N-CSR 1 ncsr1209bea.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-04984 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) Gene L. Needles, Jr., 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: December 31, 2009 ITEM 1. REPORTS TO STOCKHOLDERS. GUIDANCE | VISION | EXPERIENCE (American Beacon Funds(SM) LOGO) Annual Report (GRAPHIC) December 31, 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 President's Message.................................................................... 1 Performance Overviews.................................................................. 3 American Beacon Funds Statements of Assets and Liabilities................................................ 12 Statements of Operations............................................................ 13 Statements of Changes in Net Assets................................................. 14 Notes to Financial Statements....................................................... 15 Financial Highlights................................................................ 22 State Street Equity 500 Index Portfolio Portfolio of Investments............................................................ 31 Statement of Assets and Liabilities................................................. 37 Statement of Operations............................................................. 38 Statements of Changes in Net Assets................................................. 39 Financial Highlights................................................................ 40 Notes to Financial Statements....................................................... 41 Master Small Cap Index Series Summary Schedule of Investments..................................................... 54 Statement of Assets and Liabilities................................................. 61 Statement of Operations............................................................. 62 Statements of Changes in Net Assets................................................. 63 Financial Highlights................................................................ 63 Notes to Financial Statements....................................................... 64 Master International Index Series Summary Schedule of Investments..................................................... 72 Statement of Assets and Liabilities................................................. 77 Statement of Operations............................................................. 78 Statements of Changes in Net Assets................................................. 79 Financial Highlights................................................................ 79 Notes to Financial Statements....................................................... 80 Additional Information......................................................Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor's strategies and each Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. American Beacon Funds December 31, 2009 FELLOW SHAREHOLDERS, (PHOTO OF GENE L. NEEDLES, JR.) As an introduction to the American Beacon S&P 500, Small Cap and International Equity Index Funds Annual Report for the 12-month period ended December 31, 2009, please let me take a moment to tell you how pleased I am to have been serving as President and CEO of American Beacon Advisors since April 15, 2009. I consider it a privilege to hold this position, and I take its responsibilities quite seriously. I've enjoyed a long, successful career in the investment business, and I'm no stranger to the ups and downs that markets can deliver. As a fellow investor and shareholder, I experience these trends in much the same way you do. The majority of 2008 was difficult in many ways. However, when I took the helm at American Beacon, I already had many reasons to be optimistic about what might develop in 2009. As of December 31, 2009, my optimism has been largely confirmed. The Institutional Class of the American Beacon S&P 500, Small Cap and International Equity Index Funds reported returns of 26.70%, 27.21% and 28.72%, respectively, for the 12-month period ending December 31, 2009. Of course, one year of performance doesn't tell the whole story, especially when you're investing for the long term. Please note that the recent growth rate in the stock market has helped produce short-term returns that are not typical and may not continue in the future. Many of us have long-term goals, including retirement, driving our investment decisions. While this 12-month period began amid a frightening recessionary environment, we finished the year with increasing confidence that markets have begun to stabilize, that liquidity has returned to the debt markets and that equity markets have had a substantial recovery. I know as well as you do that maintaining a long-term perspective, employing a buy-and-hold philosophy (consistent with the Fund's objectives), and doing the right thing according to your risk tolerance and time horizon is not always easy. But the professionals at American Beacon are dedicated to working hard to help investors succeed. Just as you maintain a commitment to your goals--and to those who inspire you to create your goals--we maintain a strong commitment to due diligence and oversight. That commitment is one of the key reasons I am honored to serve as President and CEO, and pleased to be able to share my enthusiasm about the path ahead with you. A financial advisor can be an important ally in creating investment success, so--as you review the enclosed annual report--please feel free to discuss your thoughts and concerns with a trusted advisor. And, as always, the professionals associated with the American Beacon Funds are grateful for the opportunity to serve you. Best regards, /s/ Gene L. Needles, Jr. Gene L. Needles, Jr. President American Beacon Funds 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. 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 1 DOMESTIC EQUITY MARKET OVERVIEW DECEMBER 31, 2009 (UNAUDITED) Economic recovery from the most recent recession continued to gain momentum throughout 2009. Most importantly, credit spreads tightened and liquidity returned to the market. During the fourth quarter 2009, the pace of job losses declined, home sales rose, and consumer spending increased. In addition, financial market conditions continued to improve as equity prices rose and credit spreads remained tight. The U.S. stock market started 2009 much the same way it ended 2008--falling steadily into early March. Poor growth prospects, falling corporate profits, tight credit conditions and a weak job market all helped push U.S. equity markets lower. In early March, domestic stocks reached a sudden turning point. The S&P 500 Index, as a proxy for U.S. equity markets in general, rose nearly 20% in the last three weeks of March when some good news helped spark a measure of optimism in the market. Despite this rally, the S&P 500 ended the first quarter of 2009 with a loss of just over 11%. The rally that started in March 2009 gained momentum over the following two quarters. The S&P 500 gained more than 15% in each of the next two quarters (second and third quarters of 2009), as aggressive monetary and fiscal stimulus measures began to take hold. Improvements in credit spreads, business confidence and other leading economic indicators helped improve sentiment throughout the year, leading many to hope the worst had passed. The rally continued into the fourth quarter of 2009 at a reduced, but still solid, pace. Reported earnings were better than predicted, and earnings projections began being revised upward toward the end of 2009. The S&P 500 Index ended the one-year period as of Dec. 31, 2009, with gain of 26.46%. The rally in the middle of the year was the strongest surge seen since the middle of the 1970s, when the country was emerging from a deep recession. While the recovery in the market has been strong, index levels are still well below the highs set in 2007. The Federal Reserve Board("Fed") left the target range of the federal funds rate unchanged at 0.0-0.25% at the Federal Open Market Committee meeting on Dec. 16, 2009. That is where it has remained since Dec. 16, 2008. During the economic crisis, the Fed employed quantitative easing tactics to flood the financial markets with liquidity. In order to avoid stimulating inflation as the economic recovery gains ground, the Fed will need to implement a careful exit strategy to reduce liquidity. The Fed has numerous tools available to drain excess liquidity from the system, but the timing of such efforts will be very important. After six straight quarters of negative returns, the gains during the final three quarters of 2009 gave investors some relief after a long, difficult period. However, there are still many challenges facing U.S. equity markets and the U.S. economy--including high unemployment, fears of inflation or a double dip recession, and concerns over the exit strategies central banks will use to reduce their stimulus programs. While it appears that the economic recovery could be sustainable, many believe that economic growth will likely be gradual at best in 2010.. S&P is a trademark of the McGraw-Hill Companies, Inc. and has been licensed for use, "Standard and Poor's(R)", "S&P", "Standard & Poor's 500", "S&P 500" are all trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by State Street Bank and Trust Company. Russell 2000 Index is a registered trademark of Frank Russell Company. 2 PERFORMANCE OVERVIEW AMERICAN BEACON S&P 500 INDEX FUND+ DECEMBER 31, 2009(UNAUDITED) For the twelve months ended December 31, 2009, the total return of the Institutional Class of the American Beacon S&P 500 Index Fund was 26.70%, slightly better than the S&P 500 Index (the "Index") return of 26.46% and the Lipper S&P 500 Objective Funds Index return of 26.31%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 12/31/99 THROUGH 12/31/09 (LINE GRAPH)
ANNUALIZED TOTAL RETURNS VALUE OF PERIODS ENDED 12/31/09 $10,000 --------------------------- 12/31/99- 1 YEAR 5 YEARS 10 YEARS 12/31/09 ------ ------- -------- --------- Institutional Class(1,4)........ 26.70% 0.36% -1.07% $8,975 Investor Class(1,2,4)........... 26.26% -0.08% -1.49% $8,603 Lipper S&P 500 Objective Funds Index (3).............. 26.31% 0.23% -1.19% $8,873 S&P 500 Index (3)............... 26.46% 0.42% -0.95% $9,089
(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 Fund prospectus for the Institutional and Investor Class shares was 0.13% and 0.57%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that is based on expenses incurred during the period covered by this report. The market rally spread across all sectors during 2009. Nine out of ten sectors in the Index posted double digit positive returns for the year. Information Technology stocks led the rally gaining 61.6% and Consumer Discretionary stocks rose 41.6%. It is reasonable to infer that these results reflect changing views on the economy and improved sentiment on more aggressive sectors such as Information Technology and Consumer Discretionary. The more defensive sectors such as Telecommunication Services and Utilities, up 8.9% and 11.9% respectively, did not fully participate in the rally but still managed solid gains. Most of the 2009 rally was led by names that had been severely punished during the market downdraft of 2007-2008. The top six individual stock returns, XL Capital (up 419.8%), Tenet Healthcare (up 368.7%), Advanced Micro Devices (up 348.2%), Ford Motor (up 336.7%), Genworth Financial (up 301.1%), and Micron Technology (up 300.0%), all began the year with stock prices below $5 and each posted returns of 300% or more. While the vast majority of stocks in the Index posted gains during the year, not every company participated in the rally. A number of stocks including Motors Liquidation Co. (formerly General Motors Corporation) (down 80.9%), CIT Group (down 83.4%) and FairPoint Communications (down 96.7%) lost most of their value during the period. 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. 3 PERFORMANCE OVERVIEW AMERICAN BEACON S&P 500 INDEX FUND+ DECEMBER 31, 2009(UNAUDITED) TOP TEN HOLDINGS
% OF EQUITIES* --------- Exxon Mobil Corp................................................ 3.3% Microsoft Corp.................................................. 2.4% Apple, Inc...................................................... 1.9% Johnson & Johnson............................................... 1.8% Procter & Gamble Co............................................. 1.8% International Business Machines Corp............................ 1.7% AT&T, Inc....................................................... 1.7% JPMorgan Chase & Co............................................. 1.7% General Electric Co............................................. 1.6% Chevron Corp.................................................... 1.6%
* Percent of the equities of State Street Equity 500 Index Portfolio EQUITY SECTOR ALLOCATION
% OF EQUITIES* --------- Information Technology.......................................... 19.8% Financials...................................................... 14.4% Health Care..................................................... 12.6% Energy.......................................................... 11.5% Consumer Staples................................................ 11.4% Industrials..................................................... 10.2% Consumer Discretionary.......................................... 9.6% Utilities....................................................... 3.7% Materials....................................................... 3.6% Telecommunication Services...................................... 3.2%
* Percent of the equities of State Street Equity 500 Index Portfolio + The S&P 500 Index Fund is not sponsored, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in this fund. 4 PERFORMANCE OVERVIEW AMERICAN BEACON SMALL CAP INDEX FUND(SM) DECEMBER 31, 2009 (UNAUDITED) For the twelve months ended December 31, 2009, the total return of the Institutional Class of the American Beacon Small Cap Index Fund was 27.21%. The Fund's performance exceeded the Russell 2000(R) Index (the "Index") return of 27.16%, but underperformed the Lipper Small-Cap Core Funds Index return of 34.50%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 7/31/00 THROUGH 12/31/09 (LINE GRAPH)
ANNUALIZED TOTAL RETURNS PERIODS ENDED 12/31/09 ----------------------------------------------------- SINCE INCEPTION VALUE OF $10,000 1 YEAR 5 YEARS (7/31/00) 7/31/00-12/31/09 ------ ------- --------------- ---------------- Institutional Class(1,3) .. 27.21% 0.47% 3.67% $14,039 Lipper Small-Cap Core Funds Index(2) ......... 34.50% 1.55% 5.00% $15,836 Russell 2000 Index(2) ..... 27.16% 0.51% 3.77% $14,165
(1.) Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. (2.) The Lipper Small-Cap Core Funds Index tracks the results of the 30 largest mutual funds in the Lipper Small-Cap Core Funds category. Lipper is an independent mutual fund research and ranking service. The Russell 2000 Index is an unmanaged index comprised of approximately 2,000 smaller-capitalization stocks from various industrial sectors. One cannot invest directly in an index. (3.) The total annual Fund operating expense ratio set forth in the most recent prospectus for the Fund was 0.20%. The expense ratio above may vary from the expense ratio presented in other sections of this report that is based on expenses incurred during the period covered by this report. Within the Index, nine of the ten sectors posted positive returns for the period. Materials (up 61.3%), Consumer Discretionary (up 60.9%) and Information Technology (up 59.8%) emerged as the best performers, while Financials (down 1.4 %) was the only sector to post a negative return. The highest individual stock returns in the Index were generated by Diedrich Coffee Inc. (up 9,581%), Dollar Thrifty Automotive Group Inc. (up 2,250%), Vanda Pharmaceuticals Inc. (up 2,150%), Avis Budget Group Inc. (up 1,774%), and Air Transport Services Group Inc. (up 1,367%). By contrast, there were several stocks within the Index that lost a significant percentage of their value during the period, including Pacific Capital Bancorp (down 94.2%), Sterling Financial Corp. (Washington) (down 93.0%), and Repros Therapeutics (down 92.4%). The Fund will continue to strive to meet its objective of closely replicating, before expenses, the return of its benchmark, the Russell 2000 Index. It does so by investing in a subset of the securities in the Index such that the characteristics of the portfolio closely track the characteristics of the Index. 5 PERFORMANCE OVERVIEW AMERICAN BEACON SMALL CAP INDEX FUND(SM) DECEMBER 31, 2009 (UNAUDITED) TOP TEN HOLDINGS
% OF EQUITIES* --------- Human Genome Sciences, Inc. .. 0.6% 3Com Corp. ................... 0.3% Tupperware Brands Corp. ...... 0.3% E*Trade Financial Corp. ...... 0.3% Assured Guaranty Ltd. ........ 0.3% Solera Holdings, Inc. ........ 0.3% Highwoods Properties, Inc. ... 0.3% Skyworks Solutions, Inc. ..... 0.3% Domtar Corp. ................. 0.3% J. Crew Group, Inc. .......... 0.2%
EQUITY SECTOR ALLOCATION
% OF EQUITIES* --------- Financials .................. 20.2% Information Technology ...... 18.4% Industrials ................. 15.9% Health Care ................. 14.3% Consumer Discretionary ...... 13.7% Energy ...................... 5.2% Materials ................... 4.7% Consumer Staples ............ 3.4% Utilities ................... 3.2% Telecommunication Services .. 1.0%
* Percent of equity portion of Master Small Cap Index Series 6 INTERNATIONAL MARKET OVERVIEW DECEMBER 31, 2009 (UNAUDITED) After the first quarter of 2009, equity markets rebounded and appreciated sharply over the remainder of the year. From the mid-March 2009 lows, global equities rebounded tremendously. We witnessed strong rotation into financials and more cyclical sectors, as investors anticipated improvements in both the credit markets and the global economy. The MSCI EAFE Index, as a proxy for international stocks, returned 31.8% for the one-year period ended December 31, 2009. In a strong reversal from 2008, all 10 sectors and 21 countries represented in the MSCI EAFE Index recorded positive returns for the 12-month period. Following a very difficult 2008, which saw a global financial and economic recession that was nearly unprecedented, U.S. stocks continued their sharp declines in the first quarter of 2009. Fear dominated this period. Investors were skeptical about the intentions of governments and global policymakers. Those fears began dissipating, and stocks moved higher as investors witnessed the effects of global monetary and fiscal stimuli. International returns were amplified by the strength of foreign currencies relative to the U.S. dollar. The U.S. dollar underperformed most major global currencies during 2009, weakening versus the British pound and euro, but strengthening versus the Japanese yen. In all, 2009 produced negative real economic growth across the developed world, as well as noticeable earnings declines. However, in another reversal of 2008's trends, international equity markets generally outperformed U.S. markets for the 12-month period, with the MSCI EAFE Index gaining 31.8% versus the 26.5% return of the S&P 500 Index. In 2009, emerging markets also experienced a significant comeback from the prior year to end up with a return of 78.5% for 2009, as represented by the MSCI Emerging Markets Index. 7 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM) DECEMBER 31, 2009 (UNAUDITED) For the twelve months ended December 31, 2009, the Institutional Class of the American Beacon International Equity Index Fund posted a total return of 28.72%, underperforming the MSCI EAFE Index (the "Index") return of 31.78% and the Lipper International Funds Index return of 35.30%. The investment manager's application of its fair valuation policy during the period was the primary driver of the Fund's underperformance. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 7/31/00 THROUGH 12/31/09 (LINE GRAPH)
ANNUALIZED TOTAL RETURNS PERIODS ENDED 12/31/09 ----------------------------------------------------- SINCE INCEPTION VALUE OF $10,000 1 YEAR 5 YEARS (7/31/00) 7/31/00-12/31/09 ------ ------- --------------- ---------------- Institutional Class(1,3) .. 28.72% 3.55% 2.07% $12,125 Lipper International Funds Index(2) ......... 35.30% 4.88% 2.89% $13,074 MSCI EAFE Index(2) ........ 31.78% 3.54% 2.18% $12,248
(1.) Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated, and current performance may be lower or higher than the performance data quoted. To obtain performance as of the most recent month end, please visit www.americanbeaconfunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. (2.) The Lipper International Funds Index tracks the results of the 30 largest mutual funds in the Lipper International Funds category. Lipper is an independent mutual fund research and ranking service. The MSCI EAFE Index is a market capitalization weighted index of international stock performance composed of equities from developed markets excluding the U.S. and Canada. Performance is that of the MSCI EAFE Index through 9/30/01, the MSCI Provisional EAFE Index from 10/1/01 through 5/31/02, and the MSCI EAFE Index thereafter. One cannot invest directly in an index. (3.) The total annual Fund operating expense ratio in the most recent prospectus for the Fund was 0.19%. The expense ratio above may vary from the expense ratio presented in other sections of this report that is based on expenses incurred during the period covered by this report. In a strong reversal from 2008, all 10 sectors and 21 countries represented in the MSCI EAFE Index recorded positive returns for the 12-month period. From a sector perspective, gains were most prominent in the Materials, Financials and Consumer Discretionary sectors, which returned 69.3%, 38.1% and 37.5% respectively for the year. At the lower end of the positive return spectrum were the Utilities and Telecommunication Services sectors, which posted significantly smaller gains of 4.2% and 15.7%, respectively. At the country level, Norway (up 87.1%), Australia (up 76.4%), Singapore (up 74.0%), Sweden (up 64.2%), and Hong Kong (up 60.2%) were the top country performers, while Japan (up 6.3%), Finland (up 11.1%), and Ireland (up 12.3%) were the least positive countries over the period. On an individual-stock basis, firms Immoeast AG (up 763.9%), Kazakhmys PLC (up 545.7%), Vedanta Resources PLC (up 387.7%) and Infineon Technologies AG (up 367.9%) were the strongest performers. By contrast, Japan Airlines Corp. (down 69.2%), Volkswagen AG (down 68.0%), and Acom Co. Ltd. (down 63.1%) 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. 8 PERFORMANCE OVERVIEW AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM) DECEMBER 31, 2009 (UNAUDITED) TOP TEN HOLDINGS
% OF NET ASSETS* ----------- HSBC Holdings plc. .... 1.9% BP plc. ............... 1.8% Nestle S.A. ........... 1.7% Total S.A. ............ 1.3% Banco Santander S.A. .. 1.3% BHP Billiton Ltd. ..... 1.3% Toyota Motor Corp. .... 1.2% Vodafone Group plc. ... 1.2% Roche Holding Ltd. .... 1.2% Telefonica S.A. ....... 1.2%
EQUITY SECTOR ALLOCATION
% OF EQUITIES* --------- Financials .............. 25.5% Industrials ............. 11.1% Materials ............... 10.4% Consumer Staples ........ 10.1% Consumer Discretionary .. 9.7% Health Care ............. 8.4% Energy .................. 8.4% Utilities ............... 5.9% Telecommunications ...... 5.8% Information Technology .. 4.7%
* Percent of equity portion of Master International Index Series COUNTRY ALLOCATION (PIE CHART) COUNTRY ALLOCATION
% OF EQUITIES* EAFE --------- ---- United Kingdom .. 21.5% 21.6% Japan ........... 20.7% 20.7% France .......... 11.0% 11.1% Australia ....... 8.5% 8.4% Germany ......... 8.1% 8.1% Switzerland ..... 7.8% 7.7% Spain ........... 4.6% 4.6% Italy ........... 3.5% 3.5% Netherlands ..... 2.7% 2.7% Sweden .......... 2.5% 2.5% Hong Kong ....... 2.3% 2.3% Singapore ....... 1.5% 1.5% Finland ......... 1.1% 1.1% Belgium ......... 1.0% 1.0% Denmark ......... 0.9% 0.9% Norway .......... 0.8% 0.8% Greece .......... 0.5% 0.5% Austria ......... 0.3% 0.3% Portugal ........ 0.3% 0.3% Ireland ......... 0.3% 0.3% New Zealand ..... 0.1% 0.1%
* Percent of equity portion of Master International Index Series 9 FUND EXPENSES DECEMBER 31, 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 July 1, 2009 through December 31, 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 CAP INTERNATIONAL INSTITUTIONAL CLASS INDEX INDEX EQUITY INDEX ------------------- --------- --------- ------------- Beginning Account Value 7/1/09 ................... $1,000.00 $1,000.00 $1,000.00 Ending Account Value 12/31/09 .................... $1,227.63 $1,239.57 $1,215.48 Expenses Paid During Period* 7/1/09 - 12/31/09 ... $ 0.90 $ 1.35 $ 1.34 Annualized Expense Ratio ......................... 0.16% 0.24% 0.24%
S&P 500 INVESTOR CLASS INDEX -------------- --------- Beginning Account Value 7/1/09 ................... $1,000.00 Ending Account Value 12/31/09 .................... $1,226.54 Expenses Paid During Period* 7/1/09 - 12/31/09 ... $ 3.42 Annualized Expense Ratio ......................... 0.61%
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The following table provides information about hypothetical account values and hypothetical expenses based on a Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in a particular Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Institutional and 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 CAP INTERNATIONAL INSTITUTIONAL CLASS INDEX INDEX EQUITY INDEX ------------------- --------- --------- ------------- Beginning Account Value 7/1/09 ................... $1,000.00 $1,000.00 $1,000.00 Ending Account Value 12/31/09 .................... $1,024.40 $1,024.00 $1,024.00 Expenses Paid During Period* 7/1/09 - 12/31/09 ... $ 0.82 $ 1.22 $ 1.32 Annualized Expense Ratio ......................... 0.16% 0.24% 0.24%
S&P 500 INVESTOR CLASS INDEX -------------- --------- Beginning Account Value 7/1/09 ................... $1,000.00 Ending Account Value 12/31/09 .................... $1,022.13 Expenses Paid During Period* 7/1/09 - 12/31/09 ... $ 3.11 Annualized Expense Ratio ......................... 0.61%
---------- * Expenses are equal to each Fund's annualized expense ratio for the six-month period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (365) to reflect the half-year period. 10 AMERICAN BEACON FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Trustees of American Beacon Funds: We have audited the accompanying statements of assets and liabilities of American Beacon Funds (comprised of American Beacon S&P 500 Index Fund, American Beacon Small Cap Index Fund, and American Beacon International Equity Index Fund) (collectively, the "Funds") as of December 31, 2009, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of each Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the Master Portfolios. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon Funds at December 31, 2009, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/Ernst & Young LLP Dallas, Texas February 26, 2010 11 AMERICAN BEACON FUNDS STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2009 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
INTERNATIONAL S&P 500 INDEX SMALL CAP INDEX EQUITY INDEX FUND FUND FUND ------------- --------------- ------------- ASSETS: Investment in Portfolio, at value ........................... $ 338,584 $ 39,822 $ 279,803 Receivable for fund shares sold ............................. 739 170 447 Prepaid expenses ............................................ 7 -- 1 ----------- ---------- ----------- TOTAL ASSETS ............................................. 339,330 39,992 280,251 ----------- ---------- ----------- LIABILITIES: Payable for fund shares redeemed ............................ 17 -- 24 Administrative service and service fees payable (Note 2) .... 22 2 12 Printing fees payable ....................................... 24 9 27 Professional fees payable ................................... 17 19 19 Sub-administration fees payable ............................. -- 1 52 Transfer agent fees payable ................................. 5 -- 2 Trustee fees payable ........................................ 5 1 1 Other liabilities ........................................... 4 2 4 ----------- ---------- ----------- TOTAL LIABILITIES ........................................ 94 34 141 ----------- ---------- ----------- NET ASSETS .................................................. $ 339,236 $ 39,958 $ 280,110 =========== ========== =========== ANALYSIS OF NET ASSETS: Paid-in-capital ............................................. 371,120 55,033 344,761 Undistributed net investment income (expense) ............... 888 -- (84) Accumulated net realized gain (loss) ........................ (86,723) (11,067) (32,465) Unrealized net appreciation (depreciation) of investments and futures contracts ........................................ 53,951 (4,008) (32,102) ----------- ---------- ----------- NET ASSETS ..................................................... $ 339,236 $ 39,958 $ 280,110 =========== ========== =========== Shares outstanding (no par value): Institutional Class ......................................... 20,923,090 3,973,872 29,868,748 =========== ========== =========== Investor Class .............................................. 1,484,099 -- -- =========== ========== =========== Net asset value, offering and redemption price per share: Institutional Class ......................................... $ 15.15 $ 10.06 $ 9.38 =========== ========== =========== Investor Class .............................................. $ 15.00 $ -- $ -- =========== ========== ===========
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios attached 12 AMERICAN BEACON FUNDS STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2009 (IN THOUSANDS)
INTERNATIONAL S&P 500 INDEX SMALL CAP INDEX EQUITY INDEX FUND FUND FUND ------------- --------------- ------------- INVESTMENT INCOME ALLOCATED FROM PORTFOLIO: Dividend income ......................................... $ 6,314 $ 421 $ 6,689 Interest income ......................................... 16 6 7 Securities lending income ............................... -- 46 -- Portfolio expenses ...................................... (123) (25) (210) Other income ............................................ 629 -- 9 -------- ------- ------- NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ....... 6,836 448 6,495 -------- ------- ------- FUND EXPENSES: Administrative service fees (Note 2): Institutional Class .................................. 127 17 116 Investor Class ....................................... 49 -- -- Sub-administrative service fees (Note 2): Institutional Class .................................. -- 2 68 Transfer agent fees: Institutional Class .................................. 24 1 20 Custody and accounting fees ............................. 9 7 11 Professional fees ....................................... 17 19 18 Registration fees ....................................... 29 -- 1 Service fees - Investor Class (Note 2) .................. 49 -- -- Printing ................................................ 25 -- 46 Trustee fees ............................................ 32 2 22 Insurance ............................................... 8 1 7 Other expenses .......................................... 17 3 15 -------- ------- ------- TOTAL FUND EXPENSES .................................. 386 52 324 -------- ------- ------- NET INVESTMENT INCOME ...................................... 6,450 396 6,171 -------- ------- ------- REALIZED AND UNREALIZED GAIN (LOSS) ALLOCATED FROM MASTER PORTFOLIO Net realized gain (loss) from: Investments .......................................... (16,373) (2,024) 5,063 Foreign currency transactions ........................ -- -- 701 Futures contracts .................................... 1,921 253 827 Change in net unrealized appreciation or depreciation of: Investments .......................................... 78,920 10,109 48,492 Foreign currency transactions ........................ -- -- 859 Futures contracts .................................... (49) (370) (3,846) -------- ------- ------- NET GAIN ON INVESTMENTS .............................. 64,419 7,968 52,096 -------- ------- ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $ 70,869 $ 8,364 $58,267 ======== ======= =======
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios attached 13 AMERICAN BEACON FUNDS STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
INTERNATIONAL EQUITY S&P 500 INDEX FUND SMALL CAP INDEX FUND INDEX FUND Year Ended December 31, Year Ended December 31, Year Ended December 31, ----------------------- ----------------------- ----------------------- 2009 2008 2009 2008 2009 2008 --------- --------- -------- -------- --------- --------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income .............. $ 6,450 $ 6,284 $ 396 $ 619 $ 6,171 $ 9,005 Net realized gain (loss) on investments, foreign currency, and futures contracts ....................... (14,452) (3,348) (1,771) (2,963) 6,591 (14,050) Change in net unrealized appreciation or depreciation of investments and futures contracts ....................... 78,871 (127,828) 9,739 (14,190) 45,505 (125,746) --------- --------- -------- -------- --------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .............. 70,869 (124,892) 8,364 (16,534) 58,267 (130,791) --------- --------- -------- -------- --------- --------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class .......... (5,395) (5,882) (451) (601) (6,410) (7,110) Investor Class ............... (325) (267) -- -- -- -- Net realized gain on investments: Institutional Class .......... -- -- -- (2,145) -- -- Investor Class ............... -- -- -- -- -- -- Tax return of capital: Institutional Class .......... -- -- -- (456) -- -- --------- --------- -------- -------- --------- --------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS .............. (5,720) (6,149) (451) (3,202) (6,410) (7,110) --------- --------- -------- -------- --------- --------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares ...... 71,955 104,131 10,774 11,693 180,859 227,499 Reinvestment of dividends and distributions ................... 5,714 6,122 451 3,202 6,409 7,110 Cost of shares redeemed ............ (41,080) (31,890) (10,732) (15,932) (144,875) (178,141) --------- --------- -------- -------- --------- --------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ........ 36,589 78,363 493 (1,037) 42,393 56,468 --------- --------- -------- -------- --------- --------- NET INCREASE (DECREASE) IN NET ASSETS ............................. 101,738 (52,678) 8,406 (20,773) 94,250 (81,433) --------- --------- -------- -------- --------- --------- NET ASSETS: Beginning of period ................ 237,498 290,176 31,552 52,325 185,860 267,293 --------- --------- -------- -------- --------- --------- END OF PERIOD * .................... $ 339,236 $ 237,498 $ 39,958 $ 31,552 $ 280,110 $ 185,860 ========= ========= ======== ======== ========= ========= * Includes undistributed net investment income (loss) of ................... $ 888 $ 200 $ -- $ -- $ (84) $ 199 ========= ========= ======== ======== ========= =========
See accompanying notes See accompanying Financial Statements of the respective Master Portfolios attached 14 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, (the "Act") as a no load, diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon S&P 500 Index Fund, the American Beacon Small Cap Index Fund and the American Beacon International Equity Index Fund (each a "Fund" and collectively, the "Funds"), each a series of the Trust. American Beacon Advisors, Inc. (the "Manager") is a wholly-owned subsidiary of 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: DECEMBER 31, 2009 ---------------- ----------- ----------------- S&P 500 Index Fund State Street Equity 500 Index Portfolio 17.9% Small Cap Index Fund Master Small Cap Index Series 17.4% International Equity Index Fund Master International Index Series 37.4%
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: ------ ----------- INSTITUTIONAL CLASS Investors making an initial investment of $250,000 INVESTOR CLASS General public and investors investing through an intermediary
Administrative service fees and service fees vary amongst the classes as described more fully in footnote 2. 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 and Valuation Inputs Valuation of securities by each Portfolio as well as the inputs used to value the Portfolios' net assets is discussed in the Portfolios' Notes to Financial Statements, which are included elsewhere in this report. 15 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 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 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. 16 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 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 up to 0.375% of the average daily net assets of the Investor Class of the S&P 500 Index Fund. Sub-administration Agreement The Trust, the Manager and BlackRock Advisors, LLC ("BlackRock") entered into a Sub-administration 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 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 do not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended December 31, 2009 remains subject to examination by the Internal Revenue Service. If applicable, the Funds recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in "Other expenses" on the Statements of Operations. Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. generally accepted accounting principles. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. The International Equity Index Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns of income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation, as applicable, as the income is earned or capital gains are recorded. The tax character of distributions paid during the years ended December 31, 2009 and December 31, 2008 were as follows (in thousands):
S&P 500 INDEX SMALL CAP INDEX INTERNATIONAL EQUITY INDEX --------------------------- ----------------------- --------------------------- YEAR YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER DECEMBER 31, DECEMBER 31, 2009 2008 2009 31, 2008 2009 2008 ------------ ------------ ------------ -------- ------------ ------------ DISTRIBUTIONS PAID FROM: ORDINARY INCOME:* Institutional Class ........ $5,395 $5,882 $397 $ 646 $6,410 $7,110 Investor Class ............. 325 267 -- -- -- -- LONG-TERM CAPITAL GAIN: Institutional Class ........ -- -- -- 2,100 -- -- Investor Class ............. -- -- -- -- -- -- RETURN OF CAPITAL Institutional Class ........ -- -- 54 456 -- -- ------ ------ ---- ------ ------ ------ TOTAL TAXABLE DISTRIBUTIONS ... $5,720 $6,149 $451 $3,202 $6,410 $7,110 ====== ====== ==== ====== ====== ======
* For tax purposes, short-term capital gains are considered ordinary income distributions. 17 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 As of December 31, 2009, the components of distributable earnings on a tax basis we as follows (in thousands):
S&P 500 SMALL CAP INT'L EQUITY INDEX FUND INDEX FUND INDEX FUND ---------- ---------- ------------ Cost basis of investments for federal income tax purposes....... $315,021 $ 44,860 $ 318,721 Unrealized appreciation...................................... 68,349 2,636 115,686 Unrealized depreciation...................................... (44,786) (7,674) (154,604) -------- -------- --------- Net unrealized depreciation.................................. 23,563 (5,038) (38,918) Undistributed ordinary income................................ 799 -- 59 Capital and other accumulated losses......................... (56,161) (10,010) (25,791) Other temporary differences.................................. (85) (27) -- -------- -------- --------- Distributable earnings.......................................... $(31,884) $(15,075) $ (64,651) ======== ======== =========
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation/ (depreciation) are attributable primarily to the tax deferral of wash sales, the realization for tax purposes of unrealized gains/ (losses) on certain derivative instruments, reclassifications of income from real estate investment securities, and the realization for tax purposes on unrealized gains/ (losses) on investments in passive foreign investment companies. Due to the inherent differences in the recognition of income, expenses and realized gains/(losses) under the U.S. generally accepted accounting principles and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities. Accordingly, the following amounts represent current year permanent differences derived from reclassifications of income from real estate investment securities, futures, foreign currency, sales of investments in passive foreign investment companies, dividend reclassifications and partnership transactions that have been reclassified as of December 31, 2009 (in thousands):
S&P 500 SMALL CAP INT'L EQUITY INDEX FUND INDEX FUND INDEX FUND ---------- ---------- ------------ Paid-in-capital................................................. $ 14,415 $ 7,236 $21,436 Undistributed net investment income............................. (42) 55 (44) Accumulated net realized gain/(loss)............................ (14,373) (7,291) (21,391) Unrealized appreciation (depreciation) of investments, futures contracts, and foreign currency...................... -- -- (1)
At December 31, 2009 capital loss carry forward positions for federal income tax purposes were as follows (in thousands):
FUND 2010 2011 2012 2013 2014 2015 2016 2017 TOTAL ---- ------ ---- ------ ------ ---- ---- ------- ------- ------- S&P 500 Index Fund ................. $7,852 $635 $1,060 $2,311 $286 $-- $11,180 $28,055 $51,379 Small Cap Index Fund ............... -- -- -- -- -- -- -- $ 9,383 $ 9,383 International Equity Index Fund .... -- -- -- -- -- -- $ 9,746 $13,890 $23,636
Net capital and foreign currency losses incurred after October 31, 2009 and within the taxable year are deemed to arise on the first business day of the Fund's next taxable year. For the period ended December 31, 2009 (in thousands), the S&P 500 Index Fund deferred $4,782 of capital losses, the Small Cap Index Fund deferred $627 of capital losses and the International Equity Index Fund deferred $382 of foreign currency losses and $2,154 of capital losses to January 1, 2010. 18 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 4. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares for each Class of the Funds (shares and dollars in thousands): Year ended December 31, 2009
INSTITUTIONAL CLASS INVESTOR CLASS ----------------- ----------------- S&P 500 INDEX FUND SHARES AMOUNT SHARES AMOUNT ------------------ ------ -------- ------ -------- Shares sold ............................ 4,250 $ 54,132 1,580 $ 17,823 Reinvestment of dividends .............. 416 5,395 26 319 Shares redeemed ........................ (2,132) (26,685) (1,193) (14,395) ------ -------- ------ -------- Net increase in shares outstanding ..... 2,534 $ 32,842 413 $ 3,747 ====== ======== ====== ========
INSTITUTIONAL CLASS ----------------- SMALL CAP INDEX FUND SHARES AMOUNT -------------------- ------ -------- Shares sold ............................ 1,305 $ 10,774 Reinvestment of dividends .............. 45 451 Shares redeemed ........................ (1,321) (10,732) ------ -------- Net increase in shares outstanding ..... 29 $ 493 ====== ========
INSTITUTIONAL CLASS ------------------- INTERNATIONAL EQUITY INDEX FUND SHARES AMOUNT ------------------------------- ------- --------- Shares sold ............................ 20,666 $ 180,859 Reinvestment of dividends .............. 691 6,409 Shares redeemed ........................ (16,414) (144,875) ------- --------- Net increase in shares outstanding ..... 4,943 $ 42,393 ======= =========
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 ======= =========
19 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 5. SUBSEQUENT EVENTS Management has evaluated the possibility of subsequent events existing in the Funds' financial statements through February 26, 2010. Management has determined that there are no material events that would require disclosure in the Funds' financial statements through this date. 20 AMERICAN BEACON FUNDS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 THIS PAGE INTENTIONALLY LEFT BLANK. 21 AMERICAN BEACON S&P 500 INDEX FUND(SM) FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class Year Ended December 31, --------------------------------------------------------- 2009 2008 2007 2006 2005 -------- -------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 12.21 $ 19.85 $ 19.19 $ 16.90 $ 16.43 -------- -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income:(A) 0.30 0.35 0.39 0 .34(B,E) 0.29 Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) 2.91 (7.64) 0.65 2.29(E) 0.47 -------- -------- -------- -------- -------- Total income (loss) from investment operations 3.21 (7.29) 1.04 2.63 0.76 -------- -------- -------- -------- -------- LESS DISTRIBUTIONS: Dividends from net investment income (0.27) (0.35) (0.38) (0.34) (0.29) Tax return of capital -- -- -- -- 0.00(D) -------- -------- -------- -------- -------- Total distributions (0.27) (0.35) (0.38) (0.34) (0.29) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 15.15 $ 12.21 $ 19.85 $ 19.19 $ 16.90 ======== ======== ======== ======== ======== TOTAL RETURN 26.70% (37.08)% 5.39% 15.69% 4.74% ======== ======== ======== ======== ======== RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $316,975 $224,583 $271,746 $223,008 $225,857 Ratios to average net assets (annualized):(A) Net investment income 2.39% 2.23% 1.89% 1.85% 1.75% Expenses, including expenses allocated from master portfolio 0.15% 0.13% 0.13% 0.14% 0.13%
(A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the State Street Equity 500 Index Portfolio. (B) Based on average shares outstanding. (C) For the years ended December 31, 2006 and 2007, the net investment income and net gains on securities (both realized and unrealized) have been restated from $0.27 and $2.23 and $0.28 and $0.65, respectively. (D) The tax return of capital is calculated based upon outstanding shares at the time of distribution. Amounts are less than $0.01 per share. (E) For the year ended December 31, 2006, the net investment income and net gains on securities (both realized and unrealized) have been restated from $0.33 and $2.30, respectively. 22 AMERICAN BEACON S&P 500 INDEX FUND(SM) FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Investor Class Year Ended December 31, ------------------------------------------------------ 2009 2008 2007 2006 2005 ------- ------- ------- ------- ------- $ 12.06 $ 19.60 $ 18.97 $ 16.69 $ 16.23 ------- ------- ------- ------- ------- 0 .33 0 .33 0.31(C) 0.23(B,C) 0.21 2.80 (7.60) 0.62(C) 2.27(C) 0.48 ------- ------- ------- ------- ------- 3.13 (7.27) 0.93 2.50 0.69 ------- ------- ------- ------- ------- (0.19) (0.27) (0.30) (0.22) (0.23) -- -- -- -- 0.00(D) ------- ------- ------- ------- ------- (0.19) (0.27) (0.30) (0.22) (0.23) ------- ------- ------- ------- ------- $ 15.00 $ 12.06 $ 19.60 $ 18.97 $(16.69) ======= ======= ======= ======= ======= 26.26% (37.35)% 4.88% 15.09% 4.32% ======= ======= ======= ======= ======= $22,261 $12,915 $18,430 $16,056 $48,985 2.01% 1.73% 1.38% 1.37% 1.28% 0.60% 0.62% 0.63% 0.61% 0.61%
23 AMERICAN BEACON SMALL CAP INDEX FUND(SM) FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class Year Ended December 31, ------------------------------------------------------ 2009 2008 2007 2006 2005 ------- ------- ------- -------- ------- NET ASSET VALUE, BEGINNING OF PERIOD ............. $ 8.00 $ 13.51 $ 14.89 $ 12.78 $ 12.57 ------- ------- ------- -------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A) ...................... 0.10 0.18 0.32 0.17 0.16 Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) ................... 2.08 (4.78) (0.53) 2.11 0.42 ------- ------- ------- -------- ------- Total income (loss) from investment operations ... 2.18 (4.60) (0.21) 2.28 0.58 ------- ------- ------- -------- ------- LESS DISTRIBUTIONS: Dividends from net investment income .......... (0.11) (0.17) (0.31) (0.17) (0.17) Distributions from net realized gains on investments ................................ -- (0.61) (0.80) -- (0.15) Tax return of capital ......................... (0.01)(B) (0.13)(B) (0.06)(B) -- (0.05)(B) ------- ------- ------- -------- ------- Total distributions .............................. (0.12) (0.91) (1.17) (0.17) (0.37) ------- ------- ------- -------- ------- NET ASSET VALUE, END OF PERIOD ................... $ 10.06 $ 8.00 $ 13.51 $ 14.89 $ 12.78 ======= ======= ======= ======== ======= TOTAL RETURN ..................................... 27.21% (33.58)% (1.63%) 17.85% 4.51% ======= ======= ======= ======== ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ...... $39,958 $31,552 $52,325 $151,878 $46,113 Ratios to average net assets (annualized):(A) Net investment income ...................... 1.18% 1.54% 1.49% 1.49% 1.12% Expenses, including expenses allocated from master portfolio ................... 0.23% 0.20% 0.20% 0.18% 0.18%
---------- (A) The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund's proportionate share of the income and expenses of the Master Small Cap Index Series. (B) The tax return of capital is calculated based upon outstanding shares at the time of distribution. 24 AMERICAN BEACON INTERNATIONAL EQUITY INDEX FUND(SM) FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Institutional Class Year Ended December 31, ----------------------------------------------------- 2009 2008 2007 2006 2005 -------- -------- -------- -------- ------- NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 7.46 $ 13.37 $ 12.76 $ 10.33 $ 9.39 -------- -------- -------- -------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income(A) ....................... 0.21 0.39 0.51(C) 0.23 0.22(C) Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized) .................... 1.93 (6.00) 0.86(C) 2.50 1.05C -------- -------- -------- -------- ------- Total income (loss) from investment operations .... 2.14 (5.61) 1.37 2.73 1.27 -------- -------- -------- -------- ------- LESS DISTRIBUTIONS: Dividends from net investment income ........... (0.22) (0.30) (0.53) (0.23) (0.24) Distributions from net realized gains on investments ................................. -- -- (0.22) (0.07) -- Tax return of capital .......................... -- -- (0.01)(B) -- (0.09)(B) -------- -------- -------- -------- ------- Total distributions ............................... (0.22) (0.30) (0.76) (0.30) (0.33) -------- -------- -------- -------- ------- NET ASSET VALUE, END OF PERIOD .................... $ 9.38 $ 7.46 $ 13.37 $ 12.76 $ 10.33 ======== ======== ======== ======== ======= TOTAL RETURN ...................................... 28.72% (41.85)% 10.68% 26.52% 13.58% ======== ======== ======== ======== ======= RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ....... $280,110 $185,860 $267,293 $162,113 $90,200 Ratios to average net assets (annualized):(A) Net investment income ....................... 2.66% 3.58% 2.96% 2.44% 2.49% Expenses, including expenses allocated from master portfolio .................... 0.23% 0.19% 0.19% 0.22% 0.23%
---------- (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) For the year ended December 31, 2005 and 2007, the net investment income and net gains on securities (both realized and unrealized) have been restated from $0.21 and $1.06 and $0.52 and $0.85, respectively. 25 AMERICAN BEACON FUNDS TAX INFORMATION FOR THE TAX YEAR ENDED DECEMBER 31, 2009 (UNAUDITED) We are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those in other areas of this report because of differences between tax and financial reporting requirements. For corporate shareholders in the Funds, the percentage of ordinary dividend income distributed for the year ended December 31, 2009, which is designated as qualifying for the dividends-received deduction, is as follows: S&P 500 Index Fund 99.7% Small Cap Index Fund 76.3% International Equity Index Fund 0.0%
For shareholders in the Funds, the percentage of dividend income distributed for the year ended December 31, 2009, which designated as qualified dividend income under the Jobs and Growth Tax Relief Act of 2003, is as follows: S&P 500 Index Fund 100.0% Small Cap Index Fund 85.0% International Equity Index Fund 100.0%
26 AMERICAN BEACON FUNDS PRIVACY POLICY (UNAUDITED) PRIVACY POLICY The American Beacon Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used. We may collect nonpublic personal information about you from one or more of the following sources: - information we receive from you on applications or other forms; - information about your transactions with us or our service providers; and - information we receive from third parties. We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards. 27 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED) The Trustees and officers of the American Beacon Funds (the "Trust") are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees nineteen funds in the fund complex that includes the Trust, the American Beacon Master Trust, the American Beacon Mileage Funds, and the American Beacon Select Funds. The Trust's Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS ------------------------- ----------------- --------------------------------------------------------------------------- INTERESTED TRUSTEES Term Lifetime of Trust until removal, resignation or retirement* Alan D. Feld** (73) Trustee since 1996 Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (1960-Present); Director, Clear Channel Communications (1984-2008); Trustee, CenterPoint Properties (1994-2006); Member, Board of Trustees, Southern Methodist University; Member, Board of Visitors, M.D. Anderson Hospital; Board of Visitors, Zale/Lipshy Hospital; Trustee American Beacon Mileage Funds (1996-Present); Trustee, American Beacon Select Funds (1999-Present) NON-INTERESTED TRUSTEES Term W. Humphrey Bogart (65) Trustee since 2004 Board Member, Baylor University Medical Center Foundation (1992-2004); Consultant, New River Canada Ltd. (mutual fund servicing company) (1998-2003); President and CEO, Allmerica Trust Company, NA (1996-1997); President and CEO, Fidelity Investments Southwest Company (1983-1995); Senior Vice President of Regional Centers, Fidelity Investments (1988-1995); Trustee American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present) Brenda A. Cline (49) Trustee since 2004 Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, Texas Christian University (1998-Present); Trustee, W.I. Cook Foundation, Inc. (d/b/a Cook Children's Health Foundation) (2001-2006); Director, Christian Church Foundation (1999-2007); Trustee, American Beacon Mileage Fund (2004-Present); Trustee, American Beacon Select Fund (2004-Present) Eugene J. Duffy (55) Trustee since 2008 Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Chairman, Special Contributions Fund Board of Trustees, National Association for the Advancement of Colored People (2007-Present); Trustee, National Association for the Advancement of Colored People (2000-Present); Board of Visitors, Emory University (2006-Present); Trustee, Atlanta Botanical Garden (2006-Present); Board Member, Willie L. Brown Jr. Institute on Politics and Public Service (2001-Present); Chair, National Association of Securities Professionals (2000-2002); Deputy Chief Administrative Officer, City of Atlanta (1985-1990); Trustee, American Beacon Mileage Funds (2008-Present); Trustee, American Beacon Select Funds (2008-Present) Thomas M. Dunning (67) Trustee since 2008 Consultant, (2008-Present); Chairman (1998-2008) and Chief Executive Officer (1998-2007), Lockton Dunning Benefits (consulting firm in employee benefits); Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, Baylor Health Care System Foundation (2007-Present); Vice Chair, State Fair of Texas (1987-Present); Board Member, Southwestern Medical Foundation (1994-Present); Board Member, John Tower Center for Political Studies/SMU (2008-Present); Board Member, University of Texas Development Board (2008-Present); Trustee, American Beacon Mileage Funds (2008-Present); Trustee, American Beacon Select Funds (2008-Present)
