-----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, L+vTWOu9eFVEZZgxXHXgL5yEC8UARobbSeSheA8HsdwE1H/u2mHfouNfQy36xDNq IaVx9UdPnHwpYAjEPmD9uw== 0000809593-08-000008.txt : 20080307 0000809593-08-000008.hdr.sgml : 20080307 20080307152415 ACCESSION NUMBER: 0000809593-08-000008 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20071231 FILED AS OF DATE: 20080307 DATE AS OF CHANGE: 20080307 EFFECTIVENESS DATE: 20080307 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-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04984 FILM NUMBER: 08674047 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-CSR 1 beaconncsr1207.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-4984 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: December 31, 2007 ITEM 1. REPORT TO STOCKHOLDERS. GUIDANCE | VISION | EXPERIENCE (AMERICAN BEACON FUNDS(SM) LOGO) ANNUAL REPORT (GRAPHIC) December 31, 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 ............................................. 3 American Beacon Funds Statements of Assets and Liabilities ........................... 12 Statements of Operations ....................................... 13 Statements of Changes in Net Assets ............................ 14 Notes to Financial Statements .................................. 15 Financial Highlights ........................................... 22 State Street Equity 500 Index Portfolio Portfolio of Investments ....................................... 31 Statements of Assets and Liabilities ........................... 38 Statement of Operations ........................................ 39 Statements of Changes in Net Assets ............................ 40 Financial Highlights ........................................... 41 Notes to Financial Statements .................................. 42 Master Small Cap Index Series Summary Schedule of Investments ................................ 50 Statement of Assets and Liabilities ............................ 56 Statement of Operations ........................................ 57 Statements of Changes in Net Assets ............................ 58 Financial Highlights ........................................... 59 Notes to Financial Statements .................................. 60 Master International Index Series Summary Schedule of Investments ................................ 69 Statements of Assets and Liabilities ........................... 74 Statements of Operations ....................................... 75 Statements of Changes in Net Assets ............................ 76 Financial Highlights ........................................... 77 Notes to Financial Statements .................................. 78 Additional Information............................................. Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor's strategies and each Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. American Beacon Funds December 31, 2007 (PHOTO OF DOUGLAS G. HERRING) FELLOW SHAREHOLDERS, I am pleased to present to you the American Beacon S&P 500, Small Cap and International Equity Index Funds Annual Report for the twelve months ended December 31, 2007. Please review the enclosed material carefully, as it includes important information about the Funds. After a number of years of steady returns, volatility returned to the U.S. equity markets toward the end of the year. The change in the investment environment was led by a crisis in the housing sector, due to several years of lax lending standards, which then spilled over into the financial sector during the summer months. Despite the increased volatility, the S&P 500 Index reported a positive return of 5.49% for the year, while the MSCI EAFE Index delivered a positive return of 11.17%. The Russell 2000(R) Index reported a negative return of -1.56% for the same period. The turmoil in the U.S. equity markets continued after the close of the Funds' fiscal year and is likely to continue over the shorter term. Looking forward, the American Beacon S&P 500, Small Cap and International Equity Index Funds will continue to meet their objective of replicating the returns, before expenses, of their corresponding Indices. As always, we appreciate the opportunity to serve your financial needs. To obtain further details about the American Beacon Funds family or to access your account information, please visit our website at www.americanbeaconfunds.com. Thank you for your continued confidence in the American Beacon Funds. Sincerely, /s/ Douglas G. Herring Douglas G. Herring President American Beacon Funds 1 DOMESTIC MARKET OVERVIEW DECEMBER 31, 2007 (UNAUDITED) The year of 2007 began with a slowdown in U.S. growth occurring following Federal Reserve Board ("Fed") credit tightening, rising oil prices, and the beginning of concerns around credit and slowing U.S. consumer spending. Earnings growth remained strong on the back of strong export growth, a declining dollar and share buybacks. A transition in leadership from small, value and domestic to large, growth and multinational became evident as the year began. During the second half of the year, the benign fundamentals of 2003-2006--namely strong global growth, rising profitability levels and falling risk premiums--were replaced by credit stress, pressures on the capital position of the financial system, questions about the sustainability of the business cycle, and rising energy and food prices. Reflecting these woes, market prices moved considerably. U.S. Government bond yields plummeted, the dollar fell faster than in earlier years, credit spreads widened and equities turned volatile. The financials and consumer discretionary sectors experienced drops of one-quarter to one-third. Commodity and industrial related multinational companies performed best. In 2007, the Fed moved from an attitude of vigilance about inflation to one of providing liquidity and lowering rates to shore up the functioning of credit markets and fight economic weakness. During the year, the Fed lowered the target federal funds rate by 100 basis points (1.00%), bringing the target rate from 5.25% to 4.25%. In a statement issued following its meeting on December 11, 2007, the Federal Open Market Committee ("FOMC") noted: "Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks." The FOMC also stated its opinion that the rate reduction "combined with the [monetary] policy actions taken earlier, should help promote moderate growth over time." In a cautionary note, however, the FOMC indicated that "[readings] on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully." The most recent data from the U.S. Department of Labor's Bureau of Labor Statistics indicated that the U.S. unemployment rate rose to 5.0% in December after holding steady at 4.7% in each of the previous three months. Non-farm payroll employment posted a small increase of 18,000 for the month, and total employment, at 146.2 million, was down following an increase in November. Job declines in manufacturing and construction largely offset job growth in several service industries. The Consumer Price Index ("CPI") increased at a seasonally-adjusted rate of 0.8% in November 2007, according to the Department of Labor, its largest advance since a 1.2% rise in September 2005. The index for energy was up 5.7%, led by a 9.5% rise in petroleum-based energy prices. The index for all items less food and energy increased 0.3% in November, following advances of 0.2% in each of the preceding five months. The overall CPI rose at an unadjusted rate of 2.3% over the previous 12 months. The U.S. gross domestic product ("GDP") grew at an annualized rate of 4.9% in the third quarter of 2007 up significantly from the 3.8% annualized growth rate for the second quarter of the year. According to the U.S. Department of Commerce, the increase in real GDP during the quarter resulted from positive contributions from exports, personal consumption expenditures, private inventory investment, nonresidential structures, federal government spending, equipment and software, and state and local government spending. A decrease in residential fixed investment (purchases of private residential structures and residential equipment that landlords rent to tenants) had a negative effect on the GDP. Additionally, there was an increase in imports, which are a subtraction in the calculation of the GDP. S&P is a trademark of the McGraw-Hill Companies, Inc. and has been licensed for use, "Standard and Poor's(R)", "S&P", "Standard & Poor's 500", "S&P 500" are all trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by State Street Bank and Trust Company. Russell 2000 Index is a registered trademark of Frank Russell Company. 2 PERFORMANCE OVERVIEW AMERICAN BEACON S&P 500 INDEX FUND+ DECEMBER 31, 2007 (UNAUDITED) For the twelve months ended December 31, 2007, the total return of the Institutional Class of the American Beacon S&P 500 Index Fund was 5.39%, slightly below the S&P 500 Index (the "Index") return of 5.49% and slightly in excess of the Lipper S&P 500 Objective Funds Index return of 5.25%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 12/31/97 THROUGH 12/31/07 (PERFORMANCE GRAPH) ANNUALIZED TOTAL RETURNS PERIODS ENDED 12/31/07
VALUE OF $10,000 12/31/97- 1 YEAR 5 YEARS 10 YEARS 12/31/07 ------ ------- -------- --------- Institutional Class(1, 4) .. 5.39% 12.65% 5.76% $17,511 PlanAhead Class(1, 2, 4) ... 4.88% 12.12% 5.34% $16,817 Lipper S&P 500 Objective Funds Index (3) ......... 5.25% 12.53% 5.62% $17,283 S&P 500 Index (3) .......... 5.49% 12.83% 5.91% $17,756
(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 12/31/97 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. Eight of the ten economic sectors in the Index gained ground during 2007, with seven of the eight posting double-digit gains. Energy was far and away the top sector, rising 34.2%, led by strong commodity prices and higher company earnings. Materials stocks gained 22.5% during the year and Utilities were the third strongest performing sector, rising 19.5%. Much like Energy stocks, the Materials sector benefited from strong commodity prices and company earnings. Utilities companies appeared to benefit from strong results and a flight-to-safety in the second part of the year. Among the sectors with positive performance, Health Care was the worst-performing, but it actually posted a nice gain of 7.1%. The top performing stocks for 2007 were National Oilwell Varco, up 140.1%, Amazon.com Inc., up 134.8%, and Apple, up 133.5%. National Oilwell Varco benefited from improved margins and strong gains by Energy companies. Amazon.com posted a very strong return, especially compared to its counterparts in the Consumer Discretionary sector. Apple posted excellent results, boosted by i-Mac sales and the strong introduction of i-Phone. On the other end of the spectrum, Financial stocks were battered during the year, falling 18.6%. These companies were hit hard by a crisis in the credit markets, particularly in the area of sub-prime mortgages. Consumer Discretionary stocks fell 13.3% as investors appeared to fear a recession in the United States. + The S&P 500 Index Fund is not sponsored, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in this fund. 3 PERFORMANCE OVERVIEW AMERICAN BEACON S&P 500 INDEX FUND+ DECEMBER 31, 2007 (UNAUDITED) Two of the bottom three performers came from Financials and both were hard hit by the mortgage bond issues. E*trade, down 84.2%, experienced significant losses from these bonds in its portfolio, while Countrywide (a large mortgage originator), down 78.4%, struggled to keep afloat when its financing came under pressure. The third worst performer was Circuit City Stores, down 77.5%, which experienced poor results during the year, causing some to question the chain's long-term viability. The investment manager continues to utilize a replication strategy, owning all 500 names in the S&P 500 Index in approximately the same weightings as the Index. Therefore, the Fund is expected to continue to meet its objective of closely tracking, before expenses, the return of its benchmark, the S&P 500 Index. TOP TEN HOLDINGS
% OF EQUITIES* --------- Exxon Mobil Corp. 4.0% General Electric Co. 2.9% Microsoft Corp. 2.2% AT&T, Inc. 2.0% Procter & Gamble Co. 1.8% Chevron Corp. 1.5% Johnson & Johnson 1.5% Bank of America Corp. 1.4% Apple, Inc. 1.3% Cisco Systems, Inc. 1.3%
* Percent of the equities of State Street Equity 500 Index Portfolio EQUITY SECTOR ALLOCATION
% OF EQUITIES* --------- Financials 17.6% Information Technology 16.7% Energy 12.9% Health Care 12.0% Industrials 11.5% Consumer Staples 10.3% Consumer Discretionary 8.5% Telecommunication Services 3.6% Utilities 3.6% Materials 3.3%
* Percent of the equities of State Street Equity 500 Index Portfolio + The S&P 500 Index Fund is not sponsored, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in this fund. 4 PERFORMANCE OVERVIEW AMERICAN BEACON SMALL CAP INDEX FUND(SM) DECEMBER 31, 2007 (UNAUDITED) For the twelve months ended December 31, 2007, the total return of the Institutional Class of the American Beacon Small Cap Index Fund was (1.63%). The Fund's performance slightly trailed the Russell 2000(R) Index return of (1.56%), and lagged the Lipper Small-Cap Core Funds Index return of 1.92%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 7/31/00 THROUGH 12/31/07 (PERFORMANCE GRAPH) ANNUALIZED TOTAL RETURNS PERIODS ENDED 12/31/07
VALUE OF SINCE $10,000 INCEPTION 7/31/00 1 YEAR 5 YEARS (7/31/00) -12/31/07 ------ ------- --------- --------- Institutional Class(1, 3).......... -1.63% 15.98% 7.09% $16,618 Lipper Small-Cap Core Funds Index(2).. 1.92% 15.76% 8.47% $18,280 Russell 2000 Index(2)............. -1.56% 16.25% 7.27% $16,824
(1.) Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. (2.) The Lipper Small-Cap Core Funds Index tracks the results of the 30 largest mutual funds in the Lipper Small-Cap Core Funds category. Lipper is an independent mutual fund research and ranking service. The Russell 2000 Index is an unmanaged index comprised of approximately 2,000 smaller-capitalization stocks from various industrial sectors. One cannot invest directly in an index. (3.) The total annual Fund operating expense ratio set forth in the most recent prospectus for the Fund was 0.18%. 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. Seven of the ten sectors in the Russell 2000 Index (the "Index") recorded positive returns for the twelve-month period. The Materials sector was the leading performer, advancing 26.0%, followed by Energy, up 14.4%, and Health Care, which was up 13.4%. Conversely, the Financials, Consumer Discretionary and Utilities sectors declined 19.5%, 14.8% and 0.1%, respectively. The strongest performers among individual stocks in the Index during the year included Onyx Pharmaceuticals, Inc., CF Industries Holdings, Inc., and Terra Industries, Inc., which were up 425.7%, 330.0%, and 298.7%, respectively. InPhonic, Inc., Delta Financial Corp., and American Home Mortgage Investment Corp., a real estate investment trust recorded the lowest returns within the Index for the year, down 99.8%, 99.7% and 99.5%, 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. 5 PERFORMANCE OVERVIEW AMERICAN BEACON SMALL CAP INDEX FUND(SM) DECEMBER 31, 2007 (UNAUDITED) TOP TEN HOLDINGS
% OF EQUITIES* --------- Hologic, Inc. 0.7% CF Industries Holdings, Inc. 0.5% Exterran Holdings, Inc. 0.4% Terra Industries, Inc. 0.4% Priceline.com Inc. 0.3% FLIR Systems, Inc. 0.3% Chipotle Mexican Grille B 0.3% Inverness Medical Innovations, Inc. 0.3% Bucyrus International, Inc. (Cl A) 0.3% Equinix, Inc. 0.3%
EQUITY SECTOR ALLOCATION
% OF EQUITIES* --------- Financials 18.8% Information Technology 18.4% Industrials 14.8% Health Care 14.5% Consumer Discretionary 13.6% Energy 6.7% Materials 5.6% Utilities 3.1% Consumer Staples 3.0% Telecommunication Services 1.5%
* Percent of equity portion of Master Small Cap Index Series 6 INTERNATIONAL MARKET OVERVIEW DECEMBER 31, 2007 (UNAUDITED) In the Eurozone, consensus has grown more confident in its predictions of a slowdown. While third quarter 2007 gross domestic product ("GDP") came in at 2.8% annualized, December saw a continued deterioration of the major business and consumer confidence surveys, and headline inflation took an alarming lurch higher in recent months, with the year-on-year rate currently a full 100 basis points (1%) above the 2% target. At the monthly European Central Bank meeting in December, rates were left unchanged, as expected, at 4%. Earnings momentum in the region finally began to fall, but might have further to go. Expectations for earnings-per-share growth in 2007 hovered around 10%, with similar levels anticipated for 2008. Restructuring remained positive, especially for some previously out-of-favor sectors, such as telecommunication services. In the U.K., GDP growth in the third quarter of 2007 remained over 3%, clearly above the economy's long-term trend, with domestic and external demand firm. Since that time, however, services and construction weakened, although the Manufacturing sector held up better to date. The housing market and retail sales growth both lost momentum. Additionally, the full impact of the tightening in credit conditions was yet to be felt. Expectations were for additional signs of weakness to become evident in the coming months, with growth slowing to below 2% during 2008. In a unanimous vote, the Bank of England's Monetary Policy Committee decided to cut rates to 5.5% at its December meeting, and the market has priced in close to 50 basis points (0.50%) of further monetary easing for 2008. Profits growth in the U.K. slowed and faces significant headwinds ahead. The consensus was for a modest outturn in earnings growth, down to only 5% for 2007. Much will depend on the global outlook, as more than 50% of U.K. profits are derived from abroad. In Japan, GDP growth in the year to the third quarter was 2%, somewhat higher than the long-term trend; however, the economy remained very dependent on exports. Personal consumption remained muted, capital spending growth slowed, and residential investment temporarily collapsed in the wake of tighter planning regulations. More recent data was mixed. Although small company business confidence weakened sharply (most likely reflecting the construction downturn), industrial output and business surveys sent somewhat stronger signals, despite some moderation in export orders. Inflation rose sharply at the end of the year to 0.6%, primarily reflecting higher food and energy prices. At its monetary policy meeting held in December, the Bank of Japan decided to maintain the target policy rate of approximately 0.50%. Corporate earnings growth over the past year was close to zero. Expectations are for improvement in 2008, with sell-side analysts projecting a rise of about 8%. The U.S. dollar underperformed most major global currencies in 2007, declining 1.7%, 9.8% and 6.2% versus the British pound, the euro and Japanese yen, respectively. 7 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM) DECEMBER 31, 2007 (UNAUDITED) For the twelve months ended December 31, 2007, the Institutional Class of the American Beacon International Equity Index Fund posted a total return of 10.68%, lagging the MSCI EAFE Index (the "Index") return of 11.17% and below the Lipper International Funds Index return of 14.25%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 7/31/00 THROUGH 12/31/07 (PERFORMANCE CHART) ANNUALIZED TOTAL RETURNS PERIODS ENDED 12/31/07
SINCE VALUE OF INCEPTION $10,000 1 YEAR 5 YEARS (7/31/00) 7/31/00-12/31/07 ------ ------- --------- ---------------- Institutional Class(1, 3) ........... 10.68% 21.55% 6.72% $16,199 Lipper International Funds Index(2).. 14.25% 21.83% 7.54% $17,142 MSCI EAFE Index(2) .................. 11.17% 21.58% 6.91% $16,415
* 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. Finland, Hong Kong and Germany, up 50.1%, 41.2% and 35.9%, respectively, were the strongest-performing countries within the Index for the year, while Ireland, Japan and Belgium, down 19.6%, 4.1% and 2.7%, respectively, were the weakest performers in the Index. With regards to sectors, nine of the ten sectors in the Index recorded gains during the period. Materials, Telecommunication Services and Consumer Staples were the top performers, up 32.0%, 28.8% and 24.5%, respectively. Financials, down 1.4%, was the only sector with a negative return for the year. The strongest performers among individual stocks in the Index during the period included Leighton Holding Ltd., up 246.8%, WorleyParsons Ltd., up 179.3%, and Cosco Corp. (Singapore) Ltd., up 171.9%. Conversely, Centro Properties Group, down 87.3%, Goodwill Group, Inc., down 84.1%, and C&C Group plc, down 68.6%, recorded the lowest returns. The Fund continues to pursue its objective of closely replicating, before expenses, the return of its benchmark, the MSCI EAFE Index. It does so by investing in a subset of the securities in the Index such that the characteristics of the portfolio closely track the characteristics of the Index. 8 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM) DECEMBER 31, 2007 (UNAUDITED) TOP TEN HOLDINGS
% OF EQUITIES* --------- BP plc 1.7% Vodafone Group, plc 1.4% HSBC Holdings plc 1.4% Total S.A. 1.3% Nestle S.A. 1.3% Nokia Corp. 1.1% Royal Dutch Shell plc 1.1% Toyota Motor Corp. 1.1% GlaxoSmithKline plc 1.0% Telefonica S.A. 1.0%
EQUITY SECTOR ALLOCATION
% OF EQUITIES* EAFE --------- ---- Financials 26.8% 26.9% Industrials 12.1% 12.1% Consumer Discretionary 10.8% 10.9% Materials 9.9% 9.9% Consumer Staples 8.5% 8.5% Energy 7.9% 7.8% Health Care 6.3% 6.3% Telecommunications 6.2% 6.2% Utilities 6.0% 5.9% Information Technology 5.5% 5.5%
* Percent of equity portion of Master International Index Series COUNTRY ALLOCATION (PIE CHART)
% OF EQUITIES* EAFE --------- ---- UNITED KINGDOM 22.2% 22.2% JAPAN 19.9% 19.9% FRANCE 10.9% 10.7% GERMANY 9.5% 9.4% SWITZERLAND 6.5% 6.7% AUSTRALIA 6.4% 6.5% SPAIN 4.4% 4.4% ITALY 4.0% 4.0% NETHERLANDS 2.8% 2.8% HONG KONG 2.4% 2.4% SWEDEN 2.3% 2.3% FINLAND 1.9% 1.9% BELGIUM 1.2% 1.2% NORWAY 1.1% 1.1% SINGAPORE 1.1% 1.1% DENMARK 0.9% 0.9% GREECE 0.8% 0.8% AUSTRIA 0.6% 0.6% IRELAND 0.6% 0.6% PORTUGAL 0.4% 0.4% NEW ZEALAND 0.1% 0.1%
* Percent of equity portion of Master International Index Series 9 FUND EXPENSES DECEMBER 31, 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 July 1, 2007 through December 31, 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
SMALL CAP INTERNATIONAL INSTITUTIONAL CLASS S&P 500 INDEX INDEX EQUITY INDEX - ------------------- ------------- --------- ------------- Beginning Account Value 7/1/07.................. $1,000.00 $1,000.00 $1,000.00 Ending Account Value 12/31/07................... $ 986.29 $ 922.40 $1,000.17 Expenses Paid During Period* 7/1/07 - 12/31/07.. $ 0.65 $ 0.58 $ 1.56 Annualized Expense Ratio........................ 0.13% 0.12% 0.31%
S&P 500 PLANAHEAD CLASS INDEX - --------------- --------- Beginning Account Value 7/1/07.................. $1,000.00 Ending Account Value 12/31/07................... $ 983.41 Expenses Paid During Period* 7/1/07 - 12/31/07.. $ 3.15 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
SMALL CAP INTERNATIONAL INSTITUTIONAL CLASS S&P 500 INDEX INDEX EQUITY INDEX - ------------------- ------------- --------- ------------- Beginning Account Value 7/1/07.................. $1,000.00 $1,000.00 $1,000.00 Ending Account Value 12/31/07................... $1,024.55 $1,024.60 $1,023.64 Expenses Paid During Period* 7/1/07 - 12/31/07.. $ 0.66 $ 0.61 $ 1.58 Annualized Expense Ratio........................ 0.13% 0.12% 0.31%
S&P 500 PLANAHEAD CLASS INDEX - --------------- --------- Beginning Account Value 7/1/07.................. $1,000.00 Ending Account Value 12/31/07................... $1,022.03 Expenses Paid During Period* 7/1/07 - 12/31/07.. $ 3.21 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 (184) by days in the year (365) to reflect the half-year period. 10 AMERICAN BEACON FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Trustees of American Beacon Funds: We have audited the accompanying statements of assets and liabilities of American Beacon Funds, comprised of the American Beacon S&P 500 Index Fund, the American Beacon Small Cap Index Fund, and the American Beacon International Equity Index Fund (collectively, the "Funds") as of December 31, 2007, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2007, by correspondence with the Master Portfolios. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon Funds as of December 31, 2007, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Dallas, Texas February 28, 2008 11 AMERICAN BEACON FUNDS STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2007 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
INTERNATIONAL S&P 500 INDEX SMALL CAP INDEX EQUITY INDEX FUND FUND FUND ------------- --------------- ------------- ASSETS: Investment in Portfolio, at value ... $ 289,675 $ 52,435 $ 271,035 Receivable for fund shares sold ..... 652 1 118 Prepaid expenses .................... 5 -- 1 ----------- ---------- ----------- TOTAL ASSETS ..................... 290,332 52,436 271,154 ----------- ---------- ----------- LIABILITIES: Payable for fund shares redeemed .... 77 60 3,781 Administrative service and service fees payable (Note 2) ............ 19 2 11 Other liabilities ................... 60 49 69 ----------- ---------- ----------- TOTAL LIABILITIES ................ 156 111 3,861 ----------- ---------- ----------- NET ASSETS .......................... $ 290,176 $ 52,325 $ 267,293 =========== ========== =========== ANALYSIS OF NET ASSETS: Paid-in-capital ..................... 215,518 52,685 221,148 Undistributed net investment income (expense) ................. 158 -- (418) Accumulated net realized gain (loss) ........................... (28,409) (803) (1,577) Unrealized net appreciation (depreciation) of investments and futures contracts ............ 102,909 443 48,140 ----------- ---------- ----------- NET ASSETS ............................. $ 290,176 $ 52,325 $ 267,293 =========== ========== =========== Shares outstanding (no par value): Institutional Class ................. 13,692,453 3,872,212 19,988,262 =========== ========== =========== PlanAhead Class ..................... 940,175 -- -- =========== ========== =========== Net asset value, offering and redemption price per share: Institutional Class ................. $ 19.85 $ 13.51 $ 13.37 =========== ========== =========== PlanAhead Class ..................... $ 19.60 $ -- $ -- =========== ========== ===========
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios attached 12 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS)
INTERNATIONAL S&P 500 INDEX SMALL CAP INDEX EQUITY INDEX FUND FUND FUND ------------- --------------- ------------- INVESTMENT INCOME ALLOCATED FROM PORTFOLIO: Dividend income ..................... $ 5,153 $ 766 $ 9,732 Interest income ..................... 271 419 274 Securities lending income ........... -- 86 -- Portfolio expenses .................. (121) (46) (301) Other income (loss) ................. -- (1) 139 ------- ------ ------- NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ................ 5,303 1,224 9,844 ------- ------ ------- FUND EXPENSES: Administrative service fees (Note 2): Institutional Class .............. 125 38 160 PlanAhead Class .................. 47 -- -- Sub-administrative service fees: Institutional Class .............. -- 16 79 Transfer agent fees: Institutional .................... 7 5 13 PlanAhead ........................ 9 -- -- Custody and accounting fees ......... 6 7 3 Professional fees ................... 18 18 24 Registration fees ................... 27 -- -- Service fees - PlanAhead Class (Note 2) ......................... 47 -- -- Printing ............................ 13 7 7 Other expenses ...................... 24 11 32 ------- ------ ------- TOTAL FUND EXPENSES .............. 323 102 318 ------- ------ ------- NET INVESTMENT INCOME .................. 4,980 1,122 9,526 ------- ------ ------- REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED FROM MASTER PORTFOLIO Net realized gain (loss) from: Investments ...................... 16,649 3,098 5,654 Foreign currency transactions .... -- -- 540 Futures contracts ................ (123) (376) 226 Change in net unrealized appreciation or depreciation of: Investments ...................... (8,865) (2,348) 19,998 Foreign currency transactions .... -- -- 39 Futures contracts ................ 47 3 (59) ------- ------ ------- NET GAIN ON INVESTMENTS .......... 7,708 377 26,398 ------- ------ ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..................... $12,688 $1,499 $35,924 ======= ====== =======
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios attached 13 AMERICAN BEACON FUNDS STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
INTERNATIONAL S&P 500 INDEX FUND SMALL CAP INDEX FUND EQUITY INDEX FUND Year Ended December 31, Year Ended December 31, Year Ended December 31, ----------------------- ----------------------- ----------------------- 2007 2006 2007 2006 2007 2006 --------- --------- --------- --------- --------- --------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ............... $ 4,980 $ 4,545 $ 1,122 $ 1,753 $ 9,526 $ 2,658 Net realized gain on investments, foreign currency, and futures contracts ........................ 16,526 816 2,722 5,769 6,420 1,943 Change in net unrealized appreciation or depreciation of investments and futures contracts ........................ (8,818) 32,077 (2,345) (2,382) 19,978 22,488 --------- --------- --------- --------- --------- --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... 12,688 37,438 1,499 5,140 35,924 27,089 --------- --------- --------- --------- --------- --------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class ................. (4,560) (3,990) (1,094) (1,732) (10,259) (2,887) PlanAhead Class ..................... (286) (517) -- -- -- -- Net realized gain on investments: Institutional Class ................. -- -- (2,872) -- (3,968) (877) PlanAhead Class ..................... -- -- -- -- -- -- Tax return of capital: Institutional Class ................. -- -- (215) -- (252) -- --------- --------- --------- --------- --------- --------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS .................. (4,846) (4,507) (4,181) (1,732) (14,479) (3,764) --------- --------- --------- --------- --------- --------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares ....... 171,408 28,321 11,780 232,022 369,147 108,842 Reinvestment of dividends and distributions .................... 4,810 4,484 4,181 1,732 14,473 3,764 Cost of shares redeemed ............. (132,948) (101,514) (112,832) (131,397) (299,885) (64,018) --------- --------- --------- --------- --------- --------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ............ 43,270 (68,709) (96,871) 102,357 83,735 48,588 --------- --------- --------- --------- --------- --------- NET INCREASE (DECREASE) IN NET ASSETS .. 51,112 (35,778) (99,553) 105,765 105,180 71,913 --------- --------- --------- --------- --------- --------- NET ASSETS: Beginning of period ................. 239,064 274,842 151,878 46,113 162,113 90,200 --------- --------- --------- --------- --------- --------- END OF PERIOD * ..................... $ 290,176 $ 239,064 $ 52,325 $ 151,878 $ 267,293 $ 162,113 ========= ========= ========= ========= ========= ========= *Includes undistributed net investment income (loss) of .................... $ 158 $ 13 $ -- $ 24 $ (418) $ (243) ========= ========= ========= ========= ========= =========
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios attached 14 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 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 FUND AT AMERICAN BEACON: PORTFOLIOS: DECEMBER 31, 2007 - ---------------- ----------- ----------------- S&P 500 Index Fund State Street Equity 500 Index Portfolio 12.0% Small Cap Index Fund Master Small Cap Index Series 8.3% International Equity Index Fund Master International Index Series 23.7%
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. 15 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 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 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. As of December 31, 2007, the Manager does not believe the adoption of FAS 157 will materially impact the amounts represented in the financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value. 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. 16 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 2. FEES AND TRANSACTIONS WITH AFFILIATES Administrative Services Agreement The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative and management services to each Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.05% of the average daily net assets of the Institutional Class of the S&P 500 Index Fund, International Equity Index Fund and the Small Cap Index Fund and an annualized fee of 0.25% of the average daily net assets of the PlanAhead Class of the S&P 500 Index Fund. Service Plans The Manager and the Trust entered into a Service Plan that obligates the Manager to oversee additional shareholder servicing of the PlanAhead Class of S&P 500 Index Fund. As compensation for performing the duties required under the Service Plan, the Manager receives 0.25% of the average daily net assets of the PlanAhead Class of the S&P 500 Index Fund. Subadministration Agreement The Trust, the Manager and BlackRock Advisors, LLC ("BlackRock") entered into a Subadministration Agreement that obligates BlackRock to provide certain other administrative services to the Small Cap Index Fund and the International Equity Index Fund. As compensation for performing these services, BlackRock receives an annualized fee of 0.08% of the average daily net assets of the Small Cap Index Fund and 0.12% of the average daily net assets of the International Equity Index Fund; however, the fee of each is to be reduced by the total expense ratio of its corresponding Portfolio, net of any fee waivers. Other At December 31, 2007, the employee benefit plans of AMR Corporation and subsidiary companies owned 91.7% of the Institutional Class of the S&P 500 Index Fund, 97.0% of the Small Cap Index Fund and 74.6% of the International Equity Index Fund. 3. FEDERAL INCOME AND EXCISE TAXES It is the policy of the Funds to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income or excise tax provision is required. The Funds adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainties in Income Taxes" ("FIN 48"), on January 1, 2007. FIN 48 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The implementation of FIN 48 did not result in any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the three year period ended December 31, 2007, remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in "Other expenses" on the Statement of Operations. Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. generally accepted accounting principles. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. 17 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 The International Equity Index Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation, as applicable, as the income is earned or capital gains are recorded. The tax character of distributions paid during the years ended December 31, 2007 and December 31, 2006 were as follows (in thousands):
S&P 500 INDEX SMALL CAP INDEX INTERNATIONAL EQUITY INDEX --------------------------- --------------------------- --------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2007 2006 2007 2006 2007 2006 ------------ ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID FROM: ORDINARY INCOME:* Institutional Class ...... $4,560 $3,990 $1,510 $1,732 $11,655 $2,887 PlanAhead Class .......... 286 517 -- -- -- -- LONG-TERM CAPITAL GAIN: Institutional Class ...... -- -- 2,456 -- 2,572 877 PlanAhead Class .......... -- -- -- -- -- -- RETURN OF CAPITAL ........... -- -- 215 -- 252 -- ------ ------ ------ ------ ------- ------ TOTAL TAXABLE DISTRIBUTIONS . $4,846 $4,507 $4,181 $1,732 $14,479 $3,764 ====== ====== ====== ====== ======= ======
* For tax purposes, short-term capital gains are considered ordinary income distributions. As of December 31, 2007, the components of distributable earnings on a tax basis we as follows (in thousands):
S&P 500 INDEX SMALL CAP INDEX INT'L EQUITY FUND FUND INDEX FUND ------------- --------------- ------------ Cost basis of investments for federal income tax purposes .. $202,868 $52,727 $224,898 Unrealized appreciation ................................. 110,546 965 53,417 Unrealized depreciation ................................. (23,739) (1,257) (7,280) -------- ------- -------- Net unrealized appreciation/depreciation ................ 86,807 (292) 46,137 Undistributed ordinary income ........................... 73 -- -- Undistributed long-term loss ............................ (12,142) -- -- Other temporary differences ............................. (80) (68) 8 -------- ------- -------- Distributable earnings ..................................... $ 74,658 $ (360) $ 46,145 ======== ======= ========
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation/ (depreciation) are attributable primarily to the tax deferral of wash sales, the realization for tax purposes of unrealized gains/ (losses) on certain derivative instruments, reclassifications of income from real estate investment securities, and the realization for tax purposes on unrealized gains/ (losses) on investments in passive foreign investment companies. Due to the inherent differences in the recognition of income, expenses and realized gains/(losses) under the U.S. generally accepted accounting principles and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities. Accordingly, the following amounts represent current year permanent differences derived from reclassifications of income from real estate investment securities, futures, foreign currency, sales of 18 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 investments in passive foreign investment companies, dividend reclassifications and partnership transactions that have been reclassified as of December 31, 2007 (in thousands):
S&P 500 INDEX SMALL CAP INDEX INT'L EQUITY FUND FUND INDEX FUND ------------- --------------- ------------ Paid-in-capital ............................................ $ 465 $(270) $ 2,688 Undistributed net investment income ........................ 11 (52) 574 Accumulated net realized gain/(loss) ....................... (476) 322 (3,262) Unrealized appreciation (depreciation) of investments, futures contracts, and foreign currency -- -- --
At December 31, 2007 capital loss carry forward positions for federal income tax purposes were as follows (in thousands):
FUND 2010 2011 2012 2013 2014 TOTAL ------ ---- ------ ------ ---- ------- S&P 500 Index $7,850 $635 $1,060 $2,311 $286 $12,142
For the period ended December 31, 2007, the S&P 500 Index and Small Cap Index Funds utilized $13,859 and $220, respectively, of net capital loss carryover. 4. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares for each Class of the Funds (shares and dollars in thousands): Year ended December 31, 2007
INSTITUTIONAL CLASS PLANAHEAD CLASS ------------------- ----------------- S&P 500 INDEX FUND SHARES AMOUNT SHARES AMOUNT - ------------------ ------ ---------- ------ -------- Shares sold ........................... 8,415 $ 164,624 347 $ 6,784 Reinvestment of dividends ............. 227 4,560 13 250 Shares redeemed ....................... (6,573) (127,653) (266) (5,295) ----- --------- --- ------- Net increase in shares outstanding .... 2,069 $ 41,531 94 $ 1,739 ===== ========= === =======
INSTITUTIONAL CLASS ------------------- SMALL CAP INDEX FUND SHARES AMOUNT - -------------------- ------ ---------- Shares sold ........................... 788 $ 11,780 Reinvestment of dividends ............. 302 4,181 Shares redeemed ....................... (7,415) (112,832) ------ --------- Net (decrease) in shares outstanding .. (6,325) $ (96,871) ====== =========
INSTITUTIONAL CLASS ------------------- INTERNATIONAL EQUITY INDEX FUND SHARES AMOUNT - ------------------------------- ------- --------- Shares sold ........................... 27,066 $ 369,147 Reinvestment of dividends ............. 1,093 14,473 Shares redeemed ....................... (20,878) (299,885) ------ --------- Net increase in shares outstanding .... 7,281 $ 83,735 ====== =========
19 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 Year Ended December 31,
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 ===== ========
20 [This page intentionally left blank] 21 AMERICAN BEACON S&P 500 INDEX FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class Year Ended December 31, ------------------------------------------------------ 2007 2006 2005 2004 2003 -------- -------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 19.19 $ 16.90 $ 16.43 $ 15.10 $ 11.96 -------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income:(A) ...................... 0.39 0.33 0.29 0.29 0.21 Net gain on investments, foreign currency and futures transactions (both realized and unrealized) ............................. 0.65 2.30 0.47 1.32 3.14 -------- -------- -------- -------- -------- Total income from investment operations ........... 1.04 2.63 0.76 1.61 3.35 -------- -------- -------- -------- -------- LESS DISTRIBUTIONS: Dividends from net investment income ........... (0.38) (0.34) (0.29) (0.28) (0.21) Tax return of capital .......................... -- -- 0.00(B) -- -- -------- -------- -------- -------- -------- Total distributions ............................... (0.38) (0.34) (0.29) (0.28) (0.21) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD .................... $ 19.85 $ 19.19 $ 16.90 $ 16.43 $ 15.10 ======== ======== ======== ======== ======== TOTAL RETURN ...................................... 5.39% 15.69% 4.74% 10.76% 28.26% ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ....... $271,746 $223,008 $225,857 $244,668 $245,251 Ratios to average net assets (annualized):(A) Net investment income, net of waivers ....... 1.89% 1.85% 1.75% 1.85% 1.63% Net investment income, before waivers ....... 1.89% 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) American Beacon Advisors, Inc. agreed to reimburse the Class for a portion of its expenses through March 1, 2003. 22 AMERICAN BEACON S&P 500 INDEX FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PlanAhead Class Year Ended December 31, ------------------------------------------------- 2007 2006 2005 2004 2003 ------- ------- ------- ------- ------- NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 18.97 $ 16.69 $ 16.23 $ 14.96 $ 11.85 ------- ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income:(A) ...................... 0.28 0.17 0.21 0.21 0.15 Net gain on investments, foreign currency and futures transactions (both realized and unrealized) ............................. 0.65 2.33 0.48 1.31 3.12 ------- ------- ------- ------- ------- Total income from investment operations ........... 0.93 2.50 0.69 1.52 3.27 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS: Dividends from net investment income ........... (0.30) (0.22) (0.23) (0.25) (0.16) Tax return of capital .......................... -- -- 0.00(B) -- -- ------- ------- ------- ------- ------- Total distributions ............................... (0.30) (0.22) (0.23) (0.25) (0.16) ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD .................... $ 19.60 $ 18.97 $ 16.69 $ 16.23 $ 14.96 ======= ======= ======= ======= ======= TOTAL RETURN ...................................... 4.88% 15.09% 4.32% 10.21% 27.65% ======= ======= ======= ======= ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ....... $18,430 $16,056 $48,985 $46,344 $34,729 Ratios to average net assets (annualized):(A) Net investment income, net of waivers ....... 1.38% 1.37% 1.28% 1.43% 1.16% Net investment income, before waivers ....... 1.38% 1.37% 1.28% 1.43% 1.15% Expenses, including expenses of the master portfolio, net of waivers ......... 0.63% 0.61% 0.61% 0.62% 0.63%(C) Expenses, including expenses of the master portfolio, before waivers ......... 0.63% 0.61% 0.61% 0.62% 0.64%
23 AMERICAN BEACON SMALL CAP INDEX FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class Year Ended December 31, --------------------------------------------------- 2007 2006 2005 2004 2003 ------- -------- ------- ------- ------- NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 14.89 $ 12.78 $ 12.57 $ 11.27 $ 7.70 ------- -------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A) ...................... 0.32 0.17 0.16 0.14 0.04 Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) .................... (0.53) 2.11 0.42 1.87 3.57 ------- -------- ------- ------- ------- Total income (loss) from investment operations .... (0.21) 2.28 0.58 2.01 3.61 ------- -------- ------- ------- ------- LESS DISTRIBUTIONS: Dividends from net investment income ........... (0.31) (0.17) (0.17) (0.13) (0.04) Distributions from net realized gains on investments ................................. (0.80) -- (0.15) (0.58) -- Tax return of capital .......................... (0.06) -- (0.05)(B) -- -- ------- -------- ------- ------- ------- Total distributions ............................... (1.17) (0.17) (0.37) (0.71) (0.04) ------- -------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD .................... $ 13.51 $ 14.89 $ 12.78 $ 12.57 $ 11.27 ======= ======== ======= ======= ======= TOTAL RETURN ...................................... -1.63% 17.85% 4.51% 17.91% 46.90% ======= ======== ======= ======= ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ....... $52,325 $151,878 $46,113 $39,196 $67,756 Ratios to average net assets (annualized):(A) Net investment income ....................... 1.49% 1.49% 1.12% 0.90% 1.04% Expenses, including expenses of the master portfolio ......................... 0.20% 0.18% 0.18% 0.22% 0.24%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the Master Small Cap Index Series. (B) The tax return of capital is calculated based upon outstanding shares at the time of distribution. 24 AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class Year Ended December 31, ------------------------------------------------------ 2007 2006 2005 2004 2003 -------- -------- ------- ------- ------- NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 12.76 $ 10.33 $ 9.39 $ 8.01 $ 5.86 -------- -------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A) ....................... 0.52 0.23 0.21 0.17 0.14 Net gain on investments, foreign currency and futures transactions (both realized and unrealized) ............................. 0.85 2.50 1.06 1.44 2.13 -------- -------- ------- ------- ------- Total income from investment operations ........... 1.37 2.73 1.27 1.61 2.27 -------- -------- ------- ------- ------- LESS DISTRIBUTIONS: Dividends from net investment income ........... (0.53) (0.23) (0.24) (0.23) (0.12) Distributions from net realized gains on investments ................................. (0.22) (0.07) -- -- -- Tax return of capital .......................... (0.01)(B) -- (0.09)(B) -- -- -------- -------- ------- ------- ------- Total distributions ............................... (0.76) (0.30) (0.33) (0.23) (0.12) -------- -------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD .................... $ 13.37 $ 12.76 $ 10.33 $ 9.39 $ 8.01 ======== ======== ======= ======= ======= TOTAL RETURN ...................................... 10.68% 26.52% 13.58% 20.12% 38.87% ======== ======== ======= ======= ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ....... $267,293 $162,113 $90,200 $23,156 $10,043 Ratios to average net assets (annualized):(A) Net investment income ....................... 2.96% 2.44% 2.49% 2.16% 2.71% Expenses, including expenses of the master portfolio ......................... 0.19% 0.22% 0.23% 0.26% 0.31%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the Master International Index Series. (B) The tax return of capital is calculated based upon outstanding shares at the time of distribution. 25 AMERICAN BEACON FUNDS TAX INFORMATION FOR THE TAX YEAR ENDED DECEMBER 31, 2007 (UNAUDITED) We are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those in other areas of this report because of differences between tax and financial reporting requirements. For corporate shareholders in the Funds, the percentage of ordinary dividend income distributed for the year ended December 31, 2007, which is designated as qualifying for the dividends-received deduction, is as follows: S&P 500 Index Fund 91.82% Small Cap Index Fund 35.11% International Equity Index Fund 0.00%
For shareholders in the Funds, the percentage of dividend income distributed for the year ended December 31, 2007, which designated as qualified dividend income under the Jobs and Grown Tax relief Act of 2003, is as follows: S&P 500 Index Fund 100.00% Small Cap Index Fund 39.20% International Equity Index Fund 81.27%
Pursuant to Section 852 of the Internal Revenue Code, The Funds designate the following amounts as long-term capital gain dividends for their taxable year ended December 31, 2007: S&P 500 Index Fund $ 0 Small Cap Index Fund $2,456,009 International Equity Index Fund $2,571,708
Of the ordinary dividends distributed to shareholders during the tax year ended December 31, 2007, the amount of income derived from Short-Term Capital Gains is as follows: S&P 500 Index Fund $ 0 Small Cap Index Fund $ 364,663 International Equity Index Fund $1,397,095
26 AMERICAN BEACON FUNDS PRIVACY POLICY (UNAUDITED) PRIVACY POLICY The American Beacon Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used. We may collect nonpublic personal information about you from one or more of the following sources: - information we receive from you on applications or other forms; - information about your transactions with us or our service providers; and - information we receive from third parties. We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards. 27 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED) The Trustees and officers of the American Beacon Funds (the "Trust") are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-seven funds in the fund complex that includes the Trust, the American Beacon Master Trust, the American Beacon Mileage Funds, and the American Beacon Select Funds. The Trust's Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS - -------------------------- ------------------------ ------------------------------------------------- INTERESTED TRUSTEES Term Lifetime of Trust until removal, resignation or retirement* Douglas G. Herring** (50) Trustee since 2006 President (2006-Present) and CEO (2008-Present), Executive Vice President American Beacon Advisors, Inc.; Vice President from 2006 to 2007 and Controller, American Airlines, Inc. President since 2007 (1998-2006); Chairman (2003-Present) and Director (1995-Present), American Airlines Federal Credit Union; Trustee, American Beacon Mileage Funds (2006-Present); Trustee, American Beacon Select Funds (2006-Present); Trustee, American Beacon Master Trust (2006-Present); Director, American Beacon Global Funds, SPC (2006-Present); Director, American Beacon Global Funds plc (2007-Present). William F. Quinn** (59) Trustee Chairman (2006-Present), CEO (2006-2007), since 1987 President (1986-2006), and Director President from (2003-Present), American Beacon Advisors, Inc.; 1987 to 2007 Chairman (1989-2003) and Director (1979-1989, Executive Vice 2003-Present), American Airlines Federal Credit President Union; Director, Hicks Acquisition I, Inc. since 2007 (2007-Present); Director, Crescent Real Estate Equities, Inc.(1994-2007); Director, Pritchard, Hubble & Herr, LLC (investment advisor) (2001-2006); Director of Investment Committee, Southern Methodist University Endowment Fund (1996-Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Member, New York Stock Exchange Pension Manager Committee (1997-1998, 2000-2002, 2006-Present); Chairman (2007-Present) and Vice Chairman (2004-2007), Committee for the Investment of Employee Benefits; Director, United Way of Metropolitan Tarrant County (1988-2000, 2004-Present); Trustee, American Beacon Mileage Funds (1995-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1995-Present); Director, American Beacon Global Funds SPC (2002-Present); Director, American Beacon Global Funds plc (2007-Present). Alan D. Feld** (71) Trustee since 1996 Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Director, Clear Channel Communications (1984-Present); Trustee, CenterPoint Properties (1994-2006); Member Board of Trustees, Southern Methodist University; Member, Board of Visitors, The University of Texas M.D. Anderson Cancer Center; Member, Board of Visitors, Zale Lipshy Hospital; Trustee, American Beacon Mileage Funds (1996-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-Present). NON-INTERESTED TRUSTEES Term Lifetime of Trust until removal, resignation or retirement* W. Humphrey Bogart (63) Trustee since 2004 Consultant, New River Canada Ltd. (mutual fund servicing company) (1998-2003); Board Member, Baylor University Medical Center Foundation (1992-2004); President and CEO, Allmerica Trust Company, NA (1996-1997); President and CEO, Fidelity Investments Southwest Company (1983-1995); Senior Vice President of Regional Centers, Fidelity Investments (1988-1995); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present).
28 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED)
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS - -------------------------- ------------------------ ------------------------------------------------- NON-INTERESTED TRUSTEES (CONT.) Brenda A. Cline (47) Trustee since 2004 Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, Texas Christian University (1998-Present); Trustee, W.I. Cook Foundation, Inc. (d/b/a Cook Children's Health Foundation) (2001-2006); Director, Christian Church Foundation (1999-2007); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present). Richard A. Massman (64) Trustee since 2004 Senior Vice President and General Counsel, Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching, and venture capital activities) (1994-Present); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present). Stephen D. O'Sullivan (72) Trustee since 1987 Consultant (1994-Present); Trustee, American Beacon Mileage Funds (1995-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1995-Present). R. Gerald Turner (62) Trustee since 2001 President, Southern Methodist University 225 Perkins Admin. Bldg. (1995-Present); Director, ChemFirst (1986-2002); Southern Methodist Univ. Director, J.C. Penney Company, Inc. Dallas, Texas 75275 (1996-Present); Director, California Federal Preferred Capital Corp. (2001-2003); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-2007); Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Co-Chair, Knight Commission on Intercollegiate Athletics; Trustee, American Beacon Mileage Funds (2001-Present); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-Present). Kneeland Youngblood (52) Trustee since 1996 Managing Partner, Pharos Capital Group, LLC (a 100 Crescent Court Chairman since private equity firm) (1998-Present); Director, Suite 1740 2005 Energy Future Holdings Corp. (2007-Present); Dallas, Texas 75201 Director, Burger King Corporation (2004-Present); Director, Gap, Inc. (2006-Present); Trustee, City of Dallas, Texas Employee Retirement Fund (2004-Present); Director, Starwood Hotels and Resorts (2001-Present); Member, Council on Foreign Relations (1995-Present); Trustee, St. Mark's School of Texas (2002-Present); Trustee, American Beacon Mileage Funds (1996- Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-Present).
