-----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, KtAqIkCk7At6aPs5iD6DBHrTAC08QDCxGHCK2rfxPPAMVu4zSGrlxARtkmqwg+TN D4Sfhsy4g7YoXAff5r8dUQ== 0000809593-09-000029.txt : 20090903 0000809593-09-000029.hdr.sgml : 20090903 20090903163427 ACCESSION NUMBER: 0000809593-09-000029 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20090630 FILED AS OF DATE: 20090903 DATE AS OF CHANGE: 20090903 EFFECTIVENESS DATE: 20090903 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: 091054006 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 C000075101 Investor Class ABTPX 0000809593 S000001827 American Beacon S&P 500 Index Fund C000004791 Institutional Class AASPX C000004792 Investor 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 ncsr0609bea.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, 2009 Date of reporting period: June 30, 2009 ITEM 1. REPORTS TO STOCKHOLDERS. GUIDANCE | VISION | EXPERIENCE (AMERICAN BEACON FUNDS(SM) LOGO) Semi-Annual Report (GRAPHIC) June 30, 2009 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 Message from American Beacon....................................... 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, 2009 (PHOTO OF GENE L. NEEDLES, JR.) Fellow Shareholders, Enclosed is the Semi-Annual Report for the American Beacon Treasury Inflation Protected Securities ("TIPS") Fund for the six months ended June 30, 2009. During the six months covered by this report, the Federal Reserve ("Fed") maintained the target range for the Fed Funds rate at 0% to 0.25%, and reiterated its expectation that the key short-term rate will remain at exceptionally low levels for an extended period. The American Beacon TIPS Fund reported a positive return of 5.43% for the six-month period ended June 30, 2009. We believe the Fund's fundamental investment strategy and lower than average expense ratio will continue to serve the Fund well over time. 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 Funds. Sincerely, /s/ Gene L. Needles, Jr. Gene L. Needles, Jr. Executive Vice 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, 2009 (UNAUDITED) The U.S. economy was still in recession at the beginning of 2009, with real GDP contraction of 6.4% in the first quarter. In response to the worst financial and economic crises in decades, Federal Reserve Board ("Fed") and Administration officials enacted unprecedented policies to stabilize the financial system and stem the downward path of the economy. While both the financial markets and the economy appear to have improved by the end of the second quarter, it was clear that the markets and the economy were far from healthy. Deflationary concerns remained due to excess capacity and continually weakening labor markets, even as many feared long-term inflation from the massive expansion of the Fed's balance sheet and the unprecedented fiscal deficits. The unemployment rate jumped from 7.2% in December 2008 to 9.5% in June, and almost 3.4 million private sector jobs were lost in the first six months of 2009. Capacity utilization continued its decline, with June's 68.0% level the lowest ever. Commodity prices, which rose sharply in May and into the first half of June, were higher than the beginning of the year led by a nearly 60% increase in crude oil futures prices. However, June's 1.4% year-over-year decline in the Consumer Price Index was the largest drop in this index in almost 60 years. While there has been preliminary discussion regarding the Fed's "exit strategy" from its policy of monetary accommodation, including its quantitative easing program, it appears premature to expect such an exit to occur anytime soon. The Barclays Capital 1-to-10-year TIPS benchmark returned 6.49% for the first half of the year. Most of the return occurred in the first quarter driven by the economic stimulus and quantitative easing policies of the U.S. Government and the Federal Reserve. The real yield curve steepened during the first six months of the year as the yield for the 2 year TIPS fell by over 4%, while the yield for the 10 and 30 year TIPS fell by less than 0.50%. The TIPS market continues to grow at a good pace and is becoming an integral part of the Treasury auction schedule. In 2009, TIPS auctions continued in the 5-, 10- and 20-year maturities. 2 PERFORMANCE OVERVIEW AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM) JUNE 30, 2009 (UNAUDITED) The Institutional Class of the Fund returned 5.43% for the period from January 1, 2009 through June 30, 2009, trailing the Barclays Capital 1-10 Year U.S. TIPS Index (the "Index") return of 6.49% and the Lipper TIPS Index return of 5.51%.
ANNUALIZED TOTAL RETURNS PERIODS ENDED 6/30/09 ---------------------------------------- SINCE INCEPTION 6 MONTHS* 1 YEAR 5 YEARS 6/30/04 --------- ------ ------- -------- Institutional Class(1, 4, 5) .................. 5.43% -2.42% 4.20% 4.20% Investor Class(1, 2, 4, 5) .................... 5.22% -2.62% 4.15% 4.15% Barclays Capital 1-10 Yr. U.S. TIPS Index(3) .. 6.49% -1.92% 4.69% 4.69% Barclays Capital U.S. TIPS Index(3) ........... 6.21% -1.12% 4.94% 4.94% Lipper TIPS Index(3) .......................... 5.51% -3.03% 4.18% 4.18%
* NOT ANNUALIZED 1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. Fund performance represents the total returns achieved by the Institutional Class up to 3/2/09, the inception date of the Investor Class, and the returns of the Investor Class since its inception. Expenses of the Investor Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the Investor Class been in existence since 6/30/04. 3. The Barclays Capital 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 Barclays Capital 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. 4. The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional and Investor Class shares was 0.29% and 0.69%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report. 5. A portion of the fees charged to the Investor Class of the Fund was waived from its inception. A portion of the fees charged to the Institutional Class of the Fund has been waived since 2005. Performance prior to waiving fees was lower than the actual returns shown. The Fund produced a strong absolute return for the six-month time period as TIPS rallied during the first quarter of 2009, amid the Federal Reserve Board's quantitative easing policies and other fiscal policy measures reducing fear of deflation among investors. While the Fund underperformed the Index, it performed in-line with its peer group. For the six-month period, the Fund maintained a duration-neutral position relative to the Index. The Fund experienced significant relative underperformance in January, which can be attributed to a difference between the valuation policies implemented by the Fund and the Index during a period of market volatility. For the remainder of the period, the Fund outperformed the Index, but not enough to offset the January deficit and Fund expenses. The Fund remains focused on investing 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#..... 10.8% U.S. Treasury Note, 0.875%, Due 4/15/2010#..... 8.4% U.S. Treasury Note, 1.625%, Due 1/15/2015#..... 8.0% U.S. Treasury Note, 1.875%, Due 7/15/2013#..... 7.3% U.S. Treasury Note, 0.625%, Due 4/15/2013#..... 6.8% U.S. Treasury Note, 1.875%, Due 7/15/2015#..... 6.8% U.S. Treasury Note, 2.000%, Due 1/15/2016#..... 6.7% U.S. Treasury Note, 2.500%, Due 7/15/2016#..... 5.4% U.S. Treasury Note, 2.375%, Due 1/15/2017#..... 5.2% U.S. Treasury Note, 2.000%, Due 7/15/2014#..... 4.9%
# Inflation Indexed Note SECTOR ALLOCATION
% OF FIXED INCOME ------------ U.S. Treasury Obligations...................... 100.0%
3 FUND EXPENSES AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM) JUNE 30, 2009 (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, 2009 through June 30, 2009. ACTUAL EXPENSES The "Actual" line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
Beginning Ending Expenses Paid During Account Value Account Period* 1/1/09 Value 6/30/09 1/1/09-6/30/09 ------------- ------------- -------------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,054.35 $1.17 Hypothetical $1,000.00 $1,023.65 $1.15 (5% return before expenses) INVESTOR CLASS Actual $1,000.00 $1,046.49 $2.39 Hypothetical $1,000.00 $1,021.27 $3.56 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.23% and 0.71% for the Institutional and Investor Class, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half year period. 4 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
PAR AMOUNT VALUE ---------- ---------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 98.27% U.S. Treasury Note, 0.875%, Due 4/15/2010 #............................ $ 9,972 $ 9,971 2.375%, Due 4/15/2011 #............................ 2,508 2,583 3.375%, Due 1/15/2012 #............................ 1,039 1,104 2.00%, Due 4/15/2012 #............................. 4,203 4,323 3.00%, Due 7/15/2012 #............................. 3,599 3,813 0.625%, Due 4/15/2013 #............................ 8,242 8,144 1.875%, Due 7/15/2013 #............................ 8,463 8,680 2.00%, Due 1/15/2014 #............................. 12,595 12,882 1.25%, Due 4/15/2014 #............................. 2,614 2,625 2.00%, Due 7/15/2014 #............................. 5,718 5,852 1.625%, Due 1/15/2015 #............................ 9,587 9,542 1.875%, Due 7/15/2015 #............................ 7,980 8,068 2.00%, Due 1/15/2016 #............................. 7,891 8,009 2.50%, Due 7/15/2016 #............................. 6,182 6,489 2.375%, Due 1/15/2017 #............................ 5,937 6,195 2.625%, Due 7/15/2017 #............................ 4,948 5,273 1.625%, Due 1/15/2018 #............................ 4,987 4,939 1.375%, Due 7/15/2018 #............................ 4,949 4,797 2.125%, Due 1/15/2019 #............................ 3,193 3,298 2.375%, Due 1/15/2025 #............................ 707 727 ---------- TOTAL U.S. TREASURY OBLIGATIONS 117,314 ----------
Shares ---------- SHORT-TERM INVESTMENT FUND - .25% Columbia Government Reserve Fund ..................... 294,232 294 ---------- TOTAL INVESTMENTS - 98.52% (Cost $115,974) .............. $ 117,608 OTHER ASSETS, NET OF LIABILITIES - 1.48% ................ 1,766 ---------- TOTAL NET ASSETS - 100.00% .............................. $ 119,374 ==========
Percentages are stated as a percent of net assets. # Inflation Indexed Note. See accompanying notes 5 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2009 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ASSETS: Investments in unaffiliated securities, at value A ... $ 117,608 Dividends and interest receivable .................... 892 Receivable for fund shares sold ...................... 1,160 Receivable for expense reimbursement ................. 10 Prepaid expenses ..................................... 22 ----------- TOTAL ASSETS ...................................... 119,692 ----------- LIABILITIES: Payable for fund shares redeemed ..................... 262 Management and investment advisory fees payable (Note 2) 22 Administrative service and service fees payable ...... 14 Other liabilities .................................... 20 ----------- TOTAL LIABILITIES ................................. 318 ----------- NET ASSETS .............................................. $ 119,374 =========== ANALYSIS OF NET ASSETS: Paid-in-capital ...................................... 143,833 Undistributed net investment income .................. (1,461) Accumulated net realized loss ........................ (24,632) Unrealized appreciation of investments, futures contracts, and foreign currency ................... 1,634 ----------- NET ASSETS .............................................. $ 119,374 =========== SHARES OUTSTANDING (NO PAR VALUE): Institutional Class .................................. 12,039,022 =========== Investor Class ....................................... 271,622 =========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE: Institutional Class .................................. $ 9.70 =========== Investor Class ....................................... $ 9.68 =========== A Cost of investments in unaffiliated securities ........ $ 115,974
See accompanying notes 6 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) (IN THOUSANDS) INVESTMENT INCOME: Dividend income ...................................... $ 1 Interest income ...................................... (1,362) ------- TOTAL INVESTMENT INCOME (LOSS) ................. (1,361) ------- EXPENSES: Management and investment advisory fees (Note 2) ..... 61 Administrative service fees (Note 2): Institutional Class ............................... 92 Investor Class .................................... 1 Transfer agent fees: Institutional Class ............................... 5 Investor Class .................................... 1 Custody and fund accounting fees ..................... 13 Professional fees .................................... 16 Registration fees and expenses ....................... 1 Prospectus and shareholder reports ................... 5 Trustee fees ......................................... 4 Other expenses ....................................... 8 ------- TOTAL EXPENSES ................................. 207 ------- Net fees waived and expenses reimbursed by Manager (Note 2) .......................................... (62) ------- NET EXPENSES ................................... 145 ------- NET INVESTMENT INCOME (LOSS) ............................ (1,506) ------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investments ....................................... (837) Change in net unrealized appreciation or depreciation of: Investments ....................................... 8,823 ------- NET GAIN ON INVESTMENTS ........................ 7,986 ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .... $ 6,480 =======
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 2009 31, 2008 ----------- --------- (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ...................................................... $ (1,506) $ 17,700 Net realized loss on investments, futures contracts, and foreign currency transactions ............................................................ (837) (22,281) Change in net unrealized appreciation or (depreciation) of investments, futures contracts, and foreign currency translations .................... 8,823 (8,833) -------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...... 6,480 (13,414) -------- --------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class ..................................................... -- (17,654) -------- --------- NET DISTRIBUTIONS TO SHAREHOLDERS .................................... -- (17,654) -------- --------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares .............................................. 23,608 406,774 Reinvestment of dividends and distributions ................................ -- 17,654 Cost of shares redeemed .................................................... (50,903) (476,868) -------- --------- NET (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ......... (27,295) (52,440) -------- --------- NET (DECREASE) IN NET ASSETS .................................................. (20,815) (83,508) -------- --------- NET ASSETS: Beginning of period ........................................................ 140,189 223,697 -------- --------- END OF PERIOD * ............................................................ $119,374 $ 140,189 ======== ========= *Includes undistributed net investment income (loss) of ....................... $ (1,461) $ 45 ======== =========
See accompanying notes 8 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (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, 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 Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. Class Disclosure The Fund has multiple 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: - ------ ----------- INSTITUTIONAL CLASS Investors making an initial investment of $2 million INVESTOR CLASS General public and investors investing through an intermediary
Administrative service fees, service fees and distribution fees vary amongst the classes as described more fully in footnote 2. Investment income, net capital gains (losses) and all expenses incurred by the 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 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. 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 for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. 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. In addition, effective June 30, 2009, the Fund adopted FASB Staff position ("FSP") No. 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" ("FSP No. 157-4"). FSP No. 9 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157 when the volume and level of activity for the asset or liability have significantly decreased. 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 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, 2009 is as follows (in thousands):
Quoted Prices in Active Markets Significant Other Significant for Identical Observable Inputs Unobservable Inputs Description Assets (Level 1) (Level 2) (Level 3) Total - ----------- ---------------- ----------------- ------------------- ------- Assets: U.S. Treasury Obligations ................... $ -- $117,314 $-- $117,314 Short-Term Investments ...................... 294 -- -- 294 ---- -------- --- -------- Total Investments ........................... 294 117,314 -- 117,608 Liabilities: Investments in Other Financial Instruments... -- -- -- -- Total ....................................... $294 $117,314 $-- $117,608 ==== ======== === ========
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 10 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) 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 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 investment advisory and portfolio management services. 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 0.05% of the average daily net assets plus amounts paid by the Manager to the investment advisors hired by the Manager to 11 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) direct investment activities of the Fund. Management fees paid during the six months ended June 30, 2009 were as follows:
MANAGEMENT FEE RATE MANAGEMENT FEE AMOUNTS PAID TO INVESTMENT ADVISORS NET AMOUNTS RETAINED BY MANAGER - ------------------- -------------- ----------------------------------- ------------------------------- 0.10% - 0.13% $61,484 $30,742 $30,742
Administrative Services Agreement The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative services to the Fund. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of 0.15% of the average daily net assets of the Institutional Class and 0.30% of the average daily net assets of the Investor Class of the Fund. Services Plan The Manager and the Trust entered into a Service Plan which obligates the Manager to oversee additional shareholder servicing of the Investor Class of the Fund. As compensation for performing the duties required under the Service Plan, the Manager receives an annualized fee of 0.25% of the average daily net assets of the Investor Class of the Fund. Investment in Affiliated Funds The Fund may invest in the American Beacon Money Market Select Fund and the American Beacon US Government Money Market Select Fund (collectively the "Select Funds"). The Fund and the Select Funds have the same investment advisor and, therefore, are considered to be affiliated. The Manager serves as investment advisor to the Select Funds and receives from the Select Funds an annualized fee equal to 0.09% of the Select Funds' average daily net assets. During the six months ended June 30, 2009, the Fund did not invest in the Select Funds. Interfund Lending Program Pursuant to an exemptive order by the Securities Exchange Commission (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, 2009, the Fund did not utilize the credit facility. Reimbursement of Expenses The Manager voluntarily agreed to waive a portion of its Administrative Service fee for the Institutional Class. For the six months ended June 30, 2009, the Manager waived expenses of $62,189. 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. The Fund has not recorded a liability for potential reimbursement, due to the current assessment that a reimbursement is unlikely. 12 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) 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, 2008, remains subject to examination by the Internal Revenue Service. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in "Other expenses" on the Statement of Operations. Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. generally accepted accounting principles. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns on income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation, as applicable, as the income is earned or capital gains are recorded. The tax character of distributions paid during the six months ended June 30, 2009 and the fiscal year ended December 31, 2008 were as follows (in thousands):
SIX MONTHS ENDED YEAR ENDED JUNE 30, DECEMBER 31, 2009 2008 ---------------- ------------ (UNAUDITED) DISTRIBUTIONS PAID FROM: Ordinary income*........... $-- $17,654 Tax return of capital...... -- -- --- ------- TOTAL TAXABLE DISTRIBUTIONS... $-- $17,654 === =======
* For tax purposes, short-term capital gains distributions are considered ordinary income distributions. As of June 30, 2009, the components of distributable earnings on a tax basis were as follows (in thousands): Cost basis of investments for federal income tax purposes .. $117,453 Unrealized appreciation .................................... 952 Unrealized depreciation .................................... (797) -------- Net unrealized appreciation/(depreciation) ................. 155 Undistributed ordinary income .............................. (1,461) Undistributed long-term gain/(loss) ........................ (23,153) -------- Distributable earnings ..................................... $ 24,459 ========
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. 13 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) 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, 2009, the capital loss carry forward positions for federal income tax purposes were $144, $974, $111, $14,012, and $7,913 expiring in 2013, 2014, 2015, 2016, and 2017, respectively (in thousands). 4. INVESTMENT TRANSACTIONS Purchases and proceeds from sales of investments for the six months ended June 30, 2009, excluding short-term investments, were $70,492,074 and $98,433,374, respectively. Of these amounts, the Fund had purchases and sales of U.S. Government securities of $70,492,074 and $98,433,374, respectively. 5. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares (dollars and shares in thousands): Six Months Ended June 30, 2009
INSTITUTIONAL CLASS INVESTOR CLASS ----------------- --------------- SHARES AMOUNT SHARES AMOUNT ------ -------- ------ ------ Shares sold ......................... 2,170 $ 20,897 281 $2,711 Reinvestment of dividends ........... -- -- -- -- Shares redeemed ..................... (5,372) (50,817) (9) (86) ------ -------- --- ------ Net increase (decrease) in shares outstanding ...................... (3,202) $(29,920) 272 $2,625 ====== ======== === ======
Year Ended December 31, 2008
INSTITUTIONAL CLASS ------------------- SHARES AMOUNT ------- --------- Shares sold ......................... 38,729 $ 406,774 Reinvestment of dividends ........... 1,773 17,654 Shares redeemed ..................... (47,232) (476,868) ------- --------- Net (decrease) in shares outstanding ...................... (6,730) $ (52,440) ======= =========
6. SUBSEQUENT EVENTS In accordance with the provisions set forth in FASB Statement of Financial Accounting Standards No. 165 "Subsequent Events", adopted by the Fund as of June 30, 2009, management has evaluated the possibility of subsequent events existing in the Fund's financial statements through August 28, 2009. Management has determined that there are no material events that would require disclosure in the Fund's financial statements through this date. 14 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Institutional Class ----------------------------------------------------------------------- Investor Six Class Months June ----------- Ended Year Ended December 31, 30 to March 2 to June 30, -------------------------------------------- December June 30, 2009 2008 2007(B) 2006 2005 31, 2004(A) 2009 ----------- -------- -------- ------- ------- ----------- ----------- (unaudited) (unaudited) Net asset value, beginning of period ......... $ 9.20 $ 10.18 $ 9.53 $ 9.75 $ 10.16 $ 10.00 $ 9.25 -------- -------- -------- ------- ------- ------- ------ Income from investment operations: Net investment income (loss) .............. (0.13) 0.80 0.45 0.29 0.56(C) 0.18(C) 0.03 Net gains (losses) on securities (both realized and unrealized) ............... 0.63 (0.98) 0.59 (0.19) (0.37) 0.21 0.40 -------- -------- -------- ------- ------- ------- ------ Total income (loss) from investment operations ................................ 0.50 (0.18) 1.04 0.10 0.19 0.39 0.43 -------- -------- -------- ------- ------- ------- ------ Less distributions: Dividends from net investment income ...... -- (0.80) (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 .......................... -- (0.80) (0.39) (0.32) (0.60) (0.23) -- -------- -------- -------- ------- ------- ------- ------ Net asset value, end of period ............... $ 9.70 $ 9.20 $ 10.18 $ 9.53 $ 9.75 $ 10.16 $ 9.68 ======== ======== ======== ======= ======= ======= ====== Total return ................................. 5.43%(F) (2.09)% 11.22% 1.05% 1.86% 3.94% 4.65%(F) ======== ======== ======== ======= ======= ======= ====== Ratios and supplemental data: Net assets, end of period (in thousands) .. $116,744 $140,189 $223,697 $33,792 $30,584 $20,943 $2,630 Ratios to average net assets (annualized): Expenses, after expense reimbursements (recoupments) ....................... 0.23% 0.25% 0.43% 0.49% 0.44% 0.46% 0.71% Expenses, before expense reimbursements (recoupments) ....................... 0.33% 0.29% 0.43% 0.49% 0.39% 0.62% 1.18% Net investment income (loss), after expense reimbursements (recoupements) ...................... (2.47)% 5.19% 4.74% 2.94% 5.45% 3.34% 3.99% Net investment income (loss), before expense reimbursements (recoupments) ....................... (2.57)% 5.15% 4.74% 2.94% 5.50% 3.18% 3.52% Portfolio turnover rate ................... 57%(F) 128% 139% 259% 355% 190%(F) 57%(F G)
(A) The American Beacon Treasury Inflation Protected Securities Fund commenced active operations on June 30, 2004. (B) Brown Brothers Harriman & Co. was removed 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. (G) Portfolio turnover rate is for the period from January 1, 2009 through June 30, 2009. 15 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) At its May 27, 2009 meeting, the Board of Trustees ("Board" or "Trustees") considered the renewal of the Management Agreement between the Manager and the American Beacon Funds (the "Funds") and each Investment Advisory Agreement between the Manager and a subadvisor ("Investment Advisory Agreements"). In preparation for the Board's consideration to renew the Management Agreement and each Investment Advisory Agreement, 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 13, 2009 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. In connection with Board's consideration of the Management Agreement and each Investment Advisory Agreement, the Trustees considered, among other materials, responses by the Manager and the subadvisors to inquiries requesting: - a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; - a copy of the firm's most recent audited or unaudited financial statements, as well as Parts I and II of its Form ADV 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 comparison of the performance of that portion of Fund assets managed by each firm with performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any remedial measures if the firm's performance was materially below that of the peer group; - a profit/loss analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to each Fund; - an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; - a description of any payments by the subadvisors to the Manager to support the Funds' marketing efforts; - an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; - confirmation that the firm's financial condition would not impair its ability to provide high-quality advisory services to the Funds; - a description of any internal actions the firm has taken or anticipates taking in light of the current and projected decrease in revenues from prior years as a result of the current economic environment and, 16 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) as applicable, information regarding the firm's decline in assets under management from January 1, 2008 through March 31, 2009; - a description of the scope of portfolio management services provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies, 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 description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a description of trade allocation procedures among accounts managed by the firm; - a discussion of whether the firm receives, with respect to the Funds, other compensation, including any payment for order flow or ECN liquidity rebates; - a certification by the firm regarding the reasonable design of its compliance program; - information regarding the firm's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm; - a description of the firm's affiliation with any broker-dealer; - a discussion of any anticipated change in the firm's controlling persons; and - verification of the firm's insurance coverage with regards to the services provided to the Funds. In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement: - a comparison of the performance of each Fund to 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; 17 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) - a description of the Manager's securities lending practices and the fees received from such practices; - 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 any revenue sharing activities with respect to the Funds; - 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 Management Agreement and each Investment Advisory 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. Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 13, 2009 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 27, 2009 meeting at which the Board considered the renewal of the Agreements. The Board did not identify any particular information that was most relevant to its consideration to renew the Management Agreement and each Investment Advisory Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal of the Agreements. The memorandum explained the regulatory requirements surrounding the Trustees' process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal of each Agreement was in the best interests of the Funds and their shareholders. Considerations with Respect to All Funds In determining whether to renew the Management Agreement and each Investment Advisory Agreement, the Trustees considered the best interests of each Fund separately. While the Management Agreement and the Investment Advisory Agreements for all of the Funds were considered at the May 27, 2009 meeting, the Board considered each Fund's investment management and subadvisory relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of a Fund and, as applicable, each subadvisor for a Fund; (3) the costs incurred by the Manager and (to the extent provided) the subadvisors 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 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 its relationship with a Fund. The Trustees posed questions to various management personnel of the Manager 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 the Management Agreement, the Board considered: the background and experience of key investment personnel and the Manager's ability to 18 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) 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; 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 each Investment Advisory Agreement, 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 Management Agreement and the Investment Advisory 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. The Manager also noted that it generally was satisfied with the performance of the subadvisors. A discussion regarding the Board's considerations with respect to the Fund's performance appears below under "Additional Considerations and Conclusions with Respect to the Treasury Inflation Protected Securities Fund." Costs of the Services Provided to the Funds and the Profits 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. 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 and to discontinue the expense waivers and reimbursements for certain classes of the Funds that were closing or maintained competitive expense ratios without such expense waivers. 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 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 for each subadvisor in connection with its investment advisory services to the 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 the Fund's fee rates is set forth below under "Additional Considerations and Conclusions with Respect to Treasury Inflation Protected Securities Fund." 19 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) Economies of Scale. In considering the reasonableness of the management and investment advisory fees, the Board considered whether economies of scale will be realized as the Funds grow and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board 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 the Manager's representation that Fund assets have decreased significantly primarily due to market depreciation in 2008 and the first quarter of 2009, as well as significant share redemptions from the Money Market Funds and the inability of certain competitor money market funds' to maintain positive yields, causing mass redemptions in money market funds throughout the industry. In addition, the Board noted that the management fee for the Money Market Funds is amongst the lowest in the industry. 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 Fund. 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. The Board also considered that the Manager's relationship with the Funds and the money market portfolios continues to be a significant factor in attracting separate account assets for the Manager, noting specifically the Manager's utilization of the Large Cap Value Fund model for a newly registered actively managed exchange traded fund managed by the Manager. In addition, the Board noted that the Manager provides services to each Trust at a relatively low cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of its relationship 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 universe below are to the universe of comparable mutual funds included in the analysis provided to the Trustees by Lipper, Inc. In considering the renewal of the Management Agreement for the Treasury Inflation Protected Securities Fund, 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, 2009 and (2) the expense ratio of the Institutional Class of Fund shares ranked better than the median of its Lipper expense universe. In considering the renewal of the Investment Advisory Agreement with NISA Investment Advisors LLC ("NISA"), the Trustees considered the following additional factors: (1) NISA outperformed the peer universe median for the one- and three-year periods ended March 31, 2009; (2) NISA has indicated that it does not charge a lower advisory fee to other clients for which it provides comparable services; (3) NISA has informed the Manager that it does not accrue any indirect "fall-out" benefits because of its relationship with the Fund; and (4) the Manager's recommendation to continue to retain NISA. Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager and the subadvisor under the Agreements are fair and reasonable, (2) determined that the Treasury Inflation Protected Securities Fund and its shareholders would benefit from the Manager's and subadvisor's continued 20 DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENTS OF THE FUND (UNAUDITED) management of the Fund and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the Treasury Inflation Protected Securities Fund. 21 (AMERICAN BEACON FUNDS(SM) LOGO) DELIVERY OF DOCUMENTS To reduce expenses, your financial institution may mail only one copy of the Prospectus, Annual Report and Semi-Annual Report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please contact your financial institution. Delivery of individual copies will commence thirty days after receiving your request. If you invest in the Fund through a financial institution, you may be able to receive the Fund's regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution's name or contact your financial institution directly. TO OBTAIN MORE INFORMATION ABOUT THE FUND: (GRAPHIC) (GRAPHIC) BY E-MAIL: ON THE INTERNET: american_beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com (GRAPHIC) (GRAPHIC) BY TELEPHONE: BY MAIL: Call (800) 658-5811 American Beacon Funds P.O. Box 219643 Kansas City, MO 64121-9643 AVAILABILITY OF 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 Fund uses to determine how to vote proxies report, the Fund files a complete schedule of relating to portfolio securities is available in its portfolio holdings with the Securities the Fund's Statement of Additional Information, and Exchange Commission ("SEC") on Form N-Q is available free of charge on the Fund's as of the first and third fiscal quarters. website (www.americanbeaconfunds.com) and by The Fund's Forms N-Q are available on the calling 1-800-967-9009 or by accessing the SEC's SEC's website at www.sec.gov. The Forms N-Q website at www.sec.gov. The Fund's proxy voting may also be reviewed and copied at the SEC's record for the most recent year ended June 30 is Public Reference Room, 450 Fifth Street, NW, filed annually with the SEC on Form N-PX. The Washington, DC 20549. Information regarding Fund's Forms N-PX are available on the SEC's the operation of the SEC's Public Reference website at www.sec.gov. The Fund's proxy voting Room may be obtained by calling record may also be obtained by calling 1-800-SEC-0330. A complete schedule of the 1-800-967-9009. Fund's portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each month.
FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED PUBLIC DISTRIBUTOR STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES ACCOUNTING FIRM FORESIDE FUND SERVICES Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP Portland, Maine Dallas, Texas
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus. American Beacon Funds and American Beacon Treasury Inflation Protected Securities Fund are service marks of American Beacon Advisors, Inc SAR 6/09 GUIDANCE | VISION | EXPERIENCE (AMERICAN BEACON FUNDS(SM) LOGO) Semi-Annual Report (GRAPHIC) June 30, 2009 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 Message from American Beacon....................................... 1 Market and 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 Statement of Assets and Liabilities............................. 30 Statement of Operations......................................... 31 Statement of Changes in Net Assets.............................. 32 Financial Highlights............................................ 33 Notes to Financial Statements................................... 34 Master Small Cap Index Series Summary Schedule of Investments................................. 39 Statement of Assets and Liabilities............................. 47 Statement of Operations......................................... 48 Statement of Changes in Net Assets.............................. 49 Financial Highlights............................................ 49 Notes to Financial Statements................................... 50 Master International Index Series Summary Schedule of Investments................................. 59 Statement of Assets and Liabilities............................. 65 Statement of Operations......................................... 66 Statement of Changes in Net Assets.............................. 67 Financial Highlights............................................ 67 Notes to Financial Statements................................... 68 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, 2009 (PHOTO OF GENE L. NEEDLES, JR.) FELLOW SHAREHOLDERS, Enclosed is the Semi-Annual Report for the American Beacon S&P 500, Small Cap and International Equity Index Funds for the six months ended June 30, 2009. The American Beacon S&P 500 Index Fund reported a return of 3.21% for the six-month period ended June 30, 2009, beating the S&P 500 Index return of 3.16%. The Small Cap Index Fund and International Equity Index Fund also reported positive returns of 2.62% and 5.90%, respectively, for the same period. 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 Funds. Sincerely, /s/ Gene L. Needles, Jr. Gene L. Needles, Jr. Executive Vice 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, 2009 (UNAUDITED) Economic conditions continued to deteriorate during the first quarter of 2009. The housing market had yet to find a bottom as inventories of unsold homes remained high despite plummeting prices and low mortgage rates. Labor market conditions also worsened during the quarter. Concerns over rising unemployment and shrinking household wealth caused consumer confidence to drop to a record low, signaling that consumer spending is likely to contract further. As the economy slipped further into recession, the U.S. Government ramped up its actions to stem the crisis. During the first quarter, President Obama signed into law a $787 billion economic stimulus package that included tax cuts, spending on infrastructure, and aid to U.S. states. In addition, the President pledged $75 billion in Troubled Assets Relief Program ("TARP") funds to modify mortgage loans and ease government-sponsored enterprise ("GSE") refinancing rules in an effort to curb U.S. foreclosures and prevent further deterioration in home prices. The Treasury Department also unveiled the details of its much anticipated toxic asset purchase program during the quarter. Under the Public-Private Investment Program, private investors will invest alongside the Government to purchase illiquid mortgage loans and securities from financial institutions. The goal of the program is to improve price transparency for distressed assets and free up bank balance sheets to enable additional lending. In a bold move, the Federal Reserve ("Fed") also announced that it was going to begin quantitative easing by buying up to $300 billion of long-term Treasuries. In addition, they upsized purchases of agency mortgage-backed securities by $750 billion and agency debt by $100 billion, bringing total purchases of these securities to $1.25 trillion and $200 billion, respectively, by year end. The markets responded positively to the news as stocks gained and Treasury yields plunged after the announcement. There is some fear, however, that the aggressive growth of the Fed's balance sheet will eventually lead to inflation. Economic conditions in the second quarter remained challenging, but tentative signs of improvement emerged. The housing market showed some signs of stabilizing, job losses slowed, and business and consumer confidence improved. Despite these economic "green shoots," recovery will be slow to take hold. Home sales picked up, but the supply of homes on the market remained elevated and home values continued to fall. While the pace of payroll declines slowed from its January peak, the U.S. continued to shed jobs and the unemployment rate continued to climb. In addition, although improvements in business and consumer confidence were encouraging, growth in spending moderated. Though consumers were in the process of deleveraging and building savings, neither was conducive to a robust rebound in consumer spending or business investment. On the financial front, the Government's efforts to stabilize financial markets were producing results. Equity markets improved and credit markets were beginning to thaw. The Treasury-Euro Dollar ("TED") spread, an indicator of perceived credit risk in the general economy, had come in over 400 basis points (4.00%) since its October 2008 peak. Banks and corporations were taking advantage of increased access to liquidity by successfully raising capital without government assistance. In addition, some large banks were beginning to wean themselves from government aid by announcing plans to repay TARP funds. For its part, the Fed remained committed to an accommodative policy. Amid concerns that liquidity injections and unprecedented government borrowing would cause inflation to accelerate, the Fed left the target range of the Fed Funds rate unchanged at 0.0-0.25% at the June 24th meeting. The Fed believed that although commodity prices had risen, economic slack would dampen inflation pressures. They stated that "economic activity is likely to remain weak for some time", warranting "exceptionally low levels of the Fed Funds rate for an extended period." Overall, the economic outlook improved during the period, but significant headwinds remained. The country has been experiencing the worst financial crisis since the Great Depression and the road to recovery could be long. In a recent address to students and faculty at Morehouse College, Fed chairman Ben Bernanke stated that "today's economic conditions are difficult, but the foundations of our economy are strong, and we face no problems that cannot be overcome with insight, patience, and persistence." 2 PERFORMANCE OVERVIEW AMERICAN BEACON S&P 500(R) INDEX FUND+ JUNE 30, 2009 (UNAUDITED) For the six months ended June 30, 2009, the total return of the Institutional Class of the American Beacon S&P 500 Index Fund was 3.21%, slightly ahead of the S&P 500 Index (the "Index") return of 3.16% and also ahead of the Lipper S&P 500 Objective Funds Index return of 3.13%.
ANNUALIZED TOTAL RETURNS PERIODS ENDED 6/30/09 --------------------------------------- 6 MONTHS* 1 YEAR 5 YEARS 10 YEARS --------- ------ ------- -------- Institutional Class(1, 4) .................. 3.21% -26.18% -2.34% -2.37% Investor Class(1, 2, 4) .................... 2.94% -26.53% -2.80% -2.79% Lipper S&P 500 Objective Funds Index (3) ... 3.13% -26.27% -2.43% -2.46% S&P 500 Index (3) .......................... 3.16% -26.22% -2.24% -2.22%
* Not annualized (1.) The Investor Class was formerly known as the PlanAhead Class. 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 Investor 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 Investor Class shares were 0.13% and 0.57%, 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. Only three of ten sectors within the Index gained value during period. Information Technology stocks were the best performing sector, gaining 25.0%. Many of the largest firms in the sector posted solid gains during the period. Apple (up 66.9%), Microsoft (up 23.9%), IBM (up 25.4%), Google (up 37.0%), Qualcomm (up 27.3%), Intel (up 15.0%), Cisco (up 14.4%) and Oracle (up 21.1%) contributed three percentage points to the overall Index return. Materials companies gained 13.9% and Consumer Discretionary firms gained 8.3%. The Healthcare sector was essentially flat during the period, while the remaining six sectors posted small losses, with Industrials (down 6.1%) being the most significant laggard. Many companies made headlines during the period, but automobile firms were near the top and bottom of the spectrum. General Motors, once the largest corporation in the world, succumbed to mounting pressures and filed for bankruptcy protection. Despite government intervention and intense negotiations, bankruptcy became the best choice for the firm. Government funds and fruits of the negotiations had most hoping for a very quick exit from bankruptcy, with the U.S. Government becoming a large stakeholder in the firm, at least temporarily. GM stock lost 65.9% of its value during the period, and this was from an already depressed level in December. At the other end of the spectrum, Ford Motor gained 165.1% as the company avoided bankruptcy. Ford's balance sheet was in better shape to negotiate the downturn and the company avoided taking any government aid during the period. While the stock rose from a low opening level, its ability to survive such a difficult period has positioned it in a positive light going forward. The investment manager continues to utilize a replication strategy, owning all 500 names in the S&P 500 Index in approximately the same weightings as the Index. Therefore, the Fund is expected to continue to meet its objective of closely tracking, before expenses, the return of its benchmark, the S&P 500 Index. + 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. 3 PERFORMANCE OVERVIEW AMERICAN BEACON S&P 500(R) INDEX FUND JUNE 30, 2009 (UNAUDITED) TOP TEN HOLDINGS
% OF EQUITIES* --------- Exxon Mobil Corp............................... 4.2% Microsoft Corp................................. 2.2% Johnson & Johnson.............................. 1.9% Procter & Gamble Co............................ 1.8% AT&T, Inc...................................... 1.8% International Business Machines Corp........... 1.7% Chevron Corp................................... 1.6% JPMorgan Chase & Co............................ 1.6% Apple Inc...................................... 1.5% General Electric Co............................ 1.5%
* Percent of the equities of State Street Equity 500 Index Portfolio EQUITY SECTOR ALLOCATION
% OF EQUITIES* --------- Information Technology......................... 18.4% Health Care.................................... 14.0% Financials..................................... 13.6% Energy......................................... 12.4% Consumer Staples............................... 12.0% Industrials.................................... 9.8% Consumer Discretionary......................... 9.0% Utilities...................................... 4.1% Telecommunication Services..................... 3.5% Materials...................................... 3.2%
* Percent of the equities of State Street Equity 500 Index Portfolio 4 PERFORMANCE OVERVIEW AMERICAN BEACON SMALL CAP INDEX FUND(SM) JUNE 30, 2009 (UNAUDITED) For the six months ended June 30, 2009, the total return of the Institutional Class of the American Beacon Small Cap Index Fund was 2.62%. The Fund's performance was in line with the Russell 2000(R) Index (the "Index") return of 2.63% but lagged the Lipper Small-Cap Core Funds Index return of 8.23%, which consists primarily of actively managed funds.
ANNUALIZED TOTAL RETURNS PERIODS ENDED 6/30/09 ---------------------------------------- SINCE INCEPTION 6 MONTHS* 1 YEAR 5 YEARS (7/31/00) --------- ------ ------- --------- Institutional Class(1, 3) .................. 2.62% -24.82% -1.78% 1.41% Lipper Small-Cap Core Funds Index(2) ....... 8.23% -25.01% -0.93% 2.76% Russell 2000 Index(2) ...................... 2.63% -25.02% -1.71% 1.51%
* 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. Seven of the ten sectors within the Russell 2000 Index posted positive returns for the six-month period. The Information Technology, Consumer Discretionary, and Telecommunication Services sectors, up 28.4%, 22.3% and 10.4%, respectively, posted the largest gains for the period while the Financial, Industrials, and Utilities sectors, down 17.8%, 7.2% and 5.8%, respectively, detracted from performance. The highest individual stock returns in the Index were generated by Dollar Thrifty Automotive Group Inc. (up 1,719.8%), Borders Group Inc. (up 820.0%) and Stein Mart Inc. (up 684.1%). By contrast, there were several stocks within the Index that lost a great deal of their value during the period, including Visteon Corp. (down 94.3%), Meruelo Maddox Properties, Inc. (down 96.0%), and Apex Silver Mines (down 99.0%). 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* --------- Palm, Inc................................... 0.3% 3Com Corp................................... 0.3% Piedmont Natural Gas Co..................... 0.2% Jack Henry & Associates Inc................. 0.2% Owens & Minor, Inc.......................... 0.2% VistaPrint Ltd.............................. 0.2% Polycom, Inc................................ 0.2% Tetra Tech, Inc............................. 0.2% Solera Holdings Inc......................... 0.2% Skyworks Solutions Inc...................... 0.2%
EQUITY SECTOR ALLOCATION
% OF EQUITIES* --------- Information Technology...................... 19.7% Financials.................................. 19.5% Industrials................................. 16.0% Health Care................................. 15.1% Consumer Discretionary...................... 13.0% Energy...................................... 4.5% Materials................................... 3.8% Utilities................................... 3.6% Consumer Staples............................ 3.5% Telecommunications.......................... 1.3%
* Percent of equity portion of Master Small Cap Index Series 5 INTERNATIONAL MARKET OVERVIEW JUNE 30, 2009 (UNAUDITED) After posting steep declines early in the year, global markets rebounded sharply in the second quarter of 2009, on increasing evidence of a recovery in global growth and a notable shift by investors into riskier assets. From their low point on March 6th, most markets around the world were up around 40% or more by the close of the period. International markets, as represented by the MSCI EAFE Index, advanced 25.43% in the second quarter alone, leaving the index up 7.95% for the six months. In developed markets, the majority of countries gained better than 20% in the second quarter, while some posted returns in excess of 30%, helping push most countries into positive territory for the year to date. From a global sector perspective, financial markets are anticipating a cyclical recovery, and as a result, cyclical sectors led the way for the six months as a whole. 6 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM) JUNE 30, 2009 (UNAUDITED) For the six months ended June 30, 2009, the Institutional Class of the American Beacon International Equity Index Fund posted a total return of 5.90%, underperforming the MSCI EAFE Index (the "Index") return of 7.95% and the Lipper International Funds Index return of 10.11%. The investment manager's application of its fair valuation policy during the period was the primary driver of the Fund's underperformance.
ANNUALIZED TOTAL RETURNS PERIODS ENDED 6/30/09 ---------------------------------------- SINCE INCEPTION 6 MONTHS* 1 YEAR 5 YEARS (7/31/00) --------- ------ ------- --------- Institutional Class(1, 3) .................. 5.90% -30.98% 2.38% -0.03% Lipper International Funds Index(2) ........ 10.11% -30.14% 3.35% 0.70% MSCI EAFE Index(2) ......................... 7.95% -31.35% 2.31% 0.04%
* Not annualized (1.) Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. (2.) The Lipper 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. 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. In developed markets, the majority of regions gained better than 20% in the second quarter, while some posted returns in excess of 30%, helping push most countries into positive territory for the year to date. Standouts included Hong Kong (up 35.6%), and Singapore (up 32.2%), while Ireland (down 2.8%) and Mexico (down 21.0%) detracted from performance. From a sector perspective, financial markets are anticipating a cyclical recovery and, as a result, cyclical sectors led the way for the six months as a whole. Materials (up 25.6%), Consumer Discretionary (up 15.9%), and Financials (up 13.5%) emerged as the best performers. Key laggards were the more defensive sectors, including Utilities (down 7.9%), Healthcare (down 4.6%) and Telecommunication Services (down 3.1%). On an individual stock basis, firms Kazakhmys PLC (up 212.4%), Fortis Bank N.V. (up 163.9%) and Verdanta Resources PLC (up 141.3%) were the strongest performers. By contrast, financial companies Bank of Ireland (down 78.9%), Allied Irish Banks PLC (down 79.7%), and Anglo Irish Bank (down 99.9%) were the most notable laggards within the Index. 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, 2009 (UNAUDITED) TOP TEN HOLDINGS
% OF EQUITIES* --------- BP plc...................................... 1.8% HSBC Holdings plc........................... 1.7% Nestle S.A.................................. 1.7% Total S.A................................... 1.4% Toyota Motor Corp........................... 1.3% Vodafone Group plc.......................... 1.2% Roche Holding Ltd........................... 1.2% Banco Santander S.A......................... 1.2% Telefonica S.A.............................. 1.2% BHP Billiton Ltd............................ 1.1%
EQUITY SECTOR ALLOCATION
% OF EQUITIES* EAFE --------- ---- Financials.................................. 24.6% 24.6% Industrials................................. 11.3% 11.3% Consumer Staples............................ 10.0% 10.0% Consumer Discretionary...................... 10.0% 10.0% Materials................................... 9.4% 9.4% Energy...................................... 8.7% 8.7% Health Care................................. 8.4% 8.4% Utilities................................... 6.4% 6.4% Telecommunications.......................... 6.0% 6.0% Information Technology...................... 5.2% 5.2%
* Percent of equity portion of Master International Index Series COUNTRY ALLOCATION (PIE CHART)
% OF EQUITIES* EAFE --------- ---- Japan....................................... 24.1% 24.1% United Kingdom.............................. 21.0% 21.0% France...................................... 10.3% 10.3% Germany..................................... 7.8% 7.8% Switzerland................................. 7.5% 7.5% Australia................................... 7.4% 7.4% Spain....................................... 4.5% 4.5% Italy....................................... 3.5% 3.5% Hong Kong................................... 2.4% 2.4% Sweden...................................... 2.4% 2.4% Netherlands................................. 2.3% 2.3% Singapore................................... 1.4% 1.4% Finland..................................... 1.3% 1.3% Denmark..................................... 0.9% 0.9% Belgium..................................... 0.9% 0.9% Norway...................................... 0.7% 0.7% Greece...................................... 0.6% 0.6% Portugal.................................... 0.3% 0.3% Austria..................................... 0.3% 0.3% Ireland..................................... 0.3% 0.3% New Zealand................................. 0.1% 0.1%
8 FUND EXPENSES JUNE 30, 2009 (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, 2009 through June 30, 2009. 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 Investor 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 INTERNATIONAL S&P 500 INSTITUTIONAL CLASS INDEX CAP INDEX EQUITY INDEX INVESTOR CLASS INDEX - ------------------- --------- --------- ------------- ------------------------------------- --------- Beginning Account Value 1/1/09........ $1,000.00 $1,000.00 $1,000.00 Beginning Account Value 1/1/09....... $1,000.00 Ending Account Value 6/30/09.......... $1,032.10 $1,026.25 $1,058.98 Ending Account Value 6/30/09......... $1,029.37 Expenses Paid During Period* 1/1/09 - Expenses Paid During Period* 1/1/09 - 6/30/09............................ $ 0.76 $ 1.06 $ 1.12 6/30/09........................... $ 2.92 Annualized Expense Ratio.............. 0.15% 0.21% 0.22% Annualized Expense Ratio............. 0.58%
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 Investor 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 INTERNATIONAL S&P 500 INSTITUTIONAL CLASS INDEX CAP INDEX EQUITY INDEX INVESTOR CLASS INDEX - ------------------- --------- --------- ------------- ------------------------------------- --------- Beginning Account Value 1/1/09........ $1,000.00 $1,000.00 $1,000.00 Beginning Account Value 1/1/09....... $1,000.00 Ending Account Value 6/30/09.......... $1,024.05 $1,023.75 $1,023.70 Ending Account Value 6/30/09......... $1,021.92 Expenses Paid During Period* 1/1/09 - Expenses Paid During Period* 1/1/09 - 6/30/09............................ $ 0.75 $ 1.05 $ 1.10 6/30/09........................... $ 2.91 Annualized Expense Ratio.............. 0.15% 0.21% 0.22% Annualized Expense Ratio............. 0.58%
- ---------- * Expenses are equal to each Fund's annualized expense ratio for the six-month period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (181) by days in the year (365) to reflect the half-year period. 9 AMERICAN BEACON FUNDS STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2009 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
SMALL CAP INTERNATIONAL S&P 500 INDEX INDEX EQUITY INDEX FUND FUND FUND ------------- ----------- ------------- ASSETS: Investment in Portfolio, at value ......... $ 274,539 $ 33,438 $ 188,012 Receivable for fund shares sold ........... 301 3 202 Prepaid expenses .......................... 28 -- 4 ----------- ---------- ----------- TOTAL ASSETS ........................... 274,868 33,441 188,218 ----------- ---------- ----------- LIABILITIES: Payable for fund shares redeemed .......... 5 735 36 Administrative service and service fees payable (Note 2) ....................... 20 1 7 Other liabilities ......................... 32 28 24 ----------- ---------- ----------- TOTAL LIABILITIES ...................... 57 764 67 ----------- ---------- ----------- NET ASSETS ................................ $ 274,811 $ 32,677 $ 188,151 =========== ========== =========== ANALYSIS OF NET ASSETS: Paid-in-capital ........................... 348,245 47,826 274,179 Undistributed net investment income (expense) .............................. 2,259 145 3,779 Accumulated net realized gain (loss) ...... (65,133) (3,346) (23,508) Unrealized net appreciation (depreciation) of investments and futures contracts ... (10,560) (11,948) (66,299) ----------- ---------- ----------- NET ASSETS ................................... $ 274,811 $ 32,677 $ 188,151 =========== ========== =========== Shares outstanding (no par value): Institutional Class ....................... 19,864,596 3,979,644 23,797,778 =========== ========== =========== Investor Class ............................ 2,071,067 -- -- =========== ========== =========== Net asset value, offering and redemption price per share: Institutional Class ....................... $ 12.54 $ 8.21 $ 7.91 =========== ========== =========== Investor Class ............................ $ 12.37 $ -- $ -- =========== ========== ===========
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios 10 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2009 (IN THOUSANDS) (UNAUDITED)
SMALL CAP INTERNATIONAL S&P 500 INDEX INDEX EQUITY INDEX FUND FUND FUND ------------- ----------- ------------- INVESTMENT INCOME ALLOCATED FROM PORTFOLIO: Dividend income ........................... $ 3,100 $ 150 $ 3,759 Interest income ........................... 12 5 3 Securities lending income ................. -- 21 -- Portfolio expenses ........................ (53) (10) (87) Other income .............................. 629 -- 1 ------- ------- ------- NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ........................... 3,688 166 3,676 ------- ------- ------- FUND EXPENSES: Administrative service fees (Note 2): Institutional Class .................... 55 7 42 Investor Class ......................... 22 -- -- Sub-administrative service fees: Institutional Class .................... -- 2 13 Transfer agent fees: Institutional Class .................... 14 -- 10 Custody and accounting fees ............... 4 3 4 Professional fees ......................... 8 7 8 Registration fees ......................... 14 -- -- Service fees - Investor Class (Note 2) .... 22 -- -- Printing .................................. 10 -- 2 Trustee fees .............................. 3 -- 7 Insurance ................................. 1 -- 4 Other expenses ............................ 5 2 7 ------- ------- ------- TOTAL FUND EXPENSES .................... 158 21 97 ------- ------- ------- NET INVESTMENT INCOME ........................ 3,530 145 3,579 ------- ------- ------- REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED FROM MASTER PORTFOLIO Net realized gain (loss) from: Investments ............................ (7,881) (1,461) (6,667) Foreign currency transactions .......... -- -- 190 Futures contracts ...................... 646 120 634 Change in net unrealized appreciation or depreciation of: Investments ............................ 14,669 2,169 11,484 Foreign currency transactions .......... -- -- 30 Futures contracts ...................... (309) (371) (206) ------- ------- ------- NET GAIN ON INVESTMENTS ................ 7,125 457 5,465 ------- ------- ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ $10,655 $ 602 $ 9,044 ======= ======= =======
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios 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 Six Months Year Six Months Year ended ended ended ended ended ended June 30, December 31, June 30, December 31, June 30, December 31, 2009 2008 2009 2008 2009 2008 ----------- ------------ ------------ ------------ ----------- ------------ (unaudited) (unaudited) (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income .................. $ 3,530 $ 6,284 $ 145 $ 619 $ 3,579 $ 9,005 Net realized (loss) on investments, foreign currency, and futures contracts ........................... (7,235) (3,348) (1,341) (2,963) (5,843) (14,050) Change in net unrealized appreciation or (depreciation) of investments and futures contracts ... 14,360 (127,828) 1,798 (14,190) 11,308 (125,746) -------- --------- ------- -------- -------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........ 10,655 (124,892) 602 (16,534) 9,044 (130,791) -------- --------- ------- -------- -------- --------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class .............. (1,363) (5,882) -- (601) -- (7,110) Investor Class ................... (108) (267) -- -- -- -- Net realized gain on investments: Institutional Class .............. -- -- -- (2,145) -- -- Investor Class ................... -- -- -- -- -- -- Tax return of capital: Institutional Class .............. -- -- -- (456) -- -- -------- --------- ------- -------- -------- --------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS ..................... (1,471) (6,149) -- (3,202) -- (7,110) -------- --------- ------- -------- -------- --------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares .......... 44,559 104,131 6,391 11,693 22,037 227,499 Reinvestment of dividends and distributions ....................... 1,469 6,122 -- 3,202 -- 7,110 Cost of shares redeemed ................ (17,899) (31,890) (5,868) (15,932) (28,790) (178,141) -------- --------- ------- -------- -------- --------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS .. 28,129 78,363 523 (1,037) (6,753) 56,468 -------- --------- ------- -------- -------- --------- NET INCREASE (DECREASE) IN NET ASSETS ..... 37,313 (52,678) 1,125 (20,773) 2,291 (81,433) -------- --------- ------- -------- -------- --------- NET ASSETS: Beginning of period .................... 237,498 290,176 31,552 52,325 185,860 267,293 -------- --------- ------- -------- -------- --------- END OF PERIOD * ........................ $274,811 $ 237,498 $32,677 $ 31,552 $188,151 $ 185,860 ======== ========= ======= ======== ======== ========= *Includes undistributed net investment income (loss) of ....................... $ 2,259 $ 200 $ 145 $ -- $ 3,779 $ 199 ======== ========= ======= ======== ======== =========
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios 12 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (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, 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 Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors. Each Fund invests all of its investable assets in a corresponding portfolio. The State Street Equity 500 Index Portfolio, Master Small Cap Index Series and the Master International Index Series (each a "Portfolio" and collectively the "Portfolios") are open-ended management investment companies registered under the Act. The value of such investment reflects each Fund's proportionate interest in the net assets of the corresponding Portfolio.
