American Beacon Funds Semi-Annual Report June 30, 2012

Fair Values of Derivative Financial Instruments as of June 30, 2012

Asset Derivatives

Statement of
Assets and
Liabilities
Location

Equity contracts

Net unrealized

appreciation¹

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-04984

AMERICAN BEACON FUNDS

(Exact name of registrant as specified in charter)

4151 Amon Carter Boulevard, MD 2450

Fort Worth, Texas 76155

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

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, 2012

Date of reporting period: June 30, 2012

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


Message from American Beacon			1

Market and Performance Overview			2

Schedule of Investments			6

Financial Highlights			18

Additional Information			Back Cover

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.

Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor’s strategies and the Fund’s portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.


American Beacon Funds		June 30, 2012

Message from American Beacon

Dear Shareholders,

The first half of 2012 began with renewed optimism in the markets as economic data for the U.S. appeared to be strengthening and concerns of “European contagion” were lessened. However, by the end of June, the optimism had waned as domestic economic data weakened and global pressures took a toll on the U.S. economy.

The American Beacon Treasury Inflation Protected Securities (TIPS) Fund is conservatively managed for the long term — investing primarily in high-quality inflation-protected government securities — to help investors address the inevitable fluctuation in the rate of inflation. For the six months ended June 30, 2012, the American Beacon Treasury Inflation Protected Securities Fund (Institutional Class) returned 2.60%.

With ongoing uncertainty in the eurozone, the upcoming Presidential election and the looming “fiscal cliff” of expiring tax cuts and automatic spending cuts, we may see further market turbulence in the months to come. But regardless of the headlines, American Beacon remains focused on seeking opportunities and meeting market challenges to deliver the type of consistency in performance and service that our shareholders value.

Thank you for your continued investment in the American Beacon Funds. For additional information about the Funds or to access your account information, please visit our website at www.americanbeaconfunds.com.

Best Regards,

LOGO

Gene L. Needles, Jr.

President

American Beacon Funds

Market Overview

June 30, 2012 (Unaudited)

Although 2012 began with renewed optimism in the financial markets, it became apparent as the year progressed that the U.S. economy continues to grow at a below-trend pace. The second quarter’s growth rate of 1.5% was disappointing after the first quarter’s 2.0% growth rate. While still recovering from the 2008-2009 economic and financial crises, the economy has also been negatively affected by uncertainty related to tax and spending policies (the impending “fiscal cliff”), a global economic slowdown and the ongoing European debt situation. Added to these concerns is the uncertain outcome of what is expected to be a tight Presidential election, and it’s not surprising that businesses, consumers and investors appear to be in “wait and see” mode. Central banks around the world remain actively engaged in trying to promote growth, while European governments continue to struggle to address what is a severe and intensifying crisis. Against this challenging backdrop, most Treasury interest rates were lower on June 30, 2012, than they were on December 31, 2011.

In the first quarter 2012, respectable economic data and seemingly positive developments in the eurozone buoyed risk markets — i.e., equities and credit — and caused most Treasury yields to rise. In the second quarter, however, economic data tended to lag expectations, the eurozone crisis re-accelerated and risk markets performed poorly while most Treasury yields declined. Treasury yields were lower than at year-end – for example, the 30-year Treasury yield was 2.75% on June 30, approximately 15 basis points (0.15%) lower than its December 31 level.

Inflation as measured by the Consumer Price Index (CPI) remained well-behaved over the first six months of the year, and few are concerned about unwanted inflationary pressures. In June, the CPI increased at a 1.7% year-over-year pace, a little more than half the 3.0% rate of December 2011. The core CPI year-over-year (CPI excluding food and energy) increased at a 2.2% pace in June, the same as in December. Market-based measures of inflation expectations did increase about 25 basis points (0.25%) from their year-end level; for example, inflation expectations as reflected in breakeven inflation rates (the spread between similar maturity nominal and inflation-protected securities) rose from December to June.

Declining real Treasury interest rates contributed to strongly positive total returns for Treasury Inflation Protected Securities (“TIPS”). The Barclays Capital U.S. TIPS Index returned 4.04% over the first half of the year, while the Intermediate (1-10 year maturity) TIPS Index returned 2.80%. By the end of June, most TIPS were trading with negative real yields, and even the longest dated TIPS, maturing in February 2042, was yielding only 0.55%.

The Treasury Department continues to auction TIPS each month, in 5-, 10- or 30-year maturities. At the end of June, the total outstanding market value of the Barclays Capital U.S. TIPS Index was approximately $796 billion.

American Beacon Treasury Inflation Protected Securities Fund^SM

Performance Overview

June 30, 2012 (Unaudited)

The Institutional Class of the American Beacon Treasury Inflation Protected Securities Fund (the “Fund”) returned 2.60% for the six months ended June 30, 2012, trailing the Barclays Capital 1-10 Year U.S. TIPS Index (the “Index”) return of 2.80% and the Lipper TIPS Index return of 3.72%.


	Annualized Total Returns
	Periods Ended 6/30/12
	6 Months*			1 Year			5 Years			Since Inception 6/30/04
Institutional Class(1,7,8)		2.60	%		6.41	%		6.85	%		5.38	%
Y Class (1,3,7,8)		2.40	%		5.97	%		6.67	%		5.27	%
Investor Class(1,2,7,8)		2.34	%		5.86	%		6.55	%		5.20	%
A Class without sales load (1,4,7,8)		2.15	%		5.50	%		6.38	%		5.09	%
A Class with sales load (1,4,7,8)		-2.73	%		0.49	%		5.34	%		4.45	%
C Class without sales load (1,5,7,8)		1.81	%		4.71	%		6.11	%		4.93	%
C Class with sales load (1,5,7,8)		0.81	%		3.71	%		6.11	%		4.93	%
Barclays Capital 1-10 Yr. U.S. TIPS Index(6)		2.80	%		6.26	%		6.97	%		5.70	%
Barclays Capital U.S. TIPS Index(6)		4.04	%		11.66	%		8.44	%		6.67	%
Lipper TIPS Index(6)		3.72	%		10.25	%		7.64	%		6.11	%

*	Not annualized

Performance shown is historical and is not 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 for the five-year and since inception periods represent 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 for the five-year and since inception periods represent 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.

4.	Fund performance for the five-year and since inception periods represent 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 for the five-year and since inception periods represent 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 Index tracks the results of the 30 largest mutual funds in the Lipper TIPS category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index.

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 2004. A portion of the fees charged to the Y, A, and C Classes has been waived since 2012. Performance prior to waiving fees was lower than the actual returns shown.

The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.36%, 1.04%, 0.77%, 1.32%, and 2.62% respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund produced positive absolute returns for the six-month time period, as TIPS benefited in an environment of slowing global growth, deteriorating U.S. economic figures, and continuing concern over European sovereign risk.

From a yield curve positioning standpoint, the Fund benefited primarily in the second quarter from overweighting 8-9 year maturities and underweighting 1-2 year maturities, but lost value through overweighting 2-3 year maturities. Individual security selections within the 8-10 year maturity range detracted from relative performance.

American Beacon Treasury Inflation Protected Securities Fund^SM

Performance Overview

June 30, 2012 (Unaudited)

From a duration perspective, a tactical short duration position initiated during May detracted from the Fund’s relative performance.

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, 0.50%, Due 4/15/15		15.8	%
U.S. Treasury Note, 1.125%, Due 1/15/21		9.3	%
U.S. Treasury Note, 0.125%, Due 4/15/16		8.3	%
U.S. Treasury Note, 0.125%, Due 1/15/22		7.1	%
U.S. Treasury Note, 0.125%, Due 4/15/17		6.5	%
U.S. Treasury Note, 0.625%, Due 7/15/21		6.2	%
U.S. Treasury Note, 2.00%, Due 7/15/14		5.1	%
U.S. Treasury Note, 1.25%, Due 7/15/20		4.5	%
U.S. Treasury Note, 1.625%, Due 1/15/18		4.0	%
U.S. Treasury Note, 1.875%, Due 7/15/15		3.9	%

Sector Allocation


	% of Fixed Income
U.S. Treasury Obligations		100.0	%

American Beacon Treasury Inflation Protected Securities Fund^SM

Fund Expenses

June 30, 2012 (Unaudited)

Fund Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees if applicable, and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2012 through June 30, 2012.

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 you account was subject to a custodial IRA fee during the period, your cost 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 1/1/12		Ending Account Value 6/30/12		Expenses Paid During Period* 1/1/12 - 6/30/12
Institutional Class
Actual	$	1,000.00	$	1,025.99	$	1.26
Hypothetical **	$	1,000.00	$	1,023.62	$	1.26

Y Class
Actual	$	1,000.00	$	1,024.02	$	3.12
Hypothetical **	$	1,000.00	$	1,021.78	$	3.12

Investor Class
Actual	$	1,000.00	$	1,023.38	$	3.47
Hypothetical **	$	1,000.00	$	1,021.43	$	3.47

A Class
Actual	$	1,000.00	$	1,021.52	$	5.03
Hypothetical **	$	1,000.00	$	1,019.89	$	5.02

C Class
Actual	$	1,000.00	$	1,018.08	$	8.93
Hypothetical **	$	1,000.00	$	1,016.01	$	8.92

Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 0.25%, 0.62%, 0.69%, 1.05%, and 1.78% 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 (182) by days in the year (366) to reflect the half-year period.

**	5% return before expenses.

American Beacon Treasury Inflation Protected Securities Fund^SM

Schedule of Investments

June 30, 2012 (Unaudited)


	Par Amount		Fair Value
	(000’s)		(000’s)
U.S. TREASURY OBLIGATIONS — 99.10%
U.S. Treasury Notes,
1.875%, Due 7/15/2013 ^A	$	7,384	$	7,562
2.00%, Due 1/15/2014 ^A		8,292		8,610
1.25%, Due 4/15/2014 ^A		9,305		9,607
2.00%, Due 7/15/2014 ^A		17,973		19,045
1.625%, Due 1/15/2015 ^A		6,236		6,627
0.50%, Due 4/15/2015 ^A		56,827		59,003
1.875%, Due 7/15/2015 ^A		13,448		14,625
2.00%, Due 1/15/2016 ^A		10,925		12,087
0.125%, Due 4/15/2016 ^A		29,939		31,163
2.50%, Due 7/15/2016 ^A		7,377		8,445
2.375%, Due 1/15/2017 ^A		8,664		9,999
0.125%, Due 4/15/2017 ^A		23,155		24,443
2.625%, Due 7/15/2017 ^A		5,667		6,731
1.625%, Due 1/15/2018 ^A		13,079		14,925
1.375%, Due 7/15/2018 ^A		11,192		12,777
2.125%, Due 1/15/2019 ^A		5,701		6,821
1.875%, Due 7/15/2019 ^A		1,562		1,869
1.375%, Due 1/15/2020 ^A		10,506		12,215
1.25%, Due 7/15/2020 ^A		14,626		16,983
1.125%, Due 1/15/2021 ^A		30,342		34,916
0.625%, Due 7/15/2021 ^A		20,757		23,118
0.125%, Due 1/15/2022 ^A		25,178		26,639
2.375%, Due 1/15/2025 ^A		1,343		1,768
2.00%, Due 1/15/2026 ^A		1,177		1,501

Total U.S. Treasury Obligations (Cost $368,922)				371,479


	Shares
SHORT-TERM INVESTMENTS—0.40% (Cost $1,502)
JPMorgan U.S. Government Money Market Fund, Capital Class		1,502,032		1,502

TOTAL INVESTMENTS —99.50% (Cost $370,424)				372,981
OTHER ASSETS, NET OF LIABILITIES—0.50%				1,883

TOTAL NET ASSETS—100.00%			$	374,864

Percentages are stated as a percent of net assets.

^A	Inflation-Indexed Note.

See accompanying notes

American Beacon Treasury Inflation Protected Securities Fund^SM

Statement of Assets and Liabilities

June 30, 2012 (in thousands, except share and per share amounts) (Unaudited)


Assets:

Investments in unaffiliated securities, at fair value ^A	$	372,981
Receivable for investments sold		2,566
Dividends and interest receivable		1,564
Receivable for fund shares sold		815
Receivable for expense reimbursement (Note 2)		29
Prepaid expenses		73

Total assets		378,028

Liabilities:
Payable for investments purchased		2,856
Payable for fund shares redeemed		159
Management and investment advisory fees payable (Note 2)		65
Administrative service and service fees payable (Note 2)		55
Professional fees payable		18
Other liabilities		11

Total liabilities		3,164

Net assets	$	374,864

Analysis of Net Assets:
Paid-in-capital		367,028
Undistributed net investment income		2,383
Accumulated net realized gain		2,896
Unrealized appreciation of investments		2,557

Net assets	$	374,864

Shares outstanding at no par value (Unlimited shares authorized):
Institutional Class		30,577,393

Y Class		89,862

Investor Class		2,011,089

A Class		58,750

C Class		26,847

Net asset value, offering and redemption price per share:
Institutional Class (Net assets $349,978,538)	$	11 .45

Y Class (Net assets $1,033,962)	$	11 .51

Investor Class (Net assets $22,879,681)	$	11 .38

A Class (Net assets $ 669,608) (offering price $11.96)	$	11 .39

C Class (Net assets $302,206)	$	11 .26

^ACost of investments in unaffiliated securities	$	370,424

See accompanying notes

American Beacon Treasury Inflation Protected Securities Fund^SM

Statement of Operations

For the Six Months ended June 30, 2012 (in thousands) (Unaudited)


Investment Income:
Interest income	$	2,735

Total investment income		2,735

Expenses:
Management and investment advisory fees (Note 2)		136
Administrative service fees (Note 2):
Institutional Class		168
Y Class		1
Investor Class		32
A Class		1
C Class		1
Transfer agent fees:
Institutional Class		8
Investor Class		2
Custody and fund accounting fees		14
Professional fees		23
Registration fees and expenses		16
Service fees (Note 2):
Investor Class		27
A Class		1
Distribution fees (Note 2):
A Class		1
C Class		1
Prospectus and shareholder report expenses		19
Insurance fees		3
Trustee fees		8
Other expenses		4

Total expenses		466

Net fees waived and expenses reimbursed (Note 2)		(115	)

Net expenses		351

Net investment income		2,384

Realized and unrealized gain (loss) on investments:
Net realized gain (loss) from:
Investments		4,112
Change in net unrealized appreciation or (depreciation) from:
Investments		(1,156	)

Net gain on investments		2,956

Net increase in net assets resulting from operations	$	5,340

See accompanying notes

American Beacon Treasury Inflation Protected Securities Fund^SM

Statement of Changes of Net Assets (in thousands)


	Six Months Ended June 30, 2012			Year Ended December 31, 2011
	(unaudited)
Increase (Decrease) in Net Assets:
Operations:
Net investment income	$	2,384		$	5,518
Net realized gain from investments		4,112			11,233
Change in net unrealized appreciation or (depreciation) from investments		(1,156	)		1,958

Net increase in net assets resulting from operations		5,340			18,709

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

Net distributions to shareholders		—			(5,983	)

Capital Share Transactions:
Proceeds from sales of shares		218,308			273,161
Reinvestment of dividends and distributions		—			5,353
Cost of shares redeemed		(77,190	)		(235,964	)

Net increase in net assets from capital share transactions		141,118			42,550

Net increase in net assets		146,458			55,276

Net Assets:
Beginning of period		228,406			173,130

End of Period *	$	374,864		$	228,406

*Includes undistributed net investment income of	$	2,383		$	—

See accompanying notes

American Beacon Treasury Inflation Protected Securities Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

1. Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”) which is comprised of 24 Funds, is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, (the “Act”) as an open-end management investment company. These financial statements and notes to the financial statements relate to the American Beacon Treasury Inflation Protected Securities Fund (the “Fund”), a series of the Trust.