28 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED)
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS ------------------------- ----------------- --------------------------------------------------------------------------- NON-INTERESTED TRUSTEES (CONT.) Richard A. Massman (66) Trustee since 2004 Consultant and General Counsel Emeritus (2009-Present) and Senior Vice Chairman since President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding 2008 company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Chairman (2007-Present) and Director (2005-Present), The Dallas Opera Foundation; Chairman (2006-2009) and Director (2005-Present), Temple Emanu-El Foundation; Trustee, Presbyterian Healthcare Foundation (2006-Present); Trustee, American Beacon Mileage Funds, (2004-Present); Trustee, American Beacon Select Funds (2004-Present) R. Gerald Turner (64) Trustee since 2001 President, Southern Methodist University (1995-Present); Director, 225 Perkins Admin. Bldg. ChemFirst (1986-2002); Director, J.C. Penney Company, Inc. (1996-Present); Southern Methodist Univ. Director, California Federal Preferred Capital Corp. (2001-2003); Director, Dallas, Texas 75275 Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-2007); Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Co-Chair, Knight Commission on Intercollegiate Athletics; Trustee American Beacon Mileage Funds (2001-Present); Trustee American Beacon Select Funds (2001-Present) Paul J. Zucconi,CPA (68) Trustee since 2008 Director, Affirmative Insurance Holdings, Inc. (producer of nonstandard automobile insurance) (2004-Present); Director, Titanium Metals Corporation (producer of titanium melted and mill products and sponge) (2002- Present); Director, Torchmark Corporation (life and health insurance products) (2002-Present); Director, National Kidney Foundation serving North Texas (2003-Present); Director, Dallas Chapter of National Association of Corporate Directors (2004-Present); Partner, KPMG (1976-2001); Trustee, American Beacon Mileage Funds (2008-Present); Trustee, American Beacon Select Funds (2008-Present) OFFICERS Term One Year William F. Quinn (62) Executive Vice Executive Chairman (2009-Present), Chairman (2006-2009), CEO (2006-2007), President from President (1986-2006) and Director (2003-Present), American Beacon 2007 to 2008 and Advisors, Inc.; Chairman (1989-2003) and Director (1979-1989, 2009-Present 2003-Present), American Airlines Federal Credit Union; Director Hicks President from Acquisition I, Inc. (2007-2009); Director, Crescent Real Estate Equities, 1987 to 2007 Inc.(1994-2007); Director, Pritchard, Hubble & Herr, LLC (investment Trustee from advisor) (2001-2006); Director of Investment Committee, Southern Methodist 1987 to 2008 University Endowment Fund (1996-Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Member, New York Stock Exchange Pension Managers Advisory Committee (1997-1998, 2000-2002, 2006-Present); Vice Chairman (2004-2007) and Chairman (2007-Present), Committee for the Investment of Employee Benefits; Director, United Way of Metropolitan Tarrant County (1988-2000, 2004-Present); Trustee (1995-2008) and President (1995-2007, 2008-2009), American Beacon Mileage Funds; Trustee (1999-2008) and President(1999-2007, 2008-2009), American Beacon Select Funds; Director, American Beacon Global Funds SPC (2002-Present); Director, American Beacon Global Funds, plc (2007-2009) Gene L. Needles, Jr. (55) President since President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; 2009 Executive President (2008-2009), Touchstone Investments; President (2003-2007), CEO Vice President (2004-2007), Managing Director of Sales (2002-2003), National Sales Manager 2009 (1999-2002), and Regional Sales Manager (1993-1999), AIM Distributors Rosemary K. Behan (51) VP, Secretary and Vice President, Legal and Compliance, American Beacon Advisors, Inc. Chief Legal (2006-Present); Assistant General Counsel, First Command Financial Officer since 2006 Planning, Inc. (2004-2006); Attorney, Enforcement Division, Securities and Exchange Commission (1995-2004)
29 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED)
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS ------------------------- ----------------- --------------------------------------------------------------------------- Brian E. Brett (49) VP since 2004 Vice President, Director of Sales and Marketing, American Beacon Advisors, Inc. (2004-Present); Regional Vice President, Neuberger Berman, LLC (investment advisor) (1996-2004). Wyatt L. Crumpler (43) VP since 2007 Vice President, Asset Management, American Beacon Advisors, Inc. (2007-Present); Managing Director of Corporate Accounting (2004-2007), Director of IT Strategy and Finance (2001-2004), American Airlines, Inc. Michael W. Fields (56) VP since 1989 Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-Present); Director, American Beacon Global Funds SPC (2002-Present); Director, American Beacon Global Funds plc (2007-2009) Melinda G. Heika (48) Treasurer since Vice President, Finance & Accounting (2010-Present); Controller 2010 (2005-2009); Assistant Controller (1998-2004), American Beacon Advisors, Inc. Terri L. McKinney (46) VP since 2010 Vice President, Enterprise Services (2009-Present), Managing Director (2003-2009), Director of Marketing & Retail Sales (1996-2003), American Beacon Advisors, Inc.; Vice President, Board of Trustees (2008-Present), Trustee (2006-2008) The Down Syndrome Guild of Dallas Jeffrey K. Ringdahl (34) VP since 2010 Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007) Christina E. Sears (38) Chief Compliance Chief Compliance Officer, American Beacon Advisors, Inc. (2004-Present); Officer since 2004 Senior Compliance Analyst (1998-2004), American Beacon Advisors, Inc. and Asst. Secretary since 1999
* The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, provided, however, that the Board may determine to grant one or more annual exemptions to this requirement. ** Mr. Feld is deemed to be an "interested person" of the Trusts, as defined by the 1940 Act. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to the Manager and one or more of the Trust's sub-advisors. 30 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS DECEMBER 31, 2009
MARKET VALUE SHARES (000) ------------- ------------- COMMON STOCKS - 97.5% CONSUMER DISCRETIONARY - 9.7% Abercrombie & Fitch Co. Class A 15,846 $ 552 Amazon.Com, Inc.(a) 62,292 8,380 Apollo Group, Inc. Class A(a) 23,129 1,401 AutoNation, Inc.(a) 16,963 325 AutoZone, Inc.(a) 5,464 864 Bed Bath & Beyond, Inc.(a) 49,145 1,898 Best Buy Co., Inc. 64,519 2,546 Big Lots, Inc.(a) 16,227 470 Black & Decker Corp. 11,937 774 Carnival Corp.(a) 82,750 2,622 CBS Corp. Class B 127,003 1,784 Coach, Inc. 59,828 2,186 Comcast Corp. Class A 530,448 8,943 D.R. Horton, Inc. 52,876 575 Darden Restaurants, Inc. 27,988 982 DeVry, Inc. 12,500 709 Direct TV. Class A(a) 176,977 5,902 Eastman Kodak Co.(a) 54,482 230 eBay, Inc.(a) 207,303 4,880 Expedia, Inc.(a) 38,815 998 Family Dollar Stores, Inc. 25,558 711 Ford Motor Co.(a) 612,398 6,124 Fortune Brands, Inc. 27,245 1,177 GameStop Corp. Class A(a) 32,400 711 Gannett Co., Inc. 42,074 625 Gap, Inc. 86,798 1,818 Genuine Parts Co. 29,509 1,120 Goodyear Tire & Rubber Co.(a) 42,357 597 H&R Block, Inc. 60,415 1,367 Harley-Davidson, Inc. 42,501 1,071 Harman International Industries, Inc. 12,621 445 Hasbro, Inc. 24,425 783 Home Depot, Inc. 314,712 9,105 Host Hotels & Resorts, Inc.(a) 112,521 1,313 International Game Technology 53,619 1,006 Interpublic Group of Cos., Inc.(a) 83,894 619 JC Penney Co., Inc. 44,010 1,171 Johnson Controls, Inc. 123,686 3,369 Kohl's Corp.(a) 57,833 3,119 Lennar Corp. Class A 25,931 331 Limited Brands 51,267 986 Lowe's Cos., Inc. 272,962 6,385 Macy's, Inc. 78,623 1,318 Marriot International, Inc. Class A 49,350 1,345 Mattel, Inc. 67,076 1,340 McDonald's Corp. 200,825 12,540 McGraw-Hill, Inc. 59,066 1,979 Meredith Corp. 7,889 243 New York Times Co. Class A(a) 22,922 283 Newell Rubbermaid, Inc. 50,693 761 News Corp. Class A 417,409 5,714 NIKE, Inc. Class B 71,752 4,741 Nordstrom, Inc. 29,533 1,110 O'Reilly Automotive, Inc.(a) 24,600 938 Office Depot, Inc.(a) 51,256 331 Omnicom Group, Inc. 58,541 2,292 Polo Ralph Lauren Corp. 10,615 860 Priceline.com, Inc.(a) 7,690 1,680 Pulte Homes, Inc.(a) 64,905 649
MARKET VALUE SHARES (000) ------------- ------------- Radioshack Corp. 26,203 $ 511 Ross Stores, Inc. 22,300 952 Scripps Networks Interactive, Inc. Class A 17,135 711 Sears Holdings Corp. (a) 9,374 782 Snap-On, Inc. 11,612 491 Stanley Works 14,483 746 Staples, Inc. 136,733 3,362 Starbucks Corp. (a) 139,361 3,214 Starwood Hotels & Resorts Worldwide, Inc. 34,647 1,267 Target Corp. 140,816 6,811 Tiffany & Co. 22,880 984 Time Warner Cable, Inc. 66,571 2,755 Time Warner, Inc. 216,491 6,309 TJX Cos., Inc. 76,806 2,807 V.F. Corp. 16,193 1,186 Viacom, Inc. Class B (a) 115,022 3,420 Walt Disney Co. 348,745 11,247 Washington Post Co. Class B 1,260 554 Whirlpool Corp. 13,661 1,102 Wyndham Worldwide Corp. 34,299 692 Wynn Resorts, Ltd. 12,300 716 Yum! Brands, Inc. 88,292 3,088 ------------- 182,805 ------------- CONSUMER STAPLES - 11.0% Altria Group, Inc. 387,999 7,616 Archer-Daniels-Midland Co. 118,024 3,695 Avon Products, Inc. 79,160 2,493 Brown-Forman Corp. Class B 20,855 1,117 Campbell Soup Co. 34,065 1,151 Clorox Co. 26,043 1,589 Coca-Cola Co. 432,011 24,625 Coca-Cola Enterprises, Inc. 62,501 1,325 Colgate-Palmolive Co. 91,901 7,550 ConAgra Foods, Inc. 82,975 1,913 Constellation Brands, Inc. Class A (a) 37,426 596 Costco Wholesale Corp. 80,289 4,751 CVS Caremark Corp. 262,032 8,440 Dean Foods Co. (a) 33,458 604 Dr Pepper Snapple Group, Inc. 46,200 1,307 Estee Lauder Cos., Inc. Class A 23,252 1,124 General Mills, Inc. 61,732 4,371 H.J. Heinz Co. 59,469 2,543 Hormel Foods Corp. 13,400 515 Kellogg Co. 47,535 2,529 Kimberly-Clark Corp. 76,500 4,874 Kraft Foods, Inc. Class A 276,309 7,510 Kroger Co. 123,176 2,529 Lorillard, Inc. 29,461 2,364 McCormick & Co., Inc. 23,953 865 Molson Coors Brewing Co., Class B 28,262 1,276 Pepsi Bottling Group, Inc. 26,753 1,003 PepsiCo, Inc. 290,656 17,672 Philip Morris International, Inc. 354,799 17,098 Procter & Gamble Co. 542,719 32,905 Reynolds American, Inc. 30,887 1,636 Safeway, Inc. 76,564 1,630 Sara Lee Corp. 127,334 1,551 SuperValu, Inc. 41,948 533
See Notes to Financial Statements. 31 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- (CONTINUED) DECEMBER 31, 2009
MARKET VALUE SHARES (000) ------------- ------------- COMMON STOCKS - (CONTINUED) CONSUMER STAPLES - (CONTINUED) Sysco Corp. 111,809 $ 3,124 The Hershey Company 30,782 1,102 The J.M. Smucker Co. 22,060 1,362 Tyson Foods, Inc., Class A 57,835 710 Wal-Mart Stores, Inc. 397,602 21,252 Walgreen Co. 182,618 6,706 Whole Foods Market, Inc.(a) 24,833 682 ------------- 208,238 ------------- ENERGY - 11.3% Anadarko Petroleum Corp. 91,026 5,682 Apache Corp. 62,325 6,430 Baker Hughes, Inc. 58,478 2,367 BJ Services Co. 54,048 1,005 Cabot Oil & Gas Corp. 20,300 885 Cameron International Corp.(a) 44,300 1,852 Chesapeake Energy Corp. 121,382 3,141 Chevron Corp.(b) 372,546 28,682 ConocoPhillips 275,030 14,046 Consol Energy, Inc. 33,073 1,647 Denbury Resources, Inc.(a) 47,800 707 Devon Energy Corp. 82,251 6,045 Diamond Offshore Drilling, Inc. 12,900 1,270 El Paso Corp. 130,692 1,285 EOG Resources, Inc. 46,517 4,526 EQT Corp. 23,600 1,036 ExxonMobil Corp.(b) 882,272 60,162 FMC Technologies, Inc.(a) 22,800 1,319 Halliburton Co. 166,934 5,023 Hess Corp. 55,101 3,334 Marathon Oil Corp. 130,177 4,064 Massey Energy Co. 15,800 664 Murphy Oil Corp. 35,941 1,948 Nabors Industries, Ltd.(a) 52,804 1,156 National Oilwell Varco, Inc. 79,257 3,494 Noble Energy, Inc. 32,710 2,330 Occidental Petroleum Corp. 150,444 12,239 Peabody Energy Corp. 50,424 2,280 Pioneer Natural Resources Co. 22,000 1,060 Questar Corp. 32,468 1,350 Range Resources Corp. 28,700 1,431 Rowan Cos., Inc.(a) 19,620 444 Schlumberger, Ltd. 222,575 14,487 Smith International, Inc. 44,334 1,204 Southwestern Energy Co.(a) 65,200 3,143 Spectra Energy Corp. 121,798 2,498 Sunoco, Inc. 20,384 532 Tesoro Corp. 26,365 357 Valero Energy Corp. 105,609 1,769 Williams Cos., Inc. 109,768 2,314 XTO Energy, Inc. 107,452 5,000 ------------- 214,208 ------------- FINANCIALS - 14.8% AFLAC, Inc. 85,990 3,977 Allstate Corp. 101,506 3,049 American Express Co. 220,064 8,917 American International Group, Inc.(a) 24,133 723
MARKET VALUE SHARES (000) ------------- ------------- Ameriprise Financial, Inc. 46,207 $ 1,794 AON Corp. 50,647 1,942 Apartment Investment & Management Co. Class A 21,052 335 Assurant, Inc. 20,831 614 AvalonBay Communities, Inc. 14,398 1,182 Bank of America Corp. 1,852,771 27,903 Bank of New York Mellon Corp. 223,185 6,242 BB&T Corp. 129,070 3,274 Boston Properties, Inc. 25,967 1,742 Capital One Financial Corp. 82,863 3,177 CB Richard Ellis Group, Inc. Class A(a) 47,275 641 Charles Schwab Corp. 180,193 3,391 Chubb Corp. 62,875 3,092 Cincinnati Financial Corp. 31,214 819 Citigroup, Inc. 3,627,702 12,008 CME Group, Inc. 12,191 4,096 Comerica, Inc. 26,844 794 Developers Diversified Realty Corp. 1,532 14 Discover Financial Services 100,205 1,474 E*Trade Financial Corp. (a) 305,315 534 Equity Residential 51,257 1,731 Federated Investors, Inc. Class B 18,970 522 Fifth Third Bancorp 148,516 1,448 First Horizon National Corp. (a) 43,304 580 Franklin Resources, Inc. 28,380 2,990 Genworth Financial, Inc. Class A (a) 91,551 1,039 Goldman Sachs Group, Inc. 95,334 16,096 Hartford Financial Services Group, Inc 70,597 1,642 HCP, Inc. 54,900 1,677 Health Care REIT, Inc. 23,800 1,055 Hudson City Bancorp, Inc. 92,292 1,267 Huntington Bancshares, Inc. 118,556 433 IntercontinentalExchange, Inc. (a) 13,680 1,536 Invesco Ltd. 78,100 1,835 J.P. Morgan Chase & Co. 731,815 30,495 Janus Capital Group, Inc. 36,007 484 KeyCorp 174,875 971 Kimco Realty Corp. 71,369 966 Legg Mason, Inc. 31,242 942 Leucadia National Corp. (a) 35,436 843 Lincoln National Corp. 56,392 1,403 Loews Corp. 68,631 2,495 M & T Bank Corp. 15,937 1,066 Marsh & McLennan Cos., Inc. 98,753 2,180 Marshall & Ilsley Corp. 105,093 573 Mastercard, Inc. Class A 17,700 4,531 MetLife, Inc. 151,596 5,359 Moody's Corp. 38,966 1,044 Morgan Stanley 254,830 7,543 NASDAQ OMX Group, Inc. (a) 28,600 567 Northern Trust Corp. 45,506 2,384 NYSE Euronext 47,300 1,197 Paychex, Inc. 60,338 1,849 People's United Financial Inc. 68,100 1,137 PNC Financial Services Group, Inc. 85,317 4,504 Principal Financial Group, Inc. 58,391 1,404 Progressive Corp. (a) 125,201 2,252
See Notes to Financial Statements. 32 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- (CONTINUED) DECEMBER 31, 2009
MARKET VALUE SHARES (000) ------------- ------------- COMMON STOCKS - (CONTINUED) FINANCIALS - (CONTINUED) ProLogis 87,391 $ 1,196 Prudential Financial, Inc. 85,339 4,246 Public Storage, Inc. 24,987 2,035 Regions Financial Corp. 227,189 1,202 Simon Property Group, Inc. 52,415 4,183 SLM Corp.(a) 91,354 1,030 State Street Corp.(c) 90,925 3,959 SunTrust Banks, Inc. 93,818 1,904 T. Rowe Price Group, Inc. 48,275 2,571 Torchmark Corp. 15,021 660 Total System Services, Inc. 37,775 652 Travelers Cos., Inc. 101,104 5,041 U.S. Bancorp 358,452 8,069 Unum Group 60,129 1,174 Ventas, Inc. 29,100 1,273 Visa, Inc. 83,100 7,268 Vornado Realty Trust 29,014 2,029 Wells Fargo Co. 952,849 25,717 Western Union Co. 132,485 2,497 XL Capital, Ltd. Class A 66,368 1,217 Zions Bancorp 25,453 327 ------------- 280,024 ------------- HEALTH CARE - 12.1% Abbott Laboratories 288,006 15,549 Aetna, Inc. 82,350 2,611 Allergan, Inc. 58,292 3,673 AmerisourceBergen Corp. 54,186 1,413 Amgen, Inc.(a) 188,236 10,649 Baxter International, Inc. 111,761 6,558 Becton, Dickinson & Co. 43,497 3,430 Biogen Idec, Inc.(a) 54,531 2,917 Boston Scientific Corp.(a) 284,234 2,558 Bristol-Myers Squibb Co. 317,516 8,017 C.R. Bard, Inc. 17,797 1,386 Cardinal Health, Inc. 67,657 2,181 CareFusion Corp.(a) 31,178 780 Celgene Corp.(a) 84,618 4,712 Cephalon, Inc.(a) 13,300 830 CIGNA Corp. 50,996 1,799 Coventry Health Care, Inc.(a) 26,203 637 DaVita, Inc.(a) 18,200 1,069 Dentsply International Inc. 26,700 939 Eli Lilly & Co. 188,975 6,748 Express Scripts, Inc.(a) 50,599 4,374 Forest Laboratories, Inc.(a) 56,502 1,814 Genzyme Corp.(a) 48,392 2,372 Gilead Sciences, Inc.(a) 166,299 7,197 Hospira, Inc.(a) 29,203 1,489 Humana, Inc.(a) 31,607 1,387 Intuitive Surgical, Inc.(a) 7,100 2,154 Johnson & Johnson 512,449 33,007 King Pharmaceuticals, Inc.(a) 48,592 596 Laboratory Corp. of America Holdings(a) 20,222 1,513 Life Technologies Corp.(a) 32,987 1,723 McKesson Corp. 50,355 3,147 Mead Johnson Nutrition Co. 34,818 1,522
MARKET VALUE SHARES (000) ------------- ------------- Medco Health Solutions, Inc. (a) 87,968 $ 5,622 Medtronic, Inc. 204,778 9,006 Merck & Co., Inc. 569,270 20,801 Millipore Corp. (a) 11,135 806 Mylan Inc.(a) 60,109 1,108 Patterson Cos., Inc. (a) 18,294 512 Pfizer, Inc. 1,504,611 27,369 Quest Diagnostics, Inc. 29,300 1,769 St. Jude Medical, Inc. (a) 61,226 2,252 Stryker Corp. 53,289 2,684 Tenet Healthcare Corp. (a) 73,370 396 UnitedHealth Group, Inc. 215,596 6,571 Varian Medical Systems, Inc. (a) 22,660 1,062 Watson Pharmaceuticals, Inc. (a) 20,646 818 Wellpoint, Inc. (a) 84,838 4,945 Zimmer Holdings, Inc. (a) 39,552 2,338 ------------- 228,810 ------------- INDUSTRIALS - 10.2% 3M Co. 131,072 10,836 Amphenol Corp. Class A 31,200 1,441 Avery Dennison Corp. 21,588 788 Boeing Co. 135,988 7,361 Burlington Northern Santa Fe Corp. 48,482 4,781 Caterpillar, Inc. 116,279 6,627 CH Robinson Worldwide, Inc. 31,561 1,854 Cintas Corp. 25,088 654 CSX Corp. 74,338 3,605 Cummins, Inc. 37,058 1,699 Danaher Corp. 49,086 3,691 Deere & Co. 77,837 4,210 Dover Corp. 33,695 1,402 Eaton Corp. 31,195 1,985 Emerson Electric Co. 139,348 5,936 Equifax, Inc. 25,683 793 Expeditors International Washington, Inc. 38,620 1,341 Fastenal Co. 25,500 1,062 FedEx Corp. 57,800 4,823 First Solar, Inc. (a) 8,670 1,174 Flir Systems, Inc. (a) 28,900 946 Flowserve Corp. 10,400 983 Fluor Corp. 32,260 1,453 General Dynamics Corp. 71,061 4,844 General Electric Co. (b) 1,977,333 29,917 Goodrich Co. 22,445 1,442 Honeywell International, Inc. 143,081 5,609 Illinois Tool Works, Inc. 72,971 3,502 Iron Mountain, Inc. (a) 32,200 733 ITT Industries, Inc. 34,192 1,701 Jacobs Engineering Group, Inc. (a) 22,300 839 L-3 Communications Holdings, Inc. 21,803 1,896 Leggett & Platt, Inc. 27,098 553 Lockheed Martin Corp. 59,152 4,457 Masco Corp. 64,323 888 Monster Worldwide, Inc. (a) 22,609 393 Norfolk Southern Corp. 69,655 3,651 Northrop Grumman Corp. 57,811 3,229 PACCAR, Inc. 68,674 2,491 Pall Corp. 21,509 779
See Notes to Financial Statements. 33 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- (CONTINUED) DECEMBER 31, 2009
MARKET VALUE SHARES (000) ------------- ------------- COMMON STOCKS - (CONTINUED) INDUSTRIALS - (CONTINUED) Parker-Hannifin Corp. 29,403 $ 1,584 Pitney Bowes, Inc. 40,027 911 Precision Castparts Corp. 26,007 2,870 Quanta Services, Inc.(a) 39,800 829 R.R. Donnelley & Sons Co. 36,109 804 Raytheon Co. 70,682 3,642 Republic Services, Inc. 60,403 1,710 Robert Half International, Inc. 30,640 819 Rockwell Automation, Inc. 26,305 1,236 Rockwell Collins, Inc. 28,431 1,574 Roper Industries, Inc. 17,000 890 Ryder Systems, Inc. 11,321 466 Southwest Airlines Co. 134,786 1,541 Stericycle, Inc.(a) 14,800 816 Textron, Inc. 49,939 939 Thermo Fisher Scientific, Inc.(a) 77,324 3,688 Union Pacific Corp. 93,468 5,973 United Parcel Service, Inc. Class B 183,846 10,547 United Technologies Corp. 174,478 12,110 W.W. Grainger, Inc. 11,569 1,120 Waste Management, Inc. 89,739 3,034 ------------- 193,472 ------------- INFORMATION TECHNOLOGY - 18.2% Adobe Systems, Inc.(a) 96,157 3,537 Advanced Micro Devices, Inc.(a) 99,186 960 Affiliated Computer Services, Inc. Class A(a) 18,737 1,118 Agilent Technologies, Inc.(a) 64,768 2,012 Akamai Technologies, Inc.(a) 34,224 867 Altera Corp. 52,854 1,196 Analog Devices, Inc. 53,269 1,682 AOL, Inc.(a)(d) 1 -- Apple Inc.(a) 167,284 35,274 Applied Materials, Inc. 252,607 3,521 Autodesk, Inc.(a) 41,576 1,056 Automatic Data Processing, Inc. 95,317 4,081 BMC Software, Inc.(a) 34,221 1,372 Broadcom Corp. Class A(a) 81,359 2,559 CA, Inc. 72,499 1,628 Cisco Systems, Inc.(a) 1,072,419 25,674 Citrix Systems, Inc.(a) 33,367 1,388 Cognizant Technology Solutions Corp. Class A(a) 55,284 2,504 Computer Sciences Corp.(a) 27,744 1,596 Compuware Corp.(a) 51,350 371 Corning, Inc. 288,176 5,565 Dell, Inc.(a) 317,050 4,553 Dun & Bradstreet Corp. 9,400 793 Electronic Arts, Inc.(a) 60,100 1,067 EMC Corp.(a) 377,584 6,596 Fidelity National Information Services, Inc. 58,077 1,361 Fiserv, Inc.(a) 28,852 1,399 Google, Inc. Class A(a) 44,790 27,769 Harris Corp. 23,700 1,127 Hewlett-Packard Co. 441,916 22,763 IMS Health, Inc. 34,832 734
MARKET VALUE SHARES (000) ------------- ------------- Intel Corp. 1,028,956 $ 20,991 International Business Machines Corp. 243,942 31,932 Intuit, Inc.(a) 60,663 1,863 Jabil Circuit, Inc. 31,651 550 Juniper Networks, Inc. (a) 98,893 2,637 KLA-Tencor Corp. 30,605 1,107 Lexmark International Group, Inc. Class A(a) 15,842 412 Linear Technology Corp. 43,763 1,337 LSI Corp.(a) 114,762 690 McAfee, Inc. (a) 28,200 1,144 MEMC Electronic Materials, Inc. (a) 45,478 619 Microchip Technology, Inc. 32,489 944 Micron Technology, Inc. (a) 153,662 1,623 Microsoft Corp. (b) 1,435,335 43,763 Molex, Inc. 23,305 502 Motorola, Inc. (a) 435,465 3,379 National Semiconductor Corp. 42,096 647 NetApp, Inc. (a) 61,857 2,127 Novell, Inc.(a) 68,720 285 Novellus Systems, Inc. (a) 20,030 468 NVIDIA Corp. (a) 99,756 1,863 Oracle Corp. 728,362 17,874 PerkinElmer, Inc. 21,118 435 QLogic Corp. (a) 24,322 459 QUALCOMM, Inc. 309,711 14,327 Red Hat, Inc.(a) 37,200 1,150 SAIC, Inc.(a) 54,800 1,038 Salesforce.com, Inc. (a) 21,200 1,564 SanDisk Corp. (a) 40,667 1,179 Sun Microsystems, Inc. (a) 139,841 1,310 Symantec Corp. (a) 153,863 2,753 Tellabs, Inc.(a) 73,830 419 Teradata Corp. (a) 33,520 1,054 Teradyne, Inc. (a) 28,149 302 Texas Instruments, Inc. 232,199 6,051 VeriSign, Inc.(a) 37,521 910 Waters Corp.(a) 17,265 1,070 Western Digital Corp. (a) 42,000 1,854 Xerox Corp. 161,834 1,369 Xilinx, Inc. 51,202 1,283 Yahoo!, Inc. (a) 218,719 3,670 ------------- 345,077 ------------- MATERIALS - 3.6% Air Products & Chemicals, Inc. 39,809 3,227 Airgas, Inc. 16,600 790 AK Steel Holding Corp. 20,000 427 Alcoa, Inc. 180,249 2,906 Allegheny Technologies, Inc. 17,228 771 Ball Corp. 17,262 892 Bemis Co., Inc. 21,162 627 CF Industries Holdings, Inc. 9,750 885 Cliffs Natural Resources, Inc. 23,400 1,078 Dow Chemical Co. 211,928 5,856 E.I. Du Pont de Nemours & Co. 167,412 5,637 Eastman Chemical Co. 14,204 856 Ecolab, Inc. 43,666 1,947 FMC Corp. 12,600 703
See Notes to Financial Statements. 34 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- (CONTINUED) DECEMBER 31, 2009
MARKET VALUE SHARES (000) ------------- ------------- COMMON STOCKS - (CONTINUED) MATERIALS - (CONTINUED) Freeport-McMoRan Copper & Gold, Inc. Class B(a) 79,652 $ 6,395 International Flavors & Fragrances, Inc. 16,031 660 International Paper Co. 81,411 2,180 MeadWestvaco Corp. 30,320 868 Monsanto Co. 102,255 8,359 Newmont Mining Corp. 90,206 4,268 Nucor Corp. 59,354 2,769 Owens-Illinois, Inc.(a) 30,400 999 Pactiv Corp.(a) 22,615 546 Plum Creek Timber Co., Inc. 29,311 1,107 PPG Industries, Inc. 30,971 1,813 Praxair, Inc. 56,711 4,554 Sealed Air Corp. 29,692 649 Sherwin-Williams Co. 17,696 1,091 Sigma-Aldrich Corp. 23,634 1,194 Titanium Metals Corp.(a) 16,600 208 United States Steel Corp. 25,878 1,426 Vulcan Materials Co. 22,561 1,188 Weyerhaeuser Co. 39,537 1,706 ------------- 68,582 ------------- TELECOMMUNICATION SERVICES - 3.1% American Tower Corp. Class A(a) 74,600 3,223 AT&T, Inc. 1,095,950 30,720 CenturyTel, Inc. 55,873 2,023 Frontier Communications Corp. 60,384 472 JDS Uniphase Corp.(a) 42,723 352 MetroPCS Communications, Inc.(a) 51,700 395 Qwest Communications International, Inc. 273,890 1,153 Sprint Nextel Corp.(a) 527,165 1,929 Verizon Communications, Inc. 529,166 17,531 Windstream Corp. 77,313 850 ------------- 58,648 ------------- UTILITIES - 3.5% AES Corp.(a) 125,095 1,665 Allegheny Energy, Inc. 33,059 776 Ameren Corp. 44,660 1,248 American Electric Power Co., Inc. 90,152 3,136 CenterPoint Energy, Inc. 74,711 1,084 CMS Energy Corp. 45,756 717 Consolidated Edison, Inc. 51,752 2,351 Constellation Energy Group, Inc. 37,314 1,312 Dominion Resources, Inc. 109,862 4,276 DTE Energy Co. 29,884 1,303 Duke Energy Corp. 246,020 4,234 Edison International 61,319 2,133 Entergy Corp. 34,698 2,840 Exelon Corp. 122,221 5,973 FirstEnergy Corp. 57,507 2,671 FPL Group, Inc. 78,021 4,121 Integrys Energy Group, Inc. 14,716 618 Nicor, Inc. 9,400 396 NiSource, Inc. 48,582 747 Northeast Utilities 32,000 825
MARKET VALUE SHARES (000) ------------- ------------- Pepco Holdings, Inc. 41,700 $ 703 PG&E Corp. 70,126 3,131 Pinnacle West Capital Corp. 20,160 737 PPL Corp. 70,875 2,290 Progress Energy, Inc. 52,481 2,152 Public Service Enterprise Group, Inc. 95,724 3,183 SCANA Corp. 21,300 803 Sempra Energy 46,286 2,591 Southern Co. 147,443 4,913 TECO Energy, Inc. 42,151 684 Wisconsin Energy Corp. 22,800 1,136 Xcel Energy, Inc. 85,351 1,811 ------------- 66,560 ------------- TOTAL COMMON STOCKS (Cost $1,337,721,650) 1,846,424 -------------
PAR AMOUNT (000) ------------- U.S. GOVERNMENT SECURITIES - 0.3% United States Treasury Bill (b)(e)(f) 0.02% due 03/11/10 $ 4,815 $ 4,815 ------------- TOTAL U.S. GOVERNMENT SECURITIES (Cost $4,814,838) 4,815 -------------
SHARES (000) ------------- MONEY MARKET FUNDS - 1.6% AIM Short Term Investment Prime Portfolio 29,939 29,939 Federated Money Market Obligations Trust 576 576 ------------- TOTAL MONEY MARKET FUNDS (Cost $30,514,519) 30,515 ------------- TOTAL INVESTMENTS (g)+ - 99.4% (Identified Cost $1,373,051,007) 1,881,754 OTHER ASSETS IN EXCESS OF LIABILITIES - 0.6% 11,632 ------------- NET ASSETS - 100.0% $ 1,893,386 =============
---------- (a) Non-income producing security. (b) All or part of this security has been designated as collateral for futures contracts. (c) Affiliated issuer. See table that follows for more information. (d) Amount is less than $1,000. (e) Rate represents annualized yield at date of purchase. See Notes to Financial Statements. 35 STATE STREET EQUITY 500 INDEX PORTFOLIO PORTFOLIO OF INVESTMENTS -- (CONTINUED) DECEMBER 31, 2009 (f) Value determined based on Level 2 inputs established by provisions surrounding Fair Value Measurements and Disclosures. (Note 2) (g) Unless otherwise indicated, the values of the Securities of the Portfolio are determined based on Level 1 inputs established by provisions surrounding Fair Value Measurements and Disclosures. (Note 2) + See Note 2 of the Notes to Financial Statements.
NUMBER OF CONTRACTS UNREALIZED (000) APPRECIATION --------- ------------ Schedule of Futures Contracts S&P 500 Financial Futures Contracts (long) Expiration Date 03/2010 808 $547 ---- Total unrealized appreciation on open futures contracts purchased $547 ====
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 December 31, 2009 is listed in the Portfolio of Investments.
INCOME EARNED FOR THE 12 REALIZED SHARES PURCHASED SHARES SOLD FOR VALUE AT MONTHS ENDED LOSS ON SECURITY NUMBER OF SHARES FOR THE 12 MONTHS THE 12 MONTHS NUMBER OF SHARES 12/31/09 12/31/09 SHARES SOLD DESCRIPTION HELD AT 12/31/08 ENDED 12/31/09 ENDED 12/31/09 HELD AT 12/31/09 (000) (000) (000) ------------ ---------------- ----------------- --------------- ---------------- -------- ------------- ----------- State Street Corp. 81,725 24,400 15,200 90,925 $3,959 $4 $(410)
See Notes to Financial Statements. 36 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2009 (AMOUNTS IN THOUSANDS) ASSETS Investments in unaffiliated issuers at market value (identified cost $1,369,546) $1,877,795 Investments in non-controlled affiliates at market value (identified cost $3,505) (Note 4) 3,959 ---------- Total investments at market value (identified cost $1,373,051) 1,881,754 Investment securities sold 9,626 Dividends and interest 2,540 ---------- Total assets 1,893,920 LIABILITIES Daily variation margin on futures contracts 461 Management fees (Note 4) 73 ---------- Total liabilities 534 ---------- NET ASSETS $1,893,386 ==========
See Notes to Financial Statements. 37 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2009 (AMOUNTS IN THOUSANDS) INVESTMENT INCOME Interest $ 102 Dividend income -- unaffiliated issuers (net of foreign taxes withheld of $2) 38,848 Dividend income -- non-controlled affiliated issuer 4 -------- Total investment income 38,954 -------- EXPENSES Management fees (Note 4) 755 -------- Total expenses 755 -------- NET INVESTMENT INCOME $ 38,199 ======== REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investments -- unaffiliated issuers $(99,438) Investments -- non-controlled affiliated issuer (410) Futures contracts 11,628 -------- (88,220) Net change in net unrealized appreciation (depreciation) on: Investments 473,799 Futures contracts (404) -------- 473,395 -------- Net realized and unrealized gain 385,175 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $423,374 ========
See Notes to Financial Statements. 38 STATE STREET EQUITY 500 INDEX PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
FOR THE YEAR ENDED FOR THE YEAR ENDED DECEMBER 31, 2009 DECEMBER 31, 2008 ------------------ ------------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 38,199 $ 45,563 Net realized loss on investments and futures contracts (88,220) (19,853) Net change in net unrealized appreciation (depreciation) on investments and futures contracts 473,395 (897,802) ---------- ----------- Net increase (decrease) in net assets resulting from operations 423,374 (872,092) ---------- ----------- CAPITAL TRANSACTIONS Contributions 267,641 288,497 Withdrawals (319,837) (316,574) ---------- ----------- Net decrease in net assets from capital transactions (52,196) (28,077) ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS 371,178 (900,169) NET ASSETS Beginning of year 1,522,208 2,422,377 ---------- ----------- End of year $1,893,386 $ 1,522,208 ========== ===========
See Notes to Financial Statements. 39 STATE STREET EQUITY 500 INDEX PORTFOLIO FINANCIAL HIGHLIGHTS The following table includes selected supplemental data and ratios to average net assets:
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 12/31/09 12/31/08 12/31/07 12/31/06 12/31/05 ---------- ---------- ---------- ---------- ---------- SUPPLEMENTAL DATA AND RATIOS: Net assets, end of year (in thousands) $1,893,386 $1,522,208 $2,422,377 $2,766,696 $2,453,109 Ratios to average net assets: Operating expenses 0.045% 0.045% 0.045% 0.045% 0.045% Net investment income 2.28% 2.30% 1.96% 1.94% 1.84% Portfolio turnover rate* 19% 14% 12% 10% 8% Total return(a) 26.50% (37.02)% 5.49% 15.75% 4.87%
---------- * The portfolio turnover rate excludes in-kind security transactions. (a) Results represent past performance and are not indicative of future results. See Notes to Financial Statements. 40 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 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 December 31, 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 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 provisions surrounding Fair Value Measurements and Disclosures that defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This applies to fair value measurements that are already required or permitted by other accounting standards and is intended to increase consistency of those measurements and applies broadly to securities and other types of assets and liabilities. In accordance with these provisions, 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 41 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 advantageous market of the investment. Various inputs are used in determining the value of the Portfolio's investments. The three tier hierarchy of inputs is summarized below: - Level 1 -- quoted prices in active markets for identical securities - 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 December 31, 2009, in valuing the Portfolio's assets carried at fair value:
QUOTED PRICES IN ACTIVE MARKETS FOR SIGNIFICANT OTHER SIGNIFICANT IDENTICAL ASSETS OBSERVABLE INPUTS UNOBSERVABLE INPUTS DESCRIPTION (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL ----------- ------------------ ----------------- ------------------- ---------- INVESTMENTS: Common Stocks $1,846,424 $ -- $-- $1,846,424 U.S. Government Securities -- 4,815 -- 4,815 Money Market Funds 30,515 -- -- 30,515 OTHER ASSETS: Futures contracts 547 -- -- 547 ---------- ------ --- ---------- TOTAL ASSETS $1,877,486 $4,815 $-- $1,882,301 ========== ====== === ==========
The type of inputs used to value each security under the provisions surrounding Fair Value Measurement and Disclosures 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 42 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 Portfolio's partners in proportion to their holdings in the Portfolio, regardless of whether such items have been distributed by the Portfolio. Each partner is responsible for tax liability based on its distributive share; therefore, no provision has been made for federal income taxes. The Portfolio has reviewed the tax positions for open years as of and during the year ended December 31, 2009, 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 December 31, 2009, tax years 2006 through 2009 remain subject to examination by the Portfolio's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts. At December 31, 2009, the book cost of investments was $1,373,051,007 which approximates cost computed on a federal tax basis. The aggregate gross unrealized appreciation and gross unrealized depreciation was $643,620,459 and $134,917,676, respectively, resulting in net appreciation of $508,702,783 for all securities as computed on a federal income tax basis. 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 provisions surrounding Derivatives and Hedging which requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. The following table, grouped into appropriate risk categories, discloses the amounts related to the Portfolio's use of derivative instruments and hedging activities at December 31, 2009: ASSET DERIVATIVES (1) (AMOUNTS IN THOUSANDS)
FOREIGN INTEREST RATE EXCHANGE CREDIT EQUITY COMMODITY OTHER CONTRACTS RISK CONTRACTS RISK CONTRACTS RISK CONTRACTS RISK CONTRACTS RISK CONTRACTS RISK TOTAL -------------- -------------- -------------- -------------- -------------- -------------- ----- Futures Contracts $-- $-- $-- $547 $-- $-- $547
(1) Portfolio of Investments: Unrealized Appreciation of futures contracts. 43 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 Transactions in derivative instruments for the year ended December 31, 2009, were as follows: REALIZED GAIN (LOSS)(1) (AMOUNTS IN THOUSANDS)
FOREIGN INTEREST RATE EXCHANGE CREDIT EQUITY COMMODITY OTHER CONTRACTS RISK CONTRACTS RISK CONTRACTS RISK CONTRACTS RISK CONTRACTS RISK CONTRACTS RISK TOTAL -------------- -------------- -------------- -------------- -------------- -------------- ------- Futures Contracts $-- $-- $-- $11,628 $-- $-- $11,628
CHANGE IN APPRECIATION (DEPRECIATION) (2) (AMOUNTS IN THOUSANDS)
FOREIGN INTEREST RATE EXCHANGE CREDIT EQUITY COMMODITY OTHER CONTRACTS RISK CONTRACTS RISK CONTRACTS RISK CONTRACTS RISK CONTRACTS RISK CONTRACTS RISK TOTAL -------------- -------------- -------------- -------------- -------------- -------------- ----- Futures Contracts $-- $-- $-- $(404) $-- $-- $(404) --- --- --- ----- --- --- -----
(1) Statement of Operations location: Net realized gain (loss) on: Futures contracts (2) Statement of Operations location: Net change in unrealized appreciation (depreciation) on: Futures contracts USE OF ESTIMATES: The Portfolio's financial statements are prepared in accordance with U.S. generally accepted accounting principles, which require the use of management estimates. Actual results could differ from those estimates. 3. SECURITIES TRANSACTIONS For the year ended December 31, 2009, purchases and sales of investment securities, excluding short-term investments, futures contracts, and contributions in-kind and fair value of withdrawals, aggregated to $319,306,818 and $310,310,639, respectively. 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 Corporation 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 Corporation, the holding company of State Street, were made according to its representative portion of the S&P 500(R) Index. The market value of this investment at December 31, 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. These fees are paid through a unitary fee. 44 STATE STREET EQUITY 500 INDEX PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 2009 6. INDEMNIFICATIONS The Trust's organizational documents provide that its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, both in some of its principal service contracts and in the normal course of its business, the Trust enters into contracts that provide indemnifications to other parties for certain types of losses or liabilities. The Trust's maximum exposure under these arrangements is unknown as this could involve future claims against the Trust. Management does not expect any significant claims. 7. SUBSEQUENT EVENTS In accordance with provisions surrounding Subsequent Events adopted by the Portfolio, management has evaluated the possibility of subsequent events existing in the Portfolio's financial statements through February 23, 2010, the date the financial statements were issued. Management has determined that there are no material events that would require disclosure in the Portfolio's financial statements through this date. 45 STATE STREET EQUITY 500 INDEX PORTFOLIO REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees of State Street Master Funds and Owners of Beneficial Interest of State Street Equity 500 Index Portfolio: We have audited the accompanying statement of assets and liabilities of State Street Equity 500 Index Portfolio (the "Portfolio") (one of the portfolios constituting State Street Master Funds), including the portfolio of investments, as of December 31, 2009, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Portfolio's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of State Street Equity 500 Index Portfolio of State Street Master Funds at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/Ernst & Young LLP Boston, Massachusetts February 23, 2010 46 STATE STREET EQUITY 500 INDEX PORTFOLIO GENERAL INFORMATION DECEMBER 31, 2009 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES AND RECORD The Trust has adopted proxy voting procedures relating to portfolio securities held by the Portfolio. A description of the policies and procedures are available (i) without charge, upon request, by calling (877) 521-4083 or (ii) on the website of the Securities and Exchange Commission (the "SEC") at www.sec.gov. Information on how the Portfolio voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available by August 31 (i) without charge, upon request, by calling (877) 521-4083 or (ii) on the SEC's website at www.sec.gov. QUARTERLY PORTFOLIO SCHEDULE The Trust files a complete schedule of portfolio holdings with the SEC for the first and third quarters of its fiscal year (as of March and September of each year) on Form N-Q. The Trust's Forms N-Q are available on the SEC's website at www.sec.gov. The Trust's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The most recent Form N-Q is available without charge, upon request, by calling (877) 521-4083. ADVISORY AGREEMENT RENEWAL The Board of Trustees of the Trust met on November 19, 2009 (the "Meeting") to consider the renewal of the investment advisory agreement for the Portfolio (the "Advisory Agreement"). In preparation for considering the Advisory Agreement, the Trustees had reviewed the renewal materials provided by the investment adviser, which they had requested through independent counsel. In deciding whether to renew the Advisory Agreement, the Trustees considered various factors, including (i) the nature, extent and quality of the services provided by the SSgA Funds Management, Inc. (the "Adviser") under the Advisory Agreement, (ii) the investment performance of the Portfolio, (iii) the costs to the Adviser of its services and the profits realized by the Adviser and its affiliates from their relationship with the Trust, (iv) the extent to which economies of scale would be realized if and as the Trust grows and whether the fee levels in the Advisory Agreement reflect these economies of scale, and (v) any additional benefits to the Adviser from its relationship with the Trust. In considering the nature, extent and quality of the services provided by the Adviser, the Trustees relied on their prior direct experience as Trustees of the Trust as well as on the materials provided at the Meeting. The Board reviewed the Adviser's responsibilities under the Advisory Agreement and noted the experience and expertise that would be appropriate to expect of an adviser to the Portfolio, which is an index fund. The Trustees reviewed the background and experience of the Adviser's senior management, including those individuals responsible for the investment and compliance operations relating to the investments of the Portfolio, and the responsibilities of the latter with respect to the Portfolio. They also considered the resources, operational structures and practices of the Adviser in managing the Portfolio's investments, in monitoring and securing the Portfolio's compliance with its investment objective and policies with respect to its investments and with applicable laws and regulations, and in seeking best execution of portfolio transactions. The Trustees also considered information about the Adviser's overall investment management business, noting that the Adviser manages assets for a variety of institutional investors and that the Adviser and its affiliates had over $1.74 trillion in assets under management as of September 30, 2009, including over $163 billion managed by the Adviser. They reviewed information regarding State Street's business continuity and disaster recovery program. Drawing upon the materials 47 STATE STREET EQUITY 500 INDEX PORTFOLIO GENERAL INFORMATION (CONTINUED) DECEMBER 31, 2009 (UNAUDITED) provided and their general knowledge of the business of the Adviser, the Trustees determined that the experience, resources and strength of the Adviser in the management of index products are exceptional. As discussed more fully below, they also determined that the advisory fee for the Portfolio was fair and reasonable and that its performance and expense ratio were acceptable. On the basis of this review, the Trustees determined that the nature and extent of the services provided by the Adviser to the Portfolio was appropriate and had been of good quality. The Trustees noted that, in view of the investment objective of the Portfolio and the available data, the investment performance was acceptable. The Trustees noted that the performance of the Portfolio in absolute terms was not of the importance that normally attaches to that of actively-managed funds. Of more importance to the Trustees was the extent to which the Portfolio achieved its objective of replicating, before expenses, the total return of the S&P 500 Index. Drawing upon information provided at the Meeting and upon reports provided to the Trustees by the Adviser throughout the preceding year, they determined that the Portfolio had in fact tracked the index within an acceptable range of tracking error. They concluded that the performance the Portfolio was satisfactory. The Trustees considered the profitability to the Adviser and its affiliate, State Street, of the advisory relationships with the Trust. The Trustees had been provided with data regarding the profitability to the Adviser and its affiliated service provider with respect to the Portfolio individually, and on an aggregate basis, for the year ended June 30, 2009, with additional data relating to prior years. Having discussed with representatives of the Adviser the methodologies used in computing the costs that formed the bases of the profitability calculations, they concluded that these methodologies were reasonable and turned to the data provided. After discussion and analysis they concluded that, to the extent that the Adviser's and State Street's relationships with the Trust had been profitable during the period for which information had been provided, the profitability was in no case such as to render the advisory fee excessive. In order better to evaluate the Portfolio's advisory fee, the Trustees had requested comparative information from Lipper Inc. with respect to fees paid by, and expense ratios of, similar funds. The Trustees found that the Portfolio's advisory fee and total expense ratio were generally lower than the average for its peer group; after discussion, they concluded that the data available provided confirmation of the reasonableness of the Adviser's fee. The Board determined that the Adviser's fee was fair and reasonable. In considering whether the Adviser benefits in other ways from its relationship with the Trust, the Trustees also considered whether the Adviser's affiliates may benefit from the Trust's relationship with State Street as fund administrator, custodian and transfer agent. They noted that the Adviser utilizes no soft-dollar arrangements in connection with the Portfolio's brokerage transactions to obtain third-party (non-proprietary research) services. The Trustees concluded that, to the extent that the Adviser or its affiliates derive other benefits from their relationships with the Trust, those benefits are not so significant as to render the Adviser's fee excessive. The Trustees also considered the extent to which economies of scale may be realized by the Portfolio as assets grow and whether the Portfolio's fee levels reflect such economies of scale, if any, for the benefit of investors. In considering the matter, the Board determined that, to the extent economies of scale were in fact realized, such economies of scale were shared with the Portfolio by virtue of an advisory fee of a comparatively low level that subsumed economies of scale in the fee itself. The Trustees also recognized, 48 STATE STREET EQUITY 500 INDEX PORTFOLIO GENERAL INFORMATION (CONTINUED) DECEMBER 31, 2009 (UNAUDITED) however, that should sustained, substantial asset growth be realized in the future, it might be necessary to consider additional measures. On the basis of the foregoing discussions and determinations, without any one factor being dispositive, the Board decided to approve the continuance of the Advisory Agreement. 49 TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED) The table below includes information about the Trustees and Executive Officers of the State Street Master Funds, including their: - business addresses and ages; - principal occupations during the past five years; and - other directorships of publicly traded companies or funds.
NUMBER OF FUNDS IN FUND NAME, ADDRESS, POSITION(S) TERM OF OFFICE PRINCIPAL COMPLEX AND DATE OF BIRTH HELD WITH AND LENGTH OF OCCUPATION DURING OVERSEEN BY OTHER DIRECTORSHIPS ("DOB") TRUST TIME SERVED PAST FIVE YEARS TRUSTEE* HELD BY TRUSTEE ---------------------- -------------------- --------------------- ------------------------ ------------- --------------------- INDEPENDENT TRUSTEES Michael F. Holland Trustee and Chairman Term: Indefinite Chairman, Holland & 22 Trustee, State Street Holland & Company, of the Board Elected: 7/99 Company L.L.C. Institutional LLC (investment adviser) Investment Trust; 375 Park Avenue (1995 - present). Director, the Holland New York, NY 10152 Series Fund, Inc.; Director, The China DOB: 1944 Fund, Inc.; Director, The Taiwan Fund, Inc.; and Director, Reaves Utility Income Fund William L. Boyan Trustee Term: Indefinite Trustee of Old Mutual 22 Trustee, State Street State Street Master Elected: 7/99 South Africa Master Institutional Funds Trust (investments) Investment Trust; P.O. Box 5049 (1995 - present); Trustee, Old Mutual Boston, MA 02206 Chairman emeritus, South Africa Master Children's Hospital Trust; and Trustee, DOB: 1937 (1984 - present); Children's Hospital, Director, Boston Plan Boston, MA. For Excellence (non- profit) (1994 - present); President and Chief Operations Officer, John Hancock Mutual Life Insurance Company (1959 - 1999). Mr. Boyan retired in 1999. Rina K. Spence Trustee Term: Indefinite President of SpenceCare 22 Trustee, State Street State Street Master Elected: 7/99 International LLC (1998 Institutional Funds - present); Member of Investment Trust; P.O. Box 5049 the Advisory Board, Director, Berkshire Boston, MA 02206 Ingenium Corp. Life Insurance (technology company) Company of America DOB: 1948 (2001 - present); Chief 1993-2009; Director, Executive Officer, IEmily.com, Inc. IEmily.com (internet 2000-present; and company) (2000 - Trustee, National 2001); Chief Executive Osteoporosis Officer of Consensus Foundation 2005-2008 Pharmaceutical, Inc. (1998 - 1999); Founder, President and Chief Executive Officer of Spence Center for Women's Health (1994 - 1998); Trustee, Eastern Enterprise (utilities) (1988 - 2000). Douglas T. Williams Trustee Term: Indefinite Executive Vice President 22 Trustee, State Street State Street Master Elected: 7/99 of Chase Manhattan Institutional Funds Bank (1987 - 1999). Investment Trust; P.O. Box 5049 Mr. Williams retired in Treasurer, Nantucket Boston, MA 02206 1999. Educational Trust, 2002-2007 DOB: 1940
* The "Fund Complex" consists of eleven series of the Trust and eleven series of State Street Institutional Investment Trust. 50
NUMBER OF FUNDS IN FUND NAME, ADDRESS, POSITION(S) TERM OF OFFICE PRINCIPAL COMPLEX AND DATE OF BIRTH HELD WITH AND LENGTH OF OCCUPATION DURING OVERSEEN BY OTHER DIRECTORSHIPS ("DOB") TRUST TIME SERVED PAST FIVE YEARS TRUSTEE* HELD BY TRUSTEE ---------------------- -------------------- --------------------- ------------------------ ------------- --------------------- INTERESTED TRUSTEES(1) James E. Ross Trustee President Term: Indefinite President and Chief 22 Trustee, State Street SSgA Funds Elected Executive Officer from Institutional Management, Inc. Trustee: 2/07 Elected January 2006 to Present; Investment Trust; and State Street Financial President: 4/05 Principal Executive Trustee, Select Center Officer since 2005; Sector SPDR(R) Trust One Lincoln Street 2005 to Present, Boston, MA 02111-2900 President (2001 to 2005, Principal), SSgA Funds DOB: 1965 Management, Inc. (investment adviser); March 2006 to Present, Senior Managing Director (2000 to 2006, Principal), State Street Global Advisors. OFFICERS: Gary L. French Treasurer Term: Indefinite Senior Vice President of -- -- State Street Bank and Elected: 5/05 State Street Bank and Trust Company Trust Company (2002 - 2 Avenue de Lafayette present). Boston, MA 02111 DOB: 1951 Ellen M. Needham Vice President Term: Indefinite Principal, SSgA Funds -- -- SSgA Funds Elected: 09/09 Management, Inc. Management, Inc. (investment adviser); State Street Financial July 2007 to Present, Center Managing Director One Lincoln Street (June 2006 to July 2007, Boston, MA 02111-2900 Vice President; 2000 to June 2006, Principal), DOB: 1967 State Street Global Advisors. Laura F. Healy Assistant Treasurer Term: Indefinite Vice President of State -- -- State Street Bank and Elected: 11/08 Street Bank and Trust Trust Company Company (prior to July 2 Avenue de Lafayette 2, 2008, Investors Boston, MA 02111 Financial Corporation) since 2002. DOB: 1964 Brian D. O'Sullivan Assistant Treasurer Term: Indefinite Vice President of State -- -- State Street Bank and Elected: 11/08 Street Bank and Trust Trust Company Company (2007-present) 801 Pennsylvania with which he has been Avenue affiliated with since Kansas City, MO 64105 1997. DOB: 1975 Peter T. Sattelmair Assistant Treasurer Term: Indefinite Director of Fund State Street Bank and Elected: 11/08 Administration of State Trust Company Street Bank and Trust 801 Pennsylvania Company (2007 - Avenue present) with which he Kansas City, MO 64105 has been affiliated with since 1999. DOB: 1977
* The "Fund Complex" consists of eleven series of the Trust and eleven series of State Street Institutional Investment Trust. (1) Mr. Ross is an Interested Trustee because of his employment by SSgA Funds Management, Inc., an affiliate of the Trust. 51
NUMBER OF FUNDS IN FUND NAME, ADDRESS, POSITION(S) TERM OF OFFICE PRINCIPAL COMPLEX AND DATE OF BIRTH HELD WITH AND LENGTH OF OCCUPATION DURING OVERSEEN BY OTHER DIRECTORSHIPS ("DOB") TRUST TIME SERVED PAST FIVE YEARS TRUSTEE* HELD BY TRUSTEE ---------------------- -------------------- --------------------- ------------------------ ------------- --------------------- OFFICERS: (CONTINUED) Julie Piatelli Chief Compliance Term: Indefinite Principal and Senior -- -- SSgA Funds Officer Elected: 7/07 Compliance and Risk Management, Inc. Management Officer, State Street Financial SSgA Funds Center Management, Inc. One Lincoln Street (2004-present), Vice Boston, MA 02111 President State Street Global Advisors DOB: 1967 (2004-present). David James Secretary Term: Indefinite Vice President and -- -- State Street Bank and Elected: 11/09 Managing Counsel, Trust Company State Street Bank and 4 Copley Place Trust Company, 2009 to 5th Floor present; Vice President Boston, MA 02116 and Counsel, PNC Global Investment DOB: 1970 Servicing (US), Inc. 2006 to 2009; Assistant Vice President and Counsel, State Street Bank and Trust Company, October 2000 to December 2004 and was retired in 2005. Brian C. Poole Assistant Secretary Term: Indefinite Vice President and -- -- State Street Bank and Elected 9/08 Counsel (2008 - Trust Company present) and Associate 4 Copley Place, Counsel (2004 - 2007), 5th Floor State Street Bank and Boston, MA 02116 Trust Company (formerly Investors DOB: 1971 Bank and Trust Company.
