American Beacon Funds N-CSR

N-CSR 1 d309760dncsr.htm AMERICAN BEACON FUNDS N-CSR American Beacon Funds N-CSR

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-4984

AMERICAN BEACON FUNDS

(Exact name of registrant as specified in charter)

4151 Amon Carter Boulevard, MD 2450

Fort Worth, Texas 76155

(Address of principal executive offices)-(Zip code)

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) 391-6100

Date of fiscal year end: December 31, 2011

Date of reporting period: December 31, 2011

ITEM 1. REPORTS TO STOCKHOLDERS.

LOGO

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			20

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.

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


American Beacon Funds		December 31, 2011

LOGO

Dear Shareholders,

From around the globe to within U.S. borders, many events caused emotions to run high in 2011. We saw challenges that not only affected equity and credit markets — as well as our investments in them — but also changed many people’s lives in profound ways.

Among the headlines that had significant effects on investors were the political upheaval in the Middle East and North Africa, Japan’s earthquake and related nuclear disaster, controversy over U.S. troop withdrawal from Iraq, deterioration of the European economy, U.S. Congressional gridlocks over everything from the debt ceiling to tax breaks, the Occupy Wall Street movement and less-than-inspiring economic and jobs growth numbers domestically. Despite all these challenges, the broader stock market ended the year relatively unchanged while the government bond market, as represented by the Barclays Capital 1-10 Year U.S. TIPS Index, appreciated by 8.93%.

It’s easy to see how uncertainty in the markets — fueled by challenging events — could create an emotional response among investors. However, 2011 also reminded investors that maintaining a consistent, well-balanced investment strategy can protect against short-sighted actions — fueled by emotions — that can jeopardize long-term goals.

The long-term-focused, conservative management applied to the American Beacon Treasury Inflation Protected Securities (“TIPS”) Fund, which invests primarily in high-quality inflation-protected government securities, provided investors with a relative bright spot in an otherwise volatile (but ultimately flat) year overall. Over the 12-month period ended December 31, 2011, the American Beacon Treasury Inflation Protected Securities Fund (Institutional Class) returned 9.14%.

The year to come will surely provide its own list of unexpected national and world events. American Beacon remains focused on seeking opportunities and meeting market challenges to deliver the type of consistency in performance and service our shareholders value. Thank you for your continued investment in the American Beacon Funds.

To obtain further details about the growing number of investment opportunities now available within the American Beacon Funds family or to access your account information, please visit our website at www.americanbeaconfunds.com.

Best Regards,

Gene L. Needles, Jr.

President

American Beacon Funds

Market Overview

December 31, 2011 (Unaudited)

2011 was a year of many shocks that tested the resiliency of the U.S. economy.

The year began much like 2010 with high levels of optimism surrounding the economic growth prospects for the United States. Unfortunately, that optimism was called into question early in the year by two important but unrelated events. The first was the growing level of political instability in the Middle East and North Africa that resulted in the overthrow of a ruling government in Egypt, a civil war in Libya and continued violence in several other countries. Given the region’s importance as a global exporter of petroleum, the instability resulted in oil prices increasing by more than 25% from the February low in the first half of the year. The spike in oil prices effectively neutralized the positive effects of U.S. fiscal stimulus passed in late 2010. The other significant event was the devastating earthquake in Japan on March 11 and the following catastrophe with the Fukushima Daiichi nuclear power plant. Beyond the negative impact on confidence, the destruction of manufacturing capacity in Japan caused supply chain disruptions for American manufacturers.

The political impasse in the U.S. over the debt ceiling and the subsequent downgrade of U.S. debt by Standard and Poor’s shook investor confidence in 2011. However, the heightened sovereign debt risks in Europe and the subsequent negative connotations for the European and global banking systems led investors to purchase U.S. government securities due to the perceived relative safety of these investments.

TIPS investors were the beneficiaries of the risk aversion in 2011. On the back of increased demand for the highest quality, most liquid assets — as well as central bank policy that was designed to lower the return for risk-free assets — U.S. real rates declined by approximately 150 basis points (1.50%) from their February peak, which translated into solid principal returns for TIPS. In addition, the Arab Spring boost to oil prices — along with early strength in food, cotton and automobile prices — resulted in higher inflation accruals than would have been expected from an economy growing below 2%. For the year, the inflation accrual for TIPS was 3.5% with headline CPI peaking in September at 3.9%. Supply and demand dynamics for TIPS were favorable as the U.S. Department of

the Treasury’s issuance resulted in an increase of $112 billion TIPS outstanding over its fiscal year ended September 30.

Valuations of TIPS relative to nominal U.S. Treasuries cheapened throughout the year as inflation expectations declined in response to expectations for slower U.S. economic growth. For the year, break-even inflation rates fell from their April peak of 2.64% for 10-year TIPS to finish at 1.96%. TIPS did manage to find support in the fourth quarter as expectations for a U.S. double-dip recession waned, boosting inflation expectations from the September low of 1.71%. Despite the cheapening on valuation, TIPS managed to outperform comparable maturity nominal Treasury securities as the inflation accrual overwhelmed the relative valuation changes.

American Beacon Treasury Inflation Protected Securities Fund^SM

Performance Overview

December 31, 2011 (Unaudited)

The Institutional Class of the Fund returned 9.14% for the twelve months ended December 31, 2011, outperforming the Barclays Capital 1-10 Year U.S. TIPS Index (the “Index”) return of 8.93% but trailing the Lipper TIPS Funds Index return of 11.93%.

Comparison of Change in Value

of a $10,000 Investment

For the Period From 6/30/04 through 12/31/11

LOGO


	Annualized Total Returns Periods Ended 12/31/2011									Value of
	1 Year			5 Years			Since Inception 6/30/04			$10,000 6/30/04- 12/31/11
Institutional Class (1,7,8)		9.14	%		6.74	%		5.39	%	$	14,825
Y Class (1,2,7,8)		8.66	%		6.60	%		5.29	%		14,728
Investor Class (1,3,7,8)		8.67	%		6.50	%		5.23	%		14,656
A Class without sales charge (1,4,7,8)		8.17	%		6.36	%		5.14	%		14,564
A Class with sales charge (1,4,7,8)		2.99	%		5.32	%		4.46	%		13,871
C Class without sales charge (1,5,7,8)		7.47	%		6.17	%		5.01	%		14,430
C Class with sales charge (1,5,7,8)		6.47	%		6.17	%		5.01	%		14,430
Barclays Capital 1-10 Yr. U.S. TIPS Index(6)		8.93	%		6.90	%		5.70	%		15,162
Barclays Capital U.S. TIPS Index(6)		13.56	%		7.95	%		6.57	%		16,116
Lipper TIPS Funds Index(6)		11.93	%		7.15	%		6.01	%		15,497

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.

Fund performance represents the total returns achieved by the Institutional Class up to 3/1/10, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of the Y 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 Y Class been in existence since 6/30/04.

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.

Fund performance represents the total returns achieved by the Institutional Class from 6/30/04 through 3/1/09, and the Investor Class from 3/2/09 up to 5/17/10, the inception date of the A Class, and the returns of the A Class since its inception. Expenses of the A Class are higher than those of the Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 6/30/04. The maximum sales charge for A Class is 4.75%.

Fund performance represents the total returns achieved by the Institutional Class from 6/30/04 through 3/1/09, and the Investor Class from 3/2/09 up to 9/1/10, the inception date of the C Class, and the returns of the C Class since its inception. Expenses of the C Class are higher than those of the Institutional and Investor Classes. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 6/30/04. The maximum contingent deferred sales charge for C Class is 1.00% for shares redeemed within one year of the date of purchase.

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.

7.	A portion of the fees charged to the Investor Class of the Fund was waived from its inception. A portion of the fees charged to the Institutional Class of the Fund has been waived since 2005. Performance prior to waiving fees was lower than the actual returns shown.

The total annual Fund operating expense ratios set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.35%, 0.60%, 0.75%, 0.99%, and 1.77%, 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.

American Beacon Treasury Inflation Protected Securities Fund^SM

Performance Overview

December 31, 2011 (Unaudited)

The Fund produced strong absolute returns for the twelve-month time period as TIPS rallied amid downgraded global growth expectations, increased risk aversion, and uncertainty surrounding the European financial environment.

From a yield curve positioning standpoint, the Fund benefited from overweighting 9-10 year maturity TIPS and underweighting 2-3 year maturity TIPS, but an overweight allocation to 1-2 year maturity TIPS detracted from relative performance for the year. Individual security selections within the 1-3 year and 4-5 year maturity ranges also added value.

From a duration perspective, the Fund’s average modified duration was generally in-line with the Index for the year. However, a tactical short duration position implemented during the second quarter caused the Fund to lag during that period.

The Fund remains focused on investing in TIPS to provide inflation protection and income to its shareholders.

Top Ten Holdings


	% of Net Assets
U.S. Treasury Note, 2.00%, Due 1/15/2014		11.6	%
U.S. Treasury Note, 1.125%, Due 1/15/2021		11.1	%
U.S. Treasury Note, 1.375%, Due 1/15/2020		10.1	%
U.S. Treasury Note, 0.50%, Due 4/15/2015		9.5	%
U.S. Treasury Note, 0.125%, Due 4/15/2016		7.8	%
U.S. Treasury Note, 1.25%, Due 7/15/2020		7.1	%
U.S. Treasury Note, 2.00%, Due 7/15/2014		7.0	%
U.S. Treasury Note, 2.00%, Due 1/15/2016		6.6	%
U.S. Treasury Note, 0.625%, Due 7/15/2021		5.3	%
U.S. Treasury Note, 1.375%, Due 7/15/2018		4.2	%

Portfolio Diversification


	% of Fixed Income
A		0.0	%
AA		0.0	%
AAA		0.0	%
Treasury		100.0	%

LOGO

American Beacon Treasury Inflation Protected Securities Fund^SM

Fund Expenses

December 31, 2011 (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, 2011 through December 31, 2011.

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 that invest in the Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 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 that invest in the Fund through an IRA may be subject to a custodial IRA fee of $15 that is

typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 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 Account Value 7/1/11		Ending Account Value 12/31/11		Expenses Paid During Period* 7/1/11-12/31/11
Institutional Class
Actual	$	1,000.00	$	1,037.11	$	1.28
Hypothetical **	$	1,000.00	$	1,023.95	$	1.28
Y Class
Actual	$	1,000.00	$	1,034.89	$	3.18
Hypothetical **	$	1,000.00	$	1,022.08	$	3.16
Investor Class
Actual	$	1,000.00	$	1,034.40	$	3.54
Hypothetical **	$	1,000.00	$	1,021.73	$	3.52
A Class
Actual	$	1,000.00	$	1,032.76	$	5.28
Hypothetical **	$	1,000.00	$	1,020.01	$	5.24
C Class
Actual	$	1,000.00	$	1,028.49	$	9.15
Hypothetical **	$	1,000.00	$	1,016.18	$	9.10

Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.25%, 0.62%, 0.69%, 1.03% and 1.79% for the Institutional, Y, Investor, A and C 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% return before expenses.

American Beacon Treasury Inflation Protected Securities Fund

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Trustees of

American Beacon Treasury Inflation Protected Securities Fund:

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the American Beacon Treasury Inflation Protected Securities Fund (one of the funds constituting the American Beacon Funds) (the “Fund”), as of December 31, 2011, 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, 2011, 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 the American Beacon Treasury Inflation Protected Securities Fund at December 31, 2011, 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.

LOGO

Dallas, Texas

February 28, 2011

American Beacon Treasury Inflation Protected Securities Fund

Schedule of Investments

December 31, 2011


	Principal Amount		Fair Value
	(000’s)		(000’s)
U.S. TREASURY OBLIGATIONS - 99.19%
U.S. Treasury Note,
3.375%, Due 1/15/2012, ^A	$	134	$	134
1.875%, Due 7/15/2013, ^A		9,216		9,637
2.00%, Due 1/15/2014, ^A		24,976		26,449
1.25%, Due 4/15/2014, ^A		2,060		2,158
2.00%, Due 7/15/2014, ^A		14,923		16,079
1.625%, Due 1/15/2015, ^A		3,511		3,787
0.50%, Due 4/15/2015, ^A		20,814		21,778
1.875%, Due 7/15/2015, ^A		6,473		7,138
2.00%, Due 1/15/2016, ^A		13,559		15,156
0.125%, Due 4/15/2016, ^A		17,050		17,774
2.50%, Due 7/15/2016, ^A		3,437		3,975
2.375%, Due 1/15/2017, ^A		5,300		6,152
2.625%, Due 7/15/2017, ^A		3,272		3,895
1.625%, Due 1/15/2018, ^A		1,129		1,286
1.375%, Due 7/15/2018, ^A		8,537		9,666
2.125%, Due 1/15/2019, ^A		1,571		1,868
1.875%, Due 7/15/2019, ^A		2,614		3,080
1.375%, Due 1/15/2020, ^A		20,288		23,100
1.25%, Due 7/15/2020, ^A		14,334		16,213
1.125%, Due 1/15/2021, ^A		22,633		25,240
0.625%, Due 7/15/2021, ^A		11,217		12,000

Total U.S. Treasury Obligations (Cost $222,852)				226,565


	Shares
SHORT-TERM INVESTMENTS - 0.18% (Cost $401)
JPMorgan U.S. Government Money Market Fund		401,205		401

TOTAL INVESTMENTS - 99.37% (Cost $223,253)				226,966
OTHER ASSETS, NET OF LIABILITIES - 0.63%				1,440

TOTAL NET ASSETS - 100.00%			$	228,406

Percentages are stated as a percent of net assets.

^A	Inflation-Indexed Note.

See accompanying notes

American Beacon Treasury Inflation Protected Securities Fund

Statement of Assets and Liabilities

December 31, 2011 (in thousands, except share and per share amounts)


Assets:
Investments in unaffiliated securities, at fair value ^A	$	226,966
Dividends and interest receivable		1,291
Receivable for fund shares sold		221
Receivable for expense reimbursement (Note 2)		19
Prepaid expenses		38

Total assets		228,535

Liabilities:
Payable for fund shares redeemed		11
Management and investment advisory fees payable (Note 2)		55
Administrative service and service fees payable (Note 2)		35
Professional fees payable		21
Other liabilities		7

Total liabilities		129

Net assets	$	228,406

Analysis of Net Assets:
Paid-in-capital		225,908
Undistributed net investment income		—
Accumulated net realized loss		(1,215	)
Unrealized appreciation of investments		3,713

Net assets	$	228,406

Shares outstanding (no par value):
Institutional Class		18,540,956

Y Class		44,545

Investor Class		1,791,991

A Class		76,689

C Class		24,011

Net asset value, offering and redemption price per share:
Institutional Class	$	11.16

Y Class	$	11.24

Investor Class	$	11.12

A Class (net asset value and redemption price)	$	11.15

A Class (offering price)	$	11.71

C Class	$	11.06


^ACost of investments in unaffiliated securities	$	223,253

See accompanying notes

American Beacon Treasury Inflation Protected Securities Fund

Statement of Operations

For the Year Ended December 31, 2011 (in thousands)


Investment Income:
Interest income	$	6,223

Total investment income		6,223

Expenses:
Management and investment advisory fees (Note 2)		275
Administrative service fees (Note 2):
Institutional Class		330
Y Class		1
Investor Class		53
A Class		2
C Class		1
Transfer agent fees:
Institutional Class		10
Y Class		2
Investor Class		2
A Class		2
C Class		2
Custody and fund accounting fees		28
Professional fees		47
Registration fees and expenses		69
Service fees (Note 2):
Investor Class		44
A Class		1
Distribution fees (Note 2):
A Class		1
C Class		2
Prospectus and shareholder reports		40
Insurance fees		5
Trustee fees		18
Other expenses		8

Total expenses		943

Net fees waived and expenses reimbursed by Manager (Note 2)		(238	)

Net expenses		705

Net investment income		5,518

Realized and unrealized gain (loss) on investments:
Net realized gain (loss) from:
Investments		11,233
Change in net unrealized appreciation or (depreciation) of:
Investments		1,958

Net gain on investments		13,191

Net increase in net assets resulting from operations	$	18,709

See accompanying notes

American Beacon Treasury Inflation Protected Securities Fund

Statement of Changes in Net Assets

(in thousands)


	Year Ended December 31, 2011			Year Ended December 31, 2010
Increase (Decrease) in Net Assets:
Operations:
Net investment income	$	5,518		$	2,885
Net realized gain on investments		11,233			8,451
Change in net unrealized appreciation or (depreciation) of investments		1,958			(331	)

Net increase in net assets resulting from operations		18,709			11,005

Distributions to Shareholders:
Net investment income:
Institutional Class		(5,260	)		(2,717	)
Y Class		(9	)		(1	)
Investor Class		(412	)		(166	)
A Class		(17	)		—
C Class		(3	)		—
Tax return of capital:
Institutional Class		(256	)		—
Y Class		(1	)		—
Investor Class		(24	)		—
A Class		(1	)		—
C Class		—			—

Net distributions to shareholders		(5,983	)		(2,884	)

Capital Share Transactions:
Proceeds from sales of shares		273,161			135,939
Reinvestment of dividends and distributions		5,353			2,242
Cost of shares redeemed		(235,964	)		(134,873	)

Net increase in net assets from capital share transactions		42,550			3,308

Net increase in net assets		55,276			11,429

Net Assets:
Beginning of period		173,130			161,701

End of Period *	$	228,406		$	173,130


* Includes undistributed net investment income (loss) of	$	—		$	182

See accompanying notes

American Beacon Treasury Inflation Protected Securities Fund

Notes to Financial Statements

December 31, 2011

1. Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”) which is comprised of twenty Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, (the “Act”), as a diversified, open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Treasury Inflation Protected Securities Fund (the “Fund”), a series of the Trust.

American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc., and was organized in 1986 to provide business management, 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
Y Class		Investors making an initial investment of $100,000
Investor Class		General public and investors investing through an intermediary
A Class		General public and investors investing through an intermediary with applicable sales charges
C Class		General public and investors investing through an intermediary with applicable sales charges

Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the Fund. Class specific expenses, where applicable, currently include administrative service fees, service fees, and distribution fees and vary amongst the classes as described more fully in Note 2.

New Accounting Pronouncements

In May 2011, FASB issued an ASU to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. generally accepted accounting principles, (“U.S. GAAP”) and International Financial Reporting Standards (IFRSs). FASB concluded that the amendments in this ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. The ASU is effective prospectively during interim or annual periods beginning on or after December 15, 2011.

Management has evaluated the implications of these changes and determined that the impact will only affect the disclosure requirements related to the financial statements.

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, 2011 were as follows:


Management Fee Rate	Management Fee		Amount paid to Investment Sub-Advisor		Net Amount Retained by Manager
0.15% – 0.19%	$	274,567	$	156,431	$	118,136

American Beacon Treasury Inflation Protected Securities Fund

Notes to Financial Statements

December 31, 2011

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, 0.30% of the average daily net assets of the Y and Investor Classes, and 0.40% of the average daily net assets of the A and C Classes of the Fund.

Distribution Plans

The Fund, except for the A and C Classes of the Fund, have adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no fees may be charged to the Fund for distribution purposes. However, the Plan authorizes the management and administrative service fees received by the Manager and the investment advisors hired by the Manager to be used for distribution purposes. Under this Plan, the Fund does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Fund shares.

Separate Distribution Plans (the “Distribution Plans”) have been adopted pursuant to Rule 12b-1 under the Act for the A and C Classes of the Fund. Under the Distribution Plans, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the A Class and 1.00% of the average daily net assets of the C Class of the Fund. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expense incurred in a particular month by the Manager for distribution assistance.

Service Plan

The Manager and the Trust entered into a Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes of the Fund. As compensation for performing the duties required under the Service Plans, the Manager receives an annualized fee of 0.10% of the average daily net assets of the Y Class, 0.15% of the average daily net assets of the A and C Classes, and up to 0.375% of the average daily net assets of the Investor Class of the Fund. Service fees for the Y and C Classes for the period ended December 31, 2011 were less than $500.

Interfund Lending Program

Pursuant to an exemptive order by the Securities and 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, 2011, the Fund did not utilize the credit facility.

American Beacon Treasury Inflation Protected Securities Fund

Notes to Financial Statements

December 31, 2011

Reimbursement of Expenses

The Manager voluntarily and contractually agreed to reimburse a portion of its Administrative Service fee for the Institutional Class and other expenses of the Y, Investor, A, and C Classes. Of these amounts approximately $19,000 was receivable from the Manager at December 31, 2011. For the year ended December 31, 2011, the Manager reimbursed expenses as follows:


	Expense Cap and Limits
Class	1/1/11 to 2/28/11			3/1/11 to 12/31/11			Reimbursed Expenses		Expiration of Reimbursements
Institutional*		0.10	%		0.10	%	$	217,538		2014
Y**		N/A			N/A			1,648		2014
Investor		N/A			0.69	%		15,596		2014
A**		N/A			N/A			1,655		2014
C**		N/A			N/A			1,647		2014

*	Expense reduction.

**	Voluntary Reimbursement.

Expense Reimbursement Plan

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 carryover of excess expenses potentially reimbursable to the Manager, but not recorded as a liability is $131,280, $195,951, and $238,084 will expire in 2012, 2013, and 2014 respectively. The Fund has not recorded a liability for these potential reimbursements due to the current assessment that reimbursements are unlikely.

Sales Commissions

The Fund’s distributor, Foreside Fund Services, LLC (“Foreside”) may receive a portion of A Class sales charges from broker dealers and it may be used to offset expenses that the Manager pays to Foreside. For the year ended December 31, 2011 there has been $918 in sales commissions from the sale of A Class shares that were received by Foreside.

3. Security Valuation and Fair Value Measurements

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 (“NAV”) 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 fair 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 Trust’s Board of Trustees (the “Board”).

Valuation Inputs

Various inputs may be used to determine the fair 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.

American Beacon Treasury Inflation Protected Securities Fund

Notes to Financial Statements

December 31, 2011

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 2 securities are fixed-income securities that are valued using observable inputs as stated above.

Level 3 –

Prices determined using other 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.

Level 1 and Level 2 trading assets and trading liabilities, at fair value

Fixed income securities including corporate, U.S. government agencies, and U.S. treasury obligations, are normally valued by pricing service providers that use broker dealer quotations, reported trades or valuation estimates from their internal pricing models. The service providers’ internal models use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates, and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Fixed income securities purchased on a delayed-delivery basis are marked to market daily until settlement at the forward settlement date are categorized as Level 2 of the fair value hierarchy.

Investments in registered open-end investment management companies will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost which approximates fair value. These investments are categorized as Level 2 of the fair value hierarchy.

Level 3 trading assets and trading liabilities, at fair value

The valuation techniques and significant inputs used in determining the fair values of financial instruments classified as Level 3 of the fair value hierarchy are as follows:

Securities and other assets for which market quotes are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction and are categorized as Level 3 of the fair value hierarchy.

Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the relevant market, but prior to the Exchange close, that materially affect the values of a Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade, do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager the responsibility for monitoring significant events that may materially affect the fair values of a Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be re-evaluated in light of such significant events.

The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation methods to the Manager. For instances in which daily market quotes are not readily available, investments may be valued, pursuant to guidelines established by the Board, with reference to other securities or indices. In the event that the security or asset cannot be valued pursuant to one of the valuation methods established by the Board, the fair value of the security or asset will be determined in good faith by the Valuation Committee of the Board, generally based upon recommendations provided by the Manager.

American Beacon Treasury Inflation Protected Securities Fund

Notes to Financial Statements

December 31, 2011

When a Fund uses fair valuation methods applied by the Manager that use significant unobservable inputs to determine its NAV, securities will be priced by another method that the Board or persons acting at their direction believe accurately reflects fair value and are categorized as Level 3 of the fair value hierarchy. These methods may require subjective determinations about the value of a security. While the Trust’s policy is intended to result in a calculation of a Fund’s NAV that fairly reflects security values as of the time of pricing, the Trust cannot guarantee that values determined by the Board or persons acting at their direction would accurately reflect the price that a Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by a Fund may differ from the value that would be realized if the securities were sold.

For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to total realized and unrealized gains or losses, purchases and sales, and transfers in and out of the Level 3 category during the period. The end of period timing recognition is used for the significant transfers between Levels of the Fund’s assets and liabilities. In accordance with the requirements of U.S. GAAP, a fair value hierarchy and Level 3 reconciliation, if any, have been included below.

The Fund’s investments are summarized by level based on the inputs used to determine their values. U.S. GAAP also requires all significant transfers between any levels to be disclosed. During the year ended December 31, 2011, there were no significant transfers into or out of any level for the Fund. As of December 31, 2011, the investments were classified as described below (in thousands):


	Level 1		Level 2		Level 3		Total
U.S. Treasury Obligations	$	—	$	226,565	$	—	$	226,565
Short-term investments		401		—		—		401

Total	$	401	$	226,565	$	—	$	226,966

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 NAV. 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.

American Beacon Treasury Inflation Protected Securities Fund

Notes to Financial Statements

December 31, 2011

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 up on the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP 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 trustees 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.

4. Federal Income and Excise Taxes

It is the policy of the Fund to qualify as a regulated investment company, by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, the Fund is treated as a single entity for the purpose of determining such qualification.

The Fund does not have any unrecognized tax benefits in the accompanying financial statements. Each of the tax years in the four year period ended December 31, 2011 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. GAAP. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements.

American Beacon Treasury Inflation Protected Securities Fund

Notes to Financial Statements

December 31, 2011

The tax character of distributions paid during the fiscal years ended December 31, 2011 and December 31, 2010 were as follows (in thousands):


	Year Ended December 31, 2011		Year Ended December 31, 2010
Distributions paid from:
Ordinary income:*
Institutional Class	$	5,260	$	2,717
Y Class		9		1
Investor Class		412		166
A Class		17		—
C Class		3		—
Tax return of capital:
Institutional Class		256		—
Y Class		1		—
Investor Class		24		—
A Class		1		—
C Class		—		—

Total distributions paid	$	5,983	$	2,884

*	For tax purposes, short-term capital gains distributions are considered ordinary income distributions.

As of December 31, 2011, the components of distributable earnings on a tax basis were as follows (in thousands):


Cost basis of investments for federal income tax purposes	$	223,791
Unrealized appreciation		3,498
Unrealized depreciation		(323	)

Net unrealized appreciation or (depreciation)		3,175
Undistributed ordinary income		—
Accumulated long-term gain (loss)		(677	)
Other temporary differences		—

Distributable earnings	$	2,498

Due to inherent differences in the recognition of income, expenses, and realized gains (losses) under U.S. GAAP 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 a return of capital that have been reclassified as of December 31, 2011 (in thousands):


Paid-in-capital	$	(282	)
Undistributed net investment income		283
Accumulated net realized gain (loss)		—
Unrealized appreciation or (depreciation) of investments		(1	)

On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted, which changed various technical rules governing the tax treatment of regulated investment companies. The changes are generally effective for taxable years beginning after the date of enactment. One of the more prominent changes addresses capital loss carryforwards. Under the Act, each Fund will be permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result

American Beacon Treasury Inflation Protected Securities Fund

Notes to Financial Statements

December 31, 2011

of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.

Finally, the Act contains several provisions aimed at preserving the character of distributions made by a fiscal year registered investment company (“RIC”) during the portion of its taxable year ending after October 31 or December 31, reducing the circumstances under which a RIC might be required to file amended Forms 1099 to restate previously reported distributions. Except for the simplification provisions related to RIC qualification, the Act is effective for taxable years beginning after December 22, 2010. The provisions related to RIC qualification are effective for taxable years for which the extended due date of the tax return is after December 22, 2010.

Losses prior to the provisions of the Act are $677 expiring in 2017 (in thousands) which may be applied against any realized net taxable gains in each succeeding year or until the expiration date, whichever occurs first. The Fund utilized $11,117 of net capital loss carryforward for the year ended December 31, 2011.

5. Investment Transactions

The aggregate cost of purchases and proceeds from sales of investments for the year ended December 31, 2011, excluding short-term investments, were $931,953,635 and $893,075,861, respectively. These amounts also represent purchases and sales of U.S. Government securities.

6. Capital Share Transactions

The tables below summarize the activity in capital shares (dollars and shares in thousands):

Year Ended December 31, 2011


	Institutional Class						Y Class						Investor Class
	Shares			Amount			Shares			Amount			Shares			Amount
Shares sold		23,868		$	263,690			21		$	232			759		$	8,298
Reinvestment of dividends		450			4,913			1			10			38			416
Shares redeemed		(20,729	)		(230,629	)		(12	)		(128	)		(461	)		(5,039	)

Net increase in shares outstanding		3,589		$	37,974			10		$	114			336		$	3,675


	A Class						C Class
	Shares			Amount			Shares		Amount
Shares sold		76		$	840			9	$	101
Reinvestment of dividends		1			11			—		3
Shares redeemed		(15	)		(167	)		—		(1	)

Net increase in shares outstanding		62		$	684			9	$	103

Year Ended December 31, 2010


	Institutional Class						Y Class				Investor Class
	Shares			Amount			Shares		Amount		Shares			Amount
Shares sold		11,655		$	121,423			34	$	359		1,349		$	13,851
Reinvestment of dividends		200			2,077			—		1		16			164
Shares redeemed		(12,245	)		(129,823	)		—		—		(488	)		(5,050	)

Net increase (decrease) in shares outstanding		(390	)	$	(6,323	)		34	$	360		877		$	8,965

American Beacon Treasury Inflation Protected Securities Fund

Notes to Financial Statements

December 31, 2011


	A Class				C Class
	Shares		Amount		Shares		Amount
Shares sold		15	$	155		15	$	151
Reinvestment of dividends		—		—		—		—
Shares redeemed		—		—		—		—

Net increase (decrease) in shares outstanding		15	$	155		15	$	151

American Beacon Treasury Inflation Protected Securities Fund

Financial Highlights

(For a share outstanding throughout the period)


	Institutional Class															Y Class
	Year Ended December 31,															Year Ended December 31,			March 1 to December 31,
	2011			2010			2009^A			2008			2007^B			2011			2010
Net asset value, beginning of period	$	10.51		$	10.16		$	9.20		$	10.18		$	9.53		$	10.60		$	10.25

Income from investment operations:
Net investment income		0.28			0.16			0.06			0.80			0.45			0.26			0.05
Net gains (losses) on securities (both realized and unrealized)		0.67			0.35			0.95			(0.98	)		0.59			0.65			0.35

Total income (loss) from investment operations		0.95			0.51			1.01			(0.18	)		1.04			0.91			0.40

Less distributions:
Dividends from net investment income		(0.29	)		(0.16	)		(0.05	)		(0.80	)		(0.39	)		(0.26	)		(0 .05	)
Distributions from net realized gains on securities		—			—			—			—			—			—			—
Tax return of capital		(0.01	)^C		—			—			—			0.00	^C,D		(0.01	)^C		—

Total distributions		(0.30	)		(0.16	)		(0.05	)		(0.80	)		(0.39	)		(0.27	)		(0.05	)

Net asset value, end of period	$	11.16		$	10.51		$	10.16		$	9.20		$	10.18		$	11.24		$	10.60

Total return ^E		9.14	%		5.03	%		11.00	%		(2.09	)%		11.22	%		8.66	%		3.89	%^F

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	206,864		$	157,195		$	155,833		$	140,189		$	223,697		$	501		$	365
Ratios to average net assets (annualized):
Expenses, before reimbursements		0.36	%		0.35	%		0.36	%		0.29	%		0.43	%		1.04	%		0.60	%^G
Expenses, after reimbursements		0.26	%		0.25	%		0.26	%		0.25	%		0.43	%		0.63	%		0.60	%^G
Net investment income (loss), before reimbursements		2.24	%		1.40	%		0.59	%		5.15	%		4.74	%		1.80	%		0.85	%^G
Net investment income (loss), after reimbursements		2.34	%		1.50	%		0.69	%		5.19	%		4.74	%		2.21	%		0.85	%^G
Portfolio turnover rate		381	%		214	%		180	%		128	%		139	%		381	%		214	%^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	The tax return of capital is calculated based on outstanding shares at the time of distribution.

^D	Amount represents less than $0.01 per share.

Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. May include adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions.

^F	Not annualized.

^G	Annualized.

^H	Portfolio turnover rate is for the period from January 1 through December 31, 2010.

^I	Portfolio turnover rate is for the period from January 1 through December 31, 2009.

American Beacon Treasury Inflation Protected Securities Fund

Financial Highlights

(For a share outstanding throughout the period)


Investor Class							A Class						C Class
Year Ended December 31,				March 2 to December 31,			Year Ended December 31,			May 17 to December 31,			Year Ended December 31,			September 1 to December 31,
2011	2010			2009^A			2011			2010			2011			2010
$10.48	$	10.13		$	9.25		$	10.54		$	10.35		$	10.46		$	10.38


0.24		0.06			0.14			0.10			0.04			0.13			0.00
0.66		0.41			0.79			0.76			0.19			0.65			0.08

0.90		0.47			0.93			0.86			0.23			0.78			0.08


(0.25)		(0.12	)		(0.05	)		(0.24	)		(0.04	)		(0.17	)		—
—		—			—			—			—			—			—
(0.01)^C		—			—			(0.01	)^C		—			(0.01	)^C		—

(0.26)		(0.12	)		(0.05	)		(0.25	)		(0.04	)		(0.18	)		—

$11.12	$	10.48		$	10.13		$	11.15		$	10.54		$	11.06		$	10.46

8.67%		4.62	%		10.05	%^F		8.17	%		2.23	%^F		7.47	%		0.77	%^F


$19,920	$	15,262		$	5,868		$	855		$	155		$	266		$	153

0.77%		0.75	%		0.81	%^G		1.32	%		0.99	%^G		2.62	%		1.77	%^G
0.68%		0.64	%		0.65	%^G		1.03	%		0.99	%^G		1.79	%		1.77	%^G
2.24%		1.06	%		3.04	%^G		0.88	%		0.55	%^G		0.25	%		(0.05	)%^G
2.32%		1.17	%		3.20	%^G		1.17	%		0.55	%^G		1.08	%		(0.05	)%^G
381%		214	%		180	%^I		381	%		214	%^H		381	%		214	%^H

American Beacon Treasury Inflation Protected Securities Fund

Privacy Policy and Federal Tax Information

December 31, 2011 (Unaudited)

Privacy Policy

The American Beacon Funds recognize and respect 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, 2011, 99.6% were derived from U.S. Treasury Obligations.

Trustees and Officers of the American Beacon Funds

(Unaudited)

The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-two funds in the fund complex that includes the Trust, the American Beacon Master Trust, the American Beacon Mileage Trust, 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.


Name, Age and Address	Position, Term of Office and Length of Time Served with the Trust	Principal Occupation(s) During Past 5 Years and Current Directorships
INTERESTED TRUSTEES

	Term Lifetime of Trust until removal, resignation or retirement*

Alan D. Feld** (75)	Trustee since 1996	Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Director, Clear Channel Communications (1984-2008); Trustee, American Beacon Mileage Funds (1996-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-Present).

NON-INTERESTED TRUSTEES

	Term Lifetime of Trust until removal, resignation or retirement*

W. Humphrey Bogart (67)	Trustee since 2004	Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present).

Brenda A. Cline (51)	Trustee since 2004	Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Kimbell Art Foundation (1993-Present); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present).

Eugene J. Duffy (57)	Trustee since 2008	Principal and Executive Vice President, Paradigm Asset Management (1994- Present); Director, Sunrise Bank of Atlanta (2008-Present); Trustee, American Beacon Mileage Funds (2008-Present); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-Present).

Thomas M. Dunning (69)	Trustee since 2008	Non-Executive Chairman (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, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-Present); Trustee, American Beacon Select Funds (2008- Present); Trustee, American Beacon Master Trust (2008-Present).

Richard A. Massman (68)	Trustee since 2004 Chairman since 2008	Consultant and General Counsel Emeritus (2009-Present) and 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); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004- Present); Trustee, American Beacon Master Trust (2004-Present).

Trustees and Officers of the American Beacon Funds

(Unaudited)


Name, Age and Address	Position, Term of Office and Length of Time Served with the Trust	Principal Occupation(s) During Past 5 Years and Current Directorships
R. Gerald Turner (66)	Trustee since 2001	President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-2007); Trustee, American Beacon Mileage Funds (2001- Present); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-Present).

Paul J. Zucconi, CPA (71)	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) (2002-Present); Director, Torchmark Corporation (life and health insurance products) (2002-Present); Director, Charter Bank (community bank services and products) (2010-Present); Trustee, American Beacon Mileage Funds (2008-Present); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-Present).

OFFICERS

	Term One Year

Gene L. Needles, Jr. (57)	President since 2009 Executive Vice President since 2009	President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2009-Present), President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009-Present), American Beacon Mileage Funds; President (2008- 2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors.

William F. Quinn (63)	Executive Vice President from 2007 to 2008 and 2009 to Present President from 1987 to 2007 and 2008 to 2009 Trustee from 1987 to 2008	Executive Chairman (2009-Present), Chairman (2006-2009), CEO (2006-2007), and Director (2003-Present), American Beacon Advisors, Inc.; Chairman and Director (2008-Present), Lighthouse Holdings, Inc.; Chairman and Director (2008-Present), Lighthouse Holdings Parent, Inc.; Director (2003-Present), American Airlines Federal Credit Union; Director, Hicks Acquisition I, Inc. (2007- 2009); Director, Hicks Acquisition II, Inc. (2010-Present) (special purpose acquisition company); Director, Crescent Real Estate Equities, Inc. (1994-2007); 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 (2002-2011); Director, American Beacon Global Funds, plc (2007-2009).

Rosemary K. Behan (52)	VP, Secretary and Chief Legal Officer since 2006	Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006- Present); Secretary (2008-Present), Lighthouse Holdings, Inc.; Secretary (2008- Present), Lighthouse Holdings Parent, Inc.

Brian E. Brett (51)	VP since 2004	Vice President, Director of Sales, American Beacon Advisors, Inc. (2004- Present).

Wyatt L. Crumpler (45)	VP since 2007	Vice President, Asset Management (2009-Present) and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc.

Erica Duncan (41)	VP Since 2011	Vice President, Marketing & Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM.

Michael W. Fields (57)	VP since 1989	Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009).

Trustees and Officers of the American Beacon Funds

(Unaudited)


Name, Age and Address	Position, Term of Office and Length of Time Served with the Trust	Principal Occupation(s) During Past 5 Years and Current Directorships
Melinda G. Heika (50)	Treasurer since 2010	Vice President, Finance & Accounting (2010-Present); Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer (2010- Present), Lighthouse Holdings, Inc.; Treasurer (2010-Present), Lighthouse Holdings Parent, Inc.

Terri L. McKinney (48)	VP since 2010	Vice President, Enterprise Services (2009-Present) and Managing Director (2003- 2009), American Beacon Advisors, Inc.

Jeffrey K. Ringdahl (36)	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).

Samuel J. Silver (48)	VP Since 2011	Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc.

Christina E. Sears (40)	Chief Compliance Officer since 2004 and Asst. Secretary since 1999	Chief Compliance Officer (2004-Present), American Beacon Advisors, Inc.

John J. Okray (37)	Asst. Secretary since 2010	Assistant General Counsel, American Beacon Advisors, Inc. (2010-Present); Asst. Secretary (2010-Present), Lighthouse Holdings, Inc.; Asst. Secretary (2010- Present), Lighthouse Holdings Parent, Inc.; Vice President, OppenheimerFunds, Inc. (2004-2010).

Sonia L. Bates (55)	Asst. Treasurer since 2011	Director, Tax and Financial Reporting (2011 - Present) and Manager, Tax and Financial Reporting (2005-2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011- Present), Lighthouse Holdings Parent, Inc.

*	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 and Master Trust’s sub-advisors.

LOGO

Delivery of Documents

eDelivery is NOW AVAILABLE - Stop traditional mail delivery and receive your

shareholder reports and summary prospectus on-line. Sign up at

www.americanbeaconfunds.com

If you invest in the Fund through a financial institution, you may be able to receive the Fund’s regulatory mailings, such as the Summary 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:



By E-mail:		On the Internet:
american_beacon.funds@ambeacon.com		Visit our website at www.americanbeaconfunds.com



By Telephone:		By Mail:
Call (800) 658-5811		American Beacon Funds
		P.O. Box 219643
		Kansas City, MO 64121-9643


Availability of Quarterly Portfolio Schedules		Availability of Proxy Voting Policy and Records

In addition to the Schedule of Investments 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 twenty days after the end of each month.		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

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 or Summary Prospectus.

American Beacon Funds and the American Beacon Treasury Inflation Protected Securities Fund are service marks of American Beacon Advisors, Inc.

AR 12/11

LOGO

About American Beacon Advisors

Contents


President’s Message			1
Performance Overviews			2

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			30
Statement of Assets and Liabilities			36
Statement of Operations			37
Statements of Changes in Net Assets			38
Financial Highlights			39
Notes to Financial Statements			40

Master Small Cap Index Series
Schedule of Investments			51
Statement of Assets and Liabilities			72
Statement of Operations			73
Statements of Changes in Net Assets			74
Financial Highlights			74
Notes to Financial Statements			75

Master International Index Series
Summary Schedule of Investments			83
Statement of Assets and Liabilities			93
Statement of Operations			94
Statements of Changes in Net Assets			95
Financial Highlights			95
Notes to Financial Statements			96

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.

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.


American Beacon Funds		December 31, 2011

LOGO

Dear Shareholders,

From around the globe to within U.S. borders, many events caused emotions to run high in 2011. We saw challenges that not only affected equity and credit markets – as well as our investments in them – but also changed many people’s lives in profound ways.

It’s easy to see how uncertainty in the markets – fueled by these events – could create an emotional response among investors. However, 2011 also reminded investors that maintaining a consistent, well-balanced investment strategy can protect against short-sighted actions – fueled by emotions – that can jeopardize long-term goals.

Volatility both domestically and internationally caused most equity markets to end the year flat or down. Over the 12-month period ended December 31, 2011, the American Beacon S&P 500 Index Fund (Institutional Class) returned 1.92%. The American Beacon Small Cap Index Fund (Institutional Class) returned -4.54% over the same period. And the American Beacon International Equity Index Fund (Institutional Class) returned -12.50%. These returns were generally in line with the performance of each Fund’s respective Index.

Best regards,

Gene L. Needles, Jr.

President

American Beacon Funds

American Beacon S&P 500 Index Fund^†

Performance Overview

December 31, 2011 (Unaudited)

For the twelve months ended December 31, 2011, the total return of the Institutional Class of the American Beacon S&P 500 Index Fund was 1.92%, slightly behind the S&P 500 Index (the “Index”) return of 2.11% but consistent with the Lipper S&P 500 Objective Funds Index return of 1.93%.

Comparison of Change in Value

of a $10,000 Investment

For the Period from 12/31/01 through 12/31/11

LOGO


	Annualized Total Returns Periods Ended 12/31/11									Value of $10,000 12/31/01- 12/31/11
	1 Year			5 Years			10 Years			Value of $10,000 12/31/01- 12/31/11
Institutional Class (1,4).		1.92	%		-0.31	%		2.79	%	$	13,172
Investor Class (1,2,4)		1.44	%		-0.75	%		2.33	%	$	12,592
Lipper S&P 500 Objective Funds Index (3)		1.93	%		-0.45	%		2.68	%	$	13,028
S&P 500 Index (3)		2.11	%		-0.25	%		2.92	%	$	13,332

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.

The total annual Fund operating expense ratios set forth in the most recent Fund prospectus for the Institutional and Investor Class shares were 0.13% and 0.60%, 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.

Performance Summary provided by SSgA Funds Management, Inc.

Apart from mild choppiness in January for smaller stocks, U.S. equities worked their way steadily higher in the first seven weeks of 2011, emboldened by solid profit reports and ongoing liquidity from the Federal Reserve. Only when Libyan violence erupted in late February, spurring a leap in oil and gasoline prices, did U.S. averages stumble in a meaningful way. Amid fresh concerns over the resilience of consumer spending, share prices slumped into early March, and when the broader scope of the devastation and nuclear aftermath from events in Japan became evident, the Index briefly slipped into the red on a year-to-date basis. On Sunday March 20, communications powerhouse AT&T announced it had struck a deal to acquire T-Mobile from Deutsche Telekom. While the $39 billion price tag seemed more than generous, investors quickly focused on the enhanced pricing power that might accrue to the merged entity and its fewer remaining competitors. Furthermore, the ready arrangement of financing for such a huge outlay served notice to investors that the market climate remained favorable for buying, and the Index resumed the docile upward trading pattern that had prevailed through much of December and January. Although the Index did not surpass its highs of mid-February, it did provide a nominal gain for March, finishing the opening quarter of 2011 with a solid 5.9% return.

