-----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, RbKJ1FjfQGWGAvQrTZSqOiI4akk11Pf0g/97lY4MfKl19VMrBAt1VfPyZKtAlB+U xEzjPRXmy5Pc6jW+duzTLg== 0000809593-08-000040.txt : 20080905 0000809593-08-000040.hdr.sgml : 20080905 20080905152516 ACCESSION NUMBER: 0000809593-08-000040 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20080630 FILED AS OF DATE: 20080905 DATE AS OF CHANGE: 20080905 EFFECTIVENESS DATE: 20080905 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN BEACON FUNDS CENTRAL INDEX KEY: 0000809593 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-04984 FILM NUMBER: 081058604 BUSINESS ADDRESS: STREET 1: 4151 AMON CARTER BOULEVARD STREET 2: MD 2450 CITY: FORT WORTH STATE: TX ZIP: 76155 BUSINESS PHONE: 8179673509 MAIL ADDRESS: STREET 1: 4151 AMON CARTER BOULEVARD STREET 2: MD 2450 CITY: FORT WORTH STATE: TX ZIP: 76155 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN AADVANTAGE FUNDS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN EAGLE FUNDS DATE OF NAME CHANGE: 19890813 0000809593 S000001820 American Beacon Treasury Inflation Protected Securities Fund C000004773 Institutional Class ATPIX 0000809593 S000001822 American Beacon Money Market Fund C000004775 Institutional Class AADXX C000004776 PlanAhead Class APAXX C000004778 Cash Management Class AAEXX C000047470 BBH ComSet Class ABHXX 0000809593 S000001824 American Beacon U.S. Government Money Market Fund C000004781 PlanAhead Class AUPXX C000004783 Cash Management Class AAUXX 0000809593 S000001827 American Beacon S&P 500 Index Fund C000004791 Institutional Class AASPX C000004792 PlanAhead Class AAFPX 0000809593 S000001828 American Beacon Small Cap Index Fund C000004793 Institutional Class ASCIX 0000809593 S000001829 American Beacon International Equity Index Fund C000004794 Institutional Class AIIIX N-CSRS 1 ncsr0608bea.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-04984 AMERICAN BEACON FUNDS (Exact name of registrant as specified in charter) 4151 Amon Carter Boulevard, MD 2450 Fort Worth, Texas 76155 (Address of principal executive offices)-(Zip code) William F. Quinn, PRESIDENT 4151 Amon Carter Boulevard, MD 2450 Fort Worth, Texas 76155 (Name and address of agent for service) Registrant's telephone number, including area code: (817) 967-3509 Date of fiscal year end: December 31, 2008 Date of reporting period: June 30, 2008 ITEM 1. REPORTS TO STOCKHOLDERS. GUIDANCE | VISION | EXPERIENCE (AMERICAN BEACON FUNDS(SM) LOGO) Semi-Annual Report (GRAPHIC) June 30, 2008 S&P 500 INDEX FUND SMALL CAP INDEX FUND INTERNATIONAL EQUITY INDEX FUND About American Beacon Advisors Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management. Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company. Contents President's Message................................................ 1 Performance Overviews.............................................. 2 American Beacon Funds Statements of Assets and Liabilities............................ 10 Statements of Operations........................................ 11 Statements of Changes in Net Assets............................. 12 Notes to Financial Statements................................... 13 Financial Highlights............................................ 18 State Street Equity 500 Index Portfolio Portfolio of Investments........................................ 22 Statements of Assets and Liabilities............................ 29 Statement of Operations......................................... 30 Statements of Changes in Net Assets............................. 31 Financial Highlights............................................ 32 Notes to Financial Statements................................... 33 Master Small Cap Index Series Summary Schedule of Investments................................. 37 Statement of Assets and Liabilities............................. 44 Statement of Operations......................................... 45 Statements of Changes in Net Assets............................. 46 Financial Highlights............................................ 46 Notes to Financial Statements................................... 47 Master International Index Series Summary Schedule of Investments................................. 51 Statements of Assets and Liabilities............................ 56 Statements of Operations........................................ 57 Statements of Changes in Net Assets............................. 58 Financial Highlights............................................ 58 Notes to Financial Statements................................... 59 Additional Information............................................. Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor's strategies and each Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. American Beacon Funds June 30, 2008 (PHOTO OF WILLIAM F. QUINN) FELLOW SHAREHOLDERS, I am pleased to present to you the American Beacon S&P 500 Index Fund, Small Cap Index Fund and International Equity Index Fund Semi-Annual Report for the six months ended June 30, 2008. The American Beacon S&P 500 Index Fund and Small Cap Index Fund, both Institutional Class, reported a total return of -12.03% and -9.33%, respectively, for this six-month period, with an expense ratio of 13 basis points (0.13%) and 20 basis points (0.20%) for its most recent fiscal year. The Institutional Class of the American Beacon International Equity Index Fund reported a total return of -10.77% for this six-month period, with an expense ratio of 19 basis points (0.19%) for its most recent fiscal year. This Fund beat the MSCI EAFE Index return for the same period by 19 basis points (0.19%). During the period, the sub-prime mortgage crisis continued to cause uncertainties surrounding banks, investment banks and the entire financial system, resulting in an extraordinary amount of volatility. The Federal Reserve ("Fed") was challenged to fulfill its dual mandate of balancing the risks to both growth and inflation. Inflation concerns were mounting, but weak economic growth and turmoil in the financial markets limited the Fed's ability to raise interest rates in the near term to strengthen the U.S. dollar and counter inflation. We believe the Fund's fundamental value investment philosophy and lower than average expense ratio will continue to serve the Fund well over the longer term. Please review the enclosed market overview, portfolio listings and detailed financial data. As always, we welcome the opportunity to serve your financial needs. To obtain further details about the American Beacon Funds family or to access your account information, please visit our website at www.americanbeaconfunds.com. Thank you for your continued confidence in the American Beacon Index Funds. Sincerely, /s/ William F. Quinn William F. Quinn President American Beacon Funds Investing in foreign equities entails additional risk not associated with domestic equities, such as currency fluctuations, economic and political instability and differences in accounting standards. Investing in the securities of small capitalization companies involves greater risk and the possibility of greater price volatility than investing in larger capitalization and more established companies. 1 DOMESTIC MARKET OVERVIEW JUNE 30, 2008 (UNAUDITED) The continued financial industry turmoil and surging energy prices took their toll on the U.S. equity markets. After experiencing positive results in April and May, the markets resumed their downward spiral in June. The June sell-off knocked 10% off the Dow Jones Industrial Average, its worst June return since the Great Depression, as every member company posted negative returns. Broader market measures fared somewhat better, but all are in the red year-to-date. Performance by market capitalization has been mixed all year. Following the first quarter when return dispersion by market cap was very narrow, mid- and small capitalization companies were the clear leaders in the second quarter. Large company benchmarks fell hard as heavyweights like General Electric, AT&T and Bank of America posted double-digit losses. The general trends that have existed for some time at the sector level continued. As commodity prices have risen, Energy companies produced the best returns, followed by Utilities and Materials companies. On the flip side, Financial companies continued to suffer from credit and banking issues. Since mid-2007 when economic and equity market weakness became evident, growth companies have outperformed value companies every quarter except for the first quarter of 2008. The second quarter continued the theme of outperformance by growth companies across the market capitalization range. 2 PERFORMANCE OVERVIEW AMERICAN BEACON S&P 500(R) INDEX FUND+ JUNE 30, 2008 (UNAUDITED) For the six months ended June 30, 2008, the total return of the Institutional Class of the American Beacon S&P 500 Index Fund was -12.03%, slightly below the S&P 500 Index return of -11.91% and the Lipper S&P 500 Objective Funds Index return of -12.00%.
ANNUALIZED TOTAL RETURNS PERIODS ENDED 6/30/08 --------------------------------------- 6 MONTHS* 1 YEAR 5 YEARS 10 YEARS --------- ------ ------- -------- Institutional Class(1,4) ..... -12.03% -13.24% 7.42% 2.73% PlanAhead Class(1,2,4)........ -12.24% -13.69% 6.92% 2.29% Lipper S&P 500 Objective Funds Index (3) ................. -12.00% -13.29% 7.32% 2.61% S&P 500 Index (3) ............ -11.91% -13.12% 7.59% 2.88%
* 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.) 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 prospectus for the Institutional and PlanAhead Class shares were 0.13% and 0.63%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report which are based on expenses incurred during the period covered by this report. Eight of the 10 economic sectors in the S&P 500 Index (the "Index") lost value during the first half of 2008. Energy stocks continued to be a bright spot, rising 8.9%. Company earnings were strong in the sector, aided by rising oil, natural gas and gasoline prices. Materials stocks managed a small gain of 1.2%. These companies were also assisted by strong commodity prices. Financials bore the brunt of the pain in the first half of 2008, falling 29.7%. Losses were widespread in the sector as the credit crunch and falling home prices took a heavy toll. Many financial companies took multi-billion dollar losses on bad loans and mortgage related instruments. Cyclical companies were also hit as consumers reduced spending in response to high commodity prices and fears of recession and inflation. Consumer Discretionary stocks fell 13.3% in the first half. The Information Technology, Telecommunication Services, Industrial, and Health Care sectors all took double digits falls as well. The two best performing stocks in the Index during the first half of 2008 were Big Lots and Nabors Industries. Big Lots was able to post a gain of over 95% as shoppers' greater focus on price led to a strong return for the discount retailer. Nabors owed its return of nearly 80% to the continued strong performance within the Energy sector during the first part of 2008. The two worst performing stocks during the first half of 2008 were Ambac Financial Group and Bear Stearns. Ambac Financial Group had a decline of over 92% while Bear Stearns posted a return of -89%. Both stocks were hurt by the continued credit crunch and concerns regarding mortgage losses. As of June 30, 2008, the Fund's largest sector weightings were Information Technology (16.4% of assets), Energy (16.2% of assets), and Financials (14.2% of assets), consistent with the top sectorweightings in the index. The investment manager continues to utilize a replication strategy, typically owning all 500 names in the S&P 500 Index in approximately the same weightings as the Index. Therefore, the Fund is expected to continue to meet its objective of closely tracking, before expenses, the return of its benchmark, the S&P 500 Index. Therefore,the + The S&P 500 Index Fund is not sponsored, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in this fund. S&P is a trademark of the McGraw-Hill Companies, Inc. and has been licensed for use, "Standard and Poor's(R)", "S&P", "Standard & Poor's 500", "S&P 500" are all trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by State Street Bank and Trust Company. Russell 1000, Russell 2000, Russell 1000 Growth, Russell 1000 Value, Russell 2000 Growth, and Russell 2000 Value Indexes are registered trademarks of Frank Russell Company. PERFORMANCE OVERVIEW AMERICAN BEACON S&P 500(R) INDEX FUND JUNE 30, 2008 (UNAUDITED) 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. .................................. 4.2% General Electric Co. ............................... 2.4% Microsoft Corp. .................................... 2.0% AT&T, Inc. ......................................... 1.8% Chevron Corp. ...................................... 1.8% Procter & Gamble Co. ............................... 1.7% Johnson & Johnson .................................. 1.6% International Business Machines Corp. .............. 1.5% Apple, Inc. ........................................ 1.3% ConocoPhillips ..................................... 1.3%
* Percent of the equities of State Street Equity 500 Index Portfolio EQUITY SECTOR ALLOCATION
% OF EQUITIES* --------- Information Technology.............................. 16.5% Energy.............................................. 16.2% Financials.......................................... 14.2% Health Care......................................... 11.9% Industrials......................................... 11.1% Consumer Staples.................................... 10.8% Consumer Discretionary.............................. 8.1% Utilities........................................... 4.0% Materials........................................... 3.9% Telecommunication Services.......................... 3.3%
* Percent of the equities of State Street Equity 500 Index Portfolio 4 PERFORMANCE OVERVIEW AMERICAN BEACON SMALL CAP INDEX FUND(SM) JUNE 30, 2008 (UNAUDITED) For the six months ended June 30, 2008, the total return of the Institutional Class of the American Beacon Small Cap Index Fund was -9.33%. The Fund's performance exceeded the Russell 2000(R) Index return of -9.37%, but substantially lagged the Lipper Small-Cap Core Funds Index return of -7.04%.
ANNUALIZED TOTAL RETURNS PERIODS ENDED 6/30/08 ---------------------------------------- SINCE INCEPTION 6 MONTHS* 1 YEAR 5 YEARS (7/31/00) --------- ------ ------- --------- Institutional Class(1,3) ..... -9.33% -16.36% 10.07% 5.32% Lipper Small-Cap Core Funds Index(2) .................. -7.04% -13.50% 11.07% 6.93% Russell 2000 Index(2) ........ -9.37% -16.19% 10.29% 5.47%
* Not annualized (1.) Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. (2.) The Lipper Small-Cap Core Funds Index tracks the results of the 30 largest mutual funds in the Lipper Small-Cap Core Funds category. Lipper is an independent mutual fund research and ranking service. The Russell 2000 Index is an unmanaged index comprising approximately 2,000 smaller-capitalization stocks from various industrial sectors. One cannot invest directly in an index. (3.) The total annual Fund operating expense ratio set forth in the most recent prospectus for the Fund was 0.20%. The expense ratio above may vary from the expense ratio presented in other sections of this report which is based on expenses incurred during the period covered by this report. Nine of the ten sectors in the Russell 2000 Index (the "Index") lost ground during the semi-annual period. Only the Energy sector, up 45.4%, recorded a positive return. Telecommunication Services, Consumer Discretionary, and Financials were the weakest performing sectors, down 23.0%, 18.9% and 17.1%, respectively. The strongest performers among individual stocks in the Index included Goodrich Petroleum Corp., Finish Line, Inc. and Clayton Williams Energy, Inc., which were up 266.6%, 259.5% and 252.9%, respectively. Conversely, Superior Offshore International, down 95.0%, Fremont General Corp., down 94.6%, and Keryx Biopharmaceuticals, Inc., down 94.3%, recorded the most notable losses for the period. The Fund will continue to strive to meet its objective of closely replicating, before expenses, the return of its benchmark, the Russell 2000 Index. It does so by investing in a subset of the securities in the Index such that the characteristics of the portfolio closely track the characteristics of the Index. TOP TEN HOLDINGS
% OF EQUITIES* --------- Comstock Resources, Inc. ............................ 0.4% Alexion Pharmaceuticals, Inc. ....................... 0.3% Compass Minerals International, Inc. ................ 0.3% Energy Conversion Devices, Inc. ..................... 0.3% EXCO Resources, Inc. ................................ 0.3% GrafTech International Ltd. ......................... 0.3% Penn Virginia Corp. ................................. 0.3% W-H Energy Services, Inc. ........................... 0.3% Berry Petroleum Co. (CI A)........................... 0.2% ITC Holdings Corp. .................................. 0.2%
EQUITY SECTOR ALLOCATION
% OF EQUITIES* --------- Financials........................................... 18.3% Information Technology............................... 17.5% Industrials.......................................... 16.6% Health Care.......................................... 13.4% Consumer Discretionary............................... 12.3% Energy............................................... 9.3% Materials............................................ 4.6% Utilities............................................ 3.5% Consumer Staples..................................... 3.2% Telecommunication Services........................... 1.3%
* Percent of equity portion of Master Small Cap Index Series 5 INTERNATIONAL MARKET OVERVIEW JUNE 30, 2008 (UNAUDITED) The euphoria world markets basked in following the Bear Stearns purchase in mid-March evaporated by mid-May as investors realized that the sub-prime crisis was not only not over, but had been joined by hawkish inflation warnings by central bankers around the globe. June was the worst month of the period and caused the developed foreign markets to fall for the third straight quarter. The MSCI EAFE Index dropped by 11.0% for the six-month period. The U.S. dollar strengthened slightly in the second quarter and the EAFE Index fell less than 1% in local terms. However, for the six-month period, the EAFE Index was down 15.7% in local terms. The MSCI EAFE Growth Index outperformed the MSCI EAFE Value Index for the six months. The Growth Index was flat for the second quarter, while the Value Index dropped 4.6%. Asian markets outperformed European markets for the period. Given the negative performance of the Index, only four of the 21 EAFE markets produced positive returns in the second quarter, while only Norway (up 1.6%) was able to generate a positive return for the six-month period. Of the major markets, Japan was the top market for the second quarter (up 2.5%) and the six-month period (down 5.5%). The Netherlands was the worst major market for the second quarter (down 8.8%) and the six-month period (down 14.8%). Energy (up 17.5%) and Materials (up 9.6%) were the only two sectors with positive performance for the six-month period. Financials was the worst sector for the second quarter (down 10.7%) and the six-month period (down 20.1%). 6 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM) JUNE 30, 2008 (UNAUDITED) For the six months ended June 30, 2008, the Institutional Class of the American Beacon International Equity Index Fund posted a total return of - -10.77%, slightly above the MSCI EAFE Index (the "Index") return of -10.96% and ahead of the Lipper International Funds Index return of -11.15%.
ANNUALIZED TOTAL RETURNS PERIODS ENDED 6/30/08 ------------------------------------------- SINCE INCEPTION 6 MONTHS* 1 YEAR 5 YEARS (7/31/00) --------- --------- ------- --------- Institutional Class(1,3).............. -10.77% -10.76% 16.59% 4.77% Lipper International Funds Index(2)... -11.15% -8.94% 16.91% 5.46% MSCI EAFE Index(2).................... -10.96% -10.61% 16.65% 4.91%
* 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 set forth in the most recent prospectus for the Fund was 0.19%. The expense ratio above may vary from the expense ratio presented in other sections of this report, which is based on expenses incurred during the period covered by this report. Amid fears of economic recession resulting primarily from the threat of inflation, record-high oil and gasoline prices and the continued fallout from the troubled U.S. housing market, international equity markets generally lost ground during the first six months of 2008. The strongest performing countries were Bermuda, Luxembourg and Norway, up 29.0%, 26.5% and 1.3%, respectively. Conversely Greece, down 26.7%, New Zealand, down 26.2%, and Portugal, down 24.7%, posted the lowest returns for the period. Only two of the 10 sectors within the Index finished in positive territory. The Materials sector gained 6.0% and the Energy sector gained 5.1%, while Financials, Consumer Discretionary, and Telecommunication Services, down 19.8%, 16.5% and 15.9%, respectively, were the weakest performing sectors. The strongest performers among individual stocks in the Index during the period included K+S AG, Origin Energy Ltd., and Yara International ASA, which posted respective gains of 144.1%, 101.7% and 93.1%. At the other end of the spectrum, Babcock & Brown lost 69.3%, Yell Group plc was down 68.7% and Taylor Wimpey plc declined 66.5% making these the worst performing stocks in the Index for the semi-annual period. 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. 7 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM) JUNE 30, 2008 (UNAUDITED) TOP TEN HOLDINGS
% OF EQUITIES* --------- BP plc ................................ 1.8% HSBC Holdings plc ..................... 1.5% Total S.A. ............................ 1.5% Nestle S.A. ........................... 1.4% Vodafone Group plc .................... 1.3% BHP Billiton Ltd. ..................... 1.2% Royal Dutch Shell plc (CI A) .......... 1.2% E.ON AG ............................... 1.0% Novartis AG ........................... 1.0% Toyota Motor Corp. .................... 1.0%
EQUITY SECTOR ALLOCATION
% OF EQUITIES* EAFE --------- ----- Financials ............................ 25.1% 25.1% Industrials ........................... 12.0% 12.0% Materials ............................. 11.9% 11.8% Consumer Discretionary ................ 9.7% 9.7% Energy ................................ 9.3% 9.3% Consumer Staples ...................... 8.1% 8.1% Health Care ........................... 6.8% 6.8% Utilities ............................. 6.4% 6.4% Telecommunication Services ............ 5.6% 5.6% Information Technology ................ 5.1% 5.2%
* Percent of equity portion of Master International Index Series COUNTRY ALLOCATION (PIE CHART) United Kingdom ........................ 21.89% Japan ................................. 21.42% France ................................ 10.75% Germany ............................... 9.11% Switzerland ........................... 7.03% Australia ............................. 6.87% Spain ................................. 4.11% Italy ................................. 3.80% Netherlands ........................... 2.56% Sweden ................................ 2.19% Finland ............................... 1.56% Hong Kong ............................. 2.14% Belgium ............................... 1.02% Norway ................................ 1.12% Singapore ............................. 1.10% Denmark ............................... 1.02% Ireland ............................... 0.57% Greece ................................ 0.66% Austria ............................... 0.63% Portugal .............................. 0.28% New Zealand ........................... 0.09%
% OF EQUITIES* EAFE --------- ----- United Kingdom ........................ 21.9% 21.9% Japan ................................. 21.4% 21.4% France ................................ 10.7% 10.7% Germany ............................... 9.1% 9.1% Switzerland ........................... 7.0% 7.1% Australia ............................. 6.9% 6.8% Spain ................................. 4.1% 4.1% Italy ................................. 3.8% 3.8% Netherlands ........................... 2.6% 2.6% Sweden ................................ 2.2% 2.2% Hong Kong ............................. 2.1% 2.1% Finland ............................... 1.6% 1.6% Singapore ............................. 1.2% 1.2% Norway ................................ 1.1% 1.1% Belgium ............................... 1.0% 1.0% Denmark ............................... 1.0% 1.0% Greece ................................ 0.7% 0.7% Austria ............................... 0.6% 0.6% Ireland ............................... 0.6% 0.6% Portugal .............................. 0.3% 0.3% New Zealand ........................... 0.1% 0.1%
* Percent of equity portion of Master International Index Series 8 FUND EXPENSES JUNE 30, 2008 (UNAUDITED) FUND EXPENSE EXAMPLE As a shareholder of a Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in a particular Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2008 through June 30, 2008. ACTUAL EXPENSES The following table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid During Period" row to estimate the expenses you paid on your account during this period. Shareholders of the Institutional and PlanAhead Classes that invest in a Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. ACTUAL
S&P 500 SMALL CAP INTERNATIONAL INSTITUTIONAL CLASS INDEX INDEX EQUITY INDEX - ------------------- --------- --------- ------------- Beginning Account Value 1/1/08 ................. $1,000.00 $1,000.00 $1,000.00 Ending Account Value 6/30/08 ................... $ 879.71 $ 906.74 $ 892.30 Expenses Paid During Period* 1/1/08 - 6/30/08 .. $ 0.57 $ 0.96 $ .87 Annualized Expense Ratio ....................... 0.12% 0.20% 0.19%
S&P 500 PLANAHEAD CLASS INDEX - --------------- --------- Beginning Account Value 1/1/08 ................. $1,000.00 Ending Account Value 6/30/08 ................... $ 877.65 Expenses Paid During Period* 1/1/08 - 6/30/08 .. $ 2.86 Annualized Expense Ratio ....................... 0.61%
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The following table provides information about hypothetical account values and hypothetical expenses based on a Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in a particular Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Institutional and PlanAhead Classes that invest in a Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by a Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Expenses Paid During Period" line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher. HYPOTHETICAL
S&P 500 SMALL CAP INTERNATIONAL INSTITUTIONAL CLASS INDEX INDEX EQUITY INDEX - ------------------- --------- --------- ------------- Beginning Account Value 1/1/08 ................. $1,000.00 $1,000.00 $1,000.00 Ending Account Value 6/30/08 ................... $1,024.26 $1,023.86 $1,023.94 Expenses Paid During Period* 1/1/08 - 6/30/08 .. $ 0.61 $ 1.02 $ 0.94 Annualized Expense Ratio ....................... 0.12% 0.20% 0.19%
S&P 500 PLANAHEAD CLASS INDEX - --------------- --------- Beginning Account Value 1/1/08 ................. $1,000.00 Ending Account Value 6/30/08 ................... $1,021.82 Expenses Paid During Period* 1/1/08 - 6/30/08 .. $ 3.08 Annualized Expense Ratio ....................... 0.61%
- ---------- * 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 (182) by days in the year (366) to reflect the half-year period. 9 AMERICAN BEACON FUNDS STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2008 (UNAUDITED) (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 ........................... $ 300,651 $ 42,171 $ 327,005 Receivable for fund shares sold ............................. 210 18 297 Prepaid expenses ............................................ 16 -- 1 ----------- ---------- ----------- TOTAL ASSETS ............................................. 300,877 42,189 327,303 ----------- ---------- ----------- LIABILITIES: Payable for fund shares redeemed ............................ 15 -- 296 Distribution fees payable (Note 2) .......................... 4 -- -- Administrative service and service fees payable (Note 2) .... 16 1 14 Prepaid expenses ............................................ -- 1 -- Other liabilities ........................................... 39 43 76 ----------- ---------- ----------- TOTAL LIABILITIES ........................................ 74 45 386 ----------- ---------- ----------- NET ASSETS .................................................. $ 300,803 $ 42,144 $ 326,917 =========== ========== =========== ANALYSIS OF NET ASSETS: Paid-in-capital ............................................. 265,574 47,461 319,248 Undistributed net investment income (expense) ............... 1,710 240 6,167 Accumulated net realized gain (loss) ........................ (26,888) (1,398) (4,829) Unrealized net appreciation (depreciation) of investments and futures contracts ........................................ 60,407 (4,159) 6,331 ----------- ---------- ----------- NET ASSETS ..................................................... $ 300,803 $ 42,144 $ 326,917 =========== ========== =========== Shares outstanding (no par value): Institutional Class ......................................... 16,355,600 3,440,735 27,396,671 =========== ========== =========== PlanAhead Class ............................................. 966,928 -- -- =========== ========== =========== Net asset value, offering and redemption price per share: Institutional Class ......................................... $ 17.38 $ 12.25 $ 11.93 =========== ========== =========== PlanAhead Class ............................................. $ 17.14 $ -- $ -- =========== ========== ===========
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios attached 10 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2008 (IN THOUSANDS)(UNAUDITED)
INTERNATIONAL S&P 500 INDEX SMALL CAP INDEX EQUITY INDEX FUND FUND FUND ------------- --------------- ------------- INVESTMENT INCOME ALLOCATED FROM PORTFOLIO: Dividend income ............................................ $ 3,150 $ 205 $ 6,760 Interest income ............................................ 97 30 64 Securities lending income .................................. -- 48 -- Portfolio expenses ......................................... (69) (15) (152) Other income ............................................... -- -- 33 -------- ------- -------- NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO .......... 3,178 268 6,705 -------- ------- -------- FUND EXPENSES: Administrative service fees (Note 2): Institutional Class ..................................... 73 11 73 PlanAhead Class ......................................... 21 -- -- Sub-administrative service fees: Institutional Class ..................................... -- 2 25 Transfer agent fees: Institutional Class ..................................... 1 1 3 PlanAhead Class ......................................... 4 -- -- Custody and accounting fees ................................ 4 3 2 Professional fees .......................................... 9 7 9 Registration fees .......................................... 14 -- -- Service fees - PlanAhead Class (Note 2) .................... 21 -- -- Printing ................................................... 8 1 4 Other expenses ............................................. 3 3 4 -------- ------- -------- TOTAL FUND EXPENSES ..................................... 158 28 120 -------- ------- -------- NET INVESTMENT INCOME ......................................... 3,020 240 6,585 -------- ------- -------- REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED FROM MASTER PORTFOLIO Net realized gain (loss) from: Investments ............................................. 2,062 (622) (2,982) Foreign currency transactions ........................... -- -- 59 Futures contracts ....................................... (541) 27 (329) Change in net unrealized appreciation or depreciation of: Investments ............................................. (42,071) (6,133) (41,738) Foreign currency transactions ........................... -- -- (15) Futures contracts ....................................... (431) 1,531 (56) -------- ------- -------- NET GAIN (LOSS) ON INVESTMENTS .......................... (40,981) (5,197) (45,061) -------- ------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................................................. $(37,961) $(4,957) $(38,476) ======== ======= ========
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios attached 11 AMERICAN BEACON FUNDS STATEMENTS OF CHANGES IN NET ASSETS
INTERNATIONAL EQUITY S&P 500 INDEX FUND SMALL CAP INDEX FUND INDEX FUND -------------------------- -------------------------- ------------------------- Six Months Year ended Six Months Year ended Six Months Year ended ended June December 31, ended June December 31, ended June December 31, 30, 2008 2007 30, 2008 2007 30, 2008 2007 ----------- ------------ ----------- ------------ ---------- ------------ (unaudited) (unaudited) (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ............. $ 3,020 $ 4,980 $ 240 $ 1,122 $ 6,585 $ 9,526 Net realized gain (loss) on investments, foreign currency, and futures contracts ...................... 1,521 16,526 (595) 2,722 (3,252) 6,420 Change in net unrealized appreciation or depreciation of investments and futures contracts ...................... (42,502) (8,818) (4,602) (2,345) (41,809) 19,978 -------- --------- -------- --------- --------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............. (37,961) 12,688 (4,957) 1,499 (38,476) 35,924 -------- --------- -------- --------- --------- --------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class ............ (1,406) (4,560) -- (1,094) -- (10,259) PlanAhead Class ................ (62) (286) -- -- -- -- Net realized gain on investments: Institutional Class ............ -- -- -- (2,872) -- (3,968) PlanAhead Class ................ -- -- -- -- -- -- Tax return of capital: Institutional Class ............ -- -- -- (215) -- (252) -------- --------- -------- --------- --------- --------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS ............. (1,468) (4,846) -- (4,181) -- (14,479) -------- --------- -------- --------- --------- --------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares ..... 66,870 171,408 4,184 11,780 184,735 369,147 Reinvestment of dividends and distributions .................. 1,459 4,810 -- 4,181 -- 14,473 Cost of shares redeemed ........... (18,273) (132,948) (9,408) (112,832) (86,635) (299,885) -------- --------- -------- --------- --------- --------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS .......... 50,056 43,270 (5,224) (96,871) 98,100 83,735 -------- --------- -------- --------- --------- --------- NET INCREASE (DECREASE) IN NET ASSETS ............................ 10,627 51,112 (10,181) (99,553) 59,624 105,180 -------- --------- -------- --------- --------- --------- NET ASSETS: Beginning of period ............... 290,176 239,064 52,325 151,878 267,293 162,113 -------- --------- -------- --------- --------- --------- END OF PERIOD * ................... $300,803 $ 290,176 $ 42,144 $ 52,325 $ 326,917 $ 267,293 ======== ========= ======== ========= ========= ========= *Includes undistributed net investment income (loss) of .................. $ 1,710 $ 158 $ 240 $ -- $ 6,167 $ (418) ======== ========= ======== ========= ========= =========
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios attached 12 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the "Act"), as amended, as a no load, diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon S&P 500 Index Fund, the American Beacon Small Cap Index Fund and the American Beacon International Equity Index Fund (each a "Fund" and collectively, the "Funds"), each a series of the Trust. American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary of AMR Corporation ("AMR") and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. On April 16, 2008, AMR, the parent company of the Manager, announced that it had reached a definitive agreement to sell all of its interests in the Manager to Lighthouse Holdings, Inc., which is owned by investment funds affiliated with Pharos Capital Group, LLC and TPG Capital, L.P. AMR will acquire a minority equity stake in the parent corporation of Lighthouse Holdings, Inc. Completion of the sale would result in a change of control of the Manager, but there are no anticipated material changes in the services to be provided by the Manager or in the fee rate charged by the Manager to the Fund. The target closing date for the proposed acquisition is expected to be no later than September 30, 2008. Based in Dallas and Nashville, Pharos Capital Group, LLP invests through private equity funds, primarily in companies seeking later stage equity funding for internal growth, acquisitions, management buyouts or recapitalizations across industry sectors. TPG Capital, L.P. is the global buyout group of TPG, a leading private investment firm with more than $50 billion of assets under management. TPG Capital, L.P. has extensive experience with global public and private investments executed through leveraged buyouts, recapitalizations, spinouts, joint ventures and restructurings. Each Fund invests all of its investable assets in a corresponding portfolio. The State Street Equity 500 Index Portfolio, Master Small Cap Index Series and the Master International Index Series (each a "Portfolio" and collectively the "Portfolios") are open-ended management investment companies registered under the Act. The value of such investment reflects each Fund's proportionate interest in the net assets of the corresponding Portfolio.
% OF PORTFOLIO HELD BY FUND AT AMERICAN BEACON: PORTFOLIOS: JUNE 30, 2008 - ---------------- --------------------------------------- --------------- S&P 500 Index Fund State Street Equity 500 Index Portfolio 14.7% Small Cap Index Fund Master Small Cap Index Series 7.8% International Equity Index Fund Master International Index Series 31.0%
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%
13 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 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 Portfolios' Notes to Financial Statements, which are included elsewhere in this report. The Portfolios adopted the provisions of Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), effective with the beginning of the Portfolios' fiscal year. This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value, and requires additional disclosures about the use of fair value measurements. The three levels of the hierarchy under FAS 157 are described below: Level 1 - Quoted prices in active markets for identical securities. Level 2 - Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Level 3 - Prices determined using significant unobservable inputs. Unobservable inputs reflect the Portfolio's own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. The summary of inputs used to value the Portfolios' net assets as of June 30, 2008 is discussed in the Portfolios' Notes to Financial Statements, which are included elsewhere in this report. Investment Income Each Fund records its share of net investment income and realized and unrealized gains and losses from the security transactions of its corresponding Portfolio each day. All net investment income and realized and unrealized gains (losses) of each Portfolio are allocated pro rata among the investors in that Portfolio at the time of such determination. Dividends to Shareholders Dividends from net investment income of the Small Cap Index and International Equity Index Funds normally will be declared and paid annually. The S&P 500 Index Fund normally will declare and pay dividends quarterly. Distributions, if any, of net realized capital gains are generally paid annually and recorded on the ex-dividend date. Dividends are determined in accordance with income tax principles that may treat certain transactions differently than generally accepted accounting principles. Allocation of Income, Expenses, Gains and Losses Income, expenses (other than those attributable to a specific class), gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. Valuation of Shares The price per share is calculated on each day on which shares are offered for sale. Net asset value per share is computed by dividing the value of each Fund's total assets (which includes the value of the Fund's investments in its Portfolio) less liabilities, by the number of Fund shares outstanding. 14 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated. Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust's maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement. 2. 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 June 30, 2008, the employee benefit plans of AMR Corporation and subsidiary companies owned 93.3% of the Institutional Class of the S&P 500 Index Fund, 96.7% of the Small Cap Index Fund and 80.8% of the International Equity Index Fund. 3. FEDERAL INCOME AND EXCISE TAXES It is the policy of each of the Funds to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income or excise tax provision is required. 15 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 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. 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 applicable, as the income is earned or capital gains are recorded. The tax character of distributions paid during the six months ended June 30, 2008 and fiscal year ended December 31, 2007 were as follows (in thousands):
INTERNATIONAL EQUITY S&P 500 INDEX SMALL CAP INDEX INDEX ---------------------- ---------------------- ---------------------- SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED JUNE 30, DECEMBER JUNE 30, DECEMBER JUNE 30, DECEMBER 2008 31, 2007 2008 31, 2007 2008 31, 2007 ----------- -------- ----------- -------- ----------- -------- (UNAUDITED) (UNAUDITED) (UNAUDITED) DISTRIBUTIONS PAID FROM: ORDINARY INCOME:* Institutional Class ............ $1,406 $4,560 $-- $1,510 $-- $11,655 PlanAhead Class ................ 62 286 -- -- -- -- LONG-TERM CAPITAL GAIN: Institutional Class ............ -- -- -- 2,456 -- 2,572 PlanAhead Class ................ RETURN OF CAPITAL: Institutional Class ............ -- -- -- 215 -- 252 ------ ------ --- ------ --- ------- TOTAL TAXABLE DISTRIBUTIONS .... $1,468 $4,846 $-- $4,181 $-- $14,479 ====== ====== === ====== === =======
* For tax purposes, short-term capital gains are considered ordinary income distributions. At June 30, 2008 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
16 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 4. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares for each Class of the Funds (shares and dollars in thousands): Six Months ended June 30, 2008
INSTITUTIONAL CLASS PLANAHEAD CLASS ------------------- ---------------- S&P 500 INDEX FUND SHARES AMOUNT SHARES AMOUNT - ------------------ ------ -------- ------ ------- Shares sold .......................... 3,467 $ 64,230 144 $ 2,640 Reinvestment of dividends ............ 76 1,406 3 53 Shares redeemed ...................... (880) (16,076) (120) (2,197) ----- -------- ---- ------- Net increase in shares outstanding ... 2,663 $ 49,560 27 $ 496 ===== ======== ==== =======
INSTITUTIONAL CLASS ------------------- SMALL CAP INDEX FUND SHARES AMOUNT - -------------------- ------ ------- Shares sold .......................... 328 $ 4,184 Reinvestment of dividends ............ -- -- Shares redeemed ...................... (759) (9,408) ---- ------- Net (decrease) in shares outstanding.. (431) $(5,224) ==== =======
INSTITUTIONAL CLASS ------------------- INTERNATIONAL EQUITY INDEX FUND SHARES AMOUNT - ------------------------------- ------ -------- Shares sold .......................... 14,514 $184,735 Reinvestment of dividends ............ -- -- Shares redeemed ...................... (7,109) (86,635) ------ -------- Net increase in shares outstanding ... 7,405 $ 98,100 ====== ========
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 ======= =========
17 AMERICAN BEACON S&P 500 INDEX FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class ---------------------------------------------------------------------- Six Months Year Ended December 31, ended June ------------------------------------------------------ 30, 2008 2007 2006 2005 2004 2003 ----------- -------- -------- -------- -------- -------- (unaudited) NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 19.85 $ 19.19 $ 16.90 $ 16.43 $ 15.10 $ 11.96 -------- -------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income:(A) ..................... 0.18 0.39 0.33 0.29 0.29 0.21 Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) ................... (2.56) 0.65 2.30 0.47 1.32 3.14 -------- -------- -------- -------- -------- -------- Total income (loss) from investment operations ... (2.38) 1.04 2.63 0.76 1.61 3.35 -------- -------- -------- -------- -------- -------- LESS DISTRIBUTIONS: Dividends from net investment income .......... (0.09) (0.38) (0.34) (0.29) (0.28) (0.21) Tax return of capital ......................... -- -- -- 0.00(B) -- -- -------- -------- -------- -------- -------- -------- Total distributions .............................. (0.09) (0.38) (0.34) (0.29) (0.28) (0.21) -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD ................... $ 17.38 $ 19.85 $ 19.19 $ 16.90 $ 16.43 $ 15.10 ======== ======== ======== ======== ======== ======== TOTAL RETURN ..................................... -12.03%(C) 5.39% 15.69% 4.74% 10.76% 28.26% ======== ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ...... $284,228 $271,746 $223,008 $225,857 $244,668 $245,251 Ratios to average net assets (annualized):(A) Net investment income, net of waivers ...... 1.99% 1.89% 1.85% 1.75% 1.85% 1.63% Net investment income, before waivers ...... 1.99% 1.89% 1.85% 1.75% 1.85% 1.63% Expenses, including expenses of the master portfolio, net of waivers ........ 0.12% 0.13% 0.14% 0.13% 0.17% 0.14% Expenses, including expenses of the master portfolio, before waivers ........ 0.12% 0.13% 0.14% 0.13% 0.17% 0.14%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the State Street Equity 500 Index Portfolio. (B) The tax return of capital is calculated based upon outstanding shares at the time of distribution. Amounts are less than $0.01 per share. (C) Not annualized. (D) American Beacon Advisors, Inc. agreed to reimburse the Class for a portion of its expenses through March 1, 2003. 18
PlanAhead Class ---------------------------------------------------------------------- Six Months Year Ended December 31, ended June ------------------------------------------------------ 30, 2008 2007 2006 2005 2004 2003 ----------- ------- ------- ------- ------- ------- (unaudited) NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 19.60 $ 18.97 $ 16.69 $ 16.23 $ 14.96 $ 11.85 ------- ------- ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income:(A) ..................... 0.24 0.28 0.17 0.21 0.21 0.15 Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) ................... (2.63) 0.65 2.33 0.48 1.31 3.12 ------- ------- ------- ------- ------- ------- Total income (loss) from investment operations ... (2.39) 0.93 2.50 0.69 1.52 3.27 ------- ------- ------- ------- ------- ------- LESS DISTRIBUTIONS: Dividends from net investment income .......... (0.07) (0.30) (0.22) (0.23) (0.25) (0.16) Tax return of capital ......................... -- -- -- 0.00(B) -- -- ------- ------- ------- ------- ------- ------- Total distributions .............................. (0.07) (0.30) (0.22) (0.23) (0.25) (0.16) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD ................... $ 17.14 $ 19.60 $18.97 $ 16.69 $ 16.23 $ 14.96 ======= ======= ======= ======= ======= ======= TOTAL RETURN ..................................... -12.24%(C) 4.88% 15.09% 4.32% 10.21% 27.65% ======= ======= ======= ======= ======= ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ...... $16,575 $18,430 $16,056 $48,985 $46,344 $34,729 Ratios to average net assets (annualized):(A) Net investment income, net of waivers ...... 1.50% 1.38% 1.37% 1.28% 1.43% 1.16% Net investment income, before waivers ...... 1.50% 1.38% 1.37% 1.28% 1.43% 1.15% Expenses, including expenses of the master portfolio, net of waivers ........ 0.61% 0.63% 0.61% 0.61% 0.62% 0.63%(D) Expenses, including expenses of the master portfolio, before waivers ........ 0.61% 0.63% 0.61% 0.61% 0.62% 0.64%
19 AMERICAN BEACON SMALL CAP INDEX FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class ---------------------------------------------------------------------- Six Months Year Ended December 31, ended June ------------------------------------------------------ 30, 2008 2007 2006 2005 2004 2003 ----------- -------- -------- -------- -------- -------- (unaudited) NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 13.51 $ 14.89 $ 12.78 $ 12.57 $ 11.27 $ 7.70 ------- ------- -------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A) ...................... 0.06 0.32 0.17 0.16 0.14 0.04 Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) ................... (1.32) (0.53) 2.11 0.42 1.87 3.57 ------- ------- -------- ------- ------- ------- Total income (loss) from investment operations ... (1.26) (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 ................... $ 12.25 $ 13.51 $ 14.89 $ 12.78 $ 12.57 $ 11.27 ======= ======= ======== ======= ======= ======= TOTAL RETURN ..................................... -9.33%(C) -1.63% 17.85% 4.51% 17.91% 46.90% ======= ======= ======== ======= ======= ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ...... $42,144 $52,325 $151,878 $46,113 $39,196 $67,756 Ratios to average net assets (annualized):(A) Net investment income ...................... 1.11% 1.49% 1.49% 1.12% 0.90% 1.04% Expenses, including expenses of the master portfolio ........................ 0.20% 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. (C) Not annualized. 20 AMERICAN BEACON INSTITUTIONAL EQUITY INDEX FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class ---------------------------------------------------------------------- Six Months Year Ended December 31, ended June -------------------------------------------------------- 30, 2008 2007 2006 2005 2004 2003 ----------- -------- -------- ------- ------- ------- (unaudited) NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 13.37 $ 12.76 $ 10.33 $ 9.39 $ 8.01 $ 5.86 -------- -------- -------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A) ...................... 0.28 0.52 0.23 0.21 0.17 0.14 Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) ................... (1.72) 0.85 2.50 1.06 1.44 2.13 -------- -------- -------- ------- ------- ------- Total income (loss) from investment operations ... (1.44) 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 ................... $ 11.93 $ 13.37 $ 12.76 $ 10.33 $ 9.39 $ 8.01 ======== ======== ======== ======= ======= ======= TOTAL RETURN ..................................... -10.77%(C) 10.68% 26.52% 13.58% 20.12% 38.87% ======== ======== ======== ======= ======= ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ...... $326,917 $267,293 $162,113 $90,200 $23,156 $10,043 Ratios to average net assets (annualized):(A) Net investment income ...................... 4.49% 2.96% 2.44% 2.49% 2.16% 2.71% Expenses, including expenses of the master portfolio ........................ 0.19% 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. (C) Not annualized. 21 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2008 (UNAUDITED)
MARKET VALUE SHARES (000) ---------- ---------- COMMON STOCKS -- 97.6% CONSUMER DISCRETIONARY -- 8.2% Abercrombie & Fitch Co. 15,846 $ 993 Amazon.Com, Inc. (a) 54,892 4,025 Apollo Group, Inc. Class A (a) 24,529 1,086 AutoNation, Inc. (a) 23,063 231 AutoZone, Inc. (a) 7,864 952 Bed Bath & Beyond, Inc. (a) 46,645 1,311 Best Buy Co., Inc. 60,719 2,404 Big Lots, Inc. (a) 12,827 401 Black & Decker Corp. 10,037 577 Carnival Corp. 77,250 2,546 CBS Corp. Class B 120,203 2,343 Centex Corp. 24,082 322 Clear Channel Communications, Inc. 88,647 3,120 Coach, Inc. (a) 63,128 1,823 Comcast Corp. Class A 527,348 10,004 D.R. Horton, Inc. 45,576 495 Darden Restaurants, Inc. 25,688 820 Dillard's, Inc. Class A 12,294 142 DIRECTV Group, Inc. (a) 128,877 3,339 Eastman Kodak Co. 54,482 786 eBay, Inc. (a) 198,703 5,431 EW Scripps Co. Class A 16,835 699 Expedia, Inc. (a) 39,215 721 Family Dollar Stores, Inc. 27,158 542 Ford Motor Co. (a) 387,098 1,862 Fortune Brands, Inc. 27,745 1,732 GameStop Corp. (a) 29,000 1,172 Gannett Co., Inc. 42,074 912 Gap, Inc. 81,298 1,355 General Motors Corp. 98,645 1,134 Genuine Parts Co. 30,809 1,223 Goodyear Tire & Rubber Co. (a) 45,257 807 H&R Block, Inc. 58,415 1,250 Harley-Davidson, Inc. 43,201 1,566 Harman International Industries, Inc. 10,521 435 Hasbro, Inc. 25,825 922 Home Depot, Inc. 301,112 7,052 Host Hotels & Resorts, Inc. 91,365 1,247 International Game Technology 55,119 1,377 Interpublic Group of Cos., Inc. (a) 83,694 720 JC Penney & Co., Inc. 40,310 1,463 Johnson Controls, Inc. 105,286 3,020 Jones Apparel Group, Inc. 13,434 185 KB HOME 14,794 250 Kohl's Corp. (a) 53,533 2,143 Leggett & Platt, Inc. 32,898 552 Lennar Corp. Class A 27,931 345 Limited Brands 50,567 852 Liz Claiborne, Inc. 20,797 294 Lowe's Cos., Inc. 259,262 5,380 Macy's, Inc. 78,723 1,529 Marriot International, Inc. Class A 52,821 1,386 Mattel, Inc. 66,976 1,147 McDonald's Corp. 202,025 11,358
MARKET VALUE SHARES (000) ---------- ---------- McGraw-Hill, Inc. 56,766 $ 2,277 Meredith Corp. 7,889 223 New York Times Co. Class A 22,922 353 Newell Rubbermaid, Inc. 51,593 866 News Corp. Class A 410,409 6,173 NIKE, Inc. Class B 68,052 4,057 Nordstrom, Inc. 30,833 934 Office Depot, Inc. (a) 51,256 561 Omnicom Group, Inc. 56,541 2,538 Polo Ralph Lauren Corp. 10,615 666 Pulte Homes, Inc. 34,526 332 Radioshack Corp. 20,203 248 Sears Holdings Corp. (a) 12,674 934 Sherwin-Williams Co. 18,396 845 Snap-On, Inc. 9,512 495 Stanley Works 14,583 654 Staples, Inc. 123,933 2,943 Starbucks Corp. (a) 128,561 2,024 Starwood Hotels & Resorts Worldwide, Inc. 33,647 1,348 Target Corp. 139,316 6,477 Tiffany & Co. 22,280 908 Time Warner, Inc. 638,473 9,449 TJX Cos., Inc. 77,106 2,427 V.F. Corp. 15,193 1,081 Viacom, Inc. Class B (a) 113,922 3,479 Walt Disney Co. 338,745 10,569 Washington Post Co. 1,060 622 Wendy's International, Inc. 17,016 463 Whirlpool Corp. 13,761 849 Wyndham Worldwide Corp. 34,299 614 Yum! Brands, Inc. 84,192 2,954 ---------- 168,146 ---------- CONSUMER STAPLES -- 10.5% Altria Group, Inc. 376,299 7,737 Anheuser-Busch Cos., Inc. 127,403 7,914 Archer-Daniels-Midland Co. 114,424 3,862 Avon Products, Inc. 77,160 2,779 Brown-Forman Corp. Class B 15,624 1,181 Campbell Soup Co. 39,265 1,314 Clorox Co. 25,743 1,344 Coca-Cola Co. 357,511 18,583 Coca-Cola Enterprises, Inc. 53,901 932 Colgate-Palmolive Co. 90,901 6,281 ConAgra Foods, Inc. 85,775 1,654 Constellation Brands, Inc. Class A (a) 37,226 739 Costco Wholesale Corp. 77,289 5,421 CVS Corp. 255,832 10,123 Dean Foods Co. (a) 25,258 496 Estee Lauder Cos, Inc. Class A 20,552 955 General Mills, Inc. 60,132 3,654 H.J. Heinz Co. 55,669 2,664 Hershey Foods Corp. 29,582 970 Kellogg Co. 45,935 2,206 Kimberly-Clark Corp. 75,900 4,537
See notes to financial statements 22 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2008 (UNAUDITED)
MARKET VALUE SHARES (000) ---------- ---------- CONSUMER STAPLES -- (CONTINUED) Kraft Foods, Inc. 269,122 $ 7,657 Kroger Co. 116,676 3,368 Lorillard, Inc. (a) 30,860 2,134 McCormick & Co., Inc. 22,353 797 Molson Coors Brewing Co., Class B 23,862 1,296 Pepsi Bottling Group, Inc. 22,953 641 PepsiCo, Inc. 283,156 18,006 Philip Morris International, Inc. 377,099 18,625 Procter & Gamble Co. 545,612 33,179 Reynolds American, Inc. 31,387 1,465 Safeway, Inc. 80,264 2,292 Sara Lee Corp. 129,634 1,588 SuperValu, Inc. 37,648 1,163 Sysco Corp. 106,809 2,938 Tyson Foods, Inc., Class A 46,035 688 UST Corp. 26,637 1,455 Wal-Mart Stores, Inc. 416,502 23,407 Walgreen Co. 176,718 5,745 Whole Foods Market, Inc. 25,433 602 Wrigley Wm., Jr. Co. 38,648 3,006 ---------- 215,398 ---------- ENERGY -- 15.0% Anadarko Petroleum Corp. 83,326 6,236 Apache Corp. 59,425 8,260 Baker Hughes, Inc. 54,878 4,793 BJ Services Co. 52,248 1,669 Cabot Oil & Gas Corp. 17,400 1,179 Cameron International Corp. (a) 38,000 2,103 Chesapeake Energy Corp. 85,982 5,671 ChevronTexaco Corp. 368,946 36,574 ConocoPhillips 276,030 26,054 Devon Energy Corp. 79,351 9,535 El Paso Corp. 123,192 2,678 ENSCO International, Inc. 26,077 2,105 EOG Resources, Inc. 44,317 5,814 ExxonMobil Corp. 943,272 83,131 Halliburton Co. 156,234 8,291 Hess Corp. 49,801 6,284 Marathon Oil Corp. 126,277 6,550 Murphy Oil Corp. 33,841 3,318 Nabors Industries, Ltd. (a) 48,904 2,408 National Oilwell Varco, Inc. (a) 73,557 6,526 Noble Corp. 47,918 3,113 Noble Energy, Inc. 31,210 3,139 Occidental Petroleum Corp. 146,944 13,204 Range Resources Corp. 27,200 1,783 Rowan Cos., Inc. 19,520 913 Schlumberger, Ltd. 212,675 22,848 Smith International, Inc. 35,334 2,938 Sunoco, Inc. 21,584 878 Tesoro Corp. 26,365 521 Transocean, Inc. (a) 56,635 8,631 Valero Energy Corp. 95,009 3,912 Weatherford International Ltd. (a) 120,910 5,996
MARKET VALUE SHARES (000) ---------- ---------- Williams Cos., Inc. 104,468 $ 4,211 XTO Energy, Inc. 90,821 6,222 ---------- 307,488 ---------- FINANCIALS -- 14.0% ACE, Ltd. 59,783 3,293 AFLAC, Inc. 84,490 5,306 Allstate Corp. 97,306 4,436 American Capital Strategies Ltd. 34,302 815 American Express Co. 206,364 7,774 American International Group, Inc. 479,966 12,700 Ameriprise Financial, Inc. 39,907 1,623 AON Corp. 54,747 2,515 Apartment Investment & Management Co. Class A 17,797 606 Assurant, Inc. 17,131 1,130 AvalonBay Communities, Inc. 13,353 1,191 Bank of America Corp. 795,098 18,979 Bank of New York Mellon Corp. 203,085 7,683 BB&T Corp. 96,670 2,201 Boston Properties, Inc. 21,667 1,955 Capital One Financial Corp. 66,063 2,511 CB Richard Ellis Group, Inc. Class A (a) 29,875 574 Charles Schwab Corp. 166,093 3,412 Chubb Corp. 65,575 3,214 Cincinnati Financial Corp. 28,114 714 CIT Group, Inc. 54,842 374 Citigroup, Inc. 974,402 16,331 CME Group, Inc. 9,641 3,694 Comerica, Inc. 27,144 696 Countrywide Financial Corp. 100,246 426 Developers Diversified Realty Corp. 20,024 695 Discover Financial Services 85,605 1,127 E*Trade Financial Corp. (a) 81,315 255 Equity Residential 49,057 1,877 Fannie Mae 189,550 3,698 Federal Home Loan Mortgage Corp. 117,439 1,926 Federated Investors, Inc. Class B 15,270 526 Fidelity National Information Services, Inc. 30,977 1,143 Fifth Third Bancorp 108,216 1,102 First Horizon National Corp. 38,372 285 Franklin Resources, Inc. 28,380 2,601 General Growth Properties, Inc. 48,893 1,713 Genworth Financial, Inc. Class A 79,351 1,413 Goldman Sachs Group, Inc. 70,570 12,343 Hartford Financial Services Group, Inc. 56,197 3,629 HCP, Inc. 43,100 1,371 Hudson City Bancorp, Inc. 95,292 1,590 Huntington Bancshares, Inc. 64,656 373 IntercontinentalExchange, Inc. (a) 12,680 1,446 J.P. Morgan Chase & Co. 618,015 21,204 Janus Capital Group, Inc. 26,407 699 KeyCorp 86,875 954
See notes to financial statements 23 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2008 (UNAUDITED)
MARKET VALUE SHARES (000) ---------- ---------- FINANCIALS -- (CONTINUED) Kimco Realty Corp. 45,869 $ 1,583 Legg Mason, Inc. 26,342 1,148 Lehman Brothers Holdings, Inc. 127,128 2,518 Leucadia National Corp. 31,136 1,462 Lincoln National Corp. 46,692 2,116 Loews Corp. 63,731 2,989 M & T Bank Corp. 14,137 997 Marsh & McLennan Cos., Inc. 91,753 2,436 Marshall & Ilsley Corp. 45,493 697 MBIA, Inc. 41,484 182 Merrill Lynch & Co., Inc. 174,490 5,533 MetLife, Inc. 126,456 6,673 MGIC Investment Corp. 18,100 111 Moody's Corp. 35,466 1,221 Morgan Stanley 197,230 7,114 National City Corp. 145,254 693 Northern Trust Corp. 33,806 2,318 NYSE Euronext 48,100 2,437 Plum Creek Timber Co., Inc. 30,811 1,316 PNC Financial Services Group, Inc. 62,951 3,595 Principal Financial Group, Inc. 46,591 1,955 Progressive Corp. 121,701 2,278 ProLogis 45,591 2,478 Prudential Financial, Inc. 77,239 4,614 Public Storage, Inc. 22,787 1,841 Regions Financial Corp. 122,289 1,334 SAFECO Corp. 15,250 1,024 Simon Property Group, Inc. 39,600 3,560 SLM Corp. (a) 83,254 1,611 Sovereign Bancorp, Inc. 85,574 630 State Street Corp. (b) 75,725 4,846 SunTrust Banks, Inc. 62,218 2,254 T. Rowe Price Group, Inc. 47,075 2,658 Torchmark Corp. 15,621 916 Travelers Cos, Inc. 107,104 4,648 U.S. Bancorp 309,152 8,622 Unum Group 61,629 1,260 Vornado Realty Trust 23,734 2,089 Wachovia Corp. 379,778 5,898 Washington Mutual, Inc. 184,441 909 Wells Fargo Co. 589,093 13,991 Western Union Co. 130,185 3,218 XL Capital, Ltd. Class A 33,044 679 Zions Bancorp 17,953 565 ---------- 287,140 ---------- HEALTH CARE -- 11.5% Abbott Laboratories 276,406 14,641 Aetna, Inc. 88,050 3,569 Allergan, Inc. 54,092 2,816 AmerisourceBergen Corp. 29,893 1,195 Amgen, Inc. (a) 194,036 9,151 Applera Corp. - Applied Biosystems Group 29,573 990 Barr Pharmaceuticals, Inc. (a) 18,923 853
