMBER 31, 2005 JUNE 30, 2006 SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE - ------------------- --------- ----- ------------------- $1,071,309 $16,098,533 $15,937,909 $1,231,933
13 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS -- CONTINUED JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- 5. CAPITAL SHARE TRANSACTIONS The table below summarizes the activity in capital shares (in thousands): Six Months ended June 30, 2006
SHARES AMOUNT ------ ------- Shares sold............................................................. 650 $ 6,299 Reinvestment of dividends............................................... -- -- Shares redeemed......................................................... (692) (6,708) ---- ------- Net decrease in shares outstanding...................................... (42) $ (409) ==== =======
Year ended December 31, 2005
SHARES AMOUNT ------ -------- Shares sold............................................................. 4,421 $ 44,770 Reinvestment of dividends............................................... 175 1,735 Shares redeemed......................................................... (3,520) (35,578) ------ -------- Net increase in shares outstanding...................................... 1,076 $ 10,927 ====== ========
14 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
SIX MONTHS YEAR SIX MONTHS ENDED ENDED ENDED JUNE 30, DECEMBER 31, DECEMBER 31, 2006 2005 2004 (A) ----------- ------------ ------------ (UNAUDITED) NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 9.75 $ 10.16 $ 10.00 ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income.................................. 0.19 0.56 0.18(B) Net gains (loss) on securities (both realized and unrealized).......................................... (0.22) (0.37) 0.21 ------- ------- ------- Total income from investment operations..................... (0.03) 0.19 0.39 ------- ------- ------- LESS DISTRIBUTIONS: Dividends from net investment income................... -- (0.55) (0.23) Distributions from net realized gains on securities.... -- (0.05) --(D) ------- ------- ------- Total distributions......................................... -- (0.60) (0.23) ------- ------- ------- NET ASSET VALUE, END OF PERIOD.............................. $ 9.72 $ 9.75 $ 10.16 ======= ======= ======= TOTAL RETURN................................................ (0.21%)(C) 1.86% 3.94%(C) ======= ======= ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands)............... $30,091 $30,584 $20,943 Ratios to average net assets (annualized): Expenses, after expense reimbursements (recoupments)..................................... 0.41% 0.44% 0.46% Expenses, before expense reimbursements (recoupments)..................................... 0.41% 0.39% 0.62% Net investment income, after expense reimbursements (recoupments)..................................... 3.85% 5.45% 3.34% Net investment income, before expense reimbursements (recoupments)..................................... 3.85% 5.50% 3.18% Portfolio turnover rate................................ 154%(C) 355% 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. (D) Amount is less than $0.01 per share. 15 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) - -------------------------------------------------------------------------------- At its February 17, 2006 meeting, the Board of Trustees (the "Board") considered the renewal of the existing Management Agreement between the Manager and the American Beacon Funds (the "Funds") and each Investment Advisory Agreement between the Manager and the subadvisors, on behalf of the American Beacon Treasury Inflation Protected Securities Fund. In preparation for the Board's consideration to renew these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors and Lipper, Inc. ("Lipper"). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor. In addition, the Board's Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee held separate meetings on December 8, 2005, February 8, 2006 and February 17, 2006 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board's review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process. The Board considered, among other materials, responses by the Manager and the subadvisors to inquiries requesting: - a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; - a copy of the firm'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 firm or its personnel, including the results of any recent regulatory examination or independent audit; - a comparison of the performance of that portion of Fund assets managed by each firm with performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any remedial measures if the firm's performance was materially below that of the peer group; - a cost/profitability analysis of the firm 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 firm or Funds as a result of their relationship, if any; - confirmation that the firm's financial condition does not raise concerns that the firm would be unable to continue providing the same scope and quality of services to the Funds; - a description of the scope of portfolio management services provided to the Funds, 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 Funds, 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 firm's participation in "soft dollar" arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the firm's methodology for obtaining the most favorable execution and the use of any affiliated broker-dealers; - a description of any actual or potential conflicts of interest anticipated in managing Fund assets; 16 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (UNAUDITED) - -------------------------------------------------------------------------------- - a description of trade allocation procedures among accounts managed by the firm; - a summary of any material changes to the firm's compliance program with regard to federal, state, corporate and Fund requirements; - a discussion of any material compliance problems and remedial actions; - information regarding the firm's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto; - a description of the firm's affiliation with any broker-dealer; - a discussion of any anticipated change in the firm's controlling persons; and - verification of the firm's insurance coverage with regards to the services provided to the Funds. In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement: - a comparison of the performance of each Fund to appropriate indices, including comments on the relative performance of each subadvisor and each Fund versus comparable indices; - a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and whether (and if so, why) such subadvisor should have its contract renewed; - a comparison of advisory fees and expense ratios for comparable mutual funds; - a table detailing the Manager's profitability with respect to each Fund; - an analysis of any material complaints received from Fund shareholders; - a description of the Manager's securities lending practices and the fees received from such practices; - a description of the portfolio turnover rate and average execution costs for each Fund and each subadvisor to a 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; and - a description of how expenses that are not readily identifiable to a particular Fund are allocated. The Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds, and (iii) each Fund's investment advisory fees versus comparable mutual funds. References below to the Treasury Inflation Protected Securities Fund's Lipper peer group are to the group of comparable mutual funds included in the analysis provided by Lipper. The Trustees also received a memorandum from their legal counsel detailing the Board's responsibilities pertaining to the renewal of the Management and Investment Advisory Agreements. This memorandum explained the regulatory requirements surrounding the Board's process for evaluating investment advisors and the terms of the contracts. Provided below is an overview of the primary factors the Board considered at its February 2006 meeting. The Board did not identify any particular information that was most relevant to its consideration to renew the Management and Investment Advisory Agreements, and each Trustee may have afforded different weight to the various factors. 17 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (UNAUDITED) - -------------------------------------------------------------------------------- CONSIDERATIONS WITH RESPECT TO ALL FUNDS In determining whether to approve the continuance of the Management Agreement and each Investment Advisory Agreement, the Board considered the best interests of each Fund separately. In addition, while the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the same Board meeting, the Board considered each Fund's investment management and subadvisory relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of the Fund and the investment advisor; (3) the Manager's or subadvisor's cost for providing the services and the profitability of the advisory business to the Manager or subadvisor; (4) the extent to which economies of scale have been taken into account in setting the fee schedule; 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. Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board 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 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 Funds' product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Funds; the addition of personnel to manage the Funds, promote sales and improve services; and the active role played by the Manager in monitoring and, as appropriate, recommending replacements for the investment subadvisors and master portfolios. Based on this information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, supported a decision to renew the Management and each Investment Advisory Agreement. Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund's investment performance relative to its benchmark index(es) and peer group. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. A discussion regarding the Board's considerations with respect to the Treasury Inflation Protected Securities Fund's performance appears below under "Additional Considerations and Conclusions with Respect to the Treasury Inflation Protected Securities Fund." Cost of Services and Profits Realized. In analyzing the cost of services and profitability of the Manager in connection with its investment advisory services to a Fund, the Board considered the Manager's operations and low cost structure. The Board noted that the Manager proposed to continue most of the expense waivers and reimbursements that were in place for each applicable Fund's 2005 fiscal year. The Board also noted that each sub-advised Fund pays the Manager the amounts due to its subadvisors, and the Manager remits these amounts directly to the applicable subadvisors. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending relationships on behalf of various Funds. In analyzing the cost of services and profitability of each subadvisor in connection with its investment advisory services to a Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee a subadvisor charges for any comparable client accounts. The Board gave less weight to profitability considerations or did not view this data as imperative to its deliberations given the arms-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fees. A discussion regarding the Board's considerations with respect to the Treasury Inflation Protected Securities Fund's fee rates is set forth below under "Additional Considerations and Conclusions with Respect to the Treasury Inflation Protected Securities Fund." 18 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND -- CONTINUED (UNAUDITED) - -------------------------------------------------------------------------------- Economies of Scale. In considering the reasonableness of the management and investment advisory fees, the Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board noted that, in many cases, the Manager has negotiated breakpoints in the subadvisory fee rate. The Board also noted, where applicable, for purposes of determining the investment advisory fee charged to the Funds, the fee schedule to each Investment Advisory Agreement specifies that all other assets managed by a subadvisor on behalf of AMR Corporation and its pension plans shall be considered. Thus, the Funds are able to receive additional breakpoint benefits resulting from the subadvisor's management of a larger pool of assets. With respect to the management fee, the Board acknowledged the Manager's low cost structure and the increasing costs of personnel, technology and operations. Based on these considerations, the Board concluded that the Funds' fee structures are reasonably designed to pass on economies of scale to Fund shareholders. Benefits to be Derived from the Relationship with the Funds. The Board considered the "fall-out" or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager's or subadvisor's investment process and expanding the level of assets under management by the Manager and the subadvisors. The Board noted that the Manager and the subadvisors may not direct the Funds' brokerage transactions to certain brokers to obtain research and other services and that the Funds participate in a brokerage recapture program. After consideration of this information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Funds appear to be fair and reasonable. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE TREASURY INFLATION PROTECTED SECURITIES FUND In considering the renewal of the Management Agreement and each Investment Advisory Agreement (collectively, the "Agreements") with the Fund, the Board considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the total return performance of the Fund was in the 4th quintile for the one-year period compared to the returns of a peer group of mutual funds identified by Lipper as having an investment objective similar to the Fund; (2) the Fund's total return performance underperformed the Lipper Treasury Inflation Protected Securities Fund Index for that same period; (3) the portion of Fund assets allocated to Brown Brothers Harriman & Co. ("BBH") outperformed the Fund's benchmark index for all relevant periods; (4) the portion of Fund assets allocated to NISA Investment Advisors LLC ("NISA") underperformed the Fund's benchmark index for all relevant periods; and (5) the Manager's explanation that the Fund's underperformance for the since-inception period was primarily due to investment of the Fund's initial assets shortly after a strong rally in the Treasury inflation protected securities market. In addition, the Board considered the fees payable under the Agreements. In this regard, they considered that: (1) the Institutional Class total expenses were in the 2nd quintile and actual management fees (including administrative fees) were in the 3rd quintile compared to the expenses and fees of a peer group of similar funds classified by Lipper where the 1st quintile represents the lowest fees or expenses among the group; (2) BBH and NISA indicated that they do not charge a lower fee rate for comparable client services; (3) BBH waived its standard minimum annual fee; (4) the fee schedules of each subadvisor include breakpoints, which reduce fee rates as the assets of the Fund increase; and (5) the Manager's profitability analysis indicated that it incurred a loss on the services it provided to the Fund. Based on these considerations and those noted above with respect to all Funds, the Board: (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable; (2) concluded that the profits to the Manager are reasonable in light of the quality of services provided to the Fund, including oversight of the Fund's subadvisors; (3) determined that the Fund and its shareholders would benefit from the Manager's and subadvisors' continued management of the Fund; and (4) approved the renewal of the Agreements with respect to the Fund. 19 (LIGHTHOUSE LOGO) (This page intentionally left blank) 20 (LIGHTHOUSE LOGO) (This page intentionally left blank) 21 (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 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: (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: American Beacon Funds Call (800) 658-5811 P.O. Box 219643 Kansas City, MO 64121-9643
- -------------------------------------------------------------------------------- AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS In addition to the Schedule of Investments A description of the policies and procedures provided in each semi-annual and annual that the Funds use to determine how to vote report, each Fund files a complete schedule of proxies relating to portfolio securities is its portfolio holdings with the Securities and available in each Fund's Statement of Exchange Commission ("SEC") on Form N-Q as of Additional Information, which may be obtained the first and third fiscal quarters. The free of charge by calling 1-800-967-9009 or by Funds' Forms N-Q are available on the SEC's accessing the SEC's website at www.sec.gov. website at www.sec.gov. The Forms N-Q may also Each Fund's proxy voting record for the most be reviewed and copied at the SEC's Public recent year ended June 30 is filed annually Reference Room, 450 Fifth Street, NW, with the SEC on Form N-PX. The Funds' Forms N- Washington, DC 20549. Information regarding PX are available on the SEC's website at the operation of the SEC's Public Reference www.sec.gov. Each Fund's proxy voting record Room may be obtained by calling 1-800-SEC- may also be obtained by calling 1-800-967- 0330. A complete schedule of each Fund's 9009. portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each quarter.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES Boston, Massachusetts SERVICES ERNST & YOUNG LLP Portland, Maine Kansas City, Missouri 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. 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, 2006 MONEY MARKET FUND U.S. GOVERNMENT MONEY MARKET FUND MUNICIPAL MONEY MARKET FUND About American Beacon Advisors - -------------------------------------------------------------------------------- Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management. Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company. Contents - -------------------------------------------------------------------------------- President's Message........................... 1 Financial Highlights Money Market Fund........................... 20 U.S. Government Money Market Fund........... 22 Municipal Money Market Fund................. 24 Schedule of Investments Money Market Portfolio...................... 25 U.S. Government Money Market Portfolio...... 28 Municipal Money Market Portfolio............ 29 Additional Information...................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, 2006 FELLOW SHAREHOLDERS: Enclosed please find the Semi-Annual Report for the American Beacon Money Market Funds for the six months ended June 30, 2006. During this time, the Funds outperformed their respective peer groups. The Federal Reserve (the "Fed") raised overnight rates four times during the period, resulting in a Fed Funds target rate of 5.25% as of June 30, 2006. In its June statement, the Fed acknowledged that economic growth is moderating but remained concerned that "the high levels of resource utilization and the prices of energy and other commodities have the potential to sustain inflation pressures." Despite rising interest rates, the Cash Management Class of the American Beacon Funds produced strong relative returns for the period. The Money Market Fund-Cash Management Class returned 2.32% for the six months, outperforming the Lipper Institutional Money Market Average return of 2.14%. The U.S. Government Money Market Fund -- Cash Management Class outpaced the Lipper Institutional U.S. Government Money Market Average with a return of 2.28% versus 2.15% for the Average. Both Funds surpassed their respective Lipper peer groups over all time periods. 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 (BILL QUINN PICTURE) 1 ECONOMIC OVERVIEW (UNAUDITED) - -------------------------------------------------------------------------------- The U.S. economy expanded at an annual rate of 5.6% in the first quarter of 2006 thanks to strong consumer spending and business investment. However, soaring gasoline prices and a slowdown in the housing market caused the second quarter gross domestic product ("GDP") growth to slow to an estimated 2.5%. It also appeared that the labor market was cooling as payroll gains came in below consensus, rising 325,000 during the second quarter versus a revised 629,000 in the first quarter. Despite the slowdown in payroll growth, the unemployment rate continued to decline during the second quarter, coming in at a low 4.6% for the month of June. In addition, June average hourly earnings climbed 3.9% from the prior year, fueling concerns that the low unemployment rate was putting upward pressure on inflation. The Federal Reserve Board raised overnight rates by 25 percentage points at each of the first four meetings in 2006, resulting in a Fed Funds target rate of 5.25% as of June 30, 2006. In its June statement, the Fed acknowledged that economic growth was moderating but remained concerned that "the high levels of resource utilization and the prices of energy and other commodities have the potential to sustain inflation pressures." They did remove the phrase "some further policy firming may yet be needed" and stated that the extent and timing of any additional firming "will depend on the evolution of the outlook for both inflation and economic growth." The Fed remains data dependent, leaving the door open for either a pause or another rate hike at their next several meetings. As expected, we began to see higher energy and commodity prices being passed on to the consumer in the form of higher goods prices during the period. The core Consumer Price Index ("CPI") rose more than forecast in June, up 0.3% for the month and 2.6% year over year. This was the fourth consecutive month of core inflation rising 0.3%, which according to Bloomberg, is the longest such stretch since January to April 1995. Fed chairman Bernanke called the recent increases in core prices "unwelcome developments" and said central bankers "will be vigilant" to ensure inflation doesn't become entrenched. As a result, if core inflation numbers continue to rise in the coming months, the Fed may likely prolong its tightening cycle. At the end of the second quarter, the Fed Funds futures market was indicating a chance of another 0.25% rate increase by the end of the third quarter. The yield curve shifted up as the Fed Funds rate rose during the second quarter 2006. However, the curve continued to invert as yields on the 6-month Treasury bill ended the quarter at 5.23% versus 5.15% for the 2-year note and 5.14% for the 10-year note. 2 PERFORMANCE OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- The Money Market Fund maintained the strategy of purchasing 3-month variable rate securities based on the London Interbank Offered Rate (LIBOR) in addition to short-dated commercial paper during the period in response to the rising interest rate environment. With the Fed Funds futures market indicating a chance of another 25 percentage point rate increase by the end of the third quarter, the Money Market Fund continued to keep its weighted-average maturity relatively short. However, we will continue to monitor economic trends and adjust our weighted-average maturity accordingly. In addition, we remain conservative on credit risk given the tight credit spread environment. For the six months ended June 30, 2006, the total return of the Cash Management Class of the American Beacon Money Market Fund was 2.32%. The Fund outperformed the Lipper Institutional Money Market Average return of 2.14% by 18 percentage points. Lipper Inc. ranked the Cash Management Class of the Fund 19th among 324 and 14th among 280 Institutional Money Market Funds for the one-year and three-year periods ended June 30, 2006, 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, 2006 ------------------------------------- 1 YEAR 3 YEARS* 5 YEARS* 10 YEARS* ------ -------- -------- --------- American Beacon Money Market Fund........... 4.21% 2.44% 2.24% 3.92% Lipper Institutional Money Market Fund Average............... 3.85% 2.11% 1.96% 3.70%
* Annualized
ANNUALIZED TOTAL RETURNS ------------------------- AS OF 6/30/2006 ------------------------- 1 YEAR 5 YEARS 10 YEARS ------ ------- -------- Cash Management(1,2).......... 4.21% 2.24% 3.92% Institutional(1).............. 4.09% 2.15% 3.88% PlanAhead(1).................. 3.82% 1.87% 3.58% Platinum Class(1)............. 3.34% 1.42% 3.14%
1 Performance shown is historical and may not be indicative of future returns. Investment returns will vary, and shares may be worth more or less at redemption than at original purchase. An investment in this Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of an investment at $1.00 per share it is possible to lose money by investing in the Fund. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 Fund performance for the five and ten-year period represents the total returns achieved by the Institutional Class from 1/1/96 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 1/1/96. 3 PERFORMANCE OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) -- CONTINUED JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- PORTFOLIO STATISTICS AS OF JUNE 30, 2006
CASH MANAGEMENT INSTITUTIONAL PLANAHEAD PLATINUM CLASS CLASS CLASS CLASS ---------- ------------- --------- -------- 7-day Current Yield* 5.06% 5.03% 4.80% 4.22% 7-day Effective Yield* 5.19% 5.15% 4.92% 4.31% 30-day Yield* 4.99% 4.94% 4.66% 4.15% Weighted Average Maturity 36 Days 36 Days 36 Days 36 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 Fund's current seven day yield. Yield is a more accurate reflection of the Fund's current earnings than total returns. TOP TEN HOLDINGS AS OF JUNE 30, 2006
% OF NET ASSETS ---------- Royal Bank of Scotland 5.1% US Bank, NA 4.2% ASIF Global Financing 4.1% Wells Fargo & Co. 4.1% FCAR Owner Trust 3.9% American Honda Finance Corp. 3.6% Citigroup Global Markets Holdings, Inc. 3.4% Goldman Sachs Group, Inc. 3.3% Barclays US Funding LLC 3.3% General Electric Capital Corp. 3.1%
ASSET ALLOCATION AS OF JUNE 30, 2006
% OF NET ASSETS ---------- Bank CDs, TDs, and Notes 48.0% Corporate Notes 37.0% Commercial Paper 11.4% Funding Agreements 1.7% Repurchase Agreements 1.6% Net Other Assets 0.3%
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, 2006 through June 30, 2006. 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 "Actual" 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. 4 PERFORMANCE OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) -- CONTINUED JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT ACCOUNT DURING PERIOD* VALUE VALUE 1/1/06- 1/1/06 6/30/06 6/30/06 --------- --------- -------------- CASH MANAGEMENT CLASS Actual $1,000.00 $1,023.16 $0.75 Hypothetical (5% return before expenses) $1,000.00 $1,024.05 $0.75 INSTITUTIONAL CLASS Actual $1,000.00 $1,022.72 $1.15 Hypothetical (5% return before expenses) $1,000.00 $1,023.66 $1.15 PLANAHEAD CLASS Actual $1,000.00 $1,021.29 $2.61 Hypothetical (5% return before expenses) $1,000.00 $1,022.23 $2.61 PLATINUM CLASS Actual $1,000.00 $1,018.92 $4.96 Hypothetical (5% return before expenses) $1,000.00 $1,019.89 $4.95
* Expenses are equal to the Fund's annualized expense ratio for the six- month period of 0.15%, 0.23%, 0.52% 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) JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- The U.S. Government Money Market Fund maintained the strategy of purchasing 3-month LIBOR-based variable rate securities in addition to short-dated commercial paper during the period in response to the rising interest rate environment. With the Fed Funds futures market indicating greater than a 50% chance of another 25 percentage point rate increase at the Fed meeting in August, the U.S. Government Money Market Fund continued to keep its weighted-average maturity relatively short. However, we will continue to monitor economic trends and adjust our duration posture accordingly. In addition, we remain conservative on credit risk given the tight credit spread environment. For the six months ended June 30, 2006, the total return of the Cash Management Class of the American Beacon U.S. Government Money Market Fund was 2.28%. The Fund outperformed the Lipper Institutional U.S. Government Money Market Average return of 2.15% by 13 percentage points. Lipper Inc. ranked the Cash Management Class of the Fund 9th among 140, 11th among 103 and 11th among 61 Institutional U.S. Government Money Market Funds for the one-year, five-year and ten-year periods ended June 30, 2006, 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, 2006 ------------------------------------- 1 YEAR 3 YEARS* 5 YEARS* 10 YEARS* ------ -------- -------- --------- American Beacon U.S. Government Money Market Fund........... 4.14% 2.37% 2.18% 3.81% Lipper Institutional U.S. Government Money Market Average........ 3.87% 2.11% 1.93% 3.64%
* Annualized
ANNUALIZED TOTAL RETURNS --------------------------- AS OF 6/30/2006 --------------------------- 1 YEAR 5 YEARS 10 YEARS ------ ------- -------- Cash Management Class(1,2)... 4.14% 2.18% 3.81% PlanAhead Class(1)........... 3.67% 1.78% 3.44% Platinum Class(1)............ 3.31% 1.39% 3.02%
1 Performance shown is historical and may not be indicative of future returns. Investment returns will vary, and share may be worth more or less at redemption than at original purchase. An investment in this Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of an investment at $1.00 per share it is possible to lose money by investing in the Fund. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 Prior to December 1, 2001, the Cash Management Class of the Fund was known as the Institutional Class. PORTFOLIO STATISTICS AS OF JUNE 30, 2006
CASH MANAGEMENT PLANAHEAD PLATINUM CLASS CLASS CLASS ---------- --------- -------- 7-day Current Yield* 4.98% 4.52% 4.18% 7-day Effective Yield* 5.10% 4.62% 4.26% 30-day Yield* 4.90% 4.44% 4.10% Weighted Average Maturity 11 Days 11 Days 11 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 Fund's current seven day yield. Yield is a more accurate reflection of the Fund's current earnings than total returns. ASSET ALLOCATION AS OF JUNE 30, 2006
% OF NET ASSETS ---------- Repurchase Agreements 84.7% Variable Rate Agency 15.3%
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 6 PERFORMANCE OVERVIEW AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM) -- CONTINUED JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- held for the entire period from January 1, 2006 through June 30, 2006. 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 "Actual" 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 EXPENSES PAID ACCOUNT ACCOUNT DURING PERIOD* VALUE VALUE 1/1/06- 1/1/06 6/30/06 6/30/06 --------- --------- -------------- CASH MANAGEMENT CLASS Actual $1,000.00 $1,022.80 $0.95 Hypothetical (5% return before expenses) $1,000.00 $1,023.85 $0.95 PLANAHEAD CLASS Actual $1,000.00 $1,020.48 $3.26 Hypothetical (5% return before expenses) $1,000.00 $1,021.57 $3.26 PLATINUM CLASS Actual $1,000.00 $1,018.77 $4.96 Hypothetical (5% return before expenses) $1,000.00 $1,019.89 $4.96
* Expenses are equal to the Fund's annualized expense ratio for the six- month period of 0.19%, 0.65% 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. 7 PERFORMANCE OVERVIEW AMERICAN BEACON MUNICIPAL MONEY MARKET FUND(SM) JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- The American Beacon Municipal Money Market Fund maintained a relatively short average maturity in the first half of 2006. 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 seventeen consecutive Fed meetings since June 2004. We will continue to focus purchases on attractively priced VRDNs backed by letters of credit or bond insurance and may buy selective fixed rate instruments when evidence emerges that the Fed has completed its current tightening cycle. For the six months ended June 30, 2006, the total return of the PlanAhead Class of the American Beacon Municipal Money Market Fund was 1.16%. The Fund under-performed the Lipper Tax-Exempt Money Market Average return of 1.27%. 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, 2006 ------------------------------------- 1 YEAR 3 YEARS* 5 YEARS* 10 YEARS* ------ -------- -------- --------- American Beacon Municipal Money Market Fund.................. 2.01% 1.01% 1.01% 2.06% Lipper Tax-Exempt Money Mkt Avg............... 2.26% 1.24% 1.15% 2.12%
* Annualized
ANNUALIZED TOTAL RETURNS --------------------------- AS OF 6/30/2006 --------------------------- 1 YEAR 5 YEARS 10 YEARS ------ ------- -------- PlanAhead Class(1)........... 2.01% 1.01% 2.06% Platinum Class(1)............ 2.01% 0.85% 1.78%
1 Performance shown is historical and may not be indicative of future returns. Investment returns will vary, and share may be worth more or less at redemption than at original purchase. An investment in this Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of an investment at $1.00 per share it is possible to lose money by investing in the Fund. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. PORTFOLIO STATISTICS AS OF JUNE 30, 2006
PLANAHEAD PLATINUM CLASS CLASS --------- -------- 7-day Current Yield* 3.00% 3.00% 7-day Effective Yield* 3.05% 3.05% 30-day Yield* 2.73% 2.73% Weighted Average Maturity 4 Days 4 Days
* Annualized. You may call 1-800-388-3344 to obtain the Fund's current seven day yield. Yield is a more accurate reflection of the Fund's current earnings than total returns. TOP TEN HOLDINGS AS OF JUNE 30, 2006
% OF NET ASSETS ---------- Alachua County, Florida Housing Financial Authority 5.3% Village of Richton Park, Illinois -- Industrial Development Revenue Bonds 5.2% Michigan State Housing Development Authority 5.1% Ohio Water Development Authority 4.9% Montgomery County, Maryland Variable Rate Housing Revenue Bonds 4.9% New York State Housing Finance Agency 4.6% Sweetwater County, Wyoming Pollution Control Revenue Refunding Bonds 4.3% Indiana County Industrial Development Authority Refunding Bonds 4.3% City of Farmington Pollution Control Revenue Bonds 4.3% University Athletic Association, Inc. Revenue Bonds 4.1%
ASSET ALLOCATION AS OF JUNE 30, 2006
% OF NET ASSETS ---------- Municipal Obligations 98.3% Other Investments 1.7%
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, 2006 through June 30, 2006. 8 PERFORMANCE OVERVIEW AMERICAN BEACON MUNICIPAL MONEY MARKET FUND(SM) -- CONTINUED JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- 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 "Actual" 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 EXPENSES PAID ACCOUNT ACCOUNT DURING PERIOD* VALUE VALUE 1/1/06- 1/1/06 6/30/06 6/30/06 --------- --------- -------------- PLANAHEAD CLASS Actual $1,000.00 $1,011.61 $4.94 Hypothetical (5% return before expenses) $1,000.00 $1,019.98 $4.96 PLATINUM CLASS Actual $1,000.00 $1,011.61 $4.94 Hypothetical (5% return before expenses) $1,000.00 $1,019.89 $4.96
* Expenses are equal to the Fund's annualized expense ratio for the six- month period of 0.99% 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. 9 AMERICAN BEACON FUNDS STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2006 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) - --------------------------------------------------------------------------------
U.S. GOVERNMENT MUNICIPAL MONEY MARKET MONEY MARKET MONEY MARKET ------------ --------------- ------------ ASSETS: Investment in Portfolio, at value............... $ 708,616 $ 10,188 $ 8,248 Receivable for fund shares sold................. 359 -- -- Receivable from Manager for expense reimbursement (Note 2)........................ 25 7 4 Prepaid expenses................................ 35 9 11 ------------ ---------- ---------- TOTAL ASSETS............................... 709,035 10,204 8,263 ------------ ---------- ---------- LIABILITIES: Payable for fund shares redeemed................ 3,315 -- -- Dividends payable............................... 260 18 -- Administrative service and service fees payable (Note 2)...................................... 111 2 2 Distribution fees payable (Note 2).............. 9 1 1 Other liabilities............................... 122 18 8 ------------ ---------- ---------- TOTAL LIABILITIES.......................... 3,817 39 11 ------------ ---------- ---------- NET ASSETS........................................... $ 705,218 $ 10,165 $ 8,252 ============ ========== ========== ANALYSIS OF NET ASSETS: Paid-in-capital................................. 705,218 10,165 8,252 ------------ ---------- ---------- NET ASSETS........................................... $ 705,218 $ 10,165 $ 8,252 ============ ========== ========== SHARES OUTSTANDING (NO PAR VALUE): Cash Management Class........................... 388,533,942 3,001,399 N/A ============ ========== ========== Institutional Class............................. 52,893,999 N/A N/A ============ ========== ========== PlanAhead Class................................. 223,284,905 2,145,936 1,166,200 ============ ========== ========== Platinum Class.................................. 40,505,197 5,017,372 7,086,039 ============ ========== ========== 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 10 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED) (IN THOUSANDS) - --------------------------------------------------------------------------------
U.S. GOVERNMENT MUNICIPAL MONEY MARKET MONEY MARKET MONEY MARKET ------------ --------------- ------------ INVESTMENT INCOME ALLOCATED FROM PORTFOLIO: Interest income................................. $13,896 $394 $76 Portfolio expenses.............................. (317) (11) (3) ------- ---- --- NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO................................ 13,579 383 73 ------- ---- --- FUND EXPENSES: Administrative service fees (Note 2): Cash Management Class......................... 104 3 -- Institutional Class........................... 23 -- -- PlanAhead Class............................... 100 1 1 Platinum Class................................ 120 16 11 Transfer agent fees: Cash Management Class......................... 20 3 -- Institutional Class........................... 7 -- -- PlanAhead Class............................... 16 -- 3 Platinum Class................................ 1 1 2 Professional fees............................... 12 3 3 Registration fees and expenses.................. 40 29 15 Distribution fees -- Platinum Class (Note 2).... 46 6 4 Service Fees -- PlanAhead Class (Note 2)........ 249 3 1 Other expenses.................................. 80 6 3 ------- ---- --- TOTAL FUND EXPENSES........................ 818 71 43 ------- ---- --- LESS WAIVER AND REIMBURSEMENT OF EXPENSES (NOTE 2)... 157 41 24 ------- ---- --- NET FUND EXPENSES.......................... 661 30 19 ------- ---- --- NET INVESTMENT INCOME................................ 12,918 353 54 ------- ---- --- REALIZED GAIN ALLOCATED FROM PORTFOLIO: Net realized gain on investments................ -- -- -- ------- ---- --- NET GAIN ON INVESTMENTS.................... -- -- -- ------- ---- --- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................................... $12,918 $353 $54 ======= ==== ===
See accompanying notes 11 AMERICAN BEACON FUNDS STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) - --------------------------------------------------------------------------------