---------- * The "Fund Complex" consists of eleven series of the Trust and eleven series of State Street Institutional Investment Trust. The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request, by calling (toll free) 877-521-4083. 52 This page intentionally left blank. 53 Summary Schedule of Investments MASTER SMALL CAP INDEX SERIES December 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS) 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" represents 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 $ 1,209,229 0.5% AEROSPACE Other Securities 2,985,173 1.3 AGRICULTURE, FISHING & RANCHING Other Securities 923,904 0.4 AIR TRANSPORT UAL Corp.(a)(b) 39,900 515,109 0.2 Other Securities 2,109,678 0.9 ------------ ---- 2,624,787 1.1 ALTERNATIVE ENERGY Other Securities 543,253 0.2 ALUMINUM Other Securities 370,245 0.2 ASSET MANAGEMENT & CUSTODIAN Other Securities 2,272,509 1.0 AUTO PARTS Other Securities 1,532,701 0.7 AUTO SERVICES Other Securities 280,700 0.1 BANKS: DIVERSIFIED FirstMerit Corp. 19,529 393,314 0.2 Prosperity Bancshares, Inc. 11,400 461,358 0.2 SVB Financial Group (a) 9,600 400,224 0.2 Other Securities 11,957,987 5.2 ------------ ---- 13,212,883 5.8 BANKS: SAVINGS, THRIFT & Other Securities 2,354,824 1.0 MORTGAGE LENDING BEVERAGE: BREWERS & DISTILLERS Other Securities 88,540 0.0 BEVERAGE: SOFT DRINKS Other Securities 326,398 0.1 BIOTECHNOLOGY Human Genome Sciences, Inc.(a) 43,600 1,334,160 0.6 Onyx Pharmaceuticals, Inc.(a) 14,820 434,819 0.2 Other Securities 7,183,001 3.1 ------------ ---- 8,951,980 3.9 BUILDING MATERIALS Other Securities 2,116,429 0.9 BUILDING: CLIMATE CONTROL Other Securities 312,468 0.1 BUILDING: ROOFING, WALLBOARD & PLUMBING Other Securities 162,400 0.1 CABLE TELEVISION SERVICES Other Securities 120,903 0.1 CASINOS & GAMBLING Bally Technologies, Inc.(a) 12,800 528,512 0.2 Other Securities 481,517 0.2 ------------ ---- 1,010,029 0.4 CEMENT Other Securities 7,644 0.0 CHEMICALS: DIVERSIFIED W.R.Grace & Co.(a) 17,300 438,555 0.2 Other Securities 2,517,683 1.1 ------------ ---- 2,956,238 1.3 CHEMICALS: SPECIALTY Other Securities 1,040,752 0.5 COAL Other Securities 588,134 0.3 COMMERCIAL FINANCE & Other Securities 232,499 0.1 MORTGAGE COMPANIES COMMERCIAL SERVICES Watson Wyatt Worldwide, Inc.(a) 9,915 471,161 0.2 Other Securities 5,434,300 2.4 ------------ ---- 5,905,461 2.6 COMMERCIAL SERVICES: RENTAL & LEASING Other Securities 1,030,724 0.4
See Notes to Financial Statements. 54 MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 Summary Schedule of Investments (continued) MASTER SMALL CAP INDEX SERIES (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT -------- ----------------------------------- ------ ------------ ------- COMMERCIAL VEHICLES & PARTS Other Securities $ 391,538 0.2% COMMUNICATIONS TECHNOLOGY 3Com Corp.(a) 93,000 697,500 0.3 Polycom,Inc.(a) 19,600 489,412 0.2 Other Securities 5,462,788 2.4 ------------ ---- 6,649,700 2.9 COMPUTER SERVICES SOFTWARE & SYSTEMS Concur Technologies, Inc.(a) 9,800 418,950 0.2 Informatica Corp.(a) 20,800 537,888 0.2 Parametric Technology Corp.(a) 28,160 460,134 0.2 Solera Holdings, Inc. 16,900 608,569 0.3 Other Securities 13,236,890 5.8 ------------ ---- 15,262,431 6.7 COMPUTER TECHNOLOGY Other Securities 1,972,245 0.9 CONSTRUCTION EMCOR Group,Inc.(a) 16,172 435,027 0.2 Other Securities 874,632 0.4 ------------ ---- 1,309,659 0.6 CONSUMER ELECTRONICS Other Securities 371,101 0.2 CONSUMER LENDING Other Securities 1,553,633 0.7 CONSUMER SERVICES: MISCELLANEOUS Other Securities 1,581,684 0.7 CONTAINERS & PACKAGING Rock-Tenn Co., Class A 9,180 462,764 0.2 Other Securities 607,852 0.3 ------------ ---- 1,070,616 0.5 COSMETICS Other Securities 409,526 0.2 DIVERSIFIED FINANCIAL SERVICES Stifel Financial Corp.(a) 7,149 423,507 0.2 Other Securities 635,907 0.3 ------------ ---- 1,059,414 0.5 DIVERSIFIED MANUFACTURING OPERATIONS Other Securities 540,315 0.2 DIVERSIFIED MATERIALS & PROCESSING Clarcor, Inc. 12,610 409,068 0.2 Other Securities 1,455,413 0.6 ------------ ---- 1,864,481 0.8 DIVERSIFIED MEDIA Other Securities 180,998 0.1 DIVERSIFIED RETAIL Other Securities 1,300,468 0.6 DRUG & GROCERY STORE CHAINS Other Securities 1,532,603 0.7 EDUCATION SERVICES Other Securities 1,394,633 0.6 ELECTRONIC COMPONENTS Other Securities 1,267,286 0.5 ELECTRONIC ENTERTAINMENT Other Securities 404,948 0.2 ELECTRONICS Other Securities 1,115,376 0.5 ENERGY EQUIPMENT Other Securities 391,344 0.2 ENGINEERING & CONTRACTING SERVICES Other Securities 1,048,636 0.5 ENTERTAINMENT Other Securities 636,831 0.3 FINANCIAL DATA & SYSTEMS Jack Henry & Associates, Inc. 20,100 464,712 0.2 Other Securities 1,992,463 0.9 ------------ ---- 2,457,175 1.1 FOODS Other Securities 2,646,795 1.2 FOREST PRODUCTS Other Securities 295,680 0.1 FORMS & BULK PRINTING SERVICES Other Securities 684,581 0.3 FUNERAL PARLORS & CEMETERIES Other Securities 366,924 0.2 GAS PIPELINE Other Securities 55,660 0.0 GLASS Other Securities 99,400 0.0
See Notes to Financial Statements. MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 55 Summary Schedule of Investments (continued) MASTER SMALL CAP INDEX SERIES (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT -------- ----------------------------------- ------ ------------ ------- GOLD Other Securities $ 561,406 0.2% HEALTH CARE FACILITIES Other Securities 1,326,509 0.6 HEALTH CARE MANAGEMENT SERVICES Other Securities 2,369,614 1.0 HEALTH CARE SERVICES HealthSouth Corp.(a) 22,000 412,940 0.2 Other Securities 4,237,718 1.8 ------------ ---- 4,650,658 2.0 HEALTH CARE: MISCELLANEOUS Other Securities 255,258 0.1 HOME BUILDING Other Securities 585,005 0.3 HOTEL/MOTEL Other Securities 482,322 0.2 HOUSEHOLD APPLIANCES Other Securities 114,692 0.0 HOUSEHOLD EQUIPMENT & PRODUCTS Tupperware Corp. 15,174 706,653 0.3 Other Securities 627,409 0.3 ------------ ---- 1,334,062 0.6 HOUSEHOLD FURNISHINGS Tempur-Pedic International, Inc.(a) 17,900 422,977 0.2 Other Securities 435,564 0.2 ------------ ---- 858,541 0.4 INSURANCE: LIFE Other Securities 978,894 0.4 INSURANCE: MULTI-LINE Assured Guaranty Ltd. 29,200 635,392 0.3 Platinum Underwriters Holdings Ltd. 11,900 455,651 0.2 Other Securities 967,655 0.4 ------------ ---- 2,058,698 0.9 INSURANCE: PROPERTY-CASUALTY ProAssurance Corp.(a) 8,023 430,915 0.2 Other Securities 3,906,752 1.7 ------------ ---- 4,337,667 1.9 LEISURE TIME Other Securities 1,406,368 0.6 LUXURY ITEMS Other Securities 476,641 0.2 MACHINERY: AGRICULTURAL Other Securities 225,750 0.1 MACHINERY: CONSTRUCTION & HANDLING Other Securities 190,761 0.1 MACHINERY: ENGINES Other Securities 279,205 0.1 MACHINERY: INDUSTRIAL Nordson Corp. 8,210 502,288 0.2 Other Securities 2,208,199 1.0 ------------ ---- 2,710,487 1.2 MACHINERY: SPECIALTY Other Securities 315,396 0.1 MANUFACTURED HOUSING Other Securities 88,770 0.0 MEDICAL & DENTAL Owens & Minor, Inc. 9,698 416,335 0.2 INSTRUMENTS & SUPPLIES Other Securities 5,839,090 2.5 ------------ ---- 6,255,425 2.7 MEDICAL EQUIPMENT Other Securities 3,879,084 1.7 MEDICAL SERVICES Other Securities 789,054 0.3 METAL FABRICATING Other Securities 1,623,438 0.7 METALS & MINERALS: DIVERSIFIED Other Securities 952,111 0.4 OFFICE SUPPLIES & EQUIPMENT Other Securities 1,420,954 0.6 OFFSHORE DRILLING & OTHER SERVICES Other Securities 148,551 0.1 OIL WELL EQUIPMENT & SERVICES Dril-Quip,Inc.(a) 7,076 399,652 0.2 Other Securities 2,912,232 1.2 ------------ ---- 3,311,884 1.4
See Notes to Financial Statements. 56 MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 Summary Schedule of Investments (continued) MASTER SMALL CAP INDEX SERIES (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT -------- ----------------------------------- ------- ------------ ------- OIL: CRUDE PRODUCERS Arena Resources, Inc.(a) 9,300 $ 401,016 0.2% Atlas Energy, Inc. 16,087 485,345 0.2 Other Securities 4,362,795 1.9 ------------ ---- 5,249,156 2.3 OIL: INTEGRATED Other Securities 115,125 0.0 PAINTS & COATINGS Other Securities 469,513 0.2 PAPER Domtar Corp.(a) 10,100 559,641 0.3 Other Securities 950,550 0.4 ------------ ---- 1,510,191 0.7 PERSONAL CARE Chattem, Inc.(a) 4,600 429,180 0.2 Other Securities 240,111 0.1 ------------ ---- 669,291 0.3 PHARMACEUTICALS Other Securities 3,849,853 1.7 PHOTOGRAPHY Other Securities 293,256 0.1 PLASTICS Other Securities 78,530 0.0 POWER TRANSMISSION EQUIPMENT Regal-Beloit Corp. 8,551 444,139 0.2 Other Securities 329,228 0.1 ------------ ---- 773,367 0.3 PRECIOUS METALS & MINERALS Other Securities 222,907 0.1 PRINTING & COPYING SERVICES Other Securities 105,875 0.0 PRODUCER DURABLES: MISCELLANEOUS Other Securities 144,315 0.1 PRODUCTION TECHNOLOGY EQUIPMENT Other Securities 2,369,944 1.0 PUBLISHING Other Securities 368,511 0.2 RADIO & TV BROADCASTERS Other Securities 128,827 0.1 RAILROAD EQUIPMENT Other Securities 135,620 0.1 RAILROADS Other Securities 343,360 0.1 REAL ESTATE Other Securities 409,562 0.2 REAL ESTATE INVESTMENT TRUSTS (REITS) Highwoods Properties, Inc. 17,300 576,955 0.2 MFA Financial, Inc. 67,700 497,595 0.2 National Retail Properties, Inc. 19,675 417,504 0.2 Omega Healthcare Investors, Inc. 20,400 396,780 0.2 Washington REIT 14,365 395,756 0.2 Other Securities 11,846,327 5.2 ------------ ---- 14,130,917 6.2 RECREATIONAL VEHICLES & BOATS Other Securities 800,568 0.3 RENTAL & LEASING SERVICES: CONSUMER Other Securities 857,321 0.4 RESTAURANTS Other Securities 2,972,811 1.3 SCIENTIFIC INSTRUMENTS: CONTROL & FILTER Other Securities 1,816,142 0.8 SCIENTIFIC INSTRUMENTS: ELECTRICAL American Superconductor Corp.(a)(b) 10,200 417,180 0.2 GrafTech International Ltd.(a) 29,444 457,854 0.2 Other Securities 1,592,022 0.7 ------------ ---- 2,467,056 1.1 SCIENTIFIC INSTRUMENTS: GAUGES & METERS Other Securities 304,296 0.1 SCIENTIFIC INSTRUMENTS: POLLUTION CONTROL Other Securities 995,650 0.4 SECURITIES BROKERAGE & SERVICES E*Trade Financial Corp.(a) 372,500 651,875 0.3 Other Securities 1,436,560 0.6 ------------ ---- 2,088,435 0.9
See Notes to Financial Statements. MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 57 Summary Schedule of Investments (continued) MASTER SMALL CAP INDEX SERIES (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE PERCENT -------- ----------------------------------- ------- ------------ ------- SEMICONDUCTORS & COMPONENTS Atheros Communications, Inc.(a) 15,370 $ 526,269 0.2% Skyworks Solutions, Inc.(a) 40,033 568,068 0.2 Other Securities 4,737,920 2.1 ------------ ---- 5,832,257 2.5 SHIPPING Other Securities 1,297,636 0.6 SPECIALTY RETAIL Tractor Supply Co.(a) 8,700 460,752 0.2 Other Securities 6,833,688 3.0 ------------ ---- 7,294,440 3.2 STEEL Other Securities 132,021 0.1 SUGAR Other Securities 43,600 0.0 SYNTHETIC FIBERS & CHEMICALS Other Securities 65,550 0.0 TECHNOLOGY: MISCELLANEOUS Other Securities 781,324 0.3 TELECOMMUNICATIONS EQUIPMENT Other Securities 1,017,303 0.4 TEXTILE PRODUCTS Other Securities 146,785 0.1 TEXTILES APPAREL & SHOES J.Crew Group, Inc.(a) 12,070 540,012 0.2 The Warnaco Group, Inc.(a) 10,700 451,433 0.2 Other Securities 3,725,932 1.6 ------------ ---- 4,717,377 2.0 TOBACCO Other Securities 510,131 0.2 TOYS Other Securities 175,888 0.1 TRANSPORTATION: MISCELLANEOUS Other Securities 396,281 0.2 TRUCKERS Other Securities 1,459,630 0.6 UTILITIES: ELECTRICAL Cleco Corp. 14,667 400,849 0.2 Other Securities 3,544,144 1.5 ------------ ---- 3,944,993 1.7 UTILITIES: GAS DISTRIBUTORS Nicor, Inc.(c) 10,600 446,260 0.2 Piedmont Natural Gas Co. 18,000 481,500 0.2 Other Securities 1,856,979 0.8 ------------ ---- 2,784,739 1.2 UTILITIES: TELECOMMUNICATIONS Other Securities 2,096,170 0.9 UTILITIES: WATER Other Securities 708,530 0.3 ------------ ---- TOTAL COMMON STOCKS 224,138,747 97.6 ============ ==== INVESTMENT COMPANIES BlackRock Kelso Capital Corp.(d) 3,100 26,412 0.0 Other Securities 382,714 0.2 ------------ ---- TOTAL INVESTMENT COMPANIES 409,126 0.2 ============ ==== RIGHTS BANKS: SAVINGS, THRIFT & Other Securities -- 0.0 MORTGAGE LENDING BUILDING MATERIALS Other Securities 1,577 0.0 ------------ ---- TOTAL RIGHTS 1,577 0.0 ============ ====
See Notes to Financial Statements. 58 MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 Summary Schedule of Investments (continued) MASTER SMALL CAP INDEX SERIES (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY WARRANTS (e) SHARES VALUE PERCENT -------- ------------------------------------------------------------------- ---------- ------------ ------- ALTERNATIVE ENERGY GreenHunter Energy, Inc.(Expires 8/27/11) (b)(f) 180 -- 0.0% COMMUNICATIONS TECHNOLOGY Other Securities -- 0.0 TOTAL WARRANTS -- 0.0 ------------ ----- TOTAL LONG-TERM INVESTMENTS (COST -- $190,334,906) $224,549,450 97.8 ============ ===== SHORT-TERM SECURITIES BlackRock Liquidity Funds, TempFund, Institutional Class, 0.11% (d)(g) 9,452,117 9,452,117 4.1
BENEFICIAL INTEREST (000) ---------- BlackRock Liquidity Series, LLC Money Market Series, 0.29% (d)(g)(h) $17,387 $ 17,386,620 7.6 ------------ ----- TOTAL SHORT-TERM SEC URITIES (COST -- $26,83,737) 26,838,737 11.7 ------------ ----- TOTAL INVESTMENTS (COST -- $217,173,643*) 251,388,187 109.5 LIABILITIES IN EXCESS OF OTHER ASSETS (21,751,491) (9.5) ------------ ----- NET ASSETS $229,636,696 100.0% ============ =====
* The cost and unrealized appreciation (depreciation) of investments as of December 31, 2009, as computed for federal income tax purposes, were as follows: Aggregate cost .................................................. $229,753,769 ------------ Gross unrealized appreciation ................................... $ 48,267,727 Gross unrealized depreciation ................................... (26,633,309) ------------ Net unrealized appreciation ..................................... $ 21,634,418 ============
(a) Non-income producing security. (b) Security, or a portion of security, is on loan. (c) All or a portion of 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. $ 16,102 $ 239,668 $(221,996) -- BlackRock Kelso Capital Corp. $ 11,712 $ 42,960 $ (13,276) $ 992 BlackRock Liquidity Funds, TempFund, Institutional Class $9,452,117(1) -- -- $ 26,184 BlackRock Liquidity Series, LLC, Cash Sweep Series -- $33,514,609(2) -- $ 37,173 BlackRock Liquidity Series, LLC, Money Market Series -- $ 7,257,582(2) -- $451,286
(1) Represents net purchase cost. (2) 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 was as follows:
ACQUISITION ISSUE DATE COST VALUE ----- ----------- ---- ----- GreenHunter Energy,Inc. 6/27/08 $-- $--
(g) Represents the current yield as of report date. (h) Security was purchased with the cash collateral from securities loans. See Notes to Financial Statements. MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 59 Summary Schedule of Investments (concluded) MASTER SMALL CAP INDEX SERIES - 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 December 31, 2009 were as follows:
EXPIRATION NOTIONAL UNREALIZED CONTRACTS ISSUE DATE VALUE APPRECIATION --------- ----------------- ---------- ---------- ------------ 72 Russell 2000 MINI March 2010 $4,403,447 $88,573
- 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 assets and liabilities - 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 December 31, 2009 in determining the fair valuation of the Series' investments:
INVESTMENTS IN VALUATION INPUTS SECURITIES ---------------- ASSETS -------------- Level 1 Long-Term Investments(1) ................................... $224,549,450 Short-Term Securities ...................................... 9,452,117 ------------ Total Level 1 ................................................. 234,001,567 ------------ Level 2 -- Short-Term Securities .............................. 17,386,620 Level 3 ....................................................... -- ------------ TOTAL.......................................................... $251,388,187 ============
(1) See above Schedule of Investments for values in each industry.
OTHER FINANCIAL VALUATION INPUTS INSTRUMENTS(2) ---------------- ASSETS --------------- Level 1 ....................................................... $88,573 Level 2 ....................................................... -- Level 3 ....................................................... -- ------- TOTAL ......................................................... $88,573 =======
(2) Other financial instruments are financial futures contracts which are shown at the unrealized appreciation/depreciation on the instrument. See Notes to Financial Statements. 60 MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 Statement of Assets and Liabilities MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 ASSETS Investments at value -- unaffiliated (including securities loaned of $16,357,904) (cost -- $190,311,919) .... $224,523,038 Investments at value -- affiliated (cost -- $26,861,724) .................................................... 26,865,149 Cash on deposit for financial futures contracts ............................................................. 780,000 Dividends receivable ........................................................................................ 271,553 Securities lending income receivable -- affiliated .......................................................... 27,404 Investment advisor receivable ............................................................................... 15,720 Investments sold receivable ................................................................................. 12,300 Prepaid expenses ............................................................................................ 54,144 ------------ Total assets ................................................................................................ 252,549,308 ------------ LIABILITIES Collateral on securities loaned, at value ................................................................... 17,386,620 Withdrawals payable to investors ............................................................................ 5,379,905 Margin variation payable .................................................................................... 130,554 Other affiliates payable .................................................................................... 1,270 Directors' fees payable ..................................................................................... 257 Other accrued expenses payable .............................................................................. 14,006 ------------ Total liabilities ........................................................................................... 22,912,612 ------------ NET ASSETS .................................................................................................. $229,636,696 ============ NET ASSETS CONSIST OF Investors' capital .......................................................................................... $195,333,579 Net unrealized appreciation/depreciation .................................................................... 34,303,117 ------------ NET ASSETS .................................................................................................. $229,636,696 ============
See Notes to Financial Statements. MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 61 Statement of Operations MASTER SMALL CAP INDEX SERIES YEAR ENDED DECEMBER 31, 2009 INVESTMENT INCOME Dividends ....................................................... $ 3,969,783 Foreign taxes withheld .......................................... (449) Income -- affiliated ............................................ 64,349 Securities lending -- affiliated ................................ 451,286 ------------ Total income .................................................... 4,484,969 ------------ EXPENSES Professional .................................................... 83,163 Accounting services ............................................. 80,196 Custodian ....................................................... 71,403 Investment advisory ............................................. 33,405 Directors ....................................................... 20,977 Printing ........................................................ 1,416 Other ........................................................... 11,486 ------------ Total expenses .................................................. 302,046 Less fees paid indirectly ....................................... (111) Less fees waived by advisor ..................................... (60,386) ------------ Total expenses after fees waived and paid indirectly ............ 241,549 ------------ Net investment income ........................................... 4,243,420 ------------ REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from: Investments -- unaffiliated .................................. (66,098,465) Investments -- affiliated .................................... (235,272) In-kind redemption ........................................... 32,836,315 Financial futures contracts .................................. 2,630,142 ------------ (30,867,280) ------------ Net change in unrealized appreciation/depreciation on: Investments .................................................. 126,875,161 Financial futures contracts .................................. (2,286,369) ------------ 124,588,792 ------------ Total realized and unrealized gain .............................. 93,721,512 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. $ 97,964,932 ============
See Notes to Financial Statements. 62 MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 Statements of Changes in Net Assets MASTER SMALL CAP INDEX SERIES
YEAR ENDED DECEMBER 31, ----------------------------- INCREASE (DECREASE) IN NET ASSETS: 2009 2008 ---------------------------------- ------------- ------------- OPERATIONS Net investment income .......................................................... $ 4,243,420 $ 7,541,773 Net realized loss .............................................................. (30,867,280) (28,428,998) Net change in unrealized appreciation/depreciation ............................. 124,588,792 (153,156,287) ------------- ------------- Net increase (decrease) in net assets resulting from operations ................ 97,964,932 (174,043,512) ------------- ------------- CAPITAL TRANSACTIONS Proceeds from contributions .................................................... 171,416,855 277,100,847 Fair value of withdrawals ...................................................... (384,465,211) (388,731,499) ------------- ------------- Net decrease in net assets derived from capital transactions ................... (213,048,356) (111,630,652) ------------- ------------- NET ASSETS Total decrease in net assets ................................................... (115,083,424) (285,674,164) Beginning of year .............................................................. 344,720,120 630,394,284 ------------- ------------- End of year $ 229,636,696 $ 344,720,120 ============= =============
Financial Highlights MASTER SMALL CAP INDEX SERIES
YEAR ENDED DECEMBER 31, ----------------------------------------------------- 2009 2008 2007 2006 2005 -------- --------- -------- -------- -------- TOTAL INVESTMENT RETURN Total investment return ................................ 27.37% (33.57)% (1.46)% 18.13% 4.63% -------- -------- -------- -------- -------- RATIOS TO AVERAGE NET ASSETS Total expenses ......................................... 0.09% 0.08% 0.06% 0.07% 0.08% Total expenses after fees waived and paid indirectly ... 0.07% 0.07% 0.06% 0.07% 0.07% Net investment income .................................. 1.27% 1.60% 1.69% 1.55% 1.17% SUPPLEMENTAL DATA Net assets, end of year (000) .......................... $229,637 $344,720 $630,394 $561,373 $370,145 -------- -------- -------- -------- -------- Portfolio turnover ..................................... 43% 42% 26% 40% 37% ======== ======== ======== ======== ========
See Notes to Financial Statements. MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 63 Notes to Financial Statements MASTER SMALL CAP INDEX SERIES 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: Master Small Cap Index Series (the "Series"), a non-diversified, open-end management investment company, is a series of Quantitative Master Series LLC (the "Master LLC"). The Master LLC is registered as an investment company 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 Board of Directors (the "Board") to issue nontransferable interests, 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: The Series' policy is to value instruments at fair value. 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 Money Market Series (the "Money Market Series") at fair value, which is ordinarily based upon its pro rata ownership in the net assets of the underlying fund. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. The Money Market Series' investments will follow the parameters of investments by a money market fund that is subject to Rule 2a-7 promulgated by the Securities and Exchange Commission ("SEC") under the 1940 Act. The Series may withdraw up to 25% of its investment daily, although the manager of the Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day. 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, or is not available, 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. SEGREGATION AND COLLATERALIZATION: In cases in which the 1940 Act and the interpretive positions of the SEC require that the Series either delivers collateral or segregates assets in connection with certain investments (e.g., financial futures contracts), the Series will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or 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, each party has requirements to deliver/deposit securities as collateral for certain investments. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment 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. 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 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 or if the value of an investment purchased with cash collateral falls below the original value of the cash collateral received. 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 64 MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 Notes to Financial Statements (continued) MASTER SMALL CAP INDEX SERIES 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 applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates. The Series files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Series' US federal tax returns remain open for each of the four years ended December 31, 2009. The statute of limitations on the Series' state and local tax returns may remain open for an additional year depending upon the jurisdiction. RECENT ACCOUNTING STANDARDS: In June 2009, amended guidance was issued by the Financial Accounting Standards Board ("FASB") for transfers of financial assets. This guidance 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. The amended guidance is effective for financial statements for fiscal years and interim periods beginning after November 15, 2009. Earlier application is prohibited. The recognition and measurement provisions of this guidance must be applied to transfers occurring on or after the effective date. Additionally, the enhanced disclosure provisions of the amended guidance should be applied to transfers that occurred both before and after the effective date of this guidance. The impact of this guidance on the Series' financial statements and disclosures, if any, is currently being assessed. In January 2010, the FASB issued amended guidance for improving disclosure about fair value measurements that adds new disclosure requirements about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances and settlements in the reconciliation for fair value measurements using significant unobservable inputs (Level 3). It also clarifies existing disclosure requirements relating to the levels of disaggregation for fair value measurement and inputs and valuation techniques used to measure fair value. The amended guidance is effective for financial statements for fiscal years and interim periods beginning after December 15, 2009 except for disclosures about purchases, sales, issuances and settlements in the rollforward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The impact of this guidance on the Series' financial statements and 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. 2. DERIVATIVE FINANCIAL INSTRUMENTS: The Series may engage in various portfolio investment strategies both to increase the returns of the Series and to economically hedge, or protect, its exposure to certain risks, such as equity risk. Losses may arise if the value of the contract decreases due to an unfavorable change in the price of the underlying instruments or if the counterparty does not perform under the contract. To the extent amounts due to the Series from its counterparty are not fully collateralized contractually or otherwise, the Series bears the risk of loss from counterparty non-performance. See Note 1 "Segregation and Collateralization" for information with respect to collateral practices. Counterparty risk related to exchange-traded financial futures contracts and options is minimal because of the protection against defaults provided by the exchange on which they trade. 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 financial futures contracts, interest rates and the underlying assets. DERIVATIVE INSTRUMENTS CATEGORIZED BY RISK EXPOSURE: VALUE OF DERIVATIVE INSTRUMENTS AS OF DECEMBER 31, 2009
ASSET DERIVATIVES ----------------------------- STATEMENT OF ASSETS AND LIABILITIES LOCATION VALUE -------------------- ------- Net unrealized appreciation/ Equity contracts* ........................ depreciation $88,573
* 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 YEAR ENDED DECEMBER 31, 2009 NET REALIZED GAIN (LOSS) FROM
FINANCIAL FUTURES CONTRACTS ----------------- Equity contracts ................... $2,630,142
MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 65 Notes to Financial Statements (continued) MASTER SMALL CAP INDEX SERIES NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON
FINANCIAL FUTURES CONTRACTS ----------------- Equity contracts ................... $(2,286,369)
For the year ended December 31,2009,the average derivative activity was as follows: Futures: Average number of contracts ..... 141 Average value ................... $206,787
3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: The PNC Financial Services Group, Inc. ("PNC"), Bank of America Corporation ("BAC") and Barclays Bank PLC ("Barclays") are the largest stockholders of BlackRock, Inc. ("BlackRock"). Due to the ownership structure, PNC is an affiliate for 1940 Act purposes, but BAC and Barclays are 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' portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operation 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 value of the Series' net assets. 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 year ended December 31, 2009, the Manager waived $55,314, 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 year ended December 31, 2009, the Manager waived advisory fees in the amount of $5,072, which is included in fees waived by advisor in the Statement of Operations. The Manager has entered into a separate sub-advisory agreement with BlackRock Investment Management, LLC ("BIM"), an affiliate of the Manager, under which the Manager pays the sub-advisor 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 year ended December 31, 2009, the Series reimbursed the Manager $6,369 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 a fee based on a share of the income derived from the securities lending activities and has retained BIM as the securities lending agent. 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 year ended December 31, 2009, BIM received $110,435 in securities lending agent fees. Certain officers and/or directors of the Master LLC are officers and/or directors of BlackRock or its affiliates. 4. INVESTMENTS: Purchases and sales of investments, excluding short-term securities, for the year ended December 31, 2009 were $133,781,657 and $313,588,744, respectively. 5. 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 was renewed until November 2010. 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. Prior to its renewal, the credit agreement had the following terms: 0.02% upfront fee on the aggregate commitment amount which was allocated to the Series based on its net assets as of October 31, 2008; 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, and 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) on amounts borrowed. Effective November 2009, the credit agreement was renewed with the following terms: 0.02% upfront fee on the aggregate commitment amount which was allocated to the Series based on its net assets as of October 31, 2009, a commitment fee of 0.10% per annum based on the Series' pro 66 MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 Notes to Financial Statements (concluded) MASTER SMALL CAP INDEX SERIES rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 1.25% per annum and (b) the Fed Funds rate plus 1.25% per annum on amounts borrowed. The Series did not borrow under the credit agreement during the year ended December 31, 2009. 6. CONCENTRATION, 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 generally approximated by their value recorded in the Series' Statement of Assets and Liabilities, less any collateral held by the Series. The Series invests a significant portion of its assets in the financial services sector. 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 February 24, 2010, the date the financial statements were issued, and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements. MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 67 Report of Independent Registered Public Accounting Firm MASTER SMALL CAP INDEX SERIES TO THE INVESTORS AND BOARD OF DIRECTORS OF QUANTITATIVE MASTER SERIES LLC: We have audited the accompanying statement of assets and liabilities, including the summary schedule of investments, of Master Small Cap Index Series, one of the portfolios constituting Quantitative Master Series LLC, (the "Master LLC") as of December 31, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Master LLC's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Master LLC is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Master LLC's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Master Small Cap Index Series of Quantitative Master Series LLC as of December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Princeton, New Jersey February 24, 2010 68 MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 Officers and Directors MASTER SMALL CAP INDEX SERIES
NUMBER OF BLACKROCK- LENGTH ADVISED REGISTERED OF TIME INVESTMENT COMPANIES NAME, ADDRESS POSITION(S) SERVED ("RICS") CONSISTING OF AND YEAR OF HELD WITH AS A PRINCIPAL OCCUPATION(S) DURING INVESTMENT PORTFOLIOS PUBLIC BIRTH MASTER LLC DIRECTOR(2) PAST FIVE YEARS ("PORTFOLIOS") OVERSEEN DIRECTORSHIPS --------------------- ------------ ----------- ------------------------------------ ----------------------- ---------------- NON-INTERESTED DIRECTORS(1) RONALD W. FORBES Co-Chair of Since Professor Emeritus of Finance, 36 RICs consisting of None 55 East 52nd Street the Board 2007 School of Business, State 106 Portfolios New York, NY 10055 and Director University of New York at Albany 1940 since 2000. RODNEY D. JOHNSON Co-Chair of Since President, Fairmount Capital 36 RICs consisting of None 55 East 52nd Street the Board 2007 Advisors, Inc. since 1987; 106 Portfolios New York, NY 10055 and Director Director, Fox Chase Cancer Center 1941 since 2004; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006. DAVID O. BEIM Director Since Professor of Finance and Economics 36 RICs consisting of None 55 East 52nd Street 2007 at the Columbia University Graduate 106 Portfolios New York, NY 10055 School of Business since 1991; 1940 Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006. DR. MATINA HORNER Director Since Executive Vice President of 36 RICs consisting of NSTAR (electric 55 East 52nd Street 2007 Teachers Insurance and Annuity 106 Portfolios and gas utility) New York, NY 10055 Association and College Retirement 1939 Equities Fund from 1989 to 2003. HERBERT I. LONDON Director Since Professor Emeritus, New York 36 RICs consisting of AIMS Worldwide, 55 East 52nd Street and Member 2007 University since 2005; John M. Olin 106 Portfolios Inc. (marketing) New York, NY 10055 of the Professor of Humanities, New York 1939 Audit University from 1993 to 2005 and Committee Professor thereof from 1980 to 2005; President, Hudson Institute (policy research organization) since 1997 and Trustee thereof since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005. CYNTHIA A. MONTGOMERY Director Since Professor, Harvard Business School 36 RICs consisting of Newell 55 East 52nd Street 2007 since 1989; Director, Harvard 106 Portfolios Rubbermaid, New York, NY 10055 Business School Publishing since Inc. 1952 2005; Director, McLean Hospital (manufacturing) since 2005. JOSEPH P. PLATT, JR. Director Since Director, The West Penn Allegheny 36 RICs consisting of Greenlight 55 East 52nd Street 2007 Health System (a not-for-profit 106 Portfolios Capital Re, New York, NY 10055 health system) since 2008; Ltd. 1947 Director, Jones and Brown (Canadian (reinsurance insurance broker) since 1998; company) General Partner, Thorn Partners, LP (private investment) since 1998; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008. ROBERT C. ROBB, JR. Director Since Partner, Lewis, Eckert, Robb and 36 RICs consisting of None 55 East 52nd Street 2007 Company (management and financial 106 Portfolios New York, NY 10055 consulting firm) since 1981. 1945 TOBY ROSENBLATT Director Since President, Founders Investments 36 RICs consisting of A.P. Pharma, 55 East 52nd Street 2007 Ltd. (private investments) since 106 Portfolios Inc. (specialty New York, NY 10055 1999; Director, College Access pharmaceuticals) 1938 Foundation of California (philan- thropic foundation) since 2009; Director, Forward Management, LLC since 2007; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.
MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 69 Officers and Directors (contined) MASTER SMALL CAP INDEX SERIES
NUMBER OF BLACKROCK- LENGTH ADVISED REGISTERED OF TIME INVESTMENT COMPANIES NAME, ADDRESS POSITION(S) SERVED ("RICS") CONSISTING OF AND YEAR OF HELD WITH AS A PRINCIPAL OCCUPATION(S) DURING INVESTMENT PORTFOLIOS PUBLIC BIRTH MASTER LLC DIRECTOR(2) PAST FIVE YEARS ("PORTFOLIOS") OVERSEEN DIRECTORSHIPS --------------------- ------------ ----------- ------------------------------------ ----------------------- ---------------- NON-INTERESTED DIRECTORS(1) (CONCLUDED) KENNETH L. URISH Chair of Since Managing Partner, Urish Popeck & 36 RICs consisting of None 55 East 52nd Street the Audit 2007 Co., LLC (certified public 106 Portfolios New York, NY 10055 Committee accountants and consultants) since 1951 and Director 1976; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Trustee, The Holy Family Foundation since 2001; Committee Member, Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants from 2007 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007. FREDERICK W. WINTER Director Since Professor and Dean Emeritus of the 36 RICs consisting of None 55 East 52nd Street and Member 2007 Joseph M. Katz School of Business, 106 Portfolios New York, NY 10055 of the University of Pittsburgh since 2005 1945 Audit and Dean thereof from 1997 to 2005; Committee Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.
(1) Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Directors who turn 72 prior to December 31, 2013. (2) Date shown is the earliest date a person has served as a director for the Master LLC covered by this annual report. Following the combination of Merrill Lynch Investment Managers, L.P. ("MLIM") and BlackRock, Inc. ("BlackRock") in September 2006, the various legacy MLIM and legacy BlackRock Fund boards were realigned and consolidated into three new Fund boards in 2007. As a result, although the chart shows directors as joining the Master LLC board in 2007, each director first became a member of the board of other legacy MLIM or legacy BlackRock Funds as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Matina Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, Jr., 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999 and Frederick W. Winter, 1999. INTERESTED DIRECTORS(3) RICHARD S. DAVIS Director Since Managing Director, BlackRock, Inc. 173 RICs consisting None 55 East 52nd Street 2007 since 2005; Chief Executive of 304 Portfolios New York, NY 10055 Officer, State Street Research & 1945 Management Company from 2000 to 2005; Chairman of the Board of Directors, State Street Research Mutual Funds from 2000 to 2005; Chairman, SSR Realty from 2000 to 2004. HENRY GABBAY Director Since Consultant, BlackRock, Inc. from 173 RICs consisting None 55 East 52nd Street 2007 2007 to 2008; Managing Director, of 304 Portfolios New York, NY 10055 BlackRock, Inc. from 1989 to 2007; 1947 Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.