MARKET VALUE SHARES (000) ---------- ---------- Baxter International, Inc. 112,561 $ 7,197 Becton, Dickinson & Co. 43,597 3,544 Biogen Idec, Inc. (a) 51,431 2,875 Boston Scientific Corp. (a) 243,834 2,997 Bristol-Myers Squibb Co. 351,338 7,213 C.R. Bard, Inc. 17,597 1,548 Cardinal Health, Inc. 64,557 3,330 Celgene Corp. (a) 77,318 4,938 CIGNA Corp. 48,796 1,727 Coventry Health Care, Inc. (a) 27,603 840 Covidien Ltd. 88,504 4,239 Eli Lilly & Co. 175,675 8,109 Express Scripts, Inc. (a) 44,699 2,804 Forest Laboratories, Inc. (a) 54,802 1,904 Genzyme Corp. (a) 48,492 3,492 Gilead Sciences, Inc. (a) 165,799 8,779 Hospira, Inc. (a) 28,503 1,143 Humana, Inc. (a) 31,507 1,253 IMS Health, Inc. 34,732 809 Intuitive Surgical, Inc. (a) 6,900 1,859 Johnson & Johnson 502,649 32,340 King Pharmaceuticals, Inc. (a) 39,792 417 Laboratory Corp. of America Holdings (a) 19,222 1,338 McKesson Corp. 48,655 2,720 Medco Health Solutions, Inc. (a) 89,568 4,228 Medtronic, Inc. 200,578 10,380 Merck & Co., Inc. 382,019 14,398 Millipore Corp. (a) 9,535 647 Mylan Laboratories Inc. (a) 51,709 624 Patterson Cos., Inc. (a) 21,594 635 Pfizer, Inc. 1,209,271 21,126 Quest Diagnostics, Inc. 28,100 1,362 Schering-Plough Corp. 288,655 5,684 St. Jude Medical, Inc. (a) 60,726 2,483 Stryker Corp. 43,389 2,728 Tenet Healthcare Corp. (a) 76,270 424 Thermo Fisher Scientific, Inc. (a) 75,524 4,209 UnitedHealth Group, Inc. 217,996 5,722 Varian Medical Systems, Inc. (a) 22,860 1,185 Watson Pharmaceuticals, Inc. (a) 17,346 471 Wellpoint, Inc. (a) 93,138 4,439 Wyeth 238,987 11,462 Zimmer Holdings, Inc. (a) 42,152 2,868 ---------- 235,705 ---------- INDUSTRIALS -- 11.1% 3M Co. 126,372 8,794 Allied Waste Industries, Inc. (a) 60,230 760 Avery Dennison Corp. 18,988 834 Boeing Co. 133,788 8,793 Burlington Northern Santa Fe Corp. 52,382 5,232 Caterpillar, Inc. 109,379 8,074 CH Robinson Worldwide, Inc. 30,461 1,671 Cintas Corp. 25,088 665 Cooper Industries, Ltd. 32,034 1,265
See notes to financial statements 24 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2008 (UNAUDITED)
MARKET VALUE SHARES (000) ---------- ---------- INDUSTRIALS -- (CONTINUED) CSX Corp. 71,638 $ 4,500 Cummins, Inc. 35,358 2,317 Danaher Corp. 45,086 3,485 Deere & Co. 77,737 5,607 Domtar Corp. (a) (c) 11 -- Dover Corp. 34,295 1,659 Eaton Corp. 28,795 2,447 Emerson Electric Co. 140,348 6,940 Equifax, Inc. 23,683 796 Expeditors International Washington, Inc. 37,320 1,605 FedEx Corp. 55,100 4,341 Fluor Corp. (a) 15,630 2,908 General Dynamics Corp. 71,661 6,034 General Electric Co. 1,782,233 47,568 Goodrich Co. 22,145 1,051 Honeywell International, Inc. 132,781 6,676 Illinois Tool Works, Inc. 72,471 3,443 Ingersoll-Rand Co. Class A 55,057 2,061 ITT Industries, Inc. 33,292 2,108 Jacobs Engineering Group, Inc. (a) 21,700 1,751 L-3 Communications Holdings, Inc. 22,303 2,027 Lockheed Martin Corp. 59,852 5,905 Manitowoc Co., Inc. 24,000 781 Masco Corp. 67,523 1,062 Monster Worldwide, Inc. (a) 22,609 466 Norfolk Southern Corp. 66,755 4,184 Northrop Grumman Corp. 60,811 4,068 PACCAR, Inc. 64,874 2,714 Pall Corp. 22,209 881 Parker-Hannifin Corp. 29,603 2,111 Pitney Bowes, Inc. 36,727 1,252 Precision Castparts Corp. 25,307 2,439 R.R. Donnelley & Sons Co. 38,309 1,137 Raytheon Co. 75,882 4,271 Robert Half International, Inc. 26,240 629 Rockwell Automation, Inc. 27,505 1,203 Rockwell Collins, Inc. 29,731 1,426 Ryder Systems, Inc. 9,821 677 Southwest Airlines Co. 128,486 1,675 Terex Corp. (a) 17,435 896 Textron, Inc. 45,239 2,168 Total System Services, Inc. 37,575 835 Tyco Electronics Ltd. 86,204 3,088 Tyco International Ltd. 87,761 3,514 Union Pacific Corp. 92,568 6,989 United Parcel Service, Inc. Class B 181,846 11,178 United Technologies Corp. 173,078 10,679 W.W. Grainger, Inc. 12,169 995 Waste Management, Inc. 88,439 3,335 ---------- 225,970 ---------- INFORMATION TECHNOLOGY -- 15.5% Adobe Systems, Inc. (a) 93,857 3,697 Advanced Micro Devices, Inc. (a) 114,986 670
MARKET VALUE SHARES (000) ---------- ---------- Affiliated Computer Services, Inc. Class A (a) 16,737 $ 895 Agilent Technologies, Inc. (a) 63,768 2,266 Akamai Technologies, Inc. (a) 29,424 1,024 Altera Corp. 52,854 1,094 Analog Devices, Inc. 50,269 1,597 Apple Computer, Inc. (a) 157,484 26,369 Applied Materials, Inc. 240,707 4,595 Autodesk, Inc. (a) 41,876 1,416 Automatic Data Processing, Inc. 92,817 3,889 BMC Software, Inc. (a) 35,721 1,286 Broadcom Corp. Class A (a) 78,159 2,133 CA, Inc. 68,199 1,575 CIENA Corp. (a) 14,529 337 Cisco Systems, Inc. (a) 1,055,219 24,544 Citrix Systems, Inc. (a) 33,467 984 Cognizant Technology Solutions Corp. Class A (a) 50,084 1,628 Computer Sciences Corp. (a) 25,944 1,215 Compuware Corp. (a) 41,450 395 Convergys Corp. (a) 20,035 298 Corning, Inc. 280,676 6,470 Dell, Inc. (a) 363,550 7,954 Electronic Arts, Inc. (a) 55,800 2,479 Electronic Data Systems Corp. 91,816 2,262 EMC Corp. (a) 366,084 5,378 Fiserv, Inc. (a) 29,952 1,359 Google, Inc. Class A (a) 41,490 21,841 Hewlett-Packard Co. 440,316 19,466 IAC (a) 34,889 673 Intel Corp. 1,022,956 21,973 International Business Machines Corp. 245,442 29,092 Intuit, Inc. (a) 58,463 1,612 Jabil Circuit, Inc. 39,951 656 Juniper Networks, Inc. (a) 92,093 2,043 KLA-Tencor Corp. 30,405 1,238 Lexmark International Group, Inc. Class A (a) 15,842 530 Linear Technology Corp. 40,863 1,331 LSI Logic Corp. (a) 112,662 692 MEMC Electronic Materials, Inc. (a) 40,878 2,516 Microchip Technology, Inc. 33,189 1,014 Micron Technology, Inc. (a) 142,362 854 Microsoft Corp. 1,431,835 39,390 Molex, Inc. 24,805 606 Motorola, Inc. 399,965 2,936 National Semiconductor Corp. 41,596 854 NetApp, Inc. (a) 61,157 1,325 Novell, Inc. (a) 68,720 405 Novellus Systems, Inc. (a) 20,030 424 NVIDIA Corp. (a) 100,756 1,886 Oracle Corp. (a) 707,762 14,863 Paychex, Inc. 58,038 1,815 PerkinElmer, Inc. 21,118 588 QLogic Corp. (a) 24,322 355
See notes to financial statements 25 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2008 (UNAUDITED)
MARKET VALUE SHARES (000) ---------- ---------- INFORMATION TECHNOLOGY -- (CONTINUED) QUALCOMM, Inc. 288,011 $ 12,779 SanDisk Corp. (a) 40,167 751 Sun Microsystems, Inc. (a) 144,741 1,575 Symantec Corp. (a) 152,663 2,954 Tellabs, Inc. (a) 73,830 343 Teradata Corp. (a) 33,520 776 Teradyne, Inc. (a) 27,649 306 Texas Instruments, Inc. 236,399 6,657 Unisys Corp. (a) 69,807 276 VeriSign, Inc. (a) 33,421 1,263 Waters Corp. (a) 16,965 1,094 Xerox Corp. 161,834 2,194 Xilinx, Inc. 52,602 1,328 Yahoo!, Inc. (a) 246,219 5,087 ---------- 316,170 ---------- MATERIALS -- 4.3% Air Products & Chemicals, Inc. 38,009 3,758 AK Steel Holding Corp. 20,000 1,380 Alcoa, Inc. 144,949 5,163 Allegheny Technologies, Inc. 17,528 1,039 Ashland, Inc. 10,700 516 Ball Corp. 17,562 838 Bemis Co., Inc. 17,262 387 Consol Energy, Inc. 32,073 3,604 Dow Chemical Co. 167,428 5,845 E.I. Du Pont de Nemours & Co. 160,412 6,880 Eastman Chemical Co. 14,204 978 Ecolab, Inc. 31,366 1,348 Freeport-McMoRan Copper & Gold, Inc. Class B 68,252 7,998 Hercules, Inc. 23,050 390 International Flavors & Fragrances, Inc. 14,331 560 International Paper Co. 76,311 1,778 Massey Energy Co. 14,300 1,341 MeadWestvaco Corp. 32,320 771 Monsanto Co. 97,955 12,385 Newmont Mining Corp. 80,406 4,194 Nucor Corp. 55,954 4,178 Pactiv Corp. (a) 23,915 508 Peabody Energy Corp. 48,324 4,255 PPG Industries, Inc. 29,871 1,714 Praxair, Inc. 55,711 5,250 Rohm & Haas Co. 21,706 1,008 Sealed Air Corp. 28,492 542 Sigma-Aldrich Corp. 23,834 1,284 Titanium Metals Corp. 16,600 232 United States Steel Corp. 20,978 3,876 Vulcan Materials Co. 19,361 1,157 Weyerhaeuser Co. 36,937 1,889 ---------- 87,046 ---------- TELECOMMUNICATION SERVICES -- 3.3% American Tower Corp. (a) 71,500 3,021 AT&T, Inc. 1,061,950 35,777
MARKET VALUE SHARES (000) ---------- ---------- CenturyTel, Inc. 20,441 $ 728 Citizens Communications Co. 60,384 685 Embarq Corp. 27,597 1,305 Fairpoint Communications, Inc. (c) 8 -- JDS Uniphase Corp. (a) 42,723 485 Qwest Communications International, Inc. 283,890 1,116 Sprint Nextel Corp. 504,565 4,793 Verizon Communications, Inc. 508,766 18,010 Windstream Corp. 79,613 982 ---------- 66,902 ---------- UTILITIES -- 4.2% AES Corp. (a) 117,495 2,257 Allegheny Energy, Inc. 30,759 1,541 Ameren Corp. 38,360 1,620 American Electric Power Co., Inc. 72,652 2,923 CenterPoint Energy, Inc. 57,611 925 CMS Energy Corp. 38,856 579 Consolidated Edison, Inc. 47,752 1,867 Constellation Energy Group, Inc. 31,414 2,579 Dominion Resources, Inc. 102,562 4,871 DTE Energy Co. 27,984 1,188 Duke Energy Corp. 224,120 3,895 Dynegy, Inc. (a) 82,690 707 Edison International 59,219 3,043 Entergy Corp. 34,098 4,108 Exelon Corp. 116,621 10,491 FirstEnergy Corp. 54,107 4,455 FPL Group, Inc. 72,421 4,749 Integrys Energy Group, Inc. 12,916 657 Nicor, Inc. 9,100 388 NiSource, Inc. 49,982 896 Pepco Holdings, Inc. 36,900 946 PG&E Corp. 64,726 2,569 Pinnacle West Capital Corp. 17,760 546 PPL Corp. 66,075 3,454 Progress Energy, Inc. 46,981 1,965 Public Service Enterprise Group, Inc. 90,124 4,139 Questar Corp. 30,268 2,150 Sempra Energy 43,786 2,472 Southern Co. 135,943 4,747 Southwestern Energy Co. (a) 61,200 2,914 Spectra Energy Corp. 111,598 3,207 TECO Energy, Inc. 35,651 766 Xcel Energy, Inc. 77,251 1,550 ---------- 85,164 ---------- TOTAL COMMON STOCKS (Cost $1,381,101,228) 1,995,129 ----------
See notes to financial statements 26 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2008 (UNAUDITED)
PAR MARKET AMOUNT VALUE (000) (000) ---------- ---------- U.S. GOVERNMENT SECURITIES -- 0.1% United States Treasury Bill 1.9% due 09/11/08 (d) (e) $ 2,936 $ 2,925 ---------- TOTAL U.S. GOVERNMENT SECURITIES (Cost $2,924,843) 2,925 ----------
MARKET SHARES VALUE (000) (000) ---------- ---------- MONEY MARKET FUNDS -- 1.8% AIM Short Term Investment Prime Portfolio 36,185 $ 36,185 Federated Money Market Obligations Trust 564 564 ---------- TOTAL MONEY MARKET FUNDS (Cost $36,749,196) 36,749 ---------- TOTAL INVESTMENTS -- 99.5% (Identified cost $1,420,775,267)(f) 2,034,803 OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.5% 10,846 ---------- NET ASSETS -- 100.0% $2,045,649 ==========
(a) Non-income producing security. (b) Affiliated issuer. See table that follows for more information. (c) Amount is less than $1,000. (d) Security held as collateral in relation to initial margin requirements on futures contracts. (e) Rate represents annualized yield at date of purchase. (f) Cost of investments shown approximates cost for federal income tax purposes. See notes to financial statements 27 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2008 (UNAUDITED) SCHEDULE OF FUTURES CONTRACTS
UNREALIZED NUMBER OF APPRECIATION CONTRACTS (000) --------- ------------ S&P 500 Financial Futures Contracts (long) Expiration Date 09/2008 791 $(2,706) ------- Total unrealized depreciation on open futures contracts purchased $(2,706) =======
AFFILIATE TABLE
Income Earned Shares Shares for the Number of purchased for sold for Number of Value at 6 months ended Realized Gain Security shares held at the 6 months the 6 months shares 6/30/08 6/30/08 on shares sold Description 12/31/2007 ended 6/30/08 ended 6/30/08 held at 6/30/08 (000) (000) (000) - ------------------ -------------- ------------- ------------- --------------- -------- -------------- -------------- State Street Corp. 70,325 9,100 3,700 75,725 $4,846 $34 $59
See notes to financial statements 28 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2008 (UNAUDITED) (AMOUNTS IN THOUSANDS) ASSETS Investments in unaffiliated issuers at market (identified cost $1,417,431)............... $2,029,957 Investments in non-controlled affiliates at market (identified cost $3,344) (Note 4)..... 4,846 ---------- 2,034,803 Receivables: Investment securities sold......................................................... 9,502 Daily variation margin on futures contracts........................................ 40 Dividends and interest............................................................. 2,763 ---------- TOTAL ASSETS.................................................................... 2,047,108 ---------- LIABILITIES Payables: Investment securities purchased.................................................... 1,380 Management fees (Note 4)........................................................... 79 ---------- TOTAL LIABILITIES............................................................... 1,459 ---------- NET ASSETS............................................................................... $2,045,649 ==========
See notes to financial statements 29 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF OPERATIONS JUNE 30, 2007 (UNAUDITED) (AMOUNTS IN THOUSANDS) INVESTMENT INCOME Dividend income - unaffiliated issuers .............................. $ 22,512 Dividend income - non-controlled affiliated issuer .................. 34 Interest ............................................................ 700 --------- TOTAL INVESTMENT INCOME .......................................... 23,246 --------- EXPENSES Management fees (Note 4) ............................................ $ 495 --------- TOTAL EXPENSES ................................................... 495 --------- NET INVESTMENT INCOME .................................................. 22,751 --------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments - unaffiliated issuers .................................. 16,145 Investments - non-controlled affiliated issuer ...................... 59 Futures contracts ................................................... (3,936) --------- --------- 12,268 --------- Net change in net unrealized depreciation on: Investments ......................................................... (318,954) Futures contracts ................................................... (3,381) --------- (322,335) --------- Net realized and unrealized loss ....................................... (310,067) --------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ................... $(287,316) =========
See notes to financial statements 30 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
FOR THE FOR THE SIX MONTHS ENDED YEAR ENDED JUNE 30, 2008 DECEMBER 31, (UNAUDITED) 2007 ---------------- ------------ INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net Investment Income ............................................... $ 22,751 $ 53,117 Net realized gain on investments and futures contracts .............. 12,268 169,211 Net change in net unrealized appreciation (depreciation) ............ (322,335) (66,481) ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .. (287,316) 155,847 ---------- ---------- CAPITAL TRANSACTIONS Proceeds from contributions ......................................... 159,368 328,812 Withdrawals in kind ................................................. -- (63,656) Fair value of withdrawals ........................................... (248,780) (765,322) ---------- ---------- NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS ............. (89,412) (500,166) ---------- ---------- TOTAL NET INCREASE (DECREASE) IN NET ASSETS ............................ (376,728) (344,319) NET ASSETS Beginning of period .................................................... 2,422,377 2,766,696 ---------- ---------- END OF PERIOD .......................................................... $2,045,649 $2,422,377 ========== ==========
See notes to financial statements 31 STATE STREET EQUITY 500 INDEX PORTFOLIO FINANCIAL HIGHLIGHTS The following table includes selected supplemental data and ratios to average net assets:
SIX MONTHS YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED 6/30/2008 12/31/2007 12/31/2006 12/31/2005 12/31/2004 12/31/2003 ---------- ---------- ---------- ---------- ---------- ---------- (UNAUDITED) SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) ... $2,045,649 $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% 0.045% Net investment income ...................... 2.07%+ 1.96% 1.94% 1.84% 1.97% 1.74% Portfolio turnover rate* ...................... 6%++ 12% 10% 8% 9% 12% Total return (a) .............................. (11.98%)++ 5.49% 15.75% 4.87% 10.86% 28.62%
- ---------- * The portfolio turnover rate excludes in-kind security transactions. + Annualized ++ Not Annualized (a) Results represent past performance and are not indicative of future results. 32 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 1. ORGANIZATION State Street Master Funds (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company, and was organized as a business trust under the laws of The Commonwealth of Massachusetts on July 27, 1999. The Trust comprises eleven investment portfolios: the State Street Equity 500 Index Portfolio, the State Street Equity 400 Index Portfolio, the State Street Equity 2000 Index Portfolio, the State Street Aggregate Bond Index Portfolio, the State Street Money Market Portfolio, the State Street Tax Free Money Market Portfolio, the State Street Short-Term Tax Exempt Bond Portfolio, the State Street Limited Duration Bond Portfolio, the State Street Treasury Money Market Portfolio, the State Street Treasury Plus Money Market Portfolio and the State Street U.S. Government Money Market Portfolio. Information presented in these financial statements pertains only to the State Street Equity 500 Index Portfolio (the "Portfolio"). At June 30, 2008, only the Portfolio, the State Street Money Market Portfolio, the State Street Tax Free Money Market Portfolio, the State Street Short-Term Tax Exempt Bond Portfolio, the State Street Treasury Money Market Portfolio, the State Street Treasury Plus Money Market Portfolio and the State Street U.S. Government Money Market Portfolio were in operation. The Portfolio is authorized to issue an unlimited number of non-transferable beneficial interests. The Portfolio's investment objective is to replicate, as closely as possible, before expenses, the performance of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500(R) Index"). The Portfolio uses a passive management strategy designed to track the performance of the S&P 500(R) Index. The S&P 500(R) Index is a well-known, unmanaged, stock index that includes common stocks of 500 companies from several industrial sectors representing a significant portion of the market value of all stocks publicly traded in the United States. There is no assurance that the Portfolio will achieve its objective. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies consistently followed by the Portfolio in the preparation of its financial statements. Security valuation: The Portfolio's investments are valued each business day by independent pricing services. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price if no sale has occurred) on the primary market or exchange on which they trade. Investments in other mutual funds are valued at the net asset value per share. Fixed-income securities and options are valued on the basis of the closing bid price. Futures contracts are valued on the basis of the last sale price. Money market instruments maturing within 60 days of the valuation date are valued at amortized cost, a method by which each money market instrument is initially valued at cost, and thereafter a constant accretion or amortization of any discount or premium is recorded until maturity of the security. The Portfolio may value securities for which market quotations are not readily available at "fair value," as determined in good faith pursuant to procedures established by the Board of Trustees. The Portfolio adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. In accordance with FAS 157, fair value is defined as the price that the portfolio would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. Various inputs are used in determining the value of the Fund's investments. FAS 157 established a three tier hierarchy of inputs to establish a classification of fair value measurements and disclosure. The three tier hierarchy of inputs is summarized below: - Level 1 - quoted prices in active markets for identical securities See notes to financial statements 33 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) - Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) - Level 3 - significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of the inputs used, as of June 30, 2008, in valuing the Fund's assets carried at fair value:
INVESTMENTS IN OTHER FINANCIAL VALUATION INPUTS SECURITIES INSTRUMENTS* - ---------------- -------------- --------------- Level 1 - Quoted Prices $1,995,129,310 $(2,705,707) Level 2 - Other Significant Observable Inputs 39,674,039 -- Level 3 - Significant Unobservable Inputs -- -- -------------- ----------- TOTAL $2,034,803,349 $(2,705,707) ============== ===========
* Other financial instruments include futures contracts. 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. 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 June 30, 2008, 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 June 30, 2008, 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 See notes to financial statements 34 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 (UNAUDITED) losses by the Portfolio. The Portfolio recognizes a realized gain or loss when the contract is closed. The Portfolio voluntarily segregates securities in an amount equal to the outstanding value of the open futures contracts in accordance with Securities and Exchange Commission requirements. The primary risks associated with the use of futures contracts are an imperfect correlation between the change in market value of the securities held by the Portfolio and the prices of futures contracts and the possibility of an illiquid market. Use of Estimates: The Portfolio's financial statements are prepared in accordance with U.S. generally accepted accounting principles that require the use of management estimates. Actual results could differ from those estimates. 3. SECURITIES TRANSACTIONS For the six months June 30, 2008, purchases and sales of investment securities, excluding short-term investments, futures contracts, and contributions in-kind and fair value of withdrawals, aggregated to $126,676,195 and $203,832,247, respectively. At June 30, 2008, the book cost of investments was $1,420,775,267 which approximates cost computed on a federal tax basis. The aggregate gross unrealized appreciation and gross unrealized depreciation was $761,630,535 and $147,602,453, respectively, resulting in net appreciation of $614,028,082 for all securities as computed on a federal income tax basis. The differences between book and tax cost amounts are primarily due to wash sale loss deferrals. 4. RELATED PARTY FEES AND TRANSACTIONS The Portfolio has entered into an investment advisory agreement with SSgA Funds Management, Inc. ("SSgA FM" or the "Adviser"), a subsidiary of State Street Corp. and an affiliate of State Street Bank and Trust Company ("State Street"), under which SSgA FM directs the investments of the Portfolio in accordance with its investment objective, policies, and limitations. The Trust has contracted with State Street to provide custody, administration and transfer agent services to the Portfolio. In compensation for SSgA FM's services as investment adviser and for State Street's services as administrator, custodian and transfer agent (and for assuming ordinary operating expenses of the Portfolio, including ordinary legal, audit and trustees expense), State Street receives a unitary fee, calculated daily, at the annual rate of 0.045% of the Portfolio's average daily net assets. Certain investments made by the Portfolio were made in securities affiliated with State Street and SSgA FM. Investments in State Street Corp., the holding company of State Street, were made according to its representative portion of the S&P 500(R) Index. The market value of this investment at June 30, 2008 is listed in the Portfolio of Investments. 5. TRUSTEES' FEES Pursuant to certain agreements with State Street and its affiliates, each Independent Trustee receives for his or her services a $30,000 retainer in addition to $2,500 for each in-person meeting and $500 for each telephonic meeting from State Street or its affiliates. 35 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 6. INDEMNIFICATIONS The Trust's organizational documents provide that its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, both in some of its principal service contracts and in the normal course of its business, the Trust enters into contracts that provide indemnifications to other parties for certain types of losses or liabilities. The Trust's maximum exposure under these arrangements is unknown as this could involve future claims against the Trust. Management does not expect any significant claims. 7. NEW ACCOUNTING PRONOUNCEMENTS In March 2008, the Financial Accounting Standards board ("FASB") issued Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161"). SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. SFAS 161 requires enhanced disclosures about Funds' derivative and hedging activities. Management is currently evaluating the impact the adoption of SFAS 161 will have on the Funds' financial statement disclosures. GENERAL INFORMATION (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES AND RECORD The Trust has adopted proxy voting procedures relating to portfolio securities held by the Portfolio. A description of the policies and procedures are available (i) without charge, upon request, by calling (877) 521-4083 or (ii) on the website of the Securities and Exchange Commission (the "SEC") at www.sec.gov. Information on how the Portfolio voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by August 31 (i) without charge, upon request, by (i) calling (877) 521-4083 or (ii) on the SEC's website at www.sec.gov. QUARTERLY PORTFOLIO SCHEDULE The Trust files a complete schedule of portfolio holdings with the SEC for the first and third quarters of its fiscal year (as of March and September of each year) on Form N-Q. The Trust's Forms N-Q are available on the SEC's website at www.sec.gov. The Trust's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The most recent Form N-Q is available without charge, upon request, by calling (877) 521-4083. See notes to financial statements 36 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2008 (UNAUDITED) 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.
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT - -------- ------------------------------------------ ------ ----------- ------- ADVERTISING AGENCIES Other Securities $ 2,369,420 0.4% AEROSPACE Curtiss-Wright Corp. 21,068 942,582 0.2 Other Securities 3,769,108 0.7 ----------- --- 4,711,690 0.9 ----------- --- AGRICULTURE, FISHING & RANCHING Other Securities 764,315 0.1 AIR TRANSPORT Other Securities 3,154,435 0.6 ALUMINUM Other Securities 396,122 0.1 AUTO PARTS: AFTER MARKET Other Securities 549,017 0.1 AUTO PARTS: ORIGINAL EQUIPMENT Other Securities 2,585,846 0.5 AUTO,TRUCKS & PARTS Other Securities 581,475 0.1 BANKS: NEW YORK CITY Other Securities 376,096 0.1 BANKS: OUTSIDE NEW YORK CITY Other Securities 24,764,625 4.6 BEVERAGE: BREWERS (WINERIES) Other Securities 170,856 0.0 BEVERAGE: SOFT DRINKS Other Securities 574,564 0.1 BIOTECHNOLOGY RESEARCH & PRODUCTION Alexion Pharmaceuticals, Inc. (a) 18,180 1,318,050 0.2 Myriad Genetics, Inc. (a) 21,100 960,472 0.2 OSI Pharmaceuticals, Inc. (a) 27,000 1,115,640 0.2 Other Securities 13,560,243 2.5 ----------- --- 16,954,405 3.1 ----------- --- BUILDING MATERIALS Other Securities 3,150,759 0.6 BUILDING: CEMENT Other Securities 77,112 0.0 BUILDING: HEATING & PLUMBING Other Securities 378,774 0.1 BUILDING: MISCELLANEOUS Other Securities 728,407 0.1 BUILDING: ROOFING & WALLBOARD Other Securities 320,063 0.1 CABLE TELEVISION SERVICES Other Securities 538,322 0.1 CASINOS & GAMBLING Other Securities 2,413,136 0.4 CHEMICALS Energy Conversion Devices, Inc. (a) 19,164 1,411,237 0.3 Hercules, Inc. 53,300 902,369 0.2 Other Securities 7,867,862 1.4 ----------- --- 10,181,468 1.9 ----------- --- COAL Other Securities 1,695,304 0.3 COMMERCIAL INFORMATION SERVICES Other Securities 973,705 0.2 COMMUNICATIONS & MEDIA Other Securities 270,735 0.1 COMMUNICATIONS TECHNOLOGY Other Securities 14,101,690 2.6 COMPUTER SERVICES SOFTWARE & SYSTEMS Micros Systems, Inc. (a) 38,496 1,173,743 0.2 Parametric Technology Corp. (a) 54,360 906,181 0.2 Sybase, Inc. (a) 37,400 1,100,308 0.2 Other Securities 25,931,503 4.8 ----------- --- 29,111,735 5.4 ----------- --- COMPUTER TECHNOLOGY Other Securities 5,540,819 1.0
See notes to financial statements 37 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2008 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT - -------- ------------------------------------------ ------ ----------- ------- CONSTRUCTION EMCOR Group, Inc. (a) 31,972 $ 912,161 0.2% Other Securities 1,212,154 0.2 ----------- --- 2,124,315 0.4 ----------- --- CONSUMER ELECTRONICS Take-Two Interactive Software, Inc. (a)(b) 36,300 928,191 0.2 Other Securities 2,865,677 0.5 ----------- --- 3,793,868 0.7 ----------- --- CONSUMER PRODUCTS Tupperware Corp. 29,274 1,001,756 0.2 Other Securities 1,840,101 0.3 ----------- --- 2,841,857 0.5 ----------- --- CONTAINERS & PACKAGING: METALS & GLASS Other Securities 958,476 0.2 CONTAINERS & PACKAGING: PAPER & PLASTIC Other Securities 286,783 0.1 COPPER Other Securities 566,140 0.1 COSMETICS Other Securities 979,060 0.2 DIVERSIFIED FINANCIAL SERVICES Other Securities 2,972,690 0.5 DIVERSIFIED MATERIALS & PROCESSING Acuity Brands, Inc. 19,160 921,213 0.2 Olin Corp. 35,214 921,903 0.2 Other Securities 3,638,419 0.6 ----------- --- 5,481,535 1.0 ----------- --- DRUG & GROCERY STORE CHAINS Other Securities 3,532,921 0.6 DRUGS & PHARMACEUTICALS Onyx Pharmaceuticals, Inc. (a) 26,220 933,432 0.2 United Therapeutics Corp. (a) 10,646 1,040,647 0.2 Other Securities 10,824,899 2.0 ----------- --- 12,798,978 2.4 ----------- --- EDUCATION SERVICES Other Securities 1,596,799 0.3 ELECTRICAL & ELECTRONICS Other Securities 2,165,856 0.4 ELECTRICAL EQUIPMENT & COMPONENTS Other Securities 4,976,052 0.9 ELECTRICAL: HOUSEHOLD APPLIANCE Other Securities 196,892 0.0 ELECTRONICS Other Securities 2,649,925 0.5 ELECTRONICS: INSTRUMENTS, GAUGES & METERS Other Securities 487,631 0.1 ELECTRONICS: MEDICAL SYSTEMS Other Securities 5,346,929 1.0 ELECTRONICS: OTHER Other Securities 51,100 0.0 ELECTRONICS: SEMI-CONDUCTORS/ Microsemi Corp. (a) 37,090 933,926 0.2 COMPONENTS Other Securities 9,608,237 1.7 ----------- --- 10,542,163 1.9 ----------- --- ELECTRONICS: TECHNOLOGY Other Securities 3,373,293 0.6 ENERGY EQUIPMENT & SERVICES Other Securities 451,181 0.1 ENERGY MISCELLANEOUS Concho Resources, Inc. (a) 23,600 880,280 0.2 Penn Virginia Corp. 19,616 1,479,439 0.3 Other Securities 3,859,640 0.7 ----------- --- 6,219,359 1.2 ----------- --- ENGINEERING & CONTRACTING SERVICES Other Securities 2,059,060 0.4 ENTERTAINMENT Other Securities 1,153,091 0.2 FINANCE COMPANIES Other Securities 705,539 0.1 FINANCE: SMALL LOAN Other Securities 520,005 0.1 FINANCIAL DATA PROCESSING Other Securities 4,128,932 0.8 SERVICES & SYSTEMS
See notes to financial statements 38 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2008 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT - -------- ------------------------------------------ ------ ----------- ------- FINANCIAL INFORMATION SERVICES Other Securities $ 1,082,287 0.2% FINANCIAL MISCELLANEOUS Other Securities 3,824,921 0.7 FOODS Flowers Foods, Inc. 36,476 1,033,730 0.2 Other Securities 6,288,312 1.2 ----------- --- 7,322,042 1.4 ----------- --- FOREST PRODUCTS Other Securities 917,050 0.2 FORMS & BULK PRINTING SERVICES Other Securities 448,278 0.1 FUNERAL PARLORS & CEMETERIES Other Securities 289,613 0.1 GLASS Other Securities 221,392 0.0 GOLD Other Securities 1,327,624 0.2 HEALTH CARE FACILITIES Psychiatric Solutions, Inc. (a) 26,200 991,408 0.2 Other Securities 2,307,377 0.4 ----------- --- 3,298,785 0.6 ----------- --- HEALTH CARE MANAGEMENT Other Securities 4,669,392 0.9 HEALTH CARE SERVICES Other Securities 3,837,532 0.7 HOMEBUILDING Other Securities 1,088,607 0.2 HOTEL/MOTEL Other Securities 333,112 0.1 HOUSEHOLD FURNISHINGS Other Securities 1,467,119 0.3 IDENTIFICATION CONTROL & FILTER DEVICES Other Securities 4,276,840 0.8 INDUSTRIAL PRODUCTS Other Securities 145,536 0.0 INSURANCE: LIFE Other Securities 1,896,275 0.4 INSURANCE: MULTI-LINE Other Securities 5,477,654 1.0 INSURANCE: PROPERTY-CASUALTY Aspen Insurance Holdings Ltd. (c) 40,300 953,901 0.2 Other Securities 8,848,372 1.6 ----------- --- 9,802,273 1.8 ----------- --- INVESTMENT MANAGEMENT COMPANIES Apollo Investment Corp. (b) 67,146 962,202 0.2 Other Securities 2,350,762 0.4 ----------- --- 3,312,964 0.6 ----------- --- JEWELRY,WATCHES & GEMSTONES Other Securities 847,047 0.2 LEISURE TIME Other Securities 2,208,867 0.4 MACHINE TOOLS Other Securities 186,863 0.0 MACHINERY & ENGINEERING Other Securities 485,575 0.1 MACHINERY: AGRICULTURAL Other Securities 729,774 0.1 MACHINERY: CONSTRUCTION & HANDLING Other Securities 466,079 0.1 MACHINERY: ENGINES Other Securities 552,917 0.1 MACHINERY: INDUSTRIAL/SPECIALTY Nordson Corp. 15,910 1,159,680 0.2 Woodward Governor Co. 27,758 989,850 0.2 Other Securities 3,901,546 0.7 ----------- --- 6,051,076 1.1 ----------- --- MACHINERY: OIL WELL Dril-Quip, Inc. (a) 14,576 918,288 0.2 EQUIPMENT & SERVICES W-H Energy Services, Inc. (a) 14,657 1,403,261 0.3 Other Securities 8,194,236 1.5 ----------- --- 10,515,785 2.0 ----------- --- MACHINERY: SPECIALTY Other Securities 518,767 0.1 MANUFACTURED HOUSING Other Securities 429,760 0.1
See notes to financial statements 39 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2008 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT - -------- ------------------------------------------ ------ ----------- ------- MANUFACTURING Other Securities $ 569,346 0.1% MEDICAL & DENTAL Owens & Minor, Inc. 19,398 886,295 0.2 INSTRUMENTS & SUPPLIES Other Securities 14,298,900 2.6 ----------- --- 15,185,195 2.8 ----------- --- MEDICAL SERVICES Other Securities 2,256,029 0.4 METAL FABRICATING Other Securities 4,305,209 0.8 METALS & MINERALS MISCELLANEOUS Compass Minerals International, Inc. 15,300 1,232,568 0.2 GrafTech International Ltd. (a) 48,744 1,307,802 0.2 Other Securities 2,859,184 0.5 ----------- --- 5,399,554 0.9 ----------- --- MISCELLANEOUS BUSINESS & CONSUMER DISCRETIONARY Other Securities 112,660 0.0 MISCELLANEOUS CONSUMER STAPLES Other Securities 116,280 0.0 MISCELLANEOUS HEALTH CARE Other Securities 102,300 0.0 MISCELLANEOUS MATERIALS & COMMODITIES Other Securities 883,101 0.2 MISCELLANEOUS MATERIALS & PROCESSING Other Securities 555,328 0.1 MISCELLANEOUS PRODUCER DURABLES Other Securities 267,705 0.1 MISCELLANEOUS TECHNOLOGY Other Securities 572,222 0.1 MULTI-SECTOR COMPANIES Other Securities 1,716,748 0.3 OFFICE FURNITURE & BUSINESS EQUIPMENT Other Securities 1,806,563 0.3 OFFSHORE DRILLING Other Securities 218,790 0.0 OIL: CRUDE PRODUCERS Berry Petroleum Co. Class A 20,202 1,189,494 0.2 Bill Barrett Corp. (a) 17,300 1,027,793 0.2 Carrizo Oil & Gas, Inc. (a) 12,900 878,361 0.2 Comstock Resources, Inc. (a) 21,557 1,820,057 0.3 EXCO Resources, Inc. (a) 35,200 1,299,232 0.2 Stone Energy Corp. (a) 13,478 888,335 0.2 Swift Energy Co. (a) 14,417 952,387 0.2 Other Securities 14,584,867 2.7 ----------- --- 22,640,526 4.2 ----------- --- OIL: INTEGRATED DOMESTIC Other Securities 1,400,052 0.3 OIL: INTEGRATED INTERNATIONAL Other Securities 238,007 0.0 PAINTS & COATINGS Other Securities 961,933 0.2 PAPER Other Securities 2,272,123 0.4 PLASTICS Other Securities 133,472 0.0 POLLUTION CONTROL & ENVIRONMENTAL SERVICES Other Securities 2,222,252 0.4 POWER TRANSMISSION EQUIPMENT Other Securities 732,032 0.1 PRINTING & COPYING SERVICES Other Securities 1,005,603 0.2 PRODUCTION TECHNOLOGY EQUIPMENT Other Securities 6,162,503 1.1 PUBLISHING: MISCELLANEOUS Other Securities 1,045,411 0.2 PUBLISHING: NEWSPAPERS Other Securities 1,065,028 0.2 RADIO & TV BROADCASTERS Other Securities 1,342,749 0.2 RAILROAD EQUIPMENT Westinghouse Air Brake Technologies 22,839 1,110,432 0.2 Other Securities 417,548 0.1 ----------- --- 1,527,980 0.3 ----------- ---
See notes to financial statements 40 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2008 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT - -------- ------------------------------------------ ------ ----------- ------- RAILROADS Other Securities $ 482,234 0.1% REAL ESTATE Other Securities 1,463,088 0.3 REAL ESTATE INVESTMENT TRUSTS Anthracite Capital, Inc. (c)(d) 26,600 187,264 0.0 (REIT'S) Realty Income Corp. 47,800 1,087,928 0.2 Other Securities 27,130,860 5.0 ----------- ---- 28,406,052 5.2 ----------- ---- RECREATIONAL VEHICLES & BOATS Other Securities 872,367 0.2 RENTAL & LEASING SERVICES: COMMERCIAL Other Securities 704,808 0.1 RENTAL & LEASING SERVICES: CONSUMER Other Securities 1,604,088 0.3 RESTAURANTS Other Securities 5,876,063 1.1 RETAIL Aeropostale, Inc. (a)(c) 31,575 989,245 0.2 Other Securities 14,280,895 2.6 ----------- ---- 15,270,140 2.8 ----------- ---- SAVINGS & LOAN Other Securities 5,071,259 0.9 SCIENTIFIC EQUIPMENT & SUPPLIERS Other Securities 920,907 0.2 SECURITIES BROKERAGE & SERVICES Other Securities 2,688,476 0.5 SERVICES: COMMERCIAL Waste Connections, Inc. (a) 31,327 1,000,271 0.2 Watson Wyatt Worldwide, Inc. 20,115 1,063,882 0.2 Other Securities 14,849,257 2.7 ----------- ---- 16,913,410 3.1 ----------- ---- SHIPPING Other Securities 4,911,822 0.9 SHOES Other Securities 3,641,676 0.7 STEEL Other Securities 1,557,466 0.3 SUGAR Other Securities 85,415 0.0 TELECOMMUNICATIONS EQUIPMENT Polycom, Inc. (a) 41,500 1,010,940 0.2 Other Securities 2,566,262 0.5 ----------- ---- 3,577,202 0.7 ----------- ---- TEXTILE PRODUCTS Other Securities 365,908 0.1 TEXTILES APPAREL MANUFACTURERS The Warnaco Group, Inc. (a) 21,500 947,505 0.2 Other Securities 3,346,853 0.6 ----------- ---- 4,294,358 0.8 ----------- ---- TIRES & RUBBER Other Securities 677,450 0.1 TOBACCO Other Securities 1,215,372 0.2 TOYS Other Securities 1,154,101 0.2 TRANSPORTATION MISCELLANEOUS Other Securities 1,561,081 0.3 TRUCKERS Other Securities 3,223,990 0.6 UTILITIES: CABLE TV & RADIO Other Securities 116,412 0.0 UTILITIES: ELECTRICAL ITC Holdings Corp. 23,300 1,190,863 0.2 Westar Energy, Inc. 49,500 1,064,745 0.2 Other Securities 7,469,315 1.4 ----------- ---- 9,724,923 1.8 ----------- ---- UTILITIES: GAS DISTRIBUTORS Nicor, Inc. 21,300 907,167 0.2 Piedmont Natural Gas Co. (b) 34,600 905,136 0.1 Other Securities 3,855,390 0.7 ----------- ---- 5,667,693 1.0 ----------- ---- UTILITIES: MISCELLANEOUS Other Securities 667,290 0.1
See notes to financial statements 41 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2008 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT - -------- ---------------------------------------------------- ---------- ------------ ------- UTILITIES: TW Telecom, Inc. 69,500 $ 1,114,085 0.2% TELECOMMUNICATIONS (a)(b) Other 4,881,990 0.9 Securities ------------ ----- 5,996,075 1.1 ------------ ----- UTILITIES: WATER Other Securities 1,225,110 0.2 WHOLESALERS Other Securities 1,185,216 0.2 ------------ ----- TOTAL COMMON STOCKS 496,365,284 91.5 ============ ===== EXCHANGE-TRADED FUNDS iShares Russell 2000 Index Fund (b) 67,164 4,636,331 0.9 ------------ ----- TOTAL EXCHANGE-TRADED FUNDS 4,636,331 0.9 ============ ===== MUTUAL FUNDS BlackRock Kelso Capital Corp. (d) 4,100 38,786 0.0 Other Securities 670,600 0.1 ------------ ----- TOTAL MUTUAL FUNDS 709,386 0.1 ============ ===== WARRANTS (E) COMMUNICATIONS TECHNOLOGY Other Securities 0 0.0 ------------ ----- TOTAL WARRANTS 0 0.0 ============ ===== OTHER INTERESTS (F) OIL: CRUDE PRODUCERS Other Securities 0 0.0 ------------ ----- TOTAL OTHER INTERESTS 0 0.0 ============ ===== TOTAL LONG-TERM INVESTMENTS (COST -- $493,391,561) 501,711,001 92.5 ============ =====
BENEFICIAL INTEREST SHORT-TERM SECURITIES (000) ---------------------------------------------------- ---------- BlackRock Liquidity Series, LLC Cash Sweep Series, 2.56% $34,422 34,421,562 6.3 BlackRock Liquidity Series, LLC Money Market Series, 2.70% (d)(g)(h) 64,589 64,588,600 11.9 ------------ ----- TOTAL SHORT-TERM SECURITIES (COST -- $99,010,162) -- 18.2% 99,010,162 18.2 ============ ===== TOTAL INVESTMENTS (COST -- $592,401,723*) 600,721,163 110.7 LIABILITIES IN EXCESS OF OTHER ASSETS (57,908,928) (10.7) ------------ ----- NET ASSETS $542,812,235 100.0% ============ =====
See notes to financial statements 42 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2008 (UNAUDITED) * The cost and unrealized appreciation (depreciation) of investments, as of June 30, 2008, as computed for federal income tax purposes, were as follows: Aggregate Cost.................................................. $598,304,091 ------------ Gross unrealized appreciation................................... $ 79,863,244 Gross unrealized depreciation................................... (77,446,172) ------------ Net unrealized appreciation..................................... $ 2,417,072 ============
(a) Non-income producing security. (b) Security, or a portion of security, is on loan. (c) All or a portion of the security has been pledged as collateral in connection with open financial futures contracts. (d) Investments in companies considered to be an affiliate of the Series, for purposes of Section 2 (a)(3) of the Investment Company Act of 1940, were as follows:
PURCHASE INTEREST/DIVIDEND AFFILIATED COST SALE COST REALIZED LOSS INCOME - ---------- ---------- ----------- ------------- ----------------- Anthracite Capital, Inc. $ -- $ 120,735 $(48,521) $ 17,439 BlackRock Kelso Capital Corp. 15,517 6,168 (524) 2,279 BlackRock Liquidity Series, LLC Cash Sweep Series 1,194,769* -- -- 378,995 BlackRock Liquidity Series, LLC Money Market Series -- 19,220,217** -- 597,824
* Represents net purchase cost. ** Represents net sale cost. (e) Warrants entitle the Series to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date. (f) Other interests represent beneficial interest in liquidation trusts and other reorganization entities and are non-income producing. (g) Represents the current yield as of report date. (h) Security was purchased with the cash proceeds from securities loans. - - For Series compliance purposes, the Series' industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Series management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. - - Financial futures contracts purchased as of June 30, 2008, were as follows:
NUMBER OF UNREALIZED CONTRACTS ISSUE EXPIRATION DATE FACE VALUE DEPRECIATION - --------- ------------------ --------------- ----------- ------------ 603 Russell 2000 Index September 2008 $43,948,831 $(2,239,321)
- - Effective January 1, 2008, the Series adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). FAS 157 clarifies the definition of fair value, establishes a framework for measuring fair values and requires additional disclosures about the use of fair value measurements. Various inputs are used in determining the fair value of investments, which are as follows: - Level 1 -- price quotations in active markets/exchanges for identical securities - Level 2 -- other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or other market-corroborated inputs) - Level 3 -- unobservable inputs based on the best information available in the circumstance, to the extent observable inputs are not available (including the Series' own assumption used in determining the fair value of investments) The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Series' policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements. The following table summarizes the inputs used as of June 30, 2008 in determining the fair valuation of the Series' investments:
INVESTMENTS IN OTHER FINANCIAL VALUATION INPUTS SECURITIES INSTRUMENTS* - ---------------- -------------- --------------- Level 1.................................... $501,711,001 $(2,239,321) Level 2.................................... 99,010,162 -- Level 3.................................... -- -- ------------ ----------- Total...................................... $600,721,163 $(2,239,321) ============ ===========
* Other financial instruments are futures. See notes to financial statements 43 MASTER SMALL CAP INDEX SERIES STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2008 (UNAUDITED) ASSETS Investments at value -- unaffiliated (including securities loaned of $54,110,838) (cost -- $493,080,503) ........................................................... $501,484,951 Investments at value -- affiliated (cost -- $99,321,220) ............................ 99,236,212 Cash ................................................................................ 876,888 Investments sold receivable ......................................................... 83,594,388 Contributions receivable from Investors ............................................. 1,376,705 Dividends receivable ................................................................ 539,407 Securities lending income receivable ................................................ 92,177 Receivable from advisor ............................................................. 1,541 Prepaid expenses .................................................................... 17,103 Other assets ........................................................................ 5,713 ------------ Total assets ........................................................................ 687,225,085 ------------ LIABILITIES Collateral on securities loaned -- at value ......................................... 64,588,600 Investments purchased payable ....................................................... 79,342,102 Margin variation payable ............................................................ 434,749 Other affiliates payable ............................................................ 4,343 Officer's and Directors' fees payable ............................................... 117 Other accrued expenses payable ...................................................... 41,556 Other liabilities payable ........................................................... 1,383 ------------ Total liabilities ................................................................... 144,412,850 ------------ NET ASSETS Net assets .......................................................................... $542,812,235 ============ NET ASSETS CONSIST OF Investors' capital .................................................................. $536,732,116 Net unrealized appreciation/depreciation ............................................ 6,080,119 ------------ Net assets .......................................................................... $542,812,235 ============
See notes to financial statements 44 MASTER SMALL CAP INDEX SERIES STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) INVESTMENT INCOME Dividends (net of $1,058 foreign withholding tax and $19,718 from affiliates)..... $ 2,578,195 Interest from affiliates.......................................................... 378,995 Securities lending -- net......................................................... 597,824 ------------ Total income......................................................................... 3,555,014 ------------ EXPENSES Custodian fees.................................................................... 63,851 Accounting services............................................................... 49,000 Professional fees................................................................. 42,254 Investment advisory............................................................... 26,865 Officers and Directors............................................................ 11,359 Printing.......................................................................... 528 Miscellaneous..................................................................... 6,260 ------------ Total expenses....................................................................... 200,117 Less fees waived by advisor....................................................... (8,848) Less fees paid indirectly......................................................... (775) ------------ Total expenses after fees waived and paid indirectly................................. 190,494 ------------ Net investment income................................................................ 3,364,520 ------------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from: Investments (including $(49,045) from affiliates)................................. 8,191,176 In-kind redemption................................................................ (11,422,101) Futures........................................................................... 496,632 ------------ 2,734,293 ------------ Net change in unrealized appreciation/depreciation on: Investments....................................................................... (54,081,567) Futures........................................................................... (2,708,926) ------------ (56,790,493) ------------ Total realized and unrealized loss................................................... (59,524,786) ============ Net Decrease in Net Assets Resulting from Operations................................. $(56,160,266) ============
See notes to financial statements 45 MASTER SMALL CAP INDEX SERIES STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, YEAR ENDED 2008 DECEMBER (UNAUDITED) 31, 2008 ------------- ------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS Net investment income ................................................ $ 3,364,520 $ 10,909,414 Net realized gain (loss) ............................................. (2,734,293) 21,031,968 Net change in unrealized appreciation/depreciation ................... (56,790,493) (45,314,859) ------------- ------------- Net decrease in net assets resulting from operations ................. (56,160,266) (13,373,477) ------------- ------------- CAPITAL TRANSACTIONS Proceeds from contributions .......................................... 170,373,581 443,692,332 Fair value of withdrawals ............................................ (201,795,364) (361,297,148) ------------- ------------- Increase (decrease) in net assets derived from capital transactions .. (31,421,783) 82,395,184 ------------- ------------- NET ASSETS Total increase (decrease) in net assets .............................. (87,582,049) 69,021,707 Beginning of period .................................................. 630,394,284 561,372,577 ------------- ------------- End of period ........................................................ $ 542,812,235 $ 630,394,284 ============= =============
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, 2008 ----------------------------------------------------- (UNAUDITED) 2007 2006 2005 2004 2003 ------------- -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN Total investment return ............................... (9.27)%(1) (1.46)% 18.13% 4.63% 18.15% 47.11% -------- -------- -------- -------- -------- -------- RATIOS TO AVERAGE NET ASSETS Total expenses after fees waived and paid indirectly .. 0.07%(2) 0.06% 0.07% 0.07% 0.08% 0.09% -------- -------- -------- -------- -------- -------- Total expenses after fees waived and before paid indirectly ......................................... 0.07%(2) 0.06% 0.07% 0.07% 0.08% 0.09% -------- -------- -------- -------- -------- -------- Total expenses ........................................ 0.07%(2) 0.06% 0.07% 0.08% 0.08% 0.10% -------- -------- -------- -------- -------- -------- Net investment income ................................. 1.25%(2) 1.69% 1.55% 1.17% 1.11% 1.13% -------- -------- -------- -------- -------- -------- SUPPLEMENTAL DATA Net assets, end of period (000) ....................... $542,812 $630,394 $561,373 $370,145 $365,661 $335,659 -------- -------- -------- -------- -------- -------- Portfolio turnover .................................... 34% 26% 40% 37% 38% 29% -------- -------- -------- -------- -------- --------
(1) Aggregate total investment return. (2) Annualized. See notes to financial statements 46 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES: Master Small Cap Index Series (the "Series"), a non-diversified management investment company, is part of Quantitative Master Series LLC (the "Master LLC"). The Master LLC is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), and is organized as a Delaware limited liability company. The Limited Liability Company Agreement permits the Directors to issue non-transferable interests in the Master LLC, subject to certain limitations. The Series' financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. Actual results may differ from these estimates. The following is a summary of significant accounting policies followed by the Series: Valuation of Investments: Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid price. If no bid price is available the prior day's price will be used, unless it is determined that such prior day's price no longer reflects the fair value of the security. Investments in open-end investment companies are valued at net asset value each business day. Financial futures contracts traded on exchanges are valued at their last sale price. In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the market value of such investment, the investment will be valued by a method approved by the Board of Directors (the "Board") as reflecting fair value ("Fair Value Assets"). When determining the price for Fair Value Assets, the investment advisor and/or sub-advisor seeks to determine the price that the Series might reasonably expect to receive from the current sale of that asset in an arm's-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor and/or sub-advisor deems relevant. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof. Derivative Financial Instruments: The Series may engage in various portfolio investment strategies to increase the return of the Series and to hedge, or protect, its exposure to interest rate movements and movements in the securities markets. Losses may arise if the value of the contract decreases due to an unfavorable change in the price of the underlying security, or if the counterparty does not perform under the contract. - Financial futures contracts -- The Series may purchase or sell financial futures contracts and options on 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 margin variation and are recognized by the Series as unrealized gains or losses. When the contract is closed, the Series records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Segregation: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission ("SEC") require that the Series segregates assets in connection with certain investments (e.g., futures), the Series will, consistent with certain interpretive letters issued by the SEC, designate on its books and records cash or other 47 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) liquid debt securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Investment Transactions and Investment Income: Investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Series has determined the ex-dividend date. Interest income is recognized on the accrual basis. Securities lending: The Series may lend securities to financial institutions that provide cash or securities issued or guaranteed by the U.S. government as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Series and any additional required collateral is delivered to the Series on the next business day. Where the Series receives securities as collateral for the loaned securities, it collects a fee from the borrower. The Series typically receives the income on the loaned securities but does not receive the income on the collateral. Where the Series receives cash collateral, it may invest such collateral and retain the amount earned on such investment, net of any amount rebated to the borrower. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within five business days. The Series may pay reasonable finder's, lending agent, administrative and custodial fees in connection with its loans. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Series could experience delays and costs in gaining access to the collateral. The Series also could suffer a loss where the value of the collateral falls below the market value of the borrowed securities, in the event of borrower default or in the event of losses on investments made with cash collateral. 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 shares of the net assets, income, expenses and realized and unrealized gains and losses of the Series. Therefore, no federal income tax provision is required. It is intended that the Master LLC's assets will be managed so an investor in the Master LLC can satisfy the requirements of Subchapter M of the Internal Revenue Code. Under the applicable foreign tax laws, a withholding tax may be imposed on interest dividend, and capital gains at various rates. 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 statutes of limitations on the Series' state and local tax returns may remain open for an additional year depending upon the jurisdiction. Recent Accounting Pronouncement: In March 2008, Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133" ("FAS 161") was issued and is effective for fiscal years beginning after November 15, 2008. FAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity's results of operations and financial position. The impact of the Series' financial statement disclosures, if any, is currently being assessed. 48 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) Other: Expenses directly related to the Series are charged to that Series. Other operating expenses shared by several funds are pro-rated among those funds on the basis of relative net assets or other appropriate methods. 2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: The Master LLC, on behalf of the Series, has entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the "Advisor"), an indirect, wholly owned subsidiary of BlackRock, Inc., to provide investment advisory and administration services. Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC Financial Services Group, Inc. are principal owners of BlackRock, Inc. The Advisor is responsible for the management of the Series' investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Series. For such services, the Series pays the Advisor a monthly fee at an annual rate of 0.01% of the average daily value of the Series' net assets. The Advisor has entered into a contractual arrangement with the Master LLC with respect to the Series under which the Advisor will waive its fees or reimburse expenses so that the total operating expenses incurred by the Series will not exceed 0.08% of the Series' average daily net assets. This arrangement has a one-year term and is renewable. This amount is shown on the Statement of Operations as fees waived by the Advisor. The Advisor has entered into a separate sub-advisory agreement with BlackRock Investment Management, LLC ("BIM"), an affiliate of the Advisor, under which the Advisor pays BIM, for services it provides, a monthly fee that is a percentage of the investment advisory fee paid by the Series to the Advisor. For the six months ended June 30, 2008, the Series reimbursed the Advisor $4,043 for certain accounting services, which is included in accounting services in the Statement of Operations. The Master LLC, on behalf of the Series, has received an exemptive order from the Securities and Exchange Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned subsidiary of Merrill Lynch, or its affiliates. As of June 30, 2008, the Series lent securities with a value of $2,416,233 to MLPF&S or its affiliates. Pursuant to that order, the Master LLC has retained BIM as the securities lending agent for a fee based on a share of the returns on investment of cash collateral. BIM may, on behalf of the Master LLC and the Series, invest cash collateral received by the Series for such loans, among other things, in a private investment company managed by the Advisor or in registered money market funds advised by the Advisor or its affiliates. For the six months ended June 30, 2008, BIM received $148,155 in securities lending agent fees. Pursuant to the terms of the custody agreement, custodian fees may be reduced by amounts calculated on uninvested cash balances ("custody credits"), which are shown on the Statement of Operations as fees paid indirectly. Certain officers and/or directors of the Master LLC are officers and/or directors of BlackRock, Inc. or its affiliates. 3. INVESTMENTS: Purchases and sales of investments, excluding short-term securities, for the six months ended June 30, 2008 were $174,555,892, and $215,406,565, respectively. 49 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 4. SHORT-TERM BORROWINGS: The Master LLC, on behalf of the Series, along with certain other funds managed by the Advisor and its affiliates, is a party to a $500,000,000 credit agreement with a group of lenders. 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. On November 21, 2007, the credit agreement was renewed for one year under substantially the same terms. 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, which is included in miscellaneous expenses in the Statement of Operations. 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 six months ended June 30, 2008. 50 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2008 (UNAUDITED) 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.
