-----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, IDQeiGOiU4vLkz8YSoYQwBQDA4ZYqAfo54f/zx+QBQmlXaR772CeBzoDGB1xJ2Ed PbfkUfOX/8ifc7cIOB5REA== 0000809593-07-000041.txt : 20070907 0000809593-07-000041.hdr.sgml : 20070907 20070907152432 ACCESSION NUMBER: 0000809593-07-000041 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070630 FILED AS OF DATE: 20070907 DATE AS OF CHANGE: 20070907 EFFECTIVENESS DATE: 20070907 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: 071105872 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 C000004778 Cash Management Class AAEXX C000047470 BBH ComSet Class ABHXX 0000809593 S000001824 American Beacon U.S. Government Money Market Fund C000004781 PlanAhead Class AUPXX 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 ncsr0607bea.txt 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) Douglas G. Herring, PRESIDENT 4151 Amon Carter Boulevard, MD 2450 Fort Worth, Texas 76155 (Name and address of agent for service) Registrant's telephone number, including area code: (817) 967-3509 Date of fiscal year end: December 31, 2007 Date of reporting period: June 30, 2007 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 June 30, 2007 S&P 500 INDEX FUND SMALL CAP INDEX FUND INTERNATIONAL EQUITY INDEX FUND About American Beacon Advisors Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management. Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company. Contents President's Message ............................................... 1 Performance Overviews ............................................. 2 American Beacon Funds Statements of Assets and Liabilities ........................... 10 Statements of Operations ....................................... 11 Statements of Changes in Net Assets ............................ 12 Notes to Financial Statements .................................. 13 Financial Highlights ........................................... 18 State Street Equity 500 Index Portfolio Portfolio of Investments ....................................... 22 Statements of Assets and Liabilities ........................... 29 Statement of Operations ........................................ 30 Statements of Changes in Net Assets ............................ 31 Financial Highlights ........................................... 32 Notes to Financial Statements .................................. 33 Master Small Cap Index Series Summary of Investments ......................................... 37 Statement of Assets and Liabilities ............................ 43 Statement of Operations ........................................ 44 Statements of Changes in Net Assets ............................ 45 Financial Highlights ........................................... 45 Notes to Financial Statements .................................. 46 Master International Index Series Summary of Investments ......................................... 49 Statements of Assets and Liabilities ........................... 54 Statements of Operations ....................................... 55 Statements of Changes in Net Assets ............................ 56 Financial Highlights ........................................... 56 Notes to Financial Statements .................................. 57 Additional Information ............................................ Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor's strategies and each Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. American Beacon Funds June 30, 2007 (PHOTO OF DOUGLAS G. HERRING) FELLOW SHAREHOLDERS, I am pleased to present to you the Semi-Annual Report for the American Beacon S&P 500 Index Fund, the International Equity Index Fund and the Small Cap Index Fund for the six months ended June 30, 2007. For this period, the three Funds posted strong returns - 6.86%, 10.66% and 6.65%, respectively. In comparison, the S&P 500 Index gained 6.96%, the MSCI EAFE Index returned 10.74% and the Russell 2000 Index was up 6.45%. 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 access Fund and account information at www.americanbeaconfunds.com. Thank you for your continued confidence in the American Beacon Funds. Sincerely, /s/ Douglas G. Herring Douglas G. Herring President American Beacon Funds 1 DOMESTIC MARKET OVERVIEW June 30, 2007 (Unaudited) Signs of stress in the fixed income markets brought a cautious end to the first half of 2007, with U.S. stocks and bonds both slipping. Risk aversion tended to increase in the second quarter, especially after hopes for an official rate cut eroded through May. But in contrast to their less discriminating behavior during the panicky episodes of April 2005 and May 2006, investors focused their dismay in spring 2007 on specific sectors and instruments rather than on the broad market. The second quarter did bring a record high for the S&P 500(R) Index, but the underpinnings of the global liquidity that has been buoying the capital markets clearly began to creak. After peaking in early June, major equity averages explored a lower trading range and closed the month with modest losses. The S&P 500 retreated 1.7% for the month, paring its second quarter return to 6.3%, and its first-half gain back to 7.0%. With mid caps a touch weaker in June, the broader Russell 1000(R) Index lost 1.9%, trimming its second quarter result to 5.9%. Since the start of 2007, the Russell 1000 retained a 7.2% return. The S&P 400 Index of mid cap stocks shed 2.2% in June, leaving it with a 5.8% second quarter gain, and a still healthy 12% advance since the start of 2007. Despite expanding caution in the bond world during June, smaller stocks held in impressively well on the equity side. With an abundance of short sellers trying to compress the elevated valuations of small caps, prices found ready support during market disruptions. As a result, the Russell 2000(R) Index limited its June decline to 1.5% and retained a 4.4% return for the second quarter. For the first half as a whole, the Russell 2000 gained 6.5%. The S&P 600 Index, also a benchmark for small caps, declined 1.6% in June, but added 5.2% for the second quarter to extend its first-half return to 8.6%. With a rise in credit concerns putting financial stocks on the defensive, growth-oriented benchmarks outpaced value themes in June to establish a more measurable advantage on a year-to-date basis. The Russell 1000(R) Growth Index limited its June loss to 1.5%, against a 2.3% drop for the Russell 1000(R) Value Index. Russell 1000 Growth added 6.9% for the second quarter and gained 8.1% for the six-month period, while Russell 1000 Value managed only 4.9% for the quarter and had a 6.2% return from the start of 2007. The gap grew even greater in the small cap arena, with the Russell 2000(R) Growth Index limiting its June dip to 0.6%, against a 2.3% decline for the Russell 2000(R) Value Index. Russell 2000(R) Growth advanced 6.7% for the second quarter and was ahead 9.3% from the start of the year, while Russell 2000(R) Value only edged 2.3% higher on the June quarter and returned 3.8% for the six-month period. S&P is a trademark of the McGraw-Hill Companies, Inc. and has been licensed for use, "Standard and Poor's(R)", "S&P", "Standard & Poor's 500", "S&P 500" are all trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by State Street Bank and Trust Company. Russell 1000, Russell 2000, Russell 1000 Growth, Russell 1000 Value, Russell 2000 Growth, and Russell 2000 Value Indexes are registered trademarks of Frank Russell Company. 2 PERFORMANCE OVERVIEW AMERICAN BEACON S&P 500 INDEX FUND+ JUNE 30, 2007 (UNAUDITED) For the six months ended June 30, 2007, the total return of the Institutional Class of the American Beacon S&P 500 Index Fund was 6.86%, slightly below the S&P 500 Index return of 6.96% and slightly in excess of the Lipper S&P 500 Objective Funds Index return of 6.82%.
ANNUALIZED TOTAL RETURNS PERIODS ENDED 6/30/07 --------------------------------------- 6 MONTHS* 1 YEAR 5 YEARS 10 YEARS --------- ------ ------- -------- Institutional Class(1,4) .................. 6.86% 20.43% 10.49% 6.97% PlanAhead Class(1,2,4) .................... 6.65% 19.88% 9.99% 6.57% Lipper S&P 500 Objective Funds Index (3) .. 6.82% 20.31% 10.42% 6.84% S&P 500 Index (3) ......................... 6.96% 20.59% 10.71% 7.13%
* Not annualized 1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800- 967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. Fund performance for the ten-year period represents the total returns achieved by the Institutional Class from 6/30/97 to 3/2/98, the inception date of the PlanAhead Class, and the returns of the PlanAhead Class since its inception. Because the Institutional Class had lower expenses, its performance was better than the PlanAhead Class would have realized during the same period. A portion of the fees charged to the PlanAhead Class of the Fund was waived through 2002. Performance prior to waiving fees was lower than the actual returns shown for periods prior to 2002. 3. The Lipper S&P 500 Objective Funds Index tracks the results of the 30 largest mutual funds in the Lipper S&P 500 Objective Funds category. Lipper is an independent mutual fund research and ranking service. The S&P 500 Index is a market capitalization weighted index of common stocks publicly traded in the U.S. One cannot invest directly in an index. 4. The total annual Fund operating expense ratios set forth in the most recent Fund prospectus for the Institutional and PlanAhead Class shares was 0.14% and 0.61%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. Nine out of ten sectors in the S&P 500 Index (the "Index") had positive returns for the first six months of 2007. Energy was the top performing sector, returning 17.2% for the period. Firm product prices continued to boost oil stocks, but shares in oil service names also remained in steady upward trends. The Materials sector was the second best performer, gaining 16.7%, led by Freeport-McMoRan and U.S. Steel. The Telecommunication Services sector tacked on 15.9%, while the Industrials sector was up 11.0% for the six-month period. The weakest and only sector posting a negative return for the first six months was the interest-rate sensitive Financials sector. Financials lost 0.8% in the first half of 2007. The best performing security in the Index for the six-month period was electronics retailer RadioShack with a 97.5% gain. Also impressive were Medimmune and Amazon.com with gains of 78.9% and 73.4%, respectively. Lexmark International posted the worst return for the period, losing 32.6%. The next worst performers were homebuilders Pulte Homes and Lennar Corp. On the back of the slowdown in new home sales, these stocks lost 32.0% and 29.9%, respectively. As of June 30, 2007, the Fund's largest sector weightings were Financials (20.9% of assets), Information Technology (15.4% of assets), and Health Care (11.7% of assets), consistent with the top sector weightings in the Index. The investment manager continues to utilize a replication strategy, typically owning all 500 names in the S&P 500 Index in approximately the same weightings as the Index. Therefore, the Fund is expected to continue to meet its objective of closely tracking, before expenses, the return of its benchmark, the S&P 500 Index. + The S&P 500 Index Fund is not sponsored, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in this fund. 3 PERFORMANCE OVERVIEW AMERICAN BEACON S&P 500 INDEX FUND+ JUNE 30, 2007 (UNAUDITED) TOP TEN HOLDINGS
%of Equities* --------- Exxon Mobil Corp. 3.5% General Electric Co. 2.9% AT&T, Inc. 1.9% Citigroup, Inc. 1.9% Microsoft Corp. 1.9% Bank of America Corp. 1.6% Procter & Gamble Co. 1.4% American International Group, Inc. 1.4% Chevron Corp. 1.4% Pfizer, Inc. 1.3%
* Percent of the equities of State Street Equity 500 Index Portfolio EQUITY SECTOR ALLOCATION
%of Equities* --------- Financials 20.9% Information Technology 15.4% Health Care 11.7% Industrials 11.4% Energy 10.8% Consumer Discretionary 10.2% Consumer Staples 9.3% Telecommunication Services 3.7% Utilities 3.5% Materials 3.1%
* Percent of the equities of State Street Equity 500 Index Portfolio + The S&P 500 Index Fund is not sponsored, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in this fund. 4 PERFORMANCE OVERVIEW AMERICAN BEACON SMALL CAP INDEX FUND(SM) JUNE 30, 2007 (UNAUDITED) For the six months ended June 30, 2007, the total return of the Institutional Class of the American Beacon Small Cap Index Fund was 6.65%. The Fund's performance exceeded the Russell 2000(R) Index return of 6.45%, but substantially lagged the Lipper Small-Cap Core Funds Index return of 9.54%.
ANNUALIZED TOTAL RETURNS PERIODS ENDED 6/30/07 ---------------------------------------- SINCE INCEPTION 6 MONTHS* 1 YEAR 5 YEARS (7/31/00) --------- ------ ------- --------- Institutional Class(1,3) ............... 6.65% 16.31% 13.71% 8.89% Lipper Small- Cap Core Funds Index(2) .. 9.54% 17.17% 13.79% 10.26% Russell 2000 Index(2) .................. 6.45% 16.44% 13.88% 9.04%
* Not annualized 1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800- 967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. The Lipper Small-Cap Core Funds Index tracks the results of the 30 largest mutual funds in the Lipper Small-Cap Core Funds category. Lipper is an independent mutual fund research and ranking service. The Russell 2000 Index is an unmanaged index comprising approximately 2,000 smaller-capitalization stocks from various industrial sectors. One cannot invest directly in an index. 3. The total annual Fund operating expense ratio set forth in the most recent prospectus for the Fund was 0.18%. The expense ratio above may vary from the expense ratio presented in other sections of this report that are based on expenses incurred during the period covered by this report. Eight of the 10 sectors in the Russell 2000 Index ("Index") recorded positive returns for the six-month period. The Materials sector was, by far, the performance leader, advancing 22.1%, followed by Industrials, up 15.3%, and Energy, which was up 14.6%. Conversely, Financials and Utilities declined -6.2% and -4.0%, respectively. The Health Care sector, while posting a gain of 4.4%, lagged the broad Index return and was the third worst performing sector. The strongest performers among individual stocks in the Index included Rural Cellular Corp. and TBS International Ltd., which were up 233.4% and 224.9%, respectively. NetBank, Inc., Bally Total Fitness Holding Corp. and AtheroGenics, Inc. recorded the lowest returns within the Index for the first half of the year, down -93.3%, -80.4% and -78.4%, respectively. The Fund will continue to strive to meet its objective of closely replicating, before expenses, the return of its benchmark, the Russell 2000 Index. It does so by investing in a subset of the securities in the Index such that the characteristics of the portfolio closely track the characteristics of the Index. TOP TEN HOLDINGS
%OF EQUITIES* --------- CF Industries Holdings, Inc. 0.2% Polycom, Inc. 0.2% Florida East Coast Industries, Inc. 0.2% FLIR Systems, Inc. 0.2% Sotheby's 0.2% Hologic, Inc. 0.2% ValueClick, Inc. 0.2% Time Warner Telecom Incorporated 0.2% Alexandria Real Estate Equities, Incorporated 0.2% Equinix, Inc. 0.2%
EQUITY SECTOR ALLOCATION
%OF EQUITIES* --------- Financials 21.4% Industrials 19.0% Information Technology 17.4% Consumer Discretionary 14.7% Health Care 11.4% Materials 5.6% Energy 4.4% Consumer Staples 3.1% Utilities 2.5% Telecommunication Services 0.5%
* Percent of equity portion of Master Small Cap Index Series 5 INTERNATIONAL MARKET OVERVIEW JUNE 30, 2007 (UNAUDITED) In the first quarter of 2007, speculation regarding a slowing U.S. economy and its effect on demand for foreign goods and commodities, coupled with a significant correction in the Chinese equity market at the end of February, made for a volatile period. The global economy proved to be extremely resilient, however, with most markets managing to eke out gains for the quarter. In Europe, stocks benefited from continued robust economic expansion and strong corporate profits. Germany led the way in the region, with its market up 4.9%. The U.K. market was up 2.5% and France's market advanced 1.7%. Japanese equities posted a marginal gain of 0.9% for the first quarter, as a decline in business sentiment (due to uncertainty surrounding the U.S. economy), a minor increase in the yen and the global sell-off in late February depressed performance. Positive momentum returned to the markets in the second half of the period as corporate activity dominated the headlines. Concerns about the U.S. mortgage market and rising interest rates around the globe, coupled with another substantial decline in Shanghai's main stock index in June, were headwinds. Despite these issues, global equities remained exceptionally resilient, buoyed by healthy economies and strong corporate earnings. European stocks, in particular, produced significant gains in the second quarter, thanks to robust exports and continually strong merger-and-acquisition activity. German stocks skyrocketed 17.21%, French equities were up 11.40% and U.K. stocks trailed the pack with a 7.76% gain. As was the case in the first quarter, Japanese stocks continued to struggle somewhat compared to other developed markets, but still advanced 4.97% for the quarter. The inflation background was fairly benign during the semi-annual period, though there was some noteworthy central bank activity. In the U.S., the Federal Reserve Board remained on hold, opting to keep the federal funds target rate unchanged at 5.25%. In contrast, the European Central Bank ("ECB") continued to tighten monetary policy, increasing its benchmark interest rate two times (0.25% each) to end the period at 4.0%. Given the ECB's continued concerns regarding higher oil prices, wage increase demands and volatile markets, further rate increases are widely expected. Meanwhile, the Bank of Japan increased its policy rate by 0.25% to 0.5% in February, but opted to leave the monetary policy unchanged in June. The U.S. dollar outperformed most major currencies in the first half of 2007, advancing 2.4% and 2.5% against the euro and pound, respectively. However, the dollar declined 3.6% versus the yen for the period. 6 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM) JUNE 30, 2007 (UNAUDITED) For the six months ended June 30, 2007, the Institutional Class of the American Beacon International Equity Index Fund posted a total return of 10.66%, slightly below the MSCI EAFE Index return of 10.74% and well below the Lipper International Funds Index return of 11.48%.
ANNUALIZED TOTAL RETURNS PERIODS ENDED 6/30/07 ---------------------------------------- SINCE INCEPTION 6 MONTHS* 1 YEAR 5 YEARS (7/31/00) --------- ------ ------- --------- Institutional Class (1,3) ............... 10.66% 26.98% 17.71% 7.22% Lipper International Funds lndex(2) ..... 11.48% 28.40% 17.55% 7.72% MSCI EAFE Index(2) ...................... 10.74% 27.00% 17.73% 7.37%
* Not annualized 1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. The Lipper International Funds Index tracks the results of the 30 largest mutual funds in the Lipper International Funds category. Lipper is an independent mutual fund research and ranking service. The MSCI EAFE Index is a market capitalization weighted index of international stock performance composed of equities from developed markets excluding the U.S. and Canada. Performance is that of the MSCI EAFE Index through 9/30/01, the MSCI Provisional EAFE Index from 10/1/01 through 5/31/02, and the MSCI EAFE Index thereafter. One cannot invest directly in an index. 3. The total annual Fund operating expense ratio in the most recent prospectus for the Fund was 0.22%. The expense ratio above may vary from the expense ratio presented in other sections of this report that are based on expenses incurred during the period covered by this report. International markets remained on a persistently upward path during the first six months of 2007 with all 21 countries in the MSCI EAFE Index ("EAFE") posting positive returns. The strongest performers were Finland (up 28.8%), Germany (up 24.7%) and Norway (up 23.8%). Conversely, Japan (up 2.9%), Ireland (up 2.9%) and Italy (up 6.1%) were the weakest markets. All 10 sectors within EAFE recorded positive returns, led by Materials (up 25.7%), Industrials (up 20.1%) and Energy (up 16.9%). The sectors posting the lowest returns were Health Care (up 1.1%), Financials (up 5.7%) and Information Technology (up 9.3%). The top performing securities were Neptune Orient Lines Ltd. and Leighton Holdings, with returns of 154.4% and 119.6%, respectively. The worst performers were Altana and Goodwill Group, with returns of -61.1% and -57.8%, respectively. 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 EAFE such that the characteristics of the portfolio closely track the characteristics of EAFE. 7 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM) JUNE 30, 2007 (UNAUDITED) TOP TEN HOLDINGS
% OF EQUITIES* --------- BP PLC 1.7% HSBC Holdings PLC 1.5% Vodafone Group PLC 1.3% Total S.A. 1.2% Toyota Motor Corp. 1.2% Nestle S.A. 1.1% GlaxoSmithKline PLC 1.1% Royal Dutch Shell PLC 1.1% Novartis AG 0.9% Roche Holding AG 0.9%
EQUITY SECTOR ALLOCATION
% OF EQUITIES* EAFE --------- ----- Financials 30.5% 30.5% Consumer Discretionary 13.5% 13.5% Industrials 12.9% 12.9% Energy 8.3% 8.3% Materials 7.9% 7.9% Telecommunications 6.9% 6.9% Health Care 6.4% 6.4% Consumer Staples 5.5% 5.5% Utilities 4.7% 4.7% Information Technology 3.4% 3.4%
* Percent of equity portion of Master International Index Series COUNTRY ALLOCATION (PIECHART)
% OF EQUITIES* EAFE --------- ----- United Kingdom 23.1% 23.1% Japan 21.2% 21.2% France 10.4% 10.4% Germany 8.4% 8.4% Switzerland 6.6% 6.6% Australia 6.2% 6.2% Spain 4.0% 4.0% Italy 3.8% 3.8% Netherlands 3.5% 3.5% Sweden 2.6% 2.6% Finland 1.7% 1.6% Hong Kong 1.7% 1.7% Belgium 1.2% 1.2% Norway 1.1% 1.0% Singapore 1.1% 1.1% Denmark 0.8% 0.9% Ireland 0.8% 0.8% Greece 0.7% 0.7% Austria 0.6% 0.6% Portugal 0.4% 0.4% New Zealand 0.1% 0.2%
* Percent of equity portion of Master International Index Series 8 FUND EXPENSES JUNE 30, 2007 (UNAUDITED) FUND EXPENSE EXAMPLE As a shareholder of a Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in a particular Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2007 through June 30, 2007. ACTUAL EXPENSES The following table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid During Period" row to estimate the expenses you paid on your account during this period. Shareholders of the Institutional and PlanAhead Classes that invest in a Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. Actual
S&P 500 SMALL CAP INTERNATIONAL INSTITUTIONAL CLASS INDEX INDEX EQUITY INDEX - ------------------- --------- --------- ------------- Beginning Account Value 1/1/07 ....................... $1,000.00 $1,000.00 $1,000.00 Ending Account Value 6/30/07 ......................... $1,068.56 $1,066.49 $1,106.58 Expenses Paid During Period* 1/1/07 - 6/30/07 ........ $ 0.67 $ 0.98 $ 1.00 Annualized Expense Ratio ............................. 0.13% 0.19% 0.19%
S&P 500 PLANAHEAD CLASS INDEX - --------------- --------- Beginning Account Value 1/1/07 ....................... $1,000.00 Ending Account Value 6/30/07 ......................... $1,066.48 Expenses Paid During Period* 1/1/07 - 6/30/07......... $ 3.21 Annualized Expense Ratio ............................. 0.63%
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The following table provides information about hypothetical account values and hypothetical expenses based on a Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in a particular Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Institutional and PlanAhead Classes that invest in a Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by a Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Expenses Paid During Period" line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher. HYPOTHETICAL
S&P 500 SMALL CAP INTERNATIONAL INSTITUTIONAL CLASS INDEX INDEX EQUITY INDEX - ------------------- --------- --------- ------------- Beginning Account Value 1/1/07 .................................. $1,000.00 $1,000.00 $1,000.00 Ending Account Value 6/30/07 .................................... $1,024.15 $1,023.85 $1,023.84 Expenses Paid During Period* 1/1/07 - 6/30/07 ................... $ 0.66 $ 0.96 $ 0.96 Annualized Expense Ratio ........................................ 0.13% 0.19% 0.19%
S&P 500 PLANAHEAD CLASS INDEX - --------------- --------- Beginning Account Value 1/1/07 .................................. $1,000.00 Ending Account Value 6/30/07 .................................... $1,021.68 Expenses Paid During Period* 1/1/07 - 6/30/07 ................... $ 3.14 Annualized Expense Ratio ........................................ 0.63%
* Expenses are equal to each Fund's annualized expense ratio for the six-month period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period. 9 AMERICAN BEACON FUNDS STATEMENTS OF ASSETS AND LIABILITIES June 30, 2007 (Unaudited) (in thousands, except share and per share amounts)
INTERNATIONAL S&P 500 INDEX SMALL CAP EQUITY INDEX FUND INDEX FUND FUND ------------- ---------- ------------- ASSETS: Investment in Portfolio, at value ........................... $ 255,512 $ 66,947 $ 386,361 Receivable for fund shares sold ............................. 552 -- 33 Prepaid expenses ............................................ 11 -- 1 ----------- ---------- ----------- TOTAL ASSETS ............................................. 256,075 66,947 386,395 ----------- ---------- ----------- LIABILITIES: Payable for fund shares redeemed ............................ 42 135 4,429 Administrative service and service fees payable (Note 2) .... 18 2 16 Other liabilities ........................................... 45 37 90 ----------- ---------- ----------- TOTAL LIABILITIES ........................................ 105 174 4,535 ----------- ---------- ----------- NET ASSETS ..................................................... $ 255,970 $ 66,773 $ 381,860 =========== ========== =========== ANALYSIS OF NET ASSETS: Paid-in-capital ............................................. 173,308 58,395 322,222 Undistributed net investment income (expense) ............... 1,137 655 5,897 Accumulated net realized gain (loss) ........................ (37,188) 1,717 2,609 Unrealized net appreciation (depreciation) of investments and futures contracts ........................................ 118,713 6,006 51,132 ----------- ---------- ----------- NET ASSETS ..................................................... $ 255,970 $ 66,773 $ 381,860 =========== ========== =========== Shares outstanding (no par value): Institutional Class ......................................... 11,601,014 4,205,925 27,053,047 =========== ========== =========== PlanAhead Class ............................................. 962,213 -- -- =========== ========== =========== Net asset value, offering and redemption price per share: Institutional Class ......................................... $ 20.39 $ 15.88 $ 14.12 =========== ========== =========== PlanAhead Class ............................................. $ 20.15 $ -- $ -- =========== ========== ===========
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios attached 10 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2007 (IN THOUSANDS) (UNAUDITED)
INTERNATIONAL S&P 500 SMALL CAP EQUITY INDEX INDEX FUND INDEX FUND FUND ---------- ---------- ------------- INVESTMENT INCOME ALLOCATED FROM PORTFOLIO: Dividend income ......................................... $ 2,629 $ 390 $ 6,191 Interest income ......................................... 160 284 212 Securities lending income ............................... -- 46 -- Portfolio expenses ...................................... (63) (27) (112) Other income ............................................ -- -- 38 ------- ------ ------- NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ....... 2,726 693 6,329 ------- ------ ------- FUND EXPENSES: Administrative service fees (Note 2): Institutional Class .................................. 65 23 78 PlanAhead Class ...................................... 23 -- -- Sub-administrative service fees: Institutional Class .................................. -- 10 75 Transfer agent fees: Institutional ........................................ -- 3 3 PlanAhead ............................................ 5 -- -- Custody and accounting fees ............................. 3 4 10 Professional fees ....................................... 6 11 8 Registration fees ....................................... 17 -- -- Service fees - PlanAhead Class (Note 2) ................. 23 -- -- Printing ................................................ 8 2 4 Other expenses .......................................... 15 8 10 ------- ------ ------- TOTAL FUND EXPENSES .................................. 165 61 188 ------- ------ ------- NET INVESTMENT INCOME ...................................... 2,561 632 6,141 ------- ------ ------- REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED FROM MASTER PORTFOLIO Net realized gain (loss) from: Investments .......................................... 6,946 2,285 2,808 Foreign currency transactions ........................ 100 -- 263 Futures contracts .................................... 225 192 69 Change in net unrealized appreciation or depreciation of: Investments .......................................... 7,039 3,238 23,011 Foreign currency transactions ........................ -- -- 14 Futures contracts .................................... (52) (21) (55) ------- ------ ------- NET GAIN ON INVESTMENTS .............................. 14,258 5,694 26,110 ------- ------ ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $16,819 $6,326 $32,251 ======= ====== =======
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios attached 11 AMERICAN BEACON FUNDS STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
INTERNATIONAL EQUITY INDEX S&P 500 INDEX FUND SMALL CAP INDEX FUND FUND ---------------------------- ---------------------------- ---------------------------- Six Months Year ended Six Months Year ended Six Months Year ended ended June 30, December 31, ended June 30, December 31, ended June 30, December 31, 2007 2006 2007 2006 2007 2006 -------------- ------------ -------------- ------------ -------------- ------------ (unaudited) (unaudited) (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ............. $ 2,561 $ 4,545 $ 632 $ 1,753 $ 6,141 $ 2,658 Net realized gain on investments, foreign currency, and futures contracts ...................... 7,271 816 2,477 5,769 3,140 1,943 Change in net unrealized appreciation or depreciation of investments and futures contracts ...................... 6,987 32,077 3,217 (2,382) 22,970 22,488 --------- --------- --------- --------- -------- --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... 16,819 37,438 6,326 5,140 32,251 27,089 --------- --------- --------- --------- -------- --------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class ............... (1,357) (3,900) -- (1,732) -- (2,887) PlanAhead Class ................... (81) (517) -- -- -- -- Net realized gain form investments, foreign currency, and futures transactions: Institutional Class ............... -- -- -- -- -- (877) PlanAhead Class ................... -- -- -- -- -- -- --------- --------- --------- --------- -------- --------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS ................ (1,438) (4,507) -- (1,732) -- (3,764) --------- --------- --------- --------- -------- --------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares ..... 113,963 28,321 8,971 232,022 240,463 108,842 Reinvestment of dividends and distributions .................. 1,428 4,484 -- 1,732 -- 3,764 Cost of shares redeemed ........... (113,866) (101,514) (100,401) (131,397) (52,967) (64,018) --------- --------- --------- --------- -------- --------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ................ 1,525 (68,709) (91,430) 102,357 187,496 48,588 --------- --------- --------- --------- -------- --------- NET INCREASE (DECREASE) IN NET ASSETS 16,906 (35,778) (85,104) 105,765 219,747 71,913 --------- --------- --------- --------- -------- --------- NET ASSETS: Beginning of period ............... 239,064 274,842 151,877 46,113 162,113 90,200 --------- --------- --------- --------- -------- --------- END OF PERIOD * ................... $ 255,970 $ 239,064 $ 66,773 $ 151,877 $381,860 $ 162,113 ========= ========= ========= ========= ======== ========= * Includes undistributed net investment income (loss) of ....... $ 1,137 $ 13 $ 655 $ 24 $ 5,897 $ (243) ========= ========= ========= ========= ======== =========
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios attached 12 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the "Act"), as amended, as a no load, diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon S&P 500 Index Fund, the American Beacon Small Cap Index Fund and the American Beacon International Equity Index Fund (each a "Fund" and collectively, the "Funds"), each a series of the Trust. American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary of AMR Corporation and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. Each Fund invests all of its investable assets in a corresponding portfolio. The State Street Equity 500 Index Portfolio, Master Small Cap Index Series and the Master International Index Series (each a "Portfolio" and collectively the "Portfolios") are open-ended management investment companies registered under the Act. The value of such investment reflects each Fund's proportionate interest in the net assets of the corresponding Portfolio.
% OF PORTFOLIO HELD BY AMERICAN BEACON: PORTFOLIOS: FUND AT JUNE 30, 2007 - ---------------- --------------------------------------- ---------------------- S&P 500 Index Fund State Street Equity 500 Index Portfolio 9.3% Small Cap Index Fund Master Small Cap Index Series 11.9% International Equity Index Fund Master International Index Series 31.2%
The financial statements of the Portfolios are included elsewhere in this report and should be read in conjunction with the Funds' financial statements. The following is a summary of the significant accounting policies followed by the Funds. Class Disclosure The S&P 500 Index Fund has two classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:
CLASS: OFFERED TO: SERVICE FEES: - ------ ----------- ------------- INSTITUTIONAL CLASS Investors making an initial investment of $2 million Administrative Service Fee - 0.05% PLANAHEAD CLASS General public and investors investing through an intermediary Administrative Service Fee - 0.25% Service Fee - 0.25%
Investment income, net capital gains (losses) and all expenses incurred by the S&P 500 Index Fund are allocated based on the relative net assets of each class, except for service fees and certain other fees and expenses related solely to one class of shares. Security Valuation Valuation of securities by each Portfolio is discussed in the Portfolio's Notes to Financial Statements, which are included elsewhere in this report. 13 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (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. Net asset value per share is computed by dividing the value of each Fund's total assets (which includes the value of the Fund's investments in its Portfolio) less liabilities, by the number of Fund shares outstanding. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated. Recently Issued Accounting Pronouncements On July 13, 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance on how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing each Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. The Funds adopted the provisions of FIN 48 effective January 1, 2007. Tax positions taken by the Funds have been deemed to meet the more likely than not threshold, and therefore, there have been no adjustments to the Funds' net asset value per share. In September 2006, the FASB issued Statement on Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Manager is evaluating the impact of FAS 157; however, it is not expected to have a material impact on the Funds' net assets or results of operations. 14 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED) Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust's maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement. 2. FEES AND TRANSACTIONS WITH AFFILIATES Administrative Services Agreement The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative and management services to each Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.05% of the average daily net assets of the Institutional Class of the S&P 500 Index Fund, International Equity Index Fund and the Small Cap Index Fund and an annualized fee of 0.25% of the average daily net assets of the PlanAhead Class of the S&P 500 Index Fund. Service Plans The Manager and the Trust entered into a Service Plan that obligates the Manager to oversee additional shareholder servicing of the PlanAhead Class of S&P 500 Index Fund. As compensation for performing the duties required under the Service Plan, the Manager receives 0.25% of the average daily net assets of the PlanAhead Class of the S&P 500 Index Fund. 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. For the six months ended June 30, 2007 there are no fees subject to recoupment. Subadministration Agreement The Trust, the Manager and BlackRock Advisors, LLC ("BlackRock") entered into a Subadministration Agreement that obligates BlackRock to provide certain other administrative services to the Small Cap Index Fund and the International Equity Index Fund. As compensation for performing these services, BlackRock receives an annualized fee of 0.08% of the average daily net assets of the Small Cap Index Fund and 0.12% of the average daily net assets of the International Equity Index Fund; however, the fee of each is to be reduced by the total expense ratio of its corresponding Portfolio, net of any fee waivers. Other At June 30, 2007, the employee benefit plans of AMR Corporation and subsidiary companies owned 89.1% of the Institutional Class of the S&P 500 Index Fund, 98.6% of the Small Cap Index Fund and 84.5% of the International Equity Index Fund. 15 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED) 3. FEDERAL INCOME AND EXCISE TAXES It is the policy of each of the Funds to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income or excise tax provision is required. Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. generally accepted accounting principles. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. The tax character of distributions paid during the six months ended June 30, 2007 and fiscal year ended December 31, 2006 were as follows (in thousands):
S&P 500 INDEX SMALL CAP INDEX INTERNATIONAL EQUITY INDEX -------------------------- -------------------------- -------------------------- SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2007 2006 2007 2006 2007 2006 ----------- ------------ ----------- ------------ ----------- ------------ (UNAUDITED) (UNAUDITED) (UNAUDITED) DISTRIBUTIONS PAID FROM: ORDINARY INCOME:* Institutional Class ....... $1,357 $3,990 $-- $1,732 $-- $2,887 PlanAhead Class ........... 81 517 -- -- -- -- LONG-TERM CAPITAL GAIN: Institutional Class ....... -- -- -- -- -- 877 PlanAhead Class ........... -- -- -- -- -- -- ------ ------ --- ------ --- ------ TOTAL TAXABLE DISTRIBUTIONS .. $1,438 $4,507 $-- $1,732 $-- $3,764 ====== ====== === ====== === ======
* For tax purposes, short-term capital gains are considered ordinary income distributions. At June 30, 2007 capital loss carry forward positions for federal income tax purposes were as follows (in thousands):
FUND 2007 2008 2009 2010 2011 2012 2013 2014 TOTAL - ---- ---- ------ ------ ------- ---- ------ ------ ---- ------- S&P 500 Index .... $45 $8,848 $1,300 $11,516 $635 $1,060 $2,311 $286 $26,001 Small Cap Index .. -- -- -- -- -- -- -- 220 220
4. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares for each Class of the Funds (shares and dollars in thousands): Six Months ended June 30, 2007
INSTITUTIONAL CLASS PLANAHEAD CLASS ------------------- ---------------- S&P 500 INDEX FUND SHARES AMOUNT SHARES AMOUNT - ------------------ ------ ---------- ------ ------- Shares sold ........................... 5,700 $ 109,919 209 $ 4,044 Reinvestment of dividends ............. 71 1,357 4 71 Shares redeemed ....................... (5,793) (111,965) (97) (1,901) ------ --------- --- ------- Net increase (decrease) in shares outstanding ........................ (22) $ (689) 116 $ 2,214 ====== ========= === =======
16 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED)
INSTITUTIONAL CLASS ------------------- SMALL CAP INDEX FUND SHARES AMOUNT - -------------------- ------ ---------- Shares sold ............................ 602 $ 8,971 Reinvestment of dividends .............. -- -- Shares redeemed ........................ (6,593) (100,401) ------ --------- Net (decrease) in shares outstanding ... (5,991) $ (91,430) ====== =========
INSTITUTIONAL CLASS ------------------- INTERNATIONAL EQUITY INDEX FUND SHARES AMOUNT - ------------------------------- ------ -------- Shares sold ............................ 18,157 $240,463 Reinvestment of dividends .............. -- -- Shares redeemed ........................ (3,811) (52,967) ------ -------- Net increase in shares outstanding ..... 14,346 $187,496 ====== ========
Year ended December 31, 2006
INSTITUTIONAL CLASS PLANAHEAD CLASS ------------------- ----------------- S&P 500 INDEX FUND SHARES AMOUNT SHARES AMOUNT - ------------------ ------ --------- ------ ------- Shares sold 874 $ 15,548 732 $ 12,773 Reinvestment of dividends 222 3,990 28 494 Shares redeemed (2,834) (49,785) (2,850) (51,729) ------ -------- ------ -------- Net (decrease) in shares outstanding (1,738) $(30,247) (2,090) $(38,462) ====== ======== ====== ========
INSTITUTIONAL CLASS ------------------- SMALL CAP INDEX FUND SHARES AMOUNT - -------------------- ------ ---------- Shares sold ............................ 16,217 $ 232,022 Reinvestment of dividends .............. 118 1,732 Shares redeemed ........................ (9,747) (131,397) ------ --------- Net increase in shares outstanding ..... 6,588 $ 102,357 ====== =========
INSTITUTIONAL CLASS ------------------- INTERNATIONAL EQUITY INDEX FUND SHARES AMOUNT - ------------------------------- ------ -------- Shares sold ............................ 9,373 $108,842 Reinvestment of dividends .............. 298 3,764 Shares redeemed ........................ (5,697) (64,018) ------ -------- Net increase in shares outstanding ..... 3,974 $ 48,588 ====== ========
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, ------------------------------------------ 2007 2006 2005 2004 2003 ----------- -------- -------- -------- -------- (unaudited) NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 19.19 $ 16.90 $ 16.43 $ 15.10 $ 11.96 -------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income:(A) ................................ 0.20 0.33 0.29 0.29 0.21 Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) .............................. 1.11 2.30 0.47 1.32 3.14 -------- -------- -------- -------- -------- Total income (loss) from investment operations .............. 1.31 2.63 0.76 1.61 3.35 -------- -------- -------- -------- -------- LESS DISTRIBUTIONS: Dividends from net investment income ..................... (0.11) (0.34) (0.29) (0.28) (0.21) Tax return of capital .................................... -- -- 0.00(B) -- -- -------- -------- -------- -------- -------- Total distributions ......................................... (0.11) (0.34) (0.29) (0.28) (0.21) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD .............................. $ 20.39 $ 19.19 $ 16.90 $ 16.43 $ 15.10 ======== ======== ======== ======== ======== TOTAL RETURN ................................................ 6.86%(C) 15.69% 4.74% 10.76% 28.26% ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ................. $236,589 $223,008 $225,857 $244,668 $245,251 Ratios to average net assets (annualized):(A) Net investment income, net of waivers ................. 1.87% 1.85% 1.75% 1.85% 1.63% Net investment income, before waivers ................. 1.87% 1.85% 1.75% 1.85% 1.63% Expenses, including expenses of the master portfolio, net of waivers ..................................... 0.13% 0.14% 0.13% 0.17% 0.14% Expenses, including expenses of the master portfolio, before waivers ..................................... 0.13% 0.14% 0.13% 0.17% 0.14%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the State Street Equity 500 Index Portfolio. (B) The tax return of capital is calculated based upon outstanding shares at the time of distribution. Amounts are less than $0.01 per share. (C) Not annualized. 18
PlanAhead Class - -------- --------------------------------------------------------------- Six Months Year Ended December 31, ended June ------------------------------------------------- 2002 30, 2007 2006 2005 2004 2003 2002 - -------- ----------- ------- ------- ------- ------- ------- (unaudited) $ 15.62 $ 18.97 $ 16.69 $ 16.23 $ 14.96 $ 11.85 $ 15.49 - -------- ------- ------- ------- ------- ------- ------- 0.20 0.34 0.17 0.21 0.21 0.15 0.14 (3.66) 0.93 2.33 0.48 1.31 3.12 (3.64) - -------- ------- ------- ------- ------- ------- ------- (3.46) 1.27 2.50 0.69 1.52 3.27 (3.50) - -------- ------- ------- ------- ------- ------- ------- (0.20) (0.09) (0.22) (0.23) (0.25) (0.16) (0.14) -- -- -- 0.00(B) -- -- -- - -------- ------- ------- ------- ------- ------- ------- (0.20) (0.09) (0.22) (0.23) (0.25) (0.16) (0.14) - -------- ------- ------- ------- ------- ------- ------- $ 11.96 $ 20.15 $ 18.97 $ 16.69 $ 16.23 $ 14.96 $ 11.85 ======== ======= ======= ======= ======= ======= ======= -22.27% 6.65%(C) 15.09% 4.32% 10.21% 27.65% -22.59% ======== ======= ======= ======= ======= ======= ======= $195,368 $19,381 $16,056 $48,985 $46,344 $34,729 $24,885 1.47% 1.35% 1.37% 1.28% 1.43% 1.16% 1.06% 1.47% 0.58% 1.37% 1.28% 1.43% 1.15% 0.98% 0.14% 0.63% 0.61% 0.61% 0.62% 0.63% 0.55% 0.14% 0.63% 0.61% 0.61% 0.62% 0.64% 0.63%
19 AMERICAN BEACON SMALL CAP INDEX FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout each period)
Institutional Class ----------------------------------------------------------------- Six Months Year Ended December 31, ended June --------------------------------------------------- 30, 2007 2006 2005 2004 2003 2002 ----------- -------- ------- ------- ------- ------- (unaudited) NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 14.89 $ 12.78 $ 12.57 $ 11.27 $ 7.70 $ 9.79 ------- -------- ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A) ................................. 0.16 0.17 0.16 0.14 0.04 0.11 Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) .............................. 0.83 2.11 0.42 1.87 3.57 (2.10) ------- -------- ------- ------- ------- ------- Total income (loss) from investment operations .............. 0.99 2.28 0.58 2.01 3.61 (1.99) ------- -------- ------- ------- ------- ------- LESS DISTRIBUTIONS: Dividends from net investment income ..................... -- (0.17) (0.17) (0.13) (0.04) (0.10) Distributions from net realized gains on investments ..... -- -- (0.15) (0.58) -- -- Tax return of capital .................................... -- -- (0.05)(B) -- -- -- ------- -------- ------- ------- ------- ------- Total distributions ......................................... -- (0.17) (0.37) (0.71) (0.04) (0.10) ------- -------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD .............................. $ 15.88 $ 14.89 $ 12.78 $ 12.57 $ 11.27 $ 7.70 ======= ======== ======= ======= ======= ======= TOTAL RETURN ................................................ 6.65%(C) 17.85% 4.51% 17.91% 46.90% -20.37% ======= ======== ======= ======= ======= ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ................. $66,773 $151,878 $46,113 $39,196 $67,756 $11,227 Ratios to average net assets (annualized):(A) Net investment income ................................. 1.38% 1.49% 1.12% 0.90% 1.04% 1.13% Expenses, including expenses of the master portfolio .. 0.19% 0.18% 0.18% 0.22% 0.24% 0.20%
- ---------- (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 Year Ended December 31, ended June ---------------------------------------------------- 30, 2007 2006 2005 2004 2003 2002 ----------- -------- ------- ------- ------- -------- (unaudited) NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 12.76 $ 10.33 $ 9.39 $ 8.01 $ 5.86 $ 7.07 -------- -------- ------- ------- ------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A) ................................. 0.26 0.23 0.21 0.17 0.14 0.11 Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) .............................. 1.10 2.50 1.06 1.44 2.13 (1.23) -------- -------- ------- ------- ------- -------- Total income (loss) from investment operations .............. 1.36 2.73 1.27 1.61 2.27 (1.12) -------- -------- ------- ------- ------- -------- LESS DISTRIBUTIONS: Dividends from net investment income ..................... -- (0.23) (0.24) (0.23) (0.12) (0.09) Distributions from net realized gains on investments ..... -- (0.07) -- -- -- -- Tax return of capital .................................... -- -- (0.09)(B) -- -- -- -------- -------- ------- ------- ------- -------- Total distributions ......................................... -- (0.30) (0.33) (0.23) (0.12) (0.09) -------- -------- ------- ------- ------- -------- NET ASSET VALUE, END OF PERIOD .............................. $ 14.12 $ 12.76 $ 10.33 $ 9.39 $ 8.01 $ 5.86 ======== ======== ======= ======= ======= ======== TOTAL RETURN ................................................ 10.66%(C) 26.52% 13.58% 20.12% 38.87% -15.65% ======== ======== ======= ======= ======= ======== RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ................. $381,860 $162,113 $90,200 $23,156 $10,043 $ 4,912 Ratios to average net assets (annualized):(A) Net investment income ................................. 3.94% 2.44% 2.49% 2.16% 2.71% 1.97% Expenses, including expenses of the master portfolio .. 0.19% 0.22% 0.23% 0.26% 0.31% 0.25%
- ---------- (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, 2007 (UNAUDITED)
MARKET VALUE SHARES (000) --------- ---------- COMMON STOCKS -- 97.8% CONSUMER DISCRETIONARY --10.3% Abercrombie & Fitch Co. 17,968 $ 1,311 Amazon.Com, Inc. (a) 62,212 4,256 Apollo Group, Inc. Class A (a) 29,068 1,698 AutoNation, Inc. (a) 30,992 695 AutoZone, Inc. (a) 9,180 1,254 Bed Bath & Beyond, Inc. (a) 55,467 1,996 Best Buy Co., Inc. 82,076 3,830 Big Lots, Inc. (a) 22,762 670 Black & Decker Corp. 13,556 1,197 Brunswick Corp. 19,033 621 Carnival Corp. 89,754 4,377 CBS Corp. Class B 146,179 4,871 Centex Corp. 24,662 989 Circuit City Stores, Inc. 29,424 444 Citadel Broadcasting Corp. 3,251 21 Clear Channel Communications, Inc. 99,109 3,748 Coach, Inc. (a) 73,865 3,500 Comcast Corp. Class A (a) 621,038 17,464 D.R. Horton, Inc. 54,763 1,091 Darden Restaurants, Inc. 29,106 1,280 Dillard's, Inc. Class A 12,590 452 DIRECTV Group, Inc. (a) 154,582 3,572 Dollar General Corp. 64,764 1,420 Dow Jones & Co., Inc. 13,543 778 Eastman Kodak Co. 59,594 1,659 eBay, Inc. (a) 228,599 7,356 EW Scripps Co. Class A 17,240 788 Family Dollar Stores, Inc. 31,412 1,078 Federated Department Stores, Inc. 91,734 3,649 Ford Motor Co. 380,839 3,588 Fortune Brands, Inc. 29,847 2,459 Gannett Co., Inc. 46,671 2,565 Gap, Inc. 108,086 2,064 General Motors Corp. 111,466 4,213 Genuine Parts Co. 34,965 1,734 Goodyear Tire & Rubber Co. (a) 36,774 1,278 H&R Block, Inc. 65,556 1,532 Harley-Davidson, Inc. 50,693 3,022 Harman International Industries, Inc. 13,518 1,579 Harrah's Entertainment, Inc. 37,162 3,168 Hasbro, Inc. 33,001 1,037 Hilton Hotels Corp. 76,361 2,556 Home Depot, Inc. 394,424 15,521 Host Hotels & Resorts, Inc. 106,440 2,461 International Game Technology 66,380 2,635 Interpublic Group of Cos., Inc. (a) 96,155 1,096 JC Penney & Co., Inc. 45,541 3,296 Johnson Controls, Inc. 39,671 4,593 Jones Apparel Group, Inc. 21,438 606
MARKET VALUE SHARES (000) --------- ---------- KB HOME 15,150 $ 596 Kohl's Corp. (a) 63,936 4,541 Leggett & Platt, Inc. 35,226 777 Lennar Corp. Class A 28,603 1,046 Limited Brands 70,205 1,927 Liz Claibome, Inc. 21,298 794 Lowe's Cos., Inc. 303,360 9,310 Marriot International, Inc. Class A 64,846 2,804 Mattel, Inc. 80,655 2,040 McDonald's Corp. 240,039 12,184 McGraw-Hill, Inc. 68,066 4,634 Meredith Corp. 8,079 498 New York Times Co. Class A 29,823 758 Newell Rubbermaid, Inc. 56,935 1,676 News Corp. Class A 467,500 9,916 NIKE, Inc. Class B 76,244 4,444 Nordstrom, Inc. 44,751 2,288 Office Depot, Inc. (a) 56,890 1,724 OfficeMax, Inc. 15,495 609 Omnicom Group, Inc. 66,656 3,527 Polo Ralph Lauren Corp. 12,304 1,207 Pulte Homes, Inc. 43,857 985 Radioshack Corp. 28,165 933 Sears Holdings Corp. (a) 16,315 2,765 Sherwin-Williams Co. 21,092 1,402 Snap-On, Inc. 12,096 611 Stanley Works 16,880 1,025 Staples, Inc. 145,213 3,446 Starbucks Corp. (a) 146,505 3,844 Starwood Hotels & Resorts Worldwide, Inc. 42,240 2,833 Target Corp. 171,207 10,889 Tiffany & Co. 28,084 1,490 Time Warner, Inc. 761,827 16,029 TJX Cos., Inc. 92,681 2,549 Tribune Co. 17,026 501 V.F. Corp. 17,300 1,584 Viacom, Inc. Class B (a) 137,461 5,723 Walt Disney Co. 395,717 13,510 Wendy's International, Inc. 17,426 640 Whirlpool Corp. 15,833 1,761 Wyndham Worldwide Corp. (a) 35,125 1,274 Yum! Brands, Inc. 105,270 3,444 ---------- 281,606 ---------- CONSUMER STAPLES -- 9.1% Altria Group, Inc. 420,867 29,520 Anheuser-Busch Cos., Inc. 153,484 8,006 Archer-Daniels-Midland Co. 131,829 4,362 Avon Products, Inc. 89,296 3,282 Brown-Forman Corp. Class B 16,341 1,194 Campbell Soup Co. 44,856 1,741 Clorox Co. 31,063 1,929 Coca-Cola Co. 402,502 21,055 Coca-Cola Enterprises, Inc. 57,499 1,380
See notes to financial statements 22 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2007 (UNAUDITED)
MARKET VALUE SHARES (000) --------- ---------- CONSUMER STAPLES -- (CONTINUED) Colgate-Palmolive Co. 102,023 $ 6,616 ConAgra Foods, Inc. 99,003 2,659 Constellation Brands, Inc. Class A (a) 38,122 926 Costco Wholesale Corp. 90,679 5,307 CVS Corp. 307,120 11,194 Dean Foods Co. (a) 25,866 824 Estee Lauder Cos, Inc. Class A 23,812 1,084 General Mills, Inc. 69,037 4,033 H.J. Heinz Co. 65,954 3,131 Hershey Foods Corp. 33,366 1,689 Kellogg Co. 51,066 2,645 Kimberly-Clark Corp. 90,686 6,066 Kraft Foods, Inc. 322,401 11,365 Kroger Co. 141,594 3,983 McCormick & Co., Inc. 25,963 991 Molson Coors Brewing Co., Class B 9,447 873 Pepsi Bottling Group, Inc. 27,090 912 PepsiCo, Inc. 327,327 21,227 Procter & Gamble Co. 631,273 38,628 Reynolds American, Inc. 34,855 2,273 Safeway, Inc. 86,702 2,950 Sara Lee Corp, 148,645 2,586 SuperValu, Inc. 41,934 1,942 Sysco Corp. 123,421 4,072 Tyson Foods, Inc., Class A 52,309 1,205 UST Corp. 32,960 1,770 Wal-Mart Stores, Inc. 487,134 23,436 Walgreen Co. 199,284 8,677 Whole Foods Market, Inc. 28,605 1,096 Wrigley Wm, Jr. Co. 42,241 2,336 ---------- 248,965 ---------- ENERGY --10.3% Anadarko Petroleum Corp. 93,562 4,864 Apache Corp. 66,938 5,461 Baker Hughes, Inc. 64,253 5,406 BJ Services Co. 60,161 1,711 Chesapeake Energy Corp. 83,052 2,874 Chevron Texaco Corp. 431,562 36,355 ConocoPhillips 326,980 25,668 Devon Energy Corp. 88,290 6,912 El Paso Corp. 142,038 2,447 ENSCO International, Inc. 30,760 1,877 EOG Resources, Inc. 49,439 3,612 ExxonMobil Corp. 1,128,765 94,681 Halliburton Co. 183,720 6,338 Hess Corp. 53,187 3,136 Marathon Oil Corp. 136,639 8,193 Murphy Oil Corp. 38,497 2,288 Nabors Industries, Ltd. (a) 57,066 1,905 National Oilwell Varco, Inc. (a) 35,561 3,707 Noble Corp. 26,379 2,573 Occidental Petroleum Corp. 166,901 9,660
MARKET VALUE SHARES (000) --------- ---------- Rowan Cos., Inc. 22,960 $ 941 Schlumberger, Ltd. 235,434 19,998 Smith International, Inc. 40,947 2,401 Sunoco, Inc. 24,942 1,987 Transocean, Inc. (a) 58,106 6,158 Valero Energy Corp. 110,546 8,165 Weatherford International Ltd. (a) 66,724 3,686 Williams Cos., Inc. 121,119 3,830 XTO Energy, Inc. 75,963 4,565 ---------- 281,399 ---------- FINANCIALS -- 20.5% ACE, Ltd. 65,299 4,082 AFLAC, Inc. 97,052 4,988 Allstate Corp. 120,863 7,434 Ambac Financial Group, Inc. 20,719 1,806 American Express Co. 238,051 14,564 American International Group, Inc. 520,393 36,443 Ameriprise Financial, Inc. 48,098 3,058 AON Corp. 58,523 2,494 Apartment Investment & Management Co. Class A 19,984 1,008 Archstone-Smith Trust 43,300 2,559 Assurant, Inc. 16,894 995 AvalonBay Communities, Inc. 16,308 1,939 Bank of America Corp. 888,598 43,444 Bank of New York Co., Inc. 150,074 6,219 BB&T Corp. 107,292 4,365 Bear Steams Cos., Inc. 23,904 3,347 Boston Properties, Inc. 23,315 2,381 Capital One Financial Corp. 82,500 6,471 CB Richard Ellis Group, Inc. Class A (a) 38,377 1,401 Charles Schwab Corp. 203,287 4,171 Chicago Mercantile Exchange Holdings, Inc. 7,088 3,788 Chubb Corp. 79,482 4,303 Cincinnati Financial Corp. 35,173 1,527 CIT Group, INC. 39,188 2,149 Citigroup, Inc. 990,655 50,812 Comerica, Inc. 31,970 1,901 Commerce Bancorp, Inc. 38,888 1,438 Compass Bancshares, Inc. 26,546 1,831 Countrywide Financial Corp. 119,222 4,334 Developers Diversified Realty Corp. 25,878 1,364 E*Trade Financial Corp. (a) 87,673 1,937 Equity Residential 57,810 2,638 Fannie Mae 193,026 12,610 Federal Home Loan Mortgage Corp. 131,778 7,999 Federated Investors, Inc. Class B 18,710 717
See notes to financial statements 23 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2007 (UNAUDITED)
MARKET VALUE SHARES (000) --------- ---------- FINANCIALS -- (CONTINUED) Fidelity National Information Services, Inc. 33,590 $ 1,823 Fifth Third Bancorp 110,120 4,379 First Horizon National Corp. 25,778 1,005 Franklin Resources, Inc. 33,138 4,390 General Growth Properties, Inc. 49,200 2,605 Genworth Financial, Inc. Class A 82,313 2,832 Goldman Sachs Group, Inc. 82,179 17,812 Hartford Financial Services Group, Inc. 63,658 6,271 Hudson City Bancorp, Inc. 101,557 1,241 Huntington Bancshares, Inc. 73,381 1,669 J.P. Morgan Chase & Co. 683,768 33,129 Janus Capital Group, Inc. 39,115 1,089 KeyCorp 77,804 2,671 Kimco Realty Corp. 45,938 1,749 Legg Mason, Inc. 26,743 2,631 Lehman Brothers Holdings, Inc. 104,674 7,800 Lincoln National Corp. 53,551 3,799 Loews Corp. 90,370 4,607 M & T Bank Corp. 15,577 1,665 Marsh & McLennan Cos., Inc. 112,397 3,471 Marshall & Ilsley Corp. 50,056 2,384 MBIA, Inc. 25,381 1,579 Mellon Financial Corp. 82,999 3,652 Merrill Lynch & Co., Inc. 174,966 14,624 MetLife, Inc. 147,901 9,537 MGIC Investment Corp. 17,204 978 Moody's Corp. 46,079 2,866 Morgan Stanley 210,637 17,668 National City Corp. 115,690 3,855 Northern Trust Corp. 36,975 2,375 Plum Creek Timber Co., Inc. 36,715 1,530 PNC Financial Services Group, Inc. 70,027 5,013 Principal Financial Group, Inc. 53,345 3,109 Progressive Corp. 148,429 3,552 ProLogis 50,990 2,901 Prudential Financial, Inc. 93,249 9,067 Public Storage, Inc. 24,979 1,919 Regions Financial Corp. 141,629 4,688 SAFECO Corp. 21,816 1,358 Simon Property Group, Inc. 44,342 4,126 SLM Corp. 82,235 4,735 Sovereign Bancorp, Inc. 74,062 1,566 State Street Corp. (b) 79,755 5,455 SunTrust Banks, Inc. 70,517 6,046 Synovus Financial Corp. 63,785 1,958 T. Rowe Price Group, Inc. 52,100 2,703 Torchmark Corp. 18,352 1,230 Travelers Cos, Inc. 134,350 7,188 U.S. Bancorp 349,394 11,513