(3) Mr. Davis is an "interested person" as defined in the Investment Company Act of 1940, of the Master LLC based on his position with BlackRock, Inc. and its affiliates. Mr. Gabbay is an "interested person" of the Master LLC based on his former positions with BlackRock, Inc. and its affiliates as well as his ownership of BlackRock, Inc. and PNC securities. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Directors who turn 72 prior to December 31, 2013. 70 MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 Officers and Directors (concluded) MASTER SMALL CAP INDEX SERIES
POSITION(S) LENGTH NAME, ADDRESS HELD WITH OF TIME AND YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS ------------------- ---------------- ---------- ---------------------------------------------------------------------- MASTER LLC OFFICERS(1) ANNE F. ACKERLEY President and Since 2009 Managing Director of BlackRock, Inc. since 2000; Vice President of the 55 East 52nd Street Chief Executive BlackRock-advised funds from 2007 to 2009; Chief Operating Officer of New York, NY 10055 Officer BlackRock's Global Client Group (GCG) since 2009; Chief Operating 1962 Officer of BlackRock's U.S. Retail Group from 2006 to 2009; Head of BlackRock's Mutual Fund Group from 2000 to 2006. JEFFREY HOLLAND, Vice President Since 2009 Managing Director of BlackRock, Inc. since 2010; Director of CFA BlackRock, Inc. from 2006 to 2009; Chief Operating Officer of 55 East 52nd Street BlackRock's U.S. Retail Group since 2009; Co-head of Product New York, NY 10055 Development and Management for BlackRock's U.S. Retail Group from 2007 1971 to 2009; Product Manager of Raymond James & Associates from 2003 to 2006. BRENDAN KYNE Vice President Since 2009 Managing Director of BlackRock, Inc. since 2010; Director of 55 East 52nd Street BlackRock, Inc. from 2008 to 2009; Head of Product Development and New York, NY 10055 Management for BlackRock's U.S. Retail Group since 2009, Co-head 1977 thereof from 2007 to 2009; Vice President of BlackRock, Inc. from 2005 to 2008. BRIAN SCHMIDT Vice President Since 2009 Managing Director of BlackRock, Inc. since 2004; Various positions 55 East 52nd Street with U.S. Trust Company from 1991 to 2003 including Director from 2001 New York, NY 10055 to 2003 and Senior Vice President from 1998 to 2003; Vice President, 1958 Chief Financial Officer and Treasurer of Excelsior Funds, Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Funds Trust from 2001 to 2003. NEAL J. ANDREWS Chief Financial Since 2007 Managing Director of BlackRock, Inc. since 2006; Senior Vice President 55 East 52nd Street Officer and Line of Business Head of Fund Accounting and Administration at PNC New York, NY 10055 Global Investment Servicing (U.S.) Inc. from 1992 to 2006. 1966 JAY M. FIFE Treasurer Since 2007 Managing Director of BlackRock, Inc. since 2007 and Director in 2006; 55 East 52nd Street Assistant Treasurer of the Merrill Lynch Investment Managers, L.P. New York, NY 10055 ("MLIM") and Fund Asset Management, L.P. advised funds from 2005 to 1970 2006; Director of MLIM Fund Services Group from 2001 to 2006. BRIAN P. KINDELAN Chief Compliance Since 2007 Chief Compliance Officer of the BlackRock-advised funds since 2007; 55 East 52nd Street Officer Managing Director and Senior Counsel of BlackRock, Inc. since 2005. New York, NY 10055 1959 HOWARD B. SURLOFF Secretary Since 2007 Managing Director and General Counsel of U.S. Funds at BlackRock, Inc. 55 East 52nd Street since 2006; General Counsel (U.S.) of Goldman Sachs Asset Management, New York, NY 10055 L.P. from 1993 to 2006. 1965
(1) Officers of the Master LLC serve at the pleasure of the Board of Directors. Further information about the Master LLC's Officers and Directors is available in the Master LLC's Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762. INVESTMENT ADVISOR BlackRock Advisors, LLC Wilmington, DE 19809 SUB-ADVISOR BlackRock Investment Management, LLC Plainsboro, NJ 08536 CUSTODIAN State Street Bank and Trust Company North Quincy, MA 02171 ACCOUNTING AGENT State Street Bank and Trust Company Princeton, NJ 08540 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP Princeton, NJ 08540 LEGAL COUNSEL Sidley Austin LLP New York, NY 10019 MASTER SMALL CAP INDEX SERIES DECEMBER 31, 2009 71 Summary Schedule of Investments MASTER INTERNATIONAL INDEX SERIES December 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS) 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" represents 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 Australia & New Zealand Banking Group Ltd. 175,062 $ 3,567,483 0.5% BHP Billiton Ltd. 235,856 9,025,412 1.2 Commonwealth Bank of Australia Ltd. 108,214 5,283,200 0.7 National Australia Bank Ltd. 146,693 3,579,900 0.5 Westpac Banking Corp. 205,646 4,645,276 0.6 Other Securities 33,587,838 4.5 ------------ ------ 59,689,109 8.0 AUSTRIA Other Securities 2,469,114 0.3 BELGIUM Other Securities 7,170,804 1.0 BERMUDA Other Securities 695,365 0.1 CAYMAN ISLANDS Other Securities 352,666 0.1 DENMARK Other Securities 6,569,630 0.9 FINLAND Nokia Oyj 260,135 3,363,540 0.4 Other Securities 4,931,862 0.7 ------------ ------ 8,295,402 1.1 FRANCE BNP Paribas SA 66,723 5,292,332 0.7 France Telecom SA 127,575 3,187,876 0.4 GDF Suez 87,797 3,803,453 0.5 Sanofi-Aventis 73,274 5,762,470 0.8 Societe Generale SA 43,036 2,990,138 0.4 Total SA 148,344 9,528,118 1.3 Other Securities 45,852,337 6.1 ------------ ------ 76,416,724 10.2 GERMANY Allianz AG, Registered Shares 32,101 3,979,237 0.5 BASF SE 65,061 4,026,667 0.5 Bayer AG 57,376 4,591,427 0.6 DaimlerChrysler AG 62,353 3,321,145 0.5 E.ON AG 133,923 5,621,288 0.8 Siemens AG 57,947 5,317,843 0.7 Other Securities 29,842,346 4.0 ------------ ------ 56,699,953 7.6 GREECE Other Securities 3,857,171 0.5 HONG KONG Other Securities 16,607,378 2.2 IRELAND Other Securities 2,055,882 0.3 ITALY Eni SpA 182,935 4,658,582 0.6 UniCredit SpA 977,959 3,270,057 0.4 Other Securities 16,350,598 2.2 ------------ ------ 24,279,237 3.2
PORTFOLIO ABBREVIATIONS To simplify the listings of portfolio holdings AUD Australian Dollar JPY Japanese Yen in the Summary Schedule of Investments, EUR Euro SEK Swedish Krona the names and descriptions of many of the GBP British Pound USD US Dollar securities have been abbreviated according to the following list:
See Notes to Financial Statements. 72 MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 Summary Schedule of Investments (continued) MASTER INTERNATIONAL INDEX SERIES (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE PERCENT ------- ------------------------------------------------- --------- ------------ ------- JAPAN Canon, Inc. 75,500 $ 3,211,655 0.4% Honda Motor Co., Ltd. 116,800 3,962,872 0.5 Mitsubishi UFJ Financial Group, Inc. 891,774 4,392,688 0.6 Toyota Motor Corp. 207,800 8,761,048 1.2 Other Securities 127,639,885 17.1 ------------ ----- 147,968,148 19.8 KAZAKHSTAN Other Securities 257,020 0.0 LUXEMBOURG Other Securities 3,998,531 0.5 NETHERLANDS Unilever NV 115,438 3,757,134 0.5 Other Securities 15,736,687 2.1 ------------ ----- 19,493,821 2.6 NEW ZEALAND Other Securities 808,698 0.1 NORWAY Other Securities 5,390,433 0.7 PORTUGAL Other Securities 2,310,358 0.3 SINGAPORE Other Securities 11,172,972 1.5 SPAIN Banco Bilbao Vizcaya Argentaria SA 246,340 4,489,549 0.6 Banco Santander SA 573,683 9,479,911 1.3 Telefonica SA 295,654 8,275,065 1.1 Other Securities 10,904,494 1.4 ------------ ----- 33,149,019 4.4 SWEDEN Other Securities 17,420,607 2.3 SWITZERLAND ABB Ltd. 160,090 3,084,827 0.4 Credit Suisse Group AG 82,164 4,070,517 0.5 Nestle SA, Registered Shares 256,418 12,444,897 1.7 Novartis AG, Registered Shares 154,654 8,445,538 1.1 Roche Holding AG 52,024 8,896,774 1.2 UBS AG 264,485 4,118,620 0.6 Other Securities 16,784,756 2.2 ------------ ----- 57,845,929 7.7 UNITED KINGDOM Anglo American Plc (a) 92,120 3,989,485 0.5 AstraZeneca Plc 101,396 4,765,323 0.6 BG Group Plc 235,247 4,247,679 0.6 BHP Billiton Plc 154,491 4,925,163 0.7 BP Plc 1,311,741 12,666,379 1.7 Barclays Plc 798,732 3,519,574 0.5 British American Tobacco Plc 139,745 4,536,580 0.6 Diageo Plc 174,907 3,051,444 0.4 GlaxoSmithKline Plc 362,949 7,696,642 1.0 HSBC Holdings Plc 1,213,396 13,842,812 1.9 Rio Tinto Plc, Registered Shares 95,402 5,151,391 0.7 Royal Dutch Shell Plc 248,191 7,510,303 1.0 Royal Dutch Shell Plc, Class B 188,629 5,493,474 0.7 Standard Chartered Plc 140,697 3,552,016 0.5 Tesco Plc 555,601 3,832,965 0.5 Vodafone Group Plc 3,680,257 8,522,398 1.1 Other Securities 56,091,237 7.5 ------------ ----- 153,394,865 20.5 ------------ ----- TOTAL COMMON STOCKS 718,368,836 95.9 ------------ ----- PREFERRED SECURITIES PREFERRED STOCKS GERMANY Other Securities 1,729,654 0.2 ------------ ----- TOTAL PREFERRED SECURITIES 1,729,654 0.2
See Notes to Financial Statements. MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 73 Summary Schedule of Investments (continued) MASTER INTERNATIONAL INDEX SERIES (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY RIGHTS SHARES VALUE PERCENT ------- ------------------------------------------------- --------- ------------ ------- AUSTRALIA Other Securities $ 7,718 0.0% BELGIUM Other Securities 3 0.0 JAPAN Other Securities -- 0.0 ------------ ----- TOTAL RIGHTS 7,721 0.0 ------------ ----- WARRANTS (b) FRANCE Other Securities 1,617 0.0 ITALY Other Securities 3,743 0.0 TOTAL WARRANTS 5,360 0.0 ------------ ----- TOTAL LONG-TERM SECURITIES (COST -- $716,040,453) 720,111,571 96.1 ------------ ----- SHORT-TERM SECURITIES BlackRock Liquidity Funds, TempCash, Institutional Class, 0.17% (c)(d) 6,620,218 6,620,218 0.9 TOTAL SHORT-TERM SECURITIES (COST -- $6,620,218) 6,620,218 0.9 TOTAL INVESTMENTS (COST -- $722,660,671*) 726,731,789 97.0 OTHER ASSETS LESS LIABILITIES 22,548,127 3.0 ------------ ----- NET ASSETS $749,279,916 100.0% ============ =====
* The cost and unrealized appreciation (depreciation) of investments as of December 31, 2009, as computed for federal income tax purposes, were as follows: Aggregate cost ................................................ $ 755,115,777 ------------- Gross unrealized appreciation ................................. $ 84,372,030 Gross unrealized depreciation ................................. (112,756,018) ------------- Net unrealized depreciation ................................... $ (28,383,988) =============
(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) Investments in companies considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
NET AFFILIATE ACTIVITY INCOME --------- ------------ ------- BlackRock Liquidity Funds, TempCash, Institutional Class $ 6,620,218 $18,139 BlackRock Liquidity Series, LLC Cash Sweep Series $(11,259,665) $ 3,568
(d) Represents the current yield as of report date. See Notes to Financial Statements. 74 MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 Summary Schedule of Investments (continued) MASTER INTERNATIONAL INDEX SERIES - Financial futures contracts purchased as of December 31, 2009 were as follows:
UNREALIZED EXPIRATION NOTIONAL APPRECIATION CONTRACTS ISSUE EXCHANGE DATE VALUE (DEPRECIATION) --------- ----------------------- --------- ------------ ---------- -------------- 2 Hang Seng Index Futures Hong Kong January 2010 $ 277,554 $ 5,225 97 OMXS30 Index Futures Stockholm January 2010 $1,301,611 (10,248) 146 DJ Euro Stoxx 50 Eurex March 2010 $6,046,911 173,425 79 FTSE 100 Index Futures LIFFE March 2010 $6,742,774 98,525 25 SPI 200 Index Futures Sydney March 2010 $2,624,954 114,137 75 TOPIX Index Futures Tokyo March 2010 $7,158,072 125,710 -------- TOTAL $506,774 ========
- Foreign currency exchange contracts as of December 31, 2009 were as follows:
UNREALIZED CURRENCY CURRENCY SETTLEMENT APPRECIATION PURCHASED SOLD COUNTERPARTY DATE (DEPRECIATION) --------------- --------------- ----------------------------- ---------- -------------- EUR 401,000 USD 574,112 UBS AG 1/04/10 $ 741 GBP 246,000 USD 397,612 UBS AG 1/04/10 (274) JPY 40,968,000 USD 440,185 UBS AG 1/04/10 (308) AUD 315,000 USD 287,457 Brown Brothers Harriman & Co. 1/15/10 (4,942) EUR 8,980,000 USD 13,243,561 Goldman Sachs International 1/15/10 (370,429) EUR 2,830,000 USD 4,238,803 UBS AG 1/15/10 (181,903) GBP 5,700,000 USD 9,352,215 Goldman Sachs International 1/15/10 (146,362) GBP 100,000 USD 162,387 UBS AG 1/15/10 (881) JPY 513,770,000 USD 5,700,111 Goldman Sachs International 1/15/10 (183,271) JPY 195,255,000 USD 2,168,918 UBS AG 1/15/10 (72,278) SEK 6,150,000 USD 865,368 Brown Brothers Harriman & Co. 1/15/10 (5,709) USD 276,649 AUD 315,000 UBS AG 1/15/10 (5,866) USD 3,718,021 EUR 2,552,000 Goldman Sachs International 1/15/10 59,643 USD 10,939,441 EUR 7,340,000 UBS AG 1/15/10 417,304 USD 1,709,400 GBP 1,050,000 Goldman Sachs International 1/15/10 13,585 USD 3,689,929 GBP 2,265,000 UBS AG 1/15/10 31,814 USD 564,052 JPY 50,020,000 Goldman Sachs International 1/15/10 26,940 USD 4,725,345 JPY 414,175,000 UBS AG 1/15/10 277,952 USD 149,693 SEK 1,095,000 Brown Brothers Harriman & Co. 1/15/10 (3,369) --------- TOTAL $(147,613) =========
See Notes to Financial Statements. MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 75 Summary Schedule of Investments (concluded) MASTER INTERNATIONAL INDEX SERIES - 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 assets and liabilities - 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 December 31, 2009 in determining the fair valuation of the Series' investments:
INVESTMENTS IN VALUATION INPUTS SECURITIES ---------------- ASSETS -------------- Level 1 Long-Term Investments: Belgium .................................................. $ 175 Cayman Islands ........................................... 149,097 France ................................................... 1,617 Italy .................................................... 3,743 Japan .................................................... 90,791 Norway ................................................... 158,756 Singapore ................................................ 148,258 Spain .................................................... 4,771 Switzerland .............................................. 486,802 Short-Term Securities ....................................... 6,620,218 ------------ Total Level 1 .................................................. 7,664,228 ------------ Level 2 Long-Term Investments: Australia ................................................ 59,696,816 Austria .................................................. 2,469,114 Belgium .................................................. 7,170,629 Bermuda .................................................. 695,365 Cayman Islands ........................................... 203,569 Denmark .................................................. 6,569,630 Finland .................................................. 8,295,402 France ................................................... 76,416,724 Germany .................................................. 58,429,607 Greece ................................................... 3,857,171 Hong Kong ................................................ 16,607,378 Ireland .................................................. 2,055,881 Italy .................................................... 24,279,237 Japan .................................................... 147,877,357 Kazakhstan ............................................... 257,020 Luxembourg ............................................... 3,998,531 Netherlands .............................................. 19,493,821 New Zealand .............................................. 808,698
INVESTMENTS IN VALUATION INPUTS (CONCLUDED) SECURITIES ---------------------------- ASSETS -------------- Norway ................................................... $ 5,231,677 Portugal ................................................. 2,310,358 Singapore ................................................ 11,024,714 Spain .................................................... 33,144,248 Sweden ................................................... 17,420,607 Switzerland .............................................. 57,359,127 United Kingdom ........................................... 153,394,865 ------------ Total Level 2 .................................................. 719,067,546 ------------ Level 3 Long-Term Investments: Australia ................................................ 11 Belgium .................................................. 3 Ireland .................................................. 1 ------------ Total Level 3 .................................................. 15 ------------ TOTAL .......................................................... $726,731,789 ============
VALUATION INPUTS OTHER FINANCIAL INSTRUMENTS (1) ---------------- ------------------------------- ASSETS LIABILITIES ---------- ----------- Level 1 ...................................... $ 517,022 $ (10,248) Level 2 ...................................... 827,979 (975,592) Level 3 ...................................... -- -- ---------- --------- TOTAL ........................................ $1,345,001 $(985,840) ========== =========
(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 Leve l 3 investments for which significant unobservable inputs were used to determine fair value:
INVESTMENTS IN SECURITIES -------------- Balance, as of December 31, 2008 .............................. $ 26,500 Accrued discounts/premiums .................................... -- Realized gain (loss) .......................................... -- Change in unrealized appreciation/depreciation (2) ............ (1,493) Net purchases (sales) ......................................... 12 Net transfers in/out of level 3 ............................... (25,004) -------- BALANCE, AS OF DECEMBER 31, 2009 .............................. $ 15 ========
(2) Included in the related net change in unrealized appreciation/depreciation on the Statement of Operations. The change in unrealized appreciation/depreciation on securities still held at December 31, 2009 was $12. See Notes to Financial Statements. 76 MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 Statement of Assets and Liabilities MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 ASSETS Investments at value -- unaffiliated (cost -- $716,040,453) ........... $720,111,571 Investments at value -- affiliated (cost -- $6,620,218) ............... 6,620,218 Unrealized appreciation on foreign currency exchange contracts ........ 827,979 Cash .................................................................. 309,308 Foreign currency at value (cost -- $14,506,460) ....................... 14,449,072 Cash pledgedfor financial futures contracts ........................... 4,451,000 Dividends receivable .................................................. 3,614,124 Contributions receivable from investors ............................... 100,427 Investments sold receivable ........................................... 14,346 Prepaid expenses ...................................................... 62,805 ------------ Total assets .......................................................... 750,560,850 ------------ LIABILITIES Unrealized depreciation on foreign currency exchange contracts ........ 975,592 Margin variation payable .............................................. 138,091 Investments purchased payable ......................................... 17,274 Investment advisory fees payable ...................................... 5,922 Other affiliates payable .............................................. 4,302 Directors' fees payable ............................................... 449 Other accrued expenses payable ........................................ 137,193 Other liabilities ..................................................... 2,111 ------------ Total liabilities ..................................................... 1,280,934 ------------ NET ASSETS ............................................................ $749,279,916 ============ NET ASSETS CONSIST OF Investors' capital .................................................... $744,745,518 Net unrealized appreciation/depreciation .............................. 4,534,398 ------------ NET ASSETS ............................................................ $749,279,916 ============
See Notes to Financial Statements. MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 77 Statement of Operations MASTER INTERNATIONAL INDEX SERIES YEAR ENDED DECEMBER 31, 2009 INVESTMENT INCOME Dividends ........................................................... $ 25,323,037 Foreign taxes withheld .............................................. (2,351,811) Income -- affiliated ................................................ 21,707 ------------- Total income ........................................................ 22,992,933 ------------- EXPENSES Custodian ........................................................... 216,809 Accounting services ................................................. 159,506 Pricing ............................................................. 117,648 Professional ........................................................ 79,487 Investment advisory ................................................. 74,764 Directors ........................................................... 26,110 Printing ............................................................ 2,419 Miscellaneous ....................................................... 29,749 ------------- Total expenses ...................................................... 706,492 Less fees waived by advisor ......................................... (18,879) ------------- Total expenses after fees waived .................................... 687,613 ------------- Net investment income ............................................... 22,305,320 ------------- REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) from: Investments ...................................................... (68,061,699) In-kind redemptions .............................................. 63,030,935 Financial futures contracts ...................................... 3,356,669 Foreign currency transactions .................................... 2,194,635 ------------- 520,540 ------------- Net change in unrealized appreciation/depreciation on: Investments ...................................................... 184,556,567 Financial futures contracts ...................................... 102,377 Foreign currency transactions .................................... (530,150) ------------- 184,128,794 ------------- Total realized and unrealized gain .................................. 184,649,334 ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $ 206,954,654 =============
See Notes to Financial Statements. 78 MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 Statements of Changes in Net Assets MASTER INTERNATIONAL INDEX SERIES
YEAR ENDED DECEMBER 31, ------------------------------ INCREASE (DECREASE) IN NET ASSETS: 2009 2008 ---------------------------------- ------------- -------------- OPERATIONS Net investment income .......................................................... $ 22,305,320 $ 33,039,462 Net realized gain (loss) ....................................................... 520,540 (52,309,895) Net change in unrealized appreciation/depreciation ............................. 184,128,794 (468,096,168) ------------- -------------- Net increase (decrease) in net assets resulting from operations ................ 206,954,654 (487,366,601) ------------- -------------- CAPITAL TRANSACTIONS Proceeds from contributions .................................................... 359,210,927 589,551,495 Value of withdrawals ........................................................... (523,005,063) (539,237,057) ------------- -------------- Net increase (decrease) in net assets derived from capital transactions ........ (163,794,136) 50,314,438 ------------- -------------- NET ASSETS Total increase (decrease) in net assets ........................................ 43,160,518 (437,052,163) Beginning of year .............................................................. 706,119,398 1,143,171,561 ------------- -------------- End of year .................................................................... $ 749,279,916 $ 706,119,398 ============= ==============
Financial Highlights MASTER INTERNATIONAL INDEX SERIES
YEAR ENDED DECEMBER 31, ------------------------------------------------------- 2009 2008 2007 2006 2005 -------- -------- ---------- -------- -------- TOTAL INVESTMENT RETURN Total investment return ...................... 28.99% (41.94)% 10.80% 26.61% 13.64% -------- -------- ---------- -------- -------- RATIOS TO AVERAGE NET ASSETS Total expenses ............................... 0.09% 0.11% 0.10% 0.11% 0.10% -------- -------- ---------- -------- -------- Total expenses after fees waived ............. 0.09% 0.10% 0.09% 0.10% 0.10% -------- -------- ---------- -------- -------- Net investment income ........................ 2.98% 3.54% 2.86% 2.70% 2.53% -------- -------- ---------- -------- -------- SUPPLEMENTAL DATA Net assets, end of year (000) ................ $749,280 $706,119 $1,143,172 $829,986 $523,155 -------- -------- ---------- -------- -------- Portfolio turnover ........................... 30% 30% 30% 23% 11% -------- -------- ---------- -------- --------
See Notes to Financial Statements. MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 79 Notes to Financial Statements MASTER INTERNATIONAL INDEX SERIES 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: Master International Index Series (the "Series"), a non-diversified open-end management investment company, is a series of Quantitative Master Series LLC (the "Master LLC"). The Master LLC is registered as an investment company 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 Board of Directors (the "Board") to issue non-transferable interests, 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: The Series' policy is to value instruments at fair value. 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. Securities and other assets and liabilities denominated in foreign currencies are translated into US dollars using exchange rates determined as of the close of business on the New York Stock Exchange ("NYSE"). Foreign currency exchange contracts are valued at the mid between the bid and ask prices and are determined as of the close of business on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. 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 or is not available, 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. Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. The values of such instruments 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 instruments 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 instruments, those instruments may be Fair Value Assets and 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 gain (loss) for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes. PREFERRED STOCK: The Series may invest in preferred stocks. Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer's board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions. 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 either deliver collateral or segregate assets in connection with certain investments (e.g., foreign currency exchange contracts and financial futures contracts) the Series will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or other liquid 80 MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 Notes to Financial Statements (continued) MASTER INTERNATIONAL INDEX SERIES 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, each party has requirements to deliver/deposit securities as collateral for certain investments. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: For financial reporting purposes, 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 of 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 laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates. It is intended that the Series' assets will be managed so an investor in the Series can satisfy the requirements of Subchapter M of the Internal Revenue Code. The Series files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Series' US federal tax returns remain open for each of the four years ended December 31, 2009. 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 STANDARDS: In June 2009, amended guidance was issued by the Financial Accounting Standards Board ("FASB") for transfers of financial assets. This guidance 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. The amended guidance is effective for financial statements for fiscal years and interim periods beginning after November 15, 2009. Earlier application is prohibited. The recognition and measurement provisions of this guidance must be applied to transfers occurring on or after the effective date. Additionally, the enhanced disclosure provisions of the amended guidance should be applied to transfers that occurred both before and after the effective date of this guidance. The impact of this guidance on the Series' financial statements and disclosures, if any, is currently being assessed. In January 2010, the FASB issued amended guidance for improving disclosure about fair value measurements that adds new disclosure requirements about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances and settlements in the reconciliation for fair value measurements using significant unobservable inputs (Level 3). It also clarifies existing disclosure requirements relating to the levels of disaggregation for fair value measurement and inputs and valuation techniques used to measure fair value. The amended guidance is effective for financial statements for fiscal years and interim periods beginning after December 15, 2009 except for disclosures about purchases, sales, issuances and settlements in the rollforward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The impact of this guidance on the Series' financial statements and 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. 2. DERIVATIVE FINANCIAL INSTRUMENTS The Series may engage in various portfolio investment strategies both to increase the returns of the Series and to economically hedge, or protect, its exposure to certain risks such as equity and foreign currency exchange rate risks. 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 counterparty risk through master netting agreements included within an International Swaps and Derivatives Association, Inc. ("ISDA") Master Agreement between the Series and its counterparties. The ISDA Master Agreement allows the Series to offset with its counterparty certain derivative financial instrument's payables and/or receivables with collateral held with each counterparty. The amount of collateral moved to/from applicable counterparties is based upon minimum transfer amounts of up to $500,000. To the extent amounts due to the Series from its counterparties are not fully collateralized contractually or otherwise, the Series bears the risk of loss from counterparty nonperformance. See Note 1 "Segregation and Collateralization" for additional information with respect to collateral practices. The Series' maximum risk of loss from counterparty credit risk on over-the-counter ("OTC") derivatives is generally the aggregate unrealized gain in excess of any collateral pledged by the counterparty to the Series. Certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Series' net assets decline by a stated percentage or the Series fails to meet the terms of its ISDA Master Agreements, which would cause the Series to accelerate payment of any net liability owed to the counterparty. Counterparty risk related to exchange-traded financial futures contracts is minimal MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 81 Notes to Financial Statements (continued) MASTER INTERNATIONAL INDEX SERIES because of the protection against defaults provided by the exchange on which they trade. FINANCIAL FUTURES CONTRACTS: The Series may purchase or sell financial futures contracts to gain exposure to, or economically hedge against, changes in the value of interest rates (interest rate 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 contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest rates and the underlying assets. FOREIGN 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 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 or unfavorable movements in the value of a foreign currency relative to the US dollar. DERIVATIVE INSTRUMENTS CATEGORIZED BY RISK EXPOSURE: VALUES OF DERIVATIVE INSTRUMENTS AS OF DECEMBER 31, 2009
ASSET DERIVATIVES LIABILITY DERIVATIVES -------------------------- ------------------------- STATEMENT OF STATEMENT OF ASSETS AND ASSETS AND LIABILITIES LIABILITIES LOCATION VALUE LOCATION VALUE -------------- -------- ------------ -------- Foreign currency Unrealized Unrealized exchange contracts ... appreciation depreciation on foreign on foreign currency currency exchange exchange contracts $827,979 contracts $975,592 Equity contracts* ....... Net unrealized Net unrealized appreciation/ appreciation/ depreciation $517,022 depreciation $ 10,248
* Includes cumulative appreciation/depreciation of financial futures contracts as reported in the Summary 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 YEAR ENDED DECEMBER 31,2009
NET REALIZED GAIN (LOSS) FROM ----------------------- FOREIGN FINANCIAL CURRENCY FUTURES EXCHANGE CONTRACTS CONTRACTS ---------- ---------- Foreign currency transactions ... -- $3,045,619 Equity contracts ................ $3,356,669 --
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON ---------------------------- FOREIGN FINANCIAL CURRENCY FUTURES EXCHANGE CONTRACTS CONTRACTS --------- --------- Foreign currency transactions ... -- $(444,129) Equity contracts ................ $102,377 --
For the year ended December 31,2009,the average derivative activity was as follows: Futures: Average number of contracts ........ 537 Average value ...................... $ 447,752 Foreign currency exchange contracts: Average number of contracts ........ 81 Average US dollar amount ........... $43,305,771
3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES: The PNC Financial Services Group, Inc. ("PNC"), Bank of America Corporation ("BAC") and Barclays Bank PLC ("Barclays") are the largest stockholders of BlackRock, Inc. ("BlackRock"). Due to the ownership structure, PNC is an affiliate for 1940 Act purposes, but BAC and Barclays are not. The Master LLC, on behalf of the Series, has entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the "Manager"), the Master LLC's 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 value of the Series' 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 and/or reimburse its fees and/or expenses so that the total annual operating expenses incurred by the Series (excluding interest expense, acquired fund fees and certain other Series' expenses) will not exceed 0.12% of the average daily value of the Series' net assets. This arrangement has a one-year term and is renewable. For the year ended December 31, 2009, 82 MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 Notes to Financial Statements (concluded) MASTER INTERNATIONAL INDEX SERIES the Series waived $14,094, which is included in fees waived by advisor in the Statement of Operations. The Manager has voluntarily agreed to waive its advisory fee by the amount of investment advisory fees the Series pays to the Manager indirectly through its investment in affiliated money market funds. For the year ended December 31, 2009, the Series waived $4,785, 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, with respect to the Series 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 year ended December 31, 2009, the Series reimbursed the Manager $15,780 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. 4. INVESTMENTS: Purchases and sales of investments, excluding short-term securities, for the year ended December 31, 2009, were $210,297,699 and $355,604,095, respectively. 5. 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 was renewed until November 2010. 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. Prior to its renewal, the credit agreement had the following terms: 0.02% upfront fee on the aggregate commitment amount which was allocated to the Series based on its net assets as of October 31, 2008; 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, and 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) on amounts borrowed. Effective November 2009, the credit agreement was renewed with the following terms: 0.02% upfront fee on the aggregate commitment amount which was allocated to the Series based on its net assets as of October 31, 2009, a commitment fee of 0.10% per annum based on the Series' pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 1.25% per annum and (b) the Fed Funds rate plus 1.25% per annum on amounts borrowed. The Series did not borrow under the credit agreement during the year ended December 31, 2009. 6. CONCENTRATION, 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 generally approximated by their value recorded in the Series' Summary Statement of Assets and Liabilities, less any collateral held by the Series. 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 its investment performance. As of December 31, 2009, the Series had the following industry classifications:
PERCENT OF LONG-TERM INDUSTRY INVESTMENTS -------- ----------- Commercial Banks ............. 14% Oil, Gas & Consumable Fuels ... 8 Pharmaceuticals .............. 7 Metals & Mining .............. 6 Other* ....................... 65
* 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' financial statements through February 24, 2010, the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements. MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 83 MASTER INTERNATIONAL INDEX SERIES Report of Independent Registered Public Accounting Firm TO THE INVESTORS AND BOARD OF DIRECTORS OF QUANTITATIVE MASTER SERIES LLC: We have audited the accompanying statement of assets and liabilities, including the summary schedule of investments, of Master International Index Series, one of the portfolios constituting Quantitative Master Series LLC, (the "Master LLC") as of December 31, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Master LLC's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Master LLC is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Master LLC's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Master International Index Series of Quantitative Master Series LLC as of December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Princeton, New Jersey February 24, 2010 84 MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 Officers and Directors MASTER INTERNATIONAL INDEX SERIES
NUMBER OF BLACKROCK-ADVISED REGISTERED INVESTMENT COMPANIES ("RICS") LENGTH CONSISTING OF OF TIME INVESTMENT POSITION(S) SERVED PORTFOLIOS NAME, ADDRESS HELD WITH AS A PRINCIPAL OCCUPATION(S) ("PORTFOLIOS") PUBLIC AND YEAR OF BIRTH MASTER LLC DIRECTOR(2) DURING PAST FIVE YEARS OVERSEEN DIRECTORSHIPS ------------------- ------------ ----------- ------------------------------------------ ------------------ -------------------- NON-INTERESTED DIRECTORS(1) RONALD W.FORBES Co-Chair of Since Professor Emeritus of Finance, School of 36 RICs consisting None 55 East 52nd Street the Board 2007 Business, State University of New York at of 106 Portfolios New York, NY 10055 and Director Albany since 2000. 1940 RODNEY D.JOHNSON Co-Chair of Since President, Fairmount Capital 36 RICs consisting None 55 East 52nd Street the Board 2007 Advisors, Inc.since 1987; Director, of 106 Portfolios New York, NY 10055 and Director FoxChase Cancer Center since 2004; Member 1941 of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006. DAVID O.BEIM Director Since Professor of Finance and Economics at the 36 RICs consisting None 55 East 52nd Street 2007 Columbia University Graduate School of of 106 Portfolios New York, NY 10055 Business since 1991; Trustee, Phillips 1940 Exeter Academy since 2002; Chairman, Wave Hill, Inc.(public garden andcultural center) from 1990 to 2006. DR.MATINA HORNER Director Since Executive Vice President of Teachers 36 RICs consisting NSTAR (electric 55 East 52nd Street 2007 Insurance and Annuity Association and of 106 Portfolios and gas utility) New York, NY 10055 College Retirement Equities Fund from 1989 1939 to 2003. HERBERT I.LONDON Director Since Professor Emeritus, New York University 36 RICs consisting AIMS Worldwide, 55 East 52nd Street and Member 2007 since 2005; John M.Olin Professor of of 106 Portfolios Inc. (marketing) New York, NY 10055 of the Humanities, New York University from 1993 1939 Audit to 2005 and Professor thereof from 1980 to Committee 2005; President, Hudson Institute (policy research organization) since 1997 and Trustee thereof since 1980; Chairman of the Board of Trustees for Grantham University since 2006; Director, InnoCentive, Inc. (strategic solutions company) since 2005; Director, Cerego, LLC (software development and design) since 2005. CYNTHIA Director Since Professor, Harvard Business School since 36 RICs consisting Newell Rubbermaid, A.MONTGOMERY 2007 1989; Director, Harvard Business School of 106 Portfolios Inc. 55 East 52nd Street Publishing since 2005; Director, McLean (manufacturing) New York, NY 10055 Hospital since 2005. 1952 JOSEPH P.PLATT, JR. Director Since Director, The West Penn Allegheny Health 36 RICs consisting Greenlight Capital 55 East 52nd Street 2007 System (a not-for-profit health system) of 106 Portfolios Re, Ltd. New York, NY 10055 since 2008; Director, Jones and Brown (reinsurance 1947 (Canadian insurance broker) since 1998; company) General Partner, Thorn Partners, LP (private investment) since 1998; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008. ROBERT C.ROBB, JR. Director Since Partner, Lewis, Eckert, Robb and Company 36 RICs consisting None 55 East 52nd Street 2007 (management and financial consulting firm) of 106 Portfolios New York, NY 10055 since 1981. 1945 TOBY ROSENBLATT Director Since President, Founders Investments 36 RICs consisting A.P.Pharma, Inc. 55 East 52nd Street 2007 Ltd. (private investments) since 1999; of 106 Portfolios (specialty New York, NY 10055 Director, College Access Foundation of pharmaceuticals) 1938 California (philan-thropic foundation) since 2009; Director, Forward Management, LLC since 2007; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.
MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 85 Officers and Directors (continued) MASTER INTERNATIONAL INDEX SERIES
NUMBER OF BLACKROCK-ADVISED REGISTERED INVESTMENT COMPANIES ("RICS") LENGTH CONSISTING OF OF TIME INVESTMENT POSITION(S) SERVED PORTFOLIOS NAME, ADDRESS HELD WITH AS A PRINCIPAL OCCUPATION(S) ("PORTFOLIOS") PUBLIC AND YEAR OF BIRTH MASTER LLC DIRECTOR(2) DURING PAST FIVE YEARS OVERSEEN DIRECTORSHIPS ------------------- ------------ ----------- ------------------------------------------ ------------------ -------------------- NON-INTERESTED DIRECTORS(1) (CONCLUDED) KENNETH L. URISH Chair of Since Managing Partner, Urish Popeck & Co., LLC 36 RICs consisting None 55 East 52nd Street the Audit 2007 (certified public accountants and of 106 Portfolios New York, NY 10055 Committee consultants) since 1976; Member of 1951 and Director External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Trustee, The Holy Family Foundation since 2001; Committee Member, Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountantsfrom2007to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007. FREDERICK W. WINTER Director Since Professor and Dean Emeritus of the Joseph 36 RICs consisting None 55 East 52nd Street and Member 2007 M. Katz School of Business, University of of 106 Portfolios New York, NY 10055 of the Pittsburgh since 2005 and Dean thereof 1945 Audit from 1997 to 2005; Director, Alkon Committee Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.
(1) Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Directors who turn 72 prior to December 31, 2013. (2) Date shown is the earliest date a person has served as a director for the Master LLC covered by this annual report. Following the combination of MerrillLynch Investment Managers, L.P. ("MLIM") and BlackRock, Inc. ("BlackRock") in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new Fund boards in 2007. As a result, although the chart shows directors as joining the Master LLC Board in 2007, each director first became a member of the board of other legacy MLIM or legacy BlackRock Funds as follows: David O. Beim, 1998; Ronald W. Forbes, 1977; Matina Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, Jr., 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999 and Frederick W. Winter, 1999. INTERESTED DIRECTORS(3) RICHARD S. DAVIS Director Since Managing Director, BlackRock, Inc. since 173RICs consisting None 55 East 52nd Street 2007 2005; Chief Executive Officer, State Street of 304 Portfolios New York, NY 10055 Research & Management Company from 2000 to 1945 2005; Chairman of the Board of Directors, State Street Research Mutual Funds from 2000 to 2005; Chairman, SSR Realty from 2000 to 2004. HENRY GABBAY Director Since Consultant, BlackRock, Inc. from 2007 to 173RICs consisting None 55 East 52nd Street 2007 2008; Managing Director, BlackRock, Inc. from of 304 Portfolios New York, NY 10055 1989 to 2007; Chief Administrative 1947 Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.
(3) Mr. Davis is an "interested person"as defined in the Investment Company Act of 1940, of the Master LLC based on his position with BlackRock, Inc. and its affiliates. Mr. Gabbay is an "interested person"of the Master LLC based on his former positions with BlackRock, Inc. and its affiliates as well as his ownership of BlackRock, Inc. and PNC securities. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. The Board has approved one-year extensions in terms of Directors who turn 72 prior to December 31, 2013. 86 MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 Officers and Directors (concluded) MASTER INTERNATIONAL INDEX SERIES
POSITION(S) LENGTH NAME, ADDRESS HELD WITH OF TIME AND YEAR OF BIRTH MASTER LLC SERVED PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS ------------------- --------------- ------- ------------------------------------------------------------------------------------ MASTER LLC OFFICERS(1) ANNE F. ACKERLEY President and Since Managing Director of BlackRock, Inc. since 2000; Vice President of the 55 East 52nd Street Chief Executive 2009 BlackRock-advised funds from 2007 to 2009; Chief Operating Officer of BlackRock's New York, NY 10055 Officer Global Client Group (GCG) since 2009; Chief Operating Officer of BlackRock's U.S. 1962 Retail Group from 2006 to 2009; Head of BlackRock's Mutual Fund Group from 2000 to 2006. JEFFREY HOLLAND, CFA Vice President Since Managing Director of BlackRock, Inc. since 2010; Director of BlackRock, Inc. from 55 East 52nd Street 2009 2006 to 2009; Chief Operating Officer of BlackRock's U.S. Retail Group since 2009; New York, NY 10055 Co-head of Product Development and Management for BlackRock's U.S. Retail Group from 1971 2007 to 2009; Product Manager of Raymond James & Associates from 2003 to 2006. BRENDAN KYNE Vice President Since Managing Director of BlackRock, Inc. since 2010; Director of BlackRock, Inc. from 55 East 52nd Street 2009 2008 to 2009; Head of Product Development and Management for BlackRock's U.S. Retail New York, NY 10055 Group since 2009, Co-head thereof from 2007 to 2009; Vice President of BlackRock, 1977 Inc. from 2005 to 2008. BRIAN SCHMIDT Vice President Since Managing Director of BlackRock, Inc. since 2004; Various positions with U.S. Trust 55 East 52nd Street 2009 Company from 1991 to 2003 including Director from 2001 to 2003 and Senior Vice New York, NY 10055 President from 1998 to 2003; Vice President, Chief Financial Officer and Treasurer of 1958 Excelsior Funds, Inc., Excelsior Tax-Exempt Funds, Inc. and Excelsior Funds Trust from 2001 to 2003. NEAL J. ANDREWS Chief Financial Since Managing Director of BlackRock, Inc. since 2006; Senior Vice President and Line of 55 East 52nd Street Officer 2007 Business Head of Fund Accounting and Administration at PNC Global Investment New York, NY 10055 Servicing (U.S.) Inc. from 1992 to 2006. 1966 JAY M. FIFE Treasurer Since Managing Director of BlackRock, Inc. since 2007 and Director in 2006; Assistant 55 East 52nd Street 2007 Treasurer of the Merrill Lynch Investment Managers, L.P.("MLIM") and Fund Asset New York, NY 10055 Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services 1970 Group from 2001 to 2006. BRIAN P. KINDELAN Chief Compliance Since Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing 55 East 52nd Street Officer 2007 Director and Senior Counsel of BlackRock, Inc. since 2005. New York, NY 10055 1959 HOWARD B. SURLOFF Secretary Since Managing Director and General Counsel of U.S. Funds at BlackRock, Inc. since 2006; 55 East 52nd Street 2007 General Counsel (U.S.) of Goldman Sachs Asset Management, L.P. from 1993 to 2006. New York, NY 10055 1965