U.S. GOVERNMENT MUNICIPAL MONEY MARKET MONEY MARKET MONEY MARKET ---------------------------- ---------------------------- ---------------------------- SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED ENDED DECEMBER 31, ENDED DECEMBER 31, ENDED DECEMBER 31, JUNE 30, 2006 2005 JUNE 30, 2006 2005 JUNE 30, 2006 2005 ------------- ------------ ------------- ------------ ------------- ------------ (UNAUDITED) (UNAUDITED) (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income... $ 12,918 $ 20,577 $ 353 $ 850 $ 54 $ 97 Net realized gain on investments........... -- 2 -- 1 -- -- ----------- ----------- -------- --------- ------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.. 12,918 20,579 353 851 54 97 ----------- ----------- -------- --------- ------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Cash Management Class.............. (6,915) (10,861) (207) (619) -- -- Institutional Class... (1,066) (1,545) -- -- -- -- PlanAhead Class....... (4,238) (7,158) (56) (108) (13) (30) Platinum Class........ (699) (1,013) (90) (123) (41) (67) Net realized gain on investments: Cash Management Class.............. -- (1) -- (1) -- -- Institutional Class... -- -- -- -- -- -- PlanAhead Class....... -- (1) -- -- -- -- Platinum Class........ -- -- -- -- -- -- ----------- ----------- -------- --------- ------- -------- DISTRIBUTIONS TO SHAREHOLDERS:.... (12,918) (20,579) (353) (851) (54) (97) ----------- ----------- -------- --------- ------- -------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares................ 1,893,383 4,429,630 30,402 144,480 13,056 15,294 Reinvestment of dividends and distributions......... 11,409 18,064 109 162 54 97 Cost of shares redeemed.............. (1,713,396) (4,580,001) (48,712) (156,852) (9,271) (16,156) ----------- ----------- -------- --------- ------- -------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS..... 191,396 (132,307) (18,201) (12,210) 3,839 (765) ----------- ----------- -------- --------- ------- -------- NET INCREASE (DECREASE) IN NET ASSETS................. 191,396 (132,307) (18,201) (12,210) 3,839 (765) NET ASSETS: Beginning of period..... 513,822 646,129 28,366 40,576 4,413 5,178 ----------- ----------- -------- --------- ------- -------- END OF PERIOD........... $ 705,218 $ 513,822 $ 10,165 $ 28,366 $ 8,252 $ 4,413 =========== =========== ======== ========= ======= ========
See accompanying notes 12 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the "Act"), as amended, as a diversified, no-load, open-end management investment company with separate series. The following series are included in this report: American Beacon Money Market, American Beacon U.S. Government Money Market and American Beacon Municipal Money Market Funds (each a "Fund" and collectively, the "Funds"). 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 MASTER TRUST: - ---------------- ----------------------------- Money Market Fund Money Market Portfolio U.S. Government Money Market Fund U.S. Government Money Market Portfolio Municipal Money Market Fund Municipal Money Market Portfolio
Each Fund has the same investment objectives as its corresponding American Beacon Master Trust Portfolio. The value of such investment reflects each Fund's proportionate interest in the net assets of the corresponding portfolio (7.83%, 4.19% and 23.84% at June 30, 2006 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. Class Disclosure Each Fund has multiple classes of shares designed to meet the needs of different groups of investors. Please note that not all Funds offer all classes. The following table sets forth the differences amongst the classes:
CLASS OFFERED TO: SERVICE AND DISTRIBUTION FEES: - ----- ----------- ------------------------------ CASH MANAGEMENT CLASS Investors making an initial investment of $10 Administrative Service Fee -- 0.07% million for Money Market and $2 million for U.S. Government Money Market, or investors investing through an intermediary INSTITUTIONAL CLASS Investors making an initial investment of $2 Administrative Service Fee -- 0.10% million PLANAHEAD CLASS General public and investors investing through an Administrative Service Fee -- 0.10% intermediary Service Fee -- 0.25% PLATINUM CLASS Investors investing through selected financial Administrative Service Fee -- 0.65% institutions (such as banks and broker-dealers) Distribution Fee -- 0.25%
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 among the 13 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- corresponding Fund and other investors in each Portfolio at the time of such determination. The Funds generally declare dividends daily from net investment income and net short-term capital gain, if any, payable monthly. Dividends to shareholders are determined in accordance with federal income tax principles that may treat certain transactions differently than U.S. generally accepted accounting principles. Allocation of Income, Expenses, Gains and Losses Income, expenses (other than those attributable to a specific class), gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. 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. 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. 14 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- 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 the Cash Management Class of each Fund for other expenses through February 28, 2007 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 PlanAhead Class of the Municipal Money Market Fund for other expenses through February 28, 2007 to the extent that total annual fund operating expenses exceed 0.99%. In addition, the Manager voluntarily agreed to reimburse the PlanAhead Class of the U.S. Government Money Market Fund for other expenses through February 28, 2007 to the extent that total annual fund operating expenses exceed 0.65%. Beginning June 26, 2006 the Manager voluntarily agreed to reimburse the Institutional Class of the Money Market Fund for other expenses to the extent annualized operating expenses exceed 0.18%. The Manager contractually agreed to reimburse the Platinum Class of each Fund for distribution fees and other expenses through February 28, 2007 to the extent that total annual fund operating expenses exceed 0.99%. During the six months ended June 30, 2006, the Manager waived or reimbursed expenses as follows:
FUND AMOUNT - ---- ------ Money Market Fund Cash Management Class...................................................... $128,082 Institutional Class........................................................ 12,148 Platinum Class............................................................. 13,295 U.S. Government Money Market Fund Cash Management Class...................................................... 21,011 PlanAhead Class............................................................ 5,484 Platinum Class............................................................. 14,552 Municipal Money Market Fund PlanAhead Class............................................................ 5,584 Platinum Class............................................................. 18,274
Expense Reimbursement Plan The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek recoupment of fees waived or expenses reimbursed for a period of up to three years. However, recoupment will occur only if the Class' 15 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- average net assets have grown or expenses have declined sufficiently to allow recoupment 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................................................. 293,487 54,846 29,552 2009................................................. 141,377 41,047 23,858
The Funds have not recorded a liability for this potential reimbursement due to the current assessment that a reimbursement is unlikely. 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 plus a fee for each Board meeting attended. 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. Net investment income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book-to- tax differences. To the extent these differences are permanent, reclassifications are made to the appropriate equity accounts in the period that the differences arise. Temporary differences are not reflected in the financial records. Dividends are 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. 16 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- The tax character of distributions during the six months ended June 30, 2006 and the year ended December 31, 2005 were as follows (in thousands):
MUNICIPAL MONEY MONEY MARKET U.S. GOVERNMENT MONEY MARKET MARKET ------------------------------- -------------------------------- ---------------- SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, 2006 2005 2006 2005 2006 ---------------- ------------ ---------------- ------------ ---------------- (UNAUDITED) (UNAUDITED) (UNAUDITED) DISTRIBUTIONS PAID FROM: ORDINARY INCOME:* Cash Management Class.. $ 6,915 $10,862 $207 $620 $-- Institutional Class.... 1,066 1,545 -- -- -- PlanAhead Class........ 4,238 7,159 56 108 -- Platinum Class......... 699 1,013 90 123 -- TAX-EXEMPT INCOME: Cash Management Class.. -- -- -- Institutional Class.... -- -- -- PlanAhead Class........ -- -- 13 Platinum Class......... -- -- 41 ------- ------- ---- ---- --- TOTAL DISTRIBUTIONS PAID............ $12,918 $20,579 $353 $851 $54 ------- ------- ---- ---- --- MUNICIPAL MONEY MARKET ------------ YEAR ENDED DECEMBER 31, 2005 ------------ DISTRIBUTIONS PAID FROM: ORDINARY INCOME:* Cash Management Class.. $-- Institutional Class.... -- PlanAhead Class........ -- Platinum Class......... -- TAX-EXEMPT INCOME: Cash Management Class.. -- Institutional Class.... -- PlanAhead Class........ 30 Platinum Class......... 67 --- TOTAL DISTRIBUTIONS PAID............ $97 ---
- -------- * For tax purposes short-term capital gains distributions are considered ordinary income distributions. As of June 30, 2006 the components of taxable distributable earnings were the same as book. The cost basis of investments for federal income tax purposes was also the same as the book basis. 4. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares for each class of the Funds (in thousands). Each share is valued at $1.00: Six Months Ended June 30, 2006 (Unaudited)
CASH MONEY MARKET FUND MANAGEMENT CLASS INSTITUTIONAL CLASS PLANAHEAD CLASS PLATINUM CLASS - ----------------- ---------------- ------------------- --------------- -------------- Shares sold............................. 1,416,754 132,369 316,744 27,516 Reinvestment of dividends............... 6,351 693 3,666 699 Shares redeemed......................... (1,234,580) (116,589) (334,029) (28,198) ---------- -------- -------- ------- Net increase (decrease) in shares outstanding........................... 188,525 16,473 (13,619) 17 ========== ======== ======== ======= CASH U.S. GOVERNMENT MONEY MARKET FUND MANAGEMENT CLASS PLANAHEAD CLASS PLATINUM CLASS - --------------------------------- ---------------- --------------- -------------- Shares sold............................. 16,539 4,794 9,069 Reinvestment of dividends............... -- 19 90 Shares redeemed......................... (36,055) (4,600) (8,057) ---------- -------- ------- Net increase (decrease) in shares outstanding........................... (19,516) 213 1,102 ========== ======== ======= MUNICIPAL MONEY MARKET FUND PLANAHEAD CLASS PLATINUM CLASS - --------------------------- --------------- -------------- Shares sold............................. 1,179 11,877 Reinvestment of dividends............... 13 41 Shares redeemed......................... (1,672) (7,599) -------- ------- Net increase (decrease) in shares outstanding........................... (480) 4,319 ======== =======
17 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED JUNE 30, 2006 (UNAUDITED) - -------------------------------------------------------------------------------- Year Ended December 31, 2005
CASH MONEY MARKET FUND MANAGEMENT CLASS INSTITUTIONAL CLASS PLANAHEAD CLASS PLATINUM CLASS - ----------------- ---------------- ------------------- --------------- -------------- Shares sold............................. 3,192,463 215,369 962,664 59,134 Reinvestment of dividends............... 10,515 957 5,579 1,013 Shares redeemed......................... (3,437,555) (214,050) (863,779) (64,617) ---------- -------- -------- ------- Net increase (decrease) in shares outstanding........................... (234,577) 2,276 104,464 (4,470) ========== ======== ======== ======= CASH U.S. GOVERNMENT MONEY MARKET FUND MANAGEMENT CLASS PLANAHEAD CLASS PLATINUM CLASS - --------------------------------- ---------------- --------------- -------------- Shares sold............................. 82,100 57,385 4,995 Reinvestment of dividends............... -- 39 123 Shares redeemed......................... (88,173) (60,861) (7,818) ---------- -------- ------- Net decrease in shares outstanding...... (6,073) (3,437) (2,700) ========== ======== ======= MUNICIPAL MONEY MARKET FUND PLANAHEAD CLASS PLATINUM CLASS - --------------------------- --------------- -------------- Shares sold............................. 4,267 11,027 Reinvestment of dividends............... 30 67 Shares redeemed......................... (4,356) (11,800) -------- ------- Net decrease in shares outstanding...... (59) (706) ======== =======
18 (LIGHTHOUSE LOGO) (This page intentionally left blank) 19 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, 2006 2005 2004 2003 2002 2001(B) ----------- -------- -------- -------- ------ ------------ (UNAUDITED) NET ASSET VALUE, BEGINNING OF PERIOD............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- ------ ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A)........ 0.02 0.03 0.01 0.01 0.02 --(D) Net realized gain on investments................... --(D) --(D) --(D) --(D) --(D) --(D) -------- -------- -------- -------- ------ ------- Total income from investment operations......................... 0.02 0.03 0.01 0.01 0.02 -- -------- -------- -------- -------- ------ ------- LESS DISTRIBUTIONS: Dividends from net investment income........................ (0.02) (0.03) (0.01) (0.01) (0.02) --(D) Distributions from net realized gain on investments........... --(D) --(D) --(D) --(D) --(D) --(D) -------- -------- -------- -------- ------ ------- Total distributions.................. (0.02) (0.03) (0.01) (0.01) (0.02) -- -------- -------- -------- -------- ------ ------- NET ASSET VALUE, END OF PERIOD....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ====== ======= TOTAL RETURN......................... 2.32%(C) 3.19% 1.30% 1.08% 1.73% 0.19%(C) ======== ======== ======== ======== ====== ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands).................... $388,534 $200,010 $434,587 $117,395 $6,641 $15,006 Ratios to average net assets (annualized)(A): Expenses, net of waivers...... 0.15% 0.15% 0.15% 0.16% 0.19% 0.19% Expenses, before waivers...... 0.24% 0.23% 0.23% 0.24% 0.22% 0.19% Net investment income, net of waivers.................... 4.67% 3.08% 1.34% 1.03% 1.73% 1.96% Net investment income, before waivers.................... 4.58% 3.00% 1.26% 0.95% 1.70% 1.96% INSTITUTIONAL CLASS -------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ---------------------------------------------------------- 2006 2005 2004 2003 2002 2001 ----------- ------- ------- -------- -------- -------- (UNAUDITED) NET ASSET VALUE, BEGINNING OF PERIOD............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A)........ 0.02 0.03 0.01 0.01 0.02 0.04 Net realized gain on investments................... --(D) --(D) --(D) --(D) --(D) --(D) ------- ------- ------- -------- -------- -------- Total income from investment operations......................... 0.02 0.03 0.01 0.01 0.02 0.04 ------- ------- ------- -------- -------- -------- LESS DISTRIBUTIONS: Dividends from net investment income........................ (0.02) 0.03) (0.01) (0.01) (0.02) (0.04) Distributions from net realized gain on investments........... --(D) --(D) --(D) --(D) --(D) --(D) ------- ------- ------- -------- -------- -------- Total distributions.................. (0.02) (0.03) (0.01) (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......................... 2.27%(C) 3.06% 1.20% 0.97% 1.67% 4.15% ======= ======= ======= ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands).................... $52,894 $36,421 $34,146 $159,092 $474,922 $805,843 Ratios to average net assets (annualized)(A): Expenses, net of waivers...... 0.23% 0.28% 0.24% 0.27% 0.24% 0.25% Expenses, before waivers...... 0.28% 0.28% 0.24% 0.27% 0.24% 0.25% Net investment income, net of waivers.................... 4.59% 3.07% 1.05% 1.00% 1.68% 4.13% Net investment income, before waivers.................... 4.53% 3.07% 1.05% 1.00% 1.68% 4.13%
- -------- (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. 20 - --------------------------------------------------------------------------------
PLANAHEAD CLASS PLATINUM CLASS - ------------------------------------------------------------- ---------------------------------------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED DECEMBER 31, ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------------------------ JUNE 30, --------------------------------------------- 2006 2005 2004 2003 2002 2001 2006 2005 2004 2003 2002 2001 - ----------- -------- -------- -------- -------- -------- ----------- ------- ------- ------- -------- -------- (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 -------- -------- -------- -------- -------- -------- ------- ------- ------- ------- -------- -------- 0.02 0.03 0.01 0.01 0.01 0.04 0.02 0.02 --(D) --(D) 0.01 0.03 --(D) --(D) --(D) --(D) --(D) --(D) --(D) --(D) --(D) --(D) --(D) --(D) -------- -------- -------- -------- -------- -------- ------- ------- ------- ------- -------- -------- 0.02 0.03 0.01 0.01 0.01 0.04 0.02 0.02 -- -- 0.01 0.03 -------- -------- -------- -------- -------- -------- ------- ------- ------- ------- -------- -------- (0.02) (0.03) (0.01) (0.01) (0.01) (0.04) (0.02) (0.02) --(D) --(D) (0.01) (0.03) --(D) --(D) --(D) --(D) --(D) --(D) --(D) --(D) --(D) --(D) --(D) --(D) -------- -------- -------- -------- -------- -------- ------- ------- ------- ------- -------- -------- (0.02) (0.03) (0.01) (0.01) (0.01) (0.04) (0.02) (0.02) -- -- (0.01) (0.03) -------- -------- -------- -------- -------- -------- ------- ------- ------- ------- -------- -------- $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== ======== ======= ======= ======= ======= ======== ======== 2.13%(C) 2.82% 0.93% 0.70% 1.37% 3.83% 1.89%(C) 2.33% 0.46% 0.25% 0.98% 3.45% ======== ======== ======== ======== ======== ======== ======= ======= ======= ======= ======== ======== $223,285 $236,903 $132,438 $126,972 $155,535 $163,825 $40,505 $40,488 $44,958 $48,920 $913,240 $868,395 0.52% 0.51% 0.51% 0.54% 0.54% 0.55% 0.99% 0.99% 0.99% 0.96% 0.93% 0.93% 0.52% 0.51% 0.51% 0.54% 0.54% 0.55% 1.06% 1.06% 1.06% 1.09% 0.94% 0.93% 4.25% 2.83% 0.94% 0.71% 1.36% 3.83% 3.78% 2.27% 0.43% 0.38% 0.97% 3.36% 4.25% 2.83% 0.94% 0.71% 1.36% 3.83% 3.70% 2.20% 0.36% 0.25% 0.96% 3.36%
21 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, ------------------------------------------- 2006 2005 2004 2003 2002 2001(B) ----------- ------- ------- ------- ------- ------- (UNAUDITED) NET ASSET VALUE, BEGINNING OF PERIOD.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------- ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A)......................... 0.02 0.03 0.01 0.01 0.02 0.04 Net realized gain on investments................. --(C) --(C) --(C) --(C) --(C) --(C) ------ ------- ------- ------- ------- ------- Total income from investment operations............... 0.02 0.03 0.01 0.01 0.02 0.04 ------ ------- ------- ------- ------- ------- LESS DISTRIBUTIONS: Dividends from net investment income............. (0.02) (0.03) (0.01) (0.01) (0.02) (0.04) Distributions from net realized gain on investments.................................... --(C) --(C) --(C) --(C) --(C) --(C) ------ ------- ------- ------- ------- ------- Total distributions................................... (0.02) (0.03) (0.01) (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.......................................... 2.28%(D) 3.12% 1.22% 1.04% 1.67% 4.09% ====== ======= ======= ======= ======= ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands)......... $3,002 $22,518 $28,591 $22,060 $38,310 $66,302 Ratios to average net assets (annualized)(A): Expenses, net of waivers....................... 0.19% 0.19% 0.19% 0.19% 0.19% 0.25% Expenses, before waivers....................... 0.64% 0.38% 0.29% 0.37% 0.23% 0.25% Net investment income, net of waivers.......... 4.38% 2.99% 1.21% 1.04% 1.69% 3.74% Net investment income, before waivers.......... 3.93% 2.80% 1.11% 0.86% 1.65% 3.74%
- -------- (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. 22 - --------------------------------------------------------------------------------
PLANAHEAD CLASS PLATINUM CLASS - ------------------------------------------------------- ------------------------------------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED DECEMBER 31, ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------------------ JUNE 30, ------------------------------------------ 2006 2005 2004 2003 2002 2001 2006 2005 2004 2003 2002 2001 - ----------- ------ ------ ------- -------- ------- ----------- ------ ------ ------ -------- -------- (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 ------ ------ ------ ------- -------- ------- ------ ------ ------ ------ -------- -------- 0.02 0.03 --(C) 0.01 0.01 0.04 0.02 0.02 --(C) --(C) 0.01 0.03 --(C) --(C) --(C) --(C) --(C) --(C) --(C) --(C) --(C) --(C) --(C) --(C) ------ ------ ------ ------- -------- ------- ------ ------ ------ ------ -------- -------- 0.02 0.03 -- 0.01 0.01 0.04 0.02 0.02 -- -- 0.01 0.03 ------ ------ ------ ------- -------- ------- ------ ------ ------ ------ -------- -------- (0.02) (0.03) --(C) (0.01) (0.01) (0.04) (0.02) (0.02) --(C) --(C) (0.01) (0.03) --(C) --(C) --(C) --(C) --(C) --(C) --(C) --(C) --(C) --(C) --(C) --(C) ------ ------ ------ ------- -------- ------- ------ ------ ------ ------ -------- -------- (0.02) (0.03) -- (0.01) (0.01) (0.04) (0.02) (0.02) -- -- (0.01) (0.03) ------ ------ ------ ------- -------- ------- ------ ------ ------ ------ -------- -------- $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ======= ======== ======= ====== ====== ====== ====== ======== ======== 2.05%(D) 2.71% 0.85% 0.61% 1.30% 3.79% 1.88%(D) 2.30% 0.42% 0.24% 0.90% 3.37% ====== ====== ====== ======= ======== ======= ====== ====== ====== ====== ======== ======== $2,146 $1,933 $5,370 $26,785 $175,115 $78,934 $5,017 $3,915 $6,615 $6,752 $119,833 $112,670 0.65% 0.58% 0.56% 0.58% 0.55% 0.55% 0.99% 0.99% 0.98% 1.00% 0.95% 0.95% 1.05% 0.61% 0.57% 0.62% 0.55% 0.55% 1.59% 1.25% 1.15% 1.20% 0.98% 0.95% 4.08% 2.47% 0.68% 0.72% 1.25% 3.59% 3.73% 2.19% 0.40% 0.31% 0.88% 3.20% 3.69% 2.44% 0.67% 0.68% 1.25% 3.59% 3.12% 1.93% 0.23% 0.11% 0.85% 3.20%
23 AMERICAN BEACON MUNICIPAL MONEY MARKET FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) - --------------------------------------------------------------------------------
PLANAHEAD CLASS PLATINUM CLASS ----------------------------------------------------- --------------------------------------- SIX MONTHS YEAR ENDED DECEMBER 31, SIX MONTHS YEAR ENDED DECEMBER 31, ENDED -------------------------------------- ENDED ------------------------ JUNE 30, 2006 2005 2004 2003 2002 2001 JUNE 30, 2006 2005 2004 2003 ------------- ------ ------ ------ ------ ------ ------------- ------ ------- ------- (UNAUDITED) (UNAUDITED) NET ASSET VALUE, BEGINNING OF PERIOD................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ ------ ------ ------ ------- ------- Net investment income(A)........... 0.01 0.02 --(B) --(B) 0.01 0.02 0.01 0.02 --(B) --(B) Less dividends from net investment income.............. (0.01) (0.02) --(B) --(B)(0.01) (0.02) (0.01) (0.02) --(B) --(B) ------ ------ ------ ------ ------ ------ ------ ------ ------- ------- NET ASSET VALUE, END OF PERIOD................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== ====== ====== ====== ======= ======= TOTAL RETURN............... 1.16%(C) 1.49% 0.31% 0.32% 0.93% 2.25% 1.16%(C) 1.49% 0.31% 0.20% ====== ====== ====== ====== ====== ====== ====== ====== ======= ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands):......... $1,166 $1,647 $1,706 $3,072 $7,346 $3,669 $7,086 $2,766 $ 3,472 $ 3,271 Ratios to average net assets (annualized)(A): Expenses, net of waivers.......... 0.99% 0.98% 0.94% 0.81% 0.57% 0.58% 0.99% 0.99% 0.97% 1.01% Expenses, before waivers.......... 1.99% 1.22% 1.04% 0.93% 0.57% 0.58% 2.05% 1.55% 1.58% 1.35% Net investment income, net of waivers.......... 2.30% 1.52% 0.24% 0.36% 0.94% 2.30% 2.39% 1.51% 0.29% 0.21% Net investment income (loss), before waivers... 1.29% 1.28% 0.14% 0.24% 0.94% 2.30% 1.32% 0.95% (0.32%) (0.13%) PLATINUM CLASS ---------------- YEAR ENDED DECEMBER 31, ---------------- 2002 2001 ------- ------- NET ASSET VALUE, BEGINNING OF PERIOD................ $ 1.00 $ 1.00 ------- ------- Net investment income(A)........... --(B) 0.02 Less dividends from net investment income.............. --(B) 0.02 ------- ------- NET ASSET VALUE, END OF PERIOD................... $ 1.00 $ 1.00 ======= ======= TOTAL RETURN............... 0.51% 1.82% ======= ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands):......... $71,132 $59,427 Ratios to average net assets (annualized)(A): Expenses, net of waivers.......... 0.99% 1.00% Expenses, before waivers.......... 1.01% 1.00% Net investment income, net of waivers.......... 0.52% 1.87% Net investment income (loss), before waivers... 0.50% 1.87%
- -------- (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. 24 AMERICAN BEACON MONEY MARKET FUND SCHEDULE OF INVESTMENTS June 30, 2006 (Unaudited)
PAR AMOUNT VALUE ------------ ------------ (DOLLARS IN THOUSANDS) FUNDING AGREEMENTS - 1.66% ------------ Metropolitan Life Insurance Co., 5.281%, Due 3/1/2007 ............................. $ 150,000 $ 150,000 ------------ MEDIUM-TERM NOTES - 33.72% ABN Amro Bank NV, 5.222%, Due 5/11/2007 ++ ......................................... 18,200 18,214 American Honda Finance Corp., 5.198%, Due 7/11/2006 ++# ....................................................... 37,100 37,102 5.34%, Due 8/15/2006 ++# ........................................................ 10,000 10,002 5.053%, Due 10/10/2006 ++# ...................................................... 30,000 30,003 5.068%, Due 10/18/2006 ++# ...................................................... 47,000 47,000 5.12%, Due 11/7/2006 ++# ........................................................ 55,000 55,000 5.26%, Due 12/12/2006 ++# ....................................................... 63,000 62,997 5.208%, Due 1/16/2007 ++# ....................................................... 25,000 25,021 5.068%, Due 1/26/2007 ++# ....................................................... 50,000 49,999 5.319%, Due 2/20/2007 ++# ....................................................... 10,000 10,009 ASIF Global Financing, 5.172%, Due 8/11/2006 ++# ....................................................... 135,000 135,004 5.38%, Due 12/11/2006 ++# ....................................................... 30,000 30,013 5.194%, Due 2/23/2007 ++# ....................................................... 209,250 209,260 Bank of America Corp., 5.481%, Due 9/1/2006 ++ .................................... 9,500 9,504 Bank One Corp., 5.284%, Due 8/11/2006 ++ .......................................... 30,000 30,005 Citigroup Global Markets Holdings, Inc., 5.225%, Due 7/25/2006 ++ ........................................................ 129,750 129,763 5.41%, Due 12/12/2006 ++ ........................................................ 28,933 28,950 5.411%, Due 3/16/2007 ++ ........................................................ 149,300 149,405 Credit Suisse First Boston USA, Inc., 5.67%, Due 2/15/2007 ++ ......................................................... 21,904 21,974 5.10%, Due 4/5/2007 ++ .......................................................... 215,443 215,620 General Electric Capital Corp., 5.373%, Due 3/9/2007 ++ ......................................................... 32,500 32,530 5.497%, Due 6/22/2007 ++ ........................................................ 68,268 68,334 5.352%, Due 8/17/2007 ++ ........................................................ 180,000 180,000 Goldman Sachs Group, Inc., 5.28%, Due 10/27/2006 ++ ........................................................ 50,000 50,028 5.599%, Due 3/30/2007 ++ ........................................................ 34,000 34,026 HBOS Treasury Services Plc, 5.214%, Due 8/28/2006 ++# ............................. 40,000 40,003 HSBC Finance Corp., 5.16%, Due 10/27/2006 ++ ........................................................ 40,000 40,008 5.26%, Due 2/28/2007 ++ ......................................................... 23,500 23,510 JP Morgan Chase & Co., 5.43%, Due 12/12/2006 ++ ................................... 24,500 24,517 Merrill Lynch & Company, Inc., 5.137%, Due 10/19/2006 ++ ....................................................... 153,000 153,029 5.28%, Due 10/27/2006 ++ ........................................................ 48,100 48,127 Metropolitan Life Global Funding I, 5.37%, Due 8/28/2006 ++# ...................... 32,620 32,628 Monumental Global Funding II, 5.49%, Due 12/27/2006 ++# ........................... 40,000 40,005 Morgan Stanley, 5.226%, Due 11/9/2006 ++ .......................................... 40,000 40,011
See accompanying notes 25 AMERICAN BEACON MONEY MARKET FUND SCHEDULE OF INVESTMENTS - CONTINUED June 30, 2006 (Unaudited)
PAR AMOUNT VALUE ------------ ------------ (DOLLARS IN THOUSANDS) PACCAR Financial Corp., 5.334%, Due 9/20/2006 ++ ........................................................ $ 33,000 $ 32,995 5.191%, Due 12/4/2006 ++ ........................................................ 125,000 124,973 Toyota Motor Credit Corp., 5.038%, Due 7/14/2006 ++ ........................................................ 175,000 175,001 5.274%, Due 9/15/2006 ++ ........................................................ 84,200 84,201 Wachovia Corp., 5.22%, Due 2/6/2007 ++ ............................................ 153,925 154,007 Wells Fargo & Co., 5.419%, Due 9/15/2006 ++ ........................................................ 42,975 42,986 5.509%, Due 3/23/2007 ++ ........................................................ 174,100 174,230 5.189%, Due 7/17/2007 ++# ....................................................... 150,000 150,000 ------------ TOTAL MEDIUM-TERM NOTES ........................................................... 3,049,994 ------------ PROMISSORY NOTES - 3.32% ------------ Goldman Sachs Group, Inc., 5.226%, Due 8/9/2006 ++# ............................... 300,000 300,000 ------------ CERTIFICATES OF DEPOSIT AND BANK NOTES - 24.55% BB&T Corp., 5.038%, Due 1/24/2007 ++ .............................................. 150,000 149,998 Credit Suisse, 5.28%, Due 6/12/2007 ++ ............................................ 150,000 150,000 Fifth Third Bancorp, 5.06%, Due 8/3/2006 ++ ....................................... 35,000 34,999 HSBC Bank USA, 5.339%, Due 12/14/2006 ++ .......................................... 268,700 268,757 JP Morgan Chase Bank, NA, 5.095%, Due 1/12/2007 ++ ................................ 63,000 63,024 Royal Bank of Canada, 5.367%, Due 12/22/2006 .......................................................... 30,000 29,993 5.065%, Due 1/12/2007 ........................................................... 10,000 10,002 Royal Bank of Scotland Plc, 5.269%, Due 11/21/2006 ++# ...................................................... 150,000 150,000 5.218%, Due 11/24/2006 ++# ...................................................... 30,200 30,205 5.499%, Due 3/30/2007 ++# ....................................................... 278,000 278,051 SouthTrust Bank, 5.456%, Due 3/19/2007 ++ ......................................... 46,000 46,029 State Street Bank & Trust Co., 5.299%, Due 12/15/2006 ++ ....................................................... 16,950 16,949 5.02%, Due 1/16/2007 ++ ......................................................... 59,500 59,505 SunTrust Banks, Inc., 5.231%, Due 5/17/2007 ++ .................................... 167,000 167,109 US Bank, NA, 5.126%, Due 7/28/2006 ++ ........................................................ 135,845 135,848 5.06%, Due 1/25/2007 ++ ......................................................... 190,000 190,004 5.341%, Due 3/16/2007 ++ ........................................................ 50,000 50,014 Wachovia Bank, NA, 5.221%, Due 12/4/2006 ++ ........................................................ 27,000 27,000 5.459%, Due 3/30/2007 ++ ........................................................ 200,000 199,998 World Savings Bank FSB, 5.291%, Due 6/1/2007 ++ ................................... 162,460 162,571 ------------ TOTAL CERTIFICATES OF DEPOSIT AND BANK NOTES ...................................... 2,220,056 ------------ COMMERCIAL PAPER - 11.36% Barclays US Funding LLC, 5.135%, Due 8/22/2006 .................................... 300,000 297,775 FCAR Owner Trust, Series II, 5.30%, Due 8/4/2006 .................................................. 100,000 99,499
See accompanying notes 26 AMERICAN BEACON MONEY MARKET FUND SCHEDULE OF INVESTMENTS - CONTINUED June 30, 2006 (Unaudited)
PAR AMOUNT VALUE ------------ ------------ (DOLLARS IN THOUSANDS) Series I, 5.31%, Due 8/4/2006 ................................................... $ 250,000 $ 248,746 HSBC Finance Corp., 5.31%, Due 8/4/2006 ........................................... 100,000 99,499 Long Lane Master Trust IV, 5.32%, Due 7/28/2006 # ................................. 200,000 199,202 Stanfield Victoria, 5.05%, Due 7/20/2006 # .......................................................... 26,000 25,931 5.07%, Due 7/31/2006 # .......................................................... 57,000 56,759 ------------ TOTAL COMMERCIAL PAPER ............................................................ 1,027,411 ------------ TIME DEPOSITS - 23.49% Allied Irish Banks Plc, 5.28%, Due 7/3/2006 ....................................... 400,000 400,000 BNP Paribas, 5.28%, Due 7/3/2006 .................................................. 425,000 425,000 Deutsche Bank AG, 5.313%, Due 7/3/2006 ............................................ 250,000 250,000 Fifth Third Bank, 5.25%, Due 7/3/2006 ............................................. 200,000 200,000 Lloyds TSB Bank Plc, 5.31%, Due 7/3/2006 .......................................... 425,000 425,000 Societe Generale, 5.29%, Due 7/3/2006 ............................................. 425,000 425,000 ------------ TOTAL TIME DEPOSITS ............................................................... 2,125,000 ------------ REPURCHASE AGREEMENTS - 1.56% ------------ Goldman Sachs, 5.28%, Due 7/3/2006 (Collateral held at the Bank of New York for Goldman Sachs, FNMA, 5.00% - 7.50%, Due 10/1/2025 - 6/1/2036, Total Value - $143,148.) ......................................................... 141,015 141,015 ------------ TOTAL INVESTMENTS - 99.66% (COST $9,013,476) ........................................ $ 9,013,476 OTHER ASSETS, NET OF LIABILITIES - 0.34% ............................................ 31,139 ------------ TOTAL NET ASSETS - 100.00% .......................................................... $ 9,044,615 ============
Percentages are stated as a percent of net assets. Based on cost of investments of $9,013,476 for federal income tax purposes at June 30, 2006, there was no unrealized appreciation or depreciation of investments. ++ The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. # Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $2,004,194 or 22.16% of net assets. See accompanying notes 27 AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND SCHEDULE OF INVESTMENTS June 30, 2006 (Unaudited)
PAR AMOUNT VALUE ------------ ------------ (DOLLARS IN THOUSANDS) U.S. AGENCY OBLIGATIONS - 12.33% FEDERAL HOME LOAN BANK - 4.11% ------------ 4.86%, Due 4/4/2007 ++ .......................................................... $ 10,000 $ 9,997 ------------ FEDERAL HOME LOAN MORTGAGE CORPORATION - 4.11% ------------ 5.35%, Due 12/27/2006 ++ ........................................................ 10,000 9,997 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.11% ------------ 5.307%, Due 12/22/2006 ++ ....................................................... 10,000 9,997 ------------ TOTAL U.S. AGENCY OBLIGATIONS ..................................................... 29,991 ------------ U.S. TREASURY OBLIGATIONS - 2.93% FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.58% Discount Note, Due 8/1/2006 ..................................................... 2,305 2,295 Discount Note, Due 8/4/2006 ..................................................... 4,000 3,981 ------------ 6,276 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.35% ------------ Discount Note, Due 10/25/2006 ................................................... 850 836 ------------ TOTAL U.S. TREASURY OBLIGATIONS ................................................... 7,112 ------------ REPURCHASE AGREEMENTS - 84.69% Banc of America Securities, LLC, 5.313%, Due 7/3/2006 (Collateral held at the Bank of New York for Banc of America Securities, LLC, FNMA, 5.00%, Due 3/1/2035, Total Value - $86,328.) ............................................ 85,000 85,000 Barclays Capital, Inc., 5.25%, Due 7/3/2006 (Collateral held at the Bank of New York for Barclays Capital, Incorporated, FHLMC, 5.50%, Due 5/1/2033, Total Value - $2,032 and FNMA, 5.00% - 5.385%, Due 4/1/2036 - 5/1/2036, Total Value - $48,745.) .......................................................... 50,000 50,000 Goldman Sachs, 5.28%, Due 7/3/2006 (Collateral held at the Bank of New York for Goldman Sachs, FNMA, 5.00% - 7.50%, Due 11/1/2029 - 9/1/2035, Total Value - $72,067.) .......................................................... 70,990 70,990 ------------ TOTAL REPURCHASE AGREEMENTS ......................................................... 205,990 ------------ TOTAL INVESTMENTS - 99.95% (COST $243,093) .......................................... $ 243,093 OTHER ASSETS, NET OF LIABILITIES - 0.05% ............................................ 131 ------------ TOTAL NET ASSETS - 100.00% .......................................................... $ 243,224 ============
Percentages are stated as a percent of net assets. Based on cost of investments of $243,093 for federal income tax purposes at June 30, 2006, there was no unrealized appreciation or depreciation of investments. ++ The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. See accompanying notes 28 AMERICAN BEACON MUNICIPAL MONEY MARKET FUND SCHEDULE OF INVESTMENTS June 30, 2006 (Unaudited)