% OF PORTFOLIO HELD BY FUND AT AMERICAN BEACON: PORTFOLIOS: JUNE 30, 2009 - ------------------------------- --------------------------------------- --------------- S&P 500 Index Fund State Street Equity 500 Index Portfolio 16.3% Small Cap Index Fund Master Small Cap Index Series 8.2% International Equity Index Fund Master International Index Series 25.8%
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% INVESTOR CLASS General public and investors investing through an intermediary Administrative Service Fee - 0.25% Service Fee - 0.25%
Investment income, net capital gains (losses) and all expenses incurred by the S&P 500 Index Fund are allocated based on the relative net assets of each class, except for service fees and certain other fees and expenses related solely to one class of shares. Security Valuation Valuation of securities by each Portfolio is discussed in the Portfolios' Notes to Financial Statements, which are included elsewhere in this report. The Fund adopted the provisions of 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. 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. In addition, effective June 30, 2009, the Fund adopted FASB Staff position ("FSP") No. 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability 13 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) Have Significantly Decreased and Identifying Transactions That Are Not Orderly" ("FSP No. 157-4"). FSP No. 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157 when the volume and level of activity for the asset or liability have significantly decreased. 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, 2009 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. 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 14 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) 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 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 Investor 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 Investor 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 Investor 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 reduced by the total expense ratio of its corresponding Portfolio, net of any fee waivers. 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. 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, 2008, 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. 15 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) 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, 2009 and fiscal year ended December 31, 2008 were as follows (in thousands):
S&P 500 INDEX SMALL CAP INDEX INTERNATIONAL EQUITY INDEX -------------------------- -------------------------- -------------------------- SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR ENDED ENDED ENDED ENDED ENDED ENDED JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 2009 2008 2009 2008 2009 2008 ----------- ------------ ----------- ------------ ----------- ------------ (UNAUDITED) (UNAUDITED) (UNAUDITED) DISTRIBUTIONS PAID FROM: ORDINARY INCOME:* Institutional Class .......... $1,363 $5,882 $-- $ 646 $-- $7,110 Investor Class ............... 108 267 -- -- -- -- LONG-TERM CAPITAL GAIN: Institutional Class .......... -- -- -- 2,100 -- -- Investor Class ............... RETURN OF CAPITAL: Institutional Class .......... -- -- -- 456 -- -- ------ ------ --- ------ --- ------ TOTAL TAXABLE DISTRIBUTIONS .......... $1,471 $6,149 $-- $3,202 $-- $7,110 ====== ====== === ====== === ======
* For tax purposes, short-term capital gains are considered ordinary income distributions. At June 30, 2009 capital loss carry forward positions for federal income tax purposes were as follows (in thousands):
FUND 2010 2011 2012 2013 2014 2016 TOTAL - ---- ------ ---- ------ ------ ---- ------- ------- S&P 500 Index .......................... $7,852 $635 $1,060 $2,311 $286 $11,180 $23,324
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, 2009
INSTITUTIONAL CLASS INVESTOR CLASS ------------------- ---------------- S&P 500 INDEX FUND SHARES AMOUNT SHARES AMOUNT - ------------------ ------- --------- ------ ------- Shares sold ......................... 2,544 $ 29,499 1,382 $15,060 Reinvestment of dividends ........... 124 1,363 10 106 Shares redeemed ..................... (1,193) (13,481) (392) (4,418) ------- -------- ----- ------- Net increase in shares outstanding .. 1,475 $ 17,381 1,000 $10,748 ======= ======== ===== =======
INSTITUTIONAL CLASS ---------------- SMALL CAP INDEX FUND SHARES AMOUNT - -------------------- ------ ------- Shares sold ......................... 838 $ 6,391 Reinvestment of dividends ........... -- -- Shares redeemed ..................... (803) (5,868) ---- ------- Net increase in shares outstanding .. 35 $ 523 ==== =======
16 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED)
INSTITUTIONAL CLASS ----------------- INTERNATIONAL EQUITY INDEX FUND SHARES AMOUNT - ------------------------------- ------ -------- Shares sold ........................... 3,191 $ 22,037 Reinvestment of dividends ............. -- -- Shares redeemed ....................... (4,319) (28,790) ------ -------- Net (decrease) in shares outstanding .. (1,128) $ (6,753) ====== ========
Year ended December 31, 2008
INSTITUTIONAL CLASS INVESTOR CLASS ----------------- ---------------- S&P 500 INDEX FUND SHARES AMOUNT SHARES AMOUNT - ------------------ ------ -------- ------ ------- Shares sold ......................... 5,952 $ 97,796 427 $ 6,335 Reinvestment of dividends ........... 385 5,882 16 240 Shares redeemed ..................... (1,640) (27,201) (312) (4,689) ------ -------- --- ------- Net increase in shares outstanding .. 4,697 $ 76,477 131 $ 1,886 ====== ======== === =======
INSTITUTIONAL CLASS ----------------- SMALL CAP INDEX FUND SHARES AMOUNT - -------------------- ------ -------- Shares sold ........................ 1,023 $ 11,693 Reinvestment of dividends .......... 428 3,202 Shares redeemed .................... (1,378) (15,932) ------ -------- Net increase (decrease) in shares outstanding ..................... 73 $ (1,037) ====== ========
INSTITUTIONAL CLASS ------------------- INTERNATIONAL EQUITY INDEX FUND SHARES AMOUNT - ------------------------------- ------- --------- Shares sold ......................... 19,770 $ 227,499 Reinvestment of dividends ........... 1,003 7,110 Shares redeemed ..................... (15,836) (178,141) ------- --------- Net increase in shares outstanding .. 4,937 $ 56,468 ======= =========
5. SUBSEQUENT EVENTS In accordance with the provisions set forth in FASB Statement of Financial Accounting Standards No. 165 "Subsequent Events", adopted by the Fund as of June 30, 2009, management has evaluated the possibility of subsequent events existing in the Fund's financial statements through August 28, 2009. Management has determined that there are no material events that would require disclosure in the Fund's financial statements through this date. 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, 2009 2008 2007 2006 2005 2004 ----------- -------- -------- -------- -------- -------- (unaudited) NET ASSET VALUE, BEGINNING OF PERIOD ......... $ 12.21 $ 19.85 $ 19.19 $ 16.90 $ 16.43 $ 15.10 -------- -------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income:(A) ................. 0.16 0.36 0.39 0.33 0.29 0.29 Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) ......... 0.24 (7.65) 0.65 2.30 0.47 1.32 -------- -------- -------- -------- -------- -------- Total income (loss) from investment operations ................................ 0.40 (7.29) 1.04 2.63 0.76 1.61 -------- -------- -------- -------- -------- -------- LESS DISTRIBUTIONS: Dividends from net investment income ...... (0.07) (0.35) (0.38) (0.34) (0.29) (0.28) Tax return of capital ..................... -- -- -- -- 0.00(B) -- -------- -------- -------- -------- -------- -------- Total distributions .......................... (0.07) (0.35) (0.38) (0.34) (0.29) (0.28) -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD ............... $ 12.54 $ 12.21 $ 19.85 $ 19.19 $ 16.90 $ 16.43 ======== ======== ======== ======== ======== ======== TOTAL RETURN ................................. 3.21%(C) -37.08% 5.39% 15.69% 4.74% 10.76% ======== ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) .. $249,193 $224,583 $271,746 $223,008 $225,857 $244,668 Ratios to average net assets (annualized):(A) Net investment income, net of waivers .. 3.01% 2.23% 1.89% 1.85% 1.75% 1.85% Net investment income, before waivers .. 3.01% 2.23% 1.89% 1.85% 1.75% 1.85% Expenses, including expenses of the master portfolio, net of waivers .... 0.15% 0.13% 0.13% 0.14% 0.13% 0.17% Expenses, including expenses of the master portfolio, before waivers .... 0.15% 0.13% 0.13% 0.14% 0.13% 0.17%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the State Street Equity 500 Index Portfolio. (B) The tax return of capital is calculated based upon outstanding shares at the time of distribution. Amounts are less than $0.01 per share. (C) Not annualized. 18
Investor Class - ---------------------------------------------------------------- Six Months Year Ended December 31, ended June ------------------------------------------------- 30, 2009 2008 2007 2006 2005 2004 - ----------- ------- ------- ------- ------- ------- (unaudited) $ 12.06 $ 19.60 $ 18.97 $ 16.69 $ 16.23 $ 14.96 ------- ------- ------- ------- ------- ------- 0.15 0.38 0.28 0.17 0.21 0.21 0.23 (7.65) 0.65 2.33 0.48 1.31 ------- ------- ------- ------- ------- ------- 0.38 (7.27) 0.93 2.50 0.69 1.52 ------- ------- ------- ------- ------- ------- (0.07) (0.27) (0.30) (0.22) (0.23) (0.25) -- -- -- -- 0.00(B) -- ------- ------- ------- ------- ------- ------- (0.07) (0.27) (0.30) (0.22) (0.23) (0.25) ------- ------- ------- ------- ------- ------- $ 12.37 $ 12.06 $ 19.60 $ 18.97 $ 16.69 $ 16.23 ======= ======= ======= ======= ======= ======= 2.94%(C) -37.35% 4.88% 15.09% 4.32% 10.21% ======= ======= ======= ======= ======= ======= $25,618 $12,915 $18,430 $16,056 $48,985 $46,344 2.65% 1.72% 1.38% 1.37% 1.28% 1.43% 2.65% 1.72% 1.38% 1.37% 1.28% 1.43% 0.58% 0.62% 0.63% 0.61% 0.61% 0.62% 0.58% 0.62% 0.63% 0.61% 0.61% 0.62%
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, 2009 2008 2007 2006 2005 2004 ----------- ------- ------- -------- ------- ------- (unaudited) NET ASSET VALUE, BEGINNING OF PERIOD ......... $ 8.00 $ 13.51 $ 14.89 $ 12.78 $ 12.57 $ 11.27 ------- ------- ------- -------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A) .................. 0.02 0.18 0.32 0.17 0.16 0.14 Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) ......... 0.19 (4.78) (0.53) 2.11 0.42 1.87 ------- ------- ------- -------- ------- ------- Total income (loss) from investment operations ................................ 0.21 (4.60) (0.21) 2.28 0.58 2.01 ------- ------- ------- -------- ------- ------- LESS DISTRIBUTIONS: Dividends from net investment income ...... -- (0.17) (0.31) (0.17) (0.17) (0.13) Distributions from net realized gains on investments ............................ -- (0.61) (0.80) -- (0.15) (0.58) Tax return of capital ..................... -- (0.13) (0.06) -- (0.05)(B) -- ------- ------- ------- -------- ------- ------- Total distributions .......................... -- (0.91) (1.17) (0.17) (0.37) (0.71) ------- ------- ------- -------- ------- ------- NET ASSET VALUE, END OF PERIOD ............... $ 8.21 $ 8.00 $ 13.51 $ 14.89 $ 12.78 $ 12.57 ======= ======= ======= ======== ======= ======= TOTAL RETURN ................................. 2.62%(C) -33.58% -1.63% 17.85% 4.51% 17.91% ======= ======= ======= ======== ======= ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) .. $32,677 $31,552 $52,325 $151,878 $46,113 $39,196 Ratios to average net assets (annualized):(A) Net investment income .................. 0.99% 1.54% 1.49% 1.49% 1.12% 0.90% Expenses, including expenses of the master portfolio .................... 0.21% 0.20% 0.20% 0.18% 0.18% 0.22%
- ---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the Master Small Cap Index Series. (B) The tax return of capital is calculated based upon outstanding shares at the time of distribution. (C) Not annualized. 20 AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class ----------------------------------------------------------------------- Six Months Year Ended December 31, ended June -------------------------------------------------------- 30, 2009 2008 2007 2006 2005 2004 ----------- -------- -------- -------- ------- ------- (unaudited) NET ASSET VALUE, BEGINNING OF PERIOD ......... $ 7.46 $ 13.37 $ 12.76 $ 10.33 $ 9.39 $ 8.01 -------- -------- -------- -------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A) .................. 0.21 0.39 0.52 0.23 0.21 0.17 Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) ............... 0.24 (6.00) 0.85 2.50 1.06 1.44 -------- -------- -------- -------- ------- ------- Total income (loss) from investment operations ................................ 0.45 (5.61) 1.37 2.73 1.27 1.61 -------- -------- -------- -------- ------- ------- LESS DISTRIBUTIONS: Dividends from net investment income ...... -- (0.30) (0.53) (0.23) (0.24) (0.23) Distributions from net realized gains on investments ............................ -- -- (0.22) (0.07) -- -- Tax return of capital ..................... -- -- (0.01)(B) -- (0.09)(B) -- -------- -------- -------- -------- ------- ------- Total distributions .......................... -- (0.30) (0.76) (0.30) (0.33) (0.23) -------- -------- -------- -------- ------- ------- NET ASSET VALUE, END OF PERIOD ............... $ 7.91 $ 7.46 $ 13.37 $ 12.76 $ 10.33 $ 9.39 ======== ======== ======== ======== ======= ======= TOTAL RETURN ................................. 5.90%(C) -41.85% 10.68% 26.52% 13.58% 20.12% ======== ======== ======== ======== ======= ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) .. $188,151 $185,860 $267,293 $162,113 $90,200 $23,156 Ratios to average net assets (annualized):(A) Net investment income .................. 4.27% 3.58% 2.96% 2.44% 2.49% 2.16% Expenses, including expenses of the master portfolio .................... 0.22% 0.19% 0.19% 0.22% 0.23% 0.26%
- ---------- (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, 2009 (UNAUDITED)
MARKET VALUE SHARES (000) ---------- ---------- COMMON STOCKS - 97.6% CONSUMER DISCRETIONARY - 8.9% Abercrombie & Fitch Co. Class A 19,246 $ 489 Amazon.Com, Inc.(a) 65,792 5,504 Apollo Group, Inc. Class A(a) 21,729 1,545 AutoNation, Inc.(a) 23,063 400 AutoZone, Inc.(a) 7,564 1,143 Bed Bath & Beyond, Inc.(a) 52,445 1,613 Best Buy Co., Inc. 70,719 2,368 Big Lots, Inc.(a) 16,227 341 Black & Decker Corp. 11,937 342 Carnival Corp. 87,950 2,266 CBS Corp. Class B 143,703 994 Centex Corp. 24,082 204 Coach, Inc. 67,028 1,802 Comcast Corp. Class A 587,648 8,515 D.R. Horton, Inc. 52,876 495 Darden Restaurants, Inc. 27,988 923 DeVry, Inc. 12,500 625 DIRECTV Group, Inc.(a) 109,477 2,705 Eastman Kodak Co. 54,482 161 eBay, Inc.(a) 221,403 3,793 Expedia, Inc.(a) 45,615 689 Family Dollar Stores, Inc. 26,858 760 Ford Motor Co.(a) 653,098 3,964 Fortune Brands, Inc. 30,545 1,061 GameStop Corp. Class A(a) 32,400 713 Gannett Co., Inc. 42,074 150 Gap, Inc. 93,698 1,537 Genuine Parts Co. 33,709 1,131 Goodyear Tire & Rubber Co.(a) 42,257 510 H&R Block, Inc. 66,915 1,153 Harley-Davidson, Inc. 48,001 778 Harman International Industries, Inc. 15,952 299 Hasbro, Inc. 24,425 592 Home Depot, Inc. 345,912 8,174 Host Hotels & Resorts, Inc. 123,665 1,038 International Game Technology 62,219 989 Interpublic Group of Cos., Inc.(a) 100,694 509 JC Penney Co., Inc. 44,310 1,272
MARKET VALUE SHARES (000) ---------- ---------- Johnson Controls, Inc. 123,186 $ 2,676 KB HOME 14,794 202 Kohl's Corp.(a) 62,833 2,686 Lennar Corp. Class A 27,931 271 Limited Brands 58,067 695 Lowe's Cos., Inc. 299,662 5,816 Macy's, Inc. 85,423 1,005 Marriot International, Inc. Class A 62,049 1,369 Mattel, Inc. 73,376 1,178 McDonald's Corp. 226,725 13,034 McGraw-Hill, Inc. 63,566 1,914 Meredith Corp. 7,889 202 New York Times Co. Class A 22,922 126 Newell Rubbermaid, Inc. 51,593 537 News Corp. Class A 471,209 4,293 NIKE, Inc. Class B 79,452 4,114 Nordstrom, Inc. 32,733 651 O'Reilly Automotive, Inc.(a) 28,700 1,093 Office Depot, Inc.(a) 51,256 234 Omnicom Group, Inc. 62,741 1,981 Polo Ralph Lauren Corp. 10,615 568 Pulte Homes, Inc. 41,426 366 Radioshack Corp. 26,203 366 Scripps Networks Interactive, Inc. Class A 16,835 469 Sears Holdings Corp.(a) 11,874 790 Snap-On, Inc. 11,612 334 Stanley Works 17,483 592 Staples, Inc. 148,033 2,986 Starbucks Corp.(a) 152,361 2,116 Starwood Hotels & Resorts Worldwide, Inc. 38,947 865 Target Corp. 153,916 6,075 Tiffany & Co. 26,380 669 Time Warner Cable, Inc. 70,971 2,248 Time Warner, Inc. 244,591 6,161 TJX Cos., Inc. 84,806 2,668 V.F. Corp. 18,193 1,007 Viacom, Inc. Class B(a) 125,122 2,840 Walt Disney Co. 378,445 8,829 Washington Post Co. Class B 1,260 444 Whirlpool Corp. 13,761 586
See notes to financial statements 22 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
MARKET VALUE SHARES (000) ---------- ---------- COMMON STOCKS (CONTINUED) CONSUMER DISCRETIONARY (CONTINUED) Wyndham Worldwide Corp. 34,299 $ 416 Wynn Resorts, Ltd.(a) 14,300 505 Yum! Brands, Inc. 92,892 3,097 ---------- 150,621 ---------- CONSUMER STAPLES -11.7% Altria Group, Inc. 421,999 6,917 Archer-Daniels-Midland Co. 132,324 3,542 Avon Products, Inc. 88,560 2,283 Brown-Forman Corp. Class B 21,055 905 Campbell Soup Co. 43,265 1,273 Clorox Co. 29,243 1,633 Coca-Cola Co. 407,411 19,552 Coca-Cola Enterprises, Inc. 62,501 1,041 Colgate-Palmolive Co. 102,401 7,244 ConAgra Foods, Inc. 89,175 1,700 Constellation Brands, Inc. Class A(a) 37,426 475 Costco Wholesale Corp. 89,489 4,090 CVS Caremark Corp. 296,832 9,460 Dean Foods Co.(a) 37,858 726 Dr Pepper Snapple Group, Inc.(a) 51,300 1,087 Estee Lauder Cos, Inc. Class A 23,252 760 General Mills, Inc. 66,432 3,721 H.J. Heinz Co. 63,269 2,259 Hormel Foods Corp. 13,400 463 Kellogg Co. 50,735 2,363 Kimberly-Clark Corp. 84,900 4,451 Kraft Foods, Inc. Class A 299,909 7,600 Kroger Co. 134,476 2,965 Lorillard, Inc. 33,861 2,295 McCormick & Co., Inc. 27,653 899 Molson Coors Brewing Co., Class B 31,062 1,315 Pepsi Bottling Group, Inc. 26,753 905 PepsiCo, Inc. 318,656 17,513 Philip Morris International, Inc. 400,499 17,470 Procter & Gamble Co. 595,119 30,411 Reynolds American, Inc. 33,187 1,282 Safeway, Inc. 89,664 1,826 Sara Lee Corp. 139,034 1,357
MARKET VALUE SHARES (000) ---------- ---------- SuperValu, Inc. 41,948 $ 543 Sysco Corp. 119,109 2,678 The Hershey Company 34,982 1,259 The J.M. Smucker Co. 25,260 1,229 Tyson Foods, Inc., Class A 57,835 729 Wal-Mart Stores, Inc. 456,802 22,127 Walgreen Co. 201,718 5,930 Whole Foods Market, Inc. 30,633 581 ---------- 196,859 ---------- ENERGY -12.2% Anadarko Petroleum Corp. 101,026 4,586 Apache Corp. 68,525 4,944 Baker Hughes, Inc. 62,278 2,269 BJ Services Co. 60,448 824 Cabot Oil & Gas Corp. 20,300 622 Cameron International Corp.(a) 45,100 1,276 Chesapeake Energy Corp. 116,682 2,314 Chevron Corp.(d) 409,346 27,119 ConocoPhillips 303,730 12,775 Consol Energy, Inc. 35,773 1,215 Denbury Resources, Inc.(a) 47,800 704 Devon Energy Corp. 90,751 4,946 Diamond Offshore Drilling, Inc. 14,500 1,204 El Paso Corp. 146,692 1,354 ENSCO International, Inc. 29,177 1,017 EOG Resources, Inc. 50,617 3,438 EQT Corp. 26,800 936 ExxonMobil Corp.(d) 998,072 69,775 FMC Technologies, Inc.(a) 25,400 954 Halliburton Co. 180,834 3,743 Hess Corp. 57,501 3,091 Marathon Oil Corp. 142,977 4,308 Massey Energy Co. 19,300 377 Murphy Oil Corp. 39,041 2,121 Nabors Industries, Ltd.(a) 58,704 915 National Oilwell Varco, Inc.(a) 86,557 2,827 Noble Energy, Inc. 34,810 2,053 Occidental Petroleum Corp. 165,044 10,862 Peabody Energy Corp. 54,024 1,629 Pioneer Natural Resources Co. 25,300 645
See notes to financial statements 23 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
MARKET VALUE SHARES (000) ---------- ---------- COMMON STOCKS (CONTINUED) ENERGY (CONTINUED) Questar Corp. 35,968 $ 1,117 Range Resources Corp. 31,400 1,300 Rowan Cos., Inc. 25,320 489 Schlumberger, Ltd. 245,175 13,266 Smith International, Inc. 42,934 1,106 Southwestern Energy Co.(a) 70,800 2,751 Spectra Energy Corp. 129,598 2,193 Sunoco, Inc. 24,884 577 Tesoro Corp. 26,365 336 Valero Energy Corp. 113,109 1,910 Williams Cos., Inc. 117,268 1,831 XTO Energy, Inc. 119,352 4,552 ---------- 206,271 ---------- FINANCIALS -13.6% AFLAC, Inc. 96,490 3,000 Allstate Corp. 110,906 2,706 American Express Co. 244,064 5,672 American International Group, Inc. 556,666 646 Ameriprise Financial, Inc. 54,007 1,311 AON Corp. 57,247 2,168 Apartment Investment & Management Co. Class A 29,552 262 Assurant, Inc. 25,031 603 AvalonBay Communities, Inc. 15,398 861 Bank of America Corp. 1,651,371 21,798 Bank of New York Mellon Corp. 244,085 7,154 BB&T Corp. 131,270 2,885 Boston Properties, Inc. 28,767 1,372 Capital One Financial Corp. 90,363 1,977 CB Richard Ellis Group, Inc. Class A(a) 47,275 443 Charles Schwab Corp. 193,893 3,401 Chubb Corp. 70,575 2,815 Cincinnati Financial Corp. 31,214 698 CIT Group, Inc. 75,542 162 Citigroup, Inc. 1,128,102 3,350 CME Group, Inc. 13,391 4,166 Comerica, Inc. 31,744 671
MARKET VALUE SHARES (000) ---------- ---------- Developers Diversified Realty Corp. 1,467 $ 7 Discover Financial Services 95,905 985 E*Trade Financial Corp.(a) 232,015 297 Equity Residential 55,457 1,233 Federated Investors, Inc. Class B 18,970 457 Fifth Third Bancorp 150,016 1,065 First Horizon National Corp.(a) 41,999 504 Franklin Resources, Inc. 31,380 2,260 Genworth Financial, Inc. Class A 96,251 673 Goldman Sachs Group, Inc. 103,134 15,206 Hartford Financial Services Group, Inc. 67,797 805 HCP, Inc. 56,500 1,197 Health Care REIT, Inc. 21,400 730 Hudson City Bancorp, Inc. 103,492 1,375 Huntington Bancshares, Inc. 118,556 496 IntercontinentalExchange, Inc.(a) 14,980 1,711 Invesco Ltd. 84,800 1,511 J.P. Morgan Chase & Co. 796,615 27,173 Janus Capital Group, Inc. 36,007 410 KeyCorp 144,575 758 Kimco Realty Corp. 64,969 653 Legg Mason, Inc. 31,142 759 Leucadia National Corp.(a) 35,436 747 Lincoln National Corp. 62,492 1,075 Loews Corp. 72,831 1,996 M & T Bank Corp. 15,937 812 Marsh & McLennan Cos., Inc. 108,453 2,183 Marshall & Ilsley Corp. 80,193 385 Mastercard, Inc. Class A 14,500 2,426 MBIA, Inc.(a) 31,984 139 MetLife, Inc. 167,496 5027 Moody's Corp. 38,966 1,027 Morgan Stanley 276,030 7,870 NASDAQ OMX Group, Inc.(a) 28,600 609 Northern Trust Corp. 48,506 2,604 NYSE Euronext 52,300 1,425 Paychex, Inc. 64,838 1,634 People's United Financial Inc. 68,100 1,024 PNC Financial Services Group,Inc. 94,017 3,649
See notes to financial statements 24 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
MARKET VALUE SHARES (000) ---------- ---------- COMMON STOCKS (CONTINUED) FINANCIALS (CONTINUED) Principal Financial Group, Inc. 64,591 $ 1,217 Progressive Corp.(a) 140,601 2,124 ProLogis 87,391 704 Prudential Financial, Inc. 93,939 3,496 Public Storage, Inc. 25,387 1,662 Regions Financial Corp. 227,189 918 Simon Property Group, Inc. 56,883 2,926 SLM Corp.(a) 91,354 938 State Street Corp.(b) 100,825 4,759 SunTrust Banks, Inc. 97,418 1,603 T. Rowe Price Group, Inc. 53,375 2,224 Torchmark Corp. 18,421 682 Total System Services, Inc. 37,775 506 Travelers Cos, Inc. 120,104 4,929 U.S. Bancorp 386,952 6,934 Unum Group 67,029 1,063 Ventas, Inc. 32,100 959 Vornado Realty Trust 32,433 1,460 Wells Fargo Co. 950,749 23,065 Western Union Co. 146,885 2,409 XL Capital, Ltd. Class A 65,468 750 Zions Bancorp 21,753 251 ---------- 228,597 ---------- HEALTH CARE -13.3% Abbott Laboratories 316,606 14,893 Aetna, Inc. 93,850 2,351 Allergan, Inc. 62,092 2,954 AmerisourceBergen Corp. 59,786 1,061 Amgen, Inc.(a) 206,736 10,945 Baxter International, Inc. 125,561 6,650 Becton, Dickinson & Co. 49,597 3,537 Biogen Idec, Inc.(a) 61,231 2,765 Boston Scientific Corp.(a) 303,534 3,078 Bristol-Myers Squibb Co. 403,938 8,204 C.R. Bard, Inc. 19,697 1,466 Cardinal Health, Inc. 72,357 2,210 Celgene Corp.(a) 95,018 4,546 Cephalon, Inc.(a) 15,600 884 CIGNA Corp. 53,596 1,291
MARKET VALUE SHARES (000) ---------- ---------- Coventry Health Care, Inc.(a) 27,603 $ 516 DaVita, Inc.(a) 20,300 1,004 Dentsply International Inc. 30,300 925 Eli Lilly & Co. 206,475 7,152 Express Scripts, Inc.(a) 54,999 3,781 Forest Laboratories, Inc.(a) 62,402 1,567 Genzyme Corp.(a) 56,192 3,128 Gilead Sciences, Inc.(a) 185,899 8,708 Hospira, Inc.(a) 31,703 1,221 Humana, Inc.(a) 35,107 1,133 Intuitive Surgical, Inc.(a) 8,100 1,326 Johnson & Johnson 564,749 32,078 King Pharmaceuticals, Inc.(a) 48,592 468 Laboratory Corp. of America Holdings(a) 22,222 1,506 Life Technologies Corp.(a) 36,587 1,526 McKesson Corp. 55,655 2,449 Medco Health Solutions, Inc.(a) 101,268 4,619 Medtronic, Inc. 228,178 7,961 Merck & Co., Inc. 429,319 12,004 Millipore Corp.(a) 11,135 782 Mylan Inc.(a) 60,109 784 Patterson Cos., Inc.(a) 18,294 397 Pfizer, Inc. 1,380,671 20,710 Quest Diagnostics, Inc. 31,800 1,794 Schering-Plough Corp. 331,855 8,336 St. Jude Medical, Inc.(a) 71,426 2,936 Stryker Corp. 48,789 1,939 Tenet Healthcare Corp.(a) 97,770 276 UnitedHealth Group, Inc. 248,296 6,202 Varian Medical Systems, Inc.(a) 25,560 898 Watson Pharmaceuticals, Inc.(a) 20,646 696 Wellpoint, Inc.(a) 100,638 5,121 Wyeth 273,387 12,409 Zimmer Holdings, Inc.(a) 46,252 1,970 ---------- 225,157 ---------- INDUSTRIALS - 9.9% 3M Co. 141,572 8,509 Amphenol Corp. Class A 34,300 1,085 Avery Dennison Corp. 21,588 554 Boeing Co. 148,288 6,302
See notes to financial statements 25 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
MARKET VALUE SHARES (000) ---------- ---------- COMMON STOCKS (CONTINUED) INDUSTRIALS (CONTINUED) Burlington Northern Santa Fe Corp. 57,282 $ 4,213 Caterpillar, Inc. 123,379 4,076 CH Robinson Worldwide, Inc. 33,761 1,761 Cintas Corp. 25,088 573 Cooper Industries, Ltd. Class A 35,334 1,097 CSX Corp. 82,438 2,855 Cummins, Inc. 40,358 1,421 Danaher Corp. 52,786 3,259 Deere & Co. 85,137 3,401 Dover Corp. 36,795 1,218 Eaton Corp. 34,595 1,543 Emerson Electric Co. 154,548 5,007 Equifax, Inc. 27,583 720 Expeditors International Washington, Inc. 43,020 1,434 Fastenal Co. 25,500 846 FedEx Corp. 63,000 3,504 Flir Systems, Inc.(a) 28,900 652 Flowserve Corp. 11,800 824 Fluor Corp. 37,860 1,942 General Dynamics Corp. 79,361 4,396 General Electric Co.(d) 2,167,833 25,407 Goodrich Co. 24,445 1,222 Honeywell International, Inc. 150,481 4,725 Illinois Tool Works, Inc. 78,071 2,915 Iron Mountain, Inc.(a) 37,500 1,078 ITT Industries, Inc. 37,992 1,691 Jacobs Engineering Group, Inc.(a) 25,500 1,073 L-3 Communications Holdings, Inc. 24,803 1,721 Leggett & Platt, Inc. 34,298 522 Lockheed Martin Corp. 67,952 5,480 Manitowoc Co., Inc. 24,000 126 Masco Corp. 77,723 745 Monster Worldwide, Inc.(a) 22,609 267 Norfolk Southern Corp. 75,855 2,857 Northrop Grumman Corp. 67,411 3,079 PACCAR, Inc. 73,874 2,402 Pall Corp. 22,209 590
MARKET VALUE SHARES (000) ---------- ---------- Parker-Hannifin Corp. 31,803 $ 1,366 Pitney Bowes, Inc. 40,027 878 Precision Castparts Corp. 28,507 2,082 Quanta Services, Inc.(a) 39,800 921 R.R. Donnelley & Sons Co. 38,309 445 Raytheon Co. 82,282 3,656 Republic Services, Inc. 66,303 1,618 Robert Half International, Inc. 30,640 724 Rockwell Automation, Inc. 27,505 883 Rockwell Collins, Inc. 32,831 1,370 Ryder Systems, Inc. 9,821 274 Southwest Airlines Co. 147,786 995 Stericycle, Inc.(a) 17,100 881 Textron, Inc. 56,939 550 Thermo Fisher Scientific, Inc.(a) 86,424 3,524 Union Pacific Corp. 102,968 5,361 United Parcel Service, Inc. Class B 202,846 10,140 United Technologies Corp. 191,978 9,975 W.W. Grainger, Inc. 13,569 1,111 Waste Management, Inc. 98,639 2,778 ---------- 166,624 ---------- INFORMATION TECHNOLOGY -17.3% Adobe Systems, Inc.(a) 107,957 3,055 Advanced Micro Devices, Inc.(a) 114,986 445 Affiliated Computer Services, Inc. Class A(a) 18,737 832 Agilent Technologies, Inc.(a) 73,968 1,502 Akamai Technologies, Inc.(a) 34,224 656 Altera Corp. 58,354 950 Analog Devices, Inc. 58,969 1,461 Apple Inc.(a) 182,584 26,006 Applied Materials, Inc. 275,907 3,027 Autodesk, Inc.(a) 46,376 880 Automatic Data Processing, Inc. 103,917 3,683 BMC Software, Inc.(a) 38,821 1,312 Broadcom Corp. Class A(a) 88,159 2,186 CA, Inc. 78,299 1,365 CIENA Corp.(a) 14,529 150 Cisco Systems, Inc.(a) 1,177,719 21,953 Citrix Systems, Inc.(a) 36,867 1,176
See notes to financial statements 26 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
MARKET VALUE SHARES (000) ---------- ---------- COMMON STOCKS (CONTINUED) INFORMATION TECHNOLOGY (CONTINUED) Cognizant Technology Solutions Corp. Class A(a) 58,584 $ 1,564 Computer Sciences Corp.(a) 30,344 1,344 Compuware Corp.(a) 51,350 352 Convergys Corp.(a) 20,035 186 Corning, Inc. 318,576 5,116 Dell, Inc.(a) 357,950 4,915 Dun & Bradstreet Corp. 11,000 893 Electronic Arts, Inc.(a) 67,600 1,468 EMC Corp.(a) 413,084 5,411 Fidelity National Information Services, Inc. 36,777 734 Fiserv, Inc.(a) 32,352 1,479 Google, Inc. Class A(a) 48,990 20,654 Harris Corp. 26,400 749 Hewlett-Packard Co. 490,616 18,962 IMS Health, Inc. 34,832 442 Intel Corp. 1,138,656 18,845 International Business Machines Corp. 269,842 28,177 Intuit, Inc.(a) 65,563 1,846 Jabil Circuit, Inc. 39,951 296 Juniper Networks, Inc.(a) 106,193 2,506 KLA-Tencor Corp. 34,105 861 Lexmark International Group, Inc. Class A(a) 15,842 251 Linear Technology Corp. 43,763 1,022 LSI Corp.(a) 136,962 625 McAfee, Inc.(a) 31,200 1,316 MEMC Electronic Materials, Inc.(a) 45,478 810 Microchip Technology, Inc. 37,089 836 Micron Technology, Inc.(a) 170,662 864 Microsoft Corp.(d) 1,566,135 37,227 Molex, Inc. 31,305 487 Motorola, Inc. 473,765 3,141 National Semiconductor Corp. 39,396 494 NetApp, Inc.(a) 66,557 1,313 Novell, Inc.(a) 68,720 311 Novellus Systems, Inc.(a) 20,030 335
MARKET VALUE SHARES (000) ---------- ---------- NVIDIA Corp.(a) 108,256 $ 1,222 Oracle Corp. 773,362 16,565 PerkinElmer, Inc. 21,118 368 QLogic Corp.(a) 24,322 308 QUALCOMM, Inc. 339,111 15,328 Salesforce.com, Inc.(a) 21,200 809 SanDisk Corp.(a) 46,167 678 Sun Microsystems, Inc.(a) 153,941 1,419 Symantec Corp.(a) 165,863 2,581 Tellabs, Inc.(a) 73,830 423 Teradata Corp.(a) 33,520 785 Teradyne, Inc.(a) 27,649 190 Texas Instruments, Inc. 261,399 5,568 VeriSign, Inc.(a) 37,521 693 Waters Corp.(a) 20,865 1,074 Western Digital Corp.(a) 45,500 1,206 Xerox Corp. 180,034 1,167 Xilinx, Inc. 58,102 1,189 Yahoo!, Inc.(a) 281,919 4,415 ---------- 292,459 ---------- MATERIALS - 3.3% Air Products & Chemicals, Inc. 43,209 2,791 AK Steel Holding Corp. 20,000 384 Alcoa, Inc. 202,249 2,089 Allegheny Technologies, Inc. 20,328 710 Ball Corp. 19,662 888 Bemis Co., Inc. 21,162 533 CF Industries Holdings, Inc. 9,750 723 Dow Chemical Co. 222,028 3,584 E.I. Du Pont de Nemours & Co. 184,712 4,732 Eastman Chemical Co. 14,204 538 Ecolab, Inc. 32,966 1,285 Freeport-McMoRan Copper & Gold, Inc. Class B 84,352 4,227 International Flavors & Fragrances, Inc. 17,531 574 International Paper Co. 90,511 1,369 MeadWestvaco Corp. 32,320 530 Monsanto Co. 111,755 8,308 Newmont Mining Corp. 100,206 4,095 Nucor Corp. 64,954 2,886
See notes to financial statements 27 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
MARKET VALUE SHARES (000) ---------- ---------- COMMON STOCKS (CONTINUED) MATERIALS (CONTINUED) Owens-Illinois, Inc.(a) 35,200 $ 986 PactivCorp.(a) 28,515 619 Plum Creek Timber Co., Inc. 33,011 983 PPG Industries, Inc. 34,371 1,509 Praxair, Inc. 63,411 4,507 Sealed Air Corp. 34,592 638 Sherwin-Williams Co. 20,096 1,080 Sigma-Aldrich Corp. 23,934 1,186 Titanium Metals Corp. 16,600 153 United States Steel Corp. 29,478 1,054 Vulcan Materials Co. 25,961 1,119 Weyerhaeuser Co. 41,537 1,264 ---------- 55,344 ---------- TELECOMMUNICATION SERVICES - 3.5% American Tower Corp. Class A(a) 79,700 2,513 AT&T, Inc. 1,207,550 29,996 CenturyTel, Inc. 19,441 597 Embarq Corp. 30,097 1266 Fairpoint Communications, Inc.(c) 8 0 Frontier Communications Corp. 60,384 431 JDS Uniphase Corp.(a) 42,723 244 MetroPCS Communications, Inc.(a) 51,700 688 Qwest Communications International, Inc. 309,290 1,284 Sprint Nextel Corp.(a) 575,465 2,768 Verizon Communications, Inc. 581,666 17,875 Windstream Corp. 90,013 752 ---------- 58,414 ---------- UTILITIES - 3.9% AES Corp.(a) 139,895 1,624 Allegheny Energy, Inc. 33,059 848 Ameren Corp. 45,460 1,132 American Electric Power Co., Inc. 96,852 2,798 CenterPoint Energy, Inc. 75,611 838 CMS Energy Corp. 45,756 553 Consolidated Edison, Inc. 55,052 2,060 Constellation Energy Group, Inc. 38,914 1,034
MARKET VALUE SHARES (000) ---------- ---------- Dominion Resources, Inc. 121,562 $ 4,063 DTE Energy Co. 33,384 1,068 Duke Energy Corp. 264,020 3,852 Dynegy, Inc. Class A(a) 82,690 188 Edison International 65,719 2,068 Entergy Corp. 40,498 3,139 Exelon Corp. 134,521 6,889 FirstEnergy Corp. 63,507 2,461 FPL Group, Inc. 83,821 4,766 Integrys Energy Group, Inc. 14,716 441 Nicor, Inc. 9,400 325 NiSource, Inc. 58,782 685 Northeast Utilities 37,300 832 Pepco Holdings, Inc. 41,700 560 PG&E Corp. 75,526 2,903 Pinnacle West Capital Corp. 20,160 608 PPL Corp. 75,475 2,488 Progress Energy, Inc. 56,081 2,122 Public Service Enterprise Group, Inc. 102,624 3,349 SCANA Corp. 25,100 815 Sempra Energy 49,786 2,471 Southern Co. 159,443 4,968 TECO Energy, Inc. 42,151 503 Wisconsin Energy Corp. 22,800 928 Xcel Energy, Inc. 91,751 1,689 ---------- 65,068 ---------- TOTAL COMMON STOCKS (Cost $1,528,520,087) 1,645,414 ----------
PAR AMOUNT (000) ---------- U.S. GOVERNMENT SECURITIES - 0.3% United States Treasury Bill(d)(e)(f) 0.2% due 09/10/09 $ 4,815 4,813 ---------- TOTAL U.S. GOVERNMENT SECURITIES (Cost $4,813,481) 4,813 ----------
See notes to financial statements 28 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
MARKET SHARES VALUE (000) (000) ---------- ---------- MONEY MARKET FUNDS - 2.3% AIM Short Term Investment Prime Portfolio 38,830 $ 38,830 Federated Money Market Obligations Trust 575 575 ---------- TOTAL MONEY MARKET FUNDS (Cost $39,405,105) 39,405 ---------- TOTAL INVESTMENTS(g)+ - 100.2% (Cost $1,572,738,673) 1,689,632 LIABILITIES IN EXCESS OF ASSETS - (0.2%) (2,776) NET ASSETS - 100% $1,686,856 ==========
(a) Non-income producing security. (b) Affiliated issuer. See table that follows for more information. (c) Amount is less than $1,000. (d) All or part of this security has been designated as collateral for futures contracts. (e) Rate represents annualized yield at date of purchase. (f) Value determined based on Level 2 inputs established by FAS 157. (Note 2) (g) Unless otherwise indicated, the values of the Securities of the Portfolio are determined based on Level 1 inputs established by FAS 157. (Note 2) + See Note 2 of the Notes to the Financial Statements. SCHEDULE OF FUTURES CONTRACTS
UNREALIZED NUMBER OF APPRECIATION CONTRACTS (000) --------- ------------ Schedule of Futures Contract S&P 500 Financial Futures Contracts (long) Expiration Date 9/2009 926 $(1,165) ------- Total unrealized depreciation on open futures contracts purchased $(1,165) =======
AFFILIATE TABLE 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, 2009 is listed in the Portfolio of Investments.