American Beacon Advisors, Inc. (the “Manager”) is a wholly-owned subsidiary of Lighthouse Holdings, Inc. and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services to the Trust and other investors.

Class Disclosure

The Fund has multiple classes of shares designed to meet the needs of different groups of investors. The following table sets forth the differences amongst the classes:


Class:		Offered to:
Institutional Class		Investors making an initial investment of $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 respective 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, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) ASU No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and the International Financial Reporting Standards (“IFRSs”)”. ASU No. 2011-04 amends FASB ASC Topic 820, Fair Value Measurements and Disclosures, to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRSs. ASU No. 2011-04 is effective for fiscal years beginning after December 15, 2011 and for the interim period January 1, 2012 to June 30, 2012.

Management has evaluated the implications of these changes and determined that the impact of the new guidance will only affect the disclosure requirements related to the financial statements. However, as the Fund did not hold any Level 3 investments as of June 30, 2012, the financial statement disclosures were not affected.

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

American Beacon Treasury Inflation Protected Securities Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

average daily net assets plus amounts paid by the Manager to the investment advisors hired by the Manager to direct investment activities of the Fund. Management fees paid during the six months ended June 30, 2012 were as follows:


Management Fee Rate	Management Fee	Amounts paid to Investment Advisors	Net Amounts Retained by Manager
0.11%	$136,256	$76,030	$60,226

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 Trust, except for the A Class of the Fund, has adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees will 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 Trust does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Trust shares.

A separate Distribution Plan (the “Distribution Plan”) has been adopted pursuant to Rule 12b-1 under the Act for the A and C Classes of the Fund. Under the Distribution Plan, 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 Classes of the Fund. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance.

Services Plan

The Manager and the Trust entered into a Service Plan which obligates 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 Plan, 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 six months ended June 30, 2012 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. This program provides an alternative credit facility allowing the Fund to borrow from other participating Funds. For the six months ended June 30, 2012, the Fund did not utilize the credit facility.

Expense Reimbursement Plan

The Manager contractually agreed to reimburse a portion of its Administrative Service fee for the Institutional Class and contractually agreed to reimburse other expenses of the Y, Investor, A, and C Classes. Of

American Beacon Treasury Inflation Protected Securities Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

these amounts $29,338 was receivable from the Manager at June 30, 2012. For the six months ended June 30, 2012, the Manager reimbursed expenses as follows:


		Expense Cap
Fund	Class	3/1/11 to 4/26/12			4/27/12 to 5/1/13			Waived or Reimbursed Expenses		Expiration
Treasury Inflation Protected Securities Fund	Institutional		0.10	%*		0.10	%*	$	108,915		2015
Treasury Inflation Protected Securities Fund	Y		N/A			0.61	%		35		2015
Treasury Inflation Protected Securities Fund	Investor		0.69	%		0.69	%		6,767		2015
Treasury Inflation Protected Securities Fund	A		N/A			1.00	%		163		2015
Treasury Inflation Protected Securities Fund	C		N/A			1.78	%		—		2015

*	Expense reduction.

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 $69,090, $195,591, 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 six months ended June 30, 2012, there has been $235 in sales commissions from the sale of Class A 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 Board of Trustees (the “Board”).

Valuation Inputs

Various inputs may be used to determine the value of the Fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.


Level 1 –		Quoted prices in active markets for identical securities.

American Beacon Treasury Inflation Protected Securities Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)


Level 2 –		Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others. Level 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.

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 six months ended June 30, 2012, there were no significant transfers into or out of any level for the Fund. As of June 30, 2012, the investments were classified as described below (in thousands):


	Level 1		Level 2		Level 3		Total
U.S. Treasury Obligations	$	—	$	371,479	$	—	$	371,479
Short-Term Investments		1,502		—		—		1,502

Total Investments	$	1,502	$	371,479	$	—	$	372,981

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

American Beacon Treasury Inflation Protected Securities Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

increase in the principal amount of an inflation-indexed bond is recorded as interest income, even though principal is not received until maturity.

Dividends to Shareholders

Dividends from net investment income of the Fund normally will be declared and paid at least semi-annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.

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 directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Trust enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Trust’s maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Trust has had no prior claims or losses pursuant to any such agreement.

4. Federal Income and Excise Taxes

It is the policy of the Fund to qualify as a regulated investment company (“RIC”), 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.

The tax character of distributions paid were as follows (in thousands):

American Beacon Treasury Inflation Protected Securities Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)



	Six Months Ended June 30, 2012		Year Ended December 31, 2011
	(unaudited)
Distributions paid from:
Ordinary income:*
Institutional Class	$	—	$	5,260
Y Class		—		9
Investor Class		—		412
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

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

As of June 30, 2012, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):


Cost basis of investments for federal income tax purposes	$	371,174

Unrealized appreciation		3,125
Unrealized depreciation		(1,318	)

Net unrealized appreciation or (depreciation)		1,807

Undistributed ordinary income		6,029
Undistributed long-term gain or (loss)		—
Other temporary differences		—

Distributable earnings or (deficits)	$	7,836

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 losses from washsales.

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 that have been reclassified as of June 30, 2012 (in thousands):


Paid in capital	$	2
Undistributed net investment income		(1	)
Accumulated net realized gain (loss)		(1	)
Unrealized appreciation or (depreciation) of investments and foreign currency		—

American Beacon Treasury Inflation Protected Securities Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

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.

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.

As of June 30, 2012, the Fund did not have capital loss carryforward positions. The Fund utilized $677 of net capital loss carryforward for the six months ended June 30, 2012.

5. Investment Transactions

Purchases and proceeds from sales of investments for the six months ended June 30, 2012, excluding short-term investments, were $417,308,711 and $276,759,923, 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):

For the Six Months Ended June 30, 2012


	Institutional Class						Y Class						Investor Class
	Shares			Amount			Shares			Amount			Shares			Amount
Shares sold		18,486		$	211,604			51		$	579			531		$	5,997
Reinvestment of dividends		—			—			—			—			—			—
Shares redeemed		(6,450	)		(73,310	)		(6	)		(62	)		(312	)		(3,520	)

Net increase in shares outstanding		12,036		$	138,294			45		$	517			219		$	2,477


	A Class						C Class
	Shares			Amount			Shares		Amount
Shares sold		8		$	96			3	$	32
Reinvestment of dividends		—			—			—		—
Shares redeemed		(26	)		(298	)		—		—

Net increase (decrease) in shares outstanding		(18	)	$	(202	)		3	$	32

For the 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

American Beacon Treasury Inflation Protected Securities Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)


	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

American Beacon Treasury Inflation Protected Securities Fund^SM

Financial Highlights

(For a share outstanding throughout the period)


	Institutional Class																		Y Class
	Six Months Ended June 30,			Year Ended December 31,															Six Months Ended June 30,
	2012			2011			2010			2009^A			2008			2007^B			2012			2011
	(unaudited)																		(unaudited)
Net asset value, beginning of period	$	11 .16		$	10 .51		$	10 .16		$	9 .20		$	10 .18		$	9 .53		$	11.24		$	10.60

Income from investment operations:
Net investment income		0 .08			0 .28			0 .16			0 .06			0 .80			0 .45			0 .12			0 .26
Net gains (losses) from securities (both realized and unrealized)		0 .21			0 .67			0 .35			0 .95			(0 .98	)		0 .59			0 .15			0 .65

Total income (loss) from investment operations		0 .29			0 .95			0 .51			1 .01			(0 .18	)		1 .04			0 .27			0 .91

Less distributions:
Dividends from net investment income		—			(0 .29	)		(0 .16	)		(0 .05	)		(0 .80	)		(0 .39	)		—			(0 .26	)
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	)

Net asset value, end of period	$	11 .45		$	11 .16		$	10 .51		$	10 .16		$	9 .20		$	10 .18		$	11.51		$	11.24

Total return ^E		2 .60	%^F		9 .14	%		5 .03	%		11 .00	%		(2 .09	)%		11 .22	%		2.40	%^F		8.66	%

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	349,978		$	206,864		$	157,195		$	155,833		$	140,189		$	223,697		$	1,034		$	501
Ratios to average net assets (annualized):
Expenses, before reimbursements		0 .34	%		0 .36	%		0 .35	%		0 .36	%		0 .29	%		0 .43	%		0.62	%		1.04	%
Expenses, net of reimbursements		0 .25	%		0 .26	%		0 .25	%		0 .26	%		0 .25	%		0 .43	%		0.62	%		0.63	%
Net investment income (loss), before reimbursements		1 .91	%		2 .24	%		1 .40	%		0 .59	%		5 .15	%		4 .74	%		2.36	%		1.80	%
Net investment income (loss), net of reimbursements		2 .01	%		2 .34	%		1 .50	%		0 .69	%		5 .19	%		4 .74	%		2.37	%		2.21	%
Portfolio turnover rate		108	%^F		381	%		214	%		180	%		128	%		139	%		108	%^F		381	%

^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.


			Investor Class												A Class									C Class
March 1 to Dec. 31,			Six Months Ended June 30,			Year Ended December 31,						March 2 to Dec. 31,			Six Months Ended June 30,			Year Ended Dec. 31,			May 17 to Dec. 31,			Six Months Ended June 30,			Year Ended Dec. 31,			Sept. 1 to Dec. 31,
2010			2012			2011			2010			2009^A			2012			2011			2010			2012			2011			2010
			(unaudited)												(unaudited)									(unaudited)
$	10.25		$	11.12		$	10.48		$	10.13		$	9.25		$	11.15		$	10.54		$	10.35		$	11.06		$	10.46		$	10.38


	0.05			0.09			0.24			0.06			0.14			0.02			0.10			0.04			0.03			0.13			0.00
	0.35			0.17			0.66			0.41			0.79			0.23			0.76			0.19			0.17			0.65			0.08

	0.40			0.26			0.90			0.47			0.93			0.25			0.86			0.23			0.20			0.78			0.08


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

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

$	10.60		$	11.38		$	11.12		$	10.48		$	10.13		$	11.40		$	11.15		$	10.54		$	11.26		$	11.06		$	10.46

	3.89	%^F		2.34	%^F		8.67	%		4.62	%		10.05	%^F		2.15	%^F		8.17	%		2.23	%^F		1.81	%^F		7.47	%		0.77	%^F


$	365		$	22,880		$	19,920		$	15,262		$	5,868		$	670		$	855		$	155		$	302		$	266		$	153

	0.60	%^G		0.75	%		0.77	%		0.75	%		0.81	%^G		1.05	%		1.32	%		0.99	%^G		1.78	%		2.62	%		1.77	%^G
	0.60	%^G		0.69	%		0.68	%		0.64	%		0.65	%^G		1.05	%		1.03	%		0.99	%^G		1.78	%		1.79	%		1.77	%^G
	0.85	%^G		1.58	%		2.24	%		1.06	%		3.04	%^G		0.97	%		0.88	%		0.55	%^G		0.54	%		0.25	%		(0.05	)%^G
	0.85	%^G		1.64	%		2.32	%		1.17	%		3.20	%^G		1.02	%		1.17	%		0.55	%^G		0.54	%		1.08	%		(0.05	)%^G
	214	%^H		108	%^F		381	%		214	%		180	%^I		108	%^F		381	%		214	%^H		108	%^F		381	%		214	%^H

Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreements and Investment Advisory Agreements of the Funds (Unaudited)

At its May 9, 2012 meeting, the Board of Trustees (“Board”) considered the renewal of the Management Agreement between the Manager and the American Beacon Funds (“Beacon Trust”) on behalf of each of their series (collectively, the “Funds”) and the renewal of each investment advisory agreement between the Manager and a subadvisor (each an “Investment Advisory Agreement”). The Management Agreement and the Investment Advisory Agreements are collectively referred to herein as the “Agreements.” In preparation for the Board’s consideration to renew and approve these Agreements, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager, the subadvisors and Lipper, Inc. (“Lipper”). The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager and each subadvisor.

In addition, the Board’s Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Fund. The Investment Committee held a separate meeting on May 4, 2012 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process.

In connection with the Board’s consideration of the Management Agreement and each Investment Advisory Agreement, the Trustees received and evaluated such information as they deemed necessary. The materials requested by the Board included, among other information, the following:

•

a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Fund, or any other area, including how these changes might affect the Fund;

•

a copy of the firm’s most recent audited or unaudited financial statements, as well as Parts 1 and 2 of its Form ADV registration statement with the SEC;

•

a summary of any material pending or anticipated litigation or regulatory proceedings involving the firm or its personnel, including the results of any recent regulatory examination or independent audit;

•

a comparison of the performance of that portion of Fund assets managed or to be managed by each firm with the performance of other similar accounts managed by the firm, including a discussion of relative performance versus a peer group average and any remedial measures if the firm’s performance was materially below that of the peer group;

•

any actual or anticipated economies of scale in relation to the services the Manager and the firm provide or will provide to the Fund and whether the current fee rates charged or to be charged to the Fund reflects these economies of scale for the benefit of the Fund’s investors;

•

an analysis of compensation, including a comparison with fee rates charged to other clients for which similar services are provided, any proposed changes to the fee schedule, if applicable, and the effect of any fee waivers;

•

a description of any payments made or to be made by the subadvisors to the Manager to support the Fund’s marketing efforts;

•

a copy of the firm’s proxy voting policies and procedures and, if applicable, the name of the third party voting service used by the firm;

•

an evaluation of any other benefits to the firm or Fund as a result of their relationship, if any;

•

confirmation that the firm’s financial condition would not impair its ability to provide high-quality advisory services to the Fund;

•

a description of the scope of portfolio management services provided or to be provided to the Fund, including whether such services differ from the services provided to other clients, including other registered investment companies, and any advantages or disadvantages that might accrue to the Fund due to the firm’s involvement in other activities;

•

a description of the personnel who are or will be assigned primary responsibility for managing the Fund, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Fund;

•

a description of the basis upon which portfolio managers are compensated, including any “incentive” arrangements, and a description of the oversight mechanisms used to prevent a portfolio manager whose compensation is tied to performance of the Fund from taking undue risks;

•

a description of the firm’s practices in monitoring the quality of portfolio holdings and in reviewing portfolio valuation;

•

a description of the firm’s use of derivatives, short sells, leveraged trading strategies or other similar trading strategies for the Fund;

•

a discussion regarding the firm’s participation in third-party and proprietary “soft dollar” arrangements, if any, or other brokerage allocation policies with respect to Fund transactions;

•

a discussion of the firm’s methodology for obtaining best execution, including any plans to improve the quality of execution in the upcoming year, and the use of any affiliated broker-dealers;

•

a description of any actual or potential conflicts of interest anticipated in managing Fund assets;

•

a discussion of whether the firm has identified any investment or operational matters that likely present a high risk in managing Fund assets;

•

a description of the firm’s criteria for assessing counterparties and counterparty risk to the extent the firm enters into transactions with counterparties on the Fund’s behalf;

•

a description of trade allocation procedures among accounts managed by the firm;

Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreements and Investment Advisory Agreements of the Funds (Unaudited)

•

a discussion of whether the firm utilizes “commission recapture” or “directed brokerage” arrangements for the benefit of the Fund or “step-out” transactions;

•

a discussion of whether the firm receives, or anticipates receiving, other compensation, including any payment for order flow or ECN liquidity rebates with respect to the Fund;

•

a certification by the firm regarding the reasonable design of its compliance program;

•

a summary of the results of the firm’s most recent annual review of its compliance program and a discussion of any material compliance problems encountered by a subadvisor since the most recent annual review;

•

information regarding the firm’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the firm;

•

a description of the firm’s affiliation with any broker-dealer;

•

a discussion of any anticipated change in the firm’s controlling persons; and

•

verification of the firm’s insurance coverage with regards to the services provided to the Fund.