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT - -------- ------------------------------------- --------- -------------- ------- AEROSPACE & DEFENSE Other Securities $ 6,477,955 0.6% AIR FREIGHT & LOGISTICS Other Securities 3,767,596 0.4 AIRLINES Other Securities 2,481,451 0.2 AUTO COMPONENTS Other Securities 7,687,699 0.7 AUTOMOBILES DaimlerChrysler AG 75,625 4,690,714 0.4 Honda Motor Co., Ltd. 139,800 4,770,908 0.5 Toyota Motor Corp. 225,800 10,658,665 1.0 Other Securities 14,028,865 1.3 -------------- ------ 34,149,152 3.2 -------------- ------ BEVERAGES Other Securities 13,886,140 1.3 BIOTECHNOLOGY Other Securities 2,410,776 0.2 BUILDING PRODUCTS Other Securities 5,591,469 0.5 CAPITAL MARKETS UBS AG (a) 247,404 5,155,464 0.5 Other Securities 18,204,064 1.7 -------------- ------ 23,359,528 2.2 -------------- ------ CHEMICALS BASF SE 80,438 5,543,913 0.5 Bayer AG 64,499 5,426,846 0.5 Other Securities 26,338,452 2.5 -------------- ------ 37,309,211 3.5 -------------- ------ COMMERCIAL BANKS BNP Paribas SA 67,732 6,097,042 0.6 Banco Bilbao Vizcaya Argentaria SA 297,839 5,674,971 0.5 Banco Santander SA 521,062 9,506,325 0.9 Commonwealth Bank of Australia Ltd. 108,474 4,182,715 0.4 HSBC Holdings Plc 991,430 15,265,566 1.4 Mitsubishi UFJ Financial Group, Inc. 874,618 7,729,388 0.7 Royal Bank of Scotland Group Plc 1,341,311 5,710,136 0.6 Sumitomo Mitsui Financial Group, Inc. 543 4,083,473 0.4 Unicredit SpA 959,229 5,835,610 0.6 Other Securities 76,004,073 7.2 -------------- ------ 140,089,299 13.3 -------------- ------ COMMERCIAL SERVICES & SUPPLIES Other Securities 7,700,134 0.7 COMMUNICATIONS EQUIPMENT Nokia Oyj 334,503 8,176,242 0.8 Other Securities 3,829,801 0.3 -------------- ------ 12,006,043 1.1 -------------- ------ COMPUTERS & PERIPHERALS Other Securities 4,793,664 0.5 CONSTRUCTION & ENGINEERING Other Securities 10,656,169 1.0 CONSTRUCTION MATERIALS Other Securities 6,377,682 0.6 CONSUMER FINANCE Other Securities 2,191,133 0.2 CONTAINERS & PACKAGING Other Securities 1,009,455 0.1 DISTRIBUTORS Other Securities 940,163 0.1 DIVERSIFIED CONSUMER SERVICES Other Securities 186,305 0.0 DIVERSIFIED FINANCIAL SERVICES ING Groep NV CVA 158,275 5,004,296 0.5 Other Securities 11,158,479 1.0 -------------- ------ 16,162,775 1.5 -------------- ------
See notes to financial statements 51 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2008 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT - -------- ------------------------------------- --------- -------------- ------- DIVERSIFIED TELECOMMUNICATION SERVICES France Telecom SA 151,335 $ 4,438,218 0.4% Telefonica SA 357,958 9,472,939 0.9 Other Securities 25,007,589 2.4 -------------- ------ 38,918,746 3.7 -------------- ------ ELECTRIC UTILITIES E.ON AG 53,136 10,709,279 1.0 Other Securities 28,616,239 2.7 -------------- ------ 39,325,518 3.7 -------------- ------ ELECTRICAL EQUIPMENT ABB Ltd. 184,739 5,229,195 0.5 Other Securities 11,816,261 1.1 -------------- ------ 17,045,456 1.6 -------------- ------ ELECTRONIC EQUIPMENT & INSTRUMENTS Other Securities 11,311,271 1.1 ENERGY EQUIPMENT & SERVICES Other Securities 5,934,962 0.6 FOOD & STAPLES RETAILING Tesco Plc 652,982 4,776,106 0.4 Other Securities 16,617,656 1.6 -------------- ------ 21,393,762 2.0 -------------- ------ FOOD PRODUCTS Nestle SA Registered Shares 332,370 14,978,145 1.4 Other Securities 15,332,800 1.5 -------------- ------ 30,310,945 2.9 -------------- ------ GAS UTILITIES Other Securities 4,955,653 0.5 HEALTH CARE EQUIPMENT & SUPPLIES Other Securities 6,378,191 0.6 HEALTH CARE PROVIDERS & SERVICES Other Securities 2,109,808 0.2 HOTELS, RESTAURANTS & LEISURE Other Securities 8,294,680 0.8 HOUSEHOLD DURABLES Other Securities 10,980,411 1.0 HOUSEHOLD PRODUCTS Other Securities 4,369,977 0.4 IT SERVICES Other Securities 2,801,370 0.3 INDEPENDENT POWER PRODUCERS & ENERGY TRADERS Other Securities 2,002,089 0.2 INDUSTRIAL CONGLOMERATES Siemens AG 72,270 8,011,879 0.8 Other Securities 9,508,381 0.9 -------------- ------ 17,520,260 1.7 -------------- ------ INSURANCE Allianz AG Registered Shares 37,418 6,581,962 0.6 Other Securities 40,838,856 3.9 -------------- ------ 47,420,818 4.5 -------------- ------ INTERNET & CATALOG RETAIL Other Securities 790,368 0.1 INTERNET SOFTWARE & SERVICES Other Securities 740,160 0.1 LEISURE EQUIPMENT & PRODUCTS Other Securities 2,060,759 0.2 LIFE SCIENCES TOOLS & SERVICES Other Securities 541,736 0.1 MACHINERY Other Securities 22,146,199 2.1 MARINE Other Securities 5,335,474 0.5 MEDIA Other Securities 14,932,731 1.4 METALS & MINING Anglo American Plc 110,084 7,731,603 0.7 ArcelorMittal 72,665 7,141,154 0.7 BHP Billiton Ltd. 278,546 11,855,039 1.1 BHP Billiton Plc 184,422 7,072,581 0.7 Rio Tinto Ltd. 23,469 3,036,599 0.3 Rio Tinto Plc Registered Shares 83,246 10,025,058 0.9 Xstrata Plc 53,315 4,247,091 0.4 Other Securities 23,870,761 2.3 -------------- ------ 74,979,886 7.1 -------------- ------
See notes to financial statements 52 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2008 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT - -------- ------------------------------------- --------- -------------- ------- MULTI-UTILITIES RWE AG 36,869 $ 4,654,941 0.4% Suez SA 86,754 5,880,853 0.6 Other Securities 8,439,349 0.8 -------------- ------ 18,975,143 1.8 -------------- ------ MULTILINE RETAIL Other Securities 3,099,631 0.3 OFFICE ELECTRONICS Canon, Inc. 88,200 4,540,176 0.4 Other Securities 2,319,383 0.2 -------------- ------ 6,859,559 0.6 -------------- ------ OIL, GAS & CONSUMABLE FUELS BG Group Plc 278,189 7,229,421 0.7 BP Plc 1,577,445 18,283,499 1.7 Eni SpA 216,899 8,057,887 0.8 Royal Dutch Shell Plc 297,074 12,177,494 1.2 Royal Dutch Shell Plc Class B 230,059 9,212,270 0.9 Statoilhydro ASA 108,294 4,040,423 0.4 Total SA 179,986 15,320,161 1.4 Other Securities 14,921,976 1.4 -------------- ------ 89,243,131 8.5 -------------- ------ PAPER & FOREST PRODUCTS Other Securities 2,752,871 0.3 PERSONAL PRODUCTS Other Securities 3,316,540 0.3 PHARMACEUTICALS AstraZeneca Plc 120,974 5,143,607 0.5 GlaxoSmithKline Plc 456,019 10,080,644 1.0 Novartis AG Registered Shares 195,789 10,774,699 1.0 Roche Holding AG 59,298 10,660,139 1.0 Sanofi-Aventis 85,065 5,652,487 0.5 Other Securities 16,309,554 1.5 -------------- ------ 58,621,130 5.5 -------------- ------ REAL ESTATE INVESTMENT TRUSTS (REITS) Other Securities 11,905,537 1.1 REAL ESTATE MANAGEMENT & DEVELOPMENT Other Securities 16,141,405 1.5 ROAD & RAIL Other Securities 8,705,794 0.8 SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Other Securities 4,545,430 0.4 SOFTWARE Nintendo Co., Ltd. 8,200 4,650,002 0.4 Other Securities 5,288,544 0.5 -------------- ------ 9,938,546 0.9 -------------- ------ SPECIALTY RETAIL Other Securities 5,924,607 0.6 TEXTILES, APPAREL & LUXURY GOODS Other Securities 9,555,769 0.9 TOBACCO British American Tobacco Plc 125,553 4,330,801 0.4 Other Securities 5,195,419 0.5 -------------- ------ 9,526,220 0.9 -------------- ------ TRADING COMPANIES & DISTRIBUTORS Other Securities 12,418,880 1.2 TRANSPORTATION INFRASTRUCTURE Other Securities 3,676,856 0.4 WATER UTILITIES Other Securities 512,930 0.1 WIRELESS TELECOMMUNICATION SERVICES Vodafone Group Plc 4,437,083 13,073,020 1.2 Other Securities 5,681,633 0.6 -------------- ------ 18,754,653 1.8 -------------- ------ TOTAL COMMON STOCKS 1,026,309,661 97.2 -------------- ------
See notes to financial statements 53 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2008 (UNAUDITED)
EXCHANGE-TRADED FUNDS SHARES VALUE PERCENT ------------------------------------- --------- -------------- ------- iShares MSCI EAFE Index Fund 580,230 $ 39,861,801 3.8% -------------- ------ TOTAL EXCHANGE-TRADED FUNDS 39,861,801 3.8 -------------- ------
INDUSTRY PREFERRED STOCKS - -------- ------------------------------------- AUTOMOBILES Other Securities 1,254,469 0.1 HOUSEHOLD PRODUCTS Other Securities 607,358 0.1 MEDIA Other Securities 46,726 0.0 MULTI-UTILITIES Other Securities 263,966 0.0 -------------- ------ TOTAL PREFERRED STOCKS 2,172,519 0.2 -------------- ------
RIGHTS ------------------------------------- COMMERCIAL BANKS Other Securities 49,023 0.0 TOTAL RIGHTS 49,023 0.0 -------------- ------ TOTAL LONG-TERM SECURITIES (COST -- $921,272,409) 1,068,393,004 101.2 -------------- ------
BENEFICIAL INTEREST SHORT-TERM SECURITIES (000) ------------------------------------- --------- BlackRock Liquidity Series, LLC Cash Sweep Series, 2.56% (b)(c) $ 7,111 $ 7,110,912 0.7 -------------- ------ TOTAL SHORT-TERM SECURITIES (COST -- $7,110,912) 7,110,912 0.7 ============== ====== TOTAL INVESTMENTS (COST -- $928,383,321*) 1,075,503,916 101.9 LIABILITIES IN EXCESS OF OTHER ASSETS (19,567,874) (1.9) NET ASSETS -------------- ------ $1,055,936,042 100.0% ============== ======
* The cost and unrealized appreciation (depreciation of investments, as of June 30, 2008, as computed for federal income tax purposes, were as follows: Aggregate Cost .................................................. $941,324,811 ------------ Gross unrealized appreciation ................................... 204,863,295 Gross unrealized depreciation ................................... (70,684,190) ------------ Net unrealized appreciation ..................................... $134,179,105 ------------
(a) Non-income producing security. (b) Represents the current yield as of the report date. (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:
AFFILIATED NET ACTIVITY (000) INTEREST INCOME - ---------- ------------------ --------------- BlackRock Liquidity Series, LLC Cash Sweep Series $(6,418) $233,820
- - 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. See notes to financial statements 54 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2008 (UNAUDITED) - Financial futures contracts purchased as of June 30, 2008, were as follows:
NUMBER OF UNREALIZED CONTRACTS ISSUE EXCHANGE EXPIRATION DATE FACE VALUE DEPRECIATION - --------- ---------------------- --------- --------------- ---------- ------------ 43 OMX Stock Index Future Stockholm July 2008 $ 681,701 $ (65,880) 108 DJ Euro Stoxx 50 Eurex September 2008 5,955,728 (208,334) 45 FTSE 100 Index Future LIFFE September 2008 5,163,908 (101,434) 22 SPI 200 Index Future Sydney September 2008 2,836,241 (98,183) 48 TOPIX Index Future Tokyo September 2008 6,252,247 (292,083) --------- TOTAL $(765,944) =========
- Forward foreign currency contracts as of June 30, 2008 were as follows:
UNREALIZED SETTLEMENT APPRECIATION CURRENCY PURCHASED CURRENCY SOLD DATE (DEPRECIATION) ------------------ ------------------- ---------- -------------- AUD 3,186,150 USD 2,987,612 8/14/08 $ 47,781 CHF 1,813,000 USD 1,737,942 8/14/08 37,724 EUR 10,821,500 USD 16,745,401 8/14/08 252,441 EUR 620,000 USD 966,856 8/14/08 7,008 EUR 53,000 USD 81,915 8/14/08 1,334 GBP 301,000 USD 597,612 8/14/08 (206) GBP 4,440,000 USD 8,633,170 8/14/08 179,075 JPY 87,113,000 USD 816,306 8/14/08 6,180 JPY 1,363,174,000 USD 13,085,321 8/14/08 (214,789) SEK 4,841,000 USD 802,622 8/14/08 (836) USD 1,618,334 AUD 1,715,000 8/14/08 (15,519) USD 1,106,877 CHF 1,147,000 8/14/08 (16,504) USD 196,463 CHF 203,000 8/14/08 (2,357) USD 427,888 EUR 276,000 8/14/08 (5,638) USD 13,332,680 EUR 8,586,000 8/14/08 (153,756) USD 390,860 GBP 200,000 8/14/08 (6,088) USD 6,040,685 GBP 3,085,000 8/14/08 (82,238) USD 10,281,351 JPY 1,070,553,000 8/14/08 173,627 USD 294,678 JPY 1,780,000 8/14/08 (132) --------- TOTAL $ 207,107 =========
- Currency Abbreviations: AUD Australian Dollar CHF Swiss Franc EUR Euro GBP British Pound JPY Japanese Yen SEK Swedish Krona - - Effective January 1, 2008, the Series adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). FAS 157 clarifies the definition of fair value, establishes a framework for measuring fair values and requires additional disclosures about the use of fair value measurements. Various inputs are used in determining the fair value of investments, which are as follows: - Level 1 -- price quotations in active markets/exchanges for identical securities - Level 2 -- other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or other market-corroborated inputs) - Level 3 -- unobservable inputs based on the best information available in the circumstance, to the extent observable inputs are not available (including the Series' own assumption used in determining the fair value of investments) The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Series' policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements. The following table summarizes the inputs used as of June 30, 2008 in determining the fair valuation of the Series' investments:
INVESTMENTS IN OTHER FINANCIAL VALUATION INPUTS SECURITIES INSTRUMENTS* - ---------------- -------------- --------------- Level 1 ........ $ 41,426,133 $(765,944) Level 2 ........ 1,034,077,783 207,107 Level 3 ........ -- -- -------------- --------- TOTAL .......... $1,075,503,916 $(588,837) ============== =========
* Other financial instruments are futures and forward foreign currency contracts. See notes to financial statements 55 MASTER INTERNATIONAL INDEX SERIES STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2008 (UNAUDITED) ASSETS Investments at value -- unaffiliated (cost --$921,272,409) ..... $1,068,393,004 Investments at value -- affiliated (cost --$7,110,912) ......... 7,110,912 Cash ........................................................... 1,241,800 Cash on deposit for financial futures contracts ................ 4,499,000 Foreign currency at value (cost --$6,094,021) .................. 6,143,946 Unrealized appreciation on forward foreign currency contracts .. 705,170 Dividends receivable ........................................... 4,942,237 Investments sold receivable .................................... 188,571 Prepaid expenses ............................................... 31,186 -------------- Total assets ................................................... 1,093,255,826 -------------- LIABILITIES Unrealized depreciation on forward foreign currency contracts .. 498,063 Investments purchased payable .................................. 413,252 Withdrawals payable to the Investors ........................... 36,000,501 Margin variation payable ....................................... 134,770 Investment advisory fees payable ............................... 2,855 Other affiliates payable ....................................... 8,803 Officer's and Directors' fees payable .......................... 209 Other accrued expenses payable ................................. 261,331 -------------- Total liabilities .............................................. 37,319,784 -------------- NET ASSETS Net assets ..................................................... $1,055,936,042 ============== NET ASSETS CONSIST OF Investors' capital ............................................. $ 908,998,040 Net unrealized appreciation/depreciation ....................... 146,938,002 -------------- Net assets ..................................................... $1,055,936,042 ==============
See notes to financial statements 56 MASTER INTERNATIONAL INDEX SERIES STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) INVESTMENT INCOME Dividends (net of $2,573,398 foreign withholding tax) .. $ 23,793,681 Interest from affiliates ............................... 233,820 ------------- Total income ........................................... 24,027,501 ------------- EXPENSES Custodian .............................................. 311,407 Accounting services .................................... 82,696 Investment advisory .................................... 53,046 Professional ........................................... 33,220 Officer and Directors .................................. 12,780 Printing ............................................... 785 Miscellaneous .......................................... 53,786 ------------- Total expenses ......................................... 547,720 Less fees waived by advisor ............................ (6,728) ------------- Total expenses after waiver ............................ 540,992 ------------- Net investment income .................................. 23,486,509 ------------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from: Investments ......................................... (9,341,626) In-kind redemption .................................. (1,719,947) Futures ............................................. (1,916,406) Foreign currency .................................... 234,913 ------------- (12,743,066) ------------- Net change in unrealized appreciation/depreciation on: Investments ......................................... (141,005,531) Futures ............................................. (904,529) Foreign currency .................................... 346,290 ------------- (141,563,770) ------------- Total realized and unrealized loss ..................... (154,306,836) ------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $(130,820,327) =============
See notes to financial statements 57 MASTER INTERNATIONAL INDEX SERIES STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2008 DECEMBER 31, (UNAUDITED) 2007 ---------------- -------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS Net investment income ............................................ $ 23,486,509 $ 32,702,640 Net realized gain (loss) ......................................... (12,743,066) 21,342,720 Net change in unrealized appreciation/depreciation ............... (141,563,770) 60,461,397 -------------- -------------- Net increase (decrease) in net assets resulting from operations .. (130,820,327) 114,506,757 -------------- -------------- CAPITAL TRANSACTIONS Proceeds from contributions ...................................... 389,573,397 740,944,038 Fair value of withdrawals ........................................ (345,988,589) (542,265,015) -------------- -------------- Net increase in net assets derived from capital transactions ..... 43,584,808 198,679,023 -------------- -------------- NET ASSETS Total increase (decrease) in net assets .......................... (87,235,519) 313,185,780 Beginning of period .............................................. 1,143,171,561 829,985,781 -------------- -------------- End of period .................................................... $1,055,936,042 $1,143,171,561 ============== ==============
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, 2008 ------------------------------------------------------ (UNAUDITED) 2007 2006 2005 2004 2003 ----------- ---------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN Total investment return .......... (10.80)%(1) 10.80% 26.61% 13.64% 20.32% 38.97% ---------- ---------- -------- -------- -------- -------- RATIOS TO AVERAGE NET ASSETS Total expenses after waiver ...... 0.10%(2) 0.09% 0.10% 0.10% 0.09% 0.09% ---------- ---------- -------- -------- -------- -------- Total expenses ................... 0.10%(2) 0.10% 0.11% 0.10% 0.10% 0.10% ---------- ---------- -------- -------- -------- -------- Net investment income ............ 4.42%(2) 2.86% 2.70% 2.53% 2.55% 2.23% ---------- ---------- -------- -------- -------- -------- SUPPLEMENTAL DATA Net assets, end of period (000) .. $1,055,936 $1,143,172 $829,986 $523,155 $322,067 $553,129 ---------- ---------- -------- -------- -------- -------- Portfolio turnover ............... 16% 30% 23% 11% 14% 9% ---------- ---------- -------- -------- -------- --------
(1) Aggregate total investment return. (2) Annualized. See notes to financial statements 58 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 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 (the "1940 Act"), and is organized as a Delaware limited liability company. The Master LLC's Limited Liability Company Agreement permits the Directors to issue non-transferable interests in the Series subject to certain limitations. The Series' financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. Actual results may differ from these estimates. (a) Valuation of investments Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid price. If no bid price is available, the prior day's price will be used, unless it is determined that such prior day's price no longer reflects the fair value of the security. Financial futures contracts traded on exchanges are valued at their last sale price. Investments in open-end investment companies are valued at net asset value each business day. Short-term securities are valued at amortized cost. In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the market value of such investment, the investment will be valued by a method approved by the Board of Directors (the "Board") as reflecting fair value ("Fair Value Assets"). When determining the price for Fair Value Assets, the investment advisor and/or sub-advisor seeks to determine the price that the Series might reasonably expect to receive from the current sale of that asset in an arm's-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor and/or sub-advisor deems relevant. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of business on the New York Stock Exchange ("NYSE"). The values of such securities used in computing the net assets of the Series are determined as of such times. Foreign currency exchange rates will be determined as of the close of business on the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of business on the NYSE that may not be reflected in the computation of the Series' net assets. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such securities, those securities will be valued at their fair value as determined in good faith by the Board or by the investment advisor using a pricing service and/or procedures approved by the Board. (b) Derivative financial instruments The Series may engage in various portfolio investment strategies to increase the return of the Series and to hedge, or protect, its exposure to interest rate movements and movements in the securities markets. Losses may arise if the value of the contract decreases due to an unfavorable change in the price of the underlying security or if the counterparty does not perform under the contract. - Forward foreign currency contracts -- The Series may enter into forward foreign currency contracts as a hedge against either specific transactions or portfolio positions. Forward currency contracts, when used by the Series, help to manage the overall exposure to the foreign currency backing some of the investments held by the Series. The contract is marked-to-market daily and the change in market value is recorded by the Series as an unrealized gain or loss. When the contract is closed, the Series records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. 59 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) - Financial futures contracts -- The Series may purchase or sell financial futures contracts and options on such futures contracts. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Series deposits, and maintains as collateral, such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Series agrees to receive from, or pay to, the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as margin variation and are recorded by the Series as unrealized gains or losses. When the contract is closed, the Series records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. - Foreign currency options and futures -- The Series may also purchase or sell listed or over-the-counter foreign currency options, foreign currency futures and related options on foreign currency futures as a short or long hedges 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 Foreign currency amounts are translated into United States dollars on the following basis: (i) market value of investment securities, assets and liabilities at the current rate of exchange; and (ii) purchases and sales of investment securities, income and expenses at the rates of exchange prevailing on the respective dates of such transactions. The Series reports foreign currency related transactions as components of realized gains for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes. (d) Preferred stock The Series may invest in preferred stocks. Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer's board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions. (e) Segregation In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission ("SEC") require that the Series segregates assets in connection with certain investments (e.g., futures), the Series will, consistent with certain interpretive letters issued by the SEC, designate on its books and records cash or other liquid debt securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. (f) Investment transactions and investment income Investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Series has determined the ex-dividend date. Interest income is recognized on the accrual basis. 60 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) (g) Dividends and distributions Dividends and distributions paid by the Series are recorded on the ex-dividend dates. (h) Income taxes The Series is classified as a partnership for federal income tax purposes. As such, each investor in the Series is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Series. Therefore, no federal income tax provision is required. Under the applicable foreign tax law, a withholding tax may be imposed on interest, dividends and capital gains at various rates. It is intended that the Series' assets will be managed so an investor in the Series can satisfy the requirements of Subchapter M of the Internal Revenue Code. The Series files 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 statutes of limitations on the Series' state and local tax returns may remain open for an additional year depending upon the jurisdiction. (i) Recent accounting pronouncement Recent Accounting Pronouncement: In March 2008, Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133" ("FAS 161"), was issued and is effective for fiscal years beginning after November 15, 2008. FAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity's results of operations and financial position. The impact on the Series financial statement disclosures, if any, is currently being assessed. 2. INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH AFFILIATES: The Master LLC, on behalf of the Series, entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the "Advisor"), an indirect, wholly owned subsidiary of BlackRock, Inc., to provide investment advisory and administration services. Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC Financial Services Group, Inc. ("PNC") are principal owners of BlackRock, Inc. The Advisor is responsible for the management of the Series' portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Series. For such services, the Series pays the Advisor a monthly fee at an annual rate of 0.01% of the average daily value of the Series' net assets. The Advisor has entered into a contractual arrangement with the Master LLC with respect to the Series under which the Advisor will waive its fees or reimburse expenses so that the total operating expenses incurred by the Series will not exceed 0.12% of the Series' average daily net assets. This arrangement has a one-year term and is renewable. This amount is shown on the Statement of Operations as fees waived by the advisor. The Advisor has entered into a sub-advisory agreement with BlackRock Investment Management, LLC ("BIM"), an affiliate of the Advisor, under which the Advisor pays BIM, for services it provides, a monthly fee that is equal to a percentage of the investment advisory fee paid by the Series to the Advisor. For the six months ended June 30, 2008, the Series reimbursed the Advisor $7,617 for certain accounting services, which is included in accounting services in the Statement of Operations. In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned subsidiary of Merrill Lynch, received $25,149 in commissions on the execution of portfolio security transactions for the Series for the six months ended June 30, 2008. 61 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 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 six months ended June 30, 2008 were $283,039,338 and $168,644,084, respectively. 4. SHORT-TERM BORROWINGS: The Master LLC, on behalf of the Series, along with certain other funds managed by the Advisor and its affiliates, is a party to a $500,000,000 credit agreement with a group of lenders. 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. On November 21, 2007, the credit agreement was renewed for one year under substantially the same terms. 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, which is included in miscellaneous in the Statement of Operations. 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 six months ended June 30, 2008. 5. COMMITMENTS: At June 30, 2008, the Series had entered into foreign exchange contracts, in addition to the contracts listed on the Schedule of Investments, under which it had agreed to buy various foreign securities with approximate values of $52,000. 62 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) At its May 21, 2008 meeting, the Board of Trustees ("Board" or "Trustees") considered the renewal of the existing Management Agreement (the "Current Agreement") between the Manager and the American Beacon Funds (collectively, the "Funds"). In preparation for the Board's consideration to renew the Current Agreement, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager and Lipper, Inc. ("Lipper"). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager. In addition, the Board's Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee held a separate meeting on May 9, 2008 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board's review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process. On May 21, May 22 and June 4, 2008, the Board met to determine, among other matters, whether to approve a new investment management agreement ("New Agreement") between the Manager and the Funds. The New Agreement is necessary because, on April 16, 2008, AMR Corporation ("AMR"), the parent company of the Manager, entered into an agreement with Lighthouse Holdings, Inc. ("Lighthouse") pursuant to which Lighthouse will acquire all of the capital stock of the Manager ("Transaction") in exchange for cash and 10% of the capital stock of the parent corporation of Lighthouse. Upon the closing of the Transaction ("Closing"), the Manager will cease to be a wholly owned subsidiary of AMR and will become a subsidiary of Lighthouse. This change in control is deemed to be an "assignment" under the Investment Company Act of 1940 ("1940 Act") of the Funds' Current Agreement with the Manager. As required by the 1940 Act, the Funds' Current Agreement provides for its automatic termination in the event of an assignment, and it will, therefore, terminate upon the Closing. To provide for the continuity of management for the Funds, the Board met to consider the New Agreement with the Manager. The New Agreement for each Fund will reflect substantially the same terms as the Current Agreement for each Fund. In addition, the Current Agreement has been updated and modernized. As part of this process, the primary administrative services provided by the Manager to the Funds will be transferred to one single administrative services agreement ("New Administrative Services Agreement"). The aggregate fee rates for each Fund under the New Agreement and the New Administrative Services Agreement will be the same as the fee rates imposed under the Current Agreement and the Administrative Services Agreement between the Funds and the Manager (the "Current Administrative Services Agreement"). The New Agreement is subject to shareholder approval. If approved by the shareholders of the Funds, the New Agreement will become effective upon the Closing or, if the Closing is not consummated, the New Agreement will become effective on or about January 1, 2009. The Manager and Lighthouse anticipate that the Closing will occur in the third calendar quarter of 2008. Upon the Closing, Lighthouse directly will control the Manager. Lighthouse currently does not anticipate any changes to the organization or structure of the Funds, to the service providers or to the aggregate fee rates under the Current Agreement. In addition, the portfolio managers at the Manager that currently manage the Funds are expected to continue to manage the Funds after the Closing. In that regard, the Manager and Lighthouse have entered into or will enter into employment contracts that will take effect upon the Closing with certain key personnel performing or overseeing the Funds' investment programs. However, there can be no assurance that these personnel will choose to remain employed by the Manager before or after the Closing. The Manager and the Funds will continue to operate under their existing names. Potential benefits to the Funds as a result of the Transaction include Lighthouse's intention to devote additional resources to product development and distribution of Fund shares. Any resulting growth of Fund assets may produce economies of scale that could benefit shareholders of the Funds. In addition, under the Current Agreement, the Manager may retain subadvisors to provide investment advisory services for all or a portion of the assets of a Fund. Pursuant to an exemptive order issued by the Securities and Exchange Commission ("SEC"), the Manager is permitted to enter into new or modified 63 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) investment advisory agreements with existing or new subadvisors ("New Investment Advisory Agreements") without approval of a Fund's shareholders, but subject to the approval of a Fund's Board. In preparation for the Board's consideration to approve the New Agreement, the Board held preliminary conference call meetings on April 15, 16 and 21, 2008, to discuss the New Agreement and the effect that approving the New Agreement and would have on the Funds. The Board, with the assistance of independent legal counsel, received a memorandum and related advice from their legal counsel detailing the Board's responsibilities in considering the New Agreement. In connection with Board's consideration of the Current Agreement and New Agreement, the Trustees considered, among other materials, responses by the Manager to inquiries requesting: - a description of the Transaction, the effects of the Transaction on the Funds and the Board, and any proposed changes to the Funds, their service providers or fee structure and other information; - a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; - a copy of the firm's Form ADV registration statement with the SEC; - a summary of any material past, pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit; - a profit/loss analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to each Fund; - a description of any payments by the firm to support the Funds' marketing efforts; - an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; - an evaluation of other benefits to the firm or Funds as a result of their relationship, if any; - confirmation that the firm's financial condition does not raise concerns that the firm would be unable to continue providing the same scope and quality of services to the Funds; - a description of the scope of portfolio management services provided to the Funds and the firm's other clients, including other registered investment companies, whether such services differ, and any advantages or disadvantages that might accrue to the Funds due to the firm's involvement in other activities; - a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds; - a description of the basis upon which portfolio managers are compensated, including any "incentive" arrangements; - a discussion regarding the firm's participation in "soft dollar" arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the firm's methodology for obtaining the most favorable execution and the use of any affiliated broker-dealers; - a discussion of whether the firm receives, with respect to the Funds, other compensation, including any payment for order flow or ECN liquidity rebates; - a description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a summary of any material changes to the firm's compliance program with regard to federal, state, corporate and Fund requirements and a certification regarding the reasonable design of the compliance program; - a discussion of any material compliance problems and remedial actions; - information regarding the firm's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto; - a description of the firm's affiliation with any broker-dealer; - a discussion of any anticipated change in the firm's controlling persons; - verification of the firm's insurance coverage with regard to the services provided to the Funds; 64 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) - a comparison of the performance of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of each Fund versus the respective peer group average; - a discussion, if applicable, of any underperformance by a Fund relative to its peer group and what, if any, remedial measures the Manager has or intends to take; - a comparison of advisory fees and expense ratios for comparable mutual funds; - an analysis of any material complaints received from Fund shareholders; - a description of the Manager's securities lending practices and the fees received from such practices; - a description of any revenue sharing activities with respect to the Funds; - a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; - a description of the portfolio turnover rate and average execution costs for each Fund; and - a description of how expenses that are not readily identifiable to a particular Fund are allocated. In connection with the Current Agreement and New Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds, and (iii) each Fund's investment advisory fees versus comparable mutual funds. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. References below to each Fund's Lipper peer group are to the group of comparable mutual funds included in the analysis provided by Lipper. The Current Agreement and New Agreement are each referenced to herein as an "Agreement" and collectively, the "Agreements." The Trustees also received memoranda from their legal counsel detailing the Board's responsibilities pertaining to the approval of each Agreement. These memoranda explained the regulatory requirements surrounding the Trustees' process for evaluating investment advisors and the terms of the contracts. In connection with the Board's consideration of the New Agreement, the Trustees considered, among other information, the following factors, in addition to other factors noted in the Proxy Statement: (1) The manner in which each Fund's assets are managed will not change as a result of the Transaction, and the same people who currently manage the Fund's assets are expected to continue to do so after the Transaction; (2) The aggregate fee rates payable by each Fund under the New Agreement and the New Administrative Services Agreement are the same as the fee rates payable under the Current Agreement and the Current Administrative Services Agreement; (3) The material terms regarding advisory services pursuant to the New Agreement are substantially the same as the terms of the Current Agreement; (4) The qualifications of the Manager's personnel who will provide advisory and administrative services to the Funds are not expected to change; (5) The Manager's financial condition and the post-Closing capitalization of Lighthouse; (6) The impact of the Transaction on the Manager's day-to-day operations; (7) The capabilities, experience, corporate structure and capital resources of Lighthouse; (8) The long-term business goals of Lighthouse with regard to the Manager and the Trusts; (9) Fund shareholders will not bear any costs in connection with the Transaction, inasmuch as AMR and Lighthouse will bear equally the costs, fees and expenses incurred by the Funds in connection with the Proxy Statement, the fees and expenses of accountants and attorneys relating to the Transaction and 65 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) Proxy Statement, the fees and expenses incurred by the Funds in connection with the Transaction, and the meeting fees of the Boards for meetings held in connection with the Transaction; (10) The Funds may realize benefits as a result of the Transaction, including long-term economies of scale; and (11) The potential for increased costs to the Funds in order to satisfy existing obligations under the current Trustees' retirement plan. Provided below is an overview of the other primary factors the Board considered at its May 21, May 22 and June 4, 2008 meetings. The Board did not identify any particular information that was most relevant to its consideration to renew the Current Agreement and approve the New Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the Non-interested Trustees provided the Board with memoranda regarding its responsibilities pertaining to the renewal of the Current Agreement and approval of the New Agreement. Based on its evaluation, the Board unanimously concluded that the terms of the Current Agreement were reasonable and fair and that the renewal of each Current Agreement was in the best interests of each Fund and its shareholders. The Board also unanimously concluded that the terms of the New Agreement were reasonable and fair and that the approval of the New Agreement was in the best interests of each Fund and its shareholders. CONSIDERATIONS WITH RESPECT TO ALL FUNDS In determining whether to renew the Current Agreement and approve the New Agreement, the Trustees considered the best interests of each Fund separately. While the Current Agreement for all of the Funds was considered at the Board meetings on May 21, 2008, and the New Agreement for all of the Funds was considered at the meetings on May 21, May 22 and June 4, 2008, the Board considered each Fund's investment management relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of a Fund; (3) the costs incurred by the Manager in rendering its services and its resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fees with contracts entered into by the Manager with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager from its relationship with a Fund. The Trustees posed questions to various management personnel of the Manager and Lighthouse regarding certain key aspects of the materials submitted in support of the renewal. Nature, Extent and Quality of Services. With respect to the renewal of each Fund's Current Agreement and the approval of each Fund's New Agreement, the Board considered: the background and experience of key investment personnel and the Manager's ability to retain them; the Manager's disciplined investment approach and goal to provide consistent above average long-term performance at a low cost; the Manager's continuing efforts to add new series and share classes to enhance the Funds' product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Funds; the addition of personnel to manage the Funds, promote sales and improve services, including the addition of a separate new information technology (IT) department at the Manager; the high rankings received by the Funds in service surveys; and the active role played by the Manager in monitoring and, as appropriate, recommending replacements for the master portfolios. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager were appropriate for each Fund and, thus, determined to renew the Current Agreement and approve the New Agreement for each Fund. Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund's investment performance relative to its benchmark index(es) and peer group. The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the performance reports and 66 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) discussions with management at Board and Committee meetings throughout the year. A discussion regarding the Board's considerations with respect to each Fund's performance appears below under "Additional Considerations and Conclusions with Respect to Each Fund." Costs of the Services to be Provided to the Funds and the Projected Profits to be Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager by Fund, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an individual Fund level and at an aggregate level for all Funds. The Board also considered that the Current and New Agreements for the Funds stipulate that, to the extent that a Fund invests all of its investable assets in another registered investment company (i.e., is a Feeder Fund), the Fund will not pay the Manager a management fee. The index series of the Funds operate under a master-feeder structure, but each of these series invests in a master portfolio that is not managed by the Manager. As such, the Board considered that the Manager does not receive a management fee with respect to the International Equity Index, S&P 500 Index, or Small Cap Index Funds. The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors. Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services performed by the Manager. A discussion regarding the Board's considerations with respect to each Fund's fee rates is set forth below under "Additional Considerations and Conclusions with Respect to Each Fund." Economies of Scale. In considering the reasonableness of the management fees, the Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. The Board noted that certain Funds have grown their shareholder base, which has spread fixed costs over a larger shareholder and asset base. The Board also considered the Manager's representations that its costs have increased due primarily to greater service provider and regulatory costs. The Manager also represented that it anticipates further economies of scale would be largely offset by higher costs of adding and retaining qualified personnel, improving technology and increasing demands on its advisory business. Based on the foregoing information, the Board concluded that the Manager fee schedules for each Fund provides for a reasonable sharing of benefits from any economies of scale with the Funds. Benefits Derived from the Relationship with the Funds. The Board considered the "fall-out" or ancillary benefits that accrue to the Manager as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager's investment process and expanding the level of assets under management by the Manager. In addition, the Board noted that the Manager provides services to the Funds at a relatively low cost. In this regard, the Board considered that the benefit plans of AMR have invested substantial assets in the Funds, which helps reduce costs for other Fund shareholders, just as the investment of other Fund shareholders helps to reduce costs for AMR's benefit plans. Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager by virtue of its relationships with the Funds appear to be fair and reasonable. 67 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO EACH FUND The performance comparisons below were made versus each Fund's Lipper peer universe median. References to the Lipper expense group below are to the group of comparable mutual funds included in the analysis provided to the Trustees by Lipper, Inc. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE S&P 500 INDEX FUND In considering the renewal of the Current Agreement and the approval of the New Agreement, the Trustees considered the following additional factors: (1) the Fund's master portfolio outperformed the peer universe median for the one-, three-, five- and ten-year periods ended March 31, 2008 and (2) the Fund's expense ratio was lower than its Lipper expense group median. Based on these and other considerations, the Trustees concluded that the fees paid to the Manager under the Agreements are fair and reasonable, determined that the S&P 500 Index Fund and its shareholders would benefit from the Manager's continued management of the Fund, approved the renewal of the Current Agreement and approved the New Agreement with respect to the S&P 500 Index Fund. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE SMALL CAP INDEX FUND In considering the renewal of the Current Agreement and the approval of the New Agreement, the Trustees considered the following additional factors: (1) the Fund's master portfolio outperformed the peer universe median for the one-, three- and five-year periods ended March 31, 2008 and (2) the Fund's expense ratio was lower than its Lipper expense group median. Based on these and other considerations, the Trustees concluded that the fees paid to the Manager under the Agreements are fair and reasonable, determined that the Small Cap Index Fund and its shareholders would benefit from the Manager's continued management of the Fund, approved the renewal of the Current Agreement and approved the New Agreement with respect to the Small Cap Index Fund. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE INTERNATIONAL EQUITY INDEX FUND In considering the renewal of the Current Agreement and approval of the New Agreement, the Trustees considered the following additional factors: (1) the performance of the Fund's master portfolio underperformed its peer universe median for the one-year period but outperformed for the three- and five-year periods ended March 31, 2008 and (2) the Fund's expense ratio was lower than the Lipper expense group median. Based on these and other considerations, the Trustees concluded that the fees paid to the Manager under the Agreements are fair and reasonable, determined that the International Equity Index Fund and its shareholders would benefit from the Manager's continued management of the Fund, approved the renewal of the Current Agreement and approved the New Agreement with respect to the International Equity Index Fund. 68 This page intentionally left blank. 69 (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 PORTFOLIO AVAILABILITY OF PROXY VOTING POLICY SCHEDULES AND RECORDS In addition to the Schedule of A description of the policies and Investments provided in each procedures that the Funds use to semi-annual and annual report, each determine how to vote proxies Fund files a complete schedule of its relating to portfolio securities portfolio holdings with the is available in each Fund's Statement Securities and Exchange Commission of Additional Information, which may ("SEC") on Form N-Q as of the first be obtained free of charge by calling and third fiscal quarters. The Fund's 1-800-967-9009 or by accessing the Forms N-Q are available on the SEC's SEC's website at www.sec.gov. Each website at www.sec.gov. The Forms N-Q Fund's proxy voting record for the may also be reviewed and copied at most recent year ended June 30 is the SEC's Public Reference Room, 450 filed annually with the SEC on Form Fifth Street, NW, Washington, DC N-PX. The Fund's Forms N-PX are 20549. Information regarding the available on the SEC's website at operation of the SEC's Public www.sec.gov. The Fund's proxy voting Reference Room may be obtained by record may also be obtained by calling 1-800-SEC-0330. A complete calling 1-800-967-9009. schedule of the Fund's portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each fiscal quarter.
FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES TRUST SERVICES ERNST & YOUNG LLP Portland, Maine Boston, Massachusetts Kansas City, Missouri 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. PlanAhead Class is a registered service mark of American Beacon Advisors, Inc. American Beacon Funds, American Beacon Small Cap Index Fund, and American Beacon International Equity Index Fund are service marks of American Beacon Advisors, Inc. SAR 6/08 62517 GUIDANCE | VISION | EXPERIENCE (AMERICAN BEACON FUNDS(SM) LOGO) Semi-Annual Report (GRAPHIC) June 30, 2008 TREASURY INFLATION PROTECTED SECURITIES FUND About American Beacon Advisors Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management. Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company. Contents President's Message 1 Market and Performance Overview 2 Schedule of Investments 5 Additional Information Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor's strategies and the Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. American Beacon Funds June 30, 2008 (PHOTO OF WILLIAM F. QUINN) Fellow Shareholders, I am pleased to present to you the Semi-Annual Report for the American Beacon Treasury Inflation Protected Securities Fund for the six months ended June 30, 2008. The Institutional Class of the Fund reported a total return of 5.80% for this six-month period with an expense ratio of 43 basis points (0.43%) for its most recent fiscal year. The Fund outperformed the Lipper TIPS Index return by 143 basis points (1.43%). During the period, the sub-prime mortgage crisis continued to cause uncertainties surrounding banks, investment banks and the entire financial system, resulting in an extraordinary amount of volatility. The Federal Reserve ("Fed") was challenged to fulfill its dual mandate of balancing the risks to both growth and inflation. Inflation concerns were mounting, but weak economic growth and turmoil in the financial markets limited the Fed's ability to raise interest rates in the near term to strengthen the U.S. dollar and counter inflation. We feel the Funds' strategy of inflation protection combined with lower than average expense ratios will continue to benefit the Fund's yield while protecting the Fund's liquidity for the long term. Please review the enclosed market overview, portfolio listings and detailed financial data. As always, we welcome the opportunity to serve your financial needs. To obtain further details about the American Beacon Funds family or to access your account information, please visit our website at www.americanbeaconfunds.com. Thank you for your continued confidence in the Fund. Sincerely, /s/ William F. Quinn William F. Quinn President American Beacon Funds Investing in debt securities entails interest rate risk which is the risk that debt securities will decrease in value with increases in market interest rates. 1 MARKET OVERVIEW JUNE 30, 2008 (UNAUDITED) The three-fold predicament of financial market stress, below-trend economic growth, and higher-than-desired inflation put official policymakers in a difficult spot in the first half of 2008. This predicament also led to as turbulent a fixed income market environment as has been seen in recent memory. Over the first half of 2008, the Treasury yield curve steepened as short rates declined while long rates rose, while securities linked with seemingly any kind of credit - corporate, mortgage, consumer receivable, and even municipal - performed poorly. Market liquidity deteriorated, underwriting standards tightened, and banks and broker dealers took massive writedowns. In the first half of 2008, monetary and fiscal policymakers lowered official interest rates, passed fiscal stimulus measures, engineered a buyout of Bear Stearns, and instituted new liquidity mechanisms for market participants. Inflation as measured by the Consumer Price Index ("CPI") is higher than policymakers want. Sharp increases in the price of crude oil (the crude oil futures contract traded at $96 per barrel at the end of December 2007, and $140 per barrel at the end of June 2008), as well as increases in the prices of food and other commodities, suggested that unwanted price pressures remained. For example, in June, the CPI increased at a 5.0% year-over-year pace, while the CPI excluding energy increased at a 2.4% year-over-year pace. Federal Reserve Board 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") in the first half of 2008. Over this period, the Lehman Brothers U. S. TIPS Index returned 4.88%, while Lehman's Intermediate (1-10 year maturity) TIPS Index returned 5.94%. Inflation expectations as evidenced by breakeven inflation rates (the spread between similar maturity nominal and inflation-protected securities) ranged approximately 39 basis points (0.39%) from high to low in the first two quarters of 2008. In early March, breakevens reached their high for the period, at 2.62%, while in late January they bottomed, at 2.23%. On June 30, 10-year breakevens were approximately 2.57%. The U.S. Treasury continues to be committed to the TIPS market, with $30 billion of new supply auctioned in the first half of 2008. At year-end 2007, the total outstanding market value of TIPS was approximately $500 billion. 2 PERFORMANCE OVERVIEW AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM) JUNE 30, 2008 (UNAUDITED) The Institutional Class of the Fund returned 5.80% for the period from January 1, 2008 through June 30, 2008, trailing the Lehman Brothers 1-10 Yr U.S. TIPS Index (the "Index") return of 5.94%. The Fund outperformed the Lipper TIPS Index return of 4.37% for the same time period.
ANNUALIZED TOTAL RETURNS PERIODS ENDED 6/30/08 ------------------------- SINCE 6 INCEPTION MONTHS* 1 YEAR 3 YEARS 6/30/04 ------ ------ ------- --------- Institutional Class(1, 3) ....... 5.80% 15.25% 6.02% 5.92% Lehman Bros. 1 - 10 Yr. U.S. TIPS Index(2) ..................... 5.94% 15.20% 6.36% 6.41% Lehman Bros. U.S. TIPS Index(2).. 4.88% 15.09% 5.59% 6.51% Lipper TIPS Index(2) ............ 4.37% 13.77% 4.83% 6.07%
* NOT ANNUALIZED 1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. The Lehman Bros. 1-10 Yr. U.S. TIPS Index is an unmanaged market index comprising U.S. Treasury inflation-indexed securities with maturities between one and ten years while the Lehman Bros. U.S. TIPS Index includes all maturities. The Lipper TIPS Index tracks the results of the 30 largest mutual funds in the Lipper TIPS 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 prospectus for the Fund was 0.43%. After contractual expense reimbursements through February 28, 2009, the net expense ratio disclosed in the most recent prospectus was 0.35%. The expense ratio above may vary from the expense ratios presented in other sections of this report that is based on expenses incurred during the period covered by this report. The Fund underperformed the Index for the six-month period by 14 basis points (0.14%). Much of the Fund's underperformance can be attributed to Fund expenses. Nearly all of the Fund's performance occurred in the 1st quarter, specifically in January and February. The unexpected spike in inflation over the last part of 2007 and into 2008 led investors into TIPS, causing real yields to fall sharply. The Fund maintained a duration neutral position relative to the Index. From a yield curve positioning standpoint, the Fund was underweight the 2010-2013 maturities and overweight the 2014-2018 maturities. As the real yield curve steepened during the period, the Fund's overweight in the longer maturity TIPS allowed the Fund's holdings to outperform relative to the Index before the application of Fund expenses. The Fund remains focused on investing primarily in TIPS to provide inflation protection and income to its shareholders. TOP TEN HOLDINGS
% OF NET ASSETS ------ U.S. Treasury Note, 2.000%, Due 1/15/2014 .. 9.2% U.S. Treasury Note, 0.875%, Due 4/15/2010 .. 8.7% U.S. Treasury Note, 1.625%, Due 1/15/2015 .. 8.4% U.S. Treasury Note, 3.000%, Due 7/15/2012 .. 8.3% U.S. Treasury Note, 2.375%, Due 4/15/2011 .. 7.5% U.S. Treasury Note, 1.875%, Due 7/15/2013 .. 7.3% U.S. Treasury Note, 2.375%, Due 1/15/2017 .. 6.6% U.S. Treasury Note, 2.000%, Due 7/15/2014 .. 6.2% U.S. Treasury Note, 2.625%, Due 7/15/2017 .. 5.7% U.S. Treasury Note, 1.875%, Due 7/15/2015 .. 5.6%
SECTOR ALLOCATION
% OF FIXED INCOME ------------ US TREASURY OBLIGATIONS ... 100.0%
3 FUND EXPENSES AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM) JUNE 30, 2008 (UNAUDITED) FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2008 through June 30, 2008. ACTUAL EXPENSES The "Actual" line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
Expenses Beginning Ending Paid During Account Account Period* Value Value 1/1/08- 1/1/08 6/30/08 6/30/08 --------- --------- ----------- INSTITUTIONAL CLASS Actual .......................... $1,000.00 $1,057.96 $1.51 Hypothetical (5% return before expenses) .................... $1,000.00 $1,023.39 $1.49
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.30% 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 (182) by days in the year (366) to reflect the half year period. 4 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND SCHEDULE OF INVESTMENTS June 30, 2008 (Unaudited)
PAR AMOUNT VALUE ---------- -------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 95.49% 4.25%, Due 1/15/2010 ++ ...................... $ 11,228 $ 12,042 0.875%, Due 4/15/2010 ++ ..................... 27,005 27,472 3.50%, Due 1/15/2011 ++ ...................... 3,659 3,983 2.375%, Due 4/15/2011 ++ ..................... 22,378 23,712 3.375%, Due 1/15/2012 ++ ..................... 6,205 6,850 2.00%, Due 4/15/2012 ++ ...................... 6,509 6,867 3.00%, Due 7/15/2012 ++ ...................... 23,724 26,054 0.625%, Due 4/15/2013 ++ ..................... 5,182 5,163 1.875%, Due 7/15/2013 ++ ..................... 21,821 23,069 2.00%, Due 1/15/2014 ++ ...................... 27,461 29,154 2.00%, Due 7/15/2014 ++ ...................... 18,299 19,433 1.625%, Due 1/15/2015 ++ ..................... 25,680 26,520 1.875%, Due 7/15/2015 ++ ..................... 16,977 17,777 2.00%, Due 1/15/2016 ++ ...................... 15,907 16,755 2.50%, Due 7/15/2016 ++ ...................... 15,910 17,385 2.375%, Due 1/15/2017 ++ ..................... 19,304 20,895 2.625%, Due 7/15/2017 ++ ..................... 16,161 17,850 -------- TOTAL U.S. TREASURY OBLIGATIONS ................. 300,981 --------
SHARES ---------- SHORT TERM INVESTMENTS - 0.39% American Beacon Money Market Select Fund # ................................. 1,220,135 1,220 -------- TOTAL INVESTMENTS - 95.88% (Cost $296,277) ... $302,201 OTHER ASSETS, NET OF LIABILITIES - 4.12% ..... 12,995 -------- TOTAL NET ASSETS - 100.00% ................... $315,196 ========
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 5 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2008 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ASSETS: Investments in unaffiliated securities, at value A ..... $ 300,981 Investments in affiliated securities, at value B ....... 1,220 Dividends and interest receivable ...................... 2,590 Receivable for fund shares sold ........................ 10,619 Prepaid expenses ....................................... 5 ----------- TOTAL ASSETS ........................................ 315,415 ----------- LIABILITIES: Management and investment advisory fees payable (Note 2) ............................................ 157 Administrative service and service fees payable ........ 23 Other liabilities ...................................... 39 ----------- TOTAL LIABILITIES ................................... 219 ----------- NET ASSETS ................................................ $ 315,196 =========== ANALYSIS OF NET ASSETS: Paid-in-capital ........................................ 299,339 Undistributed net investment income .................... 11,553 Accumulated net realized loss .......................... (1,619) Unrealized appreciation of investments, futures contracts, and foreign currency ..................... 5,923 ----------- NET ASSETS ................................................ $ 315,196 =========== SHARES OUTSTANDING (NO PAR VALUE): Institutional Class .................................... 29,255,123 =========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE: Institutional Class .................................... $ 10.77 =========== - ---------- A Cost of investments in unaffiliated securities .......... $ 295,057 B Cost of investments in affiliated securities ............ $ 1,220
See accompanying notes 6 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) (IN THOUSANDS) INVESTMENT INCOME: Dividend income from affiliated securities ................ $ 63 Interest income ........................................... 12,101 ------- TOTAL INVESTMENT INCOME ................................ 12,164 ------- EXPENSES: Management and investment advisory fees (Note 2) .......... 333 Administrative service fees (Note 2): Institutional Class .................................... 206 Transfer agent fees: Institutional Class .................................... 30 Custody and fund accounting fees .......................... 24 Professional fees ......................................... 13 Registration fees and expenses ............................ -- Prospectus and shareholder reports ........................ 2 Other expenses ............................................ 4 ------- TOTAL EXPENSES ......................................... 612 ------- Net fees waived and expenses reimbursed by Manager (Note 2) ............................................... (1) ------- NET EXPENSES ........................................... 611 ------- NET INVESTMENT INCOME ........................................ 11,553 ------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investments ............................................ (105) Change in net unrealized appreciation or depreciation of: Investments ............................................ 4,279 ------- NET GAIN ON INVESTMENTS ................................ 4,174 ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......... $15,727 =======
See accompanying notes 7 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF CHANGES IN NET ASSETS (IN THOUSANDS)
Six Months Ended Year Ended June 30, December 2008 31, 2007 ----------- ---------- (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ..................................... $ 11,553 $ 2,643 Net realized loss on investments, futures contracts, and foreign currency transactions .......................... (105) (72) Change in net unrealized appreciation or (depreciation) of investments, futures contracts, and foreign currency translations ........................................... 4,279 1,889 --------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... 15,727 4,460 --------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class .................................... -- (2,630) Net realized gain on investments: Institutional Class .................................... -- (19) --------- -------- NET DISTRIBUTIONS TO SHAREHOLDERS ...................... -- (2,649) --------- -------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares ............................. 358,393 207,597 Reinvestment of dividends and distributions ............... -- 2,649 Cost of shares redeemed ................................... (282,621) (22,152) --------- -------- NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ........................................ 75,772 188,094 --------- -------- NET INCREASE IN NET ASSETS ................................... 91,499 189,905 --------- -------- NET ASSETS: Beginning of period ....................................... 223,697 33,792 --------- -------- END OF PERIOD * ........................................... $ 315,196 $223,697 ========= ======== *Includes undistributed net investment income of ............. $ 11,553 $ -- ========= ========
See accompanying notes 8 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the "Act"), as amended, as a no load, diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Treasury Inflation Protected Securities Fund (the "Fund"), a series of the Trust. American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary of AMR Corporation ("AMR"), the parent company of American Airlines, Inc. ("American"), and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. On April 16, 2008, AMR, the parent company of the Manager, announced that it had reached a definitive agreement to sell all of its interests in the Manager to Lighthouse Holdings, Inc., which is owned by investment funds affiliated with Pharos Capital Group, LLC and TPG Capital, L.P. AMR will acquire a minority equity stake in the parent corporation of Lighthouse Holdings, Inc. Completion of the sale would result in a change of control of the Manager, but there are no anticipated material changes in the services to be provided by the Manager or in the fee rate charged by the Manager to the Fund. The target closing date for the proposed acquisition is expected to be no later than September 30, 2008. Based in Dallas and Nashville, Pharos Capital Group, LLP invests through private equity funds, primarily in companies seeking later stage equity funding for internal growth, acquisitions, management buyouts or recapitalizations across industry sectors. TPG Capital, L.P. is the global buyout group of TPG, a leading private investment firm with more than $50 billion of assets under management. TPG Capital, L.P. has extensive experience with global public and private investments executed through leveraged buyouts, recapitalizations, spinouts, joint ventures and restructurings. Valuation of Investments Investments are valued at the close of the New York Stock Exchange (the "Exchange"), normally 4 p.m. ET, each day that the Exchange is open for business. Debt securities (other than short-term securities) normally are valued on the basis of prices provided by an independent pricing service and may take into account appropriate factors such as institution-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data. When a price is unavailable from a pricing service or when the price provided by the pricing service is deemed not to represent fair value, the prices of debt securities may be determined using quotes obtained from brokers. Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method, which approximates market value. Securities for which market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Board of Trustees (the "Board"). The Fund adopted the provisions of Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), effective with the beginning of the Fund's fiscal year. This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value, and requires additional disclosures about the use of fair value measurements. The three levels of the hierarchy under FAS 157 are described below: Level 1 - Quoted prices in active markets for identical securities. 9 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) Level 2 - Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Level 3 - Prices determined using significant unobservable inputs. Unobservable inputs reflect the Fund's own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. A summary of the inputs used to value the Fund's net assets as of June 30, 2008 is as follows (in thousands):
Investments Valuation Inputs in Securities ---------------- ------------- Level 1 - Quoted Prices ........................ $302,201 Level 2 - Other significant observable inputs .. -- Level 3 - Significant unobservable inputs ...... -- -------- Total .......................................... $302,201
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, money market securities are valued using amortized cost, in accordance with rules under the Investment Company Act of 1940. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected as Level 2. Security Transactions and Investment Income Security transactions are recorded on the trade date of the security purchase or sale. The Fund may purchase securities with delivery or payment to occur at a later date. At the time the Fund enters into a commitment to purchase a security, the transaction is recorded, and the value of the security is reflected in the net asset value. The value of the security may vary with market fluctuations. Dividend income, net of foreign taxes, is recorded on the ex-dividend date except certain dividends from foreign securities which are recorded as soon as the information is available to the Fund. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond is recorded as interest income, even though principal is not received until maturity. Dividends to Shareholders Dividends from net investment income of the Fund normally will be declared and paid at least semi-annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date. Currency Translation All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the mean of the bid and ask prices of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses and purchases and sales of investments are translated in U.S. dollars at 10 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 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. Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust's maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement. 2. TRANSACTIONS WITH AFFILIATES Management Agreement The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all administrative, investment advisory, and fund management. Investment assets of the Fund may be managed by multiple investment advisors which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Fund an annualized fee equal to 0.10% of the average daily net assets plus amounts paid by the Manager to the investment advisors hired by the Manager to direct investment activities of the Fund. Management fees paid during the six months ended June 30, 2008 were as follows:
AMOUNTS PAID TO NET AMOUNTS RETAINED MANAGEMENT FEE RATE MANAGEMENT FEE INVESTMENT ADVISORS BY MANAGER - ------------------- -------------- ------------------- -------------------- 0.15% - 0.19% $333,204 $127,332 $205,872
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. 11 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) Investment in Affiliated Funds The Fund is permitted, pursuant to an exemptive order by the Securities and Exchange Commission ("SEC") and procedures approved by the Board, to invest up to 25% of its total assets in the American Beacon Money Market Select Fund (the "Select Fund"). The Fund and the Select Fund have the same investment advisor and, therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Fund and receives from the Select Fund an annualized fee equal to 0.10% of the Select Fund's average daily net assets. During the six months ended June 30, 2008, fees earned by the Manager from the Select Fund were $1,726. Interfund Lending Program Pursuant to an exemptive order by the SEC, the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program as a borrower. This program provides an alternative credit facility allowing the Fund to borrow from other participating Funds. For the six months ended June 30, 2008, the Fund did not utilize the credit facility. Reimbursement of Expenses The Manager agreed to reimburse the Fund to the extent that total annual fund operating expenses exceed the Fund's expense cap. For the six months ended June 30, 2008, the Manager waived or reimbursed expenses of $1,279. 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. For the six months ended June 30, 2008, the Fund was able to recoup prior year fee waivers totaling $27,929. 3. FEDERAL INCOME AND EXCISE TAXES It is the policy of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income 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 the 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 12 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 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 six months ended June 30, 2008 and the fiscal year ended December 31, 2007 were as follows (in thousands):
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2008 2007 ----------- ------------ (Unaudited) DISTRIBUTIONS PAID FROM: Ordinary income* .......... $-- $2,630 Tax return of capital ..... -- 19 --- ------ TOTAL TAXABLE DISTRIBUTIONS .. $-- $2,649 === ======
* For tax purposes, short-term capital gains distributions are considered ordinary income distributions. As of June 30, 2008, the components of distributable earnings on a tax basis were as follows (in thousands): Cost basis of investments for federal income tax purposes .. $296,527 Unrealized appreciation .................................... 5692 Unrealized depreciation .................................... (18) -------- Net unrealized appreciation/(depreciation) ................. 5,674 Undistributed ordinary income .............................. 11,553 Undistributed long-term gain/(loss) ........................ (1,370) -------- Distributable earnings ..................................... $ 15,857 ========
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. 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. At June 30, 2008, the capital loss carry forward positions for federal income tax purposes were $144,311, $974,237, $110,477, and $141,206, expiring in 2013, 2014, 2015, and 2016, respectively. 4. INVESTMENT TRANSACTIONS Purchases and proceeds from sales of Investment transactions for the six months ended June 30, 2008, excluding short-term investments, were $343,090,248 and $267,911,007, respectively. The Fund had purchases and sales of U.S. Government securities of $343,090,248 and $267,911,007, respectively. A summary of the Fund's transactions in the Select Fund for the six months ended June 30, 2008 is set forth below:
JUNE 30, 2008 DECEMBER 31, 2007 SHARES/MARKET AFFILIATE SHARES/MARKET VALUE PURCHASES SALES VALUE - --------- ------------------- ----------- ----------- ------------- Select Fund .. $4,476,103 $60,250,054 $63,506,022 $1.220,135
13 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 5. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares (dollars and shares in thousands): Six Months Ended June 30, 2008
INSTITUTIONAL CLASS ------------------- SHARES AMOUNT ------- --------- Shares sold ......................... 34,040 $ 358,393 Reinvestment of dividends ........... -- -- Shares redeemed ..................... (26,756) (282,621) ------- --------- Net increase in shares outstanding .. 7,284 $ 75,772 ======= =========
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 ====== =========
14 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
Institutional Class ------------------------------------------------------------------ Six Months Ended Year Ended December 31, June 30 to June 30, ----------------------------------- December 2008 2007(B) 2006 2005 31, 2004(A) ----------- -------- ------- ------- ----------- (unaudited) Net asset value, beginning of period ........... $ 10.18 $ 9.53 $ 9.75 $ 10.16 $ 10.00 -------- -------- ------- ------- ------- Income from investment operations: Net investment income ....................... 0.40 0.45 0.29 0.56(C) 0.18(C) Net gains (losses) on securities (both realized and unrealized) ................. 0.19 0.59 (0.19) (0.37) 0.21 -------- -------- ------- ------- ------- Total income (loss) from investment operations .................................. 0.59 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(D) Tax return of capital ....................... -- 0.00(D, E) (0.03)(E) -- -- -------- -------- ------- ------- ------- Total distributions ............................ -- (0.39) (0.32) (0.60) (0.23) -------- -------- ------- ------- ------- Net asset value, end of period ................. $ 10.77 $ 10.18 $ 9.53 $ 9.75 $ 10.16 ======== ======== ======= ======= ======= Total return ................................... 5.80%(F) 11.22% 1.05% 1.86% 3.94%(F) ======== ======== ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands) .... $315,196 $223,697 $33,792 $30,584 $20,943 Ratios to average net assets (annualized): Expenses, after expense reimbursements (recoupments) ......................... 0.30% 0.43% 0.49% 0.44% 0.46% Expenses, before expense reimbursements (recoupments) ......................... 0.30% 0.43% 0.49% 0.39% 0.62% Net investment income, after expense reimbursements (recoupements) ......... 5.58% 4.74% 2.94% 5.45% 3.34% Net investment income, before expense reimbursements (recoupments) .......... 5.58% 4.74% 2.94% 5.50% 3.18% Portfolio turnover rate ..................... 69%(F) 139% 259% 355% 190%(F)
(A) The American Beacon Treasury Inflation Protected Securities Fund commenced active operations on June 30, 2004. (B) Brown Brothers Harriman & Co. resigned as an investment advisor to the Treasury Inflation Protected Securities Fund on November 30, 2007. (C) Based on average shares outstanding. (D) Amount represents less than $0.01 per share. (E) The tax return of capital is calculated based on outstanding shares at the time of distribution. (F) Not annualized. 15 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) At its May 21, 2008 meeting, the Board of Trustees ("Board" or "Trustees") considered the renewal of the existing Management Agreement (the "Current Agreement") between the Manager and the American Beacon Funds (the "Funds") and each Investment Advisory Agreement between the Manager and a subadvisor ("Current Investment Advisory Agreement"). In preparation for the Board's consideration to renew these Current Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors and Lipper, Inc. ("Lipper"). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor. In addition, the Board's Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee held a separate meeting on May 9, 2008 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board's review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process. On May 21, May 22 and June 4, 2008, the Board met to determine, among other matters, whether to approve a new investment management agreement ("New Agreement") between the Manager and the Funds. The New Agreement is necessary because, on April 16, 2008, AMR Corporation ("AMR"), the parent company of the Manager, entered into an agreement with Lighthouse Holdings, Inc. ("Lighthouse") pursuant to which Lighthouse will acquire all of the capital stock of the Manager ("Transaction") in exchange for cash and 10% of the capital stock of the parent corporation of Lighthouse. Upon the closing of the Transaction ("Closing"), the Manager will cease to be a wholly owned subsidiary of AMR and will become a subsidiary of Lighthouse. This change in control is deemed to be an "assignment" under the Investment Company Act of 1940 ("1940 Act") of each Fund's Current Agreement with the Manager. As required by the 1940 Act, each Fund's Current Agreement provides for its automatic termination in the event of an assignment, and each will, therefore, terminate upon the Closing. To provide for the continuity of management for the Funds, the Board met to consider the New Agreement with the Manager. The New Agreement for each Fund will reflect substantially the same terms as the Current Agreement for each Fund. In addition, the Current Agreement has been updated and modernized. As part of this process, the primary administrative services provided by the Manager to the Funds will be transferred to one single administrative services agreement ("New Administrative Services Agreement"). The aggregate fee rates for each Fund under the New Agreement and the New Administrative Services Agreement will be the same as the fee rates imposed under the Current Agreement and the Administrative Services Agreement between the Funds and the Manager (the "Current Administrative Services Agreement"). The New Agreement is subject to shareholder approval. If approved by the shareholders of the Funds, the New Agreement will become effective upon the Closing or, if the Closing is not consummated, the New Agreement will become effective on or about January 1, 2009. The Manager and Lighthouse anticipate that the Closing will occur in the third calendar quarter of 2008. Upon the Closing, Lighthouse directly will control the Manager. Lighthouse currently does not anticipate any changes to the organization or structure of the Funds, to the service providers or to the aggregate fee rates under any Current Agreement. In addition, the portfolio managers at the Manager that currently manage the Funds are expected to continue to manage the Funds after the Closing. In that regard, the Manager and Lighthouse have entered into or will enter into employment contracts that will take effect upon the Closing with certain key personnel performing or overseeing the Funds' investment programs. However, there can be no assurance that these personnel will choose to remain employed by the Manager before or after the Closing. The Manager and the Funds will continue to operate under their existing names. Potential benefits to the Funds as a result of the Transaction include Lighthouse's intention to devote additional resources to product development and distribution of Fund shares. Any resulting growth of Fund assets may produce economies of scale that could benefit shareholders of the Funds. 16 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) In addition, under the Current Agreement, the Manager may retain subadvisors to provide investment advisory services for all or a portion of the assets of a Fund. With respect to certain Funds, the Manager has entered into Current Investment Advisory Agreements with various subadvisors on behalf of those Funds. Upon the Closing, these Current Investment Advisory Agreements will terminate automatically upon the termination of each Current Agreement. Pursuant to an exemptive order issued by the Securities and Exchange Commission ("SEC"), the Manager is permitted to enter into new or modified investment advisory agreements with existing or new subadvisors ("New Investment Advisory Agreements") without approval of a Fund's shareholders, but subject to the approval of a Fund's Board. Each New Investment Advisory Agreement will reflect substantially the same terms as the Current Investment Advisory Agreement for each applicable Fund. The New Investment Advisory Agreements will become effective concurrent with the effectiveness of the New Agreement. In preparation for the Board's consideration to approve the New Agreement and New Investment Advisory Agreements, the Board held preliminary conference call meetings on April 15, 16 and 21, 2008, to discuss the New Agreement and New Investment Advisory Agreements and the effect that approving the New Agreement and New Investment Advisory Agreements would have on the Funds. The Board, with the assistance of independent legal counsel, received a memorandum and related advice from their legal counsel detailing the Board's responsibilities in considering the New Agreement and New Investment Advisory Agreements. In connection with Board's consideration of the Current Agreement, Current Investment Advisory Agreements, New Agreement and New Investment Advisory Agreements, the Trustees considered, among other materials, responses by the Manager and the subadvisors to inquiries requesting: - a description of the Transaction, the effects of the Transaction on the Trusts and the Board, and any proposed changes to the Trusts, their service providers or fee structure and other information; - a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; - a copy of the firm's Form ADV registration statement with the SEC; - a summary of any material past, pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit; - a profit/loss analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to each Fund; - a description of any payments by the firm to support the Funds' marketing efforts; - an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; - an evaluation of other benefits to the firm or Funds as a result of their relationship, if any; - confirmation that the firm's financial condition does not raise concerns that the firm would be unable to continue providing the same scope and quality of services to the Funds; - a description of the scope of portfolio management services provided to the Funds and the firm's other clients, including other registered investment companies, whether such services differ, and any advantages or disadvantages that might accrue to the Funds due to the firm's involvement in other activities; - a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds; - a description of the basis upon which portfolio managers are compensated, including any "incentive" arrangements; - a discussion regarding the firm's participation in "soft dollar" arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the firm's methodology for obtaining the most favorable execution and the use of any affiliated broker-dealers; 17 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) - a discussion of whether the firm receives, with respect to the Funds, other compensation, including any payment for order flow or ECN liquidity rebates; - a description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a summary of any material changes to the firm's compliance program with regard to federal, state, corporate and Fund requirements and a certification regarding the reasonable design of the compliance program; - a discussion of any material compliance problems and remedial actions; - information regarding the firm's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto; - a description of the firm's affiliation with any broker-dealer; - a discussion of any anticipated change in the firm's controlling persons; and verification of the firm's insurance coverage with regard to the services provided to the Funds. In addition to the foregoing, the Manager provided the following information specific to the renewal of each Fund's Current Agreement and the approval of each Fund's New Agreement: - a comparison of the performance of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of each subadvisor and each Fund versus the respective peer group average; - a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take; - a comparison of advisory fees and expense ratios for comparable mutual funds; - an analysis of any material complaints received from Fund shareholders; - a description of the Manager's securities lending practices and the fees received from such practices; - a description of any revenue sharing activities with respect to the Funds; - a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; - a description of the portfolio turnover rate and average execution costs for each Fund and each subadvisor to a Fund; and - a description of how expenses that are not readily identifiable to a particular Fund are allocated. In connection with the Current Agreements, Current Investment Advisory Agreements, New Agreement and New Investment Advisory Agreements, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds, and (iii) each Fund's investment advisory fees versus comparable mutual funds. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. References below to each Fund's Lipper peer group are to the group of comparable mutual funds included in the analysis provided by Lipper. The Current Agreements, Current Investment Advisory Agreements, New Agreement and New Investment Advisory Agreements are each referenced to herein as an "Agreement" and collectively, the "Agreements." The Trustees also received memoranda from their legal counsel detailing the Board's responsibilities pertaining to the approval of each Agreement. These memoranda explained the regulatory requirements surrounding the Trustees' process for evaluating investment advisors and the terms of the contracts. In connection with the Board's consideration of the New Agreement and each New Investment Advisory Agreement, the Trustees considered, among other information, the following factors, in addition to other factors noted in the Proxy Statement: 1. The manner in which each Fund's assets are managed will not change as a result of the Transaction, and the same people who currently manage the Fund's assets are expected to continue to do so after the Transaction; 18 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) 2. The aggregate fee rates payable by each Fund under the New Agreement and the New Administrative Services Agreement are the same as the fee rates payable under the Current Agreement and the Current Administrative Services Agreement; 3. The material terms regarding advisory services pursuant to the New Agreement are substantially the same as the terms of the Current Agreement; 4. The qualifications of the Manager's personnel who will provide advisory and administrative services to the Funds are not expected to change; 5. The Manager's financial condition and the post-Closing capitalization of Lighthouse; 6. The impact of the Transaction on the Manager's day-to-day operations; 7. The capabilities, experience, corporate structure and capital resources of Lighthouse; 8. The long-term business goals of Lighthouse with regard to the Manager and the Trusts; 9. Fund shareholders will not bear any costs in connection with the Transaction, inasmuch as AMR and Lighthouse will bear equally the costs, fees and expenses incurred by the Funds in connection with the Proxy Statement, the fees and expenses of accountants and attorneys relating to the Transaction and Proxy Statement, the fees and expenses incurred by the Funds in connection with the Transaction, and the meeting fees of the Boards for meetings held in connection with the Transaction; 10. The Funds may realize benefits as a result of the Transaction, including long-term economies of scale; 11. The potential for increased costs to the Funds in order to satisfy existing obligations under the current Trustees' retirement plan; and 12. The advisory relationship with each subadvisor would continue in the same manner as before the Transaction and that each New Investment Advisory Agreement will be substantially the same as each Current Investment Advisory Agreement. Provided below is an overview of the other primary factors the Board considered at its May 21, May 22 and June 4, 2008 meetings. The Board did not identify any particular information that was most relevant to its consideration to renew the Current Agreement and Current Investment Advisory Agreements and approve the New Agreement and New Investment Advisory Agreements, and each Trustee may have afforded different weight to the various factors. Legal counsel to the Non-interested Trustees provided the Board with memoranda regarding its responsibilities pertaining to the renewal of the Current Agreement and Current Investment Advisory Agreements and approval of the New Agreement and New Investment Advisory Agreements. Based on its evaluation, the Board unanimously concluded that the terms of the Current Agreement and Current Investment Advisory Agreements were reasonable and fair and that the renewal of the Current Agreement and each Current Investment Advisory Agreement was in the best interests of each Fund and its shareholders. The Board also unanimously concluded that the terms of the New Agreement and New Investment Advisory Agreements were reasonable and fair and that the approval of the New Agreement and each New Investment Advisory Agreement was in the best interests of each Fund and its shareholders. CONSIDERATIONS WITH RESPECT TO ALL FUNDS In determining whether to renew the Current Agreement and the Current Investment Advisory Agreements and approve the New Agreement and New Investment Advisory Agreements, the Trustees considered the best interests of each Fund separately. While the Current Agreement and Current Investment Advisory Agreements for all of the Funds were considered at the Board meetings on May 21, 2008, and the New Agreement and New Investment Advisory Agreements for all of the Funds were considered at the meetings on May 21, May 22 and June 4, 2008, the Board considered each Fund's investment management and subadvisory relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager and (to the extent provided) the 19 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) subadvisors in rendering their services and their resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fees with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager and Lighthouse regarding certain key aspects of the materials submitted in support of the renewal. Nature, Extent and Quality of Services. With respect to the renewal of each Fund's Current Agreement and the approval of each Fund's New Agreement, the Board considered: the background and experience of key investment personnel and the Manager's ability to retain them; the Manager's disciplined investment approach and goal to provide consistent above average long-term performance at a low cost; the Manager's continuing efforts to add new series and share classes to enhance the Funds' product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Funds; the addition of personnel to manage the Funds, promote sales and improve services, including the addition of a separate new information technology (IT) department at the Manager; the high rankings received by the Funds in service surveys; and the active role played by the Manager in monitoring and, as appropriate, recommending replacements for the investment subadvisors and master portfolios. With respect to the renewal of the Current Investment Advisory Agreements and the approval of the New Investment Advisory Agreements, the Trustees considered the background and experience of each subadvisor's investment personnel responsible for managing the Funds, the size of the subadvisor and their ability to continue to attract and retain qualified investment personnel. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for each Fund and, thus, determined to renew the Current Agreement and Current Investment Advisory Agreements, and approve the New Agreement and New Investment Advisory Agreements for each Fund. Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund's investment performance relative to its benchmark index(es) and peer group. The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Manager also noted that it generally was satisfied with the performance of the subadvisors. A discussion regarding the Board's considerations with respect to each Fund's performance appears below under "Additional Considerations and Conclusions with Respect to Each Fund." Costs of the Services to be Provided to the Funds and the Projected Profits to be Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager and a subadvisor by Fund, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an individual Fund level and at an aggregate level for all Funds. The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year. The Board further considered that each subadvised Fund pays the Manager the amounts due to its subadvisors, and the Manager remits these amounts directly to the applicable subadvisors. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending 20 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) relationships on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors. In analyzing the cost of services and profitability of each subadvisor in connection with its investment advisory services to a Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee a subadvisor charges for any comparable client accounts. The Board gave less weight to profitability considerations or did not view this data as imperative to its deliberations given the arm's-length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fees. Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services performed by the Manager and the subadvisors. A discussion regarding the Board's considerations with respect to each Fund's fee rates is set forth below under "Additional Considerations and Conclusions with Respect to Each Fund." Economies of Scale. In considering the reasonableness of the management and investment advisory fees, the Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rates chargeable to the Funds, many subadvisors have agreed to take into account other assets of AMR and its pension plans that are managed by the subadvisors. Thus, the Funds are able to receive lower effective fee rates. The Board also noted that certain Funds have grown their shareholder base, which has spread fixed costs over a larger shareholder and asset base. The Board also considered the Manager's representations that its costs have increased due primarily to greater service provider and regulatory costs. The Manager also represented that it anticipates further economies of scale would be largely offset by higher costs of adding and retaining qualified personnel, improving technology and increasing demands on its advisory business. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee schedules for each Fund provides for a reasonable sharing of benefits from any economies of scale with the Funds. Benefits Derived from the Relationship with the Funds. The Board considered the "fall-out" or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager's or subadvisor's investment process and expanding the level of assets under management by the Manager and the subadvisors. In addition, the Board noted that the Manager provides services to the Funds at a relatively low cost. In this regard, the Board considered that the benefit plans of AMR have invested substantial assets in the Funds, which helps reduce costs for other Fund shareholders, just as the investment of other Fund shareholders helps to reduce costs for AMR's benefit plans. In addition, the Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that Funds did not pay commissions to any affiliated broker-dealer of the Manager during the most recent fiscal years ended October 31, and December 31, 2007, though during that period certain Funds did pay commissions to affiliated broker-dealers of the relevant subadvisor, as set forth in the following table.