MARKET VALUE SHARES (000) --------- ---------- UnumProvident Corp. 70,272 $ 1,835 Vornado Realty Trust 25,663 2,819 Wachovia Corp. 382,551 19,606 Washington Mutual, Inc. 176,813 7,539 Wells Fargo Co. 671,168 23,605 Western Union Co. 154,006 3,208 XL Capital, Ltd. Class A 35,985 3,033 Zions Bancorp 22,548 1,734 ---------- 561,709 ---------- HEALTHCARE -- 11.3% Abbott Laboratories 308,173 16,503 Aetna, Inc. 104,478 5,161 Allergan, Inc. 60,720 3,500 AmerisourceBergen Corp. 38,733 1,916 Amgen, Inc. (a) 232,946 12,880 Applera Corp. - Applied Biosystems Group 37,974 1,160 Barr Pharmaceuticals, Inc. (a) 22,041 1,107 Bausch & Lomb, Inc. 11,192 777 Baxter International, Inc. 129,248 7,282 Becton, Dickinson & Co. 48,231 3,593 Biogen Idec, Inc. (a) 68,259 3,652 Biomet, Inc. 49,805 2,277 Boston Scientific Corp, (a) 239,920 3,680 Bristol-Myers Squibb Co. 395,541 12,483 C.R. Bard, Inc. 21,057 1,740 Cardinal Health, Inc. 77,324 5,462 Celgene Corp. (a) 76,266 4,372 CIGNA Corp. 57,603 3,008 Coventry Health Care, Inc. (a) 30,418 1,754 Eli Lilly & Co. 196,716 10,993 Express Scripts, Inc. (a) 53,300 2,666 Forest Laboratories, Inc. (a) 63,392 2,894 Genzyme Corp. (a) 53,296 3,432 Gilead Sciences, Inc. (a) 184,760 7,163 Hospira, Inc. (a) 32,361 1,263 Humana, Inc. (a) 34,211 2,084 IMS Health, Inc. 39,562 1,271 Johnson & Johnson 579,829 35,729 King Pharmaceuticals, Inc. (a) 50,479 1,033 Laboratory Corp. of America Holdings (a) 23,679 1,853 Manor Care, Inc. 14,550 950 McKesson Corp. 58,326 3,479 Medco Health Solutions, Inc. (a) 56,280 4,389 Medtronic, Inc. 229,638 11,909 Merck & Co., Inc. 432,929 21,560 Millipore Corp. (a) 11,096 833 Mylan Laboratories Inc. 50,291 915 Patterson Cos., Inc. (a) 28,798 1,073 Pfizer, Inc. 1,404,988 35,926 Quest Diagnostics, Inc. 32,622 1,685 Schering-Plough Corp. 299,793 9,126 St. Jude Medical, Inc. (a) 67,700 2,809
See notes to financial statements 24 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2007 (UNAUDITED)
MARKET VALUE SHARES (000) --------- ---------- HEALTH CARE -- (CONTINUED) Stryker Corp. 58,889 $ 3,715 Tenet Healthcare Corp. (a) 97,769 636 Thermo Electron Corp. (a) 83,180 4,302 UnitedHealth Group, Inc. 267,658 13,688 Varian Medical Systems, Inc. (a) 26,073 1,108 Watson Pharmaceuticals, Inc. (a) 21,553 701 Wellpoint, Inc. (a) 122,052 9,743 Wyeth 268,757 15,411 Zimmer Holdings, Inc. (a) 46,854 3,977 ---------- 310,623 ---------- INDUSTRIALS -- 11.2% 3M Co. 144,762 12,564 Allied Waste Industries, Inc. (a) 52,668 709 American Standard Cos., Inc. 35,873 2,116 Avery Dennison Corp. 18,781 1,249 Boeing Co. 157,581 15,153 Burlington Northern Santa Fe Corp. 71,276 6,068 Caterpillar, Inc. 128,707 10,078 CH Robinson Worldwide, Inc. 35,545 1,867 Cintas Corp. 28,292 1,116 Cooper Industries, Ltd. 37,463 2,139 CSX Corp. 86,266 3,889 Cummins, Inc. 21,304 2,156 Danaher Corp. 47,929 3,619 Deere & Co. 45,011 5,435 Domtar Corp. (a)(c) 11 0 Dover Corp. 42,036 2,150 Eaton Corp. 29,664 2,759 Emerson Electric Co. 158,691 7,427 Equifax, Inc. 25,928 1,152 FedEx Corp. 61,080 6,778 Fluor Corp. 18,030 2,008 General Dynamics Corp. 81,517 6,376 General Electric Co. 2,061,275 78,906 Goodrich Co. 25,914 1,543 Honeywell International, Inc. 156,653 8,816 Illinois Tool Works, Inc. 82,716 4,482 Ingersoll-Rand Co. Class A 59,524 3,263 ITT Industries, Inc. 36,449 2,489 L-3 Communications Holdings, Inc. 25,371 2,471 Lockheed Martin Corp. 70,511 6,637 Masco Corp. 75,908 2,161 Monster Worldwide, Inc. (a) 26,635 1,095 Norfolk Southern Corp. 78,545 4,129 Northrop Grumman Corp. 69,403 5,404 PACCAR, Inc. 49,138 4,277 Pall Corp. 25,444 1,170 Parker-Hannifin Corp. 23,146 2,266 Pitney Bowes, Inc. 44,710 2,093
MARKET VALUE SHARES (000) --------- ---------- Precision Castparts Corp. 27,733 $ 3,366 R.R. Donnelley & Sons Co. 44,044 1,916 Raytheon Co. 88,385 4,763 Robert Half International, Inc. 34,790 1,270 Rockwell Automation, Inc. 31,718 2,202 Rockwell Collins, Inc. 32,802 2,317 Ryder Systems, Inc. 12,618 679 Southwest Airlines Co. 152,983 2,281 Terex Corp. (a) 21,093 1,715 Textron, Inc. 25,544 2,813 Tyco International, Ltd. 394,492 13,330 Union Pacific Corp. 53,823 6,198 United Parcel Service, Inc. Class B 212,895 15,541 United Technologies Corp. 198,704 14,094 W.W. Grainger, Inc. 14,510 1,350 Waste Management, Inc. 103,974 4,060 ---------- 305,905 ---------- INFORMATION TECHNOLOGY -- 14.7% Adobe Systems, Inc. (a) 118,964 4,776 Advanced Micro Devices, Inc. (a) 111,815 1,599 Affiliated Computer Services, Inc. Class A (a) 19,803 1,123 Agilent Technologies, Inc. (a) 78,002 2,998 Altera Corp. 73,156 1,619 Analog Devices, Inc. 65,749 2,475 Apple Computer, Inc. (a) 173,850 21,217 Applied Materials, Inc. 277,682 5,518 Autodesk, Inc. (a) 47,540 2,238 Automatic Data Processing, Inc. 109,180 5,292 Avaya, Inc. (a) 87,050 1,466 BMC Software, Inc. (a) 40,985 1,242 Broadcom Corp. Class A (a) 93,725 2,741 CA, Inc. 84,371 2,179 CIENA Corp. (a) 17,644 637 Cisco Systems, Inc. (a) 1,215,336 33,847 Citrix Systems, Inc. (a) 37,473 1,262 Cognizant Technology Solutions Corp. Class A (a) 29,295 2,200 Computer Sciences Corp. (a) 35,540 2,102 Compuware Corp. (a) 55,966 664 Convergys Corp. (a) 28,608 693 Corning, Inc. (a) 315,821 8,069 Dell, Inc. (a) 452,998 12,933 Electronic Arts, Inc. (a) 61,035 2,888 Electronic Data Systems Corp. 101,195 2,806 EMC Corp. (a) 423,883 7,672 First Data Corp. 152,248 4,974 Fiserv, Inc. (a) 34,824 1,978 Google, Inc. Class A (a) 43,842 22,946 Hewlett-Packard Co. 526,347 23,486 IAC (a) 44,529 1,541 Intel Corp. 1,162,615 27,624
See notes to financial statements 25 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2007 (UNAUDITED)
MARKET VALUE SHARES (000) --------- ---------- INFORMATION TECHNOLOGY -- (CONTINUED) International Business Machines Corp. 273,311 $ 28,766 Intuit, Inc. (a) 70,239 2,113 Jabil Circuit, Inc. 38,313 846 Juniper Networks, Inc. (a) 111,786 2,814 KLA-Tencor Corp. 38,510 2,116 Lexmark International Group, Inc. Class A (a) 19,500 962 Linear Technology Corp. 51,047 1,847 LSI Logic Corp. (a) 158,096 1,187 Maxim Integrated Products, Inc. 65,786 2,198 MEMC Electronic Materials, Inc. (a) 45,701 2,793 Micron Technology, Inc. (a) 154,889 1,941 Microsoft Corp. 1,686,090 49,689 Molex, Inc. 29,396 882 Motorola, Inc. 465,173 8,234 National Semiconductor Corp. 58,215 1,646 NCR Corp. (a) 36,427 1,914 Network Appliance, Inc. (a) 72,665 2,122 Novell, Inc. (a) 70,374 548 Novellus Systems, Inc. (a) 25,633 727 NVIDIA Corp. (a) 69,660 2,878 Oracle Corp. (a) 796,528 15,700 Paychex, Inc. 68,992 2,699 PerkinElmer, Inc. 25,526 665 QLogic Corp. (a) 32,708 545 QUALCOMM, Inc. 332,965 14,447 SanDisk Corp. (a) 46,706 2,286 Solectron Corp, (a) 189,755 698 Sun Microsystems, Inc. (a) 719,014 3,782 Symantec Corp. (a) 178,049 3,597 Tektronix, Inc. 17,074 576 Tellabs, Inc. (a) 87,077 937 Teradyne, Inc. (a) 39,375 692 Texas Instruments, Inc. 287,600 10,822 Unisys Corp. (a) 71,488 653 VeriSign, Inc. (a) 50,839 1,613 Waters Corp. (a) 21,019 1,248 Xerox Corp. (a) 189,335 3,499 Xilinx, Inc. 59,910 1,604 Yahoo!, Inc. (a) 242,665 6,583 ---------- 403,674 ---------- MATERIALS -- 3.2% Air Products & Chemicals, Inc. 43,196 3,472 Alcoa, Inc. 172,861 7,006 Allegheny Technologies, Inc. 20,893 2,191 Ashland, Inc. 10,958 701 Ball Corp. 20,545 1,092 Bemis Co., Inc. 21,774 723 Consol Energy, Inc. 36,737 1,694 Dow Chemical Co. 190,941 8,443
MARKET VALUE SHARES (000) --------- ---------- E.I Du Pont de Nemours & Co. 184,120 $ 9,361 Eastman Chemical Co. 17,106 1,100 Ecolab, Inc. 36,565 1,561 Freeport-McMoRan Copper & Gold, Inc. Class B 74,393 6,161 Hercules, Inc. (a) 23,605 464 International Flavors & Fragrances, Inc. 16,168 843 International Paper Co. 87,485 3,416 MeadWestvaco Corp. 37,604 1,328 Monsanto Co. 107,954 7,291 Newmont Mining Corp. 88,998 3,476 Nucor Corp. 60,165 3,529 Pactiv Corp. (a) 27,591 880 Peabody Energy Corp. 52,048 2,518 PPG Industries, Inc. 32,126 2,445 Praxair, Inc. 63,409 4,565 Rohm & Haas Co. 29,482 1,612 Sealed Air Corp. 33,377 1,035 Sigma-Aldrich Corp. 27,317 1,166 Temple-Inland, Inc. 21,386 1,316 United States Steel Corp. 23,224 2,526 Vulcan Materials Co. 19,491 2,233 Weyerhaeuser Co. 42,127 3,325 ---------- 87,473 ---------- TELECOMMUNICATION SERVICES -- 3.7% ALLTEL Corp. 69,403 4,688 AT&T, Inc. 1,234,806 51,244 CenturyTel, Inc. 22,933 1,125 Citizens Communications Co. 69,518 1,062 Embarq Corp. 30,412 1,927 JDS Uniphase Corp. (a) 43,752 588 Qwest Communications International, Inc. (a) 308,851 2,996 Sprint Corp. (Fon Group) 579,048 11,992 Verizon Communications, Inc. 581,637 23,946 Windstream Corp. 98,878 1,459 ---------- 101,027 ---------- UTILITIES --3.5% AES Corp. (a) 133,637 2,924 Allegheny Energy, Inc. (a) 33,697 1,743 Ameren Corp. 40,308 1,976 American Electric Power Co., Inc. 80,381 3,620 CenterPoint Energy, Inc. 64,938 1,130 CMS Energy Corp. 46,141 794 Consolidated Edison, Inc. 50,471 2,277 Constellation Energy Group, Inc. 36,543 3,185 Dominion Resources, Inc. 69,255 5,977 DTE Energy Co. 36,388 1,755 Duke Energy Corp. 251,870 4,609 Dynegy, Inc. (a) 82,789 782 Edison International 64,331 3,610
See notes to financial statements 26 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2007 (UNAUDITED)
MARKET VALUE SHARES (000) --------- ---------- UTILITIES -- (CONTINUED) Entergy Corp. 40,018 $ 4,296 Exelon Corp. 133,510 9,693 FirstEnergy Corp. 61,294 3,968 FPL Group, Inc. 80,411 4,563 Integrys Energy Group, Inc. 15,378 780 KeySpan Corp. 36,347 1,526 Nicor, Inc. 9,319 400 NiSource, Inc. 56,685 1,174 PG&E Corp. 69,971 3,170 Pinnacle West Capital Corp. 20,748 827 PPL Corp. 75,961 3,554 Progress Energy, Inc. 50,365 2,296 Public Service Enterprise Group, Inc. 49,987 4,388 Questar Corp. 35,350 1,868 Sempra Energy 53,280 3,156 Southern Co. 148,478 5,091 Spectra Energy Corp. 127,058 3,298 TECO Energy, Inc. 43,371 745 TXU Corp. 91,207 6,138 Xcel Energy, Inc. 83,653 1,712 ---------- 97,025 ---------- TOTAL COMMON STOCKS (Cost $1,593,337,921) 2,679,406 ----------
PAR AMOUNT (000) --------- U.S. Government Securities -- 0.2% United States Treasury Bill 4.6% due 09/06/07 (d)(e) $4,299 4,262 ---------- TOTAL U.S. GOVERNMENT SECURITIES (Cost $4,261,836) 4,262 ----------
SHARES (000) --------- MONEY MARKET FUNDS -- 1.5% AIM Short Term Investment Prime Portfolio 40,921 $ 40,921 Federated Money Market Obligations Trust 540 540 ---------- TOTAL MONEY MARKET FUNDS (Cost $41,461,153) 41,461 ---------- TOTAL INVESTMENTS -- 99.5% (identified cost $1,639,060,910) $2,725,129 OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.5% 13,046 ---------- NET ASSETS -- 100.0% $2,738,175 ==========
(a) Non-income producing security. (b) Affiliated issuer. See table that follows for more information. (c) Amounts is less than $1,000. (d) Rate represents annualized yield at date of purchase. (e) Security held as collateral in relation to initial margin requirements on futures contracts. See notes to financial statements 27 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2007 (UNAUDITED)
NUMBER UNREALIZED OF DEPRECIATION CONTRACTS (000) --------- ------------ Schedule of Futures Contracts S&P 500 Financial Futures Contracts (long) Expiration Date 09/2007 770 $(324) ----- Total unrealized depreciation on open futures contracts purchased $(324) =====
AFFILIATE TABLE
Realized Income Earned Gain Number of Shares purchased Shares sold for Number of for the 6 Months on shares Security shares held for the 6 Months the 6 Months shares held ended 6/30/07 sold Description at 12/31/2006 ended 6/30/07 ended 6/30/07 at 6/30/07 (000) (000) - ------------------ ------------- ---------------- --------------- ----------- ---------------- --------- State Street Corp. 69,744 17,100 7,089 79,755 $29 $139
See notes to financial statements 28 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2007 (UNAUDITED) (AMOUNTS IN THOUSANDS) ASSETS Investments in unaffiliated issuers at market (identified cost $1,635,907) .................................................... $2,719,674 Investments in non-controlled affiliates at market (identified cost $3,154) (Note 4) ............................................... 5,455 ---------- 2,725,129 Receivables: Investment securities sold .................................. 14,207 Dividends and interest ...................................... 3,151 ---------- TOTAL ASSETS .............................................. 2,742,487 ---------- LIABILITIES Payables: Investment securities purchased ............................. 4,137 Daily variation margin on futures contracts ................. 70 Management fees (Note 4) .................................... 105 TOTAL LIABILITIES ........................................ 4,312 ---------- NET ASSETS ........................................................ $2,738,175 ==========
See notes to financial statements 29 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF OPERATIONS JUNE 30, 2007 (UNAUDITED) (AMOUNTS IN THOUSANDS) INVESTMENT INCOME Dividend income - unaffiliated issuers .................. $ 25,994 Dividend income - non-controlled affiliated issuer ...... 29 Interest ................................................ 1,569 -------- TOTAL INVESTMENT INCOME .............................. 27,592 -------- EXPENSES Management fees (Note 4) ................................ $ 628 ------- TOTAL EXPENSES ....................................... 628 -------- NET INVESTMENT INCOME ...................................... 26,964 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain on: Investments - unaffiliated issuers ...................... 72,669 Investments - non-controlled affiliated issuer .......... 139 Futures contracts ....................................... 2,479 ------- -------- 75,287 -------- Net change in net unrealized appreciation (depreciation) on: Investments ............................................. 85,942 Futures contracts ....................................... (336) ------- 85,606 -------- Net realized and unrealized gain ........................... 160,893 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $187,857 ========
See notes to financial statements 30 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
FOR THE SIX FOR THE MONTHS ENDED YEAR ENDED JUNE 30, 2007 DECEMBER 31, (UNAUDITED) 2006 ------------- ------------ INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net Investment Income ..................................... $ 26,964 $ 49,532 Net realized gain on investments and futures contracts .... 75,287 9,894 Net change in net unrealized appreciation (depreciation) .. 85,606 318,596 ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... 187,857 378,022 ---------- ---------- CAPITAL TRANSACTIONS Proceeds from contributions ............................... 213,154 310,574 Contributions in-kind ..................................... -- 8,054 Fair value of withdrawals ................................. (429,532) (383,063) ---------- ---------- NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS ... (216,378) (64,435) ---------- ---------- TOTAL NET INCREASE (DECREASE) IN NET ASSETS .................. (28,521) 313,587 NET ASSETS Beginning of period .......................................... 2,766,696 2,453,109 ---------- ---------- END OF PERIOD ................................................ $2,738,175 $2,766,696 ========== ==========
See notes to financial statements 31 STATE STREET EQUITY 500 INDEX PORTFOLIO FINANCIAL HIGHLIGHTS The following table includes selected supplemental data and ratios to average net assets:
SIX MONTHS ENDED YEAR YEAR YEAR YEAR YEAR 6/30/2007 ENDED ENDED ENDED ENDED ENDED (UNAUDITED) 12/31/2006 12/31/2005 12/31/2004 12/31/2003 12/31/2002 ----------- ---------- ---------- ---------- ---------- ---------- SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) ............... $2,738,175 $2,766,696 $2,453,109 $2,767,467 $2,714,672 $1,992,548 Ratios to average net assets: Operating expenses .......... 0.045%+ 0.045% 0.045% 0.045% 0.045% 0.045% Net investment income ....... 1.98%+ 1.94% 1.84% 1.97% 1.74% 1.57% Portfolio turnover rate* ....... 7%++ 10% 8% 9% 12% 13% Total return (a) ............... 6.95%++ 15.75% 4.87% 10.86% 28.62% -22.16%
- ---------- * 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 32 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED) 1. ORGANIZATION State Street Master Funds (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company, and was organized as a business trust under the laws of The Commonwealth of Massachusetts on July 27, 1999. The Trust comprises nine investment portfolios: the State Street Equity 500 Index Portfolio, the State Street Equity 400 Index Portfolio, the State Street Equity 2000 Index Portfolio, the State Street Aggregate Bond Index Portfolio, the State Street Money Market Portfolio, the State Street Tax Free Money Market Portfolio, the State Street Tax Free Limited Duration Bond Portfolio, the State Street Limited Duration Bond Portfolio 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, 2007, only the Portfolio, the State Street Money Market Portfolio, the State Street Tax Free Money Market Portfolio and the State Street Tax Free Limited Duration Bond Portfolio were in operation. The Portfolio is authorized to issue an unlimited number of nontransferable beneficial interests. The Portfolio's investment objective is to replicate, as closely as possible, before expenses, the performance of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500(R) Index"). The Portfolio uses a passive management strategy designed to track the performance of the S&P 500(R) Index. The S&P 500(R) Index is a well-known, unmanaged, stock index that includes common stocks of 500 companies from several industrial sectors representing a significant portion of the market value of all stocks publicly traded in the United States. There is no assurance that the Portfolio will achieve its objective. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies consistently followed by the Portfolio in the preparation of its financial statements. Security valuation: The Portfolio's investments are valued each business day by independent pricing services. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price if no sale has occurred) on the primary market or exchange on which they trade. Investments in other mutual funds are valued at the net asset value per share. Fixed-income securities and options are valued on the basis of the closing bid price. Futures contracts are valued on the basis of the last sale price. Money market instruments maturing within 60 days of the valuation date are valued at amortized cost, a method by which each money market instrument is initially valued at cost, and thereafter a constant accretion or amortization of any discount or premium is recorded until maturity of the security. The Portfolio may value securities for which market quotations are not readily available at "fair value," as determined in good faith pursuant to procedures established by the Board of Trustees. Securities transactions, investment income and expenses: Securities transactions are recorded on a trade date basis for financial statement purposes. Dividend income is recorded on the ex-dividend date. Interest income is recorded daily on the accrual basis and includes amortization of premium and accretion of discount on investments. Realized gains and losses from securities transactions are recorded on the basis of identified cost. Expenses are accrued daily based on average daily net assets. All of the net investment income and realized and unrealized gains and losses from the security transactions of the Portfolio are allocated pro rata among the partners in the Portfolio based on each partner's daily ownership percentage. 33 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED) 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 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, 2007, purchases and sales of investment securities, excluding short-term investments, futures contracts, and in-kind contributions and withdrawals, aggregated to $181,886,420 and $350,888,232, respectively. The aggregate value of in-kind contributions was $0. At June 30, 2007, the book cost of investments was $1,639,060,910 which approximates cost computed on a federal tax basis. The aggregate gross unrealized appreciation and gross unrealized depreciation was $1,127,577,940 and $41,510,236, respectively, resulting in net appreciation of $1,086,067,704 for all securities as computed on a federal income tax basis. The differences between book and tax cost amounts are primarily due to wash sale loss deferrals. 4. RELATED PARTY FEES AND TRANSACTIONS The Portfolio has entered into an investment advisory agreement with SSgA Funds Management, Inc. ("SSgA FM" or the "Adviser"), a subsidiary of State Street Corp. and an affiliate of State Street Bank and Trust Company ("State Street"), under which SSgA FM directs the investments of the Portfolio in accordance with its investment objective, policies, and limitations. The Trust has contracted with State Street to provide custody, administration and transfer agent services to the Portfolio. In compensation for SSgA FM's services as investment adviser and for State Street's services as administrator, custodian and transfer agent (and for assuming ordinary operating expenses of the Portfolio, including ordinary legal, audit and trustees expense), 34 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED) 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, 2007 is listed in the Portfolio of Investments. 5. TRUSTEES' FEES Pursuant to certain agreements with State Street and its affiliates, each Independent Trustee receives for his or her services a $30,000 retainer in addition to $2,500 for each in-person meeting and $500 for each telephonic meeting from State Street or its affiliates. 6. INDEMNIFICATIONS The Trust's organizational documents provide that its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, both in some of its principal service contracts and in the normal course of its business, the Trust enters into contracts that provide indemnifications to other parties for certain types of losses or liabilities. The Trust's maximum exposure under these arrangements is unknown as this could involve future claims against the Trust. 7. NEW ACCOUNTING PRONOUNCEMENTS On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Portfolio's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded as a tax expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Recent SEC guidance allows implementing FIN 48 in portfolio NAV calculations as late as the Portfolio's last NAV calculation in the first required financial statement reporting period. As a result, the Portfolio has incorporated FIN 48 in its semi annual report at June 30, 2007. At this time, management has evaluated the implication of FIN 48 and there is no impact to the financial statements. In addition, in September 2006, Statement of Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have, if any, on the Portfolio's financial statement disclosures. 35 STATE STREET EQUITY 500 INDEX PORTFOLIO GENERAL INFORMATION JUNE 30, 2007 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES AND RECORD The Trust has adopted proxy voting procedures relating to portfolio securities held by the Portfolio. A description of the policies and procedures are available (i) without charge, upon request, by calling (877) 521-4083 or (ii) on the website of the Securities and Exchange Commission (the "SEC") at www.sec.gov. Information on how the Portfolio voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by August 31 (i) without charge, upon request, by (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. 36 Summary Schedule of Investments MASTER SMALL CAP INDEX SERIES as of June 30, 2007 (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 800-441-7762 or on the Securities and Exchange Commission's Web site at http://www.sec.gov.
SHARES PERCENT OF INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS - -------- ------- --------------------------------------- ------------ ---------- ADVERTISING AGENCIES 43,380 ValueClick, Inc. (a) $ 1,277,975 0.2% Other Securities 2,534,555 0.3 ------------ ---- 3,812,530 0.5 AEROSPACE Other Securities 4,394,880 0.6 AGRICULTURE, FISHING & RANCHING Other Securities 478,326 0.1 AIR TRANSPORT Other Securities 5,824,630 0.8 ALUMINUM Other Securities 1,045,607 0.1 AUTO PARTS: AFTER MARKET Other Securities 1,053,865 0.1 AUTO PARTS: ORIGINAL EQUIPMENT 33,380 Lear Corp. (a) 1,188,662 0.2 Other Securities 3,146,789 0.4 ------------ ---- 4,335,451 0.6 AUTO, TRUCKS & PARTS Other Securities 1,513,121 0.2 BANKS: NEW YORK CITY Other Securities 439,890 0.1 BANKS: OUTSIDE NEW YORK CITY Other Securities 35,911,526 5.1 BEVERAGE: BREWERS (WINERIES) Other Securities 220,360 0.0 BEVERAGE: SOFT DRINKS Other Securities 781,587 0.1 BIOTECHNOLOGY RESEARCH & PRODUCTION 26,900 OSI Pharmaceuticals, Inc. (a) 974,049 0.1 Other Securities 15,302,071 2.2 ------------ ---- 16,276,120 2.3 BUILDING: CEMENT Other Securities 128,612 0.0 BUILDING: HEATING & PLUMBING Other Securities 348,549 0.0 BUILDING: MATERIALS Other Securities 3,836,870 0.5 BUILDING: MISCELLANEOUS Other Securities 1,206,526 0.2 BUILDING: ROOFING & WALLBOARD Other Securities 378,027 0.1 CABLE TELEVISION SERVICES Other Securities 1,026,185 0.1 CASINOS & GAMBLING Other Securities 3,930,029 0.6 CHEMICALS 24,100 CF Industries Holdings, Inc. 1,443,349 0.2 53,600 Hercules, Inc. (a) 1,053,240 0.2 Other Securities 7,780,378 1.1 ------------ ---- 10,276,967 1.5 COAL Other Securities 931,209 0.1 COMMERCIAL INFORMATION SERVICES Other Securities 1,724,243 0.2 COMMUNICATIONS & MEDIA Other Securities 992,516 0.1 COMMUNICATIONS TECHNOLOGY 13,472 Anixter International, Inc. (a) 1,013,229 0.1 63,300 Foundry Networks, Inc. (a) 1,054,578 0.2 Other Securities 15,075,972 2.1 ------------ ---- 17,143,779 2.4 COMPUTER SERVICES, SOFTWARE & SYSTEMS 13,500 Equinix, Inc. (a)(e) 1,234,845 0.2 18,798 Micros Systems, Inc. (a) 1,022,611 0.1 57,295 Nuance Communications, Inc. (a) 958,545 0.1 52,660 Parametric Technology Corp. (a) 1,137,983 0.2 Other Securities 28,170,836 4.0 ------------ ---- 32,524,820 4.6
JUNE 30, 2007 37 Summary Schedule of Investments (continued) MASTER SMALL CAP INDEX SERIES
SHARES PERCENT OF INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS - -------- ------- --------------------------------------- ------------ ---------- COMPUTER TECHNOLOGY Other Securities $ 7,297,690 1.0% CONSTRUCTION 13,836 EMCOR Group, Inc. (a) 1,008,644 0.1 15,671 Granite Construction, Inc. 1,005,765 0.1 12,700 Washington Group International, Inc. (a) 1,016,127 0.2 Other Securities 823,429 0.1 ------------ ---- 3,853,965 0.5 CONSUMER ELECTRONICS Other Securities 5,329,447 0.8 CONSUMER PRODUCTS Other Securities 4,536,670 0.6 CONTAINERS & PACKAGING: METALS & GLASS 30,200 AptarGroup, Inc. 1,073,912 0.1 Other Securities 1,913,039 0.3 ------------ ---- 2,986,951 0.4 CONTAINERS & PACKAGING: PAPER & PLASTIC Other Securities 533,328 0.1 COPPER Other Securities 553,864 0.1 COSMETICS Other Securities 1,195,112 0.2 DIVERSIFIED FINANCIAL SERVICES Other Securities 4,347,862 0.6 DIVERSIFIED MATERIALS & PROCESSING 19,360 Acuity Brands, Inc. 1,167,021 0.2 Other Securities 4,282,780 0.6 ------------ ---- 5,449,801 0.8 DRUG & GROCERY STORE CHAINS Other Securities 4,349,368 0.6 DRUGS & PHARMACEUTICALS Other Securities 15,930,727 2.3 EDUCATION SERVICES Other Securities 3,369,000 0.5 ELECTRICAL & ELECTRONICS Other Securities 1,925,233 0.3 ELECTRICAL: EQUIPMENT & COMPONENTS 19,901 Baldor Electric Co. 980,721 0.1 Other Securities 5,414,399 0.8 ------------ ---- 6,395,120 0.9 ELECTRICAL: HOUSEHOLD APPLIANCE Other Securities 121,563 0.0 ELECTRONICS 28,800 Flir Systems, Inc. (a) 1,332,000 0.2 Other Securities 3,828,510 0.5 ------------ ---- 5,160,510 0.7 ELECTRONICS: INSTRUMENTS, GAUGES 14,002 Itron, Inc. (a) 1,091,316 0.1 & METERS Other Securities 480,540 0.1 ------------ ---- 1,571,856 0.2 ELECTRONICS: MEDICAL SYSTEMS 23,480 Hologic, Inc. (a)(e) 1,298,679 0.2 24,664 Illumina, Inc. (a) 1,001,112 0.1 Other Securities 4,804,491 0.7 ------------ ---- 7,104,282 1.0 ELECTRONICS: SEMI-CONDUCTORS/ 102,300 ON Semiconductor Corp. (a) 1,096,656 0.2 COMPONENTS Other Securities 12,216,144 1.7 ------------ ---- 13,312,800 1.9 ELECTRONICS: TECHNOLOGY Other Securities 3,368,291 0.5 ENERGY MISCELLANEOUS Other Securities 3,798,979 0.5 ENGINEERING & CONTRACTING SERVICES Other Securities 3,504,237 0.5 ENTERTAINMENT 17,855 Gaylord Entertainment Co. (a) 957,742 0.1 Other Securities 1,464,958 0.2 ------------ ---- 2,422,700 0.3 FERTILIZERS 40,300 Terra Industries, Inc. (a) 1,024,426 0.1 FINANCE COMPANIES 16,600 International Securities Exchange, Inc. 1,084,810 0.1 Other Securities 1,291,080 0.2 ------------ ---- 2,375,890 0.3 FINANCE: SMALL LOAN Other Securities 957,944 0.1
38 JUNE 30, 2007 Summary Schedule of Investments (continued) MASTER SMALL CAP INDEX SERIES
SHARES PERCENT OF INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS - -------- ------- --------------------------------------- ------------ ---------- FINANCIAL DATA PROCESSING 24,000 Deluxe Corp. $ 974,640 0.2% SERVICES & SYSTEMS Other Securities 4,307,441 0.6 ------------ ---- 5,282,081 0.8 FINANCIAL INFORMATION SERVICES Other Securities 1,673,969 0.2 FINANCIAL MISCELLANEOUS 28,736 Sotheby's Holdings, Inc. Class A 1,322,431 0.2 Other Securities 4,897,432 0.7 ------------ ---- 6,219,863 0.9 FOODS Other Securities 6,600,707 0.9 FOREST PRODUCTS Other Securities 558,374 0.1 FORMS & BULK PRINTING SERVICES Other Securities 445,119 0.1 FUNERAL PARLORS & CEMETERIES Other Securities 383,455 0.1 GLASS Other Securities 414,518 0.1 GOLD Other Securities 737,281 0.1 HEALTH CARE FACILITIES Other Securities 4,537,699 0.6 HEALTH CARE MANAGEMENT SERVICES Other Securities 4,048,774 0.6 HEALTH CARE SERVICES Other Securities 4,546,296 0.6 HOMEBUILDING Other Securities 1,825,623 0.3 HOTEL/MOTEL Other Securities 464,749 0.1 HOUSEHOLD FURNISHINGS Other Securities 3,147,714 0.4 IDENTIFICATION CONTROL & FILTER DEVICES Other Securities 3,940,953 0.6 INDUSTRIAL PRODUCTS Other Securities 366,459 0.1 INSURANCE: LIFE Other Securities 3,008,617 0.4 INSURANCE: MULTI-LINE Other Securities 7,207,342 1.0 INSURANCE: PROPERTY-CASUALTY 36,800 Aspen Insurance Holdings Ltd. 1,032,976 0.2 27,715 Ohio Casualty Corp. 1,200,337 0.2 Other Securities 10,784,738 1.5 ------------ ---- 13,018,051 1.9 INVESTMENT MANAGEMENT COMPANIES 46,546 Apollo Investment Corp. 1,001,677 0.1 Other Securities 4,514,143 0.7 ------------ ---- 5,515,820 0.8 JEWELRY, WATCHES & GEMSTONES Other Securities 813,360 0.1 LEISURE TIME Other Securities 3,595,489 0.5 MACHINE TOOLS Other Securities 74,970 0.0 MACHINERY & ENGINEERING Other Securities 551,355 0.1 MACHINERY: AGRICULTURAL Other Securities 473,282 0.1 MACHINERY: CONSTRUCTION & HANDLING Other Securities 779,935 0.1 MACHINERY: ENGINES Other Securities 732,487 0.1 MACHINERY: INDUSTRIAL/SPECIALTY Other Securities 4,380,590 0.6 MACHINERY: OIL WELL 40,143 Hanover Compressor Co. 957,411 0.1 EQUIPMENT & SERVICES Other Securities 8,994,420 1.3 ------------ ---- 9,951,831 1.4 MACHINERY: SPECIALTY 15,600 Bucyrus International, Inc. 1,104,168 0.2 Other Securities 818,758 0.1 ------------ ---- 1,922,926 0.3 MANUFACTURED HOUSING Other Securities 532,733 0.1 MANUFACTURING Other Securities 486,868 0.1
JUNE 30, 2007 39 Summary Schedule of Investments (continued) MASTER SMALL CAP INDEX SERIES
SHARES PERCENT OF INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS - -------- ------- --------------------------------------- ------------ ---------- MEDICAL & DENTAL 19,240 Inverness Medical Innovations, Inc. (a) $ 981,625 0.1% INSTRUMENTS & SUPPLIES 21,000 Kyphon, Inc. (a) 1,011,150 0.2 13,860 Ventana Medical Systems, Inc. (a) 1,070,962 0.2 Other Securities 15,639,512 2.2 ------------ ---- 18,703,249 2.7 MEDICAL SERVICES Other Securities 1,946,975 0.3 METAL FABRICATING Other Securities 6,715,498 1.0 METALS & MINERALS MISCELLANEOUS Other Securities 4,320,988 0.6 MILLING: FRUIT & GRAIN PROCESSING Other Securities 84,500 0.0 MISCELLANEOUS BUSINESS & Other Securities 151,116 0.0 CONSUMER DISCRETIONARY MISCELLANEOUS CONSUMER STAPLES Other Securities 270,940 0.0 MISCELLANEOUS HEALTH CARE Other Securities 30,429 0.0 MISCELLANEOUS MATERIALS & COMMODITIES Other Securities 1,391,648 0.2 MISCELLANEOUS MATERIALS & PROCESSING Other Securities 1,908,381 0.3 MISCELLANEOUS PRODUCER DURABLES Other Securities 421,134 0.1 MISCELLANEOUS TECHNOLOGY Other Securities 885,031 0.1 MULTI-SECTOR COMPANIES Other Securities 2,708,379 0.4 OFFICE FURNITURE & BUSINESS EQUIPMENT Other Securities 1,991,458 0.3 OFFSHORE DRILLING Other Securities 1,244,583 0.2 OIL: CRUDE PRODUCERS 70,062 PetroHawk Energy Corp. (a) 1,111,183 0.2 Other Securities 13,462,900 1.9 ------------ ---- 14,574,083 2.1 OIL: INTEGRATED DOMESTIC Other Securities 747,002 0.1 OIL: INTEGRATED INTERNATIONAL Other Securities 124,131 0.0 PAINTS & COATINGS Other Securities 1,369,136 0.2 PAPER Other Securities 2,839,977 0.4 PHOTOGRAPHY Other Securities 111,200 0.0 PLASTICS Other Securities 516,616 0.1 POLLUTION CONTROL & ENVIRONMENTAL Other Securities 1,123,980 0.2 SERVICES POWER TRANSMISSION EQUIPMENT Other Securities 649,280 0.1 PRINTING & COPYING SERVICES Other Securities 1,649,408 0.2 PRODUCTION TECHNOLOGY EQUIPMENT Other Securities 7,575,909 1.1 PUBLISHING: MISCELLANEOUS Other Securities 1,853,298 0.3 PUBLISHING: NEWSPAPERS Other Securities 1,991,706 0.3 RADIO & TV BROADCASTERS Other Securities 3,405,506 0.5 RAILROAD EQUIPMENT Other Securities 1,352,623 0.2 RAILROADS 16,081 Florida East Coast Industries, Inc. (e) 1,334,401 0.2 Other Securities 443,870 0.1 ------------ ---- 1,778,271 0.3 REAL ESTATE Other Securities 1,273,429 0.2 REAL ESTATE INVESTMENT TRUSTS (REITS) 12,776 Alexandria Real Estate Equities, Inc. 1,236,972 0.2 25,400 Anthracite Capital, Inc. (c)(g) 297,180 0.0 38,559 Nationwide Health Properties, Inc. 1,048,805 0.1 18,986 Post Properties, Inc. 989,740 0.1 43,900 Realty Income Corp. 1,105,841 0.2 Other Securities 37,007,151 5.3 41,685,689 5.9 RECREATIONAL VEHICLES & BOATS Other Securities 1,793,180 0.3
40 JUNE 30, 2007 Summary Schedule of Investments (continued) MASTER SMALL CAP INDEX SERIES
SHARES PERCENT OF INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS - -------- ------- --------------------------------------- ------------ ---------- RENTAL & LEASING SERVICES: COMMERCIAL Other Securities $ 1,000,893 0.1% RENTAL & LEASING SERVICES: CONSUMER Other Securities 2,303,921 0.3 RESTAURANTS 13,500 Chipotle Mexican Grill, Inc. Class B (a) 1,061,505 0.2 13,568 Jack in the Box, Inc. (a) 962,514 0.1 Other Securities 9,815,916 1.4 ------------ ---- 11,839,935 1.7 RETAIL 22,500 Men's Wearhouse, Inc. 1,149,075 0.2 15,916 Priceline.com, Inc. (a) 1,094,066 0.1 Other Securities 22,676,226 3.2 ------------ ---- 24,919,367 3.5 SAVINGS & LOAN Other Securities 10,314,810 1.5 SCIENTIFIC EQUIPMENT & SUPPLIERS Other Securities 1,090,068 0.2 SECURITIES BROKERAGE & SERVICES Other Securities 3,370,260 0.5 SERVICES: COMMERCIAL Other Securities 23,583,914 3.4 SHIPPING Other Securities 4,563,432 0.6 SHOES Other Securities 4,314,822 0.6 STEEL Other Securities 1,784,447 0.3 SUGAR Other Securities 157,029 0.0 TELECOMMUNICATIONS EQUIPMENT 67,600 Andrew Corp. (a) 976,144 0.1 20,361 Belden, Inc. 1,126,981 0.2 39,900 Polycom, Inc. (a) 1,340,640 0.2 Other Securities 3,394,688 0.5 ------------ ---- 6,838,453 1.0 TEXTILE PRODUCTS Other Securities 494,528 0.1 TEXTILES APPAREL MANUFACTURERS Other Securities 5,342,752 0.8 TIRES & RUBBER Other Securities 1,072,121 0.2 TOBACCO Other Securities 1,714,973 0.2 TOYS Other Securities 1,055,135 0.2 TRANSPORTATION MISCELLANEOUS Other Securities 1,573,041 0.2 TRUCKERS Other Securities 2,894,702 0.4 UTILITIES: CABLE TV & RADIO Other Securities 289,731 0.0 UTILITIES: ELECTRICAL Other Securities 9,458,219 1.3 UTILITIES: GAS DISTRIBUTORS Other Securities 5,405,760 0.8 UTILITIES: MISCELLANEOUS Other Securities 636,404 0.1 UTILITIES: TELECOMMUNICATIONS 62,900 Time Warner Telecom, Inc. Class A (a) 1,264,290 0.2 Other Securities 7,515,229 1.0 ------------ ---- 8,779,519 1.2 UTILITIES: WATER Other Securities 1,117,476 0.2 WHOLESALE & INTERNATIONAL TRADE Other Securities 534,013 0.1 WHOLESALERS Other Securities 2,132,963 0.3 ------------ ---- TOTAL COMMON STOCKS (COST -- $505,540,295) 629,324,552 89.5 ============ ==== EXCHANGE-TRADED FUNDS 169,590 iShares Russell 2000 Index Fund (e) 14,065,795 2.0 ------------ ---- TOTAL EXCHANGE-TRADED FUNDS (COST -- $12,334,264) 14,065,795 2.0 ============ ====
JUNE 30, 2007 41 Summary Schedule of Investments (concluded) MASTER SMALL CAP INDEX SERIES
SHARES PERCENT OF INDUSTRY HELD MUTUAL FUNDS VALUE NET ASSETS - -------- ----------- ------------ ------------ ---------- INVESTMENT MANAGEMENT COMPANIES Other Securities $ 839,367 0.1% TOTAL MUTUAL FUNDS (COST -- $834,885) 839,367 0.1 OTHER INTERESTS (B) OIL: CRUDE PRODUCERS Other Securities 0 0.0 TOTAL OTHER INTERESTS (COST -- $0) 0 0.0 BENEFICIAL INTEREST SHORT-TERM SECURITIES ----------- --------------------- $58,707,799 BlackRock Liquidity Series,LLC Cash Sweep Series I, 5.33% (c)(f) 58,707,799 8.3 79,242,375 BlackRock Liquidity Series,LLC Money Market Series, 5.33% (c)(d)(f) 79,242,375 11.3 TOTAL SHORT-TERM SECURITIES (COST -- $137,950,174) 137,950,174 19.6 ------------ ----- TOTAL INVESTMENTS (COST -- $656,659,618*) 782,179,888 111.2% LIABILITIES IN EXCESS OF OTHER ASSETS (79,137,700) (11.2) ------------ ----- NET ASSETS $703,042,188 100.0% ============ =====
* The cost and unrealized appreciation (depreciation) of investments, as of June 30, 2007, as computed for federal income tax purposes, were as follows: Aggregate cost .................. $661,793,190 ============ Gross unrealized appreciation ... $139,737,560 Gross unrealized depreciation ... (19,350,862) ------------ Net unrealized appreciation ..... $120,386,698 ============
(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: (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 June 30, 2007. (g) Security held as collateral in connection with open future contracts. - - For Series compliance purposes, the Series' industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes, 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. - - "Other Securities" represents issues that are not identified as the 50 largest holdings of the Series and issues not exceeding 1% of net assets. Some securities, or a portion thereof, in this category are either held as collateral in connection with open financial futures contracts or are out on loan.
INTEREST/ PURCHASE REALIZED DIVIDEND AFFILIATE COST SALE COST GAIN INCOME - --------- ----------- ----------- -------- ---------- BlackRock Liquidity Series,LLC Cash Sweep Series -- $50,105,151** -- $1,633,563 BlackRock Liquidity Series,LLC Money Market Series $45,075,895* -- -- $ 372,569 Anthracite Capital,Inc $ 44,389 $ 6,196 $119 $ 14,058
* Represents net purchase cost. ** Represents net sale cost. - - Financial futures contracts purchased as of June 30,2007,were as follows:
NUMBER OF EXPIRATION FACE UNREALIZED CONTRACTS ISSUE DATE VALUE DEPRECIATION - --------- ------- ---------- ----------- ------------ 141 Russell September 2000 2007 Index $59,797,945 $(429,895)
See Notes to Financial Statements. 42 JUNE 30, 2007 Statement of Assets and Liabilities MASTER SMALL CAP INDEX SERIES AS OF JUNE 30,2007 (UNAUDITED) ASSETS Investments in unaffiliated securities,at value (including securities loaned of $75,927,045) (identified cost -- $518,414,835) ............. $643,932,534 Investments in affiliated securities, at value (identified cost -- $138,244,783) ............. 138,247,354 Cash ............................................. 28,466 Receivables: Securities sold ............................... $1,594,408 Contributions ................................. 1,250,872 Dividends ..................................... 883,157 Securities lending ............................ 139,034 3,867,471 ---------- Prepaid expenses and other assets ................ 765,788 ------------ Total assets ..................................... 786,841,613 ------------ LIABILITIES Collateral on securities loaned,at value ......... 79,242,375 Payables: Withdrawals ................................... 1,973,651 Securities purchased .......................... 1,504,012 Variation margin .............................. 221,009 Investment adviser ............................ 5,626 Other affiliates .............................. 5,600 3,709,898 ---------- Accrued expenses ................................. 847,152 ------------ Total liabilities ................................ 83,799,425 ------------ NET ASSETS NET ASSETS .................................... $703,042,188 ------------ NET ASSETS CONSIST OF Investors' capital ............................... $577,951,813 Unrealized appreciation -- net ................... 125,090,375 ------------ Net assets ....................................... $703,042,188 ============
See Notes to Financial Statements. JUNE 30, 2007 43 Statement of Operations MASTER SMALL CAP INDEX SERIES FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) INVESTMENT INCOME Dividends (net of $1,164 foreign withholding tax and $14,058 from affiliates) ............................................ $ 3,010,692 Interest from affiliates ....................................... 1,633,563 Securities lending -- net ...................................... 372,569 ----------- Total income ................................................... 5,016,824 ----------- EXPENSES Accounting services ............................................ $ 54,034 Professional fees .............................................. 49,046 Investment advisory fees ....................................... 30,658 Custodian fees ................................................. 28,730 Trustees' fees and expenses .................................... 2,311 Printing and shareholder reports ............................... 384 Pricing fees ................................................... 60 Other .......................................................... 4,429 ----------- Total expenses ................................................. 169,652 ----------- Investment income -- net ....................................... 4,847,172 ----------- REALIZED & UNREALIZED GAIN -- NET Realized gain on: Investments -- net (including $119 gain from affiliates) .... 15,757,308 Financial futures contracts -- net .......................... 2,579,173 18,336,481 ----------- Change in unrealized appreciation/depreciation on: Investments -- net .......................................... 16,804,556 Financial futures contracts -- net .......................... 100,348 16,904,904 ----------- ----------- Total realized and unrealized gain -- net ...................... 35,241,385 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $40,088,557 ===========
See Notes to Financial Statements. 44 JUNE 30, 2007 Statements of Changes in Net Assets MASTER SMALL CAP INDEX SERIES
FOR THE SIX MONTHS ENDED FOR THE JUNE 30, YEAR ENDED 2007 DECEMBER 31, INCREASE (DECREASE) IN NET ASSETS: (UNAUDITED) 2006 - ---------------------------------- ------------- ------------- OPERATIONS Investment income -- net ....................................... $ 4,847,172 $ 7,477,587 Realized gain -- net ........................................... 18,336,481 25,599,413 Change in unrealized appreciation/depreciation -- net .......... 16,904,904 31,237,076 ------------- ------------- Net increase in net assets resulting from operations ........... 40,088,557 64,314,076 ------------- ------------- CAPITAL TRANSACTIONS Proceeds from contributions .................................... 329,087,687 555,696,889 Fair value of withdrawals ...................................... (227,506,633) (428,783,737) ------------- ------------- Net increase in net assets derived from capital transactions ... 101,581,054 126,913,152 ------------- ------------- NET ASSETS Total increase in net assets ................................... 141,669,611 191,227,228 Beginning of period ............................................ 561,372,577 370,145,349 ------------- ------------- End of period .................................................. $ 703,042,188 $ 561,372,577 ============= =============
See Notes to Financial Statements. Financial Highlights MASTER SMALL CAP INDEX SERIES
FOR THE SIX MONTHS ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31, THE FOLLOWING RATIOS HAVE BEEN DERIVED FROM 2007 ---------------------------------------------------- INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS. (UNAUDITED) 2006 2005 2004 2003 2002 ------------ -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN Total investment return ......................... 6.69%+ 18.13% 4.63% 18.15% 47.11% (20.19%) -------- -------- -------- -------- -------- -------- RATIOS TO AVERAGE NET ASSETS Expenses, net of reimbursement .................. .06%* .07% .07% .08% .09% .08% -------- -------- -------- -------- -------- -------- Expenses ........................................ .06%* .07% .08% .08% .10% .14% -------- -------- -------- -------- -------- -------- Investment income -- net ........................ 1.58%* 1.55% 1.17% 1.11% 1.13% 1.26% -------- -------- -------- -------- -------- -------- SUPPLEMENTAL DATA Net assets, end of period (in thousands) ........ $703,042 $561,373 $370,145 $365,661 $335,659 $181,915 -------- -------- -------- -------- -------- -------- Portfolio turnover .............................. 18% 40% 37% 38% 29% 39% -------- -------- -------- -------- -------- --------
* Annualized. + Aggregate total investment return. See Notes to Financial Statements. JUNE 30, 2007 45 Notes to Financial Statements (Unaudited) MASTER SMALL CAP INDEX SERIES 1. SIGNIFICANT ACCOUNTING POLICIES: Master Small Cap Index Series (the "Series"), a non-diversified investment company, is part of Quantitative Master Series LLC (the "Master LLC"). The Master LLC is registered under the Investment Company Act of 1940, as amended, and is organized as a Delaware limited liability company. Prior to June 15, 2007, the Master LLC was organized as a Delaware statutory trust (the "Trust"). The Limited Liability Company Agreement (the "LLC Agreement") permits the Directors (and prior to June 15, 2007, the Declaration of Trust permitted the Trustees) to issue non-transferable interests in the Series subject to certain limitations. Throughout this report the Trust and the Master LLC are referred to as the Master LLC and the Board of Trustees is referred to as the Board of Directors. 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 Global Market are valued at the last sale price or official close price on the exchange, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price for long positions, and at the last available asked price for short positions. In cases where equity securities are traded on more than one exchange, the securities are valued on the exchange designated as the primary market by or under the authority of the Board of Directors of the Master LLC. Long positions traded in the over-the-counter ("OTC") market, NASDAQ Capital Market or Bulletin Board are valued at the last available bid price or yield equivalent obtained from one or more dealers or pricing services approved by the Board of Directors of the Master LLC. Short positions traded in the OTC market are valued at the last available asked price. Portfolio securities that are traded both in the OTC market and on a stock exchange are valued according to the broadest and most representative market. Options written or purchased are valued at the last sale price in the case of exchange-traded options. Options traded in the OTC market are valued at the last asked price (options written) or the last bid price (options purchased). Swap agreements are valued based upon quoted fair valuations received daily by the Series from a pricing service or counterparty. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their last sale price as of the close of such exchanges. Valuation of short-term investment vehicles is generally based on the net asset value of the underlying investment vehicle or amortized cost. Repurchase agreements are valued at cost plus accrued interest. The Series employs pricing services to provide certain securities prices for the Series. Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of Directors of the Master LLC, 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 Master LLC under the general supervision by the Board of Directors of the Master LLC. Such valuations and procedures will be reviewed periodically by the Board of Directors of the Master LLC. 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 are generally determined as of the close of business on the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of business on the NYSE that may not be reflected in the computation of the Series' net assets. If events (for example,a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such securities,those securities will be valued at their fair value as determined in good faith by the Board of Directors of the Master LLC or by BlackRock Advisors, LLC ("the Manager"), an indirect, wholly owned subsidiary of BlackRock, Inc., using a pricing service and/or procedures approved by the Board of Directors of the Master LLC. (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. 46 JUNE 30, 2007 Notes to Financial Statements (continued) MASTER SMALL CAP INDEX SERIES - - Financial futures contracts -- The Series may purchase or sell financial futures contracts and options on such financial futures contracts. Financial futures contracts are contracts for delayed delivery of securities at a specific future date and at a specified price or yield. Upon entering into a contract, the Series deposits, and maintains, as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract,the Series agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Series as unrealized gains or losses. When the contract is closed, the Series records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. - - Options -- The Series may purchase and write call and put options. When the Series writes an option,an amount equal to the premium received by the Series is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Series enters into a closing transaction), the Series realizes a gain or loss on the option to the extent of the premiums received or paid (or a gain or loss to the extent that the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. (C) INCOME TAXES -- The Series is classified as a partnership for federal income tax purposes. As such,each investor in the Series is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Series. Therefore, no federal income tax provision is required. Under the applicable foreign tax law, a withholding tax may be imposed on interest, dividends and capital gains at various rates. It is intended that the Series' assets will be managed so an investor in the Series can satisfy the requirements of Subchapter M of the Internal Revenue Code. (D) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the date the securities are purchased or sold (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Interest income is recognized on the accrual basis. (E) SECURITIES LENDING -- The Series may lend securities to financial institutions that provide cash or securities issued or guaranteed by the U.S. government as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Series and any additional required collateral is delivered to the Series on the next business day. Where the Series receives securities as collateral for the loaned securities, it collects a fee from the borrower. The Series typically receives the income on the loaned securities but does not receive the income on the collateral. Where the Series receives cash collateral, it may invest such collateral and retain the amount earned on such investment, net of any amount rebated to the borrower. Loans of securities are terminable at any time and the borrower, after notice,is required to return borrowed securities within five business days. The Series may pay reasonable finder's, lending agent, administrative and custodial fees in connection with its loans. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason,the Series could experience delays and costs in gaining access to the collateral. The Series also could suffer a loss where the value of the collateral falls below the market value of the borrowed securities, in the event of borrower default or in the event of losses on investments made with cash collateral. (F) RECENT ACCOUNTING PRONOUNCEMENTS -- Effective June 29,2007,the Master LLC implemented Financial Accounting Standards Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109 "("FIN 48").FIN 48 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity, including investment companies, before being measured and recognized in the financial statements. Management has evaluated the application of FIN 48 to the Master LLC,and has determined that the adoption of FIN 48 does not have a material impact on the Master LLC's financial statements. The Master LLC files U.S. and various state tax returns. No income tax returns are currently under examination. The statute of limitations on the Master LLC's tax returns remains open for the years ended December 31, 2003, through December 31, 2006. JUNE 30, 2007 47 Notes to Financial Statements (concluded) MASTER SMALL CAP INDEX SERIES In September 2006, Statement of Financial Accounting Standards No. 157, "Fair Value Measurements"("FAS 157"), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. At this time, management is evaluating the implications of FAS 157 and its impact on the Fund's financial statements, if any, has not been determined. In addition,in February 2007,Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("FAS 159"), was issued and is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FAS 157. FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. FAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. At this time, management is evaluating the implications of FAS 159 and its impact on the Fund's financial statements,if any, has not been determined. 2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES: The Master LLC has entered into an Investment Advisory Agreement with the Manager. Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC Financial Services Group, Inc. are the principal owners of BlackRock, Inc. The Manager is responsible for the management of the Series' investments and provides the necessary personnel, facilities,equipment and certain other services necessary to the operations of the Series. For such services,the Series pays a monthly fee at an annual rate of .01% of the average daily value of the Series' net assets. The Manager has entered into a contractual arrangement with the Series under which all expenses incurred by the Series will not exceed .08%. This arrangement has a one-year term and is renewable. In addition,the Manager has entered into a sub-advisory agreement with BlackRock Investment Management, LLC ("BIM"), an affiliate of the Manager, under which the Manager pays BIM for services it provides a monthly fee of an annual rate that is a percentage of the management fee paid by the Series to the Manager. Merrill Lynch Trust Company ("MLTC"), an indirect, wholly owned subsidiary of Merrill Lynch, is the Series' custodian. Effective July 17, 2007, State Street Bank&Trust Co. became the Series' custodian. The Master LLC has received an exemptive order from the Securities and Exchange Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned subsidiary of Merrill Lynch, or its affiliates. As of June 30, 2007, the Series lent securities with a value of $88,142 to MLPF&S or its affiliates. Pursuant to that order, the Master LLC has retained BIM as the securities lending agent for a fee based on a share of the returns on investment of cash collateral. BIM may, on behalf of the Master LLC and the Series, invest cash collateral received by the Series for such loans, among other things, in a private investment company managed by the Manager or in registered money market funds advised by the Manager or its affiliates. For the six months ended June 30, 2007, BIM received $118,728 in securities lending agent fees. For the six months ended June 30, 2007, the Series reimbursed the Manager $5,829 for certain accounting services. Certain officers and/or trustees of the Master LLC are officers and/or directors of BlackRock, Inc. or its affiliates. 3. INVESTMENTS: Purchases and sales (including in-kind redemptions) of investments,excluding short-term securities,for the six months ended June 30, 2007 were $258,417,198 and $98,031,953, respectively. 4. SHORT-TERM BORROWINGS: The Master LLC, on behalf of the Series, along with certain other funds managed by the Manager and its affiliates, is party to a $500,000,000 credit agreement with a group of lenders which expires November 2007. 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 .06% per annum based on the fund's pro rata share of the unused portion of the credit agreement. Amounts borrowed under the credit agreement bear interest at a rate equal to, at each fund's election, the federal funds rate plus .35% or a base rate as defined in the credit agreement. The Series did not borrow under the credit agreement during the six months ended June 30, 2007. 48 JUNE 30, 2007 Summary Schedule of Investments MASTER INTERNATIONAL INDEX SERIES As of June 30, 2007 (Unaudited) (in U.S. dollars) 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 ofinvestments is available without charge,upon request,by calling 800-441-7762 or on the Securities and Exchange Commission's Website at http://www.sec.gov.