29 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED)
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS - -------------------------- ------------------------ ------------------------------------------------- OFFICERS Term One Year Rosemary K. Behan (48) VP, Secretary and Vice President, Legal and Compliance, American Chief Legal Beacon Advisors, Inc. (2006-Present); Assistant Officer since 2006 General Counsel, First Command Financial Planning, Inc. (2004-2006); Enforcement Attorney (1995-2004), Securities and Exchange Commission. Brian E. Brett (47) VP since 2004 Vice President, Director of Sales and Marketing, American Beacon Advisors, Inc. (2004-Present); Regional Vice President, Neuberger Berman, LLC (investment advisor) (1996-2004). Wyatt Crumpler (41) VP since 2007 Vice President, Trust Investments, American Beacon Advisors, Inc. (2007-Present); Managing Director of Corporate Accounting (2004-2007), Director of IT Strategy and Finance (2002-2004), American Airlines, Inc. Michael W. Fields (53) VP since 1989 Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-Present); Director, American Beacon Global Funds SPC (2002-Present); Director, American Beacon Global Funds plc (2007-Present). Rebecca L. Harris (41) Treasurer since Vice President, Finance, American Beacon 1995 Advisors, Inc. (1995-Present). Christina E. Sears (36) Chief Compliance Chief Compliance Officer, American Beacon Officer since 2004 Advisors, Inc. (2004-Present); Senior Compliance and Asst. Analyst, American Beacon Advisors, Inc. Secretary since (1998-2004). 1999
* The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, with the exception of Messrs. Quinn and O'Sullivan. ** Messrs. Quinn, Feld and Herring are deemed to be "interested persons" of the Trust, as defined by the 1940 Act. Mr. Quinn is Chairman of the Manager. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two years to one or more of the Trust's Investment advisors. Mr. Herring is President and CEO of the Manager. 30 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007
MARKET VALUE SHARES (000) --------- --------- COMMON STOCKS -- 98.1% CONSUMER DISCRETIONARY -- 8.7% Abercrombie & Fitch Co. 15,846 $ 1,267 Amazon.Com, Inc. (a) 56,092 5,196 Apollo Group, Inc. Class A (a) 26,529 1,861 AutoNation, Inc. (a) 23,063 361 AutoZone, Inc. (a) 7,864 943 Bed Bath & Beyond, Inc. (a) 50,745 1,491 Best Buy Co., Inc. 64,119 3,376 Big Lots, Inc. (a) 17,227 275 Black & Decker Corp. 11,837 824 Brunswick Corp. 18,586 317 Carnival Corp. 80,250 3,570 CBS Corp. Class B 125,903 3,431 Centex Corp. 24,082 608 Circuit City Stores, Inc. 28,732 121 Clear Channel Communications, Inc. 92,847 3,205 Coach, Inc. (a) 68,028 2,080 Comcast Corp. Class A (a) 568,201 10,375 D.R. Horton, Inc. 53,476 704 Darden Restaurants, Inc. 25,688 712 Dillard's, Inc. Class A 12,294 231 DIRECTV Group, Inc. (a) 128,877 2,980 Eastman Kodak Co. 54,482 1,192 eBay, Inc. (a) 210,566 6,989 EW Scripps Co. Class A 16,835 758 Expedia, Inc. (a) 35,655 1,127 Family Dollar Stores, Inc. 27,158 522 Ford Motor Co. (a) 383,580 2,581 Fortune Brands, Inc. 27,745 2,008 GameStop Corp. (a) 29,000 1,801 Gannett Co., Inc. 42,074 1,641 Gap, Inc. 91,398 1,945 General Motors Corp. 103,845 2,585 Genuine Parts Co. 31,409 1,454 Goodyear Tire & Rubber Co. (a) 45,757 1,291 H&R Block, Inc. 58,415 1,085 Harley-Davidson, Inc. 46,901 2,191 Harman International Industries, Inc. 10,521 775 Harrah's Entertainment, Inc. 33,588 2,981 Hasbro, Inc. 25,825 661 Home Depot, Inc. 312,409 8,416 Host Hotels & Resorts, Inc. 92,665 1,579 International Game Technology 56,319 2,474 Interpublic Group of Cos., Inc. (a) 83,694 679 JC Penney & Co., Inc. 40,310 1,773 Johnson Controls, Inc. 109,486 3,946 Jones Apparel Group, Inc. 13,434 215 KB HOME 14,794 320 Kohl's Corp. (a) 56,933 2,608 Leggett & Platt, Inc. 34,398 600 Lennar Corp. Class A 27,931 500 Limited Brands 58,467 1,107 Liz Claiborne, Inc. 20,797 423 Lowe's Cos., Inc. 267,062 6,041 Macy's, Inc. 78,723 2,037
MARKET VALUE SHARES (000) --------- --------- Marriot International, Inc. Class A 56,821 $ 1,942 Mattel, Inc. 66,976 1,275 McDonald's Corp. 218,804 12,890 McGraw-Hill, Inc. 60,766 2,662 Meredith Corp. 7,889 434 New York Times Co. Class A 29,122 511 Newell Rubbermaid, Inc. 51,593 1,335 News Corp. Class A 428,209 8,774 NIKE, Inc. Class B 70,852 4,552 Nordstrom, Inc. 34,633 1,272 Office Depot, Inc. (a) 51,256 713 OfficeMax, Inc. 15,131 313 Omnicom Group, Inc. 59,941 2,849 Polo Ralph Lauren Corp. 10,615 656 Pulte Homes, Inc. 42,826 451 Radioshack Corp. 27,503 464 Sears Holdings Corp. (a) 14,174 1,446 Sherwin-Williams Co. 20,596 1,195 Snap-On, Inc. 9,512 459 Stanley Works 14,583 707 Staples, Inc. 130,833 3,018 Starbucks Corp. (a) 136,861 2,802 Starwood Hotels & Resorts Worldwide, Inc. 36,747 1,618 Target Corp. 153,204 7,660 Tiffany & Co. 25,080 1,154 Time Warner, Inc. 667,238 11,016 TJX Cos., Inc. 81,106 2,330 V.F. Corp. 16,893 1,160 Viacom, Inc. Class B (a) 123,909 5,442 Walt Disney Co. 356,571 11,510 Washington Post Co. 1,060 839 Wendy's International, Inc. 17,016 440 Whirlpool Corp. 13,761 1,123 Wyndham Worldwide Corp. 34,299 808 Yum! Brands, Inc. 95,392 3,651 --------- 209,704 --------- CONSUMER STAPLES -- 10.0% Altria Group, Inc. 389,107 29,409 Anheuser-Busch Cos., Inc. 135,496 7,092 Archer-Daniels-Midland Co. 118,424 5,498 Avon Products, Inc. 80,660 3,188 Brown-Forman Corp. Class B 15,624 1,158 Campbell Soup Co. 41,465 1,482 Clorox Co. 25,743 1,678 Coca-Cola Co. 367,217 22,536 Coca-Cola Enterprises, Inc. 53,901 1,403 Colgate-Palmolive Co. 94,376 7,358 ConAgra Foods, Inc. 91,275 2,171 Constellation Brands, Inc. Class A (a) 37,226 880 Costco Wholesale Corp. 80,837 5,639 CVS Corp. 272,152 10,818 Dean Foods Co. 25,258 653 Estee Lauder Cos, Inc. Class A 20,552 896 General Mills, Inc. 62,732 3,576
See notes to Financial Statements 31 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007
MARKET VALUE SHARES (000) --------- --------- CONSUMER STAPLES -- (CONTINUED) H.J. Heinz Co. 58,369 $ 2,725 Hershey Foods Corp. 29,582 1,166 Kellogg Co. 48,435 2,539 Kimberly-Clark Corp. 76,800 5,325 Kraft Foods, Inc. 289,941 9,461 Kroger Co. 129,276 3,453 McCormick & Co., Inc. 22,353 847 Molson Coors Brewing Co., Class B 23,962 1,237 Pepsi Bottling Group, Inc. 26,453 1,044 PepsiCo, Inc. 296,067 22,471 Procter & Gamble Co. 573,613 42,115 Reynolds American, Inc. 31,887 2,103 Safeway, Inc. 80,264 2,746 Sara Lee Corp. 129,134 2,074 SuperValu, Inc. 37,648 1,413 Sysco Corp. 112,209 3,502 Tyson Foods, Inc., Class A 52,935 811 UST Corp. 28,137 1,542 Wal-Mart Stores, Inc. 439,955 20,911 Walgreen Co. 183,684 6,995 Whole Foods Market, Inc. 25,433 1,038 Wrigley Wm., Jr. Co. 39,748 2,327 --------- 243,280 --------- ENERGY -- 12.3% Anadarko Petroleum Corp. 85,626 5,625 Apache Corp. 61,311 6,593 Baker Hughes, Inc. 57,578 4,670 BJ Services Co. 54,548 1,323 Chesapeake Energy Corp. 82,282 3,225 ChevronTexaco Corp. 390,310 36,428 ConocoPhillips 294,567 26,010 Devon Energy Corp. 82,412 7,327 El Paso Corp. 130,592 2,251 ENSCO International, Inc. 26,077 1,555 EOG Resources, Inc. 44,917 4,009 ExxonMobil Corp. 1,008,814 94,516 Halliburton Co. 160,734 6,093 Hess Corp. 51,487 5,193 Marathon Oil Corp. 130,790 7,960 Murphy Oil Corp. 35,241 2,990 Nabors Industries, Ltd. (a) 52,404 1,435 National Oilwell Varco, Inc. (a) 65,557 4,816 Noble Corp. 48,918 2,764 Noble Energy, Inc. 31,210 2,482 Occidental Petroleum Corp. 152,638 11,752 Range Resources Corp. 27,200 1,397 Rowan Cos., Inc. 19,520 770 Schlumberger, Ltd. 221,006 21,740 Smith International, Inc. 37,534 2,772 Sunoco, Inc. 21,584 1,564 Tesoro Corp. 26,365 1,258 Transocean, Inc. 58,799 8,417 Valero Energy Corp. 101,906 7,137 Weatherford International Ltd. (a) 62,555 4,291
MARKET VALUE SHARES (000) --------- --------- Williams Cos., Inc. 110,168 $ 3,942 XTO Energy, Inc. 89,221 4,582 --------- 296,887 --------- FINANCIALS -- 17.4% ACE, Ltd. 60,483 3,737 AFLAC, Inc. 90,470 5,666 Allstate Corp. 105,579 5,514 Ambac Financial Group, Inc. 20,232 521 American Capital Strategies Ltd. 34,302 1,131 American Express Co. 217,379 11,308 American International Group, Inc. 469,749 27,386 Ameriprise Financial, Inc. 43,007 2,370 AON Corp. 54,747 2,611 Apartment Investment & Management Co. Class A 16,714 580 Assurant, Inc. 17,131 1,146 AvalonBay Communities, Inc. 14,753 1,389 Bank of America Corp. 819,839 33,827 Bank of New York Mellon Corp. 209,203 10,201 BB&T Corp. 101,370 3,109 Bear Stearns Cos., Inc. 21,168 1,868 Boston Properties, Inc. 21,667 1,989 Capital One Financial Corp. 70,163 3,316 CB Richard Ellis Group, Inc. Class A (a) 37,475 808 Charles Schwab Corp. 174,693 4,463 Chubb Corp. 72,375 3,950 Cincinnati Financial Corp. 31,514 1,246 CIT Group, Inc. 35,142 844 Citigroup, Inc. 919,107 27,059 CME Group, Inc. 10,141 6,957 Comerica, Inc. 27,144 1,182 Commerce Bancorp, Inc. 34,174 1,303 Countrywide Financial Corp. 100,246 896 Developers Diversified Realty Corp. 23,024 882 Discover Financial Services 85,605 1,291 E*Trade Financial Corp. (a) 81,315 289 Equity Residential 49,057 1,789 Fannie Mae 181,144 7,242 Federal Home Loan Mortgage Corp. 123,039 4,192 Federated Investors, Inc. Class B 15,270 629 Fidelity National Information Services, Inc. 30,977 1,288 Fifth Third Bancorp 95,716 2,405 First Horizon National Corp. 25,172 457 Franklin Resources, Inc. 29,680 3,396 General Growth Properties, Inc. 45,893 1,890 Genworth Financial, Inc. Class A 80,451 2,047 Goldman Sachs Group, Inc. 74,399 16,000 Hartford Financial Services Group, Inc. 57,297 4,996 Hudson City Bancorp, Inc. 95,292 1,431 Huntington Bancshares, Inc. 64,656 954 IntercontinentalExchange, Inc. (a) 12,680 2,441 J.P. Morgan Chase & Co. 619,837 27,056
See notes to Financial Statements 32 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007
MARKET VALUE SHARES (000) --------- --------- FINANCIALS -- (CONTINUED) Janus Capital Group, Inc. 29,407 $ 966 KeyCorp 70,475 1,653 Kimco Realty Corp. 45,869 1,670 Legg Mason, Inc. 25,142 1,839 Lehman Brothers Holdings, Inc. 98,213 6,427 Leucadia National Corp. 31,736 1,495 Lincoln National Corp. 49,592 2,887 Loews Corp. 81,290 4,092 M & T Bank Corp. 14,137 1,153 Marsh & McLennan Cos., Inc. 100,753 2,667 Marshall & Ilsley Corp. 49,593 1,313 MBIA, Inc. 21,584 402 Merrill Lynch & Co., Inc. 158,458 8,506 MetLife, Inc. 137,145 8,451 MGIC Investment Corp. 16,800 377 Moody's Corp. 38,966 1,391 Morgan Stanley 195,948 10,407 National City Corp. 115,554 1,902 Northern Trust Corp. 34,306 2,627 NYSE Euronext 48,600 4,266 Plum Creek Timber Co., Inc. 30,811 1,419 PNC Financial Services Group, Inc. 63,251 4,152 Principal Financial Group, Inc. 49,491 3,407 Progressive Corp. 135,501 2,596 ProLogis 47,891 3,035 Prudential Financial, Inc. 83,039 7,726 Public Storage, Inc. 23,087 1,695 Regions Financial Corp. 128,789 3,046 SAFECO Corp. 16,950 944 Simon Property Group, Inc. 41,100 3,570 SLM Corp. 73,899 1,488 Sovereign Bancorp, Inc. 65,974 752 State Street Corp. (b) 70,325 5,710 SunTrust Banks, Inc. 64,818 4,050 Synovus Financial Corp. 57,585 1,387 T. Rowe Price Group, Inc. 48,675 2,963 Torchmark Corp. 17,921 1,085 Travelers Cos, Inc. 118,604 6,381 U.S. Bancorp 317,331 10,072 Unum Group 63,629 1,514 Vornado Realty Trust 25,134 2,211 Wachovia Corp. 364,322 13,855 Washington Mutual, Inc. 159,441 2,170 Wells Fargo Co. 621,744 18,770 Western Union Co. 143,985 3,496 XL Capital, Ltd. Class A 33,044 1,662 Zions Bancorp 20,553 960 --------- 421,659 --------- HEALTH CARE -- 11.6% Abbott Laboratories 285,708 16,043 Aetna, Inc. 94,397 5,450 Allergan, Inc. 56,592 3,635 AmerisourceBergen Corp. 29,493 1,323 Amgen, Inc. (a) 199,895 9,283
MARKET VALUE SHARES (000) --------- --------- Applera Corp. - Applied Biosystems Group 33,273 $ 1,129 Barr Pharmaceuticals, Inc. (a) 18,923 1,005 Baxter International, Inc. 116,561 6,766 Becton, Dickinson & Co. 45,297 3,786 Biogen Idec, Inc. (a) 52,931 3,013 Boston Scientific Corp. (a) 244,634 2,845 Bristol-Myers Squibb Co. 363,616 9,643 C.R. Bard, Inc. 19,097 1,810 Cardinal Health, Inc. 66,957 3,867 Celgene Corp. (a) 70,418 3,254 CIGNA Corp. 51,496 2,767 Coventry Health Care, Inc. (a) 27,603 1,635 Covidien Ltd. 92,404 4,093 Eli Lilly & Co. 181,443 9,687 Express Scripts, Inc. (a) 47,299 3,453 Forest Laboratories, Inc. (a) 58,602 2,136 Genzyme Corp. (a) 48,492 3,610 Gilead Sciences, Inc. (a) 172,094 7,918 Hospira, Inc. (a) 28,503 1,215 Humana, Inc. (a) 30,047 2,263 IMS Health, Inc. 34,732 800 Johnson & Johnson 529,940 35,347 King Pharmaceuticals, Inc. (a) 49,292 505 Laboratory Corp. of America Holdings (a) 21,122 1,595 McKesson Corp. 54,455 3,567 Medco Health Solutions, Inc. (a) 48,834 4,952 Medtronic, Inc. 208,511 10,482 Merck & Co., Inc. 402,238 23,374 Millipore Corp. (a) 9,535 698 Mylan Laboratories Inc. 58,709 825 Patterson Cos., Inc. (a) 25,094 852 Pfizer, Inc. 1,257,294 28,578 Quest Diagnostics, Inc. 28,100 1,486 Schering-Plough Corp. 299,884 7,989 St. Jude Medical, Inc. (a) 60,894 2,475 Stryker Corp. 43,489 3,250 Tenet Healthcare Corp. (a) 95,470 485 Thermo Fisher Scientific, Inc. (a) 76,824 4,431 UnitedHealth Group, Inc. 238,346 13,872 Varian Medical Systems, Inc. (a) 22,860 1,192 Watson Pharmaceuticals, Inc. (a) 17,346 471 Wellpoint, Inc. (a) 105,770 9,279 Wyeth 247,016 10,916 Zimmer Holdings, Inc. (a) 44,052 2,914 --------- 281,964 --------- INDUSTRIALS -- 11.4% 3M Co. 131,560 11,093 Allied Waste Industries, Inc. (a) 51,430 567 Avery Dennison Corp. 20,488 1,089 Boeing Co. 143,954 12,590 Burlington Northern Santa Fe Corp. 55,082 4,584 Caterpillar, Inc. 117,740 8,543 CH Robinson Worldwide, Inc. 30,461 1,649
See notes to Financial Statements 33 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007
MARKET VALUE SHARES (000) --------- --------- INDUSTRIALS -- (CONTINUED) Cintas Corp. 25,088 $ 843 Cooper Industries, Ltd. 34,434 1,821 CSX Corp. 80,738 3,551 Cummins, Inc. 18,529 2,360 Danaher Corp. 46,986 4,123 Deere & Co. 82,162 7,651 Domtar Corp. (a) (c) 11 0 Dover Corp. 36,195 1,668 Eaton Corp. 26,595 2,578 Emerson Electric Co. 145,740 8,258 Equifax, Inc. 23,683 861 Expeditors International Washington, Inc. 37,820 1,690 FedEx Corp. 57,339 5,113 Fluor Corp. 16,530 2,409 General Dynamics Corp. 74,748 6,652 General Electric Co. 1,866,192 69,180 Goodrich Co. 22,145 1,564 Honeywell International, Inc. 138,282 8,514 Illinois Tool Works, Inc. 75,471 4,041 Ingersoll-Rand Co. Class A 51,321 2,385 ITT Industries, Inc. 33,792 2,232 Jacobs Engineering Group, Inc. (a) 22,600 2,161 L-3 Communications Holdings, Inc. 22,503 2,384 Lockheed Martin Corp. 64,312 6,769 Manitowoc Co., Inc. 24,000 1,172 Masco Corp. 67,523 1,459 Monster Worldwide, Inc. (a) 22,609 733 Norfolk Southern Corp. 71,955 3,629 Northrop Grumman Corp. 63,511 4,995 PACCAR, Inc. 68,474 3,730 Pall Corp. 22,209 895 Parker-Hannifin Corp. 32,403 2,440 Pitney Bowes, Inc. 40,827 1,553 Precision Castparts Corp. 25,307 3,510 R.R. Donnelley & Sons Co. 40,209 1,517 Raytheon Co. 80,756 4,902 Robert Half International, Inc. 31,140 842 Rockwell Automation, Inc. 27,505 1,897 Rockwell Collins, Inc. 30,231 2,176 Ryder Systems, Inc. 9,821 462 Southwest Airlines Co. 138,886 1,694 Terex Corp. (a) 19,035 1,248 Textron, Inc. 45,639 3,254 Tyco Electronics Ltd. 91,104 3,383 Tyco International Ltd. 90,861 3,603 Union Pacific Corp. 48,084 6,040 United Parcel Service, Inc. Class B 192,650 13,624 United Technologies Corp. 182,024 13,932 W.W. Grainger, Inc. 12,169 1,065 Waste Management, Inc. 96,739 3,160 --------- 275,838 --------- INFORMATION TECHNOLOGY -- 15.9% Adobe Systems, Inc. (a) 108,757 4,647
MARKET VALUE SHARES (000) --------- --------- Advanced Micro Devices, Inc. (a) 114,986 $ 862 Affiliated Computer Services, Inc. Class A (a) 19,337 872 Agilent Technologies, Inc. (a) 69,168 2,541 Akamai Technologies, Inc. (a) 29,424 1,018 Altera Corp. 59,454 1,149 Analog Devices, Inc. 57,869 1,835 Apple Computer, Inc. (a) 161,217 31,934 Applied Materials, Inc. 254,707 4,524 Autodesk, Inc. (a) 41,876 2,084 Automatic Data Processing, Inc. 97,217 4,329 BMC Software, Inc. (a) 35,721 1,273 Broadcom Corp. Class A (a) 85,359 2,231 CA, Inc. 68,899 1,719 CIENA Corp. (a) 14,529 496 Cisco Systems, Inc. (a) 1,120,801 30,340 Citrix Systems, Inc. (a) 33,467 1,272 Cognizant Technology Solutions Corp. Class A (a) 54,284 1,842 Computer Sciences Corp. (a) 30,744 1,521 Compuware Corp. (a) 54,650 485 Convergys Corp. (a) 27,935 460 Corning, Inc. 291,844 7,001 Dell, Inc. (a) 417,763 10,239 Electronic Arts, Inc. (a) 57,100 3,335 Electronic Data Systems Corp. 91,816 1,903 EMC Corp. (a) 388,642 7,202 Fiserv, Inc. (a) 29,952 1,662 Google, Inc. Class A (a) 42,771 29,575 Hewlett-Packard Co. 476,394 24,048 IAC (a) 34,889 939 Intel Corp. 1,080,236 28,799 International Business Machines Corp. 253,729 27,428 Intuit, Inc. (a) 61,163 1,933 Jabil Circuit, Inc. 39,951 610 Juniper Networks, Inc. (a) 94,093 3,124 KLA-Tencor Corp. 33,505 1,614 Lexmark International Group, Inc. Class A (a) 15,842 552 Linear Technology Corp. 40,863 1,301 LSI Logic Corp. (a) 138,462 735 MEMC Electronic Materials, Inc. (a) 42,578 3,768 Microchip Technology, Inc. 37,989 1,194 Micron Technology, Inc. (a) 142,362 1,032 Microsoft Corp. 1,485,833 52,896 Molex, Inc. 24,805 677 Motorola, Inc. 418,265 6,709 National Semiconductor Corp. 41,596 942 Network Appliance, Inc. (a) 66,057 1,649 Novell, Inc. (a) 68,720 472 Novellus Systems, Inc. (a) 20,030 552 NVIDIA Corp. (a) 100,756 3,428 Oracle Corp. (a) 728,972 16,460 Paychex, Inc. 61,738 2,236 PerkinElmer, Inc. 21,118 550
See notes to Financial Statements 34 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007
MARKET VALUE SHARES (000) --------- --------- INFORMATION TECHNOLOGY -- (CONTINUED) QLogic Corp. (a) 24,322 $ 345 QUALCOMM, Inc. 307,534 12,102 SanDisk Corp. (a) 40,167 1,332 Sun Microsystems, Inc. (a) 148,641 2,695 Symantec Corp. (a) 164,763 2,659 Tellabs, Inc. (a) 85,030 556 Teradata Corp. (a) 33,520 919 Teradyne, Inc. (a) 27,649 286 Texas Instruments, Inc. 258,656 8,639 Unisys Corp. (a) 69,807 330 VeriSign, Inc. (a) 40,321 1,517 Waters Corp. (a) 18,865 1,492 Xerox Corp. 171,534 2,777 Xilinx, Inc. 52,602 1,151 Yahoo!, Inc. (a) 243,219 5,657 --------- 384,456 --------- MATERIALS -- 3.5% Air Products & Chemicals, Inc. 39,609 3,907 Alcoa, Inc. 159,562 5,832 Allegheny Technologies, Inc. 18,128 1,566 Ashland, Inc. 10,700 507 Ball Corp. 17,562 790 Bemis Co., Inc. 17,262 473 Consol Energy, Inc. 33,573 2,401 Dow Chemical Co. 174,930 6,896 E.I. Du Pont de Nemours & Co. 166,474 7,340 Eastman Chemical Co. 15,004 917 Ecolab, Inc. 30,766 1,575 Freeport-McMoRan Copper & Gold, Inc. Class B 70,723 7,245 Hercules, Inc. 23,050 446 International Flavors & Fragrances, Inc. 14,331 690 International Paper Co. 78,611 2,545 MeadWestvaco Corp. 32,320 1,012 Monsanto Co. 100,225 11,194 Newmont Mining Corp. 83,206 4,063 Nucor Corp. 52,454 3,106 Pactiv Corp. (a) 23,915 637 Peabody Energy Corp. 48,324 2,979 PPG Industries, Inc. 29,871 2,098 Praxair, Inc. 59,114 5,244 Rohm & Haas Co. 23,906 1,269 Sealed Air Corp. 28,492 659 Sigma-Aldrich Corp. 24,234 1,323 Titanium Metals Corp. 16,600 439 United States Steel Corp. 21,578 2,609 Vulcan Materials Co. 20,361 1,610 Weyerhaeuser Co. 39,537 2,915 --------- 84,287 --------- TELECOMMUNICATION SERVICES -- 3.6% American Tower Corp. (a) 75,200 3,204 AT&T, Inc. 1,120,152 46,553 CenturyTel, Inc. 20,441 847
MARKET VALUE SHARES (000) --------- --------- Citizens Communications Co. 60,384 $ 769 Embarq Corp. 27,597 1,367 JDS Uniphase Corp. (a) 42,723 568 Qwest Communications International, Inc. (a) 283,890 1,990 Sprint Nextel Corp. 523,943 6,879 Verizon Communications, Inc. 531,829 23,236 Windstream Corp. 89,913 1,171 --------- 86,584 --------- UTILITIES -- 3.7% AES Corp. (a) 124,995 2,674 Allegheny Energy, Inc. 30,759 1,957 Ameren Corp. 36,960 2,004 American Electric Power Co., Inc. 73,152 3,406 CenterPoint Energy, Inc. 57,611 987 CMS Energy Corp. 38,856 675 Consolidated Edison, Inc. 50,752 2,479 Constellation Energy Group, Inc. 33,014 3,385 Dominion Resources, Inc. 108,424 5,145 DTE Energy Co. 30,584 1,344 Duke Energy Corp. 233,920 4,718 Dynegy, Inc. (a) 95,490 682 Edison International 59,819 3,193 Entergy Corp. 35,998 4,302 Exelon Corp. 123,974 10,121 FirstEnergy Corp. 56,007 4,052 FPL Group, Inc. 75,121 5,092 Integrys Energy Group, Inc. 12,916 668 Nicor, Inc. 9,100 385 NiSource, Inc. 49,982 944 Pepco Holdings, Inc. 36,900 1,082 PG&E Corp. 64,726 2,789 Pinnacle West Capital Corp. 17,760 753 PPL Corp. 71,275 3,713 Progress Energy, Inc. 46,981 2,275 Public Service Enterprise Group, Inc. 47,212 4,638 Questar Corp. 32,468 1,756 Sempra Energy 49,286 3,050 Southern Co. 140,787 5,455 Spectra Energy Corp. 113,198 2,923 TECO Energy, Inc. 35,651 614 Trane, Inc. 31,030 1,449 Xcel Energy, Inc. 77,251 1,744 --------- 90,454 --------- TOTAL COMMON STOCKS (Cost $1,442,132,115) 2,375,113 ---------
See notes to Financial Statements 35 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007
PAR MARKET AMOUNT VALUE (000) (000) --------- ---------- U.S. GOVERNMENT SECURITIES -- 0.2% United States Treasury Bill 3.0% due 03/06/08 (d) (e) $ 4,299 $ 4,276 ---------- TOTAL U.S. GOVERNMENT SECURITIES (Cost $4,275,869) 4,276 ----------
MARKET SHARES VALUE (000) (000) --------- ---------- MONEY MARKET FUNDS -- 2.0% AIM Short Term Investment Prime Portfolio 48,722 $ 48,722 Federated Money Market Obligations Trust 554 554 ---------- TOTAL MONEY MARKET FUNDS (Cost $49,275,442) 49,276 ---------- TOTAL INVESTMENTS -- 100.3% (identified cost $1,495,683,426) 2,428,665 LIABILITIES IN EXCESS OF ASSETS -- (0.3)% (6,288) ---------- NET ASSETS -- 100.0% $2,422,377 ==========
(a) Non-income producing security. (b) Affiliated issuer. See table that follows for more information. (c) Amount is less than $1,000. (d) Rate represents annualized yield at date of purchase. (e) Security held as collateral in relation to initial margin requirements on futures contracts. See notes to Financial Statements 36 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2007 SCHEDULE OF FUTURES CONTRACTS
UNREALIZED NUMBER OF APPRECIATION CONTRACTS (000) --------- ------------ S&P 500 Financial Futures Contracts (long) Expiration Date 03/2008 677 $675 ---- Total unrealized depreciation on open futures contracts purchased $675 ====
AFFILIATE TABLE
Income Earned Shares for the year Realized Number of purchased for Shares sold for Number of Value at ended Gain on Security shares held at the year ended the year ended shares held at 12/31/07 12/31/07 shares sold Description 12/31/2006 12/31/07 12/31/07 12/31/07 (000) (000) (000) - ------------------ -------------- -------------- --------------- -------------- -------- ------------ ----------- State Street Corp. 69,744 18,900 18,319 70,325 $5,710 62 $573
See notes to Financial Statements 37 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2007 (AMOUNTS IN THOUSANDS) ASSETS Investments in unaffiliated issuers at market (identified cost $1,492,789) .................. $2,422,955 Investments in non-controlled affiliates at market (identified cost $2,894) (Note 4) ............. 5,710 ---------- 2,428,665 Cash ............................................. 143 Receivables: Investment securities sold ................. 548 Dividends and interest ..................... 3,648 ---------- TOTAL ASSETS ............................ 2,433,004 ---------- LIABILITIES Payables: Investment securities purchased ............ 10,140 Daily variation margin on futures contracts 291 Management fees (Note 4) ................... 196 TOTAL LIABILITIES ....................... 10,627 ---------- NET ASSETS ....................................... $2,422,377 ==========
See notes to Financial Statements 38 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF OPERATIONS DECEMBER 31, 2007 (AMOUNTS IN THOUSANDS) INVESTMENT INCOME Dividend income - unaffiliated issuers..................... $ 51,567 Dividend income - non-controlled affiliated issuer......... 62 Interest 2,709 -------- TOTAL INVESTMENT INCOME................................. 54,338 -------- EXPENSES Management fees (Note 4)................................... $ 1,221 -------- TOTAL EXPENSES.......................................... 1,221 -------- NET INVESTMENT INCOME......................................... 53,117 -------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments - unaffiliated issuers......................... 169,491 Investments - non-controlled affiliated issuer............. 573 Futures contracts.......................................... (853) -------- 169,211 -------- Net change in net unrealized appreciation (depreciation) on: Investments................................................ (67,144) Futures contracts.......................................... 663 -------- -------- (66,481) -------- Net realized and unrealized gain.............................. 102,730 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......... $155,847 ========
See notes to Financial Statements 39 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
FOR THE FOR THE YEAR ENDED YEAR ENDED DECEMBER 31 DECEMBER 31, 2007 2006 ----------- ------------ INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net Investment Income ..................................... $ 53,117 $ 49,532 Net realized gain on investments and futures contracts .... 169,211 9,894 Net change in net unrealized appreciation (depreciation) .. (66,481) 318,596 ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... 155,847 378,022 ---------- ---------- CAPITAL TRANSACTIONS Proceeds from contributions ............................... 328,812 310,574 Contributions in-kind ..................................... -- 8,054 Fair value of withdrawals ................................. (765,322) (383,063) Withdrawals in-kind ....................................... (63,656) -- ---------- ---------- NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS ... (500,166) (64,435) ---------- ---------- TOTAL NET INCREASE (DECREASE) IN NET ASSETS .................. (344,319) 313,587 NET ASSETS Beginning of period .......................................... 2,766,696 2,453,109 ---------- ---------- End of period ................................................ $2,422,377 $2,766,696 ========== ==========
See notes to Financial Statements 40 STATE STREET EQUITY 500 INDEX PORTFOLIO FINANCIAL HIGHLIGHTS The following table includes selected supplemental data and ratios to average net assets:
YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED 12/31/2007 12/31/2006 12/31/2005 12/31/2004 12/31/2003 ---------- ---------- ---------- ---------- ---------- SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) .................. $2,422,377 $2,766,696 $2,453,109 $2,767,467 $2,714,672 Ratios to average net assets: Operating expenses ............. 0.045% 0.045% 0.045% 0.045% 0.045% Net investment income .......... 1.96% 1.94% 1.84% 1.97% 1.74% Portfolio turnover rate* .......... 12% 10% 8% 9% 12% Total return (a) .................. 5.49% 15.75% 4.87% 10.86% 28.62%
- ---------- * The portfolio turnover rate excludes in-kind security transactions. (a) Results represent past performance and are not indicative of future results. 41 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 1. ORGANIZATION State Street Master Funds (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company, and was organized as a business trust under the laws of The Commonwealth of Massachusetts on July 27, 1999. The Trust comprises eleven investment portfolios: the State Street Equity 500 Index Portfolio, the State Street Equity 400 Index Portfolio, the State Street Equity 2000 Index Portfolio, the State Street Aggregate Bond Index Portfolio, the State Street Money Market Portfolio, the State Street Tax Free Money Market Portfolio, the State Street Tax Free Limited Duration Bond Portfolio, the State Street Limited Duration Bond Portfolio, the State Street Treasury Money Market Portfolio, the State Street Treasury Plus Money Market Portfolio and the State Street U.S. Government Money Market Portfolio. Information presented in these financial statements pertains only to the State Street Equity 500 Index Portfolio (the "Portfolio"). At December 31, 2007, only the 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 Treasury Money Market Portfolio, the State Street Treasury Plus Money Market Portfolio and the State Street U.S. Government Money Market Portfolio were in operation. The Portfolio is authorized to issue an unlimited number of non-transferable beneficial interests. The Portfolio's investment objective is to replicate, as closely as possible, before expenses, the performance of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500(R) Index"). The Portfolio uses a passive management strategy designed to track the performance of the S&P 500(R) Index. The S&P 500(R) Index is a well-known, unmanaged, stock index that includes common stocks of 500 companies from several industrial sectors representing a significant portion of the market value of all stocks publicly traded in the United States. There is no assurance that the Portfolio will achieve its objective. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies consistently followed by the Portfolio in the preparation of its financial statements. Security valuation: The Portfolio's investments are valued each business day by independent pricing services. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price if no sale has occurred) on the primary market or exchange on which they trade. Investments in other mutual funds are valued at the net asset value per share. Fixed-income securities and options are valued on the basis of the closing bid price. Futures contracts are valued on the basis of the last sale price. Money market instruments maturing within 60 days of the valuation date are valued at amortized cost, a method by which each money market instrument is initially valued at cost, and thereafter a constant accretion or amortization of any discount or premium is recorded until maturity of the security. The Portfolio may value securities for which market quotations are not readily available at "fair value," as determined in good faith pursuant to procedures established by the Board of Trustees. 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. 42 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 Federal income taxes: The Portfolio is not required to pay federal income taxes on its net investment income and net capital gains because it is treated as a partnership for federal income tax purposes. All interest, dividends, gains and losses of the Portfolio are deemed to have been "passed through" to the Portfolio's partners in proportion to their holdings in the Portfolio, regardless of whether such items have been distributed by the Portfolio. Each partner is responsible for tax liability based on its distributive share; therefore, no provision has been made for federal income taxes. The Portfolio adopted the provisions of Financial Accounting Standards Board Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes", on June 29, 2007. As of and during the period ended December 31, 2007, the Portfolio did not have a liability for any unrecognized tax expenses. The Portfolio recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of December 31, 2007, tax years 2004 through 2007 remain subject to examination by the portfolio's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts. Futures: The Portfolio may enter into financial futures contracts as part of its strategy to track the performance of the S&P 500(R) Index. Upon entering into a futures contract, the Portfolio is required to deposit with the broker cash or securities in an amount equal to a certain percentage of the contract amount. Variation margin payments are made or received by the Portfolio each day, depending on the daily fluctuations in the value of the underlying security or index, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio. The Portfolio recognizes a realized gain or loss when the contract is closed. The Portfolio voluntarily segregates securities in an amount equal to the outstanding value of the open futures contracts in accordance with Securities and Exchange Commission requirements. The primary risks associated with the use of futures contracts are an imperfect correlation between the change in market value of the securities held by the Portfolio and the prices of futures contracts and the possibility of an illiquid market. Use of Estimates: The Portfolio's financial statements are prepared in accordance with U.S. generally accepted accounting principles that require the use of management estimates. Actual results could differ from those estimates. 3. SECURITIES TRANSACTIONS For the year ended December 31, 2007, purchases and sales of investment securities, excluding short-term investments, futures contracts, and contributions in-kind and fair value of withdrawals, aggregated to $312,810,297 and $728,958,796, respectively. The aggregate value of withdrawals in-kind was $63,655,791. The realized gain associated with the withdrawal in-kind was $19,063,455. At December 31, 2007, the book cost of investments was $1,495,683,426 which approximates cost computed on a federal tax basis. The aggregate gross unrealized appreciation and gross unrealized depreciation was $1,001,447,866 and $68,465,885, respectively, resulting in net appreciation of $932,981,981 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. 43 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 4. RELATED PARTY FEES AND TRANSACTIONS The Portfolio has entered into an investment advisory agreement with SSgA Funds Management, Inc. ("SSgA FM" or the "Adviser"), a subsidiary of State Street Corp. and an affiliate of State Street Bank and Trust Company ("State Street"), under which SSgA FM directs the investments of the Portfolio in accordance with its investment objective, policies, and limitations. The Trust has contracted with State Street to provide custody, administration and transfer agent services to the Portfolio. In compensation for SSgA FM's services as investment adviser and for State Street's services as administrator, custodian and transfer agent (and for assuming ordinary operating expenses of the Portfolio, including ordinary legal, audit and trustees expense), State Street receives a unitary fee, calculated daily, at the annual rate of 0.045% of the Portfolio's average daily net assets. Certain investments made by the Portfolio were made in securities affiliated with State Street and SSgA FM. Investments in State Street Corp., the holding company of State Street, were made according to its representative portion of the S&P 500(R) Index. The market value of this investment at December 31, 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. Management does not expect anything significant. 7. NEW ACCOUNTING PRONOUNCEMENTS 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 has evaluated the application of SFAS 157 to the Portfolio and believes the impact will be limited to expanded disclosures in the Portfolio's Financial Statements resulting from adoption of this pronouncement. 44 STATE STREET EQUITY 500 INDEX PORTFOLIO REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of State Street Master Funds and Owners of Beneficial Interest of State Street Equity 500 Index Portfolio: We have audited the accompanying statement of assets and liabilities of the State Street Equity 500 Index Portfolio (one of the portfolios constituting State Street Master Funds) (the Portfolio), including the portfolio of investments, as of December 31, 2007, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Portfolio's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2007, by correspondence with the custodian and brokers or by other appropriate auditing where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of State Street Equity 500 Index Portfolio of State Street Master Funds at December 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts February 25, 2008 45 STATE STREET EQUITY 500 INDEX PORTFOLIO GENERAL INFORMATION DECEMBER 31, 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 calling (877) 521-4083 or (ii) on the SEC's website at www.sec.gov. QUARTERLY PORTFOLIO SCHEDULE The Trust files a complete schedule of portfolio holdings with the SEC for the first and third quarters of its fiscal year (as of March and September of each year) on Form N-Q. The Trust's Forms N-Q are available on the SEC's website at www.sec.gov. The Trust's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The most recent Form N-Q is available without charge, upon request, by calling (877) 521-4083. ADVISORY AGREEMENT RENEWAL The Board of Trustees of the Trust met on November 29, 2007 (the "Meeting") to consider the renewal of the investment advisory agreement for the Portfolio (the "Advisory Agreement"). In preparation for considering the Advisory Agreement, the Trustees had reviewed the renewal materials provided by the Adviser, which they had requested through independent counsel. In deciding whether to renew the Advisory Agreement, the Trustees considered various factors, including (i) the nature, extent and quality of the services provided by SSgA Funds Management, Inc. (the "Adviser") under the Advisory Agreement, (ii) the investment performance of the Portfolio, (iii) the costs to the Adviser of its services and the profits realized by the Adviser and its affiliates from their relationship with the Trust, (iv) the extent to which economies of scale would be realized if and as the Trust grows and whether the fee levels in the Advisory Agreement reflect these economies of scale, and (v) any additional benefits to the Adviser from its relationship with the Trust. In considering the nature, extent and quality of the services provided by the Adviser, the Trustees relied on their prior direct experience as Trustees of the Trust as well as on the materials provided at the Meeting. The Board reviewed the Adviser's responsibilities under the Advisory Agreement and noted the experience and expertise that would be appropriate to expect of an adviser to the Portfolio, which is an index fund. The Trustees reviewed the background and experience of the Adviser's senior management, including those individuals responsible for the investment and compliance operations relating to the investments of the Portfolio, and the responsibilities of the latter with respect to the Portfolio. They also considered the resources, operational structures and practices of the Adviser in managing the Portfolio's investments, in monitoring and securing the Portfolio's compliance with its investment objective and policies with respect to its investments and with applicable laws and regulations, and in seeking best execution of portfolio transactions. The Trustees also considered information about the Adviser's overall investment management business, noting that the Adviser manages assets for a variety of institutional investors and that the Adviser and its affiliates had over $1.99 trillion in assets under management as of September 30, 2007, including over $140 billion managed by the Adviser. They reviewed information regarding State Street's business continuity and disaster recovery program. Drawing upon the materials provided and their general knowledge of the business of the Adviser, the Trustees determined that they were satisfied with the experience, resources and strength of the Adviser in the management of index products. As discussed more fully below, they also determined that the advisory fee for the Portfolio was fair and reasonable and that its performance and expense ratio was satisfactory. On the basis of this review, the Trustees determined that the nature and extent of the services provided by the Adviser to the Portfolio was appropriate, had been of uniformly high quality, and could be expected to remain so. 46 STATE STREET EQUITY 500 INDEX PORTFOLIO GENERAL INFORMATION DECEMBER 31, 2007 (UNAUDITED) The Trustees noted that, in view of the investment objective of the Portfolio, the investment performance was satisfactory. The Trustees noted that the performance of the Portfolio in absolute terms was not of the importance that normally attaches to that of actively-managed funds. Of more importance to the Trustees was the extent to which the Portfolio achieved its objective of replicating, before expenses, the total return of the S&P 500 Index. Drawing upon information provided at the Meeting and upon reports provided to the Trustees by the Adviser throughout the preceding year, they determined that the Portfolio had in fact tracked the index within an acceptable range of tracking error. They concluded that the performance the Portfolio was satisfactory. The Trustees considered the profitability to the Adviser and its affiliate, State Street, of the advisory relationships with the Trust. The Trustees had been provided with data regarding the profitability to the Adviser and its affiliated service providers with respect to the Portfolio individually, and on an aggregate basis, for the year ended June 30, 2007. Having discussed with representatives of the Adviser the methodologies used in computing the costs that formed the bases of the profitability calculations, they concluded that these methodologies were reasonable and turned to the data provided. After discussion and analysis they concluded that, to the extent that the Adviser's and State Street's relationships with the Trust had been profitable during the period for which information had been provided, the profitability was in no case such as to render the advisory fee excessive. In order better to evaluate the Portfolio's advisory fee, the Trustees had requested comparative information from Lipper Inc. with respect to fees paid by, and expense ratios of, similar funds. The Trustees found that that the Portfolio's advisory fee and total expense ratio were lower than the average for its peer group. The Board determined that the Adviser's fees were fair and reasonable. In considering whether the Adviser benefits in other ways from its relationship with the Trust, the Trustees also considered whether the Adviser's affiliates may benefit from the Trust' relationship with State Street as fund administrator, custodian and transfer agent and the Portfolios' use of State Street Global Markets to perform certain brokerage services. They noted that the Adviser utilizes no soft-dollar arrangements in connection with the Portfolio's brokerage transactions. The Trustees concluded that, to the extent that the Adviser or its affiliates derive other benefits from their relationships with the Trust, those benefits are not so significant as to render the Adviser's fees excessive. The Board also considered the extent to which economies of scale may be realized by the Portfolio as assets grow and whether the Portfolio's fee levels reflect such economies of scale, if any, for the benefit of investors. In considering the matter, the Board determined that, to the extent economies of scale were in fact realized, such economies of scale were shared with the Portfolio by virtue of advisory fees of comparatively low levels that subsumed economies of scale in the fees themselves. The Trustees also recognized, however, that should sustained, substantial asset growth be realized in the future, it might be necessary to consider additional measures. 47 STATE STREET EQUITY 500 INDEX PORTFOLIO TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED) The table below includes information about the Trustees and Executive Officers of the State Street Master Funds, including their: - business addresses and ages; - principal occupations during the past five years; and - other directorships of publicly traded companies or funds.
NUMBER OF FUNDS IN FUND COMPLEX TERM OF OFFICE OVERSEEN NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION BY OTHER DIRECTORSHIPS HELD BY AND DATE OF BIRTH ("DOB") WITH TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE* TRUSTEE - ------------------------- ---------------- ---------------- ---------------------- --------- --------------------------------- INDEPENDENT TRUSTEES Michael F. Holland Trustee and Term: Indefinite Chairman, Holland & 22 Trustee, State Street Holland & Company, LLC Chairman of the Company L.L.C. Institutional Investment Trust; 375 Park Avenue Board Elected: 7/99 (investment adviser) Director, the Holland Series Fund, New York, NY 10152 (1995 - present). Inc.; Director, The China Fund, Inc.; Chairman and Trustee, DOB: July 7, 1944 Scottish Widows Investment Partnership Trust; and Director, Reaves Utility Income Fund William L. Boyan Trustee Term: Indefinite Trustee of Old Mutual 22 Trustee, State Street State Street Master Funds South Africa Master Institutional Investment Trust; P.O. Box 5049 Elected: 7/99 Trust (investments) and Trustee, Old Mutual South Boston, MA 02206 (1995 - present); Africa Master Trust Chairman emeritus, DOB: January 20, 1937 Children's Hospital (1984 - present); Director, Boston Plan For Excellence (non-profit) (1994 - present); President and Chief Operations Officer, John Hancock Mutual Life Insurance Company (1959 - 1999). Mr. Boyan retired in 1999. Rina K. Spence Trustee Term: Indefinite President of 22 Trustee, State Street State Street Master Funds SpenceCare Institutional Investment Trust; P.O. Box 5049 Elected: 7/99 International LLC Director, Berkshire Life Boston, MA 02206 (1998 - present); Insurance Company of America; and Member of the Advisory Director, IEmily.com DOB: October 24, 1948 Board, Ingenium Corp. (technology company) (2001 - present); Chief Executive Officer, IEmily.com (internet company) (2000 - 2001); Chief Executive Officer of Consensus Pharmaceutical, Inc. (1998 - 1999); Founder, President and Chief Executive Officer of Spence Center for Women's Health (1994 - 1998); Trustee, Eastern Enterprise (utilities) (1988 - 2000). Douglas T. Williams Trustee Term: Indefinite Executive Vice 22 Trustee, State Street State Street Master Funds President of Chase Institutional Investment Trust P.O. Box 5049 Elected: 7/99 Manhattan Bank (1987 - Boston, MA 02206 1999). Mr. Williams retired in 1999. DOB: December 23, 1940
* The "Fund Complex" consists of eleven series of the Trust and eleven series of State Street Institutional Investment Trust. 48 STATE STREET EQUITY 500 INDEX PORTFOLIO TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED)
NUMBER OF FUNDS IN FUND COMPLEX TERM OF OFFICE OVERSEEN NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION BY OTHER DIRECTORSHIPS HELD BY AND DATE OF BIRTH ("DOB") WITH TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE* TRUSTEE - ------------------------- ---------------- ---------------- ---------------------- --------- --------------------------------- INTERESTED TRUSTEES(1) James E. Ross Trustee/ Term: Indefinite President, SSgA Funds 22 Trustee, State Street SSgA Funds President Management, Inc. (2005 Institutional Investment Trust; Management, Inc. Elected - present); Principal, Trustee, SPDR(R) Series Trust; State Street Trustee: 2/07 SSgA Funds Management, Trustee, SPDR(R) Index Shares Financial Center Inc. (2001 - 2005); Trust and Trustee, Select Sector One Lincoln Street Elected Senior Managing SPDR(R) Trust Boston, MA 02111-2900 President: 4/05 Director, State Street Global Advisors (March 2006 - present); DOB: June 24, 1965 Principal, State Street Global Advisers (2000 - 2006). OFFICERS Gary L. French Treasurer Term: Indefinite Senior Vice President -- -- State Street Bank and of State Street Bank Trust Company Elected: 5/05 and Trust Company 2 Avenue de Lafayette (2002 - present); Boston, MA 02111 Managing Director, Deutsche Bank DOB: July 4, 1951 (including its predecessor, Scudder Investments), Fund Operations Unit (2001 - 2002); President, UAM Fund Services (1995 - 2001). Julie Piatelli Interim Chief Term: Indefinite Principal and Senior -- -- SSgA Funds Compliance Compliance and Risk Management, Inc. Officer Elected: 7/07 Management Officer, State Street Financial SSgA Funds Management, Center Inc. (2004-present), One Lincoln Street Vice President State Boston, MA 02111 Street Global Advisors (2004-present); Manager, PricewaterhouseCoopers LLP (1999-2004). DOB: August 5, 1967 Nancy L. Conlin Secretary Term: Indefinite Vice President and -- -- State Street Bank and Managing Counsel, Trust Company Elected: 9/07 State Street Bank and 2 Avenue de Lafayette Trust Company (2007 - Boston, MA 02111 present); General Counsel to Plymouth Rock Companies (2004-2007); and U.S. Chief Counsel to Sun Life Financial (2002 - 2004). DOB: December 11, 1953
(1) Mr. Ross is an Interested Trustee because of his employment by SSgA Funds Management, Inc., an affiliate of the Trust. The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request, by calling (toll free) 877-521-4083. 49 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS DECEMBER 31, 2007 This summary schedule of investments is presented to help investors focus on the Series' principal holdings. It includes the Series'50 largest holdings, each investment of any issuer that exceeds 1% of the Series' net assets and affiliated issues. "Other Securities" represent all issues not required to be disclosed under the rules adopted by the Securities and Exchange Commission. A complete schedule of investments is available without charge, upon request, by calling (800) 441-7762 or on the Securities and Exchange Commission's website at http://www.sec.gov.
PERCENT OF NET INDUSTRY SHARES HELD COMMON STOCKS VALUE ASSETS - -------- ------------ ------------------------ ------------ ------- Advertising Agencies Other Securities $ 2,728,6270 0.4% Aerospace Other Securities 4,763,033 0.8 Agriculture, Fishing & Ranching Other Securities 419,000 0.2 Air Transport Other Securities 4,495,267 0.7 Aluminum Other Securities 1,302,854 0.2 Auto Parts: After Market Other Securities 643,495 0.1 Auto Parts: Original Equipment Other Securities 3,254,638 0.5 Auto, Trucks & Parts Other Securities 710,402 0.1 Banks: New York City Other Securities 543,912 0.1 Banks: Outside New York City Other Securities 32,026,967 5.1 Beverage: Brewers (Wineries) Other Securities 176,955 0.0 Beverage: Soft Drinks Other Securities 851,326 0.1 Biotechnology Research & Production 16,980 Alexion Pharmaceuticals, Inc.(a) 1,274,009 0.2 26,800 OSI Pharmaceuticals, Inc.(a) 1,300,068 0.2 Other Securities 14,041,789 2.2 ------------ ----- 16,615,866 2.6 ------------ ----- Building Materials Other Securities 3,201,191 0.5 Building: Cement Other Securities 57,276 0.0 Building: Heating & Plumbing Other Securities 383,350 0.1 Building: Miscellaneous Other Securities 1,103,150 0.2 Building: Roofing & Wallboard Other Securities 189,075 0.0 Cable Television Services Other Securities 652,385 0.1 Casinos & Gambling 24,500 Bally Technologies, Inc. (a) 1,218,140 0.2 Other Securities 2,818,047 0.4 ------------ ------ 4,036,187 0.6 ------------ ----- Chemicals 25,500 CF Industries Holdings, Inc. 2,806,530 0.4 54,300 Hercules, Inc. 1,050,705 0.2 Other Securities 8,542,282 1.4 ------------ ----- 12,399,517 2.0 ------------ ----- Coal Other Securities 1,367,331 0.2 Commercial Information Services Other Securities 1,011,999 0.2 Communications & Media Other Securities 945,209 0.1 Communications Technology 67,500 Foundry Networks, Inc.(a) 1,182,600 0.2 Other Securities 15,324,146 2.4 ------------ ----- 16,506,746 2.6 ------------ ----- Computer Services, Software & Systems 36,064 Ansys, Inc.(a) 1,495,213 0.2 16,700 Equinix, Inc.(a)(g) 1,687,869 0.3 18,798 Micros Systems, Inc.(a) 1,318,868 0.2 67,495 Nuance Communications, Inc.(a) 1,260,807 0.2 75,339 SAIC, Inc.(a) 1,515,821 0.2 42,500 Sybase, Inc.(a) 1,108,825 0.2 Other Securities 28,297,111 4.5 ------------ ----- 36,684,514 5.8 ------------ ----- Computer Technology Other Securities 5,620,994 0.9 Construction Other Securities 1,874,246 0.3 Consumer Electronics Other Securities 5,445,177 0.9 Consumer Products Other Securities 3,263,801 0.5 Containers & Packaging: Metals & Glass 32,200 AptarGroup, Inc. 1,317,302 0.2 Other Securities 1,884,525 0.3 ------------ ----- 3,201,827 0.5 ------------ ----- Containers & Packaging: Paper & Plastic Other Securities 386,317 0.1 Copper Other Securities 466,217 0.1 Cosmetics Other Securities 1,107,539 0.2
See notes to Financial Statements 50 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS DECEMBER 31, 2007
PERCENT OF NET INDUSTRY SHARES HELD COMMON STOCKS VALUE ASSETS - -------- ------------ ------------------------ ------------ ------- Diversified Financial Services Other Securities $ 4,261,213 0.7% Diversified Materials & Processing 43,862 Hexcel Corp.(a) 1,064,969 0.2 Other Securities 4,554,140 0.7 ------------ ----- 5,619,109 0.9 ------------ ----- Drug & Grocery Store Chains Other Securities 3,628,904 0.6 Drugs & Pharmaceuticals 43,048 BioMarin Pharmaceuticals, Inc.(a) 1,523,899 0.3 37,000 MGI Pharma, Inc.(a) 1,499,610 0.2 24,820 Onyx Pharmaceuticals, Inc.(a) 1,380,488 0.2 35,715 Perrigo Co. 1,250,382 0.2 Other Securities 14,329,127 2.3 ------------ ----- 19,983,506 3.2 ------------ ----- Education Services 27,800 DeVry, Inc. 1,444,488 0.2 6,720 Strayer Education, Inc. 1,146,298 0.2 Other Securities 1,688,070 0.3 ------------ ----- 4,278,856 0.7 ------------ ----- Electrical & Electronics Other Securities 1,884,584 0.3 Electrical Equipment & Components1 2,816 Genlyte Group, Inc.(a) 1,220,083 0.2 Other Securities 5,134,991 0.8 ------------ ----- 6,355,074 1.0 ------------ ----- Electrical: Household Appliance Other Securities 102,687 0.0 Electronics 61,400 Flir Systems, Inc.(a)(g) 1,921,820 0.3 Other Securities 2,874,730 0.5 ------------ ----- 4,796,550 0.8 ------------ ----- Electronics: Instruments, Gauges & Meters 13,602 Itron, Inc.(a)(g) 1,305,384 0.2 Other Securities 580,382 0.1 ------------ ----- 1,885,766 0.3 ------------ ----- Electronics: Medical Systems 55,720 Hologic, Inc.(a) 3,824,621 0.6 24,864 Illumina, Inc.(a) 1,473,441 0.2 Other Securities 5,069,639 0.8 ------------ ------ 10,367,701 1.6 ------------ ----- Electronics: Semi-Conductors/Components Other Securities 12,771,830 2.0 Electronics: Technology Other Securities 3,139,301 0.5 Energy Miscellaneous Other Securities 4,747,794 0.7 Engineering & Contracting Services Other Securities 2,159,633 0.3 Entertainment Other Securities 1,870,208 0.3 Fertilizers 43,000 Terra Industries, Inc.(a) 2,053,680 0.3 Finance Companies Other Securities 680,987 0.1 Finance: Small Loan Other Securities 708,749 0.1 Financial Data Processing Services & Systems Other Securities 4,767,287 0.8 Financial Information Services Other Securities 2,118,294 0.3 Financial Miscellaneous 29,036 Sotheby's Holdings, Inc. Class A 1,132,942 0.2 Other Securities 2,899,541 0.4 ------------ ----- 4,032,483 0.6 ------------ ----- Foods Other Securities 6,911,198 1.1 Forest Products Other Securities 471,053 0.1 Forms & Bulk Printing Services Other Securities 462,527 0.1 Funeral Parlors & Cemeteries Other Securities 400,714 0.1 Glass Other Securities 239,540 0.0 Gold 211,900 Coeur d'Alene Mines Corp.(a)(g) 1,046,786 0.1 Other Securities 442,016 0.1 ------------ ----- 1,488,802 0.2 ------------ ----- Health Care Facilities Other Securities 3,631,051 0.6 Health Care Management Services Other Securities 5,523,584 0.9 Health Care Services Other Securities 4,826,867 0.8 Homebuilding Other Securities 674,741 0.1 Hotel/Motel Other Securities 366,094 0.1 Household Furnishings Other Securities 2,524,333 0.4 Identification Control & Filter Devices Other Securities 3,986,459 0.6 Industrial Products Other Securities 143,451 0.0 Insurance: Life Other Securities 2,710,464 0.4 Insurance: Multi-Line Other Securities 6,904,069 1.1
See notes to Financial Statements 51 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS DECEMBER 31, 2007
PERCENT OF NET INDUSTRY SHARES HELD COMMON STOCKS VALUE ASSETS - -------- ------------ ------------------------ ------------ ------- Insurance: Property-Casualty 41,000 Aspen Insurance Holdings Ltd. $ 1,182,440 0.2% Other Securities 9,914,033 1.6 ------------ ----- 11,096,473 1.8 ------------ ----- Investment Management Companies 39,200 Waddell & Reed Financial, Inc. Class A 1,414,728 0.2 Other Securities 4,408,431 0.7 ------------ ----- 5,823,159 0.9 ------------ ----- Jewelry, Watches & Gemstones Other Securities 1,083,344 0.2 Leisure Time Other Securities 2,802,955 0.4 Machine Tools Other Securities 117,855 0.0 Machinery & Engineering Other Securities 545,286 0.1 Machinery: Agricultural Other Securities 427,351 0.1 Machinery: Construction & Handling Other Securities 687,744 0.1 Machinery: Engines Other Securities 718,762 0.1 Machinery: Industrial/Specialty Other Securities 5,042,725 0.8 Machinery: Oil Well Equipment & Services 27,972 Exterran Holdings, Inc.(a) 2,288,110 0.4 Other Securities 7,689,714 1.2 ------------ ----- 9,977,824 1.6 ------------ ----- Machinery: Specialty 17,400 Bucyrus International, Inc. 1,729,386 0.3 Other Securities 651,526 0.1 ------------ ----- 2,380,912 0.4 ------------ ----- Manufactured Housing Other Securities 502,108 0.1 Manufacturing Other Securities 350,127 0.1 Medical & Dental Instruments & Supplies 32,043 Immucor, Inc.(a) 1,089,142 0.2 31,230 Inverness Medical Innovations, Inc.(a) 1,754,501 0.3 12,060 Ventana Medical Systems, Inc.(a) 1,051,994 0.1 Other Securities 15,124,673 2.4 ------------ ----- 19,020,310 3.0 ------------ ----- Medical Services Other Securities 1,980,529 0.3 Metal Fabricating Other Securities 6,136,545 1.0 Metals & Minerals Miscellaneous Other Securities 4,650,783 0.7 Milling: Fruit & Grain Processing Other Securities 49,926 0.0 Miscellaneous Business & Consumer Discretionary Other Securities 129,240 0.0 Miscellaneous Consumer Staples Other Securities 240,445 0.0 Miscellaneous Health Care Other Securities 45,510 0.0 Miscellaneous Materials & Commodities Other Securities 1,028,898 0.2 Miscellaneous Materials & Processing Other Securities 1,590,450 0.3 Miscellaneous Producer Durables Other Securities 351,812 0.1 Miscellaneous Technology Other Securities 1,262,595 0.2 Multi-Sector Companies Other Securities 2,576,879 0.4 Office Furniture & Business Equipment Other Securities 1,895,252 0.3 Offshore Drilling 12,254 Atwood Oceanics, Inc.(a) 1,228,341 0.2 Other Securities 1,055,742 0.2 ------------ ----- 2,284,083 0.4 ------------ ----- Oil: Crude Producers 76,062 PetroHawk Energy Corp.(a) 1,316,633 0.2 19,610 Whiting Petroleum Corp.(a) 1,130,713 0.2 Other Securities 14,525,155 2.3 ------------ ----- 16,972,501 2.7 ------------ ----- Oil: Integrated Domestic Other Securities 765,919 0. Oil: Integrated International Other Securities 119,505 0.0 Paints & Coatings Other Securities 1,054,877 0.2 Paper Other Securities 2,526,225 0.4 Photography Other Securities 61,230 0.0 Plastics Other Securities 215,081 0.0 Pollution Control & Environmental Services Other Securities 1,576,172 0.2 Power Transmission Equipment Other Securities 649,572 0.1 Printing & Copying Services Other Securities 1,652,220 0.3 Production Technology Equipment Other Securities 7,204,415 1.1 Publishing: Miscellaneous Other Securities 1,332,752 0.2 Publishing: Newspapers Other Securities 1,643,523 0.3 Radio & TV Broadcasters Other Securities 1,990,850 0.3 Railroad Equipment Other Securities 1,170,329 0.2 Railroads Other Securities 369,197 0.1
See notes to Financial Statements 52 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS DECEMBER 31, 2007
PERCENT OF NET INDUSTRY SHARES HELD COMMON STOCKS VALUE ASSETS - -------- ------------ ------------------------ ------------ ------- Real Estate Other Securities $ 1,497,879 0.2% Real Estate Investment Trusts (REITs) 14,876 Alexandria Real Estate Equities, Inc. 1,512,443 0.2 29,600 Anthracite Capital, Inc.(c)(e) 214,304 0.0 41,859 Nationwide Health Properties, Inc. 1,313,117 0.2 45,300 Realty Income Corp.(g) 1,224,006 0.2 Other Securities 29,429,964 4.7 ------------ ----- 33,693,834 5.3 ------------ ----- Recreational Vehicles & Boats Other Securities 1,406,916 0.2 Rental & Leasing Services: Commercial Other Securities 555,968 0.1 Rental & Leasing Services: Consumer Other Securities 1,532,664 0.2 Restaurants 14,800 Chipotle Mexican Grill,Inc.Class B (a) 1,821,140 0.3 Other Securities 6,544,740 1.0 ------------ ----- 8,365,880 1.3 ------------ ----- Retail 17,516 Priceline.com, Inc.(a) 2,011,888 0.3 Other Securities 16,232,956 2.6 ------------ ----- 18,244,844 2.9 ------------ ----- Savings & Loan Other Securities 6,668,020 1.1 Scientific Equipment & Suppliers Other Securities 1,155,098 0.2 Securities Brokerage & Services Other Securities 3,262,926 0.5 Services: Commercial 21,741 FTI Consulting, Inc.(a) 1,340,115 0.2 Other Securities 19,209,518 3.1 ------------ ----- 20,549,633 3.3 ------------ ----- Shipping Other Securities 4,288,465 0.7 Shoes Other Securities 3,332,108 0.5 Steel Other Securities 1,851,699 0.3 Sugar Other Securities 90,096 0.0 Telecommunications Equipment 40,900 Polycom, Inc.(a) 1,136,202 0.2 Other Securities 2,935,316 0.4 ------------ ------ 4,071,518 0.6 ------------ ----- Textile Products Other Securities 419,767 0.1 Textiles Apparel Manufacturers Other Securities 4,648,888 0.7 Tires & Rubber Other Securities 807,392 0.1 Tobacco Other Securities 1,334,287 0.2 Toys Other Securities 1,062,116 0.2 Transportation Miscellaneous Other Securities 1,226,959 0.2 Truckers Other Securities 2,326,912 0.4 Utilities: Cable TV & Radio Other Securities 130,815 0.0 Utilities: Electrical 19,800 ITC Holdings Corp. 1,117,116 0.2 44,600 Westar Energizing. 1,156,924 0.2 Other Securities 8,104,134 1.3 ------------ ----- 10,378,174 1.7 ------------ ----- Utilities: Gas Distributors Other Securities 5,327,629 0.9 Utilities: Miscellaneous Other Securities 612,466 0.1 Utilities: Telecommunications 67,200 Time Warner Telecom, Inc. Class A (a)(g) 1,363,488 0.2 Other Securities 6,470,911 1.0 ------------ ----- 7,834,399 1.2 ------------ ----- Utilities: Water Other Securities 1,179,339 0.2 Wholesale & International Trade Other Securities 953,964 0.2 Wholesalers 52,400 LKQ Corp.(a) 1,101,448 0.2 Other Securities 1,324,150 0.2 ------------ ----- 2,425,598 0.4 ------------ ----- TOTAL COMMON STOCKS (COST -- $525,261,156) 587,256,036 93.2 ------------ -----
See notes to Financial Statements 53 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS DECEMBER 31, 2007
PERCENT OF NET INDUSTRY SHARES HELD EXCHANGE-TRADED FUNDS VALUE ASSETS - -------- ------------ ------------------------ ------------ ------- 169,590 iShares Russell 2000 Index Fund (g) $ 12,915,974 2.0% TOTAL EXCHANGE-TRADED FUNDS ------------ ----- (COST -- $12,334,264) 12,915,974 2.0 ------------ ----- MUTUAL FUNDS 2,900 BlackRock Kelso Capital Corp.(c) 44,312 0.0 Other Securities 763,142 0.1 TOTAL MUTUAL FUNDS ------------ ----- (COST -- $983,037) 807,454 0.1 ------------ ----- RIGHTS Chemicals Other Securities 0 0.0 TOTAL RIGHTS ------------- ----- (COST -- $0) 0 0.0 ------------ ----- OTHER INTERESTS (b) Oil: Crude Producers Other Securities 0 0.0 -------------------- TOTAL OTHER INTERESTS (COST -- $0) 0 0.0 ------------ ----- BENEFICIAL INTEREST SHORT-TERM SECURITIES ------------ ------------------------ $ 33,226,793 BlackRock Liquidity Series, LLC Cash Sweep Series,5.04% (c)(f) 33,226,793 5.3 83,808,817 BlackRock Liquidity Series, LLC Money Market Series,4.78% (c)(d)(f) 83,808,817 13.3 TOTAL SHORT-TERM SECURITIES ------------ ----- (COST -- $117,035,610) 117,035,610 18.6 TOTAL INVESTMENTS (COST -- $655,614,067*) 718,015,074 113.9 LIABILITIES IN EXCESS OF OTHER ASSETS (87,620,790) (13.9) NET ASSETS ------------ ----- $630,394,284 100.0% ============ =====
* The cost and unrealized appreciation (depreciation) of investments, as of December 31, 2007, as computed for federal income tax purposes, were as follows: Aggregate cost $661,516,435 Net unrealized appreciation ------------ Gross unrealized appreciation $122,933,165 Gross unrealized depreciation (66,434,526) Net unrealized appreciation ------------ $ 56,498,639 ============
(a) Non-income producing security. (b) "Other interests" represent beneficial interest in liquidation trusts and other reorganization entities and are non-income producing. (c) Investments in companies considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940,were as follows:
INTEREST/ AFFILIATE PURCHASE COST SALE COST REALIZED LOSS DIVIDEND INCOME - --------- ------------- ------------ ------------- --------------- BlackRock Liquidity Series, LLC Cash Sweep Series -- $(75,586,157)** -- $3,154,441 BlackRock Liquidity Series, LLC Money Market Series $ 49,642,337* -- -- $ 828,965 Anthracite Capital, Inc. $ 79,398 $ 8,674 $(719) $ 30,528 BlackRock Kelso Capital Corp. $ 42,004 -- -- $ 946
* Represents net purchase cost. ** Represents net sale cost. (d) Security was purchased with the cash proceeds from securities loans. (e) Security held as collateral in connection with open financial futures contracts. See notes to Financial Statements 54 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS DECEMBER 31, 2007 (f) Represents the current yield as of December 31, 2007. (g) Security, or a portion of security, is on loan. - "Other Securities" represent issues that are not identified as the 50 largest holdings of the Series and issues not exceeding 1% of net assets. Some securities, or a portion of, in this category are either held as collateral in connection with open financial futures contracts or are out on loan. - 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. Industries are shown as a percent of net assets. These industry classifications are unaudited. - Financial futures contracts purchased as of December 31, 2007, were as follows:
UNREALIZED NUMBER OF CONTRACTS ISSUE EXPIRATION DATE FACE VALUE APPRECIATION - ------------------- ------------------ --------------- ----------- ------------ 74 Russell 2000 Index March 2008 $28,101,735 $469,605
See notes to Financial Statements 55 MASTER SMALL CAP INDEX SERIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2007 ASSETS: Investments in unaffiliated securities, at value (including securities loaned of $79,098,563) (identified cost -- $538,209,313 .............. $600,720,848 Investments in affiliated securities, at value (identified cost -- $117,404,754 .............. 117,294,226 Receivables: Securities .................................... $ 3,056,557 Contributions ................................. 2,291,452 Dividends ..................................... 906,596 Securities lending ............................ 86,699 6,341,304 ------------ Prepaid expenses and other assets ................ 22,910 ------------ TOTAL ASSETS ..................................... 724,379,288 ------------ LIABILITIES: Collateral on securities loaned, at value ........ 83,808,817 Bank overdraft ................................... 70,793 Payables: Withdrawals ................................... 7,976,744 Securities purchased .......................... 1,964,209 Variation margin .............................. 62,238 Other affiliates .............................. 5,932 Investment adviser ............................ 579 10,009,702 ----------- Accrued expenses and other liabilities ........... 95,692 ------------ TOTAL LIABILITIES ................................ 93,985,004 ------------ NET ASSETS: Net Assets ....................................... $630,394,284 ============ NET ASSETS CONSIST OF Investors' capital ............................... $567,523,672 Unrealized appreciation -- net ................... 62,870,612 ------------ NET ASSETS ....................................... $630,394,284 ============
See notes to Financial Statements 56 MASTER SMALL CAP INDEX SERIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2007 INVESTMENT INCOME: Dividends (net of $2,176 foreign withholding tax and $31,474 from affiliates) ..................... $ 7,305,905 Interest from affiliates ............................ 3,154,441 Securities lending -- net ........................... 828,965 ------------ TOTAL INCOME ........................................... 11,289,311 EXPENSES: Accounting services ................................. $ 115,617 Professional fees ................................... 109,527 Custodian fees ...................................... 72,998 Investment advisory fees ............................ 64,480 Directors' fees and expenses ........................ 9,617 Printing and shareholder reports .................... 888 Pricing fees ........................................ 120 Other ............................................... 11,536 ------------ Total expenses before reimbursement .................... 384,783 Reimbursement of expenses ........................... (4,886) ------------ TOTAL EXPENSES AFTER REIMBURSEMENT ..................... 379,897 ------------ INVESTMENT INCOME -- NET ............................... 10,909,414 ------------ REALIZED & UNREALIZED GAIN (LOSS) -- NET: Realized gain (loss) on: Investments (including $(719) from affiliates) -- net ........................................... 24,927,695 Financial futures contracts -- net .................. (3,895,727) 21,031,968 ------------ Change in unrealized appreciation/depreciation on: Investments -- net .................................. (46,314,707) Financial futures contracts -- net .................. 999,848 (45,314,859) ------------ ------------ TOTAL REALIZED AND UNREALIZED LOSS -- NET .............. (24,282,891) ------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $(13,373,477) ============
See notes to Financial Statements 57 MASTER SMALL CAP INDEX SERIES STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31, ----------------------------- 2007 2006 ------------- ------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS Investment income -- net ...................................... $ 10,909,414 $ 7,477,587 Realized gain -- net .......................................... 21,031,968 25,599,413 Change in unrealized appreciation/depreciation -- net ......... (45,314,859) 31,237,076 ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... (13,373,477) 64,314,076 ------------- ------------- CAPITAL TRANSACTIONS Proceeds from contributions ................................... 443,692,332 555,696,889 Fair value of withdrawals ..................................... (361,297,148) (428,783,737) ------------- ------------- NET INCREASE IN NET ASSETS DERIVED FROM CAPITAL TRANSACTIONS ..... 82,395,184 126,913,152 ------------- ------------- NET ASSETS Total increase in net assets .................................. 69,021,707 191,227,228 Beginning of year ............................................. 561,372,577 370,145,349 ------------- ------------- END OF YEAR ................................................... $ 630,394,284 $ 561,372,577 ============= =============
See notes to Financial Statements 58 MASTER SMALL CAP INDEX SERIES FINANCIAL HIGHLIGHTS THE FOLLOWING RATIOS HAVE BEEN DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS.
For the Year Ended December 31, ---------------------------------------------------- 2007 2006 2005 2004 2003 -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN ................... (1.46%) 18.13% 4.63% 18.15% 47.11% -------- -------- -------- -------- -------- Ratios to Average Net Assets Expenses, net of reimbursement ......... .06% .07% .07% .08% .09% -------- -------- -------- -------- -------- Expenses ............................... .06% .07% .08% .08% .10% -------- -------- -------- -------- -------- Investment income -- net ............... 1.69% 1.55% 1.17% 1.11% 1.13% -------- -------- -------- -------- -------- Supplemental Data Net assets, end of year (in thousands).. $630,394 $561,373 $370,145 $365,661 $335,659 -------- -------- -------- -------- -------- Portfolio turnover ..................... 26% 40% 37% 38% 29% -------- -------- -------- -------- --------
59 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 1. SIGNIFICANT ACCOUNTING POLICIES: Master Small Cap Index Series (the "Series"), a non-diversified management investment company, is part of Quantitative Master Series LLC (the "Master LLC"). The Master LLC is registered under the Investment Company Act of 1940, as amended, 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 Limited Liability Company Agreement permits the Directors (and prior to June 15, 2007, the Declaration of Trust permitted the Trustees) to issue non-transferable interests in the Master LLC 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 of the Trust and the Board of Directors of the Master LLC are referred to as the Board of Directors. The financial statements of the Series 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. 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. Effective September 4, 2007, exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade and previously were valued at the last sales price as of close of options trading on applicable exchanges. Options traded in the OTC market are valued at the last asked price (options written) and the last bid price (options purchased). Swap agreements are valued based upon quoted fair valuations 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, including valuations furnished by the pricing services retained by the Master LLC, 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 of the Board of Directors. Such valuations and procedures will be reviewed periodically by the Board of Directors. 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 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 60 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 (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 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. (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 due to an unfavorable change in the price of the underlying security or index, or if the counterparty does not perform under the contract. The counterparty, for certain instruments, may pledge cash or securities as collateral. - 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. (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. 61 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 (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 mount 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 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) Bank overdraft The Series recorded a bank overdraft which resulted from failed trades. (g) 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 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. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Series' U.S. federal tax returns remains open for the years ended December 31, 2004 through December 31, 2006. The statute of limitations on the Series' state and local tax returns may remain open for an additional year depending upon the jurisdiction. 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. The impact on the Series' financial statement disclosures, if any, is currently being assessed. 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. FAS159 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. The impact on the Series' financial statement disclosures, if any, is currently being assessed. 62 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES: The Master LLC, on behalf of the Series, 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 0.01% 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 0.08%. This arrangement has a one-year term and is renewable. For the year ended December 31, 2007, the Manager earned $64,480, of which $4,886 was waived. 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 the sub-adviser for services it provides a fee that is a percentage of the management fee paid by the Series to the Manager. The Master LLC, on behalf of the Series, has received an exemptive order from the Securities and Exchange Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned subsidiary of Merrill Lynch, or its affiliates. As of December 31, 2007, the Series loaned securities with a value of $336,134 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 year ended December 31, 2007, BIM received $251,767 in securities lending agent fees. Merrill Lynch Trust Co., an indirect, wholly owned subsidiary of Merrill Lynch, was the Series' custodian. Effective July 17, 2007, State Street Bank and Trust Co. became the Series' custodian. For the year ended December 31, 2007, the Series reimbursed the Manager $11,726 for certain accounting services. Certain officers and/or directors of the Master LLC are officers and/or directors of BlackRock, Inc. or its affiliates. 3. INVESTMENTS: Purchases and sales of investments, excluding short-term securities, for the year ended December 31, 2007 were $322,261,614, and$150,670,484. 4. SHORT-TERM BORROWINGS: The Master LLC, on behalf of the Series, along with certain other funds managed by the Manager and its affiliates, is a party to a $500,000,000 credit agreement with a group of lenders. 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 0.06% 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 0.35%or a base rate as defined in the credit agreement. The Series did not borrow under the credit agreement during the year ended December 31, 2007. On November 21, 2007, the credit agreement was renewed for one year under substantially the same terms. 63 MASTER SMALL CAP INDEX SERIES REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Investors and Board of Directors of Quantitative Master Series LLC: We have audited the accompanying statement of assets and liabilities, including the summary schedule of investments, of Master Small Cap Index Series, one of the portfolios constituting Quantitative Master Series LLC(the "Master LLC") (formerly Quantitative Master Series Trust) as of December 31,2007, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Master LLC's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Master LLC is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Master LLC's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2007, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Master Small Cap Index Series of Quantitative Master Series LLC as of December 31,2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Princeton, New Jersey February 22, 2008 64 MASTER SMALL CAP INDEX SERIES PROXY RESULTS (UNAUDITED) During the six-month period ended December 31, 2007, the holders of interests of Master Small Cap Index Series of Quantitative Master Series LLC voted on the following proposal, which was approved at a special meeting on September 7, 2007. This proposal was a part of the reorganization of the Board of Directors of Quantitative Master Series LLC that took effect on November 1, 2007. A description of the proposal and number of shares voted for each Director are as follows:
UNITS OF INTEREST UNITS OF INTEREST VOTED FOR WITHHELD FROM VOTING ----------------- -------------------- To elect the Board of Directors of David O. Beim, Richard S. Davis, Ronald W. Quantitative master Series LLC: Forbes, Henry Gabbay, Dr. Matina Horner, Rodney D. Johnson, Herbert I. London, Cynthia A. Montgomery, Joseph P. Platt, Jr., Robert C. Robb, Jr., Toby Rosenblatt, Kenneth L. Urish and Frederick W. Winter 125,557,799 0
65 MASTER SMALL CAP INDEX SERIES OFFICERS AND DIRECTORS (UNAUDITED)
NUMBER OF BLACKROCK- ADVISED POSITION(S) LENGTH OF FUNDS AND NAME, ADDRESS HELD WITH TIME PORTFOLIOS PUBLIC AND YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS OVERSEEN DIRECTORSHIPS - ----------------- ------------ --------- ------------------------------------------------- ------------- --------------- NON-INTERESTED DIRECTORS* DAVID O. BEIM Director 2007 to Professor of Finance and Economics at the 35 Funds None 40 East 52nd Street New present Columbia University Graduate School of Business 81 Portfolios York, NY 10022 1940 since 1991; Chairman of Outward Bound USA from 1997 to 2001; Chairman of Wave Hill, Inc. from 1990 to 2006; Trustee of Phillips Exeter Academy from 2002 to present. RONALD W. FORBES Director and 2007 to Professor Emeritus of Finance, School of Business, 35 Funds None 40 East 52nd Street Co-Chairman present State University of New York at Albany since 2000 81 Portfolios New York, NY 10022 1940 of the Board and Professor thereof from 1989 to 2000; of Directors International Consultant, Urban Institute, Washington, D.C. from 1995 to 1999. DR. MATINA HORNER Director 2007 to Executive Vice President of Teachers Insurance 35 Funds NSTAR (electric 40 East 52nd Street present and Annuity Association and College Retirement 81 Portfolios and gas utility) New York, NY 10022 Equities Fund from 1989 to 2003. 1939 RODNEY D. JOHNSON Director and 2007 to President, Fairmount Capital Advisors, Inc. since 35 Funds None 40 East 52nd Street Co-Chairman present 1987; Director, Fox Chase Cancer Center since 81 Portfolios New York, NY 10022 1941 of the Board 2002; Member of the Archdiocesan Investment of Directors Committee of the Archdiocese of Philadelphia since 2003. HERBERT I. LONDON Director and 2007 to Professor Emeritus, New York University since 35 Funds AIMS Worldwide, 40 East 52nd Street New Member of present 2005; John M. Olin Professor of Humanities, New 81 Portfolios Inc. York, NY 10022 1939 the Audit York University from 1993 to 2005 and Professor (marketing) Committee thereof from 1980 to 2005; President, Hudson Institute since 1997 and Director thereof since 1980; Dean, Gallatin Division of New York University from 1976 to 1993; Distinguished Fellow, Herman Kahn Chair, Hudson Institute from 1984 to 1985; Chairman of the Board of Directors of Vigilant Research, Inc. since 2006; Member of the Board of Directors for Grantham University since 2006; Director of AIMS Worldwide, Inc. since 2006; Director of Reflex Security since 2006; Director of InnoCentive, Inc. since 2006; Director of Cerego, LLC since 2005; Director, Damon Corp. from 1991 to 1995; Overseer, Center for Naval Analyses from 1983 to 1993. CYNTHIA A. MONTGOMERY Director 2007 to Professor, Harvard Business School since 1989; 35 Funds Newell 40 East 52nd Street New present Associate Professor, J.L. Kellogg Graduate School 81 Portfolios Rubbermaid, York, NY 10022 1952 of Management, Northwestern University from 1985 Inc. to 1989; Associate Professor, Graduate School of (manufacturing) Business Administration, University of Michigan from 1979 to 1985; Director, Harvard Business School Publishing since 2005; Director, McLean Hospital since 2005. JOSEPH P. PLATT, JR. Director 2007 to Partner, Amarna Corporation, LLC (private 35 Funds Greenlight 40 East 52nd Street present investment company) since 2002; Director, Jones 81 Portfolios Capital Re, New York, NY 10022 and Brown (Canadian insurance broker) since 1998; Ltd. 1947 Director, Greenlight Capital Re, Ltd. (reinsurance (reinsurance company) since 2004; Partner, Amarna company) Financial Company (private investment company) since 2005; Director and Executive Vice President, Johnson and Higgins (insurance brokerage) from 1990 to 1997.
* Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. 66 MASTER SMALL CAP INDEX SERIES OFFICERS AND DIRECTORS (UNAUDITED)
NUMBER OF BLACKROCK- ADVISED POSITION(S) LENGTH OF FUNDS AND NAME, ADDRESS HELD WITH TIME PORTFOLIOS PUBLIC AND YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS OVERSEEN DIRECTORSHIPS - ----------------- ------------ --------- ------------------------------------------------- ------------- --------------- NON-INTERESTED DIRECTORS* (CONCLUDED) ROBERT C. ROBB, JR. Director 2007 to Partner, Lewis, Eckert, Robb and Company 35 Funds None 40 East 52nd Street present (management and financial consulting firm) since 81 Portfolios New York, NY 10022 1945 1981; Trustee, Medical College of Pennsylvania/ Hahnemann University from 1998 to 2002; Trustee, EQK Realty Investors from 1994 to 2000; Director, Tamaqua Cable Products Company from 1981 to 1998; Director, Brynwood Partners from 1984 to 1998; Director, The PNC Bank from 1994 to 1998; Director, Provident National Bank from 1983 to 1993; Director Brinks, Inc. from 1981 to 1986. TOBY ROSENBLATT Director and 2007 TO President since 1999 and Vice President -- 35 Funds A.P. Pharma, 40 East 52nd Street Vice present General Partner since 1990, Founders Investments 81 Portfolios Inc.(speciality New York, NY 10022 1938 Chairman of Ltd. (private investments); Director, Forward pharmaceuticals) the Management, LLC since 2007; Trustee, SSR Funds Performance from 1990 to 2005; Trustee, Metropolitan Series Oversight Funds, Inc. from 2001 to 2005. Committee KENNETH L. URISH Director and 2007 to Managing Partner, Urish Popeck & Co., LLC 35 Funds None 40 East 52nd Street New Chairman of present (certified public accountants and consultants) 81 Portfolios York, NY 10022 1951 the Audit since 1976; External Advisory Board, The Committee Pennsylvania State University Accounting Department since 2001; Trustee, The Holy Family Foundation since 2001; President and Trustee, Pittsburgh Catholic Publishing Associates since 2003; Former Trustee, Inter-Tel from 2006 to 2007. FREDERICK W. WINTER Director and 2007 to Professor and Dean Emeritus of the Joseph M. Katz 35 Funds None 40 East 52nd Street Member of present School of Business-- University of Pittsburgh 81 Portfolios New York, NY 10022 the Audit since 2005 and Dean thereof from 1997 to 2005; 1945 Committee Director, Alkon Corporation (pneumatics) since 1992; Director, Indotronix International (IT service) since 2004; Director, Tippman Sports (recreation) since 2005. * Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. INTERESTED DIRECTORS* RICHARD S. DAVIS Director 2007 to Managing Director, BlackRock, Inc. since 2005; 184 Funds None 40 East 52nd Street New present Chief Executive Officer, State Street Research & 289 York, NY 10022 1945 Management Company from 2000 to 2005; Chairman of Portfolios the Board of Trustees, State Street Research mutual funds ("SSR Funds") from 2000 to 2005; Senior Vice President, Metropolitan Life Insurance Company from 1999 to 2000; Chairman, SSR Realty from 2000 to 2004. HENRY GABBAY Director 2007 to Consultant, BlackRock, Inc. since 2007; Managing 183 Funds None 40 East 52nd Street New present Director, BlackRock, Inc. from 1989 to June 2007; 288 York, NY 10022 1947 Chief Administrative Officer, BlackRock Advisors, Portfolios LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007; Treasurer of certain closed-end funds in the BlackRock Fund complex from 1989 to 2006. * Messrs. Davis and Gabbay are both "interested persons," as defined in the Investment Company Act of 1940, of the Master LLC based on their positions with BlackRock, Inc. and its affiliates. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
67 MASTER SMALL CAP INDEX SERIES OFFICERS AND DIRECTORS (UNAUDITED)
NUMBER OF BLACKROCK- ADVISED POSITION(S) LENGTH OF FUNDS AND NAME, ADDRESS HELD WITH TIME PORTFOLIOS PUBLIC AND YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS OVERSEEN DIRECTORSHIPS - ----------------- ------------ --------- ------------------------------------------------- ------------- --------------- ADVISORY BOARD MEMBER DAVID R.WILMERDING, JR.* Advisory 2007 Chairman, Wilmerding & Associates, Inc. 35 Funds Chestnut Street 40 East 52nd Street New Board Member (investment advisers) from1989 to 2005; Chairman, 81 Portfolios Exchange Fund, York, NY 10022 1935 Coho Partners, Ltd. (investment advisers) from (open-end 2003 to 2005; Director, Beaver Management investment Corporation. company)
* David R.Wilmerding, Jr. resigned from the Advisory Board of the Master LLC, effective December 31, 2007.
POSITION(S) LENGTH OF NAME, ADDRESS HELD WITH TIME AND YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS - ----------------- ------------ --------- ---------------------------------------------------------------------------------- MASTER LLC OFFICERS* DONALD C. BURKE Fund 2007 to Managing Director of BlackRock, Inc. since 2006; Formerly Managing Director of 40 East 52nd Street New President present Merrill Lynch Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P. York, NY 10022 1960 and Chief ("FAM") in 2006; First Vice President thereof from 1997 to 2005; Treasurer thereof Executive from 1999 to 2006 and Vice President thereof from 1990 to 1997. Officer ANNE F. ACKERLEY Vice 2007 to Managing Director of BlackRock, Inc. since 2000 and First Vice President and Chief 40 East 52nd Street New President present Operating Officer of Mergers and Acquisitions Group from 1997 to 2000; First Vice York, NY 10022 1962 President and Chief Operating Officer of Public Finance Group thereof from 1995 to 1997; First Vice President of Emerging Markets Fixed Income Research of Merrill Lynch & Co., Inc. from 1994 to 1995. NEAL J. ANDREWS Chief 2007 to Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice President 40 East 52nd Street New Financial present and Line of Business Head of Fund Accounting and Administration at PFPC Inc. from York, NY 10022 1966 Officer 1992 to 2006. JAY M. FIFE Treasurer 2007 to Managing Director of BlackRock, Inc. since 2007 and Director since 2006; Formerly 40 East 52nd Street New present Assistant Treasurer of the MLIM/FAM advised funds from 2005 to 2006; Director of York, NY 10022 MLIM Fund Services Group from 2001 to 2006. 1970 BRIAN P. KINDELAN Chief 2007 to Chief Compliance Officer of the Funds since 2007; Managing Director and Senior 40 East 52nd Street New Compliance present Counsel thereof since January 2005; Director and Senior Counsel of BlackRock York, NY 10022 1959 Officer Advisors, Inc. from 2001 to 2004 and Vice President and Senior Counsel thereof from 1998 to 2000; Senior Counsel of The PNC Bank Corp. from 1995 to 1998. HOWARD SURLOFF Secretary 2007 to Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at 40 East 52nd Street New present BlackRock, Inc. since 2006; Formerly General Counsel (U.S.) of Goldman Sachs Asset York, NY 10022 Management, L.P. from 1993 to 2006. 1965
* Officers of the Master LLC serve at the pleasure of the Board of Directors. Further information about the Master LLC's Officers and Directors is available in the Master LLC's Statement of Additional Information, which can be obtained without charge by calling 1-800-441-7762.
INDEPENDENT REGISTERED CUSTODIAN ACCOUNTING AGENT PUBLIC ACCOUNTING FIRM LEGAL COUNSEL - --------- ---------------- ---------------------- ------------- State Street Bank and State Street Bank and Deloitte & Touche LLP Sidley Austin LLP Trust Company Trust Company Princeton, NJ 08540 New York, NY 10019 North Quincy, MA 02171 Princeton, NJ 08540
68 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS DECEMBER 31, 2007 This summary schedule of investments is presented to help investors focus on the Series' principal holdings. It includes the Series' 50 largest holdings, each investment of any issuer that exceeds 1% of the Series' net assets and affiliated issues. "Other Securities" represent all issues not required to be disclosed under the rules adopted by the Securities and Exchange Commission. A complete schedule of investments is available without charge, upon request, by calling 800-441-7762 or on the Securities and Exchange Commission's website at http://www.sec.gov.
PERCENT OF INDUSTRY SHARES HELD COMMON STOCKS VALUE NET ASSETS - --------------------------------------- ----------- ------------------------------------------ -------------- ---------- Aerospace & Defense Other Securities $ 7,692,434 0.7% Air Freight & Logistics Other Securities 4,572,587 0.4 Airlines Other Securities 2,996,203 0.3 Other Securities 8,898,372 0.8 Automobiles 71,898 DaimlerChrysler AG 6,968,357 0.6 214,000 Toyota Motor Corp. 11,397,364 1.0 Other Securities 16,882,011 1.5 ------------ ---- 35,247,732 3.1 ------------ ---- Beverages Other Securities 15,712,051 1.4 Biotechnology Other Securities 1,782,724 0.2 Building Products Other Securities 6,666,148 0.6 Capital Markets 84,380 Credit Suisse Group 5,079,301 0.4 39,145 Deutsche Bank AG Registered Shares 5,111,363 0.4 162,085 UBS AG 7,473,367 0.7 Other Securities 10,905,634 1.0 ------------ ---- 28,569,665 2.5 ------------ ---- Chemicals 37,627 BASF AG 5,579,794 0.5 55,633 Bayer AG 5,087,673 0.4 Other Securities 25,275,281 2.2 ------------ ---- 35,942,748 3.1 ------------ ---- Commercial Banks 64,161 BNP Paribas SA 6,961,475 0.6 285,794 Banco Bilbao Vizcaya Argentaria SA 6,957,420 0.6 480,675 Banco Santander SA 10,381,617 0.9 527,057 Barclays Plc 5,322,917 0.4 104,821 Commonwealth Bank of Australia Ltd. 5,404,442 0.5 922,258 HSBC Holdings Plc 15,535,003 1.4 687,629 Mitsubishi UFJ Financial Group, Inc. 6,484,291 0.6 784,325 Royal Bank of Scotland Group Plc 6,925,178 0.6 701,256 UniCredito Italiano SpA 5,767,100 0.5 Other Securities 85,062,747 7.4 ------------ ---- 154,802,190 13.5 ------------ ---- Commercial Services & Supplies Other Securities 9,168,267 0.8 Communications Equipment 301,553 Nokia Oyj 11,584,870 1.0 Other Securities 4,359,164 0.4 ------------ ---- 15,944,034 1.4 ------------ ---- Computers & Peripherals Other Securities 4,503,778 0.4 Construction & Engineering Other Securities 10,251,987 0.9 Construction Materials Other Securities 7,131,517 0.6 Consumer Finance Other Securities 2,321,598 0.2 Containers & Packaging Other Securities 1,126,356 0.1 Distributors Other Securities 1,291,365 0.1 Diversified Consumer Services Other Securities 425,682 0.0 Diversified Financial Services 143,436 ING Group NV CVA 5,589,044 0.5 Other Securities 14,188,976 1.2 ------------ ---- 19,778,020 1.7 ------------ ---- Diversified Telecommunication Services 217,200 Deutsche Telekom AG 4,780,446 0.4 138,273 France Telecom SA 4,959,959 0.4 329,719 Telefonica SA 10,688,282 1.0 Other Securities 24,226,418 2.1 ------------ ---- 44,655,105 3.9 ------------ ---- Electric Utilities 47,712 E.ON AG 10,143,245 0.9 Other Securities 26,904,874 2.3 ------------ ---- 37,048,119 3.2 ------------ ----
See notes to Financial Statements 69 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS DECEMBER 31, 2007
PERCENT OF INDUSTRY SHARES HELD COMMON STOCKS VALUE NET ASSETS - -------- ----------- ------------- -------------- ---------- Electrical Equipment 170,320 ABB Ltd. $ 4,910,631 0.4% Other Securities 11,546,907 1.0 ----------- --- 16,457,538 1.4 ----------- --- Electronic Equipment & Instruments Other Securities 12,341,464 1.1 Energy Equipment & Services Other Securities 4,436,496 0.4 Food & Staples Retailing 616,389 Tesco Plc 5,863,427 0.5 Other Securities 17,350,760 1.5 ----------- --- 23,214,187 2.0 ----------- --- Food Products 31,297 Nestle SA Registered Shares 14,371,279 1.3 131,620 Unilever NV 4,835,823 0.4 Other Securities 13,611,876 1.2 ----------- --- 32,818,978 2.9 ----------- --- Gas Utilities Other Securities 4,554,983 0.4 Health Care Equipment & Supplies Other Securities 6,516,002 0.6 Health Care Providers & Services Other Securities 2,321,644 0.2 Health Care Technology Other Securities 178,539 0.0 Hotels, Restaurants & Leisure Other Securities 10,366,424 0.9 Household Durables Other Securities 13,856,878 1.2 Household Products Other Securities 4,494,104 0.4 IT Services Other Securities 3,090,596 0.3 Independent Power Producers & Energy Traders Other Securities 1,544,297 0.1 Industrial Conglomerates 65,334 Siemens AG 10,388,270 0.9 Other Securities 11,066,650 1.0 ----------- --- 21,454,920 1.9 ----------- --- Insurance 117,504 AXA SA 4,684,764 0.4 34,467 Allianz AG Registered Shares 7,425,560 0.6 Other Securities 39,812,467 3.5 ----------- --- 51,922,791 4.5 ----------- --- Internet & Catalog Retail Other Securities 766,398 0.1 Internet Software & Services Other Securities 1,135,845 0.1 Leisure Equipment & Products Other Securities 2,131,639 0.2 Life Sciences Tools & Services Other Securities 722,212 0.1 Machinery Other Securities 23,293,341 2.0 Marine Other Securities 4,309,972 0.4 Media Other Securities 19,929,650 1.7 Metals & Mining 103,812 Anglo American Plc 6,301,536 0.5 69,987 ArcelorMittal 5,434,698 0.5 265,166 BHP Billiton Ltd. 9,269,681 0.8 180,451 BHP Billiton Plc 5,502,561 0.5 78,068 Rio Tinto Plc Registered Shares 8,216,068 0.7 Other Securities 25,784,432 2.3 ----------- --- 60,508,976 5.3 ----------- --- Multi-Utilities 34,092 RWE AG 4,780,056 0.4 77,516 Suez SA 5,276,207 0.5 Other Securities 9,423,851 0.8 ----------- --- 19,480,114 1.7 ----------- --- Multiline Retail Other Securities 4,869,160 0.4 Office Electronics Other Securities 5,869,228 0.5 Oil, Gas & Consumable Fuels 263,695 BG Group Plc 6,050,102 0.5 1,493,200 BP Plc 18,247,282 1.6 200,844 Eni SpA 7,330,081 0.6 284,525 Royal Dutch Shell Plc 12,011,215 1.1 216,157 Royal Dutch Shell Plc Class B 9,010,661 0.8 161,867 Total SA 13,402,661 1.2 Other Securities 13,960,652 1.2 ----------- --- 80,012,654 7.0 ----------- --- Paper & Forest Products Other Securities 3,411,709 0.3 Personal Products Other Securities 3,951,119 0.3
See notes to Financial Statements 70 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS DECEMBER 31, 2007
PERCENT OF INDUSTRY SHARES HELD COMMON STOCKS VALUE NET ASSETS - -------- ----------- ------------- -------------- ---------- Pharmaceuticals 116,048 AstraZeneca Plc $ 4,995,039 0.4% 441,993 GlaxoSmithKline Plc 11,225,109 1.0 183,604 Novartis AG Registered Shares 10,040,813 0.9 55,612 Roche Holding AG 9,613,411 0.8 76,807 Sanofi-Aventis 7,030,945 0.6 Other Securities 14,963,589 1.3 -------------- ----- 57,868,906 5.0 -------------- ----- Real Estate Investment Trusts (REITs) Other Securities 13,208,339 1.2 Real Estate Management & Development Other Securities 18,971,417 1.7 Road & Rail Other Securities 9,076,814 0.8 Semiconductors &Semiconductor Equipment Other Securities 5,843,567 0.5 Software Other Securities 10,091,154 0.9 Specialty Retail Other Securities 8,086,335 0.7 Textiles, Apparel & Luxury Goods Other Securities 10,170,591 0.9 Tobacco 119,338 British American Tobacco Plc 4,665,295 0.4 Other Securities 7,158,604 0.6 -------------- ----- 11,823,899 1.0 -------------- ----- Trading Companies & Distributors Other Securities 11,335,508 1.0 Transportation Infrastructure Other Securities 4,272,958 0.4 Water Utilities Other Securities 1,140,308 0.1 Wireless Telecommunication Services 4,153,856 Vodafone Group Plc 15,593,248 1.4 Other Securities 6,801,333 0.6 -------------- ----- 22,394,581 2.0 -------------- ----- TOTAL COMMON STOCKS (COST -- $797,004,493) 1,080,774,917 94.5 -------------- ----- EXCHANGE TRADED FUNDS 288,947 iShares MSCI EAFE Index Fund (c) 22,708,345 2.0 Total Exchange-Traded Funds (Cost -- $19,661,875) 22,708,345 2.0 -------------- ----- PREFERRED STOCKS Automobiles Other Securities 1,246,695 0.1 Household Products Other Securities 886,330 0.1 Media Other Securities 119,809 0.0 Multi-Utilities Other Securities 314,051 0.0 Total Preferred Stocks (Cost -- $1,272,423) 2,566,885 0.2 -------------- ----- RIGHTS Metals & Mining Other Securities 0 0.0 Real Estate Management & Development Other Securities 14,770 0.0 Total Rights (Cost -- $0) 14,770 0.0 -------------- ----- BENEFICIAL INTEREST SHORT-TERM SECURITIES USD BlackRock Liquidity Series, LLC Cash Sweep 13,529,338 Series, 5.04% (a)(b) 13,529,338 1.2 Total Short-Term Securities (Cost -- $13,529,338) 13,529,338 1.2 -------------- ----- TOTAL INVESTMENTS (COST -- $831,468,129*) 1,119,594,255 97.9 OTHER ASSETS LESS LIABILITIES 23,577,306 2.1 -------------- ----- NET ASSETS $1,143,171,561 100.0% ============== =====
See notes to Financial Statements 71 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS DECEMBER 31, 2007 * The cost and unrealized appreciation (depreciation) of investments as of December 31, 2007, as computed for federal income tax purposes, were as follows: Aggregate cost ................................................ $ 844,409,619 -------------- Gross unrealized appreciation ................................. 305,352,070 Gross unrealized depreciation ................................. (30,167,434) -------------- Net unrealized appreciation ................................... $ 275,184,636 ==============
(a) Investments in companies considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
INTEREST AFFILIATE NET ACTIVITY INCOME - --------- ------------ -------- BlackRock Liquidity Series, LLC Cash Sweep Series $(12,221,959) $981,689
(b) Represents the current yield as of December 31, 2007. (c) All or a portion of security held as collateral in connection with open financial futures contracts. - "Other Securities" represent issues that are not identified as the 50 largest holdings of the Series and issues not exceeding 1% of net assets. Some securities, or a portion of, in this category are held in connection with open financial futures contracts. - For Series compliance purposes, the Series' industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Series management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percent of net assets. These industry classifications are unaudited. - Financial futures contracts purchased as of December 31, 2007 were as follows:
UNREALIZED NUMBER OF APPRECIATION CONTRACTS ISSUE EXCHANGE EXPIRATION DATE FACE VALUE (DEPRECIATION) - --------- ---------------------- --------- --------------- ----------- -------------- 4 Hang Seng Index Future Hong Kong January 2008 $ 703,945 $ 11,935 49 OMX Stock Index Future Stockholm January 2008 $ 812,340 9,293 30 CAC40 10 Euro Future MATIF March 2008 $ 2,458,577 26,400 311 DJ Euro Stoxx 50 Eurex March 2008 $19,949,983 215,887 63 FTSE 100 Index Future LIFFE March 2008 $ 7,980,053 115,038 10 SPI 200 Index Future Sydney March 2008 $ 1,379,492 13,970 58 TOPIX Index Future Tokyo March 2008 $ 7,885,858 (253,938) --------- TOTAL UNREALIZED APPRECIATION -- NET $ 138,585 =========
See notes to Financial Statements 72 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS DECEMBER 31, 2007 - - Forward foreign exchange contracts as of December 31, 2007 were as follows: UNREALIZED FOREIGN CURRENCY FOREIGN CURRENCY SETTLEMENT APPRECIATION PURCHASED SOLD DATE (DEPRECIATION) - ---------------- ---------------- ---------- -------------- AUD 3,668,400 USD 3,216,436 2/12/08 $ (3,449) CHF 3,317,500 USD 2,951,653 2/12/08 (13,477) DKK 1,549,100 USD 304,230 2/12/08 (315) EUR 8,296,000 USD 12,139,443 2/12/08 (2,413) GBP 3,709,300 USD 7,504,118 2/12/08 (129,329) HKD 5,901,300 USD 758,953 2/12/08 (837) JPY 562,900,000 USD 5,081,239 2/12/08 (18,293) NOK 2,334,500 USD 426,560 2/12/08 2,873 NZD 18,200 USD 13,887 2/12/08 47 SEK 5,898,000 USD 918,736 2/12/08 (5,817) SGD 398,800 USD 276,923 2/12/08 983 USD 1,945,468 AUD 2,204,000 2/12/08 15,084 USD 1,471,670 CHF 1,644,000 2/12/08 15,645 USD 117,544 DKK 595,800 2/12/08 655 USD 5,029,644 EUR 3,424,000 2/12/08 20,340 USD 3,643,681 GBP 1,794,000 2/12/08 76,870 USD 481,051 HKD 3,742,000 2/12/08 331 USD 1,751,762 JPY 195,050,000 2/12/08 (2,595) USD 143,367 NOK 780,000 2/12/08 (114) USD 11,599 NZD 15,000 2/12/08 115 USD 345,843 SEK 2,204,358 2/12/08 4,642 USD 122,039 SGD 175,300 2/12/08 (120) -------- TOTAL UNREALIZED DEPRECIATION ON FORWARD FOREIGN EXCHANGE CONTRACTS -- NET $(39,174) -------- - Currency Abbreviations: AUD Australian Dollar CHF Swiss Franc DKK Danish Krone EUR Euro GBP British Pound HKD Hong Kong Dollar JPY Japanese Yen NOK Norwegian Krone NZD New Zealand Dollar SEK Swedish Krona SGD Singapore Dollar USD U.S. Dollar See notes to Financial Statements 73 MASTER INTERNATIONAL INDEX SERIES STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2007 ASSETS: Investments in unaffiliated securities, at value (identified cost -- $817,938,791)......................................... $1,106,064,917 Investments in affiliated securities, at value (identified cost -- $13,529,338).......................................... 13,529,338 Foreign cash (cost -- $17,212,445)............................... 17,263,524 Unrealized appreciation on forward foreign exchange contracts.... 137,585 Receivables: Contributions................................................. $13,818,236 Securities sold............................................... 5,915,884 Dividends .................................................... 3,168,772 Investment adviser............................................ 8,666 22,911,558 ----------- Prepaid expenses and other assets................................ 32,122 -------------- TOTAL ASSETS..................................................... 1,159,939,044 -------------- LIABILITIES: Unrealized depreciation on forward foreign exchange contracts.... 176,759 Bank overdraft .................................................. 1,156,797 Payables: Securities purchased.......................................... 9,098,125 Withdrawals................................................... 5,647,739 Variation margin.............................................. 304,540 Other affiliates.............................................. 10,356 15,060,760 ----------- Accrued expenses and other liabilities........................... 373,167 -------------- TOTAL LIABILITIES................................................ 16,767,483 -------------- NET ASSETS: Net Assets....................................................... $1,143,171,561 ============== NET ASSETS CONSIST OF Investors' capital............................................... $ 854,669,789 Unrealized appreciation -- net................................... 288,501,772 -------------- NET ASSETS....................................................... $1,143,171,561 ==============
See notes to Financial Statements 74 MASTER INTERNATIONAL INDEX SERIES STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2007 INVESTMENT INCOME: Dividends (net of $2,925,220 foreign withholding tax)......... $ 32,791,613 Interest (including $981,689 from affiliates.................. 985,172 ------------ TOTAL INCOME..................................................... 33,776,785 ------------ EXPENSES: Custodian fees................................................ $ 610,971 Accounting services........................................... 184,231 Investment advisory fees...................................... 114,233 Professional fees............................................. 87,698 Pricing fees.................................................. 76,438 Directors' fees and expenses.................................. 12,834 Printing and shareholder reports.............................. 1,574 Other......................................................... 25,036 ----------- Total expenses before reimbursement.............................. 1,113,015 Reimbursement of expenses..................................... (38,870) ----------- TOTAL EXPENSES AFTER REIMBURSEMENT............................... 1,074,145 ------------ INVESTMENT INCOME -- NET......................................... 32,702,640 ------------ REALIZED & UNREALIZED GAIN (LOSS) -- NET: Realized gain on: Investments -- net............................................ 18,774,995 Financial futures contracts -- net............................ 734,254 Foreign currency transactions -- net.......................... 1,833,471 21,342,720 ----------- Change in unrealized appreciation/depreciation on: Investments -- net............................................ 61,219,919 Financial futures contracts -- net............................ (526,818) Foreign currency transactions -- net.......................... (231,704) 60,461,397 ----------- ------------ TOTAL REALIZED AND UNREALIZED LOSS -- NET........................ 81,804,117 ------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $114,506,757 ============
See notes to Financial Statements 75 MASTER INTERNATIONAL INDEX SERIES STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31, ----------------------------- 2007 2006 -------------- ------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS Investment income -- net...................................... $ 32,702,640 $ 17,659,987 Realized gain -- net.......................................... 21,342,720 12,066,140 Change in unrealized appreciation/depreciation -- net......... 60,461,397 126,438,123 -------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.. 114,506,757 156,164,250 -------------- ------------- CAPITAL TRANSACTIONS Proceeds from contributions................................... 740,944,038 517,743,669 Fair value of withdrawals..................................... (542,265,015) (367,077,433) -------------- ------------- NET INCREASE IN NET ASSETS DERIVED FROM CAPITAL TRANSACTIONS..... 198,679,023 150,666,236 -------------- ------------- NET ASSETS Total increase in net assets.................................. 313,185,780 306,830,486 Beginning of year............................................. 829,985,781 523,155,295 -------------- ------------- END OF YEAR................................................... $1,143,171,561 $ 829,985,781 ============== =============
See notes to Financial Statements 76 MASTER INTERNATIONAL INDEX SERIES FINANCIAL HIGHLIGHTS THE FOLLOWING RATIOS HAVE BEEN DERIVED FROM INFORMATION PROVIDED IN THE FINANCIAL STATEMENTS.
For the Year Ended December 31, --------------------------------------------------- 2007 2006 2005 2004 2003 ---------- -------- -------- --------- -------- TOTAL INVESTMENT RETURN.......................................... 10.80% 26.61% 13.64% 20.32% 38.97% ---------- -------- -------- --------- -------- Ratios to Average Net Assets Expenses, net of reimbursement................................ .09% .10% .10% .09% .09% ---------- -------- -------- --------- -------- Expenses...................................................... .10% .11% .10% .10% .10% ---------- -------- -------- --------- -------- Investment income -- net...................................... 2.86% 2.70% 2.53% 2.55% 2.23% ---------- -------- -------- --------- -------- Supplemental Data Net assets, end of year (in thousands)........................ $1,143,172 $829,986 $523,155 $322,067 $553,129 ---------- -------- -------- --------- -------- Portfolio turnover............................................ 30% 23% 11% 14% 9% ---------- -------- -------- --------- --------
77 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 1. SIGNIFICANT ACCOUNTING POLICIES: Master International Index Series (the "Series"), a non-diversified management investment company, is part of Quantitative Master Series LLC (the "Master LLC"). The Master LLC is registered under the Investment Company Act of 1940, as amended, 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 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 of the Trust and the Board of Directors of the Master LLC are referred to as the Board of Directors. The financial statements of the Series 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. 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. 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. 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. Effective September 4, 2007, exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade and previously were valued at the last sales price as of the close of options trading on applicable exchanges. 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, including valuations furnished by the pricing services retained by the Master LLC, 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 of the Board of Directors. Such valuations and procedures will be reviewed periodically by the Board of Directors. 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 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 78 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 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 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. (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. - 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 79 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 or liabilities expressed in foreign currencies into U.S. dollars. Realized and unrealized gains or losses from investments include the effects of foreign exchange rates on investments. The Series invests in foreign securities, which may involve a number of risk factors and special considerations not present with investments in securities of U.S. corporations. (d) Income taxes The Series is classified as a partnership for federal income tax purposes. As such, each investor in the Series is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Series. Therefore, no federal income tax provision is required. Under the applicable foreign tax law, a withholding tax may be imposed on interest, dividends and capital gains at various rates. It is intended that the Series' assets will be managed so an investor in the Series can satisfy the requirements of Subchapter M of the Internal Revenue Code. (e) Security transactions and investment income Security transactions are accounted for on the date the securities are purchased or sold (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Series has determined the ex-dividend date. Interest income is recognized on the accrual basis. (f) Securities lending The Series may lend securities to financial institutions that provide cash or securities issued or guaranteed by the U.S. government as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Series and any additional required collateral is delivered to the Series on the next business day. Where the Series receives securities as collateral for the loaned securities, it collects a fee from the borrower. The Series typically receives the income on the loaned securities but does not receive the income on the collateral. Where the Series receives cash collateral, it may invest such collateral and retain the amount earned on such investment, net of any amount rebated to the borrower. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within five business days. The Series may pay reasonable 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. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Series' U.S. federal tax returns remains open for the years ended December 31, 2004 through December 31, 2006. The statute of limitations on the Series' state and local tax returns may remain open for an additional year depending upon the jurisdiction. 80 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 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. The impact on the Series' financial statement disclosures, if any, is currently being assessed. 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. The impact on the Series' financial statement disclosures, if any, is currently being assessed. (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, on behalf of the Series, 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 0.01% 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 0.12%. 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, an affiliate of the Manager, under which the Manager pays the sub-adviser 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 year ended December 31, 2007, the Series reimbursed the Manager $20,941 for certain accounting services. In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated, a wholly owned subsidiary of Merrill Lynch, received $69,153 in commissions on the execution of portfolio security transactions for the Series for the year ended December 31, 2007. Certain officers and/or directors of the Master LLC are officers and/or directors of BlackRock, Inc. or its affiliates. 3. INVESTMENTS: Purchases and sales of investments, excluding short-term securities, for the year ended December 31, 2007 were $556,679,431 and $329,787,155, respectively. 81 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 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. 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 0.06% 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 0.35% or a base rate as defined in the credit agreement. The Series did not borrow under the credit agreement during the year ended December 31, 2007. On November 21, 2007, the credit agreement was renewed for one year under substantially the same terms. 82 MASTER INTERNATIONAL INDEX SERIES REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Investors and Board of Directors of Quantitative Master Series LLC: We have audited the accompanying statement of assets and liabilities, including the summary schedule of investments, of Master International Index Series, one of the portfolios constituting Quantitative Master Series LLC (formerly Quantitative Master Series Trust) (the "Master LLC") as of December 31, 2007, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Master LLC's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Master LLC is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Master LLC's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2007, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Master International Index Series of Quantitative Master Series LLC as of December 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Princeton, New Jersey February 22, 2008 83 MASTER INTERNATIONAL INDEX SERIES OFFICERS AND DIRECTORS (UNAUDITED)
NUMBER OF BLACKROCK- ADVISED FUNDS POSITION(S) LENGTH OF AND NAME, ADDRESS AND HELD WITH TIME PRINCIPAL OCCUPATION(S) DURING PORTFOLIOS PUBLIC YEAR OF BIRTH MASTER LLC SERVED PAST FIVE YEARS OVERSEEN DIRECTORSHIPS - -------------------- ---------------- --------- ----------------------------------- -------------- -------------------- NON-INTERESTED DIRECTORS* DAVID O. BEIM Director 2007 to Professor of Finance and Economics 35 Funds None 40 East 52nd Street present at the Columbia University 81 Portfolios New York, NY 10022 Graduate School of Business since 1940 1991; Chairman of Outward Bound USA from 1997 to 2001; Chairman of Wave Hill, Inc. from 1990 to 2006; Trustee of Phillips Exeter Academy from 2002 to present. RONALD W. FORBES Director and 2007 to Professor Emeritus of Finance, 35 Funds None 40 East 52nd Street Co-Chairman of present School of Business, State 81 Portfolios New York, NY the Board of University of New York at Albany 10022 1940 Directors since 2000 and Professor thereof from 1989 to 2000; International Consultant, Urban Institute, Washington, D.C. from 1995 to 1999. DR. MATINA HORNER Director 2007 to Executive Vice President of 35 Funds NSTAR (electric and 40 East 52nd Street present Teachers Insurance and Annuity 81 Portfolios gas utility) New York, NY 10022 Association and College Retirement 1939 Equities Fund from 1989 to 2003. RODNEY D. JOHNSON Director and 2007 to President, Fairmount Capital 35 Funds None 40 East 52nd Street Co-Chairman of present Advisors, Inc. since 1987; 81 Portfolios New York, NY 10022 the Board of Director, Fox Chase Cancer Center 1941 Directors since 2002; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2003. HERBERT I. LONDON Director and 2007 to Professor Emeritus, New York 35 Funds AIMS Worldwide, Inc. 40 East 52nd Street Member of present University since 2005; John M. 81 Portfolios (marketing) New York, NY 10022 the Audit Olin Professor of Humanities, New 1939 Committee York University from 1993 to 2005 and Professor thereof from 1980 to 2005; President, Hudson Institute since 1997 and Director thereof since 1980; Dean, Gallatin Division of New York University from 1976 to 1993; Distinguished Fellow, Herman Kahn Chair, Hudson Institute from 1984 to 1985; Chairman of the Board of Directors of Vigilant Research, Inc. since 2006; Member of the Board of Directors for Grantham University since 2006; Director of AIMS Worldwide, Inc. since 2006; Director of Reflex Security since 2006; Director of InnoCentive, Inc. since 2006; Director of Cerego, LLC since 2005; Director, Damon Corp. from 1991 to 1995; Overseer, Center for Naval Analyses from 1983 to 1993. CYNTHIA A. Director 2007 to Professor, Harvard Business School 35 Funds Newell Rubbermaid, MONTGOMERY present since 1989; Associate Professor, 81 Portfolios Inc. (manufacturing) 40 East 52nd Street J.L. Kellogg Graduate School of New York, NY 10022 Management, Northwestern 1952 University from 1985 to 1989; Associate Professor, Graduate School of Business Administration, University of Michigan from 1979 to 1985; Director, Harvard Business School Publishing since 2005; Director, McLean Hospital since 2005. JOSEPH P. PLATT, JR. Director 2007 to Partner, Amarna Corporation, LLC 35 Funds Greenlight Capital 40 East 52nd Street present (private investment company) since 81 Portfolios Re, Ltd. New York, NY 10022 2002; Director, Jones and Brown (reinsurance 1947 (Canadian insurance broker) since company) 1998; Director, Greenlight Capital Re, Ltd. (reinsurance company) since 2004; Partner, Amarna Financial Company (private investment company) since 2005; Director and Executive Vice President, Johnson and Higgins (insurance brokerage) from 1990 to 1997.
* Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. 84 MASTER INTERNATIONAL INDEX SERIES OFFICERS AND DIRECTORS (UNAUDITED)
NUMBER OF BLACKROCK- ADVISED FUNDS POSITION(S) LENGTH OF AND NAME, ADDRESS AND HELD WITH TIME PRINCIPAL OCCUPATION(S) DURING PORTFOLIOS PUBLIC YEAR OF BIRTH MASTER LLC SERVED PAST FIVE YEARS OVERSEEN DIRECTORSHIPS - -------------------- ---------------- --------- ----------------------------------- -------------- -------------------- NON-INTERESTED DIRECTORS* (CONCLUDED) ROBERT C. ROBB, JR. Director 2007 to Partner, Lewis, Eckert, Robb and 35 Funds None 40 East 52nd Street present Company (management and financial 81 Portfolios New York, NY 10022 consulting firm) since 1981; 1945 Trustee, Medical College of Pennsylvania/ Hahnemann University from 1998 to 2002; Trustee, EQK Realty Investors from 1994 to 2000; Director, Tamaqua Cable Products Company from 1981 to 1998; Director, Brynwood Partners from 1984 to 1998; Director, The PNC Bank from 1994 to 1998; Director, Provident National Bank from 1983 to 1993; Director Brinks, Inc. from 1981 to 1986. TOBY ROSENBLATT Director and 2007 TO President since 1999 and Vice 35 Funds A.P. Pharma, 40 East 52nd Street Vice Chairman present President -- General Partner since 81 Portfolios Inc.(speciality New York, NY 10022 of the 1990, Founders Investments Ltd. pharmaceuticals) 1938 Performance (private investments); Director, Oversight Forward Management, LLC since Committee 2007; Trustee, SSR Funds from 1990 to 2005; Trustee, Metropolitan Series Funds, Inc. from 2001 to 2005. KENNETH L. URISH Director and 2007 to Managing Partner, Urish Popeck & 35 Funds None 40 East 52nd Street Chairman of the present Co., LLC (certified public 81 Portfolios New York, NY 10022 Audit Committee accountants and consultants) since 1951 1976; External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Trustee, The Holy Family Foundation since 2001; President and Trustee, Pittsburgh Catholic Publishing Associates since 2003; Former Trustee, Inter-Tel from 2006 to 2007. FREDERICK W. WINTER Director and 2007 to Professor and Dean Emeritus of the 35 Funds None 40 East 52nd Street Member of the present Joseph M. Katz School of Business-- 81 Portfolios New York, NY 10022 Audit Committee University of Pittsburgh since 1945 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Indotronix International (IT service) since 2004; Director, Tippman Sports (recreation) since 2005. INTERESTED DIRECTORS* RICHARD S. DAVIS Director 2007 to Managing Director, BlackRock, Inc. 184 Funds None 40 East 52nd Street present since 2005; Chief Executive 289 New York, NY 10022 Officer, State Street Research & Portfolios 1945 Management Company from 2000 to 2005; Chairman of the Board of Trustees, State Street Research mutual funds ("SSR Funds") from 2000 to 2005; Senior Vice President, Metropolitan Life Insurance Company from 1999 to 2000; Chairman, SSR Realty from 2000 to 2004. HENRY GABBAY Director 2007 to Consultant, BlackRock, Inc. since 183 Funds None 40 East 52nd Street present 2007; Managing Director, 288 Portfolios New York, NY 10022 BlackRock, Inc. from 1989 to June 1947 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007; Treasurer of certain closed-end funds in the BlackRock Fund complex from 1989 to 2006.
* Messrs. Davis and Gabbay are both "interested persons," as defined in the Investment Company Act of 1940, of the Master LLC based on their positions with BlackRock, Inc. and its affiliates. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. 85 MASTER INTERNATIONAL INDEX SERIES PROXY RESULTS (UNAUDITED)
NUMBER OF BLACKROCK- ADVISED FUNDS POSITION(S) LENGTH OF AND NAME, ADDRESS AND HELD WITH TIME PRINCIPAL OCCUPATION(S) DURING PORTFOLIOS PUBLIC YEAR OF BIRTH MASTER LLC SERVED PAST FIVE YEARS OVERSEEN DIRECTORSHIPS - -------------------- ---------------- --------- ----------------------------------- -------------- -------------------- ADVISORY BOARD MEMBER DAVID R. WILMERDING, Advisory Board 2007 Chairman, Wilmerding & Associates, 35 Funds Chestnut Street JR.* Member Inc. (investment advisers) 81 Portfolios Exchange Fund, 40 East 52nd Street from1989 to 2005; Chairman, Coho (open-end investment New York, NY 10022 Partners, Ltd. (investment company) 1935 advisers) from 2003 to 2005; Director, Beaver Management Corporation.
* David R.Wilmerding, Jr. resigned from the Advisory Board of the Master LLC, effective December 31, 2007.
POSITION(S) LENGTH OF NAME, ADDRESS AND HELD WITH TIME YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS - -------------------- ---------------- --------- ------------------------------------------------------------------------------- MASTER LLC OFFICERS* DONALD C. BURKE Fund President 2007 to Managing Director of BlackRock, Inc. since 2006; Formerly Managing Director of 40 East 52nd Street and Chief present Merrill Lynch Investment Managers, L.P. ("MLIM") and Fund Asset Management, New York, NY 10022 Executive L.P. ("FAM") in 2006; First Vice President thereof from 1997 to 2005; 1960 Officer Treasurer thereof from 1999 to 2006 and Vice President thereof from 1990 to1997. ANNE F. ACKERLEY Vice President 2007 to Managing Director of BlackRock, Inc. since 2000 and First Vice President and 40 East 52nd Street present Chief Operating Officer of Mergers and Acquisitions Group from 1997 to 2000; New York, NY 10022 First Vice President and Chief Operating Officer of Public Finance Group 1962 thereof from 1995 to 1997; First Vice President of Emerging Markets Fixed Income Research of Merrill Lynch & Co., Inc. from 1994 to 1995. NEAL J. ANDREWS Chief 2007 to Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice 40 East 52nd Street Financial present President and Line of Business Head of Fund Accounting and Administration at New York, NY 10022 Officer PFPC Inc. from 1992 to 2006. 1966 JAY M. FIFE Treasurer 2007 to Managing Director of BlackRock, Inc. since 2007 and Director since 2006; 40 East 52nd Street present Formerly Assistant Treasurer of the MLIM/FAM advised funds from 2005 to 2006; New York, NY 10022 Director of MLIM Fund Services Group from 2001 to 2006. 1970 BRIAN P. KINDELAN Chief 2007 to Chief Compliance Officer of the Funds since 2007; Managing Director and Senior 40 East 52nd Street Compliance present Counsel thereof since January 2005; Director and Senior Counsel of BlackRock New York, NY 10022 Officer Advisors, Inc. from 2001 to 2004 and Vice President and Senior Counsel thereof 1959 from 1998 to 2000; Senior Counsel of The PNC Bank Corp. from 1995 to 1998. HOWARD SURLOFF Secretary 2007 to Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at 40 East 52nd Street present BlackRock, Inc. since 2006; Formerly General Counsel (U.S.) of Goldman Sachs New York, NY 10022 Asset Management, L.P. from 1993 to 2006. 1965
* Officers of the Master LLC serve at the pleasure of the Board of Directors. Further information about the Master LLC's Officers and Directors is available in the Master LLC's Statement of Additional Information, which can be obtained without charge by calling 1-800-441-7762.
INDEPENDENT REGISTERED PUBLIC CUSTODIAN ACCOUNTING AGENT ACCOUNTING FIRM LEGAL COUNSEL - -------------------------------------- --------------------- ----------------------------- -------------------------------- JPMorgan Chase Bank, N.A. State Street Bank and Deloitte & Touche LLP Sidley Austin LLP Brooklyn, NY 11245 Trust Company Princeton, NJ 08540 New York, NY 10019 Princeton, NJ 08540
86 MASTER INTERNATIONAL INDEX SERIES PROXY RESULTS (UNAUDITED) During the six-month period ended December 31, 2007, the holders of interest of Master International Index Series of Quantitative Master Series LLC voted on the following proposal, which was approved at a special meeting on September 7, 2007.This proposal was a part of the reorganization of the Board of Directors of Quantitative Master Series LLC that took effect on November 1, 2007.A description of the proposal and number of shares voted are\as follows:
UNITS OF INTEREST VOTED UNITS OF INTEREST FOR WITHHELD FROM VOTING -------------- -------------------- To elect the Board of Directors David O. Beim, Richard S. Davis, Ronald W. Forbes, 377,583,324 0 of Quantitative Master Series Henry Gabbay, Dr. Matina Horner, Rodney D. LLC: Johnson, Herbert I. London, Cynthia A. Montgomery, Joseph P. Platt, Jr., Robert C. Robb, Jr., Toby Rosenblatt, Kenneth L. Uris and Frederick W. Winter
87 [This page intentionally left blank.] 88 [This page intentionally left blank.] 89 (AMERICAN BEACON FUNDS(SM) LOGO) DELIVERY OF DOCUMENTS To reduce expenses, your financial institution may mail only one copy of the Prospectus, Annual Report and Semi-Annual Report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please contact your financial institution. Delivery of individual copies will commence thirty days after receiving your request. If you invest in the Fund through a financial institution, you may be able to receive the Fund's regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution's name or contact your financial institution directly. TO OBTAIN MORE INFORMATION ABOUT THE FUND: (GRAPHIC) (GRAPHIC) BY E-MAIL: ON THE INTERNET: american_beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com (GRAPHIC) (GRAPHIC) BY TELEPHONE: BY MAIL: Institutional Class American Beacon Funds Call (800) 658-5811 P.O. Box 219643 PlanAhead Class(R) Kansas City, MO 64121 (800) 388-3344 AVAILABILITY OF QUARTERLY AVAILABILITY OF PROXY PORTFOLIO SCHEDULES VOTING POLICY 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 relating Fund files a complete schedule of its to portfolio securities is available in portfolio holdings with the each Fund's Statement of Additional Securities and Exchange Commission Information, which may be obtained free ("SEC") on Form N-Q as of the first of charge by calling 1-800-967-9009 or and third fiscal quarters. The Fund's by accessing the SEC's website at Forms N-Q are available on the SEC's www.sec.gov. Each Fund's proxy voting website at www.sec.gov. The Forms N-Q record for the most recent year ended may also be reviewed and copied at June 30 is filed annually with the SEC the SEC's Public Reference Room, 450 on Form N-PX. The Fund's Forms N-PX are Fifth Street, NW, Washington, DC available on the SEC's website at 20549. Information regarding the www.sec.gov. The Fund's proxy voting operation of the SEC's Public record may also be obtained by calling Reference Room may be obtained by 1-800-967-9009. calling 1-800-SEC-0330. A complete schedule of the Fund's portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each fiscal quarter. FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP Portland, Maine Dallas, Texas
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus. American Airlines, Inc. is not responsible for investments made in the American Beacon Funds. American Beacon Funds is a service mark of AMR Corporation. American Beacon Small Cap Index Fund and American Beacon International Equity Index Fund are service marks of American Beacon Advisors, Inc. AR 12/07 541486 GUIDANCE - VISION - EXPERIENCE (AMERICAN BEACON FUNDS (SM) LOGO) ANNUAL REPORT December 31, 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............................................ 7 Financial Highlights............................................... 16 Additional Information............................................. Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor's strategies and the Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. American Beacon Funds December 31, 2007 (PHOTO OF DOUGLAS G. HERRING) FELLOW SHAREHOLDERS, I am pleased to present to you the American Beacon Treasury Inflation Protected Securities Fund Annual Report for the twelve months ended December 31, 2007. Please review the enclosed material carefully, as it includes important information about the Fund. Renewed volatility affected the fixed income markets during the second half of the year. The change in the investment environment was led by a crisis in the housing sector, due to several years of lax lending standards, which then spilled over into the financial sector during the summer months. U.S. inflation concerns and a flight to quality during the year due to the heightened economic uncertainty led to strong performance in the TIPS sector. For 2007, the American Beacon Treasury Inflation Protected Securities Fund returned 11.22%, outperforming the Lipper TIPS Index by 70 basis points (0.70%). The turmoil in the U.S. markets continued after the close of the Fund's fiscal year and is likely to continue over the shorter term. However, we believe the Fund's fundamental investment philosophy and lower than average expense ratio will continue to provide inflation protection over the longer term. As always, we appreciate the opportunity to serve your financial needs. To obtain further details about the American Beacon Funds family or to access your account information, please visit our website at www.americanbeaconfunds.com. Thank you for your continued confidence in the American Beacon Treasury Inflation Protected Securities Fund. 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 DECEMBER 31, 2007 (UNAUDITED) It was a tale of two fixed income markets in 2007. Early in the year, Treasury yields stayed within relatively narrow ranges, credit spreads were stable, and Federal Reserve ("Fed") policymakers left their target federal funds interest rate unchanged at 5.25%. From about mid-June through year-end, however, Treasury yields declined sharply, credit spreads widened, and the Federal Open Market Committee ("FOMC") lowered the overnight lending rate by 100 basis points (1.00%), while making it clear it was prepared to lower the rate further in 2008. An economic slowdown, precipitated in no small part by problems in the housing market, and a sharp contraction in market liquidity, led to the increased volatility and monetary policy action by the Fed. While the economy was slowing, inflation as measured by the Consumer Price Index ("CPI") remained higher than the FOMC would have liked. Sharp increases in the price of crude oil, as well as increases in the prices of agricultural and other commodities, suggested that unwanted inflationary pressures had likely not yet been purged. For example, in December, CPI increased at a 4.1% year-over-year pace, while Core CPI (CPI excluding food and energy) increased at a 2.4% year-over-year pace. Fed officials have repeatedly expressed a desire for Core CPI to be in the 1% to 2% annual range. Declining real Treasury interest rates and higher-than-expected CPI readings contributed to strong positive total returns for treasury inflation protected securities ("TIPS"). The Lehman Brothers U.S. TIPS Index returned 11.63% in 2007, while the Lehman Brothers 1-10 Year U.S. TIPS Index returned 11.45%. Inflation expectations as evidenced by breakeven inflation rates (the spread between similar maturity nominal and inflation-protected securities) ranged approximately 35 basis points (0.35%) from high to low in 2007. In early April, breakevens peaked for the year at 2.48%, while in late August they troughed, at 2.16%. At year-end, 10-year breakevens were approximately 2.30%. The U.S. Treasury appears committed to the TIPS market, with $57 billion of new supply auctioned in 2007. At year-end, the total outstanding market value of TIPS was approximately $463 billion. 2 PERFORMANCE OVERVIEW AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM) DECEMBER 31, 2007 (UNAUDITED) The Institutional Class of the Fund returned 11.22% for the period from January 1, 2007 through December 31, 2007, trailing the Lehman Brothers 1-10 Yr U.S. TIPS Index (the "Index") return of 11.45%. The Fund outperformed the Lipper TIPS Funds Index return of 10.52% for the same time period. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 6/30/04 THROUGH 12/31/07 (LINE GRAPH) ANNUALIZED TOTAL RETURNS PERIODS ENDED 12/31/07
VALUE OF SINCE $10,000 INCEPTION 6/30/04- 1 YEAR 3 YEARS 6/30/04 12/31/07 ------ ------- --------- -------- Institutional Class(1,3) .................... 11.22% 4.61% 5.09% $11,899 Lehman Bros. 1-10 Yr. U.S. TIPS Index(2) .... 11.45% 4.87% 5.61% $12,104 Lehman Bros. U.S. TIPS Index(2) ............. 11.63% 4.85% 6.02% $12,271 Lipper TIPS Funds Index(2) .................. 10.52% 4.29% 5.66% $12,126
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 twelve-month period by 23 basis points (0.23%). The underperformance can be attributed to Fund expenses and sub-advisor performance in the first three quarters of the year, although a large cash flow into the Fund in late November allowed the Fund to outperform its Index in the fourth quarter (the cash was deployed after the TIPS market had fallen a significant amount). Three factors contributed to most of the value lost relative to the Index in the first three quarters: 1) 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 early in the year and non-U.S. government inflation-linked bonds continued to underperform the Index; 2) an overweight position in intermediate-term TIPS subtracted value as the TIPS yield curve flattened during the second quarter; and 3) 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. 3 MARKET OVERVIEW DECEMBER 31, 2007 (UNAUDITED) TOP TEN HOLDINGS
% OF NET ASSETS ---------- U.S. Treasury Note, 2.000%, Due 1/15/2014 14.3% U.S. Treasury Note, 0.875%, Due 4/15/2010 11.9% U.S. Treasury Note, 2.500%, Due 7/15/2016 10.7% U.S. Treasury Note, 3.375%, Due 1/15/2012 10.4% U.S. Treasury Note, 1.625%, Due 1/15/2015 10.3% U.S. Treasury Note, 1.875%, Due 7/15/2015 6.6% U.S. Treasury Note, 2.375%, Due 4/15/2011 5.8% U.S. Treasury Note, 3.000%, Due 7/15/2012 5.3% U.S. Treasury Note, 2.375%, Due 1/15/2017 3.9% U.S. Treasury Note, 4.250%, Due 1/15/2010 3.4%
PORTFOLIO DIVERSIFICATION
% OF FIXED INCOME ------------ A 0.0% AA 0.0% AAA 100.0%
(BAR GRAPH) 4 FUND EXPENSES AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM) DECEMBER 31, 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 July 1, 2007 through December 31, 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. Shareholders of the Institutional Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Institutional Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
Expenses Paid Beginning Account Ending Account During Period* Value 7/1/07 Value 12/31/07 7/1/07-12/31/07 ----------------- -------------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,089.34 $2.37 Hypothetical $1,000.00 $1,022.94 $2.29
(5% return before expenses) * Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.45% for the Institutional Class, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half year period. 5 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Trustees of American Beacon Treasury Inflation Protected Securities Fund: We have audited the accompanying statement of assets and liabilities of American Beacon Treasury Inflation Protected Securities Fund (the "Fund"), a separate fund comprising the American Beacon Funds, including the schedule of investments, as of December 31, 2007, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2007, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon Treasury Inflation Protected Securities Fund as of December 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Dallas, Texas February 27, 2008 See accompanying notes 6 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2007
PAR AMOUNT VALUE ---------- -------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 95.56% 3.875%, Due 1/15/2009 ++ ................... $ 4,108 $ 4,230 4.25%, Due 1/15/2010 ++ .................... 7,196 7,678 0.875%, Due 4/15/2010 ++ ................... 26,820 26,730 3.50%, Due 1/15/2011 ++ .................... 2,119 2,279 2.375%, Due 4/15/2011 ++ ................... 12,505 13,034 3.375%, Due 1/15/2012 ++ ................... 21,332 23,270 2.00%, Due 4/15/2012 ++ .................... 1,699 1,761 3.00%, Due 7/15/2012 ++ .................... 10,876 11,779 1.875%, Due 7/15/2013 ++ ................... 4,277 4,407 2.00%, Due 1/15/2014 ++ .................... 31,009 32,029 2.00%, Due 7/15/2014 ++ .................... 6,883 7,112 1.625%, Due 1/15/2015 ++ ................... 23,010 23,102 1.875%, Due 7/15/2015 ++ ................... 14,420 14,698 2.00%, Due 1/15/2016 ++ .................... 5,368 5,509 2.50%, Due 7/15/2016 ++ .................... 22,407 23,896 2.375%, Due 1/15/2017 ++ ................... 8,262 8,718 2.625%, Due 7/15/2017 ++ ................... 3,271 3,529 -------- TOTAL U.S. TREASURY OBLIGATIONS ............... 213,761 --------
SHARES ---------- SHORT TERM INVESTMENTS - 2.00% American Beacon Money Market Select Fund # .... 4,476,103 4,476 -------- TOTAL INVESTMENTS - 97.56% (COST $216,593) ....... $218,237 OTHER ASSETS, NET OF LIABILITIES - 2.44% ......... 5,460 -------- TOTAL NET ASSETS - 100.00% ....................... $223,697 ========
Percentages are stated as a percent of net assets. ++ Inflation-Indexed Note. # The Fund/Trust is affiliated by having the same investment advisor. See accompanying notes 7 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2007 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ASSETS: Investments in unaffiliated securities, at value (A) ................................ $ 213,761 Investments in affiliated securities, at value (B) .................................. 4,476 Dividends and interest receivable ................................................... 1,995 Receivable for fund shares sold ..................................................... 4,835 ----------- TOTAL ASSETS ..................................................................... 225,067 ----------- LIABILITIES: Payable for fund shares redeemed .................................................... 1,239 Payable under excess expense reimbursement plan ..................................... 28 Management and investment advisory fees payable (Note 2) ............................ 47 Administrative service and service fees payable ..................................... 16 Other liabilities ................................................................... 40 ----------- TOTAL LIABILITIES ................................................................ 1,370 ----------- NET ASSETS ............................................................................. $ 223,697 =========== ANALYSIS OF NET ASSETS: Paid-in-capital ..................................................................... 223,567 Accumulated net realized loss ....................................................... (1,514) Unrealized appreciation of investments, futures contracts, and foreign currency ..... 1,644 ----------- NET ASSETS ............................................................................. $ 223,697 =========== SHARES OUTSTANDING (NO PAR VALUE): Institutional Class ................................................................. 21,971,512 =========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE: Institutional Class ................................................................. $ 10.18 =========== - ---------- (A) Cost of investments in unaffiliated securities ..................................... $ 212,117 (B) Cost of investments in affiliated securities ....................................... $ 4,476
See accompanying notes 8 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS) INVESTMENT INCOME: Dividend income from affiliated securities ................. $ 64 Interest income ............................................ 2,820 ------ TOTAL INVESTMENT INCOME ................................. 2,884 ------ EXPENSES: Management and investment advisory fees (Note 2) ........... 122 Administrative service fees (Note 2): Institutional Class ..................................... 55 Transfer agent fees: Institutional Class ..................................... 2 Custody and fund accounting fees ........................... 6 Professional fees .......................................... 32 Registration fees and expenses ............................. 12 Prospectus and shareholder reports ......................... 4 Other expenses ............................................. 8 ------ TOTAL EXPENSES .......................................... 241 ------ NET INVESTMENT INCOME ......................................... 2,643 ------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investments ............................................. (74) Foreign currency transactions ........................... 2 Change in net unrealized appreciation or depreciation of: Investments ............................................. 1,889 ------ NET GAIN ON INVESTMENTS .............................. 1,817 ------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......... $4,460 ======
See accompanying notes 9 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF CHANGES IN NET ASSETS (IN THOUSANDS)
Year Ended Year Ended December December 31, 2007 31, 2006 ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ....................................................... $ 2,643 $ 926 Net realized loss on investments, futures contracts, and foreign currency transactions .................................................... (72) (975) Change in net unrealized appreciation or (depreciation) of investments, futures contracts, and foreign currency translations ..................... 1,889 357 -------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..................... 4,460 308 -------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class ...................................................... (2,630) (952) Tax return of capital: Institutional Class ...................................................... (19) (95) -------- -------- NET DISTRIBUTIONS TO SHAREHOLDERS ..................................... (2,649) (1,047) -------- -------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares ............................................... 207,597 16,407 Reinvestment of dividends and distributions ................................. 2,649 1,048 Cost of shares redeemed ..................................................... (22,152) (13,508) -------- -------- NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ............... 188,094 3,947 -------- -------- NET INCREASE IN NET ASSETS ..................................................... 189,905 3,208 -------- -------- NET ASSETS: Beginning of period ......................................................... 33,792 30,584 -------- -------- END OF PERIOD * ............................................................. $223,697 $ 33,792 ======== ======== * Includes undistributed net investment income of .............................. $ -- $ -- ======== ========
See accompanying notes 10 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 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. 11 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 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 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. As of December 31, 2007, the Manager does not believe the adoption of FAS 157 will materially impact the amounts represented in the financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of the fair value. 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 TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 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 year ended December 31, 2007 were as follows:
AMOUNTS PAID NET AMOUNTS TO INVESTMENT RETAINED BY MANAGEMENT FEE RATE MANAGEMENT FEE ADVISORS MANAGER - ------------------- -------------- ------------- ----------- 0.15%-0.25% $121,667 $66,456 $55,211
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 year ended December 31, 2007, fees earned by the Manager from the Select Fund were $1,263. Interfund Lending Program Pursuant to an exemptive order by the SEC, the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Fund to borrow from other participating Funds. For the year ended December 31, 2007, the Fund did not utilize the credit facility. Reimbursement of Expenses The Manager contractually agreed to reimburse the Fund to the extent that total annual fund operating expenses exceed the Fund's expense cap of 0.35%. For the year ended December 31, 2007, the Manager waived or reimbursed expenses of $31,833. The Fund has adopted an Expense Reimbursement Plan whereby the Manager may seek repayment of fees waived or expenses reimbursed for a period of up to three years. However, reimbursement will occur only if the Class's average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed the previously agreed upon contractual expense limit. 13 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 As a result of the significant increase in the Class's average net assets during the year ended December 31, 2007, it was determined that all of the previously reimbursed expenses noted above will likely be recouped by the Manager. As of December 31, 2007, $3,904 was recouped. The remaining reimbursed expenses of $27,929 are subject to potential recovery through 2010 and are recorded as a liability. 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. The Fund adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainties in Income Taxes" ("FIN 48"), on January 1, 2007. FIN 48 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The implementation of FIN 48 did not result in any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the three year period ended December 31, 2007, remains subject to examination by the Internal Revenue Service. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in "Other expenses" on the Statement of Operations. Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. generally accepted accounting principles. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns on income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation, as applicable, as the income is earned or capital gains are recorded. The tax character of distributions paid during the fiscal years ended December 31, 2007 and December 31, 2006 were as follows (in thousands):
YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2007 2006 ------------ ------------ DISTRIBUTIONS PAID FROM: Ordinary income*............................... $2,630 $ 952 Tax return of capital.......................... 19 95 ------ ------ TOTAL TAXABLE DISTRIBUTIONS....................... $2,649 $1,047 ====== ======
* For tax purposes, short-term capital gains distributions are considered ordinary income distributions. As of December 31, 2007, the components of distributable earnings on a tax basis were as follows (in thousands): Cost basis of investments for federal income tax purposes .......... $216,878 Unrealized appreciation ............................................ 1,377 Unrealized depreciation ............................................ (18) -------- Net unrealized appreciation/(depreciation) ......................... 1,359 Undistributed ordinary income ...................................... -- Undistributed long-term gain/(loss) ................................ (1,228) -------- Distributable earnings ............................................. $ 131 ========
14 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation/ (depreciation) are attributable primarily to the tax deferral of losses from wash sales. Due to inherent differences in the recognition of income, expenses and realized gains/(losses) under U.S. generally accepted accounting principles and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities. Accordingly, the following amounts represent current year permanent differences derived from foreign currency transactions and return of capital that have been reclassified as of December 31, 2007 (in thousands): Paid-in-capital ....................................................... $(19) Undistributed net investment income ................................... 6 Accumulated net realized gain (loss) .................................. 13 Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency ..................................... --
At December 31, 2007, the capital loss carry forward positions for federal income tax purposes were $144,311, $974,237 and $110,477, expiring in 2013, 2014 and 2015, respectively. 4. INVESTMENT TRANSACTIONS Purchases and proceeds from sales of Investment transactions for the year ended December 31, 2007, excluding short-term investments, were $264,293,811 and $85,886,075, respectively. The Fund had purchases and sales of U.S. Government securities of $263,728,468 and $84,411,089, respectively. A summary of the Fund's transactions in the Select Fund for the year ended December 31, 2007 is set forth below:
DECEMBER 31, 2006 DECEMBER 31, 2007 AFFILIATE SHARES/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE - --------- ------------------- ----------- ----------- ------------------- Select Fund...................... $1,430,704 $40,557,963 $37,512,564 $4,476,103
5. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares (dollars and shares in thousands): Year Ended December 31, 2007
INSTITUTIONAL CLASS ------------------- SHARES AMOUNT ------ -------- Shares sold ............................ 20,422 $207,597 Reinvestment of dividends .............. 271 2,649 Shares redeemed ........................ (2,267) (22,152) ------ -------- Net increase in shares outstanding ..... 18,426 $188,094 ====== ========
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 ====== ========
15 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Institutional Class --------------------------------------------------- Year Ended December 31, June 30 to ----------------------------------- December 2007(F) 2006 2005 31, 2004(A) -------- ------- ------- ----------- Net asset value, beginning of period .................. $ 9.53 $ 9.75 $ 10.16 $ 10.00 -------- ------- ------- ------- Income from investment operations: Net investment income .............................. 0.45 0.29 0.56(B) 0.18(B) Net gains (losses) on securities (both realized and unrealized) ................................. 0.59 (0.19) (0.37) 0.21 -------- ------- ------- ------- Total income (loss) from investment operations ........ 1.04 0.10 0.19 0.39 -------- ------- ------- ------- Less distributions: Dividends from net investment income ............... (0.39) (0.29) (0.55) (0.23) Distributions from net realized gains on securities ...................................... -- (0.05) 0.00(C) Tax return of capital .............................. 0.00(C,D) (0.03)(D) -- -- -------- ------- ------- ------- Total distributions ................................... (0.39) (0.32) (0.60) (0.23) -------- ------- ------- ------- Net asset value, end of period ........................ $ 10.18 $ 9.53 $ 9.75 $ 10.16 ======== ======= ======= ======= Total return .......................................... 11.22% 1.05% 1.86% 3.94%(E) ======== ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands) ........... $223,697 $33,792 $30,584 $20,943 Ratios to average net assets (annualized): Expenses, after expense reimbursements (recoupments) ................................ 0.43% 0.49% 0.44% 0.46% Expenses, before expense reimbursements (recoupments) ................................ 0.43% 0.49% 0.39% 0.62% Net investment income, after expense reimbursements (recoupements) ................ 4.74% 2.94% 5.45% 3.34% Net investment income, before expense reimbursements (recoupments) ................. 4.74% 2.94% 5.50% 3.18% Portfolio turnover rate ............................ 139% 259% 355% 190%(E)
(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) The tax return of capital is calculated based on outstanding shares at the time of distribution. (E) Not annualized. (F) Brown Brothers Harriman & Co. was removed as an investment advisor to the Treasury Inflation Protected Securities Fund on November 30, 2007. 16 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND PRIVACY POLICY & FEDERAL TAX INFORMATION (UNAUDITED) PRIVACY POLICY The American Beacon Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used. We may collect nonpublic personal information about you from one or more of the following sources: - information we receive from you on applications or other forms; - information about your transactions with us or our service providers; and - information we receive from third parties. We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards. FEDERAL TAX INFORMATION We are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those in other areas of this report because of differences between tax and financial reporting requirements. The Fund's distributions to shareholders did not include any short-term capital gains. Of the ordinary dividends paid to shareholders during the tax year ended December 31, 2007, 97.11% were derived from U.S. Treasury Obligations. 17 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED) The Trustees and officers of the American Beacon Funds (the "Trust") are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-seven funds in the fund complex that includes the Trust, the American Beacon Master Trust, the American Beacon Mileage Funds, and the American Beacon Select Funds. The Trust's Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS --------------------- --------------------------- ------------------------------------------------------------------------ INTERESTED TRUSTEES Term Lifetime of Trust until removal, resignation or retirement* Douglas G. Herring** (50) Trustee since 2006 President (2006-Present) and CEO (2008-Present), American Beacon Executive Vice Advisors, Inc.; Vice President and Controller, American Airlines, Inc. President from 2006 to 2007 (1998-2006); Chairman (2003-Present) and Director (1995-Present), President since 2007 American Airlines Federal Credit Union; Trustee, American Beacon Mileage Funds (2006-Present); Trustee, American Beacon Select Funds (2006-Present); Trustee, American Beacon Master Trust (2006-Present); Director, American Beacon Global Funds SPC (2006-Present); Director, American Beacon Global Funds plc (2007-Present). William F. Quinn** (59) Trustee Chairman (2006-Present), CEO (2006-2007), President (1986-2006), and since 1987 Director (2003-Present), American Beacon Advisors, Inc.; Chairman President from (1989-2003) and Director (1979-1989, 2003-Present), American Airlines 1987 to 2007 Federal Credit Union; Director, Hicks Acquisition I, Inc. (2007-Present); Executive Vice Director, Crescent Real Estate Equities, Inc.(1994-2007); Director, President Pritchard, Hubble & Herr, LLC (investment advisor) (2001-2006); Director since 2007 of Investment Committee, Southern Methodist University Endowment Fund (1996-Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Member, New York Stock Exchange Pension Manager Committee (1997-1998, 2000-2002, 2006-Present); Chairman (2007-Present) and Vice Chairman (2004-2007), Committee for the Investment of Employee Benefits; Director, United Way of Metropolitan Tarrant County (1988-2000, 2004-Present); Trustee, American Beacon Mileage Funds (1995-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1995-Present); Director, American Beacon Global Funds SPC (2002-Present); Director, American Beacon Global Funds plc (2007-Present). Alan D. Feld** (71) Trustee since 1996 Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Director, Clear Channel Communications (1984-Present); Trustee, CenterPoint Properties (1994-2006); Member Board of Trustees, Southern Methodist University; Member, Board of Visitors, The University of Texas M.D. Anderson Cancer Center; Member, Board of Visitors, Zale Lipshy Hospital; Trustee, American Beacon Mileage Funds (1996-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-Present). NON-INTERESTED TRUSTEES Term Lifetime of Trust until removal, resignation or retirement* W. Humphrey Bogart (63) Trustee since 2004 Consultant, New River Canada Ltd. (mutual fund servicing company) (1998-2003); Board Member, Baylor University Medical Center Foundation (1992-2004); President and CEO, Allmerica Trust Company, NA (1996-1997); President and CEO, Fidelity Investments Southwest Company (1983-1995); Senior Vice President of Regional Centers, Fidelity Investments (1988-1995); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present).