(1) Officers of the Master LLC serve at the pleasure of the Board of Directors. Further information about the Master LLC's Officers and Directors is available in the Master LLC's Statement of Additional Information, which canbe obtained without charge by calling (800) 441-7762. INVESTMENT ADVISOR BlackRock Advisors, LLC Wilmington, DE 19809 SUB-ADVISOR BlackRock Investment Management, LLC Plainsboro, NJ 08536 CUSTODIAN JPMorgan Chase Bank, N.A. Brooklyn, NY 11245 ACCOUNTING AGENT State Street Bank and Trust Company Princeton, NJ 08540 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP Princeton, NJ 08540 LEGAL COUNSEL Sidley Austin LLP New York, NY 10019 MASTER INTERNATIONAL INDEX SERIES DECEMBER 31, 2009 87 This page intentionally left blank. 88 This page intentionally left blank. 89 (AMERICAN BEACON FUNDS (SM) LOGO) DELIVERY OF DOCUMENTS To reduce expenses, your financial institution may mail only one copy of the Prospectus, Annual Report and Semi-Annual Report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please contact your financial institution. Delivery of individual copies will commence thirty days after receiving your request. If you invest in the Fund through a financial institution, you may be able to receive the Fund's regulatory mailings, such as the Prospectus, Annual Report and Semi-Annual Report, by e-mail. If you are interested in this option, please go to www.icsdelivery.com and search for your financial institution's name or contact your financial institution directly. TO OBTAIN MORE INFORMATION ABOUT THE FUND: (GRAPHIC) (GRAPHIC) BY E-MAIL: ON THE INTERNET: american_beacon.funds@ambeacon.com Visit our website at www.americanbeaconfunds.com (GRAPHIC) (GRAPHIC) BY TELEPHONE: BY MAIL: Institutional and Investor Classes American Beacon Funds Call (800) 658-5811 P.O. Box 219643 Kansas City, MO 64121 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 that provided in each semi-annual and annual report, the Funds use to determine how to vote proxies each Fund files a complete schedule of its relating to portfolio securities is available in portfolio holdings with the Securities and each Fund's Statement of Additional Information, Exchange Commission ("SEC") on Form N-Q as of the which may be obtained free of charge by calling first and third fiscal quarters. The Fund's Forms 1-800-967-9009 or by accessing the SEC's website N-Q are available on the SEC's website at at www.sec.gov. Each Fund's proxy voting record www.sec.gov. The Forms N-Q may also be reviewed for the most recent year ended June 30 is filed and copied at the SEC's Public Reference Room, 450 annually with the SEC on Form N-PX. The Fund's Fifth Street, NW, Washington, DC 20549. Forms N-PX are available on the SEC's website at Information regarding the operation of the SEC's www.sec.gov. The Fund's proxy voting record may Public Reference Room may be obtained by calling also be obtained by calling 1-800-967-9009. 1-800-SEC-0330. A complete schedule of the Fund's portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each fiscal quarter.
FUND SERVICE PROVIDERS: CUSTODIAN STATE STREET BANK AND TRUST Boston, Massachusetts TRANSFER AGENT BOSTON FINANCIAL DATA SERVICES Kansas City, Missouri INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ERNST & YOUNG LLP Dallas, Texas DISTRIBUTOR FORESIDE FUND SERVICES, LLC Portland, Maine This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus. American Beacon Funds, American Beacon Small Cap Index Fund and American Beacon International Equity Index Fund are service marks of American Beacon Advisors, Inc. AR 12/09 00072609 GUIDANCE | VISION | EXPERIENCE (AMERICAN BEACON FUNDS(SM) LOGO) Annual Report (GRAPHIC) December 31, 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 President's Message................................................ 1 Market and Performance Overview.................................... 2 Schedule of Investments............................................ 7 Financial Highlights............................................... 17 Additional Information............................................. Back Cover
Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor's strategies and the Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. American Beacon Funds December 31, 2009 (PHOTO OF GENE L. NEEDLES) FELLOW SHAREHOLDERS, As an introduction to the American Beacon Treasury Inflation Protected Securities Fund Annual Report for the 12-month period ended December 31, 2009, please let me take a moment to tell you how pleased I am to have been serving as President and CEO of American Beacon Advisors since April 15, 2009. I consider it a privilege to hold this position, and I take its responsibilities quite seriously. I've enjoyed a long, successful career in the investment business, and I'm no stranger to the ups and downs that markets can deliver. As a fellow investor and shareholder, I experience these trends in much the same way you do. The majority of 2008 was difficult in many ways. However, when I took the helm at American Beacon, I already had many reasons to be optimistic about what might develop in 2009. As of December 31, 2009, my optimism has been largely confirmed. For the one-year period (as of 12/31/09), American Beacon Treasury Inflation Protected Securities Fund-Institutional Class returned 11.00%. Of course, one year of performance doesn't tell the whole story, especially when you're investing for the long term. Many of us have long-term goals, including retirement, driving our investment decisions. While this 12-month period began amid a frightening recessionary environment, we finished the year with increasing confidence that markets have begun to stabilize, that liquidity has returned to the debt markets and that equity markets have had a substantial recovery. I know as well as you do that maintaining a long-term perspective and doing the right thing according to your risk tolerance and time horizon is not always easy. But the professionals at American Beacon are dedicated to working hard to help investors succeed. Just as you maintain a commitment to your goals--and to those who inspire you to create your goals--we maintain a strong commitment to due diligence and oversight. That commitment is one of the key reasons I am honored to serve as President and CEO, and pleased to be able to share my enthusiasm about the path ahead with you. A financial advisor can be an important ally in creating investment success, so--as you review the enclosed annual report--please feel free to discuss your thoughts and concerns with a trusted advisor. And, as always, the professionals associated with the American Beacon Funds are grateful for the opportunity to serve you. Best Regards, /s/ Gene L. Needles, Jr. Gene L. Needles, Jr. President American Beacon Funds Investing in debt securities entails interest rate risk which is the risk that debt securities will decrease in value with increases in market interest rates. 1 MARKET OVERVIEW DECEMBER 31, 2009 (UNAUDITED) The United States economy experienced an unusually volatile 2009. In the first quarter, the economy contracted at a 6.4% annualized rate as measured by Gross Domestic Product ("GDP"), the largest quarterly decline in economic output since the second quarter of 1980. In contrast, in the fourth quarter, the economy expanded at a positive 5.7%. Such a quarterly expansion is among the strongest quarterly growth rates of the past ten years. The well-documented economic and financial crises led to an early-year contraction in growth. Many believe that massive monetary and fiscal stimuli are the principal contributors to the fourth quarter's strong positive performance. Treasury yields rose in 2009, and the yield curve steepened--as longer maturity bond yields rose more than short maturity bond yields. In total, the Treasury sector generated a -3.57% total return in 2009. In contrast to the poor performance of Treasuries, corporate bonds did very well. The Barclays Capital Credit Index generated a 16.04% return in calendar year 2009. Similarly, equity markets performed well, as the S&P 500 Index rose nearly 26.5% in 2009--including a remarkable 67.8% increase from its low point in early March. Also, energy prices reversed their 2008 decline, as crude oil futures prices ended 2009 nearly 80% higher than their 2008 ending levels. As crude oil, agricultural, and other commodities rallied in 2009, inflation--as measured by the Consumer Price Index ("CPI")--had a stable upswing, with notably higher results in the second half of the year. For example, in December, the CPI increased at a 2.7% year-over-year pace (vs. -1.4% in June), while the core CPI (CPI excluding food and energy) increased at a 1.8% year-over-year pace (vs. 1.5% in June). Decreasing real Treasury interest rates and increasing CPI readings contributed to positive total returns for Treasury Inflation Protected Securities ("TIPS"). The Barclays Capital U.S. TIPS Index returned 11.41% in 2009, while the Intermediate (1-10 year maturity) TIPS Index returned 12.02%. Inflation expectations as evidenced by breakeven inflation rates (the spread between similar maturity nominal and inflation-protected securities) ranged approximately 245 basis points (2.45%) from high to low in 2009. In mid December, breakevens peaked for the year at 2.45%, while in early January they troughed at 0%. At year end, 10-year breakevens were approximately 2.37%. The U.S. Treasury appears committed to the TIPS market, with $58 billion of new supply auctioned in 2009. At year-end, the total outstanding market value of TIPS was approximately $550 billion. Now, the key question seems to be whether or not the U.S. economy can sustain a reasonable growth rate absent further governmental intervention. Given double-digit unemployment and significant amounts of excess capacity in the economy at the end of 2009, the prospects for future growth remain unclear. However, with the threat of inflation on the horizon, expectations are that the TIPS market remains strong. 2 PERFORMANCE OVERVIEW AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM) DECEMBER 31, 2009 (UNAUDITED) The Institutional Class of the Fund returned 11.00% for the period from January 1, 2009 through December 31, 2009, trailing the Barclays Capital 1-10 Year U.S. TIPS Index (the "Index") return of 12.02% and the Lipper TIPS Index return of 11.75%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 6/30/04 THROUGH 12/31/09 (LINE GRAPH)
ANNUALIZED TOTAL RETURNS PERIODS ENDED 12/31/2009 ---------------------------- VALUE OF SINCE $10,000 INCEPTION 6/30/04- 1 YEAR 5 YEARS 6/30/04 12/31/09 ------ ------- --------- -------- Institutional Class(1, 4, 5) ........ 11.00% 4.47% 4.78% $12,932 Investor Class (1, 2, 4, 5) .......... 10.64% 4.40% 4.72% $12,891 Barclays Capital 1-10 Yr. U.S. TIPS Index(3) .............. 12.02% 4.74% 5.21% $13,229 Barclays Capital U.S. TIPS Index(3) .... 11.41% 4.63% 5.39% $13,349 Lipper TIPS Funds Index(3) .............. 11.75% 3.99% 4.88% $12,998
(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 Funds Index tracks the results of the 30 largest mutual funds in the Lipper TIPS Fund category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index. (4.) 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. (5.) The total annual Fund operating expense ratios 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. The Fund produced a strong absolute return for the twelve-month time period amid rising commodity and energy prices. The Fund's underperformance relative to the Index stemmed from significant relative underperformance in January, which is attributable 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. For the one-year period, the Fund maintained a duration neutral position relative to the Index, and from a yield curve positioning standpoint, the Fund was underweight the 2011-2012 and 2017 - 2019 maturities and overweight the 2013 - 2016 and 2025 - 2026 maturities. As the real yield curve steepened during the period, the Fund's concentration in shorter maturity TIPS benefited relative performance. The Fund remains focused on investing primarily in TIPS to provide inflation protection and income to its shareholders. 3 PERFORMANCE OVERVIEW AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM) DECEMBER 31, 2009 (UNAUDITED) TOP TEN HOLDINGS
% OF NET ASSETS ---------- U.S. Treasury Note, 2.000%, Due 1/15/2016... 9.1% U.S. Treasury Note, 2.375%, Due 4/15/2011... 8.8% U.S. Treasury Note, 2.000%, Due 1/15/2014... 8.8% U.S. Treasury Note, 1.625%, Due 1/15/2015... 8.0% U.S. Treasury Note, 1.875%, Due 7/15/2015... 7.5% U.S. Treasury Note, 2.625%, Due 7/15/2017... 7.3% U.S. Treasury Note, 2.000%, Due 7/15/2014... 5.8% U.S. Treasury Note, 0.625%, Due 4/15/2013... 5.7% U.S. Treasury Note, 2.500%, Due 7/15/2016... 5.2% U.S. Treasury Note, 2.125%, Due 1/15/2019... 4.6%
PORTFOLIO DIVERSIFICATION
% OF FIXED INCOME ------------ A........................................... 0.0% AA.......................................... 0.0% AAA......................................... 100.0%
(PERFORMANCE GRAPH) U.S. Government Treasury Obligations 99.5% Short-Term Investments 0.5%
4 FUND EXPENSES AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND(SM) DECEMBER 31, 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 July 1, 2009 through December 31, 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. Shareholders of the Institutional Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Institutional Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
Beginning Ending Account Account Expenses Paid Value Value During Period* 7/1/09 12/31/09 7/1/09-12/31/09 --------- --------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,054.96 $1.50 Hypothetical $1,000.00 $1,023.74 $1.48 (5% return before expenses) INVESTOR CLASS Actual $1,000.00 $1,052.67 $3.36 Hypothetical $1,000.00 $1,021.93 $3.31 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.29% and 0.65% 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 (184) by days in the year (365) to reflect the half year period. 5 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders of American Beacon Treasury Inflation Protected Securities Fund and the Board of Trustees of American Beacon Funds: We have audited the accompanying statement of assets and liabilities of American Beacon Treasury Inflation Protected Securities Fund (a series of American Beacon Funds) (the "Fund"), including the schedule of investments, as of December 31, 2009, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of American Beacon Treasury Inflation Protected Securities Fund at December 31, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles. /s/Ernst & Young LLP Dallas, Texas February 26, 2010 See accompanying notes 6 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND SCHEDULE OF INVESTMENTS DECEMBER 31, 2009
PAR AMOUNT VALUE ---------- --------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 98.14% 3.50%, Due 1/15/2011 *......................... 3,794 3,936 2.375%, Due 4/15/2011 *........................ 13,842 14,250 3.375%, Due 1/15/2012 *........................ 2,374 2,539 2.00%, Due 4/15/2012 *......................... 6,690 6,991 3.00%, Due 7/15/2012 *......................... 6,745 7,252 0.625%, Due 4/15/2013 *........................ 9,138 9,292 1.875%, Due 7/15/2013 *........................ 5,314 5,597 2.00%, Due 1/15/2014 *......................... 13,387 14,157 1.25%, Due 4/15/2014 *......................... 1,302 1,346 2.00%, Due 7/15/2014 *......................... 8,896 9,424 1.625%, Due 1/15/2015 *........................ 12,391 12,887 1.875%, Due 7/15/2015 *........................ 11,503 12,120 2.00%, Due 1/15/2016 *......................... 13,930 14,709 2.50%, Due 7/15/2016 *......................... 7,777 8,469 2.375%, Due 1/15/2017 *........................ 4,674 5,048 2.625%, Due 7/15/2017 *........................ 10,733 11,803 1.625%, Due 1/15/2018 *........................ 2,616 2,678 1.375%, Due 7/15/2018 *........................ 4,501 4,510 2.125%, Due 1/15/2019 *........................ 7,068 7,495 1.875%, Due 7/15/2019 *........................ 2,121 2,202 2.375%, Due 1/15/2025 *........................ 298 315 2.00%, Due 1/15/2026 *......................... 517 520 3.625%, Due 4/15/2028 *........................ 468 578 2.50%, Due 1/15/2029 *......................... 539 578 -------- TOTAL U.S. TREASURY OBLIGATIONS.................... 158,696 -------- SHARES --------- SHORT TERM INVESTMENTS - 0.46% JP Morgan U.S. Government Money Market Fund ....... 736,787 737 -------- TOTAL INVESTMENTS - 98.60% (COST $157,347)............ 159,433 OTHER ASSETS, NET OF LIABILITIES - 1.40%.............. 2,268 -------- TOTAL NET ASSETS - 100.00%............................ $161,701 ========
Percentages are stated as a percent of net assets. * Inflation-Indexed Note. See accompanying notes 7 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2009 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ASSETS: Investments in securities, at value (A) ...................... $ 159,433 Dividends and interest receivable ............................ 1,305 Receivable for fund shares sold .............................. 1,045 Receivable from Manager for expense reimbursement (Note 2) ... 14 Prepaid expenses ............................................. 9 ----------- TOTAL ASSETS .............................................. 161,806 ----------- LIABILITIES: Payable for fund shares redeemed ............................. 7 Management and investment advisory fees payable (Note 2) ..... 28 Administrative service and service fees payable .............. 21 Professional fees payable .................................... 31 Other liabilities ............................................ 18 ----------- TOTAL LIABILITIES ......................................... 105 ----------- NET ASSETS ...................................................... $ 161,701 =========== ANALYSIS OF NET ASSETS: Paid-in-capital .............................................. 180,333 Undistributed net investment income .......................... 181 Accumulated net realized loss ................................ (20,899) Unrealized appreciation of investments ....................... 2,086 ----------- NET ASSETS ...................................................... $ 161,701 =========== SHARES OUTSTANDING (NO PAR VALUE): Institutional Class .......................................... 15,341,804 =========== Investor Class ............................................... 579,536 =========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE: Institutional Class .......................................... $ 10 .16 =========== Investor Class ............................................... $ 10 .13 =========== (A) Cost of investments in securities ........................... $ 157,347
See accompanying notes 8 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2009 (IN THOUSANDS) INVESTMENT INCOME: Dividend income .............................................. $ 1 Interest income .............................................. 1,304 ------- TOTAL INVESTMENT INCOME ................................ 1,305 ------- EXPENSES: Management and investment advisory fees (Note 2) ............. 146 Administrative service fees (Note 2): Institutional Class ....................................... 191 Investor Class ............................................ 7 Transfer agent fees: Institutional Class ....................................... 11 Investor Class ............................................ 1 Custody and fund accounting fees ............................. 28 Professional fees ............................................ 32 Registration fees and expenses ............................... 18 Service fees: Investor Class (Note 2) ................................... 6 Prospectus and shareholder reports ........................... 14 Trustee fees ................................................. 13 Other expenses ............................................... 16 ------- TOTAL EXPENSES ......................................... 483 ------- Net fees waived and expenses reimbursed by Manager (Note 2) .. (131) ------- NET EXPENSES ........................................... 352 ------- NET INVESTMENT INCOME ........................................... 953 ------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investments ............................................... 2,896 Change in net unrealized appreciation or depreciation of: Investments ............................................... 9,275 ------- NET GAIN ON INVESTMENTS ................................ 12,171 ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $13,124 =======
See accompanying notes 9 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND STATEMENT OF CHANGES IN NET ASSETS (IN THOUSANDS)
Year Ended Year Ended December December 31, 2009 31, 2008 ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ................................................... $ 953 $ 17,700 Net realized gain (loss) on investments ................................. 2,896 (22,281) Change in net unrealized appreciation or (depreciation) of investments .. 9,275 (8,833) -------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ... 13,124 (13,414) -------- --------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class .................................................. (789) (17,654) Investor Class ....................................................... (28) -- Net realized gain on investments: -------- --------- NET DISTRIBUTIONS TO SHAREHOLDERS ................................. (817) (17,654) -------- --------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares ........................................... 82,724 406,774 Reinvestment of dividends and distributions ............................. 615 17,654 Cost of shares redeemed ................................................. (74,134) (476,868) -------- --------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ................................................... 9,205 (52,440) -------- --------- NET INCREASE (DECREASE) IN NET ASSETS ...................................... 21,512 (83,508) -------- --------- NET ASSETS: Beginning of period ..................................................... 140,189 223,697 -------- --------- END OF PERIOD * ......................................................... $161,701 $ 140,189 ======== ========= * Includes undistributed net investment income of .......................... $ 181 $ 45 ======== =========
See accompanying notes 10 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American Beacon Funds (the "Trust") is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, (the "Act") as a no load, diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Treasury Inflation Protected Securities Fund (the "Fund"), a series of the Trust. American Beacon Advisors, Inc. (the "Manager") is wholly-owned subsidiary of Lighthouse Holdings, Inc., and was organized in 1986 to provide business management, advisor, administration 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 $250,000 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"). Valuation Inputs Various inputs may be used to determine the value of the Fund's investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities. Level 1 - Quoted prices in active markets for identical securities. 11 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 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. The Fund's investments are summarized by level based on the inputs used to determine their values. As of December 31, 2009, the Fund's investments were classified as follows: (in thousands)
Level 1 Level 2 Level 3 Total ------- ------- ------- -------- U.S. Treasury Obligations ................. -- 158,696 -- $158,696 Short term investments .................... 737 -- -- 737 --- ------- --- -------- Total .................................. 737 158,696 -- $159,433
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 is recorded on the ex-dividend date. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. Interest is accrued based on the principal value, which is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond is recorded as interest income, even though principal is not received until maturity. Dividends to Shareholders Dividends from net investment income of the Fund normally will be declared and paid at least semi-annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date. 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. 12 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 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 direct investment activities of the Fund. Management fees paid during the year ended December 31, 2009 were as follows:
AMOUNT PAID TO NET AMOUNT MANAGEMENT FEE MANAGEMENT INVESTMENT RETAINED BY RATE FEE SUB-ADVISOR MANAGER -------------- ---------- ----------- ----------- 0.15%-0.19% $145,994 $81,111 $64,883
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. Service 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 up to 0.375% 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 of 0.09% of the Select Funds' average daily net assets. During the year ended December 31, 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 year ended December 31, 2009, the Fund did not utilize the credit facility. 13 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Reimbursement of Expenses The Manager voluntarily agreed to reimburse a portion of its Administrative Service fee for the Institutional Class and other expenses of the Investor Class. For the year ended December 31, 2009 the Manager reimbursed expenses of $127,326 and $3,954 for the Institutional and Investor Classes, respectively. 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. 3. FEDERAL INCOME TAXES It is the policy of the Fund to comply with the requirements of Subchapter M of the Internal Revenue Code and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income or excise tax provision is required. The Fund does not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period indeed December 31, 2009 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 expense" on the Statement of Operations. Dividends are categorized in accordance with income tax regulations which may treat certain transactions differently than U.S. generally accepted accounting principles. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on returns on income earned or gains realized or repatriated. Taxes are accrued and applied to net investment income, net realized capital gains and net unrealized appreciation, as applicable, as the income is earned or capital gains are recorded. The tax character of distributions paid during the fiscal years ended December 31, 2009 and December 31, 2008 were as follows (in thousands):
INSTITUTIONAL INVESTOR --------------------------- --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2009 2008 2009 2008 ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID FROM: Ordinary income* .......... $789 $17,654 $28 $-- Tax return of capital ..... -- -- -- -- ---- ------- --- --- TOTAL TAXABLE DISTRIBUTIONS .. $789 $17,654 $28 $-- ==== ======= === ===
* For tax purposes, short-term capital gains distributions are considered ordinary income distributions. 14 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 As of December 31, 2009, the components of distributable earnings on a tax basis were as follows (in thousands): Cost basis of investments for federal income tax purposes ........ $157,638 Unrealized appreciation .......................................... 2,061 Unrealized depreciation .......................................... (266) -------- Net unrealized appreciation/(depreciation) ....................... 1,795 Undistributed ordinary income .................................... 182 Undistributed long-term gain/(loss) .............................. (20,609) -------- Distributable earnings ........................................... $(18,632) ========
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation/ (depreciation) are attributable primarily to the tax deferral of losses from wash sales. Due to inherent differences in the recognition of income, expenses and realized gains/(losses) under U.S. generally accepted accounting principles and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities. Accordingly, the following amounts represent current year permanent differences derived from foreign currency transactions and return of capital that have been reclassified as of December 31, 2009 (in thousands): Paid-in-capital ...................................... $-- Undistributed net investment income .................. -- Accumulated net realized gain (loss) ................. -- Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency ............ --
At December 31, 2009, the capital loss carry forward positions for federal income tax purposes were (in thousands) $144, $974, $111, $14,012, and $5,367 expiring in 2013, 2014, 2015, 2016 and 2017 respectively. 4. INVESTMENT TRANSACTIONS The aggregate cost of purchases and proceeds from sales of investments for the year ended December 31, 2009, excluding short-term investments, were $317,947,298 and $310,085,334, respectively. The Fund had purchases and sales of U.S. Government securities of $317,947,298 and $310,085,334, respectively. 5. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares (dollars and shares in thousands): Year Ended December 31, 2009
INSTITUTIONAL CLASS INVESTOR CLASS ------------------- ---------------- SHARES AMOUNT SHARES AMOUNT ------- --------- ------ ------- Shares sold ............................ 7,637 $ 75,743 709 $ 6,981 Reinvestment of dividends .............. 58 587 3 28 Shares redeemed ........................ (7,594) (72,804) (132) (1,330) ------ -------- ---- ------- Net increase in shares outstanding ..... 101 $ 3,526 580 $ 5,679 ====== ======== ==== =======
15 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2009 Year Ended December 31, 2008
INSTITUTIONAL CLASS ------------------- SHARES AMOUNT ------- --------- Shares sold ............................ 38,729 $ 406,774 Reinvestment of dividends .............. 1,772 17,654 Shares redeemed ........................ (47,232) (476,868) ------ --------- Net (decrease) in shares outstanding ... (6,731) $ (52,440) ====== =========
6. SUBSEQUENT EVENTS Management has evaluated the possibility of subsequent events existing in the Fund's financial statements through February 26, 2010. Management has determined that there are no material events that would require disclosure in the Fund's financial statements through this date. 16 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period)
Investor Institutional Class Class Year Ended December 31, March 2 to ------------------------------------------------------- December 2009(A) 2008 2007(B) 2006 2005 31, 2009(A) -------- -------- -------- ------ ------- ----------- Net asset value, beginning of period .................... $ 9 .20 $ 10.18 $ 9 .53 $9 .75 $ 10.16 $ 9.25 -------- -------- -------- ------ ------- ------ Income from investment operations: Net investment income ................................ 0.06 0.80 0.45 0.29 0.56(C) 0.14 Net gains (losses) on securities (both realized and unrealized) .......................... 0.95 (0.98) 0.59 (0.19) (0.37) 0.79 -------- -------- -------- ------ ------- ------ Total income (loss) from investment operations .......... 1.01 (0.18) 1.04 0.10 0.19 0.93 -------- -------- -------- ------ ------- ------ Less distributions: Dividends from net investment income ................. (0.05) (0.80) (0.39) (0.29) (0.55) (0.05) Distributions from net realized gains on securities .. -- -- -- -- (0.05) -- Tax return of capital ................................ -- -- 0.00(D, E) (0.03)(D) -- -- -------- -------- -------- ------ ------- ------ Total distributions ..................................... (0.05) (0.80) (0.39) (0.32) (0.60) (0.05) -------- -------- -------- ------ ------- ------ Net asset value, end of period .......................... $ 10.16 $ 9.20 $ 10.18 $ 9.53 $ 9.75 $10.13 ======== ======== ======== ====== ======= ====== Total return ............................................ 11.00% (2.09)% 11.22% 1.05% 1.86% 10.05%(F) ======== ======== ======== ====== ======= ====== Ratios and supplemental data: Net assets, end of period (in thousands) ............. $155,833 $140,189 $223,697 $33,792 $30,584 $5,868 Ratios to average net assets (annualized): Expenses, after expense reimbursements (recoupments) .................................. 0.26% 0.25% 0.43% 0.49% 0.44% 0.65%(G) Expenses, before expense reimbursements (recoupments) .................................. 0.36% 0.29% 0.43% 0.49% 0.39% 0.81%(G) Net investment income, after expense reimbursements (recoupements) .................. 0.69% 5.19% 4.74% 2.94% 5.45% 3.20%(G) Net investment income, before expense reimbursements (recoupments) ................... 0.59% 5.15% 4.74% 2.94% 5.50% 3.04%(G) Portfolio turnover rate .............................. 180% 128% 139% 259% 355% 180%(H)
(A) Standish Mellon Asset Management Company, LLC was added as an investment advisor on December 11, 2009. (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) The tax return of capital is calculated based on outstanding shares at the time of distribution. (E) Amount represents less than $0.01 per share. (F) Not annualized. (G) Annualized. (H) Portfolio turnover rate is for the period from January 1 through December 31, 2009. 17 AMERICAN BEACON TREASURY INFLATION PROTECTED SECURITIES FUND PRIVACY POLICY & FEDERAL TAX INFORMATION (UNAUDITED) PRIVACY POLICY The American Beacon Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used. We may collect nonpublic personal information about you from one or more of the following sources: - information we receive from you on applications or other forms; - information about your transactions with us or our service providers; and - information we receive from third parties. We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards. FEDERAL TAX INFORMATION We are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those in other areas of this report because of differences between tax and financial reporting requirements. The Fund's distributions to shareholders did not include any short-term capital gains. Of the ordinary dividends paid to shareholders during the tax year ended December 31, 2009, 100% were derived from U.S. Treasury Obligations. 18 TRUSTEES AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED) The Trustees and officers of the American Beacon Funds (the "Trust") are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees nineteen funds in the fund complex that includes the Trust, the American Beacon Master Trust, the American Beacon Mileage Funds, and the American Beacon Select Funds. The Trust's Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS --------------------- ---------------------- --------------------------------------------------------- INTERESTED TRUSTEES Term Lifetime of Trust until removal, resignation or retirement* Alan D. Feld** (73) Trustee since 1996 Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (1960-Present); Director, Clear Channel Communications (1984-2008); Trustee, CenterPoint Properties (1994-2006); Member, Board of Trustees, Southern Methodist University ; Member, Board of Visitors, M.D. Anderson Hospital; Board of Visitors, Zale/Lipshy Hospital; Trustee, American Beacon Mileage Funds (1996-Present); Trustee, American Beacon Select Funds (1999-Present) NON-INTERESTED TRUSTEES Term W. Humphrey Bogart (65) Trustee since 2004 Board Member, Baylor University Medical Center Foundation (1992-2004); Consultant, New River Canada Ltd. (mutual fund servicing company) (1998-2003); President and CEO, Allmerica Trust Company, NA (1996-1997); President and CEO, Fidelity Investments Southwest Company (1983-1995); Senior Vice President of Regional Centers, Fidelity Investments (1988-1995); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present) Brenda A. Cline (49) Trustee since 2004 Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, Texas Christian University (1998-Present); Trustee, W.I. Cook Foundation, Inc. (d/b/a Cook Children's Health Foundation) (2001-2006); Director, Christian Church Foundation (1999-2007); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present) Eugene J. Duffy (55) Trustee since 2008 Principal and Executive Vice President, Paradigm Asset Management (1994-Present); Director, Sunrise Bank of Atlanta (2008-Present); Chairman, Special Contributions Fund Board of Trustees, National Association for the Advancement of Colored People (2007-Present); Trustee, National Association for the Advancement of Colored People (2000-Present); Board of Visitors, Emory University (2006-Present); Trustee, Atlanta Botanical Garden (2006-Present); Board Member, Willie L. Brown Jr. Institute on Politics and Public Service (2001-Present); Chair, National Association of Securities Professionals (2000-2002); Deputy Chief Administrative Officer, City of Atlanta (1985-1990); Trustee, American Beacon Mileage Funds (2008-Present); Trustee, American Beacon Select Funds (2008-Present)
19 TRUSTEE AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED)
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS --------------------- ---------------------- --------------------------------------------------------- NON-INTERESTED TRUSTEES (CONT.) Thomas M. Dunning (67) Trustee since 2008 Consultant, (2008-Present); Chairman (1998-2008) and Chief Executive Officer (1998-2007), Lockton Dunning Benefits (consulting firm in employee benefits); Director, Oncor Electric Delivery Company LLC (2007-Present); Board Member, Baylor Health Care System Foundation (2007-Present); Vice Chair, State Fair of Texas (1987-Present); Board Member, Southwestern Medical Foundation (1994- Present); Board Member, John Tower Center for Political Studies/SMU (2008- Present); Board Member, University of Texas Development Board (2008-Present); Trustee, American Beacon Mileage Funds (2008-Present); Trustee, American Beacon Select Funds (2008-Present) Richard A. Massman (66) Trustee since 2004 Consultant and General Counsel Emeritus (2009-Present), Chairman since 2008 Senior Vice President and General Counsel (1994-2009), Hunt Consolidated, Inc. (holding company engaged in oil and gas exploration and production, refining, real estate, farming, ranching and venture capital activities); Chairman (2007-Present) and Director (2005-Present), The Dallas Opera Foundation; Chairman (2006-2009) and Director (2005-Present), Temple Emanu-El Foundation; Trustee, Presbyterian Healthcare Foundation (2006-Present); Trustee, American Beacon Mileage Funds (2004- Present); Trustee, American Beacon Select Funds (2004-Present) R. Gerald Turner (64) Trustee since 2001 President, Southern Methodist University (1995-Present); 225 Perkins Admin. Bldg. Director, ChemFirst (1986-2002); Director, J.C. Penney Southern Methodist Univ. Company, Inc. (1996-Present); Director, California Dallas, Texas 75275 Federal Preferred Capital Corp. (2001-2003); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-2007); Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Co-Chair, Knight Commission on Intercollegiate Athletics; Trustee, American Beacon Mileage Funds (2001-Present); Trustee, American Beacon Select Funds (2001- Present) Paul J. Zucconi,CPA (68) Trustee since 2008 Director, Affirmative Insurance Holdings, Inc. (producer of nonstandard automobile insurance) (2004-present); Director, Titanium Metals Corporation (producer of titanium melted and mill products and sponge) (2002- present); Director, Torchmark Corporation (life and health insurance products) (2002- present); Director, National Kidney Foundation serving North Texas (2003- Present); Director, Dallas Chapter of National Association of Corporate Directors (2004-Present); Partner, KPMG (1976-2001); Trustee, American Beacon Mileage Funds (2008-Present); Trustee, American Beacon Select Funds (2008-Present) OFFICERS Term One Year William F. Quinn (62) Executive Vice Executive Chairman (2009-Present), Chairman (2006-2009) President from CEO (2006-2007), President (1986-2006) and Director 2007 to 2008 and (2003-Present), American Beacon Advisors, Inc.; Chairman 2009 to Present (1989-2003) and Director (1979-1989, 2003-Present), President from American Airlines Federal Credit Union; Director Hicks 1987 to 2007 Acquisition I, Inc. (2007-2009); Director, Crescent Real Trustee from Estate Equities, Inc.(1994-2007); Director, Pritchard, 1987 to 2008 Hubble & Herr, LLC (investment advisor) (2001-2006); Director of Investment Committee, Southern Methodist University Endowment Fund (1996-Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Member, New York Stock Exchange Pension Manager Committee (1997-1998, 2000-2002, 2006-Present); Vice Chairman (2004-2007) and Chairman (2007-Present), Committee for the Investment of Employee Benefits; Director, United Way of Metropolitan Tarrant County (1988-2000, 2004-Present); Trustee (1995-2008) and President (1995-2007, 2008-Present), American Beacon Mileage Funds; Trustee (1999-2008) and President (1999-2007, 2008-Present) American Beacon Select Funds; Director American Beacon Global Funds SPC (2002-Present); Director, American Beacon Global Funds, plc (2007-2009)
20 TRUSTEE AND OFFICERS OF THE AMERICAN BEACON FUNDS (UNAUDITED)
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS --------------------- ---------------------- --------------------------------------------------------- Gene L. Needles, Jr. (55) President since 2009 President, CEO and Director (2009-Present), American Executive Vice Beacon Advisors, Inc.; President (2008-2009), Touchstone President 2009 Investments; President (2003-2007), CEO (2004-2007), Managing Director of Sales (2002-2003), National Sales Manager (1999-2002), and Regional Sales Manager (1993-1999), AIM Distributors Rosemary K. Behan (51) VP, Secretary and Vice President, Legal and Compliance, American Beacon Chief Legal Advisors, Inc. (2006-Present); Assistant General Officer since 2006 Counsel, First Command Financial Planning, Inc. (2004-2006); Attorney, Enforcement Division, Securities and Exchange Commission (1995-2004) Brian E. Brett (49) VP since 2004 Vice President, Director of Sales and Marketing, American Beacon Advisors, Inc. (2004-Present); Regional Vice President, Neuberger Berman, LLC (investment advisor) (1996-2004) Wyatt L. Crumpler (43) VP since 2007 Vice President, Asset Management, American Beacon Advisors, Inc. (2007- Present); Managing Director of Corporate Accounting (2004-2007), Director of IT Strategy and Finance (2001-2004), American Airlines, Inc. Michael W. Fields (55) VP since 1989 Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-Present); Director American Beacon Global Funds SPC (2002-Present); Director, American Beacon Global Funds plc (2007-2009) Melinda G. Heika (48) Treasurer since Vice President, Finance & Accounting (2010-Present), 2010 Controller (2005-2009), Assistant Controller (1998-2004), American Beacon Advisors, Inc. Terri L. McKinney (46) VP since 2010 Vice President, Enterprise Services (2009-Present), Managing Director (2003-2009), Director of Marketing & Retail Sales (1996-2003), American Beacon Advisors, Inc.; Vice President, Board of Trustees (2008-Present), Trustee (2006-2008) Down Syndrome Guild of Dallas Jeffrey K. Ringdahl (34) VP since 2010 Chief Operating Officer, American Beacon Advisors, Inc. (2010-Present); Vice President, Product Management, Touchstone Advisors, Inc. (2007-2010); Senior Director, Business Integration, Fidelity Investments (2005-2007) Christina E. Sears (38) Chief Compliance Chief Compliance Officer (2004-Present) and Senior Officer since 2004 Compliance Analyst (1998-2004), American Beacon and Asst. Advisors, Inc. Secretary since 1999
* The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 72, provided, however, that the Board may determine to grant one or more annual exemptions to this requirement. ** Mr. Feld is deemed to be an "interested person" of the Trust, as defined by the 1940 Act. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two fiscal years to the Manager and one or more of the Trust's s sub-advisors. 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: (E-MAIL GRAPHIC) BY E-MAIL: american_beacon.funds@ambeacon.com (INTERNET GRAPHIC) ON THE INTERNET: Visit our website at www.americanbeaconfunds.com (TELEPHONE GRAPHIC) BY TELEPHONE: Call (800) 658-5811 (MAIL GRAPHIC) BY MAIL: American Beacon Funds P.O. Box 219643 Kansas City, MO 64121-9643 AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission ("SEC") on Form N-Q as of the first and third fiscal quarters. The Fund's Forms N-Q are available on the SEC's website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC's Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. A complete schedule of the Fund's portfolio holdings is also available on the Funds' website (www.americanbeaconfunds.com) approximately thirty days after the end of each month. AVAILABILITY OF PROXY VOTING POLICY AND RECORDS A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund's Statement of Additional Information, is available free of charge on the Fund's website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by accessing the SEC's website at www.sec.gov. The Fund's proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund's Forms N-PX are available on the SEC's website at www.sec.gov. The Fund's proxy voting record may also be obtained by calling 1-800-967- 9009. FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT REGISTERED DISTRIBUTOR STATE STREET BANK AND BOSTON FINANCIAL DATA PUBLIC ACCOUNTING FIRM FORESIDE FUND SERVICES, TRUST SERVICES ERNST & YOUNG LLP LLC Boston, Massachusetts Kansas City, Missouri Dallas, Texas Portland, Maine
This report is prepared for shareholders of the American Beacon Funds and may be distributed to others only if preceded or accompanied by a current prospectus. American Beacon Funds and the American Beacon Treasury Inflation Protected Securities Fund are service marks of American Beacon Advisors, Inc. AR 12/09 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. The Trust's Board of Trustees has determined that Mr. Paul J. Zucconi, CPA, a member of the Trust's Audit and Compliance Committee, is an "audit committee financial expert" as defined in Form N-CSR. Mr. Paul J. Zucconi is "independent" as defined in Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a)
Audit Fees Fiscal Year Ended ---------- ----------------- $294,836 10/31/2008 $88,878 12/31/2008 $298,018 10/31/2009 $72,414 12/31/2009
(b)
Audit-Related Fees Fiscal Year Ended ------------------ ----------------- $0 10/31/2008 $0 12/31/2008 $13,750* 10/31/2009 $0 12/31/2009 * Review of N-1A filings
(c)
Tax Fees Fiscal Year Ended -------- ----------------- $12,698* 10/31/2008 $6,095 12/31/2008 $10,077 10/31/2009 $10,257 12/31/2009 * For review of 2007 tax returns
(d)
All Other Fees Fiscal Year Ended -------------- ----------------- $0 10/31/2008 $0 12/31/2008 $0 10/31/2009 $0 12/31/2009