SHARES PERCENT OF INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS - -------- --------- ------------------------------------ -------------- ---------- AEROSPACE & DEFENSE Other Securities $ 7,754,745 0.6% AIR FREIGHT & LOGISTICS Other Securities 5,683,050 0.5 AIRLINES Other Securities 3,673,391 0.3 AUTO COMPONENTS Other Securities 8,970,653 0.7 AUTOMOBILES 75,546 DaimlerChrysler AG 6,988,912 0.6 138,200 Honda Motor Co.,Ltd. 5,018,352 0.4 230,500 Toyota Motor Corp. 14,536,804 1.2 Other Securities 11,781,389 0.9 -------------- ---- 38,325,457 3.1 BEVERAGES Other Securities 16,439,101 1.3 BIOTECHNOLOGY Other Securities 1,367,160 0.1 BUILDING PRODUCTS Other Securities 8,074,180 0.7 CAPITAL MARKETS 97,055 Credit Suisse Group 6,890,038 0.6 42,330 Deutsche Bank AG Registered Shares 6,161,182 0.5 173,246 UBS AG 10,360,859 0.8 Other Securities 13,737,557 1.1 -------------- ---- 37,149,636 3.0 CHEMICALS 40,667 BASF AG 5,341,373 0.4 Other Securities 31,793,475 2.6 -------------- ---- 37,134,848 3.0 COMMERCIAL BANKS 147,900 ABN AMRO Holding NV 6,781,561 0.6 70,204 BNP Paribas SA 8,339,084 0.7 290,558 Banco Bilbao Vizcaya Argentaria SA 7,105,568 0.6 517,105 Banco Santander Central Hispano SA 9,505,417 0.8 558,207 Barclays Plc 7,766,284 0.6 111,239 Commonwealth Bank of Australia Ltd. 5,204,055 0.4 321,445 HBOS Plc 6,322,604 0.5 988,642 HSBC Holdings Plc 18,102,519 1.5 481,326 Lloyds TSB Group Plc 5,350,592 0.4 677 Mitsubishi UFJ Financial Group,Inc. 7,461,006 0.6 797 Mizuho Financial Group,Inc. 5,506,102 0.4 807,211 Royal Bank of Scotland Group Plc 10,214,033 0.8 29,633 Societe Generale SA 5,490,355 0.4 568 Sumitomo Mitsui Financial Group,Inc. 5,295,127 0.4 649,240 UniCredito Italiano SpA 5,797,880 0.5 Other Securities 69,243,860 5.6 -------------- ---- 183,486,047 14.8 COMMERCIAL SERVICES & SUPPLIES Other Securities 12,317,807 1.0 COMMUNICATIONS EQUIPMENT 337,349 Nokia Oyj 9,474,543 0.7 1,250,446 Telefonaktiebolaget LM Ericsson 4,987,896 0.4 Other Securities 3,297,262 0.3 -------------- ---- 17,759,701 1.4 COMPUTERS & PERIPHERALS Other Securities 5,327,830 0.4 CONSTRUCTION & ENGINEERING Other Securities 11,619,465 0.9 CONSTRUCTION MATERIALS Other Securities 10,559,720 0.9 CONSUMER FINANCE Other Securities 3,938,928 0.3 CONTAINERS & PACKAGING Other Securities 1,189,003 0.1 DISTRIBUTORS Other Securities 1,506,274 0.1
JUNE 30, 2007 49 Summary Schedule of Investments (continued) MASTER INTERNATIONAL INDEX SERIES (in U.S. dollars)
SHARES PERCENT OF INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS - -------- --------- ------------------------------------ -------------- ---------- DIVERSIFIED CONSUMER SERVICES Other Securities $ 432,523 0.0% DIVERSIFIED FINANCIAL SERVICES 152,241 ING Groep NV CVA 6,700,707 0.5 Other Securities 12,001,395 1.0 -------------- ---- 18,702,102 1.5 DIVERSIFIED TELECOMMUNICATION 367,946 Telefonica SA 8,188,297 0.7 SERVICES Other Securities 33,210,526 2.7 -------------- ---- 41,398,823 3.4 ELECTRIC UTILITIES 50,794 E.ON AG 8,528,735 0.7 Other Securities 27,422,804 2.2 -------------- ---- 35,951,539 2.9 ELECTRICAL EQUIPMENT Other Securities 14,352,233 1.2 ELECTRONIC EQUIPMENT & INSTRUMENTS Other Securities 12,604,127 1.0 ENERGY EQUIPMENT & SERVICES Other Securities 4,110,503 0.3 FOOD & STAPLES RETAILING 678,089 Tesco Plc 5,673,366 0.5 Other Securities 17,330,381 1.4 -------------- ---- 23,003,747 1.9 FOOD PRODUCTS 35,209 Nestle SA Registered Shares 13,378,488 1.1 Other Securities 19,583,147 1.6 -------------- ---- 32,961,635 2.7 GAS UTILITIES Other Securities 4,710,788 0.4 HEALTH CARE EQUIPMENT & SUPPLIES Other Securities 6,689,941 0.5 HEALTH CARE PROVIDERS & SERVICES Other Securities 2,440,066 0.2 HEALTH CARE TECHNOLOGY Other Securities 366,010 0.0 HOTELS,RESTAURANTS & LEISURE Other Securities 12,337,743 1.0 HOUSEHOLD DURABLES Other Securities 21,172,246 1.7 HOUSEHOLD PRODUCTS Other Securities 4,162,927 0.3 IT SERVICES Other Securities 4,145,230 0.3 INDEPENDENT POWER PRODUCERS & Other Securities 1,548,104 0.1 ENERGY TRADERS INDUSTRIAL CONGLOMERATES 70,074 Siemens AG 10,083,919 0.8 Other Securities 9,691,059 0.8 -------------- ---- 19,774,978 1.6 INSURANCE 128,703 AXA SA 5,532,384 0.4 37,185 Allianz AG Registered Shares 8,721,182 0.7 Other Securities 46,573,172 3.8 -------------- ---- 60,826,738 4.9 INTERNET & CATALOG RETAIL Other Securities 1,080,661 0.1 INTERNET SOFTWARE & SERVICES Other Securities 902,212 0.1 LEISURE EQUIPMENT & PRODUCTS Other Securities 4,270,850 0.4 LIFE SCIENCES TOOLS & SERVICES Other Securities 129,697 0.0 MACHINERY Other Securities 29,053,268 2.4 MARINE Other Securities 4,988,858 0.4 MEDIA Other Securities 24,404,884 2.0 METALS & MINING 126,834 Anglo American Plc (b) 7,446,652 0.6 81,778 Arcelor Mittal 5,111,306 0.4 296,625 BHP Billiton Ltd. 8,863,373 0.7 202,912 BHP Billiton Plc 5,636,662 0.5 86,423 Rio Tinto Plc Registered Shares 6,611,689 0.5 Other Securities 27,453,893 2.2 -------------- ---- 61,123,575 4.9
50 JUNE 30, 2007 Summary Schedule of Investments (continued) MASTER INTERNATIONAL INDEX SERIES (in U.S. dollars)
SHARES PERCENT OF INDUSTRY HELD COMMON STOCKS VALUE NET ASSETS - -------- --------- ------------------------------------ -------------- ---------- MULTILINE RETAIL Other Securities $ 5,873,141 0.5% MULTI-UTILITIES Other Securities 19,132,242 1.6 OFFICE ELECTRONICS 88,800 Canon,Inc. 5,207,501 0.4 Other Securities 2,514,752 0.2 -------------- ---- 7,722,253 0.6 OIL,GAS & CONSUMABLE FUELS 1,652,954 BP Plc 19,888,862 1.6 215,605 Eni SpA 7,817,279 0.6 4,487 Eni SpA (a)(c) 324,634 0.0 314,244 Royal Dutch Shell Plc 12,793,170 1.0 235,510 Royal Dutch Shell Plc Class B 9,817,472 0.8 177,462 Total SA 14,388,304 1.2 Other Securities 20,395,053 1.7 -------------- ---- 85,424,774 6.9 PAPER & FOREST PRODUCTS Other Securities 4,141,012 0.3 PERSONAL PRODUCTS Other Securities 3,834,424 0.3 PHARMACEUTICALS 130,352 AstraZeneca Plc 6,985,676 0.6 490,915 GlaxoSmithKline Plc 12,788,335 1.0 201,122 Novartis AG Registered Shares 11,291,107 0.9 62,542 Roche Holding AG 11,081,603 0.9 83,230 Sanofi-Aventis 6,723,927 0.6 Other Securities 16,293,613 1.3 -------------- ---- 65,164,261 5.3 REAL ESTATE INVESTMENT TRUSTS (REITS) Other Securities 17,410,844 1.4 REAL ESTATE MANAGEMENT & DEVELOPMENT Other Securities 20,038,765 1.6 ROAD & RAIL Other Securities 9,793,210 0.8 SEMICONDUCTORS & Other Securities 8,710,688 0.7 SEMICONDUCTOR EQUIPMENT SOFTWARE Other Securities 9,112,087 0.7 SPECIALTY RETAIL Other Securities 9,424,931 0.8 TEXTILES,APPAREL & LUXURY GOODS Other Securities 10,678,667 0.9 THRIFTS & MORTGAGE FINANCE Other Securities 915,250 0.1 TOBACCO Other Securities 11,444,280 0.9 TRADING COMPANIES & DISTRIBUTORS Other Securities 13,545,374 1.1 TRANSPORTATION INFRASTRUCTURE Other Securities 4,214,527 0.3 WATER UTILITIES Other Securities 1,156,044 0.1 WIRELESS TELECOMMUNICATION 4,510,161 Vodafone Group Plc 15,112,699 1.2 SERVICES Other Securities 7,702,851 0.6 -------------- ---- 22,815,550 1.8 TOTAL COMMON STOCKS (COST -- $889,550,832) 1,190,475,328 96.1 EXCHANGE-TRADED FUNDS 284,277 iShares MSCI EAFE Index Fund (c) 22,921,255 1.8 TOTAL EXCHANGE-TRADED FUNDS (COST -- $17,644,632) 22,921,255 1.8
JUNE 30, 2007 51 Summary Schedule of Investments (continued) MASTER INTERNATIONAL INDEX SERIES (in U.S. dollars)
PERCENT OF INDUSTRY PREFERRED STOCKS VALUE NET ASSETS - -------- ------------------------------------ -------------- ---------- AUTOMOBILES Other Securities $ 2,409,499 0.2% HOUSEHOLD PRODUCTS Other Securities 959,482 0.1 MEDIA Other Securities 198,125 0.0 MULTI-UTILITIES Other Securities 201,177 0.0 -------------- ----- TOTAL PREFERRED STOCKS (COST -- $2,134,986) 3,768,283 0.3 -------------- ----- RIGHTS MACHINERY Other Securities 23,116 0.0 REAL ESTATE INVESTMENT TRUSTS (REITS) Other Securities 4,516 0.0 -------------- ----- TOTAL RIGHTS (COST -- $25,522) 27,632 0.0 -------------- ----- TOTAL INVESTMENTS (COST -- $909,355,972*) 1,217,192,498 98.2 OTHER ASSETS LESS LIABILITIES 22,239,999 1.8 -------------- ----- NET ASSETS $1,239,432,497 100.0% ============== =====
* The cost and unrealized appreciation (depreciation) of investments as of June 30, 2007, as computed for federal income tax purposes, were as follows: Aggregate cost ................. $918,449,793 ------------ Gross unrealized appreciation .. $306,851,241 Gross unrealized depreciation .. (8,108,536) ------------ Net unrealized appreciation .... $298,742,705 ============
(a) Depositary receipts. (b) Non-income producing security. (c) All or a portion of security held as collateral in connection with open financial futures. - - "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 apply for purposes of this report, which may combine industry sub-classifications for reporting ease. - - Financial futures contracts purchased as of June 30, 2007 were as follows:
UNREALIZED NUMBER OF EXPIRATION APPRECIATION CONTRACTS ISSUE EXCHANGE DATE FACE VALUE (DEPRECIATION) - --------- ----- --------- -------------- ----------- ------------- 4 Hang Seng Index Future Hong Kong July 2007 $ 561,201 $ (1,681) 43 OMX Stock Index Future Stockholm July 2007 $ 800,426 (11,215) 227 DJ Euro Stoxx 50 Eurex September 2007 $13,745,745 125,880 60 FTSE 100 Index Future LIFFE September 2007 $ 7,985,811 12,101 13 SPI 200 Index Future Sydney September 2007 $ 1,738,711 (9,173) 48 TOPIX Index Future Tokyo September 2007 $ 6,870,319 49,478 -------- TOTAL UNREALIZED APPRECIATION -- NET $165,390 ========
52 JUNE 30, 2007 Summary Schedule of Investments (concluded) MASTER INTERNATIONAL INDEX SERIES (in U.S. dollars) - - Forward foreign exchange contracts purchased as of June 30, 2007 were as follows:
UNREALIZED FOREIGN CURRENCY SETTLEMENT APPRECIATION PURCHASED DATE (DEPRECIATION) - ---------------- ----------- -------------- AUD 3,613,000 August 2007 $ 65,449 CHF 5,056,200 August 2007 (11,327) EUR 11,882,900 August 2007 (5,249) GBP 6,279,400 August 2007 117,900 JPY 1,517,444,700 August 2007 (313,481) SEK 7,241,400 August 2007 (3,585) --------- TOTAL UNREALIZED DEPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS -- NET (USD COMMITMENT -- $49,527,364) $(150,293) =========
- - Forward foreign exchange contracts sold as of June 30, 2007 were as follows:
UNREALIZED FOREIGN CURRENCY SETTLEMENT APPRECIATION SOLD DATE (DEPRECIATION) - ---------------- ----------- -------------- AUD 3,613,000 August 2007 $ (33,654) CHF 5,056,200 August 2007 (13,056) EUR 11,882,900 August 2007 (52,855) GBP 6,279,400 August 2007 (99,153) JPY 1,517,444,700 August 2007 64,494 SEK 7,241,400 August 2007 (6,599) --------- TOTAL UNREALIZED DEPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS -- NET (USD COMMITMENT -- $49,236,247) $(140,823) =========
- - Investments in companies considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
NET INTEREST AFFILIATE ACTIVITY INCOME - --------- ------------ -------- BlackRock Liquidity Series, LLC Cash Sweep Series $(25,751,297) $760,130
- - Currency Abbreviations: AUD Australian Dollar JPY Japanese Yen CHF Swiss Franc SEK Swedish Krona EUR Euro USD U.S.Dollar GBP British Pound See Notes to Financial Statements. JUNE 30, 2007 53 Statement of Assets and Liabilities MASTER INTERNATIONAL INDEX SERIES AS OF JUNE 30,2007 (UNAUDITED) ASSETS Investments in unaffiliated securities,at value (identified cost--$909,355,972) .. $1,217,192,498 Foreign cash (cost--$7,094,550) .................................................. 7,158,903 Unrealized appreciation on forward foreign exchange contracts .................... 247,843 Receivables: Securities sold ............................................................... $38,135,301 Dividends ..................................................................... 3,323,359 Contributions ................................................................. 2,608,468 Variation margin .............................................................. 1,717,180 Interest ...................................................................... 233,274 46,017,582 ----------- Prepaid expenses and other assets ................................................ 1,627,054 -------------- Total assets ..................................................................... 1,272,243,880 -------------- LIABILITIES Unrealized depreciation on forward exchange contracts ............................ 538,959 Bank overdraft ................................................................... 16,760,363 Payables: Securities purchased .......................................................... 8,551,662 Beneficial interest redeemed .................................................. 6,360,600 Investment adviser ............................................................ 10,117 Other affiliates .............................................................. 9,814 14,932,193 ----------- Accrued expenses and other liabilities ........................................... 579,868 -------------- Total liabilities ................................................................ 32,811,383 -------------- NET ASSETS NET ASSETS ....................................................................... $1,239,432,497 -------------- NET ASSETS CONSIST OF Investors' capital ............................................................... $ 931,343,783 Unrealized appreciation -- net ................................................... 308,088,714 -------------- Net assets ....................................................................... $1,239,432,497 --------------
See Notes to Financial Statements. 54 JUNE 30, 2007 Statement of Operations MASTER INTERNATIONAL INDEX SERIES FOR THE SIX MONTHS ENDED JUNE 30,2007 (UNAUDITED) INVESTMENT INCOME Dividends (net of $2,291,346 foreign withholding tax) ............................ $ 19,873,151 Interest (including $760,130 from affiliates) .................................... 763,613 ------------ Total income ..................................................................... 20,636,764 ------------ EXPENSES Custodian fees ................................................................... $ 192,211 Accounting services .............................................................. 69,495 Investment advisory fees ......................................................... 54,131 Pricing fees ..................................................................... 31,741 Professional fees ................................................................ 31,505 Directors' fees and expenses ..................................................... 2,976 Printing and shareholder reports ................................................. 608 Other ............................................................................ 8,493 ----------- Total expenses ................................................................... 391,160 ------------ Investment income -- net ......................................................... 20,245,604 ------------ REALIZED & UNREALIZED GAIN (LOSS) -- NET Realized gain on: Investments -- net ............................................................ 7,388,347 Financial futures contracts -- net ............................................ 2,697,339 Foreign currency transactions -- net .......................................... 124,837 10,210,523 ----------- Change in unrealized appreciation/depreciation on: Investments -- net ............................................................ 80,930,319 Financial futures contracts -- net ............................................ (500,013) Foreign currency transactions -- net .......................................... (381,967) 80,048,339 ----------- ------------ Total realized and unrealized gain -- net ........................................ 90,258,862 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................. $110,504,466 ============
See Notes to Financial Statements. JUNE 30, 2007 55 Statements of Changes in Net Assets MASTER INTERNATIONAL INDEX SERIES INCREASE (DECREASE) INNET ASSETS:
FOR THE SIX MONTHS ENDED FOR THE JUNE 30, YEAR ENDED 2007 DECEMBER 31, (UNAUDITED) 2006 -------------- ------------- OPERATIONS Investment income -- net ..................................... $ 20,245,604 $ 17,659,987 Realized gain -- net ......................................... 10,210,523 12,066,140 Change in unrealized appreciation/depreciation -- net ........ 80,048,339 126,438,123 -------------- ------------- Net increase in net assets resulting from operations ......... 110,504,466 156,164,250 -------------- ------------- CAPITAL TRANSACTIONS Proceeds from contributions .................................. 459,741,058 517,743,669 Fair value of withdrawals .................................... (160,798,808) (367,077,433) -------------- ------------- Net increase in net assets derived from capital transactions.. 298,942,250 150,666,236 -------------- ------------- NET ASSETS Total increase in net assets ................................. 409,446,716 306,830,486 Beginning of period .......................................... 829,985,781 523,155,295 -------------- ------------- End of period ................................................ $1,239,432,497 $ 829,985,781 -------------- -------------
See Notes to Financial Statements Financial Highlights MASTER INTERNATIONAL INDEX SERIES 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 30,2007 ---------------------------------------------------- (UNAUDITED) 2006 2005 2004 2003 2002 ----------- -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN Total investment return ....................... 10.69%+ 26.61% 13.64% 20.32% 38.97% (15.81%) RATIOS TO AVERAGE NET ASSETS Expenses, net of reimbursement ................ .07%* .10% .10% .09% .09% .08% Expenses ...................................... .07%* .11% .10% .10% .10% .16% Investment income -- net ...................... 3.74%* 2.70% 2.53% 2.55% 2.23% 2.21% SUPPLEMENTAL DATA Net assets, end of period (in thousands) ...... $1,239,432 $829,986 $523,155 $322,067 $553,129 $166,820 Portfolio turnover ............................ 8% 23% 11% 14% 9% 20%
* Annualized + Aggregate total investment return. See Notes to Financial Statements. 56 JUNE 30, 2007 Notes to Financial Statements (Unaudited) MASTER INTERNATIONAL INDEX SERIES 1. SIGNIFICANT ACCOUNTING POLICIES: Master International Index Series (the "Series"), a non-diversified investment company,is part of Quantitative Master Series LLC (the "Master LLC"). The Master LLC is registered under the Investment Company Act of 1940,as amended, and is organized as a Delaware limited liability company. Prior to June 15,2007, the Master LLC was organized as a Delaware statutory trust (the "Trust"). The Master LLC's Limited Liability Company Agreement (the "LLC Agreement") permits the Directors (and prior to June 15, 2007, the Declaration of Trust permitted the Trustees) to issue non-transferable interests in the Series, subject to certain limitations. Throughout this report the Trust and the Master LLC are referred to as the Master LLC and the Board of Trustees is referred to as the Board of Directors. 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 Global Market are valued at the last sale price or official close price on the exchange, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price for long positions, and at the last available asked price for short positions. In cases where equity securities are traded on more than one exchange, the securities are valued on the exchange designated as the primary market by or under the authority of the Board of Directors of the Master LLC. Long positions traded in the over-the-counter ("OTC") markets, NASDAQ Capital Market or Bulletin Board are valued at the last available bid price or yield equivalent obtained from one or more dealers or pricing services approved by the Board of Directors of the Master LLC. Short positions traded in the OTC markets are valued at the last available asked price. Portfolio securities that are traded both in the OTC markets and on a stock exchange are valued according to the broadest and most representative market. Options written or purchased are valued at the last sale price in the case of exchange-traded options. Options traded in the OTC market are valued at the last asked price (options written) or the last bid price (options purchased). Swap agreements are valued based upon quoted fair valuations received daily by the Series from a pricing service or counter-party. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their last sale price as of the close of such exchanges. Valuation of short-term investment vehicles is generally based on the net asset value of the underlying investment vehicle or amortized cost. Repurchase agreements are valued at cost plus accrued interest. The Series employs pricing services to provide certain securities prices for the Series. Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of Directors of the Master LLC, 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 Master LLC's Board of Directors. Such valuations and procedures will be reviewed periodically by the Board of Directors of the Master LLC. 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 securities used in computing the net assets of the Series are determined as of such times. Foreign currency exchange rates will generally be determined as of the close of business on the NYSE. Occasionally,events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of business on the NYSE that may not be reflected in the computation of the Series' net assets. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such securities, those securities will be valued at their fair value as determined in good faith by the Master LLC's Board of Directors or by Black Rock Advisors, LLC (the "Manager"), an indirect, wholly owned subsidiary of Black Rock, Inc., using a pricing service and/or procedures approved by the Master LLC's Board of Directors. (b) Derivative financial instruments -- The Series may engage in various portfolio investment strategies to provide liquidity or as a proxy for a direct investment in securities underlying the Series' index. Losses may arise due to changes in the value of the contract due to an unfavorable change in the price of the underlying security or if the counterparty does not perform under the contract. The counterparty for certain instruments may pledge cash or securities as collateral. JUNE 30, 2007 57 Notes to Financial Statements (continued) MASTER INTERNATIONAL INDEX SERIES - - Financial futures contracts -- The Series may purchase or sell financial futures contracts and options on such financial futures contracts. Financial futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Series deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Series agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Series as unrealized gains or losses. When the contract is closed, the Series records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. - - Options -- The Series may purchase and write call and put options. When the Series writes an option,an amount equal to the premium received by the Series is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to(or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Series enters into a closing transaction), the Series realizes a gain or loss on the option to the extent of the premiums received or paid (or a gain or loss to the extent that the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. - - Forward foreign exchange contracts -- The Series may enter into forward foreign exchange contracts as a hedge against either specific transactions or portfolio positions. The contract is marked-to-market daily and the change in market value is recorded by the Series as an unrealized gain or loss. When the contract is closed,the Series records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. - - Foreign currency options and futures -- The Series may also purchase or sell listed or OTC foreign currency options, foreign currency futures and related options on foreign currency futures as a short or long hedge against possible variations in foreign exchange rates. Such transactions may be effected with respect to hedges on non-U.S. dollar-denominated securities owned by the Series, sold by the Series but not yet delivered,or committed or anticipated to be purchased by the Series. (c) Foreign currency transactions -- Transactions denominated in foreign currencies are recorded at the exchange rate prevailing when recognized. Assets and liabilities denominated in foreign currencies are valued at the exchange rate at the end of the period. Foreign currency transactions are the result of settling (realized) or valuing (unrealized) assets 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 58 JUNE 30, 2007 Notes to Financial Statements (continued) MASTER INTERNATIONAL INDEX SERIES 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. (g) Recent accounting pronouncements -- Effective June 29, 2007, the Series implemented Financial Accounting Standards Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109"("FIN 48"). FIN 48 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity, including investment companies, before being measured and recognized in the financial statements. Management has evaluated the application of FIN 48 to the Series,and has determined that the adoption of FIN 48 does not have a material impact on the Series' financial statements. The Series files U.S. and various state tax returns. No income tax returns are currently under examination. The statute of limitations on the Series' tax returns remains open for the years ended December 31, 2003 through December 31, 2006. In September 2006, Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. At this time, management is evaluating the implications of FAS 157 and its impact on the Series' financial statements, if any, has not been determined. In addition, in February 2007, Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("FAS 159"), was issued and is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FAS 157. FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. FAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. At this time, management is evaluating the implications of FAS 159 and its impact on the Series' financial statements, if any, has not been determined. (h) Bank overdraft -- The Series recorded a bank overdraft which resulted from management estimates of available cash. 2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES: The Master LLC has entered into an Investment Advisory Agreement with the Manager. Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC Financial Services Group, Inc. are the principal owners of BlackRock, Inc. The Manager is responsible for the management of the Series' investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Series. For such services, the Series pays a monthly fee at an annual rate of .01% of the average daily value of the Series' net assets. The Manager has entered into a contractual arrangement with the Series under which the expenses incurred by the Series will not exceed .12%. This arrangement has a one-year term and is renewable. In addition, the Manager has entered into a sub-advisory agreement with BlackRock Investment Management, LLC ("BIM"), an affiliate of the Manager, under which the Manager pays BIM for services it provides a monthly fee at an annual rate that is a percentage of the management fee paid by the Series to the Manager. For the six months ended June 30, 2007, the Series reimbursed the Manager $8,962 for certain accounting services. In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly owned subsidiary of Merrill Lynch,or its affiliates, received $40,963 in commissions on the execution of portfolio security transactions for the Series for the six months ended June 30, 2007. Certain officers and/or directors of the Master LLC are officers and/or directors of BlackRock, Inc. or its affiliates. JUNE 30, 2007 59 Notes to Financial Statements (concluded) MASTER INTERNATIONAL INDEX SERIES 3. INVESTMENTS: Purchases and sales of investments, excluding short-term securities,for the six months ended June 30, 2007 were $408,936,386 and $79,280,648, respectively. 4. COMMITMENTS: At June 30, 2007, 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 and sell various foreign currencies with approximate values of $263,000 and $15,001,000, respectively. 5. SHORT-TERM BORROWINGS: The Master LLC, on behalf of the Series, along with certain other funds managed by the Manager and its affiliates, is a party to a $500,000,000 credit agreement with a group of lenders, which expires November 2007. 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 .06% per annum based on the Series' pro rata share of the unused portion of the credit agreement. Amounts borrowed under the credit agreement bear interest at a rate equal to, at each fund's election, the federal funds rate plus .35% or a base rate as defined in the credit agreement. The Series did not borrow under the credit agreement during the six months ended June 30,2007. 60 JUNE 30, 2007 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) INTERIM RENEWAL In prior years, the Board of Trustees ("Board" or "Trustees") typically has considered the annual renewal of the existing Management Agreement between American Beacon Advisors, Inc. (the "Manager") and the American Beacon Funds (the "Trust"), on behalf of the International Equity Index, S&P 500 Index, and Small Cap Index Funds (each, a "Fund" and collectively, the "Funds"), at the Board meeting held in the first quarter of each year. At the November 15, 2006 meeting, the Board decided to conduct these annual renewals at their second quarter meeting each year to enable the Trustees to consider more year-end data in their deliberations. At the March 8, 2007 Board meeting, the Board considered renewal of the Management Agreement on an interim basis until the Board meeting scheduled for the second quarter, at which meeting the Board would perform a comprehensive review of factors relevant to an annual renewal. In connection with the interim renewal, the Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager. 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. The Board considered several factors at its March 2007 meeting but did not identify any particular information that was most relevant to its consideration to renew the Management Agreement, and each Trustee may have afforded different weight to these factors. The Board determined that certain factors typically considered in connection with an annual renewal were not material with respect to an interim renewal. In determining whether to renew the Management Agreement on an interim basis, the Trustees considered the best interests of each Fund separately. The following considerations and conclusions are applicable to all Funds. Cost of Services. The Board considered that the Manager's fee rate schedule for the Funds had not changed since the last contract renewal. Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Trustees considered that the Manager continues to provide high-quality services to each Fund at a low cost to investors and provides a comprehensive compliance program for each Fund. Based on this information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager were appropriate for each Fund and, thus, supported a decision to renew the Management Agreement on an interim basis. Investment Performance. The Board considered the performance reports and discussions with management at Board and Investment Committee meetings throughout the year. In considering the renewal of the Management Agreement with the Manager with respect to the International Equity Index Fund, the Trustees considered that the Fund outperformed both its benchmark index and the respective Lipper index for the 2006 calendar year. In considering the renewal of the Management Agreement with the Manager with respect to the S&P 500 Index Fund, the Trustees considered that the Fund outperformed its benchmark index (before the deduction of fund expenses) and its respective Lipper index for the 2006 calendar year. In considering the renewal of the Management Agreement with the Manager with respect to the Small Cap Index Fund, the Trustees considered that the Fund outperformed its respective Lipper index and underperformed its benchmark index for the 2006 calendar year. Based on these considerations, among others, the Trustees determined that the Funds and their shareholders would benefit from the Manager's continued management of the Funds until the next regular Board meeting and approved the renewal of the Agreement with respect to each of the Funds on an interim basis until the next regular Board meeting. 61 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) ANNUAL RENEWAL At its May 25, 2007 meeting, the Board considered the renewal of the existing Management Agreement. In preparation for the Board's consideration to renew the Management Agreement, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager and Lipper, Inc. ("Lipper"). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager. In addition, the Board's Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee held a separate meeting on May 4, 2007 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 Trustees considered, among other materials, responses by the Manager to inquiries requesting: - a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; - a copy of the Manager's most recent audited or unaudited financial statements as well as its SEC Form ADV registration statement; - 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 comparison of the performance of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of each Fund versus the respective peer group average; - a profit/loss analysis of the Manager and any actual or anticipated economies of scale in relation to the services it provides to each Fund; - a description of any payments by the firm to support the Funds' marketing efforts; - an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; - an evaluation of other benefits to the Manager or Funds as a result of their relationship, if any; - confirmation that the Manager's financial condition does not raise concerns that the Manager would be unable to continue providing the same scope and quality of services to the Funds; - a description of the scope of portfolio management services provided to the Funds and the Manager's other clients, including other registered investment companies, whether such services differ, and any advantages or disadvantages that might accrue to the Funds due to the Manager's involvement in other activities; - a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year , and a discussion of the adequacy of current and projected staffing levels to service the Funds; - a description of the basis upon which portfolio managers are compensated, including any "incentive" arrangements; - a discussion regarding the Manager's participation in "soft dollar" arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the Manager's methodology for obtaining the most favorable execution and the use of any affiliated broker-dealers; - a discussion of whether the Manager receives, with respect to the Funds, other compensation, including any payment for order flow or ECN liquidity rebates; - a description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a description of trade allocation procedures among accounts managed by the Manager; 62 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) - a summary of any material changes to the Manager's compliance program with regard to federal, state, corporate and Fund requirements and a certification to the reasonable design of the compliance program; - 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 advisory fees and expense ratios for comparable mutual funds; - an analysis of any material complaints received from Fund shareholders; - a description of any revenue sharing activities with respect to the Funds; - a discussion of any rebate arrangements between the Manager and service providers to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; 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 Management and Investment Advisory Agreements. This memorandum explained the regulatory requirements surrounding the Trustees' process for evaluating investment advisors and the terms of the contracts. Provided below is an overview of the primary factors the Board considered at its May 25, 2007 meeting. The Board did not identify any particular information that was most relevant to its consideration to renew the Management 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 Management Agreement, the Trustees considered the best interests of each Fund separately. In addition, while the Management Agreement for all of the Funds was considered at the same Board meeting, the Board considered each Fund's investment management relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of the Fund and the investment advisor; (3) the Manager's cost for providing the services and the profitability of the advisory business to the Manager; (4) the extent to which economies of scale have been taken into account in setting the fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fees with contracts entered into by the Manager with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager from its relationship with a Fund. The Trustees posed questions to various management personnel of the Manager 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 background and experience of key investment personnel and the Manager's ability to retain them; the Manager's disciplined investment approach and goal to provide consistent above average long-term performance at a low cost; the Manager's continuing efforts to add new series and share classes to enhance the Funds' product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Funds; the addition of personnel to manage the Funds, promote sales and improve services, 63 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) including the addition of a separate new information technology (IT) department at the Manager; the high rankings received by the Funds in service surveys; and the active role played by the Manager in monitoring and, as appropriate, recommending replacements for the master portfolios. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management services provided by the Manager were appropriate for each Fund and, thus, supported a decision to renew the Management 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. With respect to Lipper data, the Board considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. A discussion regarding the Board's considerations with respect to each Fund's performance appears below under "Additional Considerations and Conclusions with Respect to Each Fund." Cost of Services and Profits Realized. In analyzing the cost of services and profitability of the Manager by Fund, the Board considered the revenues earned and the expenses incurred by the Manager. The profitability levels were noted at both an individual Fund level and at an aggregate level for all Funds. The Board also considered that the Management Agreement stipulates that to the extent that a Fund invests all of its investable assets in another registered investment company, the Fund will not pay the Manager a management fee. The Funds operate under a master-feeder structure whereby each Fund invests all of its assets in a master portfolio that is not managed by the Manager. As such, the Board considered that the Manager does not receive a management fee with respect to the Funds. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. The Board also noted that the non-Institutional Classes of the Funds maintain higher expense ratios in order to compensate third party distributors but the net fee to the Manager is generally the same for all Classes. Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services performed by the Manager. A discussion regarding the Board's considerations with respect to each Fund's fee rates is set forth below under "Additional Considerations and Conclusions with Respect to Each Fund." Economies of Scale. The Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. The Board also considered the Manager's representations that its costs have increased due primarily to greater service provider and regulatory costs. The Manager also represented that it anticipates further economies of scale would be largely offset by higher costs of adding and retaining qualified personnel, improving technology and increasing demands on its advisory business. Based on the foregoing information, the Board concluded that the Manager's fee schedule provides for a reasonable sharing of benefits from any economies of scale with each Fund. Benefits Derived from the Relationship with the Funds. The Board considered the "fall-out" or ancillary benefits that accrue to the Manager as a result of the advisory relationships with the Funds, including expanding the level of assets under management by the Manager. In addition, the Board noted that the Manager provides services to the Trust at a relatively low cost, and the benefit plans of AMR Corporation have invested a substantial number of assets in the Funds, which helps reduce costs. 64 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager by virtue of its relationships with the Funds appear to be fair and reasonable. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO EACH FUND The performance comparisons below were made versus each Fund's Lipper peer universe median. References to the Lipper expense group below are to the group of comparable mutual funds included in the analysis provided to the Trustees by Lipper. All performance comparisons are for periods ended March 31, 2007, unless otherwise noted. Additional Considerations and Conclusions with Respect to the International Equity Index Fund. In considering the renewal of the Management Agreement with respect to the International Equity Index Fund (the "Fund"), the Trustees considered the following additional factors: (1) the performance of the Fund was higher than its Lipper peer universe median for the one-, three- and five-year periods; (2) the Fund's actual management fee (including administrative fees) and the total expense ratio was lower than the Lipper expense group median. Based on these considerations and those noted above with respect to all Funds, the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the Fund. Additional Considerations and Conclusions with Respect to the S&P 500 Index Fund. In considering the renewal of the Management Agreement with respect to the S&P 500 Index Fund (the "Fund"), the Trustees considered the following additional factors: (1) the Fund outperformed its peer universe median for the one-, three-, five- and ten-year periods; and (2) the Fund's actual management fee (including administrative fees) and the total expense ratio was lower than its Lipper expense group median. Based on these considerations and those noted above with respect to all Funds, the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the Fund. Additional Considerations and Conclusions with Respect to the Small Cap Index Fund. In considering the renewal of the Management Agreement with respect to the Small Cap Index Fund (the "Fund"), the Trustees considered the following additional factors: (1) the Fund outperformed its peer universe median for the one-year period and underperformed for the three- and five-year periods; and (2) the Fund's actual management fee (including administrative fees) and the total expense ratio was lower than its Lipper expense group median. Based on these considerations and those noted above with respect to all Funds, the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the Fund. 65 (AMERICAN BEACON FUNDS(SM) LOGO) DELIVERY OF DOCUMENTS To reduce expenses, your financial institution may mail only one copy of the Prospectus, Annual Report and Semi-Annual Report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please contact your financial institution. Delivery of individual copies will commence thirty days after receiving your request. If you invest in the Fund through a financial institution, you may be able to receive the Fund's regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution's name or contact your financial institution directly. TO OBTAIN MORE INFORMATION ABOUT THE FUND: (KEYBOARD GRAPHIC) (MOUSE GRAPHIC) BY E-MAIL: ON THE INTERNET: Visit our website at american_beacon.funds@ambeacon.com www.americanbeaconfunds.com (TELEPHONE GRAPHIC) (MAILBOX GRAPHIC) BY TELEPHONE: BY MAIL: Institutional Class American Beacon Funds Call (800) 658-5811 P.O. Box 219643 PlanAhead Class(R) Kansas City, MO 64121 (800) 388-3344 AVAILABILITY OF QUARTERLY PORTFOLIO AVAILABILITY OF PROXY VOTING POLICY SCHEDULES AND RECORDS In addition to the Schedule of A description of the policies and Investments provided in each procedures that the Funds use to semi-annual and annual report, each determine how to vote proxies Fund files a complete schedule of its relating to portfolio securities is portfolio holdings with the available in each Fund's Statement of Securities and Exchange Commission Additional Information, which may be ("SEC") on Form N-Q as of the first obtained free of charge by calling and third fiscal quarters. The Fund's 1-800-967-9009 or by accessing the Forms N-Q are available on the SEC's SEC's website at www.sec.gov. Each website at www.sec.gov. The Forms N-Q Fund's proxy voting record for the may also be reviewed and copied at most recent year ended June 30 is the SEC's Public Reference Room, 450 filed annually with the SEC on Form Fifth Street, NW, Washington, DC N-PX. The Fund's Forms N-PX are 20549. Information regarding the available on the SEC's website at operation of the SEC's Public www.sec.gov. The Fund's proxy voting Reference Room may be obtained by record may also be obtained by calling 1-800-SEC-0330. A complete calling 1-800-967-9009. schedule of the Fund's portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each fiscal quarter. FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FORESIDE FUND SERVICES TRUST SERVICES FIRM Portland, Maine Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP Dallas, Texas
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus. American Beacon Funds is a service mark of AMR Corporation. American Beacon Small Cap Index Fund and American Beacon International Equity Index Fund are service marks of American Beacon Advisors, Inc. SAR 6/07 540289 GUIDANCE | VISION | EXPERIENCE (AMERICAN BEACON FUNDS(SM) LOGO) Semi-Annual Report June 30, 2007 TREASURY INFLATION PROTECTED SECURITIES FUND ABOUT AMERICAN BEACON Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management. Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company. CONTENTS President's Message ............................................... 1 Market and Performance Overview ................................... 2 Schedule of Investments ........................................... 5 Additional Information ............................................ Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor's strategies and the Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. American Beacon Funds June 30, 2007 (PHOTO OF DOUGLAS G. HERRING) FELLOW SHAREHOLDERS, I am pleased to present to you the Semi-Annual Report for the American Beacon Treasury Inflation Protected Securities Fund for the six months ended June 30, 2007. For this period, the Fund performed well, returning 2.10% versus the Lipper TIPS Fund Index return of 1.39%. 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 access Fund and account information at www.americanbeaconfunds.com. Thank you for your continued confidence in the American Beacon Funds. Sincerely, /s/ Douglas G. Herring Douglas G. Herring President American Beacon Funds Investing in debt securities entails interest rate risk which is the risk that debt securities will decrease in value with increases in market interest rates. 1 MARKET OVERVIEW JUNE 30, 2007 (UNAUDITED) A sudden global risk aversion trade in late-February brought the first meaningful correction in equity prices in nine months and initiated a significant rally in high-quality bond markets. During the first half of 2007, the Lehman Brothers U.S. 1-10 year TIPS Index returned 2.49% while the Lehman Brothers Aggregate Index returned 0.98%. During the second quarter, real yields were markedly higher as strong economic data and increased growth projections diminished the probability of a near-term ease by the Federal Reserve Board. The ten-year Treasure Inflation Protected Securities ("TIPS") yield reached a multi-year high of over 2.75% during the period before ending the first half of the year at 2.65%. Through June, year-over-year Consumer Price Index ("CPI") had advanced at a 2.7% clip. Current TIPS valuations suggest that investors project CPI to average 2.4% annually over the next decade. This is well below the 3.1% average of the past 25 years. Due to the decrease in the federal budget deficit, the U.S. Treasury ("Treasury") has been lowering their borrowing requirements and cutting back TIPS auctions by about 20%. The Treasury auctioned $6.0 billion of 10-year TIPS in April and the auction was met with reasonably strong demand. TIPS yields rose during the first half of the year and the real yield curve flattened in shape. The most pronounced increase was in the short portion of the curve where real yields rose by 0.33%. Yields on five-year and 30-year TIPS rose by 0.20% and 0.26%, respectively. 2 PERFORMANCE OVERVIEW AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM) JUNE 30, 2007 (UNAUDITED) The Institutional Class of the Fund returned 2.10% for the period from January 1, 2007 through June 30, 2007, trailing the Lehman Brothers 1-10 Yr U.S. TIPS Index (the "Index") return of 2.49%. The Fund outperformed the Lipper TIPS Index return of 1.39% for the same time period. ANNUALIZED TOTAL RETURNS PERIODS ENDED 6/30/07
SINCE 6 INCEPTION MONTHS* 1 YEAR 3 YEARS 6/30/04 ------- ------ ------- --------- Institutional Class(1,3) .................... 2.10% 3.38% 2.99% 2.99% Lehman Bros. 1- 10 Yr. U.S. TIPS Index(2) ... 2.49% 4.19% 3.63% 3.63% Lehman Bros. U.S. TIPS Index(2) ............. 1.73% 3.99% 3.80% 3.80% Lipper TIPS Funds Index(2) .................. 1.39% 3.54% 3.62% 3.62%
* NOT ANNUALIZED 1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. The Lehman Bros. 1-10 Yr. U.S. TIPS Index is an unmanaged market index comprising U.S. Treasury inflation-indexed securities with maturities between one and ten years while the Lehman Bros. U.S. TIPS Index includes all maturities. The Lipper TIPS Funds Index tracks the results of the 30 largest mutual funds in the Lipper TIPS Fund category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. 3. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Fund was 0.49%. After contractual expense reimbursements through February 28, 2008, the net expense ratio disclosed in the most recent prospectus was 0.35%. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. The Fund underperformed the Index for the six-month period by 39 basis points. While part of the underperformance can be attributed to Fund expenses, sub-advisor performance also negatively impacted the Fund over the past six months. The underperformance occurred in both the first and second quarters of the year. In the first quarter, exposure to non-Index securities (U.S. corporate inflation-linked bonds and German and French government inflation-linked bonds) hurt performance as spreads between corporate and government yields widened. In the second quarter, non-U.S. government inflation-linked bonds continued to underperform, and an overweight position in intermediate-term TIPS subtracted value as the TIPS yield curve flattened. Lastly, the Fund held a position in the inflation-linked debt of the Student Loan Marketing Association ("SLMA"). This position was negatively impacted by the structure of a pending private equity transaction which would subordinate current SLMA unsecured bondholders. The Fund remains focused on investing primarily in TIPS to provide inflation protection and income to its shareholders. TOP TEN HOLDINGS
% OF NET ASSETS ------ U.S. Treasury Note, 3.375%, Due 1/15/2012 13.7% U.S. Treasury Note, 0.875%, Due 4/15/2010 11.1% U.S. Treasury Note, 1.875%, Due 7/15/2015 10.0% U.S. Treasury Note, 2.000%, Due 1/15/2016 9.2% U.S. Treasury Note, 3.000%, Due 7/15/2012 7.4% U.S. Treasury Note, 2.000%, Due 1/15/2014 7.2% U.S. Treasury Note, 1.875%, Due 7/15/2013 6.0% U.S. Treasury Note, 1.625%, Due 1/15/2015 5.8% U.S. Treasury Note, 2.500%, Due 7/15/2016 5.4% U.S. Treasury Note, 3.500%, Due 1/15/2011 4.7%
3 PERFORMANCE OVERVIEW AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM) JUNE 30, 2007 (UNAUDITED) PORTFOLIO DIVERSIFICATION
% OF FIXED INCOME ------------ A 0.3% AA 0.6% AAA 98.9% UNCLASSIFIED 0.2%
(PERFORMANCE GRAPH) U.S. Government Sponsored Agency Instruments 0.2% Corporate Obligations 1.2% U.S. Government Treasury Obligations 98.6%
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, 2007 through June 30, 2007. ACTUAL EXPENSES The "Actual" line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
Beginning Ending Account Account Expenses Paid Value Value During Period* 1/1/07 6/30/07 1/1/07-6/30/07 --------- --------- -------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,020.99 $2.00 Hypothetical $1,000.00 $1,022.81 $2.01 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratio for the six-month period of 0.40% for the Institutional Class, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (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, 2007 (Unaudited)
PAR AMOUNT VALUE -------- ------- (DOLLARS IN THOUSANDS) CORPORATE OBLIGATIONS - 1.15% Allstate Life Global Funding, 3.83%, Due 3/1/2010 ++.... $ 100 $ 93 Lehman Brothers Holdings, Inc., 4.05%, Due 6/2/2009 ++.. 105 101 Merrill Lynch & Co., Inc., 3.94%, Due 3/2/2009 ++....... 150 144 Toyota Motor Credit Corp., 5.03%, Due 2/5/2016 ++....... 110 105 ------- TOTAL CORPORATE OBLIGATIONS 443 ------- U.S. AGENCY OBLIGATIONS - 0.25% FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.25% 3.919%, Due 2/17/2009 ++................................ 100 96 ------- U.S. TREASURY OBLIGATIONS - 97.16% 3.875%, Due 1/15/2009 #................................. 1,040 1,056 4.25%, Due 1/15/2010 #.................................. 823 854 0.875%, Due 4/15/2010 #................................. 4,489 4,263 3.50%, Due 1/15/2011 #.................................. 1,757 1,808 2.375%, Due 4/15/2011 #................................. 1,431 1,416 3.375%, Due 1/15/2012 #................................. 5,109 5,273 3.00%, Due 7/15/2012 #.................................. 2,799 2,853 1.875%, Due 7/15/2013 #................................. 2,402 2,304 2.00%, Due 1/15/2014 #.................................. 2,874 2,762 2.00%, Due 7/15/2014 #.................................. 1,809 1,736 1.625%, Due 1/15/2015 #................................. 2,381 2,213 1.875%, Due 7/15/2015 #................................. 4,069 3,845 2.00%, Due 1/15/2016 #.................................. 3,738 3,549 2.50%, Due 7/15/2016 #.................................. 2,092 2,069 2.375%, Due 1/15/2017 #................................. 789 770 4.625%, Due 2/15/2017................................... 650 630 ------- TOTAL U.S. TREASURY OBLIGATIONS 37,401 -------
SHARES -------- SHORT TERM INVESTMENTS - 0.35% American Beacon Money Market Select Fund @.............. 136,724 137 ------- TOTAL INVESTMENTS - 98.91% (COST $38,742) $38,077 OTHER ASSETS, NET OF LIABILITIES - 1.09% 419 ------- TOTAL NET ASSETS - 100.00% $38,496 =======
See accompanying notes 5 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND SCHEDULE OF INVESTMENTS June 30, 2007 (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. # Inflation-Indexed Note. @ 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, 2007 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ASSETS: Investments in unaffiliated securities, at value A........... $ 37,940 Investments in affiliated securities, at value B............. 137 Dividends and interest receivable............................ 396 Receivable for fund shares sold.............................. 51 Receivable for expense reimbursement......................... 3 ---------- TOTAL ASSETS.............................................. 38,527 ---------- LIABILITIES: Management and investment advisory fees payable (Note 2)..... 15 Administrative service and service fees payable.............. 3 Other liabilities............................................ 13 ---------- TOTAL LIABILITIES......................................... 31 ---------- NET ASSETS...................................................... $ 38,496 ========== ANALYSIS OF NET ASSETS: Paid-in-capital.............................................. 39,401 Undistributed net investment income.......................... 1,280 Accumulated net realized loss................................ (1,520) Unrealized depreciation of investments, futures contracts, and foreign currency...................................... (665) ---------- NET ASSETS...................................................... $ 38,496 ========== SHARES OUTSTANDING (NO PAR VALUE): Institutional Class.......................................... 3,955,287 ========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE: Institutional Class.......................................... $ 9.73 ========== A Cost of investments in unaffiliated securities................ $ 38,605 B Cost of investments in affiliated securities.................. $ 137
See accompanying notes 7 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS) INVESTMENT INCOME: Dividend income from affiliated securities ......................... $ 25 Interest income .................................................... 1,346 ------ TOTAL INVESTMENT INCOME ......................................... 1,371 ------ EXPENSES: Management and investment advisory fees (Note 2) ................... 42 Administrative service fees (Note 2): Institutional Class ............................................. 19 Custody and fund accounting fees ................................... 2 Professional fees .................................................. 13 Registration fees and expenses ..................................... 12 Prospectus and shareholder reports ................................. 2 Other expenses ..................................................... 1 ------ TOTAL EXPENSES .................................................. 91 ------ Net fees waived and expenses reimbursed by Manager (Note 2) ........ (14) ------ NET EXPENSES .................................................... 77 ------ NET INVESTMENT INCOME ................................................. 1,294 ------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investments ..................................................... (80) Foreign currency transactions ................................... 1 Change in net unrealized appreciation or depreciation of: Investments ..................................................... (420) ------ NET LOSS ON INVESTMENTS ...................................... (499) ------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................. $ 795 ======
See accompanying notes 8 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF CHANGES OF NET ASSETS (IN THOUSANDS)
Six Months Ended Year Ended June 30, December 2007 31, 2006 ----------- ---------- (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ................................................... $ 1,294 $ 926 Net realized loss on investments, futures contracts, and foreign currency transactions ................................................ (79) (975) Change in net unrealized appreciation or (depreciation) of investments, futures contracts, and foreign currency translations .... (420) 357 -------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................. 795 308 -------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class .................................................. -- (952) Net realized gain on investments: Institutional Class .................................................. -- (95) -------- -------- NET DISTRIBUTIONS TO SHAREHOLDERS ................................. -- (1,047) -------- -------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares ........................................... 15,239 16,407 Reinvestment of dividends and distributions ............................. -- 1,048 Cost of shares redeemed ................................................. (11,330) (13,508) -------- -------- NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ........... 3,909 3,947 -------- -------- NET INCREASE IN NET ASSETS ................................................. 4,704 3,208 -------- -------- NET ASSETS: Beginning of period ..................................................... 33,792 30,584 -------- -------- END OF PERIOD* .......................................................... $ 38,496 $ 33,792 ======== ======== *Includes undistributed net investment income of ........................... $ 1,280 $ -- ======== ========
See accompanying notes 9 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the "Act"), as amended, as a no load, diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Treasury Inflation Protected Securities Fund (the "Fund"), a series of the Trust. American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary of AMR Corporation and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. Security Valuation Investments are valued at the close of the New York Stock Exchange (the "Exchange"), normally 4 p.m. ET, each day that the Exchange is open for business. Debt securities (other than short-term securities) normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data. When a price is unavailable from a pricing service or when the price provided by the pricing service is deemed not to represent fair value, the prices of debt securities may be determined using quotes obtained from brokers. Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates market value. Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Board of Trustees (the "Board"). Security Transactions and Investment Income Security transactions are recorded on the trade date of the security purchase or sale. The Fund may purchase securities with delivery or payment to occur at a later date. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The value of the security may vary with market fluctuations. Dividend income, net of foreign taxes, is recorded on the ex-dividend date except certain dividends from foreign securities which are recorded as soon as the information is available to the Fund. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond is recorded as interest income, even though principal is not received until maturity. 10 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED) Dividends to Shareholders Dividends from net investment income of the Fund normally will be declared and paid semi-annually. Distributions, if any, of net realized capital gains are generally paid annually and recorded on the ex-dividend date. Currency Translation All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean of the bid and ask prices of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses and purchases and sales of investments are translated in U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and is reported with all other foreign currency gains and losses in the Fund's Statement of Operations. Forward Foreign Currency Exchange Contracts The Fund may enter into forward foreign currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of Fund securities denominated in foreign currencies. Forward foreign currency contracts are valued at the forward exchange rate prevailing on the day of valuation. The Fund bears the market risk that arises from changes in foreign exchange rates, and accordingly, the unrealized gain (loss) on these contracts is reflected in the accompanying financial statements. The Fund also bears the credit risk if the counterparty fails to perform under the contract. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated. Recently Issued Accounting Pronouncements On July 13, 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance on how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. The Fund adopted the provisions of FIN 48 effective January 1, 2007. Tax positions taken by the Fund have been deemed to meet the more likely than not threshold, and therefore there have been no adjustments to the Fund's net asset value per share. In September 2006, the FASB issued Statement on Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Manager is evaluating the impact of FAS 157; however, it is not expected to have a material impact on the Fund's net assets or results of operations. 11 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED) Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust's maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement. 2. TRANSACTIONS WITH AFFILIATES Management Agreement The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all administrative, investment advisory, and fund management. Investment assets of the Fund are managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Fund an annualized fee equal to 0.10% of the average daily net assets plus amounts paid by the Manager to the investment advisors hired by the Manager to direct investment activities of the Fund. Management fees paid during the six months ended June 30, 2007 were as follows:
AMOUNTS PAID TO NET AMOUNTS MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY FEE RATE FEE ADVISORS MANAGER - ---------- ---------- --------------- ----------- 0.22% $42,232 $23,036 $19,196
Administrative Services Agreement The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative and management services to the Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.10% of the average daily net assets of the Fund. Investment in Affiliated Funds The Fund is permitted, pursuant to an exemptive order by the Securities and Exchange Commission ("SEC") and procedures approved by the Board, to invest up to 25% of its total assets in the American Beacon Money Market Select Fund (the "Select Fund"). The Fund and the Select Fund have the same investment advisor and, therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Fund and receives from the Select Fund an annualized fee equal to 0.10% of the Select Fund's average daily net assets. During the six months ended June 30, 2007, fees earned by the Manager from the Select Fund were $469. Interfund Lending Program Pursuant to an exemptive order by the SEC, the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Fund to borrow from other participating Funds. For the six months ended June 30, 2007, the Fund did not utilize the credit facility. 12 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED) Reimbursement of Expenses The Manager agreed to reimburse the Fund to the extent that total annual fund operating expenses exceed the Fund's expense cap. For the period ended June 30, 2007, the Manager waived or reimbursed expenses of $13,589. 3. FEDERAL INCOME TAXES It is the policy of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income or excise tax provision is required. Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. generally accepted accounting principles. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. The tax character of distributions paid during the six months ended June 30, 2007 and the fiscal year ended December 31, 2006 were as follows (in thousands):
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2007 2006 ----------- ------------ (UNAUDITED) DISTRIBUTIONS PAID FROM: Ordinary income*.......... $-- $ 952 Tax return of capital..... -- 95 --- ------ TOTAL TAXABLE DISTRIBUTIONS.. $-- $1,047 === ======
* For tax purposes, short-term capital gains distributions are considered ordinary income distributions. As of June 30, 2007, the components of distributable earnings on a tax basis were as follows (in thousands): Cost basis of investments for federal income tax purposes... $38,888 Unrealized appreciation..................................... 8 Unrealized depreciation..................................... (819) ------- Net unrealized appreciation/(depreciation).................. (811) Undistributed ordinary income............................... 1,279 Undistributed long-term gain/(loss)......................... (1,373) ------- Distributable earnings...................................... $ (905) =======
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses from wash sales and current recognition of unrealized appreciation/(depreciation) on open foreign currency transactions. Due to inherent differences in the recognition of income, expenses and realized gains/(losses) under U.S. generally accepted accounting principles and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities. 13 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED) Accordingly, the following amounts represent current year permanent differences derived from foreign currency transactions and return of capital that have been reclassified as of June 30, 2007 (in thousands): Paid-in-capital................................................. $ -- Undistributed net investment income............................. (14) Accumulated net realized gain (loss)............................ 14 Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency............................... --
At June 30, 2007, the capital loss carry forward positions for federal income tax purposes were $144,311, 974,237 and $254,530, expiring in 2013, 2014 and 2015, respectively. 4. INVESTMENT TRANSACTIONS Purchases and proceeds from sales of Investment transactions for the six months ended June 30, 2007, excluding short-term investments, were $46,581,136 and $40,994,536, respectively. The Fund had purchases and sales of U.S. Government securities of $46,014,793 and $40,066,581, respectively. A summary of the Fund's transactions in the Select Fund for the six months ended June 30, 2007 is set forth below:
DECEMBER 31, 2006 JUNE 30, 2007 AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE - --------- ------------------- ----------- ----------- ------------------- Select Fund.... $1,430,704 $17,280,372 $18,574,352 $136,724
5. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares (dollars and shares in thousands): Six Months Ended June 30, 2007
INSTITUTIONAL CLASS ------------------- SHARES AMOUNT ------ -------- Shares sold ......................... 1,579 $ 15,239 Reinvestment of dividends ........... -- -- Shares redeemed ..................... (1,169) (11,330) ------ -------- Net increase in shares outstanding .. 410 $ 3,909 ====== ========
Year Ended December 31, 2006
INSTITUTIONAL CLASS ------------------- SHARES AMOUNT ------ -------- Shares sold ......................... 1,696 $ 16,407 Reinvestment of dividends ........... 109 1,048 Shares redeemed ..................... (1,397) (13,508) ------ -------- Net increase in shares outstanding .. 408 $ 3,947 ====== ========
14 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
Institutional Class ---------------------------------------------- Six Months Year Ended June Ended December 31, 30 to June 30, ------------------ December 2007 2006 2005 31, 2004(A) ----------- ------- -------- --------- (unaudited) Net asset value, beginning of period ....................... $ 9.53 $ 9.75 $ 10.16 $ 10.00 ------- ------- ------- ------- Income from investment operations: Net investment income ................................... 0.33 0.29 0.56(B) 0.18(B) Net gains (losses) on securities (both realized and unrealized) .......................................... (0.13) (0.19) (0.37) 0.21 ------- ------- ------- ------- Total income (loss) from investment operations ............. 0.20 0.10 0.19 0.39 ------- ------- ------- ------- Less distributions: Dividends from net investment income .................... -- (0.29) (0.55) (0.23) Distributions from net realized gains on securities ..... -- (0.05) --(C) Tax return of capital ................................... -- (0.03) -- -- ------- ------- ------- ------- Total distributions ........................................ -- (0.32) (0.60) (0.23) ------- ------- ------- ------- Net asset value, end of period ............................. $ 9.73 $ 9.53 $ 9.75 $ 10.16 ======= ======= ======= ======= Total return ............................................... 2.10%(D) 1.05% 1.86% 3.94%(D) ======= ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands) ................ $38,496 $33,792 $30,584 $20,943 Ratios to average net assets (annualized): Expenses, after expense reimbursements (recoupments) ..................................... 0.40% 0.49% 0.44% 0.46% Expenses, before expense reimbursements (recoupments) ..................................... 0.47% 0.49% 0.39% 0.62% Net investment income, after expense reimbursements (recoupements) .................................... 6.73% 2.94% 5.45% 3.34% Net investment income, before expense reimbursements (recoupments) ...................... 6.66% 2.94% 5.50% 3.18% Portfolio turnover rate ................................. 110%(D) 259% 355% 190%(D)
(A) The American Beacon Treasury Inflation Protected Securities Fund commenced active operations on June 30, 2004. (B) Based on average shares outstanding. (C) Amount represents less than $0.01 per share. (D) Not annualized. 15 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) INTERIM RENEWAL In prior years, the Board of Trustees ("Board" or "Trustees") typically has considered the annual renewal of the existing Management Agreement between American Beacon Advisors, Inc. (the "Manager") and the American Beacon Funds (the "Trust"), on behalf of the Treasury Inflation Protected Securities Fund (the "Fund"), and each Investment Advisory Agreement between the Manager and a sub-advisor at the Board meeting held in the first quarter of each year. At the November 15, 2006 meeting, the Board decided to conduct these annual renewals at their second quarter meeting each year to enable the Trustees to consider more year-end data in their deliberations. At the March 8, 2007 Board meeting, the Board considered renewal of the Management and Investment Advisory Agreements on an interim basis until the Board meeting scheduled for the second quarter, at which meeting the Board would perform a comprehensive review of factors relevant to an annual renewal. In connection with the interim renewal, the Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager. 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. The Board considered several factors at its March 2007 meeting but 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 these factors. The Board determined that certain factors typically considered in connection with an annual renewal were not material with respect to an interim renewal. In determining whether to renew the Management and Investment Advisory Agreements on an interim basis, the Trustees considered the best interests of the Fund. The following considerations and conclusions are applicable to the Fund. Cost of Services. The Board considered that the fee rate schedules for the Manager and the sub-advisors had not changed since the last contract renewal. The Board considered that, in many cases, the Manager has negotiated the lowest sub-advisory fee a sub-advisor charges for any comparable client accounts. Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Trustees considered that the Manager continues to provide high-quality services to the Fund at a low cost to investors and provides a comprehensive compliance program for the Fund. Additionally, the Manager allocates the assets of the Fund among the Fund's sub-advisors, and monitors and evaluates the performance of the sub-advisors. 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 sub-advisor were appropriate for the Fund and, thus, supported a decision to renew the Management and each Investment Advisory Agreement on an interim basis. Investment Performance. The Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. Based on, among others, these considerations and those noted above, the Trustees determined that the Fund and its shareholders would benefit from the Manager's and the sub-advisors' continued management of the Fund until the next regular Board meeting and approved the renewal of the Agreements on an interim basis until the next regular Board meeting. ANNUAL RENEWAL At its May 25, 2007 meeting, the Board considered the renewal of the existing Management Agreement between the Manager and the Fund and each Investment Advisory Agreement between the Manager and a subadvisor. 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. 16 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) In addition, the Board's Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Fund. The Investment Committee held a separate meeting on May 4, 2007 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 Trustees 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 Fund, or any other area, including how these changes might affect the Fund; - a copy of the firm's most recent audited or unaudited financial statements as well as its SEC Form ADV registration statement; - 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 profit/loss analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to the Fund; - a description of any payments by the firm to support the Fund's marketing efforts; - an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; - an evaluation of other benefits to the firm or Fund 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 Fund; - a description of the scope of portfolio management services provided to the Fund and the firm's other clients, including other registered investment companies, whether such services differ, and any advantages or disadvantages that might accrue to the Fund due to the firm's involvement in other activities; - a description of the personnel who are assigned primary responsibility for managing the Fund, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Fund; - a description of the basis upon which portfolio managers are compensated, including any "incentive" arrangements; - a discussion regarding the firm's participation in "soft dollar" arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the firm's methodology for obtaining the most favorable execution and the use of any affiliated broker-dealers; - a discussion of whether the firm receives, with respect to the Fund, other compensation, including any payment for order flow or ECN liquidity rebates; - a description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a 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 and a certification to the reasonable design of the compliance program; - a discussion of any material compliance problems and remedial actions; 17 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) - 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 Fund. 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 the Fund to comparable investment companies and appropriate indices, including comments on the relative performance of each subadvisor and the Fund versus the respective peer group average; - a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take; - a comparison of advisory fees and expense ratios for comparable mutual funds; - an analysis of any material complaints received from Fund shareholders; - a description of the Manager's securities lending practices and the fees received from such practices; - a description of any revenue sharing activities with respect to the Fund; - a discussion of any rebate arrangements between the Manager and service providers to the Fund pursuant to which the Manager receives direct or indirect benefits from the service provider; - a description of the portfolio turnover rate and average execution costs for the Fund and each subadvisor to the Fund; 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 the Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses versus comparable mutual funds, and (iii) the Fund's investment advisory fees versus comparable mutual funds. References below to the 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 Trustees' 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 May 25, 2007 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. CONSIDERATIONS WITH RESPECT TO ALL SERIES OF THE TRUST In determining whether to approve the continuance of the Management Agreement and each Investment Advisory Agreement, the Trustees considered the best interests of the Fund separately from the other series of the Trust. In addition, while the Management Agreement and the Investment Advisory Agreements for the Fund were considered at the same Board meeting, the Board considered the 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; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fees 18 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager 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 background and experience of key investment personnel and the Manager's ability to retain them; the Manager's disciplined investment approach and goal to provide consistent above average long-term performance at a low cost; the Manager's continuing efforts to add new series and share classes to enhance the Trust's' product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Trust; the addition of personnel to manage the series of the Trust, promote sales and improve services, including the addition of a separate new information technology (IT) department at the Manager; the high rankings received by the Trust in service surveys; and the active role played by the Manager in monitoring and, as appropriate, recommending replacements for the investment subadvisors. With respect to the renewal of the Investment Advisory Agreements, the Trustees considered the background and experience of each subadvisor's investment personnel responsible for managing series of the Trust, the size of the subadvisor and their ability to continue to attract and retain qualified investment personnel. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each series of the Trust 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 investment performance by each series of the Trust relative to its benchmark index(es) and peer group. With respect to Lipper data, the Board considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Manager also noted that it generally was satisfied with the performance of the subadvisors. A discussion regarding the Board's considerations with respect to the Fund's performance appears below under "Additional Considerations and Conclusions with Respect to the Fund." Cost of Services and Profits Realized. In analyzing the cost of services and profitability of the Manager and a subadvisor by series, the Board considered the revenues earned and the expenses incurred by the Manager and those subadvisors that provided such data. The profitability levels were noted at both an individual series level and at an aggregate level for all series of the Trust. The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and Classes that were in place during the last fiscal year. The Board further considered that each sub-advised series 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 Trust and to compensate third-party administrators and broker-dealers for services to Trust shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending relationships on behalf of various series of the Trust. In analyzing the cost of services and profitability of each subadvisor in connection with its investment advisory services to a series, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee a subadvisor charges for any comparable client accounts. The Board gave less weight to profitability considerations or did not view this data as imperative to its deliberations given the arm's-length 19 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fees. Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services performed by the Manager and the subadvisors. A discussion regarding the Board's considerations with respect to the Fund's fee rates is set forth below under "Additional Considerations and Conclusions with Respect to the Fund." Economies of Scale. In considering the reasonableness of the management and investment advisory fees, the Board considered whether economies of scale will be realized as each series of the Trust grows and whether fee levels reflect these economies of scale for the benefit of Trust shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in the subadvisory fee rates. The Board also noted, for purposes of determining the fee rates chargeable to the Trust, many subadvisors have agreed to take into account other assets of AMR Corporation and its pension plans that are managed by the subadvisors. Thus, many series of the Trust are able to receive lower effective fee rates. This fee arrangement also benefits AMR Corporation and its pension plans. The Board also noted that the Trust had experienced substantial recent asset growth. The Board also considered the Manager's representations that its costs have increased due primarily to greater service provider and regulatory costs. The Manager also represented that it anticipates further economies of scale would be largely offset by higher costs of adding and retaining qualified personnel, improving technology and increasing demands on its advisory business. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee schedules provide for a reasonable sharing of benefits from any economies of scale with each series of the Trust. BENEFITS DERIVED FROM THE RELATIONSHIP WITH THE TRUST. 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 Trust, including greater exposure in the marketplace with respect to the Manager's or subadvisor's investment process and expanding the level of assets under management by the Manager and the subadvisors. In addition, the Board noted that the Manager provides services to the Trust at a relatively low cost, and the benefit plans of AMR Corporation have invested a substantial number of assets in the Trust, which helps reduce costs. The Board also considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Trust. Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Trust appear to be fair and reasonable. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE FUND The performance comparisons below were made versus the Fund's Lipper peer universe median. References to the Lipper expense group below are to the group of comparable mutual funds included in the analysis provided to the Trustees by Lipper. All performance comparisons are for periods ended March 31, 2007, unless otherwise noted. In considering the renewal of the Management Agreement with respect to the Fund, the Trustees considered the following additional factors: (1) the Fund outperformed its peer universe median for the one- and two-year periods; (2) the Manager's explanation regarding the limitations of Lipper's methodology on the selection of a particular peer group for the Fund; (3) the actual management fee (including administrative fees) and the total expense ratio of the Institutional Class of Fund shares was lower than its Lipper expense group median; (4) the Manager's explanation that the Lipper data does not reflect the imposition of a more recent fee waiver for the Fund; and (5) the Manager contractually agreed to continue to waive fees and/or 20 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) reimburse expenses to the extent necessary to maintain a competitive total expense ratio for the Fund's Institutional Class. In considering the renewal of the Investment Advisory Agreements with Brown Brothers Harriman & Co. ("BBH") and NISA Investment Advisors LLC ("NISA"), the Trustees considered the following additional factors: (1) BBH and NISA each outperformed the peer universe median for the one- and two-year periods; (2) BBH underperformed its market benchmark index with respect to its allocated portion of the Fund's assets for the one-year period ended December 31, 2006; (3) NISA outperformed its market benchmark index with respect to its allocated portion of the Fund's assets for the 2006 and 2005 calendar years; (4) the fee schedules of each subadvisor include breakpoints, which reduce fee rates as the assets of the Fund increase; (5) each subadvisor also represented that it does not charge a lower advisory fee to any other comparable clients; and (6) the Manager's recommendation to continue to retain each subadvisor. Based on these considerations and those noted above with respect to all Fund, the Trustees (1) concluded that the fees paid to the Manager and the subadvisors under the Management and Investment Advisory Agreements are fair and reasonable, (2) determined that the Fund and its shareholders would benefit from the continued management of the Fund by the Manager and subadvisors and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the Fund. 21 (AMERICAN BEACON FUNDS(SM) LOGO) DELIVERY OF DOCUMENTS To reduce expenses, your financial institution may mail only one copy of the Prospectus, Annual Report and Semi-Annual Report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please contact your financial institution. Delivery of individual copies will commence thirty days after receiving your request. If you invest in the Fund through a financial institution, you may be able to receive the Fund's regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution's name or contact your financial institution directly. TO OBTAIN MORE INFORMATION ABOUT THE FUND: (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: Call (800) 658-5811 American Beacon Funds P.O. Box 219643 Kansas City, MO 64121-9643 AVAILABILITY OF QUARTERLY PORTFOLIO AVAILABILITY OF PROXY VOTING POLICY AND SCHEDULES RECORDS In addition to the Schedule of A description of the policies and Investments provided in each procedures the Fund uses to determine semi-annual and annual report, the how to vote proxies relating to Fund files a complete schedule of its portfolio securities is available in the portfolio holdings with the Fund's Statement of Additional Securities and Exchange Commission Information, is available free of charge ("SEC") on Form N-Q as of the first on the Fund's website and third fiscal quarters. The Fund's (www.americanbeaconfunds.com) and by Forms N-Q are available on the SEC's calling 1-800-967-9009 or by accessing website at www.sec.gov. The Forms N-Q the SEC's website at www.sec.gov. The may also be reviewed and copied at Fund's proxy voting record for the most the SEC's Public Reference Room, 450 recent year ended June 30 is filed Fifth Street, NW, Washington, DC annually with the SEC on Form N-PX. The 20549. Information regarding the Fund's Forms N-PX are available on the operation of the SEC's Public SEC's website at www.sec.gov. The Fund's Reference Room may be obtained by proxy voting record may also be obtained calling 1-800-SEC-0330. A complete by calling 1-800-967-9009. schedule of the Fund's portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each month. FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FORESIDE FUND SERVICES TRUST SERVICES FIRM Portland, Maine Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP Dallas, Texas
THIS REPORT IS PREPARED FOR SHAREHOLDERS OF THE AMERICAN BEACON FUNDS AND MAY BE DISTRIBUTED TO OTHERS ONLY IF PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS. American 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 SAR 6/07 GUIDANCE | VISION | EXPERIENCE (AMERICAN BEACON FUND(SM) LOGO) Semi-Annual Report (GRAPHICS) June 30, 2007 MONEY MARKET FUND U.S GOVERNMENT MONEY MARKET FUND ABOUT AMERICAN BEACON ADVISORS Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management. Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company. CONTENTS President's Message .............................................. 1 Financial Highlights Money Market Fund.............................................. 16 U.S. Government Money Market Fund ............................. 20 Schedule of Investments Money Market Portfolio ........................................ 22 U.S. Government Money Market Portfolio ........................ 27 Additional Information............................................ Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor's strategies and each Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. American Beacon Funds June 30, 2007 (PHOTO OF DOUGHS G. HERRING) Fellow Shareholders, I am pleased to present to you the Semi-Annual Report for the American Beacon Money Market Fund and the U.S. Government Money Market Fund for the six months ended June 30, 2007. For this period, both Funds performed well versus their respective Lipper peer groups. The American Beacon Money Market Fund - Institutional Class and - Cash Management Class returned 2.60% and 2.62%, respectively, outperforming the Lipper Institutional Money Market Funds Average return of 2.47%. The American Beacon U.S. Government Money Market Fund - Cash Management Class gained 2.59% versus the Lipper Institutional U.S. Government Money Market Funds Average return of 2.46%. 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 access Fund and account information at www.americanbeaconfunds.com. Thank you for your continued confidence in the American Beacon Funds. Sincerely, /s/ Douglas G. Herring ---------------------- Douglas G. Herring President American Beacon Funds 1 ECONOMIC OVERVIEW JUNE 30, 2007 (Unaudited) Annualized Gross Domestic Product ("GDP") growth came in at an anemic 0.7% during the first quarter of 2007, the lowest rate of growth in four years. Inventory drawdowns, a widening trade deficit and an ongoing slump in the housing market were the main contributors to the slowdown. GDP growth in the second quarter recovered to an estimated 3.4% annualized rate as consumer spending held strong and business investment rebounded. The labor market remained a bright spot for the economy. Higher wages enabled consumers to keep spending despite increasing energy prices and declining home values. Payroll gains averaged 148,000 per month during the second quarter of 2007 and the unemployment rate remained near a six-year low at 4.5% in June. The Federal Open Market Committee ("Fed") left rates unchanged at 5.25% at both the May and June meetings. This marked eight consecutive meetings with no movement from the Fed. In its June statement, the Fed acknowledged that the economy was expected to expand at a moderate pace and that core inflation measures had improved modestly. However, Fed officials remained concerned about the high level of resource utilization and stated that "a sustained moderation in inflation pressures has yet to be convincingly demonstrated." Thus the Fed's inflation bias remained in place after the June meeting. Though economic growth recovered in the second quarter and the Fed has been unremitting in its commitment to contain inflation, the market is fearful that subprime mortgage difficulties could spill over into the broader economy. As such, the Fed continues to maintain ample flexibility by stating that "future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth." 2 PERFORMANCE OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) JUNE 30, 2007 (Unaudited) The Money Market Fund will maintain the strategy of purchasing high quality commercial paper maturing in 3 months or less and 3-month London Interbank Offered Rate (LIBOR) based variable rate securities until it becomes apparent that the Fed is on the verge of lowering interest rates. In addition, we remain conservative on credit risk given the volatile credit spread environment and effects of the subprime mortgage difficulties. For the six months ended June 30, 2007, the total return of the Cash Management Class of the American Beacon Money Market Fund was 2.62%. The Fund outperformed the Lipper Institutional Money Market Average return of 2.47% by 15 basis points (0.15%). Lipper Inc. ranked the Cash Management Class of the Fund 17th among 350, 20th among 298, and 18th among 252 Institutional Money Market Funds for the one-year, three-year and five-year periods ended June 30, 2007, respectively. The Lipper Institutional Money Market Average is calculated by taking an arithmetic average of the returns of the mutual funds in the Lipper Institutional Money Market Funds category. Lipper is an independent mutual fund research and ranking service that ranks mutual funds in various categories by making comparative calculations using total returns. Cash Management Class Total Returns as of June 30, 2007
1year 5 Years* 10 Years* ----- -------- --------- American Beacon Money Market Fund 5.36% 2.80% 3.91% Lipper Institutional Money Market Funds Average 5.04% 2.51% 3.68%
* Annualised
ANNUALIZED TOTAL RETURNS AS OF 6/30/2007 --------------------------- 1 YEAR 5 YEARS 10 YEARS ------ ------- -------- Cash Management Class (1,2,5) ................... 5.36% 2.80% 3.91% Institutional Class (1,3,5) ..... 5.32% 2.71% 3.86% PlanAheadClass (1,5) ........... 5.03% 2.44% 3.56% BBH Comset Class (1,4,5)....... 5.36% 2.80% 3.91%
1. Performance shown is historical and may not be indicative of future returns. Investment returns will vary, and shares may be worth more or less at redemption than at original purchase. An investment in this Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of an investment at $1.00 per share it is possible to lose money by investing in the Fund. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. Fund performance for the five and ten-year periods represent the total returns achieved by the Institutional Class from 7/1/97 to 12/1/01, the inception date of the Cash Management Class, and the returns of the Cash Management Class thereafter. Expenses of the Cash Management Class are lower than those of the Institutional Class. Therefore, total returns shown are lower than they would have been had the Cash Management Class been in place since 7/1/97. A portion of the fees charged to the Cash Management Class of the Fund has been waived. Performance prior to waiving fees was lower than the actual returns shown. 3. A portion of the fees charged to the Institutional Class of the Fund has been waived since 2006. Performance prior to waiving fees was lower than the actual returns shown for periods since 2006. 4. Fund performance represents the total returns achieved by the Institutional Class from 7/1/97 to 12/1/01, the total returns achieved by the Cash Management Class from 12/1/01 up to 4/2/07, the inception date of the BBH Comset Class, and the returns of the BBH Comset Class thereafter. Expenses of the BBH Comset Class are lower than those of the Institutional and Cash Management Classes through 12/31/03. Therefore, total returns shown through 12/31/03 are lower than they would have been had the BBH Comset Class been in place during that period. Expenses of the BBH Comset Class have been the same as those of the Cash Management Class since 1/1/04. 5. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Cash Management, Institutional, PlanAhead and the BBH Comset Class shares was 0.20%, 0.23%, 0.49% and 0.19%, respectively. After expense reimbursement, the net expense ratio set forth in the most recent Fund prospectus for the Cash Management, Institutional and BBH Comset Class shares was 0.15%, 0.18% and 0.15%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. 3 PERFORMANCE OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) JUNE 30, 2007 (Unaudited) PORTFOLIO STATISTICS AS OF JUNE 30, 2007
CASH BBH MANAGEMENT INSTITUTIONAL PLANAHEAD COMSET CLASS CLASS CLASS CLASS ---------- ------------- --------- ------- 7-day Current Yield* 5.24% 5.19% 4.89% 5.24% 7-day Effective Yield* 5.38% 5.32% 5.01% 5.38% 30-day Yield* 5.22% 5.17% 4.87% 5.22% Weighted Avg. Maturity 35 Days 35 Days 35 Days 35 Days Moody's Rating Aaa N/A N/A Aaa S&P Rating AAAm N/A N/A AAAm
* Annualized. You may call 1-800-388-3344 to obtain the Fund's current seven day yield. Yield is a more accurate reflection of the Fund's current earnings than total returns. TOP TEN ISSUERS AS OF JUNE 30, 2007
% OF NET ASSETS** ------------ General Electric Capital Corp. 5.2% Royal Bank of Scotland plc 5.2% Bank of America 4.9% Lehman Brothers 4.8% Calyon N.Y. 4.7% Citigroup 4.7% FCAR Owner Trust, Series I 4.6% Natixis 4.5% US Bank, NA 4.0% Toyota Motor Credit Corp. 3.8%
** Percent of net assets of American Beacon Master Money Market Portfolio. ASSET ALLOCATION AS OF JUNE 30, 2007
% OF NET ASSETS** ------------ Bank CDs, TDs and Notes 36.8% Corporate Notes 34.8% Commercial Paper 20.2% Repurchase Agreements 8.6% Funding Agreements 0.9% Liabilities, Net of Other Assets -1.3%
** Percent of net assets of American Beacon Master Money Market Portfolio. 4 PERFORMANCE OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) JUNE 30, 2007 (Unaudited) FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2007 through June 30, 2007. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in these lines, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Actual" line under the heading "Expenses Paid During Period" for the applicable Class to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
Beginning Ending Expenses Paid Account Account During Period* Value Value 1/1/07- 1/1/07 06/30/07 06/30/07 --------- --------- -------------- CASH MANAGEMENT CLASS Actual ..................... $1,000.00 $1,026.20 $0.75 Hypothetical (5% return before expenses) ........... $1,000.00 $1,024.05 $0.75 INSTITUTIONAL CLASS Actua ...................... $1,000.00 $1,025.99 $0.95 Hypothetical (5% return before expenses) ........... $1,000.00 $1,023.85 $0.95 PLANAHEAD CLASS Actual ..................... $1,000.00 $1,024.62 $2.26 Hypothetical (5% return before expenses) ........... $1,000.00 $1,022.56 $2.26
Beginning Ending Expenses Paid Account Account During Period** Value Value 4/2/07- 4/2/07 06/30/07 06/30/07 --------- --------- --------------- BBH COMSET CLASS Actual .................... $1,000.00 $1,012.93 $0.37 Hypothetical (5% return before expenses) .......... $1,000.00 $1,011.96 $0.37
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.15%, 0.19%, 0.45% for the Cash Management, Institutional and PlanAhead Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period. ** Expenses are equal to the Fund's annualized expense ratios for the period of 0.15% for the BBH ComSet Class multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (90) 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, 2007 (Unaudited) The U.S. Government Money Market Fund will maintain the strategy of primarily transacting overnight repurchase agreements until it becomes more apparent that the Fed is on the verge of lowering interest rates. We remain conservative on credit risk given the volatile credit spread environment and effects of the subprime mortgage difficulties. For the year ended June 30, 2007, the total return of the Cash Management Class of the American Beacon U.S. Government Money Market Fund was 2.59%. The Fund outperformed the Lipper Institutional U.S. Government Money Market Average return of 2.46% by 13 basis points (0.13%). Lipper Inc. ranked the Cash Management Class of the Fund 8th among 148, 8th among 106 and 7th among 66 Institutional U.S. Government Money Market Funds for the one-year, five-year and ten-year periods ended June 30, 2007, respectively. 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, 2007 (PERFORMANCE GRAPH)
1year 5 Years* 10 Years* ----- -------- --------- American Beacon U.S. Government Money Market Fund 5.29% 2.74% 3.81% Lipper Institutional U.S. Government Money Market FundS Average 5.02% 2.50% 3.62%
* Annualized
ANNUALIZED TOTAL RETURNS AS OF 6/30/2007 --------------------------- 1 YEAR 5 YEARS 10 YEARS ------ ------- -------- Cash Management Class (1,2,4)................. 5.29% 2.74% 3.81% PlanAhead Class (1,3,4).... 4.82% 2.31% 3.43%
1 Performance shown is historical and may not be indicative of future returns. Investment returns will vary, and shares may be worth more or less at redemption than at original purchase. An investment in this Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of an investment at $1.00 per share it is possible to lose money by investing in the Fund. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 Prior to December 1, 2001, the Cash Management Class of the Fund was known as the Institutional Class. A portion of the fees charged to the Cash Management Class of the Fund has been waived since 2002. Performance prior to waiving fees was lower than actual returns shown for periods since 2002. 3 A portion of the fees charged to the PlanAhead Class of the Fund has been waived since 2003. Performance prior to waiving fees was lower than the actual returns shown for periods since 2003. 4 The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Cash Management and the PlanAhead Class shares was 0.64% and 1.02%, respectively. After expense reimbursement, the net expense ratio set forth in the most recent Fund prospectus for the Cash Management, Institutional and BBH Comset Class shares was 0.15% and 0.63%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. PORTFOLIO STATISTICS AS OF JUNE 30, 2007
CASH MANAGEMENT PLANAHEAD CLASS CLASS ---------- --------- 7-day Current Yield* 5.23% 4.73% 7-day Effective Yield* 5.37% 4.85% 30-day Yield* 5.19% 4.69% Weighted Avg. Maturity 13 Days 13 Days Moody's Rating Aaa N/A S&P Rating AAAm N/A
* Annualized. You may call 1-800-388-3344 to obtain the Fund's current seven day yield. Yield is a more accurate reflection of the Fund's current earnings than total returns. 6 PERFORMANCE OVERVIEW AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM) JUNE 30, 2007 (Unaudited) ASSET ALLOCATION AS OF JUNE 30, 2007
% OF NET ASSETS** ------------ Repurchase Agreements 94.7% Government Securities 5.2% Net Other Assets 0.1%
** Percent of net assets of the American Beacon Master U.S. Government Money Market Portfolio. FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2007 through June 30, 2007. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in these lines, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Actual" line under the heading "Expenses Paid During Period" for the applicable Class to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
Beginning Ending Expenses Paid Account Account During Period* Value Value 1/1/07- 1/1/07 06/30/07 06/30/07 --------- --------- -------------- CASH MANAGEMENT CLASS Actual . . . . . . . . . . $1,000.00 $1,025.93 $0.83 Hypothetical (5% return before expenses) . . . . . $1,000.00 $1,023.85 $0.82 PLANAHEAD CLASS Actual . . . . . . . . . . $1,000.00 $1,023.46 $3.26 Hypothetical (5% return before expenses) . . . . . $1,000.00 $1,021.77 $3.26
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.19% and 0.65% for the Cash Management and PlanAhead Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period. 7 AMERICAN BEACON FUNDS STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
U.S. GOVERNMENT MONEY MARKET MONEY MARKET ------------ --------------- ASSETS: Investment in Portfolio, at value ........................ $ 927,269 $ 22,174 Receivable for fund shares sold .......................... 86 -- Receivable from Manager for expense reimbursement (Note 2) .............................................. 155 1 Prepaid expenses ......................................... 78 11 ------------ ----------- TOTAL ASSETS .......................................... 927,588 22,186 ------------ ----------- LIABILITIES: Payable for fund shares redeemed ......................... 88 -- Dividends payable ........................................ 754 29 Administrative service and service fees payable (Note 2) .............................................. 72 1 Distribution fees payable (Note 2) ....................... 1 -- Other liabilities ........................................ 5 9 ------------ ----------- TOTAL LIABILITIES ..................................... 920 39 ------------ ----------- NET ASSETS .................................................. $ 926,668 $ 22,147 ============ =========== ANALYSIS OF NET ASSETS: Paid-in-capital .......................................... 926,668 22,147 ============ =========== NET ASSETS .................................................. $ 926,668 $ 22,147 SHARES OUTSTANDING (NO PAR VALUE): Cash Management Class .................................... 622,413,677 20,478,365 ============ =========== Institutional Class ...................................... 224,681,036 N/A ============ =========== PlanAhead Class .......................................... 59,105,741 1,669,039 ============ =========== BBH ComSet Class ......................................... 20,467,642 N/A ============ =========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE: Cash Management Class .................................... $ 1.00 $ 1.00 ============ =========== Institutional Class ...................................... $ 1.00 N/A ============ =========== PlanAhead Class .......................................... $ 1.00 $ 1.00 ============ =========== BBH ComSet Class ......................................... $ 1.00 N/A ============ ===========
See accompanying notes 8 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS)
U.S. GOVERNMENT MONEY MARKET MONEY MARKET ------------ --------------- INVESTMENT INCOME ALLOCATED FROM PORTFOLIO: Interest income ................................. $31,526 $246 Portfolio expenses .............................. (632) (5) ------- ---- NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO 30,894 241 ------- ---- FUND EXPENSES: Administrative service fees (Note 2): Cash Management Class ........................ 240 1 Institutional Class .......................... 151 -- PlanAhead Class .............................. 76 1 Platinum Class ............................... 81 10 BBH ComSet Class ............................. 3 -- Transfer agent fees: Cash Management Class ........................ 11 -- Institutional Class .......................... 5 -- PlanAhead Class .............................. 4 3 BBH ComSet Class ............................. 2 -- Professional fees ............................... 9 7 Registration fees and expenses .................. 42 29 Service fees - PlanAhead Class (Note 2) ......... 191 2 Distribution fees - Platinum Class (Note 2) ..... 31 4 Prospectus and shareholder reports .............. 26 1 Other expenses .................................. -- 4 ------- ---- TOTAL FUND EXPENSES .......................... 872 62 ------- ---- Less waiver and reimbursement of expenses (Note 2) . (230) (42) ------- ---- NET FUND EXPENSES ............................... 642 20 ------- ---- NET INVESTMENT INCOME .............................. 30,252 221 ------- ---- REALIZED GAIN ALLOCATED FROM PORTFOLIO: Net realized gain on investments ................ 10 -- ------- ---- NET GAIN ON INVESTMENTS ...................... 10 -- ------- ---- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $30,262 $221 ------- ----
See accompanying notes 9 AMERICAN BEACON FUNDS STATEMENTS OF CHANGES IN NET ASSETS JUNE 30, 2007 (UNAUDITED)(IN THOUSANDS)
MONEY MARKET U.S. GOVERNMENT MONEY MARKET ------------------------------- ------------------------------- Year ended Year ended Six Months ended December 31, Six Months ended December 31, June 30, 2007 2006 June 30, 2007 2006 ---------------- ------------ ---------------- ------------ (unaudited) (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ....................... $ 30,252 $ 36,739 $ 221 $ 607 Net realized gain on investments ............ 10 1 -- -- NET INCREASE IN NET ASSETS RESULTING FROM ----------- ----------- -------- -------- OPERATIONS ............................ 30,262 36,740 221 607 ----------- ----------- -------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Cash Management Class .................... (17,905) (21,235) (109) (304) Institutional Class ...................... (7,833) (4,754) -- -- PlanAhead Class .......................... (3,757) (9,290) (45) (114) Platinum Class ........................... (544) (1,460) (67) (189) BBH ComSet Class ......................... (212) -- -- -- Net realized gain on investments: Cash Management Class .................... (6) -- -- -- Institutional Class ...................... (3) -- -- -- PlanAhead Class .......................... (2) (1) -- -- Platinum Class ........................... -- -- -- -- BBH ComSet Class ......................... -- -- -- -- ----------- ----------- -------- -------- DISTRIBUTIONS TO SHAREHOLDERS ......... (30,262) (36,740) (221) (607) ----------- ----------- -------- -------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares ............... 3,817,043 5,755,911 31,546 39,131 Reinvestment of dividends and distributions . 25,802 32,640 79 225 Cost of shares redeemed ..................... (4,126,659) (5,091,891) (19,116) (58,084) ----------- ----------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ............ (283,814) 696,660 12,509 (18,728) ----------- ----------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS .......... (283,814) 696,660 12,509 (18,728) ----------- ----------- -------- -------- NET ASSETS: Beginning of period ......................... 1,210,482 513,822 9,638 28,366 ----------- ----------- -------- -------- END OF PERIOD ............................... $ 926,668 $ 1,210,482 $ 22,147 $ 9,638 =========== =========== ======== ========
See accompanying notes 10 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED)(IN THOUSANDS) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the "Act"), as amended, as a diversified, no-load, open-end management investment company with separate series. The following series are included in this report: American Beacon Money Market and American Beacon U.S. Government Money Market Funds (each a "Fund" and collectively, the "Funds"). The BBH Comset Class of the Money Market Fund commenced operations on April 2, 2007. The Platinum Class of the Funds was fully liquidated effective May 31, 2007. Each Fund invests all of its investable assets in the corresponding portfolio of the American Beacon Master Trust, an open-end diversified management investment company, as follows: AMERICAN BEACON: (ARROW) invests assets in (ARROW) AMERICAN BEACON MASTER TRUST: Money Market Fund Money Market Portfolio U.S. Government Money Market Fund U.S. Government Money Market Portfolio
Each Fund has the same investment objectives as its corresponding American Beacon Master Trust Portfolio. The value of such investment reflects each Fund's proportionate interest in the net assets of the corresponding portfolio (5.5% and 2.8% at June 30, 2007 of the American Beacon Master Trust Money Market and U.S. Government Money Market Portfolios, respectively) (each a "Portfolio" and collectively the "Portfolios"). The financial statements of the Portfolios are included elsewhere in this report and should be read in conjunction with the Funds' financial statements. American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary of AMR Corporation and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. The following is a summary of the significant accounting policies followed by the Funds. Class Disclosure Each Fund has multiple classes of shares designed to meet the needs of different groups of investors. Please note that not all Funds offer all classes. The following table sets forth the differences amongst the classes:
CLASS: OFFERED TO: SERVICE AND DISTRIBUTION FEES: - ------ ------------------------------------ ---------------------------------- CASH MANAGEMENT CLASS Investors making an initial Administrative Service Fee - 0.07% investment of $10 million for Money Market and $2 million for U.S. Government Money Market, or investors investing through an intermediary INSTITUTIONAL CLASS Investors making an initial Administrative Service Fee - 0.10% investment of $2 million PLANAHEAD CLASS General public and investors Administrative Service Fee - 0.10% investing through an intermediary Service Fee - 0.25% BBH COMSET Investors making an initial Administrative Service Fee - 0.08% investment of at least $10 million in BBH ComSet(SM) who meet the eligibility requirements established by Brown Brothers Harriman & Co.
Valuation of Investments The Funds record their investment in the Portfolios at fair value. Valuation of securities by the Portfolios is discussed in Note 1 of the Portfolios' Notes to Financial Statements, which are included elsewhere in this report. 11 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2007 (UNAUDITED)(IN THOUSANDS) Investment Income and Dividends to Shareholders Each Fund records its share of net investment income (loss) and realized gain (loss) in the Portfolio each day. All net investment income (loss) and realized gain (loss) of each Portfolio are allocated pro rata among the corresponding Fund and other investors in each Portfolio at the time of such determination. The Funds generally declare dividends daily from net investment income and net short-term capital gain, if any, payable monthly. Dividends to shareholders are determined in accordance with federal income tax principles that may treat certain transactions differently than U.S. generally accepted accounting principles. Allocation of Income, Expenses, Gains and Losses Income, expenses (other than those attributable to a specific class), gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated. Recently Issued Accounting Pronouncements On July 13, 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance on how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing each Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. The Funds adopted the provisions of FIN 48 effective January 1, 2007. Tax positions taken by the Funds have been deemed to meet the more likely than not threshold, and therefore, there have been no adjustments to the Funds' net asset value per share. In September 2006, the FASB issued Statement on Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Manager is evaluating the impact of FAS 157; however, it is not expected to have a material impact on the Funds' net assets or results of operations. Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust's maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement. 12 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2007 (UNAUDITED)(IN THOUSANDS) 2. TRANSACTIONS WITH AFFILIATES Administrative Services Agreement As compensation for providing administrative services to the Funds, the Manager receives an annualized fee of 0.10% of the average daily net assets of each of the Institutional and PlanAhead Classes of the Funds, 0.08% of the average daily net assets of the BBH Class of the Money Market Fund and 0.07% of the Cash Management Class of the Funds. Distribution Plan The Trust has adopted a "defensive" Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the fees received by the Manager to be used for distribution purposes. Under this plan, the Trust does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Trust shares. Service Agreement The Manager and the Trust entered into a Service Agreement which obligates the Manager to oversee additional shareholder servicing of the PlanAhead Class. As compensation for performing the duties required under the Service Agreement, the Manager receives 0.25% based on the daily net assets of the PlanAhead Class. Reimbursement and Waiver of Expenses The Manager contractually agreed to reimburse the following Funds for distribution and other expenses through February 29, 2008 to the extent total annual fund operating expenses exceed the following amounts:
FUND CLASS EXPENSE CAP AMOUNT - ---- --------------- ----------- ------- Money Market Fund Institutional 0.18%** $50,430 Money Market Fund Cash Management 0.15% 163,573 U.S. Government Money Market Fund Cash Management 0.15%* 1,290 U.S. Government Money Market Fund PlanAhead 0.65% 1,312
* Prior to March 1, 2007, the expense cap was 0.19%. ** Prior to March 1, 2007, fees were voluntarily waived by the Manager to arrive at expense cap. The Manager voluntarily agreed to reimburse the BBH ComSet Class of the Money Market Fund for other expenses through February 29, 2008 to the extent total annual fund operating expenses exceeded 0.15%. The Manager reimbursed expenses totaling $6,494 to the BBH ComSet Class of the Money Market Fund during the six months ended June 30, 2007. Expense Reimbursement Plan The Funds have adopted an Expense Reimbursement Plan whereby the Manager may seek recoupment of fees waived or expenses reimbursed for a period of up to three years. However, recoupment will occur only if the Class' average net assets have grown or expenses have declined sufficiently to allow recoupment without causing its expense ratio to exceed the previously agreed upon expense limit. The following waived fees or reimbursed expenses are subject to potential recovery expiring in: 13 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2007 (UNAUDITED)(IN THOUSANDS)
U.S. GOVERNMENT YEAR MONEY MARKET MONEY MARKET* - ---- ------------ --------------- 2007 .. $140,252 $13,955 2008 .. 293,487 40,129 2009 .. 260,591 23,815 2010 .. 230,471 2,602
* Excludes waived fees or reimbursed expenses related to the Platinum class, which was closed May 14, 2007 The Funds have not recorded a liability for this potential reimbursement due to the current assessment that a reimbursement is unlikely. 3. FEDERAL INCOME TAXES It is the policy of 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 categorized 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. The tax character of distributions paid for the six months ended June 30, 2007 and the year ended December 31, 2006 were as follows (in thousands):
U.S. GOVERNMENT MONEY MARKET MONEY MARKET ----------------------------- ------------------------- SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED ENDED JUNE 30, DECEMBER 31, ENDED JUNE DECEMBER 31, 2007 2006 30, 2007 2006 -------------- ------------ ---------- ------------ DISTRIBUTIONS PAID FROM ORDINARY INCOME:* Cash Management Class .. $17,912 $21,235 $109 $304 Institutional Class .... 7,836 4,754 -- -- PlanAhead Class ........ 3,759 9,291 45 114 Platinum Class ......... 543 1,460 67 189 BBH ComSet Class ....... 212 -- -- -- ------- ------- ---- ---- TOTAL DISTRIBUTIONS PAID .. $30,262 $36,740 $221 $607 ======= ======= ==== ====
* For tax purposes short-term capital gains distributions are considered ordinary income distributions. As of June 30, 2007, the components of distributable earnings on a tax basis were the same as book. The cost basis of investments for federal income tax purposes was also the same as the book basis. The Funds do not have capital loss carry forwards as of June 30, 2007. 14 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2007 (UNAUDITED)(IN THOUSANDS) 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, 2007
Cash Management Institutional PlanAhead Platinum Class Class Class Class ---------- ------------- --------- -------- Money Market Fund Shares sold ........................................ 2,886,591 523,291 328,658 14,014 Reinvestment of dividends .......................... 15,172 7,108 3,019 502 Shares redeemed .................................... (2,781,254) (810,121) (443,088) (48,173) ---------- -------- -------- ------- Net increase (decrease) in shares outstanding ...... 120,509 (279,722) (111,411) (33,657) ========== ======== ======== =======
BBH ComSet Class ------------ Money Market Fund Shares sold ........................................ 64,489 Reinvestment of dividends .......................... 1 Shares redeemed .................................... (44,023) ------- Net increase in shares outstanding ................. 20,467 =======
Cash Management PlanAhead Platinum Class Class Class ---------- --------- -------- U.S. Government Money Market Fund Shares sold ........................................ 24,185 3,062 4,299 Reinvestment of dividends .......................... 5 12 62 Shares redeemed .................................... (7,280) (3,463) (8,373) ------ ---- ------ Net increase (decrease) in shares outstanding ...... 16,910 (389) (4,012) ====== ==== ======
Year Ended December 31, 2006
Cash Management Institutional PlanAhead Platinum Class Class Class Class ---------- ------------- --------- -------- Money Market Fund Shares sold ........................................ 3,868,924 1,325,652 515,551 45,785 Reinvestment of dividends .......................... 19,760 3,586 7,834 1,460 Shares redeemed .................................... (3,586,788) (861,256) (589,770) (54,077) ---------- --------- -------- ------- Net increase (decrease) in shares outstanding ...... 301,896 467,982 (66,385) (6,832) ========== ========= ======== =======
Cash Management PlanAhead Platinum Class Class Class ---------- --------- -------- U.S. Government Money Market Fund Shares sold ........................................ 20,648 8,290 10,194 Reinvestment of dividends .......................... 0 36 189 Shares redeemed .................................... (39,597) (8,201) (10,286) ------- ------ ------- Net increase (decrease) in shares outstanding ...... (18,949) 125 97 ======= ====== =======
15 AMERICAN BEACON MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
Cash Management Class ---------------------------------------------------------------- Six Months Year Ended December 31, Ended June -------------------------------------------------- 30, 2007 2006 2005 2004 2003 2002 ----------- -------- -------- -------- -------- ------ (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 .03 0 .05 0 .03 0 .01 0 .01 0 .02 Net realized gain on investments(B) ...................... -- -- -- -- -- -- -------- -------- -------- -------- -------- ------ Total income from investment operations ..................... 0.03 0.05 0.03 0.01 0.01 0.02 -------- -------- -------- -------- -------- ------ Less distributions: Less Dividends from net investment income ................ (0.03) (0.05) (0.03) (0.01) (0.01) (0.02) Distributions from net realized gains on investments(B) .. -- -- -- -- -- -- -------- -------- -------- -------- -------- ------ Total distributions ......................................... (0.03) (0.05) (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 ................................................ 2.62%(C) 5.05% 3.19% 1.30% 1.08% 1.73% ======== ======== ======== ======== ======== ====== Ratios and supplemental data: Net assets, end of period (in thousands) ................. $622,414 $501,905 $200,010 $434,587 $117,395 $6,641 Ratios to average net assets (annualized):(A) Expenses, net of waivers .............................. 0.15% 0.15% 0.15% 0.15% 0.16% 0.19% Expenses, before waivers .............................. 0.20% 0.20% 0.23% 0.23% 0.24% 0.22% Net investment income, net of waivers ................. 5.23% 5.04% 3.08% 1.34% 1.03% 1.73% Net investment income, before waivers ................. 5.18% 4.99% 3.00% 1.26% 0.95% 1.70%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon Master Money Market Portfolio. (B) Amount is less than $0.01 per share. (C) Not annualized. 16 AMERICAN BEACON MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
Institutional Class ---------------------------------------------------------------- Six Months Year Ended December 31, Ended June -------------------------------------------------- 30, 2007 2006 2005 2004 2003 2002 ----------- -------- ------- ------- -------- -------- (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) ................................. 0.03 0.05 0.03 0.01 0.01 0.02 Net realized gain on investments(B) ...................... -- -- -- -- -- -- -------- -------- ------- ------- -------- -------- Total income from investment operations ..................... 0.03 0.05 0.03 0.01 0.01 0.02 -------- -------- ------- ------- -------- -------- Less distributions: Less Dividends from net investment income ................ (0.03) (0.05) (0.03) (0.01) (0.01) (0.02) Distributions from net realized gains on investments(B) .. -- -- -- -- -- -- -------- -------- ------- ------- -------- -------- Total distributions ......................................... (0.03) (0.05) (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 ................................................ 2.60%(C) 4.99% 3.06% 1.20% 0.97% 1.67% ======== ======== ======= ======= ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands) ................. $224,681 $504,403 $36,421 $34,146 $159,092 $474,922 Ratios to average net assets (annualized):(A) Expenses, net of waivers .............................. 0.19% 0.19% 0.28% 0.24% 0.27% 0.24% Expenses, before waivers .............................. 0.22% 0.23% 0.28% 0.24% 0.27% 0.24% Net investment income, net of waivers ................. 5.19% 5.06% 3.07% 1.05% 1.00% 1.68% Net investment income, before waivers ................. 5.15% 5.02% 3.07% 1.05% 1.00% 1.68%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon Master Money Market Portfolio. (B) Amount is less than $0.01 per share. (C) Not annualized. 17 AMERICAN BEACON MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