18 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED)
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS --------------------- --------------------------- ------------------------------------------------------------------------ NON-INTERESTED TRUSTEES (CONT.) Brenda A. Cline (47) Trustee since 2004 Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, Texas Christian University (1998-Present); Trustee, W.I. Cook Foundation, Inc. (d/b/a Cook Children's Health Foundation) (2001-2006); Director, Christian Church Foundation (1999-2007); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present). Richard A. Massman (64) Trustee since 2004 Senior Vice President and General Counsel, Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching, and venture capital activities) (1994-Present); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present). Stephen D. O'Sullivan (72) Trustee since 1987 Consultant (1994-Present); Trustee, American Beacon Mileage Funds (1995-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1995-Present). R. Gerald Turner (62) Trustee since 2001 President, Southern Methodist University (1995-Present); Director, 225 Perkins Admin. Bldg. ChemFirst (1986-2002); Director, J.C. Penney Company, Inc. Southern Methodist Univ. (1996-Present); Director, California Federal Preferred Capital Corp. Dallas, Texas 75275 (2001-2003); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-2007); Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Co-Chair, Knight Commission on Intercollegiate Athletics; Trustee, American Beacon Mileage Funds (2001-Present); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-Present). Kneeland Youngblood (52) Trustee since 1996 Managing Partner, Pharos Capital Group, LLC (a private equity firm) 100 Crescent Court Chairman since (1998-Present); Director, Energy Future Holdings Corp. (2007-Present); Suite 1740 2005 Director, Burger King Corporation (2004-Present); Director, Gap, Inc. Dallas, Texas 75201 (2006-Present); Trustee, City of Dallas, Texas Employee Retirement Fund (2004-Present); Director, Starwood Hotels and Resorts (2001-Present); Member, Council on Foreign Relations (1995-Present); Trustee, St. Mark's School of Texas (2002-Present); Trustee, American Beacon Mileage Funds (1996- Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-Present).
19 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED)
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS --------------------- --------------------------- ------------------------------------------------------------------------ OFFICERS Term One Year Rosemary K. Behan (48) VP, Secretary and Vice President, Legal and Compliance, American Beacon Advisors, Inc. Chief Legal (2006-Present); Assistant General Counsel, First Command Financial Officer since 2006 Planning, Inc. (2004-2006); Enforcement Attorney (1995-2004), Securities and Exchange Commission. Brian E. Brett (47) VP since 2004 Vice President, Director of Sales and Marketing, American Beacon Advisors, Inc. (2004-Present); Regional Vice President, Neuberger Berman, LLC (investment advisor) (1996-2004). Wyatt Crumpler (41) VP since 2007 Vice President, Trust Investments, American Beacon Advisors, Inc. (2007-Present); Managing Director of Corporate Accounting (2004-2007), Director of IT Strategy and Finance (2002-2004), American Airlines, Inc. Michael W. Fields (53) VP since 1989 Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-Present); Director, American Beacon Global Funds SPC (2002-Present); Director, American Beacon Global Funds plc (2007-Present). Rebecca L. Harris (41) Treasurer since Vice President, Finance, American Beacon Advisors, Inc. (1995-Present). 1995 Christina E. Sears (36) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Officer since 2004 Senior Compliance Analyst, American Beacon Advisors, Inc. (1998-2004). and Asst. Secretary since 1999
* The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, with the exception of Messrs. Quinn and O'Sullivan. ** Messrs. Quinn, Feld and Herring are deemed to be "interested persons" of the Trust, as defined by the 1940 Act. Mr. Quinn is Chairman of the Manager. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two years to one or more of the Trust's Investment advisors. Mr. Herring is President and CEO of the Manager. 20 [This page intentionally left blank.] 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: (GRAPHIC) (GRAPHIC) BY E-MAIL: ON THE INTERNET: american_beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com (GRAPHIC) (GRAPHIC) BY TELEPHONE: BY MAIL: Call (800) 658-5811 American Beacon Funds P.O. Box 219643 Kansas City, MO 64121-9643 AVAILABILITY OF AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES PROXY VOTING POLICY AND 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 STATE STREET BANK AND TRUST Boston, Massachusetts TRANSFER AGENT BOSTON FINANCIAL DATA SERVICES Kansas City, Missouri INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP Dallas, Texas DISTRIBUTOR FORESIDE FUND SERVICES Portland, Maine This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus. American Airlines, Inc. is not responsible for investments made in the American Beacon Funds. American Beacon Funds is a service mark of AMR Corporation. American Beacon Treasury Inflation Protected Securities Fund is a service mark of American Beacon Advisors, Inc AR 12/07 541500 GUIDANCE | VISION | EXPERIENCE (AMERICAN BEACON FUNDS(SM) LOGO) Annual Report December 31, 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.............................................. 17 U.S. Government Money Market Fund.............................. 21 Schedule of Investments Money Market Portfolio......................................... 24 U.S. Government Money Market Portfolio......................... 28 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. December 31, 2007 American Beacon Funds (PHOTO OF DOUGLAS G. HERRING) Fellow Shareholders, I am pleased to present to you the American Beacon Money Market Funds Annual Report for the twelve months ended December 31, 2007. Please review the enclosed material carefully, as it includes important information about the Funds. Renewed volatility affected the fixed income markets during the second half of the year. The change in the investment environment was led by a crisis in the housing sector, due to several years of lax lending standards, which then spilled over into the financial sector during the summer months. By design, American Beacon's conservative credit review process allowed us to avoid many of the pitfalls of the more toxic asset classes. Even with this conservative approach, both the Institutional Class and Cash Management Class of the American Beacon Money Market Fund posted one-year returns of 5.24% and 5.28%, outperforming the Lipper Institutional Money Market Average by 26 basis points (0.26%) and 30 basis points (0.30%), respectively. The American Beacon U.S. Government Money Market Fund - Cash Management Class also outperformed its benchmark, with a one-year total return of 5.13% versus the Lipper Institutional U.S. Government Money Market Average of 4.86%. The turmoil in the U.S. credit markets continued after the close of the Funds' fiscal year and is likely to continue over the shorter term. However, we believe the Funds' fundamental investment philosophy, proven credit selection process and lower than average expense ratio will continue to serve the Funds well over the longer term. As always, we appreciate the opportunity to serve your financial needs. To obtain further details about the American Beacon Funds family or to access your account information, please visit our website at www.americanbeaconfunds.com. Thank you for your continued confidence in the American Beacon Money Market Funds. Sincerely, /s/ Douglas G. Herring Douglas G. Herring President American Beacon Funds 1 PERFORMANCE OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) DECEMBER 31, 2007 (UNAUDITED) The year of 2007 began with a slowdown in U.S. growth occurring following Federal Reserve Board ("Fed") credit tightening, rising oil prices, and the beginning of concerns around credit and slowing U.S. consumer spending. Earnings growth remained strong on the back of strong export growth, a declining dollar and share buybacks. A transition in leadership from small, value and domestic to large, growth and multinational became evident as the year began. During the second half of the year, the benign fundamentals of 2003-2006--namely strong global growth, rising profitability levels and falling risk premiums--were replaced by credit stress, pressures on the capital position of the financial system, questions about the sustainability of the business cycle, and rising energy and food prices. Reflecting these woes, market prices moved considerably. U.S. Government bond yields plummeted, the dollar fell faster than in earlier years, credit spreads widened and equities turned volatile. The financials and consumer discretionary sectors experienced drops of one-quarter to one-third. Commodity and industrial related multinational companies performed best. In 2007, the Fed moved from an attitude of vigilance about inflation to one of providing liquidity and lowering rates to shore up the functioning of credit markets and fight economic weakness. During the year, the Fed lowered the target federal funds rate by 100 basis points (1.00%), bringing the target rate from 5.25% to 4.25%. In a statement issued following its meeting on December 11, 2007, the Federal Open Market Committee ("FOMC") noted: "Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks." The FOMC also stated its opinion that the rate reduction "combined with the [monetary] policy actions taken earlier, should help promote moderate growth over time." In a cautionary note, however, the FOMC indicated that "[r]eadings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully." The most recent data from the U.S. Department of Labor's Bureau of Labor Statistics indicated that the U.S. unemployment rate rose to 5.0% in December after holding steady at 4.7% in each of the previous three months. Non-farm payroll employment posted a small increase of 18,000 for the month, and total employment, at 146.2 million, was down following an increase in November. Job declines in manufacturing and construction largely offset job growth in several service industries. The Consumer Price Index ("CPI") increased at a seasonally-adjusted rate of 0.8% in November 2007, according to the Department of Labor, its largest advance since a 1.2% rise in September 2005. The index for energy was up 5.7%, led by a 9.5% rise in petroleum-based energy prices. The index for all items less food and energy increased 0.3% in November, following advances of 0.2% in each of the preceding five months. The overall CPI rose at an unadjusted rate of 2.3% over the previous 12 months. The U.S. gross domestic product ("GDP") grew at an annualized rate of 4.9% in the third quarter of 2007 up significantly from the 3.8% annualized growth rate for the second quarter of the year. According to the U.S. Department of Commerce, the increase in real GDP during the quarter resulted from positive contributions from exports, personal consumption expenditures, private inventory investment, nonresidential structures, federal government spending, equipment and software, and state and local government spending. A decrease in residential fixed investment (purchases of private residential structures and residential equipment that landlords rent to tenants) had a negative effect on the GDP. Additionally, there was an increase in imports, which are a subtraction in the calculation of the GDP. 2 PERFORMANCE OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) DECEMBER 31, 2007 (UNAUDITED) As the economy began to show signs of weakening during the year, the Federal Reserve ("Fed") started its series of easing monetary policy in September. Since then the Fed has reduced the fed funds rate at each Federal Open Market Committee ("FOMC") meeting, resulting in a 4.25% fed funds rate by year end. These were moves of 50 basis points (0.50%) for the September FOMC meeting followed by 25 basis points (0.25%) at each of the remaining two meetings of the year. In response to the events that caused the Fed to ease, the American Beacon Money Market Fund's weighted-average maturity was maintained around 30 days towards the end of the year. The primary strategy of the Fund for the year was to buy variable-rate securities, short-dated commercial paper and overnight investments. The strategies implemented during the year enabled the Fund to outperform its Lipper peer group. For the twelve months ended December 31, 2007, the total return of the Cash Management Class of the American Beacon Money Market Fund was 5.28%. The Fund outperformed the Lipper Institutional Money Market Average return of 4.98% by 30 basis points (0.30%). Based on annualized total returns, Lipper Inc. ranked the Cash Management Class of the Fund 41 among 382, 25 among 321 and 19 among 264 Institutional Money Market Funds for the one-year, three-year, and five-year periods ended December 31, 2007, respectively. (BAR CHART)
ANNUALIZED TOTAL RETURNS AS OF 12/31/2007 --------------------------- 1 YEAR 5 YEARS 10 YEARS ------ ------- -------- Cash Mgmt Class(1, 2, 5)......... 5.28% 3.17% 3.88% Institutional Class (1, 3, 5).... 5.24% 3.08% 3.83% PlanAhead Class (1, 5)........... 4.94% 2.80% 3.54% BBH Comset Class (1, 4, 5)....... 5.28% 3.17% 3.88%
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 represents the total returns achieved by the Institutional Class from 1/1/98 to 12/1/01, the inception date of the Cash Management Class, and the returns of the Cash Management Class thereafter. Expenses of the Cash Management Class are lower than those of the Institutional Class. Therefore, total returns shown are lower than they would have been had the Cash Management Class been in place since 1/1/98. 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 1/1/98 to 12/1/01, the total returns achieved by the Cash Management Class from 12/1/01 up to 4/2/07, the inception date of the BBH Comset Class, and the returns of the BBH Comset Class thereafter. Expenses of the BBH Comset Class are lower than those of the Institutional and Cash Management Classes through 12/31/03. Therefore, total returns shown through 12/31/03 are lower than they would have been had the BBH Comset Class been in place during that period. Expenses of the BBH Comset Class have been the same as those of the Cash Management Class since 1/1/04. 5. The total annual Fund operating expense 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) DECEMBER 31, 2007 (UNAUDITED) PORTFOLIO STATISTICS AS OF DECEMBER 31, 2007
CASH BBH MANAGEMENT INSTITUTIONAL PLANAHEAD COMSET CLASS CLASS CLASS CLASS ---------- ------------- --------- ------- 7-day Current Yield* 4.78% 4.75% 4.47% 4.78% 7-day Effective Yield* 4.89% 4.86% 4.57% 4.89% 30-day Yield* 4.78% 4.75% 4.47% 4.78% Weighted Avg. Maturity 26 Days 26 Days 26 Days 26 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 DECEMBER 31, 2007
% OF NET ASSETS** ------------ General Electric Capital Corp. 5.8% Royal Bank of Scotland plc 4.8% Bank of America 4.5% Deutsche Bank 4.5% Goldman Sachs 4.5% Lehman Brothers 4.5% Barclays Capital, Inc. 4.5% Citigroup 4.5% Societe Generale NA, Inc. 4.2% BNP Paribas 3.4%
** Percent of net assets of American Beacon Master Money Market Portfolio. ASSET ALLOCATION AS OF DECEMBER 31, 2007
% OF NET ASSETS** ------------ Corporate Notes 30.0% Bank CDs, TDs and Notes 22.2% Repurchase Agreements 19.4% Commercial Paper 18.4% S/T Investments 9.6% Liabilities, Net of Other Assets 0.4%
** Percent of net assets of American Beacon Master Money Market Portfolio. 4 PERFORMANCE OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) DECEMBER 31, 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 July 1, 2007 through December 31, 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 Account Account Expenses Paid Value Value During Period* 7/1/07 12/31/07 7/1/07-12/31/07 --------- --------- --------------- CASH MANAGEMENT CLASS Actual..................................... $1,000.00 $1,025.92 $0.77 Hypothetical (5% return before expenses)... $1,000.00 $1,024.45 $0.77 INSTITUTIONAL CLASS Actual..................................... $1,000.00 $1,025.75 $0.87 Hypothetical (5% return before expenses)... $1,000.00 $1,024.35 $0.87 PLANAHEAD CLASS Actual..................................... $1,000.00 $1,024.18 $2.50 Hypothetical (5% return before expenses)... $1,000.00 $1,022.74 $2.50 BBH COMSET CLASS Actual..................................... $1,000.00 $1,025.92 $0.77 Hypothetical (5% return before expenses)... $1,000.00 $1,024.45 $0.77
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.15%, 0.17%, 0.49% and 0.15% for the Cash Management, Institutional, PlanAhead, and BBHComSet Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period . 5 PERFORMANCE OVERVIEW AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM) DECEMBER 31, 2007 (UNAUDITED) As the economy began to show signs of weakening during the year, the Federal Reserve ("Fed") started its series of easing monetary policy in September. Since then the Fed has reduced the fed funds rate at each Federal Open Market Committee ("FOMC") meeting, resulting in a 4.25% fed funds rate by year end. These were moves of 50 basis points (0.50%) for the September FOMC meeting followed by 25 basis points (0.25%) at each of the remaining two meetings of the year. In response to the events that caused the Fed to ease, the American Beacon U.S. Government Money Market Fund's weighted-average maturity was maintained around 10 days towards the end of the year. The primary strategy of the Fund for the year was to buy variable-rate securities, short-dated fixed-rate securities and overnight investments. The strategies implemented during the year enabled the Fund to outperform its Lipper peer group. For the twelve months ended December 31, 2007, the total return of the Cash Management Class of the American Beacon U.S. Government Money Market Fund was 5.13%. The Fund outperformed the Lipper Institutional U.S. Government Money Market Average return of 4.86% by 27 basis points (0.27%). Based on annualized total returns, Lipper Inc. ranked the Cash Management Class of the Fund 8 among 163, 7 among 111 and 7 among 76 Institutional U.S. Government Money Market Funds for the one-year, five-year, and ten-year periods ended December 31, 2007, respectively. (BAR CHART)
ANNUALIZED TOTAL RETURNS AS OF 12/31/2007 --------------------------- 1 YEAR 5 YEARS 10 YEARS ------ ------- -------- Cash Management Class (1, 2, 4).. 5.13% 3.08% 3.79% PlanAhead Class (1, 3, 4)........ 4.65% 2.65% 3.39%
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 and PlanAhead 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 DECEMBER 31, 2007
CASH MANAGEMENT CLASS PLANAHEAD CLASS --------------------- --------------- 7-day Current Yield* 4.43% 4.06% 7-day Effective Yield* 4.53% 4.14% 30-day Yield* 4.41% 4.03% Weighted Avg. Maturity 11 Days 11 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) DECEMBER 31, 2007 (UNAUDITED) ASSET ALLOCATION AS OF DECEMBER 31, 2007
% OF NET ASSETS** ------------ Repurchase Agreements 81.0% Government Securities 18.9% 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 July 1, 2007 through December 31, 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 Account Account Expenses Paid Value Value During Period* 7/1/07 12/31/07 7/1/07-12/31/07 --------- --------- --------------- CASH MANAGEMENT CLASS Actual..................................... $1,000.00 $1,024.73 $0.77 Hypothetical (5% return before expenses)... $1,000.00 $1,024.45 $0.77 PLANAHEAD CLASS Actual..................................... $1,000.00 $1,022.51 $2.96 Hypothetical (5% return before expenses)... $1,000.00 $1,022.28 $2.96
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.15% and 0.58% for the Cash Management and PlanAhead Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. 7 AMERICAN BEACON FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Trustees of American Beacon Funds: We have audited the accompanying statements of assets and liabilities of American Beacon Funds, comprised of the American Beacon Money Market Fund and the American Beacon U.S. Government Money Market Fund (collectively, the "Funds") as of December 31, 2007, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon Funds as of December 31, 2007, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Dallas, Texas February 27, 2008 8 AMERICAN BEACON FUNDS STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2007 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
U.S. GOVERNMENT MONEY MARKET MONEY MARKET -------------- --------------- ASSETS: Investment in Portfolio, at value ............................ $ 2,345,276 $ 18,103 Receivable for fund shares sold .............................. 53 -- Receivable from Manager for expense reimbursement (Note 2) ... 117 2 Prepaid expenses ............................................. 23 19 -------------- ----------- TOTAL ASSETS .............................................. 2,345,469 18,124 -------------- ----------- LIABILITIES: Payable for fund shares redeemed ............................. 7 -- Dividends payable ............................................ 6,458 39 Administrative service and service fees payable (Note 2) ..... 172 1 Other liabilities ............................................ 56 23 -------------- ----------- TOTAL LIABILITIES ......................................... 6,693 63 -------------- ----------- NET ASSETS ................................................... $ 2,338,776 $ 18,061 ============== =========== ANALYSIS OF NET ASSETS: Paid-in-capital .............................................. 2,338,776 18,061 -------------- ----------- NET ASSETS ...................................................... $ 2,338,776 $ 18,061 ============== =========== SHARES OUTSTANDING (NO PAR VALUE): Cash Management Class ........................................ 349,248,723 16,432,346 ============== =========== Institutional Class .......................................... 450,661,969 N/A ============== =========== PlanAhead Class .............................................. 112,278,266 1,628,248 ============== =========== BBH ComSet Class ............................................. 1,426,587,073 N/A ============== =========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE: Cash Management Class ........................................ $ 1.00 $ 1.00 ============== =========== Institutional Class .......................................... $ 1.00 N/A ============== =========== PlanAhead Class .............................................. $ 1.00 $ 1.00 ============== =========== BBH ComSet Class ............................................. $ 1.00 N/A ============== ===========
See accompanying notes See accompanying Financial Statements of the American Beacon Master Portfolios 9 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS)
U.S. GOVERNMENT MONEY MARKET MONEY MARKET -------------- --------------- INVESTMENT INCOME ALLOCATED FROM PORTFOLIO: Interest income .............................................. $91,208 $ 533 Portfolio expenses ........................................... (1,839) (12) ------- ----- NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ............ 89,369 521 ------- ----- FUND EXPENSES: Administrative service fees (Note 2): Cash Management Class ..................................... 442 5 Institutional Class ....................................... 264 -- PlanAhead Class ........................................... 128 2 Platinum Class (Note 1) ................................... 80 10 BBH ComSet Class .......................................... 552 -- Transfer agent fees: Cash Management Class ..................................... 51 1 Institutional Class ....................................... 18 -- PlanAhead Class ........................................... 13 4 Platinum Class (Note 1) ................................... -- 1 BBH ComSet Class .......................................... 5 -- Professional fees ............................................ 29 14 Registration fees and expenses ............................... 114 29 Service fees - PlanAhead Class (Note 2) ...................... 319 5 Distribution fees - Platinum Class (Note 1) .................. 31 4 Prospectus and shareholder reports ........................... 41 -- Other expenses ............................................... 22 5 ------- ----- TOTAL FUND EXPENSES ....................................... 2,109 80 ------- ----- Less waiver and reimbursement of expenses (Note 2) .............. (776) (53) ------- ----- NET FUND EXPENSES ......................................... 1,333 27 ------- ----- NET INVESTMENT INCOME ........................................... 88,036 494 ------- ----- REALIZED GAIN ALLOCATED FROM PORTFOLIO: Net realized gain on investments ............................. 10 -- ------- ----- NET GAIN ON INVESTMENTS ................................... 10 -- ------- ----- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $88,046 $ 494 ------- -----
See accompanying notes See accompanying Financial Statements of the American Beacon Master Portfolios 10 AMERICAN BEACON FUNDS STATEMENTS OF CHANGES IN NET ASSETS DECEMBER 31, 2007 (IN THOUSANDS)
MONEY MARKET U.S. GOVERNMENT MONEY MARKET Year Ended December 31, Year Ended December 31, -------------------------- ---------------------------- 2007 2006 2007 2006 ------------ ----------- --------- -------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ........................... $ 88,036 $ 36,739 $ 494 $ 607 Net realized gain (loss) on investments ......... 10 1 -- -- ------------ ----------- --------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ 88,046 36,740 494 607 ------------ ----------- --------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Cash Management Class ........................ (32,696) (21,235) (334) (304) Institutional Class .......................... (13,567) (4,754) -- -- PlanAhead Class .............................. (6,183) (9,290) (94) (114) Platinum Class (Note 1) ...................... (543) (1,460) (66) (189) BBH ComSet Class ............................. (35,047) -- -- -- Net realized gain on investments: Cash Management Class ........................ (6) -- -- -- Institutional Class .......................... (3) -- -- -- PlanAhead Class .............................. (1) (1) -- -- Platinum Class (Note 1) ...................... -- -- -- -- BBH ComSet Class ............................. -- -- -- -- ------------ ----------- --------- -------- DISTRIBUTIONS TO SHAREHOLDERS ............. (88,046) (36,740) (494) (607) ------------ ----------- --------- -------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares ................... 11,962,330 5,755,911 145,717 39,131 Reinvestment of dividends and distributions ..... 44,661 32,640 157 225 Cost of shares redeemed ......................... (10,878,697) (5,091,891) (137,451) (58,084) ------------ ----------- --------- -------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ................ 1,128,294 696,660 8,423 (18,728) ------------ ----------- --------- -------- NET INCREASE (DECREASE) IN NET ASSETS .............. 1,128,294 696,660 8,423 (18,728) ------------ ----------- --------- -------- NET ASSETS: Beginning of period ............................. 1,210,482 513,822 9,638 28,366 ------------ ----------- --------- -------- END OF PERIOD ................................... $ 2,338,776 $ 1,210,482 $ 18,061 $ 9,638 ============ =========== ========= ========
See accompanying notes See accompanying Financial Statements of the American Beacon Master Portfolios 11 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 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 (17.8% and 1.3% at December 31, 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 investment of $10 million for Administrative Service Fee - 0.07% Money Market and $2 million for U.S. Government Money Market, or investors investing through an intermediary INSTITUTIONAL CLASS Investors making an initial investment of $2 million Administrative Service Fee - 0.10% PLANAHEAD CLASS General public and investors investing through an intermediary Administrative Service Fee - 0.10% Service Fee - 0.25% BBH COMSET Investors making an initial investment of at least $10 million Administrative Service Fee - 0.08% 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. 12 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 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 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. As of December 31, 2007, the Manager does not believe the adoption of FAS 157 will materially impact the amounts represented in the financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value. Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust's maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement. 2. TRANSACTIONS WITH AFFILIATES Administrative Services Agreement As compensation for providing administrative services to the Funds, the Manager receives an annualized fee of 0.10% of the average daily net assets of each of the Institutional and PlanAhead Classes of the Funds, 0.08% of the average daily net assets of the BBH Class of the Money Market Fund and 0.07% of the Cash Management Class of the Funds. 13 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 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%** $ 97,463 Money Market Fund........................... Cash Management 0.15% 253,808 U.S. Government Money Market Fund........... Cash Management 0.15%* 5,778 U.S. Government Money Market Fund........... PlanAhead 0.65% 1,799
* 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 $417,784 to the BBH ComSet Class of the Money Market Fund during the year ended December 31, 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 table below excludes amounts previously reimbursed to the Platinum Classes of the Funds. The following waived fees or reimbursed expenses are subject to potential recovery expiring in:
U.S. GOVERNMENT YEAR MONEY MARKET MONEY MARKET - ---- ------------ --------------- 2008........................................ 293,487 54,846 2009........................................ 260,591 65,678 2010........................................ 769,055 7,577
The Funds have not recorded a liability for this potential reimbursement due to the current assessment that a reimbursement is unlikely. 14 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 3. FEDERAL INCOME TAXES It is the policy of the Funds to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income or excise tax provision is required. The Funds adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainties in Income Taxes" ("FIN 48"), on January 1, 2007. FIN 48 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The implementation of FIN 48 did not result in any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the three year period ended December 31, 2007, remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in "Other expenses" on the Statements of Operations. Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. generally accepted accounting principles. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. The tax character of distributions paid for the years ended December 31, 2007 and December 31, 2006 were as follows (in thousands):
MONEY MARKET U.S. GOVERNMENT MONEY MARKET --------------------------- --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2007 2006 2007 2006 ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID FROM ORDINARY INCOME:* Cash Management Class.................... $32,702 $21,235 $334 $304 Institutional Class...................... 13,570 4,754 -- -- PlanAhead Class.......................... 6,184 9,291 94 114 Platinum Class........................... 543 1,460 66 189 BBH ComSet Class......................... 35,047 -- -- -- ------- ------- ---- ---- TOTAL DISTRIBUTIONS PAID.................... $88,046 $36,740 $494 $607 ======= ======= ==== ====
* For tax purposes short-term capital gains distributions are considered ordinary income distributions. As of December 31, 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 December 31, 2007. 4. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares for each class of the Funds (in thousands). Each share is valued at $1.00: Year Ended December 31, 2007
Cash Management Institutional PlanAhead Platinum Class Class Class Class ---------- ------------- --------- -------- Money Market Fund Shares sold ................................. 4,891,367 1,043,210 631,312 14,014 Reinvestment of dividends ................... 28,101 12,166 3,889 502 Share redeemed .............................. (5,072,125) (1,109,117) (693,440) (48,172) ---------- ---------- -------- ------- Net (decrease) in shares outstanding ........ (152,657) (53,741) (58,239) (33,656) ========== ========== ======== =======
15 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007
BBH ComSet Class ---------------- Money Market Fund Shares sold ...................................... 5,382,427 Reinvestment of dividends ........................ 3 Shares redeemed .................................. (3,955,843) ---------- Net increase in shares outstanding ............... 1,426,587 ==========
Cash Management PlanAhead Platinum Class Class Class ---------- --------- -------- U.S. Government Money Market Fund Shares sold ...................................... 132,887 8,531 4,299 Reinvestment of dividends ........................ 81 14 62 Shares redeemed .................................. (120,104) (8,974) (8,373) -------- -------- ------- Net increase (decrease) in shares outstanding .... 12,864 (429) (4,012) ======== ======== =======
Year Ended December 31, 2006
Cash Management Institutional PlanAhead Platinum Class Class Class Class ---------- ------------- --------- -------- Money Market Fund Shares sold ...................................... 3,868,924 1,325,652 515,550 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 (66,386) (6,832) ========== ========= ======== =======
Cash Management PlanAhead Platinum Class Class Class ---------- --------- -------- U.S. Government Money Market Fund Shares sold ...................................... 20,647 8,290 10,194 Reinvestment of dividends ........................ 0 36 189 Shares redeemed .................................. (39,597) (8,201) (10,286) ------- ------ ------- Net increase (decrease) in shares outstanding .... (18,950) 125 97 ======= ====== =======
16 AMERICAN BEACON MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
Cash Management Class Year Ended December 31, ---------------------------------------------------- 2007 2006 2005 2004 2003 -------- -------- -------- -------- -------- Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income(A) ................................. 0.05 0.05 0.03 0.01 0.01 Net realized gain on investments(B) ...................... -- -- -- -- -- -------- -------- -------- -------- -------- Total income from investment operations ..................... 0.05 0.05 0.03 0.01 0.01 -------- -------- -------- -------- -------- Less distributions: Dividends from net investment income ..................... (0.05) (0.05) (0.03) (0.01) (0.01) Distributions from net realized gains on investments(B) .. -- -- -- -- -- -------- -------- -------- -------- -------- Total distributions ......................................... (0.05) (0.05) (0.03) (0.01) (0.01) -------- -------- -------- -------- -------- Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total return ................................................ 5.28% 5.05% 3.19% 1.30% 1.08% ======== ======== ======== ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands) ................. $349,249 $501,905 $200,010 $434,587 $117,395 Ratios to average net assets (annualized):(A) Expenses, net of waivers .............................. 0.15% 0.15% 0.15% 0.15% 0.16% Expenses, before waivers .............................. 0.19% 0.20% 0.23% 0.23% 0.24% Net investment income, net of waivers ................. 5.18% 5.04% 3.08% 1.34% 1.03% Net investment income, before waivers ................. 5.14% 4.99% 3.00% 1.26% 0.95%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon Master Money Market Portfolio. (B) Amount is less than $0.01 per share. 17 AMERICAN BEACON MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
Institutional Class Year Ended December 31, -------------------------------------------------- 2007 2006 2005 2004 2003 -------- -------- ------- ------- -------- Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- ------- ------- -------- Income from investment operations: Net investment income(A) ................................. 0.05 0.05 0.03 0.01 0.01 Net realized gain on investments(B) ...................... -- -- -- -- -- -------- -------- ------- ------- -------- Total income from investment operations ..................... 0.05 0.05 0.03 0.01 0.01 -------- -------- ------- ------- -------- Less distributions: Dividends from net investment income ..................... (0.05) (0.05) (0.03) (0.01) (0.01) Distributions from net realized gains on investments(B) .. -- -- -- -- -- -------- -------- ------- ------- -------- Total distributions ......................................... (0.05) (0.05) (0.03) (0.01) (0.01) -------- -------- ------- ------- -------- Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======= ======= ======== Total return ................................................ 5.24% 4.99% 3.06% 1.20% 0.97% ======== ======== ======= ======= ======== Ratios and supplemental data: Net assets, end of period (in thousands) ................. $450,662 $504,403 $36,421 $34,146 $159,092 Ratios to average net assets (annualized):(A) Expenses, net of waivers .............................. 0.18% 0.19% 0.28% 0.24% 0.27% Expenses, before waivers .............................. 0.22% 0.23% 0.28% 0.24% 0.27% Net investment income, net of waivers ................. 5.13% 5.06% 3.07% 1.05% 1.00% Net investment income, before waivers ................. 5.10% 5.02% 3.07% 1.05% 1.00%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon Master Money Market Portfolio. (B) Amount is less than $0.01 per share. 18 AMERICAN BEACON MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
PlanAhead Class Year Ended December 31, ---------------------------------------------------- 2007 2006 2005 2004 2003 -------- -------- -------- -------- -------- Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income(A) ................................. 0 .05 0 .05 0 .03 0 .01 0 .01 Net realized gain on investments(B) ...................... -- -- -- -- -- -------- -------- -------- -------- -------- Total income from investment operations ..................... 0.05 0.05 0.03 0.01 0.01 -------- -------- -------- -------- -------- Less distributions: Dividends from net investment income ..................... (0.05) (0.05) (0.03) (0.01) (0.01) Distributions from net realized gains on investments(B) .. -- -- -- -- -- -------- -------- -------- -------- -------- Total distributions ......................................... (0.05) (0.05) (0.03) (0.01) (0.01) -------- -------- -------- -------- -------- Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total return ................................................ 4.94% 4.69% 2.82% 0.93% 0.70% ======== ======== ======== ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands) ................. $112,278 $170,518 $236,903 $132,438 $126,972 Ratios to average net assets (annualized):(A) Expenses, net of waivers .............................. 0.47% 0.49% 0.51% 0.51% 0.54% Expenses, before waivers .............................. 0.47% 0.49% 0.51% 0.51% 0.54% Net investment income, net of waivers ................. 4.85% 4.59% 2.83% 0.94% 0.71% Net investment income, before waivers ................. 4.84% 4.59% 2.83% 0.94% 0.71%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon Master Money Market Portfolio. (B) Amount is less than $0.01 per share. 19 AMERICAN BEACON MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
BBH ComSet Class April 2 to December 31, 2007 ------------ Net asset value, beginning of period ........................ $ 1.00 ---------- Income from investment operations: Net investment income(A) ................................. 0 .04 Net realized gain on investments(B) ...................... -- ---------- Total income from investment operations ..................... 0.04 ---------- Less distributions: Dividends from net investment income ..................... (0.04) Distributions from net realized gains on investments(B) .. -- ---------- Total distributions ......................................... (0.04) ---------- Net asset value, end of period .............................. $ 1.00 ========== Total return ................................................ 3.92%(C) ========== Ratios and supplemental data: Net assets, end of period (in thousands) ................. $1,426,587 Ratios to average net assets (annualized):(A) Expenses, net of waivers .............................. 0.15% Expenses, before waivers .............................. 0.21% Net investment income, net of waivers ................. 5.10% Net investment income, before waivers ................. 5.03%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon Master Money Market Portfolio. (B) Amount is less than $0.01 per share. (C) Not annualized. 20 AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
Cash Management Class Year Ended December 31, ---------------------------------------------- 2007 2006 2005 2004 2003 ------- ------ ------- ------- ------- Net asset value, beginning of period ........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------ ------- ------- ------- Income from investment operations: Net investment income(A) ................................. 0.05 0.05 0.03 0.01 0.01 Net realized gain on investments(B) ...................... -- -- -- -- -- ------- ------ ------- ------- ------- Total income from investment operations ..................... 0.05 0.05 0.03 0.01 0.01 ------- ------ ------- ------- ------- Less distributions: Dividends from net investment income ..................... (0.05) (0.05) (0.03) (0.01) (0.01) Distributions from net realized gains on investments(B) .. -- -- -- -- -- ------- ------ ------- ------- ------- Total distributions ......................................... (0.05) (0.05) (0.03) (0.01) (0.01) ------- ------ ------- ------- ------- Net asset value, end of period .............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ====== ======= ======= ======= Total return ................................................ 5.13% 4.97% 3.12% 1.22% 1.04% ======= ====== ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands) ................. $16,433 $3,568 $22,518 $28,591 $22,060 Ratios to average net assets (annualized):(A) Expenses, net of waivers .............................. 0.15% 0.19% 0.19% 0.19% 0.19% Expenses, before waivers .............................. 0.60% 0.64% 0.38% 0.29% 0.37% Net investment income, net of waivers ................. 4.87% 4.60% 2.99% 1.21% 1.04% Net investment income, before waivers ................. 4.42% 4.16% 2.80% 1.11% 0.86%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon U.S. Government Master Money Market Portfolio. (B) Amount is less than $0.01 per share. 21 AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
PlanAhead Class Year Ended December 31, --------------------------------------------- 2007 2006 2005 2004 2003 ------ ------ ------ ------ ------- Net asset value, beginning of period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------- Income from investment operations: Net investment income(A) .............................. 0.05 0.04 0.03 0.00(B) 0 .01 Net realized gain on investments(B) ...................... -- -- -- -- -- ------ ------ ------ ------ ------- Total income from investment operations .................. 0.05 0.04 0.03 -- 0.01 ------ ------ ------ ------ ------- Less distributions: Dividends from net investment income .................. (0.05) (0.04) (0.03) 0.00(B) (0.01) Distributions from net realized gains on investments(B) .. -- -- -- -- -- ------ ------ ------ ------ ------- Total distributions ...................................... (0.05) (0.04) (0.03) -- (0.01) ------ ------ ------ ------ ------- Net asset value, end of period ........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ======= Total return ............................................. 4.65% 4.51% 2.71% 0.85% 0.61% ====== ====== ====== ====== ======= Ratios and supplemental data: Net assets, end of period (in thousands) .............. $1,628 $2,058 $1,933 $5,370 $26,785 Ratios to average net assets (annualized):(A) Expenses, net of waivers ........................... 0.61% 0.63% 0.58% 0.56% 0.58% Expenses, before waivers ........................... 1.20% 1.02% 0.61% 0.57% 0.62% Net investment income, net of waivers .............. 4.56% 4.39% 2.47% 0.68% 0.72% Net investment income, before waivers .............. 3.97% 4.00% 2.44% 0.67% 0.68%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the American Beacon U.S. Government Master Money Market Portfolio. (B) Amount is less than $0.01 per share. 22 AMERICAN BEACON MASTER TRUST REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Trustees of American Beacon Master Trust: We have audited the accompanying statements of assets and liabilities of American Beacon Master Trust, comprised of the American Beacon Money Market Portfolio and the American Beacon U.S. Government Money Market Portfolio (collectively, the "Portfolios"), including the schedules of investments, as of December 31, 2007, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Portfolios' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Portfolios' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolios' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2007, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon Master Trust as of December 31, 2007, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Dallas, Texas February 27, 2008 23 AMERICAN BEACON MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS DECEMBER 31, 2007
PAR AMOUNT VALUE ------------ ----------- (DOLLARS IN THOUSANDS) MEDIUM-TERM NOTES - 26.60% ABN Amro Bank NV, 5.259%, Due 4/18/2008 ++# ................ $ 132,050 $ 132,081 American Honda Finance Corp., 5.171%, Due 1/23/2008 ++# ............................... 40,000 40,001 5.075%, Due 2/22/2008 ++# ............................... 33,200 33,204 4.866%, Due 5/9/2008 ++# ................................ 15,000 15,000 ASIF Global Financing XXI, 5.408%, Due 3/14/2008 ++ # ...... 32,650 32,674 ASIF Global Financing XXXII, 5.08%, Due 2/25/2008 ++ # ..... 206,600 206,626 Bank of America Corp., 5.308%, Due 5/5/2008 ++ ............. 32,000 32,050 Bank of New York Mellon Corp., 4.966%, Due 6/16/2008 ++ .... 17,645 17,645 Bank of Scotland plc, 5.214%, Due 7/17/2008 ++ # ........... 125,800 125,818 Berkshire Hathaway Finance Corp., 5.299%, Due 1/11/2008 ++ ................................ 131,885 131,888 4.938%, Due 5/16/2008 ++ ................................ 23,750 23,760 Citigroup, Inc., 4.944%, Due 5/2/2008 ++ ................... 199,700 199,755 Commonwealth Bank of Australia, 4.96%, Due 1/31/2008 ++ # .. 175,000 175,005 Credit Suisse USA, Inc., 5.234%, Due 6/2/2008 ++ ........... 27,303 27,319 General Electric Capital Corp., 5.29%, Due 1/3/2008 ++ .................................. 211,500 211,501 5.293%, Due 1/15/2008 ++ ................................ 324,455 324,466 5.171%, Due 3/4/2008 ++ ................................. 40,886 40,891 5.303%, Due 4/15/2008 ++ ................................ 65,000 65,018 4.955%, Due 5/19/2008 ++ ................................ 20,000 20,007 HSBC Finance Corp., 4.982%, Due 5/21/2008 ++ ............... 162,770 162,784 JPMorgan Chase & Co., 5.154%, Due 1/25/2008 ++ ............. 295,000 295,016 Merrill Lynch & Co., Inc., 4.90%, Due 2/14/2008 ++ ................................. 61,300 61,305 5.091%, Due 6/16/2008 ++ ................................ 93,350 93,404 Morgan Stanley, 5.334%, Due 1/18/2008 ++ ................... 68,900 68,905 Royal Bank of Scotland plc, 5.259%, Due 4/11/2008 ++# ............................... 435,500 435,549 5.19%, Due 4/21/2008 ++ # ............................... 50,000 50,006 4.942%, Due 8/20/2008 ++ # .............................. 150,000 150,000 Toyota Motor Credit Corp., 5.233%, Due 4/15/2008 ++ ................................ 100,000 100,008 4.961%, Due 6/17/2008 ++ ................................ 24,000 24,002 5.213%, Due 7/7/2008 ++ ................................. 60,500 60,504 Wells Fargo & Co., 5.108%, Due 8/20/2008 ++ ................ 150,000 150,000 ----------- TOTAL MEDIUM-TERM NOTES .................................... 3,506,192 ----------- PROMISSORY NOTES - 3.41% Goldman Sachs Group, Inc., 4.889%, Due 5/9/2008 ++ ......... 450,000 450,000 ----------- CERTIFICATES OF DEPOSIT AND BANK NOTES - 19.14% Bank of America, NA, 5.084%, Due 7/25/2008 ++ .............. 18,300 18,303
See accompanying notes 24 AMERICAN BEACON MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS DECEMBER 31, 2007
PAR AMOUNT VALUE ------------ ----------- (DOLLARS IN THOUSANDS) Bank of Scotland N.Y., 5.05%, Due 3/14/2008 ................ $ 155,600 $ 155,638 BNP Paribas N.Y., 5.00%, Due 3/13/2008 .................................... 200,000 200,000 5.11%, Due 3/13/2008 .................................... 50,000 50,011 5.00%, Due 3/17/2008 .................................... 100,000 100,000 4.93%, Due 3/27/2008 .................................... 100,000 100,000 Credit Suisse N.Y., 5.00%, Due 2/26/2008 ++ ................ 250,000 250,000 Deutsche Bank N.Y., 4.941%, Due 6/19/2008 ++ ............... 280,000 280,040 HSBC Bank USA, 5.061%, Due 7/28/2008 ++ .................... 71,000 71,033 M&I Marshall & Ilsley Bank, 4.839%, Due 2/15/2008 ++ ....... 196,500 196,501 Nordea Bank Finland N.Y., 4.991%, Due 5/28/2008 ++ ......... 21,600 21,596 Royal Bank of Canada N.Y., 4.896%, Due 3/20/2008 ++ ........ 10,000 10,000 Societe Generale N.Y., 5.00%, Due 3/7/2008 ..................................... 250,000 250,000 4.68%, Due 3/28/2008 .................................... 200,000 200,000 Suntrust Bank, 5.309%, Due 4/2/2008 ++ ..................... 53,020 53,035 Toronto Dominion Bank N.Y., 4.66%, Due 3/28/2008 ........... 250,000 249,999 US Bank, NA, 5.20%, Due 1/3/2008 ++ ........................ 221,500 221,500 Wachovia Bank, NA, 4.976%, Due 6/20/2008 ++ ................ 50,000 50,020 Westpac Bank N.Y., 5.203%, Due 1/15/2008 ++ ................ 46,000 46,000 ----------- TOTAL CERTIFICATES OF DEPOSIT AND BANK NOTES ............... 2,523,676 ----------- COMMERCIAL PAPER - 18.39% Ciesco LLC, 4.92%, Due 1/28/2008 # ......................... 225,000 224,170 Danske Corp., 4.64%, Due 1/31/2008 # ....................... 100,000 99,613 Edison Asset Securitization LLC, 4.84%, Due 2/20/2008 # .... 150,000 148,992 General Electric Capital Corp., 4.83%, Due 2/15/2008 ....... 100,000 99,396 GOVCO, Inc., 4.73%, Due 1/22/2008 # .................................. 100,000 99,724 4.73%, Due 1/23/2008 # .................................. 150,000 149,566 ING US Funding LLC, 4.64%, Due 1/23/2008 .................................... 11,950 11,916 4.89%, Due 1/25/2008 .................................... 35,000 34,886 4.83%, Due 1/28/2008 .................................... 150,000 149,455 Jupiter Securitization, LLC, 5.80%, Due 1/18/2008 # .................................. 55,000 54,849 5.20%, Due 1/22/2008 # .................................. 119,615 119,252 Kitty Hawk Funding Corp., 4.84%, Due 1/18/2008 # .................................. 24,258 24,203 4.78%, Due 1/28/2008 # .................................. 72,628 72,368 Long Lane Master Trust IV, 4.97%, Due 1/22/2008 # .................................. 120,000 119,659 4.78%, Due 1/24/2008 # .................................. 27,000 26,918 5.60%, Due 1/25/2008 # .................................. 110,787 110,402 4.78%, Due 1/28/2008 # .................................. 10,297 10,260
See accompanying notes 25 AMERICAN BEACON MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS DECEMBER 31, 2007
PAR AMOUNT VALUE ------------ ----------- (DOLLARS IN THOUSANDS) Societe Generate NA, Inc., 4.745%, Due 1/29/2008 ........... $ 100,000 $ 99,631 Three Rivers Funding Corp., 5.00%, Due 1/2/2008 # .......... 450,000 449,937 Toyota Motor Credit Corp., 4.76%, Due 2/22/2008 ............ 200,000 198,625 UBS Finance Delaware LLC, 4.77%, Due 1/24/2008 ............. 53,500 53,337 Variable Funding Capital Corp., 5.35%, Due 1/17/2008 # .................................. 17,606 17,564 5.35%, Due 1/18/2008 # .................................. 50,000 49,874 ----------- TOTAL COMMERCIAL PAPER ..................................... 2,424,597 ----------- TIME DEPOSITS - 3.03% Danske Bank, 5.00%, Due 1/2/2008 ........................... 400,000 400,000 -----------
SHARES ------------ SHORT TERM INVESTMENTS - 9.64% BlackRock Temp Fund ........................................ 630,638,084 630,638 Dreyfus Institutional Cash Advantage Fund .................. 640,000,000 640,000 ----------- TOTAL SHORT TERM INVESTMENTS ............................... 1,270,638 -----------
PAR AMOUNT ------------ REPURCHASE AGREEMENTS - 19.42% Bank of America, NA, 4.68%, Due 1 /2/2008 (Held at Bank of New York, Collateralized by Mortgage Loan Obligations valued at $577,800, 2/23/2036) .......................... $ 540,000 540,000 Barclays Bank plc, 4.65%, Due 1/2/2008 (Held at Bank of New York, Collateralized by Equity Securities valued at $619,500, 1/1/2049) ..................................... 590,000 590,000 Citigroup, Inc., 4.68%, Due 1/2/2008 (Held at Chase NYC, Collateralized by Mortgage Loan Obligations valued at $433,771, 2/28/2037 - 11/29/2037) ....................... 390,000 390,000 Deutsche Bank Securities, Inc., 4.68%, Due 1/2/2008 (Held at Bank of New York, Collateralized by Equity Securities valued at $325,500, 1/1/2049) ........................... 310,000 310,000 Goldman Sachs Group, Inc., 4.75%, Due 1 /2/2008 (Held at Bank of New York, Collateralized by Mortgage Loan Obligations valued at $144,200, 1/1/2010 - 1/1/2020) .... 140,000 140,000 Lehman Brothers, Inc., 4.70%, Due 1 /2/2008 (Held at Chase NYC, Collateralized by Corporate Obligations valued at $55,611, 5.125% - 6.75%, 9/13/2016 - 7/15/2027 and U.S. Government Agency Obligations valued at $546,108, 5.5% - 6.5%, 11/1/2036 -9/1/2037) .............................. 590,000 590,000 ----------- TOTAL REPURCHASE AGREEMENTS ................................ 2,560,000 ----------- TOTAL INVESTMENTS - 99.63% (COST $13,135,103) ................. $13,135,103 OTHER ASSETS, NET OF LIABILITIES - 0.37% ...................... 48,896 ----------- TOTAL NET ASSETS - 100.00% .................................... $13,183,999 ===========
See accompanying notes 26 AMERICAN BEACON MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS DECEMBER 31, 2007 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 $3,173,315 or 24.07% of net assets. The Fund has no right to demand registration of these securities. See accompanying notes 27 AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS DECEMBER 31, 2007
PAR AMOUNT VALUE ------------ ----------- (DOLLARS IN THOUSANDS) U.S. AGENCY OBLIGATIONS - 18.88% FEDERAL HOME LOAN BANK - 8.84% 4.56%, Due 3/17/2008 .................................... $ 7,500 $ 7,428 4.27%, Due 3/26/2008 .................................... 20,000 19,798 4.775%, Due 8/15/2008 ++ ................................ 35,000 35,014 4.841%, Due 9/17/2008 ++ ................................ 25,000 24,992 5.074%, Due 1/5/2009 ++ ................................. 35,000 34,998 ----------- 122,230 ----------- FEDERAL HOME LOAN MORTGAGE CORPORATION - 5.94% 4.25%, Due 1/28/2008 .................................... 29,000 28,907 4.29%, Due 3/24/2008 .................................... 18,382 18,200 4.55%, Due 4/7/2008 ..................................... 10,072 9,948 4.767%, Due 2/11/2009 ++ ................................ 25,000 24,994 ----------- 82,049 ----------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.10% 4.45%, Due 2/6/2008 ..................................... 17,736 17,657 4.27%, Due 3/19/2008 .................................... 15,085 14,946 4.28%, Due 3/26/2008 .................................... 20,044 19,842 4.47%, Due 4/9/2008 ..................................... 4,199 4,147 ----------- 56,592 ----------- TOTAL U.S. AGENCY OBLIGATIONS .............................. 260,871 ----------- REPURCHASE AGREEMENTS - 81.06% Banc of America Securities LLC, 4.62%, Due 1/2/2008 (Held at Bank New York, Collateralized by U.S. Government Agency Obligations valued at $408,000, 5.0%, 6/1/2035) ......... 400,000 400,000 Barclays Capital, Inc., 4.65%, Due 1/2/2008 (Held at Bank of New York, Collateralized by U.S. Government Agency Obligations valued at $306,000, 4.5% - 6.0%, 1/1/2018 - 5/1/2047) ............................................... 300,000 300,000 Goldman Sachs, 4.75%, Due 1/2/2008 (Held at Bank of New York, Collateralized by U.S. Government Agency Obligations valued at $428,682, 4.5% - 7.0%, 7/1/2010 - 12/1/2037) .............................................. 420,276 420,276 ----------- TOTAL REPURCHASE AGREEMENTS ................................ 1,120,276 ----------- TOTAL INVESTMENTS - 99.94% (COST $1,381,147) .................. $ 1,381,147 OTHER ASSETS, NET OF LIABILITIES - 0.06% ...................... 837 ----------- TOTAL NET ASSETS - 100.00% .................................... $ 1,381,984 ===========
Percentages are stated as a percent of net assets. ++ The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the final maturity date. See accompanying notes 28 AMERICAN BEACON MASTER TRUST PORTFOLIOS STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2007 (IN THOUSANDS)
U.S. GOVERNMENT MONEY MARKET MONEY MARKET ------------ --------------- ASSETS: Investment in securities at value (cost - $10,575,103 and $260,871, respectively)........................................................... $10,575,103 $ 260,871 Repurchase agreement (cost - $2,560,000 and $1,120,276, respectively)... 2,560,000 1,120,276 Dividends and interest receivable....................................... 50,408 1,008 Prepaid expenses........................................................ 8 -- ----------- ---------- TOTAL ASSETS......................................................... 13,185,519 1,382,155 ----------- ---------- LIABILITIES: Management and investment advisory fees payable (Note 2)................ 1,302 107 Other liabilities....................................................... 218 64 ----------- ---------- TOTAL LIABILITIES.................................................... 1,520 171 ----------- ---------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS................... $13,183,999 $1,381,984 =========== ==========
See accompanying notes 29 AMERICAN BEACON MASTER TRUST PORTFOLIOS STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2007 (IN THOUSANDS)
U.S. Government Money Market Money Market ------------ --------------- INVESTMENT INCOME: Interest income..................................... $841,750 $48,251 -------- ------- TOTAL INVESTMENT INCOME.......................... 841,750 48,251 -------- ------- EXPENSES: Management and investment advisory fees (Note 2).... 15,926 947 Custodian fees...................................... 443 27 Professional fees................................... 177 43 Other expenses...................................... 381 31 -------- ------- TOTAL EXPENSES................................... 16,927 1,048 -------- ------- NET INVESTMENT INCOME.................................. 824,823 47,203 -------- ------- REALIZED GAIN ON INVESTMENTS: Net realized gain on investments.................... 127 3 -------- ------- NET GAIN ON INVESTMENTS.......................... 127 3 -------- ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $824,950 $47,206 ======== =======
See accompanying notes 30 AMERICAN BEACON MASTER TRUST PORTFOLIOS STATEMENT OF CHANGES IN NET ASSETS (IN THOUSANDS)
U.S. GOVERNMENT MONEY MARKET MONEY MARKET Year Ended December 31, Year Ended December 31, ---------------------------- ------------------------- 2007 2006 2007 2006 ------------ ------------- ----------- ----------- INCREASE IN NET ASSETS: OPERATIONS: Net investment income....................... $ 824,823 $ 530,893 $ 47,203 $ 17,197 Net realized gain on investments............ 127 12 3 1 ------------ ------------- ----------- ----------- TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... 824,950 530,905 47,206 17,198 ------------ ------------- ----------- ----------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Contributions............................... 35,059,358 131,682,048 5,041,893 3,002,184 Withdrawals................................. (35,428,478) (126,270,825) (4,270,511) (2,695,546) ------------ ------------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS....... (369,120) 5,411,223 771,382 306,638 ------------ ------------- ----------- ----------- NET INCREASE IN NET ASSETS............... 455,830 5,942,128 818,588 323,836 ------------ ------------- ----------- ----------- NET ASSETS: Beginning of period......................... 12,728,169 6,786,041 563,396 239,560 ------------ ------------- ----------- ----------- END OF PERIOD............................... $ 13,183,999 $ 12,728,169 $ 1,381,984 $ 563,396 ============ ============= =========== ===========
See accompanying notes 31 AMERICAN BEACON MASTER TRUST PORTFOLIOS FINANCIAL HIGHLIGHTS
Money Market Year Ended December 31, -------------------------------- 2007 2006 2005 2004 2003 ---- ---- ---- ---- ---- Total return................................. 5.33% 5.09% 3.25% 1.34% 1.13% Ratios to average net assets (annualized):... Expenses.................................. 0.11% 0.11% 0.11% 0.11% 0.11% Net investment income..................... 5.19% 5.03% 3.20% 1.30% 1.14%
U.S. Government Money Market Year Ended December 31, -------------------------------- 2007 2006 2005 2004 2003 ---- ---- ---- ---- ---- Total return................................. 5.18% 5.04% 3.19% 1.30% 1.11% Ratios to average net assets (annualized):... Expenses.................................. 0.11% 0.12% 0.12% 0.11% 0.12% Net investment income..................... 4.98% 4.97% 3.15% 1.30% 1.13%
32 AMERICAN BEACON MASTER TRUST NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 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 government securities for the Portfolios. Additionally, repurchase agreements in the Money Market Portfolio may be collateralized by non-government securities. All collateral is valued at cost, which approximates market value and is held at the custodian bank. The collateral is monitored daily by the Manager so that the collateral's market value exceeds the carrying value of the repurchase agreement plus accrued interest. 33 AMERICAN BEACON MASTER TRUST NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 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 Portfolios' tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. The Portfolios file tax returns with the U.S. Internal Revenue Service. Generally, the tax authorities can examine all tax returns filed for the last three years. The Portfolios may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns on income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation, as applicable, as the income is earned or capital gains are recorded. If applicable, the Portfolios recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in "Other expenses" on the Statements of Operations. The Portfolios adopted the provisions of FIN 48 effective January 1, 2007. Tax positions taken by the Portfolios have been deemed to 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. As of December 31, 2007, the Manager does not believe the adoption of FAS 157 will materially impact the amounts represented in the financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value. 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 34 AMERICAN BEACON MASTER TRUST NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 the duties required under the Management Agreement, the Manager receives from the Portfolios 0.10% of the average daily net assets of each of the Portfolios. Interfund Lending Program Pursuant to an exemptive order by the Securities and Exchange Commission, the Portfolios, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Money Market Portfolio to lend money to other participating series managed by the Manager. For the year ended December 31, 2007, the Money Market Portfolio earned $8,708 under the credit facility. This amount is included in interest income on the financial statements. 35 AMERICAN BEACON FUNDS PRIVACY POLICY & FEDERAL TAX INFORMATION DECEMBER 31, 2007 (UNAUDITED) PRIVACY POLICY The American Beacon Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used. We may collect nonpublic personal information about you from one or more of the following sources: - information we receive from you on applications or other forms; - information about your transactions with us or our service providers; and - information we receive from third parties. We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards. FEDERAL TAX INFORMATION We are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those in other areas of this report because of differences between tax and financial reporting requirements. The distributions to shareholders during the tax year ended December 31, 2007 include short-term capital gains of $9,550 and $24 for the Money Market Fund and U.S. Government Money Market Fund, respectively. We are required by Internal Revenue Code to advise you within 60 days of the Funds' fiscal year end as to the federal tax status of dividends paid by the Funds during its fiscal year ended December 31, 2007. For purposes of preparing your annual federal income tax returns, you should report the amounts reflected on your Form 1099-DIV, Box 1a. Of the ordinary dividends paid, the percentage of income exempt from federal income taxes is 0% for both the Money Market Fund and the U.S. Government Money Market Fund. Of the ordinary dividends paid to shareholders of the U.S. Government Money Market Fund during the tax year ended December 31, 2007, 8.1% were derived from U.S. Treasury Obligations. Pursuant to Section 852 of the Internal Revenue Code, the Money Market Fund designated $621 as long-term capital gain dividends for the taxable year ended December 31, 2007. 36 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED) The Trustees and officers of the American Beacon Funds (the "Trust") are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-seven funds in the fund complex that includes the Trust, the American Beacon Master Trust, the American Beacon Mileage Funds, and the American Beacon Select Funds. The Trust's Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS - --------------------- --------------------- --------------------------------------------------------- INTERESTED TRUSTEES Term Lifetime of Trust until removal, resignation or retirement* Douglas G. Herring** (50) Trustee since 2006 President (2006-Present) and CEO (2008-Present), American Executive Vice Beacon Advisors, Inc.; Vice President and Controller, President from American Airlines, Inc. (1998-2006); Chairman 2006 to 2007 (2003-Present) and Director (1995-Present), American President since 2007 Airlines Federal Credit Union; Trustee, American Beacon Mileage Funds (2006-Present); Trustee, American Beacon Select Funds (2006-Present); Trustee, American Beacon Master Trust (2006-Present); Director, American Beacon Global Funds SPC (2007-Present); Director, American Beacon Global Funds plc (2007-Present). William F. Quinn** (59) Trustee Chairman (2006-Present), CEO (2006-2007), President since 1987 (1986-2006), and Director (2003-Present), American Beacon President from Advisors, Inc.; Chairman (1989-2003) and Director 1987 to 2007 (1979-1989, 2003-Present), American Airlines Federal Executive Vice Credit Union; Director, Hicks Acquisition I, Inc. President (2007-Present); Director, Crescent Real Estate Equities, since 2007 Inc.(1994-2007); Director, Pritchard, Hubble & Herr, LLC (investment advisor) (2001-2006); Director of Investment Committee, Southern Methodist University Endowment Fund (1996-Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Member, New York Stock Exchange Pension Manager Committee (1997-1998, 2000-2002, 2006-Present); Chairman (2007-Present) and Vice Chairman (2004-2007), Committee for the Investment of Employee Benefits; Director, United Way of Metropolitan Tarrant County (1988-2000, 2004-Present); Trustee, American Beacon Mileage Funds (1995-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1995-Present); Director, American Beacon Global Funds SPC (2002-Present); Director, American Beacon Global Funds plc (2007-Present). Alan D. Feld** (71) Trustee since 1996 Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Director, Clear Channel Communications (1984-Present); Trustee, CenterPoint Properties (1994-2006); Member Board of Trustees, Southern Methodist University; Member, Board of Visitors, The University of Texas M.D. Anderson Cancer Center; Member, Board of Visitors, Zale Lipshy Hospital; Trustee, American Beacon Mileage Funds (1996-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-Present). NON-INTERESTED TRUSTEES Term Lifetime of Trust until removal, resignation or retirement* W. Humphrey Bogart (63) Trustee since 2004 Consultant, New River Canada Ltd. (mutual fund servicing company) (1998-2003); Board Member, Baylor University Medical Center Foundation (1992-2004); President and CEO, Allmerica Trust Company, NA (1996-1997); President and CEO, Fidelity Investments Southwest Company (1983-1995); Senior Vice President of Regional Centers, Fidelity Investments (1988-1995); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present).