Income Earned Number of Shares Shares sold Number of for the Six Realized shares held purchased for for shares held Value at months ended Gain on Security at the Six months the Six months at 6/30/09 6/30/09 shares sold Description 12/31/2008 ended 6/30/09 ended 6/30/09 6/30/09 (000) (000) (000) ----------- ----------- -------------- -------------- ----------- -------- ------------ ----------- State Street Corp. 81,725 19,100 -- 100,825 $4,759 $21 $--
See notes to financial statements 29 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2009 (UNAUDITED) (AMOUNTS IN THOUSANDS) ASSETS Investments in unaffiliated issuers at market (identified cost $1,568,389) .................. $1,684,873 Investments in non-controlled affiliates at market (identified cost $4,350) (Note 4) ............. 4,759 ---------- 1,689,632 Investment securities sold .................... 1,330 Dividends and interest ........................ 2,271 ---------- TOTAL ASSETS ............................... 1,693,233 ---------- LIABILITIES Investment securities purchased ............... 6,050 Daily variation margin on futures contracts ... 265 Management fees (Note 4) ...................... 62 ---------- TOTAL LIABILITIES .......................... 6,377 ---------- NET ASSETS ....................................... $1,686,856 ==========
See notes to financial statements 30 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF OPERATIONS JUNE 30, 2009 (UNAUDITED) (AMOUNTS IN THOUSANDS) INVESTMENT INCOME Dividend income - unaffiliated issuers .... $ 19,392 Dividend income - non-controlled affiliated issuer ................................. 21 Interest .................................. 74 -------- TOTAL INVESTMENT INCOME ................ 19,487 EXPENSES Management fees (Note 4) .................. 332 -------- TOTAL EXPENSES ......................... 332 -------- NET INVESTMENT INCOME ........................ 19,155 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments - unaffiliated issuers ........ $(49,381) Futures contracts ......................... 3,942 -------- (45,439) Net change in net unrealized depreciation on: Investments ............................... 81,989 Futures contracts ......................... (2,116) -------- 79,873 -------- Net realized and unrealized loss ............. 34,434 -------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ $ 53,589 ========
See notes to financial statements 31 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, 2009 DECEMBER 31, (UNAUDITED) 2008 ---------------- ------------ INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net Investment Income ............................ $ 19,155 $ 45,563 Net realized gain on investments and futures contracts ..................................... (45,439) (19,853) Net change in net unrealized appreciation (depreciation) ................................ 79,873 (897,802) ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................ 53,589 (872,092) ---------- ---------- CAPITAL TRANSACTIONS Proceeds from contributions ...................... 162,539 288,497 Fair value of withdrawals ........................ (51,480) (316,574) ---------- ---------- NET DECREASE IN NET ASSETS FROM CAPITAL TRANSACTIONS ............................... 111,059 (28,077) ---------- ---------- TOTAL NET INCREASE (DECREASE) IN NET ASSETS ......... 164,648 (900,169) NET ASSETS Beginning of period ................................. 1,522,208 2,422,377 ---------- ---------- END OF PERIOD ....................................... $1,686,856 $1,522,208 ========== ==========
See notes to financial statements 32 STATE STREET EQUITY 500 INDEX PORTFOLIO FINANCIAL HIGHLIGHTS The following table includes selected supplemental data and ratios to average net assets:
SIX MONTHS YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED 6/30/2009 12/31/2008 12/31/2007 12/31/2006 12/31/2005 12/31/2004 ----------- ---------- ---------- ----------- ------------ ---------- (UNAUDITED) SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in thousands) ............... $1,686,856 $1,522,208 $2,422,377 $2,766,696 $2,453,109 $2,767,467 Ratios to average net assets: Operating expenses .......... 0.045%+ 0.045% 0.045% 0.045% 0.045% 0.045% Net investment income ....... 2.59%+ 2.30% 1.96% 1.94% 1.84% 1.97% Portfolio turnover rate* ....... 5%++ 14% 12% 10% 8% 9% Total return (a) ............... 3.20%++ (37.02)% 5.49% 15.75% 4.87% 10.86%
- ---------- * The portfolio turnover rate excludes in-kind security transactions. + Annualized ++ Not Annualized (a) Results represent past performance and are not indicative of future results. See notes to financial statements 33 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (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, 2009, 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 ("FASB")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 34 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (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 Portfolio'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, 2009, in valuing the Fund's assets carried at fair value:
Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Description (Level 1) (Level 2) (Level 3) Total - ----------- ----------- ----------- ------------ ---------- ASSETS: Common Stocks.............................................. $1,645,414 $ -- $-- $1,645,414 U.S. Government Securities................................. -- 4,813 -- 4,813 Money Market Funds......................................... 39,405 -- -- 39,405 ---------- ------ --- ---------- Total Investments.......................................... 1,684,819 4,813 -- 1,689,632 LIABILITIES: Investments in Other Financial Instruments Futures contracts....................................... (1,165) -- -- (1,165) ---------- ------ --- ---------- Total Investments in Other Financial Instruments........... (1,165) -- -- (1,165) ---------- ------ --- ---------- Total...................................................... $1,683,654 $4,813 $-- $1,688,467 ========== ====== === ==========
In April 2009, the FASB issued FASB Staff Position No. 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset and Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" ("FSB 157-4"). FSB 157-4 provides additional guidance for estimating fair value in accordance with FAS 157 when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. The type of inputs used to value each security is identified in the Portfolio of Investments, which also includes a breakdown of the Portfolio's investments by category. 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 35 STATE STREET EQUITY 500 INDEX PORTFOLIO GENERAL INFORMATION JUNE 30, 2007 (UNAUDITED) 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 has reviewed the tax positions for open years as of and during the year ended December 31, 2008, and determined it 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, 2009, tax years 2005 through 2008 remain subject to examination by the portfolio's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts. Futures: The Portfolio may enter into financial futures contracts as part of its strategy to track the performance of the S&P 500(R) Index. Upon entering into a futures contract, the Portfolio is required to deposit with the broker cash or securities in an amount equal to a certain percentage of the contract amount. Variation margin payments are made or received by the Portfolio each day, depending on the daily fluctuations in the value of the underlying security or index, and are recorded for financial statement purposes as unrealized gains or losses by the Portfolio. The Portfolio recognizes a realized gain or loss when the contract is closed. The Portfolio voluntarily segregates securities in an amount equal to the outstanding value of the open futures contracts in accordance with Securities and Exchange Commission requirements. The primary risks associated with the use of futures contracts are an imperfect correlation between the change in market value of the securities held by the Portfolio and the prices of futures contracts and the possibility of an illiquid market. The Portfolio adopted the provisions of FASB Statement of Financial Accounting Standards No. 161 "Disclosures about Derivative Instruments and Hedging Activities" ("FAS 161"). FAS 161 has established improved financial reporting about derivative instruments and hedging activities as it relates to disclosure associated with these types of investments. The following table, grouped into appropriate risk categories, discloses the amounts related to the Funds use of derivative instruments and hedging activities at June 30, 2009: Liability Derivatives * (amounts in thousands)
Foreign Exchange Commodity Interest Rate Contracts Credit Equity Contracts Other Contracts Risk Risk Contracts Risk Contracts Risk Risk Contracts Risk Total -------------- --------- -------------- -------------- --------- -------------- ----- Futures Contracts $-- $-- $-- $265 $-- $-- $265
Transactions in derivative instruments during the six months ended June 30, 2009, were as follows: Realized Gain (Loss) ** (amounts in thousands)
Foreign Exchange Commodity Interest Rate Contracts Credit Equity Contracts Other Contracts Risk Risk Contracts Risk Contracts Risk Risk Contracts Risk Total -------------- --------- -------------- -------------- --------- -------------- ------- Futures Contracts $-- $-- $-- $3,942 $-- $-- $ 3,942
Change in Appreciation (Depreciation) *** (amounts in thousands)
Foreign Exchange Commodity Interest Rate Contracts Credit Equity Contracts Other Contracts Risk Risk Contracts Risk Contracts Risk Risk Contracts Risk Total -------------- --------- -------------- -------------- --------- -------------- ------- Futures Contracts $-- $-- $-- $(2,116) $-- $-- $(2,116)
* Statements of Assets and Liabilities location: Daily variation margin on futures contracts ** Statements of Operations location: Net realized gain (loss) on: Futures contracts *** Statements of Operations location: Net change in unrealized appreciation (depreciation) on: Futures contracts 36 STATE STREET EQUITY 500 INDEX PORTFOLIO GENERAL INFORMATION JUNE 30, 2007 (UNAUDITED) Use of Estimates: The Portfolio's financial statements are prepared in accordance with U.S. generally accepted accounting principles that require the use of management estimates. Actual results could differ from those estimates. 3. SECURITIES TRANSACTIONS For the six months June 30, 2009, purchases and sales of investment securities, excluding short-term investments, futures contracts, and contributions in-kind and fair value of withdrawals, aggregated to $202,423,545 and $66,166,854, respectively. At June 30, 2009, the book cost of investments was $1,572,738,673 which approximates cost computed on a federal tax basis. The aggregate gross unrealized appreciation and gross unrealized depreciation was $393,534,625 and $276,641,660, respectively, resulting in net appreciation of $116,892,965 for all securities as computed on a federal income tax basis. 4. RELATED PARTY FEES AND TRANSACTIONS The Portfolio has entered into an investment advisory agreement with SSgA Funds Management, Inc. ("SSgA FM" or the "Adviser"), a subsidiary of State Street Corp. and an affiliate of State Street 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, 2009 is listed in the Portfolio of Investments. 5. TRUSTEES' FEES Pursuant to certain agreements with State Street and its affiliates, each Independent Trustee receives for his or her services a $30,000 retainer in addition to $2,500 for each in-person meeting and $500 for each telephonic meeting from State Street or its affiliates. 6. INDEMNIFICATIONS The Trust's organizational documents provide that its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, both in some of its principal service contracts and in the normal course of its business, the Trust enters into contracts that provide indemnifications to other parties for certain types of losses or liabilities. The Trust's maximum exposure under these arrangements is unknown as this could involve future claims against the Trust. Management does not expect any significant claims. 37 STATE STREET EQUITY 500 INDEX PORTFOLIO GENERAL INFORMATION JUNE 30, 2007 (UNAUDITED) 7. SUBSEQUENT EVENTS In accordance with the provisions set forth in FASB Statement of Financial Accounting Standards No. 165 "Subsequent Events", adopted by the Portfolio as of June 30, 2009, management has evaluated the possibility of subsequent events existing in the Portfolio's financial statements through August 20, 2009. Management has determined that there are no material events that would require disclosure in the Portfolio's financial statements through this date. 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. 38 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2009 (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 $ 1,890,400 0.5% AEROSPACE Other Securities 5,812,955 1.4 AGRICULTURE, FISHING & RANCHING Other Securities 1,896,547 0.5 AIR TRANSPORT Other Securities 3,474,937 0.9 ALTERNATIVE ENERGY Other Securities 993,164 0.3 ALUMINUM Other Securities 452,081 0.1 ASSET MANAGEMENT & CUSTODIAN Other Securities 3,511,162 0.9 AUTO PARTS Other Securities 1,540,133 0.4 AUTO SERVICES Other Securities 452,535 0.1 BANKS: DIVERSIFIED First Merit Corp. 44,412 754,116 0.2 Prosperity Bancshares, Inc. 24,500 730,835 0.2 Westamerica Bancorp. (b) 15,583 773,073 0.2 Other Securities 22,439,710 5.5 ------------ ----- 24,697,734 6.1 ------------ ----- BANKS: SAVINGS, THRIFT & MORTGAGE LENDING Other Securities 4,663,390 1.1 BEVERAGE: BREWERS & DISTILLERS Other Securities 139,073 0.0 BEVERAGE: SOFT DRINKS Other Securities 592,708 0.1 BIOTECHNOLOGY Onyx Pharmaceuticals, Inc. (a) 30,520 862,495 0.2 Other Securities 16,226,094 4.0 ------------ ----- 17,088,589 4.2 ------------ ----- BUILDING MATERIALS Other Securities 3,476,596 0.9 BUILDING: CLIMATE CONTROL Other Securities 585,750 0.2 BUILDING: ROOFING, WALLBOARD & PLUMBING Other Securities 356,439 0.1 CABLE TELEVISION SERVICES Other Securities 238,134 0.1 CASINOS & GAMBLING Bally Technologies, Inc. (a) 29,000 867,680 0.2 Other Securities 1,091,671 0.3 ------------ ----- 1,959,351 0.5 ------------ ----- CEMENT Other Securities 35,244 0.0 CHEMICALS: DIVERSIFIED Other Securities 6,144,966 1.5 COAL Other Securities 622,400 0.2 COMMERCIAL FINANCE & Other Securities 376,502 0.1 MORTGAGE COMPANIES COMMERCIAL SERVICES Tetra Tech, Inc. (a) 32,031 917,688 0.2 Watson Wyatt Worldwide, Inc. 22,715 852,494 0.2 Other Securities 11,614,618 2.9 ------------ ----- 13,384,800 3.3 ------------ ----- COMMERCIAL SERVICES: RENTAL & LEASING Other Securities 1,461,849 0.4 COMMERCIAL VEHICLES & PARTS Other Securities 660,983 0.2 COMMUNICATIONS TECHNOLOGY 3Com Corp. (a) 209,800 988,158 0.3 Polycom, Inc. (a) 44,800 908,096 0.2 Other Securities 11,781,934 2.9 ------------ ----- 13,678,188 3.4 ------------ -----
See notes to financial statements 39 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT - -------- ------------- ----------- ------------ ------- COMPUTER SERVICES SOFTWARE & SYSTEMS Digital River, Inc. (a) 20,300 $ 737,296 0.2% Informatica Corp. (a) 46,600 801,054 0.2 Parametric Technology Corp. (a) 61,660 720,805 0.2 Solera Holdings, Inc. (a) 37,000 939,800 0.2 Other Securities 24,511,652 6.0 ------------ ----- 27,710,607 6.8 ------------ ----- COMPUTER TECHNOLOGY Data Domain, Inc. (a) 25,200 840,420 0.2 Palm, Inc. (a)(b) 73,388 1,216,039 0.3 Other Securities 2,888,327 0.7 ------------ ----- 4,944,786 1.2 ------------ ----- CONSTRUCTION Other Securities 2,330,268 0.6 CONSUMER ELECTRONICS Other Securities 826,561 0.2 CONSUMER LENDING Other Securities 2,218,567 0.5 CONSUMER SERVICES: MISCELLANEOUS Other Securities 2,498,317 0.6 CONTAINERS & PACKAGING Rock-Tenn Co. Class A 20,480 781,517 0.2 Other Securities 1,085,740 0.3 ------------ ----- 1,867,257 0.5 ------------ ----- COSMETICS Other Securities 539,670 0.1 DIVERSIFIED FINANCIAL SERVICES Other Securities 2,002,020 0.5 DIVERSIFIED MANUFACTURING OPERATIONS Other Securities 925,566 0.2 DIVERSIFIED MATERIALS & PROCESSING Clarcor, Inc. 27,210 794,260 0.2 Other Securities 3,271,981 0.8 ------------ ----- 4,066,241 1.0 ------------ ----- DIVERSIFIED MEDIA Other Securities 141,963 0.0 DIVERSIFIED RETAIL Tractor Supply Co. (a) 19,100 789,212 0.2 Other Securities 15,144,479 3.7 ------------ ----- 15,933,691 3.9 ------------ ----- DRUG & GROCERY STORE CHAINS Other Securities 2,734,704 0.7 EDUCATION SERVICES Other Securities 2,917,424 0.7 ELECTRONIC COMPONENTS Other Securities 2,355,064 0.6 ELECTRONIC ENTERTAINMENT Other Securities 956,215 0.2 ELECTRONICS Other Securities 1,842,725 0.5 ENERGY EQUIPMENT Other Securities 987,015 0.2 ENGINEERING & CONTRACTING SERVICES Other Securities 1,139,215 0.3 ENTERTAINMENT Other Securities 1,187,092 0.3 FINANCIAL DATA & SYSTEMS Jack Henry & Associates, Inc. 45,400 942,050 0.2 Other Securities 3,785,865 1.0 ------------ ----- 4,727,915 1.2 ------------ ----- FOODS Other Securities 4,780,959 1.2 FOREST PRODUCTS Other Securities 547,759 0.1 FORMS & BULK PRINTING SERVICES Other Securities 980,731 0.2 FUNERAL PARLORS & CEMETERIES Other Securities 718,130 0.2 GAS PIPELINES Other Securities 89,856 0.0 GLASS Other Securities 186,960 0.0 GOLD Other Securities 767,423 0.2 HEALTH CARE FACILITIES Other Securities 2,511,454 0.6
See notes to financial statements 40 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT - -------- ------------- ----------- ------------ ------- HEALTH CARE MANAGEMENT SERVICES AMERIGROUP Corp. (a) 28,100 $ 754,485 0.2% Other Securities 3,320,243 0.8 ------------ ----- 4,074,728 1.0 ------------ ----- HEALTH CARE SERVICES Quality Systems, Inc. (b) 12,800 729,088 0.2 Other Securities 6,739,925 1.6 ------------ ----- 7,469,013 1.8 ------------ ----- HEALTH CARE: MISCELLANEOUS Other Securities 479,870 0.1 HOME BUILDING Other Securities 1,025,472 0.2 HOTEL/MOTEL Other Securities 772,785 0.2 HOUSEHOLD APPLIANCES Other Securities 194,055 0.0 HOUSEHOLD EQUIPMENT & PRODUCTS Tupperware Corp. 33,274 865,789 0.2 Other Securities 457,301 0.1 ------------ ----- 1,323,090 0.3 ------------ ----- HOUSEHOLD FURNISHINGS Other Securities 1,241,763 0.3 INSURANCE: LIFE Other Securities 1,458,471 0.4 INSURANCE: MULTI-LINE Platinum Underwriters Holdings Ltd. 27,300 780,507 0.2 Other Securities 2,263,787 0.6 ------------ ----- 3,044,294 0.8 ------------ ----- INSURANCE: PROPERTY-CASUALTY IPC Holdings, Ltd. 29,800 814,732 0.2 ProAssurance Corp. (a)(c) 17,623 814,359 0.2 Other Securities 7,368,549 1.8 ------------ ----- 8,997,640 2.2 ------------ ----- LEISURE TIME Other Securities 2,484,006 0.6 LUXURY ITEMS Other Securities 796,874 0.2 MACHINERY & ENGINEERING Other Securities 454,873 0.1 MACHINERY: AGRICULTURAL Other Securities 252,220 0.1 MACHINERY: CONSTRUCTION & HANDLING Other Securities 368,443 0.1 MACHINERY: ENGINES Other Securities 456,504 0.1 MACHINERY: INDUSTRIAL Other Securities 3,850,930 0.9 MACHINERY: SPECIALTY Other Securities 411,035 0.1 MANUFACTURED HOUSING Other Securities 164,444 0.0 MEDICAL & DENTAL NuVasive, Inc. (a) 19,400 865,240 0.2 INSTRUMENTS & SUPPLIES Owens & Minor, Inc. 22,198 972,716 0.2 Steris Corp. 31,100 811,088 0.2 Other Securities 9,608,755 2.4 ------------ ----- 12,257,799 3.0 ------------ ----- MEDICAL EQUIPMENT Haemonetics Corp. (a) 13,672 779,304 0.2 Thoratec Corp. (a) 30,047 804,659 0.2 Other Securities 6,095,703 1.5 ------------ ----- 7,679,666 1.9 ------------ ----- MEDICAL SERVICES Other Securities 1,332,981 0.3 METAL FABRICATING Other Securities 2,931,767 0.7 METALS & MINERALS: DIVERSIFIED Other Securities 1,357,497 0.3 OFFICE SUPPLIES & EQUIPMENT Other Securities 1,771,072 0.4 OFFSHORE DRILLING & OTHER SERVICES Other Securities 216,220 0.1 OIL WELL EQUIPMENT & SERVICES Other Securities 5,352,821 1.3 OIL: CRUDE PRODUCERS Other Securities 7,214,972 1.8 OIL: INTEGRATED Other Securities 302,883 0.1
See notes to financial statements 41 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT - -------- ------------- ----------- ------------ ------- PAINTS & COATINGS Other Securities $ 636,955 0.2% PAPER Other Securities 1,349,902 0.3 PERSONAL CARE Other Securities 1,459,131 0.4 PHARMACEUTICALS Auxilium Pharmaceuticals, Inc. (a)(b) 23,100 724,878 0.2 Isis Pharmaceuticals, Inc. (a)(b) 49,689 819,869 0.2 Other Securities 5,784,658 1.4 ------------ ----- 7,329,405 1.8 ------------ ----- PHOTOGRAPHY Other Securities 473,747 0.1 PLASTICS Other Securities 150,293 0.0 POWER TRANSMISSION EQUIPMENT Regal-Beloit Corp. 19,451 772,594 0.2 Other Securities 555,471 0.1 ------------ ----- 1,328,065 0.3 ------------ ----- PRECIOUS METALS & MINERALS Other Securities 259,465 0.1 PRINTING & COPYING SERVICES VistaPrint Ltd. (a) 22,400 955,360 0.3 Other Securities 109,134 0.0 ------------ ----- 1,064,494 0.3 ------------ ----- PRODUCER DURABLES: MISCELLANEOUS Other Securities 267,780 0.1 PRODUCTION TECHNOLOGY EQUIPMENT Other Securities 3,910,594 1.0 PUBLISHING Other Securities 625,261 0.2 RADIO & TV BROADCASTERS Other Securities 171,684 0.0 RAILROAD EQUIPMENT Other Securities 244,022 0.1 RAILROADS Other Securities 468,564 0.1 REAL ESTATE Other Securities 699,404 0.2 REAL ESTATE INVESTMENT TRUSTS Anthracite Capital, Inc. (d) 33,000 20,460 0.0 (REITS) Highwoods Properties, Inc. 38,400 859,008 0.2 MFA Financial, Inc. 120,700 835,244 0.2 National Retail Properties, Inc. 42,475 736,941 0.2 Other Securities 18,811,742 4.6 ------------ ----- 21,263,395 5.2 ------------ ----- RECREATIONAL VEHICLES & BOATS Other Securities 974,358 0.2 RENTAL & LEASING SERVICES: CONSUMER Other Securities 1,286,699 0.3 RESTAURANTS Other Securities 6,198,540 1.5 SCIENTIFIC INSTRUMENTS: CONTROL & FILTER Other Securities 2,832,727 0.7 SCIENTIFIC INSTRUMENTS: ELECTRICAL GrafTech International Ltd. (a) 63,944 723,207 0.2 Other Securities 3,639,685 0.9 ------------ ----- 4,362,892 1.1 ------------ ----- SCIENTIFIC INSTRUMENTS: GAUGES & METERS Other Securities 582,269 0.1 SCIENTIFIC INSTRUMENTS: POLLUTION CONTROL Other Securities 1,982,610 0.5 SECURITIES BROKERAGE & SERVICES Knight Capital Group, Inc. Class A (a) 49,700 847,385 0.2 Other Securities 2,676,178 0.7 ------------ ----- 3,523,563 0.9 ------------ ----- SEMICONDUCTORS & COMPONENTS Skyworks Solutions, Inc. (a) 89,133 871,721 0.2 Other Securities 9,695,005 2.4 ------------ ----- 10,566,726 2.6 ------------ ----- SHIPPING Other Securities 2,774,534 0.7 STEEL Other Securities 265,238 0.1 SUGAR Other Securities 70,238 0.0 SYNTHETIC FIBERS & CHEMICALS Other Securities 143,856 0.0
See notes to financial statements 42 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT - -------- ------------- ----------- ------------ ------- TECHNOLOGY: MISCELLANEOUS Other Securities $ 1,293,285 0.3% TELECOMMUNICATIONS EQUIPMENT Arris Group, Inc. (a) 66,300 806,208 0.2 Other Securities 1,378,186 0.3 ------------ ----- 2,184,394 0.5 ------------ ----- TEXTILE PRODUCTS Other Securities 205,434 0.1 TEXTILES APPAREL & SHOES Carter's, Inc. (a) 30,100 740,761 0.2 J. Crew Group, Inc. (a)(b) 27,070 731,431 0.2 The Warnaco Group, Inc. (a) 24,400 790,560 0.2 Other Securities 5,247,236 1.3 ------------ ----- 7,509,988 1.9 ------------ ----- TOBACCO Other Securities 942,862 0.2 TOYS Other Securities 356,317 0.1 TRANSPORTATION MISCELLANEOUS Other Securities 687,365 0.2 TRUCKERS Other Securities 3,117,416 0.8 UTILITIES: ELECTRICAL Cleco Corp. 32,267 723,426 0.2 Portland General Electric Co. 40,700 792,836 0.2 Other Securities 6,052,978 1.5 ------------ ----- 7,569,240 1.9 ------------ ----- UTILITIES: GAS DISTRIBUTORS New Jersey Resources Corp. 22,561 835,659 0.2 Nicor, Inc. 24,100 834,342 0.2 Piedmont Natural Gas Co. (b) 39,100 942,701 0.2 WGL Holdings, Inc. 26,700 854,934 0.2 Other Securities 2,273,511 0.6 ------------ ----- 5,741,147 1.4 ------------ ----- UTILITIES: TELECOMMUNICATIONS Other Securities 5,080,880 1.2 UTILITIES: WATER Other Securities 1,491,982 0.4 WHOLESALE & INTERNATIONAL TRADE Other Securities 1,018,433 0.2 ------------ ----- TOTAL COMMON STOCKS 399,826,107 98.5 ============ ===== INVESTMENT COMPANIES ASSET MANAGEMENT & CUSTODIAN BlackRock Kelso Capital Corp. (d) 6,700 41,741 0.0 Other Securities 594,167 0.1 ------------ ----- TOTAL INVESTMENT COMPANIES 635,908 0.1 ============ ===== WARRANTS (e) ALTERNATIVE ENERGY GreenHunter Energy, Inc. (expires 8/27/11) (f) 180 -- 0.0 COMMUNICATIONS TECHNOLOGY Other Securities -- 0.0 ------------ ----- TOTAL WARRANTS -- 0.0 ============ =====
See notes to financial statements 43 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
INDUSTRY OTHER INTERESTS (g) SHARES VALUE PERCENT - -------- ------------------- ----------- ------------ ------- OIL: CRUDE PRODUCERS Other Securities -- 0.0% TOTAL OTHER INTERESTS -- 0.0 ------------ ----- TOTAL LONG-TERM INVESTMENTS (COST -- $457,409,135) $400,462,015 98.6 ============ ===== SHORT-TERM SECURITIES BlackRock Liquidity Funds, TempFund, 0.45% (d)(h) 12,940,007 12,940,007 3.2
BENEFICIAL INTEREST (000) ------------ BlackRock Liquidity Series, LLC Money Market Series, 0.55% (d)(h)(i) $ 29,126 29,126,454 7.2 ------------ ----- TOTAL SHORT-TERM SECURITIES (COST -- $42,066,461) 42,066,461 10.4 ============ ===== TOTAL INVESTMENTS (COST -- $499,475,596*) LIABILITIES IN 442,528,476 109.0 EXCESS OF OTHER ASSETS (36,541,058) (9.0) ------------ ----- NET ASSETS $405,987,418 100.0 ============ =====
* The cost and unrealized appreciation (depreciation) of investments as of June 30, 2009, as computed for federal income tax purposes, were as follows: Aggregate cost ................. $ 520,628,821 ============= Gross unrealized appreciation .. $ 35,770,593 Gross unrealized depreciation .. (113,870,938) ------------- Net unrealized depreciation .... $ (78,100,345) =============
(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 SALE REALIZED AFFILIATE COST COST LOSS INCOME - --------- ----------- ----------- -------- -------- Anthracite Capital, Inc. $ 11,193 $ -- $ -- $ -- BlackRock Kelso Capital Corp. 11,712 3,084 (1,902) 1,856 BlackRock Liquidity Funds,TempFund 12,940,007* -- -- 19,336 BlackRock Liquidity Series, LLC Cash Sweep Series -- 33,514,609** -- 37,506 BlackRock Liquidity Series, LLC Money Market Series $ 4,482,252* $ -- $ -- $251,505
* 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) Restricted security as to resale, representing 0.0% of net assets were as follows:
ACQUISITION ISSUE DATE COST VALUE - ----- ----------- ---- ----- GreenHunter Energy, Inc. 6/27/08 $-- $--
(g) Other interests represent beneficial interest in liquidation trusts and other reorganization entities and are non-income producing. (h) Represents the current yield as of report date. (i) Security was purchased with the cash proceeds from securities loans See notes to financial statements 44 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) - - Financial futures contracts purchased as of June 30, 2009 were as follows:
EXPIRATION FACE UNREALIZED CONTRACTS ISSUE DATE VALUE DEPRECIATION - --------- --------------------- ---------------- ---------- ------------ 179 Russell 2000 ICE MINI September 2009 $9,132,385 $(53,505)
- - 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 Accounting Standards Board Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" 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 active, quoted prices for identical or 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 circumstances, to the extent observable inputs are not available (including the Series' own assumptions 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, 2009 in determining the fair valuation of the Series' investments:
INVESTMENTS IN SECURITIES VALUATION INPUTS ASSETS -------------- Level 1 -- Long-Term Investments(1) ......................... $413,278,100 Level 2 Long-Term Investments Semiconductors & Components ............................. 123,791 Short-Term Securities .................................... 29,126,454 ------------ Total Level 2 ............................................... 29,250,245 ------------ Level 3 Long-Term Investments Asset Management & Custodian ............................ 121 ------------ TOTAL ....................................................... $442,528,476
(1) See above Schedule of Investments for values in each industry excluding industries in Level 2 and Level 3 within the table.
OTHER FINANCIAL INSTRUMENTS(2) VALUATION INPUTS LIABILITIES - ---------------- -------------- Level 1 ..................................................... $(53,505) Level 2 ..................................................... -- Level 3 ..................................................... -- -------- TOTAL ....................................................... $(53,505)
(2) Other financial instruments are financial futures contracts which are shown at the unrealized appreciation/depreciation on the instrument. See notes to financial statements 45 MASTER SMALL CAP INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) The following is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value:
INVESTMENTS IN SECURITIES ASSETS ASSET MANAGEMENT & CUSTODIAN ---------------- Balance, as of December 31, 2008 ............................ -- Accrued discounts/premiums .................................. -- Realized gain (loss) ........................................ -- Change in unrealized appreciation/depreciation .............. -- Net purchases (sales) ....................................... -- Net transfer in ............................................. $121 ---- BALANCE, AS OF JUNE 30, 2009 ................................ $121 ----
See notes to financial statements 46 MASTER SMALL CAP INDEX SERIES STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2009 (UNAUDITED) ASSETS Investments at value -- unaffiliated (including securities loaned of $26,101,570) (cost -- $457,111,513) ............ $400,399,814 Investments at value -- affiliated (cost -- $42,364,083)..... 42,128,662 Investments sold receivable ................................. 46,679,430 Dividends receivable ........................................ 429,124 Securities lending income receivable - affiliated ........... 70,818 Prepaid expenses ............................................ 13,361 Other assets ................................................ 68 ------------ Total assets................................................. 489,721,277 ------------ LIABILITIES Collateral at value - securities loaned .................... 29,126,454 Investments purchased payable ............................... 50,918,602 Withdrawals payable to investors ............................ 3,664,827 Margin variation payable .................................... 16,872 Investment advisory fees payable ............................ 2,302 Other affiliates payable .................................... 1,623 Other accrued expenses payable .............................. 2,933 Other liabilities payable ................................... 246 ------------ Total liabilities ........................................... 83,733,859 ------------ NET ASSETS Net assets .................................................. $405,987,418 ------------ NET ASSETS CONSIST OF Investors' capital .......................................... $462,988,043 Net unrealized appreciation/depreciation .................... (57,000,625) ------------ Net assets .................................................. $405,987,418
See notes to financial statements 47 MASTER SMALL CAP INDEX SERIES STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) INVESTMENT INCOME $ 1,798,556 Dividends ................................................ Foreign tax withheld ..................................... (358) Income - affiliated ...................................... 58,698 Securities lending -- affiliated ......................... 251,505 -------------- Total income ................................................ 2,108,401 -------------- EXPENSES Accounting services ...................................... 45,959 Professional ............................................. 43,079 Investment advisory ...................................... 17,572 Custodian ................................................ 11,319 Officers and Directors ................................... 9,687 Printing ................................................. 500 Other .................................................... 5,629 -------------- Total expenses .............................................. 133,745 Less fees waived by advisor .............................. (11,282) -------------- Total expenses after fees waived and paid indirectly ........ 122,463 -------------- Net investment income ....................................... 1,985,938 -------------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from: Investments - unaffiliated ............................... (17,487,606) Investments - affiliated ................................. (1,902) Financial futures contracts .............................. 1,608,381 -------------- (15,881,127) -------------- Net change in unrealized appreciation/depreciation on: Investments - unaffiliated ............................... 35,769,135 Investments - affiliated ................................. (55,638) Financial futures contracts .............................. (2,428,447) -------------- 33,285,050 -------------- Total realized and unrealized loss .......................... 17,403,923 -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $ 19,389,861 ==============
See notes to financial statements 48 MASTER SMALL CAP INDEX SERIES STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, YEAR ENDED 2009 DECEMBER 31, (UNAUDITED) 2008 ------------ ------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS Net investment income ............................... $ 1,985,938 $ 7,541,773 Net realized gain (loss) ............................ (15,881,127) (28,428,998) Net change in unrealized appreciation/depreciation .. 33,285,050 (153,156,287) ------------ ------------- Net increase (decrease) in net assets resulting from operations ....................................... 19,389,861 (174,043,512) ------------ ------------- CAPITAL TRANSACTIONS Proceeds from contributions ......................... 110,351,983 277,100,847 Fair value of withdrawals ........................... (68,474,546) (388,731,499) ------------ ------------- Net increase (decrease) in net assets derived from capital transactions ............................. 41,877,437 (111,630,652) ------------ ------------- NET ASSETS Total increase (decrease) in net assets ............. 61,267,298 (285,674,164) Beginning of period ................................. 344,720,120 630,394,284 ------------ ------------- End of period ....................................... $405,987,418 $ 344,720,120 ------------ -------------
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30,2009 ----------------------------------------------------- (UNAUDITED) 2008 2007 2006 2005 2004 ------------ -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN Total investment return ...................... 2.75%(1) (33.57)% (1.46)% 18.13% 4.63% 18.15% -------- -------- -------- -------- -------- -------- RATIOS TO AVERAGE NET ASSETS Total expenses ............................... 0.08%(2) 0.08% 0.06% 0.07% 0.08% 0.08% -------- -------- -------- -------- -------- -------- Total expenses after fees waived and fees paid indirectly ................................ 0.07%(2) 0.07% 0.06% 0.07% 0.07% 0.08% -------- -------- -------- -------- -------- -------- Net investment income ........................ 1.13%(2) 1.60% 1.69% 1.55% 1.17% 1.11% -------- -------- -------- -------- -------- -------- SUPPLEMENTAL DATA Net assets, end of period (000) .............. $405,987 $344,720 $630,394 $561,373 $370,145 $365,661 -------- -------- -------- -------- -------- -------- Portfolio turnover ........................... 16% 42% 26% 40% 37% 38% -------- -------- -------- -------- -------- --------
(1) Aggregate total investment return. (2) Annualized. See notes to financial statements 49 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (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 Master LLC's Limited Liability Company Agreement permits the Master LLC's Board of 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. Investments in open-end investment companies are valued at net asset value each business day. Short-term securities with maturities less than 60 days may be valued at amortized cost, which approximates fair value. The Series values its investments in Cash Sweep Series and Money Market Series, each a series of BlackRock Liquidity Series, LLC at fair value, which is ordinarily based upon its pro rata ownership in the net assets of the underlying fund. 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 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. Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission ("SEC") require that the Series segregate assets in connection with certain investments (e.g., financial futures contracts), the Series will, consistent with certain interpretive letters issued by the SEC, designate on its books and records cash or other liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, the Series may also be required to deliver or deposit securities as collateral for certain investments (e.g., financial futures contracts). As part of these agreements, when the value of these investments achieves a previously agreed upon value (minimum transfer amount), the Series may be required to deliver and/or receive additional collateral. 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. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income is recognized on the accrual basis. 50 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) Securities lending: The Series may lend securities to financial institutions that provide cash 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. The Series typically receives the income on the loaned securities but does not receive the income on the collateral. The Series may invest the cash 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 the standard time period for settlement of securities transactions. The Series may pay reasonable lending agent, administrative and custodial fees in connection with its loans. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Series could experience delays and costs in gaining access to the collateral. The Series also could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities. Income Taxes: The Series is classified as a "pass-through entity" 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 dividends, 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 four years ended December 31, 2008. 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 June 2009, Statement of Financial Accounting Standards No. 166, "Accounting for Transfers of Financial Assets -- an amendment of FASB Statement No. 140" ("FAS 166"), was issued. FAS 166 is intended to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred financial assets. FAS 166 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2009. Earlier application is prohibited. The recognition and measurement provisions of FAS 166 must be applied to transfers occurring on or after the effective date. Additionally, the disclosure provisions of FAS 166 should be applied to transfers that occurred both before and after the effective date of FAS 166. The impact of FAS 166 on the Series' financial statement disclosures, if any, is currently being assessed. 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. 51 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) 2. DERIVATIVE FINANCIAL INSTRUMENTS: The Series may engage in various portfolio investment strategies both to increase the return of the Series and to economically 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. The Series may mitigate these losses through master netting agreements included within an International Swap and Derivatives Association, Inc. ("ISDA") Master Agreement between the Series and its counterparty. The ISDA allows the Series to offset with its counterparty the Series derivative financial instruments' payables and/or receivables with collateral held. See Note 1 "Segregation and Collateralization" for information with respect to collateral practices. The Series is subject to equity risk in the normal course of pursuing its investment objectives by investing in various derivative financial instruments, as described below. Financial Futures Contracts: The Series may purchase or sell financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk). Financial futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. 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. The use of financial futures transactions involves the risk of an imperfect correlation in the movements in the price of futures contracts, interest rates and the underlying assets. Financial futures transactions involve minimal counterparty risk since financial futures contracts are guaranteed against default by the exchange on which they trade. VALUES OF DERIVATIVE INSTRUMENTS AS OF JUNE 30, 2009*
LIABILITY DERIVATIVES ------------------------- Balance Sheet Location Value ------------- --------- Equity Contracts** ............. Net unrealized Appreciation/ depreciation $53,505
* For open derivative instruments as of June 30, 2009, see the Schedule of Investments, which is also indicative of activity for the period ended June 30, 2009. ** Includes cumulative appreciation/depreciation of financial futures contracts as reported in the Schedule of Investments THE EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2009 NET REALIZED GAIN FROM DERIVATIVES RECOGNIZED IN INCOME
Financial Futures Contracts ---------- Equity contracts............. $1,608,381
NET CHANGE IN UNREALIZED DEPRECIATION ON DERIVATIVES RECOGNIZED IN INCOME
Financial Futures Contracts ----------- Equity Contracts............. @(2,428,447)
52 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) 3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: The PNC Financial Services Group, Inc. ("PNC") and Bank of America Corporation ("BAC") are the largest stockholders of BlackRock, Inc. ("BlackRock"). Due to the ownership structure, PNC is an affiliate for 1940 Act purposes, but BAC is not. The Master LLC, on behalf of the Series, entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the "Manager"), the Series' investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of the Series' investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Series. For such services, the Series pays the Manager a monthly fee at an annual rate of 0.01% of the average daily net assets of the Series. However, the Manager has entered into a contract with the Master LLC, on behalf of the Series that provides that the advisory fee for the Series, when combined with the administration fees of a certain feeder fund, will not exceed a specified amount. No fees are currently being waived for the Series. This arrangement has a one-year term and is renewable. The Manager has entered into a contractual arrangement with the Master LLC with respect to the Series under which the Manager 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. For the six months ended June 30, 2009, the Manager waived $8,779, which is included in fees waived by advisor in the Statement of Operations. The Manager has agreed to waive its advisory fee by the amount of investment advisory fees the Series pays to the Manager indirectly through is investment in affiliated money market funds. For the six months ended June 30, 2009, the Manager waived $2,503, which is included in fees waived by advisor in the Statement of Operations. The Manager has entered into a sub-advisory agreement with BlackRock Investment Management, LLC ("BIM"), an affiliate of the Manager, under which the Manager pays BIM for services it provides, a monthly fee that is a percentage of the investment advisory fee paid by the Fund to the Manager. For the six months ended June 30, 2009, the Series reimbursed the Manager $3,105 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 SEC permitting it, among other things, to pay an affiliated securities lending agent fee based on a share of the revenue derived from the securities lending activities. The Master LLC has retained BIM as the securities lending agent for a fee based on a share of the income from investment of cash collateral. BIM may, on behalf of the Master LLC and the Series, invest cash collateral received by the Series for such loans, among other things, in a private investment company managed by the Manager or in registered money market funds advised by the Manager or its affiliates. The share of income earned by the Series on such investments is shown as securities lending -- affiliated in the Statement of Operations. For the six months ended June 30, 2009, BIM received $61,598 in securities lending agent fees. Certain officers and/or directors of the Master LLC are officers and/or directors of BlackRock, or its affiliates. The Series reimburses the Manager for its allocated share of compensation paid to the Master LLC's Chief Compliance Officer. 4. INVESTMENTS: Purchases and sales of investments, excluding short-term securities, for the six months ended June 30, 2009 were $125,679,260 and $53,523,249, respectively. 53 MASTER SMALL CAP INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) 5. SHORT-TERM BORROWINGS: The Master LLC, on behalf of the Series, along with certain other funds managed by the Manager and its affiliates, is a party to a $500 million credit agreement with a group of lenders, which expires in November 2009. The Series may borrow under the credit agreement to fund shareholder redemptions and for other lawful purposes other than for leverage. The Series may borrow up to the maximum amount allowable under the Series' current Prospectus and Statement of Additional Information, subject to various other legal, regulatory or contractual limits. The Series paid its pro rata share of a 0.02% upfront fee on the aggregate commitment amount based on its net assets. The Series pays a commitment fee of 0.08% 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 the higher of the (a) federal funds effective rate and (b) reserve adjusted one month LIBOR, plus, in each case, the higher of (i) 1.50% and (ii) 50% of the CDX Index (as defined in the credit agreement) in effect from time to time. The Series did not borrow under the credit agreement during the six months ended June 30, 2009. 6. CONCENTRATIONS, MARKET AND CREDIT RISK: In the normal course of business, the Series invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (credit risk). The value of securities held by the Series may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Series; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to credit risk, the Series may be exposed to counterparty risk, or the risk that an entity with which the Series have unsettled or open transactions may default. Financial assets, which potentially expose the Series to credit and counterparty risks, consist principally of investments and cash due from counterparties. The extent of the Series' exposure to credit and counterparty risks with respect to these financial assets is approximated by their value recorded in the Series' Statement of Assets and Liabilities. The Series invests a significant portion of its assets in the financial services sector. Please see the Summary Schedule of Investments for these securities. Changes in economic conditions affecting the financial services sector would have a greater impact on the Series, and could affect the value, income and/or liquidity of positions in such securities. 7. SUBSEQUENT EVENTS: Management has evaluated the impact of all subsequent events on the Series through August 21, 2009, the date the financial statements were issued, and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements. 54 MASTER SMALL CAP INDEX SERIES DISCLOSURE OF INVESTMENT ADVISORY AGREEMENT AND SUB-ADVISORY AGREEMENT JUNE 30, 2009 (UNAUDITED) The Board of Directors (the "Board," and the members of which are referred to as "Board Members") of Quantitative Master Series LLC (the "Master LLC") met on April 16,2009 and May 21 - 22, 2009 to consider the approval of the Master LLC's investment advisory agreement (the "Advisory Agreement") with BlackRock Advisors, LLC (the "Manager"), the Master LLC's investment advisor, on behalf of Master Small Cap Index Series (the "Portfolio"), a series of the Master LLC. The Board also considered the approval of the sub-advisory agreement (the "Sub-Advisory Agreement") between the Manager and BlackRock Investment Management, LLC (the "Sub-Advisor") with respect to the Portfolio. The Manager and the Sub-Advisor are referred to herein as "BlackRock." The Advisory Agreement and the Sub-Advisory Agreement are referred to herein as the "Agreements." ACTIVITIES AND COMPOSITION OF THE BOARD The Board of the Master LLC consists of thirteen individuals, eleven of whom are not "interested persons" of the Master LLC as defined in the Investment Company Act of 1940, as amended (the "1940 Act") (the "Independent Board Members"). The Board Members are responsible for the oversight of the operations of the Master LLC and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Co-Chairs of the Board are each Independent Board Members. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight and Contract Committee and an Executive Committee, each of which is composed of Independent Board Members (except for the Performance Oversight and Contract Committee and the Executive Committee, which each have one interested Board Member) and is chaired by Independent Board Members. THE AGREEMENTS Pursuant to the 1940 Act, the Board is required to consider the continuation of the Agreements on an annual basis. In connection with this process, the Board assessed, among other things, the nature, scope and quality of the services provided to the Portfolio by the personnel of BlackRock and its affiliates, including investment management, administrative services, shareholder services, oversight of fund accounting and custody, marketing services and assistance in meeting legal and regulatory requirements. Throughout the year, the Board, acting directly and through its committees, considers at each of its meetings factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to the Portfolio and its shareholders. Among the matters the Board considered were: (a) investment performance of an affiliated feeder fund that invests all of its investable assets in the Portfolio (the "representative feeder fund") for one-, three-and five-year periods against its applicable benchmark, as well as senior management and portfolio managers' analysis of the reasons for any underperformance; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Portfolio for services, such as marketing and distribution and fund accounting; (c) Portfolio operating expenses; (d) the resources devoted to and compliance reports relating to the Portfolio's investment objective, policies and restrictions; (e) the Master LLC's compliance with its Code of Ethics and compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock's and other service providers' internal controls; (h) BlackRock's implementation of the proxy voting policies approved by the Board; (i) the use of brokerage commissions and execution quality; (j) BlackRock's implementation of the Master LLC's valuation and liquidity procedures; and (k) periodic updates on BlackRock's business. BOARD CONSIDERATIONS IN APPROVING THE AGREEMENTS The Approval Process: Prior to the April 16, 2009 meeting, the Board requested and received materials specifically relating to the Agreements. The Board is engaged in an ongoing process with BlackRock to continuously review the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April meeting included: (a) information independently compiled and prepared by Lipper, Inc. ("Lipper") on representative feeder fund fees and expenses, and the investment performance of the representative feeder fund as compared with a peer group of funds as determined by Lipper (collectively, "Peers"); (b) information on the profitability of the Agreements to BlackRock and a discussion of fall-out benefits to BlackRock 55 MASTER SMALL CAP INDEX SERIES DISCLOSURE OF INVESTMENT ADVISORY AGREEMENT AND SUB-ADVISORY AGREEMENT JUNE 30, 2009 (UNAUDITED) and its affiliates and significant shareholders; (c) a general analysis provided by BlackRock concerning investment advisory fees charged to other clients, such as institutional and closed-end funds, under similar investment mandates, as well as the performance of such other clients; (d) the impact of economies of scale; (e) a summary of aggregate amounts paid by the Portfolio to BlackRock; and (f) an internal comparison of management fees classified by Lipper, if applicable. At an in-person meeting held on April 16, 2009, the Board reviewed materials relating to its consideration of the Agreements. As a result of the discussions that occurred during the April 16, 2009 meeting, the Board presented BlackRock with questions and requests for additional information and BlackRock responded to these requests with additional written information in advance of the May 21 - 22, 2009 Board meeting. At an in-person meeting held on May 21 - 22, 2009, the Board Members of the Master LLC present at the meeting, including the Independent Board Members present at the meeting, unanimously approved the continuation of the Advisory Agreement between the Manager and the Master LLC with respect to the Portfolio and the Sub-Advisory Agreement between the Manager and the Sub-Advisor with respect to the Portfolio, each for a one-year term ending June 30, 2010. The Board considered all factors it believed relevant with respect to the Portfolio, including, among other factors: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Portfolio and BlackRock portfolio management; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and certain affiliates from the relationship with the Portfolio; (d) economies of scale; and (e) other factors. The Board also considered other matters it deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to the distribution of Portfolio shares, services related to the valuation and pricing of portfolio holdings of the Portfolio, direct and indirect benefits to BlackRock and its affiliates from their relationship with the Portfolio and advice from independent legal counsel with respect to the review process and materials submitted for the Board's review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as controlling, and each Board Member may have attributed different weights to the various items considered. A. Nature, Extent and Quality of the Services: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of the Portfolio. Throughout the year, the Board received information regarding the investment performance of the representative feeder fund. The Board met with BlackRock's senior management personnel responsible for investment operations, including the senior investment officers. The Board also reviewed the materials provided by the Portfolio's portfolio management team discussing performance of the representative feeder fund and the Portfolio's investment objective, strategies and outlook. The Board considered, among other factors, the number, education and experience of BlackRock's investment personnel generally and the Portfolio's portfolio management team, investments by portfolio managers in the funds they manage, BlackRock's portfolio trading capabilities, BlackRock's use of technology, BlackRock's commitment to compliance and BlackRock's approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board also reviewed a general description of BlackRock's compensation structure with respect to the Portfolio's portfolio management team and BlackRock's ability to attract and retain high-quality talent. In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services provided to the Portfolio. BlackRock and its affiliates provide the Portfolio with certain administrative, transfer agency, shareholder and other services (in addition to any such services provided to the Portfolio by third parties) and officers and other personnel as are necessary for the operations of the Portfolio. In addition to investment advisory services, BlackRock and its affiliates provide the Portfolio with other services, including: (i) preparing disclosure documents, such as the prospectus, the statement of additional information and periodic shareholder reports; (ii) assisting with daily accounting and pricing; (iii) overseeing and coordinating the activities of other service providers; (iv) organizing Board meetings and preparing the materials for such Board meetings; (v) providing legal and compliance support; and (vi) performing other administrative functions necessary 56 MASTER SMALL CAP INDEX SERIES DISCLOSURE OF INVESTMENT ADVISORY AGREEMENT AND SUB-ADVISORY AGREEMENT JUNE 30, 2009 (UNAUDITED) for the operation of the Portfolio, such as tax reporting and fulfilling regulatory filing requirements. The Board reviewed the structure and duties of BlackRock's fund administration, accounting, legal and compliance departments and considered BlackRock's policies and procedures for assuring compliance with applicable laws and regulations. B. The Investment Performance of the Portfolio and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of the Portfolio. In preparation for the April 16, 2009 meeting, the Board was provided with reports, independently prepared by Lipper, which included a comprehensive analysis of the representative feeder fund's performance. The Board also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper's rankings. In connection with its review, the Board received and reviewed information regarding the investment performance of the representative feeder fund as compared to a representative group of similar funds as determined by Lipper and to all funds in the representative feeder fund's applicable Lipper category. The Board was provided with a description of the methodology used by Lipper to select peer funds. The Board regularly reviews the performance of the representative feeder fund throughout the year. The Board attaches more importance to performance over relatively long periods of time, typically three to five years. The Board noted that, in general, the representative feeder fund performed better than its Peers in that the representative feeder fund's performance was at or above the median of its Lipper Performance Universe in two of the one-, three- and five-year periods reported. C. Consideration of the Advisory Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Portfolio: The Board, including the Independent Board Members, reviewed the information provided by Lipper regarding the Portfolio's contractual advisory fee rates and the representative feeder fund's total expenses. The Board considered the services provided and the fees charged by BlackRock to other types of clients with similar investment mandates, including separately managed institutional accounts. The Board received and reviewed statements relating to BlackRock's financial condition and profitability with respect to the services it provided the Portfolio. The Board was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Portfolio. The Board reviewed BlackRock's profitability with respect to the Portfolio and each fund the Board currently oversees for the year ended December 31, 2008 compared to aggregate profitability data provided for the year ended December 31, 2007. The Board reviewed BlackRock's profitability with respect to other fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock's assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, expense allocations and business mix, and therefore comparability of profitability is somewhat limited. The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. Nevertheless, to the extent such information is available, the Board considered BlackRock's operating margin in general compared to the operating margin for leading investment management firms whose operations include advising open-end funds, among other product types. The comparison indicated that operating margins for BlackRock with respect to its registered funds are consistent with margins earned by similarly situated publicly traded competitors. In addition, the Board considered, among other things, certain third party data comparing BlackRock's operating margin with that of other publicly-traded asset management firms, which concluded that larger asset bases do not, in themselves, translate to higher profit margins. In addition, the Board considered the cost of the services provided to the Portfolio by BlackRock, and BlackRock's and its affiliates' profits relating to the management and distribution of the Portfolio and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Board reviewed BlackRock's methodology in allocating its costs to the management of the Portfolio. The Board also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its 57 MASTER SMALL CAP INDEX SERIES DISCLOSURE OF INVESTMENT ADVISORY AGREEMENT AND SUB-ADVISORY AGREEMENT JUNE 30, 2009 (UNAUDITED) obligations under the Agreements and to continue to provide the high quality of services that is expected by the Board. The Board noted that the contractual advisory fees, which do not take into account any expense reimbursement or fee waivers, were lower than or equal to the median contractual advisory fees paid by comparable funds. The Board noted that BlackRock has contractually agreed to waive fees or reimburse expenses in order to limit the Portfolio's total net expenses. The Board further noted that BlackRock has contractually agreed to waive or reimburse advisory fees for the Portfolio. No fees were required to be waived pursuant to this agreement. D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of the Portfolio increase and whether there should be changes in the advisory fee rate or structure in order to enable the Portfolio to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the assets of the Portfolio. The Board also considered BlackRock's overall operations and its efforts to expand the scale of, and improve the quality of, its operations. E. Other Factors: The Board also took into account other ancillary or "fallout" benefits that BlackRock or its affiliates and significant shareholders may derive from its relationship with the Portfolio, both tangible and intangible, such as BlackRock's ability to leverage its investment professionals who manage other portfolios, an increase in BlackRock's profile in the investment advisory community, and the engagement of BlackRock's affiliates as service providers to the Portfolio, including for administrative and distribution services. The Board also noted that BlackRock may use third party research obtained by soft dollars generated by certain mutual fund transactions to assist itself in managing all or a number of its other client accounts. In connection with its consideration of the Agreements, the Board also received information regarding BlackRock's brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year. CONCLUSION The Board Members of the Master LLC present at the meeting, including the Independent Board Members present at the meeting, unanimously approved the continuation of the Advisory Agreement between the Manager and the Master LLC with respect to the Portfolio for a one-year term ending June 30, 2010 and the Sub-Advisory Agreement between the Manager and the Sub-Advisor with respect to the Portfolio for a one-year term ending June 30, 2010. Based upon their evaluation of all these factors in their totality, the Board Members of the Master LLC present at the meeting, including the Independent Board Members present at the meeting, were satisfied that the terms of the Agreements were fair and reasonable and in the best interest of the Portfolio and its shareholders. In arriving at a decision to approve the Agreements, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for the Portfolio reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. Certain aspects of the arrangements may be the subject of more attention in some years than in others, and the Board Members' conclusions may be based in part on their consideration of these arrangements in prior years. 58 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2009 (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.