PlanAhead Class ------------------------------------------------------------------ Six Months Year Ended December 31, Ended June ---------------------------------------------------- 30, 2007 2006 2005 2004 2003 2002 ----------- -------- -------- -------- -------- -------- (Unaudited) Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- -------- -------- -------- -------- -------- Income from investment operations: Net investment income(A) ................................. 0.02 0.05 0.03 0.01 0.01 0.01 Net realized gain on investments(B) ...................... -- -- -- -- -- -- ------- -------- -------- -------- -------- -------- Total income from investment operations ..................... 0.02 0.05 0.03 0.01 0.01 0.01 ------- -------- -------- -------- -------- -------- Less distributions: Less Dividends from net investment income ................ (0.02) (0.05) (0.03) (0.01) (0.01) (0.01) Distributions from net realized gains on investments(B) .. -- -- -- -- -- -- ------- -------- -------- -------- -------- -------- Total distributions ......................................... (0.02) (0.05) (0.03) (0.01) (0.01) (0.01) ------- -------- -------- -------- -------- -------- Net asset value, end of period .............................. $ 1.00 $1 .00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======== ======== ======== ======== ======== Total return ................................................ 2.46%(C) 4.69% 2.82% 0.93% 0.70% 1.37% ======= ======== ======== ======== ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands) ................. $59,106 $170,518 $236,903 $132,438 $126,972 $155,535 Ratios to average net assets (annualized):(A) Expenses, net of waivers .............................. 0.45% 0.49% 0.51% 0.51% 0.54% 0.54% Expenses, before waivers .............................. 0.46% 0.49% 0.51% 0.51% 0.54% 0.54% Net investment income, net of waivers ................. 4.92% 4.59% 2.83% 0.94% 0.71% 1.36% Net investment income, before waivers ................. 4.91% 4.59% 2.83% 0.94% 0.71% 1.36%
(A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon Master Money Market Portfolio. (B) Amount is less than $0.01 per share. (C) Not annualized. See accompanying notes 18 AMERICAN BEACON MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
BBH ComSet Class ------------ April 02 to June 30, 2007 ------------ (Unaudited) Net asset value, beginning of period ........................ $ 1.00 ------- Income from investment operations: Net investment income(A) ................................. 0.01 Net realized gain on investments(B) ...................... -- ------- Total income from investment operations ..................... 0.01 ------- Less distributions: Less Dividends from net investment income ................ (0.01) Distributions from net realized gains on investments(B) .. -- ------- Total distributions ......................................... (0.01) ------- Net asset value, end of period .............................. $ 1.00 ======= Total return ................................................ 1.29%(C) ======= Ratios and supplemental data: Net assets, end of period (in thousands) ................. $20,467 Ratios to average net assets (annualized):(A) Expenses, net of waivers .............................. 0.15% Expenses, before waivers .............................. 0.31% Net investment income, net of waivers ................. 5.22% Net investment income, before waivers ................. 5.06%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon Master Money Market Portfolio. (B) Amount is less than $0.01 per share. (C) Not annualized. See accompanying notes 19 AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
Cash Management Class ------------------------------------------------------------- Six Months Ended Year Ended December 31, June 30, ---------------------------------------------- 2007 2006 2005 2004 2003 2002 ----------- ------ ------- ------- ------- ------- (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).................................. 0.03 0.05 0.03 0.01 0.01 0.02 Net realized gain on investments(B)....................... -- -- -- -- -- -- ------- ------ ------- ------- ------- ------- Total income from investment operations ..................... 0.03 0.05 0.03 0.01 0.01 0.02 ------- ------ ------- ------- ------- ------- Less distributions: Less Dividends from net investment income ................ (0.03) (0.05) (0.03) (0.01) (0.01) (0.02) Distributions from net realized gains on investments(B)... -- -- -- -- -- -- ------- ------ ------- ------- ------- ------- Total distributions ......................................... (0.03) (0.05) (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 ................................................ 2.59%(C) 4.97% 3.12% 1.22% 1.04% 1.67% ======= ====== ======= ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands) ................. $20,478 $3,568 $22,518 $28,591 $22,060 $38,310 Ratios to average net assets (annualized):(A) Expenses, net of waivers .............................. 0.16% 0.19% 0.19% 0.19% 0.19% 0.19% Expenses, before waivers .............................. 1.20% 0.64% 0.38% 0.29% 0.37% 0.23% Net investment income, net of waivers ................. 5.17% 4.60% 2.99% 1.21% 1.04% 1.69% Net investment income, before waivers ................. 4.14% 4.16% 2.80% 1.11% 0.86% 1.65%
(A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon Master U.S. Government Money Market Portfolio. (B) Amount is less than $0.01 per share. (C) Not annualized. See accompanying notes 20 AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
PlanAhead Class -------------------------------------------------------------- Six Months Ended Year Ended December 31, June 30, ----------------------------------------------- 2007 2006 2005 2004 2003 2002 ----------- ------ ------ ------- ------- -------- (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 0.04 0.03 0.00(B) 0.01 0.01 Net realized gain on investments(B)....................... -- -- -- -- -- -- ------ ------ ------ ------ ------- -------- Total income from investment operations...................... 0.02 0.04 0.03 -- 0.01 0.01 ------ ------ ------ ------ ------- -------- Less distributions: Less Dividends from net investment income................. (0.02) (0.04) (0.03) 0.00(B) (0.01) (0.01) Distributions from net realized gains on investments(B)... -- -- -- -- -- -- ------ ------ ------ ------ ------- -------- Total distributions.......................................... (0.02) (0.04) (0.03) -- (0.01) (0.01) ------ ------ ------ ------ ------- -------- Net asset value, end of period............................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ======= ======== Total return................................................. 2.35%(C) 4.51% 2.71% 0.85% 0.61% 1.30% ====== ====== ====== ====== ======= ======== Ratios and supplemental data: Net assets, end of period (in thousands).................. $1,669 $2,058 $1,933 $5,370 $26,785 $175,115 Ratios to average net assets (annualized):(A) Expenses, net of waivers............................... 0.65% 0.63% 0.58% 0.56% 0.58% 0.55% Expenses, before waivers............................... 1.75% 1.02% 0.61% 0.57% 0.62% 0.55% Net investment income, net of waivers.................. 4.68% 4.39% 2.47% 0.68% 0.72% 1.25% Net investment income, before waivers.................. 3.59% 4.00% 2.44% 0.67% 0.68% 1.25%
(A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon Master U.S. Government Money Market Portfolio. (B) Amount is less than $0.01 per share. (C) Not annualized. See accompanying notes 21 AMERICAN BEACON MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS June 30, 2007 (Unaudited)
PAR AMOUNT VALUE -------- ---------- (DOLLARS IN THOUSANDS) FUNDING AGREEMENTS - 0.89% Metropolitan Life Insurance Co., 5.41%, Due 11/21/2007 ++ ......... $150,000 $ 150,000 ---------- MEDIUM-TERM NOTES - 32.06% ABN Amro Bank NV, 5.409%, Due 4/18/2008 ++ # ...................... 132,050 132,133 American Honda Finance Corp., 5.31%, Due 7/10/2007 ++ # ...................................... 33,040 33,040 5.385%, Due 7/23/2007 ++ # ..................................... 10,000 10,000 5.38%, Due 8/23/2007 ++ # ...................................... 20,000 20,002 5.47%, Due 8/23/2007 ++ # ...................................... 5,500 5,501 5.38%, Due 9/19/2007 ++ # ...................................... 25,000 25,003 5.465%, Due 10/22/2007 ++ # .................................... 10,000 10,004 5.39%, Due 11/15/2007 ++ # ..................................... 42,000 42,009 5.375%, Due 1/23/2008 ++ ....................................... 40,000 40,011 5.42%, Due 2/22/2008 ++ # ...................................... 33,200 33,219 5.327%, Due 5/9/2008 ++ # ...................................... 15,000 15,000 ASIF Global Financing XXI, 5.71%, Due 3/14/2008 ++ # .............. 32,650 32,736 ASIF Global Financing XXXII, 5.41%, Due 2/25/2008 ++ # ............ 206,600 206,713 Bank of America Corp., 5.46%, Due 9/7/2007 ++ # ....................................... 183,180 183,223 5.786%, Due 5/5/2008 ++ ........................................ 32,000 32,125 Berkshire Hathaway Finance Corp., 5.40%, Due 1/11/2008 ++ # ...................................... 128,085 128,147 5.42%, Due 5/16/2008 ++ # ...................................... 23,750 23,772 Citigroup Global Markets Holdings, Inc., 5.43%, Due 8/16/2007 ++ .. 58,800 58,808 Citigroup, Inc., 5.416%, Due 11/1/2007 ++ ....................................... 130,115 130,162 5.405%, Due 5/2/2008 ++ ........................................ 199,700 199,838 Commonwealth Bank of Australia, 5.355%, Due 1/31/2008 ++ # ........ 175,000 175,035 Credit Suisse USA, Inc., 5.47%, Due 6/2/2008 ++ ................... 25,053 25,084 General Electric Capital Corp., 5.445%, Due 10/17/2007 ++ ...................................... 180,000 180,000 5.41%, Due 1/3/2008 ++ ......................................... 211,500 211,608 5.406%, Due 1/15/2008 ++ ....................................... 324,455 324,604 5.40%, Due 3/4/2008 ++ ......................................... 40,886 40,907 5.416%, Due 4/15/2008 ++ ....................................... 65,000 65,050 5.41%, Due 5/19/2008 ++ ........................................ 20,000 20,016 Goldman Sachs Group, Inc., 5.474%, Due 7/2/2007 ++ ........................................ 64,350 64,350 5.475%, Due 10/5/2007 ++ ....................................... 12,700 12,705 HBOS Treasury Services plc, 5.357%, Due 7/17/2008 ++ # ............ 59,500 59,515 HSBC Finance Corp., 5.505%, Due 7/27/2007 ++ ....................................... 97,525 97,538 5.39%, Due 10/4/2007 ++ ........................................ 115,000 115,022 5.36%, Due 5/21/2008 ++ ........................................ 162,770 162,803
22 AMERICAN BEACON MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS June 30, 2007 (Unaudited)
PAR AMOUNT VALUE -------- ---------- (DOLLARS IN THOUSANDS) JPMorgan Chase & Co., 5.425%, Due 1/25/2008 ++ .................... $220,000 $ 220,129 Merrill Lynch & Co., Inc., 5.39%, Due 8/24/2007 ++ ........................................ 39,830 39,833 5.47%, Due 8/27/2007 ++ ........................................ 77,000 77,017 5.485%, Due 10/19/2007 ++ ...................................... 83,000 83,037 5.39%, Due 2/14/2008 ++ ........................................ 61,300 61,324 5.46%, Due 6/16/2008 ++ ........................................ 93,350 93,463 Monumental Global Funding II, 5.39%, Due 9/13/2007 ++ # ........... 21,500 21,502 Morgan Stanley, 5.48%, Due 7/27/2007 ++ ........................................ 58,595 58,602 5.484%, Due 1/18/2008 ++ ....................................... 68,900 68,958 Royal Bank of Scotland plc, 5.36%, Due 12/21/2007 ++ # ..................................... 230,000 230,044 5.36%, Due 4/11/2008 ++ # ...................................... 435,500 435,638 5.365%, Due 4/21/2008 ++ # ..................................... 50,000 50,017 5.33%, Due 7/18/2008 ++ # ...................................... 150,000 150,000 Toyota Motor Credit Corp., 5.327%, Due 8/10/2007 ++ ....................................... 60,000 60,002 5.33%, Due 9/14/2007 ++ ........................................ 95,000 95,005 5.33%, Due 10/12/2007 ++ ....................................... 4,800 4,800 5.346%, Due 4/15/2008 ++ ....................................... 100,000 100,022 5.33%, Due 6/17/2008 ++ ........................................ 24,000 24,004 Wachovia Corp., 5.435%, Due 7/20/2007 ++ .......................... 179,152 179,163 Wells Fargo & Co., 5.42%, Due 9/28/2007 ++ ........................................ 269,901 269,971 5.33%, Due 7/14/2008 ++ # ...................................... 150,000 150,000 ---------- TOTAL MEDIUM-TERM NOTES ........................................... 5,388,214 ---------- PROMISSORY NOTES - 2.68% Goldman Sachs Group, Inc., 5.36%, Due 5/9/2008 ++ ................. 450,000 450,000 ---------- CERTIFICATES OF DEPOSIT AND BANK NOTES - 25.94% Allied Irish Banks N.Y., 5.336%, Due 8/8/2007 ++ .................. 15,000 15,000 Bank of New York, 5.335%, Due 11/16/2007 ++ ...................................... 77,500 77,505 5.335%, Due 11/19/2007 ++ ...................................... 5,000 5,000 Bank of Nova Scotia N.Y., 5.335%, Due 10/31/2007 ++ ............... 64,860 64,863 Barclays Bank N.Y., 5.32%, Due 8/24/2007 ........................................... 250,000 250,000 5.35%, Due 10/2/2007 ........................................... 250,000 250,000 BNP Paribas N.Y., 5.29%, Due 10/3/2007 ++ ......................... 100,000 99,994 Branch Banking & Trust, 5.307%, Due 8/10/2007 ++ ....................................... 50,000 49,999 5.36%, Due 11/16/2007 ++ ....................................... 100,000 100,017 Caylon N.Y., 5.327%, Due 8/10/2007 ++ ....................................... 542,000 541,999
23 AMERICAN BEACON MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS June 30, 2007 (Unaudited)
PAR AMOUNT VALUE -------- ---------- (DOLLARS IN THOUSANDS) Caylon N.Y., 5.28%, Due 9/13/2007 ++ ........................................ $185,700 $ 185,690 5.29%, Due 10/3/2007 ++ ........................................ 67,500 67,497 Credit Suisse N.Y., 5.338%, Due 8/13/2007 ++ ....................................... 125,000 125,001 5.33%, Due 2/26/2008 ++ ........................................ 250,000 250,000 Deutsche Bank N.Y., 5.36%, Due 6/19/2008 ++ ....................... 280,000 280,084 HSBC Bank USA, 5.43%, Due 9/21/2007 ++ ............................ 203,550 203,600 M&I Marshall & Ilsley Bank, 5.341%, Due 8/1/2007 ++ ........................................ 50,000 50,000 5.33%, Due 2/15/2008 ++ ........................................ 196,500 196,504 National City Bank, 5.30%, Due 10/4/2007 ++ ........................................ 135,000 134,994 5.40%, Due 1/10/2008 ++ ........................................ 6,925 6,928 Nordea Bank Finland N.Y., 5.298%, Due 5/28/2008 ++ ................ 21,600 21,592 Suntrust Bank, 5.429%, Due 4/2/2008 ++ ............................ 53,020 53,064 US Bank, NA, 5.39%, Due 9/10/2007 ++ ........................................ 250,000 250,037 5.39%, Due 9/28/2007 ++ ........................................ 60,000 60,011 5.379%, Due 10/1/2007 ++ ....................................... 135,450 135,474 5.32%, Due 1/3/2008 ++ ......................................... 221,500 221,503 Wachovia Bank, 5.35%, Due 9/28/2007 ++ ............................ 50,000 50,003 Westpac Bank N.Y., 5.316%, Due 1/15/2008 ++ ....................... 46,000 45,999 World Savings Bank FSB, 5.36%, Due 10/19/2007 ++ ....................................... 400,000 400,050 5.42%, Due 12/7/2007 ++ ........................................ 117,400 117,446 5.41%, Due 6/20/2008 ++ ........................................ 50,000 50,041 ---------- TOTAL CERTIFICATES OF DEPOSIT AND BANK NOTES ...................... 4,359,895 ---------- COMMERCIAL PAPER - 20.20% Barton Capital LLC, 5.28%, Due 7/2/2007 ............................................ 50,000 49,993 5.29%, Due 7/13/2007 # ......................................... 37,856 37,789 Beta Finance Corp., 5.26%, Due 9/12/2007 .......................... 40,000 39,573 Citigroup Funding, Inc., 5.26%, Due 8/23/2007 ........................................... 200,000 198,451 5.26%, Due 8/29/2007 ........................................... 150,000 148,707 Falcon Asset Securitization LLC, 5.26%, Due 9/28/2007 ............. 77,749 76,738 FCAR Owner Trust, Series I, 5.27%, Due 8/15/2007 ........................................... 300,000 298,018 5.285%, Due 9/17/2007 .......................................... 475,000 469,566 Fountain Square Commercial Funding Corp., 5.26%, Due 8/21/2007 # ......................................... 10,000 9,926 5.275%, Due 9/19/2007 # ........................................ 90,378 89,319 General Electric Capital Corp., 5.04%, Due 11/9/2007 .............. 40,000 39,266 Golden Funding Corp., 5.375%, Due 7/16/2007 ....................... 150,000 149,664
24 AMERICAN BEACON MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS June 30, 2007 (Unaudited)
PAR AMOUNT VALUE --------- ----------- (DOLLARS IN THOUSANDS) K2 USA LLC, 5.26%, Due 9/18/2007 # ............... $ 36,100 $ 35,683 Kitty Hawk Funding Corp., 5.32%, Due 7/31/2007 ... 30,000 29,867 Lexington Parker Capital Co. LLC, 5.26%, Due 10/18/2007 ................................ 25,000 24,602 Long Lane Master Trust IV, 5.32%, Due 7/23/2007 # ........................ 24,101 24,023 5.34%, Due 7/26/2007 # ........................ 414,549 413,414 Park Avenue Receivables Co. LLC, 5.30%, Due 7/20/2007 .......................... 250,000 249,301 5.265%, Due 8/22/2007 ......................... 60,000 59,544 Sheffield Receivables Corp., 5.29%, Due 7/23/2007 # ............................... 42,850 42,712 Stanfield Victoria Funding LLC, 5.26%, Due 8/21/2007 # ........................ 45,000 44,665 5.26%, Due 8/28/2007 # ........................ 25,000 24,788 5.265%, Due 9/4/2007 # ........................ 25,000 24,762 5.27%, Due 9/6/2007 # ......................... 115,000 113,873 Three Rivers Funding Corp., 5.28%, Due 7/11/2007 # ............................... 87,156 87,028 Toyota Motor Credit Corp., 5.20%, Due 7/30/2007 .......................... 100,000 99,581 5.20%, Due 7/31/2007 .......................... 200,000 199,133 5.20%, Due 8/1/2007 ........................... 50,000 49,776 UBS Finance Delaware LLC, 5.20%, Due 8/6/2007 ........................... 140,000 139,272 5.20%, Due 8/10/2007 .......................... 100,000 99,422 Yorktown Capital LLC, 5.28%, Due 7/5/2007 ........ 25,249 25,234 ----------- TOTAL COMMERCIAL PAPER ........................... 3,393,690 ----------- TIME DEPOSITS - 10.92% ING Bank, NV, 5.344%, Due 7/2/2007 ............... 620,000 620,000 Natixis, 5.375%, Due 7/2/2007 .................... 750,000 750,000 Rabobank Nederland, 5.34%, Due 12/1/2006 ......... 464,487 464,487 ----------- TOTAL TIME DEPOSITS .............................. 1,834,487 ----------- REPURCHASE AGREEMENTS - 8.63% Bank of America, NA, 5.475%, Due 7/2/2007 (Held at Bank of New York, Collateralized by Whole Loan Mortgages valued at $618,000, 0.00%, 2/23/2036) .................................... 600,000 600,000 Citigroup, Inc., 5.475%, Due 7/2/2007 (Held at JPMorgan Chase, NYC, Collateralized by Whole Loan Mortgages valued at $53,028, 0.00%, 4/24/2037 - 6/25/2037) ........................ 50,000 50,000 Lehman Brothers Holdings, Inc., 5.41%, Due 7/2/2007 (Held at JPMorgan Chase, NYC, Collateralized by Asset Backed Securities valued at $662,937, 0.00% - 8.9%, 9/17/2007 - 2/25/2047) .................................... 650,000 650,000 5.445%, Due 7/2/2007 (Held at JPMorgan Chase, NYC, Collateralized by Corporate Obligations valued at $115,908, 0.00% - 8.25%, 9/15/2010 - 8/1/2037; and Medium-Term Notes valued at $37,081, 5.9%, 12/21/2035) ....... 150,000 150,000 ----------- TOTAL REPURCHASE AGREEMENTS ...................... 1,450,000 ----------- TOTAL INVESTMENTS - 101.32% (COST $17,026,286) ...... $17,026,286 LIABILITIES, NET OF OTHER ASSETS - (1.32%) .......... (222,280) ----------- TOTAL NET ASSETS - 100.00% .......................... $16,804,006 ===========
25 AMERICAN BEACON MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS June 30, 2007 (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. # Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $3,120,235 or 18.57% of net assets. The Fund has no right to demand registration of these securities. 26 AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS June 30, 2007 (Unaudited)
PAR AMOUNT VALUE ---------- ----------- (DOLLARS IN THOUSANDS) U.S. AGENCY OBLIGATIONS - 5.17% FEDERAL FARM CREDIT BANK - 1.34% 5.10%, Due 8/14/2007 ++ .......................... $ 10,851 $ 10,783 -------- FEDERAL HOME LOAN BANK - 3.73% 5.30%, Due 2/22/2008 ++ .......................... 15,000 14,999 5.30%, Due 5/7/2008 ++ ........................... 15,000 14,999 -------- 29,998 -------- FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.10% 5.05%, Due 12/31/2007 ++ ......................... 793 773 -------- TOTAL U.S. AGENCY OBLIGATIONS ....................... 41,554 -------- REPURCHASE AGREEMENTS - 94.75% Banc of America Securities, LLC, 5.375%, Due 7/2/2007 (Held at Bank of New York, Collateralized by U.S. Government Obligations valued at $255,000, 5.5%, 6/1/2033) ........... 250,000 250,000 Barclays Capital, Inc., 5.35%, Due 7/2/2007 (Held at Bank of New York, Collateralized by U.S. Government Obligations valued at $224,400, 3.998% - 6.277%, 6/1/2035 - 7/1/2037) ......... 220,000 220,000 Goldman Sachs, 5.35%, Due 7/2/2007 (Held at Bank of New York, Collateralized by U.S. Government Obligations valued at $297,745, 4.0% - 7.5%, 1/1/2009 - 4/1/2037) .......................... 291,907 291,907 -------- TOTAL REPURCHASE AGREEMENTS ...................... 761,907 -------- TOTAL INVESTMENTS - 99.92% (COST $803,461) .......... $803,461 OTHER ASSETS, NET OF LIABILITIES - 0.08% ............ 604 -------- TOTAL NET ASSETS - 100.00% .......................... $804,065 ========
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. 27 AMERICAN BEACON MASTER TRUST PORTFOLIOS STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS)
U.S. GOVERNMENT MONEY MONEY MARKET MARKET ----------- ----------- ASSETS: Investment in securities at value (cost - $15,576,286 and $41,554, respectively) ................................ $15,576,286 $ 41,554 Repurchase agreement (cost - $1,450,000 and $761,907, respectively) ...................... 1,450,000 761,907 Dividends and interest receivable ............... 75,748 680 Prepaid expenses ................................ 164 7 ----------- -------- TOTAL ASSETS ................................. 17,102,198 804,148 ----------- -------- LIABILITIES: Management and investment advisory fees payable (Note 2) ........................................ 1,435 61 Other liabilities ............................... 296,757 22 ----------- -------- TOTAL LIABILITIES ............................ 298,192 83 ----------- -------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS $16,804,006 $804,065 =========== ========
See accompanying notes 28 AMERICAN BEACON MASTER TRUST PORTFOLIOS STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED) (IN THOUSANDS)
U.S. Government Money Money Market Market -------- ---------- INVESTMENT INCOME: Interest income ..................................... $433,809 $19,778 -------- ------- TOTAL INVESTMENT INCOME .......................... 433,809 19,778 -------- ------- EXPENSES: Management and investment advisory fees (Note 2) .... 8,087 371 Custodian fees ...................................... 291 12 Professional fees ................................... 66 16 Other expenses ...................................... 235 6 -------- ------- TOTAL EXPENSES ................................... 8,679 405 -------- ------- NET INVESTMENT INCOME .................................. 425,130 19,373 -------- ------- REALIZED GAIN ON INVESTMENTS: Net realized gain on investments .................... 128 1 -------- ------- NET GAIN ON INVESTMENTS .......................... 128 1 -------- ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $425,258 $19,374 ======== =======
See accompanying notes 29 AMERICAN BEACON MASTER TRUST PORTFOLIOS STATEMENT OF CHANGES IN NET ASSETS (IN THOUSANDS)
U.S. GOVERNMENT MONEY MONEY MARKET MARKET ------------------------------ --------------------------- Six Months Year Ended Six Months Year Ended Ended June 30, December 31, Ended June December 31, 2007 2006 30, 2007 2006 -------------- ------------- ------------ ------------ (unaudited) (unaudited) INCREASE IN NET ASSETS: OPERATIONS: Net investment income ........................... $ 425,130 $ 530,893 $ 19,373 $ 17,196 Net realized gain on investments ................ 128 12 1 1 ------------ ------------- ----------- ------------ TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ 425,258 530,905 19,374 17,197 ------------ ------------- ----------- ------------ TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Contributions ................................... 18,498,503 131,682,048 1,960,272 3,002,185 Withdrawals ..................................... (14,847,924) (126,270,825) (1,738,977) (2,695,546) ------------ ------------- ----------- ------------ NET INCREASE IN NET ASSETS RESULTING FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS ................................. 3,650,579 5,411,223 221,295 306,639 ------------ ------------- ----------- ------------ NET INCREASE IN NET ASSETS ................... 4,075,837 5,942,128 240,669 323,836 ------------ ------------- ----------- ------------ NET ASSETS: Beginning of period ............................. 12,728,169 6,786,041 563,396 239,560 ------------ ------------- ----------- ------------ END OF PERIOD ................................... $ 16,804,006 $ 12,728,169 $ 804,065 $ 563,396 ============ ============= =========== ============
See accompanying notes 30 AMERICAN BEACON MASTER TRUST PORTFOLIOS FINANCIAL HIGHLIGHTS
Money Market --------------------------------------------------- Six Months Year Ended December 31, Ended June ------------------------------------- 30, 2007 2006 2005 2004 2003 2002 ----------- ----- ----- ----- ----- ----- (unaudited) Total return ................................ 2.64%(A) 5.09% 3.25% 1.34% 1.13% 1.81% Ratios to average net assets (annualized): Expenses ................................. 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% Net investment income .................... 5.26% 5.03% 3.20% 1.30% 1.14% 1.81%
U.S. Government Money Market --------------------------------------------------- Six Months Year Ended December 31, Ended June ------------------------------------- 30, 2007 2006 2005 2004 2003 2002 ----------- ----- ----- ----- ----- ----- (unaudited) Total return ................................ 2.61%(A) 5.04% 3.19% 1.30% 1.11% 1.74% Ratios to average net assets (annualized): Expenses ................................. 0.11% 0.12% 0.12% 0.11% 0.12% 0.12% Net investment income .................... 5.22% 4.97% 3.15% 1.30% 1.13% 1.71%
- ---------- (A) Not annualized 31 AMERICAN BEACON MASTER TRUST NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Master Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended, as a no load, open-end management investment company that was organized as a trust under the laws of the Commonwealth of Massachusetts pursuant to a Declaration of Trust dated as of November 1, 2004. Prior to November 1, 2004, the Trust was organized as a trust under the laws of the State of New York. Beneficial interests in the Trust are divided into separate series, each having distinct investment objectives and policies. These financial statements relate to the American Beacon Master Money Market Portfolio and American Beacon Master U.S. Government Money Market Portfolio (each a "Portfolio" and collectively the "Portfolios"). The objective of each Portfolio is current income, liquidity and the maintenance of a stable price of $1.00 per share. The assets of each Portfolio belong only to that Portfolio, and the liabilities of each Portfolio are borne solely by that Portfolio and no other. American Beacon Advisors, Inc. (the "Manager") is a wholly owned subsidiary of AMR Corporation and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services. The following is a summary of the significant accounting policies followed by the Portfolios. Security Valuation Securities of the Portfolios are valued at amortized cost, which approximates fair value. In the event that a deviation of 1/2 of 1% or more exists between the $1.00 per share price of the Portfolios, calculated at amortized cost, and the price per share calculated by reference to market quotations, or if there is any other deviation that the Trust's Board of Trustees (the "Board") believes would result in a material dilution to shareholders or purchasers, the Board will promptly consider the appropriate action that should be initiated. Security Transactions and Investment Income Security transactions are recorded on the trade date of the security purchase or sale. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for amortization of premiums or accretion of discounts on investment grade short-term securities and zero coupon instruments. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification. Federal Income Taxes The Portfolios will be treated as partnerships for federal income tax purposes. As such, each investor in a Portfolio will be taxed on its share of the Portfolio's ordinary income and capital gains. It is intended that each Portfolio's assets will be managed in such a way that an investor in the Portfolio will be able to satisfy the requirements of subchapter M of the Internal Revenue Code. Repurchase Agreements Under the terms of a repurchase agreement, securities are acquired by a Portfolio from a securities dealer or a bank that are subject to resale at a later date. Repurchase agreements are fully collateralized by U.S. Treasury or U.S. Government agency securities and are valued at cost, which approximates market value. All collateral is held at the custodian bank. The collateral is monitored daily by the Manager so that the collateral's market value exceeds the carrying value of the repurchase agreement plus accrued interest. 32 AMERICAN BEACON MASTER TRUST NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (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. Recently Issued Accounting Pronouncements On July 13, 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance on how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing each Portfolio's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. The Portolios adopted the provisions of FIN 48 effective January 1, 2007. Tax positions taken by the Portfolios have been deemed to meet the more likely than not threshold, and therefore, there have been no adjustments to the Portfolios' net asset value per share. In September 2006, the FASB issued Statement on Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Manager is evaluating the impact of FAS 157; however, it is not expected to have a material impact on the Portfolios' net assets or results of operations. 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. 33 AMERICAN BEACON MASTER TRUST NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED) 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, 2007, the Money Market Portfolio earned $8,708 under the credit facility. This amount is included in interest income on the financial statements. 34 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS (UNAUDITED) INTERIM RENEWAL In prior years, the Board of Trustees ("Board" or "Trustees") typically has considered the annual renewal of the existing Management Agreements between American Beacon Advisors, Inc. (the "Manager") and the American Beacon Funds (the "Trust"), on behalf of the Money Market and U.S. Government Money Market Funds (each, a "Fund" and collectively, the "Funds"), and between the Manager and the American Beacon Master Trust, on behalf of the Money Market and U.S. Government Money Market Portfolios (collectively, the "Portfolios"), at the Board meeting held in the first quarter of each year. (The term "Funds" is used throughout this section to refer to both the Funds and the Portfolios.) At the November 15, 2006 meeting, the Board decided to conduct these annual renewals at their second quarter meeting each year to enable the Trustees to consider more year-end data in their deliberations. At the March 8, 2007 Board meeting, the Board considered renewal of the Management Agreements on an interim basis until the Board meeting scheduled for the second quarter, at which meeting the Board would perform a comprehensive review of factors relevant to an annual renewal. In connection with the interim renewal, the Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager. 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. The Board considered several factors at its March 2007 meeting.but did not identify any particular information that was most relevant to its consideration to renew the Management Agreement, and each Trustee may have afforded different weight to these factors. The Board determined that certain factors typically considered in connection with an annual renewal were not material with respect to an interim renewal. In determining whether to renew the Management Agreement on an interim basis, the Trustees considered the best interests of each Fund separately. The following considerations and conclusions are applicable to all Funds. Cost of Services. With respect to the Management Agreement, 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 2006 fiscal year as well as implement additional waivers and/or reimbursements. Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Trustees considered that the Manager continues to provide high-quality services to each Fund at a low cost to investors and provides a comprehensive compliance program for each Fund. Based on this information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager were appropriate for each Fund and, thus, supported a decision to renew the Management Agreement on an interim basis. Investment Performance. The Board considered the performance reports and discussions with management at Board and Committee meetings throughout the year. In considering the renewal of the Management Agreement with the Manager for the Funds, the Trustees considered that 1) each Fund outperformed its respective benchmark index for the 2006 calendar year, and 2) the fee rate schedules for the Manager had not changed since the last contract renewal. Based on, among others, considerations and those noted above with respect to all Funds, the Trustees determined that the Funds and their shareholders would benefit from the Manager's continued management of the Funds until the next regular Board meeting and approved the renewal of the Agreement with respect to each of the Funds on an interim basis until the next regular Board meeting. 35 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS - CONTINUED (UNAUDITED) ANNUAL RENEWAL At its May 25, 2007 meeting, the Board considered the renewal of the Management Agreements. 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 a separate meeting on May 4, 2007 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 Trustees considered, among other materials, responses by the Manager to inquiries requesting: - a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; - a copy of the Manager's SEC Form ADV registration statement; - 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 comparison of performance of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of each Fund versus the respective peer group average; - a profit/loss analysis of the Manager and any actual or anticipated economies of scale in relation to the services it provides to each Fund; - an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; - an evaluation of other benefits to the Manager or Funds as a result of their relationship, if any; - confirmation that the Manager's financial condition does not raise concerns that the Manager would be unable to continue providing the same scope and quality of services to the Funds; - a description of the scope of portfolio management services provided to the Funds and other clients, including other registered investment companies, whether such services differ, and any advantages or disadvantages that might accrue to the Funds due to the manager's involvement in other activities; - a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year and a discussion of the adequacy of current and projected staffing levels to service the Funds; - a description of the basis upon which portfolio managers are compensated, including any "incentive" arrangements; - a discussion regarding the Manager's participation in "soft dollar" arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the Manager's methodology for obtaining the most favorable execution and the use of any affiliated broker-dealers; - a description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a description of trade allocation procedures among accounts managed by the Manager; 36 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS - CONTINUED (UNAUDITED) - a summary of any material changes to the Manager's compliance program with regard to federal, state, corporate and Fund requirements and a certification to the reasonable design of the compliance program; - 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 advisory fees and expense ratios for comparable mutual funds; - an analysis of any material complaints received from Fund shareholders; - a description of any revenue sharing activities with respect to the Funds; - a discussion of any rebate arrangements between the Manager and service providers to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; - a discussion of whether the Manager receives, with respect to the Funds, other compensation; 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 Management Agreements. This memorandum explained the regulatory requirements surrounding the Trustees' 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 May 25, 2007 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. CONSIDERATIONS WITH RESPECT TO ALL FUNDS In determining whether to approve the continuance of the Management Agreements, the Trustees considered the best interests of each Fund separately. In addition, while the Management Agreements for all of the Funds were considered at the same Board meeting, the Board considered each Fund's investment management relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of the Fund and the investment advisor; (3) the Manager's cost for providing the services and the profitability of the advisory business to the Manager; (4) the extent to which economies of scale have been taken into account in setting the fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fees with contracts entered into by the Manager with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager from its relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the material submitted in support of the renewal. 37 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 each Management Agreement the Board considered: the background and experience of key investment personnel and the Manager's ability to retain them; the Manager's disciplined investment approach and goal to provide consistent above average long-term performance at a low cost; the Manager's continuing efforts to add new series and share classes to enhance the Funds' product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Funds; the addition of personnel to manage the Funds, promote sales and improve services, including the addition of a separate new information technology department at the Manager; and the high rankings received by the Funds in service surveys. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management services provided by the Manager were appropriate for each Fund and, thus, supported a decision to renew each Management 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. With respect to Lipper data, the Board considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. A discussion regarding the Board's considerations with respect to each Fund's performance appears below under "Additional Considerations and Conclusions with Respect to Each Fund." Cost of Services and Profits Realized. In analyzing the cost of services and profitability of the Manager by Fund, the Board considered the revenues earned and the expenses incurred by the Manager. The profitability levels were noted at both an individual Fund level and at an aggregate level for all Funds. The Board also considered that the Management Agreement for the Trust stipulates that to the extent that a Fund invests all of its investable assets in another registered investment company, the Fund will not pay the Manager a management fee. Each Fund operates under a master-feeder structure whereby each Fund invests all of its assets in a corresponding portfolio of the American Beacon Master Trust. As such, the Manager receives a management fee from the master portfolio. The Board also considered the Manager's advisory fees for services provided by the Manager to institutional separate accounts with similar investment strategies. Although the Board noted that, in certain cases, the fee rates paid by other clients is lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds. The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and Classes that were in place during the last fiscal year. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. The Board also noted that the non-Institutional Classes of the Funds maintain higher expense ratios in order to compensate third party distributors but the net fee to the Manager is generally the same for all Classes. Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services performed by the Manager. A discussion regarding the Board's considerations with respect to each Fund's fee rates is set forth below under "Additional Considerations and Conclusions with Respect to Each Fund." Economies of Scale. In considering the reasonableness of the management fees, the Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. The Board noted that the Funds have experienced substantial recent 38 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS - CONTINUED (UNAUDITED) asset growth. With respect to the Funds, the Board noted that, although the fee schedules for these Funds do not have breakpoints, the effective advisory fee rates are low by industry standards and the performance of these Funds has been highly competitive and, in many cases, among the top performers among similar funds. The Board also considered the Manager's representations that its costs have increased due primarily to greater service provider and regulatory costs. The Manager also represented that it anticipates further economies of scale would be largely offset by higher costs of adding and retaining qualified personnel, improving technology and increasing demands on its advisory business. Based on the foregoing information, the Board concluded that the Manager fee schedule provides for a reasonable sharing of benefits from any economies of scale with each Fund. Benefits Derived from the Relationship with the Funds. The Board considered the "fall-out" or ancillary benefits that accrue to the Manager as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager's investment process and expanding the level of assets under management by the Manager. The Board also considered that the Funds permit institutional investors access to such investments at a more favorable cost and that the Manager's relationship with the Funds continues to be a significant factor in attracting separate account assets for the Manager. In addition, the Board noted that the Manager provides services to the Trust at a relatively low cost. Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager by virtue of its relationship with the Funds appear to be fair and reasonable. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO EACH FUND The performance of each Fund was compared to the respective Lipper Average, which includes all comparable funds in the Lipper category, and the Lipper Index, which includes the 30 largest funds in the Lipper category. References to the Lipper expense group below are to the group of comparable mutual funds included in the analysis provided to the Trustees by Lipper. All performance comparisons are for periods ended March 31, 2007, unless otherwise noted. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE MONEY MARKET FUND In considering the renewal of the Management Agreement with the Fund, the Trustees considered the following additional factors: (1) the Money Market Fund underperformed the Lipper Index for all reported periods except the one-year, but outperformed the Lipper Average for all reported periods; (2) the actual management fee and total expense ratio of the Money Market Fund were both lower than its Lipper expense group median; (3) the Manager is subject to a risk of financial responsibility should the Fund be unable to maintain a stable $1.00 per share net asset value; (4) the Manager's explanation that fee schedule "breakpoints" were not warranted due to, among other factors, the low base management fee charged to the Fund; and (5) the Manager has contractually agreed to waive fees and/or reimburse Fund expenses to the extent necessary to maintain a competitive total expense ratio for the Institutional and Cash Management Classes of the Money Market Fund. Based on these considerations and those noted above with respect to all Funds, the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the Fund. 39 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 Management Agreement with respect to the Fund, the Trustees considered the following additional factors: (1) the Cash Management Class of the U.S. Government Money Market Fund ("Cash Management Class") outperformed the Lipper Index and Average for all reported periods; (2) the actual management fee (including administrative fees) and the total expense ratio of the Cash Management Class was lower than its Lipper expense group median; (3) the Manager is subject to a risk of financial responsibility should the Fund be unable to maintain a stable $1.00 per share net asset value; (4) the Manager's explanation that fee schedule "breakpoints" were not warranted due to, among other factors, the low, base management fee charged to the Fund; and (5) the Manager has contractually agreed to continue to waive fees and/or reimburse Fund expenses to the extent necessary to maintain a competitive total expense ratio for all Classes of the U.S. Government Money Market Fund. Based on these considerations and those noted above with respect to all Funds, the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the Fund. 40 (THIS PAGE INTENTIONALLY LEFT BLANK) 41 (AMERICAN BEACON FUNDS(SM) LOGO) DELIVERY OF DOCUMENT To reduce expenses, your financial institution may mail only one copy of the Prospectus, Annual Report and Semi-Annual Report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please contact your financial institution. Delivery of individual copies will commence thirty days after receiving your request. If you invest in the Fund through a financial institution, you may be able to receive the Fund's regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution's name or contact your financial institution directly. TO OBTAIN MORE INFORMATION ABOUT THE FUND: (KEYBOARD GRAPHIC) (MOUSE GRAPHIC) BY E-MAIL: ON THE INTERNET: Visit our website at american_beacon.funds@ambeacon.com 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 Fort Worth, TX 76155 Call (800) 388-3344 AVAILABILITY OF QUARTERLY PORTFOLIO AVAILABILITY OF PROXY VOTING POLICY AND SCHEDULES RECORDS In addition to the Schedule of A description of the policies and Investments provided in each procedures the Fund uses to determine semi-annual and annual report, the how to vote proxies relating to Fund files a complete schedule of its portfolio securities is available in the portfolio holdings with the Fund's Statement of Additional Securities and Exchange Commission Information, is available free of charge ("SEC") on Form N-Q as of the first on the Fund's website and third fiscal quarters. The Fund's (www.americanbeaconfunds.com) and by Forms N-Q are available on the SEC's calling 1-800-967-9009 or by accessing website at www.sec.gov. The Forms N-Q the SEC's website at www.sec.gov. The may also be reviewed and copied at Fund's proxy voting record for the most the SEC's Public Reference Room, 450 recent year ended June 30 is filed Fifth Street, NW, Washington, DC annually with the SEC on Form N-PX. The 20549. Information regarding the Fund's Forms N-PX are available on the operation of the SEC's Public SEC's website at www.sec.gov. The Fund's Reference Room may be obtained by proxy voting record may also be obtained calling 1-800-SEC-0330. A complete by calling 1-800-967-9009. schedule of the Fund's portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each month. FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FORESIDE FUND SERVICES TRUST SERVICES FIRM Portland, Maine Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP Dallas, Texas
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus. American Beacon Funds is a service mark of AMR Corporation. PlanAhead Class is a registered service mark of American Beacon Advisors, Inc. American Beacon Money Market Fund and American Beacon U.S. Government Money Market Fund are service marks of American Beacon Advisors, Inc. SAR 6/07 540291 42 ITEM 2. CODE OF ETHICS. The Trust did not amend the code of ethics that applies to its principal executive and financial officers (the "Code") nor did it grant any waivers to the provisions of the Code during the period covered by the shareholder report presented in Item 1. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. The schedules of investments for each series of the Trust are included in the shareholder report presented in Item 1. The shareholder report for the S&P 500 Index Fund, the Small Cap Index Fund and the International Equity Index Fund presented in Item 1 includes a summary schedule of investments for the Master International Index Series and the Master Small Cap Index Series, both of which are series of the Master Quantitative Series Trust. A complete schedule of investments for each of these two series follows. Master Small Cap Index Series Schedule of Investments as of June 30, 2007 (unaudited)
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- Advertising Agencies - 0.5% 17,900 Catalina Marketing Corp. $ 563,850 8,000 DG FastChannel, Inc. (a) 163,040 13,100 Greenfield Online, Inc. (a) 208,421 14,500 inVentiv Health, Inc. (a) 530,845 12,200 Marchex, Inc. Class B 199,104 18,270 National CineMedia, Inc. (a) 511,743 20,800 Valassis Communications, Inc. (a) 357,552 43,380 ValueClick, Inc. (a) 1,277,975 ------------- 3,812,530 - ----------------------------------------------------------------------------------------------------------------------------- Aerospace - 0.6% 3,000 AeroVironment, Inc. (a) 61,830 6,000 Argon ST, Inc. (a) 139,260 18,268 Curtiss-Wright Corp. 851,471 11,126 Heico Corp. (e) 468,182 7,700 Ladish Co., Inc. (a) 331,100 3,500 MTC Technologies, Inc. (a) 85,960 16,513 Moog, Inc. Class A (a) 728,388 25,835 Orbital Sciences Corp. (a) 542,793 16,634 Teledyne Technologies, Inc. (a) 764,332 3,600 TransDigm Group, Inc. (a) 145,656 4,600 United Industrial Corp. 275,908 ------------- 4,394,880 - ----------------------------------------------------------------------------------------------------------------------------- Agriculture, Fishing & Ranching - 0.1% 1,200 Alico, Inc. 73,188 7,500 The Andersons, Inc. (e) 339,975 2,900 Cadiz, Inc. (a) 65,163 ------------- 478,326 - ----------------------------------------------------------------------------------------------------------------------------- Air Transport - 0.8% 17,968 AAR Corp. (a) 593,124 23,100 ABX Air, Inc. (a) 186,186 39,820 AirTran Holdings, Inc. (a) 434,834 17,098 Alaska Air Group, Inc. (a) 476,350 1,000 Allegiant Travel Co. (a) 30,740 6,900 Atlas Air Worldwide Holdings, Inc. (a) 406,686 10,085 Bristow Group, Inc. (a) 499,712 14,095 EGL, Inc. (a) 655,136 15,600 ExpressJet Holdings, Inc. (a) 93,288 77,700 JetBlue Airways Corp. (a)(e) 912,975 7,900 Midwest Air Group, Inc. (a) 118,658 8,200 PHI, Inc. (a) 244,278 11,200 Pinnacle Airlines Corp. (a) 210,000 14,400 Republic Airways Holdings, Inc. (a) 293,040 28,100 SkyWest, Inc. 669,623 ------------- 5,824,630 - ----------------------------------------------------------------------------------------------------------------------------- Aluminum - 0.1% 11,002 Century Aluminum Co. (a) 601,039 6,100 Kaiser Aluminum Corp. 444,568 ------------- 1,045,607 - ----------------------------------------------------------------------------------------------------------------------------- Auto Parts: After Market - 0.1% 9,543 Aftermarket Technology Corp. (a) 283,236 7,350 Commercial Vehicle Group, Inc. (a) 136,930 7,100 Keystone Automotive Industries, Inc. (a) 293,727 3,800 Standard Motor Products, Inc. 57,114 12,999 Superior Industries International, Inc. 282,858 ------------- 1,053,865 - ----------------------------------------------------------------------------------------------------------------------------- Auto Parts: Original Equipment - 0.6% 19,400 American Axle & Manufacturing Holdings, Inc. 574,628 12,300 Amerigon Inc. (a) 220,785 31,000 ArvinMeritor, Inc. 688,200 44,200 Hayes Lemmerz International, Inc. (a) 236,470
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 33,380 Lear Corp. (a) $ 1,188,662 7,300 Noble International Ltd. 149,212 2,873 Sauer-Danfoss, Inc. 85,500 2,500 Stoneridge, Inc. (a) 30,850 20,100 Tenneco, Inc. (a) 704,304 56,400 Visteon Corp. (a) 456,840 ------------- 4,335,451 - ----------------------------------------------------------------------------------------------------------------------------- Auto, Trucks & Parts - 0.2% 7,700 Accuride Corp. (a) 118,657 28,500 Force Protection, Inc. (a) 588,240 4,000 Miller Industries, Inc. (a) 100,400 13,394 Modine Manufacturing Co. 302,704 12,300 Spartan Motors, Inc. 209,346 13,245 Wabash National Corp. 193,774 ------------- 1,513,121 - ----------------------------------------------------------------------------------------------------------------------------- Banks: New York City - 0.1% 12,900 Signature Bank (a) 439,890 - ----------------------------------------------------------------------------------------------------------------------------- Banks: Outside New York City - 5.1% 3,784 1st Source Corp. 94,297 480 Abington Bancorp, Inc. 4,584 7,021 Alabama National Bancorp. 434,179 11,718 Amcore Financial, Inc. 339,705 7,450 AmericanWest Bancorp 135,814 5,900 Ameris Bancorp 132,573 2,190 Bancfirst Corp. 93,776 8,800 Banco Latinoamericano de Exportaciones, SA 'E' 165,440 7,515 The Bancorp, Inc. (a) 168,035 5,200 Bank of the Ozarks, Inc. 144,924 10,100 BankFinancial Corp. 156,045 7,013 Banner Corp. 238,863 17,333 Boston Private Financial Holdings, Inc. 465,738 26,365 CVB Financial Corp. 293,179 4,021 Capital City Bank Group, Inc. (e) 126,018 4,100 Capital Corp. of the West 98,236 6,000 Capitol Bancorp Ltd. 163,980 11,925 Cascade Bancorp (e) 275,825 22,244 Cathay General Bancorp 746,064 24,000 Centennial Bank Holdings, Inc. (a) 203,280 5,700 Center Financial Corp. 96,444 12,248 Central Pacific Financial Corp. 404,306 10,748 Chemical Financial Corp. 278,051 19,982 Chittenden Corp. 698,371 36,387 Citizens Banking Corp. 665,882 9,193 City Holding Co. 352,368 5,898 CityBank 185,846 1,700 Clifton Savings Bancorp, Inc. 18,428 8,026 CoBiz Financial, Inc. 145,431 7,141 Columbia Banking System, Inc. 208,874 4,800 Community Bancorp (a) 134,304 11,800 Community Bank System, Inc. 236,236 8,699 Community Banks, Inc. 280,282 6,723 Community Trust Bancorp, Inc. 217,153 16,904 Corus Bankshares, Inc. (e) 291,763 2,000 Enterprise Financial Services Corp. 49,720 35,300 First BanCorp 387,947 4,136 First Bancorp 77,467 4,514 First Busey Corp. 90,235
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 13,123 First Charter Corp. $ 255,505 32,240 First Commonwealth Financial Corp. (e) 352,061 11,311 First Community Bancorp, Inc. 647,102 3,094 First Community Bancshares, Inc. 96,502 14,387 First Financial Bancorp 215,661 7,953 First Financial Bankshares, Inc. 308,656 5,744 First Financial Corp. 168,644 5,846 First Merchants Corp. 140,479 23,500 First Midwest Bancorp, Inc. 834,485 3,600 First Regional Bancorp (a) 91,584 1,700 First South Bancorp, Inc. (e) 45,730 11,500 First State Bancorp. 244,835 38,200 FirstMerit Corp. 799,526 14,300 Franklin Bank Corp. (a) 213,070 15,966 Frontier Financial Corp. 359,714 21,164 Glacier Bancorp, Inc. 430,687 24,700 Greater Bay Bancorp 687,648 2,800 Greene County Bancshares, Inc. 87,528 11,654 Hancock Holding Co. 437,608 17,704 Hanmi Financial Corp. 302,030 12,636 Harleysville National Corp. 203,692 4,300 Heartland Financial USA, Inc. 104,490 4,700 Heritage Commerce Corp. 111,296 2,300 Home Bancshares, Inc. 51,865 8,145 Independent Bank Corp./MA 240,603 13,645 Independent Bank Corp./MI 234,830 10,774 Integra Bank Corp. 231,318 21,210 International Bancshares Corp. 543,400 20,000 Investors Bancorp, Inc. (a) 268,600 10,148 Irwin Financial Corp. 151,916 4,196 Lakeland Bancorp, Inc. 55,807 4,000 Lakeland Financial Corp. 85,080 13,983 MB Financial, Inc. 485,769 6,727 Macatawa Bank Corp. 107,027 5,419 MainSource Financial Group, Inc. 90,985 8,480 Midwest Banc Holdings, Inc. 122,960 12,913 NBT Bancorp, Inc. 291,317 9,700 Nara Bancorp, Inc. 154,521 18,590 National Penn Bancshares, Inc. 310,081 32,795 Old National Bancorp 544,725 5,722 Old Second Bancorp, Inc. 166,854 3,541 Omega Financial Corp. 95,217 14,818 Oriental Financial Group 161,664 21,062 Pacific Capital Bancorp 568,253 4,715 Park National Corp. 399,785 4,110 Peoples Bancorp, Inc. 111,258 6,800 Pinnacle Financial Partners, Inc. (a) 199,648 8,200 Piper Jaffray Cos. (a) 456,986 4,050 Preferred Bank 162,000 9,796 PrivateBancorp, Inc. 282,125 15,400 Prosperity Bancshares, Inc. 504,504 16,024 Provident Bankshares Corp. 525,267 4,898 Renasant Corp. 111,381 2,954 Republic Bancorp, Inc. Class A 49,007
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 1,333 Royal Bancshares of Pennsylvania Class A $ 26,273 9,963 S&T Bancorp, Inc. 327,783 2,463 SCBT Financial Corp. 89,653 16,200 SVB Financial Group (a) 860,382 3,030 SY Bancorp, Inc. 71,993 7,314 Sandy Spring Bancorp, Inc. 229,952 1,403 Santander BanCorp 20,849 8,958 Seacoast Banking Corp. of Florida (e) 194,837 6,700 Security Bank Corp. 134,670 900 Sierra Bancorp 25,380 4,600 Simmons First National Corp. Class A 126,914 30,100 The South Financial Group, Inc. 681,464 4,680 Southside Bancshares, Inc. 101,650 8,900 Southwest Bancorp, Inc. 213,956 36,814 Sterling Bancshares, Inc. 416,366 16,002 Sterling Financial Corp. 168,341 4,400 Suffolk Bancorp 140,448 5,270 Sun Bancorp, Inc. (a) 88,905 15,100 Superior Bancorp (a) 154,473 23,916 Susquehanna Bancshares, Inc. 535,001 2,500 Taylor Capital Group, Inc. 68,825 13,261 Texas Capital Bancshares, Inc. (a) 296,383 2,840 Tompkins Trustco, Inc. 106,216 3,878 Trico Bancshares 86,712 39,361 TrustCo Bank Corp. NY 388,887 23,927 Trustmark Corp. 618,752 47,100 UCBH Holdings, Inc. 860,517 14,052 UMB Financial Corp. 518,097 3,896 USB Holding Co., Inc. 74,258 27,880 Umpqua Holdings Corp. 655,459 4,500 Union Bankshares Corp. 104,400 17,700 United Bankshares, Inc. 562,860 16,000 United Community Banks, Inc. 414,240 1,300 United Security Bancshares 26,494 2,750 Univest Corp. of Pennsylvania 61,930 7,554 Virginia Commerce Bancorp (a) 127,738 5,000 Washington Trust Bancorp, Inc. 126,050 1 Wells Fargo & Co. 19 10,863 WesBanco, Inc. 320,459 5,000 West Coast Bancorp 151,950 14,583 Westamerica Bancorp. 645,152 5,000 Western Alliance Bancorp (a) 149,250 7,300 Wilshire Bancorp, Inc. 88,914 12,000 Wintrust Financial Corp. 526,200 3,500 Yardville National Bancorp 119,525 ------------- 35,911,526 - ----------------------------------------------------------------------------------------------------------------------------- Beverage: Brewers (Wineries) - 0.0% 5,600 Boston Beer Co., Inc. Class A (a) 220,360 - ----------------------------------------------------------------------------------------------------------------------------- Beverage: Soft Drinks - 0.1% 1,287 Coca-Cola Bottling Co. Consolidated 64,736 1,610 Farmer Bros. Co. 36,434 3,200 Green Mountain Coffee Roasters, Inc. (a) 251,968 12,900 Jones Soda Co. (a)(e) 180,858 3,108 National Beverage Corp. (a) 35,773 8,600 Peet's Coffee & Tea, Inc. (a) 211,818 ------------- 781,587 - -----------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- Biotechnology Research & 16,500 Acadia Pharmaceuticals, Inc. (a) $ 225,555 Production - 2.3% 7,000 Acorda Therapeutics, Inc. (a) 119,420 5,400 Advanced Magnetics, Inc. (a) 314,064 11,287 Albany Molecular Research, Inc. (a) 167,612 16,980 Alexion Pharmaceuticals, Inc. (a) 765,119 26,900 Allos Therapeutics, Inc. (a) 118,898 14,900 Alnylam Pharmaceuticals, Inc. (a)(e) 226,331 5,600 Altus Pharmaceuticals, Inc. (a) 64,624 17,300 American Oriental Bioengineering, Inc. (a)(e) 153,970 31,600 Applera Corp. - Celera Genomics Group (a)(h) 391,840 30,700 Arena Pharmaceuticals, Inc. (a) 337,393 38,419 Ariad Pharmaceuticals, Inc. (a)(e) 210,920 8,600 Arqule, Inc. (a) 60,630 20,400 Array Biopharma, Inc. (a) 238,068 13,220 ArthroCare Corp. (a) 580,490 16,800 Bioenvision, Inc. (a)(e) 97,104 9,300 Bionovo, Inc. (a) 35,898 34,924 Cell Genesys, Inc. (a)(e) 116,995 26,367 Cubist Pharmaceuticals, Inc. (a) 519,694 17,200 Cypress Bioscience, Inc. (a) 227,556 10,000 Cytokinetics, Inc. (a) 56,500 9,024 Digene Corp. (a)(e) 541,891 24,600 Discovery Laboratories, Inc. (a) 69,618 38,096 Encysive Pharmaceuticals, Inc. (a)(e) 67,811 26,300 Enzon Pharmaceuticals, Inc. (a) 206,455 39,218 Exelixis, Inc. (a)(e) 474,538 45,900 GenVec, Inc. (a) 107,865 3,900 Genomic Health, Inc. (a)(e) 73,320 31,629 Geron Corp. (a)(e) 222,668 24,100 Halozyme Therapeutics, Inc. (a) 222,443 63,700 Human Genome Sciences, Inc. (a) 568,204 6,800 Idenix Pharmaceuticals, Inc. (a) 40,120 16,200 Immunomedics, Inc. (a) 67,230 36,524 Incyte Corp. (a) 219,144 9,200 Integra LifeSciences Holdings Corp. (a)(e) 454,664 13,214 InterMune, Inc. (a)(e) 342,771 6,600 Kendle International, Inc. (a) 242,682 6,200 Kensey Nash Corp. (a) 166,222 16,800 Keryx Biopharmaceuticals, Inc. (a) 164,136 11,600 Kosan Biosciences, Inc. (a) 60,552 14,850 MannKind Corp. (a)(e) 183,101 16,300 Martek Biosciences Corp. (a)(e) 423,311 9,901 Maxygen, Inc. (a) 84,852 12,000 Medivation, Inc. (a) 245,160 4,200 Metabolix, Inc. (a) 105,126 9,800 Momenta Pharmaceuticals, Inc. (a)(e) 98,784 18,700 Myriad Genetics, Inc. (a) 695,453 26,354 Nabi Biopharmaceuticals (a) 121,228 11,100 Nastech Pharmaceutical Co., Inc. (a)(e) 121,101 19,800 Neurocrine Biosciences, Inc. (a)(e) 222,354 8,200 Neurogen Corp. (a) 54,448 7,200 Novacea, Inc. (a) 68,040 26,900 OSI Pharmaceuticals, Inc. (a) 974,049 4,700 Omrix Biopharmaceuticals, Inc. (a) 147,862