(e)(1) Pursuant to its charter, the Trust's Audit and Compliance Committee shall have the following duties and powers pertaining to pre-approval of audit and non-audit services provided by the Trust's principal accountant: - to approve, prior to appointment, the engagement of auditors to annually audit and provide their opinion on the Trusts' financial statements, and, in connection therewith, reviewing and evaluating matters potentially affecting the independence and capabilities of the auditors; - to approve, prior to appointment, the engagement of the auditors to provide non-audit services to the Trusts, an investment adviser to any series of the Trusts or any entity controlling, controlled by, or under common control with an investment adviser ("adviser affiliate") that provides ongoing services to the Trusts, if the engagement relates directly to the operations and financial reporting of the Trusts; - to consider whether the non-audit services provided by a Trust's auditor to an investment adviser or any adviser affiliate that provides ongoing services to a series of the Trusts, which services were not pre-approved by the Committee, are compatible with maintaining the auditor's independence; - to review the arrangements for and scope of the annual audit and any special audits; and - to review and approving the fees proposed to be charged to the Trusts by the auditors for each audit and non-audit service. The Audit and Compliance Committee may delegate any portion of its authority, including the authority to grant pre-approvals of audit and permitted non-audit services, to a subcommittee of one or more members. Any decisions of the subcommittee to grant pre-approvals shall be presented to the full audit committee at its next regularly scheduled meeting. (e)(2) None of the fees disclosed in paragraphs (b) through (d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) Not applicable. (g)
Aggregate Non-Audit Fees for Services Rendered to the: ------------------------------------------------------ Adviser's Affiliates Providing Registrant Adviser Ongoing Services to Registrant Fiscal Year Ended ---------- ------- ------------------------------ ----------------- $12,698 $0 N/A 10/31/2008 $6,095 $0 N/A 12/31/2008 $23,827 $0 N/A 10/31/2009 $10,257 $0 N/A 12/31/2009
(h) Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. The schedules of investments for each series of the Trust are included in the shareholder report presented in Item 1. The shareholder report for the S&P 500 Index Fund, the Small Cap Index Fund and the International Equity Index Fund presented in Item 1 includes a summary schedule of investments for the Master International Index Series and the Master Small Cap Index Series, both of which are series of the Master Quantitative Series 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 DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- ADVERTISING AGENCIES - AMREP Corp. (a) 300 $ 4,110 0.5% Arbitron, Inc. 5,858 137,194 Constant Contact, Inc. (a) 5,200 83,200 DG FastChannel, Inc. (a) 4,700 131,271 Harte-Hanks, Inc. 9,200 99,176 Marchex, Inc., Class B 5,000 25,400 National CineMedia, Inc. 10,570 175,145 Travelzoo, Inc. (a) 1,700 20,893 Valassis Communications, Inc. (a) 11,900 217,294 ValueClick, Inc. (a) 20,580 208,270 Viad Corp. 5,200 107,276 -------------- 1,209,229 -------------- AEROSPACE - 1.3% AAR Corp. (a) 8,868 203,787 AeroVironment, Inc. (a) 3,200 93,056 Argon ST, Inc. (a) 3,300 71,676 Astronics Corp. (a) 2,100 17,955 Ceradyne, Inc. (a) 6,350 121,984 Cubic Corp. 3,852 143,680 Curtiss-Wright Corp. 11,268 352,914 Ducommun, Inc. 2,600 48,646 Esterline Technologies Corp. (a) 6,941 282,985 GenCorp, Inc. (a) 12,371 86,597 Global Defense Technology & Systems, Inc. (a) 500 8,230 Heico Corp. 5,226 231,669 Herley Industries, Inc. (a) 3,300 45,837 Kaman Corp., Class A 6,394 147,637 LMI Aerospace, Inc. (a) 2,100 27,930 Ladish Co., Inc. (a) 4,000 60,320 Moog, Inc., Class A (a) 10,813 316,064 Orbital Sciences Corp. (a) 12,735 194,336 Teledyne Technologies, Inc. (a) 8,934 342,708 Triumph Group, Inc. 3,879 187,162 -------------- 2,985,173 -------------- AGRICULTURE, FISHING & AgFeed Industries, Inc. (a)(b) 7,400 37,000 RANCHING - 0.4% Alico, Inc. 900 25,614 The Andersons, Inc. 4,300 111,026 Cadiz, Inc. (a) 2,800 33,516 Cal-Maine Foods, Inc. 3,100 105,648 Calavo Growers, Inc. 2,600 44,200 China Green Agriculture, Inc. (a) 1,800 26,460 Fresh Del Monte Produce, Inc. (a) 10,100 223,210 HQ Sustainable Maritime Industries, Inc. (a) 2,100 14,784 Sanderson Farms, Inc. 4,550 191,828 Seaboard Corp. 82 110,618 -------------- 923,904 -------------- AIR TRANSPORT - 1.1% Air Transport Services Group, Inc. (a) 13,000 34,320 AirTran Holdings, Inc. (a) 31,220 162,968 Alaska Air Group, Inc. (a) 8,498 293,691 Allegiant Travel Co. (a) 3,400 160,378 Atlas Air Worldwide Holdings, Inc. (a) 4,800 178,800
1 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Bristow Group, Inc. (a) 8,285 $ 318,558 Hawaiian Holdings, Inc. (a) 12,900 90,300 JetBlue Airways Corp. (a) 60,200 328,090 PHI, Inc. (a) 3,300 68,310 Republic Airways Holdings, Inc. (a) 7,300 53,947 SkyWest, Inc. 14,000 236,880 UAL Corp. (a)(b) 39,900 515,109 US Airways Group, Inc. (a) 37,900 183,436 -------------- 2,624,787 -------------- ALTERNATIVE ENERGY - 0.2% Clean Energy Fuels Corp. (a) 8,200 126,362 Comverge, Inc. (a)(b) 4,500 50,580 EnerNOC, Inc. (a)(b) 3,100 94,209 Evergreen Energy, Inc. (a)(b) 30,600 10,496 Green Plains Renewable Energy (a) 2,800 41,636 Rex Stores Corp. (a) 1,800 25,308 Syntroleum Corp. (a) 17,200 45,752 TGC Industries Inc. (a) 3,800 14,858 US Geothermal, Inc. (a) 15,500 23,715 USEC, Inc. (a) 28,659 110,337 -------------- 543,253 -------------- ALUMINUM - 0.2% Century Aluminum Co. (a) 13,100 212,089 Kaiser Aluminum Corp. 3,800 158,156 -------------- 370,245 -------------- ASSET MANAGEMENT & Allied Capital Corp. 44,300 159,923 CUSTODIAN - 1.0% American Capital Ltd. (a)(b) 69,600 169,824 Ampal-American Israel Corp., Class A (a) 4,401 11,883 Apollo Investment Corp. (b) 38,846 370,202 Ares Capital Corp. 25,372 315,881 Artio Global Investors, Inc. (a) 6,200 158,038 Calamos Asset Management, Inc., Class A 5,100 58,803 Capital Southwest Corp. 700 55,160 Cohen & Steers, Inc. (b) 4,300 98,212 Cowen Group, Inc., Class A (a) 4,000 23,680 Diamond Hill Investments Group 600 38,538 Epoch Holding Corp. 2,500 26,125 Fifth Street Finance Corp. 7,100 76,254 GAMCO Investors, Inc., Class A 1,896 91,558 Harris & Harris Group, Inc. (a) 6,400 29,248 JMP Group, Inc. 4,100 39,852 Kohlberg Capital Corp. 4,300 19,608 MCG Capital Corp. (a) 17,400 75,168 MVC Capital, Inc. 5,500 64,900 NGP Capital Resources Co. 5,423 44,089 National Financial Partners Corp. (a) 9,900 80,091 Oppenheimer Holdings, Inc. 2,500 83,050 Pzena Investment Management, Inc., Class A (a) 1,900 15,466 Resource America, Inc., Class A 2,549 10,298 TICC Capital Corp. 7,400 44,770 Teton Advisors, Inc. 53 847 U.S. Global Investors, Inc. 3,200 39,392
2 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Virtus Investment Partners, Inc. (a) 1,535 $ 24,407 Westwood Holdings Group, Inc. 1,300 47,242 -------------- 2,272,509 -------------- AUTO PARTS - 0.7% ATC Technology Corp. (a) 5,143 122,661 American Axle & Manufacturing Holdings, Inc. (b) 9,600 76,992 Amerigon, Inc. (a) 5,300 42,082 ArvinMeritor, Inc. (a) 18,400 205,712 China Automotive Systems. Inc. (a) 1,600 29,936 Dana Holding Corp. (a) 32,800 355,552 Dorman Products, Inc. (a) 2,600 40,716 Exide Technologies (a) 11,700 83,187 Fuel Systems Solutions, Inc. (a) 3,200 131,968 Standard Motor Products, Inc. 4,300 36,636 Stoneridge, Inc. (a) 3,800 34,238 Superior Industries International, Inc. 4,899 74,955 Tenneco, Inc. (a) 13,800 244,674 U.S. Auto Parts Network, Inc. (a) 1,900 9,880 Wonder Auto Technology, Inc. (a) 3,700 43,512 -------------- 1,532,701 -------------- AUTO SERVICES - 0.1% Cooper Tire & Rubber Co. 14,000 280,700 -------------- BANKS: DIVERSIFIED - 5.8% 1st Source Corp. 3,684 59,276 Alliance Financial Corp. 1,200 32,580 American National Bankshares, Inc. 1,400 30,660 Ameris Bancorp 3,461 24,784 Ames National Corp. 1,600 33,776 Arrow Financial Corp. 2,290 57,250 Auburn National Bancorporation 500 9,845 BancFirst Corp. 1,590 58,894 Banco Latinoamericana de Comercio Exterior SA 6,800 94,520 Bancorp Rhode Island, Inc. 900 23,112 The Bancorp, Inc. (a) 3,800 26,068 Bank of Kentucky Financial Corp. 700 13,146 Bank of Marin Bancorp 1,500 48,840 Bank of the Ozarks, Inc. (b) 3,100 90,737 Banner Corp. 3,913 10,487 Bar Harbor Bankshares 900 24,705 Boston Private Financial Holdings, Inc. 17,533 101,165 Bridge Bancorp, Inc. 1,700 40,868 Bryn Mawr Bank Corp. 1,600 24,144 CNB Financial Corporation 2,100 33,579 CVB Financial Corp. (b) 20,065 173,362 California First National Bancorp 300 3,918 Camden National Corp. 1,900 62,130 Cape Bancorp, Inc. (a) 2,700 18,144 Capital City Bank Group, Inc. (b) 2,921 40,427 Cardinal Financial Corp. 7,000 61,180 Cathay General Bancorp 13,844 104,522 Center Bancorp, Inc. 2,945 26,269 Centerstate Banks, Inc. 3,600 36,324 Central Pacific Financial Corp. (b) 7,048 9,233
3 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Century Bancorp, Inc., Class A 1,100 $ 24,233 Chemical Financial Corp. 5,048 119,032 Chicopee Bancorp, Inc. (a) 1,500 18,720 Citizens & Northern Corp. 2,200 20,988 Citizens Banking Corp. (a) 29,487 20,346 Citizens Holding Co. 1,100 24,629 City Holding Co. 3,993 129,094 CoBiz Financial, Inc. 5,826 27,673 Columbia Banking System, Inc. 6,441 104,215 Community Bank System, Inc. 8,200 158,342 Community Trust Bancorp, Inc. 3,823 93,472 Danvers Bancorp, Inc. 4,500 58,455 Eagle Bancorp, Inc. (a) 2,900 30,363 East-West Bancorp, Inc. 22,400 353,920 Enterprise Bancorp, Inc. 1,600 17,520 Enterprise Financial Services Corp. 2,700 20,817 F.N.B. Corp. 27,297 185,347 Farmers Capital Bank Corp. 1,600 16,352 Financial Institutions, Inc. 2,700 31,806 First Bancorp, Inc. 2,100 32,382 First Bancorp, North Carolina 3,536 49,398 First BanCorp, Puerto Rico (b) 20,700 47,610 First Busey Corp. (b) 9,314 36,231 First Commonwealth Financial Corp. 21,040 97,836 First Community Bancshares, Inc. 2,994 36,078 First Financial Bancorp 11,887 173,075 First Financial Bankshares, Inc. 5,253 284,870 First Financial Corp. (b) 3,044 92,903 First Merchants Corp. 5,246 31,161 First Midwest Bancorp, Inc. 12,500 136,125 The First of Long Island Corp. 1,600 40,400 First South Bancorp, Inc. 2,100 21,630 FirstMerit Corp. 19,529 393,314 German American Bancorp, Inc. (b) 3,100 50,375 Glacier Bancorp, Inc. 15,464 212,166 Guaranty Bancorp (a) 13,200 17,424 Hampton Roads Bankshares, Inc. (b) 4,400 7,612 Hancock Holding Co. 6,554 287,000 Harleysville National Corp. 10,736 69,140 Heartland Financial USA, Inc. (b) 3,200 45,920 Home Bancshares, Inc. 3,760 90,503 IBERIABANK Corp. 4,950 266,359 Independent Bank Corp./MA 5,045 105,390 International Bancshares Corp. (b) 13,210 250,065 Investors Bancorp, Inc. (a) 11,200 122,528 Lakeland Bancorp, Inc. 5,005 31,982 Lakeland Financial Corp. 3,100 53,475 MB Financial, Inc. 11,783 232,361 MainSource Financial Group, Inc. 5,019 23,991 Merchants Bancshares, Inc. 1,400 31,696
4 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Meridian Interstate Bancorp, Inc. (a) 2,200 $ 19,118 Metro Bancorp, Inc. (a) 1,700 21,369 Midsouth Bancorp, Inc. 1,400 19,460 NASB Financial, Inc. 900 20,961 NBT Bancorp, Inc. 8,513 173,410 Nara Bancorp, Inc. 7,200 81,648 National Bankshares, Inc. 1,900 53,751 National Penn Bancshares, Inc. 29,365 170,023 Northeast Community Bancorp 1,300 8,541 Northrim Bancorp Inc. 1,800 30,384 Norwood Financial Corp. 400 11,436 Ohio Valley Banc Corp. 1,000 22,030 Old National Bancorp 20,295 252,267 Old Point Financial Corp. 400 6,220 Old Second Bancorp, Inc. (b) 3,422 23,578 Oriental Financial Group 6,118 66,074 Orrstown Financial Service, Inc. (b) 1,400 48,832 Pacific Capital Bancorp (b) 8,862 8,508 Pacific Continental Corp. 3,500 40,040 PacWest Bancorp 6,011 121,122 Park National Corp. (b) 2,715 159,859 Peapack-Gladstone Financial Corp. 2,120 26,882 Penns Woods Bancorp, Inc. 900 29,196 Peoples Bancorp, Inc. 2,610 25,265 Peoples Financial Corp. 1,300 26,416 Pinnacle Financial Partners, Inc. (a) 7,800 110,916 Porter Bancorp, Inc. 1,050 15,792 PremierWest Bancorp 5,065 7,192 PrivateBancorp, Inc. 11,896 106,707 Prosperity Bancshares, Inc. 11,400 461,358 Provident Financial Services, Inc. 14,958 159,303 Renasant Corp. 5,298 72,053 Republic Bancorp, Inc., Class A 2,254 46,432 Republic First Bancorp, Inc. (a) 2,200 9,394 Rockville Financial, Inc. 2,100 22,050 Roma Financial Corp. 2,000 24,720 S&T Bancorp, Inc. (b) 5,863 99,730 SCBT Financial Corp. 2,863 79,276 SVB Financial Group (a) 9,600 400,224 SY Bancorp, Inc. 2,730 58,286 Sandy Spring Bancorp, Inc. 4,114 36,573 Santander BanCorp (a) 903 11,089 Shore Bancshares, Inc. 2,100 30,366 Sierra Bancorp 1,800 13,734 Signature Bank (a) 9,600 306,240 Simmons First National Corp., Class A 3,500 97,300 Smithtown Bancorp, Inc. 3,500 20,825 The South Financial Group, Inc. 38,100 24,563 Southside Bancshares, Inc. 3,066 60,155 Southwest Bancorp, Inc. 3,600 24,984
5 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- State Bancorp, Inc. 3,600 $ 25,596 StellarOne Corp. 5,700 56,772 Sterling Bancorp 4,516 32,244 Sterling Bancshares, Inc. 17,914 91,899 Sterling Financial Corp. (a)(b) 13,143 8,149 Suffolk Bancorp 2,400 71,280 Sun Bancorp, Inc. (a) 3,414 12,803 Susquehanna Bancshares, Inc. 21,556 126,965 Texas Capital Bancshares, Inc. (a) 9,161 127,888 Tompkins Trustco, Inc. 2,140 86,670 Tower Bancorp, Inc. 800 18,280 Towne Bank (b) 5,300 61,904 Trico Bancshares 3,378 56,244 TrustCo Bank Corp. NY 19,161 120,714 Trustmark Corp. (b) 14,727 331,947 UMB Financial Corp. 8,052 316,846 Umpqua Holdings Corp. 20,380 273,296 Union Bankshares Corp. 3,750 46,463 United Bankshares, Inc. (b) 9,800 195,706 United Community Banks, Inc. (a)(b) 21,678 73,488 United Security Bancshares (b) 1,700 29,138 Univest Corp. of Pennsylvania 3,550 62,232 Washington Banking Co. 2,800 33,432 Washington Trust Bancorp, Inc. 3,500 54,530 Webster Financial Corp. 16,300 193,481 WesBanco, Inc. 5,563 68,647 West Bancorp, Inc. 4,100 20,213 Westamerica Bancorp (b) 6,783 375,575 Western Alliance Bancorp (a) 11,900 44,982 Wilber Corp. 1,300 9,360 Wilshire Bancorp, Inc. 4,800 39,312 Wintrust Financial Corp. 5,400 166,266 Yardkin Valley Financial Corp. 4,000 14,640 -------------- 13,212,883 -------------- BANKS: SAVINGS, THRIFT & Abington Bancorp, Inc. 5,480 37,757 MORTGAGE LENDING - 1.0% Astoria Financial Corp. 21,500 267,245 Bank Mutual Corp. 11,838 81,919 BankFinancial Corp. 5,000 49,500 Beneficial Mutual Bancorp, Inc. (a) 8,100 79,704 Berkshire Hills Bancorp, Inc. 3,300 68,244 Brookline Bancorp, Inc. 15,287 151,494 Brooklyn Federal Bancorp, Inc. 1,100 11,044 Clifton Savings Bancorp, Inc. 2,100 19,677 Dime Community Bancshares, Inc. 6,949 81,442 Doral Financial Corp. (a) 1,400 5,082 ESB Financial Corp. 2,100 27,762 ESSA Bancorp, Inc. 3,800 44,460 First Defiance Financial Corp. 2,300 25,967 First Financial Holdings, Inc. 3,326 43,205 First Financial Northwest, Inc. 5,000 32,750
6 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- First Financial Service Corp. 1,300 $ 11,778 Flagstar Bancorp, Inc. (a) 16,750 10,050 Flushing Financial Corp. 6,475 72,908 Fox Chase Bancorp, Inc. (a) 1,400 13,328 Great Southern Bancorp, Inc. 2,400 51,264 Heritage Financial Corp. 1,700 23,426 Heritage Financial Group 1,000 7,250 Home Bancorp, Inc. (a) 2,100 25,599 Home Federal Bancorp, Inc. 4,000 53,240 K Fed Bancorp 800 7,032 Kearny Financial Corp. 4,100 41,328 Kentucky First Federal Banco 1,200 13,200 Legacy Bancorp, Inc./MA 1,700 16,762 NewAlliance Bancshares, Inc. 25,000 300,250 Northfield Bancorp, Inc. 4,500 60,840 Northwest Bancshares, Inc. 9,375 106,125 OceanFirst Financial Corp. 2,300 25,990 Ocwen Financial Corp. (a) 13,265 126,946 Oritani Financial Corp. 2,100 28,833 Provident New York Bancorp 8,089 68,271 Prudential Bancorp, Inc. of Pennsylvania 1,400 13,328 Territorial BanCorp, Inc. (a) 2,800 50,540 United Financial Bancorp, Inc. 4,300 56,373 ViewPoint Financial Group 2,416 34,815 WSFS Financial Corp. 1,591 40,777 Waterstone Financial, Inc. (a) 1,400 2,870 Westfield Financial, Inc. 7,812 64,449 -------------- 2,354,824 -------------- BEVERAGE: BREWERS & Boston Beer Co., Inc., Class A (a) 1,900 88,540 DISTILLERS - 0.0% -------------- BEVERAGE: SOFT DRINKS - Coca-Cola Bottling Co. Consolidated 1,087 58,720 0.1% Diedrich Coffee, Inc. (a) 700 24,395 Farmer Bros. Co. 1,520 30,005 Heckmann Corp. (a) 20,800 103,792 National Beverage Corp. 2,128 29,494 Peet's Coffee & Tea, Inc. (a) 2,400 79,992 -------------- 326,398 -------------- BIOTECHNOLOGY - 3.9% AMAG Pharmaceuticals, Inc. (a) 3,960 150,599 ARYx Therapeutics, Inc. (a) 4,800 15,408 AVI BioPharma, Inc. (a)(b) 21,200 30,952 Accelrys, Inc. (a) 6,700 38,391 Acorda Therapeutics, Inc. (a) 9,400 237,068 Affymax, Inc. (a) 3,800 94,012 Albany Molecular Research, Inc. (a) 5,787 52,546 Allos Therapeutics, Inc. (a) 16,200 106,434 Alnylam Pharmaceuticals, Inc. (a)(b) 9,000 158,580 Amicus Therapeutics, Inc. (a) 4,100 16,277 Arena Pharmaceuticals, Inc. (a)(b) 21,000 74,550 Ariad Pharmaceuticals, Inc. (a) 23,719 54,079 Arqule, Inc. (a) 10,100 37,269 Array Biopharma, Inc. (a) 11,800 33,158
7 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- BioDelivery Sciences International, Inc. (a) 2,800 $ 11,004 BioMimetic Therapeutics, Inc. (a) 3,022 36,052 Biodel, Inc. (a) 4,000 17,360 Cardium Therapeutics, Inc. (a) 9,500 6,460 Celera Corp. (a) 20,200 139,582 Cell Therapeutics, Inc. (a)(b) 130,900 149,226 Celldex Therapeutics, Inc. (a) 5,900 27,612 Cepheid, Inc. (a) 14,500 180,960 Chelsea Therapeutics International, Inc. (a) 6,500 17,550 Clinical Data, Inc. (a) 2,798 51,091 Cornerstone Therapeutics, Inc. (a) 1,500 9,150 Cubist Pharmaceuticals, Inc. (a) 13,967 264,954 Curis, Inc. (a) 14,500 47,125 Cypress Bioscience, Inc. (a) 9,500 54,720 Cytokinetics, Inc. (a) 9,400 27,354 Cytori Therapeutics, Inc. (a)(b) 6,700 40,870 Discovery Laboratories, Inc. (a)(b) 22,800 14,330 Dyax Corp. (a) 15,500 52,545 Emergent Biosolutions, Inc. (a) 4,300 58,437 Enzo Biochem, Inc. (a) 7,895 42,475 Enzon Pharmaceuticals, Inc. (a)(b) 11,100 116,883 Exelixis, Inc. (a) 26,618 196,175 Facet Biotech Corp. (a) 5,780 101,612 GTx, Inc. (a)(b) 4,600 19,320 Genomic Health, Inc. (a) 3,400 66,504 Geron Corp. (a)(b) 22,329 123,926 Halozyme Therapeutics, Inc. (a) 16,000 93,920 Harvard Bioscience, Inc. (a) 7,000 24,990 Hemispherx Biopharma, Inc. (a)(b) 28,900 16,184 Human Genome Sciences, Inc. (a) 43,600 1,334,160 Idenix Pharmaceuticals, Inc. (a) 6,200 13,330 Idera Pharmaceuticals, Inc. (a) 5,400 27,918 ImmunoGen, Inc. (a) 13,100 102,966 Immunomedics, Inc. (a) 15,000 48,150 Incyte Corp. (a) 20,124 183,330 Insmed, Inc. (a) 30,600 23,562 InterMune, Inc. (a) 9,414 122,759 Kensey Nash Corp. (a) 2,000 51,000 Lexicon Genetics, Inc. (a) 21,200 36,040 Ligand Pharmaceuticals, Inc., Class B (a) 29,400 63,798 MannKind Corp. (a)(b) 13,450 117,822 Martek Biosciences Corp. (a) 7,400 140,156 Maxygen, Inc. (a) 6,201 37,764 Medivation, Inc. (a) 6,600 248,490 Metabolix, Inc. (a) 4,700 52,029 Micromet, Inc. (a)(b) 13,200 87,912 Molecular Insight Pharmaceuticals, Inc. (a) 4,300 9,675 Momenta Pharmaceuticals, Inc. (a) 9,100 114,751 Myriad Pharmaceuticals, Inc. (a) 4,675 23,515 NPS Pharmaceuticals, Inc. (a) 11,900 40,460
8 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Nabi Biopharmaceuticals (a) 12,854 $ 62,985 Nanosphere, Inc. (a) 2,600 16,744 Nektar Therapeutics (a) 23,100 215,292 Neurocrine Biosciences, Inc. (a) 9,800 26,656 Neurogesx, Inc. (a) 3,000 23,130 Novavax, Inc. (a)(b) 14,700 39,102 Omeros Corp. (a) 700 4,914 OncoGenex Pharmaceutical, Inc. (a) 1,000 22,280 Onyx Pharmaceuticals, Inc. (a) 14,820 434,819 Opko Health, Inc. (a) 10,700 19,581 Orexigen Therapeutics, Inc. (a) 5,800 43,152 Osiris Therapeutics, Inc. (a) 4,100 29,274 OxiGene, Inc. (a)(b) 8,200 9,348 PDL BioPharma, Inc. 27,200 186,592 Pharmasset, Inc. (a) 5,000 103,500 Poniard Pharmaceuticals, Inc. (a)(b) 6,400 11,712 Progenics Pharmaceuticals, Inc. (a) 6,700 29,748 Protalix BioTherapeutics, Inc. (a)(b) 9,260 61,301 RTI Biologics, Inc. (a) 13,200 50,688 Regeneron Pharmaceuticals, Inc. (a) 15,519 375,249 Repligen Corp. (a) 7,700 31,647 Repros Therapeutics, Inc. (a) 2,100 1,673 Rigel Pharmaceuticals, Inc. (a) 12,170 115,737 Sangamo Biosciences, Inc. (a) 10,300 60,976 Savient Pharmaceuticals, Inc. (a) 15,328 208,614 Seattle Genetics, Inc. (a) 19,800 201,168 Sequenom, Inc. (a)(b) 12,800 52,992 StemCells, Inc. (a)(b) 21,700 27,342 Sucampo Pharmaceuticals, Inc., Class A (a) 2,300 9,292 Synta Pharmaceuticals Corp. (a) 4,100 20,746 Theravance, Inc. (a) 13,300 173,831 Vanda Pharmaceuticals, Inc. (a) 6,500 73,060 ViroPharma, Inc. (a) 19,400 162,766 ZymoGenetics, Inc. (a) 9,200 58,788 -------------- 8,951,980 -------------- BUILDING MATERIALS - 0.9% Acuity Brands, Inc. 9,960 354,974 Ameron International Corp. 2,100 133,266 BlueLinx Holdings, Inc. (a) 2,600 7,202 Builders FirstSource, Inc. (a)(b) 4,000 15,400 Gibraltar Industries, Inc. 6,734 105,926 Griffon Corp. (a) 10,455 127,760 Headwaters, Inc. (a) 13,146 85,712 LSI Industries, Inc. 4,712 37,131 Louisiana-Pacific Corp. (a) 29,400 205,212 NCI Building Systems, Inc. (a) 18,568 33,608 Orion Energy Systems, Inc. (a) 4,100 17,999 Quanex Building Products Corp. 9,410 159,688 Simpson Manufacturing Co., Inc. (b) 9,532 256,315 Texas Industries, Inc. 5,705 199,618 Trex Co., Inc. (a) 3,809 74,656
9 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Watsco, Inc. 6,165 $ 301,962 -------------- 2,116,429 -------------- BUILDING: CLIMATE CONTROL Aaon, Inc. 2,650 51,649 - 0.1% Comfort Systems USA, Inc. 9,800 120,932 Interline Brands, Inc. (a) 8,100 139,887 -------------- 312,468 -------------- BUILDING: ROOFING, Beacon Roofing Supply, Inc. (a) 10,150 162,400 WALLBOARD & PLUMBING - 0.1% -------------- CABLE TELEVISION SERVICES Knology, Inc. (a) 7,000 76,650 - 0.1% Mediacom Communications Corp., Class A (a) 9,900 44,253 -------------- 120,903 -------------- CASINOS & GAMBLING - 0.4% Ameristar Casinos, Inc. 6,400 97,472 Bally Technologies, Inc. (a) 12,800 528,512 Dover Downs Gaming & Entertainment, Inc. 3,605 13,627 Isle of Capri Casinos, Inc. (a) 3,975 29,733 Lakes Entertainment, Inc. (a) 5,300 13,303 Monarch Casino & Resort, Inc. (a) 2,200 17,820 Multimedia Games, Inc. (a) 7,300 43,873 Pinnacle Entertainment, Inc. (a) 14,994 134,646 Shuffle Master, Inc. (a) 13,500 111,240 Youbet.com, Inc. (a) 6,900 19,803 -------------- 1,010,029 -------------- CEMENT - 0.0% U.S. Concrete, Inc. (a) 8,400 7,644 -------------- CHEMICALS: DIVERSIFIED - Aceto Corp. 6,200 31,930 1.2% American Vanguard Corp. 4,733 39,284 Arch Chemicals, Inc. 6,356 196,273 Hawkins, Inc. 1,700 37,111 Innophos Holdings, Inc. 4,290 98,627 LSB Industries, Inc. (a) 4,300 60,630 Landec Corp. (a) 7,000 43,680 OM Group, Inc. (a) 7,200 226,008 Olin Corp. 18,514 324,365 Omnova Solutions, Inc. (a) 9,800 60,074 PolyOne Corp. (a) 23,167 173,057 Rockwood Holdings, Inc. (a) 12,200 287,432 Schulman A, Inc. 5,106 103,039 Sensient Technologies Corp. 11,857 311,839 ShengdaTech, Inc. (a) 7,000 42,910 Solutia, Inc. (a) 28,485 361,760 W.R. Grace & Co. (a) 17,300 438,555 Westlake Chemical Corp. 4,800 119,664 -------------- 2,956,238 -------------- CHEMICALS: SPECIALTY - Balchem Corp. 4,600 154,146 0.5% Calgon Carbon Corp. (a) 12,601 175,154 ICO, Inc. 5,600 40,936 Innospec, Inc. 5,900 59,531 NewMarket Corp. 2,300 263,971 Polypore International, Inc. (a) 6,000 71,400 Quaker Chemical Corp. 2,700 55,728 Stepan Co. 1,955 126,704
10 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Zep, Inc. 5,380 $ 93,182 -------------- 1,040,752 -------------- COAL - 0.3% Cloud Peak Energy, Inc. (a) 6,700 97,552 International Coal Group, Inc. (a) 21,700 83,762 James River Coal Co. (a) 6,200 114,886 Patriot Coal Corp. (a) 17,500 270,550 Westmoreland Coal Co. (a) 2,400 21,384 -------------- 588,134 -------------- COMMERCIAL FINANCE & Financial Federal Corp. 6,500 178,750 MORTGAGE COMPANIES - 0.1% Medallion Financial Corp. 3,700 30,229 NewStar Financial, Inc. (a) 6,000 23,520 -------------- 232,499 -------------- COMMERCIAL SERVICES - ABM Industries, Inc. 11,370 234,904 2.6% APAC Customer Services, Inc. (a) 6,900 41,124 Administaff, Inc. 5,061 119,389 The Advisory Board Co. (a) 3,900 119,574 Barrett Business Services, Inc. 1,800 22,122 CBIZ, Inc. (a) 10,953 84,338 CDI Corp. 3,101 40,158 CRA International, Inc. (a) 2,400 63,960 CoStar Group, Inc. (a) 4,450 185,876 Compass Diversified Holdings 5,800 74,008 Cornell Cos., Inc. (a) 2,500 56,750 Corporate Executive Board Co. 8,100 184,842 Diamond Management & Technology Consultants, Inc. 5,500 40,535 Dice Holdings, Inc. (a) 3,600 23,580 DynCorp. International, Inc. (a) 6,100 87,535 ExlService Holdings, Inc. (a) 3,800 69,008 Forrester Research, Inc. (a) 3,281 85,142 G&K Services, Inc., Class A 4,677 117,533 GP Strategies Corp. (a) 3,600 27,108 The Geo Group, Inc. (a) 12,100 264,748 Global Sources Ltd. (a) 3,997 24,981 The Hackett Group, Inc. (a) 9,600 26,688 Healthcare Services Group, Inc. 10,537 226,124 Heidrick & Struggles International, Inc. 3,758 117,400 Huron Consulting Group, Inc. (a) 5,000 115,200 ICF International, Inc. (a) 1,700 45,560 ICT Group, Inc. (a) 2,100 34,293 Innodata Corp. (a) 4,300 23,822 Kelly Services, Inc., Class A 6,468 77,163 Kforce, Inc. (a) 7,400 92,500 Korn/Ferry International (a) 10,168 167,772 Liquidity Services, Inc. (a) 3,600 36,252 LoopNet, Inc. (a) 4,700 46,718 MAXIMUS, Inc. 4,004 200,200 MPS Group, Inc. (a) 22,805 313,341 Mac-Gray Corp. (a) 3,100 31,930 Navigant Consulting, Inc. (a) 12,323 183,120
11 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- On Assignment, Inc. (a) 8,900 $ 63,635 Resources Connection, Inc. (a) 11,232 238,343 Rollins, Inc. 10,953 211,174 SYKES Enterprises, Inc. (a) 8,161 207,861 Spherion Corp. (a) 12,929 72,661 Standard Parking Corp. (a) 1,600 25,408 Startek, Inc. (a) 3,300 24,684 TeleTech Holdings, Inc. (a) 7,789 156,014 TrueBlue, Inc. (a) 10,922 161,755 Unifirst Corp. 3,500 168,385 Volt Information Sciences, Inc. (a) 2,938 29,380 Watson Wyatt Worldwide, Inc. (a) 9,915 471,161 World Fuel Services Corp. 13,800 369,702 -------------- 5,905,461 -------------- COMMERCIAL SERVICES: Aircastle Ltd. 11,800 116,230 RENTAL & LEASING - 0.4% CAI International, Inc. (a) 2,200 19,866 Electro Rent Corp. 4,453 51,388 H&E Equipment Services, Inc. (a) 6,600 69,234 McGrath RentCorp 6,010 134,384 Mobile Mini, Inc. (a) 9,142 128,811 PHH Corp. (a)(b) 13,064 210,461 RSC Holdings, Inc. (a) 11,800 83,072 TAL International Group, Inc. 3,600 47,628 United Rentals, Inc. (a) 15,000 147,150 Willis Lease Finance Corp. (a) 1,500 22,500 -------------- 1,030,724 -------------- COMMERCIAL VEHICLES & Force Protection, Inc. (a) 17,500 91,175 PARTS - 0.2% Miller Industries, Inc. (a) 2,700 30,645 Modine Manufacturing Co. 10,694 126,617 Rush Enterprises, Inc., Class A (a) 8,200 97,498 Spartan Motors, Inc. 8,100 45,603 -------------- 391,538 -------------- COMMUNICATIONS TECHNOLOGY 3Com Corp. (a) 93,000 697,500 - 2.9% AboveNet, Inc. (a) 3,000 195,120 Acme Packet, Inc. (a) 10,100 111,100 Adtran, Inc. 12,700 286,385 Airvana, Inc. (a) 5,300 40,280 Anaren, Inc. (a) 3,022 45,481 Anixter International, Inc. (a) 6,872 323,671 Aruba Networks, Inc. (a) 14,900 158,834 Bel Fuse, Inc. 2,559 54,993 BigBand Networks, Inc. (a) 8,200 28,208 Black Box Corp. 4,088 115,854 Comtech Telecommunications Corp. (a) 6,425 225,196 Digi International, Inc. (a) 6,200 56,544 DigitalGlobe, Inc. (a) 3,800 91,960 EMS Technologies, Inc. (a) 3,800 55,100 Echelon Corp. (a)(b) 8,413 97,254 Emulex Corp. (a) 19,000 207,100 Extreme Networks, Inc. (a) 22,300 64,001
12 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- GSI Technology, Inc. (a) 4,100 $ 18,368 GeoEye, Inc. (a) 4,100 114,308 Globecomm Systems, Inc. (a) 5,200 40,664 Harmonic, Inc. (a) 23,996 151,895 Harris Stratex Networks, Inc., Class A (a) 13,450 92,939 Hughes Communications, Inc. (a) 2,100 54,663 Infinera Corp. (a) 20,600 182,722 InterDigital, Inc. (a)(b) 10,200 270,708 Ixia (a) 7,229 53,784 KVH Industries, Inc. (a) 2,700 39,825 Loral Space & Communications Ltd. (a) 2,700 85,347 NETGEAR, Inc. (a) 8,100 175,689 Network Equipment Technologies, Inc. (a) 8,100 32,805 Novatel Wireless, Inc. (a) 6,300 50,211 Oplink Communications, Inc. (a) 4,402 72,149 PC-Tel, Inc. (a) 4,800 28,416 Plantronics, Inc. 12,099 314,332 Polycom, Inc. (a) 19,600 489,412 Power-One, Inc. (a) 19,200 83,520 Riverbed Technology, Inc. (a) 13,000 298,610 SeaChange International, Inc. (a) 7,500 49,275 Shoretel, Inc. (a) 10,309 59,586 Sonus Networks, Inc. (a) 51,600 108,876 Switch and Data Facilities Co., Inc. (a) 5,000 101,050 Sycamore Networks, Inc. 4,940 103,295 Syniverse Holdings, Inc. (a) 16,600 290,168 Tekelec (a) 15,200 232,256 Viasat, Inc. (a) 6,301 200,246 -------------- 6,649,700 -------------- COMPUTER SERVICES 3PAR, Inc. (a) 6,700 79,395 SOFTWARE & SYSTEMS - 6.7% ACI Worldwide, Inc. (a)(c) 8,685 148,948 AMICAS, Inc. (a) 8,100 44,064 ActivIdentity Corp. (a) 12,900 30,315 Actuate Corp. (a) 11,200 47,936 Acxiom Corp. (a) 16,900 226,798 American Reprographics Co. (a) 9,100 63,791 American Software, Class A 5,700 34,200 ArcSight, Inc. (a) 4,100 104,878 Ariba, Inc. (a) 21,480 268,930 Art Technology Group, Inc. (a) 31,700 142,967 AsiaInfo Holdings, Inc. (a) 7,200 219,384 Avid Technology, Inc. (a) 7,400 94,424 Blackbaud, Inc. 10,926 258,181 Blackboard, Inc. (a) 7,800 354,042 Blue Coat Systems, Inc. (a) 9,600 273,984 Bottomline Technologies, Inc. (a) 6,500 114,205 CACI International, Inc., Class A (a) 6,900 337,065 COMSYS IT Partners, Inc. (a) 3,600 32,004 CSG Systems International, Inc. (a) 8,500 162,265 Callidus Software, Inc. (a) 7,300 22,046
13 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- China Information Security Technology, Inc. (a) 6,700 $ 41,272 China Transinfo Technology (a) 2,100 17,157 Chordiant Software, Inc. (a) 7,540 20,735 Ciber, Inc. (a) 18,202 62,797 ComScore, Inc. (a) 5,600 98,280 CommVault Systems, Inc. (a) 10,100 239,269 Compellent Technologies, Inc. (a) 4,100 92,988 Computer Task Group, Inc. (a) 4,300 34,443 Concur Technologies, Inc. (a) 9,800 418,950 DealerTrack Holdings, Inc. (a) 9,600 180,384 Delrek, Inc. (a) 3,529 27,456 DemandTec, Inc. (a) 5,000 43,850 Digital River, Inc. (a) 8,800 237,512 DivX, Inc. (a) 8,700 49,068 Double-Take Software, Inc. (a) 4,300 42,957 EarthLink, Inc. 23,900 198,609 Ebix, Inc. (a) 1,600 78,128 eLoyalty Corp. (a) 2,100 14,427 Epicor Software Corp. (a) 11,200 85,344 EPIQ Systems, Inc. (a) 7,817 109,360 ePlus, Inc. (a) 800 13,208 FalconStor Software, Inc. (a) 8,909 36,171 Fortinet, Inc. (a) 2,400 42,168 GSE Systems, Inc. (a) 4,300 23,564 Gartner, Inc., Class A (a) 14,879 268,417 i2 Technologies, Inc. (a) 3,800 72,656 iGate Corp. 5,500 55,000 Imergent, Inc. 1,600 9,712 infoGROUP, Inc. 8,061 64,649 Informatica Corp. (a) 20,800 537,888 Infospace, Inc. (a) 8,700 74,559 Integral Systems, Inc. (a) 3,182 27,556 Interactive Intelligence, Inc. (a) 3,100 57,164 Internap Network Services Corp. (a) 12,690 59,643 Internet Brands, Inc., Class A (a) 7,300 57,159 Internet Capital Group, Inc. (a) 9,200 61,180 JDA Software Group, Inc. (a) 6,608 168,306 Kenexa Corp. (a) 5,600 73,080 Keynote Systems, Inc. 3,100 33,821 Lawson Software, Inc. (a) 34,000 226,100 Limelight Networks, Inc. (a) 7,100 27,903 Lionbridge Technologies, Inc. (a) 16,100 37,030 LivePerson, Inc. (a) 9,800 68,306 LogMeIn, Inc. (a) 1,700 33,915 Manhattan Associates, Inc. (a) 5,639 135,505 Mantech International Corp., Class A (a) 5,100 246,228 Mentor Graphics Corp. (a) 23,600 208,388 Mercury Computer Systems, Inc. (a) 5,756 63,374 MicroStrategy, Inc., Class A (a) 2,000 188,040 Moduslink Global Solutions, Inc. (a) 11,480 108,027
14 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Monotype Imaging Holdings, Inc. (a) 5,900 $ 53,277 NCI, Inc., Class A (a) 1,200 33,180 NIC, Inc. 13,100 119,734 Ness Technologies, Inc. (a) 9,700 47,530 NetScout Systems, Inc. (a) 5,800 84,912 NetSuite, Inc. (a) 4,000 63,920 OpenTable, Inc. (a) 700 17,822 Openwave Systems, Inc. (a) 22,100 50,388 Opnet Technologies, Inc. 3,022 36,838 PAR Technology Corp. (a) 2,000 11,560 PROS Holdings, Inc. (a) 4,500 46,575 Parametric Technology Corp. (a) 28,160 460,134 Pegasystems, Inc. 3,400 115,600 Perficient, Inc. (a) 7,200 60,696 Pervasive Software Inc. (a) 3,500 16,870 Phoenix Technologies Ltd. (a) 7,300 20,075 Progress Software Corp. (a) 10,008 292,334 QAD, Inc. 2,900 17,719 Quest Software, Inc. (a) 14,300 263,120 Rackspace Hosting, Inc. (a) 16,200 337,770 Radiant Systems, Inc. (a) 6,900 71,760 RealNetworks, Inc. (a) 21,100 78,281 RightNow Technologies, Inc. (a) 5,200 90,324 SAVVIS, Inc. (a) 9,180 128,979 SRA International, Inc., Class A (a) 10,400 198,640 SYNNEX Corp. (a) 4,200 128,772 Saba Software, Inc. (a) 5,600 23,184 Sapient Corp. (a) 21,492 177,739 Smith Micro Software, Inc. (a) 6,700 61,238 SolarWinds, Inc. (a) 2,900 66,729 Solera Holdings, Inc. 16,900 608,569 SonicWALL, Inc. (a) 13,441 102,286 Sourcefire, Inc. (a) 5,585 149,399 Stanley, Inc. (a) 3,000 82,230 SuccessFactors, Inc. (a) 10,700 177,406 Support.com, Inc. (a) 11,600 30,624 Synchronoss Technologies, Inc. (a) 5,000 79,050 Syntel, Inc. 3,183 121,049 TIBCO Software, Inc. (a) 40,700 391,941 TNS, Inc. (a) 6,100 156,709 Taleo Corp., Class A (a) 9,000 211,680 TechTarget, Inc. (a) 2,900 16,327 TeleCommunication Systems, Inc., Class A (a) 9,400 90,992 Terremark Worldwide, Inc. (a) 13,460 92,066 Tier Technologies, Inc., Class B (a) 4,100 32,800 Tyler Technologies, Inc. (a) 7,500 149,325 Ultimate Software Group, Inc. (a) 6,100 179,157 Unica Corp. (a) 3,100 24,025 Unisys Corp. (a) 10,010 385,986 United Online, Inc. 20,628 148,315
15 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- VASCO Data Security International, Inc. (a) 6,700 $ 42,009 VeriFone Holdings, Inc. (a) 17,800 291,564 Virtusa Corp. (a) 3,000 27,180 Web.Com Group, Inc. (a) 7,000 45,710 Websense, Inc. (a) 11,102 193,841 Zix Corp. (a) 14,600 24,966 -------------- 15,262,431 -------------- COMPUTER TECHNOLOGY - % Adaptec, Inc. (a) 26,000 87,100 0.9 Cray, Inc. (a) 8,300 53,286 Dynamics Research Corp. (a) 2,000 21,220 Imation Corp. 6,100 53,192 Immersion Corp. (a) 7,000 31,990 Insight Enterprises, Inc. (a) 11,598 132,449 Intermec, Inc. (a) 15,509 199,446 Isilon Systems, Inc. (a) 6,100 41,846 Netezza Corp. (a) 12,100 117,370 PC Connection, Inc. (a) 2,100 14,175 PC Mall, Inc. (a) 2,800 14,616 Palm, Inc. (a)(b) 38,988 391,440 Quantum Corp. (a) 48,600 142,398 Radisys Corp. (a) 5,842 55,791 Rimage Corp. (a) 2,300 39,882 STEC, Inc. (a)(b) 5,400 88,236 Safeguard Scientifics, Inc. (a) 4,533 46,735 Silicon Graphics International Corp. (a) 7,400 51,874 Stratasys, Inc. (a) 5,100 88,128 Super Micro Computer, Inc. (a) 5,300 58,936 Synaptics, Inc. (a)(b) 7,900 242,135 -------------- 1,972,245 -------------- CONSTRUCTION - 0.6% EMCOR Group, Inc. (a) 16,172 435,027 Granite Construction, Inc. 7,837 263,793 Great Lakes Dredge & Dock Corp. 9,200 59,616 Insituform Technologies, Inc., Class A (a) 9,738 221,247 Orion Marine Group, Inc. (a) 6,300 132,678 Primoris Services Corp. 1,800 14,346 Sterling Construction Co., Inc. (a) 3,600 69,048 Tutor Perini Corp. (a) 6,300 113,904 -------------- 1,309,659 -------------- CONSUMER ELECTRONICS - Audiovox Corp., Class A (a) 4,285 30,381 0.2% Ipass, Inc. 11,400 11,856 TiVo, Inc. (a) 25,494 259,529 Universal Electronics, Inc. (a) 2,986 69,335 -------------- 371,101 -------------- CONSUMER LENDING - 0.7% Advance America, Cash Advance Centers, Inc. 10,600 58,936 Asset Acceptance Capital Corp. (a) 3,700 25,086 Cash America International, Inc. 6,919 241,888 Credit Acceptance Corp. (a)(b) 1,562 65,760 Dollar Financial Corp. (a) 6,000 141,960 Encore Capital Group, Inc. (a) 3,300 57,420 Ezcorp, Inc. (a) 11,000 189,310
16 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- First Cash Financial Services, Inc. (a) 5,000 $ 110,950 The First Marblehead Corp. (a) 15,500 33,015 MGIC Investment Corp. (a)(b) 28,600 165,308 MoneyGram International, Inc. (a) 19,400 55,872 Nelnet, Inc., Class A 4,700 80,981 Portfolio Recovery Associates, Inc. (a)(b) 3,900 175,032 QC Holdings, Inc. 1,400 6,734 Tree.com, Inc. (a) 1,400 12,810 World Acceptance Corp. (a)(b) 3,700 132,571 -------------- 1,553,633 -------------- CONSUMER SERVICES: Ancestry.com, Inc. (a) 1,200 16,812 MISCELLANEOUS - 0.7% Coinstar, Inc. (a) 6,892 191,460 Core-Mark Holdings Co., Inc. (a) 2,300 75,808 Jackson Hewitt Tax Service, Inc. 5,500 24,200 The Knot, Inc. (a) 7,400 74,518 Mercadolibre, Inc. (a) 6,300 326,781 Move, Inc. (a) 40,000 66,400 Nutrisystem, Inc. (b) 7,100 221,307 Pre-Paid Legal Services, Inc. (a) 1,760 72,301 Sotheby's Holdings, Inc., Class A (b) 16,236 364,985 Steiner Leisure Ltd. (a) 3,700 147,112 -------------- 1,581,684 -------------- CONTAINERS & PACKAGING - AEP Industries, Inc. (a) 1,300 49,764 0.5% Bway Holding Co. (a) 1,900 36,518 Graphic Packaging Holding Co. (a) 26,300 91,261 Myers Industries, Inc. 7,852 71,453 Rock-Tenn Co., Class A 9,180 462,764 Silgan Holdings, Inc. 6,200 358,856 -------------- 1,070,616 -------------- COSMETICS - 0.2% Bare Escentuals, Inc. (a) 16,500 201,795 Elizabeth Arden, Inc. (a) 6,093 87,983 Inter Parfums, Inc. 3,550 43,203 Revlon, Inc., Class A (a) 4,500 76,545 -------------- 409,526 -------------- DIVERSIFIED FINANCIAL American Physicians Service Group, Inc. 1,500 34,605 SERVICES - 0.5% Broadpoint Gleacher Securities, Inc. (a) 11,800 52,628 Cheviot Financial Corp. 500 3,695 Duff & Phelps Corp. 4,200 76,692 Evercore Partners, Inc., Class A 3,200 97,280 FBR Capital Markets Corp. (a) 3,600 22,248 First California Financial Group (a) 1,100 3,014 Main Street Capital Corp. 1,600 25,792 Piper Jaffray Cos. (a) 4,500 227,745 Rewards Network, Inc. 1,833 23,169 Sanders Morris Harris Group, Inc. 4,500 24,750 Stifel Financial Corp. (a) 7,149 423,507 Thomas Weisel Partners Group, Inc. (a) 5,000 18,900 Triangle Capital Corp. 2,100 25,389 -------------- 1,059,414 --------------
17 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- DIVERSIFIED MANUFACTURING A.M. Castle & Co. 4,100 $ 56,129 OPERATIONS - 0.2% Barnes Group, Inc. 11,714 197,967 Federal Signal Corp. 12,159 73,197 Raven Industries, Inc. 4,000 127,080 Standex International Corp. 3,031 60,893 Trimas Corp. (a) 3,700 25,049 -------------- 540,315 -------------- DIVERSIFIED MATERIALS & Belden, Inc. 11,561 253,417 PROCESSING - 0.8% Cabot Microelectronics Corp. (a) 5,800 191,168 Clarcor, Inc. 12,610 409,068 Encore Wire Corp. (b) 4,450 93,761 Fushi Copperweld, Inc. (a) 3,800 38,456 Harbinger Group, Inc. (a) 2,100 14,742 Hexcel Corp. (a) 23,962 311,027 Insteel Industries, Inc. 4,400 57,200 Koppers Holdings, Inc. 5,000 152,200 NL Industries, Inc. 1,734 12,034 Rogers Corp. (a) 4,055 122,907 Symyx Technologies, Inc. (a) 8,479 46,635 Tredegar Corp. 7,245 114,616 Uranium Energy Corp. (a) 12,500 47,250 -------------- 1,864,481 -------------- DIVERSIFIED MEDIA - 0.1% Belo Corp., Class A 22,100 120,224 EW Scripps Co. (a) 6,200 43,152 Playboy Enterprises, Inc., Class B (a) 5,507 17,622 -------------- 180,998 -------------- DIVERSIFIED RETAIL - 0.6% 99 Cents Only Stores (a) 11,500 150,305 Dillard's, Inc., Class A 11,800 217,710 Fred's, Inc. 8,535 87,057 GSI Commerce, Inc. (a) 6,900 175,191 Gaiam, Inc. (a) 4,467 34,351 HSN, Inc. (a) 9,800 197,862 Lumber Liquidators, Inc. (a) 3,200 85,760 Overstock.com, Inc. (a) 3,900 52,884 PriceSmart, Inc. 4,200 85,848 Saks, Inc. (a)(b) 29,600 194,176 Tuesday Morning Corp. (a) 7,490 19,324 -------------- 1,300,468 -------------- DRUG & GROCERY STORE Arden Group, Inc., Class A 232 22,184 CHAINS - 0.7% Casey's General Stores, Inc. 12,107 386,455 drugstore.com, Inc. (a) 21,500 66,435 The Great Atlantic & Pacific Tea Co., Inc. (a) 8,427 99,354 Ingles Markets, Inc., Class A 3,164 47,871 Nash Finch Co. 3,277 121,544 The Pantry, Inc. (a) 4,600 62,514 PetMed Express, Inc. (b) 5,500 96,965 Ruddick Corp. 9,869 253,929 Spartan Stores, Inc. 5,500 78,595 Susser Holdings Corp. (a) 1,900 16,321 Village Super Market, Inc., Class A 1,600 43,712
18 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Weis Markets, Inc. 2,700 $ 98,172 Winn-Dixie Stores, Inc. (a) 13,800 138,552 -------------- 1,532,603 -------------- EDUCATION SERVICES - 0.6% Ambassadors Group, Inc. 4,700 62,463 American Public Education, Inc. (a) 4,000 137,440 Archipelago Learning, Inc. (a) 1,300 26,910 Bridgepoint Education, Inc. (a) 3,600 54,072 Capella Education Co. (a) 3,300 248,490 Chinacast Education Corp. (a) 7,800 58,968 Corinthian Colleges, Inc. (a)(b) 18,400 253,368 Franklin Covey Co. (a) 3,700 23,310 Grand Canyon Education, Inc. (a) 3,800 72,238 K12, Inc. (a) 5,300 107,431 Learning Tree International, Inc. (a) 2,100 25,074 Lincoln Educational Services Corp. (a) 1,800 39,006 Nobel Learning Communities, Inc. (a) 1,400 10,626 The Princeton Review, Inc. (a) 3,600 14,616 Renaissance Learning, Inc. 1,249 14,189 Rosetta Stone, Inc. (a) 1,700 30,515 School Specialty, Inc. (a) 4,654 108,857 Universal Technical Institute, Inc. (a) 5,300 107,060 -------------- 1,394,633 -------------- ELECTRONIC COMPONENTS - 3D Systems Corp. (a) 4,400 49,720 0.5% Acacia Research - Acacia Technologies (a) 7,700 70,147 Checkpoint Systems, Inc. (a) 9,823 149,801 Cogent, Inc. (a) 9,000 93,510 DDi Corp. (a) 4,300 21,027 Methode Electronics, Inc. 9,480 82,286 Microvision, Inc. (a)(b) 18,900 59,913 Multi-Fineline Electronix, Inc. (a) 2,400 68,088 NVE Corp. (a) 1,000 41,310 Park Electrochemical Corp. 5,149 142,318 ScanSource, Inc. (a) 6,500 173,550 Smart Modular Technologies WWH, Inc. (a) 9,200 57,868 TTM Technologies, Inc. (a) 10,800 124,524 Technitrol, Inc. 10,361 45,381 Universal Display Corp. (a)(b) 7,107 87,843 -------------- 1,267,286 -------------- ELECTRONIC ENTERTAINMENT DTS, Inc. (a) 3,800 129,998 - 0.2% Memsic, Inc. (a) 4,800 15,744 THQ, Inc. (a)(b) 15,537 78,306 Take-Two Interactive Software, Inc. (a)(b) 18,000 180,900 -------------- 404,948 -------------- ELECTRONICS - 0.5% Agilysys, Inc. 3,163 28,783 American Science & Engineering, Inc. 2,000 151,680 CPI International, Inc. (a) 1,800 23,832 Coherent, Inc. (a) 5,300 157,569 Daktronics, Inc. (b) 8,398 77,346 II-VI, Inc. (a) 6,220 197,796 IPG Photonics Corp. (a) 5,600 93,744
19 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- iRobot Corp. (a) 4,700 $ 82,720 Newport Corp. (a) 9,035 83,032 Rofin-Sinar Technologies, Inc. (a) 7,300 172,353 SRS Labs Inc. (a) 2,600 19,058 Spectrum Control, Inc. (a) 2,900 27,463 -------------- 1,115,376 -------------- ENERGY EQUIPMENT - 0.2% Ascent Solar Technologies, Inc. (a) 3,600 19,080 Energy Conversion Devices, Inc. (a)(b) 10,564 111,661 Evergreen Solar, Inc. (a)(b) 48,300 72,933 FuelCell Energy, Inc. (a) 16,926 63,642 GT Solar International, Inc. (a)(b) 7,400 41,144 PowerSecure International, Inc. (a) 4,300 31,003 Raser Technologies, Inc. (a)(b) 12,700 15,748 STR Holdings, Inc. (a) 2,300 36,133 -------------- 391,344 -------------- ENGINEERING & CONTRACTING Argan, Inc. (a) 2,100 30,219 SERVICES - 0.5% Dycom Industries, Inc. (a) 9,902 79,513 ENGlobal Corp. (a) 4,100 12,833 Exponent, Inc. (a) 3,404 94,767 Furmamite Corp. (a) 9,000 34,290 Hill International, Inc. (a) 6,200 38,688 Integrated Electrical Services, Inc. (a) 1,800 10,530 Layne Christensen Co. (a) 4,900 140,679 MYR Group, Inc. (a) 3,700 66,896 Michael Baker Corp. (a) 1,900 78,660 Mistras Group, Inc. (a) 1,800 27,108 Tetra Tech, Inc. (a) 14,331 389,373 VSE Corp. 1,000 45,080 -------------- 1,048,636 -------------- ENTERTAINMENT - 0.3% Ascent Media Corp., Class A (a) 3,500 89,355 CKX, Inc. (a) 14,900 78,523 Carmike Cinemas, Inc. (a) 2,500 18,900 Cinemark Holdings, Inc. 8,400 120,708 Live Nation, Inc. (a) 20,600 175,306 LodgeNet Interactive Corp. (a) 4,700 25,991 Reading International, Inc., Class A (a) 5,000 20,250 Rentrak Corp. (a) 2,200 38,874 World Wrestling Entertainment, Inc. 4,496 68,924 -------------- 636,831 -------------- FINANCIAL DATA & SYSTEMS Advent Software, Inc. (a) 4,000 162,920 - 1.1% Cardtronics, Inc. (a) 3,200 35,424 Cass Information Systems, Inc. 2,115 64,296 CompuCredit Holdings Corp. (b) 4,089 13,616 CyberSource Corp. (a) 16,764 337,124 Euronet Worldwide, Inc. (a)(b) 12,050 264,497 Fair Isaac Corp. 11,200 238,672 Global Cash Access, Inc. (a) 9,900 74,151 Heartland Payment Systems, Inc. 9,700 127,361 Information Services Group, Inc. (a) 5,500 17,435 Jack Henry & Associates, Inc. 20,100 464,712
20 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Net 1 UEPS Technologies, Inc. (a) 7,600 $ 147,592 Online Resources Corp. (a) 6,400 33,664 RiskMetrics Group, Inc. (a) 5,300 84,323 S1 Corp. (a) 13,222 86,207 Value Line, Inc. 100 2,511 Wright Express Corp. (a) 9,500 302,670 -------------- 2,457,175 -------------- FOODS - 1.2% American Dairy, Inc. (a)(b) 2,100 45,528 American Italian Pasta Co., Class A (a) 4,700 163,513 B&G Foods, Inc., Class A 6,100 55,998 China Biotics, Inc. (a) 1,800 27,846 Chiquita Brands International, Inc. (a) 11,100 200,244 Diamond Foods, Inc. 4,000 142,160 Dole Food Co., Inc. (a) 7,600 94,316 Hain Celestial Group, Inc. (a) 9,057 154,060 J&J Snack Foods Corp. 3,500 139,860 Lancaster Colony Corp. 4,499 223,600 Lance, Inc. 7,100 186,730 Lifeway Foods, Inc. (a) 1,000 11,880 Medifast, Inc. (a) 2,900 88,682 Nutraceutical International Corp. (a) 2,500 30,925 Omega Protein Corp. (a) 4,700 20,492 Overhill Farms, Inc. (a) 4,500 21,870 Schiff Nutrition International, Inc. 1,500 11,730 Seneca Foods Corp. (a) 2,000 47,740 Smart Balance, Inc. (a) 15,700 94,200 Synutra International, Inc. (a)(b) 4,800 64,848 Tootsie Roll Industries, Inc. (b) 6,157 168,579 TreeHouse Foods, Inc. (a) 7,300 283,678 United Natural Foods, Inc. (a) 10,680 285,583 Zhongpin, Inc. (a) 5,300 82,733 -------------- 2,646,795 -------------- FOREST PRODUCTS - 0.1% Deltic Timber Corp. 2,709 125,102 Universal Forest Products, Inc. 4,634 170,578 -------------- 295,680 -------------- FORMS & BULK PRINTING Bowne & Co., Inc. 8,503 56,800 SERVICES - 0.3% Consolidated Graphics, Inc. (a) 2,400 84,048 Deluxe Corp. 12,800 189,312 Ennis, Inc. 6,400 107,456 Innerworkings, Inc. (a) 5,700 33,630 M&F Worldwide Corp. (a) 2,800 110,600 Multi-Color Corp. 2,450 29,915 Schawk, Inc. 3,800 51,680 The Standard Register Co. 4,145 21,140 -------------- 684,581 -------------- FUNERAL PARLORS & Matthews International Corp., Class A 7,373 261,225 CEMETERIES - 0.2% Stewart Enterprises, Inc., Class A 20,524 105,699 -------------- 366,924 -------------- GAS PIPELINE - 0.0% Crosstex Energy, Inc. 9,200 55,660 GLASS - 0.0% Apogee Enterprises, Inc. (b) 7,100 99,400
21 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- GOLD - 0.2% Allied Nevada Gold Corp. (a)(b) 12,700 $ 191,516 Coeur d'Alene Mines Corp. (a) 17,570 317,314 US Gold Corp. (a) 21,200 52,576 -------------- 561,406 -------------- HEALTH CARE FACILITIES - Amsurg Corp. (a) 7,700 169,554 0.6% Assisted Living Concepts, Inc. (a) 2,440 64,343 Capital Senior Living Corp. (a) 5,300 26,606 Emeritus Corp. (a) 5,000 93,750 The Ensign Group, Inc. 2,531 38,901 Hanger Orthopedic Group, Inc. (a) 6,100 84,363 Kindred Healthcare, Inc. (a) 8,790 162,263 LCA-Vision, Inc. (a) 4,900 25,088 MedCath Corp. (a) 3,700 29,267 National Healthcare Corp. 1,900 68,609 Psychiatric Solutions, Inc. (a) 13,000 274,820 Select Medical Holdings Corp. (a) 7,100 75,402 Skilled Healthcare Group, Inc., Class A (a) 3,600 26,820 Sun Healthcare Group, Inc. (a) 10,900 99,953 Sunrise Senior Living, Inc. (a) 11,174 35,980 US Physical Therapy, Inc. (a) 3,000 50,790 -------------- 1,326,509 -------------- HEALTH CARE MANAGEMENT AMERIGROUP Corp. (a) 12,200 328,912 SERVICES - 1.0% American Caresource Holdings, Inc. (a) 2,500 6,000 American Dental Partners, Inc. (a) 3,200 41,280 Bioscript, Inc. (a) 10,200 85,272 Catalyst Health Solutions, Inc. (a) 8,900 324,583 Centene Corp. (a) 9,800 207,466 Computer Programs & Systems, Inc. 2,100 96,705 Contiucare Corp. (a) 6,500 28,405 HealthSpring, Inc. (a) 12,200 214,842 Magellan Health Services, Inc. (a) 8,400 342,132 MedQuist Inc. 1,900 12,711 Metropolitan Health Networks, Inc. (a) 11,600 23,084 Molina Healthcare, Inc. (a) 3,200 73,184 National Research Corp. 300 6,210 Transcend Services, Inc. (a) 1,500 32,040 Triple-S Management Corp. (a) 5,300 93,280 Universal American Financial Corp. (a) 6,400 74,880 WellCare Health Plans, Inc. (a) 10,300 378,628 -------------- 2,369,614 -------------- HEALTH CARE SERVICES - AMN Healthcare Services, Inc. (a) 8,405 76,149 2.0% Air Methods Corp. (a) 2,400 80,688 Alliance Healthcare Services, Inc. (a) 5,800 33,118 Allied Healthcare International, Inc. (a) 12,700 36,957 Almost Family, Inc. (a) 1,700 67,201 Amedisys, Inc. (a)(b) 6,366 309,133 athenahealth, Inc. (a) 8,200 370,968 CardioNet, Inc. (a) 4,500 26,730 Chemed Corp. 5,472 262,492 Chindex International, Inc. (a) 3,300 46,629