COUNTRY COMMON STOCKS SHARES VALUE PERCENT - -------------- ------------------------------------- --------- ------------ ------- AUSTRALIA BHP Billiton Ltd. 291,694 $ 7,991,219 1.1% Commonwealth Bank of Australia Ltd. 127,873 4,008,295 0.6 National Australia Bank Ltd. 166,752 3,004,240 0.4 Westpac Banking Corp. 252,957 4,115,532 0.6 Other Securities 33,145,943 4.5 ------------ ---- 52,265,229 7.2 ------------ ---- AUSTRIA Other Securities 2,323,739 0.3 BELGIUM Other Securities 6,826,588 0.9 BERMUDA Other Securities 533,697 0.1 CAYMAN ISLANDS Other Securities 140,825 0.0 DENMARK Other Securities 6,814,183 0.9 FINLAND Nokia Oyo 325,001 4,760,345 0.7 Other Securities 4,447,680 0.6 ------------ ---- 9,208,025 1.3 ------------ ---- FRANCE BNP Paribas SA 71,588 4,668,443 0.6 France Telecom SA 156,670 3,564,819 0.5 GDF Suez 103,010 3,855,905 0.5 Sarnoff-Aventis 90,246 5,332,626 0.7 Total SA 182,981 9,917,706 1.4 Other Securities 44,259,751 6.1 ------------ ---- 71,599,250 9.8 ------------ ---- GERMANY Allianz AG Registered Shares 38,833 3,582,060 0.5 BASF SE 79,140 3,153,080 0.4 Bayer AG 65,514 3,520,739 0.5 Deutsche Bank AG Registered Shares 47,867 2,909,881 0.4 Deutsche Telekom AG 242,627 2,868,474 0.4 E.ON AG 163,131 5,790,821 0.8 SAP AG 73,503 2,963,526 0.4 Siemens AG 70,526 4,877,058 0.7 Other Securities 24,739,218 3.4 ------------ ---- 54,404,857 7.5 ------------ ---- GREECE Other Securities 4,220,394 0.6 HONG KONG Other Securities 17,224,276 2.4 IRELAND Other Securities 2,039,099 0.3 ITALY Enid Spa 221,901 5,262,859 0.7 Unaccredited Spa 1,234,659 3,122,825 0.4 Other Securities 16,536,464 2.3 ------------ ---- 24,922,148 3.4 ------------ ---- JAPAN Canon, Inc. 92,500 3,021,420 0.4 Honda Motor Co., Ltd. 143,300 3,942,305 0.6 Mitsubishi UFJ Financial Group, Inc. 803,274 4,960,053 0.7 Sumitomo Mitsui Financial Group, Inc. 78,310 3,168,838 0.4 Toyota Motor Corp. 239,300 9,049,697 1.2 Other Securities 148,863,968 20.4 ------------ ---- 173,006,281 23.7 ------------ ---- KAZAKHSTAN Other Securities 262,643 0.0 LUXEMBOURG Other Securities 3,488,123 0.5
See notes to financial statements 59 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
COUNTRY COMMON STOCKS SHARES VALUE PERCENT - -------------- ------------------------------------- --------- ------------ ------- NETHERLANDS Unilever NV 139,902 $ 3,383,693 0.5% Other Securities 13,289,331 1.8 ------------ ---- 16,673,024 2.3 ------------ ---- NEW ZEALAND Other Securities 696,028 0.1 NORWAY Other Securities 4,569,962 0.6 PORTUGAL Other Securities 2,284,901 0.3 SINGAPORE Other Securities 9,820,549 1.3 SPAIN Bunco Bilbao Viscera Argent aria SA 304,686 3,836,467 0.5 Bunco Santander SA 698,017 8,437,768 1.2 Telephonic SA 363,182 8,247,745 1.1 Other Securities 11,786,716 1.6 ------------ ---- 32,308,696 4.4 ------------ ---- SWEDEN Other Securities 17,130,706 2.3 SWITZERLAND ABB Ltd. 196,263 3,099,126 0.4 Credit Suisse Group AG 100,261 4,593,557 0.6 Nestle SA Registered Shares 323,069 12,198,584 1.7 Novartis AG Registered Shares 188,616 7,678,037 1.0 Roche Holding AG 62,431 8,506,362 1.2 UBS AG 286,878 3,522,407 0.5 Other Securities 15,475,478 2.1 ------------ ---- 55,073,551 7.5 ------------ ---- UNITED KINGDOM Anglo American Plc (a) 113,879 3,329,716 0.5 AstraZeneca Plc 125,205 5,520,593 0.8 BG Group Plc 290,448 4,891,049 0.7 BHP Billiton Plc 190,913 4,302,913 0.6 BP Plc 1,620,524 12,805,066 1.8 Barclays Plc 817,657 3,799,689 0.5 British American Tobacco Plc 172,688 4,766,905 0.6 Diageo Plc 216,226 3,105,677 0.4 GlaxoSmithKline Plc 448,632 7,924,320 1.1 HSBC Holdings Plc 1,487,969 12,396,518 1.7 Royal Dutch Shell Plc 305,285 7,657,855 1.0 Royal Dutch Shell Plc Class B 233,157 5,869,819 0.8 Standard Chartered Plc 164,102 3,085,610 0.4 Tesco Plc 680,320 3,972,964 0.5 Vodafone Group Plc 4,538,978 8,828,032 1.2 Other Securities 56,738,072 7.8 ------------ ---- 148,994,798 20.4 ------------ ---- TOTAL COMMON STOCKS 716,831,572 98.1 INVESTMENT COMPANIES UNITED STATES Other Securities 1,642,059 0.2 TOTAL INVESTMENT COMPANIES 1,642,059 0.2 PREFERRED STOCKS GERMANY Other Securities 1,335,068 0.2 TOTAL PREFERRED STOCKS 1,335,068 0.2
See notes to financial statements 60 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
COUNTRY WARRANTS (b) SHARES VALUE PERCENT - -------------- ------------------------------------------------ --------- ------------ ------- ITALY Other Securities -- 0.0% SINGAPORE Other Securities -- 0.0 TOTAL WARRANTS -- 0.0 RIGHTS BELGIUM Other Securities -- 0.0 JAPAN Other Securities -- 0.0 NORWAY Other Securities $ 27,263 0.0 SINGAPORE Other Securities 16,326 0.0 SPAIN Other Securities 9,280 0.0 UNITED KINGDOM Other Securities 467,192 0.1 TOTAL RIGHTS 520,061 0.1 TOTAL LONG-TERM INVESTMENTS (COST -- $850,722,029) 720,328,760 98.6 SHORT-TERM SECURITIES Blackrock Liquidity Funds, TempCash, 0.49%(c)(d) 2,133,954 2,133,954 0.3 TOTAL SHORT-TERM SECURITIES (COST -- $2,133,954) 2,133,954 0.3 TOTAL INVESTMENTS (COST -- $852,855,983*) 722,462,714 98.9 OTHER ASSETS LESS LIABILITIES 8,073,429 1.1 ------------ ----- NET ASSETS $730,536,143 100.0% ============ =====
* The cost and unrealized appreciation (depreciation) of investments, as of June 30, 2009, as computed for federal income tax purposes, were as follows: Aggregate Cost................................................. $ 871,955,481 ------------- Gross unrealized appreciation.................................. $ 47,116,946 Gross unrealized depreciation.................................. (196,609,713) ------------- Net unrealized depreciation.................................... $(149,492,767) -------------
(a) Non-income producing security. (b) 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. (c) Represents the current yield as of the report date. (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:
AFFILIATED NET ACTIVITY (000) INTEREST INCOME - ---------- ------------------ --------------- BlackRock Liquidity Funds, TempCash 2,133,954 $6,108 BlackRock Liquidity Series, LLC Cash Sweep Series $(11,259,665) $4,364
- - Financial futures contracts purchased as of June 30, 2009, were as follows:
UNREALIZED NUMBER OF APPRECIATION CONTRACTS ISSUE EXCHANGE EXPIRATION DATE FACE VALUE (DEPRECIATION) - --------- ---------------------- --------- --------------- ---------- -------------- 23 OMX Stock Index Future Stockholm July 2009 $ 232,893 $ 4,124 70 DJ Euro Stoxx 50 Eurex September 2009 2,365,159 (10,320) 27 FTSE 100 Index Future LIFFE September 2009 1,906,163 (32,514) 7 SPI 200 Index Future Sydney September 2009 554,914 (4,813) 17 TOPIX Index Future Tokyo September 2009 1,650,177 (18,735) -------- TOTAL $(62,258) ========
See notes to financial statements 61 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) - Forward foreign currency contracts as of June 30, 2009 were as follows:
UNREALIZED SETTLEMENT APPRECIATION CURRENCY PURCHASED CURRENCY SOLD COUNTERPARTY DATE (DEPRECIATION) - ------------------- ----------------- ------------------ ---------- -------------- AUD 456,000 USD 368,676 UBS AG 7/1/09 (1,230) SGD 10,000 USD 6,885 UBS AG 7/1/09 19 USD 598,174 AUD 741,000 UBS AG 7/1/09 1,075 USD 1,403,579 EUR 1,000,000 UBS AG 7/1/09 720 USD 801,795 GBP 487,000 UBS AG 7/1/09 584 USD 2,074,443 JPY 200,000,000 UBS AG 7/1/09 (1,645) USD 204,873 SEK 1,581,000 UBS AG 7/1/09 (62) USD 193,544 HKD 1,500,000 UBS AG 7/2/09 (3) Brown Brothers AUD 91,000 USD 69,433 Harriman & Co. 8/13/09 3,646 Brown Brothers CHF 170,000 USD 152,536 Harriman & Co. 8/13/09 4,009 Brown Brothers EUR 128,000 USD 173,194 Harriman & Co. 8/13/09 6,370 Brown Brothers GBP 232,000 USD 355,423 Harriman & Co. 8/13/09 26,248 Brown Brothers HKD 691,000 USD 89,214 Harriman & Co. 8/13/09 (19) Brown Brothers JPY 55,539,000 USD 577,611 Harriman & Co. 8/13/09 (794) Brown Brothers SEK 449,000 USD 57,710 Harriman & Co. 8/13/09 484 Brown Brothers USD 284,585 EUR 209,000 Harriman & Co. 8/13/09 (8,609) Brown Brothers USD 89,156 HKD 691,000 Harriman & Co. 8/13/09 (40) Brown Brothers USD 181,876 JPY 17,883,000 Harriman & Co. 8/13/09 (3,853) Brown Brothers USD 36,379 NOK 234,000 Harriman & Co. 8/13/09 30 DKK 233,000 USD 42,393 HSBC Bank, USA, NA 8/13/09 1,467 NOK 234,000 USD 36,617 HSBC Bank, USA, NA 8/13/09 (269) AUD 1,461,000 USD 1,113,543 UBS AG 8/13/09 59,731 DKK 330,000 USD 59,821 UBS AG 8/13/09 2,298 EUR 2,824,000 USD 3,940,669 UBS AG 8/13/09 20,960 GBP 2,041,600 USD 3,114,166 UBS AG 8/13/09 244,535 JPY 263,123,000 USD 2,679,986 UBS AG 8/13/09 52,758 NOK 1,500,000 USD 237,363 UBS AG 8/13/09 (4,361) NZD 146,000 USD 87,541 UBS AG 8/13/09 6,407 USD 1,196,646 AUD 1,552,000 UBS AG 8/13/09 (49,706) USD 154,445 CHF 170,000 UBS AG 8/13/09 (2,100) USD 103,299 DKK 563,000 UBS AG 8/13/09 (2,681) USD 1,874,399 EUR 1,341,000 UBS AG 8/13/09 (6,813) USD 3,321,349 GBP 2,078,000 UBS AG 8/13/09 (97,235) USD 1,849,699 JPY 178,125,000 UBS AG 8/13/09 (272) USD 237,556 NOK 1,500,000 UBS AG 8/13/09 4,554 USD 93,193 NZD 146,000 UBS AG 8/13/09 (755) -------- TOTAL $207,107 --------
- Currency Abbreviations: AUD Australian Dollar CHF Swiss Franc DKK Danish Krone EUR Euro GBP British Pound HKD Hong Kong Dollar JPY Japanese Yen NOK Norwegian Krone NZD New Zealand Dollar SEK Swedish Krona SGD Singapore Dollar USD US Dollar - - Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, "Fair Value Measurements, "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 active, See notes to financial statements 62 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) quoted prices for identical or 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 circumstances, to the extent observable inputs are not available (including the Series' own assumptions 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, 2009 in determining the fair valuation of the Series' investments:
INVESTMENTS IN SECURITIES VALUATION INPUTS -------------- - ---------------- Assets Level 1 Long-Term Investments Common Stocks: Belgium............................................... $ 102 France................................................ 345,689 Italy................................................. 118,702 Japan................................................. 201,099 Norway................................................ 138,277 Switzerland........................................... 2,683,691 Investment Companies: United States......................................... 1,642,059 Rights: Norway................................................ 27,263 Singapore............................................. 4,005 Spain................................................. 9,280 United Kingdom........................................ 467,192 Short-Term Securities....................................... 2,133,954 ------------- Total Level 1 .............................................. $ 8,793,397 ------------- Level 2 Long-Term Investments Common Stocks: Australia............................................. $ 52,265,229 Austria............................................... 2,323,739 Belgium............................................... 6,826,486 Bermuda............................................... 533,697 Cayman Islands........................................ 140,825 Denmark............................................... 6,814,183 Finland............................................... 9,208,025 France................................................ 71,253,561 Germany............................................... 54,404,857 Greece................................................ $ 4,220,394 Hong Kong............................................. 17,224,276 Ireland............................................... 2,039,099 Italy................................................. 24,803,446 Japan................................................. 172,805,182 Kazakhstan............................................ 262,643 Luxembourg............................................ 3,488,123 Netherlands........................................... 16,673,024 New Zealand........................................... 696,028 Norway................................................ 4,431,685 Portugal.............................................. 2,284,901 Singapore............................................. 9,820,549 Spain................................................. 32,308,696 Sweden................................................ 17,130,706 Switzerland........................................... 54,051,467 United Kingdom........................................ 146,311,107 Preferred Stocks: Germany............................................... 1,335,068 Warrants: Italy................................................. -- Rights: Belgium............................................... -- Singapor.............................................. 12,321 ------------ Total Level 2............................................... $713,669,317 ------------ Level 3..................................................... -- ------------ TOTAL....................................................... $722,462,714 ============
See notes to financial statements 63 MASTER INTERNATIONAL INDEX SERIES SUMMARY SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
Other Financial Instruments(1) ---------------------- Assets Liabilities -------- ----------- Level 1 $ 4,124 $ (66,382) Level 2 435,895 (180,447) Level 3 -- -- -------- --------- TOTAL $440,019 $(246,829)
(1) Other financial instruments are financial futures contracts and foreign currency exchange contracts, which are shown at the unrealized appreciation/depreciation on the instrument. The following table is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value:
Common Stocks Australia ------------- Balance, as of December 31, 2008 $ 26,500 Accrued discounts/premiums -- Realized gain (loss) -- Change in unrealized appreciation/depreciation(2) 661,574 Net purchases (sales) -- Net transfers out (688,074) --------- BALANCE, AS OF JUNE 30, 2009 -- =========
(2) Included in the related net change in unrealized appreciation/depreciation on the Statement of Operations related to securities classified as Level 3 at period end. See notes to financial statements 64 MASTER INTERNATIONAL INDEX SERIES STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2009 (UNAUDITED) ASSETS Investments at value -- unaffiliated (cost --$850,722,029)...... $ 720,328,760 Investments at value -- affiliated (cost --$2,133,954).......... 2,133,954 Unrealized appreciation on foreign currency exchange contracts.. 435,895 Cash............................................................ 33,786 Foreign currency at value (cost --$8,370,791)................... 8,454,099 Collateral for financial futures contracts...................... 2,246,000 Dividends receivable............................................ 4,552,130 Investments sold receivable..................................... 277,834 Margin variation receivable..................................... 116,325 Interest receivable............................................. 1,421 Prepaid expenses................................................ 24,472 Other assets.................................................... 207 ------------- Total assets.................................................... 783,604,883 ------------- LIABILITIES Unrealized depreciation on foreign currency exchange contracts.. 180,447 Withdrawals payable to Investors................................ 6,870,131 Investments purchased payable................................... 865,338 Investment advisory fees payable................................ 6,023 Other affiliates payable........................................ 3,018 Other accrued expenses payable.................................. 143,783 ------------- Total liabilities............................................... 8,068,740 ------------- NET ASSETS...................................................... $ 730,536,143 ============= NET ASSETS CONSIST OF Investors' capital.............................................. $ 860,520,785 Net unrealized appreciation/depreciation........................ (129,984,642) ------------- Net Assets...................................................... $ 730,536,143 =============
See notes to financial statements 65 MASTER INTERNATIONAL INDEX SERIES STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED) INVESTMENT INCOME Dividends........................................................ $ 16,345,858 Foreign tax withheld............................................. (1,805,951) Income - affiliated.............................................. 10,472 ------------ Total income..................................................... 14,550,379 ------------ EXPENSES Custodian........................................................ 109,768 Accounting services.............................................. 84,790 Professional..................................................... 46,928 Investment advisory.............................................. 32,197 Officer and Directors............................................ 12,402 Printing......................................................... 930 Miscellaneous.................................................... 61,556 ------------ Total expenses................................................... 346,571 Less fees waived by advisor................................... (14,790) ------------ Total expenses after fees waived................................. 333,781 ------------ Net investment income............................................ 14,216,598 ------------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from: Investments................................................... (25,644,845) Financial futures contracts................................... 2,604,173 Foreign currency.............................................. 788,030 ------------ (22,252,642) ------------ Net change in unrealized appreciation/depreciation on: Investments................................................... 50,092,180 Financial futures contracts................................... (466,655) Foreign currency.............................................. (15,771) ------------ 49,609,754 ------------ Total realized and unrealized gain............................... 27,357,112 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $ 41,573,710 ============
See notes to financial statements 66 MASTER INTERNATIONAL INDEX SERIES STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DECEMBER 31, INCREASE (DECREASE) IN NET ASSETS: (UNAUDITED) 2008 - ---------------------------------- ------------- -------------- OPERATIONS Net investment income ..................................................... $ 14,216,598 $ 33,039,462 Net realized loss ......................................................... (22,252,642) (52,309,895) Net change in unrealized appreciation/depreciation ........................ 49,609,754 (468,096,168) ------------- -------------- Net increase (decrease) in net assets resulting from operations ........... 41,573,710 (487,366,601) ------------- -------------- CAPITAL TRANSACTIONS Proceeds from contributions ............................................... 118,416,235 589,551,495 Fair value of withdrawals ................................................. (135,573,200) (539,237,057) ------------- -------------- Net increase (decrease) in net assets derived from capital transactions ... (17,156,965) 50,314,438 ------------- -------------- NET ASSETS Total increase (decrease) in net assets ................................... 24,416,745 (437,052,163) Beginning of period ....................................................... 706,119,398 1,143,171,561 ------------- -------------- End of period ............................................................. $ 730,536,143 $ 706,119,398 ------------- --------------
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, 2009 ------------------------------------------------------- (UNAUDITED) 2008 2007 2006 2005 2004 ----------- -------- ---------- -------- -------- -------- TOTAL INVESTMENT RETURN Total investment return ........... 6.10%(1) (41.94)% 10.80% 26.61% 13.64% 20.32% -------- -------- ---------- -------- -------- -------- RATIOS TO AVERAGE NET ASSETS Total expenses .................... 0.11%(2) 0.11% 0.10% 0.11% 0.10% 0.10% -------- -------- ---------- -------- -------- -------- Total expenses after fees waived .. 0.10%(2) 0.10% 0.09% 0.10% 0.10% 0.09% -------- -------- ---------- -------- -------- -------- Net investment income ............. 4.42%(2) 3.54% 2.86% 2.70% 2.53% 2.55% -------- -------- ---------- -------- -------- -------- SUPPLEMENTAL DATA Net assets, end of period (000) ... $730,536 $706,119 $1,143,172 $829,986 $523,155 $322,067 -------- -------- ---------- -------- -------- -------- Portfolio turnover ................ 8% 30% 30% 23% 11% 14% -------- -------- ---------- -------- -------- --------
(1) Aggregate total investment return. (2) Annualized. See notes to financial statements 67 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES Master International Index Series (the "Series"), is part of Quantitative Master Series LLC (the "Master LLC") and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as a non-diversified, open-end management investment company and is organized as a Delaware limited liability company. The Limited Liability Company Agreement permits the Board of Directors (the "Board") to issue nontransferable 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. 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 with maturities less than 60 days may be valued at amortized cost, which approximates fair value. The Series values its investment in BlackRock Liquidity Series, LLC Cash Sweep Series at fair values, which is ordinarily based upon its pro-rata ownership in the net assets of the underlying fund. 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. 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. 68 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) Foreign currency transactions 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. Segregation and Collateralization 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., financial futures contracts and foreign currency exchange contracts), the Series will, consistent with certain interpretive letters issued by the SEC, designate on its books and records cash or other liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, the Series may also be required to deliver or deposit securities as collateral for certain investments (e.g., financial futures contracts).As part of these agreements, when the value of these investments achieves a previously agreed upon value (minimum transfer amount), the Series may be required to deliver and/or receive additional collateral. 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 dates. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income is recognized on the accrual basis. 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. Recent accounting pronouncement In June 2009, Statement of Financial Accounting Standards No. 166, "Accounting for Transfers of Financial Assets -- an amendment of FASB Statement No. 140" ("FAS 166"), was issued. FAS 166 is intended to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred financial assets. FAS 166 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2009. Earlier application is prohibited. The recognition and measurement provisions of FAS 166 must be applied to transfers occurring on or after the effective date. Additionally, the disclosure provisions of FAS 166 should be applied to transfers that occurred both before and after the effective date of FAS 166. The impact of FAS 69 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) 166 on the Series' financial statement disclosures, if any, is currently being assessed. Other Expenses directly related to the Series are charged to the 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. DERIVATIVE FINANCIAL INSTRUMENTS: The Series may engage in various portfolio investment strategies both to increase the return of the Series and to economically 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. The Series may mitigate these losses through master netting agreements included within an International Swap and Derivatives Association, Inc. ("ISDA") Master Agreement between the Series and its counterparty. The ISDA allows the Series to offset with its counterparty the Series' derivative financial instruments' payables and/or receivables with collateral held. See Note 1 "Segregation and Collateralization" for additional information with respect to collateral practices. The Series is subject to equity risk and foreign currency exchange rate risk in the normal course of pursuing its investment objectives by investing in various derivative financial instruments, as described below. Financial Futures contracts The Series may purchase or sell financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk). Financial futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. 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. The use of financial futures transactions involves the risk of an imperfect correlation in the movements in the price of futures contracts, interest rates and the underlying assets. Financial futures transactions involve minimal counterparty risk since financial futures contracts are guaranteed against default by the exchange on which they trade. Forward Currency Exchange Contracts The Series may enter into foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio positions (foreign currency exchange rate risk). A foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Foreign currency exchange 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. The use of foreign currency exchange contracts involves the risk that counterparties may not meet the terms of the agreement and market risk of unanticipated movements in the value of a foreign currency relative to the US dollar. In the event of default by the counterparty to the transaction, the Series' maximum amount of loss, as either the buyer or seller, is the unrealized loss of the contract. 70 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) DERIVATIVES NOT ACCOUNTED FOR AS HEDGING INSTRUMENTS UNDER FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES":
Values of Derivative Instruments as of June 30, 2009* ----------------------------------------------------- Asset Derivatives Liability Derivatives ------------------------- ------------------------- BALANCE SHEET BALANCE SHEET LOCATION VALUE LOCATION VALUE -------------- -------- -------------- -------- Equity contracts** Net unrealized Net unrealized appreciation/ appreciation/ depreciation $ 4,124 depreciation $ 66,382 Foreign currency exchange contracts Unrealized Unrealized appreciation depreciation on foreign on foreign currency currency exchange exchange contracts 435,895 contracts 180,447 -------- -------- TOTAL $440,019 $246,829 ======== ========
* For open derivative instruments as of June 30, 2009, see the Schedule of Investments, which is also indicative of activity for the six months ended June 30, 2009. ** Includes cumulative appreciation/depreciation of financial futures contracts as reported in the Schedule of Investments. Only current day's margin variation is reported within the Statement of Assets and Liabilities. THE EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2009
NET REALIZED GAIN FROM DERIVATIVES RECOGNIZED IN INCOME ----------------------------------- FOREIGN FINANCIAL CURRENCY FUTURES EXCHANGE CONTRACTS CONTRACTS TOTAL ---------- --------- ---------- Foreign currency exchange contracts -- $428,072 $ 428,072 Equity contracts $2,604,173 -- 2,604,173 ---------- -------- ---------- TOTAL $2,604,173 $428,072 $3,032,245 ========== ======== ==========
NET CHANGE IN UNREALIZED DEPRECIATION ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------- FOREIGN FINANCIAL CURRENCY FUTURES EXCHANGE CONTRACTS CONTRACTS TOTAL ---------- --------- ---------- Foreign currency exchange contracts -- $(41,068) $ (41,068) Equity contracts $(466,655) -- $(466,655) --------- -------- --------- TOTAL $(466,655) $(41,068) $(507,723) ========= ======== =========
3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: The PNC Financial Services Group, Inc. ("PNC") and Bank of America Corporation ("BAC") are the largest stockholders of BlackRock, Inc. ("BlackRock"). Due to the ownership structure, PNC is an affiliate for 1940 Act purposes, but BAC is not. The Master LLC, on behalf of the Series, has entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the "Manager"), the Series' investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of the Series' investments and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Series. For such services, the Series pays the Manager a monthly fee at an annual rate of 0.01% of the Series' average daily net assets. The Manager has entered into a contractual arrangement with the Master LLC with respect to the Series under which the Manager 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 as fees waived by advisor in the Statement of Operations. The Manager has entered into a sub-advisory agreement with BlackRock Investment Management, LLC 71 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED) ("BIM"), an affiliate of the Manager, under which the Manager pays BIM for services it provides, a monthly fee that is a percentage of the investment advisory fee paid by the Series to the Manager. For the six months ended June 30, 2009, the Series reimbursed the Manager $6,813 for certain accounting services, which is included in accounting services in the Statement of Operations. Certain officers and/or directors of the Master LLC are officers and/or directors of BlackRock or its affiliates. The Series reimburses the Manager for compensation paid to the Master LLC's Chief Compliance Officer. 4. INVESTMENTS: Purchases and sales of investments, excluding short-term securities, for the six months ended June 30, 2009 were $62,863,141 and $52,079,100, respectively. 5. SHORT-TERM BORROWINGS: The Series, along with certain other funds managed by the Manager and its affiliates, is a party to a $500 million credit agreement with a group of lenders, which expires on November 2009. 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 a maximum amount allowable under the Series' current Prospectus and Statement of Additional Information, subject to various other legal, regulatory or contractual limits. The Series paid its pro rata share of a 0.02% up front fee on the aggregate commitment amount based on its net assets. The Series pays a commitment fee of 0.08% 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, the higher of the (a) Federal Funds effective rate and (b) reserve adjusted 1 month LIBOR, plus, in each case, the higher of (i) 1.5% and (ii) 50% of the CDX Index (as defined in the credit agreement) in effect from time to time. The Series did not borrow under the credit agreement during the six months ended June 30, 2009. 6. GEOGRAPHIC, MARKET AND CREDIT RISK: In the normal course of business, the Series invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (credit risk). The value of securities held by the Series may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Series; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to credit risk, the Series may be exposed to counterparty risk, or the risk that an entity with which the Series has unsettled or open transactions may default. Financial assets, which potentially expose the Series to credit and counterparty risks, consist principally of investments and cash due from counterparties. The extent of the Series' exposure to credit and counterparty risks with respect to these financial assets is approximated by their value recorded in the Series' Statement of Assets and Liabilities. The Series invests from time to time a substantial amount of its assets in issuers located in a single country or a limited number of countries. When the Series concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in those countries may have a significant impact on their investment performance. Please see the Schedule of Investments for concentrations in specific countries. As of June 30, 2009, the Series had the following industry classifications 72 MASTER INTERNATIONAL INDEX SERIES NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 (UNAUDITED)
PERCENT OF LONG-TERM INDUSTRY INVESTMENT - -------- ---------- Commercial Banks................ 13% Oil, Gas and Consumable Fuels... 8 Pharmaceuticals................. 7 Metals and Mining............... 5 Other*.......................... 67
* All other industries held were each less than 5% of long-term investments. 7. SUBSEQUENT EVENTS: Management has evaluated the impact of all subsequent events on the Series through August 21, 2009, the date the financial statements were issued, and has determined that there were no subsequent events requiring adjustment or disclosure in the financial statements. 73 MASTER INTERNATIONAL INDEX SERIES DISCLOSURE OF INVESTMENT ADVISORY AGREEMENT AND SUB-ADVISORY AGREEMENT JUNE 30, 2009 (UNAUDITED) The Board of Directors (the "Board," and the members of which are referred to as "Board Members") of Quantitative Master Series LLC (the "Master LLC") met on April 16,2009 and May 21 - 22, 2009 to consider the approval of the Master LLC's investment advisory agreement (the "Advisory Agreement") with BlackRock Advisors, LLC (the "Manager"), the Master LLC's investment advisor, on behalf of Master Small Cap Index Series (the "Portfolio"), a series of the Master LLC. The Board also considered the approval of the sub-advisory agreement (the "Sub-Advisory Agreement") between the Manager and BlackRock Investment Management, LLC (the "Sub-Advisor") with respect to the Portfolio. The Manager and the Sub-Advisor are referred to herein as "BlackRock." The Advisory Agreement and the Sub-Advisory Agreement are referred to herein as the "Agreements." ACTIVITIES AND COMPOSITION OF THE BOARD The Board of the Master LLC consists of thirteen individuals, eleven of whom are not "interested persons" of the Master LLC as defined in the Investment Company Act of 1940, as amended (the "1940 Act") (the "Independent Board Members"). The Board Members are responsible for the oversight of the operations of the Master LLC and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Co-Chairs of the Board are each Independent Board Members. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight and Contract Committee and an Executive Committee, each of which is composed of Independent Board Members (except for the Performance Oversight and Contract Committee and the Executive Committee, which each have one interested Board Member) and is chaired by Independent Board Members. THE AGREEMENTS Pursuant to the 1940 Act, the Board is required to consider the continuation of the Agreements on an annual basis. In connection with this process, the Board assessed, among other things, the nature, scope and quality of the services provided to the Portfolio by the personnel of BlackRock and its affiliates, including investment management, administrative services, shareholder services, oversight of fund accounting and custody, marketing services and assistance in meeting legal and regulatory requirements. Throughout the year, the Board, acting directly and through its committees, considers at each of its meetings factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to the Portfolio and its shareholders. Among the matters the Board considered were: (a) investment performance of an affiliated feeder fund that invests all of its investable assets in the Portfolio (the "representative feeder fund") for one-, three-and five-year periods against its applicable benchmark, as well as senior management and portfolio managers' analysis of the reasons for any underperformance; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Portfolio for services, such as marketing and distribution and fund accounting; (c) Portfolio operating expenses; (d) the resources devoted to and compliance reports relating to the Portfolio's investment objective, policies and restrictions; (e) the Master LLC's compliance with its Code of Ethics and compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock's and other service providers' internal controls; (h) BlackRock's implementation of the proxy voting policies approved by the Board; (i) the use of brokerage commissions and execution quality; (j) BlackRock's implementation of the Master LLC's valuation and liquidity procedures; and (k) periodic updates on BlackRock's business. BOARD CONSIDERATIONS IN APPROVING THE AGREEMENTS The Approval Process: Prior to the April 16, 2009 meeting, the Board requested and received materials specifically relating to the Agreements. The Board is engaged in an ongoing process with BlackRock to continuously review the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April meeting included: (a) information independently compiled and prepared by Lipper, Inc. ("Lipper") on representative feeder fund fees and expenses, and the investment performance of the 74 MASTER INTERNATIONAL INDEX SERIES DISCLOSURE OF INVESTMENT ADVISORY AGREEMENT AND SUB-ADVISORY AGREEMENT JUNE 30, 2009 (UNAUDITED) representative feeder fund as compared with a peer group of funds as determined by Lipper (collectively, "Peers"); (b) information on the profitability of the Agreements to BlackRock and a discussion of fall-out benefits to BlackRock and its affiliates and significant shareholders; (c) a general analysis provided by BlackRock concerning investment advisory fees charged to other clients, such as institutional and closed-end funds, under similar investment mandates, as well as the performance of such other clients; (d) the impact of economies of scale; (e) a summary of aggregate amounts paid by the Portfolio to BlackRock; and (f) an internal comparison of management fees classified by Lipper, if applicable. At an in-person meeting held on April 16, 2009, the Board reviewed materials relating to its consideration of the Agreements. As a result of the discussions that occurred during the April 16, 2009 meeting, the Board presented BlackRock with questions and requests for additional information and BlackRock responded to these requests with additional written information in advance of the May 21 - 22, 2009 Board meeting. At an in-person meeting held on May 21 - 22, 2009, the Board Members of the Master LLC present at the meeting, including the Independent Board Members present at the meeting, unanimously approved the continuation of the Advisory Agreement between the Manager and the Master LLC with respect to the Portfolio and the Sub-Advisory Agreement between the Manager and the Sub-Advisor with respect to the Portfolio, each for a one-year term ending June 30, 2010. The Board considered all factors it believed relevant with respect to the Portfolio, including, among other factors: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Portfolio and BlackRock portfolio management; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and certain affiliates from the relationship with the Portfolio; (d) economies of scale; and (e) other factors. The Board also considered other matters it deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to the distribution of Portfolio shares, services related to the valuation and pricing of portfolio holdings of the Portfolio, direct and indirect benefits to BlackRock and its affiliates from their relationship with the Portfolio and advice from independent legal counsel with respect to the review process and materials submitted for the Board's review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as controlling, and each Board Member may have attributed different weights to the various items considered. A. Nature, Extent and Quality of the Services: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of the Portfolio. Throughout the year, the Board received information regarding the investment performance of the representative feeder fund. The Board met with BlackRock's senior management personnel responsible for investment operations, including the senior investment officers. The Board also reviewed the materials provided by the Portfolio's portfolio management team discussing performance of the representative feeder fund and the Portfolio's investment objective, strategies and outlook. The Board considered, among other factors, the number, education and experience of BlackRock's investment personnel generally and the Portfolio's portfolio management team, investments by portfolio managers in the funds they manage, BlackRock's portfolio trading capabilities, BlackRock's use of technology, BlackRock's commitment to compliance and BlackRock's approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board also reviewed a general description of BlackRock's compensation structure with respect to the Portfolio's portfolio management team and BlackRock's ability to attract and retain high-quality talent. In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services provided to the Portfolio. BlackRock and its affiliates provide the Portfolio with certain administrative, transfer agency, shareholder and other services (in addition to any such services provided to the Portfolio by third parties) and officers and other personnel as are necessary for the operations of the Portfolio. In addition to investment advisory services, BlackRock and its affiliates provide the Portfolio with other services, including: (i) preparing disclosure documents, such as the prospectus, the statement of additional information and 75 MASTER INTERNATIONAL INDEX SERIES DISCLOSURE OF INVESTMENT ADVISORY AGREEMENT AND SUB-ADVISORY AGREEMENT JUNE 30, 2009 (UNAUDITED) periodic shareholder reports; (ii) assisting with daily accounting and pricing; (iii) overseeing and coordinating the activities of other service providers; (iv) organizing Board meetings and preparing the materials for such Board meetings; (v) providing legal and compliance support; and (vi) performing other administrative functions necessary for the operation of the Portfolio, such as tax reporting and fulfilling regulatory filing requirements. The Board reviewed the structure and duties of BlackRock's fund administration, accounting, legal and compliance departments and considered BlackRock's policies and procedures for assuring compliance with applicable laws and regulations. B. The Investment Performance of the Portfolio and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of the Portfolio. In preparation for the April 16, 2009 meeting, the Board was provided with reports, independently prepared by Lipper, which included a comprehensive analysis of the representative feeder fund's performance. The Board also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper's rankings. In connection with its review, the Board received and reviewed information regarding the investment performance of the representative feeder fund as compared to a representative group of similar funds as determined by Lipper and to all funds in the representative feeder fund's applicable Lipper category. The Board was provided with a description of the methodology used by Lipper to select peer funds. The Board regularly reviews the performance of the representative feeder fund throughout the year. The Board attaches more importance to performance over relatively long periods of time, typically three to five years. The Board noted that, in general, the representative feeder fund performed better than its Peers in that the representative feeder fund's performance was at or above the median of its Lipper Performance Universe in two of the one-, three- and five-year periods reported. C. Consideration of the Advisory Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Portfolio: The Board, including the Independent Board Members, reviewed the information provided by Lipper regarding the Portfolio's contractual advisory fee rates and the representative feeder fund's total expenses. The Board considered the services provided and the fees charged by BlackRock to other types of clients with similar investment mandates, including separately managed institutional accounts. The Board received and reviewed statements relating to BlackRock's financial condition and profitability with respect to the services it provided the Portfolio. The Board was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Portfolio. The Board reviewed BlackRock's profitability with respect to the Portfolio and each fund the Board currently oversees for the year ended December 31, 2008 compared to aggregate profitability data provided for the year ended December 31, 2007. The Board reviewed BlackRock's profitability with respect to other fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock's assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, expense allocations and business mix, and therefore comparability of profitability is somewhat limited. The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. Nevertheless, to the extent such information is available, the Board considered BlackRock's operating margin in general compared to the operating margin for leading investment management firms whose operations include advising open-end funds, among other product types. The comparison indicated that operating margins for BlackRock with respect to its registered funds are consistent with margins earned by similarly situated publicly traded competitors. In addition, the Board considered, among other things, certain third party data comparing BlackRock's operating margin with that of other publicly-traded asset management firms, which concluded that larger asset bases do not, in themselves, translate to higher profit margins. In addition, the Board considered the cost of the services provided to the Portfolio by BlackRock, and BlackRock's and its affiliates' profits relating to the management and distribution of the Portfolio and the other 76 MASTER INTERNATIONAL INDEX SERIES DISCLOSURE OF INVESTMENT ADVISORY AGREEMENT AND SUB-ADVISORY AGREEMENT JUNE 30, 2009 (UNAUDITED) funds advised by BlackRock and its affiliates. As part of its analysis, the Board reviewed BlackRock's methodology in allocating its costs to the management of the Portfolio. The Board also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreements and to continue to provide the high quality of services that is expected by the Board. The Board noted that the contractual advisory fees, which do not take into account any expense reimbursement or fee waivers, were lower than or equal to the median contractual advisory fees paid by comparable funds. The Board noted that BlackRock has contractually agreed to waive fees or reimburse expenses in order to limit the Portfolio's total net expenses. The Board further noted that BlackRock has contractually agreed to waive or reimburse advisory fees for the Portfolio. No fees were required to be waived pursuant to this agreement. D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of the Portfolio increase and whether there should be changes in the advisory fee rate or structure in order to enable the Portfolio to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the assets of the Portfolio. The Board also considered BlackRock's overall operations and its efforts to expand the scale of, and improve the quality of, its operations. E. Other Factors: The Board also took into account other ancillary or "fallout" benefits that BlackRock or its affiliates and significant shareholders may derive from its relationship with the Portfolio, both tangible and intangible, such as BlackRock's ability to leverage its investment professionals who manage other portfolios, an increase in BlackRock's profile in the investment advisory community, and the engagement of BlackRock's affiliates as service providers to the Portfolio, including for administrative and distribution services. The Board also noted that BlackRock may use third party research obtained by soft dollars generated by certain mutual fund transactions to assist itself in managing all or a number of its other client accounts. In connection with its consideration of the Agreements, the Board also received information regarding BlackRock's brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year. CONCLUSION The Board Members of the Master LLC present at the meeting, including the Independent Board Members present at the meeting, unanimously approved the continuation of the Advisory Agreement between the Manager and the Master LLC with respect to the Portfolio for a one-year term ending June 30, 2010 and the Sub-Advisory Agreement between the Manager and the Sub-Advisor with respect to the Portfolio for a one-year term ending June 30, 2010. Based upon their evaluation of all these factors in their totality, the Board Members of the Master LLC present at the meeting, including the Independent Board Members present at the meeting, were satisfied that the terms of the Agreements were fair and reasonable and in the best interest of the Portfolio and its shareholders. In arriving at a decision to approve the Agreements, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for the Portfolio reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. Certain aspects of the arrangements may be the subject of more attention in some years than in others, and the Board Members' conclusions may be based in part on their consideration of these arrangements in prior years. 77 AMERICAN BEACON FUNDS DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) At its May 27, 2009 meeting, the Board of Trustees ("Board") considered the renewal of the Management Agreement between the Manager and the American Beacon Funds (collectively, the "Funds"). In preparation for the Board's consideration to renew these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager 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 13, 2009 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. In connection with the Board's consideration of the Management Agreement, the Trustees considered, among other materials, responses by the Manager to inquiries requesting: - a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds; - a copy of the firm's most recent audited or unaudited financial statements, as well as Parts I and II of its 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 comparison of the performance of that portion of Fund assets managed by each firm with performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any remedial measures if the firm's performance was materially below that of the peer group; - a profit/loss analysis of the firm and any actual or anticipated economies of scale in relation to the services it provides to each Fund; - an analysis of compensation, including a comparison with fees charged to other clients for which similar services are provided, any proposed changes to the fee schedule and the effect of any fee waivers; - a description of any payments by the firm to support the Funds' marketing efforts; - an evaluation of any other benefits to the firm or Funds as a result of their relationship, if any; - confirmation that the firm's financial condition would not impair its ability to provide high-quality advisory services to the Funds; - a description of any internal actions the firm has taken or anticipates taking in light of the current and projected decrease in revenues from prior years as a result of the current economic environment and, as applicable, information regarding the firm's decline in assets under management from January 1, 2008 through March 31, 2009; - a description of the scope of portfolio management services provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment 78 AMERICAN BEACON FUNDS DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) companies, 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 description of any actual or potential conflicts of interest anticipated in managing Fund assets; - a description of trade allocation procedures among accounts managed by the firm; - a discussion of whether the firm receives, with respect to the Funds, other compensation, including any payment for order flow or ECN liquidity rebates; - a certification by the firm regarding the reasonable design of its compliance program; - information regarding the firm's code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm; - a description of the firm's affiliation with any broker-dealer; - a discussion of any anticipated change in the firm's controlling persons; and - verification of the firm's insurance coverage with regards to the services provided to the Funds. In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement: - a comparison of the performance of each Fund to 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 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 any revenue sharing activities with respect to the Funds; 79 AMERICAN BEACON FUNDS DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) - 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 Management 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. Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 13, 2009 at which the Trustees reviewed the investment performance of the Manager and the primary factors considered by the Board at its May 27, 2009 meeting at which the Board considered the renewal of the Management Agreement. The Board did not identify any particular information that was most relevant to its consideration to renew the Management Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal of the Management Agreement. The memorandum explained the regulatory requirements surrounding the Trustees' process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of the Management Agreement were reasonable and fair and that the renewal of the Management Agreement was in the best interests of the Funds and their shareholders. CONSIDERATIONS WITH RESPECT TO ALL FUNDS In determining whether to renew the Management Agreement, the Trustees considered the best interests of each Fund separately. While the Management Agreement for all of the Funds were considered at the May 27, 2009 meeting, the Board considered each Fund's investment management relationships separately. In each instance, the Board considered, among other things, the following factors: (1) the nature and quality of the services provided; (2) the investment performance of a Fund; (3) the costs incurred by the Managers in rendering their 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 or its 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 from its relationship with a Fund. The Trustees posed questions to various management personnel of the Manager 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 the Management Agreement, the Board considered: the background and experience of key investment personnel and the Manager's ability to retain them; the Manager's disciplined investment approach and goal to provide consistent above average long-term performance at a low cost; the Manager's continuing efforts to add new series and share classes to enhance the Funds' product line; the Manager's record in building improved compliance, control and credit functions that reduce risks to the Funds; the addition of personnel to manage the Funds, promote sales and improve services; and the active role played by the Manager in monitoring and, as appropriate, recommending replacements for the master portfolios. 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 80 AMERICAN BEACON FUNDS DISCLOSURE REGARDING THE BOARD OF TRUSTEES' APPROVAL OF THE MANAGEMENT AGREEMENT OF THE FUNDS (UNAUDITED) 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 Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, 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 Management Agreement for the Funds stipulates 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. 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. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending 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. 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 also noted the Manager's representation that Fund assets have decreased significantly primarily due to market depreciation in 2008 and the first quarter of 2009, as well as significant share redemptions from the Money Market Funds and the inability of certain competitor money market funds' to maintain positive yields, causing mass redemptions in money market funds throughout the industry. 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 the money market portfolios continues to be a significant factor in attracting separate account assets for the Manager, noting specifically the Manager's utilization of the Large Cap Value Fund model for a newly registered actively managed exchange traded fund managed by the Manager. In addition, the Board noted that the Manager provides services to each Trust at a relatively low cost. Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager by virtue of its relationship with the Funds appear to be fair and reasonable. 81 AMERICAN BEACON FUNDS 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 Management Agreement for the S&P 500 Index Fund, 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, 2009 and (2) the Fund's expense ratio ranked better than the median of its Lipper expense universe. Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the S&P 500 Index Fund and its shareholders would benefit from the Manager's continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the S&P 500 Index Fund. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE SMALL CAP INDEX FUND In considering the renewal of the Management Agreement for the Small Cap Index Fund, 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, 2009 and (2) the Fund's expense ratio was ranked better than the median of its Lipper expense universe. Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the Small Cap Index Fund and its shareholders would benefit from the Manager's continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the Small Cap Index Fund. ADDITIONAL CONSIDERATIONS AND CONCLUSIONS WITH RESPECT TO THE INTERNATIONAL EQUITY INDEX FUND In considering the renewal of the Management Agreement for the International Equity Index Fund, the Trustees considered the following additional factors: (1) the performance of the Fund's master portfolio outperformed the peer universe median for the one-, three- and five-year periods ended March 31, 2009; and (2) the Fund's expense ratio ranked better than the median of its Lipper expense universe. Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the International Equity Index Fund and its shareholders would benefit from the Manager's continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the International Equity Index Fund. 82 This page intentionally left blank. 83 (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 Investor Class(R) Kansas City, MO 64121 (800) 388-3344 AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES In AVAILABILITY OF PROXY VOTING POLICY AND RECORDS A addition to the Schedule of Investments provided in description of the policies and procedures that the each semi-annual and annual report, each Fund files a Funds use to determine how to vote proxies relating to complete schedule of its portfolio holdings with the portfolio securities is available in each Fund's Securities and Exchange Commission ("SEC") on Form Statement of Additional Information, which may be N-Q as of the first and third fiscal quarters. The obtained free of charge by calling 1-800-967-9009 or Fund's Forms N-Q are available on the SEC's website by accessing the SEC's website at www.sec.gov. Each at www.sec.gov. The Forms N-Q may also be reviewed Fund's proxy voting record for the most recent year and copied at the SEC's Public Reference Room, 450 ended June 30 is filed annually with the SEC on Form Fifth Street, NW, Washington, DC 20549. Information N-PX. The Fund's Forms N-PX are available on the SEC's regarding the operation of the SEC's Public Reference website at www.sec.gov. The Fund's proxy voting record Room may be obtained by calling 1-800-SEC-0330. A may also be obtained by calling 1-800-967-9009. complete schedule of the Fund's portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each fiscal quarter.
FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES Boston, Massachusetts Kansas City, Missouri ERNST & YOUNG LLP Portland, Maine Dallas, Texas
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus. American Beacon Funds, American Beacon Small Cap Index Fund, and American Beacon International Equity Index Fund are service marks of American Beacon Advisors, Inc. SAR 6/09 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, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- ADVERTISING AGENCIES - 0.5% AMREP Corp. (a) 700 $ 7,721 Arbitron, Inc. 14,258 226,559 Constant Contact, Inc. (a) 13,200 261,888 DG FastChannel, Inc. (a) 9,600 175,680 Harte-Hanks, Inc. 19,600 181,300 Marchex, Inc. Class B 10,500 35,385 National CineMedia, Inc. 22,470 309,187 Travelzoo, Inc. (a) 3,600 39,420 Valassis Communications, Inc. (a) 26,200 160,082 ValueClick, Inc. (a) 46,880 493,178 -------------- 1,890,400 -------------- AEROSPACE - 1.4% AAR Corp. (a) 20,668 331,721 AeroVironment, Inc. (a) 7,000 216,020 Argon ST, Inc. (a) 7,200 148,104 Astronics Corp. (a) 4,600 47,794 Axsys Technologies, Inc. (a) 5,100 273,564 Ceradyne, Inc. (a) 13,750 242,825 Cubic Corp. 8,252 295,339 Curtiss-Wright Corp. 24,068 715,542 Ducommun, Inc. 5,600 105,224 Esterline Technologies Corp. (a) 15,741 426,109 GenCorp, Inc. (a) 29,171 55,717 Heico Corp. 12,426 450,567 Herley Industries, Inc. (a) 7,100 77,887 Kaman Corp. Class A 13,694 228,690 LMI Aerospace, Inc. (a) 4,400 44,528 Ladish Co., Inc. (a) 8,500 110,245 Moog, Inc. Class A (a) 23,113 596,547 Orbital Sciences Corp. (a) 30,635 464,733 Teledyne Technologies, Inc. (a) 19,134 626,639 Triumph Group, Inc. 8,879 355,160 -------------- 5,812,955 -------------- AGRICULTURE, FISHING & AgFeed Industries, Inc. (a)(b) 15,800 93,694 RANCHING - 0.5% Alico, Inc. 1,800 54,036 The Andersons, Inc. 9,700 290,418 Cadiz, Inc. (a) 6,100 58,743 Cal-Maine Foods, Inc. (b) 7,400 184,704 Calavo Growers, Inc. 5,500 109,065 China Green Agriculture, Inc. (a) 3,900 31,551 Fresh Del Monte Produce, Inc. (a) 21,700 352,842 HQ Sustainable Maritime Industries, Inc. (a) 4,400 40,260 Sanderson Farms, Inc. 10,850 488,250 Seaboard Corp. 172 192,984 -------------- 1,896,547 --------------
1 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- AIR TRANSPORT - 0.9% Air Transport Services Group, Inc. (a) 27,800 $ 64,496 AirTran Holdings, Inc. (a) 64,120 396,903 Alaska Air Group, Inc. (a)(c) 19,898 363,337 Allegiant Travel Co. (a)(b) 8,200 325,048 Atlas Air Worldwide Holdings, Inc. (a) 9,400 217,986 Bristow Group, Inc. (a) 15,485 458,821 Hawaiian Holdings, Inc. (a) 27,500 165,550 JetBlue Airways Corp. (a)(b) 122,100 521,367 PHI, Inc. (a) 7,200 123,408 Republic Airways Holdings, Inc. (a) 18,400 120,152 SkyWest, Inc. 30,500 311,100 UAL Corp. (a)(b) 76,400 243,716 US Airways Group, Inc. (a) 67,100 163,053 -------------- 3,474,937 -------------- ALTERNATIVE ENERGY - 0.3% Clean Energy Fuels Corp. (a)(b) 16,700 143,787 Comverge, Inc. (a) 9,600 116,160 EnerNOC, Inc. (a) 6,200 134,354 Evergreen Energy, Inc. (a)(b) 65,200 63,896 Green Plains Renewable Energy (a) 6,100 39,955 Syntroleum Corp. (a) 36,900 81,549 TGC Industries Inc. (a) 8,300 40,421 US Geothermal, Inc. (a) 33,200 47,144 USEC, Inc. (a) 61,259 325,898 -------------- 993,164 -------------- ALUMINUM - 0.1% Century Aluminum Co. (a) 25,300 157,619 Kaiser Aluminum Corp. 8,200 294,462 -------------- 452,081 -------------- ASSET MANAGEMENT & Allied Capital Corp. 94,700 329,556 CUSTODIAN - 0.9% American Capital Ltd. 117,200 376,212 Ampal-American Israel Corp. Class A (a) 9,400 22,936 Apollo Investment Corp. (b) 77,046 462,276 Ares Capital Corp. 51,972 418,894 Calamos Asset Management, Inc. Class A 10,900 153,799 Capital Southwest Corp. 1,600 115,760 Cohen & Steers, Inc. 9,200 137,540 Diamond Hill Investments Group 1,200 48,216 Epoch Holding Corp. 5,300 45,792 Fifth Street Finance Corp. 11,200 112,448 GAMCO Investors, Inc. Class A 3,996 193,806 Harris & Harris Group, Inc. (a) 13,800 80,454 JMP Group, Inc. 8,700 66,903 Kohlberg Capital Corp. 9,200 58,144 MCG Capital Corp. (a) 39,300 95,499 MVC Capital, Inc. 11,600 98,136 NGP Capital Resources Co. 11,523 67,640
2 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- National Financial Partners Corp. 21,200 $ 155,184 Oppenheimer Holdings, Inc. 5,400 114,318 Pzena Investment Management, Inc. Class A 4,100 31,078 Resource America, Inc. Class A 5,449 29,316 TICC Capital Corp. 15,900 70,119 Teton Advisors, Inc. (a) 53 121 U.S. Global Investors, Inc. 6,900 63,894 Virtus Investment Partners, Inc. (a) 3,135 46,053 Westwood Holdings Group, Inc. 2,800 117,068 -------------- 3,511,162 -------------- AUTO PARTS - 0.4% ATC Technology Corp. (a) 11,143 161,573 American Axle & Manufacturing Holdings, Inc. 23,700 81,528 Amerigon, Inc. (a) 11,400 69,540 ArvinMeritor, Inc. 39,300 172,527 China Automotive Systems. Inc. (a) 3,400 18,700 Dana Holding Corp. (a) 48,700 62,336 Dorman Products, Inc. (a) 5,600 77,448 Exide Technologies (a) 25,000 93,250 Fuel Systems Solutions, Inc. (a)(b) 6,700 135,273 Lear Corp. (a) 29,380 14,690 Standard Motor Products, Inc. 9,300 76,911 Stoneridge, Inc. (a) 8,100 38,880 Superior Industries International, Inc. 12,399 174,826 Tenneco, Inc. (a) 25,300 268,180 U.S. Auto Parts Network, Inc. (a) 4,100 15,457 Wonder Auto Technology, Inc. (a) 7,800 79,014 -------------- 1,540,133 -------------- AUTO SERVICES - 0.1% Cooper Tire & Rubber Co. 31,500 312,480 Titan International, Inc. 18,749 140,055 -------------- 452,535 -------------- BANKS: DIVERSIFIED - 6.1% 1st Source Corp. 7,884 136,157 Alliance Financial Corp. 2,500 70,900 American National Bankshares, Inc. 3,000 57,840 Ameris Bancorp 7,300 46,136 Ames National Corp. 3,300 80,553 Arrow Financial Corp. 4,800 129,600 Auburn National Bancorporation 1,100 31,350 BancFirst Corp. 3,190 110,310 Banco Latinoamericano de Comercio Exterior SA 14,600 181,478 Bancorp Rhode Island, Inc. 1,900 37,449 The Bancorp, Inc. (a) 6,900 41,400 Bank of Kentucky Financial Corp. 1,500 42,000 Bank of Marin Bancorp 3,100 83,545 Bank of the Ozarks, Inc. (b) 6,600 142,758 Banner Corp. 8,413 32,138
3 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Bar Harbor Bankshares 1,900 $ 58,615 Boston Private Financial Holdings, Inc. 37,533 168,148 Bridge Bancorp, Inc. 3,600 97,992 Bryn Mawr Bank Corp. 3,300 62,271 CNB Financial Corp. 4,300 60,931 CVB Financial Corp. (b) 35,665 212,920 California First National Bancorp 600 6,840 Camden National Corp. 4,100 139,523 Cape Bancorp, Inc. (a) 5,800 50,054 Capital City Bank Group, Inc. (b) 6,221 104,824 Cardinal Financial Corp. 15,000 117,450 Cathay General Bancorp (b) 26,444 251,482 Center Bancorp, Inc. 5,400 44,010 Centerstate Banks, Inc. 4,400 32,648 Central Pacific Financial Corp. 15,148 56,805 Century Bancorp, Inc. Class A 2,400 44,256 Chemical Financial Corp. 10,848 215,984 Chicopee Bancorp, Inc. (a) 3,100 40,207 Citizens & Northern Corp. 4,800 98,736 Citizens Banking Corp. (a) 66,287 47,064 Citizens Holding Co. 2,400 74,880 City Holding Co. 8,493 257,847 CoBiz Financial, Inc. 10,126 64,908 The Colonial BancGroup, Inc. (b) 108,400 67,208 Columbia Banking System, Inc. 9,741 99,650 Community Bank System, Inc. 17,500 254,800 Community Trust Bancorp, Inc. 8,123 217,290 Danvers Bancorp, Inc. 9,300 125,085 Eagle Bancorp, Inc. 6,200 54,374 East-West Bancorp, Inc. 34,200 221,958 Enterprise Bancorp, Inc. 3,400 40,120 Enterprise Financial Services Corp. 5,800 52,722 F.N.B. Corp. 49,297 305,148 Farmers Capital Bank Corp. 3,400 85,578 Financial Institutions, Inc. 5,800 79,228 First BanCorp, Puerto Rico (b) 44,300 174,985 First Bancorp, Inc. 4,600 89,562 First Bancorp, North Carolina 7,536 118,164 First Busey Corp. (b) 13,314 97,858 First Commonwealth Financial Corp. 45,040 285,554 First Community Bancshares, Inc. 5,094 65,407 First Financial Bancorp 19,987 150,302 First Financial Bankshares, Inc. 11,353 571,737 First Financial Corp. 6,644 209,818 First Merchants Corp. 11,246 90,305 First Midwest Bancorp, Inc. 26,000 190,060 First South Bancorp, Inc. 4,400 51,040
4 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- The First of Long Island Corp. 3,300 $ 76,362 FirstMerit Corp. 44,412 754,116 German American Bancorp, Inc. 6,600 95,106 Glacier Bancorp, Inc. (b) 32,964 486,878 Guaranty Bancorp (a) 28,100 53,671 Hampton Roads Bankshares, Inc. 9,300 76,725 Hancock Holding Co. 12,454 404,630 Harleysville National Corp. 23,036 108,269 Heartland Financial USA, Inc. (b) 6,900 98,532 Home Bancshares, Inc. 7,360 140,134 IBERIABANK Corp. 8,550 336,956 Independent Bank Corp./MA 10,845 213,647 International Bancshares Corp. (b) 28,510 293,938 Investors Bancorp, Inc. (a) 24,100 220,756 Lakeland Bancorp, Inc. 10,605 95,339 Lakeland Financial Corp. 6,400 121,600 MB Financial, Inc. 18,883 192,418 MainSource Financial Group, Inc. 10,719 79,535 Merchants Bancshares, Inc. 3,000 66,570 Meridian Interstate Bancorp, Inc. (a) 4,800 35,760 Metro Bancorp, Inc. (a) 2,600 50,076 MidSouth Bancorp, Inc. 2,900 48,720 NASB Financial, Inc. 1,800 51,480 NBT Bancorp, Inc. 18,213 395,404 Nara Bancorp, Inc. 12,300 63,714 National Bankshares, Inc. 4,100 98,400 National Penn Bancshares, Inc. 43,965 202,679 Northeast Community Bancorp 2,700 21,897 Northrim Bancorp Inc. 3,900 54,288 Norwood Financial Corp. 900 28,224 Ohio Valley Banc Corp. 2,000 58,680 Old National Bancorp 35,495 348,561 Old Point Financial Corp. 900 16,650 Old Second Bancorp, Inc. (b) 7,322 43,200 Oriental Financial Group 12,918 125,305 Orrstown Financial Service, Inc. 3,000 111,720 PacWest Bancorp 12,511 164,645 Pacific Capital Bancorp 24,962 53,419 Pacific Continental Corp. 6,300 76,419 Park National Corp. (b) 5,915 334,079 Peapack-Gladstone Financial Corp. 4,400 84,876 Penns Woods Bancorp, Inc. 1,900 55,366 Peoples Bancorp, Inc. 5,510 93,946 Peoples Financial Corp. 2,600 49,400 Pinnacle Financial Partners, Inc. (a) 12,900 171,828 Porter Bancorp, Inc. 2,000 30,300
5 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- PremierWest Bancorp 10,765 $ 36,493 PrivateBancorp, Inc. 18,996 422,471 Prosperity Bancshares, Inc. 24,500 730,835 Provident Financial Services, Inc. 31,958 290,818 Renasant Corp. 11,298 169,696 Republic Bancorp, Inc. Class A 4,854 109,652 Republic First Bancorp, Inc. (a) 4,800 37,440 Rockville Financial, Inc. 4,400 48,180 Roma Financial Corp. 4,200 53,508 S&T Bancorp, Inc. (b) 12,563 152,766 SCBT Financial Corp. 6,063 143,632 SVB Financial Group (a) 17,500 476,350 SY Bancorp, Inc. 5,730 138,494 Sandy Spring Bancorp, Inc. 8,714 128,096 Santander BanCorp (a) 1,903 13,245 Shore Bancshares, Inc. 4,300 77,142 Sierra Bancorp 3,900 49,257 Signature Bank (a) 18,800 509,856 Simmons First National Corp. Class A 7,400 197,728 Smithtown Bancorp, Inc. 7,500 95,925 The South Financial Group, Inc. 45,600 54,264 Southside Bancshares, Inc. 6,666 152,451 Southwest Bancorp, Inc. 7,700 75,152 State Bancorp, Inc. 7,700 58,212 StellarOne Corp. 12,100 156,695 Sterling Bancorp 9,716 81,129 Sterling Bancshares, Inc. 44,014 278,609 Sterling Financial Corp. 28,043 81,605 Suffolk Bancorp 5,100 130,764 Sun Bancorp, Inc. (a) 7,314 37,887 Susquehanna Bancshares, Inc. 46,156 225,703 Texas Capital Bancshares, Inc. (a) 19,561 302,609 Tompkins Trustco, Inc. 4,640 222,488 Tower Bancorp, Inc. 1,700 59,755 Towne Bank (b) 11,200 156,800 Trico Bancshares 7,278 112,809 TrustCo Bank Corp. NY 40,761 240,898 Trustmark Corp. (b) 31,227 603,306 UCBH Holdings, Inc. (b) 61,900 77,994 UMB Financial Corp. 17,152 651,948 Umpqua Holdings Corp. (b) 32,180 249,717 Union Bankshares Corp. 6,850 102,545 United Bankshares, Inc. (b) 20,800 406,432 United Community Banks, Inc. (b) 22,869 136,985 United Security Bancshares 3,600 78,840 Univest Corp. of Pennsylvania 6,650 134,729
6 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Washington Banking Co. 6,100 $ 57,462 Washington Trust Bancorp, Inc. 7,500 133,725 Webster Financial Corp. 27,700 222,985 WesBanco, Inc. 11,763 171,034 West Bancorp., Inc. 8,900 44,500 Westamerica Bancorp. (b) 15,583 773,073 Western Alliance Bancorp (a) 25,500 174,420 Wilber Corp. 2,700 29,970 Wilshire Bancorp, Inc. 10,300 59,225 Wintrust Financial Corp. 12,800 205,824 Yardkin Valley Financial Corp. 8,600 59,426 -------------- 24,697,734 -------------- BANKS: SAVINGS, THRIFT & Abington Bancorp, Inc. 11,680 92,973 MORTGAGE LENDING- 1.1% Astoria Financial Corp. 46,700 400,686 Bank Mutual Corp. 25,338 220,947 BankFinancial Corp. 10,600 93,916 Beneficial Mutual Bancorp, Inc. (a) 17,200 165,120 Berkshire Hills Bancorp, Inc. 7,200 149,616 Brookline Bancorp, Inc. 32,687 304,643 Brooklyn Federal Bancorp, Inc. 2,400 27,000 Clifton Savings Bancorp, Inc. 4,600 49,496 Dime Community Bancshares, Inc. 14,949 136,185 Doral Financial Corp. (a) 2,900 7,250 ESB Financial Corp. 4,600 60,352 ESSA Bancorp, Inc. 8,300 113,461 First Defiance Financial Corp. 4,900 63,700 First Financial Holdings, Inc. 6,326 59,464 First Financial Northwest, Inc. 10,600 82,892 First Financial Service Corp. 2,600 45,266 Flagstar Bancorp, Inc. (a) 35,850 24,378 Flushing Financial Corp. 11,475 107,291 Fox Chase Bancorp, Inc. (a) 2,900 27,811 Great Southern Bancorp, Inc. 5,200 106,860 Heritage Financial Corp. 3,600 41,616 Heritage Financial Group 2,000 17,140 Home Bancorp, Inc. (a) 4,400 52,536 Home Federal Bancorp, Inc. 8,500 86,615 K Fed Bancorp 1,700 15,606 Kearny Financial Corp. 8,900 101,816 Kentucky First Federal Banco 2,500 30,375 Legacy Bancorp, Inc./MA 3,600 39,960 NewAlliance Bancshares, Inc. 56,800 653,200 Northfield Bancorp, Inc. 9,600 111,552 Northwest Bancorp, Inc. 8,967 169,118 OceanFirst Financial Corp. 4,900 58,653 Ocwen Financial Corp. (a) 19,565 253,758
7 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Oritani Financial Corp. 4,700 $ 64,437 Provident New York Bancorp 17,189 139,575 Prudential Bancorp, Inc. of Pennsylvania 2,900 34,249 United Financial Bancorp, Inc. 9,100 125,762 ViewPoint Financial Group 5,116 77,917 WSFS Financial Corp. 3,291 89,877 Waterstone Financial, Inc. (a) 3,000 8,910 Westfield Financial, Inc. 16,712 151,411 -------------- 4,663,390 -------------- BEVERAGE: BREWERS & DISTILLERS - 0.0% Boston Beer Co., Inc. Class A (a) 4,700 139,073 -------------- BEVERAGE: SOFT DRINKS - 0.1% Coca-Cola Bottling Co. Consolidated 2,287 126,082 Diedrich Coffee Inc. (a) 1,400 33,292 Farmer Bros. Co. 3,120 71,386 Heckmann Corp. (a) 44,400 166,500 National Beverage Corp. (a) 4,628 49,288 Peet's Coffee & Tea, Inc. (a) 5,800 146,160 -------------- 592,708 -------------- BIOTECHNOLOGY - 4.2% AMAG Pharmaceuticals, Inc. (a)(c) 9,060 495,310 ARYx Therapeutics, Inc. (a) 10,200 42,126 AVI BioPharma, Inc. (a) 45,200 71,416 Accelrys, Inc. (a) 14,400 85,104 Acorda Therapeutics, Inc. (a) 20,300 572,257 Affymax, Inc. (a) 6,800 125,324 Albany Molecular Research, Inc. (a) 12,487 104,765 Allos Therapeutics, Inc. (a) 32,800 271,912 Alnylam Pharmaceuticals, Inc. (a)(b) 19,300 429,811 Amicus Therapeutics, Inc. (a) 8,900 101,905 Arena Pharmaceuticals, Inc. (a)(b) 42,800 213,572 Ariad Pharmaceuticals, Inc. (a) 46,419 73,806 Arqule, Inc. (a) 21,400 131,396 Array Biopharma, Inc. (a) 25,300 79,442 BioDelivery Sciences International Inc. (a) 6,000 40,020 BioMimetic Therapeutics, Inc. (a) 6,622 61,187 Biodel, Inc. (a) 8,600 44,376 Cardium Therapeutics, Inc. (a) 20,200 37,370 Celera Corp. (a) 43,200 329,616 Cell Therapeutics, Inc. (a) 244,200 420,024 Celldex Therapeutics, Inc. (a)(b) 4,800 37,536 Cepheid, Inc. (a) 31,000 292,020 Chelsea Therapeutics International, Inc. (a) 13,900 58,519 Clinical Data, Inc. (a) 6,098 67,200 Cornerstone Therapeutics, Inc. (a) 3,100 34,038 Cougar Biotechnology, Inc. (a) 8,000 343,680
8 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Cubist Pharmaceuticals, Inc. (a) 30,867 $ 565,792 Curis, Inc. (a) 31,000 49,290 Cypress Bioscience, Inc. (a) 20,400 192,168 Cytokinetics, Inc. (a) 20,000 56,600 Cytori Therapeutics, Inc. (a)(b) 14,500 52,345 Discovery Laboratories, Inc. (a) 69,600 71,688 Dyax Corp. (a) 31,400 67,196 Emergent Biosolutions, Inc. (a) 9,200 131,836 Enzo Biochem, Inc. (a) 16,995 75,288 Enzon Pharmaceuticals, Inc. (a)(b) 24,200 190,454 Exelixis, Inc. (a) 58,218 283,522 Facet Biotech Corp. (a) 12,680 117,797 GTx, Inc. (a)(b) 9,800 90,454 Genomic Health, Inc. (a) 7,300 126,509 Geron Corp. (a)(b) 47,629 365,314 Halozyme Therapeutics, Inc. (a) 33,400 232,798 Harvard Bioscience, Inc. (a) 15,000 59,250 Hemispherx Biopharma, Inc. (a) 61,700 156,718 Human Genome Sciences, Inc. (a) 72,900 208,494 Idenix Pharmaceuticals, Inc. (a) 13,300 48,944 Idera Pharmaceuticals, Inc. (a) 11,500 67,390 ImmunoGen, Inc. (a) 27,300 235,053 Immunomedics, Inc. (a) 32,100 81,534 Incyte Corp. (a) 39,824 131,021 Insmed, Inc. (a) 65,200 65,200 InterMune, Inc. (a)(b) 20,114 305,733 Kensey Nash Corp. (a) 4,400 115,324 Lexicon Genetics, Inc. (a) 42,700 52,948 Life Sciences Research, Inc. (a) 4,900 35,133 Ligand Pharmaceuticals, Inc. Class B (a) 62,700 179,322 MannKind Corp. (a)(b) 27,750 230,603 Martek Biosciences Corp. 17,700 374,355 Maxygen, Inc. (a) 13,201 88,711 Medarex, Inc. (a) 69,600 581,160 Medivation, Inc. (a) 15,600 349,596 Metabolix, Inc. (a) 10,100 83,022 Micromet, Inc. (a) 21,800 108,564 Molecular Insight Pharmaceuticals, Inc. (a) 9,100 47,047 Momenta Pharmaceuticals, Inc. (a) 19,500 234,585 Myriad Pharmaceuticals, Inc. (a) 12,675 58,939 NPS Pharmaceuticals, Inc. (a) 25,400 118,364 Nabi Biopharmaceuticals (a) 27,454 66,439 Nanosphere, Inc. (a) 5,500 27,005 Nektar Therapeutics (a) 49,500 320,760 Neurocrine Biosciences, Inc. (a) 20,900 67,507 Neurogesx, Inc. (a) 6,500 36,660
9 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Novavax, Inc. (a) 30,900 $ 101,352 OncoGenex Pharmaceutical, Inc. (a) 2,000 43,760 Onyx Pharmaceuticals, Inc. (a) 30,520 862,495 Opko Health, Inc. (a) 22,900 40,533 Orexigen Therapeutics, Inc. (a) 10,600 54,378 Osiris Therapeutics, Inc. (a)(b) 8,700 116,841 OxiGene, Inc. (a) 17,500 38,150 PDL BioPharma, Inc. 63,900 504,810 Pharmasset, Inc. (a) 10,700 120,375 Poniard Pharmaceuticals, Inc. (a) 13,700 81,789 Progenics Pharmaceuticals, Inc. (a) 14,300 73,645 Protalix BioTherapeutics, Inc. (a) 20,060 90,671 RTI Biologics, Inc. (a) 28,300 121,407 Regeneron Pharmaceuticals, Inc. (a) 33,519 600,660 Repligen Corp. (a) 16,400 90,200 Repros Therapeutics, Inc. (a) 4,500 32,355 Rigel Pharmaceuticals, Inc. (a) 19,670 238,400 Sangamo Biosciences, Inc. (a) 22,000 108,680 Savient Pharmaceuticals, Inc. (a) 32,528 450,838 Seattle Genetics, Inc. (a) 37,800 367,416 Sequenom, Inc. (a)(b) 31,800 124,338 StemCells, Inc. (a) 52,600 89,420 Sucampo Pharmaceuticals, Inc. Class A (a) 5,000 30,850 Synta Pharmaceuticals Corp. (a) 8,700 20,097 Theravance, Inc. (a) 28,500 417,240 Vanda Pharmaceuticals, Inc. (a) 13,900 163,603 ViroPharma, Inc. (a) 41,400 245,502 ZymoGenetics, Inc. (a) 19,700 90,620 -------------- 17,088,589 -------------- BUILDING MATERIALS - 0.9% Acuity Brands, Inc. 22,160 621,588 Ameron International Corp. 4,900 328,496 BlueLinx Holdings, Inc. (a) 5,600 16,800 Builders FirstSource, Inc. (a)(b) 8,600 35,776 Gibraltar Industries, Inc. 14,434 99,162 Griffon Corp. (a) 22,355 185,994 Headwaters, Inc. (a) 22,646 76,091 LSI Industries, Inc. 10,012 54,565 Louisiana-Pacific Corp. (a) 55,500 189,810 NCI Building Systems, Inc. (a)(b) 10,568 27,900 Orion Energy Systems, Inc. (a) 8,900 33,375 Quanex Building Products Corp. 20,110 225,634 Simpson Manufacturing Co., Inc. (b) 20,832 450,388 Texas Industries, Inc. (b) 12,805 401,565 Trex Co., Inc. (a) 8,209 109,754 Watsco, Inc. 12,665 619,698 -------------- 3,476,596 --------------
10 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- BUILDING: CLIMATE CONTROL - Aaon, Inc. 6,650 $ 132,468 0.2% Comfort Systems USA, Inc. 21,000 215,250 Interline Brands, Inc. (a) 17,400 238,032 -------------- 585,750 -------------- BUILDING: ROOFING, WALLBOARD & PLUMBING - 0.1% Beacon Roofing Supply, Inc. (a) 24,650 356,439 -------------- CABLE TELEVISION SERVICES - Knology, Inc. (a) 15,100 130,313 0.1% Mediacom Communications Corp. Class A (a) 21,100 107,821 -------------- 238,134 -------------- CASINOS & GAMBLING - 0.5% Ameristar Casinos, Inc. 13,700 260,711 Bally Technologies, Inc. (a) 29,000 867,680 Dover Downs Gaming & Entertainment, Inc. 7,605 35,363 Isle of Capri Casinos, Inc. (a) 8,575 114,219 Lakes Entertainment, Inc. (a) 11,200 32,592 Monarch Casino & Resort, Inc. (a) 4,800 35,040 Multimedia Games, Inc. (a) 15,600 77,376 Pinnacle Entertainment, Inc. (a) 32,094 298,153 Shuffle Master, Inc. (a) 28,700 189,707 Youbet.com, Inc. (a) 14,700 48,510 -------------- 1,959,351 -------------- CEMENT - 0.0% U.S. Concrete, Inc. (a) 17,800 35,244 -------------- CHEMICALS: DIVERSIFIED - 1.5% Aceto Corp. 13,200 88,044 American Vanguard Corp. 9,933 112,242 Arch Chemicals, Inc. 13,756 338,260 Balchem Corp. 9,800 240,296 Calgon Carbon Corp. (a) 29,701 412,547 Hawkins, Inc. 4,500 101,610 ICO, Inc. (a) 14,700 39,984 Innophos Holdings, Inc. 9,290 156,908 Innospec, Inc. 12,600 135,450 LSB Industries, Inc. (a) 9,200 148,764 Landec Corp. (a) 15,100 102,529 NewMarket Corp. 5,300 356,849 OM Group, Inc. (a) 16,300 473,026 Olin Corp. 41,314 491,223 Omnova Solutions, Inc. (a) 25,500 83,130 PolyOne Corp. (a) 49,367 133,785 Polypore International, Inc. (a) 12,700 141,224 Quaker Chemical Corp. 5,900 78,411 Rockwood Holdings, Inc. (a) 26,800 392,352 Schulman A, Inc. 11,906 179,900 Sensient Technologies Corp. 26,057 588,106 ShengdaTech, Inc. (a) 15,000 56,550 Solutia, Inc. (a) 49,385 284,458
11 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Stepan Co. 4,155 $ 183,485 W.R. Grace & Co. (a) 38,600 477,482 Westlake Chemical Corp. 10,300 210,017 Zep, Inc. 11,480 138,334 -------------- 6,144,966 -------------- COAL - 0.2% International Coal Group, Inc. (a)(b) 46,300 132,418 James River Coal Co. (a) 14,800 223,924 Patriot Coal Corp. (a) 35,100 223,938 Westmoreland Coal Co. (a) 5,200 42,120 -------------- 622,400 -------------- COMMERCIAL FINANCE & Financial Federal Corp. 14,200 291,810 MORTGAGE COMPANIES - 0.1% Medallion Financial Corp. 7,900 60,435 NewStar Financial, Inc. (a) 12,700 24,257 -------------- 376,502 -------------- COMMERCIAL SERVICES - 3.3% ABM Industries, Inc. (c) 24,370 440,366 AMN Healthcare Services, Inc. (a) 17,805 113,595 APAC Customer Services, Inc. (a) 14,800 75,924 Administaff, Inc. 11,261 262,043 The Advisory Board Co. (a) 8,400 215,880 Barrett Business Services, Inc. 3,700 38,850 CBIZ, Inc. (a) 23,453 166,985 CDI Corp. 6,601 73,601 COMSYS IT Partners, Inc. (a) 7,700 45,045 CRA International, Inc. (a) 5,800 161,008 CoStar Group, Inc. (a) 10,650 424,616 Compass Diversified Holdings 12,500 101,125 Cornell Cos., Inc. (a) 5,800 94,018 Corporate Executive Board Co. 18,700 388,212 Cross Country Healthcare, Inc. (a) 16,500 113,355 Diamond Management & Technology Consultants, Inc. 11,600 48,720 Dice Holdings, Inc. (a) 7,800 36,270 DynCorp. International, Inc. (a) 13,000 218,270 ExlService Holdings, Inc. (a) 8,000 89,680 Exponent, Inc. (a) 7,304 179,021 First Advantage Corp. Class A (a) 5,400 82,134 Forrester Research, Inc. (a) 8,381 205,754 G&K Services, Inc. Class A 9,877 208,899 GP Strategies Corp. (a) 7,600 44,764 The Geo Group, Inc. (a) 27,300 507,234 Global Sources Ltd. (a) 8,597 61,984 Health Grades, Inc. (a) 11,600 45,356 Healthcare Services Group, Inc. 23,137 413,690 Heidrick & Struggles International, Inc. 9,058 165,309 Huron Consulting Group, Inc. (a) 11,500 531,645 ICF International, Inc. (a) 5,000 137,950
12 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- ICT Group, Inc. (a) 4,700 $ 41,031 Innodata Corp. (a) 13,000 56,940 inVentiv Health, Inc. (a) 17,900 242,187 Kelly Services, Inc. Class A 13,968 152,950 Kforce, Inc. (a) 15,800 130,666 Korn/Ferry International (a) 24,268 258,212 Liquidity Services, Inc. (a) 7,800 76,908 LoopNet, Inc. (a) 9,900 76,725 MAXIMUS, Inc. 9,404 387,915 MPS Group, Inc. (a) 49,405 377,454 Mac-Gray Corp. (a) 6,600 87,384 Navigant Consulting, Inc. (a) 26,423 341,385 On Assignment, Inc. (a) 19,000 74,290 PHH Corp. (a)(b) 29,064 528,384 Primoris Services Corp. 3,800 28,196 Resources Connection, Inc. (a) 24,032 412,629 Rollins, Inc. 23,453 405,971 SYKES Enterprises, Inc. (a) 18,561 335,768 Schawk, Inc. 8,000 60,080 Spherion Corp. (a) 27,729 114,243 Standard Parking Corp. (a) 4,000 65,160 Startek, Inc. (a) 7,200 57,744 TeleTech Holdings, Inc. (a) 16,789 254,353 Tetra Tech, Inc. (a) 32,031 917,688 TrueBlue, Inc. (a) 23,422 196,745 Unifirst Corp. 7,500 278,775 Viad Corp. 11,000 189,420 Volt Information Sciences, Inc. (a) 6,438 40,366 Watson Wyatt Worldwide, Inc. 22,715 852,494 World Fuel Services Corp. 15,800 651,434 -------------- 13,384,800 -------------- COMMERCIAL SERVICES: Aircastle Ltd. 25,100 184,485 RENTAL & LEASING - 0.4% CAI International, Inc. (a) 4,800 24,480 Electro Rent Corp. 9,553 90,658 H&E Equipment Services, Inc. (a) 14,100 131,835 McGrath RentCorp 12,710 242,253 Mobile Mini, Inc. (a) 19,442 285,214 RSC Holdings, Inc. (a) 25,200 169,344 TAL International Group, Inc. 7,700 83,930 United Rentals, Inc. (a) 32,200 208,978 Willis Lease Finance Corp. (a) 3,100 40,672 -------------- 1,461,849 --------------
13 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- COMMERCIAL VEHICLES & PARTS - Force Protection, Inc. (a) 37,400 $ 330,616 0.2% Miller Industries, Inc. (a) 5,800 51,040 Modine Manufacturing Co. 17,594 84,451 Spartan Motors, Inc. 17,200 194,876 -------------- 660,983 -------------- COMMUNICATIONS TECHNOLOGY - 3Com Corp. (a) 209,800 988,158 3.4% AboveNet, Inc. (a) 3,300 267,234 Acme Packet, Inc. (a) 21,500 217,580 Adtran, Inc. 29,500 633,365 Airvana, Inc. (a) 11,200 71,344 Anaren, Inc. (a) 7,722 136,524 Anixter International, Inc. (a) 15,772 592,869 Aruba Networks, Inc. (a) 32,300 282,302 Avocent Corp. (a) 23,650 330,154 Bel Fuse, Inc. 5,459 87,562 BigBand Networks, Inc. (a) 17,500 90,475 Black Box Corp. 9,388 314,216 Comtech Telecommunications Corp. (a) 14,925 475,809 Digi International, Inc. (a) 13,200 128,700 DigitalGlobe, Inc. (a) 8,300 159,360 EMS Technologies, Inc. (a) 8,200 171,380 Echelon Corp. (a) 18,213 154,446 Emulex Corp. (a) 44,400 434,232 Extreme Networks, Inc. (a) 47,500 95,000 GSI Technology, Inc. (a) 8,700 33,582 GeoEye, Inc. (a) 9,900 233,244 Globecomm Systems, Inc. (a) 11,100 79,809 Harmonic, Inc. (a) 51,196 301,544 Harris Stratex Networks, Inc. Class A (a) 31,750 205,740 Hughes Communications, Inc. (a) 4,700 107,301 Infinera Corp. (a) 44,100 402,633 InterDigital, Inc. (a)(b) 23,700 579,228 Ixia (a) 15,429 103,991 KVH Industries, Inc. (a) 6,900 47,127 Loral Space & Communications Ltd. (a) 5,800 149,350 NETGEAR, Inc. (a) 18,500 266,585 Network Equipment Technologies, Inc. (a) 17,200 73,272 Novatel Wireless, Inc. (a) 16,700 150,634 Oplink Communications, Inc. (a) 10,902 124,283 PC-Tel, Inc. (a) 10,300 55,105 Plantronics, Inc. 25,899 489,750 Polycom, Inc. (a) 44,800 908,096 Power-One, Inc. (a) 41,200 61,388 Riverbed Technology, Inc. (a) 29,400 681,786 SeaChange International, Inc. (a) 16,200 130,086 Shoretel, Inc. (a) 22,009 176,072
14 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Sonus Networks, Inc. (a) 110,300 $ 177,583 Starent Networks Corp. (a)(b) 20,800 507,728 Switch and Data Facilities Co., Inc. (a) 10,800 126,684 Sycamore Networks, Inc. (a) 105,600 330,528 Syniverse Holdings, Inc. (a) 36,300 581,889 Tekelec (a) 35,400 595,782 Viasat, Inc. (a) 14,301 366,678 -------------- 13,678,188 -------------- COMPUTER SERVICES SOFTWARE & 3PAR, Inc. (a) 14,300 177,320 SYSTEMS - 6.8% ACI Worldwide, Inc. (a)(c) 18,685 260,842 AMICAS, Inc. (a) 17,200 47,816 ActivIdentity Corp. (a) 27,600 69,828 Actuate Corp. (a) 23,900 114,242 Acxiom Corp. 36,000 317,880 American Reprographics Co. (a) 19,400 161,408 American Software Class A 12,100 69,696 ArcSight, Inc. (a) 10,200 181,254 Ariba, Inc. (a) 47,480 467,203 Art Technology Group, Inc. (a) 67,700 257,260 AsiaInfo Holdings, Inc. (a) 15,300 263,313 Avid Technology, Inc. (a) 15,800 211,878 Blackbaud, Inc. 23,426 364,274 Blackboard, Inc. (a) 16,800 484,848 Blue Coat Systems, Inc. (a) 20,900 345,686 Bottomline Technologies, Inc. (a) 14,200 127,942 CACI International, Inc. Class A (a) 15,900 679,089 CSG Systems International, Inc. (a) 18,800 248,912 Callidus Software, Inc. (a) 15,500 44,175 China Information Security Technology, Inc. (a) 14,400 41,184 China Transinfo Technology (a) 4,600 21,528 Chordiant Software, Inc. (a) 16,140 58,588 Ciber, Inc. (a) 38,802 120,286 ComScore, Inc. (a) 12,000 159,840 CommVault Systems, Inc. (a) 22,400 371,392 Compellent Technologies, Inc. (a) 9,400 143,350 Computer Task Group, Inc. (a) 9,200 56,120 Concur Technologies, Inc. (a) 21,000 652,680 DealerTrack Holdings, Inc. (a) 20,900 355,300 Delrek, Inc. (a) 5,329 23,128 DemandTec, Inc. (a) 10,700 94,160 Digital River, Inc. (a) 20,300 737,296 DivX, Inc. (a) 18,600 102,114 Double-Take Software, Inc. (a) 9,200 79,580 EPIQ Systems, Inc. (a) 16,717 256,606 EarthLink, Inc. (a) 57,400 425,334
15 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Ebix, Inc. (a) 3,600 $ 112,752 eLoyalty Corp. (a) 4,300 33,884 Entrust, Inc. (a) 29,000 52,490 Epicor Software Corp. (a) 24,000 127,200 ePlus, Inc. (a) 1,700 24,769 FalconStor Software, Inc. (a) 18,909 89,818 GSE Systems, Inc. (a) 9,100 61,425 GSI Commerce, Inc. (a) 13,300 189,525 Gartner, Inc. Class A (a) 31,679 483,422 The Hackett Group, Inc. (a) 20,600 47,998 i2 Technologies, Inc. (a) 8,300 104,165 iGate Corp. 11,600 76,792 Imergent, Inc. 3,500 24,500 infoGROUP, Inc. 17,361 99,131 Informatica Corp. (a) 46,600 801,054 Infospace, Inc. (a) 18,700 123,981 Integral Systems, Inc. (a) 8,882 73,898 Interactive Intelligence, Inc. (a) 6,700 82,142 Internap Network Services Corp. (a) 27,090 94,544 Internet Brands, Inc. Class A (a) 15,500 108,500 Internet Capital Group, Inc. (a) 19,600 131,908 JDA Software Group, Inc. (a) 14,108 211,056 Kenexa Corp. (a) 12,000 138,840 Keynote Systems, Inc. (a) 6,600 50,424 Lawson Software, Inc. (a) 72,700 405,666 Limelight Networks, Inc. (a) 15,200 66,880 Lionbridge Technologies, Inc. (a) 34,300 63,112 LivePerson, Inc. (a) 20,800 83,200 MSC.Software Corp. (a) 24,300 161,838 Manhattan Associates, Inc. (a) 12,739 232,105 Mantech International Corp. Class A (a) 11,600 499,264 Mentor Graphics Corp. (a) 51,500 281,705 Mercury Computer Systems, Inc. (a) 12,156 112,443 MicroStrategy, Inc. Class A (a) 4,800 241,056 Moduslink Global Solutions, Inc. (a) 24,480 167,933 Monotype Imaging Holdings, Inc. (a) 12,600 85,806 NCI, Inc. Class A (a) 3,400 103,428 NIC, Inc. 27,900 188,883 Ness Technologies, Inc. (a) 20,700 80,937 NetScout Systems, Inc. (a) 12,500 117,250 NetSuite, Inc. (a) 8,500 100,385 Omniture, Inc. (a) 36,102 453,441 OpenTV Corp. (a) 45,300 59,796 OpenTable, Inc. (a) 1,500 45,255 Openwave Systems, Inc. (a) 47,200 105,728 Opnet Technologies, Inc. 6,622 60,658 PAR Technology Corp. (a) 4,200 26,838
16 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- PROS Holdings, Inc. (a) 9,700 $ 78,764 Parametric Technology Corp. (a) 61,660 720,805 Pegasystems, Inc. 7,900 208,402 Perficient, Inc. (a) 15,300 106,947 Perot Systems Corp. Class A (a) 47,100 674,943 Pervasive Software Inc. (a) 7,500 45,675 Phoenix Technologies Ltd. (a) 15,600 42,276 Progress Software Corp. (a) 21,708 459,558 QAD, Inc. 6,200 20,150 Quest Software, Inc. (a) 34,800 485,112 Rackspace Hosting, Inc. (a) 35,200 487,872 Radiant Systems, Inc. (a) 14,700 122,010 RealNetworks, Inc. (a) 45,000 134,550 RightNow Technologies, Inc. (a) 11,100 130,980 SAVVIS, Inc. (a) 19,680 225,533 SPSS, Inc. (a) 9,789 326,659 SRA International, Inc. Class A (a) 22,300 391,588 SYNNEX Corp. (a) 10,100 252,399 Saba Software, Inc. (a) 12,000 46,200 Sapient Corp. (a) 45,992 289,290 Smith Micro Software, Inc. (a) 14,500 142,390 SolarWinds, Inc. (a) 6,200 102,238 Solera Holdings, Inc. (a) 37,000 939,800 SonicWALL, Inc. (a) 28,741 157,501 Sourcefire, Inc. (a) 12,285 152,211 Stanley, Inc. (a) 6,400 210,432 SuccessFactors, Inc. (a) 19,400 178,092 SumTotal Systems, Inc. (a) 15,800 75,998 Support.com Inc. (a) 24,800 54,064 Synchronoss Technologies, Inc. (a) 10,700 131,289 Syntel, Inc. 6,783 213,258 TIBCO Software, Inc. (a) 95,400 684,018 TNS, Inc. (a) 13,400 251,250 Taleo Corp. Class A (a) 17,100 312,417 TechTarget, Inc. (a) 6,200 24,800 TeleCommunication Systems, Inc. Class A (a) 20,000 142,200 Terremark Worldwide, Inc. (a) 26,460 152,939 Tier Technologies, Inc. Class B (a) 8,800 67,584 Tyler Technologies, Inc. (a) 16,100 251,482 Ultimate Software Group, Inc. (a) 13,000 315,120 Unica Corp. (a) 6,600 36,168 Unisys Corp. (a) 200,100 302,151 United Online, Inc. 44,028 286,622 VASCO Data Security International, Inc. (a) 14,300 104,533 VeriFone Holdings, Inc. (a) 39,400 295,894 Vignette Corp. (a) 12,980 170,687
17 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Virtusa Corp. (a) 6,500 $ 52,195 Web.Com Group, Inc. (a) 15,000 84,450 Websense, Inc. (a) 23,702 422,844 Wind River Systems, Inc. (a) 36,500 418,290 Zix Corp. (a) 31,200 46,800 -------------- 27,710,607 -------------- COMPUTER TECHNOLOGY - 1.2% Adaptec, Inc. (a) 65,100 172,515 Cray, Inc. (a) 17,700 139,476 Data Domain, Inc. (a) 25,200 840,420 Dynamics Research Corp. (a) 4,200 42,042 Imation Corp. 15,900 120,999 Immersion Corp. (a) 15,000 74,100 Intermec, Inc. (a) 33,209 428,396 Isilon Systems, Inc. (a) 13,100 55,544 Netezza Corp. (a) 26,000 216,320 Palm, Inc. (a)(b) 73,388 1,216,039 Quantum Corp. (a) 103,800 86,154 Radisys Corp. (a) 12,442 112,102 Rimage Corp. (a) 5,000 83,050 STEC, Inc. (a)(b) 12,900 299,151 Safeguard Scientifics, Inc. (a) 54,800 72,336 Silicon Graphics International Corp. (a) 15,800 71,732 Stratasys, Inc. (a) 10,900 119,791 Super Micro Computer, Inc. (a) 11,400 87,324 Synaptics, Inc. (a)(b) 18,300 707,295 -------------- 4,944,786 -------------- CONSTRUCTION - 0.6% EMCOR Group, Inc. (a) 35,272 709,673 Granite Construction, Inc. 18,237 606,927 Great Lakes Dredge & Dock Corp. 19,800 94,644 Insituform Technologies, Inc. Class A (a) 20,738 351,924 Orion Marine Group, Inc. (a) 11,500 218,500 Sterling Construction Co., Inc. (a) 7,600 115,976 Tutor Perini Corp. (a) 13,400 232,624 -------------- 2,330,268 -------------- CONSUMER ELECTRONICS - 0.2% Audiovox Corp. Class A (a) 9,185 53,824 Ipass, Inc. (a) 24,400 39,040 TiVo, Inc. (a) 55,794 584,721 Universal Electronics, Inc. (a) 7,386 148,976 -------------- 826,561 -------------- CONSUMER LENDING - 0.5% Advance America, Cash Advance Centers, Inc. 22,600 100,118 Asset Acceptance Capital Corp. (a) 7,900 60,751 Cash America International, Inc. 16,119 377,023 Credit Acceptance Corp. (a) 3,162 69,090 Dollar Financial Corp. (a) 12,700 175,133 Encore Capital Group, Inc. (a) 7,200 95,400
18 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- First Cash Financial Services, Inc. (a) 12,700 $ 222,504 The First Marblehead Corp. (a) 33,000 66,660 MGIC Investment Corp. 68,500 301,400 MoneyGram International, Inc. (a) 41,400 73,692 Nelnet, Inc. Class A (a) 9,900 134,541 Portfolio Recovery Associates, Inc. (a)(b) 8,400 325,332 QC Holdings, Inc. 2,900 14,906 Tree.com, Inc. (a) 3,000 28,800 World Acceptance Corp. (a) 8,700 173,217 -------------- 2,218,567 -------------- CONSUMER SERVICES: Coinstar, Inc. (a) 15,992 426,986 MISCELLANEOUS - 0.6% Core-Mark Holdings Co., Inc. (a) 5,000 130,300 Jackson Hewitt Tax Service, Inc. 15,200 95,152 The Knot, Inc. (a) 15,800 124,504 Mercadolibre, Inc. (a) 13,800 370,944 Move, Inc. (a) 85,400 184,464 Nutri/System, Inc. 16,400 237,800 Pre-Paid Legal Services, Inc. (a) 4,160 181,334 Sotheby's Holdings, Inc. Class A (b) 35,836 505,646 Steiner Leisure Ltd. (a) 7,900 241,187 -------------- 2,498,317 -------------- CONTAINERS & PACKAGING - 0.5% AEP Industries, Inc. (a) 2,700 71,253 Bway Holding Co. (a) 4,000 70,120 Graphic Packaging Holding Co. (a) 56,300 103,029 Myers Industries, Inc. 16,852 140,209 Rock-Tenn Co. Class A 20,480 781,517 Silgan Holdings, Inc. 14,300 701,129 -------------- 1,867,257 -------------- COSMETICS - 0.1% Bare Escentuals, Inc. (a) 36,100 320,207 Elizabeth Arden, Inc. (a) 12,893 112,556 Inter Parfums, Inc. 7,450 54,683 Revlon, Inc., Class A (a) 9,600 52,224 -------------- 539,670 -------------- DIVERSIFIED FINANCIAL American Physicians Service Group, Inc. 3,200 72,608 SERVICES - 0.5% Broadpoint Gleacher Securities, Inc. (a) 20,400 113,832 Cheviot Financial Corp. 1,100 8,800 CompuCredit Corp. (a)(b) 8,689 19,985 Duff & Phelps Corp. 9,000 160,020 Evercore Partners, Inc. Class A 5,200 102,128 FBR Capital Markets Corp. (a) 7,700 36,190 FCStone Group, Inc. (a) 14,200 56,090 First California Financial Group (a) 2,400 14,808 Main Street Capital Corp. 3,500 47,915 Piper Jaffray Cos. (a) 10,500 458,535