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 400 Orexigen Therapeutics, Inc. (a) $ 6,008 3,400 Osiris Therapeutics, Inc. (a)(e) 45,934 8,600 PRA International, Inc. (a) 217,580 9,550 PharmaNet Development Group, Inc. (a) 304,454 17,000 Poniard Pharmaceuticals, Inc. (a) 115,600 11,300 Progenics Pharmaceuticals, Inc. (a) 243,741 12,100 Protalix BioTherapeutics, Inc. (a) 326,579 17,500 Regeneration Technologies, Inc. (a) 196,875 8,370 Rigel Pharmaceuticals, Inc. (a) 74,577 23,128 Savient Pharmaceuticals, Inc. (a) 287,250 13,900 Seattle Genetics, Inc. (a) 136,359 10,845 Tanox, Inc. (a) 210,501 23,032 Telik, Inc. (a) 77,848 7,100 Tercica, Inc. (a) 36,210 13,900 Vanda Pharmaceuticals, Inc. (a) 281,614 15,078 Verenium Corp. (a) 76,445 29,700 ViroPharma, Inc. (a) 409,860 45,000 XOMA Ltd. (a) 136,800 14,100 ZymoGenetics, Inc. (a) 206,001 ------------- 16,276,120 - ----------------------------------------------------------------------------------------------------------------------------- Building: Cement - 0.0% 14,800 US Concrete, Inc. (a) 128,612 - ----------------------------------------------------------------------------------------------------------------------------- Building: Heating & Plumbing - 0.0% 2,100 Aaon, Inc. 66,885 10,800 Interline Brands, Inc. (a) 281,664 ------------- 348,549 - ----------------------------------------------------------------------------------------------------------------------------- Building: Materials - 0.5% 4,800 Ameron International Corp. 432,912 3,200 BlueLinx Holdings, Inc. 33,568 12,800 Building Material Holding Corp. 181,632 12,012 LSI Industries, Inc. 215,015 10,068 NCI Building Systems, Inc. (a) 496,654 1,300 PGT, Inc. (a) 14,209 14,932 Simpson Manufacturing Co., Inc. 503,806 11,805 Texas Industries, Inc. 925,630 5,209 Trex Co., Inc. (a) 102,253 9,865 Watsco, Inc. 536,656 9,500 Zoltek Cos., Inc. (a) 394,535 ------------- 3,836,870 - ----------------------------------------------------------------------------------------------------------------------------- Building: Miscellaneous - 0.2% 5,000 Builders FirstSource, Inc. (a) 80,300 17,800 Comfort Systems USA, Inc. 252,404 6,700 Drew Industries, Inc. (a) 222,038 13,800 Goodman Global, Inc. (a) 306,636 15,847 Griffon Corp. (a) 345,148 ------------- 1,206,526 - ----------------------------------------------------------------------------------------------------------------------------- Building: Roofing & Wallboard - 0.1% 22,250 Beacon Roofing Supply, Inc. (a)(e) 378,027 - ----------------------------------------------------------------------------------------------------------------------------- Cable Television Services - 0.1% 177,900 Charter Communications, Inc. Class A (a)(e) 720,495 6,998 Crown Media Holdings, Inc. Class A (a)(e) 50,386 44,094 TiVo, Inc. (a) 255,304 ------------- 1,026,185 - ----------------------------------------------------------------------------------------------------------------------------- Casinos & Gambling - 0.6% 11,000 Ameristar Casinos, Inc. 382,140 23,200 Bally Technologies, Inc. (a) 612,944 2,832 Churchill Downs, Inc. 148,340 6,705 Dover Downs Gaming & Entertainment, Inc. 100,642 6,875 Isle of Capri Casinos, Inc. (a)(e) 164,725 11,500 Lakes Entertainment, Inc. (a)(e) 135,815 11,300 MTR Gaming Group, Inc. (a) 174,020
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 17,474 Magna Entertainment Corp. Class A (a) $ 51,024 5,200 Monarch Casino & Resort, Inc. (a) 139,620 14,300 Multimedia Games, Inc. (a)(e) 182,468 25,894 Pinnacle Entertainment, Inc. (a) 728,916 3,500 Riviera Holdings Corp. (a) 127,225 17,800 Shuffle Master, Inc. (a) 295,480 16,500 Trump Entertainment Resorts, Inc. (a) 207,075 16,618 WMS Industries, Inc. (a) 479,595 ------------- 3,930,029 - ----------------------------------------------------------------------------------------------------------------------------- Chemicals - 1.5% 5,433 American Vanguard Corp. (e) 77,800 9,156 Arch Chemicals, Inc. 321,742 5,800 Balchem Corp. 105,386 24,100 CF Industries Holdings, Inc. 1,443,349 10,500 Cabot Microelectronics Corp. (a) 372,645 21,301 Calgon Carbon Corp. (a)(e) 247,092 12,485 Cambrex Corp. 165,676 12,600 EnerSys (a) 230,580 17,264 Energy Conversion Devices, Inc. (a)(e) 532,076 21,900 Exide Technologies (a) 203,670 17,537 Georgia Gulf Corp. (e) 317,595 53,600 Hercules, Inc. (a) 1,053,240 5,500 Innophos Holdings, Inc. 78,650 4,900 Innospec, Inc. 290,129 7,700 LSB Industries, Inc. (a) 164,241 5,500 Landec Corp. (a) 73,700 9,341 Medis Technologies Ltd. (a)(e) 137,219 3,134 NL Industries, Inc. 31,403 6,700 NewMarket Corp. 324,079 6,665 Nuco2, Inc. (a) 171,091 13,000 OM Group, Inc. (a) 687,960 6,200 Pioneer Cos., Inc. (a) 213,094 38,967 PolyOne Corp. (a) 280,173 13,800 Rockwood Holdings, Inc. (a) 504,390 13,606 Schulman A, Inc. 331,034 16,500 Senomyx, Inc. (a) 222,750 4,000 ShengdaTech, Inc. (a) 21,280 2,655 Stepan Co. 80,393 9,400 Tronox, Inc. Class A 135,172 6,300 Tronox, Inc. Class B 88,515 20,700 UAP Holding Corp. 623,898 30,500 WR Grace & Co. (a) 746,945 ------------- 10,276,967 - ----------------------------------------------------------------------------------------------------------------------------- Coal - 0.1% 25,900 Alpha Natural Resources, Inc. (a) 538,461 48,200 International Coal Group, Inc. (a) 288,236 9,200 US BioEnergy Corp. (a) 104,512 ------------- 931,209 - ----------------------------------------------------------------------------------------------------------------------------- Commercial Information Services - 0.2% 14,158 Arbitron, Inc. 729,562 225,800 CMGI, Inc. (a) 440,310 12,061 infoUSA, Inc. 123,263 13,400 LECG Corp. (a) 202,474 9,800 LoopNet, Inc. (a) 228,634 ------------- 1,724,243 - ----------------------------------------------------------------------------------------------------------------------------- Communications & Media - 0.1% 30,100 Entravision Communications Corp. Class A (a) 313,943 106,500 Gemstar-TV Guide International, Inc. (a) 523,980
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 8,900 Knology, Inc. (a) $ 154,593 ------------- 992,516 - ----------------------------------------------------------------------------------------------------------------------------- Communications Technology - 2.4% 169,100 3Com Corp. (a) 698,383 6,000 Acme Packet, Inc. (a) 68,940 28,200 Adtran, Inc. 732,354 10,422 Anaren, Inc. (a) 183,531 13,472 Anixter International, Inc. (a) 1,013,229 1,100 Aruba Networks, Inc. (a) 22,110 24,000 Atheros Communications, Inc. (a) 740,160 58,500 Avanex Corp. (a) 105,300 24,050 Avocent Corp. (a) 697,690 5,159 Bel Fuse, Inc. 175,561 2,600 BigBand Networks, Inc. (a) 34,086 9,288 Black Box Corp. 384,337 1,000 CPI International, Inc. (a) 19,830 21,400 CSG Systems International, Inc. (a) 567,314 8,700 Cbeyond Communications, Inc. (a) 335,037 20,400 Cogent Communications Group, Inc. (a) 609,348 8,500 Comtech Group, Inc. (a) 140,335 11,325 Comtech Telecommunications Corp. (a) 525,706 8 CycleLogic, Inc. (a) 0 8,100 Digi International, Inc. (a) 119,394 13,900 Ditech Networks, Inc. (a) 113,841 6,400 EMS Technologies, Inc. (a) 141,184 15,213 Echelon Corp. (a)(e) 237,779 51,500 Extreme Networks, Inc. (a) 208,575 105,100 Finisar Corp. (a)(e) 397,278 63,300 Foundry Networks, Inc. (a) 1,054,578 5,400 GeoEye, Inc. (a) 117,342 39,196 Harmonic, Inc. (a) 347,669 9,250 Harris Stratex Networks, Inc. Class A (a) 166,315 1,600 Hughes Communications, Inc. (a) 83,488 12,200 InPhonic, Inc. (a)(e) 56,852 9,577 Inter-Tel, Inc. 229,178 16,900 InterVoice, Inc. (a) 140,777 15,329 Ixia (a) 141,947 22,000 j2 Global Communications, Inc. (a) 767,800 4,300 Loral Space & Communications Ltd. (a) 211,904 16,400 NETGEAR, Inc. (a) 594,500 7,000 Network Equipment Technologies, Inc. (a) 66,780 6,900 Nextwave Wireless, Inc. (a) 57,615 15,100 Novatel Wireless, Inc. (a) 392,902 9,702 Oplink Communications, Inc. (a) 145,530 1,300 Optium Corp. (a) 16,445 7,100 SeaChange International, Inc. (a) 55,096 20,138 Secure Computing Corp. (a) 152,847 16,800 Sirenza Microdevices, Inc. (a) 199,416 109,700 Sonus Networks, Inc. (a) 934,644 11,210 Standard Microsystems Corp. (a) 384,951 4,300 Switch and Data Facilities Co., Inc. (a) 82,517 69,400 Sycamore Networks, Inc. (a) 278,988 8,400 Syniverse Holdings, Inc. (a) 108,024 97,600 TIBCO Software, Inc. (a) 883,280 28,900 Tekelec (a) 416,738
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 27,730 Terremark Worldwide, Inc. (a) $ 178,859 47,800 Utstarcom, Inc. (a) 268,158 9,201 Viasat, Inc. (a) 295,352 13,500 Vonage Holdings Corp. (a) 41,985 ------------- 17,143,779 - ----------------------------------------------------------------------------------------------------------------------------- Computer Services Software & Systems - 4.6% 19,500 Actuate Corp. (a) 132,405 25,802 Agile Software Corp. (a) 207,964 13,000 American Reprographics Co. (a) 400,270 6,300 Ansoft Corp. (a) 185,787 33,764 Ansys, Inc. (a) 894,746 34,080 Ariba, Inc. (a) 337,733 43,300 Art Technology Group, Inc. (a) 115,178 13,100 AsiaInfo Holdings, Inc. (a) 127,070 38,288 Aspen Technology, Inc. (a) 536,032 87,800 BearingPoint, Inc. (a) 641,818 19,126 Blackbaud, Inc. 422,302 14,000 Blackboard, Inc. (a) 589,680 5,900 Blue Coat Systems, Inc. (a) 292,168 34,167 Borland Software Corp. (a) 202,952 9,400 Bottomline Technologies, Inc. (a) 116,090 13,400 CACI International, Inc. Class A (a) 654,590 7,600 COMSYS IT Partners, Inc. (a) 173,356 17,340 Chordiant Software, Inc. (a) 271,544 23,602 Ciber, Inc. (a) 193,064 18,300 Commvault Systems, Inc. (a) 316,041 900 Comverge, Inc. (a) 27,909 17,000 Concur Technologies, Inc. (a) 388,450 12,100 Covansys Corp. (a) 410,553 13,100 DealerTrack Holdings, Inc. (a) 482,604 17,500 Digital River, Inc. (a) 791,875 7,400 DivX, Inc. (a)(e) 111,000 3,300 Double-Take Software, Inc. (a) 54,153 14,718 EPIQ Systems, Inc. (a) 237,835 6,300 eCollege.com, Inc. (a) 140,175 24,639 Electronics for Imaging, Inc. (a) 695,313 25,300 Epicor Software Corp. (a) 376,211 13,500 Equinix, Inc. (a)(e) 1,234,845 30,179 Gartner, Inc. Class A (a) 742,102 6,100 i2 Technologies, Inc. (a)(e) 113,704 5,100 iGate Corp. (a) 40,902 3,700 Imergent, Inc. (e) 90,502 9,700 Infocrossing, Inc. (a)(e) 179,159 41,600 Informatica Corp. (a) 614,432 3,100 Integral Systems, Inc. 75,361 3,500 Interactive Intelligence, Inc. (a) 72,100 14,200 Internet Capital Group, Inc. (a) 176,080 20,525 Interwoven, Inc. (a) 288,171 11,108 JDA Software Group, Inc. (a) 218,050 3,000 Keynote Systems, Inc. (a) 49,200 56,600 Lawson Software, Inc. (a)(e) 559,774 25,300 Lionbridge Technologies, Inc. (a) 149,017 9,400 LivePerson, Inc. (a) 50,290 15,000 MSC.Software Corp. (a) 203,100 24,400 Macrovision Corp. (a) 733,464 19,900 Magma Design Automation, Inc. (a) 279,396
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 12,739 Manhattan Associates, Inc. (a) $ 355,545 6,700 Mantech International Corp. Class A (a) 206,561 37,000 Mentor Graphics Corp. (a) 487,290 10,856 Mercury Computer Systems, Inc. (a) 132,443 4,200 MicroStrategy, Inc. Class A (a) 396,858 18,798 Micros Systems, Inc. (a) 1,022,611 14,900 Ness Technologies, Inc. (a) 193,849 57,295 Nuance Communications, Inc. (a) 958,545 14,600 Omniture, Inc. (a) 334,632 65,500 On2 Technologies, Inc. (a) 196,500 20,900 OpenTV Corp. (a) 44,308 42,733 Openwave Systems, Inc. (e) 267,509 42,900 Opsware, Inc. (a) 407,979 6,800 PDF Solutions, Inc. (a) 80,444 19,607 Packeteer, Inc. (a) 153,131 52,660 Parametric Technology Corp. (a) 1,137,983 1,800 Pegasystems, Inc. 19,674 19,208 Progress Software Corp. (a) 610,622 3,300 QAD, Inc. 27,390 27,300 Quest Software, Inc. (a) 441,987 44,400 RealNetworks, Inc. (a) 362,748 7,300 RightNow Technologies, Inc. (a) 119,793 11,880 SAVVIS, Inc. (a) 588,179 5,700 SI International, Inc. (a) 188,214 7,989 SPSS, Inc. (a) 352,634 16,000 SRA International, Inc. Class A (a) 404,160 14,361 SYKES Enterprises, Inc. (a) 272,715 4,300 SYNNEX Corp. (a) 88,623 40,992 Sapient Corp. (a) 316,868 10,000 Sigma Designs, Inc. (a) 260,900 12,700 Smith Micro Software, Inc. (a) 191,262 8,600 Solera Holdings, Inc. (a) 166,668 24,341 SonicWALL, Inc. (a) 209,089 40,100 Sourceforge, Inc. (a) 169,222 700 Stanley, Inc. (a) 12,334 39,700 Sybase, Inc. (a) 948,433 6,500 Synchronoss Technologies, Inc. (a) 190,710 3,783 Syntel, Inc. 114,965 9,400 Taleo Corp. Class A (a) 211,782 300 TechTarget, Inc. (a) 3,855 17,985 Transaction Systems Architects, Inc. Class A (a) 605,375 19,708 The TriZetto Group, Inc. (a) 381,547 16,900 Tyler Technologies, Inc. (a) 209,729 12,900 Ultimate Software Group, Inc. (a) 373,197 1,600 Unica Corp. (a) 26,400 13,400 VASCO Data Security International, Inc. (a) 304,314 12,380 Vignette Corp. (a) 237,201 8,900 Visual Sciences, Inc. (a) 137,683 19,502 Websense, Inc. (a) 414,418 32,400 Wind River Systems, Inc. (a) 356,400 21,608 Zoran Corp. (a) 433,024 ------------- 32,524,820 - ----------------------------------------------------------------------------------------------------------------------------- Computer Technology - 1.0% 52,100 Adaptec, Inc. (a) 198,501 16,800 Advanced Analogic Technologies, Inc. (a) 162,960 20,500 Cray, Inc. (a) 156,415
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 35,600 Emulex Corp. (a) $ 777,504 18,609 FalconStor Software, Inc. (a) 196,325 133,400 Gateway, Inc. (a) 212,106 13,817 Hutchinson Technology, Inc. (a) 259,898 15,300 Imation Corp. 563,958 15,100 Immersion Corp. (a) 226,198 23,909 Intermec, Inc. (a)(e) 605,137 1,800 Isilon Systems, Inc. (a) 27,756 12,000 Komag, Inc. (a) 382,680 45,088 Palm, Inc. (e) 721,859 35,800 Perot Systems Corp. Class A (a) 610,032 74,600 Quantum Corp. (a) 236,482 14,600 Rackable Systems, Inc. (a)(e) 180,456 11,400 Radiant Systems, Inc. (a) 150,936 10,942 Radisys Corp. (a) 135,681 2,600 Rimage Corp. (a) 82,134 7,400 STEC, Inc. (a) 47,582 42,100 Safeguard Scientifics, Inc. (a) 118,301 1,200 Silicon Graphics, Inc. (a) 31,848 5,400 Stratasys, Inc. (a) 253,692 12,600 Synaptics, Inc. (a) 450,954 27,700 Trident Microsystems, Inc. (a) 508,295 ------------- 7,297,690 - ----------------------------------------------------------------------------------------------------------------------------- Construction - 0.5% 5,251 Brookfield Homes Corp. (e) 152,752 13,836 EMCOR Group, Inc. (a) 1,008,644 15,671 Granite Construction, Inc. 1,005,765 10,900 Perini Corp. (a) 670,677 12,700 Washington Group International, Inc. (a) 1,016,127 ------------- 3,853,965 - ----------------------------------------------------------------------------------------------------------------------------- Consumer Electronics - 0.8% 71,900 CNET Networks, Inc. (a) 588,861 7,900 DTS, Inc. (a) 171,983 61,300 EarthLink, Inc. (a) 457,911 200 Glu Mobile, Inc. (a) 2,780 16,000 InfoSpace, Inc. 371,360 17,990 Internap Network Services Corp. (a) 259,416 21,800 Ipass, Inc. (a)(e) 118,156 8,300 LoJack Corp. (a) 185,007 11,274 Midway Games, Inc. (a)(e) 71,703 10,300 NIC, Inc. 70,452 21,100 NetFlix, Inc. (a)(e) 409,129 12,000 Sohu.com, Inc. (a) 383,880 29,437 THQ, Inc. (a) 898,417 31,700 Take-Two Interactive Software, Inc. (a) 633,049 29,050 United Online, Inc. 479,035 6,286 Universal Electronics, Inc. (a) 228,308 ------------- 5,329,447 - ----------------------------------------------------------------------------------------------------------------------------- Consumer Products - 0.6% 24,100 American Greetings Corp. Class A 682,753 13,200 Blyth, Inc. 350,856 3,391 CSS Industries, Inc. 134,317 7,200 Citi Trends, Inc. (a) 273,312 7,100 Mannatech, Inc. (e) 112,819 13,073 Matthews International Corp. Class A 570,114 13,663 Nautilus, Inc. 164,503 8,900 Oakley, Inc. 252,760 21,276 Playtex Products, Inc. (a) 315,098
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 8,513 RC2 Corp. (a) $ 340,605 21,100 Spectrum Brands, Inc. (a) 142,847 15,991 The Topps Co., Inc. 168,065 28,474 Tupperware Corp. 818,343 4,700 USANA Health Sciences, Inc. (a) 210,278 ------------- 4,536,670 - ----------------------------------------------------------------------------------------------------------------------------- Containers & Packaging: Metals & 30,200 AptarGroup, Inc. 1,073,912 Glass - 0.4% 14,450 Greif, Inc. 861,365 17,842 Mobile Mini, Inc. (a) 520,986 9,600 Silgan Holdings, Inc. 530,688 ------------- 2,986,951 - ----------------------------------------------------------------------------------------------------------------------------- Containers & Packaging: Paper & 2,100 AEP Industries, Inc. (a) 94,521 Plastic - 0.1% 25,100 Graphic Packaging Corp. (a) 121,484 14,352 Myers Industries, Inc. 317,323 ------------- 533,328 - ----------------------------------------------------------------------------------------------------------------------------- Copper - 0.1% 16,082 Mueller Industries, Inc. 553,864 - ----------------------------------------------------------------------------------------------------------------------------- Cosmetics - 0.2% 10,593 Elizabeth Arden, Inc. (a) 256,986 15,600 Helen of Troy Ltd. (a) 421,200 1,800 Inter Parfums, Inc. 47,916 21,826 Nu Skin Enterprises, Inc. Class A 360,129 79,475 Revlon, Inc. Class A (a) 108,881 ------------- 1,195,112 - ----------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.6% 300 ACA Capital Holdings, Inc. (a) 3,570 58,600 The BISYS Group, Inc. 693,238 2,100 Clayton Holdings, Inc. (a) 23,919 2,500 Enstar Group Ltd. (a) 301,775 19,950 Euronet Worldwide, Inc. (a)(e) 581,742 1,900 Evercore Partners, Inc. Class A 56,563 3,400 FCStone Group, Inc. (a) 194,854 23,800 F.N.B. Corp. 398,412 20,690 Freedom Acquisition Holdings, Inc. (a) 227,797 7,600 Greenhill & Co., Inc. (e) 522,196 8,900 Huron Consulting Group, Inc. (a) 649,789 7,700 Information Services Group, Inc. (a) 58,905 20,000 Interactive Brokers Group, Inc. Class A (a) 542,600 9,200 Marathon Acquisition Corp. (a) 72,496 1,400 Oritani Financial Corp. (a) 20,006 ------------- 4,347,862 - ----------------------------------------------------------------------------------------------------------------------------- Diversified Materials & Processing - 0.8% 19,360 Acuity Brands, Inc. 1,167,021 18,014 Barnes Group, Inc. 570,683 20,094 Brady Corp. 746,291 24,210 Clarcor, Inc. 906,180 39,962 Hexcel Corp. (a) 841,999 6,300 Koppers Holdings, Inc. 212,184 32,014 Olin Corp. 672,294 13,345 Tredegar Corp. 284,249 3,000 Valhi, Inc. 48,900 ------------- 5,449,801 - ----------------------------------------------------------------------------------------------------------------------------- Drug & Grocery Store Chains - 0.6% 432 Arden Group, Inc. Class A 58,925 24,407 Casey's General Stores, Inc. 665,335 8,831 The Great Atlantic & Pacific Tea Co., Inc. (a)(e) 296,192 6,364 Ingles Markets, Inc. Class A 219,240 14,283 Longs Drug Stores Corp. 750,143 6,777 Nash Finch Co. 335,462 18,642 Pathmark Stores, Inc. (a) 241,600
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 18,069 Ruddick Corp. $ 544,238 11,100 Spartan Stores, Inc. 365,301 1,000 Village Super Market, Inc. Class A 47,810 5,400 Weis Markets, Inc. 218,754 12,229 Wild Oats Markets, Inc. (a) 204,958 13,700 Winn-Dixie Stores, Inc. (a) 401,410 ------------- 4,349,368 - ----------------------------------------------------------------------------------------------------------------------------- Drugs & Pharmaceuticals - 2.3% 14,900 Adams Respiratory Therapeutics, Inc. (a)(e) 586,911 500 Affymax, Inc. (a) 13,480 31,100 Akorn, Inc. (a) 217,389 4,200 Alexza Pharmaceuticals, Inc. (a) 34,734 41,800 Alkermes, Inc. (a) 610,280 18,825 Alpharma, Inc. Class A 489,638 15,400 Auxilium Pharmaceuticals, Inc. (a) 245,476 16,200 Beijing Med-Pharm Corp. (a) 172,854 6,100 Bentley Pharmaceuticals, Inc. (a) 74,054 43,948 BioMarin Pharmaceuticals, Inc. (a) 788,427 5,500 Bradley Pharmaceuticals, Inc. (a) 119,405 29,400 CV Therapeutics, Inc. (a)(e) 388,374 3,700 Cadence Pharmaceuticals, Inc. (a) 44,881 1,700 Caraco Pharmaceutical Laboratories Ltd. (a) 25,806 8,300 Chattem, Inc. (a)(e) 526,054 26,300 CytRx Corp. (a) 82,056 36,300 Dendreon Corp. (a)(e) 257,004 20,800 Durect Corp. (a) 80,080 100 Emergent Biosolutions, Inc. (a) 1,030 11,295 Enzo Biochem, Inc. (a)(e) 168,860 4,900 GTx, Inc. (a)(e) 79,331 20,300 Indevus Pharmaceuticals, Inc. (a) 136,619 40,889 Isis Pharmaceuticals, Inc. (a) 395,806 22,600 Javelin Pharmaceuticals, Inc. (a) 139,894 15,300 KV Pharmaceutical Co. Class A (a) 416,772 33,800 Ligand Pharmaceuticals, Inc. Class B 232,544 34,100 MGI Pharma, Inc. (a) 762,817 57,900 Medarex, Inc. (a)(e) 827,391 21,727 Medicines Co. (a) 382,830 24,300 Medicis Pharmaceutical Corp. Class A 742,122 43,200 Nektar Therapeutics (a)(e) 409,968 12,631 Noven Pharmaceuticals, Inc. (a) 296,197 2,300 Obagi Medical Products, Inc. (a) 40,756 20,800 Onyx Pharmaceuticals, Inc. (a) 559,520 17,600 Pain Therapeutics, Inc. (a)(e) 153,296 15,500 Par Pharmaceutical Cos., Inc. (a) 437,565 13,600 Penwest Pharmaceuticals Co. (a)(e) 169,592 36,915 Perrigo Co. 722,796 11,300 Pharmion Corp. (a) 327,135 13,300 Pozen, Inc. (a) 240,331 12,500 Quidel Corp. (a) 219,500 25,319 Regeneron Pharmaceuticals, Inc. (a) 453,716 23,800 Salix Pharmaceuticals Ltd. (a) 292,740 26,800 Santarus, Inc. (a)(e) 138,556 15,400 Sciele Pharma, Inc. (a)(e) 362,824 7,900 Somaxon Pharmaceuticals, Inc. (a) 96,064 26,882 SuperGen, Inc. (a) 149,464 1,600 Trubion Pharmaceuticals, Inc. (a) 33,408
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 9,046 United Therapeutics Corp. (a) $ 576,773 40,600 Valeant Pharmaceuticals International 677,614 21,500 Vivus, Inc. (a) 112,445 9,400 Xenoport, Inc. (a) 417,548 ------------- 15,930,727 - ----------------------------------------------------------------------------------------------------------------------------- Education Services - 0.5% 11,404 Bright Horizons Family Solutions, Inc. (a) 443,730 3,600 Capella Education Co. (a) 165,708 42,300 Corinthian Colleges, Inc. (a) 689,067 26,000 DeVry, Inc. 884,520 2,149 Renaissance Learning, Inc. 28,259 6,920 Strayer Education, Inc. 911,433 9,700 Universal Technical Institute, Inc. (a) 246,283 ------------- 3,369,000 - ----------------------------------------------------------------------------------------------------------------------------- Electrical & Electronics - 0.3% 29,429 Benchmark Electronics, Inc. (a) 665,684 5,300 Coleman Cable, Inc. (a) 137,058 6,800 OSI Systems, Inc. (a) 185,980 22,098 Plexus Corp. (a) 508,033 19,900 TTM Technologies, Inc. (a) 258,700 10,807 Universal Display Corp. (a) 169,778 ------------- 1,925,233 - ----------------------------------------------------------------------------------------------------------------------------- Electrical Equipment & 8,981 AO Smith Corp. 358,252 Components - 0.9% 3,700 AZZ Inc. (a) 124,505 15,100 American Superconductor Corp. (a)(e) 291,581 19,901 Baldor Electric Co. 980,721 14,168 CTS Corp. 179,367 9,918 Cohu, Inc. 220,675 6,300 Color Kinetics, Inc. (a)(e) 210,483 8,360 Franklin Electric Co., Inc. (e) 394,425 12,116 Genlyte Group, Inc. (a) 951,591 11,460 Littelfuse, Inc. (a) 387,004 19,800 MKS Instruments, Inc. (a) 548,460 3,531 Powell Industries, Inc. (a) 112,145 30,500 Power-One, Inc. (a)(e) 121,390 11,100 Sonic Solutions, Inc. (a) 139,971 30,600 Taser International, Inc. (a) 426,870 16,661 Technitrol, Inc. 477,671 7,179 Triumph Group, Inc. 470,009 ------------- 6,395,120 - ----------------------------------------------------------------------------------------------------------------------------- Electrical: Household Appliance - 0.0% 1,950 National Presto Industries, Inc. 121,563 - ----------------------------------------------------------------------------------------------------------------------------- Electronics - 0.7% 31,212 Aeroflex, Inc. (a) 442,274 15,763 Agilysys, Inc. 354,667 22,300 Arrowhead Research Corp. (a) 112,169 19,800 Avid Technology, Inc. (a)(e) 699,930 16,098 Daktronics, Inc. (e)(h) 345,785 28,800 Flir Systems, Inc. (a) 1,332,000 10,272 II-VI, Inc. (a) 279,090 54,766 MRV Communications, Inc. (a)(e) 177,990 19,380 Methode Electronics, Inc. 303,297 2,300 Multi-Fineline Electronix, Inc. (a)(e) 39,468 8,749 Park Electrochemical Corp. 246,547 35,500 Semtech Corp. (a) 615,215 6,767 Supertex, Inc. (a) 212,078 ------------- 5,160,510 - -----------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- Electronics: Instruments, Gauges & 5,000 Faro Technologies, Inc. (a) $ 159,300 Meters - 0.2% 14,002 Itron, Inc. (a) 1,091,316 4,800 Measurement Specialties, Inc. (a) 113,664 1,700 OYO Geospace Corp. (a) 126,123 5,700 Zygo Corp. (a) 81,453 ------------- 1,571,856 - ----------------------------------------------------------------------------------------------------------------------------- Electronics: Medical Systems - 1.0% 5,000 Accuray, Inc. (a) 110,900 29,800 Affymetrix, Inc. (a) 741,722 7,072 Analogic Corp. 519,863 10,500 Aspect Medical Systems, Inc. (a) 157,080 23,487 Bruker BioSciences Corp. (a) 211,618 4,700 Cynosure, Inc. Class A (a) 171,221 5,570 Datascope Corp. 213,220 23,250 eResearch Technology, Inc. (a) 221,107 8,100 Greatbatch, Inc. (a) 262,440 12,572 Haemonetics Corp. (a) 661,413 23,480 Hologic, Inc. (a)(e) 1,298,679 24,664 Illumina, Inc. (a) 1,001,112 12,151 Luminex Corp. (a) 149,579 29,900 Minrad International, Inc. (a) 177,307 12,500 Natus Medical, Inc. (a) 199,000 12,700 NxStage Medical, Inc. (a) 164,211 6,800 Quality Systems, Inc. (e) 258,196 7,300 Sirona Dental Systems, Inc. 276,159 2,300 Tomotherapy, Inc. (a) 50,416 6,800 Visicu, Inc. (a) 62,220 8,822 Zoll Medical Corp. (a) 196,819 ------------- 7,104,282 - ----------------------------------------------------------------------------------------------------------------------------- Electronics: Semi-Conductors/ 23,900 AMIS Holdings, Inc. (a) 299,228 Components - 1.9% 11,516 Actel Corp. (a) 160,188 44,600 Amkor Technology, Inc. (a)(h) 702,450 25,600 Anadigics, Inc. (a)(e) 353,024 140,700 Applied Micro Circuits Corp. (a) 351,750 900 Cavium Networks, Inc. (a) 20,358 37,700 Cirrus Logic, Inc. (a)(h) 312,910 209,800 Conexant Systems, Inc. (a) 289,524 12,383 DSP Group, Inc. (a) 253,480 8,675 Diodes, Inc. (a) 362,355 15,727 Exar Corp. (a) 210,742 6,273 Excel Technology, Inc. (a) 175,268 19,800 Formfactor, Inc. (a) 758,340 19,700 Genesis Microchip, Inc. (a) 184,392 5,500 Hittite Microwave Corp. (a) 235,015 2,600 IPG Photonics Corp. (a) 51,870 16,793 IXYS Corp. (a) 140,222 59,700 Lattice Semiconductor Corp. (a) 341,484 18,900 MIPS Technologies, Inc. (a) 166,131 26,900 Micrel, Inc. 342,168 35,990 Microsemi Corp. (a)(e) 861,961 21,500 Microtune, Inc. (a) 112,445 7,300 Monolithic Power Systems, Inc. (a) 127,385 8,500 Netlogic Microsystems, Inc. (a)(e) 270,640 102,300 ON Semiconductor Corp. (a) 1,096,656 23,900 Omnivision Technologies, Inc. (a)(e) 432,829 8,300 PLX Technology, Inc. (a) 92,628
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 88,200 PMC-Sierra, Inc. (a) $ 681,786 11,293 Pericom Semiconductor Corp. (a) 126,030 84,400 RF Micro Devices, Inc. (a)(e) 526,656 23,000 SiRF Technology Holdings, Inc. (a) 477,020 42,676 Silicon Image, Inc. (a) 366,160 39,458 Silicon Storage Technology, Inc. (a) 147,178 69,533 Skyworks Solutions, Inc. (a) 511,068 35,700 Spansion LLC Class A (a) 396,270 16,900 Syntax-Brillian Corp. (a) 83,148 5,200 Techwell, Inc. (a) 68,120 19,700 Tessera Technologies, Inc. (a) 798,835 60,436 TriQuint Semiconductor, Inc. (a) 305,806 8,400 Volterra Semiconductor Corp. (a) 119,280 ------------- 13,312,800 - ----------------------------------------------------------------------------------------------------------------------------- Electronics: Technology - 0.5% 7,400 3D Systems Corp. (a) 184,038 12,400 Acacia Research - Acacia Technologies (a) 200,384 4,000 American Science & Engineering, Inc. (a) 227,400 17,123 Checkpoint Systems, Inc. (a) 432,356 16,800 Cogent, Inc. (a) 246,792 13,680 Coherent, Inc. (a)(h) 417,377 4,952 Cubic Corp. 149,451 9,426 EDO Corp. 309,833 4,500 Eagle Test Systems, Inc. (a) 72,270 7,200 Gerber Scientific, Inc. (a) 83,664 6,450 Innovative Solutions & Support, Inc. (a) 149,769 15,500 Ionatron, Inc. (a) 60,450 33,900 Kemet Corp. (a) 238,995 10,400 ScanSource, Inc. (a) 332,696 19,100 Smart Modular Technologies WWH, Inc. (a) 262,816 ------------- 3,368,291 - ----------------------------------------------------------------------------------------------------------------------------- Energy Miscellaneous - 0.5% 5,600 Alon USA Energy, Inc. 246,456 13,040 Aventine Renewable Energy Holdings, Inc. (a) 221,289 9,100 Clean Energy Fluels Corp. (a) 114,296 16,100 Crosstex Energy, Inc. (e) 462,553 4,300 Dawson Geophysical Co. (a) 264,278 400 EnerNOC, Inc. (a) 15,252 31,700 Evergreen Energy, Inc. (a)(e) 191,151 38,600 Evergreen Solar, Inc. (a)(e) 358,980 30,626 FuelCell Energy, Inc. (a)(e) 242,558 1,500 GeoMet, Inc. (a) 11,490 2,220 MarkWest Hydrocarbon, Inc. 127,495 12,100 Matrix Service Co. (a) 300,685 1,400 Nova Biosource Fuels, Inc. (a) 3,570 4,100 Ormat Technologies, Inc. (e) 154,488 15,100 Pacific Ethanol, Inc. (a)(e) 199,320 16,316 Penn Virginia Corp. 655,903 88,500 Rentech, Inc. (a)(e) 229,215 ------------- 3,798,979 - ----------------------------------------------------------------------------------------------------------------------------- Engineering & Contracting Services - 0.5% 15,500 Aecom Technology Corp. (a) 384,555 5,800 Cal Dive International, Inc. (a) 96,454 8,100 Clean Harbors, Inc. (a) 400,302 17,802 Dycom Industries, Inc. (a) 533,704 9,700 ENGlobal Corp. (a) 117,855 16,300 InfraSource Services, Inc. (a) 604,730
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 7,200 Integrated Electrical Services, Inc. (a) $ 237,384 6,000 Layne Christensen Co. (a) 245,700 4,600 Michael Baker Corp. (a) 170,890 39,439 SAIC, Inc. (a) 712,663 ------------- 3,504,237 - ----------------------------------------------------------------------------------------------------------------------------- Entertainment - 0.3% 7,000 Carmike Cinemas, Inc. 153,720 8,700 Cinemark Holdings, Inc. (a) 155,643 17,855 Gaylord Entertainment Co. (a) 957,742 28,500 Live Nation, Inc. (a) 637,830 9,472 Lodgenet Entertainment Corp. (a) 303,672 5,355 Speedway Motorsports, Inc. 214,093 ------------- 2,422,700 - ----------------------------------------------------------------------------------------------------------------------------- Fertilizers - 0.1% 40,300 Terra Industries, Inc. (a) 1,024,426 - ----------------------------------------------------------------------------------------------------------------------------- Finance Companies - 0.3% 12,542 Accredited Home Lenders Holding Co. (a)(e) 171,449 6,000 Asta Funding, Inc. (e) 230,580 2,169 Credit Acceptance Corp. (a) 58,194 11,000 Delta Financial Corp. (e) 134,970 16,600 International Securities Exchange, Inc. 1,084,810 13,600 MVC Capital, Inc. (e) 255,816 3,600 NewStar Financial, Inc. (a) 51,228 9,100 World Acceptance Corp. (a) 388,843 ------------- 2,375,890 - ----------------------------------------------------------------------------------------------------------------------------- Finance: Small Loan - 0.1% 26,900 Advance America, Cash Advance Centers, Inc. 477,206 6,900 Dollar Financial Corp. (a) 196,650 11,000 Encore Capital Group, Inc. (a) 137,280 5,700 Nelnet, Inc. Class A 139,308 500 QC Holdings, Inc. 7,500 ------------- 957,944 - ----------------------------------------------------------------------------------------------------------------------------- Financial Data Processing Services & 8,000 Advent Software, Inc. (a) 260,400 Systems - 0.8% 15,300 Authorize.Net Holdings, Inc. (a) 273,717 1,050 Cass Information Systems, Inc. (e) 38,073 8,789 CompuCredit Corp. (a)(e) 307,791 10,300 CyberSource Corp. (a) 124,218 24,000 Deluxe Corp. 974,640 20,588 eFunds Corp. (a) 726,550 13,823 eSpeed, Inc. Class A (a) 119,431 7,700 ExlService Holdings, Inc. (a) 144,298 4,500 Heartland Payment Systems, Inc. (e) 131,985 30,700 Hypercom Corp. (a) 181,437 34,200 Jack Henry & Associates, Inc. 880,650 16,000 Online Resources Corp. (a) 175,680 12,000 TNS, Inc. 172,920 16,700 TradeStation Group, Inc. (a) 194,555 16,800 Wright Express Corp. (a) 575,736 ------------- 5,282,081 - ----------------------------------------------------------------------------------------------------------------------------- Financial Information Services - 0.2% 4,900 Bankrate, Inc. (a) 234,808 27,140 INVESTools, Inc. (a) 270,314 13,800 Interactive Data Corp. 369,564 5,200 Morningstar, Inc. (a) 244,530 45,400 Move, Inc. (a) 203,392 29,522 S1 Corp. (a) 235,881 9,000 TheStreet.com, Inc. 97,920 400 Value Line, Inc. 17,560 ------------- 1,673,969 - -----------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- Financial Miscellaneous - 0.9% 15,250 Advanta Corp. Class B $ 474,885 5,400 Asset Acceptance Capital Corp. (a) 95,580 12,919 Cash America International, Inc. 512,238 4,900 Federal Agricultural Mortgage Corp. Class B 167,678 14,000 Financial Federal Corp. 417,480 11,400 First Cash Financial Services, Inc. (a) 267,216 15,100 Global Cash Access, Inc. (a) 241,902 7,399 LandAmerica Financial Group, Inc. 713,930 8,000 Portfolio Recovery Associates, Inc. (e) 480,160 12,100 RAM Holdings Ltd. (a) 190,575 4,200 Sanders Morris Harris Group, Inc. 48,888 28,736 Sotheby's Holdings, Inc. Class A 1,322,431 12,116 Sterling Bancorp 194,219 7,522 Stewart Information Services Corp. 299,601 6,433 Stifel Financial Corp. (a) 378,839 4,976 Triad Guaranty, Inc. (a) 198,692 2,991 WSFS Financial Corp. 195,701 1,200 Wauwatosa Holdings, Inc. (a) 19,848 ------------- 6,219,863 - ----------------------------------------------------------------------------------------------------------------------------- Foods - 0.9% 600 American Dairy, Inc. (a) 11,196 8,500 Cal-Maine Foods, Inc. 139,230 18,500 Chiquita Brands International, Inc. (e) 350,760 22,184 Flowers Foods, Inc. 740,058 10,100 Fresh Del Monte Produce, Inc. 253,005 14,957 Hain Celestial Group, Inc. (a) 405,933 4,700 J&J Snack Foods Corp. 177,378 13,500 Lance, Inc. 318,060 5,300 M&F Worldwide Corp. (a) 352,874 2,463 Maui Land & Pineapple Co., Inc. (a) 90,466 15,300 Performance Food Group Co. (a) 497,097 17,100 Pilgrim's Pride Corp. 652,707 12,895 Ralcorp Holdings, Inc. (a) 689,238 8,650 Sanderson Farms, Inc. 389,423 112 Seaboard Corp. 262,640 20,457 Sensient Technologies Corp. 519,403 15,203 Tootsie Roll Industries, Inc. 421,275 12,400 TreeHouse Foods, Inc. (a) 329,964 ------------- 6,600,707 - ----------------------------------------------------------------------------------------------------------------------------- Forest Products - 0.1% 4,609 Deltic Timber Corp. 252,665 7,234 Universal Forest Products, Inc. 305,709 ------------- 558,374 - ----------------------------------------------------------------------------------------------------------------------------- Forms & Bulk Printing Services - 0.1% 9,700 Ennis, Inc. 228,144 9,100 Innerworkings, Inc. (a)(e) 145,782 6,245 The Standard Register Co. 71,193 ------------- 445,119 - ----------------------------------------------------------------------------------------------------------------------------- Funeral Parlors & Cemeteries - 0.1% 49,224 Stewart Enterprises, Inc. Class A 383,455 - ----------------------------------------------------------------------------------------------------------------------------- Glass - 0.1% 14,900 Apogee Enterprises, Inc. 414,518 - ----------------------------------------------------------------------------------------------------------------------------- Gold - 0.1% 133,200 Coeur d'Alene Mines Corp. (a)(e) 478,188 10,900 Royal Gold, Inc. (e) 259,093 ------------- 737,281 - ----------------------------------------------------------------------------------------------------------------------------- Health Care Facilities - 0.6% 21,500 Assisted Living Concepts, Inc. (a) 228,975 10,800 Capital Senior Living Corp. (a) 101,736 1,100 Emeritus Corp. (a) 34,078 8,000 Genesis HealthCare Corp. (a) 547,360 11,390 Kindred Healthcare, Inc. (a) 349,901
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 8,750 LCA-Vision, Inc. (e) $ 413,525 6,000 MedCath Corp. (a) 190,800 1,800 National Healthcare Corp. 92,880 23,600 Psychiatric Solutions, Inc. (a) 855,736 6,800 Radiation Therapy Services, Inc. (a) 179,112 11,200 Res-Care, Inc. (a) 236,768 13,400 Skilled Healthcare Group, Inc. Class A (a) 207,834 22,100 Sun Healthcare Group, Inc. (a) 320,229 19,474 Sunrise Senior Living, Inc. (a) 778,765 ------------- 4,537,699 - ----------------------------------------------------------------------------------------------------------------------------- Health Care Management Services - 0.6% 22,900 AMERIGROUP Corp. (a) 545,020 23,741 Allscripts Healthcare Solutions, Inc. (a)(e) 604,921 7,900 American Dental Partners, Inc. (a) 205,163 15,900 Amsurg Corp. (a) 383,826 19,000 Centene Corp. (a) 406,980 5,000 Computer Programs & Systems, Inc. 154,900 3,385 Corvel Corp. (a) 88,484 18,431 Eclipsys Corp. (a) 364,934 6,900 HMS Holdings Corp. (a) 132,066 17,300 HealthSpring, Inc. (a) 329,738 4,300 Molina Healthcare, Inc. (a) 131,236 12,100 Omnicell, Inc. (a) 251,438 14,800 Phase Forward, Inc. (a) 249,084 7,400 Vital Images, Inc. (a) 200,984 ------------- 4,048,774 - ----------------------------------------------------------------------------------------------------------------------------- Health Care Services - 0.6% 5,700 Alliance Imaging, Inc. (a) 53,523 11,266 Amedisys, Inc. (a) 409,294 20,200 Apria Healthcare Group, Inc. (a) 581,154 5,500 Bio-Reference Labs, Inc. (a) 150,425 3,000 Emergency Medical Services Corp. (a) 117,390 14,712 Gentiva Health Services, Inc. (a) 295,123 37,400 HealthSouth Corp. (a)(e) 677,314 13,225 Healthcare Services Group, Inc. 390,138 16,500 Healthways, Inc. (a) 781,605 18,800 Hythiam, Inc. (a)(e) 162,620 6,300 LHC Group, Inc. (a) 165,060 10,500 Matria Healthcare, Inc. (a) 317,940 6,800 Nighthawk Radiology Holdings, Inc. (a)(e) 122,740 14,700 Odyssey HealthCare, Inc. (a) 174,342 6,800 Symbion, Inc. (a) 147,628 ------------- 4,546,296 - ----------------------------------------------------------------------------------------------------------------------------- Homebuilding - 0.3% 15,700 Beazer Homes USA, Inc. 387,319 16,100 Hovnanian Enterprises, Inc. Class A (a)(e) 266,133 7,200 M/I Homes, Inc. 191,520 11,400 Meritage Homes Corp. (a) 304,950 25,700 Standard-Pacific Corp. 450,521 13,500 WCI Communities, Inc. (a) 225,180 ------------- 1,825,623 - ----------------------------------------------------------------------------------------------------------------------------- Hotel/Motel - 0.1% 6,600 Lodgian, Inc. (a) 99,198 7,279 Marcus Corp. 172,949 7,900 Morgans Hotel Group Co. (a) 192,602 ------------- 464,749 - ----------------------------------------------------------------------------------------------------------------------------- Household Furnishings - 0.4% 6,900 American Woodmark Corp. (e) 238,740 13,400 Ethan Allen Interiors, Inc. (e) 458,950
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 21,000 Furniture Brands International, Inc. $ 298,200 8,836 Haverty Furniture Cos., Inc. 103,116 4,500 Hooker Furniture Corp. 100,980 20,200 La-Z-Boy, Inc. (e) 231,492 4,400 Libbey, Inc. 94,908 6,600 Lifetime Brands, Inc. (e) 134,970 15,500 Sealy Corp. 256,060 21,400 Select Comfort Corp. (a) 347,108 34,100 Tempur-Pedic International, Inc. 883,190 ------------- 3,147,714 - ----------------------------------------------------------------------------------------------------------------------------- Identification Control & Filter 15,612 Advanced Energy Industries, Inc. (a) 353,768 Devices - 0.6% 21,441 Asyst Technologies, Inc. (a) 155,018 5,700 Badger Meter, Inc. (e) 161,082 12,732 ESCO Technologies, Inc. (a) 461,662 4,018 The Gorman-Rupp Co. 128,013 27,028 L-1 Identity Solutions, Inc. (a)(e)(h) 552,723 12,226 Mine Safety Appliances Co. 535,010 6,112 Robbins & Myers, Inc. 324,731 4,300 Sun Hydraulics, Inc. 211,775 13,527 Veeco Instruments, Inc. (a) 280,550 5,996 Vicor Corp. 79,327 13,636 Watts Water Technologies, Inc. Class A 510,941 12,617 X-Rite, Inc. 186,353 ------------- 3,940,953 - ----------------------------------------------------------------------------------------------------------------------------- Industrial Products - 0.1% 12,300 Smith & Wesson Holding Corp. (a) 206,025 5,400 TAL International Group, Inc. 160,434 ------------- 366,459 - ----------------------------------------------------------------------------------------------------------------------------- Insurance: Life - 0.4% 24,700 American Equity Investment Life Holding Co. 298,376 20,900 Citizens, Inc. (a) 147,136 20,205 Delphi Financial Group, Inc. Class A 844,973 3,880 Great American Financial Resources, Inc. 93,857 1,042 Kansas City Life Insurance Co. 48,453 762 National Western Life Insurance Co. Class A 192,725 3,880 The Phoenix Cos., Inc. 730,987 12,693 Presidential Life Corp. 249,544 21,400 Scottish Re Group Ltd. (a) 104,646 14,000 Universal American Financial Corp. (a) 297,920 ------------- 3,008,617 - ----------------------------------------------------------------------------------------------------------------------------- Insurance: Multi-Line - 1.0% 11,440 Alfa Corp. 178,121 27,800 Assured Guaranty Ltd. 821,768 4,386 CNA Surety Corp. (a) 82,939 11,009 Crawford & Co. Class B 74,421 2,600 EMC Insurance Group, Inc. 64,532 8,300 eHealth, Inc. (a) 158,447 4,625 FBL Financial Group, Inc. Class A 181,855 900 Flagstone Reinsurance Holdings Ltd. (a) 11,988 13,500 HealthExtras, Inc. (a) 399,330 16,006 Hilb Rogal & Hobbs Co. 686,017 18,768 Horace Mann Educators Corp. 398,632 1,240 Independence Holding Co. 25,333 29,200 Max Capital Group Ltd. 826,360 11,100 Meadowbrook Insurance Group, Inc. (a) 121,656 46,000 Montpelier Re Holdings Ltd. 852,840 6,697 Pico Holdings, Inc. (a) 289,712
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 24,700 Platinum Underwriters Holdings Ltd. $ 858,325 14,900 Primus Guaranty Ltd. (a) 159,728 8,400 Security Capital Assurance Ltd. 259,308 16,055 Zenith National Insurance Corp. 756,030 ------------- 7,207,342 - ----------------------------------------------------------------------------------------------------------------------------- Insurance: Property-Casualty - 1.9% 11,900 21st Century Insurance Group 260,134 5,856 American Physicians Capital, Inc. (a) 237,168 11,200 Amerisafe, Inc. (a) 219,856 14,400 Amtrust Financial Services, Inc. 270,576 14,666 Argonaut Group, Inc. 457,726 36,800 Aspen Insurance Holdings Ltd. 1,032,976 4,032 Baldwin & Lyons, Inc. Class B 104,751 4,700 Bristol West Holdings, Inc. 105,139 23,100 Commerce Group, Inc. 802,032 3,400 Darwin Professional Underwriters, Inc. (a) 85,578 3,244 Donegal Group, Inc. Class A 48,336 23,280 Employers Holdings, Inc. 494,467 5,800 FPIC Insurance Group, Inc. (a) 236,466 3,977 First Acceptance Corp. (a) 40,406 8,500 First Mercury Financial Corp. (a) 178,245 29,500 Fremont General Corp. (e) 317,420 7,000 Greenlight Capital Re Ltd. (a) 157,710 7,300 Hallmark Financial Services, Inc. (a) 88,476 4,762 Harleysville Group, Inc. 158,860 26,600 IPC Holdings, Ltd. 858,914 8,400 Infinity Property & Casualty Corp. 426,132 4,500 James River Group, Inc. 149,535 3,858 The Midland Co. 181,095 4,000 NYMAGIC, Inc. 160,800 4,700 National Interstate Corp. 122,576 7,000 Navigators Group, Inc. (a) 377,300 10,900 Odyssey Re Holdings Corp. 467,501 27,715 Ohio Casualty Corp. 1,200,337 14,206 PMA Capital Corp. Class A (a) 151,862 13,700 PXRE Group Ltd. (a) 63,568 15,223 ProAssurance Corp. (a) 847,464 9,154 RLI Corp. 512,166 7,100 Safety Insurance Group, Inc. 293,940 12,900 SeaBright Insurance Holdings, Inc. (a) 225,492 26,408 Selective Insurance Group, Inc. 709,847 4,612 State Auto Financial Corp. 141,358 10,700 Tower Group, Inc. 341,330 8,200 United America Indemnity, Ltd. (a) 203,934 8,100 United Fire & Casualty Co. 286,578 ------------- 13,018,051 - ----------------------------------------------------------------------------------------------------------------------------- Investment Management Companies - 0.8% 46,546 Apollo Investment Corp. 1,001,677 30,239 Ares Capital Corp. (e) 509,527 12,600 Calamos Asset Management, Inc. Class A 321,930 1,300 Capital Southwest Corp. 202,527 6,400 Cohen & Steers, Inc. 278,080 4,400 Cowen Group, Inc. (a) 78,804 7,300 Epoch Holding Corp. (a) 97,747 2,496 GAMCO Investors, Inc. Class A 139,901 6,200 Kohlberg Capital Corp. 115,010
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 27,200 MCG Capital Corp. $ 435,744 11,423 NGP Capital Resources Co. 190,993 15,900 National Financial Partners Corp. (e) 736,329 14,900 NexCen Brands, Inc. (a) 165,986 5,700 Technology Investment Capital Corp. 90,003 7,100 U.S. Global Investors, Inc. 160,815 3,800 WP Stewart & Co. Ltd. 41,382 36,500 Waddell & Reed Financial, Inc. Class A 949,365 ------------- 5,515,820 - ----------------------------------------------------------------------------------------------------------------------------- Jewelry, Watches & Gemstones - 0.1% 19,000 Fossil, Inc. (a) 560,310 7,500 Movado Group, Inc. 253,050 ------------- 813,360 - ----------------------------------------------------------------------------------------------------------------------------- Leisure Time - 0.5% 31,600 Callaway Golf Co. (h) 562,796 8,800 Great Wolf Resorts, Inc. (a) 125,400 24,200 K2, Inc. (a) 367,598 13,800 Life Time Fitness, Inc. (a)(e) 734,574 15,700 Premier Exhibitions, Inc. (a) 247,432 30,700 Six Flags, Inc. (a) 186,963 3,500 Steinway Musical Instruments, Inc. 121,065 6,800 Sturm Ruger & Co., Inc. (a) 105,536 9,500 Town Sports International Holdings, Inc. (a) 183,540 13,656 Vail Resorts, Inc. (a) 831,241 9,400 West Marine, Inc. (a) 129,344 ------------- 3,595,489 - ----------------------------------------------------------------------------------------------------------------------------- Machine Tools - 0.0% 1,500 Hurco Companies, Inc. (a) 74,970 - ----------------------------------------------------------------------------------------------------------------------------- Machinery & Engineering - 0.1% 18,690 Applied Industrial Technologies, Inc. 551,355 - ----------------------------------------------------------------------------------------------------------------------------- Machinery: Agricultural - 0.1% 5,650 Gehl Co. (a) 171,534 6,813 Lindsay Manufacturing Co. (e) 301,748 ------------- 473,282 - ----------------------------------------------------------------------------------------------------------------------------- Machinery: Construction & Handling - 0.1% 8,800 ASV, Inc. (a)(e) 152,064 6,817 Astec Industries, Inc. (a) 287,814 2,187 NACCO Industries, Inc. Class A 340,057 ------------- 779,935 - ----------------------------------------------------------------------------------------------------------------------------- Machinery: Engines - 0.1% 21,500 Briggs & Stratton Corp. (e) 678,540 7,300 Raser Techonologies, Inc. (a)(e) 53,947 ------------- 732,487 - ----------------------------------------------------------------------------------------------------------------------------- Machinery: Industrial/Specialty - 0.6% 11,900 Actuant Corp. Class A 750,414 1,300 Altra Holdings, Inc. (a) 22,464 7,700 Chart Industries, Inc. (a) 218,988 9,100 Columbus McKinnon Corp. (a) 293,020 8,300 EnPro Industries, Inc. (a) 355,157 3,900 Hardinge, Inc. 132,717 7,670 Kadant, Inc. (a) 239,304 6,000 Middleby Corp. (a) 358,920 14,710 Nordson Corp. 737,854 9,628 Tecumseh Products Co. Class A (a) 151,256 7,274 Tennant Co. 265,501 2,800 Twin Disc, Inc. 201,348 12,179 Woodward Governor Co. 653,647 ------------- 4,380,590 - ----------------------------------------------------------------------------------------------------------------------------- Machinery: Oil Well Equipment & 10,200 Allis-Chalmers Energy, Inc. (a)(e) 234,498 Services - 1.4% 15,500 Basic Energy Services, Inc. (a) 396,335 8,802 CARBO Ceramics, Inc. 385,616 16,200 Complete Production Services, Inc. (a)(h) 418,770
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 10,176 Dril-Quip, Inc. (a) $ 457,411 4,800 Flotek Industries, Inc. (a) 287,760 6,417 Gulf Island Fabrication, Inc. 222,670 40,143 Hanover Compressor Co. (a) 957,411 12,200 Horizon Offshore, Inc. (a) 234,240 11,440 Hornbeck Offshore Services, Inc. (a) 443,414 29,046 Input/Output, Inc. (a) 453,408 6,500 Lufkin Industries, Inc. 419,575 8,200 NATCO Group, Inc. Class A (a) 377,528 42,820 Newpark Resources, Inc. (a) 331,855 21,200 Oil States International, Inc. (a) 876,408 51,981 Parker Drilling Co. (a) 547,880 14,000 RPC, Inc. 238,560 11,100 Sulphco, Inc. (a) 40,071 2,000 Superior Offshore International, Inc. (a) 36,400 5,700 Superior Well Services, Inc. (a) 144,837 900 T-3 Energy Services, Inc. (a) 30,105 5,200 Trico Marine Services, Inc. (a) 212,576 6,000 Union Drilling, Inc. (a) 98,520 12,826 Universal Compression Holdings, Inc. (a) 929,500 14,257 W-H Energy Services, Inc. (a) 882,651 9,900 Willbros Group, Inc. (a) 293,832 ------------- 9,951,831 - ----------------------------------------------------------------------------------------------------------------------------- Machinery: Specialty - 0.3% 15,600 Bucyrus International, Inc. 1,104,168 5,100 Cascade Corp. 400,044 12,400 Flow International Corp. (a) 156,240 9,641 Semitool, Inc. (a) 92,650 12,200 TurboChef Technologies, Inc. (a) 169,824 ------------- 1,922,926 - ----------------------------------------------------------------------------------------------------------------------------- Manufactured Housing - 0.1% 35,927 Champion Enterprises, Inc. (a) 353,162 4,205 Palm Harbor Homes, Inc. (a)(e) 59,501 4,001 Skyline Corp. 120,070 ------------- 532,733 - ----------------------------------------------------------------------------------------------------------------------------- Manufacturing - 0.1% 20,959 Federal Signal Corp. 332,410 5,431 Standex International Corp. 154,458 ------------- 486,868 - ----------------------------------------------------------------------------------------------------------------------------- Medical & Dental Instruments & 10,700 Abaxis, Inc. (a) 223,202 Supplies - 2.7% 12,600 Abiomed, Inc. (a)(e) 135,828 25,700 Align Technology, Inc. (a) 620,912 31,300 American Medical Systems Holdings, Inc. (a)(e) 564,652 9,100 AngioDynamics, Inc. (a) 163,891 9,208 Arrow International, Inc. 352,482 7,700 Bio-Rad Laboratories, Inc. Class A (a) 581,889 7,400 BioMimetic Therapeutics, Inc. (a) 115,662 14,528 CONMED Corp. (a) 425,380 2,100 Cantel Medical Corp. (a) 35,721 27,500 Cepheid, Inc. (a) 401,500 12,100 Conceptus, Inc. (a) 234,377 6,800 CryoLife, Inc. (a) 88,468 4,200 Cutera, Inc. (a) 104,664 9,669 Cyberonics, Inc. (a)(e) 162,633 9,400 DJO, Inc. (a) 387,938 5,100 ev3, Inc. (a) 86,088 8,600 FoxHollow Technologies, Inc. (a) 182,664
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 4,200 Hansen Medical, Inc. (a)(e) $ 79,338 8,300 I-Flow Corp. (a)(e) 138,942 7,250 ICU Medical, Inc. (a) 311,315 29,643 Immucor, Inc. (a) 829,115 12,522 Invacare Corp. 229,528 19,240 Inverness Medical Innovations, Inc. (a) 981,625 21,000 Kyphon, Inc. (a) 1,011,150 3,678 Landauer, Inc. 181,142 16,400 LifeCell Corp. (a) 500,856 6,050 Medical Action Industries, Inc. (a) 109,263 17,344 Mentor Corp. 705,554 14,400 Meridian Bioscience, Inc. 311,904 11,710 Merit Medical Systems, Inc. (a) 140,052 8,700 Micrus Endovascular Corp. (a) 214,020 4,800 Northstar Neuroscience, Inc. (a) 55,824 15,000 NuVasive, Inc. (a) 405,150 20,059 OraSure Technologies, Inc. (a) 164,083 5,900 Orthofix International NV (a) 265,323 19,598 Owens & Minor, Inc. 684,754 29,173 PSS World Medical, Inc. (a) 531,532 8,800 Palomar Medical Technologies, Inc. (a) 305,448 11,629 PolyMedica Corp. 475,045 16,900 Sonic Innovations, Inc. (a) 147,875 7,815 SonoSite, Inc. (a) 245,625 18,600 Spectranetic Corp. (a) 214,272 10,800 Stereotaxis, Inc. (a) 141,048 28,300 Steris Corp. 865,980 8,083 SurModics, Inc. (a) 404,150 14,400 Symmetry Medical, Inc. (a) 230,544 25,947 Thoratec Corp. (a) 477,165 13,860 Ventana Medical Systems, Inc. (a) 1,070,962 3,524 Vital Signs, Inc. 195,758 8,000 Volcano Corp. (a) 161,680 14,376 West Pharmaceutical Services, Inc. 677,828 15,400 Wright Medical Group, Inc. (a) 371,448 ------------- 18,703,249 - ----------------------------------------------------------------------------------------------------------------------------- Medical Services - 0.3% 5,900 Air Methods Corp. (a) 216,353 17,000 Magellan Health Services, Inc. (a) 789,990 13,971 Option Care, Inc. 215,153 13,797 Parexel International Corp. (a) 580,302 10,195 RehabCare Group, Inc. (a) 145,177 ------------- 1,946,975 - ----------------------------------------------------------------------------------------------------------------------------- Metal Fabricating - 1.0% 3,100 Ampco-Pittsburgh Corp. 124,279 5,600 CIRCOR International, Inc. 226,408 300 Compx International, Inc. 5,550 5,300 Dynamic Materials Corp. 198,750 10,150 Encore Wire Corp. (e) 298,816 4,600 Haynes International, Inc. (a) 388,378 8,000 Insteel Industries, Inc. 144,000 13,626 Kaydon Corp. 710,187 6,300 LB Foster Co. Class A (a) 180,684 53,660 Mueller Water Products, Inc. Series A (e) 915,440 5,900 Northwest Pipe Co. (a) 209,863 16,110 Quanex Corp. 784,557 10,000 RBC Bearings, Inc. (a) 412,500
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 10,013 RTI International Metals, Inc. (a) $ 754,680 12,693 Ryerson, Inc. 477,891 8,900 Superior Essex, Inc. (a) 332,415 700 Trimas Corp. (a) 8,456 7,458 Valmont Industries, Inc. 542,644 ------------- 6,715,498 - ----------------------------------------------------------------------------------------------------------------------------- Metals & Minerals Miscellaneous - 0.6% 3,400 AM Castle & Co. 122,094 8,673 AMCOL International Corp. 236,860 23,900 Apex Silver Mines Ltd. (a) 482,302 8,211 Brush Engineered Materials, Inc. (a) 344,780 14,000 Compass Minerals International, Inc. 485,240 43,144 GrafTech International Ltd. (a) 726,545 57,800 Hecla Mining Co. (a) 493,612 29,200 Idaho General Mines, Inc. (a) 185,128 9,353 Minerals Technologies, Inc. 626,183 17,064 Stillwater Mining Co. (a) 187,875 23,500 US Gold Corp. (a) 129,250 27,300 Uranium Resources, Inc. (a) 301,119 ------------- 4,320,988 - ----------------------------------------------------------------------------------------------------------------------------- Milling: Fruit & Grain Processing - 0.0% 5,000 MGP Ingredients, Inc. (e) 84,500 - ----------------------------------------------------------------------------------------------------------------------------- Miscellaneous Business & Consumer 4,200 Core-Mark Holdings Co., Inc. (a) 151,116 Discretionary - 0.0% - ----------------------------------------------------------------------------------------------------------------------------- Miscellaneous Consumer Staples - 0.0% 9,500 Reddy Ice Holdings, Inc. 270,940 - ----------------------------------------------------------------------------------------------------------------------------- Miscellaneous Health Care - 0.0% 2,100 Animal Health International, Inc. (a) 30,429 - ----------------------------------------------------------------------------------------------------------------------------- Miscellaneous Materials & 11,850 Ceradyne, Inc. (a) 876,426 Commodities - 0.2% 17,379 Symyx Technologies Inc. (a) 200,032 9,589 WD-40 Co. 315,190 ------------- 1,391,648 - ----------------------------------------------------------------------------------------------------------------------------- Miscellaneous Materials & 14,538 Insituform Technologies, Inc. Class A (a) 317,074 Processing - 0.3% 11,100 Metal Management, Inc. 489,177 7,655 Rogers Corp. (a) 283,235 36,459 USEC, Inc. (a) 801,369 2,300 Xerium Technologies, Inc. 17,526 ------------- 1,908,381 - ----------------------------------------------------------------------------------------------------------------------------- Miscellaneous Producer Durables - 0.1% 20,300 Blount International, Inc. (a) 265,524 5,700 Park-Ohio Holdings Corp (a) 155,610 ------------- 421,134 - ----------------------------------------------------------------------------------------------------------------------------- Miscellaneous Technology - 0.1% 12,200 IHS, Inc. Class A (a) 561,200 6,700 iRobot Corp. (a)(e) 132,995 7,600 Vocus, Inc. (a) 190,836 ------------- 885,031 - ----------------------------------------------------------------------------------------------------------------------------- Multi-Sector Companies - 0.4% 13,200 Compass Diversified Trust 235,356 24,371 GenCorp, Inc. (a) 318,529 3,700 GenTek Inc. (a) 130,314 12,794 Kaman Corp. Class A 399,045 11,399 Lancaster Colony Corp. 477,504 6,900 Raven Industries, Inc. 246,399 2,565 Sequa Corp. Class A (a) 287,280 21,200 Walter Industries, Inc. 613,952 ------------- 2,708,379 - ----------------------------------------------------------------------------------------------------------------------------- Office Furniture & Business 21,100 ACCO Brands Corp. (a) 486,355 Equipment - 0.3% 29,500 Herman Miller, Inc. 932,200 10,674 Kimball International, Inc. Class B 149,543
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 18,900 Knoll, Inc. $ 423,360 ------------- 1,991,458 - ----------------------------------------------------------------------------------------------------------------------------- Offshore Drilling - 0.2% 11,954 Atwood Oceanics, Inc. (a) 820,283 4,000 Bois d'Arc Energy, Inc. (a) 68,120 11,000 Hercules Offshore, Inc. (a)(e) 356,180 ------------- 1,244,583 - ----------------------------------------------------------------------------------------------------------------------------- Oil: Crude Producers - 2.1% 200 APCO Argentina, Inc. 16,958 10,600 ATP Oil & Gas Corp. (a) 515,584 5,800 Arena Resources, Inc. (a) 337,038 11,225 Atlas America, Inc. 603,119 28,200 BPZ Energy, Inc. (a) 157,356 16,202 Berry Petroleum Co. Class A 610,491 11,700 Bill Barrett Corp. (a) 430,911 19,800 Brigham Exploration Co. (a) 116,226 8,800 Bronco Drilling Co., Inc. (a) 144,408 9,800 Callon Petroleum Co. (a) 138,866 11,000 Carrizo Oil & Gas, Inc. (a) 456,170 4,300 Clayton Williams Energy, Inc. (a) 113,821 17,557 Comstock Resources, Inc. (a) 526,183 7,000 Contango Oil & Gas Co. (a) 254,030 3,000 Delek US Holdings, Inc. 79,950 23,500 EXCO Resources, Inc. (a) 409,840 14,400 Edge Petroleum Corp. (a) 201,744 21,500 Encore Acquisition Co. (a) 597,700 16,000 Energy Infrastructure Acquisition Corp. (a) 156,160 15,537 Energy Partners Ltd. (a) 259,312 20,400 FX Energy, Inc. (a) 186,660 22,600 GeoGlobal Resources, Inc. (a)(e) 115,034 4,600 Geokinectics, Inc. (a) 142,738 6,800 Goodrich Petroleum Corp. (a)(e) 235,484 85,743 Grey Wolf, Inc. (a) 706,522 11,400 Gulfport Energy Corp. (a) 227,772 16,300 Harvest Natural Resources, Inc. (a) 194,133 36,400 Mariner Energy, Inc. (a) 882,700 12,300 McMoRan Exploration Co. (a)(e) 172,200 38,911 Meridian Resource Corp. (a) 117,511 5,500 NTR Acquisition Co. (a) 52,085 31,500 Oilsands Quest, Inc. (a) 77,805 16,400 Parallel Petroleum Corp. (a) 359,160 70,062 PetroHawk Energy Corp. (a) 1,111,183 7,100 Petroleum Development Corp. (a) 337,108 18,100 Petroquest Energy, Inc. (a) 263,174 21,700 Pioneer Drilling Co. (a) 323,547 5,249 Resource America, Inc. Class A 108,182 20,300 Rosetta Resources, Inc. (a) 437,262 10,478 Stone Energy Corp. (a) 358,976 13,017 Swift Energy Co. (a) 556,607 19,400 TXCO Resources, Inc. (a) 199,432 9,400 Toreador Resources Corp. (a) 141,000 2,900 Venoco, Inc. (a) 54,143 11,110 VeraSun Energy Corp. (a) 160,873 25,900 Warren Resources, Inc. (a) 302,512 15,410 Whiting Petroleum Corp. (a) 624,413 ------------- 14,574,083 - -----------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- Oil: Integrated Domestic - 0.1% 28,600 Delta Petroleum Corp. (a)(e) $ 574,002 5,000 GMX Resources Inc. (a)(e) 173,000 ------------- 747,002 - ----------------------------------------------------------------------------------------------------------------------------- Oil: Integrated International - 0.0% 25,700 Vaalco Energy, Inc. (a) 124,131 - ----------------------------------------------------------------------------------------------------------------------------- Paints & Coatings - 0.2% 21,576 Ferro Corp. 537,890 26,380 H.B. Fuller Co. 788,498 1,693 Kronos Worldwide, Inc. 42,748 ------------- 1,369,136 - ----------------------------------------------------------------------------------------------------------------------------- Paper - 0.4% 11,674 Albany International Corp. Class A 472,096 24,400 Bowater, Inc. (e) 608,780 13,298 Buckeye Technologies, Inc. (a) 205,720 8,892 Chesapeake Corp. 111,772 900 Multi-Color Corp. 35,379 9,700 Mercer International, Inc.-Sbi (a) 98,940 8,100 Neenah Paper, Inc. 334,206 19,901 P.H. Glatfelter Co. 270,455 13,980 Rock-Tenn Co. Class A 443,446 19,342 Wausau Paper Corp. 259,183 ------------- 2,839,977 - ----------------------------------------------------------------------------------------------------------------------------- Photography - 0.0% 1,600 CPI Corp. 111,200 - ----------------------------------------------------------------------------------------------------------------------------- Plastics - 0.1% 5,600 The Lamson & Sessions Co. (a) 148,792 13,854 Spartech Corp. 367,824 ------------- 516,616 - ----------------------------------------------------------------------------------------------------------------------------- Pollution Control & Environmental 7,100 American Ecology Corp. 152,082 Services - 0.2% 35,100 Darling International, Inc. (a) 320,814 5,900 Fuel Tech, Inc. (a) 202,075 17,146 Headwaters, Inc. (a) 296,111 3,400 Team, Inc. (a) 152,898 ------------- 1,123,980 - ----------------------------------------------------------------------------------------------------------------------------- Power Transmission Equipment - 0.1% 13,951 Regal-Beloit Corp. 649,280 - ----------------------------------------------------------------------------------------------------------------------------- Printing & Copying Services - 0.2% 15,382 Bowne & Co., Inc. 300,103 23,300 Cenveo, Inc. (a) 540,327 6,400 Schawk, Inc. 128,128 17,800 VistaPrint Ltd. (a) 680,850 ------------- 1,649,408 - ----------------------------------------------------------------------------------------------------------------------------- Production Technology Equipment - 1.1% 14,957 ATMI, Inc. (a)(h) 448,710 44,200 Axcelis Technologies, Inc. (a) 286,858 34,278 Brooks Automation, Inc. (a)(e) 622,146 19,256 Cognex Corp. 433,453 40,468 Credence Systems Corp. (a) 145,685 15,700 Cymer, Inc. (a)(h) 631,140 8,231 Dionex Corp. (a) 584,319 12,661 Electro Scientific Industries, Inc. (a) 263,349 57,299 Entegris, Inc. (a)(e) 680,712 10,090 Esterline Technologies Corp. (a) 487,448 13,955 FEI Co. (a) 452,979 10,900 Intevac, Inc. (a) 231,734 28,456 Kulicke & Soffa Industries, Inc. (a) 297,934 33,103 LTX Corp. (a) 184,053 9,200 MTS Systems Corp. 410,964 22,899 Mattson Technology, Inc. (a) 222,120 17,479 Photronics, Inc. (a) 260,088 6,800 Rofin-Sinar Technologies, Inc. (a) 469,200 12,673 Rudolph Technologies, Inc. (a) 210,499 5,200 Ultra Clean Holdings, Inc. (a) 72,696
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 13,490 Ultratech, Inc. (a) $ 179,822 ------------- 7,575,909 - ----------------------------------------------------------------------------------------------------------------------------- Publishing: Miscellaneous - 0.3% 4,600 Consolidated Graphics, Inc. (a) 318,688 4,050 Courier Corp. 162,000 5,940 GateHouse Media, Inc. 110,187 14,182 Martha Stewart Living Omnimedia, Inc. Class A (e) 243,930 11,207 Playboy Enterprises, Inc. Class B (a) 126,975 100,200 Primedia, Inc. (a) 285,570 16,860 Scholastic Corp. (a) 605,948 ------------- 1,853,298 - ----------------------------------------------------------------------------------------------------------------------------- Publishing: Newspapers - 0.3% 36,700 Belo Corp. Class A 755,653 19,000 Journal Communications, Inc. Class A 247,190 22,900 Lee Enterprises, Inc. 477,694 9,600 Media General, Inc. Class A 319,392 36,529 Sun-Times Media Group, Inc. 191,777 ------------- 1,991,706 - ----------------------------------------------------------------------------------------------------------------------------- Radio & TV Broadcasters - 0.5% 19,900 CKX, Inc. (a) 275,018 102,330 Citadel Broadcasting Corp. 660,028 17,500 Cox Radio, Inc. Class A (a) 249,200 19,600 Cumulus Media, Inc. Class A (a)(e) 183,260 19,800 Emmis Communications Corp. Class A 182,358 14,200 Entercom Communications Corp. 353,438 2,200 Fisher Communications, Inc. (a) 111,738 18,200 Gray Television, Inc. 168,714 11,800 Lin TV Corp. Class A (a) 221,958 1,500 Nexstar Broadcasting Group, Inc. Class A (a) 19,710 33,200 Radio One, Inc. Class D (a) 234,392 3,383 Salem Communications Corp. Class A 37,517 21,364 Sinclair Broadcast Group, Inc. Class A 303,796 17,484 Spanish Broadcasting System, Inc. Class A (a) 75,181 24,000 Westwood One, Inc. 172,560 9,796 World Wrestling Entertainment, Inc. 156,638 ------------- 3,405,506 - ----------------------------------------------------------------------------------------------------------------------------- Railroad Equipment - 0.2% 3,800 American Railcar Industries, Inc. (e) 148,200 5,300 Freightcar America, Inc. 253,552 7,000 Greenbrier Cos., Inc. (e) 211,540 20,239 Westinghouse Air Brake Technologies Corp. 739,331 ------------- 1,352,623 - ----------------------------------------------------------------------------------------------------------------------------- Railroads - 0.3% 16,081 Florida East Coast Industries, Inc. (e) 1,334,401 14,875 Genesee & Wyoming, Inc. Class A (a) 443,870 ------------- 1,778,271 - ----------------------------------------------------------------------------------------------------------------------------- Real Estate - 0.2% 800 AMREP Corp. 38,040 3,000 Avatar Holdings, Inc. (a)(e) 230,820 5,600 Bluegreen Corp. (a) 65,464 2,500 Consolidated-Tomoka Land Co. 173,225 11,100 Grubb & Ellis Co. (a) 128,760 7,100 HFF, Inc. Class A (a) 110,121 3,400 Quadra Realty Trust, Inc. (a) 42,534 5,500 Resource Capital Corp. 76,890 4,015 Tejon Ranch Co. (a) 177,463 14,400 Thomas Properties Group, Inc. 230,112 ------------- 1,273,429 - ----------------------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts (REITs) -5.9% 15,801 Acadia Realty Trust 410,036 19,472 Affordable Residential Communities Inc. (a) 230,159 3,400 Agree Realty Corp. 106,250