In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement:

•

a comparison of the performance of the Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, as applicable, each subadvisor and the Fund versus the respective peer group average;

•

a discussion, if applicable, of any underperformance by a subadvisor relative to its peer group and what, if any, remedial measures the Manager has or intends to take;

•

a comparison of advisory fee rates and expense ratios for comparable mutual funds;

•

a profit/loss analysis of the Manager;

•

an analysis of any material complaints received from Fund shareholders;

•

a description of the extent to which the Manager monitors the investment activities and financial conditions of each subadvisor to the Fund;

•

a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices;

•

a description of the Manager’s securities lending practices and the fees received from such practices;

•

a discussion of any rebate arrangements between the Manager and a service provider to the Fund pursuant to which the Manager receives direct or indirect benefits from the service provider;

•

a description of the portfolio turnover rate and average execution costs for the Fund and, as applicable, each subadvisor to the Fund; and

•

a description of how expenses that are not readily identifiable to a particular Fund are allocated.

In connection with the Management Agreement and each Investment Advisory Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of the Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of the Fund versus comparable mutual funds; and (iii) the Fund’s investment advisory fee rate versus comparable mutual funds. The class of shares used for comparative purposes was the class with the longest performance history, which was the Institutional Class. References below to the Fund’s Lipper peer group are to the group of comparable mutual funds included in the analysis provided by Lipper.

Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 4, 2012 at which the Trustees reviewed the investment performance of the Manager and each subadvisor and the primary factors considered by the Board at its May 9, 2012 meeting at which the Board considered the renewal of the Management Agreement and Investment Advisory Agreements.

The Board did not identify any particular information that was most relevant to its consideration to renew each Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal of each Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal of each Agreement was in the best interests of the Funds and their shareholders.

Considerations With Respect to the Renewal of the Management Agreement and each Investment Advisory Agreement

In determining whether to renew the Management Agreement and each Investment Advisory Agreement on behalf of the Fund, the Trustees considered the best interests of the Fund separately. While the Management Agreement and the Investment Advisory Agreements for the Fund were considered at the May 9, 2012 meeting, the Board considered the Fund’s investment management and subadvisory relationships separately.

Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreements and Investment Advisory Agreements of the Funds (Unaudited)

In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of the Fund and, as applicable, each subadvisor for the Fund; (3) the costs incurred by the Manager in rendering services to the Fund and its resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fee rates with contracts entered into by the Manager or a subadvisor or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager or a subadvisor from their relationship with the Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.

Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: the Fund’s long-term performance and the background and experience of key investment personnel at the Manager; the low cost structure of the Fund; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Fund; the manager’s commitment to enhance the Fund’s product line and increase assets in the Fund; the Manager’s high quality of services; the Manager’s active role in monitoring and, as appropriate recommending additional or replacement subadvisors; the Manager’s commitment to training employees; and the Manager’s efforts to retain key employees and maintain staff levels.

With respect to the renewal of each Investment Advisory Agreement, the Trustees considered the level of staffing, quality, background and experience of each subadvisor’s investment personnel responsible for managing the Funds, the size of the subadvisor and the subadvisor’s ability to continue to attract and retain qualified investment personnel. The Board also considered the adequacy of the resources committed to the Fund by each subadvisor, and whether those resources were commensurate with the needs of the Fund and are sufficient to sustain appropriate levels of performance and compliance needs. In this regard, the Board considered the financial stability of each subadvisor. The Board also considered the subadvisors’ representations regarding their compliance programs and code of ethics. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management and advisory services provided by the Manager and each subadvisor were appropriate for the Fund and, thus, determined to renew the Management Agreement and the Investment Advisory Agreement for the Fund.

Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding the Fund’s investment performance relative to its benchmark index(es) and peer group. The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the performance reports and discussions with management at Board and Committee meetings throughout the year. The Manager also noted that it generally was satisfied with the performance of the subadvisors. A discussion regarding the Board’s considerations with respect to the Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to the Fund.”

Costs of the Services Provided to the Fund and the Profits Realized by the Manager from its Relationship with the Fund. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an aggregate level for all Funds and at an individual Fund level, with some Funds being profitable for the Manager and with the Manager sustaining losses with respect to other Funds. The Board also considered that the Management Agreement for the Beacon Trust stipulates that, to the extent that a Fund invests all of its investable assets in another registered investment company (i.e., is a “Feeder Fund”), the Fund will not pay the Manager a management fee. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rate paid by the Fund, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Fund.

The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year and to put in place new expense waivers and reimbursements for certain new classes of the Funds and new series of the Beacon Trust. The Board further considered that each subadvised Fund pays the Manager the amounts due to its subadvisors, and the Manager remits these amounts directly to the applicable subadvisors. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Fund and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.

In analyzing the cost of services and profitability for each subadvisor in connection with its investment advisory services to the Fund, the Board considered that, in many cases, the Manager has negotiated the lowest subadvisory fee rate a subadvisor charges for any comparable client accounts. The Board did not consider profitability data of the subadvisors as imperative to its deliberations given the arm’s length nature of the relationship between the Manager and the subadvisors with respect to the negotiation of subadvisory fee rates.

Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to the Fund’s fee rate is set forth below under “Additional Considerations and Conclusions with Respect to the Fund.”

Economies of Scale. In considering the reasonableness of the management and investment advisory fees rates, the Board considered whether economies of scale will be realized as the Fund grows and whether fee levels reflect these economies of scale for the benefit of Fund shareholders. In this regard, the Board considered that the Manager has negotiated breakpoints in many subadvisory fee rates. The Board also noted that, for purposes of determining the fee rate chargeable to the Fund, many subadvisors have agreed to take into account assets of AMR Corporation and its pension plans that are managed by the subadvisors. Thus, the Fund is able to receive lower effective fee rates.

Disclosure Regarding the Board of Trustees’ Approval of the Management

Agreements and Investment Advisory Agreements of the Funds (Unaudited)

In addition, the Board noted the Manager’s representation that the Fund benefits from economies of scale because comparably low fee rate levels are reflected in the current management and administration fee rates the Manager charges. The Board further noted the Manager’s representation that the Fund benefits from these comparably low fee rate levels despite not having yet reached an asset size at which economies of scale would traditionally be considered to exist, and the Manager’s belief that breakpoints are not appropriate at this time. Based on the foregoing information, the Board concluded that the Manager and subadvisor fee schedules for the Fund provides for a reasonable sharing of benefits from any economies of scale with the Fund.

Benefits Derived from the Relationship with the Fund. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager and/or the subadvisors as a result of the advisory relationships with the Fund, including greater exposure in the marketplace with respect to the Manager’s or subadvisor’s investment process and expanding the level of assets under management by the Manager and the subadvisors. The Board also considered that the Manager uses its proprietary American Beacon Large Cap Value Fund model to manage its collective investment trust.

In addition, the Manager noted that the Trusts also derive benefits from their association with the Manager. Specifically, the Board noted the Manager’s representation that it provides services to most Funds at a lower than industry average cost. The Board considered that certain of the subadvisors reimburse the Manager for certain of its costs relating to distribution activities for the Funds. The Board also considered that the Fund did not pay commissions to any affiliated broker-dealer of the Manager or the relevant subadvisor during the most recent fiscal year ended December 31, 2011.

Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager and the subadvisors by virtue of their relationships with the Fund appear to be fair and reasonable.

Additional Considerations and Conclusions with Respect to the Fund

The performance comparisons below were made versus the Fund’s Lipper peer universe median and/or benchmark index. References to the Lipper expense universe below are to the group of comparable mutual funds included in the analysis provided to the Trustees by Lipper. In reviewing the performance, the Trustees viewed longer-term performance over five years or longer as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events that do not reflect manager skill.

In considering the renewal of the Management Agreement for the Fund, the Trustees considered the following additional factors: (1) the Fund underperformed the peer universe median for the one-, three- and five-year periods ended March 31, 2012; (2) the Trustees also considered the Fund’s performance relative to its benchmark because the peer universe funds generally have longer duration and invest in Treasury Inflation Protection Securities (“TIPS”), nominal Treasuries and foreign inflation-linked bonds, whereas the Fund may invest only in U.S. TIPS with one- to ten-year duration; (3) the Fund outperformed its benchmark for the one- and three-year periods ended March 31, 2012 and underperformed its benchmark for the five-year period; and (4) the expense ratio of the Institutional Class of Fund shares ranked better than the median of its Lipper expense universe.

In considering the renewal of the Investment Advisory Agreement with NISA Investment Advisors LLC (“NISA”) and Standish Mellon Asset Management LLC (“Standish”), the Trustees considered the following additional factors: (1) NISA underperformed the peer universe median for the one-, three- and five-year periods ended March 31, 2012; (2) Standish was added as a subadvisor in December 2009 and underperformed the peer universe median for the one-year period ended March 31, 2012; (3) management’s explanation that NISA’s and Standish’s underperformance was due in part to NISA’s and Standish’s focus on shorter duration TIPS; (4) the performance of NISA with respect to the portion of the Fund’s assets it manages was comparable to its composite of similarly managed accounts; (5) the performance of Standish with respect to the portion of the Fund’s assets it manages outperformed its composite of similarly managed accounts for the one-year and since inception periods ended December 31, 2011; (6) representations by each subadvisor regarding fee rates charged by the subadvisor to other comparable clients; (7) whether each subadvisor uses Fund commissions to obtain proprietary or third-party research; and (8) the Manager’s recommendation to continue to retain each subadvisor.

Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager and the subadvisors under the Agreements are fair and reasonable, (2) determined that the Fund and its shareholders would benefit from the Manager’s and subadvisors’ continued management of the Fund, and (3) approved the renewal of the Management and Investment Advisory Agreements with respect to the Fund.

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Additional Information

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


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

Availability of Quarterly Portfolio Schedules In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling (202) 551-8090. A complete schedule of the Fund’s portfolio holdings is also available on (www.americanbeaconfunds.com), the Funds’ website approximately twenty days after the end of each month.		Availability of Proxy Voting Policy and Records A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

CUSTODIAN

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

SAR 6/12

LOGO

About American Beacon Advisors

Contents


Message from American Beacon			1

Market Performance Overview			2

Schedule of Investments			6

Financial Highlights			20

Additional Information			Back Cover

Growth stocks typically are more volatile than value stocks; however, value stocks have a lower expected growth rate in earnings and sales. 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. Because the Fund may invest in fewer companies than a more diversified portfolio, the fluctuating value of a single holding may have a greater impact on the value of the Fund. The Fund may invest in future contracts which are a type of derivative investment. Investing in derivatives could result in losing more than the amount invested.


American Beacon Funds		June 30, 2012

Message from American Beacon

Dear Shareholders,

In March of this year, we broadened the investment opportunities American Beacon offers to investors by introducing the American Beacon Holland Large Cap Growth Fund to the American Beacon Funds family. The sub-advisor of this established fund, Holland Capital Management, will continue investing the Fund in the same way that it has since launching the strategy in 1996. As manager of the Fund, American Beacon Advisors will oversee and monitor the investment team to ensure they continue to adhere to their conservative growth strategy that seeks to identify high quality holdings.

After a volatile 2011, the market has been somewhat calmer since the beginning of 2012. Nonetheless, uncertainty remains and investors have been repeatedly concerned, then reassured, then concerned again as headlines cover the continuing debt crisis in Europe, a fragile U.S. recovery and slowing growth in China.

Despite this challenging environment, for the six months ended June 30, 2012, the American Beacon Holland Large Cap Growth Fund (Institutional Class) returned 8.67%.

Best Regards,

Gene L. Needles, Jr.

President

American Beacon Funds

Domestic Equity Market Overview

June 30, 2012 (Unaudited)

The U.S. stock market opened 2012 with its strongest first quarter since 1998. This strength was driven by investor optimism that economic conditions were stabilizing and the global recovery was continuing. However, the second quarter was a different story altogether. Weak economic data and persistent news about the financial problems in Europe caused investor enthusiasm to wane. In addition, concerns about a slowdown in China — which has been a major contributor to global activity — increased, and the November presidential election and potential upcoming “fiscal cliff” added to the uncertainty.

Given the confluence of macroeconomic and geopolitical concerns, investors began to question the recovery and future growth prospects both domestically and globally, and the “risk-off” trade became evident in the quarter. And while stock market volatility had seemingly calmed in early 2012, it returned in the second quarter as investors reacted to economic and other global news and data, rather than to individual company fundamentals. Such an environment can be challenging for active managers with fundamentally based strategies.

The S&P 500 Index showed considerable variability on a month-to-month basis during the second quarter, with losses of -0.6% in April and -6.0% in May and a gain of 4.1% in June. Although this resulted in a -2.8% second quarter loss, given the Index’s strong 12.6% return for the opening quarter of the year, the Index was solidly positive for the first half of the year, up 9.5%.

Along with the near-term concerns, a number of longer-term issues continue to linger, including still-high unemployment, slack housing, political wranglings, and potential changes in fiscal and other policies that affect corporations and individuals alike. Corporate earnings have been a bright spot, but there is increased apprehension that corporate profits have peaked, particularly given that economies outside of the U.S. may be slowing and many companies derive revenues from these markets. Employment data had been showing better trends, but recently gains have been weak. The Federal Reserve is still committed to exceptionally low interest rates through late 2014 and has recently extended “Operation Twist,” which was set to expire at the end of June. Operation Twist is the program allowing the Fed to

sell shorter-term Treasuries and buy longer-term Treasuries in an effort to reduce consumer lending rates. However, investors remain uneasy about the timing of any future Fed action and what effect it may have, if any.

Yet, despite the headwinds, a number of potential tailwinds exist. The U.S. economy is in much better shape than the early post-recessionary period and will likely continue to experience growth, but at a slow pace. Corporate profits should remain reasonably decent, a massive amount of liquidity remains on corporate balance sheets, and the potential for retail-driven inflows also exists. The Fed’s accommodative stance is a positive and a compromise before the fiscal cliff is not out of the question. And, in the current environment, the U.S. stock market is relatively attractive compared to other markets.

American Beacon Holland Large Cap Growth Fund^SM

Performance Overview

June 30, 2012 (Unaudited)

The Institutional Class of the American Beacon Holland Large Cap Growth Fund (the “Fund”) returned 8.67% for the six months ended June 30, 2012, compared to the Russell 1000^® Growth Index (the “Index”) return of 10.08% and the Lipper Large-Cap Growth Funds Index return of 9.75%.