19 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Rewards Network, Inc. (a) 11,800 $ 44,604 Sanders Morris Harris Group, Inc. 9,600 52,800 Stifel Financial Corp. (a) 14,549 699,661 Thomas Weisel Partners Group, Inc. (a) 10,600 63,812 Triangle Capital Corp. 4,600 50,232 -------------- 2,002,020 -------------- DIVERSIFIED MANUFACTURING A.M. Castle & Co. 8,700 105,096 OPERATIONS - 0.2% Barnes Group, Inc. 25,014 297,416 Federal Signal Corp. 26,059 199,351 Raven Industries, Inc. 8,600 220,160 Standex International Corp. 6,631 76,920 Trimas Corp. (a) 7,900 26,623 -------------- 925,566 -------------- DIVERSIFIED MATERIALS & Belden, Inc. 24,861 415,179 PROCESSING - 1.0% Brady Corp. 26,094 655,481 Cabot Microelectronics Corp. (a) 12,500 353,625 Clarcor, Inc. 27,210 794,260 Encore Wire Corp. 9,750 208,163 Fushi Copperweld, Inc. (a) 8,000 66,160 GenTek, Inc. (a) 4,500 100,485 Hexcel Corp. (a) 51,262 488,527 Insteel Industries, Inc. 9,300 76,632 Koppers Holdings, Inc. 10,900 287,433 NL Industries, Inc. 3,634 26,819 Rogers Corp. (a) 8,555 173,068 Symyx Technologies, Inc. (a) 18,179 106,347 Tredegar Corp. 15,545 207,059 Uranium Energy Corp. (a) 26,800 77,720 Zapata Corp. (a) 4,300 29,283 -------------- 4,066,241 -------------- DIVERSIFIED MEDIA - 0.0% Belo Corp. Class A 47,200 84,488 EW Scripps Co. 13,200 27,588 Playboy Enterprises, Inc. Class B (a) 11,907 29,887 -------------- 141,963 -------------- DIVERSIFIED RETAIL - 3.9% 1-800-FLOWERS.COM, Inc. Class A (a) 14,024 26,926 99 Cents Only Stores (a) 25,100 340,858 America's Car Mart, Inc. (a) 5,300 108,650 AnnTaylor Stores Corp. (a) 32,200 256,956 Asbury Automotive Group, Inc. 16,900 173,056 bebe Stores, Inc. 11,700 80,496 Big 5 Sporting Goods Corp. 11,600 128,296 Blue Nile, Inc. (a) 7,000 300,930 Books-A-Million, Inc. 3,100 22,041 Borders Group, Inc. (a) 24,100 88,688 Brown Shoe Co., Inc. 22,427 162,371 The Buckle, Inc. (b) 13,509 429,181
20 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Build-A-Bear Workshop, Inc. (a) 8,900 $ 39,783 Cabela's, Inc. Class A (a) 21,000 258,300 The Cato Corp. Class A 14,795 258,025 Central Garden & Pet Co. Class A (a) 33,234 327,355 Charlotte Russe Holding, Inc. (a) 11,200 144,256 Charming Shoppes, Inc. (a) 61,740 229,673 The Children's Place Retail Stores, Inc. (a) 12,585 332,622 Christopher & Banks Corp. 19,228 129,020 Citi Trends, Inc. (a) 7,900 204,452 Coldwater Creek, Inc. (a) 30,400 184,224 Collective Brands, Inc. (a) 34,300 499,751 Conn's, Inc. (a)(b) 5,200 65,000 DSW, Inc. Class A (a) 7,100 69,935 Destination Maternity Corp. (a) 2,900 48,372 Dillard's, Inc. Class A (b) 26,700 245,640 Dress Barn, Inc. (a) 23,990 343,057 drugstore.com, Inc. (a) 45,800 83,356 Ezcorp, Inc. (a) 24,200 260,876 The Finish Line, Inc. Class A 22,580 167,544 Fred's, Inc. 21,435 270,081 Gaiam, Inc. (a) 9,567 52,331 Gander Mountain Co. (a) 2,100 12,600 Genesco, Inc. (a) 10,238 192,167 Group 1 Automotive, Inc. 12,632 328,685 Gymboree Corp. (a) 15,558 551,998 HSN, Inc. (a) 20,900 220,913 Haverty Furniture Cos., Inc. 9,436 86,339 hhgregg, Inc. (a) 5,900 89,444 Hibbett Sports, Inc. (a) 15,275 274,950 Hot Topic, Inc. (a) 23,481 171,646 Insight Enterprises, Inc. (a) 24,798 239,549 Jo-Ann Stores, Inc. (a) 14,505 299,818 Jos. A. Bank Clothiers, Inc. (a) 9,733 335,399 Lawson Products, Inc. 2,188 31,091 Lithia Motors, Inc. Class A 9,800 90,552 Lumber Liquidators, Inc. (a) 8,200 129,232 Men's Wearhouse, Inc. 28,200 540,876 Midas, Inc. (a) 7,542 79,040 Monro Muffler, Inc. 8,950 230,105 New York & Co. (a) 12,300 38,007 Nu Skin Enterprises, Inc. Class A 26,426 404,318 OfficeMax, Inc. 40,100 251,828 Overstock.com, Inc. (a) 8,400 100,464 PC Connection, Inc. (a) 4,700 24,675 PC Mall, Inc. (a) 6,100 41,236 Pacific Sunwear of California, Inc. (a) 35,400 119,298
21 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- The Pep Boys - Manny, Moe & Jack 25,566 $ 259,239 PetMed Express, Inc. (a) 12,500 187,875 Pier 1 Imports, Inc. (a) 43,599 86,762 PriceSmart, Inc. 9,000 150,750 Regis Corp. 23,200 403,912 Retail Ventures, Inc. (a) 13,300 28,994 Rex Stores Corp. (a) 3,900 39,234 Rush Enterprises, Inc. Class A (a) 17,600 205,040 Saks, Inc. (a) 65,100 288,393 Sally Beauty Co., Inc. (a) 50,100 318,636 School Specialty, Inc. (a) 10,054 203,191 Shoe Carnival, Inc. (a) 4,700 56,071 Shutterfly, Inc. (a) 11,500 160,425 Sonic Automotive, Inc. 14,000 142,240 Sport Supply Group, Inc. 4,400 37,796 Stage Stores, Inc. 20,250 224,775 Stamps.com, Inc. (a) 7,303 61,929 Stein Mart, Inc. (a) 13,424 118,937 Syms Corp. (a) 3,300 24,783 Systemax, Inc. (a) 5,100 60,741 The Talbots, Inc. 13,000 70,200 Ticketmaster Entertainment (a) 19,600 125,832 Titan Machinery, Inc. (a) 7,000 88,830 Tractor Supply Co. (a) 19,100 789,212 Tuesday Morning Corp. (a) 15,990 53,886 Tween Brands, Inc. (a) 13,466 89,953 Ulta Salon Cosmetics & Fragrance, Inc. (a) 14,800 164,576 The Wet Seal, Inc. Class A (a) 50,500 155,035 Zale Corp. (a)(b) 10,700 36,808 Zumiez, Inc. (a) 10,400 83,304 -------------- 15,933,691 -------------- DRUG & GROCERY STORE Arden Group, Inc. Class A 532 66,553 CHAINS - 0.7% Casey's General Stores, Inc. 27,507 706,655 The Great Atlantic & Pacific Tea Co., Inc. (a) 18,027 76,615 Ingles Markets, Inc. Class A 6,764 103,083 Nash Finch Co. 6,877 186,092 The Pantry, Inc. (a) 12,000 199,200 Ruddick Corp. 22,869 535,821 Spartan Stores, Inc. 11,900 147,679 Susser Holdings Corp. (a) 4,100 45,879 Village Super Market, Inc. Class A 3,300 98,175 Weis Markets, Inc. 5,900 197,768 Winn-Dixie Stores, Inc. (a) 29,600 371,184 -------------- 2,734,704 --------------
22 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- EDUCATION SERVICES - 0.7% Ambassadors Group, Inc. 10,000 $ 137,700 American Public Education, Inc. (a) 9,600 380,256 Bridgepoint Education, Inc. (a) 7,800 132,600 Capella Education Co. (a) 7,700 461,615 Chinacast Education Corp. (a) 16,600 118,192 Corinthian Colleges, Inc. (a)(b) 42,300 716,139 Franklin Covey Co. (a) 7,900 49,217 Grand Canyon Education, Inc. (a) 8,200 137,596 K12, Inc. (a)(b) 12,400 267,220 Learning Tree International, Inc. (a) 4,500 46,350 Lincoln Educational Services Corp. (a) 5,000 104,650 Nobel Learning Communities, Inc. (a) 2,900 33,263 The Princeton Review, Inc. (a) 7,700 41,657 Renaissance Learning, Inc. 2,549 23,476 Rosetta Stone, Inc. (a) 3,600 98,784 Universal Technical Institute, Inc. (a) 11,300 168,709 -------------- 2,917,424 -------------- ELECTRONIC COMPONENTS - 0.6% 3D Systems Corp. (a) 9,400 67,774 Acacia Research - Acacia Technologies (a) 16,500 129,855 Checkpoint Systems, Inc. (a) 20,823 326,713 Cogent, Inc. (a) 22,500 241,425 Methode Electronics, Inc. 20,180 141,664 Microvision, Inc. (a)(b) 37,100 113,897 Multi-Fineline Electronix, Inc. (a) 5,100 109,140 NVE Corp. (a) 2,500 121,500 Park Electrochemical Corp. 10,949 235,732 ScanSource, Inc. (a) 14,200 348,184 Smart Modular Technologies WWH, Inc. (a) 19,600 44,492 TTM Technologies, Inc. (a) 23,100 183,876 Technitrol, Inc. 21,961 142,088 Universal Display Corp. (a)(b) 15,207 148,724 -------------- 2,355,064 -------------- ELECTRONIC ENTERTAINMENT - DTS, Inc. (a) 9,300 251,751 0.2% Memsic, Inc. (a) 10,200 43,248 THQ, Inc. (a) 36,137 258,741 Take-Two Interactive Software, Inc. 42,500 402,475 -------------- 956,215 -------------- ELECTRONICS - 0.5% Agilysys, Inc. 6,763 31,650 American Science & Engineering, Inc. 4,900 338,688 CPI International, Inc. (a) 3,900 33,891 Coherent, Inc. (a) 11,200 231,616 Daktronics, Inc. (b) 17,898 137,815 II-VI, Inc. (a) 13,220 293,087 IPG Photonics Corp. (a) 12,000 131,640 iRobot Corp. (a) 10,100 131,098
23 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Newport Corp. (a) 19,335 $ 111,950 Rofin-Sinar Technologies, Inc. (a) 15,500 310,155 SRS Labs Inc. (a) 5,500 36,575 Spectrum Control, Inc. (a) 6,200 54,560 -------------- 1,842,725 -------------- ENERGY EQUIPMENT - 0.2% Ascent Solar Technologies, Inc. (a)(b) 7,800 60,996 Energy Conversion Devices, Inc. (a)(b) 24,864 351,826 Evergreen Solar, Inc. (a)(b) 103,200 223,944 FuelCell Energy, Inc. (a)(b) 36,026 150,589 GT Solar International, Inc. (a) 15,900 84,588 PowerSecure International, Inc. (a) 9,200 39,192 Raser Technologies, Inc. (a)(b) 27,100 75,880 -------------- 987,015 -------------- ENGINEERING & CONTRACTING Argan, Inc. (a) 4,500 63,585 SERVICES - 0.3% Dycom Industries, Inc. (a) 21,102 233,599 ENGlobal Corp. (a) 8,700 42,804 Furmamite Corp. (a) 19,200 85,632 Hill International, Inc. (a) 13,300 57,190 Integrated Electrical Services, Inc. (a) 3,700 28,897 Layne Christensen Co. (a) 10,400 212,680 MYR Group, Inc. (a) 9,000 181,980 Michael Baker Corp. (a) 4,200 177,912 VSE Corp. 2,100 54,936 -------------- 1,139,215 -------------- ENTERTAINMENT - 0.3% Ascent Media Corp. Class A (a) 7,400 196,692 CKX, Inc. (a) 32,000 226,880 Carmike Cinemas, Inc. 5,400 45,252 Cinemark Holdings, Inc. 17,900 202,628 Live Nation, Inc. (a) 43,900 213,354 LodgeNet Interactive Corp. (a) 9,900 33,660 Reading International, Inc. Class A (a) 10,800 49,140 Rentrak Corp. (a) 4,800 78,864 World Wrestling Entertainment, Inc. 11,196 140,622 -------------- 1,187,092 -------------- FINANCIAL DATA & SYSTEMS - Advent Software, Inc. (a) 8,600 281,994 1.2% Bankrate, Inc. (a)(b) 6,700 169,108 Cardtronics, Inc. (a) 6,900 26,289 Cass Information Systems, Inc. 4,615 151,095 CyberSource Corp. (a) 37,364 571,669 Euronet Worldwide, Inc. (a) 25,850 501,232 Fair Isaac Corp. 26,100 403,506 Global Cash Access, Inc. (a) 21,100 167,956 Heartland Payment Systems, Inc. 20,800 199,056 Information Services Group, Inc. (a) 11,600 34,916 Jack Henry & Associates, Inc. 45,400 942,050
24 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Net 1 UEPS Technologies, Inc. (a) 19,900 $ 270,441 Online Resources Corp. (a) 13,600 84,864 RiskMetrics Group, Inc. (a) 11,300 199,558 S1 Corp. (a) 28,222 194,732 Value Line, Inc. 300 9,861 Wright Express Corp. (a) 20,400 519,588 -------------- 4,727,915 -------------- FOODS - 1.2% American Dairy, Inc. (a) 4,400 174,504 American Italian Pasta Co. Class A (a) 11,100 323,454 B&G Foods, Inc. Class A 10,800 90,828 China Biotics, Inc. (a) 3,500 37,730 Chiquita Brands International, Inc. (a) 24,500 251,370 Diamond Foods, Inc. 9,100 253,890 Hain Celestial Group, Inc. (a) 21,757 339,627 J&J Snack Foods Corp. 7,400 265,660 Lancaster Colony Corp. 10,599 467,098 Lance, Inc. 15,300 353,889 Lifeway Foods, Inc. (a) 2,100 27,090 Medifast, Inc. (a) 6,500 74,490 Nutraceutical International Corp. (a) 5,400 56,106 Omega Protein Corp. (a) 10,000 40,600 Overhill Farms, Inc. (a) 9,600 50,592 Schiff Nutrition International, Inc. (a) 5,700 29,013 Seneca Foods Corp. (a) 3,300 110,286 Smart Balance, Inc. (a) 33,500 228,135 Synutra International, Inc. (a)(b) 10,300 113,300 Tootsie Roll Industries, Inc. (b) 12,957 293,994 TreeHouse Foods, Inc. (a) 16,700 480,459 United Natural Foods, Inc. (a) 23,280 611,100 Zhongpin, Inc. (a) 10,400 107,744 -------------- 4,780,959 -------------- FOREST PRODUCTS - 0.1% Deltic Timber Corp. 5,709 202,498 Universal Forest Products, Inc. 10,434 345,261 -------------- 547,759 -------------- FORMS & BULK PRINTING Bowne & Co., Inc. 15,480 100,775 SERVICES - 0.2% Consolidated Graphics, Inc. (a) 5,200 90,584 Deluxe Corp. 27,300 349,713 Ennis, Inc. 13,500 168,210 Innerworkings, Inc. (a) 12,100 57,475 M&F Worldwide Corp. (a) 6,100 122,000 Multi-Color Corp. 5,150 63,139 The Standard Register Co. 8,845 28,835 -------------- 980,731 -------------- FUNERAL PARLORS & CEMETERIES - Matthews International Corp. Class A 16,273 506,416 0.2% Stewart Enterprises, Inc. Class A 43,924 211,714 -------------- 718,130 --------------
25 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- GAS PIPELINES - 0.0% Crosstex Energy, Inc. 21,600 $ 89,856 -------------- GLASS - 0.0% Apogee Enterprises, Inc. 15,200 186,960 -------------- GOLD - 0.2% Allied Nevada Gold Corp. (a) 23,500 189,410 Coeur d'Alene Mines Corp. (a) 37,270 458,421 US Gold Corp. (a) 45,300 119,592 -------------- 767,423 -------------- HEALTH CARE FACILITIES - 0.6% Amsurg Corp. (a) 16,500 353,760 Assisted Living Concepts, Inc. (a) 5,340 77,697 Capital Senior Living Corp. (a) 11,200 50,960 Emeritus Corp. (a) 10,500 138,705 The Ensign Group, Inc. 5,531 78,706 Hanger Orthopedic Group, Inc. (a) 12,900 175,311 Kindred Healthcare, Inc. (a) 21,390 264,594 LCA-Vision, Inc. (a) 10,400 43,888 MedCath Corp. (a) 7,900 92,904 National Healthcare Corp. 4,000 151,760 Psychiatric Solutions, Inc. (a) 30,000 682,200 Skilled Healthcare Group, Inc. Class A (a) 9,600 72,000 Sun Healthcare Group, Inc. (a) 23,300 196,652 Sunrise Senior Living, Inc. (a) 23,874 39,392 US Physical Therapy, Inc. (a) 6,300 92,925 -------------- 2,511,454 -------------- HEALTH CARE MANAGEMENT AMERIGROUP Corp. (a) 28,100 754,485 SERVICES - 1.0% American Caresource Holdings, Inc. (a) 5,400 20,196 American Dental Partners, Inc. (a) 6,500 58,955 Bioscript, Inc. (a) 23,700 140,304 Catalyst Health Solutions, Inc. (a) 19,400 483,836 Centene Corp. (a) 23,000 459,540 Computer Programs & Systems, Inc. 5,100 195,381 Contiucare Corp. (a) 14,000 32,620 HealthSpring, Inc. (a) 26,200 284,532 Magellan Health Services, Inc. (a) 18,900 620,298 MedQuist Inc. 4,100 24,928 Metropolitan Health Networks, Inc. (a) 24,800 49,848 Molina Healthcare, Inc. (a) 7,200 172,224 National Research Corp. 700 17,080 Transcend Services, Inc. (a) 3,100 49,135 Triple-S Management Corp. (a) 11,400 177,726 Universal American Financial Corp. (a) 13,700 119,464 WellCare Health Plans, Inc. (a) 22,400 414,176 -------------- 4,074,728 -------------- HEALTH CARE SERVICES - 1.8% Air Methods Corp. (a) 5,800 158,688 Alliance Healthcare Services, Inc. (a) 13,400 98,222 Allied Healthcare International, Inc. (a) 27,200 59,024 Almost Family, Inc. (a) 3,800 99,218 Amedisys, Inc. (a)(b) 14,466 477,667
26 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- athenahealth, Inc. (a)(b) 18,100 $ 669,881 CardioNet, Inc. (a) 12,500 204,000 Chemed Corp. 12,072 476,603 Corvel Corp. (a) 3,985 90,738 Eclipsys Corp. (a) 30,031 533,951 Emergency Medical Services Corp. (a) 5,300 195,146 Gentiva Health Services, Inc. (a) 15,212 250,390 HMS Holdings Corp. (a) 13,700 557,864 HealthSouth Corp. (a) 47,200 681,568 Healthways, Inc. (a) 18,400 247,480 IPC The Hospitalist Co., Inc. (a) 8,500 226,865 LHC Group, Inc. (a) 8,100 179,901 Novamed Eyecare, Inc. (a) 9,500 37,525 Odyssey HealthCare, Inc. (a) 17,600 180,928 Omnicell, Inc. (a) 16,900 181,675 PharMerica Corp. (a) 16,269 319,360 Phase Forward, Inc. (a) 23,500 355,085 Quality Systems, Inc. (b) 12,800 729,088 RehabCare Group, Inc. (a) 9,795 234,394 Res-Care, Inc. (a) 13,500 193,050 Virtual Radiologic Corp. (a) 3,400 30,702 -------------- 7,469,013 -------------- HEALTH CARE: MISCELLANEOUS - MedAssets, Inc. (a) 20,900 406,505 0.1% The Providence Service Corp. (a) 6,700 73,365 -------------- 479,870 -------------- HOME BUILDING - 0.2% Beazer Homes USA, Inc. (a)(b) 19,400 35,502 Brookfield Homes Corp. (b) 5,151 20,604 Hovnanian Enterprises, Inc. Class A (a)(b) 27,200 64,192 M/I Homes, Inc. (a) 8,900 87,131 Meritage Homes Corp. (a) 16,800 316,848 Ryland Group, Inc. 23,400 392,184 Standard-Pacific Corp. (a) 53,700 109,011 -------------- 1,025,472 -------------- HOTEL/MOTEL - 0.2% Gaylord Entertainment Co. (a)(b) 17,955 228,208 Marcus Corp. 10,679 112,343 Morgans Hotel Group Co. (a) 12,300 47,109 Orient Express Hotels Ltd. Class A 40,500 343,845 Red Lion Hotels Corp. (a) 8,600 41,280 -------------- 772,785 -------------- HOUSEHOLD APPLIANCE - 0.0% National Presto Industries, Inc. 2,550 194,055 --------------
27 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- HOUSEHOLD EQUIPMENT & PRODUCTS - 0.3% American Greetings Corp. Class A 22,400 $ 261,632 Blyth, Inc. 3,225 105,748 CSS Industries, Inc. 3,991 81,337 Nivs Intellimedia Technology (a) 2,900 8,584 Tupperware Corp. 33,274 865,789 -------------- 1,323,090 -------------- HOUSEHOLD FURNISHINGS - 0.3% American Woodmark Corp. 5,600 134,120 Ethan Allen Interiors, Inc. (b) 13,100 135,716 Furniture Brands International, Inc. 22,200 67,266 Hooker Furniture Corp. 5,400 61,992 Kirkland's, Inc. (a) 7,300 87,673 La-Z-Boy, Inc. 27,500 129,800 Sealy Corp. (a) 23,500 46,060 Stanley Furniture Co., Inc. 5,100 55,029 Tempur-Pedic International, Inc. (b) 40,100 524,107 -------------- 1,241,763 -------------- INSURANCE: LIFE - 0.4% American Equity Investment Life Holding Co. 28,700 160,146 Citizens, Inc. (a)(b) 16,600 100,928 Conseco, Inc. (a) 101,800 241,266 Delphi Financial Group, Inc. Class A 23,005 446,987 FBL Financial Group, Inc. Class A 6,925 57,201 Independence Holding Co. 1,640 10,430 Kansas City Life Insurance Co. 2,242 60,332 Life Partners Holdings, Inc. (b) 3,900 55,302 National Western Life Insurance Co. Class A 1,188 138,699 The Phoenix Cos., Inc. (a) 61,800 103,206 Presidential Life Corp. 11,093 83,974 -------------- 1,458,471 -------------- INSURANCE: MULTI-LINE - 0.8% AMBAC Financial Group, Inc. (b) 153,700 141,404 Assured Guaranty Ltd. 32,100 397,398 Crawford & Co. Class B (a) 12,609 60,523 Eastern Insurance Holdings, Inc. 4,800 45,168 eHealth, Inc. (a) 13,200 233,112 Flagstone Reinsurance Holdings Ltd. 21,900 225,570 Horace Mann Educators Corp. 21,268 212,042 Maiden Holdings Ltd. 26,600 174,496 Max Capital Group Ltd. 24,300 448,578 Pico Holdings, Inc. (a) 10,297 295,524 Platinum Underwriters Holdings Ltd. 27,300 780,507 Primus Guaranty Ltd. (a) 12,700 29,972 -------------- 3,044,294 -------------- INSURANCE: PROPERTY- AmTrust Financial Services, Inc. 11,800 134,520 CASUALTY - 2.2% American Physicians Capital, Inc. 3,956 154,916 American Safety Insurance Holdings Ltd. (a) 4,600 62,606 Amerisafe, Inc. (a) 10,100 157,156 Argo Group International Holdings Ltd. (a) 16,479 465,037
28 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Baldwin & Lyons, Inc. Class B 4,332 $ 85,340 CNA Surety Corp. (a) 8,786 118,523 Donegal Group, Inc. Class A 5,744 87,366 EMC Insurance Group, Inc. 2,600 54,106 Employers Holdings, Inc. 25,380 343,899 Enstar Group Ltd. (a) 3,500 205,975 FPIC Insurance Group, Inc. (a) 4,300 131,666 First Acceptance Corp. (a) 8,277 17,630 First Mercury Financial Corp. 7,600 104,652 Greenlight Capital Re Ltd. (a) 15,100 261,381 Hallmark Financial Services, Inc. (a) 4,500 32,175 Harleysville Group, Inc. 7,462 210,578 Hilltop Holdings, Inc. (a) 20,372 241,816 IPC Holdings, Ltd. 29,800 814,732 Infinity Property & Casualty Corp. 7,500 273,450 Meadowbrook Insurance Group, Inc. 32,052 209,300 Mercer Insurance Group, Inc. 2,700 42,930 Montpelier Re Holdings Ltd. 46,900 623,301 NYMAGIC, Inc. 2,400 33,312 National Interstate Corp. 3,300 50,094 Navigators Group, Inc. (a) 6,900 306,567 PMA Capital Corp. Class A (a) 16,806 76,467 The PMI Group, Inc. 37,900 75,042 ProAssurance Corp. (a)(c) 17,623 814,359 RLI Corp. 10,264 459,827 Radian Group, Inc. 43,800 119,136 Safety Insurance Group, Inc. 6,700 204,752 SeaBright Insurance Holdings, Inc. (a) 11,100 112,443 Selective Insurance Group, Inc. 28,208 360,216 State Auto Financial Corp. 7,412 129,710 Stewart Information Services Corp. 9,222 131,414 Tower Group, Inc. 21,486 532,423 United America Indemnity, Ltd. (a) 18,641 89,290 United Fire & Casualty Co. 11,900 204,085 Universal Insurance Holdings, Inc. 6,300 31,626 Zenith National Insurance Corp. 19,955 433,822 -------------- 8,997,640 -------------- LEISURE TIME - 0.6% Bluegreen Corp. (a) 7,400 18,648 Callaway Golf Co. 34,700 175,929 Churchill Downs, Inc. 5,032 169,377 Great Wolf Resorts, Inc. (a) 14,300 29,172 Interval Leisure Group, Inc. (a) 20,700 192,924 Life Time Fitness, Inc. (a) 21,800 436,218 Orbitz Worldwide, Inc. (a) 18,000 34,200 Pool Corp. (b) 26,400 437,184 Smith & Wesson Holding Corp. (a) 27,800 157,904
29 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Speedway Motorsports, Inc. 6,955 $ 95,701 Steinway Musical Instruments, Inc. (a) 3,600 38,520 Sturm Ruger & Co., Inc. 9,900 123,156 Town Sports International Holdings, Inc. (a) 10,400 39,000 Universal Travel Group (a) 6,000 67,140 Vail Resorts, Inc. (a)(b) 15,656 419,894 West Marine, Inc. (a) 8,900 49,039 -------------- 2,484,006 -------------- LUXURY ITEMS - 0.2% Fossil, Inc. (a) 24,900 599,592 Fuqi International, Inc. (a)(b) 5,200 107,692 Movado Group, Inc. 8,500 89,590 -------------- 796,874 -------------- MACHINERY & ENGINEERING - 0.1% Applied Industrial Technologies, Inc. (c) 23,090 454,873 -------------- MACHINERY: AGRICULTURAL - 0.1% Alamo Group, Inc. 3,300 33,330 Lindsay Manufacturing Co. (b) 6,613 218,890 -------------- 252,220 -------------- MACHINERY: CONSTRUCTION & Astec Industries, Inc. (a) 9,617 285,528 HANDLING - 0.1% NACCO Industries, Inc. Class A 2,887 82,915 -------------- 368,443 -------------- MACHINERY: ENGINES - 0.1% Briggs & Stratton Corp. (b) 26,600 354,844 Harbin Electric, Inc. (a) 6,500 101,660 -------------- 456,504 -------------- MACHINERY: INDUSTRIAL - 0.9% Actuant Corp. Class A (c) 30,300 369,660 Altra Holdings, Inc. (a) 14,200 106,358 Chart Industries, Inc. (a) 15,200 276,336 Colfax Corp. (a) 12,700 98,044 Columbus McKinnon Corp. (a) 10,036 126,955 DXP Enterprises, Inc. (a) 4,100 47,027 EnPro Industries, Inc. (a) 10,700 192,707 Flow International Corp. (a) 20,100 47,235 Graham Corp. 5,400 71,820 John Bean Technologies Corp. 15,200 190,304 Kadant, Inc. (a) 6,770 76,433 MTS Systems Corp. 9,200 189,980 Middleby Corp. (a) 8,617 378,459 Nordson Corp. 18,210 703,999 Sauer-Danfoss, Inc. 5,973 36,614 Tecumseh Products Co. Class A (a) 9,428 91,546 Tennant Co. 9,974 183,422 Twin Disc, Inc. 4,300 29,283 Woodward Governor Co. 32,058 634,748 -------------- 3,850,930 --------------
30 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- MACHINERY: SPECIALTY - 0.1% Albany International Corp. Class A 15,574 $ 177,232 Cascade Corp. 4,900 77,077 Hurco Companies, Inc. (a) 3,400 53,142 K-Tron International, Inc. (a) 1,300 103,584 -------------- 411,035 -------------- MANUFACTURED HOUSING - 0.0% Cavco Industries, Inc. (a) 3,400 86,122 Skyline Corp. 3,601 78,322 -------------- 164,444 -------------- MEDICAL & DENTAL INSTRUMENTS ATS Medical, Inc. (a) 27,600 90,804 & SUPPLIES - 3.0% Abiomed, Inc. (a) 16,500 145,530 Align Technology, Inc. (a) 31,600 334,960 Alphatec Holdings, Inc. (a) 14,100 46,812 American Medical Systems Holdings, Inc. (a) 39,500 624,100 AngioDynamics, Inc. (a) 13,100 173,837 Atrion Corp. 700 93,863 Bovie Medical Corp. (a) 9,900 86,229 CONMED Corp. (a) 15,528 240,995 Cantel Medical Corp. (a) 6,600 107,118 Cardiovascular Systems, Inc. (a) 5,800 44,718 Conceptus, Inc. (a)(b) 16,300 275,470 CryoLife, Inc. (a) 14,700 81,438 Cutera, Inc. (a) 6,600 56,892 Delcath Systems Inc. (a) 13,800 49,404 ev3, Inc. (a) 37,932 406,631 Endologix, Inc. (a) 25,700 85,838 Exactech, Inc. (a) 4,000 58,000 Hansen Medical, Inc. (a) 11,700 57,798 Heartware International, Inc. (a) 2,400 66,984 Home Diagnostics, Inc. (a) 5,500 33,770 I-Flow Corp. (a) 11,600 80,504 ICU Medical, Inc. (a) 6,750 277,763 Immucor, Inc. (a) 38,143 524,848 Insulet Corp. (a) 14,900 114,730 Integra LifeSciences Holdings Corp. (a) 10,100 267,751 Invacare Corp. 14,922 263,373 Landauer, Inc. 4,978 305,351 MAKO Surgical Corp. (a) 7,800 70,356 Matrixx Initiatives, Inc. (a) 4,300 24,037 Medical Action Industries, Inc. (a) 7,450 85,303 Meridian Bioscience, Inc. 22,100 499,018 Merit Medical Systems, Inc. (a) 14,910 243,033 Micrus Endovascular Corp. (a) 8,400 75,936 Neogen Corp. (a) 7,500 217,350 NuVasive, Inc. (a) 19,400 865,240 OraSure Technologies, Inc. (a) 24,659 60,908
31 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Orthofix International NV (a) 9,100 $ 227,591 Orthovita, Inc. (a) 33,700 173,555 Owens & Minor, Inc. 22,198 972,716 PSS World Medical, Inc. (a) 31,973 591,820 Quidel Corp. (a) 14,700 214,032 Rochester Medical Corp. (a) 5,000 67,000 Rockwell Medical Technologies, Inc. (a) 7,000 52,850 Steris Corp. 31,100 811,088 SurModics, Inc. (a) 8,283 187,444 Symmetry Medical, Inc. (a) 19,100 178,012 Synovis Life Technologies, Inc. (a) 6,100 126,697 Trans1, Inc. (a) 6,700 41,741 Utah Medical Products, Inc. 1,600 42,736 Vascular Solutions, Inc. (a) 9,200 71,944 Volcano Corp. (a) 25,700 359,286 West Pharmaceutical Services, Inc. 17,376 605,554 Wright Medical Group, Inc. (a) 20,800 338,208 Young Innovations, Inc. 2,700 58,833 -------------- 12,257,799 -------------- MEDICAL EQUIPMENT - 1.9% Abaxis, Inc. (a) 11,700 240,318 Accuray, Inc. (a)(b) 22,100 147,407 Affymetrix, Inc. (a) 37,800 224,154 Analogic Corp. 6,972 257,615 Aspect Medical Systems, Inc. (a) 10,500 62,055 Bruker BioSciences Corp. (a) 26,487 245,270 Cardiac Science Corp. (a) 10,300 41,406 Clarient, Inc. (a) 17,700 65,844 Cyberonics, Inc. (a) 14,569 242,282 Cynosure, Inc. Class A (a) 5,200 39,780 DexCom, Inc. (a) 25,600 158,464 Dionex Corp. (a) 9,631 587,780 Electro-Optical Sciences, Inc. (a) 10,300 80,237 Enteromedics, Inc. (a) 9,900 32,967 Greatbatch, Inc. (a) 12,400 280,364 Haemonetics Corp. (a) 13,672 779,304 IRIS International, Inc. (a) 9,600 113,280 Luminex Corp. (a) 22,651 419,950 Masimo Corp. (a) 27,400 660,614 Merge Healthcare, Inc. (a) 12,900 55,470 Natus Medical, Inc. (a) 14,600 168,484 NxStage Medical, Inc. (a) 12,200 71,980 OSI Systems, Inc. (a) 8,300 173,055 Palomar Medical Technologies, Inc. (a) 9,700 142,202 Sirona Dental Systems, Inc. (a) 9,100 181,909 Somanetics Corp. (a) 6,400 105,664 SonoSite, Inc. (a) 9,115 182,847
32 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Spectranetic Corp. (a) 17,200 $ 84,796 Stereotaxis, Inc. (a)(b) 14,000 54,320 Thoratec Corp. (a) 30,047 804,659 Tomotherapy, Inc. (a) 21,900 60,225 Varian, Inc. (a) 15,435 608,602 Vital Images, Inc. (a) 7,700 87,395 Zoll Medical Corp. (a) 11,322 218,967 -------------- 7,679,666 -------------- MEDICAL SERVICES - 0.3% America Service Group, Inc. (a) 4,800 77,136 Bio-Reference Labs, Inc. (a) 6,300 199,143 eResearch Technology, Inc. (a) 22,750 141,278 Genoptix, Inc. (a) 9,300 297,507 Kendle International, Inc. (a) 7,600 93,024 Nighthawk Radiology Holdings, Inc. (a) 11,300 41,810 Parexel International Corp. (a) 31,294 450,008 RadNet, Inc. (a) 14,700 33,075 -------------- 1,332,981 -------------- METAL FABRICATING - 0.7% Ampco-Pittsburgh Corp. 4,500 105,525 Dynamic Materials Corp. 6,800 131,104 The Eastern Co. 3,600 59,400 Hawk Corp. Class A (a) 2,600 36,010 Haynes International, Inc. (a) 6,400 151,680 Kaydon Corp. 17,826 580,415 L.B. Foster Co. Class A (a) 5,400 162,378 Mueller Industries, Inc. 20,282 421,866 Mueller Water Products, Inc. Series A 61,860 231,356 Northwest Pipe Co. (a) 4,900 170,324 Omega Flex, Inc. 1,300 19,708 RBC Bearings, Inc. (a) 11,600 237,220 RTI International Metals, Inc. (a) 12,413 219,338 Worthington Industries, Inc. 31,700 405,443 -------------- 2,931,767 -------------- METALS & MINERALS AMCOL International Corp. 12,273 264,851 DIVERSIFIED - 0.3% Brush Engineered Materials, Inc. (a) 10,811 181,084 General Moly, Inc. (a) 33,400 74,148 Hecla Mining Co. (a)(b) 113,600 304,448 Minerals Technologies, Inc. 10,053 362,109 Oil-Dri Corp. of America 2,500 37,125 Paramount Gold and Silver Corp. (a) 30,900 46,968 United States Lime & Minerals Inc. (a) 800 33,936 Uranerz Energy Corp. (a) 28,100 52,828 -------------- 1,357,497 --------------
33 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- OFFICE SUPPLIES & ACCO Brands Corp. (a) 28,800 $ 81,216 EQUIPMENT - 0.4% Electronics for Imaging, Inc. (a) 27,139 289,302 HNI Corp. 24,000 433,440 Herman Miller, Inc. 29,400 450,996 Kimball International, Inc. Class B 16,974 105,918 Knoll, Inc. 25,400 192,532 Steelcase, Inc. Class A 37,400 217,668 -------------- 1,771,072 -------------- OFFSHORE DRILLING & OTHER Hercules Offshore, Inc. (a) 46,000 182,620 SERVICES - 0.1% Vantage Drilling Co. (a) 19,200 33,600 -------------- 216,220 -------------- OIL WELL EQUIPMENT Allis-Chalmers Energy, Inc. (a)(b) 14,900 34,419 & SERVICES - 1.3% Basic Energy Services, Inc. (a) 11,300 77,179 Bolt Technology Corp. (a) 4,700 52,828 Boots & Coots, Inc. (a) 46,300 64,357 Bronco Drilling Co., Inc. (a) 12,700 54,356 CARBO Ceramics, Inc. (b) 10,202 348,908 Cal Dive International, Inc. (a) 23,974 206,896 Complete Production Services, Inc. (a) 32,000 203,520 Dawson Geophysical Co. (a) 4,200 125,370 Dril-Quip, Inc. (a) 15,376 585,826 Geokinetics, Inc. (a) 2,600 35,490 Global Industries Ltd. (a) 54,400 307,904 Gulf Island Fabrication, Inc. 6,517 103,164 Hornbeck Offshore Services, Inc. (a) 12,240 261,814 ION Geophysical Corp. (a) 47,446 121,936 Key Energy Services, Inc. (a) 65,300 376,128 Lufkin Industries, Inc. 7,900 332,195 Matrix Service Co. (a) 14,000 160,720 NATCO Group, Inc. Class A (a) 10,700 352,244 Natural Gas Services Group (a) 6,500 86,450 Newpark Resources, Inc. (a) 47,420 135,147 OYO Geospace Corp. (a) 2,200 56,452 Parker Drilling Co. (a) 63,481 275,508 Pioneer Drilling Co. (a) 21,600 103,464 RPC, Inc. 15,200 126,920 Sulphco, Inc. (a)(b) 21,500 19,780 Superior Well Services, Inc. (a) 8,100 48,195 T-3 Energy Services, Inc. (a) 6,600 78,606 Tetra Technologies, Inc. (a) 39,700 316,012 Union Drilling, Inc. (a) 5,600 37,072 Willbros Group, Inc. (a) 21,100 263,961 -------------- 5,352,821 --------------
34 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- OIL: CRUDE PRODUCERS - 1.8% APCO Argentina, Inc. 4,600 $ 88,458 ATP Oil & Gas Corp. (a)(b) 15,200 105,792 Approach Resources, Inc. (a) 7,400 51,060 Arena Resources, Inc. (a) 20,600 656,110 Atlas America, Inc. 18,187 325,001 BPZ Resources, Inc. (a)(b) 42,400 207,336 Berry Petroleum Co. Class A 22,902 425,748 Bill Barrett Corp. (a) 20,900 573,914 Brigham Exploration Co. (a) 43,700 152,513 CREDO Petroleum Corp. (a) 3,300 35,244 Carrizo Oil & Gas, Inc. (a) 15,300 262,395 Cheniere Energy, Inc. (a) 28,000 82,320 Clayton Williams Energy, Inc. (a) 3,100 58,497 Contango Oil & Gas Co. (a) 6,300 267,687 Cubic Energy, Inc. (a) 11,400 12,312 Delta Petroleum Corp. (a) 98,000 189,140 Endeavour International Corp. (a) 60,900 82,824 FX Energy, Inc. (a) 22,400 84,896 GMX Resources Inc. (a) 13,600 144,704 GeoResources, Inc. (a) 3,900 39,780 Goodrich Petroleum Corp. (a) 12,900 317,211 Gran Tierra Energy, Inc. (a) 107,000 369,150 Gulfport Energy Corp. (a) 14,000 95,900 Harvest Natural Resources, Inc. (a) 17,600 77,616 Isramco Inc. (a) 500 53,265 McMoRan Exploration Co. (a) 33,300 198,468 Northern Oil And Gas, Inc. (a) 16,000 101,920 Oilsands Quest, Inc. (a) 91,500 87,840 Panhandle Oil & Gas, Inc. 3,800 74,594 Parallel Petroleum Corp. (a) 22,200 43,068 Penn Virginia Corp. 24,016 393,142 Petroleum Development Corp. (a) 8,000 125,520 Petroquest Energy, Inc. (a)(b) 23,100 85,239 PrimeEnergy Corp. (a) 300 10,743 Rex Energy Corp. (a) 14,600 83,220 Rosetta Resources, Inc. (a) 28,000 245,000 Stone Energy Corp. (a) 17,998 133,545 Swift Energy Co. (a) 16,617 276,673 Toreador Resources Corp. 11,700 78,390 Vaalco Energy, Inc. (a) 31,200 131,976 Venoco, Inc. (a) 9,600 73,632 W&T Offshore, Inc. 17,700 172,398 Warren Resources, Inc. (a) 32,300 79,135 Zion Oil & Gas, Inc. (a) 5,800 61,596 -------------- 7,214,972 --------------
35 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- OIL: INTEGRATED - 0.1% Alon USA Energy, Inc. 3,800 $ 39,330 CVR Energy, Inc. (a) 12,100 88,693 Delek US Holdings, Inc. 6,800 57,664 Western Refining, Inc. (a) 16,600 117,196 -------------- 302,883 -------------- PAINTS & COATINGS - 0.2% Chase Corp. 3,900 46,410 Ferro Corp. 23,976 65,934 H.B. Fuller Co. 25,980 487,645 North American Galvanizing & Coatings (a) 6,100 36,966 -------------- 636,955 -------------- PAPER - 0.3% Boise, Inc. (a) 15,000 25,800 Buckeye Technologies, Inc. (a) 20,698 92,934 Clearwater Paper Corp. (a) 5,599 141,599 Domtar Corp. (a) 22,600 374,708 Kapstone Paper and Packaging Corp. (a) 10,100 47,369 Neenah Paper, Inc. 8,100 71,361 P.H. Glatfelter Co. 24,301 216,279 Schweitzer-Mauduit International, Inc. 8,220 223,666 Wausau Paper Corp. 23,242 156,186 -------------- 1,349,902 -------------- PERSONAL CARE - 0.4% Chattem, Inc. (a)(b) 10,400 708,240 Female Health Co. (a) 7,500 36,000 Helen of Troy Ltd. (a) 16,000 268,640 Mannatech, Inc. 8,400 27,720 Orchids Paper Products Co. (a) 2,900 59,595 USANA Health Sciences, Inc. (a) 3,500 104,055 WD-40 Co. 8,789 254,881 -------------- 1,459,131 -------------- PHARMACEUTICALS - 1.8% Acura Pharmaceuticals, Inc. (a) 4,400 26,312 Adolor Corp. (a) 24,800 43,648 Akorn, Inc. (a) 27,900 33,480 Alkermes, Inc. (a) 50,500 546,410 Allion Healthcare, Inc. (a) 9,900 58,905 American Oriental Bioengineering, Inc. (a) 33,000 174,570 Ardea Biosciences, Inc. (a) 7,000 110,180 Auxilium Pharmaceuticals, Inc. (a)(b) 23,100 724,878 Avanir Pharmaceuticals, Inc. (a) 35,800 79,476 BMP Sunstone Corp. (a) 18,800 89,112 BioCryst Pharmaceuticals, Inc. (a) 13,000 52,390 Biospecifics Technologies (a) 1,700 40,511 Cadence Pharmaceuticals, Inc. (a) 12,700 126,873 Cambrex Corp. (a) 15,585 64,210 Caraco Pharmaceutical Laboratories Ltd. (a) 5,500 16,885 China Sky One Medical, Inc. (a) 6,100 82,228 Depomed, Inc. (a) 27,400 89,050
36 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Durect Corp. (a) 43,000 $ 102,340 Hi-Tech Pharmacal Co., Inc. (a) 3,800 33,820 Impax Laboratories, Inc. (a) 33,300 245,088 Infinity Pharmaceuticals, Inc. (a) 10,800 63,072 Inspire Pharmaceuticals, Inc. (a) 22,600 125,656 Isis Pharmaceuticals, Inc. (a)(b) 49,689 819,869 Ista Pharmaceuticals, Inc. (a) 19,400 81,480 Javelin Pharmaceuticals, Inc. (a) 26,900 33,087 K-V Pharmaceutical Co. Class A (a) 18,500 59,385 Lannett Co., Inc. (a) 4,700 32,195 MAP Pharmaceuticals, Inc. (a) 3,700 45,214 Medicines Co. (a) 28,227 236,825 Medicis Pharmaceutical Corp. Class A 31,200 509,184 MiddleBrook Pharmaceuticals, Inc. (a) 19,500 26,325 Noven Pharmaceuticals, Inc. (a) 13,331 190,633 Obagi Medical Products, Inc. (a) 9,200 67,068 Optimer Pharmaceuticals, Inc. (a)(b) 15,300 229,041 Pain Therapeutics, Inc. (a) 18,600 99,882 Par Pharmaceutical Cos., Inc. (a) 18,600 281,790 Pozen, Inc. (a) 13,800 105,984 Prestige Brands Holdings, Inc. (a) 17,700 108,855 Questcor Pharmaceuticals, Inc. (a) 30,700 153,500 SIGA Technologies, Inc. (a) 14,700 124,068 Salix Pharmaceuticals Ltd. (a) 25,800 254,646 Santarus, Inc. (a) 26,300 74,166 Sciclone Pharmaceuticals, Inc. (a) 22,200 56,832 Spectrum Pharmaceuticals, Inc. (a) 18,600 142,290 SuperGen, Inc. (a) 29,500 59,295 Vical, Inc. (a) 16,100 43,631 Vivus, Inc. (a) 37,300 226,784 Xenoport, Inc. (a) 14,600 338,282 -------------- 7,329,405 -------------- PHOTOGRAPHY - 0.1% CPI Corp. 2,500 42,475 Eastman Kodak Co. 145,700 431,272 -------------- 473,747 -------------- PLASTICS - 0.0% Spartech Corp. 16,354 150,293 -------------- POWER TRANSMISSION EQUIPMENT - Advanced Energy Industries, Inc. (a) 17,612 158,331 0.3% Maxwell Technologies, Inc. (a) 12,000 165,960 Powell Industries, Inc. (a) 4,231 156,843 Regal-Beloit Corp. 19,451 772,594 Vicor Corp. 10,296 74,337 -------------- 1,328,065 -------------- PRECIOUS METALS & MINERALS - Horsehead Holding Corp. (a) 18,300 136,335 0.1% Stillwater Mining Co. (a) 21,564 123,130 -------------- 259,465 --------------