37 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED)
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS - --------------------- --------------------- --------------------------------------------------------- NON-INTERESTED TRUSTEES (CONT.) Brenda A. Cline (47) Trustee since 2004 Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, Texas Christian University (1998-Present); Trustee, W.I. Cook Foundation, Inc. (d/b/a Cook Children's Health Foundation) (2001-2006); Director, Christian Church Foundation (1999-2007); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present). Richard A. Massman (64) Trustee since 2004 Senior Vice President and General Counsel, Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching, and venture capital activities) (1994-Present); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present). Stephen D. O'Sullivan (72) Trustee since 1987 Consultant (1994-Present); Trustee, American Beacon Mileage Funds (1995-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1995-Present). R. Gerald Turner (62) Trustee since 2001 President, Southern Methodist University (1995-Present); 225 Perkins Admin. Bldg. Director, ChemFirst (1986-2002); Director, J.C. Penney Southern Methodist Univ. Company, Inc. (1996-Present); Director, California Dallas, Texas 75275 Federal Preferred Capital Corp. (2001-2003); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-2007); Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Co-Chair, Knight Commission on Intercollegiate Athletics; Trustee, American Beacon Mileage Funds (2001-Present); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-Present). Kneeland Youngblood (52) Trustee since 1996 Managing Partner, Pharos Capital Group, LLC (a private 100 Crescent Court Chairman since equity firm) (1998-Present); Director, Energy Future Suite 1740 2005 Holdings Corp. (2007-Present); Director, Burger King Dallas, Texas 75201 Corporation (2004-Present); Director, Gap, Inc. (2006-Present); Trustee, City of Dallas, Texas Employee Retirement Fund (2004-Present); Director, Starwood Hotels and Resorts (2001-Present); Member, Council on Foreign Relations (1995-Present); Trustee, St. Mark's School of Texas (2002-Present); Trustee, American Beacon Mileage Funds (1996- Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-Present).
38 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED)
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS - --------------------- --------------------- --------------------------------------------------------- OFFICERS Term One Year Rosemary K. Behan (48) VP, Secretary and Vice President, Legal and Compliance, American Beacon Chief Legal Advisors, Inc. (2006-Present); Assistant General Counsel, Officer since 2006 First Command Financial Planning, Inc. (2004-2006); Enforcement Attorney (1995-2004), Securities and Exchange Commission. Brian E. Brett (47) VP since 2004 Vice President, Director of Sales and Marketing, American Beacon Advisors, Inc. (2004-Present); Regional Vice President, Neuberger Berman, LLC (investment advisor) (1996-2004). Wyatt Crumpler (41) VP since 2007 Vice President, Trust Investments, American Beacon Advisors, Inc. (2007-Present); Managing Director of Corporate Accounting (2004-2007), Director of IT Strategy and Finance (2002-2004), American Airlines, Inc. Michael W. Fields (53) VP since 1989 Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-Present); Director, American Beacon Global Funds SPC (2002-Present); Director, American Beacon Global Funds plc (2007-Present). Rebecca L. Harris (41) Treasurer since 1995 Vice President, Finance, American Beacon Advisors, Inc. (1995-Present). Christina E. Sears (36) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc. Officer since 2004 (2004-Present); Senior Compliance Analyst, American and Asst. Secretary Beacon Advisors, Inc. (1998-2004). since 1999
* The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, with the exception of Messrs. Quinn and O'Sullivan. ** Messrs. Quinn, Feld and Herring are deemed to be "interested persons" of the Trust, as defined by the 1940 Act. Mr. Quinn is Chairman of the Manager. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two years to one or more of the Trust's Investment advisors. Mr. Herring is President and CEO of the Manager. 39 (THIS PAGE INTENTIONALLY LEFT BLANK) 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: (GRAPHIC) (GRAPHIC) BY E-MAIL: ON THE INTERNET: american_beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com (GRAPHIC) (GRAPHIC) BY TELEPHONE: BY MAIL: Institutional Class American Beacon Funds Call (800) 658-5811 4151 Amon Carter Blvd., MD 2450 PlanAhead Class Fort Worth, TX 76155 Call (800) 388-3344 AVAILABILITY OF QUARTERLY PORTFOLIO 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 STATE STREET BANK AND TRUST Boston, Massachusetts TRANSFER AGENT BOSTON FINANCIAL DATA SERVICES Kansas City, Missouri INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP Dallas, Texas DISTRIBUTOR FORESIDE FUND SERVICES Portland, Maine This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus. American Airlines, Inc. is not responsible for investments made in the American Beacon Funds. American Beacon Funds is a service mark of AMR Corporation. PlanAhead Class is a registered service mark of American Beacon Advisors, Inc. American Beacon Money Market Fund and American Beacon U.S. Government Money Market Fund are service marks of American Beacon Advisors, Inc. AR 12/07 541497 ITEM 2. CODE OF ETHICS. The Trust has adopted a code of ethics that applies to its principal executive and financial officers (the "Code"). The Trust did not amend 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. The Code is filed herewith as Exhibit 99.CODE ETH. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Trust's Board of Trustees has determined that Brenda Cline, a member of the Trust's Audit and Compliance Committee, is an "audit committee financial expert" as defined in Form N-CSR. Ms. Cline is "independent" as defined in Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a)
Audit Fees Fiscal Year Ended - ---------- ----------------- $265,722 10/31/2006 Revised $92,179 12/31/2006 $280,229 10/31/2007 $85,006 12/31/2007
(b)
Audit-Related Fees Fiscal Year Ended - ------------------ ----------------- $23,164* 10/31/2006 $0 12/31/2006 $8,750* 10/31/2006 $0 12/31/2006
* Attestation services related to Interfund Lending Program (c)
Tax Fees Fiscal Year Ended - -------- ----------------- $0 10/31/2006 $0 12/31/2006 $29,199 10/31/2007 $11,141 12/31/2007
(d)
All Other Fees Fiscal Year Ended - -------------- ----------------- $0 10/31/2006 $0 12/31/2006 $0 10/31/2007 $0 12/31/2007
(e)(1) Pursuant to its charter, the Trust's Audit and Compliance Committee shall have the following duties and powers pertaining to pre-approval of audit and non-audit services provided by the Trust's principal accountant: - to approve, prior to appointment, the engagement of auditors to annually audit and provide their opinion on the Trusts' financial statements, and, in connection therewith, reviewing and evaluating matters potentially affecting the independence and capabilities of the auditors; - to approve, prior to appointment, the engagement of the auditors to provide non-audit services to the Trusts, an investment adviser to any series of the Trusts or any entity controlling, controlled by, or under common control with an investment adviser ("adviser affiliate") that provides ongoing services to the Trusts, if the engagement relates directly to the operations and financial reporting of the Trusts; - to consider whether the non-audit services provided by a Trust's auditor to an investment adviser or any adviser affiliate that provides ongoing services to a series of the Trusts, which services were not pre-approved by the Committee, are compatible with maintaining the auditor's independence; - to review the arrangements for and scope of the annual audit and any special audits; and - to review and approving the fees proposed to be charged to the Trusts by the auditors for each audit and non-audit service. The Audit and Compliance Committee may delegate any portion of its authority, including the authority to grant pre-approvals of audit and permitted non-audit services, to a subcommittee of one or more members. Any decisions of the subcommittee to grant pre-approvals shall be presented to the full audit committee at its next regularly scheduled meeting. (e)(2) None of the fees disclosed in paragraphs (b) through (d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) Not applicable. (g)
Aggregate Non-Audit Fees for Services Rendered to the: - ------------------------------------------------------ Adviser's Affiliates Providing Registrant Adviser Ongoing Services to Registrant Fiscal Year Ended - ---------- ------- ------------------------------ ----------------- $23,164 $0 N/A 10/31/2006 $0 $0 N/A 12/31/2006 $29,199 $0 N/A 10/31/2007 $11,141 $0 N/A 12/31/2007
(h) Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. The schedules of investments for each series of the Trust are included in the shareholder report presented in Item 1. The shareholder report for the S&P 500 Index Fund, the Small Cap Index Fund and the International Equity Index Fund presented in Item 1 includes a summary schedule of investments for the Master International Index Series and the Master Small Cap Index Series, both of which are series of the Master Quantitative Series Trust. A complete schedule of investments for each of these two series follows. Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- Advertising Agencies - 0.4% 7,600 DG FastChannel, Inc. (a) $ 194,864 11,700 Greenfield Online, Inc. (a) 170,937 14,600 inVentiv Health, Inc. (a) 452,016 12,200 Marchex, Inc. Class B (i) 132,492 19,770 National CineMedia, Inc. 498,402 22,600 Valassis Communications, Inc. (a) 264,194 46,380 ValueClick, Inc. (a) 1,015,722 --------------- 2,728,627 - ---------------------------------------------------------------------------------------------------------------------------------- Aerospace - 0.8% 3,000 AeroVironment, Inc. (a) 72,600 6,400 Argon ST, Inc. (a) 118,784 20,568 Curtiss-Wright Corp. 1,032,514 11,726 Heico Corp. (i) 638,832 6,900 Ladish Co., Inc. (a) 298,011 3,500 MTC Technologies, Inc. (a) 82,250 16,713 Moog, Inc. Class A (a) 765,623 27,735 Orbital Sciences Corp. (a) 680,062 16,334 Teledyne Technologies, Inc. (a) 871,092 4,500 TransDigm Group, Inc. (a) 203,265 --------------- 4,763,033 - ---------------------------------------------------------------------------------------------------------------------------------- Agriculture, Fishing & 1,200 Alico, Inc. (i) 43,800 Ranching - 0.1% 6,500 The Andersons, Inc. 291,200 4,000 Cadiz, Inc. (a) 84,000 --------------- 419,000 - ---------------------------------------------------------------------------------------------------------------------------------- Air Transport - 0.7% 16,368 AAR Corp. (a)(g) 622,475 23,100 ABX Holdings, Inc. (a) 96,558 39,820 AirTran Holdings, Inc. (a) 285,111 18,398 Alaska Air Group, Inc. (a) 460,134 1,600 Allegiant Travel Co. (a) 51,424 6,500 Atlas Air Worldwide Holdings, Inc. (a) 352,430 9,185 Bristow Group, Inc. (a) 520,330 17,500 ExpressJet Holdings, Inc. (a) 43,400 83,400 JetBlue Airways Corp. (a)(i) 492,060 9,800 Midwest Air Group, Inc. (a) 145,040 7,100 PHI, Inc. (a) 220,242 10,200 Pinnacle Airlines Corp. (a) 155,550 14,700 Republic Airways Holdings, Inc. (a) 287,973 28,400 SkyWest, Inc. 762,540 --------------- 4,495,267 - ---------------------------------------------------------------------------------------------------------------------------------- Aluminum - 0.2% 13,692 Century Aluminum Co. (a) 738,546 7,100 Kaiser Aluminum Corp. 564,308 --------------- 1,302,854 - ---------------------------------------------------------------------------------------------------------------------------------- Auto Parts: After 10,343 Aftermarket Technology Corp. (a) 281,950 Market - 0.1% 8,450 Commercial Vehicle Group, Inc. (a) 122,525 4,800 Standard Motor Products, Inc. 39,168 10,999 Superior Industries International, Inc. (i) 199,852 --------------- 643,495 - ---------------------------------------------------------------------------------------------------------------------------------- Auto Parts: Original 21,100 American Axle & Manufacturing Holdings, Inc. 392,882 Equipment - 0.5% 10,800 Amerigon Inc. (a) 227,448 33,600 ArvinMeritor, Inc. 394,128 47,500 Hayes Lemmerz International, Inc. (a) 217,075 35,680 Lear Corp. (a) 986,909
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 6,900 Noble International Ltd. $ 112,539 3,873 Sauer-Danfoss, Inc. 97,019 3,900 Stoneridge, Inc. (a) 31,356 20,200 Tenneco, Inc. (a) 526,614 61,200 Visteon Corp. (a) 268,668 --------------- 3,254,638 - ---------------------------------------------------------------------------------------------------------------------------------- Auto, Trucks & Parts - 0.1% 8,400 Accuride Corp. (a) 66,024 31,900 Force Protection, Inc. (a)(i) 148,973 4,000 Miller Industries, Inc. (a) 54,760 13,394 Modine Manufacturing Co. 221,135 15,400 Spartan Motors, Inc. (i) 117,656 13,245 Wabash National Corp. 101,854 --------------- 710,402 - ---------------------------------------------------------------------------------------------------------------------------------- Banks: New York City - 0.1% 6,600 Northfield Bancorp, Inc. (a) 71,412 14,000 Signature Bank (a) 472,500 --------------- 543,912 - ---------------------------------------------------------------------------------------------------------------------------------- Banks: Outside 4,684 1st Source Corp. 81,080 New York City - 5.1% 7,480 Abington Bancorp, Inc. 70,312 7,421 Alabama National Bancorp. 577,428 11,718 Amcore Financial, Inc. 265,998 8,350 AmericanWest Bancorp (i) 147,210 5,900 Ameris Bancorp 99,415 2,990 Bancfirst Corp. 128,121 10,600 Banco Latinoamericano de Exportaciones, SA 172,886 6,915 The Bancorp, Inc. (a) 93,076 6,700 Bank of the Ozarks, Inc. 175,540 10,100 BankFinancial Corp. 159,782 8,013 Banner Corp. 230,213 13,600 Beneficial Mutual Bancorp, Inc. (a) 132,192 17,233 Boston Private Financial Holdings, Inc. 466,669 31,365 CVB Financial Corp. 324,314 4,821 Capital City Bank Group, Inc. (i) 136,048 4,800 Capital Corp. of the West 93,264 7,000 Capitol Bancorp Ltd. 140,840 12,025 Cascade Bancorp (i) 167,388 23,944 Cathay General Bancorp 634,276 24,000 Centennial Bank Holdings, Inc. (a) 138,720 5,700 Center Financial Corp. 70,224 14,648 Central Pacific Financial Corp. 270,402 11,748 Chemical Financial Corp. 279,485 20,282 Chittenden Corp. 722,445 35,687 Citizens Banking Corp. 517,818 8,593 City Holding Co. 290,787 6,598 CityBank 147,135 2,400 Clifton Savings Bancorp, Inc. 23,520 10,426 CoBiz Financial, Inc. 155,035 8,541 Columbia Banking System, Inc. 253,924 5,200 Community Bancorp (a) 90,324 14,300 Community Bank System, Inc. 284,141 7,323 Community Trust Bancorp, Inc. 201,602 18,604 Corus Bankshares, Inc. (i) 198,505
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 3,500 Enterprise Financial Services Corp. (i) $ 83,335 39,200 First BanCorp 285,768 4,136 First Bancorp 78,129 13,214 First Busey Corp. (i) 262,430 15,123 First Charter Corp. 451,573 34,840 First Commonwealth Financial Corp. (i) 371,046 11,111 First Community Bancorp, Inc. 458,218 3,694 First Community Bancshares, Inc. 117,802 14,387 First Financial Bancorp 164,012 9,753 First Financial Bankshares, Inc. 367,200 5,744 First Financial Corp. 162,785 7,046 First Merchants Corp. 153,885 21,800 First Midwest Bancorp, Inc. 667,080 3,600 First Regional Bancorp (a) 68,004 2,600 First South Bancorp, Inc. (i) 57,694 11,500 First State Bancorp. 159,850 35,400 FirstMerit Corp. 708,354 14,300 Franklin Bank Corp. (a) 61,633 18,466 Frontier Financial Corp. (i) 342,914 24,764 Glacier Bancorp, Inc. (i) 464,077 5,500 Greene County Bancshares, Inc. 105,600 12,554 Hancock Holding Co. 479,563 19,504 Hanmi Financial Corp. 168,124 14,736 Harleysville National Corp. 214,704 4,300 Heartland Financial USA, Inc. (i) 79,851 4,700 Heritage Commerce Corp. 86,433 3,900 Home Bancshares, Inc. 81,783 7,545 Independent Bank Corp./MA 205,375 13,345 Independent Bank Corp./MI 126,778 10,774 Integra Bank Corp. 152,021 22,010 International Bancshares Corp. 460,889 21,300 Investors Bancorp, Inc. (a) 301,182 10,148 Irwin Financial Corp. 74,588 6,705 Lakeland Bancorp, Inc. 77,711 4,100 Lakeland Financial Corp. 85,690 17,083 MB Financial, Inc. 526,669 7,827 Macatawa Bank Corp. (i) 67,234 6,719 MainSource Financial Group, Inc. 104,548 10,780 Midwest Banc Holdings, Inc. 133,888 15,513 NBT Bancorp, Inc. 354,007 10,900 Nara Bancorp, Inc. 127,203 23,147 National Penn Bancshares, Inc. (i) 350,446 31,395 Old National Bancorp 469,669 5,922 Old Second Bancorp, Inc. 158,650 6,141 Omega Financial Corp. (i) 179,686 11,318 Oriental Financial Group 151,774 22,162 Pacific Capital Bancorp 446,121 5,715 Park National Corp. (i) 368,618 4,110 Peoples Bancorp, Inc. 102,298 6,800 Pinnacle Financial Partners, Inc. (a) 172,856 8,600 Piper Jaffray Cos. (a) 398,352
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 4,550 Preferred Bank $ 118,391 9,496 PrivateBancorp, Inc. (i) 310,044 16,700 Prosperity Bancshares, Inc. 490,813 15,724 Provident Bankshares Corp. 336,336 10,198 Renasant Corp. 219,971 2,954 Republic Bancorp, Inc. Class A 48,830 1,333 Royal Bancshares of Pennsylvania Class A 14,663 11,663 S&T Bancorp, Inc. 322,365 3,263 SCBT Financial Corp. 103,339 15,100 SVB Financial Group (a) 761,040 4,430 SY Bancorp, Inc. 106,054 7,514 Sandy Spring Bancorp, Inc. 209,039 1,403 Santander BanCorp 12,150 8,858 Seacoast Banking Corp. of Florida (i) 91,060 8,200 Security Bank Corp. (i) 74,948 3,800 Sierra Bancorp 94,582 5,400 Simmons First National Corp. Class A 143,100 34,700 The South Financial Group, Inc. 542,361 4,680 Southside Bancshares, Inc. 95,753 8,200 Southwest Bancorp, Inc. 150,306 35,814 Sterling Bancshares, Inc. 399,684 13,302 Sterling Financial Corp. 218,419 4,900 Suffolk Bancorp 150,479 5,270 Sun Bancorp, Inc. (a) 83,161 19,700 Superior Bancorp (a) 105,789 39,756 Susquehanna Bancshares, Inc. 733,097 3,000 Taylor Capital Group, Inc. 61,200 11,961 Texas Capital Bancshares, Inc. (a) 218,288 2,840 Tompkins Trustco, Inc. 110,192 4,978 Trico Bancshares 96,075 36,461 TrustCo Bank Corp. NY (i) 361,693 22,927 Trustmark Corp. 581,429 43,700 UCBH Holdings, Inc. 618,792 13,652 UMB Financial Corp. 523,691 28,780 Umpqua Holdings Corp. 441,485 4,700 Union Bankshares Corp. 99,358 18,000 United Bankshares, Inc. 504,360 19,600 United Community Banks, Inc. 309,680 2,200 United Security Bancshares (i) 33,616 4,550 Univest Corp. of Pennsylvania (i) 96,051 7,554 Virginia Commerce Bancorp (a)(i) 88,608 5,000 Washington Trust Bancorp, Inc. 126,150 11,963 WesBanco, Inc. 246,438 7,600 West Coast Bancorp 140,600 13,083 Westamerica Bancorp. (i) 582,848 9,100 Western Alliance Bancorp (a)(i) 170,807 7,300 Wilshire Bancorp, Inc. 57,305 11,600 Wintrust Financial Corp. 384,308 --------------- 32,026,967 - ---------------------------------------------------------------------------------------------------------------------------------- Beverage: Brewers 4,700 Boston Beer Co., Inc. Class A (a) 176,955 (Wineries) - 0.0% - ----------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- Beverage: Soft Drinks - 0.1% 2,287 Coca-Cola Bottling Co. Consolidated $ 134,659 1,810 Farmer Bros. Co. 41,612 8,400 Green Mountain Coffee Roasters, Inc. (a) 341,880 12,900 Jones Soda Co. (a)(i) 95,976 3,108 National Beverage Corp. 24,988 7,300 Peet's Coffee & Tea, Inc. (a)(i) 212,211 --------------- 851,326 - ---------------------------------------------------------------------------------------------------------------------------------- Biotechnology Research & 7,860 AMAG Pharmaceuticals, Inc. (a) 472,622 Production - 2.6% 15,600 Acadia Pharmaceuticals, Inc. (a) 172,692 10,500 Acorda Therapeutics, Inc. (a) 230,580 11,587 Albany Molecular Research, Inc. (a) 166,621 16,980 Alexion Pharmaceuticals, Inc. (a) 1,274,009 22,200 Allos Therapeutics, Inc. (a) 139,638 16,300 Alnylam Pharmaceuticals, Inc. (a)(i) 474,004 10,300 Altus Pharmaceuticals, Inc. (a) 53,354 22,700 American Oriental Bioengineering, Inc. (a)(i) 251,516 2,900 Amicus Therapeutics, Inc. (a) 31,175 35,800 Applera Corp. - Celera Genomics Group (a)(g) 568,146 34,000 Arena Pharmaceuticals, Inc. (a) 266,220 34,819 Ariad Pharmaceuticals, Inc. (a) 147,981 18,800 Arqule, Inc. (a) 109,040 22,200 Array Biopharma, Inc. (a) 186,924 12,120 ArthroCare Corp. (a)(i) 582,366 1,400 Biodel, Inc. (a) 32,522 12,700 Bionovo, Inc. (a)(i) 21,717 38,424 Cell Genesys, Inc. (a) 88,375 25,867 Cubist Pharmaceuticals, Inc. (a) 530,532 17,500 Cypress Bioscience, Inc. (a) 193,200 11,800 Cytokinetics, Inc. (a) 55,814 41,000 Discovery Laboratories, Inc. (a) 88,150 38,096 Encysive Pharmaceuticals, Inc. (a)(i) 32,382 22,100 Enzon Pharmaceuticals, Inc. (a) 210,613 48,718 Exelixis, Inc. (a) 420,436 40,500 GenVec, Inc. (a) 59,535 5,300 Genomic Health, Inc. (a)(i) 119,992 34,429 Geron Corp. (a)(i) 195,557 26,800 Halozyme Therapeutics, Inc. (a) 190,548 62,600 Human Genome Sciences, Inc. (a) 653,544 6,800 Idenix Pharmaceuticals, Inc. (a)(i) 18,360 18,200 Immunomedics, Inc. (a) 42,224 39,324 Incyte Corp. (a) 395,206 8,500 Integra LifeSciences Holdings Corp. (a) 356,405 14,214 InterMune, Inc. (a) 189,473 6,200 Kendle International, Inc. (a) 303,304 6,200 Kensey Nash Corp. (a) 185,504 20,700 Keryx Biopharmaceuticals, Inc. (a)(i) 173,880 14,700 Kosan Biosciences, Inc. (a) 52,920 21,750 MannKind Corp. (a)(i) 173,130 15,100 Martek Biosciences Corp. (a)(i) 446,658 9,901 Maxygen, Inc. (a) 79,505 10,500 Medivation, Inc. (a) 151,200
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 6,900 Metabolix, Inc. (a) $ 164,220 11,900 Momenta Pharmaceuticals, Inc. (a) 84,966 20,000 Myriad Genetics, Inc. (a) 928,400 26,354 Nabi Biopharmaceuticals (a) 95,138 1,800 Nanosphere, Inc. (a) 25,182 13,200 Nastech Pharmaceutical Co., Inc. (a)(i) 50,160 19,200 Neurocrine Biosciences, Inc. (a)(i) 87,168 8,900 Neurogen Corp. (a) 30,705 7,200 Novacea, Inc. (a) 21,456 26,800 OSI Pharmaceuticals, Inc. (a) 1,300,068 6,500 Omrix Biopharmaceuticals, Inc. (a) 225,810 3,700 Orexigen Therapeutics, Inc. (a) 52,725 4,600 Osiris Therapeutics, Inc. (a)(i) 55,292 8,950 PharmaNet Development Group, Inc. (a) 350,930 14,800 Poniard Pharmaceuticals, Inc. (a)(i) 65,268 12,100 Progenics Pharmaceuticals, Inc. (a) 218,647 5,260 Protalix BioTherapeutics, Inc. (a) 17,884 15,600 Regeneration Technologies, Inc. (a) 135,408 13,070 Rigel Pharmaceuticals, Inc. (a)(i) 331,847 23,428 Savient Pharmaceuticals, Inc. (a) 538,141 23,000 Seattle Genetics, Inc. (a) 262,200 800 Sucampo Pharmaceuticals, Inc. Class A (a) 14,672 2,900 Synta Pharmaceuticals Corp. (a) 19,430 24,932 Telik, Inc. (a)(i) 86,514 12,400 Tercica, Inc. (a)(i) 84,072 13,900 Vanda Pharmaceuticals, Inc. (a) 95,632 32,800 ViroPharma, Inc. (a) 260,432 62,300 XOMA Ltd. (a) 211,197 18,400 ZymoGenetics, Inc. (a) 214,728 --------------- 16,615,866 - ---------------------------------------------------------------------------------------------------------------------------------- Building Materials - 0.5% 4,300 Ameron International Corp. 396,245 3,200 BlueLinx Holdings, Inc. (i) 12,576 14,600 Building Material Holding Corp. (i) 80,738 9,712 LSI Industries, Inc. 176,758 9,568 NCI Building Systems, Inc. (a) 275,463 1,300 PGT, Inc. (a) 6,188 15,832 Simpson Manufacturing Co., Inc. (i) 420,973 12,705 Texas Industries, Inc. 890,621 5,209 Trex Co., Inc. (a)(i) 44,329 10,765 Watsco, Inc. 395,721 11,700 Zoltek Cos., Inc. (a)(i) 501,579 --------------- 3,201,191 - ---------------------------------------------------------------------------------------------------------------------------------- Building: Cement - 0.0% 17,200 U.S. Concrete, Inc. (a) 57,276 - ---------------------------------------------------------------------------------------------------------------------------------- Building: Heating & 6,850 Aaon, Inc. 135,767 Plumbing - 0.1% 11,300 Interline Brands, Inc. (a) 247,583 --------------- 383,350 - ---------------------------------------------------------------------------------------------------------------------------------- Building: Miscellaneous - 0.2% 7,800 Builders FirstSource, Inc. (a)(i) 56,316 17,800 Comfort Systems USA, Inc. 227,484 8,600 Drew Industries, Inc. (a) 235,640
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 16,000 Goodman Global, Inc. (a) $ 392,640 15,347 Griffon Corp. (a) 191,070 --------------- 1,103,150 - - --------------------------------------------------------------------------------------------------------------------------------- Building: Roofing & 22,250 Beacon Roofing Supply, Inc. (a)(i) 187,345 Wallboard - 0.0% 200 China Architectural Engineering, Inc. (a) 1,730 --------------- 189,075 - ---------------------------------------------------------------------------------------------------------------------------------- Cable Television 193,000 Charter Communications, Inc. Class A (a)(i) 225,810 Services - 0.1% 6,998 Crown Media Holdings, Inc. Class A (a)(i) 45,487 45,694 TiVo, Inc. (a)(i) 381,088 --------------- 652,385 - ---------------------------------------------------------------------------------------------------------------------------------- Casinos & Gambling - 0.6% 11,900 Ameristar Casinos, Inc. 327,726 24,500 Bally Technologies, Inc. (a) 1,218,140 3,832 Churchill Downs, Inc. 206,813 7,805 Dover Downs Gaming & Entertainment, Inc. 87,806 6,875 Isle of Capri Casinos, Inc. (a) 94,669 11,200 Lakes Entertainment, Inc. (a) 77,616 11,300 MTR Gaming Group, Inc. (a) 76,727 17,474 Magna Entertainment Corp. Class A (a)(i) 16,950 5,300 Monarch Casino & Resort, Inc. (a) 127,624 13,100 Multimedia Games, Inc. (a)(i) 109,254 26,194 Pinnacle Entertainment, Inc. (a) 617,131 3,900 Riviera Holdings Corp. (a) 120,120 17,500 Shuffle Master, Inc. (a)(i) 209,825 16,500 Trump Entertainment Resorts, Inc. (a)(i) 70,950 18,418 WMS Industries, Inc. (a) 674,836 --------------- 4,036,187 - ---------------------------------------------------------------------------------------------------------------------------------- Chemicals - 2.0% 13,506 A. Schulman, Inc. 291,054 7,033 American Vanguard Corp. (i) 122,022 11,456 Arch Chemicals, Inc. 421,008 6,900 Balchem Corp. 154,422 25,500 CF Industries Holdings, Inc. 2,806,530 11,200 Cabot Microelectronics Corp. (a)(i) 402,192 19,401 Calgon Carbon Corp. (a)(i) 308,282 12,485 Cambrex Corp. 104,624 11,100 EnerSys (a) 277,056 17,364 Energy Conversion Devices, Inc. (a)(i) 584,299 31,800 Exide Technologies (a)(i) 254,400 17,537 Georgia Gulf Corp. (i) 116,095 54,300 Hercules, Inc. 1,050,705 10,000 Innophos Holdings, Inc. 148,800 10,400 Innospec, Inc. 178,464 7,700 LSB Industries, Inc. (a)(i) 217,294 10,500 Landec Corp. (a) 140,700 11,741 Medis Technologies Ltd. (a)(i) 181,164 3,134 NL Industries, Inc. 35,822 7,000 NewMarket Corp. 389,830 6,665 Nuco2, Inc. (a) 165,959 13,400 OM Group, Inc. (a) 771,036 39,267 PolyOne Corp. (a) 258,377 6,600 Polypore International, Inc. (a) 115,500 15,200 Rockwood Holdings, Inc. (a) 504,944
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 16,100 Senomyx, Inc. (a) $ 120,589 11,700 ShengdaTech, Inc. (a)(i) 169,065 3,155 Stepan Co. 102,632 9,400 Tronox, Inc. Class A (i) 83,660 6,800 Tronox, Inc. Class B 58,820 23,300 UAP Holding Corp. 899,380 31,300 W.R. Grace & Co. (a) 819,434 10,480 Zep, Inc. (a) 145,358 --------------- 12,399,517 - ---------------------------------------------------------------------------------------------------------------------------------- Coal - 0.2% 30,200 Alpha Natural Resources, Inc. (a) 980,896 54,400 International Coal Group, Inc. (a)(i) 291,584 8,100 US BioEnergy Corp. (a) 94,851 --------------- 1,367,331 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Information 12,258 Arbitron, Inc. 509,565 Services - 0.2% 2,600 HSW International, Inc. (a) 16,198 12,061 infoUSA, Inc. 107,705 13,100 LECG Corp. (a) 197,286 12,900 LoopNet, Inc. (a)(i) 181,245 --------------- 1,011,999 - ---------------------------------------------------------------------------------------------------------------------------------- Communications & 32,900 Entravision Communications Corp. Class A (a) 257,607 Media - 0.1% 116,800 Gemstar-TV Guide International, Inc. (a) 555,968 10,300 Knology, Inc. (a) 131,634 --------------- 945,209 - ---------------------------------------------------------------------------------------------------------------------------------- Communications 173,300 3Com Corp. (a) 783,316 Technology - 2.6% 10,700 Acme Packet, Inc. (a) 134,713 27,600 Adtran, Inc. 590,088 8,922 Anaren, Inc. (a) 147,124 13,672 Anixter International, Inc. (a) 851,355 4,300 Aruba Networks, Inc. (a) 64,113 25,700 Atheros Communications, Inc. (a) 784,878 93,500 Avanex Corp. (a)(i) 93,500 23,650 Avocent Corp. (a) 551,281 5,159 Bel Fuse, Inc. 151,004 6,600 BigBand Networks, Inc. (a) 33,924 8,588 Black Box Corp. 310,628 1,800 CPI International, Inc. (a) 30,780 18,100 CSG Systems International, Inc. (a) 266,432 9,100 Cbeyond Communications, Inc. (a) 354,809 23,300 Cogent Communications Group, Inc. (a) 552,443 9,400 Comtech Group, Inc. (a) 151,434 10,825 Comtech Telecommunications Corp. (a) 584,658 8 CycleLogic, Inc. 0 9,700 Digi International, Inc. (a) 137,643 13,900 Ditech Networks, Inc. (a) 48,233 7,400 EMS Technologies, Inc. (a) 223,776 14,313 Echelon Corp. (a)(i) 295,420 56,200 Extreme Networks, Inc. (a) 198,948 111,100 Finisar Corp. (a)(i) 161,095 67,500 Foundry Networks, Inc. (a) 1,182,600 8,300 GeoEye, Inc. (a) 279,295 40,896 Harmonic, Inc. (a) 428,590
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 10,050 Harris Stratex Networks, Inc. Class A (a) $ 167,835 2,400 Hughes Communications, Inc. (a) 131,064 6,100 Infinera Corp. (a) 90,524 21,900 InterDigital, Inc. (a) 510,927 18,500 InterVoice, Inc. (a) 147,815 17,029 Ixia (a) 161,435 23,100 j2 Global Communications, Inc. (a) 489,027 4,500 Loral Space & Communications Ltd. (a) 154,125 16,200 NETGEAR, Inc. (a) 577,854 10,000 Network Equipment Technologies, Inc. (a) 84,200 9,800 Nextwave Wireless, Inc. (a) 52,724 14,600 Novatel Wireless, Inc. (a) 236,520 10,702 Oplink Communications, Inc. (a) 164,276 7,900 Optium Corp. (a)(i) 62,252 10,900 SeaChange International, Inc. (a) 78,807 22,138 Secure Computing Corp. (a) 212,525 2,600 Shoretel, Inc. (a) 36,322 124,400 Sonus Networks, Inc. (a)(i) 725,252 10,910 Standard Microsystems Corp. (a) 426,254 6,300 Starent Networks Corp. (a) 114,975 6,200 Switch and Data Facilities Co., Inc. (a) 99,324 87,300 Sycamore Networks, Inc. (a) 335,232 13,100 Syniverse Holdings, Inc. (a) 204,098 88,900 TIBCO Software, Inc. (a) 717,423 28,900 Tekelec (a) 361,250 25,830 Terremark Worldwide, Inc. (a)(i) 167,895 50,900 UTStarcom, Inc. (a)(i) 139,975 11,401 Viasat, Inc. (a) 392,536 31,400 Vonage Holdings Corp. (a)(i) 72,220 --------------- 16,506,746 - ---------------------------------------------------------------------------------------------------------------------------------- Computer Services 1,700 3PAR, Inc. (a) 21,760 Software & Systems - 5.8% 17,485 ACI Worldwide, Inc. (a) 332,914 28,700 Actuate Corp. (a) 222,999 14,100 American Reprographics Co. (a) 232,368 8,100 Ansoft Corp. (a) 209,385 36,064 Ansys, Inc. (a) 1,495,213 36,680 Ariba, Inc. (a) 408,982 60,400 Art Technology Group, Inc. (a) 260,928 15,000 AsiaInfo Holdings, Inc. (a) 165,000 38,988 Aspen Technology, Inc. (a) 632,385 95,100 BearingPoint, Inc. (a) 269,133 20,626 Blackbaud, Inc. 578,353 13,400 Blackboard, Inc. (a) 539,350 1,900 BladeLogic, Inc. (a) 56,183 14,400 Blue Coat Systems, Inc. (a) 473,328 35,767 Borland Software Corp. (a) 107,658 10,500 Bottomline Technologies, Inc. (a) 147,000 14,400 CACI International, Inc. Class A (a) 644,688 22,880 CMGI, Inc. (a) 299,499 8,500 COMSYS IT Partners, Inc. (a) 134,130 16,240 Chordiant Software, Inc. (a) 138,852
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 23,602 Ciber, Inc. (a) $ 144,208 2,100 ComScore, Inc. (a) 68,523 17,000 Commvault Systems, Inc. (a) 360,060 1,500 Compellent Technologies, Inc. (a) 18,045 2,900 Comverge, Inc. (a) 91,321 20,000 Concur Technologies, Inc. (a) 724,200 2,400 Constant Contact, Inc. (a) 51,600 16,700 DealerTrack Holdings, Inc. (a) 558,949 2,500 Deltek, Inc. 38,075 19,100 Digital River, Inc. (a) 631,637 11,100 DivX, Inc. (a)(i) 155,400 4,100 Double-Take Software, Inc. (a) 89,052 12,917 EPIQ Systems, Inc. (a) 224,885 26,639 Electronics for Imaging, Inc. (a) 598,845 27,400 Epicor Software Corp. (a) 322,772 16,700 Equinix, Inc. (a)(i) 1,687,869 32,279 Gartner, Inc. Class A (a) 566,819 7,500 i2 Technologies, Inc. (a)(i) 94,500 7,400 iGate Corp. (a) 62,678 3,800 Imergent, Inc. (i) 40,242 40,900 Informatica Corp. (a) 737,018 15,400 Information Services Group, Inc. (a)(i) 105,490 3,191 Integral Systems, Inc. 74,223 6,200 Interactive Intelligence, Inc. (a) 163,370 15,900 Internet Capital Group, Inc. (a) 186,666 20,625 Interwoven, Inc. (a) 293,288 12,108 JDA Software Group, Inc. (a) 247,730 11,900 Kenexa Corp. (a) 231,098 5,000 Keynote Systems, Inc. (a) 70,250 57,800 Lawson Software, Inc. (a) 591,872 5,700 Limelight Networks, Inc. (a) 39,273 29,500 Lionbridge Technologies, Inc. (a) 104,725 14,900 LivePerson, Inc. (a) 79,417 19,200 MSC.Software Corp. (a) 249,408 22,800 Macrovision Corp. (a) 417,924 19,700 Magma Design Automation, Inc. (a) 240,537 12,739 Manhattan Associates, Inc. (a) 335,800 9,200 Mantech International Corp. Class A (a) 403,144 41,900 Mentor Graphics Corp. (a) 451,682 7,100 Mercadolibre, Inc. (a) 524,548 10,856 Mercury Computer Systems, Inc. (a) 174,890 4,100 MicroStrategy, Inc. Class A (a) 389,910 18,798 Micros Systems, Inc. (a) 1,318,868 3,500 Monotype Imaging Holdings, Inc. (a) 53,095 14,900 Ness Technologies, Inc. (a) 137,527 3,200 Netezza Corp. (a) 44,160 67,495 Nuance Communications, Inc. (a) 1,260,807 16,000 Omniture, Inc. (a) 532,640 65,500 On2 Technologies, Inc. (a)(i) 66,810 28,400 OpenTV Corp. (a)(i) 37,488 42,733 Openwave Systems, Inc. (i) 111,106
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 11,100 PDF Solutions, Inc. (a) $ 100,011 2,400 PROS Holdings, Inc. (a) 47,088 18,907 Packeteer, Inc. (a) 116,467 53,460 Parametric Technology Corp. (a) 954,261 3,900 Pegasystems, Inc. 46,527 19,008 Progress Software Corp. (a) 640,189 3,600 QAD, Inc. 33,624 32,000 Quest Software, Inc. (a) 590,080 45,300 RealNetworks, Inc. (a) 275,877 8,600 RightNow Technologies, Inc. (a) 136,310 75,339 SAIC, Inc. (a) 1,515,821 12,880 SAVVIS, Inc. (a) 358,966 5,700 SI International, Inc. (a) 156,579 8,689 SPSS, Inc. (a) 312,022 19,400 SRA International, Inc. Class A (a) 571,330 14,361 SYKES Enterprises, Inc. (a) 258,498 5,900 SYNNEX Corp. (a) 115,640 40,192 Sapient Corp. (a) 354,092 13,200 Sigma Designs, Inc. (a) 728,640 12,700 Smith Micro Software, Inc. (a) 107,569 12,100 Solera Holdings, Inc. (a) 299,838 30,441 SonicWALL, Inc. (a) 326,328 700 Sourcefire, Inc. (a) 5,838 39,700 Sourceforge, Inc. (a) 97,265 2,900 Stanley, Inc. (a) 92,858 2,900 SuccessFactors, Inc. (a) 34,278 42,500 Sybase, Inc. (a) 1,108,825 8,700 Synchronoss Technologies, Inc. (a) 308,328 5,983 Syntel, Inc. 230,465 8,100 Taleo Corp. Class A (a) 241,218 2,200 TechTarget, Inc. (a) 32,516 21,408 The TriZetto Group, Inc. (a) 371,857 16,900 Tyler Technologies, Inc. (a) 217,841 11,700 Ultimate Software Group, Inc. (a) 368,199 2,400 Unica Corp. (a) 22,200 12,500 VASCO Data Security International, Inc. (a) 349,000 200 Veraz Networks, Inc. (a) 964 13,180 Vignette Corp. (a) 192,560 700 Virtusa Corp. (a) 12,131 9,800 Visual Sciences, Inc. (a) 181,104 21,202 Websense, Inc. (a) 360,010 35,200 Wind River Systems, Inc. (a) 314,336 23,208 Zoran Corp. (a) 522,412 --------------- 36,684,514 - ---------------------------------------------------------------------------------------------------------------------------------- Computer Technology - 0.9% 56,600 Adaptec, Inc. (a) 191,308 16,800 Advanced Analogic Technologies, Inc. (a) 189,504 18,200 Cray, Inc. (a) 109,018 3,300 Data Domain, Inc. (a) 86,922 39,900 Emulex Corp. (a) 651,168 16,009 FalconStor Software, Inc. (a) 180,261 11,017 Hutchinson Technology, Inc. (a) 289,967
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 16,600 Imation Corp. $ 348,600 14,300 Immersion Corp. (a) 185,185 28,309 Intermec, Inc. (a)(i) 574,956 1,800 Isilon Systems, Inc. (a) 9,144 44,188 Palm, Inc. (i) 280,152 37,900 Perot Systems Corp. Class A (a) 511,650 81,700 Quantum Corp. (a) 219,773 14,500 Rackable Systems, Inc. (a)(i) 145,000 12,600 Radiant Systems, Inc. (a) 217,098 10,942 Radisys Corp. (a) 146,623 4,900 Rimage Corp. (a) 127,155 15,500 STEC, Inc. (a) 135,470 44,600 Safeguard Scientifics, Inc. (a) 80,280 1,800 Silicon Graphics, Inc. (a) 32,904 10,300 Stratasys, Inc. (a) 266,152 11,200 Synaptics, Inc. (a) 460,992 27,700 Trident Microsystems, Inc. (a) 181,712 --------------- 5,620,994 - ---------------------------------------------------------------------------------------------------------------------------------- Construction - 0.3% 5,251 Brookfield Homes Corp. (i) 82,966 29,672 EMCOR Group, Inc. (a) 701,149 15,971 Granite Construction, Inc. 577,831 2,700 Great Lakes Dredge & Dock Corp. 23,544 11,800 Perini Corp. (a) 488,756 --------------- 1,874,246 - ---------------------------------------------------------------------------------------------------------------------------------- Consumer Electronics - 0.9% 70,700 CNET Networks, Inc. (a) 646,198 8,600 DTS, Inc. (a) 219,902 57,800 EarthLink, Inc. (a) 408,646 200 Glu Mobile, Inc. (a) 1,044 15,600 InfoSpace, Inc. 293,280 23,090 Internap Network Services Corp. (a) 192,340 21,800 Ipass, Inc. (a)(i) 88,508 9,100 LoJack Corp. (a) 152,971 11,274 Midway Games, Inc. (a)(i) 31,116 15,300 NIC, Inc. 129,132 21,900 NetFlix, Inc. (a)(i) 582,978 1,000 Protection One, Inc. (a) 11,890 12,200 Sohu.com, Inc. (a) 665,144 29,537 THQ, Inc. (a) 832,648 31,900 Take-Two Interactive Software, Inc. (a)(i) 588,555 31,350 United Online, Inc. 370,557 6,886 Universal Electronics, Inc. (a) 230,268 --------------- 5,445,177 - ---------------------------------------------------------------------------------------------------------------------------------- Consumer Products - 0.5% 23,900 American Greetings Corp. Class A 485,170 12,400 Blyth, Inc. 272,056 3,791 CSS Industries, Inc. 139,130 7,200 Citi Trends, Inc. (a)(i) 111,168 7,100 Mannatech, Inc. (i) 44,872 13,873 Matthews International Corp. Class A 650,228 15,663 Nautilus, Inc. (i) 75,966 9,013 RC2 Corp. (a) 252,995 14,200 Smith & Wesson Holding Corp. (a)(i) 86,620
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 21,100 Spectrum Brands, Inc. (a)(i) $ 112,463 27,574 Tupperware Corp. 910,769 3,300 USANA Health Sciences, Inc. (a)(i) 122,364 --------------- 3,263,801 - ---------------------------------------------------------------------------------------------------------------------------------- Containers & Packaging: 32,200 AptarGroup, Inc. 1,317,302 Metals & Glass - 0.5% 14,750 Greif, Inc. 964,208 17,142 Mobile Mini, Inc. (a) 317,813 11,600 Silgan Holdings, Inc. 602,504 --------------- 3,201,827 - ---------------------------------------------------------------------------------------------------------------------------------- Containers & Packaging: 2,800 AEP Industries, Inc. (a) 89,628 Paper & Plastic - 0.1% 25,300 Graphic Packaging Corp. (a) 93,357 14,052 Myers Industries, Inc. 203,332 --------------- 386,317 - ---------------------------------------------------------------------------------------------------------------------------------- Copper - 0.1% 16,082 Mueller Industries, Inc. 466,217 - ---------------------------------------------------------------------------------------------------------------------------------- Cosmetics - 0.2% 11,593 Elizabeth Arden, Inc. (a) 235,918 14,900 Helen of Troy Ltd. (a) 255,386 2,800 Inter Parfums, Inc. 50,316 23,726 Nu Skin Enterprises, Inc. Class A 389,818 79,475 Revlon, Inc. Class A (a) 93,781 4,800 Ulta Salon Cosmetics & Fragrance, Inc. (a) 82,320 --------------- 1,107,539 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial 22,000 Aldabra 2 Acquisition Corp. (a) 214,280 Services - 0.7% 2,700 Clayton Holdings, Inc. (a) 13,959 3,400 Duff & Phelps Corp. (a) 66,912 21,450 Euronet Worldwide, Inc. (a)(i) 643,500 3,200 Evercore Partners, Inc. Class A 68,960 28,400 F.N.B. Corp. (i) 417,480 4,500 FCStone Group, Inc. (a) 207,135 8,000 Greenhill & Co., Inc. (i) 531,840 21,000 Heckmann Corp. (a) 154,350 22,500 Hicks Acquisition Co. I, Inc. (a) 206,775 8,700 Huron Consulting Group, Inc. (a) 701,481 17,400 Interactive Brokers Group, Inc. Class A (a) 562,368 13,900 Marathon Acquisition Corp. (a) 108,142 16,100 NRDC Acquisition Corp. (a) 147,637 3,400 Oritani Financial Corp. (a) 41,820 19,100 Triplecrown Acquisition Corp. (a) 174,574 --------------- 4,261,213 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Materials & 19,260 Acuity Brands, Inc. 866,700 Processing - 0.9% 21,514 Barnes Group, Inc. 718,352 22,294 Brady Corp. 782,296 23,710 Clarcor, Inc. 900,269 43,862 Hexcel Corp. (a) 1,064,969 8,300 Koppers Holdings, Inc. 358,892 34,414 Olin Corp. 665,223 13,345 Tredegar Corp. 214,588 3,000 Valhi, Inc. 47,820 --------------- 5,619,109 - ----------------------------------------------------------------------------------------------------------------------------------- Drug & Grocery 432 Arden Group, Inc. Class A 66,826 Store Chains - 0.6% 23,607 Casey's General Stores, Inc. 699,003 9,927 The Great Atlantic & Pacific Tea Co., Inc. (a) 311,013
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 6,364 Ingles Markets, Inc. Class A $ 161,582 15,083 Longs Drug Stores Corp. 708,901 6,577 Nash Finch Co. 232,037 19,169 Ruddick Corp. 664,589 10,800 Spartan Stores, Inc. 246,780 1,000 Village Super Market, Inc. Class A 50,890 5,400 Weis Markets, Inc. 215,676 16,100 Winn-Dixie Stores, Inc. (a) 271,607 --------------- 3,628,904 - ---------------------------------------------------------------------------------------------------------------------------------- Drugs & Pharmaceuticals - 3.2% 16,600 Adams Respiratory Therapeutics, Inc. (a) 991,684 1,100 Affymax, Inc. (a) 24,596 27,500 Akorn, Inc. (a) 201,850 6,900 Alexza Pharmaceuticals, Inc. (a) 55,821 46,900 Alkermes, Inc. (a)(g) 731,171 20,325 Alpharma, Inc. Class A (a) 409,549 14,700 Auxilium Pharmaceuticals, Inc. (a) 440,853 16,000 Beijing Med-Pharm Corp. (a)(i) 175,680 7,400 Bentley Pharmaceuticals, Inc. (a) 111,666 2,200 BioForm Medical, Inc. (a) 15,026 43,048 BioMarin Pharmaceuticals, Inc. (a) 1,523,899 5,500 Bradley Pharmaceuticals, Inc. (a) 108,350 28,200 CV Therapeutics, Inc. (a) 255,210 7,900 Cadence Pharmaceuticals, Inc. (a) 117,394 3,600 Caraco Pharmaceutical Laboratories Ltd. (a) 61,740 7,500 Chattem, Inc. (a) 566,550 41,600 CytRx Corp. (a)(i) 117,728 35,200 Dendreon Corp. (a)(i) 218,944 31,000 Durect Corp. (a) 199,330 100 Emergent Biosolutions, Inc. (a) 506 12,695 Enzo Biochem, Inc. (a) 161,734 6,400 GTx, Inc. (a)(i) 91,840 29,000 Indevus Pharmaceuticals, Inc. (a) 201,550 40,489 Isis Pharmaceuticals, Inc. (a)(i) 637,702 22,600 Javelin Pharmaceuticals, Inc. (a) 84,524 4,000 Jazz Pharmaceuticals, Inc. (a) 58,800 16,600 K-V Pharmaceutical Co. Class A (a) 473,764 35,300 Ligand Pharmaceuticals, Inc. Class B 170,499 1,500 MAP Pharmaceuticals, Inc. (a) 26,265 37,000 MGI Pharma, Inc. (a) 1,499,610 58,600 Medarex, Inc. (a) 610,612 24,227 Medicines Co. (a) 464,189 24,400 Medicis Pharmaceutical Corp. Class A 633,668 100 Molecular Insight Pharmaceuticals, Inc. (a) 906 43,200 Nektar Therapeutics (a) 289,872 12,631 Noven Pharmaceuticals, Inc. (a) 175,318 2,800 Obagi Medical Products, Inc. (a) 51,212 24,820 Onyx Pharmaceuticals, Inc. (a) 1,380,488 17,600 Pain Therapeutics, Inc. (a)(i) 186,560 14,500 Par Pharmaceutical Cos., Inc. (a) 348,000 13,600 Penwest Pharmaceuticals Co. (a) 79,560 35,715 Perrigo Co. 1,250,382
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 11,700 Pharmion Corp. (a) $ 735,462 13,300 Pozen, Inc. (a)(i) 159,600 12,500 Quidel Corp. (a) 243,375 29,619 Regeneron Pharmaceuticals, Inc. (a) 715,299 22,700 Salix Pharmaceuticals Ltd. (a)(i) 178,876 31,400 Santarus, Inc. (a) 86,350 16,500 Sciele Pharma, Inc. (a)(i) 337,425 3,200 Sirtris Pharmaceuticals, Inc. (a) 43,808 8,200 Somaxon Pharmaceuticals, Inc. (a)(i) 42,722 26,882 SuperGen, Inc. (a) 98,119 2,000 Trubion Pharmaceuticals, Inc. (a)(i) 20,000 9,246 United Therapeutics Corp. (a) 902,872 44,400 Valeant Pharmaceuticals International (a) 531,468 23,000 Vivus, Inc. (a)(i) 119,140 10,100 Xenoport, Inc. (a) 564,388 --------------- 19,983,506 - ---------------------------------------------------------------------------------------------------------------------------------- Education Services - 0.7% 1,900 American Public Education, Inc. (a) 79,382 12,304 Bright Horizons Family Solutions, Inc. (a) 424,980 5,100 Capella Education Co. (a) 333,846 40,400 Corinthian Colleges, Inc. (a) 622,160 27,800 DeVry, Inc. 1,444,488 300 Lincoln Educational Services Corp. (a) 4,416 2,349 Renaissance Learning, Inc. 32,886 6,720 Strayer Education, Inc. 1,146,298 11,200 Universal Technical Institute, Inc. (a) 190,400 --------------- 4,278,856 - ---------------------------------------------------------------------------------------------------------------------------------- Electrical & Electronics - 0.3% 32,829 Benchmark Electronics, Inc. (a) 582,058 5,300 Coleman Cable, Inc. (a) 50,085 7,000 OSI Systems, Inc. (a) 185,290 21,598 Plexus Corp. (a) 567,163 20,000 TTM Technologies, Inc. (a) 233,200 12,907 Universal Display Corp. (a)(i) 266,788 --------------- 1,884,584 - ---------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment & 9,381 A.O. Smith Corp. 328,804 Components - 1.0% 4,600 AZZ Inc. (a) 130,410 18,800 American Superconductor Corp. (a)(i) 513,992 21,401 Baldor Electric Co. 720,357 16,768 CTS Corp. 166,506 11,018 Cohu, Inc. 168,575 9,160 Franklin Electric Co., Inc. (i) 350,553 12,816 Genlyte Group, Inc. (a) 1,220,083 10,760 Littelfuse, Inc. (a) 354,650 23,800 MKS Instruments, Inc. (a) 455,532 3,531 Powell Industries, Inc. (a) 155,611 30,500 Power-One, Inc. (a) 121,695 11,100 Sonic Solutions, Inc. (a) 115,329 29,000 Taser International, Inc. (a)(i) 415,860 17,661 Technitrol, Inc. 504,751 7,679 Triumph Group, Inc. 632,366 --------------- 6,355,074 - ----------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- Electrical: Household 1,950 National Presto Industries, Inc. $ 102,687 Appliance - 0.0% - ---------------------------------------------------------------------------------------------------------------------------------- Electronics - 0.8% 13,063 Agilysys, Inc. 197,512 20,800 Arrowhead Research Corp. (a) 78,624 19,400 Avid Technology, Inc. (a) 549,796 14,898 Daktronics, Inc. (g) 336,248 61,400 Flir Systems, Inc. (a)(i) 1,921,820 11,172 II-VI, Inc. (a) 341,305 63,966 MRV Communications, Inc. (a) 148,401 18,380 Methode Electronics, Inc. 302,167 2,700 Multi-Fineline Electronix, Inc. (a) 46,818 9,549 Park Electrochemical Corp. 269,664 26,900 Semtech Corp. (a) 417,488 5,967 Supertex, Inc. (a) 186,707 --------------- 4,796,550 - ---------------------------------------------------------------------------------------------------------------------------------- Electronics: Instruments, 7,900 Faro Technologies, Inc. (a) 214,722 Gauges & Meters - 0.3% 13,602 Itron, Inc. (a)(i) 1,305,384 5,500 Measurement Specialties, Inc. (a) 121,550 1,900 OYO Geospace Corp. (a) 143,184 8,100 Zygo Corp. (a) 100,926 --------------- 1,885,766 - ---------------------------------------------------------------------------------------------------------------------------------- Electronics: Medical 7,900 Accuray, Inc. (a) 120,238 Systems - 1.6% 30,300 Affymetrix, Inc. (a)(i) 701,142 5,672 Analogic Corp. 384,108 8,500 Aspect Medical Systems, Inc. (a)(i) 119,000 28,387 Bruker BioSciences Corp. (a) 377,547 2,900 Cynosure, Inc. Class A (a) 76,734 5,570 Datascope Corp. 202,748 19,850 eResearch Technology, Inc. (a) 234,627 9,700 Greatbatch, Inc. (a) 193,903 12,372 Haemonetics Corp. (a) 779,683 55,720 Hologic, Inc. (a) 3,824,621 24,864 Illumina, Inc. (a) 1,473,441 17,051 Luminex Corp. (a)(i) 276,908 5,700 Masimo Corp. (a) 224,865 27,600 Minrad International, Inc. (a) 89,700 11,300 Natus Medical, Inc. (a) 218,655 10,800 NxStage Medical, Inc. (a) 163,836 8,100 Quality Systems, Inc. 246,969 7,300 Sirona Dental Systems, Inc. (a)(i) 244,404 5,700 Tomotherapy, Inc. (a) 111,492 6,800 Visicu, Inc. (a) 80,716 8,322 Zoll Medical Corp. (a) 222,364 --------------- 10,367,701 - ---------------------------------------------------------------------------------------------------------------------------------- Electronics: Semi- 31,800 AMIS Holdings, Inc. (a) 318,636 Conductors/Components - 2.0% 11,516 Actel Corp. (a) 157,309 46,100 Amkor Technology, Inc. (a)(g) 393,233 27,700 Anadigics, Inc. (a) 320,489 33,300 Applied Micro Circuits Corp. (a) 291,042 2,200 AuthenTec, Inc. (a) 31,966 3,400 Cavium Networks, Inc. (a) 78,268
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 41,900 Cirrus Logic, Inc. (a) $ 221,232 231,400 Conexant Systems, Inc. (a)(i) 192,062 15,583 DSP Group, Inc. (a) 190,113 14,012 Diodes, Inc. (a) 421,341 21,327 Exar Corp. (a) 169,976 6,273 Excel Technology, Inc. (a) 169,998 22,300 Formfactor, Inc. (a) 738,130 14,700 Genesis Microchip, Inc. (a) 125,979 6,900 Hittite Microwave Corp. (a) 329,544 3,300 IPG Photonics Corp. (a) 65,967 14,493 IXYS Corp. (a) 116,234 56,600 Lattice Semiconductor Corp. (a) 183,950 21,000 MIPS Technologies, Inc. (a) 104,160 26,900 Micrel, Inc. 227,305 35,590 Microsemi Corp. (a)(i) 787,963 23,800 Microtune, Inc. (a) 155,414 11,300 Monolithic Power Systems, Inc. (a) 242,611 8,000 Netlogic Microsystems, Inc. (a)(i) 257,600 112,800 ON Semiconductor Corp. (a)(i) 1,001,664 23,700 Omnivision Technologies, Inc. (a) (i) 370,905 10,400 PLX Technology, Inc. (a) 96,720 99,600 PMC-Sierra, Inc. (a) 651,384 12,393 Pericom Semiconductor Corp. (a) 231,749 123,184 RF Micro Devices, Inc. (a) 703,381 2,000 Rubicon Technology, Inc. (a) 47,500 26,700 SiRF Technology Holdings, Inc. (a)(i) 670,971 42,676 Silicon Image, Inc. (a) 192,896 39,458 Silicon Storage Technology, Inc. (a) 117,979 74,633 Skyworks Solutions, Inc. (a) 634,381 43,100 Spansion LLC Class A (a) 169,383 19,700 Syntax-Brillian Corp. (a)(i) 60,676 5,200 Techwell, Inc. (a) 57,252 22,300 Tessera Technologies, Inc. (a) 927,680 65,336 TriQuint Semiconductor, Inc. (a) 433,178 10,300 Volterra Semiconductor Corp. (a) 113,609 --------------- 12,771,830 - ---------------------------------------------------------------------------------------------------------------------------------- Electronics: Technology - 0.5% 7,400 3D Systems Corp. (a)(i) 114,256 14,400 Acacia Research - Acacia Technologies (a) 129,312 3,900 American Science & Engineering, Inc. 221,325 17,123 Checkpoint Systems, Inc. (a) 444,855 20,600 Cogent, Inc. (a) 229,690 6,552 Cubic Corp. 256,838 4,500 Eagle Test Systems, Inc. (a) 57,510 11,400 Gerber Scientific, Inc. (a) 123,120 36,346 ION Geophysical Corp. (a) 573,540 6,450 Innovative Solutions & Support, Inc. (a)(i) 62,501 15,500 Ionatron, Inc. (a)(i) 44,330 39,900 Kemet Corp. (a) 264,537 12,100 ScanSource, Inc. (a) 391,435
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 21,000 Smart Modular Technologies WWH, Inc. (a) $ 213,780 1,600 Super Micro Computer, Inc. (a) 12,272 --------------- 3,139,301 - ---------------------------------------------------------------------------------------------------------------------------------- Energy Miscellaneous - 0.7% 5,600 Alon USA Energy, Inc. 152,208 1,900 Approach Resources, Inc. (a) 24,434 14,440 Aventine Renewable Energy Holdings, Inc. (a)(i) 184,254 8,200 CVR Energy, Inc. (a) 204,508 5,800 Clean Energy Fuels Corp. (a) 87,812 9,100 Concho Resources, Inc. (a) 187,551 16,100 Crosstex Energy, Inc. (i) 599,564 3,100 Dawson Geophysical Co. (a) 221,526 2,000 EnerNOC, Inc. (a) 98,200 43,000 Evergreen Energy, Inc. (a)(i) 95,890 38,000 Evergreen Solar, Inc. (a)(i) 656,260 28,426 FuelCell Energy, Inc. (a)(i) 281,986 3,600 GeoMet, Inc. (a) 18,720 2,420 MarkWest Hydrocarbon, Inc. 151,613 12,500 Matrix Service Co. (a) 272,750 7,200 Nova Biosource Fuels, Inc. (a)(i) 20,880 6,500 Ormat Technologies, Inc. 357,565 14,100 Pacific Ethanol, Inc. (a)(i) 115,479 18,116 Penn Virginia Corp. 790,401 83,400 Rentech, Inc. (a)(i) 150,954 15,078 Verenium Corp. (a)(i) 75,239 --------------- 4,747,794 - ---------------------------------------------------------------------------------------------------------------------------------- Engineering & Contracting 18,900 Aecom Technology Corp. (a) 539,973 Services - 0.3% 7,000 Clean Harbors, Inc. (a) 361,900 18,002 Dycom Industries, Inc. (a) 479,753 9,300 ENGlobal Corp. (a)(i) 105,648 7,000 Integrated Electrical Services, Inc. (a) 131,530 7,900 Layne Christensen Co. (a) 388,759 3,700 Michael Baker Corp. (a) 152,070 --------------- 2,159,633 - ---------------------------------------------------------------------------------------------------------------------------------- Entertainment - 0.3% 7,000 Carmike Cinemas, Inc. 50,820 11,000 Cinemark Holdings, Inc. 187,000 19,155 Gaylord Entertainment Co. (a) 775,203 34,300 Live Nation, Inc. (a) 498,036 10,872 Lodgenet Entertainment Corp. (a) 189,608 5,455 Speedway Motorsports, Inc. 169,541 --------------- 1,870,208 - ---------------------------------------------------------------------------------------------------------------------------------- Fertilizers - 0.3% 43,000 Terra Industries, Inc. (a) 2,053,680 - ---------------------------------------------------------------------------------------------------------------------------------- Finance Companies - 0.1% 5,800 Asta Funding, Inc. (i) 153,352 2,169 Credit Acceptance Corp. (a)(i) 44,833 12,600 MVC Capital, Inc. (i) 203,364 5,400 NewStar Financial, Inc. (a) 44,712 8,700 World Acceptance Corp. (a) 234,726 --------------- 680,987 - ---------------------------------------------------------------------------------------------------------------------------------- Finance: Small Loan - 0.1% 28,400 Advance America, Cash Advance Centers, Inc. 288,544 7,600 Dollar Financial Corp. (a) 233,244 9,400 Encore Capital Group, Inc. (a) 90,992
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 6,400 Nelnet, Inc. Class A $ 81,344 1,300 QC Holdings, Inc. 14,625 --------------- 708,749 - ---------------------------------------------------------------------------------------------------------------------------------- Financial Data Processing 8,200 Advent Software, Inc. (a)(i) 443,620 Services & Systems - 0.8% 2,315 Cass Information Systems, Inc. 77,344 9,889 CompuCredit Corp. (a)(i) 98,692 29,964 CyberSource Corp. (a) 532,460 24,200 Deluxe Corp. 795,938 11,623 eSpeed, Inc. Class A (a) 131,340 9,400 ExlService Holdings, Inc. (a) 216,952 6,400 Heartland Payment Systems, Inc. (i) 171,520 29,200 Hypercom Corp. (a) 145,416 36,700 Jack Henry & Associates, Inc. 893,278 14,100 Online Resources Corp. (a) 168,072 12,000 TNS, Inc. 213,000 15,200 TradeStation Group, Inc. (a) 215,992 18,700 Wright Express Corp. (a) 663,663 --------------- 4,767,287 - ---------------------------------------------------------------------------------------------------------------------------------- Financial Information 4,700 Bankrate, Inc. (a)(i) 226,023 Services - 0.3% 24,540 INVESTools, Inc. (a) 435,340 15,600 Interactive Data Corp. 514,956 5,800 Morningstar, Inc. (a) 450,950 45,400 Move, Inc. (a) 111,230 26,922 S1 Corp. (a) 196,531 10,500 TheStreet.com, Inc. 167,160 400 Value Line, Inc. 16,104 --------------- 2,118,294 - ---------------------------------------------------------------------------------------------------------------------------------- Financial Miscellaneous - 0.6% 17,750 Advanta Corp. Class B 143,242 7,400 Asset Acceptance Capital Corp. 77,034 12,919 Cash America International, Inc. 417,284 5,000 Federal Agricultural Mortgage Corp. Class B 131,600 13,100 Financial Federal Corp. 291,999 12,100 First Cash Financial Services, Inc. (a) 177,628 17,100 Global Cash Access, Inc. (a) 103,626 6,499 LandAmerica Financial Group, Inc. (i) 217,392 7,700 Portfolio Recovery Associates, Inc. (i) 305,459 11,700 RAM Holdings Ltd. (a) 57,798 5,900 Sanders Morris Harris Group, Inc. 60,475 29,736 Sotheby's Holdings, Inc. Class A 1,132,942 10,816 Sterling Bancorp 147,530 8,222 Stewart Information Services Corp. 214,512 6,433 Stifel Financial Corp. (a) 338,183 3,176 Triad Guaranty, Inc. (a)(i) 31,125 3,091 WSFS Financial Corp. 155,168 2,300 Wauwatosa Holdings, Inc. (a) 29,486 --------------- 4,032,483 - ---------------------------------------------------------------------------------------------------------------------------------- Foods - 1.1% 1,800 American Dairy, Inc. (a) 23,310 6,500 Cal-Maine Foods, Inc. (i) 172,445 19,900 Chiquita Brands International, Inc. (a)(i) 365,961 35,776 Flowers Foods, Inc. 837,516 14,400 Fresh Del Monte Produce, Inc. (a) 483,552
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 18,557 Hain Celestial Group, Inc. (a) $ 593,824 5,400 J&J Snack Foods Corp. 168,912 14,700 Lance, Inc. 300,174 5,300 M&F Worldwide Corp. (a) 285,405 2,463 Maui Land & Pineapple Co., Inc. (a) 71,698 16,600 Performance Food Group Co. (a) 446,042 17,600 Pilgrim's Pride Corp. (i) 509,520 12,295 Ralcorp Holdings, Inc. (a) 747,413 6,950 Sanderson Farms, Inc. 234,771 142 Seaboard Corp. 208,740 21,957 Sensient Technologies Corp. 620,944 1,400 Synutra International, Inc. (a)(i) 42,280 16,803 Tootsie Roll Industries, Inc. 460,738 14,700 TreeHouse Foods, Inc. (a) 337,953 --------------- 6,911,198 - ---------------------------------------------------------------------------------------------------------------------------------- Forest Products - 0.1% 4,609 Deltic Timber Corp. 237,317 7,934 Universal Forest Products, Inc. 233,736 --------------- 471,053 - - --------------------------------------------------------------------------------------------------------------------------------- Forms & Bulk Printing 10,100 Ennis, Inc. 181,800 Services - 0.1% 11,100 Innerworkings, Inc. (a)(i) 191,586 7,645 The Standard Register Co. 89,141 --------------- 462,527 - ---------------------------------------------------------------------------------------------------------------------------------- Funeral Parlors & 45,024 Stewart Enterprises, Inc. Class A 400,714 Cemeteries - 0.1% - ---------------------------------------------------------------------------------------------------------------------------------- Glass - 0.0% 14,000 Apogee Enterprises, Inc. 239,540 - ---------------------------------------------------------------------------------------------------------------------------------- Gold - 0.2% 211,900 Coeur d'Alene Mines Corp. (a)(i) 1,046,786 12,000 Royal Gold, Inc. (i) 366,240 25,600 US Gold Corp. (a) 75,776 --------------- 1,488,802 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Facilities - 0.6% 28,600 Assisted Living Concepts, Inc. (a) 214,500 10,800 Capital Senior Living Corp. (a) 107,244 4,600 Emeritus Corp. (a) 115,690 400 The Ensign Group, Inc. 5,760 12,190 Kindred Healthcare, Inc. (a) 304,506 9,250 LCA-Vision, Inc. (i) 184,723 5,600 MedCath Corp. (a) 137,536 2,600 National Healthcare Corp. 134,420 25,300 Psychiatric Solutions, Inc. (a) 822,250 6,500 Radiation Therapy Services, Inc. (a) 200,915 11,200 Res-Care, Inc. (a) 281,792 11,800 Skilled Healthcare Group, Inc. Class A (a) 172,634 20,300 Sun Healthcare Group, Inc. (a) 348,551 19,574 Sunrise Senior Living, Inc. (a) 600,530 --------------- 3,631,051 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Management 24,600 AMERIGROUP Corp. (a) 896,670 Services - 0.9% 24,641 Allscripts Healthcare Solutions, Inc. (a)(i) 478,528 3,200 American Dental Partners, Inc. (a) 32,096 14,700 Amsurg Corp. (a) 397,782 2,700 athenahealth, Inc. (a) 97,200 20,400 Centene Corp. (a) 559,776 5,000 Computer Programs & Systems, Inc. 113,700
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 3,785 Corvel Corp. (a) $ 87,131 21,431 Eclipsys Corp. (a) 542,419 9,900 HMS Holdings Corp. (a) 328,779 13,500 HealthExtras, Inc. (a) 352,080 20,600 HealthSpring, Inc. (a) 392,430 6,500 Molina Healthcare, Inc. (a) 251,550 15,800 Omnicell, Inc. (a) 425,494 19,300 Phase Forward, Inc. (a) 419,775 8,200 Vital Images, Inc. (a) 148,174 --------------- 5,523,584 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Services - 0.8% 12,300 Alliance Imaging, Inc. (a) 118,326 11,566 Amedisys, Inc. (a) 561,182 18,600 Apria Healthcare Group, Inc. (a) 401,202 5,500 Bio-Reference Labs, Inc. (a) 179,740 3,600 Emergency Medical Services Corp. (a) 105,408 14,012 Gentiva Health Services, Inc. (a) 266,788 36,600 HealthSouth Corp. (a)(i) 768,600 19,837 Healthcare Services Group, Inc. 420,148 16,300 Healthways, Inc. (a) 952,572 18,800 Hythiam, Inc. (a)(i) 55,084 7,000 LHC Group, Inc. (a) 174,860 10,500 Matria Healthcare, Inc. (a) 249,585 10,000 Nighthawk Radiology Holdings, Inc. (a)(i) 210,500 14,700 Odyssey HealthCare, Inc. (a) 162,582 12,969 PharMerica Corp. (a) 180,010 1,000 Virtual Radiologic Corp. (a) 20,280 --------------- 4,826,867 - ---------------------------------------------------------------------------------------------------------------------------------- Homebuilding - 0.1% 18,700 Beazer Homes USA, Inc. (i) 138,941 17,300 Hovnanian Enterprises, Inc. Class A (a)(i) 124,041 6,100 M/I Homes, Inc. (i) 64,050 12,500 Meritage Homes Corp. (a)(i) 182,125 31,600 Standard-Pacific Corp. (i) 105,860 15,800 WCI Communities, Inc. (a)(i) 59,724 --------------- 674,741 - ---------------------------------------------------------------------------------------------------------------------------------- Hotel/Motel - 0.1% 6,600 Lodgian, Inc. (a) 74,316 7,779 Marcus Corp. 120,186 8,900 Morgans Hotel Group Co. (a) 171,592 --------------- 366,094 - ---------------------------------------------------------------------------------------------------------------------------------- Household Furnishings - 0.4% 6,100 American Woodmark Corp. (i) 110,898 11,100 Ethan Allen Interiors, Inc. 316,350 22,100 Furniture Brands International, Inc. (i) 222,326 9,936 Haverty Furniture Cos., Inc. 89,325 2,800 hhgregg, Inc. (a) 38,528 5,500 Hooker Furniture Corp. 110,550 21,100 La-Z-Boy, Inc. (i) 167,323 7,000 Libbey, Inc. 110,880 6,500 Lifetime Brands, Inc. (i) 84,370 18,000 Sealy Corp. (i) 201,420 22,200 Select Comfort Corp. (a) 155,622 35,300 Tempur-Pedic International, Inc. (i) 916,741 --------------- 2,524,333 - ----------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- Identification Control & 16,912 Advanced Energy Industries, Inc. (a) $ 221,209 Filter Devices - 0.6% 21,441 Asyst Technologies, Inc. (a) 69,897 5,900 Badger Meter, Inc. 265,205 12,032 ESCO Technologies, Inc. (a) 480,558 5,697 The Gorman-Rupp Co. 177,746 27,028 L-1 Identity Solutions, Inc. (a)(g) 485,153 13,126 Mine Safety Appliances Co. (i) 680,846 6,612 Robbins & Myers, Inc. 500,066 5,650 Sun Hydraulics, Inc. 142,550 14,827 Veeco Instruments, Inc. (a) 247,611 7,096 Vicor Corp. 110,627 14,836 Watts Water Technologies, Inc. Class A 442,113 14,017 X-Rite, Inc. (a) 162,878 --------------- 3,986,459 - ---------------------------------------------------------------------------------------------------------------------------------- Industrial Products - 0.0% 6,300 TAL International Group, Inc. 143,451 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance: Life - 0.4% 27,200 American Equity Investment Life Holding Co. 225,488 18,400 Citizens, Inc. (a)(i) 101,752 20,305 Delphi Financial Group, Inc. Class A 716,360 1,442 Kansas City Life Insurance Co. 62,338 862 National Western Life Insurance Co. Class A 178,753 52,100 The Phoenix Cos., Inc. 618,426 11,593 Presidential Life Corp. 202,993 25,300 Scottish Re Group Ltd. (a) 18,343 22,900 Universal American Financial Corp. (a) 586,011 --------------- 2,710,464 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance: Multi-Line - 1.1% 13,640 Alfa Corp. 295,579 35,700 Assured Guaranty Ltd. 947,478 6,186 CNA Surety Corp. (a) 122,421 11,009 Crawford & Co. Class B (a) 45,687 6,400 eHealth, Inc. (a) 205,504 2,600 EMC Insurance Group, Inc. 61,542 5,725 FBL Financial Group, Inc. Class A 197,684 4,100 Flagstone Reinsurance Holdings Ltd. 56,990 17,206 Hilb Rogal & Hobbs Co. 698,047 20,368 Horace Mann Educators Corp. 385,770 1,240 Independence Holding Co. 15,686 28,100 Max Capital Group Ltd. 786,519 11,600 Meadowbrook Insurance Group, Inc. (a) 109,156 48,000 Montpelier Re Holdings Ltd. 816,480 7,297 Pico Holdings, Inc. (a) 245,325 27,200 Platinum Underwriters Holdings Ltd. 967,232 17,800 Primus Guaranty Ltd. (a)(i) 124,778 11,800 Security Capital Assurance Ltd. (i) 45,902 17,355 Zenith National Insurance Corp. 776,289 --------------- 6,904,069 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance: 13,200 AmTrust Financial Services, Inc. 181,764 Property-Casualty - 1.8% 4,856 American Physicians Capital, Inc. 201,329 10,400 Amerisafe, Inc. (a) 161,304 12,679 Argo Group International Holdings Ltd. (a) 534,166 41,000 Aspen Insurance Holdings Ltd. 1,182,440 4,032 Baldwin & Lyons, Inc. Class B 110,718