Although U.S. equities hesitated in early April amid a dip in the Institute for Supply Management’s services index and a slump in small business confidence, a steady diet of healthy first-quarter earnings reports easily got share prices back on track. There were signs of malaise beneath the surface, however, as defensive sectors were starting to perform better and smaller stocks did not recover their swagger as readily as they had during the March volatility that was linked to Japan. The new vulnerabilities came home to roost

American Beacon S&P 500 Index Fund^†

Performance Overview

December 31, 2011 (Unaudited)

during May, when weekly jobless claims surged and housing data deteriorated afresh. Share prices continued to slide through most of June, as the unemployment rate rebounded to 9.1%, its highest level of 2011, and consumer price inflation reached 3.6%, its highest point since October 2008. Core inflation also continued its steady climb, damping investor hopes that the Federal Reserve might soon introduce a new round of asset purchases after the expiration of QE2 at the end of June. The only relief for equity holders came late in the month with the announcement that crude oil in storage would be allocated to the marketplace. Developments in Europe provided an additional boost to sentiment, as competing interests seemed to come together on a financing plan for Greece that would buy the country at least a few months of time to shore up its budget.

The market declines continued in the third quarter as weak payroll data, increasing political gridlock, and a downgrade of the United States’ credit rating all helped drive the Index down during the quarter. Increasing concerns over debt issues in Europe also weighed on investor sentiment. The Federal Reserve attempted to boost morale by announcing interest rates would remain near zero well into 2013, but the impact was muted. The third quarter ended with the largest drop in the Index since the fourth quarter of 2008, arguably the height of the financial crisis.

The final quarter of the year brought relief for weary investors, as the Index rose 11.82%. Sentiment was aided by hopes for progress in Europe, a quieting of the rancorous debates in Washington, solid corporate earnings and signs of improvement in U.S. housing and employment data.

The volatile times of 2011 ended with the Index rising 2.11% for the year. While investor concerns were high through much of the year, the return was quite respectable. In comparison, U.S. markets were much stronger than the international markets. The Index beat the MSCI EAFE benchmark (developed international markets) by 14.00%, and beat the MSCI Emerging Index by more than 20.00%.

Seven of the ten S&P sectors posted gains and defensive sectors were in favor during the year. The Utilities (+19.93%), Consumer Staples (+13.89%) and Health Care (+12.72%) sectors all rose significantly. These sectors are normally expected

to do well when the economy slows, and investor fears were heightened this year. At the other end of the spectrum, the Financials (-16.74%) sector was the worst performing sector. The sovereign debt issues in Europe and the United States combined with fears of a slowing global economy to weigh heavily on the Financials sector’s share prices.

Some notable contributors to return in 2011 were Apple (+25.56%), Philip Morris (+39.75%) and Pfizer (+28.77%). Apple continues to produce strong earnings and revenues as demand for their products continues to be very strong. Pfizer and Philip Morris appeared to benefit from the anti-cyclical nature of their businesses.

Many of the biggest drags on return came from financial firms. Citibank (-44.33%), Goldman Sachs (-45.60%) and Bank of America (-58.13%) all weighed heavily on the Fund and Index. The concerns in global equity and debt markets weighed heavily on these financial giants.

Portfolio Strategy

The investment manager continues to utilize a replication strategy, owning all 500 names in the S&P 500 Index in approximately the same weightings as the Index. Therefore, the Fund is expected to continue to meet its objective of closely tracking, before expenses, the return of its benchmark, the S&P 500 Index.

Top Ten Holdings


	% of Net Assets*
Exxon Mobil Corp.		3.6	%
Apple, Inc.		3.3	%
Chevron Corp.		1.9	%
International Business Machine Corp.		1.9	%
General Electric Co.		1.7	%
Microsoft Corp.		1.7	%
AT&T, Inc.		1.6	%
Johnson & Johnson		1.6	%
Procter & Gamble Co.		1.6	%
Pfizer, Inc.		1.5	%

*	Percent of net assets of State Street Equity 500 Index Portfolio

American Beacon S&P 500 Index Fund^†

Performance Overview

December 31, 2011 (Unaudited)

Sector Allocation


	% of Equities*
Information Technology		19.0	%
Financials		13.6	%
Energy		12.3	%
Health Care		11.9	%
Consumer Staples		11.6	%
Consumer Discretionary		10.7	%
Industrials		10.7	%
Utilities		3.8	%
Materials		3.5	%
Telecommunication Services		2.9	%

*	Percent of the equities of State Street Equity 500 Index Portfolio

^†	S&P is a trademark of the McGraw-Hill Companies, Inc. and has been licensed for use. “Standard and Poor’s^®”, “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.

American Beacon Small Cap Index Fund^SM

Performance Overview

December 31, 2011 (unaudited)

For the twelve months ended December 31, 2011, the total return of the Institutional Class of the American Beacon Small Cap Index Fund was -4.54%. The Fund’s performance was below the Russell 2000 Index (the “Index”) return of -4.18% and also below the Lipper Small-Cap Core Funds Index return of -3.81% which consists primarily of actively managed funds.

Comparison of Change in Value

of a $10,000 Investment

For the Period from 12/31/01 through 12/31/11

LOGO


	Annualized Total Returns Periods Ended 12/31/11									Value of $10,000 12/31/01-
	1 Year			5 Years			10 Years			12/31/11
Institutional Class(1,3)		-4.54	%		0.16	%		5.53	%	$	17,128
Lipper Small-Cap Core Funds Index(2)		-3.81	%		1.32	%		5.81	%	$	17,584
Russell 2000 Index(2)		-4.18	%		0.15	%		5.62	%	$	17,274

The Lipper Small-Cap Core Funds Index tracks the results of the 30 largest mutual funds in the Lipper Small-Cap Core Funds category. Lipper is an independent mutual fund research and ranking service. The Russell 2000 Index is an unmanaged index comprised of approximately 2,000 smaller-capitalization stocks from various industrial sectors. One cannot invest directly in an index.

3.	The total annual Fund operating expense ratio set forth in the most recent prospectus for the Fund was 0.18%. The expense ratio above may vary from the expense ratio presented in other sections of this report that is based on expenses incurred during the period covered by this report.

Performance Summary provided by Blackrock Investment Management, LLC

U.S. equities delivered paltry rewards for the extreme volatility investors endured in 2011. Political turmoil, natural disasters, and above all, global debt problems drove a “risk on - risk off” tug-of-war that characterized the year’s market activity.

Early in the year, stocks moved unevenly higher despite political upheaval spreading across the Middle East/North Africa region and a sharp rise in oil and other commodity prices. March brought devastating natural disasters in Japan, resulting in global supply chain disruptions. But equity markets were remarkably resilient as the global economic recovery appeared to be on track and investors were gradually increasing their appetite for risk. After peaking in late April, equities were met with a sharp reversal when the heightened possibility of Greece defaulting on its debt rekindled fears about the potential impact of the sovereign debt crisis spreading in Europe. In the United States, a prolonged debt ceiling debate revealed the ineffectiveness of the nation’s policymakers and ultimately led to Standard & Poor’s decision to downgrade the U.S. government’s credit rating in early August. This announcement spurred one of the most volatile periods in trading history. Stock markets across the world whipsawed on hopes and fears driven by news flow. Equities swooned as debt problems in Europe spread to Italy and Spain, and global economic indicators grew increasingly bleak.

U.S. stocks staged a strong rebound in October as the domestic labor market improved and corporate profits continued to beat analyst expectations. Encouraging news from Europe also contributed to the rally. After months of deliberation, European leaders agreed upon a new plan to reduce Greece’s debt burden, recapitalize the region’s banks and increase the size of the euro-zone bailout fund. However, a lack of definitive details about the rescue plan soon raised

American Beacon Small Cap Index Fund^SM

Performance Overview

December 31, 2011 (unaudited)

doubts among investors and thwarted the rally at the end of October. In November, political instability in Greece and Italy fueled uncertainty as to whether Europe’s leaders would be able to contain the crisis. In the United States, bickering lawmakers failed to reach an agreement on reducing the U.S. budget deficit, further undermining investors’ confidence in policymakers on both sides of the Atlantic. Market volatility softened in December with the support of global central bank actions and continued improvement in economic data.

For the year, U.S. stocks outperformed most international markets given their relative safety during a time of heightened uncertainty overseas. Dividend-paying stocks performed particularly well as investors sought yield in a low interest rate environment. Relative to the Russell 2000 Index from a sector perspective, the Utilities sector (+16.64%) led the index for 2011. The defensive Consumer Staples sector (+7.81%) performed well amid high volatility, as did the Health Care sector (+1.87%), which benefited from increased merger and acquisition activity during the year. Battered by the world’s debt problems, the Financials sector (-4.25%) saw the largest losses. The more cyclical Materials (-12.31%) and Industrials (-5.41%) sectors also declined amid heightened uncertainty about the global economy.

Portfolio Strategy

The Fund will continue to strive to meet its objective of closely replicating, before expenses, the return of its benchmark, the Russell 2000 Index. It does so by investing in a subset of the securities in the Index such that the characteristics of the portfolio closely track the characteristics of the Index.

Top Ten Holdings


	% of Net Assets*
HealthSpring, Inc.		0.3	%
NetLogic Microsystems Inc.		0.3	%
SuccessFactors, Inc.		0.3	%
Clean Harbors, Inc.		0.3	%
World Fuel Services Corp.		0.3	%
Jack Henry & Associates Inc .		0.3	%
American Campus Communities Inc.		0.3	%
Salix Pharmaceuticals Ltd.		0.3	%
Biomed Realty Trust Inc.		0.3	%
Onyx Pharmaceuticals Inc.		0.3	%

*	Percent of net assets of Master Small Cap Index Series

Sector Allocation


	% of Equities*
Financials		22.2	%
Information Technology		17.1	%
Industrials		15.7	%
Consumer Discretionary		13.0	%
Health Care		12.6	%
Energy		6.7	%
Materials		4.5	%
Utilities		3.7	%
Consumer Staples		3.7	%
Telecommunications		0.8	%

*	Percent of equity portion of Master Small Cap Index Series

American Beacon International Equity Index Fund^SM

Performance Overview

December 31, 2011 (Unaudited)

For the twelve months ended December 31, 2011, the Institutional Class of the American Beacon International Equity Index Fund posted a total return of -12.50%, underperforming the MSCI EAFE Index (the “Index”) return of -12.14% but outperforming the Lipper International Large-Cap Core Funds Index return of -13.56% which consists primarily of actively managed funds. The investment manager’s application of its fair valuation policy during the period was a significant driver of the Fund’s underperformance.

Comparison of Change in Value

of a $10,000 Investment

For the Period from 12/31/01 through 12/31/11

LOGO


	Annualized Total Returns Periods Ended 12/31/11									Value of $10,000 12/31/01-
	1 Year			5 Years			10 Years			12/31/11
Institutional Class(1,3)		-12.50	%		-4.86	%		4.66	%	$	15,765
Lipper International Large-Cap Core Funds Index(2)		-13.56	%		-4.96	%		2.43	%	$	12,712
MSCI EAFE Index(2)		-12.14	%		-4.72	%		4.67	%	$	15,838

The Lipper International Large-Cap Core Funds Index tracks the results of the 30 largest mutual funds in the Lipper International Large-Cap Core 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 Provisional EAFE Index from 12/31/01 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 0.21%. 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.

Performance Summary provided by Blackrock Investment Management, LLC

International equities lost the “risk on - risk off” trading tug- of-war that characterized 2011. Political turmoil, natural disasters, and above all, global debt problems, consumed investors’ attention and drove broad market swings. As the year progressed, news flow grew increasingly influential over investors’ trading activity, to the point where company fundamentals became virtually meaningless. The MSCI EAFE Index lost 12.14% (in US dollar terms) for the year amid a whirlwind of unprecedented global events.

Early in the year, stocks moved unevenly higher despite political upheaval spreading across the Middle East/North Africa region and a sharp rise in oil and other commodity prices. March brought devastating natural disasters that left Japan with massive infrastructure damage, resulting in global supply chain disruptions. All the while, inflationary pressures persisted in developing countries. Nevertheless, the global economy continued to expand, although at a slower pace. Solid corporate profits, improving labor market conditions and reasonably upbeat leading indicators pushed most of the world’s equity markets forward.

After reaching their peak at the end of April, equities were met with a sharp reversal when the heightened possibility of Greece defaulting on its debt rekindled fears about the potential impact of the sovereign debt crisis spreading in Europe. Concurrently, it became evident that the pace of economic growth had slowed in the United States and other developed nations. In the United States, a prolonged debt ceiling debate revealed the ineffectiveness of the nation’s policymakers and ultimately led to Standard & Poor’s decision to downgrade the U.S. government’s credit rating in early August. This announcement was the catalyst that spurred one of the most volatile periods in equity trading history. Stock markets across the world swooned as debt problems in Europe spread to Italy and Spain, and global economic indicators grew increasingly bleak.

American Beacon International Equity Index Fund^SM

Performance Overview

December 31, 2011 (Unaudited)

Equities rebounded in October as stronger economic data from the United States helped to calm fears of a global double-dip recession and European leaders demonstrated greater unity in their quest to stem the debt crisis. After months of deliberation, at last finance ministers agreed upon a new plan to reduce Greece’s debt burden, recapitalize the region’s banks and increase the size of the euro-zone bailout fund. However, a lack of definitive details about the rescue plan raised doubts among investors and thwarted the rally at the end of October. International equities generally declined through the final two months of the year as political instability in Greece and Italy fueled uncertainty as to whether Europe’s leaders would be able to contain the crisis. Market volatility softened in December with the support of global central bank actions and improving economic data.

Of the 22 developed countries in the MSCI EAFE Index, only Ireland (+14.30%) and New Zealand (+6.35%) posted gains for the year (in USD). While equity markets sold off broadly across Europe, countries participating in the euro currency union saw particularly painful losses. Greece (-60.56%) finished well below all other countries in the index. Asian stocks were dragged down by the world’s debt problems and a weak outlook for consumer demand from Europe and the United States. Japan (-14.19%) also suffered the effects of its appreciating yen on its export-driven economy.

From a sector perspective, the Health Care sector (+6.32%) was the top performer in 2011. The defensive Consumer Staples sector (+4.63%) also outperformed amid highly volatile conditions. However, heightened uncertainty did not bode well for the more cyclical Materials (-22.50%) and Financials (-21.24%) sectors which were battered by the world’s debt problems.

Portfolio Strategy

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.

Sector Allocation


	% of Equities*
Financials		19.9	%
Industrials		14.4	%
Health Care		12.3	%
Consumer Discretionary		10.7	%
Energy		10.0	%
Materials		9.6	%
Consumer Staples		7.7	%
Telecommunication Services		6.8	%
Information Technology		6.3	%
Utilities		2.3	%

*	Percent of equity portion of Master International Index Series

Country Allocation

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	% of Equities*
United Kingdom		23.3	%
Japan		21.6	%
France		8.9	%
Australia		8.6	%
Switzerland		8.6	%
Germany		7.8	%
Spain		3.3	%
Sweden		3.1	%
Hong Kong		2.8	%
Netherlands		2.7	%
Italy		2.3	%
Singapore		1.6	%
Denmark		1.1	%
Belgium		1.0	%
Norway		0.9	%
Finland		0.8	%
Israel		0.7	%
Ireland		0.3	%
Austria		0.2	%
Portugal.		0.2	%
New Zealand		0.1	%
Greece		0.1	%

*	Percent of equity portion of Master International Index Series

American Beacon International Equity Index Fund^SM

Performance Overview

December 31, 2011 (Unaudited)

Top Ten Holdings


	% of Net Assets*
Nestle S.A.		1.9	%
Vodafone Group plc		1.4	%
HSBC Holding plc		1.4	%
BP plc		1.4	%
Novartis AG		1.4	%
Royal Dutch Shell plc (Class A)		1.4	%
Roche Holding AG		1.2	%
GlaxoSmithKline plc		1.2	%
BHP Billiton Ltd.		1.2	%
Total S.A.		1.1	%

*	Percent of net assets of Master International Index Series

American Beacon Funds

Fund Expenses

December 31, 2011 (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, 2011 through December 31, 2011.

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 that invest in a Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 higher.

Actual


Institutional Class	S&P 500 Index			Small Cap Index			International Equity Index			Investor Class	S&P 500 Index
Beginning Account Value 7/1/11	$	1,000.00		$	1,000.00		$	1,000.00		Beginning Account Value 7/1/11	$	1,000.00
Ending Account Value 12/31/11	$	962.39		$	901.16		$	830.39		Ending Account Value 12/31/11	$	960.56
Expenses Paid During Period* 7/1/11 - 12/31/11	$	0.69		$	1.53		$	1.25		Expenses Paid During Period* 7/1/11 - 12/31/11	$	3.06
Annualized Expense Ratio		0.14	%		0.32	%		0.27	%	Annualized Expense Ratio		0.62	%

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 that invest in a Fund through an IRA may be subject to a custodial IRA fee of $15 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $15 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


Institutional Class	S&P 500 Index			Small Cap Index			International Equity Index			Investor Class	S&P 500 Index
Beginning Account Value 7/1/11	$	1,000.00		$	1,000.00		$	1,000.00		Beginning Account Value 7/1/11	$	1,000.00
Ending Account Value 12/31/11	$	1,024.50		$	1,023.59		$	1,023.84		Ending Account Value 12/31/11	$	1,022.08
Expenses Paid During Period* 7/1/11 - 12/31/11	$	0.71		$	1.63		$	0.38		Expenses Paid During Period* 7/1/11 - 12/31/11	$	3.16
Annualized Expense Ratio		0.14	%		0.32	%		0.27	%	Annualized Expense Ratio		0.62	%

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.

American Beacon Funds

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Trustees of

American Beacon International Equity Index Fund, American Beacon S&P 500 Index Fund, and American Beacon Small Cap Index Fund:

We have audited the accompanying statements of assets and liabilities of the American Beacon International Equity Index Fund, the American Beacon S&P 500 Index Fund, and the American Beacon Small Cap Index Fund (three of the funds constituting the American Beacon Funds) (collectively, the “Funds”) as of December 31, 2011, 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, 2011, by correspondence with the custodian and the Master International Index Series, the State Street Equity 500 Index Portfolio, and the Master Small Cap Index Series, respectively. 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 the American Beacon International Equity Index Fund, the American Beacon S&P 500 Index Fund, and the American Beacon Small Cap Index Fund at December 31, 2011, 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.

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Dallas, Texas

February 28, 2012

American Beacon Funds

Statements of Assets and Liabilities

December 31, 2011 (in thousands, except share and per share amounts)


	S&P 500 Index Fund			Small Cap Index Fund			International Equity Index Fund
Assets:
Investment in Portfolio, at fair value	$	438,357		$	43,198		$	320,498
Receivable for fund shares sold		217			9			1,279
Prepaid expenses		10			5			23

Total assets		438,584			43,212			321,800

Liabilities:
Payable for fund shares redeemed		50			29			151
Administrative service and service fees payable (Note 2)		25			2			13
Printing fees payable		—			4			—
Professional fees payable		13			15			11
Sub-administration fees payable		—			4			26
Transfer agent fees payable		3			—			3
Trustee fees payable		1			—			3
Other liabilities		1			1			1

Total liabilities		93			55			208

Net Assets	$	438,491		$	43,157		$	321,592

Analysis of Net Assets:
Paid-in-capital		427,031			62,711			422,381
Undistributed net investment income (distribution in excess)		151			(3	)		11
Accumulated net realized gain (loss)		(67,004	)		(14,970	)		(47,912	)
Unrealized net appreciation or (depreciation) of investments, futures contracts, and foreign currency translations		78,313			(4,581	)		(52,888	)

Net assets	$	438,491		$	43,157		$	321,592

Shares outstanding (no par value):
Institutional Class		24,772,683			3,638,048			38,466,946

Investor Class		960,665			—			—

Net asset value, offering and redemption price per share:
Institutional Class	$	17.05		$	11.86		$	8.36

Investor Class	$	16.82		$	—		$	—

See accompanying notes

See accompanying Financial Statements of the respective Master Portfolios attached

American Beacon Funds

Statements of Operations

For the Year ended December 31, 2011 (in thousands)


	S&P 500 Index Fund			Small Cap Index Fund			International Equity Index Fund
Investment Income (expense) Allocated From Portfolio:
Dividend income (net of foreign taxes)^A	$	8,598		$	826		$	11,628
Interest income		5			2			1
Securities lending income		—			77			—
Portfolio expenses (net of fees waived)^B		(183	)		(51	)		(401	)
Other income		—			—			5

Net investment income allocated from Portfolio		8,420			854			11,233

Fund Expenses:
Administrative service fees (Note 2):
Institutional Class		202			35			170
Investor Class		42			—			—
Sub-administrative service fees:
Institutional Class		—			3			55
Transfer agent fees:
Institutional Class		12			4			13
Investor Class		5			—			—
Custody and accounting fees		14			12			12
Professional fees		34			23			31
Registration fees		46			4			21
Service fees - Investor Class (Note 2)		42			—			—
Printing		90			36			60
Trustee fees		31			7			27
Insurance		9			2			7
Other expenses		28			2			9

Total fund expenses		555			128			405

Net investment income		7,865			726			10,828


Realized and Unrealized Gain (Loss) Allocated From Master Portfolio
Net realized gain (loss) from:
Investments		15,068			2,964			(9,316	)
Foreign currency transactions		—			—			60
Futures contracts		661			(114	)		(202	)
Change in net unrealized appreciation or (depreciation) of:
Investments		(14,747	)		(4,319	)		(44,079	)
Futures contracts		(131	)		2			162

Net gain (loss) on investments		851			(1,467	)		(53,375	)

Net increase (decrease) in net assets resulting from operations	$	8,716		$	(741	)	$	(42,547	)

^A Foreign taxes	$	7		$	—		$	1,171

^B Fees waived by Master Portfolio		—			15			1

See accompanying notes

See accompanying Financial Statements of the respective Master Portfolios attached

American Beacon Funds

Statements of Changes in Net Assets (in thousands)


	S&P 500 Index						Small Cap Index						International Equity Index
	Fund						Fund						Fund
	Year Ended December 31, 2011			Year Ended December 31, 2010			Year Ended December 31, 2011			Year Ended December 31, 2010			Year Ended December 31, 2011			Year Ended December 31, 2010
Increase (Decrease) in Net Assets:
Operations:
Net investment income	$	7,865		$	6,563		$	726		$	882		$	10,828		$	7,231
Net realized gain (loss) on investments, foreign currency, and futures contracts		15,729			4,901			2,850			(2,864	)		(9,458	)		(7,559	)
Change in net unrealized appreciation or depreciation of investments and futures contracts		(14,878	)		39,239			(4,317	)		3,744			(43,917	)		23,115

Net increase (decrease) in net assets resulting from operations		8,716			50,703			(741	)		1,762			(42,547	)		22,787

Distributions to Shareholders:
Net investment income:
Institutional Class		(7,679	)		(6,796	)		(729	)		(894	)		(10,886	)		(7,040	)
Investor Class		(289	)		(318	)		—			—			—			—
Tax return of capital:
Institutional Class		(54	)		—			(15	)		(104	)		—			—
Investor Class		(2	)		—			—			—			—			—

Total distributions to shareholders		(8,024	)		(7,114	)		(744	)		(998	)		(10,886	)		(7,040	)

Capital Share Transactions:
Proceeds from sales of shares		214,771			63,163			16,709			132,393			111,683			83,813
Reinvestment of dividends and distributions		8,012			7,107			744			998			10,886			7,040
Cost of shares redeemed		(184,283	)		(53,796	)		(65,949	)		(80,975	)		(73,599	)		(60,655	)

Net increase (decrease) in net assets from capital share transactions		38,500			16,474			(48,496	)		52,416			48,970			30,198

Net increase (decrease) in net assets		39,192			60,063			(49,981	)		53,180			(4,463	)		45,945

Net Assets:
Beginning of period		399,299			339,236			93,138			39,958			326,055			280,110

End of Period *	$	438,491		$	399,299		$	43,157		$	93,138		$	321,592		$	326,055

* Includes undistributed net investment income (distribution in excess) of	$	151		$	325		$	(3	)	$	(3	)	$	11		$	(82	)

See accompanying notes

See accompanying Financial Statements of the respective Master Portfolios attached

American Beacon Funds

Notes to Financial Statements

December 31, 2011

1. Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”) which is comprised of 20 Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, (the “Act”) as a 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 (closed to new investors), 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.


American Beacon:	Portfolios:	% of Portfolio Held by Fund at December 31, 2011
S&P 500 Index Fund	State Street Equity 500 Index Portfolio		24.01	%
Small Cap Index Fund	Master Small Cap Index Series		8.19	%
International Equity Index Fund	Master International Index Series		37.45	%

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

Each class offered by the Trust has equal rights as to assets and voting privileges. Income and non-class specific expenses are allocated daily to each class on the basis of the relative net assets. Realized and unrealized capital gains and losses of each class are allocated daily based on the relative net assets of each class of the respective Fund. Class specific expenses, where applicable, currently include administrative service fees, and service fees, and vary amongst the classes as described more fully in Note 2.

New Accounting Pronouncements

American Beacon Funds

Notes to Financial Statements

December 31, 2011

Management has evaluated the implications of these changes and determined that the impact will only affect the disclosure requirements related to the financial statements.

2. 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 0.25% of the average daily net assets of the Investor Class of the S&P 500 Index Fund.

Service Plans

The Manager and the Trust entered into a Service Plan that obligates the Manager to oversee additional shareholder servicing of the Investor Class of S&P 500 Index Fund. As compensation for performing the duties required under the Service Plan, the Manager receives 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. Security Valuation and Fair Value Measurements

U.S. GAAP defines fair market value as the price that a Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds’ policy is to fair value its financial instruments in the Portfolios at fair value based on the Fund’s apportionate interest in the net assets of the Portfolios. Valuation of securities held by the Portfolios is discussed in the accompanying Notes to the Financial Statements of the respective Portfolios attached.

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.

American Beacon Funds

Notes to Financial Statements

December 31, 2011

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. NAV 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

Other

4. Federal Income and Excise Taxes

It is the policy of each Fund to qualify as a regulated investment company, by complying with all applicable provisions of Subchapter M of the Internal Revenue Code, as amended, and to make distribution of taxable income sufficient to relieve it from substantially all federal income and excise taxes. For federal income tax purposes, each Fund is treated as a single entity for the purpose of determining such qualification.

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, 2011 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.

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.

American Beacon Funds

Notes to Financial Statements

December 31, 2011

The tax character of distributions paid during the years ended December 31, 2011 and December 31, 2010 were as follows (in thousands):


	S&P 500 Index Fund				Small Cap Index Fund				International Equity Index Fund
	Year Ended December 31, 2011		Year Ended December 31, 2010		Year Ended December 31, 2011		Year Ended December 31, 2010		Year Ended December 31, 2011		Year Ended December 31, 2010
Distributions paid from:
Ordinary income:
Institutional Class	$	7,679	$	6,796	$	729	$	894	$	10,886	$	7,040
Investor Class		289		318		—		—		—		—
Return of Capital:
Institutional Class		54		—		15		104		—		—
Investor Class		2		—		—		—		—		—

Total paid distributions	$	8,024	$	7,114	$	744	$	998	$	10,886	$	7,040

As of December 31, 2011, the components of distributable earnings on a tax basis were as follows (in thousands):


	S&P 500 Index Fund			Small Cap Index Fund			Int’l Equity Index Fund
Cost basis of investments for federal income tax purposes	$	381,441		$	48,902		$	386,223
Unrealized appreciation		87,193			7,270			82,659
Unrealized depreciation		(30,277	)		(12,974	)		(148,384	)

Net unrealized depreciation		56,916			(5,704	)		(65,725	)
Undistributed ordinary income		—			—			65
Capital and other accumulated losses		(45,394	)		(13,850	)		(35,129	)
Other temporary differences		(62	)		—			—

Distributable earnings	$	11,460		$	(19,554	)	$	(100,789	)

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 or (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. GAAP and federal income tax regulations, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statements of Assets and Liabilities.

Accordingly, the following amounts represent current year permanent differences derived from reclassifications of income from real estate investment securities, foreign currency, sales of investments in passive foreign investment companies, and partnership transactions that have been reclassified as of December 31, 2011 (in thousands):


	S&P 500 Index Fund			Small Cap Index Fund			Int’l Equity Index Fund
Paid-in-capital	$	6,728		$	(1,569	)	$	355
Undistributed net investment income		(71	)		3			151
Accumulated net realized gain/(loss)		(6,657	)		1,566			(521	)
Unrealized appreciation or (depreciation) of investments, futures contracts, and foreign currency		—			—			15

American Beacon Funds

Notes to Financial Statements

December 31, 2011

permitted to carry forward capital losses incurred in taxable years beginning after the date of enactment for an unlimited period. However, any losses incurred during those future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years, which carry an expiration date. As a result of this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered all short-term as permitted under previous regulation.

Losses incurred that will be carried forward under the provisions of the Act are as follows:


	Loss Carryforward Character
Fund	Short term		Long term		Total
S&P 500 Index Fund	$	—	$	—	$	—
Small Cap Index Fund		—		—		—
International Equity Index Fund		888		5,346		6,234

Capital losses prior to the provisions of the Act which may be applied against any realized net taxable gains in each succeeding year or until their expiration dates, which ever occurs first (in thousands) are as follows:


Fund	2013		2014		2015		2016		2017		2018		Total
S&P 500 Index Fund	$	918	$	286	$	—	$	11,180	$	28,055	$	4,955	$	45,394
Small Cap Index Fund		—		—		—		—		4,998		8,852		13,850
International Equity Index Fund		—		—		—		9,746		13,890		5,259		28,895

The S&P 500 Index and Small Cap Index Funds utilized (in thousands) $3,087 and $4,385, respectively, of net capital loss carryforwards for the year ended December 31, 2011.

Net capital and foreign currency losses incurred after October 31, 2011 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, 2011 (in thousands), the S&P 500 Index Fund deferred $61 of capital loss and the International Equity Index Fund deferred $216 of foreign currency losses to January 1, 2012.

5. 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, 2011


	Institutional Class						Investor Class
S&P 500 Index Fund	Shares			Amount			Shares			Amount
Shares sold		12,416		$	209,438			313		$	5,333
Reinvestment of dividends		456			7,732			17			280
Shares redeemed		(10,452	)		(177,155	)		(418	)		(7,128	)

Net increase (decrease) in shares outstanding		2,420		$	40,015			(88	)	$	(1,515	)

American Beacon Funds

Notes to Financial Statements

December 31, 2011


	Institutional Class
Small Cap Index Fund	Shares			Amount
Shares sold		1,307		$	16,709
Reinvestment of dividends		62			744
Shares redeemed		(5,101	)		(65,949	)

Net (decrease) in shares outstanding		(3,732	)	$	(48,496	)


	Institutional Class
International Equity Index Fund	Shares			Amount
Shares sold		11,684		$	111,683
Reinvestment of dividends		1,312			10,886
Shares redeemed		(7,570	)		(73,599	)

Net increase in shares outstanding		5,426		$	48,970

Year ended December 31, 2010


	Institutional Class						Investor Class
S&P 500 Index Fund	Shares			Amount			Shares			Amount
Shares sold		3,124		$	48,883			950		$	14,280
Reinvestment of dividends		431			6,796			20			311
Shares redeemed		(2,126	)		(32,615	)		(1,405	)		(21,181	)

Net increase (decrease) in shares outstanding		1,429		$	23,064			(435	)	$	(6,590	)


	Institutional Class
Small Cap Index Fund	Shares			Amount
Shares sold		11,348		$	132,393
Reinvestment of dividends		78			998
Shares redeemed		(8,030	)		(80,975	)

Net increase in shares outstanding		3,396		$	52,416


	Institutional Class
International Equity Index Fund	Shares			Amount
Shares sold		8,974		$	83,813
Reinvestment of dividends		718			7,040
Shares redeemed		(6,519	)		(60,655	)

Net increase in shares outstanding		3,173		$	30,198

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American Beacon S&P 500 Index Fund

Financial Highlights

(For a share outstanding throughout the period)


	Institutional Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Net asset value, beginning of period	$	17.07		$	15.15		$	12.21		$	19.85		$	19.19

Income from investment operations:
Net investment income:^A		0.34			0.29			0.30			0.35			0.39
Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized)		(0.02	)		1.95			2.91			(7.64	)		0.65

Total income (loss) from investment operations		0.32			2.24			3.21			(7.29	)		1.04

Less distributions:
Dividends from net investment income		(0.34	)		(0.32	)		(0.27	)		(0.35	)		(0.38	)
Tax return of capital		(0.00	)^CD		—			—			—			—

Total distributions		(0.34	)		(0.32	)		(0.27	)		(0.35	)		(0.38	)

Net asset value, end of period	$	17.05		$	17.07		$	15.15		$	12.21		$	19.85

Total return^B		1.92	%		14.96	%		26.70	%		(37.08	)%		5.39	%

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	422,337		$	381,592		$	316,975		$	224,583		$	271,746
Ratios to average net assets (annualized):^A
Net investment income		1.95	%		1.90	%		2.39	%		2.23	%		1.89	%
Expenses, including expenses allocated from the master portfolio		0.16	%		0.13	%		0.15	%		0.13	%		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	May include adjustments with accounting principles generally accepted in the United States of America and as such, the net assets for financial reporting purposes and the returns based upon the net asset value may differ from the net asset value and returns for shareholder transactions.

^C	Amount represents less than $0.01 per share.

^D	The tax return of capital is calculated based upon outstanding shares at the time of distribution.

American Beacon S&P 500 Index Fund

Financial Highlights

(For a share outstanding throughout the period)


Investor Class
Year Ended December 31,
2011			2010			2009			2008			2007
$	16.88		$	15.00		$	12.06		$	19.60		$	18.97


	0.22			0.15			0.33			0.33			0.31
	0.02			1.99			2.80			(7.60	)		0.62

	0.24			2.14			3.13			(7.27	)		0.93


	(0.30	)		(0.26	)		(0.19	)		(0.27	)		(0.30	)
	(0.00	)^CD		—			—			—			—

	(0.30	)		(0.26	)		(0.19	)		(0.27	)		(0.30	)

$	16.82		$	16.88		$	15.00		$	12.06		$	19.60

	1.44	%		14.43	%		26.26	%		(37.35	)%		4.88	%


$	16,154		$	17,707		$	22,261		$	12,915		$	18,430

	1.44	%		1.42	%		2.01	%		1.73	%		1.38	%
	0.64	%		0.60	%		0.60	%		0.62	%		0.63	%

American Beacon Small Cap Index Fund^SM

Financial Highlights

(For a share outstanding throughout the period)


	Institutional Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Net asset value, beginning of period	$	12.64		$	10.06		$	8.00		$	13.51		$	14.89

Income from investment operations:
Net investment income^A		0.19			0.13			0.10			0.18			0.32
Net gain (loss) on investments and futures transactions (both realized and unrealized)		(0.76	)		2.59			2.08			(4.78	)		(0.53	)

Total income (loss) from investment operations		(0.57	)		2.72			2.18			(4.60	)		(0.21	)

Less distributions:
Dividends from net investment income		(0.21	)		(0.13	)		(0.11	)		(0.17	)		(0.31	)
Distributions from net realized gains on investments		—			—			—			(0.61	)		(0.80	)
Tax return of capital		(0.00	)^BD		(0.01	)^B		(0.01	)^B		(0.13	)^B		(0.06	)^B

Total distributions		(0.21	)		(0.14	)		(0.12	)		(0.91	)		(1.17	)

Net asset value, end of period	$	11.86		$	12.64		$	10.06		$	8.00		$	13.51

Total return^C		(4.54	)%		27.05	%		27.21	%		(33.58	)%		(1.63	)%

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	43,157		$	93,138		$	39,958		$	31,552		$	52,325
Ratios to average net assets (annualized):^A
Net investment income		1.04	%		1.21	%		1.18	%		1.54	%		1.49	%
Expenses, including expenses allocated from the master portfolio		0.26	%		0.18	%		0.23	%		0.20	%		0.20	%

^A	The per share amounts and ratios reflect income and expenses assuming inclusion of the Fund’s proportionate share of the income and expenses of the Master Small Cap Index Series.

^B	The tax return of capital is calculated based upon outstanding shares at the time of distribution.

^C	May include adjustments with accounting principles generally accepted in the United States of America and as such, the net assets for financial reporting purposes and the returns based upon the net asset value may differ from the net asset value and returns for shareholder transactions.

^D	Amount represents less than $0.01 per share.

American Beacon International Equity Index Fund^SM

Financial Highlights

(For a share outstanding throughout the period)


	Institutional Class
	Year Ended December 31,
	2011			2010			2009			2008			2007
Net asset value, beginning of period	$	9.87		$	9.38		$	7.46		$	13.37		$	12.76
Income from investment operations:
Net investment income^A		0.29			0.22			0.21			0.39			0.51
Net gain (loss) on investments, foreign currency and futures transactions (both realized and unrealized)		(1.51	)		0.49			1.93			(6.00	)		0.86

Total income (loss) from investment operations		(1.22	)		0.71			2.14			(5.61	)		1.37

Less distributions:
Dividends from net investment income		(0.29	)		(0.22	)		(0.22	)		(0.30	)		(0.53	)
Distributions from net realized gains on investments		—			—			—			—			(0.22	)
Tax return of capital		—			—			—			—			(0.01	)^B

Total distributions		(0.29	)		(0.22	)		(0.22	)		(0.30	)		(0.76	)

Net asset value, end of period	$	8.36		$	9.87		$	9.38		$	7.46		$	13.37

Total return^C		(12.29	)%		7.57	%		28.72	%		(41.85	)%		10.68	%

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	321,592		$	326,055		$	280,110		$	185,860		$	267,293
Ratios to average net assets (annualized):^A
Net investment income		3.26	%		2.66	%		2.66	%		3.58	%		2.96	%
Expenses, including expenses allocated from the master portfolio		0.24	%		0.21	%		0.23	%		0.19	%		0.19	%

^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	May include adjustments with accounting principles generally accepted in the United States of America and as such, the net assets for financial reporting purposes and the returns based upon the net asset value may differ from the net asset value and returns for shareholder transactions.

American Beacon Funds

Privacy Policy and Federal Tax Information

December 31, 2011 (Unaudited)

Privacy Policy

The American Beacon Funds recognize and respect 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.

Federal Tax Information

For corporate shareholders in the Funds, the percentage of ordinary dividend income distributed for the year ended December 31, 2011, which is designated as qualifying for the dividends-received deduction, is as follows:


S&P 500 Index Fund	98.04	%
Small Cap Index Fund	60.52	%
International Equity Index Fund	0.00	%

For shareholders in the Funds, the percentage of dividend income distributed for the year ended December 31, 2011, which designated as qualified dividend income under the Jobs and Growth Tax Relief Act of 2003, is as follows:


S&P 500 Index Fund	100.00	%
Small Cap Index Fund	75.58	%
International Equity Index Fund	100.00	%

Trustees and Officers of the American Beacon Funds

(Unaudited)

The Trustees and officers of the American Beacon Funds (the “Trust”) are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-two 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.


Name, Age and Address	Position, Term of Office and Length of Time Served with the Trust	Principal Occupation(s) During Past 5 Years and Current Directorships
INTERESTED TRUSTEES
	Term Lifetime of Trust until removal, resignation or retirement*

Alan D. Feld** (75)	Trustee since 1996	Sole Shareholder of a professional corporation which is a Partner in the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Director, Clear Channel Communications (1984-2008); Trustee, American Beacon Mileage Funds (1996-Present); Trustee, American Beacon Select Funds (1999-Present); Trustee, American Beacon Master Trust (1996-Present).

NON-INTERESTED TRUSTEES	Term Lifetime of Trust until removal, resignation or retirement*

W. Humphrey Bogart (67)	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); Trustee, American Beacon Master Trust (2004-Present).

Brenda A. Cline (51)	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, Trinity Valley School (2003-2004); Member; Trinity Valley School Endowment Committee (2004-Present); Trustee, American Beacon Mileage Funds (2004-present); Trustee, American Beacon Select Funds (2004-Present); Trustee, American Beacon Master Trust (2004-Present).

Eugene J. Duffy (57)	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); Trustee, American Beacon Master Trust (2008-Present).

Trustees and Officers of the American Beacon Funds

(Unaudited)


Name, Age and Address	Position, Term of Office and Length of Time Served with the Trust	Principal Occupation(s) During Past 5 Years and Current Directorships
Thomas M. Dunning (69)	Trustee since 2008	Non-Executive Chairman (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, BancTec (2010-Present); Trustee, American Beacon Mileage Funds (2008-Present); Trustee, American Beacon Select Funds (2008- Present); Trustee, American Beacon Master Trust (2008-Present).

Richard A. Massman (68)	Trustee since 2004 Chairman since 2008	Consultant and General Counsel Emeritus (2009-Present) and 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); Trustee, American Beacon Mileage Funds (2004-Present); Trustee, American Beacon Select Funds (2004- Present); Trustee, American Beacon Master Trust (2004-Present).

R. Gerald Turner (66)	Trustee since 2001	President, Southern Methodist University (1995-Present); Director, J.C. Penney Company, Inc. (1996-Present); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-2007); Trustee, American Beacon Mileage Funds (2001-Present); Trustee, American Beacon Select Funds (2001-Present); Trustee, American Beacon Master Trust (2001-Present).

Paul J. Zucconi, CPA (71)	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) (2002-Present); Director, Torchmark Corporation (life and health insurance products) (2002-Present); Director, Charter Bank (community bank services and products) (2010-Present); Trustee, American Beacon Mileage Funds (2008-Present); Trustee, American Beacon Select Funds (2008-Present); Trustee, American Beacon Master Trust (2008-Present).
OFFICERS
	Term
	One Year

Gene L. Needles, Jr. (57)	President since 2009 Executive Vice President 2009	President, CEO and Director (2009-Present), American Beacon Advisors, Inc.; President (2009-Present), President, CEO and Director (2009-Present), Lighthouse Holdings, Inc.; President and CEO (2009-Present), Lighthouse Holdings Parent, Inc.; President (2009-Present), American Beacon Select Funds; President (2009- Present), American Beacon Mileage Funds; President (2008-2009), Touchstone Investments; President (2003-2007), CEO (2004-2007), AIM Distributors.

William F. Quinn (63)	Executive Vice President from 2007 to 2008 and 2009 to Present President from 1987 to 2007 and 2008 to 2009 Trustee from 1987 to 2008	Executive Chairman (2009-Present), Chairman (2006-2009), CEO (2006-2007), and Director (2003-Present), American Beacon Advisors, Inc.; Chairman and Director (2008-Present), Lighthouse Holdings, Inc.; Chairman and Director (2008-Present), Lighthouse Holdings Parent, Inc.; Director (2003-Present), American Airlines Federal Credit Union; Director, Hicks Acquisition I, Inc. (2007-2009); Director, Hicks Acquisition II, Inc. (2010-Present) (special purpose acquisition company); Director, Crescent Real Estate Equities, Inc. (1994-2007); 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 (2002-2011); Director, American Beacon Global Funds, plc (2007-2009).

Rosemary K. Behan (52)	VP, Secretary and Chief Legal Officer since 2006	Vice President, Legal and Compliance, American Beacon Advisors, Inc. (2006- Present); Secretary (2008-Present), Lighthouse Holdings, Inc.; Assistant General Counsel, First Command Financial Planning, Inc. (2004-2006); Attorney, U.S. Securities and Exchange Commission (1995-2004).

Brian E. Brett (51)	VP since 2004	Vice President, Director of Sales, American Beacon Advisors, Inc. (2004-Present).

Trustees and Officers of the American Beacon Funds

(Unaudited)


Name, Age and Address	Position, Term of Office and Length of Time Served with the Trust	Principal Occupation(s) During Past 5 Years and Current Directorships
Wyatt L. Crumpler (45)	VP since 2007	Vice President, Asset Management (2009-Present) and Vice President, Trust Investments (2007-2009), American Beacon Advisors, Inc.

Erica Duncan (41)	VP Since 2011	Vice President, Marketing & Client Services (2011-Present), American Beacon Advisors, Inc.; Supervisor, Brand Marketing (2010-2011), Invesco; Supervisor, Marketing Communications (2009-2010) and Senior Financial Writer (2004-2009), Invesco AIM.

Michael W. Fields (57)	VP since 1989	Chief Fixed Income Officer (2011-Present) and Vice President, Fixed Income Investments, American Beacon Advisors, Inc. (1988-2011); Director, American Beacon Global Funds SPC (2002-2011); Director, American Beacon Global Funds plc (2007-2009).