37 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- PRINTING & COPYING SERVICES - Cenveo, Inc. (a) 25,800 $ 109,134 0.3% VistaPrint Ltd. (a) 22,400 955,360 -------------- 1,064,494 -------------- PRODUCER DURABLES Blount International, Inc. (a) 20,500 176,505 MISCELLANEOUS - 0.1% China Fire & Security Group, Inc. (a) 7,500 91,275 -------------- 267,780 -------------- PRODUCTION TECHNOLOGY ATMI, Inc. (a)(c) 16,857 261,789 EQUIPMENT - 1.0% Brooks Automation, Inc. (a) 34,378 154,013 Cognex Corp. 21,256 300,347 Cohu, Inc. 12,518 112,412 Cymer, Inc. (a) 15,900 472,707 Electro Scientific Industries, Inc. (a) 14,561 162,792 Entegris, Inc. (a) 60,292 163,994 FEI Co. (a) 20,355 466,130 Intevac, Inc. (a) 11,700 101,907 Kulicke & Soffa Industries, Inc. (a) 32,756 112,353 MKS Instruments, Inc. (a) 26,300 346,897 Photronics, Inc. (a) 22,479 91,040 Rudolph Technologies, Inc. (a) 16,173 89,275 Semitool, Inc. (a) 11,941 55,167 Tessera Technologies, Inc. (a) 26,300 665,127 Ultratech, Inc. (a) 12,590 154,983 Veeco Instruments, Inc. (a) 17,227 199,661 -------------- 3,910,594 -------------- PUBLISHING - 0.2% Courier Corp. 5,350 81,641 Dolan Media Co. (a) 15,700 200,803 Journal Communications, Inc. Class A 20,900 21,945 Martha Stewart Living Omnimedia, Inc. Class A (a) 14,182 43,397 Primedia, Inc. 13,400 26,934 Scholastic Corp. 12,660 250,541 -------------- 625,261 -------------- RADIO & TV BROADCASTERS - 0.0% Crown Media Holdings, Inc. Class A (a) 5,798 9,683 Fisher Communications, Inc. 3,100 39,649 Lin TV Corp. Class A (a) 14,400 24,192 Outdoor Channel Holdings, Inc. (a) 8,100 47,790 Sinclair Broadcast Group, Inc. Class A 25,964 50,370 -------------- 171,684 -------------- RAILROAD EQUIPMENT - 0.1% American Railcar Industries, Inc. 4,900 40,474 Freightcar America, Inc. 6,400 107,584 Greenbrier Cos., Inc. 9,100 65,429 Portec Rail Products, Inc. 3,100 30,535 -------------- 244,022 -------------- RAILROADS - 0.1% Genesee & Wyoming, Inc. Class A (a) 17,675 468,564 --------------
38 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- REAL ESTATE - 0.2% American Realty Investors, Inc. (a) 1,000 $ 10,200 Avatar Holdings, Inc. (a) 3,200 58,144 China Housing & Land Development (a) 15,200 87,552 Consolidated-Tomoka Land Co. 2,900 101,732 Forestar Group, Inc. (a)(b) 18,928 224,865 Griffin Land & Nurseries, Inc. 1,600 50,048 Tejon Ranch Co. (a) 5,815 154,039 United Capital Corp. (a) 700 12,824 -------------- 699,404 -------------- REAL ESTATE INVESTMENT TRUSTS Acadia Realty Trust (c) 21,113 275,525 (REITS) - 5.2% Agree Realty Corp. 4,100 75,153 Alexander's, Inc. 1,067 287,663 American Campus Communities, Inc. 27,703 614,453 American Capital Agency Corp. 5,400 124,038 Anthracite Capital, Inc. (d) 33,000 20,460 Anworth Mortgage Asset Corp. 54,400 392,224 Ashford Hospitality Trust, Inc. 38,280 107,567 Associated Estates Realty Corp. 7,800 46,488 BioMed Realty Trust, Inc. (c) 52,220 534,211 CBL & Associates Properties, Inc. 37,300 201,047 CapLease, Inc. 23,700 65,412 Capstead Mortgage Corp. 34,800 442,308 Care Investment Trust, Inc. 6,200 32,240 Cedar Shopping Centers, Inc. 20,800 94,016 Cogdell Spencer, Inc. 14,700 63,063 Colonial Properties Trust 26,100 193,140 Cousins Properties, Inc. (b) 19,881 168,989 DCT Industrial Trust, Inc. 94,210 384,377 Developers Diversified Realty Corp. 72,700 354,776 DiamondRock Hospitality Co. 56,780 355,443 Dupont Fabros Technology, Inc. 14,800 139,416 Dynex Capital Corp. 5,500 45,100 EastGroup Properties, Inc. 13,327 440,058 Education Realty Trust, Inc. 15,300 65,637 Entertainment Properties Trust 18,980 390,988 Equity Lifestyle Properties, Inc. 11,194 416,193 Equity One, Inc. (b) 16,700 221,442 Extra Space Storage, Inc. 46,050 384,518 FelCor Lodging Trust, Inc. 34,570 85,042 First Industrial Realty Trust, Inc. 23,600 102,660 First Potomac Realty Trust 14,700 143,325 Franklin Street Properties Corp. 31,600 418,700 Getty Realty Corp. 9,200 173,604 Gladstone Commercial Corp. 5,100 66,096 Glimcher Realty Trust 20,256 58,742 Gramercy Capital Corp. (a) 22,802 36,711
39 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Hatteras Financial Corp. 19,200 $ 548,928 Healthcare Realty Trust, Inc. 31,500 530,145 Hersha Hospitality Trust 22,800 56,544 Highwoods Properties, Inc. 38,400 859,008 Home Properties, Inc. 17,520 597,432 Inland Real Estate Corp. 36,200 253,400 Investors Real Estate Trust 32,900 292,481 iStar Financial, Inc. 55,500 157,620 Kilroy Realty Corp. 19,800 406,692 Kite Realty Group Trust 20,740 60,561 LTC Properties, Inc. 12,400 253,580 LaSalle Hotel Properties 27,620 340,831 Lexington Corporate Properties Trust 45,138 153,469 MFA Financial, Inc. 120,700 835,244 Medical Properties Trust, Inc. 42,900 260,403 Mid-America Apartment Communities, Inc. 15,129 555,386 Mission West Properties, Inc. 8,100 55,323 Monmouth Real Estate Investment Corp. Class A 10,400 60,944 National Health Investors, Inc. 13,729 366,702 National Retail Properties, Inc. 42,475 736,941 NorthStar Realty Finance Corp. (b) 31,764 89,891 Omega Healthcare Investors, Inc. 44,100 684,432 PS Business Parks, Inc. 8,108 392,752 Parkway Properties, Inc. 11,604 150,852 Pennsylvania Real Estate Investment Trust (b) 19,132 95,660 Post Properties, Inc. 23,686 318,340 Potlatch Corp. 21,647 525,806 RAIT Investment Trust 34,710 47,553 Ramco-Gershenson Properties Trust 8,500 85,085 Redwood Trust, Inc. 41,195 608,038 Resource Capital Corp. 11,100 35,520 Saul Centers, Inc. 3,122 92,318 Sovran Self Storage, Inc. 12,080 297,168 Strategic Hotel Capital, Inc. 38,350 42,569 Sun Communities, Inc. 8,843 121,857 Sunstone Hotel Investors, Inc. 40,021 214,112 Tanger Factory Outlet Centers, Inc. 19,522 633,098 Transcontinental Realty Investors, Inc. (a) 1,400 16,898 U-Store-It Trust 26,670 130,683 UMH Properties, Inc. 4,200 33,474 Universal Health Realty Income Trust 6,227 196,275 Urstadt Biddle Properties, Inc. Class A 10,900 153,472 Walter Investment Management Corp. (a) 10,000 132,800 Washington Real Estate Investment Trust 31,665 708,346 Winthrop Realty Trust 6,040 53,937 -------------- 21,263,395 --------------
40 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- RECREATIONAL VEHICLES & BOATS Brunswick Corp. 47,200 $ 203,904 - - 0.2% Drew Industries, Inc. (a) 9,900 120,483 Marine Products Corp. 4,931 18,491 Polaris Industries, Inc. (b) 16,100 517,132 Winnebago Industries, Inc. 15,390 114,348 -------------- 974,358 -------------- RENTAL & LEASING SERVICES: Amerco, Inc. (a) 4,800 178,320 CONSUMER - 0.3% Avis Budget Group, Inc. (a) 55,900 315,835 Dollar Thrifty Automotive Group, Inc. (a) 11,695 163,145 Rent-A-Center, Inc. (a) 35,300 629,399 -------------- 1,286,699 -------------- RESTAURANTS - 1.5% AFC Enterprises, Inc. (a) 13,300 89,775 BJ's Restaurants, Inc. (a) 10,200 172,074 Benihana, Inc. Class A (a) 7,900 49,928 Bob Evans Farms, Inc. 16,380 470,761 Buffalo Wild Wings, Inc. (a)(b) 9,650 313,818 CEC Entertainment, Inc. (a) 12,150 358,182 CKE Restaurants, Inc. 27,400 232,352 California Pizza Kitchen, Inc. (a) 10,950 145,526 Caribou Coffee Co., Inc. (a) 2,900 18,618 Carrols Restaurant Group, Inc. (a) 5,400 35,964 The Cheesecake Factory, Inc. (a) 32,100 555,330 Cracker Barrel Old Country Store, Inc. 12,100 337,590 Denny's Corp. (a) 51,400 110,510 DineEquity, Inc. 9,448 294,683 Domino's Pizza, Inc. (a) 20,550 153,920 Einstein Noah Restaurant Group, Inc. (a) 2,100 18,165 Frisch's Restaurants, Inc. 1,300 38,402 Jack in the Box, Inc. (a) 30,536 685,533 Krispy Kreme Doughnuts, Inc. (a) 31,300 93,900 Landry's Restaurants, Inc. (a) 3,296 28,346 Luby's, Inc. (a) 10,200 41,412 McCormick & Schmick's Seafood Restaurants, Inc. (a) 7,300 55,553 O'Charleys, Inc. 10,084 93,277 P.F. Chang's China Bistro, Inc. (a) 12,708 407,418 Papa John's International, Inc. (a) 11,696 289,944 Red Robin Gourmet Burgers, Inc. (a) 8,300 155,625 Ruby Tuesday, Inc. (a) 28,200 187,812 Ruth's Hospitality Group, Inc. (a) 10,600 38,902 Sonic Corp. (a) 32,520 326,176 The Steak'n Shake Co. (a)(b) 12,328 107,747 Texas Roadhouse, Inc. Class A (a) 26,700 291,297 -------------- 6,198,540 --------------
41 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- SCIENTIFIC INSTRUMENTS: CIRCOR International, Inc. 9,100 $ 214,851 CONTROL & FILTER - 0.7% China Security & Surveillance Technology, Inc. (a)(b) 17,200 129,688 ESCO Technologies, Inc. (a) 14,032 628,634 Energy Recovery, Inc. (a) 19,000 134,520 Flanders Corp. (a) 8,200 50,102 The Gorman-Rupp Co. 7,697 155,248 ICx Technologies, Inc. (a) 6,100 36,600 L-1 Identity Solutions, Inc. (a) 39,428 305,173 Mine Safety Appliances Co. 13,926 335,617 PMFG, Inc. (a) 7,000 61,670 RAE Systems, Inc. (a) 26,700 36,846 Robbins & Myers, Inc. 14,724 283,437 Sun Hydraulics, Inc. 6,150 99,446 Watts Water Technologies, Inc. Class A 15,536 334,645 X-Rite, Inc. (a) 17,500 26,250 -------------- 2,832,727 -------------- SCIENTIFIC INSTRUMENTS: A.O. Smith Corp. 12,081 393,478 ELECTRICAL - 1.1% AZZ, Inc. (a) 6,500 223,665 Advanced Battery Technologies, Inc. (a)(b) 25,100 100,902 American Superconductor Corp. (a)(b) 23,100 606,375 Baldor Electric Co. 25,201 599,532 Broadwind Energy, Inc. (a) 16,300 184,516 China BAK Battery, Inc. (a) 20,100 59,295 DDi Corp. (a) 9,200 41,676 Ener1, Inc. (a)(b) 24,800 135,408 EnerSys (a) 21,400 389,266 Franklin Electric Co., Inc. 12,360 320,371 GrafTech International Ltd. (a) 63,944 723,207 Littelfuse, Inc. (a) 11,660 232,734 Preformed Line Products Co. 1,100 48,466 SatCon Technology Corp. (a) 31,100 55,980 Taser International, Inc. (a) 33,100 150,936 Ultralife Batteries, Inc. (a) 6,700 48,039 Valence Technology, Inc. (a) 27,400 49,046 -------------- 4,362,892 -------------- SCIENTIFIC INSTRUMENTS: GAUGES Badger Meter, Inc. 7,900 323,900 & METERS - 0.1% Faro Technologies, Inc. (a) 8,800 136,664 Measurement Specialties, Inc. (a) 7,700 54,285 Smartheat, Inc. (a) 4,400 30,140 Zygo Corp. (a) 8,000 37,280 -------------- 582,269 -------------- SCIENTIFIC INSTRUMENTS: American Ecology Corp. 10,100 180,992 POLLUTION CONTROL - 0.5% Clean Harbors, Inc. (a) 10,800 583,092 Darling International, Inc. (a) 44,900 296,340 EnergySolutions, Inc. 41,100 378,120 Fuel Tech, Inc. (a)(b) 9,900 96,030
42 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Heritage Crystal Clean, Inc. (a) 2,000 $ 24,300 Met-Pro Corp. 7,800 84,396 Metalico, Inc. (a) 14,400 67,104 Perma-Fix Environmental Services (a) 29,900 72,358 Team, Inc. (a) 10,100 158,267 Waste Services, Inc. (a) 8,033 41,611 -------------- 1,982,610 -------------- SECURITIES BROKERAGE & BGC Partners, Inc. 26,523 100,522 SERVICES - 0.9% E*Trade Financial Corp. (a) 263,200 336,896 GFI Group, Inc. 34,700 233,878 Gladstone Investment Corp. 11,700 56,511 International Assets Holding Corp., Inc. (a) 2,500 37,175 KBW, Inc. (a)(b) 18,500 532,060 Knight Capital Group, Inc. Class A (a) 49,700 847,385 LaBranche & Co., Inc. (a) 31,200 134,160 MF Global Ltd. (a) 51,600 305,988 MarketAxess Holdings, Inc. (a) 17,000 162,010 optionsXpress Holdings, Inc. 22,600 350,978 Penson Worldwide, Inc. (a) 11,100 99,345 SWS Group, Inc. 12,906 180,297 TradeStation Group, Inc. (a) 17,300 146,358 -------------- 3,523,563 -------------- SEMICONDUCTORS & COMPONENTS - Actel Corp. (a) 14,016 150,391 2.6% Advanced Analogic Technologies, Inc. (a) 23,000 105,570 Amkor Technology, Inc. (a) 58,400 276,232 Anadigics, Inc. (a) 33,800 141,622 Applied Micro Circuits Corp. (a) 36,200 294,306 Atheros Communications, Inc. (a)(b) 32,400 623,376 CSR Plc (a) 21,415 123,791 Cavium Networks, Inc. (a) 19,100 321,071 Ceva, Inc. (a) 10,600 92,008 Cirrus Logic, Inc. (a) 34,900 157,050 DSP Group, Inc. (a) 12,283 83,033 Diodes, Inc. (a) 16,812 262,940 Emcore Corp. (a) 40,300 50,778 Entropic Communications, Inc. (a) 30,900 69,525 Exar Corp. (a) 19,627 141,118 Formfactor, Inc. (a) 26,900 463,756 Hittite Microwave Corp. (a) 11,300 392,675 IXYS Corp. 12,137 122,826 Intellon Corp. (a) 12,700 53,975 Kopin Corp. (a) 36,100 132,487 Lattice Semiconductor Corp. (a) 60,800 114,304 MIPS Technologies, Inc. (a) 23,600 70,800 Micrel, Inc. 24,200 177,144
43 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Microsemi Corp. (a) 43,390 $ 598,782 Microtune, Inc. (a) 26,800 62,712 Monolithic Power Systems, Inc. (a) 17,900 401,139 Netlogic Microsystems, Inc. (a) 9,900 360,954 Omnivision Technologies, Inc. (a) 26,800 278,452 PLX Technology, Inc. (a) 17,800 67,106 ParkerVision, Inc. (a) 15,500 47,430 Pericom Semiconductor Corp. (a) 14,393 121,189 Power Integrations, Inc. 12,300 292,617 RF Micro Devices, Inc. (a) 143,884 541,004 Rubicon Technology, Inc. (a) 6,700 95,676 Semtech Corp. (a) 32,500 517,075 Sigma Designs, Inc. (a) 14,200 227,768 Silicon Image, Inc. (a) 39,976 91,945 Silicon Storage Technology, Inc. (a) 42,458 79,396 Skyworks Solutions, Inc. (a) 89,133 871,721 Standard Microsystems Corp. (a) 11,810 241,515 Supertex, Inc. (a) 5,867 147,320 Techwell, Inc. (a) 7,800 66,300 TriQuint Semiconductor, Inc. (a) 78,836 418,619 Trident Microsystems, Inc. (a) 33,700 58,638 Virage Logic Corp. (a) 10,300 46,350 Volterra Semiconductor Corp. (a) 12,100 158,994 White Electronic Designs Corp. (a) 11,300 52,319 Zoran Corp. (a) 27,608 300,927 -------------- 10,566,726 -------------- SHIPPING - 0.7% American Commercial Lines, Inc. (a) 4,850 75,078 DHT Maritime, Inc. 24,000 125,040 Eagle Bulk Shipping, Inc. (b) 25,200 118,188 Genco Shipping & Trading Ltd. (b) 13,800 299,736 General Maritime Corp. 26,040 257,535 Golar LNG Ltd. 18,300 156,465 Gulfmark Offshore, Inc. (a) 12,500 345,000 Horizon Lines, Inc. Class A (b) 16,100 62,146 International Shipholding Corp. 2,900 78,184 Knightsbridge Tankers Ltd. 9,000 122,760 Nordic American Tanker Shipping Ltd. 22,400 712,768 Ship Finance International Ltd. 23,900 263,617 TBS International Ltd. (a) 8,000 62,480 Teekay Tankers Ltd. Class A 4,800 44,592 Ultrapetrol Bahamas Ltd. (a) 11,500 50,945 -------------- 2,774,534 --------------
44 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- STEEL - 0.1% China Precision Steel, Inc. (a)(b) 19,200 $ 47,616 General Steel Holdings, Inc. (a) 7,100 28,187 Olympic Steel, Inc. 4,800 117,456 Sutor Technology Group Ltd. (a) 4,100 13,407 Universal Stainless & Alloy Products, Inc. (a) 3,600 58,572 -------------- 265,238 -------------- SUGAR - 0.0% Imperial Sugar Co. New Shares 5,800 70,238 -------------- SYNTHETIC FIBERS & CHEMICALS - - 0.0% Zoltek Cos., Inc. (a)(b) 14,800 143,856 TECHNOLOGY: MISCELLANEOUS - Benchmark Electronics, Inc. (a) 35,329 508,738 0.3% CTS Corp. 17,968 117,690 LaBarge, Inc. (a) 6,400 59,328 Plexus Corp. (a) 21,098 431,665 Vocus, Inc. (a) 8,900 175,864 -------------- 1,293,285 -------------- TELECOMMUNICATIONS EQUIPMENT - ADC Telecommunications, Inc. (a) 51,100 406,756 0.5% Applied Signal Technology, Inc. 6,900 176,019 Arris Group, Inc. (a) 66,300 806,208 Cogo Group, Inc. (a) 12,500 74,625 Communications System, Inc. 2,800 27,440 Mastec, Inc. (a) 27,500 322,300 OpNext, Inc. (a) 14,400 30,816 Powerwave Technologies, Inc. (a) 66,177 106,545 Symmetricom, Inc. (a) 24,200 139,634 UTStarcom, Inc. (a) 57,700 94,051 -------------- 2,184,394 -------------- TEXTILE PRODUCTS - 0.1% Interface, Inc. Class A 27,821 172,490 Unifi, Inc. (a) 23,200 32,944 -------------- 205,434 -------------- TEXTILES APPAREL & SHOES - American Apparel, Inc. (a) 18,200 66,248 1.9% Carter's, Inc. (a) 30,100 740,761 Cherokee, Inc. 4,000 79,280 Columbia Sportswear Co. 6,100 188,612 Crocs, Inc. (a) 44,800 152,320 Deckers Outdoor Corp. (a) 7,000 491,890 FGX International Holdings Ltd. (a) 7,300 83,074 G-III Apparel Group, Ltd. (a) 7,000 80,430 Iconix Brand Group, Inc. (a) 32,000 492,160 J. Crew Group, Inc. (a)(b) 27,070 731,431 Jones Apparel Group, Inc. 45,300 486,069 K-Swiss, Inc. Class A 13,996 118,966 Kenneth Cole Productions, Inc. Class A 4,892 34,391 Liz Claiborne, Inc. 52,800 152,064 lululemon athletica, inc. (a) 21,500 280,145 Maidenform Brands, Inc. (a) 9,500 108,965 Oxford Industries, Inc. 7,742 90,194
45 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Perry Ellis International, Inc. (a) 6,650 $ 48,412 Quiksilver, Inc. (a) 68,500 126,725 Skechers U.S.A., Inc. Class A (a) 17,755 173,466 Steven Madden Ltd. (a) 8,068 205,331 Timberland Co. Class A (a) 22,700 301,229 True Religion Apparel, Inc. (a) 13,900 309,970 Under Armour, Inc. Class A (a)(b) 17,700 396,126 Volcom, Inc. (a) 9,600 120,000 The Warnaco Group, Inc. (a) 24,400 790,560 Weyco Group, Inc. 3,500 80,815 Wolverine World Wide, Inc. 26,308 580,354 -------------- 7,509,988 -------------- TOBACCO - 0.2% Alliance One International, Inc. (a) 47,555 180,709 Star Scientific, Inc. (a)(b) 38,500 34,265 Universal Corp. 13,356 442,217 Vector Group Ltd. 19,991 285,671 -------------- 942,862 -------------- TOYS - 0.1% Jakks Pacific, Inc. (a) 14,930 191,552 Leapfrog Enterprises, Inc. (a) 18,146 41,554 RC2 Corp. (a) 9,313 123,211 -------------- 356,317 -------------- TRANSPORTATION MISCELLANEOUS - Dynamex, Inc. (a) 4,700 72,333 0.2% HUB Group, Inc. Class A (a) 20,200 416,928 Odyssey Marine Exploration, Inc. (a) 27,500 44,000 Pacer International, Inc. 18,700 41,701 Textainer Group Holdings Ltd. 4,566 52,463 Todd Shipyards Corp. 3,600 59,940 -------------- 687,365 -------------- TRUCKERS - 0.8% Arkansas Best Corp. 13,341 351,535 Celadon Group, Inc. (a) 11,800 99,002 Forward Air Corp. 15,432 329,010 Heartland Express, Inc. 28,373 417,651 Knight Transportation, Inc. (b) 30,362 502,491 Marten Transport Ltd. (a) 8,250 171,270 Old Dominion Freight Line, Inc. (a) 14,825 497,675 Patriot Transportation Holding, Inc. (a) 600 43,758 Saia, Inc. (a) 7,181 129,330 USA Truck, Inc. (a) 4,800 64,944 Universal Truckload Services, Inc. 2,921 45,714 Werner Enterprises, Inc. 22,800 413,136 YRC Worldwide, Inc. (a)(b) 30,000 51,900 -------------- 3,117,416 --------------
46 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- UTILITIES: ELECTRICAL - 1.9% Allete, Inc. (c) 14,366 $ 413,022 Avista Corp. 28,975 516,045 Black Hills Corp. 20,700 475,893 CH Energy Group, Inc. 8,589 401,106 Central Vermont Public Service Corp. 6,100 110,410 Cleco Corp. 32,267 723,426 El Paso Electric Co. (a) 24,008 335,152 The Empire District Electric Co. 18,268 301,787 IDACORP, Inc. 25,000 653,500 MGE Energy, Inc. 12,245 410,820 NorthWestern Corp. 19,200 436,992 Otter Tail Corp. 19,386 423,390 PNM Resources, Inc. 46,300 495,873 Pike Electric Corp. (a) 8,900 107,245 Portland General Electric Co. 40,700 792,836 UIL Holdings Corp. 15,267 342,744 Unisource Energy Corp. 18,883 501,155 Unitil Corp. 6,200 127,844 -------------- 7,569,240 -------------- UTILITIES: GAS DISTRIBUTORS - Chesapeake Utilities Corp. 3,600 117,108 1.4% Florida Public Utilities Co. 3,000 42,090 The Laclede Group, Inc. 11,848 392,524 New Jersey Resources Corp. 22,561 835,659 Nicor, Inc. 24,100 834,342 Northwest Natural Gas Co. 14,199 629,300 Piedmont Natural Gas Co. (b) 39,100 942,701 South Jersey Industries, Inc. 16,232 566,334 Southwest Gas Corp. 23,690 526,155 WGL Holdings, Inc. 26,700 854,934 -------------- 5,741,147 -------------- UTILITIES: TELECOMMUNICATIONS Alaska Communications Systems Group, Inc. 23,600 172,752 - - 1.2% Atlantic Tele-Network, Inc. 4,800 188,592 Cbeyond Communications, Inc. (a) 12,500 179,375 Centennial Communications Corp. (a) 46,226 386,449 Cincinnati Bell, Inc. (a) 116,000 329,440 Cogent Communications Group, Inc. (a) 23,700 193,155 Consolidated Communications Holdings, Inc. 12,435 145,614 D&E Communications, Inc. 7,800 79,794 FairPoint Communications, Inc. 47,893 28,736 Fibernet Telecom Group, Inc. (a) 2,800 34,776 General Communication, Inc. Class A (a) 23,739 164,511 Global Crossing Ltd. (a) 15,500 142,290 HickoryTech Corp. 6,400 49,152 Ibasis, Inc. (a) 13,700 17,947 Incontact, Inc. (a) 12,900 35,346
47 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- Iowa Telecommunications Services, Inc. 17,500 $ 218,925 iPCS, Inc. (a) 9,100 136,136 j2 Global Communications, Inc. (a) 23,900 539,184 NTELOS Holdings Corp. 16,100 296,562 Neutral Tandem, Inc. (a) 17,400 513,648 PAETEC Holding Corp. (a) 65,220 176,094 Premiere Global Services, Inc. (a) 32,500 352,300 RCN Corp. (a) 19,500 116,415 Shenandoah Telecom Co. 12,600 255,654 SureWest Communications (a) 8,400 87,948 USA Mobility, Inc. 12,420 158,479 Virgin Mobile USA, Inc. (a) 20,300 81,606 -------------- 5,080,880 -------------- UTILITIES: WATER - 0.4% American States Water Co. 9,585 332,024 Artesian Resources Corp. Class A 4,000 63,720 California Water Service Group 10,496 386,673 Connecticut Water Service, Inc. 4,500 97,605 Consolidated Water Co., Inc. 7,700 122,045 Middlesex Water Co. 7,200 104,040 Pennichuck Corp. 2,200 50,160 SJW Corp. 6,948 157,720 Southwest Water Co. 13,083 72,218 York Water Co. 6,900 105,777 -------------- 1,491,982 -------------- WHOLESALE & INTERNATIONAL Brightpoint, Inc. (a) 26,730 167,597 TRADE - 0.2% Chindex International, Inc. (a) 7,100 87,827 Houston Wire & Cable Co. 9,400 111,954 MWI Veterinary Supply, Inc. (a) 6,000 209,160 United Stationers, Inc. (a) 12,669 441,895 -------------- 1,018,433 -------------- TOTAL COMMON STOCKS - 98.5% 399,826,107 -------------- INVESTMENT COMPANIES BlackRock Kelso Capital Corp. (d) 6,700 41,741 Gladstone Capital Corp. 11,100 83,583 Hercules Technology Growth Capital, Inc. 18,262 152,670 Kayne Anderson Energy Development Co. 5,400 71,604 Pennantpark Investment Corp. 11,300 80,230 Prospect Capital Corp. 22,400 206,080 -------------- TOTAL INVESTMENT COMPANIES - 0.1% 635,908 -------------- WARRANTS (e) ALTERNATIVE ENERGY - 0.0% GreenHunter Energy, Inc. (expires 8/27/11) (b)(f) 180 -- -------------- COMMUNICATIONS TECHNOLOGY - Lantronix, Inc. (expires 2/09/11) 138 -- 0.0% -------------- TOTAL WARRANTS - 0.0% -- --------------
48 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY OTHER INTERESTS (g) SHARES VALUE - -------- ------------------------------------------------- -------------- -------------- OIL: CRUDE PRODUCERS - 0.0% PetroCorp, Inc. (Escrow Shares) 500 $ -- -------------- TOTAL OTHER INTERESTS - 0.0% -- -------------- TOTAL LONG-TERM INVESTMENTS (COST - $457,409,135) - 98.6% 400,462,015 -------------- SHORT-TERM SECURITIES BlackRock Liquidity Funds, TempFund, 0.45% (d)(h) 12,940,007 12,940,007 --------------
BENEFICIAL INTEREST (000) -------------- BlackRock Liquidity Series, LLC Money Market $ 29,126 29,126,454 -------------- Series, 0.55% (d)(h)(i) TOTAL SHORT-TERM SECURITIES (COST - $42,066,461) - 10.4% 42,066,461 -------------- TOTAL INVESTMENTS (COST - $499,475,596*) - 109.0% 442,528,476 LIABILITIES IN EXCESS OF OTHER ASSETS - (9.0)% (36,541,058) -------------- NET ASSETS - 100.0% $ 405,987,418 ==============
* The cost and unrealized appreciation (depreciation) of investments as June 30, 2009, as computed for federal income tax purposes, were as follows: Aggregate cost $ 520,628,821 ============= Gross unrealized appreciation $ 35,770,593 Gross unrealized depreciation (113,870,938) ------------- Net unrealized depreciation $ (78,100,345) =============
(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:
AFFILIATE PURCHASE COST SALE COST REALIZED LOSS INCOME - --------- ------------- ----------- ------------- -------- Anthracite Capital, Inc. $ 11,193 -- -- -- BlackRock Kelso Capital Corp $ 11,712 $ 3,084 $(1,902) $ 1,856 BlackRock Liquidity Funds, TempFund $12,940,007* -- -- $ 19,336 BlackRock Liquidity Series, LLC Cash Sweep Series -- $33,514,609** -- $ 37,506 BlackRock Liquidity Series, LLC Money Market Series $ 4,482,252* -- -- $251,505
* 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) Restricted security as to resale, representing 0.0% of net assets were as follows:
ISSUE ACQUISITION DATE COST VALUE - ----- ---------------- ---- ----- GreenHunter Energy, Inc. 6/27/08 $-- $--
49 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (g) Other interests represent beneficial interest in liquidation trusts and other reorganization entities and are non-income producing. (h) Represents the current yield as of report date. (i) Security was purchased with the cash proceeds from securities loans. - - Financial futures contracts purchased as of June 30, 2009 were as follows:
CONTRACTS ISSUE EXPIRATION DATE FACE VALUE UNREALIZED DEPRECIATION - --------- --------------------- --------------- ---------- ----------------------- 179 Russell 2000 ICE MINI September 2009 $9,132,385 $(53,505)
- - 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 Accounting Standards Board Statement of Financial Accounting Standards No. 157, "Fair Value Measurements", 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 active, quoted prices for identical or 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 circumstances, to the extent observable inputs are not available (including the Series' own assumptions 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, 2009 in determining the fair valuation of the Series' investments:
INVESTMENTS IN VALUATION SECURITIES INPUTS ASSETS - --------- -------------- Level 1 - Long-Term Investments(1) $413,278,110 ------------ Level 2 Long-Term Investments Semiconductors & Components 123,791 Short-Term Securities 29,126,454 ------------ Level 2 - Total 29,250,245 ------------ Level 3 Long-Term Investments Asset Management & Custodian 121 ------------ TOTAL $442,528,476 ============
(1) See above Schedule of Investments for values in each industry excluding industries in Level 2 and Level 3 within the table. 50 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
OTHER FINANCIAL VALUATION INSTRUMENTS(2) INPUT LIABILITIES - --------- --------------- Level 1 $(53,505) Level 2 -- Level 3 -- -------- $(53,505) ========
(2) Other financial instruments are financial futures contracts which are shown at the unrealized appreciation/depreciation on the instrument. The following is a reconciliation of investments for unobservable inputs (Level 3) used in determining fair value:
INVESTMENTS IN SECURITIES ASSET MANAGEMENT & CUSTODIAN ---------------- Balance, as of December 31, 2008 -- Accrued discounts/premiums -- Realized gain (loss) -- Change in unrealized appreciation/depreciation -- Net purchases (sales) -- Net transfer in $121 ---- Balance, as of June 30, 2009 $121 ====
51 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ AUSTRALIA - 7.2% AGL Energy Ltd. 38,940 $ 421,389 AMP Ltd. 173,614 680,215 AXA Asia Pacific Holdings Ltd. 77,231 241,243 Alumina Ltd. 217,261 249,726 Amcor Ltd. 71,378 287,014 Aristocrat Leisure Ltd. 22,855 69,637 Arrow Energy Ltd. (a) 53,661 152,410 Australia & New Zealand Banking Group Ltd. 202,842 2,688,161 Australian Stock Exchange Ltd. 14,934 443,713 BHP Billiton Ltd. 291,694 7,991,219 Bendigo and Adelaide Bank Ltd. 20,287 113,353 Billabong International Ltd. 17,551 123,354 BlueScope Steel Ltd. 158,176 320,734 Boral Ltd. 50,019 163,190 Brambles Ltd. 120,625 577,514 CFS Retail Property Trust 148,618 196,888 CSL Ltd. 52,469 1,356,649 CSR Ltd. 111,831 152,142 Caltex Australia Ltd. 12,081 134,165 Coca-Cola Amatil Ltd. 47,908 332,021 Cochlear Ltd. 4,927 228,702 Commonwealth Bank of Australia Ltd. 127,873 4,008,295 Computershare Ltd. 36,358 263,522 Crown Ltd. 40,471 235,863 DB RREEF Trust 387,384 233,072 Energy Resources of Australia Ltd. 6,563 123,149 Fairfax Media Ltd. 176,367 172,828 Fortescue Metals Group Ltd. (a) 109,670 332,401 Foster's Group Ltd. 166,479 689,792 General Property Trust 783,183 306,476 Goodman Fielder Ltd. 77,271 81,061 Harvey Norman Holdings Ltd. 44,194 117,153 Incitec Pivot Ltd. 143,533 273,158 Insurance Australia Group Ltd. 170,317 480,905 James Hardie Industries NV 35,273 119,020 Leighton Holdings Ltd. 12,576 237,203 Lend Lease Corp., Ltd. 30,026 168,972 Lion Nathan Ltd. 25,803 240,335 Macquarie Airports Group 59,427 110,478 Macquarie Group Ltd. 27,114 848,848 Macquarie Infrastructure Group 207,733 238,803 Metcash Ltd. 65,775 228,308 Mirvac Group 209,500 181,539 National Australia Bank Ltd. 166,752 3,004,240 Newcrest Mining Ltd. 41,901 1,024,114 Nufarm Ltd. 15,187 112,029 OZ Mineral Ltd. 274,214 201,030
1 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ OneSteel Ltd. 109,321 $ 225,964 Orica Ltd. 31,344 545,526 Origin Energy Ltd. 76,011 894,984 Paladin Resources Ltd. (a) 52,047 204,627 Perpetual Trustees Australia Ltd. 1,777 40,749 QBE Insurance Group Ltd. 86,323 1,381,347 Qantas Airways Ltd. 92,627 149,991 Rio Tinto Ltd. 37,896 1,582,966 SP AusNet 91,032 56,444 Santos Ltd. 71,378 836,308 Sims Metal Management Ltd. 13,208 275,028 Sonic Healthcare Ltd. 31,035 307,840 Stockland 197,278 508,885 Suncorp-Metway Ltd. 113,704 611,331 Tabcorp Holdings Ltd. 51,256 294,985 Tatts Group Ltd. 105,192 215,524 Telstra Corp. Ltd. 372,667 1,016,941 Toll Holdings Ltd. 56,456 283,316 Transurban Group 95,317 320,263 Wesfarmers Ltd. Ordinary Shares 87,794 1,598,517 Wesfarmers Ltd. Partially Protected Shares 12,455 235,386 Westfield Group 175,284 1,604,254 Westpac Banking Corp. 252,957 4,115,532 Woodside Petroleum Ltd. 42,593 1,471,421 Woolworths Ltd. 106,581 2,261,219 WorleyParsons Ltd. 14,159 269,848 ------------ 52,265,229 ------------ AUSTRIA - 0.3% Erste Bank der Oesterreichischen Sparkassen AG 16,773 455,359 OMV AG 14,239 535,313 Raiffeisen International Bank Holding AG 4,730 165,121 Telekom Austria AG 30,350 475,149 Verbund - Oesterreichische Elektrizitaetswirtschafts AG 5,911 301,549 Vienna Insurance Group 2,534 110,464 Voestalpine AG 10,194 280,784 ------------ 2,323,739 ------------ BELGIUM - 0.9% Anheuser-Busch InBev NV 63,548 2,304,224 Anheuser-Busch InBev NV VVPR Strip (a) 24,368 103 Belgacom SA 14,890 476,163 Colruyt SA 1,471 336,054 Delhaize Group 8,833 621,882 Dexia NV 46,690 356,430 Fortis 182,916 626,315 Groupe Bruxelles Lambert SA 7,108 521,057 KBC Bancassurance Holding 14,083 258,977 Mobistar SA 2,738 169,058
2 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Nationale A Portefeuille 3,872 $ 187,398 Solvay SA 5,095 431,020 UCB SA 8,700 279,387 Umicore SA 11,341 258,520 ------------ 6,826,588 ------------ BERMUDA - 0.1% Mongolia Energy Co. Ltd. (a) 244,297 89,400 SeaDrill Ltd. 24,107 347,179 Yue Yuen Industrial Holdings Ltd. 41,285 97,118 ------------ 533,697 ------------ CAYMAN ISLANDS - 0.0% Foxconn International Holdings Ltd. (a) 148,529 96,567 Lifestyle International Holdings Ltd. 32,013 44,258 ------------ 140,825 ------------ DENMARK - 0.9% A.P. Moller - Maersk A/S Class A 50 293,033 A.P. Moller - Maersk A/S Class B 97 581,181 Carlsberg A/S 9,549 612,573 Coloplast A/S Class B 1,714 117,846 DSV A/S 16,832 208,774 Danske Bank A/S 40,951 706,471 H. Lundbeck A/S 6,200 117,959 Novo-Nordisk A/S Class B 39,602 2,156,932 Novozymes A/S Class B 4,067 330,866 Topdanmark A/S (a) 1,551 181,157 TrygVesta A/S 2,219 130,891 Vestas Wind Systems A/S (a) 18,221 1,307,624 William Demant Holding (a) 1,330 68,876 ------------ 6,814,183 ------------ FINLAND - 1.3% Elisa Corp. 13,141 216,557 Fortum Oyj 39,245 894,523 Kesko Oyj Class B 6,235 165,141 Kone Oyj Class B 13,564 416,518 Metso Oyj 11,856 221,944 Neste Oil Oyj 11,359 158,070 Nokia Oyj 325,001 4,760,345 Nokian Renkaat Oyj 9,415 177,169 OKO Bank 11,124 89,126 Orion Oyj 5,513 86,466 Outokumpu Oyj 10,368 179,165 Rautaruukki Oyj 7,096 142,327 Sampo Oyj 37,840 715,478 Sanoma Oyj 4,060 62,958 Stora Enso Oyj Class R 53,245 281,643 UPM-Kymmene Oyj 46,654 407,144 Wartsila Oyj 7,230 233,451 ------------ 9,208,025 ------------ FRANCE - 9.8% AXA SA 134,009 2,536,387 Accor SA 13,636 543,291 Aeroports de Paris 2,398 176,301
3 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Air France-KLM 11,955 $ 153,328 Air Liquide 21,218 1,946,881 Alcatel SA 204,260 512,232 Alstom 17,164 1,019,143 Atos Origin SA 4,992 169,985 BNP Paribas SA 71,588 4,668,443 BioMerieux 1,193 104,921 Bouygues 20,806 786,843 Bureau Veritas SA 4,034 198,696 CNP Assurances 3,247 310,674 Cap Gemini SA 12,989 480,718 Carrefour SA 54,348 2,330,712 Casino Guichard Perrachon SA 4,366 295,691 Christian Dior SA 5,068 379,639 Cie de Saint-Gobain SA 31,600 1,063,269 Cie Generale d'Optique Essilor International SA 17,775 850,019 Compagnie Generale de Geophysique SA (a) 13,120 237,508 Compagnie Generale des Etablissements Michelin 12,919 739,894 Credit Agricole SA 75,180 942,627 Dassault Systemes SA 5,720 253,313 EDP Renovaveis SA (a) 17,823 182,845 Eiffage 3,338 195,072 Electricite de France SA 21,210 1,035,647 Eramet 461 121,093 Eurazeo 2,508 104,449 European Aeronautic Defense and Space Co. 36,223 588,281 Eutelsat Communications 8,923 230,956 Fonciere Des Regions 2,361 178,015 France Telecom SA 156,670 3,564,819 GDF Suez 103,010 3,855,905 Gecina SA 1,392 86,363 Groupe Danone 47,034 2,332,178 Hermes International 4,700 654,377 ICADE 1,353 111,326 Iliad SA 1,114 108,335 Imerys SA 2,523 106,036 Ipsen 2,182 95,600 JCDecaux SA 5,607 89,106 Klepierre 7,347 190,395 L'Oreal SA 20,428 1,533,405 LVMH Moet Hennessy Louis Vuitton SA 20,972 1,608,423 Lafarge SA 5,280 345,689 Lafarge SA (a) 12,444 846,664 Lagardere S.C.A. 10,889 363,031 Legrand Promesses 9,435 206,464
4 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ M6-Metropole Television SA 5,485 $ 104,025 Natixis 90,048 175,263 Neopost SA 2,741 246,818 PagesJaunes Groupe SA 11,204 109,229 Pernod-Ricard SA 17,219 1,088,647 Peugeot SA 13,684 361,248 Pinault-Printemps-Redoute 6,697 549,002 Publicis Groupe 11,154 341,477 Renault SA 15,860 585,972 SCOR SE 15,455 317,546 STMicroelectronics NV 60,216 453,936 Safran SA 16,573 219,508 Sanofi-Aventis 90,246 5,332,626 Schneider Electric SA 19,988 1,529,846 Societe BIC SA 1,668 96,044 Societe Des Autoroutes Paris-Rhin-Rhone 1,437 98,088 Societe Generale SA 39,494 2,167,858 Societe Television Francaise 1 10,396 117,182 Sodexho Alliance SA 8,328 428,792 Suez Environnement SA 23,764 416,448 Technip SA 9,226 454,937 Thales SA 7,881 353,811 Total SA 182,981 9,917,706 Unibail - Rodamco 7,215 1,078,746 Vallourec SA 4,781 584,374 Veolia Environnement SA 33,851 1,000,863 Vinci SA 36,028 1,625,738 Vivendi SA 100,339 2,408,531 ------------ 71,599,250 ------------ GERMANY - 7.5% Adidas-Salomon AG 17,081 650,915 Allianz AG Registered Shares 38,833 3,582,060 BASF SE 79,140 3,153,080 Bayer AG 65,514 3,520,739 Bayerische Motoren Werke AG 29,401 1,110,626 Bayerische Motoren Werke AG (Preference Shares) 5,309 128,209 Beiersdorf AG 7,770 366,017 Celesio AG 7,514 172,608 Commerzbank AG 63,031 392,917 DaimlerChrysler AG 77,338 2,808,590 Deutsche Bank AG Registered Shares 47,867 2,909,881 Deutsche Boerse AG 16,721 1,301,312 Deutsche Lufthansa AG 20,149 253,045 Deutsche Post AG 75,126 980,920 Deutsche Postbank AG 7,342 187,124 Deutsche Telekom AG 242,627 2,868,474 E.ON AG 163,131 5,790,821
5 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Fraport AG 2,921 $ 125,247 Fresenius AG 2,764 129,337 Fresenius AG (Preference Shares) 7,111 384,728 Fresenius Medical Care AG 16,982 763,111 GEA Group AG 12,993 197,303 Hamburger Hafen und Logistik AG 2,544 98,291 Hannover Rueckversicherung AG Registered Shares 5,336 197,259 Henkel KGaA 11,896 320,908 Hochtief AG 3,709 187,297 K+S AG 13,183 743,605 Linde AG 13,469 1,106,522 MAN SE 9,287 571,425 Merck KGaA 5,748 584,893 Metro AG 9,987 477,161 Muenchener Rueckversicherungs AG Registered Shares 17,729 2,395,288 Porsche Automobil Holding SE (Preference Shares) 7,884 530,680 Puma AG Rudolf Dassler Sport 573 125,494 Qiagen NV (a) 16,105 299,084 RWE AG 35,907 2,831,614 SAP AG 73,503 2,963,526 Salzgitter AG 3,477 306,466 Siemens AG 70,526 4,877,058 Solarworld AG 7,403 175,202 Suedzucker AG 5,494 111,352 TUI AG 15,953 117,785 ThyssenKrupp AG 31,093 774,606 United Internet AG 11,411 134,051 Volkswagen AG 7,493 2,538,516 Wacker Chemie AG 1,383 159,710 ------------ 54,404,857 ------------ GREECE - 0.6% Alpha Bank AE 33,709 369,050 Bank of Cyprus Public Co. Ltd. 52,818 298,393 Coca-Cola Hellenic Bottling Co. SA 14,308 294,901 EFG Eurobank Ergasias SA (a) 27,217 286,283 Hellenic Petroleum SA 7,916 76,539 Hellenic Telecommunications Organization SA 23,844 364,628 Marfin Investment Group SA 53,258 228,551 National Bank of Greece SA 43,816 1,215,515 OPAP SA 19,803 528,050 Piraeus Bank SA (a) 27,767 276,455 Public Power Corp. 9,270 191,276 Titan Cement Co. SA 3,439 90,753 ------------ 4,220,394 ------------
6 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ HONG KONG - 2.4% ASM Pacific Technology Ltd. 12,504 $ 63,942 BOC Hong Kong Holdings Ltd. 327,900 570,516 Bank of East Asia Ltd. 136,332 413,167 CLP Holdings Ltd. 181,187 1,200,577 Cathay Pacific Airways Ltd. 106,263 145,778 Cheung Kong Holdings Ltd. 122,835 1,404,510 Cheung Kong Infrastructure Holdings Ltd. 31,500 110,350 Chinese Estates Holdings Ltd. 78,000 142,496 Esprit Holdings Ltd. 99,600 553,360 Hang Lung Group Ltd. 82,000 383,709 Hang Lung Properties Ltd. 173,000 569,694 Hang Seng Bank Ltd. 67,753 948,282 Henderson Land Development Co., Ltd. 93,491 533,481 The Hong Kong & China Gas Ltd. 330,290 693,339 Hong Kong Aircraft Engineering Company Ltd. 3,200 37,183 Hong Kong Exchanges and Clearing Ltd. 90,427 1,397,684 HongKong Electric Holdings Ltd. 123,000 683,280 Hopewell Holdings Ltd. 56,349 175,950 Hutchison Whampoa Ltd. 189,176 1,230,617 Hysan Development Co. Ltd. 56,791 145,420 Kerry Properties Ltd. 64,000 278,785 Li & Fung Ltd. 203,990 544,659 The Link REIT 192,914 410,002 MTR Corp. 115,000 343,548 NWS Holdings Ltd. 79,000 142,249 New World Development Ltd. 222,484 400,477 Orient Overseas International Ltd. 19,557 82,988 PCCW Ltd. 411,000 107,022 Shangri-La Asia Ltd. 92,990 137,343 Sino Land Co. 160,421 264,094 Sun Hung Kai Properties Ltd. 124,324 1,543,831 Swire Pacific Ltd. Class A 68,077 683,352 Television Broadcasts Ltd. 17,000 68,084 Wharf Holdings Ltd. 112,870 475,890 Wheelock and Co., Ltd. 91,000 233,869 Wing Hang Bank Ltd. 12,000 104,748 ------------ 17,224,276 ------------ IRELAND - 0.3% Anglo Irish Bank Corp. Plc 62,641 1 CRH Plc 60,348 1,387,054 Elan Corp. Plc (a) 37,704 241,471 Kerry Group Plc 10,783 243,814 Ryanair Holdings Plc (a) 35,968 166,759 ------------ 2,039,099 ------------ ITALY - 3.4% A2A SpA 110,110 201,233 ACEA SpA 7,973 97,360 Alleanza Assicurazioni SpA 37,149 255,305 Assicurazioni Generali SpA 87,925 1,831,222