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 1,100 CastlePoint Holdings, Ltd. $ 13,200 23,100 Commerce Group, Inc. 831,138 3,400 Darwin Professional Underwriters, Inc. (a) 82,178 4,344 Donegal Group, Inc. Class A 74,586 23,280 Employers Holdings, Inc. 389,009 3,000 Enstar Group Ltd. (a) 367,260 4,800 FPIC Insurance Group, Inc. (a) 206,304 3,977 First Acceptance Corp. (a) 16,783 6,900 First Mercury Financial Corp. (a) 168,360 32,500 Fremont General Corp. (a)(i) 113,750 6,400 Greenlight Capital Re Ltd. (a) 133,056 3,600 Hallmark Financial Services, Inc. (a) 57,096 5,962 Harleysville Group, Inc. 210,936 28,200 IPC Holdings, Ltd. 814,134 6,700 Infinity Property & Casualty Corp. 242,071 4,058 The Midland Co. 262,512 3,700 NYMAGIC, Inc. 85,581 3,300 National Interstate Corp. 109,230 6,400 Navigators Group, Inc. (a) 416,000 12,200 Odyssey Re Holdings Corp. 447,862 14,206 PMA Capital Corp. Class A (a) 116,773 15,123 ProAssurance Corp. (a) 830,555 9,854 RLI Corp. 559,609 7,700 Safety Insurance Group, Inc. 281,974 11,400 SeaBright Insurance Holdings, Inc. (a) 171,912 25,708 Selective Insurance Group, Inc. 591,027 5,512 State Auto Financial Corp. 144,966 9,900 Tower Group, Inc. 330,660 9,800 United America Indemnity, Ltd. (a) 195,216 10,400 United Fire & Casualty Co. 302,536 6,100 Validus Holdings Ltd. (a) 158,478 --------------- 11,096,473 - ----------------------------------------------------------------------------------------------------------------------------------- Investment Management 22,100 Alternative Asset Management Acquisition Corp. (a) 202,215 Companies - 0.9% 6,100 Ampal-American Israel Corp. Class A (a) 45,079 55,546 Apollo Investment Corp. 947,059 32,639 Ares Capital Corp. 477,509 10,600 Calamos Asset Management, Inc. Class A 315,668 1,300 Capital Southwest Corp. 153,920 7,200 Cohen & Steers, Inc. (i) 215,784 7,600 Cowen Group, Inc. (a) 72,276 5,600 Epoch Holding Corp. 81,984 11,700 FBR Capital Markets Corp. (a) 112,086 2,496 GAMCO Investors, Inc. Class A 172,723 6,200 Kohlberg Capital Corp. 74,400 27,200 MCG Capital Corp. 315,248 9,923 NGP Capital Resources Co. (i) 155,096 16,800 National Financial Partners Corp. 766,248 17,000 NexCen Brands, Inc. (a) 82,280 1,000 Pzena Investment Management, Inc. Class A 11,400 9,400 TICC Capital Corp. 86,762
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 4,300 U.S. Global Investors, Inc. (i) $ 71,638 9,600 W.P. Stewart & Co. Ltd. (i) 49,056 39,200 Waddell & Reed Financial, Inc. Class A 1,414,728 --------------- 5,823,159 - ---------------------------------------------------------------------------------------------------------------------------------- Jewelry, Watches & 3,500 FGX International Holdings Ltd. (a) 41,475 Gemstones - 0.2% 20,300 Fossil, Inc. (a) 852,194 7,500 Movado Group, Inc. 189,675 --------------- 1,083,344 - ---------------------------------------------------------------------------------------------------------------------------------- Leisure Time - 0.4% 32,100 Callaway Golf Co. (g) 559,503 14,900 Great Wolf Resorts, Inc. (a) 146,169 14,700 Life Time Fitness, Inc. (a)(i) 730,296 15,100 Premier Exhibitions, Inc. (a)(i) 165,194 34,900 Six Flags, Inc. (a)(i) 70,847 3,800 Steinway Musical Instruments, Inc. 104,766 11,100 Sturm Ruger & Co., Inc. (a) 91,908 9,500 Town Sports International Holdings, Inc. (a) 90,820 14,156 Vail Resorts, Inc. (a) 761,734 9,100 West Marine, Inc. (a) 81,718 --------------- 2,802,955 - ---------------------------------------------------------------------------------------------------------------------------------- Machine Tools - 0.0% 2,700 Hurco Companies, Inc. (a) 117,855 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery & 18,790 Applied Industrial Technologies, Inc. 545,286 Engineering - 0.1% - ---------------------------------------------------------------------------------------------------------------------------------- Machinery: Agricultural - 0.1% 4,550 Gehl Co. (a) 72,982 5,013 Lindsay Manufacturing Co. (i) 354,369 --------------- 427,351 - - --------------------------------------------------------------------------------------------------------------------------------- Machinery: Construction & 8,800 A.S.V., Inc. (a)(d)(i) 121,880 Handling - 0.1% 8,817 Astec Industries, Inc. (a) 327,904 2,387 NACCO Industries, Inc. Class A 237,960 --------------- 687,744 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery: Engines - 0.1% 23,200 Briggs & Stratton Corp. (i) 525,712 13,000 Raser Technologies, Inc. (a)(i) 193,050 --------------- 718,762 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery: 24,700 Actuant Corp. Class A 840,047 Industrial/Specialty - 0.8% 3,500 Altra Holdings, Inc. (a) 58,205 6,800 Chart Industries, Inc. (a) 210,120 9,000 Columbus McKinnon Corp. (a) 293,580 9,700 EnPro Industries, Inc. (a) 297,305 5,500 Hardinge, Inc. 92,290 7,270 Kadant, Inc. (a) 215,701 6,400 Middleby Corp. (a) 490,368 15,710 Nordson Corp. 910,552 7,928 Tecumseh Products Co. Class A (a) 185,594 7,274 Tennant Co. 322,165 2,500 Twin Disc, Inc. 176,925 13,979 Woodward Governor Co. 949,873 --------------- 5,042,725 - --------------------------------------------------------------------------------------------------------------------------------- Machinery: Oil Well 10,200 Allis-Chalmers Energy, Inc. (a) 150,450 Equipment & Services - 1.6% 17,400 Basic Energy Services, Inc. (a)(i) 381,930 9,602 CARBO Ceramics, Inc. 357,194 17,375 Cal Dive International, Inc. (a)(i) 230,045 20,200 Complete Production Services, Inc. (a) 362,994
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 12,476 Dril-Quip, Inc. (a) $ 694,414 27,972 Exterran Holdings, Inc. (a) 2,288,110 8,600 Flotek Industries, Inc. (a)(i) 309,944 5,817 Gulf Island Fabrication, Inc. 184,457 9,940 Hornbeck Offshore Services, Inc. (a) 446,803 7,100 Lufkin Industries, Inc. 406,759 8,700 NATCO Group, Inc. Class A (a) 471,105 42,820 Newpark Resources, Inc. (a) 233,369 23,000 Oil States International, Inc. (a) 784,760 49,481 Parker Drilling Co. (a) 373,582 14,000 RPC, Inc. (i) 163,940 16,100 Sulphco, Inc. (a)(i) 84,042 5,500 Superior Offshore International, Inc. (a) 27,610 7,600 Superior Well Services, Inc. (a) 161,272 2,900 T-3 Energy Services, Inc. (a) 136,329 4,600 Trico Marine Services, Inc. (a) 170,292 6,000 Union Drilling, Inc. (a) 94,620 14,257 W-H Energy Services, Inc. (a) 801,386 17,300 Willbros Group, Inc. (a) 662,417 --------------- 9,977,824 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery: Specialty - 0.4% 17,400 Bucyrus International, Inc. 1,729,386 5,100 Cascade Corp. 236,946 17,800 Flow International Corp. (a) 165,896 9,641 Semitool, Inc. (a)(i) 83,684 10,000 TurboChef Technologies, Inc. (a) 165,000 --------------- 2,380,912 - - --------------------------------------------------------------------------------------------------------------------------------- Manufactured Housing - 0.1% 36,127 Champion Enterprises, Inc. (a) 340,316 4,205 Palm Harbor Homes, Inc. (a)(i) 44,363 4,001 Skyline Corp. 117,429 --------------- 502,108 - ---------------------------------------------------------------------------------------------------------------------------------- Manufacturing - 0.1% 22,759 Federal Signal Corp. 255,356 5,431 Standex International Corp. 94,771 --------------- 350,127 - ---------------------------------------------------------------------------------------------------------------------------------- Medical & Dental 9,900 Abaxis, Inc. (a) 355,014 Instruments & Supplies - 3.0% 12,600 Abiomed, Inc. (a) 195,804 27,700 Align Technology, Inc. (a) 462,036 33,700 American Medical Systems Holdings, Inc. (a)(i) 487,302 9,100 AngioDynamics, Inc. (a) 173,264 8,300 Bio-Rad Laboratories, Inc. Class A (a) 860,046 6,100 BioMimetic Therapeutics, Inc. (a) 105,957 13,428 CONMED Corp. (a) 310,321 3,700 Cantel Medical Corp. (a) 53,946 25,700 Cepheid, Inc. (a) 677,195 13,900 Conceptus, Inc. (a)(i) 267,436 8,800 CryoLife, Inc. (a) 69,960 6,200 Cutera, Inc. (a) 97,340 10,669 Cyberonics, Inc. (a)(i) 140,404 21,932 ev3, Inc. (a) 278,756 4,600 Hansen Medical, Inc. (a)(i) 137,724 8,300 I-Flow Corp. (a)(i) 130,974 6,550 ICU Medical, Inc. (a) 235,866
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 32,043 Immucor, Inc. (a) $ 1,089,142 3,900 Insulet Corp. (a) 91,572 13,622 Invacare Corp. 343,274 31,230 Inverness Medical Innovations, Inc. (a) 1,754,501 4,378 Landauer, Inc. 226,999 15,800 LifeCell Corp. (a) 681,138 6,050 Medical Action Industries, Inc. (a) 126,143 14,744 Mentor Corp. (i) 576,490 18,600 Meridian Bioscience, Inc. 559,488 13,110 Merit Medical Systems, Inc. (a) 182,229 7,900 Micrus Endovascular Corp. (a) 155,472 9,600 Northstar Neuroscience, Inc. (a) 89,280 16,100 NuVasive, Inc. (a) 636,272 22,059 OraSure Technologies, Inc. (a) 196,105 7,800 Orthofix International NV (a) 452,166 18,898 Owens & Minor, Inc. 801,842 31,473 PSS World Medical, Inc. (a) 615,927 8,800 Palomar Medical Technologies, Inc. (a) 134,816 14,400 Sonic Innovations, Inc. (a) 111,168 7,915 SonoSite, Inc. (a) 266,498 15,300 Spectranetic Corp. (a) 234,549 12,500 Stereotaxis, Inc. (a) 152,750 30,400 Steris Corp. 876,736 7,283 SurModics, Inc. (a)(i) 395,248 14,500 Symmetry Medical, Inc. (a) 252,735 25,147 Thoratec Corp. (a) 457,424 1,900 Trans1, Inc (a) 31,293 12,060 Ventana Medical Systems, Inc. (a) 1,051,994 4,324 Vital Signs, Inc. 221,043 11,600 Volcano Corp. (a) 145,116 15,476 West Pharmaceutical Services, Inc. 628,171 15,200 Wright Medical Group, Inc. (a) 443,384 --------------- 19,020,310 - ---------------------------------------------------------------------------------------------------------------------------------- Medical Services - 0.3% 5,100 Air Methods Corp. (a) 253,317 2,000 Genoptix, Inc. (a) 61,400 18,200 Magellan Health Services, Inc. (a) 848,666 12,997 Parexel International Corp. (a) 627,755 8,395 RehabCare Group, Inc. (a) 189,391 --------------- 1,980,529 - ---------------------------------------------------------------------------------------------------------------------------------- Metal Fabricating - 1.0% 3,500 Ampco-Pittsburgh Corp. 133,455 7,700 CIRCOR International, Inc. 356,972 300 Compx International, Inc. 4,386 5,700 Dynamic Materials Corp. 336,072 11,150 Encore Wire Corp. 177,508 5,000 Haynes International, Inc. (a) 347,500 9,000 Insteel Industries, Inc. 105,570 12,426 Kaydon Corp. 677,714 4,400 L.B. Foster Co. Class A (a) 227,612 53,660 Mueller Water Products, Inc. Series A (i) 510,843 4,900 Northwest Pipe Co. (a) 191,786 16,510 Quanex Corp. 856,869
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 10,000 RBC Bearings, Inc. (a) $ 434,600 10,513 RTI International Metals, Inc. (a) 724,661 9,700 Superior Essex, Inc. (a) 232,800 4,400 Trimas Corp. (a) 46,596 8,658 Valmont Industries, Inc. 771,601 --------------- 6,136,545 - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Minerals 5,600 A.M. Castle & Co. 152,264 Miscellaneous - 0.7% 10,973 AMCOL International Corp. 395,357 27,500 Apex Silver Mines Ltd. (a)(i) 419,100 9,211 Brush Engineered Materials, Inc. (a) 340,991 15,100 Compass Minerals International, Inc. 619,100 23,800 General Moly, Inc. (a) 277,746 46,644 GrafTech International Ltd. (a) 827,931 56,100 Hecla Mining Co. (a) 524,535 1,400 Horsehead Holding Corp. (a) 23,758 8,953 Minerals Technologies, Inc. 599,403 17,064 Stillwater Mining Co. (a) 164,838 24,500 Uranium Resources, Inc. (a) 305,760 --------------- 4,650,783 - ---------------------------------------------------------------------------------------------------------------------------------- Milling: Fruit & Grain 5,300 MGP Ingredients, Inc. (i) 49,926 Processing - 0.0% - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Business & 4,500 Core-Mark Holdings Co., Inc. (a) 129,240 Consumer Discretionary - 0.0% - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Consumer 9,500 Reddy Ice Holdings, Inc. 240,445 Staples - 0.0% - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Health 3,700 Animal Health International, Inc. (a) 45,510 Care - 0.0% - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Materials & 12,050 Ceradyne, Inc. (a) 565,506 Commodities - 0.2% 17,379 Symyx Technologies Inc. (a) 133,471 8,689 WD-40 Co. 329,921 --------------- 1,028,898 - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Materials & 14,038 Insituform Technologies, Inc. Class A (a) 207,762 Processing - 0.3% 12,000 Metal Management, Inc. 546,360 7,655 Rogers Corp. (a) 331,997 50,259 USEC, Inc. (a)(i) 452,331 10,000 Xerium Technologies, Inc. 52,000 --------------- 1,590,450 - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Producer 19,200 Blount International, Inc. (a) 236,352 Durables - 0.1% 4,600 Park-Ohio Holdings Corp. (a) 115,460 --------------- 351,812 - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous 5,300 Dice Holdings, Inc. (a) 42,347 Technology - 0.2% 14,500 IHS, Inc. Class A (a) 878,120 6,700 iRobot Corp. (a)(i) 121,136 6,400 Vocus, Inc. (a) 220,992 --------------- 1,262,595 - ---------------------------------------------------------------------------------------------------------------------------------- Multi-Sector Companies - 0.4% 11,600 Compass Diversified Holdings 172,840 26,571 GenCorp, Inc. (a) 309,818 3,700 GenTek Inc. (a) 108,299 11,594 Kaman Corp. Class A 426,775 10,699 Lancaster Colony Corp. 424,750
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 6,900 Raven Industries, Inc. $ 264,891 24,200 Walter Industries, Inc. 869,506 --------------- 2,576,879 - ---------------------------------------------------------------------------------------------------------------------------------- Office Furniture & 25,300 ACCO Brands Corp. (a) 405,812 Business Equipment - 0.3% 29,600 Herman Miller, Inc. 958,744 10,674 Kimball International, Inc. Class B 146,234 23,400 Knoll, Inc. 384,462 --------------- 1,895,252 - ---------------------------------------------------------------------------------------------------------------------------------- Offshore Drilling - 0.4% 12,254 Atwood Oceanics, Inc. (a) 1,228,341 6,800 Bois d'Arc Energy, Inc. (a) 134,980 38,720 Hercules Offshore, Inc. (a) 920,762 --------------- 2,284,083 - ---------------------------------------------------------------------------------------------------------------------------------- Oil: Crude Producers - 2.7% 1,365 APCO Argentina, Inc. 37,455 11,100 ATP Oil & Gas Corp. (a)(g) 560,994 14,300 Arena Resources, Inc. (a) 596,453 10,525 Atlas America, Inc. 622,869 24,700 BPZ Resources, Inc. (a)(i) 276,146 18,402 Berry Petroleum Co. Class A 817,969 14,500 Bill Barrett Corp. (a) 607,115 22,100 Brigham Exploration Co. (a) 166,192 12,500 Bronco Drilling Co., Inc. (a) 185,625 9,800 Callon Petroleum Co. (a) 161,210 11,400 Carrizo Oil & Gas, Inc. (a) 624,150 3,300 Clayton Williams Energy, Inc. (a) 102,828 20,757 Comstock Resources, Inc. (a) 705,738 6,500 Contango Oil & Gas Co. (a) 330,785 4,200 Delek US Holdings, Inc. 84,966 26,300 EXCO Resources, Inc. (a) 407,124 15,500 Edge Petroleum Corp. (a)(i) 91,915 24,800 Encore Acquisition Co. (a) 827,576 13,000 Energy Infrastructure Acquisition Corp. (a) 131,820 15,037 Energy Partners Ltd. (a) 177,587 19,600 FX Energy, Inc. (a) 111,328 19,400 GeoGlobal Resources, Inc. (a)(i) 96,030 4,200 Geokinetics, Inc. (a) 81,690 7,800 Goodrich Petroleum Corp. (a)(i) 176,436 87,043 Grey Wolf, Inc. (a) 463,939 10,100 Gulfport Energy Corp. (a) 184,426 16,700 Harvest Natural Resources, Inc. (a)(i) 208,750 38,600 Mariner Energy, Inc. (a) 883,168 17,600 McMoRan Exploration Co. (a) 230,384 38,911 Meridian Resource Corp. (a) 70,429 10,600 NTR Acquisition Co. (a) 100,700 59,400 Oilsands Quest, Inc. (a)(i) 242,352 18,200 Parallel Petroleum Corp. (a) 320,866 76,062 PetroHawk Energy Corp. (a) 1,316,633 7,100 Petroleum Development Corp. (a) 419,823 19,800 Petroquest Energy, Inc. (a) 283,140 21,700 Pioneer Drilling Co. (a) 257,796 5,249 Resource America, Inc. Class A 77,003 6,500 Rex Energy Corp. (a) 77,545
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 23,900 Rosetta Resources, Inc. (a) $ 473,937 12,378 Stone Energy Corp. (a) 580,652 14,017 Swift Energy Co. (a) 617,169 16,700 TXCO Resources, Inc. (a) 201,402 9,600 Toreador Resources Corp. (a)(i) 67,104 5,200 Venoco, Inc. (a) 103,636 18,910 VeraSun Energy Corp. (a)(i) 288,945 27,600 Warren Resources, Inc. (a) 389,988 19,610 Whiting Petroleum Corp. (a) 1,130,713 --------------- 16,972,501 - ---------------------------------------------------------------------------------------------------------------------------------- Oil: Integrated 30,700 Delta Petroleum Corp. (a)(i) 578,695 Domestic - 0.1% 5,800 GMX Resources Inc. (a)(i) 187,224 --------------- 765,919 - ---------------------------------------------------------------------------------------------------------------------------------- Oil: Integrated 25,700 Vaalco Energy, Inc. (a) 119,505 International - 0.0% - ---------------------------------------------------------------------------------------------------------------------------------- Paints & Coatings - 0.2% 20,676 Ferro Corp. 428,613 26,580 H.B. Fuller Co. 596,721 1,693 Kronos Worldwide, Inc. 29,543 --------------- 1,054,877 - ---------------------------------------------------------------------------------------------------------------------------------- Paper - 0.4% 25,144 AbitibiBowater, Inc. (i) 518,218 13,074 Albany International Corp. Class A 485,045 15,598 Buckeye Technologies, Inc. (a) 194,975 8,892 Chesapeake Corp. 46,149 11,700 Mercer International, Inc.-Sbi (a)(i) 91,611 2,650 Multi-Color Corp. 72,796 7,600 Neenah Paper, Inc. 221,540 21,301 P.H. Glatfelter Co. 326,118 15,580 Rock-Tenn Co. Class A 395,888 19,342 Wausau Paper Corp. 173,885 --------------- 2,526,225 - ---------------------------------------------------------------------------------------------------------------------------------- Photography - 0.0% 2,600 CPI Corp. 61,230 - ---------------------------------------------------------------------------------------------------------------------------------- Plastics - 0.0% 15,254 Spartech Corp. 215,081 - ---------------------------------------------------------------------------------------------------------------------------------- Pollution Control & 7,800 American Ecology Corp. 183,144 Environmental Services - 0.2% 34,600 Darling International, Inc. (a) 399,976 12,600 EnergySolutions, Inc. (a) 340,074 7,000 Fuel Tech, Inc. (a)(i) 158,550 18,746 Headwaters, Inc. (a)(i) 220,078 7,500 Team, Inc. (a) 274,350 --------------- 1,576,172 - ---------------------------------------------------------------------------------------------------------------------------------- Power Transmission 14,451 Regal-Beloit Corp. 649,572 Equipment - 0.1% - ---------------------------------------------------------------------------------------------------------------------------------- Printing & Copying 14,282 Bowne & Co., Inc. 251,363 Services - 0.3% 25,200 Cenveo, Inc. (a) 440,244 6,400 Schawk, Inc. 99,328 20,100 VistaPrint Ltd. (a) 861,285 --------------- 1,652,220 - ---------------------------------------------------------------------------------------------------------------------------------- Production Technology 16,157 ATMI, Inc. (a)(g) 521,063 Equipment - 1.1% 44,200 Axcelis Technologies, Inc. (a) 203,320 33,178 Brooks Automation, Inc. (a) 438,281 20,856 Cognex Corp. 420,248 40,468 Credence Systems Corp. (a) 97,933
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 15,000 Cymer, Inc. (a)(g) $ 583,950 8,931 Dionex Corp. (a) 740,023 12,661 Electro Scientific Industries, Inc. (a) 251,321 54,399 Entegris, Inc. (a) 469,463 13,690 Esterline Technologies Corp. (a) 708,458 17,655 FEI Co. (a) 438,374 10,900 Intevac, Inc. (a) 158,486 27,656 Kulicke & Soffa Industries, Inc. (a) 189,720 33,103 LTX Corp. (a) 105,268 8,600 MTS Systems Corp. 366,962 22,899 Mattson Technology, Inc. (a) 196,015 17,479 Photronics, Inc. (a) 217,963 14,200 Rofin-Sinar Technologies, Inc. (a) 683,162 13,973 Rudolph Technologies, Inc. (a) 158,174 9,300 Ultra Clean Holdings, Inc. (a) 113,460 12,590 Ultratech, Inc. (a) 142,771 --------------- 7,204,415 - ---------------------------------------------------------------------------------------------------------------------------------- Publishing: 4,600 Consolidated Graphics, Inc. (a) 219,972 Miscellaneous - 0.2% 4,050 Courier Corp. 133,691 11,040 GateHouse Media, Inc. (i) 96,931 13,782 Martha Stewart Living Omnimedia, Inc. Class A (a)(i) 127,759 11,207 Playboy Enterprises, Inc. Class B (a) 102,208 22,300 Primedia, Inc. 189,550 13,260 Scholastic Corp. (a) 462,641 --------------- 1,332,752 - ---------------------------------------------------------------------------------------------------------------------------------- Publishing: 39,600 Belo Corp. Class A 690,624 Newspapers - 0.3% 4,300 Dolan Media Co. (a) 125,431 21,100 Journal Communications, Inc. Class A 188,634 22,400 Lee Enterprises, Inc. 328,160 10,600 Media General, Inc. Class A 225,250 38,829 Sun-Times Media Group, Inc. (a) 85,424 --------------- 1,643,523 - ---------------------------------------------------------------------------------------------------------------------------------- Radio & TV 18,600 CKX, Inc. (a) 223,200 Broadcasters - 0.3% 86,430 Citadel Broadcasting Corp. (i) 178,046 14,400 Cox Radio, Inc. Class A (a) 174,960 16,600 Cumulus Media, Inc. Class A (a) 133,464 19,200 Emmis Communications Corp. Class A (a) 73,920 15,600 Entercom Communications Corp. 213,564 2,200 Fisher Communications, Inc. (a) 83,512 18,200 Gray Television, Inc. 145,964 11,800 Lin TV Corp. Class A (a) 143,606 5,600 Nexstar Broadcasting Group, Inc. Class A (a) 51,184 38,000 Radio One, Inc. Class D (a) 90,060 3,383 Salem Communications Corp. Class A 22,294 23,564 Sinclair Broadcast Group, Inc. Class A (i) 193,460 17,484 Spanish Broadcasting System, Inc. Class A (a)(i) 32,345 35,400 Westwood One, Inc. 70,446 10,896 World Wrestling Entertainment, Inc. 160,825 --------------- 1,990,850 - ---------------------------------------------------------------------------------------------------------------------------------- Railroad Equipment - 0.2% 3,800 American Railcar Industries, Inc. (i) 73,150 5,800 Freightcar America, Inc. 203,000
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 7,000 Greenbrier Cos., Inc. (i) $ 155,820 21,439 Westinghouse Air Brake Technologies Corp. 738,359 --------------- 1,170,329 - ---------------------------------------------------------------------------------------------------------------------------------- Railroads - 0.1% 15,275 Genesee & Wyoming, Inc. Class A (a) 369,197 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate - 0.2% 800 AMREP Corp. (i) 24,440 2,800 Avatar Holdings, Inc. (a)(i) 117,096 7,000 Bluegreen Corp. (a) 50,330 2,500 Consolidated-Tomoka Land Co. 156,700 15,000 Dupont Fabros Technology, Inc. 294,000 10,300 Grubb & Ellis Co. 66,023 7,100 HFF, Inc. Class A (a) 54,954 22,672 Hilltop Holdings, Inc. (a) 247,578 4,700 Quadra Realty Trust, Inc. 37,788 8,100 Resource Capital Corp. 75,411 1,500 Stratus Properties, Inc. (a) 50,910 4,415 Tejon Ranch Co. (a) 180,353 13,200 Thomas Properties Group, Inc. 142,296 --------------- 1,497,879 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Investment 15,501 Acadia Realty Trust 396,981 Trusts (REITs) - 5.3% 3,800 Agree Realty Corp. 114,380 22,700 Alesco Financial, Inc. (i) 74,456 867 Alexander's, Inc. (a) 306,268 14,876 Alexandria Real Estate Equities, Inc. 1,512,443 12,850 American Campus Communities, Inc. 345,023 56,600 American Financial Realty Trust (g) 453,932 29,600 Anthracite Capital, Inc. (c)(g) 214,304 22,600 Anworth Mortgage Asset Corp. 186,676 7,000 Arbor Realty Trust, Inc. 112,770 49,980 Ashford Hospitality Trust, Inc. (g) 359,356 9,900 Associated Estates Realty Corp. 93,456 3,800 BRT Realty Trust (i) 58,140 28,720 BioMed Realty Trust, Inc. (i) 665,442 10,100 CBRE Realty Finance, Inc. 53,934 17,400 CapLease, Inc. 146,508 6,000 Capital Trust, Inc. (i) 183,900 21,100 Cedar Shopping Centers, Inc. 215,853 13,900 Chimera Investment Corp. 248,532 18,300 Corporate Office Properties Trust (g) 576,450 19,100 Cousins Properties, Inc. (i) 422,110 9,900 Crystal River Capital, Inc.(i) 142,956 76,010 DCT Industrial Trust, Inc. 707,653 20,900 Deerfield Capital Corp. (i) 167,200 44,150 DiamondRock Hospitality Co. 661,367 26,340 Digital Realty Trust, Inc. 1,010,666 11,127 Eastgroup Properties, Inc. 465,665 15,300 Education Realty Trust, Inc. 171,972 13,080 Entertainment Properties Trust 614,760 9,494 Equity Lifestyle Properties, Inc. 433,591 17,200 Equity One, Inc. 396,116 30,350 Extra Space Storage, Inc. 433,702 29,270 FelCor Lodging Trust, Inc. 456,319
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 21,200 First Industrial Realty Trust, Inc. (i) $ 733,520 12,500 First Potomac Realty Trust 216,125 25,300 Franklin Street Properties Corp. 374,440 63,600 Friedman Billings Ramsey Group, Inc. Class A 199,704 15,690 GMH Communities Trust 86,609 6,800 Getty Realty Corp. 181,424 17,856 Glimcher Realty Trust 255,162 10,550 Gramercy Capital Corp. (i) 256,471 23,700 Healthcare Realty Trust, Inc. 601,743 17,700 Hersha Hospitality Trust 168,150 26,500 Highwoods Properties, Inc. 778,570 15,520 Home Properties, Inc. 696,072 40,300 IMPAC Mortgage Holdings, Inc. (i) 22,568 27,400 Inland Real Estate Corp. 387,984 23,100 Investors Real Estate Trust (i) 207,207 12,700 JER Investors Trust, Inc. (i) 136,779 9,940 Kite Realty Group Trust 151,784 9,600 LTC Properties, Inc. 240,480 18,720 LaSalle Hotel Properties 597,168 30,992 Lexington Corporate Properties Trust 450,624 20,300 Luminent Mortgage Capital, Inc. (i) 15,834 57,300 MFA Mortgage Investments, Inc. 530,025 16,600 Maguire Properties, Inc. (i) 489,202 24,700 Medical Properties Trust, Inc. 251,693 16,480 Meruelo Maddux Properties, Inc. (a) 65,920 11,929 Mid-America Apartment Communities, Inc. 509,965 6,000 Mission West Properties, Inc. 57,060 9,629 National Health Investors, Inc. 268,649 32,375 National Retail Properties, Inc. 756,928 41,859 Nationwide Health Properties, Inc. 1,313,117 20,300 Newcastle Investment Corp. (i) 263,088 26,700 NorthStar Realty Finance Corp. (i) 238,164 100 Novastar Financial, Inc. (a)(i) 289 29,200 Omega Healthcare Investors, Inc. 468,660 6,708 PS Business Parks, Inc. 352,505 7,504 Parkway Properties, Inc. 277,498 15,132 Pennsylvania Real Estate Investment Trust 449,118 19,186 Post Properties, Inc. 673,812 18,247 Potlatch Corp. 810,897 29,810 RAIT Investment Trust (i) 256,962 9,400 Ramco-Gershenson Properties Trust 200,878 45,300 Realty Income Corp. (i) 1,224,006 10,795 Redwood Trust, Inc. (i) 369,621 5,422 Saul Centers, Inc. 289,697 39,414 Senior Housing Properties Trust 893,910 9,180 Sovran Self Storage, Inc. 368,118 34,800 Strategic Hotel Capital, Inc. 582,204 8,343 Sun Communities, Inc. 175,787 29,200 Sunstone Hotel Investors, Inc. 534,068 14,622 Tanger Factory Outlet Centers, Inc. 551,396 2,875 Tarragon Corp. (a)(i) 4,313
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 22,170 U-Store-It Trust $ 203,077 5,727 Universal Health Realty Income Trust 202,965 9,200 Urstadt Biddle Properties, Inc. Class A 142,600 21,065 Washington Real Estate Investment Trust 661,652 17,900 Winthrop Realty Trust, Inc. 94,691 --------------- 33,693,834 - ---------------------------------------------------------------------------------------------------------------------------------- Recreational Vehicles & 6,043 Arctic Cat, Inc. 72,153 Boats - 0.2% 27,799 Fleetwood Enterprises, Inc. (a)(i) 166,238 2,075 Marine Products Corp. 14,546 13,024 Monaco Coach Corp. 115,653 15,800 Polaris Industries, Inc. (i) 754,766 13,490 Winnebago Industries, Inc. (i) 283,560 --------------- 1,406,916 - - --------------------------------------------------------------------------------------------------------------------------------- Rental & Leasing Services: 5,853 Electro Rent Corp. 86,917 Commercial - 0.1% 8,600 H&E Equipment Services, Inc. (a) 162,368 11,910 McGrath RentCorp 306,683 --------------- 555,968 - ---------------------------------------------------------------------------------------------------------------------------------- Rental & Leasing Services: 19,693 Aaron Rents, Inc. (g) 378,893 Consumer - 0.2% 4,600 Amerco, Inc. (a)(i) 302,128 10,695 Dollar Thrifty Automotive Group, Inc. (a) 253,258 9,500 RSC Holdings, Inc. (a) 119,225 33,000 Rent-A-Center, Inc. (a) 479,160 --------------- 1,532,664 - ---------------------------------------------------------------------------------------------------------------------------------- Restaurants - 1.3% 13,400 AFC Enterprises, Inc. (a) 151,688 7,900 BJ's Restaurants, Inc. (a) 128,454 3,400 Benihana, Inc. Class A (a) 43,350 16,280 Bob Evans Farms, Inc. 438,420 7,550 Buffalo Wild Wings, Inc. (a) 175,311 10,400 CBRL Group, Inc. 336,856 13,050 CEC Entertainment, Inc. (a) 338,778 26,200 CKE Restaurants, Inc. 345,840 14,950 California Pizza Kitchen, Inc. (a) 232,771 4,300 Carrols Restaurant Group, Inc. (a) 41,194 14,800 Chipotle Mexican Grill, Inc. Class B (a) 1,821,140 47,100 Denny's Corp. (a) 176,625 20,850 Domino's Pizza, Inc. 275,846 7,148 IHOP Corp. (i) 261,474 27,536 Jack in the Box, Inc. (a) 709,603 27,500 Jamba, Inc. (a)(i) 101,750 28,200 Krispy Kreme Doughnuts, Inc. (a)(i) 89,112 6,096 Landry's Restaurants, Inc. (i) 120,091 7,200 McCormick & Schmick's Seafood Restaurants, Inc. (a) 85,896 5,500 Morton's Restaurant Group, Inc. (a) 51,315 12,184 O'Charleys, Inc. 182,516 10,508 P.F. Chang's China Bistro, Inc. (a)(i) 240,003 10,896 Papa John's International, Inc. (a) 247,339 6,800 Red Robin Gourmet Burgers, Inc. (a) 217,532 24,700 Ruby Tuesday, Inc. 240,825 9,500 Ruth's Chris Steak House, Inc. (a) 84,930 29,220 Sonic Corp. (a) 639,918 10,728 The Steak n Shake Co. (a) 116,935
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 21,500 Texas Roadhouse, Inc. Class A (a) $ 237,790 26,550 Triarc Cos. 232,578 --------------- 8,365,880 - ---------------------------------------------------------------------------------------------------------------------------------- Retail - 2.9% 13,024 1-800-FLOWERS.COM, Inc. Class A (a) 113,700 22,400 99 Cents Only Stores (a) 178,304 9,800 A.C. Moore Arts & Crafts, Inc. (a) 134,750 12,300 Asbury Automotive Group, Inc. 185,115 31,375 Aeropostale, Inc. (a) 831,438 10,900 Big 5 Sporting Goods Corp. 157,178 9,600 bebe Stores, Inc. 123,456 86,200 Blockbuster, Inc. Class A (a)(i) 336,180 5,800 Blue Nile, Inc. (a)(i) 394,748 5,200 The Bon-Ton Stores, Inc. (i) 49,348 8,800 Books-A-Million, Inc. 104,896 24,700 Borders Group, Inc. 263,055 19,127 Brown Shoe Co., Inc. 290,156 5,673 The Buckle, Inc. 187,209 6,300 Build-A-Bear Workshop, Inc. (a) 87,885 20,334 CSK Auto Corp. (a) 101,873 18,400 Cabela's, Inc. Class A (a)(i) 277,288 7,050 Cache, Inc. (a) 65,847 15,700 Casual Male Retail Group, Inc. (a) 81,326 12,995 The Cato Corp. Class A 203,501 33,234 Central Garden & Pet Co. Class A (a) 178,134 12,000 Charlotte Russe Holding, Inc. (a) 193,800 57,240 Charming Shoppes, Inc. (a) 309,668 9,585 The Children's Place Retail Stores, Inc. (a) 248,539 15,728 Christopher & Banks Corp. 180,086 30,200 Collective Brands, Inc. (a) 525,178 5,900 Conn's, Inc. (a)(i) 100,949 22,890 Dress Barn, Inc. (a) 286,354 10,900 Eddie Bauer Holdings, Inc. (a) 69,215 16,100 Ezcorp, Inc. (a) 181,769 9,400 FTD Group, Inc. 121,072 19,135 Fred's, Inc. 184,270 9,700 GSI Commerce, Inc. (a) 189,150 8,200 Gaiam, Inc. (a) 243,376 5,800 Gander Mountain Co. (a)(i) 28,594 10,738 Genesco, Inc. (a) 405,896 11,132 Group 1 Automotive, Inc. 264,385 12,258 Gymboree Corp. (a) 373,379 15,175 Hibbett Sports, Inc. (a) 303,197 23,181 Hot Topic, Inc. (a) 134,913 22,598 Insight Enterprises, Inc. (a) 412,188 12,205 Jo-Ann Stores, Inc. (a) 159,641 7,533 Jos. A. Bank Clothiers, Inc. (a)(i) 214,314 1,788 Lawson Products, Inc. 67,801 6,800 Lithia Motors, Inc. Class A 93,364 7,700 MarineMax, Inc. (a)(i) 119,350 25,300 Men's Wearhouse, Inc. 682,594 10,800 New York & Co. (a) 68,904
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 7,800 Overstock.com, Inc. (a)(i) $ 121,134 2,600 PC Connection, Inc. (a) 29,510 30,600 Pacific Sunwear of California, Inc. (a) 431,766 10,800 The Pantry, Inc. (a) 282,204 19,310 The Pep Boys - Manny, Moe & Jack 221,679 11,500 PetMed Express, Inc. (a) 139,150 42,199 Pier 1 Imports, Inc. (a) 220,701 5,400 PriceSmart, Inc. 162,324 17,516 Priceline.com, Inc. (a) 2,011,888 9,000 Retail Ventures, Inc. (a) 45,810 14,500 Rush Enterprises, Inc. Class A (a) 263,610 6,647 Russ Berrie & Co., Inc. (a) 108,745 40,000 Sally Beauty Co., Inc. (a) 362,000 10,054 School Specialty, Inc. (a) 347,366 6,900 Shutterfly, Inc. (a) 176,778 14,700 Sonic Automotive, Inc. 284,592 18,250 Stage Stores, Inc. 270,100 8,803 Stamps.com, Inc. (a) 107,221 13,724 Stein Mart, Inc. 65,052 1,500 Syms Corp. 22,650 3,800 Systemax, Inc. (i) 77,216 11,100 The Talbots, Inc. (i) 131,202 14,590 Tuesday Morning Corp. 73,971 10,766 Tween Brands, Inc. (a) 285,084 20,080 United Natural Foods, Inc. (a) 636,938 17,256 ValueVision Media, Inc. Class A (a) 108,540 7,000 Volcom, Inc. (a) 154,210 41,200 The Wet Seal, Inc. Class A (a) 95,996 18,700 Zale Corp. (a)(i) 300,322 8,200 Zumiez, Inc. (a)(i) 199,752 --------------- 18,244,844 - ---------------------------------------------------------------------------------------------------------------------------------- Savings & Loan - 1.1% 9,337 Anchor Bancorp Wisconsin, Inc. 219,606 26,738 Bank Mutual Corp. 282,620 21,542 BankAtlantic Bancorp, Inc. Class A 88,322 16,973 BankUnited Financial Corp. Class A (i) 117,114 5,300 Berkshire Hills Bancorp, Inc. 137,800 31,387 Brookline Bancorp, Inc. 318,892 13,649 Dime Community Bancshares, Inc. 174,298 10,000 Downey Financial Corp. (i) 311,100 5,826 First Financial Holdings, Inc. 159,749 6,600 First Indiana Corp. 211,200 49,053 First Niagara Financial Group, Inc. 590,598 8,600 First Place Financial Corp. 120,314 5,900 FirstFed Financial Corp. (a)(i) 211,338 21,350 Flagstar Bancorp, Inc. (i) 148,810 10,275 Flushing Financial Corp. 164,914 3,378 Great Southern Bancorp, Inc. 74,181 6,150 Horizon Financial Corp. 107,256 5,850 IBERIABANK Corp. 273,488 3,700 Imperial Capital Bancorp, Inc. 67,710 11,000 KNBT Bancorp, Inc. 169,620
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 7,400 Kearny Financial Corp. $ 88,134 700 NASB Financial, Inc. 18,214 53,000 NewAlliance Bancshares, Inc. 610,560 7,267 Northwest Bancorp, Inc. 193,084 13,965 Ocwen Financial Corp. (a) 77,366 11,011 PFF Bancorp, Inc. 132,572 29,058 Provident Financial Services, Inc. 419,016 18,789 Provident New York Bancorp 242,754 3,500 Rockville Financial, Inc. 42,700 2,700 Roma Financial Corp. 42,363 24,343 Sterling Financial Corp. 408,719 9,300 TierOne Corp. 205,995 9,061 United Community Financial Corp. 50,017 5,800 ViewPoint Financial Group 95,874 39,633 W Holding Co., Inc. (i) 47,956 4,512 Westfield Financial, Inc. 43,766 --------------- 6,668,020 - ---------------------------------------------------------------------------------------------------------------------------------- Scientific Equipment & 17,635 Newport Corp. (a) 225,552 Suppliers - 0.2% 14,235 Varian, Inc. (a) 929,546 --------------- 1,155,098 - ---------------------------------------------------------------------------------------------------------------------------------- Securities Brokerage & 22,145 Centerline Holding Co. (i) 168,745 Services - 0.5% 7,300 GFI Group, Inc. (a) 698,756 12,400 KBW, Inc. (a) 317,316 46,500 Knight Capital Group, Inc. Class A (a)(g) 669,600 20,500 LaBranche & Co., Inc. (a) 103,320 49,900 Ladenburg Thalmann Financial Services, Inc. (a)(i) 105,788 13,500 MarketAxess Holdings, Inc. (a) 173,205 20,400 optionsXpress Holdings, Inc. 689,928 5,200 Penson Worldwide, Inc. (a) 74,620 9,706 SWS Group, Inc. 122,975 10,100 Thomas Weisel Partners Group, Inc. (a) 138,673 --------------- 3,262,926 - ---------------------------------------------------------------------------------------------------------------------------------- Services: Commercial - 3.3% 20,370 ABM Industries, Inc. 415,344 16,405 AMN Healthcare Services, Inc. (a) 281,674 10,961 Administaff, Inc. 309,977 8,500 The Advisory Board Co. (a) 545,615 8,300 Ambassadors Group, Inc. 151,973 5,400 Ambassadors International, Inc. (i) 78,732 4,400 Barrett Business Services, Inc. 79,244 22,753 CBIZ, Inc. (a) 223,207 7,001 CDI Corp. 169,844 5,600 CRA International, Inc. (a) 266,616 10,978 Casella Waste Systems, Inc. (a) 143,153 11,172 Chemed Corp. 624,291 9,050 CoStar Group, Inc. (a) 427,613 13,092 Coinstar, Inc. (a) 368,540 5,200 Cornell Cos., Inc. (a) 121,264 16,000 Cross Country Healthcare, Inc. (a) 227,840 13,800 Diamond Management & Technology Consultants, Inc. 100,326 12,200 DynCorp. International, Inc. (a) 327,936
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 7,704 Exponent, Inc. (a) $ 208,316 21,741 FTI Consulting, Inc. (a) 1,340,115 4,200 First Advantage Corp. Class A (a) 69,174 5,881 Forrester Research, Inc. (a) 164,786 10,177 G&K Services, Inc. Class A 381,841 23,500 The Geo Group, Inc. (a) 658,000 13,300 Gevity HR, Inc. 102,277 9,620 Global Sources Ltd. (a) 271,476 23,700 Harris Interactive, Inc. (a) 100,962 8,558 Heidrick & Struggles International, Inc. 317,587 21,200 Home Solutions of America, Inc. (a)(i) 21,200 12,300 Hudson Highland Group, Inc. (a) 103,443 4,400 ICT Group, Inc. (a) 52,580 47,000 IKON Office Solutions, Inc. 611,940 14,000 Jackson Hewitt Tax Service, Inc. 444,500 11,168 Kelly Services, Inc. Class A 208,395 13,100 Kforce, Inc. (a) 127,725 13,200 The Knot, Inc. (a) 210,408 20,968 Korn/Ferry International (a) 394,618 4,600 Liquidity Services, Inc. (a) 59,340 7,604 MAXIMUS, Inc. 293,590 44,605 MPS Group, Inc. (a) 487,979 7,242 Midas, Inc. (a) 106,168 8,750 Monro Muffler, Inc. 170,538 22,523 Navigant Consulting, Inc. (a) 307,889 19,100 Net 1 UEPS Technologies, Inc. (a) 560,776 17,100 On Assignment, Inc. (a) 119,871 13,400 Orbitz Worldwide, Inc. (a) 113,900 23,164 PHH Corp. (a) 408,613 11,300 People Support, Inc. (a) 154,584 13,900 Perficient, Inc. (a) 218,786 4,560 Pre-Paid Legal Services, Inc. (a) 252,396 5,600 The Providence Service Corp. (a) 157,584 20,700 Regis Corp. 578,772 23,032 Resources Connection, Inc. 418,261 18,453 Rollins, Inc. 354,298 23,000 Source Interlink Cos., Inc. (a)(i) 66,240 24,529 Spherion Corp. (a) 178,571 1,700 Standard Parking Corp. (a) 82,433 7,800 Steiner Leisure Ltd. (a) 344,448 19,589 TeleTech Holdings, Inc. (a) 416,658 27,231 Tetra Tech, Inc. (a) 585,467 3,700 Travelzoo, Inc. (a) 50,616 21,122 TrueBlue, Inc. (a) 305,847 5,800 Unifirst Corp. 220,400 9,600 Viad Corp. 303,168 6,138 Volt Information Sciences, Inc. (a) 112,080 32,027 Waste Connections, Inc. (a) 989,634 2,600 Waste Industries USA, Inc. 94,380 8,233 Waste Services, Inc. (a) 70,557
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 19,915 Watson Wyatt Worldwide, Inc. $ 924,255 13,400 World Fuel Services Corp. 389,002 --------------- 20,549,633 - ---------------------------------------------------------------------------------------------------------------------------------- Shipping - 0.7% 24,200 American Commercial Lines, Inc. (a)(g) 393,008 4,700 Arlington Tankers Ltd. (i) 104,011 10,400 Double Hull Tankers, Inc. 127,296 21,900 Eagle Bulk Shipping, Inc. 581,445 9,400 Genco Shipping & Trading Ltd. 514,744 12,000 General Maritime Corp. (i) 293,400 16,400 Golar LNG Ltd. 362,768 10,800 Gulfmark Offshore, Inc. (a) 505,332 15,800 Horizon Lines, Inc. Class A 294,512 9,000 Knightsbridge Tankers Ltd. (i) 217,350 12,900 Nordic American Tanker Shipping Ltd. (i) 423,378 14,500 Ship Finance International Ltd. (i) 401,795 2,100 TBS International Ltd. (a) 69,426 --------------- 4,288,465 - ---------------------------------------------------------------------------------------------------------------------------------- Shoes - 0.5% 6,500 DSW, Inc. Class A (a)(i) 121,940 5,700 Deckers Outdoor Corp. (a) 883,842 20,966 The Finish Line, Inc. Class A 50,738 2,800 Heelys, Inc. (a)(i) 19,488 23,700 Iconix Brand Group, Inc. (a) 465,942 12,296 K-Swiss, Inc. Class A 222,558 4,992 Kenneth Cole Productions, Inc. Class A 87,310 5,400 Shoe Carnival, Inc. (a) 76,194 9,355 Skechers U.S.A., Inc. Class A (a) 182,516 9,968 Steven Madden Ltd. (a) 199,360 20,600 Timberland Co. Class A (a) 372,448 2,400 Weyco Group, Inc. 66,000 23,808 Wolverine World Wide, Inc. 583,772 --------------- 3,332,108 - ---------------------------------------------------------------------------------------------------------------------------------- Steel - 0.3% 5,100 Claymont Steel, Inc. (a) 119,085 4,400 Esmark, Inc. (a) 62,172 9,834 Gibraltar Industries, Inc. 151,640 3,300 Olympic Steel, Inc. 104,643 10,250 Schnitzer Steel Industries, Inc. Class A 708,583 3,600 Universal Stainless & Alloy Products, Inc. (a) 128,052 32,300 Worthington Industries, Inc. 577,524 --------------- 1,851,699 - ---------------------------------------------------------------------------------------------------------------------------------- Sugar - 0.0% 4,800 Imperial Sugar Co. New Shares (i) 90,096 - ---------------------------------------------------------------------------------------------------------------------------------- Telecommunications 400 Airvana, Inc. (a) 2,172 Equipment - 0.6% 70,190 Arris Group, Inc. (a) 700,502 7,285 Audiovox Corp. Class A (a) 90,334 20,961 Belden, Inc. 932,764 17,500 Mastec, Inc. (a) 177,975 6,300 OpNext, Inc. (a) 55,755 22,499 Plantronics, Inc. 584,974 40,900 Polycom, Inc. (a) 1,136,202 61,477 Powerwave Technologies, Inc. (a)(i) 247,752
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 600 Preformed Line Products Co. $ 35,700 22,800 Symmetricom, Inc. (a) 107,388 --------------- 4,071,518 - ---------------------------------------------------------------------------------------------------------------------------------- Textile Products - 0.1% 25,721 Interface, Inc. Class A 419,767 - ---------------------------------------------------------------------------------------------------------------------------------- Textiles Apparel 27,300 Carter's, Inc. (a) 528,255 Manufacturers - 0.7% 4,200 Cherokee, Inc. (i) 135,534 6,600 Columbia Sportswear Co. 290,994 7,300 G-III Apparel Group, Ltd. (a) 107,821 18,170 J. Crew Group, Inc. (a) 875,976 11,282 Kellwood Co. 187,732 6,100 Lululemon Athletica, Inc. (a) 288,957 11,200 Maidenform Brands, Inc. (a) 151,536 7,042 Oxford Industries, Inc. 181,472 6,450 Perry Ellis International, Inc. (a) 99,201 54,200 Quiksilver, Inc. (a) 465,036 5,500 True Religion Apparel, Inc. (a)(i) 117,425 10,700 Under Armour, Inc. Class A (a)(i) 467,269 21,600 The Warnaco Group, Inc. (a) 751,680 --------------- 4,648,888 - ---------------------------------------------------------------------------------------------------------------------------------- Tires & Rubber - 0.1% 28,900 Cooper Tire & Rubber Co. 479,162 10,500 Titan International, Inc. 328,230 --------------- 807,392 - ---------------------------------------------------------------------------------------------------------------------------------- Tobacco - 0.2% 45,555 Alliance One International, Inc. (a) 185,409 7,520 Schweitzer-Mauduit International, Inc. 194,843 12,656 Universal Corp. 648,240 15,244 Vector Group Ltd. (i) 305,795 --------------- 1,334,287 - ---------------------------------------------------------------------------------------------------------------------------------- Toys - 0.2% 13,430 Jakks Pacific, Inc. (a) 317,082 16,246 Leapfrog Enterprises, Inc. (a) 109,336 23,800 Marvel Entertainment, Inc. (a) 635,698 --------------- 1,062,116 - ---------------------------------------------------------------------------------------------------------------------------------- Transportation 13,100 Celadon Group, Inc. (a) 119,996 Miscellaneous - 0.2% 4,600 Dynamex, Inc. (a) 124,476 18,200 HUB Group, Inc. Class A (a) 483,756 22,000 Odyssey Marine Exploration, Inc. (a) 136,180 16,400 Pacer International, Inc. 239,440 1,800 Textainer Group Holdings Ltd. 26,154 5,700 Ultrapetrol Bahamas Ltd. (a) 96,957 --------------- 1,226,959 - ---------------------------------------------------------------------------------------------------------------------------------- Truckers - 0.4% 9,041 Arkansas Best Corp. 198,359 14,132 Forward Air Corp. 440,494 25,173 Heartland Express, Inc. (i) 356,953 26,962 Knight Transportation, Inc. (i) 399,307 5,450 Marten Transport Ltd. (a) 76,028 14,025 Old Dominion Freight Line, Inc. (a) 324,118 400 Patriot Transportation Holding, Inc. (a) 36,892 6,181 Saia, Inc. (a) 82,207 1,800 Universal Truckload Services, Inc. (a) 34,488 22,200 Werner Enterprises, Inc. 378,066 --------------- 2,326,912 - ----------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- Utilities: Cable 28,500 Mediacom Communications Corp. Class A (a)(i) $ 130,815 TV & Radio - 0.0% - ---------------------------------------------------------------------------------------------------------------------------------- Utilities: Electrical - 1.7% 12,066 Allete, Inc. 477,572 24,775 Avista Corp. 533,653 17,600 Black Hills Corp. 776,160 7,489 CH Energy Group, Inc. 333,560 5,000 Central Vermont Public Service Corp. 154,200 27,867 Cleco Corp. 774,702 21,408 El Paso Electric Co. (a) 547,403 14,068 The Empire District Electric Co. 320,469 20,500 IDACORP, Inc. 722,010 19,800 ITC Holdings Corp. 1,117,116 9,045 MGE Energy, Inc. 320,826 15,500 NorthWestern Corp. 457,250 12,786 Otter Tail Corp. 442,396 35,800 PNM Resources, Inc. 767,910 6,600 Pike Electric Corp. (a) 110,616 14,400 Portland General Electric Co. 400,032 11,967 UIL Holdings Corp. 442,181 16,583 Unisource Energy Corp. 523,194 44,600 Westar Energy, Inc. 1,156,924 --------------- 10,378,174 - ---------------------------------------------------------------------------------------------------------------------------------- Utilities: Gas 2,900 EnergySouth, Inc. 168,200 Distributors - 0.9% 9,348 The Laclede Group, Inc. 320,076 13,074 New Jersey Resources Corp. 653,961 19,900 Nicor, Inc. 842,765 12,599 Northwest Natural Gas Co. 613,067 34,800 Piedmont Natural Gas Co. (i) 910,368 13,832 South Jersey Industries, Inc. 499,197 19,690 Southwest Gas Corp. 586,171 22,400 WGL Holdings, Inc. 733,824 --------------- 5,327,629 - ---------------------------------------------------------------------------------------------------------------------------------- Utilities: Miscellaneous - 0.1% 164,200 Aquila, Inc. (a) 612,466 - ---------------------------------------------------------------------------------------------------------------------------------- Utilities: 21,100 Alaska Communications Systems Group, Inc. 316,500 Telecommunications - 1.2% 5,200 Atlantic Tele-Network, Inc. 175,656 11,826 Centennial Communications Corp. (a) 109,863 116,000 Cincinnati Bell, Inc. (a) 551,000 9,000 Consolidated Communications Holdings, Inc. 179,100 15,400 FairPoint Communications, Inc. 200,508 54,550 FiberTower Corp. (a)(i) 124,374 25,539 General Communication, Inc. Class A (a) 223,466 16,700 Global Crossing Ltd. (a)(i) 368,235 6,300 Globalstar, Inc. (a)(i) 50,400 7,292 Golden Telecom, Inc. (a)(f) 736,127 50,500 ICO Global Communications Holdings Ltd. (a) 160,590 22,900 IDT Corp. Class B 193,505 11,400 Ibasis, Inc. 58,482 14,400 Iowa Telecommunications Services, Inc. 234,144 8,100 iPCS, Inc. 291,519 13,100 NTELOS Holdings Corp. 388,939 2,000 Neutral Tandem, Inc. (a) 38,040
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Shares Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- 9,521 North Pittsburgh Systems, Inc. $ 235,105 8,900 ORBCOMM, Inc. (a) 55,981 31,820 PAETEC Holding Corp. (a) 310,245 29,000 Premiere Global Services, Inc. (a) 430,650 13,500 RCN Corp. (a) 210,465 5,100 Rural Cellular Corp. Class A (a) 224,859 9,600 Shenandoah Telecom Co. 230,208 7,000 SureWest Communications 119,700 67,200 Time Warner Telecom, Inc. Class A (a)(i) 1,363,488 11,120 USA Mobility, Inc. (a) 159,016 10,600 Virgin Mobile USA, Inc. (a) 94,234 --------------- 7,834,399 - ---------------------------------------------------------------------------------------------------------------------------------- Utilities: Water - 0.2% 8,285 American States Water Co. 312,179 9,296 California Water Service Group 344,138 5,600 Consolidated Water Co., Inc. 141,064 6,148 SJW Corp. 213,151 13,483 Southwest Water Co. (i) 168,807 --------------- 1,179,339 - ---------------------------------------------------------------------------------------------------------------------------------- Wholesale & International 16,425 Central European Distribution Corp. (a) 953,964 Trade - 0.2% - ---------------------------------------------------------------------------------------------------------------------------------- Wholesalers - 0.4% 23,830 Brightpoint, Inc. (a) 366,029 8,000 Houston Wire & Cable Co. (i) 113,120 52,400 LKQ Corp. (a) 1,101,448 4,000 MWI Veterinary Supply, Inc. (a) 160,000 16,400 Prestige Brands Holdings, Inc. (a) 122,672 12,169 United Stationers, Inc. (a) 562,329 --------------- 2,425,598 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks (Cost - $525,261,156) - 93.2% 587,256,036 - ---------------------------------------------------------------------------------------------------------------------------------- Exchange-Traded Funds - ---------------------------------------------------------------------------------------------------------------------------------- 169,590 iShares Russell 2000 Index Fund (i) 12,915,974 - ---------------------------------------------------------------------------------------------------------------------------------- Total Exchange-Traded Funds (Cost - $12,334,264) - 2.0% 12,915,974 - ---------------------------------------------------------------------------------------------------------------------------------- Mutual Funds - ---------------------------------------------------------------------------------------------------------------------------------- 2,900 BlackRock Kelso Capital Corp. (c) 44,312 7,000 Gladstone Capital Corp. (i) 119,000 15,200 Hercules Technology Growth Capital, Inc. 188,784 3,200 Kayne Anderson Energy Development Co. 73,312 11,600 Patriot Capital Funding, Inc. 117,044 11,600 Pennantpark Investment Corp. 116,232 11,400 Prospect Capital Corp. 148,770 - ---------------------------------------------------------------------------------------------------------------------------------- Total Mutual Funds (Cost - $983,037) - 0.1% 807,454 - ---------------------------------------------------------------------------------------------------------------------------------- Rights - ---------------------------------------------------------------------------------------------------------------------------------- Chemicals - 0.0% 1,174 Medis Technologies Ltd. (a)(e) 0 - ---------------------------------------------------------------------------------------------------------------------------------- Total Rights (Cost - $0) - 0.0% 0 - ---------------------------------------------------------------------------------------------------------------------------------- Other Interests - ---------------------------------------------------------------------------------------------------------------------------------- Oil: Crude Producers - 0.0% 500 PetroCorp Inc. (Escrow Shares) (b) 0 - ---------------------------------------------------------------------------------------------------------------------------------- Total Other Interests (Cost - $0) - 0.0% 0 - ----------------------------------------------------------------------------------------------------------------------------------
Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007
Beneficial Interest Short-Term Securities Value - ---------------------------------------------------------------------------------------------------------------------------------- $ 33,226,793 BlackRock Liquidity Series, LLC Cash Sweep Series, 5.04% (c)(h) $ 33,226,793 83,808,817 BlackRock Liquidity Series, LLC Money Market Series, 4.78% (c)(d)(h) 83,808,817 - ---------------------------------------------------------------------------------------------------------------------------------- Total Short-Term Securities (Cost - $117,035,610) - 18.6% 117,035,610 - ---------------------------------------------------------------------------------------------------------------------------------- Total Investments (Cost - $655,614,067*) - 113.9% 718,015,074 Liabilities in Excess of Other Assets - (13.9%) (87,620,790) --------------- Net Assets - 100.0% $ 630,394,284 ---------------
* The cost and unrealized appreciation (depreciation) of investments, as of December 31, 2007, as computed for federal income tax purposes, were as follows: Aggregate cost $ 661,516,435 ============= Gross unrealized appreciation $ 122,933,165 Gross unrealized depreciation (66,434,526) ------------- Net unrealized appreciation $ 56,498,639 ============= (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 Loss Income -------------------------------------------------------------------------------------------------------------------- BlackRock Liquidity Series, LLC Cash Sweep Series - $(75,586,157)** - $ 3,154,441 BlackRock Liquidity Series, LLC Money Market Series $ 49,642,337* - - $ 828,965 Anthracite Capital, Inc. $ 79,398 $ 8,674 $ (719) $ 30,528 BlackRock Kelso Capital Corp. $ 42,004 - - $ 946 --------------------------------------------------------------------------------------------------------------------