Melinda G. Heika (50)	Treasurer since 2010	Vice President, Finance & Accounting (2010-Present); Treasurer (2010-Present), and Controller (2005-2009), American Beacon Advisors, Inc.; Treasurer (2010- Present), Lighthouse Holdings, Inc.; Treasurer (2010-Present), Lighthouse Holdings Parent, Inc.

Terri L. McKinney (48)	VP since 2010	Vice President, Enterprise Services (2009-Present) and Managing Director (2003- 2009), American Beacon Advisors, Inc.

Jeffrey K. Ringdahl (36)	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).

Samuel J. Silver (48)	VP Since 2011	Vice President, Fixed Income Investments (2011-Present) and Senior Portfolio Manager, Fixed Income Investments (1999-2011), American Beacon Advisors, Inc.

Christina E. Sears (40)	Chief Compliance Officer since 2004 and Asst. Secretary since 1999	Chief Compliance Officer (2004-Present), American Beacon Advisors, Inc.

John J. Okray (37)	Asst. Secretary since 2010	Assistant General Counsel, American Beacon Advisors, Inc. (2010-Present); Asst. Secretary (2010-Present), Lighthouse Holdings, Inc.; Asst. Secretary (2010- Present), Lighthouse Holdings Parent, Inc.; Vice President, OppenheimerFunds, Inc. (2004-2010).

Sonia L. Bates (55)	Asst. Treasurer since 2011	Director, Tax and Financial Reporting (2011 - Present) and Manager, Tax and Financial Reporting (2005 - 2010), American Beacon Advisors, Inc.; Asst. Treasurer (2011-Present), Lighthouse Holdings, Inc.; Asst. Treasurer (2011- Present), Lighthouse Holdings Parent, Inc.

*	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 and Master Trust’s sub-advisors.

State Street Equity 500 Index Portfolio

Portfolio of Investments

December 31, 2011


	Shares		Market Value (000)
COMMON STOCKS – 97.3%
Consumer Discretionary – 10.9%
Abercrombie & Fitch Co. Class A		13,046	$	637
Amazon.com, Inc.^(a)		56,492		9,779
Apollo Group, Inc. Class A^(a)		18,029		971
AutoNation, Inc.^(a)		6,363		235
AutoZone, Inc.^(a)		4,464		1,451
Bed Bath & Beyond, Inc.^(a)		38,345		2,223
Best Buy Co., Inc.		47,119		1,101
Big Lots, Inc.^(a)		9,227		348
BorgWarner, Inc.^(a)		17,100		1,090
Cablevision Systems Corp.		35,600		506
CarMax, Inc.^(a)		34,000		1,036
Carnival Corp.		70,650		2,306
CBS Corp. Class B		105,103		2,853
Chipotle Mexican Grill, Inc.^(a)		5,000		1,689
Coach, Inc.		44,228		2,700
Comcast Corp. Class A		427,348		10,132
D.R. Horton, Inc.		40,376		509
Darden Restaurants, Inc.		20,488		934
DeVry, Inc.		10,400		400
Direct TV. Class A^(a)		110,077		4,707
Discovery Communications, Inc. Class A^(a)		43,000		1,762
Dollar Tree, Inc.^(a)		18,600		1,546
eBay, Inc.^(a)		178,903		5,426
Expedia, Inc.		14,357		417
Family Dollar Stores, Inc.		18,858		1,087
Ford Motor Co.^(a)		593,498		6,386
GameStop Corp. Class A^(a)		19,500		471
Gannett Co., Inc.		33,574		449
Gap, Inc.		53,498		992
Genuine Parts Co.		23,809		1,457
Goodyear Tire & Rubber Co.^(a)		34,957		495
H&R Block, Inc.		47,115		769
Harley-Davidson, Inc.		35,801		1,392
Harman International Industries, Inc.		9,721		370
Hasbro, Inc.		17,825		568
Home Depot, Inc.		243,112		10,220
Host Hotels & Resorts, Inc.		110,521		1,632
International Game Technology		47,919		824
Interpublic Group of Cos., Inc.		71,894		700
JC Penney Co., Inc.		21,810		767
Johnson Controls, Inc.		105,986		3,313
Kohl’s Corp.		39,533		1,951
Lennar Corp. Class A		25,931		510
Limited Brands, Inc.		38,767		1,564
Lowe’s Cos., Inc.		195,762		4,968
Macy’s, Inc.		67,423		2,170
Marriott International, Inc. Class A		40,450		1,180
Mattel, Inc.		54,676		1,518
McDonald’s Corp.		159,725		16,025
McGraw-Hill Cos., Inc.		46,966		2,112
NetFlix, Inc.^(a)		8,000		554
Newell Rubbermaid, Inc.		42,693		689
News Corp. Class A		342,209		6,105
NIKE, Inc. Class B		57,852		5,575
Nordstrom, Inc.		26,233		1,304
O’Reilly Automotive, Inc.^(a)		19,400		1,551


	Shares		Market Value (000)
Omnicom Group, Inc.		43,941	$	1,959
Orchard Supply Hardware Stores Corp. Class A^(a)(b)		242		2
Priceline.com, Inc.^(a)		7,690		3,597
PulteGroup, Inc.^(a)		54,705		345
Ralph Lauren Corp.		9,815		1,355
Ross Stores, Inc.		36,800		1,749
Scripps Networks Interactive, Inc. Class A		16,235		689
Sears Holdings Corp.^(a)		5,374		171
Snap-on, Inc.		9,212		466
Stanley Black & Decker, Inc.		26,207		1,772
Staples, Inc.		111,233		1,545
Starbucks Corp.		115,961		5,335
Starwood Hotels & Resorts Worldwide, Inc.		30,047		1,441
Target Corp.		105,316		5,394
Tiffany & Co.		19,880		1,317
Time Warner Cable, Inc.		51,171		3,253
Time Warner, Inc.		156,191		5,645
TJX Cos., Inc.		58,506		3,777
TripAdvisor, Inc.^(a)		14,357		362
Urban Outfitters, Inc.^(a)		18,300		504
V.F. Corp.		13,693		1,739
Viacom, Inc. Class B		88,322		4,011
Walt Disney Co.		280,345		10,513
Washington Post Co. Class B		660		249
Whirlpool Corp.		11,361		539
Wyndham Worldwide Corp.		22,699		859
Wynn Resorts, Ltd.		12,700		1,403
Yum! Brands, Inc.		71,592		4,225

				198,642

Consumer Staples – 11.1%
Altria Group, Inc.		321,799		9,541
Archer-Daniels-Midland Co.		103,624		2,964
Avon Products, Inc.		68,660		1,199
Beam, Inc.		23,345		1,196
Brown-Forman Corp. Class B		15,655		1,260
Campbell Soup Co.		26,665		886
Clorox Co.		20,543		1,367
Coca-Cola Co.		355,711		24,889
Coca-Cola Enterprises, Inc.		51,001		1,315
Colgate-Palmolive Co.		76,001		7,022
ConAgra Foods, Inc.		64,975		1,715
Constellation Brands, Inc. Class A^(a)		29,326		606
Costco Wholesale Corp.		68,389		5,698
CVS Caremark Corp.		203,132		8,284
Dean Foods Co.^(a)		23,558		264
Dr Pepper Snapple Group, Inc.		34,700		1,370
Estee Lauder Cos., Inc. Class A		17,852		2,005
General Mills, Inc.		99,464		4,019
H.J. Heinz Co.		50,369		2,722
Hormel Foods Corp.		21,200		621
Kellogg Co.		39,335		1,989
Kimberly-Clark Corp.		60,800		4,472
Kraft Foods, Inc. Class A		274,509		10,256
Kroger Co.		95,576		2,315
Lorillard, Inc.		21,661		2,469
McCormick & Co., Inc.		20,753		1,046

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Portfolio of Investments — (continued)

December 31, 2011


	Shares		Market Value (000)
COMMON STOCKS – (continued)
Consumer Staples – (continued)
Molson Coors Brewing Co. Class B		25,162	$	1,096
PepsiCo, Inc.		244,954		16,253
Philip Morris International, Inc.		271,999		21,346
Procter & Gamble Co.		429,319		28,640
Reynolds American, Inc.		53,374		2,211
Safeway, Inc.		54,164		1,140
Sara Lee Corp.		92,534		1,751
SuperValu, Inc.		34,848		283
Sysco Corp.		93,009		2,728
The Hershey Co.		24,182		1,494
The J.M. Smucker Co.		18,160		1,420
Tyson Foods, Inc. Class A		44,235		913
Wal-Mart Stores, Inc.		272,102		16,261
Walgreen Co.		140,618		4,649
Whole Foods Market, Inc.		25,033		1,742

				203,417

Energy – 11.9%
Alpha Natural Resources, Inc.^(a)		35,600		727
Anadarko Petroleum Corp.		77,726		5,933
Apache Corp.		59,925		5,428
Baker Hughes, Inc.		67,173		3,267
Cabot Oil & Gas Corp.		16,300		1,237
Cameron International Corp.^(a)		38,600		1,899
Chesapeake Energy Corp.		102,582		2,287
Chevron Corp.^(c)		310,446		33,031
ConocoPhillips		207,130		15,094
Consol Energy, Inc.		34,973		1,283
Denbury Resources, Inc.^(a)		61,500		929
Devon Energy Corp.		64,651		4,008
Diamond Offshore Drilling, Inc.		10,200		564
El Paso Corp.		121,192		3,220
EOG Resources, Inc.		41,417		4,080
EQT Corp.		23,300		1,277
ExxonMobil Corp.^(c)		747,847		63,387
FMC Technologies, Inc.^(a)		36,600		1,912
Halliburton Co.		142,934		4,933
Helmerich & Payne, Inc.		16,300		951
Hess Corp.		47,501		2,698
Marathon Oil Corp.		112,277		3,286
Marathon Petroleum Corp.		55,588		1,850
Murphy Oil Corp.		29,741		1,658
Nabors Industries, Ltd.^(a)		42,504		737
National Oilwell Varco, Inc.		65,757		4,471
Newfield Exploration Co.^(a)		20,600		777
Noble Corp.^(a)		39,400		1,191
Noble Energy, Inc.		27,710		2,616
Occidental Petroleum Corp.		125,744		11,782
Peabody Energy Corp.		43,024		1,424
Pioneer Natural Resources Co.		18,100		1,620
QEP Resources, Inc.		27,068		793
Range Resources Corp.		25,300		1,567
Rowan Cos., Inc.^(a)		19,620		595
Schlumberger, Ltd.		208,858		14,267
Southwestern Energy Co.^(a)		54,900		1,753
Spectra Energy Corp.		99,698		3,066
Sunoco, Inc.		17,184		705
Tesoro Corp.^(a)		20,765		485


	Shares		Market Value (000)
Valero Energy Corp.		90,109	$	1,897
Williams Cos., Inc.		92,568		3,057

				217,742

Financials – 13.9%
ACE Ltd.		52,800		3,702
AFLAC, Inc.		73,490		3,179
Allstate Corp.		81,506		2,234
American Express Co.		157,664		7,437
American International Group, Inc.^(a)		69,433		1,611
Ameriprise Financial, Inc.		36,607		1,817
AON Corp.		51,147		2,394
Apartment Investment & Management Co. Class A		17,052		391
Assurant, Inc.		14,131		580
AvalonBay Communities, Inc.		14,798		1,933
Bank of America Corp.		1,574,471		8,754
Bank of New York Mellon Corp.		189,885		3,781
BB&T Corp.		109,170		2,748
Berkshire Hathaway, Inc. Class B^(a)		272,403		20,784
BlackRock, Inc.		15,700		2,798
Boston Properties, Inc.		22,967		2,288
Capital One Financial Corp.		72,263		3,056
CBRE Group, Inc.^(a)		49,575		755
Charles Schwab Corp.		169,893		1,913
Chubb Corp.		43,875		3,037
Cincinnati Financial Corp.		25,114		765
Citigroup, Inc.		451,520		11,880
CME Group, Inc.		10,491		2,556
Comerica, Inc.		32,744		845
DDR Corp. REIT		1,532		19
Discover Financial Services		86,105		2,067
E*Trade Financial Corp.^(a)		35,531		283
Equity Residential		46,457		2,649
Federated Investors, Inc. Class B		14,870		225
Fifth Third Bancorp		142,916		1,818
First Horizon National Corp.		46,055		368
Franklin Resources, Inc.		22,580		2,169
Genworth Financial, Inc. Class A^(a)		72,151		473
Goldman Sachs Group, Inc.		78,134		7,066
Hartford Financial Services Group, Inc.		69,797		1,134
HCP, Inc.		63,800		2,643
Health Care REIT, Inc.		28,500		1,554
Hudson City Bancorp, Inc.		76,692		479
Huntington Bancshares, Inc.		127,456		700
IntercontinentalExchange, Inc.^(a)		11,180		1,348
Invesco, Ltd.		68,200		1,370
J.P. Morgan Chase & Co.		592,915		19,714
KeyCorp		150,475		1,157
Kimco Realty Corp.		62,669		1,018
Legg Mason, Inc.		18,042		434
Leucadia National Corp.		29,736		676
Lincoln National Corp.		48,192		936
Loews Corp.		48,931		1,842
M & T Bank Corp.		19,637		1,499
Marsh & McLennan Cos., Inc.		84,953		2,686
Mastercard, Inc. Class A		16,500		6,152
MetLife, Inc.		164,396		5,126
Moody’s Corp.		30,266		1,019
Morgan Stanley		228,130		3,452

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Portfolio of Investments — (continued)

December 31, 2011


	Shares		Market Value (000)
COMMON STOCKS – (continued)
Financials – (continued)
NASDAQ OMX Group, Inc.^(a)		18,400	$	451
Northern Trust Corp.		38,506		1,527
NYSE Euronext		40,200		1,049
Paychex, Inc.		50,338		1,516
People’s United Financial, Inc.		57,000		733
PNC Financial Services Group, Inc.		81,717		4,713
Principal Financial Group, Inc.		50,291		1,237
Progressive Corp.		99,501		1,941
ProLogis, Inc.		72,299		2,067
Prudential Financial, Inc.		74,939		3,756
Public Storage, Inc.		22,287		2,997
Regions Financial Corp.		191,689		824
Simon Property Group, Inc.		45,815		5,907
SLM Corp.		79,354		1,063
State Street Corp.^(d)		79,225		3,194
SunTrust Banks, Inc.		83,918		1,485
T. Rowe Price Group, Inc.		40,075		2,282
Torchmark Corp.		17,131		743
Total System Services, Inc.		27,675		541
Travelers Cos., Inc.		64,304		3,805
U.S. Bancorp		296,652		8,024
Unum Group		47,529		1,001
Ventas, Inc.		45,100		2,486
Visa, Inc. Class A		79,000		8,021
Vornado Realty Trust		29,114		2,238
Wells Fargo & Co.		817,749		22,537
Western Union Co.		98,585		1,800
XL Group PLC		50,668		1,002
Zions Bancorp.		30,453		496

				252,750

Health Care – 11.3%
Abbott Laboratories		240,806		13,541
Aetna, Inc.		58,950		2,487
Allergan, Inc.		47,392		4,158
AmerisourceBergen Corp.		41,786		1,554
Amgen, Inc.		123,745		7,946
Baxter International, Inc.		88,261		4,367
Becton Dickinson and Co.		34,097		2,548
Biogen Idec, Inc.^(a)		37,631		4,141
Boston Scientific Corp.^(a)		238,634		1,274
Bristol-Myers Squibb Co.		263,516		9,286
C.R. Bard, Inc.		13,497		1,154
Cardinal Health, Inc.		53,957		2,191
CareFusion Corp.^(a)		33,878		861
Celgene Corp.^(a)		69,218		4,679
Cerner Corp.^(a)		23,100		1,415
CIGNA Corp.		43,496		1,827
Coventry Health Care, Inc.^(a)		21,903		665
Covidien PLC		75,800		3,412
DaVita, Inc.^(a)		14,600		1,107
Dentsply International, Inc.		20,800		728
Edwards Lifesciences Corp.^(a)		17,800		1,258
Eli Lilly & Co.		159,075		6,611
Express Scripts, Inc.^(a)		74,998		3,352
Forest Laboratories, Inc.^(a)		43,802		1,325
Gilead Sciences, Inc.^(a)		119,799		4,903
Hospira, Inc.^(a)		25,303		768


	Shares		Market Value (000)
Humana, Inc.		26,407	$	2,314
Intuitive Surgical, Inc.^(a)		6,100		2,824
Johnson & Johnson		424,549		27,842
Laboratory Corp. of America Holdings^(a)		15,822		1,360
Life Technologies Corp.^(a)		27,887		1,085
McKesson Corp.		37,755		2,942
Mead Johnson Nutrition Co.		31,118		2,139
Medco Health Solutions, Inc.^(a)		59,168		3,308
Medtronic, Inc.		164,878		6,307
Merck & Co., Inc.		476,970		17,982
Mylan, Inc.^(a)		68,209		1,464
Patterson Cos., Inc.		12,894		381
Perrigo Co.		14,500		1,411
Pfizer, Inc.		1,199,411		25,955
Quest Diagnostics, Inc.		24,000		1,393
St. Jude Medical, Inc.		51,926		1,781
Stryker Corp.		51,689		2,570
Tenet Healthcare Corp.^(a)		73,370		376
UnitedHealth Group, Inc.		166,196		8,423
Varian Medical Systems, Inc.^(a)		18,160		1,219
Watson Pharmaceuticals, Inc.^(a)		19,646		1,185
WellPoint, Inc.		55,438		3,673
Zimmer Holdings, Inc.^(a)		28,552		1,525

				207,017

Industrials – 10.6%
3M Co.		110,172		9,004
Amphenol Corp. Class A		27,300		1,239
Avery Dennison Corp.		15,388		441
Boeing Co.		114,488		8,398
Caterpillar, Inc.		100,379		9,094
CH Robinson Worldwide, Inc.		25,961		1,812
Cintas Corp.		17,588		612
Cooper Industries PLC		25,100		1,359
CSX Corp.		168,314		3,545
Cummins, Inc.		30,258		2,663
Danaher Corp.		88,272		4,152
Deere & Co.		64,337		4,977
Dover Corp.		28,195		1,637
Eaton Corp.		52,190		2,272
Emerson Electric Co.		116,248		5,416
Equifax, Inc.		17,983		697
Expeditors International Washington, Inc.		33,820		1,385
Fastenal Co.		46,500		2,028
FedEx Corp.		48,900		4,084
First Solar, Inc.^(a)		8,070		272
Flir Systems, Inc.		23,500		589
Flowserve Corp.		8,400		834
Fluor Corp.		27,160		1,365
Fortune Brands Home & Security, Inc.^(a)		1,145		20
General Dynamics Corp.		55,561		3,690
General Electric Co.^(c)		1,642,433		29,416
Goodrich Corp.		19,745		2,442
Honeywell International, Inc.		120,781		6,564
Illinois Tool Works, Inc.		76,671		3,581
Ingersoll-Rand PLC		47,400		1,444
Iron Mountain, Inc.		28,100		866

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Portfolio of Investments — (continued)

December 31, 2011


	Shares		Market Value (000)
COMMON STOCKS – (continued)
Industrials – (continued)
Jacobs Engineering Group, Inc.^(a)		20,400	$	828
Joy Global, Inc.		16,600		1,245
L-3 Communications Holdings, Inc.		15,703		1,047
Leggett & Platt, Inc.		20,398		470
Lockheed Martin Corp.		42,252		3,418
Masco Corp.		57,123		599
Norfolk Southern Corp.		53,455		3,895
Northrop Grumman Corp.		40,211		2,352
PACCAR, Inc.		57,774		2,165
Pall Corp.		17,409		995
Parker-Hannifin Corp.		24,203		1,846
Pitney Bowes, Inc.		29,727		551
Precision Castparts Corp.		22,107		3,643
Quanta Services, Inc.^(a)		31,200		672
R.R. Donnelley & Sons Co.		29,609		427
Raytheon Co.		54,082		2,617
Republic Services, Inc.		49,903		1,375
Robert Half International, Inc.		23,440		667
Rockwell Automation, Inc.		22,205		1,629
Rockwell Collins, Inc.		24,531		1,358
Roper Industries, Inc.		15,000		1,303
Ryder System, Inc.		7,921		421
Southwest Airlines Co.		126,986		1,087
Stericycle, Inc.^(a)		12,900		1,005
Textron, Inc.		40,939		757
Thermo Fisher Scientific, Inc.^(a)		60,024		2,699
Tyco International, Ltd.		71,300		3,330
Union Pacific Corp.		75,368		7,985
United Parcel Service, Inc. Class B		150,546		11,018
United Technologies Corp.		141,278		10,326
W.W. Grainger, Inc.		9,669		1,810
Waste Management, Inc.		73,839		2,415
Xylem, Inc.		28,692		737

				192,590

Information Technology – 17.3%
Accenture PLC Class A		100,600		5,355
Adobe Systems, Inc.^(a)		77,957		2,204
Advanced Micro Devices, Inc.^(a)		84,086		454
Agilent Technologies, Inc.^(a)		54,768		1,913
Akamai Technologies, Inc.^(a)		27,324		882
Altera Corp.		50,454		1,872
Analog Devices, Inc.		47,569		1,702
AOL, Inc.^(a)(c)		1		–
Apple, Inc.^(a)		144,984		58,719
Applied Materials, Inc.		203,807		2,183
Autodesk, Inc.^(a)		36,276		1,100
Automatic Data Processing, Inc.		75,517		4,079
BMC Software, Inc.^(a)		26,221		860
Broadcom Corp. Class A^(a)		75,359		2,213
CA, Inc.		58,299		1,178
Cisco Systems, Inc.		838,819		15,166
Citrix Systems, Inc.^(a)		29,667		1,801
Cognizant Technology Solutions Corp. Class A^(a)		47,784		3,073
Computer Sciences Corp.		23,144		548
Corning, Inc.		241,176		3,130
Dell, Inc.^(a)		238,350		3,487
Dun & Bradstreet Corp.		7,100		531
Electronic Arts, Inc.^(a)		50,400		1,038


	Shares		Market Value (000)
EMC Corp.^(a)		318,884	$	6,869
F5 Networks, Inc.^(a)		12,200		1,295
Fidelity National Information Services, Inc.		38,077		1,012
Fiserv, Inc.^(a)		22,752		1,336
Google, Inc. Class A^(a)		39,390		25,442
Harris Corp.		19,000		685
Hewlett-Packard Co.		310,016		7,986
Intel Corp.		794,456		19,266
International Business Machines Corp.		183,942		33,823
Intuit, Inc.		46,463		2,443
Jabil Circuit, Inc.		27,551		542
Juniper Networks, Inc.^(a)		83,793		1,710
KLA-Tencor Corp.		25,205		1,216
Lexmark International, Inc. Class A		10,042		332
Linear Technology Corp.		35,263		1,059
LSI Corp.^(a)		89,162		530
Microchip Technology, Inc.		29,389		1,077
Micron Technology, Inc.^(a)		161,462		1,016
Microsoft Corp.^(c)		1,168,135		30,325
Molex, Inc.		19,805		473
Motorola Mobility Holdings, Inc.^(a)		40,983		1,590
Motorola Solutions, Inc.		43,652		2,021
NetApp, Inc.^(a)		58,157		2,109
Novellus Systems, Inc.^(a)		9,830		406
NVIDIA Corp.^(a)		93,456		1,295
Oracle Corp.		611,862		15,694
PerkinElmer, Inc.		15,618		312
QUALCOMM, Inc.		259,911		14,217
Red Hat, Inc.^(a)		29,900		1,235
SAIC, Inc.^(a)		42,900		527
Salesforce.com, Inc.^(a)		21,200		2,151
SanDisk Corp.^(a)		37,667		1,854
Symantec Corp.^(a)		118,163		1,849
TE Connectivity, Ltd.		68,400		2,107
Teradata Corp.^(a)		26,220		1,272
Teradyne, Inc.^(a)		28,149		384
Texas Instruments, Inc.		180,199		5,246
VeriSign, Inc.		25,721		919
Waters Corp.^(a)		13,765		1,019
Western Digital Corp.^(a)		35,600		1,102
Xerox Corp.		223,001		1,775
Xilinx, Inc.		42,402		1,359
Yahoo!, Inc.^(a)		193,619		3,123

				315,491

Materials – 3.5%
Air Products & Chemicals, Inc.		33,409		2,846
Airgas, Inc.		10,400		812
Alcoa, Inc.		168,749		1,460
Allegheny Technologies, Inc.		17,228		824
Ball Corp.		25,124		897
Bemis Co., Inc.		14,462		435
CF Industries Holdings, Inc.		10,450		1,515
Cliffs Natural Resources, Inc.		22,200		1,384
Dow Chemical Co.		183,628		5,281
E.I. Du Pont de Nemours & Co.		143,912		6,588
Eastman Chemical Co.		20,708		809
Ecolab, Inc.		45,866		2,652
FMC Corp.		10,700		921
Freeport-McMoRan Copper & Gold, Inc. Class B		147,904		5,441

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Portfolio of Investments — (continued)

December 31, 2011


	Shares		Market Value (000)
COMMON STOCKS – (continued)
Materials – (continued)
International Flavors & Fragrances, Inc.		13,031	$	683
International Paper Co.		68,811		2,037
MeadWestvaco Corp.		26,720		800
Monsanto Co.		83,455		5,848
Mosaic Co.		43,800		2,209
Newmont Mining Corp.		77,106		4,627
Nucor Corp.		49,854		1,973
Owens-Illinois, Inc.^(a)		24,000		465
Plum Creek Timber Co., Inc.		25,311		925
PPG Industries, Inc.		24,871		2,076
Praxair, Inc.		46,911		5,015
Sealed Air Corp.		22,792		392
Sherwin-Williams Co.		13,996		1,249
Sigma-Aldrich Corp.		18,934		1,183
Titanium Metals Corp.		10,800		162
United States Steel Corp.		21,478		568
Vulcan Materials Co.		18,961		746
Weyerhaeuser Co.		84,074		1,570

				64,393

Telecommunication Services – 3.1%
American Tower Corp. Class A		60,800		3,649
AT&T, Inc.		918,150		27,765
CenturyLink, Inc.		94,665		3,522
Frontier Communications Corp.		147,244		758
JDS Uniphase Corp.^(a)		32,523		340
MetroPCS Communications, Inc.^(a)		41,500		360
Sprint Nextel Corp.^(a)		476,265		1,114
Verizon Communications, Inc.		438,166		17,579
Windstream Corp.		78,313		919

				56,006

Utilities – 3.7%
AES Corp.^(a)		102,795		1,217
AGL Resources, Inc.		18,100		765
Ameren Corp.		37,560		1,244
American Electric Power Co., Inc.		73,952		3,055
CenterPoint Energy, Inc.		66,311		1,332
CMS Energy Corp.		37,956		838
Consolidated Edison, Inc.		45,952		2,850
Constellation Energy Group, Inc.		31,314		1,242
Dominion Resources, Inc.		88,362		4,690
DTE Energy Co.		26,384		1,437
Duke Energy Corp.		206,620		4,546
Edison International		51,319		2,125
Entergy Corp.		27,798		2,031
Exelon Corp.		102,821		4,459
FirstEnergy Corp.		65,722		2,911
Integrys Energy Group, Inc.		11,616		629
NextEra Energy, Inc.		64,921		3,952
NiSource, Inc.		41,982		1,000
Northeast Utilities		26,400		952
NRG Energy, Inc.^(a)		36,700		665
Oneok, Inc.		16,100		1,396
Pepco Holdings, Inc.		34,700		704
PG&E Corp.		63,026		2,598
Pinnacle West Capital Corp.		16,160		779
PPL Corp.		88,475		2,603
Progress Energy, Inc.		46,181		2,587


	Shares		Market Value (000)
Public Service Enterprise Group, Inc.		79,324	$	2,619
SCANA Corp.		17,700		798
Sempra Energy		37,386		2,056
Southern Co.		133,843		6,196
TECO Energy, Inc.		34,951		669
Wisconsin Energy Corp.		35,200		1,231
Xcel Energy, Inc.		76,351		2,110

				68,286

TOTAL COMMON STOCKS (Cost $1,113,788)				1,776,334

PREFERRED STOCK – 0.0%
Consumer Discretionary – 0.0%
Orchard Supply Hardware Stores Corp. Series A^(a)(b)(e)		242		–

TOTAL PREFERRED STOCK (Cost $1)				–


	Par Amount
U.S. GOVERNMENT SECURITIES – 0.1%
U.S. Treasury Bill^(c)(f) 0.01% due 02/23/2012	$	350,000	350
U.S. Treasury Bill^(c)(f) 0.01% due 05/17/2012		110,000	110
U.S. Treasury Bill^(c)(f) 0.00% due 01/12/2012		2,265,000	2,265
U.S. Treasury Bill^(c)(f) 0.00% due 04/12/2012		400,000	400

TOTAL U.S. GOVERNMENT SECURITIES (Cost $3,125)			3,125

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Portfolio of Investments — (continued)

December 31, 2011


	Shares		Market Value (000)
MONEY MARKET FUNDS – 2.4%
AIM Short Term Investment Prime Portfolio		42,650,897		42,651
Federated Money Market Obligations Trust		577,343		577

TOTAL MONEY MARKET FUNDS (Cost $43,228)				43,228

TOTAL INVESTMENTS† – 99.8% (Cost $1,160,142)				1,822,687
Other Assets in Excess of Liabilities – 0.2%				2,841

NET ASSETS – 100.0%			$	1,825,528

^(a)	Non-income producing security.

^(b)	Securities are valued at fair value as determined in good faith by the Trust’s Pricing and Investment Committee in accordance with procedures approved by the Board of Trustees. Securities’ values are determined based on Level 2 inputs. (Note 2)

^(c)	All or part of this security has been designated as collateral for futures contracts.

^(d)	Affiliated issuer. See table that follows for more information.

^(e)	Amount is less than $1,000.

^(f)	Rate represents annualized yield at date of purchase.

†	See Note 2 of the Notes to Financial Statements.

PLC

= Public Limited Company

REIT

= Real Estate Investment Trust


	Number of Contracts		Notional Value (000)		Unrealized Appreciation (000)
Schedule of Futures S&P 500 Financial Futures Contracts (long) Expiration Date 3/2012		786	$	49,088	$	139

Total unrealized appreciation on open futures contracts purchased					$	139

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^® Index. The market value of this investment at December 31, 2011 is listed in the Portfolio of Investments.


Security Description	Number of shares held at 12/31/2010		Shares purchased for the twelve months ended 12/31/2011		Shares sold for the twelve months ended 12/31/2011		Number of shares held at 12/31/2011		Value at 12/31/2011 (000)		Income earned for the twelve months ended 12/31/2011 (000)		Realized loss on shares sold (000)
State Street Corp.		85,825		6,100		12,700		79,225	$	3,194	$	57	$	(20	)

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Statement of Assets and Liabilities

December 31, 2011

(Amounts in thousands)


Assets
Investments in unaffiliated issuers at market value (identified cost $1,157,478)	$	1,819,493
Investments in non-controlled affiliates at market value (identified cost $2,664) (Note 4)		3,194

Total investments at market value (identified cost $1,160,142)		1,822,687
Cash		4
Receivable for investment securities sold		312
Dividends and interest receivable		2,766

Total assets		1,825,769
Liabilities
Daily variation margin on futures contracts		180
Management fees (Note 4)		61

Total liabilities		241

Net Assets	$	1,825,528

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Statement of Operations

Year Ended December 31, 2011

(Amounts in thousands)


Investment Income
Interest	$	25
Dividend income – unaffiliated issuers (net of foreign taxes withheld of $33)		38,773
Dividend income – non-controlled affiliated issuer		57

Total investment income		38,855

Expenses
Management fees (Note 4)		840

Total expenses		840

Net Investment Income	$	38,015

Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments – unaffiliated issuers	$	65,528
Investments – non-controlled affiliated issuer		(20	)
Futures contracts		2,728

		68,236

Net change in net unrealized appreciation (depreciation) on:
Investments		(60,247	)
Futures contracts		(403	)

		(60,650	)

Net realized and unrealized gain		7,586

Net Increase in Net Assets Resulting from Operations	$	45,601

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Statements of Changes in Net Assets

(Amounts in thousands)


	For The Year Ended December 31, 2011			For The Year Ended December 31, 2010
Increase (Decrease) in Net Assets From Operations:
Net investment income	$	38,015		$	37,668
Net realized gain on investments and futures contracts		68,236			26,111
Net change in net unrealized appreciation (depreciation) on investments and futures contracts		(60,650	)		214,085

Net increase in net assets from operations		45,601			277,864

Capital Transactions
Contributions		279,791			241,838
Withdrawals		(598,001	)		(314,951	)

Net decrease in net assets from capital transactions		(318,210	)		(73,113	)

Net Increase (Decrease) in Net Assets		(272,609	)		204,751
Net Assets
Beginning of year		2,098,137			1,893,386

End of year	$	1,825,528		$	2,098,137

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Financial Highlights

The following table includes selected supplemental data and ratios to average net assets:


	Year Ended 12/31/11			Year Ended 12/31/10			Year Ended 12/31/09			Year Ended 12/31/08			Year Ended 12/31/07
Supplemental Data and Ratios:
Net assets, end of period (in thousands)		1,825,528			2,098,137			1,893,386			1,522,208			2,422,377
Ratios to average net assets:
Operating expenses		0.045	%		0.045	%		0.045	%		0.045	%		0.045	%
Net investment income		2.04	%		1.99	%		2.28	%		2.30	%		1.96	%
Portfolio turnover rate^(a)		15	%		12	%		19	%		14	%		12	%
Total return^(b)		2.03	%		15.08	%		26.50	%		(37.02	)%		5.49	%

^(a)	The portfolio turnover rate excludes in-kind security transactions.

^(b)	Results represent past performance and are not indicative of future results.

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Notes to Financial Statements

December 31, 2011

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, 2011, the following Portfolios were in operation: the Portfolio, the State Street Money Market Portfolio, the State Street Tax Free Money Market Portfolio, the State Street Short-Term Tax Free Bond Portfolio, the State Street U.S. Government Money Market Portfolio, the State Street Treasury Money Market Portfolio and the State Street Treasury Plus Money Market Portfolio. 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^® Index”). The Portfolio uses a passive management strategy designed to track the performance of the S&P 500^® Index. The S&P 500^® 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 define fair value, establish a framework for measuring fair value in generally accepted accounting principles and expand 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

State Street Equity 500 Index Portfolio

Notes to Financial Statements — (continued)

December 31, 2011

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 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, 2011, in valuing the Portfolio’s assets carried at fair value (amounts in thousands):


Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total
Assets:
Investments:
Common Stocks	$	1,776,332	$	2		$	–	$	1,776,334
Preferred Stock		–		–	*		–		–	*
U.S. Government Securities		–		3,125			–		3,125
Money Market Funds		43,228		–			–		43,228

Total Investments		1,819,560		3,127			–		1,822,687
Other Assets:
Futures contracts		139		–			–		139

Total Assets	$	1,819,699	$	3,127		$	–	$	1,822,826

*	Fund held Level 2 securities that were valued at $0 at December 31, 2011.

The type of inputs used to value each security under the provisions surrounding fair value measurements and disclosures is identified in the Portfolio of Investments, which also includes a breakdown of the Portfolio’s investments by category.

As of the year ended December 31, 2011, there were no transfers between levels.

Securities transactions, investment income and expenses – Securities transactions are recorded on a trade date basis. 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. The effects of changes in foreign currency exchange rates on portfolio investments are included in the net realized and unrealized gains and losses on investments and foreign currency transactions on the Statement of Operations.

State Street Equity 500 Index Portfolio

Notes to Financial Statements — (continued)

December 31, 2011

All of the net investment income and realized and unrealized gains and losses from the security transactions of the Portfolio are allocated pro rata among the partners in the Portfolio based on each partner’s daily ownership percentage.

Federal income taxes: The Portfolio is not required to pay federal income taxes on its net investment income and net capital gains because it is treated as a partnership for federal income tax purposes. All interest, dividends, gains and losses of the Portfolio are deemed to have been “passed through” to the Portfolio’s partners in proportion to their holdings in the Portfolio, regardless of whether such items have been distributed by the Portfolio. Each partner is responsible for tax liability based on its distributive share; therefore, no provision has been made for federal income taxes.

The Portfolio has reviewed the tax positions for open years as of and during the year ended December 31, 2011, 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, 2011, tax years 2008 through 2011 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, 2011, the tax cost of investments was $1,315,634,901. The aggregate gross unrealized appreciation and gross unrealized depreciation was $579,830,424 and $72,778,052 respectively, resulting in net appreciation of $507,052,372 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^® 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, which is recorded on the Statement of Assets and Liabilities. The Portfolio recognizes a realized gain or loss when the contract is closed, which is recorded on the Statement of Operations. 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.

To the extent permitted by the investment objective, restrictions and policies set forth in the Portfolio’s Prospectus and Statement of Additional Information, the Portfolio may participate in various derivative-based transactions. Derivative securities are instruments or agreements whose value is derived from an underlying security or index. The Portfolio’s use of derivatives includes futures. These instruments offer unique characteristics and risks that assist the Portfolio in meeting its investment objective. The

State Street Equity 500 Index Portfolio

Notes to Financial Statements — (continued)

December 31, 2011

Portfolio typically uses derivatives in two ways: cash equitization and return enhancement. Cash equitization is a technique that may be used by the Portfolio through the use of options and futures to earn “market-like” returns with the Portfolio’s excess and liquidity reserve cash balances and receivables. Return enhancement can be accomplished through the use of derivatives in the Portfolio. By purchasing certain instruments, the Portfolio may more effectively achieve the desired portfolio characteristics that assist in meeting the Portfolio’s investment objectives. Depending on how the derivatives are structured and utilized, the risks associated with them may vary widely. These risks are generally categorized as market risk, liquidity risk and counterparty or credit risk.

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, 2011:

Asset Derivatives⁽¹⁾ (amounts in thousands)


	Equity Contracts Risk	Total
Futures Contracts	$139	$	139

⁽¹⁾	Portfolio of Investments: Unrealized appreciation of futures contracts. Only unsettled receivable/payable for variation margin is reported within Statement of Assets and Liabilities.

Transactions in derivative instruments during the year ended December 31, 2011, were as follows:

Realized Gain (Loss)⁽²⁾ (amounts in thousands)


	Equity Contracts Risk	Total
Futures Contracts	$2,728	$	2,728

Change in Appreciation (Depreciation)⁽³⁾ (amounts in thousands)


	Equity Contracts Risk	Total
Futures Contracts	$(403)	$	(403	)

⁽²⁾	Statement of Operations location: Net realized gain (loss) on: Futures contracts

⁽³⁾	Statement of Operations location: Net change in unrealized appreciation (depreciation) on: Futures contracts

The average notional value of futures contracts outstanding during the period ended December 31, 2011, was $36,089,554.

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. It is reasonably possible that these differences could be material.

Subsequent Events: Management has determined that there are no subsequent events or transactions that would have materially impacted the Portfolio’s financial statements as presented.

3. Securities Transactions

For the year ended December 31, 2011, purchases and sales of investment securities, excluding short-term investments, futures contracts, and contributions in-kind and fair value of withdrawals, aggregated to $277,424,267 and $455,596,021 respectively.

State Street Equity 500 Index Portfolio

Notes to Financial Statements — (continued)

December 31, 2011

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^® Index. The market value of this investment at December 31, 2011 is listed in the Portfolio of Investments.

5. Trustees’ Fees

The Trust paid each Trustee who is not an officer or employee of SSgA FM or State Street $2,500 for each meeting of the Board of Trustees and an additional $500 for each telephonic meeting attended. The Trust also paid each Trustee an annual retainer of $30,000. Each Trustee is reimbursed for out-of-pocket and travel expenses. Effective January 1, 2012, the Trust pays each Trustee an annual retainer of $100,000, meeting fees of $5,000 and telephonic meeting fees of $1,250.

6. Indemnifications

The Trust’s organizational documents provide that its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, both in some of its principal service contracts and in the normal course of its business, the Trust enters into contracts that provide indemnifications to other parties for certain types of losses or liabilities. The Trust’s maximum exposure under these arrangements is unknown as this could involve future claims against the Trust. Management does not expect any significant claims.

7. New Accounting Pronouncement

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (International Financial Reporting Standards)”. The ASU changes certain fair value measurement principles and disclosure requirements. The ASU is effective for annual periods beginning after December 15, 2011. Management is currently evaluating the impact the adoption of ASU 2011-04 will have on the Funds’ financial statements and related disclosures.

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, 2011, 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, 2011, by correspondence with the custodian and brokers. 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, 2011, 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.

LOGO

Boston, Massachusetts

February 23, 2012

State Street Equity 500 Index Portfolio

General Information

December 31, 2011 (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 17, 2011 (the “November Meeting” or “Meeting”) to consider the renewal of the investment advisory agreement for the Portfolio (the “Advisory Agreement”). In preparation for considering renewal of the Advisory Agreement at the November Meeting, the Trustees who are not “interested persons” of the Trust within the meaning of the Investment Company Act of 1940, as amended (the “Independent Trustees”) convened a special telephonic meeting on October 19, 2011 (the “Preliminary Meeting”), at which they reviewed renewal materials provided by the SSgA Funds Management, Inc. (“SSgA FM” or the “Adviser”), which they had requested through independent counsel, and discussed the materials with counsel and representatives of the Adviser. In the course of the Preliminary Meeting they requested additional materials from the Adviser and State Street Bank and Trust Company (“State Street”), which were subsequently provided in advance of the November Meeting along with updates of certain of the original materials. At the November Meeting, 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 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 in advance of the November Meeting. The Trustees 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

State Street Equity 500 Index Portfolio

General Information — (continued)

December 31, 2011 (Unaudited)

Advisory Agreement Renewal — (continued)

the Adviser in managing the Portfolio’s investments, in monitoring and securing the Portfolio’s compliance with its investment objective and investment policies 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 $2.0 trillion in assets under management at September 30, 2011, including over $214.5 billion managed by the Adviser. They reviewed information regarding State Street’s business continuity and disaster recovery program. Drawing upon the materials provided and their general knowledge of the business of the Adviser, the Trustees determined that the experience, resources and strength of the Adviser in the management of a variety of index products are exceptional. As discussed more fully below, they also determined that the advisory fee paid by the Portfolio was fair and reasonable and that the Portfolio’s 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 were appropriate and had been of good quality.

The Trustees determined, in view of the investment objective of the Portfolio and after review and discussion of the available data and of a memorandum discussing the recent performance of the Portfolio supplied by the Adviser at the Independent Trustees’ request, that 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 performance of the Portfolio was satisfactory.

The Trustees considered the profitability to the Adviser and its affiliate, State Street, of the advisory relationships with the Trust. (They noted at the outset that the issue of profitability would not arise with respect to State Street Global Markets LLC (“SSGM”), also an affiliate of the Adviser, because of the fact that SSGM receives no compensation from the feeder fund and, by implication, the Portfolio.) The Trustees had been provided with data regarding the profitability to the Adviser and State Street with respect to the Portfolio individually, and on an aggregate basis with the other feeder funds and master portfolios overseen by the Trustees (together, the “Funds and Portfolios”), for the year ended June 30, 2011, and for the four prior years. Having discussed with representatives of the Adviser the methodologies used in computing the costs that formed the bases of the profitability calculations, including information as to changes in the methodologies from prior years, they concluded that these methodologies appeared 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 to either or both of those entities during the period for which information had been provided, the profitability was in no case such as to render the advisory fee excessive, especially in light of the competitive levels of the fees paid to the Adviser and State Street by the Trust. They noted that the levels of profitability had increased in recent periods as a number of the Funds and Portfolios had experienced significant growth, and they determined to reconsider the profitability of these relationships to the Adviser and State Street at next year’s renewal meeting.

State Street Equity 500 Index Portfolio

General Information — (continued)

December 31, 2011 (Unaudited)

Advisory Agreement Renewal — (continued)

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 not managed by the Adviser. The Trustees found that the Portfolio’s advisory fee and total expense ratio were all lower than the average for its Lipper peer group; after discussion, they concluded that the data available provided confirmation of the reasonableness of the Adviser’s fee.