22 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Corvel Corp. (a) 1,885 $ 63,223 Cross Country Healthcare, Inc. (a) 7,700 76,307 Eclipsys Corp. (a) 14,031 259,854 Emergency Medical Services Corp. (a) 6,700 362,805 Gentiva Health Services, Inc. (a) 6,912 186,693 HMS Holdings Corp. (a) 5,900 287,271 Health Grades, Inc. (a) 5,500 23,595 HealthSouth Corp. (a) 22,000 412,940 Healthways, Inc. (a) 8,600 157,724 IPC The Hospitalist Co., Inc. (a) 4,000 133,000 LHC Group, Inc. (a) 3,400 114,274 MWI Veterinary Supply, Inc. (a) 2,800 105,560 Medidata Solutions, Inc. (a) 1,600 24,960 NovaMed Eyecare, Inc. (a)(b) 4,400 17,072 Odyssey HealthCare, Inc. (a) 8,200 127,756 Omnicell, Inc. (a) 7,900 92,351 PharMerica Corp. (a) 7,569 120,196 Phase Forward, Inc. (a) 10,900 167,315 Quality Systems, Inc. 5,500 345,345 RehabCare Group, Inc. (a) 5,595 170,256 Res-Care, Inc. (a) 6,400 71,680 Virtual Radiologic Corp. (a) 1,600 20,416 -------------- 4,650,658 -------------- HEALTH CARE: MedAssets, Inc. (a) 9,800 207,858 MISCELLANEOUS - 0.1% The Providence Service Corp. (a) 3,000 47,400 -------------- 255,258 -------------- HOME BUILDING - 0.3% Beazer Homes USA, Inc. (a)(b) 8,300 40,172 Brookfield Homes Corp. (a)(b) 2,451 19,608 Hovnanian Enterprises, Inc., Class A (a)(b) 11,600 44,544 M/I Homes, Inc. (a) 4,100 42,599 Meritage Homes Corp. (a) 7,800 150,774 Ryland Group, Inc. 9,800 193,060 Standard-Pacific Corp. (a) 25,200 94,248 -------------- 585,005 -------------- HOTEL/MOTEL - 0.2% Gaylord Entertainment Co. (a)(b) 9,155 180,811 Marcus Corp. 4,979 63,831 Morgans Hotel Group Co. (a) 5,800 26,274 Orient Express Hotels Ltd., Class A (b) 18,900 191,646 Red Lion Hotels Corp. (a) 4,000 19,760 -------------- 482,322 -------------- HOUSEHOLD APPLIANCES - National Presto Industries, Inc. 1,050 114,692 0.0% -------------- HOUSEHOLD EQUIPMENT & American Greetings Corp., Class A 9,300 202,647 PRODUCTS - 0.6% Blyth, Inc. 1,525 51,423 CSS Industries, Inc. 1,891 36,761 Central Garden & Pet Co., Class A (a) 15,534 154,408 Helen of Troy Ltd. (a) 7,300 178,558 Nivs Intellimedia Technology (a) 1,400 3,612 Tupperware Corp. 15,174 706,653 -------------- 1,334,062 -------------- HOUSEHOLD FURNISHINGS - American Woodmark Corp. 2,600 51,168 0.4%
23 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Ethan Allen Interiors, Inc. (b) 5,200 $ 69,784 Furniture Brands International, Inc. (a) 10,400 56,784 Hooker Furniture Corp. 2,500 30,925 Kirkland's, Inc. (a) 2,600 45,162 La-Z-Boy, Inc. (b) 12,900 122,937 Sealy Corp. (a)(b) 10,900 34,444 Stanley Furniture Co., Inc. 2,400 24,360 Tempur-Pedic International, Inc. (a) 17,900 422,977 -------------- 858,541 -------------- INSURANCE: LIFE - 0.4% American Equity Investment Life Holding Co. 13,500 100,440 Citizens, Inc. (a) 7,800 50,934 Conseco, Inc. (a) 46,900 234,500 Delphi Financial Group, Inc., Class A 10,905 243,945 FBL Financial Group, Inc., Class A 3,225 59,727 Independence Holding Co. 740 4,292 Kansas City Life Insurance Co. 1,042 30,999 Life Partners Holdings, Inc. (b) 1,400 29,666 National Western Life Insurance Co., Class A 556 96,533 The Phoenix Cos., Inc. (a) 28,900 80,342 Presidential Life Corp. 5,193 47,516 -------------- 978,894 -------------- INSURANCE: MULTI-LINE - AMBAC Financial Group, Inc. (a)(b) 66,900 55,527 0.9% Assured Guaranty Ltd. 29,200 635,392 Crawford & Co., Class B (a) 5,909 23,281 Eastern Insurance Holdings, Inc. 2,200 18,964 eHealth, Inc. (a) 6,200 101,866 Flagstone Reinsurance Holdings Ltd. 10,300 112,682 Horace Mann Educators Corp. 9,968 124,600 Maiden Holdings Ltd. 12,200 89,304 Max Capital Group Ltd. 11,200 249,760 Pico Holdings, Inc. (a) 5,297 173,371 Platinum Underwriters Holdings Ltd. 11,900 455,651 Primus Guaranty Ltd. (a) 6,000 18,300 -------------- 2,058,698 -------------- INSURANCE: American Physicians Capital, Inc. 1,674 50,756 PROPERTY-CASUALTY - 1.9% American Safety Insurance Holdings Ltd. (a) 2,100 30,345 Amerisafe, Inc. (a) 4,300 77,271 AmTrust Financial Services, Inc. 5,500 65,010 Argo Group International Holdings Ltd. (a) 7,479 217,938 Baldwin & Lyons, Inc., Class B 2,032 50,008 CNA Surety Corp. (a) 4,086 60,841 Donegal Group, Inc., Class A 2,744 42,642 EMC Insurance Group, Inc. 1,300 27,963 Employers Holdings, Inc. 11,380 174,569 Enstar Group Ltd. (a) 1,600 116,832 FPIC Insurance Group, Inc. (a) 1,400 54,068 First Acceptance Corp. (a) 3,877 7,560 First Mercury Financial Corp. 3,600 49,356 Greenlight Capital Re Ltd. (a) 7,000 164,990 Hallmark Financial Services, Inc. (a) 2,100 16,716
24 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Harleysville Group, Inc. 3,462 $ 110,057 Hilltop Holdings, Inc. (a) 9,572 111,418 Infinity Property & Casualty Corp. 3,400 138,176 Meadowbrook Insurance Group, Inc. 14,952 110,645 Mercer Insurance Group, Inc. 1,300 23,621 Montpelier Re Holdings Ltd. 21,000 363,720 NYMAGIC, Inc. 1,100 18,249 National Interstate Corp. 1,600 27,136 Navigators Group, Inc. (a) 3,100 146,041 PMA Capital Corp., Class A (a) 7,806 49,178 The PMI Group, Inc. 15,600 39,312 ProAssurance Corp. (a) 8,023 430,915 RLI Corp. 4,564 243,033 Radian Group, Inc. 18,500 135,235 Safety Insurance Group, Inc. 2,900 105,067 SeaBright Insurance Holdings, Inc. (a) 4,200 48,258 Selective Insurance Group, Inc. 13,208 217,272 State Auto Financial Corp. 3,512 64,972 Stewart Information Services Corp. 4,022 45,368 Tower Group, Inc. 10,786 252,500 United America Indemnity, Ltd. (a) 8,741 69,229 United Fire & Casualty Co. 5,500 100,265 Universal Insurance Holdings, Inc. 3,000 17,610 Zenith National Insurance Corp. 8,855 263,525 -------------- 4,337,667 -------------- LEISURE TIME - 0.6% Bluegreen Corp. (a) 3,500 8,470 Callaway Golf Co. 14,100 106,314 Churchill Downs, Inc. 2,332 87,100 Great Wolf Resorts, Inc. (a) 6,700 15,879 Interval Leisure Group, Inc. (a) 9,700 120,959 Life Time Fitness, Inc. (a)(b) 10,000 249,300 Orbitz Worldwide, Inc. (a) 8,400 61,656 Pool Corp. (b) 11,600 221,328 Smith & Wesson Holding Corp. (a) 12,300 50,307 Speedway Motorsports, Inc. 3,255 57,353 Sport Supply Group, Inc. 2,100 26,439 Steinway Musical Instruments, Inc. (a) 1,700 27,047 Sturm Ruger & Co., Inc. (b) 3,600 34,920 Town Sports International Holdings, Inc. (a) 4,900 11,417 Universal Travel Group (a) 2,400 24,336 Vail Resorts, Inc. (a)(b) 7,156 270,497 West Marine, Inc. (a) 4,100 33,046 -------------- 1,406,368 -------------- LUXURY ITEMS - 0.2% Fossil, Inc. (a) 11,600 389,296 Fuqi International, Inc. (a)(b) 2,700 48,465 Movado Group, Inc. 4,000 38,880 -------------- 476,641 -------------- MACHINERY: AGRICULTURAL - Alamo Group, Inc. 1,600 27,440 0.1% Lindsay Manufacturing Co. (b) 2,713 108,113 Titan International, Inc. (b) 7,849 63,655
25 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Titan Machinery, Inc. (a) 2,300 $ 26,542 -------------- 225,750 -------------- MACHINERY: CONSTRUCTION & Astec Industries, Inc. (a) 4,517 121,688 HANDLING - 0.1% NACCO Industries, Inc., Class A 1,387 69,073 -------------- 190,761 -------------- MACHINERY: ENGINES - 0.1% Briggs & Stratton Corp. (b) 11,300 211,423 Harbin Electric, Inc. (a) 3,300 67,782 -------------- 279,205 -------------- MACHINERY: INDUSTRIAL - Actuant Corp., Class A 16,300 302,039 1.2% Altra Holdings, Inc. (a) 6,700 82,745 Applied Industrial Technologies, Inc. 10,690 235,928 Chart Industries, Inc. (a) 6,700 110,885 Colfax Corp. (a) 6,000 72,240 Columbus McKinnon Corp. (a) 4,736 64,694 DXP Enterprises, Inc. (a) 1,900 24,833 EnPro Industries, Inc. (a) 5,000 132,050 Flow International Corp. (a) 9,400 28,952 Graham Corp. 2,400 49,680 John Bean Technologies Corp. 7,100 120,771 Kadant, Inc. (a) 3,170 50,593 MTS Systems Corp. 4,300 123,582 Middleby Corp. (a) 4,017 196,913 Nordson Corp. 8,210 502,288 Sauer-Danfoss, Inc. 2,773 33,304 Tecumseh Products Co., Class A (a) 4,428 51,763 Tennant Co. 4,674 122,412 Twin Disc, Inc. 2,100 21,924 Woodward Governor Co. 14,858 382,891 -------------- 2,710,487 -------------- MACHINERY: SPECIALTY - Albany International Corp., Class A 6,874 154,390 0.1% Cascade Corp. 2,300 63,227 Duoyuan Printing, Inc. (a) 1,100 8,855 Hurco Companies, Inc. (a) 1,600 23,680 K-Tron International, Inc. (a) 600 65,244 -------------- 315,396 -------------- MANUFACTURED HOUSING - Cavco Industries, Inc. (a) 1,600 57,472 0.0% Skyline Corp. 1,701 31,298 -------------- 88,770 -------------- MEDICAL & DENTAL AGA Medical Holdings, Inc. (a) 2,700 39,879 INSTRUMENTS & SUPPLIES - ATS Medical, Inc. (a) 12,900 41,667 2.7% Abiomed, Inc. (a) 7,700 67,298 Align Technology, Inc. (a) 14,500 258,390 Alphatec Holdings, Inc. (a) 6,700 35,778 American Medical Systems Holdings, Inc. (a) 18,300 353,007 AngioDynamics, Inc. (a) 6,100 98,088 Atrion Corp. 300 46,716 Bovie Medical Corp. (a) 4,700 36,707 CONMED Corp. (a) 7,228 164,798 Cantel Medical Corp. 2,500 50,450 Cardiovascular Systems, Inc. (a) 2,700 12,393
26 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Conceptus, Inc. (a) 7,600 $ 142,576 CryoLife, Inc. (a) 6,100 39,162 Cutera, Inc. (a) 3,100 26,381 Delcath Systems, Inc. (a) 6,400 32,896 Endologix, Inc. (a) 12,000 63,360 ev3, Inc. (a) 17,732 236,545 Exactech, Inc. (a) 1,900 32,889 Hansen Medical, Inc. (a) 5,500 16,665 Heartware International, Inc. (a) 1,200 42,564 Home Diagnostics, Inc. (a) 2,600 15,860 ICU Medical, Inc. (a) 2,750 100,210 Immucor, Inc. (a) 17,143 346,974 Insulet Corp. (a) 7,900 112,812 Integra LifeSciences Holdings Corp. (a) 4,600 169,188 Invacare Corp. 6,922 172,635 Landauer, Inc. 2,278 139,869 MAKO Surgical Corp. (a) 3,600 39,960 Matrixx Initiatives, Inc. (a) 600 2,532 Medical Action Industries, Inc. (a) 3,550 57,013 Meridian Bioscience, Inc. 10,200 219,810 Merit Medical Systems, Inc. (a) 6,810 131,365 Micrus Endovascular Corp. (a) 3,900 58,539 Neogen Corp. (a) 5,150 121,592 NuVasive, Inc. (a) 8,400 268,632 OraSure Technologies, Inc. (a) 11,559 58,720 Orthofix International NV (a) 4,300 133,171 Orthovita, Inc. (a) 15,800 55,458 Owens & Minor, Inc. 9,698 416,335 PSS World Medical, Inc. (a) 13,673 308,600 Quidel Corp. (a) 6,300 86,814 Rochester Medical Corp. (a) 2,300 25,599 Rockwell Medical Technologies, Inc. (a) 3,300 25,377 Steris Corp. 13,600 380,392 SurModics, Inc. (a)(b) 3,783 85,723 Symmetry Medical, Inc. (a) 9,000 72,540 Synovis Life Technologies, Inc. (a) 2,200 28,402 Trans1, Inc. (a) 3,100 12,245 Utah Medical Products, Inc. 700 20,524 Vascular Solutions, Inc. (a) 4,300 36,077 Volcano Corp. (a) 12,000 208,560 West Pharmaceutical Services, Inc. 7,776 304,819 Wright Medical Group, Inc. (a) 8,900 168,655 Young Innovations, Inc. 1,300 32,214 -------------- 6,255,425 -------------- MEDICAL EQUIPMENT - 1.7% Abaxis, Inc. (a) 5,100 130,305 Accuray, Inc. (a)(b) 10,400 58,344 Affymetrix, Inc. (a) 17,700 103,368 Analogic Corp. 3,272 126,005 Bruker BioSciences Corp. (a) 12,387 149,387 Cardiac Science Corp. (a) 4,800 10,704
27 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Cyberonics, Inc. (a) 6,769 $ 138,358 Cynosure, Inc., Class A (a) 2,400 27,576 DexCom, Inc. (a) 12,000 96,960 Dionex Corp. (a) 4,431 327,318 Electro-Optical Sciences, Inc. (a)(b) 4,800 49,728 Enteromedics, Inc. (a)(b) 4,700 2,632 Greatbatch, Inc. (a) 5,800 111,534 Haemonetics Corp. (a) 5,972 329,356 IRIS International, Inc. (a) 4,500 55,620 Luminex Corp. (a) 10,651 159,019 Masimo Corp. (a) 12,600 383,292 Merge Healthcare, Inc. (a) 6,100 20,496 Natus Medical, Inc. (a) 6,800 100,572 NxStage Medical, Inc. (a) 5,700 47,595 OSI Systems, Inc. (a) 3,800 103,664 Palomar Medical Technologies, Inc. (a) 4,500 45,360 Sirona Dental Systems, Inc. (a) 4,300 136,482 Somanetics Corp. (a) 2,400 42,120 SonoSite, Inc. (a) 4,315 101,963 Spectranetic Corp. (a) 8,100 56,376 Stereotaxis, Inc. (a) 6,500 25,545 Thoratec Corp. (a) 13,147 353,917 Tomotherapy, Inc. (a) 10,300 40,170 Varian, Inc. (a) 6,935 357,430 Vital Images, Inc. (a) 3,600 45,684 Zoll Medical Corp. (a) 5,322 142,204 -------------- 3,879,084 -------------- MEDICAL SERVICES - 0.3% America Service Group, Inc. 2,200 34,914 Bio-Reference Labs, Inc. (a) 2,600 101,894 Clarient, Inc. (a) 8,300 21,995 eResearch Technology, Inc. (a) 10,650 64,007 Genoptix, Inc. (a) 3,800 135,014 inVentiv Health, Inc. (a) 8,400 135,828 Kendle International, Inc. (a) 3,200 58,592 Nighthawk Radiology Holdings, Inc. (a) 5,300 24,009 Parexel International Corp. (a) 14,094 198,725 RadNet, Inc. (a) 6,900 14,076 -------------- 789,054 -------------- METAL FABRICATING - 0.7% Ampco-Pittsburgh Corp. 2,100 66,213 Dynamic Materials Corp. 3,200 64,160 The Eastern Co. 1,700 22,831 Hawk Corp., Class A (a) 1,300 22,893 Haynes International, Inc. 3,000 98,910 Kaydon Corp. 7,626 272,706 L.B. Foster Co., Class A (a) 2,500 74,525 Lawson Products, Inc. 988 17,438 Mueller Industries, Inc. 9,382 233,049 Mueller Water Products, Inc., Series A 36,260 188,552 Northwest Pipe Co. (a) 2,000 53,720 Omega Flex, Inc. 600 8,400
28 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- RBC Bearings, Inc. (a) 5,500 $ 133,815 RTI International Metals, Inc. (a) 6,813 171,483 Worthington Industries, Inc. 14,900 194,743 -------------- 1,623,438 -------------- METALS & MINERALS: AMCOL International Corp. 5,773 164,069 DIVERSIFIED - 0.4% Brush Engineered Materials, Inc. (a) 5,011 92,904 General Moly, Inc. (a) 15,600 32,448 Hecla Mining Co. (a)(b) 55,800 344,844 Minerals Technologies, Inc. 4,653 253,449 Oil-Dri Corp. of America 800 12,400 Paramount Gold and Silver Corp. (a) 14,500 21,025 United States Lime & Minerals, Inc. (a) 400 13,812 Uranerz Energy Corp. (a) 13,200 17,160 -------------- 952,111 -------------- OFFICE SUPPLIES & ACCO Brands Corp. (a) 13,500 98,280 EQUIPMENT - 0.6% Electronics for Imaging, Inc. (a) 12,639 164,433 HNI Corp. 11,100 306,693 Herman Miller, Inc. 13,500 215,730 Kimball International, Inc., Class B 7,974 67,938 Knoll, Inc. 11,900 122,927 Steelcase, Inc., Class A 17,500 111,300 United Stationers, Inc. (a) 5,869 333,653 -------------- 1,420,954 -------------- OFFSHORE DRILLING & OTHER Hercules Offshore, Inc. (a) 26,800 128,104 SERVICES - 0.1% Vantage Drilling Co. (a) 12,700 20,447 -------------- 148,551 -------------- OIL WELL EQUIPMENT & Allis-Chalmers Energy, Inc. (a)(b) 12,700 47,879 SERVICES - 1.4% Basic Energy Services, Inc. (a) 5,300 47,170 Bolt Technology Corp. (a) 2,100 23,142 Boots & Coots, Inc. (a) 21,700 35,805 Bronco Drilling Co., Inc. (a) 4,700 23,829 CARBO Ceramics, Inc. (b) 4,402 300,084 Cal Dive International, Inc. (a) 10,974 82,963 Complete Production Services, Inc. (a) 14,600 189,800 Dawson Geophysical Co. (a) 1,500 34,665 Dril-Quip, Inc. (a) 7,076 399,652 Geokinetics, Inc. (a) 1,300 12,506 Global Industries Ltd. (a) 25,000 178,250 Gulf Island Fabrication, Inc. 3,017 63,448 Hornbeck Offshore Services, Inc. (a) 5,040 117,331 ION Geophysical Corp. (a) 24,246 143,536 Key Energy Services, Inc. (a) 30,600 268,974 Lufkin Industries, Inc. 3,400 248,880 Matrix Service Co. (a) 6,500 69,225 Natural Gas Services Group (a) 3,000 56,550 Newpark Resources, Inc. (a) 22,220 93,991 OYO Geospace Corp. (a) 1,000 42,890 Parker Drilling Co. (a) 29,681 146,921 Pioneer Drilling Co. (a) 10,100 79,790 RPC, Inc. 7,100 73,840
29 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Sulphco, Inc. (a)(b) 12,200 $ 8,174 Superior Well Services, Inc. (a) 3,800 54,188 T-3 Energy Services, Inc. (a) 3,100 79,050 Tetra Technologies, Inc. (a) 18,600 206,088 Union Drilling, Inc. (a) 2,600 16,250 Willbros Group, Inc. (a) 9,900 167,013 -------------- 3,311,884 -------------- OIL: CRUDE PRODUCERS - ATP Oil & Gas Corp. (a)(b) 9,300 170,004 2.3% Apco Oil and Gas International, Inc. 2,100 46,410 Approach Resources, Inc. (a) 3,500 27,020 Arena Resources, Inc. (a) 9,300 401,016 Atlas Energy, Inc. 16,087 485,345 BPZ Resources, Inc. (a)(b) 22,200 210,900 Berry Petroleum Co., Class A 10,602 309,048 Bill Barrett Corp. (a) 9,600 298,656 Brigham Exploration Co. (a) 23,200 314,360 CREDO Petroleum Corp. (a) 1,600 14,880 Carrizo Oil & Gas, Inc. (a) 6,900 182,781 Cheniere Energy, Inc. (a) 13,100 31,702 Clayton Williams Energy, Inc. (a) 1,500 52,560 Contango Oil & Gas Co. (a) 3,000 141,030 Cubic Energy, Inc. (a) 5,300 7,897 Delta Petroleum Corp. (a)(b) 45,900 47,736 Endeavour International Corp. (a) 28,500 30,780 FX Energy, Inc. (a)(b) 10,500 29,925 GMX Resources, Inc. (a) 7,100 97,554 GeoResources, Inc. (a) 1,800 24,588 Goodrich Petroleum Corp. (a) 5,500 133,925 Gran Tierra Energy, Inc. (a) 50,100 287,073 Gulfport Energy Corp. (a) 6,500 74,425 Harvest Natural Resources, Inc. (a) 8,200 43,378 Isramco, Inc. (a) 200 14,300 McMoRan Exploration Co. (a)(b) 17,900 143,558 Northern Oil And Gas, Inc. (a) 7,800 92,352 Oilsands Quest, Inc. (a) 48,600 55,890 Panhandle Oil & Gas, Inc. 1,800 46,620 Penn Virginia Corp. 10,616 226,015 Petroleum Development Corp. (a) 4,300 78,303 Petroquest Energy, Inc. (a)(b) 11,400 69,882 PrimeEnergy Corp. (a) 100 3,639 Rex Energy Corp. (a) 6,700 80,400 Rosetta Resources, Inc. (a) 12,800 255,104 Stone Energy Corp. (a) 9,798 176,854 Swift Energy Co. (a) 8,917 213,651 Toreador Resources Corp. (b) 5,500 54,450 Vaalco Energy, Inc. 14,600 66,430 Venoco, Inc. (a) 4,500 58,680 W&T Offshore, Inc. 8,300 97,110 Warren Resources, Inc. (a) 15,100 36,995
30 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Zion Oil & Gas, Inc. (a) 2,228 $ 15,930 -------------- 5,249,156 -------------- OIL: INTEGRATED - 0.0% Alon USA Energy, Inc. 1,800 12,312 CVR Energy, Inc. (a) 5,700 39,102 Delek US Holdings, Inc. 3,200 21,792 Western Refining, Inc. (a)(b) 8,900 41,919 -------------- 115,125 -------------- PAINTS & COATINGS - 0.2% Chase Corp. 1,800 21,258 Ferro Corp. 19,676 162,130 H.B. Fuller Co. 11,980 272,545 North American Galvanizing & Coatings (a) 2,800 13,580 -------------- 469,513 -------------- PAPER - 0.7% Boise, Inc. (a) 7,000 37,170 Buckeye Technologies, Inc. (a) 9,698 94,652 Clearwater Paper Corp. (a) 2,599 142,867 Domtar Corp. (a) 10,100 559,641 Kapstone Paper and Packaging Corp. (a) 7,100 69,935 Neenah Paper, Inc. 3,800 53,010 P.H. Glatfelter Co. 11,301 137,307 Schweitzer-Mauduit International, Inc. 4,120 289,842 Wausau Paper Corp. 10,842 125,767 -------------- 1,510,191 -------------- PERSONAL CARE - 0.3% Chattem, Inc. (a) 4,600 429,180 Female Health Co. (a) 3,500 16,555 Mannatech, Inc. 3,900 12,168 Orchids Paper Products Co. (a) 1,400 28,028 USANA Health Sciences, Inc. (a) 1,600 51,040 WD-40 Co. 4,089 132,320 -------------- 669,291 -------------- PHARMACEUTICALS - 1.7% Acura Pharmaceuticals, Inc. (a) 2,100 11,193 Adolor Corp. (a) 11,600 16,936 Akorn, Inc. (a) 13,100 23,449 Alkermes, Inc. (a) 23,600 222,076 Allion Healthcare, Inc. (a) 4,700 30,832 American Oriental Bioengineering, Inc. (a) 15,500 72,075 Ardea Biosciences, Inc. (a) 3,300 46,200 Auxilium Pharmaceuticals, Inc. (a) 11,000 329,780 Avanir Pharmaceuticals, Inc. (a)(b) 16,700 31,730 BMP Sunstone Corp. (a) 8,800 50,072 BioCryst Pharmaceuticals, Inc. (a)(b) 5,800 37,468 Biospecifics Technologies (a) 800 23,480 Cadence Pharmaceuticals, Inc. (a)(b) 6,000 58,020 Cambrex Corp. (a) 7,285 40,650 Caraco Pharmaceutical Laboratories Ltd. (a) 2,600 15,704 China Sky One Medical, Inc. (a)(b) 2,800 63,700 Cumberland Pharmaceuticals, Inc. (a) 1,800 24,462 Depomed, Inc. (a) 12,800 42,880 Durect Corp. (a) 20,100 49,647 Hi-Tech Pharmacal Co., Inc. (a) 1,800 50,490 Impax Laboratories, Inc. (a) 15,200 206,720
31 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Infinity Pharmaceuticals, Inc. (a) 5,000 $ 30,900 Inspire Pharmaceuticals, Inc. (a) 14,100 77,832 Isis Pharmaceuticals, Inc. (a) 23,089 256,288 Ista Pharmaceuticals, Inc. (a) 9,100 41,496 Javelin Pharmaceuticals, Inc. (a) 12,600 16,380 K-V Pharmaceutical Co., Class A (a) 8,700 31,929 Lannett Co., Inc. (a) 2,100 12,411 MAP Pharmaceuticals, Inc. (a) 1,800 17,154 Medicines Co. (a) 13,227 110,313 Medicis Pharmaceutical Corp., Class A 13,700 370,585 MiddleBrook Pharmaceuticals, Inc. (a) 9,100 4,641 Obagi Medical Products, Inc. (a) 4,300 51,600 Optimer Pharmaceuticals, Inc. (a)(b) 7,200 81,216 Pain Therapeutics, Inc. (a) 8,700 46,632 Par Pharmaceutical Cos., Inc. (a) 8,000 216,480 Pozen, Inc. (a) 6,400 38,336 Prestige Brands Holdings, Inc. (a) 8,300 65,238 Questcor Pharmaceuticals, Inc. (a) 14,400 68,400 SIGA Technologies, Inc. (a) 6,900 40,020 Salix Pharmaceuticals Ltd. (a) 13,000 330,200 Santarus, Inc. (a) 12,300 56,826 Sciclone Pharmaceuticals, Inc. (a) 10,300 23,999 Spectrum Pharmaceuticals, Inc. (a) 9,500 42,180 SuperGen, Inc. (a) 13,800 36,156 Vical, Inc. (a) 9,000 29,610 Vivus, Inc. (a)(b) 18,900 173,691 Xenoport, Inc. (a) 7,100 131,776 -------------- 3,849,853 -------------- PHOTOGRAPHY - 0.1% CPI Corp. 1,200 14,736 Eastman Kodak Co. (b) 66,000 278,520 -------------- 293,256 -------------- PLASTICS - 0.0% Spartech Corp. 7,654 78,530 -------------- POWER TRANSMISSION Advanced Energy Industries, Inc. (a) 8,212 123,837 EQUIPMENT - 0.3% Maxwell Technologies, Inc. (a) 5,600 99,904 Powell Industries, Inc. (a) 1,931 60,884 Regal-Beloit Corp. 8,551 444,139 Vicor Corp. (a) 4,796 44,603 -------------- 773,367 -------------- PRECIOUS METALS & Horsehead Holding Corp. (a) 10,000 127,500 MINERALS - 0.1% Stillwater Mining Co. (a) 10,064 95,407 -------------- 222,907 -------------- PRINTING & COPYING Cenveo, Inc. (a) 12,100 105,875 SERVICES - 0.0% PRODUCER DURABLES: Blount International, Inc. (a) 9,600 96,960 MISCELLANEOUS - 0.1% China Fire & Security Group, Inc. (a)(b) 3,500 47,355 -------------- 144,315 -------------- PRODUCTION TECHNOLOGY ATMI, Inc. (a)(c) 7,857 146,297 EQUIPMENT - 1.0% Brooks Automation, Inc. (a) 16,078 137,949 Cognex Corp. 9,956 176,420 Cohu, Inc. 5,818 81,161 Cymer, Inc. (a) 7,000 268,660
32 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Electro Scientific Industries, Inc. (a) 6,761 $ 73,154 Entegris, Inc. (a) 30,292 159,942 FEI Co. (a) 9,455 220,869 Intevac, Inc. (a) 5,500 63,085 Kulicke & Soffa Industries, Inc. (a) 15,656 84,386 MKS Instruments, Inc. (a) 12,300 214,143 Photronics, Inc. (a) 11,079 49,302 Rudolph Technologies, Inc. (a) 7,573 50,891 Tessera Technologies, Inc. (a) 11,800 274,586 Ultratech, Inc. (a) 4,990 74,151 Veeco Instruments, Inc. (a) 8,927 294,948 -------------- 2,369,944 -------------- PUBLISHING - 0.2% Courier Corp. 2,450 34,912 Dolan Media Co. (a) 6,500 66,365 Journal Communications, Inc., Class A 9,800 38,122 Martha Stewart Living Omnimedia, Inc., 6,682 33,009 Class A (a)(b) Primedia, Inc. 5,900 21,299 Scholastic Corp. 5,860 174,804 -------------- 368,511 -------------- RADIO & TV BROADCASTERS - Crown Media Holdings, Inc., Class A (a) 2,698 3,912 0.1% Fisher Communications, Inc. (a) 1,500 24,375 Lin TV Corp., Class A (a) 6,700 29,882 Outdoor Channel Holdings, Inc. (a) 3,800 22,040 Sinclair Broadcast Group, Inc., Class A 12,064 48,618 -------------- 128,827 -------------- RAILROAD EQUIPMENT - 0.1% American Railcar Industries, Inc. 2,300 25,346 Freightcar America, Inc. 2,500 49,575 Greenbrier Cos., Inc. 4,300 44,634 Portec Rail Products, Inc. 1,500 16,065 -------------- 135,620 -------------- RAILROADS - 0.1% Genesee & Wyoming, Inc., Class A (a) 8,875 289,680 RailAmerica, Inc. (a) 4,400 53,680 -------------- 343,360 -------------- REAL ESTATE - 0.2% American Realty Investors, Inc. (a) 400 4,900 Avatar Holdings, Inc. (a) 1,500 25,515 China Housing & Land Development (a)(b) 7,100 29,323 Consolidated-Tomoka Land Co. 1,400 48,916 Forestar Group, Inc. (a)(b) 8,828 194,039 Griffin Land & Nurseries, Inc. 700 20,391 Tejon Ranch Co. (a) 2,715 79,332 United Capital Corp. (a) 300 7,146 -------------- 409,562 -------------- REAL ESTATE INVESTMENT Acadia Realty Trust 9,913 167,232 TRUSTS (REITS) - 6.2% Agree Realty Corp. 1,900 44,251 Alexander's, Inc. (a) 467 142,164 American Campus Communities, Inc. 12,903 362,574 American Capital Agency Corp. 3,500 92,890 Anworth Mortgage Asset Corp. 25,500 178,500 Apollo Commercial Real Estate Finance, Inc. (a) 1,800 32,382
33 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Ashford Hospitality Trust, Inc. (a) 14,080 $ 65,331 Associated Estates Realty Corp. 3,600 40,572 BioMed Realty Trust, Inc. 24,220 382,192 CBL & Associates Properties, Inc. 33,800 326,846 CapLease, Inc. 11,100 48,618 Capstead Mortgage Corp. 15,800 215,670 Care Investment Trust, Inc. 2,900 22,562 Cedar Shopping Centers, Inc. 9,800 66,640 Cogdell Spencer, Inc. 6,900 39,054 Colonial Properties Trust 15,300 179,469 Colony Financial, Inc. 2,900 59,073 Cousins Properties, Inc. 16,809 128,253 CreXus Investment Corp. (a) 2,500 34,900 Cypress Sharpridge Investments, Inc. 3,800 51,338 DCT Industrial Trust, Inc. 48,310 242,516 Developers Diversified Realty Corp. 37,700 349,102 DiamondRock Hospitality Co. 27,380 231,909 DuPont Fabros Technology, Inc. 6,900 124,131 Dynex Capital Corp. 2,600 22,698 EastGroup Properties, Inc. 6,227 238,370 Education Realty Trust, Inc. 12,400 60,016 Entertainment Properties Trust 9,680 341,414 Equity Lifestyle Properties, Inc. 6,094 307,564 Equity One, Inc. (b) 7,800 126,126 Extra Space Storage, Inc. 21,550 248,903 FelCor Lodging Trust, Inc. (a) 16,170 58,212 First Industrial Realty Trust, Inc. 11,400 59,622 First Potomac Realty Trust 6,900 86,733 Franklin Street Properties Corp. 15,500 226,455 Getty Realty Corp. 4,300 101,179 Gladstone Commercial Corp. 2,400 32,184 Glimcher Realty Trust 12,556 33,901 Government Properties Income Trust 2,700 62,046 Gramercy Capital Corp. (a) 10,702 27,718 Hatteras Financial Corp. 8,300 232,068 Healthcare Realty Trust, Inc. 14,100 302,586 Hersha Hospitality Trust 10,700 33,598 Highwoods Properties, Inc. 17,300 576,955 Home Properties, Inc. 8,120 387,405 Inland Real Estate Corp. 16,900 137,735 Invesco Mortgage Capital, Inc. 2,100 47,796 Investors Real Estate Trust 16,400 147,600 iStar Financial, Inc. (a)(b) 26,000 66,560 Kilroy Realty Corp. (b) 10,200 312,834 Kite Realty Group Trust 9,740 39,642 LTC Properties, Inc. 5,800 155,150 LaSalle Hotel Properties 15,420 327,367 Lexington Corporate Properties Trust 22,643 137,669 MFA Financial, Inc. 67,700 497,595 Medical Properties Trust, Inc. 20,100 201,000
34 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Mid-America Apartment Communities, Inc. 6,529 $ 315,220 Mission West Properties, Inc. 3,800 27,322 Monmouth Real Estate Investment Corp., Class A 4,900 36,456 National Health Investors, Inc. 6,429 237,809 National Retail Properties, Inc. 19,675 417,504 NorthStar Realty Finance Corp. (b) 14,963 51,323 Omega Healthcare Investors, Inc. 20,400 396,780 PS Business Parks, Inc. 4,208 210,610 Parkway Properties, Inc. 5,504 114,593 Pennsylvania Real Estate Investment Trust (b) 8,932 75,565 PennyMac Mortgage Investment Trust (a) 3,500 60,130 Post Properties, Inc. 11,086 217,286 Potlatch Corp. 9,947 317,110 RAIT Investment Trust (b) 16,210 21,235 Ramco-Gershenson Properties Trust 5,400 51,516 Redwood Trust, Inc. 19,195 277,560 Resource Capital Corp. 5,200 25,584 Saul Centers, Inc. 1,522 49,861 Sovran Self Storage, Inc. 6,280 224,384 Starwood Property Trust, Inc. 10,500 198,345 Strategic Hotel Capital, Inc. (a)(b) 19,850 36,921 Sun Communities, Inc. 4,143 81,824 Sunstone Hotel Investors, Inc. 24,521 217,746 Tanger Factory Outlet Centers, Inc. 9,622 375,162 Transcontinental Realty Investors, Inc. (a) 700 8,337 U-Store-It Trust 18,670 136,664 UMH Properties, Inc. 2,000 16,960 Universal Health Realty Income Trust 2,927 93,752 Urstadt Biddle Properties, Inc., Class A 5,100 77,877 Walter Investment Management Corp. 4,900 70,217 Washington REIT 14,365 395,756 Winthrop Realty Trust 2,637 28,638 -------------- 14,130,917 -------------- RECREATIONAL VEHICLES & % Brunswick Corp. 21,800 277,078 BOATS - 0.3 Drew Industries, Inc. (a) 4,700 97,055 Marine Products Corp. 2,331 11,492 Polaris Industries, Inc. (b) 7,500 327,225 Winnebago Industries, Inc. (a) 7,190 87,718 -------------- 800,568 -------------- RENTAL & LEASING Amerco, Inc. (a) 2,200 109,384 SERVICES: CONSUMER - 0.4% Avis Budget Group, Inc. (a) 23,800 312,256 Dollar Thrifty Automotive Group, Inc. (a) 6,495 166,337 Rent-A-Center, Inc. (a) 15,200 269,344 -------------- 857,321 -------------- RESTAURANTS - 1.3% AFC Enterprises, Inc. (a) 6,200 50,592 BJ's Restaurants, Inc. (a) 4,800 90,336 Benihana, Inc., Class A (a) 3,700 14,023 Bob Evans Farms, Inc. 7,680 222,336 Buffalo Wild Wings, Inc. (a)(b) 4,050 163,093 CEC Entertainment, Inc. (a) 5,550 177,156
35 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- CKE Restaurants, Inc. 12,800 $ 108,288 California Pizza Kitchen, Inc. (a) 5,150 69,267 Caribou Coffee Co., Inc. (a) 1,400 10,808 Carrols Restaurant Group, Inc. (a) 2,500 17,675 The Cheesecake Factory, Inc. (a) 13,800 297,942 Cracker Barrel Old Country Store, Inc. 5,100 193,749 Denny's Corp. (a)(b) 24,000 52,560 DineEquity, Inc. (a)(b) 4,448 108,042 Domino's Pizza, Inc. (a) 9,650 80,867 Einstein Noah Restaurant Group, Inc. (a) 1,000 9,830 Frisch's Restaurants, Inc. 600 14,310 Jack in the Box, Inc. (a) 13,536 266,253 Krispy Kreme Doughnuts, Inc. (a) 14,600 43,070 Landry's Restaurants, Inc. (a) 1,596 33,979 Luby's, Inc. (a) 4,800 17,664 McCormick & Schmick's Seafood Restaurants, 3,400 23,664 Inc. (a) O'Charleys, Inc. (a) 4,684 30,680 P.F. Chang's China Bistro, Inc. (a) 5,408 205,017 Papa John's International, Inc. (a) 4,796 112,035 Red Robin Gourmet Burgers, Inc. (a) 3,200 57,280 Ruby Tuesday, Inc. (a) 15,300 110,160 Ruth's Hospitality Group, Inc. (a) 5,000 10,450 Sonic Corp. (a) 14,820 149,237 The Steak N Shake Co. (a) 291 94,319 Texas Roadhouse, Inc., Class A (a) 12,300 138,129 -------------- 2,972,811 -------------- SCIENTIFIC INSTRUMENTS: Brady Corp. 11,694 350,937 CONTROL & FILTER - 0.8% CIRCOR International, Inc. 4,300 108,274 China Security & Surveillance Technology, Inc. (a) 9,500 72,580 ESCO Technologies, Inc. 6,532 234,172 Energy Recovery, Inc. (a)(b) 8,900 61,232 Flanders Corp. (a) 3,800 16,948 The Gorman-Rupp Co. 3,597 99,421 ICx Technologies, Inc. (a) 2,800 26,656 L-1 Identity Solutions, Inc. (a) 18,428 138,026 Mine Safety Appliances Co. 6,526 173,135 PMFG, Inc. (a) 3,300 53,493 RAE Systems, Inc. (a) 12,500 13,750 Robbins & Myers, Inc. 6,424 151,092 Sun Hydraulics, Inc. 2,850 74,813 Watts Water Technologies, Inc., Class A 7,236 223,737 X-Rite, Inc. (a) 8,200 17,876 -------------- 1,816,142 -------------- SCIENTIFIC INSTRUMENTS: A.O. Smith Corp. 5,081 220,465 ELECTRICAL - 1.1% AZZ, Inc. (a) 2,600 85,020 Advanced Battery Technologies, Inc. (a)(b) 11,700 46,800 American Superconductor Corp. (a)(b) 10,200 417,180 Baldor Electric Co. 11,501 323,063 Broadwind Energy, Inc. (a)(b) 7,600 61,484
36 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- China BAK Battery, Inc. (a) 9,400 $ 26,132 Ener1, Inc. (a)(b) 11,600 73,544 EnerSys (a) 9,200 201,204 Franklin Electric Co., Inc. 5,860 170,409 GrafTech International Ltd. (a) 29,444 457,854 Houston Wire & Cable Co. 4,400 52,360 Littelfuse, Inc. (a) 5,460 175,539 Preformed Line Products Co. 500 21,900 SatCon Technology Corp. (a) 14,600 41,172 Taser International, Inc. (a) 15,500 67,890 Ultralife Batteries, Inc. (a) 3,100 13,392 Valence Technology, Inc. (a) 12,800 11,648 -------------- 2,467,056 -------------- SCIENTIFIC INSTRUMENTS: Badger Meter, Inc. 3,300 131,406 GAUGES & METERS - 0.1% Faro Technologies, Inc. (a) 4,100 87,904 Measurement Specialties, Inc. (a) 3,600 36,180 Smartheat, Inc. (a) 1,600 23,232 Zygo Corp. (a) 3,800 25,574 -------------- 304,296 -------------- SCIENTIFIC INSTRUMENTS: American Ecology Corp. 4,700 80,088 POLLUTION CONTROL - 0.4% Clean Harbors, Inc. (a) 5,100 304,011 Darling International, Inc. (a) 20,900 175,142 EnergySolutions, Inc. 19,100 162,159 Fuel Tech, Inc. (a) 4,700 38,399 Heritage Crystal Clean, Inc. (a) 1,000 10,460 Met-Pro Corp. 3,600 38,232 Metalico, Inc. (a) 6,700 32,964 Perma-Fix Environmental Services (a) 14,000 31,780 Team, Inc. (a) 4,700 88,407 Waste Services, Inc. (a) 3,733 34,008 -------------- 995,650 -------------- SECURITIES BROKERAGE & BGC Partners, Inc. 12,323 56,932 SERVICES - 0.9% E*Trade Financial Corp. (a) 372,500 651,875 GFI Group, Inc. 16,200 74,034 Gladstone Investment Corp. 5,500 25,080 International Assets Holding Corp., Inc. (a) 3,155 45,874 KBW, Inc. (a) 8,700 238,032 Knight Capital Group, Inc., Class A (a) 21,600 332,640 LaBranche & Co., Inc. (a) 14,600 41,464 MF Global Ltd. (a) 23,600 164,020 MarketAxess Holdings, Inc. 7,900 109,810 optionsXpress Holdings, Inc. 10,600 163,770 Penson Worldwide, Inc. (a)(b) 5,200 47,112 SWS Group, Inc. 6,106 73,883 TradeStation Group, Inc. (a) 8,100 63,909 -------------- 2,088,435 -------------- SEMICONDUCTORS & Actel Corp. (a) 6,516 77,410 COMPONENTS - 2.5% Advanced Analogic Technologies, Inc. (a) 10,700 42,158 Amkor Technology, Inc. (a) 27,400 196,184 Anadigics, Inc. (a) 15,800 66,676
37 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Applied Micro Circuits Corp. (a) 16,400 $ 122,508 Atheros Communications, Inc. (a) 15,370 526,269 Cavium Networks, Inc. (a) 8,800 209,704 Ceva, Inc. (a) 5,000 64,300 Cirrus Logic, Inc. (a) 14,300 97,526 DSP Group, Inc. (a) 5,783 32,558 Diodes, Inc. (a) 7,812 159,755 Emcore Corp. (a) 18,900 20,223 Entropic Communications, Inc. (a) 14,500 44,515 Exar Corp. (a) 9,227 65,604 FormFactor, Inc. (a) 11,300 245,888 Hittite Microwave Corp. (a) 5,200 211,900 IXYS Corp. (a) 5,737 42,569 Kopin Corp. (a) 16,900 70,642 Lattice Semiconductor Corp. (a) 23,700 63,990 MIPS Technologies, Inc. (a) 11,000 48,070 Micrel, Inc. 11,300 92,660 Microsemi Corp. (a) 19,290 342,397 Microtune, Inc. (a) 12,500 28,250 Monolithic Power Systems, Inc. (a) 8,200 196,554 NetLogic Microsystems, Inc. (a) 4,100 189,666 Omnivision Technologies, Inc. (a) 11,200 162,736 PLX Technology, Inc. (a) 8,400 27,132 ParkerVision, Inc. (a)(b) 7,300 13,359 Pericom Semiconductor Corp. (a) 6,693 77,170 Power Integrations, Inc. 5,400 196,344 RF Micro Devices, Inc. (a) 65,284 311,405 Rubicon Technology, Inc. (a)(b) 3,100 62,961 Semtech Corp. (a) 14,800 251,748 Sigma Designs, Inc. (a) 6,500 69,550 Silicon Image, Inc. (a) 18,676 48,184 Silicon Storage Technology, Inc. (a) 19,858 50,836 Skyworks Solutions, Inc. (a) 40,033 568,068 Standard Microsystems Corp. (a) 5,510 114,498 Supertex, Inc. (a) 2,267 67,557 Techwell, Inc. (a) 3,600 47,520 Trident Microsystems, Inc. (a) 15,800 29,388 TriQuint Semiconductor, Inc. (a) 33,836 203,016 Virage Logic Corp. (a) 4,800 26,400 Volterra Semiconductor Corp. (a) 5,000 95,600 White Electronic Designs Corp. (a) 5,300 24,751 Zoran Corp. (a) 11,408 126,058 -------------- 5,832,257 -------------- SHIPPING - 0.6% American Commercial Lines, Inc. (a) 2,250 41,242 DHT Maritime, Inc. 10,100 37,168 Eagle Bulk Shipping, Inc. (a)(b) 13,700 67,815 Genco Shipping & Trading Ltd. (b) 5,900 132,042 General Maritime Corp. 12,140 84,859 Golar LNG Ltd. 8,600 110,252 Gulfmark Offshore, Inc. (a) 5,500 155,705
38 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Horizon Lines, Inc., Class A 7,500 $ 41,775 International Shipholding Corp. 1,400 43,498 Knightsbridge Tankers Ltd. 4,200 55,692 Nordic American Tanker Shipping Ltd. (b) 10,500 315,000 Ship Finance International Ltd. 11,200 152,656 TBS International Ltd. (a) 2,800 20,580 Teekay Tankers Ltd., Class A 1,600 13,648 Ultrapetrol Bahamas Ltd. (a) 5,400 25,704 -------------- 1,297,636 -------------- SPECIALTY RETAIL - 3.2% 1-800-FLOWERS.COM, Inc., Class A (a) 6,524 17,289 America's Car Mart, Inc. (a) 2,300 60,559 AnnTaylor Stores Corp. (a) 13,500 184,140 Asbury Automotive Group, Inc. (a) 7,900 91,087 bebe Stores, Inc. 5,500 34,485 Big 5 Sporting Goods Corp. 5,500 94,490 Blue Nile, Inc. (a) 3,200 202,656 Books-A-Million, Inc. 1,500 10,080 Borders Group, Inc. (a) 11,200 13,216 Brown Shoe Co., Inc. 10,527 103,901 The Buckle, Inc. (b) 6,009 175,944 Build-A-Bear Workshop, Inc. (a) 4,100 20,049 Cabela's, Inc., Class A (a)(b) 8,900 126,914 The Cato Corp., Class A 6,295 126,278 Charming Shoppes, Inc. (a) 28,840 186,595 The Children's Place Retail Stores, Inc. (a) 4,985 164,555 Christopher & Banks Corp. 8,928 68,031 Citi Trends, Inc. (a) 3,700 102,194 Coldwater Creek, Inc. (a) 14,300 63,778 Collective Brands, Inc. (a) 14,900 339,273 Conn's, Inc. (a)(b) 2,400 14,016 DSW, Inc., Class A (a) 2,600 67,288 Destination Maternity Corp. (a) 1,400 26,600 Dress Barn, Inc. (a) 13,982 322,984 The Finish Line, Inc., Class A 10,580 132,779 Gander Mountain Co. (a) 1,000 5,100 Genesco, Inc. (a) 5,238 143,835 Group 1 Automotive, Inc. 5,432 153,997 Gymboree Corp. (a) 6,758 293,905 Haverty Furniture Cos., Inc. 4,436 60,906 hhgregg, Inc. (a) 2,800 61,684 Hibbett Sports, Inc. (a) 6,275 137,987 Hot Topic, Inc. (a) 9,181 58,391 Jo-Ann Stores, Inc. (a) 6,105 221,245 Jos. A. Bank Clothiers, Inc. (a) 4,133 174,371 Lithia Motors, Inc., Class A (b) 4,500 36,990 Men's Wearhouse, Inc. 12,900 271,674 Midas, Inc. (a) 3,542 29,930 Monro Muffler, Inc. 3,650 122,056 New York & Co. (a) 5,800 24,882 Nu Skin Enterprises, Inc., Class A 11,426 307,017
39 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- OfficeMax, Inc. (a) 18,800 $ 238,572 Pacific Sunwear of California, Inc. (a) 16,600 66,068 The Pep Boys - Manny, Moe & Jack 11,966 101,232 Pier 1 Imports, Inc. (a) 26,299 133,862 Regis Corp. 13,100 203,967 Retail Ventures, Inc. (a) 6,200 55,118 Rue21, Inc. (a) 1,300 36,517 Sally Beauty Co., Inc. (a) 23,500 179,775 Shoe Carnival, Inc. (a) 2,100 42,987 Shutterfly, Inc. (a) 4,400 78,364 Sonic Automotive, Inc. 6,900 71,691 Stage Stores, Inc. 9,550 118,038 Stamps.com, Inc. (a) 3,403 30,627 Stein Mart, Inc. (a) 6,324 67,414 Syms Corp. (a) 1,600 11,568 Systemax, Inc. 2,400 37,704 The Talbots, Inc. (b) 6,100 54,351 Ticketmaster Entertainment (a) 9,200 112,424 Tractor Supply Co. (a) 8,700 460,752 Ulta Salon Cosmetics & Fragrance, Inc. (a) 6,900 125,304 Vitacost.com, Inc. (a) 1,900 19,798 Vitamin Shoppe, Inc. (a) 1,700 37,808 The Wet Seal, Inc., Class A (a) 23,600 81,420 Zale Corp. (a)(b) 5,000 13,600 Zumiez, Inc. (a) 4,900 62,328 -------------- 7,294,440 -------------- STEEL - 0.1% China Precision Steel, Inc. (a)(b) 9,000 18,450 General Steel Holdings, Inc. (a) 3,300 14,553 Olympic Steel, Inc. 1,900 61,902 Sutor Technology Group Ltd. (a) 1,900 5,054 Universal Stainless & Alloy Products, Inc. (a) 1,700 32,062 -------------- 132,021 -------------- SUGAR - 0.0% Imperial Sugar Co., New Shares 2,500 43,600 -------------- SYNTHETIC FIBERS & Zoltek Cos., Inc. (a)(b) 6,900 65,550 CHEMICALS - 0.0% -------------- TECHNOLOGY: MISCELLANEOUS Benchmark Electronics, Inc. (a) 16,329 308,781 - 0.3% CTS Corp. 8,368 80,500 LaBarge, Inc. (a) 3,000 36,150 Plexus Corp. (a) 9,898 282,093 Vocus, Inc. (a) 4,100 73,800 -------------- 781,324 -------------- TELECOMMUNICATIONS ADC Telecommunications, Inc. (a) 22,000 136,620 EQUIPMENT - 0.4% Applied Signal Technology, Inc. 2,600 50,154 Arris Group, Inc. (a) 30,500 348,615 Brightpoint, Inc. (a) 12,530 92,095 Cogo Group, Inc. (a) 5,800 42,746 Communications System, Inc. 1,300 16,172 Mastec, Inc. (a) 12,900 161,250 OpNext, Inc. (a) 6,700 12,730 Powerwave Technologies, Inc. (a) 30,977 39,031 Symmetricom, Inc. (a) 11,300 58,760
40 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- UTStarcom, Inc. (a)(b) 27,000 $ 59,130 -------------- 1,017,303 -------------- TEXTILE PRODUCTS - 0.1% Interface, Inc., Class A 12,621 104,881 Unifi, Inc. (a) 10,800 41,904 -------------- 146,785 -------------- TEXTILES APPAREL & SHOES American Apparel, Inc. (a) 8,500 26,350 - 2.1% Carter's, Inc. (a) 13,200 346,500 Cherokee, Inc. 1,900 33,858 Columbia Sportswear Co. (b) 2,800 109,312 Crocs, Inc. (a) 20,900 120,175 Deckers Outdoor Corp. (a) 3,000 305,160 FGX International Holdings Ltd. (a) 3,400 66,606 G-III Apparel Group, Ltd. (a) 3,300 71,511 Iconix Brand Group, Inc. (a) 17,300 218,845 J. Crew Group, Inc. (a) 12,070 540,012 Jones Apparel Group, Inc. 20,900 335,654 K-Swiss, Inc., Class A 6,496 64,570 Kenneth Cole Productions, Inc., Class A 1,092 10,538 Liz Claiborne, Inc. (a)(b) 24,100 135,683 lululemon athletica, Inc. (a) 10,000 301,000 Maidenform Brands, Inc. (a) 4,400 73,436 Oxford Industries, Inc. 3,342 69,113 Perry Ellis International, Inc. (a) 1,850 27,861 Quiksilver, Inc. (a) 32,000 64,640 Skechers U.S.A., Inc., Class A (a) 7,655 225,134 Steven Madden Ltd. (a) 3,568 147,144 Timberland Co., Class A (a) 10,700 191,851 True Religion Apparel, Inc. (a) 6,200 114,638 Under Armour, Inc., Class A (a) 8,300 226,341 Volcom, Inc. (a) 4,500 75,330 The Warnaco Group, Inc. (a) 10,700 451,433 Weyco Group, Inc. 1,600 37,824 Wolverine World Wide, Inc. 12,008 326,858 -------------- 4,717,377 -------------- TOBACCO - 0.2% Alliance One International, Inc. (a) 19,955 97,380 Star Scientific, Inc. (a) 18,100 12,670 Universal Corp. 5,756 262,531 Vector Group Ltd. 9,825 137,550 -------------- 510,131 -------------- TOYS - 0.1% Jakks Pacific, Inc. (a) 5,930 71,872 Leapfrog Enterprises, Inc. (a) 8,446 33,024 RC2 Corp. (a) 4,813 70,992 -------------- 175,888 -------------- TRANSPORTATION Dynamex, Inc. (a) 2,100 38,010 MISCELLANEOUS - 0.2% Echo Global Logistics, Inc. (a) 500 6,345 HUB Group, Inc., Class A (a) 9,200 246,836 Odyssey Marine Exploration, Inc. (a) 12,900 18,189 Pacer International, Inc. 6,900 21,804 Textainer Group Holdings Ltd. 2,166 36,605
41 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Todd Shipyards Corp. 1,700 $ 28,492 -------------- 396,281 -------------- TRUCKERS - 0.6% Arkansas Best Corp. 5,741 168,958 Celadon Group, Inc. (a) 5,500 59,675 Forward Air Corp. 7,232 181,162 Heartland Express, Inc. 12,273 187,409 Knight Transportation, Inc. 14,262 275,114 Marten Transport Ltd. (a) 3,850 69,107 Old Dominion Freight Line, Inc. (a) 6,325 194,178 Patriot Transportation Holding, Inc. (a) 300 28,338 Saia, Inc. (a) 3,281 48,624 USA Truck, Inc. (a) 2,200 27,544 Universal Truckload Services, Inc. 1,321 23,910 Werner Enterprises, Inc. 9,600 189,984 YRC Worldwide, Inc. (a)(b) 6,700 5,627 -------------- 1,459,630 -------------- UTILITIES: ELECTRICAL - % Allete, Inc. 6,966 227,649 1.7 Avista Corp. 13,275 286,607 Black Hills Corp. 9,300 247,659 CH Energy Group, Inc. 3,989 169,612 Central Vermont Public Service Corp. 2,800 58,240 Cleco Corp. 14,667 400,849 El Paso Electric Co. (a) 10,908 221,214 The Empire District Electric Co. 7,968 149,241 IDACORP, Inc. 11,500 367,425 MGE Energy, Inc. 5,745 205,326 NorthWestern Corp. 8,200 213,364 Otter Tail Corp. 8,986 222,853 PNM Resources, Inc. 19,800 250,470 Pike Electric Corp. (a) 4,100 38,048 Portland General Electric Co. 17,400 355,134 UIL Holdings Corp. 7,167 201,249 Unisource Energy Corp. 8,183 263,411 Unitil Corp. 2,900 66,642 -------------- 3,944,993 -------------- UTILITIES: GAS Chesapeake Utilities Corp. 2,267 72,657 DISTRIBUTORS - 1.2% The Laclede Group, Inc. 4,948 167,094 New Jersey Resources Corp. 9,761 365,061 Nicor, Inc. (c) 10,600 446,260 Northwest Natural Gas Co. 6,399 288,211 Piedmont Natural Gas Co. 18,000 481,500 South Jersey Industries, Inc. 6,832 260,846 Southwest Gas Corp. 10,890 310,692 WGL Holdings, Inc. 11,700 392,418 -------------- 2,784,739 -------------- UTILITIES: Alaska Communications Systems Group, Inc. 11,000 87,780 TELECOMMUNICATIONS - 0.9% Atlantic Tele-Network, Inc. 2,200 121,022 Cbeyond Communications, Inc. (a) 5,700 89,775 Cincinnati Bell, Inc. (a) 51,600 178,020 Cogent Communications Group, Inc. (a) 11,100 109,446
42 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
INDUSTRY COMMON STOCKS SHARES VALUE -------- ---------------------------------------------------- -------------- -------------- Consolidated Communications Holdings, Inc. 5,835 $ 102,112 General Communication, Inc., Class A (a) 11,139 71,067 Global Crossing Ltd. (a) 7,300 104,025 HickoryTech Corp. 3,000 26,490 Incontact, Inc. (a) 6,100 17,873 Iowa Telecommunications Services, Inc. 7,100 118,996 j2 Global Communications, Inc. (a) 10,500 213,675 NTELOS Holdings Corp. 7,500 133,650 Neutral Tandem, Inc. (a) 7,300 166,075 PAETEC Holding Corp. (a) 30,520 126,658 Premiere Global Services, Inc. (a) 15,200 125,400 RCN Corp. (a) 9,100 98,735 Shenandoah Telecom Co. 5,900 120,065 SureWest Communications (a) 3,900 38,844 USA Mobility, Inc. 4,220 46,462 -------------- 2,096,170 -------------- UTILITIES: WATER - 0.3% American States Water Co. 4,485 158,814 Artesian Resources Corp., Class A 1,900 34,789 California Water Service Group 4,796 176,589 Connecticut Water Service, Inc. 2,100 52,017 Consolidated Water Co., Inc. 3,600 51,444 Middlesex Water Co. 3,300 58,179 Pennichuck Corp. 1,000 21,130 SJW Corp. 3,248 73,307 Southwest Water Co. 6,083 35,829 York Water Co. 3,200 46,432 708,530 -------------- TOTAL COMMON STOCKS - 97.6% 224,138,747 -------------- INVESTMENT COMPANIES BlackRock Kelso Capital Corp. (d) 3,100 26,412 Gladstone Capital Corp. 5,200 40,040 Hercules Technology Growth Capital, Inc. 8,562 88,959 Kayne Anderson Energy Development Co. 2,500 36,375 Pennantpark Investment Corp. 5,300 47,276 Prospect Capital Corp. (b) 14,400 170,064 -------------- TOTAL INVESTMENT COMPANIES - 0.2% 409,126 -------------- RIGHTS BANKS: SAVINGS, THRIFT & Flagstar Bancorp, Inc. (Expires 1/25/10) 25,125 -- MORTGAGE LENDING - 0.0% BUILDING MATERIALS - 0.0% Builders FirstSource, Inc. (Expires 1/14/10) 6,444 1,577 TOTAL RIGHTS - 0.0% 1,577 WARRANTS (E) ALTERNATIVE ENERGY - 0.0% GreenHunter Energy, Inc. (Expires 8/27/11) (b)(f) 180 -- COMMUNICATIONS TECHNOLOGY Lantronix, Inc. (Expires 2/09/11) (a)(f) 138 -- - 0.0% TOTAL WARRANTS - 0.0% -- -------------- TOTAL LONG-TERM INVESTMENTS (COST - $190,334,906) - 97.8% 224,549,450 --------------
43 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
SHORT-TERM SECURITIES SHARES VALUE ---------------------------------------------------- -------------- -------------- BlackRock Liquidity Funds, TempFund, Institutional Class, 0.11% (d)(g) 9,452,117 $ 9,452,117 --------------
BENEFICIAL INTEREST (000) -------------- BlackRock Liquidity Series, LLC Money Market Series, 0.29% (d)(g)(h) $ 17,387 $ 17,386,620 -------------- TOTAL SHORT-TERM SECURITIES (COST - $26,838,737) - 11.7% 26,838,737 -------------- TOTAL INVESTMENTS (COST - $217,173,643*) - 109.5% 251,388,187 LIABILITIES IN EXCESS OF OTHER ASSETS - (9.5)% (21,751,491) -------------- NET ASSETS - 100.0% $ 229,636,696 ==============
* The cost and unrealized appreciation (depreciation) of investments as December 31, 2009, as computed for federal income tax purposes, were as follows: Aggregate cost $229,753,769 ============ Gross unrealized appreciation $ 48,267,727 Gross unrealized depreciation (26,633,309) ------------ Net unrealized appreciation $ 21,634,418 ============
(a) Non-income producing security. (b) Security, or a portion of security, is on loan. (c) All or a portion of 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 REALIZED AFFILIATE COST SALE COST LOSS INCOME --------- ---------- ----------- --------- -------- Anthracite Capital, Inc. $ 16,102 $ 239,668 $(221,996) -- BlackRock Kelso Capital Corp. $ 11,712 $ 42,960 $ (13,276) $ 992 BlackRock Liquidity Funds, TempFund, $9,452,117(1) -- -- $ 26,184 Institutional Class BlackRock Liquidity Series, LLC Cash Sweep Series -- $33,514,609(2) -- $ 37,173 BlackRock Liquidity Series, LLC Money Market Series -- $ 7,257,582(2) -- $451,286
(1) Represents net purchase cost. (2) 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 was as follows:
ACQUISITION ISSUE DATE COST VALUE ----- ----------- ---- ----- GreenHunter Energy, Inc. 6/27/08 $-- $--
(g) Represents the current yield as of report date. (h) Security was purchased with the cash collateral from securities loans. - For Series compliance purposes, the Series' industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Series management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. 44 MASTER SMALL CAP INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 - Financial futures contracts purchased as of December 31, 2009 were as follows:
UNREALIZED CONTRACTS ISSUE EXPIRATION DATE NOTIONAL VALUE APPRECIATION --------- ----------------- --------------- -------------- ------------ 72 Russell 2000 MINI March 2010 $4,403,447 $88,573
- 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 asset and liabilities - 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 December 31, 2009 in determining the fair valuation of the Series' investments:
INVESTMENTS IN SECURITIES VALUATION INPUTS ASSETS ---------------- ------------ Level 1 - Long-Term Investments(1) $224,549,450 Short-Term Securities 9,452,117 ------------ Total Level 1 234,001,567 ------------ Level 2 - Short-Term Securities 17,386,620 Level 3 -- ------------ TOTAL $251,388,187 ============
(1) See above Schedule of Investments for values in each industry.