PAR AMOUNT VALUE ------------ ------------ (DOLLARS IN THOUSANDS) ALABAMA - 2.89% ------------ Infirmary Health System Special Care Facilities Financial Authority of Mobile Revenue Bonds, Series 2006A, 3.97%, Due 2/1/2040, LOC Bank of Nova Scotia ........ $ 1,000 $ 1,000 ------------ COLORADO - 9.83% Colorado Educational & Cultural Facilities Authority Revenue Bonds, Series C-3, 4.03%, Due 1/1/2031, LOC US Bank, NA ........................................ 500 500 Colorado Educational and Cultural Facilities Variable Rate Demand Revenue Bonds, Series A7, (National Jewish Federation Bond Program), 4.03%, Due 7/1/2029, LOC Bank Of America, NA ............................................ 1,000 1,000 Colorado Health Facilities Authority Revenue Bonds, Series 2002B, 3.92%, Due 1/1/2033, LOC US Bank, NA .................................................... 900 900 University of Colorado Hospital System Revenue Bonds, Series 2004B, 3.97%, Due 11/15/2035, LOC Citibank, NA ................................................. 1,000 1,000 ------------ TOTAL COLORADO .................................................................... 3,400 ------------ FLORIDA - 18.60% Alachua County, Florida Housing Financial Authority, Multifamily Housing Revenue Bonds, Series 2001, (University Cove Apartment Project), 4.01%, Due 6/15/2034, LOC Fannie Mae .................................................... 1,830 1,830 Collier County Health Facilities Authority Revenue Bonds, Series 2003 C, 4.00%, Due 1/1/2035, LOC JP Morgan Chase ......................................... 1,300 1,300 Florida Gulf Coast University Financing Corp. Revenue Bonds, Series 2003, 4.01%, Due 12/1/2033, LOC Wachovia Bank, NA ...................................... 1,000 1,000 Orange County Health Facilities Authority, Variable Rate Demand Revenue Bonds, Series 1992, (Adventist Health System/Sunbelt, Inc.), 4.05%, Due 11/15/2014, LOC Suntrust Bank ................................................................ 900 900 University Athletic Association, Inc. Revenue Bonds, Series 2001 Bonds, 4.05%, Due 10/1/2031, LOC Suntrust Bank ................................................. 1,405 1,405 ------------ TOTAL FLORIDA ..................................................................... 6,435 ------------ ILLINOIS - 7.49% Illinois Finance Authority Variable Rate Revenue Bonds, Series 2005B, 4.03%, Due 5/15/2035, LOC JP Morgan Chase ............................................... 790 790 Village of Richton Park, Illinois-Industrial Development Revenue Bonds, Series 1997, (Avatar Corporation Project), 4.07%, Due 4/1/2027, LOC Fifth Third Bank ................................................................. 1,800 1,800 ------------ TOTAL ILLINOIS .................................................................... 2,590 ------------ INDIANA - 2.89% ------------ Fort Wayne, Indiana Industrial Economic Development Revenue Bonds, Series 1989, (ND-Tech Corporation Project), 4.08%, Due 7/1/2009, LOC Comerica Bank .................................................................... 1,000 1,000 ------------ KENTUCKY - 6.64% Breckinridge County, Kentucky Lease Program Revenue Bonds, Series A, 4.03%, Due 2/1/2032, LOC US Bank, NA .................................................... 1,196 1,196 Carroll County, Kentucky Solid Waste Disposal Revenue Bonds, Series 2001, (North American Stainless, L.P.), 3.99%, Due 5/1/2031, LOC Fifth Third Bank ...... 1,100 1,100 ------------ TOTAL KENTUCKY ...................................................................... 2,296 ------------ MARYLAND - 4.86% ------------ Montgomery County, Maryland Variable Rate Housing Revenue Bonds, Series 1997, Issue I (The Grand), 4.02%, Due 6/1/2030, LOC Federal National Mortgage Association ............................................................. 1,680 1,680 ------------
See accompanying notes 29 AMERICAN BEACON MUNICIPAL MONEY MARKET FUND SCHEDULE OF INVESTMENTS - CONTINUED June 30, 2006 (Unaudited)
PAR AMOUNT VALUE ------------ ------------ (DOLLARS IN THOUSANDS) MICHIGAN - 5.13% ------------ Michigan State Housing Development Authority, Variable Rate Limited Obligation Multifamily Housing Revenue Refunding Bonds, 4.03%, Due 6/1/2018, LOC Bank of New York ................................................................. $ 1,775 $ 1,775 ------------ NEVADA - 2.89% ------------ Nevada Housing Division-Variable Rate Demand Multi-Unit Housing Revenue Bonds, Series 2004, (Sundance Village Apartments), 4.03%, Due 10/1/2035, LOC Citibank, NA ................................................................. 1,000 1,000 ------------ NEW MEXICO - 4.34% ------------ City of Farmington Pollution Control Revenue Bonds, Series 1994B, (Arizona Public Service Company), 3.99%, Due 9/1/2024, LOC Barclays Bank PLC .............. 1,500 1,500 ------------ NEW YORK - 9.83% Dutchess County Industrial Development Agency Variable Rate Demand Civic Facility Revenue Bonds, Series 2002, 3.98%, Due 10/1/2032, LOC Allied Irish Bank, PLC .................................................................. 1,000 1,000 New York City Housing Development Corporation, Multi-Family Mortgage Revenue Bonds, Series 2002A, (First Avenue Development), 4.00%, Due 10/15/2035, LOC Fannie Mae ....................................................................... 800 800 New York State Housing Finance Agency, 66 West 38th Street Housing Revenue Bonds, Series 2000A, 4.00%, Due 5/15/2033, LOC Fannie Mae ........................ 1,600 1,600 ------------ TOTAL NEW YORK .................................................................... 3,400 ------------ OHIO - 4.91% ------------ Ohio Water Development Authority, Environmental Improvement Revenue Bonds, Series 2000B, (Waste Management, Incorporated Project), 4.06%, Due 7/1/2020, LOC Fleet National Bank .......................................................... 1,700 1,700 ------------ PENNSYLVANIA - 6.65% Delaware County Pennsylvania Pollution Control, Series 1999A, 4.05%, Due 4/1/2021, LOC Wachovia Bank, NA .............................................. 800 800 Indiana County Industrial Development Authority Refunding Bonds, Series 2003A (Exelon Generation), 4.07%, Due 6/1/2027, LOC BNP Paribas ........................ 1,500 1,500 ------------ TOTAL PENNSYLVANIA ................................................................ 2,300 ------------ TEXAS - 3.47% ------------ City of Midlothian, Texas Industrial Development Corporation, Environmental Facilities Revenue Bonds, Series 1999, (Holnam Texas Limited Partnership Project), 4.05%, Due 9/1/2031, LOC Bank One ...................................... 1,200 1,200 ------------ UTAH - 3.32% ------------ Morgan County UT Solid Waste Disposal Revenue Bonds, Series 1996, (Holman, Inc. Project), 4.03%, Due 8/1/2031, LOC Wachovia Bank, NA ............... 1,150 1,150 ------------ WYOMING - 4.34% ------------ Sweetwater County, Wyoming Pollution Control Revenue Refunding Bonds, Series 1990A, (Pacificorp Project), 3.97%, Due 7/1/2015, LOC Barclays Bank PLC ............................................................ 1,500 1,500 ------------
SHARES ------------ SHORT TERM INVESTMENTS - 1.67% BlackRock Provident MuniCash Fund ................................................. 32,554 33
See accompanying notes 30 AMERICAN BEACON MUNICIPAL MONEY MARKET FUND SCHEDULE OF INVESTMENTS - CONTINUED June 30, 2006 (Unaudited)
SHARES VALUE ------------ ------------ (DOLLARS IN THOUSANDS) Federated Municipal Obligations Fund, ------------ TOTAL SHORT TERM INVESTMENTS 585 ------------ TOTAL INVESTMENTS - 99.75% (COST $34,511) $ 34,511 OTHER ASSETS, NET OF LIABILITIES - 0.25% 86 ------------ TOTAL NET ASSETS - 100.00% $ 34,597 ============
Percentages are stated as a percent of net assets. For municipal obligations, rates associated with money market securities represent yield to maturity or yield to next reset date. Based on cost of investments of $34,511 for federal income tax purposes at June 30, 2006, there was no unrealized appreciation or depreciation of investments. See accompanying notes 31 AMERICAN BEACON MASTER TRUST PORTFOLIOS STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2006 (UNAUDITED) (IN THOUSANDS) - --------------------------------------------------------------------------------
U.S. GOVERNMENT MUNICIPAL MONEY MARKET MONEY MARKET MONEY MARKET ------------ --------------- ------------ ASSETS: Investments in securities at value (cost - $8,872,461, $37,103 and $34,511, respectively)................................. $8,872,461 $ 37,103 $34,511 Repurchase agreements (cost - $141,015, $205,990 and $0 respectively) 141,015 205,990 -- Dividends and interest receivable............... 31,847 168 99 Prepaid expenses................................ 105 2 -- ---------- -------- ------- TOTAL ASSETS............................... 9,045,428 243,263 34,610 ---------- -------- ------- LIABILITIES: Management and investment advisory fees payable (Note 2)...................................... 760 24 3 Other liabilities............................... 53 15 10 ---------- -------- ------- TOTAL LIABILITIES.......................... 813 39 13 ---------- -------- ------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.......................................... $9,044,615 $243,224 $34,597 ========== ======== =======
See accompanying notes 32 AMERICAN BEACON MASTER TRUST PORTFOLIOS STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED) (IN THOUSANDS) - --------------------------------------------------------------------------------
U.S. GOVERNMENT MUNICIPAL MONEY MARKET MONEY MARKET MONEY MARKET ------------ --------------- ------------ INVESTMENT INCOME: Interest income................................. $204,069 $6,635 $516 -------- ------ ---- TOTAL INVESTMENT INCOME.................... 204,069 6,635 516 -------- ------ ---- EXPENSES: Management and investment advisory fees (Note 2)............................................ 4,274 140 15 Custodian fees.................................. 191 6 1 Professional fees............................... 47 8 6 Other expenses.................................. 161 18 1 -------- ------ ---- TOTAL EXPENSES............................. 4,673 172 23 -------- ------ ---- NET INVESTMENT INCOME................................ 199,396 6,463 493 -------- ------ ---- REALIZED GAIN ON INVESTMENTS: Net realized gain on investments................ 3 1 -- -------- ------ ---- NET GAIN ON INVESTMENTS.................... 3 1 -- -------- ------ ---- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................................... $199,399 $6,464 $493 ======== ====== ====
See accompanying notes 33 AMERICAN BEACON MASTER TRUST PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) - --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY MARKET MONEY MARKET MUNICIPAL MONEY MARKET ------------------------------ ------------------------------ ------------------------------ SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2006 2005 2006 2005 2006 2005 ---------------- ------------ ---------------- ------------ ---------------- ------------ (UNAUDITED) (UNAUDITED) (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income..... $ 199,396 $ 218,128 $ 6,463 $ 7,700 $ 493 $ 837 Net realized gain on investments............. 3 18 1 6 -- -- ------------ ------------ ----------- ----------- -------- -------- TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... 199,399 218,146 6,464 7,706 493 837 ------------ ------------ ----------- ----------- -------- -------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Contributions............. 55,472,099 98,275,830 1,322,006 1,782,252 24,379 56,703 Withdrawals............... (53,412,924) (97,114,356) (1,324,806) (1,799,917) (20,771) (62,338) ------------ ------------ ----------- ----------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS.......... 2,059,175 1,161,474 (2,800) (17,665) 3,608 (5,635) ------------ ------------ ----------- ----------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS............. 2,258,574 1,379,620 3,664 (9,959) 4,101 (4,798) ------------ ------------ ----------- ----------- -------- -------- NET ASSETS: Beginning of period....... 6,786,041 5,406,421 239,560 249,519 30,496 35,294 ------------ ------------ ----------- ----------- -------- -------- END OF PERIOD............. $ 9,044,615 $ 6,786,041 $ 243,224 $ 239,560 $ 34,597 $ 30,496 ============ ============ =========== =========== ======== ========
See accompanying notes 34 AMERICAN BEACON MASTER TRUST PORTFOLIOS FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
MONEY MARKET ----------------------------------------------------------- SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, -------------- ----------------------------------------- 2006 2005 2004 2003 2002 2001 -------------- ----- ----- ----- ----- ----- (UNAUDITED) Total return......................................... 2.34%(A) 3.25% 1.34% 1.13% 1.81% 4.30% Ratios to average net assets (annualized): Expenses........................................ 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% Net investment income........................... 4.66% 3.20% 1.30% 1.14% 1.81% 3.95%
U.S. GOVERNMENT MONEY MARKET ----------------------------------------------------------- SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, -------------- ----------------------------------------- 2006 2005 2004 2003 2002 2001 -------------- ----- ----- ----- ----- ----- (UNAUDITED) Total return......................................... 2.32%(A) 3.19% 1.30% 1.11% 1.74% 4.24% Ratios to average net assets (annualized): Expenses........................................ 0.12% 0.12% 0.11% 0.12% 0.12% 0.11% Net investment income........................... 4.61% 3.15% 1.30% 1.13% 1.71% 3.99%
MUNICIPAL MONEY MARKET ----------------------------------------------------------- SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, -------------- ----------------------------------------- 2006 2005 2004 2003 2002 2001 -------------- ----- ----- ----- ----- ----- (UNAUDITED) Total return......................................... 1.58%(A) 2.38% 1.18% 1.08% 1.39% 2.71% Ratios to average net assets (annualized): Expenses........................................ 0.15% 0.11% 0.11% 0.12% 0.12% 0.13% Net investment income........................... 3.18% 2.35% 1.14% 1.05% 1.39% 2.71%
- -------- (A) Not annualized. 35 AMERICAN BEACON MASTER TRUST NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006 (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 objective of each Portfolio is current income, liquidity and the maintenance of a stable price of $1.00 per share. The assets of each Portfolio belong only to that Portfolio, and the liabilities of each Portfolio are borne solely by that Portfolio and no other. American Beacon Advisors, Inc. (the "Manager"), 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. The following is a summary of the significant accounting policies followed by the Portfolios. Security Valuation Securities of the Portfolios are valued at amortized cost, which approximates fair value. In the event that a deviation of 1/2 of 1% or more exists between the $1.00 per share price of the Portfolios, calculated at amortized cost, and the price per share calculated by reference to market quotations, or if there is any other deviation that the Trust's Board of Trustees (the "Board") believes would result in a material dilution to shareholders or purchasers, the Board will promptly consider the appropriate action that should be initiated. Security Transactions and Investment Income Security transactions are recorded on the trade date of the security purchase or sale. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for amortization of premiums or accretion of discounts on investment grade short-term securities and zero coupon instruments. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification. Federal Income 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 and are valued at cost, which approximates market value. 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. 36 AMERICAN BEACON MASTER TRUST NOTES TO FINANCIAL STATEMENTS -- CONTINUED JUNE 30, 2006 (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 Money Market Portfolio to lend money to other participating series managed by the Manager. For the six months ended June 30, 2006, the Money Market Portfolio earned $79 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 plus a fee for each Board meeting attended. 37 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS (UNAUDITED) - -------------------------------------------------------------------------------- At its February 17, 2006 meeting, the Board of Trustees (the "Board") considered the renewal of the existing Management Agreements (the "Agreements") between the Manager and the American Beacon Funds, on behalf of the American Beacon Money Market Fund, American Beacon Municipal Money Market Fund, and the American Beacon U.S. Government Money Market Fund (collectively, the "Funds"), and between the Manager and the American Beacon Master Trust, on behalf of the American Beacon Master Money Market Portfolio, American Beacon Master Municipal Money Market Portfolio, and the American Beacon Master U.S. Government Money Market Portfolio (collectively, the "Portfolios"). The term "Funds" is used throughout this section to refer to both the Funds and the Portfolios. In preparation for the Board's consideration to renew the Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager and Lipper, Inc. ("Lipper"). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager. In addition, the Board's Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee held separate meetings on December 8, 2005, February 8, 2006 and February 17, 2006 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board's review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process. The Board 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; - confirmation that the Manager's financial condition does not raise concerns that it would be unable to continue providing the same scope and quality of services to the Funds; - a description of the scope of portfolio management services provided to the Funds, 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 Funds, 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; - a description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a description of trade allocation procedures among accounts managed by the firm; - a summary of any material changes to the Manager's compliance program with regard to federal, state, corporate and Fund requirements; 38 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS -- CONTINUED (UNAUDITED) - -------------------------------------------------------------------------------- - a discussion of any material compliance problems and remedial actions; - information regarding the Manager's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto; - a description of the Manager's affiliation with any broker-dealer; - a discussion of any anticipated change in the Manager's controlling persons; - verification of the Manager's insurance coverage with regards to the services provided to the Funds; - a comparison of the performance of each Fund to appropriate indices, including comments on the relative performance of each Fund versus comparable indices; - a discussion, if applicable, of any underperformance by a Fund relative to its peer group; - an analysis of any material complaints received from Fund shareholders; - a description of the Manager's securities lending practices and the fees received from such practices; - a description of 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; and - a description of how expenses that are not readily identifiable to a particular Fund are allocated. The Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds, and (iii) each Fund's investment advisory fees versus comparable mutual funds. For each Fund, the class used for comparative purposes was the class with the longest performance history, which in most cases is the Institutional Class. References below to each Fund's Lipper peer group are to the group of comparable mutual funds included in the analysis provided by Lipper. The Trustees also received a memorandum from their legal counsel detailing the Board's responsibilities pertaining to the renewal of the Agreements. This memorandum explained the regulatory requirements surrounding the Board's process for evaluating investment advisors and the terms of the contracts. Provided below is an overview of the primary factors the Board considered at its February 2006 meeting. The Board did not identify any particular information that was most relevant to its consideration to renew the Agreements, and each Trustee may have afforded different weight to the various factors. CONSIDERATIONS WITH RESPECT TO ALL FUNDS In determining whether to approve the continuance of the Agreements, the Board considered the best interests of each Fund separately. In addition, while the Agreements for all of the Funds were considered at the same Board meeting, the Board considered each Fund's investment management relationship separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of the Fund; (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. 39 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS -- CONTINUED (UNAUDITED) - -------------------------------------------------------------------------------- Nature, Extent and Quality of Services With respect to the renewal of the Agreements, the Board 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 provide consistent above average long-term performance at low cost; the continuing efforts by the Manager to add new Funds so as to enhance the Trusts' 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. Based on this information, the Board concluded that the nature, extent and quality of the management services provided by the Manager were appropriate for each Fund and, thus, supported a decision to renew the Agreements. Investment Performance The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund's investment performance relative to its benchmark index(es) and peer group. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. Discussions regarding the Board's considerations with respect to each Fund's performance are below under "Additional Considerations and Conclusions with Respect to each Fund." Cost of Services and Profits Realized In analyzing the cost of services and profitability of the Manager in connection with its investment advisory services to a Fund, the Board considered the Manager's operations and low cost structure. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. Discussions regarding the Board's considerations with respect to each Fund's fee rates are set forth below under "Additional Considerations and Conclusions with Respect to each Fund." Economies of Scale In considering the reasonableness of the management fees, the Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. With respect to the management fee, the Board acknowledged the Manager's low cost structure and the increasing costs of personnel, technology and operations. Based on these considerations, the Board concluded that the Funds' fee structures are reasonably designed to pass on economies of scale to Fund shareholders. Benefits to be Derived from the Relationship with the Funds The Board considered the "fall-out" or ancillary benefits that accrue to the Manager as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager's investment process and expanding the level of assets under management by the Manager. After consideration of this information, the Board concluded that the potential benefits accruing to the Manager by virtue of its relationships with the Funds appear to be fair and reasonable. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO EACH FUND The Board considered the relative performance of each Fund versus the respective Lipper Average, which includes all comparable funds in the Lipper category, and the Lipper Index, which includes up to the 30 largest funds in the respective Lipper category where the Fund is classified by Lipper. 40 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS -- CONTINUED (UNAUDITED) - -------------------------------------------------------------------------------- Additional Considerations and Conclusions with Respect to the Money Market Fund In considering the renewal of the Agreements with the Fund, the Board considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the Institutional Class total return performance was in the 2nd quintile for all relevant periods compared to the returns of a peer group of mutual funds identified by Lipper as having an investment objective similar to the Fund ("Lipper Universe"), and (2) the Institutional Class outperformed the Lipper Institutional Money Market Average for all relevant periods and underperformed the Lipper Institutional Money Market Index for all relevant periods except the ten-year period. In addition, the Board considered the fees payable under the Agreements. In this regard, they considered that: (1) the Institutional Class total expenses were in the 2nd quintile and actual management fees (including administrative fees) were in the 4th quintile compared to the expenses and fees of a peer group of similar funds classified by Lipper ("Fee Universe") where the 1st quintile represents the lowest fees or expenses among the group; (2) the Manager's explanation that fee schedule "breakpoints" were not warranted due to, among other factors, the low, base management fee (excluding administrative fees) charged to the Fund; and (3) the Manager has contractually agreed to waive fees and/or reimburse expenses to the extent necessary to maintain a competitive total expense ratio for the Institutional, Cash Management, and Platinum Classes of the Fund. Based on these considerations and those noted above with respect to all Funds, the Board: (1) concluded that the fees paid to the Manager under the Agreements are fair and reasonable; (2) concluded that the profits to the Manager are reasonable in light of the quality of services provided to the Fund, including direct management of the Fund's assets; (3) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund; and (4) approved the renewal of the Agreements with respect to the Fund. Additional Considerations and Conclusions with Respect to the Municipal Money Market Fund In considering the renewal of the Agreements with the Fund, the Board considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the PlanAhead Class total return performance was in the 5th quintile for all relevant periods except the five-and ten-year periods in which case its performance was in the 4th and 3rd quintile, respectively, compared to the Lipper Universe; (2) the PlanAhead Class underperformed the Lipper Tax Exempt Money Market Average and the Lipper Tax Exempt Money Market Index for all relevant periods; and (3) the Manager's explanation that the PlanAhead Class has a relatively low level of assets, which resulted in a higher expense ratio and a negative impact on performance during the more recent periods. In addition, the Board considered the fees payable under the Agreements. In this regard, they considered that: (1) the PlanAhead Class total expenses were in the 5th quintile and actual management fees (including administrative fees) were in the 1st quintile compared to the Fee Universe where the 1st quintile represents the lowest fees or expenses among the group; (2) 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; (3) the Manager has contractually agreed to waive fees and/or reimburse expenses to the extent necessary to maintain a competitive total expense ratio for the PlanAhead and Platinum Classes of the Fund; and (4) the Manager's profitability analysis indicated that it incurred a loss on the services it provided to the Fund. Based on these considerations and those noted above with respect to all Funds, the Board: (1) concluded that the fees paid to the Manager under the Agreements are fair and reasonable; (2) concluded that the profits to the Manager are reasonable in light of the quality of services provided to the Fund, including direct management of the Fund's assets; (3) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund; and (4) approved the renewal of the Agreements with respect to the Fund. 41 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS -- CONTINUED (UNAUDITED) - -------------------------------------------------------------------------------- Additional Considerations and Conclusions with Respect to the U.S. Government Money Market Fund In considering the renewal of the Agreements with the Fund, the Board considered performance data for various periods ended December 31, 2005. In this regard, they considered that: (1) the Cash Management Class total return performance was in the 1st quintile for all relevant periods compared to the Lipper Universe, and (2) the Cash Management Class outperformed the Lipper Institutional U.S. Government Money Market Average and the Lipper Institutional U.S. Government Money Market Index for all relevant periods. In addition, the Board considered the fees payable under the Agreements. In this regard, they considered that: (1) the Cash Management Class actual management fees (including administrative fees) and total expenses were in the 1st quintile compared to the Fee Universe where the 1st quintile represents the lowest fees or expenses among the group; (2) 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; (3) the Manager has contractually agreed to waive fees and/or reimburse expenses to the extent necessary to maintain a competitive total expense ratio for the Cash Management, Platinum, and PlanAhead Classes of the Fund; and (4) the Manager's profitability analysis indicated that it incurred a loss on the services it provided to the Fund. Based on these considerations and those noted above with respect to all Funds, the Board: (1) concluded that the fees paid to the Manager under the Agreements are fair and reasonable; (2) concluded that the profits to the Manager are reasonable in light of the quality of services provided to the Fund, including direct management of the Fund's assets; (3) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund; and (4) approved the renewal of the Agreements with respect to the Fund. 42 (LIGHTHOUSE LOGO) (This page intentionally left blank) 43 (LIGHTHOUSE LOGO) (This page intentionally left blank) 44 (LIGHTHOUSE LOGO) (This page intentionally left blank) 45 (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 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: (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:
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 Platinum Class(SM) American Beacon Funds Kansas City, MO 64121-9643 ------------------ 4151 Amon Carter Blvd., MD Call (800) 967-9009 2450 Fort Worth, TX 76155
- ------------------------------------------------------------------------------- AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES Availability of Proxy Voting Policy and Records In addition to the Schedule of Investments A description of the policies and procedures provided in each semi-annual and annual that the Funds use to determine how to vote report, each Fund files a complete schedule of proxies relating to portfolio securities is its portfolio holdings with the Securities and available in each Fund's Statement of Exchange Commission ("SEC") on Form N-Q as of Additional Information, which may be obtained the first and third fiscal quarters. The free of charge by calling 1-800-967-9009 or by Funds' Forms N-Q are available on the SEC's accessing the SEC's website at www.sec.gov. website at www.sec.gov. The Forms N-Q may also Each Fund's proxy voting record for the most be reviewed and copied at the SEC's Public recent year ended June 30 is filed annually Reference Room, 450 Fifth Street, NW, with the SEC on Form N-PX. The Funds' Forms N- Washington, DC 20549. Information regarding PX are available on the SEC's website at the operation of the SEC's Public Reference www.sec.gov. Each Fund's proxy voting record Room may be obtained by calling 1-800-SEC- may also be obtained by calling 1-800-967- 0330. A complete schedule of each Fund's 9009. portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each fiscal quarter.
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES TRUST SERVICES ERNST & YOUNG LLP Portland, Maine Boston, Massachusetts Kansas City, Missouri 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. 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. SAR 06/06 537882 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 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, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Australia - 4.7% Airlines - 0.0% 32,501 Qantas Airways Ltd. $ 71,474 ----------------------------------------------------------------------------------------------------------------- Beverages - 0.1% 40,082 Coca-Cola Amatil Ltd. 211,132 80,782 Foster's Group Ltd. 328,292 732 Lion Nathan Ltd. 4,242 -------------- 543,666 ----------------------------------------------------------------------------------------------------------------- Biotechnology - 0.1% 10,984 CSL Ltd. 438,629 ----------------------------------------------------------------------------------------------------------------- Capital Markets - 0.1% 13,704 Macquarie Bank Ltd. 702,513 88 Perpetual Trustees Australia Ltd. 4,783 -------------- 707,296 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.0% 14,011 Orica Ltd. 248,681 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.3% 96,429 Australia & New Zealand Banking Group Ltd. 1,904,953 62,940 Commonwealth Bank of Australia 2,076,661 85,085 National Australia Bank Ltd. 2,222,588 94,185 Westpac Banking Corp. 1,629,007 -------------- 7,833,209 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.1% 58,017 Brambles Industries Ltd. 474,139 364 Downer EDI Ltd. 2,012 -------------- 476,151 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.0% 7,102 Leighton Holdings Ltd. 91,546 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.1% 19,485 Boral Ltd. 117,837 4,886 James Hardie Industries NV 27,951 44,233 Rinker Group Ltd. 538,621 -------------- 684,409 ----------------------------------------------------------------------------------------------------------------- Containers & Packaging - 0.0% 39,761 Amcor Ltd. 197,329 ----------------------------------------------------------------------------------------------------------------- Distributors - 0.0% 59,199 Pacific Brands Ltd. 94,561 ----------------------------------------------------------------------------------------------------------------- Diversified Consumer Services - 0.0% 36,661 ABC Learning Centres Ltd. 174,318 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.1% 1,247 Australian Stock Exchange Ltd. 30,184 16,255 Babcock & Brown Ltd. 261,942 57,631 Challenger Financial Services Group Ltd. 135,301 14,970 SFE Corp. Ltd. 183,512 21,784 Suncorp-Metway Ltd. 313,168 -------------- 924,107 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 132,468 Telstra Corp. Ltd. 362,174 Services - 0.1% ----------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.0% 8,780 WorleyParsons Ltd. 131,114 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.2% 55,825 Coles Myer Ltd. 471,157 53,744 Woolworths Ltd. 804,569 -------------- 1,275,726 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 59,684 Futuris Corp. Ltd. 93,118 ----------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.0% 271 Alinta Ltd. 2,100 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.0% 6,833 Ansell Ltd. $ 49,090 227 Cochlear Ltd. 9,213 -------------- 58,303 ----------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 0.0% 68,222 DCA Group Ltd. 141,412 37,257 Mayne Group Ltd. 84,701 2,433 Sonic Healthcare Ltd. 25,668 -------------- 251,781 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.1% 5,323 Aristocrat Leisure Ltd. 50,937 22,614 TABCORP Holdings Ltd. 255,375 13,371 UNiTAB Ltd. 146,625 -------------- 452,937 ----------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 11,013 Computershare Ltd. 64,229 ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.1% 36,793 CSR Ltd. 91,573 20,114 Wesfarmers Ltd. 527,959 -------------- 619,532 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.3% 73,654 AMP Ltd. 499,603 41,638 AXA Asia Pacific Holdings Ltd. 193,962 91,395 Insurance Australia Group Ltd. 363,274 36,870 QBE Insurance Group Ltd. 561,546 -------------- 1,618,385 ----------------------------------------------------------------------------------------------------------------- Media - 0.1% 223 APN News & Media Ltd. 842 67,858 John Fairfax Holdings Ltd. 189,056 41,100 Macquarie Communications Infrastructure Group 180,463 5,775 Publishing & Broadcasting Ltd. 78,130 -------------- 448,491 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.9% 49,188 Alumina Ltd. 246,673 178,905 BHP Billiton Ltd. 3,854,594 48,010 BlueScope Steel Ltd. 283,568 28,055 Iluka Resources Ltd. 136,524 13,770 Newcrest Mining Ltd. 215,657 23,580 OneSteel Ltd. 71,301 15,573 Rio Tinto Ltd. 900,140 18,525 Zinifex Ltd. 137,906 -------------- 5,846,363 ----------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.1% 35,882 Australian Gas Light Co., Ltd. 466,789 ----------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.0% 1,216 Harvey Norman Holdings Ltd. 3,559 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.3% 10,809 Caltex Australia Ltd. 189,520 22,737 Origin Energy Ltd. 124,328 46,774 Paladin Resources Ltd. (a) 142,825
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 32,208 Santos Ltd. $ 289,539 25,476 Woodside Petroleum Ltd. 832,803 -------------- 1,579,015 ----------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.0% 5,919 PaperlinX Ltd. 13,720 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.0% 75,099 Mayne Pharma Ltd. (a) 145,066 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 110,868 CFS Retail Property Trust 153,207 (REITs) - 0.4% 15,072 Centro Properties Group/New 74,913 166,094 Commonwealth Property Office Fund 171,525 77,721 DB RREEF Trust 84,593 80,734 ING Industrial Fund 133,758 33,488 Investa Property Group 54,487 1,304 Macquarie Office Trust 1,337 48,443 Macquire Goodman Group 215,944 44,598 Mirvac Group 144,133 1,388 Multiplex Group 3,372 59,977 Stockland 312,810 80,142 Westfield Group 1,031,851 -------------- 2,381,930 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 123,927 General Property Trust 399,589 Development - 0.1% 17,727 Lend Lease Corp., Ltd. 184,252 -------------- 583,841 ----------------------------------------------------------------------------------------------------------------- Road & Rail - 0.0% 18,383 Toll Holdings Ltd. 191,889 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.0% 128 Billabong International Ltd. 1,460 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.1% 1,568 Macquarie Airports 3,576 156,245 Macquarie Infrastructure Group 390,035 29,085 Transurban Group 150,180 -------------- 543,791 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Australia 29,620,689 - - --------------------------------------------------------------------------------------------------------------------------------- Austria - 0.6% Building Products - 0.0% 3,296 Wienerberger AG 156,567 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.1% 10,982 Erste Bank der Oesterreichischen Sparkassen AG 617,858 2,739 Raiffeisen International Bank Holding AG 237,802 -------------- 855,660 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 157 RHI AG (a) 5,079 ----------------------------------------------------------------------------------------------------------------- Containers & Packaging - 0.0% 509 Mayr-Melnhof Karton AG 81,947 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 18,265 Telekom Austria AG 406,605 Services - 0.1% ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.0% 3,166 Verbund - Oesterreichische Elektrizitaetswirtschafts AG 152,213 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.0% 43 Wiener Staedtische Allgemeine Versicherung AG 2,529 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.0% 1,201 Andritz AG 198,470 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% 3,329 Boehler-Uddeholm AG 181,972