In addition, the Trustees considered other advisory fees paid to the Adviser. They noted that as a general matter fees paid to the Adviser by similar mutual funds sponsored by State Street tended to be higher than the fees paid by the Portfolio. As to fees paid by mutual funds for which the Adviser acted as sub-adviser and by institutional accounts managed by the Adviser, the Trustees noted that these tended to be lower than those paid by the Portfolio; in considering these fees, the Trustees reviewed and discussed a memorandum prepared by the Adviser discussing the differences between the services provided to the Portfolio by the Adviser and those provided to the other two types of clients. The Trustees determined that, in light of these significant differences, in both cases the fees were of doubtful utility for purposes of comparison with those of the Portfolio, but that to the extent that meaningful comparison was practicable the differences in services satisfactorily accounted for differences in the fees. The Trustees 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 and with SSGM, a wholly-owned subsidiary of State Street, as principal underwriter for the Trust. They noted, among other things, that the Adviser utilizes no soft-dollar arrangements to obtain third-party (non-proprietary research) services in connection with the Portfolio’s brokerage transactions. The Trustees concluded that, to the extent that the Adviser or its affiliates derive other benefits from their relationships with the Trust, those benefits are not so significant as to render the Adviser’s 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 Trustees determined that, to the extent that economies of scale were in fact being 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, however, that should sustained, substantial asset growth be realized in the future, it might be appropriate to consider additional measures.

On the basis of the foregoing discussions and determinations, without any one factor being dispositive, the Trustees approved the continuance of the Advisory Agreement.

Trustees and Executive Officers (Unaudited)

The table below includes information about the Trustees and Executive Officers of the State Street Master Funds.


Name, Address, and Year of Birth	Position(s) Held with Trust	Term of Office and Length of Time Served	Principal Occupation During Past Five Years	Number of Funds in Fund Complex Overseen by Trustee*	Other Directorships Held by Trustee
Independent Trustees
Michael F. Holland Holland & Company, LLC 375 Park Avenue New York, NY 10152 1944	Trustee and Chairman of the Board	Term: Indefinite Elected: 7/99	Chairman, Holland & Company L.L.C. (investment adviser) (1995 – present).	22	Trustee, State Street Institutional Investment Trust; Director, the Holland Series Fund, Inc.; Director, The China Fund, Inc.; Director, The Taiwan Fund, Inc.; and Director, Reaves Utility Income Fund, Inc.
William L. Boyan State Street Master Funds P.O. Box 5049 Boston, MA 02206 1937	Trustee	Term: Indefinite Elected: 7/99	President and Chief Operations Officer, John Hancock Financial Services (1958 – 1997) Mr. Boyan retired in 1997. Chairman Emeritus, Children’s Hospital, Boston, MA (1984 – 2011); Former Trustee of Old Mutual South Africa Master Trust (investments) (1992 – 2007); Former Chairman, Boston Plan For Excellence, Boston Public Schools (1995 – 2010).	22	Trustee, State Street Institutional Investment Trust; Former Trustee of Old Mutual South Africa Master Trust; Trustee, Children’s Hospital, Boston, MA; and Trustee, Florida Stage.
Rina K. Spence State Street Master Funds P.O. Box 5049 Boston, MA 02206 1948	Trustee	Term: Indefinite Elected: 7/99	President of SpenceCare International LLC (international healthcare consulting) (1999 – present); Chief Executive Officer, IEmily.com (internet company) (2000 – 2001); Chief Executive Officer of Consensus Pharmaceutical, Inc. (1998 – 1999); Founder, President and Chief Executive Officer of Spence Center for Women’s Health (1994 – 1998); President and CEO Emerson Hospital (1984-1994); Trustee, Eastern Enterprise (utilities) (1988 – 2000).	22	Trustee, State Street Institutional Investment Trust; Director, Berkshire Life Insurance Company of America (1993 – 2009); Director, IEmily.com, Inc. (2000 – 2010); and Trustee, National Osteoporosis Foundation (2005 – 2008).
Douglas T. Williams State Street Master Funds P.O. Box 5049 Boston, MA 02206 1940	Trustee	Term: Indefinite Elected: 7/99	Executive Vice President of Chase Manhattan Bank (1987 – 1999). Mr. Williams retired in 1999.	22	Trustee, State Street Institutional Investment Trust; Treasurer, Nantucket Educational Trust (2002 – 2007).
Interested Trustees**
James E. Ross SSgA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111-2900 1965	Trustee President	Term: Indefinite Elected Trustee: 2/07 Elected President: 4/05	President, SSgA Funds Management Inc. (2005 – present); Senior Managing Director, State Street Global Advisors (2006 – present).	22	Trustee, State Street Institutional Investment Trust; Trustee, SPDR Series Trust; Trustee, SPDR Index Shares Funds; and Trustee, Select Sector SPDR Trust

*	The “Fund Complex” consists of eleven series of the Trust and eleven series of State Street Institutional Investment Trust.

**	Mr. Ross is an Interested Trustee because of his employment by SSgA Funds Management, Inc., an affiliate of the Trust.


Name, Address, and Year of Birth	Position(s) Held with Trust	Term of Office and Length of Time Served	Principal Occupation During Past Five Years
Officers:
Ellen M. Needham SSgA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111-2900 1967	Vice President	Term: Indefinite Elected: 09/09	Senior Managing Director (1992 – present) and Chief Operating Officer (May 2010 – present), SSgA Funds Management, Inc.; Senior Managing Director, State Street Global Advisors (1992 – present).*
Laura F. Dell State Street Bank and Trust Company 4 Copley Place 5th floor Boston, MA 02116 1964	Treasurer Assistant Treasurer	Term: Indefinite Elected: 11/10 11/08 – 11/10	Vice President, State Street Bank and Trust Company (2002 – present).*
Chad C. Hallett State Street Bank and Trust Company 4 Copley Place 5th floor Boston, MA 02116 1969	Assistant Treasurer	Term: Indefinite Elected: 09/11	Vice President, State Street Bank and Trust Company (2001 – present).*
Caroline Connolly State Street Bank and Trust Company 4 Copley Place 5th floor Boston, MA 02116 1975	Assistant Treasurer	Term: Indefinite Elected: 09/11	Assistant Vice President, State Street Bank and Trust Company (2007 – present); Assistant Vice President, Eaton Vance Management (2005 – 2007).
Jacqueline Angell State Street Global Advisors and SSgA Funds Management, Inc. State Street Financial Center One Lincoln Street Boston, MA 02111-2900 1974	Chief Compliance Officer	Term: Indefinite Elected: 04/11	Vice President, State Street Global Advisors and SSgA Funds Management, Inc. (2008 – present); Director of Investment Adviser Oversight, Fidelity Investments (2006 – 2008).
Ryan M. Louvar State Street Bank and Trust Company 4 Copley Place, 5th Floor Boston, MA 02116 1972	Secretary	Term: Indefinite Elected: 2/12	Vice President and Senior Counsel, State Street Bank and Trust Company (2005 – present).*
Mark E. Tuttle State Street Bank and Trust Company 4 Copley Place, 5th Floor Boston, MA 02116 1970	Assistant Secretary	Term: Indefinite Elected: 2/12	Vice President and Counsel, State Street Bank and Trust Company (2007 – present); Assistant Counsel, BISYS Group, Inc. (2005 – 2007) (a financial services company).*
Scott E. Habeeb State Street Bank and Trust Company 4 Copley Place, 5th Floor Boston, MA 02116 1968	Assistant Secretary	Term: Indefinite Elected: 2/12	Vice President and Counsel, State Street Bank and Trust Company (2007 – present); Legal Analyst, Verizon Communications (2004 – 2007).*

*	Served in various capacities and/or with various affiliated entities during noted time period.

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.


Schedule of Investments December 31, 2011		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Advertising Agencies – 0.6%
Arbitron, Inc.		12,861	$	442,547
Constant Contact, Inc. (a)		13,957		323,942
Digital Generation, Inc. (a)		13,033		155,353
Harte-Hanks, Inc.		21,080		191,617
Marchex, Inc., Class B		10,143		63,394
MDC Partners, Inc.		11,888		160,726
National CineMedia, Inc.		26,169		324,496
QuinStreet, Inc. (a)(b)		13,057		122,213
ReachLocal, Inc. (a)		4,991		30,844
Travelzoo, Inc. (a)(b)		2,584		63,515
Valassis Communications, Inc. (a)		21,211		407,888
ValueClick, Inc. (a)		37,224		606,379
Viad Corp.		9,664		168,927

				3,061,841

Aerospace – 1.6%
AAR Corp.		18,838		361,124
AeroVironment, Inc. (a)		7,999		251,729
Astronics Corp. (a)		4,865		174,216
Ceradyne, Inc. (a)		11,811		316,299
Cubic Corp.		7,488		326,402
Curtiss-Wright Corp.		21,984		776,695
Ducommun, Inc.		4,790		61,072
Esterline Technologies Corp. (a)		14,432		807,759
GenCorp, Inc. (a)		27,859		148,210
Heico Corp.		19,762		1,155,682
Kaman Corp., Class A		12,460		340,407
Kratos Defense & Security Solutions, Inc. (a)		15,692		93,681
LMI Aerospace, Inc. (a)		4,348		76,307
Moog, Inc., Class A (a)		21,508		944,846
Orbital Sciences Corp. (a)		27,701		402,495
Teledyne Technologies, Inc. (a)		17,395		954,116
Triumph Group, Inc.		17,806		1,040,761

				8,231,801

Agriculture, Fishing & Ranching – 0.4%
Alico, Inc.		1,685		32,638
The Andersons, Inc.		8,811		384,688
Cadiz, Inc. (a)		5,584		53,774
Cal-Maine Foods, Inc.		6,723		245,860
Calavo Growers, Inc.		5,636		144,733
Fresh Del Monte Produce, Inc.		17,282		432,223
Limoneira Co.		3,633		61,434
Pilgrims Pride Corp. (a)		24,058		138,574
Sanderson Farms, Inc.		10,477		525,212
Seaboard Corp.		148		301,328

				2,320,464

Air Transport – 0.9%
Air Transport Services Group, Inc. (a)		25,588		120,775
Alaska Air Group, Inc. (a)		16,989		1,275,704
Allegiant Travel Co. (a)		7,037		375,354
Atlas Air Worldwide Holdings, Inc. (a)		12,450		478,454
Bristow Group, Inc.		17,180		814,160
Hawaiian Holdings, Inc. (a)		24,139		140,006
JetBlue Airways Corp. (a)		116,995		608,374
PHI, Inc. (a)(b)		6,178		153,523
Republic Airways Holdings, Inc. (a)		22,894		78,526
SkyWest, Inc.		25,174		316,941
Spirit Airlines, Inc. (a)		7,451		116,236
US Airways Group, Inc. (a)		76,869		389,726

				4,867,779


Common Stocks	Shares		Value
Alternative Energy – 0.1%
Ameresco, Inc. (a)		8,379	$	114,960
Amyris, Inc. (a)		8,356		96,428
EnerNOC, Inc. (a)		11,010		119,679
Gevo, Inc. (a)		3,174		19,965
Green Plains Renewable Energy, Inc. (a)		8,820		86,083
Rex American Resources Corp. (a)		2,909		64,318
Solazyme, Inc. (a)		5,350		63,665
Syntroleum Corp. (a)		40,907		39,271
USEC, Inc. (a)		55,202		62,930

				667,299

Aluminum – 0.1%
Century Aluminum Co. (a)(b)		24,481		208,333
Kaiser Aluminum Corp.		7,704		353,460
Noranda Aluminum Holding Corp.		10,818		89,248

				651,041

Asset Management & Custodian – 0.9%
Apollo Investment Corp.		93,077		599,416
Arlington Asset Investment Corp.		3,065		65,376
Artio Global Investors, Inc.		14,900		72,712
Calamos Asset Management, Inc., Class A		9,041		113,103
Capital Southwest Corp.		1,379		112,457
CIFC Corp. (a)		5,795		31,293
Cohen & Steers, Inc. (b)		8,435		243,771
Cowen Group, Inc., Class A (a)		31,390		81,300
Diamond Hill Investments Group, Inc.		1,201		88,850
Epoch Holding Corp.		7,035		156,388
Fifth Street Finance Corp.		34,386		329,074
Financial Engines, Inc. (a)		18,161		405,535
GAMCO Investors, Inc., Class A		3,210		139,603
Golub Capital BDC, Inc.		4,768		73,904
Harris & Harris Group, Inc. (a)		14,393		49,800
JMP Group, Inc.		7,041		50,343
Kohlberg Capital Corp.		8,986		56,702
Manning & Napier, Inc. (a)		6,217		77,650
MCG Capital Corp.		36,848		147,024
Medley Capital Corp.		5,182		53,893
MVC Capital, Inc.		11,427		132,439
National Financial Partners Corp. (a)		19,642		265,560
New Mountain Finance Corp.		3,300		44,253
NGP Capital Resources Co.		10,343		74,366
Oppenheimer Holdings, Inc.		4,915		79,132
Pzena Investment Management, Inc., Class A		4,481		19,403
Solar Capital Ltd.		17,315		382,488
Solar Senior Capital Ltd.		3,605		56,779
THL Credit, Inc.		4,417		53,932
TICC Capital Corp.		15,439		133,547
Virtus Investment Partners, Inc. (a)		2,596		197,322
Westwood Holdings Group, Inc.		2,973		108,663

				4,496,078

Auto Parts – 0.6%
American Axle & Manufacturing Holdings, Inc. (a)		31,624		312,761
Amerigon, Inc. (a)		10,517		149,972
Dana Holding Corp. (a)		69,306		842,068
Dorman Products, Inc. (a)		5,112		188,786
Exide Technologies (a)		36,702		96,526
Fuel Systems Solutions, Inc. (a)		7,893		130,156
Meritor, Inc. (a)		44,831		238,501
Motorcar Parts of America, Inc. (a)		5,939		44,543
Standard Motor Products, Inc.		9,318		186,826
Stoneridge, Inc. (a)		12,293		103,630

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	51


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Auto Parts (concluded)
Superior Industries International, Inc.		11,085	$	183,346
Tenneco, Inc. (a)		28,636		852,780
Tower International, Inc. (a)		2,846		30,566
U.S. Auto Parts Network, Inc. (a)		7,363		32,176

				3,392,637

Auto Services – 0.1%
Cooper Tire & Rubber Co.		29,448		412,567

Back Office Support, HR & Consulting – 1.8%
The Advisory Board Co. (a)		7,499		556,501
Angie’s List, Inc. (a)		5,057		81,418
Barrett Business Services, Inc.		3,641		72,674
CBIZ, Inc. (a)		18,554		113,365
CDI Corp.		6,205		85,691
Compass Diversified Holdings		19,217		238,099
Convergys Corp. (a)		49,854		636,636
Corporate Executive Board Co.		16,369		623,659
CoStar Group, Inc. (a)(b)		11,974		799,025
CRA International, Inc. (a)		5,046		100,113
Dice Holdings, Inc. (a)		23,039		190,993
ExlService Holdings, Inc. (a)		7,650		171,130
Forrester Research, Inc. (a)		6,958		236,155
FTI Consulting, Inc. (a)(b)		19,882		843,394
GP Strategies Corp. (a)		7,057		95,128
The Hackett Group, Inc. (a)		15,070		56,362
Heidrick & Struggles International, Inc.		8,447		181,948
Hudson Highland Group, Inc. (a)		15,667		75,045
Huron Consulting Group, Inc. (a)(b)		10,499		406,731
ICF International, Inc. (a)(b)		9,308		230,652
Insperity, Inc.		10,875		275,681
Kelly Services, Inc., Class A		12,634		172,833
Kforce, Inc. (a)		14,105		173,915
Korn/Ferry International (a)		22,290		380,267
Liquidity Services, Inc. (a)		8,965		330,808
LoopNet, Inc. (a)		7,773		142,090
MAXIMUS, Inc.		16,423		679,091
Navigant Consulting, Inc. (a)		24,447		278,940
On Assignment, Inc. (a)		17,556		196,276
PRGX Global, Inc. (a)		9,030		53,729
Resources Connection, Inc.		22,045		233,457
RPX Corp. (a)		4,907		62,074
ServiceSource International, Inc. (a)		4,982		78,168
Stream Global Services, Inc. (a)		4,386		14,518
SYKES Enterprises, Inc. (a)		18,812		294,596
TeleTech Holdings, Inc. (a)		12,042		195,080
TrueBlue, Inc. (a)		19,035		264,206

				9,620,448

Banks: Diversified – 6.3%
1st Source Corp.		7,354		186,277
1st United Bancorp, Inc. (a)		13,212		73,327
Alliance Financial Corp.		2,330		71,950
Ameris Bancorp (a)		11,398		117,171
Ames National Corp.		4,133		80,594
Arrow Financial Corp.		4,961		116,286
Bancfirst Corp.		3,306		124,107
Banco Latinoamericana De Comercio Exterior SA		13,331		213,963
Bancorp Rhode Island, Inc.		1,873		82,531
The Bancorp, Inc. (a)		14,102		101,957
BancorpSouth, Inc.		39,816		438,772
Bank of Kentucky Financial Corp.		2,848		57,102


Common Stocks	Shares		Value
Banks: Diversified (continued)
Bank of Marin Bancorp		2,601	$	97,772
Bank of the Ozarks, Inc.		13,389		396,716
Banner Corp.		7,916		135,759
BBCN Bancorp, Inc. (a)		35,325		333,821
Boston Private Financial Holdings, Inc.		36,710		291,477
Bridge Bancorp, Inc.		3,392		67,501
Bridge Capital Holdings (a)		4,508		46,883
Bryn Mawr Bank Corp.		5,291		103,122
Camden National Corp.		3,737		121,826
Cape Bancorp, Inc. (a)		5,423		42,571
Capital Bank Corp. (a)		6,327		12,717
Capital City Bank Group, Inc.		5,673		54,177
Cardinal Financial Corp.		13,926		149,565
Cascade Bancorp (a)		3,435		15,045
Cathay General Bancorp		37,395		558,307
Center Bancorp, Inc.		5,927		57,907
Centerstate Banks, Inc.		14,491		95,930
Central Pacific Financial Corp. (a)		7,237		93,502
Century Bancorp, Inc., Class A		1,675		47,302
Chemical Financial Corp.		13,206		281,552
Citizens & Northern Corp.		5,901		108,991
City Holding Co.		7,337		248,651
CNB Financial Corp.		6,085		96,021
CoBiz Financial, Inc.		15,809		91,218
Columbia Banking System, Inc.		18,827		362,796
Community Bank System, Inc.		17,552		487,946
Community Trust Bancorp, Inc.		6,708		197,349
CVB Financial Corp.		42,651		427,790
Eagle Bancorp, Inc. (a)		8,081		117,498
Encore Bancshares, Inc. (a)		4,094		55,351
Enterprise Bancorp, Inc.		2,804		40,097
Enterprise Financial Services Corp.		7,656		113,309
F.N.B. Corp.		60,515		684,425
Financial Institutions, Inc.		6,687		107,928
First Bancorp, Inc.		4,404		67,690
First Bancorp, North Carolina		7,340		81,841
First Busey Corp.		37,217		186,085
First Commonwealth Financial Corp.		50,187		263,984
First Community Bancshares, Inc.		7,710		96,221
First Connecticut Bancorp, Inc.		8,692		113,083
First Financial Bancorp		27,804		462,659
First Financial Bankshares, Inc. (b)		15,022		502,185
First Financial Corp.		5,388		179,313
First Interstate Bancsystem, Inc.		7,621		99,302
First Merchants Corp.		12,313		104,291
First Midwest Bancorp, Inc.		35,511		359,726
The First of Long Island Corp.		3,762		99,016
FirstMerit Corp.		52,016		787,002
German American Bancorp, Inc.		6,154		111,941
Glacier Bancorp, Inc.		34,338		413,086
Hampton Roads Bankshares, Inc. (a)		5,285		14,481
Hancock Holding Co.		36,287		1,160,095
Hanmi Financial Corp. (a)		15,050		111,370
Heartland Financial USA, Inc.		6,487		99,511
Heritage Commerce Corp. (a)		10,305		48,846
Home Bancshares, Inc.		10,725		277,885
Hudson Valley Holding Corp.		7,536		159,914
IBERIABANK Corp.		14,049		692,616
Independent Bank Corp./MA		10,267		280,186
International Bancshares Corp.		25,322		464,279
Investors Bancorp, Inc. (a)		21,983		296,331
Lakeland Bancorp, Inc.		10,583		91,225
Lakeland Financial Corp.		7,812		202,096

See Notes to Financial Statements.



52	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Banks: Diversified (continued)
MainSource Financial Group, Inc.		9,641	$	85,130
MB Financial, Inc.		25,891		442,736
Merchants Bancshares, Inc.		2,398		70,022
Meridian Interstate Bancorp, Inc. (a)		4,122		51,319
Metro Bancorp, Inc. (a)		6,710		56,230
Midsouth Bancorp, Inc.		3,863		50,258
National Bankshares, Inc.		3,448		96,268
National Penn Bancshares, Inc.		58,859		496,770
NBT Bancorp, Inc.		16,528		365,765
Old National Bancorp		45,135		525,823
Oriental Financial Group, Inc.		21,599		261,564
Orrstown Financial Service, Inc.		3,709		30,599
Pacific Capital Bancorp NA (a)		2,041		57,638
Pacific Continental Corp.		8,979		79,464
PacWest Bancorp		14,437		273,581
Park National Corp.		6,182		402,201
Park Sterling Corp. (a)		15,426		62,938
Penns Woods Bancorp, Inc.		1,904		73,837
Peoples Bancorp, Inc.		5,152		76,301
Pinnacle Financial Partners, Inc. (a)		16,249		262,421
PrivateBancorp, Inc.		28,584		313,852
Prosperity Bancshares, Inc.		22,302		899,886
Provident Financial Services, Inc.		28,798		385,605
Renasant Corp.		12,098		181,470
Republic Bancorp, Inc., Class A		4,797		109,851
Rockville Financial, Inc.		14,124		146,325
Roma Financial Corp.		3,866		38,041
S&T Bancorp, Inc.		13,479		263,514
Sandy Spring Bancorp, Inc.		11,533		202,404
SCBT Financial Corp.		6,728		195,179
Seacoast Banking Corp. of Florida (a)		33,522		50,953
Sierra Bancorp		5,988		52,694
Signature Bank (a)(b)		21,865		1,311,681
Simmons First National Corp., Class A		8,348		226,982
Southside Bancshares, Inc.		7,890		170,897
Southwest Bancorp, Inc. (a)		9,409		56,078
State Bancorp, Inc.		7,391		90,170
State Bank Financial Corp. (a)		15,081		227,874
StellarOne Corp.		11,084		126,136
Sterling Bancorp		15,049		130,023
Sterling Financial Corp. (a)		12,809		213,910
Suffolk Bancorp (a)		4,831		52,127
Sun Bancorp, Inc. (a)		20,014		48,434
Susquehanna Bancshares, Inc.		74,447		623,866
SVB Financial Group (a)		20,359		970,921
SY Bancorp, Inc.		5,896		121,045
Taylor Capital Group, Inc. (a)		6,124		59,525
Texas Capital Bancshares, Inc. (a)		17,711		542,134
Tompkins Trustco, Inc.		3,920		150,959
Tower Bancorp, Inc.		5,043		143,927
Towne Bank (b)		11,744		143,747
Trico Bancshares		6,893		98,018
TrustCo Bank Corp. NY		44,783		251,233
Trustmark Corp.		30,495		740,724
UMB Financial Corp.		15,282		569,255
Umpqua Holdings Corp.		54,520		675,503
Union First Market Bankshares Corp.		9,809		130,362
United Bankshares, Inc.		10,792		305,090
United Community Banks, Inc. (a)		19,865		138,856
Univest Corp. of Pennsylvania		8,218		120,312
Virginia Commerce Bancorp (a)		11,263		87,063


Common Stocks	Shares		Value
Banks: Diversified (concluded)
Washington Banking Co.		7,434	$	88,539
Washington Trust Bancorp, Inc.		6,889		164,372
Webster Financial Corp.		34,235		698,052
WesBanco, Inc.		11,135		216,798
West Bancorp., Inc.		7,601		72,818
West Coast Bancorp (a)		5,344		83,366
Westamerica Bancorp		13,793		605,513
Western Alliance Bancorp (a)(b)		33,174		206,674
Wilshire Bancorp, Inc. (a)		29,027		105,368
Wintrust Financial Corp.		16,620		466,191

				33,528,301

Banks: Savings, Thrift & Mortgage Lending – 1.0%
Apollo Residential Mortgage, Inc.		4,861		74,179
Astoria Financial Corp.		41,394		351,435
Bank Mutual Corp.		22,470		71,455
BankFinancial Corp.		10,632		58,689
Beneficial Mutual Bancorp, Inc. (a)(b)		15,917		133,066
Berkshire Hills Bancorp, Inc.		9,944		220,657
BofI Holding, Inc. (a)		4,297		69,826
Brookline Bancorp, Inc.		28,293		238,793
Charter Financial Corp.		3,276		30,336
Clifton Savings Bancorp, Inc.		4,248		39,421
Dime Community Bancshares, Inc.		14,897		187,702
Doral Financial Corp. (a)		64,583		61,741
ESB Financial Corp.		6,028		84,814
ESSA Bancorp, Inc.		5,166		54,088
First Defiance Financial Corp.		4,613		67,304
First Financial Holdings, Inc.		7,961		71,092
First Pactrust Bancorp, Inc.		5,032		51,578
Flagstar BanCorp., Inc. (a)		56,611		28,589
Flushing Financial Corp.		15,062		190,233
Fox Chase BanCorp., Inc.		6,530		82,474
Franklin Financial Corp. (a)		6,569		77,777
Great Southern Bancorp, Inc.		4,928		116,252
Heritage Financial Corp.		7,429		93,308
Home Federal Bancorp, Inc.		8,025		83,460
Kearny Financial Corp.		6,555		62,273
Northfield Bancorp, Inc.		8,225		116,466
Northwest Bancshares, Inc.		46,340		576,470
OceanFirst Financial Corp.		7,093		92,706
Ocwen Financial Corp. (a)		45,602		660,317
OmniAmerican Bancorp, Inc. (a)		5,659		88,846
Oritani Financial Corp.		21,772		278,028
Provident New York Bancorp		18,444		122,468
Territorial BanCorp., Inc.		5,258		103,845
United Financial Bancorp, Inc.		7,725		124,295
ViewPoint Financial Group		16,550		215,315
Westfield Financial, Inc.		13,531		99,588
WSFS Financial Corp.		3,029		108,923

				5,187,809

Beverage: Brewers & Distillers – 0.1%
Boston Beer Co., Inc., Class A (a)(b)		3,882		421,430
Central European Distribution Corp. (a)		34,442		150,684
Craft Brewers Alliance, Inc. (a)		4,934		29,702

				601,816

Beverage: Soft Drinks – 0.2%
Coca-Cola Bottling Co. Consolidated		2,141		125,355
Farmer Bros. Co.		3,056		23,348
Heckmann Corp. (a)		47,562		316,287

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	53


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Beverage: Soft Drinks (concluded)
National Beverage Corp.		5,489	$	88,208
Peet’s Coffee & Tea, Inc. (a)		6,073		380,656
Primo Water Corp. (a)		7,266		22,089

				955,943

Biotechnology – 3.7%
Accelrys, Inc. (a)		26,249		176,393
Acorda Therapeutics, Inc. (a)		18,687		445,498
Aegerion Pharmaceuticals, Inc. (a)		4,226		70,743
Affymax, Inc. (a)		16,675		110,222
Albany Molecular Research, Inc. (a)		9,593		28,107
Alimera Sciences, Inc. (a)		5,767		7,209
Alkermes Plc (a)(b)		45,193		784,550
Allos Therapeutics, Inc. (a)		38,324		54,420
Alnylam Pharmaceuticals, Inc. (a)		17,488		142,527
AMAG Pharmaceuticals, Inc. (a)		9,994		188,987
Amicus Therapeutics, Inc. (a)		8,128		27,960
Anthera Pharmaceuticals, Inc. (a)		10,448		64,151
Arena Pharmaceuticals, Inc. (a)		68,959		128,953
Ariad Pharmaceuticals, Inc. (a)(b)		62,549		766,225
Arqule, Inc. (a)		25,347		142,957
Array Biopharma, Inc. (a)		27,130		58,601
Astex Pharmaceuticals (a)		25,639		48,458
AVEO Pharmaceuticals, Inc. (a)		14,826		255,007
AVI BioPharma, Inc. (a)		69,690		51,919
BG Medicine, Inc. (a)		3,856		18,200
BioMimetic Therapeutics, Inc. (a)		9,391		26,764
BioSante Pharmaceuticals, Inc. (a)(b)		54,499		27,364
BioTime, Inc. (a)		11,732		68,163
Cell Therapeutics, Inc. (a)(b)		91,830		106,523
Celldex Therapeutics, Inc. (a)		21,027		54,670
Cepheid, Inc. (a)(b)		29,269		1,007,146
Chelsea Therapeutics International, Inc. (a)		25,436		130,487
Clovis Oncology, Inc. (a)		5,322		74,987
Codexis, Inc. (a)		11,740		62,222
Complete Genomics, Inc. (a)		5,216		15,283
Cornerstone Therapeutics, Inc. (a)		3,620		20,272
Cubist Pharmaceuticals, Inc. (a)		28,380		1,124,416
Curis, Inc. (a)(b)		36,259		169,692
Cytori Therapeutics, Inc. (a)		24,751		54,452
Dyax Corp. (a)(b)		46,950		63,852
Dynavax Technologies Corp. (a)(b)		72,760		241,563
Emergent Biosolutions, Inc. (a)		11,533		194,216
Enzo Biochem, Inc. (a)		17,475		39,144
Enzon Pharmaceuticals, Inc. (a)		17,766		119,032
Exact Sciences Corp. (a)		26,799		217,608
Exelixis, Inc. (a)		60,653		287,192
Furiex Pharmaceuticals, Inc. (a)		4,683		78,253
Genomic Health, Inc. (a)		8,029		203,856
Geron Corp. (a)		61,464		90,967
GTx, Inc. (a)		10,826		36,375
Halozyme Therapeutics, Inc. (a)		38,938		370,300
Harvard Bioscience, Inc. (a)		11,322		43,816
Horizon Pharma, Inc. (a)		1,874		7,496
Idenix Pharmaceuticals, Inc. (a)		28,561		212,637
ImmunoGen, Inc. (a)		35,631		412,607
Immunomedics, Inc. (a)		31,017		103,287
Incyte Corp. (a)(b)		41,877		628,574
Inhibitex, Inc. (a)		30,148		329,819
Insmed, Inc. (a)		11,122		33,922
InterMune, Inc. (a)		25,649		323,177


Common Stocks	Shares		Value
Biotechnology (concluded)
Kensey Nash Corp. (b)		3,937	$	75,551
Keryx Biopharmaceuticals, Inc. (a)		32,268		81,638
Lexicon Genetics, Inc. (a)		80,559		103,921
Ligand Pharmaceuticals, Inc. (a)		9,305		110,450
MannKind Corp. (a)(b)		36,643		91,607
Maxygen, Inc. (a)		13,547		76,270
Medivation, Inc. (a)		14,841		684,319
Metabolix, Inc. (a)		15,941		72,532
Micromet, Inc. (a)		43,432		312,276
Momenta Pharmaceuticals, Inc. (a)		21,877		380,441
Nabi Biopharmaceuticals (a)		19,002		35,724
Nektar Therapeutics (a)		54,138		302,902
Neurocrine Biosciences, Inc. (a)		23,366		198,611
Novavax, Inc. (a)		45,860		57,784
NPS Pharmaceuticals, Inc. (a)		40,749		268,536
Nymox Pharmaceutical Corp. (a)		9,022		74,161
OncoGenex Pharmaceutical, Inc. (a)		4,607		54,086
Oncothyreon, Inc. (a)		19,722		149,493
Onyx Pharmaceuticals, Inc. (a)		30,009		1,318,896
Opko Health, Inc. (a)		51,573		252,708
Orexigen Therapeutics, Inc. (a)		15,819		25,469
Osiris Therapeutics, Inc. (a)		8,201		43,875
Pacific Biosciences of California, Inc. (a)		15,866		44,425
PDL BioPharma, Inc.		66,353		411,389
Peregrine Pharmaceuticals, Inc. (a)(b)		38,877		40,043
PharmAthene, Inc. (a)(b)		18,525		23,527
Progenics Pharmaceuticals, Inc. (a)(b)		13,911		118,800
Raptor Pharmaceutical Corp. (a)		22,335		139,817
Rigel Pharmaceuticals, Inc. (a)		32,599		257,206
RTI Biologics, Inc. (a)		26,166		116,177
Sangamo Biosciences, Inc. (a)		24,948		70,852
Savient Pharmaceuticals, Inc. (a)		33,443		74,578
Seattle Genetics, Inc. (a)		45,691		763,725
Sequenom, Inc. (a)		46,918		208,785
Sucampo Pharmaceuticals, Inc., Class A (a)		5,721		25,344
Sunesis Pharmaceuticals, Inc. (a)		15,250		17,842
Synta Pharmaceuticals Corp. (a)		10,853		50,684
Targacept, Inc. (a)		12,893		71,814
Theravance, Inc. (a)		32,665		721,896
Transcept Pharmaceuticals, Inc. (a)(b)		2,688		21,047
Trius Therapeutics, Inc. (a)		3,551		25,390
Vanda Pharmaceuticals, Inc. (a)		13,196		62,813
ViroPharma, Inc. (a)		33,516		918,003
Zalicus, Inc. (a)(b)		35,119		42,494
ZIOPHARM Oncology, Inc. (a)		27,753		122,391

				19,671,513

Building Materials – 0.9%
Acuity Brands, Inc.		20,537		1,088,461
Builders FirstSource, Inc. (a)		21,372		43,599
Gibraltar Industries, Inc. (a)		14,402		201,052
Griffon Corp.		22,622		206,539
Headwaters, Inc. (a)		28,990		64,358
Louisiana-Pacific Corp. (a)		62,589		505,093
LSI Industries, Inc.		9,040		54,240
NCI Building Systems, Inc. (a)		9,238		100,417
Quanex Building Products Corp.		18,027		270,766
Simpson Manufacturing Co., Inc.		19,715		663,607
Texas Industries, Inc.		10,790		332,116
Trex Co., Inc. (a)		7,373		168,915
Watsco, Inc.		13,315		874,263

				4,573,426

See Notes to Financial Statements.



54	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Building: Climate Control – 0.1%
Aaon, Inc.		8,936	$	183,099
Comfort Systems USA, Inc.		18,097		194,000
Interline Brands, Inc. (a)		15,794		245,912

				623,011

Building: Roofing, Wallboard & Plumbing – 0.1%
Beacon Roofing Supply, Inc. (a)		21,793		440,872
USG Corp. (a)		33,848		343,896

				784,768

Cable Television Services – 0.0%
Knology, Inc. (a)		14,221		201,938

Casinos & Gambling – 0.3%
Ameristar Casinos, Inc.		15,206		262,912
Boyd Gaming Corp. (a)		25,912		193,303
Isle of Capri Casinos, Inc. (a)		9,331		43,576
Monarch Casino & Resort, Inc. (a)		4,275		43,562
Multimedia Games Holding Co., Inc. (a)		12,816		101,759
Pinnacle Entertainment, Inc. (a)(b)		29,308		297,769
Scientific Games Corp., Class A (a)		27,561		267,342
Shuffle Master, Inc. (a)		25,648		300,595

				1,510,818

Cement – 0.1%
Eagle Materials, Inc.		21,110		541,683

Chemicals: Diversified – 0.9%
Aceto Corp.		12,685		87,527
American Vanguard Corp.		10,585		141,204
Chemtura Corp. (a)		45,627		517,410
Georgia Gulf Corp. (a)		16,099		313,770
Hawkins, Inc.		4,122		151,937
Innophos Holdings, Inc.		10,284		499,391
KMG Chemicals, Inc.		3,276		56,577
Landec Corp. (a)		12,333		68,078
LSB Industries, Inc. (a)		8,711		244,169
Olin Corp.		37,781		742,397
OM Group, Inc. (a)		14,683		328,752
Omnova Solutions, Inc. (a)		21,063		97,100
PolyOne Corp.		44,255		511,145
Sensient Technologies Corp.		23,737		899,632
TPC Group, Inc. (a)(b)		6,280		146,512

				4,805,601

Chemicals: Specialty – 0.6%
Balchem Corp.		13,657		553,655
Calgon Carbon Corp. (a)(b)		26,748		420,211
FutureFuel Corp.		8,898		110,513
Innospec, Inc. (a)		11,252		315,844
Kraton Performance Polymers, Inc. (a)		15,128		307,098
NewMarket Corp.		4,269		845,731
Quaker Chemical Corp.		6,093		236,957
Senomyx, Inc. (a)		18,904		65,786
Stepan Co.		3,833		307,253
Zep, Inc.		10,420		145,672

				3,308,720


Common Stocks	Shares		Value
Coal – 0.2%
Cloud Peak Energy, Inc. (a)		28,842	$	557,227
Hallador Energy Co.		1,890		18,768
James River Coal Co. (a)		16,850		116,602
KiOR, Inc. (a)(b)		5,344		54,402
L&L Energy, Inc. (a)		10,867		28,145
Patriot Coal Corp. (a)		43,300		366,751
Westmoreland Coal Co. (a)		4,597		58,612

				1,200,507

Commercial Finance & Mortgage Companies – 0.1%
Federal Agricultural Mortgage Corp., Class B		4,712		84,910
Medallion Financial Corp.		7,296		83,028
NewStar Financial, Inc. (a)		13,163		133,868
Walker & Dunlop, Inc. (a)		5,217		65,526

				367,332

Commercial Services: Rental & Leasing – 0.7%
Aircastle Ltd.		26,032		331,127
CAI International, Inc. (a)		5,751		88,910
Electro Rent Corp.		8,960		153,664
Essex Rental Corp. (a)		8,437		24,889
H&E Equipment Services, Inc. (a)		13,595		182,445
Marlin Business Services, Inc.		4,181		53,099
McGrath RentCorp		11,539		334,516
Mobile Mini, Inc. (a)		17,414		303,874
PHH Corp. (a)		26,657		285,230
RSC Holdings, Inc. (a)		32,099		593,831
SeaCube Container Leasing Ltd.		5,201		77,027
TAL International Group, Inc.		10,420		299,992
United Rentals, Inc. (a)		29,605		874,828

				3,603,432

Commercial Vehicles & Parts – 0.2%
Accuride Corp. (a)		19,181		136,569
Commercial Vehicle Group, Inc. (a)		13,680		123,667
Miller Industries, Inc.		5,264		82,803
Modine Manufacturing Co. (a)		22,091		208,981
Rush Enterprises, Inc., Class A (a)(b)		15,350		321,122
Spartan Motors, Inc.		15,902		76,488
Wabash National Corp. (a)		32,495		254,761

				1,204,391

Communications Technology – 2.3%
AboveNet, Inc. (a)		10,997		714,915
Adtran, Inc.		30,645		924,253
Anaren, Inc. (a)		7,125		118,418
Anixter International, Inc. (a)		13,734		819,096
Aruba Networks, Inc. (a)		40,444		749,023
Aviat Networks, Inc. (a)		28,869		52,830
Bel Fuse, Inc.		4,981		93,394
Black Box Corp.		8,535		239,321
Calix, Inc. (a)		17,910		115,878
Comtech Telecommunications Corp.		9,616		275,210
Dialogic, Inc. (a)		7,985		9,582
Digi International, Inc. (a)(b)		12,034		134,299
DigitalGlobe, Inc. (a)(b)		16,707		285,857
Echelon Corp. (a)		16,496		80,336
Emulex Corp. (a)		41,653		285,740
Extreme Networks, Inc. (a)		43,809		127,922
Finisar Corp. (a)		42,470		711,160
GeoEye, Inc. (a)		10,462		232,466
Globecomm Systems, Inc. (a)		10,616		145,227

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	55


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Communications Technology (concluded)
GSI Technology, Inc. (a)		10,035	$	46,964
Harmonic, Inc. (a)		54,502		274,690
Infinera Corp. (a)		49,540		311,111
InterDigital, Inc.		21,483		936,014
Ixia (a)(b)		18,338		192,732
KVH Industries, Inc. (a)		6,918		53,822
Loral Space & Communications Ltd. (a)		5,155		334,456
Meru Networks, Inc. (a)		5,640		23,293
NeoPhotonics Corp. (a)		4,439		20,331
NETGEAR, Inc. (a)		17,357		582,675
Novatel Wireless, Inc. (a)		14,979		46,884
Numerex Corp. (a)		4,487		36,928
Oclaro, Inc. (a)		23,691		66,809
Oplink Communications, Inc. (a)		9,252		152,380
Plantronics, Inc.		20,611		734,576
Procera Networks, Inc. (a)		6,820		106,256
SeaChange International, Inc. (a)		12,532		88,100
Shoretel, Inc. (a)		22,395		142,880
Sonus Networks, Inc. (a)		100,190		240,456
Sycamore Networks, Inc. (a)		9,507		170,175
Tekelec (a)(b)		29,249		319,692
TeleNav, Inc. (a)		7,552		58,981
Viasat, Inc. (a)		17,177		792,203
Westell Technologies, Inc., Class A (a)		26,028		57,782

				11,905,117

Computer Services Software & Systems – 6.1%
ACI Worldwide, Inc. (a)(c)		15,817		452,999
The Active Network, Inc. (a)		5,703		77,561
Actuate Corp. (a)		18,315		107,326
Acxiom Corp. (a)		38,502		470,109
American Reprographics Co. (a)		17,682		81,160
American Software, Inc., Class A		10,828		102,325
Aspen Technology, Inc. (a)(b)		40,063		695,093
Avid Technology, Inc. (a)(b)		14,055		119,889
Bankrate, Inc. (a)		10,872		233,748
Blackbaud, Inc.		21,106		584,636
Blue Coat Systems, Inc. (a)		20,622		524,830
Bottomline Technologies, Inc. (a)		17,015		394,238
BroadSoft, Inc. (a)		10,685		322,687
CACI International, Inc., Class A (a)		12,476		697,658
Callidus Software, Inc. (a)		14,234		91,382
Ciber, Inc. (a)(b)		30,256		116,788
CommVault Systems, Inc. (a)		20,857		891,011
Computer Task Group, Inc. (a)		7,187		101,193
ComScore, Inc. (a)		15,107		320,268
Concur Technologies, Inc. (a)		21,148		1,074,107
Convio, Inc. (a)		5,542		61,295
Cornerstone OnDemand, Inc. (a)		5,360		97,766
CSG Systems International, Inc. (a)		16,392		241,126
DealerTrack Holdings, Inc. (a)(b)		19,483		531,107
Deltek, Inc. (a)(b)		10,549		103,591
Demand Media, Inc. (a)		4,024		26,760
DemandTec, Inc. (a)		15,307		201,593
Digimarc Corp. (a)		2,939		70,213
Digital River, Inc. (a)		17,682		265,584
DynaVox, Inc., Class A (a)		4,834		17,596
EarthLink, Inc.		52,039		335,131
Ebix, Inc.		13,662		301,930
Envestnet, Inc. (a)		9,172		109,697
EPIQ Systems, Inc.		14,859		178,605


Common Stocks	Shares		Value
Computer Services Software & Systems (continued)
ePlus, Inc. (a)		1,831	$	51,781
FalconStor Software, Inc. (a)		14,017		36,164
FriendFinder Networks, Inc. (a)		3,035		2,276
Guidance Software, Inc. (a)		6,830		44,258
ICG Group, Inc. (a)		17,563		135,586
iGate Corp. (a)		14,715		231,467
Imperva, Inc. (a)		2,735		95,205
Infospace, Inc. (a)		18,547		203,832
Interactive Intelligence Group, Inc. (a)(b)		6,757		154,870
Internap Network Services Corp. (a)		24,809		147,365
IntraLinks Holdings, Inc. (a)		15,188		94,773
JDA Software Group, Inc. (a)		20,039		649,063
Kenexa Corp. (a)		12,527		334,471
Keynote Systems, Inc.		6,942		142,589
The KEYW Holding Corp. (a)		8,656		64,054
KIT Digital, Inc. (a)(b)		18,191		153,714
Limelight Networks, Inc. (a)		32,208		95,336
Lionbridge Technologies, Inc. (a)		29,524		67,610
LivePerson, Inc. (a)		24,920		312,746
LogMeIn, Inc. (a)		9,635		371,429
Magma Design Automation, Inc. (a)		31,676		227,434
Manhattan Associates, Inc. (a)		9,674		391,604
Mantech International Corp., Class A		11,024		344,390
Mentor Graphics Corp. (a)		45,617		618,567
Mercury Computer Systems, Inc. (a)		14,333		190,486
MicroStrategy, Inc., Class A (a)		3,783		409,775
Moduslink Global Solutions, Inc.		20,698		111,769
Monotype Imaging Holdings, Inc. (a)(b)		16,949		264,235
Motricity, Inc. (a)		19,184		17,266
NCI, Inc., Class A (a)		3,213		37,431
NetScout Systems, Inc. (a)		17,728		312,013
NetSuite, Inc. (a)		12,895		522,892
NIC, Inc.		30,289		403,147
OpenTable, Inc. (a)(b)		11,141		435,947
Openwave Systems, Inc. (a)		40,665		64,251
Opnet Technologies, Inc.		6,825		250,273
Parametric Technology Corp. (a)		56,455		1,030,868
PDF Solutions, Inc. (a)		11,144		77,674
Pegasystems, Inc.		7,875		231,525
Perficient, Inc. (a)(b)		11,480		114,915
Progress Software Corp. (a)		31,765		614,653
PROS Holdings, Inc. (a)		10,219		152,059
QAD, Inc. (a)		3,165		33,232
QLIK Technologies, Inc. (a)		33,352		807,118
Quepasa Corp. (a)(b)		3,821		12,686
Quest Software, Inc. (a)		26,894		500,228
RealNetworks, Inc.		9,829		73,717
RealPage, Inc. (a)		14,370		363,130
Responsys, Inc. (a)		4,229		37,596
RightNow Technologies, Inc. (a)		11,662		498,317
Saba Software, Inc. (a)		13,390		105,647
Sapient Corp.		51,795		652,617
SciQuest, Inc. (a)		5,946		84,849
Smith Micro Software, Inc. (a)		18,591		21,008
SolarWinds, Inc. (a)		26,986		754,259
Sourcefire, Inc. (a)		13,459		435,802
SPS Commerce, Inc. (a)		3,980		103,281
SS&C Technologies Holdings, Inc. (a)(b)		11,931		215,474
SuccessFactors, Inc. (a)		39,517		1,575,543
Support.com, Inc. (a)		22,615		50,884
Synchronoss Technologies, Inc. (a)		12,524		378,350

See Notes to Financial Statements.