	Annualized Total Returns Periods Ended 6/30/12
	6 Months*			1 Year			5 Years			10 Years
Institutional Class(1,2,8)		8.67	%		4.65	%		3.43	%		5.30	%
Y Class (1,3,8)		8.62	%		4.60	%		3.42	%		5.30	%
Investor Class(1,8)		8.50	%		4.37	%		3.34	%		5.26	%
A Class with sales charge (1,4,8)		2.19	%		-1.73	%		2.10	%		4.62	%
A Class without sales charge (1,4,8)		8.40	%		4.28	%		3.31	%		5.24	%
C Class with sales charge (1,5,8)		7.21	%		3.09	%		3.27	%		5.22	%
C Class without sales charge (1,5,8)		8.21	%		4.09	%		3.27	%		5.22	%
Lipper Large-Cap Growth Funds Index (7)		9.75	%		1.26	%		1.24	%		4.42	%
Russell 1000 Growth Index (7)		10.08	%		5.76	%		2.87	%		6.03	%

*	Not annualized

Performance shown is historical and is not 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 call 1-800-967-9009 or visit www.americanbeaconfunds.com. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. A portion of the fees charged to each class was waived since 2002. Performance prior to waiving fees was lower than the actual returns shown since 2002.

Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 6/30/02 up to 3/1/10, the inception date of the Institutional Class, and the returns of the Institutional Class since its inception. Expenses of the Institutional Class are lower than those of the Investor Class. As a result, total returns shown may be lower than they would have been had the Institutional Class been in existence since 6/30/02.

3.	Fund performance for the six-month, one-year, five-year, and ten-year periods represent the returns achieved by the Investor Class from 6/30/02 up to 3/23/12, the inception date of the Y Class, and the returns of the Y Class since its inception. Expenses of

the Y Class are lower than those of the Investor Class. As a result, total returns shown may be lower than they would have been had the Y Class been in existence since 6/30/02.

Fund performance for the five-year and ten-year periods represent the returns achieved by the Investor Class from 6/30/02 through 2/1/10, 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 Investor Class. As a result, total returns shown may be higher than they would have been had the A Class been in existence since 6/30/02. A Class shares have a maximum sales charge of 5.75%.

Fund performance for the six-month, one-year, five-year, and ten-year periods represent the returns achieved by the Investor Class from 6/30/02 through 3/23/12, 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 Investor Class. As a result, total returns shown may be higher than they would have been had the C Class been in existence since 6/30/02. C Class has a maximum contingent deferred sales charge of 1.00% for shares redeemed within one year of the date of purchase.

The Russell 1000 Growth Index is an unmanaged index of those stocks in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values. Russell 1000^® Growth Index and Russell 1000 Index are registered trademarks of the Frank Russell Company. The Lipper Large-Cap Growth Funds Index tracks the results of the 30 largest mutual funds in the Lipper Large-Cap Growth Funds category. Lipper is an independent mutual fund research and ranking service. One cannot directly invest in an index.

The total annual Fund operating expense ratio set forth in the most recent Fund prospectus for the Institutional, Y, Investor, A, and C Class shares was 0.97%, 1.07%, 1.34% 1.47%, and 2.22% respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

The Fund underperformed the Index as both stock selection and sector allocation detracted value relative to the Index.

Holdings in the Information Technology, Consumer Discretionary and Financials sectors detracted value from the Fund’s performance. In the Information Technology sector, Cisco Systems (down 4.4%) and Apple (up 44.3%) detracted the most value from relative performance. Nike (down 8.5%) and Advance Auto Parts (down 2.4%) had the largest negative impact on performance in the Consumer Discretionary sector. In the Financials sector, BlackRock (down 3.1%) detracted from the Fund’s returns. Monster Beverage (up 54.4%)

American Beacon Holland Large Cap Growth Fund^SM

Performance Overview

June 30, 2012 (Unaudited)

generated positive returns in the Consumer Staples sector.

During the six-month period, an overweight in Energy, the worst performing sector in the Index, detracted relative value through sector allocation.

Looking forward, the Fund’s sub-advisor will continue to maintain a disciplined, long-term approach to equity investing in larger stocks with above-average growth potential.

Top Ten Holdings


	% of Net Assets
Citrix Systems, Inc.		4.8	%
Apple, Inc.		4.7	%
Range Resources Corp.		4.4	%
Yum! Brands, Inc.		3.9	%
Amazon.com, Inc.		3.7	%
Visa, Inc.		3.3	%
International Business Machines Corp.		3.0	%
Cisco Systems, Inc.		2.9	%
Qualcomm, Inc.		4.3	%
Covidien PLC		3.8	%

Sector Allocation


	% of Equities
Financials		25.9	%
Health Care		11.6	%
Energy		11.3	%
Information Technology		11.2	%
Industrials		10.6	%
Consumer Staples		9.7	%
Consumer Discretionary		8.2	%
Telecommunication Services		5.1	%
Utilities		4.8	%
Materials		1.6	%

American Beacon Holland Large Cap Growth Fund^SM

Fund Expenses

June 30, 2012 (Unaudited)

Fund Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) 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 in each Class and held for the entire period from January 1, 2012 (or inception date) through June 30, 2012.

Actual Expenses

The “Actual” lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. Shareholders of the Investor and Institutional Classes 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” lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not

be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Investor and Institutional Classes 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, such as sales charges (loads). Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the “Hypothetical” lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.


	Beginning Account Value 1/1/12		Ending Account Value 6/30/12		Expenses Paid During Period 1/1/12 - 6/30/12
Institutional Class
Actual	$	1,000.00	$	1,086.70	$	5.34	*
Hypothetical **	$	1,000.00	$	1,019.74	$	5.17	*

Y Class
Actual	$	1,000.00	$	958.69	$	2.60	***
Hypothetical **	$	1,000.00	$	1,019.99	$	2.59	***

Investor Class
Actual	$	1,000.00	$	1,084.98	$	6.79	*
Hypothetical **	$	1,000.00	$	1,018.35	$	6.57	*

A Class
Actual	$	1,000.00	$	1,084.04	$	7.10	*
Hypothetical **	$	1,000.00	$	1,018.05	$	6.87	*

C Class
Actual	$	1,000.00	$	955.89	$	5.63	***
Hypothetical **	$	1,000.00	$	1,014.27	$	5.62	***

Expenses are equal to the Fund’s annualized expense ratios for the six-month period of 1.03%, 1.31%, and 1.37% for the Institutional, Investor, and A Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (182) by days in the year (366) to reflect the half year period.

**	5% return before expenses.

***

Expenses are equal to the Fund’s annualized expense ratios for the period (3/23/12—6/30/12) of 0.98% and 2.12% for the Y and C Classes respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal period (100) by days in the year (366) to reflect the fiscal period.

American Beacon Holland Large Cap Growth Fund^SM

Schedule of Investments

June 30, 2012 (Unaudited)


	Shares		Fair Value
			(000’s)
COMMON STOCK — 96.35%
CONSUMER DISCRETIONARY — 12.43%
Hotels, Restaurants & Leisure — 3.91%
Yum! Brands, Inc.		40,450	$	2,606

Internet & Catalog Retail — 3.66%
Amazon.com, Inc.^A		10,650		2,432

Specialty Retail — 2.18%
Advance Auto Parts, Inc.		21,200		1,446

Textiles & Apparel — 2.68%
NIKE, Inc., Class B		20,250		1,778

Total Consumer Discretionary				8,262

CONSUMER STAPLES — 10.38%
Beverages — 3.65%
Monster Beverage Corp.^A		15,050		1,072
PepsiCo, Inc.		19,150		1,353

				2,425

Food & Drug Retailing — 4.38%
Costco Wholesale Corp.		16,950		1,611
Mead Johnson Nutrition Co., Class A		16,150		1,300

				2,911

Food Products — 1.59%
HJ Heinz Co.		19,500		1,060

Household Products — 0.76%
Procter & Gamble Co.		8,250		505

Total Consumer Staples				6,901

ENERGY — 10.53%
Energy Equipment & Services — 1.59%
Halliburton Co.		37,150		1,055

Oil & Gas — 8.94%
Exxon Mobil Corp.		11,759		1,006
Occidental Petroleum Corp.		15,000		1,287
Range Resources Corp.		46,950		2,904
Southwestern Energy Co.^A		23,350		746

				5,943

Total Energy				6,998

FINANCIALS — 5.24%
Diversified Financials — 2.97%
BlackRock, Inc., Class A		3,550		603
Greenhill & Co. Inc		17,100		610
TD Ameritrade Holding Corp.		44,950		764

				1,977

Insurance — 2.27%
Berkshire Hathaway, Inc., Class B^A		18,090		1,507

Total Financials				3,484

HEALTH CARE — 12.34%
Health Care Equipment & Supplies — 8.73%
Covidien plc		47,500		2,541
Hospira, Inc.^A		44,600		1,560


	Shares		Fair Value
			(000’s)
Waters Corp.^A		21,350	$	1,697

				5,798

Health Care Providers & Services — 3.61%
Cerner Corp.^A		9,500		785
Laboratory Corp. of America Holdings^A		17,450		1,616

				2,401

Total Health Care				8,199

INDUSTRIALS — 6.72%
Aerospace & Defense — 1.14%
United Technologies Corp.		10,000		755

Air Freight & Couriers — 1.22%
Expeditors International of Washington, Inc.		12,700		492
United Parcel Service, Inc., Class B		4,050		319

				811

Electrical Equipment — 1.60%
Roper Industries, Inc.		10,800		1,065

Industrial Conglomerates — 2.00%
Honeywell International, Inc.		23,750		1,326

Trading Companies & Distributors — 0.76%
MSC Industrial Direct Co., Inc., Class A		7,750		508

Total Industrials				4,465

INFORMATION TECHNOLOGY — 35.92%
Communications Equipment — 4.07%
Cisco Systems, Inc.		111,650		1,917
NeuStar, Inc., Class A^A		23,500		785

				2,702

Computers & Peripherals — 7.69%
Apple, Inc.^A		5,350		3,124
International Business Machines Corp.		10,150		1,985

				5,109

Internet Software & Services — 2.49%
Google, Inc., Class A^A		2,850		1,653

IT Consulting & Services — 6.19%
Automatic Data Processing, Inc.		9,900		551
IHS, Inc., Class A^A		12,700		1,368
Visa, Inc., Class A		17,750		2,195

				4,114

Semiconductor Equipment & Products — 5.41%
Intel Corp.		28,250		753
QUALCOMM, Inc.		51,000		2,840

				3,593

Software — 10.07%
Adobe Systems, Inc.^A		45,750		1,481
Citrix Systems, Inc.^A		38,300		3,214
MICROS Systems, Inc.^A		20,550		1,052
Microsoft Corp.		31,050		950

				6,697

Total Information Technology				23,868

MATERIALS — 2.79%
Ecolab, Inc.		7,150		487

See accompanying notes

American Beacon Holland Large Cap Growth Fund^SM

Schedule of Investments

June 30, 2012 (Unaudited)


	Shares		Fair Value
			(000’s)
Praxair, Inc.		12,600	$	1,370

Total Materials				1,857

Total Common Stock (Cost $47,241)				64,034

SHORT-TERM INVESTMENTS — 3.42% (Cost $2,272)
JPMorgan U.S. Government Money Market Fund, Capital Class		2,271,744		2,272

TOTAL INVESTMENTS — 99.77% (Cost $49,513)				66,306
OTHER ASSETS, NET OF LIABILITIES — 0.23%				154

TOTAL NET ASSETS — 100.00%			$	66,460

Percentages are stated as a percent of net assets.

^A	Non-income producing security.

Futures Contracts Open on June 30, 2012 ($000’s):


Description	Type		Number of Contracts		Expiration Date		Contract Value		Unrealized Appreciation (Depreciation)
S&P 500 Mini E Index Future		Long		32		September, 2012	$	2,170		68

							$	2,170		68

See accompanying notes

American Beacon Holland Large Cap Growth Fund^SM

Statement of Assets and Liabilities

June 30, 2012 (in thousands, except share and per share amounts) (Unaudited)


Assets:
Investments in unaffiliated securities, at fair value ^A	$	66,306
Deposit with brokers for futures contracts		116
Receivable for investments sold		852
Dividends and interest receivable		32
Receivable for fund shares sold		2
Receivable for expense reimbursement (Note 2)		3
Receivable for variation margin from open futures contracts		56

Total assets		67,367

Liabilities:
Payable for investments purchased		694
Payable for fund shares redeemed		53
Management and investment advisory fees payable (Note 2)		70
Administrative service and service fees payable (Note 2)		36
Professional fees payable		6
Other liabilities		48

Total liabilities		907

Net assets	$	66,460

Analysis of Net Assets:
Paid-in-capital		47,207
Undistributed net investment income		—
Accumulated net realized gain		2,392
Unrealized appreciation of investments and futures contracts		16,861

Net assets	$	66,460

Shares outstanding at no par value (Unlimited shares authorized):
Institutional Class		70,071

Y Class		865

Investor Class		2,951,934

A Class		3,126

C Class		218

Net asset value, offering and redemption price per share:
Institutional Class (Net assets of $1,545,643)	$	22 .06

Y Class ( Net assets of $19,063)	$	22 .05

Investor Class (Net assets of $64,822,000)	$	21 .96

A Class (Net assets of $68,561) (offering price $23.27)	$	21 .93

C Class (Net assets of $4,779)	$	21 .89

^A Cost of investments in unaffiliated securities	$	49,513

See accompanying notes

American Beacon Holland Large Cap Growth Fund^SM

Statement of Operations

For the Six Months Ended June 30, 2012 (in thousands) (Unaudited)


Investment Income:
Dividend income from unaffiliated securities (net of foreign taxes)*	$	356

Total investment income		356

Expenses:
Management and investment advisory fees (Note 2)		210
Administrative service fees (Note 2):
Institutional Class		2
Investor Class		84
Transfer agent fees:
Institutional Class		1
Y Class		1
Investor Class		7
A Class		1
C Class		1
Custody and fund accounting fees		20
Professional fees		18
Registration fees and expenses		31
Service fees (Note 2):
Investor Class		67
Distribution fees (Note 2):
Investor Class		37
Prospectus and shareholder report expenses		2
Insurance fees		1
Trustee fees		2
Other expenses		3

Total expenses		488

Net fees waived and expenses reimbursed (Note 2)		(58	)

Net expenses		430

Net investment income		(74	)

Realized and unrealized gain (loss) on investments:
Net realized gain (loss) from:
Investments		2,918
Futures contracts		(239	)
Change in net unrealized appreciation or (depreciation) from:
Investments		2,325
Futures contracts		68

Net gain on investments		5,072

Net increase in net assets resulting from operations	$	4,998

See accompanying notes

American Beacon Holland Large Cap Growth Fund^SM

Statement of Changes in Net Assets (in thousands)


	Six Months Ended June 30, 2012			Year Ended December 31, 2011
	(unaudited)
Increase (Decrease) in Net Assets:
Operations:
Net investment income	$	(74	)	$	(134	)
Net realized gain from investments and futures contracts		2,679			1,226
Change in net unrealized appreciation from investments and futures contracts		2,393			776

Net increase in net assets resulting from operations		4,998			1,868

Distributions to Shareholders:
Net realized gain on investments:
Institutional Class		—			(22	)
Investor Class		—			(1,096	)

Net distributions to shareholders		—			(1,119	)

Capital Share Transactions:
Proceeds from sales of shares		5,896			8,364
Reinvestment of dividends and distributions		—			1,119
Cost of shares redeemed		(4,321	)		(5,610	)

Net increase in net assets from capital share transactions		1,575			3,873

Net increase in net assets		6,573			4,622

Net Assets:
Beginning of period		59,887			55,266

End of Period *	$	66,460		$	59,887

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

See accompanying notes

American Beacon Holland Large Cap Growth Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

1. Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”), which is comprised of 24 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 Holland Large Cap Growth Fund (the “Fund”), a series of the Trust.