OTHER FINANCIAL INSTRUMENTS(2) VALUATION INPUTS ASSETS ---------------- --------------- Level 1 $88,573 Level 2 -- Level 3 -- ------- TOTAL $88,573 =======
(2) Other financial instruments are financial futures contracts which are shown at the unrealized appreciation/depreciation on the instrument. 45 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON DETAILED SCHEDULE OF INVESTMENTS To the Investors and Board of Directors of Quantitative Master Series LLC: We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of Master Small Cap Index Series, one of the portfolios constituting Quantitative Master Series LLC, (the "Master LLC") as of December 31, 2009, and for the year then ended and have issued our report thereon dated February 24, 2010 which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR. Our audit also included the Master LLC's Schedule of Investments (the "Schedule") as of December 31, 2009 appearing in Item 6 of this Form N-CSR. This Schedule is the responsibility of the Master LLC's management. Our responsibility is to express an opinion based on our audit. In our opinion, the Schedule referred to above, when considered in relation to the basic financial statements taken as a whole of the Master LLC referred to above, presents fairly, in all material respects, the information set forth therein. DELOITTE & TOUCHE LLP February 24, 2010 Princeton, New Jersey 46 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- AUSTRALIA - 8.0% AGL Energy Ltd. 32,318 $ 406,212 AMP Ltd. 134,396 811,796 AXA Asia Pacific Holdings Ltd. 63,768 372,847 Alumina Ltd. 176,221 288,088 Amcor Ltd. 85,527 476,158 Aristocrat Leisure Ltd. 23,258 83,319 Arrow Energy Ltd. (a) 43,525 161,871 Asciano Group 177,084 286,684 Australia & New Zealand Banking Group Ltd. 175,062 3,567,483 Australian Stock Exchange Ltd. 12,589 392,483 BGP Holdings Plc (a) 783,183 11 BHP Billiton Ltd. 235,856 9,025,412 Bendigo and Adelaide Bank Ltd. 23,903 209,819 Billabong International Ltd. 14,236 139,288 BlueScope Steel Ltd. 116,707 321,571 Boral Ltd. 47,833 253,889 Brambles Ltd. 93,900 569,494 CFS Retail Property Trust 120,545 205,259 CSL Ltd. 40,498 1,177,658 CSR Ltd. 95,827 154,301 Caltex Australia Ltd. 5,477 45,560 Coca-Cola Amatil Ltd. 39,909 411,482 Cochlear Ltd. 3,996 246,768 Commonwealth Bank of Australia Ltd. 108,214 5,283,200 Computershare Ltd. 31,128 318,487 Crown Ltd. 32,826 234,880 DB RREEF Trust 326,593 247,777 Energy Resources of Australia Ltd. 5,323 113,596 Fairfax Media Ltd. 157,547 244,876 Fortescue Metals Group Ltd. (a) 90,869 359,429 Foster's Group Ltd. 132,582 652,198 General Property Trust 635,242 341,354 Goodman Fielder Ltd. 76,606 111,554 Goodman Group 480,536 271,860 Harvey Norman Holdings Ltd. 47,593 179,423 Incitec Pivot Ltd. 103,113 326,158 Insurance Australia Group Ltd. 153,545 551,484 James Hardie Industries NV (a) 26,387 200,707 Leighton Holdings Ltd. 11,460 388,474
PORTFOLIO ABBREVIATIONS To simplify the listings of portfolio holdings in the Schedules of Investments, the names and descriptions of many of securities have been abbreviated according to the following list: ADR American Depository Receipt AUD Australian Dollar EUR Euro GBP British Pound JPY Japanese Yen SEK Swedish Krona USD US Dollar 1 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Lend Lease Group 36,073 $ 332,987 Macquarie Group Ltd. 22,862 979,548 Macquarie Infrastructure Group (a) 168,493 200,681 Map Group 48,201 130,463 Metcash Ltd. 53,350 213,920 Mirvac Group 179,774 250,829 National Australia Bank Ltd. 146,693 3,579,900 Newcrest Mining Ltd. 34,140 1,081,373 Nufarm Ltd. 12,318 119,571 OZ Mineral Ltd. 222,416 237,068 OneSteel Ltd. 99,214 297,996 Orica Ltd. 25,432 591,292 Origin Energy Ltd. 63,616 957,118 Paladin Resources Ltd. (a) 42,215 157,584 QBE Insurance Group Ltd. 69,424 1,584,275 Qantas Airways Ltd. 59,212 157,983 Rio Tinto Ltd. 30,300 2,022,666 SP AusNet 73,836 60,594 Santos Ltd. 61,585 775,636 Sims Metal Management Ltd. 10,713 209,905 Sonic Healthcare Ltd. 25,851 356,033 Stockland 156,090 549,937 Suncorp-Metway Ltd. 101,353 784,667 Tabcorp Holdings Ltd. 49,709 308,411 Tatts Group Ltd. 85,322 186,136 Telstra Corp. Ltd. 274,890 845,114 Toll Holdings Ltd. 50,305 392,830 Transurban Group 89,765 444,253 Wesfarmers Ltd. Ordinary Shares 68,858 1,924,912 Wesfarmers Ltd. Partially Protected Shares 11,123 310,577 Westfield Group 142,576 1,595,692 Westpac Banking Corp. 205,646 4,645,276 Woodside Petroleum Ltd. 35,566 1,499,891 Woolworths Ltd. 86,641 2,173,023 WorleyParsons Ltd. 11,479 298,058 -------------- 59,689,109 -------------- AUSTRIA - 0.3% Erste Bank der Oesterreichischen Sparkassen AG 14,801 549,989 Immoeast Immobilien Anlagen AG (a) 30,711 168,610 OMV AG 11,416 500,890 Raiffeisen International Bank Holding AG 3,837 214,358 Telekom Austria AG 25,749 367,559 Verbund - Oesterreichische Elektrizitaetswirtschafts AG 5,338 226,342 Vienna Insurance Group 2,435 124,986 Voestalpine AG 8,660 316,380 -------------- 2,469,114 --------------
2 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- BELGIUM - 1.0% Anheuser-Busch InBev NV 51,402 $ 2,660,933 Anheuser-Busch InBev NV VVPR Strip (a) 24,368 175 Belgacom SA 11,277 409,389 Colruyt SA 1,193 287,815 Delhaize Group 6,859 524,708 Dexia NV 39,474 248,479 Fortis 164,508 608,952 Groupe Bruxelles Lambert SA 6,169 582,511 KBC Bancassurance Holding 12,538 538,697 Mobistar SA 1,543 105,781 Nationale A Portefeuille 3,141 167,141 Solvay SA 4,453 479,567 UCB SA 7,495 312,838 Umicore SA 7,309 243,818 -------------- 7,170,804 -------------- BERMUDA - 0.1% Mongolia Energy Co., Ltd. (a) 187,757 95,536 SeaDrill Ltd. 19,162 487,537 Yue Yuen Industrial Holdings Ltd. 38,785 112,292 -------------- 695,365 -------------- CAYMAN ISLANDS - 0.1% Foxconn International Holdings Ltd. (a) 134,900 155,298 Lifestyle International Holdings Ltd. 25,966 48,271 Sands China Ltd. (a) 122,200 149,097 -------------- 352,666 -------------- DENMARK - 0.9% A P Moller - Maersk A/S, Class A 41 276,953 A P Moller - Maersk A/S, Class B 103 723,667 Carlsberg A/S 7,349 540,994 Coloplast A/S, Class B 1,414 127,871 Danske Bank A/S 35,051 786,874 Dsv A/S 15,864 287,501 H Lundbeck A/S 5,000 90,336 Novo-Nordisk A/S, Class B 32,752 2,090,944 Novozymes A/S, Class B 3,292 342,492 Topdanmark A/S (a) 1,251 168,477 TrygVesta A/S 1,800 118,322 Vestas Wind Systems A/S (a) 14,971 911,476 William Demant Holding (a) 1,380 103,723 -------------- 6,569,630 -------------- FINLAND - 1.1% Elisa Corp. 10,641 242,874 Fortum Oyj 34,445 934,474 Kesko Oyj, Class B 5,035 166,269 Kone Oyj, Class B 11,564 495,563 Metso Oyj 8,556 300,960 Neste Oil Oyj 9,709 172,529 Nokia Oyj 260,135 3,363,540 Nokian Renkaat Oyj 7,815 189,506 OKO Bank 9,023 97,315
3 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Orion Oyj 4,981 $ 107,422 Outokumpu Oyj 10,168 192,482 Rautaruukki Oyj 5,746 132,914 Sampo Oyj 32,840 799,981 Sanoma Oyj 4,340 97,917 Stora Enso Oyj, Class R 47,345 332,069 UPM-Kymmene Oyj 35,654 423,883 Wartsila Oyj 6,130 245,704 -------------- 8,295,402 -------------- FRANCE - 10.2% AXA SA 118,646 2,785,685 Accor SA 9,993 546,837 Aeroports de Paris 1,945 156,335 Air France-KLM 9,956 156,242 Air Liquide 17,514 2,082,901 Alcatel SA 160,264 539,644 Alstom 13,602 951,267 Atos Origin SA 3,828 175,374 BNP Paribas SA 66,723 5,292,332 BioMerieux 968 113,099 Bouygues 17,021 881,657 Bureau Veritas SA 3,272 170,562 CNP Assurances 2,634 255,064 Cap Gemini SA 9,826 448,263 Carrefour SA 43,624 2,092,501 Casino Guichard Perrachon SA 3,996 356,024 Christian Dior SA 4,796 491,493 Cie de Saint-Gobain SA 26,026 1,411,813 Cie Generale d'Optique Essilor International SA 15,575 931,564 Compagnie Generale de Geophysique SA (a) 10,011 212,800 Compagnie Generale des Etablissements Michelin 10,861 831,831 Credit Agricole SA 66,650 1,169,697 Dassault Systemes SA 4,640 264,224 EDP Renovaveis SA (a) 14,456 137,064 Eiffage 2,707 152,574 Electricite de France SA 18,214 1,082,518 Eramet 374 117,126 Eurazeo 2,034 141,087 European Aeronautic Defense and Space Co. 31,850 640,221 Eutelsat Communications 7,237 232,192 Fonciere Des Regions 1,915 195,815 France Telecom SA 127,575 3,187,876 GDF Suez 87,797 3,803,453 Gecina SA 1,263 137,332 Groupe Danone 38,312 2,348,594 Hermes International 4,098 545,536
4 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- ICADE 1,246 $ 119,295 Iliad SA 1,024 122,372 Imerys SA 2,046 122,485 Ipsen 1,770 98,145 JC Decaux SA 4,548 110,393 Klepierre 6,678 270,561 L'Oreal SA 17,178 1,918,537 LVMH Moet Hennessy Louis Vuitton SA 17,330 1,943,172 Lafarge SA 15,271 1,257,629 Lagardere S.C.A. 9,747 394,612 Legrand Promesses 7,653 212,995 M6-Metropole Television SA 4,449 113,869 Natixis 70,340 351,232 Neopost SA 2,223 183,476 PagesJaunes Groupe SA 9,088 101,298 Pernod-Ricard SA 14,580 1,246,730 Peugeot SA 10,153 341,318 Pinault-Printemps-Redoute 5,920 710,607 Publicis Groupe 9,773 397,371 Renault SA 12,929 663,255 STMicroelectronics NV 55,598 513,738 Safran SA 13,442 262,647 Sanofi-Aventis 73,274 5,762,470 Schneider Electric SA 16,032 1,864,081 Scor SE 12,536 314,930 Societe BIC SA 1,501 103,697 Societe Des Autoroutes Paris-Rhin-Rhone 1,166 89,774 Societe Generale SA 43,036 2,990,138 Societe Television Francaise 1 8,432 154,857 Sodexho Alliance SA 6,923 393,918 Suez Environnement SA 20,117 463,880 Technip SA 7,614 535,695 Thales SA 7,489 384,899 Total SA 148,344 9,528,118 Unibail - Rodamco 6,571 1,443,516 Vallourec SA 3,982 720,417 Veolia Environnement SA 30,342 1,000,166 Vinci SA 29,687 1,670,518 Vivendi SA 84,277 2,501,316 -------------- 76,416,724 -------------- GERMANY - 7.6% Adidas-Salomon AG 13,451 728,579 Allianz AG, Registered Shares 32,101 3,979,237 BASF SE 65,061 4,026,667 Bayer AG 57,376 4,591,427 Bayerische Motoren Werke AG 23,433 1,066,723 Bayerische Motoren Werke AG (Preference Shares) 4,306 142,528
5 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Beiersdorf AG 6,565 $ 432,695 Celesio AG 6,095 154,328 Commerzbank AG 52,877 443,786 DaimlerChrysler AG 62,353 3,321,145 Deutsche Bank AG, Registered Shares 40,836 2,887,512 Deutsche Boerse AG 14,154 1,172,086 Deutsche Lufthansa AG 14,269 240,942 Deutsche Post AG 64,142 1,239,659 Deutsche Postbank AG 6,288 205,419 Deutsche Telekom AG 198,099 2,906,073 E.ON AG 133,923 5,621,288 Fraport AG 2,369 122,309 Fresenius AG 2,242 139,858 Fresenius AG (Preference Shares) 6,590 473,069 Fresenius Medical Care AG 14,944 792,733 GEA Group AG 10,961 244,167 Hannover Rueckversicherung AG, Registered Shares 4,328 202,206 HeidelbergCement AG 10,390 718,799 Henkel KGaA 9,649 432,286 Hochtief AG 3,185 242,910 Infineon Technologies AG (a) 73,728 410,177 K+S AG 12,192 695,350 Linde AG 11,102 1,337,593 MAN SE 7,221 560,293 Merck KGaA 4,278 401,138 Metro AG 8,625 526,752 Muenchener Rueckversicherungs AG, Registered Shares 13,539 2,108,829 Porsche Automobil Holding SE (Preference Shares) 6,736 421,230 Puma AG Rudolf Dassler Sport 465 154,794 Qiagen NV (a) 16,748 377,173 RWE AG 29,091 2,823,057 SAP AG 60,153 2,867,680 Salzgitter AG 2,546 249,479 Siemens AG 57,947 5,317,843 Solarworld AG 6,166 135,697 Suedzucker AG 4,456 92,843 TUI AG 14,453 120,835 ThyssenKrupp AG 23,610 887,553 United Internet AG 9,255 121,963 Volkswagen AG 3,304 366,076 Wacker Chemie AG 1,122 195,167 -------------- 56,699,953 -------------- GREECE - 0.5% Alpha Bank AE 30,397 354,709 Bank of Cyprus Public Co., Ltd. 38,379 268,714 Coca-Cola Hellenic Bottling Co. SA 15,028 342,088 EFG Eurobank Ergasias SA (a) 27,772 310,373 Hellenic Petroleum SA 7,916 88,626
6 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Hellenic Telecommunications Organization SA 21,199 $ 311,147 Marfin Investment Group SA 53,258 150,969 National Bank of Greece SA 44,706 1,148,580 OPAP SA 16,937 372,110 Piraeus Bank SA (a) 21,954 251,930 Public Power Corp. 8,529 158,179 Titan Cement Co. SA 3,439 99,746 -------------- 3,857,171 -------------- HONG KONG - 2.2% ASM Pacific Technology Ltd. 12,004 113,494 BOC Hong Kong Holdings Ltd. 282,400 634,460 Bank of East Asia Ltd. 96,532 379,232 CLP Holdings Ltd. 155,687 1,053,622 Cathay Pacific Airways Ltd. 86,263 160,198 Cheung Kong Holdings Ltd. 97,835 1,257,197 Cheung Kong Infrastructure Holdings Ltd. 25,500 96,969 Chinese Estates Holdings Ltd. 64,000 109,046 Esprit Holdings Ltd. 77,888 516,758 Hang Lung Group Ltd. 63,000 311,568 Hang Lung Properties Ltd. 158,000 619,415 Hang Seng Bank Ltd. 58,753 864,373 Henderson Land Development Co., Ltd. 81,491 608,960 The Hong Kong & China Gas Ltd. 306,290 768,222 Hong Kong Aircraft Engineering Company Ltd. 2,400 31,048 Hong Kong Exchanges and Clearing Ltd. 72,927 1,297,546 HongKong Electric Holdings Ltd. 109,000 593,753 Hopewell Holdings Ltd. 45,349 146,215 Hutchison Whampoa Ltd. 154,176 1,054,851 Hysan Development Co., Ltd. 45,791 129,592 Kerry Properties Ltd. 52,000 263,017 Li & Fung Ltd. 173,990 719,351 The Link REIT 141,914 362,125 MTR Corp. 104,000 358,286 NWS Holdings Ltd. 64,000 117,464 New World Development Ltd. 172,484 351,419 Orient Overseas International Ltd. 16,057 74,460 PCCW Ltd. 333,000 80,206 Shangri-La Asia Ltd. 86,990 162,983 Sino Land Co. 104,421 201,033 Sun Hung Kai Properties Ltd. 100,324 1,491,729 Swire Pacific Ltd., Class A 54,077 653,973 Television Broadcasts Ltd. 14,000 67,262 Wharf Holdings Ltd. 108,870 624,806 Wheelock and Co., Ltd. 74,000 225,721 Wing Hang Bank Ltd. 11,500 107,024 -------------- 16,607,378 --------------
7 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- IRELAND - 0.3% Anglo Irish Bank Corp. Plc (a) 62,641 $ 1 CRH Plc 50,149 1,363,521 Elan Corp. Plc (a) 35,769 225,738 Kerry Group Plc 10,099 297,001 Ryanair Holdings Plc (a) 35,968 169,621 -------------- 2,055,882 -------------- ITALY - 3.2% A2A SpA 75,591 158,590 Assicurazioni Generali SpA 79,436 2,140,030 Autogrill SpA 11,318 142,660 Autostrade SpA 17,781 465,011 Banca Carige SpA 50,030 133,550 Banca Monte dei Paschi di Siena SpA 157,305 274,995 Banca Popolare di Milano Scrl 35,046 248,993 Banco Popolare SpA 43,205 323,656 Enel SpA 454,261 2,629,891 Eni SpA 182,935 4,658,582 Exor SpA 6,689 130,284 Fiat SpA 54,154 792,487 Finmeccanica SpA 32,731 524,051 Fondiaria-Sai SpA 6,981 110,980 Intesa Sanpaolo SpA 523,040 2,353,690 Intesa Sanpaolo SpA (Non-Convertible Savings Shares) 62,426 209,160 Italcementi SpA 5,021 68,680 Luxottica Group SpA 9,899 255,946 Mediaset SpA 46,410 381,580 Mediobanca SpA (a) 35,249 418,746 Mediolanum SpA 22,232 138,877 Parmalat SpA 141,422 395,375 Pirelli & C. SpA 171,223 102,541 Prysmian SpA 5,678 99,111 Saipem SpA 18,261 630,194 Snam Rete Gas SpA 108,602 539,336 Telecom Italia SpA 712,453 1,111,388 Telecom Italia SpA (Non-Convertible Savings Shares) 456,819 507,383 Terna SpA 85,253 366,636 Unicredit SpA 977,959 3,270,057 Unione Di Banche Italiane ScpA 44,370 635,996 Unipol SpA 44,435 60,781 -------------- 24,279,237 -------------- JAPAN - 19.8% The 77 Bank Ltd. 18,000 95,769 Abc-Mart Inc. 1,800 49,933 Acom Co., Ltd. 3,370 51,307 Advantest Corp. 10,000 260,510 Aeon Co., Ltd. 44,400 360,378 Aeon Credit Service Co., Ltd. 7,200 69,509 Aeon Mall Co., Ltd. 4,600 89,119
8 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Aioi Insurance Co., Ltd. 36,000 $ 172,564 Air Water Inc. 6,000 70,674 Aisin Seiki Co., Ltd. 13,400 387,140 Ajinomoto Co., Inc. 52,000 489,422 Alfresa Holdings Corp. 1,900 75,543 All Nippon Airways Co., Ltd. 69,000 187,287 Amada Co., Ltd. 25,000 156,590 Aozora Bank Ltd. 57,000 60,586 Asahi Breweries Ltd. 24,700 454,908 Asahi Glass Co., Ltd. 66,100 628,748 Asahi Kasei Corp. 91,000 455,955 Asics Corp. 11,000 98,724 Astellas Pharma, Inc. 30,600 1,141,651 The Bank of Kyoto Ltd. 21,000 169,736 The Bank of Yokohama Ltd. 80,000 364,757 Benesse Holdings, Inc. 6,300 263,409 Bridgestone Corp. 40,200 709,120 Brother Industries Ltd. 18,700 215,061 Canon Marketing Japan Inc. 3,800 55,997 Canon, Inc. 75,500 3,211,655 Casio Computer Co., Ltd. 20,700 165,712 Central Japan Railway Co. 110 736,262 The Chiba Bank Ltd. 61,000 364,851 Chiyoda Corp. 7,000 54,063 Chubu Electric Power Co., Inc. 44,700 1,066,344 Chugai Pharmaceutical Co., Ltd. 17,700 330,841 The Chugoku Bank Ltd. 13,000 161,222 Chugoku Electric Power Co. 19,700 376,233 Chuo Mitsui Trust Holdings, Inc. 77,000 259,386 Citizens Holding Co., Ltd. 26,300 151,983 Coca-Cola West Holdings Co., Ltd. 2,700 47,637 Cosmo Oil Co., Ltd. 34,000 71,442 Credit Saison Co., Ltd. 13,900 155,671 Dai Nippon Printing Co., Ltd. 41,000 522,756 Daicel Chemical Industries Ltd. 20,000 117,479 Daido Steel Co., Ltd. 19,000 70,535 Daihatsu Motor Co., Ltd. 16,000 159,935 Daiichi Sankyo Co., Ltd. 49,600 1,040,186 Daikin Industries Ltd. 16,400 647,755 Dainippon Pharma Co., Ltd. 14,000 146,938 Daito Trust Construction Co., Ltd. 6,300 298,295 Daiwa House Industry Co., Ltd. 39,000 419,356 Daiwa Securities Group, Inc. 108,000 543,525 Dena Co., Ltd. 14 82,934 Denki Kagaku Kogyo Kabushiki Kaisha 25,000 111,762 Denso Corp. 35,700 1,078,749
9 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Dentsu, Inc. 13,313 $ 306,507 Diamond Lease Co., Ltd. 3,300 99,416 Dowa Mining Co., Ltd. 14,000 77,463 East Japan Railway Co. 23,149 1,464,886 Eisai Co., Ltd. 18,800 691,205 Electric Power Development Co. 9,400 267,269 Elpida Memory, Inc. (a) 10,600 172,759 FamilyMart Co., Ltd. 2,600 76,756 Fanuc Ltd. 13,500 1,258,227 Fast Retailing Co., Ltd. 3,200 601,406 Fuji Electric Holdings Co., Ltd. 25,800 44,619 Fuji Heavy Industries Ltd. 32,000 156,362 Fuji Media Holdings, Inc. 44 60,966 Fuji Photo Film Co., Ltd. 33,400 1,008,702 Fujitsu Ltd. 123,000 798,075 Fukuoka Financial Group, Inc. 54,000 188,190 Furukawa Electric Co., Ltd. 45,000 187,934 GS Yuasa Corp. 23,000 170,033 The Gunma Bank Ltd. 22,000 112,517 The Hachijuni Bank Ltd. 26,000 151,728 Hakuhodo DY Holdings, Inc. 920 44,814 Hankyu Hanshin Holdings, Inc. 81,000 361,266 Hino Motors Ltd. 18,000 62,277 Hirose Electric Co., Ltd. 2,300 241,155 The Hiroshima Bank Ltd. 28,000 107,889 Hisamitsu Pharmaceutical Co., Ltd. 5,100 164,706 Hitachi Chemical Co., Ltd. 7,100 144,702 Hitachi Construction Machinery Co., Ltd. 6,700 175,626 Hitachi High-Technologies Corp. 3,500 69,441 Hitachi Ltd. 303,000 931,460 Hitachi Metals Ltd. 11,000 105,830 Hokkaido Electric Power Co., Inc. 12,900 234,017 Hokuhoku Financial Group, Inc. 77,100 157,641 Hokuriku Electric Power 13,000 283,843 Honda Motor Co., Ltd. 116,800 3,962,872 Hoya Corp. 27,300 728,433 IHI Corp. 79,000 125,986 Ibiden Co., Ltd. 9,500 340,712 Idemitsu Kosan Co., Ltd. 1,600 93,407 Inpex Corp. 61 461,228 Isetan Mitsukoshi Holdings Ltd. 24,405 220,360 Isuzu Motors Ltd. 83,000 155,911 Ito En, Ltd. 4,700 70,774 Itochu Corp. 100,000 738,677 Itochu Techno-Science Corp. 1,100 29,539 The Iyo Bank Ltd. 19,000 154,573
10 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- J Front Retailing Co., Ltd. 29,600 $ 130,722 JFE Holdings, Inc. 33,500 1,324,216 JGC Corp. 16,000 294,843 JS Group Corp. 18,900 325,360 JSR Corp. 12,900 262,538 JTEKT Corp. 12,700 163,344 Jafco Co., Ltd. 1,500 36,302 Japan Airlines Corp. (a) 17,000 12,220 Japan Petroleum Explora 2,400 105,823 Japan Prime Realty Investment Corp. 50 103,894 Japan Real Estate Investment Corp. 30 221,154 Japan Retail Fund Investment Corp. 30 134,917 The Japan Steel Works, Ltd. 21,000 267,773 Japan Tobacco, Inc. 326 1,100,737 The Joyo Bank Ltd. 42,000 168,776 Jupiter Telecommunications Co., Ltd. 145 143,481 KDDI Corp. 196 1,038,156 Kajima Corp. 54,800 110,879 Kamigumi Co., Ltd. 19,000 138,639 Kaneka Corp. 21,000 133,799 The Kansai Electric Power Co., Inc. 52,500 1,184,744 Kansai Paint Co., Ltd. 11,000 92,185 Kao Corp. 36,000 843,722 Kawasaki Heavy Industries Ltd. 84,000 213,209 Kawasaki Kisen Kaisha Ltd. 30,000 85,719 Keihin Electric Express Railway Co., Ltd. 28,000 206,123 Keio Electric Railway Co., Ltd. 38,000 229,310 Keisei Electric Railway Co., Ltd. 25,000 136,763 Keyence Corp. 3,120 647,536 Kikkoman Corp. 13,000 159,290 Kinden Corp. 6,000 50,842 Kintetsu Corp. 126,000 417,638 Kirin Holdings Co., Ltd. 59,000 946,183 Kobe Steel Ltd. 169,000 306,262 Koito Manufacturing Co., Ltd. 5,000 80,251 Komatsu Ltd. 64,700 1,354,441 Konami Corp. 8,600 153,548 Konica Minolta Holdings, Inc. 33,500 345,225 Kubota Corp. 73,000 669,836 Kuraray Co., Ltd. 20,500 241,280 Kurita Water Industries Ltd. 8,600 270,191 Kyocera Corp. 10,900 959,968 Kyowa Hakko Kirin Co., Ltd. 18,000 190,347 Kyushu Electric Power Co., Inc. 28,500 587,012 Lawson, Inc. 3,500 154,578 Mabuchi Motor Co., Ltd. 1,600 79,297
11 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Makita Corp. 6,900 $ 237,002 Marubeni Corp. 108,000 596,590 Marui Group Co., Ltd. 20,400 125,610 Maruichi Steel Tube Ltd. 3,600 71,878 Matsui Securities Co., Ltd. 6,400 44,590 Mazda Motor Corp. 89,400 205,569 McDonald's Holdings Co. Japan Ltd. 5,700 109,020 Medipal Holdings Corp. 8,100 100,397 Meiji Holdings Co., Ltd. 4,293 162,231 Minebea Co., Ltd. 19,000 103,103 Mitsubishi Chemical Holdings Corp. 83,500 355,571 Mitsubishi Corp. 90,200 2,246,755 Mitsubishi Electric Corp. 142,000 1,054,869 Mitsubishi Estate Co., Ltd. 85,000 1,357,099 Mitsubishi Gas Chemical Co., Inc. 25,000 125,980 Mitsubishi Heavy Industries Ltd. 223,200 787,219 Mitsubishi Logistics Corp. 7,000 82,582 Mitsubishi Materials Corp. 95,000 232,350 Mitsubishi Motors Corp. (a) 251,000 348,877 Mitsubishi Rayon Co., Ltd. 27,000 108,604 Mitsubishi Tanabe Pharma Corp. 16,000 199,646 Mitsubishi UFJ Financial Group, Inc. 891,774 4,392,688 Mitsui & Co., Ltd. 119,000 1,688,148 Mitsui Chemicals, Inc. 45,000 116,518 Mitsui Engineering & Shipbuilding Co., Ltd. 47,000 113,197 Mitsui Fudosan Co., Ltd. 56,000 946,861 Mitsui Mining & Smelting Co., Ltd. 58,000 150,745 Mitsui OSK Lines Ltd. 74,000 390,918 Mitsui Sumitomo Insurance Group Holdings, Inc. 28,457 726,826 Mitsumi Electric Co., Ltd. 5,500 97,145 Mizuho Financial Group, Inc. 942,240 1,694,432 Murata Manufacturing Co., Ltd. 16,000 798,515 NEC Corp. 165,000 426,512 NGK Insulators Ltd. 19,000 415,519 NGK Spark Plug Co., Ltd. 12,000 136,133 NHK Spring Co., Ltd. 8,000 74,487 NOK Corp. 8,600 118,618 NSK Ltd. 27,000 198,126 NTN Corp. 43,000 194,283 NTT Data Corp. 92 285,280 NTT DoCoMo, Inc. 1,105 1,542,015 NTT Urban Development Co. 57 38,050 Namco Bandai Holdings, Inc. 13,500 128,965 Nidec Corp. 8,100 748,626 Nikon Corp. 20,000 394,929 Nintendo Co., Ltd. 6,800 1,624,092
12 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Nippon Building Fund, Inc. 36 $ 273,605 Nippon Electric Glass Co. 21,500 295,923 Nippon Express Co., Ltd. 69,000 284,953 Nippon Meat Packers, Inc. 10,000 115,773 Nippon Mining Holdings, Inc. 61,500 263,946 Nippon Oil Corp. 77,000 356,980 Nippon Paper Group, Inc. 6,894 175,938 Nippon Sanso Corp. 20,000 212,853 Nippon Sheet Glass Co., Ltd. 33,000 94,571 Nippon Steel Corp. 367,000 1,487,080 Nippon Telegraph & Telephone Corp. 36,660 1,448,183 Nippon Yusen Kabushiki Kaisha 90,000 277,186 Nipponkoa Insurance Co., Ltd. 43,000 244,822 The Nishi-Nippon City Bank Ltd. 39,000 95,498 Nissan Chemical Industries Ltd. 13,000 185,305 Nissan Motor Co., Ltd. 179,600 1,578,310 Nissay Dowa General Insurance Co., Ltd. 6,000 28,790 Nissha Printing Co., Ltd. 1,300 64,043 Nisshin Seifun Group, Inc. 11,000 148,654 Nisshin Steel Co., Ltd. 49,000 86,628 Nisshinbo Industries, Inc. 11,000 101,920 Nissin Foods Holdings Co., Ltd. 6,100 199,255 Nitori Co., Ltd. 2,600 193,524 Nitto Denko Corp. 10,610 381,152 Nomura Holdings, Inc. 249,100 1,852,476 Nomura Real Estate Holdings, Inc. 6,500 96,424 Nomura Real Estate Office Fund, Inc. 16 87,018 Nomura Research Institute Ltd. 7,100 139,629 OJI Paper Co., Ltd. 59,000 247,201 ORIX Corp. 6,940 472,505 Obayashi Corp. 40,000 136,154 Obic Co., Ltd. 350 57,144 Odakyu Electric Railway Co., Ltd. 43,000 329,995 Olympus Corp. 16,000 515,856 Omron Corp. 13,000 233,802 Ono Pharmaceutical Co., Ltd. 6,200 268,162 Oracle Corp. Japan 1,900 79,164 Oriental Land Co., Ltd. 3,300 217,138 Osaka Gas Co., Ltd. 130,000 438,137 Otsuka Shokai Co., Ltd. 600 29,927 Panasonic Corp. 141,000 2,029,893 Panasonic Electric Works Ltd. 29,873 361,940 Rakuten, Inc. 510 388,278 Resona Holdings, Inc. 36,256 368,352 Ricoh Co., Ltd. 51,000 730,767 Rinnai Corp. 3,100 149,807
13 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Rohm Co., Ltd. 7,500 $ 489,472 SBI Holdings, Inc. 1,385 247,962 SMC Corp. 4,000 456,728 Sankyo Co., Ltd. (Gunma) 4,500 225,330 Santen Pharmaceutical Co., Ltd. 3,900 123,807 Sanyo Electric Co., Ltd. (a) 104,000 192,101 Sapporo Hokuyo Holdings, Inc. 13,789 50,049 Sapporo Holdings Ltd. 19,000 104,695 Secom Co., Ltd. 13,800 655,467 Sega Sammy Holdings, Inc. 14,332 171,507 Seiko Epson Corp. 8,400 135,747 Sekisui Chemical Co., Ltd. 32,000 199,069 Sekisui House Ltd. 32,000 290,506 Senshu Ikeda Holdings, Inc. 24,870 90,791 Seven & I Holdings Co., Ltd. 56,000 1,143,433 Seven Bank Ltd. 18 35,934 Sharp Corp. 67,000 846,096 Shikoku Electric Power Co., Inc. 13,100 338,475 Shimadzu Corp. 21,000 139,873 Shimamura Co., Ltd. 1,500 143,322 Shimano, Inc. 4,500 181,674 Shimizu Corp. 43,000 154,448 Shin-Etsu Chemical Co., Ltd. 29,700 1,676,813 Shinko Electric Industries 7,100 103,352 Shinko Securities Co., Ltd. 32,300 97,738 Shinsei Bank Ltd. 81,000 88,243 Shionogi & Co., Ltd. 23,000 498,671 Shiseido Co., Ltd. 22,000 422,818 The Shizuoka Bank Ltd. 43,000 374,298 Showa Denko KK 82,000 163,305 Showa Shell Sekiyu KK 18,700 152,412 Softbank Corp. 52,500 1,230,744 Sojitz Corp. 86,500 163,666 Sompo Japan Insurance, Inc. 69,800 450,033 Sony Corp. 70,100 2,037,931 Sony Financial Holdings, Inc. 62 161,351 Square Enix Holdings Co., Ltd. 5,400 113,922 Stanley Electric Co., Ltd. 11,600 235,287 Sumco Corp. 9,200 162,568 Sumitomo Chemical Co., Ltd. 114,000 500,171 Sumitomo Corp. 74,800 761,669 Sumitomo Electric Industries Ltd. 49,500 616,566 Sumitomo Heavy Industries Ltd. 48,000 243,007 Sumitomo Metal Industries Ltd. 248,000 666,634 Sumitomo Metal Mining Co., Ltd. 35,000 516,514 Sumitomo Mitsui Financial Group, Inc. 62,450 1,792,026
14 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Sumitomo Realty & Development Co., Ltd. 25,000 $ 471,937 Sumitomo Rubber Industries, Ltd. 16,100 139,964 The Sumitomo Trust & Banking Co., Ltd. 106,000 520,464 Suruga Bank Ltd. 15,000 130,715 Suzuken Co., Ltd. 4,400 144,706 Suzuki Motor Corp. 22,900 563,959 Sysmex Corp. 1,800 94,117 T&D Holdings, Inc. 21,900 450,381 TDK Corp. 7,700 470,566 THK Co., Ltd. 7,500 133,372 Taiheiyo Cement Corp. 92,000 104,950 Taisei Corp. 75,000 128,685 Taisho Pharmaceutical Co., Ltd. 9,000 154,850 Takashimaya Co., Ltd. 19,000 121,063 Takeda Pharmaceutical Co., Ltd. 51,500 2,121,865 Teijin Ltd. 66,000 213,238 Terumo Corp. 11,800 711,185 Tobu Railway Co., Ltd. 56,000 292,336 Toho Co., Ltd. 6,000 97,461 Toho Gas Co., Ltd. 36,000 191,283 Tohoku Electric Power Co., Inc. 31,600 626,231 Tokio Marine Holdings, Inc. 50,000 1,364,460 Tokuyama Corp. 23,000 128,605 The Tokyo Electric Power Co., Inc. 85,300 2,140,897 Tokyo Electron Ltd. 11,500 738,163 Tokyo Gas Co., Ltd. 151,000 602,736 Tokyo Steel Manufacturing Co., Ltd. 9,900 111,451 Tokyo Tatemono Co., Ltd. 18,000 69,241 Tokyu Corp. 79,000 314,590 Tokyu Land Corp. 23,000 85,437 TonenGeneral Sekiyu KK 20,000 167,110 Toppan Printing Co., Ltd. 40,000 325,687 Toray Industries, Inc. 101,700 553,312 Toshiba Corp. 274,000 1,520,399 Tosoh Corp. 40,000 110,469 Toto Ltd. 18,000 114,455 Toyo Seikan Kaisha Ltd. 11,200 170,622 Toyo Suisan Kaisha, Ltd. 8,000 184,485 Toyoda Gosei Co., Ltd. 5,900 178,735 Toyota Boshoku Corp. 3,600 80,379 Toyota Industries Corp. 12,500 373,327 Toyota Motor Corp. 207,800 8,761,048 Toyota Tsusho Corp. 13,500 199,767 Trend Micro, Inc. 8,500 322,866 Tsumura & Co. 3,000 96,986 UNY Co., Ltd. 13,000 91,676
15 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- USS Co., Ltd. 1,170 $ 71,424 Ube Industries Ltd. 86,000 235,297 Uni-Charm Corp. 2,400 224,991 Ushio, Inc. 6,300 105,060 West Japan Railway Co. 108 362,086 Yahoo! Japan Corp. 1,035 311,192 Yakult Honsha Co., Ltd. 6,400 193,757 Yamada Denki Co., Ltd. 6,600 445,247 Yamaguchi Financial Group, Inc. 17,000 157,805 Yamaha Corp. 9,700 116,870 Yamaha Motor Co., Ltd. 18,500 233,972 Yamato Kogyo Co., Ltd. 2,800 91,547 Yamato Transport Co., Ltd. 24,000 334,081 Yamazaki Baking Co., Ltd. 6,000 71,365 Yaskawa Electric Corp. 13,000 108,298 The Yasuda Trust & Banking Co., Ltd. 118,000 110,091 Yokogawa Electric Corp. 14,000 123,642 -------------- 147,968,148 -------------- KAZAKHSTAN - 0.0% Eurasian Natural Resources Corp. 17,547 257,020 LUXEMBOURG - 0.5% ArcelorMittal 59,927 2,739,037 SES Global 21,161 476,700 Tenaris SA 36,323 782,794 -------------- 3,998,531 -------------- NETHERLANDS - 2.6% ASML Holding NV 31,787 1,085,265 Aegon NV 104,935 671,962 Akzo Nobel NV 17,764 1,178,017 Corio NV 3,739 254,737 Fugro NV 5,693 327,001 Heineken Holding NV 8,300 347,132 Heineken NV 18,968 900,477 ING Groep NV CVA 250,557 2,412,959 Koninklijke Ahold NV 87,842 1,163,790 Koninklijke Boskalis Westminster NV 4,224 162,612 Koninklijke DSM NV 10,467 514,280 Koninklijke KPN NV 123,146 2,093,169 Koninklijke Philips Electronics NV 66,644 1,969,950 Koninklijke Vopak NV (a) 1,953 154,784 Randstad Holdings NV 8,053 400,696 Reed Elsevier NV 49,608 608,657 SBM Offshore NV 10,381 203,676 TNT NV 25,883 795,215 Unilever NV 115,438 3,757,134 Wolters Kluwer NV 22,511 492,308 -------------- 19,493,821 -------------- NEW ZEALAND - 0.1% Auckland International Airport Ltd. 44,629 65,248 Contact Energy Ltd. (a) 17,272 76,892
16 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Fletcher Building Ltd. 53,169 $ 306,765 Sky City Ltd. 28,496 68,058 Telecom Corp. of New Zealand Ltd. 162,398 291,735 -------------- 808,698 -------------- NORWAY - 0.7% DnB NOR ASA 63,032 680,476 Norsk Hydro ASA 44,429 373,222 Orkla ASA 58,937 578,221 Renewable Energy Corp. ASA (a) 20,857 161,006 Statoil ASA 84,582 2,109,443 Telenor ASA 52,195 729,148 Telenor ASA (a) - ADR 3,798 158,756 Yara International ASA 13,250 600,161 -------------- 5,390,433 -------------- PORTUGAL - 0.3% Banco Comercial Portugues SA, Registered Shares 174,287 210,043 Banco Espirito Santo SA, Registered Shares 37,186 242,192 Brisa-Auto Estradas de Portugal SA, Private Shares 16,547 170,028 Cimpor Cimentos de Portugal SA 21,742 199,843 Energias de Portugal SA 134,285 597,846 Galp Energia SGPS SA 10,491 181,208 Jeronimo Martins SGPS SA 18,526 185,277 Portugal Telecom SGPS SA, Registered Shares 42,937 523,921 -------------- 2,310,358 -------------- SINGAPORE - 1.5% Ascendas Real Estate Investment Trust 136,962 215,002 CapitaLand Ltd. 184,749 548,069 CapitaMall Trust 202,700 258,721 CapitaMalls Asia Ltd. (a) 82,000 148,258 City Developments Ltd. 37,535 306,906 ComfortDelgro Corp. Ltd. 110,816 128,900 Cosco Corp. (Singapore) Ltd. 79,002 66,243 DBS Group Holdings Ltd. 130,407 1,417,652 Fraser and Neave Ltd. 63,096 187,556 Genting Singapore Plc (a) 349,563 322,025 Golden Agri-Resources Ltd. 402,562 145,068 Jardine Cycle & Carriage Ltd. 8,721 166,509 Keppel Corp. Ltd. 93,616 545,326 Neptune Orient Lines Ltd. 101,350 118,290 Noble Group Ltd. 99,720 228,733 Olam International Ltd. 99,900 187,698 Oversea-Chinese Banking Corp. 194,914 1,255,079 SembCorp Industries Ltd. 81,590 213,197 Sembcorp Marine Ltd. 71,197 185,765 Singapore Airlines Ltd. 39,009 413,143 Singapore Exchange Ltd. 70,000 412,172 Singapore Press Holdings Ltd. 105,316 274,162 Singapore Technologies Engineering Ltd. 92,213 212,235 Singapore Telecommunications Ltd. 608,132 1,339,481
17 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- StarHub Ltd. 54,157 $ 82,712 UOL Group Ltd. 23,457 67,599 United Overseas Bank Ltd. 86,572 1,205,061 Wilmar International Ltd. 98,670 448,653 Yangzijiang Shipbuilding Holdings Ltd. 85,183 72,757 -------------- 11,172,972 -------------- SPAIN - 4.4% ACS Actividades de Construccion y Servicios, SA 11,364 568,060 Abertis Infraestructuras SA 21,211 479,563 Acciona SA 1,758 229,785 Acerinox SA 11,621 242,695 Banco Bilbao Vizcaya Argentaria SA 246,340 4,489,549 Banco Popular Espanol SA 58,737 431,448 Banco Santander SA 573,683 9,479,911 Banco de Sabadell SA 67,059 372,491 Banco de Valencia SA 11,587 88,082 Bankinter SA 21,946 226,099 Corp. Mapfre SA 51,177 214,919 Criteria Caixacorp SA 59,893 283,684 Enagas 14,796 328,002 Ferrovial SA 35,676 421,345 Fomento de Construcciones y Contratas SA 3,049 129,285 Gamesa Corp. Tecnologica SA 11,623 195,816 Gas Natural SDG SA 15,958 343,980 Gestevision Telecinco SA 8,666 126,048 Grifols SA 10,806 189,745 Iberdrola Renovables 60,286 287,081 Iberdrola SA 252,045 2,415,285 Iberia Lineas Aereas de Espana 36,747 99,679 Inditex SA 16,079 1,004,173 Indra Sistemas SA 7,258 171,797 Mapfre Sa Eur (a) 1,137 4,771 Red Electrica de Espana 8,800 491,060 Repsol YPF SA 49,467 1,327,426 Sacyr Vallehermoso SA 5,142 59,014 Telefonica SA 295,654 8,275,065 Zardoya Otis SA 8,897 173,161 -------------- 33,149,019 -------------- SWEDEN - 2.3% Alfa Laval AB 19,718 272,674 Assa Abloy AB, Series B 19,177 369,445 Atlas Copco AB, Class A 45,887 674,533 Atlas Copco AB, Class B 27,049 352,694 Electrolux AB 14,469 340,009 Getinge AB, Class B 13,341 254,973 Hennes & Mauritz AB, B Shares 35,240 1,953,591 Holmen AB, Class B 2,545 64,839 Husqvarna AB 27,933 204,925
18 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Investor AB 34,000 $ 629,758 Lundin Petroleum AB (a) 14,102 111,259 Millicom International Cellular SA - ADR 5,814 431,465 Nordea Bank AB 224,634 2,275,994 SKB AB 24,225 417,727 SSAB AB 15,106 248,954 Sandvik AB 67,813 816,599 Scania AB 21,585 278,754 Securitas AB 17,048 166,963 Skandinaviska Enskilda Banken AB, Class A 96,949 599,327 Skanska AB, Class B 25,005 424,286 Svenska Cellulosa AB 41,311 550,788 Svenska Handelsbanken, Class A 34,112 971,844 Swedbank AB-A Shares 38,450 378,559 Swedish Match AB 17,350 379,328 Tele2 AB 22,966 352,787 Telefonaktiebolaget LM Ericsson 202,889 1,867,807 TeliaSonera AB 150,701 1,089,207 Volvo AB, A Shares 31,401 267,655 Volvo AB, B Shares 78,566 673,863 -------------- 17,420,607 -------------- SWITZERLAND - 7.7% ABB Ltd. 160,090 3,084,827 Actelion Ltd. (a) 7,930 423,544 Adecco SA, Registered Shares 8,252 455,221 Aryzta AG 5,840 217,504 BKW FMB Energie AG 807 62,894 Baloise Holding AG 3,902 323,973 Compagnie Financiere Richemont SA 37,060 1,246,212 Credit Suisse Group AG 82,164 4,070,517 GAM Holdings Ltd. 18,341 222,092 Geberit AG 2,933 519,959 Givaudan SA 572 457,695 Holcim Ltd. (a) 17,483 1,358,734 Julius Baer Group Ltd. 13,842 486,802 Kuehne & Nagel International AG 3,968 385,806 Lindt & Spruengli AG 61 130,966 Lindt & Spruengli AG 'R' 7 171,906 Logitech International SA (a) 15,111 262,098 Lonza Group AG, Registered Shares 2,911 205,106 Nestle SA, Registered Shares 256,418 12,444,897 Nobel Biocare Holding AG 10,399 348,524 Novartis AG, Registered Shares 154,654 8,445,538 Pargesa Holding SA 2,165 188,370 Roche Holding AG 52,024 8,896,774 SGS SA 430 561,357
19 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Schindler Holding AG 5,210 $ 396,813 Sonova Holding AG 3,530 427,660 Straumann Holding AG, Registered Shares 654 183,686 The Swatch Group Ltd. Bearer Shares 2,162 547,246 The Swatch Group Ltd., Registered Shares 3,776 179,737 Swiss Life Holding 2,407 306,258 Swiss Reinsurance Co., Registered Shares 24,845 1,190,191 Swisscom AG 1,717 655,744 Syngenta AG 6,812 1,923,763 Synthes, Inc. 4,715 618,083 UBS AG 264,485 4,118,620 Zurich Financial Services AG 10,643 2,326,812 -------------- 57,845,929 -------------- UNITED KINGDOM - 20.5% 3i Group Plc 67,937 307,596 Admiral Group Plc 11,889 227,326 Amec Plc 23,434 298,560 Anglo American Plc (a) 92,120 3,989,485 Antofagasta Plc 27,604 439,112 Associated British Foods Plc 24,559 325,586 AstraZeneca Plc 101,396 4,765,323 Autonomy Corp. Plc (a) 15,017 364,678 Aviva Plc 191,729 1,219,614 BAE Systems Plc 247,781 1,434,075 BG Group Plc 235,247 4,247,679 BHP Billiton Plc 154,491 4,925,163 BP Plc 1,311,741 12,666,379 BT Group Plc 542,601 1,181,691 Balfour Beatty Plc 50,454 209,956 Barclays Plc 798,732 3,519,574 British Airways Plc (a) 39,996 120,293 British American Tobacco Plc 139,745 4,536,580 British Land Co. Plc 60,133 463,046 British Sky Broadcasting Plc 79,107 714,557 Bunzl Plc 24,344 264,627 Burberry Group Plc 31,090 298,607 Cable & Wireless Plc 179,589 408,553 Cadbury Plc 99,248 1,276,089 Cairn Energy Plc (a) 96,380 515,949 Capita Group Plc 43,577 526,910 Carnival Plc (a) 11,216 382,108 The Carphone Warehouse Plc 26,664 80,382 Centrica Plc 358,767 1,625,049 Cobham Plc 80,535 325,305 Compass Group Plc 129,497 926,744 Diageo Plc 174,907 3,051,444
20 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Drax Group Plc 23,972 $ 159,817 Experian Group Ltd. 71,841 709,623 Firstgroup Plc 34,889 238,663 Fresnillo Plc 13,316 169,139 GlaxoSmithKline Plc 362,949 7,696,642 Group 4 Securicor Plc 88,209 369,734 HSBC Holdings Plc 1,213,396 13,842,812 Hammerson Plc 48,068 327,171 Home Retail Group 61,428 278,604 ICAP Plc 36,053 248,659 Imperial Tobacco Group Plc 71,152 2,244,653 Inmarsat Plc 30,487 339,722 Intercontinental Hotels Group Plc 17,940 257,762 International Power Plc 106,548 530,917 Invensys Plc 56,527 271,941 Investec Plc 28,233 192,907 J Sainsbury Plc 81,616 425,560 Johnson Matthey Plc 15,284 377,031 Kazakhmys Plc 14,981 317,200 Kingfisher Plc 165,329 608,610 Land Securities Group Plc 52,921 582,478 Legal & General Group Plc 410,318 527,862 Liberty International Plc 33,369 275,876 Lloyds TSB Group Plc 2,676,495 2,153,449 London Stock Exchange Group Plc 9,771 112,840 Lonmin Plc (a) 10,670 335,331 Man Group Plc 119,795 591,229 Marks & Spencer Group Plc 110,508 713,986 National Grid Plc 172,232 1,879,894 Next Plc 13,795 461,250 Old Mutual Plc 369,215 646,567 Pearson Plc 56,741 813,549 Petrofac Ltd. 14,306 239,481 Prudential Plc 176,684 1,808,580 Rangold Resources Ltd. 6,294 501,196 Reckitt Benckiser Plc 42,121 2,280,010 Reed Elsevier Plc 84,850 696,579 Resolution Ltd. (a) 167,965 242,649 Rexam Plc 61,337 286,743 Rio Tinto Plc, Registered Shares 95,402 5,151,391 Rolls-Royce Group Plc 129,743 1,010,362 Royal & Sun Alliance Insurance Group 235,791 458,089 Royal Bank of Scotland Group Plc 1,183,159 549,233 Royal Dutch Shell Plc 248,191 7,510,303 Royal Dutch Shell Plc, Class B 188,629 5,493,474 SABMiller Plc 65,155 1,915,168
21 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY COMMON STOCKS SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- Sage Group Plc 91,802 $ 325,094 Schroders Plc 8,942 191,104 Scottish & Southern Energy Plc 64,431 1,206,001 Sego Plc 52,680 292,204 Serco Group Plc 39,498 336,851 Severn Trent Plc 16,561 289,370 Shire Ltd. 39,224 766,432 Smith & Nephew Plc 61,878 636,500 Smiths Group Plc 27,238 444,031 Standard Chartered Plc 140,697 3,552,016 Standard Life Plc 162,910 565,845 TUI Travel Plc 39,643 162,470 Tesco Plc 555,601 3,832,965 Thomas Cook Group Plc 53,878 199,035 Tomkins Plc 63,755 198,120 Tullow Oil Plc 56,187 1,178,825 Unilever Plc 89,838 2,879,784 United Utilities Group Plc 47,732 381,531 Vedanta Resources Plc 9,549 399,394 Vodafone Group Plc 3,680,257 8,522,398 WPP Plc 87,706 857,789 Whitbread Plc 12,394 281,240 William Morrison Supermarkets Plc 146,459 653,445 Wolseley Plc (a) 19,874 397,814 Xstrata Plc 132,419 2,361,831 -------------- 153,394,865 -------------- TOTAL COMMON STOCKS - 95.9% 718,368,836 -------------- PREFERRED SECURITIES PREFERRED STOCKS GERMANY - 0.2% Henkel KGaA, 1.75% 13,965 733,345 RWE AG, 3.50% 2,641 235,090 Volkswagen AG, 4.35% 8,070 761,219 -------------- TOTAL PREFERRED SECURITIES - 0.2% 1,729,654 -------------- RIGHTS AUSTRALIA - 0.0% Woodside Petroleum Ltd. (Expires 1/29/10) 2,963 7,718 BELGIUM - 0.0% Fortis (Expires 7/01/14) 184,182 3 JAPAN - 0.0% Dowa Mining Co., Ltd. (Expires 1/29/10) 7,000 -- -------------- TOTAL RIGHTS - 0.0% 7,721 --------------
22 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 (PERCENTAGES SHOWN ARE BASED ON NET ASSETS)
COUNTRY WARRANTS (b) SHARES VALUE ------- ---------------------------------------------------- -------------- -------------- FRANCE - 0.0% Fonciere Des Regions (Expires 12/31/10) 1,915 $ 1,617 ITALY - 0.0% Mediobanca SpA (Expires 3/18/11) 38,564 1 Unione Di Banche Italiane ScpA (Expires 6/30/11) 53,164 3,742 -------------- 3,743 -------------- TOTAL WARRANTS - 0.0% 5,360 -------------- TOTAL LONG-TERM SECURITIES (COST - $716,040,453) - 96.1% 720,111,571 -------------- SHORT-TERM SECURITIES BlackRock Liquidity Funds, TempCash, Institutional Class, 0.17% (c)(d) 6,620,218 6,620,218 TOTAL SHORT-TERM SECURITIES (COST - $6,620,218) - 0.9% 6,620,218 -------------- TOTAL INVESTMENTS (COST - $722,660,671*) - 97.0% 726,731,789 OTHER ASSETS LESS LIABILITIES - 3.0% 22,548,127 -------------- NET ASSETS - 100.0% $ 749,279,916 ==============
* The cost and unrealized appreciation (depreciation) of investments as of December 31, 2009, as computed for federal income tax purposes, were as follows: Aggregate cost $ 755,115,777 ============= Gross unrealized appreciation $ 84,372,030 Gross unrealized depreciation (112,756,018) ------------- Net unrealized depreciation $ (28,383,988) =============
(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) Investments in companies considered to be an affiliate of the Series, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as follows:
NET AFFILIATE ACTIVITY INCOME --------- ------------ ------- BlackRock Liquidity Funds, TempCash, Institutional Class $ 6,620,218 $18,139 BlackRock Liquidity Series, LLC Cash Sweep Series $(11,259,665) $ 3,568
(d) Represents the current yield as of report date. 23 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 - Financial futures contracts purchased as of December 31, 2009 were as follows:
UNREALIZED EXPIRATION NOTIONAL APPRECIATION CONTRACTS ISSUE EXCHANGE DATE VALUE (DEPRECIATION) --------- ----------------------- --------- ------------ ---------- -------------- 2 Hang Seng Index Futures Hong Kong January 2010 $ 277,554 $ 5,225 97 OMXS30 Index Futures Stockholm January 2010 $1,301,611 (10,248) 146 DJ Euro Stoxx 50 Eurex March 2010 $6,046,911 173,425 79 FTSE 100 Index Futures LIFFE March 2010 $6,742,774 98,525 25 SPI 200 Index Futures Sydney March 2010 $2,624,954 114,137 75 TOPIX Index Futures Tokyo March 2010 $7,158,072 125,710 -------- TOTAL $506,774 ========
- Foreign currency exchange contracts as of December 31, 2009 were as follows:
UNREALIZED CURRENCY CURRENCY SETTLEMENT APPRECIATION PURCHASED SOLD COUNTERPARTY DATE (DEPRECIATION) ------------------- ----------------- -------------- ---------- -------------- EUR 401,000 USD 574,112 UBS AG 1/04/10 $ 741 GBP 246,000 USD 397,612 UBS AG 1/04/10 (274) JPY 40,968,000 USD 440,185 UBS AG 1/04/10 (308) AUD 315,000 USD 287,457 Brown Brothers 1/15/10 (4,942) Harriman & Co. EUR 8,980,000 USD 13,243,561 Goldman Sachs 1/15/10 (370,429) International EUR 2,830,000 USD 4,238,803 UBS AG 1/15/10 (181,903) GBP 5,700,000 USD 9,352,215 Goldman Sachs 1/15/10 (146,362) International GBP 100,000 USD 162,387 UBS AG 1/15/10 (881) JPY 513,770,000 USD 5,700,111 Goldman Sachs 1/15/10 (183,271) International JPY 195,255,000 USD 2,168,918 UBS AG 1/15/10 (72,278) SEK 6,150,000 USD 865,368 Brown Brothers 1/15/10 (5,709) Harriman & Co. USD 276,649 AUD 315,000 UBS AG 1/15/10 (5,866) USD 3,718,021 EUR 2,552,000 Goldman Sachs 1/15/10 59,643 International USD 10,939,441 EUR 7,340,000 UBS AG 1/15/10 417,304 USD 1,709,400 GBP 1,050,000 Goldman Sachs 1/15/10 13,585 International USD 3,689,929 GBP 2,265,000 UBS AG 1/15/10 31,814 USD 564,052 JPY 50,020,000 Goldman Sachs 1/15/10 26,940 International USD 4,725,345 JPY 414,175,000 UBS AG 1/15/10 277,952 USD 149,693 SEK 1,095,000 Brown Brothers 1/15/10 (3,369) Harriman & Co. --------- TOTAL $(147,613) =========
24 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 - 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 assets and liabilities - 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 December 31, 2009 in determining the fair valuation of the Series' investments:
INVESTMENTS IN SECURITIES VALUATION INPUTS ASSETS ---------------- -------------- Level 1 Long-Term Investments: Belgium $ 175 Cayman Islands 149,097 France 1,617 Italy 3,743 Japan 90,791 Norway 158,756 Singapore 148,258 Spain 4,771 Switzerland 486,802 Short-Term Securities 6,620,218 ----------- Total Level 1 7,664,228 ----------- Level 2 Long-Term Investments: Australia 59,696,816 Austria 2,469,114 Belgium 7,170,629 Bermuda 695,365 Cayman Islands 203,569 Denmark 6,569,630 Finland 8,295,402 France 76,416,724 Germany 58,429,607 Greece 3,857,171 Hong Kong 16,607,378
25 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009
INVESTMENTS IN SECURITIES VALUATION INPUTS ASSETS ---------------- -------------- Ireland $ 2,055,881 Italy 24,279,237 Japan 147,877,357 Kazakhstan 257,020 Luxembourg 3,998,531 Netherlands 19,493,821 New Zealand 808,698 Norway 5,231,677 Portugal 2,310,358 Singapore 11,024,714 Spain 33,144,248 Sweden 17,420,607 Switzerland 57,359,127 United Kingdom 153,394,865 -------------- Total Level 2 719,067,546 -------------- Level 3 Long-Term Investments: Australia 11 Belgium 3 Ireland 1 -------------- Total Level 3 15 -------------- TOTAL $ 726,731,789 ==============
OTHER FINANCIAL INSTRUMENTS(1) ----------------------------- VALUATION INPUTS ASSETS LIABILITIES ---------------- --------------- ----------- Level 1 $ 517,022 $ (10,248) Level 2 827,979 (975,592) Level 3 -- -- ---------- --------- TOTAL $1,345,001 $(985,840) ========== =========
(1) Other financial instruments are financial futures contracts and foreign currency exchange contracts, which are shown at the unrealized appreciation/depreciation on the instrument. 26 MASTER INTERNATIONAL INDEX SERIES OF QUANTITATIVE MASTER SERIES LLC SCHEDULE OF INVESTMENTS DECEMBER 31, 2009 The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:
INVESTMENTS VALUATION INPUTS IN SECURITIES ---------------- ------------- Balance, as of December 31, 2008 $ 26,500 Accrued discounts/premiums -- Realized gain (loss) -- Change in unrealized appreciation/ depreciation(2) (1,493) Net purchases (sales) 12 Net transfers in/out of level 3 (25,004) -------- BALANCE, AS OF DECEMBER 31, 2009 $ 15 ========
(2) Included in the related net change in unrealized appreciation/depreciation on the Statement of Operations. The change in unrealized appreciation/depreciation on securities still held at December 31, 2009 was $12. 27 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON DETAILED SCHEDULE OF INVESTMENTS To the Investors and Board of Directors of Quantitative Master Series LLC: We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of Master International Index Series, one of the portfolios constituting Quantitative Master Series LLC, (the "Master LLC") as of December 31, 2009, and for the year then ended and have issued our report thereon dated February 24, 2010 which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR. Our audit also included the Master LLC's Schedule of Investments (the "Schedule") as of December 31, 2009 appearing in Item 6 of this Form N-CSR. This Schedule is the responsibility of the Master LLC's management. Our responsibility is to express an opinion based on our audit. In our opinion, the Schedule referred to above, when considered in relation to the basic financial statements taken as a whole of the Master LLC referred to above, presents fairly, in all material respects, the information set forth therein. DELOITTE & TOUCHE LLP February 24, 2010 Princeton, New Jersey 28 ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not Applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not Applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust's Board of Trustees since the Trust last disclosed such procedures in Schedule 14A. ITEM 11. CONTROLS AND PROCEDURES. (a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective. (b) There were no changes in the Trust's internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Filed herewith as EX-99.CODE ETH. (a)(2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT. (a)(3) Not Applicable. (b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): American Beacon Funds By /s/ Gene L. Needles, Jr. -------------------- Gene L. Needles, Jr. President Date: March 8, 2010 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/ Gene L. Needles, Jr. -------------------- Gene L. Needles, Jr. President Date: March 8, 2010 By /s/ Melinda G. Heika --------------------- Melinda G. Heika Treasurer Date: March 8, 2010