56	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Computer Services Software & Systems (concluded)
SYNNEX Corp. (a)		11,869	$	361,530
Syntel, Inc.		7,305		341,655
Taleo Corp., Class A (a)		19,450		752,520
Tangoe, Inc. (a)		4,772		73,489
TechTarget, Inc. (a)		7,257		42,381
TeleCommunication Systems, Inc., Class A (a)		21,452		50,412
TNS, Inc. (a)(b)		12,035		213,260
Tyler Technologies, Inc. (a)		14,063		423,437
Ultimate Software Group, Inc. (a)		12,234		796,678
Unisys Corp. (a)		20,420		402,478
United Online, Inc.		42,036		228,676
VASCO Data Security International, Inc. (a)		12,601		82,159
Verint Systems, Inc. (a)		10,021		275,978
VirnetX Holding Corp. (a)(b)		19,300		481,921
Virtusa Corp. (a)		7,196		104,198
Wave Systems Corp., Class A (a)		38,544		83,640
Web.Com Group, Inc. (a)		13,766		157,621
Websense, Inc. (a)		18,929		354,540
Zillow, Inc. (a)(b)		1,856		41,723
Zix Corp. (a)		31,609		89,137

				32,273,936

Computer Technology – 0.6%
Cray, Inc. (a)		17,225		111,446
Dot Hill Systems Corp. (a)		28,725		38,204
Dynamics Research Corp. (a)		4,341		49,227
Identive Group, Inc. (a)		17,865		39,839
Imation Corp. (a)		14,003		80,237
Immersion Corp. (a)		13,595		70,422
Insight Enterprises, Inc. (a)		20,783		317,772
Intermec, Inc. (a)		28,245		193,761
OCZ Technology Group, Inc. (a)(b)		24,417		161,396
PC Connection, Inc.		4,240		47,022
Quantum Corp. (a)(b)		107,063		256,951
Radisys Corp. (a)		9,084		45,965
Rimage Corp.		4,334		48,758
Safeguard Scientifics, Inc. (a)		9,786		154,521
Silicon Graphics International Corp. (a)		14,717		168,657
STEC, Inc. (a)		17,477		150,127
Stratasys, Inc. (a)		10,039		305,286
Super Micro Computer, Inc. (a)(b)		12,754		199,983
Synaptics, Inc. (a)		15,242		459,546
Xyratex Ltd.		13,453		179,194

				3,078,314

Construction – 0.4%
Aegion Corp. (a)		18,778		288,055
EMCOR Group, Inc.		31,693		849,689
Granite Construction, Inc.		18,340		435,025
Great Lakes Dredge & Dock Corp.		28,057		155,997
Orion Marine Group, Inc. (a)		12,922		85,931
Primoris Services Corp.		12,693		189,506
Sterling Construction Co., Inc. (a)		7,801		84,017
Tutor Perini Corp. (a)		14,835		183,064

				2,271,284

Consumer Electronics – 0.2%
RealD, Inc. (a)		19,562		155,322
Skullcandy, Inc. (a)(b)		4,396		55,038
TiVo, Inc. (a)(b)		56,430		506,177
Universal Electronics, Inc. (a)(b)		7,133		120,334


Common Stocks	Shares		Value
Consumer Electronics (concluded)
VOXX International Corp. (a)		8,683	$	73,371
XO Group, Inc. (a)		13,531		112,849
Zagg, Inc. (a)(b)		10,337		73,083

				1,096,174

Consumer Lending – 0.8%
Advance America, Cash Advance Centers, Inc.		26,449		236,719
Cash America International, Inc.		13,996		652,633
Credit Acceptance Corp. (a)		3,203		263,543
Encore Capital Group, Inc. (a)		7,752		164,807
Ezcorp, Inc. (a)		22,360		589,633
First Cash Financial Services, Inc. (a)		14,932		523,964
The First Marblehead Corp. (a)		26,647		31,177
Imperial Holdings, Inc. (a)		9,011		16,941
MGIC Investment Corp. (a)		89,132		332,462
MoneyGram International, Inc. (a)		5,083		90,223
Nelnet, Inc., Class A		12,337		301,886
Netspend Holdings, Inc. (a)		12,805		103,849
Nicholas Financial, Inc.		4,794		61,459
Portfolio Recovery Associates, Inc. (a)(b)		8,159		550,896
World Acceptance Corp. (a)		7,172		527,142

				4,447,334

Consumer Services: Miscellaneous – 0.5%
Ancestry.com, Inc. (a)		14,983		344,010
Coinstar, Inc. (a)(b)		14,849		677,708
Core-Mark Holdings Co., Inc.		5,369		212,613
Move, Inc. (a)		18,840		119,069
NutriSystem, Inc.		12,826		165,840
Sotheby’s, Class A		32,021		913,559
Steiner Leisure Ltd. (a)		7,123		323,313

				2,756,112

Containers & Packaging – 0.1%
AEP Industries, Inc. (a)		2,035		57,285
Graphic Packaging Holding Co. (a)(b)		75,722		322,576
Myers Industries, Inc.		14,210		175,351

				555,212

Copper – 0.0%
Revett Minerals, Inc. (a)		11,474		54,157

Cosmetics – 0.1%
Elizabeth Arden, Inc. (a)(b)		11,589		429,257
Inter Parfums, Inc.		7,716		120,061
Revlon, Inc., Class A (a)		5,183		77,071

				626,389

Diversified Financial Services – 0.5%
California First National Bancorp		748		12,028
DFC Global Corp. (a)		20,690		373,661
Duff & Phelps Corp.		14,556		211,062
Edelman Financial Group, Inc.		9,526		62,586
Evercore Partners, Inc., Class A		9,972		265,455
FBR & Co. (a)		22,110		45,325
Fidus Investment Corp.		2,247		29,144
Gleacher & Co., Inc. (a)		33,671		56,567
Intersections, Inc.		4,528		50,215
Main Street Capital Corp.		10,768		228,712
Piper Jaffray Cos. (a)		7,480		151,096
Stifel Financial Corp. (a)(b)		25,457		815,897
Triangle Capital Corp.		10,488		200,531

				2,502,279

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	57


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Diversified Manufacturing Operations – 0.4%
A.M. Castle & Co. (a)		7,685	$	72,700
Barnes Group, Inc.		25,822		622,568
Federal Signal Corp. (a)		29,432		122,143
Lydall, Inc. (a)		8,147		77,315
OSI Systems, Inc. (a)		9,027		440,337
Raven Industries, Inc.		8,572		530,607
Standex International Corp.		5,924		202,423
Trimas Corp. (a)(b)		12,109		217,357

				2,285,450

Diversified Materials & Processing – 0.9%
Belden, Inc.		22,456		747,336
Cabot Microelectronics Corp. (a)		11,139		526,318
Clarcor, Inc.		23,877		1,193,611
Encore Wire Corp.		8,804		228,024
Harbinger Group, Inc. (a)		3,798		15,230
Hexcel Corp. (a)(b)		46,405		1,123,465
Insteel Industries, Inc.		8,191		90,019
Koppers Holdings, Inc.		9,762		335,422
NL Industries, Inc.		3,389		43,955
Tredegar Corp.		11,341		251,997
Uranium Energy Corp. (a)(b)		36,447		111,528

				4,666,905

Diversified Media – 0.1%
Belo Corp., Class A		43,892		276,520
EW Scripps Co. (a)		14,938		119,653

				396,173

Diversified Retail – 0.5%
99 Cents Only Stores (a)		22,157		486,346
The Bon-Ton Stores, Inc.		6,149		20,722
Fred’s, Inc.		17,534		255,646
Geeknet, Inc. (a)		2,182		37,203
Gordmans Stores, Inc. (a)		2,697		33,901
HSN, Inc.		18,931		686,438
Overstock.com, Inc. (a)		5,374		42,132
PriceSmart, Inc.		8,418		585,809
Saks, Inc. (a)		54,655		532,886
Tuesday Morning Corp. (a)		20,424		70,463
ValueVision Media, Inc., Class A (a)		18,625		35,015
Winmark Corp.		1,041		59,722

				2,846,283

Drug & Grocery Store Chains – 0.9%
Arden Group, Inc., Class A		552		49,686
Casey’s General Stores, Inc.		18,001		927,231
The Fresh Market, Inc. (a)		13,348		532,585
GNC Holdings, Inc. (a)		10,812		313,007
Ingles Markets, Inc., Class A		5,792		87,228
Nash Finch Co.		5,726		167,657
The Pantry, Inc. (a)		10,871		130,126
PetMed Express, Inc.		9,710		100,790
Rite Aid Corp. (a)		279,057		351,612
Ruddick Corp.		23,311		993,981
Spartan Stores, Inc.		10,711		198,153
Susser Holdings Corp. (a)		4,438		100,388
Village Super Market, Inc., Class A		3,020		85,919
Weis Markets, Inc.		5,278		210,803
Winn-Dixie Stores, Inc. (a)		26,513		248,692

				4,497,858


Common Stocks	Shares		Value
Education Services – 0.5%
Ambassadors Group, Inc.		8,473	$	38,213
American Public Education, Inc. (a)		8,462		366,235
Archipelago Learning, Inc. (a)(b)		6,056		58,562
Bridgepoint Education, Inc. (a)(b)		8,469		194,787
Cambium Learning Group, Inc. (a)		7,733		23,354
Capella Education Co. (a)		6,860		247,303
Corinthian Colleges, Inc. (a)		37,719		81,850
Franklin Covey Co. (a)		6,113		51,777
Grand Canyon Education, Inc. (a)		13,564		216,481
HealthStream, Inc. (a)		8,588		158,449
K12, Inc. (a)		12,316		220,949
Lincoln Educational Services Corp.		10,581		83,590
National American University Holdings, Inc.		4,580		34,716
Rosetta Stone, Inc. (a)(b)		5,080		38,760
School Specialty, Inc. (a)		8,243		20,608
Strayer Education, Inc.		5,808		564,480
Universal Technical Institute, Inc. (a)		10,127		129,423

				2,529,537

Electronic Components – 0.7%
3D Systems Corp. (a)		19,872		286,157
Acacia Research – Acacia Technologies (a)		20,254		739,473
Checkpoint Systems, Inc. (a)		19,037		208,265
DDi Corp.		7,096		66,206
InvenSense, Inc. (a)		4,973		49,531
Kemet Corp. (a)		20,986		147,951
LeCroy Corp. (a)		7,724		64,959
Methode Electronics, Inc.		17,593		145,846
Microvision, Inc. (a)		56,035		20,178
Multi-Fineline Electronix, Inc. (a)		4,198		86,269
NVE Corp. (a)		2,245		124,665
Park Electrochemical Corp.		9,856		252,511
Pulse Electronics Corp.		19,580		54,824
Rogers Corp. (a)		7,560		278,661
ScanSource, Inc. (a)		12,795		460,620
TTM Technologies, Inc. (a)(b)		24,623		269,868
Universal Display Corp. (a)(b)		18,220		668,492
Viasystems Group, Inc. (a)		1,439		24,348

				3,948,824

Electronic Entertainment – 0.2%
DTS, Inc. (a)		8,252		224,784
Glu Mobile, Inc. (a)(b)		22,231		69,805
Take-Two Interactive Software, Inc. (a)		34,807		471,635
THQ, Inc. (a)		33,039		25,110

				791,334

Electronics – 0.5%
Agilysys, Inc. (a)		8,745		69,523
American Science & Engineering, Inc.		4,292		292,328
Coherent, Inc. (a)		11,171		583,908
Daktronics, Inc.		16,567		158,546
II-VI, Inc. (a)(b)		24,531		450,389
iRobot Corp. (a)		11,264		336,230
Newport Corp. (a)		17,763		241,755
Richardson Electronics Ltd.		6,507		79,971
Rofin-Sinar Technologies, Inc. (a)		13,494		308,338
SRS Labs, Inc. (a)		5,970		34,328

				2,555,316

See Notes to Financial Statements.



58	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Energy Equipment – 0.1%
C&J Energy Services, Inc. (a)		5,637	$	117,982
Capstone Turbine Corp. (a)(b)		116,980		135,697
FuelCell Energy, Inc. (a)		60,604		52,847
PowerSecure International, Inc. (a)		8,655		42,842
STR Holdings, Inc. (a)(b)		14,354		118,134

				467,502

Engineering & Contracting Services – 0.5%
Argan, Inc.		3,614		54,969
Dycom Industries, Inc. (a)		16,707		349,510
Exponent, Inc. (a)		6,266		288,048
Furmamite Corp. (a)(b)		17,702		111,700
Hill International, Inc. (a)		11,825		60,781
Layne Christensen Co. (a)		9,302		225,108
Mastec, Inc. (a)(b)		26,858		466,523
Michael Baker Corp. (a)		3,914		76,754
Mistras Group, Inc. (a)		6,974		177,767
MYR Group, Inc. (a)		9,556		182,902
Tetra Tech, Inc. (a)		29,561		638,222
UniTek Global Services, Inc. (a)		5,345		24,213
VSE Corp.		1,973		47,904

				2,704,401

Entertainment – 0.4%
Ascent Capital Group, Inc., Class A (a)(b)		6,776		343,679
Cinemark Holdings, Inc.		44,025		814,022
Lions Gate Entertainment Corp. (a)		21,300		177,216
Live Nation Entertainment, Inc. (a)		66,892		555,873
Rentrak Corp. (a)		4,526		64,631
World Wrestling Entertainment, Inc.		13,062		121,738

				2,077,159

Environmental, Maintenance, & Security Service – 0.7%
ABM Industries, Inc.		25,134		518,263
The Brink’s Co.		22,125		594,720
G&K Services, Inc., Class A		8,860		257,915
The Geo Group, Inc. (a)		30,686		513,991
Healthcare Services Group, Inc.		31,492		557,093
Mac-Gray Corp.		5,780		79,706
Rollins, Inc.		30,136		669,622
Standard Parking Corp. (a)(b)		7,452		133,167
Swisher Hygiene, Inc. (a)		40,256		150,557
Unifirst Corp.		6,701		380,215

				3,855,249

Fertilizers – 0.0%
Rentech, Inc. (a)		60,976		79,879

Financial Data & Systems – 1.0%
Advent Software, Inc. (a)		15,559		379,017
Cardtronics, Inc. (a)		20,390		551,754
Cass Information Systems, Inc.		4,395		159,934
Euronet Worldwide, Inc. (a)		24,259		448,306
Fair Isaac Corp.		16,911		606,090
Global Cash Access, Inc. (a)		14,592		64,935
Heartland Payment Systems, Inc.		18,248		444,521
Higher One Holdings, Inc. (a)(b)		14,494		267,269
Jack Henry & Associates, Inc.		40,893		1,374,414
S1 Corp. (a)		26,518		253,777
Wright Express Corp. (a)(b)		18,299		993,270

				5,543,287


Common Stocks	Shares		Value
Foods – 1.2%
B&G Foods, Inc., Class A		22,720	$	546,870
The Chefs’ Warehouse, Inc. (a)		4,851		86,639
Chiquita Brands International, Inc. (a)		21,500		179,310
Diamond Foods, Inc. (b)		10,405		335,769
Dole Food Co., Inc. (a)(b)		16,959		146,695
Hain Celestial Group, Inc. (a)		16,964		621,900
J&J Snack Foods Corp.		6,785		361,505
Lancaster Colony Corp.		8,875		615,393
Lifeway Foods, Inc. (a)		2,168		20,900
Medifast, Inc. (a)(b)		6,526		89,537
Natures Sunshine Prods, Inc. (a)		5,336		82,815
Nutraceutical International Corp. (a)		4,321		48,914
Omega Protein Corp. (a)		9,091		64,819
Schiff Nutrition International, Inc. (a)		5,693		60,915
Seneca Foods Corp. (a)		4,368		112,782
Smart Balance, Inc. (a)(b)		28,204		151,173
Snyders-Lance, Inc.		22,408		504,180
Synutra International, Inc. (a)(b)		8,141		41,193
Tootsie Roll Industries, Inc.		11,318		267,897
TreeHouse Foods, Inc. (a)		16,803		1,098,580
United Natural Foods, Inc. (a)(b)		22,903		916,349

				6,354,135

Forest Products – 0.1%
Deltic Timber Corp.		5,102		308,110
Universal Forest Products, Inc.		9,235		285,084

				593,194

Forms & Bulk Printing Services – 0.3%
Consolidated Graphics, Inc. (a)		3,997		192,975
Deluxe Corp.		24,380		554,889
Ennis, Inc.		12,397		165,252
Innerworkings, Inc. (a)		12,211		113,685
Multi-Color Corp.		5,395		138,813
Quad/Graphics, Inc.		11,953		171,406
Schawk, Inc.		5,492		61,565

				1,398,585

Fruit & Grain Processing – 0.0%
MGP Ingredients, Inc.		5,933		29,902

Funeral Parlors & Cemeteries – 0.2%
Hillenbrand, Inc.		29,712		663,172
Matthews International Corp., Class A		13,983		439,485
Stewart Enterprises, Inc., Class A		37,517		216,098

				1,318,755

Gas Pipeline – 0.1%
Crosstex Energy, Inc.		19,431		245,608
SemGroup Corp. (a)(b)		19,777		515,388

				760,996

Glass – 0.0%
Apogee Enterprises, Inc.		13,399		164,272

Gold – 0.4%
Coeur d’Alene Mines Corp. (a)		42,408		1,023,729
Gold Resource Corp.		13,460		286,025
Golden Star Resources Ltd. (a)(b)		122,752		202,541
Jaguar Mining, Inc. (a)(b)		39,992		255,149
Midway Gold Corp. (a)		40,597		85,660
U.S. Gold Corp. (a)		49,992		167,973
Vista Gold Corp. (a)		33,160		101,801

				2,122,878

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	59


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Health Care Facilities – 0.6%
Amsurg Corp. (a)		14,801	$	385,418
Assisted Living Concepts, Inc.		9,281		138,194
Capital Senior Living Corp. (a)		12,922		102,601
Emeritus Corp. (a)		14,469		253,352
The Ensign Group, Inc.		7,718		189,091
Five Star Quality Care, Inc. (a)		19,302		57,906
Hanger Orthopedic Group, Inc. (a)		15,856		296,349
HealthSouth Corp. (a)		45,064		796,281
Kindred Healthcare, Inc. (a)(b)		24,649		290,119
National Healthcare Corp.		4,865		203,843
Select Medical Holdings Corp. (a)(b)		21,240		180,115
Skilled Healthcare Group, Inc., Class A (a)		8,991		49,091
Sunrise Senior Living, Inc. (a)		27,289		176,833
US Physical Therapy, Inc.		5,563		109,480
Vanguard Health Systems, Inc. (a)		14,470		147,883

				3,376,556

Health Care Management Services – 1.1%
American Dental Partners, Inc. (a)		7,275		136,988
Bioscript, Inc. (a)		19,292		105,334
Centene Corp. (a)		23,701		938,323
Computer Programs & Systems, Inc.		5,248		268,225
HealthSpring, Inc. (a)		32,105		1,751,007
Magellan Health Services, Inc. (a)		13,463		666,015
Metropolitan Health Networks, Inc. (a)		20,140		150,446
Molina Healthcare, Inc. (a)(b)		13,303		297,056
National Research Corp.		821		31,863
Triple-S Management Corp. (a)		9,321		186,606
Universal American Corp.		15,309		194,577
WellCare Health Plans, Inc. (a)		20,166		1,058,715

				5,785,155

Health Care Services – 1.4%
Accretive Health, Inc. (a)(b)		18,956		435,609
Air Methods Corp. (a)		5,365		453,074
Alliance Healthcare Services, Inc. (a)		12,487		15,734
Almost Family, Inc. (a)		4,000		66,320
Amedisys, Inc. (a)		13,985		152,576
AMN Healthcare Services, Inc. (a)		18,439		81,685
athenahealth, Inc. (a)		16,510		810,971
CardioNet, Inc. (a)		12,314		29,184
Chemed Corp.		9,400		481,374
Chindex International, Inc. (a)		5,206		44,355
Corvel Corp. (a)(b)		3,006		155,440
Cross Country Healthcare, Inc. (a)		13,175		73,121
ePocrates, Inc. (a)		3,229		25,186
ExamWorks Group, Inc. (a)		12,860		121,913
Gentiva Health Services, Inc. (a)		14,662		98,969
Healthways, Inc. (a)		16,153		110,810
HMS Holdings Corp. (a)		40,142		1,283,741
IPC The Hospitalist Co., Inc. (a)(b)		7,750		354,330
LHC Group, Inc. (a)		7,498		96,199
Medidata Solutions, Inc. (a)		9,937		216,130
MedQuist Holdings, Inc. (a)		15,801		152,006
MWI Veterinary Supply, Inc. (a)		5,954		395,584
Omnicell, Inc. (a)(b)		15,704		259,430
PharMerica Corp. (a)		13,882		210,729
Quality Systems, Inc.		18,354		678,914
Sun Healthcare Group, Inc. (a)		11,809		45,819
Team Health Holdings, Inc. (a)		12,613		278,369
Transcend Services, Inc. (a)		4,103		97,364

				7,224,936


Common Stocks	Shares		Value
Health Care: Miscellaneous – 0.1%
MedAssets, Inc. (a)		22,561	$	208,689
The Providence Service Corp. (a)		6,087		83,757

				292,446

Home Building – 0.3%
Beazer Homes USA, Inc. (a)(b)		35,484		88,000
Hovnanian Enterprises, Inc., Class A (a)(b)		29,261		42,429
KB Home		36,488		245,199
M/I Homes, Inc. (a)		8,906		85,498
MDC Holdings, Inc.		17,806		313,920
Meritage Homes Corp. (a)(b)		13,242		307,082
Ryland Group, Inc.		21,024		331,338
Standard-Pacific Corp. (a)		50,460		160,463

				1,573,929

Hotel/Motel – 0.2%
Gaylord Entertainment Co. (a)		16,877		407,411
Marcus Corp.		9,730		122,695
Morgans Hotel Group Co. (a)		10,390		61,301
Orient Express Hotels Ltd., Class A (a)		45,225		337,831
Red Lion Hotels Corp. (a)		6,853		47,491

				976,729

Household Appliances – 0.0%
National Presto Industries, Inc.		2,272		212,659

Household Equipment & Products – 0.2%
American Greetings Corp., Class A		19,151		239,579
Blyth, Inc.		2,468		140,182
Central Garden & Pet Co., Class A (a)		19,962		166,084
CSS Industries, Inc.		3,805		75,796
Helen of Troy Ltd. (a)(b)		14,639		449,417
Libbey, Inc. (a)		9,434		120,189
Summer Infant, Inc. (a)		6,386		44,958

				1,236,205

Household Furnishings – 0.3%
American Woodmark Corp.		4,442		60,678
Ethan Allen Interiors, Inc.		11,455		271,598
Furniture Brands International, Inc. (a)		17,997		22,136
Kirkland’s, Inc. (a)		7,813		103,913
La-Z-Boy, Inc. (a)		24,613		292,895
Lifetime Brands, Inc.		4,588		55,698
Sealy Corp. (a)		22,615		38,898
Select Comfort Corp. (a)		26,369		571,943

				1,417,759

Insurance: Life – 0.7%
American Equity Investment Life Holding Co.		28,222		293,509
Citizens, Inc. (a)		18,001		174,430
CNO Financial Group, Inc. (a)(b)		105,106		663,219
Delphi Financial Group, Inc., Class A		22,895		1,014,248
FBL Financial Group, Inc., Class A		6,097		207,420
Independence Holding Co.		3,234		26,292
Kansas City Life Insurance Co.		1,939		63,638
National Western Life Insurance Co., Class A		1,025		139,564
The Phoenix Cos., Inc. (a)		55,522		93,277
Presidential Life Corp.		10,338		103,276
Primerica, Inc.		16,070		373,467
Symetra Financial Corp.		32,141		291,519

				3,443,859

See Notes to Financial Statements.



60	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Insurance: Multi-Line – 0.5%
Alterra Capital Holdings Ltd.		43,121	$	1,018,949
Crawford & Co., Class B		12,825		79,002
eHealth, Inc. (a)		9,732		143,061
Flagstone Reinsurance Holdings SA		25,091		208,004
Fortegra Financial Corp. (a)		2,884		19,265
Horace Mann Educators Corp.		19,062		261,340
Maiden Holdings Ltd.		24,243		212,369
Pico Holdings, Inc. (a)		10,804		222,346
Platinum Underwriters Holdings Ltd.		17,744		605,248

				2,769,584

Insurance: Property-Casualty – 1.6%
American Safety Insurance Holdings Ltd. (a)		4,999		108,728
Amerisafe, Inc. (a)		8,816		204,972
AmTrust Financial Services, Inc.		11,563		274,621
Argo Group International Holdings Ltd.		13,125		380,100
Baldwin & Lyons, Inc., Class B		4,154		90,557
Donegal Group, Inc., Class A		3,731		52,831
EMC Insurance Group, Inc.		2,404		49,450
Employers Holdings, Inc.		10,430		188,679
Enstar Group Ltd. (a)(b)		3,270		321,114
First American Financial Corp.		50,011		633,639
Global Indemnity Plc (a)		6,538		129,649
Greenlight Capital Re Ltd. (a)		13,364		316,326
Hallmark Financial Services, Inc. (a)		5,643		39,445
Harleysville Group, Inc.		5,832		329,916
Hilltop Holdings, Inc. (a)		19,048		160,956
Infinity Property & Casualty Corp.		5,929		336,411
Meadowbrook Insurance Group, Inc.		25,541		272,778
Montpelier Re Holdings Ltd. (b)		29,708		527,317
National Interstate Corp.		3,410		84,125
Navigators Group, Inc. (a)		5,566		265,387
OneBeacon Insurance Group Ltd.		10,682		164,396
ProAssurance Corp.		14,523		1,159,226
Radian Group, Inc.		63,300		148,122
RLI Corp.		8,749		637,452
Safety Insurance Group, Inc.		6,101		246,969
SeaBright Holdings, Inc.		9,719		74,350
Selective Insurance Group, Inc.		25,804		457,505
State Auto Financial Corp.		7,153		97,209
Stewart Information Services Corp.		8,673		100,173
Tower Group, Inc.		17,623		355,456
United Fire & Casualty Co.		10,340		208,661
Universal Insurance Holdings, Inc.		9,601		34,372

				8,450,892

International Trade & Diversified Logistic – 0.0%
Global Sources Ltd. (a)		5,710		27,694

Leisure Time – 1.0%
Black Diamond, Inc. (a)		6,315		47,173
Callaway Golf Co.		30,501		168,671
Churchill Downs, Inc.		5,942		309,756
International Speedway Corp., Class A		13,960		353,886
Interval Leisure Group, Inc. (a)		19,070		259,543
Johnson Outdoors, Inc. (a)		2,238		34,353
Life Time Fitness, Inc. (a)		20,029		936,356
Orbitz Worldwide, Inc. (a)		9,706		36,495
Pool Corp.		22,827		687,093
Six Flags Entertainment Corp.		19,748		814,408
Smith & Wesson Holding Corp. (a)		28,537		124,421
Speedway Motorsports, Inc.		5,600		85,848


Common Stocks	Shares		Value
Leisure Time (concluded)
Steinway Musical Instruments, Inc. (a)		3,113	$	77,950
Sturm Ruger & Co., Inc.		8,939		299,099
Town Sports International Holdings, Inc. (a)		9,527		70,023
Vail Resorts, Inc.		17,051		722,280
West Marine, Inc. (a)		6,834		79,479

				5,106,834

Luxury Items – 0.0%
Movado Group, Inc.		8,215		149,267

Machinery: Agricultural – 0.2%
Alamo Group, Inc.		3,161		85,126
Lindsay Manufacturing Co.		5,949		326,541
Titan International, Inc.		19,942		388,071
Titan Machinery, Inc. (a)		7,295		158,520

				958,258

Machinery: Construction & Handling – 0.1%
Astec Industries, Inc. (a)(b)		9,444		304,191
Douglas Dynamics, Inc.		8,847		129,343
NACCO Industries, Inc., Class A		2,762		246,426

				679,960

Machinery: Engines – 0.1%
Briggs & Stratton Corp.		23,907		370,319

Machinery: Industrial – 1.3%
Actuant Corp., Class A		32,487		737,130
Altra Holdings, Inc. (a)		12,752		240,120
Applied Industrial Technologies, Inc.		20,078		706,143
Chart Industries, Inc. (a)		13,922		752,763
Colfax Corp. (a)(b)		11,643		331,593
Columbus McKinnon Corp. (a)		9,137		115,949
DXP Enterprises, Inc. (a)		4,107		132,245
EnPro Industries, Inc. (a)		9,771		322,248
Flow International Corp. (a)		22,530		78,855
Graham Corp.		4,683		105,086
John Bean Technologies Corp.		13,578		208,694
Kadant, Inc. (a)		5,840		132,042
Middleby Corp. (a)		8,873		834,417
MTS Systems Corp.		7,391		301,183
Omega Flex, Inc. (a)		1,035		14,625
Sauer-Danfoss, Inc. (a)		5,491		198,829
Tecumseh Products Co., Class A (a)		9,230		43,381
Tennant Co.		9,074		352,706
Twin Disc, Inc.		4,023		146,115
Woodward, Inc.		29,162		1,193,601

				6,947,725

Machinery: Specialty – 0.1%
Machinery: Specialty – 0.1%
Albany International Corp., Class A		13,090		302,641
Cascade Corp.		4,350		205,189
Hurco Cos., Inc. (a)		3,007		63,147
Xerium Technologies, Inc. (a)		4,914		32,138

				603,115

Manufactured Housing – 0.0%
Cavco Industries, Inc. (a)		3,234		129,554
Skyline Corp.		3,592		15,625

				145,179

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	61


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Medical & Dental Instruments & Supplies – 2.3%
Abiomed, Inc. (a)		15,032	$	277,641
Align Technology, Inc. (a)		29,091		690,184
Alphatec Holdings, Inc. (a)		26,027		44,766
AngioDynamics, Inc. (a)		11,832		175,232
Antares Pharma, Inc. (a)		41,066		90,345
AtriCure, Inc. (a)		6,689		74,248
Atrion Corp.		745		178,971
Biolase Technology, Inc. (a)(b)		15,131		38,887
Cantel Medical Corp.		6,260		174,842
Cardiovascular Systems, Inc. (a)		7,037		69,314
Cerus Corp. (a)		22,757		63,720
Conceptus, Inc. (a)(b)		14,783		186,857
CONMED Corp. (a)		13,407		344,158
CryoLife, Inc. (a)		13,061		62,693
Delcath Systems, Inc. (a)		22,814		69,583
Endologix, Inc. (a)(b)		23,197		266,302
Exactech, Inc. (a)		3,914		64,464
Hansen Medical, Inc. (a)		22,917		59,126
Heartware International, Inc. (a)(b)		5,667		391,023
ICU Medical, Inc. (a)(b)		5,745		258,525
Insulet Corp. (a)		21,774		410,004
Integra LifeSciences Holdings Corp. (a)		9,273		285,887
Invacare Corp.		13,565		207,409
Landauer, Inc.		4,458		229,587
MAKO Surgical Corp. (a)(b)		15,142		381,730
Medical Action Industries, Inc. (a)		7,424		38,827
Medtox Scientific, Inc. (a)		3,636		51,086
Meridian Bioscience, Inc.		19,492		367,229
Merit Medical Systems, Inc. (a)		19,871		265,874
Navidea Biopharmaceuticals, Inc. (a)(b)		44,826		117,444
Neogen Corp. (a)(b)		11,018		337,591
NuVasive, Inc. (a)		20,025		252,115
OraSure Technologies, Inc. (a)		22,164		201,914
Orthofix International NV (a)(b)		8,540		300,864
Owens & Minor, Inc.		30,182		838,758
PSS World Medical, Inc. (a)		26,276		635,616
Quidel Corp. (a)		13,503		204,300
Rockwell Medical Technologies, Inc. (a)		7,600		64,372
Staar Surgical Co. (a)		16,890		177,176
Steris Corp.		28,068		836,988
SurModics, Inc. (a)		7,255		106,358
Symmetry Medical, Inc. (a)(b)		17,287		138,123
Synovis Life Technologies, Inc. (a)		5,430		151,117
Tornier NV (a)		5,003		90,054
Unilife Corp. (a)(b)		31,256		97,519
Uroplasty, Inc. (a)		9,381		39,869
Vascular Solutions, Inc. (a)		8,035		89,430
Volcano Corp. (a)(b)		24,687		587,304
West Pharmaceutical Services, Inc.		15,857		601,773
Wright Medical Group, Inc. (a)		18,472		304,788
Young Innovations, Inc.		2,668		79,053

				12,071,040

Medical Equipment – 1.2%
Abaxis, Inc. (a)		10,684		295,626
Accuray, Inc. (a)(b)		32,499		137,471
Affymetrix, Inc. (a)		33,479		136,929
Analogic Corp.		5,942		340,595
ArthroCare Corp. (a)		12,943		410,034
Bacterin International Holdings, Inc. (a)		11,255		32,189
Cyberonics, Inc. (a)(b)		13,413		449,336


Common Stocks	Shares		Value
Medical Equipment (concluded)
Cynosure, Inc., Class A (a)		4,437	$	52,179
DexCom, Inc. (a)(b)		31,840		296,430
Fluidigm Corp. (a)		3,010		39,612
Greatbatch, Inc. (a)(b)		11,021		243,564
Haemonetics Corp. (a)		12,151		743,884
IRIS International, Inc. (a)		8,469		79,185
Luminex Corp. (a)(b)		17,913		380,293
Masimo Corp. (a)		24,916		465,556
Merge Healthcare, Inc. (a)(b)		26,322		127,662
Natus Medical, Inc. (a)(b)		13,783		129,974
NxStage Medical, Inc. (a)(b)		21,142		375,905
Palomar Medical Technologies, Inc. (a)		8,833		82,147
Solta Medical, Inc. (a)		28,997		91,051
SonoSite, Inc. (a)		6,525		351,437
Spectranetic Corp. (a)		15,846		114,408
Stereotaxis, Inc. (a)(b)		22,866		18,832
Synergetics USA, Inc. (a)		10,435		77,010
Zeltiq Aesthetics, Inc. (a)(b)		3,371		38,295
Zoll Medical Corp. (a)		10,385		656,124

				6,165,728

Medical Services – 0.2%
Bio-Reference Labs, Inc. (a)		11,626		189,155
eResearch Technology, Inc. (a)		23,294		109,249
Neostem, Inc. (a)		10,587		5,367
Parexel International Corp. (a)		27,893		578,501
RadNet, Inc. (a)		15,292		32,572

				914,844

Metal Fabricating – 0.6%
Ampco-Pittsburgh Corp.		4,056		78,443
Compx International, Inc.		465		6,849
Dynamic Materials Corp.		6,343		125,465
Haynes International, Inc.		5,787		315,970
Kaydon Corp.		15,457		471,438
L.B. Foster Co., Class A		4,278		121,025
Lawson Products, Inc.		1,669		25,753
Metals USA Holdings Corp. (a)		5,466		61,492
Mueller Industries, Inc.		17,918		688,410
Mueller Water Products, Inc., Series A		73,779		180,021
NN, Inc. (a)		7,696		46,176
Northwest Pipe Co. (a)		4,314		98,618
RBC Bearings, Inc. (a)(b)		10,388		433,180
RTI International Metals, Inc. (a)		14,290		331,671
Worthington Industries, Inc.		27,245		446,273

				3,430,784

Metals & Minerals: Diversified – 0.6%
AMCOL International Corp.		11,555		310,252
General Moly, Inc. (a)(b)		31,951		98,729
Globe Specialty Metals, Inc.		29,875		400,026
Hecla Mining Co.		132,357		692,227
Materion Corp. (a)(b)		9,674		234,885
Minerals Technologies, Inc.		8,637		488,250
Oil-Dri Corp. of America		2,369		47,948
Paramount Gold and Silver Corp. (a)(b)		55,682		119,159
SunCoke Energy, Inc. (a)		6,236		69,843
Thompson Creek Metals Co., Inc. (a)		72,435		504,148
United States Lime & Minerals, Inc. (a)		1,227		73,755
Ur-Energy, Inc. (a)		52,825		45,377
Uranerz Energy Corp. (a)(b)		30,397		55,322

See Notes to Financial Statements.