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 17,700 Alesco Financial, Inc. $ 143,901 767 Alexander's, Inc. (a) 310,060 12,776 Alexandria Real Estate Equities, Inc. 1,236,972 10,050 American Campus Communities, Inc. 284,315 56,600 American Financial Realty Trust (h) 584,112 21,987 American Home Mortgage Investment Corp. (e) 404,121 25,400 Anthracite Capital, Inc. (c)(h) 297,180 19,800 Anworth Mortgage Asset Corp. 179,190 7,000 Arbor Realty Trust, Inc. 180,670 46,080 Ashford Hospitality Trust, Inc. (h) 541,901 11,400 Associated Estates Realty Corp. 177,726 3,800 BRT Realty Trust 98,838 28,420 BioMed Realty Trust, Inc. 713,910 7,800 CBRE Realty Finance, Inc. 92,742 16,300 Capital Lease Funding, Inc. 175,225 6,000 Capital Trust, Inc. 204,840 19,200 Cedar Shopping Centers, Inc. 275,520 17,000 Corporate Office Properties Trust (h) 697,170 17,400 Cousins Properties, Inc. 504,774 35,900 Crescent Real Estate EQT Co. (h) 805,596 8,600 Crystal River Capital, Inc. 208,808 71,110 DCT Industrial Trust, Inc. 765,144 20,900 Deerfield Triarc Capital Corp. 305,767 41,150 DiamondRock Hospitality Co. 785,142 21,540 Digital Realty Trust, Inc. 811,627 9,927 Eastgroup Properties, Inc. 435,001 15,300 Education Realty Trust, Inc. 214,659 11,580 Entertainment Properties Trust 622,772 27,040 Equity Inns, Inc. 605,696 8,794 Equity Lifestyle Properties, Inc. 458,959 15,000 Equity One, Inc. 383,250 28,050 Extra Space Storage, Inc. 462,825 27,170 FelCor Lodging Trust, Inc. 707,235 20,800 First Industrial Realty Trust, Inc. 806,208 13,100 First Potomac Realty Trust 305,099 23,300 Franklin Street Properties Corp. 385,382 62,700 Friedman Billings Ramsey Group, Inc. Class A 342,342 13,590 GMH Communities Trust 131,687 5,900 Getty Realty Corp. 155,052 16,156 Glimcher Realty Trust 403,900 6,550 Gramercy Capital Corp. 180,387 23,200 Healthcare Realty Trust, Inc. 644,496 17,700 Hersha Hospitality Trust 209,214 26,700 Highland Hospitality Corp. 512,640 24,800 Highwoods Properties, Inc. 930,000 15,720 Home Properties, Inc. 816,340 40,300 IMPAC Mortgage Holdings, Inc. (e) 185,783 25,200 Inland Real Estate Corp. 427,896 16,992 Innkeepers USA Trust 301,268 21,000 Investors Real Estate Trust 216,930 11,300 JER Investors Trust, Inc. 169,500 9,940 Kite Realty Group Trust 189,059 8,200 LTC Properties, Inc. 186,550 19,020 LaSalle Hotel Properties 825,848 28,692 Lexington Corporate Properties Trust 596,794
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 20,300 Luminent Mortgage Capital, Inc. (e) $ 204,827 35,300 MFA Mortgage Investments, Inc. 256,984 15,900 Maguire Properties, Inc. 545,847 26,400 Medical Properties Trust, Inc. 349,272 16,480 Meruelo Maddux Properties, Inc. (a) 134,477 11,029 Mid-America Apartment Communities, Inc. 578,802 3,700 Mission West Properties, Inc. 51,578 8,729 National Health Investors, Inc. 276,884 28,875 National Retail Properties, Inc. 631,208 38,559 Nationwide Health Properties, Inc. 1,048,805 20,300 Newcastle Investment Corp. 508,921 26,700 NorthStar Realty Finance Corp. 334,017 21,100 NovaStar Financial, Inc. (e) 147,278 29,200 Omega Healthcare Investors, Inc. 462,236 6,408 PS Business Parks, Inc. 406,075 6,204 Parkway Properties, Inc. 297,978 14,232 Pennsylvania Real Estate Investment Trust 630,905 18,986 Post Properties, Inc. 989,740 16,247 Potlatch Corp. 699,433 29,810 RAIT Investment Trust 775,656 9,400 Ramco-Gershenson Properties Trust 337,742 43,900 Realty Income Corp. 1,105,841 9,695 Redwood Trust, Inc. (e) 469,044 16,900 Republic Property Trust 207,025 6,222 Saul Centers, Inc. 282,168 33,314 Senior Housing Properties Trust 677,940 8,580 Sovran Self Storage, Inc. 413,213 44,900 Spirit Finance Corp. 653,744 32,300 Strategic Hotel Capital, Inc. 726,427 9,243 Sun Communities, Inc. 275,164 27,100 Sunstone Hotel Investors, Inc. 769,369 15,322 Tanger Factory Outlet Centers, Inc. 573,809 2,875 Tarragon Corp. (a) 24,323 18,270 U-Store-It Trust 299,445 4,627 Universal Health Realty Income Trust 154,079 9,200 Urstadt Biddle Properties, Inc. Class A 156,492 19,665 Washington Real Estate Investment Trust 668,610 8,955 Winston Hotels, Inc. 134,325 11,800 Winthrop Realty Trust, Inc. 81,538 ------------- 41,685,689 - ----------------------------------------------------------------------------------------------------------------------------- Recreational Vehicles & Boats - 0.3% 5,643 Arctic Cat, Inc. 111,731 27,799 Fleetwood Enterprises, Inc. (a) 251,581 2,075 Marine Products Corp. 17,077 13,024 Monaco Coach Corp. 186,894 15,500 Polaris Industries, Inc. 839,480 13,090 Winnebago Industries, Inc. 386,417 ------------- 1,793,180 - ----------------------------------------------------------------------------------------------------------------------------- Rental & Leasing Services: 5,253 Electro Rent Corp. 76,379 Commercial - 0.1% 5,900 H&E Equipment Services, Inc. (a) 163,666 2,900 Interpool, Inc. 78,010 11,010 McGrath RentCorp 370,927 13,100 Williams Scotsman International, Inc. (a) 311,911 ------------- 1,000,893 - ----------------------------------------------------------------------------------------------------------------------------- Rental & Leasing Services: 18,393 Aaron Rents, Inc. 537,076 Consumer - 0.3% 4,600 Amerco, Inc. (a)(e) 347,300
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 11,895 Dollar Thrifty Automotive Group, Inc. (a) $ 485,792 5,900 RSC Holdings, Inc. (a) 118,000 31,100 Rent-A-Center, Inc. (a) 815,753 ------------- 2,303,921 - ----------------------------------------------------------------------------------------------------------------------------- Restaurants - 1.7% 12,800 AFC Enterprises, Inc. (a) 221,312 32,400 Applebee's International, Inc. 780,840 4,700 BJ's Restaurants, Inc. (a) 92,778 2,700 Benihana, Inc. Class A (a) 54,000 17,380 Bob Evans Farms, Inc. 640,453 7,750 Buffalo Wild Wings, Inc. (a) 322,323 10,700 CBRL Group, Inc. 454,536 12,350 CEC Entertainment, Inc. (a) 434,720 27,400 CKE Restaurants, Inc. 549,918 15,750 California Pizza Kitchen, Inc. (a) 338,310 4,300 Carrols Restaurant Group, Inc. (a) 65,575 13,500 Chipotle Mexican Grill, Inc. Class B (a) 1,061,505 49,000 Denny's Corp. (a) 216,090 15,450 Domino's Pizza, Inc. 282,271 7,548 IHOP Corp. 410,838 13,568 Jack in the Box, Inc. (a) 962,514 28,700 Jamba, Inc. (a) 262,318 28,200 Krispy Kreme Doughnuts, Inc. (a)(e) 261,132 7,396 Landry's Restaurants, Inc. 223,803 3,800 McCormick & Schmick's Seafood Restaurants, Inc. (a) 98,572 1,300 Morton's Restaurant Group, Inc. (a) 23,543 13,684 O'Charleys, Inc. 275,869 11,208 P.F. Chang's China Bistro, Inc. (a) 394,522 11,696 Papa John's International, Inc. (a) 336,377 15,877 Rare Hospitality International, Inc. (a) 425,027 8,800 Red Robin Gourmet Burgers, Inc. (a) 355,256 23,600 Ruby Tuesday, Inc. 621,388 8,300 Ruth's Chris Steak House, Inc. (a) 141,017 31,520 Sonic Corp. (a) 697,222 9,828 The Steak n Shake Co. (a) 164,029 20,800 Texas Roadhouse, Inc. Class A (a) 266,032 25,850 Triarc Cos. 405,845 ------------- 11,839,935 - ----------------------------------------------------------------------------------------------------------------------------- Retail - 3.5% 900 1-800 Contacts, Inc. (a) 21,114 15,424 1-800-FLOWERS.COM, Inc. Class A (a) 145,448 18,200 99 Cents Only Stores (a) 238,602 8,800 AC Moore Arts & Crafts, Inc. (a) 172,568 22,450 Aeropostale, Inc. (a) 935,716 8,600 Asbury Automotive Group, Inc. 214,570 8,400 bebe Stores, Inc. 134,484 9,900 Big 5 Sporting Goods Corp. 252,450 89,000 Blockbuster, Inc. Class A (a)(e) 383,590 5,800 Blue Nile, Inc. (a) 350,320 3,800 The Bon-Ton Stores, Inc. 152,228 9,200 Books-A-Million, Inc. 155,848 25,400 Borders Group, Inc. 484,124 19,127 Brown Shoe Co., Inc. 465,169 5,073 The Buckle, Inc. 199,876 6,300 Build-A-Bear Workshop, Inc. (a)(e) 164,682 17,834 CSK Auto Corp. (a) 328,146 13,800 Cabela's, Inc. Class A (a) 305,394
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 7,950 Cache, Inc. (a) $ 105,496 15,700 Casual Male Retail Group, Inc. (a) 158,570 12,995 The Cato Corp. Class A 285,110 30,434 Central Garden and Pet Co. Class A (a) 356,991 11,100 Charlotte Russe Holding, Inc. (a) 298,257 59,440 Charming Shoppes, Inc. (a) 643,735 9,485 The Children's Place Retail Stores, Inc. (a) 489,805 15,728 Christopher & Banks Corp. 269,735 5,200 Conn's, Inc. (a) 148,512 500 DEB Shops, Inc. 13,825 22,990 Dress Barn, Inc. (a) 471,755 10,200 Eddie Bauer Holdings, Inc. (a) 131,070 16,100 Ezcorp, Inc. (a) 213,164 4,800 FTD Group, Inc. 88,368 18,735 Fred's, Inc. 250,674 10,500 GSI Commerce, Inc. (a)(e) 238,455 7,500 Gaiam, Inc. (a) 136,725 5,800 Gander Mountain Co. (a)(e) 65,830 10,738 Genesco, Inc. (a) 561,705 10,532 Group 1 Automotive, Inc. 424,861 14,139 Guitar Center, Inc. (a) 845,654 14,258 Gymboree Corp. (a) 561,908 23,181 HOT Topic, Inc. (a) 251,977 15,875 Hibbett Sports, Inc. (a) 434,658 20,998 Insight Enterprises, Inc. (a) 473,925 12,205 Jo-Ann Stores, Inc. (a) 346,988 8,933 Jos. A. Bank Clothiers, Inc. (a) 370,452 1,788 Lawson Products, Inc. 69,196 6,800 Lithia Motors, Inc. Class A 172,312 7,100 MarineMax, Inc. (a) 142,142 22,500 Men's Wearhouse, Inc. 1,149,075 7,200 New York & Co. (a) 78,912 7,200 Overstock.com, Inc. (a)(e) 131,544 400 PC Connection, Inc. (a) 5,296 30,500 Pacific Sunwear of California, Inc. (a) 671,000 9,900 The Pantry, Inc. (a) 456,390 28,400 Payless Shoesource, Inc. (a) 896,020 20,710 The Pep Boys - Manny, Moe & Jack 417,514 12,800 PetMed Express, Inc. (a) 164,352 38,399 Pier 1 Imports, Inc. 326,008 3,800 PriceSmart, Inc. 93,974 15,916 Priceline.com, Inc. (a) 1,094,066 8,800 Retail Ventures, Inc. (a) 141,944 9,600 Rush Enterprises, Inc. Class A (a) 208,512 6,647 Russ Berrie & Co., Inc. (a) 123,834 35,900 Sally Beauty Co., Inc. (a) 323,100 9,654 School Specialty, Inc. (a) 342,138 4,400 Shutterfly, Inc. (a) 94,820 11,700 Sonic Automotive, Inc. 338,949 17,350 Stage Stores, Inc. 363,656 8,803 Stamps.com, Inc. (a) 121,305 11,824 Stein Mart, Inc. 144,962 300 Syms Corp. (a) 5,919 2,600 Systemax, Inc. 54,106 8,100 Talbots, Inc. 202,743
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 12,990 Tuesday Morning Corp. $ 160,556 13,366 Tween Brands, Inc. (a) 596,124 20,780 United Natural Foods, Inc. (a) 552,332 17,856 ValueVision Media, Inc. Class A (a) 202,130 6,400 Volcom, Inc. (a) 320,832 36,700 The Wet Seal, Inc. Class A (a) 220,567 21,300 Zale Corp. (a) 507,153 7,500 Zumiez, Inc. (a) 283,350 ------------- 24,919,367 - ----------------------------------------------------------------------------------------------------------------------------- Savings & Loan - 1.5% 8,537 Anchor Bancorp Wisconsin, Inc. 223,584 26,738 Bank Mutual Corp. 308,289 19,442 BankAtlantic Bancorp, Inc. Class A 167,396 16,973 BankUnited Financial Corp. Class A 340,648 3,800 Berkshire Hills Bancorp, Inc. 119,738 31,887 Brookline Bancorp, Inc. 367,019 16,249 Dime Community Bancshares, Inc. 214,324 9,200 Downey Financial Corp. (e) 607,016 5,226 First Financial Holdings, Inc. 170,942 8,500 First Indiana Corp. 188,020 51,853 First Niagara Financial Group, Inc. 679,274 5,000 First Place Financial Corp. 105,600 12,650 First Republic Bank 678,799 8,300 FirstFed Financial Corp. (a)(e) 470,859 19,350 Flagstar Bancorp, Inc. 233,167 9,575 Flushing Financial Corp. 153,775 3,078 Great Southern Bancorp, Inc. 83,260 4,450 Horizon Financial Corp. 96,966 6,350 IBERIABANK Corp. 314,008 3,700 ITLA Capital Corp. 192,844 9,400 KNBT Bancorp, Inc. 138,180 6,600 Kearny Financial Corp. 88,968 15,560 MAF Bancorp, Inc. 844,286 300 NASB Financial, Inc. 10,095 49,300 NewAlliance Bancshares, Inc. 725,696 6,267 Northwest Bancorp, Inc. 163,819 13,965 Ocwen Financial Corp. (a) 186,153 12,811 PFF Bancorp, Inc. 357,811 15,028 Partners Trust Financial Group, Inc. 157,794 28,658 Provident Financial Services, Inc. 451,650 14,889 Provident New York Bancorp 201,150 3,500 Rockville Financial, Inc. 52,850 600 Roma Financial Corp. 9,942 22,343 Sterling Financial Corp. 646,606 9,800 TierOne Corp. 294,980 9,061 United Community Financial Corp. 90,429 1,700 ViewPoint Financial Group 29,257 39,633 W Holding Co., Inc. 104,631 4,512 Westfield Financial, Inc. 44,985 ------------- 10,314,810 - ----------------------------------------------------------------------------------------------------------------------------- Scientific Equipment & Suppliers - 0.2% 18,935 Newport Corp. (a) 293,114 14,535 Varian, Inc. (a) 796,954 ------------- 1,090,068 - ----------------------------------------------------------------------------------------------------------------------------- Securities Brokerage & Services - 0.5% 22,145 Centerline Holding Co. 398,610 6,300 GFI Group, Inc. (a) 456,624 11,100 KBW, Inc. (a) 326,118
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 48,900 Knight Capital Group, Inc. Class A (a)(h) $ 811,740 20,200 LaBranche & Co., Inc. (a) 149,076 49,900 Ladenburg Thalmann Financial Services, Inc. (a)(e) 114,770 13,500 MarketAxess Holdings, Inc. (a) 242,865 17,000 optionsXpress Holdings, Inc. 436,220 4,600 Penson Worldwide, Inc. (a) 112,838 9,706 SWS Group, Inc. 209,844 6,700 Thomas Weisel Partners Group, Inc. (a) 111,555 ------------- 3,370,260 - ----------------------------------------------------------------------------------------------------------------------------- Services: Commercial - 3.4% 21,470 ABM Industries, Inc. 554,141 15,105 AMN Healthcare Services, Inc. (a) 332,310 10,161 Administaff, Inc. 340,292 7,800 The Advisory Board Co. (a) 433,368 8,800 Ambassadors Group, Inc. 312,664 5,400 Ambassadors International, Inc. 179,604 4,400 Barrett Business Services 113,652 20,553 CBIZ, Inc. (a) 151,064 7,501 CDI Corp. 241,532 6,400 CRA International, Inc. (a) 308,480 9,878 Casella Waste Systems, Inc. (a) 106,485 11,072 Chemed Corp. 733,963 8,450 CoStar Group, Inc. (a) 446,836 7,500 Coinmach Service Corp. Class A 99,225 12,092 Coinstar, Inc. (a) 380,656 5,200 Cornell Cos., Inc. (a) 127,712 16,100 Cross Country Healthcare, Inc. (a) 268,548 12,300 Diamond Management & Technology Consultants, Inc. 162,360 13,300 DynCorp. International, Inc. (a) 292,467 7,704 Exponent, Inc. (a) 172,338 17,741 FTI Consulting, Inc. (a) 674,690 4,200 First Advantage Corp. Class A (a) 96,642 4,981 Forrester Research, Inc. (a) 140,116 9,377 G&K Services, Inc. Class A 370,485 23,900 The Geo Group, Inc. (a) 695,490 13,300 Gevity HR, Inc. 257,089 9,200 Global Sources Ltd. (a) 208,840 23,700 Harris Interactive, Inc. (a) 126,795 9,158 Heidrick & Struggles International, Inc. (a) 469,256 21,200 Home Solutions of America, Inc. (a)(e) 126,776 10,700 Hudson Highland Group, Inc. (a) 228,873 3,500 ICT Group, Inc. (a) 65,485 46,300 IKON Office Solutions, Inc. 722,743 14,000 Jackson Hewitt Tax Service, Inc. 393,540 10,168 Kelly Services, Inc. Class A 279,213 12,300 Kenexa Corp. (a) 463,833 13,100 Kforce, Inc. (a) 209,338 12,600 The Knot, Inc. (a) 254,394 19,068 Korn/Ferry International (a) 500,726 20,522 Labor Ready, Inc. (a) 474,263 4,600 Liquidity Services, Inc. (a) 86,388 9,504 MAXIMUS, Inc. 412,284 44,505 MPS Group, Inc. (a) 595,032 6,442 Midas, Inc. (a) 146,040 5,300 Monro Muffler, Inc. 198,485 25,223 Navigant Consulting, Inc. (a) 468,139
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 20,000 Net 1 UEPS Technologies, Inc. (a) $ 483,000 15,300 On Assignment, Inc. (a) 164,016 22,264 PHH Corp. (a) 694,859 10,200 People Support, Inc. (a) 115,770 11,100 Perficient, Inc. (a) 229,770 4,760 Pre-Paid Legal Services, Inc. (a) 306,116 5,600 The Providence Service Corp. (a) 149,632 19,200 Regis Corp. 734,400 23,432 Resources Connection, Inc. (a) 777,474 12,302 Rollins, Inc. 280,117 24,000 Source Interlink Cos., Inc. (a) 119,520 24,529 Spherion Corp. (a) 230,327 1,000 Standard Parking Corp. (a) 35,130 6,200 Steiner Leisure Ltd. (a) 304,544 16,789 TeleTech Holdings, Inc. (a) 545,307 28,131 Tetra Tech, Inc. (a) 606,223 1,700 Travelzoo, Inc. (a) 45,203 4,700 Unifirst Corp. 207,035 3,300 Vertrue, Inc. (a) 160,974 8,800 Viad Corp. 371,096 6,138 Volt Information Sciences, Inc. (a) 113,185 29,827 Waste Connections, Inc. (a) 901,968 1,600 Waste Industries USA, Inc. 54,624 8,233 Waste Services, Inc. (a) 100,031 18,015 Watson Wyatt Worldwide, Inc. 909,397 12,400 World Fuel Services Corp. 521,544 ------------- 23,583,914 - ----------------------------------------------------------------------------------------------------------------------------- Shipping - 0.6% 27,200 American Commercial Lines, Inc. (a)(h) 708,560 3,400 Arlington Tankers Ltd 97,512 7,700 Double Hull Tankers, Inc. 120,043 21,700 Eagle Bulk Shipping, Inc. 486,297 6,300 Genco Shipping & Trading Ltd. 259,938 10,300 General Maritime Corp. 275,834 18,800 Golar LNG Ltd. 313,208 11,300 Gulfmark Offshore, Inc. (a) 578,786 12,800 Horizon Lines, Inc. Class A 419,328 9,800 Knightsbridge Tankers Ltd. 298,998 10,200 Nordic American Tanker Shipping Ltd. (e) 416,568 11,700 Ship Finance International Ltd. 347,256 10,400 Star Maritime Acquisition Corp. (a) 127,504 4,000 TBS International Ltd. (a) 113,600 ------------- 4,563,432 - ----------------------------------------------------------------------------------------------------------------------------- Shoes - 0.6% 8,500 DSW, Inc. Class A (a)(e) 295,970 5,600 Deckers Outdoor Corp. (a) 565,040 18,266 The Finish Line, Inc. Class A 166,403 2,800 Heelys, Inc. (a)(e) 72,408 22,100 Iconix Brand Group, Inc. (a) 491,062 11,196 K-Swiss, Inc. Class A 317,183 4,892 Kenneth Cole Productions, Inc. Class A 120,832 6,000 Shoe Carnival, Inc. (a) 164,940 8,455 Skechers U.S.A., Inc. Class A (a) 246,886 10,968 Steven Madden Ltd. 359,312 15,935 Stride Rite Corp. 322,843 20,600 Timberland Co. Class A (a) 518,914 700 Weyco Group, Inc. 18,851
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 23,608 Wolverine World Wide, Inc. $ 654,178 ------------- 4,314,822 - ----------------------------------------------------------------------------------------------------------------------------- Steel - 0.3% 1,900 Claymont Steel, Inc. (a) 40,641 9,234 Gibraltar Industries, Inc. 204,533 3,800 Olympic Steel, Inc. 108,908 10,650 Schnitzer Steel Industries, Inc. Class A 510,561 3,700 Universal Stainless & Alloy Products, Inc. (a) 130,351 3,600 Wheeling-Pittsburgh Corp. (a) 68,508 33,300 Worthington Industries, Inc. 720,945 ------------- 1,784,447 - ----------------------------------------------------------------------------------------------------------------------------- Sugar - 0.0% 5,100 Imperial Sugar Co. New Shares (e) 157,029 - ----------------------------------------------------------------------------------------------------------------------------- Telecommunications Equipment - 1.0% 67,600 Andrew Corp. (a) 976,144 47,400 Arris Group, Inc. (a) 833,766 7,285 Audiovox Corp. Class A (a) 94,486 20,361 Belden, Inc. 1,126,981 23,734 C-COR, Inc. (a) 333,700 22,200 Interdigital Communications Corp. (a) 714,174 14,900 Mastec, Inc. (a) 235,718 5,400 OpNext, Inc. (a) 71,496 20,699 Plantronics, Inc. 542,728 39,900 Polycom, Inc. (a) 1,340,640 56,677 Powerwave Technologies, Inc. (a) 379,736 400 Preformed Line Products Co. 19,204 20,200 Symmetricom, Inc. (a) 169,680 ------------- 6,838,453 - ----------------------------------------------------------------------------------------------------------------------------- Textile Products - 0.1% 26,221 Interface, Inc. Class A 494,528 - ----------------------------------------------------------------------------------------------------------------------------- Textiles Apparel Manufacturers - 0.8% 22,900 Carter's, Inc. (a) 594,026 4,900 Cherokee, Inc. 179,046 6,100 Columbia Sportswear Co. 418,948 8,500 G-III Apparel Group, Ltd. (a) 134,215 16,070 J. Crew Group, Inc. (a) 869,226 11,282 Kellwood Co. 317,250 8,300 Maidenform Brands, Inc. (a) 164,838 6,542 Oxford Industries, Inc. 290,072 6,450 Perry Ellis International, Inc. (a) 207,496 54,100 Quiksilver, Inc. (a) 764,433 6,100 True Religion Apparel, Inc. (a) 124,013 10,700 Under Armour, Inc. Class A (a) 488,455 20,100 The Warnaco Group, Inc. (a) 790,734 ------------- 5,342,752 - ----------------------------------------------------------------------------------------------------------------------------- Tires & Rubber - 0.2% 26,800 Cooper Tire & Rubber Co. 740,216 10,500 Titan International, Inc. 331,905 ------------- 1,072,121 - ----------------------------------------------------------------------------------------------------------------------------- Tobacco - 0.2% 41,955 Alliance One International, Inc. (a) 421,648 6,820 Schweitzer-Mauduit International, Inc. 211,420 11,756 Universal Corp. 716,176 16,233 Vector Group Ltd. 365,729 ------------- 1,714,973 - ----------------------------------------------------------------------------------------------------------------------------- Toys - 0.2% 13,730 Jakks Pacific, Inc. (a) 386,362 12,546 Leapfrog Enterprises, Inc. (a) 128,597 21,200 Marvel Entertainment, Inc. (a) 540,176 ------------- 1,055,135 - ----------------------------------------------------------------------------------------------------------------------------- Transportation Miscellaneous - 0.2% 13,700 Celadon Group, Inc. (a) 217,830 4,600 Dynamex, Inc. (a) 117,438 16,300 HUB Group, Inc. Class A (a) 573,108
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 25,500 Odyssey Marine Exploration, Inc. (a) $ 153,255 16,000 Pacer International, Inc. 376,320 5,700 Ultrapetrol Bahamas Ltd. (a) 135,090 ------------- 1,573,041 - ----------------------------------------------------------------------------------------------------------------------------- Truckers - 0.4% 11,541 Arkansas Best Corp. 449,753 13,132 Forward Air Corp. 447,670 25,173 Heartland Express, Inc. 410,320 22,762 Knight Transportation, Inc. 441,128 4,650 Marten Transport Ltd. (a) 83,747 12,325 Old Dominion Freight Line, Inc. (a) 371,599 100 Patriot Transportation Holding, Inc. (a) 8,670 6,181 Saia, Inc. (a) 168,494 1,800 Universal Truckload Services, Inc. (a) 35,766 23,700 Werner Enterprises, Inc. 477,555 ------------- 2,894,702 - ----------------------------------------------------------------------------------------------------------------------------- Utilities: Cable TV & Radio - 0.0% 29,900 Mediacom Communications Corp. Class A (a) 289,731 - ----------------------------------------------------------------------------------------------------------------------------- Utilities: Electrical - 1.3% 12,466 Allete, Inc. 586,525 25,975 Avista Corp. 559,761 16,400 Black Hills Corp. 651,900 6,889 CH Energy Group, Inc. 309,798 2,800 Central Vermont Public Service Corp. 105,504 27,867 Cleco Corp. 682,741 22,608 El Paso Electric Co. (a) 555,252 13,168 The Empire District Electric Co. 294,568 19,100 IDACORP, Inc. 611,964 17,100 ITC Holdings Corp. 694,773 7,545 MGE Energy, Inc. 246,495 14,400 NorthWestern Corp. 458,064 11,586 Otter Tail Corp. 371,563 33,300 PNM Resources, Inc. 925,407 5,500 Pike Electric Corp. (a) 123,090 11,900 Portland General Electric Co. 326,536 12,967 UIL Holdings Corp. 429,208 17,283 Unisource Energy Corp. 568,438 39,400 Westar Energy, Inc. 956,632 ------------- 9,458,219 - ----------------------------------------------------------------------------------------------------------------------------- Utilities: Gas Distributors - 0.8% 5,322 Cascade Natural Gas Corp. 140,554 2,900 EnergySouth, Inc. 147,900 9,348 The Laclede Group, Inc. 298,014 13,474 New Jersey Resources Corp. 687,443 21,100 Nicor, Inc. 905,612 13,199 Northwest Natural Gas Co. 609,662 32,400 Piedmont Natural Gas Co. (e) 798,660 6,900 SEMCO Energy, Inc. (a) 53,613 14,732 South Jersey Industries, Inc. 521,218 16,590 Southwest Gas Corp. 560,908 20,900 WGL Holdings, Inc. 682,176 ------------- 5,405,760 - ----------------------------------------------------------------------------------------------------------------------------- Utilities: Miscellaneous - 0.1% 155,600 Aquila, Inc. (a) 636,404 - ----------------------------------------------------------------------------------------------------------------------------- Utilities: Telecommunications - 1.2% 22,700 Alaska Communications Systems Group, Inc. 359,568 5,900 Atlantic Tele-Network, Inc. 168,976 8,855 CT Communications, Inc. 270,166 8,026 Centennial Communications Corp. (a) 76,167 117,500 Cincinnati Bell, Inc. (a) 679,150 7,200 Consolidated Communications Holdings, Inc. 162,720
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------- 68,000 Dobson Communications Corp. Class A (a) $ 754,800 3,400 Eschelon Telecom, Inc. (a) 100,640 15,400 FairPoint Communications, Inc. 273,350 55,550 FiberTower Corp. (a)(e) 240,531 23,339 General Communication, Inc. Class A (a) 298,973 13,000 Global Crossing Ltd. (a) 245,440 5,000 Globalstar, Inc. (a)(e) 51,750 6,792 Golden Telecom, Inc. (f) 373,628 57,000 ICO Global Communications Holdings Ltd. (a) 198,360 19,100 IDT Corp. Class B 197,112 10,200 Ibasis, Inc. (a) 102,510 16,700 Iowa Telecommunications Services, Inc. 379,591 7,100 iPCS, Inc. 240,477 9,900 NTELOS Holdings Corp. 273,636 9,521 North Pittsburgh Systems, Inc. 202,321 8,700 ORBCOMM, Inc. (a) 142,767 31,020 PAETEC Holding Corp. (a) 350,216 29,400 Premiere Global Services, Inc. (a) 382,788 12,700 RCN Corp. 238,633 4,200 Rural Cellular Corp. Class A (a) 184,002 2,200 Shenandoah Telecom Co. 111,826 4,900 SureWest Communications 133,476 62,900 Time Warner Telecom, Inc. Class A (a) 1,264,290 12,020 USA Mobility, Inc. 321,655 ------------- 8,779,519 - ----------------------------------------------------------------------------------------------------------------------------- Utilities: Water - 0.2% 9,285 American States Water Co. 330,267 8,296 California Water Service Group 311,017 3,800 Consolidated Water Co., Inc. 111,378 5,248 SJW Corp. 174,758 14,883 Southwest Water Co. 190,056 ------------- 1,117,476 - ----------------------------------------------------------------------------------------------------------------------------- Wholesale & International Trade - 0.1% 15,425 Central European Distribution Corp. (a)(e) 534,013 - ----------------------------------------------------------------------------------------------------------------------------- Wholesalers - 0.3% 25,230 Brightpoint, Inc. (a) 347,922 5,800 Houston Wire & Cable Co. (a) 164,778 19,700 LKQ Corp. (a) 485,802 3,700 MWI Veterinary Supply, Inc. (a) 147,593 11,500 Prestige Brands Holdings, Inc. (a) 149,270 12,569 United Stationers, Inc. (a) 837,598 ------------- 2,132,963 - ----------------------------------------------------------------------------------------------------------------------------- Total Common Stocks (Cost - $505,540,295) - 89.5% 629,324,552 - ----------------------------------------------------------------------------------------------------------------------------- Exchange-Traded Funds - ----------------------------------------------------------------------------------------------------------------------------- 169,590 iShares Russell 2000 Index Fund (e) 14,065,795 - ----------------------------------------------------------------------------------------------------------------------------- Total Exchange-Traded Funds (Cost - $12,334,264) - 2.0% 14,065,795 - ----------------------------------------------------------------------------------------------------------------------------- Mutual Funds - ----------------------------------------------------------------------------------------------------------------------------- Investment Management Companies - 0.1% 5,700 Gladstone Capital Corp. (e) 122,322 15,200 Hercules Technology Growth Capital, Inc. 205,352 2,700 Kayne Anderson Energy Development Co. 67,986 12,700 Patriot Capital Funding, Inc. 188,595 11,700 Pennantpark Investment Corp. 164,268 5,200 Prospect Capital Corp. 90,844 - ----------------------------------------------------------------------------------------------------------------------------- Total Mutual Funds (Cost - $834,885) - 0.1% 839,367 - -----------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series Schedule of Investments as of June 30, 2007
Beneficial Industry Interest Other Interests (b) Value - ----------------------------------------------------------------------------------------------------------------------------- Oil: Crude Producers - 0.0% $ 500 PetroCorp Inc. (Escrow Shares) (a) $ 0 - ----------------------------------------------------------------------------------------------------------------------------- Total Other Interests (Cost -$ 0) - 0.0% 0 - ----------------------------------------------------------------------------------------------------------------------------- Short-Term Securities - ----------------------------------------------------------------------------------------------------------------------------- 58,707,799 BlackRock Liquidity Series, LLC Cash Sweep Series, 5.33% (c)(g) 58,707,799 79,242,375 BlackRock Liquidity Series, LLC Money Market Series, 5.33% (c)(d)(g) 79,242,375 - ----------------------------------------------------------------------------------------------------------------------------- Total Short-Term Securities (Cost -$ 137,950,174) - 19.6% 137,950,174 - ----------------------------------------------------------------------------------------------------------------------------- Total Investments (Cost -$ 656,659,618*) - 111.2% 782,179,888 Liabilities in Excess of Other Assets - (11.2%) (79,137,700) ------------- Net Assets - 100.0% $ 703,042,188 =============
* The cost and unrealized appreciation (depreciation) of investments, as of June 30, 2007, as computed for federal income tax purposes, were as follows: Aggregate cost $ 661,793,190 ============== Gross unrealized appreciation $ 139,737,560 Gross unrealized depreciation (19,350,862) -------------- Net unrealized appreciation $ 120,386,698 ============== (a) Non-income producing security. (b) Other interests represent beneficial interest in liquidation trusts and other reorganization entities and are non-income producing. (c) Investments in companies considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
------------------------------------------------------------------------------------------------------------ Interest/ Purchase Sale Realized Dividend Affiliate Cost Cost Gain Income ------------------------------------------------------------------------------------------------------------ BlackRock Liquidity Series, LLC Cash Sweep Series -- $ 50,105,151** -- $ 1,633,563 BlackRock Liquidity Series, LLC Money Market Series $ 45,075,895* -- -- $ 372,569 Anthracite Capital, Inc. $ 44,389 $ 6,196 $ 119 $ 14,058 ------------------------------------------------------------------------------------------------------------
* Represents net purchase cost. ** Represents net sale cost. (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 June 30, 2007. (h) Security held as collateral in connection with open future contracts. o Financial futures contracts purchased as of June 30, 2007, were as follows:
--------------------------------------------------------------------------------------------------------- Number of Expiration Face Unrealized Contracts Issue Date Value Depreciation --------------------------------------------------------------------------------------------------------- 141 Russell 2000 Index September 2007 $ 59,797,945 $ (429,895) ---------------------------------------------------------------------------------------------------------
o For Series compliance purposes, the Series' industry classifications refer to any one or more of the 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 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, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Australia - 6.0% Air Freight & Logistics - 0.1% 57,345 Toll Holdings Ltd. $ 702,719 ----------------------------------------------------------------------------------------------------------------- Airlines - 0.1% 82,221 Qantas Airways Ltd. 390,105 ----------------------------------------------------------------------------------------------------------------- Beverages - 0.1% 43,836 Coca-Cola Amatil Ltd. 353,922 202,354 Foster's Group Ltd. 1,091,969 6,284 Lion Nathan Ltd. 49,318 -------------- 1,495,209 ----------------------------------------------------------------------------------------------------------------- Biotechnology - 0.1% 15,178 CSL Ltd. 1,129,813 ----------------------------------------------------------------------------------------------------------------- Capital Markets - 0.1% 23,543 Macquarie Bank Ltd. 1,690,982 1,184 Perpetual Trustees Australia Ltd. 78,689 -------------- 1,769,671 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.1% 31,019 Orica Ltd. 781,618 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.4% 153,040 Australia & New Zealand Banking Group Ltd. 3,758,844 111,239 Commonwealth Bank of Australia Ltd. 5,204,055 139,218 National Australia Bank Ltd. 4,838,191 166,417 Westpac Banking Corp. 3,613,707 -------------- 17,414,797 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 144,986 Brambles Ltd. (b) 1,494,719 0.1% 7,609 Downer EDI Ltd. 47,418 -------------- 1,542,137 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.1% 9,604 Leighton Holdings Ltd. 334,759 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.1% 32,839 Boral Ltd. 243,768 33,896 James Hardie Industries NV 250,135 -------------- 493,903 ----------------------------------------------------------------------------------------------------------------- Containers & Packaging - 0.0% 55,191 Amcor Ltd. 349,492 ----------------------------------------------------------------------------------------------------------------- Distributors - 0.0% 87,190 Pacific Brands Ltd. 254,607 ----------------------------------------------------------------------------------------------------------------- Diversified Consumer Services - 51,906 ABC Learning Centres Ltd. 303,719 0.0% ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 12,193 Australian Stock Exchange Ltd. 502,123 0.1% 21,814 Babcock & Brown Ltd. 591,347 49,792 Challenger Financial Services Group Ltd. 245,304 -------------- 1,338,774 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 253,956 Telstra Corp. Ltd. 988,048 Services - 0.1% 117,168 Telstra Corp. Ltd. Installment Receipts 308,232 -------------- 1,296,280 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Energy Equipment & Services - 0.0% 9,755 WorleyParsons Ltd. $ 280,604 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.3% 108,500 Coles Myer Ltd. 1,481,392 100,333 Woolworths Ltd. 2,292,903 -------------- 3,774,295 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 61,294 Futuris Corp. Ltd. 144,368 75,440 Goodman Fielder Ltd. 155,250 -------------- 299,618 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 6,833 Ansell Ltd. 70,594 0.0% 2,469 Cochlear Ltd. 127,487 -------------- 198,081 ----------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 92,818 Mayne Group Ltd. 320,793 0.1% 35,912 Sonic Healthcare Ltd. 457,718 -------------- 778,511 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 23,055 Aristocrat Leisure Ltd. 280,337 0.1% 52,742 Tabcorp Holdings Ltd. 766,328 64,333 Tattersall's Ltd. 255,865 -------------- 1,302,530 ----------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 34,681 Computershare Ltd. 330,917 ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.1% 124,920 CSR Ltd. 367,664 29,516 Wesfarmers Ltd. 1,142,866 -------------- 1,510,530 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.5% 154,726 AMP Ltd. 1,324,749 53,968 AXA Asia Pacific Holdings Ltd. 339,320 161,803 Insurance Australia Group Ltd. 780,466 77,266 QBE Insurance Group Ltd. 2,038,663 84,436 Suncorp-Metway Ltd. 1,442,103 -------------- 5,925,301 ----------------------------------------------------------------------------------------------------------------- Media - 0.1% 4,076 APN News & Media Ltd. 20,194 136,433 John Fairfax Holdings Ltd. 542,792 60,440 Macquarie Communications Infrastructure Group 323,441 47,474 Publishing and Broadcasting Ltd. 786,724 -------------- 1,673,151 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Metals & Mining - 1.1% 106,550 Alumina Ltd. $ 705,662 296,625 BHP Billiton Ltd. 8,863,373 58,610 BlueScope Steel Ltd. 512,964 13,551 Fortescue Metals Group Ltd. (b) 387,123 28,055 Iluka Resources Ltd. 146,227 27,769 Newcrest Mining Ltd. 535,945 27,510 OneSteel Ltd. 149,644 23,834 Rio Tinto Ltd. 1,988,178 48,260 Zinifex Ltd. 765,337 -------------- 14,054,453 ----------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.0% 12,485 Harvey Norman Holdings Ltd. 55,845 ----------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.1% 28,965 AGL Energy Ltd. 372,192 52,782 Alinta Ltd. 680,750 -------------- 1,052,942 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.3% 10,809 Caltex Australia Ltd. 216,444 58,406 Origin Energy Ltd. 491,115 36,005 Paladin Resources Ltd. (b) 250,185 63,858 Santos Ltd. 754,004 44,107 Woodside Petroleum Ltd. 1,705,078 -------------- 3,416,826 ----------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.0% 5,919 PaperlinX Ltd. 18,630 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 114,334 CFS Retail Property Trust 207,715 (REITs) - 0.5% 93,312 Centro Properties Group 671,000 166,094 Commonwealth Property Office Fund 235,627 163,730 DB RREEF Trust 271,815 99,888 Goodman Group 566,898 83,673 ING Industrial Fund 165,699 191,324 Investa Property Group 472,341 69,934 Macquarie Office Trust 98,900 70,450 Mirvac Group 339,814 77,826 Multiplex Group 323,987 131,926 Stockland 908,848 147,668 Westfield Group 2,491,641 -------------- 6,754,285 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 194,005 General Property Trust 764,708 Development - 0.1% 22,466 Lend Lease Corp., Ltd. 352,656 -------------- 1,117,364 ----------------------------------------------------------------------------------------------------------------- Road & Rail - 0.1% 58,392 Asciano Group (b) 501,484 - ------------------------------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Textiles, Apparel & Luxury Goods - 4,526 Billabong International Ltd. $ 68,720 0.0% ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 30,724 Macquarie Airports Group 104,991 0.1% 184,082 Macquarie Infrastructure Group 560,698 98,073 Transurban Group 664,940 -------------- 1,330,629 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Australia 74,042,319 - ------------------------------------------------------------------------------------------------------------------------------------ Austria - 0.7% Building Products - 0.1% 7,215 Wienerberger AG 530,523 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.1% 15,184 Erste Bank der Oesterreichischen Sparkassen AG 1,183,455 2,739 Raiffeisen International Bank Holding AG 432,623 -------------- 1,616,078 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 2,326 RHI AG (b) 126,962 ----------------------------------------------------------------------------------------------------------------- Containers & Packaging - 0.0% 509 Mayr-Melnhof Karton AG 115,449 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.1% 33,399 Telekom Austria AG 831,729 ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.0% 4,033 Verbund - Oesterreichische Elektrizitaetswirtschafts AG 206,230 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 3,077 BetandWin.com Interactive Entertainment AG (b) 101,375 0.0% ----------------------------------------------------------------------------------------------------------------- Insurance - 0.0% 796 Wiener Staedtische Allgemeine Versicherung AG 56,727 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.0% 4,212 Andritz AG 277,389 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% 5,045 Boehler-Uddeholm AG 503,748 9,587 Voestalpine AG 805,888 -------------- 1,309,636 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.1% 16,340 OMV AG 1,089,967 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 37,119 IMMOFINANZ Immobilien Anlagen AG (b) 540,572 Development - 0.2% 30,380 Immoeast Immobilien Anlagen AG (b) 428,715 32,559 Meinl European Land Ltd. (b) 933,241 -------------- 1,902,528 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 1,050 Flughafen Wien AG 103,557 0.0% ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Austria 8,268,150 - ------------------------------------------------------------------------------------------------------------------------------------ Belgium - 1.2% Beverages - 0.1% 14,701 InBev NV 1,164,403 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.1% 4,760 Solvay SA 749,292 2,876 Umicore SA 623,577 -------------- 1,372,869 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.3% 46,525 Dexia 1,453,261 16,035 KBC Bancassurance Holding 2,161,011 -------------- 3,614,272 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Distributors - 0.0% 204 D'ieteren SA $ 91,194 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 111,376 Fortis 4,720,541 0.4% 6,092 Groupe Bruxelles Lambert SA 757,235 -------------- 5,477,776 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 17,512 Belgacom SA 775,054 Services - 0.1% ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.0% 927 Bekaert SA 135,953 ----------------------------------------------------------------------------------------------------------------- Electronic Equipment & 1,006 Barco NV 93,385 Instruments - 0.0% ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.1% 921 Colruyt SA 192,239 7,134 Delhaize Group 700,712 714 Delhaize Group (a) 69,915 -------------- 962,866 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 1,461 Omega Pharma SA 126,476 0.0% ----------------------------------------------------------------------------------------------------------------- Health Care Technology - 0.0% 14,189 AGFA-Gevaert NV 366,010 ----------------------------------------------------------------------------------------------------------------- Marine - 0.0% 1,787 Compagnie Maritime Belge SA (CMB) 124,741 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.0% 1,612 Euronav SA 58,638 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.1% 11,749 UCB SA 694,895 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 199 Cofinimmo SA 37,894 (REITs) - 0.0% ----------------------------------------------------------------------------------------------------------------- Wireless Telecommunication 1,464 Mobistar SA 124,707 Services - 0.0% ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Belgium 15,221,133 - ------------------------------------------------------------------------------------------------------------------------------------ Bermuda - 0.0% Energy Equipment & Services - 0.0% 17,248 SeaDrill Ltd. (b) 370,017 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods- 19,785 Yue Yuen Industrial Holdings Ltd. 61,332 0.0% ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Bermuda 431,349 - ------------------------------------------------------------------------------------------------------------------------------------ Cayman Islands - Communications Equipment - 0.1% 150,416 Foxconn International Holdings Ltd. (b) 430,951 0.1% ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 283,663 Shui On Land Ltd. 254,509 Development - 0.0% ----------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.0% 266,518 Belle International Holdings Ltd. (b) 294,154 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in the Cayman Islands 979,614 - ------------------------------------------------------------------------------------------------------------------------------------ Denmark - 0.8% Beverages - 0.0% 2,762 Carlsberg A/S 333,864 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.1% 3,817 Novozymes A/S Class B 442,398 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.2% 43,551 Danske Bank A/S 1,780,896
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 3,350 Jyske Bank (b) $ 241,400 4,339 Sydbank A/S 207,473 -------------- 2,229,769 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.0% 3,467 FLS Industries A/S Class B 271,486 ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.1% 17,655 Vestas Wind Systems A/S (b) 1,158,560 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 5,963 Danisco A/S 444,586 4,160 East Asiatic Co., Ltd. A/S 228,787 -------------- 673,373 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 671 Coloplast A/S Class B 54,362 0.0% 27,000 GN Store Nord A/S (b) 318,689 1,430 William Demant Holding (b) 141,630 -------------- 514,681 ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% 796 Bang & Olufsen A/S Class B 95,182 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.0% 1,651 Topdanmark A/S (b) 281,524 1,391 TrygVesta A/S 109,302 -------------- 390,826 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.0% 1,620 NKT Holding A/S 160,813 ----------------------------------------------------------------------------------------------------------------- Marine - 0.1% 88 AP Moller - Maersk A/S 1,058,460 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.0% 1,800 D/S Torm A/S 67,164 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.2% 9,319 H Lundbeck A/S 236,104 20,326 Novo-Nordisk A/S B 2,210,964 -------------- 2,447,068 ----------------------------------------------------------------------------------------------------------------- Road & Rail - 0.1% 24,928 Dsv A/S 488,260 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Denmark 10,331,904 - ------------------------------------------------------------------------------------------------------------------------------------ Finland - 1.6% Auto Components - 0.0% 9,415 Nokian Renkaat Oyj 329,842 ----------------------------------------------------------------------------------------------------------------- Building Products - 0.0% 3,128 Asko Oyj 121,611 ----------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.8% 337,349 Nokia Oyj 9,474,543 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.0% 13,931 YIT Oyj 437,208 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 840 OKO Bank 15,565 0.0% ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 17,841 Elisa Corp. 486,336 Services - 0.0% ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.1% 38,445 Fortum Oyj 1,201,310 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.1% 7,835 Kesko Oyj Class B 519,804 ----------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 9,495 TietoEnator Oyj 305,079 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.1% 41,601 Sampo Oyj 1,197,813 ----------------------------------------------------------------------------------------------------------------- Leisure Equipment & Products - 0.0% 12,504 Amer Sports Corp. 308,622 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.2% 2,051 Cargotec Corp. Class B 126,130 8,228 KCI Konecranes Oyj 343,846
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 4,302 Kone Oyj Class B $ 270,414 13,656 Metso Oyj 803,679 5,530 Wartsila Oyj 363,645 -------------- 1,907,714 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 2,600 SanomaWSOY Oyj (Class B) 82,159 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% 12,568 Outokumpu Oyj 422,710 6,996 Rautaruukki Oyj 446,915 -------------- 869,625 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.0% 14,359 Neste Oil Oyj 562,678 ----------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.2% 57,145 Stora Enso Oyj Class R 1,075,204 42,954 UPM-Kymmene Oyj 1,057,108 -------------- 2,132,312 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.0% 3,062 Orion Oyj 76,630 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Finland 20,028,851 - ------------------------------------------------------------------------------------------------------------------------------------ France - 9.5% Aerospace & Defense - 0.2% 32,127 European Aeronautic Defense and Space Co. 1,042,641 9,174 Safran SA 234,607 9,925 Thales SA 606,488 2,001 Zodiac SA 153,732 -------------- 2,037,468 ----------------------------------------------------------------------------------------------------------------- Airlines - 0.1% 10,976 Air France-KLM 510,709 ----------------------------------------------------------------------------------------------------------------- Auto Components - 0.2% 13,712 Compagnie Generale des Etablissements Michelin 1,916,171 8,665 Valeo SA 464,925 -------------- 2,381,096 ----------------------------------------------------------------------------------------------------------------- Automobiles - 0.3% 15,274 Peugeot SA 1,230,484 14,436 Renault SA 2,315,377 -------------- 3,545,861 ----------------------------------------------------------------------------------------------------------------- Beverages - 0.1% 8,377 Pernod-Ricard SA 1,849,536 ----------------------------------------------------------------------------------------------------------------- Building Products - 0.2% 27,530 Cie de Saint-Gobain SA 3,083,983 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.2% 20,167 Air Liquide 2,646,364 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.3% 70,204 BNP Paribas SA 8,339,084 56,271 Credit Agricole SA 2,283,366 29,633 Societe Generale SA 5,490,355 -------------- 16,112,805 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 1,788 Societe BIC SA 131,680 0.0% ----------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.2% 185,712 Alcatel SA 2,597,676 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.2% 34,996 Vinci SA 2,611,999 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Construction Materials - 0.2% 1,346 Imerys SA $ 136,257 13,321 Lafarge SA 2,427,791 -------------- 2,564,048 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 139,218 France Telecom SA 3,818,253 Services - 0.3% ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.3% 9,116 Alstom (b) 1,520,118 19,047 Schneider Electric SA 2,668,642 -------------- 4,188,760 ----------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.1% 9,408 Technip SA 777,595 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.3% 48,481 Carrefour SA 3,405,005 5,058 Casino Guichard Perrachon SA 511,445 -------------- 3,916,450 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.2% 36,872 Groupe Danone 2,978,010 ----------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 14,651 Gaz de France SA 739,070 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 9,936 Cie Generale d'Optique Essilor International SA 1,183,435 0.1% ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 17,548 Accor SA 1,551,257 0.2% 6,609 Sodexho Alliance SA 472,590 -------------- 2,023,847 ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.1% 28,268 Thomson 540,606 ----------------------------------------------------------------------------------------------------------------- IT Services - 0.1% 6,356 Atos Origin SA (b) 397,243 13,467 Cap Gemini SA 984,555 -------------- 1,381,798 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.5% 128,703 AXA SA 5,532,384 2,829 CNP Assurances 361,487 8,310 Scor SE 225,576 -------------- 6,119,447 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.1% 3,816 Vallourec SA 1,220,074 ----------------------------------------------------------------------------------------------------------------- Media - 0.5% 12,405 Lagardere S.C.A. 1,075,869 1,796 M6-Metropole Television SA 58,381 7,450 PagesJaunes Groupe SA 156,825 15,664 Publicis Groupe 692,197 14,679 Societe Television Francaise 1 507,364 94,372 Vivendi SA 4,059,669 -------------- 6,550,305 ----------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.1% 6,763 Pinault-Printemps-Redoute 1,179,705 ----------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.6% 84,609 Suez SA 4,836,963 29,040 Veolia Environnement SA 2,280,830 -------------- 7,117,793 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Office Electronics - 0.0% 1,892 Neopost SA $ 276,836 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 1.2% 177,462 Total SA 14,388,304 ----------------------------------------------------------------------------------------------------------------- Personal Products - 0.2% 22,151 L'Oreal SA 2,618,263 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.5% 83,230 Sanofi-Aventis 6,723,927 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 492 Gecina SA 82,224 (REITs) - 0.2% 1,434 Klepierre 242,829 7,107 Unibail - Rodamco 1,817,532 -------------- 2,142,585 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 1,974 Icade 152,054 Development - 0.0% ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 66,883 STMicroelectronics NV 1,288,978 Equipment - 0.1% ----------------------------------------------------------------------------------------------------------------- Software - 0.1% 10,996 Business Objects SA (b) 429,526 3,307 Dassault Systemes SA 208,490 -------------- 638,016 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 5,108 Hermes International 577,437 0.2% 21,402 LVMH Moet Hennessy Louis Vuitton SA 2,462,616 -------------- 3,040,053 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 2,184 Aeroports de Paris 253,449 0.1% 538 Societe Des Autoroutes Paris-Rhin-Rhone 54,670 -------------- 308,119 ----------------------------------------------------------------------------------------------------------------- Wireless Telecommunication 20,903 Bouygues 1,751,363 Services - 0.1% ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in France 117,136,871 - ------------------------------------------------------------------------------------------------------------------------------------ Germany - 7.7% Air Freight & Logistics - 0.2% 72,864 Deutsche Post AG 2,367,550 ----------------------------------------------------------------------------------------------------------------- Airlines - 0.1% 25,511 Deutsche Lufthansa AG 715,694 ----------------------------------------------------------------------------------------------------------------- Auto Components - 0.1% 11,534 Continental AG 1,628,306 ----------------------------------------------------------------------------------------------------------------- Automobiles - 0.8% 75,546 DaimlerChrysler AG 6,988,912 15,320 Volkswagen AG 2,445,480 -------------- 9,434,392 ----------------------------------------------------------------------------------------------------------------- Capital Markets - 0.5% 42,330 Deutsche Bank AG Registered Shares 6,161,182 3,332 MLP AG 63,938 -------------- 6,225,120 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.9% 11,169 Altana AG 269,776 40,667 BASF AG 5,341,373 58,479 Bayer AG 4,427,896 11,639 Linde AG 1,404,743 -------------- 11,443,788 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Commercial Banks - 0.3% 52,619 Commerzbank AG $ 2,526,788 7,451 Deutsche Postbank AG 655,724 -------------- 3,182,512 ----------------------------------------------------------------------------------------------------------------- Computers & Peripherals - 0.0% 1,694 Wincor Nixdorf AG 156,325 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.1% 2,333 Bilfinger Berger AG 207,370 4,632 Hochtief AG 504,969 -------------- 712,339 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 19,265 Deutsche Boerse AG 2,182,620 0.2% ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.3% 228,534 Deutsche Telekom AG 4,224,455 ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.7% 50,794 E.ON AG 8,528,735 ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.0% 8,066 Solarworld AG 372,356 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.1% 14,542 Metro AG 1,207,417 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 131 Suedzucker AG 2,910 ----------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 5,439 Celesio AG 353,439 0.1% 17,863 Fresenius Medical Care AG 823,447 -------------- 1,176,886 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 23,537 TUI AG 652,306 0.1% ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.8% 4,392 Rheinmetall AG 408,921 70,074 Siemens AG 10,083,919 -------------- 10,492,840 ----------------------------------------------------------------------------------------------------------------- Insurance - 1.0% 37,185 Allianz AG Registered Shares 8,721,182 18,885 Muenchener Rueckversicherungs AG Registered Shares 3,475,846 -------------- 12,197,028 ----------------------------------------------------------------------------------------------------------------- Life Sciences Tools & Services - 7,219 Qiagen NV (b) 129,697 0.0% ----------------------------------------------------------------------------------------------------------------- Machinery - 0.1% 2,865 Heidelberger Druckmaschn AG 138,979 10,854 MAN AG 1,562,097 -------------- 1,701,076 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 11,543 Premiere AG (b) 273,360 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.2% 3,101 Salzgitter AG 600,122 33,270 ThyssenKrupp AG 1,981,591 -------------- 2,581,713 ----------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.0% 2,978 KarstadtQuelle AG (b) 100,833 ----------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.3% 38,359 RWE AG 4,094,009 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Personal Products - 0.1% 5,837 Beiersdorf AG $ 416,335 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.1% 6,536 Merck KGaA 900,875 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 9,043 IVG Immobilien AG 352,455 Development - 0.0% ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 65,704 Infineon Technologies AG (b) 1,091,332 Equipment - 0.1% ----------------------------------------------------------------------------------------------------------------- Software - 0.3% 71,443 SAP AG 3,672,934 ----------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.0% 3,720 Douglas Holding AG 242,433 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods- 17,886 Adidas-Salomon AG 1,130,476 0.1% 1,339 Puma AG Rudolf Dassler Sport 597,180 -------------- 1,727,656 ----------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage Finance - 0.1% 14,117 Hypo Real Estate Holding AG 915,250 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Germany 95,103,537 - ------------------------------------------------------------------------------------------------------------------------------------ Greece - 0.7% Beverages - 0.1% 6,415 Coca-Cola Hellenic Bottling Co. SA 295,202 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.4% 39,931 Alpha Bank AE 1,251,843 26,716 EFG Eurobank Ergasias SA 870,373 37,993 National Bank of Greece SA 2,163,302 23,122 Piraeus Bank SA 842,577 -------------- 5,128,095 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.0% 3,355 Hellenic Technodomiki Tev SA 43,876 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 2,911 Titan Cement Co. SA 167,817 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 9,515 Hellenic Exchanges SA 248,309 0.0% ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 26,676 Hellenic Telecommunications Organization SA 826,799 Services - 0.1% ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.0% 9,295 Public Power Corp. 261,961 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 17,514 OPAP SA 618,827 0.1% ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.0% 4,010 Viohalco, Hellenic Copper and Aluminum Industry SA 62,081 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.0% 854 Hellenic Petroleum SA 13,737 3,114 Motor Oil Hellas Corinth Refineries SA 81,588 -------------- 95,325 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods- 4,357 Folli - Follie SA Registered Shares 176,361 0.0% ----------------------------------------------------------------------------------------------------------------- Wireless Telecommunication 9,444 Cosmote Mobile Telecommunications SA 291,356 Services - 0.0% ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Greece 8,216,009 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Hong Kong - 1.6% Airlines - 0.0% 61,263 Cathay Pacific Airways Ltd. $ 152,357 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.2% 344,400 BOC Hong Kong Holdings Ltd. 819,976 147,939 Bank of East Asia Ltd. 831,973 71,253 Hang Seng Bank Ltd. 964,163 3,500 Wing Hang Bank Ltd. 38,647 -------------- 2,654,759 ----------------------------------------------------------------------------------------------------------------- Distributors - 0.1% 233,990 Li & Fung Ltd. 842,234 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 97,348 Hong Kong Exchanges and Clearing Ltd. 1,374,262 0.1% ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 144,195 PCCW Ltd. 88,767 Services - 0.0% ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.1% 135,687 CLP Holdings Ltd. 910,832 1,500 Cheung Kong Infrastructure Holdings Ltd. 5,535 93,500 HongKong Electric Holdings Ltd. 471,645 -------------- 1,388,012 ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.0% 87,328 Johnson Electric Holdings Ltd. 48,497 ----------------------------------------------------------------------------------------------------------------- Electronic Equipment & 30,147 Kingboard Chemical Holdings Ltd. 138,751 Instruments - 0.0% ----------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 62,000 Tingyi (Cayman Islands) Holding Corporation 72,131 ----------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 388,264 The Hong Kong & China Gas Ltd. 818,168 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 64,990 Shangri-La Asia Ltd. 157,089 0.0% ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% 170,060 Techtronic Industries Co. 227,066 ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.2% 201,176 Hutchison Whampoa Ltd. 1,997,084 56,773 Melco International Development Ltd. 84,407 -------------- 2,081,491 ----------------------------------------------------------------------------------------------------------------- Internet Software & Services - 0.0% 55,407 Tencent Holdings Limited 222,734 ----------------------------------------------------------------------------------------------------------------- Marine - 0.0% 9,557 Orient Overseas International Ltd. 93,437 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 4,000 Television Broadcasts Ltd. 28,145 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 222,414 The Link REIT 492,299 (REITs) - 0.1% ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 141,835 Cheung Kong Holdings Ltd. 1,858,546 Development - 0.5% 223,000 Hang Lung Properties Ltd. 770,004 96,491 Henderson Land Development Co., Ltd. 657,771 5,791 Hysan Development Co. Ltd. 15,424 29,000 Kerry Properties Ltd. 182,136 185,484 New World Development Ltd. 464,187 20,000 Shun Tak Holdings Ltd. 29,436 52,421 Sino Land Co. 109,140 131,324 Sun Hung Kai Properties Ltd. 1,580,176