FUND BROKER AFFILIATED WITH COMMISSION - ---- -------------------- ------------------------- ---------- American Beacon Large Goldman Sachs Asset Cap Growth Fund Goldman, Sachs & Co. Management, L.P. $1,020 American Beacon Emerging JM Morgan Stanley Morgan Stanley Investment Markets Fund Securities Limited Management Inc. $ 326
The percentage of total commissions of the American Beacon Large Cap Growth Fund and Emerging Markets Fund paid to affiliated broker-dealers in 2007 was 4.13% and 0.07%, respectively. 21 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of its relationships with the Funds appear to be fair and reasonable. Additional Considerations and Conclusions with Respect to the Treasury Inflation Protected Securities Fund The performance comparisons below were made versus the Fund's Lipper peer universe median. References to the Lipper expense group below are to the group of comparable mutual funds included in the analysis provided to the Trustees by Lipper, Inc. In considering the renewal of the Current Agreement and the approval of the New Agreement, the Trustees considered the following additional factors: (1) the Treasury Inflation Protected Securities Fund outperformed the peer universe median for the one- and three-year periods ended March 31, 2008; and (2) the expense ratio of the Institutional Class of Fund shares was lower than its Lipper expense group median. In considering the renewal of the Current Investment Advisory Agreement and the approval of the New Investment Advisory Agreement with NISA Investment Advisors LLC ("NISA"), the Trustees considered the following additional factors: (1) NISA underperformed the peer universe median for the one-year period ended March 31, 2008, but outperformed the peer universe median for the three-year period and (2) the Manager's recommendation to continue to retain NISA. Based on these and other considerations, the Trustees concluded that the fees paid to the Manager and the subadvisor under the Agreements are fair and reasonable, determined that the Treasury Inflation Protected Securities Fund and its shareholders would benefit from the Manager's and subadvisor's continued management of the Fund, approved the renewal of the Current Agreement and Current Investment Advisory Agreement and approved the New Agreement and New Investment Advisory Agreement with respect to the Treasury Inflation Protected Securities Fund. 22 This page intentionally left blank 23 This page intentionally left blank 24 This page intentionally left blank 25 (AMERICAN BEACON FUNDS(SM) LOGO) DELIVERY OF DOCUMENTS To reduce expenses, your financial institution may mail only one copy of the Prospectus, Annual Report and Semi-Annual Report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please contact your financial institution. Delivery of individual copies will commence thirty days after receiving your request. If you invest in the Fund through a financial institution, you may be able to receive the Fund's regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution's name or contact your financial institution directly. TO OBTAIN MORE INFORMATION ABOUT THE FUND: (GRAPHIC) (GRAPHIC) BY E-MAIL: ON THE INTERNET: american_beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com (GRAPHIC) (GRAPHIC) BY TELEPHONE: BY MAIL: Call (800) 658-5811 American Beacon Funds P.O. Box 219643 Kansas City, MO 64121-9643 AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS In addition to the Schedule of Investments A description of the policies and procedures the provided in each semi-annual and annual report, Fund uses to determine how to vote proxies the Fund files a complete schedule of its relating to portfolio securities is available in portfolio holdings with the Securities and the Fund's Statement of Additional Information, Exchange Commission ("SEC") on Form N-Q as of is available free of charge on the Fund's the first and third fiscal quarters. The Fund's website (www.americanbeaconfunds.com) and by Forms N-Q are available on the SEC's website at calling 1-800-967-9009 or by accessing the SEC's www.sec.gov. The Forms N-Q may also be reviewed website at www.sec.gov. The Fund's proxy voting and copied at the SEC's Public Reference Room, record for the most recent year ended June 30 is 450 Fifth Street, NW, Washington, DC 20549. filed annually with the SEC on Form N-PX. The Information regarding the operation of the SEC's Fund's Forms N-PX are available on the SEC's Public Reference Room may be obtained by calling website at www.sec.gov. The Fund's proxy voting 1-800-SEC-0330. A complete schedule of the record may also be obtained by calling Fund's portfolio holdings is also available on 1-800-967-9009. the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each month.
FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES TRUST SERVICES ERNST & YOUNG LLP Portland, Maine Boston, Massachusetts Kansas City, Missouri 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 is not responsible for investments made in the American Beacon Funds. American Beacon Funds and American Beacon Treasury Inflation Protected Securities Fund are service marks of American Beacon Advisors, Inc SAR 6/08 62521 GUIDANCE | VISION | EXPERIENCE (AMERICAN BEACON FUNDS(SM) LOGO) Semi-Annual Report (GRAPHIC) June 30, 2008 MONEY MARKET FUND U.S. GOVERNMENT MONEY MARKET FUND ABOUT AMERICAN BEACON ADVISORS Since 1986, American Beacon Advisors has offered a variety of products and investment advisory services to numerous institutional and retail clients, including a variety of mutual funds, corporate cash management, and separate account management. Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, financial planners, and other institutional investors. With American Beacon Advisors, you can put the experience of a multi-billion dollar asset management firm to work for your company. CONTENTS President's Message ............................................... 1 Financial Highlights Money Market Fund .............................................. 16 U.S. Government Money Market Fund .............................. 20 Schedules of Investments Money Market Portfolio ......................................... 22 U.S. Government Money Market Portfolio ......................... 25 Additional Information ............................................ Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor's strategies and each Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. American Beacon Funds June 30, 2008 (PHOTO OF WILLIAM F. QUINN) Fellow Shareholders, I am pleased to present to you the Semi-Annual Report for the American Beacon Money Market Fund and the U.S. Government Money Market Fund for the six months ended June 30, 2008. The American Beacon Money Market Fund reported a total return of 1.63% and 1.64% for this six-month period for the Institutional and Cash Management classes with expense ratios of 23 basis points (0.23%) and 20 basis points (0.20%), respectively, for their most recent fiscal year. Both classes outperformed the Lipper Institutional Money Market Funds Average return of 1.49%. The American Beacon U.S. Government Money Market Fund - Cash Management Class reported a total return of 1.41% for this same period with an expense ratio of 60 basis points (0.60%) for its most recent fiscal year, outperforming the Lipper Institutional U.S. Government Money Market Funds Average return by 9 basis points (0.09%). During the period, the sub-prime mortgage crisis continued to cause uncertainties surrounding banks, investment banks and the entire financial system, resulting in an extraordinary amount of volatility. The Federal Reserve ("Fed") was challenged to fulfill its dual mandate of balancing the risks to both growth and inflation. Inflation concerns were mounting, but weak economic growth and turmoil in the financial markets limited the Fed's ability to raise interest rates in the near term to strengthen the U.S. dollar and counter inflation. We feel the Funds' strategy of investing in high credit quality securities combined with lower than average expense ratios will continue to benefit the Funds' yields while protecting the Funds' liquidity for the long term. Please review the enclosed market overview, portfolio listings and detailed financial data. As always, we welcome the opportunity to serve your financial needs. To obtain further details about the American Beacon Funds family or to access your account information, please visit our website at www.americanbeaconfunds.com. Thank you for your continued confidence in the American Beacon Money Market Funds. Sincerely, /s/ William F. Quinn William F. Quinn President American Beacon Funds 1 ECONOMIC OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) JUNE 30, 2008 (UNAUDITED) The Federal Open Market Committee ("Fed") left the rates unchanged at 2.00% at the June 25th meeting, ending a 225 basis point (2.25%) easing cycle that began in September 2007. In addition, the Fed shifted its bias toward inflation risk, opening the door to the possibility that the next move could be a rate hike. However, inflation was not the Fed's only concern. They have also had to contend with a softening labor market, declining house prices, and continued strain in the financial markets. Headline producer and consumer prices both surprised to the upside in June. Thus far, waning consumer demand limited companies' ability to pass on higher raw materials costs, but this trend began to reverse as corporate profits eroded. Although inflation was on the rise, sluggish economic growth remained a chief concern for the Fed. Nonfarm payrolls declined by 438,000 for the first half of 2008, resulting in a rise in the unemployment rate to 5.5%. This combined with continued declines in home prices caused consumer confidence to drop to the lowest levels on record. Although the fiscal stimulus package is expected to buoy second quarter gross domestic product, the economic slowdown may deepen in the second half of 2008 as the impact of federal tax rebates fade. The Fed continued to address financial market instability. Although measures taken by the Fed to increase liquidity have eased short-term funding pressures somewhat, financial markets remained volatile. In response to renewed concerns over the health of the nation's financial system, Fed Chairman Ben Bernanke recently announced that the central bank may extend its emergency loan program for investment banks into 2009. The program was created in March and was set to potentially expire in mid-September. Bernanke stated that the Fed is "currently monitoring developments in financial markets closely and considering several options, including extending the duration of our facilities for primary dealers beyond year-end, should the current unusual and exigent circumstances continue in dealer funding markets." Given all of the above, the Fed was challenged to fulfill its dual mandate of balancing the risks to both growth and inflation. Inflation concerns mounted, but weak economic growth and turmoil in the financial markets limited the Fed's ability to raise interest rates in the near term. Bernanke stated, "Given the high degree of uncertainty, monetary policy makers will need to carefully assess incoming information bearing on the outlook for both inflation and growth". 2 PERFORMANCE OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) JUNE 30, 2008 (UNAUDITED) As the economy continued to show signs of weakening during the first half of the year, the Federal Reserve ("Fed") continued its series of easing monetary policy. The year began with an overnight target rate of 4.25% before the Fed eased by 75 basis points (0.75%) inter-meeting on January 22nd. The Fed continued to cut rates at the following three Federal Open Market Committee ("FOMC") meetings, resulting in a 2.00% fed funds target by the April 30th FOMC meeting. The Fed has remained on hold the last two meetings, expressing concern for both inflation and slow growth. In response to the events that caused the Fed to ease, the American Beacon Money Market Fund's weighted-average maturity was maintained around 40 days. With credit quality a priority, the primary strategy of the Fund for the first half of the year was to buy high-quality, 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 six months ended June 30, 2008, the total return of the Cash Management Class of the American Beacon Money Market Fund was 1.64%. The Fund outperformed the Lipper Institutional Money Market Average return of 1.49% by 15 basis points (0.15%). Based on annualized total returns, Lipper Inc. ranked the Cash Management Class of the Fund 74 among 386, 29 among 337 and 17 among 271 Institutional Money Market Funds for the one-year, three-year, and five-year periods ended June 30, 2008, respectively. (BAR CHART)
ANNUALIZED TOTAL RETURNS AS OF 6/30/2008 --------------------------- 1 YEAR 5 YEARS 10 YEARS ------ ------- -------- Cash Mgmt Class(1,2,5) ........ 4.27% 3.38% 3.77% Institutional Class (1,3,5) ... 4.25% 3.30% 3.72% PlanAhead Class (1,5) ......... 3.93% 3.02% 3.42% BBH ComSet Class (1,4,5) ...... 4.27% 3.38% 3.77%
(1.) Performance shown is historical and may not be indicative of future returns. Investment returns will vary, and shares may be worth more or less at redemption than at original purchase. An investment in this Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of an investment at $1.00 per share, it is possible to lose money by investing in the Fund. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. (2.) Fund performance for the ten-year period represents the total returns achieved by the Institutional Class from 7/1/98 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 the Cash Management Class would have realized in the same period. A portion of the fees charged to the Cash Management Class of the Fund has been waived. Performance prior to waiving fees was lower than the actual returns shown. (3.) A portion of the fees charged to the Institutional Class of the Fund has been waived since 2006. Performance prior to waiving fees was lower than the actual returns shown for periods since 2006. (4.) Fund performance represents the total returns achieved by the Institutional Class from 7/1/98 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 ratios set forth in the most recent Fund prospectus for the Cash Management, Institutional, PlanAhead and the BBH ComSet Class shares were 0.20%, 0.23%, 0.48% and 0.22%, 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, which are based on expenses incurred during the period covered by this report. 3 PERFORMANCE OVERVIEW AMERICAN BEACON MONEY MARKET FUND(SM) JUNE 30, 2008 (UNAUDITED) PORTFOLIO STATISTICS AS OF JUNE 30, 2008
CASH BBH MANAGEMENT INSTITUTIONAL PLANAHEAD COMSET CLASS CLASS CLASS CLASS ---------- ------------- --------- ------- 7-day Current Yield* ........ 2.60% 2.57% 2.28% 2.60% 7-day Effective Yield* ........ 2.63% 2.60% 2.30% 2.63% 30-day Yield* .... 2.58% 2.55% 2.25% 2.58% Weighted Avg. Maturity ...... 34 Days 34 Days 34 Days 34 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 7-day yield. Yield is a more accurate reflection of the Fund's current earnings than total returns. TOP TEN ISSUERS AS OF JUNE 30, 2008
% OF NET ASSETS** ------------ General Electric Capital Corp. .. 5.3% Rabobank Nederland N.Y. ......... 5.1% Westpac Banking Corp. ........... 4.7% Nordea Bank Finland N.Y. ........ 4.3% Toronto Dominion Bank N.Y. ...... 4.3% US Bank, NA ..................... 4.3% BNP Paribas N.Y. ................ 4.1% Barclays Bank plc ............... 3.9% Toyota Motor Credit Corp. ....... 3.6% Bank of Nova Scotia N.Y. ........ 3.5%
** Percent of net assets of American Beacon Master Money Market Portfolio. ASSET ALLOCATION AS OF JUNE 30, 2008
% OF NET ASSETS** ------------ Bank CDs, TDs and Notes ........... 49.1% Commercial Paper .................. 25.9% Corporate Notes ................... 10.2% Short-Term Investments ............ 9.0% Repurchase Agreements ............. 7.1% Liabilities, Net of Other Assets .. -1.3%
** Percent of net assets of American Beacon Master Money Market Portfolio. 4 FUND EXPENSES AMERICAN BEACON MONEY MARKET FUND(SM) JUNE 30, 2008 (UNAUDITED) FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2008 through June 30, 2008. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in these lines, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Actual" line under the heading "Expenses Paid During Period" for the applicable Class to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
Beginning Ending Expenses Account Account Paid During Value Value Period* 1/1/08 6/30/08 1/1/08-6/30/08 --------- --------- -------------- CASH MANAGEMENT CLASS Actual ................. $1,000.00 $1,016.37 $0.75 Hypothetical (5% return before expenses) ........... $1,000.00 $1,024.12 $0.76 INSTITUTIONAL CLASS Actual ................. $1,000.00 $1,016.29 $0.89 Hypothetical (5% return before expenses) ........... $1,000.00 $1,023.97 $0.89 PLANAHEAD CLASS Actual ................. $1,000.00 $1,014.75 $2.37 Hypothetical (5% return before expenses) ........... $1,000.00 $1,022.51 $2.38 BBH COMSET CLASS Actual ................. $1,000.00 $1,016.37 $0.75 Hypothetical (5% return before expenses) ........... $1,000.00 $1,024.12 $0.76
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.15%, 0.18%, 0.47% and 0.15% for the Cash Management, Institutional, PlanAhead and BBH ComSet 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 (182) by days in the year (366) to reflect the half-year period. 5 PERFORMANCE OVERVIEW AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM) JUNE 30, 2008 (UNAUDITED) As the economy continued to show signs of weakening during the first half of the year, the Federal Reserve ("Fed") continued its series of easing monetary policy. The year began with an overnight target rate of 4.25% before the Fed eased by 75 basis points (0.75%) inter-meeting on January 22nd. The Fed continued to cut rates at the following three Federal Open Market Committee ("FOMC") meetings, resulting in a 2.00% fed funds target by the April 30th FOMC meeting. The Fed has remained on hold the last two meetings, expressing concern for both inflation and slow growth. 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 20 days. With the ongoing volatility in the market, the primary strategy of the Fund for the first half of the year was to buy short-dated, fixed-rate agencies and overnight investments. The strategies implemented during the year enabled the Fund to outperform its Lipper peer group. For the six months ended June 30, 2008, the total return of the Cash Management Class of the American Beacon U.S. Government Money Market Fund was 1.41%. The Fund outperformed the Lipper Institutional U.S. Government Money Market Average return of 1.32% by 9 basis points (0.09%). Based on annualized total returns, Lipper Inc. ranked the Cash Management Class of the Fund 30 among 171, 9 among 116 and 6 among 71 Institutional U.S. Government Money Market Funds for the one-year, five-year, and ten-year periods ended June 30, 2008, respectively. (BAR CHART)
ANNUALIZED TOTAL RETURNS AS OF 6/30/2008 --------------------------- 1 YEAR 5 YEARS 10 YEARS ------ ------- -------- Cash Management Class (1,2,4) .... 3.92% 3.26% 3.65% PlanAhead Class (1,3,4) .......... 3.44% 2.81% 3.25%
(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 ratios set forth in the most recent Fund prospectus for the Cash Management and the PlanAhead Class shares were 0.60% and 1.20%, respectively. After expense reimbursement, the net expense ratio set forth in the most recent Fund prospectus for the Cash Management and PlanAhead Class shares were 0.15% and 0.65%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report, which are based on expenses incurred during the period covered by this report. PORTFOLIO STATISTICS AS OF JUNE 30, 2008
CASH MANAGEMENT PLANAHEAD CLASS CLASS ---------- --------- 7-day Current Yield* .... 2.19% 1.69% 7-day Effective Yield* .. 2.22% 1.71% 30-day Yield* ........... 2.16% 1.66% Weighted Avg. Maturity .. 15 Days 15 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 7-day yield. Yield is a more accurate reflection of the Fund's current earnings than total returns. 6 PERFORMANCE OVERVIEW AND FUND EXPENSES AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND(SM) JUNE 30, 2008 (UNAUDITED) ASSET ALLOCATION AS OF JUNE 30, 2008
% OF NET ASSETS** ------------ Repurchase Agreements ....................... 71.1% Government Securities ....................... 28.8% Other Assets, Net of Liabilities ............ 0.1%
TOP ISSUERS AS OF JUNE 30, 2008
% OF NET ASSETS** ------------ Federal Home Loan Bank ...................... 21.2% Federal Home Loan Mortgage Corporation ...... 4.7% Federal National Mortgage Association ....... 2.9%
** Percent of net assets of the American Beacon Master U.S. Government Money Market Portfolio. FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2008 through June 30, 2008. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in these lines, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Actual" line under the heading "Expenses Paid During Period" for the applicable Class to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
Beginning Ending Expenses Account Account Paid During Value Value Period* 1/1/08 6/30/08 1/1/08-6/30/08 --------- --------- -------------- CASH MANAGEMENT CLASS Actual ........................... $1,000.00 $1,014.09 $0.75 Hypothetical (5% return before expenses) ..................... $1,000.00 $1,024.12 $0.75 PLANAHEAD CLASS Actual ........................... $1,000.00 $1,011.64 $3.15 Hypothetical (5% return before expenses) ..................... $1,000.00 $1,021.73 $3.17
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.15% and 0.63% 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 (182) by days in the year (366) to reflect the half-year period. 7 AMERICAN BEACON FUNDS STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2008 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
U.S. GOVERNMENT MONEY MARKET MONEY MARKET -------------- --------------- ASSETS: Investment in Portfolio, at value ..... $ 2,538,318 $ 32,749 Receivable for fund shares sold ....... 3 7 Receivable from Manager for expense reimbursement (Note 2) ............. 102 8 Prepaid expenses ...................... 18 24 -------------- ----------- TOTAL ASSETS ....................... 2,538,441 32,788 -------------- ----------- LIABILITIES: Payable for fund shares redeemed ...... 6 -- Dividends payable ..................... 3,893 30 Administrative service and service fees payable (Note 2) ................... 195 2 Distribution fees payable (Note 2) .... 1 -- Other liabilities ..................... 36 19 -------------- ----------- TOTAL LIABILITIES .................. 4,131 51 -------------- ----------- NET ASSETS ............................ $ 2,534,310 $ 32,737 ============== =========== ANALYSIS OF NET ASSETS: Paid-in-capital .................... 2,534,310 32,737 -------------- ----------- NET ASSETS ............................... $ 2,534,310 $ 32,737 ============== =========== SHARES OUTSTANDING (NO PAR VALUE): Cash Management Class ................. 790,500,052 30,395,128 ============== =========== Institutional Class ................... 564,940,638 N/A ============== =========== PlanAhead Class ....................... 86,004,736 2,342,237 ============== =========== BBH ComSet Class ...................... 1,092,864,925 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 8 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) (IN THOUSANDS)
U.S. GOVERNMENT MONEY MARKET MONEY MARKET ------------ --------------- INVESTMENT INCOME ALLOCATED FROM PORTFOLIO: Interest income ........................ $44,061 $358 Portfolio expenses ..................... (1,389) (14) ------- ---- NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ........................ 42,672 344 ------- ---- FUND EXPENSES: Administrative service fees (Note 2): Cash Management Class ............... 229 8 Institutional Class ................. 174 -- PlanAhead Class ..................... 54 1 BBH ComSet Class .................... 596 -- Transfer agent fees: Cash Management Class ............... 8 1 Institutional Class ................. 9 -- PlanAhead Class ..................... 4 2 BBH ComSet Class .................... 16 -- Professional fees ...................... 13 5 Registration fees and expenses ......... 33 18 Service fees - PlanAhead Class (Note 2) ............................ 135 3 Prospectus and shareholder reports ..... 12 2 Other expenses ......................... 54 2 ------- ---- TOTAL FUND EXPENSES ................. 1,337 42 ------- ---- Less waiver and reimbursement of expenses (Note 2) ............................... (551) (31) ------- ---- NET FUND EXPENSES ................... 786 11 ------- ---- NET INVESTMENT INCOME ..................... 41,886 333 ------- ---- REALIZED GAIN ALLOCATED FROM PORTFOLIO: Net realized gain on investments ....... -- -- ------- ---- NET GAIN ON INVESTMENTS ............. -- -- ------- ---- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................. $41,886 $333 ------- ----
See accompanying notes See accompanying Financial Statements of the American Beacon Master Portfolios 9 AMERICAN BEACON FUNDS STATEMENTS OF CHANGES IN NET ASSETS
MONEY MARKET U.S. GOVERNMENT MONEY MARKET ------------------------------- ------------------------------- Year ended Year ended Six Months ended December 31, Six Months ended December 31, June 30, 2008 2007 June 30, 2008 2007 ---------------- ------------ ---------------- ------------ (unaudited) (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ..................... $ 41,886 $ 88,036 $ 333 $ 494 Net realized gain (loss) on investments ... -- 10 -- -- ----------- ------------ -------- --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................. 41,886 88,046 333 494 ----------- ------------ -------- --------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Cash Management Class .................. (10,361) (32,696) (304) (334) Institutional Class .................... (5,814) (13,567) -- -- PlanAhead Class ........................ (1,613) (6,183) (29) (94) Platinum Class ......................... -- (543) -- (66) BBH ComSet Class ....................... (24,098) (35,047) -- -- Net realized gain on investments: Cash Management Class .................. -- (6) -- -- Institutional Class .................... -- (3) -- -- PlanAhead Class ........................ -- (1) -- -- BBH ComSet Class ....................... -- -- -- -- ----------- ------------ -------- --------- DISTRIBUTIONS TO SHAREHOLDERS ....... (41,886) (88,046) (333) (494) ----------- ------------ -------- --------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares ............. 7,566,309 11,962,330 38,932 145,717 Reinvestment of dividends and distributions .......................... 12,267 44,661 168 157 Cost of shares redeemed ................... (7,383,042) (10,878,697) (24,424) (137,451) ----------- ------------ -------- --------- NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS .................. 195,534 1,128,294 14,676 8,423 =========== ============ ======== ========= NET INCREASE IN NET ASSETS ................... 195,534 1,128,294 14,676 8,423 ----------- ------------ -------- --------- NET ASSETS: Beginning of period ....................... 2,338,776 1,210,482 18,061 9,638 ----------- ------------ -------- --------- END OF PERIOD ............................. $ 2,534,310 $ 2,338,776 $ 32,737 $ 18,061 =========== ============ ======== =========
See accompanying notes See accompanying Financial Statements of the American Beacon Master Portfolios 10 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (the "Act"), as amended, as a diversified, no-load, open-end management investment company with separate series. The following series are included in this report: American Beacon Money Market and American Beacon U.S. Government Money Market Funds (each a "Fund" and collectively, the "Funds"). American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary of AMR Corporation ("AMR") and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. On April 16, 2008, AMR, the parent company of the Manager, announced that it had reached a definitive agreement to sell all of its interests in the Manager to Lighthouse Holdings, Inc., which is owned by investment funds affiliated with Pharos Capital Group, LLC and TPG Capital, L.P. AMR will acquire a minority equity stake in the parent corporation of Lighthouse Holdings, Inc. Completion of the sale would result in a change of control of the Manager, but there are no anticipated material changes in the services to be provided by the Manager or in the fee rate charged by the Manager to the Fund. The target closing date for the proposed acquisition is expected to be no later than September 30, 2008. Based in Dallas and Nashville, Pharos Capital Group, LLP invests through private equity funds, primarily in companies seeking later stage equity funding for internal growth, acquisitions, management buyouts or recapitalizations across industry sectors. TPG Capital, L.P. is the global buyout group of TPG, a leading private investment firm with more than $50 billion of assets under management. TPG Capital, L.P. has extensive experience with global public and private investments executed through leveraged buyouts, recapitalizations, spinouts, joint ventures and restructurings. 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 (20.0% and 4.5% at June 30, 2008 of the American Beacon Master Trust Money Market and U.S. Government Money Market Portfolios, respectively) (each a "Portfolio" and collectively the "Portfolios"). The financial statements of the Portfolios are included elsewhere in this report and should be read in conjunction with the Funds' financial statements. The following is a summary of the significant accounting policies followed by the Funds. Class Disclosure Each Fund has multiple classes of shares designed to meet the needs of different groups of investors. Please note that not all Funds offer all classes. The following table sets forth the differences amongst the classes: 11 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED)
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 Administrative Service Fee - 0.10% intermediary Service Fee - 0.25% BBH COMSET Investors making an initial investment of at least $10 Administrative Service Fee - 0.08% million in BBH ComSet(SM) who meet the eligibility requirements established by Brown Brothers Harriman & Co.
Valuation of Investments The Funds record their investment in the Portfolios at fair value. Valuation of securities by the Portfolios is discussed in Note 1 of the Portfolios' Notes to Financial Statements, which are included elsewhere in this report. The Portfolios adopted the provisions of Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), effective with the beginning of the American Beacon Portfolios' fiscal year. This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value, and requires additional disclosures about the use of fair value measurements. The three levels of the hierarchy under FAS 157 are described below: Level 1 - Quoted prices in active markets for identical securities. Level 2 - Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Level 3- Prices determined using significant unobservable inputs. Unobservable inputs reflect the Portfolio's own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. The summary of inputs used to value the Portfolios' net assets as of June 30, 2008 is discussed in the Portfolios' Notes to Financial Statements, which are included elsewhere in this report. Investment Income and Dividends to Shareholders Each Fund records its share of net investment income (loss) and realized gain (loss) in the Portfolio each day. All net investment income (loss) and realized gain (loss) of each Portfolio are allocated pro rata among the 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. 12 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated. Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust's maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement. 2. TRANSACTIONS WITH AFFILIATES 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 ComSet Class of the Money Market Fund and 0.07% of the Cash Management Class of the Funds. Distribution Plan The Trust has adopted a "defensive" Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the fees received by the Manager to be used for distribution purposes. Under this plan, the Trust does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Trust shares. Service Agreement The Manager and the Trust entered into a Service Agreement which obligates the Manager to oversee additional shareholder servicing of the PlanAhead Class. As compensation for performing the duties required under the Service Agreement, the Manager receives 0.25% based on the daily net assets of the PlanAhead Class. Reimbursement and Waiver of Expenses The Manager contractually agreed to reimburse the following Funds for distribution and other expenses through February 28, 2009 to the extent total annual fund operating expenses exceed the following amounts:
FUND CLASS EXPENSE CAP AMOUNT - ---- --------------- ----------- -------- Money Market Fund .................. Institutional 0.18% $ 73,330 Money Market Fund .................. Cash Management 0.15% 124,672 Money Market Fund .................. BBH ComSet* 0.15% 352,445 U.S. Government Money Market Fund .. Cash Management 0.15% 29,021 U.S. Government Money Market Fund .. PlanAhead 0.65% 2,434
* Prior to March 1, 2008, fees were voluntarily waived by the Manager to arrive at expense cap. 13 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 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 .... 150,253 26,231 2009 .... 260,591 65,678 2010 .... 769,055 7,577 2011 .... 569,563 31,455
The Funds have not recorded a liability for this potential reimbursement due to the current assessment that a reimbursement is unlikely. 3. FEDERAL INCOME TAXES It is the policy of the Funds to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income or excise tax provision is required. 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 six months ended June 30, 2008 and the fiscal year ended December 31, 2007 were as follows (in thousands):
MONEY MARKET U.S. GOVERNMENT MONEY MARKET ---------------------------- ---------------------------- SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED ENDED DECEMBER 31, ENDED DECEMBER 31, JUNE 30, 2008 2007 JUNE 30, 2008 2007 ------------- ------------ ------------- ------------ (Unaudited) (Unaudited) DISTRIBUTIONS PAID FROM ORDINARY INCOME:* Cash Management Class ................ $10,361 $32,702 $304 $334 Institutional Class .................. 5,814 13,570 -- -- PlanAhead Class ...................... 1,613 6,184 29 94 Platinum Class ....................... -- 543 -- 66 BBH ComSet Class ..................... 24,098 35,047 -- -- ------- ------- ---- ---- TOTAL DISTRIBUTIONS PAID ................ $41,886 $88,046 $333 $494 ======= ======= ==== ====
* For tax purposes short-term capital gains distributions are considered ordinary income distributions. As of June 30, 2008, the components of distributable earnings on a tax basis were the same as book. The cost basis of investments for federal income tax purposes was also the same as the book basis. 14 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) The Funds do not have capital loss carry forwards as of June 30, 2008. 4. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares for each class of the Funds (in thousands). Each share is valued at $1.00: Six Months Ended June 30, 2008
Cash Management Class Institutional Class PlanAhead Class ---------------- ------------------- --------------- Money Market Beacon Fund Shares sold .................................... 1,645,628 1,269,084 149,996 Reinvestment of dividends ...................... 9,582 2,099 586 Shares redeemed ................................ (1,213,959) (1,156,904) (176,855) ---------- ---------- -------- Net increase (decrease) in shares outstanding .. 441,251 114,279 (26,273) ========== ========== ========
BBH ComSet Class ---------------- Money Market Beacon Fund Shares sold .................................... 4,501,601 Reinvestment of dividends ...................... -- Shares redeemed ................................ (4,835,324) ---------- Net (decrease) in shares outstanding ........... (333,723) ==========
Cash Management Class PlanAhead Class ---------------- --------------- U.S. Government Money Market Beacon Fund Shares sold .................................... 26,268 12,664 Reinvestment of dividends ...................... 163 5 Shares redeemed ................................ (12,469) (11,955) ------- ------- Net increase in shares outstanding ............. 13,962 714 ======= =======
Year Ended December 31, 2007
Cash Management Class Institutional Class PlanAhead Class Platinum Class ---------------- ------------------- --------------- -------------- Money Market Beacon Fund Shares sold .................................... 4,891,367 1,043,210 631,312 14,014 Reinvestment of dividends ...................... 28,101 12,166 3,889 502 Shares redeemed ................................ (5,072,125) (1,109,117) (693,440) (48,172) ---------- ---------- -------- ------- Net (decrease) in shares outstanding ........... (152,657) (53,741) (58,239) (33,656) ========== ========== ======== =======
BBH ComSet Class ---------------- Money Market Beacon Fund Shares sold .................................... 5,382,427 Reinvestment of dividends ...................... 3 Shares redeemed ................................ (3,955,843) ---------- Net increase in shares outstanding ............. 1,426,587 ==========
Cash Management Class PlanAhead Class Platinum Class ---------------- --------------- -------------- U.S. Government Money Market Beacon Fund Shares sold .................................... 132,887 8,530 4,299 Reinvestment of dividends ...................... 81 14 62 Shares redeemed ................................ (120,104) (8,973) (8,373) -------- ------ ------ Net increase (decrease) in shares outstanding .. 12,864 (429) (4,012) ======== ====== ======
15 AMERICAN BEACON MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
Cash Management Class -------------------------------------------------------------------- Six Months Year Ended December 31, Ended June ---------------------------------------------------- 30, 2008 2007 2006 2005 2004 2003 ----------- -------- -------- -------- -------- -------- (Unaudited) Net asset value, beginning of period ............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- -------- Income from investment operations: Net investment income(A) ..................... 0.02 0.05 0.05 0.03 0.01 0.01 Net realized gain on investments(B) .......... -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Total income from investment operations ......... 0.02 0.05 0.05 0.03 0.01 0.01 -------- -------- -------- -------- -------- -------- Less distributions: Dividends from net investment income ......... (0.02) (0.05) (0.05) (0.03) (0.01) (0.01) Distributions from net realized gains on investments(B) ............................ -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Total distributions ............................. (0.02) (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 $ 1.00 ======== ======== ======== ======== ======== ======== Total return .................................... 1.64%(C) 5.28% 5.05% 3.19% 1.30% 1.08% ======== ======== ======== ======== ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands) ..... $790,500 $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% 0.15% 0.16% Expenses, before waivers .................. 0.19% 0.19% 0.20% 0.23% 0.23% 0.24% Net investment income, net of waivers ..... 3.16% 5.18% 5.04% 3.08% 1.34% 1.03% Net investment income, before waivers ..... 3.12% 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. (C) Not annualized. 16 AMERICAN BEACON MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
Institutional Class -------------------------------------------------------------------- Six Months Year Ended December 31, Ended June ---------------------------------------------------- 30, 2008 2007 2006 2005 2004 2003 ----------- -------- -------- -------- -------- -------- (Unaudited) Net asset value, beginning of period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- ------- ------- -------- Income from investment operations: Net investment income(A). ............................... 0.02 0.05 0.05 0.03 0.01 0.01 Net realized gain on investments(B) ..................... -- -- -- -- -- -- -------- -------- -------- ------- ------- -------- Total income from investment operations .................... 0.02 0.05 0.05 0.03 0.01 0.01 -------- -------- -------- ------- ------- -------- Less distributions: Dividends from net investment income .................... (0.02) (0.05) (0.05) (0.03) (0.01) (0.01) Distributions from net realized gains on investments(B) ....................................... -- -- -- -- -- -- -------- -------- -------- ------- ------- -------- Total distributions ........................................ (0.02) (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 $ 1.00 ======== ======== ======== ======= ======= ======== Total return ............................................... 1.63%(C) 5.24% 4.99% 3.06% 1.20% 0.97% ======== ======== ======== ======= ======= ======== Ratios and supplemental data: Net assets, end of period (in thousands) ................ $564,940 $450,662 $504,403 $36,421 $34,146 $159,092 Ratios to average net assets (annualized):(A) Expenses, net of waivers ............................. 0.18% 0.18% 0.19% 0.28% 0.24% 0.27% Expenses, before waivers ............................. 0.22% 0.22% 0.23% 0.28% 0.24% 0.27% Net investment income, net of waivers ................ 3.33% 5.13% 5.06% 3.07% 1.05% 1.00% Net investment income, before waivers ................ 3.29% 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. (C) Not annualized. 17 AMERICAN BEACON MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
PlanAhead Class -------------------------------------------------------------------- Six Months Year Ended December 31, Ended June ---------------------------------------------------- 30, 2008 2007 2006 2005 2004 2003 ----------- -------- -------- -------- -------- -------- (Unaudited) Net asset value, beginning of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- -------- -------- -------- -------- -------- Income from investment operations: Net investment income(A) .................... 0.01 0.05 0.05 0.03 0.01 0.01 Net realized gain on investments(B) ......... -- -- -- -- -- -- ------- -------- -------- -------- -------- -------- Total income from investment operations ........ 0.01 0.05 0.05 0.03 0.01 0.01 ------- -------- -------- -------- -------- -------- Less distributions: Dividends from net investment income ........ (0.01) (0.05) (0.05) (0.03) (0.01) (0.01) Distributions from net realized gains on investments(B) ........................... -- -- -- -- -- -- ------- -------- -------- -------- -------- -------- Total distributions ............................ (0.01) (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 $ 1.00 ======= ======== ======== ======== ======== ======== Total return ................................... 1.48%(C) 4.94% 4.69% 2.82% 0.93% 0.70% ======= ======== ======== ======== ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands) .... $86,005 $112,278 $170,518 $236,903 $132,438 $126,972 Ratios to average net assets (annualized):(A) Expenses, net of waivers ................. 0.47% 0.47% 0.49% 0.51% 0.51% 0.54% Expenses, before waivers ................. 0.47% 0.47% 0.49% 0.51% 0.51% 0.54% Net investment income, net of waivers .... 2.98% 4.85% 4.59% 2.83% 0.94% 0.71% Net investment income, before waivers .... 2.98% 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. (C) Not annualized. 18 AMERICAN BEACON MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
BBH ComSet Class --------------------------- Six Months April 2 to Ended June December 30, 2008 31, 2007 ----------- ---------- (Unaudited) Net asset value, beginning of period ....................... $ 1.00 $ 1.00 ---------- ---------- Income from investment operations: Net investment income(A) ................................ 0.02 0.04 Net realized gain on investments(B) ..................... -- -- ---------- ---------- Total income from investment operations .................... 0.02 0.04 ---------- ---------- Less distributions: Dividends from net investment income .................... (0.02) (0.04) Distributions from net realized gains on investments(B) ....................................... -- -- ---------- ---------- Total distributions ........................................ (0.02) (0.04) ---------- ---------- Net asset value, end of period ............................. $ 1.00 $ 1.00 ========== ========== Total return ............................................... 1.64%(C) 3.92%(C) ========== ========== Ratios and supplemental data: Net assets, end of period (in thousands) ................ $1,092,865 $1,426,587 Ratios to average net assets (annualized):(A) Expenses, net of waivers ............................. 0.15% 0.15% Expenses, before waivers ............................. 0.20% 0.21% Net investment income, net of waivers ................ 3.22% 5.10% Net investment income, before waivers ................ 3.18% 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. 19 AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
Cash Management Class ------------------------------------------------------------ Six Months Ended Year Ended December 31, June 30, ---------------------------------------------- 2008 2007 2006 2005 2004 2003 ----------- ------- ------ ------- ------- ------- (Unaudited) Net asset value, beginning of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------ ------- ------- ------- Income from investment operations: Net investment income(A) ............................. 0.01 0.05 0.05 0.03 0.01 0.01 Net realized gain on investments(B) .................. -- -- -- -- -- -- ------- ------- ------ ------- ------- ------- Total income from investment operations ................. 0.01 0.05 0.05 0.03 0.01 0.01 ------- ------- ------ ------- ------- ------- Less distributions: Dividends from net investment income ................. (0.01) (0.05) (0.05) (0.03) (0.01) (0.01) Distributions from net realized gains on investments (B) ................................... -- -- -- -- -- -- ------- ------- ------ ------- ------- ------- Total distributions ..................................... (0.01) (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 $ 1.00 ======= ======= ====== ======= ======= ======= Total return ............................................ 1.41%(C) 5.13% 4.97% 3.12% 1.22% 1.04% ======= ======= ====== ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands) ............. $30,395 $16,433 $3,568 $22,518 $28,591 $22,060 Ratios to average net assets (annualized):(A) Expenses, net of waivers .......................... 0.15% 0.15% 0.19% 0.19% 0.19% 0.19% Expenses, before waivers .......................... 0.41% 0.60% 0.64% 0.38% 0.29% 0.37% Net investment income, net of waivers ............. 2.69% 4.87% 4.60% 2.99% 1.21% 1.04% Net investment income, before waivers ............. 2.44% 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 Master U.S. Government 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)
PlanAhead Class ----------------------------------------------------------- Six Months Ended Year Ended December 31, June 30, --------------------------------------------- 2008 2007 2006 2005 2004 2003 ----------- ------ ------ ------ ------ ------- (Unaudited) Net asset value, beginning of period .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------ ------ ------ ------ ------ ------- Income from investment operations: Net investment income(A) ............................. 0.01 0.05 0.04 0.03 0.00(B) 0.01 Net realized gain on investments(B) .................. -- -- -- -- -- -- ------ ------ ------ ------ ------ ------- Total income from investment operations ................. 0.01 0.05 0.04 0.03 -- 0.01 ------ ------ ------ ------ ------ ------- Less distributions: Dividends from net investment income ................. (0.01) (0.05) (0.04) (0.03) 0.00(B) (0.01) Distributions from net realized gains on investments (B) ................................... -- -- -- -- -- -- ------ ------ ------ ------ ------ ------- Total distributions ..................................... (0.01) (0.05) (0.04) (0.03) -- (0.01) ------ ------ ------ ------ ------ ------- Net asset value, end of period .......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ====== ====== ====== ====== ====== ======= Total return ............................................ 1.16%(C) 4.65% 4.51% 2.71% 0.85% 0.61% ====== ====== ====== ====== ====== ======= Ratios and supplemental data: Net assets, end of period (in thousands) ............. $2,342 $1,628 $2,058 $1,933 $5,370 $26,785 Ratios to average net assets (annualized):(A) Expenses, net of waivers .......................... 0.63% 0.61% 0.63% 0.58% 0.56% 0.58% Expenses, before waivers .......................... 0.82% 1.20% 1.02% 0.61% 0.57% 0.62% Net investment income, net of waivers ............. 2.29% 4.56% 4.39% 2.47% 0.68% 0.72% Net investment income, before waivers ............. 2.09% 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 Master U.S. Government Money Market Portfolio. (B) Amount is less than $0.01 per share. (C) Not annualized. 21 AMERICAN BEACON MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS June 30, 2008 (Unaudited)
PAR AMOUNT VALUE ------------ ----------- (DOLLARS IN THOUSANDS) MEDIUM-TERM NOTES - 10.12% American Honda Finance Corp., 3.013%, Due 9/18/2008 ++ # ......................................... $ 20,900 $ 20,905 Bank of Scotland plc, 2.716%, Due 7/17/2008 ++ # .............. 125,800 125,801 Goldman Sachs Group, Inc., 3.013%, Due 7/29/2008 ++ ........... 178,775 178,781 Royal Bank of Scotland plc, 2.868%, Due 7/21/2008 ++ # ................................. 50,000 50,000 2.511%, Due 8/20/2008 ++ # ................................. 150,000 150,000 Toyota Motor Credit Corp., 2.698%, Due 7/7/2008 ++ ............ 60,500 60,500 US Bank, NA, 2.65%, Due 9/16/2008 ....................................... 250,000 250,000 2.83%, Due 10/20/2008 ...................................... 100,000 100,000 2.70%, Due 11/17/2008 ...................................... 200,000 200,000 Wells Fargo & Co., 2.551%, Due 8/20/2008 ++ # ................. 150,000 150,000 ----------- TOTAL MEDIUM-TERM NOTES ....................................... 1,285,987 ----------- CERTIFICATES OF DEPOSIT AND BANK NOTES - 45.23% Bank of America, NA, 2.92%, Due 7/25/2008 ++ .................. 27,300 27,300 Bank of Nova Scotia N.Y., 2.57%, Due 8/13/2008 ....................................... 150,000 150,000 2.61%, Due 8/13/2008 ....................................... 100,000 100,000 2.60%, Due 9/2/2008 ........................................ 200,000 200,000 Barclays Bank plc, 2.75%, Due 7/2/2008 ........................................ 200,000 200,000 2.87%, Due 7/30/2008 ....................................... 100,000 100,000 2.70%, Due 8/19/2008 ....................................... 200,000 200,000 BNP Paribas N.Y., 2.84%, Due 8/4/2008 ........................................ 175,000 175,000 2.89%, Due 8/15/2008 ....................................... 100,000 100,000 2.65%, Due 8/28/2008 ....................................... 50,000 50,000 3.01%, Due 8/29/2008 ....................................... 50,000 50,000 2.74%, Due 9/25/2008 ....................................... 150,000 150,000 Commonwealth Bank of Australia N.Y., 2.60%, Due 8/20/2008 ....................................... 100,000 100,000 2.60%, Due 9/4/2008 ........................................ 100,000 100,000 Dexia Credit Local S.A., 2.75%, Due 7/15/2008 ................. 200,000 200,000 HSBC Bank USA, 2.957%, Due 7/28/2008 ++ ....................... 77,000 77,004 Lloyds Bank N.Y., 2.62%, Due 8/12/2008 ........................ 150,000 150,000 National Australia Bank Ltd., 2.61%, Due 9/8/2008 ............. 200,000 200,000 Nordea Bank Finland N.Y., 2.90%, Due 7/28/2008 ....................................... 150,000 150,000 2.88%, Due 7/29/2008 ....................................... 150,000 150,000 2.76%, Due 8/11/2008 ....................................... 150,000 150,000 2.54%, Due 8/15/2008 ....................................... 100,000 100,000 Rabobank Nederland N.Y., 2.60%, Due 7/8/2008 ........................................ 300,000 300,000
See accompanying notes 22 AMERICAN BEACON MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS June 30, 2008 (Unaudited)
PAR AMOUNT VALUE ------------ ----------- (DOLLARS IN THOUSANDS) Rabobank Nederland N.Y., 2.62%, Due 8/19/2008 ....................................... $ 50,000 $ 50,005 2.61%, Due 8/25/2008 ....................................... 100,000 100,000 2.85%, Due 9/26/2008 ....................................... 200,000 200,000 Royal Bank of Canada N.Y., 2.62%, Due 8/18/2008 ....................................... 100,000 100,000 2.63%, Due 8/20/2008 ....................................... 225,000 225,030 Royal Bank of Scotland plc, 2.83%, Due 7/8/2008 ............... 200,000 200,000 Societe Generale N.Y., 3.00%, Due 7/10/2008 ....................................... 250,000 250,000 2.75%, Due 8/6/2008 ........................................ 100,000 100,000 Svenska Handelsbanken AB, 2.60%, Due 9/3/2008 ................. 200,000 200,000 Toronto Dominion Bank N.Y., 2.85%, Due 8/29/2008 ....................................... 200,000 200,000 2.81%, Due 9/5/2008 ........................................ 150,000 150,000 2.76%, Due 9/24/2008 ....................................... 150,000 150,000 2.72%, Due 10/20/2008 ...................................... 50,000 50,000 Westpac Banking Corp., 2.82%, Due 8/1/2008 ........................................ 100,000 100,015 2.74%, Due 8/4/2008 ........................................ 94,225 94,232 2.62%, Due 8/14/2008 ....................................... 200,000 200,000 2.61%, Due 9/9/2008 ........................................ 200,000 200,000 ----------- TOTAL CERTIFICATES OF DEPOSIT AND BANK NOTES .................. 5,748,586 ----------- COMMERCIAL PAPER - 25.92% Concord Minutemen Capital Co. LLC, 3.00%, Due 7/1/2008 # ...... 394,026 394,026 Elysian Funding LLC, 3.10%, Due 7/1/2008 # .................... 350,000 350,000 Fountain Square Commercial Funding, 3.75%, Due 7/1/2008 # ..... 300,000 300,000 Gemini Securitization Corp. LLC, 2.77%, Due 7/25/2008 ....................................... 95,219 95,043 2.75%, Due 7/28/2008 ....................................... 198,750 198,355 General Electric Capital Corp., 2.78%, Due 7/11/2008 ....................................... 175,000 174,865 2.76%, Due 7/15/2008 ....................................... 50,000 49,946 2.72%, Due 7/30/2008 ....................................... 50,000 49,890 2.78%, Due 7/31/2008 ....................................... 50,000 49,884 2.86%, Due 8/15/2008 ....................................... 100,000 99,643 2.46%, Due 10/27/2008 ...................................... 200,000 198,387 2.55%, Due 10/31/2008 ...................................... 46,000 45,603 ING (US) Funding LLC, 2.65%, Due 9/30/2008 .................... 300,000 297,990 Kitty Hawk Funding Corp., 2.77%, Due 8/7/2008 ................. 74,985 74,772 Lexington Parker Capital Co. LLC, 3.05%, Due 7/1/2008 # ....... 494,301 494,301 Salisbury Receivables Co., 3.00%, Due 7/1/2008 ................ 23,785 23,785 Toyota Motor Credit Corp., 2.92%, Due 7/3/2008 ........................................ 50,000 49,992
See accompanying notes 23 AMERICAN BEACON MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS June 30, 2008 (Unaudited)
PAR AMOUNT VALUE ------------ ----------- (DOLLARS IN THOUSANDS) Toyota Motor Credit Corp., 2.76%, Due 8/21/2008 ....................................... $ 75,000 $ 74,707 2.76%, Due 8/22/2008 ....................................... 275,000 273,904 ----------- TOTAL COMMERCIAL PAPER ........................................ 3,295,093 ----------- TIME DEPOSITS - 3.93% BNP Paribas N.Y., 2.75%, Due 7/1/2008 ......................... 75,000 75,000 Deutsche Bank N.Y., 2.75%, Due 7/1/2008 ....................... 225,000 225,000 Societe Generale N.Y., 2.563%, Due 7/1/2008 ................... 200,000 200,000 ----------- TOTAL TIME DEPOSITS ........................................... 500,000 -----------
SHARES ------------ SHORT TERM INVESTMENTS - 9.04% OTHER SHORT-TERM INVESTMENTS - 9.04% BlackRock Temp Fund ........................................... 529,063,351 529,063 Dreyfus Institutional Preferred Money Market Fund ............. 620,262,421 620,263 ----------- TOTAL SHORT TERM INVESTMENTS .................................. 1,149,326 -----------
PAR AMOUNT ------------ REPURCHASE AGREEMENTS - 7.08% Bank of America, NA, 2.75%, Due 7/1/2008 (Held at Bank of New York, Collateralized by Mortgage Obligations valued at $588,500, 2/23/2036) ....................................... $ 550,000 550,000 Barclays Bank plc, 2.75%, Due 7/1/2008 (Held at Bank of New York, Collateralized by Equity Securities valued at $105,000) .................................................. 100,000 100,000 Citigroup, Inc., 2.80%, Due 7/1/2008 (Held at Chase NYC, Collateralized by Mortgage Obligations valued at $303,279, 3/14/2036 - 6/23/2038) ..................................... 250,000 250,000 ----------- TOTAL REPURCHASE AGREEMENTS ................................... 900,000 ----------- TOTAL INVESTMENTS - 101.32% (COST $12,878,992) ................... $12,878,992 LIABILITIES, NET OF OTHER ASSETS - (1.32%) ....................... (168,355) ----------- TOTAL NET ASSETS - 100.00% ....................................... $12,710,637 ===========
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 $2,035,033 or 16.01% of net assets. The Fund has no right to demand registration of these securities. See accompanying notes 24 AMERICAN BEACON U.S. GOVERNMENT MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS June 30, 2008 (Unaudited)
PAR AMOUNT VALUE ------------ ----------- (DOLLARS IN THOUSANDS) U.S. AGENCY OBLIGATIONS - 28.77% FEDERAL HOME LOAN BANK - 21.19% 2.17%, Due 8/6/2008 ........................................ $ 7,579 $ 7,562 2.589%, Due 8/15/2008 ++ ................................... 35,000 35,003 2.65%, Due 9/17/2008 ++ .................................... 25,000 24,998 2.616%, Due 12/15/2008 ++ .................................. 35,000 35,006 2.51%, Due 1/9/2009 ++ ..................................... 25,000 25,025 2.737%, Due 1/28/2009 ++ ................................... 25,000 24,997 ----------- 152,591 ----------- FEDERAL HOME LOAN MORTGAGE CORPORATION - 4.67% 2.16%, Due 7/21/2008 ....................................... 23,731 23,702 1.004%, Due 11/8/2008 ...................................... 10,000 9,964 ----------- 33,666 ----------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.91% 2.27%, Due 7/30/2008 ....................................... 10,000 9,982 2.30%, Due 8/1/2008 ........................................ 11,000 10,978 ----------- 20,960 ----------- TOTAL U.S. AGENCY OBLIGATIONS ................................. 207,217 -----------
SHARES ------------ SHORT TERM INVESTMENTS - 0.03% OTHER SHORT-TERM INVESTMENTS - 0.03% Goldman Sachs Financial Square Government Fund ................ 24,748 25 Morgan Stanley Government Portfolio ........................... 193,229 193 ----------- TOTAL SHORT TERM INVESTMENTS .................................. 218 -----------
PAR AMOUNT ------------ REPURCHASE AGREEMENTS - 71.13% Banc of America Securities LLC, 2.52%, Due 7/1/2008 (Held at Bank of New York, Collateralized by U.S. Government Agency Obligations valued at $253,820, 5.5% - 6.0%, 6/1/2033 - 5/1/2038) .................................................. $ 250,000 250,000 Barclays Capital, Inc., 2.60%, Due 7/1/2008 (Held at Bank of New York, Collateralized by U.S. Government Agency Obligations valued at $192,952, 4.44% - 6.43%, 8/1/2035 - 4/1/2038) .................................................. 190,000 190,000 Goldman Sachs Group, Inc., 2.45%, Due 7/1/2008 (Held at Bank of New York, Collateralized by U.S. Government Agency Obligations valued at $73,448, 4.0% - 8.0%, 9/20/2010 - 6/1/2038) .................................................. 72,365 72,365 ----------- TOTAL REPURCHASE AGREEMENTS ................................... 512,365 ----------- TOTAL INVESTMENTS - 99.93% (COST $719,800) ....................... $ 719,800 OTHER ASSETS, NET OF LIABILITIES - 0.07% ......................... 510 ----------- TOTAL NET ASSETS - 100.00% ....................................... $ 720,310 ===========
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 25 AMERICAN BEACON MASTER TRUST PORTFOLIOS STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2008 (UNAUDITED) (IN THOUSANDS)
U.S. GOVERNMENT MONEY MARKET MONEY MARKET ------------ --------------- ASSETS: Investment in securities at value (cost - $11,978,992 and $207,435, respectively) .. $11,978,992 $207,435 Repurchase agreement (cost - $900,000 and $512,365, respectively) .................. 900,000 512,365 Dividends and interest receivable .................................................. 31,127 595 Prepaid expenses ................................................................... 115 14 ----------- -------- TOTAL ASSETS .................................................................... 12,910,234 720,409 ----------- -------- LIABILITIES: Management and investment advisory fees payable (Note 2) ........................... 1,083 54 Other liabilities .................................................................. 198,514 45 TOTAL LIABILITIES ----------- -------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS .............................. 199,597 99 ----------- -------- $12,710,637 $720,310 =========== ========
STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) (IN THOUSANDS)
U.S. GOVERNMENT MONEY MARKET MONEY MARKET ------------ --------------- INVESTMENT INCOME: Interest income .................................................................... $234,691 $16,340 -------- ------- TOTAL INVESTMENT INCOME ......................................................... 234,691 16,340 -------- ------- EXPENSES: Management and investment advisory fees (Note 2) 6,844 518 Custodian fees ..................................................................... 183 17 Professional fees .................................................................. 76 12 Other expenses ..................................................................... 195 24 -------- ------- TOTAL EXPENSES .................................................................. 7,298 571 -------- ------- NET INVESTMENT INCOME ................................................................. 227,393 15,769 -------- ------- REALIZED GAIN ON INVESTMENTS: Net realized gain on investments ................................................... 0 6 -------- ------- NET GAIN ON INVESTMENTS ......................................................... 0 6 -------- ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................................. $227,393 $15,775 ======== =======