Reorganization

The American Beacon Holland Large Cap Growth Fund is the legal successor to the Holland Large Cap Growth Fund (the “Predecessor Fund”). The accounting and performance history of the Institutional, Investor, and A Class shares of the Predecessor Fund were redesignated as that of the Institutional, Investor, and A Class Shares of the Fund, respectively. On March 23, 2012, the Fund (which had no prior activities or net assets) acquired all the net assets of the Predecessor Fund pursuant to a plan of reorganization. The exchange consisted of the Predecessor’s Fund’s Institutional, Investor, and A Class shares for the Fund’s Institutional, Investor and A Class shares at the same aggregate value. The acquisition was accounted for as a tax-free exchange after the close of business on March 23, 2012, as follows:


Institutional Shares		59,104
Investor Shares		2,950,499
A Shares		725
Net Assets	$	69,012,463
Unrealized Appreciation	$	21,683,463

The reorganization shifted the management oversight responsibility from Holland Capital Management, LLC (“Holland”) to the Manager. The Manager engaged Holland as the sub-advisor to the Fund, thus maintaining the continuity of the portfolio management.

For financial reporting purposes, assets received and shares issued by the Fund were recorded at fair value; however, the cost basis of the investments received from the Predecessor Fund were carried forward to align ongoing reporting of the Fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.

Class Disclosure

March 23, 2012 was the inception date of the Y and C Classes.

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 directly or 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

American Beacon Holland Large Cap Growth Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

New Accounting Pronouncements

Management has evaluated the implications of these changes and determined that the impact of the new guidance will only affect the disclosure requirements related to the financial statements. However, the Fund did not hold any Level 3 investments as of June 30, 2012, the financial statement disclosures were not affected.

2. Transactions with Affiliates

Management Agreement

Prior to March 23, 2012, the manager of the Predecessor Fund received an annual rate of 0.85% of the average daily net assets up to $500 million, 0.75% of the average daily net assets up to the next $500 million, and 0.65% of the average daily net assets in excess of $1 billion. Since March 23, 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. 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 unaffiliated investment advisor hired by the Manager to direct investment activities for the Fund. Management fees paid including amounts paid by the Predecessor Fund during the six months ended June 30, 2012 were as follows (dollars in thousands):


Management Fee Rate	Management Fee	Amounts paid to Investment Advisors	Net Amounts Retained by Manager
0.32%	$210,030	$200,918	$9,112

Administrative Services Agreement

Prior to March 23, the Predecessor Fund contracted with Atlantic Fund Administration, LLC to serve as the Funds’ Administrator and incurred $31,574 in administrative service fees. Since March 23, 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 0.30% of the average daily net assets of the Institutional, Y, and Investor Classes of the Fund and 0.40% of the average daily net assets of the A and C Classes of the Fund. For the period ended June 30, 2012, expenses for the Y, A, and C Classes were less than $500.

Distribution Plans

The Fund, except for the A, and C Classes of the Fund, has adopted a “defensive” Distribution Plan (the “Plan”) in accordance with Rule 12b-1 under the Act, pursuant to which no separate fees will 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.

American Beacon Holland Large Cap Growth Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

Prior to March 23, Foreside Fund Services, LLC served as the Predecessor Fund’s distributor and collected a fee up to 0.25% of the average daily net assets of Investor and A Shares of the Predecessor Fund. The Predecessor Fund incurred $36,906 in Distribution Fees. Since March 23, 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. The fee will be payable without regard to whether the amount of the fee is more or less than the actual expenses incurred in a particular month by the Manager for distribution assistance. For the period ended June 30, 2012, expenses for the A, and C Classes were less than $500.

Service Plans

Since March 23, the Manager and the Trust entered into Service Plans that obligate the Manager to oversee additional shareholder servicing of the Y, Investor, A, and C Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 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. For the period ended June 30, 2012, expenses for the Y, A, and C Classes were less than $500.

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 distribution related expenses. For the six months ended June 30, 2012, Foreside collected $49 from the sale of Class A Shares.

A contingent deferred sales charge (“CDSC”) of 1.00% will be deducted with respect to Class C Shares redeemed within 12 months of purchase, unless waived as discussed in the Prospectus. Any applicable CDSC will be 1.00% of the lesser of the original purchase price or the value of the redemption of the Class C Shares redeemed. During the period ended June 30, 2012 no CDSC charges were collected.

Interfund Lending Program

Since March 23, and pursuant to an exemptive order issued by the Securities and Exchange Commission (“SEC”), the Fund, along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating Funds. During the six months ended June 30, 2012, the Fund did not utilize the credit facility.

Expense Reimbursement Plan

Prior to March 23, the Predecessor Fund contractually agreed to reimburse operating expenses to the extent that total annual fund expenses exceeded 1.20%, 1.35%, and 1.40% of the Institutional, Investor, and A Classes, respectively. At the time of reorganization the Predecessor Fund had reimbursed expenses of $2,509 for Institutional, Investor, and A Classes.

After the reorganization the Manager agreed to reimburse the following Funds to the extent that total annual fund operating expenses exceeded a Fund’s expense cap. Of these amounts, $2,522 was receivable from the Manager at June 30, 2012. For the period ended June 30, 2012, the Manager waived or reimbursed expenses as follows:

American Beacon Holland Large Cap Growth Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)


		Expense Cap
Fund	Class	1/1/12 to 3/23/12	3/24/12 to 6/30/12	Waived or Reimbursed Expenses		Not Available for Recoupement		Expiration
Holland Large Cap Growth	Institutional	1.20%	0.97%		2,897		1,964		2015
Holland Large Cap Growth	Y	N/A	1.07%		636		—		2015
Holland Large Cap Growth	Investor	1.35%	1.34%		52,866		993		2015
Holland Large Cap Growth	A	1.40%	1.47%		1,504		552		2015
Holland Large Cap Growth	C	N/A	2.22%		622		—		2015

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’ 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. Reimbursements made by the Predecessor Fund are not eligible for this Plan. During the six months ended June 30, 2012, the Fund has not recorded a liability for potential reimbursement, due to the current assessment that a reimbursement is unlikely.

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. Equity securities for which market quotations are available are valued at the last sale price or official closing price (closing bid price or last evaluated quote if no sale has occurred) on the primary market or exchange on which they trade.

Securities for which the market prices are not readily available or are not reflective of the fair value of the security, as determined by the Manager, will be priced at fair value following procedures approved by the Trust’s Board of Trustees (the “Board”).

Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker, an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and an appropriate payable or receivable for the change in value (“variation margin”) is recorded by the Fund. Gains or losses are recognized, but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statement of Assets and Liabilities.

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.

Level 2 —		Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.

Level 3 —		Prices determined using 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.

American Beacon Holland Large Cap Growth Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

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

Common stocks and financial derivative instruments, such as futures contracts that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.

The end of period timing recognition is used for the significant transfers between Levels of the Funds’ 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 in the Notes to the Schedule of Investments for each respective Fund.

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 six months ended June 30, 2012, there were no significant transfers into or out of any levels for the Fund. As of June 30, 2012, the investments were classified as described below (in thousands):


	Level 1		Level 2		Level 3		Total
Common Stock	$	64,034	$	—	$	—	$	64,034
Short-Term Investments		2,272		—		—		2,272

Total Investments in Securities	$	66,306	$	—	$	—	$	66,306

Futures Contracts	$	68	$	—	$	—	$	68

Security Transactions and Investment Income

Dividend income, net of foreign taxes, is recorded on the ex-dividend date, except certain dividends from foreign securities which are recorded as soon as the information is available to the Fund. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification.

Dividends to Shareholders

Dividends from net investment income of the Fund normally will be declared and paid at least annually. Distributions, if any, of net realized capital gains are generally paid at least annually and recorded on the ex-dividend date.

Commission Recapture

The Fund has established brokerage commission recapture arrangements with certain brokers or dealers. If the Fund’s investment advisor chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. This amount is reported with the net realized gain in the Fund’s Statement of Operations.

American Beacon Holland Large Cap Growth Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

Allocation of Income, Expenses, Gains, and Losses

Income, expenses (other than those attributable to a specific class), gains, and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

Use of Estimates

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. Financial Derivative Instruments

Futures Contracts

Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Fund may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations.

Upon entering into a futures contract, the Fund is required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents a portion of the face value of the futures contract. The Fund usually reflects this amount on the Schedule of Investments as a U.S. Treasury Bill held as collateral for futures contracts or as Cash deposited with broker on the Statement of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded.

Values of Derivative Instruments not accounted for as hedging instruments as of June 30, 2012 (in thousands)⁽²⁾:


Statement of Assets and Liabilities	Derivatives		Fair Value
Unrealized appreciation of investments and futures contracts⁽¹⁾		Equity Contracts	$	68

American Beacon Holland Large Cap Growth Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

Effect of derivative instruments not accounted for as hedging instruments for the six months ended June 30, 2012 (in thousands):


Statement of Operations	Derivatives		Total
Net realized gain (loss) from futures contracts		Equity Contracts	$	(239	)
Change in net unrealized appreciation or (depreciation) of futures contracts		Equity Contracts		68

(1)	Includes cumulative appreciation or (depreciation) of futures contracts is reported in the Schedule of Investments footnotes. Only current day’s variation margin as reported within the Statement of Assets and Liabilities.

(2)	The volume of derivative activity described above is reflective of the derivative activity through the current period of operations.

5. Federal Income and Excise Taxes

The tax character of distributions paid were as follows (in thousands):


	Six Months Ended June 30, 2012		Year Ended December 31, 2011
	(unaudited)
Distributions paid from:
Ordinary income*
Institutional Class	$	—	$	—
Y Class		—		—
Investor Class		—		21
A Class		—		—
C Class		—		—
Long-Term Capital Gain
Institutional Class		—		22
Y Class		—		—
Investor Class		—		1,076
A Class		—		—
C Class		—		—

Total distributions paid	$	—	$	1,119

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

As of June 30, 2012, the components of distributable earnings or (deficits) on a tax basis were as follows (in thousands):


Cost basis of investments for federal income tax purposes	$	49,690
Unrealized appreciation		18,235
Unrealized depreciation		(1,619	)

Net unrealized appreciation or (depreciation)		16,616
Undistributed ordinary income		—
Accumulated long-term gain or (loss)		2,569
Other temporary differences		68

Distributable earnings or (deficits)	$	19,253

American Beacon Holland Large Cap Growth Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

Due to inherent differences in the recognition of income, expenses and realized gains or (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 the realization for tax purposes of unrealized gains or (losses) on certain derivative instruments and prior period adjustments to income and expense as of June 30, 2012 (in thousands):


Paid-in-capital	$	8
Undistributed net investment income		74
Accumulated net realized gain (loss)		(74	)
Unrealized appreciation or (depreciation) of investments and futures contracts		(8	)

On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “RIC MOD”) 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 RIC MOD, 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 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 RIC MOD contains several provisions aimed at preserving the character of distributions made by a fiscal year 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 RIC MOD 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.

As of June 30, 2012, the Fund had $0 net capital loss carryforwards

6. Investment Transactions

The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, for the six months ended June 30, 2012 were (in thousands) $7,813,459 and $7,209,963, respectively.

7. Capital Share Transactions

The tables below summarize the activity in capital shares for each Class of the Fund (dollars and shares in thousands):

American Beacon Holland Large Cap Growth Fund^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

For the Six months Ended June 30, 2012


	Institutional Class						Y Class				Investor Class
	Shares			Amount			Shares		Amount		Shares			Amount
Shares sold		12		$	262			1	$	19		251		$	5,554
Reinvestment of dividends		—			—			—		—		—			—
Shares redeemed		(1	)		(8	)		—		—		(198	)		(4,313	)

Net increase in shares outstanding		11		$	254			1	$	19		53		$	1,241


	A Class				C Class
	Shares		Amount		Shares		Amount
Shares sold		2	$	56		—	$	5
Reinvestment of dividends		—		—		—		—
Shares redeemed		—		—		—		—

Net increase in shares outstanding		2	$	56		—	$	5

For the Year Ended December 31, 2011


	Institutional Class						Investor Class						A Class
	Shares			Amount			Shares			Amount			Shares		Amount
Shares sold		6		$	130			399		$	8,234			—	$	—
Reinvestment of dividends		1			23			55			1,096			—		—
Shares redeemed		(5	)		(103	)		(266	)		(5,507	)		—		—

Net increase in shares outstanding		2		$	50			188		$	3,823			—	$	—

8. Change in Independent Registered Public Accounting Firm

The Fund engaged Ernst & Young, LLP (“E&Y”) as the independent registered public accounting firm for the fiscal year ending December 31, 2012. E&Y replaces BBD, LLP (“BBD”), the Predecessor Fund’s previous independent registered public accounting firm, who was dismissed upon completion of the tax-free reorganization. The engagement of E&Y as accountants of the Fund was approved by the Audit Committee of the Board of Trustees on November 7, 2011. During the periods that BBD served as the Predecessor Fund’s independent registered public accounting firm and through March 23, 2012, BBD’s audit reports contained no adverse opinion or disclaimer of opinion; nor were its reports qualified or modified as to uncertainty, audit scope, or accounting principle. There were no disagreements between the Fund and BBD on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

American Beacon Holland Large Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)


	Institutional Class									Y Class
	Six Months Ended June 30, 2012			Year Ended Dec. 31, 2011			March 1 to Dec. 1, 2010^F			March 23 to June 30, 2012
	(unaudited)									(unaudited)
Net asset value, beginning of period	$	20.30		$	20.00		$	17.88		$	23.00

Income from investment operations:
Net investment income (loss)		0 .01			(0.02	)^D		(0.01	)^D		0 .00
Net gains (losses) from securities (both realized and unrealized)		1 .75			0 .71			2 .61			(0 .95	)

Total income (loss) from investment operations		1 .76			0 .69			2 .60			(0 .95	)

Less distributions:
Dividends from net investment income		—			—			—			—
Distributions from net realized gains on securities		—			(0 .39	)		(0 .48	)		—

Total distributions		—			(0 .39	)		(0 .48	)		—

Net asset value, end of period	$	22.06		$	20.30		$	20.00		$	22.05

Total return ^E		8.67	%^A		3.47	%		14.58	%^A		(4.13	)%^A

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	1,546		$	1,193		$	1,126		$	19
Ratios to average net assets (annualized):
Expenses, before reimbursements		1.46	%		1.49	%		1.91	%^B		23.23	%^B
Expenses, net of reimbursements		1.03	%		1.20	%		1.20	%^B		0.98	%^B
Net investment (loss), before reimbursements		(0.37	)%		(0.38	)%		(0.77	)%^B		(22.14	)%^B
Net investment income (loss), net of reimbursements		0.06	%		(0.09	)%		(0.06	)%^B		0.12	%^B
Portfolio turnover rate		11	%^A		12	%		18	%^A		11	%^AC

^A	Not annualized.

^B	Annualized.

^C	Portfolio turnover rate is for the period January 1, 2012 to June 30, 2012.

^D	Per share amounts calculated based on the average shares outstanding during the period.

^E	Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable.

^F	Commencement of operations.