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 682 Voestalpine AG $ 103,599 -------------- 285,571 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.1% 8,826 OMV AG 525,337 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 18,388 IMMOFINANZ Immobilien Anlagen AG (a) 204,084 Development - 0.1% 4,532 Meinl European Land Ltd. (a) 92,312 -------------- 296,396 ----------------------------------------------------------------------------------------------------------------- Trading Companies & Distributors - 0.1% 101,935 Hagemeyer NV - Registered Shares 470,527 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.0% 1,050 Flughafen Wien AG 80,180 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Austria 3,517,081 - - --------------------------------------------------------------------------------------------------------------------------------- Belgium - 1.1% Beverages - 0.1% 9,707 InBev NV 475,998 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.1% 2,617 Solvay SA 300,995 1,590 Umicore 212,252 -------------- 513,247 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.3% 31,510 Dexia 757,462 9,249 KBC Bancassurance Holding 992,227 -------------- 1,749,689 ----------------------------------------------------------------------------------------------------------------- Distributors - 0.0% 204 D'ieteren SA 65,864 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.3% 58,469 Fortis 1,990,160 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 9,112 Belgacom SA 302,114 Services - 0.0% ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.0% 927 Bekaert SA 89,017 ----------------------------------------------------------------------------------------------------------------- Electronic Equipment & Instruments - 0.0% 493 Barco NV 45,545 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.1% 921 Colruyt SA 143,790 3,633 Delhaize Group 251,779 950 Delhaize Group (b) 65,636 -------------- 461,205 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.0% 1,461 Omega Pharma SA 101,999 ----------------------------------------------------------------------------------------------------------------- Leisure Equipment & Products - 0.1% 10,766 AGFA-Gevaert NV 260,729 ----------------------------------------------------------------------------------------------------------------- Marine - 0.0% 1,598 Compagnie Maritime Belge SA (CMB) 46,403 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.1% 1,612 Euronav Sa 49,592 3,359 Groupe Bruxelles Lambert SA 351,761 211 Groupe Bruxelles Lambert SA Strip VVPR (a) 5 -------------- 401,358 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.0% 3,959 UCB SA 214,131 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 8 Cofinimmo 1,383 (REITs) - 0.0% ----------------------------------------------------------------------------------------------------------------- Wireless Telecommunication Services - 0.0% 849 Mobistar SA 67,360 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Belgium 6,786,202 - - --------------------------------------------------------------------------------------------------------------------------------- Bermuda - 0.0% Energy Equipment & Services - 0.0% 4,604 SeaDrill Ltd. (a) 60,670 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.0% 19,785 Yue Yuen Industrial Holdings 54,385 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Bermuda 115,055 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Denmark - 0.7% Beverages - 0.0% 412 Carlsberg A/S $ 30,121 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.0% 2,117 Novozymes A/S Class B 142,978 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.2% 21,922 Danske Bank A/S 834,229 2,625 Jyske Bank (a) 152,089 -------------- 986,318 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.0% 1,267 FLS Industries A/S Class B 47,781 ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.1% 13,624 Vestas Wind Systems A/S (a) 372,492 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.1% 2,384 Danisco A/S 173,679 2,910 East Asiatic Co., Ltd. A/S 109,865 -------------- 283,544 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.1% 271 Coloplast A/S Class B 20,115 17,200 GN Store Nord 197,540 1,430 William Demant Holding (a) 106,875 -------------- 324,530 ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% 436 Bang & Olufsen A/S Class B 48,206 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.0% 1,751 Topdanmark A/S (a) 244,022 17 TrygVesta A/S 1,061 -------------- 245,083 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.0% 720 NKT Holding A/S 44,987 ----------------------------------------------------------------------------------------------------------------- Marine - 0.1% 61 AP Moller - Maersk A/S 474,720 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.1% 3,119 H Lundbeck A/S 71,108 12,315 Novo-Nordisk A/S B 784,234 -------------- 855,342 ----------------------------------------------------------------------------------------------------------------- Road & Rail - 0.0% 1,580 DSV A/S 264,067 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Denmark 4,120,169 - - --------------------------------------------------------------------------------------------------------------------------------- Finland - 1.4% Auto Components - 0.0% 10,665 Nokian Renkaat Oyj 140,187 ----------------------------------------------------------------------------------------------------------------- Building Products - 0.0% 228 Asko Oyj 6,166 ----------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.7% 223,091 Nokia Oyj 4,552,703 1,270 Nokia Oyj (b) 25,730 -------------- 4,578,433 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.0% 5,799 YIT Oyj 142,144 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.0% 47 OKO Bank 691 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 5,441 Elisa Corp. 103,592 Services - 0.1% 33,441 TeliaSonera AB 188,997 -------------- 292,589 ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.1% 26,045 Fortum Oyj 666,053 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.0% 235 Kesko Oyj Class B 9,009 ----------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 5,675 TietoEnator Oyj 163,849 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.1% 22,288 Sampo Oyj $ 425,201 ----------------------------------------------------------------------------------------------------------------- Leisure Equipment & Products - 0.0% 5,404 Amer Sports Corp. 112,838 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.1% 2,051 Cargotec Corp. Class B 89,822 10,749 KCI Konecranes Oyj 193,520 4,102 Kone Oyj Class B 170,464 8,456 Metso Oyj 306,746 430 Wartsila Oyj 18,144 -------------- 778,696 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% 768 Outokumpu Oyj 17,971 7,496 Rautaruukki Oyj 226,393 -------------- 244,364 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.0% 6,709 Neste Oil Oyj 236,252 ----------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.2% 33,245 Stora Enso Oyj Class R 464,198 30,754 UPM-Kymmene Oyj 662,607 -------------- 1,126,805 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.0% 191 Orion Oyj Class B 3,793 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Finland 8,927,070 - - --------------------------------------------------------------------------------------------------------------------------------- France - 9.2% Aerospace & Defense - 0.1% 15,052 European Aeronautic Defense and Space Co. 432,273 7,026 Safran SA 152,905 6,060 Thales SA 236,644 2,001 Zodiac SA 112,501 -------------- 934,323 ----------------------------------------------------------------------------------------------------------------- Airlines - 0.1% 10,021 Air France-KLM 235,511 ----------------------------------------------------------------------------------------------------------------- Auto Components - 0.1% 8,430 Compagnie Generale des Etablissements Michelin 506,617 4,147 Valeo SA 147,624 -------------- 654,241 ----------------------------------------------------------------------------------------------------------------- Automobiles - 0.2% 8,120 Peugeot SA 505,118 9,459 Renault SA 1,015,965 -------------- 1,521,083 ----------------------------------------------------------------------------------------------------------------- Beverages - 0.1% 4,524 Pernod-Ricard 896,621 ----------------------------------------------------------------------------------------------------------------- Building Products - 0.2% 15,460 Cie de Saint-Gobain 1,105,034 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.2% 6,595 Air Liquide 1,284,327 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.2% 42,556 BNP Paribas 4,072,930 29,323 Credit Agricole SA 1,115,449 17,830 Societe Generale 2,621,824 -------------- 7,810,203 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.0% 1,788 Societe BIC SA 115,684 ----------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.1% 65,654 Alcatel SA 832,774 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.2% 11,219 Vinci SA 1,155,408 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Construction Materials - 0.2% 1,109 Imerys SA $ 88,627 8,059 Lafarge SA 1,011,407 -------------- 1,100,034 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 85,373 France Telecom SA 1,835,028 Services - 0.3% ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.3% 6,646 Alstom (a) 607,179 11,151 Schneider Electric SA 1,162,053 -------------- 1,769,232 ----------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.1% 6,935 Technip SA 383,962 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.3% 32,441 Carrefour SA 1,901,486 1,766 Casino Guichard Perrachon SA 134,245 -------------- 2,035,731 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.3% 12,771 Groupe Danone 1,622,360 ----------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 9,825 Gaz de France 329,774 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.1% 5,748 Cie Generale d'Optique Essilor International SA 578,423 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.1% 9,821 Accor SA 597,621 4,916 Sodexho Alliance SA 236,161 -------------- 833,782 ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.1% 17,020 Thomson 281,392 ----------------------------------------------------------------------------------------------------------------- IT Services - 0.1% 4,426 Atos Origin (a) 289,475 7,442 Cap Gemini SA 424,689 -------------- 714,164 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.5% 87,501 AXA 2,870,940 1,415 CNP Assurances 134,522 47,921 SCOR 104,780 -------------- 3,110,242 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.1% 322 Vallourec 387,024 ----------------------------------------------------------------------------------------------------------------- Media - 0.5% 7,124 Lagardere S.C.A. 525,598 2,237 PagesJaunes Groupe SA 70,222 9,178 Publicis Groupe 354,413 9,292 Societe Television Francaise 1 302,973 52,379 Vivendi SA 1,835,110 5,853 Vivendi SA (b) 204,328 -------------- 3,292,644 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.2% 30,913 Arcelor 1,491,755 ----------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.5% 51,152 Suez SA 2,125,692 16,017 Veolia Environnement 827,607 -------------- 2,953,299 ----------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.1% 2,658 Pinault-Printemps-Redoute 338,848 ----------------------------------------------------------------------------------------------------------------- Office Electronics - 0.0% 1,763 Neopost SA 200,856 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 1.2% 115,027 Total SA 7,567,276 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Personal Products - 0.2% 14,662 L'Oreal SA $ 1,384,516 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.8% 52,111 Sanofi-Aventis 5,084,033 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 492 Gecina SA 64,420 (REITs) - 0.1% 1,410 Klepierre 163,253 2,766 Unibail 482,061 -------------- 709,734 ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 34,849 STMicroelectronics NV 561,010 Equipment - 0.1% ----------------------------------------------------------------------------------------------------------------- Software - 0.1% 5,400 Business Objects SA (a) 147,278 2,635 Dassault Systemes SA 141,172 -------------- 288,450 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.2% 2,214 Hermes International 195,760 13,533 LVMH Moet Hennessy Louis Vuitton SA 1,342,796 -------------- 1,538,556 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.0% 39 Societe Des Autoroutes Paris-Rhin-Rhone 2,673 ----------------------------------------------------------------------------------------------------------------- Wireless Telecommunication Services - 0.1% 12,881 Bouygues 662,110 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in France 57,602,117 - - --------------------------------------------------------------------------------------------------------------------------------- Germany - 6.3% Air Freight & Logistics - 0.2% 40,214 Deutsche Post AG 1,077,762 ----------------------------------------------------------------------------------------------------------------- Airlines - 0.0% 16,156 Deutsche Lufthansa AG 297,475 ----------------------------------------------------------------------------------------------------------------- Auto Components - 0.1% 7,026 Continental AG 717,989 ----------------------------------------------------------------------------------------------------------------- Automobiles - 0.5% 48,144 DaimlerChrysler AG 2,378,051 9,701 Volkswagen AG 680,126 -------------- 3,058,177 ----------------------------------------------------------------------------------------------------------------- Capital Markets - 0.5% 26,296 Deutsche Bank AG Registered Shares 2,958,876 3,332 MLP AG 68,636 -------------- 3,027,512 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.7% 28,099 BASF AG 2,255,623 34,813 Bayer AG 1,599,830 5,274 Linde AG 406,304 -------------- 4,261,757 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.2% 35,733 Commerzbank AG 1,299,432 2,841 Deutsche Postbank AG 204,374 -------------- 1,503,806 ----------------------------------------------------------------------------------------------------------------- Computers & Peripherals - 0.0% 64 Wincor Nixdorf AG 8,179 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.0% 1,858 Bilfinger Berger AG 100,993 2,359 Hochtief AG 131,181 -------------- 232,174 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.1% 6,556 Deutsche Boerse AG 892,777 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 138,741 Deutsche Telekom AG 2,231,721 Services - 0.4% ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.6% 33,498 E.ON AG 3,855,780 ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.0% 1,790 Solarworld AG 112,311 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.1% 8,936 Metro AG $ 506,404 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 121 Suedzucker AG 2,683 ----------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 0.1% 1,529 Celesio AG 138,947 2,136 Fresenius Medical Care AG 245,481 -------------- 384,428 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.1% 14,762 TUI AG 292,382 ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.6% 912 Rheinmetall AG 63,566 42,682 Siemens AG 3,712,783 860 Siemens AG (b) 74,665 -------------- 3,851,014 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.8% 20,777 Allianz AG Registered Shares 3,281,516 10,741 Muenchener Rueckversicherungs AG Registered Shares 1,466,935 -------------- 4,748,451 ----------------------------------------------------------------------------------------------------------------- Life Sciences Tools & Services - 0.0% 4,634 Qiagen NV (a) 62,512 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.1% 1,583 Heidelberger Druckmaschn 71,957 7,652 MAN AG 553,987 -------------- 625,944 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 4,064 Premiere AG (a) 39,389 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% 1,267 Salzgitter AG 107,523 19,807 ThyssenKrupp AG 677,987 -------------- 785,510 ----------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.3% 22,007 RWE AG 1,830,470 ----------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.0% 143 KarstadtQuelle AG (a) 3,794 ----------------------------------------------------------------------------------------------------------------- Personal Products - 0.0% 530 Beiersdorf AG 79,839 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.1% 4,223 Altana AG 235,214 2,289 Merck KGaA 208,099 -------------- 443,313 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 2,617 IVG Immobilien AG 79,038 Development - 0.0% ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 41,983 Infineon Technologies AG (a) 467,569 Equipment - 0.1% ----------------------------------------------------------------------------------------------------------------- Software - 0.4% 11,186 SAP AG 2,360,006 ----------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.0% 1,073 Douglas Holding AG 49,557 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.1% 12,101 Adidas-Salomon AG 578,382 815 Puma AG Rudolf Dassler Sport 316,727 -------------- 895,109 ----------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage Finance - 0.1% 6,725 Hypo Real Estate Holding AG 408,365 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Germany 39,193,197 - - --------------------------------------------------------------------------------------------------------------------------------- Greece - 0.6% Beverages - 0.0% 5,270 Coca-Cola Hellenic Bottling Co. SA 157,008 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.3% 21,304 Alpha Bank AE 530,645 10,613 EFG Eurobank Ergasias SA 294,212
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 2,890 Emporiki Bank of Greece SA $ 100,069 20,854 National Bank of Greece SA 823,419 8,091 Piraeus Bank SA 192,417 -------------- 1,940,762 ----------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.0% 13,438 Intracom SA 89,350 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.0% 622 Hellenic Technodomiki Tev SA 5,981 9,486 Technical Olympic SA 42,695 -------------- 48,676 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 2,652 Titan Cement Co. SA 124,382 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.0% 4,962 Hellenic Exchanges SA 79,816 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 13,486 Hellenic Telecommunications Services - 0.1% Organization SA 296,941 ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.0% 5,799 Public Power Corp. 137,325 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.1% 15,257 OPAP SA 552,090 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.0% 4,010 Viohalco, Hellenic Copper and Aluminum Industry SA 36,712 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.0% 276 Hellenic Petroleum SA 3,670 ----------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.0% 103 Germanos SA 2,463 ----------------------------------------------------------------------------------------------------------------- Wireless Telecommunication Services - 0.1% 10,850 Cosmote Mobile Telecommunications SA 244,173 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Greece 3,713,368 - - --------------------------------------------------------------------------------------------------------------------------------- Hong Kong - 1.3% Airlines - 0.0% 6,263 Cathay Pacific Airways Ltd. 10,967 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.2% 234,900 BOC Hong Kong Holdings Ltd. 459,699 56,939 Bank of East Asia Ltd. 234,222 31,953 Hang Seng Bank Ltd. 405,223 -------------- 1,099,144 ----------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.0% 89,061 Foxconn International Holdings Ltd. (a) 190,345 ----------------------------------------------------------------------------------------------------------------- Distributors - 0.0% 55,990 Li & Fung Ltd. 113,177 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.1% 64,000 Hong Kong Exchanges and Clearing Ltd. 411,587 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 77,195 PCCW Ltd. 55,161 Services - 0.0% ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.1% 98,687 CLP Holdings Ltd. 577,485 1,500 Cheung Kong Infrastructure Holdings Ltd. 4,336 55,000 HongKong Electric Holdings 248,906 -------------- 830,727 ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.0% 87,328 Johnson Electric Holdings Ltd. 63,526 ----------------------------------------------------------------------------------------------------------------- Electronic Equipment & Instruments - 0.0% 1,147 Kingboard Chemical Holdings Ltd. 3,234 ----------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.0% 144,240 Hong Kong & China Gas 316,633 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.0% 24,990 Shangri-La Asia Ltd. 48,101 ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% 62,560 Techtronic Industries Co. 84,573 ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.2% 114,176 Hutchison Whampoa Ltd. 1,042,240 56,773 Melco International Development 142,536 -------------- 1,184,776 ----------------------------------------------------------------------------------------------------------------- Marine - 0.0% 1,557 Orient Overseas International Ltd. 5,643 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 164,414 The Link REIT (a) $ 329,167 (REITs) - 0.1% ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 70,835 Cheung Kong Holdings Ltd. 767,448 Development - 0.5% 16,000 Hang Lung Properties Ltd. 28,634 57,491 Henderson Land Development Co., Ltd. 298,669 1,791 Hysan Development Company Ltd. 5,050 1,000 Kerry Properties Ltd. 3,405 185,484 New World Development Ltd. 305,677 52,421 Sino Land Co. 83,690 79,324 Sun Hung Kai Properties Ltd. 808,866 53,077 Swire Pacific Ltd. Class A 547,717 52,107 Wharf Holdings Ltd. 185,162 -------------- 3,034,318 ----------------------------------------------------------------------------------------------------------------- Road & Rail - 0.0% 23,500 MTR Corp. 56,730 ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 5,004 ASM Pacific Technology 24,385 Equipment - 0.0% 388,000 Solomon Systech International Ltd. 97,912 -------------- 122,297 ----------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% 48,000 Esprit Holdings Ltd. 391,812 120,394 Giordano International Ltd. 56,965 -------------- 448,777 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.0% 59,353 Texwinca Holdings Ltd. 39,737 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.0% 18,349 Hopewell Holdings 51,737 ----------------------------------------------------------------------------------------------------------------- Wireless Telecommunication Services - 0.0% 45,647 Hutchison Telecommunications International Ltd. (a) 73,463 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Hong Kong 8,573,820 - - --------------------------------------------------------------------------------------------------------------------------------- Ireland - 0.8% Airlines - 0.0% 27,680 Ryanair Holdings Plc (a) 251,292 ----------------------------------------------------------------------------------------------------------------- Beverages - 0.0% 9,490 C&C Group Plc 82,393 ----------------------------------------------------------------------------------------------------------------- Building Products - 0.0% 326 Kingspan Group Plc 5,707 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.4% 50,871 Allied Irish Banks Plc 1,219,624 53,168 Bank of Ireland 948,372 14,136 Depfa Bank Plc 234,253 -------------- 2,402,249 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.2% 29,305 CRH Plc 958,769 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 36,182 Eircom Group Plc 100,394 Services - 0.0% ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.0% 648 Fyffes Plc 1,143 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 20,458 Greencore Group Plc 96,787 237 Iaws Group Plc 4,182 4,615 Kerry Group Plc 99,786 -------------- 200,755 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.0% 264 Paddy Power Plc 4,574 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% 54,122 Waterford Wedgewood Plc Restricted Shares $ 3,114 ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.0% 2,954 DCC Plc 71,766 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.1% 12,172 Irish Life & Permanent Plc 289,487 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 80,725 Independent News & Media Plc 236,373 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.1% 19,545 Elan Corp. Plc (a) 323,638 ----------------------------------------------------------------------------------------------------------------- Trading Companies & Distributors - 0.0% 3,425 Grafton Group Plc 43,137 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Ireland 4,974,791 - - --------------------------------------------------------------------------------------------------------------------------------- Italy - 3.5% Aerospace & Defense - 0.0% 14,956 Finmeccanica SpA 331,986 ----------------------------------------------------------------------------------------------------------------- Automobiles - 0.1% 35,328 Fiat SpA 469,161 ----------------------------------------------------------------------------------------------------------------- Capital Markets - 0.1% 10,369 Banca Fideuram SpA 60,273 24,836 Mediobanca SpA 486,164 15,925 Mediolanum SpA 111,730 -------------- 658,167 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.3% 184,937 Banca Intesa SpA 1,082,565 33,946 Banca Intesa SpA (RNC) 184,299 48,279 Banca Monte dei Paschi di Siena SpA 290,142 25,464 Banca Popolare di Milano Scrl 324,458 20,982 Banche Popolari Unite Scrl 542,747 22,265 Banco Popolare di Verona e Novara Scrl 596,432 77,207 Capitalia SpA 633,495 63,407 Sanpaolo IMI SpA 1,121,279 393,632 UniCredito Italiano SpA 3,081,832 -------------- 7,857,249 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 5,058 Italcementi SpA 127,926 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 585,550 Telecom Italia SpA 1,630,708 Services - 0.4% 294,827 Telecom Italia SpA (RNC) 761,505 -------------- 2,392,213 ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.4% 227,173 Enel SpA 1,958,102 102,045 Terna SpA 272,052 -------------- 2,230,154 ----------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.0% 63,411 Snam Rete Gas SpA 278,756 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.0% 4,375 Autogrill SpA 67,253 93 Lottomatica SpA 3,534 -------------- 70,787 ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.0% 111,693 Pire 97,101 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.4% 28,503 Alleanza Assicurazioni SpA 322,908 49,601 Assicurazioni Generali SpA 1,805,645 6,433 Fondiaria-Sai SpA 262,973 -------------- 2,391,526 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Internet Software & Services - 0.0% 27,235 Tiscali SpA (a) $ 80,966 ----------------------------------------------------------------------------------------------------------------- Media - 0.1% 4,823 Arnoldo Mondadori Editore SpA 46,598 12,331 Gruppo Editoriale L'Espresso SpA 65,859 49,526 Mediaset SpA 583,873 158,897 Seat Pagine Gialle SpA 73,956 -------------- 770,286 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.6% 111,634 ENI SpA 3,284,486 4,487 ENI SpA (b) 263,611 -------------- 3,548,097 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.0% 4,772 Benetton Group SpA 71,250 9,077 Bulgari SpA 102,740 4,546 Luxottica Group SpA 123,347 -------------- 297,337 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.1% 17,500 Autostrade SpA 491,836 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Italy 22,093,548 - - --------------------------------------------------------------------------------------------------------------------------------- Japan - 22.2% Air Freight & Logistics - 0.1% 21,000 Yamato Transport Co., Ltd. 372,917 ----------------------------------------------------------------------------------------------------------------- Airlines - 0.0% 2,000 All Nippon Airways Co., Ltd. 7,698 27,000 Japan Airlines Corp. 67,786 -------------- 75,484 ----------------------------------------------------------------------------------------------------------------- Auto Components - 0.4% 9,100 Aisin Seiki Co., Ltd. 270,656 30,000 Bridgestone Corp. 578,664 30,400 Denso Corp. 994,585 8,000 NGK Spark Plug Co., Ltd. 160,959 6,400 NOK Corp. 185,872 11,900 Stanley Electric Co., Ltd. 245,672 200 Sumitomo Rubber Industries, Ltd. 2,203 1,000 Toyoda Gosei Co., Ltd. 20,076 7,400 Toyota Industries Corp. 292,595 -------------- 2,751,282 ----------------------------------------------------------------------------------------------------------------- Automobiles - 1.8% 80,500 Honda Motor Co., Ltd. 2,556,226 107,100 Nissan Motor Co., Ltd. 1,171,106 145,300 Toyota Motor Corp. 7,613,585 8,400 Yamaha Motor Co., Ltd. 219,709 -------------- 11,560,626 ----------------------------------------------------------------------------------------------------------------- Beverages - 0.2% 14,500 Asahi Breweries Ltd. 203,836 200 Coca-Cola West Holdings Co. Ltd. 4,243 6,200 ITO EN, Ltd. 227,249 37,000 Kirin Brewery Co., Ltd. 582,277 25,000 Sapporo Holdings Ltd. 126,624
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 12,000 Takara Holdings, Inc. $ 70,227 -------------- 1,214,456 ----------------------------------------------------------------------------------------------------------------- Building Products - 0.3% 40,100 Asahi Glass Co., Ltd. 508,989 2,000 Central Glass Co., Ltd. 11,914 13,100 Daikin Industries Ltd. 454,945 10,200 JS Group Corp. 214,591 34,000 Nippon Sheet Glass Co., Ltd. 189,162 27,000 Sanwa Shutter Corp. 159,192 21,000 Toto Ltd. 200,971 -------------- 1,739,764 ----------------------------------------------------------------------------------------------------------------- Capital Markets - 0.6% 70,000 Daiwa Securities Group, Inc. 835,236 1,000 Jafco Co., Ltd. 60,010 10,300 Matsui Securities Co., Ltd. 97,580 6,000 Mitsubishi UFJ Securities Co. 77,470 33,500 Nikko Cordial Corp. 429,025 96,700 Nomura Holdings, Inc. 1,814,473 87 SBI E*trade Securities Co. Ltd. 115,680 1,300 Shinko Securities Co., Ltd. 5,504 499 Softbank Investments Corp. 220,439 -------------- 3,655,417 ----------------------------------------------------------------------------------------------------------------- Chemicals - 1.1% 49,000 Asahi Kasei Corp. 320,194 3,000 Daicel Chemical Industries Ltd. 24,537 28,000 Dainippon Ink and Chemicals, Inc. 105,078 4,000 Denki Kagaku Kogyo Kabushiki Kaisha 16,656 2,400 Hitachi Chemical Co., Ltd. 62,984 6,700 JSR Corp. 169,383 13,000 Kaneka Corp. 118,270 22,500 Kuraray Co., Ltd. 251,935 56,500 Mitsubishi Chemical Holdings Corp. 353,388 17,000 Mitsubishi Gas Chemical Co., Inc. 195,110 36,000 Mitsubishi Rayon Co., Ltd. 293,505 34,000 Mitsui Chemicals, Inc. 222,176 16,000 Nippon Kayaku Co., Ltd. 133,386 11,000 Nissan Chemical Industries Ltd. 137,217 7,610 Nitto Denko Corp. 542,549 19,800 Shin-Etsu Chemical Co., Ltd. 1,077,339 69,000 Showa Denko KK 307,230 13,000 Sumitomo Bakelite Co., Ltd. 122,136 64,000 Sumitomo Chemical Co., Ltd. 534,103 58,000 Teijin Ltd. 368,351
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 17,000 Tokuyama Corp. $ 252,810 75,700 Toray Industries, Inc. 657,570 35,000 Tosoh Corp. 139,614 70,000 Ube Industries Ltd. 202,686 -------------- 6,608,207 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 2.8% 11,000 The 77 Bank Ltd. 76,692 29,000 The Bank of Fukuoka Ltd. 220,706 8,000 The Bank of Kyoto Ltd. 86,428 72,000 The Bank of Yokohama Ltd.. 557,407 52,000 The Chiba Bank Ltd. 486,725 13,000 The Gunma Bank Ltd. 96,663 43,100 Hokuhoku Financial Group, Inc. 180,220 21,000 The Joyo Bank Ltd. 127,490 437 Mitsubishi UFJ Financial Group, Inc. 6,116,433 22,000 Mitsui Trust Holdings, Inc. 264,620 490 Mizuho Financial Group, Inc. 4,153,523 16,000 The Nishi-Nippon City Bank Ltd. 76,700 232 Resona Holdings, Inc. 732,642 10 Sapporo Hokuyo Holdings, Inc. 104,973 63,000 Shinsei Bank Ltd. 399,554 24,000 The Shizuoka Bank Ltd. 259,493 300 Sumitomo Mitsui Financial Group, Inc. 3,175,436 53,000 The Sumitomo Trust & Banking Co., Ltd. 579,539 4,000 Suruga Bank Ltd. 53,956 -------------- 17,749,200 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.3% 25,000 Dai Nippon Printing Co., Ltd. 387,088 210 The Goodwill Group, Inc. 155,229 4,500 Kokuyo Co., Ltd. 75,344 4,500 Meitec Corp. 146,831 5,100 Park24 Co. Ltd. 150,348 11,000 Secom Co., Ltd. 520,579 24,000 Toppan Printing Co., Ltd. 271,670 -------------- 1,707,089 ----------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.0% 7,000 Uniden Corp. 77,400 ----------------------------------------------------------------------------------------------------------------- Computers & Peripherals - 0.4% 108,000 Fujitsu Ltd. 838,000 11,800 Mitsumi Electric Company, Ltd. 139,765 116,000 NEC Corp. 618,991 4,200 Seiko Epson Corp. 114,631 159,000 Toshiba Corp. 1,038,998 -------------- 2,750,385 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.3% 8,457 COMSYS Holdings Corp. $ 104,459 10,000 Chiyoda Corp. 204,698 14,000 JGC Corp. 241,141 71,800 Kajima Corp. 329,747 8,000 Kinden Corp. 68,652 38,000 Nishimatsu Construction Co., Ltd. 141,941 24,000 Obayashi Corp. 165,228 13,000 Okumura Corp. 72,326 16,000 Shimizu Corp. 89,717 50,000 Taisei Corp. 182,828 3,000 Toda Corp. 14,513 -------------- 1,615,250 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 32,000 Sumitomo Osaka Cement Co., Ltd. 98,535 43,000 Taiheiyo Cement Corp. 158,737 -------------- 257,272 ----------------------------------------------------------------------------------------------------------------- Consumer Finance - 0.4% 3,010 Acom Co., Ltd. 163,514 1,400 Aeon Credit Service Co., Ltd. 34,046 5,100 Aiful Corp. 272,589 9,700 Credit Saison Co., Ltd. 459,905 200 Hitachi Capital Corp. 3,499 4,140 ORIX Corp. 1,012,229 3,400 Promise Co., Ltd. 197,192 10 Shohkoh Fund & Co., Ltd. 2,274 5,200 Takefuji Corp. 310,230 -------------- 2,455,478 ----------------------------------------------------------------------------------------------------------------- Containers & Packaging - 0.0% 5,000 Toyo Seikan Kaisha Ltd. 90,758 ----------------------------------------------------------------------------------------------------------------- Diversified Consumer Services - 0.0% 1,900 Benesse Corp. 65,652 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 273 Nippon Telegraph & Telephone Corp. 1,339,745 Services - 0.2% ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.7% 34,500 Chubu Electric Power Co., Inc. 932,555 5,900 Hokkaido Electric Power Co., Inc. 140,126 34,700 The Kansai Electric Power Co., Inc. 777,081 15,900 Kyushu Electric Power Co., Inc. 369,978 16,700 Tohoku Electric Power Co., Inc. 366,680 63,300 The Tokyo Electric Power Co., Inc. 1,749,797 -------------- 4,336,217 ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.3% 15,800 Fuji Electric Holdings Co., Ltd. 82,791 19,000 Fujikura Ltd. 209,920 41,000 Furukawa Electric Co., Ltd. 265,407 12,873 Matsushita Electric Works Ltd. 143,127 89,000 Mitsubishi Electric Corp. 713,931
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 32,300 Sumitomo Electric Industries Ltd. $ 473,558 2,900 Ushio, Inc. 61,265 -------------- 1,949,999 ----------------------------------------------------------------------------------------------------------------- Electronic Equipment & Instruments - 0.9% 11,000 Alps Electric Co., Ltd. 137,602 15,600 Citizen Watch Co., Ltd. 141,514 13,000 Dainippon Screen Manufacturing Co., Ltd. 119,179 1,300 Hirose Electric Co., Ltd. 158,072 153,000 Hitachi Ltd. 1,011,836 18,500 Hoya Corp. 658,662 4,500 Ibiden Co., Ltd. 216,507 1,700 Keyence Corp. 434,536 9,100 Kyocera Corp. 705,297 1,100 Mabuchi Motor Co., Ltd. 65,818 9,300 Murata Manufacturing Co., Ltd. 604,461 4,700 Nidec Corp. 337,139 6,000 Nippon Electric Glass Co. 120,457 31,000 Oki Electric Industry Co., Ltd. 73,219 9,300 Omron Corp. 237,147 8,100 TDK Corp. 616,455 12,000 Taiyo Yuden Co., Ltd. 152,526 3,500 Yokogawa Electric Corp. 49,937 -------------- 5,840,364 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.4% 29,600 Aeon Co., Ltd. 649,923 200 Circle K Sunkus Co., Ltd. 4,330 3,600 FamilyMart Co., Ltd. 103,923 2,200 Lawson, Inc. 80,252 3,000 Matsumotokiyoshi Co., Ltd. 76,368 37,900 Seven & I Holdings Co. Ltd. 1,249,906 4,000 UNY Co., Ltd. 59,030 -------------- 2,223,732 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.3% 40,000 Ajinomoto Co., Inc. 443,336 100 House Foods Corp. 1,513 16,600 Katokichi Co., Ltd. 166,995 14,000 Kikkoman Corp. 174,640 25,000 Meiji Dairies Corp. 174,736 26,000 Nichirei Corp. 139,194 2,000 Nippon Meat Packers, Inc. 23,199 11,000 Nisshin Seifun Group, Inc. 122,687 4,800 Nissin Food Products Co., Ltd. 169,637 12,500 QP Corp. 118,860
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 10,000 Toyo Suisan Kaisha, Ltd. $ 156,760 3,100 Yakult Honsha Co., Ltd. 84,337 6,000 Yamazaki Baking Co., Ltd. 53,799 -------------- 1,829,693 ----------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 80,000 Osaka Gas Co., Ltd. 257,534 129,000 Tokyo Gas Co., Ltd. 608,240 -------------- 865,774 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.1% 10,000 Olympus Corp. 267,681 5,600 Terumo Corp. 187,132 -------------- 454,813 ----------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 0.0% 5,100 Mediceo Paltac Holdings Co. Ltd. 91,235 1,000 Suzuken Co., Ltd. 39,715 -------------- 130,950 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.0% 1,800 Oriental Land Co., Ltd. 101,404 40 ROUND ONE Corp. 142,763 1,900 Skylark Co., Ltd. 41,469 -------------- 285,636 ----------------------------------------------------------------------------------------------------------------- Household Durables - 1.2% 8,400 Casio Computer Co., Ltd. 160,556 1,900 Daito Trust Construction Co., Ltd. 105,375 22,000 Daiwa House Industry Co., Ltd. 352,185 26,000 HASEKO Corp. (a) 88,475 3,400 Makita Corp. 107,667 104,000 Matsushita Electric Industrial Co., Ltd. 2,197,087 12,100 Pioneer Corp. 195,395 118,000 Sanyo Electric Co., Ltd. (a) 254,962 19,000 Sekisui Chemical Co., Ltd. 164,213 35,000 Sekisui House Ltd. 480,995 50,000 Sharp Corp. 790,797 52,700 Sony Corp. 2,328,085 -------------- 7,225,792 ----------------------------------------------------------------------------------------------------------------- Household Products - 0.1% 28,000 Kao Corp. 733,587 2,200 Uni-Charm Corp. 121,629 -------------- 855,216 ----------------------------------------------------------------------------------------------------------------- IT Services - 0.1% 3,000 CSK Holdings Corp. 136,990 400 Itochu Techno-Science Corp. 18,440 43 NET One Systems Co., Ltd. 80,121 53 NTT Data Corp. 229,497 1,300 Nomura Research Institute Ltd. 161,029 100 Obic Co., Ltd. 20,242
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 5,100 TIS, Inc. $ 142,763 -------------- 789,082 ----------------------------------------------------------------------------------------------------------------- Independent Power Producers & Energy 8,600 Electric Power Development Co. 328,006 Traders - 0.1% ----------------------------------------------------------------------------------------------------------------- Insurance - 0.6% 69 Millea Holdings, Inc. 1,285,658 70,000 Mitsui Sumitomo Insurance Co., Ltd. 879,937 47,800 Sompo Japan Insurance, Inc. 669,029 11,000 T&D Holdings, Inc. 890,084 -------------- 3,724,708 ----------------------------------------------------------------------------------------------------------------- Internet & Catalog Retail - 0.0% 374 Rakuten, Inc. 223,127 ----------------------------------------------------------------------------------------------------------------- Internet Software & Services - 0.1% 181 eAccess Ltd. 118,909 94 Index Corp. 92,919 490 Yahoo! Japan Corp. 259,756 -------------- 471,584 ----------------------------------------------------------------------------------------------------------------- Leisure Equipment & Products - 0.3% 27,100 Fuji Photo Film Co., Ltd. 910,327 11,100 Namco Bandai Holdings, Inc. 168,857 13,000 Nikon Corp. 227,214 1,300 Sankyo Co., Ltd. (Gunma) 82,675 8,932 Sega Sammy Holdings, Inc. 331,292 3,200 Shimano, Inc. 97,975 6,400 Yamaha Corp. 120,369 -------------- 1,938,709 ----------------------------------------------------------------------------------------------------------------- Machinery - 1.0% 18,000 Amada Co., Ltd. 188,952 9,100 Amano Corp. 135,328 10,000 Daifuku Co., Ltd. 165,158 39,000 Ebara Corp. 166,487 7,900 Fanuc Ltd. 710,423 5,000 Hino Motors Ltd. 29,130 200 Hitachi Construction Machinery Co., Ltd. 4,820 84,000 Ishikawajima-Harima Heavy Industries Co., Ltd. 266,002 7,300 JTEKT Corp. 141,128 32,000 The Japan Steel Works, Ltd. 219,464 90,000 Kawasaki Heavy Industries Ltd. 303,110 49,000 Komatsu Ltd. 975,156 44,000 Kubota Corp. 417,618 2,800 Kurita Water Industries Ltd. 57,560 23,000 Minebea Co., Ltd. 125,347 187,200 Mitsubishi Heavy Industries Ltd. 808,965 46,000 Mitsui Engineering & Shipbuilding Co., Ltd. 140,839 9,000 NGK Insulators Ltd. 105,341 14,000 NSK Ltd. 116,223 15,000 NTN Corp. 118,751