* Represents net purchase cost. ** Represents net sale cost. (d) Security was purchased with the cash proceeds from securities loans. (e) The rights may be exercised until January 7, 2008. (f) Depositary receipts. (g) Security held as collateral in connection with open financial futures contracts. (h) Represents the current yield as of December 31, 2007. (i) Security, or a portion of security, is on loan. o For Series compliance purposes, the Series' industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Series management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percent of net assets. These industry classifications are unaudited. o Financial futures contracts purchased as of December 31, 2007, were as follows: -------------------------------------------------------------------------- Number of Expiration Face Unrealized Contracts Issue Date Value Appreciation -------------------------------------------------------------------------- 74 Russell 2000 Index March 2008 $ 28,101,735 $ 469,605 -------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON DETAILED SCHEDULE OF INVESTMENTS To the Investors and Board of Directors of Quantitative Master Series LLC: We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of Master Small Cap Index Series ("the Series"), one of the portfolios constituting Quantitative Master Series LLC (formerly Quantitative Master Series Trust) (the "Master LLC") as of December 31, 2007, and for the year then ended and have issued our report thereon dated February 22, 2008 which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR. Our audit also included the Series' schedule of investments in securities (the "Schedule") as of December 31, 2007 appearing in Item 6 of this Form N-CSR. This Schedule is the responsibility of the Master LLC's management. Our responsibility is to express an opinion based on our audit. In our opinion, the Schedule referred to above, when considered in relation to the basic financial statements taken as a whole of the Series referred to above, presents fairly, in all material respects, the information set forth therein. DELOITTE & TOUCHE LLP February 22, 2008 Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ---------------------------------------------------------------------------------------------------------------------------------- Australia - Air Freight & Logistics - 0.1% 49,700 Toll Holdings Ltd. $ 496,210 6.2% ---------------------------------------------------------------------------------------------------------------- Airlines - 0.0% 82,665 Qantas Airways Ltd. 392,769 ---------------------------------------------------------------------------------------------------------------- Beverages - 0.1% 43,836 Coca-Cola Amatil Ltd. 362,482 156,558 Foster's Group Ltd. 895,583 15,527 Lion Nathan Ltd. 130,374 -------------- 1,388,439 ---------------------------------------------------------------------------------------------------------------- Biotechnology - 0.1% 43,419 CSL Ltd. 1,375,508 ---------------------------------------------------------------------------------------------------------------- Capital Markets - 0.1% 20,151 Macquarie Group Ltd. 1,348,248 1,184 Perpetual Trustees Australia Ltd. 68,518 -------------- 1,416,766 ---------------------------------------------------------------------------------------------------------------- Chemicals - 0.1% 27,954 Orica Ltd. 773,391 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.6% 145,546 Australia & New Zealand Banking Group Ltd. 3,483,128 21,750 Bendigo Bank Ltd. 280,581 104,821 Commonwealth Bank of Australia Ltd. 5,404,442 128,876 National Australia Bank Ltd. 4,245,113 18,349 St. George Bank Ltd. 504,886 148,698 Westpac Banking Corp. 3,615,884 -------------- 17,534,034 ---------------------------------------------------------------------------------------------------------------- Commercial Services & 111,885 Brambles Ltd. 1,123,439 Supplies - 0.1% 7,609 Downer EDI Ltd. 35,732 -------------- 1,159,171 ---------------------------------------------------------------------------------------------------------------- Construction & 72,939 Boart Longyear Group (b) 148,948 Engineering - 0.1% 9,875 Leighton Holdings Ltd. 522,518 -------------- 671,466 ---------------------------------------------------------------------------------------------------------------- Construction 32,839 Boral Ltd. 175,124 Materials - 0.0% 33,896 James Hardie Industries NV 190,400 -------------- 365,524 ---------------------------------------------------------------------------------------------------------------- Containers & 55,191 Amcor Ltd. 333,087 Packaging - 0.0% ---------------------------------------------------------------------------------------------------------------- Distributors - 0.0% 50,712 Pacific Brands Ltd. 144,018 ---------------------------------------------------------------------------------------------------------------- Diversified Consumer 41,900 ABC Learning Centres Ltd. 188,926 Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Diversified Financial 12,193 Australian Stock Exchange Ltd. 641,859 Services - 0.1% 21,814 Babcock & Brown Ltd. 513,116 40,299 Challenger Financial Services Group Ltd. 174,556 -------------- 1,329,531 ---------------------------------------------------------------------------------------------------------------- Diversified 220,405 Telstra Corp. Ltd. 903,246 Telecommunication 117,168 Telstra Corp. Ltd. Installment Receipts 323,995 Services - 0.1% -------------- 1,227,241 ---------------------------------------------------------------------------------------------------------------- Energy Equipment 9,755 WorleyParsons Ltd. 439,457 & Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Food & Staples 13,354 Wesfarmers Ltd. 477,226 Retailing - 0.5% 42,806 Wesfarmers Ltd. (b) 1,512,976 97,179 Woolworth's Ltd. 2,881,942 -------------- 4,872,144 ---------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 61,294 Futuris Corp. Ltd. 114,976 82,843 Goodman Fielder Ltd. 136,951 -------------- 251,927 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - --------------------------------------------------------------------------------------------------------------------------------- Health Care Equipment 6,833 Ansell Ltd. $ 71,947 & Supplies - 0.0% 3,234 Cochlear Ltd. 211,428 -------------- 283,375 ---------------------------------------------------------------------------------------------------------------- Health Care Providers & 48,146 Mayne Group Ltd. 167,392 Services - 0.1% 30,229 Sonic Healthcare Ltd. 441,109 -------------- 608,501 ---------------------------------------------------------------------------------------------------------------- Hotels, Restaurants 23,055 Aristocrat Leisure Ltd. 225,893 & Leisure - 0.1% 35,857 Crown Ltd. (b) 423,462 44,237 Tabcorp Holdings Ltd. 571,937 105,531 Tatts Group Ltd. 367,649 -------------- 1,588,941 ---------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 34,681 Computershare Ltd. 299,175 ---------------------------------------------------------------------------------------------------------------- Industrial 99,498 CSR Ltd. 269,425 Conglomerates - 0.0% ---------------------------------------------------------------------------------------------------------------- Insurance - 0.5% 154,726 AMP Ltd. 1,342,738 53,968 AXA Asia Pacific Holdings Ltd. 347,185 149,879 Insurance Australia Group Ltd. 539,437 68,168 QBE Insurance Group Ltd. 1,979,106 73,294 Suncorp-Metway Ltd. 1,081,820 -------------- 5,290,286 ---------------------------------------------------------------------------------------------------------------- Media - 0.1% 113,673 Fairfax Media Ltd. 464,192 36,612 Macquarie Communications Infrastructure Group 173,274 -------------- 637,466 ---------------------------------------------------------------------------------------------------------------- Metals & Mining - 1.4% 106,550 Alumina Ltd. 589,853 265,166 BHP Billiton Ltd. 9,269,681 58,610 BlueScope Steel Ltd. 491,989 114,370 Fortescue Metals Group Ltd. (b) 753,168 28,055 Iluka Resources Ltd. 112,697 36,312 Newcrest Mining Ltd. 1,047,057 42,672 OneSteel Ltd. 228,860 91,474 Oxiana Ltd. 275,571 22,206 Rio Tinto Ltd. 2,583,296 37,874 Zinifex Ltd. 406,264 -------------- 15,758,436 ---------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.0% 28,965 AGL Energy Ltd. 337,184 ---------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.0% 31,607 Harvey Norman Holdings Ltd. 186,806 ---------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 10,809 Caltex Australia Ltd. 182,525 Fuels - 0.3% 58,406 Origin Energy Ltd. 450,930 36,005 Paladin Resources Ltd. (b) 210,386 53,148 Santos Ltd. 653,095 37,671 Woodside Petroleum Ltd. 1,651,186 -------------- 3,148,122 ---------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.0% 5,919 PaperlinX Ltd. 13,715 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Real Estate Investment 114,334 CFS Retail Property Trust $ 233,838 Trusts (REITs) - 0.5% 80,903 Centro Properties Group 70,765 87,890 Centro Retail Trust 72,691 123,474 Commonwealth Property Office Fund 166,640 174,595 DB RREEF Trust 304,783 99,888 Goodman Group 425,117 77,729 ING Industrial Fund 172,214 114,131 Macquarie Office Trust 139,535 70,450 Mirvac Group 368,177 122,330 Stockland Corp., Ltd. 897,883 138,089 Westfield Group 2,524,615 -------------- 5,376,258 ---------------------------------------------------------------------------------------------------------------- Real Estate Management & 162,144 General Property Trust 570,687 Development - 0.1% 22,466 Lend Lease Corp., Ltd. 339,235 -------------- 909,922 ---------------------------------------------------------------------------------------------------------------- Road & Rail - 0.0% 57,500 Asciano Group 350,479 ---------------------------------------------------------------------------------------------------------------- Textiles, Apparel & 5,609 Billabong International Ltd. 72,617 Luxury Goods - 0.0% ---------------------------------------------------------------------------------------------------------------- Transportation 30,724 Macquarie Airports Group 108,517 Infrastructure - 0.1% 184,082 Macquarie Infrastructure Group 486,877 98,073 Transurban Group 585,626 -------------- 1,181,020 ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Australia 70,671,337 - ------------------------------------------------------------------------------------------------------------------------------------ Austria - 0.6% Building Products - 0.0% 6,223 Wienerberger AG 342,876 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.1% 15,184 Erste Bank der Oesterreichischen Sparkassen AG 1,072,114 2,739 Raiffeisen International Bank Holding AG 411,662 -------------- 1,483,776 ---------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 2,326 RHI AG (b) 95,052 ---------------------------------------------------------------------------------------------------------------- Containers & 1,018 Mayr-Melnhof Karton AG 110,177 Packaging - 0.0% ---------------------------------------------------------------------------------------------------------------- Diversified 27,080 Telekom Austria AG 747,841 Telecommunication Services - 0.1% ---------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.1% 5,222 Verbund - Oesterreichische Elektrizitaetswirtschafts AG 362,995 ---------------------------------------------------------------------------------------------------------------- Hotels, Restaurants 3,077 BetandWin.com Interactive Entertainment AG (b) 119,438 & Leisure - 0.0% ---------------------------------------------------------------------------------------------------------------- Insurance - 0.0% 1,596 Wiener Staedtische Allgemeine Versicherung AG 127,940 ---------------------------------------------------------------------------------------------------------------- Machinery - 0.0% 3,531 Andritz AG 212,115 ---------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% 9,070 Voestalpine AG 650,035 ---------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 12,855 OMV AG 1,037,710 Fuels - 0.1% ---------------------------------------------------------------------------------------------------------------- Real Estate Management & 37,119 IMMOFINANZ Immobilien Anlagen AG 374,975 Development - 0.1% 30,380 Immoeast Immobilien Anlagen AG (b) 326,104 23,055 Meinl European Land Ltd. (b) 317,080 -------------- 1,018,159 ---------------------------------------------------------------------------------------------------------------- Transportation 1,050 Flughafen Wien AG 121,286 Infrastructure - 0.0% ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Austria 6,429,400 - ------------------------------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Belgium - 1.2% Beverages - 0.1% 14,553 InBev NV $ 1,209,805 ---------------------------------------------------------------------------------------------------------------- Chemicals - 0.1% 4,760 Solvay SA 665,745 2,305 Umicore SA 571,188 -------------- 1,236,933 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.3% 41,350 Dexia NV 1,038,182 15,092 KBC Bancassurance Holding 2,124,265 -------------- 3,162,447 ---------------------------------------------------------------------------------------------------------------- Distributors - 0.0% 204 D'ieteren SA 73,308 ---------------------------------------------------------------------------------------------------------------- Diversified Financial 166,827 Fortis 4,367,320 Services - 0.5% 6,092 Groupe Bruxelles Lambert SA 779,104 402 KBC Ancora 45,692 343 Nationale A Portefeuille 24,673 -------------- 5,216,789 ---------------------------------------------------------------------------------------------------------------- Diversified 13,195 Belgacom SA 650,109 Telecommunication Services - 0.1% ---------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.0% 927 Bekaert SA 124,476 ---------------------------------------------------------------------------------------------------------------- Electronic Equipment & 1,006 Barco NV 76,831 Instruments - 0.0% ---------------------------------------------------------------------------------------------------------------- Food & Staples 921 Colruyt SA 216,547 Retailing - 0.1% 7,045 Delhaize Group 618,468 -------------- 835,015 ---------------------------------------------------------------------------------------------------------------- Health Care Equipment & 1,461 Omega Pharma SA 100,547 Supplies - 0.0% ---------------------------------------------------------------------------------------------------------------- Health Care 11,702 AGFA-Gevaert NV 178,539 Technology - 0.0% ---------------------------------------------------------------------------------------------------------------- Marine - 0.0% 1,243 Compagnie Maritime Belge SA (CMB) 107,533 ---------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 1,612 Euronav SA 57,046 Fuels - 0.0% ---------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.0% 9,950 UCB SA 451,717 ---------------------------------------------------------------------------------------------------------------- Real Estate Investment 199 Cofinimmo SA 37,474 Trusts (REITs) - 0.0% ---------------------------------------------------------------------------------------------------------------- Wireless Telecommunication 1,464 Mobistar SA 133,547 Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Belgium 13,652,116 - ------------------------------------------------------------------------------------------------------------------------------------ Bermuda - 0.0% Energy Equipment 17,858 SeaDrill Ltd. (b) 430,989 & Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Marine - 0.0% 105,832 Pacific Basin Shipping Ltd. 167,928 ---------------------------------------------------------------------------------------------------------------- Paper & Forest 69 Citic Resources Holdings Ltd. (b) 40 Products - 0.0% ---------------------------------------------------------------------------------------------------------------- Textiles, Apparel & 80,289 C C Land Holdings Ltd. 114,838 Luxury Goods - 0.0% 19,785 Yue Yuen Industrial Holdings Ltd. 70,853 -------------- 185,691 ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Bermuda 784,648 - ------------------------------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Cayman Communications 150,416 Foxconn International Holdings Ltd. (b) $ 334,499 Islands - 0.0% Equipment - 0.0% ---------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.0% 21,932 Lifestyle International Holdings Ltd. 58,666 ---------------------------------------------------------------------------------------------------------------- Paper & Forest 16,000 Lee & Man Paper Manufacturing Ltd. 69,754 Products - 0.0% ---------------------------------------------------------------------------------------------------------------- Real Estate Management & 195,250 Shui On Land Ltd. 225,426 Development - 0.0% ---------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.0% 210,518 Belle International Holdings Ltd. 314,943 ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in the Cayman Islands 1,003,288 - ------------------------------------------------------------------------------------------------------------------------------------ Denmark - 0.9% Beverages - 0.0% 2,762 Carlsberg A/S 332,508 ---------------------------------------------------------------------------------------------------------------- Building Products - 0.0% 314 Rockwool International AS 72,830 ---------------------------------------------------------------------------------------------------------------- Chemicals - 0.0% 3,817 Novozymes A/S Class B 433,058 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.2% 35,951 Danske Bank A/S 1,405,236 3,350 Jyske Bank (b) 263,063 4,339 Sydbank A/S 185,788 -------------- 1,854,087 ---------------------------------------------------------------------------------------------------------------- Construction 3,667 FLS Industries A/S Class B 373,928 & Engineering - 0.0% ---------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.2% 15,164 Vestas Wind Systems A/S (b) 1,637,421 ---------------------------------------------------------------------------------------------------------------- Food Products - 0.1% 4,813 Danisco A/S 340,074 1,960 East Asiatic Co., Ltd. A/S 151,725 -------------- 491,799 ---------------------------------------------------------------------------------------------------------------- Health Care Equipment & 1,471 Coloplast A/S Class B 127,060 Supplies - 0.0% 17,000 GN Store Nord A/S (b) 133,171 1,430 William Demant Holding (b) 131,345 -------------- 391,576 ---------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% 796 Bang & Olufsen A/S Class B 74,393 ---------------------------------------------------------------------------------------------------------------- Insurance - 0.0% 1,651 Topdanmark A/S (b) 235,888 1,391 TrygVesta A/S 105,476 -------------- 341,364 ---------------------------------------------------------------------------------------------------------------- Machinery - 0.0% 1,620 NKT Holding A/S 145,524 ---------------------------------------------------------------------------------------------------------------- Marine - 0.1% 87 AP Moller - Maersk A/S 929,100 14 AP Moller - Maersk A/S 148,078 -------------- 1,077,178 ---------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 1,800 D/S Torm A/S 62,796 Fuels - 0.0% ---------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.3% 4,919 H Lundbeck A/S 132,181 38,452 Novo-Nordisk A/S Class B 2,510,200 -------------- 2,642,381 ---------------------------------------------------------------------------------------------------------------- Road & Rail - 0.0% 17,794 Dsv A/S 389,306 ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Denmark 10,320,149 - ------------------------------------------------------------------------------------------------------------------------------------ Finland - 1.8% Auto Components - 0.0% 9,415 Nokian Renkaat Oyj 326,848 ---------------------------------------------------------------------------------------------------------------- Building Products - 0.0% 3,128 Asko Oyj 78,149 ---------------------------------------------------------------------------------------------------------------- Communications 301,553 Nokia Oyj 11,584,870 Equipment - 1.0% ---------------------------------------------------------------------------------------------------------------- Construction 10,417 YIT Oyj 226,761 & Engineering - 0.0% ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Diversified Financial 4,380 OKO Bank $ 83,531 Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Diversified 13,341 Elisa Corp. 407,994 Telecommunication Services - 0.1% ---------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.2% 35,245 Fortum Oyj 1,583,226 ---------------------------------------------------------------------------------------------------------------- Food & Staples 6,735 Kesko Oyj Class B 368,181 Retailing - 0.0% ---------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 2,895 TietoEnator Oyj 64,755 ---------------------------------------------------------------------------------------------------------------- Insurance - 0.1% 34,301 Sampo Oyj 905,311 ---------------------------------------------------------------------------------------------------------------- Leisure Equipment & 6,404 Amer Sports Corp. 172,617 Products - 0.0% ---------------------------------------------------------------------------------------------------------------- Machinery - 0.1% 2,051 Cargotec Corp. Class B 94,761 4,889 KCI Konecranes Oyj 166,541 5,362 Kone Oyj Class B 374,359 10,056 Metso Oyj 545,194 5,530 Wartsila Oyj 418,510 -------------- 1,599,365 ---------------------------------------------------------------------------------------------------------------- Media - 0.0% 3,180 SanomaWSOY Oyj (Class B) 90,733 ---------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% 9,368 Outokumpu Oyj 287,985 6,996 Rautaruukki Oyj 299,018 -------------- 587,003 ---------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 10,159 Neste Oil Oyj 358,803 Fuels - 0.0% ---------------------------------------------------------------------------------------------------------------- Paper & Forest 45,945 Stora Enso Oyj Class R 685,862 Products - 0.2% 41,854 UPM-Kymmene Oyj 846,899 -------------- 1,532,761 ---------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.0% 3,919 Orion Oyj 91,835 ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Finland 20,062,743 - ------------------------------------------------------------------------------------------------------------------------------------ France - 9.9% Aerospace & Defense - 0.2% 27,386 European Aeronautic Defense and Space Co. 874,035 9,174 Safran SA 188,105 8,345 Thales SA 497,098 2,001 Zodiac SA 127,923 -------------- 1,687,161 ---------------------------------------------------------------------------------------------------------------- Airlines - 0.0% 10,781 Air France-KLM 376,780 ---------------------------------------------------------------------------------------------------------------- Auto Components - 0.1% 11,399 Compagnie Generale des Etablissements Michelin 1,303,231 6,926 Valeo SA 284,794 -------------- 1,588,025 ---------------------------------------------------------------------------------------------------------------- Automobiles - 0.3% 13,188 Peugeot SA 999,321 14,608 Renault SA 2,071,745 -------------- 3,071,066 ---------------------------------------------------------------------------------------------------------------- Beverages - 0.1% 7,245 Pernod-Ricard SA 1,672,016 ---------------------------------------------------------------------------------------------------------------- Building Products - 0.2% 21,753 Cie de Saint-Gobain SA 2,049,966 ---------------------------------------------------------------------------------------------------------------- Chemicals - 0.2% 18,476 Air Liquide 2,748,754 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.1% 64,161 BNP Paribas SA 6,961,475 50,024 Credit Agricole SA 1,687,626
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 9,914 Natixis $ 190,512 27,190 Societe Generale SA 3,932,468 -------------- 12,772,081 ---------------------------------------------------------------------------------------------------------------- Commercial Services 1,788 Societe BIC SA 128,059 & Supplies - 0.0% ---------------------------------------------------------------------------------------------------------------- Communications 166,842 Alcatel SA 1,213,686 Equipment - 0.1% ---------------------------------------------------------------------------------------------------------------- Construction 931 Eiffage 91,686 & Engineering - 0.2% 31,742 Vinci SA 2,347,506 -------------- 2,439,192 ---------------------------------------------------------------------------------------------------------------- Construction Materials - 0.2% 1,346 Imerys SA 110,822 12,053 Lafarge SA 2,188,677 -------------- 2,299,499 ---------------------------------------------------------------------------------------------------------------- Diversified Financial 793 Eurazeo 101,573 Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Diversified 138,273 France Telecom SA 4,959,959 Telecommunication 1,238 Neuf Cegetel 62,616 Services - 0.4% -------------- 5,022,575 ---------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.1% 7,679 Electricite de France SA 914,664 ---------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.4% 8,259 Alstom 1,773,977 1,890 Legrand Promesses 64,511 15,858 Schneider Electric SA 2,147,870 -------------- 3,986,358 ---------------------------------------------------------------------------------------------------------------- Energy Equipment 2,101 Compagnie Generale de Geophysique SA 594,287 & Services - 0.1% 8,034 Technip SA 639,035 -------------- 1,233,322 ---------------------------------------------------------------------------------------------------------------- Food & Staples 44,422 Carrefour SA 3,457,494 Retailing - 0.3% 4,146 Casino Guichard Perrachon SA 451,014 -------------- 3,908,508 ---------------------------------------------------------------------------------------------------------------- Food Products - 0.3% 32,461 Groupe Danone 2,909,278 ---------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 14,651 Gaz de France SA 856,750 ---------------------------------------------------------------------------------------------------------------- Health Care Equipment & 16,773 Cie Generale d'Optique Essilor Supplies - 0.1% International SA 1,069,913 ---------------------------------------------------------------------------------------------------------------- Hotels, Restaurants 16,330 Accor SA 1,305,433 & Leisure - 0.1% 6,609 Sodexho Alliance SA 405,768 -------------- 1,711,201 ---------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% 23,755 Thomson 335,891 ---------------------------------------------------------------------------------------------------------------- IT Services - 0.1% 6,356 Atos Origin SA (b) 328,398 10,162 Cap Gemini SA 638,486 -------------- 966,884 ---------------------------------------------------------------------------------------------------------------- Industrial 681 Wendel 98,318 Conglomerates - 0.0% ---------------------------------------------------------------------------------------------------------------- Insurance - 0.5% 117,504 AXA SA 4,684,764 2,829 CNP Assurances 368,094 11,575 Scor SE 296,186 -------------- 5,349,044 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Machinery - 0.1% 3,979 Vallourec SA $ 1,076,171 ---------------------------------------------------------------------------------------------------------------- Media - 0.6% 3,127 JC Decaux SA 122,731 10,972 Lagardere S.C.A. 821,697 1,796 M6-Metropole Television SA 47,201 7,450 PagesJaunes Groupe SA 149,124 13,176 Publicis Groupe 515,487 12,073 Societe Television Francaise 1 321,889 87,147 Vivendi SA 4,001,188 -------------- 5,979,317 ---------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.5% 69,987 ArcelorMittal 5,434,698 ---------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.7% 77,516 Suez SA 5,276,207 27,914 Veolia Environnement SA 2,542,651 -------------- 7,818,858 ---------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.1% 6,575 Pinault-Printemps-Redoute 1,056,138 ---------------------------------------------------------------------------------------------------------------- Office Electronics - 0.0% 1,892 Neopost SA 194,903 ---------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 161,867 Total SA 13,402,661 Fuels - 1.2% ---------------------------------------------------------------------------------------------------------------- Personal Products - 0.2% 18,840 L'Oreal SA 2,697,842 ---------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.6% 76,807 Sanofi-Aventis 7,030,945 ---------------------------------------------------------------------------------------------------------------- Real Estate Investment 492 Gecina SA 77,188 Trusts (REITs) - 0.1% 987 ICADE 147,126 4,302 Klepierre 219,883 5,475 Unibail - Rodamco 1,199,742 -------------- 1,643,939 ---------------------------------------------------------------------------------------------------------------- Semiconductors & 57,917 STMicroelectronics NV 828,448 Semiconductor Equipment - 0.1% ---------------------------------------------------------------------------------------------------------------- Software - 0.1% 8,701 Business Objects SA (b) 531,429 3,307 Dassault Systemes SA 195,735 -------------- 727,164 ---------------------------------------------------------------------------------------------------------------- Textiles, Apparel & 1,454 Christian Dior SA 191,080 Luxury Goods - 0.3% 5,108 Hermes International 645,376 18,417 LVMH Moet Hennessy Louis Vuitton SA 2,225,682 -------------- 3,062,138 ---------------------------------------------------------------------------------------------------------------- Transportation 2,184 Aeroports de Paris 223,428 Infrastructure - 0.0% 1,173 Societe Des Autoroutes Paris-Rhin-Rhone 115,005 -------------- 338,433 ---------------------------------------------------------------------------------------------------------------- Wireless 18,480 Bouygues 1,535,561 Telecommunication Services - 0.1% ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in France 113,337,780 - ------------------------------------------------------------------------------------------------------------------------------------ Germany - 8.6% Air Freight & Logistics - 0.2% 61,925 Deutsche Post AG 2,126,303 ---------------------------------------------------------------------------------------------------------------- Airlines - 0.0% 18,121 Deutsche Lufthansa AG 483,042 ---------------------------------------------------------------------------------------------------------------- Auto Components - 0.1% 12,152 Continental AG 1,590,102 ---------------------------------------------------------------------------------------------------------------- Automobiles - 1.1% 11,753 Bayerische Motoren Werke AG 729,211 71,898 DaimlerChrysler AG 6,968,357
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 681 Porsche Automobil Holding SE (Preference Shares) (b) $ 1,375,240 12,501 Volkswagen AG 2,873,573 -------------- 11,946,381 ---------------------------------------------------------------------------------------------------------------- Capital Markets - 0.5% 39,145 Deutsche Bank AG Registered Shares 5,111,363 3,332 MLP AG 52,696 -------------- 5,164,059 ---------------------------------------------------------------------------------------------------------------- Chemicals - 1.1% 6,338 Altana AG 153,217 37,627 BASF AG 5,579,794 55,633 Bayer AG 5,087,673 2,464 K+S AG 587,762 9,553 Linde AG 1,265,795 322 Wacker Chemie AG 92,882 -------------- 12,767,123 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.3% 48,752 Commerzbank AG 1,854,853 7,451 Deutsche Postbank AG 662,919 17,581 Hypo Real Estate Holding AG 928,691 -------------- 3,446,463 ---------------------------------------------------------------------------------------------------------------- Computers & 1,694 Wincor Nixdorf AG 160,408 Peripherals - 0.0% ---------------------------------------------------------------------------------------------------------------- Construction 2,333 Bilfinger Berger AG 178,404 & Engineering - 0.1% 3,840 Hochtief AG 515,834 -------------- 694,238 ---------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 558 HeidelbergCement AG 85,871 ---------------------------------------------------------------------------------------------------------------- Diversified Financial 15,284 Deutsche Boerse AG 3,016,518 Services - 0.3% ---------------------------------------------------------------------------------------------------------------- Diversified 217,200 Deutsche Telekom AG 4,780,446 Telecommunication Services - 0.4% ---------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.9% 47,712 E.ON AG 10,143,245 ---------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.1% 3,319 Q-Cells AG (b) 471,017 7,781 Solarworld AG 472,319 -------------- 943,336 ---------------------------------------------------------------------------------------------------------------- Food & Staples 12,825 Metro AG 1,079,647 Retailing - 0.1% ---------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 131 Suedzucker AG 3,108 ---------------------------------------------------------------------------------------------------------------- Health Care Equipment & 1,988 Fresenius AG (Preference Shares) 165,145 Supplies - 0.0% ---------------------------------------------------------------------------------------------------------------- Health Care Providers & 5,439 Celesio AG 336,494 Services - 0.1% 16,501 Fresenius Medical Care AG 886,056 -------------- 1,222,550 ---------------------------------------------------------------------------------------------------------------- Hotels, Restaurants 18,924 TUI AG (b) 528,562 & Leisure - 0.1% ---------------------------------------------------------------------------------------------------------------- Household Products - 0.0% 6,982 Henkel KGaA 356,758 ---------------------------------------------------------------------------------------------------------------- Industrial 3,625 Rheinmetall AG 288,026 Conglomerates - 0.9% 65,334 Siemens AG 10,388,270 -------------- 10,676,296 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Insurance - 0.9% 34,467 Allianz AG Registered Shares $ 7,425,560 15,854 Muenchener Rueckversicherungs AG Registered Shares 3,078,988 -------------- 10,504,548 ---------------------------------------------------------------------------------------------------------------- Life Sciences Tools 10,345 Quiagen NV (b) 224,957 & Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Machinery - 0.2% 2,865 Heidelberger Druckmaschinen AG 95,680 9,538 MAN AG 1,583,158 10,497 MG Technologies AG (b) 365,950 -------------- 2,044,788 ---------------------------------------------------------------------------------------------------------------- Media - 0.0% 7,941 Premiere AG (b) 149,808 ---------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.2% 3,101 Salzgitter AG 463,461 28,502 ThyssenKrupp AG 1,604,238 -------------- 2,067,699 ---------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.4% 34,092 RWE AG 4,780,056 ---------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.0% 2,978 KarstadtQuelle AG (b) 71,198 ---------------------------------------------------------------------------------------------------------------- Personal Products - 0.0% 5,837 Beiersdorf AG 452,318 ---------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.1% 5,128 Merck KGaA 663,192 ---------------------------------------------------------------------------------------------------------------- Real Estate Management & 9,043 IVG Immobilien AG 309,101 Development - 0.0% ---------------------------------------------------------------------------------------------------------------- Semiconductors & 64,934 Infineon Technologies AG (b) 765,448 Semiconductor Equipment - 0.1% ---------------------------------------------------------------------------------------------------------------- Software - 0.3% 66,774 SAP AG 3,437,083 ---------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.0% 2,768 Douglas Holding AG 160,041 ---------------------------------------------------------------------------------------------------------------- Textiles, Apparel & 16,350 Adidas-Salomon AG 1,215,661 Luxury Goods - 0.1% 691 Puma AG Rudolf Dassler Sport 273,254 -------------- 1,488,915 ---------------------------------------------------------------------------------------------------------------- Transportation 156 Fraport AG 12,284 Infrastructure - 0.0% ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Germany 98,511,037 - ------------------------------------------------------------------------------------------------------------------------------------ Greece - 0.8% Beverages - 0.0% 10,280 Coca-Cola Hellenic Bottling Co. SA 443,630 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.5% 33,467 Alpha Bank AE 1,211,931 26,235 EFG Eurobank Ergasias SA 920,670 32,084 National Bank of Greece SA 2,200,165 26,167 Piraeus Bank SA 1,017,810 -------------- 5,350,576 ---------------------------------------------------------------------------------------------------------------- Construction 3,355 Hellenic Technodomiki Tev SA 47,926 & Engineering - 0.0% ---------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 2,911 Titan Cement Co. SA 132,198 ---------------------------------------------------------------------------------------------------------------- Diversified Financial 4,760 Hellenic Exchanges SA 166,948 Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Diversified 23,245 Hellenic Telecommunications Organization SA 850,318 Telecommunication Services - 0.1% ---------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.1% 9,295 Public Power Corp. 487,675 ---------------------------------------------------------------------------------------------------------------- Hotels, Restaurants 17,514 OPAP SA 700,227 & Leisure - 0.1% ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Metals & Mining - 0.0% 4,010 Viohalco, Hellenic Copper and Aluminum Industry SA $ 57,929 ---------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 4,739 Hellenic Petroleum SA 77,717 Fuels - 0.0% 3,114 Motor Oil Hellas Corinth Refineries SA 71,866 -------------- 149,583 ---------------------------------------------------------------------------------------------------------------- Textiles, Apparel & 2,620 Folli - Follie SA Registered Shares 97,284 Luxury Goods - 0.0% ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Greece 8,484,294 - ------------------------------------------------------------------------------------------------------------------------------------ Hong Kong - 2.2% Airlines - 0.0% 86,263 Cathay Pacific Airways Ltd. 224,597 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.3% 331,400 BOC Hong Kong Holdings Ltd. 918,881 124,939 Bank of East Asia Ltd. 846,565 65,353 Hang Seng Bank Ltd. 1,337,756 9,000 Wing Hang Bank Ltd. 133,973 -------------- 3,237,175 ---------------------------------------------------------------------------------------------------------------- Distributors - 0.1% 195,990 Li & Fung Ltd. 781,358 ---------------------------------------------------------------------------------------------------------------- Diversified Financial 86,848 Hong Kong Exchanges and Clearing Ltd. 2,434,678 Services - 0.2% ---------------------------------------------------------------------------------------------------------------- Diversified 182,195 PCCW Ltd. 107,685 Telecommunication Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.1% 117,187 CLP Holdings Ltd. 796,171 17,500 Cheung Kong Infrastructure Holdings Ltd. 64,960 93,500 HongKong Electric Holdings Ltd. 535,084 -------------- 1,396,215 ---------------------------------------------------------------------------------------------------------------- Electronic Equipment 34,147 Kingboard Chemical Holdings Ltd. 201,731 & Instruments - 0.0% ---------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 80,000 Tingyi (Cayman Islands) Holding Corp. 127,708 ---------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 322,264 The Hong Kong & China Gas Ltd. 981,657 ---------------------------------------------------------------------------------------------------------------- Hotels, Restaurants 64,990 Shangri-La Asia Ltd. 202,125 & Leisure - 0.0% ---------------------------------------------------------------------------------------------------------------- Industrial 173,176 Hutchison Whampoa Ltd. 1,950,879 Conglomerates - 0.2% 56,773 Melco International Development Ltd. 84,819 12,000 NWS Holdings Ltd. 38,058 -------------- 2,073,756 ---------------------------------------------------------------------------------------------------------------- Internet Software 59,407 Tencent Holdings Ltd. 443,703 & Services - 0.1% ---------------------------------------------------------------------------------------------------------------- Marine - 0.0% 9,557 Orient Overseas International Ltd. 70,017 ---------------------------------------------------------------------------------------------------------------- Media - 0.0% 4,000 Television Broadcasts Ltd. 23,909 ---------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.0% 194,741 Fosun International (b) 180,259 ---------------------------------------------------------------------------------------------------------------- Real Estate Investment 208,414 The Link REIT 448,734 Trusts (REITs) - 0.1% ---------------------------------------------------------------------------------------------------------------- Real Estate Management & 120,835 Cheung Kong Holdings Ltd. 2,207,590 Development - 0.8% 10,000 Chinese Estates Holdings Limited 18,012 17,000 Hang Lung Group Ltd. 91,859 184,000 Hang Lung Properties Ltd. 822,122 78,491 Henderson Land Development Co., Ltd. 728,956 28,791 Hysan Development Co. Ltd. 81,317
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 39,000 Kerry Properties Ltd. $ 310,105 210,484 New World Development Ltd. 736,907 64,000 Shun Tak Holdings Ltd. 100,032 88,421 Sino Land Co. 309,632 112,324 Sun Hung Kai Properties Ltd. 2,359,203 72,577 Swire Pacific Ltd. Class A 994,531 86,107 Wharf Holdings Ltd. (b) 445,433 5,000 Wheelock and Company, Limited 15,310 -------------- 9,221,009 ---------------------------------------------------------------------------------------------------------------- Road & Rail - 0.1% 136,000 MTR Corp. 495,801 ---------------------------------------------------------------------------------------------------------------- Semiconductors & 5,004 ASM Pacific Technology Ltd. 36,373 Semiconductor Equipment - 0.0% ---------------------------------------------------------------------------------------------------------------- Speciality Retail - 0.1% 84,600 Esprit Holdings Ltd. 1,245,757 230,394 Giordano International Ltd. 109,903 -------------- 1,355,660 ---------------------------------------------------------------------------------------------------------------- Transportation 2,400 Hong Kong Aircraft Engineering Company Ltd. 64,778 Infrastructure - 0.0% 36,349 Hopewell Holdings Ltd. 166,656 -------------- 231,434 ---------------------------------------------------------------------------------------------------------------- Wireless 169,647 Hutchison Telecommunications Telecommunication International Ltd. 255,722 Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Hong Kong 24,531,306 - ------------------------------------------------------------------------------------------------------------------------------------ Ireland - 0.6% Airlines - 0.0% 35,968 Ryanair Holdings Plc (b) 246,905 ---------------------------------------------------------------------------------------------------------------- Building Products - 0.0% 6,310 Kingspan Group Plc 94,870 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.3% 72,428 Allied Irish Banks Plc 1,660,925 24,122 Anglo Irish Bank Corp. Plc 385,089 80,768 Bank of Ireland 1,202,132 -------------- 3,248,146 ---------------------------------------------------------------------------------------------------------------- Construction Materials - 0.1% 43,238 CRH Plc 1,501,628 ---------------------------------------------------------------------------------------------------------------- Containers & 5,262 Smurfit Kappa Plc (b) 86,302 Packaging - 0.0% ---------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 20,458 Greencore Group Plc 134,545 5,153 Iaws Group Plc 113,935 7,105 Kerry Group Plc 226,879 -------------- 475,359 ---------------------------------------------------------------------------------------------------------------- Hotels, Restaurants 2,377 Paddy Power Plc 77,663 & Leisure - 0.0% ---------------------------------------------------------------------------------------------------------------- Industrial 2,954 DCC Plc 83,913 Conglomerates - 0.0% ---------------------------------------------------------------------------------------------------------------- Insurance - 0.1% 24,915 Irish Life & Permanent Plc 426,246 ---------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.1% 37,376 Elan Corp. Plc (b) 817,824 ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Ireland 7,058,856 - ------------------------------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Italy - 3.7% Aerospace & Defense - 0.1% 26,776 Finmeccanica SpA $ 859,083 ---------------------------------------------------------------------------------------------------------------- Automobiles - 0.1% 59,430 Fiat SpA 1,529,003 ---------------------------------------------------------------------------------------------------------------- Capital Markets - 0.1% 42,528 Mediobanca SpA 874,004 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.3% 580,816 Banca Intesa SpA 4,570,775 64,173 Banca Intesa SpA (RNC) 467,855 77,015 Banca Monte dei Paschi di Siena SpA 411,353 39,570 Banca Popolare di Milano Scrl 536,930 57,246 Banco Popolare SPA (b) 1,265,105 701,256 UniCredito Italiano SpA 5,767,100 51,354 Unione Di Banche Italiane SPCA 1,411,137 -------------- 14,430,255 ---------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 6,019 Italcementi SpA 128,876 ---------------------------------------------------------------------------------------------------------------- Diversified Financial 5,710 IFIL-Investments SpA 53,493 Services - 0.0% 2,087 Instituto Finanziario Industriale SpA (Preference Shares) (b) 70,591 -------------- 124,084 ---------------------------------------------------------------------------------------------------------------- Diversified 822,031 Telecom Italia SpA 2,548,549 Telecommunication 478,015 Telecom Italia SpA (RNC) 1,133,479 Services - 0.3% -------------- 3,682,028 ---------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.4% 328,027 Enel SpA 3,900,598 113,079 Terna SpA 455,529 -------------- 4,356,127 ---------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.0% 8,179 Prysmian SpA (b) 202,396 ---------------------------------------------------------------------------------------------------------------- Energy Equipment 8,542 Saipem SpA 340,866 & Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 122,230 Parmalat SpA 471,932 ---------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 84,550 Snam Rete Gas SpA 539,929 ---------------------------------------------------------------------------------------------------------------- Hotels, Restaurants 4,375 Autogrill SpA 74,413 & Leisure - 0.0% 8,091 Lottomatica SpA 296,716 -------------- 371,129 ---------------------------------------------------------------------------------------------------------------- Industrial 286,056 Pirelli & C SpA (b) 314,229 Conglomerates - 0.0% ---------------------------------------------------------------------------------------------------------------- Insurance - 0.4% 39,029 Alleanza Assicurazioni SpA 506,965 79,204 Assicurazioni Generali SpA 3,585,256 6,967 Fondiaria-Sai SpA 285,794 33,249 Mediolanum SpA 265,938 39,092 Unipol SpA (Preference Shares) 123,618 -------------- 4,767,571 ---------------------------------------------------------------------------------------------------------------- Media - 0.1% 10,724 Arnoldo Mondadori Editore SpA 88,084 68,133 Mediaset SpA 686,369 158,897 Seat Pagine Gialle SpA 62,594 -------------- 837,047 ---------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.0% 14,097 A2A SpA 64,530 ---------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 200,844 Eni SpA 7,330,081 Fuels - 0.7% ---------------------------------------------------------------------------------------------------------------- Textiles, Apparel & 9,077 Bulgari SpA 127,476 Luxury Goods - 0.0% 8,388 Luxottica Group SpA 266,804 -------------- 394,280 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Transportation 21,098 Autostrade SpA $ 801,437 Infrastructure - 0.1% ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Italy 42,418,887 - ------------------------------------------------------------------------------------------------------------------------------------ Japan - 18.8% Air Freight & Logistics - 0.1% 37,000 Yamato Transport Co., Ltd. 531,849 ---------------------------------------------------------------------------------------------------------------- Airlines - 0.0% 31,000 All Nippon Airways Co., Ltd. 114,235 104,000 Japan Airlines Corp. (b) 235,847 -------------- 350,082 ---------------------------------------------------------------------------------------------------------------- Auto Components - 0.4% 17,200 Aisin Seiki Co., Ltd. 712,119 47,700 Bridgestone Corp. 842,145 38,100 Denso Corp. 1,550,451 15,000 NGK Spark Plug Co., Ltd. 260,093 3,000 NHK Spring Co., Ltd. 27,383 11,400 NOK Corp. 239,863 11,900 Stanley Electric Co., Ltd. 295,561 21,700 Sumitomo Rubber Industries, Ltd. 190,082 2,100 Tokai Rika Co., Ltd. 64,745 3,100 Toyoda Gosei Co., Ltd. 109,258 3,100 Toyota Boshoku Corp. 99,726 13,700 Toyota Industries Corp. 555,450 -------------- 4,946,876 ---------------------------------------------------------------------------------------------------------------- Automobiles - 1.6% 4,000 Fuji Heavy Industries Ltd. 18,528 123,000 Honda Motor Co., Ltd. 4,063,286 42,000 Isuzu Motors Ltd. 188,557 20,000 Mazda Motor Corp. 98,988 120,000 Mitsubishi Motors Corp. (b) 201,071 181,200 Nissan Motor Co., Ltd. 1,977,706 11,000 Suzuki Motor Corp. 329,782 214,000 Toyota Motor Corp. 11,397,364 17,800 Yamaha Motor Co., Ltd. 426,000 -------------- 18,701,282 ---------------------------------------------------------------------------------------------------------------- Beverages - 0.2% 32,700 Asahi Breweries Ltd. 551,583 200 Coca-Cola West Holdings Co., Ltd. 4,415 6,200 Ito En, Ltd. 117,959 64,000 Kirin Holdings Co., Ltd. 938,918 25,000 Sapporo Holdings Ltd. 201,305 20,000 Takara Holdings, Inc. 119,942 -------------- 1,934,122 ---------------------------------------------------------------------------------------------------------------- Building Products - 0.3% 73,100 Asahi Glass Co., Ltd. 966,776 2,000 Central Glass Co., Ltd. 7,546 20,900 Daikin Industries Ltd. 1,165,720 16,300 JS Group Corp. 260,066 59,000 Nippon Sheet Glass Co., Ltd. 297,835 27,000 Sanwa Holdings Corp. 132,555 21,000 Toto Ltd. 166,348 -------------- 2,996,846 ---------------------------------------------------------------------------------------------------------------- Capital Markets - 0.4% 115,000 Daiwa Securities Group, Inc. 1,032,430 1,000 Jafco Co., Ltd. 32,753 10,300 Matsui Securities Co., Ltd. 80,443 33,000 Nikko Cordial Corp. 490,946
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 136,300 Nomura Holdings, Inc. $ 2,283,687 180 SBI E*trade Securities Co. Ltd. 163,274 954 SBI Holdings, Inc. 256,521 43,300 Shinko Securities Co., Ltd. 177,102 -------------- 4,517,156 ---------------------------------------------------------------------------------------------------------------- Chemicals - 0.9% 84,000 Asahi Kasei Corp. 554,356 4,000 Daicel Chemical Industries Ltd. 23,919 32,000 Dainippon Ink and Chemicals, Inc. 159,537 19,000 Denki Kagaku Kogyo Kabushiki Kaisha 82,126 5,300 Hitachi Chemical Co., Ltd. 121,788 17,100 JSR Corp. 437,790 13,000 Kaneka Corp. 107,182 4,000 Kansai Paint Co., Ltd. 28,873 35,000 Kuraray Co., Ltd. 422,251 86,500 Mitsubishi Chemical Holdings Corp. 659,967 22,000 Mitsubishi Gas Chemicals Co., Inc. 214,020 56,000 Mitsubishi Rayon Co., Ltd. 269,960 41,000 Mitsui Chemicals, Inc. 266,166 16,000 Nippon Kayaku Co., Ltd. 103,840 15,000 Nippon Sanso Corp. 140,938 17,000 Nissan Chemical Industries Ltd. 221,742 13,110 Nitto Denko Corp. 689,021 32,400 Shin-Etsu Chemical Co., Ltd. 2,014,995 111,000 Showa Denko KK 394,223 135,000 Sumitomo Chemical Co., Ltd. 1,195,510 91,000 Teijin Ltd. 387,835 21,000 Tokuyama Corp. 209,529 106,700 Toray Industries, Inc. 830,467 53,000 Tosoh Corp. 225,922 95,000 Ube Industries Ltd. 321,554 15,000 Zeon Corp. 89,475 -------------- 10,172,986 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.8% 4,000 Aozora Bank Ltd. 11,615 13,000 The 77 Bank Ltd. 80,889 15,000 The Bank of Kyoto Ltd. 177,450 104,000 The Bank of Yokohama Ltd. 724,610 52,000 The Chiba Bank Ltd. 418,411 54,000 Chuo Mitsui Trust Holdings, Inc. 411,808 72,000 Fukuoka Financial Group, Inc. 420,482 17,000 The Gunma Bank Ltd. 111,780 23,000 The Hachijuni Bank Ltd. 154,537 24,000 The Hiroshima Bank Ltd. 129,540 78,100 Hokuhoku Financial Group, Inc. 225,777 37,000 The Joyo Bank Ltd. 206,787 687,629 Mitsubishi UFJ Financial Group, Inc. 6,484,291 785 Mizuho Financial Group, Inc. 3,739,306
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 34,000 The Nishi-Nippon City Bank Ltd. $ 84,212 481 Resona Holdings, Inc. 852,646 14 Sapporo Hokuyo Holdings, Inc. 124,369 139,000 Shinsei Bank Ltd. 504,638 53,000 The Shizuoka Bank Ltd. 581,327 523 Sumitomo Mitsui Financial Group, Inc. 3,870,345 89,000 The Sumitomo Trust & Banking Co., Ltd. 586,576 9,000 Suruga Bank Ltd. 97,909 13,000 The Yasuda Trust & Banking Co., Ltd. 23,971 -------------- 20,023,276 ---------------------------------------------------------------------------------------------------------------- Commercial Services 55,000 Dai Nippon Printing Co., Ltd. 805,568 & Supplies - 0.2% 84 The Goodwill Group, Inc. (b) 10,801 4,500 Kokuyo Co., Ltd. 40,663 4,100 Meitec Corp. 123,335 16,400 Secom Co., Ltd. 895,339 48,000 Toppan Printing Co., Ltd. 470,729 -------------- 2,346,435 ---------------------------------------------------------------------------------------------------------------- Computers & 134,000 Fujitsu Ltd. 896,389 Peripherals - 0.3% 6,300 Mitsumi Electric Co., Ltd. 210,774 177,000 NEC Corp. 813,004 8,000 Seiko Epson Corp. 170,391 235,000 Toshiba Corp. 1,734,291 -------------- 3,824,849 ---------------------------------------------------------------------------------------------------------------- Construction 8,457 COMSYS Holdings Corp. 68,835 & Engineering - 0.2% 17,000 Chiyoda Corp. 191,720 20,000 JGC Corp. 342,924 94,800 Kajima Corp. 307,691 8,000 Kinden Corp. 62,542 38,000 Nishimatsu Construction Co., Ltd. 105,512 68,000 Obayashi Corp. 339,610 13,000 Okumura Corp. 63,102 34,000 Shimizu Corp. 147,582 100,000 Taisei Corp. 268,957 3,000 Toda Corp. 14,382 -------------- 1,912,857 ---------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 61,000 Sumitomo Osaka Cement Co., Ltd. 115,326 78,000 Taiheiyo Cement Corp. 184,253 -------------- 299,579 ---------------------------------------------------------------------------------------------------------------- Consumer Finance - 0.2% 3,550 Acom Co., Ltd. 71,717 10,800 Aeon Credit Service Co., Ltd. 159,073 4,100 Aiful Corp. 72,031 15,700 Credit Saison Co., Ltd. 427,683 7,430 ORIX Corp. 1,249,631 3,750 Promise Co., Ltd. 92,332 6,920 Takefuji Corp. 166,209 -------------- 2,238,676 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Containers & 7,700 Toyo Seikan Kaisha Ltd. $ 136,532 Packaging - 0.0% ---------------------------------------------------------------------------------------------------------------- Distributors - 0.0% 1,500 Canon Marketing Japan Inc. 27,871 ---------------------------------------------------------------------------------------------------------------- Diversified Consumer 3,400 Benesse Corp. 143,871 Service - 0.0% ---------------------------------------------------------------------------------------------------------------- Diversified Financial 1,100 Diamond Lease Co., Ltd. 36,378 Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Diversified 405 Nippon Telegraph & Telephone Corp. 2,013,227 Telecommunication Services - 0.2% ---------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.7% 55,600 Chubu Electric Power Co., Inc. 1,445,318 6,800 Chugoku Electric Power Co 132,193 9,900 Hokkaido Electric Power Co., Inc. 213,405 3,000 Hokuriku Electric Power Co. 62,379 64,000 The Kansai Electric Power Co., Inc. 1,490,747 27,300 Kyushu Electric Power Co., Inc. 670,185 4,000 Shikoku Electric Power Co., Inc. 107,049 37,100 Tohoku Electric Power Co., Inc. 834,618 97,700 The Tokyo Electric Power Co., Inc. 2,529,087 -------------- 7,484,981 ---------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.3% 18,800 Fuji Electric Holdings Co., Ltd. 64,981 40,000 Fujikura Ltd. 202,100 41,000 Furukawa Electric Co., Ltd. 157,958 21,873 Matsushita Electric Works Ltd. 239,229 155,000 Mitsubishi Electric Corp. 1,605,362 55,000 Sumitomo Electric Industries Ltd. 867,435 5,600 Ushio, Inc. 122,235 -------------- 3,259,300 ---------------------------------------------------------------------------------------------------------------- Electronic Equipment & 19,000 Alps Electric Co., Ltd. 245,463 Instruments - 1.0% 34,700 Citizens Holding Co. Ltd. 336,983 39,700 Fuji Photo Film Co., Ltd. 1,661,664 1,600 Hirose Electric Co., Ltd. 183,616 277,000 Hitachi Ltd. 2,057,930 35,300 Hoya Corp. 1,116,862 10,200 Ibiden Co., Ltd. 705,318 2,600 Keyence Corp. 638,481 12,700 Kyocera Corp. 1,122,353 1,100 Mabuchi Motor Co., Ltd. 66,033 16,800 Murata Manufacturing Co., Ltd. 964,734 7,400 Nidec Corp. 534,666 30,500 Nippon Electric Glass Co. 496,145 63,000 Oki Electric Industry Co., Ltd. (b) 98,104 13,700 Omron Corp. 322,545 10,900 TDK Corp. 802,817 13,000 Taiyo Yuden Co., Ltd. 207,688 12,000 Yaskawa Electric Corp. 161,880 9,500 Yokogawa Electric Corp. 104,309 -------------- 11,827,591 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Food & Staples 53,400 Aeon Co., Ltd. $ 778,949 Retailing - 0.3% 200 Circle K Sunkus Co., Ltd. 2,956 3,600 FamilyMart Co., Ltd. 112,733 7,400 Lawson, Inc. 262,176 3,000 Matsumotokiyoshi Holdings Co. Ltd. (b) 73,043 62,800 Seven & I Holdings Co. Ltd. 1,824,493 4,000 UNY Co., Ltd. 33,787 -------------- 3,088,137 ---------------------------------------------------------------------------------------------------------------- Food Products - 0.2% 60,000 Ajinomoto Co., Inc. 679,037 100 House Foods Corp. 1,680 18,000 Kikkoman Corp. 246,214 40,000 Meiji Dairies Corp. 203,773 26,000 Nichirei Corp. 107,063 6,000 Nippon Meat Packers, Inc. 60,553 11,000 Nisshin Seifun Group, Inc. 110,598 8,000 Nissin Food Products Co., Ltd. 258,064 12,500 QP Corp. 130,019 10,000 Toyo Suisan Kaisha, Ltd. 179,866 5,100 Yakult Honsha Co., Ltd. 117,203 6,000 Yamazaki Baking Co., Ltd. 58,561 -------------- 2,152,631 ---------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 163,000 Osaka Gas Co., Ltd. 641,312 197,000 Tokyo Gas Co., Ltd. 920,252 -------------- 1,561,564 ---------------------------------------------------------------------------------------------------------------- Health Care Equipment & 16,000 Olympus Corp. 652,080 Supplies - 0.1% 15,200 Terumo Corp. 792,418 -------------- 1,444,498 ---------------------------------------------------------------------------------------------------------------- Health Care Providers & 900 Alfresa Holdings Corp. 54,263 Services - 0.0% 8,600 Mediceo Paltac Holdings Co., Ltd. 126,924 2,600 Suzuken Co., Ltd. 92,545 -------------- 273,732 ---------------------------------------------------------------------------------------------------------------- Hotels, Restaurants 2,800 Oriental Land Co., Ltd. 168,502 & Leisure - 0.0% 39 ROUND ONE Corp. 77,294 -------------- 245,796 ---------------------------------------------------------------------------------------------------------------- Household Durables - 1.0% 23,800 Casio Computer Co., Ltd. 276,751 4,300 Daito Trust Construction Co., Ltd. 235,907 38,000 Daiwa House Industry Co., Ltd. 485,495 58,000 HASEKO Corp. (b) 99,043 10,800 Makita Corp. 451,516 154,000 Matsushita Electric Industrial Co., Ltd. 3,155,595 19,200 Pioneer Corp. 172,581 162,000 Sanyo Electric Co., Ltd. (b) 222,075 21,000 Sekisui Chemical Co., Ltd. 140,270 46,000 Sekisui House Ltd. 491,665 78,000 Sharp Corp. 1,391,376 78,400 Sony Corp. 4,271,457 -------------- 11,393,731 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Household Products - 0.1% 44,000 Kao Corp. $ 1,322,770 2,200 Uni-Charm Corp. 138,839 -------------- 1,461,609 ---------------------------------------------------------------------------------------------------------------- IT Services - 0.1% 6,700 CSK Holdings Corp. 215,930 700 Itochu Techno-Science Corp. 23,387 80 NTT Data Corp. 354,332 11,400 Nomura Research Institute Ltd. 372,955 100 Obic Co., Ltd. 18,406 600 Otsuka Shokai Co., Ltd. 51,249 4,900 TIS, Inc. 84,265 -------------- 1,120,524 ---------------------------------------------------------------------------------------------------------------- Independent Power 11,400 Electric Power Development Co. 424,108 Producers & Energy Traders - 0.0% ---------------------------------------------------------------------------------------------------------------- Industrial 79,000 Hankyu Hanshin Holdings, Inc. 340,999 Conglomerates - 0.0% ---------------------------------------------------------------------------------------------------------------- Insurance - 0.4% 9,000 Aioi Insurance Co., Ltd. 42,479 60,100 Millea Holdings, Inc. 2,017,705 104,000 Mitsui Sumitomo Insurance Co., Ltd. 1,006,943 18,000 Nipponkoa Insurance Co., Ltd. 163,420 59,800 Sompo Japan Insurance, Inc. 536,270 56 Sony Financial Holdings, Inc. (b) 214,045 17,050 T&D Holdings, Inc. 867,527 -------------- 4,848,389 ---------------------------------------------------------------------------------------------------------------- Internet & Catalog 645 Rakuten, Inc. (b) 314,821 Retail - 0.0% ---------------------------------------------------------------------------------------------------------------- Internet Software 27 Access Co. Ltd. (b) 121,618 & Service - 0.1% 167 eAccess Ltd. 103,616 1,047 Yahoo! Japan Corp. 466,908 -------------- 692,142 ---------------------------------------------------------------------------------------------------------------- Leisure Equipment 11,900 Namco Bandai Holdings, Inc. 184,600 & Products - 0.2% 26,000 Nikon Corp. 884,476 6,200 Sankyo Co., Ltd. (Gunma) 286,458 20,832 Sega Sammy Holdings, Inc. 257,985 3,200 Shimano, Inc. 115,057 10,100 Yamaha Corp. 230,446 -------------- 1,959,022 ---------------------------------------------------------------------------------------------------------------- Machinery - 0.9% 21,000 Amada Co., Ltd. 182,145 8,500 Daifuku Co., Ltd. 119,819 53,000 Ebara Corp. 179,914 16,000 Fanuc Ltd. 1,551,170 3,000 GLORY Ltd. 68,938 5,000 Hino Motors Ltd. 32,315
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 10,500 Hitachi Construction Machinery Co., Ltd. $ 311,692 79,000 IHI Corp. 163,120 9,600 JTEKT Corp. 171,578 28,000 The Japan Steel Works, Ltd. 406,013 111,000 Kawasaki Heavy Industries Ltd. 324,753 72,000 Komatsu Ltd. 1,930,980 98,000 Kubota Corp. 659,494 11,600 Kurita Water Industries Ltd. 349,877 31,000 Minebea Co., Ltd. 198,603 264,200 Mitsubishi Heavy Industries Ltd. 1,122,675 71,000 Mitsui Engineering & Shipbuilding Co., Ltd. 272,806 24,000 NGK Insulators Ltd. 643,471 24,000 NSK Ltd. 246,010 21,000 NTN Corp. 182,050 19,000 OKUMA Corp. 201,070 900 OSG Corp. 9,775 3,900 SMC Corp. 463,958 41,000 Sumitomo Heavy Industries Ltd. 373,821 6,000 THK Co., Ltd. 121,269 -------------- 10,287,316 ---------------------------------------------------------------------------------------------------------------- Marine - 0.2% 45,000 Kawasaki Kisen Kaisha Ltd. 436,856 83,000 Mitsui OSK Lines Ltd. 1,049,311 97,000 Nippon Yusen Kabushiki Kaisha 764,165 -------------- 2,250,332 ---------------------------------------------------------------------------------------------------------------- Media - 0.1% 600 Asatsu-DK, Inc. 16,707 117 Dentsu, Inc. 307,779 58 Fuji Television Network, Inc. 95,381 600 Hakuhodo DY Holdings, Inc. 33,416 52 Jupiter Telecommunications Co., Ltd. (b) 43,749 4,700 Toho Co., Ltd. 104,992 3,700 Tokyo Broadcasting System, Inc. 79,267 -------------- 681,291 ---------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.8% 26,000 DAIDO STEEL CO., LTD. 193,747 17,000 Dowa Mining Co., Ltd. 118,065 45,800 JFE Holdings, Inc. 2,296,604 233,000 Kobe Steel Ltd. 751,158 103,000 Mitsubishi Materials Corp. 434,924 68,000 Mitsui Mining & Smelting Co., Ltd. 270,660 63,800 Nippon Light Metal Co., Ltd. 110,477 450,000 Nippon Steel Corp. 2,754,423 47,000 Nisshin Steel Co., Ltd. 162,392 1,600 Osaka Titanium Technologies Co. 117,098 320,000 Sumitomo Metal Industries Ltd. 1,463,345 41,000 Sumitomo Metal Mining Co., Ltd. 693,167 800 Toho Titanium Co. Ltd. 23,726 7,500 Tokyo Steel Manufacturing Co., Ltd. 82,930 1,700 Yamato Kogyo Co Ltd 68,828 -------------- 9,541,544 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Multiline Retail - 0.1% 6,000 H20 Retailing Corp. $ 46,656 21,400 Isetan Co., Ltd. 288,270 24,600 J Front Retailing Co. Ltd. (b) 217,341 30,600 Marui Group Co. Ltd. 301,929 48,000 Mitsukoshi Ltd. 217,140 2,000 Ryohin Keikaku Co., Ltd. 120,057 30,000 Takashimaya Co., Ltd. 361,530 -------------- 1,552,923 ---------------------------------------------------------------------------------------------------------------- Office Electronics - 0.5% 3,400 Brother Industries Ltd. 43,772 83,500 Canon, Inc. 3,821,510 42,500 Konica Minolta Holdings, Inc. 745,068 58,000 Ricoh Co., Ltd. 1,058,868 -------------- 5,669,218 ---------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 24,000 Cosmo Oil Co., Ltd. 88,713 Fuels - 0.3% 1,000 Idemitsu Kosan Co. Ltd. 105,325 58 Inpex Holdings, Inc. 629,449 3,200 Japan Petrolleum Explora 232,836 77,500 Nippon Mining Holdings, Inc. 491,551 109,000 Nippon Oil Corp. 881,197 22,800 Showa Shell Sekiyu KK 251,693 14,000 TonenGeneral Sekiyu KK 137,663 -------------- 2,818,427 ---------------------------------------------------------------------------------------------------------------- Paper & Forest 97 Nippon Paper Group, Inc. 292,192 Products - 0.0% 49,000 OJI Paper Co., Ltd. 240,737 -------------- 532,929 ---------------------------------------------------------------------------------------------------------------- Personal Products - 0.1% 6,200 Aderans Co., Ltd. 97,521 25,000 Shiseido Co., Ltd. 589,939 -------------- 687,460 ---------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.9% 40,600 Astellas Pharma, Inc. 1,760,847 22,100 Chugai Pharmaceutical Co., Ltd. 316,070 56,200 Daiichi Sankyo Co. Ltd. 1,729,212 21,900 Eisai Co., Ltd. 857,118 33,000 Kyowa Hakko Kogyo Co., Ltd. 352,442 13,000 Mitsubishi Tanabe Pharma Corp. 120,760 2,000 Ono Pharmacecutical Co. Ltd. 92,288 5,000 Santen Pharmaceutical Co., Ltd. 122,408 27,000 Shionogi & Co., Ltd. 478,685 7,000 Taisho Pharmaceutical Co., Ltd. 134,707 67,100 Takeda Pharmaceutical Co., Ltd. 3,920,039 -------------- 9,884,576 ---------------------------------------------------------------------------------------------------------------- Real Estate Investment 70 Japan Prime Realty Investment Corp. 279,969 Trusts (REITs) - 0.2% 38 Japan Real Estate Investment Corp. 471,617 42 Japan Retail Fund Investment Corp. 297,829 43 Nippon Building Fund, Inc. 600,487 21 Nomura Real Estate Office Fund, Inc. 197,618 -------------- 1,847,520 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Real Estate Management & 2,100 Aeon Mall Co. Ltd. $ 55,111 Development - 0.5% 82 KK DaVinci Advisors (b) 71,041 8,100 Leopalace21 Corp. 217,629 95,000 Mitsubishi Estate Co., Ltd. 2,263,370 64,000 Mitsui Fudosan Co., Ltd. 1,380,253 51 NTT Urban Development Co. 81,647 600 Nomura Real Estate Holdings, Inc. 14,376 28,000 Sumitomo Realty & Development Co., Ltd. 684,770 29,000 Tokyo Tatemono Co., Ltd. 272,007 28,000 Tokyu Land Corp. 239,577 9,400 Urban Corp. 124,061 -------------- 5,403,842 ---------------------------------------------------------------------------------------------------------------- Road & Rail - 0.6% 124 Central Japan Railway Co. 1,054,004 266 East Japan Railway Co. 2,187,992 19,000 Keihin Electric Express Railway Co., Ltd. 116,554 31,000 Keio Electric Railway Co., Ltd. 187,743 33,000 Keisei Electric Railway Co., Ltd. 176,048 100,000 Kintetsu Corp. 310,088 72,000 Nippon Express Co., Ltd. 367,352 36,000 Odakyu Electric Railway Co., Ltd. 229,024 13,000 Seino Holdings Corp. 87,474 50,000 Tobu Railway Co., Ltd. 232,796 100,000 Tokyu Corp. 652,869 152 West Japan Railway Co. 754,039 -------------- 6,355,983 ---------------------------------------------------------------------------------------------------------------- Semiconductors & 12,500 Advantest Corp. 353,445 Semiconductor 6,000 Elpida Memory, Inc. (b) 205,139 Equipment - 0.2% 1,300 NEC Electronics Corp. (b) 30,808 7,600 Rohm Co., Ltd. 659,350 17,000 Sanken Electric Co., Ltd. 90,386 2,300 Shinko Electric Industries 46,417 7,600 Sumco Corp. 216,165 12,700 Tokyo Electron Ltd. 771,799 3,900 Tokyo Seimitsu Co. Ltd. 94,602 -------------- 2,468,111 ---------------------------------------------------------------------------------------------------------------- Software - 0.5% 4,900 Fuji Soft, Inc. 77,199 5,000 Konami Corp. 163,993 7,900 Nintendo Co., Ltd. 4,638,501 900 Oracle Corp. Japan 39,516 1,500 Square Enix Co. Ltd. 45,667 9,500 Trend Micro, Inc. 337,902 -------------- 5,302,778 ---------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% 2,600 Aoyama Trading Co., Ltd. 67,336 3,900 Autobacs Seven Co., Ltd. 78,572 200 EDION Corp. 2,140