62	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Metals & Minerals: Diversified (concluded)
Uranium Resources, Inc. (a)(b)		47,358	$	34,382
US Energy Corp. – Wyoming (a)		12,129		35,295

				3,209,598

Miscellaneous Consumer Staples – 0.0%
Spectrum Brands Holdings, Inc. (a)		7,890		216,186

Office Supplies & Equipment – 0.6%
ACCO Brands Corp. (a)		26,177		252,608
AT Cross Co. (a)		4,711		53,140
Electronics for Imaging, Inc. (a)		22,108		315,039
Herman Miller, Inc.		27,163		501,157
HNI Corp.		21,239		554,338
Kimball International, Inc., Class B		14,562		73,829
Knoll, Inc.		22,706		337,184
Steelcase, Inc., Class A		37,773		281,787
United Stationers, Inc.		20,191		657,419

				3,026,501

Offshore Drilling & Other Services – 0.1%
Hercules Offshore, Inc. (a)		54,560		242,246
Vantage Drilling Co. (a)		81,823		94,915

				337,161

Oil Well Equipment & Services – 1.9%
Basic Energy Services, Inc. (a)(b)		11,412		224,816
Cal Dive International, Inc. (a)		45,279		101,878
Complete Production Services, Inc. (a)		37,404		1,255,278
Dawson Geophysical Co. (a)(b)		3,753		148,356
Dril-Quip, Inc. (a)		16,281		1,071,615
Exterran Holdings, Inc. (a)		30,232		275,111
Flotek Industries, Inc. (a)		23,662		235,674
Geokinetics, Inc. (a)		4,972		10,690
Global Geophysical Services, Inc. (a)		8,570		57,590
Golar LNG Ltd.		18,899		840,061
Gulf Island Fabrication, Inc.		6,818		199,154
Helix Energy Solutions Group, Inc. (a)		50,225		793,555
Hornbeck Offshore Services, Inc. (a)		14,614		453,326
ION Geophysical Corp. (a)		62,335		382,114
Key Energy Services, Inc. (a)(b)		59,128		914,710
Lufkin Industries, Inc.		14,433		971,485
Matrix Service Co. (a)		12,587		118,821
Mitcham Industries, Inc. (a)		5,707		124,641
Natural Gas Services Group, Inc. (a)		5,790		83,723
Newpark Resources, Inc. (a)(b)		42,869		407,256
OYO Geospace Corp. (a)(b)		2,059		159,222
Parker Drilling Co. (a)		55,343		396,809
Pioneer Drilling Co. (a)		29,247		283,111
RigNet, Inc. (a)		2,632		44,060
Tesco Corp. (a)		14,361		181,523
Tetra Technologies, Inc. (a)		36,470		340,630
Union Drilling, Inc. (a)		6,948		43,356
Willbros Group, Inc. (a)		19,055		69,932

				10,188,497

Oil: Crude Producers – 3.1%
Abraxas Petroleum Corp. (a)		39,095		129,014
Apco Oil and Gas International, Inc.		4,327		353,602
Approach Resources, Inc. (a)		12,348		363,155
ATP Oil & Gas Corp. (a)(b)		21,096		155,267
Berry Petroleum Co., Class A		24,425		1,026,339
Bill Barrett Corp. (a)		22,347		761,362


Common Stocks	Shares		Value
Oil: Crude Producers (concluded)
BPZ Resources, Inc. (a)(b)		48,421	$	137,516
Callon Petroleum Co. (a)		18,282		90,862
CAMAC Energy, Inc. (a)		30,744		31,051
Carrizo Oil & Gas, Inc. (a)		18,443		485,973
Cheniere Energy, Inc. (a)		39,224		340,857
Clayton Williams Energy, Inc. (a)		2,801		212,540
Comstock Resources, Inc. (a)		22,561		345,183
Contango Oil & Gas Co. (a)		5,769		335,640
Crimson Exploration, Inc. (a)		10,671		30,519
Endeavour International Corp. (a)(b)		17,609		153,022
Energy Partners Ltd. (a)		13,752		200,779
Energy XXI Bermuda Ltd. (a)		35,686		1,137,670
Evolution Petroleum Corp. (a)		7,349		59,159
FX Energy, Inc. (a)		24,891		119,477
Gastar Exploration Ltd. (a)		27,138		86,299
GeoResources, Inc. (a)		9,515		278,885
GMX Resources, Inc. (a)(b)		29,313		36,641
Goodrich Petroleum Corp. (a)		12,264		168,385
Gulfport Energy Corp. (a)(b)		21,612		636,473
Harvest Natural Resources, Inc. (a)(b)		16,095		118,781
Houston American Energy Corp. (a)		7,876		96,008
Hyperdynamics Corp. (a)(b)		73,797		180,803
Isramco, Inc. (a)(b)		519		46,482
Kodiak Oil & Gas Corp. (a)		122,099		1,159,940
Magnum Hunter Resources Corp. (a)(b)		52,832		284,764
McMoRan Exploration Co. (a)		46,551		677,317
Northern Oil And Gas, Inc. (a)		29,918		717,434
Oasis Petroleum, Inc. (a)		28,205		820,483
Panhandle Oil & Gas, Inc.		3,334		109,389
Penn Virginia Corp.		21,677		114,671
Petroleum Development Corp. (a)(b)		11,148		391,406
Petroquest Energy, Inc. (a)		26,582		175,441
Resolute Energy Corp. (a)		21,799		235,429
Rex Energy Corp. (a)		16,543		244,175
Rosetta Resources, Inc. (a)		25,101		1,091,893
Stone Energy Corp. (a)		23,223		612,623
Swift Energy Co. (a)		20,100		597,372
Triangle Petroleum Corp. (a)		20,435		121,997
Vaalco Energy, Inc. (a)		24,357		147,116
Venoco, Inc. (a)		14,035		95,017
Voyager Oil & Gas, Inc. (a)		22,061		56,697
W&T Offshore, Inc.		16,551		351,047
Warren Resources, Inc. (a)		34,143		111,306
Zion Oil & Gas, Inc. (a)		14,905		32,940

				16,266,201

Oil: Integrated – 0.1%
Targa Resources, Inc.		7,763		315,876

Oil: Refining & Marketing – 0.6%
Alon USA Energy, Inc.		5,327		46,398
Clean Energy Fuels Corp. (a)(b)		23,709		295,414
CVR Energy, Inc. (a)		41,695		780,947
Delek US Holdings, Inc.		6,993		79,790
Miller Energy Resources, Inc. (a)(b)		14,093		39,320
Western Refining, Inc.		25,158		334,350
World Fuel Services Corp.		33,656		1,412,879

				2,989,098

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	63


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Paints & Coatings – 0.1%
Chase Corp.		2,961	$	41,158
Ferro Corp. (a)		41,124		201,096
H.B. Fuller Co.		23,426		541,375

				783,629

Paper – 0.5%
Boise, Inc.		43,378		308,851
Buckeye Technologies, Inc.		18,895		631,849
Clearwater Paper Corp. (a)		10,888		387,722
Kapstone Paper and Packaging Corp. (a)		18,475		290,797
Neenah Paper, Inc. (a)		7,042		157,177
P.H. Glatfelter Co.		20,610		291,013
Schweitzer-Mauduit International, Inc.		7,619		506,359
Verso Paper Corp. (a)		7,798		7,486
Wausau Paper Corp.		23,292		192,392

				2,773,646

Personal Care – 0.1%
Female Health Co.		9,039		40,766
USANA Health Sciences, Inc. (a)		3,094		93,965
WD-40 Co.		7,584		306,469

				441,200

Pharmaceuticals – 2.1%
Achillion Pharmaceuticals, Inc. (a)		22,518		171,587
Acura Pharmaceuticals, Inc. (a)(b)		5,146		17,960
Akorn, Inc. (a)		26,658		296,437
Ampio Pharmaceuticals, Inc. (a)		9,874		42,162
Anacor Pharmaceuticals, Inc. (a)		4,928		30,554
Ardea Biosciences, Inc. (a)(b)		7,990		134,312
Auxilium Pharmaceuticals, Inc. (a)		22,704		452,491
Avanir Pharmaceuticals, Inc. (a)		58,920		120,786
BioCryst Pharmaceuticals, Inc. (a)		13,221		32,656
Biospecifics Technologies (a)		2,290		38,060
Cadence Pharmaceuticals, Inc. (a)		23,966		94,666
Cambrex Corp. (a)		13,881		99,666
Cleveland BioLabs, Inc. (a)		14,174		40,538
Columbia Laboratories, Inc. (a)(b)		18,549		46,373
Corcept Therapeutics, Inc. (a)		19,494		66,669
Depomed, Inc. (a)		25,551		132,354
Durect Corp. (a)		38,471		45,396
Dusa Pharmaceuticals, Inc. (a)		11,325		49,603
Endocyte, Inc. (a)		8,597		32,325
Hi-Tech Pharmacal Co., Inc. (a)		4,926		191,572
Impax Laboratories, Inc. (a)(b)		30,988		625,028
Infinity Pharmaceuticals, Inc. (a)		9,072		80,196
Ironwood Pharmaceuticals, Inc. (a)		23,990		287,160
Isis Pharmaceuticals, Inc. (a)		47,196		340,283
ISTA Pharmaceuticals, Inc. (a)		15,264		107,611
Jazz Pharmaceuticals, Inc. (a)		10,474		404,611
K-V Pharmaceutical Co., Class A (a)		23,470		32,858
Lannett Co., Inc. (a)		8,104		35,820
MAP Pharmaceuticals, Inc. (a)		10,405		137,034
The Medicines Co. (a)		25,557		476,382
Medicis Pharmaceutical Corp., Class A		29,273		973,327
Obagi Medical Products, Inc. (a)		8,902		90,444
Optimer Pharmaceuticals, Inc. (a)(b)		21,947		268,631
Pacira Pharmaceuticals, Inc. (a)		3,318		28,701
Pain Therapeutics, Inc. (a)		18,264		69,403
Par Pharmaceutical Cos., Inc. (a)		17,182		562,367
Pernix Therapeutics Holdings, Inc. (a)		1,687		15,622


Common Stocks	Shares		Value
Pharmaceuticals (concluded)
Pharmacyclics, Inc. (a)		21,753	$	322,379
Pozen, Inc. (a)		12,270		48,467
Prestige Brands Holdings, Inc. (a)		23,899		269,342
Questcor Pharmaceuticals, Inc. (a)		25,174		1,046,735
Sagent Pharmaceuticals, Inc. (a)		3,074		64,554
Salix Pharmaceuticals Ltd. (a)		27,677		1,324,344
Santarus, Inc. (a)		25,288		83,703
Sciclone Pharmaceuticals, Inc. (a)(b)		16,383		70,283
SIGA Technologies, Inc. (a)(b)		15,618		39,357
Spectrum Pharmaceuticals, Inc. (a)(b)		27,212		398,112
Vical, Inc. (a)		34,062		150,213
Vivus, Inc. (a)		42,154		411,001
Xenoport, Inc. (a)		16,389		62,442
Zogenix, Inc. (a)		9,795		21,941

				10,984,518

Photography – 0.0%
Eastman Kodak Co. (a)(b)		137,534		89,328

Plastics – 0.1%
A. Schulman, Inc.		14,633		309,927
Spartech Corp. (a)		14,719		69,621

				379,548

Power Transmission Equipment – 0.2%
Active Power, Inc. (a)		40,379		26,650
Advanced Energy Industries, Inc. (a)		20,680		221,896
Generac Holdings, Inc. (a)		11,802		330,810
Global Power Equipment Group, Inc. (a)		7,461		177,199
Maxwell Technologies, Inc. (a)		13,224		214,758
Powell Industries, Inc. (a)		4,174		130,563
Power-One, Inc. (a)		32,347		126,477
Vicor Corp.		9,374		74,617

				1,302,970

Precious Metals & Minerals – 0.2%
Golden Minerals Co. (a)		13,345		77,535
Horsehead Holding Corp. (a)		20,743		186,894
Stillwater Mining Co. (a)		54,646		571,597

				836,026

Printing & Copying Services – 0.0%
Casella Waste Systems, Inc. (a)		11,898		76,147
Cenveo, Inc. (a)		25,778		87,645

				163,792

Producer Durables: Miscellaneous – 0.1%
Blount International, Inc. (a)		23,010		334,105
Park-Ohio Holdings Corp. (a)(b)		3,889		69,380

				403,485

Production Technology Equipment – 1.3%
ATMI, Inc. (a)(b)(c)		15,023		300,911
Axcelis Technologies, Inc. (a)		50,821		67,592
Brooks Automation, Inc.		31,418		322,663
Cognex Corp.		19,650		703,274
Cohu, Inc.		11,475		130,241
Cymer, Inc. (a)		14,461		719,579
Electro Scientific Industries, Inc.		10,686		154,733
Entegris, Inc. (a)		63,753		556,245
FEI Co. (a)		18,330		747,497
FSI International, Inc. (a)		18,509		67,743
GSI Group, Inc. (a)		12,244		125,256
Intevac, Inc. (a)(b)		10,909		80,727
Kulicke & Soffa Industries, Inc. (a)		34,180		316,165

See Notes to Financial Statements.



64	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Production Technology Equipment (concluded)
LTX-Credence Corp. (a)		23,507	$	125,763
MKS Instruments, Inc.		24,760		688,823
Nanometrics, Inc. (a)		9,536		175,653
Photronics, Inc. (a)		27,962		170,009
Rudolph Technologies, Inc. (a)(b)		14,997		138,872
Tessera Technologies, Inc. (a)		24,262		406,389
Ultra Clean Holdings, Inc. (a)		10,712		65,450
Ultratech, Inc. (a)		11,911		292,653
Veeco Instruments, Inc. (a)		19,309		401,627

				6,757,865

Publishing – 0.4%
AH Belo Corp.		8,552		40,622
Courier Corp.		4,851		56,902
The Dolan Co. (a)		14,336		122,143
Journal Communications, Inc., Class A (a)		20,633		90,785
Martha Stewart Living Omnimedia, Inc., Class A		12,937		56,923
McClatchy Co., Class A (a)(b)		27,142		64,869
Meredith Corp.		17,216		562,102
The New York Times Co., Class A (a)		64,963		502,164
Scholastic Corp.		12,577		376,933
Value Line, Inc.		699		7,186

				1,880,629

Radio & TV Broadcasters – 0.2%
Central European Media Enterprises, Ltd. (a)		17,350		113,122
Crown Media Holdings, Inc., Class A (a)(b)		18,488		22,370
Cumulus Media, Inc., Class A (a)		17,291		57,752
Dial Global, Inc. (a)(b)		2,711		8,648
Entercom Communications Corp. (a)		11,465		70,510
Entravision Communications Corp., Class A		25,376		39,587
Fisher Communications, Inc. (a)		4,138		119,299
Gray Television, Inc. (a)		24,582		39,823
Lin TV Corp., Class A (a)		13,877		58,700
Nexstar Broadcasting Group, Inc., Class A (a)		4,924		38,604
Outdoor Channel Holdings, Inc.		6,875		51,287
Saga Communications, Inc. (a)		1,766		66,013
Sinclair Broadcast Group, Inc., Class A		23,901		270,798

				956,513

Railroad Equipment – 0.1%
American Railcar Industries, Inc. (a)		4,644		111,131
Freightcar America, Inc. (a)		5,687		119,142
Greenbrier Cos., Inc. (a)(b)		9,371		227,528

				457,801

Railroads – 0.2%
Genesee & Wyoming, Inc., Class A (a)		18,773		1,137,268
Railamerica, Inc. (a)		10,096		150,330

				1,287,598

Real Estate – 0.2%
Avatar Holdings, Inc. (a)		4,497		32,288
Consolidated-Tomoka Land Co.		1,911		51,731
Forestar Group, Inc. (a)		16,822		254,517
Griffin Land & Nurseries, Inc.		1,164		30,799
HFF, Inc., Class A (a)		13,975		144,362
Kennedy-Wilson Holdings, Inc.		12,531		132,578
Tejon Ranch Co. (a)		6,748		165,191

				811,466


Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) – 8.8%
Acadia Realty Trust		20,137	$	405,559
AG Mortgage Investment Trust, Inc.		3,062		61,638
Agree Realty Corp.		4,742		115,610
Alexander’s, Inc.		971		359,299
American Assets Trust, Inc.		15,204		311,834
American Campus Communities, Inc. (b)		32,143		1,348,720
American Capital Mortgage Investment Corp.		3,909		73,567
Anworth Mortgage Asset Corp.		64,052		402,247
Apollo Commercial Real Estate Finance, Inc.		9,499		124,722
ARMOUR Residential REIT, Inc.		43,834		309,030
Ashford Hospitality Trust, Inc.		24,768		198,144
Associated Estates Realty Corp. (b)		19,664		313,641
BioMed Realty Trust, Inc.		72,964		1,319,189
Campus Crest Communities, Inc.		14,513		146,001
CapLease, Inc.		32,521		131,385
Capstead Mortgage Corp.		40,185		499,901
CBL & Associates Properties, Inc.		70,399		1,105,264
Cedar Realty Trust, Inc. (b)		26,860		115,767
Chatham Lodging Trust		6,479		69,844
Chesapeake Lodging Trust		15,357		237,419
Cogdell Spencer, Inc.		21,267		90,385
Colonial Properties Trust		39,605		826,160
Colony Financial, Inc.		15,599		245,060
Coresite Realty Corp.		9,402		167,544
Cousins Properties, Inc.		43,528		279,014
CreXus Investment Corp.		27,378		284,184
CubeSmart		58,198		619,227
CYS Investments, Inc.		39,038		512,959
DCT Industrial Trust, Inc. (b)		116,750		597,760
DiamondRock Hospitality Co. (b)		79,639		767,720
Dupont Fabros Technology, Inc. (b)		27,889		675,472
Dynex Capital Corp. (b)		19,046		173,890
Eastgroup Properties, Inc. (b)		12,823		557,544
Education Realty Trust, Inc.		43,647		446,509
Entertainment Properties Trust		22,142		967,827
Equity Lifestyle Properties, Inc.		14,552		970,473
Equity One, Inc.		25,574		434,247
Excel Trust, Inc.		14,478		173,736
Extra Space Storage, Inc.		44,523		1,078,792
FelCor Lodging Trust, Inc. (a)(b)		59,255		180,728
First Industrial Realty Trust, Inc. (a)		41,078		420,228
First Potomac Realty Trust		23,835		311,047
Franklin Street Properties Corp.		33,899		337,295
Getty Realty Corp.		12,483		174,138
Gladstone Commercial Corp.		5,278		92,629
Glimcher Realty Trust (b)		50,927		468,528
Government Properties Income Trust		16,874		380,509
Hatteras Financial Corp.		35,450		934,817
Healthcare Realty Trust, Inc. (b)		36,970		687,272
Hersha Hospitality Trust (b)		67,135		327,619
Highwoods Properties, Inc.		34,223		1,015,396
Home Properties, Inc.		22,735		1,308,854
Hudson Pacific Properties, Inc.		10,451		147,986
Inland Real Estate Corp.		36,938		281,098
InvesCo. Mortgage Capital, Inc.		54,883		771,106
Investors Real Estate Trust		38,380		279,982
iStar Financial, Inc. (a)		38,768		205,083
Kilroy Realty Corp.		27,727		1,055,567
Kite Realty Group Trust		26,774		120,751
LaSalle Hotel Properties		40,388		977,793
Lexington Corporate Properties Trust		57,057		427,357
LTC Properties, Inc. (b)		14,459		446,205

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	65


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (concluded)
Medical Properties Trust, Inc.		53,322	$	526,288
MFA Financial, Inc.		169,299		1,137,689
Mid-America Apartment Communities, Inc.		17,371		1,086,556
Mission West Properties, Inc.		8,317		75,019
Monmouth Real Estate Investment Corp., Class A		18,412		168,470
MPG Office Trust, Inc. (a)		23,522		46,809
National Health Investors, Inc.		11,611		510,652
National Retail Properties, Inc.		49,500		1,305,810
Newcastle Investment Corp.		50,057		232,765
NorthStar Realty Finance Corp.		45,477		216,925
Omega Healthcare Investors, Inc. (b)		48,346		935,495
One Liberty Properties, Inc.		5,342		88,143
Parkway Properties, Inc.		10,326		101,814
Pebblebrook Hotel Trust		24,167		463,523
Pennsylvania Real Estate Investment Trust (b)		26,471		276,357
PennyMac Mortgage Investment Trust (d)		13,158		218,686
Post Properties, Inc.		23,611		1,032,273
Potlatch Corp. (b)		19,111		594,543
PS Business Parks, Inc.		8,838		489,890
RAIT Financial Trust		18,666		88,664
Ramco-Gershenson Properties Trust		18,454		181,403
Redwood Trust, Inc.		37,226		378,961
Resource Capital Corp.		36,793		206,409
Retail Opportunity Investments Corp.		23,410		277,174
RLJ Lodging Trust		13,104		220,540
Sabra Healthcare REIT, Inc.		17,561		212,312
Saul Centers, Inc.		3,471		122,943
Sovran Self Storage, Inc.		13,157		561,409
STAG Industrial, Inc.		7,275		83,444
Starwood Property Trust, Inc.		44,307		820,123
Strategic Hotel Capital, Inc. (a)		82,968		445,538
Summit Hotel Properties, Inc.		13,024		122,947
Sun Communities, Inc.		10,064		367,638
Sunstone Hotel Investors, Inc. (a)		56,088		457,117
Tanger Factory Outlet Centers, Inc.		40,689		1,193,001
Terreno Realty Corp.		4,348		65,829
Two Harbors Investment Corp.		66,738		616,659
UMH Properties, Inc.		5,972		55,599
Universal Health Realty Income Trust		3,196		124,644
Urstadt Biddle Properties, Inc., Class A		11,063		200,019
Walter Investment Management Corp.		12,226		250,755
Washington Real Estate Investment Trust		31,302		856,110
Whitestone REIT		3,393		40,377
Winthrop Realty Trust		13,820		140,549

				46,467,143

Recreational Vehicles & Boats – 0.2%
Arctic Cat, Inc. (a)		5,767		130,046
Brunswick Corp.		42,191		761,970
Drew Industries, Inc. (a)		9,061		222,266
Marine Products Corp. (a)		5,167		25,628
Winnebago Industries, Inc. (a)		13,802		101,859

				1,241,769

Rental & Leasing Services: Consumer – 0.6%
Amerco, Inc. (a)		4,103		362,705
Avis Budget Group, Inc. (a)		49,773		533,567
Dollar Thrifty Automotive Group, Inc. (a)(b)		13,704		962,843
Rent-A-Center, Inc.		27,827		1,029,599
Zipcar, Inc. (a)(b)		4,728		63,450

				2,952,164


Common Stocks	Shares		Value
Restaurants – 1.5%
AFC Enterprises, Inc. (a)		11,748	$	172,696
Benihana, Inc.		6,608		67,600
Biglari Holdings, Inc. (a)		574		211,370
BJ’s Restaurants, Inc. (a)		11,392		516,285
Bob Evans Farms, Inc.		14,370		481,970
Bravo Brio Restaurant Group, Inc. (a)		9,141		156,768
Buffalo Wild Wings, Inc. (a)(b)		8,672		585,447
Caribou Coffee Co., Inc. (a)		5,988		83,533
Carrols Restaurant Group, Inc. (a)		6,117		70,774
CEC Entertainment, Inc.		9,405		324,002
The Cheesecake Factory, Inc. (a)		27,375		803,456
Cracker Barrel Old Country Store, Inc.		10,866		547,755
Denny’s Corp. (a)		46,958		176,562
DineEquity, Inc. (a)(b)		7,325		309,188
Domino’s Pizza, Inc. (a)		27,560		935,662
Einstein Noah Restaurant Group, Inc.		2,927		46,305
Ellie Mae, Inc. (a)		4,123		23,295
Jack in the Box, Inc. (a)		20,802		434,762
Jamba, Inc. (a)		30,157		39,506
Krispy Kreme Doughnuts, Inc. (a)		27,765		181,583
Luby’s, Inc. (a)		9,063		40,874
McCormick & Schmick’s Seafood Restaurants, Inc. (a)		6,279		54,878
O’Charleys, Inc. (a)(b)		9,011		49,470
P.F. Chang’s China Bistro, Inc.		10,069		311,233
Papa John’s International, Inc. (a)		8,834		332,865
Red Robin Gourmet Burgers, Inc. (a)		6,146		170,244
Ruby Tuesday, Inc. (a)		30,978		213,748
Ruth’s Hospitality Group, Inc. (a)		16,781		83,402
Sonic Corp. (a)		29,287		197,102
Texas Roadhouse, Inc., Class A		29,859		444,899

				8,067,234

Scientific Instruments: Control & Filter – 0.7%
Brady Corp.		22,505		710,483
CIRCOR International, Inc.		8,163		288,236
Energy Recovery, Inc. (a)		21,246		54,815
ESCO Technologies, Inc.		12,605		362,772
The Gorman-Rupp Co.		7,232		196,349
Mine Safety Appliances Co.		12,901		427,281
PMFG, Inc. (a)		8,340		162,713
Robbins & Myers, Inc.		18,684		907,108
Sun Hydraulics, Inc.		9,550		223,756
Thermon Group Holdings, Inc. (a)		4,742		83,554
Watts Water Technologies, Inc., Class A		14,252		487,561
X-Rite, Inc. (a)		12,373		57,411

				3,962,039

Scientific Instruments: Electrical – 0.6%
A123 Systems, Inc. (a)		41,814		67,321
American Superconductor Corp. (a)(b)		21,173		78,128
A.O. Smith Corp.		18,001		722,200
AZZ, Inc.		5,942		270,005
Broadwind Energy, Inc. (a)		55,821		37,958
Coleman Cable, Inc. (a)		4,183		36,392
EnerSys (a)		22,602		586,974
Franklin Electric Co., Inc.		11,029		480,423
Houston Wire & Cable Co.		8,477		117,152
Littelfuse, Inc.		10,766		462,723
Preformed Line Products Co.		1,130		67,416
SatCon Technology Corp. (a)		25,649		15,392
Taser International, Inc. (a)		26,372		135,025
Valence Technology, Inc. (a)		36,478		35,748

				3,112,857

See Notes to Financial Statements.



66	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Scientific Instruments: Gauges & Meters – 0.2%
Badger Meter, Inc.		7,144	$	210,248
Faro Technologies, Inc. (a)		7,742		356,132
Measurement Specialties, Inc. (a)		7,089		198,209
Vishay Precision Group, Inc. (a)		5,788		92,492
Zygo Corp. (a)		7,548		133,222

				990,303

Scientific Instruments: Pollution Control – 0.6%
Clean Harbors, Inc. (a)(b)		22,189		1,414,105
Darling International, Inc. (a)		55,459		737,050
EnergySolutions, Inc. (a)		37,817		116,855
Fuel Tech, Inc. (a)		8,724		57,404
Heritage-Crystal Clean, Inc. (a)		2,328		38,552
Met-Pro Corp.		6,875		62,150
Metalico, Inc. (a)		18,767		61,743
Team, Inc. (a)(b)		9,223		274,384
TRC Cos., Inc. (a)		8,414		50,568
US Ecology, Inc.		8,742		164,175
WCA Waste Corp. (a)		7,998		52,067

				3,029,053

Securities Brokerage & Services – 0.4%
BGC Partners, Inc.		36,076		214,291
FXCM, Inc.		8,047		78,458
Gain Capital Holdings, Inc.		4,017		26,914
GFI Group, Inc.		33,832		139,388
Gladstone Investment Corp.		10,319		75,019
International FCStone, Inc. (a)		6,258		147,501
Investment Technology Group, Inc. (a)		19,558		211,422
KBW, Inc.		15,670		237,871
Knight Capital Group, Inc., Class A (a)(b)		47,508		561,545
Ladenburg Thalmann Financial Services, Inc. (a)		50,629		125,560
MarketAxess Holdings, Inc.		13,602		409,556
SWS Group, Inc.		13,881		95,362

				2,322,887

Semiconductors & Components – 2.5%
Advanced Analogic Technologies, Inc. (a)		20,241		116,993
Aeroflex Holding Corp. (a)		9,312		95,355
Alpha & Omega Semiconductor, Ltd. (a)		6,712		49,065
Amkor Technology, Inc. (a)		45,952		200,351
Amtech Systems, Inc. (a)		4,791		40,771
Anadigics, Inc. (a)		33,114		72,520
Applied Micro Circuits Corp. (a)		30,106		202,312
AXT, Inc. (a)		15,101		62,971
Cavium, Inc. (a)(b)		22,941		652,213
Ceva, Inc. (a)		10,912		330,197
Cirrus Logic, Inc. (a)(b)		31,390		497,532
Diodes, Inc. (a)		16,767		357,137
DSP Group, Inc. (a)		6,828		35,574
eMagin Corp. (a)		8,794		32,538
Emcore Corp. (a)		45,287		39,051
Entropic Communications, Inc. (a)		40,737		208,166
Exar Corp. (a)		17,246		112,099
Formfactor, Inc. (a)		23,966		121,268
GT Advanced Technologies, Inc. (a)		59,734		432,474
Hittite Microwave Corp. (a)		14,843		732,947
Inphi Corp. (a)		10,151		121,406
Integrated Device Technology, Inc. (a)		70,337		384,040
Integrated Silicon Solutions, Inc. (a)		12,738		116,425
IXYS Corp. (a)(b)		11,502		124,567


Common Stocks	Shares		Value
Semiconductors & Components (concluded)
Kopin Corp. (a)		31,808	$	123,415
Lattice Semiconductor Corp. (a)		55,925		332,195
MaxLinear, Inc., Class A (a)		7,258		34,476
Micrel, Inc.		23,977		242,407
Microsemi Corp. (a)		40,967		686,197
Mindspeed Technologies, Inc. (a)		16,376		75,002
MIPS Technologies, Inc. (a)		25,060		111,768
Monolithic Power Systems, Inc. (a)(b)		14,221		214,310
MoSys, Inc. (a)		14,912		62,630
Netlogic Microsystems, Inc. (a)		32,357		1,603,937
Omnivision Technologies, Inc. (a)(b)		27,520		336,707
Pericom Semiconductor Corp. (a)		11,937		90,841
PLX Technology, Inc. (a)		20,997		60,261
Power Integrations, Inc.		13,671		453,330
Rambus, Inc. (a)(b)		46,589		351,747
RF Micro Devices, Inc. (a)		130,895		706,833
Rubicon Technology, Inc. (a)		8,141		76,444
Semtech Corp. (a)(b)		30,919		767,410
Sigma Designs, Inc. (a)		14,969		89,814
Silicon Image, Inc. (a)		37,771		177,524
Spansion, Inc., Class A (a)		23,901		197,900
Standard Microsystems Corp. (a)		10,907		281,073
Supertex, Inc. (a)		4,884		92,210
TriQuint Semiconductor, Inc. (a)		77,968		379,704
Volterra Semiconductor Corp. (a)(b)		11,645		298,228

				12,984,335

Shipping – 0.3%
Baltic Trading Ltd.		7,643		36,304
DHT Holdings, Inc.		32,967		24,396
Eagle Bulk Shipping, Inc. (b)		31,914		30,066
Excel Maritime Carriers Ltd. (a)(b)		23,021		33,381
Frontline, Ltd. (b)		24,303		104,260
Genco Shipping & Trading Ltd. (a)		13,959		94,363
Gulfmark Offshore, Inc., Class A (a)		11,234		471,940
International Shipholding Corp.		2,580		48,220
Knightsbridge Tankers Ltd.		10,484		143,316
Nordic American Tankers Ltd.		22,468		269,391
Overseas Shipholding Group, Inc. (b)		12,618		137,915
Scorpio Tankers, Inc. (a)		14,308		69,966
Ship Finance International Ltd. (b)		21,504		200,847
Teekay Tankers Ltd., Class A		19,801		69,700
Ultrapetrol Bahamas Ltd. (a)(b)		10,220		30,456

				1,764,521

Specialty Retail – 3.5%
1-800-FLOWERS.COM, Inc., Class A (a)		12,405		27,291
Aéropostale, Inc. (a)(b)		38,282		583,800
America’s Car Mart, Inc. (a)		4,050		158,679
ANN, Inc. (a)		24,655		610,951
Asbury Automotive Group, Inc. (a)(b)		13,794		297,399
Ascena Retail Group, Inc. (a)		29,757		884,378
Barnes & Noble, Inc. (b)		13,761		199,259
bebe Stores, Inc.		18,298		152,422
Big 5 Sporting Goods Corp.		10,429		108,879
Blue Nile, Inc. (a)(b)		5,647		230,849
Body Central Corp. (a)		5,569		139,002
Brown Shoe Co., Inc.		19,927		177,350
The Buckle, Inc.		12,770		521,910
Build-A-Bear Workshop, Inc. (a)		6,847		57,926
Cabela’s, Inc., Class A (a)		20,510		521,364
Casual Male Retail Group, Inc. (a)		19,782		67,654

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	67


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Specialty Retail (concluded)
The Cato Corp., Class A		13,131	$	317,770
Charming Shoppes, Inc. (a)		55,178		270,372
The Children’s Place Retail Stores, Inc. (a)		12,352		656,138
Christopher & Banks Corp.		16,329		38,210
Citi Trends, Inc. (a)		6,846		60,108
Coldwater Creek, Inc. (a)		34,136		40,280
Collective Brands, Inc. (a)		29,157		418,986
Conn’s, Inc. (a)		6,889		76,468
Cost Plus, Inc. (a)		9,004		87,789
Destination Maternity Corp.		5,091		85,122
Express, Inc. (a)		26,150		521,431
The Finish Line, Inc., Class A		24,573		473,890
Francesca’s Holdings Corp. (a)		4,707		81,431
Genesco, Inc. (a)		11,219		692,661
Group 1 Automotive, Inc.		10,757		557,213
Haverty Furniture Cos., Inc.		8,913		97,865
hhgregg, Inc. (a)(b)		7,977		115,268
Hibbett Sports, Inc. (a)(b)		12,972		586,075
Hot Topic, Inc.		20,091		132,802
Jos. A. Bank Clothiers, Inc. (a)		13,086		638,073
Lithia Motors, Inc., Class A		10,441		228,240
Lumber Liquidators Holdings, Inc. (a)		10,957		193,501
MarineMax, Inc. (a)		11,075		72,209
Mattress Firm Holding Corp. (a)		2,841		65,883
The Men’s Wearhouse, Inc.		24,398		790,739
Monro Muffler, Inc.		14,430		559,740
New York & Co. (a)		13,808		36,729
Nu Skin Enterprises, Inc., Class A		25,970		1,261,363
Office Depot, Inc. (a)		131,668		283,086
OfficeMax, Inc. (a)(b)		40,715		184,846
Pacific Sunwear of California, Inc. (a)		21,866		37,391
Penske Auto Group, Inc.		21,121		406,579
The Pep Boys – Manny, Moe & Jack		24,952		274,472
Pier 1 Imports, Inc. (a)		46,518		647,996
Regis Corp.		27,366		452,907
Rue21, Inc. (a)		7,101		153,382
Shoe Carnival, Inc. (a)		4,340		111,538
Shutterfly, Inc. (a)(b)		14,089		320,666
Sonic Automotive, Inc.		19,073		282,471
Stage Stores, Inc.		14,775		205,225
Stamps.com, Inc. (a)		5,024		131,277
Stein Mart, Inc. (a)		13,130		89,415
Systemax, Inc. (a)		5,123		84,068
The Talbots, Inc. (a)		32,730		87,062
Teavana Holdings, Inc. (a)(b)		3,323		62,406
Vitamin Shoppe, Inc. (a)(b)		11,737		468,072
The Wet Seal, Inc., Class A (a)(b)		42,954		140,030
Zale Corp. (a)		15,179		57,832
Zumiez, Inc. (a)		10,081		279,849

				18,656,039

Steel – 0.1%
Carbonite, Inc. (a)(b)		3,583		39,772
Handy & Harman Ltd. (a)		2,848		28,195
Olympic Steel, Inc.		4,391		102,398
Shiloh Industries, Inc. (a)		2,458		20,598
TMS International Corp. (a)		6,026		59,537
Universal Stainless & Alloy Products, Inc. (a)		3,373		126,015

				376,515


Common Stocks	Shares		Value
Sugar – 0.0%
Imperial Sugar Co., New Shares		6,145	$	21,938

Synthetic Fibers & Chemicals – 0.0%
Zoltek Cos., Inc. (a)		13,062		99,532

Technology: Miscellaneous – 0.4%
Benchmark Electronics, Inc. (a)(b)		28,743		387,168
CTS Corp.		16,321		150,153
Fabrinet (a)		9,664		132,204
Pendrell Corp. (a)		72,206		184,847
Plexus Corp. (a)(b)		16,842		461,134
Sanmina-SCI Corp. (a)		38,163		355,298
Vocus, Inc. (a)(b)		8,346		184,363

				1,855,167

Telecommunications Equipment – 0.2%
Arris Group, Inc. (a)		58,618		634,247
Brightpoint, Inc. (a)		32,309		347,645
Communications Systems, Inc.		3,259		45,821
OpNext, Inc. (a)		22,764		18,389
Powerwave Technologies, Inc. (a)		15,092		31,391
Symmetricom, Inc. (a)		20,561		110,824
Ubiquiti Networks, Inc. (a)		4,122		75,144

				1,263,461

Textile Products – 0.1%
Interface, Inc., Class A		25,007		288,581
Unifi, Inc. (a)		6,344		48,214

				336,795

Textiles Apparel & Shoes – 1.5%
Carter’s, Inc. (a)		23,272		926,458
Cherokee, Inc.		3,904		45,560
Columbia Sportswear Co.		5,744		267,383
Crocs, Inc. (a)		42,782		631,890
Delta Apparel, Inc. (a)		3,425		65,383
G-III Apparel Group Ltd. (a)		7,831		195,070
Iconix Brand Group, Inc. (a)		34,558		562,950
The Jones Group, Inc.		38,353		404,624
K-Swiss, Inc., Class A (a)(b)		11,855		34,617
Kenneth Cole Productions, Inc., Class A (a)		3,535		37,436
Liz Claiborne, Inc. (a)(b)		44,833		386,909
Maidenform Brands, Inc. (a)		11,075		202,673
Oxford Industries, Inc.		6,077		274,194
Perry Ellis International, Inc. (a)		5,688		80,883
Quiksilver, Inc. (a)		61,538		222,152
R.G. Barry Corp.		3,978		48,054
Skechers U.S.A., Inc., Class A (a)		17,728		214,863
Steven Madden Ltd. (a)(b)		17,927		618,482
True Religion Apparel, Inc. (a)		12,218		422,498
Vera Bradley, Inc. (a)(b)		9,370		302,183
The Warnaco Group, Inc. (a)		19,167		959,117
Weyco Group, Inc.		3,267		80,205
Wolverine World Wide, Inc.		23,499		837,504

				7,821,088

See Notes to Financial Statements.



68	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Tobacco – 0.2%
Alliance One International, Inc. (a)(b)		41,120	$	111,847
Star Scientific, Inc. (a)(b)		51,044		111,276
Universal Corp.		10,967		504,043
Vector Group Ltd.		22,795		404,839

				1,132,005

Toys – 0.1%
Jakks Pacific, Inc.		12,853		181,356
Leapfrog Enterprises, Inc. (a)		19,671		109,961

				291,317

Transportation Miscellaneous – 0.2%
Echo Global Logistics, Inc. (a)		5,322		85,950
HUB Group, Inc., Class A (a)(b)		17,428		565,190
Odyssey Marine Exploration, Inc. (a)(b)		34,442		94,371
Pacer International, Inc. (a)		16,164		86,477
Textainer Group Holdings Ltd.		5,421		157,860
Wesco Aircraft Holdings, Inc. (a)		9,952		139,229

				1,129,077

Truckers – 0.7%
Arkansas Best Corp.		12,031		231,837
Celadon Group, Inc.		9,536		112,620
Covenant Transport Group, Inc., Class A (a)		3,660		10,870
Forward Air Corp.		13,930		446,456
Heartland Express, Inc.		23,892		341,417
Knight Transportation, Inc.		28,925		452,387
Marten Transport Ltd.		7,346		132,155
Old Dominion Freight Line, Inc. (a)(b)		22,472		910,790
Patriot Transportation Holding, Inc. (a)		2,889		62,691
Quality Distribution, Inc. (a)		7,090		79,763
Roadrunner Transportation Systems, Inc. (a)		4,102		57,961
Saia, Inc. (a)		7,443		92,889
Swift Transportation Co. (a)		37,502		309,016
Universal Truckload Services, Inc.		2,617		47,499
Werner Enterprises, Inc.		20,748		500,027

				3,788,378

Utilities: Electrical – 2.2%
Allete, Inc.		15,139		635,535
Atlantic Power Corp. (a)		53,785		769,125
Avista Corp.		27,328		703,696
Black Hills Corp.		18,671		626,972
Central Vermont Public Service Corp.		6,326		222,043
CH Energy Group, Inc.		7,378		430,728
Cleco Corp.		28,897		1,100,976
Dynegy, Inc. (a)		48,545		134,470
El Paso Electric Co.		19,925		690,202
The Empire District Electric Co.		19,884		419,354
Genie Energy Ltd.		7,144		56,652
IDACORP, Inc.		23,481		995,829
MGE Energy, Inc.		10,979		513,488
NorthWestern Corp.		17,208		615,874
Otter Tail Corp.		17,142		377,467
Pike Electric Corp. (a)		7,664		55,104
PNM Resources, Inc.		37,769		688,529
Portland General Electric Co.		35,695		902,726
UIL Holdings Corp.		23,954		847,253
Unisource Energy Corp.		17,369		641,263
Unitil Corp.		5,128		145,533

				11,572,819


Common Stocks	Shares		Value
Utilities: Gas Distributors – 1.2%
Chesapeake Utilities Corp.		4,537	$	196,679
The Laclede Group, Inc.		10,659		431,370
New Jersey Resources Corp.		19,639		966,239
Northwest Natural Gas Co.		12,661		606,841
Piedmont Natural Gas Co.		34,111		1,159,092
South Jersey Industries, Inc.		14,215		807,554
Southwest Gas Corp.		21,751		924,200
WGL Holdings, Inc.		24,310		1,074,988

				6,166,963

Utilities: Miscellaneous – 0.0%
Ormat Technologies, Inc.		8,558		154,301

Utilities: Telecommunications – 0.8%
8x8, Inc. (a)		29,090		92,215
Alaska Communications Systems Group, Inc. (b)		21,152		63,668
Atlantic Tele-Network, Inc.		4,449		173,734
Boingo Wireless, Inc. (a)		2,887		24,828
Cbeyond Communications, Inc. (a)		13,294		106,485
Cincinnati Bell, Inc. (a)(b)		94,239		285,544
Cogent Communications Group, Inc. (a)		21,735		367,104
Consolidated Communications Holdings, Inc.		12,421		236,620
Fairpoint Communications, Inc. (a)(b)		9,874		42,754
General Communication, Inc., Class A (a)(b)		19,656		192,432
Globalstar, Inc. (a)(b)		53,210		28,733
HickoryTech Corp.		6,392		70,823
IDT Corp., Class B		6,633		62,218
inContact, Inc. (a)		14,490		64,191
Iridium Communications, Inc. (a)		20,569		158,587
j2 Global, Inc.		21,748		611,989
Leap Wireless International, Inc. (a)		28,860		268,109
Lumos Networks Corp.		7,122		109,252
Neutral Tandem, Inc. (a)		14,905		159,335
NTELOS Holdings Corp.		7,130		145,309
ORBCOMM, Inc. (a)		16,916		50,579
Premiere Global Services, Inc. (a)		24,806		210,107
Shenandoah Telecom Co.		11,346		118,906
SureWest Communications		6,570		79,037
Towerstream Corp. (a)		21,052		44,209
USA Mobility, Inc.		10,601		147,036
Vonage Holdings Corp. (a)		65,884		161,416

				4,075,220

Utilities: Water – 0.3%
American States Water Co.		8,867		309,458
Artesian Resources Corp., Class A		3,370		63,457
California Water Service Group		19,894		363,264
Connecticut Water Service, Inc.		4,126		111,938
Consolidated Water Co., Inc.		6,937		59,520
Middlesex Water Co.		7,501		139,969
Pennichuck Corp.		2,179		62,821
SJW Corp.		6,783		160,350
York Water Co.		6,152		108,521

				1,379,298

Total Common Stocks – 98.7%				522,151,952

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	69


Schedule of Investments (continued)		Master Small Cap Index Series
		(Percentages shown are based on Net Assets)


Investment Companies	Shares		Value
Asset Management & Custodian – 0.2%
BlackRock Kelso Capital Corp. (d)		34,792	$	283,903
Gladstone Capital Corp.		10,173		77,620
Hercules Technology Growth Capital, Inc.		20,886		197,164
Pennantpark Investment Corp.		21,738		219,336
Prospect Capital Corp.		51,782		481,055

				1,259,078

Total Investment Companies – 0.2%				1,259,078


Other Interests
Machinery: Industrial – 0.0%
Gerber Scientific, Inc. (a)(e)		12,866		129

Total Other Interests – 0.0%				129


Warrants (f)
Oil: Crude Producers – 0.0%
Magnum Hunter Resources Corp. (Expires 10/14/13)		5,700		—

Total Warrants – 0.0%				—

Total Long-Term Investments (Cost – $474,596,580) – 98.9%				523,411,159


Short-Term Securities	Shares		Value
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.10% (d)(g)		7,771,176	$	7,771,176


	Beneficial Interest (000)
BlackRock Liquidity Series, LLC Money Market Series, 0.22% (d)(g)(h)	$	58,202		58,201,803

Total Short-Term Securities (Cost – $65,972,979) – 12.5%				65,972,979

Total Investments (Cost –$540,569,559*) –111.4%				589,384,138
Liabilities in Excess of Other Assets – (11.4)%				(60,330,561	)

Net Assets – 100.0%			$	529,053,577

*	As of December 31, 2011, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	552,096,089

Gross unrealized appreciation	$	84,839,369
Gross unrealized depreciation		(47,551,320	)

Net unrealized appreciation	$	37,288,049

(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 during the year, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares/ Beneficial Interest Held at December 31, 2010		Shares/ Beneficial Interest Purchased			Shares Sold			Shares/ Beneficial Interest Held at December 31, 2011		Value at December 31, 2011		Realized Gain (Loss)			Income
BlackRock Kelso Capital Corp.		20,122		19,019			(4,349	)		34,792	$	283,903	$	(11,522	)	$	28,204
BlackRock Liquidity Funds, TempFund, Institutional Class		7,181,244		589,198	¹		—			7,771,176	$	7,771,176	$	139		$	8,079
BlackRock Liquidity Series, LLC Money Market Series	$	8,152,630	$	50,049,173	¹		—		$	58,201,803	$	58,201,803		—		$	639,806
PennyMac Mortgage Investment Trust		5,329		10,221			(2,392	)		13,158	$	218,686	$	(5,810	)	$	19,341

¹	Represents net shares/beneficial interest purchased.

(e)	Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities.

(f)	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, if any.

(g)	Represents the current yield as of report date.

(h)	Security was purchased with the cash collateral from loaned securities.

See Notes to Financial Statements.



70	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments (concluded)		Master Small Cap Index Series

•

Financial futures contracts purchased as of December 31, 2011 were as follows:

Contracts

Issue

Exchange

Expiration

Notional
Value

Unrealized
Depreciation

125

Russell 2000
EMINI

ICE

Futures

Indices

March

2012

9,235,000

(7,075

)

•

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 rating group indexes, and/or as defined by Series management. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

•

Fair Value Measurements – Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

•

Level 1 – unadjusted 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 and derivative financial instruments)

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and does not necessarily correspond to the Series’ perceived risk of investing in those securities. For information about the Series’ policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the inputs used as of December 31, 2011 in determining the fair valuation of the Series’ investments and derivative financial instruments:


Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks¹	$	522,069,421	$	82,531		—	$	522,151,952
Investment Companies		1,259,078		—		—		1,259,078
Other Interests		—		129		—		129
Short-Term Securities		7,771,176		58,201,803		—		65,972,979

Total	$	531,099,675	$	58,284,463		—	$	589,384,138

¹	See above Schedule of Investments for values in each industry excluding Level 2, Banks: Diversified, within the table.


Valuation Inputs	Level 1			Level 2		Level 3		Total
Derivative Financial Instruments²
Liabilities:
Equity Contracts	$	(7,075	)		—		—	$	(7,075	)

²	Derivative financial instruments are financial futures contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	71


Statement of Assets and Liabilities		Master Small Cap Index Series


December 31, 2011
Assets
Investments at value – unaffiliated (including securities loaned of $56,207,758) (cost – $474,050,799)	$	522,908,570
Investments at value – affiliated (cost – $66,518,760)		66,475,568
Cash pledged as collateral for financial futures contracts		727,000
Investments sold receivable		26,702,011
Dividends receivable		778,995
Securities lending income receivable – affiliated		129,452
Receivable from advisor		34,365
Prepaid expenses		23,514

Total assets		617,779,475

Liabilities
Bank overdraft		79,371
Collateral on securities loaned at value		58,201,803
Margin variation payable		34,832
Other affiliates payable		2,958
Directors’ fees payable		383
Withdrawals payable to investor		30,303,810
Other accrued expenses payable		102,741

Total liabilities		88,725,898

Net Assets	$	529,053,577

Net Assets Consist of
Investors’ capital	$	480,246,059
Net unrealized appreciation/depreciation		48,807,518

Net Assets	$	529,053,577

See Notes to Financial Statements.



72	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Statement of Operations		Master Small Cap Index Series

Year Ended December 31, 2011


Investment Income
Dividends – unaffiliated	$	6,035,188
Foreign taxes withheld		(4,470	)
Dividends – affiliated		55,624
Securities lending – affiliated		639,806

Total income		6,726,148

Expenses
Investment advisory		43,820
Custodian		135,602
Accounting services		115,227
Professional		87,054
Directors		12,588
Printing		1,199
Miscellaneous		19,098

Total expenses		414,588
Less fees waived and/or reimbursed by advisor		(93,339	)

Total expenses after fees waived and/or reimbursed		321,249

Net investment income		6,404,899

Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments – unaffiliated		8,294,002
Investments – affiliated		(17,193	)
Financial futures contracts		(1,236,622	)
Foreign currency transactions		78
Short positions		56,001

		7,096,266

Net change in unrealized appreciation/depreciation on:
Investments		(46,193,675	)
Financial futures contracts		(6,698	)
Foreign currency transactions		14

		(46,200,359	)

Total realized and unrealized loss		(39,104,093	)

Net Decrease in Net Assets Resulting from Operations	$	(32,699,194	)

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	73


Statements of Changes in Net Assets		Master Small Cap Index Series


	Year Ended December 31,
Increase (Decrease) in Net Assets:	2011			2010
Operations
Net investment income	$	6,404,899		$	3,501,724
Net realized gain (loss)		7,096,266			(9,889,317	)
Net change in unrealized appreciation/depreciation		(46,200,359	)		60,704,760

Net increase (decrease) in net assets resulting from operations		(32,699,194	)		54,317,167

Capital Transactions
Proceeds from contributions		449,939,216			226,075,632
Value of withdrawals		(226,358,426	)		(171,857,514	)

Net increase in net assets derived from capital transactions		223,580,790			54,218,118

Net Assets
Total increase in net assets		190,881,596			108,535,285
Beginning of year		338,171,981			229,636,696

End of year	$	529,053,577		$	338,171,981


Financial Highlights		Master Small Cap Index Series


	Year Ended December 31,
	2011			2010			2009			2008			2007
Total Investment Return
Total investment return		(4.30	)%		27.19	%		27.37	%		(33.57	)%		(1.46	)%

Ratios to Average Net Assets
Total expenses		0.09	%		0.12	%		0.09	%		0.08	%		0.06	%

Total expenses after fees waived and/or reimbursed and fees paid indirectly		0.07	%		0.08	%		0.07	%		0.07	%		0.06	%

Net investment income		1.46	%		1.27	%		1.27	%		1.60	%		1.69	%

Supplemental Data
Net assets, end of year (000)	$	529,054		$	338,172		$	229,637		$	344,720		$	630,394

Portfolio turnover		31	%		42	%		43	%		42	%		26	%

See Notes to Financial Statements.