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 15,000 OKUMA Corp. $ 169,532 2,500 SMC Corp. 354,066 30,000 Sumitomo Heavy Industries Ltd. 277,654 3,700 THK Co., Ltd. 110,370 -------------- 6,107,424 ----------------------------------------------------------------------------------------------------------------- Marine - 0.2% 38,000 Kawasaki Kisen Kaisha Ltd. 220,059 69,000 Mitsui OSK Lines Ltd. 469,597 45,000 Nippon Yusen Kabushiki Kaisha 292,875 -------------- 982,531 ----------------------------------------------------------------------------------------------------------------- Media - 0.1% 600 Asatsu-DK, Inc. 19,420 86 Dentsu, Inc. 237,729 58 Fuji Television Network, Inc. 128,872 4,600 Toho Co., Ltd. 91,948 3,700 Tokyo Broadcasting System, Inc. 89,170 -------------- 567,139 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.8% 26,000 DAIDO STEEL CO., LTD. 204,243 7,000 Dowa Mining Co., Ltd. 61,969 30,300 JFE Holdings, Inc. 1,285,527 125,000 Kobe Steel Ltd. 391,462 78,000 Mitsubishi Materials Corp. 332,975 21,000 Mitsui Mining & Smelting Co., Ltd. 123,999 1,800 Nippon Light Metal Co., Ltd. 4,928 332,000 Nippon Steel Corp. 1,257,543 39,000 Nisshin Steel Co., Ltd. 125,548 201,000 Sumitomo Metal Industries Ltd. 829,917 36,000 Sumitomo Metal Mining Co., Ltd. 469,860 1,000 Sumitomo Titanium Corp. 158,509 100 Tokyo Steel Manufacturing Co., Ltd. 2,191 -------------- 5,248,671 ----------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.2% 8,000 Daimaru, Inc. 106,093 6,000 Hankyu Department Stores 46,608 9,700 Isetan Co., Ltd. 165,464 20,200 Marui Co., Ltd. 314,888 38,000 Mitsukoshi Ltd. 173,853 1,700 Ryohin Keikaku Co., Ltd. 139,492 19,000 Takashimaya Co., Ltd. 238,674 -------------- 1,185,072 ----------------------------------------------------------------------------------------------------------------- Office Electronics - 0.6% 56,400 Canon, Inc. 2,767,826 24,000 Konica Minolta Holdings, Inc. 303,372
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 34,000 Ricoh Co., Ltd. $ 667,716 -------------- 3,738,914 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.2% 32 Inpex Holdings, Inc. (a) 282,728 49,500 Nippon Mining Holdings, Inc. 416,993 78,000 Nippon Oil Corp. 570,424 5,600 Showa Shell Sekiyu KK 65,790 9,000 TonenGeneral Sekiyu KK 92,586 -------------- 1,428,521 ----------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.1% 37 Nippon Paper Group, Inc. 151,476 49,000 OJI Paper Co., Ltd. 279,045 -------------- 430,521 ----------------------------------------------------------------------------------------------------------------- Personal Products - 0.1% 5,600 Aderans Co., Ltd. 151,371 14,000 Shiseido Co., Ltd. 274,942 -------------- 426,313 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 1.1% 29,700 Astellas Pharma, Inc. 1,091,195 17,300 Chugai Pharmaceutical Co., Ltd. 353,370 37,500 Daiichi Sankyo Co. Ltd. 1,033,329 11,500 Eisai Co., Ltd. 518,086 10,000 Kaken Pharmaceutical Co., Ltd. 75,143 11,000 Kyowa Hakko Kogyo Co., Ltd. 74,190 5,000 Santen Pharmaceutical Co., Ltd. 118,751 22,000 Shionogi & Co., Ltd. 392,599 6,000 Taisho Pharmaceutical Co., Ltd. 117,832 46,600 Takeda Pharmaceutical Co., Ltd. 2,902,436 13,000 Tanabe Seiyaku Co., Ltd. 160,119 -------------- 6,837,050 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 47 Japan Prime Realty Investment Corp. 141,434 (REITs) - 0.1% 13 Japan Real Estate Investment Corp. 115,995 12 Japan Retail Fund Investment Corp. 94,476 31 Nippon Building Fund, Inc. 301,010 21 Nomura Real Estate Office Fund, Inc. 166,435 -------------- 819,350 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 121 KK DaVinci Advisors (a) 119,608 Development - 0.6% 4,500 Leopalace21 Corp. 155,491 63,000 Mitsubishi Estate Co., Ltd. 1,339,194 46,000 Mitsui Fudosan Co., Ltd. 999,956 22,000 Sumitomo Realty & Development Co., Ltd. 542,711 21,000 Tokyo Tatemono Co., Ltd. 225,220 24,000 Tokyu Land Corp. 187,062 -------------- 3,569,242 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Road & Rail - 0.7% 87 Central Japan Railway Co. $ 867,603 183 East Japan Railway Co. 1,360,714 14,000 Keihin Electric Express Railway Co., Ltd. 99,200 19,000 Keio Electric Railway Co., Ltd. 123,160 34,000 Keisei Electric Railway Co., Ltd. 192,136 67,000 Kintetsu Corp. 223,890 35,000 Nippon Express Co., Ltd. 189,214 24,000 Odakyu Electric Railway Co., Ltd. 154,940 13,000 Seino Holdings Corp. 137,375 38,000 Tobu Railway Co., Ltd. 181,498 40,000 Tokyu Corp. 233,740 90 West Japan Railway Co. 373,967 -------------- 4,137,437 ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 4,300 Advantest Corp. 438,595 Equipment - 0.4% 4,100 Elpida Memory, Inc. (a) 154,223 1,300 NEC Electronics Corp. (a) 41,736 5,800 Rohm Co., Ltd. 519,040 11,000 Sanken Electric Co., Ltd. 140,104 2,700 Sumco Corp. 153,996 9,900 Tokyo Electron Ltd. 692,822 3,500 Tokyo Seimitsu Co. Ltd. 181,866 -------------- 2,322,382 ----------------------------------------------------------------------------------------------------------------- Software - 0.2% 4,000 Fuji Soft, Inc. 131,916 3,600 Konami Corp. 79,517 5,700 Nintendo Co., Ltd. 957,355 900 Oracle Corp. Japan 42,120 5,000 Trend Micro, Inc. 168,832 -------------- 1,379,740 ----------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.2% 2,600 Aoyama Trading Co., Ltd. 81,424 4,100 Autobacs Seven Co., Ltd. 178,612 3,200 Fast Retailing Co., Ltd. 261,733 50 Nitori Co., Ltd. 2,436 5,800 Shimachu Co., Ltd. 151,704 600 Shimamura Co., Ltd. 65,818 680 USS Co., Ltd. 44,970 3,800 Yamada Denki Co., Ltd. 387,928 -------------- 1,174,625 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.1% 13,000 Asics Corp. 132,599 22,000 Gunze Ltd. 131,251 1,000 Nisshinbo Industries, Inc. 10,952 7,000 Onward Kashiyama Co., Ltd. 107,834
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 11,000 Tokyo Style Co., Ltd. $ 130,963 4,000 Toyobo Co., Ltd. 11,337 11,000 Wacoal Holdings Corp. 154,345 -------------- 679,281 ----------------------------------------------------------------------------------------------------------------- Tobacco - 0.1% 249 Japan Tobacco, Inc. 908,306 ----------------------------------------------------------------------------------------------------------------- Trading Companies & Distributors - 0.7% 72,000 Itochu Corp. 632,988 92,000 Marubeni Corp. 490,924 68,700 Mitsubishi Corp. 1,373,219 84,000 Mitsui & Co., Ltd. 1,187,456 21,000 Sojitz Corp. (a) 83,034 48,000 Sumitomo Corp. 633,618 7,000 Toyota Tsusho Corp. 168,088 -------------- 4,569,327 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.0% 2,000 Kamigumi Co., Ltd. 15,204 7,000 Mitsubishi Logistics Corp. 109,732 -------------- 124,936 ----------------------------------------------------------------------------------------------------------------- Wireless Telecommunication Services - 0.5% 107 KDDI Corp. 658,015 889 NTT DoCoMo, Inc. 1,306,495 41,500 Softbank Corp. 931,177 -------------- 2,895,687 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Japan 139,092,253 - - --------------------------------------------------------------------------------------------------------------------------------- Luxembourg - 0.0% Personal Products - 0.0% 183 Oriflame Cosmetics SA 6,084 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Luxembourg 6,084 - - --------------------------------------------------------------------------------------------------------------------------------- Netherlands - Air Freight & Logistics - 0.1% 24,597 TNT NV 880,003 3.1% ----------------------------------------------------------------------------------------------------------------- Beverages - 0.1% 11,236 Heineken NV 476,266 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.2% 14,621 Akzo Nobel NV 788,192 9,418 Koninklijke DSM NV 392,101 -------------- 1,180,293 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.4% 91,876 ABN AMRO Holding NV 2,512,854 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.1% 124 Buhrmann NV 1,798 1,033 Randstad Holdings NV 60,548 14,134 Vedior NV 296,751 -------------- 359,097 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.7% 5,748 Euronext NV 538,735 96,491 ING Groep NV CVA 3,791,436 -------------- 4,330,171 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 100,293 Koninklijke KPN NV 1,127,233 Services - 0.2% ----------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.0% 10,642 SBM Offshore NV 283,580 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.1% 78,715 Koninklijke Ahold NV (a) 683,411 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Food Products - 0.4% 6,222 Royal Numico NV $ 279,169 88,398 Unilever NV 2,004,036 -------------- 2,283,205 ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.3% 68,487 Koninklijke Philips Electronics NV 2,139,370 ----------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 3,472 Getronics NV 37,336 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.2% 72,566 Aegon NV 1,240,563 ----------------------------------------------------------------------------------------------------------------- Media - 0.1% 36,364 Reed Elsevier NV 546,806 12,035 Wolters Kluwer NV 284,228 -------------- 831,034 ----------------------------------------------------------------------------------------------------------------- Office Electronics - 0.0% 283 OCE NV 4,154 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 1,615 Corio NV 100,423 (REITs) - 0.1% 3,893 Rodamco Europe NV 381,550 353 Wereldhave NV 34,326 -------------- 516,299 ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 30,227 ASML Holding NV (a) 612,216 Equipment - 0.1% ----------------------------------------------------------------------------------------------------------------- Trading Companies & Distributors - 0.0% 1,166 Hagemeyer NV (a) 5,382 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in the Netherlands 19,502,467 - - --------------------------------------------------------------------------------------------------------------------------------- New Construction Materials - 0.0% 19,230 Fletcher Building Ltd. 107,359 Zealand - 0.1% ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 66,963 Telecom Corp. of New Zealand Ltd. 165,064 Services - 0.1% ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.0% 20,226 Contact Energy Ltd. 87,867 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.0% 41,926 Fisher & Paykel Healthcare Corp. 110,255 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.0% 1,741 Sky City Ltd. 5,736 ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% 27,665 Fisher & Paykel Appliances Holdings Ltd. 77,816 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.0% 10,253 Tower Ltd. (a) 21,520 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 241 Sky Network Television Ltd. 846 ----------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.0% 14,918 Warehouse Group Ltd. 45,147 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 999 Kiwi Income Property Trust 835 (REITs) - 0.0% ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.0% 58,991 Auckland International Airport Ltd. 78,106 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in New Zealand 700,551 - - --------------------------------------------------------------------------------------------------------------------------------- Norway - 0.8% Airlines - 0.0% 2,392 SAS AB (a) 24,410 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.0% 8,050 Yara International ASA 107,375 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.1% 28,499 DNB NOR ASA 353,799 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.0% 23,129 Tomra Systems ASA 187,705 ----------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.0% 14,741 Tandberg ASA 122,001 357 Tandberg Television ASA (a) 5,924 -------------- 127,925 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 15,595 Telenor ASA 188,591 Services - 0.1% 8,600 Telenor ASA (b) 313,814 -------------- 502,405 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.1% 7,490 Acergy SA (a) $ 114,048 16,804 Ocean RIG ASA (a) 118,011 4,462 Petrojarl ASA (a) 29,400 4,462 Petroleum Geo-Services ASA (a) 251,689 50 ProSafe ASA 3,053 8,780 TGS Nopec Geophysical Co. ASA (a) 155,208 -------------- 671,409 ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.1% 8,305 Orkla ASA 385,047 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.0% 21,838 Storebrand ASA 225,483 ----------------------------------------------------------------------------------------------------------------- Marine - 0.0% 50 Stolt-Nielsen SA 1,173 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 3,218 Schibsted ASA 85,846 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.4% 71,149 DET Norske Oljeselskap 142,925 3,194 Frontline Ltd. 119,340 41,651 Norsk Hydro ASA 1,104,428 37,007 Statoil ASA 1,049,679 -------------- 2,416,372 ----------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.0% 3,197 Norske Skogindustrier ASA 46,882 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Norway 5,135,831 - - --------------------------------------------------------------------------------------------------------------------------------- Portugal - 0.3% Commercial Banks - 0.1% 23,822 Banco BPI SA 180,934 82,464 Banco Comercial Portugues SA Registered Shares 234,084 9,325 Banco Espirito Santo SA Registered Shares 125,674 -------------- 540,692 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 13,841 Cimpor Cimentos de Portugal SA 92,206 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 52,568 Portugal Telecom SGPS SA Registered Shares 634,524 Services - 0.1% ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.1% 77,296 Energias de Portugal SA 303,424 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.0% 3,659 Jeronimo Martins 62,459 ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.0% 38,165 Sonae SGPS SA 57,096 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 3,893 PT Multimedia Servicos de Telecomunicacoes e Multimedia SGPS SA 45,049 ----------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.0% 2,587 Sonae Industria SGPS SA (a) 22,262 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.0% 7,704 Brisa-Auto Estradas de Portugal SA Private Shares 80,382 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Portugal 1,838,094 - - --------------------------------------------------------------------------------------------------------------------------------- Singapore - 0.8% Aerospace & Defense - 0.0% 52,213 Singapore Technologies Engineering Ltd. 95,422 ----------------------------------------------------------------------------------------------------------------- Air Freight & Logistics - 0.0% 127,954 Singapore Post Ltd. 87,388 ----------------------------------------------------------------------------------------------------------------- Airlines - 0.0% 17,582 Singapore Airlines Ltd. 141,203 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.3% 68,605 DBS Group Holdings Ltd. 785,247 108,914 Oversea-Chinese Banking Corp. 454,569 67,572 United Overseas Bank Ltd. 666,597 -------------- 1,906,413 ----------------------------------------------------------------------------------------------------------------- Computers & Peripherals - 0.0% 5,357 Creative Technology Ltd. 29,811
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Distributors - 0.0% 3,529 Jardine Cycle & Carriage Ltd. $ 22,316 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.0% 75,000 Singapore Exchange Ltd. 166,946 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 332,771 Singapore Telecommunications Ltd. 532,400 Services - 0.1% ----------------------------------------------------------------------------------------------------------------- Electronic Equipment & Instruments - 0.0% 5,000 Venture Corp. Ltd. 33,516 ----------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 0.0% 76,000 Parkway Holdings Ltd. 118,709 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.0% 27,535 City Developments Ltd. 162,805 ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.1% 20,675 Fraser and Neave Ltd. 52,297 1,766 Haw Par Corp. Ltd. 6,366 37,914 Keppel Corp. Ltd. 352,443 23,590 SembCorp Industries Ltd. 48,333 -------------- 459,439 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.1% 96,427 SembCorp Marine Ltd. 182,933 ----------------------------------------------------------------------------------------------------------------- Marine - 0.0% 92,002 Cosco Corp. (Singapore) Ltd. 73,306 1,200 Neptune Orient Lines Ltd. 1,374 -------------- 74,680 ----------------------------------------------------------------------------------------------------------------- Media - 0.1% 81,316 Singapore Press Holdings Ltd. 211,858 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.0% 194 Singapore Petroleum Co. Ltd. 620 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 1,152 Ascendas Real Estate Investment Trust 1,399 (REITs) - 0.0% ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 90,833 CapitaLand Ltd. 258,481 Development - 0.1% 2,182 Keppel Land Ltd. 5,575 7,457 UOL Group Ltd. 13,487 83,100 Wing Tai Holdings Ltd. 74,621 -------------- 352,164 ----------------------------------------------------------------------------------------------------------------- Road & Rail - 0.0% 95,816 ComfortDelgro Corp. Ltd. 92,705 ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 82,002 Chartered Semiconductor Manufacturing Equipment - 0.0% Ltd. (a) 70,005 1,120 Chartered Semiconductor Manufacturing Ltd. (a)(b) 9,744 2,000 STATS ChipPAC Ltd. (a) 1,258 -------------- 81,007 ----------------------------------------------------------------------------------------------------------------- Trading Companies & Distributors - 0.0% 1,100 Noble Group Ltd. 758 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Singapore 4,754,492 - - --------------------------------------------------------------------------------------------------------------------------------- Spain - 3.6% Airlines - 0.0% 29,434 Iberia Lineas Aereas de Espana 76,025 ----------------------------------------------------------------------------------------------------------------- Biotechnology - 0.0% 13,970 Zeltia SA 102,711 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.4% 181,006 Banco Bilbao Vizcaya Argentaria SA 3,721,632 50,064 Banco Popular Espanol SA 745,772 306,300 Banco Santander Central Hispano SA 4,472,676 -------------- 8,940,080 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.2% 15,679 ACS Actividades de Construccion y Servicios, SA 653,768 1,045 Acciona SA 162,281 2,241 Fomento de Construcciones y Contratas SA 170,352
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 3,188 Grupo Ferrovial SA $ 243,359 4,680 Sacyr Vallehermoso SA 156,365 -------------- 1,386,125 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 233,917 Telefonica SA 3,894,280 Services - 0.6% 1,124 Telefonica SA (b) 55,908 -------------- 3,950,188 ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.6% 51,526 Endesa SA 1,791,389 44,099 Iberdrola SA 1,518,516 5,815 Union Fenosa SA 224,995 -------------- 3,534,900 ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.1% 11,492 Gamesa Corp. Tecnologica SA 246,277 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 265 Azucarera Ebro Agricolas, SA 5,438 ----------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.0% 7,017 Gas Natural SDG SA 214,170 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.0% 7,075 NH Hoteles SA 126,832 ----------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 10,794 Indra Sistemas SA 211,858 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.0% 7,569 Corporacion Mapfre SA 139,656 ----------------------------------------------------------------------------------------------------------------- Media - 0.1% 6,197 Antena 3 de Television SA 141,520 240 Promotora de Informaciones SA 3,851 513 Sogecable SA (a) 14,752 10,099 Telefonica Publicidad e Informacion, SA 109,375 -------------- 269,498 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.0% 10,180 Acerinox SA 176,507 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.2% 50,685 Repsol YPF SA 1,451,069 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 134 Inmobiliaria Colonial SA 10,640 Development - 0.1% 3,249 Metrovacesa SA 293,298 -------------- 303,938 ----------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% 9,564 Inditex SA 403,315 ----------------------------------------------------------------------------------------------------------------- Tobacco - 0.1% 15,811 Altadis SA 747,215 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.1% 7,073 Abertis Infraestructuras SA 165,604 6,540 Cintra Concesiones de Infraestructuras de Transporte SA 85,464 -------------- 251,068 ----------------------------------------------------------------------------------------------------------------- Water Utilities - 0.0% 3,213 Sociedad General de Aguas de Barcelona SA Class A 89,274 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Spain 22,626,144 - - --------------------------------------------------------------------------------------------------------------------------------- Sweden - 2.1% Airlines - 0.0% 1,617 SAS AB (a) 17,047 ----------------------------------------------------------------------------------------------------------------- Building Products - 0.1% 20,377 Assa Abloy AB B 342,283 ----------------------------------------------------------------------------------------------------------------- Capital Markets - 0.0% 6,838 D Carnegie AB 125,303 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.4% 111,951 Nordea Bank AB 1,336,552 28,753 Skandinaviska Enskilda Banken AB Class A 684,552
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 26,612 Svenska Handelsbanken Class A $ 685,300 -------------- 2,706,404 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.1% 23,048 Securitas AB 441,542 ----------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.4% 714,376 Telefonaktiebolaget LM Ericsson 2,360,279 1,307 Telefonaktiebolaget LM Ericsson (b) 43,183 -------------- 2,403,462 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.0% 17,205 Skanska AB Class B 265,117 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.0% 1,210 OMHEX AB 21,669 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 17,466 Tele2 AB 176,395 Services - 0.1% 50,260 TeliaSonera AB 285,368 -------------- 461,763 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.0% 20 Axfood AB 575 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.0% 7,749 Elekta AB 131,240 2,520 Getinge AB Class B 42,854 -------------- 174,094 ----------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 0.0% 234 Capio AB (a) 4,190 ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.1% 17,768 Electrolux AB Series B 256,526 17,771 Husqvarna AB (a) 214,013 -------------- 470,539 ----------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 4,686 WM-data AB Class B 14,442 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.5% 5,467 Alfa Laval AB 163,552 19,849 Atlas Copco AB Class A 551,097 7,616 Atlas Copco AB Class B 197,710 25,500 SKF AB Class B 401,787 58,095 Sandvik AB 675,445 3,346 Scania AB Class B 151,891 6,544 Trelleborg AB Class B 111,740 3,680 Volvo AB Class A 177,271 11,529 Volvo AB Class B 566,571 -------------- 2,997,064 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 16,001 Eniro AB 168,263 2,610 Modern Times Group AB 137,141 2,610 Modern Times Group AB (a) 8,928 -------------- 314,332 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% 10,010 Boliden AB 184,124 2,520 Hoganas AB 62,620 5,201 Ssab Svenskt Stal AB 103,609 -------------- 350,353 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.0% 502 Lundin Petroleum AB (a) 6,080 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.1% 6,721 Billerud AB $ 89,104 945 Holmen AB Class B 38,175 12,430 Svenska Cellulosa AB 513,355 -------------- 640,634 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 373 Castellum AB 3,819 Development - 0.0% 218 Fabege AB 4,055 4,619 Kungsleden AB 54,183 6,283 Wihlborgs Fastigheter AB 108,155 -------------- 170,212 ----------------------------------------------------------------------------------------------------------------- Software - 0.0% 37,000 Telelogic AB (a) 82,183 ----------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.2% 26,180 Hennes & Mauritz AB B Shares 1,013,989 ----------------------------------------------------------------------------------------------------------------- Tobacco - 0.0% 18,950 Swedish Match AB 305,159 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Sweden 13,328,436 - - --------------------------------------------------------------------------------------------------------------------------------- Switzerland - Auto Components - 0.0% 16 Rieter Holding AG 6,139 6.4% ----------------------------------------------------------------------------------------------------------------- Biotechnology - 0.1% 437 Serono SA 301,262 ----------------------------------------------------------------------------------------------------------------- Building Products - 0.0% 139 Geberit AG Registered Shares 160,446 ----------------------------------------------------------------------------------------------------------------- Capital Markets - 1.5% 63,432 Credit Suisse Group 3,541,836 55,029 UBS AG Registered Shares 6,019,499 -------------- 9,561,335 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.2% 5,361 Ciba Specialty Chemicals AG Registered Shares 298,247 8,419 Clariant AG 119,241 164 Givaudan 128,857 1,964 Lonza Group AG Registered Shares 134,434 6,516 Syngenta AG 864,367 -------------- 1,545,146 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.1% 8,170 Adecco SA Registered Shares 482,197 171 SGS SA 161,927 -------------- 644,124 ----------------------------------------------------------------------------------------------------------------- Computers & Peripherals - 0.0% 3,533 Logitech International SA (a) 136,129 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.1% 11,481 Holcim Ltd. 878,179 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 1,193 Swisscom AG 391,986 Services - 0.1% ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.2% 101,024 ABB Ltd. 1,311,250 ----------------------------------------------------------------------------------------------------------------- Electronic Equipment & Instruments - 0.0% 1,880 Kudelski SA 45,350 ----------------------------------------------------------------------------------------------------------------- Food Products - 1.1% 21,394 Nestle SA Registered Shares 6,706,364 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.1% 1,521 Nobel Biocare Holding AG 360,384 2,121 Phonak Holding AG Registered Shares 132,368 101 Straumann Holding AG Registered Shares 25,703 1,834 Synthes, Inc. 220,829 -------------- 739,284 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.0% 8 Kuoni Reisen Holding AG Registered Shares $ 4,480 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.5% 18,933 Swiss Reinsurance Registered Shares 1,320,673 7,226 Zurich Financial Services AG 1,580,872 -------------- 2,901,545 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.0% 664 SIG Holding AG Registered Shares 145,809 142 Schindler Holding AG 7,355 212 Sulzer AG 158,524 -------------- 311,688 ----------------------------------------------------------------------------------------------------------------- Marine - 0.0% 2,295 Kuehne & Nagel International AG 166,739 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 2.1% 123,337 Novartis AG Registered Shares 6,665,232 37,298 Roche Holding AG 6,153,409 -------------- 12,818,641 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 1,750 PSP Swiss Property AG 90,286 Development - 0.0% ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 1,096 Micronas Semiconductor Holding AG Equipment - 0.1% Registered Shares 29,525 641 Unaxis Holding AG 177,910 -------------- 207,435 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.2% 25,736 Compagnie Financiere Richemont AG 1,176,503 1,364 The Swatch Group Ltd. Bearer Shares 229,931 1,347 The Swatch Group Ltd. Registered Shares 46,953 -------------- 1,453,387 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Switzerland 40,381,195 - - --------------------------------------------------------------------------------------------------------------------------------- United Aerospace & Defense - 0.3% 176,092 BAE Systems Plc 1,204,247 Kingdom - 22.8% 33,228 Cobham Plc 102,633 21,337 Meggitt Plc 125,989 91,898 Rolls-Royce Group Plc 703,678 -------------- 2,136,547 ----------------------------------------------------------------------------------------------------------------- Airlines - 0.1% 45,599 British Airways Plc (a) 289,068 ----------------------------------------------------------------------------------------------------------------- Auto Components - 0.0% 25,737 GKN Plc 129,954 ----------------------------------------------------------------------------------------------------------------- Automobiles - 0.0% 1,025 TI Automotive Ltd. A (a) 0 ----------------------------------------------------------------------------------------------------------------- Beverages - 0.6% 153,488 Diageo Plc 2,581,932 43,030 SABMiller Plc 775,570 44,800 Scottish & Newcastle Plc 422,380 -------------- 3,779,882 ----------------------------------------------------------------------------------------------------------------- Capital Markets - 0.3% 25,440 3i Group Plc 424,180 49,741 Amvescap Plc 455,624 2,707 Close Brothers Group Plc 45,612 5,488 Collins Stewart Hldgs PLC 77,041 11,924 ICAP Plc 109,830
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 2,082 Investec Plc $ 99,350 17,882 Man Group Plc 842,720 3,844 Schroders Plc 71,808 -------------- 2,126,165 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.2% 33,130 BOC Group Plc 968,771 51,891 Imperial Chemical Industries Plc 348,391 7,957 Johnson Matthey Plc 195,294 -------------- 1,512,456 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 4.2% 346,680 Barclays Plc 3,940,201 204,250 HBOS Plc 3,551,057 594,963 HSBC Holdings Plc 10,470,477 301,627 Lloyds TSB Group Plc 2,965,113 164,849 Royal Bank of Scotland Group Plc 5,421,080 -------------- 26,347,928 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.2% 580 Aggreko Plc 3,081 40,938 Brambles Industries Plc 325,584 24,329 Capita Group Plc 207,665 424 Davis Service Group Plc 3,700 368 De La Rue Plc 3,720 28,394 Group 4 Securicor Plc 88,096 62,856 Hays Plc 156,945 1,536 Intertek Group Plc 19,886 117,019 Rentokil Initial Plc 337,636 3,289 Serco Group Plc 19,466 -------------- 1,165,779 ----------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.1% 9,765 CSR Plc (a) 227,568 1 Telent Plc 10 -------------- 227,578 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.0% 11,218 Amec Plc 66,032 22,845 Balfour Beatty Plc 145,140 -------------- 211,172 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.1% 41,601 Hanson Plc 505,134 ----------------------------------------------------------------------------------------------------------------- Consumer Finance - 0.0% 7,372 Cattles Plc 44,893 12,919 Provident Financial Plc 146,951 -------------- 191,844 ----------------------------------------------------------------------------------------------------------------- Containers & Packaging - 0.1% 30,771 Rexam Plc 300,499 ----------------------------------------------------------------------------------------------------------------- Distributors - 0.0% 10,537 Inchcape Plc 92,085 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.1% 17,150 London Stock Exchange Group Plc 360,973 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 455,650 BT Group Plc 2,016,281 Services - 0.4%
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 145,013 Cable & Wireless Plc $ 308,441 -------------- 2,324,722 ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.3% 46,956 Scottish & Southern Energy Plc 999,618 70,387 Scottish Power Plc 758,977 788 Scottish Power Plc (b) 33,994 -------------- 1,792,589 ----------------------------------------------------------------------------------------------------------------- Electronic Equipment & Instruments - 0.0% 17,536 Electrocomponents Plc 75,165 4,873 Premier Farnell Plc 15,975 -------------- 91,140 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.6% 31,083 Boots Group Plc 442,384 90,508 J Sainsbury Plc 559,952 398,904 Tesco Plc 2,464,238 -------------- 3,466,574 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.4% 117,300 Cadbury Schweppes Plc 1,131,410 23,044 Tate & Lyle Plc 258,071 59,402 Unilever Plc 1,335,982 -------------- 2,725,463 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.1% 3,701 SSL International Plc 20,347 64,393 Smith & Nephew Plc 496,045 -------------- 516,392 ----------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 0.0% 7,115 Alliance Unichem Plc 134,491 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.5% 8,427 Carnival Plc 343,364 130,207 Compass Group Plc 631,564 13,556 Enterprise Inns Plc 237,688 526 First Choice Holidays Plc 2,225 22,052 Intercontinental Hotels Group Plc 385,638 40,108 Ladbrokes Plc 302,292 34,218 Mitchells & Butlers Plc 326,250 6,689 Punch Taverns Plc 108,252 20,616 Rank Group Plc 76,070 11,261 Sportingbet Plc 81,958 15,250 Whitbread Plc 328,874 26,415 William Hill Plc 306,083 -------------- 3,130,258 ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.2% 13,853 Barratt Developments Plc 242,896 850 Bellway Plc 18,237 2,757 Berkeley Group Holdings Plc 61,854 122 Bovis Homes Group Plc 1,812
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 17,405 Persimmon Plc $ 397,244 42,300 Taylor Woodrow Plc 261,309 33,251 Wimpey George Plc 279,670 -------------- 1,263,022 ----------------------------------------------------------------------------------------------------------------- Household Products - 0.2% 35,555 Reckitt Benckiser Plc 1,328,372 ----------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 43,029 LogicaCMG Plc 138,875 ----------------------------------------------------------------------------------------------------------------- Independent Power Producers & Energy 77,818 International Power Plc 409,478 Traders - 0.1% ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.2% 17,683 Cookson Group Plc 171,787 37,131 Smiths Group Plc 611,902 40,930 Tomkins Plc 217,834 -------------- 1,001,523 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.9% 115,816 Aviva Plc 1,639,765 112,244 Friends Provident Plc 371,088 372,927 Legal & General Group Plc 884,604 295,614 Old Mutual Plc 892,577 132,791 Prudential Plc 1,500,644 252 Resolution Plc 3,123 104,732 Royal & Sun Alliance Insurance Group 260,537 -------------- 5,552,338 ----------------------------------------------------------------------------------------------------------------- Internet & Catalog Retail - 0.1% 50,067 GUS Plc 894,533 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.1% 10,160 FKI Plc 20,107 11,145 IMI Plc 102,912 206,656 Invensys Plc (a) 73,578 -------------- 196,597 ----------------------------------------------------------------------------------------------------------------- Media - 0.8% 74,833 Aegis Group Plc 180,276 69,702 British Sky Broadcasting Plc 739,344 10,334 Daily Mail & General Trust 117,356 62,341 EMI Group Plc 350,234 9,395 Emap Plc 147,962 217,260 ITV Plc 433,982 43,313 Pearson Plc 590,009 66,943 Reed Elsevier Plc 676,029 86,174 Reuters Group Plc 613,627 10,641 Trinity Mirror Plc 96,044 14,647 United Business Media Plc 175,411 72,180 WPP Group Plc 873,764 32,669 Yell Group Plc 309,065 -------------- 5,303,103 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 1.5% 72,979 Anglo American Plc 2,993,830 133,948 BHP Billiton Plc 2,598,839
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 36,160 Corus Group Plc $ 305,305 56,351 Rio Tinto Plc Registered Shares 2,979,775 21,955 Xstrata Plc 832,444 -------------- 9,710,193 ----------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.5% 215,405 Centrica Plc 1,136,447 153,874 National Grid Plc 1,664,903 52,179 United Utilities Plc 619,099 -------------- 3,420,449 ----------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.2% 92,673 Marks & Spencer Group Plc 1,006,141 15,229 Next Plc 459,684 -------------- 1,465,825 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 4.3% 193,718 BG Group Plc 2,588,663 1,068,495 BP Plc 12,460,209 3,749 BP Plc (b) 260,968 204,390 Royal Dutch Shell Plc 6,880,164 143,015 Royal Dutch Shell Plc Class B 5,001,967 -------------- 27,191,971 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 2.2% 84,007 AstraZeneca Plc 5,071,464 304,144 GlaxoSmithKline Plc 8,499,854 800 GlaxoSmithKline Plc (b) 44,640 -------------- 13,615,958 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 30,459 British Land Co. Plc 711,519 Development - 0.4% 369 Brixton Plc 3,271 231 Great Portland Estates Plc 2,136 18,654 Hammerson Plc 408,499 26,877 Land Securities Group Plc 891,807 9,622 Liberty International Plc 189,532 17,134 Slough Estates Plc 193,786 -------------- 2,400,550 ----------------------------------------------------------------------------------------------------------------- Road & Rail - 0.1% 7,097 Arriva Plc 78,298 16,088 Firstgroup Plc 139,554 8,934 National Express Group Plc 146,733 30,764 Stagecoach Group Plc 65,577 -------------- 430,162 ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 77,662 ARM Holdings Plc 162,673 Equipment - 0.0% ----------------------------------------------------------------------------------------------------------------- Software - 0.1% 21,202 Misys Plc 84,311 61,121 Sage Group Plc 260,855 -------------- 345,166 ----------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.2% 70,155 DSG International Plc 247,833