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ 3,300 Fast Retailing Co., Ltd. $ 236,028 1,200 Nitori Co., Ltd. 57,510 4,800 Shimachu Co., Ltd. 135,236 800 Shimamura Co., Ltd. 67,644 680 USS Co., Ltd. 42,231 7,580 Yamada Denki Co., Ltd. 855,064 -------------- 1,541,761 ---------------------------------------------------------------------------------------------------------------- Textiles, Apparel & 13,000 Asics Corp. 186,240 Luxury Goods - 0.1% 22,000 Gunze Ltd. 96,231 14,000 Nisshinbo Industries, Inc. 170,708 7,000 Onward Holdings Co. Ltd. 71,611 11,000 Wacoal Holdings Corp. 143,406 -------------- 668,196 ---------------------------------------------------------------------------------------------------------------- Tobacco - 0.2% 362 Japan Tobacco, Inc. 2,140,414 ---------------------------------------------------------------------------------------------------------------- Trading Companies & 1,400 Hitachi High-Technologies Corp. 30,396 Distributors - 0.9% 128,000 Itochu Corp. 1,235,154 123,000 Marubeni Corp. 861,862 105,900 Mitsubishi Corp. 2,866,150 133,000 Mitsui & Co., Ltd. 2,777,391 94,100 Sojitz Corp. 335,607 83,300 Sumitomo Corp. 1,165,482 13,900 Toyota Tsusho Corp. 374,788 -------------- 9,646,830 ---------------------------------------------------------------------------------------------------------------- Transportation 8,000 Kamigumi Co., Ltd. 57,731 Infrastructure - 0.0% 7,000 Mitsubishi Logistics Corp. 78,074 -------------- 135,805 ---------------------------------------------------------------------------------------------------------------- Wireless 191 KDDI Corp. 1,413,223 Telecommunication 1,256 NTT DoCoMo, Inc. 2,067,765 Services - 0.4% 56,600 Softbank Corp. 1,160,852 -------------- 4,641,840 ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Japan 215,107,421 - ------------------------------------------------------------------------------------------------------------------------------------ Luxembourg - 0.0% Media - 0.0% 8,368 SES Global 219,878 ---------------------------------------------------------------------------------------------------------------- Personal Products - 0.0% 1,783 Oriflame Cosmetics SA 113,499 ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Luxembourg 333,377 - ------------------------------------------------------------------------------------------------------------------------------------ Netherlands - 2.7% Air Freight & 31,802 TNT NV 1,319,460 Logistics - 0.1% ---------------------------------------------------------------------------------------------------------------- Beverages - 0.1% 2,755 Heineken Holding NV 156,356 19,518 Heineken NV 1,260,527 -------------- 1,416,883 ---------------------------------------------------------------------------------------------------------------- Chemicals - 0.2% 21,375 Akzo Nobel NV 1,720,734 11,618 Koninklijke DSM NV 548,898 -------------- 2,269,632 ---------------------------------------------------------------------------------------------------------------- Commercial Services 5,832 Corporate Express NV 45,383 & Supplies - 0.1% 3,129 Randstad Holdings NV 122,285 17,976 Vedior NV 457,536 -------------- 625,204 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Diversified Financial 143,436 ING Groep NV CVA $ 5,589,044 Services - 0.5% ---------------------------------------------------------------------------------------------------------------- Diversified 149,896 Koninklijke KPN NV 2,730,899 Telecommunication Services - 0.2% ---------------------------------------------------------------------------------------------------------------- Energy Equipment 3,390 Fugro NV 261,820 & Services - 0.1% 13,640 SBM Offshore NV 430,042 -------------- 691,862 ---------------------------------------------------------------------------------------------------------------- Food & Staples 102,772 Koninklijke Ahold NV (b) 1,423,275 Retailing - 0.1% ---------------------------------------------------------------------------------------------------------------- Food Products - 0.4% 131,620 Unilever NV 4,835,823 ---------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% 3,423 TomTom NV (b) 258,528 ---------------------------------------------------------------------------------------------------------------- Industrial 86,666 Koninklijke Philips Electronics NV (b) 3,713,662 Conglomerates - 0.4% ---------------------------------------------------------------------------------------------------------------- Insurance - 0.2% 112,170 Aegon NV 1,978,494 ---------------------------------------------------------------------------------------------------------------- Media - 0.2% 57,466 Reed Elsevier NV 1,140,434 23,059 Wolters Kluwer NV 758,537 -------------- 1,898,971 ---------------------------------------------------------------------------------------------------------------- Office Electronics - 0.0% 283 OCE NV 5,107 ---------------------------------------------------------------------------------------------------------------- Real Estate Investment 1,928 Corio NV 155,971 Trusts (REITs) - 0.0% 1,694 Wereldhave NV 184,733 -------------- 340,704 ---------------------------------------------------------------------------------------------------------------- Semiconductors & 32,754 ASML Holding NV (b) 1,034,171 Semiconductor Equipment - 0.1% ---------------------------------------------------------------------------------------------------------------- Trading Companies & 32,722 Hagemeyer NV 223,820 Distributors - 0.0% ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in the Netherlands 30,355,539 - ------------------------------------------------------------------------------------------------------------------------------------ New Zealand - 0.1% Construction Materials - 0.0% 32,024 Fletcher Building Ltd. 282,575 ---------------------------------------------------------------------------------------------------------------- Diversified 145,114 Telecom Corp. of New Zealand Ltd. 484,759 Telecommunication Services - 0.1% ---------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.0% 20,226 Contact Energy Ltd. 128,035 ---------------------------------------------------------------------------------------------------------------- Health Care Equipment & 41,926 Fisher & Paykel Healthcare Corp. 112,320 Supplies - 0.0% ---------------------------------------------------------------------------------------------------------------- Hotels, Restaurants 29,721 Sky City Ltd. 105,005 & Leisure - 0.0% ---------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% 27,665 Fisher & Paykel Appliances Holdings Ltd. 72,872 ---------------------------------------------------------------------------------------------------------------- Media - 0.0% 241 Sky Network Television Ltd. 1,110 ---------------------------------------------------------------------------------------------------------------- Real Estate Investment 12,534 Kiwi Income Property Trust 12,886 Trusts (REITs) - 0.0% ---------------------------------------------------------------------------------------------------------------- Transportation 58,991 Auckland International Airport Ltd. 131,537 Infrastructure - 0.0% ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in New Zealand 1,331,099 - ------------------------------------------------------------------------------------------------------------------------------------ Norway - 1.0% Chemicals - 0.1% 13,800 Yara International ASA 634,620 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.1% 57,999 DnB NOR ASA 882,280 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - ------------------------------------------------------------------------------------------------------------------------------------ Commercial Services 15,929 Tomra Systems ASA $ 112,130 & Supplies - 0.0% ---------------------------------------------------------------------------------------------------------------- Communications 4,141 Tandberg ASA 85,502 Equipment - 0.0% ---------------------------------------------------------------------------------------------------------------- Diversified 42,395 Telenor ASA 1,005,990 Telecommunication 8,033 Telenor ASA (a) 575,862 Services - 0.2% -------------- 1,581,852 ---------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.1% 13,685 Renewable Energy Corp. AS (b) 686,420 ---------------------------------------------------------------------------------------------------------------- Energy Equipment 13,390 Acergy SA 294,591 & Services - 0.1% 12,991 Aker Kvaerner ASA 342,865 14,865 Ocean RIG ASA (b) 107,836 11,223 Petroleum Geo-Services ASA (b) 323,190 9,094 ProSafe ASA 157,331 5,442 TGS Nopec Geophysical Co. ASA (b) 74,187 -------------- 1,300,000 ---------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 312,427 Marine Harvest (b) 199,224 ---------------------------------------------------------------------------------------------------------------- Industrial 65,821 Orkla ASA 1,260,265 Conglomerates - 0.1% ---------------------------------------------------------------------------------------------------------------- Insurance - 0.0% 32,487 Storebrand ASA 337,034 ---------------------------------------------------------------------------------------------------------------- Marine - 0.0% 400 Stolt-Nielsen SA 12,135 ---------------------------------------------------------------------------------------------------------------- Media - 0.0% 3,218 Schibsted ASA 138,902 ---------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% 56,828 Norsk Hydro ASA 809,168 ---------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 70,332 DNO International ASA (b) 129,133 Fuels - 0.3% 1,944 Frontline Ltd. 92,772 101,844 Statoilhydro ASA 3,141,969 -------------- 3,363,874 ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Norway 11,403,406 - ------------------------------------------------------------------------------------------------------------------------------------ Portugal - 0.4% Commercial Banks - 0.1% 23,822 Banco BPI SA 185,647 163,650 Banco Comercial Portugues SA Registered Shares 697,538 13,508 Banco Espirito Santo SA Registered Shares 295,730 -------------- 1,178,915 ---------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% 13,841 Cimpor Cimentos de Portugal SA 120,936 ---------------------------------------------------------------------------------------------------------------- Diversified 60,384 Portugal Telecom SGPS SA Registered Shares 792,003 Telecommunication Services - 0.1% ---------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.1% 159,158 Energias de Portugal SA 1,043,026 ---------------------------------------------------------------------------------------------------------------- Food & Staples 18,295 Jeronimo Martins SGPS SA 145,351 Retailing - 0.0% ---------------------------------------------------------------------------------------------------------------- Industrial 96,264 Sonae SGPS SA 277,449 Conglomerates - 0.0% ---------------------------------------------------------------------------------------------------------------- Media - 0.1% 23,393 PT Multimedia Servicos de Telecomunicacoes e Multimedia SGPS SA 325,919 ---------------------------------------------------------------------------------------------------------------- Paper & Forest 9,059 Sonae Industria SGPS SA (b) 87,272 Products - 0.0% ---------------------------------------------------------------------------------------------------------------- Transportation 17,438 Brisa-Auto Estradas de Portugal SA Private Infrastructure - 0.0% Shares 255,805 ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Portugal 4,226,676 - -----------------------------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - - ---------------------------------------------------------------------------------------------------------------------------------- Singapore - 1.1% Aerospace & Defense - 0.0% 82,213 Singapore Technologies Engineering Ltd. $ 212,043 ---------------------------------------------------------------------------------------------------------------- Air Freight & Logistics - 0.0% 127,954 Singapore Post Ltd. 98,765 ---------------------------------------------------------------------------------------------------------------- Airlines - 0.0% 36,009 Singapore Airlines Ltd. 432,584 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.4% 93,605 DBS Group Holdings Ltd. 1,328,534 214,914 Oversea-Chinese Banking Corp. 1,224,903 95,572 United Overseas Bank Ltd. 1,308,890 -------------- 3,862,327 ---------------------------------------------------------------------------------------------------------------- Distributors - 0.0% 4,529 Jardine Cycle & Carriage Ltd. 67,626 ---------------------------------------------------------------------------------------------------------------- Diversified Financial 69,000 Singapore Exchange Ltd. 632,077 Services - 0.1% ---------------------------------------------------------------------------------------------------------------- Diversified 651,132 Singapore Telecommunications Ltd. 1,791,440 Telecommunication Services - 0.2% ---------------------------------------------------------------------------------------------------------------- Electronic Equipment & 7,000 Venture Corp. Ltd. 61,394 Instruments - 0.0% ---------------------------------------------------------------------------------------------------------------- Food & Staples 16,000 Olam International Ltd. 31,474 Retailing - 0.0% ---------------------------------------------------------------------------------------------------------------- Food Products - 0.0% 11,273 Wilmar International Ltd. 41,890 ---------------------------------------------------------------------------------------------------------------- Health Care Providers & 79,800 Parkway Holdings Ltd. 216,861 Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Hotels, Restaurants 52,238 Genting International PLC (b) 24,659 & Leisure - 0.0% ---------------------------------------------------------------------------------------------------------------- Industrial 50,096 Fraser and Neave Ltd. 202,949 Conglomerates - 0.1% 1,766 Haw Par Corp. Ltd. 8,619 98,616 Keppel Corp. Ltd. 878,735 44,590 SembCorp Industries Ltd. 177,226 -------------- 1,267,529 ---------------------------------------------------------------------------------------------------------------- Machinery - 0.0% 100,197 SembCorp Marine Ltd. 277,175 ---------------------------------------------------------------------------------------------------------------- Marine - 0.0% 76,002 Cosco Corp. (Singapore) Ltd. 300,050 5,200 Neptune Orient Lines Ltd. 13,979 -------------- 314,029 ---------------------------------------------------------------------------------------------------------------- Media - 0.1% 133,316 Singapore Press Holdings Ltd. 413,920 ---------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 16,194 Singapore Petroleum Co. Ltd. 84,542 Fuels - 0.0% ---------------------------------------------------------------------------------------------------------------- Real Estate Investment 125,152 Ascendas Real Estate Investment Trust 211,872 Trusts (REITs) - 0.0% 12,000 Capita Commercial Trust 20,117 51,000 CapitaMall Trust 120,926 -------------- 352,915 ---------------------------------------------------------------------------------------------------------------- Real Estate Management & 147,000 Allgreen Properties Ltd. 149,774 Development - 0.2% 135,833 CapitaLand Ltd. 584,408 49,535 City Developments Ltd. 482,412 42,182 Keppel Land Ltd. 211,055 7,457 UOL Group Ltd. 23,136 57,110 Wing Tai Holdings Ltd. 105,610 -------------- 1,556,395 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - - ---------------------------------------------------------------------------------------------------------------------------------- Road & Rail - 0.0% 95,816 ComfortDelgro Corp. Ltd. $ 120,414 ---------------------------------------------------------------------------------------------------------------- Semiconductors & 1,000 Chartered Semiconductor Manufacturing Ltd. (b) 663 Semiconductor Equipment - 0.0% ---------------------------------------------------------------------------------------------------------------- Trading Companies & 54,100 Noble Group Ltd. 90,005 Distributors - 0.0% ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Singapore 11,950,727 - - ---------------------------------------------------------------------------------------------------------------------------------- South Paper & Forest 1 Mondi Ltd. (a) 8 Africa - 0.0% Products - 0.0% ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in South Africa 8 - - ---------------------------------------------------------------------------------------------------------------------------------- Spain - 4.0% Airlines - 0.0% 53,218 Iberia Lineas Aereas de Espana 231,038 ---------------------------------------------------------------------------------------------------------------- Biotechnology - 0.0% 14,047 Zeltia SA 123,674 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.7% 285,794 Banco Bilbao Vizcaya Argentaria SA 6,957,420 64,720 Banco Popular Espanol SA 1,103,077 480,675 Banco Santander SA 10,381,617 31,092 Banco de Sabadell SA 336,289 6,140 Bankinter SA 112,132 -------------- 18,890,535 ---------------------------------------------------------------------------------------------------------------- Construction 16,756 ACS Actividades de Construccion y & Engineering - 0.2% Servicios, SA 992,334 2,030 Acciona SA 639,594 4,587 Fomento de Construcciones y Contratas SA 342,720 4,971 Grupo Ferrovial SA 347,564 6,344 Sacyr Vallehermoso SA 244,208 -------------- 2,566,420 ---------------------------------------------------------------------------------------------------------------- Diversified 329,719 Telefonica SA 10,688,282 Telecommunication Services - 0.9% ---------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.5% 69,345 Iberdrola Renovables (b) 572,831 282,940 Iberdrola SA 4,290,525 518 Iberdrola SA (a) 31,505 7,061 Red Electrica de Espana 445,769 9,776 Union Fenosa SA 659,914 -------------- 6,000,544 ---------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.1% 15,284 Gamesa Corp. Tecnologica SA 707,200 ---------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 10,537 Gas Natural SDG SA 615,083 ---------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 11,926 Indra Sistemas SA 323,430 ---------------------------------------------------------------------------------------------------------------- Insurance - 0.0% 42,475 Corp. Mapfre SA 186,355 ---------------------------------------------------------------------------------------------------------------- Machinery - 0.0% 6,638 Zardoya Otis SA 186,332 ---------------------------------------------------------------------------------------------------------------- Media - 0.0% 8,518 Antena 3 de Television SA 130,074 11,454 Gestevision Telecinco SA 291,163 673 Promotora de Informaciones SA 12,507 1,844 Sogecable SA (b) 73,654 -------------- 507,398 ---------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.0% 15,326 Acerinox SA 375,404 ---------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 58,862 Repsol YPF SA 2,099,797 Fuels - 0.2% ---------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% 17,098 Inditex SA 1,034,600 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - - ---------------------------------------------------------------------------------------------------------------------------------- Tobacco - 0.1% 21,546 Altadis SA $ 1,563,362 ---------------------------------------------------------------------------------------------------------------- Transportation 17,370 Abertis Infraestructuras SA 554,450 Infrastructure - 0.1% 23,413 Cintra Concesiones de Infraestructuras de Transporte SA 351,645 -------------- 906,095 ---------------------------------------------------------------------------------------------------------------- Water Utilities - 0.0% 3,245 Sociedad General de Aguas de Barcelona SA Class A 130,509 ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Spain 47,136,058 - - ---------------------------------------------------------------------------------------------------------------------------------- Sweden - 2.2% Airlines - 0.0% 4,009 SAS AB (b) 51,200 ---------------------------------------------------------------------------------------------------------------- Building Products - 0.1% 28,977 Assa Abloy AB Series B 581,096 ---------------------------------------------------------------------------------------------------------------- Capital Markets - 0.0% 6,238 D Carnegie AB 120,861 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.5% 11,100 ForeningsSparbanken AB 312,372 167,551 Nordea Bank AB 2,807,971 34,153 Skandinaviska Enskilda Banken AB Class A 871,857 40,412 Svenska Handelsbanken Class A 1,291,821 -------------- 5,284,021 ---------------------------------------------------------------------------------------------------------------- Commercial Services 24,648 Securitas AB 342,790 & Supplies - 0.0% 23,048 Securitas Systems AB 81,420 -------------- 424,210 ---------------------------------------------------------------------------------------------------------------- Communications 1,164,446 Telefonaktiebolaget LM Ericsson 2,725,477 Equipment - 0.2% ---------------------------------------------------------------------------------------------------------------- Construction 29,605 Skanska AB Class B 554,055 & Engineering - 0.1% ---------------------------------------------------------------------------------------------------------------- Diversified Consumer 23,048 Securitas Direct AB (b) 92,885 Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Diversified Financial 13,800 Investor AB 312,371 Services - 0.0% 4,910 OMX AB 199,315 -------------- 511,686 ---------------------------------------------------------------------------------------------------------------- Diversified 22,466 Tele2 AB 447,089 Telecommunication 175,201 TeliaSonera AB 1,636,829 Services - 0.2% -------------- 2,083,918 ---------------------------------------------------------------------------------------------------------------- Food & Staples 20 Axfood AB 803 Retailing - 0.0% ---------------------------------------------------------------------------------------------------------------- Health Care Equipment & 7,749 Elekta AB 128,876 Supplies - 0.0% 9,720 Getinge AB Class B 259,862 -------------- 388,738 ---------------------------------------------------------------------------------------------------------------- Household Durables - 0.1% 19,955 Electrolux AB 330,981 20,861 Husqvarna AB 247,097 -------------- 578,078 ---------------------------------------------------------------------------------------------------------------- Machinery - 0.5% 7,167 Alfa Laval AB 402,423 26,954 Atlas Copco AB 367,358 52,644 Atlat Copco AB 782,464 30,410 SKB AB 512,576 74,406 Sandvik AB 1,276,009 30,020 Scania AB 712,493 6,544 Trelleborg AB Class B 136,572 35,571 Volvo AB A Shares 591,738 82,548 Volvo AB B Shares 1,381,207 -------------- 6,162,840 - - ----------------------------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.0% 14,690 Eniro AB $ 130,530 2,986 Modern Times Group AB 207,221 -------------- 337,751 ---------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% 22,731 Boliden AB 282,727 2,520 Hoganas AB 53,331 17,900 SSAB Svenskt Stal AB Series A 483,073 2,858 SSAB Svenskt Stal AB Series B 69,663 -------------- 888,794 ---------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 12,702 Lundin Petroleum AB (b) 131,973 Fuels - 0.0% ---------------------------------------------------------------------------------------------------------------- Paper & Forest 6,721 Billerud AB 69,001 Products - 0.1% 1,645 Holmen AB Class B 60,875 44,166 Svenska Cellulosa AB 780,008 -------------- 909,884 ---------------------------------------------------------------------------------------------------------------- Real Estate Management & 3,889 Castellum AB 40,240 Development - 0.0% 3,636 Fabege AB 36,976 4,960 Kungsleden AB 54,958 6,033 Wihlborgs Fastigheter AB 107,232 -------------- 239,406 ---------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.2% 37,155 Hennes & Mauritz AB B Shares 2,244,370 4,266 Nobia AB 37,661 -------------- 2,282,031 ---------------------------------------------------------------------------------------------------------------- Tobacco - 0.1% 24,550 Swedish Match AB 584,490 ---------------------------------------------------------------------------------------------------------------- Wireless 2,063 Millicom International Cellular SA (a)(b) 234,663 Telecommunication Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Sweden 25,168,860 - - ---------------------------------------------------------------------------------------------------------------------------------- Switzerland - 6.4% Auto Components - 0.0% 234 Rieter Holding AG 103,276 ---------------------------------------------------------------------------------------------------------------- Biotechnology - 0.0% 6,207 Actelion Ltd. (b) 283,542 ---------------------------------------------------------------------------------------------------------------- Building Products - 0.0% 3,300 Geberit AG 449,515 ---------------------------------------------------------------------------------------------------------------- Capital Markets - 1.2% 84,380 Credit Suisse Group 5,079,301 1,327 EFG International AG 53,471 7,393 Julius Baer Holding AG Class B 606,634 162,085 UBS AG 7,473,367 -------------- 13,212,773 ---------------------------------------------------------------------------------------------------------------- Chemicals - 0.3% 6,646 Ciba Specialty Chemicals AG Registered Shares 307,310 621 Givaudan SA 599,328 8,098 Syngenta AG 2,054,951 -------------- 2,961,589 ---------------------------------------------------------------------------------------------------------------- Commercial Services & 10,739 Adecco SA Registered Shares 577,275 Supplies - 0.1% 301 SGS SA 358,846 -------------- 936,121 ---------------------------------------------------------------------------------------------------------------- Computers & 14,198 Logitech International SA (b) 518,521 Peripherals - 0.1% ---------------------------------------------------------------------------------------------------------------- Construction Materials - 0.2% 17,071 Holcim Ltd. 1,819,779 ---------------------------------------------------------------------------------------------------------------- Diversified Financial 248 Pargesa Holding SA 27,703 Services - 0.0% ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - - ---------------------------------------------------------------------------------------------------------------------------------- Diversified 2,044 Swisscom AG $ 797,887 Telecommunication Services - 0.1% ---------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.4% 170,320 ABB Ltd. 4,910,631 ---------------------------------------------------------------------------------------------------------------- Electronic Equipment & 4,444 Kudelski SA 87,545 Instruments - 0.0% ---------------------------------------------------------------------------------------------------------------- Food Products - 1.3% 39 Lindt & Spruengli AG 134,375 31,297 Nestle SA Registered Shares 14,371,279 -------------- 14,505,654 ---------------------------------------------------------------------------------------------------------------- Health Care Equipment & 1,926 Nobel Biocare Holding AG 512,933 Supplies - 0.1% 2,994 Sonova Holding AG 336,146 864 Straumann Holding AG Registered Shares 237,180 4,117 Synthes, Inc. 511,882 -------------- 1,598,141 ---------------------------------------------------------------------------------------------------------------- Hotels, Restaurants 83 Kuoni Reisen Holding AG Registered Shares 43,186 & Leisure - 0.0% ---------------------------------------------------------------------------------------------------------------- Insurance - 0.5% 2,667 Swiss Life Holding (b) 665,527 27,816 Swiss Reinsurance Co. Registered Shares 1,967,825 11,736 Zurich Financial Services AG 3,444,358 -------------- 6,077,710 ---------------------------------------------------------------------------------------------------------------- Life Sciences Tools 4,087 Lonza Group AG Registered Shares 494,286 & Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Machinery - 0.1% 2,369 Schindler Holding AG 152,022 282 Sulzer AG 414,697 -------------- 566,719 ---------------------------------------------------------------------------------------------------------------- Marine - 0.0% 3,237 Kuehne & Nagel International AG 310,820 ---------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 1.7% 183,604 Novartis AG Registered Shares 10,040,813 55,612 Roche Holding AG 9,613,411 -------------- 19,654,224 ---------------------------------------------------------------------------------------------------------------- Real Estate Management & 1,750 PSP Swiss Property AG (b) 88,157 Development - 0.0% ---------------------------------------------------------------------------------------------------------------- Semiconductors & 655 OC Oerlikon Corp. AG (b) 273,217 Semiconductor Equipment - 0.0% ---------------------------------------------------------------------------------------------------------------- Textiles, Apparel & 41,317 Compagnie Financiere Richemont AG 2,822,816 Luxury Goods - 0.3% 2,854 The Bearer Shares Swatch Group Ltd. 857,986 2,160 The Registered Shares Swatch Group Ltd. 127,298 -------------- 3,808,100 ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in Switzerland 73,529,096 - - ---------------------------------------------------------------------------------------------------------------------------------- United Aerospace & Defense - 0.4% 266,693 BAE Systems Plc 2,646,637 Kingdom - 75,689 Cobham Plc 314,988 21.3% 63,403 Meggitt Plc 419,604 143,073 Rolls-Royce Group Plc (b) 1,552,918 -------------- 4,934,147 ---------------------------------------------------------------------------------------------------------------- Airlines - 0.0% 33,898 British Airways Plc (b) 207,206 ---------------------------------------------------------------------------------------------------------------- Auto Components - 0.0% 61,413 GKN Plc 343,245 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - - ---------------------------------------------------------------------------------------------------------------------------------- Beverages - 0.6% 205,651 Diageo Plc $ 4,414,350 72,571 SABMiller Plc 2,036,757 58,875 Scottish & Newcastle Plc 863,541 -------------- 7,314,648 ---------------------------------------------------------------------------------------------------------------- Capital Markets - 0.3% 34,376 3i Group Plc 680,623 4,359 Close Brothers Group Plc 82,721 46,779 ICAP Plc 674,115 21,059 Investec Plc 187,292 126,687 Man Group Plc 1,438,119 5,199 Schroders Plc 133,394 7,338 Tullett Prebon Plc 67,782 -------------- 3,264,046 ---------------------------------------------------------------------------------------------------------------- Chemicals - 0.2% 92,487 Imperial Chemical Industries Plc 1,233,504 19,052 Johnson Matthey Plc 711,158 -------------- 1,944,662 ---------------------------------------------------------------------------------------------------------------- Commercial Banks - 3.3% 7,670 Alliance & Leicester PLC 95,951 527,057 Barclays Plc 5,322,917 292,541 HBOS Plc 4,253,853 922,258 HSBC Holdings Plc 15,535,003 446,447 Lloyds TSB Group Plc 4,204,060 784,325 Royal Bank of Scotland Group Plc 6,925,178 50,000 Standard Chartered Plc 1,824,834 -------------- 38,161,796 ---------------------------------------------------------------------------------------------------------------- Commercial Services 15,192 Aggreko Plc 159,486 & Supplies - 0.3% 29,284 Biffa Plc 190,512 42,255 Capita Group Plc 585,799 3,467 Davis Service Group Plc 35,234 8,421 De La Rue Plc 163,714 75,806 Experian Group Ltd. 598,746 109,578 Group 4 Securicor Plc 535,636 86,430 Hays Plc 199,922 9,359 Intertek Group Plc 184,763 142,104 Rentokil Initial Plc 338,927 48,259 Serco Group Plc 444,198 -------------- 3,436,937 ---------------------------------------------------------------------------------------------------------------- Construction & 31,376 Amec Plc 524,562 Engineering - 0.1% 24,322 Balfour Beatty Plc 240,582 -------------- 765,144 ---------------------------------------------------------------------------------------------------------------- Consumer Finance - 0.0% 14,252 Cattles Plc 82,922 ---------------------------------------------------------------------------------------------------------------- Containers & 55,278 Rexam Plc 460,258 Packaging - 0.0% ---------------------------------------------------------------------------------------------------------------- Distributors - 0.0% 26,225 Inchcape Plc 197,184 ---------------------------------------------------------------------------------------------------------------- Diversified Financial 12,915 London Stock Exchange Group Plc 507,480 Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Diversified 634,403 BT Group Plc 3,427,083 Telecommunication 213,436 Cable & Wireless Plc 787,518 Services - 0.4% -------------- 4,214,601 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - - ---------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.3% 85,474 British Energy Group Plc $ 935,974 67,819 Scottish & Southern Energy Plc 2,211,412 -------------- 3,147,386 ---------------------------------------------------------------------------------------------------------------- Electronic Equipment & 17,536 Electrocomponents Plc 72,203 Instruments - 0.0% 4,873 Premier Farnell Plc 14,169 -------------- 86,372 ---------------------------------------------------------------------------------------------------------------- Food & Staples 128,957 J Sainsbury Plc 1,086,567 Retailing - 0.7% 616,389 Tesco Plc 5,863,427 80,082 William Morrison Supermarkets PLC 511,658 -------------- 7,461,652 ---------------------------------------------------------------------------------------------------------------- Food Products - 0.7% 8,781 Associated British Foods PLC 156,638 164,779 Cadbury Schweppes Plc 2,014,735 37,280 Tate & Lyle Plc 331,962 102,635 Unilever Plc 3,849,310 -------------- 6,352,645 ---------------------------------------------------------------------------------------------------------------- Health Care Equipment & 3,701 SSL International Plc 39,262 Supplies - 0.1% 80,405 Smith & Nephew Plc 922,487 -------------- 961,749 ---------------------------------------------------------------------------------------------------------------- Hotels, Restaurants 13,158 Carnival Plc 578,603 & Leisure - 0.4% 162,100 Compass Group Plc 989,129 40,342 Enterprise Inns Plc 391,135 20,878 Intercontinental Hotels Group Plc 363,829 49,711 Ladbrokes Plc 317,310 30,315 Mitchells & Butlers Plc 253,877 132,999 PartyGaming Plc (b) 76,750 20,831 Punch Taverns Plc 317,020 55,408 Rank Group Plc 100,388 58,338 TUI Travel Plc (b) 341,126 28,262 Thomas Cook Group Plc (b) 156,919 17,688 Whitbread Plc 486,421 26,415 William Hill Plc 275,985 -------------- 4,648,492 ---------------------------------------------------------------------------------------------------------------- Household Durables - 0.1% 23,009 Barratt Developments Plc 206,939 4,004 Berkeley Group Holdings Plc (b) 107,661 9,500 Bovis Homes Group Plc 115,664 22,497 Persimmon Plc 358,395 88,076 Taylor Wimpey Plc 354,726 -------------- 1,143,385 ---------------------------------------------------------------------------------------------------------------- Household Products - 0.2% 46,046 Reckitt Benckiser Plc 2,675,737 ---------------------------------------------------------------------------------------------------------------- IT Services - 0.0% 135,116 LogicaCMG Plc 315,828 ---------------------------------------------------------------------------------------------------------------- Independent Power 124,268 International Power Plc 1,120,189 Producers & Energy Traders - 0.1% ---------------------------------------------------------------------------------------------------------------- Industrial 14,609 Cookson Group Plc 202,607 Conglomerates - 0.1% 27,401 Smiths Group Plc 549,738 92,890 Tomkins Plc 326,734 -------------- 1,079,079 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.9% 203,377 Aviva Plc $ 2,710,499 145,613 Friends Provident Plc 474,848 507,133 Legal & General Group Plc 1,317,220 413,662 Old Mutual Plc 1,378,217 193,321 Prudential Plc 2,722,117 49,562 Resolution Plc 701,538 227,193 Royal & Sun Alliance Insurance Group 663,651 162,594 Standard Life Plc 814,409 -------------- 10,782,499 ---------------------------------------------------------------------------------------------------------------- Internet & 69,483 Home Retail Group 451,577 Catalog Retail - 0.0% ---------------------------------------------------------------------------------------------------------------- Life Sciences Tools 3,124 Lighthouse Caledonia ASA (b) 2,969 & Services - 0.0% ---------------------------------------------------------------------------------------------------------------- Machinery - 0.1% 8,103 Charter Plc (b) 127,643 10,160 FKI Plc 11,955 33,055 IMI Plc 259,313 74,878 Invensys Plc (b) 336,085 -------------- 734,996 ---------------------------------------------------------------------------------------------------------------- Media - 0.7% 89,101 British Sky Broadcasting Plc 1,096,014 17,377 Daily Mail & General Trust 171,744 21,515 Emap Plc 392,756 282,651 ITV Plc 478,994 63,244 Pearson Plc 915,892 99,614 Reed Elsevier Plc 1,337,878 99,693 Reuters Group Plc 1,260,479 25,643 Trinity Mirror Plc 176,545 16,440 United Business Media Plc 212,193 89,849 WPP Group Plc 1,151,066 61,820 Yell Group Plc 492,669 -------------- 7,686,230 ---------------------------------------------------------------------------------------------------------------- Metals & Mining - 2.1% 103,812 Anglo American Plc 6,301,536 8,690 Antofagasta PLC 123,199 180,451 BHP Billiton Plc 5,502,561 4,729 Kazakhmys Plc 127,946 4,617 Lonmin Plc 282,757 78,068 Rio Tinto Plc Registered Shares 8,216,068 3,389 Vedanta Resources PLC Wi 137,495 49,400 Xstrata Plc 3,466,445 -------------- 24,158,007 ---------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.6% 288,111 Centrica Plc 2,052,249 204,468 National Grid Plc 3,391,043 68,950 United Utilities Plc 1,036,194 -------------- 6,479,486 ---------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.2% 130,949 Marks & Spencer Group Plc 1,449,537 15,333 Next Plc 493,892 -------------- 1,943,429 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - - ---------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 263,695 BG Group Plc $ 6,050,102 Fuels - 4.0% 1,493,200 BP Plc 18,247,282 284,525 Royal Dutch Shell Plc 12,011,215 216,157 Royal Dutch Shell Plc Class B 9,010,661 49,889 Tullow Oil Plc 647,979 -------------- 45,967,239 ---------------------------------------------------------------------------------------------------------------- Paper & Forest 31,709 Mondi Plc 265,346 Products - 0.0% ---------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 1.5% 116,048 AstraZeneca Plc 4,995,039 441,993 GlaxoSmithKline Plc 11,225,109 17,920 Shire Plc 412,064 -------------- 16,632,212 ---------------------------------------------------------------------------------------------------------------- Real Estate Investment 40,281 British Land Co. Plc 755,374 Trusts (REITs) - 0.3% 8,381 Brixton Plc 48,689 4,736 Great Portland Estates Plc 44,128 22,761 Hammerson Plc 463,870 36,475 Land Securities Group Plc 1,093,064 19,762 Liberty International Plc 422,228 34,456 Segro Plc 320,556 -------------- 3,147,909 ---------------------------------------------------------------------------------------------------------------- Road & Rail - 0.1% 12,232 Arriva Plc 190,446 37,235 Firstgroup Plc 601,042 13,327 National Express Group Plc 327,794 43,699 Stagecoach Group Plc 245,549 -------------- 1,364,831 ---------------------------------------------------------------------------------------------------------------- Semiconductors & 115,101 ARM Holdings Plc 283,868 Semiconductor 12,891 CSR Plc (b) 153,268 Equipment - 0.0% -------------- 437,136 ---------------------------------------------------------------------------------------------------------------- Software - 0.1% 43,411 Misys Plc 157,952 102,053 Sage Group Plc 466,177 -------------- 624,129 ---------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% 26,867 The Carphone Warehouse Plc 182,796 143,393 DSG International Plc 283,493 24,803 Galiform Plc (b) 43,931 50,995 Kesa Electricals Plc 235,513 183,471 Kingfisher Plc 526,114 90,190 Signet Group Plc 125,452 -------------- 1,397,299 ---------------------------------------------------------------------------------------------------------------- Textiles, Apparel & 34,804 Burberry Group Plc 393,370 Luxury Goods - 0.0% ---------------------------------------------------------------------------------------------------------------- Tobacco - 0.7% 119,338 British American Tobacco Plc 4,665,295 53,069 Imperial Tobacco Group Plc 2,870,338 -------------- 7,535,633 ----------------------------------------------------------------------------------------------------------------
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Shares Country Industry Held Common Stocks Value - - ---------------------------------------------------------------------------------------------------------------------------------- Trading Companies & 32,178 Bunzl Plc $ 455,032 Distributors - 0.1% 6,634 Travis Perkins Plc 158,399 51,790 Wolseley Plc 761,422 -------------- 1,374,853 ---------------------------------------------------------------------------------------------------------------- Transportation 38,537 BBA Aviation Plc 157,822 Infrastructure - 0.0% ---------------------------------------------------------------------------------------------------------------- Water Utilities - 0.1% 21,239 Kelda Group Plc 457,988 18,144 Severn Trent Plc 551,811 -------------- 1,009,799 ---------------------------------------------------------------------------------------------------------------- Wireless 4,153,856 Vodafone Group Plc 15,593,248 Telecommunication Services - 1.4% ---------------------------------------------------------------------------------------------------------------- Total Common Stocks in the United Kingdom 242,966,809 - - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks (Cost - $797,004,493) - 94.5% 1,080,774,917 - - ---------------------------------------------------------------------------------------------------------------------------------- Exchange-Traded Funds - - ---------------------------------------------------------------------------------------------------------------------------------- United States - 2.0% 288,947 iShares MSCI EAFE Index Fund (g) 22,708,345 - - ---------------------------------------------------------------------------------------------------------------------------------- Total Exchange-Traded Funds (Cost - $19,661,875) - 2.0% 22,708,345 - - ---------------------------------------------------------------------------------------------------------------------------------- Preferred Stocks - - ---------------------------------------------------------------------------------------------------------------------------------- Germany - 0.2% Automobiles - 0.1% 8,484 Volkswagen AG, 4.35% 1,246,695 ---------------------------------------------------------------------------------------------------------------- Household Products - 0.1% 15,771 Henkel KGaA, 1.75% 886,330 ---------------------------------------------------------------------------------------------------------------- Media - 0.0% 5,011 ProSieben SAT.1 Media AG, 2.24% 119,809 ---------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.0% 2,583 RWE AG, 3.50% 314,051 ---------------------------------------------------------------------------------------------------------------- Total Preferred Stocks (Cost - $1,272,423) - 0.2% 2,566,885 - - ---------------------------------------------------------------------------------------------------------------------------------- Rights - - ---------------------------------------------------------------------------------------------------------------------------------- Hong Kong - 0.0% Real Estate Management & 10,763 Wharf Holdings Ltd. (e) 14,770 Development - 0.0% ---------------------------------------------------------------------------------------------------------------- Total Rights in Hong Kong 14,770 - - ---------------------------------------------------------------------------------------------------------------------------------- Japan - 0.0% Metals & Mining - 0.0% 7,000 Dowa Mining Co., Ltd. (f) 0 ---------------------------------------------------------------------------------------------------------------- Total Rights in Japan 0 - - ---------------------------------------------------------------------------------------------------------------------------------- Total Rights (Cost - $0) - 0.0% 14,770 - - ---------------------------------------------------------------------------------------------------------------------------------- Beneficial Interest Short-Term Securities - - ---------------------------------------------------------------------------------------------------------------------------------- USD 13,529,338 BlackRock Liquidity Series, LLC Cash Sweep Series, 5.04% (c)(d) 13,529,338 - - ---------------------------------------------------------------------------------------------------------------------------------- Total Short-Term Securities (Cost - $13,529,338) - 1.2% 13,529,338 - - ---------------------------------------------------------------------------------------------------------------------------------- Total Investments (Cost - $831,468,129*) - 97.9% 1,119,594,255 Other Assets Less Liabilities - 2.1% 23,577,306 -------------- Net Assets - 100.0% $1,143,171,561 ==============
* The cost and unrealized appreciation (depreciation) of investments as of December 31, 2007, as computed for federal income tax purposes, were as follows: Aggregate cost $ 844,409,619 ============= Gross unrealized appreciation $ 305,352,070 Gross unrealized depreciation (30,167,434) ------------- Net unrealized appreciation $ 275,184,636 ============= Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars) (a) Depositary receipts. (b) Non-income producing security. (c) Investments in companies considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
------------------------------------------------------------------------------------- Net Interest Affiliate Activity Income ------------------------------------------------------------------------------------- BlackRock Liquidity Series, LLC Cash Sweep Series $ (12,221,959) $ 981,689 -------------------------------------------------------------------------------------
(d) Represents the current yield as of December 31, 2007. (e) The rights may be exercised until April 1, 2008. (f) The rights may be exercised until January 29, 2010. (g) All or a portion of security held as collateral in connection with open financial futures contracts. o For Series compliance purposes, the Series' industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Series management. This definition may not apply for purpose of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percent of net assets. These industry classifications are unaudited. o Financial futures contracts purchased as of December 31, 2007 were as follows:
---------------------------------------------------------------------------------------------------------- Unrealized Number of Appreciation Contracts Issue Exchange Expiration Date Face Value (Depreciation) ---------------------------------------------------------------------------------------------------------- 4 Hang Seng Index Future Hong Kong January 2008 $ 703,945 $ 11,935 49 OMX Stock Index Future Stockholm January 2008 $ 812,340 9,293 30 CAC40 10 Euro Future MATIF March 2008 $ 2,458,577 26,400 311 DJ Euro Stoxx 50 Eurex March 2008 $19,949,983 215,887 63 FTSE 100 Index Future LIFFE March 2008 $ 7,980,053 115,038 10 SPI 200 Index Future Sydney March 2008 $ 1,379,492 13,970 58 TOPIX Index Future Tokyo March 2008 $ 7,885,858 (253,938) ---------------------------------------------------------------------------------------------------------- Total Unrealized Appreciation - Net $ 138,585 ============
o Forward foreign exchange contracts as of December 31, 2007 were as follows:
----------------------------------------------------------------------------------------- Unrealized Foreign Appreciation Currency Purchased Foreign Currency Sold Settlement Date (Depreciation) ----------------------------------------------------------------------------------------- AUD 3,668,400 USD 3,216,436 2/12/2008 $ (3,449) CHF 3,317,500 USD 2,951,653 2/12/2008 (13,477) DKK 1,549,100 USD 304,230 2/12/2008 (315) EUR 8,296,000 USD 12,139,443 2/12/2008 (2,413) GBP 3,709,300 USD 7,504,118 2/12/2008 (129,329) HKD 5,901,300 USD 758,953 2/12/2008 (837) JPY 562,900,000 USD 5,081,239 2/12/2008 (18,293) NOK 2,334,500 USD 426,560 2/12/2008 2,873 NZD 18,200 USD 13,887 2/12/2008 47 SEK 5,898,000 USD 918,736 2/12/2008 (5,817) SGD 398,800 USD 276,923 2/12/2008 983 USD 1,945,468 AUD 2,204,000 2/12/2008 15,084 USD 1,471,670 CHF 1,644,000 2/12/2008 15,645 USD 117,544 DKK 595,800 2/12/2008 655 USD 5,029,644 EUR 3,424,000 2/12/2008 20,340 USD 3,643,681 GBP 1,794,000 2/12/2008 76,870 USD 481,051 HKD 3,742,000 2/12/2008 331 USD 1,751,762 JPY 195,050,000 2/12/2008 (2,595)
Master International Index Series of Quantitative Master Series LLC Schedule of Investments as of December 31, 2007 (in U.S. dollars)
Unrealized Foreign Appreciation Currency Purchased Foreign Currency Sold Settlement Date (Depreciation) -------------------------------------------------------------------------------------------- USD 143,367 NOK 780,000 2/12/2008 $ (114) USD 11,599 NZD 15,000 2/12/2008 115 USD 345,843 SEK 2,204,358 2/12/2008 4,642 USD 122,039 SGD 175,300 2/12/2008 (120) -------------------------------------------------------------------------------------------- Total Unrealized Depreciation on Forward Foreign Exchange Contracts - Net $ (39,174) ==========
o Currency Abbreviations: AUD Australian Dollar CHF Swiss Franc DKK Danish Krone EUR Euro GBP British Pound HKD Hong Kong Dollar JPY Japanese Yen NOK Norwegian Krone NZD New Zealand Dollar SEK Swedish Krona SGD Singapore Dollar USD U.S. Dollar REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON DETAILED SCHEDULE OF INVESTMENTS To the Investors and Board of Directors of Quantitative Master Series LLC: We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of Master International Index Series ("the Series"), one of the portfolios constituting Quantitative Master Series LLC (formerly Quantitative Master Series Trust) (the "Master LLC") as of December 31, 2007, and for the year then ended and have issued our report thereon dated February 22, 2008 which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR. Our audit also included the Series' schedule of investments in securities (the "Schedule") as of December 31, 2007 appearing in Item 6 of this Form N-CSR. This Schedule is the responsibility of the Master LLC's management. Our responsibility is to express an opinion based on our audit. In our opinion, the Schedule referred to above, when considered in relation to the basic financial statements taken as a whole of the Series referred to above, presents fairly, in all material respects, the information set forth therein. DELOITTE & TOUCHE LLP February 22, 2008 ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust's Board of Trustees since the Trust last disclosed such procedures in Schedule 14A. ITEM 11. CONTROLS AND PROCEDURES. (a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective. (b) There were no changes in the Trust's internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Filed herewith as EX-99.CODE ETH. (a)(2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT. (a)(3) Not applicable. (b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): American Beacon Funds By /s/ Douglas G. Herring -------------------- Douglas G. Herring President Date: March 7, 2008 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ Douglas G. Herring -------------------- Douglas G. Herring President Date: March 7, 2008 By /s/ Rebecca L. Harris --------------------- Rebecca L. Harris Treasurer Date: March 7, 2008 EX-99.CERT 2 ex99cert.txt For period ended 12/31/2007 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) 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) 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 (c) 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: March 7, 2008 /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) 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) 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 (c) 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: March 7, 2008 /s/ Douglas G. Herring --------------- -------------------- Douglas G. Herring President American Beacon Funds EX-99.906 CERT 3 ex906cert.txt For period ended 12/31/2007 Registrant Name: American Beacon Funds File Number: 811-4984 EXHIBIT 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 December 31, 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: March 7, 2008 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. EX-99.CODE ETH 4 ex99code.txt For period ended 12/31/2007 Registrant Name: American Beacon Funds File Number: 811-4984 EXHIBIT 99.CODE ETH AMERICAN BEACON FUNDS AMERICAN BEACON MILEAGE FUNDS AMERICAN BEACON SELECT FUNDS AMERICAN BEACON MASTER TRUST Code of Ethics for Principal Executive and Financial Officers Dated: March 1, 2007 Purpose The American Beacon Funds, the American Beacon Mileage Funds, the American Beacon Select Funds, and the American Beacon Master Trust (collectively, the "Trusts") have adopted this Code of Ethics for Principal Executive and Financial Officers (the "Code"), which applies to the Trusts' Principal Executive Officer and Principal Financial Officer (the "Covered Officers" as set forth in Exhibit A), for the purpose of promoting: * honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; * full, fair, accurate, timely, and understandable disclosure in reports and documents that a Trust files with, or submits to, the Securities and Exchange Commission (the "SEC") and in other public communications made by the registrant; * compliance with applicable governmental laws, rules, and regulations; * the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and * accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. Conflicts of Interest For purposes of this Code, a "conflict of interest" occurs when a Covered Officer's "personal interests" interfere with the interests of, or his/her service to, the Trusts. For example, a conflict of interest would arise if a Covered Officer, or a member of his/her family, receives improper personal benefits as a result of his/her position with the Trusts. Certain conflicts of interest arise out of the relationship between Covered Officers and the Trusts and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Trusts because of their status as "affiliated persons" of the Trusts. Conflicts also may arise from a Covered Officer's position or employment at American Beacon Advisors, Inc. ("AmBeacon"), the Trusts' manager, and his/her position with each Trust. This Code recognizes that the Covered Officers will, in the normal course of their duties, be involved in establishing policies and implementing decisions that will have different effects on AmBeacon and the Trusts. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Trusts and AmBeacon and is consistent with the performance by the Covered Officers of their duties as officers of the Trusts. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Trusts. Each Covered Officer should not: * use his/her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Trusts whereby the Covered Officer would benefit personally to the detriment of the Trusts; or * cause the Trusts to take action, or fail to take action, for the personal benefit of the Covered Officer rather than the benefit of the Trusts. At times, certain situations may arise that may, or may not, be considered conflicts of interest under this Code. Covered Officers are encouraged to discuss such situations with the Trusts' Chief Legal Officer ("CLO"). Examples of these types of situations include: * service as a director on the board of any public or private company; * the receipt of any non-nominal gifts in excess of $150; * the receipt of any entertainment from any company with which the Trusts have current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; * any ownership interest in, or any consulting or employment relationship with, any of the Trusts' service providers, other than AmBeacon, the distributor for the Trusts' shares, or any affiliated person thereof; * a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trusts for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. Disclosure and Compliance Each Covered Officer: * should familiarize himself/herself with the disclosure requirements generally applicable to the Trusts; * should not knowingly misrepresent, or cause others to misrepresent, facts about the Trusts to others, whether within or outside the Trusts, including to the Trusts' Trustees and auditors, and to governmental regulators and self-regulatory organizations; * should, to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Trusts and AmBeacon with the goal of promoting 2 full, fair, accurate, timely and understandable disclosure in the reports and documents the Trusts file with, or submit to, the SEC and in other public communications made by the Trusts; and * is responsible to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. Reporting and Accountability Each Covered Officer must: * upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he/she has received, read, and understands the Code; * annual thereafter affirm to the Board that he/she has complied with the requirements of the Code; * complete at least annually the Officer Questionnaire by detailing any directorships with public or private companies and/or material relationships or transactions with affiliated persons of any Trust or its series; * not retaliate against any other Covered Officer or any employee of the Trusts or their affiliated persons for reports of potential violations that are made in good faith; and * notify the Legal Officer promptly if he/she knows of any violations of this Code. Failure to do so is itself a violation of this Code. The CLO is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. In addition, the CLO is authorized and encouraged to consult with counsel to the Trusts and counsel to the Independent Trustees of the Trusts' Boards of Trustees. However, any approvals or waivers sought by the Covered Officers will be considered by the Independent Trustees. The Trusts will follow these procedures in investigating and enforcing this Code: * the CLO will take all appropriate action to investigate any potential violations reported to him; * if, after such investigation, the CLO believes that no violation has occurred, the CLO is not required to take any further action; * any matter that the CLO believes is a violation will be reported to the Independent Trustees; * if the Independent Trustees concur that a violation has occurred, they will inform and make a recommendation to the applicable Trust's Board of Trustees, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of AmBeacon or its board; or a recommendation to dismiss the Covered Officer; * the Independent Trustees will be responsible for granting waivers, as appropriate; and * any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. 3 Other Policies and Procedures This Code shall be the sole code of ethics adopted by the Trusts for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Trusts, AmBeacon, the distributor for the Trusts' shares, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Trusts' and AmBeacon's codes of ethics under Rule 17j-1 under the Investment Company Act and the more detailed policies and procedures set forth in the Trusts' Statement of Policy on Material Non-Public Information are separate requirements applying to the Covered Officers and others, and are not part of nor replaced by this Code. Amendments Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of Independent Trustees. Confidentiality All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board of Trustees, its counsel and AmBeacon. Internal Use This Code is intended solely for the internal use by the Trusts and does not constitute an admission, by or on behalf of any Trust, as to any fact, circumstance, or legal conclusion. 4 EXHIBIT A Persons Covered by this Code of Ethics
Position with each Trust Name Principal Executive Officer President Douglas G. Herring Principal Financial Officer Treasurer Rebecca L. Harris
5 -----END PRIVACY-ENHANCED MESSAGE-----