American Beacon Holland Large Cap Growth Fund^SM

Financial Highlights

(For a share outstanding throughout the period)


Investor Class																		A Class									C Class
Six Months Ended June 30,			Year Ended December 31,															Six Months Ended June 30,			Year Ended Dec. 31,			Feb. 1 to Dec. 31,			March 23 to June 30,
2012			2011			2010			2009			2008			2007			2012			2011			2010^F			2012
(unaudited)																		(unaudited)									(unaudited)
$	20.24		$	19 .97		$	17 .94		$	12 .90		$	19 .81		$	18 .65		$	20.23		$	19.96		$	17.40		$	22.90


	(0.02	)		(0 .05	)^D		(0 .04	)^D		(0 .02	)^D		(0 .04	)^D		(0 .04	)^D		(0 .02	)		(0.05	)^D		(0.04	)^D		(0 .07	)
	1 .74			0 .71			2 .55			5 .06			(6 .86	)		1 .79			1 .72			0 .71			3 .08			(0 .94	)

	1 .72			0 .66			2 .51			5 .04			(6 .90	)		1 .75			1 .70			0 .66			3 .04			(1 .01	)


	—			—			—			—			—			(0 .01	)		—			—			—			—
	—			(0 .39	)		(0 .48	)		—			(0 .01	)		(0 .58	)		—			(0 .39	)		(0 .48	)		—

	—			(0 .39	)		(0 .48	)		—			(0 .01	)		(0 .59	)		—			(0 .39	)		(0 .48	)		—

	$21.96		$	20 .24		$	19 .97		$	17 .94		$	12 .90		$	19 .81		$	21.93		$	20.23		$	19.96		$	21.89

	8.50	%^A		3 .33	%		14.03	%		39.07	%		(34.83	)%		9 .40	%		8.40	%^A		3.33	%		17.51	%^A		(4.13	)%^A


$	64,822		$	58,682		$	54,128		$	50,341		$	33,766		$	55,703		$	68		$	13		$	12		$	5

	1.48	%		1 .64	%		1 .77	%		1 .69	%		1 .71	%		1 .41	%		9.78	%		10.06	%		42.81	%^B		49.07	%^B
	1.31	%		1 .35	%		1 .35	%		1 .35	%		1 .35	%		1 .35	%		1.37	%		1.40	%		1.40	%^B		2.12	%^B
	(0.39	)%		(0.52	)%		(0.64	)%		(0.45	)%		(0.61	)%		(0.25	)%		(8.72	)%		(8.94	)%		(41.73	)%^B		(48.06	)%^B
	(0.23	)%		(0.24	)%		(0.22	)%		(0.11	)%		(0.25	)%		(0.19	)%		(0.31	)%		(0.28	)%		(0.22	)%^B		(1.11	)%^B
	11	%^A		12	%		18	%		11	%		35	%		26	%		11	%^A		12	%		18	%^A		11	%^AC

Disclosure Regarding the Board of Trustees’ Approval of Investment

Advisory Agreements of the Fund (Unaudited)

At the August 9-10, 2011 Board meeting, the Board considered the approval of the Investment Management Agreement (“Management Agreement”) between American Beacon Advisors, Inc. (“Manager”) and American Beacon Funds (“Trust”) on behalf of the American Beacon Holland Large Cap Growth Fund (the “New Fund”), pending the reorganization of the Lou Holland Growth Fund (the “Old Fund”) into a new series of the Trust (a “Reorganization”). Prior to the meeting, the Board requested and reviewed information provided by the Manager in connection with its consideration of the Management Agreement and the Investment Committee of the Board met with representatives of the Manager. The Board considered, among other materials, responses by the Manager to inquiries requesting:

•

a description of the advisory and related services proposed to be provided to the New Fund;

•

identification of the professional personnel who are proposed to be assigned primary responsibility for managing the New Fund;

•

a comparison of the performance of the Old Fund with its industry peer group;

•

an analysis of the proposed advisory fee, a comparison to the fees charged to other comparable clients and an explanation of any differences between the fee schedules; and

•

any other information the Manager believed would be material to the Board’s consideration of the Agreement.

The Board also considered information that had been provided by the Manager to the Board at the May 2011 Board meeting in connection with the renewal of the Management Agreement between the Manager and the Trust as it relates to other existing series of the Trust (“Existing Funds”).

The Board did not identify any particular information that was most relevant to its consideration to approve the Management Agreement, and each Trustee may have afforded different weight to the various factors. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the approval. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the approval of the Management Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of the Management Agreement were reasonable and fair and that the approval of the Management Agreement was in the best interests of the New Fund and its shareholders. Provided below is an overview of the primary factors the Trustees considered in approving the Management Agreement.

Nature, extent and quality of the services to be provided by the Manager. The Board noted that it had considered the renewal of the Management Agreement between the Manager and the Trust as it relates to the Existing Funds at its May 2011 meeting. At that meeting, the Board received detailed information regarding the Manager, including information regarding the scope of the services provided by the Manager to the Existing Funds and the background and experience of the Manager’s key investment personnel. The Board also considered at the May meeting the Manager’s disciplined investment approach and goal to provide consistent above average long-term performance at a low cost on behalf of the Existing Funds and the Manager’s record in building improved compliance, control and credit functions that reduce risks for all series of the Trust. The Board noted the Manager’s representation that the advisory and related services proposed to the New Fund will be consistent with the services provided to the Existing Funds except that the New Fund is a single-manager fund and therefore the Manager will not allocate assets among multiple investment advisors, which it does for many, but not all, Existing Funds. The Board considered the background and experience of key investment personnel who will have primary responsibility for the day-to-day oversight of the New Fund. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management to be provided by the Manager were appropriate for the New Fund.

Performance. The Board noted that the New Fund is new and therefore had no historical performance for the Board to review. As a result, the Board concluded that historical investment performance was not a material factor in the approval of the Management Agreement for the New Fund.

Comparisons of the amounts to be paid to the Manager under the Management Agreement and other funds in the relevant Morningstar category. In evaluating the Management Agreement, the Board reviewed the Manager’s proposed management fee schedule. For the New Fund, the Board considered a comparison of the management fee rate to be charged by the Manager under the Management Agreement, together with the proposed advisory fee rate to be paid to the sub-advisor, versus the fee rates charged by comparable funds. The Board noted that the management fee rate proposed by the Manager for the New Fund is lower than overall industry averages. The Board also noted that the management fee rate proposed by the Manager is consistent with other funds of the Trust. In addition, the Board considered that the Manager has agreed to contractually limit the expenses of the New Fund for at least one year following the inception date of each New Fund at competitive market levels. This information assisted the Board in concluding that the management fee rate appeared to be within a reasonable range for the services to be provided to the New Fund, in light of all the factors considered.

Costs of the services to be provided and profits to be realized by the Manager from the relationship with the New Fund. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues to be earned and the expenses to be incurred by the Manager in connection with the services to be provided to the New Fund. The Board also considered that the Manager will receive service and administrative fees to compensate the Manager for providing administrative services to the New Fund and to compensate third-party administrators and broker-dealers for services to New Fund shareholders. Based on the foregoing information, the Board concluded that the profitability level was reasonable in light of the services to be performed by the Manager.

Extent to which economies of scale would be realized as the New Fund grows and whether fee levels reflect these economies of scale for the benefit of New Fund investors. The Board considered that the fee to be paid to the sub-advisor of the New Fund will be passed through the Manager by the New Fund and that the Manager would not benefit economically from the proposed fee agreement. The Board also considered the Manager’s representation that the fee schedule for the New Fund generally reflects breakpoints in the sub-advisory fees and that the Manager believes that the proposed fee rate for the New Fund properly reflect economies of scale for the benefit of New Fund shareholders. Thus, the Board concluded that the New Fund will be receiving economies of scale due to the breakpoints incorporated into the fee schedule.

Disclosure Regarding the Board of Trustees’ Approval of Investment

Advisory Agreements of the Fund (Unaudited)

Benefits to be derived by the Manager from the relationship with the New Fund. The Board considered the Manager’s representation that it does not anticipate any material “fall-out” benefits resulting from its proposed relationship with the New Fund. After consideration of this information, the Board concluded that the potential benefits that may accrue to the Manager by virtue of its relationship with the New Fund were not a material factor in approving the Management Agreement.

Board’s Conclusion. Based on the various considerations described above, the Board, including a majority of Trustees who are not “interested persons” of the Trust, the Manager or the sub-advisor to the New Fund, as that term is defined in the Investment Company Act of 1940, as amended (“1940 Act”), concluded that the proposed management fee is reasonable and that the approval of the Management Agreement is in the best interests of the New Fund and its shareholders and, as a result, approved the Management Agreement.

Approval of Appointment of Holland Capital Management LLC

At the August 9-10, 2011 Board meeting, the Manager proposed that the Board approve Holland Capital Management LLC (“Holland”) as an investment sub-advisor to the New Fund, a new series of the Trust, following the reorganization of the Old Fund into the New Fund. Prior to the meeting, the Board requested and reviewed information provided by Holland in connection with its consideration of Holland as an investment advisor to the New Fund and the Investment Committee of the Board met with representatives from Holland. The Board considered, among other materials, responses by Holland to inquiries requesting:

•

a description of the advisory and related services proposed to be provided to the New Fund;

•

identification of the professional personnel to perform services for the New Fund and their education, experience and responsibilities;

•

a comparison of investment performance of accounts managed by Holland that have investment objectives and policies comparable to the New Fund with the performance of applicable peer groups and indices;

•

an analysis of the proposed subadvisory fee;

•

a description of the portfolio managers’ compensation, including any incentive arrangements, and if compensation is tied to performance, a description of the oversight mechanisms to prevent a manager with lagging performance from taking undue risks;

•

a description of Holland’s compliance program and matters, as well as its trading activities;

•

a discussion of Holland’s financial condition and the potential impact of Holland’s financial condition on services to be performed for the New Fund; and

•

any other information Holland believed would be material to the Board’s consideration of the Agreement.

The Board considered multiple factors when evaluating Holland and in approving the Investment Advisory Agreement between the Manager and Holland on behalf of the New Fund (“Agreement”), including Holland’s experience, its reputation and financial condition, the past performance of the Holland Fund, its overall capabilities to perform the services under the Agreement and its willingness to perform those services for the New Fund. A discussion of the factors relating to the Board’s selection of Holland and approval of the Agreement follows.

Nature, extent and quality of the services to be provided by Holland. The Board considered Holland’s investment philosophy and investment process, as well as the background and experience of its portfolio managers. The Board also considered Holland’s investment resources, infrastructure and the adequacy of its compliance program. In addition, the Board took into consideration the Manager’s recommendation on behalf of Holland. Holland also represented that it was adequately staffed and resourced to effectively service the New Fund and that any changes in staffing will depend on increased assets that result from more active marketing and distribution activities. Based on the foregoing information, the Board concluded that the nature, extent and quality of the management to be provided by Holland were appropriate for the New Fund.

Performance of Holland. The Board evaluated Holland’s performance information regarding the Lou Holland Growth Fund Investor Class shares (“Growth Fund Investor Class”), as compared to the Russell 1000 Growth Index (“Index”). The Index outperformed the Growth Fund Investor Class in 2006 and 2007, and the Growth Fund Investor Class outperformed the Index in 2008, 2009 and 2010. After taking into consideration Holland’s performance information, the Board concluded that the historical investment performance information of Holland supported approval of the Agreement.

Comparisons of the amounts to be paid under the Agreement with those under contracts between Holland and its other clients. In evaluating the Agreement, the Board reviewed the proposed advisory fee rate to be paid to Holland for services performed on behalf of the New Fund. The Board also noted that Holland’s investment advisory fee rate under the Agreement will be paid through the Manager by the New Fund, and that the management fee rate charged by the Manager, together with the proposed advisory fee rate to be paid to Holland, was lower than the industry average fee rate for accounts with a similar investment mandate. After consideration of this information, the Board concluded that the fee rate to be paid to Holland was reasonable in light of the services to be performed by Holland.

Disclosure Regarding the Board of Trustees’ Approval of Investment

Advisory Agreements of the Fund (Unaudited)

Costs of the services to be provided and profits to be realized by Holland and its affiliates from the relationship with the New Fund. The Board did not consider the costs of the services to be provided and profits to be realized by Holland from its relationship with the New Fund, noting instead the arm’s-length nature of the relationship between the Manager and Holland with respect to the negotiation of the advisory fee rate on behalf of the New Fund.

Extent to which economies of scale would be realized as the New Fund grows and whether fee levels reflect these economies of scale for the benefit of New Fund investors. The Board considered that the Manager negotiated “breakpoints” in Holland’s fee rate based on the levels of assets in the New Fund. Thus, the Board concluded that the New Fund is receiving economies of scale due to the breakpoints incorporated into the fee schedule.

Benefits to be derived by Holland from the relationship with the New Fund. The Board considered the “fall-out” or ancillary benefits that may accrue to Holland as a result of the advisory relationship with the New Fund. In this regard, the Board considered Holland’s representation that it does not anticipate accruing any “fall-out” benefits as a result of its relationship with the New Fund. The Board also considered that Holland receives benefits from brokers that include a wide variety of proprietary investment research information and services, but enters only into soft dollar arrangements covered by the safe harbor under Section 28(e) of the Securities Exchange Act of 1934, as amended (“1934 Act”). After consideration of this information, the Board concluded that the potential benefits that may accrue to Holland by virtue of its relationship with the New Fund were not a material factor in approving the Agreement.

Board’s Conclusion. The Board did not identify any single factor as being of paramount importance, and different Trustees may have given different weight to different factors. However, based on the various considerations described above, the Board, including a majority of Trustees who are not “interested persons” of the Trust, the Manager or Holland, as that term is defined in the 1940 Act, concluded that the proposed investment advisory fee is reasonable and that the approval of the Agreement is in the best interests of the New Fund and its shareholders and, as a result, approved the Agreement.

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Additional Information

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To obtain more information about the Fund:



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


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

Availability of Quarterly Portfolio Schedules In addition to the Schedule of Investments provided in each semi-annual and annual report, the Fund files a complete schedule of its portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-Q as of the first and third fiscal quarters. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling (202) 551-8090. A complete schedule of the Fund’s portfolio holdings is also available on (www.americanbeaconfunds.com), the Funds’ website approximately twenty days after the end of each month.		Availability of Proxy Voting Policy and Records A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is available in the Fund’s Statement of Additional Information, is available free of charge on the Fund’s website (www.americanbeaconfunds.com) and by calling 1-800-967-9009 or by accessing the SEC’s website at www.sec.gov. The Fund’s proxy voting record for the most recent year ended June 30 is filed annually with the SEC on Form N-PX. The Fund’s Forms N-PX are available on the SEC’s website at www.sec.gov. The Fund’s proxy voting record may also be obtained by calling 1-800-967-9009.

Fund Service Providers:

CUSTODIAN

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 Holland Large Cap Growth Fund are service marks of American Beacon Advisors, Inc.

SAR 6/12

LOGO

About American Beacon Advisors

Contents



Message from American Beacon			1
Performance Overviews			2

American Beacon Funds
Statements of Assets and Liabilities			10
Statements of Operations			11
Statements of Changes in Net Assets			12
Notes to Financial Statements			13
Financial Highlights			18

State Street Equity 500 Index Portfolio
Portfolio of Investments			26
Statement of Assets and Liabilities			32
Statement of Operations			33
Statement of Changes in Net Assets			34
Financial Highlights			35
Notes to Financial Statements			36

Master Small Cap Index Series
Schedule of Investments			43
Statement of Assets and Liabilities			64
Statement of Operations			65
Statement of Changes in Net Assets			66
Financial Highlights			67
Notes to Financial Statements			68

Master International Index Series
Schedule of Investments			78
Statement of Assets and Liabilities			88
Statement of Operations			89
Statement of Changes in Net Assets			90
Financial Highlights			90
Notes to Financial Statements			91

Additional Information			Back Cover

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.