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Common Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- 45,858 HMV Group Plc $ 145,885 49,782 Kesa Electricals Plc 266,096 141,072 Kingfisher Plc 622,296 24,803 MFI Furniture Plc 49,545 76,918 Signet Group Plc 136,574 2,126 Travis Perkins Plc 59,494 -------------- 1,527,723 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.1% 39,914 Burberry Group Plc 317,440 ----------------------------------------------------------------------------------------------------------------- Tobacco - 0.6% 79,342 British American Tobacco Plc 1,998,702 39,420 Gallaher Group Plc 616,086 39,269 Imperial Tobacco Group Plc 1,212,199 -------------- 3,826,987 ----------------------------------------------------------------------------------------------------------------- Trading Companies & Distributors - 0.1% 19,858 Bunzl Plc 226,799 30,646 Wolseley Plc 676,211 -------------- 903,010 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.1% 11,119 Associated British Ports Holdings Plc 185,704 11,599 BBA Group Plc 56,690 -------------- 242,394 ----------------------------------------------------------------------------------------------------------------- Water Utilities - 0.1% 14,810 Kelda Group Plc 209,685 19,122 Severn Trent Plc 413,797 -------------- 623,482 ----------------------------------------------------------------------------------------------------------------- Wireless Telecommunication 3,120,505 Vodafone Group Plc 6,651,714 Services - 1.1% 4,178 Vodafone Group Plc (b) 88,991 -------------- 6,740,705 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in the United Kingdom 142,571,222 - - --------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks (Cost - $440,955,183) - 92.4% 579,173,876 - - --------------------------------------------------------------------------------------------------------------------------------- Exchange-Traded Funds - - --------------------------------------------------------------------------------------------------------------------------------- United Diversified Financial Services - 3.0% 284,277 iShares MSCI EAFE Index Fund 18,537,703 States - 3.0% ----------------------------------------------------------------------------------------------------------------- Total Exchange-Traded Funds (Cost - $17,644,632) - 3.0% 18,537,703 - - --------------------------------------------------------------------------------------------------------------------------------- Preferred Stocks - - --------------------------------------------------------------------------------------------------------------------------------- Germany - 0.2% Automobiles - 0.1% 497 Porsche AG 480,287 5,058 Volkswagen AG, 4.35% 255,464 -------------- 735,751 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.1% 2,695 Henkel KGaA, 1.75% 307,933 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars)
Shares Country Industry Held Preferred Stocks Value - - --------------------------------------------------------------------------------------------------------------------------------- Media - 0.0% 5,011 ProSieben SAT.1 Media AG, 2.24% $ 125,136 ----------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.0% 1,869 RWE AG, 3.50% 140,736 ----------------------------------------------------------------------------------------------------------------- Total Preferred Stocks (Cost - $821,955) - 0.2% 1,309,556 - - --------------------------------------------------------------------------------------------------------------------------------- Rights - - --------------------------------------------------------------------------------------------------------------------------------- Germany - 0.0% Chemicals - 0.0% 5,481 Linde AG (e) 21,165 ----------------------------------------------------------------------------------------------------------------- Total Rights in Germany 21,165 - - --------------------------------------------------------------------------------------------------------------------------------- United Machinery - 0.0% 85,905 Invensys Plc (e) 6,435 Kingdom - 0.0% ----------------------------------------------------------------------------------------------------------------- Total Rights in the United Kingdom 6,435 - - --------------------------------------------------------------------------------------------------------------------------------- Total Rights (Cost - $0) - 0.0% 27,600 - - --------------------------------------------------------------------------------------------------------------------------------- Beneficial Interest Short-Term Securities - - --------------------------------------------------------------------------------------------------------------------------------- USD 12,041,829 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I, 4.78% (c)(d) 12,041,829 - - --------------------------------------------------------------------------------------------------------------------------------- Total Short-Term Securities (Cost - $12,041,829) - 1.9% 12,041,829 - - --------------------------------------------------------------------------------------------------------------------------------- Total Investments (Cost - $471,463,599*) - 97.5% 611,090,564 Other Assets Less Liabilities - 2.5% 15,502,170 -------------- Net Assets - 100.0% $ 626,592,734 ==============
* The cost and unrealized appreciation (depreciation) of investments as of June 30, 2006, as computed for federal income tax purposes, were as follows: Aggregate cost $ 476,995,253 ============= Gross unrealized appreciation $ 143,003,774 Gross unrealized depreciation (8,908,463) ------------- Net unrealized appreciation $ 134,095,311 ============= (a) Non-income producing security. (b) Depositary receipts. (c) Investments in companies considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
---------------------------------------------------------------------------------------------------------- Net Interest Affiliate Activity Income ---------------------------------------------------------------------------------------------------------- Merrill Lynch Liquidity Series, LLC Cash Sweep Series I $ (8,287,046) $ 358,356 ----------------------------------------------------------------------------------------------------------
(d) Represents the current yield as of 6/30/2006. (e) The rights may be exercised until 7/07/2006. o For Series compliance purposes, the Series' industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Series' management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percent of net assets. Master International Index Series Schedule of Investments as of June 30, 2006 (in U.S. Dollars) o Financial futures contracts purchased as of June 30, 2006 were as follows:
---------------------------------------------------------------------------------------------------------------------------- Number of Expiration Unrealized Contracts Issue Exchange Date Face Value Appreciation ---------------------------------------------------------------------------------------------------------------------------- 15 Hang Seng Index Future Hong Kong July 2006 $ 1,531,094 $ 44,514 63 OMX Stock Index Future Stockholm July 2006 $ 801,261 36,369 2 DAX Index 25 Euro Future Eurex September 2006 $ 355,419 10,693 114 DJ Euro Stoxx 50 Eurex September 2006 $ 5,102,330 235,658 36 FTSE 100 Index Future LIFFE September 2006 $ 3,773,687 104,834 1 S&P/MIB Index Future Eurex September 2006 $ 230,699 3,749 28 SPI 200 Index Future Sydney September 2006 $ 2,543,440 98,482 73 TOPIX Index Future Tokyo September 2006 $ 9,816,395 333,935 ---------------------------------------------------------------------------------------------------------------------------- Total Unrealized Appreciation - Net $ 868,234 =========
o Forward foreign exchange contracts purchased as of June 30, 2006 were as follows:
---------------------------------------------------------------------------------------------------------------------------- Unrealized Foreign Currency Settlement Appreciation Purchased Date (Depreciation) ---------------------------------------------------------------------------------------------------------------------------- AUD 3,222,700 August 2006 $ (56,513) CHF 4,526,600 August 2006 (17,435) EUR 13,231,800 August 2006 18,608 GBP 5,051,600 August 2006 (41,744) HKD 3,680,000 August 2006 (1,142) JPY 1,630,758,700 August 2006 (372,110) SEK 8,668,900 August 2006 11,550 SGD 80,800 August 2006 150 ---------------------------------------------------------------------------------------------------------------------------- Total Unrealized Depreciation on Forward Foreign Exchange Contracts - Net (USD Commitment - $48,976,148) $ (458,636) ==========
o Forward foreign exchange contracts sold as of June 30, 2006 were as follows:
---------------------------------------------------------------------------------------------------------------------------- Unrealized Foreign Currency Settlement Appreciation Sold Date (Depreciation) ---------------------------------------------------------------------------------------------------------------------------- AUD 2,240,900 August 2006 $ 32,899 CHF 3,092,500 August 2006 28,178 EUR 8,444,400 August 2006 (10,655) GBP 4,177,200 August 2006 81,067 HKD 3,680,000 August 2006 808 JPY 979,262,000 August 2006 266,062 SEK 5,478,000 August 2006 (14,060) SGD 80,800 August 2006 (145) ---------------------------------------------------------------------------------------------------------------------------- Total Unrealized Appreciation on Forward Foreign Exchange Contracts - Net (USD Commitment - $33,057,761) $ 384,154 =========
Master International Index Series Schedule of Investments as of June 30, 2006 o Currency Abbreviations: AUD Australian Dollar CHF Swiss Franc EUR Euro GBP British Pound HKD Hong Kong Dollar JPY Japanese Yen SEK Swedish Krona SGD Singapore Dollar USD U.S. Dollar Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- Advertising Agencies - 0.6% 14,100 24/7 Real Media, Inc. (a) $ 123,798 11,935 Advo, Inc. 293,720 25,400 aQuantive, Inc. (a) 643,382 15,400 Catalina Marketing Corp. 438,284 10,900 inVentiv Health, Inc. (a) 313,702 6,500 Marchex, Inc. Class B (a)(e) 106,795 15,900 Valassis Communications, Inc. (a) 375,081 34,300 ValueClick, Inc. (a) 526,505 ------------ 2,821,267 - - -------------------------------------------------------------------------------------------------------------------------------- Aerospace - 0.5% 5,800 ARGON ST, Inc. (a) 154,454 16,968 Curtiss-Wright Corp. 523,972 8,726 Heico Corp. 247,382 5,500 K&F Industries Holdings, Inc. (a) 97,515 5,900 Ladish Co., Inc. (a) 221,073 3,400 MTC Technologies, Inc. (a) 80,342 12,213 Moog, Inc. Class A (a) 417,929 18,335 Orbital Sciences Corp. (a) 295,927 10,934 Teledyne Technologies, Inc. (a) 358,198 2,200 TransDigm Group, Inc. (a) 52,690 4,000 United Industrial Corp. 181,000 ------------ 2,630,482 - - -------------------------------------------------------------------------------------------------------------------------------- Agriculture, Fishing & Ranching - 0.2% 1,300 Alico, Inc. 71,643 5,200 The Andersons, Inc. 216,372 13,128 Delta & Pine Land Co. 385,963 20,600 Gold Kist, Inc. (a) 275,422 ------------ 949,400 - - -------------------------------------------------------------------------------------------------------------------------------- Air Transport - 1.0% 12,168 AAR Corp. (a) 270,495 17,300 ABX Air, Inc. (a) 104,492 29,720 AirTran Holdings, Inc. (a) 441,639 13,199 Alaska Air Group, Inc. (a) 520,305 8,200 Atlas Air Worldwide Holdings, Inc. (a) 402,128 11,100 Aviall, Inc. (a) 527,472 7,785 Bristow Group, Inc. (a) 280,260 10,295 EGL, Inc. (a) 516,809 13,000 ExpressJet Holdings, Inc. (a) 89,830 16,555 Frontier Airlines Holdings, Inc. (a)(e) 119,362 65,800 JetBlue Airways Corp. (a) 798,812 100 MAIR Holdings, Inc. (a) 621 11,956 Mesa Air Group, Inc. (a) 117,767 3,700 PHI, Inc. (a) 122,840 9,300 Republic Airways Holdings, Inc. (a) 158,286 21,600 Skywest, Inc. 535,680 ------------ 5,006,798 - - -------------------------------------------------------------------------------------------------------------------------------- Aluminum - 0.2% 10,200 Aleris International, Inc. (a) 467,670 8,602 Century Aluminum Co. (a) 307,005 ------------ 774,675 - - -------------------------------------------------------------------------------------------------------------------------------- Auto Parts: After Market - 0.2% 7,243 Aftermarket Technology Corp. (a) 179,989 5,550 Commercial Vehicle Group, Inc. (a) 114,774 6,800 Keystone Automotive Industries, Inc. (a) 287,096 10,699 Superior Industries International, Inc. (e) 195,685 ------------ 777,544 - - --------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- Auto Parts: Original Equipment - 0.4% 16,600 American Axle & Manufacturing Holdings, Inc. $ 284,026 22,300 ArvinMeritor, Inc. 383,337 10,400 IMPCO Technologies, Inc. (a) 110,968 23,100 Lear Corp. 513,051 3,800 Noble International Ltd. 54,416 14,400 Quantum Fuel Systems Technologies Worldwide, Inc. (a)(e) 48,960 2,173 Sauer-Danfoss, Inc. 55,238 15,100 Tenneco, Inc. (a) 392,600 42,600 Visteon Corp. (a) 307,146 ------------ 2,149,742 - - -------------------------------------------------------------------------------------------------------------------------------- Auto, Trucks & Parts - 0.2% 4,500 Accuride Corp. (a) 56,115 2,000 Miller Industries, Inc. (a) 41,400 13,594 Modine Manufacturing Co. 317,556 20,700 Navistar International Corp. (a) 509,427 11,545 Wabash National Corp. 177,331 ------------ 1,101,829 - - -------------------------------------------------------------------------------------------------------------------------------- Banks: New York City - 0.1% 12,100 Signature Bank (a) 391,798 - - -------------------------------------------------------------------------------------------------------------------------------- Banks: Outside New York City - 6.5% 3,440 1st Source Corp. 116,375 6,021 Alabama National Bancorp. 410,331 8,218 Amcore Financial, Inc. 240,870 6,150 AmericanWest Bancorp 139,297 3,900 Ameris Bancorp 90,246 2,604 Arrow Financial Corp. 71,428 2,290 Bancfirst Corp. 102,477 2,715 The Bancorp, Inc. (a) 67,902 1,300 BancTrust Financial Group, Inc. 30,511 3,986 Bank of Granite Corp. 83,028 3,500 Bank of the Ozarks, Inc. 116,550 7,400 BankFinancial Corp. 128,020 3,113 Banner Corp. 119,975 14,233 Boston Private Financial Holdings, Inc. 397,101 18,150 CVB Financial Corp. 284,229 5,729 Cadence Financial Corp. 127,585 1,500 Camden National Corp. 59,850 3,021 Capital City Bank Group, Inc. 91,234 2,900 Capital Corp. of the West 92,800 3,400 Capitol Bancorp Ltd. 132,430 8,100 Cardinal Financial Corp. 94,122 6,100 Cascade Bancorp 172,813 19,644 Cathay General Bancorp 714,649 18,200 Centennial Bank Holdings, Inc. (a) 188,188 6,500 Center Financial Corp. 153,660 900 Centerstate Banks of Florida, Inc. 18,450 12,048 Central Pacific Financial Corp. 466,258 7,748 Chemical Financial Corp. 237,089 14,582 Chittenden Corp. 376,945 15,600 Citizens Banking Corp. 380,796 6,693 City Holding Co. 241,885 2,199 CityBank 102,847 1,700 Clifton Savings Bancorp, Inc. 18,411 4,526 CoBiz, Inc. 101,926 1,700 Columbia Bancorp 42,619 6,341 Columbia Banking System, Inc. 237,027
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 2,100 Community Bancorp (a) $ 65,268 2,900 Community Bancorp Inc. 122,699 13,100 Community Bank System, Inc. 264,227 7,299 Community Banks, Inc. 189,774 4,723 Community Trust Bancorp, Inc. 164,974 15,704 Corus Bankshares, Inc. 411,131 30,000 Doral Financial Corp. 192,300 1,100 Enterprise Financial Services Corp. 27,995 1,800 FNB Corporation 66,600 1,685 Farmers Capital Bank Corp. 53,971 23,400 First BanCorp/PR 217,620 2,836 First Bancorp/NC 59,556 3,814 First Busey Corp. 78,073 12,923 First Charter Corp. 317,001 23,540 First Commonwealth Financial Corp. 298,958 7,600 First Community Bancorp, Inc. 449,008 2,994 First Community Bancshares, Inc. 98,772 10,787 First Financial Bancorp 160,834 5,853 First Financial Bankshares, Inc. 213,869 4,444 First Financial Corp. 133,364 6,146 First Merchants Corp. 149,409 18,900 First Midwest Bancorp, Inc. 700,812 1,050 First Oak Brook Bancshares, Inc. 38,850 900 First Regional Bancorp (a) 79,200 1,200 First South Bancorp, Inc. 41,076 8,300 First State Bancorp. 197,374 31,100 FirstMerit Corp. 651,234 2,700 Flag Financial Corp. 52,515 10,900 Franklin Bank Corp. (a) 220,071 10,811 Frontier Financial Corp. 367,466 2,200 GB&T Bancshares, Inc. 47,872 9,643 Glacier Bancorp, Inc. 282,251 19,400 Greater Bay Bancorp 557,750 2,900 Greene County Bancshares, Inc. 89,784 10,454 Hancock Holding Co. 585,424 16,904 Hanmi Financial Corp. 328,614 9,178 Harleysville National Corp. 194,665 3,100 Heartland Financial USA, Inc. 82,615 3,900 Heritage Commerce Corp. 96,681 18 Huntington Bancshares, Inc. 424 4,845 Independent Bank Corp./MA 157,317 9,605 Independent Bank Corp./MI 252,611 5,874 Integra Bank Corp. 127,759 4,600 Interchange Financial Services Corp. 103,500 15,100 International Bancshares Corp. 414,948 3,000 Intervest Bancshares Corp. (a) 121,500 16,200 Investors Bancorp, Inc. (a) 219,510 8,048 Irwin Financial Corp. 156,051 3,997 Lakeland Bancorp, Inc. 62,633 3,800 Lakeland Financial Corp. 92,302 7,650 MB Financial, Inc. 270,504 3,277 MBT Financial Corp. 52,432 4,532 Macatawa Bank Corp. 105,992 5,066 MainSource Financial Group, Inc. 88,300
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 4,130 Mercantile Bank Corp. $ 164,581 1 Mercantile Bankshares Corp. 36 200 MetroCorp Bancshares, Inc. 5,856 7,450 Mid-State Bancshares 208,600 8,280 Midwest Banc Holdings, Inc. 184,230 10,213 NBT Bancorp, Inc. 237,248 10,200 Nara Bancorp, Inc. 191,250 13,777 National Penn Bancshares, Inc. 273,611 1,155 Northern Empire Bancshares (a) 27,720 22,395 Old National Bancorp 447,228 6,376 Old Second Bancorp, Inc. 197,656 2,741 Omega Financial Corp. 85,821 7,018 Oriental Financial Group 89,550 15,662 Pacific Capital Bancorp 487,401 3,915 Park National Corp. 386,841 3,910 Peoples Bancorp, Inc. 116,674 4,100 Pinnacle Financial Partners, Inc. (a) 124,763 7,300 Piper Jaffray Cos. (a) 446,833 6,350 Placer Sierra Bancshares 147,257 2,500 Preferred Bank 134,025 2,480 Premierwest Bancorp 35,191 7,496 PrivateBancorp, Inc. 310,409 10,500 Prosperity Bancshares, Inc. 345,345 13,024 Provident Bankshares Corp. 473,943 9,311 R-G Financial Corp. Class B 79,981 2,332 Renasant Corp. 94,096 30,959 Republic Bancorp, Inc. 383,582 2,633 Republic Bancorp, Inc. Class A 54,240 1,270 Royal Bancshares of Pennsylvania Class A 30,836 10,663 S&T Bancorp, Inc. 354,331 2,346 SCBT Financial Corp. 83,635 13,600 SVB Financial Group (a) 618,256 2,730 SY Bancorp, Inc. 75,020 4,614 Sandy Spring Bancorp, Inc. 166,381 1,403 Santander BanCorp 34,542 4,258 Seacoast Banking Corp. of Florida 113,391 2,800 Security Bank Corp. 62,356 1,300 Shore Bancshares, Inc. 35,269 300 Sierra Bancorp 7,866 4,100 Simmons First National Corp. Class A 118,941 1,000 Smithtown Bancorp, Inc. 24,160 6,023 Southside Bancshares, Inc. 134,433 7,100 Southwest Bancorp, Inc. 181,050 2,400 State National Bancshares, Inc. 91,464 18,876 Sterling Bancshares, Inc. 353,925 8,502 Sterling Financial Corp. 186,194 3,400 Suffolk Bancorp 111,350 1,500 Summit Bancshares, Inc. 31,815 5,029 Sun Bancorp, Inc. (a) 81,671 1,700 Superior Bancorp (a) 18,700 18,616 Susquehanna Bancshares, Inc. 444,922 900 Taylor Capital Group, Inc. 36,729 10,461 Texas Capital Bancshares, Inc. (a) 243,741 17,113 Texas Regional Bancshares, Inc. Class A 648,925
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 2,840 Tompkins Trustco, Inc. $ 122,120 3,600 Trico Bancshares 98,568 31,061 TrustCo Bank Corp. NY 342,292 15,527 Trustmark Corp. 480,871 36,200 UCBH Holdings, Inc. 598,748 9,652 UMB Financial Corp. 321,798 3,496 USB Holding Co., Inc. 78,660 21,680 Umpqua Holdings Corp. 556,092 2,900 Union Bankshares Corp. 125,106 14,500 United Bankshares, Inc. 531,135 10,200 United Community Banks, Inc. 310,488 500 United Security Bancshares 10,695 2,650 Univest Corp. of Pennsylvania 73,193 5,200 Vineyard National Bancorp 139,880 7,568 Virginia Commerce Bancorp (a) 180,875 2,200 Virginia Financial Group, Inc. 92,884 4,000 Washington Trust Bancorp, Inc. 110,880 8,363 WesBanco, Inc. 259,169 5,290 West Bancorp., Inc. 98,764 4,900 West Coast Bancorp 144,403 12,083 Westamerica Bancorp. 591,705 3,200 Western Alliance Bancorp (a) 111,296 8,200 Wilshire Bancorp, Inc. 147,764 9,500 Wintrust Financial Corp. 483,075 3,400 Yardville National Bancorp 121,482 ------------ 33,181,178 - - -------------------------------------------------------------------------------------------------------------------------------- Beverage: Brewers (Wineries) - 0.1% 5,000 Boston Beer Co., Inc. Class A (a) 146,450 1,187 Coca-Cola Bottling Co. Consolidated 60,264 1,610 Farmer Bros. Co. 34,905 800 Green Mountain Coffee Roasters, Inc. (a) 32,136 11,200 Jones Soda Co. (a) 100,800 2,690 National Beverage Corp. 38,602 5,900 Peet's Coffee & Tea, Inc. (a) 178,121 ------------ 591,278 - - -------------------------------------------------------------------------------------------------------------------------------- Biotechnology Research & Production - 2.4% 11,700 ADVENTRX Pharmaceuticals, Inc. (a) 37,089 11,700 AVI BioPharma, Inc. (a) 43,875 8,100 Acadia Pharmaceuticals, Inc. (a) 68,364 3,800 Advanced Magnetics, Inc. (a) 114,836 8,487 Albany Molecular Research, Inc. (a) 90,641 12,080 Alexion Pharmaceuticals, Inc. (a) 436,330 9,700 Alnylam Pharmaceuticals, Inc. (a) 146,276 1,000 Altus Pharmaceuticals, Inc. (a) 18,450 11,300 American Oriental Bioengineering, Inc. (a) 62,489 23,900 Applera Corp. - Celera Genomics Group (a) 309,505 14,200 Arena Pharmaceuticals, Inc. (a) 164,436 20,719 Ariad Pharmaceuticals, Inc. (a) 93,443 17,700 Array Biopharma, Inc. (a) 152,220 10,320 Arthrocare Corp. (a) 433,543 18,000 Bioenvision, Inc. (a) 95,940 21,924 Cell Genesys, Inc. (a)(e) 110,058 3,900 Coley Pharmaceutical Group, Inc. (a) 45,045 5,900 Combinatorx, Inc. (a) 51,861 3,600 Cotherix, Inc. (a) 30,996 20,467 Cubist Pharmaceuticals, Inc. (a) 515,359
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 11,600 Cypress Bioscience, Inc. (a) $ 71,224 5,200 Cytokinetics, Inc. (a) 32,708 7,124 Digene Corp. (a) 275,984 7,778 Diversa Corp. (a) 75,135 18,500 deCODE genetics, Inc. (a) 114,515 24,696 Encysive Pharmaceuticals, Inc. (a) 171,143 19,500 Enzon Pharmaceuticals, Inc. (a) 147,030 26,418 Exelixis, Inc. (a) 265,501 8,700 Genitope Corp. (a) 54,984 4,100 Genomic Health, Inc. (a) 48,257 32,400 Genta, Inc. (a) 53,136 22,029 Geron Corp. (a)(e) 152,000 7,400 Hana Biosciences, Inc. (a) 67,118 49,000 Human Genome Sciences, Inc. (a) 524,300 24,600 ICOS Corp. (a) 540,954 5,700 Idenix Pharmaceuticals Inc. (a) 53,580 32,124 Incyte Corp. (a) 147,770 7,600 Integra LifeSciences Holdings Corp. (a) 294,956 11,414 InterMune, Inc. (a)(e) 187,760 5,200 Kendle International, Inc. (a) 190,996 5,500 Kensey Nash Corp. (a) 162,250 13,000 Keryx Biopharmaceuticals, Inc. (a) 184,600 19,605 Lexicon Genetics, Inc. (a) 86,066 7,450 MannKind Corp. (a)(e) 158,760 12,200 Martek Biosciences Corp. (a)(e) 353,190 6,301 Maxygen, Inc. (a) 47,131 4,200 Metabasis Therapeutics, Inc. (a) 32,046 5,500 Momenta Pharmaceuticals Inc. (a) 69,905 61,100 Monogram Biosciences, Inc. (a) 120,978 14,200 Myogen, Inc. (a) 411,800 12,300 Myriad Genetics, Inc. (a) 310,575 21,723 NPS Pharmaceuticals, Inc. (a) 106,008 20,054 Nabi Biopharmaceuticals (a)(e) 115,110 9,500 Nastech Pharmaceutical Co., Inc. (a) 150,100 16,000 Neurocrine Biosciences, Inc. (a) 169,600 12,100 Northfield Laboratories, Inc. (a)(e) 119,669 17,000 Nuvelo, Inc. (a) 283,050 21,600 OSI Pharmaceuticals, Inc. (a) 711,936 6,000 PRA International Inc. (a) 133,620 13,500 Panacos Pharmaceuticals, Inc. (a) 74,520 79,000 Peregrine Pharmaceuticals, Inc. (a) 125,610 9,200 Progenics Pharmaceuticals, Inc. (a) 221,352 8,270 Rigel Pharmaceuticals, Inc. (a) 80,467 13,900 Sangamo Biosciences, Inc. (a) 82,010 20,600 Savient Pharmaceuticals, Inc. (a) 108,150 13,172 Serologicals Corp. (a) 414,128 9,800 Sirna Therapeutics, Inc. (a) 55,860 5,400 Solexa, Inc. (a) 45,900 8,145 Tanox, Inc. (a) 112,645 18,732 Telik, Inc. (a) 309,078 5,938 Trimeris, Inc. (a) 68,228 21,800 Viropharma, Inc. (a) 187,916 12,300 Zymogenetics, Inc. (a) 233,331 ------------ 12,335,396 - - --------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- Building Materials - 0.6% 2,700 Ameron International Corp. $ 180,954 2,900 BlueLinx Holdings, Inc. 37,787 11,500 Building Material Holding Corp. (e) 320,505 6,312 LSI Industries, Inc. 107,241 8,068 NCI Building Systems, Inc. (a) 428,976 14,432 Simpson Manufacturing Co., Inc. 520,274 9,045 Texas Industries, Inc. 480,290 4,409 Trex Co., Inc. (a)(e) 114,149 10,665 Watsco, Inc. 637,980 5,900 Zoltek Cos., Inc. (a)(e) 176,351 ------------ 3,004,507 - - -------------------------------------------------------------------------------------------------------------------------------- Building: Cement - 0.0% 15,100 US Concrete, Inc. (a) 166,855 - - -------------------------------------------------------------------------------------------------------------------------------- Building: Heating & Plumbing - 0.1% 1,700 Aaon, Inc. 43,622 7,900 Interline Brands, Inc. (a) 184,702 25,850 Jacuzzi Brands, Inc. (a) 227,480 ------------ 455,804 - - -------------------------------------------------------------------------------------------------------------------------------- Building: Miscellaneous - 0.2% 4,000 Builders FirstSource, Inc. (a) 81,440 11,600 Comfort Systems USA, Inc. 165,764 5,200 Drew Industries, Inc. (a) 168,480 5,700 Goodman Global, Inc. (a) 86,526 10,347 Griffon Corp. (a) 270,057 ------------ 772,267 - - -------------------------------------------------------------------------------------------------------------------------------- Building: Roofing & Wallboard - 0.1% 17,450 Beacon Roofing Supply, Inc. (a) 384,074 8,851 ElkCorp 245,792 ------------ 629,866 - - -------------------------------------------------------------------------------------------------------------------------------- Cable Television Services - 0.1% 163,900 Charter Communications, Inc. Class A (a)(e) 185,207 5,198 Crown Media Holdings, Inc. Class A (a) 21,416 31,394 TiVo, Inc. (a)(e) 224,467 ------------ 431,090 - - -------------------------------------------------------------------------------------------------------------------------------- Casinos & Gambling - 0.7% 8,600 Ameristar Casinos, Inc. 167,270 12,091 Aztar Corp. (a) 628,248 16,500 Bally Technologies, Inc. (a) 271,755 3,800 Century Casinos, Inc. (a) 40,698 1,732 Churchill Downs, Inc. 64,863 7,105 Dover Downs Gaming & Entertainment, Inc. 139,542 7,075 Isle of Capri Casinos, Inc. (a) 181,474 5,800 Lakes Entertainment, Inc. (a) 70,122 9,900 MTR Gaming Group, Inc. (a) 92,862 13,374 Magna Entertainment Corp. Class A (a) 70,347 2,700 Monarch Casino & Resort, Inc. (a) 75,924 12,100 Multimedia Games, Inc. (a) 122,573 16,864 Pinnacle Entertainment, Inc. (a) 516,882 15,400 Progressive Gaming International Corp. (a) 120,120 2,100 Riviera Holdings Corp. (a) 43,470 13,400 Shuffle Master, Inc. (a)(e) 439,252 12,100 Trump Entertainment Resorts, Inc. (a) 243,815 8,212 WMS Industries, Inc. (a) 224,927 ------------ 3,514,144 - - -------------------------------------------------------------------------------------------------------------------------------- Chemicals - 1.2% 4,233 American Vanguard Corp. 65,527 7,756 Arch Chemicals, Inc. 279,604 2,200 Balchem Corp. 49,500 16,500 CF Industries Holdings, Inc. 235,290 10,100 Cabot Microelectronics Corp. (a) 306,131 14,001 Calgon Carbon Corp. 85,266
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 8,485 Cambrex Corp. $ 176,743 6,600 China BAK Battery, Inc. (a) 56,166 14,764 Energy Conversion Devices, Inc. (a)(e) 537,853 14,100 EnerSys (a) 294,690 13,737 Georgia Gulf Corp. 343,700 37,900 Hercules, Inc. (a) 578,354 3,800 Innospec, Inc. 96,596 8,367 MacDermid, Inc. 240,970 5,941 Medis Technologies Ltd. (a)(e) 120,483 2,534 NL Industries, Inc. 27,241 5,700 NewMarket Corp. 279,642 7,265 Nuco2, Inc. (a) 174,651 9,800 OM Group, Inc. (a) 302,330 9,400 Omnova Solutions, Inc. (a) 53,392 3,900 Pioneer Cos., Inc. (a) 106,392 30,867 PolyOne Corp. (a) 271,012 10,400 Rockwood Holdings, Inc. (a) 239,304 12,006 Schulman A, Inc. 274,817 9,600 Senomyx, Inc. (a) 138,528 3,755 Stepan Co. 118,583 9,400 Tronox, Inc. Class A 122,012 7,500 Tronox, Inc. Class B 98,775 15,900 UAP Holding Corp. 346,779 22,600 WR Grace & Co. (a) 264,420 ------------ 6,284,751 - - -------------------------------------------------------------------------------------------------------------------------------- Coal - 0.2% 16,700 Alpha Natural Resources, Inc. (a) 327,654 36,600 International Coal Group, Inc. (a) 263,154 6,600 James River Coal Co. (a) 174,834 1,100 Westmoreland Coal Co. (a) 26,092 ------------ 791,734 - - -------------------------------------------------------------------------------------------------------------------------------- Commercial Information Services - 0.2% 11,858 Arbitron, Inc. 454,517 143,100 CMGI, Inc. (a) 173,151 11,161 infoUSA, Inc. 115,070 6,200 LECG Corp. (a) 114,514 11,174 ProQuest Co. (a) 137,328 7,153 Sourcecorp (a) 177,323 ------------ 1,171,903 - - -------------------------------------------------------------------------------------------------------------------------------- Communications & Media - 0.1% 20,200 Entravision Communications Corp. Class A (a) 173,114 81,000 Gemstar-TV Guide International, Inc. (a) 285,120 ------------ 458,234 - - -------------------------------------------------------------------------------------------------------------------------------- Communications Technology - 2.5% 145,600 3Com Corp. (a) 745,472 26,100 Adtran, Inc. 585,423 8,022 Anaren, Inc. (a) 164,371 10,972 Anixter International, Inc. 520,731 17,000 Atheros Communications Inc. (a) 322,320 43,900 Avanex Corp. (a) 77,264 18,500 Avocent Corp. (a) 485,625 3,059 Bel Fuse, Inc. 100,366 7,388 Black Box Corp. 283,182 24,550 Broadwing Corp. (a) 254,092 100,600 Brocade Communications Systems, Inc. (a) 617,684 300 CPI International, Inc. (a) 4,350 18,700 CSG Systems International Inc. (a) 462,638 4,300 Carrier Access Corp. (a) 35,561
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 7,500 Cbeyond Communications, Inc. (a) $ 163,575 4,500 Cogent Communications Group, Inc. (a) 42,165 19,188 CommScope, Inc. (a) 602,887 7,600 Comtech Group, Inc. (a) 84,588 9,125 Comtech Telecommunications Corp. (a) 267,089 8 CycleLogic, Inc. (a) 0 7,700 Digi International, Inc. (a) 96,481 15,000 Ditech Networks, Inc. (a) 130,800 3,400 EMS Technologies, Inc. (a) 61,098 10,313 Echelon Corp. (a) 77,244 49,700 Extreme Networks Inc. (a) 206,752 72,300 Finisar Corp. (a) 236,421 48,400 Foundry Networks, Inc. (a) 515,944 24,696 Harmonic, Inc. (a) 110,638 5,900 ID Systems, Inc. (a) 104,607 12,400 InPhonic, Inc. (a)(e) 78,120 8,277 Inter-Tel, Inc. 174,314 18,200 InterVoice, Inc. (a) 129,584 12,129 Ixia (a) 109,161 18,800 j2 Global Communications, Inc. (a)(e) 586,936 2,700 Loral Space & Communications Ltd. (a) 76,572 13,000 Netgear, Inc. (a) 281,450 13,200 Novatel Wireless, Inc. (a) 137,016 7,502 Oplink Communications, Inc. (a) 137,362 4,183 Optical Communication Products, Inc. (a) 8,408 18,300 Redback Networks, Inc. (a) 335,622 14,838 Secure Computing Corp. (a) 127,607 11,100 Sirenza Microdevices, Inc. (a) 134,754 83,300 Sonus Networks, Inc. (a) 412,335 7,410 Standard Microsystems Corp. (a) 161,760 28,200 Stratex Networks, Inc. (a) 95,598 61,500 Sycamore Networks, Inc. (a) 249,690 6,300 Syniverse Holdings, Inc. (a) 92,610 70,400 TIBCO Software, Inc. (a) 496,320 12,920 Talx Corp. 282,560 23,500 Tekelec (a) 290,225 8,930 Terremark Worldwide, Inc. (a) 32,148 2,540 Ulticom, Inc. (a) 26,594 38,200 UTstarcom, Inc. (a)(e) 297,578 7,001 Viasat, Inc. (a) 179,786 16,000 Vonage Holdings Corp. (a) 137,440 14,031 WebEx Communications, Inc. (a) 498,662 25,275 Zhone Technologies, Inc. (a)(e) 51,308 ------------ 12,980,888 - - -------------------------------------------------------------------------------------------------------------------------------- Computer Services Software & 17,400 @Road Inc. (a) 96,048 Systems - 4.3% 2,300 Access Integrated Technologies, Inc. (a) 22,563 14,400 Actuate Corp. (a) 58,176 19,202 Agile Software Corp. (a) 121,741 10,000 Altiris, Inc. (a) 180,400 8,100 American Reprographics Co. (a) 293,625 7,500 Ansoft Corp. (a) 153,600 12,632 Ansys, Inc. (a) 604,062 25,180 Ariba, Inc. (a) 207,231 31,400 Art Technology Group, Inc. (a) 93,572
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 18,208 Aspen Technology, Inc. (a) $ 238,889 8,200 Audible, Inc. (a)(e) 74,538 60,700 BearingPoint, Inc. (a) 508,059 13,626 Blackbaud, Inc. 309,310 11,200 Blackboard, Inc. (a) 324,352 6,800 Blue Coat Systems, Inc. (a) 114,648 25,867 Borland Software Corp. (a) 136,578 10,700 Bottomline Technologies, Inc. (a) 87,098 10,300 CACI International, Inc. Class A (a) 600,799 7,700 COMSYS IT Partners, Inc. (a) 116,424 20,600 Chordiant Software, Inc. (a) 62,418 18,202 Ciber, Inc. (a) 119,951 3,400 Click Commerce, Inc. (a)(e) 67,082 13,500 Concur Technologies, Inc. (a) 208,845 2,000 Constellation 3D, Inc. (a) 0 6,500 Convera Corp. (a) 43,680 9,300 Covansys Corp. (a) 116,901 2,100 DealerTrack Holdings, Inc. (a) 46,431 12,364 Dendrite International, Inc. (a) 114,243 13,200 Digital River, Inc. (a) 533,148 35,007 Digitas, Inc. (a) 406,781 7,845 EPIQ Systems, Inc. (a) 130,541 22,539 Electronics for Imaging Inc. (a) 470,614 9,200 Emageon, Inc. (a) 134,228 19,300 Epicor Software Corp. (a) 203,229 10,700 Equinix, Inc. (a) 587,002 5,900 eCollege.com, Inc. (a) 124,726 18,979 Gartner, Inc. Class A (a) 269,502 19,700 Hyperion Solutions Corp. (a) 543,720 8,900 Infocrossing, Inc. (a)(e) 102,795 28,700 Informatica Corp. (a) 377,692 2,400 Integral Systems, Inc. 64,392 13,100 Internet Capital Group, Inc. (a) 117,900 13,000 Internet Security Systems Inc. (a) 245,050 17,825 Interwoven, Inc. (a) 152,938 3,100 i2 Technologies, Inc. (a) 39,277 4,100 iGate Corp. (a) 26,199 9,708 JDA Software Group, Inc. (a) 136,203 6,600 Jupitermedia Corp. (a) 85,800 9,300 Kanbay International, Inc. (a) 135,222 14,758 Keane, Inc. (a) 184,475 39,000 Lawson Software, Inc. (a) 261,300 16,500 Lionbridge Technologies Inc. (a) 91,245 8,674 MRO Software, Inc. (a) 174,087 16,300 Macrovision Corp. (a) 350,776 9,100 Magma Design Automation, Inc. (a) 66,885 9,139 Manhattan Associates, Inc. (a) 185,430 4,800 Mantech International Corp. Class A (a) 148,128 6,800 Mapinfo Corp. (a) 88,740 26,500 Mentor Graphics Corp. (a) 343,970 8,156 Mercury Computer Systems, Inc. (a) 125,521 9,400 Merge Technologies, Inc. (a) 115,432 14,898 Micros Systems, Inc. (a) 650,745 3,800 MicroStrategy, Inc. Class A (a) 370,576
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 6,100 Ness Technologies, Inc. (a) $ 65,575 15,474 NetIQ Corp. (a) 188,628 5,685 Netscout Systems, Inc. (a) 50,710 41,795 Nuance Communications, Inc. (a) 420,458 33,833 Openwave Systems, Inc. (a) 390,433 2,600 Opnet Technologies, Inc. (a) 33,696 25,300 Opsware, Inc. (a) 208,472 4,800 PDF Solutions, Inc. (a) 59,568 13,607 Packeteer, Inc. (a) 154,303 42,660 Parametric Technology Corp. (a) 542,209 1,300 Pegasystems, Inc. 8,346 16,408 Progress Software Corp. (a) 384,111 3,300 QAD, Inc. 25,575 25,900 Quest Software, Inc. (a) 363,636 41,000 RealNetworks, Inc. (a) 438,700 4,600 RightNow Technologies, Inc. (a) 76,728 4,100 SAVVIS, Inc. (a) 121,401 5,800 SI International, Inc. (a) 177,828 7,889 SPSS, Inc. (a) 253,552 12,200 SRA International, Inc. Class A (a) 324,886 1,400 SSA Global Technologies, Inc. (a) 27,132 9,961 SYKES Enterprises, Inc. (a) 160,970 2,200 SYNNEX Corp. (a) 41,712 9,199 SafeNet, Inc. (a) 163,006 27,192 Sapient Corp. (a) 144,118 10,700 Sigma Designs, Inc. (a) 100,901 9,000 Smith Micro Software, Inc. (a) 144,180 26,541 SonicWALL, Inc. (a) 238,604 8,900 Stellent, Inc. 84,995 30,100 Sybase, Inc. (a) 583,940 1,483 Syntel, Inc. 30,342 2,000 Taleo Corp. Class A (a) 23,580 12,485 Transaction Systems Architects, Inc. Class A (a) 520,500 18,008 Trizetto Group (a) 266,338 10,900 Tyler Technologies, Inc. (a) 122,080 8,000 Ultimate Software Group, Inc. (a) 153,280 15,900 VA Software Corp. (a) 61,692 8,300 Vasco Data Security International Inc. (a) 69,471 4,400 Verint Systems, Inc. (a) 128,436 10,380 Vignette Corp. (a) 151,340 16,002 Websense, Inc. (a) 328,681 29,500 Wind River Systems, Inc. (a) 262,550 11,200 Witness Systems, Inc. (a) 225,904 22,620 webMethods, Inc. (a) 223,259 16,308 Zoran Corp. (a) 396,937 ------------ 22,108,296 - - -------------------------------------------------------------------------------------------------------------------------------- Computer Technology - 1.5% 46,600 Adaptec, Inc. (a) 202,244 9,700 Advanced Analogic Technologies, Inc. (a) 101,656 20,634 Advanced Digital Information Corp. (a) 242,862 27,500 Emulex Corp. (a) 447,425 9,109 FalconStor Software, Inc. (a)(e) 63,490 4,300 Fargo Electronics, Inc. (a) 109,177 16,582 Filenet Corp. (a) 446,553 83,600 Gateway, Inc. (a) 158,840
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 10,617 Hutchinson Technology, Inc. (a) $ 229,646 12,100 Imation Corp. 496,705 11,596 Intergraph Corp. (a) 365,158 16,809 Intermec, Inc. (a) 385,598 11,600 Komag, Inc. (a) 535,688 60,900 McData Corp. (a) 248,472 13,600 Mobility Electronics, Inc. (a) 98,736 5,900 Neoware Systems, Inc. (a) 72,511 33,888 Palm, Inc. (a)(e) 545,597 16,000 Pegasus Wireless Corp. (a) 143,040 27,000 Perot Systems Corp. Class A (a) 390,960 58,400 Quantum Corp. (a) 153,008 27,962 RSA Security, Inc. (a) 760,287 10,600 Rackable Systems, Inc. (a) 418,594 12,300 Radiant Systems, Inc. (a) 130,011 5,742 Radisys Corp. (a) 126,094 31,800 Safeguard Scientifics, Inc. (a) 68,688 3,700 Stratasys, Inc. (a) 109,002 10,200 Synaptics, Inc. (a) 218,280 19,600 Trident Microsystems, Inc. (a) 372,008 ------------ 7,640,330 - - -------------------------------------------------------------------------------------------------------------------------------- Construction - 0.4% 5,451 Brookfield Homes Corp. (e) 179,610 10,636 EMCOR Group, Inc. (a) 517,654 13,371 Granite Construction, Inc. 605,305 6,000 Perini Corp. (a) 135,000 2,100 Sterling Construction Co., Inc. (a) 57,960 11,100 Washington Group International, Inc. (a) 592,074 ------------ 2,087,603 - - -------------------------------------------------------------------------------------------------------------------------------- Consumer Electronics - 0.8% 56,500 CNET Networks, Inc. (a) 450,870 93,400 Covad Communications Group, Inc. (a) 187,734 5,400 DTS, Inc. (a) 105,192 5,800 Directed Electronics, Inc. (a) 76,096 47,200 Earthlink, Inc. (a) 408,752 10,400 Infospace, Inc. (a) 235,768 87,900 Internap Network Services Corp. (a) 92,295 17,500 Ipass, Inc. (a) 98,000 8,300 LoJack Corp. (a) 156,538 12,074 Midway Games, Inc. (a)(e) 97,679 10,300 NIC, Inc. (a) 74,469 13,100 NetFlix, Inc. (a)(e) 356,451 4,100 Parkervision, Inc. (a) 37,310 8,600 Sohu.com, Inc. (a) 221,794 24,637 THQ, Inc. (a) 532,159 28,300 Take-Two Interactive Software, Inc. (a) 306,206 21,450 United Online, Inc. 257,400 4,186 Universal Electronics, Inc. (a) 74,134 8,500 WebSideStory, Inc. (a) 103,700 ------------ 3,872,547 - - -------------------------------------------------------------------------------------------------------------------------------- Consumer Products - 0.6% 17,300 American Greetings Class A 363,473 8,600 Blyth, Inc. 158,756 4,300 CNS, Inc. 105,350 2,291 CSS Industries, Inc. 65,866 2,100 Citi Trends, Inc. (a) 89,649 5,400 Mannatech, Inc. 68,094