See accompanying notes 26 AMERICAN BEACON MASTER TRUST PORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
U.S. GOVERNMENT MONEY MONEY MARKET MARKET ----------------------------- -------------------------- Six Months Year Ended Six Months Year Ended Ended June 30, December 31, Ended June December 31, 2008 2007 30, 2008 2007 -------------- ------------ ----------- ------------ (unaudited) (unaudited) INCREASE IN NET ASSETS: OPERATIONS: Net investment income ......................................... $ 227,393 $ 824,823 $ 15,769 $ 47,203 Net realized gain on investments .............................. 0 127 6 3 ----------- ------------ ----------- ----------- TOTAL INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... 227,393 824,950 15,775 47,206 ----------- ------------ ----------- ----------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Contributions ................................................. 89,239,048 35,059,358 3,942,000 5,041,893 Withdrawals ................................................... (89,939,803) (35,428,478) (4,619,449) (4,270,511) ----------- ------------ ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS ......... (700,755) (369,120) (677,449) 771,382 ----------- ------------ ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS ...................... (473,362) 455,830 (661,674) 818,588 ----------- ------------ ----------- ----------- NET ASSETS: Beginning of period ........................................... 13,183,999 12,728,169 1,381,984 563,396 ----------- ------------ ----------- ----------- END OF PERIOD ................................................. $12,710,637 $ 13,183,999 $ 720,310 $ 1,381,984 =========== ============ =========== ===========
FINANCIAL HIGHLIGHTS
MONEY MARKET ---------------------------------------------- Six Months Year Ended December 31, Ended June -------------------------------- 30, 2008 2007 2006 2005 2004 2003 ----------- ---- ---- ---- ---- ---- (unaudited) Total return ..................................................... 1.66%(A) 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% 0.11% Net investment income ......................................... 3.31% 5.19% 5.03% 3.20% 1.30% 1.14%
U.S. GOVERNMENT MONEY MARKET ---------------------------------------------- Six Months Year Ended December 31, Ended June -------------------------------- 30, 2008 2007 2006 2005 2004 2003 ----------- ---- ---- ---- ---- ---- (unaudited) Total return ..................................................... 1.43%(A) 5.18% 5.04% 3.19% 1.30% 1.11% Ratios to average net assets (annualized): ....................... Expenses....................................................... 0.11% 0.11% 0.12% 0.12% 0.11% 0.12% Net investment income.......................................... 3.04% 4.98% 4.97% 3.15% 1.30% 1.13%
(A) Not annualized See accompanying notes 27 AMERICAN BEACON MASTER TRUST NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Master Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended, as a no load, open-end management investment company that was organized as a trust under the laws of the Commonwealth of Massachusetts pursuant to a Declaration of Trust dated as of November 1, 2004. Prior to November 1, 2004, the Trust was organized as a trust under the laws of the State of New York. Beneficial interests in the Trust are divided into separate series, each having distinct investment objectives and policies. These financial statements relate to the American Beacon Master Money Market Portfolio and American Beacon Master U.S. Government Money Market Portfolio (each a "Portfolio" and collectively the "Portfolios"). The objective of each Portfolio is current income, liquidity and the maintenance of a stable price of $1.00 per share. The assets of each Portfolio belong only to that Portfolio, and the liabilities of each Portfolio are borne solely by that Portfolio and no other. American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary of AMR Corporation ("AMR") and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. On April 16, 2008, AMR, the parent company of the Manager, announced that it had reached a definitive agreement to sell all of its interests in the Manager to Lighthouse Holdings, Inc., which is owned by investment funds affiliated with Pharos Capital Group, LLC and TPG Capital, L.P. AMR will acquire a minority equity stake in the parent corporation of Lighthouse Holdings, Inc. Completion of the sale would result in a change of control of the Manager, but there are no anticipated material changes in the services to be provided by the Manager or in the fee rate charged by the Manager to the Fund. The target closing date for the proposed acquisition is expected to be no later than September 30, 2008. Based in Dallas and Nashville, Pharos Capital Group, LLP invests through private equity funds, primarily in companies seeking later stage equity funding for internal growth, acquisitions, management buyouts or recapitalizations across industry sectors. TPG Capital, L.P. is the global buyout group of TPG, a leading private investment firm with more than $50 billion of assets under management. TPG Capital, L.P. has extensive experience with global public and private investments executed through leveraged buyouts, recapitalizations, spinouts, joint ventures and restructurings. The following is a summary of the significant accounting policies followed by the Portfolios. Valuation of Investments Securities of the Portfolios are valued at amortized cost, which approximates fair value. In the event that a deviation of 1/2 of 1% or more exists between the $1.00 per share price of the Portfolios, calculated at amortized cost, and the price per share calculated by reference to market quotations, or if there is any other deviation that the Trust's Board of Trustees (the "Board") believes would result in a material dilution to shareholders or purchasers, the Board will promptly consider the appropriate action that should be initiated. The Portfolios adopted the provisions of Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), effective with the beginning of the Portfolios' fiscal year. This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value, and requires additional disclosures about the use of fair value measurements. The three levels of the hierarchy under FAS 157 are described below: Level 1 - Quoted prices in active markets for identical securities. Level 2 - Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. 28 AMERICAN BEACON MASTER TRUST NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) Level 3 - Prices determined using significant unobservable inputs. Unobservable inputs reflect the Portfolio's own assumptions about the factors market participants would use in pricing an investment, and would be based on the best information available. A summary of the inputs used to value the Portfolios' net assets as of June 30, 2008 is as follows (in thousands):
Investments in Securities ------------------------------ U.S. Government Valuation Inputs Money Market Money Market - ---------------- ------------ --------------- Level 1 - Quoted Prices............................... $ 1,149,326 $ 218 Level 2 - Other significant observable inputs......... 11,729,666 719,582 Level 3 - Significant unobservable inputs............. -- -- ----------- -------- Total................................................. $12,878,992 $719,800
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, money market securities are valued using amortized cost, in accordance with rules under the Investment Company Act of 1940. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected as Level 2. Security Transactions and Investment Income Security transactions are recorded on the trade date of the security purchase or sale. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for amortization of premiums or accretion of discounts on investment grade short-term securities and zero coupon instruments. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification. Federal Income and Excise Taxes The Portfolios will be treated as partnerships for federal income tax purposes. As such, each investor in a Portfolio will be taxed on its share of the Portfolio's ordinary income and capital gains. It is intended that each Portfolio's assets will be managed in such a way that an investor in the Portfolio will be able to satisfy the requirements of subchapter M of the Internal Revenue Code. 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 29 AMERICAN BEACON MASTER TRUST NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 (UNAUDITED) meet the more likely than not threshold, and therefore there have been no adjustments to the Portfolios' net asset value per share. 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. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated. Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust's maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement. 2. TRANSACTIONS WITH AFFILIATES Management Agreement The Trust and the Manager are parties to a Management Agreement that obligates the Manager to provide or oversee the provision of all administrative, investment advisory and portfolio management services. The Manager serves as the sole investment advisor to each of the Portfolios. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Portfolios 0.10% of the average daily net assets of each of the Portfolios. Interfund Lending Program Pursuant to an exemptive order by the Securities and Exchange Commission, the Portfolios, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Money Market Portfolio to lend money to other participating series managed by the Manager. For the six months ended June 30, 2008, the credit facility was not utilized. 30 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS (UNAUDITED) At its May 21, 2008 meeting, the Board of Trustees ("Board" or "Trustees") considered the renewal of each existing Management Agreement (each, a "Current Agreement" and collectively, the "Current Agreements") between the Manager and the American Beacon Funds ("Beacon Trust"), American Beacon Mileage Funds ("Mileage Trust"), American Beacon Select Funds ("Select Trust") or American Beacon Master Trust ("Master Trust") (collectively, the "Funds"). In preparation for the Board's consideration to renew these Current Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager and Lipper, Inc. ("Lipper"). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager. In addition, the Board's Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee held a separate meeting on May 9, 2008 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board's review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process. On May 21, May 22 and June 4, 2008, the Board met to determine, among other matters, whether to approve a new investment management agreement ("New Agreement") between the Manager and the Funds. The New Agreement is necessary because, on April 16, 2008, AMR Corporation ("AMR"), the parent company of the Manager, entered into an agreement with Lighthouse Holdings, Inc. ("Lighthouse") pursuant to which Lighthouse will acquire all of the capital stock of the Manager ("Transaction") in exchange for cash and 10% of the capital stock of the parent corporation of Lighthouse. Upon the closing of the Transaction ("Closing"), the Manager will cease to be a wholly owned subsidiary of AMR and will become a subsidiary of Lighthouse. This change in control is deemed to be an "assignment" under the Investment Company Act of 1940 ("1940 Act") of each Fund's Current Agreement with the Manager. As required by the 1940 Act, each Fund's Current Agreement provides for its automatic termination in the event of an assignment, and each will, therefore, terminate upon the Closing. To provide for the continuity of management for the Funds, the Board met to consider the New Agreement with the Manager. The New Agreement for each Fund will reflect substantially the same terms as the Current Agreement for each Fund. In addition, the Current Agreements have been updated and modernized. As part of this process, the primary administrative services provided by the Manager to the Funds will be transferred to one single administrative services agreement ("New Administrative Services Agreement"). Currently, the Manager provides administrative services to the Funds in Mileage Trust, Select Trust and Master Trust pursuant to their Current Agreements and to the Funds in Beacon Trust pursuant to its Current Agreement and an Administrative Services Agreement ("Current Administrative Services Agreement"). The aggregate fee rates for each Fund under the New Agreement and the New Administrative Services Agreement will be the same as the fee rates imposed under the existing agreements which they replace. The New Agreement is subject to shareholder approval. If approved by the shareholders of the Funds, the New Agreement will become effective upon the Closing or, if the Closing is not consummated, the New Agreement will become effective on or about January 1, 2009. The Manager and Lighthouse anticipate that the Closing will occur in the third calendar quarter of 2008. Upon the Closing, Lighthouse directly will control the Manager. Lighthouse currently does not anticipate any changes to the organization or structure of the Funds, to the service providers or to the aggregate fee rates under any Current Agreement. In addition, the portfolio managers at the Manager that currently manage the Funds are expected to continue to manage the Funds after the Closing. In that regard, the Manager and Lighthouse have entered into or will enter into employment contracts that will take effect 31 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS (UNAUDITED) upon the Closing with certain key personnel performing or overseeing the Funds' investment programs. However, there can be no assurance that these personnel will choose to remain employed by the Manager before or after the Closing. The Manager and the Funds will continue to operate under their existing names. Potential benefits to the Funds as a result of the Transaction include Lighthouse's intention to devote additional resources to product development and distribution of Fund shares. Any resulting growth of Fund assets may produce economies of scale that could benefit shareholders of the Funds. In addition, under the Current Agreements, the Manager may retain subadvisors to provide investment advisory services for all or a portion of the assets of a Fund. Pursuant to an exemptive order issued by the Securities and Exchange Commission ("SEC"), the Manager is permitted to enter into new or modified investment advisory agreements with existing or new subadvisors ("New Investment Advisory Agreements") without approval of a Fund's shareholders, but subject to the approval of a Fund's Board. In preparation for the Board's consideration to approve the New Agreement, the Board held preliminary conference call meetings on April 15, 16 and 21, 2008, to discuss the New Agreement and the effect that approving the New Agreement would have on the Funds. The Board, with the assistance of independent legal counsel, received a memorandum and related advice from their legal counsel detailing the Board's responsibilities in considering the New Agreement. In connection with Board's consideration of the Current Agreement and New Agreement, the Trustees considered, among other materials, responses by the Manager to inquiries requesting: - a description of the Transaction, the effects of the Transaction on the Trusts and the Board, and any proposed changes to the Trusts, their service providers or fee structure and other information; - a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; - a copy of the firm's Form ADV registration statement with the SEC; - a summary of any material past, pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit; - a profit/loss analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to each Fund; - a description of any payments by the firm to support the Funds' marketing efforts; - an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; - an evaluation of other benefits to the firm or Funds as a result of their relationship, if any; - confirmation that the firm's financial condition does not raise concerns that the firm would be unable to continue providing the same scope and quality of services to the Funds; - a description of the scope of portfolio management services provided to the Funds and the firm's other clients, including other registered investment companies, whether such services differ, and any advantages or disadvantages that might accrue to the Funds due to the firm's involvement in other activities; - a description of the personnel who are assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds; - a description of the basis upon which portfolio managers are compensated, including any "incentive" arrangements; - a discussion regarding the firm's participation in "soft dollar" arrangements, if any, or other brokerage allocation policies with respect to Fund transactions, including the firm's methodology for obtaining the most favorable execution and the use of any affiliated broker-dealers; 32 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS (UNAUDITED) - a discussion of whether the firm receives, with respect to the Funds, other compensation, including any payment for order flow or ECN liquidity rebates; - a description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a summary of any material changes to the firm's compliance program with regard to federal, state, corporate and Fund requirements and a certification regarding the reasonable design of the compliance program; - a discussion of any material compliance problems and remedial actions; - information regarding the firm's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto; - a description of the firm's affiliation with any broker-dealer; - a discussion of any anticipated change in the firm's controlling persons; - verification of the firm's insurance coverage with regard to the services provided to the Funds; - a comparison of the performance of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of each Fund versus the respective peer group average; - a discussion, if applicable, of any underperformance by a Fund relative to its peer group and what, if any, remedial measures the Manager has or intends to take; - a comparison of advisory fees and expense ratios for comparable mutual funds; - an analysis of any material complaints received from Fund shareholders; - a description of the Manager's securities lending practices and the fees received from such practices; - a description of any revenue sharing activities with respect to the Funds; - a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider; - a description of the portfolio turnover rate and average execution costs for each Fund; and - a description of how expenses that are not readily identifiable to a particular Fund are allocated. In connection with the Current Agreements and New Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds, and (iii) each Fund's investment advisory fees versus comparable mutual funds. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. References below to each Fund's Lipper peer group are to the group of comparable mutual funds included in the analysis provided by Lipper. The Current Agreements and New Agreement are each referenced to herein as an "Agreement" and collectively, the "Agreements." The Trustees also received memoranda from their legal counsel detailing the Board's responsibilities pertaining to the approval of each Agreement. These memoranda explained the regulatory requirements surrounding the Trustees' process for evaluating investment advisors and the terms of the contracts. In connection with the Board's consideration of the New Agreement, the Trustees considered, among other information, the following factors, in addition to other factors noted in the Proxy Statement: (1) The manner in which each Fund's assets are managed will not change as a result of the Transaction, and the same people who currently manage the Fund's assets are expected to continue to do so after the Transaction; (2) The aggregate fee rates payable by each Fund under the New Agreement and the New Administrative Services Agreement are the same as the fee rates payable under the Current Agreements and, in the case of the Beacon Trust, under the Current Agreement and the Current Administrative Services Agreement; 33 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS (UNAUDITED) (3) The material terms regarding advisory services pursuant to the New Agreement are substantially the same as the terms of the Current Agreements; (4) The qualifications of the Manager's personnel who will provide advisory and administrative services to the Funds are not expected to change; (5) The Manager's financial condition and the post-Closing capitalization of Lighthouse; (6) The impact of the Transaction on the Manager's day-to-day operations; (7) The capabilities, experience, corporate structure and capital resources of Lighthouse; (8) The long-term business goals of Lighthouse with regard to the Manager and the Trusts; (9) Fund shareholders will not bear any costs in connection with the Transaction, inasmuch as AMR and Lighthouse will bear equally the costs, fees and expenses incurred by the Funds in connection with the Proxy Statement, the fees and expenses of accountants and attorneys relating to the Transaction and Proxy Statement, the fees and expenses incurred by the Funds in connection with the Transaction, and the meeting fees of the Boards for meetings held in connection with the Transaction; (10) The Funds may realize benefits as a result of the Transaction, including long-term economies of scale; and (11) The potential for increased costs to the Trusts in order to satisfy existing obligations under the current Trustees' retirement plan. Provided below is an overview of the other primary factors the Board considered at its May 21, May 22 and June 4, 2008 meetings. The Board did not identify any particular information that was most relevant to its consideration to renew the Current Agreements and approve the New Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the Non-interested Trustees provided the Board with memoranda regarding its responsibilities pertaining to the renewal of the Current Agreements and approval of the New Agreement. Based on its evaluation, the Board unanimously concluded that the terms of each Current Agreement were reasonable and fair and that the renewal of each Current Agreement was in the best interests of each Fund and its shareholders. The Board also unanimously concluded that the terms of the New Agreement were reasonable and fair and that the approval of the New Agreement was in the best interests of each Fund and its shareholders. CONSIDERATIONS WITH RESPECT TO ALL FUNDS In determining whether to renew the Current Agreement and approve the New Agreement, the Trustees considered the best interests of each Fund separately. While the Current Agreements for all of the Funds were considered at the Board meetings on May 21, 2008, and the New Agreement for all of the Funds was considered at the meetings on May 21, May 22 and June 4, 2008, the Board considered each Fund's investment management relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of a Fund; (3) the costs incurred by the Manager in rendering its services and its resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fees with contracts entered into by the Manager with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager from its relationship with a Fund. The Trustees posed questions to various management personnel of the Manager and Lighthouse regarding certain key aspects of the materials submitted in support of the renewal. Nature, Extent and Quality of Services. With respect to the renewal of each Fund's Current Agreement and the approval of each Fund's New Agreement, the Board considered: the background and experience of key investment personnel and the Manager's ability to retain them; the Manager's disciplined investment approach and goal to provide consistent above average long-term performance at a low cost; the Manager's continuing 34 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS (UNAUDITED) efforts to add new series and share classes to enhance the Funds' product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Funds; the addition of personnel to manage the Funds, promote sales and improve services, including the addition of a separate new information technology (IT) department at the Manager; the high rankings received by the Funds in service surveys. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager were appropriate for each Fund and, thus, determined to renew the Current Agreements and approve the New Agreement for each Fund. Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund's investment performance relative to its benchmark index(es) and peer group. The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. A discussion regarding the Board's considerations with respect to each Fund's performance appears below under "Additional Considerations and Conclusions with Respect to Each Fund." Costs of the Services to be Provided to the Funds and the Projected Profits to be Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager by Fund, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an individual Fund level and at an aggregate level for all Funds. The Board also considered that the Current and New Agreements for the Beacon Trust, Mileage Trust and Select Trust stipulate that, to the extent that a Fund invests all of its investable assets in another registered investment company (i.e., is a Feeder Fund), the Fund will not pay the Manager a management fee. Because the money market series of the Beacon Trust, Mileage Trust and Select Trust operate as Feeder Funds with respect to the Master Trust, the Manager only receives a management fee from the Master Trust. With respect to the Money Market Funds, the Board also considered the Manager's advisory fees for services provided by the Manager to institutional separate accounts with similar investment strategies. Although the Board noted that, in certain cases, the fee rates paid by other clients is lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds. The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors. Based on the foregoing information, the Board concluded that the profitability levels were reasonable in light of the services performed by the Manager. A discussion regarding the Board's considerations with respect to each Fund's fee rates is set forth below under "Additional Considerations and Conclusions with Respect to Each Fund." Economies of Scale. In considering the reasonableness of the management fees, the Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. The Board noted that certain Funds have grown their shareholder base, which has spread fixed costs over a larger shareholder and asset base. With respect to the Money Market Funds, the Board also noted that, although the fee schedules for these Funds do not have breakpoints, the effective advisory fee rates are low by industry standards and the performance of these Funds has been highly competitive and, in many cases, among the top performers among similar funds. The Board also considered the Manager's representations that its costs have increased due primarily to greater service provider and regulatory costs. The Manager also represented that it anticipates further 35 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS (UNAUDITED) economies of scale would be largely offset by higher costs of adding and retaining qualified personnel, improving technology and increasing demands on its advisory business. Based on the foregoing information, the Board concluded that the Manager fee schedules for each Fund provides for a reasonable sharing of benefits from any economies of scale with the Fund. Benefits Derived from the Relationship with the Funds. The Board considered the "fall-out" or ancillary benefits that accrue to the Manager as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager's investment process and expanding the level of assets under management by the Manager. The Board also considered that the Manager's relationship with the Funds and, in particular the money market funds, continues to be a significant factor in attracting separate account assets for the Manager. In addition, the Board noted that the Manager provides services to each Trust at a relatively low cost. The Board also considered that Funds did not pay commissions to any affiliated broker-dealer of the Manager during the most recent fiscal year ended December 31, 2007. Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager by virtue of its relationships with the Funds appear to be fair and reasonable. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO EACH FUND The performance comparisons below were made versus each Fund's respective Lipper Average, which includes all comparable funds in the Lipper category, and the Lipper Index, which includes the 30 largest funds in the Lipper category. References to the Lipper expense group below are to the group of comparable mutual funds included in the analysis provided to the Trustees by Lipper, Inc. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE MONEY MARKET FUND In considering the renewal of the Current Agreement and the approval of the New Agreement, the Trustees considered the following additional factors: (1) the Institutional Class of the Beacon Trust slightly underperformed the Lipper Index and outperformed the Lipper Average for all reported periods ended March 31, 2008; (2) the total expense ratio and contractual management fees of the Institutional Class of Beacon Trust shares were both lower than its Lipper expense group average; (3) the Manager is subject to a high degree of risk of financial responsibility should the Fund be unable to maintain a stable $1.00 per share net asset value; (4) the Manager's explanation that fee schedule "breakpoints" were not warranted due to, among other factors, the low base management fee charged to the Fund; and (5) the Manager has contractually agreed to waive fees and/or reimburse Fund expenses to the extent necessary to maintain a competitive total expense ratio for the Institutional, Cash Management and BBH ComSet Classes of the Beacon Trust. Based on these and other considerations, the Trustees (1) concluded that the fees paid to the Manager under the Agreements are fair and reasonable, (2) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund, (3) approved the renewal of the Current Agreement and (4) approved the New Agreement with respect to the Fund. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE U.S. GOVERNMENT MONEY MARKET FUND In considering the renewal of the Current Agreement and the approval of the New Agreement, the Trustees considered the following additional factors: (1) the U.S. Government Money Market Fund was ranked as the 16th best institutional U.S. Government money market fund among 170 funds for the one year ending March 31, 2008 according to Lipper Analytical Services; (2) the Fund's total return of 4.69% outperformed the Lipper Institutional U.S. Government Money Fund Average return of 4.44%; (3) the Fund was ranked in the first quartile for the one, three and five year period ended March 31, 2008; and (4) similar to the Money Market Fund, and for the same reasons, this Fund maintained a relatively short weighted-average maturity throughout 36 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENTS OF THE FUNDS AND THE PORTFOLIOS (UNAUDITED) 2007. This strategy was accomplished primarily by purchasing short-dated fixed rate agencies, variable rate agencies and overnight repurchase agreements. Based on these and other considerations, the Trustees (1) concluded that the fees paid to the Manager under the Agreements are fair and reasonable, (2) determined that the Fund and its shareholders would benefit from the Manager's continued management of the Fund, (3) approved the renewal of the Current Agreement and (4) approved the New Agreement with respect to the Fund. 37 (THIS PAGE INTENTIONALLY LEFT BLANK) 38 (THIS PAGE INTENTIONALLY LEFT BLANK) 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 SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS In addition to the Schedule of Investments A description of the policies and procedures the provided in each semi-annual and annual report, Fund uses to determine how to vote proxies the Fund files a complete schedule of its relating to portfolio securities is available in portfolio holdings with the Securities and the Fund's Statement of Additional Information, Exchange Commission ("SEC") on Form N-Q as of is available free of charge on the Fund's the first and third fiscal quarters. The Fund's website (www.americanbeaconfunds.com) and by Forms N-Q are available on the SEC's website at calling 1-800-967-9009 or by accessing the SEC's www.sec.gov. The Forms N-Q may also be reviewed website at www.sec.gov. The Fund's proxy voting and copied at the SEC's Public Reference Room, record for the most recent year ended June 30 is 450 Fifth Street, NW, Washington, DC 20549. filed annually with the SEC on Form N-PX. The Information regarding the operation of the SEC's Fund's Forms N-PX are available on the SEC's Public Reference Room may be obtained by calling website at www.sec.gov. The Fund's proxy voting 1-800-SEC-0330. A complete schedule of the record may also be obtained by calling Fund's portfolio holdings is also available on 1-800-967-9009. the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each month.
FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES TRUST SERVICES ERNST & YOUNG LLP Portland, Maine Boston, Massachusetts Kansas City, Missouri 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. PlanAhead Class is a registered service mark of American Beacon Advisors, Inc. American Beacon Funds, American Beacon Money Market Fund, and American Beacon U.S. Government Money Market Fund are service marks of American Beacon Advisors, Inc. SAR 6/08 62519 42 ITEM 2. CODE OF ETHICS. The Trust did not amend the code of ethics that applies to its principal executive and financial officers (the "Code") nor did it grant any waivers to the provisions of the Code during the period covered by the shareholder report presented in Item 1. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. The schedules of investments for each series of the Trust are included in the shareholder report presented in Item 1. The shareholder report for the S&P 500 Index Fund, the Small Cap Index Fund and the International Equity Index Fund presented in Item 1 includes a summary schedule of investments for the Master International Index Series and the Master Small Cap Index Series, both of which are series of the Master Quantitative Series LLC. A complete schedule of investments for each of these two series follows. Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Advertising Agencies - 0.4% DG FastChannel, Inc. (a) 7,000 $ 120,750 Greenfield Online, Inc. (a) 12,100 180,532 Harte-Hanks, Inc. 18,700 214,115 inVentiv Health, Inc. (a) 15,700 436,303 Marchex, Inc. Class B (b) 11,300 139,216 National CineMedia, Inc. 19,070 203,286 R.H. Donnelley Corp. (a) 35,600 106,800 Valassis Communications, Inc. (a) 22,800 285,456 ValueClick, Inc. (a) 45,080 682,962 ------------- 2,369,420 - ---------------------------------------------------------------------------------------------------------------------------------- Aerospace - 0.9% AeroVironment, Inc. (a) 5,400 146,772 Argon ST, Inc. (a) 6,200 153,760 Ascent Solar Technologies, Inc. (a) 3,100 32,085 Curtiss-Wright Corp. 21,068 942,582 Ducommun, Inc. (a) 5,500 126,280 Heico Corp. (b) 10,626 345,770 LMI Aerospace, Inc. (a) 4,600 80,822 Ladish Co., Inc. (a) 6,900 142,071 Moog, Inc. Class A (a) 20,113 749,008 Orbital Sciences Corp. (a) 27,535 648,725 Teledyne Technologies, Inc. (a) 16,734 816,452 TransDigm Group, Inc. (a) 15,700 527,363 ------------- 4,711,690 - ---------------------------------------------------------------------------------------------------------------------------------- Agriculture, Fishing & Ranching - 0.1% AgFeed Industries, Inc. (a) 10,100 151,197 Alico, Inc. 1,500 51,990 The Andersons, Inc. 8,900 362,319 Cadiz, Inc. (a) 5,700 91,884 Calavo Growers, Inc. 5,700 69,825 HQ Sustainable Maritime Industries, Inc. (a) 2,800 37,100 ------------- 764,315 - ---------------------------------------------------------------------------------------------------------------------------------- Air Transport - 0.6% AAR Corp. (a) 18,968 256,637 AirTran Holdings, Inc. (a)(b) 47,720 97,349 Alaska Air Group, Inc. (a) 17,298 265,351 Allegiant Travel Co. (a) 6,900 128,271 Atlas Air Worldwide Holdings, Inc. (a) 6,200 306,652 Bristow Group, Inc. (a) 9,485 469,413 Hawaiian Holdings, Inc. (a) 20,300 141,085 JetBlue Airways Corp. (a)(b) 82,100 306,233 PHI, Inc. (a) 6,500 261,105 Republic Airways Holdings, Inc. (a) 15,200 131,632 SkyWest, Inc. 27,700 350,405 UAL Corp. 61,600 321,552 US Airways Group, Inc. (a) 47,500 118,750 ------------- 3,154,435 - ---------------------------------------------------------------------------------------------------------------------------------- Aluminum - 0.1% Kaiser Aluminum Corp. 7,400 396,122 - ---------------------------------------------------------------------------------------------------------------------------------- Auto Parts: After Market - 0.1% ATC Technology Corp. (a) 10,043 233,801 Commercial Vehicle Group, Inc. (a) 10,050 93,967 Dorman Products, Inc. (a) 6,300 50,778 Superior Industries International, Inc. (b) 10,099 170,471 ------------- 549,017 - ----------------------------------------------------------------------------------------------------------------------------------
1 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Auto Parts: Original Equipment - 0.5% American Axle & Manufacturing Holdings, Inc. 20,500 $ 163,795 Amerigon Inc. (a) 10,100 71,609 ArvinMeritor, Inc. 35,600 444,288 Dana Holding Corp. (a) 46,500 248,775 Fuel Systems Solutions, Inc. (a) 6,000 231,000 Hayes Lemmerz International, Inc. (a) 48,000 136,320 Lear Corp. (a) 29,780 422,280 Quantum Fuel Systems Technologies Worldwide, Inc. (a) 30,800 94,864 Sauer-Danfoss, Inc. 4,473 139,334 Stoneridge, Inc. (a) 6,700 114,302 Tenneco, Inc. (a) 22,100 299,013 Visteon Corp. (a) 62,100 163,323 Wonder Auto Technology, Inc. (a) 8,100 56,943 ------------- 2,585,846 - ---------------------------------------------------------------------------------------------------------------------------------- Auto, Trucks & Parts - 0.1% Accuride Corp. (a) 18,500 78,625 Force Protection, Inc. (a)(b) 32,400 107,244 Modine Manufacturing Co. 14,094 174,343 Spartan Motors, Inc. 14,900 111,303 Wabash National Corp. 14,545 109,960 ------------- 581,475 - ---------------------------------------------------------------------------------------------------------------------------------- Banks: New York City - 0.1% Signature Bank (a) 14,600 376,096 - ---------------------------------------------------------------------------------------------------------------------------------- Banks: Outside New York City - 4.6% 1st Source Corp. 5,584 89,902 Abington Bancorp, Inc. 12,980 118,378 Amcore Financial, Inc. 10,653 60,293 Ameris Bancorp 6,400 55,680 Ames National Corp. 3,700 61,346 Arrow Financial Corp. 5,000 90,650 BancTrust Financial Group, Inc. 9,900 65,241 Bancfirst Corp. 2,990 127,972 Banco Latinoamericano de Exportaciones, SA 'E' 12,600 203,994 Bank of the Ozarks, Inc. 5,800 86,188 BankFinancial Corp. 10,800 140,508 Banner Corp. 7,213 63,907 Beneficial Mutual Bancorp, Inc. (a) 14,100 156,087 Boston Private Financial Holdings, Inc. 18,333 103,948 Bryn Mawr Bank Corp. 3,000 52,500 CVB Financial Corp. 30,265 285,701 Camden National Corp. 4,200 97,776 Capital City Bank Group, Inc. (b) 4,721 102,729 Capitol Bancorp Ltd. (b) 6,700 60,099 Cardinal Financial Corp. 13,200 82,632 Cascade Bancorp (b) 10,525 80,727 Cathay General Bancorp (b) 23,144 251,575 Centerstate Banks of Florida, Inc. 4,200 46,326 Central Pacific Financial Corp. 13,648 145,488 Chemical Financial Corp. 11,348 231,499 Citizens & Northern Corp. 5,000 82,550 Citizens Banking Corp. 41,487 116,993 CityBank 6,398 55,023
2 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- City Holding Co. 7,793 $ 317,721 Clifton Savings Bancorp, Inc. 2,600 25,324 CoBiz Financial, Inc. 8,826 58,075 The Colonial BancGroup, Inc. 98,700 436,254 Columbia Banking System, Inc. 8,541 165,097 Community Bank System, Inc. 14,200 292,804 Community Trust Bancorp, Inc. 7,023 184,424 Corus Bankshares, Inc. (b) 17,904 74,481 East-West Bancorp, Inc. 32,000 225,927 Encore Bancshares, Inc. (a) 2,800 43,820 Enterprise Financial Services Corp. (b) 4,200 79,170 Farmers Capital Bank Corp. 2,700 47,574 Financial Institutions, Inc. 6,100 97,966 First BanCorp, Inc. (b) 43,136 332,987 First Busey Corp. (b) 11,214 148,249 First Commonwealth Financial Corp. (b) 33,640 313,861 First Community Bancshares, Inc. 4,294 121,091 First Financial Bancorp 19,187 176,520 First Financial Bankshares, Inc. 10,153 465,109 First Financial Corp. 5,344 163,580 First Merchants Corp. 8,446 153,295 First Midwest Bancorp, Inc. 22,700 423,355 First South Bancorp, Inc. (b) 3,800 48,944 FirstMerit Corp. 38,100 621,411 Fox Chase Bancorp, Inc. (a) 2,500 25,650 Frontier Financial Corp. (b) 23,766 202,486 Glacier Bancorp, Inc. (b) 25,264 403,971 Greene County Bancshares, Inc. 5,400 75,708 Guaranty Bancorp (a) 21,100 75,960 Hancock Holding Co. 12,154 477,531 Hanmi Financial Corp. 17,704 92,238 Harleysville National Corp. (b) 14,836 165,570 Heartland Financial USA, Inc. 4,800 87,312 Heritage Commerce Corp. 6,200 61,380 Home Bancshares, Inc. 4,500 101,160 Independent Bank Corp./MA 7,745 184,641 Integra Bank Corp. 9,774 76,530 International Bancshares Corp. 23,910 510,957 Investors Bancorp, Inc. (a) 20,900 272,954 Lakeland Bancorp, Inc. 7,605 92,629 Lakeland Financial Corp. 5,700 108,756 MASSBANK Corp. 2,200 87,076 MB Financial, Inc. 17,083 383,855 MainSource Financial Group, Inc. 8,819 136,695 Midwest Banc Holdings, Inc. 10,380 50,551 NBT Bancorp, Inc. 14,713 303,235 Nara Bancorp, Inc. 10,600 113,738
3 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- National Penn Bancshares, Inc. (b) 37,365 $ 496,207 Northfield Bancorp, Inc. (a)(b) 7,000 75,250 Old National Bancorp (b) 32,295 460,527 Old Second Bancorp, Inc. 6,522 75,786 Oriental Financial Group 12,218 174,229 PacWest Bancorp 11,611 172,772 Pacific Capital Bancorp 21,862 301,258 Pacific Continental Corp. 4,700 51,653 Park National Corp. (b) 5,415 291,869 Peapack-Gladstone Financial Corp. 4,500 98,865 Pennsylvania Commerce Bancorp, Inc. (a) 3,000 72,150 Peoples Bancorp, Inc. 4,910 93,192 Pinnacle Financial Partners, Inc. (a) 10,700 214,963 Piper Jaffray Cos. (a) 8,300 243,439 Premierwest Bancorp 10,900 63,765 PrivateBancorp, Inc. (b) 8,896 270,260 Prosperity Bancshares, Inc. 18,400 491,832 Provident Bankshares Corp. 15,724 100,319 Renasant Corp. 9,798 144,325 Republic Bancorp, Inc. Class A 3,354 82,508 S&T Bancorp, Inc. 11,463 333,115 SCBT Financial Corp. 3,963 113,183 SVB Financial Group (a) 14,200 683,162 SY Bancorp, Inc. 7,030 150,161 Sandy Spring Bancorp, Inc. 7,814 129,556 Santander BanCorp 1,203 12,764 Seacoast Banking Corp. of Florida (b) 7,058 54,770 Security Bank Corp. (b) 1 6 Shore Bancshares, Inc. 4,600 86,112 Sierra Bancorp 3,500 57,750 Simmons First National Corp. Class A 5,700 159,429 Smithtown Bancorp, Inc. 5,400 87,750 The South Financial Group, Inc. (b) 39,300 154,056 Southside Bancshares, Inc. 5,649 104,168 Southwest Bancorp, Inc. 6,800 78,200 State Bancorp, Inc. 7,700 96,250 StellarOne Corp. 11,700 170,820 Sterling Bancshares, Inc. 34,714 315,550 Suffolk Bancorp 4,700 138,086 Sun Bancorp, Inc. (a) 5,728 58,134 Susquehanna Bancshares, Inc. 40,456 553,843 Texas Capital Bancshares, Inc. (a) 11,361 181,776 Tompkins Trustco, Inc. 3,040 113,088 Towne Bank 10,700 161,142 Trico Bancshares 6,578 72,029 TrustCo Bank Corp. NY (b) 34,961 259,411 Trustmark Corp. 24,227 427,607 UCBH Holdings, Inc. (b) 56,500 127,125 UMB Financial Corp. 14,652 751,208
4 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Umpqua Holdings Corp. (b) 28,480 $ 345,462 Union Bankshares Corp. 4,700 69,983 United Bankshares, Inc. 17,900 410,805 United Community Banks, Inc. (b) 20,900 178,277 United Financial Bancorp, Inc. 9,700 108,349 United Security Bancshares (b) 2,800 40,712 Univest Corp. of Pennsylvania 5,050 100,293 Washington Trust Bancorp, Inc. 5,400 106,380 WesBanco, Inc. 13,363 229,175 Westamerica Bancorp (b) 13,783 724,848 West Bancorp., Inc. 9,800 85,260 West Coast Bancorp 7,400 64,158 Western Alliance Bancorp (a)(b) 7,800 60,528 Wilshire Bancorp, Inc. 7,800 66,846 Wintrust Financial Corp. 11,200 267,120 Yardkin Valley Financial Corp. 6,500 77,675 ------------- 24,764,625 - ---------------------------------------------------------------------------------------------------------------------------------- Beverage: Brewers (Wineries) - 0.0% Boston Beer Co., Inc. Class A (a) 4,200 170,856 - ---------------------------------------------------------------------------------------------------------------------------------- Beverage: Soft Drinks - 0.1% Coca-Cola Bottling Co. Consolidated 1,987 73,479 Farmer Bros. Co. 2,010 42,512 Green Mountain Coffee Roasters, Inc. (a) 8,200 308,074 National Beverage Corp. 2,708 19,687 Peet's Coffee & Tea, Inc. (a) 6,600 130,812 ------------- 574,564 - ---------------------------------------------------------------------------------------------------------------------------------- Biotechnology Research & AMAG Pharmaceuticals, Inc. (a) 8,060 274,846 Production - 3.1% Acadia Pharmaceuticals, Inc. (a) 14,300 52,767 Accelrys, Inc. (a) 14,500 70,035 Acorda Therapeutics, Inc. (a) 15,800 518,714 Albany Molecular Research, Inc. (a) 11,087 147,124 Alexion Pharmaceuticals, Inc. (a) 18,180 1,318,050 Allos Therapeutics, Inc. (a) 26,500 183,115 Alnylam Pharmaceuticals, Inc. (a)(b) 16,700 446,391 American Oriental Bioengineering, Inc. (a) 28,700 283,269 Amicus Therapeutics, Inc. (a)(b) 2,300 24,564 Applera Corp. - Applied Biosystems, Inc. (a)(c) 38,900 441,904 Arena Pharmaceuticals, Inc. (a) 35,100 182,169 Ariad Pharmaceuticals, Inc. (a) 33,119 79,486 Arqule, Inc. (a) 18,800 61,100 Array Biopharma, Inc. (a) 22,100 103,870 ArthroCare Corp. (a)(b) 12,620 515,022 Avant Immunotherapeutics, Inc. (a) 7,800 113,568 Biodel, Inc. (a) 5,700 74,100 Caliper Life Sciences, Inc. (a) 25,900 67,081 Cell Genesys, Inc. (a)(b) 40,024 104,062 Cougar Biotechnology, Inc. (a) 7,500 178,725 Cubist Pharmaceuticals, Inc. (a) 26,767 478,059 Cypress Bioscience, Inc. (a) 17,800 126,914 Cytokinetics, Inc. (a) 11,900 44,149 Cytori Therapeutics, Inc. (a) 8,700 56,376
5 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Discovery Laboratories, Inc. (a)(b) 45,900 $ 75,735 Dyax Corp. (a) 24,900 77,190 Enzon Pharmaceuticals, Inc. (a) 21,200 150,944 Exelixis, Inc. (a) 49,918 249,590 Genomic Health, Inc. (a)(b) 6,300 120,645 Geron Corp. (a)(b) 36,929 127,405 Halozyme Therapeutics, Inc. (a) 28,900 155,482 Human Genome Sciences, Inc. (a) 65,800 342,818 Idenix Pharmaceuticals, Inc. (a)(b) 11,900 86,513 Idera Pharmaceuticals, Inc. (a) 10,400 151,944 Immunomedics, Inc. (a) 27,400 58,362 Incyte Corp. (a) 32,024 243,703 Integra LifeSciences Holdings Corp. (a) 8,400 373,632 InterMune, Inc. (a) 15,614 204,856 Kendle International, Inc. (a) 6,200 225,246 Kensey Nash Corp. (a) 3,600 115,380 Lexicon Genetics, Inc. (a) 42,900 68,640 Life Sciences Research, Inc. (a) 3,600 101,664 MannKind Corp. (a)(b) 22,750 68,250 Marshall Edwards, Inc. (a) 6,400 16,448 Martek Biosciences Corp. (a) 15,600 525,876 Maxygen, Inc. (a) 9,701 32,886 Medivation, Inc. (a)(b) 12,800 151,424 Metabolix, Inc. (a) 9,800 96,040 Momenta Pharmaceuticals, Inc. (a) 10,300 126,690 Myriad Genetics, Inc. (a) 21,100 960,472 NPS Pharmaceuticals, Inc. (a) 21,300 94,785 Nabi Biopharmaceuticals (a) 27,054 106,593 Nanosphere, Inc. (a) 5,500 43,230 Neurocrine Biosciences, Inc. (a)(b) 18,200 76,258 OMRIX Biopharmaceuticals, Inc. (a) 6,800 107,032 OSI Pharmaceuticals, Inc. (a) 27,000 1,115,640 Opko Health, Inc. (a) 28,500 43,320 Orexigen Therapeutics, Inc. (a) 10,600 83,634 Osiris Therapeutics, Inc. (a)(b) 5,700 73,245 PDL BioPharma, Inc. 56,600 601,092 PharmaNet Development Group, Inc. (a) 9,150 144,296 Progenics Pharmaceuticals, Inc. (a) 12,800 203,136 Protalix BioTherapeutics, Inc. (a) 4,560 12,358 RTI Biologics, Inc. (a) 26,500 231,875 Repligen Corp. (a) 13,700 64,664 Rexahn Pharmaceuticals, Inc. (a) 12,400 40,176 Rigel Pharmaceuticals, Inc. (a) 17,270 391,338 Sangamo Biosciences, Inc. (a) 18,500 184,075 Savient Pharmaceuticals, Inc. (a) 25,528 645,858 Seattle Genetics, Inc. (a) 29,700 251,262 Sequenom, Inc. (a) 22,300 355,908 Sucampo Pharmaceuticals, Inc. Class A (a) 5,200 55,796 Synta Pharmaceuticals Corp. (a)(b) 9,300 56,730
6 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Targacept, Inc. (a) 7,900 $ 57,433 Tercica, Inc. (a) 8,500 75,055 Third Wave Technologies, Inc. (a) 20,600 229,896 ViroPharma, Inc. (a) 33,200 367,192 Vnus Medical Technologies, Inc. (a) 6,700 134,067 XOMA Ltd. (a) 62,800 106,132 ZymoGenetics, Inc. (a)(b) 17,700 149,034 ------------- 16,954,405 - ---------------------------------------------------------------------------------------------------------------------------------- Building Materials - 0.6% Ameron International Corp. 4,400 527,912 LSI Industries, Inc. 8,512 69,117 Lumber Liquidators, Inc. (a) 5,100 66,300 NCI Building Systems, Inc. (a) 9,368 344,087 Quanex Building Products Corp. 17,610 261,685 Simpson Manufacturing Co., Inc. (b) 17,432 413,836 Texas Industries, Inc. 10,905 612,098 Trex Co., Inc. (a)(b) 7,209 84,562 Watsco, Inc. (b) 10,965 458,337 Zoltek Cos., Inc. (a)(b) 12,900 312,825 ------------- 3,150,759 - ---------------------------------------------------------------------------------------------------------------------------------- Building: Cement - 0.0% U.S. Concrete, Inc. (a) 16,200 77,112 - ---------------------------------------------------------------------------------------------------------------------------------- Building: Heating & Plumbing - 0.1% Aaon, Inc. 6,350 122,301 Interline Brands, Inc. (a) 16,100 256,473 ------------- 378,774 - ---------------------------------------------------------------------------------------------------------------------------------- Building: Miscellaneous - 0.1% Builders FirstSource, Inc. (a)(b) 7,500 39,825 Comfort Systems USA, Inc. 19,000 255,360 Drew Industries, Inc. (a) 9,900 157,905 Griffon Corp. (a) 13,847 121,300 Orion Marine Group, Inc. (a) 10,900 154,017 ------------- 728,407 - ---------------------------------------------------------------------------------------------------------------------------------- Building: Roofing & Wallboard - 0.1% Beacon Roofing Supply, Inc. (a) 21,050 223,340 China Architectural Engineering, Inc. (a) 9,900 96,723 ------------- 320,063 - ---------------------------------------------------------------------------------------------------------------------------------- Cable Television Services - 0.1% Charter Communications, Inc. Class A (a)(b) 193,600 203,280 Crown Media Holdings, Inc. Class A (a) 5,998 28,430 TiVo, Inc. (a) 49,694 306,612 ------------- 538,322 - ---------------------------------------------------------------------------------------------------------------------------------- Casinos & Gambling - 0.4% Ameristar Casinos, Inc. 10,500 145,110 Bally Technologies, Inc. (a) 25,800 872,040 Churchill Downs, Inc. 4,232 147,570 Dover Downs Gaming & Entertainment, Inc. 9,505 61,022 Elixir Gaming Technologies, Inc. (a) 38,000 45,600 Isle of Capri Casinos, Inc. (a) 7,875 37,721 Monarch Casino & Resort, Inc. (a) 5,700 67,260 Pinnacle Entertainment, Inc. (a) 28,494 298,902 Riviera Holdings Corp. (a) 4,100 41,615 Shuffle Master, Inc. (a) 16,700 82,498 WMS Industries, Inc. (a) 20,618 613,798 ------------- 2,413,136 - ----------------------------------------------------------------------------------------------------------------------------------
7 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Chemicals - 1.9% Aceto Corp. 12,300 $ 93,972 American Vanguard Corp. 7,533 92,656 Arch Chemicals, Inc. 12,156 402,971 Balchem Corp. 8,200 189,666 Cabot Microelectronics Corp. (a) 10,800 358,020 Calgon Carbon Corp. (a)(b) 19,901 307,669 Cambrex Corp. (a) 13,385 78,570 China BAK Battery, Inc. (a) 13,300 62,643 EnerSys (a) 12,900 441,567 Energy Conversion Devices, Inc. (a) 19,164 1,411,237 Exide Technologies (a) 35,400 593,304 Hercules, Inc. 53,300 902,369 ICO, Inc. (a) 14,600 87,892 Innophos Holdings, Inc. 5,100 162,945 Innospec, Inc. 11,000 207,020 LSB Industries, Inc. (a) 8,700 172,260 Landec Corp. (a) 9,300 60,171 Medis Technologies Ltd. (a)(b) 10,641 35,860 NL Industries, Inc. 3,234 30,820 NewMarket Corp. 6,500 430,495 OM Group, Inc. (a) 14,500 475,455 Penford Corp. 6,100 90,768 PolyOne Corp. (a) 42,567 296,692 Polypore International, Inc. (a) 6,700 169,711 Quaker Chemical Corp. 5,300 141,298 Rockwood Holdings, Inc. (a) 19,700 685,560 Schulman A, Inc. 12,906 297,225 ShengdaTech, Inc. (a)(b) 12,300 122,139 Solutia, Inc. (a) 29,700 380,754 Stepan Co. 2,955 134,807 Ultralife Batteries, Inc. (a) 6,800 72,692 Valence Technology, Inc. (a) 26,600 117,306 W.R. Grace & Co. (a) 34,000 798,660 Westlake Chemical Corp. 8,800 130,768 Zep, Inc. 9,780 145,526 ------------- 10,181,468 - ---------------------------------------------------------------------------------------------------------------------------------- Coal - 0.3% International Coal Group, Inc. (a)(b) 59,900 781,695 James River Coal Co. (a) 12,000 704,280 National Coal Corp. (a) 11,700 103,779 Westmoreland Coal Co. (a) 5,000 105,550 ------------- 1,695,304 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Information Services - 0.2% Arbitron, Inc. 12,958 615,505 HSW International, Inc. (a) 11,600 33,640 infoGROUP, Inc. 12,261 53,826 LECG Corp. (a) 12,100 105,754 LoopNet, Inc. (a)(b) 14,600 164,980 ------------- 973,705 - -----------------------------------------------------------------------------------------------------------------------------------
8 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Communications & Media - 0.1% Entravision Communications Corp. Class A (a) 28,800 $ 115,776 Knology, Inc. (a) 14,100 154,959 ------------- 270,735 - ---------------------------------------------------------------------------------------------------------------------------------- Communications Technology - 2.6% 3Com Corp. (a) 194,800 412,976 Acme Packet, Inc. (a) 14,000 108,640 Adtran, Inc. (c) 26,400 629,376 Anaren, Inc. (a) 7,022 74,222 Anixter International, Inc. (a) 14,172 843,092 Aruba Networks, Inc. (a) 26,500 138,595 Atheros Communications, Inc. (a) 28,000 840,000 Avanex Corp. (a)(b) 79,800 90,174 Avocent Corp. (a) 21,250 395,250 Bel Fuse, Inc. 5,559 137,363 BigBand Networks, Inc. (a) 17,200 81,356 Black Box Corp. 8,288 225,351 CPI International, Inc. (a) 3,700 45,510 CSG Systems International, Inc. (a) 18,200 200,564 Cbeyond Communications, Inc. (a) 11,900 190,638 Cogent Communications Group, Inc. (a) 23,200 310,880 Cogo Group, Inc. (a) 13,100 119,341 Comtech Telecommunications Corp. (a) 11,525 564,725 Digi International, Inc. (a) 11,700 91,845 EMS Technologies, Inc. (a) 7,200 157,248 Echelon Corp. (a)(b) 14,113 153,832 Entrust, Inc. (a) 32,000 94,080 Extreme Networks, Inc. (a) 55,200 156,768 Finisar Corp. (a)(b) 153,000 182,070 Foundry Networks, Inc. (a) 68,800 813,216 GeoEye, Inc. (a) 8,500 150,535 Globecomm Systems, Inc. (a) 10,000 82,600 Harmonic, Inc. (a) 45,496 432,667 Harris Stratex Networks, Inc. Class A (a) 10,250 97,273 Hughes Communications, Inc. (a) 3,000 147,270 Infinera Corp. (a) 43,700 385,434 InterDigital, Inc. (a)(b) 21,500 522,880 InterVoice, Inc. (a) 17,900 102,030 Ixia (a) 17,329 120,437 j2 Global Communications, Inc. (a) 21,100 485,300 Loral Space & Communications Ltd. (a) 4,400 77,528 NETGEAR, Inc. (a) 16,200 224,532 Nextwave Wireless, Inc. (a)(b) 25,000 101,000 Novatel Wireless, Inc. (a) 15,000 166,950 Oplink Communications, Inc. (a) 9,702 93,139 Optium Corp. (a) 6,500 47,320 SeaChange International, Inc. (a) 13,800 98,808 Secure Computing Corp. (a) 25,138 104,071 Shoretel, Inc. (a) 22,400 99,008 Sonus Networks, Inc. (a)(b) 97,900 334,818 Standard Microsystems Corp. (a) 10,710 290,777
9 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Starent Networks Corp. (a) 13,800 $ 173,604 Switch and Data Facilities Co., Inc. (a) 10,300 174,997 Sycamore Networks, Inc. (a) 94,500 304,290 Syniverse Holdings, Inc. (a) 24,100 390,420 TIBCO Software, Inc. (a) 88,500 677,025 Tekelec (a) 30,600 450,126 Terremark Worldwide, Inc. (a)(b) 22,230 121,376 UTStarcom, Inc. (a)(b) 54,000 295,380 Viasat, Inc. (a) 12,501 252,645 Vonage Holdings Corp. (a)(b) 24,300 40,338 ------------- 14,101,690 - ---------------------------------------------------------------------------------------------------------------------------------- Computer Services Software & 3PAR, Inc. (a) 14,000 109,760 Systems - 5.4% ACI Worldwide, Inc. (a) 16,285 286,453 Actuate Corp. (a) 28,000 109,480 Acxiom Corp. 28,800 330,912 American Reprographics Co. (a) 17,900 298,035 American Software Class A 12,300 69,372 Ansoft Corp. (a) 7,000 254,800 ArcSight, Inc. (a) 1,300 11,440 Ariba, Inc. (a) 40,080 589,577 Art Technology Group, Inc. (a) 60,700 194,240 AsiaInfo Holdings, Inc. (a) 15,200 179,664 BearingPoint, Inc. (a) 99,500 80,595 Blackbaud, Inc. 21,826 467,076 Blackboard, Inc. (a) 14,700 561,981 Blue Coat Systems, Inc. (a) 15,700 221,527 Bottomline Technologies, Inc. (a) 10,100 98,273 CACI International, Inc. Class A (a) 14,200 649,934 CMGI, Inc. (a) 23,280 246,768 COMSYS IT Partners, Inc. (a) 6,900 62,928 Callidus Software Inc. (a) 13,400 67,000 China Fire & Security Group, Inc. (a) 6,100 49,044 China Information Security Technology, Inc. (a) 10,000 56,600 Chordiant Software, Inc. (a) 14,240 71,200 Ciber, Inc. (a) 25,402 157,746 ComScore, Inc. (a) 9,000 196,380 CommVault Systems, Inc. (a) 20,800 346,112 Compellent Technologies, Inc. (a) 7,400 83,916 Comverge, Inc. (a) 11,100 155,178 Concur Technologies, Inc. (a)(b) 20,300 674,569 Constant Contact, Inc. (a) 10,200 192,270 DealerTrack Holdings, Inc. (a) 20,800 293,488 Delrek, Inc. (a) 4,100 31,078 DemandTec, Inc. (a) 10,400 78,104 Digimarc Corp. (a) 9,300 131,688 Digital River, Inc. (a) 17,500 675,150 DivX, Inc. (a) 11,000 80,740 Double-Take Software, Inc. (a) 8,800 120,912 EPIQ Systems, Inc. (a) 17,617 250,161
10 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Ebix, Inc. (a) 1,000 $ 77,720 Electronics for Imaging, Inc. (a) 25,339 369,949 Ener1, Inc. (a) 18,400 136,528 Epicor Software Corp. (a) 28,200 194,862 Gartner, Inc. Class A (a) 27,579 571,437 Guidance Software, Inc. (a) 5,300 50,615 The Hackett Group, Inc. (a) 21,200 121,688 i2 Technologies, Inc. (a) 7,300 90,739 iGate Corp. (a) 8,000 65,040 Informatica Corp. (a) 41,700 627,168 Integral Systems, Inc. 3,991 154,452 Interactive Intelligence, Inc. (a) 6,200 72,168 Internet Brands, Inc. Class A (a) 11,900 78,897 Internet Capital Group, Inc. (a) 17,700 136,821 Interwoven, Inc. (a) 22,325 268,123 JDA Software Group, Inc. (a) 12,208 220,965 Kenexa Corp. (a) 10,700 201,588 Keynote Systems, Inc. (a) 6,600 85,008 Lawson Software, Inc. (a) 59,100 429,657 Limelight Networks, Inc. (a) 9,200 35,144 MSC Software Corp. (a) 20,800 228,384 Macrovision Solutions Corp. (a) 38,808 580,568 Magma Design Automation, Inc. (a) 19,900 120,793 Manhattan Associates, Inc. (a) 11,739 278,566 Mantech International Corp. Class A (a) 9,600 461,952 Mentor Graphics Corp. (a) 42,700 674,660 Mercadolibre, Inc. (a) 12,000 413,880 Mercury Computer Systems, Inc. (a) 10,756 80,993 MicroStrategy, Inc. Class A (a) 4,400 284,900 Micros Systems, Inc. (a) 38,496 1,173,743 Monotype Imaging Holdings, Inc. (a) 7,900 96,222 Ness Technologies, Inc. (a) 19,700 199,364 NetScout Systems, Inc. (a) 14,800 158,064 NetSuite, Inc. (a)(b) 2,500 51,175 Netezza Corp. (a) 19,500 223,860 Omniture, Inc. (a) 29,402 545,995 OpenTV Corp. (a) 41,200 53,972 Opnet Technologies, Inc. (a) 7,400 66,600 PC-Tel, Inc. 10,900 104,531 PROS Holdings, Inc. (a) 6,800 76,364 Parametric Technology Corp. (a) 54,360 906,181 Pegasystems, Inc. 5,200 69,992 Progress Software Corp. (a) 19,708 503,934 QAD, Inc. 3,400 23,018 Quest Software, Inc. (a) 34,000 503,540 RealNetworks, Inc. (a) 42,900 283,140 RightNow Technologies, Inc. (a) 13,800 188,646 SAVVIS, Inc. (a)(b) 18,480 238,392 SI International, Inc. (a) 6,200 129,828
11 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- SPSS, Inc. (a) 8,489 $ 308,745 SRA International, Inc. Class A (a) 19,900 446,954 SYKES Enterprises, Inc. (a) 15,561 293,480 SYNNEX Corp. (a) 8,700 218,283 Sapient Corp. (a) 42,992 276,009 Sigma Designs, Inc. (a)(b) 12,700 176,403 Smith Micro Software, Inc. (a) 13,900 79,230 Solera Holdings, Inc. (a) 24,400 674,904 SonicWALL, Inc. (a) 27,941 180,219 Sourcefire, Inc. (a) 10,300 79,619 Stanley, Inc. (a) 3,800 127,376 SuccessFactors, Inc. (a) 11,600 127,020 SupportSoft, Inc. (a) 24,600 79,950 Sybase, Inc. (a) 37,400 1,100,308 Synchronoss Technologies, Inc. (a) 11,300 102,039 Syntel, Inc. 5,883 198,375 Taleo Corp. Class A (a) 11,200 219,408 TechTarget, Inc. (a) 7,400 78,144 TeleCommunication Systems, Inc. Class A (a) 15,000 69,450 The TriZetto Group, Inc. (a) 20,508 438,461 Tyler Technologies, Inc. (a) 18,000 244,260 Ultimate Software Group, Inc. (a) 12,000 427,560 Unica Corp. (a) 4,600 36,984 VASCO Data Security International, Inc. (a) 12,800 134,784 VeriFone Holdings, Inc. (a) 32,300 385,985 Vignette Corp. (a) 12,280 147,360 Virtusa Corp. (a) 5,000 50,650 Websense, Inc. (a) 22,002 370,514 Website Pros, Inc. (a) 14,300 119,119 Wind River Systems, Inc. (a) 34,900 380,061 Zoran Corp. (a) 25,308 296,104 ------------- 29,111,735 - ---------------------------------------------------------------------------------------------------------------------------------- Computer Technology - 1.0% Adaptec, Inc. (a) 55,400 177,280 Advanced Analogic Technologies, Inc. (a) 23,400 96,642 Cray, Inc. (a) 15,300 70,992 Data Domain, Inc. (a)(b) 15,500 361,615 Emulex Corp. (a) 39,600 461,340 FalconStor Software, Inc. (a) 19,209 136,000 Hutchinson Technology, Inc. (a) 11,917 160,164 Imation Corp. 14,200 325,464 Immersion Corp. (a) 14,100 96,021 Intermec, Inc. (a) 29,009 611,510 Isilon Systems, Inc. (a) 13,700 60,828 NCI, Inc. Class A (a) 3,500 80,080 Palm, Inc. (b) 52,188 281,293 Perot Systems Corp. Class A (a) 40,700 610,907 Phoenix Technologies Ltd. (a) 14,000 154,000 Quantum Corp. (a) 85,900 115,965 Rackable Systems, Inc. (a)(b) 14,100 188,940