Any opinions herein, including forecasts, reflect our judgment as of the end of the reporting period and are subject to change. Each advisor's strategies and each Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, American Beacon Advisors, Inc. makes no representation as to the completeness or accuracy of the statements contained herein.


American Beacon Funds		June 30, 2012

Dear Shareholders,

After a volatile 2011, the market has been somewhat calmer since the beginning of 2012. Nonetheless, uncertainty remains in both domestic and international equity markets as investors have been repeatedly concerned, then reassured, then concerned again as headlines cover the continuing debt crisis in Europe, a fragile U.S. recovery and slowing growth in China.

Despite this challenging environment, for the six months ended June 30, 2012, the American Beacon S&P 500 Index Fund (Institutional Class) returned 9.46%, the American Beacon Small Cap Index Fund (Institutional Class) returned 8.68% and the American Beacon International Equity Index Fund (Institutional Class) returned 3.84%.


		Sincerely,



		Gene L. Needles, Jr.
		President
		American Beacon Funds

American Beacon S&P 500^® Index Fund ^†

Performance Overview

June 30, 2012 (Unaudited)

For the six months ended June 30, 2012, the total return of the Institutional Class of the American Beacon S&P 500 Index Fund (the “Fund”) was 9.46%, slightly behind the S&P 500 Index (the “Index”) return of 9.49% but above the Lipper S&P 500 Objective Funds Index return of 9.35%


	Annualized Total Returns Periods Ended 6/30/12
	6 Months*			1 Year			5 Years			10 Years
Institutional Class(1,4)		9.46	%		5.34	%		0.17	%		5.20	%
Investor Class(1,2,4)		9.17	%		4.87	%		-0.29	%		4.73	%
Lipper S&P 500 Objective Funds Index (3)		9.35	%		5.21	%		0.02	%		5.09	%
S&P 500 Index (3)		9.49	%		5.45	%		0.22	%		5.33	%

*	Not annualized

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.

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 prospectus for the Institutional and Investor Class shares were 0.16% and 0.64%, respectively. The expense ratios above may vary from the expense ratios presented in other sections of this report which are based on expenses incurred during the period covered by this report.

Performance Summary provided by SSgA Funds Management, Inc.

Amid a steadily firmer undertone for U.S. economic indicators, including the lowest weekly print for new unemployment claims in more than three-and-a-half years and a sizeable jump in the

University of Michigan measure of consumer confidence, U.S. equities enjoyed a buoyant uptrend during the initial weeks of 2012. The Index gained ground in 12 out of the first 14 trading sessions in January. Even though the widely followed benchmark slipped lower in each of the last four days of the month, its worst daily result was a loss of less than 0.6% on January 26, in the wake of the U.S. Federal Reserve’s (the “Fed”) stated intention to keep rates exceptionally low into late 2014. With share prices exhibiting firm underlying support, and the latest batch of earnings reports showing that U.S. corporate profits have continued to hold in well, implied volatility approached its lowest levels in six months. One of the few quibbles regarding the solid start to 2012 was the modest trading volume accompanying the rally. While one could interpret the lighter activity levels as reflecting limited buyer conviction, they may merely arise as a benign consequence of less emotional trading that can frustrate transactions with shorter-term objectives. Even after a lackluster chop into the end of January, the Index retained a generous 4.5% gain for the month. The U.S. dollar retreated in the second half of January as news in Asia looked better and disdain for the euro may have run too far, but non-U.S. equities as represented by the MSCI World ex-U.S. Index only outpaced the Index by 0.9%, returning 5.4% for the month.

Apart from a mild case of nerves in the middle of the month, U.S. stocks continued their solid upward progress during February, bolstered by data releases that corroborated the theme of steady economic recovery. Initial weekly jobless claims declined to just above 350,000, their lowest level in almost four years, and held there. Homebuilder confidence jumped for a fifth consecutive month, printing its best reading since the first half of 2007. Actual home prices remained behind the eight ball, but the more relevant source of hesitation for U.S. equities was likely Moody’s decision to review credit ratings at 17 major financial institutions. Signs that Greece was struggling to adopt mandated austerity measures contributed to the heightened worries about banks, but these concerns ultimately proved no match for abundant liquidity and improving credit markets. The Index maintained its impressive 2012 streak of avoiding any 1% daily losses; its largest decline since the start of the year was just under 0.7% on February 10th. By the end of the month, the Index had climbed 4.3% and extended its year-to-date gain to a bountiful 9.0%. As impressive as these

American Beacon S&P 500^® Index Fund ^†

Performance Overview

June 30, 2012 (Unaudited)

figures were, non-U.S. markets fared even better, enjoying continued relief from a dreary 2011 and benefitting from a number of currency rebounds as well.

Climbing briskly in each of the first three months of 2012, the Index notched its sixth double-digit quarter in the last three years. Its 3.3% March advance lifted the benchmark’s three-month return to 12.6%, representing its best first-quarter result since 1998. With the U.S. dollar showing its mettle, March also saw the Index outperform non-U.S. equities, which lost ground on average in the latest month.

Stocks in the U.S. kicked off the second quarter of 2012 promisingly enough, but after rising smartly on April 2nd, major averages quickly retreated from levels that they would not revisit for the rest of the month. The first hint of trouble came on April 4th, when an auction of Spanish debt met with insufficient demand. The major stumbling block for U.S. sentiment arrived in the form of the March employment report, which showed creation of only 120,000 new jobs, the lowest result since last October. The Index proceeded to decline by more than one percent on two consecutive days, an inauspicious juxtaposition that last occurred in November. The 1.7% decline suffered by the Index on April 10th was its largest daily loss thus far in 2012. Ironically, on that very morning, shares of device darling Apple traded at their all-time record high before pulling back for the rest of the month. The broader S&P 500 Index tried to stabilize, however, after aluminum maker Alcoa opened the earnings reporting season with solid numbers, and other major companies followed by posting generally solid results. Stocks faltered again later in the month when the coalition government in Holland resigned over its inability to institute austerity measures, and Socialist candidate François Hollande delivered a strong showing in the first round of French presidential elections. Healthy profit reports, including another barnburner from Apple, came to the rescue of equities once again. Unfortunately, Apple wound up reflecting the complex cross-currents that buffeted stocks during April. Despite the company’s heroic revenue and profits, the shares of Apple lost value on four of every five days during the last three weeks of the month.

Stocks in the U.S. held their own in early May, even nearing their April highs on the first day of the month, but disappointing payroll data on May 4th quickly took the wind out of the buying

sails. A steady drumbeat of deteriorating news from Europe prevented any swift rebound, as Greek parliamentary voting showed a severely fragmented electorate, and inability to form a government led to plans for new elections. Investor sentiment continued to hesitate through the middle of May, and with many traders trimming existing positions to make room for the widely anticipated offering of Facebook shares, lower prices offered the path of least resistance. The actual opening for Facebook on May 18th was beset with frustrating technology problems that produced delays and inaccuracies in execution and cancellation reports, but the greater indignity was rapid erosion of the Facebook valuation. While the market for initial public offerings accordingly suffered a rude reversal, a batch of better data on home sales helped consumer stocks to bounce back in the latter portion of the month, and defensive sectors were also resilient as bond yields continued to slip. These were hardly enough however, to prevent U.S. equity averages from suffering their first sizable beating since last September. The Index gave back a daunting 6.0% for the month, cutting its year-to-date progress to a solid but unspectacular 5.2%. These results were far less painful than those endured by stocks in Europe and Asia, where double-digit damage was rife.

Despite mild disappointment that the Fed did not announce more outright asset purchases, U.S. equities still ended the second quarter strong after Europe outlined cooperative plans to recapitalize troubled eurozone banks. Thanks to a 4.1% gain in June, more than half of which came on the last day of the month, the Index pared its loss for the second quarter to a manageable 2.8%, and it retains an impressive 9.5% advance since the start of 2012. Only a handful of equity markets around the world could keep pace with this resilience, especially given the backdrop of a firm U.S. dollar. Although the unhedged MSCI EAFE^® benchmark of developed markets (the “EAFE”) bested the Index by nearly 3% in June, the Index lost less than half as much as EAFE did during the full second quarter, and on a year-to-date basis, the Index has gained more than three times as much as the EAFE.

Nine of the ten Global Industry Classification Standards Sectors posted gains during the first half of 2012. Information Technology, Financials, and Consumer Discretionary provided the greatest contribution to return for the first six months. At the other end of the spectrum, Energy

American Beacon S&P 500^® Index Fund ^†

Performance Overview

June 30, 2012 (Unaudited)

was the sole sector that provided a negative contribution to return for the Fund.

Some notable contributors to return for the first half of 2012 were Apple (up 44.2 %), Microsoft (up 19.4%) and AT&T (up 21.4%). Apple continues to produce strong earnings and revenues as demand for their products continues to be very strong.

Google Inc. (down 10.2%), Procter & Gamble (down 6.7%) and McDonalds (down 10.5%) all weighed heavily on both the Fund and Index providing the largest negative contribution to return.

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*
Apple, Inc.		4.4	%
Exxon Mobil Corp.		3.3	%
Microsoft Corp.		1.9	%
International Business Machines Corp.		1.8	%
General Electric Co.		1.8	%
AT&T, Inc.		1.7	%
Chevron Corp.		1.7	%
Johnson & Johnson		1.5	%
Wells Fargo & Co.		1.5	%
Coca-Cola Co.		1.4	%

*	Percent of the Net Assets of State Street Equity 500 Index Portfolio


Sector Allocation

	% of Equities*
Information Technology		19.7	%
Financials		14.4	%
Health Care		12.0	%
Consumer Staples		11.3	%
Consumer Discretionary		11.0	%
Energy		10.8	%
Industrials		10.5	%
Utilities		3.7	%
Materials		3.4	%
Telecommunication Services		3.2	%

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

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

American Beacon Small Cap Index Fund^SM

Performance Overview

June 30, 2012 (Unaudited)

For the six months ended June 30, 2012, the total return of the Institutional Class of the American Beacon Small Cap Index Fund (the “Fund”) was 8.68%. The Fund’s performance was above the Russell 2000^® Index (the “Index”) return of 8.53% and also above the Lipper Small-Cap Core Funds Index return of 6.24% which consists primarily of actively managed funds.


	Annualized Total Returns Periods Ended 6/30/12
	6 Months*			1 Year			5 Years			10 Years
Institutional Class(1,3)		8.68	%		-2.06	%		0.54	%		6.92	%
Lipper Small-Cap Core Funds Index(2)		6.24	%		-3.75	%		0.70	%		7.04	%
Russell 2000 Index(2)		8.53	%		-2.08	%		0.54	%		7.00	%

*	Not annualized

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

3.	The total annual Fund operating expense ratio set forth in the most recent prospectus for the Fund was 0.26%. The expense ratio above may vary from the expense ratio presented in other sections of this report which is based on expenses incurred during the period covered by this report.

Performance Summary provided by BlackRock Investment Management, LLC

Following a highly volatile 2011, financial markets began the year with relative calm as the debt situation in Europe stabilized and global liquidity conditions returned to normal, due mainly to the European Central Bank’s long-term refinancing operations. U.S. economic indicators were positive, with particularly encouraging reports

from the labor market, and the outlook for the global economy brightened. As the investment environment improved and corporate earnings continued to be strong, U.S. equities moved boldly higher through the first two months of 2012.

The rally softened in March when the tone of global news flow darkened. Investors reverted to “risk off” mode and heightened volatility returned to the markets as Europe’s debt problems boiled over once again. Political instability in Greece caused anxiety about whether the country would continue its membership in the euro zone. In Spain, political leaders faced severe deficit and policy-making issues while the nation’s banks clamored for liquidity. Yields on Spanish and Italian sovereign debt rose to levels deemed unsustainable. Stock markets around the world saw increased volatility as investors reacted to news from Europe where leaders conferred and debated vehemently over the need for fiscal integration among the 17 euro-zone nations.

Alongside the drama in Europe, investors became discouraged by gloomy economic reports from various parts of the world. A slowdown in China, a key power house for global growth, was of particular concern. Chinese manufacturing and exports suffered due to weakening demand from larger, developed countries as consumers became more cautious in the mire of the financial situation in Europe. Many European countries fell into recession. In the United States, disappointing jobs reports in the second quarter dealt a crushing blow to sentiment for the U.S. economy after the labor market had been a bright spot earlier in the year.

The resurgence of concerns about global growth and Europe’s debt problems drove equity prices down through April and May. In June, U.S. stocks began a modest rebound as European leaders ramped up their efforts to move toward fiscal unity and investors anticipated additional stimulus from central banks on both sides of the Atlantic. The U.S. economy remained strong relative to other parts of the world and, year-to-date, U.S. stocks generally outperformed international equity markets, which experienced higher levels of volatility amid global uncertainty.

The U.S. economy remained strong relative to other parts of the world and year-to-date, U.S. stocks generally outperformed international equity markets, which experienced higher levels of volatility amid global uncertainty. In the US, small

American Beacon Small Cap Index Fund^SM

Performance Overview

June 30, 2012 (Unaudited)

cap stocks, as represented by the Russell 2000^® Index, advanced 8.53%, trailing large cap stocks represented by the Russell 1000^® Index, which moved up 9.38%. Health Care (up 20.87%) was the strongest-performing sector in the Russell 2000 Index, followed by Financials (up 12.31%), Consumer Discretionary (up 11.99%), Consumer Staples (up 10.05%) and Telecommunication Services (up 6.73%). Information Technology (up 5.11%) posted moderate gains, as did Industrials (up 4.39%), and Materials (up 4.12%). Energy (down 9.73%) finished in negative territory.

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*
Cepheid		0.3	%
Pharmacyclics, Inc.		0.3	%
VIVUS, Inc.		0.2	%
athenahealth, Inc.		0.2	%
HMS Holdings Corp.		0.2	%
Questcor Pharmaceuticals, Inc.		0.2	%
United Natural Foods, Inc.		0.2	%
Woodward, Inc.		0.2	%
Hexcel Corp.		0.2	%
Dril-Quip, Inc.		0.2	%

*	Percent of Net Assets of Master Small Cap Index Series


Sector Allocation

	% of Equities*
Financials		21.3	%
Information Technology		17.5	%
Industrials		15.1	%
Consumer Discretionary		13.8	%
Health Care		13.5	%
Energy		6.0	%
Materials		4.7	%
Consumer Staples		3.7	%
Utilities		3.7	%
Telecommunications		0.7	%

*	Percent of equity portion of Master Small Cap Index Series

American Beacon International Equity Index Fund^SM

Performance Overview

June 30, 2012 (Unaudited)

For the six months ended June 30, 2012, the Institutional Class of the American Beacon International Equity Index Fund (the “Fund”) posted a total return of 3.84%, outperforming the MSCI EAFE Index (the “Index”) return of 2.96% and the Lipper International Large-Cap Core Funds Index return of 3.72% 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 outperformance.


	Annualized Total Returns Periods Ended 6/30/12
	6 Months*			1 Year			5 Years			10 Years
Institutional Class(1,3)		3.84	%		-13.77	%		-6.06	%		5.16	%
Lipper International Large-Cap Core Funds Index(2)		3.72	%		-14.49	%		-6.20	%		4.17	%
MSCI EAFE Index(2)		2.96	%		-13.83	%		-6.10	%		5.14	%

*	Not annualized

The Lipper International Large-Cap Core Funds Index tracks the results of the 30 largest mutual funds in the Lipper Large-Cap Core International Funds category. Lipper is an independent mutual fund research and ranking service. The MSCI EAFE Index is a market capitalization weighted index of international stock performance composed of equities from developed markets excluding the U.S. and Canada. One cannot invest directly in an index.