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 9,873 Matthews International Corp. Class A $ 340,322 13,563 Nautilus, Inc. (e) 213,075 9,300 Oakley, Inc. 156,705 16,876 Playtex Products, Inc. (a) 176,017 6,200 RC2 Corp. (a) 239,692 11,200 Spectrum Brands, Inc. (a) 144,704 17,991 The Topps Co., Inc. 147,886 22,674 Tupperware Corp. 446,451 4,300 USANA Health Sciences, Inc. (a)(e) 162,970 13,683 Yankee Candle Co., Inc. 342,212 ------------ 3,221,222 - - -------------------------------------------------------------------------------------------------------------------------------- Containers & Packaging: Metal & Glass - 0.4% 1,400 AEP Industries, Inc. (a) 46,788 11,700 Aptargroup, Inc. 580,437 6,575 Greif, Inc. 492,862 13,842 Mobile Mini, Inc. (a) 405,017 7,000 Silgan Holdings, Inc. 259,070 19,100 Graphic Packaging Corp. (a) 72,389 8,852 Myers Industries, Inc. 152,166 ------------ 2,008,729 - - -------------------------------------------------------------------------------------------------------------------------------- Copper - 0.1% 12,282 Mueller Industries, Inc. 405,674 - - -------------------------------------------------------------------------------------------------------------------------------- Cosmetics - 0.1% 8,693 Elizabeth Arden, Inc. (a) 155,431 1,600 Inter Parfums, Inc. 27,552 19,226 Nu Skin Enterprises, Inc. Class A 285,506 7,100 Parlux Fragrances, Inc. (a)(e) 68,799 47,510 Revlon, Inc. Class A (a) 59,863 ------------ 597,151 - - -------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.5% 40,400 The BISYS Group, Inc. (a) 553,480 900 Clayton Holdings, Inc. (a) 11,745 13,500 Euronet Worldwide, Inc. (a) 517,995 23,400 F.N.B. Corp. 369,018 7,000 Greenhill & Co., Inc. 425,320 7,300 Huron Consulting Group, Inc. (a) 256,157 5,600 Rewards Network, Inc. (a) 45,752 12,900 USI Holdings Corp. (a) 172,989 ------------ 2,352,456 - - -------------------------------------------------------------------------------------------------------------------------------- Diversified Materials & Processing - 0.6% 14,960 Acuity Brands, Inc. 582,094 12,514 Barnes Group, Inc. 249,654 15,294 Brady Corp. 563,431 17,310 Clarcor, Inc. 515,665 30,262 Hexcel Corp. (a) 475,416 3,300 Koppers Holdings, Inc. 65,967 22,814 Olin Corp. 409,055 9,245 Tredegar Corp. 146,256 ------------ 3,007,538 - - -------------------------------------------------------------------------------------------------------------------------------- Drug & Grocery Store Chains - 0.5% 432 Arden Group, Inc. Class A 48,889 19,707 Casey's General Stores, Inc. 492,872 7,631 Great Atlantic & Pacific Tea Co. 173,376 5,164 Ingles Markets, Inc. Class A 87,788 10,583 Longs Drug Stores Corp. 482,796 6,277 Nash Finch Co. (e) 133,637 22,442 Pathmark Stores, Inc. (a) 211,179 11,969 Ruddick Corp. 293,360 4,329 Smart & Final, Inc. (a) 72,900
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 7,000 Spartan Stores, Inc. $ 102,410 4,100 Weis Markets, Inc. 168,920 11,929 Wild Oats Markets, Inc. (a) 233,808 ------------ 2,501,935 - - -------------------------------------------------------------------------------------------------------------------------------- Drugs & Pharmaceuticals - 2.4% 15,450 AVANIR Pharmaceuticals Class A (a)(e) 105,678 11,700 Adams Respiratory Therapeutics, Inc. (a) 522,054 15,100 Adolor Corp. (a) 377,651 9,900 Akorn, Inc. (a) 39,402 30,800 Alkermes, Inc. (a) 582,736 13,425 Alpharma, Inc. Class A 322,737 6,300 Anadys Pharmaceuticals, Inc. (a) 18,396 24,500 Andrx Corp. (a) 568,155 16,000 Atherogenics Inc. (a)(e) 208,800 4,700 Auxilium Pharmaceuticals, Inc. (a) 36,566 6,400 Bentley Pharmaceuticals, Inc. (a) 70,144 10,200 BioCryst Pharmaceuticals, Inc. (a) 146,166 32,548 BioMarin Pharmaceuticals, Inc. (a) 467,715 5,000 Bradley Pharmaceuticals, Inc. (a) 51,000 17,800 CV Therapeutics, Inc. (a) 248,666 1,200 Caraco Pharmaceutical Laboratories Ltd. (a) 10,980 7,500 Chattem, Inc. (a) 227,775 14,202 Connetics Corp. (a) 167,016 31,500 Dendreon Corp. (a) 152,460 18,300 Depomed, Inc. (a) 107,421 17,800 Durect Corp. (a)(e) 68,886 11,600 Emisphere Technologies, Inc. (a) 98,948 11,895 Enzo Biochem, Inc. (a) 179,377 1,000 GTx, Inc. (a) 9,100 3,100 Hi-Tech Pharmacal Co., Inc. (a) 51,367 22,300 Indevus Pharmaceuticals, Inc. (a) 121,981 24,289 Isis Pharmaceuticals, Inc. (a) 146,948 12,900 KV Pharmaceutical Co. Class A (a) 240,714 29,000 MGI Pharma, Inc. (a) 623,500 40,700 Medarex, Inc. (a) 391,127 16,927 Medicines Co. (a) 330,923 20,800 Medicis Pharmaceutical Corp. Class A 499,200 33,400 Nektar Therapeutics (a)(e) 612,556 4,500 New River Pharmaceuticals, Inc. (a)(e) 128,250 27,700 Novavax, Inc. (a) 139,608 10,331 Noven Pharmaceuticals, Inc. (a) 184,925 16,600 Onyx Pharmaceuticals, Inc. (a) 279,378 15,700 Pain Therapeutics, Inc. (a) 131,095 10,600 Par Pharmaceutical Cos., Inc. (a) 195,676 9,400 Penwest Pharmaceuticals Co. (a) 205,202 30,215 Perrigo Co. 486,462 10,300 Pharmion Corp. (a) 175,409 12,900 Pozen, Inc. (a) 90,816 8,100 Quidel Corp. (a) 76,950 14,019 Regeneron Pharmaceuticals, Inc. (a) 179,724 6,600 Renovis, Inc. (a) 101,046 8,150 SFBC International, Inc. (a) 123,554 18,700 Salix Pharmaceuticals Ltd. (a) 230,010 12,600 Santarus, Inc. (a) 83,790 11,400 Sciele Pharma, Inc. (a) 264,366
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 3,500 Somaxon Pharmaceuticals, Inc. (a) $ 54,635 17,082 SuperGen, Inc. (a) 62,008 8,946 United Therapeutics Corp. (a) 516,810 31,500 Valeant Pharmaceuticals International 532,980 4,300 Xenoport, Inc. (a) 77,873 ------------ 12,126,712 - - -------------------------------------------------------------------------------------------------------------------------------- Education Services - 0.4% 11,004 Bright Horizons Family Solutions, Inc. (a) 414,741 33,400 Corinthian Colleges, Inc. (a) 479,624 19,700 DeVry, Inc. (a) 432,809 3,200 Educate, Inc. (a) 24,512 2,149 Renaissance Learning, Inc. 29,119 5,520 Strayer Education, Inc. 536,102 7,700 Universal Technical Institute, Inc. (a) 169,554 ------------ 2,086,461 - - -------------------------------------------------------------------------------------------------------------------------------- Electrical & Electronics - 0.3% 21,429 Benchmark Electronics, Inc. (a) 516,867 4,900 OSI Systems, Inc. (a) 87,073 17,198 Plexus Corp. (a) 588,344 12,432 Power Integrations, Inc. (a) 217,311 13,700 TTM Technologies, Inc. (a) 198,239 7,907 Universal Display Corp. (a) 105,242 ------------ 1,713,076 - - -------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment & Components - 0.9% 6,881 AO Smith Corp. 319,003 15,000 American Superconductor Corp. (a)(e) 132,450 10,671 Baldor Electric Co. 333,896 11,908 CTS Corp. 177,310 10,118 Cohu, Inc. 177,571 3,400 Color Kinetics, Inc. (a) 64,294 6,960 Franklin Electric Co., Inc. 359,414 16,890 General Cable Corp. (a) 591,150 8,016 Genlyte Group, Inc. (a) 580,599 9,260 Littelfuse, Inc. (a) 318,359 10,800 MKS Instruments, Inc. (a) 217,296 2,431 Powell Industries, Inc. (a) 58,174 23,300 Power-One, Inc. (a) 153,780 8,600 Sonic Solutions, Inc. (a) 141,900 22,800 Taser International, Inc. (a)(e) 179,892 12,561 Technitrol, Inc. 290,787 6,679 Triumph Group, Inc. (a) 320,592 ------------ 4,416,467 - - -------------------------------------------------------------------------------------------------------------------------------- Electrical: Household Appliance - 0.0% 1,550 National Presto Industries, Inc. 81,034 - - -------------------------------------------------------------------------------------------------------------------------------- Electronics - 0.7% 7,472 II-VI, Inc. (a) 136,738 25,112 Aeroflex, Inc. (a) 293,057 12,763 Agilysys, Inc. 229,734 14,100 Avid Technology, Inc. (a) 469,953 15,098 Daktronics, Inc. 435,879 23,100 Flir Systems, Inc. (a) 528,990 22,800 Kopin Corp. (a) 82,308 52,966 MRV Communications, Inc. (a)(e) 164,724 12,480 Methode Electronics, Inc. 131,165 2,100 Multi-Fineline Electronix, Inc. (a) 69,699 6,749 Park Electrochemical Corp. 173,787 28,800 Semtech Corp. (a) 416,160 5,267 Supertex, Inc. (a) 210,364 ------------ 3,342,558 - - --------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- Electronics: Instruments, Gauges & Meters - 0.2% 9,582 Itron, Inc. (a) $ 567,829 3,200 Measurement Specialties, Inc. (a) 71,264 6,600 Metrologic Instruments, Inc. (a) 99,066 2,000 OYO Geospace Corp. (a) 114,220 5,300 Zygo Corp. (a) 86,867 ------------ 939,246 - - -------------------------------------------------------------------------------------------------------------------------------- Electronics: Medical Systems - 0.9% 23,200 Affymetrix, Inc. (a) 593,920 5,872 Analogic Corp. 273,694 5,400 Aspect Medical Systems, Inc. (a) 94,176 6,587 Bruker BioSciences Corp. (a) 35,306 7,900 Candela Corp. (a) 125,294 6,070 Datascope Corp. 187,199 20,450 eResearch Technology, Inc. (a) 186,095 6,200 Greatbatch, Inc. (a) 146,320 9,172 Haemonetics Corp. (a) 426,590 11,700 HealthTronics, Inc. (a) 89,505 16,700 Hologic, Inc. (a) 824,312 15,600 Illumina, Inc. (a) 462,696 7,200 IntraLase Corp. (a) 120,528 9,351 Luminex Corp. (a) 162,614 8,900 Natus Medical, Inc. (a) 88,021 5,400 Neurometrix, Inc. (a) 164,484 7,700 NxStage Medical, Inc. (a) 67,221 6,800 Quality Systems, Inc. 250,376 5,400 Sirona Dental Systems, Inc. 213,948 8,732 TriPath Imaging, Inc. (a) 57,806 1,100 Visicu, Inc. (a) 19,415 4,861 Zoll Medical Corp. (a) 159,246 ------------ 4,748,766 - - -------------------------------------------------------------------------------------------------------------------------------- Electronics: 13,100 AMIS Holdings, Inc. (a) 131,000 Semi-Conductors/Components - 1.8% 12,216 Actel Corp. (a) 175,300 34,100 Amkor Technology, Inc. (a) 322,586 13,300 Anadigics, Inc. (a) 89,376 115,900 Applied Micro Circuits Corp. (a) 316,407 28,600 Bookham, Inc. (a) 96,096 29,200 Cirrus Logic, Inc. (a) 237,688 160,300 Conexant Systems, Inc. (a) 400,750 12,783 DSP Group, Inc. (a) 317,658 7,975 Diodes, Inc. (a) 330,484 10,327 Exar Corp. (a) 137,039 3,673 Excel Technology, Inc. (a) 109,896 15,700 Formfactor, Inc. (a) 700,691 14,700 Genesis Microchip, Inc. (a) 169,932 3,600 Hittite Microwave Corp. (a) 130,176 5,993 IXYS Corp. (a) 57,533 5,200 Ikanos Communications, Inc. (a) 78,988 20,800 International DisplayWorks, Inc. (a) 108,160 38,000 Lattice Semiconductor Corp. (a) 234,840 20,000 MIPS Technologies, Inc. (a) 121,400 22,000 Micrel, Inc. (a) 220,220 23,590 Microsemi Corp. (a) 575,124 17,600 Microtune, Inc. (a) 110,176 29,000 Mindspeed Technologies, Inc. (a) 69,890 4,800 Monolithic Power Systems, Inc. (a) 56,784
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 4,600 MoSys, Inc. (a) $ 35,972 4,700 Netlogic Microsystems, Inc. (a) 151,575 600 Nextest Systems Corp. (a) 9,726 50,500 ON Semiconductor Corp. (a) 296,940 17,700 Omnivision Technologies, Inc. (a) 373,824 7,400 PLX Technology, Inc. (a) 90,428 11,293 Pericom Semiconductor Corp. (a) 93,732 11,400 Portalplayer, Inc. (a) 111,834 72,300 RF Micro Devices, Inc. (a) 431,631 27,176 Silicon Image, Inc. (a) 292,957 30,158 Silicon Storage Technology, Inc. (a) 122,441 17,100 Sirf Technology Holdings, Inc. (a) 550,962 62,033 Skyworks Solutions, Inc. (a) 341,802 4,600 Sunpower Corp. Class A (a) 128,892 14,600 Tessera Technologies, Inc. (a) 401,500 54,800 Transmeta Corp. (a) 89,872 38,300 Transwitch Corp. (a)(e) 80,813 57,036 Triquint Semiconductor, Inc. (a) 254,381 2,100 Virage Logic Corp. (a) 19,719 4,500 Volterra Semiconductor Corp. (a) 68,670 ------------ 9,245,865 - - -------------------------------------------------------------------------------------------------------------------------------- Electronics: Technology - 0.6% 2,700 3D Systems Corp. (a) 54,243 12,100 Acacia Research - Acacia Technologies (a) 170,126 3,700 American Science & Engineering, Inc. (a) 214,304 13,023 Checkpoint Systems, Inc. (a) 289,241 12,380 Coherent, Inc. (a) 417,577 4,952 Cubic Corp. 97,109 6,226 EDO Corp. 151,541 4,800 Eagle Test Systems, Inc. (a) 67,296 8,400 Essex Corp. (a) 154,728 4,600 Gerber Scientific, Inc. (a) 59,846 9,950 Herley Industries, Inc. (a) 111,539 35,830 Identix, Inc. (a) 250,452 6,150 Innovative Solutions & Support, Inc. (a) 86,469 15,676 Intermagnetics General Corp. (a) 422,938 6,000 Ionatron, Inc. (a)(e) 38,100 26,600 Kemet Corp. (a) 245,252 7,000 Maxwell Technologies, Inc. (a) 137,410 7,900 Scansource, Inc. (a) 231,628 ------------ 3,199,799 - - -------------------------------------------------------------------------------------------------------------------------------- Energy Equipment - 0.1% 27,000 Capstone Turbine Corp. (a) 61,560 4,100 Metretek Technologies, Inc. (a) 70,438 24,326 Plug Power, Inc. (a)(e) 113,602 ------------ 245,600 - - -------------------------------------------------------------------------------------------------------------------------------- Energy Miscellaneous - 0.6% 3,300 Alon USA Energy, Inc. 103,851 3,600 Crosstex Energy, Inc. 342,288 4,200 Dawson Geophysical Co. (a) 129,234 25,900 Evergreen Solar, Inc. (a)(e) 336,182 21,926 FuelCell Energy, Inc. (a)(e) 210,051 23,700 KFX, Inc. (a)(e) 362,136 220 Markwest Hydrocarbon, Inc. 5,445 4,900 Matrix Service Co. (a) 56,056 1,700 Ormat Technologies, Inc. 64,855 8,900 Pacific Ethanol, Inc. (a)(e) 205,768
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 5,858 Penn Virginia Corp. $ 409,357 44,100 Rentech, Inc. (a) 205,065 13,100 Syntroleum Corp. (a)(e) 79,517 13,497 Veritas DGC, Inc. (a) 696,175 ------------ 3,205,980 - - -------------------------------------------------------------------------------------------------------------------------------- Engineering & Contracting Services - 0.2% 6,200 Clean Harbors, Inc. (a) 249,922 13,402 Dycom Industries, Inc. (a) 285,329 2,200 ENGlobal Corp (a) 17,138 7,700 Infrasource Services, Inc. (a) 140,217 2,800 Integrated Electrical Services, Inc. (a) 48,916 5,500 Layne Christensen Co. (a) 155,925 ------------ 897,447 - - -------------------------------------------------------------------------------------------------------------------------------- Entertainment - 0.3% 6,400 Carmike Cinemas, Inc. 134,912 5,440 Dover Motorsports, Inc. 31,933 13,255 Gaylord Entertainment Co. (a) 578,448 22,000 Live Nation (a) 447,920 7,772 Lodgenet Entertainment Corp. (a) 144,948 4,555 Speedway Motorsports, Inc. 171,906 ------------ 1,510,067 - - -------------------------------------------------------------------------------------------------------------------------------- Fertilizers - 0.0% 31,700 Terra Industries, Inc. (a) 201,929 - - -------------------------------------------------------------------------------------------------------------------------------- Finance Companies - 0.3% 7,100 Accredited Home Lenders Holding Co. (a) 339,451 5,100 Asta Funding, Inc. 190,995 2,100 Credit Acceptance Corporation (a) 56,994 12,800 International Securities Exchange, Inc. 487,296 3,500 MVC Capital, Inc. 47,040 2,300 United PanAm Financial Corp. (a) 69,920 7,700 World Acceptance Corp. (a) 273,504 ------------ 1,465,200 - - -------------------------------------------------------------------------------------------------------------------------------- Finance: Small Loan - 0.1% 20,800 Advance America, Cash Advance Centers, Inc. 364,832 5,300 Dollar Financial Corp. (a) 95,400 200 QC Holdings, Inc. (a) 2,702 ------------ 462,934 - - -------------------------------------------------------------------------------------------------------------------------------- Financial Data Processing Services & Systems - 0.9% 7,400 Advent Software, Inc. (a) 266,918 500 Cass Information Systems, Inc. 24,345 8,489 CompuCredit Corp. (a) 326,317 10,200 Cybersource Corp. (a) 119,340 20,900 Deluxe Corp. 365,332 11,530 Digital Insight Corp. (a) 395,364 15,488 eFunds Corp. (a) 341,510 7,923 eSpeed, Inc. Class A (a) 65,999 3,300 Heartland Payment Systems, Inc. (a) 92,004 17,900 Hypercom Corp. (a) 167,365 30,500 Jack Henry & Associates, Inc. 599,630 10,582 John H. Harland Co. 460,317 11,149 Kronos, Inc. (a) 403,705 5,300 Online Resources Corp. (a) 54,802 8,800 Open Solutions, Inc. (a) 234,168 6,900 TNS, Inc. (a) 142,761 8,600 TradeStation Group, Inc. (a) 108,962 12,700 Wright Express Corp. (a) 364,998 ------------ 4,533,837 - - -------------------------------------------------------------------------------------------------------------------------------- Financial Information Services - 0.2% 4,600 Bankrate, Inc. (a) 173,696 13,400 INVESTools, Inc. (a) 106,396 10,600 Interactive Data Corp. (a) 212,954
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 3,700 Morningstar, Inc. (a) $ 153,476 40,100 Move, Inc. (a) 219,748 27,122 S1 Corp. (a) 130,186 8,900 TheStreet.com, Inc. 114,098 400 Value Line, Inc. 17,080 ------------ 1,127,634 - - -------------------------------------------------------------------------------------------------------------------------------- Financial Miscellaneous - 0.8% 3,900 ACE Cash Express, Inc. (a) 114,153 8,200 Advanta Corp. Class B 294,790 7,600 Asset Acceptance Capital Corp. (a) 150,480 9,819 Cash America International, Inc. 314,208 600 Enstar Group, Inc. (a) 55,314 5,300 Federal Agricultural Mortgage Corp. Class B 146,810 9,900 Financial Federal Corp. 275,319 12,000 First Cash Financial Services, Inc. (a) 237,000 9,600 Global Cash Access, Inc. (a) 150,048 10,100 Harris & Harris Group, Inc. 111,504 6,499 LandAmerica Financial Group, Inc. 419,835 8,100 Medallion Financial Corp. 104,976 6,500 Portfolio Recovery Associates, Inc. (a) 297,050 4,200 Sanders Morris Harris Group, Inc. 63,462 20,036 Sotheby's Holdings Inc. Class A (a) 525,945 9,216 Sterling Bancorp 179,712 7,322 Stewart Information Services Corp. 265,862 2,833 Stifel Financial Corp. (a) 100,033 3,076 Triad Guaranty, Inc. (a) 150,355 2,191 WSFS Financial Corp. 134,637 600 Wauwatosa Holdings, Inc. (a) 10,236 ------------ 4,101,729 - - -------------------------------------------------------------------------------------------------------------------------------- Foods - 0.9% 12,600 Chiquita Brands International, Inc. 173,628 7,400 Diamond Foods, Inc. 118,918 17,284 Flowers Foods, Inc. 495,014 11,057 Hain Celestial Group, Inc. (a) 284,828 4,300 J&J Snack Foods Corp. 142,201 10,100 Lance, Inc. 232,502 3,500 M&F Worldwide Corp. (a) 56,350 863 Maui Land & Pineapple Co., Inc. (a) 32,621 5,800 Medifast Inc (a) 103,646 19,600 NBTY, Inc. (a) 468,636 13,800 Performance Food Group Co. (a) 419,244 13,300 Pilgrim's Pride Corp. 343,140 3,000 Premium Standard Farms, Inc. 48,690 10,495 Ralcorp Holdings, Inc. (a) 446,352 7,050 Sanderson Farms, Inc. 197,330 112 Seaboard Corp. 143,360 16,557 Sensient Technologies Corp. 346,207 10,877 Tootsie Roll Industries, Inc. 316,847 9,500 TreeHouse Foods, Inc. (a) 226,955 ------------ 4,596,469 - - -------------------------------------------------------------------------------------------------------------------------------- Forest Products - 0.1% 3,409 Deltic Timber Corp. 192,165 6,634 Universal Forest Products, Inc. 416,151 ------------ 608,316 - - -------------------------------------------------------------------------------------------------------------------------------- Forms and Bulk Printing 9,900 Ennis, Inc. 194,832 Services - 0.1% 5,945 The Standard Register Co. 70,448 ------------ 265,280 - - --------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- Funeral Parlors & Cemeteries - 0.1% 14,100 Alderwoods Group, Inc. (a) $ 274,386 35,024 Stewart Enterprises, Inc. Class A 201,388 ------------ 475,774 - - -------------------------------------------------------------------------------------------------------------------------------- Glass - 0.0% 13,100 Apogee Enterprises, Inc. 192,570 - - -------------------------------------------------------------------------------------------------------------------------------- Gold - 0.1% 103,900 Coeur d'Alene Mines Corp. (a) 499,759 8,200 Royal Gold, Inc. 228,124 ------------ 727,883 - - -------------------------------------------------------------------------------------------------------------------------------- Health Care Facilities - 0.6% 3,800 Capital Senior Living Corporation (a) 39,064 8,800 Five Star Quality Care, Inc. (a) 97,416 7,900 Genesis HealthCare Corp. (a) 374,223 11,200 Kindred Healthcare, Inc. (a) 291,200 6,950 LCA-Vision, Inc. 367,725 4,400 Medcath Corp. (a) 82,896 1,800 National Healthcare Corp. 80,190 17,700 Psychiatric Solutions, Inc. (a) 507,282 5,500 Radiation Therapy Services, Inc. (a) 148,005 5,800 Res-Care, Inc. (a) 116,000 11,200 Sun Healthcare Group, Inc. (a) 97,328 14,874 Sunrise Senior Living, Inc. (a) 411,266 17,250 United Surgical Partners International, Inc. (a) 518,708 ------------ 3,131,303 - - -------------------------------------------------------------------------------------------------------------------------------- Health Care Management Services - 0.6% 17,500 AMERIGROUP Corp. (a) 543,200 14,141 Allscripts Healthcare Solutions, Inc. (a) 248,175 12,300 Amsurg Corp. (a) 279,825 14,400 Centene Corp. (a) 338,832 4,400 Computer Programs & Systems, Inc. 175,824 1,857 Corvel Corp. (a) 46,425 17,831 Eclipsys Corp. (a) 323,811 4,700 Healthspring, Inc. (a) 88,125 7,300 Horizon Health Corp. (a) 152,424 4,100 Molina Healthcare, Inc. (a) 156,005 7,700 Omnicell, Inc. (a) 106,414 13,737 Per-Se Technologies, Inc. (a) 345,898 12,300 Phase Forward, Inc. (a) 141,696 5,800 Vital Images, Inc. (a) 143,260 ------------ 3,089,914 - - -------------------------------------------------------------------------------------------------------------------------------- Health Care Services - 0.6% 7,100 Adeza Biomedical Corp. (a) 99,542 3,600 Alliance Imaging, Inc. (a) 23,040 6,600 Amedisys, Inc. (a) 250,140 11,800 American Retirement Corp. (a) 386,686 14,100 Apria Healthcare Group, Inc. (a) 266,490 5,300 Bio-Reference Labs, Inc. (a) 115,328 11,912 Gentiva Health Services, Inc. (a) 190,949 12,125 Healthcare Services Group 254,019 13,000 Healthways, Inc. (a) 684,320 13,200 Hythiam, Inc. (a) 92,004 2,000 LHC Group, Inc. (a) 39,840 8,700 Matria Healthcare, Inc. (a) 186,354 500 Nighthawk Radiology Holdings, Inc. (a) 8,970 11,500 Odyssey HealthCare, Inc. (a)(e) 202,055 5,200 Symbion, Inc. (a) 107,952 6,200 VistaCare, Inc. Class A (a) 75,020 ------------ 2,982,709 - - --------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- Homebuilding - 0.3% 17,000 Hovnanian Enterprises, Inc. Class A (a) $ 511,360 5,460 Levitt Corp. Class A 87,360 5,300 M/I Homes, Inc. 185,924 7,500 Meritage Homes Corp. (a) 354,375 700 Orleans Homebuilders, Inc. 11,375 6,062 Technical Olympic USA, Inc. 87,050 13,500 WCI Communities, Inc. (a)(e) 271,890 ------------ 1,509,334 - - -------------------------------------------------------------------------------------------------------------------------------- Hotel/Motel - 0.1% 6,600 Lodgian, Inc. (a) 94,050 6,379 Marcus Corp. 133,194 8,500 Morgans Hotel Group Co. (a) 132,260 ------------ 359,504 - - -------------------------------------------------------------------------------------------------------------------------------- Household Furnishings - 0.5% 5,500 American Woodmark Corp. 192,720 12,400 Ethan Allen Interiors, Inc. 453,220 18,100 Furniture Brands International, Inc. (e) 377,204 8,836 Haverty Furniture Cos., Inc. 138,637 1,600 Hooker Furniture Corp. 26,880 21,400 La-Z-Boy, Inc. (e) 299,600 5,800 Lifetime Brands, Inc. 125,686 4,700 Sealy Corp. 62,369 20,300 Select Comfort Corp. (a)(e) 466,291 6,200 Stanley Furniture Co., Inc. 148,614 15,800 Tempur-Pedic International, Inc. (a) 213,458 ------------ 2,504,679 - - -------------------------------------------------------------------------------------------------------------------------------- Identification Control & Filter Devices - 0.5% 9,912 Advanced Energy Industries, Inc. (a) 131,235 16,141 Asyst Technologies Inc. (a) 121,542 3,100 Badger Meter, Inc. 83,700 8,632 ESCO Technologies, Inc. (a) 461,380 8,200 Flanders Corp. (a) 82,246 1,775 The Gorman-Rupp Co. 47,215 10,326 Mine Safety Appliances Co. 415,105 11,982 Paxar Corp. (a) 246,470 7,700 RAE Systems, Inc. (a) 30,800 3,912 Robbins & Myers, Inc. 102,260 11,227 Veeco Instruments, Inc. (a) 267,652 5,996 Vicor Corp. 99,354 6,700 Viisage Technology, Inc. (a)(e) 101,572 8,436 Watts Water Technologies, Inc. Class A 283,028 11,317 X-Rite, Inc. 124,374 ------------ 2,597,933 - - -------------------------------------------------------------------------------------------------------------------------------- Industrial Producers - 0.0% 7,000 Smith & Wesson Holding Corp. (a) 57,540 4,000 TAL International Group, Inc. (a) 96,400 ------------ 153,940 - - -------------------------------------------------------------------------------------------------------------------------------- Insurance: Life - 0.4% 24,200 American Equity Investment Life Holding Co. 257,972 6,100 Ceres Group, Inc. (a) 37,942 14,005 Delphi Financial Group Class A 509,222 2,980 Great American Financial Resources, Inc. 62,371 1,042 Kansas City Life Insurance Co. 44,556 662 National Western Life Insurance Co. Class A 158,648 36,200 The Phoenix Cos., Inc. 509,696 6,893 Presidential Life Corp. 169,430 11,300 Universal American Financial Corp. (a) 148,595 ------------ 1,898,432 - - --------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- Insurance: Multi-Line - 0.4% 10,240 Alfa Corp. $ 169,574 2,986 CNA Surety Corp. (a) 51,598 7,809 Crawford & Co. Class B 56,069 2,000 EMC Insurance Group, Inc. 57,520 3,225 FBL Financial Group, Inc. Class A 104,490 8,400 HealthExtras, Inc. (a) 253,848 12,806 Hilb Rogal & Hobbs Co. 477,280 17,368 Horace Mann Educators Corp. 294,388 1,240 Independence Holding Co. 27,788 14,000 Meadowbrook Insurance Group, Inc. (a) 116,480 2,297 Pico Holdings, Inc. (a) 74,078 14,355 Zenith National Insurance Corp. 569,463 ------------ 2,252,576 - - -------------------------------------------------------------------------------------------------------------------------------- Insurance: Property-Casualty - 1.3% 10,100 21st Century Insurance Group 145,440 5,150 Affirmative Insurance Holdings, Inc. 80,597 3,471 American Physicians Capital, Inc. (a) 182,540 11,566 Argonaut Group, Inc. (a) 347,443 4,032 Baldwin & Lyons, Inc. Class B 102,816 4,500 Bristol West Holdings, Inc. 72,000 4,700 Capital Title Group, Inc. 34,639 18,000 Commerce Group, Inc. 531,720 4,400 Darwin Professional Underwriters, Inc. (a) 77,704 5,300 Direct General Corp. 89,676 3,244 Donegal Group, Inc. Class A 62,966 4,900 FPIC Insurance Group, Inc. (a) 189,875 3,500 First Acceptance Corp. (a) 41,230 21,100 Fremont General Corp. 391,616 5,062 Harleysville Group, Inc. 160,567 6,900 Infinity Property & Casualty Corp. 282,900 1,500 James River Group, Inc. (a) 37,350 2,858 The Midland Co. 108,547 500 NYMAGIC, Inc. 14,525 4,100 National Interstate Corp. 111,192 4,300 Navigators Group, Inc. (a) 188,426 2,500 Odyssey Re Holdings Corp. 65,875 21,515 Ohio Casualty Corp. 639,641 10,706 PMA Capital Corp. Class A (a) 110,272 11,023 ProAssurance Corp. (a) 531,088 6,754 RLI Corp. 325,408 1,900 SCPIE Holdings, Inc. (a) 44,175 6,100 Safety Insurance Group, Inc. 290,055 8,200 SeaBright Insurance Holdings, Inc. (a) 132,102 10,254 Selective Insurance Group 572,891 3,512 State Auto Financial Corp. 114,280 7,100 Tower Group, Inc. 214,775 8,900 United Fire & Casualty Co. 268,157 ------------ 6,562,488 - - -------------------------------------------------------------------------------------------------------------------------------- Investment Management Companies - 0.6% 27,856 Apollo Investment Corp. 514,785 12,738 Ares Capital Corp. 215,664 9,500 Calamos Asset Management, Inc. Class A 275,405 500 Capital Southwest Corp. 52,225 2,500 Cohen & Steers, Inc. 59,000 2,796 GAMCO Investors, Inc. Class A 102,781 22,000 MCG Capital Corp. 349,800
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 9,723 NGP Capital Resources Co. $ 142,247 12,000 National Financial Partners Corp. 531,720 3,200 Technology Investment Capital Corp. 46,880 28,300 Waddell & Reed Financial, Inc. Class A 581,848 ------------ 2,872,355 - - -------------------------------------------------------------------------------------------------------------------------------- Jewelry Watches & Gemstones - 0.1% 17,400 Fossil, Inc. (a) 313,374 8,100 Movado Group, Inc. 185,895 ------------ 499,269 - - -------------------------------------------------------------------------------------------------------------------------------- Leisure Time - 0.3% 9,400 Bally Total Fitness Holding Corp. (a) 63,732 25,200 Callaway Golf Co. 327,348 8,900 Great Wolf Resorts, Inc. (a) 106,889 12,800 K2, Inc. (a) 140,032 9,600 Life Time Fitness, Inc. (a) 444,192 30,200 Six Flags, Inc. (a)(e) 169,724 2,300 Steinway Musical Instruments Inc. (a) 56,396 10,056 Vail Resorts, Inc. (a) 373,078 4,800 West Marine, Inc. (a) 64,704 ------------ 1,746,095 - - -------------------------------------------------------------------------------------------------------------------------------- Machinery & Engineering - 0.1% 14,890 Applied Industrial Technologies, Inc. 361,976 - - -------------------------------------------------------------------------------------------------------------------------------- Machinery: Agricultural - 0.1% 3,450 Gehl Co. (a) 88,078 5,613 Lindsay Manufacturing Co. 152,225 ------------ 240,303 - - -------------------------------------------------------------------------------------------------------------------------------- Machinery: Construction & Handling - 0.1% 7,600 ASV, Inc. (a)(e) 175,104 5,717 Astec Industries, Inc. (a) 195,064 1,587 NACCO Industries, Inc. Class A 218,070 ------------ 588,238 - - -------------------------------------------------------------------------------------------------------------------------------- Machinery: Engines - 0.1% 17,000 Briggs & Stratton Corp. 528,870 4,500 Raser Techonologies, Inc. (a) 43,380 ------------ 572,250 - - -------------------------------------------------------------------------------------------------------------------------------- Machinery: Industrial/Specialty - 0.4% 10,600 Actuant Corp. Class A 529,470 5,000 Columbus McKinnon Corp. (a) 108,700 1,500 DXP Enterprises, Inc. (a) 46,605 6,900 EnPro Industries, Inc. (a) 231,840 3,970 Kadant, Inc. (a) 91,310 2,200 Middleby Corp. (a) 190,432 9,310 Nordson Corp. 457,866 8,328 Tecumseh Products Co. Class A (a) 159,898 2,737 Tennant Co. 137,616 9,279 Woodward Governor Co. 283,102 ------------ 2,236,839 - - -------------------------------------------------------------------------------------------------------------------------------- Machinery: Oil Well Equipment & Services - 1.2% 2,800 Allis-Chalmers Energy, Inc. (a) 38,052 2,800 Basic Energy Services, Inc. (a) 85,596 8,102 CARBO Ceramics, Inc. 398,051 7,300 Complete Production Services, Inc. (a) 172,572 3,388 Dril-Quip, Inc. (a) 279,307 6,417 Gulf Island Fabrication, Inc. 128,597 33,743 Hanover Compressor Co. (a)(e) 633,694 7,140 Hornbeck Offshore Services, Inc. (a) 253,613 6,949 Hydril Co. (a) 545,635 23,446 Input/Output, Inc. (a)(e) 221,565 5,900 Lufkin Industries, Inc. 350,637 6,400 NATCO Group, Inc. Class A (a) 257,280 29,820 Newpark Resources, Inc. (a) 183,393 16,000 Oil States International, Inc. (a) 548,480
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 36,081 Parker Drilling Co. (a) $ 259,062 7,100 RPC, Inc. 172,388 8,900 Sulphco, Inc. (a) 63,724 2,100 Superior Well Services, Inc. (a) 52,290 400 T-3 Energy Services Inc. (a) 7,792 5,800 Trico Marine Services, Inc. (a) 197,200 1,900 Union Drilling, Inc. (a) 28,234 9,826 Universal Compression Holdings, Inc. (a) 618,743 10,457 W-H Energy Services, Inc. (a) 531,529 2,300 Warrior Energy Service Corp. (a) 55,959 ------------ 6,083,393 - - -------------------------------------------------------------------------------------------------------------------------------- Machinery: Specialty - 0.2% 6,700 Applied Films Corp. (a) 190,883 10,300 Bucyrus International, Inc. 520,150 4,200 Cascade Corp. 166,110 10,300 Flow International Corp. (a) 144,921 4,441 Semitool, Inc. (a) 40,058 4,400 TurboChef Technologies, Inc. (a)(e) 48,928 ------------ 1,111,050 - - -------------------------------------------------------------------------------------------------------------------------------- Manufactured Housing - 0.1% 1,300 Cavco Industries, Inc. (a) 57,772 29,727 Champion Enterprises, Inc. (a) 328,186 4,005 Palm Harbor Homes, Inc. (a)(e) 70,448 2,301 Skyline Corp. 98,437 ------------ 554,843 - - -------------------------------------------------------------------------------------------------------------------------------- Manufacturing - 0.1% 16,059 Federal Signal Corp. 243,133 4,131 Standex International Corp. 125,376 ------------ 368,509 - - -------------------------------------------------------------------------------------------------------------------------------- Medical & Dental Instruments & Supplies - 2.5% 8,400 Abaxis, Inc. (a) 187,908 5,600 Abiomed, Inc. (a) 72,632 18,500 Align Technology, Inc. (a) 136,715 27,200 American Medical Systems Holdings, Inc. (a) 452,880 3,400 Angiodynamics, Inc. (a) 91,970 6,608 Arrow International, Inc. 217,205 5,800 Bio-Rad Laboratories, Inc. Class A (a) 376,652 6,749 Biosite, Inc. (a) 308,159 18,200 Cepheid, Inc. (a) 176,722 6,600 Cerus Corp. (a) 47,058 6,100 Conceptus, Inc. (a) 83,204 10,428 Conmed Corp. (a) 215,860 10,800 Conor Medsystems, Inc. (a) 297,972 8,869 Cyberonics, Inc. (a) 189,087 7,100 DJO, Inc. (a) 261,493 8,200 DexCom, Inc. (a) 111,356 8,000 Diagnostic Products Corp. 465,360 15,400 Encore Medical Corp. (a) 74,074 3,000 ev3, Inc. (a) 44,430 5,500 FoxHollow Technologies Inc. (a)(e) 150,260 7,600 I-Flow Corp. (a) 82,232 6,050 ICU Medical, Inc. (a) 255,552 8,200 IRIS International, Inc. (a) 107,912 22,043 Immucor, Inc. (a) 423,887 10,322 Invacare Corp. 256,811 8,640 Inverness Medical Innovations, Inc. (a) 243,907 14,600 Kyphon, Inc. (a) 560,056 2,678 Landauer, Inc. 128,276
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 7,500 Laserscope (a) $ 231,075 13,000 Lifecell Corp. (a) 401,960 1,600 Medical Action Industries, Inc. (a) 35,344 14,844 Mentor Corp. (e) 645,714 7,000 Meridian Bioscience, Inc. 174,650 12,510 Merit Medical Systems, Inc. (a) 172,138 7,237 Molecular Devices Corp. (a) 221,163 500 Northstar Neuroscience, Inc. (a) 5,190 13,800 NuVasive, Inc. (a) 251,574 17,059 OraSure Technologies, Inc. (a) 162,402 13,398 Owens & Minor, Inc. 383,183 26,373 PSS World Medical, Inc. (a) 465,483 6,800 Palomar Medical Technologies, Inc. (a) 310,284 9,229 PolyMedica Corp. 331,875 6,815 SonoSite, Inc. (a) 266,058 12,300 Spectranetic Corp (a) 131,856 11,000 Stereotaxis, Inc. (a) 118,690 22,500 Steris Corp. 514,350 6,783 SurModics, Inc. (a)(e) 244,934 10,000 Symmetry Medical, Inc. (a) 154,000 26,600 ThermoGenesis Corp. (a) 110,124 17,547 Thoratec Corp. (a) 243,377 9,560 Ventana Medical Systems Inc. (a) 451,041 9,700 Viasys Healthcare, Inc. (a) 248,320 1,524 Vital Signs, Inc. 75,484 9,876 West Pharmaceutical Services, Inc. 358,301 13,900 Wright Medical Group, Inc. (a) 290,927 600 Young Innovations, Inc. 21,138 ------------ 13,040,265 - - -------------------------------------------------------------------------------------------------------------------------------- Medical Services - 0.3% 4,800 Air Methods Corp. (a) 125,664 14,300 Magellan Health Services, Inc. (a) 647,933 12,471 Option Care, Inc. 149,403 11,197 Parexel International Corp. (a) 323,033 7,895 RehabCare Group, Inc. (a) 137,215 ------------ 1,383,248 - - -------------------------------------------------------------------------------------------------------------------------------- Metal Fabricating - 1.1% 1,500 Ampco-Pittsburgh Corp. 42,975 3,900 CIRCOR International, Inc. 118,911 300 Compx International, Inc. 5,370 5,000 Dynamic Materials Corp. 169,350 9,250 Encore Wire Corp. (a) 332,445 6,100 Insteel Industries, Inc. 147,620 11,226 Kaydon Corp. 418,842 5,000 LB Foster Co. Class A (a) 121,350 11,758 Lone Star Technologies Inc. (a) 635,167 13,463 Maverick Tube Corp. (a) 850,727 12,000 Mueller Water Products, Inc. (a) 208,920 5,765 NN, Inc. 71,198 7,155 NS Group, Inc. (a) 394,097 12,610 Quanex Corp. 543,113 8,800 RBC Bearings, Inc. (a) 199,760 8,713 RTI International Metals, Inc. (a) 486,534
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 9,093 Ryerson, Inc. $ 245,511 8,400 Superior Essex, Inc. (a) 251,412 5,458 Valmont Industries, Inc. 253,742 ------------ 5,497,044 - - -------------------------------------------------------------------------------------------------------------------------------- Metals & Minerals Miscellaneous - 0.5% 2,500 AM Castle & Co. 80,625 6,873 AMCOL International Corp. 181,104 7,211 Brush Engineered Materials, Inc. (a) 150,349 8,218 Cleveland-Cliffs, Inc. 651,605 9,400 Compass Minerals International, Inc. 234,530 32,844 GrafTech International Ltd. (a) 190,495 47,600 Hecla Mining Co. (a) 249,900 7,453 Minerals Technologies, Inc. 387,556 12,564 Stillwater Mining Co. (a) 159,312 ------------ 2,285,476 - - -------------------------------------------------------------------------------------------------------------------------------- Milling: Fruit and Grain Processing - 0.0% 4,600 MGP Ingredients, Inc. 106,812 - - -------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Business & Consumer Discretionary - 0.0% 2,600 Core-Mark Holdings Co., Inc. (a) 93,080 - - -------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Consumer Staples - 0.0% 7,900 Reddy Ice Holdings, Inc. 160,765 - - -------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Materials & Commodities - 0.2% 10,050 Ceradyne, Inc. (a) 497,374 11,779 Symyx Technologies Inc. (a) 284,463 7,489 WD-40 Co. 251,406 ------------ 1,033,243 - - -------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Materials & Processing - 0.2% 10,938 Insituform Technologies, Inc. Class A (a) 250,371 10,500 Metal Management, Inc. 321,510 5,255 Rogers Corp. (a) 296,067 27,459 USEC, Inc. 325,389 1,900 Xerium Technologies, Inc. 17,898 ------------ 1,211,235 - - -------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Producer Durables - 0.2% 28,900 BE Aerospace, Inc. (a) 660,654 11,100 Blount International, Inc. (a) 133,422 ------------ 794,076 - - -------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Technology - 0.1% 6,500 IHS, Inc. Class A (a) 192,595 2,700 iRobot Corp. (a)(e) 67,176 ------------ 259,771 - - -------------------------------------------------------------------------------------------------------------------------------- Multi-Sector Companies - 0.3% 4,800 Compass Diversified Trust 68,496 18,471 GenCorp, Inc. (a)(e) 296,090 5,000 Gentek Inc (a) 134,250 7,994 Kaman Corp. Class A 145,491 8,099 Lancaster Colony Corp. 319,668 7,000 Raven Industries, Inc. 220,500 1,765 Sequa Corp. Class A (a) 143,848 ------------ 1,328,343 - - -------------------------------------------------------------------------------------------------------------------------------- Office Furniture & Business Equipment - 0.3% 14,500 ACCO Brands Corp. (a) 317,550 22,200 Herman Miller, Inc. 572,094 8,274 Kimball International, Inc. Class B 163,081 9,400 Knoll, Inc. 172,584 9,840 Presstek, Inc. (a) 91,610 ------------ 1,316,919 - - -------------------------------------------------------------------------------------------------------------------------------- Offshore Drilling - 0.1% 9,854 Atwood Oceanics, Inc. (a) 488,758 3,000 Bois d'Arc Energy, Inc. (a) 49,410 5,700 Hercules Offshore, Inc. (a) 199,500 ------------ 737,668 - - --------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- Oil: Crude Producers - 2.0% 7,400 ATP Oil & Gas Corp. (a) $ 310,282 2,800 Arena Resources, Inc. (a) 96,012 7,250 Atlas America, Inc. (a) 324,872 18,100 Aurora Oil & Gas Corp. (a) 72,400 14,002 Berry Petroleum Co. Class A 464,166 8,600 Bill Barrett Corp. (a) 254,646 20,500 Brigham Exploration Co. (a) 162,155 6,500 Bronco Drilling Co., Inc. (a) 135,785 5,600 Callon Petroleum Co. (a) 108,304 8,700 Carrizo Oil & Gas, Inc. (a) 272,397 2,400 Clayton Williams Energy, Inc. (a) 82,896 14,357 Comstock Resources, Inc. (a) 428,700 800 Delek US Holdings, Inc. (a) 12,160 13,900 EXCO Resources, Inc. (a) 158,460 8,000 Edge Petroleum Corp. (a) 159,840 18,800 Encore Acquisition Co. (a) 504,404 15,400 Energy Partners Ltd. (a) 291,830 13,400 The Exploration Co. of Delaware, Inc. (a) 142,844 21,900 Gasco Energy, Inc. (a) 97,455 5,700 GeoGlobal Resources, Inc. (a) 27,873 6,000 Goodrich Petroleum Corp. (a) 170,340 64,843 Grey Wolf, Inc. (a) 499,291 1,000 Gulfport Energy Corp. (a) 11,040 12,700 Harvest Natural Resources, Inc. (a) 171,958 11,083 Houston Exploration Co. (a) 678,169 23,900 Mariner Energy, Inc. (a) 439,043 10,800 McMoRan Exploration Co. (a)(e) 190,080 29,011 Meridian Resource Corp. (a) 101,539 14,000 Parallel Petroleum Corp. (a) 345,940 18,742 PetroHawk Energy Corp. (a) 236,149 6,800 Petroleum Development Corp. (a) 256,360 13,600 Petroquest Energy, Inc. (a) 167,008 12,300 Pioneer Drilling Co. (a) 189,912 9,700 Quest Resource Corp. (a) 131,435 9,720 Remington Oil & Gas Corp. (a) 427,388 5,249 Resource America, Inc. Class A 99,993 15,600 Rosetta Resources, Inc. (a) 259,272 8,578 Stone Energy Corp. (a) 399,306 9,717 Swift Energy Co. (a) 417,151 4,300 Toreador Resources Corp. (a)(e) 120,959 20,000 Transmeridian Exploration, Inc. (a) 114,000 16,400 Warren Resources, Inc. (a) 235,504 6,500 Western Refining, Inc. 140,270 11,710 Whiting Petroleum Corp. (a) 490,298 ------------ 10,399,886 - - -------------------------------------------------------------------------------------------------------------------------------- Oil: Integrated Domestic - 0.3% 20,900 Delta Petroleum Corp. (a) 356,345 3,800 GMX Resources Inc. (a) 117,496 5,700 Giant Industries, Inc. (a) 379,335 16,800 KCS Energy, Inc. (a) 498,960 ------------ 1,352,136 - - -------------------------------------------------------------------------------------------------------------------------------- Oil: Integrated International - 0.1% 24,600 Vaalco Energy, Inc. (a) 240,096 - - --------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- Paints & Coatings - 0.2% 18,076 Ferro Corp. $ 288,493 11,340 H.B. Fuller Co. 494,084 1,693 Kronos Worldwide, Inc. 49,520 ------------ 832,097 - - -------------------------------------------------------------------------------------------------------------------------------- Paper - 0.4% 10,626 Albany International Corp. Class A 450,436 18,600 Bowater, Inc. 423,150 7,698 Buckeye Technologies, Inc. (a) 58,813 10,174 Caraustar Industries, Inc. (a) 91,566 8,892 Chesapeake Corp. 145,918 9,000 Mercer International, Inc.-Sbi (a)(e) 78,120 4,900 Neenah Paper, Inc. 149,205 14,801 P.H. Glatfelter Co. 234,892 8,080 Rock-Tenn Co. Class A 128,876 14,942 Wausau Paper Corp. 186,028 ------------ 1,947,004 - - -------------------------------------------------------------------------------------------------------------------------------- Plastics - 0.1% 6,100 The Lamson & Sessions Co. (a) 172,996 4,700 PW Eagle, Inc. 142,128 13,454 Spartech Corp. 304,060 ------------ 619,184 - - -------------------------------------------------------------------------------------------------------------------------------- Pollution Control and Environmental Services - 0.2% 5,600 American Ecology Corp. 148,400 5,800 Basin Water, Inc. (a) 58,116 19,000 Darling International, Inc. (a) 86,070 16,246 Headwaters, Inc. (a) 415,248 3,600 TEAM INC (a) 90,180 ------------ 798,014 - - -------------------------------------------------------------------------------------------------------------------------------- Power Transmission Equipment - 0.1% 10,251 Regal-Beloit Corp. 452,582 - - -------------------------------------------------------------------------------------------------------------------------------- Printing and Copying Services - 0.1% 12,882 Bowne & Co., Inc. 184,213 17,700 Cenveo, Inc. (a) 317,715 7,300 Schawk, Inc. 127,750 ------------ 629,678 - - -------------------------------------------------------------------------------------------------------------------------------- Production Technology Equipment - 1.2% 3,500 ADE Corp. (a) 113,715 12,457 ATMI, Inc. (a) 306,691 41,200 Axcelis Technologies, Inc. (a) 243,080 24,878 Brooks Automation, Inc. (a) 293,560 14,556 Cognex Corp. 378,893 42,568 Credence Systems Corp. (a) 148,988 12,900 Cymer, Inc. (a) 599,334 6,631 Dionex Corp. (a) 362,450 11,161 Electro Scientific Industries, Inc. (a) 200,786 17,300 Emcore Corp. (a) 166,080 43,499 Entegris, Inc. (a) 414,545 7,690 Esterline Technologies Corp. (a) 319,827 9,955 FEI Co. (a) 225,779 8,700 Intevac, Inc. (a) 188,616 24,056 Kulicke & Soffa Industries, Inc. (a) 178,255 25,503 LTX Corp. (a) 178,776 6,200 MTS Systems Corp. 244,962 21,899 Mattson Technology, Inc. (a) 213,953 8,262 Photon Dynamics, Inc. (a) 103,440 11,979 Photronics, Inc. (a) 177,289 5,600 Rofin-Sinar Technologies, Inc. (a) 321,832