74	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Notes to Financial Statements		Master Small Cap Index Series

1. Organization and Significant Accounting Policies:

Master Small Cap Index Series (the “Series”), a 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 of the Master LLC (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 (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

The following is a summary of significant accounting policies followed by the Series:

Valuation: US GAAP defines fair value as the price the Series would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Series fair values its financial instruments at market value using independent dealers or pricing services under policies approved by the Board. Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System (“NASDAQ”) 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 (long positions) or ask (short positions) price. If no bid or ask 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 registered investment companies are valued at NAV each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

The Series values its investments 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 underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments will follow the parameters of investments by a money market fund that is subject to Rule 2a-7 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 if a price is not available, the investment will be valued in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the investment advisor and/or the sub-advisor seeks to determine the price that the Series might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor and/or sub-advisor deems relevant. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof.

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that the Series either deliver collateral or segregate 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 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 to such transactions 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. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Series is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. 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, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis.

Securities Lending: The Series may lend securities to approved borrowers, such as banks, brokers and other financial institutions. The borrower pledges cash, securities issued or guaranteed by the US government or irrevocable letters of credit issued by a bank 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. Securities lending income, as disclosed in the Statement of



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	75


Notes to Financial Statements (continued)		Master Small Cap Index Series

Operations, represents the income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the securities lending agent. During the term of the loan, the Series earns dividend or interest income on the securities loaned but does not receive interest income on the securities received as collateral. 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. 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 value of the original cash collateral received. During the year ended December 31, 2011, any securities on loan were collateralized by cash.

Income Taxes: The Series is classified as a partnership for federal income tax purposes. As such, each investor in the Series is treated as the owner of its proportionate share of net assets, income, expenses and realized and unrealized gains and losses of the Series. Therefore, no federal income tax provision is required. It is intended that the Series’ assets will be managed so an investor in the Series can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.

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 remains open for each of the four years ended December 31, 2011. The statutes of limitations on the Series’ state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

Recent Accounting Standard: In May 2011, the Financial Accounting Standards Board (the “FASB”) issued amended guidance to improve disclosure about fair value measurements which will require the following disclosures for fair value measurements categorized as Level 3: quantitative information about the unobservable inputs and assumptions used in the fair value measurement, a description of the valuation policies and procedures and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, the amounts and reasons for all transfers in and out of Level 1 and Level 2 will be required to be disclosed. The amended guidance is effective for financial statements for fiscal years beginning after December 15, 2011, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Series’ financial statement disclosures.

In December 2011, the FASB issued guidance that will enhance current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting agreements or similar agreements and will require an entity to disclose both gross and net information about such investments and transactions eligible for offset in the Statement of Assets and Liabilities. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Series’ financial statement disclosures.

Other: Expenses directly related to the Series are charged to the Series. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.

The Series has an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statement of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

2. Derivative Financial Instruments:

The Series engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Series and to economically hedge, or protect, its exposure to certain risks such as equity risk. These contracts may be transacted on an exchange.

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. Counterparty risk related to exchange-traded financial futures contracts is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.

Financial Futures Contracts: The Series purchases or sells 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 agreements between the Series and counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Pursuant to the contract, the Series agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as margin variation and are recorded by the Series as unrealized appreciation or depreciation. When the contract is closed, the Series records a realized gain or loss equal to the difference



76	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Notes to Financial Statements (continued)		Master Small Cap Index Series

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.

Derivative Financial Instruments Categorized by Risk Exposure:

Fair Values of Derivative Financial Instruments as of December 31, 2011


	Liability Derivatives
	Statement of Assets and Liabilities Location			Value
Equity contracts		Net unrealized depreciation	*	$	(7,075	)

*	Includes cumulative appreciation/depreciation on 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 Financial Instruments in the Statement of Operations

Year Ended December 31, 2011


	Net Realized Loss From
	Financial Futures Contracts
Equity contracts	$	(1,236,622	)


	Net Change in Unrealized Appreciation/Depreciation on
	Financial Futures Contracts
Equity contracts	$	(6,698	)

For the year ended December 31, 2011, the average quarterly balances of outstanding derivative financial instruments were as follows:


Financial futures contracts:
Average number of contracts purchased		102
Average notional value of contracts purchased	$	7,600,278

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”) 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 Barclays is not.

The Master LLC, on behalf of the Series, entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the “Manager”), the Series’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of the Series’ portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Series. For such services, the Series pays the Manager a monthly fee at an annual rate of 0.01% of the Series’ average daily net assets.

The Manager 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 0.08% of the average daily value of the Series’ net assets. The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to May 1, 2012 unless approved by the Board, including a majority of the Independent directors. For the year ended December 31, 2011, the Manager waived and/or reimbursed $88,527, which is included in fees waived and/or reimbursed by advisor in the Statement of Operations.

The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Series pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with the Series’ investment in other affiliated investment companies, if any. For the year ended December 31, 2011, the Manager waived $4,812, which is included in fees waived and/or reimbursed by advisor in the Statement of Operations.

The Manager entered into a sub-advisory agreement with BlackRock Investment Management, LLC (“BIM”), an affiliate of the Manager. The Manager pays BIM, for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by the Series to the Manager.

For the year ended December 31, 2011, the Series reimbursed the Manager $5,446 for certain accounting services, which is included in accounting services in the Statement of Operations.

The Master LLC, on behalf of the Series, 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 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 market value of securities on loan and the value of the related collateral, if applicable, are shown in the Statement of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BIM is disclosed in the Schedule of Investments. 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, 2011, BIM received $290,249 in securities lending agent fees related to securities lending activities for the Series.

Certain officers and/or directors of the Master LLC are officers and/or directors of BlackRock or its affiliates.



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	77


Notes to Financial Statements (concluded)		Master Small Cap Index Series

4. Investments:

Purchases and sales of investments, excluding short-term securities, for the year ended December 31, 2011, were $371,105,816 and $139,139,069, 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 expired in November 2011. The Series may borrow under the credit agreement to fund shareholder redemptions. Effective November 2010, the credit agreement had the following terms: a commitment fee of 0.08% 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 London Inter-bank Offered Rate (“LIBOR”) plus 1.00% per annum or (b) the Fed Funds rate plus 1.00% per annum on amounts borrowed. In addition, the Series paid administration and arrangement fees which were allocated to the Series based on its net assets as of October 31, 2010. Effective November 2011, the credit agreement was renewed until November 2012 with the following terms: a commitment fee of 0.065% 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 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Series paid administration and arrangement fees which were allocated to the Series based on its net assets as of October 31, 2011. The Series did not borrow under the credit agreement during the year ended December 31, 2011.

6. Concentration, Market and Credit Risk:

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 issuer credit risk, the Series may be exposed to counter-party credit risk, or the risk that an entity with which the Series has unsettled or open transactions may fail to or be unable to perform on its commitments. The Series manages counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Series to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Series’ exposure to market, issuer and counterparty credit 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.

As of December 31, 2011, the Series invested a significant portion of its assets in securities in the energy sector. Changes in economic conditions affecting the energy 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 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.



78	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Report of Independent Registered Public Accounting Firm		Master Small Cap Index Series

To the Investors of Master Small Cap Index Series and Board of Directors of Quantitative Master Series LLC:

We have audited the accompanying statement of assets and liabilities, including the 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, 2011, 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.

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, 2011, by correspondence with the custodian and brokers. 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, one of the portfolios constituting Quantitative Master Series LLC as of December 31, 2011, 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

Boston, Massachusetts

February 22, 2012



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	79


Officers and Directors		Master Small Cap Index Series


Name, Address and Year of Birth	Position(s) Held with Master LLC	Length of Time Served as a Director²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Directors¹

Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Director	Since 2007	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 107 Portfolios	None

Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Director	Since 2007	President, Fairmount Capital Advisors, Inc. since 1987; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006; Director, Fox Chase Cancer Center from 2004 to 2010.	33 RICs consisting of 107 Portfolios	None

David O. Beim 55 East 52nd Street New York, NY 10055 1940	Director	Since 2007	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 107 Portfolios	None

Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Director	Since 2007	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 107 Portfolios	NSTAR (electric and gas utility)

Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Director	Since 2007	Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and 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; Director, Cybersettle (dispute resolution technology) since 2009.	33 RICs consisting of 107 Portfolios	AIMS Worldwide, Inc. (marketing)

Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Director	Since 2007	Professor, Harvard Business School since 1989; Director, McLean Hospital since 2005; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 107 Portfolios	Newell Rubbermaid, Inc. (manufacturing)

Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Director	Since 2007	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investment) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 107 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)

Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Director	Since 2007	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 107 Portfolios	None

Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Director	Since 2007	President, Founders Investments Ltd. (private investments) since 1999; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, Forward Manage- ment, LLC since 2007; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None



80	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Officers and Directors (continued)		Master Small Cap Index Series


Name, Address and Year of Birth	Position(s) Held with Master LLC	Length of Time Served as a Director²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Directors¹(concluded)

Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Director	Since 2007	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Trustee, The Holy Family Foundation from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	33 RICs consisting of 107 Portfolios	None

Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Director	Since 2007	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 107 Portfolios	None

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 extensions in terms of Directors who turn 72 prior to December 31, 2013.

Date shown is the earliest date a person has served 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’s 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; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A.Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.


Interested Directors³

Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Director	Since 2011	Senior Managing Director, BlackRock and Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds busi- ness since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	159 RICs consisting of 286 Portfolios	None

Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Director	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	159 RICs consisting of 286 Portfolios	None

Mr. Audet is an “interested person,” as defined in the 1940 Act, of the Master LLC based on his position with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Master LLC based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-end funds. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.



MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011	81


Officers and Directors (concluded)		Master Small Cap Index Series


Name, Address and Year of Birth	Position(s) Held with Master LLC	Length of Time Served	Principal Occupation(s) During Past Five Years
Officers¹

John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.

Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009 and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.

Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.

Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2007	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.

Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2007	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.

Ira P. Shapiro 55 East 52nd Street New York, NY 10055 1963	Secretary	Since 2010	Managing Director of BlackRock since 2009; Managing Director and Associate General Counsel of Barclays Global Investors from 2008 to 2009 and Principal thereof from 2004 to 2008.

¹	Officers of the Master LLC serve at the pleasure of the Board.

Further information about the 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	Sub-Advisor	Custodian	Accounting Agent	Independent Registered	Legal Counsel
BlackRock Advisors, LLC	BlackRock Investment	State Street Bank	State Street Bank	Public Accounting Firm	Sidley Austin LLP
Wilmington, DE 19809	Management, LLC	and Trust Company	and Trust Company	Deloitte & Touche LLP	New York, NY 10019
	Princeton, NJ 08540	Boston, MA 02110	Boston, MA 02110	Boston, MA 02116


		Effective September 22, 2011, Richard S. Davis resigned as Director of the Master LLC, and Paul L. Audet became Director of the Master LLC.



82	MASTER SMALL CAP INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments December 31, 2011		Master International Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Australia – 8.4%
AGL Energy Ltd.		40,065	$	586,224
Alumina Ltd.		210,098		240,533
Amcor Ltd.		108,736		800,474
AMP Ltd.		249,426		1,036,516
Asciano Ltd.		87,349		401,399
ASX Ltd.		15,855		494,908
Australia & New Zealand Banking Group Ltd.		233,618		4,893,106
Bendigo and Adelaide Bank Ltd.		33,458		273,843
BGP Holdings Plc		783,183		10
BHP Billiton Ltd.		285,460		10,076,350
Boral Ltd.		64,514		236,893
Brambles Ltd.		131,275		958,473
Caltex Australia Ltd.		12,363		148,451
Campbell Brothers Ltd.		6,048		302,851
CFS Retail Property Trust		167,131		287,782
Coca-Cola Amatil Ltd.		50,978		598,967
Cochlear Ltd.		4,821		306,187
Commonwealth Bank of Australia Ltd.		138,535		6,958,803
Computershare Ltd.		39,834		325,603
Crown Ltd.		42,229		348,335
CSL Ltd.		46,592		1,519,030
Dexus Property Group		436,867		370,228
Echo Entertainment Group Ltd. (a)		59,379		217,731
Fairfax Media Ltd.		210,117		154,789
Fortescue Metals Group Ltd.		109,781		480,238
Goodman Group		628,123		365,210
GPT Group		157,850		494,745
Harvey Norman Holdings Ltd.		51,396		95,945
Iluka Resources Ltd.		37,489		593,789
Incitec Pivot Ltd.		146,234		464,233
Insurance Australia Group Ltd.		187,815		572,167
Leighton Holdings Ltd.		13,328		259,089
Lend Lease Group		49,505		362,524
Lynas Corp. Ltd. (a)		159,398		170,316
Macquarie Group Ltd.		30,375		737,598
Metcash Ltd.		68,916		284,154
Mirvac Group		299,239		360,533
National Australia Bank Ltd.		195,601		4,659,516
Newcrest Mining Ltd.		67,941		2,070,508
OneSteel Ltd.		112,768		80,627
Orica Ltd.		32,729		809,848
Origin Energy Ltd.		94,512		1,288,822
OZ Minerals Ltd.		28,782		294,419
Qantas Airways Ltd. (a)		101,794		151,520
QBE Insurance Group Ltd.		96,970		1,283,339
QR National Ltd.		153,091		534,787
Ramsay Health Care Ltd.		11,800		232,249
Rio Tinto Ltd.		38,705		2,386,130
Santos Ltd.		83,636		1,046,668


Common Stocks	Shares		Value
Australia (concluded)
Sims Metal Management Ltd.		15,235	$	197,333
Sonic Healthcare Ltd.		33,723		388,700
SP AusNet		130,044		124,795
Stockland		211,155		689,799
Suncorp-Metway Ltd.		114,114		975,347
Sydney Airport		31,261		84,970
Tabcorp Holdings Ltd.		59,733		166,387
Tatts Group Ltd.		120,798		301,115
Telstra Corp. Ltd.		386,497		1,314,485
Toll Holdings Ltd.		60,262		259,475
Transurban Group		117,047		672,255
Wesfarmers Ltd., Ordinary Shares		89,346		2,691,437
Westfield Group		194,736		1,553,679
Westfield Retail Trust		257,040		655,066
Westpac Banking Corp.		269,295		5,497,451
Woodside Petroleum Ltd.		56,346		1,763,803
Woolworths Ltd.		108,073		2,774,056
WorleyParsons Ltd.		17,415		456,032

				72,182,645

Austria – 0.3%
Erste Bank der Oesterreichischen Sparkassen AG		17,307		303,814
Immoeast AG NPV		30,711		—
IMMOFINANZ Immobilien Anlagen AG (a)		83,913		251,503
OMV AG		14,801		448,352
Raiffeisen Bank International AG		4,394		113,741
Telekom Austria AG		30,477		364,607
Verbund AG		6,339		169,982
Vienna Insurance Group		3,349		132,275
Voestalpine AG		9,814		274,967

				2,059,241

Belgium – 0.9%
Ageas		192,525		297,438
Anheuser-Busch InBev NV		71,338		4,353,990
Bekaert SA		3,397		108,480
Belgacom SA		13,656		427,290
Colruyt SA		6,575		248,396
Delhaize Group		9,128		511,652
Groupe Bruxelles Lambert SA		7,252		482,436
KBC Bancassurance Holding		13,906		173,877
Mobistar SA		2,628		137,190
Solvay SA		5,376		441,344
UCB SA		9,154		384,039
Umicore SA		10,323		423,986

				7,990,118

Bermuda – 0.1%
Seadrill Ltd.		29,134		971,591

Portfolio Abbreviations

To simplify the listings of portfolio holdings in the Schedule of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:

AUD

Australian Dollar

GBP

British Pound

NOK

Norwegian Krone

CHF

Swiss Franc

HKD

Hong Kong Dollar

SEK

Swedish Krona

DKK

Danish Krone

ILS

Israeli New Shekel

SGD

Singapore Dollar

EUR

Euro

JPY

Japanese Yen

USD

US Dollar

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011	83


Schedule of Investments (continued)		Master International Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
China – 0.0%
Foxconn International Holdings Ltd. (a)		205,313	$	132,032
Denmark – 1.0%
A.P. Moller – Maersk A/S, Class A		47		291,930
A.P. Moller – Maersk A/S, Class B		117		769,587
Carlsberg A/S, Class B		9,589		675,195
Coloplast A/S, Class B		2,006		287,859
Danske Bank A/S (a)		58,674		741,403
DSV A/S		18,614		332,632
Novo-Nordisk A/S, Class B		37,789		4,341,321
Novozymes A/S, Class B		20,200		622,321
TDC A/S		34,011		272,373
Tryg A/S		2,275		126,021
Vestas Wind Systems A/S (a)		17,972		193,291
William Demant Holding A/S (a)		2,194		181,976

				8,835,909

Finland – 0.8%
Elisa Corp.		13,010		270,881
Fortum Oyj		39,929		850,410
Kesko Oyj, Class B		5,924		198,586
Kone Oyj, Class B		13,791		713,965
Metso Oyj		11,458		423,179
Neste Oil Oyj		12,128		121,975
Nokia Oyj		332,464		1,602,749
Nokian Renkaat Oyj		9,981		320,463
Orion Oyj		8,394		163,098
Pohjola Bank Plc		11,663		113,012
Sampo Oyj		37,251		921,444
Sanoma Oyj		6,877		78,706
Stora Enso Oyj, Class R		53,049		315,954
UPM-Kymmene Oyj		46,882		513,764
Wartsila Oyj		15,026		432,189

				7,040,375

France – 8.5%
Accor SA		12,527		315,699
Aeroports de Paris		3,212		219,720
Air Liquide		25,205		3,112,254
Alcatel-Lucent SA (a)		208,406		323,867
Alstom SA		18,612		562,266
Arkema SA		5,002		351,484
Atos Origin SA		4,573		199,791
AXA SA		154,552		1,997,772
BNP Paribas SA		85,842		3,342,638
Bouygues SA		16,962		533,467
Bureau Veritas SA		4,928		357,947
Cap Gemini SA		13,329		414,401
Carrefour SA		51,233		1,165,642
Casino Guichard Perrachon SA		4,970		417,926
Christian Dior SA		4,874		575,316
Cie Générale de Géophysique – Veritas (a)		12,556		291,450
Cie Générale des Etablissements Michelin, Class B		15,964		940,619
CNP Assurances		13,166		162,980
Compagnie de Saint-Gobain SA		35,649		1,362,709
Credit Agricole SA		89,561		501,790
Danone SA		51,882		3,255,721
Dassault Systèmes SA		5,426		433,443
Edenred		14,253		349,626
EDP Renoveveis SA		21,601		524,145
Eiffage SA		3,633		87,532
Essilor International SA		17,844		1,257,852


Common Stocks	Shares		Value
France (concluded)
Eurazeo		2,935	$	104,036
Eutelsat Communications SA		8,916		347,286
Foncière Des Regions		2,385		152,587
France Telecom SA		164,701		2,577,843
GDF Suez		109,997		2,988,963
Gecina SA		1,890		158,393
Groupe Eurotunnel SA		48,702		330,409
ICADE		2,075		162,599
Iliad SA		1,651		203,209
Imerys SA		3,156		144,753
JC Decaux SA (a)		5,485		125,935
Klepierre		9,565		271,772
L’Oreal SA		21,351		2,223,700
Lafarge SA		18,050		631,880
Lagardere S.C.A.		10,377		273,199
Legrand Promesses		20,060		642,535
LVMH Moët Hennessy Louis Vuitton SA		22,576		3,180,160
Natixis		82,834		206,987
Neopost SA		2,895		194,685
Pernod-Ricard SA		17,626		1,631,444
Peugeot SA		14,075		219,265
Pinault-Printemps-Redoute		6,750		963,490
Publicis Groupe		12,893		591,714
Renault SA		16,704		576,845
Safran SA		15,031		449,518
Sanofi-Aventis		101,865		7,446,097
Schneider Electric SA		43,477		2,273,036
Scor SE		15,483		361,019
Société BIC SA		2,487		220,019
Société Générale SA		58,542		1,292,350
Société Télévision Française 1		9,864		95,951
Sodexo Alliance SA		8,521		609,864
Suez Environnement Co.		25,071		288,039
Technip SA		8,685		814,218
Thales SA		9,102		286,501
Total SA		188,677		9,627,782
Unibail-Rodamco SE		8,160		1,460,421
Vallourec SA		10,022		647,390
Veolia Environnement SA		31,681		347,106
Vinci SA		40,073		1,744,316
Vivendi SA		110,760		2,417,837
Wendel SA		2,796		185,601

				72,528,811

Germany – 7.7%
Adidas-Salomon AG		18,565		1,206,225
Allianz AG, Registered Shares		40,385		3,856,934
Axel Springer AG		3,609		154,873
BASF SE		81,626		5,682,672
Bayer AG, Registered Shares		73,485		4,693,002
Bayerische Motoren Werke AG		29,403		1,965,535
Bayerische Motoren Werke AG, Preference Shares		4,787		226,011
Beiersdorf AG		9,069		513,931
Brenntag AG		3,030		281,766
Celesio AG		7,348		116,230
Commerzbank AG (a)		315,405		530,858
Continental AG (a)		7,170		445,246
Daimler AG		80,480		3,525,710
Deutsche Bank AG, Registered Shares		82,579		3,129,819
Deutsche Boerse AG (a)		17,292		905,025
Deutsche Lufthansa AG, Registered Shares		19,985		237,713
Deutsche Post AG		75,089		1,154,436
Deutsche Telekom AG, Registered Shares		249,523		2,862,248

See Notes to Financial Statements.



84	MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments (continued)		Master International Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Germany (concluded)
E.ON AG		160,005	$	3,448,131
Fraport AG		3,268		160,607
Fresenius Medical Care AG & Co.		18,534		1,258,906
Fresenius SE & Co. KGaA		10,085		932,579
GEA Group AG		15,650		441,814
Hannover Rueckversicherung AG, Registered Shares		5,466		270,844
HeidelbergCement AG		12,415		525,831
Henkel KGaA		11,649		563,587
Henkel KGaA, Preference Shares		15,800		910,841
Hochtief AG		3,923		226,514
Infineon Technologies AG		96,306		723,307
K+S AG		15,264		688,433
Kabel Deutschland Holding AG (a)		7,926		401,812
Lanxess AG		7,556		390,242
Linde AG		15,166		2,253,855
MAN AG		5,734		509,317
Merck KGaA		5,792		576,791
Metro AG		11,620		423,702
Muenchener Rueckversicherungs AG,
Registered Shares		15,926		1,951,615
Porsche Automobil Holding SE, Preference Shares		13,551		723,421
ProSieben SAT.1 Media AG, Preference Shares		7,140		130,094
RWE AG		43,444		1,525,031
RWE AG, Preference Shares		3,320		109,224
Salzgitter AG		3,611		180,107
SAP AG		81,762		4,324,527
Siemens AG		73,127		6,996,486
Suedzucker AG		5,874		187,121
ThyssenKrupp AG		34,723		796,641
United Internet AG		9,819		175,026
Volkswagen AG		2,694		360,660
Volkswagen AG, Preference Shares		12,843		1,920,174
Wacker Chemie AG		1,481		118,962

				65,694,436

Greece – 0.1%
Coca-Cola Hellenic Bottling Co. SA (a)		16,733		282,620
Hellenic Telecommunications Organization SA		21,160		76,145
National Bank of Greece SA (a)		87,714		181,323
OPAP SA		19,756		173,859

				713,947

Hong Kong – 2.8%
AIA Group Ltd.		748,800		2,330,955
ASM Pacific Technology Ltd.		18,004		201,649
Bank of East Asia Ltd.		139,932		528,002
BOC Hong Kong Holdings Ltd.		332,400		784,347
Cathay Pacific Airways Ltd.		109,263		186,819
Cheung Kong Holdings Ltd.		123,835		1,468,978
Cheung Kong Infrastructure Holdings Ltd.		41,500		242,644
CLP Holdings Ltd.		171,187		1,454,382
First Pacific Co. Ltd.		190,000		197,142
Galaxy Entertainment Group Ltd. (a)		106,000		192,686
Hang Lung Group Ltd.		78,000		426,869
Hang Lung Properties Ltd.		218,000		618,811
Hang Seng Bank Ltd.		67,853		803,746
Henderson Land Development Co. Ltd.		84,491		418,547
HKT Trust HKT Ltd. (a)		369,000		211,900
The Hong Kong & China Gas Ltd.		420,450		973,498
Hong Kong Exchanges and Clearing Ltd.		91,027		1,448,420
Hopewell Holdings Ltd.		53,349		136,272


Common Stocks	Shares		Value
Hong Kong (concluded)
Hutchison Whampoa Ltd.		190,176	$	1,586,988
Hysan Development Co. Ltd.		54,791		179,416
Kerry Properties Ltd.		63,000		208,174
Li & Fung Ltd.		497,980		917,588
Lifestyle International Holdings Ltd.		52,466		115,483
The Link Real Estate Investment Trust		201,414		740,739
MTR Corp.		127,000		410,439
New World Development Ltd.		325,226		261,136
NWS Holdings Ltd.		115,500		169,824
Orient Overseas International Ltd.		18,057		104,970
PCCW Ltd.		369,000		126,615
Power Assets Holdings Ltd.		123,500		913,162
Sands China Ltd. (a)		217,000		608,812
Shangri-La Asia Ltd.		129,905		223,773
Sino Land Co. Ltd.		265,263		376,946
SJM Holdings Ltd.		147,000		238,545
Sun Hung Kai Properties Ltd.		126,324		1,578,660
Swire Pacific Ltd. Class A		63,077		759,986
Wharf Holdings Ltd.		134,357		605,638
Wheelock & Co. Ltd.		81,000		200,289
Wing Hang Bank Ltd.		17,000		139,082
Wynn Macau Ltd.		135,200		337,508
Yue Yuen Industrial Holdings Ltd.		64,285		202,860

				23,632,300

Ireland – 0.3%
Anglo Irish Bank Corp. Plc		62,641		1
CRH Plc		63,578		1,258,652
Elan Corp. Plc (a)		44,805		621,108
James Hardie Industries SE		39,740		277,052
Kerry Group Plc		12,658		463,371
Ryanair Holdings Plc (a)		29,444		137,725

				2,757,909

Israel – 0.7%
Bank Hapoalim Ltd.		96,242		314,711
Bank Leumi Le-Israel BM		105,341		302,507
Bezeq Israeli Telecommunication Corp. Ltd.		157,237		288,532
Cellcom Israel Ltd.		4,972		83,411
Delek Group Ltd.		395		74,522
Elbit Systems Ltd.		2,059		84,779
Israel Chemicals Ltd.		40,108		417,701
The Israel Corp. Ltd.		197		123,379
Israel Discount Bank Ltd. (a)		75,065		100,754
Mizrahi Tefahot Bank Ltd.		10,047		79,780
Nice Systems Ltd. (a)		5,144		176,796
Partner Communications Co. Ltd.		7,239		64,287
Teva Pharmaceutical Industries Ltd.		83,618		3,375,413

				5,486,572

Italy – 2.1%
A2A SpA		94,579		88,632
Assicurazioni Generali SpA		103,655		1,555,999
Atlantia SpA		28,601		456,512
Autogrill SpA		9,990		97,112
Banca Carige SpA		58,018		110,835
Banca Monte dei Paschi di Siena SpA		436,913		141,895
Banco Popolare SpA		151,959		196,041
Enel Green Power SpA		154,583		322,143
Enel SpA		584,629		2,371,683
Eni SpA		213,549		4,402,875
Exor SpA		5,439		109,043
Fiat Industrial SpA (a)		68,731		585,548

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011	85


Schedule of Investments (continued)		Master International Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Italy (concluded)
Fiat SpA		69,147	$	315,593
Finmeccanica SpA		37,075		136,513
Intesa Sanpaolo SpA		894,400		1,489,637
Intesa Sanpaolo SpA, Non-Convertible
Savings Shares		90,027		111,670
Luxottica Group SpA		10,640		297,518
Mediaset SpA		61,786		170,427
Mediobanca SpA		47,138		270,559
Pirelli & C SpA		22,125		185,469
Prysmian SpA		17,540		216,720
Saipem SpA		23,292		985,339
Snam Rete Gas SpA		143,783		633,297
Telecom Italia SpA		832,746		890,088
Telecom Italia SpA (Non-Convertible
Savings Shares)		547,064		489,517
Terna SpA		109,934		369,967
UniCredit SpA		123,309		1,017,069
Unione di Banche Italiane ScpA		73,098		298,364

				18,316,065

Japan – 21.2%
ABC-Mart, Inc.		2,200		83,573
Advantest Corp.		12,800		121,561
Aeon Co. Ltd.		53,800		736,961
Aeon Credit Service Co. Ltd.		7,100		111,875
Aeon Mall Co. Ltd.		6,800		144,260
Air Water, Inc.		12,000		152,304
Aisin Seiki Co. Ltd.		17,300		490,284
Ajinomoto Co., Inc.		59,000		708,268
Alfresa Holdings Corp.		3,700		155,737
All Nippon Airways Co. Ltd.		75,000		209,566
Amada Co. Ltd.		33,000		208,875
Aozora Bank Ltd.		53,000		145,827
Asahi Breweries Ltd.		34,300		752,435
Asahi Glass Co. Ltd.		90,100		753,226
Asahi Kasei Corp.		113,000		680,995
Asics Corp.		13,000		146,122
Astellas Pharma, Inc.		39,500		1,603,988
The Bank of Kyoto Ltd.		29,000		249,333
The Bank of Yokohama Ltd.		106,000		500,107
Benesse Holdings, Inc.		5,900		285,217
Bridgestone Corp.		57,800		1,309,065
Brother Industries Ltd.		21,300		260,701
Canon, Inc.		100,800		4,435,936
Casio Computer Co. Ltd.		20,100		121,629
Central Japan Railway Co.		134		1,130,863
The Chiba Bank Ltd.		68,000		437,195
Chiyoda Corp.		12,000		121,835
Chubu Electric Power Co., Inc.		60,200		1,126,518
Chugai Pharmaceutical Co. Ltd.		19,700		324,724
The Chugoku Bank Ltd.		16,000		222,639
The Chugoku Electric Power Co., Inc.		26,300		460,822
Citizen Holdings Co. Ltd.		23,400		135,619
Coca-Cola West Co. Ltd.		5,600		97,051
Cosmo Oil Co. Ltd.		47,000		131,192
Credit Saison Co. Ltd.		13,500		269,609
Dai Nippon Printing Co. Ltd.		50,000		479,990
The Dai-ichi Life Insurance Co.		798		783,394
Daicel Chemical Industries Ltd.		26,000		157,927
Daido Steel Co. Ltd.		25,000		156,072


Common Stocks	Shares		Value
Japan (continued)
Daihatsu Motor Co. Ltd.		17,000	$	302,308
Daiichi Sankyo Co. Ltd.		59,800		1,184,347
Daikin Industries Ltd.		21,000		573,239
Dainippon Sumitomo Pharma Co. Ltd.		12,800		145,676
Daito Trust Construction Co. Ltd.		6,300		539,448
Daiwa House Industry Co. Ltd.		41,000		490,141
Daiwa Securities Group Inc.		150,000		466,403
Dena Co. Ltd.		8,200		245,643
Denki Kagaku Kogyo KK		41,000		151,087
Denso Corp.		43,200		1,186,740
Dentsu Inc.		16,213		493,222
East Japan Railway Co.		30,249		1,928,021
Eisai Co. Ltd.		22,400		926,489
Electric Power Development Co.		10,600		281,879
Elpida Memory, Inc. (a)		22,200		102,710
FamilyMart Co. Ltd.		5,600		226,144
Fanuc Ltd.		17,100		2,608,302
Fast Retailing Co. Ltd.		4,600		836,762
Fuji Electric Co. Ltd.		48,800		133,630
Fuji Film Holdings Corp.		40,600		957,783
Fuji Heavy Industries Ltd.		53,000		317,884
Fujitsu Ltd.		163,000		845,146
Fukuoka Financial Group, Inc.		70,000		293,289
Furukawa Electric Co. Ltd.		54,000		123,896
Gree, Inc.		8,100		278,448
GS Yuasa Corp.		32,000		171,396
The Gunma Bank Ltd.		35,000		191,894
The Hachijuni Bank Ltd.		36,000		205,085
Hakuhodo DY Holdings, Inc.		2,070		118,681
Hamamatsu Photonics KK		6,100		212,678
Hino Motors Ltd.		23,000		139,261
Hirose Electric Co. Ltd.		2,800		244,906
The Hiroshima Bank Ltd.		45,000		208,721
Hisamitsu Pharmaceutical Co., Inc.		5,700		241,600
Hitachi Chemical Co. Ltd.		9,400		164,545
Hitachi Construction Machinery Co. Ltd.		9,800		164,392
Hitachi High-Technologies Corp.		5,600		121,312
Hitachi Ltd.		402,000		2,091,191
Hitachi Metals Ltd.		13,000		141,077
Hokkaido Electric Power Co., Inc.		16,100		228,859
Hokuhoku Financial Group, Inc.		113,100		219,914
Hokuriku Electric Power Co.		14,900		278,267
Honda Motor Co. Ltd.		144,900		4,413,782
Hoya Corp.		38,600		829,866
Ibiden Co. Ltd.		11,000		216,569
Idemitsu Kosan Co. Ltd.		2,000		206,114
IHI Corp.		120,000		290,936
Inpex Corp.		195		1,227,763
Isetan Mitsukoshi Holdings Ltd.		33,905		354,211
Isuzu Motors Ltd.		105,000		483,371
ITOCHU Corp.		133,700		1,355,645
Itochu Techno-Solutions Corp.		2,600		116,625
The Iyo Bank Ltd.		22,000		216,788
J. Front Retailing Co. Ltd.		44,600		214,998
Japan Petroleum Exploration Co.		2,400		93,654
Japan Prime Realty Investment Corp.		58		136,300
Japan Real Estate Investment Corp.		42		326,997
Japan Retail Fund Investment Corp.		171		252,954
The Japan Steel Works Ltd.		28,000		194,231
Japan Tobacco, Inc.		400		1,881,004
JFE Holdings, Inc.		40,900		739,471
JGC Corp.		18,000		432,156

See Notes to Financial Statements.



86	MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments (continued)		Master International Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Japan (continued)
The Joyo Bank Ltd.		59,000	$	260,374
JS Group Corp.		23,800		456,148
JSR Corp.		16,000		294,883
JTEKT Corp.		19,900		194,487
Jupiter Telecommunications Co. Ltd.		148		149,807
JX Holdings, Inc.		199,360		1,203,057
Kajima Corp.		76,800		235,699
Kamigumi Co. Ltd.		23,000		198,524
Kaneka Corp.		25,000		132,665
The Kansai Electric Power Co., Inc.		66,700		1,024,589
Kansai Paint Co. Ltd.		20,000		178,132
Kao Corp.		46,700		1,274,256
Kawasaki Heavy Industries Ltd.		125,000		310,109
Kawasaki Kisen Kaisha Ltd.		65,000		117,043
KDDI Corp.		259		1,663,375
Keikyu Corp.		42,000		377,196
Keio Electric Railway Co. Ltd.		50,000		352,661
Keisei Electric Railway Co. Ltd.		24,000		176,456
Keyence Corp.		3,720		896,667
Kikkoman Corp.		12,000		137,645
Kinden Corp.		12,000		101,161
Kintetsu Corp.		146,000		570,266
Kirin Holdings Co. Ltd.		71,000		862,702
Kobe Steel Ltd.		225,000		347,742
Koito Manufacturing Co. Ltd.		8,000		111,820
Komatsu Ltd.		84,300		1,965,698
Konami Corp.		8,200		245,211
Konica Minolta Holdings, Inc.		42,000		312,303
Kubota Corp.		102,000		853,591
Kuraray Co. Ltd.		30,700		435,684
Kurita Water Industries Ltd.		9,700		251,791
Kyocera Corp.		13,600		1,090,633
Kyowa Hakko Kirin Co. Ltd.		22,000		268,549
Kyushu Electric Power Co., Inc.		36,200		518,558
Lawson, Inc.		5,400		336,449
Mabuchi Motor Co. Ltd.		2,100		87,220
Makita Corp.		10,100		325,840
Marubeni Corp.		144,000		876,497
Marui Group Co. Ltd.		17,900		139,151
Maruichi Steel Tube Ltd.		4,500		100,073
Mazda Motor Corp. (a)		138,400		243,346
McDonald’s Holdings Co. Japan Ltd.		6,200		166,947
Medipal Holdings Corp.		13,900		145,125
Meiji Holdings Co. Ltd.		6,193		256,486
Miraca Holdings, Inc.		5,100		203,324
Mitsubishi Chemical Holdings Corp.		122,000		668,612
Mitsubishi Corp.		124,900		2,517,329
Mitsubishi Electric Corp.		172,000		1,648,420
Mitsubishi Estate Co. Ltd.		112,000		1,670,078
Mitsubishi Gas Chemical Co., Inc.		35,000		194,076
Mitsubishi Heavy Industries Ltd.		270,200		1,147,594
Mitsubishi Logistics Corp.		11,000		121,819
Mitsubishi Materials Corp.		101,000		273,066
Mitsubishi Motors Corp. (a)		346,000		407,705
Mitsubishi Tanabe Pharma Corp.		20,400		322,281
Mitsubishi UFJ Financial Group, Inc.		1,132,074		4,792,612
Mitsubishi UFJ Lease & Finance Co. Ltd.		5,260		208,192
Mitsui & Co. Ltd.		154,400		2,393,083
Mitsui Chemicals, Inc.		67,000		203,433
Mitsui Fudosan Co. Ltd.		74,000		1,079,046
Mitsui OSK Lines Ltd.		99,000		381,731


Common Stocks	Shares		Value
Japan (continued)
Mizuho Financial Group, Inc.		2,026,164	$	2,743,647
MS&AD Insurance Group Holdings, Inc.		50,570		933,451
Murata Manufacturing Co. Ltd.		18,000		921,811
Nabtesco Corp.		8,800		160,075
Namco Bandai Holdings, Inc.		17,300		245,531
NEC Corp. (a)		233,000		471,567
NGK Insulators Ltd.		23,000		272,309
NGK Spark Plug Co. Ltd.		12,000		148,307
NHK Spring Co. Ltd.		14,000		123,736
Nidec Corp.		9,700		842,211
Nikon Corp.		30,200		669,248
Nintendo Co. Ltd.		8,800		1,208,171
Nippon Building Fund, Inc.		50		409,196
Nippon Electric Glass Co.		33,500		329,782
Nippon Express Co. Ltd.		77,000		299,325
Nippon Meat Packers, Inc.		15,000		185,870
Nippon Paper Group, Inc.		8,894		194,205
Nippon Sheet Glass Co. Ltd.		77,000		143,503
Nippon Steel Corp.		453,000		1,126,873
Nippon Telegraph & Telephone Corp.		42,476		2,162,449
Nippon Yusen KK		135,000		344,099
The Nishi-Nippon City Bank Ltd.		62,000		177,842
Nissan Motor Co. Ltd.		220,800		1,977,285
Nisshin Seifun Group, Inc.		16,500		199,747
Nisshin Steel Co. Ltd.		62,000		94,863
Nissin Foods Holdings Co. Ltd.		5,200		203,880
Nitori Holdings Co. Ltd.		3,350		314,122
Nitto Denko Corp.		14,810		526,798
NKSJ Holdings, Inc.		33,475		654,838
NOK Corp.		9,700		165,473
Nomura Holdings, Inc.		322,100		969,757
Nomura Real Estate Holdings, Inc.		8,300		123,158
Nomura Real Estate Office Fund, Inc.		25		128,300
Nomura Research Institute Ltd.		9,000		203,037
NSK Ltd.		39,000		251,911
NTN Corp.		41,000		164,459
NTT Data Corp.		115		366,183
NTT DoCoMo, Inc.		1,357		2,491,479
NTT Urban Development Corp.		115		78,206
Obayashi Corp.		58,000		257,901
Odakyu Electric Railway Co. Ltd.		56,000		541,384
OJI Paper Co. Ltd.		72,000		369,655
Olympus Corp.		18,800		247,124
Omron Corp.		17,800		357,299
Ono Pharmaceutical Co. Ltd.		7,500		420,625
Oracle Corp. Japan		3,200		105,779
Oriental Land Co. Ltd.		4,500		475,085
ORIX Corp.		9,140		753,513
Osaka Gas Co. Ltd.		169,000		667,701
Otsuka Corp.		1,300		89,462
Otsuka Holdings Co. Ltd.		22,600		634,287
Panasonic Corp.		196,000		1,654,175
Rakuten, Inc. (a)		650		699,303
Resona Holdings, Inc.		169,056		744,186
Ricoh Co. Ltd.		60,000		521,902
Rinnai Corp.		3,000		214,814
Rohm Co. Ltd.		8,600		399,908
Sankyo Co. Ltd.		4,900		247,730
Sanrio Co. Ltd.		3,900		200,035
Santen Pharmaceutical Co. Ltd.		6,800		280,822
SBI Holdings, Inc.		1,838		134,184
Secom Co. Ltd.		18,700		859,905

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011	87


Schedule of Investments (continued)		Master International Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Japan (continued)
Sega Sammy Holdings, Inc.		18,832	$	406,834
Seiko Epson Corp.		11,900		157,288
Sekisui Chemical Co. Ltd.		36,000		296,553
Sekisui House Ltd.		52,000		462,092
Seven & I Holdings Co. Ltd.		67,000		1,867,270
Seven Bank Ltd.		44,000		86,105
Sharp Corp.		89,000		775,818
Shikoku Electric Power Co. Inc.		16,200		464,744
Shimadzu Corp.		19,000		160,228
Shimamura Co. Ltd.		1,900		194,132
Shimano, Inc.		6,300		306,633
Shimizu Corp.		53,000		222,755
Shin-Etsu Chemical Co. Ltd.		36,500		1,792,872
Shinsei Bank Ltd.		116,000		119,940
Shionogi & Co. Ltd.		26,300		337,390
Shiseido Co. Ltd.		32,200		591,280
The Shizuoka Bank Ltd.		52,000		547,054
Showa Denko KK		125,000		252,277
Showa Shell Sekiyu KK		17,300		116,320
SMC Corp.		4,700		756,163
Softbank Corp.		78,800		2,314,203
Sojitz Corp.		113,700		175,606
Sony Corp.		89,200		1,608,363
Sony Financial Holdings, Inc.		15,500		228,596
Square Enix Holdings Co. Ltd.		5,300		103,872
Stanley Electric Co. Ltd.		13,200		193,441
Sumco Corp. (a)		10,600		78,030
Sumitomo Chemical Co. Ltd.		142,000		515,575
Sumitomo Corp.		99,900		1,350,362
Sumitomo Electric Industries Ltd.		66,900		724,305
Sumitomo Heavy Industries Ltd.		49,000		285,978
Sumitomo Metal Industries Ltd.		302,000		547,696
Sumitomo Metal Mining Co. Ltd.		47,000		601,703
Sumitomo Mitsui Financial Group, Inc.		119,350		3,309,907
Sumitomo Mitsui Trust Holdings, Inc.		276,820		811,785
Sumitomo Realty & Development Co. Ltd.		32,000		559,111
Sumitomo Rubber Industries Ltd.		15,800		189,731
Suruga Bank Ltd.		17,000		151,732
Suzuken Co. Ltd.		6,400		177,216
Suzuki Motor Corp.		30,100		619,761
Sysmex Corp.		6,700		217,830
T&D Holdings, Inc.		51,900		483,237
Taisei Corp.		93,000		235,741
Taisho Pharmaceutical Holdings Co. Ltd. (a)		3,200		246,953
Taiyo Nippon Sanso Corp.		21,000		146,038
Takashimaya Co. Ltd.		21,000		151,257
Takeda Pharmaceutical Co. Ltd.		70,200		3,083,568
TDK Corp.		10,600		467,495
Teijin Ltd.		85,000		260,782
Terumo Corp.		14,700		691,040
THK Co. Ltd.		10,900		214,705
Tobu Railway Co. Ltd.		88,000		449,014
Toho Co. Ltd.		9,900		176,299
Toho Gas Co. Ltd.		38,000		241,959
Tohoku Electric Power Co. Inc.		40,900		392,946
Tokio Marine Holdings, Inc.		64,300		1,423,848
The Tokyo Electric Power Co., Inc. (a)		130,000		311,979
Tokyo Electron Ltd.		15,000		760,014
Tokyo Gas Co. Ltd.		219,000		1,009,276
Tokyu Corp.		98,000		482,609
Tokyu Land Corp.		38,000		143,398


Common Stocks	Shares		Value
Japan (concluded)
TonenGeneral Sekiyu KK		26,000	$	283,498
Toppan Printing Co. Ltd.		50,000		367,079
Toray Industries, Inc.		130,700		935,110
Toshiba Corp.		358,000		1,461,011
Tosoh Corp.		45,000		119,582
Toto Ltd.		27,000		208,414
Toyo Seikan Kaisha Ltd.		13,800		187,807
Toyo Suisan Kaisha Ltd.		8,000		193,598
Toyoda Gosei Co. Ltd.		5,700		90,271
Toyota Boshoku Corp.		5,100		53,092
Toyota Industries Corp.		15,400		416,658
Toyota Motor Corp.		245,200		8,108,054
Toyota Tsusho Corp.		19,000		334,910
Trend Micro, Inc. (a)		8,800		262,412
Tsumura & Co.		5,600		165,090
Ube Industries Ltd.		84,000		229,597
Uni-charm Corp.		10,200		502,903
Ushio, Inc.		9,900		142,290
USS Co. Ltd.		1,940		175,334
West Japan Railway Co.		14,900		647,425
Yahoo! Japan Corp.		1,284		413,080
Yakult Honsha Co. Ltd.		8,700		273,515
Yamada Denki Co. Ltd.		7,100		483,646
Yamaguchi Financial Group, Inc.		18,000		171,518
Yamaha Corp.		13,300		121,473
Yamaha Motor Co. Ltd.		25,600		323,780
Yamato Holdings Co. Ltd.		34,600		582,341
Yamato Kogyo Co. Ltd.		3,800		108,761
Yamazaki Baking Co. Ltd.		10,000		131,391
Yaskawa Electric Corp.		19,000		160,905
Yokogawa Electric Corp. (a)		19,500		175,098

				181,431,998

Luxembourg – 0.4%
ArcelorMittal		76,199		1,384,570
Millicom International Cellular SA		6,844		683,715
SES Global		26,546		635,953
Tenaris SA		41,856		769,780

				3,474,018

Netherlands – 2.7%
Aegon NV (a)		154,577		617,797
Akzo Nobel NV		20,547		990,151
ASML Holding NV		38,288		1,599,345
Corio NV		5,219		225,988
Delta Lloyd NV		9,636		161,436
European Aeronautic Defence and Space Co. NV		36,376		1,132,713
Fugro NV		6,199		358,831
Heineken Holding NV		10,186		416,269
Heineken NV		22,994		1,064,515
ING Groep NV (a)		340,216		2,433,088
Koninklijke Ahold NV		103,122		1,386,021
Koninklijke Boskalis Westminster NV		5,872		215,073
Koninklijke DSM NV		13,844		639,890
Koninklijke KPN NV		131,165		1,565,738
Koninklijke Philips Electronics NV		89,592		1,879,792
Koninklijke Vopak NV		6,300		332,217
QIAGEN NV (a)		20,535		282,736
Randstad Holding NV		10,816		318,179
Reed Elsevier NV		60,952		709,201
SBM Offshore NV		15,337		314,389
STMicroelectronics NV		57,655		341,311

See Notes to Financial Statements.