7 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Autogrill SpA 8,807 $ 74,421 Autostrade SpA 22,588 457,513 Banca Carige SpA 61,682 169,453 Banca Monte dei Paschi di Siena SpA 175,591 283,811 Banca Popolare di Milano Scrl 35,450 211,533 Banco Popolare SpA 56,155 419,935 Enel SpA 565,654 2,761,487 Eni SpA 221,901 5,262,859 Exor SpA 8,247 118,702 Fiat SpA 68,016 685,837 Finmeccanica SpA 35,475 500,270 Fondiaria-SAI SpA 6,498 104,890 Intesa Sanpaolo SpA 655,122 2,117,045 Intesa Sanpaolo SpA (Non-Convertible Savings Shares) 68,618 169,645 Italcementi SpA 6,190 70,875 Lottomatica SpA 6,170 119,138 Luxottica Group SpA 12,204 253,883 Mediaset SpA 67,339 378,060 Mediobanca SpA 43,163 514,348 Mediolanum SpA 27,409 146,429 Parmalat SpA 150,377 363,206 Pirelli & C. SpA 204,382 71,661 Prysmian SpA 8,838 133,213 Saipem SpA 23,572 575,903 Saras SpA 19,965 57,001 Snam Rete Gas SpA 133,450 586,217 Telecom Italia SpA 847,886 1,175,582 Telecom Italia SpA (Non-Convertible Savings Shares) 531,106 523,201 Terna SpA 105,250 351,021 UniCredit SpA 1,234,659 3,122,825 Unione di Banche Italiane ScpA 53,164 692,795 Unipol SpA 54,783 64,269 ------------ 24,922,148 ------------ JAPAN - 23.7% The 77 Bank Ltd. 22,000 128,090 ABC-Mart, Inc. 2,200 56,477 Acom Co., Ltd. 4,160 103,675 Advantest Corp. 14,800 269,512 Aeon Co., Ltd. 54,800 540,710 Aeon Credit Service Co., Ltd. 8,900 116,440 Aeon Mall Co. Ltd. 4,900 92,990 Aioi Insurance Co., Ltd. 45,000 205,104 Aisin Seiki Co., Ltd. 16,500 356,456 Ajinomoto Co., Inc. 59,000 466,727 Alfresa Holdings Corp. 1,900 87,778 All Nippon Airways Co., Ltd. 43,000 150,247
8 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Amada Co., Ltd. 31,000 $ 192,113 Aozora Bank Ltd. 70,000 108,068 Asahi Breweries Ltd. 34,200 490,077 Asahi Glass Co., Ltd. 90,100 721,701 Asahi Kasei Corp. 113,000 573,334 Asics Corp. 14,000 127,696 Astellas Pharma, Inc. 40,100 1,416,018 The Bank of Kyoto Ltd. 26,000 240,988 The Bank of Yokohama Ltd. 106,000 567,374 Benesse Corp. 6,500 260,638 Bridgestone Corp. 54,200 849,014 Brother Industries Ltd. 23,000 203,433 Canon, Inc. 92,500 3,021,420 Canon Marketing Japan Inc. 4,700 65,706 Casio Computer Co., Ltd. 20,400 182,719 Central Japan Railway Co. 136 836,058 The Chiba Bank Ltd. 66,000 430,739 Chubu Electric Power Co., Inc. 57,400 1,325,583 Chugai Pharmaceutical Co., Ltd. 19,900 378,674 The Chugoku Bank Ltd. 16,000 221,832 Chugoku Electric Power Co. 22,500 469,779 Chuo Mitsui Trust Holdings, Inc. 84,000 320,065 Citizens Holding Co., Ltd. 32,400 165,917 Coca-Cola West Holdings Co., Ltd. 3,300 63,115 Cosmo Oil Co., Ltd. 42,000 142,196 Credit Saison Co., Ltd. 15,200 192,808 DIC Corp. 30,000 46,864 Dai Nippon Printing Co., Ltd. 51,000 698,285 Daicel Chemical Industries Ltd. 25,000 151,507 Daido Steel Co., Ltd. 24,000 98,123 Daihatsu Motor Co., Ltd. 20,000 185,904 Daiichi Sankyo Co., Ltd. 59,800 1,067,397 Daikin Industries Ltd. 21,400 688,727 Dainippon Pharma Co., Ltd. 17,000 148,328 Daito Trust Construction Co., Ltd. 7,200 339,497 Daiwa House Industry Co., Ltd. 45,000 483,887 Daiwa Securities Group, Inc. 115,000 683,353 Dena Co. Ltd. 24 80,132 Denki Kagaku Kogyo Kabushiki Kaisha 44,000 122,203 Denso Corp. 42,400 1,086,825 Dentsu, Inc. 16,413 344,419 Diamond Lease Co., Ltd. 4,070 132,679 Dowa Mining Co., Ltd. 24,000 99,618 East Japan Railway Co. 29,421 1,771,317 Eisai Co., Ltd. 22,400 795,317 Electric Power Development Co. 11,600 329,138 Elpida Memory, Inc. (a) 10,600 114,158
9 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ FamilyMart Co., Ltd. 5,700 $ 179,106 Fanuc Ltd. 16,700 1,338,277 Fast Retailing Co., Ltd. 4,200 547,363 Fuji Electric Holdings Co., Ltd. 31,800 52,509 Fuji Heavy Industries Ltd. 55,000 222,207 Fuji Media Holdings, Inc. 54 81,265 Fuji Photo Film Co., Ltd. 43,400 1,381,196 Fujitsu Ltd. 162,000 880,022 Fukuoka Financial Group, Inc. 67,000 299,639 Furukawa Electric Co., Ltd. 57,000 256,424 GS Yuasa Corp. 29,000 254,474 The Gunma Bank Ltd. 27,000 150,103 The Hachijuni Bank Ltd. 31,000 175,154 Hakuhodo DY Holdings, Inc. 1,140 61,453 Hankyu Hanshin Holdings, Inc. 96,000 449,428 Hikari Tsushin, Inc. 800 18,035 Hino Motors Ltd. 22,000 68,494 Hirose Electric Co., Ltd. 2,800 298,724 The Hiroshima Bank Ltd. 34,000 141,716 Hisamitsu Pharmaceutical Co., Ltd. 6,300 195,732 Hitachi Chemical Co., Ltd. 8,700 140,075 Hitachi Construction Machinery Co., Ltd. 11,300 183,639 Hitachi High-Technologies Corp. 4,300 73,059 Hitachi Ltd. 293,000 911,821 Hitachi Metals Ltd. 13,000 110,655 Hokkaido Electric Power Co., Inc. 15,900 297,707 Hokuhoku Financial Group, Inc. 88,100 220,831 Hokuriku Electric Power 16,000 365,937 Honda Motor Co., Ltd. 143,300 3,942,305 Hoya Corp. 35,800 717,142 IHI Corp. 98,000 169,286 ITOCHU Corp. 131,000 909,037 ITOCHU Techno-Science Corp. 1,300 38,634 Ibiden Co., Ltd. 11,700 328,066 Idemitsu Kosan Co., Ltd. 2,000 171,346 Inpex Corp. 69 550,150 Isetan Mitsukoshi Holdings Ltd. 30,105 306,302 Isuzu Motors Ltd. 110,000 176,474 Ito En, Ltd. 5,800 82,483 The Iyo Bank Ltd. 23,000 234,439 J. Front Retailing Co. Ltd. 34,600 165,096 JFE Holdings, Inc. 43,600 1,464,843 JGC Corp. 18,000 289,726 JS Group Corp. 22,300 344,159 JSR Corp. 15,900 272,345 JTEKT Corp. 15,600 157,659 Jafco Co., Ltd. 1,900 63,800
10 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Japan Airlines Corp. (a) 87,000 $ 167,877 Japan Petroleum Explora 3,000 166,049 Japan Prime Realty Investment Corp. 62 133,748 Japan Real Estate Investment Corp. 40 331,797 Japan Retail Fund Investment Corp. 37 170,692 The Japan Steel Works, Ltd. 30,000 369,720 Japan Tobacco, Inc. 400 1,250,333 The Joyo Bank Ltd. 52,000 265,319 Jupiter Telecommunications Co., Ltd. 159 120,606 KDDI Corp. 253 1,342,429 Kajima Corp. 67,800 211,061 Kamigumi Co., Ltd. 23,000 194,385 Kaneka Corp. 26,000 184,746 The Kansai Electric Power Co., Inc. 66,100 1,458,065 Kansai Paint Co., Ltd. 14,000 100,309 Kao Corp. 48,000 1,044,498 Kawasaki Heavy Industries Ltd. 142,000 391,152 Kawasaki Kisen Kaisha Ltd. 53,000 217,409 Keihin Electric Express Railway Co., Ltd. 32,000 248,137 Keio Electric Railway Co., Ltd. 42,000 243,963 Keisei Electric Railway Co., Ltd. 31,000 184,821 Keyence Corp. 3,520 717,126 Kikkoman Corp. 16,000 160,230 Kinden Corp. 7,000 61,511 Kintetsu Corp. 137,000 603,886 Kirin Holdings Co., Ltd. 75,000 1,046,367 Kobe Steel Ltd. 208,000 387,382 Komatsu Ltd. 82,500 1,273,763 Konami Corp. 9,800 187,657 Konica Minolta Holdings, Inc. 42,500 444,059 Kubota Corp. 95,000 782,322 Kuraray Co., Ltd. 30,000 332,573 Kurita Water Industries Ltd. 10,600 342,334 Kyocera Corp. 14,100 1,058,545 Kyowa Hakko Kirin Co. Ltd. 22,000 248,204 Kyushu Electric Power Co., Inc. 32,800 705,907 Lawson, Inc. 6,500 286,104 Leopalace21 Corp. 11,400 101,870 Mabuchi Motor Co., Ltd. 2,000 96,489 Makita Corp. 10,500 254,085 Marubeni Corp. 146,000 645,727 Marui Group Co. Ltd. 25,100 175,700 Maruichi Steel Tube Ltd. 4,400 82,981 Matsui Securities Co., Ltd. 7,900 71,638 Mazda Motor Corp. 81,000 207,157 McDonald's Holdings Co. Japan Ltd. 7,027 130,485 Mediceo Paltac Holdings Co., Ltd. 9,400 107,324
11 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Meiji Holdings Co. Ltd. 4,993 $ 201,099 Minebea Co., Ltd. 29,000 123,417 Mitsubishi Chemical Holdings Corp. 103,000 435,664 Mitsubishi Corp. 117,500 2,168,253 Mitsubishi Electric Corp. 167,000 1,055,462 Mitsubishi Estate Co., Ltd. 102,000 1,693,371 Mitsubishi Gas Chemical Co., Inc. 31,000 169,023 Mitsubishi Heavy Industries Ltd. 269,200 1,114,034 Mitsubishi Logistics Corp. 9,000 99,430 Mitsubishi Materials Corp. 99,000 308,224 Mitsubishi Motors Corp. (a) 292,000 547,251 Mitsubishi Rayon Co., Ltd. 57,000 165,636 Mitsubishi Tanabe Pharma Corp. 20,000 229,773 Mitsubishi UFJ Financial Group, Inc. 803,274 4,960,053 Mitsui & Co., Ltd. 151,000 1,789,301 Mitsui Chemicals, Inc. 55,000 175,325 Mitsui Engineering & Shipbuilding Co., Ltd. 58,000 136,238 Mitsui Fudosan Co., Ltd. 73,000 1,266,124 Mitsui Mining & Smelting Co., Ltd. 63,000 162,654 Mitsui OSK Lines Ltd. 100,000 646,234 Mitsui Sumitomo Insurance Group Holdings, Inc. 36,557 956,360 Mitsumi Electric Co., Ltd. 7,400 158,076 Mizuho Financial Group, Inc. 822,637 1,911,263 Murata Manufacturing Co., Ltd. 18,600 793,837 NEC Corp. 167,000 653,234 NGK Insulators Ltd. 23,000 468,781 NGK Spark Plug Co., Ltd. 15,000 143,195 NHK Spring Co., Ltd. 9,000 60,318 NOK Corp. 10,600 123,163 NSK Ltd. 35,000 177,176 NTN Corp. 26,000 104,139 NTT Data Corp. 113 364,754 NTT DoCoMo, Inc. 1,349 1,973,098 NTT Urban Development Co. 70 67,479 Namco Bandai Holdings, Inc. 16,700 183,161 Nidec Corp. 9,500 578,259 Nikon Corp. 29,000 501,716 Nintendo Co., Ltd. 8,600 2,380,092 Nippon Building Fund, Inc. 45 384,659 Nippon Electric Glass Co. 30,500 340,974 Nippon Express Co., Ltd. 74,000 335,940 Nippon Meat Packers, Inc. 18,000 226,628 Nippon Mining Holdings, Inc. 78,500 405,648 Nippon Oil Corp. 113,000 665,402 Nippon Paper Group, Inc. 8,500 219,889 Nippon Sanso Corp. 20,000 191,174
12 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Nippon Sheet Glass Co., Ltd. 58,000 $ 169,005 Nippon Steel Corp. 454,000 1,738,099 Nippon Telegraph & Telephone Corp. 44,300 1,804,136 Nippon Yusen Kabushiki Kaisha 100,000 430,619 Nipponkoa Insurance Co., Ltd. 53,000 308,345 The Nishi-Nippon City Bank Ltd. 48,000 121,264 Nissan Chemical Industries Ltd. 16,000 179,859 Nissan Motor Co., Ltd. 216,000 1,310,881 Nissay Dowa General Insurance Co., Ltd. 8,000 38,646 Nisshin Seifun Group, Inc. 12,500 148,515 Nisshin Steel Co., Ltd. 61,000 136,165 Nisshinbo Industries, Inc. 12,000 135,373 Nissin Foods Holdings Co., Ltd. 7,500 226,787 Nitori Co., Ltd. 3,450 244,313 Nitto Denko Corp. 14,110 430,193 Nomura Holdings, Inc. 216,100 1,824,067 Nomura Real Estate Holdings, Inc. 8,500 146,304 Nomura Real Estate Office Fund, Inc. 20 127,150 Nomura Research Institute Ltd. 8,700 192,855 OJI Paper Co., Ltd. 73,000 313,643 ORIX Corp. 7,610 452,948 Obayashi Corp. 58,000 283,917 Obic Co., Ltd. 430 69,681 Odakyu Electric Railway Co., Ltd. 53,000 453,104 Olympus Corp. 20,000 470,987 Omron Corp. 14,500 210,079 Ono Pharmaceutical Co., Ltd. 7,600 341,868 Onward Holdings Co., Ltd. 7,000 44,982 Oracle Corp. Japan 2,400 88,015 Oriental Land Co., Ltd. 4,100 274,899 Osaka Gas Co., Ltd. 169,000 538,688 Osaka Titanium Technologies Co. 1,500 54,961 Otsuka Shokai Co., Ltd. 700 37,383 Panasonic Corp. 167,000 2,249,921 Panasonic Electric Works Ltd. 32,873 310,702 Promise Co., Ltd. 5,900 75,279 Rakuten, Inc. 641 386,253 Resona Holdings, Inc. 44,700 626,575 Ricoh Co., Ltd. 58,000 747,167 Rinnai Corp. 3,800 167,949 Rohm Co., Ltd. 8,700 634,560 SBI Holdings, Inc. 1,486 301,781 SMC Corp. 4,900 526,134 Sankyo Co., Ltd. (Gunma) 4,600 245,380 Santen Pharmaceutical Co., Ltd. 6,700 203,066 Sanyo Electric Co., Ltd. (a) 154,000 398,849 Sapporo Hokuyo Holdings, Inc. 17,000 48,761
13 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Sapporo Holdings Ltd. 23,000 $ 131,553 Secom Co., Ltd. 18,200 738,660 Sega Sammy Holdings, Inc. 17,632 223,475 Seiko Epson Corp. 10,300 168,093 Sekisui Chemical Co., Ltd. 39,000 244,465 Sekisui House Ltd. 45,000 455,758 Seven & I Holdings Co., Ltd. 68,400 1,604,158 Seven Bank Ltd. 49 128,496 Sharp Corp. 87,000 902,559 Shikoku Electric Power Co., Inc. 16,200 483,159 Shimadzu Corp. 26,000 207,749 Shimamura Co., Ltd. 1,900 151,284 Shimano, Inc. 5,600 215,156 Shimizu Corp. 53,000 230,042 Shin-Etsu Chemical Co., Ltd. 36,500 1,692,830 Shinko Electric Industries 3,400 42,012 Shinko Securities Co., Ltd. 40,300 126,118 Shinsei Bank Ltd. 100,000 159,655 Shionogi & Co., Ltd. 27,000 521,667 Shiseido Co., Ltd. 31,000 507,149 The Shizuoka Bank Ltd. 52,000 514,631 Showa Denko KK 103,000 183,705 Showa Shell Sekiyu KK 19,900 210,567 Softbank Corp. 65,600 1,277,949 Sojitz Corp. 110,100 241,449 Sompo Japan Insurance, Inc. 77,800 518,431 Sony Corp. 87,200 2,274,962 Sony Financial Holdings, Inc. 77 212,302 Square Enix Holdings Co., Ltd. 5,500 129,171 Stanley Electric Co., Ltd. 12,300 249,416 Sumco Corp. 11,300 160,540 Sumitomo Chemical Co., Ltd. 140,000 629,601 Sumitomo Corp. 97,700 993,091 Sumitomo Electric Industries Ltd. 67,000 751,192 Sumitomo Heavy Industries Ltd. 55,000 244,672 Sumitomo Metal Industries Ltd. 301,000 800,141 Sumitomo Metal Mining Co., Ltd. 47,000 660,250 Sumitomo Mitsui Financial Group, Inc. 78,310 3,168,838 Sumitomo Realty & Development Co., Ltd. 33,000 602,537 Sumitomo Rubber Industries, Ltd. 17,100 137,473 The Sumitomo Trust & Banking Co., Ltd. 125,000 670,736 Suruga Bank Ltd. 19,000 181,782 Suzuken Co., Ltd. 5,000 144,851 Suzuki Motor Corp. 31,800 713,046 T&D Holdings, Inc. 19,850 567,133 TDK Corp. 10,900 511,692 THK Co., Ltd. 9,200 137,149
14 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Taiheiyo Cement Corp. 78,000 $ 133,666 Taisei Corp. 93,000 224,180 Taisho Pharmaceutical Co., Ltd. 11,000 208,190 Takashimaya Co., Ltd. 24,000 188,911 Takeda Pharmaceutical Co., Ltd. 66,600 2,589,403 Teijin Ltd. 85,000 273,212 Terumo Corp. 15,000 661,307 Tobu Railway Co., Ltd. 66,000 387,405 Toho Co., Ltd. 7,400 120,371 Toho Gas Co., Ltd. 45,000 182,755 Tohoku Electric Power Co., Inc. 36,900 770,811 Tokio Marine Holdings, Inc. 62,700 1,721,529 Tokuyama Corp. 20,000 146,806 Tokyo Broadcasting System HD 3,500 54,998 The Tokyo Electric Power Co., Inc. 105,700 2,717,685 Tokyo Electron Ltd. 15,000 723,898 Tokyo Gas Co., Ltd. 201,000 718,059 Tokyo Steel Manufacturing Co., Ltd. 9,700 118,070 Tokyo Tatemono Co., Ltd. 25,000 139,222 Tokyu Corp. 98,000 494,372 Tokyu Land Corp. 39,000 177,184 TonenGeneral Sekiyu KK 25,000 254,450 Toppan Printing Co., Ltd. 49,000 493,677 Toray Industries, Inc. 117,700 599,110 Toshiba Corp. 340,000 1,231,801 Tosoh Corp. 49,000 138,603 Toto Ltd. 22,000 153,531 Toyo Seikan Kaisha Ltd. 21,800 456,799 Toyoda Gosei Co., Ltd. 5,300 143,107 Toyota Boshoku Corp. 3,800 56,646 Toyota Industries Corp. 15,400 382,773 Toyota Motor Corp. 239,300 9,049,697 Toyota Tsusho Corp. 16,700 247,338 Trend Micro, Inc. 9,500 303,350 Tsumura & Co. 5,500 171,630 UNY Co., Ltd. 16,000 136,707 USS Co., Ltd. 1,440 74,172 Ube Industries Ltd. 90,000 251,158 Uni-Charm Corp. 3,600 275,022 Ushio, Inc. 7,800 124,428 West Japan Railway Co. 148 489,440 Yahoo! Japan Corp. 1,276 405,825 Yakult Honsha Co., Ltd. 6,800 129,901 Yamada Denki Co., Ltd. 7,440 432,847 Yamaguchi Financial Group, Inc. 21,000 276,962 Yamaha Corp. 12,000 149,566
15 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Yamaha Motor Co., Ltd. 17,300 $ 192,181 Yamato Kogyo Co. Ltd. 3,500 103,039 Yamato Transport Co., Ltd. 35,000 465,355 Yamazaki Baking Co., Ltd. 8,000 90,371 Yaskawa Electric Corp. 21,000 139,454 The Yasuda Trust & Banking Co., Ltd. 145,000 187,460 Yokogawa Electric Corp. 12,700 85,585 ------------ 173,006,281 ------------ KAZAKHSTAN - 0.0% Eurasian Natural Resources Corp. 24,271 262,643 ------------ LUXEMBOURG - 0.5% ArcelorMittal 73,925 2,446,413 SES Global 24,950 477,095 Tenaris SA 41,388 564,615 ------------ 3,488,123 ------------ NETHERLANDS - 2.3% ASML Holding NV 38,259 829,266 Aegon NV 122,107 755,972 Akzo Nobel NV 21,126 933,836 Corio NV 3,871 188,788 Fugro NV 5,841 243,249 Heineken Holding NV 10,233 326,956 Heineken NV 22,042 821,474 ING Groep NV CVA 167,621 1,698,181 Koninklijke Ahold NV 105,789 1,219,590 Koninklijke Boskalis Westminster NV 4,333 98,634 Koninklijke DSM NV 12,880 405,034 Koninklijke KPN NV 151,428 2,089,369 Koninklijke Philips Electronics NV 83,376 1,539,379 Randstad Holdings NV 8,903 247,418 Reed Elsevier NV 55,275 611,194 SBM Offshore NV 12,965 222,636 TNT NV 32,661 638,391 Unilever NV 139,902 3,383,693 Wolters Kluwer NV 23,939 419,964 ------------ 16,673,024 ------------ NEW ZEALAND - 0.1% Auckland International Airport Ltd. 55,023 57,108 Contact Energy Ltd. 21,295 80,253 Fletcher Building Ltd. 50,667 214,936 Sky City Ltd. 35,133 60,689 Telecom Corp. of New Zealand Ltd. 161,245 283,042 ------------ 696,028 ------------ NORWAY - 0.6% DnB NOR ASA 64,699 494,363 Norsk Hydro ASA 60,604 312,268 Orkla ASA 73,076 531,373 Renewable Energy Corp. ASA (a) 22,105 172,602 StatoilHydro ASA 101,632 2,007,554 Telenor ASA 55,995 432,106 Telenor ASA (a)(b) 5,999 138,277
16 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Yara International ASA 17,100 $ 481,419 ------------ 4,569,962 ------------ PORTUGAL - 0.3% Banco Comercial Portugues SA Registered Shares 209,889 213,707 Banco Espirito Santo SA Registered Shares 41,729 225,027 Brisa-Auto Estradas de Portugal SA Private Shares 20,401 146,652 Cimpor Cimentos de Portugal SA 26,806 195,824 Energias de Portugal SA 162,301 637,563 Galp Energia SGPS SA 15,896 224,071 Jeronimo Martins SGPS SA 17,014 116,052 Portugal Telecom SGPS SA Registered Shares 53,624 526,005 ------------ 2,284,901 ------------ SINGAPORE - 1.3% Ascendas Real Estate Investment Trust 124,962 136,238 CapitaLand Ltd. 239,749 609,573 CapitaMall Trust 157,700 151,672 City Developments Ltd. 46,535 274,231 ComfortDelgro Corp. Ltd. 125,816 110,836 Cosco Corp. Ltd. 97,002 83,076 DBS Group Holdings Ltd. 153,407 1,243,693 Fraser and Neave Ltd. 71,096 190,494 Genting Singapore Plc (a) 355,903 166,606 Golden Agri-Resources Ltd. 524,876 136,805 Jardine Cycle & Carriage Ltd. 10,721 141,508 Keppel Corp. Ltd. 119,616 566,994 Neptune Orient Lines Ltd. 44,200 44,871 Noble Group Ltd. 143,720 179,129 Olam International Ltd. 115,900 193,273 Oversea-Chinese Banking Corp. 222,914 1,023,443 Sembcorp Industries Ltd. 81,590 169,191 Sembcorp Marine Ltd. 87,197 160,721 Singapore Airlines Ltd. 44,009 402,911 Singapore Exchange Ltd. 81,000 394,443 Singapore Press Holdings Ltd. 130,316 283,578 Singapore Technologies Engineering Ltd. 114,213 192,448 Singapore Telecommunications Ltd. 713,132 1,471,294 StarHub Ltd. 66,769 98,442 UOL Group Ltd. 24,457 55,494 United Overseas Bank Ltd. 107,572 1,085,486 Wilmar International Ltd. 73,670 254,099 ------------ 9,820,549 ------------ SPAIN - 4.4% ACS Actividades de Construccion y Servicios, SA 13,493 684,943 Abertis Infraestructuras SA 24,700 466,451 Acciona SA 2,511 310,070 Acerinox SA 12,303 228,563 Banco Bilbao Vizcaya Argentaria SA 304,686 3,836,467
17 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Banco de Sabadell SA 80,602 $ 504,129 Banco de Valencia SA 14,285 138,892 Banco Popular Espanol SA 67,888 594,013 Banco Santander SA 698,017 8,437,768 Bankinter SA 27,057 320,991 Cintra Concesiones de Infraestructuras de Transporte SA 21,741 135,448 Corp. Mapfre SA 63,096 206,144 Criteria Caixacorp. SA 73,842 342,242 Enagas 15,736 310,544 Fomento de Construcciones y Contratas SA 3,759 154,670 Gamesa Corp. Tecnologica SA 16,408 312,822 Gas Natural SDG SA 19,674 359,285 Gestevision Telecinco SA 10,684 100,056 Grifols SA 11,234 199,279 Grupo Ferrovial SA 5,552 178,955 Iberdrola Renovables 74,326 340,751 Iberdrola SA 315,395 2,571,923 Iberia Lineas Aereas de Espana 40,744 86,669 Inditex SA 19,050 916,823 Indra Sistemas SA 9,965 216,279 Red Electrica de Espana 9,397 425,965 Repsol YPF SA 62,614 1,401,612 Sacyr Vallehermoso SA 6,339 88,178 Telefonica SA 363,182 8,247,745 Zardoya Otis SA 9,124 191,019 ------------ 32,308,696 ------------ SWEDEN - 2.3% Alfa Laval AB 30,393 291,273 Assa Abloy AB Series B 29,377 410,773 Atlas Copco AB Class A 60,148 605,643 Atlas Copco AB Class B 31,386 285,135 Electrolux AB 23,658 330,967 Getinge AB Class B 16,341 214,527 Hennes & Mauritz AB B Shares 43,990 2,196,610 Holmen AB Class B 3,145 68,865 Husqvarna AB 29,187 159,325 Investor AB 38,800 599,947 Lundin Petroleum AB (a) 17,302 134,525 Millicom International Cellular SA (a)(b) 6,200 349,742 Nordea Bank AB 278,634 2,214,409 SKB AB 34,287 423,780 SSAB AB A Shares 15,321 178,943 SSAB AB B Shares 6,267 67,665 Sandvik AB 87,411 651,498 Scania AB 24,889 247,638 Securitas AB 29,048 247,370 Skandinaviska Enskilda Banken AB Class A 131,049 579,610
18 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Skanska AB Class B 34,605 $ 388,258 Svenska Cellulosa AB 49,112 517,072 Svenska Handelsbanken Class A 42,512 806,165 Swedbank AB A Shares 34,000 198,767 Swedish Match AB 22,750 370,617 Tele2 AB 26,466 268,037 Telefonaktiebolaget LM Ericsson 257,889 2,540,576 TeliaSonera AB 191,201 1,006,330 Volvo AB A Shares 31,413 194,123 Volvo AB B Shares 94,052 582,516 ------------ 17,130,706 ------------ SWITZERLAND - 7.5% ABB Ltd. 196,263 3,099,126 Actelion Ltd. (a) 8,704 456,213 Adecco SA Registered Shares 10,847 453,374 Aryzta AG (a) 7,200 232,229 BKW FMB Energie AG 995 73,263 Baloise Holding AG 4,412 328,091 Compagnie Financiere Richemont SA 45,289 944,199 Credit Suisse Group AG 100,261 4,593,557 Geberit AG 3,498 430,987 Givaudan SA 674 413,734 Holcim Ltd. (a) 18,133 1,032,387 Julius Baer Holding AG Class B 18,593 723,123 Kuehne & Nagel International AG 4,766 374,372 Lindt & Spruengli AG 75 140,187 Lindt & Spruengli AG 'R' Shares 9 199,206 Logitech International SA (a) 15,223 211,602 Lonza Group AG Registered Shares 4,470 444,665 Nestle SA Registered Shares 323,069 12,198,584 Nobel Biocare Holding AG 10,422 228,073 Novartis AG Registered Shares 188,616 7,678,037 Pargesa Holding SA 2,669 166,683 Roche Holding AG 62,431 8,506,362 SGS SA 415 515,465 Schindler Holding AG 3,746 233,032 Schindler Holding AG Registered Shares 2,287 141,607 Sonova Holding AG 4,167 339,307 Straumann Holding AG Registered Shares 806 147,075 The Swatch Group Ltd. Bearer Shares 2,721 437,926 The Swatch Group Ltd. Registered Shares 4,656 152,915 Swiss Life Holding 2,993 259,045 Swiss Reinsurance Co. Registered Shares 30,900 1,022,085 Swisscom AG 2,087 642,214 Syngenta AG 8,442 1,964,166 Synthes, Inc. 5,231 505,811 UBS AG 286,878 3,522,407
19 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Zurich Financial Services AG 12,800 $ 2,262,442 ------------ 55,073,551 ------------ UNITED KINGDOM - 20.4% 3i Group Plc 85,891 343,616 Admiral Group Plc 13,207 189,387 Amec Plc 28,892 311,331 Anglo American Plc (a) 113,879 3,329,716 Antofagasta Plc 33,636 326,569 Associated British Foods Plc 30,278 381,451 AstraZeneca Plc 125,205 5,520,593 Autonomy Corp. Plc (a) 18,514 438,683 Aviva Plc 230,090 1,295,493 BAE Systems Plc 305,449 1,706,855 BG Group Plc 290,448 4,891,049 BHP Billiton Plc 190,913 4,302,913 BP Plc 1,620,524 12,805,066 BT Group Plc 670,729 1,123,803 Balfour Beatty Plc 42,120 214,635 Barclays Plc 817,657 3,799,689 Berkeley Group Holdings Plc (a) 4,666 61,855 British Airways Plc 49,181 101,340 British American Tobacco Plc 172,688 4,766,905 British Land Co. Plc 73,957 465,696 British Sky Broadcasting Plc 98,375 738,473 Bunzl Plc 30,014 248,895 Burberry Group Plc 38,331 267,136 Cable & Wireless Plc 220,100 483,101 Cadbury Plc 118,114 1,009,601 Cairn Energy Plc (a) 11,971 462,864 Capita Group Plc 52,466 618,614 Carnival Plc 13,985 372,471 The Carphone Warehouse Plc 32,874 85,653 Centrica Plc 442,173 1,625,884 Cobham Plc 99,291 282,800 Compass Group Plc 159,986 903,073 Diageo Plc 216,226 3,105,677 Drax Group Plc 29,555 213,938 Experian Group Ltd. 88,889 666,605 FirstGroup Plc 43,014 253,999 Fresnillo Plc 16,417 140,966 Friends Group Provident Plc 186,698 201,894 GlaxoSmithKline Plc 448,632 7,924,320 Group 4 Securicor Plc 107,676 370,866 HSBC Holdings Plc 1,487,969 12,396,518 Hammerson Plc 59,263 300,508 Home Retail Group 74,881 321,435 ICAP Plc 44,449 331,056 Imperial Tobacco Group Plc 87,941 2,288,886
20 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Intercontinental Hotels Group Plc 21,866 $ 225,090 International Power Plc 131,704 517,309 Invensys Plc 69,692 257,329 Investec Plc 30,571 164,690 J Sainsbury Plc 97,323 502,599 Johnson Matthey Plc 18,844 357,837 Kazakhmys Plc 18,613 194,109 Kingfisher Plc 204,702 600,567 Ladbrokes Plc 53,298 161,516 Land Securities Group Plc 65,501 509,371 Legal & General Group Plc 504,688 472,059 Liberty International Plc 39,129 256,512 Lloyds TSB Group Plc 1,439,101 1,658,981 London Stock Exchange Group Plc 12,046 139,500 Lonmin Plc 13,315 258,079 Man Group Plc 148,011 678,466 Marks & Spencer Group Plc 136,726 689,457 National Grid Plc 210,159 1,896,412 Next Plc 17,113 414,619 Old Mutual Plc 457,899 611,510 Pearson Plc 70,225 707,185 Prudential Plc 216,153 1,477,505 Rangold Resources Ltd. 6,662 429,332 Reckitt Benckiser Plc 51,970 2,373,360 Reed Elsevier Plc 95,363 712,424 Rexam Plc 54,834 257,730 Rio Tinto Plc Registered Shares 77,493 2,683,691 Rolls-Royce Group Plc 160,446 959,302 Royal & Sun Alliance Insurance Group 288,945 573,745 Royal Bank of Scotland Group Plc 1,501,988 954,655 Royal Dutch Shell Plc 305,285 7,657,855 Royal Dutch Shell Plc Class B 233,157 5,869,819 SABMiller Plc 77,853 1,589,595 Sage Group Plc 112,528 330,625 Schroders Plc 11,024 149,165 Scottish & Southern Energy Plc 79,703 1,499,550 Segro Plc 459,901 183,909 Serco Group Plc 45,013 313,241 Severn Trent Plc 20,494 369,569 Shire Ltd. 48,594 670,685 Smith & Nephew Plc 76,559 568,385 Smiths Group Plc 33,796 391,046 Standard Chartered Plc 164,102 3,085,610 Standard Life Plc 171,156 525,702 TUI Travel Plc 48,876 186,836 Tesco Plc 680,320 3,972,964 Thomas Cook Group Plc 31,456 106,587
21 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE - ------- ------------------------------------------- --------- ------------ Thomson Reuters Plc 14,933 $ 427,103 Tomkins Plc 78,603 191,736 Tullow Oil Plc 69,258 1,072,665 Unilever Plc 111,046 2,609,811 United Utilities Group Plc 59,147 485,010 Vedanta Resources Plc 12,258 260,964 Vodafone Group Plc 4,538,978 8,828,032 WPP Plc 108,907 724,232 Whitbread Plc 17,348 233,996 William Morrison Supermarkets Plc 186,350 727,845 Wolseley Plc 25,561 489,321 Xstrata Plc 164,343 1,786,121 ------------ 148,994,798 ------------ TOTAL COMMON STOCKS - 98.1% 716,831,572 ------------ INVESTMENT COMPANIES UNITED STATES - 0.2% iShares MSCI EAFE Index Fund (c) 35,845 1,642,059 ------------ TOTAL INVESTMENT COMPANIES - 0.2% 1,642,059 ------------ PREFERRED STOCKS GERMANY - 0.2% Henkel KGaA, 1.75% 15,700 490,298 RWE AG, 3.50% 2,932 195,796 Volkswagen AG, 4.35% 9,274 648,974 ------------ TOTAL PREFERRED STOCKS - 0.2% 1,335,068 ------------ WARRANTS (d) ITALY - 0.0% Unione di Banche Italiane ScpA (expires 6/30/11) 53,164 -- ------------ SINGAPORE - 0.0% Golden Agri-Resources Ltd. (expires 5/27/12) 35,691 -- ------------ TOTAL WARRANTS - 0.0% -- COUNTRY RIGHTS BELGIUM - 0.0% Fortis (expires 7/01/14) 184,182 -- ------------ JAPAN - 0.0% Dowa Mining Co., Ltd. (expires 1/29/10) 7,000 -- ------------ NORWAY - 0.0% Renewable Energy Corp. ASA (expires 7/13/09) 7,622 27,263 ------------ SINGAPORE - 0.0% Golden Agri-Resources Ltd. (expires 7/16/09) 89,228 12,321 Neptune Orient Lines Ltd. (expires 7/08/09) 33,150 4,005 ------------ 16,326 ------------ SPAIN - 0.0% Zardoya Otis SA 9,124 9,280 ------------ UNITED KINGDOM - 0.1% Rio Tinto Plc (expires 7/01/09) 40,684 467,192 ------------ TOTAL RIGHTS - 0.1% 520,061 ------------ TOTAL LONG-TERM INVESTMENTS (COST - $850,722,029) - 98.6% 720,328,760 ------------ SHORT-TERM SECURITIES BlackRock Liquidity Funds, TempCash, 0.489% (e)(f) 2,133,954 2,133,954 ------------ TOTAL SHORT-TERM SECURITIES (COST - $2,133,954) - 0.3% 2,133,954 ------------
22 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) TOTAL INVESTMENTS (COST - $852,855,983*) - 98.9% $722,462,714 OTHER ASSETS LESS LIABILITIES - 1.1% 8,073,429 ------------ NET ASSETS - 100.0% $730,536,143 ============
* The cost and unrealized appreciation (depreciation) of investments as of June 30, 2009, as computed for federal income tax purposes, were as follows: Aggregate cost $ 871,955,481 ============= Gross unrealized appreciation $ 47,116,946 Gross unrealized depreciation (196,609,713) ------------- Net unrealized depreciation $(149,492,767) =============
(a) Non-income producing security. (b) Depositary receipts. (c) All or a portion of security has been pledged as collateral in connection with open financial futures contracts. (d) 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. (e) Represents the current yield as of report date. (f) Investments in companies considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
AFFILIATE NET ACTIVITY INCOME - --------- -------------- ------ BlackRock Liquidity Funds, TempCash 2,133,954 $6,108 BlackRock Liquidity Series, LLC Cash Sweeps Series USD(11,259,665) $4,364
- - 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, 2009 were as follows:
UNREALIZED EXPIRATION FACE APPRECIATION CONTRACTS ISSUE EXCHANGE DATE VALUE (DEPRECIATION) - --------- ---------------------- --------- -------------- ---------- -------------- 23 OMX Stock Index Future Stockholm July 2009 $ 232,893 $ 4,124 70 DJ Euro Stoxx 50 Eurex September 2009 $2,365,159 (10,320) 27 FTSE 100 Index Future LIFFE September 2009 $1,906,163 (32,514) 7 SPI 200 Index Future Sydney September 2009 $ 554,914 (4,813) 17 TOPIX Index Future Tokyo September 2009 $1,650,177 (18,735) -------- TOTAL $(62,258) ========
23 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) - - Foreign currency exchange contracts as of June 30, 2009 were as follows:
UNREALIZED CURRENCY CURRENCY SETTLEMENT APPRECIATION PURCHASED SOLD COUNTERPARTY DATE (DEPRECIATION) ----------------- ----------------- -------------- ---------- -------------- AUD 456,000 USD 368,676 UBS AG 7/01/09 $ (1,230) SGD 10,000 USD 6,885 UBS AG 7/01/09 19 USD 598,174 AUD 741,000 UBS AG 7/01/09 1,075 USD 1,403,579 EUR 1,000,000 UBS AG 7/01/09 720 USD 801,795 GBP 487,000 UBS AG 7/01/09 584 USD 2,074,443 JPY 200,000,000 UBS AG 7/01/09 (1,645) USD 204,873 SEK 1,581,000 UBS AG 7/01/09 (62) USD 193,544 HKD 1,500,000 UBS AG 7/02/09 (3) AUD 91,000 USD 69,433 Brown Brothers 8/13/09 3,646 Harriman & Co. CHF 170,000 USD 152,536 Brown Brothers 8/13/09 4,009 Harriman & Co. EUR 128,000 USD 173,194 Brown Brothers 8/13/09 6,370 Harriman & Co. GBP 232,000 USD 355,423 Brown Brothers 8/13/09 26,248 Harriman & Co. HKD 691,000 USD 89,214 Brown Brothers 8/13/09 (19) Harriman & Co. JPY 55,539,000 USD 577,611 Brown Brothers 8/13/09 (794) Harriman & Co. SEK 449,000 USD 57,710 Brown Brothers 8/13/09 484 Harriman & Co. USD 284,585 EUR 209,000 Brown Brothers 8/13/09 (8,609) Harriman & Co. USD 89,156 HKD 691,000 Brown Brothers 8/13/09 (40) Harriman & Co. USD 181,876 JPY 17,883,000 Brown Brothers 8/13/09 (3,853) Harriman & Co. USD 36,379 NOK 234,000 Brown Brothers 8/13/09 30 Harriman & Co. DKK 233,000 USD 42,393 HSBC Bank USA, 8/13/09 1,467 NA NOK 234,000 USD 36,617 HSBC Bank USA, 8/13/09 (269) NA AUD 1,461,000 USD 1,113,543 UBS AG 8/13/09 59,731 DKK 330,000 USD 59,821 UBS AG 8/13/09 2,298 EUR 2,824,000 USD 3,940,669 UBS AG 8/13/09 20,960 GBP 2,041,600 USD 3,114,166 UBS AG 8/13/09 244,535 JPY 263,123,000 USD 2,679,986 UBS AG 8/13/09 52,758 NOK 1,500,000 USD 237,363 UBS AG 8/13/09 (4,361) NZD 146,000 USD 87,541 UBS AG 8/13/09 6,407 USD 1,196,646 AUD 1,552,000 UBS AG 8/13/09 (49,706) USD 154,445 CHF 170,000 UBS AG 8/13/09 (2,100) USD 103,299 DKK 563,000 UBS AG 8/13/09 (2,681)
24 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) - - Foreign currency exchange contracts as of June 30, 2009 were as follows:
UNREALIZED CURRENCY CURRENCY SETTLEMENT APPRECIATION PURCHASED SOLD COUNTERPARTY DATE (DEPRECIATION) ----------------- ----------------- -------------- ---------- -------------- USD 1,874,399 EUR 1,341,000 UBS AG 8/13/09 $ (6,813) USD 3,321,349 GBP 2,078,000 UBS AG 8/13/09 (97,235) USD 1,849,699 JPY 178,125,000 UBS AG 8/13/09 (272) USD 237,556 NOK 1,500,000 UBS AG 8/13/09 4,554 USD 93,193 NZD 146,000 UBS AG 8/13/09 (755) -------- TOTAL $255,448 ========
- - CURRENCY ABBREVIATIONS: AUD Australian Dollar CHF Swiss Franc DKK Danish Krone EUR Euro GBP British Pound HKD Hong Kong Dollar JPY Japanese Yen NOK Norwegian Krone NZD New Zealand Dollar SEK Swedish Krona SGD Singapore Dollar USD US Dollar - - Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, "Fair Value Measurements", 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 active, quoted prices for identical or 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 circumstances, to the extent observable inputs are not available (including the Series' own assumptions 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. 25 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED) The following table summarizes the inputs used as of June 30, 2009 in determining the fair valuation of the Series' investments:
INVESTMENTS IN VALUATION SECURITIES INPUTS ASSETS - ------------------------ -------------- Level 1 Long-Term Investments Common Stock: Belgium $ 102 France 345,689 Italy 118,702 Japan 201,099 Norway 138,277 Switzerland 1,022,084 United Kingdom 2,683,691 Investment Companies: United States 1,642,059 Rights: Norway 27,263 Singapore 4,005 Spain 9,280 United Kingdom 467,192 Short-Term Securities 2,133,954 ------------ Total Level 1 8,793,397 ------------ Level 2 Long-Term Investments Common Stock: Australia 52,265,229 Austria 2,323,739 Belgium 6,826,486 Bermuda 533,697 Cayman Islands 140,825 Denmark 6,814,183 Finland 9,208,025 France 71,253,561 Germany 54,404,857 Greece 4,220,394 Hong Kong 17,224,276 Ireland 2,039,099 Italy 24,803,446 Japan 172,805,182 Kazakhstan 262,643 Luxembourg 3,488,123 Netherlands 16,673,024 New Zealand 696,028
26 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS JUNE 30, 2009 (UNAUDITED)
INVESTMENTS IN VALUATION SECURITIES INPUTS ASSETS - ------------------------ -------------- Norway 4,431,685 Portugal 2,284,901 Singapore 9,820,549 Spain 32,308,696 Sweden 17,130,706 Switzerland 54,051,467 United Kingdom 146,311,107 Preferred Stocks: Germany 1,335,068 Warrants: Italy -- Rights: Belgium -- Singapore 12,321 ----------- Total Level 2 $713,669,317 ------------ Total Level 3 -- ------------ TOTAL $722,462,714 ============
OTHER FINANCIAL INSTRUMENTS(1) ---------------------- ASSETS LIABILITIES -------- ----------- Level 1 $ 4,124 $ (66,382) Level 2 435,895 (180,447) Level 3 -- -- -------- --------- 440,019 $(246,829) ======== =========
(1) Other financial instruments are financial futures contracts and foreign currency exchange contracts, which are shown at the unrealized appreciation/depreciation on the instrument. The following is a reconciliation of investments for unobservable inputs Level 3 were used in
COMMON STOCKS AUSTRALIA ------------- Balance, as of December 31, 2008 $ 26,500 Accrued discounts/premiums -- Realized gain (loss) -- Change in unrealized appreciation/depreciation(2) 661,574 Net purchases (sales) -- Net transfers out of Level 3 (688,074) --------- BALANCE, AS OF JUNE 30, 2009 $ -- =========
(2) Included in the related net change in unrealized appreciation/depreciation on the Statement of Operations related to securities classified as Level 3 at period end. 27 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 3, 2009 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 3, 2009 By /s/ Rebecca L. Harris --------------------- Rebecca L. Harris Treasurer Date: September 3, 2009 EX-99.CERT 2 ex99cert-09.txt For period ended 06/30/2009 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 3, 2009 /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 3, 2009 /s/ William F. Quinn ----------------- -------------------- william F. Quinn President American Beacon Funds EX-99.906 CERT 3 ex906cert-09.txt For period ended 06/30/2009 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, 2009 (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 3, 2009 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-----