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 72,577 Swire Pacific Ltd. Class A $ 807,818 72,107 Wharf Holdings Ltd. 287,990 -------------- 6,762,628 ----------------------------------------------------------------------------------------------------------------- Road & Rail - 0.0% 71,000 MTR Corp. 168,224 ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 5,004 ASM Pacific Technology Ltd. 36,248 Equipment - 0.0% ----------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% 94,000 Esprit Holdings Ltd. 1,194,313 392,394 Giordano International Ltd. 193,475 -------------- 1,387,788 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 23,349 Hopewell Holdings Ltd. 95,290 0.0% ----------------------------------------------------------------------------------------------------------------- Wireless Telecommunication 176,647 Hutchison Telecommunications International Ltd. 227,520 Services - 0.1% ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Hong Kong 19,557,897 - ------------------------------------------------------------------------------------------------------------------------------------ Ireland - 0.8% Airlines - 0.0% 49,611 Ryanair Holdings Plc (b) 330,975 ----------------------------------------------------------------------------------------------------------------- Beverages - 0.0% 33,042 C&C Group Plc 445,697 ----------------------------------------------------------------------------------------------------------------- Building Products - 0.0% 6,310 Kingspan Group Plc 176,984 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.4% 78,283 Allied Irish Banks Plc 2,138,451 83,518 Bank of Ireland 1,685,745 25,893 Depfa Bank Plc 458,531 -------------- 4,282,727 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.2% 50,696 CRH Plc 2,505,356 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 20,458 Greencore Group Plc 154,846 5,153 Iaws Group Plc 108,041 7,105 Kerry Group Plc 198,858 -------------- 461,745 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 663 Paddy Power Plc 20,669 0.0% ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% 54,122 Waterford Wedgwood Plc (b) 2,930 ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.0% 2,954 DCC Plc 99,673 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.1% 24,915 Irish Life & Permanent Plc 624,945 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 70,727 Independent News & Media Plc 358,495 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.1% 37,376 Elan Corp. Plc (b) 813,041 ----------------------------------------------------------------------------------------------------------------- Trading Companies & 20,174 Grafton Group Plc 287,902 Distributors - 0.0% ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Ireland 10,411,139 - ------------------------------------------------------------------------------------------------------------------------------------ Italy - 3.7% Aerospace & Defense - 0.1% 28,143 Finmeccanica SpA 864,661 ----------------------------------------------------------------------------------------------------------------- Automobiles - 0.1% 58,107 Fiat SpA 1,726,727 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Capital Markets - 0.1% 48,981 Mediobanca SpA $ 1,112,400 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.4% 614,905 Banca Intesa SpA 4,584,570 64,173 Banca Intesa SpA (RNC) 448,849 77,015 Banca Monte dei Paschi di Siena SpA 520,872 32,031 Banca Popolare di Milano Scrl 488,141 63,915 Banco Popolare di Verona e Novara Scrl 1,837,716 159,530 Capitalia SpA 1,581,239 649,240 UniCredito Italiano SpA 5,797,880 59,070 Unione Di Banche Italiane SPCA 1,501,264 -------------- 16,760,531 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 6,019 Italcementi SpA 185,833 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 838,903 Telecom Italia SpA 2,296,748 Services - 0.3% 478,015 Telecom Italia SpA (RNC) 1,059,399 -------------- 3,356,147 ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.3% 347,974 Enel SpA 3,740,384 140,101 Terna SpA 483,158 -------------- 4,223,542 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.1% 122,230 Parmalat SpA 516,624 ----------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.0% 84,550 Snam Rete Gas SpA 499,953 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 4,375 Autogrill SpA 92,563 0.0% 8,091 Lottomatica SpA 321,012 -------------- 413,575 ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.0% 364,370 Pirelli & C SpA 433,378 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.4% 48,286 Alleanza Assicurazioni SpA 631,183 83,701 Assicurazioni Generali SpA 3,355,989 9,435 Fondiaria-Sai SpA 456,145 38,644 Mediolanum SpA 321,669 39,092 Unipol SpA (Preference Shares) 133,999 -------------- 4,898,985 ----------------------------------------------------------------------------------------------------------------- Media - 0.1% 10,724 Arnoldo Mondadori Editore SpA 104,978 81,824 Mediaset SpA 844,902 158,897 Seat Pagine Gialle SpA 95,243 -------------- 1,045,123 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.7% 215,605 Eni SpA 7,817,279 4,487 Eni SpA (a)(g) 324,634 -------------- 8,141,913 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Textiles, Apparel & Luxury 9,077 Bulgari SpA $ 145,581 Goods - 0.0% 8,388 Luxottica Group SpA 325,850 -------------- 471,431 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 21,098 Autostrade SpA 700,684 0.1% ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Italy 45,351,507 - ------------------------------------------------------------------------------------------------------------------------------------ Japan - 20.4% Air Freight & Logistics - 0.0% 44,000 Yamato Transport Co., Ltd. 621,989 ----------------------------------------------------------------------------------------------------------------- Airlines - 0.0% 15,000 All Nippon Airways Co., Ltd. 57,067 114,000 Japan Airlines Corp. 214,447 -------------- 271,514 ----------------------------------------------------------------------------------------------------------------- Auto Components - 0.5% 20,700 Aisin Seiki Co., Ltd. 759,485 59,000 Bridgestone Corp. 1,264,787 40,800 Denso Corp. 1,595,715 23,000 NGK Spark Plug Co., Ltd. 399,514 1,000 NHK Spring Co., Ltd. 9,625 14,300 NOK Corp. 301,823 11,900 Stanley Electric Co., Ltd. 258,287 24,100 Sumitomo Rubber Industries, Ltd. 287,643 1,800 Toyoda Gosei Co., Ltd. 50,753 1,500 Toyota Boshoku Corp. 37,910 13,700 Toyota Industries Corp. 636,544 -------------- 5,602,086 ----------------------------------------------------------------------------------------------------------------- Automobiles - 1.8% 138,200 Honda Motor Co., Ltd. 5,018,352 193,200 Nissan Motor Co., Ltd. 2,068,379 230,500 Toyota Motor Corp. 14,536,804 16,200 Yamaha Motor Co., Ltd. 470,047 -------------- 22,093,582 ----------------------------------------------------------------------------------------------------------------- Beverages - 0.2% 32,700 Asahi Breweries Ltd. 507,120 200 Coca-Cola West Holdings Co., Ltd. 4,645 6,200 ITO EN, Ltd. 203,701 66,000 Kirin Holdings Co., Ltd. 987,256 25,000 Sapporo Holdings Ltd. 158,913 35,000 Takara Holdings, Inc. 233,400 -------------- 2,095,035 ----------------------------------------------------------------------------------------------------------------- Building Products - 0.2% 73,100 Asahi Glass Co., Ltd. 985,639 2,000 Central Glass Co., Ltd. 11,176 24,100 Daikin Industries Ltd. 877,796 16,300 JS Group Corp. 330,467 78,000 Nippon Sheet Glass Co., Ltd. 356,073
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 27,000 Sanwa Shutter Corp. $ 156,601 21,000 Toto Ltd. 181,792 -------------- 2,899,544 ----------------------------------------------------------------------------------------------------------------- Capital Markets - 0.5% 128,000 Daiwa Securities Group, Inc. 1,360,847 1,000 Jafco Co., Ltd. 45,979 10,300 Matsui Securities Co., Ltd. 91,858 10,000 Mitsubishi UFJ Securities Co. 112,048 33,000 Nikko Cordial Corp. 430,410 144,200 Nomura Holdings, Inc. 2,800,849 214 SBI E*trade Securities Co. Ltd. 225,245 1,104 SBI Holdings, Inc. 350,218 43,300 Shinko Securities Co., Ltd. 223,619 -------------- 5,641,073 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.9% 84,000 Asahi Kasei Corp. 551,874 3,000 Daicel Chemical Industries Ltd. 19,524 28,000 Dainippon Ink and Chemicals, Inc. 108,038 9,000 Denki Kagaku Kogyo Kabushiki Kaisha 40,507 2,800 Hitachi Chemical Co., Ltd. 63,321 20,900 JSR Corp. 504,317 13,000 Kaneka Corp. 108,874 2,000 Kansai Paint Co., Ltd. 17,482 40,000 Kuraray Co., Ltd. 468,878 86,500 Mitsubishi Chemical Holdings Corp. 794,061 20,000 Mitsubishi Gas Chemical Co., Inc. 182,576 68,000 Mitsubishi Rayon Co., Ltd. 484,352 37,000 Mitsui Chemicals, Inc. 281,022 16,000 Nippon Kayaku Co., Ltd. 126,719 6,000 Nippon Sanso Corp. 46,393 25,000 Nissan Chemical Industries Ltd. 294,156 16,910 Nitto Denko Corp. 852,322 37,500 Shin-Etsu Chemical Co., Ltd. 2,677,410 137,000 Showa Denko KK 495,453 13,000 Sumitomo Bakelite Co., Ltd. 91,018 135,000 Sumitomo Chemical Co., Ltd. 905,905 99,000 Teijin Ltd. 541,477 27,000 Tokuyama Corp. 350,990 133,700 Toray Industries, Inc. 987,965 40,000 Tosoh Corp. 221,874
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 99,000 Ube Industries Ltd. $ 304,759 15,000 Zeon Corp. 159,454 -------------- 11,680,721 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 2.0% 11,000 The 77 Bank Ltd. 71,390 11,000 The Bank of Kyoto Ltd. 131,771 121,000 The Bank of Yokohama Ltd. 847,457 52,000 The Chiba Bank Ltd. 460,921 62,000 Fukuoka Financial Group, Inc. 409,892 13,000 The Gunma Bank Ltd. 87,390 15,000 The Hachijuni Bank Ltd. 105,645 18,000 The Hiroshima Bank Ltd. 99,677 78,100 Hokuhoku Financial Group, Inc. 252,476 34,000 The Joyo Bank Ltd. 211,267 677 Mitsubishi UFJ Financial Group, Inc. 7,461,006 48,000 Mitsui Trust Holdings, Inc. 417,624 797 Mizuho Financial Group, Inc. 5,506,102 34,000 The Nishi-Nippon City Bank Ltd. 124,416 531 Resona Holdings, Inc. 1,268,462 12 Sapporo Hokuyo Holdings, Inc. 132,268 158,000 Shinsei Bank Ltd. 638,562 63,000 The Shizuoka Bank Ltd. 639,241 568 Sumitomo Mitsui Financial Group, Inc. 5,295,127 95,000 The Sumitomo Trust & Banking Co., Ltd. 904,829 8,000 Suruga Bank Ltd. 100,820 -------------- 25,166,343 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 64,000 Dai Nippon Printing Co., Ltd. 955,085 0.2% 353 The Goodwill Group, Inc. 121,539 4,500 Kokuyo Co., Ltd. 52,785 8,300 Meitec Corp. 237,774 10,200 Park24 Co. Ltd. 102,401 21,500 Secom Co., Ltd. 1,014,302 48,000 Toppan Printing Co., Ltd. 515,794 -------------- 2,999,680 ----------------------------------------------------------------------------------------------------------------- Computers & Peripherals - 0.4% 144,000 Fujitsu Ltd. 1,060,740 9,700 Mitsumi Electric Co., Ltd. 347,599 198,000 NEC Corp. 1,019,326 8,000 Seiko Epson Corp. 231,580 245,000 Toshiba Corp. 2,134,633 -------------- 4,793,878 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Construction & Engineering - 0.2% 8,457 COMSYS Holdings Corp. $ 97,949 18,000 Chiyoda Corp. 342,987 23,000 JGC Corp. 430,987 105,800 Kajima Corp. 442,197 8,000 Kinden Corp. 69,460 38,000 Nishimatsu Construction Co., Ltd. 134,174 68,000 Obayashi Corp. 370,443 13,000 Okumura Corp. 66,531 34,000 Shimizu Corp. 196,980 119,000 Taisei Corp. 402,258 3,000 Toda Corp. 15,950 -------------- 2,569,916 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 83,000 Sumitomo Osaka Cement Co., Ltd. 219,865 78,000 Taiheiyo Cement Corp. 345,009 -------------- 564,874 ----------------------------------------------------------------------------------------------------------------- Consumer Finance - 0.3% 3,550 Acom Co., Ltd. 127,353 13,800 Aeon Credit Service Co., Ltd. 218,967 10,250 Aiful Corp. 294,308 19,500 Credit Saison Co., Ltd. 507,537 200 Hitachi Capital Corp. 3,049 7,430 ORIX Corp. 1,958,453 3,750 Promise Co., Ltd. 115,702 12,400 Takefuji Corp. 416,989 -------------- 3,642,358 ----------------------------------------------------------------------------------------------------------------- Containers & Packaging - 0.0% 6,700 Toyo Seikan Kaisha Ltd. 129,512 ----------------------------------------------------------------------------------------------------------------- Distributors - 0.0% 1,000 Canon Marketing Japan Inc. 20,457 ----------------------------------------------------------------------------------------------------------------- Diversified Consumer Services - 2,300 Benesse Corp. 66,634 0.0% ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 1,100 Diamond Lease Co., Ltd. 49,409 0.0% ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 463 Nippon Telegraph & Telephone Corp. 2,048,922 Services - 0.2% ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.7% 62,800 Chubu Electric Power Co., Inc. 1,666,279 9,900 Hokkaido Electric Power Co., Inc. 214,911 67,900 The Kansai Electric Power Co., Inc. 1,605,834 27,300 Kyushu Electric Power Co., Inc. 715,517 37,100 Tohoku Electric Power Co., Inc. 832,209 109,200 The Tokyo Electric Power Co., Inc. 3,512,627 -------------- 8,547,377 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Electrical Equipment - 0.3% 18,800 Fuji Electric Holdings Co., Ltd. $ 95,360 40,000 Fujikura Ltd. 297,080 41,000 Furukawa Electric Co., Ltd. 226,431 21,873 Matsushita Electric Works Ltd. 279,660 155,000 Mitsubishi Electric Corp. 1,435,840 53,800 Sumitomo Electric Industries Ltd. 801,015 2,900 Ushio, Inc. 64,331 -------------- 3,199,717 ----------------------------------------------------------------------------------------------------------------- Electronic Equipment & 26,100 Alps Electric Co., Ltd. 260,774 Instruments - 1.0% 43,200 Citizens Holding Co. Ltd. 389,581 30,000 Dainippon Screen Manufacturing Co., Ltd. 226,401 1,600 Hirose Electric Co., Ltd. 210,403 306,000 Hitachi Ltd. 2,165,410 40,000 Hoya Corp. 1,326,925 12,700 Ibiden Co., Ltd. 819,448 2,600 Keyence Corp. 568,000 12,900 Kyocera Corp. 1,370,455 1,100 Mabuchi Motor Co., Ltd. 67,366 16,800 Murata Manufacturing Co., Ltd. 1,264,040 7,200 Nidec Corp. 422,417 35,500 Nippon Electric Glass Co. 625,895 96,000 Oki Electric Industry Co., Ltd. 178,175 13,700 Omron Corp. 359,613 12,300 TDK Corp. 1,190,433 15,000 Taiyo Yuden Co., Ltd. 346,974 10,000 Yaskawa Electric Corp. 113,666 9,500 Yokogawa Electric Corp. 127,348 -------------- 12,033,324 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.3% 61,600 Aeon Co., Ltd. 1,143,404 200 Circle K Sunkus Co., Ltd. 3,490 3,600 FamilyMart Co., Ltd. 94,878 7,900 Lawson, Inc. 273,250 3,000 Matsumotokiyoshi Co., Ltd. 65,868 69,300 Seven & I Holdings Co. Ltd. 1,980,967 4,000 UNY Co., Ltd. 47,415 -------------- 3,609,272 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.2% 66,000 Ajinomoto Co., Inc. 760,203 100 House Foods Corp. 1,535
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 22,000 Kikkoman Corp. $ 326,793 45,000 Meiji Dairies Corp. 286,658 26,000 Nichirei Corp. 133,776 6,000 Nippon Meat Packers, Inc. 72,575 11,000 Nisshin Seifun Group, Inc. 108,805 8,000 Nissin Food Products Co., Ltd. 268,165 12,500 QP Corp. 120,105 10,000 Toyo Suisan Kaisha, Ltd. 180,372 4,300 Yakult Honsha Co., Ltd. 108,730 6,000 Yamazaki Baking Co., Ltd. 51,224 -------------- 2,418,941 ----------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 163,000 Osaka Gas Co., Ltd. 605,668 224,000 Tokyo Gas Co., Ltd. 1,062,171 -------------- 1,667,839 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 16,000 Olympus Corp. 624,230 0.1% 18,000 Terumo Corp. 695,475 -------------- 1,319,705 ----------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 900 Alfresa Holdings Corp. 62,826 0.0% 8,600 Mediceo Paltac Holdings Co. Ltd. 131,706 2,600 Suzuken Co., Ltd. 81,217 -------------- 275,749 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 1,800 Oriental Land Co., Ltd. 93,993 0.0% 39 ROUND ONE Corp. 70,806 -------------- 164,799 ----------------------------------------------------------------------------------------------------------------- Household Durables - 1.0% 28,000 Casio Computer Co., Ltd. 436,573 4,300 Daito Trust Construction Co., Ltd. 204,756 38,000 Daiwa House Industry Co., Ltd. 543,133 58,000 HASEKO Corp. (b) 171,517 12,600 Makita Corp. 561,320 166,000 Matsushita Electric Industrial Co., Ltd. 3,289,649 23,500 Pioneer Corp. 319,611 203,000 Sanyo Electric Co., Ltd. (b) 332,399 21,000 Sekisui Chemical Co., Ltd. 162,300 53,000 Sekisui House Ltd. 706,465 93,000 Sharp Corp. 1,763,047 83,400 Sony Corp. 4,281,071 -------------- 12,771,841 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Household Products - 0.1% 49,000 Kao Corp. $ 1,268,678 2,200 Uni-Charm Corp. 124,726 -------------- 1,393,404 ----------------------------------------------------------------------------------------------------------------- IT Services - 0.1% 8,200 CSK Holdings Corp. 288,770 700 Itochu Techno-Science Corp. 27,450 80 NTT Data Corp. 379,561 12,500 Nomura Research Institute Ltd. 367,687 100 Obic Co., Ltd. 19,751 400 Otsuka Shokai Co., Ltd. 37,936 7,400 TIS, Inc. 169,953 -------------- 1,291,108 ----------------------------------------------------------------------------------------------------------------- Independent Power Producers & 11,400 Electric Power Development Co. 453,013 Energy Traders - 0.0% ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.0% 79,000 Hankyu Hanshin Holdings, Inc. 417,162 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.5% 65,200 Millea Holdings, Inc. 2,680,520 104,000 Mitsui Sumitomo Insurance Co., Ltd. 1,334,293 70,800 Sompo Japan Insurance, Inc. 865,935 18,900 T&D Holdings, Inc. 1,276,391 -------------- 6,157,139 ----------------------------------------------------------------------------------------------------------------- Internet & Catalog Retail - 0.0% 853 Rakuten, Inc. 286,769 ----------------------------------------------------------------------------------------------------------------- Internet Software & Services - 0.1% 55 Access Co. Ltd. (b) 165,885 267 eAccess Ltd. 159,308 1,045 Yahoo! Japan Corp. 354,285 -------------- 679,478 ----------------------------------------------------------------------------------------------------------------- Leisure Equipment & Products - 0.3% 45,400 Fuji Photo Film Co., Ltd. 2,029,175 11,100 Namco Bandai Holdings, Inc. 175,338 30,000 Nikon Corp. 835,478 6,700 Sankyo Co., Ltd. (Gunma) 282,132 20,832 Sega Sammy Holdings, Inc. 337,098 3,200 Shimano, Inc. 109,744 9,300 Yamaha Corp. 193,263 -------------- 3,962,228 ----------------------------------------------------------------------------------------------------------------- Machinery - 1.1% 21,000 Amada Co., Ltd. 262,632 9,500 Daifuku Co., Ltd. 130,960 62,000 Ebara Corp. 284,397 17,100 Fanuc Ltd. 1,764,948 5,000 Hino Motors Ltd. 29,891 11,300 Hitachi Construction Machinery Co., Ltd. 392,629
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 80,000 IHI Corp. $ 291,770 8,700 JTEKT Corp. 157,127 38,000 The Japan Steel Works, Ltd. 578,218 152,000 Kawasaki Heavy Industries Ltd. 620,107 82,000 Komatsu Ltd. 2,376,614 114,000 Kubota Corp. 921,506 11,600 Kurita Water Industries Ltd. 364,194 31,000 Minebea Co., Ltd. 175,216 298,200 Mitsubishi Heavy Industries Ltd. 1,909,830 84,000 Mitsui Engineering & Shipbuilding Co., Ltd. 447,900 29,000 NGK Insulators Ltd. 712,213 24,000 NSK Ltd. 248,122 19,000 NTN Corp. 163,820 19,000 OKUMA Corp. 300,169 900 OSG Corp. 12,399 3,900 SMC Corp. 518,405 41,000 Sumitomo Heavy Industries Ltd. 463,521 6,000 THK Co., Ltd. 150,258 -------------- 13,276,846 ----------------------------------------------------------------------------------------------------------------- Marine - 0.2% 55,000 Kawasaki Kisen Kaisha Ltd. 670,766 103,000 Mitsui OSK Lines Ltd. 1,396,569 112,000 Nippon Yusen Kabushiki Kaisha 1,027,199 -------------- 3,094,534 ----------------------------------------------------------------------------------------------------------------- Media - 0.1% 600 Asatsu-DK, Inc. 20,337 117 Dentsu, Inc. 331,687 58 Fuji Television Network, Inc. 116,716 600 Hakuhodo DY Holdings, Inc. 39,616 29 Jupiter Telecommunications Co., Ltd. (b) 23,724 4,700 Toho Co., Ltd. 85,110 3,700 Tokyo Broadcasting System, Inc. 113,223 -------------- 730,413 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 1.0% 26,000 DAIDO STEEL CO., LTD. 176,986 17,000 Dowa Mining Co., Ltd. 181,116 47,700 JFE Holdings, Inc. 2,964,849 261,000 Kobe Steel Ltd. 989,905 120,000 Mitsubishi Materials Corp. 654,233 68,000 Mitsui Mining & Smelting Co., Ltd. 317,278 87,800 Nippon Light Metal Co., Ltd. 229,092
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 505,000 Nippon Steel Corp. $ 3,552,426 47,000 Nisshin Steel Co., Ltd. 214,478 332,000 Sumitomo Metal Industries Ltd. 1,951,883 42,000 Sumitomo Metal Mining Co., Ltd. 910,506 1,600 Sumitomo Titanium Corp. 149,387 800 Toho Titanium Co. Ltd. 32,428 7,500 Tokyo Steel Manufacturing Co., Ltd. 117,452 -------------- 12,442,019 ----------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.2% 9,000 Daimaru, Inc. 107,493 6,000 Hankyu Department Stores 63,878 21,400 Isetan Co., Ltd. 351,592 37,600 Marui Co., Ltd. 475,063 59,000 Mitsukoshi Ltd. 295,273 3,900 Ryohin Keikaku Co., Ltd. 241,407 36,000 Takashimaya Co., Ltd. 454,833 -------------- 1,989,539 ----------------------------------------------------------------------------------------------------------------- Office Electronics - 0.6% 88,800 Canon, Inc. 5,207,501 51,000 Konica Minolta Holdings, Inc. 751,669 64,000 Ricoh Co., Ltd. 1,480,727 -------------- 7,439,897 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.3% 800 Idemitsu Kosan Co. Ltd. 89,526 58 Inpex Holdings, Inc. 541,981 4,200 Japan Petrolleum Explora 296,557 77,500 Nippon Mining Holdings, Inc. 741,421 123,000 Nippon Oil Corp. 1,142,383 25,100 Showa Shell Sekiyu KK 311,249 11,000 TonenGeneral Sekiyu KK 107,289 -------------- 3,230,406 ----------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.0% 97 Nippon Paper Group, Inc. 322,986 49,000 OJI Paper Co., Ltd. 238,208 -------------- 561,194 ----------------------------------------------------------------------------------------------------------------- Personal Products - 0.1% 9,000 Aderans Co., Ltd. 189,508 25,000 Shiseido Co., Ltd. 533,660 -------------- 723,168 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.9% 49,400 Astellas Pharma, Inc. 2,148,771 29,700 Chugai Pharmaceutical Co., Ltd. 533,671 65,300 Daiichi Sankyo Co. Ltd. 1,732,580 25,000 Eisai Co., Ltd. 1,091,682
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 43,000 Kyowa Hakko Kogyo Co., Ltd. $ 405,791 5,000 Santen Pharmaceutical Co., Ltd. 121,756 31,000 Shionogi & Co., Ltd. 505,305 6,000 Taisho Pharmaceutical Co., Ltd. 119,039 70,400 Takeda Pharmaceutical Co., Ltd. 4,547,942 13,000 Tanabe Seiyaku Co., Ltd. 154,567 -------------- 11,361,104 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 70 Japan Prime Realty Investment Corp. 273,018 (REITs) - 0.2% 46 Japan Real Estate Investment Corp. 540,604 45 Japan Retail Fund Investment Corp. 390,028 51 Nippon Building Fund, Inc. 707,475 21 Nomura Real Estate Office Fund, Inc. 226,392 -------------- 2,137,517 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 1,700 Aeon Mall Co. Ltd. 52,269 Development - 0.6% 188 KK DaVinci Advisors (b) 164,125 8,100 Leopalace21 Corp. 276,798 95,000 Mitsubishi Estate Co., Ltd. 2,577,411 77,000 Mitsui Fudosan Co., Ltd. 2,158,181 40 NTT Urban Development Co. 77,453 600 Nomura Real Estate Holdings, Inc. 19,487 30,000 Sumitomo Realty & Development Co., Ltd. 976,993 30,000 Tokyo Tatemono Co., Ltd. 373,490 28,000 Tokyu Land Corp. 297,727 -------------- 6,973,934 ----------------------------------------------------------------------------------------------------------------- Road & Rail - 0.6% 149 Central Japan Railway Co. 1,572,032 312 East Japan Railway Co. 2,404,026 17,000 Keihin Electric Express Railway Co., Ltd. 112,232 28,000 Keio Electric Railway Co., Ltd. 186,430 33,000 Keisei Electric Railway Co., Ltd. 193,191 91,000 Kintetsu Corp. 274,096 72,000 Nippon Express Co., Ltd. 409,289 32,000 Odakyu Electric Railway Co., Ltd. 197,327 13,000 Seino Holdings Corp. 123,055 38,000 Tobu Railway Co., Ltd. 171,773 114,000 Tokyu Corp. 761,919 157 West Japan Railway Co. 731,029 -------------- 7,136,399 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Semiconductors & Semiconductor 16,200 Advantest Corp. $ 705,349 Equipment - 0.3% 10,600 Elpida Memory, Inc. (b) 465,475 1,300 NEC Electronics Corp. (b) 34,142 7,600 Rohm Co., Ltd. 674,466 21,000 Sanken Electric Co., Ltd. 203,144 1,600 Shinko Electric Industries 34,434 10,800 Sumco Corp. 541,136 13,200 Tokyo Electron Ltd. 971,118 6,400 Tokyo Seimitsu Co. Ltd. 247,332 -------------- 3,876,596 ----------------------------------------------------------------------------------------------------------------- Software - 0.3% 6,700 Fuji Soft, Inc. 157,598 4,100 Konami Corp. 94,163 8,600 Nintendo Co., Ltd. 3,137,653 900 Oracle Corp. Japan 39,722 11,500 Trend Micro, Inc. 371,291 -------------- 3,800,427 ----------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% 2,600 Aoyama Trading Co., Ltd. 79,979 3,900 Autobacs Seven Co., Ltd. 121,686 200 EDION Corp. 2,598 3,300 Fast Retailing Co., Ltd. 234,879 950 Nitori Co., Ltd. 47,426 5,800 Shimachu Co., Ltd. 155,956 600 Shimamura Co., Ltd. 64,100 680 USS Co., Ltd. 43,294 8,500 Yamada Denki Co., Ltd. 887,717 -------------- 1,637,635 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 13,000 Asics Corp. 160,624 0.1% 22,000 Gunze Ltd. 128,485 23,000 Nisshinbo Industries, Inc. 321,256 7,000 Onward Kashiyama Co., Ltd. 89,350 12,000 Toyobo Co., Ltd. 34,339 11,000 Wacoal Holdings Corp. 135,631 -------------- 869,685 ----------------------------------------------------------------------------------------------------------------- Tobacco - 0.2% 416 Japan Tobacco, Inc. 2,050,566 ----------------------------------------------------------------------------------------------------------------- Trading Companies & 1,400 Hitachi High-Technologies Corp. 36,320 Distributors - 0.9% 142,000 Itochu Corp. 1,644,277 119,000 Marubeni Corp. 978,903 110,400 Mitsubishi Corp. 2,892,705
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 138,000 Mitsui & Co., Ltd. $ 2,754,067 106,300 Sojitz Corp. 475,122 86,000 Sumitomo Corp. 1,567,913 13,000 Toyota Tsusho Corp. 300,693 -------------- 10,650,000 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 6,000 Kamigumi Co., Ltd. 51,984 0.0% 7,000 Mitsubishi Logistics Corp. 115,230 -------------- 167,214 ----------------------------------------------------------------------------------------------------------------- Wireless Telecommunication 227 KDDI Corp. 1,681,625 Services - 0.4% 1,493 NTT DoCoMo, Inc. 2,361,326 58,700 Softbank Corp. 1,264,954 -------------- 5,307,905 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Japan 253,063,390 - ------------------------------------------------------------------------------------------------------------------------------------ Luxembourg - Personal Products - 0.0% 1,633 Oriflame Cosmetics SA 76,658 0.0% ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Luxembourg 76,658 - ------------------------------------------------------------------------------------------------------------------------------------ Netherlands - Air Freight & Logistics - 0.2% 41,738 TNT NV 1,884,546 3.7% ----------------------------------------------------------------------------------------------------------------- Beverages - 0.1% 19,518 Heineken NV 1,144,180 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.2% 22,133 Akzo Nobel NV 1,910,504 15,917 Koninklijke DSM NV 783,917 -------------- 2,694,421 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.5% 147,900 ABN AMRO Holding NV 6,781,561 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 14,967 Corporate Express NV 229,510 0.1% 3,129 Randstad Holdings NV 247,656 18,456 Vedior NV 551,534 -------------- 1,028,700 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 152,241 ING Groep NV CVA 6,700,707 0.5% ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 169,444 Koninklijke KPN NV 2,811,210 Services - 0.2% ----------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.1% 3,102 Fugro NV 196,518 16,480 SBM Offshore NV 628,547 -------------- 825,065 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.1% 131,893 Koninklijke Ahold NV (b) 1,654,319 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.4% 17,009 Royal Numico NV 883,883 139,987 Unilever NV 4,344,332 -------------- 5,228,215 ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.3% 95,445 Koninklijke Philips Electronics NV 4,044,668 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.2% 122,034 Aegon NV 2,401,875 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Media - 0.2% 69,999 Reed Elsevier NV $ 1,330,382 23,059 Wolters Kluwer NV 703,187 -------------- 2,033,569 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.4% 81,778 Arcelor Mittal 5,111,306 ----------------------------------------------------------------------------------------------------------------- Office Electronics - 0.0% 283 OCE NV 5,520 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 1,928 Corio NV 151,014 (REITs) - 0.1% 2,822 Wereldhave NV 393,109 -------------- 544,123 ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 44,541 ASML Holding NV (b) 1,223,780 Equipment - 0.1% ----------------------------------------------------------------------------------------------------------------- Trading Companies & 65,029 Hagemeyer NV 335,091 Distributors - 0.0% ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in the Netherlands 46,452,856 - ------------------------------------------------------------------------------------------------------------------------------------ New Zealand - Construction Materials - 0.0% 32,024 Fletcher Building Ltd. 305,012 0.1% ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 224,335 Telecom Corp. of New Zealand Ltd. 786,877 Services - 0.1% ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.0% 20,226 Contact Energy Ltd. 140,447 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 41,926 Fisher & Paykel Healthcare Corp. 108,873 0.0% ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 28,925 Sky City Ltd. 113,285 0.0% ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% 27,665 Fisher & Paykel Appliances Holdings Ltd. 74,192 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 241 Sky Network Television Ltd. 1,046 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 12,534 Kiwi Income Property Trust 15,946 (REITs) - 0.0% ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 58,991 Auckland International Airport Ltd. 149,054 0.0% ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in New Zealand 1,694,732 - ------------------------------------------------------------------------------------------------------------------------------------ Norway - 1.0% Chemicals - 0.1% 18,250 Yara International ASA 547,245 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.1% 66,499 DnB NOR ASA 855,356 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 19,529 Tomra Systems ASA 170,432 0.0% ----------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.0% 12,041 Tandberg ASA 268,635 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 42,395 Telenor ASA 828,690 Services - 0.1% 8,600 Telenor ASA (a) 505,617 -------------- 1,334,307 ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.1% 15,198 Renewable Energy Corp. AS (b) 588,594 ----------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.1% 13,190 Acergy SA 296,943 20,340 Aker Kvaerner ASA 514,851 16,804 Ocean RIG ASA (b) 124,750
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 13,236 Petroleum Geo-Services ASA $ 330,510 25,674 ProSafe ASA 410,526 8,780 TGS Nopec Geophysical Co. ASA (b) 179,642 -------------- 1,857,222 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 317,344 Marine Harvest (b) 342,667 ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.1% 81,450 Orkla ASA 1,535,730 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.0% 25,238 Storebrand ASA 390,943 ----------------------------------------------------------------------------------------------------------------- Marine - 0.0% 400 Stolt-Nielsen SA 13,323 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 3,218 Schibsted ASA 147,074 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.4% 114,678 DET Norske Oljeselskap (b) 239,759 6,794 Frontline Ltd. 312,286 59,658 Norsk Hydro ASA 2,288,205 52,007 Statoil ASA 1,613,558 -------------- 4,453,808 ----------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.0% 15,197 Norske Skogindustrier ASA 218,711 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Norway 12,724,047 - ------------------------------------------------------------------------------------------------------------------------------------ Portugal - 0.4% Commercial Banks - 0.1% 23,822 Banco BPI SA 211,874 225,189 Banco Comercial Portugues SA Registered Shares 1,258,476 13,508 Banco Espirito Santo SA Registered Shares 301,165 -------------- 1,771,515 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 13,841 Cimpor Cimentos de Portugal SA 130,736 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 60,384 Portugal Telecom SGPS SA Registered Shares 834,937 Services - 0.1% ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.1% 183,690 Energias de Portugal SA 1,015,738 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.0% 18,295 Jeronimo Martins SGPS SA 108,110 ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.1% 122,466 Sonae SGPS SA 347,668 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 3,893 PT Multimedia Servicos de Telecomunicacoes e Multimedia SGPS SA 62,687 ----------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.0% 9,059 Sonae Industria SGPS SA (b) 131,681 ----------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 15,709 Brisa-Auto Estradas de Portugal SA Private Shares 211,157 0.0% ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Portugal 4,614,229 - ------------------------------------------------------------------------------------------------------------------------------------ Singapore - 1.1% Aerospace & Defense - 0.0% 58,213 Singapore Technologies Engineering Ltd. 137,105 ----------------------------------------------------------------------------------------------------------------- Air Freight & Logistics - 0.0% 127,954 Singapore Post Ltd. 106,246 ----------------------------------------------------------------------------------------------------------------- Airlines - 0.1% 38,582 Singapore Airlines Ltd. 474,136 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.4% 105,605 DBS Group Holdings Ltd. 1,573,467 244,914 Oversea-Chinese Banking Corp. 1,464,094 111,572 United Overseas Bank Ltd. 1,603,908 -------------- 4,641,469 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Distributors - 0.0% 3,529 Jardine Cycle & Carriage Ltd. $ 36,264 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 93,000 Singapore Exchange Ltd. 596,670 0.1% ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 651,132 Singapore Telecommunications Ltd. 1,448,132 Services - 0.1% ----------------------------------------------------------------------------------------------------------------- Electronic Equipment & 7,000 Venture Corp. Ltd. 71,759 Instruments - 0.0% ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.0% 16,000 Olam International Ltd. 32,276 ----------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 79,800 Parkway Holdings Ltd. 208,920 0.0% ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.1% 36,096 Fraser and Neave Ltd. 128,669 1,766 Haw Par Corp. Ltd. 8,832 115,616 Keppel Corp. Ltd. 945,802 43,590 SembCorp Industries Ltd. 162,474 -------------- 1,245,777 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.0% 95,427 SembCorp Marine Ltd. 306,028 ----------------------------------------------------------------------------------------------------------------- Marine - 0.0% 118,002 Cosco Corp. (Singapore) Ltd. 288,200 5,200 Neptune Orient Lines Ltd. 18,026 -------------- 306,226 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 133,316 Singapore Press Holdings Ltd. 404,279 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.0% 16,194 Singapore Petroleum Co. Ltd. 60,909 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 125,152 Ascendas Real Estate Investment Trust 240,786 (REITs) - 0.1% 12,000 Capita Commercial Trust 22,979 37,000 CapitaMall Trust 102,163 198,000 Suntec Real Estate Investment Trust 251,420 -------------- 617,348 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 172,000 Allgreen Properties Ltd. 235,389 Development - 0.2% 139,833 CapitaLand Ltd. 740,845 57,535 City Developments Ltd. 650,407 52,182 Keppel Land Ltd. 299,063 7,457 UOL Group Ltd. 28,353 83,100 Wing Tai Holdings Ltd. 216,438 -------------- 2,170,495 ----------------------------------------------------------------------------------------------------------------- Road & Rail - 0.0% 95,816 ComfortDelgro Corp. Ltd. 136,611 ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 160,122 Chartered Semiconductor Manufacturing Ltd. (b) 149,666 Equipment - 0.0% -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Trading Companies & 1,100 Noble Group Ltd. $ 1,239 Distributors - 0.0% ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Singapore 13,151,555 - ------------------------------------------------------------------------------------------------------------------------------------ Spain - 3.8% Airlines - 0.0% 67,653 Iberia Lineas Aereas de Espana 336,721 ----------------------------------------------------------------------------------------------------------------- Biotechnology - 0.0% 25,288 Zeltia SA 237,347 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.5% 290,558 Banco Bilbao Vizcaya Argentaria SA 7,105,568 82,772 Banco Popular Espanol SA 1,540,407 517,105 Banco Santander Central Hispano SA 9,505,417 -------------- 18,151,392 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.3% 18,985 ACS Actividades de Construccion y Servicios, SA 1,207,033 2,030 Acciona SA 552,257 5,583 Fomento de Construcciones y Contratas SA 502,292 5,766 Grupo Ferrovial SA 566,827 6,344 Sacyr Vallehermoso SA 304,352 -------------- 3,132,761 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 367,946 Telefonica SA 8,188,297 Services - 0.7% ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.6% 52,673 Endesa SA 2,866,592 68,748 Iberdrola SA 3,830,106 518 Iberdrola SA (a) 29,054 11,868 Union Fenosa SA 633,612 -------------- 7,359,364 ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.1% 17,768 Gamesa Corp. Tecnologica SA 642,774 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 1,411 Azucarera Ebro Agricolas, SA 30,333 ----------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 16,225 Gas Natural SDG SA 985,758 ----------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 16,111 Indra Sistemas SA 401,749 ----------------------------------------------------------------------------------------------------------------- Insurance - 0.0% 42,475 Corp. Mapfre SA 210,169 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.0% 6,035 Zardoya Otis SA 236,450 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 8,519 Antena 3 de Television SA (b) 177,052 11,454 Gestevision Telecinco SA 324,062 673 Promotora de Informaciones SA 14,766 1,844 Sogecable SA (b) 77,061 -------------- 592,941 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.0% 19,845 Acerinox SA 484,065 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.2% 62,481 Repsol YPF SA 2,473,532 ----------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% 17,098 Inditex SA 1,006,373 ----------------------------------------------------------------------------------------------------------------- Tobacco - 0.1% 24,766 Altadis SA 1,636,769 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Transportation Infrastructure - 15,839 Abertis Infraestructuras SA $ 491,216 0.1% 27,029 Cintra Concesiones de Infraestructuras de Transporte SA 429,429 -------------- 920,645 ----------------------------------------------------------------------------------------------------------------- Water Utilities - 0.0% 32 Sociedad General de Aguas de Barcelona SA (b) 1,178 3,213 Sociedad General de Aguas de Barcelona SA Class A 117,813 -------------- 118,991 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Spain 47,146,431 - ------------------------------------------------------------------------------------------------------------------------------------ Sweden - 2.5% Airlines - 0.0% 4,009 SAS AB (b) 92,198 ----------------------------------------------------------------------------------------------------------------- Building Products - 0.1% 31,777 Assa Abloy AB Series B 699,257 ----------------------------------------------------------------------------------------------------------------- Capital Markets - 0.0% 6,838 D Carnegie AB 119,192 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.4% 168,451 Nordea Bank AB 2,631,018 42,553 Skandinaviska Enskilda Banken AB Class A 1,370,064 48,812 Svenska Handelsbanken Class A 1,364,952 -------------- 5,366,034 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 31,048 Securitas AB 491,443 0.1% 23,048 Securitas Systems AB 78,288 -------------- 569,731 ----------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.4% 1,250,446 Telefonaktiebolaget LM Ericsson 4,987,896 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.1% 37,605 Skanska AB Class B 805,257 ----------------------------------------------------------------------------------------------------------------- Diversified Consumer Services - 23,048 Securitas Direct AB (b) 62,170 0.0% ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 6,410 OMHEX AB 190,907 0.0% ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 32,366 Tele2 AB 527,943 Services - 0.2% 188,701 TeliaSonera AB 1,384,335 -------------- 1,912,278 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.0% 20 Axfood AB 707 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 7,749 Elekta AB 134,070 0.0% 9,320 Getinge AB Class B 200,788 -------------- 334,858 ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.1% 28,073 Electrolux AB 664,680 20,861 Husqvarna AB 295,305 -------------- 959,985 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.6% 7,167 Alfa Laval AB 431,814 26,954 Atlas Copco AB 421,639 64,717 Atlas Copco AB 1,077,943 42,146 SKB AB 881,823 88,940 Sandvik Ab 1,792,467
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 30,020 Scania AB $ 732,197 6,544 Trelleborg AB Class B 180,080 35,571 Volvo AB A Shares 728,556 90,132 Volvo AB B Shares 1,792,047 -------------- 8,038,566 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 23,501 Eniro AB 298,054 2,986 Modern Times Group AB 192,455 -------------- 490,509 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% 29,691 Boliden AB 615,543 2,520 Hoganas AB 74,938 17,193 SSAB Svenskt Stal AB Series A 702,588 1,832 SSAB Svenskt Stal AB Series B 69,421 -------------- 1,462,490 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.0% 11,502 Lundin Petroleum AB (b) 114,579 ----------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.1% 6,721 Billerud AB 102,071 1,345 Holmen AB Class B 56,818 54,990 Svenska Cellulosa AB 919,595 -------------- 1,078,484 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 3,889 Castellum AB 46,760 Development - 0.0% 3,636 Fabege AB 39,836 4,960 Kungsleden AB 61,727 6,033 Wihlborgs Fastigheter AB 106,414 -------------- 254,737 ----------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.2% 42,880 Hennes & Mauritz AB B Shares 2,535,325 4,266 Nobia AB 53,130 -------------- 2,588,455 ----------------------------------------------------------------------------------------------------------------- Tobacco - 0.1% 31,750 Swedish Match AB 612,454 ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in Sweden 30,740,744 - ------------------------------------------------------------------------------------------------------------------------------------ Switzerland - Auto Components - 0.0% 125 Rieter Holding AG 65,342 6.5% ----------------------------------------------------------------------------------------------------------------- Building Products - 0.1% 3,300 Geberit Ag 562,278 ----------------------------------------------------------------------------------------------------------------- Capital Markets - 1.4% 97,055 Credit Suisse Group 6,890,038 173,246 UBS AG 10,360,859 -------------- 17,250,897 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.3% 6,646 Ciba Specialty Chemicals AG Registered Shares 431,826 16,739 Clariant AG 270,953 621 Givaudan SA 612,371 4,087 Lonza Group AG Registered Shares 374,985 9,925 Syngenta AG 1,934,886 -------------- 3,625,021 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Commercial Services & Supplies - 13,034 Adecco SA Registered Shares $ 1,008,338 0.1% 301 SGS SA 355,922 -------------- 1,364,260 ----------------------------------------------------------------------------------------------------------------- Computers & Peripherals - 0.0% 14,198 Logitech International SA (b) 377,627 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.2% 19,025 Holcim Ltd. 2,054,655 ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 2,427 Swisscom AG 829,745 Services - 0.1% ----------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.3% 178,156 ABB Ltd. 4,017,022 ----------------------------------------------------------------------------------------------------------------- Electronic Equipment & 4,444 Kudelski SA 155,392 Instruments - 0.0% ----------------------------------------------------------------------------------------------------------------- Food Products - 1.1% 35,209 Nestle SA Registered Shares 13,378,488 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 2,202 Nobel Biocare Holding AG 718,801 0.1% 2,994 Phonak Holding AG Registered Shares 268,380 864 Straumann Holding AG Registered Shares 242,210 4,117 Synthes, Inc. 493,589 -------------- 1,722,980 ----------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 83 Kuoni Reisen Holding AG Registered Shares 49,903 0.0% ----------------------------------------------------------------------------------------------------------------- Insurance - 0.6% 2,667 Swiss Life Holding 703,149 32,875 Swiss Reinsurance Registered Shares 2,998,204 12,480 Zurich Financial Services AG 3,857,948 -------------- 7,559,301 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.1% 2,369 Schindler Holding AG 157,367 347 Sulzer AG 448,510 -------------- 605,877 ----------------------------------------------------------------------------------------------------------------- Marine - 0.0% 3,237 Kuehne & Nagel International AG 298,137 ----------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 1.8% 201,122 Novartis AG Registered Shares 11,291,107 62,542 Roche Holding AG 11,081,603 -------------- 22,372,710 ----------------------------------------------------------------------------------------------------------------- Real Estate Management & 1,750 PSP Swiss Property AG 98,061 Development - 0.0% ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 735 Unaxis Holding AG 389,512 Equipment - 0.0% ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 45,231 Compagnie Financiere Richemont AG 2,703,514 0.3% 3,384 The Swatch Group Ltd. (Bearer Shares) 961,290 2,155 The Swatch Group Ltd. (Registered Shares) 121,887 -------------- 3,786,691 - ------------------------------------------------------------------------------------------------------------------------------------ Total Common Stocks in Switzerland 80,563,899 - ------------------------------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ United Kingdom - Aerospace & Defense - 0.3% 278,738 BAE Systems Plc $ 2,249,274 22.2% 75,689 Cobham Plc 307,907 81,602 Meggitt Plc 501,416 153,881 Rolls-Royce Group Plc 1,656,914 -------------- 4,715,511 ----------------------------------------------------------------------------------------------------------------- Airlines - 0.0% 47,703 British Airways Plc (b) 398,982 ----------------------------------------------------------------------------------------------------------------- Auto Components - 0.1% 61,413 GKN Plc 488,876 1,025 TI Automotive Ltd. Series A (b) 0 -------------- 488,876 ----------------------------------------------------------------------------------------------------------------- Beverages - 0.6% 230,261 Diageo Plc 4,785,955 72,571 SABMiller Plc 1,837,374 77,436 Scottish & Newcastle Plc 992,646 -------------- 7,615,975 ----------------------------------------------------------------------------------------------------------------- Capital Markets - 0.4% 45,768 3i Group Plc 1,065,370 78,838 Amvescap Plc 1,015,833 4,359 Close Brothers Group Plc 74,879 56,059 ICAP Plc 552,519 21,059 Investec Plc 270,436 152,407 Man Group Plc 1,853,867 5,199 Schroders Plc 132,822 7,338 Tullett Prebon Plc 65,557 -------------- 5,031,283 ----------------------------------------------------------------------------------------------------------------- Chemicals - 0.2% 92,487 Imperial Chemical Industries Plc 1,150,488 22,181 Johnson Matthey Plc 749,915 -------------- 1,900,403 ----------------------------------------------------------------------------------------------------------------- Commercial Banks - 3.9% 558,207 Barclays Plc 7,766,284 321,445 HBOS Plc 6,322,604 988,642 HSBC Holdings Plc 18,102,519 481,326 Lloyds TSB Group Plc 5,350,592 807,211 Royal Bank of Scotland Group Plc 10,214,033 -------------- 47,756,032 ----------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 9,668 Aggreko Plc 110,717 0.4% 32,898 Biffa Plc 178,297 43,664 Capita Group Plc 633,863 3,467 Davis Service Group Plc 43,157 4,625 De La Rue Plc 71,951 99,631 Experian Group Ltd. 1,253,818
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 125,658 Group 4 Securicor Plc $ 529,860 86,430 Hays Plc 295,259 6,271 Intertek Group Plc 123,068 16,375 Michael Page International Plc 172,035 200,321 Rentokil Initial Plc 642,949 50,608 Serco Group Plc 456,213 -------------- 4,511,187 ----------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.1% 42,533 Amec Plc 498,387 22,845 Balfour Beatty Plc 201,477 -------------- 699,864 ----------------------------------------------------------------------------------------------------------------- Construction Materials - 0.1% 67,697 Hanson Plc 1,460,524 ----------------------------------------------------------------------------------------------------------------- Consumer Finance - 0.0% 14,252 Cattles Plc 111,619 13,214 Provident Financial Plc 184,951 -------------- 296,570 ----------------------------------------------------------------------------------------------------------------- Containers & Packaging - 0.1% 59,697 Rexam Plc 594,550 ----------------------------------------------------------------------------------------------------------------- Distributors - 0.0% 26,225 Inchcape Plc 261,518 ----------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 19,496 London Stock Exchange Group Plc 527,103 0.0% ----------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 706,730 BT Group Plc 4,703,674 Services - 0.4% 205,092 Cable & Wireless Plc 796,624 -------------- 5,500,298 ----------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.2% 87,627 British Energy Group Plc 945,310 73,584 Scottish & Southern Energy Plc 2,133,513 -------------- 3,078,823 ----------------------------------------------------------------------------------------------------------------- Electronic Equipment & 17,536 Electrocomponents Plc 92,054 Instruments - 0.0% 4,873 Premier Farnell Plc 19,462 -------------- 111,516 ----------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.6% 132,156 J Sainsbury Plc 1,544,865 678,089 Tesco Plc 5,673,366 -------------- 7,218,231 ----------------------------------------------------------------------------------------------------------------- Food Products - 0.5% 178,973 Cadbury Schweppes Plc 2,429,097 50,300 Tate & Lyle Plc 570,818 110,210 Unilever Plc 3,558,665 -------------- 6,558,580 ----------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 3,701 SSL International Plc 32,324 0.1% 92,698 Smith & Nephew Plc 1,148,528 -------------- 1,180,852 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Hotels, Restaurants & Leisure - 16,477 Carnival Plc $ 787,465 0.5% 172,617 Compass Group Plc 1,191,926 41,756 Enterprise Inns Plc 575,345 61,268 First Choice Holidays Plc 389,148 20,426 Intercontinental Hotels Group Plc 507,386 55,246 Ladbrokes Plc 477,619 36,037 Mitchells & Butlers Plc 632,771 132,999 PartyGaming Plc 81,890 23,200 Punch Taverns Plc 569,175 70,061 Rank Group Plc 262,036 28,262 Thomas Cook Group Plc (b) 183,881 20,831 Whitbread Plc 736,720 26,415 William Hill Plc 324,176 -------------- 6,719,538 ----------------------------------------------------------------------------------------------------------------- Household Durables - 0.2% 31,589 Barratt Developments Plc 626,164 5,238 Bellway Plc 131,868 4,004 Berkeley Group Holdings Plc 142,146 9,500 Bovis Homes Group Plc 169,525 19,510 Persimmon Plc 451,157 66,791 Taylor Wimpey Plc 480,839 45,362 Wimpey George Plc 454,077 -------------- 2,455,776 ----------------------------------------------------------------------------------------------------------------- Household Products - 0.2% 50,589 Reckitt Benckiser Plc 2,769,523 ----------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 143,406 LogicaCMG Plc 434,579 ----------------------------------------------------------------------------------------------------------------- Independent Power Producers & 127,400 International Power Plc 1,095,091 Energy Traders - 0.1% ----------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.1% 17,160 Cookson Group Plc 243,036 37,325 Smiths Group Plc 885,181 92,890 Tomkins Plc 482,512 -------------- 1,610,729 ----------------------------------------------------------------------------------------------------------------- Insurance - 1.0% 216,084 Aviva Plc 3,207,707 188,410 Friends Provident Plc 674,434 593,221 Legal & General Group Plc 1,779,699 474,557 Old Mutual Plc 1,599,130 208,608 Prudential Plc 2,969,389 58,472 Resolution Plc 731,740 227,193 Royal & Sun Alliance Insurance Group 660,961 162,594 Standard Life Plc 1,073,179 -------------- 12,696,239 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Internet & Catalog Retail - 0.1% 86,582 Home Retail Group $ 793,892 ----------------------------------------------------------------------------------------------------------------- Machinery - 0.1% 7,565 Charter Plc (b) 166,930 10,160 FKI Plc 25,598 41,314 IMI Plc 489,352 84,098 Invensys Plc 640,555 -------------- 1,322,435 ----------------------------------------------------------------------------------------------------------------- Media - 0.8% 74,833 Aegis Group Plc 205,092 96,811 British Sky Broadcasting Plc 1,241,230 17,377 Daily Mail & General Trust 265,734 70,300 EMI Group Plc 376,644 26,839 Emap Plc 440,440 282,651 ITV Plc 645,080 77,717 Pearson Plc 1,309,162 108,563 Reed Elsevier Plc 1,403,061 109,009 Reuters Group Plc 1,358,909 25,643 Trinity Mirror Plc 270,327 16,440 United Business Media Plc 260,058 100,379 WPP Group Plc 1,501,316 70,863 Yell Group Plc 654,575 -------------- 9,931,628 ----------------------------------------------------------------------------------------------------------------- Metals & Mining - 1.8% 126,834 Anglo American Plc (b) 7,446,652 202,912 BHP Billiton Plc 5,636,662 86,423 Rio Tinto Plc Registered Shares 6,611,689 51,252 Xstrata Plc 3,051,184 -------------- 22,746,187 ----------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.2% 137,958 Marks & Spencer Group Plc 1,732,631 20,290 Next Plc 814,588 -------------- 2,547,219 ----------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.6% 311,426 Centrica Plc 2,419,556 229,324 National Grid Plc 3,383,746 74,913 United Utilities Plc 1,064,196 -------------- 6,867,498 ----------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 3.8% 291,060 BG Group Plc 4,771,221 1,652,954 BP Plc 19,888,862 314,244 Royal Dutch Shell Plc 12,793,170 235,510 Royal Dutch Shell Plc Class B 9,817,472 -------------- 47,270,725 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Pharmaceuticals - 1.6% 130,352 AstraZeneca Plc $ 6,985,676 490,915 GlaxoSmithKline Plc 12,788,335 -------------- 19,774,011 ----------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 44,498 British Land Co. Plc 1,190,736 (REITs) - 0.4% 8,381 Brixton Plc 73,377 4,736 Great Portland Estates Plc 62,821 28,521 Hammerson Plc 816,747 40,146 Land Securities Group Plc 1,398,109 21,506 Liberty International Plc 491,955 50,917 Segro Plc 635,102 -------------- 4,668,847 ----------------------------------------------------------------------------------------------------------------- Road & Rail - 0.1% 12,232 Arriva Plc 167,993 49,534 Firstgroup Plc 657,989 17,716 National Express Group Plc 377,131 43,699 Stagecoach Group Plc 159,119 -------------- 1,362,232 ----------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 115,101 ARM Holdings Plc 336,703 Equipment - 0.1% 20,291 CSR Plc (b) 317,873 -------------- 654,576 ----------------------------------------------------------------------------------------------------------------- Software - 0.1% 70,946 Misys Plc 332,263 142,674 Sage Group Plc 668,447 -------------- 1,000,710 ----------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.2% 26,867 The Carphone Warehouse Plc 176,599 193,068 DSG International Plc 611,945 24,803 Galiform Plc 67,523 50,995 Kesa Electricals Plc 319,989 199,555 Kingfisher Plc 903,879 90,190 Signet Group Plc 188,158 -------------- 2,268,093 ----------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 34,804 Burberry Group Plc 476,738 0.1% ----------------------------------------------------------------------------------------------------------------- Tobacco - 0.6% 131,308 British American Tobacco Plc 4,478,322 57,827 Imperial Tobacco Group Plc 2,666,169 -------------- 7,144,491 ----------------------------------------------------------------------------------------------------------------- Trading Companies & 38,803 Bunzl Plc 537,173 Distributors - 0.2% 6,634 Travis Perkins Plc 251,795 61,758 Wolseley Plc 1,482,174 -------------- 2,271,142 -----------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Transportation Infrastructure - 0.0% 42,037 BBA Aviation Plc $ 228,178 ----------------------------------------------------------------------------------------------------------------- Water Utilities - 0.1% 18,279 Kelda Group Plc 344,502 25,077 Severn Trent Plc 692,551 -------------- 1,037,053 ----------------------------------------------------------------------------------------------------------------- Wireless Telecommunication 4,510,161 Vodafone Group Plc 15,112,699 Services - 1.2% ----------------------------------------------------------------------------------------------------------------- Total Common Stocks in the United Kingdom 275,166,507 - ------------------------------------------------------------------------------------------------------------------------------------ Total Common Stocks (Cost - $889,550,832) - 96.1% 1,190,475,328 ----------------------------------------------------------------------------------------------------------------- Exchange-Traded Funds ----------------------------------------------------------------------------------------------------------------- 284,277 iShares MSCI EAFE Index Fund (g) 22,921,255 ----------------------------------------------------------------------------------------------------------------- Total Exchange-Traded Funds (Cost - $17,644,632) - 1.8% 22,921,255 ----------------------------------------------------------------------------------------------------------------- Preferred Stocks - ------------------------------------------------------------------------------------------------------------------------------------ Germany - 0.3% Automobiles - 0.2% 855 Porsche AG 1,524,895 8,484 Volkswagen AG, 4.35% 884,604 -------------- 2,409,499 ----------------------------------------------------------------------------------------------------------------- Household Products - 0.1% 18,180 Henkel KGaA, 1.75% 959,482 ----------------------------------------------------------------------------------------------------------------- Media - 0.0% 5,011 ProSieben SAT.1 Media AG, 2.24% 198,125 ----------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.0% 2,010 RWE AG, 3.50% 201,177 ----------------------------------------------------------------------------------------------------------------- Total Preferred Stocks (Cost - $2,134,986) - 0.3% 3,768,283 ----------------------------------------------------------------------------------------------------------------- Rights - ------------------------------------------------------------------------------------------------------------------------------------ Australia - 0.0% Real Estate Investment Trusts 11,579 Westfield Goup (d) 4,516 (REITs) - 0.0% ----------------------------------------------------------------------------------------------------------------- Total Rights in Australia 4,516 - ------------------------------------------------------------------------------------------------------------------------------------ Hong Kong - 0.0% Real Estate Management & 1,019 New World Development Ltd. (e) 0 Development - 0.0% ----------------------------------------------------------------------------------------------------------------- Total Rights in Hong Kong 0 - ------------------------------------------------------------------------------------------------------------------------------------
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Japan - 0.0% Metals & Mining - 0.0% 7,000 Dowa Mining Co., Ltd. (f) $ 0 ----------------------------------------------------------------------------------------------------------------- Total Rights in Japan 0 - ------------------------------------------------------------------------------------------------------------------------------------ Spain - 0.0% Machinery - 0.0% 6,035 Zardoya Otis SA (c) 23,116 ----------------------------------------------------------------------------------------------------------------- Total Rights in Spain 23,116 ----------------------------------------------------------------------------------------------------------------- Total Rights (Cost - $25,522) - 0.0% 27,632 ----------------------------------------------------------------------------------------------------------------- Total Investments (Cost - $909,355,972*)- 98.2% 1,217,192,498 Other Assets Less Liabilities - 1.8% 22,239,999 -------------- Net Assets - 100.0% $1,239,432,497 ==============
* The cost and unrealized appreciation (depreciation) of investments as of June 30, 2007, as computed for federal income tax purposes, were as follows: Aggregate cost $ 918,449,793 ============= Gross unrealized appreciation $ 306,851,241 Gross unrealized depreciation (8,108,536) ------------- Net unrealized appreciation $ 298,742,705 ============= (a) Depositary receipts. (b) Non-income producing security. (c) The rights may be exercised until 7/2/2007. (d) The rights may be exercised until 7/5/2007. (e) The rights may be exercised until 7/6/2007. (f) The rights may be exercised until 1/29/2010. (g) All of a portion of security held as collateral in connection with open financial futures. 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 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, 2007 were as follows:
Unrealized Appreciation Number of Contracts Issue Exchange Expiration Face Value (Depreciation) - ----------------------------------------------------------------------------------------------------------------- 4 Hang Seng Index Future Hong Kong July 2007 $ 561,201 $ (1,681) 43 OMX Stock Index Future Stockholm July 2007 $ 800,426 (11,215) 227 DJ Euro Stoxx 50 Eurex September 2007 $13,745,745 125,880 60 FTSE 100 Index Future LIFFE September 2007 $ 7,985,811 12,101 13 SPI 200 Index Future Sydney September 2007 $ 1,738,711 (9,173) 48 TOPIX Index Future Tokyo September 2007 $ 6,870,319 49,478 - ----------------------------------------------------------------------------------------------------------------- Total Unrealized Appreciation - Net $ 165,390 ===========
Master International Index Series Schedule of Investments as of June 30, 2007 (in U.S. dollars) o Forward foreign exchange contracts purchased as of June 30, 2007 were as follows: -------------------------------------------------------------------------- Unrealized Appreciation Foreign Currency Purchased Settlement Date (Depreciation) -------------------------------------------------------------------------- AUD 3,613,000 August 2007 $ 65,449 CHF 5,056,200 August 2007 (11,327) EUR 11,882,900 August 2007 (5,249) GBP 6,279,400 August 2007 117,900 JPY 1,517,444,700 August 2007 (313,481) SEK 7,241,400 August 2007 (3,585) -------------------------------------------------------------------------- Total Unrealized Depreciation on Forward Foreign Exchange Contracts - Net (USD Commitment - $49,527,364) $ (150,293) ============= o Forward foreign exchange contracts sold as of June 30, 2007 were as follows: -------------------------------------------------------------------------- Unrealized Appreciation Foreign Currency Sold Settlement Date (Depreciation) -------------------------------------------------------------------------- AUD 3,613,000 August 2007 $ (33,654) CHF 5,056,200 August 2007 (13,056) EUR 11,882,900 August 2007 (52,855) GBP 6,279,400 August 2007 (99,153) JPY 1,517,444,700 August 2007 64,494 SEK 7,241,400 August 2007 (6,599) -------------------------------------------------------------------------- Total Unrealized Depreciation on Forward Foreign Exchange Contracts - Net (USD Commitment - $49,236,247) $ (140,823) ============== o 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 Activity Interest Income -------------------------------------------------------------------------------------------- BlackRock Liquidity Series, LLC Cash Sweep Series $ (25,751,297) $ 760,130 --------------------------------------------------------------------------------------------
o Currency Abbreviations: AUD Australian Dollar JPY Japanese Yen CHF Swiss Franc SEK Swedish Krona EUR Euro USD U.S. Dollar GBP British Pound 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/ Douglas G. Herring -------------------- Douglas G. Herring President Date: September 7, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ Douglas G. Herring -------------------- Douglas G. Herring President Date: September 7, 2007 By /s/ Rebecca L. Harris --------------------- Rebecca L. Harris Treasurer Date: September 7, 2007 EX-99.CERT 2 ex99cert-07.txt CERTIFICATION For period ended 06/30/2007 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 7, 2007 /s/ Rebecca L. Harris ----------------- --------------------- Rebecca L. Harris Treasurer American Beacon Funds I, Douglas G. Herring, 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 7, 2007 /s/ Douglas G. Herring ----------------- -------------------- Douglas G. Herring President American Beacon Funds EX-99.906 CERT 3 ex906cert-07.txt SOX CERTIFICATION For period ended 06/30/2007 Registrant Name: American Beacon Funds File Number: 811-04984 EX-99.906CERT Douglas G. Herring 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, 2007 (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/ Douglas G. Herring /s/ Rebecca L. Harris - ---------------------- --------------------- Douglas G. Herring Rebecca L. Harris President Treasurer American Beacon Funds American Beacon Funds Date: September 7, 2007 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-----