12 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Radiant Systems, Inc. (a) 12,200 $ 130,906 Radisys Corp. (a) 10,642 96,417 Rimage Corp. (a) 4,600 56,994 Riverbed Technology, Inc. (a) 26,500 363,580 STEC, Inc. (a) 14,600 149,942 Safeguard Scientifics, Inc. (a) 45,100 55,924 Stratasys, Inc. (a) 9,800 180,908 Synaptics, Inc. (a) 10,900 411,257 Trident Microsystems, Inc. (a) 29,000 105,850 ------------- 5,540,819 - ---------------------------------------------------------------------------------------------------------------------------------- Construction - 0.4% Brookfield Homes Corp. (b) 4,551 55,886 EMCOR Group, Inc. (a) 31,972 912,161 Granite Construction, Inc. 15,271 481,495 Great Lakes Dredge & Dock Corp. 20,400 124,644 Perini Corp. (a) 13,100 432,955 Sterling Construction Co., Inc. (a) 5,900 117,174 ------------- 2,124,315 - ---------------------------------------------------------------------------------------------------------------------------------- Consumer Electronics - 0.7% DTS, Inc. (a) 8,400 263,088 EarthLink, Inc. (a) 53,000 458,450 InfoSpace, Inc. 16,300 135,779 Internap Network Services Corp. (a) 23,890 111,805 Midway Games, Inc. (a)(b) 9,674 21,283 NIC, Inc. 16,700 114,061 NetFlix, Inc. (a)(b) 19,100 497,937 ParkerVision, Inc. (a) 11,800 117,174 Protection One, Inc. (a)(b) 1,200 10,080 THQ, Inc. (a) 31,637 640,966 Take-Two Interactive Software, Inc. (a)(b) 36,300 928,191 United Online, Inc. 33,550 336,507 Universal Electronics, Inc. (a) 7,586 158,547 ------------- 3,793,868 - ---------------------------------------------------------------------------------------------------------------------------------- Consumer Products - 0.5% American Greetings Corp. Class A 23,900 294,926 Blyth, Inc. 11,600 139,548 CSS Industries, Inc. 3,691 89,396 Citi Trends, Inc. (a) 6,800 154,088 Mannatech, Inc. (b) 7,600 41,344 Matthews International Corp. Class A 14,673 664,100 Nautilus, Inc. 14,063 71,440 RC2 Corp. (a) 8,513 158,001 Smith & Wesson Holding Corp. (a)(b) 14,500 75,545 Spectrum Brands, Inc. (a)(b) 18,400 46,920 Tupperware Corp. 29,274 1,001,756 USANA Health Sciences, Inc. (a)(b) 3,900 104,793 ------------- 2,841,857 - ---------------------------------------------------------------------------------------------------------------------------------- Containers & Packaging: Metals & Bway Holding Co. (a) 3,000 25,830 Glass - 0.2% Mobile Mini, Inc. (a) 16,442 328,840 Silgan Holdings, Inc. 11,900 603,806 ------------- 958,476 - ----------------------------------------------------------------------------------------------------------------------------------
13 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Containers & Packaging: AEP Industries, Inc. (a) 2,500 $ 43,425 Paper & Plastic - 0.1% Graphic Packaging Holding Co. (a) 66,200 133,724 Myers Industries, Inc. 13,452 109,634 ------------- 286,783 - ---------------------------------------------------------------------------------------------------------------------------------- Copper - 0.1% Mueller Industries, Inc. 17,582 566,140 - ---------------------------------------------------------------------------------------------------------------------------------- Cosmetics - 0.2% Elizabeth Arden, Inc. (a) 11,593 175,982 Helen of Troy Ltd. (a) 15,000 241,800 Inter Parfums, Inc. 6,150 92,250 Nu Skin Enterprises, Inc. Class A 23,526 351,008 Ulta Salon Cosmetics & Fragrance, Inc. (a) 10,500 118,020 ------------- 979,060 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.5% BGC Partners, Inc. (a) 3,523 26,599 Broadpoint Securities Group, Inc. (a) 9,100 18,200 Cardtronics, Inc. (a) 3,800 33,706 China Direct, Inc. (a) 2,600 19,084 Clayton Holdings, Inc. (a) 2,700 16,119 Doral Financial Corp. (a) 3,200 43,328 Duff & Phelps Corp. (a) 4,400 72,864 Euronet Worldwide, Inc. (a) 22,950 387,855 Evercore Partners, Inc. Class A 4,700 44,650 F.N.B. Corp. 40,397 475,877 FCStone Group, Inc. (a) 10,700 298,851 Greenhill & Co., Inc. (b) 8,000 430,880 Huron Consulting Group, Inc. (a) 9,100 412,594 Interactive Brokers Group, Inc. Class A (a) 19,100 613,683 Oritani Financial Corp. (a) 4,900 78,400 ------------- 2,972,690 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Materials & Processing - 1.0% Acuity Brands, Inc. 19,160 921,213 Barnes Group, Inc. 22,514 519,848 Brady Corp. 23,694 818,154 Clarcor, Inc. 23,810 835,731 Hexcel Corp. (a) 45,262 873,557 Koppers Holdings, Inc. 10,100 422,887 Olin Corp. 35,214 921,903 Tredegar Corp. 11,445 168,242 ------------- 5,481,535 - ---------------------------------------------------------------------------------------------------------------------------------- Drug & Grocery Store Chains - 0.6% Arden Group, Inc. Class A 332 42,078 Casey's General Stores, Inc. 24,607 570,144 The Great Atlantic & Pacific Tea Co., Inc. (a) 16,527 377,146 Ingles Markets, Inc. Class A 5,964 139,140 Longs Drug Stores Corp. 14,683 618,301 Nash Finch Co. 6,177 211,686 Ruddick Corp. 19,769 678,274 Spartan Stores, Inc. 9,900 227,700 Susser Holdings Corp. (a) 4,500 43,560 Village Super Market, Inc. Class A 900 34,722 Weis Markets, Inc. 5,200 168,844 Winn-Dixie Stores, Inc. (a) 26,300 421,326 ------------- 3,532,921 - ----------------------------------------------------------------------------------------------------------------------------------
14 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Drugs & Pharmaceuticals - 2.4% Acura Pharmaceuticals, Inc. (a) 4,900 $ 38,808 Adolor Corp. (a) 23,600 129,328 Affymax, Inc. (a) 5,500 87,505 Akorn, Inc. (a) 23,300 77,123 Alexza Pharmaceuticals, Inc. (a) 9,700 38,218 Alkermes, Inc. (a)(c) 45,300 559,908 Alpharma, Inc. Class A (a) 21,525 484,958 Ardea Biosciences, Inc. (a) 4,700 60,254 Auxilium Pharmaceuticals, Inc. (a) 19,400 652,228 BMP Sunstone Corp. (a)(b) 11,000 62,700 Bentley Pharmaceuticals, Inc. (a) 8,900 143,735 BioForm Medical, Inc. (a) 9,800 39,592 CV Therapeutics, Inc. (a) 28,800 237,024 Cadence Pharmaceuticals, Inc. (a) 9,600 58,464 Caraco Pharmaceutical Laboratories Ltd. (a) 3,700 48,840 Chattem, Inc. (a) 8,200 533,410 China Sky One Medical, Inc. (a) 3,100 34,503 Columbia Laboratories, Inc. (a) 20,800 68,640 Dendreon Corp. (a)(b) 44,200 196,690 Depomed, Inc. (a) 21,400 68,694 Durect Corp. (a) 35,100 128,817 Emergent Biosolutions, Inc. (a) 7,300 72,489 Enzo Biochem, Inc. (a) 14,295 160,390 GTx, Inc. (a)(b) 7,900 113,365 ImmunoGen, Inc. (a) 18,700 57,222 Indevus Pharmaceuticals, Inc. (a) 28,200 44,274 Inspire Pharmaceuticals, Inc. (a) 22,100 94,588 Isis Pharmaceuticals, Inc. (a)(b) 42,789 583,214 Javelin Pharmaceuticals, Inc. (a) 23,300 54,056 Jazz Pharmaceuticals, Inc. (a)(b) 3,100 22,971 K-V Pharmaceutical Co. Class A (a) 15,900 307,347 Ligand Pharmaceuticals, Inc. Class B (a) 35,300 91,780 MAP Pharmaceuticals, Inc. (a) 2,200 22,726 Medarex, Inc. (a) 59,800 395,278 Medicines Co. (a) 25,227 499,999 Medicis Pharmaceutical Corp. Class A 26,500 550,670 MiddleBrook Pharmaceuticals, Inc. (a) 19,500 65,910 Molecular Insight Pharmaceuticals, Inc. (a) 7,700 42,427 Nektar Therapeutics (a) 43,900 147,065 Novavax, Inc. (a) 22,600 56,274 Noven Pharmaceuticals, Inc. (a) 11,831 126,473 Obagi Medical Products, Inc. (a) 9,300 79,515 Onyx Pharmaceuticals, Inc. (a) 26,220 933,432 Optimer Pharmaceuticals, Inc. (a) 10,900 88,399 Pain Therapeutics, Inc. (a)(b) 16,600 131,140 Par Pharmaceutical Cos., Inc. (a) 16,400 266,172 Pharmasset, Inc. (a) 7,900 149,152 Pozen, Inc. (a)(b) 11,900 129,472 Questcor Pharmaceuticals, Inc. (a) 24,600 114,144
15 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Quidel Corp. (a) 13,100 $ 216,412 Regeneron Pharmaceuticals, Inc. (a) 28,619 413,258 Salix Pharmaceuticals Ltd. (a) 22,700 159,581 Sciele Pharma, Inc. (b) 16,600 321,210 Theravance, Inc. (a) 25,400 301,498 United Therapeutics Corp. (a) 10,646 1,040,647 Valeant Pharmaceuticals International (a)(b) 32,500 556,075 Vivus, Inc. (a)(b) 27,000 180,360 Xenoport, Inc. (a) 11,800 460,554 ------------- 12,798,978 - ---------------------------------------------------------------------------------------------------------------------------------- Education Services - 0.3% American Public Education, Inc. (a) 5,500 214,720 Capella Education Co. (a) 6,700 399,655 Corinthian Colleges, Inc. (a) 40,400 469,044 K12, Inc. (a) 2,300 49,289 Learning Tree International, Inc. (a) 4,800 82,080 Lincoln Educational Services Corp. (a) 300 3,489 The Princeton Review, Inc. (a) 7,700 52,052 Renaissance Learning, Inc. 2,449 27,453 Thinkorswim Group, Inc. (a) 24,740 174,417 Universal Technical Institute, Inc. (a) 10,000 124,600 ------------- 1,596,799 - ---------------------------------------------------------------------------------------------------------------------------------- Electrical & Electronics - 0.4% Benchmark Electronics, Inc. (a) 31,729 518,452 Coleman Cable, Inc. (a) 3,800 39,216 OSI Systems, Inc. (a) 7,000 149,940 Plexus Corp. (a) 20,298 561,849 Power Integrations, Inc. (a) 15,000 474,150 TTM Technologies, Inc. (a) 20,300 268,163 Universal Display Corp. (a)(b) 12,507 154,086 ------------- 2,165,856 - ---------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment & A.O. Smith Corp. 9,481 311,261 Components - 0.9% AZZ Inc. (a) 5,300 211,470 American Superconductor Corp. (a)(b) 19,800 709,830 Axsys Technologies, Inc. (a) 4,400 228,976 Baldor Electric Co. 21,701 759,101 CTS Corp. 15,868 159,473 Cohu, Inc. 10,918 160,276 Franklin Electric Co., Inc. (b) 11,160 432,785 Littelfuse, Inc. (a) 10,160 320,548 MKS Instruments, Inc. (a) 23,400 512,460 Orion Energy Systems, Inc. (a) 2,600 26,000 Powell Industries, Inc. (a) 3,531 177,998 Power-One, Inc. (a)(b) 35,400 66,906 Sonic Solutions, Inc. (a) 10,500 62,580 Taser International, Inc. (a)(b) 29,700 147,312 Technitrol, Inc. 18,161 308,555 Triumph Group, Inc. 8,079 380,521 ------------- 4,976,052 - ----------------------------------------------------------------------------------------------------------------------------------
16 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Electrical: Household Appliance - 0.0% National Presto Industries, Inc. 2,150 $ 137,987 Rex Stores Corp. (a) 5,100 58,905 ------------- 196,892 - ---------------------------------------------------------------------------------------------------------------------------------- Electronics - 0.5% Agilysys, Inc. 10,963 124,320 Avid Technology, Inc. (a)(b) 14,600 248,054 Daktronics, Inc. (c) 15,998 322,680 II-VI, Inc. (a) 11,472 400,602 Kopin Corp. (a) 35,800 102,746 MRV Communications, Inc. (a) 60,666 72,193 Methode Electronics, Inc. 18,080 188,936 Multi-Fineline Electronix, Inc. (a) 3,600 99,612 Park Electrochemical Corp. 9,649 234,567 Sanmina-SCI Corp. (a) 259,600 332,288 Semtech Corp. (a) 28,500 400,995 Supertex, Inc. (a) 5,267 122,932 ------------- 2,649,925 - ---------------------------------------------------------------------------------------------------------------------------------- Electronics: Instruments, Gauges & Faro Technologies, Inc. (a) 7,500 188,775 Meters - 0.1% Measurement Specialties, Inc. (a) 6,600 116,094 OYO Geospace Corp. (a) 1,900 111,986 Zygo Corp. (a) 7,200 70,776 ------------- 487,631 - ---------------------------------------------------------------------------------------------------------------------------------- Electronics: Medical Systems - 1.0% Accuray, Inc. (a) 18,200 132,678 Affymetrix, Inc. (a) 33,800 347,802 Analogic Corp. 6,572 414,496 Bruker BioSciences Corp. (a) 23,087 296,668 Cynosure, Inc. Class A (a) 3,800 75,316 Datascope Corp. 6,470 304,090 eResearch Technology, Inc. (a) 21,050 367,112 Greatbatch, Inc. (a) 10,900 188,570 Haemonetics Corp. (a) 12,172 675,059 Luminex Corp. (a)(b) 17,951 368,893 Masimo Corp. (a) 21,800 748,830 Natus Medical, Inc. (a) 13,600 284,784 NxStage Medical, Inc. (a) 9,700 37,248 Quality Systems, Inc. (b) 8,300 243,024 Sirona Dental Systems, Inc. (a)(b) 8,000 207,360 Somanetics Corp. (a) 5,900 125,080 Tomotherapy, Inc. (a) 20,800 185,744 Zoll Medical Corp. (a) 10,222 344,175 ------------- 5,346,929 - ---------------------------------------------------------------------------------------------------------------------------------- Electronics: Other - 0.0% ICx Technologies, Inc. (a) 7,000 51,100 - ---------------------------------------------------------------------------------------------------------------------------------- Electronics: Semi-Conductors/ Actel Corp. (a) 12,016 202,469 Components - 1.9% Advanced Battery Technologies, Inc. (a) 20,300 117,131 Amkor Technology, Inc. (a)(c) 51,200 532,992 Anadigics, Inc. (a)(b) 29,700 292,545 Applied Micro Circuits Corp. (a) 30,700 262,792 AuthenTec, Inc. (a) 12,800 133,376 Bookham, Inc. (a) 45,400 76,726 Cavium Networks, Inc. (a) 14,200 298,200
17 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Ceva, Inc. (a) 10,700 $ 85,279 Cirrus Logic, Inc. (a) 31,500 175,140 DSP Group, Inc. (a) 12,683 88,781 Diodes, Inc. (a) 13,612 376,236 Entropic Communications, Inc. (a) 700 3,325 Exar Corp. (a) 19,027 143,464 Excel Technology, Inc. (a) 5,373 119,925 Formfactor, Inc. (a) 23,600 434,948 Hittite Microwave Corp. (a) 9,100 324,142 IPG Photonics Corp. (a) 9,700 182,457 IXYS Corp. (a) 11,493 137,226 Lattice Semiconductor Corp. (a) 53,400 167,142 MIPS Technologies, Inc. (a) 20,500 76,875 Micrel, Inc. 25,200 230,580 Microsemi Corp. (a) 37,090 933,926 Microtune, Inc. (a) 21,100 73,006 Monolithic Power Systems, Inc. (a) 12,800 276,736 NVE Corp. (a) 2,500 78,975 Netlogic Microsystems, Inc. (a)(b) 8,400 278,880 Omnivision Technologies, Inc. (a) 24,800 299,832 PLX Technology, Inc. (a) 13,400 102,242 PMC-Sierra, Inc. (a) 103,100 788,715 Pericom Semiconductor Corp. (a) 11,593 172,040 RF Micro Devices, Inc. (a) 124,884 362,164 Rubicon Technology, Inc. (a) 6,700 136,144 SiRF Technology Holdings, Inc. (a) 28,100 121,392 Silicon Image, Inc. (a) 37,076 268,801 Silicon Storage Technology, Inc. (a) 39,658 109,853 Skyworks Solutions, Inc. (a) 76,733 757,355 Spansion LLC Class A (a) 63,900 143,775 Techwell, Inc. (a) 6,500 80,080 Tessera Technologies, Inc. (a) 23,400 383,058 Transmeta Corp. (a) 5,400 74,574 TriQuint Semiconductor, Inc. (a) 69,536 421,388 Volterra Semiconductor Corp. (a) 12,600 217,476 ------------- 10,542,163 - ---------------------------------------------------------------------------------------------------------------------------------- Electronics: Technology - 0.6% 3D Systems Corp. (a)(b) 8,200 77,900 American Science & Engineering, Inc. 4,300 221,579 Checkpoint Systems, Inc. (a) 19,323 403,464 China Security & Surveillance Technology, Inc. (a) 12,500 168,500 Cogent, Inc. (a) 19,500 221,715 Coherent, Inc. (a) 11,700 349,713 Cubic Corp. 6,452 143,750 Eagle Test Systems, Inc. (a) 6,000 67,200 Gerber Scientific, Inc. (a) 11,000 125,180 Herley Industries, Inc. (a) 7,100 94,288 ION Geophysical Corp. (a) 39,846 695,313 Kemet Corp. (a) 39,900 129,276 LaBarge, Inc. (a) 5,400 70,200
18 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Maxwell Technologies, Inc. (a) 9,500 $ 100,890 ScanSource, Inc. (a) 12,800 342,528 Smart Modular Technologies WWH, Inc. (a) 19,700 75,451 Super Micro Computer, Inc. (a) 11,700 86,346 ------------- 3,373,293 - ---------------------------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.1% Capstone Turbine Corp. (a) 71,700 300,423 Plug Power, Inc. (a) 41,600 97,760 PowerSecure International, Inc. (a) 7,300 52,998 ------------- 451,181 - ---------------------------------------------------------------------------------------------------------------------------------- Energy Miscellaneous - 1.2% Akeena Solar, Inc. (a) 9,000 50,310 Alon USA Energy, Inc. (b) 5,100 60,996 Approach Resources, Inc. (a) 3,500 93,765 Aventine Renewable Energy Holdings, Inc. (a)(b) 13,940 61,336 CVR Energy, Inc. (a) 10,700 205,975 Clean Energy Fuels Corp. (a)(b) 11,400 130,986 Concho Resources, Inc. (a) 23,600 880,280 Crosstex Energy, Inc. (b) 18,900 655,074 Dawson Geophysical Co. (a) 3,700 220,002 EnerNOC, Inc. (a)(b) 5,100 91,545 Evergreen Energy, Inc. (a)(b) 36,900 64,206 Evergreen Solar, Inc. (a) 49,700 481,593 FuelCell Energy, Inc. (a)(b) 33,726 239,455 GeoMet, Inc. (a) 6,300 59,724 GreenHunter Energy, Inc. (a) 2,500 34,150 Matrix Service Co. (a) 12,300 283,638 Ormat Technologies, Inc. 8,400 413,112 Pacific Ethanol, Inc. (a) 17,300 31,140 Penn Virginia Corp. 19,616 1,479,439 Rentech, Inc. (a) 75,000 142,500 Teekay Tankers Ltd. Class A 5,600 129,976 US Geothermal, Inc. (a) 27,300 80,262 USEC, Inc. (a)(b) 54,259 329,895 ------------- 6,219,359 - ---------------------------------------------------------------------------------------------------------------------------------- Engineering & Contracting Clean Harbors, Inc. (a) 9,300 660,858 Services - 0.4% Dycom Industries, Inc. (a) 19,002 275,909 ENGlobal Corp. (a) 13,500 192,240 Furmamite Corp. (a) 18,500 147,630 Hill International, Inc. (a) 11,800 193,992 Integrated Electrical Services, Inc. (a) 4,000 68,800 Layne Christensen Co. (a) 9,100 398,489 Michael Baker Corp. (a) 3,400 74,392 VSE Corp. 1,700 46,750 ------------- 2,059,060 - ---------------------------------------------------------------------------------------------------------------------------------- Entertainment - 0.2% Cinemark Holdings, Inc. 12,200 159,332 Dover Motorsports, Inc. 9,200 46,828 Gaylord Entertainment Co. (a) 19,155 458,954 Live Nation, Inc. (a) 36,000 380,880 Speedway Motorsports, Inc. 5,255 107,097 ------------- 1,153,091 - ----------------------------------------------------------------------------------------------------------------------------------
19 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Finance Companies - 0.1% Credit Acceptance Corp. (a)(b) 2,169 $ 55,440 MVC Capital, Inc. (b) 10,800 147,852 NewStar Financial, Inc. (a) 8,500 50,235 Riskmetrics Group, Inc. (a) 9,300 182,652 World Acceptance Corp. (a) 8,000 269,360 ------------- 705,539 - ---------------------------------------------------------------------------------------------------------------------------------- Finance: Small Loan - 0.1% Advance America, Cash Advance 22,500 114,300 Centers, Inc. Dollar Financial Corp. (a) 12,000 181,320 Encore Capital Group, Inc. (a)(b) 6,500 57,395 The First Marblehead Corp. 35,700 91,749 Nelnet, Inc. Class A 6,700 75,241 ------------- 520,005 - ---------------------------------------------------------------------------------------------------------------------------------- Financial Data Processing Services & Advent Software, Inc. (a) 7,900 285,032 Systems - 0.8% Cass Information Systems, Inc. 2,515 80,555 CompuCredit Corp. (a)(b) 8,489 50,934 CyberSource Corp. (a) 32,464 543,123 Deluxe Corp. 24,100 429,462 ExlService Holdings, Inc. (a) 7,000 98,210 Fair Isaac Corp. 23,000 477,710 Heartland Payment Systems, Inc. (b) 12,100 285,560 Hypercom Corp. (a) 25,300 111,320 Jack Henry & Associates, Inc. 35,500 768,220 Online Resources Corp. (a) 13,300 111,055 TNS, Inc. (a) 11,600 277,936 TradeStation Group, Inc. (a) 16,100 163,415 Wright Express Corp. (a) 18,000 446,400 ------------- 4,128,932 - ---------------------------------------------------------------------------------------------------------------------------------- Financial Information Services - 0.2% Bankrate, Inc. (a)(b) 6,300 246,141 Interactive Data Corp. 17,100 429,723 Move, Inc. (a) 64,300 149,819 S1 Corp. (a) 23,722 179,576 TheStreet.com, Inc. 10,300 67,053 Value Line, Inc. 300 9,975 ------------- 1,082,287 - ---------------------------------------------------------------------------------------------------------------------------------- Financial Miscellaneous - 0.7% AMBAC Financial Group, Inc. 141,500 189,610 Advanta Corp. Class B 17,250 108,502 Asset Acceptance Capital Corp. 7,100 86,762 Cash America International, Inc. 13,819 428,389 Federal Agricultural Mortgage Corp. Class B 4,800 118,944 Financial Federal Corp. 12,300 270,108 First Cash Financial Services, Inc. (a) 9,600 143,904 Global Cash Access, Inc. (a) 16,900 115,934 Harris & Harris Group, Inc. (a) 12,500 75,000 LandAmerica Financial Group, Inc. 8,099 179,717 Medallion Financial Corp. 8,200 77,244 Portfolio Recovery Associates, Inc. (a)(b) 7,200 270,000 Radian Group, Inc. 42,500 61,625 Sanders Morris Harris Group, Inc. 6,500 44,070
20 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Sotheby's Holdings, Inc. Class A (b) 31,736 $ 836,878 Sterling Bancorp 8,816 105,351 Stewart Information Services Corp. 8,122 157,079 Stifel Financial Corp. (a) 11,449 393,731 WSFS Financial Corp. 2,991 133,399 Wauwatosa Holdings, Inc. (a) 2,700 28,674 ------------- 3,824,921 - ---------------------------------------------------------------------------------------------------------------------------------- Foods - 1.4% American Dairy, Inc. (a) 2,000 15,680 B&G Foods, Inc. Class A 10,800 100,872 Cal-Maine Foods, Inc. (b) 6,100 201,239 Chiquita Brands International, Inc. (a) 21,200 321,604 Diamond Foods, Inc. 8,100 186,624 Flowers Foods, Inc. 36,476 1,033,730 Fresh Del Monte Produce, Inc. (a) 19,700 464,329 Hain Celestial Group, Inc. (a) 19,557 459,198 J&J Snack Foods Corp. 6,500 178,165 Lance, Inc. 13,100 245,887 Lifeway Foods, Inc. (a) 1,900 22,591 M&F Worldwide Corp. (a) 6,300 247,653 Maui Land & Pineapple Co., Inc. (a) 2,163 63,700 Omega Protein Corp. (a) 9,400 140,530 Pilgrim's Pride Corp. 20,200 262,398 Ralcorp Holdings, Inc. (a) 12,095 597,977 Sanderson Farms, Inc. 9,950 343,474 Schiff Nutrition International, Inc. 6,000 33,600 Seaboard Corp. 142 220,242 Sensient Technologies Corp. 22,857 643,653 Smart Balance, Inc. (a) 31,000 223,510 Synutra International, Inc. (a)(b) 4,800 155,136 Tootsie Roll Industries, Inc. (b) 11,435 287,362 TreeHouse Foods, Inc. (a) 14,400 349,344 United Natural Foods, Inc. (a) 20,780 404,794 Zhongpin, Inc. (a) 9,500 118,750 ------------- 7,322,042 - ---------------------------------------------------------------------------------------------------------------------------------- Forest Products - 0.2% Deltic Timber Corp. 5,009 268,031 Louisiana-Pacific Corp. 48,800 414,312 Universal Forest Products, Inc. 7,834 234,707 ------------- 917,050 - ---------------------------------------------------------------------------------------------------------------------------------- Forms & Bulk Printing Services - 0.1% Ennis, Inc. 11,300 176,845 Innerworkings, Inc. (a)(b) 15,800 188,968 The Standard Register Co. 8,745 82,465 ------------- 448,278 - ---------------------------------------------------------------------------------------------------------------------------------- Funeral Parlors & Cemeteries - 0.1% Stewart Enterprises, Inc. Class A 40,224 289,613 - ---------------------------------------------------------------------------------------------------------------------------------- Glass - 0.0% Apogee Enterprises, Inc. 13,700 221,392 - ---------------------------------------------------------------------------------------------------------------------------------- Gold - 0.2% Allied Nevada Gold Corp. (a) 21,400 126,046 Coeur d'Alene Mines Corp. (a)(b) 259,700 753,130 Royal Gold, Inc. 14,300 448,448 ------------- 1,327,624 - ----------------------------------------------------------------------------------------------------------------------------------
21 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Facilities - 0.6% Assisted Living Concepts, Inc. (a) 24,900 $ 136,950 Capital Senior Living Corp. (a) 10,600 79,924 Emeritus Corp. (a) 9,900 144,738 The Ensign Group, Inc. 4,700 54,050 Five Star Quality Care, Inc. (a) 16,800 79,464 IPC The Hospitalist Co., Inc. (a) 1,700 31,994 Kindred Healthcare, Inc. (a) 12,690 364,964 MedCath Corp. (a) 8,100 145,638 National Healthcare Corp. 4,300 197,069 Psychiatric Solutions, Inc. (a) 26,200 991,408 Res-Care, Inc. (a) 11,800 209,804 Skilled Healthcare Group, Inc. Class A (a) 8,300 111,386 Sun Healthcare Group, Inc. (a) 20,400 273,156 Sunrise Senior Living, Inc. (a) 21,274 478,240 ------------- 3,298,785 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Management AMERIGROUP Corp. (a) 25,200 524,160 Services - 0.9% athenahealth, Inc. (a)(b) 10,200 313,752 Allscripts Healthcare Solutions, Inc. (a)(b) 27,741 344,266 Amsurg Corp. (a) 15,500 377,425 Centene Corp. (a) 20,600 345,874 Computer Programs & Systems, Inc. 4,400 76,252 Corvel Corp. (a) 3,785 128,198 Eclipsys Corp. (a) 25,531 468,749 HMS Holdings Corp. (a) 12,300 264,081 HealthExtras, Inc. (a) 15,500 467,170 HealthSpring, Inc. (a) 24,100 406,808 Molina Healthcare, Inc. (a) 6,900 167,946 National Research Corp. 600 15,882 Omnicell, Inc. (a) 15,600 205,608 Phase Forward, Inc. (a) 20,800 373,776 Triple-S Management Corp. (a) 5,500 89,925 Vital Images, Inc. (a) 8,000 99,520 ------------- 4,669,392 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Services - 0.7% Alliance Imaging, Inc. (a) 12,000 104,040 Amedisys, Inc. (a) 12,466 628,536 Apria Healthcare Group, Inc. (a) 20,800 403,312 Bio-Reference Labs, Inc. (a) 5,200 116,012 CardioNet, Inc. (a) 2,400 63,912 Emergency Medical Services Corp. (a) 4,400 99,572 Gentiva Health Services, Inc. (a) 12,712 242,164 HealthSouth Corp. (a)(b) 37,200 618,636 Healthcare Services Group, Inc. 21,137 321,494 Healthways, Inc. (a) 16,700 494,320 LHC Group, Inc. (a) 6,800 158,100 Nighthawk Radiology Holdings, Inc. (a) 10,000 70,800 Odyssey HealthCare, Inc. (a) 15,700 152,918 PharMerica Corp. (a) 14,869 335,891 Virtual Radiologic Corp. (a) 2,100 27,825 ------------- 3,837,532 - ----------------------------------------------------------------------------------------------------------------------------------
22 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Homebuilding - 0.2% Beazer Homes USA, Inc. (b) 17,900 $ 99,703 Hovnanian Enterprises, Inc. Class A (a)(b) 22,000 120,560 M/I Homes, Inc. 6,700 105,391 Meritage Homes Corp. (a)(b) 14,600 221,482 Ryland Group, Inc. 20,100 438,381 Standard-Pacific Corp. 30,500 103,090 ------------- 1,088,607 - ---------------------------------------------------------------------------------------------------------------------------------- Hotel/Motel - 0.1% Lodgian, Inc. (a) 7,700 60,291 Marcus Corp. 8,879 132,741 Morgans Hotel Group Co. (a) 13,600 140,080 ------------- 333,112 - ---------------------------------------------------------------------------------------------------------------------------------- Household Furnishings - 0.3% American Woodmark Corp. (b) 5,100 107,763 Ethan Allen Interiors, Inc. (b) 11,700 287,820 Furniture Brands International, Inc. (b) 20,000 267,200 hhgregg, Inc. (a) 4,200 42,000 Haverty Furniture Cos., Inc. 9,336 93,733 Hooker Furniture Corp. 4,700 81,404 La-Z-Boy, Inc. (b) 22,100 169,065 Libbey, Inc. 6,700 49,848 Sealy Corp. (b) 17,900 102,746 Tempur-Pedic International, Inc. (b) 34,000 265,540 ------------- 1,467,119 - ---------------------------------------------------------------------------------------------------------------------------------- Identification Control & Advanced Energy Industries, Inc. (a) 16,312 223,474 Filter Devices - 0.8% Asyst Technologies, Inc. (a) 23,541 84,041 Badger Meter, Inc. (b) 7,200 363,816 Beacon Power Corp. (a)(b) 39,300 82,530 ESCO Technologies, Inc. (a) 12,332 578,617 Flanders Corp. (a) 6,900 41,745 The Gorman-Rupp Co. 6,297 250,872 L-1 Identity Solutions, Inc. (a) 30,928 411,961 Mine Safety Appliances Co. (b) 14,626 584,894 Peerless Manufacturing Co. (a) 3,300 154,671 Robbins & Myers, Inc. 13,124 654,494 Sun Hydraulics, Inc. 5,150 166,191 Veeco Instruments, Inc. (a) 15,127 243,242 Vicor Corp. 9,196 91,776 Watts Water Technologies, Inc. Class A 9 (b) 13,836 344,516 ------------- 4,276,840 - ---------------------------------------------------------------------------------------------------------------------------------- Industrial Products - 0.0% TAL International Group, Inc. 6,400 145,536 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance: Life - 0.4% American Equity Investment Life Holding Co. 28,300 230,645 Citizens, Inc. (a)(b) 17,500 107,275 Delphi Financial Group, Inc. Class A 19,705 455,974 Kansas City Life Insurance Co. 1,542 64,301 Life Partners Holdings, Inc. 3,200 63,936 National Western Life Insurance Co. Class A 935 204,298 The Phoenix Cos., Inc. 55,600 423,116 Presidential Life Corp. 9,893 152,550 Universal American Financial Corp. (a) 19,000 194,180 ------------- 1,896,275 - ----------------------------------------------------------------------------------------------------------------------------------
23 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Insurance: Multi-Line - 1.0% Assured Guaranty Ltd. 25,800 $ 464,142 CNA Surety Corp. (a) 6,186 78,191 Crawford & Co. Class B (a) 11,509 91,957 eHealth, Inc. (a) 12,300 217,218 EMC Insurance Group, Inc. 2,200 52,976 FBL Financial Group, Inc. Class A 5,625 111,825 Flagstone Reinsurance Holdings Ltd. 14,500 170,955 Hilb Rogal & Hobbs Co. 17,106 743,427 Horace Mann Educators Corp. 19,568 274,343 Independence Holding Co. 1,040 10,161 Maiden Holdings Ltd. 25,000 158,500 Max Capital Group Ltd. 26,800 571,644 Meadowbrook Insurance Group, Inc. 13,700 72,610 Montpelier Re Holdings Ltd. 42,400 625,400 Pico Holdings, Inc. (a) 7,997 347,470 Platinum Underwriters Holdings Ltd. 23,100 753,291 Primus Guaranty Ltd. (a)(b) 12,600 36,666 Quanta Capital Holdings Ltd. 31,500 83,160 Zenith National Insurance Corp. 17,455 613,718 ------------- 5,477,654 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance: Property-Casualty - 1.8% AmCOMP, Inc. (a) 7,200 69,984 AmTrust Financial Services, Inc. 7,800 98,280 American Physicians Capital, Inc. 4,156 201,317 American Safety Insurance Holdings Ltd. (a) 5,800 83,404 Amerisafe, Inc. (a) 8,900 141,866 Argo Group International Holdings Ltd. (a) 14,579 489,271 Aspen Insurance Holdings Ltd. (c) 40,300 953,901 Baldwin & Lyons, Inc. Class B 3,432 59,991 CastlePoint Holdings, Ltd. 17,200 156,348 Darwin Professional Underwriters, Inc. (a) 2,900 89,320 Donegal Group, Inc. Class A 4,544 72,113 Employers Holdings, Inc. 24,180 500,526 Enstar Group Ltd. (a) 2,500 218,750 FPIC Insurance Group, Inc. (a) 4,200 190,344 First Acceptance Corp. (a) 3,377 10,806 First Mercury Financial Corp. (a) 5,900 104,076 Greenlight Capital Re Ltd. (a) 14,400 329,184 Hallmark Financial Services, Inc. (a) 2,800 27,076 Harleysville Group, Inc. 6,762 228,758 IPC Holdings, Ltd. 25,400 674,370 Infinity Property & Casualty Corp. 7,700 319,704 NYMAGIC, Inc. 3,000 57,480 National Interstate Corp. 2,800 51,464 Navigators Group, Inc. (a) 6,300 340,515 Odyssey Re Holdings Corp. 11,500 408,250 PMA Capital Corp. Class A (a) 15,206 140,047 The PMI Group, Inc. 41,600 81,120 ProAssurance Corp. (a) 15,223 732,379 Procentury Corp. 6,100 96,624
24 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- RLI Corp. 8,854 $ 438,007 SCPIE Holdings, Inc. (a) 4,600 128,754 Safety Insurance Group, Inc. 7,700 274,505 SeaBright Insurance Holdings, Inc. (a) 9,700 140,456 Selective Insurance Group, Inc. 25,308 474,778 State Auto Financial Corp. 5,612 134,295 Tower Group, Inc. 9,600 203,424 United America Indemnity, Ltd. (a) 9,600 128,352 United Fire & Casualty Co. 11,300 304,309 Validus Holdings Ltd. 30,500 648,125 ------------- 9,802,273 - ---------------------------------------------------------------------------------------------------------------------------------- Investment Management Ampal-American Israel Corp. Class A (a)(b) 6,000 27,060 Companies - 0.6% Apollo Investment Corp. (b) 67,146 962,202 Ares Capital Corp. 45,872 462,390 Calamos Asset Management, Inc. Class A 9,800 166,894 Capital Southwest Corp. 1,200 125,076 Cohen & Steers, Inc. (b) 8,000 207,760 Epoch Holding Corp. 4,800 43,776 FBR Capital Markets Corp. (a) 11,300 56,839 GAMCO Investors, Inc. Class A 3,796 188,358 Kohlberg Capital Corp. 7,800 78,000 MCG Capital Corp. 40,000 159,200 NGP Capital Resources Co. 8,623 132,880 National Financial Partners Corp. (b) 19,200 380,544 Pzena Investment Management, Inc. Class A 4,200 53,592 Resource America, Inc. Class A 6,349 59,173 U.S. Global Investors, Inc. (b) 5,600 93,800 Westwood Holdings Group Inc. 2,900 115,420 ------------- 3,312,964 - ---------------------------------------------------------------------------------------------------------------------------------- Jewelry, Watches & Gemstones - 0.2% Bidz.com, Inc. (a) 3,600 31,176 Fossil, Inc. (a) 21,300 619,191 Fuqi International, Inc. (a) 5,500 48,180 Movado Group, Inc. 7,500 148,500 ------------- 847,047 - ---------------------------------------------------------------------------------------------------------------------------------- Leisure Time - 0.4% Callaway Golf Co. 31,300 370,279 Great Wolf Resorts, Inc. (a) 12,800 55,936 Life Time Fitness, Inc. (a)(b) 16,400 484,620 Pool Corp. 23,400 415,584 Rick's Cabaret International, Inc. (a) 2,600 43,654 Six Flags, Inc. (a)(b) 34,500 39,675 Steinway Musical Instruments, Inc. (a) 3,500 92,400 Town Sports International Holdings, Inc. (a) 8,000 74,720 Vail Resorts, Inc. (a)(b) 14,756 631,999 ------------- 2,208,867 - ---------------------------------------------------------------------------------------------------------------------------------- Machine Tools - 0.0% Hurco Companies, Inc. (a) 2,700 83,403 Thermadyne Holdings Corp. (a) 7,000 103,460 ------------- 186,863 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery & Engineering - 0.1% Applied Industrial Technologies, Inc. 20,090 485,575 - ----------------------------------------------------------------------------------------------------------------------------------
25 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Machinery: Agricultural - 0.1% Alamo Group, Inc. 3,400 $ 70,006 Gehl Co. (a) 4,950 73,211 Lindsay Manufacturing Co. 5,613 476,937 Titan Machinery, Inc. (a) 3,500 109,620 ------------- 729,774 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery: Construction & Astec Industries, Inc. (a) 8,517 273,736 Handling - 0.1% NACCO Industries, Inc. Class A 2,587 192,343 ------------- 466,079 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery: Engines - 0.1% Briggs & Stratton Corp. (b) 22,400 284,032 Harbin Electric, Inc. (a) 3,500 49,735 Raser Technologies, Inc. (a)(b) 22,500 219,150 ------------- 552,917 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery: Industrial/Specialty - 1.1% Actuant Corp. Class A 26,300 824,505 Altra Holdings, Inc. (a) 13,200 221,892 Chart Industries, Inc. (a) 13,400 651,776 Colfax Corp. (a) 10,700 268,463 Columbus McKinnon Corp. (a) 8,800 211,904 DXP Enterprises, Inc. (a) 1,900 79,116 EnPro Industries, Inc. (a) 9,700 362,198 Graham Corp. 2,500 185,275 Kadant, Inc. (a) 6,470 146,222 Middleby Corp. (a) 8,300 364,453 Nordson Corp. 15,910 1,159,680 Tecumseh Products Co. Class A (a) 8,028 263,158 Tennant Co. 7,874 236,771 Twin Disc, Inc. 4,100 85,813 Woodward Governor Co. 27,758 989,850 ------------- 6,051,076 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery: Oil Well Equipment & Allis-Chalmers Energy, Inc. (a)(b) 13,000 231,400 Services - 2.0% Basic Energy Services, Inc. (a) 19,400 611,100 Bolt Technology Corp. (a) 4,500 101,565 CARBO Ceramics, Inc. 9,602 560,277 Cal Dive International, Inc. (a) 20,574 294,002 Complete Production Services, Inc. (a) 22,600 823,092 Dril-Quip, Inc. (a) 14,576 918,288 Exterran Holdings, Inc. (a) 1 71 Flotek Industries, Inc. (a)(b) 10,800 222,696 Gulf Island Fabrication, Inc. 6,017 294,412 Hornbeck Offshore Services, Inc. (a) 10,940 618,219 Lufkin Industries, Inc. 6,900 574,632 Mitcham Industries, Inc. (a) 5,200 88,816 NATCO Group, Inc. Class A (a) 9,700 528,941 Natural Gas Services Group (a) 6,100 185,928 Newpark Resources, Inc. (a) 42,620 334,993 Parker Drilling Co. (a) 54,681 547,357 RPC, Inc. 13,700 230,160 Sulphco, Inc. (a)(b) 19,500 44,265 Superior Well Services, Inc. (a) 8,200 260,022 T-3 Energy Services, Inc. (a) 6,100 484,767
26 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ----------------------------------------------------------------------------------------------------------------------------------- Trico Marine Services, Inc. (a)(b) 5,900 $ 214,878 Union Drilling, Inc. (a) 6,500 140,920 W-H Energy Services, Inc. (a) 14,657 1,403,261 Willbros Group, Inc. (a) 18,300 801,723 ------------- 10,515,785 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery: Specialty - 0.1% Cascade Corp. 4,400 186,208 Flow International Corp. (a) 17,100 133,380 Key Technology Inc. (a) 3,000 95,430 Semitool, Inc. (a) 8,341 62,641 TurboChef Technologies, Inc. (a) 8,600 41,108 ------------- 518,767 - ---------------------------------------------------------------------------------------------------------------------------------- Manufactured Housing - 0.1% Cavco Industries, Inc. (a) 3,400 111,282 Champion Enterprises, Inc. (a) 36,827 215,438 Palm Harbor Homes, Inc. (a)(b) 4,605 25,466 Skyline Corp. 3,301 77,574 ------------- 429,760 - ---------------------------------------------------------------------------------------------------------------------------------- Manufacturing - 0.1% Federal Signal Corp. 22,759 273,108 Fushi Copperweld, Inc. (a) 7,300 173,229 Standex International Corp. 5,931 123,009 ------------- 569,346 - ---------------------------------------------------------------------------------------------------------------------------------- Medical & Dental Instruments & Abaxis, Inc. (a) 10,600 255,778 Supplies - 2.8% Abiomed, Inc. (a) 15,000 266,250 Align Technology, Inc. (a) 29,400 308,406 Alphatec Holdings, Inc. (a) 10,700 43,656 American Medical Systems Holdings, Inc. (a)(b) 34,500 515,775 AngioDynamics, Inc. (a) 12,100 164,802 Atrion Corp. 700 67,074 Bio-Rad Laboratories, Inc. Class A (a) 8,900 719,921 BioMimetic Therapeutics, Inc. (a) 5,400 64,368 CONMED Corp. (a) 14,028 372,443 Cantel Medical Corp. (a) 4,500 45,540 Cardiac Science Corp. (a) 8,600 70,520 Cepheid, Inc. (a) 26,800 753,616 Clinical Data, Inc. (a) 4,600 65,642 Conceptus, Inc. (a) 14,900 275,501 CryoLife, Inc. (a) 14,000 160,160 Cyberonics, Inc. (a) 11,269 244,537 DexCom, Inc. (a) 11,800 71,272 ev3, Inc. (a) 32,932 312,195 Exactech, Inc. (a) 3,800 97,698 Hansen Medical, Inc. (a)(b) 8,300 138,776 I-Flow Corp. (a) 9,200 93,380 ICU Medical, Inc. (a) 5,950 136,136 IRIS International, Inc. (a) 9,300 145,545 Immucor, Inc. (a) 33,043 855,153 Insulet Corp. (a) 9,200 144,716 Invacare Corp. 15,822 323,402 Landauer, Inc. 4,278 240,595 Medical Action Industries, Inc. (a) 6,550 67,924
27 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Mentor Corp. (b) 16,044 $ 446,344 Meridian Bioscience, Inc. 18,900 508,788 Merit Medical Systems, Inc. (a) 12,610 185,367 Micrus Endovascular Corp. (a) 7,200 100,944 Neogen Corp. (a) 7,300 167,097 NuVasive, Inc. (a) 16,800 750,288 OraSure Technologies, Inc. (a) 22,259 83,249 Orthofix International NV (a) 8,100 234,495 Orthovita, Inc. (a) 28,800 59,040 Owens & Minor, Inc. 19,398 886,295 PSS World Medical, Inc. (a) 29,373 478,780 Palomar Medical Technologies, Inc. (a) 8,700 86,826 SonoSite, Inc. (a) 8,015 224,500 Spectranetic Corp. (a) 14,800 145,928 Stereotaxis, Inc. (a)(b) 12,400 66,464 Steris Corp. 27,300 785,148 SurModics, Inc. (a)(b) 7,583 340,022 Symmetry Medical, Inc. (a) 16,800 272,496 Synovis Life Technologies, Inc. (a) 6,400 120,512 Thoratec Corp. (a) 25,847 449,479 Trans1, Inc. (a)(b) 6,400 96,448 Vision-Sciences Inc. (a) 6,900 25,806 Vital Signs, Inc. 3,824 217,127 Volcano Corp. (a) 23,100 281,820 West Pharmaceutical Services, Inc. 15,176 656,817 Wright Medical Group, Inc. (a) 17,400 494,334 ------------- 15,185,195 - ---------------------------------------------------------------------------------------------------------------------------------- Medical Services - 0.4% Air Methods Corp. (a) 5,100 127,500 Almost Family, Inc. (a) 3,400 90,440 Genoptix, Inc. (a) 4,200 132,510 Hanger Orthopedic Group, Inc. (a) 11,600 191,284 Magellan Health Services, Inc. (a) 19,100 707,273 Parexel International Corp. (a) 26,894 707,581 RadNet, Inc. (a) 9,400 58,280 RehabCare Group, Inc. (a) 8,595 137,778 US Physical Therapy, Inc. (a) 6,300 103,383 ------------- 2,256,029 - ---------------------------------------------------------------------------------------------------------------------------------- Metal Fabricating - 0.8% Ampco-Pittsburgh Corp. 4,100 182,368 CIRCOR International, Inc. 8,300 406,617 Dynamic Materials Corp. 6,000 197,700 Encore Wire Corp. 8,850 187,532 Haynes International, Inc. (a) 5,800 333,790 Insteel Industries, Inc. 8,000 146,480 Kaydon Corp. 13,026 669,667 L.B. Foster Co. Class A (a) 5,200 172,640 Mueller Water Products, Inc. Series A (b) 55,760 449,983 NN, Inc. 8,400 117,096 Northwest Pipe Co. (a) 4,100 228,780 Omega Flex, Inc. 1,200 18,240
28 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- RBC Bearings, Inc. (a) 10,600 $ 353,192 RTI International Metals, Inc. (a) 11,113 395,845 Superior Essex, Inc. (a) 9,400 419,522 Trimas Corp. (a) 4,300 25,757 ------------- 4,305,209 - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Minerals Miscellaneous - 0.9% A.M. Castle & Co. 8,200 234,602 AMCOL International Corp. 12,573 357,828 Apex Silver Mines Ltd. (a)(b) 28,000 137,480 Brush Engineered Materials, Inc. (a) 9,411 229,817 Compass Minerals International, Inc. 15,300 1,232,568 General Moly, Inc. (a) 29,100 229,017 GrafTech International Ltd. (a) 48,744 1,307,802 Hecla Mining Co. (a) 60,500 560,230 Horsehead Holding Corp. (a) 17,400 211,584 Minerals Technologies, Inc. 8,953 569,321 Stillwater Mining Co. (a)(b) 18,664 220,795 United States Lime & Minerals Inc. (a) 700 27,699 Uranium Resources, Inc. (a)(b) 21,900 80,811 ------------- 5,399,554 - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Business & Consumer Core-Mark Holdings Co., Inc. (a) 4,300 112,660 Discretionary - 0.0% - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Consumer Staples - 0.0% Reddy Ice Holdings, Inc. 8,500 116,280 - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Health Care - 0.0% MedAssets, Inc. (a) 6,000 102,300 - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Materials & Ceradyne, Inc. (a) 12,450 427,035 Commodities - 0.2% Lydall, Inc. (a) 8,600 107,930 Symyx Technologies, Inc. (a) 15,979 111,533 WD-40 Co. 8,089 236,603 ------------- 883,101 - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Materials & Insituform Technologies, Inc. Class A (a) 13,138 200,092 Processing - 0.1% Rogers Corp. (a) 8,755 329,100 Xerium Technologies, Inc. (b) 6,600 26,136 ------------- 555,328 - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Producer Durables - 0.1% Blount International, Inc. (a) 18,100 210,141 Park-Ohio Holdings Corp. (a) 3,900 57,564 ------------- 267,705 - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous Technology - 0.1% iRobot Corp. (a)(b) 9,200 126,408 Microvision, Inc. (a) 25,400 69,850 TerreStar Corp. (a) 29,800 118,604 Vocus, Inc. (a) 8,000 257,360 ------------- 572,222 - ---------------------------------------------------------------------------------------------------------------------------------- Multi-Sector Companies - 0.3% Brunswick Corp. 42,800 453,680 Compass Diversified Holdings 12,400 141,732 GenCorp, Inc. (a) 27,071 193,828 GenTek Inc. (a) 3,500 94,115 Kaman Corp. Class A 12,394 282,087 Lancaster Colony Corp. 9,599 290,658 Raven Industries, Inc. 7,600 249,128 United Capital Corp. (a) 600 11,520 ------------- 1,716,748 - ----------------------------------------------------------------------------------------------------------------------------------
29 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Office Furniture & Business ACCO Brands Corp. (a) 24,600 $ 276,258 Equipment - 0.3% HNI Corp. 21,900 386,754 Herman Miller, Inc. 26,600 662,074 Kimball International, Inc. Class B 16,474 136,405 Knoll, Inc. 22,400 272,160 Presstek, Inc. (a) 14,700 72,912 ------------- 1,806,563 - ---------------------------------------------------------------------------------------------------------------------------------- Offshore Drilling - 0.0% Bois d'Arc Energy, Inc. (a) 9,000 218,790 - ---------------------------------------------------------------------------------------------------------------------------------- Oil: Crude Producers - 4.2% APCO Argentina, Inc. 2,000 57,900 ATP Oil & Gas Corp. (a) 13,100 517,057 Abraxas Petroleum Corp. (a) 21,700 117,397 American Oil & Gas, Inc. (a) 16,300 63,896 Arena Resources, Inc. (a) 16,600 876,812 Atlas America, Inc. 16,287 733,729 BMB Munai, Inc. (a) 19,400 115,236 BPZ Resources, Inc. (a)(b) 28,400 834,960 Berry Petroleum Co. Class A 20,202 1,189,494 Bill Barrett Corp. (a) 17,300 1,027,793 Brigham Exploration Co. (a) 22,500 356,175 Bronco Drilling Co., Inc. (a) 12,000 220,560 Callon Petroleum Co. (a) 9,900 270,864 Cano Petroleum, Inc. (a) 17,900 142,126 Carrizo Oil & Gas, Inc. (a) 12,900 878,361 Cheniere Energy, Inc. (a) 25,000 109,250 Clayton Williams Energy, Inc. (a) 2,600 285,870 Comstock Resources, Inc. (a) 21,557 1,820,057 Contango Oil & Gas Co. (a) 6,200 576,104 Delek US Holdings, Inc. 4,600 42,366 Double Eagle Pete & Mining Co. (a) 3,600 65,628 EXCO Resources, Inc. (a) 35,200 1,299,232 Endeavour International Corp. (a) 53,200 115,444 Energy Partners Ltd. (a) 15,737 234,796 Energy XXI Bermuda Ltd. (a) 34,700 239,777 FX Energy, Inc. (a) 17,800 93,806 Gasco Energy, Inc. (a) 47,000 195,050 GeoGlobal Resources, Inc. (a)(b) 16,300 34,719 GeoResources, Inc. (a) 2,400 44,208 Geokinetics, Inc. (a) 2,600 47,086 Goodrich Petroleum Corp. (a)(b) 9,500 787,740 Gran Tierra Energy, Inc. (a) 45,200 360,244 Grey Wolf, Inc. (a) 84,843 766,132 Gulfport Energy Corp. (a) 13,000 214,110 Harvest Natural Resources, Inc. (a) 16,700 184,702 Houston American Energy Corp. (a) 6,500 72,930 McMoRan Exploration Co. (a)(b) 23,800 654,976 Meridian Resource Corp. (a) 36,811 108,592 Northern Oil And Gas, Inc. (a) 10,000 132,800 Oilsands Quest, Inc. (a) 77,500 503,750 Panhandle Oil & Gas Inc. 3,800 128,668
30 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Parallel Petroleum Corp. (a) 20,100 $ 404,613 Petroleum Development Corp. (a) 7,000 465,430 Petroquest Energy, Inc. (a) 20,600 554,140 Pioneer Drilling Co. (a) 24,100 453,321 PrimeEnergy Corp. (a) 300 16,089 Quest Resource Corp. (a) 10,400 118,664 Rex Energy Corp. (a) 8,300 219,120 Rosetta Resources, Inc. (a) 24,200 689,700 Stone Energy Corp. (a) 13,478 888,335 Swift Energy Co. (a) 14,417 952,387 TXCO Resources, Inc. (a) 15,700 184,632 Toreador Resources Corp. (a)(b) 7,500 63,975 Tri-Valley Corp. (a) 11,800 87,674 Venoco, Inc. (a) 9,400 218,174 VeraSun Energy Corp. (a)(b) 50,980 210,547 Warren Resources, Inc. (a) 28,400 416,912 Western Refining, Inc. 14,900 176,416 ------------- 22,640,526 - ---------------------------------------------------------------------------------------------------------------------------------- Oil: Integrated Domestic - 0.3% Delta Petroleum Corp. (a)(b) 29,500 752,545 GMX Resources Inc. (a)(b) 7,100 526,110 Ram Energy Resources, Inc. (a) 19,300 121,397 ------------- 1,400,052 - ---------------------------------------------------------------------------------------------------------------------------------- Oil: Integrated International - 0.0% Vaalco Energy, Inc. (a) 28,100 238,007 - ---------------------------------------------------------------------------------------------------------------------------------- Paints & Coatings - 0.2% Ferro Corp. 21,276 399,138 H.B. Fuller Co. 25,080 562,795 ------------- 961,933 - ----------------------------------------------------------------------------------------------------------------------------------- Paper - 0.4% AbitibiBowater, Inc. (b) 26,044 242,990 Albany International Corp. Class A 14,574 422,646 Boise, Inc. (a)(b) 15,800 60,830 Buckeye Technologies, Inc. (a) 16,598 140,419 Kapstone Paper and Packaging Corp. (a) 10,200 68,034 Mercer International, Inc. (a)(b) 14,300 106,964 Multi-Color Corp. 3,950 82,911 Neenah Paper, Inc. 6,900 115,299 P.H. Glatfelter Co. 19,801 267,512 Rock-Tenn Co. Class A 17,880 536,221 Verso Paper Corp. (a) 7,900 66,834 Wausau Paper Corp. 20,942 161,463 ------------- 2,272,123 - ---------------------------------------------------------------------------------------------------------------------------------- Plastics - 0.0% Spartech Corp. 14,154 133,472 - ---------------------------------------------------------------------------------------------------------------------------------- Pollution Control & Environmental American Ecology Corp. 7,600 224,428 Services - 0.4% Darling International, Inc. (a) 38,300 632,716 EnergySolutions, Inc. 15,500 346,425 Fuel Tech, Inc. (a)(b) 8,400 148,008 Headwaters, Inc. (a) 20,646 243,003 Met-Pro Corp. 8,000 106,800 Metalico, Inc. (a) 12,100 211,992 Team, Inc. (a) 9,000 308,880 ------------- 2,222,252 - ----------------------------------------------------------------------------------------------------------------------------------
31 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Power Transmission Equipment - 0.1% Regal-Beloit Corp. 15,151 $ 640,130 Synthesis Energy Systems, Inc. (a) 10,200 91,902 ------------- 732,032 - ---------------------------------------------------------------------------------------------------------------------------------- Printing & Copying Services - 0.2% Bowne & Co., Inc. 12,782 162,970 Cenveo, Inc. (a) 22,800 222,756 Schawk, Inc. 5,500 65,945 VistaPrint Ltd. (a)(b) 20,700 553,932 ------------- 1,005,603 - ---------------------------------------------------------------------------------------------------------------------------------- Production Technology ATMI, Inc. (a) 15,757 439,935 Equipment - 1.1% Axcelis Technologies, Inc. (a) 44,800 218,624 Brooks Automation, Inc. (a) 30,078 248,745 Cognex Corp. 19,856 457,681 Cymer, Inc. (a) 14,800 397,824 Dionex Corp. (a) 8,731 579,476 Electro Scientific Industries, Inc. (a) 12,861 182,240 Emcore Corp. (a) 36,200 226,612 Entegris, Inc. (a) 50,499 330,768 Esterline Technologies Corp. (a) 13,890 684,221 FEI Co. (a) 17,755 404,459 Intevac, Inc. (a) 10,300 116,184 K-Tron International, Inc. (a) 1,300 168,480 Kulicke & Soffa Industries, Inc. (a) 25,356 184,845 LTX Corp. (a) 29,703 65,347 MTS Systems Corp. 8,300 297,804 Mattson Technology, Inc. (a) 23,399 111,379 Photon Dynamics, Inc. (a) 9,300 140,244 Photronics, Inc. (a) 19,079 134,316 Rofin-Sinar Technologies, Inc. (a) 14,100 425,820 Rudolph Technologies, Inc. (a) 13,473 103,742 Ultra Clean Holdings, Inc. (a) 9,000 71,640 Ultratech, Inc. (a) 11,090 172,117 ------------- 6,162,503 - ---------------------------------------------------------------------------------------------------------------------------------- Publishing: Miscellaneous - 0.2% Consolidated Graphics, Inc. (a) 4,900 241,423 Courier Corp. 3,750 75,300 GateHouse Media, Inc. (b) 10,640 26,174 Idearc, Inc. 73,600 172,960 Martha Stewart Living Omnimedia, Inc. 11,982 88,667 Class A (a)(b) Playboy Enterprises, Inc. Class B (a) 10,107 49,929 Primedia, Inc. 12,800 59,648 Scholastic Corp. (a) 11,560 331,310 ------------- 1,045,411 - ---------------------------------------------------------------------------------------------------------------------------------- Publishing: Newspapers - 0.2% AH Belo Corp. 7,980 45,486 Belo Corp. Class A 44,000 321,640 Dolan Media Co. (a) 11,000 200,200 Journal Communications, Inc. Class A 20,000 96,400 Lee Enterprises, Inc. (b) 21,300 84,987
32 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- McClatchy Co. Class A 28,500 $ 193,230 Media General, Inc. Class A (b) 10,300 123,085 ------------- 1,065,028 - ---------------------------------------------------------------------------------------------------------------------------------- Radio & TV Broadcasters - 0.2% CKX, Inc. (a) 24,400 213,500 Citadel Broadcasting Corp. (a)(b) 85,130 103,858 Cox Radio, Inc. Class A (a) 12,100 142,780 Cumulus Media, Inc. Class A (a) 14,300 56,342 Entercom Communications Corp. 14,800 103,896 Fisher Communications, Inc. (a) 3,000 103,320 Gray Television, Inc. 19,500 55,965 Lin TV Corp. Class A (a) 12,700 75,692 Outdoor Channel Holdings, Inc. (a) 9,100 63,518 Sinclair Broadcast Group, Inc. Class A 26,264 199,606 Westwood One, Inc. (a) 33,700 41,788 World Wrestling Entertainment, Inc. 11,796 182,484 ------------- 1,342,749 - ---------------------------------------------------------------------------------------------------------------------------------- Railroad Equipment - 0.3% American Railcar Industries, Inc. 3,600 60,408 Freightcar America, Inc. 5,600 198,800 Greenbrier Cos., Inc. 7,800 158,340 Westinghouse Air Brake Technologies Corp. 22,839 1,110,432 ------------- 1,527,980 - ---------------------------------------------------------------------------------------------------------------------------------- Railroads - 0.1% Genesee & Wyoming, Inc. Class A (a) 14,175 482,234 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate - 0.3% AMREP Corp. (b) 800 38,072 Avatar Holdings, Inc. (a)(b) 2,700 81,783 Bluegreen Corp. (a) 6,100 36,905 Cogdell Spencer, Inc. 5,900 95,875 Consolidated-Tomoka Land Co. 2,600 109,356 FX Real Estate and Entertainment, Inc. (a) 3,220 6,118 Forestar Real Estate Group, Inc. (a) 17,500 333,375 Griffin Land & Nurseries, Inc. 1,400 42,980 Grubb & Ellis Co. 15,100 58,135 Hilltop Holdings, Inc. (a) 21,372 220,345 Meruelo Maddux Properties, Inc. (a) 17,380 37,888 Resource Capital Corp. 10,100 72,821 Stratus Properties, Inc. (a) 2,000 34,780 Tejon Ranch Co. (a) 5,115 184,447 Thomas Properties Group, Inc. 11,200 110,208 ------------- 1,463,088 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Investment Acadia Realty Trust 15,901 368,108 Trusts (REITs) - 5.2% Agree Realty Corp. 3,700 81,585 Alexander's, Inc. (a) 867 269,290 American Campus Communities, Inc. 18,903 526,264 American Capital Agency Corp. 5,300 88,192 Anthracite Capital, Inc. (c)(d) 26,600 187,264 Anworth Mortgage Asset Corp. 39,100 254,541 Arbor Realty Trust, Inc. 6,500 58,305 Ashford Hospitality Trust, Inc. (c) 58,780 271,564 Associated Estates Realty Corp. 6,900 73,899 BioMed Realty Trust, Inc. 33,820 829,605
33 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- CapLease, Inc. 20,200 $ 151,298 Capital Trust, Inc. (b) 7,900 151,759 Capstead Mortgage Corp. 26,400 286,440 Care Investment Trust, Inc. 7,600 71,668 Cedar Shopping Centers, Inc. 20,300 237,916 Chimera Investment Corp. 15,800 142,358 Colonial Properties Trust 23,300 466,466 Corporate Office Properties Trust 18,300 628,239 Cousins Properties, Inc. (b) 21,900 505,890 DCT Industrial Trust, Inc. 80,810 669,107 DiamondRock Hospitality Co. 44,450 484,061 Dupont Fabros Technology, Inc. 5,900 109,976 Eastgroup Properties, Inc. 12,127 520,248 Education Realty Trust, Inc. 13,100 152,615 Entertainment Properties Trust 14,380 710,947 Equity Lifestyle Properties, Inc. 9,694 426,536 Equity One, Inc. 14,600 300,030 Extra Space Storage, Inc. 36,950 567,552 FelCor Lodging Trust, Inc. 30,970 325,185 First Industrial Realty Trust, Inc. (b) 21,000 576,870 First Potomac Realty Trust 11,600 176,784 Franklin Street Properties Corp. 25,800 326,112 Friedman Billings Ramsey Group, Inc. Class A 60,800 91,200 Getty Realty Corp. 8,200 118,162 Glimcher Realty Trust 17,956 200,748 Gramercy Capital Corp. (b) 19,802 229,505 Hatteras Financial Corp. 5,900 135,641 Healthcare Realty Trust, Inc. 23,800 565,726 Hersha Hospitality Trust 16,000 120,800 Highwoods Properties, Inc. 27,000 848,340 Home Properties, Inc. 15,020 721,861 Inland Real Estate Corp. 26,400 380,688 Investors Real Estate Trust (b) 27,300 260,442 JER Investors Trust, Inc. (b) 10,800 68,040 Kite Realty Group Trust 9,440 118,000 LTC Properties, Inc. 10,900 278,604 LaSalle Hotel Properties 19,020 477,973 Lexington Corporate Properties Trust 23,192 316,107 MFA Mortgage Investments, Inc. 71,100 463,572 Maguire Properties, Inc. 18,200 221,494 Medical Properties Trust, Inc. 32,800 331,936 Mid-America Apartment Communities, Inc. 12,329 629,272 Mission West Properties, Inc. 9,300 101,928 Monmouth Real Estate Investment Corp. Class A 11,600 74,240 National Health Investors, Inc. 9,629 274,523 National Retail Properties, Inc. 34,575 722,618 Newcastle Investment Corp. (b) 26,400 185,064 NorthStar Realty Finance Corp. (b) 28,100 233,792 Omega Healthcare Investors, Inc. 32,900 547,785
34 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- One Liberty Properties, Inc. 4,700 $ 76,657 PS Business Parks, Inc. 6,708 346,133 Parkway Properties, Inc. 7,304 246,364 Pennsylvania Real Estate Investment Trust 17,332 401,062 Post Properties, Inc. 20,786 618,384 Potlatch Corp. 18,547 836,841 RAIT Investment Trust (b) 29,410 218,222 Ramco-Gershenson Properties Trust 8,800 180,752 Realty Income Corp. (b) 47,800 1,087,928 Redwood Trust, Inc. (b) 15,395 350,852 Saul Centers, Inc. 4,522 212,489 Senior Housing Properties Trust 44,814 875,217 Sovran Self Storage, Inc. 10,680 443,861 Strategic Hotel Capital, Inc. 32,700 306,399 Sun Communities, Inc. 7,843 142,978 Sunstone Hotel Investors, Inc. 28,600 474,760 Tanger Factory Outlet Centers, Inc. 14,822 532,554 U-Store-It Trust 24,670 294,807 Universal Health Realty Income Trust 5,427 162,810 Urstadt Biddle Properties, Inc. Class A 7,900 115,814 Washington Real Estate Investment Trust 23,265 699,113 Winthrop Realty Trust, Inc. 18,700 67,320 ------------- 28,406,052 - ---------------------------------------------------------------------------------------------------------------------------------- Recreational Vehicles & Boats - 0.2% Fleetwood Enterprises, Inc. (a)(b) 30,499 79,907 Marine Products Corp. 3,175 20,955 Polaris Industries, Inc. (b) 15,500 625,890 Winnebago Industries, Inc. (b) 14,290 145,615 ------------- 872,367 - ---------------------------------------------------------------------------------------------------------------------------------- Rental & Leasing Services: Aircastle Ltd. 23,400 196,794 Commercial - 0.1% Electro Rent Corp. 11,053 138,604 H&E Equipment Services, Inc. (a) 7,800 93,756 McGrath RentCorp 11,210 275,654 ------------- 704,808 - ---------------------------------------------------------------------------------------------------------------------------------- Rental & Leasing Services: Aaron Rents, Inc. (c) 20,593 459,842 Consumer - 0.3% Amerco, Inc. (a) 4,100 195,488 Dollar Thrifty Automotive Group, Inc. (a) 10,295 97,288 RSC Holdings, Inc. (a) 22,200 205,572 Rent-A-Center, Inc. (a) 31,400 645,898 ------------- 1,604,088 - ---------------------------------------------------------------------------------------------------------------------------------- Restaurants - 1.1% AFC Enterprises, Inc. (a) 12,000 95,880 BJ's Restaurants, Inc. (a) 8,000 77,840 Bob Evans Farms, Inc. 15,180 434,148 Buffalo Wild Wings, Inc. (a) 8,850 219,745 CBRL Group, Inc. 10,600 259,806 CEC Entertainment, Inc. (a) 10,350 289,903 CKE Restaurants, Inc. 24,100 300,527 California Pizza Kitchen, Inc. (a) 11,550 129,244 The Cheesecake Factory, Inc. (a) 31,800 505,938 Denny's Corp. (a) 45,100 128,084
35 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- DineEquity, Inc. (b) 8,248 $ 308,145 Domino's Pizza, Inc. (a) 19,250 221,375 Einstein Noah Restaurant Group, Inc. (a) 1,600 17,712 Jack in the Box, Inc. (a) 27,836 623,805 Krispy Kreme Doughnuts, Inc. (a)(b) 29,900 149,201 Landry's Restaurants, Inc. (b) 5,496 98,763 Luby's, Inc. (a) 12,000 73,200 O'Charleys, Inc. 10,384 104,463 P.F. Chang's China Bistro, Inc. (a)(b) 11,508 257,089 Papa John's International, Inc. (a) 10,396 276,430 Red Robin Gourmet Burgers, Inc. (a) 8,000 221,920 Ruby Tuesday, Inc. 27,500 148,500 Ruth's Hospitality Group, Inc. (a) 9,200 47,656 Sonic Corp. (a) 28,420 420,616 The Steak n Shake Co. (a) 11,428 72,339 Texas Roadhouse, Inc. Class A (a) 24,100 216,177 Triarc Cos. 28,050 177,557 ------------- 5,876,063 - ---------------------------------------------------------------------------------------------------------------------------------- Retail - 2.8% 1-800-FLOWERS.COM, Inc. Class A (a) 11,624 74,975 99 Cents Only Stores (a) 22,300 147,180 America's Car Mart, Inc. (a) 5,400 96,768 Asbury Automotive Group, Inc. 16,000 205,600 Aeropostale, Inc. (a)(c) 31,575 989,245 bebe Stores, Inc. 19,200 184,512 Big 5 Sporting Goods Corp. 10,600 80,242 Blockbuster, Inc. Class A (a)(b) 87,000 217,500 Blue Nile, Inc. (a)(b) 6,300 267,876 Borders Group, Inc. (b) 31,200 187,200 Brown Shoe Co., Inc. 20,127 272,721 The Buckle, Inc. 7,273 332,594 Build-A-Bear Workshop, Inc. (a) 7,500 54,525 CSK Auto Corp. (a) 20,134 211,004 Cabela's, Inc. Class A (a)(b) 16,600 182,766 Cache, Inc. (a) 5,350 57,245 Casual Male Retail Group, Inc. (a) 14,500 44,225 The Cato Corp. Class A 13,095 186,473 Central Garden & Pet Co. Class A (a) 30,534 125,189 Charlotte Russe Holding, Inc. (a) 10,500 186,480 Charming Shoppes, Inc. (a)(b) 53,740 246,667 Chico's FAS, Inc. (a) 83,500 448,395 The Children's Place Retail Stores, Inc. (a) 11,285 407,389 Christopher & Banks Corp. 16,728 113,750 Circuit City Stores, Inc. 83,300 240,737 Coldwater Creek, Inc. (a) 28,800 152,064 Collective Brands, Inc. (a) 28,900 336,107 Conn's, Inc. (a)(b) 4,600 73,922 Dillard's, Inc. Class A 26,900 311,233 Dress Barn, Inc. (a) 21,390 286,198 drugstore.com, Inc. (a) 44,100 83,790
36 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Ezcorp, Inc. (a) 18,900 $ 240,975 FGX International Holdings Ltd. (a) 5,700 45,828 FTD Group, Inc. 9,000 119,970 Fred's, Inc. 18,635 209,457 GSI Commerce, Inc. (a) 11,700 159,471 Gaiam, Inc. (a) 8,400 113,484 Genesco, Inc. (a) 11,238 346,917 Group 1 Automotive, Inc. 10,632 211,258 Gymboree Corp. (a) 13,558 543,269 Hibbett Sports, Inc. (a) 13,775 290,653 Hot Topic, Inc. (a) 20,781 112,425 Insight Enterprises, Inc. (a) 22,198 260,383 Jo-Ann Stores, Inc. (a) 11,905 274,172 Jos. A. Bank Clothiers, Inc. (a)(b) 8,633 230,933 Lawson Products, Inc. 1,988 49,263 MarineMax, Inc. (a) 7,600 54,492 Men's Wearhouse, Inc. 25,000 407,250 New York & Co. (a) 9,300 84,909 Overstock.com, Inc. (a)(b) 7,600 197,220 PC Connection, Inc. (a) 2,900 26,999 PC Mall, Inc. (a) 5,900 80,004 Pacific Sunwear of California, Inc. (a) 32,200 274,666 The Pantry, Inc. (a) 10,500 111,930 The Pep Boys - Manny, Moe & Jack 20,010 174,487 PetMed Express, Inc. (a) 11,900 145,775 Pier 1 Imports, Inc. (a) 42,299 145,509 PriceSmart, Inc. 6,000 118,680 Retail Ventures, Inc. (a) 11,800 54,280 Rush Enterprises, Inc. Class A (a) 15,900 190,959 Russ Berrie & Co., Inc. (a) 6,147 48,992 Sally Beauty Co., Inc. (a) 41,600 268,736 School Specialty, Inc. (a) 9,654 287,013 Shutterfly, Inc. (a) 10,000 122,100 Sonic Automotive, Inc. 13,400 172,726 Stage Stores, Inc. 18,150 211,811 Stamps.com, Inc. (a) 7,803 97,381 Stein Mart, Inc. 12,024 54,228 Syms Corp. 3,700 50,320 Systemax, Inc. 5,100 90,015 The Talbots, Inc. (b) 13,000 150,670 Tractor Supply Co. (a) 15,800 458,832 Tuesday Morning Corp. (a) 14,290 58,732 Tween Brands, Inc. (a) 12,266 201,898 Volcom, Inc. (a) 9,000 215,370 The Wet Seal, Inc. Class A (a) 45,600 217,512 Zale Corp. (a)(b) 17,000 321,130 Zumiez, Inc. (a)(b) 9,800 162,484 ------------- 15,270,140 - ----------------------------------------------------------------------------------------------------------------------------------