88	MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments (continued)		Master International Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Netherlands (concluded)
TNT Express NV		32,089	$	238,998
Unilever NV		144,761		4,977,398
Wolters Kluwer NV		27,037		466,252

				22,667,328

New Zealand – 0.1%
Auckland International Airport Ltd.		81,425		159,481
Contact Energy Ltd. (a)		29,916		122,755
Fletcher Building Ltd.		59,637		284,779
Sky City Ltd.		51,491		137,568
Telecom Corp. of New Zealand Ltd.		171,010		274,003

				978,586

Norway – 0.8%
Aker Solutions ASA		14,045		147,218
DnB NOR ASA		86,644		844,499
Gjensidige Forsikring ASA		17,265		199,842
Norsk Hydro ASA		83,258		384,332
Orkla ASA		68,292		508,540
Statoil ASA		99,131		2,538,772
Subsea 7 SA (a)		24,861		458,937
Telenor ASA		64,195		1,050,471
Yara International ASA		16,632		663,944

				6,796,555

Portugal – 0.2%
Banco Espirito Santo SA, Registered Shares		44,077		76,759
Cimpor-Cimentos de Portugal, SGPS SA		19,097		131,172
Energias de Portugal SA		172,968		534,189
Galp Energia SGPS SA		20,400		299,728
Jeronimo Martins SGPS SA (a)		19,300		318,786
Portugal Telecom SGPS SA, Registered Shares		59,975		345,421

				1,706,055

Singapore – 1.6%
Ascendas Real Estate Investment Trust		161,962		228,694
CapitaLand Ltd.		232,749		396,103
CapitaMall Trust		193,700		253,610
CapitaMalls Asia Ltd.		127,000		110,603
City Developments Ltd.		45,535		312,059
ComfortDelGro Corp. Ltd.		173,816		189,655
Cosco Corp. (Singapore) Ltd.		81,002		54,511
DBS Group Holdings Ltd.		156,407		1,388,312
Fraser and Neave Ltd.		82,096		391,906
Genting Singapore Plc (a)		549,227		639,077
Global Logistic Properties Ltd. (a)		158,000		213,595
Golden Agri-Resources Ltd.		586,251		323,020
Hutchison Port Holdings Trust		460,000		284,575
Jardine Cycle & Carriage Ltd.		9,721		360,682
Keppel Corp. Ltd.		126,577		906,017
Keppel Land Ltd.		66,000		112,818
Neptune Orient Lines Ltd.		73,350		63,430
Noble Group Ltd.		351,840		305,699
Olam International Ltd.		132,900		217,846
Oversea-Chinese Banking Corp.		225,914		1,362,453
SembCorp Industries Ltd.		89,590		279,436
Sembcorp Marine Ltd.		74,197		218,056
Singapore Airlines Ltd.		49,009		383,521
Singapore Exchange Ltd.		76,000		359,228
Singapore Press Holdings Ltd.		133,316		378,944
Singapore Technologies Engineering Ltd.		138,213		286,687
Singapore Telecommunications Ltd.		708,132		1,686,592


Common Stocks	Shares		Value
Singapore (concluded)
StarHub Ltd.		52,157	$	117,020
United Overseas Bank Ltd.		111,572		1,313,039
UOL Group Ltd.		43,457		133,862
Wilmar International Ltd.		167,670		646,367
Yangzijiang Shipbuilding Holdings Ltd.		161,183		112,810

				14,030,227

Spain – 3.2%
Abertis Infraestructuras SA		34,250		544,292
Acciona SA		2,350		201,970
Acerinox SA		9,281		118,634
ACS Actividades de Construccion y Servicios SA		12,719		375,537
Amadeus IT Holding SA, Class A		28,081		453,458
Banco Bilbao Vizcaya Argentaria SA		407,238		3,508,029
Banco de Sabadell SA		98,280		372,167
Banco Popular Espanol SA		87,441		397,150
Banco Santander SA		750,093		5,666,691
Bankia SA (a)		78,282		364,233
Bankinter SA		18,086		110,665
Criteria Caixacorp SA		67,845		331,557
Distribuidora Internacional de Alimentacion SA (a)		50,193		225,962
EDP Renovaveis SA (a)		19,120		116,759
Enagas SA		16,213		299,339
Ferrovial SA		33,161		398,786
Fomento de Construcciones y Contratas SA		4,845		125,088
Gas Natural SDG SA		31,110		533,190
Grifols SA (a)		12,868		215,613
Iberdrola SA		339,573		2,121,119
Inditex SA		19,368		1,581,105
Indra Sistemas SA		8,623		109,322
International Consolidated Airlines Group SA (a)		86,524		194,014
Mapfre SA		68,993		218,224
Red Electrica de Espana		9,707		414,511
Repsol YPF SA		70,477		2,156,265
Telefonica SA		365,060		6,289,311
Zardoya Otis SA		12,911		176,559

				27,619,550

Sweden – 3.0%
Alfa Laval AB		30,263		571,530
Assa Abloy AB, Series B		27,837		696,082
Atlas Copco AB, Class A		59,591		1,276,827
Atlas Copco AB, Class B		34,978		662,140
Boliden AB		24,882		360,976
Electrolux AB		21,871		347,510
Getinge AB, Class B		18,129		458,422
Hennes & Mauritz AB, B Shares		90,831		2,913,853
Hexagon AB		21,521		320,380
Holmen AB, Class B		4,661		133,482
Husqvarna AB		38,981		178,974
Industrivarden AB		11,056		131,411
Investor AB		39,881		741,736
Kinnevik Investment AB		18,465		358,895
Lundin Petroleum AB (a)		19,946		488,530
Modern Times Group AB		4,461		212,481
Nordea Bank AB		233,586		1,800,396
Ratos AB		17,816		208,500
Sandvik AB		89,454		1,093,617
Scania AB		28,724		423,999
Securitas AB		28,442		244,642
Skandinaviska Enskilda Banken AB, Class A		125,005		725,280
Skanska AB, Class B		35,924		592,918

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011	89


Schedule of Investments (continued)		Master International Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Sweden (concluded)
SKF AB, Class B		34,686	$	731,197
SSAB AB, Series A		13,368		117,062
Svenska Cellulosa AB		51,208		755,943
Svenska Handelsbanken, Class A		43,463		1,138,973
Swedbank AB, Class A		71,029		916,601
Swedish Match AB		18,871		668,477
Tele2 AB		28,416		550,690
Telefonaktiebolaget LM Ericsson		267,517		2,712,784
TeliaSonera AB		192,135		1,301,903
Volvo AB, B Shares		123,258		1,342,771

				25,178,982

Switzerland – 8.5%
ABB Ltd. (a)		194,769		3,658,980
Actelion Ltd. (a)		9,964		340,838
Adecco SA, Registered Shares (a)		11,874		494,864
Aryzta AG		7,612		367,227
Baloise Holding AG		4,303		294,389
Barry Callebaut AG (a)		162		159,381
Compagnie Financière Richemont SA		46,364		2,332,234
Crédit Suisse Group AG (a)		101,342		2,375,270
GAM Holdings Ltd. (a)		17,488		189,386
Geberit AG (a)		3,509		674,506
Givaudan SA (a)		744		706,970
Holcim Ltd. (a)		21,766		1,160,238
Julius Baer Group Ltd. (a)		18,311		713,258
Kuehne & Nagel International AG		4,840		541,979
Lindt & Spruengli AG		81		240,677
Lindt & Spruengli AG, Registered Shares		10		333,590
Lonza Group AG, Registered Shares (a)		4,607		271,456
Nestlé SA, Registered Shares		293,354		16,845,415
Novartis AG, Registered Shares		207,450		11,843,954
Pargesa Holding SA		2,442		159,516
Partners Group Holding AG		1,195		208,183
Roche Holding AG		62,450		10,561,435
Schindler Holding AG		4,356		506,341
Schindler Holding AG, Registered Shares		1,929		223,515
SGS SA		486		801,580
Sika AG		182		342,209
Sonova Holding AG, Registered Shares (a)		4,403		458,715
Straumann Holding AG, Registered Shares		656		112,984
Sulzer AG		2,218		236,186
The Swatch Group Ltd., Bearer Shares		2,736		1,018,385
The Swatch Group Ltd., Registered Shares		3,943		261,476
Swiss Life Holding (a)		2,722		249,304
Swiss Reinsurance Co., Registered Shares (a)		30,650		1,558,237
Swisscom AG		2,091		790,874
Syngenta AG, Registered Shares (a)		8,403		2,469,225
Synthes, Inc.		5,792		969,463
Transocean Ltd.		30,693		1,181,315
UBS AG, Registered Shares (a)		323,372		3,836,058
Zurich Financial Services AG (a)		12,938		2,915,025

				72,404,638


Common Stocks	Shares		Value
United Kingdom – 22.9%
3i Group Plc		84,667	$	237,706
Admiral Group Plc		17,676		234,347
Aggreko Plc		23,574		737,651
Amec Plc		29,771		419,276
Anglo American Plc		117,576		4,343,274
Antofagasta Plc		34,360		649,835
ARM Holdings Plc		119,652		1,104,444
Associated British Foods Plc		30,849		529,922
AstraZeneca Plc		119,432		5,516,803
Aviva Plc		254,041		1,181,629
Babcock International Group Plc		32,179		367,118
BAE Systems Plc		298,413		1,318,633
Balfour Beatty Plc		60,162		247,294
Barclays Plc		1,028,888		2,817,800
BG Group Plc		301,273		6,436,288
BHP Billiton Plc		187,699		5,487,504
BP Plc		1,683,856		11,994,589
British American Tobacco Plc		175,713		8,335,892
British Land Co. Plc		73,115		524,772
British Sky Broadcasting Group Plc		101,087		1,150,096
BT Group Plc		690,341		2,046,296
Bunzl Plc		29,609		406,281
Burberry Group Plc		38,848		714,322
Cairn Energy Plc (a)		126,105		518,455
The Capita Group Plc		54,287		529,389
Capital Shopping Centres Group Plc		48,885		236,855
Carnival Plc		16,492		543,609
Centrica Plc		459,271		2,062,815
Cobham Plc		100,563		286,346
Compass Group Plc		168,414		1,598,042
Diageo Plc		222,517		4,862,016
Essar Energy Plc (a)		29,542		78,693
Eurasian Natural Resources Corp. Plc		23,514		231,906
Experian Plc		89,049		1,210,402
Fresnillo Plc		16,255		385,157
G4S Plc		127,390		537,720
GKN Plc		138,990		394,692
GlaxoSmithKline Plc		451,042		10,277,406
Glencore International Plc		74,829		456,900
Hammerson Plc		63,897		356,809
HSBC Holdings Plc		1,586,383		12,110,517
ICAP Plc		49,487		266,560
Imperial Tobacco Group Plc		90,028		3,406,705
Inmarsat Plc		39,692		248,580
Intercontinental Hotels Group Plc		26,163		470,407
International Power Plc		136,900		715,845
Intertek Group Plc		14,546		459,348
Invensys Plc		73,682		240,959
Investec Plc		44,581		234,614
ITV Plc		324,659		342,981
J Sainsbury Plc		109,355		514,135
Johnson Matthey Plc		19,282		549,383
Kazakhmys Plc		18,566		268,071
Kingfisher Plc		209,579		814,423
Land Securities Group Plc		69,522		685,694
Legal & General Group Plc		520,545		831,869
Lloyds Banking Group Plc (a)		3,660,302		1,470,271

See Notes to Financial Statements.



90	MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011


Schedule of Investments (continued)		Master International Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
United Kingdom (concluded)
London Stock Exchange Group Plc		13,856	$	170,407
Lonmin Plc		14,124		215,199
Man Group Plc		170,006		331,773
Marks & Spencer Group Plc		142,712		689,271
Meggitt Plc		69,658		381,295
National Grid Plc		316,195		3,056,272
Next Plc		15,058		638,824
Old Mutual Plc		490,357		1,031,384
Pearson Plc		72,299		1,356,958
Petrofac Ltd.		23,369		522,654
Prudential Plc		226,278		2,238,833
Randgold Resources Ltd.		8,112		829,360
Reckitt Benckiser Group Plc		55,004		2,712,798
Reed Elsevier Plc		107,861		868,293
Resolution Ltd.		127,197		495,844
Rexam Plc		78,442		429,298
Rio Tinto Plc, Registered Shares		124,326		6,072,891
Rolls-Royce Holdings Plc (a)		166,247		1,924,833
Royal Bank of Scotland Group Plc (a)		1,570,779		495,122
Royal Dutch Shell Plc, Class A		321,693		11,802,677
Royal Dutch Shell Plc, Class B		238,598		9,075,759
RSA Insurance Group Plc		310,978		507,689
SABMiller Plc		84,677		2,976,950
The Sage Group Plc		119,005		543,777
Schroders Plc		10,062		205,149
Scottish & Southern Energy Plc		83,183		1,665,098
Segro Plc		65,911		213,419
Serco Group Plc		44,600		328,163
Severn Trent Plc		21,510		499,156
Shire Plc		49,939		1,735,585
Smith & Nephew Plc		80,158		777,923
Smiths Group Plc		35,177		499,224
Standard Chartered Plc		211,416		4,624,199
Standard Life Plc		210,131		673,259
Tate & Lyle Plc		41,890		457,963
Tesco Plc		712,289		4,456,676
Tui Travel Plc		42,176		108,785
Tullow Oil Plc		80,257		1,743,839
Unilever Plc		114,039		3,824,193
United Utilities Group Plc		60,262		566,648
Vedanta Resources Plc		10,542		166,325
Vodafone Group Plc		4,518,390		12,597,741
The Weir Group Plc		18,965		598,606
Whitbread Plc		15,173		368,378
WM Morrison Supermarkets Plc		194,176		982,140
Wolseley Plc		24,934		824,698
WPP Plc		111,905		1,173,576
Xstrata Plc		184,355		2,806,834

				196,265,084

Total Long-Term Investments (Cost – $875,963,977) – 98.3%				840,894,972


Short-Term Securities	Shares		Value
BlackRock Liquidity Funds, TempCash, Institutional Class, 0.07% (b)(c)		1,969,251	$	1,969,251

Total Short-Term Securities (Cost – $1,969,251) – 0.2%				1,969,251

Total Investments (Cost – $877,933,228*) – 98.5%				842,864,223
Other Assets Less Liabilities – 1.5%				12,916,695

Net Assets – 100.0%			$	855,780,918

*	As of December 31, 2011, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	929,473,570

Gross unrealized appreciation	$	108,922,210
Gross unrealized depreciation		(195,531,557	)

Net unrealized depreciation	$	(86,609,347	)

(a)	Non-income producing security.

(b)	Investments in companies considered to be an affiliate of the Series during the year, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares Held at December 31, 2010		Net Activity			Shares Held at December 31, 2011		Income
BlackRock Liquidity Funds, TempCash, Institutional Class		2,576,868		(607,617	)		1,969,251	$	2,226

(c)	Represents the current yield as of report date.

•

Financial futures contracts purchased as of December 31, 2011 were as follows:


Contracts	Index	Exchange	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
101	DJ Euro Stoxx 50	Eurex	March 2012	$	3,017,001	$	50,452
27	E-Mini MSCI EAFE Index	Chicago Mercantile	March 2012	$	1,902,690		7,367
33	FTSE 100 Index	NYSE Liffe	March 2012	$	2,837,145		43,925
39	Nikkei 225 Index	Singapore	March 2012	$	2,143,303		(11,293	)
12	SPI 200 Index	Australian Securities Exchange	March 2012	$	1,233,190		(33,841	)

Total						$	56,610

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011	91


Schedule of Investments (concluded)		Master International Index Series

• Foreign currency exchange contracts as of December 31, 2011 were as follows:

Currency

Purchased

Currency
Sold

Counterparty

Settlement
Date

Unrealized
Appreciation
(Depreciation)

USD 2,217,741

AUD 2,163,000

Credit Suisse

1/03/12

5,424

Securities LLC

USD 1,518,530

CHF 1,420,000

Credit Suisse

1/03/12

6,766

Securities LLC

USD 156,672

DKK 897,000

Credit Suisse

1/03/12

489

Securities LLC

USD 6,685,473

EUR 5,150,000

Credit Suisse

1/03/12

20,083

Securities LLC

USD 6,076,566

GBP 3,910,000

Credit Suisse

1/03/12

4,336

Securities LLC

USD 527,002

HKD 4,093,000

Credit Suisse

1/03/12

Securities LLC

USD 62,766

ILS 240,000

Credit Suisse

1/03/12

(210

)

Securities LLC

USD 224,365

NOK 1,339,000

Credit Suisse

1/03/12

484

Securities LLC

USD 576,780

SEK 3,954,000

Credit Suisse

1/03/12

2,242

Securities LLC

USD 241,391

SGD 313,000

Credit Suisse

1/03/12

Securities LLC

AUD 585,252

USD 600,000

Credit Suisse

1/04/12

(1,405

)

Securities LLC

EUR 1,386,580

USD 1,800,000

Credit Suisse

1/04/12

(5,418

)

Securities LLC

GBP 1,093,881

USD 1,700,000

Credit Suisse

1/04/12

(1,203

)

Securities LLC

USD 4,419,011

JPY 340,000,000

Credit Suisse

1/04/12

1,705

Securities LLC

Total

33,369

•

Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

•

Level 1 — unadjusted 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 and derivative financial instruments)

The following tables summarize the inputs used as of December 31, 2011 in determining the fair valuation of the Series’ investments and derivative financial instruments:


Valuation Inputs	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Australia		—	$	72,182,635	$	10	$	72,182,645
Austria		—		2,059,241		—		2,059,241
Belgium		—		7,990,118		—		7,990,118
Bermuda		—		971,591		—		971,591
China		—		132,032		—		132,032
Denmark		—		8,835,909		—		8,835,909
Finland		—		7,040,375		—		7,040,375
France		—		72,528,811		—		72,528,811
Germany		—		65,694,436		—		65,694,436
Greece	$	282,620		431,327		—		713,947
Hong Kong		211,900		23,420,400		—		23,632,300
Ireland		—		2,757,908		1		2,757,909
Israel		—		5,486,572		—		5,486,572
Italy		—		18,316,065		—		18,316,065
Japan		246,953		181,185,045		—		181,431,998
Luxembourg		—		3,474,018		—		3,474,018
Netherlands		1,064,515		21,602,813		—		22,667,328
New Zealand		—		978,586		—		978,586
Norway		—		6,796,555		—		6,796,555
Portugal		345,421		1,360,634		—		1,706,055
Singapore		284,575		13,745,652		—		14,030,227
Spain		364,233		27,255,317		—		27,619,550
Sweden		—		25,178,982		—		25,178,982
Switzerland		—		72,404,638		—		72,404,638
United Kingdom		—		196,265,084		—		196,265,084
Short-Term Securities		1,969,251		—		—		1,969,251

Total	$	4,769,468	$	838,094,744	$	11	$	842,864,223


Valuation Inputs	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments¹
Assets:
Equity contracts	$	101,744			—			—	$	101,744
Foreign currency exchange contracts		—		$	41,605			—		41,605
Liabilities:
Equity contracts		(45,134	)		—			—		(45,134	)
Foreign currency exchange contracts		—			(8,236	)		—		(8,236	)

Total	$	56,610		$	33,369			—	$	89,979

¹	Derivative financial instruments are financial futures contracts and foreign currency exchange contracts. Financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/depreciation on the instrument.

See Notes to Financial Statements.



92	MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011


Statement of Assets and Liabilities		Master International Index Series


December 31, 2011

Assets
Investments at value – unaffiliated (cost – $875,963,977)	$	840,894,972
Investments at value – affiliated (cost – $1,969,251)		1,969,251
Cash pledged as collateral for financial futures contracts		776,000
Investments sold receivable		18,956,284
Foreign currency at value (cost – $8,096,527)		8,095,076
Dividends receivable		4,422,925
Margin variation receivable		95,898
Unrealized appreciation on foreign currency exchange contracts		41,605
Prepaid expenses		16,026

Total assets		875,268,037


Liabilities
Bank overdraft		280,213
Withdrawals payable to investor		18,748,858
Investments purchased payable		211,900
Unrealized depreciation on foreign currency exchange contracts		8,236
Investment advisory fees payable		7,220
Other affiliates payable		2,373
Directors’ fees payable		459
Other accrued expenses payable		227,860

Total liabilities		19,487,119

Net Assets	$	855,780,918


Net Assets Consist of
Investors’ capital	$	890,655,790
Net unrealized appreciation/depreciation		(34,874,872	)

Net Assets	$	855,780,918

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011	93


Statement of Operations		Master International Index Series


Year Ended December 31, 2011
Investment Income
Dividends – unaffiliated	$	35,991,032
Foreign taxes withheld		(3,619,477	)
Dividends – affiliated		2,226

Total income		32,373,781

Expenses
Investment advisory		93,352
Custodian		263,526
Accounting services		180,326
Professional		104,300
Pricing		88,115
Directors		24,565
Printing		1,998
Miscellaneous		29,815

Total expenses		785,997
Less fees waived by advisor		(4,114	)

Total expenses after fees waived		781,883

Net investment income		31,591,898

Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		(25,889,226	)
Financial futures contracts		(587,208	)
Foreign currency transactions		198,904

		(26,277,530	)

Net change in unrealized appreciation/depreciation on:
Investments		(123,595,786	)
Financial futures contracts		51,678
Foreign currency transactions		(178,643	)

		(123,722,751	)

Total realized and unrealized loss		(150,000,281	)

Net Decrease in Net Assets Resulting from Operations	$	(118,408,383	)

See Notes to Financial Statements.



94	MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011


Statements of Changes in Net Assets		Master International Index Series


	Year Ended December 31,
Increase (Decrease) in Net Assets:	2011			2010
Operations
Net investment income	$	31,591,898		$	21,715,802
Net realized loss		(26,277,530	)		(21,606,488	)
Net change in unrealized appreciation/depreciation		(123,722,751	)		84,313,481

Net increase (decrease) in net assets resulting from operations		(118,408,383	)		84,422,795

Capital Transactions
Proceeds from contributions		277,608,631			325,133,239
Value of withdrawals		(226,119,685	)		(236,135,595	)

Net increase in net assets derived from capital transactions		51,488,946			88,997,644

Net Assets
Total increase (decrease) in net assets		(66,919,437	)		173,420,439
Beginning of year		922,700,355			749,279,916

End of year	$	855,780,918		$	922,700,355

Financial Highlights

Master International Index Series


	Year Ended December 31,
	2011			2010			2009			2008			2007
Total Investment Return
Total investment return		(12.34	)%		7.66	%		28.99	%		(41.94	)%		10.80	%

Ratios to Average Net Assets
Total expenses		0.08	%		0.11	%		0.09	%		0.11	%		0.10	%

Total expenses after fees waived and paid indirectly		0.08	%		0.10	%		0.09	%		0.10	%		0.09	%

Net investment income		3.38	%		2.73	%		2.98	%		3.54	%		2.86	%

Supplemental Data
Net assets, end of year (000)	$	855,781		$	922,700		$	749,280		$	706,119		$	1,143,172

Portfolio turnover		6	%		8	%		30	%		30	%		30	%

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011	95


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 of the Master LLC (the “Board”) to issue non-transferable interests in the Master LLC, subject to certain limitations. The Series’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosure in the financial statements. Actual results could differ from those estimates.

The following is a summary of significant accounting policies followed by the Series:

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 mean 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.

as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the investment advisor and/or the sub-advisor seeks to determine the price that the Series might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor and/or sub-advisor deems relevant. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close 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 investment advisor using a pricing service and/or policies approved by the Board. Each business day, the Series uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and OTC options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of business on the NYSE, which follows the close of the local markets.

Foreign Currency Transactions: The Series’ books and records are maintained in US dollars. Purchases and sales of investment securities are recorded at the rates of exchange prevailing on the respective date of such transactions. Generally, when the US dollar rises in value against a foreign currency, the Series’ investments denominated in that currency will lose value because its currency is worth fewer US dollars; the opposite effect occurs if the US dollar falls in relative value.

The Series does not isolate the portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in foreign currency exchange rates on investments are not segregated on the Statement of Operations from the effects of changes in market prices of those investments but are included as a component of net realized and unrealized gain (loss) from investments. The Series reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes.



96	MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011


Notes to Financial Statements (continued)		Master International Index Series

rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or 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 to such transactions has requirements to deliver/deposit securities as collateral for certain investments.

In December 2011, the FASB issued guidance that will enhance current disclosure requirements on the offsetting of certain assets and liabilities.

The new disclosures will be required for investments and derivative financial instruments subject to master netting agreements or similar agreements and will require an entity to disclose both gross and net information about such investments and transactions eligible for offset in the Statement of Assets and Liabilities. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Series’ financial statement disclosures.

2. Derivative Financial Instruments:

The Series engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Series and to economically hedge, or protect, its exposure to certain risks such as equity risk and foreign currency exchange rate risk. These contracts may be transacted on an exchange or OTC.

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. The Series’ maximum risk of loss from counterparty credit risk on OTC derivatives is generally the aggregate unrealized gain netted against any collateral pledged by/posted to the counterparty. Counterparty risk related to exchange-traded financial futures contracts is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.

The Series may mitigate counterparty risk by procuring collateral and through netting provisions included within an International Swaps and Derivatives Association, Inc. master agreement (“ISDA Master Agreement”) implemented between the Series and each of its respective counterpar-ties. An ISDA Master Agreement allows the Series to offset with each separate counterparty certain derivative financial instrument’s payables and/or receivables with collateral held. The amount of collateral moved to/from applicable counterparties is generally 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 non-performance. See



MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011	97


Notes to Financial Statements (continued)		Master International Index Series

Note 1 “Segregation and Collateralization” for information with respect to collateral practices. In addition, the Series manages counterparty risk by entering into agreements only with counterparties that it believes have the financial resources to honor its obligations and by monitoring the financial stability of those counterparties.

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.

Financial Futures Contracts: The Series purchases or sells financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk). Financial futures contracts are agreements between the Series and coun-terparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Pursuant to the contract, the Series agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as margin variation and are recorded by the Series as unrealized appreciation or depreciation. 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 enters into foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to foreign currencies (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 currencies in which some of the investments held by the Series are denominated. 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 the value of a foreign currency exchange contract changes unfavorably due to movements in the value of the referenced

foreign currencies and the risk that a counterparty to the contract does not perform its obligations under the agreement.

Derivative Instruments Categorized by Risk Exposure:

Fair Values of Derivative Instruments as of December 31, 2011


	Asset Derivatives			Liability Derivatives
	Statement of Assets and Liabilities Location	Value		Statement of Assets and Liabilities Location	Value
Equity contracts	Net unrealized appreciation*	$	101,744	Net unrealized depreciation*	$	45,134

	Unrealized appreciation on foreign currency			Unrealized depreciation on foreign currency
Foreign c urrency exchange contracts	exchange contracts	$	41,605	exchange contracts	$	8,236

Total		$	143,349		$	53,370

*	Includes cumulative appreciation/depreciation on 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 Financial Instruments in the Statement of Operations

Year Ended December 31, 2011


	Net Realized Gain (Loss) From
	Financial Futures Contracts			Foreign Currency Exchange Contracts
Equity contracts	$	(587,208	)		—
Foreign currency exchange contracts		—		$	276,346


	Net Change in Unrealized Appreciation/Depreciation on
	Financial Futures Contracts		Foreign Currency Exchange Contracts
Equity contracts	$	51,678		—
Foreign currency exchange contracts		—	$	33,369

For the year ended December 31, 2011, the average quarterly balances of outstanding derivative financial instruments were as follows:


Financial futures contracts:
Average number of contracts purchased		212
Average notional value of contracts purchased	$	13,039,843
Foreign currency exchange contracts:
Average number of contracts – US dollars purchased		4
Average number of contracts – US dollars sold		14
Average US dollar amounts purchased	$	5,806,950
Average US dollar amounts sold	$	4,186,119



98	MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011


Notes to Financial Statements (continued)		Master International Index Series

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The Master LLC, on behalf of the Series, 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’ portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Series. For such services, the Series pays the Manager a monthly fee at an annual rate of 0.01% of the average daily value of the Series’ net assets.

The Manager 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, dividend expense, acquired fund fees and expenses and certain other Series’ expenses will not exceed 0.12% of the average daily value of the Series’ net assets. The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to May 1, 2012 unless approved by the Board, including a majority of the Independent Directors. For the year ended December 31, 2011, the Manager waived $2,006, which is included in fees waived by advisor in the Statement of Operations.

The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Series pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with the Series’ investment in other affiliated investment companies, if any. For the year ended December 31, 2011, the Manager waived $2,108, which is included in fees waived by advisor in the Statement of Operations.

The Manager entered into a sub-advisory agreement with BlackRock Investment Management LLC (“BIM”), an affiliate of the Manager.The Manager pays BIM, for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by the Series to the Manager.

For the year ended December 31, 2011, the Series reimbursed the Manager $10,033 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, 2011, were $143,935,118 and $59,509,316, 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 expired in November 2011. The Series may borrow under the credit agreement to fund shareholder redemptions. Effective November 2010, the credit agreement had the following terms: a commitment fee of 0.08% 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 1.00% per annum or (b) the Fed Funds rate plus 1.00% per annum on amounts borrowed. In addition, the Series paid administration and arrangement fees which were allocated to the Series based on its net assets as of October 31, 2010. Effective November 2011, the credit agreement was renewed until November 2012 with the following terms: a commitment fee of 0.065% 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 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Series paid administration and arrangement fees which were allocated to the Series based on its net assets as of October 31, 2011. The Series did not borrow under the credit agreement during the year ended December 31, 2011.

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 (issuer 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 issuer credit risk, the Series may be exposed to counter-party credit risk, or the risk that an entity with which the Series has unsettled or open transactions may fail to or be unable to perform on its commitments. The Series manages counterparty credit risk by entering into transactions only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Series to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterpar-ties. The extent of the Series’ exposure to market, issuer and counterparty credit 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.



MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011	99


Notes to Financial Statements (concluded)		Master International Index Series

The Series invests a substantial amount of its assets in issuers located in a single country or a limited number of countries. When the Series concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in those countries may have a significant impact on their investment performance. Foreign issuers may not be subject to the same uniform accounting, auditing and financial reporting standards and practices as used in the US. Foreign securities markets may also be less liquid, more volatile, and less subject to governmental supervision not typically associated with investing in US securities. Please see the Schedule of Investments for concentrations in specific countries.

As of December 31, 2011, the Series had the following industry classifications:


Industry	Percent of Long-Term Investments
Commercial Banks		11	%
Pharmaceuticals		9	%
Oil & Gas Consumable Fuels		8	%
Metals & Mining		6	%
Other¹		66	%

¹	All other industries held were each less than 5% of long-term investments.

7. Subsequent Events:



100	MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011


Report of Independent Registered Public Accounting Firm		Master International Index Series

To the Investors of Master International Index Series and Board of Directors of Quantitative Master Series LLC:

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Master International Index Series, one of the portfolios constituting Quantitative Master Series LLC, (the “Master LLC”) as of December 31, 2011, 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.

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, 2011, 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, 2011, 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

Boston, Massachusetts

February 22, 2012



MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011	101


Officers and Directors		Master International Index Series


Name, Address and Year of Birth	Position(s) Held with Master LLC	Length of Time Served as a Director²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Directors¹
Ronald W. Forbes 55 East 52nd Street New York, NY 10055 1940	Co-Chairman of the Board and Director	Since 2007	Professor Emeritus of Finance, School of Business, State University of New York at Albany since 2000.	33 RICs consisting of 107 Portfolios	None

Rodney D. Johnson 55 East 52nd Street New York, NY 10055 1941	Co-Chairman of the Board and Director	Since 2007	President, Fairmount Capital Advisors, Inc. since 1987; Member of the Archdiocesan Investment Committee of the Archdiocese of Philadelphia since 2004; Director, The Committee of Seventy (civic) since 2006; Director, Fox Chase Cancer Center from 2004 to 2010.	33 RICs consisting of 107 Portfolios	None

David O. Beim 55 East 52nd Street New York, NY 10055 1940	Director	Since 2007	Professor of Professional Practice at the Columbia University Graduate School of Business since 1991; Trustee, Phillips Exeter Academy since 2002; Chairman, Wave Hill, Inc. (public garden and cultural center) from 1990 to 2006.	33 RICs consisting of 107 Portfolios	None

Dr. Matina S. Horner 55 East 52nd Street New York, NY 10055 1939	Director	Since 2007	Executive Vice President of Teachers Insurance and Annuity Association and College Retirement Equities Fund from 1989 to 2003.	33 RICs consisting of 107 Portfolios	NSTAR (electric and gas utility)

Herbert I. London 55 East 52nd Street New York, NY 10055 1939	Director	Since 2007	Professor Emeritus, New York University since 2005; John M. Olin Professor of Humanities, New York University from 1993 to 2005 and 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; Director, Cybersettle (dispute resolution technology) since 2009.	33 RICs consisting of 107 Portfolios	AIMS Worldwide, Inc. (marketing)

Cynthia A. Montgomery 55 East 52nd Street New York, NY 10055 1952	Director	Since 2007	Professor, Harvard Business School since 1989; Director, McLean Hospital since 2005; Director, Harvard Business School Publishing from 2005 to 2010.	33 RICs consisting of 107 Portfolios	Newell Rubbermaid, Inc. (manufacturing)

Joseph P. Platt 55 East 52nd Street New York, NY 10055 1947	Director	Since 2007	Director, The West Penn Allegheny Health System (a not-for-profit health system) since 2008; Director, Jones and Brown (Canadian insurance broker) since 1998; General Partner, Thorn Partners, LP (private investment) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Partner, Amarna Corporation, LLC (private investment company) from 2002 to 2008.	33 RICs consisting of 107 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company)

Robert C. Robb, Jr. 55 East 52nd Street New York, NY 10055 1945	Director	Since 2007	Partner, Lewis, Eckert, Robb and Company (management and financial consulting firm) since 1981.	33 RICs consisting of 107 Portfolios	None

Toby Rosenblatt 55 East 52nd Street New York, NY 10055 1938	Director	Since 2007	President, Founders Investments Ltd. (private investments) since 1999; Director, College Access Foundation of California (philanthropic foundation) since 2009; Director, Forward Manage- ment, LLC since 2007; Director, A.P. Pharma, Inc. (specialty pharmaceuticals) from 1983 to 2011; Director, The James Irvine Foundation (philanthropic foundation) from 1998 to 2008.	33 RICs consisting of 107 Portfolios	None



102	MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011


Officers and Directors (continued)		Master International Index Series


Name, Address and Year of Birth	Position(s) Held with Master LLC	Length of Time Served as a Director²	Principal Occupation(s) During Past Five Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships

Independent Directors¹(concluded)

Kenneth L. Urish 55 East 52nd Street New York, NY 10055 1951	Director	Since 2007	Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Chairman Elect of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since 2001; Trustee, The Holy Family Foundation from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007.	33 RICs consisting of 107 Portfolios	None

Frederick W. Winter 55 East 52nd Street New York, NY 10055 1945	Director	Since 2007	Professor and Dean Emeritus of the Joseph M. Katz School of Business, University of Pittsburgh since 2005 and Dean thereof from 1997 to 2005; Director, Alkon Corporation (pneumatics) since 1992; Director, Tippman Sports (recreation) since 2005; Director, Indotronix International (IT services) from 2004 to 2008.	33 RICs consisting of 107 Portfolios	None

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 extensions in terms of Directors who turn 72 prior to December 31, 2013. ² Date shown is the earliest date a person has served 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’s 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; Dr. Matina S. Horner, 2004; Rodney D. Johnson, 1995; Herbert I. London, 1987; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Robert C. Robb, Jr., 1998; Toby Rosenblatt, 2005; Kenneth L. Urish, 1999; and Frederick W. Winter, 1999.

Interested Directors³

Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Director	Since 2011	Senior Managing Director, BlackRock and Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds busi- ness since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	159 RICs consisting of 286 Portfolios	None

Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Director	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	159 RICs consisting of 286 Portfolios	None



MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011	103


Officers and Directors (concluded)		Master International Index Series


Name, Address and Year of Birth	Position(s) Held with Master LLC	Length of Time Served	Principal Occupation(s) During Past Five Years

Officers¹

John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resource Network (charitable foundation) since 2009.

Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009 and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.

Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.

Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2007	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.

Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2007	Chief Compliance Officer of the BlackRock-advised funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.

Ira P. Shapiro 55 East 52nd Street New York, NY 10055 1963	Secretary	Since 2010	Managing Director of BlackRock since 2009; Managing Director and Associate General Counsel of Barclays Global Investors from 2008 to 2009 and Principal thereof from 2004 to 2008.

¹	Officers of the Master LLC serve at the pleasure of the Board.

Further information about the 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 Princeton, NJ 08540

Custodian

JPMorgan Chase Bank, N.A.

Brooklyn, NY 11245

Accounting Agent State Street Bank and Trust Company Boston, MA 02110

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Boston, MA 02116

Legal Counsel

Sidley Austin LLP New York, NY 10019


		Effective September 22, 2011, Richard S. Davis resigned as Director of the Master LLC, and Paul L. Audet became Director of the Master LLC.



104	MASTER INTERNATIONAL INDEX SERIES	DECEMBER 31, 2011

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105

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Availability of Quarterly Portfolio Schedules In addition to the Schedule of Investments provided in each semi-annual and annual report, each 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.		Availability of Proxy Voting Policy and Records A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available in each Fund’s Statement of Additional Information, which may be obtained free of charge by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. Each 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

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 or Summary 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 12/11

ITEM 2.

CODE OF ETHICS.

The Trust has adopted a code of ethics that applies to its principal executive and financial officers (the “Code”). The Trust amended its code February 16, 2010 to disclose a change in the Principal Financial Office. The Trust did not grant any waivers to the provisions of the Code during the period covered by the shareholder report presented in Item 1. The Code is filed herewith as Exhibit 99.CODE ETH.

ITEM 3.

AUDIT COMMITTEE FINANCIAL EXPERT.

The Trust’s Board of Trustees has determined that Mr. Paul Zucconi, a member of the Trust’s Audit and Compliance Committee, is an “audit committee financial expert” as defined in Form N-CSR. Mr. Paul Zucconi is “independent” as defined in Form N-CSR.

ITEM 4.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.


(a)
Audit Fees		Fiscal Year Ended
$ 37,869		8/31/2010
$ 318,158		10/31/2010
$ 95,455		12/31/2010
$ 144,159		8/31/2011
$ 328,501		10/31/2011
$ 72,527		12/31/2011


(b)
Audit-Related Fees		Fiscal Year Ended
$ 0		8/31/2010
$ 12,375*		10/31/2010
$ 3,875*		12/31/2010
$ 0		8/31/2011
$ 0		10/31/2011
$ 0		12/31/2011

*Review of N-1A filings


(c)
Tax Fees		Fiscal Year Ended
$ 3,426		8/31/2010
$ 40,277		10/31/2010
$ 4,129		12/31/2010
$ 3,426		8/31/2011
$ 50,971		10/31/2011
$ 3,398		12/31/2011


(d)
All Other Fees		Fiscal Year Ended
$0		8/31/2010
$0		10/31/2010
$0		12/31/2010
$0		8/31/2011
$0		10/31/2011
$0		12/31/2011

(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:
Registrant	Adviser		Adviser’s Affiliates Providing Ongoing Services to Registrant	Fiscal Year Ended
$ 3,246	$	0	N/A	8/31/2010
$ 52,652	$	0	N/A	10/31/2010
$ 8,004 (Revised)	$	0	N/A	12/31/2010
$ 3,426	$	7,885	N/A	8/31/2011
$ 50,971	$	0	N/A	10/31/2011
$ 3,398	$	0	N/A	12/31/2011

(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.

ITEM 7.

DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 8.

PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 9.

PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 10.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust’s Board of Trustees since the Trust last disclosed such procedures in Schedule 14A.

ITEM 11.

CONTROLS AND PROCEDURES.

(a) Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective.

(b) There were no changes in the Trust’s internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.

ITEM 12.

EXHIBITS.

(a)(1) Not applicable.

(a)(2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT.

(a)(3) Not applicable.

(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


(Registrant): American Beacon Funds

By		/s/ Gene L. Needles, Jr.
		Gene L. Needles, Jr. President

Date: March 8, 2012

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, 2012



By		/s/ Melinda G. Heika
		Melinda G. Heika Treasurer

Date: March 8, 2012