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 11,073 Rudolph Technologies, Inc. (a) $ 160,559 10,490 Ultratech, Inc. (a) 165,113 19,113 Varian Semiconductor Equipment Associates, Inc. (a) 623,275 ------------ 6,329,798 - - -------------------------------------------------------------------------------------------------------------------------------- Publishing: Miscellaneous - 0.4% 8,494 Banta Corp. 393,527 5,000 Consolidated Graphics, Inc. (a) 260,300 2,150 Courier Corp. 86,043 8,482 Martha Stewart Living Omnimedia, Inc. Class A (a)(e) 141,734 10,907 Playboy Enterprises, Inc. Class B (a) 108,852 56,100 Primedia, Inc. (a) 102,663 2,800 Private Media Group, Inc. (a) 13,160 37,500 The Reader's Digest Association, Inc. Class A 523,500 14,260 Scholastic Corp. (a) 370,332 ------------ 2,000,111 - - -------------------------------------------------------------------------------------------------------------------------------- Publishing: Newspapers - 0.3% 29,800 Belo Corp. Class A 464,880 32,529 Hollinger International, Inc. Class A 261,208 11,100 Journal Communications, Inc. Class A 124,764 16,433 Journal Register Co. 147,240 14,700 Lee Enterprises, Inc. 396,165 9,000 Media General, Inc. Class A 377,010 ------------ 1,771,267 - - -------------------------------------------------------------------------------------------------------------------------------- Radio & TV Broadcasters - 0.5% 15,700 CKX, Inc. (a) 213,049 12,300 Citadel Broadcasting Corp. 109,470 19,500 Cox Radio, Inc. Class A (a) 281,190 23,900 Cumulus Media, Inc. Class A (a)(e) 255,013 13,600 Emmis Communications Corp. Class A (a) 212,704 11,200 Entercom Communications Corp. 292,992 1,500 Fisher Communications, Inc. (a) 63,195 21,500 Gray Television, Inc. 124,485 11,000 Lin TV Corp. Class A (a) 83,050 4,400 Outdoor Channel Holdings, Inc. (a) 45,408 25,500 Radio One, Inc. Class D (a) 188,700 3,183 Salem Communications Corp. Class A (a) 41,411 19,064 Sinclair Broadcast Group, Inc. Class A 163,188 14,884 Spanish Broadcasting System, Inc. Class A (a) 76,057 23,100 Westwood One, Inc. 173,250 10,496 World Wrestling Entertainment, Inc. 177,277 ------------ 2,500,439 - - -------------------------------------------------------------------------------------------------------------------------------- Railroad Equipment - 0.2% 1,700 American Railcar Industries, Inc. 56,287 5,000 Freightcar America, Inc. 277,550 4,500 Greenbrier Cos., Inc. 147,330 15,639 Westinghouse Air Brake Technologies Corp. 584,899 ------------ 1,066,066 - - -------------------------------------------------------------------------------------------------------------------------------- Railroads - 0.2% 11,481 Florida East Coast Industries, Inc. 600,801 11,475 Genesee & Wyoming, Inc. Class A (a) 407,018 13,002 RailAmerica, Inc. (a) 136,001 ------------ 1,143,820 - - -------------------------------------------------------------------------------------------------------------------------------- Real Estate - 0.2% 1,200 AMREP Corp. 65,184 9,800 Affordable Residential Communities 105,350 2,000 Avatar Holdings, Inc. (a)(e) 113,940 5,500 Bluegreen Corp. (a) 63,030 3,400 California Coastal Communities, Inc. (a) 108,800 1,900 Consolidated-Tomoka Land Co. 104,766 4,800 Housevalues, Inc. (a)(e) 33,264
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 5,200 Newkirk Realty Trust, Inc. $ 90,272 2,715 Tejon Ranch Co. (a) 111,749 11,300 Trammell Crow Co. (a) 397,421 ------------ 1,193,776 - - -------------------------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts (REITs) - 6.1% 23,600 Aames Investment Corp. 117,764 10,001 Acadia Realty Trust 236,524 4,200 Agree Realty Corp. 142,674 567 Alexander's, Inc. (a) 154,088 8,556 Alexandria Real Estate Equities, Inc. 758,746 8,050 American Campus Communities, Inc. 200,043 41,900 American Financial Realty Trust 405,592 15,287 American Home Mortgage Investment Corp. 563,479 24,100 Anthracite Capital, Inc. 293,056 15,100 Anworth Mortgage Asset Corp. 125,330 6,200 Arbor Realty Trust, Inc. 155,310 20,400 Ashford Hospitality Trust, Inc. 257,448 17,850 BioMed Realty Trust, Inc. 534,429 16,000 Capital Lease Funding, Inc. 182,560 2,700 Capital Trust, Inc. 96,174 7,300 Cedar Shopping Centers, Inc. 107,456 3,700 CentraCore Properties Trust 91,575 13,000 Corporate Office Properties Trust 547,040 12,800 Cousins Properties, Inc. 395,904 25,800 Crescent Real Estate EQT Co. 478,848 14,600 Deerfield Triarc Capital Corp. 189,508 19,300 DiamondRock Hospitality Co. 285,833 4,500 Digital Realty Trust, Inc. 111,105 8,927 Eastgroup Properties Inc. 416,712 12,500 Education Realty Trust, Inc. 208,125 9,880 Entertainment Properties Trust 425,334 18,140 Equity Inns, Inc. 300,398 6,494 Equity Lifestyle Properties, Inc. 284,632 11,000 Equity One, Inc. 229,900 15,050 Extra Space Storage, Inc. 244,412 20,370 FelCor Lodging Trust, Inc. 442,844 21,900 Fieldstone Investment Corp. 200,604 15,100 First Industrial Realty Trust, Inc. 572,894 6,800 First Potomac Realty Trust 202,572 15,500 Franklin Street Properties Corp. 305,040 49,200 Friedman Billings Ramsey Group, Inc. Class A 539,724 13,190 GMH Communities Trust 173,844 5,200 Getty Realty Corp. 147,888 13,739 Glenborough Realty Trust, Inc. 295,938 14,856 Glimcher Realty Trust 368,577 3,950 Gramercy Capital Corp. 102,305 15,700 Healthcare Realty Trust, Inc. 500,045 8,400 Heritage Property Investment Trust 293,328 15,300 Hersha Hospitality Trust 142,137 17,300 Highland Hospitality Corp. 243,584 20,600 Highwoods Properties, Inc. 745,308 13,120 Home Properties, Inc. 728,291 17,000 HomeBanc Corp. 134,980 25,400 IMPAC Mortgage Holdings, Inc. 283,972 27,300 Inland Real Estate Corp. 406,224
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 14,392 Innkeepers USA Trust $ 248,694 15,500 Investors Real Estate Trust 139,965 6,000 JER Investors Trust, Inc. 93,300 26,800 KKR Financial Corp. 557,708 7,240 Kite Realty Group Trust 112,872 6,800 LTC Properties, Inc. 151,980 13,320 LaSalle Hotel Properties 616,716 17,642 Lexington Corporate Properties Trust 381,067 17,021 Longview Fibre Co. 324,931 18,600 Luminent Mortgage Capital, Inc. 172,236 26,400 MFA Mortgage Investments, Inc. 181,632 14,800 Maguire Properties, Inc. 520,516 18,800 Medical Properties Trust, Inc. 207,552 9,229 Mid-America Apartment Communities, Inc. 514,517 19,100 The Mills Corp. 510,925 9,750 MortgageIT Holdings, Inc. 117,585 7,529 National Health Investors, Inc. 202,455 17,775 National Retail Properties, Inc. 354,611 28,559 Nationwide Health Properties, Inc. 642,863 14,700 Newcastle Investment Corp. 372,204 15,000 NorthStar Realty Finance Corp. 180,150 11,000 Novastar Financial, Inc. (e) 347,710 19,300 Omega Healthcare Investors, Inc. 255,146 5,308 PS Business Parks, Inc. 313,172 6,104 Parkway Properties, Inc. 277,732 11,632 Pennsylvania Real Estate Investment Trust 469,584 14,286 Post Properties, Inc. 647,727 14,647 Potlatch Corp. 552,924 11,600 RAIT Investment Trust 338,720 7,800 Ramco-Gershenson Properties Trust 210,054 27,700 Realty Income Corp. 606,630 7,095 Redwood Trust, Inc. 346,449 14,100 Republic Property Trust 139,308 3,922 Saul Centers, Inc. 159,939 15,000 Saxon Capital Inc. 171,600 21,314 Senior Housing Properties Trust 381,734 2,700 Sizeler Property Investors, Inc. 43,362 7,304 Sovran Self Storage, Inc. 370,970 33,300 Spirit Finance Corp. 374,958 28,300 Strategic Hotel Capital, Inc. 586,942 7,943 Sun Communities, Inc. 258,386 18,900 Sunstone Hotel Investors, Inc. 549,234 10,222 Tanger Factory Outlet Centers, Inc. 330,886 2,875 Tarragon Corp. 39,819 21,900 Trustreet Properties, Inc. 288,861 19,170 U-Store-It Trust 361,546 4,127 Universal Health Realty Income Trust 129,381 6,700 Urstadt Biddle Properties, Inc. Class A 109,143 16,265 Washington Real Estate Investment Trust 596,926 3,900 Windrose Medical Properties Trust 56,940 8,255 Winston Hotels, Inc. 101,124 2,300 Winthrop Realty Trust, Inc. 13,662 ------------ 31,405,146 - - --------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- Recreational Vehicles & Boats - 0.3% 5,643 Arctic Cat, Inc. $ 110,095 21,299 Fleetwood Enterprises, Inc. (a) 160,594 2,075 Marine Products Corp. 20,190 8,924 Monaco Coach Corp. 113,335 13,800 Polaris Industries, Inc. 597,540 12,890 Winnebago Industries, Inc. (e) 400,106 ------------ 1,401,860 - - -------------------------------------------------------------------------------------------------------------------------------- Rental & Leasing Services: Commercial - 0.1% 3,853 Electro Rent Corp. (a) 61,725 5,200 H&E Equipment Services, Inc. (a) 153,140 2,000 Interpool, Inc. 44,440 2,000 Marlin Business Services, Inc. (a) 45,120 6,210 McGrath RentCorp 172,700 12,400 Williams Scotsman International, Inc. (a) 270,816 ------------ 747,941 - - -------------------------------------------------------------------------------------------------------------------------------- Rental & Leasing Services: Consumer - 0.3% 13,493 Aaron Rents, Inc. 362,692 3,400 Amerco, Inc. (a) 342,244 8,195 Dollar Thrifty Automotive Group (a) 369,349 23,400 Rent-A-Center, Inc. (a) 581,724 ------------ 1,656,009 - - -------------------------------------------------------------------------------------------------------------------------------- Restaurants - 1.6% 12,400 AFC Enterprises Inc. (a) 158,100 29,400 Applebees International, Inc. 565,068 3,800 BJ's Restaurants, Inc. (a) 84,892 14,380 Bob Evans Farms, Inc. 431,544 3,525 Buffalo Wild Wings, Inc. (a) 135,043 12,500 CBRL Group, Inc. 424,000 11,050 CEC Entertainment, Inc. (a) 354,926 18,400 CKE Restaurants, Inc. 305,624 8,800 California Pizza Kitchen, Inc. (a) 241,824 3,400 Chipotle Mexican Grill, Inc. Class A (a) 207,230 7,200 Cosi, Inc. (a) 44,856 30,700 Denny's Corp. (a) 112,976 11,250 Domino's Pizza, Inc. 278,325 5,848 IHOP Corp. 281,172 12,218 Jack in the Box, Inc. (a) 478,946 18,300 Krispy Kreme Doughnuts, Inc. (a)(e) 148,962 5,496 Landry's Restaurants, Inc. 178,345 7,854 Lone Star Steakhouse & Saloon, Inc. 206,010 7,100 Luby's, Inc. (a) 74,053 2,400 McCormick & Schmick's Seafood Restaurants, Inc. (a) 57,120 600 Morton's Restaurant Group, Inc. (a) 9,192 11,084 O'Charleys, Inc. (a) 188,428 10,608 PF Chang's China Bistro, Inc. (a) 403,316 9,096 Papa John's International, Inc. (a) 301,987 13,577 Rare Hospitality International, Inc. (a) 390,475 6,800 Red Robin Gourmet Burgers, Inc. (a) 289,408 20,900 Ruby Tuesday, Inc. 510,169 8,400 Ruth's Chris Steak House, Inc. (a) 171,528 14,100 Ryan's Restaurant Group, Inc. (a) 167,931 28,800 Sonic Corp. (a) 598,752 8,228 The Steak n Shake Co. (a) 124,572 15,000 Texas Roadhouse, Inc. Class A (a) 202,800 18,450 Triarc Cos. 288,374 ------------ 8,415,948 - - --------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- Retail - 3.6% 8,324 1-800-FLOWERS.COM, Inc. Class A (a) $ 48,029 13,500 99 Cents Only Stores (a) 141,210 7,400 AC Moore Arts & Crafts, Inc. (a) 120,694 18,150 Aeropostale, Inc. (a) 524,353 5,350 America's Car Mart, Inc. (a) 108,658 2,500 Asbury Automotive Group, Inc. (a) 52,350 9,800 Big 5 Sporting Goods Corp. 191,100 42,300 Big Lots, Inc. (a) 722,484 63,500 Blockbuster, Inc. Class A (e) 316,230 6,200 Blue Nile, Inc. (a)(e) 199,392 3,900 The Bon-Ton Stores, Inc. 85,332 7,300 Books-A-Million, Inc. 121,764 20,900 Borders Group, Inc. 385,814 9,418 Brown Shoe Co., Inc. 320,965 2,249 The Buckle, Inc. 94,166 3,800 Build-A-Bear Workshop, Inc. (a) 81,738 6,700 bebe Stores, Inc. 103,314 14,634 CSK Auto Corp. (a) 175,169 8,500 Cabela's, Inc. Class A (a) 163,710 4,050 Cache, Inc. (a) 70,227 14,000 Casual Male Retail Group, Inc. (a)(e) 140,700 10,995 The Cato Corp. Class A 284,221 8,700 Central Garden and Pet Co. (a) 374,535 6,900 Charlotte Russe Holding, Inc. (a) 165,186 40,840 Charming Shoppes, Inc. (a) 459,042 8,485 The Children's Place Retail Stores, Inc. (a) 509,524 12,128 Christopher & Banks Corp. 351,712 1,500 Conn's, Inc. (a) 39,825 9,876 Cost Plus, Inc. (a) 144,782 500 DEB Shops, Inc. 12,055 17,890 Dress Barn, Inc. (a) 453,512 7,109 dELiA*s, Inc. (a) 57,441 18,700 drugstore.com, Inc. (a) 54,230 5,000 Ezcorp, Inc. (a) 188,450 3,900 FTD Group, Inc. (a) 52,650 16,935 Fred's, Inc. 226,082 11,300 GSI Commerce, Inc. (a) 152,889 8,400 Gaiam, Inc. (a) 117,768 16 Gander Mountain Co. (a) 92 7,738 Genesco, Inc. (a) 262,086 9,500 Global Imaging Systems, Inc. (a) 392,160 9,432 Group 1 Automotive, Inc. 531,399 10,139 Guitar Center, Inc. (a) 450,881 12,658 Gymboree Corp. (a) 439,992 16,581 HOT Topic, Inc. (a) 190,847 14,275 Hibbett Sporting Goods, Inc. (a) 341,173 19,398 Insight Enterprises, Inc. (a) 369,532 8,505 Jo-Ann Stores, Inc. (a) 124,598 7,633 Jos. A. Bank Clothiers, Inc. (a) 182,887 1,547 Lawson Products, Inc. 60,983 5,300 Lithia Motors, Inc. Class A 160,696 7,100 MarineMax, Inc. (a) 186,233 15,900 Men's Wearhouse, Inc. 481,770 4,900 New York & Co. (a) 47,873
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 5,300 Overstock.com, Inc. (a)(e) $ 112,678 18,110 PEP Boys-Manny, Moe & Jack 212,430 27,000 Pacific Sunwear of California, Inc. (a) 484,110 8,700 The Pantry, Inc. (a) 500,598 21,900 Payless Shoesource, Inc. (a) 595,023 19,800 Petco Animal Supplies, Inc. (a) 404,514 8,900 PetMed Express, Inc. (a) 97,633 28,999 Pier 1 Imports, Inc. (e) 202,413 10,016 Priceline.com, Inc. (a) 299,078 14,300 Restoration Hardware, Inc. (a) 102,674 6,700 Retail Ventures, Inc. (a) 119,394 9,800 Rush Enterprises Inc. Class A (a) 178,066 3,947 Russ Berrie & Co., Inc. (a) 48,390 9,654 School Specialty, Inc. (a) 307,480 8,700 Sonic Automotive, Inc. 192,966 1,400 The Sportsman's Guide, Inc. (a) 42,700 8,900 Stage Stores, Inc. 293,700 7,703 Stamps.com, Inc. (a) 214,297 7,824 Stein Mart, Inc. 115,795 7,300 Talbots, Inc. 134,685 11,166 Too, Inc. (a) 428,663 12,990 Tuesday Morning Corp. (e) 170,819 14,780 United Natural Foods, Inc. (a) 488,036 11,056 ValueVision Media, Inc. Class A (a) 121,948 3,100 Volcom Inc. (a) 99,169 18,300 The Wet Seal, Inc. Class A (a) 89,304 18,700 Zale Corp. (a) 450,483 4,000 Zumiez, Inc. (a) 150,280 ------------ 18,691,831 - - -------------------------------------------------------------------------------------------------------------------------------- Savings & Loan - 2.0% 6,437 Anchor Bancorp Wisconsin, Inc. 194,204 8,750 BFC Financial Corp. (a) 58,187 25,638 Bank Mutual Corp. 313,296 18,142 BankAtlantic Bancorp, Inc. Class A 269,227 12,673 BankUnited Financial Corp. Class A 386,780 2,600 Berkshire Hills Bancorp, Inc. 92,248 23,787 Brookline Bancorp, Inc. 327,547 500 Charter Financial Corp. 19,730 1,500 Citizens First Bancorp, Inc. 40,065 4,402 Coastal Financial Corp. 56,830 16,226 Commercial Capital Bancorp, Inc. 255,559 9,549 Dime Community Bancshares, Inc. 129,580 6,800 Downey Financial Corp. 461,380 10,422 Fidelity Bankshares, Inc. 331,628 4,026 First Financial Holdings, Inc. 128,832 6,400 First Indiana Corp. 166,592 42,653 First Niagara Financial Group, Inc. 597,995 3,100 First Place Financial Corp. 71,331 8,750 First Republic Bank 400,750 6,800 FirstFed Financial Corp. (a) 392,156 11,250 Flagstar Bancorp, Inc. 179,550 8,875 Flushing Financial Corp. 159,395 2,978 Great Southern Bancorp, Inc. 90,918 8,417 Harbor Florida Bancshares, Inc. 312,607 3,000 Horizon Financial Corp. 82,290
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 3,250 IBERIABANK Corp. $ 187,005 1,800 ITLA Capital Corp. 94,644 9,100 KNBT Bancorp, Inc. 150,332 6,600 Kearny Financial Corp. 97,680 10,960 MAF Bancorp, Inc. 469,526 300 NASB Financial, Inc. 10,365 23,111 Netbank, Inc. 153,226 36,300 NewAlliance Bancshares, Inc. 519,453 4,867 Northwest Bancorp, Inc. 128,976 5,296 OceanFirst Financial Corp. 117,677 15,665 Ocwen Financial Corp. (a) 199,102 8,211 PFF Bancorp, Inc. 272,277 15,828 Partners Trust Financial Group, Inc. 180,597 3,100 Pennfed Financial Services, Inc. 57,815 26,558 Provident Financial Services, Inc. 476,716 12,689 Provident New York Bancorp 167,749 3,400 Rockville Financial, Inc. (a) 50,048 2,400 Sound Federal Bancorp, Inc. 49,896 13,953 Sterling Financial Corp. 425,706 5,100 Texas United Bancshares, Inc. 143,565 6,300 TierOne Corp. 212,751 8,661 United Community Financial Corp. 103,932 36,333 W Holding Co., Inc. 241,614 400 Westfield Financial, Inc. 11,172 8,300 Willow Grove Bancorp, Inc. 132,053 ------------ 10,172,554 - - -------------------------------------------------------------------------------------------------------------------------------- Scientific Equipment & Suppliers - 0.1% 13,535 Newport Corp. (a) 218,184 10,335 Varian, Inc. (a) 429,006 ------------ 647,190 - - -------------------------------------------------------------------------------------------------------------------------------- Securities Brokerage & Services - 0.5% 17,445 CharterMac 326,396 5,100 GFI Group, Inc. (a) 275,145 4,300 Gladstone Investment Corp. 64,500 38,000 Knight Capital Group, Inc. Class A (a) 578,740 17,700 LaBranche & Co., Inc. (a)(e) 214,347 13,800 MarketAxess Holdings, Inc. (a)(e) 151,938 10,361 NCO Group, Inc. (a) 273,945 6,900 optionsXpress Holdings, Inc. 160,839 4,700 Penson Worldwide, Inc. (a) 80,887 5,304 SWS Group, Inc. 127,932 4,200 Thomas Weisel Partners Group, Inc. (a) 79,842 ------------ 2,334,511 - - -------------------------------------------------------------------------------------------------------------------------------- Services: Commercial - 3.2% 14,570 ABM Industries, Inc. 249,147 9,605 AMN Healthcare Services, Inc. (a) 194,982 7,661 Administaff, Inc. 274,340 7,600 The Advisory Board Co. (a) 365,484 5,700 Ambassadors Group, Inc. 164,616 1,100 Ambassadors International, Inc. 25,575 700 Barrett Business Services (a) 12,845 26,753 CBIZ, Inc. (a) 198,240 6,101 CDI Corp. 176,929 5,100 CRA International, Inc. (a) 230,214 7,378 Casella Waste Systems, Inc. (a) 96,578 2,800 Central Parking Corp. 44,800 8,272 Chemed Corp. 451,072
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 5,300 Clark, Inc. $ 69,960 13,400 Cogent, Inc. (a) 201,938 6,600 Coinmach Service Corp. Class A 67,650 9,292 Coinstar, Inc. (a) 222,450 1,500 Cornell Cos., Inc. (a) 23,040 6,750 CoStar Group, Inc. (a) 403,852 13,700 Cross Country Healthcare, Inc. (a) 249,203 9,800 DiamondCluster International, Inc. Class A (a) 77,616 5,700 DynCorp. International, Inc. (a) 59,166 8,604 Exponent, Inc. (a) 145,408 12,541 FTI Consulting, Inc. (a) 335,723 2,300 First Advantage Corp. Class A (a) 53,498 11,300 First Consulting Group, Inc. (a) 99,892 4,481 Forrester Research, Inc. (a) 125,378 7,077 G&K Services, Inc. Class A 242,741 5,600 The Geo Group, Inc. (a) 196,280 10,700 Gevity HR, Inc. 284,085 16,500 Harris Interactive, Inc. (a) 94,050 7,658 Heidrick & Struggles International, Inc. (a) 259,147 17,400 Home Solutions of America, Inc. (a) 107,358 11,000 Hudson Highland Group, Inc. (a) 118,690 1,300 ICT Group, Inc. (a) 31,889 34,700 IKON Office Solutions, Inc. 437,220 11,100 Jackson Hewitt Tax Service, Inc. 347,985 6,768 Kelly Services, Inc. Class A 183,887 6,600 Kenexa Corp. (a) 210,210 12,500 Kforce, Inc. (a) 193,625 6,700 The Knot, Inc. (a) 140,231 12,968 Korn/Ferry International (a) 254,043 18,222 Labor Ready, Inc. (a) 412,728 12,100 Lightbridge, Inc. (a) 156,695 4,900 Liquidity Services, Inc. (a) 76,293 6,004 MAXIMUS, Inc. 138,993 34,405 MPS Group, Inc. (a) 518,139 5,242 Midas, Inc. (a) 96,453 5,600 Monro Muffler, Inc. 182,336 14,123 Navigant Consulting, Inc. (a) 319,886 3,200 Navigant International, Inc. (a) 51,296 16,300 Net 1 UEPS Technologies, Inc. (a) 445,805 4,117 Netratings, Inc. (a) 57,185 6,300 On Assignment, Inc. (a) 57,897 17,364 PHH Corp. (a) 478,205 9,000 People Support, Inc. (a) 121,140 8,500 Perficient, Inc. (a) 105,060 3,460 Pre-Paid Legal Services, Inc. (e) 119,370 6,000 The Providence Service Corp. (a) 163,380 17,500 Regis Corp. 623,175 18,732 Resources Connection, Inc. (a) 468,675 9,902 Rollins, Inc. 194,475 13,800 Sirva, Inc. (a) 89,286 13,700 Sitel Corp. (a) 53,704 15,600 Source Interlink Cos., Inc. (a) 185,640 20,729 Spherion Corp. (a) 189,048 600 Standard Parking Corp. (a) 16,248
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 6,240 Startek, Inc. $ 93,288 32,900 Synagro Technologies, Inc. 129,297 11,389 TeleTech Holdings, Inc. (a) 144,185 19,131 Tetra Tech, Inc. (a) 339,384 2,000 Travelzoo, Inc. (a)(e) 60,680 4,900 Unifirst Corp. 169,050 3,600 Vertrue, Inc. (a) 154,908 6,700 Viad Corp. 209,710 3,759 Volt Information Sciences, Inc. (a) 175,169 17,018 Waste Connections, Inc. (a) 619,455 700 Waste Industries USA, Inc. 15,876 6,533 Waste Services, Inc. (a) 58,732 13,515 Watson Wyatt Worldwide, Inc. 474,917 19,013 Wireless Facilities, Inc. (a) 52,286 10,500 World Fuel Services Corp. 479,745 ------------ 16,218,831 - - -------------------------------------------------------------------------------------------------------------------------------- Shipping - 0.2% 11,900 American Commercial Lines, Inc. (a) 716,975 7,400 Gulfmark Offshore, Inc. (a) 191,142 4,300 Horizon Lines, Inc. Class A 68,886 3,300 Maritrans, Inc. 82,170 2,100 Star Maritime Acquisition Corp. (a) 21,336 ------------ 1,080,509 - - -------------------------------------------------------------------------------------------------------------------------------- Shoes - 0.5% 2,300 CROCS, Inc. (a)(e) 57,845 6,900 DSW, Inc. Class A (a) 251,298 4,600 Deckers Outdoor Corp. (a) 177,376 17,566 The Finish Line, Inc. Class A 207,806 10,800 Iconix Brand Group, Inc. (a) 176,472 10,996 K-Swiss, Inc. Class A 293,593 3,192 Kenneth Cole Productions, Inc. Class A 71,277 4,400 Shoe Carnival, Inc. (a) 104,984 5,255 Skechers U.S.A., Inc. Class A (a) 126,698 8,468 Steven Madden Ltd. 250,822 12,235 Stride Rite Corp. 161,380 16,500 Timberland Co. Class A (a) 430,650 300 Weyco Group, Inc. 6,966 18,608 Wolverine World Wide, Inc. 434,125 ------------ 2,751,292 - - -------------------------------------------------------------------------------------------------------------------------------- Steel - 0.6% 36,727 AK Steel Holding Corp. (a) 507,934 8,545 Chaparral Steel Co. (a) 615,411 7,534 Gibraltar Industries, Inc. 218,486 3,900 Olympic Steel, Inc. 138,021 12,500 Oregon Steel Mills, Inc. (a) 633,250 8,750 Schnitzer Steel Industries, Inc. Class A 310,450 5,700 Steel Technologies, Inc. 110,808 3,600 Wheeling-Pittsburgh Corp. (a) 71,604 24,000 Worthington Industries, Inc. 502,800 ------------ 3,108,764 - - -------------------------------------------------------------------------------------------------------------------------------- Sugar - 0.0% 5,200 Imperial Sugar Co. New Shares 123,344 - - -------------------------------------------------------------------------------------------------------------------------------- Telecommunications Equipment - 0.8% 53,600 Andrew Corp. (a) 474,896 35,100 Arris Group, Inc. (a) 460,512 6,285 Audiovox Corp. Class A (a) 85,853 14,161 Belden CDT, Inc. 468,021 20,434 C-COR, Inc. (a) 157,750 5,300 CalAmp Corp. (a) 47,117
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 20,100 Interdigital Communications Corp. (a) $ 701,691 11,900 Mastec, Inc. (a) 157,199 17,199 Plantronics, Inc. 381,990 31,900 Polycom, Inc. (a) 699,248 42,677 Powerwave Technologies, Inc. (a) 389,214 9,000 Radyne Comstream Inc (a) 102,420 20,500 Symmetricom, Inc. (a) 144,935 ------------ 4,270,846 - - -------------------------------------------------------------------------------------------------------------------------------- Textile Products - 0.0% 6,800 DHB Industries, Inc. (a) 13,056 15,921 Interface, Inc. Class A (a) 182,295 ------------ 195,351 - - -------------------------------------------------------------------------------------------------------------------------------- Textiles Apparel Manufacturers - 0.8% 19,100 Carter's, Inc. (a) 504,813 2,500 Cherokee, Inc. 103,400 5,800 Columbia Sportswear Co. (a) 262,508 6,485 Guess?, Inc. (a) 270,749 6,300 Hartmarx Corp. (a) 37,800 10,682 Kellwood Co. 312,662 4,500 Maidenform Brands, Inc. (a) 55,485 5,342 Oxford Industries, Inc. 210,528 4,400 Perry Ellis International, Inc. (a) 111,364 20,854 Phillips-Van Heusen Corp. 795,789 40,800 Quiksilver, Inc. (a) 496,944 12,317 Russell Corp. 223,677 6,400 True Religion Apparel, Inc. (a) 113,280 8,400 Under Armour, Inc. Class A (a) 358,008 18,500 The Warnaco Group, Inc. (a) 345,580 ------------ 4,202,587 - - -------------------------------------------------------------------------------------------------------------------------------- Tires & Rubber - 0.1% 3,774 Bandag, Inc. 138,091 25,300 Cooper Tire & Rubber Co. (e) 281,842 3,900 Titan International, Inc. (e) 72,969 ------------ 492,902 - - -------------------------------------------------------------------------------------------------------------------------------- Tobacco - 0.2% 38,455 Alliance One International, Inc. 170,740 5,220 Schweitzer-Mauduit International, Inc. 113,013 10,456 Universal Corp. 389,172 15,213 Vector Group Ltd. (e) 247,211 ------------ 920,136 - - -------------------------------------------------------------------------------------------------------------------------------- Toys - 0.1% 11,330 Jakks Pacific, Inc. (a) 227,620 11,000 Leapfrog Enterprises, Inc. (a)(e) 111,100 19,400 Marvel Entertainment, Inc. (a) 388,000 ------------ 726,720 - - -------------------------------------------------------------------------------------------------------------------------------- Transportation Miscellaneous - 0.2% 10,000 Celadon Group, Inc. (a) 220,400 1,500 Dynamex, Inc. (a) 32,715 13,000 HUB Group, Inc. Class A (a) 318,890 11,700 Pacer International, Inc. 381,186 6,481 SCS Transportation, Inc. (a) 178,422 4,500 US Xpress Enterprises, Inc. Class A (a) 121,590 ------------ 1,253,203 - - -------------------------------------------------------------------------------------------------------------------------------- Truckers - 0.5% 9,941 Arkansas Best Corp. 499,138 12,332 Forward Air Corp. 502,282 20,173 Heartland Express, Inc. 360,895 17,662 Knight Transportation, Inc. 356,772 4,450 Marten Transport Ltd. (a) 96,743 9,425 Old Dominion Freight Line Inc. (a) 354,286 1,100 PAM Transportation Services (a) 31,779
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 100 Patriot Transportation Holding, Inc. (a) $ 8,678 1,000 Quality Distribution, Inc. (a) 13,280 4,200 USA Truck, Inc. (a) 74,844 1,700 Universal Truckload Services, Inc. (a) 58,021 17,300 Werner Enterprises, Inc. 350,671 ------------ 2,707,389 - - -------------------------------------------------------------------------------------------------------------------------------- Utilities: Cable TV & Radio - 0.0% 19,100 Mediacom Communications Corp. Class A (a) 118,993 - - -------------------------------------------------------------------------------------------------------------------------------- Utilities: Electrical - 1.3% 9,866 Allete, Inc. 467,155 19,375 Avista Corp. 442,331 13,200 Black Hills Corp. 453,156 5,289 CH Energy Group, Inc. 253,872 18,867 Cleco Corp. 438,658 27,700 Duquesne Light Holdings, Inc. 455,388 16,508 El Paso Electric Co. (a) 332,801 12,968 The Empire District Electric Co. 266,492 15,100 IDACORP, Inc. 517,779 4,000 ITC Holdings Corp. 106,320 6,145 MGE Energy, Inc. 191,417 11,800 NorthWestern Corp. 405,330 9,186 Otter Tail Corp. 251,053 23,000 PNM Resources, Inc. 574,080 4,100 Pike Electric Corp. (a) 78,966 11,600 Portland General Electric Co. 289,652 5,500 UIL Holdings Corp. 309,595 13,983 Unisource Energy Corp. 435,570 29,200 Westar Energy, Inc. 614,660 ------------ 6,884,275 - - -------------------------------------------------------------------------------------------------------------------------------- Utilities: Gas Distributors - 0.8% 6,422 Cascade Natural Gas Corp. 135,440 2,600 EnergySouth, Inc. 81,198 6,048 The Laclede Group, Inc. 207,809 10,974 New Jersey Resources Corp. 513,364 15,600 Nicor, Inc. (e) 647,400 9,499 Northwest Natural Gas Co. 351,748 14,900 Peoples Energy Corp. 535,059 25,500 Piedmont Natural Gas Co. 619,650 9,732 South Jersey Industries, Inc. 266,559 12,790 Southwest Gas Corp. 400,839 17,800 WGL Holdings, Inc. (e) 515,310 ------------ 4,274,376 - - -------------------------------------------------------------------------------------------------------------------------------- Utilities: Gas Pipelines - 0.0% 14,231 Transmontaigne, Inc. (a) 159,530 - - -------------------------------------------------------------------------------------------------------------------------------- Utilities: Miscellaneous - 0.1% 120,500 Aquila, Inc. (a) 507,305 - - -------------------------------------------------------------------------------------------------------------------------------- Utilities: Telecommunications - 1.1% 18,900 Alaska Communications Systems Group, Inc. 239,085 400 Atlantic Tele-Network Inc. 8,332 8,955 CT Communications, Inc. 204,801 5,626 Centennial Communications Corp. 29,255 86,400 Cincinnati Bell, Inc. (a) 354,240 9,033 Commonwealth Telephone Enterprises, Inc. 299,534 7,800 Consolidated Communications Holdings, Inc. 129,714 56,000 Dobson Communications Corp. Class A (a) 434,000 1,600 Eschelon Telecom, Inc. (a) 24,752 10,400 FairPoint Communications, Inc. 149,760 19,800 First Avenue Networks, Inc. (a) 215,424 17,839 General Communication Inc. Class A (a) 219,776 6,492 Golden Telecom, Inc. (f) 164,572
Master Small Cap Index Series Schedule of Investments as of June 30, 2006
Shares Industry Held Common Stocks Value - - -------------------------------------------------------------------------------------------------------------------------------- 17,700 IDT Corp. Class B (a) $ 244,083 10,600 Iowa Telecommunications Services, Inc. 200,552 6,900 iPCS, Inc. (a) 333,270 7,700 NTELOS Holdings Corp. (a) 111,265 4,121 North Pittsburgh Systems, Inc. 113,575 30,100 Premiere Global Services, Inc. (a) 227,255 15,189 Price Communications Corp. (a) 257,454 8,300 RCN Corp. (a) 206,919 1,700 Shenandoah Telecom Co. 79,900 4,800 SureWest Communications 92,736 14,833 Talk America Holdings, Inc. (a) 91,816 25,000 Time Warner Telecom, Inc. Class A (a) 371,250 11,220 USA Mobility, Inc. 186,252 27,500 Ubiquitel, Inc. (a) 284,350 18,800 Valor Communications Group, Inc. (e) 215,260 ------------ 5,489,182 - - -------------------------------------------------------------------------------------------------------------------------------- Utilities: Water - 0.1% 7,385 American States Water Co. 263,275 5,396 California Water Service Group 192,853 3,748 SJW Corp. 95,387 11,183 Southwest Water Co. 133,861 ------------ 685,376 - - -------------------------------------------------------------------------------------------------------------------------------- Wholesale & International Trade - 0.1% 12,625 Central European Distribution Corp. (a) 317,645 - - -------------------------------------------------------------------------------------------------------------------------------- Wholesalers - 0.2% 19,630 Brightpoint, Inc. (a) 265,594 13,800 LKQ Corp. (a) 262,200 900 MWI Veterinary Supply, Inc. (a) 32,787 8,700 Prestige Brands Holdings, Inc. (a) 86,739 10,469 United Stationers, Inc. (a) 516,331 ------------ 1,163,651 - - -------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks (Cost - $374,034,401) - 87.7% 449,622,572 - - -------------------------------------------------------------------------------------------------------------------------------- Exchange-Traded Funds - - -------------------------------------------------------------------------------------------------------------------------------- 169,590 iShares Russell 2000 Index Fund (e) 12,159,603 - - -------------------------------------------------------------------------------------------------------------------------------- Total Exchange-Traded Funds (Cost - $12,341,064) - 2.4% 12,159,603 - - -------------------------------------------------------------------------------------------------------------------------------- Mutual Funds - - -------------------------------------------------------------------------------------------------------------------------------- Investment Management Companies - 0.0% 4,400 Gladstone Capital Corp. (e) 94,116 - - -------------------------------------------------------------------------------------------------------------------------------- Total Mutual Funds (Cost - $92,876) - 0.0% 94,116 - - -------------------------------------------------------------------------------------------------------------------------------- Benefical Interest Other Interests (b) - - -------------------------------------------------------------------------------------------------------------------------------- Oil: Crude Producers - 0.0% $ 500 PetroCorp Incorporated (Escrow Shares) 0 - - -------------------------------------------------------------------------------------------------------------------------------- Total Other Interests (Cost - $0) - 0.0% 0 - - -------------------------------------------------------------------------------------------------------------------------------- Short-Term Securities - - -------------------------------------------------------------------------------------------------------------------------------- $ 46,332,365 Merrill Lynch Liquidity Series, LLC 46,332,365 Cash Sweep Series I, 4.78% (c)(g) 36,252,065 Merrill Lynch Liquidity Series, LLC 36,252,065 Money Market Series, 5.22% (c)(d)(g) - - -------------------------------------------------------------------------------------------------------------------------------- Total Short-Term Securities (Cost - $82,584,430) - 16.1% 82,584,430 - - -------------------------------------------------------------------------------------------------------------------------------- Total Investments (Cost - $469,052,771*) - 106.2% 544,460,721 Liabilities in Excess of Other Assets - (6.2%) (31,816,511) ------------ Net Assets - 100.0% $512,644,210 ============
Master Small Cap Index Series Schedule of Investments as of June 30, 2006 * The cost and unrealized appreciation (depreciation) of investments, as of June 30, 2006, as computed for federal income tax purposes, were as follows: Aggregate cost $ 472,784,415 ============= Gross unrealized appreciation $ 93,085,630 Gross unrealized depreciation (21,409,324) ------------- Net unrealized appreciation $ 71,676,306 ============= (a) Non-income producing security. (b) Other interests represent beneficial interest in liquidation trusts and other reorganization entities and are non-income producing. (c) Investments in companies considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows: -------------------------------------------------------------------------- Affiliate Net Interest Activity Income -------------------------------------------------------------------------- Merrill Lynch Liquidity Series, LLC Cash Sweep Series I $45,690,690 $ 1,655,673 Merrill Lynch Liquidity Series, LLC Money Market Series $22,787,010 $ 185,901 -------------------------------------------------------------------------- (d) Security was purchased with the cash proceeds from securities loans. (e) Security, or a portion of security, is on loan. (f) Depositary receipts. (g) Represents the current yield as of 6/30/2006. o For Series compliance purposes, the Series' industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Series management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percent of net assets. o Financial futures contracts purchased as of June 30, 2006 were as follows:
---------------------------------------------------------------------------------------------- Number of Face Unrealized Contracts Issue Expiration Date Value Appreciation ---------------------------------------------------------------------------------------------- 133 Russell 2000 Index September 2006 $46,934,608 $1,710,142 ----------------------------------------------------------------------------------------------
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 8, 2006 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 8, 2006 By /s/ Rebecca L. Harris --------------------- Rebecca L. Harris Treasurer Date: September 8, 2006 EX-99.CERT 2 ex99cert-06.txt CERTIFICATION For period ended 06/30/2006 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 8, 2006 /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 8, 2006 /s/ William F. Quinn ----------------- -------------------- William F. Quinn President American Beacon Funds EX-99.906 CERT 3 ex906cert-06.txt SOX CERTIFICATION For period ended 06/30/2006 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, 2006 (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 8, 2006 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-----