37 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Savings & Loan - 0.9% Anchor Bancorp Wisconsin, Inc. 9,037 $ 63,349 Bank Mutual Corp. 22,838 229,293 Berkshire Hills Bancorp, Inc. 5,000 118,250 Brookline Bancorp, Inc. 28,387 271,096 Brooklyn Federal Bancorp, Inc. 2,600 31,330 Danvers Bancorp, Inc. (a) 9,400 103,400 Dime Community Bancshares, Inc. 11,449 189,023 Downey Financial Corp. (b) 10,000 27,700 ESSA Bancorp, Inc. 9,200 115,184 First Financial Holdings, Inc. 5,626 96,655 First Financial Northwest, Inc. 12,100 120,153 First Niagara Financial Group, Inc. 51,653 664,258 First Place Financial Corp. 7,900 74,260 FirstFed Financial Corp. (a)(b) 6,500 52,260 Flagstar Bancorp, Inc. (b) 20,550 61,856 Flushing Financial Corp. 9,775 185,236 Guaranty Financial Group, Inc. (a) 19,400 104,178 Home Federal Bancorp, Inc. 4,400 43,384 IBERIABANK Corp. 6,450 286,832 IndyMac Bancorp, Inc. 55,100 34,162 Kearny Financial Corp. 7,900 86,900 Meridian Interstate Bancorp, Inc. (a) 6,200 60,264 NASB Financial, Inc. 800 14,224 NewAlliance Bancshares, Inc. 51,400 641,472 Northwest Bancorp, Inc. 7,267 158,566 OceanFirst Financial Corp. 5,000 90,250 Ocwen Financial Corp. (a) 13,265 61,682 Provident Financial Services, Inc. 28,158 394,494 Provident New York Bancorp 18,989 210,018 Rockville Financial, Inc. 3,000 37,680 Roma Financial Corp. 3,200 41,920 Sterling Financial Corp. 23,843 98,710 United Community Financial Corp. 9,061 33,979 ViewPoint Financial Group 5,200 76,544 W Holding Co., Inc. (b) 49,833 42,358 Westfield Financial, Inc. 16,612 150,339 ------------- 5,071,259 - ---------------------------------------------------------------------------------------------------------------------------------- Scientific Equipment & Suppliers - 0.2% Newport Corp. (a) 17,935 204,280 Varian, Inc. (a) 14,035 716,627 ------------- 920,907 - ---------------------------------------------------------------------------------------------------------------------------------- Securities Brokerage & Services - 0.5% Diamond Hill Investments Group (a) 1,000 83,500 GFI Group, Inc. 30,700 276,607 Gladstone Investment Corp. 12,100 77,803 International Assets Holding Corp., Inc. (a) 1,800 54,108 KBW, Inc. (a)(b) 12,400 255,192 Knight Capital Group, Inc. Class A (a) 44,600 801,908 LaBranche & Co., Inc. (a) 24,300 172,044 Ladenburg Thalmann Financial Services, Inc. (a)(b) 42,900 64,779 MarketAxess Holdings, Inc. (a) 13,200 99,792
38 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- optionsXpress Holdings, Inc. 20,100 $ 449,034 Penson Worldwide, Inc. (a) 8,700 103,965 SWS Group, Inc. 12,006 199,420 Thomas Weisel Partners Group, Inc. (a) 9,200 50,324 ------------- 2,688,476 - ---------------------------------------------------------------------------------------------------------------------------------- Services: Commercial - 3.1% ABM Industries, Inc. 21,270 473,258 AMN Healthcare Services, Inc. (a) 16,005 270,805 Administaff, Inc. 10,261 286,179 The Advisory Board Co. (a) 8,200 322,506 Ambassadors Group, Inc. 9,700 144,724 Angelica Corp. 3,300 70,191 CBIZ, Inc. (a) 21,253 168,961 CDI Corp. 6,301 160,297 CRA International, Inc. (a) 5,200 187,980 Casella Waste Systems, Inc. (a) 10,578 128,946 Chemed Corp. 11,272 412,668 CoStar Group, Inc. (a) 9,550 424,498 Coinstar, Inc. (a) 13,292 434,781 Cornell Cos., Inc. (a) 5,000 120,550 Cross Country Healthcare, Inc. (a) 14,700 211,827 Dice Holdings, Inc. (a) 7,500 61,950 DynCorp. International, Inc. (a) 10,600 160,590 Exponent, Inc. (a) 7,004 219,996 First Advantage Corp. Class A (a) 5,500 87,175 Forrester Research, Inc. (a) 6,581 203,221 G&K Services, Inc. Class A 9,377 285,623 The Geo Group, Inc. (a) 24,200 544,500 Gevity HR, Inc. 11,600 62,408 Global Sources Ltd. (a) 8,020 121,744 Global Traffic Network, Inc. (a) 5,100 45,594 Heidrick & Struggles International, Inc. 8,258 228,251 Hudson Highland Group, Inc. (a) 11,700 122,499 ICF International, Inc. (a) 3,700 61,494 ICT Group, Inc. (a) 4,100 33,620 IKON Office Solutions, Inc. 38,400 433,152 Jackson Hewitt Tax Service, Inc. 13,100 160,082 Kelly Services, Inc. Class A 13,068 252,604 Kforce, Inc. (a) 14,500 123,105 The Knot, Inc. (a) 13,400 131,052 Korn/Ferry International (a) 21,268 334,546 Liquidity Services, Inc. (a) 7,700 88,781 MAXIMUS, Inc. 8,504 296,109 MPS Group, Inc. (a) 45,705 485,844 Midas, Inc. (a) 6,842 92,367 Monro Muffler, Inc. 7,550 116,950 Navigant Consulting, Inc. (a) 23,423 458,154 Net 1 UEPS Technologies, Inc. (a) 21,100 512,730 Nutri/System, Inc. 15,100 213,514 On Assignment, Inc. (a) 16,400 131,528
39 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Orbitz Worldwide, Inc. (a) 14,600 $ 73,146 PHH Corp. (a) 26,364 404,687 PRG-Schultz International, Inc. (a) 8,100 76,221 People Support, Inc. (a) 10,200 86,700 Perficient, Inc. (a) 14,500 140,070 Pre-Paid Legal Services, Inc. (a) 3,760 152,731 The Providence Service Corp. (a) 5,700 120,327 Regis Corp. 20,400 537,540 Resources Connection, Inc. 22,032 448,351 Rollins, Inc. 19,653 291,257 Spherion Corp. (a) 26,029 120,254 Standard Parking Corp. (a)(b) 4,100 74,620 Steiner Leisure Ltd. (a) 7,400 209,790 TeleTech Holdings, Inc. (a) 18,489 369,040 Tetra Tech, Inc. (a) 27,731 627,275 TrueBlue, Inc. (a) 21,022 277,701 Unifirst Corp. 6,600 294,756 Viad Corp. 9,400 242,426 Volt Information Sciences, Inc. (a) 6,038 71,913 Waste Connections, Inc. (a) 31,327 1,000,271 Waste Services, Inc. (a) 8,533 60,072 Watson Wyatt Worldwide, Inc. 20,115 1,063,882 World Fuel Services Corp. 12,900 283,026 ------------- 16,913,410 - ---------------------------------------------------------------------------------------------------------------------------------- Shipping - 0.9% American Commercial Lines, Inc. (a)(c) 17,300 189,089 Arlington Tankers Ltd. 6,000 139,320 Double Hull Tankers, Inc. 19,900 199,597 Eagle Bulk Shipping, Inc. 22,000 650,540 Genco Shipping & Trading Ltd. (b) 10,500 684,600 General Maritime Corp. 12,800 332,544 Golar LNG Ltd. 16,800 260,232 Gulfmark Offshore, Inc. (a) 9,600 558,528 Horizon Lines, Inc. Class A (b) 14,200 141,290 International Shipholding Corp. (a) 3,300 77,352 Knightsbridge Tankers Ltd. 7,900 254,459 Nordic American Tanker Shipping Ltd. (b) 16,200 628,884 Ship Finance International Ltd. (b) 19,900 587,647 TBS International Ltd. (a) 5,200 207,740 ------------- 4,911,822 - ---------------------------------------------------------------------------------------------------------------------------------- Shoes - 0.7% Crocs, Inc. (a) 40,800 326,808 DSW, Inc. Class A (a)(b) 7,500 88,350 Deckers Outdoor Corp. (a) 6,100 849,120 The Finish Line, Inc. Class A (a) 22,480 195,578 Iconix Brand Group, Inc. (a) 28,100 339,448 K-Swiss, Inc. Class A 11,896 174,871 Kenneth Cole Productions, Inc. Class A 4,292 54,508 Shoe Carnival, Inc. (a) 4,200 49,518 Skechers U.S.A., Inc. Class A (a) 16,055 317,247 Steven Madden Ltd. (a) 9,068 166,670
40 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Timberland Co. Class A (a) 23,300 $ 380,955 Weyco Group, Inc. 2,600 68,978 Wolverine World Wide, Inc. 23,608 629,625 ------------- 3,641,676 - ---------------------------------------------------------------------------------------------------------------------------------- Steel - 0.3% China Precision Steel, Inc. (a) 9,900 43,164 Esmark, Inc. (a) 7,200 137,664 General Steel Holdings, Inc. (a) 3,800 59,736 Gibraltar Industries, Inc. 13,334 212,944 Olympic Steel, Inc. 4,400 334,048 Sutor Technology Group Ltd. (a) 4,800 33,936 Universal Stainless & Alloy Products, Inc. (a) 3,100 114,824 Worthington Industries, Inc. 30,300 621,150 ------------- 1,557,466 - ---------------------------------------------------------------------------------------------------------------------------------- Sugar - 0.0% Imperial Sugar Co. New Shares 5,500 85,415 - ---------------------------------------------------------------------------------------------------------------------------------- Telecommunications Equipment - 0.7% Airvana, Inc. (a) 13,200 70,752 Applied Signal Technology, Inc. 6,700 91,522 Arris Group, Inc. (a) 58,200 491,790 Audiovox Corp. Class A (a) 6,585 64,665 Belden, Inc. 20,761 703,383 Mastec, Inc. (a) 18,800 200,408 OpNext, Inc. (a) 9,100 48,958 Plantronics, Inc. 22,999 513,338 Polycom, Inc. (a) 41,500 1,010,940 Powerwave Technologies, Inc. (a)(b) 62,377 265,102 Preformed Line Products Co. 800 32,248 Symmetricom, Inc. (a) 21,900 84,096 ------------- 3,577,202 - ---------------------------------------------------------------------------------------------------------------------------------- Textile Products - 0.1% Interface, Inc. Class A 25,321 317,272 Unifi, Inc. (a) 19,300 48,636 ------------- 365,908 - ---------------------------------------------------------------------------------------------------------------------------------- Textiles Apparel Manufacturers - 0.8% American Apparel, Inc. (a) 17,400 115,710 Carter's, Inc. (a) 26,400 364,848 Cherokee, Inc. 3,600 72,540 Columbia Sportswear Co. (b) 6,300 231,525 G-III Apparel Group, Ltd. (a) 6,200 76,508 J. Crew Group, Inc. (a) 19,970 659,210 Lululemon Athletica, Inc. (a)(b) 8,400 244,104 Maidenform Brands, Inc. (a) 10,600 143,100 Oxford Industries, Inc. 6,542 125,279 Perry Ellis International, Inc. (a) 5,250 111,405 Quiksilver, Inc. (a) 59,200 581,344 True Religion Apparel, Inc. (a)(b) 8,400 223,860 Under Armour, Inc. Class A (a)(b) 15,500 397,420 The Warnaco Group, Inc. (a) 21,500 947,505 ------------- 4,294,358 - ---------------------------------------------------------------------------------------------------------------------------------- Tires & Rubber - 0.1% Cooper Tire & Rubber Co. 27,800 217,952 Titan International, Inc. 12,900 459,498 ------------- 677,450 - ----------------------------------------------------------------------------------------------------------------------------------
41 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Tobacco - 0.2% Alliance One International, Inc. (a) 45,955 $ 234,830 Schweitzer-Mauduit International, Inc. 7,420 125,027 Star Scientific, Inc. (a) 27,600 33,120 Universal Corp. 12,856 581,348 Vector Group Ltd. (b) 14,944 241,047 ------------- 1,215,372 - ---------------------------------------------------------------------------------------------------------------------------------- Toys - 0.2% Jakks Pacific, Inc. (a) 13,030 284,706 Leapfrog Enterprises, Inc. (a) 15,646 130,175 Marvel Entertainment, Inc. (a) 23,000 739,220 ------------- 1,154,101 - ---------------------------------------------------------------------------------------------------------------------------------- Transportation Miscellaneous - 0.3% CAI International, Inc. (a) 4,000 69,600 Celadon Group, Inc. (a) 10,400 103,896 Dynamex, Inc. (a) 4,400 117,964 HUB Group, Inc. Class A (a) 17,500 597,275 Odyssey Marine Exploration, Inc. (a)(b) 19,100 75,827 Pacer International, Inc. 16,500 354,915 Textainer Group Holdings Ltd. 4,300 83,979 Ultrapetrol Bahamas Ltd. (a) 12,500 157,625 ------------- 1,561,081 - ---------------------------------------------------------------------------------------------------------------------------------- Truckers - 0.6% Arkansas Best Corp. 11,041 404,542 Forward Air Corp. 13,632 471,667 Heartland Express, Inc. 26,473 394,712 Knight Transportation, Inc. (b) 26,862 491,575 Marten Transport Ltd. (a) 6,850 109,395 Old Dominion Freight Line, Inc. (a) 13,125 394,013 Patriot Transportation Holding, Inc. (a) 500 40,000 Saia, Inc. (a) 6,381 69,681 Universal Truckload Services, Inc. (a) 1,800 39,636 Werner Enterprises, Inc. 21,200 393,896 YRC Worldwide, Inc. (a) 27,900 414,873 ------------- 3,223,990 - ---------------------------------------------------------------------------------------------------------------------------------- Utilities: Cable TV & Radio - 0.0% Mediacom Communications Corp. Class A (a) 21,800 116,412 - ---------------------------------------------------------------------------------------------------------------------------------- Utilities: Electrical - 1.8% Allete, Inc. 12,266 515,172 Avista Corp. 25,875 555,277 Black Hills Corp. 18,100 580,286 CH Energy Group, Inc. 7,489 266,384 Central Vermont Public Service Corp. 4,800 92,976 Cleco Corp. 28,567 666,468 El Paso Electric Co. (a) 21,208 419,918 The Empire District Electric Co. 15,968 296,047 IDACORP, Inc. 21,300 615,357 ITC Holdings Corp. 23,300 1,190,863 MGE Energy, Inc. 10,845 353,764 NorthWestern Corp. 19,000 482,980 Otter Tail Corp. 14,086 546,959 PNM Resources, Inc. 36,500 436,540 Pike Electric Corp. (a) 6,900 114,609 Portland General Electric Co. 29,600 666,592 UIL Holdings Corp. 11,967 351,949
42 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Unisource Energy Corp. 16,383 $ 508,037 Westar Energy, Inc. 49,500 1,064,745 ------------- 9,724,923 - ---------------------------------------------------------------------------------------------------------------------------------- Utilities: Gas Distributors - 1.0% Chesapeake Utilities Corp. 3,800 97,736 EnergySouth, Inc. 2,900 142,274 The Laclede Group, Inc. 10,748 433,897 New Jersey Resources Corp. 19,861 648,462 Nicor, Inc. 21,300 907,167 Northwest Natural Gas Co. 12,499 578,204 Piedmont Natural Gas Co. (b) 34,600 905,136 South Jersey Industries, Inc. 14,432 539,180 Southwest Gas Corp. 20,390 606,195 WGL Holdings, Inc. 23,300 809,442 ------------- 5,667,693 - ---------------------------------------------------------------------------------------------------------------------------------- Utilities: Miscellaneous - 0.1% Aquila, Inc. (a) 177,000 667,290 - ---------------------------------------------------------------------------------------------------------------------------------- Utilities: Telecommunications - 1.1% Alaska Communications Systems Group, Inc. (b) 20,600 245,964 Atlantic Tele-Network, Inc. 4,400 121,044 Centennial Communications Corp. (a) 33,326 232,949 Cincinnati Bell, Inc. (a) 115,300 458,894 Consolidated Communications Holdings, Inc. 10,735 159,844 FairPoint Communications, Inc. 42,293 304,933 FiberTower Corp. (a)(b) 46,850 65,590 General Communication, Inc. Class A (a) 23,739 163,087 Global Crossing Ltd. (a)(b) 12,700 227,838 Globalstar, Inc. (a)(b) 22,800 64,524 Hungarian Telephone & Cable Corp. (a) 1,200 21,888 ICO Global Communications Holdings Ltd. (a)(b) 46,400 151,264 IDT Corp. Class B 18,200 30,940 Ibasis, Inc. 10,600 34,768 Iowa Telecommunications Services, Inc. 15,200 267,672 iPCS, Inc. (a) 8,100 240,003 NTELOS Holdings Corp. 14,000 355,180 Neutral Tandem, Inc. (a) 8,400 147,000 ORBCOMM, Inc. (a) 12,200 69,540 PAETEC Holding Corp. (a) 57,920 367,792 Premiere Global Services, Inc. (a) 29,000 422,820 RCN Corp. 18,700 201,586 Rural Cellular Corp. Class A (a) 6,300 280,413 Shenandoah Telecom Co. 10,300 134,106 TW Telecom, Inc. (a)(b) 69,500 1,114,085 USA Mobility, Inc. 11,020 83,201 Virgin Mobile USA, Inc. (a) 10,600 29,150 ------------- 5,996,075 - ---------------------------------------------------------------------------------------------------------------------------------- Utilities: Water - 0.2% American States Water Co. 8,185 285,984 California Water Service Group 9,196 301,353 Connecticut Water Service, Inc. 4,600 103,040 Consolidated Water Co., Inc. 6,700 132,660 Middlesex Water Co. 7,100 117,789
43 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- SJW Corp. 6,448 $ 170,227 Southwest Water Co. (b) 11,383 114,057 ------------- 1,225,110 - ---------------------------------------------------------------------------------------------------------------------------------- Wholesalers - 0.2% Brightpoint, Inc. (a) 23,630 172,498 Chindex International Inc. (a) 5,800 85,086 Houston Wire & Cable Co. (b) 8,900 177,110 MWI Veterinary Supply, Inc. (a) 5,200 172,172 Prestige Brands Holdings, Inc. (a) 14,500 154,570 United Stationers, Inc. (a) 11,469 423,780 ------------- 1,185,216 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks - 91.5% 496,365,284 - ---------------------------------------------------------------------------------------------------------------------------------- Exchange-Traded Funds - ---------------------------------------------------------------------------------------------------------------------------------- iShares Russell 2000 Index Fund (b) 67,164 4,636,331 - ---------------------------------------------------------------------------------------------------------------------------------- Total Exchange-Traded Funds - 0.9% 4,636,331 - ---------------------------------------------------------------------------------------------------------------------------------- Mutual Funds - ---------------------------------------------------------------------------------------------------------------------------------- BlackRock Kelso Capital Corp. (d) 4,100 38,786 Gladstone Capital Corp. (b) 9,600 146,304 Hercules Technology Growth Capital, Inc. 15,200 135,736 Kayne Anderson Energy Development Co. 4,700 107,865 Patriot Capital Funding, Inc. 9,800 61,250 Pennantpark Investment Corp. 8,500 61,285 Prospect Capital Corp. 12,000 158,160 - ---------------------------------------------------------------------------------------------------------------------------------- Total Mutual Funds - 0.1% 709,386 - ---------------------------------------------------------------------------------------------------------------------------------- Warrants (e) - ---------------------------------------------------------------------------------------------------------------------------------- Communications Technology - 0.0% Lantronix, Inc. (expires 2/09/11) 138 -- - ---------------------------------------------------------------------------------------------------------------------------------- Total Warrants - 0.0% -- - ---------------------------------------------------------------------------------------------------------------------------------- Other Interests (f) - ---------------------------------------------------------------------------------------------------------------------------------- Oil: Crude Producers - 0.0% PetroCorp Inc. (Escrow Shares) (a)(g) 500 -- - ---------------------------------------------------------------------------------------------------------------------------------- Total Other Interests - 0.0% -- - ---------------------------------------------------------------------------------------------------------------------------------- Total Long-Term Investments (Cost - $493,391,561) - 92.5% 501,711,001 - ---------------------------------------------------------------------------------------------------------------------------------- Beneficial Interest Short-Term Securities (000) - ---------------------------------------------------------------------------------------------------------------------------------- BlackRock Liquidity Series, LLC Cash Sweep Series, 2.56% (d)(h) $ 34,422 34,421,562 BlackRock Liquidity Series, LLC Money Market Series, 2.70% (d)(h)(i) 64,589 64,588,600 - ---------------------------------------------------------------------------------------------------------------------------------- Total Short-Term Securities (Cost - $99,010,162) - 18.2% 99,010,162 - ---------------------------------------------------------------------------------------------------------------------------------- Total Investments (Cost - $592,401,723*) - 110.7% 600,721,163 Liabilities in Excess of Other Assets - (10.7%) (57,908,928) ------------- Net Assets - 100.0% $ 542,812,235 =============
44 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) * The cost and unrealized appreciation (depreciation) of investments, as of June 30, 2008, as computed for federal income tax purposes, were as follows: Aggregate cost $ 598,304,091 ============= Gross unrealized appreciation $ 79,863,244 Gross unrealized depreciation (77,446,172) ------------- Net unrealized appreciation $ 2,417,072 ============= (a) Non-income producing security. (b) Security, or a portion of security, is on loan. (c) All or a portion of security pledged as collateral in connection with open financial futures contracts. (d) Investments in companies considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
----------------------------------------------------------------------------------------------- Interest/ Purchase Sale Realized Dividend Affiliate Cost Cost Loss Income ----------------------------------------------------------------------------------------------- Anthracite Capital, Inc. -- $ 120,735 $ (48,521) $ 17,439 BlackRock Kelso Capital Corp. $ 15,517 $ 6,168 $ (524) $ 2,279 BlackRock Liquidity Series, LLC Cash Sweep Series $ 1,194,769* -- -- $ 378,995 BlackRock Liquidity Series, LLC Money Market Series -- $19,220,217** -- $ 597,824 ----------------------------------------------------------------------------------------------- * Represents net purchase cost. ** Represents net sale cost.
(e) Warrants entitle the Series to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date. (f) Other interests represent beneficial interest in liquidation trusts and other reorganization entities and are non-income producing. (g) Security is fair valued. (h) Represents the current yield as of report date. (i) Security was purchased with the cash proceeds from securities loans. 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. o Financial futures contracts purchased as of June 30, 2008, were as follows:
-------------------------------------------------------------------------------------- Expiration Face Unrealized Contracts Issue Date Value Depreciation -------------------------------------------------------------------------------------- 603 Russell 2000 Index September 2008 $43,948,831 $ (2,239,321) --------------------------------------------------------------------------------------
45 Master Small Cap Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) o Effective January 1, 2008, the Series adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). FAS 157 clarifies the definition of fair value, establishes a framework for measuring fair values and requires additional disclosures about the use of fair value measurements. Various inputs are used in determining the fair value of investments, which are as follows: o Level 1 - price quotations in active markets/exchanges for identical securities o Level 2 - other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or other market-corroborated inputs) o Level 3 - unobservable inputs based on the best information available in the circumstance, to the extent observable inputs are not available (including the Series' own assumption used in determining the fair value of investments) The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Series' policy regarding valuation of investments and other significant accounting policies, please refer to the Series' most recent financial statements as contained in its semiannual report. The following table summarizes the inputs used as of June 30, 2008 in determining the fair valuation of the Series' investments: -------------------------------------------------------------------- Valuation Investments in Other Financial Inputs Securities Instruments* -------------------------------------------------------------------- Level 1 $ 501,711,001 $ (2,239,321) Level 2 99,010,162 -- Level 3 -- -- -------------------------------------------------------------------- Total $ 600,721,163 $ (2,239,321) ==================================================================== * Other financial instruments are futures. Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Australia - 6.6% - ---------------------------------------------------------------------------------------------------------------------------------- Air Freight & Logistics - 0.0% Toll Holdings Ltd. 51,423 $ 297,563 - ---------------------------------------------------------------------------------------------------------------------------------- Airlines - 0.0% Qantas Airways Ltd. 78,155 227,753 - ---------------------------------------------------------------------------------------------------------------------------------- Beverages - 0.1% Coca-Cola Amatil Ltd. 47,908 321,956 Foster's Group Ltd. 163,017 792,499 Lion Nathan Ltd. 15,978 130,888 ------------- 1,245,343 - ---------------------------------------------------------------------------------------------------------------------------------- Biotechnology - 0.2% CSL Ltd. 46,221 1,582,193 - ---------------------------------------------------------------------------------------------------------------------------------- Capital Markets - 0.1% Macquarie Group Ltd. 23,007 1,071,104 Perpetual Trustees Australia Ltd. 1,777 72,848 ------------- 1,143,952 - ---------------------------------------------------------------------------------------------------------------------------------- Chemicals - 0.2% Incitec Pivot Ltd. 5,084 900,226 Orica Ltd. 26,833 753,138 ------------- 1,653,364 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.4% Australia & New Zealand Banking Group Ltd. 161,110 2,895,576 Bendigo and Adelaide Bank Ltd. 20,287 212,594 Commonwealth Bank of Australia Ltd. 108,474 4,182,715 National Australia Bank Ltd. 134,118 3,405,466 St. George Bank Ltd. 49,425 1,286,054 Westpac Banking Corp. 157,278 3,020,841 ------------- 15,003,246 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - Brambles Ltd. 118,200 989,327 0.1% - ---------------------------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.1% Boart Longyear Group 92,485 197,758 Leighton Holdings Ltd. 11,587 564,227 ------------- 761,985 - ---------------------------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% Boral Ltd. 36,024 195,145 James Hardie Industries NV 31,616 128,365 ------------- 323,510 - ---------------------------------------------------------------------------------------------------------------------------------- Containers & Packaging - 0.0% Amcor Ltd. 73,767 357,365 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.1% Australian Stock Exchange Ltd. 14,370 432,680 Babcock & Brown Ltd. 19,766 141,912 ------------- 574,592 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.1% Telstra Corp. Ltd. 356,892 1,450,188 - ---------------------------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.1% WorleyParsons Ltd. 12,182 441,398 - ---------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.5% Metcash Ltd. 77,470 274,837 Wesfarmers Ltd. 65,311 2,337,879 Woolworths Ltd. 101,743 2,384,338 ------------- 4,997,054 - ---------------------------------------------------------------------------------------------------------------------------------- Food Products - 0.0% Goodman Fielder Ltd. 77,271 104,114 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.0% Cochlear Ltd. 3,403 142,927 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 0.0% Sonic Healthcare Ltd. 28,196 393,734 - ---------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.1% Aristocrat Leisure Ltd. 22,855 140,375 Crown Ltd. 33,445 297,507 Tabcorp Holdings Ltd. 44,270 416,248 Tatts Group Ltd. 98,432 222,059 ------------- 1,076,189 - ---------------------------------------------------------------------------------------------------------------------------------- IT Services - 0.0% Computershare Ltd. 33,896 298,778 - ----------------------------------------------------------------------------------------------------------------------------------
1 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.0% CSR Ltd. 92,805 $ 217,693 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.5% AMP Ltd. 157,866 1,010,844 AXA Asia Pacific Holdings Ltd. 60,500 271,264 Insurance Australia Group Ltd. 155,117 516,884 QBE Insurance Group Ltd. 74,439 1,600,526 Suncorp-Metway Ltd. 78,601 984,960 ------------- 4,384,478 - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.0% Fairfax Media Ltd. 118,923 334,087 - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 1.9% Alumina Ltd. 96,761 439,251 BHP Billiton Ltd. 278,546 11,855,039 BlueScope Steel Ltd. 63,171 686,410 Fortescue Metals Group Ltd. (a) 103,496 1,175,824 Newcrest Mining Ltd. 38,108 1,057,612 OneSteel Ltd. 59,500 424,122 Oxiana Ltd. 116,557 291,900 Oxiana Ltd. (a) 133,006 332,791 Rio Tinto Ltd. 23,469 3,036,599 Sims Group Ltd. 13,146 525,683 ------------- 19,825,231 - ---------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.1% AGL Energy Ltd. 37,478 513,388 - ---------------------------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.0% Harvey Norman Holdings Ltd. 44,194 130,789 - ---------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.5% Caltex Australia Ltd. 12,081 150,952 Origin Energy Ltd. 73,855 1,142,657 Paladin Resources Ltd. (a) 37,373 228,183 Santos Ltd. 49,605 1,021,742 Woodside Petroleum Ltd. 40,426 2,612,989 ------------- 5,156,523 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts (REITs) - 0.4% CFS Retail Property Trust 125,236 222,196 DB RREEF Trust 198,135 262,298 General Property Trust 180,508 384,637 Goodman Group 132,736 393,226 Macquarie Office Trust 106,454 79,432 Mirvac Group 91,272 259,217 Stockland 124,859 645,622 Westfield Group 147,043 2,297,645 ------------- 4,544,273 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Management & Development - 0.0% Lend Lease Corp., Ltd. 31,385 287,561 - ---------------------------------------------------------------------------------------------------------------------------------- Road & Rail - 0.0% Asciano Group 48,559 161,524 - ---------------------------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.0% Billabong International Ltd. 8,070 83,456 - ---------------------------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.1% Macquarie Airports Group 62,088 122,807 Macquarie Infrastructure Group 211,459 470,501 Transurban Group 91,476 371,885 ------------- 965,193 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Australia 69,668,771 - ---------------------------------------------------------------------------------------------------------------------------------- Austria - 0.6% - ---------------------------------------------------------------------------------------------------------------------------------- Building Products - 0.0% Wienerberger AG 7,093 296,577 - ----------------------------------------------------------------------------------------------------------------------------------
2 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.2% Erste Bank der Oesterreichischen Sparkassen AG 16,354 $ 1,011,441 Raiffeisen International Bank Holding AG 4,676 594,093 ------------- 1,605,534 - ---------------------------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.0% Strabag SE 4,955 384,972 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.1% Telekom Austria AG 29,835 646,488 - ---------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.0% Verbund - Oesterreichische Elektrizitaetswirtschafts AG 5,715 510,318 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.0% Vienna Insurance Group 2,331 153,600 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery - 0.0% Andritz AG 3,293 206,552 - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% Voestalpine AG 9,930 812,626 - ---------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.1% OMV AG 14,158 1,106,170 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Management & Development - 0.1% IMMOFINANZ Immobilien Anlagen AG 40,164 413,531 Immoeast Immobilien Anlagen AG (a) 29,872 264,172 Meinl European Land Ltd. (a) 21,504 241,097 ------------- 918,800 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Austria 6,641,637 - ---------------------------------------------------------------------------------------------------------------------------------- Belgium - 1.0% - ---------------------------------------------------------------------------------------------------------------------------------- Beverages - 0.1% InBev NV 15,827 1,094,298 - ---------------------------------------------------------------------------------------------------------------------------------- Chemicals - 0.1% Solvay SA 5,101 664,561 Umicore SA 10,698 526,167 ------------- 1,190,728 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.2% Dexia NV 45,572 725,592 KBC Bancassurance Holding 13,661 1,510,110 ------------- 2,235,702 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.4% Fortis 176,293 2,800,321 Groupe Bruxelles Lambert SA 6,949 823,927 KBC Ancora 3,067 267,067 Nationale A Portefeuille 3,872 289,051 ------------- 4,180,366 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.1% Belgacom SA 14,630 627,654 - ---------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.1% Colruyt SA 1,112 293,125 Delhaize Group 8,553 572,867 ------------- 865,992 - ---------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.0% UCB SA 8,700 320,957 - ---------------------------------------------------------------------------------------------------------------------------------- Wireless Telecommunication Services - 0.0% Mobistar SA 2,394 193,239 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Belgium 10,708,936 - ---------------------------------------------------------------------------------------------------------------------------------- Bermuda - 0.2% - ---------------------------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.1% SeaDrill Ltd. 24,080 734,996 - ---------------------------------------------------------------------------------------------------------------------------------- Marine - 0.0% Pacific Basin Shipping Ltd. 110,713 158,417 - ---------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.1% Mongolia Energy Co. Ltd. (a) 317,000 612,561 - ---------------------------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.0% C C Land Holdings Ltd. 74,888 46,623 Yue Yuen Industrial Holdings Ltd. 33,785 80,268 ------------- 126,891 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Bermuda 1,632,865 - ---------------------------------------------------------------------------------------------------------------------------------- Cayman Islands - 0.0% - ---------------------------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.0% Foxconn International Holdings Ltd. (a) 148,529 144,112 - ----------------------------------------------------------------------------------------------------------------------------------
3 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.0% Lifestyle International Holdings Ltd. 32,013 $ 45,087 - ---------------------------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.0% Lee & Man Paper Manufacturing Ltd. 38,000 56,694 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in the Cayman Islands 245,893 - ---------------------------------------------------------------------------------------------------------------------------------- Denmark - 1.0% - ---------------------------------------------------------------------------------------------------------------------------------- Beverages - 0.1% Carlsberg A/S 6,199 597,148 - ---------------------------------------------------------------------------------------------------------------------------------- Building Products - 0.0% Rockwool International AS 388 49,674 - ---------------------------------------------------------------------------------------------------------------------------------- Chemicals - 0.0% Novozymes A/S Class B 4,067 366,139 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.1% Danske Bank A/S 39,051 1,124,464 Jyske Bank (a) 3,300 196,360 Sydbank A/S 4,047 153,810 ------------- 1,474,634 - ---------------------------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.1% FLS Industries A/S Class B 4,667 509,899 - ---------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.2% Vestas Wind Systems A/S (a) 15,709 2,045,264 - ---------------------------------------------------------------------------------------------------------------------------------- Food Products - 0.0% Danisco A/S 4,513 289,341 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.0% Coloplast A/S Class B 1,521 132,121 William Demant Holding (a) 1,330 87,347 ------------- 219,468 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.0% Topdanmark A/S (a) 1,551 233,379 TrygVesta A/S 2,219 156,623 ------------- 390,002 - ---------------------------------------------------------------------------------------------------------------------------------- Marine - 0.2% A P Moller - Maersk A/S 145 1,769,526 - ---------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.3% Novo-Nordisk A/S B 39,027 2,569,168 - ---------------------------------------------------------------------------------------------------------------------------------- Road & Rail - 0.0% Dsv A/S 17,556 418,818 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Denmark 10,699,081 - ---------------------------------------------------------------------------------------------------------------------------------- Finland - 1.5% - ---------------------------------------------------------------------------------------------------------------------------------- Auto Components - 0.1% Nokian Renkaat Oyj 9,015 427,600 - ---------------------------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.8% Nokia Oyj 334,503 8,176,242 - ---------------------------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.0% YIT Oyj 9,716 242,618 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.0% OKO Bank 6,121 105,669 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.0% Elisa Corp. 13,141 274,269 - ---------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.2% Fortum Oyj 37,845 1,915,549 - ---------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.0% Kesko Oyj Class B 6,235 200,625 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.1% Sampo Oyj 36,901 926,980 - ----------------------------------------------------------------------------------------------------------------------------------- Machinery - 0.1% Cargotec Corp. Class B 1,911 66,116 Kone Oyj Class B 12,064 421,708 Metso Oyj 11,056 500,405 Wartsila Oyj 7,230 451,461 ------------- 1,439,690 - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.0% SanomaWSOY Oyj (Class B) 4,060 89,822 - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% Outokumpu Oyj 10,968 381,142 Rautaruukki Oyj 7,296 331,193 ------------- 712,335 - ---------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.0% Neste Oil Oyj 11,159 327,069 - ---------------------------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.1% Stora Enso Oyj Class R 49,845 464,390 UPM-Kymmene Oyj 45,154 735,737 ------------- 1,200,127 - ---------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.0% Orion Oyj 4,698 93,306 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Finland 16,131,901 - ----------------------------------------------------------------------------------------------------------------------------------
4 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- France - 9.7% - ---------------------------------------------------------------------------------------------------------------------------------- Aerospace & Defense - 0.1% European Aeronautic Defense and Space Co. 27,823 $ 524,225 Safran SA 13,512 260,610 Thales SA 7,784 442,769 Zodiac SA 3,520 161,036 ------------- 1,388,640 - ---------------------------------------------------------------------------------------------------------------------------------- Airlines - 0.0% Air France-KLM 11,791 281,249 - ---------------------------------------------------------------------------------------------------------------------------------- Auto Components - 0.1% Compagnie Generale des Etablissements Michelin 12,241 875,307 Valeo SA 6,460 206,770 ------------- 1,082,077 - ---------------------------------------------------------------------------------------------------------------------------------- Automobiles - 0.2% Peugeot SA 13,117 708,477 Renault SA 15,630 1,272,075 ------------- 1,980,552 - ---------------------------------------------------------------------------------------------------------------------------------- Beverages - 0.1% Pernod-Ricard SA 14,007 1,429,347 - ---------------------------------------------------------------------------------------------------------------------------------- Building Products - 0.1% Cie de Saint-Gobain SA 23,631 1,463,487 - ---------------------------------------------------------------------------------------------------------------------------------- Chemicals - 0.3% Air Liquide 20,934 2,755,994 - ----------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.1% BNP Paribas SA 67,732 6,097,042 Credit Agricole SA 75,125 1,525,072 Natixis 39,544 435,296 Societe Generale SA 38,449 3,333,498 ------------- 11,390,908 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.0% Bureau Veritas SA 4,034 239,112 Societe BIC SA 1,668 87,079 ------------- 326,191 - ---------------------------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.1% Alcatel SA 188,710 1,139,216 - ---------------------------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.4% Bouygues 21,148 1,395,280 Eiffage 3,519 240,332 Vinci SA 34,773 2,123,381 ------------- 3,758,993 - ---------------------------------------------------------------------------------------------------------------------------------- Construction Materials - 0.2% Imerys SA 2,195 158,503 Lafarge SA 12,451 1,898,624 ------------- 2,057,127 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.0% Eurazeo 2,508 266,877 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.4% France Telecom SA 151,335 4,438,218 - ---------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.2% Electricite de France SA 17,700 1,676,740 - ---------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.4% Alstom 9,099 2,086,457 Legrand Promesses 9,435 237,419 Schneider Electric SA 18,556 1,996,226 ------------- 4,320,102 - ---------------------------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.1% Compagnie Generale de Geophysique SA (a) 11,135 525,719 Technip SA 8,673 800,341 ------------- 1,326,060 - ---------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.3% Carrefour SA 53,842 3,034,962 Casino Guichard Perrachon SA 3,867 436,698 ------------- 3,471,660 - ---------------------------------------------------------------------------------------------------------------------------------- Food Products - 0.3% Groupe Danone 35,856 2,508,997 - ---------------------------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% Gaz de France SA 15,449 989,178 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.1% Cie Generale d'Optique Essilor International SA 16,807 1,025,217 - ----------------------------------------------------------------------------------------------------------------------------------
5 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.2% Accor SA 16,758 $ 1,113,234 Sodexho Alliance SA 8,226 538,143 ------------- 1,651,377 - ---------------------------------------------------------------------------------------------------------------------------------- IT Services - 0.1% Atos Origin SA 5,960 328,304 Cap Gemini SA 12,105 709,686 ------------- 1,037,990 - ---------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.0% Wendel 2,643 267,591 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.4% AXA SA 127,617 3,760,353 CNP Assurances 3,217 362,707 Scor SE 12,592 286,719 ------------- 4,409,779 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery - 0.2% Vallourec SA 4,610 1,612,259 - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.5% Eutelsat Communications 8,923 247,525 JC Decaux SA 5,607 142,129 Lagardere S.C.A. 10,378 587,070 M6-Metropole Television SA 2,542 54,696 PagesJaunes Groupe SA 10,464 153,050 Publicis Groupe 12,245 395,079 Societe Television Francaise 1 11,261 187,464 Vivendi SA 96,342 3,632,710 ------------- 5,399,723 - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.0% Eramet 485 479,355 - ---------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.8% Suez SA 86,754 5,880,853 Veolia Environnement SA 32,523 1,815,672 ------------- 7,696,525 - ---------------------------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.1% Pinault-Printemps-Redoute 6,585 726,936 - ---------------------------------------------------------------------------------------------------------------------------------- Office Electronics - 0.0% Neopost SA 2,619 276,121 - ---------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 1.4% Total SA 179,986 15,320,161 - ---------------------------------------------------------------------------------------------------------------------------------- Personal Products - 0.2% L'Oreal SA 20,048 2,174,536 - ---------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.5% Sanofi-Aventis 85,065 5,652,487 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts (REITs) - 0.2% Gecina SA 839 101,400 ICADE 1,182 137,849 Klepierre 6,044 303,007 Unibail - Rodamco 7,132 1,642,340 ------------- 2,184,596 - ---------------------------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor Equipment - 0.1% STMicroelectronics NV 58,516 605,385 - ---------------------------------------------------------------------------------------------------------------------------------- Software - 0.0% Dassault Systemes SA 5,132 311,549 - ---------------------------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.4% Christian Dior SA 5,025 516,182 Hermes International 5,893 925,312 LVMH Moet Hennessy Louis Vuitton SA 20,614 2,150,392 ------------- 3,591,886 - ---------------------------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.0% Aeroports de Paris 2,398 223,761 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in France 102,698,847 - ---------------------------------------------------------------------------------------------------------------------------------- Germany - 8.7% - ---------------------------------------------------------------------------------------------------------------------------------- Air Freight & Logistics - 0.2% Deutsche Post AG 73,022 1,906,545 - ---------------------------------------------------------------------------------------------------------------------------------- Airlines - 0.0% Deutsche Lufthansa AG 21,078 454,144 - ---------------------------------------------------------------------------------------------------------------------------------- Auto Components - 0.1% Continental AG 13,141 1,352,592 - ----------------------------------------------------------------------------------------------------------------------------------- Automobiles - 1.0% Bayerische Motoren Werke AG 29,270 1,406,328 Bayerische Motoren Werke AG (Preference Shares) 5,309 210,895
6 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- DaimlerChrysler AG 75,625 $ 4,690,714 Porsche Automobil Holding SE (Preference Shares) 7,432 1,144,373 Volkswagen AG 12,193 3,521,939 ------------- 10,974,249 - ---------------------------------------------------------------------------------------------------------------------------------- Capital Markets - 0.3% Deutsche Bank AG Registered Shares 41,763 3,605,193 - ---------------------------------------------------------------------------------------------------------------------------------- Chemicals - 1.4% BASF SE 80,438 5,543,913 Bayer AG 64,499 5,426,846 K+S AG 3,152 1,814,800 Linde AG 11,564 1,624,288 Wacker Chemie AG 1,462 305,426 ------------- 14,715,273 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.2% Commerzbank AG 53,339 1,584,589 Deutsche Postbank AG 7,089 623,223 Hypo Real Estate Holding AG 12,644 355,769 ------------- 2,563,581 - ---------------------------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.1% Bilfinger Berger AG 3,103 269,073 Hochtief AG 3,582 363,338 ------------- 632,411 - ---------------------------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% HeidelbergCement AG 2,346 340,227 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.2% Deutsche Boerse AG 16,830 1,902,471 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.4% Deutsche Telekom AG 234,290 3,840,074 - ---------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 1.0% E.ON AG 53,136 10,709,279 - ---------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.1% Q-Cells AG (a) 5,381 545,103 Solarworld AG 7,042 335,112 ------------- 880,215 - ---------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.1% Metro AG 9,612 613,196 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.1% Fresenius AG 2,764 239,318 Fresenius AG (Preference Shares) 7,120 615,165 ------------- 854,483 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 0.1% Celesio AG 5,644 203,853 Fresenius Medical Care AG 16,184 891,693 ------------- 1,095,546 - ---------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.0% TUI AG 18,404 426,052 - ---------------------------------------------------------------------------------------------------------------------------------- Household Products - 0.0% Henkel KGaA 11,896 446,067 - ---------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.8% Rheinmetall AG 3,381 244,057 Siemens AG 72,270 8,011,879 ------------- 8,255,936 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.9% Allianz AG Registered Shares 37,418 6,581,962 Hannover Rueckversicherung AG Registered Shares 5,981 294,613 Muenchener Rueckversicherungs AG Registered Shares 17,074 2,994,681 ------------- 9,871,256 - ---------------------------------------------------------------------------------------------------------------------------------- Internet Software & Services - 0.0% United Internet AG 12,467 245,622 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery - 0.2% MAN AG 9,016 999,737 MG Technologies AG 13,751 485,511 ------------- 1,485,248 - ----------------------------------------------------------------------------------------------------------------------------------
7 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.3% Salzgitter AG 3,503 $ 641,707 ThyssenKrupp AG 30,739 1,928,403 ------------- 2,570,110 - ---------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.4% RWE AG 36,869 4,654,941 - ---------------------------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.0% KarstadtQuelle AG (a) 5,125 59,661 - ---------------------------------------------------------------------------------------------------------------------------------- Personal Products - 0.1% Beiersdorf AG 6,815 500,328 - ---------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.1% Merck KGaA 5,518 784,120 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Management & Development - 0.0% IVG Immobilien AG 8,435 166,141 - ---------------------------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor Equipment - 0.1% Infineon Technologies AG (a) 67,051 581,974 - ---------------------------------------------------------------------------------------------------------------------------------- Software - 0.4% SAP AG 72,131 3,775,158 - ---------------------------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.1% Adidas-Salomon AG 17,332 1,091,447 Puma AG Rudolf Dassler Sport 573 191,892 ------------- 1,283,339 - ---------------------------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.0% Fraport AG 3,687 249,889 Hamburger Hafen und Logistik AG 2,544 197,603 ------------- 447,492 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Germany 91,992,924 - ---------------------------------------------------------------------------------------------------------------------------------- Greece - 0.6% - ---------------------------------------------------------------------------------------------------------------------------------- Beverages - 0.0% Coca-Cola Hellenic Bottling Co. SA 12,150 330,567 - ---------------------------------------------------------------------------------------------------------------------------------- Capital Markets - 0.0% Marfin Investment Group SA 61,994 490,465 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.4% Alpha Bank AE 32,468 982,924 EFG Eurobank Ergasias SA 27,217 648,057 National Bank of Greece SA 43,101 1,939,843 Piraeus Bank SA 27,775 755,935 ------------- 4,326,759 - ---------------------------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% Titan Cement Co. SA 3,439 136,568 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.1% Hellenic Telecommunications Organization SA 23,011 579,677 - ---------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.0% Public Power Corp. 9,295 322,398 - ---------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.1% OPAP SA 19,276 674,447 - ---------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.0% Hellenic Petroleum SA 6,553 90,061 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Greece 6,950,942 - ---------------------------------------------------------------------------------------------------------------------------------- Hong Kong - 2.0% - ---------------------------------------------------------------------------------------------------------------------------------- Airlines - 0.0% Cathay Pacific Airways Ltd. 121,263 230,965 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.3% BOC Hong Kong Holdings Ltd. 315,900 837,365 Bank of East Asia Ltd. 121,339 659,716 CITIC International Financial Holdings Ltd. 216,000 165,310 Hang Seng Bank Ltd. 65,553 1,384,094 Wing Hang Bank Ltd. 10,500 139,055 Wing Lung Bank 9,000 176,786 ------------- 3,362,326 - ---------------------------------------------------------------------------------------------------------------------------------- Distributors - 0.1% Li & Fung Ltd. 191,990 579,322 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.1% Hong Kong Exchanges and Clearing Ltd. 87,348 1,279,536 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.0% PCCW Ltd. 364,195 220,570 - ----------------------------------------------------------------------------------------------------------------------------------
8 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.2% CLP Holdings Ltd. 181,687 $ 1,558,112 Cheung Kong Infrastructure Holdings Ltd. 28,500 120,760 HongKong Electric Holdings Ltd. 119,000 712,057 ------------- 2,390,929 - ---------------------------------------------------------------------------------------------------------------------------------- Electronic Equipment & Instruments - 0.0% Kingboard Chemical Holdings Ltd. 50,647 233,854 - ---------------------------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% The Hong Kong & China Gas Ltd. 340,290 809,743 - ---------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.0% Shangri-La Asia Ltd. 84,990 199,136 - ---------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.2% Hutchison Whampoa Ltd. 182,176 1,837,118 NWS Holdings Ltd. 79,000 206,298 ------------- 2,043,416 - ---------------------------------------------------------------------------------------------------------------------------------- Marine - 0.0% Orient Overseas International Ltd. 17,057 85,433 - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.0% Television Broadcasts Ltd. 12,000 69,313 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts (REITs) - 0.1% The Link REIT 184,414 420,196 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Management & Development - 0.8% Cheung Kong Holdings Ltd. 117,835 1,593,485 Chinese Estates Holdings Limited 96,000 147,903 Hang Lung Group Ltd. 83,000 370,182 Hang Lung Properties Ltd. 177,000 568,235 Henderson Land Development Co., Ltd. 92,491 578,277 Hysan Development Co. Ltd. 56,791 156,279 Kerry Properties Ltd. 55,000 289,250 New World Development Ltd. 206,484 421,761 Shun Tak Holdings Ltd. 60,000 56,241 Sino Land Co. 160,421 319,259 Sun Hung Kai Properties Ltd. 120,324 1,635,693 Swire Pacific Ltd. Class A 70,577 722,415 Wharf Holdings Ltd. 118,870 497,665 Wheelock and Company, Limited 91,000 244,510 ------------- 7,601,155 - ---------------------------------------------------------------------------------------------------------------------------------- Road & Rail - 0.0% MTR Corp. 121,500 382,782 - ---------------------------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor Equipment - 0.0% ASM Pacific Technology Ltd. 12,504 94,506 - ---------------------------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% Esprit Holdings Ltd. 90,300 940,250 - ---------------------------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.0% Hong Kong Aircraft Engineering Company Ltd. 3,200 49,352 Hopewell Holdings Ltd. 56,349 200,305 ------------- 249,657 - ---------------------------------------------------------------------------------------------------------------------------------- Wireless Telecommunication Services - 0.0% Hutchison Telecommunications International Ltd. (a) 158,647 224,655 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Hong Kong 21,417,744 - ---------------------------------------------------------------------------------------------------------------------------------- Ireland - 0.6% - ---------------------------------------------------------------------------------------------------------------------------------- Airlines - 0.0% Ryanair Holdings Plc (a) 35,968 157,805 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.3% Allied Irish Banks Plc 75,387 1,161,785 Anglo Irish Bank Corp. Plc 68,518 649,632 Bank of Ireland 85,948 736,352 ------------- 2,547,769 - ---------------------------------------------------------------------------------------------------------------------------------- Construction Materials - 0.1% CRH Plc 46,326 1,292,115 - ---------------------------------------------------------------------------------------------------------------------------------- Containers & Packaging - 0.0% Smurfit Kappa Plc 6,205 51,365 - ---------------------------------------------------------------------------------------------------------------------------------- Food Products - 0.0% Kerry Group Plc 9,542 281,654 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.0% Irish Life & Permanent Plc 23,239 239,131 - ----------------------------------------------------------------------------------------------------------------------------------
9 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.2% Elan Corp. Plc (a) 37,704 $ 1,357,605 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Ireland 5,927,444 - ---------------------------------------------------------------------------------------------------------------------------------- Italy - 3.7% - ---------------------------------------------------------------------------------------------------------------------------------- Aerospace & Defense - 0.1% Finmeccanica SpA 25,432 664,627 - ---------------------------------------------------------------------------------------------------------------------------------- Auto Components - 0.0% Pirelli & C SpA 266,815 183,055 - ---------------------------------------------------------------------------------------------------------------------------------- Automobiles - 0.1% Fiat SpA 60,439 983,953 - ---------------------------------------------------------------------------------------------------------------------------------- Capital Markets - 0.1% Mediobanca SpA 42,973 728,262 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.2% Banca Carige SpA 61,682 216,941 Banca Intesa SpA 635,968 3,615,885 Banca Intesa SpA (RNC) 68,618 353,631 Banca Monte dei Paschi di Siena SpA 169,369 477,395 Banca Popolare di Milano Scrl 36,005 336,054 Banco Popolare SpA 54,473 962,339 Unicredit SpA 959,229 5,835,610 Unione Di Banche Italiane ScpA 51,570 1,204,969 ------------- 13,002,824 - ---------------------------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% Italcementi SpA 6,190 102,383 Italcementi SpA (RNC) 10,722 124,401 ------------- 226,784 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.0% IFIL-Investments SpA 31,121 201,020 Instituto Finanziario Industriale SpA (Preference Shares) (a) 2,994 59,340 ------------- 260,360 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.2% Telecom Italia SpA 842,694 1,685,472 Telecom Italia SpA (RNC) 515,663 832,475 ------------- 2,517,947 - ---------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.4% Enel SpA 358,306 3,398,482 Terna SpA 104,203 440,170 ------------- 3,838,652 - ---------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.0% Prysmian SpA 9,535 240,716 - ---------------------------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.1% Saipem SpA 23,693 1,107,358 - ---------------------------------------------------------------------------------------------------------------------------------- Food Products - 0.0% Parmalat SpA 136,122 354,106 - ---------------------------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.0% Snam Rete Gas SpA 67,784 462,099 - ---------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.0% Autogrill SpA 8,807 105,302 Lottomatica SpA 6,535 194,714 ------------- 300,016 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.4% Alleanza Assicurazioni SpA 36,649 396,419 Assicurazioni Generali SpA 87,230 3,333,803 Fondiaria-Sai SpA 6,498 214,147 Mediolanum SpA 31,013 128,449 Unipol SpA 71,519 167,922 Unipol SpA (Preference Shares) 53,172 102,168 ------------- 4,342,908 - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.1% Mediaset SpA 66,086 434,707 - ---------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.1% A2A SpA 117,578 429,387 - ---------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.8% Eni SpA 216,899 8,057,887 - ---------------------------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.0% Bulgari SpA 12,838 129,057 Luxottica Group SpA 12,147 283,466 ------------- 412,523 - ---------------------------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.1% Autostrade SpA 19,679 594,361 - ----------------------------------------------------------------------------------------------------------------------------------
10 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Italy $ 39,142,532 - ---------------------------------------------------------------------------------------------------------------------------------- Japan - 20.8% - ---------------------------------------------------------------------------------------------------------------------------------- Air Freight & Logistics - 0.1% Yamato Transport Co., Ltd. 33,000 460,645 - ---------------------------------------------------------------------------------------------------------------------------------- Airlines - 0.0% All Nippon Airways Co., Ltd. 32,000 119,680 Japan Airlines Corp. (a) 91,000 191,133 ------------- 310,813 - ---------------------------------------------------------------------------------------------------------------------------------- Auto Components - 0.4% Aisin Seiki Co., Ltd. 16,500 542,003 Bridgestone Corp. 51,800 794,662 Denso Corp. 41,100 1,415,541 NGK Spark Plug Co., Ltd. 15,000 172,656 NHK Spring Co., Ltd. 9,000 71,827 NOK Corp. 10,600 168,692 Stanley Electric Co., Ltd. 11,100 269,106 Sumitomo Rubber Industries, Ltd. 20,200 151,094 Tokai Rika Co. Ltd. 2,000 41,412 Toyoda Gosei Co., Ltd. 5,300 155,102 Toyota Boshoku Corp. 3,800 101,897 Toyota Industries Corp. 15,400 494,447 ------------- 4,378,439 - ---------------------------------------------------------------------------------------------------------------------------------- Automobiles - 1.9% Daihatsu Motor Co., Ltd. 20,000 229,330 Fuji Heavy Industries Ltd. 59,000 289,446 Honda Motor Co., Ltd. 139,800 4,770,908 Isuzu Motors Ltd. 115,000 553,783 Mazda Motor Corp. 87,000 452,899 Mitsubishi Motors Corp. (a) 324,000 589,773 Nissan Motor Co., Ltd. 190,800 1,584,685 Suzuki Motor Corp. 31,800 753,169 Toyota Motor Corp. 225,800 10,658,665 Yamaha Motor Co., Ltd. 17,500 327,740 ------------- 20,210,398 - ---------------------------------------------------------------------------------------------------------------------------------- Beverages - 0.2% Asahi Breweries Ltd. 34,500 644,927 Coca-Cola West Holdings Co., Ltd. 3,300 77,014 Ito En, Ltd. 5,800 91,364 Kirin Holdings Co., Ltd. 67,000 1,047,699 Sapporo Holdings Ltd. 23,000 161,029 ------------- 2,022,033 - ---------------------------------------------------------------------------------------------------------------------------------- Building Products - 0.3% Asahi Glass Co., Ltd. 86,100 1,042,408 Daikin Industries Ltd. 22,500 1,137,664 JS Group Corp. 19,300 307,291 Nippon Sheet Glass Co., Ltd. 52,000 257,726 Toto Ltd. 22,000 155,007 ------------- 2,900,096 - ---------------------------------------------------------------------------------------------------------------------------------- Capital Markets - 0.4% Daiwa Securities Group, Inc. 113,000 1,039,125 Jafco Co., Ltd. 1,400 47,933 Nomura Holdings, Inc. 148,500 2,199,043 SBI Holdings, Inc. 890 194,789 SBI Securities Co. Ltd. 168 129,318 Shinko Securities Co., Ltd. 40,300 118,821 ------------- 3,729,029 - ----------------------------------------------------------------------------------------------------------------------------------
11 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Chemicals - 0.8% Asahi Kasei Corp. 102,000 $ 534,776 DIC Corp. 30,000 87,059 Daicel Chemical Industries Ltd. 11,000 61,963 Denki Kagaku Kogyo Kabushiki Kaisha 25,000 92,711 Hitachi Chemical Co., Ltd. 8,700 179,549 JSR Corp. 15,900 315,985 Kaneka Corp. 15,000 102,179 Kansai Paint Co., Ltd. 14,000 96,943 Kuraray Co., Ltd. 32,500 387,783 Mitsubishi Chemical Holdings Corp. 113,500 660,911 Mitsubishi Gas Chemical Co., Inc. 31,000 223,325 Mitsubishi Rayon Co., Ltd. 47,000 148,249 Mitsui Chemicals, Inc. 55,000 271,601 Nippon Sanso Corp. 14,000 116,812 Nissan Chemical Industries Ltd. 16,000 196,891 Nitto Denko Corp. 14,110 542,394 Shin-Etsu Chemical Co., Ltd. 34,700 2,153,311 Showa Denko KK 104,000 276,108 Sumitomo Chemical Co., Ltd. 134,000 844,211 Teijin Ltd. 85,000 291,654 Tokuyama Corp. 20,000 149,037 Toray Industries, Inc. 111,700 599,491 Tosoh Corp. 49,000 200,623 Ube Industries Ltd. 89,000 315,245 ------------- 8,848,811 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 2.2% The 77 Bank Ltd. 17,000 106,899 Aozora Bank Ltd. 70,000 160,124 The Bank of Kyoto Ltd. 23,000 240,409 The Bank of Yokohama Ltd. 107,000 739,935 The Chiba Bank Ltd. 64,000 449,392 The Chugoku Bank Ltd. 17,000 246,990 Chuo Mitsui Trust Holdings, Inc. 66,000 393,109 Fukuoka Financial Group, Inc. 67,000 302,876 The Gunma Bank Ltd. 22,000 146,665 The Hachijuni Bank Ltd. 25,000 162,204 The Hiroshima Bank Ltd. 26,000 115,928 Hokuhoku Financial Group, Inc. 80,100 232,348 The Iyo Bank Ltd. 25,000 292,716 The Joyo Bank Ltd. 46,000 224,020 Mitsubishi UFJ Financial Group, Inc. 874,618 7,729,388 Mizuho Financial Group, Inc. 816 3,796,713 The Nishi-Nippon City Bank Ltd. 45,000 134,206 Resona Holdings, Inc. 432 663,522 Sapporo Hokuyo Holdings, Inc. 15 101,499 Shinsei Bank Ltd. 87,000 298,248 The Shizuoka Bank Ltd. 52,000 531,421 Sumitomo Mitsui Financial Group, Inc. 543 4,083,473 The Sumitomo Trust & Banking Co., Ltd. 124,000 866,279 Suruga Bank Ltd. 15,000 195,297
12 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- The Yasuda Trust & Banking Co., Ltd. 145,000 $ 249,940 Yamaguchi Financial Group, Inc. 21,000 290,661 ------------- 22,754,262 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.2% Dai Nippon Printing Co., Ltd. 51,000 750,830 Secom Co., Ltd. 17,900 871,877 Toppan Printing Co., Ltd. 47,000 517,730 ------------- 2,140,437 - ---------------------------------------------------------------------------------------------------------------------------------- Computers & Peripherals - 0.4% Fujitsu Ltd. 157,000 1,165,854 Mitsumi Electric Co., Ltd. 8,400 187,278 NEC Corp. 162,000 850,574 Seiko Epson Corp. 10,300 283,083 Toshiba Corp. 259,000 1,910,783 ------------- 4,397,572 - ---------------------------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.1% JGC Corp. 17,000 334,758 Kajima Corp. 76,800 268,686 Kinden Corp. 7,000 70,666 Obayashi Corp. 54,000 244,743 Shimizu Corp. 48,000 227,448 Taisei Corp. 93,000 221,836 ------------- 1,368,137 - ---------------------------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% Taiheiyo Cement Corp. 73,000 146,671 - ---------------------------------------------------------------------------------------------------------------------------------- Consumer Finance - 0.2% Acom Co., Ltd. 5,260 162,811 Aeon Credit Service Co., Ltd. 9,400 117,794 Aiful Corp. 6,550 75,772 Credit Saison Co., Ltd. 14,600 306,259 Nippon Shinpan Co., Ltd. 38,000 125,714 ORIX Corp. 7,780 1,114,306 Promise Co., Ltd. 5,900 164,957 Takefuji Corp. 8,870 123,517 ------------- 2,191,130 - ---------------------------------------------------------------------------------------------------------------------------------- Containers & Packaging - 0.0% Toyo Seikan Kaisha Ltd. 9,900 174,771 - ---------------------------------------------------------------------------------------------------------------------------------- Distributors - 0.0% Canon Marketing Japan Inc. 4,700 82,674 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Consumer Services - 0.0% Benesse Corp. 4,600 186,305 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.0% Diamond Lease Co., Ltd. 3,720 161,638 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.2% Nippon Telegraph & Telephone Corp. 434 2,141,476 - ---------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.8% Chubu Electric Power Co., Inc. 56,100 1,370,296 Chugoku Electric Power Co. 25,700 548,398 Hokkaido Electric Power Co., Inc. 12,600 256,605 Hokuriku Electric Power 16,800 399,531 The Kansai Electric Power Co., Inc. 65,000 1,522,778 Kyushu Electric Power Co., Inc. 32,300 675,870 Shikoku Electric Power Co., Inc. 17,300 475,686 Tohoku Electric Power Co., Inc. 36,400 792,847 The Tokyo Electric Power Co., Inc. 102,500 2,639,212 ------------- 8,681,223 - ---------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.3% Fuji Electric Holdings Co., Ltd. 31,800 112,436 Furukawa Electric Co., Ltd. 38,000 165,403 Matsushita Electric Works Ltd. 32,873 335,451 Mitsubishi Electric Corp. 163,000 1,762,987
13 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Sumitomo Electric Industries Ltd. 63,900 $ 811,501 Ushio, Inc. 5,800 94,978 ------------- 3,282,756 - ---------------------------------------------------------------------------------------------------------------------------------- Electronic Equipment & Instruments - 1.1% Alps Electric Co., Ltd. 17,700 183,074 Citizens Holding Co. Ltd. 32,400 247,176 Fuji Photo Film Co., Ltd. 41,300 1,422,600 Hirose Electric Co., Ltd. 2,000 200,957 Hitachi High-Technologies Corp. 4,300 99,777 Hitachi Ltd. 284,000 2,045,219 Hoya Corp. 35,100 812,993 Ibiden Co., Ltd. 11,600 422,426 Keyence Corp. 3,200 762,794 Kyocera Corp. 13,800 1,301,801 Mabuchi Motor Co., Ltd. 1,000 54,309 Murata Manufacturing Co., Ltd. 18,200 858,650 Nidec Corp. 9,300 619,467 Nippon Electric Glass Co. 29,500 512,769 Omron Corp. 14,500 312,952 Shimadzu Corp. 26,000 259,252 TDK Corp. 10,500 628,301 Yaskawa Electric Corp. 16,000 157,013 Yokogawa Electric Corp. 11,300 103,527 ------------- 11,005,057 - ---------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.3% Aeon Co., Ltd. 54,400 673,398 FamilyMart Co., Ltd. 3,400 139,170 Lawson, Inc. 6,500 316,681 Seven & I Holdings Co. Ltd. 67,900 1,944,188 UNY Co., Ltd. 16,000 157,726 ------------- 3,231,163 - ---------------------------------------------------------------------------------------------------------------------------------- Food Products - 0.2% Ajinomoto Co., Inc. 56,000 530,541 Kikkoman Corp. 17,000 207,669 Meiji Dairies Corp. 31,000 159,065 Nippon Meat Packers, Inc. 16,000 216,806 Nisshin Seifun Group, Inc. 10,500 131,975 Nissin Food Products Co., Ltd. 7,500 251,463 Toyo Suisan Kaisha, Ltd. 9,000 203,693 Yakult Honsha Co., Ltd. 6,200 174,656 Yamazaki Baking Co., Ltd. 6,000 66,031 ------------- 1,941,899 - ---------------------------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.2% Osaka Gas Co., Ltd. 169,000 619,941 Toho Gas Co., Ltd. 50,000 274,181 Tokyo Gas Co., Ltd. 199,000 804,056 ------------- 1,698,178 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.1% Olympus Corp. 21,000 711,926 Terumo Corp. 14,200 726,570 ------------- 1,438,496 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 0.0% Alfresa Holdings Corp. 1,700 121,671 Mediceo Paltac Holdings Co. Ltd. 8,500 156,530 Suzuken Co., Ltd. 4,200 155,144 ------------- 433,345 - ----------------------------------------------------------------------------------------------------------------------------------
14 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.0% Oriental Land Co., Ltd. 3,200 $ 191,183 - ---------------------------------------------------------------------------------------------------------------------------------- Household Durables - 1.0% Casio Computer Co., Ltd. 19,000 216,191 HASEKO Corp. 72,000 96,341 Makita Corp. 10,600 433,803 Matsushita Electric Industrial Co., Ltd. 153,000 3,273,248 Pioneer Corp. 14,100 113,430 Sanyo Electric Co., Ltd. (a) 144,000 334,792 Sekisui Chemical Co., Ltd. 26,000 177,318 Sekisui House Ltd. 42,000 392,670 Sharp Corp. 85,000 1,385,608 Sony Corp. 82,900 3,633,812 ------------- 10,057,213 - ---------------------------------------------------------------------------------------------------------------------------------- Household Products - 0.1% Kao Corp. 44,000 1,155,107 Uni-Charm Corp. 3,600 256,081 ------------- 1,411,188 - ---------------------------------------------------------------------------------------------------------------------------------- IT Services - 0.1% CSK Holdings Corp. 6,200 122,153 Itochu Techno-Science Corp. 700 22,747 NTT Data Corp. 109 426,730 Nomura Research Institute Ltd. 10,600 248,532 Obic Co., Ltd. 430 72,309 Otsuka Shokai Co., Ltd. 600 41,437 ------------- 933,908 - ---------------------------------------------------------------------------------------------------------------------------------- Independent Power Producers & Energy Electric Power Development Co. 10,600 393,538 Traders - 0.0% - ---------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.0% Hankyu Hanshin Holdings, Inc. 84,000 352,971 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.6% Aioi Insurance Co., Ltd. 45,000 240,241 Mitsui Sumitomo Insurance Group Holdings, Inc. 30,696 1,060,904 Nipponkoa Insurance Co., Ltd. 61,000 529,778 Sompo Japan Insurance, Inc. 71,800 675,101 Sony Financial Holdings, Inc. 70 281,814 T&D Holdings, Inc. 16,650 1,026,981 Tokio Marine Holdings, Inc. 58,500 2,280,044 ------------- 6,094,863 - ---------------------------------------------------------------------------------------------------------------------------------- Internet & Catalog Retail - 0.0% Dena Co. Ltd. 30 176,708 Rakuten, Inc. 567 285,703 ------------- 462,411 - ---------------------------------------------------------------------------------------------------------------------------------- Internet Software & Services - 0.1% Yahoo! Japan Corp. 1,284 494,538 - ---------------------------------------------------------------------------------------------------------------------------------- Leisure Equipment & Products - 0.2% Namco Bandai Holdings, Inc. 16,700 189,363 Nikon Corp. 29,000 848,924 Sankyo Co., Ltd. (Gunma) 5,200 338,817 Sega Sammy Holdings, Inc. 19,432 170,104 Shimano, Inc. 5,600 281,503 Yamaha Corp. 12,000 232,048 ------------- 2,060,759 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery - 1.0% Amada Co., Ltd. 28,000 221,507 Fanuc Ltd. 16,200 1,584,316 Hino Motors Ltd. 22,000 136,640 Hitachi Construction Machinery Co., Ltd. 9,300 260,734 IHI Corp. 98,000 198,509 JTEKT Corp. 17,000 270,074
15 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- The Japan Steel Works, Ltd. 29,000 $ 564,044 Kawasaki Heavy Industries Ltd. 131,000 349,903 Komatsu Ltd. 75,600 2,111,216 Kubota Corp. 94,000 675,568 Kurita Water Industries Ltd. 10,800 400,719 Minebea Co., Ltd. 29,000 165,846 Mitsubishi Heavy Industries Ltd. 271,200 1,295,326 Mitsui Engineering & Shipbuilding Co., Ltd. 61,000 193,460 NGK Insulators Ltd. 23,000 448,400 NSK Ltd. 38,000 332,957 NTN Corp. 26,000 173,369 OKUMA Corp. 16,000 159,287 SMC Corp. 4,900 537,805 Sumitomo Heavy Industries Ltd. 48,000 325,556 THK Co., Ltd. 10,300 200,423 ------------- 10,605,659 - ---------------------------------------------------------------------------------------------------------------------------------- Marine - 0.3% Kawasaki Kisen Kaisha Ltd. 52,000 488,678 Mitsui OSK Lines Ltd. 98,000 1,397,673 Nippon Yusen Kabushiki Kaisha 94,000 905,390 ------------- 2,791,741 - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.1% Dentsu, Inc. 170 360,752 Fuji Television Network, Inc. 54 81,508 Hakuhodo DY Holdings, Inc. 800 42,702 Jupiter Telecommunications Co., Ltd. 133 103,173 Toho Co., Ltd. 6,000 122,629 Tokyo Broadcasting System, Inc. 3,500 66,482 ------------- 777,246 - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.9% Daido Steel Co., Ltd. 24,000 134,291 Dowa Mining Co., Ltd. 16,000 116,881 Hitachi Metals Ltd. 17,000 279,117 JFE Holdings, Inc. 43,600 2,198,234 Kobe Steel Ltd. 226,000 647,180 Maruichi Steel Tube Ltd. 4,400 137,689 Mitsubishi Materials Corp. 99,000 423,361 Mitsui Mining & Smelting Co., Ltd. 63,000 186,029 Nippon Steel Corp. 425,000 2,303,344 Nisshin Steel Co., Ltd. 49,000 166,796 Osaka Titanium Technologies Co. 1,500 78,783 Sumitomo Metal Industries Ltd. 322,000 1,417,705 Sumitomo Metal Mining Co., Ltd. 47,000 718,927 Toho Titanium Co. Ltd. 700 13,727 Tokyo Steel Manufacturing Co., Ltd. 9,700 112,347 Yamato Kogyo Co. Ltd. 3,500 167,139 ------------- 9,101,550 - ---------------------------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.1% Isetan Mitsukoshi Holdings Ltd. 32,505 348,055 J Front Retailing Co. Ltd. 24,600 130,240 Marui Group Co. Ltd. 28,500 221,883 Takashimaya Co., Ltd. 24,000 218,053 ------------- 918,231 - ----------------------------------------------------------------------------------------------------------------------------------
16 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Office Electronics - 0.6% Brother Industries Ltd. 23,000 $ 317,121 Canon, Inc. 88,200 4,540,176 Konica Minolta Holdings, Inc. 41,000 694,479 Ricoh Co., Ltd. 57,000 1,031,662 ------------- 6,583,438 - ---------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.3% Cosmo Oil Co., Ltd. 30,000 108,694 Idemitsu Kosan Co. Ltd. 2,000 177,867 Inpex Holdings, Inc. 70 883,983 Japan Petrolleum Explora 3,000 214,181 Nippon Mining Holdings, Inc. 75,500 474,034 Nippon Oil Corp. 113,000 761,318 Showa Shell Sekiyu KK 21,300 233,844 TonenGeneral Sekiyu KK 25,000 227,105 ------------- 3,081,026 - ---------------------------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.1% Nippon Paper Group, Inc. 90 246,219 OJI Paper Co., Ltd. 69,000 324,493 ------------- 570,712 - ---------------------------------------------------------------------------------------------------------------------------------- Personal Products - 0.1% Shiseido Co., Ltd. 28,000 641,676 - ---------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 1.0% Astellas Pharma, Inc. 41,700 1,773,300 Chugai Pharmaceutical Co., Ltd. 24,000 383,754 Daiichi Sankyo Co., Ltd. 59,000 1,625,356 Dainippon Pharma Co., Ltd. 18,000 145,598 Eisai Co., Ltd. 21,500 759,465 Hisamitsu Pharmaceutical Co., Ltd. 6,800 296,106 Kyowa Hakko Kogyo Co., Ltd. 25,000 256,319 Mitsubishi Tanabe Pharma Corp. 20,000 261,431 Ono Pharmacecutical Co. Ltd. 9,000 494,668 Santen Pharmaceutical Co., Ltd. 4,700 117,514 Shionogi & Co., Ltd. 25,000 494,996 Taisho Pharmaceutical Co., Ltd. 11,000 204,637 Takeda Pharmaceutical Co., Ltd. 69,900 3,555,078 ------------- 10,368,222 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts (REITs) - 0.1% Japan Prime Realty Investment Corp. 62 183,438 Japan Real Estate Investment Corp. 36 380,231 Japan Retail Fund Investment Corp. 37 213,336 Nippon Building Fund, Inc. 44 518,876 Nomura Real Estate Office Fund, Inc. 20 150,626 ------------- 1,446,507 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Management & Development - 0.6% Aeon Mall Co. Ltd. 3,600 106,493 Daito Trust Construction Co., Ltd. 6,900 334,658 Daiwa House Industry Co., Ltd. 44,000 414,204 Leopalace21 Corp. 11,400 163,536 Mitsubishi Estate Co., Ltd. 99,000 2,266,568 Mitsui Fudosan Co., Ltd. 71,000 1,519,612 NTT Urban Development Co. 63 82,592 Nomura Real Estate Holdings, Inc. 2,000 42,259 Sumitomo Realty & Development Co., Ltd. 33,000 656,472 Tokyo Tatemono Co., Ltd. 27,000 174,869 Tokyu Land Corp. 35,000 199,298 ------------- 5,960,561 - ----------------------------------------------------------------------------------------------------------------------------------
17 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Road & Rail - 0.6% Central Japan Railway Co. 132 $ 1,454,965 East Japan Railway Co. 286 2,329,559 Keihin Electric Express Railway Co., Ltd. 24,000 148,759 Keio Electric Railway Co., Ltd. 34,000 172,065 Keisei Electric Railway Co., Ltd. 31,000 158,685 Kintetsu Corp. 111,000 348,195 Nippon Express Co., Ltd. 70,000 336,183 Odakyu Electric Railway Co., Ltd. 53,000 344,483 Tobu Railway Co., Ltd. 52,000 246,505 Tokyu Corp. 93,000 482,561 West Japan Railway Co. 145 711,699 ------------- 6,733,659 - ---------------------------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor Equipment - 0.2% Advantest Corp. 15,000 316,171 Elpida Memory, Inc. (a) 8,200 262,982 NEC Electronics Corp. (a) 1,200 29,987 Rohm Co., Ltd. 8,700 502,332 Shinko Electric Industries 2,100 25,987 Sumco Corp. 11,300 250,362 Tokyo Electron Ltd. 14,600 841,953 ------------- 2,229,774 - ---------------------------------------------------------------------------------------------------------------------------------- Software - 0.5% Konami Corp. 7,900 276,312 Nintendo Co., Ltd. 8,200 4,650,002 Oracle Corp. Japan 1,600 65,229 Square Enix Co. Ltd. 3,300 97,657 Trend Micro, Inc. 9,000 296,794 ------------- 5,385,994 - ---------------------------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% Fast Retailing Co., Ltd. 4,500 426,929 Hikari Tsushin, Inc. 800 26,391 Nitori Co., Ltd. 2,100 107,878 Shimamura Co., Ltd. 1,100 67,826 USS Co., Ltd. 900 59,466 Yamada Denki Co., Ltd. 7,410 527,950 ------------- 1,216,440 - ---------------------------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.0% Asics Corp. 12,000 131,156 Nisshinbo Industries, Inc. 13,000 154,710 Onward Holdings Co. Ltd. 7,000 73,602 ------------- 359,468 - ---------------------------------------------------------------------------------------------------------------------------------- Tobacco - 0.2% Japan Tobacco, Inc. 379 1,616,381 - ---------------------------------------------------------------------------------------------------------------------------------- Trading Companies & Distributors - 1.1% Itochu Corp. 127,000 1,354,045 Marubeni Corp. 139,000 1,159,398 Mitsubishi Corp. 111,900 3,687,186 Mitsui & Co., Ltd. 143,000 3,156,166 Sojitz Corp. 106,500 355,269 Sumitomo Corp. 96,900 1,273,098 Toyota Tsusho Corp. 18,300 429,526 ------------- 11,414,688 - ---------------------------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.0% Kamigumi Co., Ltd. 12,000 90,980 Mitsubishi Logistics Corp. 7,000 76,671 ------------- 167,651 - ----------------------------------------------------------------------------------------------------------------------------------
18 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Wireless Telecommunication Services - 0.4% KDDI Corp. 251 $ 1,553,043 NTT DoCoMo, Inc. 1,348 1,977,165 Softbank Corp. 63,700 1,074,169 ------------- 4,604,377 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Japan 219,345,027 - ---------------------------------------------------------------------------------------------------------------------------------- Kazakhstan - 0.1% - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% Eurasian Natural Resources Corp. (a) 27,283 718,843 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Kazakhstan 718,843 - ---------------------------------------------------------------------------------------------------------------------------------- Luxembourg - 0.8% - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.1% SES Global 27,500 694,679 - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.7% ArcelorMittal 72,665 7,141,154 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Luxembourg 7,835,833 - ---------------------------------------------------------------------------------------------------------------------------------- Netherlands - 2.5% - ---------------------------------------------------------------------------------------------------------------------------------- Air Freight & Logistics - 0.1% TNT NV 32,404 1,102,843 - ---------------------------------------------------------------------------------------------------------------------------------- Beverages - 0.2% Heineken Holding NV 10,233 468,368 Heineken NV 21,017 1,070,265 ------------- 1,538,633 - ---------------------------------------------------------------------------------------------------------------------------------- Chemicals - 0.2% Akzo Nobel NV 23,219 1,588,966 Koninklijke DSM NV 11,763 689,452 ------------- 2,278,418 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.0% Randstad Holdings NV 7,204 250,713 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.5% ING Groep NV CVA 158,275 5,004,296 SNS Reaal 12,764 246,618 ------------- 5,250,914 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.3% Koninklijke KPN NV 155,421 2,657,210 - ---------------------------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.1% Fugro NV 4,637 394,849 SBM Offshore NV 11,316 416,381 ------------- 811,230 - ---------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.1% Koninklijke Ahold NV 101,602 1,362,038 - ---------------------------------------------------------------------------------------------------------------------------------- Food Products - 0.4% Unilever NV 136,647 3,864,194 - ---------------------------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% TomTom NV (a) 5,394 154,097 - ---------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.3% Koninklijke Philips Electronics NV 90,991 3,081,452 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.1% Aegon NV 116,938 1,537,354 - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.1% Reed Elsevier NV 53,247 891,134 Wolters Kluwer NV 23,939 557,202 ------------- 1,448,336 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts (REITs) - 0.0% Corio NV 2,933 228,450 - ---------------------------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor Equipment - 0.1% ASML Holding NV 35,348 865,192 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in the Netherlands 26,431,074 - ---------------------------------------------------------------------------------------------------------------------------------- New Zealand - 0.1% - ---------------------------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% Fletcher Building Ltd. 44,823 216,805 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.1% Telecom Corp. of New Zealand Ltd. 162,744 442,238 - ---------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.0% Contact Energy Ltd. 18,866 114,820 - ---------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.0% Sky City Ltd. 27,722 64,649 - ---------------------------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.0% Auckland International Airport Ltd. 55,023 81,806 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in New Zealand 920,318 - ----------------------------------------------------------------------------------------------------------------------------------
19 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Norway - 1.0% - ---------------------------------------------------------------------------------------------------------------------------------- Chemicals - 0.1% Yara International ASA 16,300 $ 1,439,545 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.1% DnB NOR ASA 63,199 802,889 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.1% Telenor ASA 49,695 932,882 Telenor ASA (b) 7,399 417,491 ------------- 1,350,373 - ---------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.0% Renewable Energy Corp. ASA (a) 12,876 332,438 - ---------------------------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.1% Acergy SA 15,590 347,379 Aker Solutions ASA 14,369 338,579 Petroleum Geo-Services ASA (a) 13,650 334,268 ------------- 1,020,226 - ---------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.1% Orkla ASA 71,270 913,216 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.0% Storebrand ASA 32,887 243,521 - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% Norsk Hydro ASA 61,718 899,936 - ---------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.4% Statoilhydro ASA 108,294 4,040,423 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Norway 11,042,567 - ---------------------------------------------------------------------------------------------------------------------------------- Portugal - 0.3% - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.1% Banco BPI SA 26,361 108,764 Banco Comercial Portugues SA Registered Shares 202,251 436,232 Banco Espirito Santo SA Registered Shares 19,851 308,766 ------------- 853,762 - ---------------------------------------------------------------------------------------------------------------------------------- Construction Materials - 0.0% Cimpor Cimentos de Portugal SA 26,806 179,747 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.1% Portugal Telecom SGPS SA Registered Shares 57,427 649,530 - ---------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.1% Energias de Portugal SA 157,249 817,682 - ---------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.0% Sonae SGPS SA 29,281 35,078 - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.0% Zon Multimedia Servicos de Telecomunicacoes e Multimedia SGPS SA 15,808 131,117 - ---------------------------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.0% Brisa-Auto Estradas de Portugal SA Private Shares 20,401 235,037 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Portugal 2,901,953 - ---------------------------------------------------------------------------------------------------------------------------------- Singapore - 1.2% - ---------------------------------------------------------------------------------------------------------------------------------- Aerospace & Defense - 0.0% Singapore Technologies Engineering Ltd. 114,213 231,218 - ---------------------------------------------------------------------------------------------------------------------------------- Airlines - 0.1% Singapore Airlines Ltd. 47,009 508,790 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.4% DBS Group Holdings Ltd. 97,605 1,357,975 Oversea-Chinese Banking Corp. 212,914 1,282,436 United Overseas Bank Ltd. 103,572 1,421,866 ------------- 4,062,277 - ---------------------------------------------------------------------------------------------------------------------------------- Distributors - 0.0% Jardine Cycle & Carriage Ltd. 7,529 94,360 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.0% Singapore Exchange Ltd. 75,000 382,590 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.2% Singapore Telecommunications Ltd. 680,132 1,813,052 - ---------------------------------------------------------------------------------------------------------------------------------- Electronic Equipment & Venture Corp. Ltd. 10,000 72,360 Instruments - 0.0% - ---------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.0% Olam International Ltd. 115,900 206,742 - ---------------------------------------------------------------------------------------------------------------------------------- Food Products - 0.1% Golden Agri-Resources Ltd. 486,000 320,808 Wilmar International Ltd. 78,900 293,179 ------------- 613,987 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 0.0% Parkway Holdings Ltd. 109,706 187,183 - ----------------------------------------------------------------------------------------------------------------------------------
20 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.0% Genting International Plc (a) 149,388 $ 63,761 - ---------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.2% Fraser and Neave Ltd. 68,096 227,183 Keppel Corp. Ltd. 112,616 923,729 SembCorp Industries Ltd. 81,590 250,459 ------------- 1,401,371 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery - 0.1% Cosco Corp. (Singapore) Ltd. 75,002 176,985 SembCorp Marine Ltd. 87,197 259,923 ------------- 436,908 - ---------------------------------------------------------------------------------------------------------------------------------- Marine - 0.0% Neptune Orient Lines Ltd. 44,200 105,128 - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.0% Singapore Press Holdings Ltd. 130,316 407,460 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts (REITs) - 0.0% Ascendas Real Estate Investment Trust 117,152 189,946 Capita Commercial Trust 38,000 53,434 CapitaMall Trust 76,000 167,628 ------------- 411,008 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Management & Development - 0.1% CapitaLand Ltd. 149,833 629,611 City Developments Ltd. 46,535 372,486 Keppel Land Ltd. 39,182 143,108 UOL Group Ltd. 20,457 51,049 Yanlord Land Group Ltd. 8,000 10,933 ------------- 1,207,187 - ---------------------------------------------------------------------------------------------------------------------------------- Road & Rail - 0.0% ComfortDelgro Corp. Ltd. 106,816 118,082 - ---------------------------------------------------------------------------------------------------------------------------------- Trading Companies & Distributors - 0.0% Noble Group Ltd. 105,720 185,042 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Singapore 12,508,506 - ---------------------------------------------------------------------------------------------------------------------------------- Spain - 4.0% - ---------------------------------------------------------------------------------------------------------------------------------- Airlines - 0.0% Iberia Lineas Aereas de Espana 40,744 97,004 - ---------------------------------------------------------------------------------------------------------------------------------- Biotechnology - 0.0% Grifols SA 11,995 382,044 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 1.6% Banco Bilbao Vizcaya Argentaria SA 297,839 5,674,971 Banco de Sabadell SA 82,738 697,396 Banco Popular Espanol SA 67,496 930,133 Banco Santander SA 521,062 9,506,325 Bankinter SA 25,077 284,423 ------------- 17,093,248 - ---------------------------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.2% ACS Actividades de Construccion y Servicios, SA 16,589 830,097 Acciona SA 2,451 579,388 Fomento de Construcciones y Contratas SA 4,036 238,783 Grupo Ferrovial SA 5,895 363,169 Sacyr Vallehermoso SA 5,917 180,631 ------------- 2,192,068 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.1% Criteria Caixacorp SA 76,967 459,276 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.9% Telefonica SA 357,958 9,472,939 - ---------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.5% Iberdrola SA 288,776 3,847,604 Red Electrica de Espana 9,318 604,859 Union Fenosa SA 10,924 634,820 ------------- 5,087,283 - ---------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.1% Gamesa Corp. Tecnologica SA 14,600 714,770 - ----------------------------------------------------------------------------------------------------------------------------------
21 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% Enagas 15,448 $ 436,067 Gas Natural SDG SA 9,650 560,388 ------------- 996,455 - ---------------------------------------------------------------------------------------------------------------------------------- IT Services - 0.0% Indra Sistemas SA 11,124 288,394 - ---------------------------------------------------------------------------------------------------------------------------------- Independent Power Producers & Iberdrola Renovables (a) 66,924 515,596 Energy Traders - 0.1% - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.0% Corp. Mapfre SA 64,801 309,336 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery - 0.0% Zardoya Otis SA 8,218 170,037 - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.0% Gestevision Telecinco SA 10,684 136,054 Promotora de Informaciones SA 4,647 49,538 ------------- 185,592 - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.0% Acerinox SA 13,595 311,939 - ---------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.2% Repsol YPF SA 61,310 2,406,079 - ---------------------------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% Inditex SA 18,581 851,770 - ---------------------------------------------------------------------------------------------------------------------------------- Transportation Infrastructure - 0.1% Abertis Infraestructuras SA 20,326 480,887 Cintra Concesiones de Infraestructuras de Transporte SA 20,706 231,011 ------------- 711,898 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Spain 42,245,728 - ---------------------------------------------------------------------------------------------------------------------------------- Sweden - 2.1% - ---------------------------------------------------------------------------------------------------------------------------------- Building Products - 0.0% Assa Abloy AB Series B 26,377 379,514 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.4% Nordea Bank AB 170,351 2,334,237 Skandinaviska Enskilda Banken AB Class A 39,253 724,181 Svenska Handelsbanken Class A 38,912 921,841 Swedbank AB-A Shares 32,500 624,456 ------------- 4,604,715 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.0% Securitas AB 23,048 266,602 - ---------------------------------------------------------------------------------------------------------------------------------- Communications Equipment - 0.2% Telefonaktiebolaget LM Ericsson 244,889 2,546,473 - ---------------------------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.1% Skanska AB Class B 31,605 450,761 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.1% Investor AB 40,800 856,572 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.2% Tele2 AB 27,266 530,232 TeliaSonera AB 186,701 1,380,279 ------------- 1,910,511 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.0% Getinge AB Class B 12,727 310,298 - ---------------------------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% Electrolux AB 21,644 275,025 Husqvarna AB 19,458 169,252 ------------- 444,277 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery - 0.5% Alfa Laval AB 31,868 492,342 Atlas Copco AB A Shares 56,777 830,384 Atlas Copco AB B Shares 33,679 445,403 SKB AB 35,213 548,800 Sandvik AB 86,550 1,175,913 Scania AB 30,821 419,634 Volvo AB B Shares 91,479 1,113,945 ------------- 5,026,421 - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.0% Modern Times Group AB 3,610 211,324 - ----------------------------------------------------------------------------------------------------------------------------------
22 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.1% Boliden AB 24,234 $ 195,668 SSAB Svenskt Stal AB Series A 15,102 484,341 SSAB Svenskt Stal AB Series B 6,267 177,095 ------------- 857,104 - ---------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 0.0% Lundin Petroleum AB (a) 15,302 225,172 - ---------------------------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.1% Holmen AB Class B 2,345 68,560 Svenska Cellulosa AB 47,900 673,986 ------------- 742,546 - ---------------------------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.2% Hennes & Mauritz AB B Shares 43,380 2,340,364 - ---------------------------------------------------------------------------------------------------------------------------------- Tobacco - 0.1% Swedish Match AB 22,550 459,561 - ---------------------------------------------------------------------------------------------------------------------------------- Wireless Telecommunication Services - 0.1% Millicom International Cellular SA (b) 6,405 659,362 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Sweden 22,291,577 - ---------------------------------------------------------------------------------------------------------------------------------- Switzerland - 7.0% - ---------------------------------------------------------------------------------------------------------------------------------- Biotechnology - 0.1% Actelion Ltd. (a) 8,371 446,539 - ---------------------------------------------------------------------------------------------------------------------------------- Building Products - 0.1% Geberit AG 3,420 502,121 - ---------------------------------------------------------------------------------------------------------------------------------- Capital Markets - 1.0% Credit Suisse Group AG 88,099 4,010,002 EFG International AG 2,886 78,542 Julius Baer Holding AG Class B 19,020 1,275,538 UBS AG (a) 247,404 5,155,464 ------------- 10,519,546 - ---------------------------------------------------------------------------------------------------------------------------------- Chemicals - 0.3% Givaudan SA 579 516,127 Syngenta AG 8,870 2,873,638 ------------- 3,389,765 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.1% Adecco SA Registered Shares 10,606 524,276 SGS SA 387 551,881 ------------- 1,076,157 - ---------------------------------------------------------------------------------------------------------------------------------- Computers & Peripherals - 0.0% Logitech International SA (a) 14,816 396,092 - ---------------------------------------------------------------------------------------------------------------------------------- Construction Materials - 0.1% Holcim Ltd. 18,039 1,458,128 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.0% Pargesa Holding SA 2,669 295,921 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.1% Swisscom AG 1,946 648,142 - ---------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.5% ABB Ltd. 184,739 5,229,195 - ---------------------------------------------------------------------------------------------------------------------------------- Food Products - 1.4% Lindt & Spruengli AG 46 126,765 Nestle SA Registered Shares 332,370 14,978,145 ------------- 15,104,910 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.2% Nobel Biocare Holding AG 10,423 338,895 Sonova Holding AG 3,914 323,022 Straumann Holding AG Registered Shares 806 192,673 Synthes, Inc. 5,092 700,366 ------------- 1,554,956 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.6% Baloise Holding AG 4,953 519,491 Swiss Life Holding 2,970 790,078 Swiss Reinsurance Co. Registered Shares 29,988 1,987,958 Zurich Financial Services AG 12,266 3,126,048 ------------- 6,423,575 - ---------------------------------------------------------------------------------------------------------------------------------- Life Sciences Tools & Services - 0.1% Lonza Group AG Registered Shares 3,920 541,736 - ----------------------------------------------------------------------------------------------------------------------------------
23 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Machinery - 0.1% Schindler Holding AG 3,443 $ 255,745 Sulzer AG 2,630 332,271 ------------- 588,016 - ---------------------------------------------------------------------------------------------------------------------------------- Marine - 0.0% Kuehne & Nagel International AG 4,494 425,229 - ---------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 2.0% Novartis AG Registered Shares 195,789 10,774,699 Roche Holding AG 59,298 10,660,139 ------------- 21,434,838 - ---------------------------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor Equipment - 0.0% OC Oerlikon Corp. AG (a) 611 168,599 - ---------------------------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.3% Compagnie Financiere Richemont AG 44,496 2,469,340 The Swatch Group Ltd. Bearer Shares 2,711 674,110 The Swatch Group Ltd. Registered Shares 4,656 217,190 ------------- 3,360,640 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Switzerland 73,564,105 - ---------------------------------------------------------------------------------------------------------------------------------- United Kingdom - 21.1% - ---------------------------------------------------------------------------------------------------------------------------------- Aerospace & Defense - 0.4% BAE Systems Plc 295,934 2,597,502 Cobham Plc 77,230 303,122 Meggitt Plc 59,138 249,477 Rolls-Royce Group Plc 154,373 1,043,369 ------------- 4,193,470 - ---------------------------------------------------------------------------------------------------------------------------------- Airlines - 0.0% British Airways Plc 49,991 212,928 - ---------------------------------------------------------------------------------------------------------------------------------- Auto Components - 0.0% GKN Plc 59,800 263,936 - ---------------------------------------------------------------------------------------------------------------------------------- Beverages - 0.5% Diageo Plc 212,442 3,892,184 SABMiller Plc 76,010 1,736,587 ------------- 5,628,771 - ---------------------------------------------------------------------------------------------------------------------------------- Capital Markets - 0.3% 3i Group Plc 32,473 531,195 ICAP Plc 44,606 477,785 Investec Plc 23,724 144,451 Man Group Plc 144,903 1,790,032 Schroders Plc 11,024 199,618 ------------- 3,143,081 - ---------------------------------------------------------------------------------------------------------------------------------- Chemicals - 0.1% Johnson Matthey Plc 18,342 671,174 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 3.1% Alliance & Leicester Plc 36,611 213,667 Barclays Plc 560,307 3,178,883 HBOS Plc 314,882 1,723,918 HSBC Holdings Plc 991,430 15,265,566 Lloyds TSB Group Plc 467,080 2,865,653 Royal Bank of Scotland Group Plc 1,341,311 5,710,136 Standard Chartered Plc 121,720 3,447,040 ------------- 32,404,863 - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.3% Capita Group Plc 52,132 711,149 Experian Group Ltd. 87,238 645,204 Group 4 Securicor Plc 105,831 425,082 Hays Plc 87,373 156,646 Rentokil Initial Plc 159,006 313,187 Serco Group Plc 45,013 399,439 ------------- 2,650,707 - ---------------------------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.0% Balfour Beatty Plc 42,120 354,325 - ---------------------------------------------------------------------------------------------------------------------------------- Consumer Finance - 0.0% Cattles Plc 1 3 - ----------------------------------------------------------------------------------------------------------------------------------
24 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Containers & Packaging - 0.1% Rexam Plc 55,448 $ 425,954 - ---------------------------------------------------------------------------------------------------------------------------------- Distributors - 0.0% Inchcape Plc 29,040 183,807 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 0.0% London Stock Exchange Group Plc 12,046 185,993 - ---------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication Services - 0.3% BT Group Plc 657,348 2,604,202 Cable & Wireless Plc 212,106 633,988 ------------- 3,238,190 - ---------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.3% British Energy Group Plc 87,231 1,227,166 Scottish & Southern Energy Plc 72,982 2,033,479 ------------- 3,260,645 - ---------------------------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 0.1% Amec Plc 28,017 493,694 - ---------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 0.6% J Sainsbury Plc 86,825 548,107 Tesco Plc 652,982 4,776,106 William Morrison Supermarkets Plc 212,662 1,121,079 ------------- 6,445,292 - ---------------------------------------------------------------------------------------------------------------------------------- Food Products - 0.5% Associated British Foods Plc 32,549 490,280 Cadbury Plc 114,256 1,433,166 Tate & Lyle Plc 34,772 274,002 Unilever Plc 107,360 3,050,295 ------------- 5,247,743 - ---------------------------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 0.1% Smith & Nephew Plc 75,865 832,346 - ---------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 0.3% Carnival Plc 13,913 441,717 Compass Group Plc 156,263 1,175,399 Enterprise Inns Plc 43,183 347,514 Intercontinental Hotels Group Plc 22,874 304,866 Ladbrokes Plc 53,298 270,808 Mitchells & Butlers Plc 32,230 130,883 Punch Taverns Plc 23,685 147,199 TUI Travel Plc 39,184 159,233 Thomas Cook Group Plc 28,091 130,234 Whitbread Plc 15,737 383,764 William Hill Plc 24,638 156,253 ------------- 3,647,870 - ---------------------------------------------------------------------------------------------------------------------------------- Household Durables - 0.0% Berkeley Group Holdings Plc 3,735 50,429 Persimmon Plc 26,158 163,723 Taylor Wimpey Plc 90,344 110,672 ------------- 324,824 - ---------------------------------------------------------------------------------------------------------------------------------- Household Products - 0.2% Reckitt Benckiser Plc 49,749 2,512,722 - ---------------------------------------------------------------------------------------------------------------------------------- IT Services - 0.0% LogicaCMG Plc 113,156 242,300 - ---------------------------------------------------------------------------------------------------------------------------------- Independent Power Producers & International Power Plc 127,582 1,092,955 Energy Traders - 0.1% - ---------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 0.1% Smiths Group Plc 33,240 716,210 Tomkins Plc 78,603 235,326 ------------- 951,536 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance - 0.8% Aviva Plc 220,953 2,190,549 Friends Provident Plc 211,595 427,873 Legal & General Group Plc 523,156 1,038,111 Old Mutual Plc 425,976 781,977
25 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Prudential Plc 208,046 $ 2,194,414 Royal & Sun Alliance Insurance Group 277,691 691,327 Standard Life Plc 185,164 769,784 ------------- 8,094,035 - ---------------------------------------------------------------------------------------------------------------------------------- Internet & Catalog Retail - 0.0% Home Retail Group 75,895 327,957 - ---------------------------------------------------------------------------------------------------------------------------------- Machinery - 0.1% IMI Plc 24,844 214,544 Invensys Plc 69,841 360,865 ------------- 575,409 - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.4% British Sky Broadcasting Plc 96,602 905,417 Daily Mail & General Trust 24,362 151,352 ITV Plc 287,054 254,175 Pearson Plc 68,799 838,386 Reed Elsevier Plc 93,359 1,063,871 Thomson Reuters Plc 17,404 464,167 United Business Media Plc (a) 15,334 165,405 WPP Group Plc 94,871 906,552 ------------- 4,749,325 - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 3.0% Anglo American Plc 110,084 7,731,603 Antofagasta Plc 35,808 465,601 BHP Billiton Plc 184,422 7,072,581 Kazakhmys Plc 18,478 582,608 Lonmin Plc 13,820 872,125 Rio Tinto Plc Registered Shares 83,246 10,025,058 Vedanta Resources Plc 12,806 553,036 Xstrata Plc 53,315 4,247,091 ------------- 31,549,703 - ---------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.5% Centrica Plc 310,775 1,911,416 National Grid Plc 209,935 2,751,880 United Utilities Plc 74,780 1,017,606 ------------- 5,680,902 - ---------------------------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.1% Marks & Spencer Group Plc 136,343 886,573 Next Plc 17,289 332,354 ------------- 1,218,927 - ---------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 4.6% BG Group Plc 278,189 7,229,421 BP Plc 1,577,445 18,283,499 Cairn Energy Plc (a) 11,821 758,672 Royal Dutch Shell Plc 297,074 12,177,494 Royal Dutch Shell Plc Class B 230,059 9,212,270 Tullow Oil Plc 60,972 1,158,643 ------------- 48,819,999 - ---------------------------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.0% Mondi Plc 31,143 182,792 - ---------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 1.5% AstraZeneca Plc 120,974 5,143,607 GlaxoSmithKline Plc 456,019 10,080,644 Shire Ltd. 49,927 816,176 ------------- 16,040,427 - ---------------------------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts (REITs) - 0.3% British Land Co. Plc 43,680 614,248 Hammerson Plc 24,993 442,685 Land Securities Group Plc 39,450 962,696
26 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Industry Common Stocks Shares Value - ---------------------------------------------------------------------------------------------------------------------------------- Liberty International Plc 21,929 $ 374,258 Segro Plc 35,377 276,620 ------------- 2,670,507 - ---------------------------------------------------------------------------------------------------------------------------------- Road & Rail - 0.1% Firstgroup Plc 41,732 430,354 National Express Group Plc 12,431 234,497 Stagecoach Group Plc 40,760 226,078 ------------- 890,929 - ---------------------------------------------------------------------------------------------------------------------------------- Software - 0.1% Sage Group Plc 112,528 465,845 - ---------------------------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% The Carphone Warehouse Plc 32,874 129,181 Kingfisher Plc 201,445 446,602 ------------- 575,783 - ---------------------------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.0% Burberry Group Plc 37,532 337,566 - ---------------------------------------------------------------------------------------------------------------------------------- Tobacco - 0.7% British American Tobacco Plc 125,553 4,330,801 Imperial Tobacco Group Plc 83,973 3,119,477 ------------- 7,450,278 - ---------------------------------------------------------------------------------------------------------------------------------- Trading Companies & Distributors - 0.1% Bunzl Plc 30,014 389,842 Wolseley Plc 57,619 429,308 ------------- 819,150 - ---------------------------------------------------------------------------------------------------------------------------------- Water Utilities - 0.1% Severn Trent Plc 20,157 512,930 - ---------------------------------------------------------------------------------------------------------------------------------- Wireless Telecommunication Services - 1.2% Vodafone Group Plc 4,437,083 13,073,020 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks in the United Kingdom 222,644,613 - ---------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks - 97.2% 1,026,309,661 - ---------------------------------------------------------------------------------------------------------------------------------- Exchange-Traded Funds - ---------------------------------------------------------------------------------------------------------------------------------- United States - 3.8% - ---------------------------------------------------------------------------------------------------------------------------------- iShares MSCI EAFE Index Fund 580,230 39,861,801 - ---------------------------------------------------------------------------------------------------------------------------------- Total Exchange-Traded Funds - 3.8% 39,861,801 - ---------------------------------------------------------------------------------------------------------------------------------- Preferred Stocks - ---------------------------------------------------------------------------------------------------------------------------------- Germany - 0.2% - ---------------------------------------------------------------------------------------------------------------------------------- Automobiles - 0.1% Volkswagen AG, 4.35% 8,663 1,254,469 - ---------------------------------------------------------------------------------------------------------------------------------- Household Products - 0.1% Henkel KGaA, 1.75% 15,284 607,358 - ---------------------------------------------------------------------------------------------------------------------------------- Media - 0.0% ProSieben SAT.1 Media AG, 2.24% 4,674 46,726 - ---------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.0% RWE AG, 3.50% 2,624 263,966 - ---------------------------------------------------------------------------------------------------------------------------------- Total Preferred Stocks - 0.2% 2,172,519 - ---------------------------------------------------------------------------------------------------------------------------------- Rights - ---------------------------------------------------------------------------------------------------------------------------------- Japan - 0.0% - ---------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.0% Dowa Mining Co., Ltd. (c)(d) 7,000 0 - ---------------------------------------------------------------------------------------------------------------------------------- Total Rights in Japan 0 - ---------------------------------------------------------------------------------------------------------------------------------- United Kingdom - 0.0% - ---------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.0% Barclays Plc (e) 116,551 22,054 HBOS Plc (f) 125,952 26,969 - ---------------------------------------------------------------------------------------------------------------------------------- Total Rights in the United Kingdom 49,023 - ---------------------------------------------------------------------------------------------------------------------------------- Total Rights - 0.0 % 49,023 - ---------------------------------------------------------------------------------------------------------------------------------- Total Long-Term Investments (Cost - $921,272,409) - 101.2% 1,068,393,004 - ----------------------------------------------------------------------------------------------------------------------------------
27 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) (Percentages shown are based on Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------------- Beneficial Interest Short-Term Securities (000) Value - ---------------------------------------------------------------------------------------------------------------------------------- BlackRock Liquidity Series, LLC Cash Sweep Series, 2.56% (g)(h) $ 7,111 $ 7,110,912 - ---------------------------------------------------------------------------------------------------------------------------------- Total Short-Term Securities (Cost - $7,110,912) - 0.7% 7,110,912 - ---------------------------------------------------------------------------------------------------------------------------------- Total Investments (Cost - $928,383,321*) - 101.9% 1,075,503,916 Liabilities in Excess of Other Assets - (1.9%) (19,567,874) -------------- Net Assets - 100.0% $1,055,936,042 ==============
* The cost and unrealized appreciation (depreciation) of investments as of June 30, 2008, as computed for federal income tax purposes, were as follows: Aggregate cost $ 941,324,811 ============= Gross unrealized appreciation $ 204,863,295 Gross unrealized depreciation (70,684,190) ------------- Net unrealized appreciation $ 134,179,105 ============= (a) Non-income producing security. (b) Depositary receipts. (c) Security is fair valued. (d) The rights may be exercised until January 29, 2010. (e) The rights may be exercised until July 14, 2008. (f) The rights may be exercised until July 18, 2008. (g) Represents the current yield as of report date. (h) 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 Activity Interest Affiliate (000) Income ------------------------------------------------------------------------- BlackRock Liquidity Series, LLC Cash Sweep Series $ (6,418) $ 233,820 ------------------------------------------------------------------------- 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. o Financial futures contracts purchased as of June 30, 2008 were as follows:
-------------------------------------------------------------------------------------------------------- Number of Expiration Face Unrealized Contracts Issue Exchange Date Value Depreciation -------------------------------------------------------------------------------------------------------- 43 OMX Stock Index Future Stockholm July 2008 $ 681,701 $ (65,880) 108 DJ Euro Stoxx 50 Eurex September 2008 $ 5,955,728 (208,334) 45 FTSE 100 Index Future LIFFE September 2008 $ 5,163,908 (101,464) 22 SPI 200 Index Future Sydney September 2008 $ 2,836,241 (98,183) 48 TOPIX Index Future Tokyo September 2008 $ 6,252,247 (292,083) -------------------------------------------------------------------------------------------------------- Total $ (765,944) ============
28 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) o Forward foreign currency contracts as of June 30, 2008 were as follows: ------------------------------------------------------------------------- Unrealized Currency Currency Settlement Appreciation Purchased Sold Date (Depreciation) ------------------------------------------------------------------------- AUD 3,186,150 $ 2,987,612 8/14/08 $ 47,781 CHF 1,813,000 $ 1,737,942 8/14/08 37,724 EUR 10,821,500 $ 16,745,401 8/14/08 252,441 EUR 620,000 $ 966,856 8/14/08 7,008 EUR 53,000 $ 81,915 8/14/08 1,334 GBP 301,000 $ 597,612 8/14/08 (206) GBP 4,440,000 $ 8,633,170 8/14/08 179,075 JPY 87,113,000 $ 816,306 8/14/08 6,180 JPY 1,363,174,000 $ 13,085,321 8/14/08 (214,789) SEK 4,841,000 $ 802,622 8/14/08 (836) $ 1,618,334 AUD 1,715,000 8/14/08 (15,519) $ 1,106,877 CHF 1,147,000 8/14/08 (16,504) $ 196,463 CHF 203,000 8/14/08 (2,357) $ 427,888 EUR 276,000 8/14/08 (5,638) $ 13,332,680 EUR 8,586,000 8/14/08 (153,756) $ 390,860 GBP 200,000 8/14/08 (6,088) $ 6,040,685 GBP 3,085,000 8/14/08 (82,238) $ 10,281,351 JPY 1,070,553,000 8/14/08 173,627 $ 294,678 JPY 1,780,000 8/14/08 (132) ------------------------------------------------------------------------- Total $ 207,107 ========= o Currency Abbreviations: AUD Australian Dollar GBP British Pound CHF Swiss Franc JPY Japanese Yen EUR Euro SEK Swedish Krona 29 Master International Index Series of Quantitative Master Series LLC Schedule of Investments June 30, 2008 (Unaudited) o Effective January 1, 2008, the Series adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). FAS 157 clarifies the definition of fair value, establishes a framework for measuring fair values and requires additional disclosures about the use of fair value measurements. Various inputs are used in determining the fair value of investments, which are as follows: o Level 1 - price quotations in active markets/exchanges for identical securities o Level 2 - other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or other market-corroborated inputs) o Level 3 - unobservable inputs based on the best information available in the circumstance, to the extent observable inputs are not available (including the Series' own assumption used in determining the fair value of investments) The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Series' policy regarding valuation of investments and other significant accounting policies, please refer to the Series' most recent financial statements as contained in its semiannual report. The following table summarizes the inputs used as of June 30, 2008 in determining the fair valuation of the Series' investments: ------------------------------------------------------------------- Valuation Investments in Other Financial Inputs Securities Instruments* ------------------------------------------------------------------- Level 1 $ 41,426,133 $ (765,944) Level 2 1,034,077,783 207,107 Level 3 -- -- ------------------------------------------------------------------- Total $1,075,503,916 $ (558,837) =================================================================== * Other financial instruments are futures and forward foreign currency contracts. 30 ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not Applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not Applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust's Board of Trustees since the Trust last disclosed such procedures in Schedule 14A. ITEM 11. CONTROLS AND PROCEDURES. (a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective. (b) There were no changes in the Trust's internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Not Applicable. (a)(2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT. (a)(3) Not Applicable. (b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): American Beacon Funds By /s/ William F. Quinn -------------------- William F. Quinn President Date: September 5, 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/ William F. Quinn -------------------- William F. Quinn President Date: September 5, 2008 By /s/ Rebecca L. Harris --------------------- Rebecca L. Harris Treasurer Date: September 5, 2008 EX-99.CERT 2 ex99cert-08.txt For period ended 06/30/2008 Registrant Name: American Beacon Funds File Number: 811-4984 EXHIBIT 99.CERT I, Rebecca L. Harris, certify that: 1. I have reviewed this report on Form N-CSR of American Beacon Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 5, 2008 /s/ Rebecca L. Harris ----------------- --------------------- Rebecca L. Harris Treasurer American Beacon Funds I, William F. Quinn, certify that: 1. I have reviewed this report on Form N-CSR of American Beacon Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 5, 2008 /s/ William F. Quinn ----------------- -------------------- william F. Quinn President American Beacon Funds EX-99.906 CERT 3 ex906cert-08.txt For period ended 06/30/2008 Registrant Name: American Beacon Funds File Number: 811-04984 EX-99.906CERT William F. Quinn and Rebecca L. Harris, respectively, the President and Treasurer of the American Beacon Funds (the "Registrant"), each certify to the best of his or her knowledge and belief that: 1. the Registrant's report on Form N-CSR for the period ended June 30, 2008 (the "Form N-CSR") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. /s/ William F. Quinn /s/ Rebecca L. Harris - ---------------------- --------------------- William F. Quinn Rebecca L. Harris President Treasurer American Beacon Funds American Beacon Funds Date: September 5, 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. -----END PRIVACY-ENHANCED MESSAGE-----