3.	The total annual Fund operating expense ratio set forth in the most recent prospectus for the Fund was 0.24%. The expense ratio above may vary from the expense ratio presented in other sections of this report, which is based on expenses incurred during the period covered by this report.

Performance Summary provided by BlackRock Investment Management, LLC

Following a highly volatile 2011, financial markets began the new year with relative calm as the debt situation in Europe stabilized and global liquidity conditions returned to normal, due mainly to the European Central Bank’s long-term

refinancing operations. Positive economic indicators, particularly from the United States, brightened the outlook for the global economy. As the market environment improved and corporate earnings continued to be strong, international equities moved boldly higher through the first two months of 2012.

The rally ended in March when the tone of global news flow darkened. Investors reverted to “risk off” mode and heightened volatility returned to the markets as Europe’s debt problems boiled over once again. Political instability in Greece caused anxiety about whether the country would continue its membership in the euro zone. In Spain, political leaders faced severe deficit and policymaking issues while the nation’s banks clamored for liquidity and yields on Spanish government debt rose to levels deemed unsustainable. Heavily-indebted Italy also saw its borrowing costs rise amid mounting pressure across the region. Stock markets around the world saw large daily swings as investors reacted to news from Europe where leaders conferred and debated vehemently over the need for fiscal integration among the 17 euro-zone nations.

Alongside the drama in Europe, investors became discouraged by gloomy economic reports from various parts of the world. A slowdown in China, a key powerhouse for global growth, was of particular concern. Chinese manufacturing and exports suffered due to weakening demand from larger, developed countries where consumers became more cautious in the mire of the financial situation in Europe. Many European countries fell into recession and disappointing reports from the United States reinforced fears about the slowing world economy.

The resurgence of concerns about global growth and Europe’s debt problems drove equity prices down through April and May. In June, international stocks began a rebound as European leaders ramped up their efforts to move toward fiscal unity and investors anticipated additional stimulus from central banks on both sides of the Atlantic.

For the six months ended June 30, 2012, most stock markets of the 22 developed nations represented in the MSCI EAFE Index posted gains. Belgium led the Index with a 19.34% gain. Smaller developed countries outside the euro currency bloc with generally lower debt levels enjoyed strong

American Beacon International Equity Index Fund^SM

Performance Overview

June 30, 2012 (Unaudited)

stock performance, including Singapore (+14.77%), Denmark (14.17%), Hong Kong (+7.88%) and New Zealand (+7.08%). Inside the euro zone, Germany (+5.89%) saw its stocks rise, as did Ireland (+4.46%) and France (+2.10%), and the Netherlands (+0.96%) managed to avoid a loss while the nation struggled with a poorly performing economy. Greek stocks (-18.64%) were hardest hit by the flare-up in the region’s debt problems, followed by Portugal (-17.03%) and Spain (- 15.42%).

From a sector perspective, Consumer Discretionary (+8.97%) led the Index year-to-date. Financials (+7.86%) staged a rebound while Consumer Staples (+6.56%) and Health Care (+6.32%) also performed well. However, the Energy sector (-5.12%) suffered the impact of falling gas prices. Materials (-2.82%) and Information Technology stocks (-2.00%) also finished in negative territory.

Portfolio Strategy

The Fund continues to pursue its objective of closely replicating, before expenses, the return of its benchmark, the 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*
Nestle S.A.		2.0	%
HSBC Holdings plc		1.6	%
Vodafone Group plc		1.4	%
Novartis AG		1.3	%
BP plc		1.3	%
Royal Dutch Shell plc		1.3	%
Roche Holding Ltd.		1.2	%
GlaxoSmithKline plc		1.2	%
Toyota Motor Corp.		1.1	%
BHP Billiton Ltd.		1.1	%

*	Percent of Net Assets of the Master International Index Series


Sector Allocation

	% of Equities*
Financials		22.5	%
Industrials		12.5	%
Consumer Staples		12.0	%
Consumer Discretionary		10.6	%
Health Care		10.1	%
Materials		9.6	%
Energy		8.3	%
Telecommunications		5.6	%
Information Technology		4.5	%
Utilities		4.3	%

*	Percent of equity portion of Master International Index Series

Country Allocation

LOGO


Country Allocation

	% of Equities*
United Kingdom		23.0	%
Japan		21.6	%
France		9.1	%
Australia		8.7	%
Switzerland		8.3	%
Germany		7.9	%
Sweden		3.1	%
Hong Kong		2.9	%
Spain		2.7	%
Netherlands		2.4	%
Italy		2.2	%
Singapore		1.8	%
Denmark		1.1	%
Belgium		1.1	%
Others		0.9	%
Norway		0.9	%
Finland		0.7	%
Israel		0.6	%
Ireland		0.3	%
Austria		0.3	%
Portugal		0.2	%
New Zealand		0.1	%
Greece		0.1	%

*	Percent of equity portion of Master International Index Series

American Beacon Funds^SM

Fund Expenses

June 30, 2012 (Unaudited)

Fund Expense Example

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The examples below are intended to help you understand the ongoing cost (in dollars) of investing in a particular Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2012 through June 30, 2012.

Actual Expenses

The following table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the “Expenses Paid During Period” row to estimate the expenses you paid on your account during this period. Shareholders of the Institutional and Investor Classes that invest in a Fund through an IRA may be subject to a custodial IRA fee of $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 1/1/12	$	1,000.00		$	1,000.00		$	1,000.00		Beginning Account Value 1/1/12	$	1,000.00
Ending Account Value 6/30/12	$	1,094.62		$	1,086.85		$	1,038.37		Ending Account Value 6/30/12	$	1,091.74
Expenses Paid During Period* 1/1/12 – 6/30/12	$	0.68		$	1.04		$	1.22		Expenses Paid During Period* 1/1/12 – 6/30/12	$	3.17
Annualized Expense Ratio		0.13	%		0.20	%		0.24	%	Annualized Expense Ratio		0.61	%

Hypothetical Example for Comparison Purposes

The following table provides information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund’s actual return). You may compare the ongoing costs of investing in a particular Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Institutional and Investor Classes that invest in a Fund through an IRA may be subject to a custodial IRA fee of $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 1/1/12	$	1,000.00		$	1,000.00		$	1,000.00		Beginning Account Value 1/1/12	$	1,000.00
Ending Account Value 6/30/12	$	1,024.22		$	1,023.87		$	1,023.67		Ending Account Value 6/30/12	$	1,021.83
Expenses Paid During Period* 1/1/12 – 6/30/12	$	0.65		$	1.01		$	1.21		Expenses Paid During Period* 1/1/12 – 6/30/12	$	3.07
Annualized Expense Ratio		0.13	%		0.20	%		0.24	%	Annualized Expense Ratio		0.61	%

Expenses are equal to each Fund’s annualized expense ratio for the six-month period multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (182) by days in the year (366) to reflect the half-year period.

American Beacon Funds^SM

Statements of Assets and Liabilities

June 30, 2012 (in thousands, except share and per share amounts) (Unaudited)


	S&P 500 Index Fund			Small Cap Index Fund			International Equity Index Fund
Assets:
Investment in Portfolio, at fair value	$	478,935		$	62,008		$	341,473
Receivable for fund shares sold		541			12			630
Prepaid expenses		29			7			15

Total assets		479,505			62,027			342,118

Liabilities:
Payable for fund shares redeemed		10			308			1,069
Administrative service and service fees payable (Note 2)		25			2			12
Printing fees payable		14			10			11
Professional fees payable		6			10			8
Sub-administration fees payable		—			8			31
Transfer agent fees payable		4			—			3
Trustee fees payable		—			—			1
Other liabilities		1			—			—

Total liabilities		60			338			1,135

Net Assets	$	479,445		$	61,689		$	340,983

Analysis of Net Assets:
Paid-in-capital		430,908			79,699			429,599
Undistributed net investment income (expense)		2,571			719			7,839
Accumulated net realized gain (loss)		(55,761	)		(15,780	)		(74,632	)
Unrealized net appreciation or (depreciation) from investments and futures contracts		101,727			(2,949	)		(21,823	)

Net assets	$	479,445		$	61,689		$	340,983

Shares outstanding at no par value (Unlimited shares authorized):
Institutional Class		24,816,084			4,787,548			39,371,426

Investor Class		1,009,401			—			—

Net asset value, offering and redemption price per share:
Institutional Class (Net assets $460,975,418, $61,688,538, and $340,982,893, respectively)	$	18 .58		$	12 .89		$	8 .66

Investor Class (Net assets $18,469,363)	$	18 .30		$	—		$	—

See accompanying notes

See accompanying Financial Statements of the respective Master Portfolios

American Beacon Funds^SM

Statements of Operations

For the Six Months ended June 30, 2012 (in thousands) (Unaudited)


	S&P 500 Index Fund			Small Cap Index Fund			International Equity Index Fund
Investment Income and (Expense) Allocated From Portfolio:
Dividend income (net of foreign taxes)^A	$	4,984		$	753		$	8,212
Interest income		6			2			2
Securities lending income		—			80			—
Portfolio expenses		(106	)		(46	)		(173	)
Other income		—			—			22

Total investment income and (expense) allocated from Portfolio		4,884			789			8,063

Fund Expenses:
Administrative service fees (Note 2):
Institutional Class		113			28			85
Investor Class		22			—			—
Sub-administrative service fees:
Institutional Class		—			3			66
Transfer agent fees:
Institutional Class		7			3			8
Investor Class		3			—			—
Custody and accounting fees		6			6			6
Professional fees		13			9			13
Registration fees		8			1			6
Service fees - Investor Class (Note 2)		22			—			—
Printing expense		37			12			27
Trustee fees		11			2			10
Insurance expense		4			1			3
Other expenses		4			2			11

Total fund expenses		250			67			235

Net investment income		4,634			722			7,828

Realized and unrealized gain (loss) allocated from Master Portfolio
Net realized gain (loss) from:
Investments		10,799			(590	)		(26,649	)
Foreign currency transactions		—			—			(224	)
Futures contracts		444			(219	)		153
Change in net unrealized appreciation or (depreciation) from:
Investments		23,220			1,642			31,280
Futures contracts		194			(11	)		(215	)

Net gain on investments		34,657			822			4,345

Net increase in net assets resulting from operations	$	39,291		$	1,544		$	12,173

^AForeign taxes	$	7		$	—		$	1

See accompanying notes

See accompanying Financial Statements of the respective Master Portfolios

American Beacon Funds^SM

Statements of Changes in Net Assets (in thousands)


	S&P 500 Index Fund						Small Cap Index Fund						International Equity Index Fund
	Six Months ended June 30, 2012			Year ended December 31, 2011			Six Months ended June 30, 2012			Year ended December 31, 2011			Six Months ended June 30, 2012			Year ended December 31, 2011
	(unaudited)						(unaudited)						(unaudited)
Increase (Decrease) in Net Assets:
Operations:
Net investment income	$	4,634		$	7,865		$	722		$	726		$	7,828		$	10,828
Net realized gain (loss) from investments, foreign currency, and futures contracts		11,243			15,729			(809	)		2,850			(26,720	)		(9,458	)
Change in net unrealized appreciation or (depreciation) from investments and futures contracts		23,414			(14,878	)		1,631			(4,317	)		31,065			(43,917	)

Net increase (decrease) in net assets resulting from operations		39,291			8,716			1,544			(741	)		12,173			(42,547	)

Distributions to Shareholders:
Net investment income:
Institutional Class		(2,151	)		(7,679	)		—			(729	)		—			(10,886	)
Investor Class		(63	)		(289	)		—			—			—			—
Tax return of capital:
Institutional Class		—			(54	)		—			(15	)		—			—
Investor Class		—			(2	)		—			—			—			—

Total distributions to shareholders		(2,214	)		(8,024	)		—			(744	)		—			(10,886	)

Capital Share Transactions:
Proceeds from sales of shares		56,534			214,771			173,030			16,709			40,784			111,683
Reinvestment of dividends and distributions		2,194			8,012			—			744			—			10,886
Cost of shares redeemed		(54,851	)		(184,283	)		(156,042	)		(65,949	)		(33,566	)		(73,599	)

Net increase (decrease) in net assets from capital share transactions		3,877			38,500			16,988			(48,496	)		7,218			48,970

Net increase (decrease) in net assets		40,954			39,192			18,532			(49,981	)		19,391			(4,463	)

Net Assets:
Beginning of period		438,491			399,299			43,157			93,138			321,592			326,055

End of Period *	$	479,445		$	438,491		$	61,689		$	43,157		$	340,983		$	321,592

* Includes undistributed net investment income (loss) of	$	2,571		$	151		$	719		$	(3	)	$	7,839		$	11

See accompanying notes

See accompanying Financial Statements of the respective Master Portfolios

American Beacon Funds^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

1. Organization and Significant Accounting Policies

American Beacon Funds (the “Trust”), which is comprised of 24 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 and the American Beacon International Equity Index Fund (each a “Fund” and collectively, the “Funds”), each a series of the Trust.

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 June 30, 2012
S&P 500 Index Fund	State Street Equity 500 Index Portfolio		25.8	%
Small Cap Index Fund	Master Small Cap Index Series		14.4	%
International Equity Index Fund	Master International Index Series		59.6	%

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

New Accounting Pronouncements

American Beacon Funds^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

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

Service Plans

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

American Beacon Funds^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

quarterly. Distributions, if any, of net realized capital gains are generally paid annually and recorded on the ex-dividend date.

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^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

The tax character of distributions paid during were as follows (in thousands):


	S&P 500 Index				Small Cap Index				International Equity Index
	Six Months Ended June 30, 2012		Year Ended December 31, 2011		Six Months Ended June 30, 2012		Year Ended December 31, 2011		Six Months Ended June 30, 2012		Year Ended December 31, 2011
	(Unaudited)				(Unaudited)				(Unaudited)
Distributions paid from:
Ordinary income:*
Institutional Class	$	—	$	7,679	$	—	$	729	$	—	$	10,886
Investor Class		—		289		—		—		—		—
Return of Capital:
Institutional Class		—		54		—		15		—		—
Investor Class		—		2		—		—		—		—

Total taxable distributions	$	—	$	8,024	$	—	$	744	$	—	$	10,886

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

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 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 for the year ended December 31, 2011 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

For the year ended December 31, 2011, the 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

American Beacon Funds^SM

Notes to Financial Statements

June 30, 2012 (Unaudited)

5. Capital Share Transactions

The tables below summarize the activity in capital shares for each Class of the Funds (shares and dollars in thousands):

For the Six Months ended June 30, 2012


	Institutional Class						Investor Class
S&P 500 Index Fund	Shares			Amount			Shares			Amount
Shares sold		2,786		$	52,229			240		$	4,305
Reinvestment of dividends		111			2,133			3			61
Shares redeemed		(2,854	)		(51,339	)		(194	)		(3,512	)

Net increase in shares outstanding		43		$	3,023			49		$	854


	Institutional Class
Small Cap Index Fund	Shares			Amount
Shares sold		13,179		$	173,030
Reinvestment of dividends		—			—
Shares redeemed		(12,029	)		(156,042	)

Net increase in shares outstanding		1,150		$	16,988


	Institutional Class
International Equity Index Fund	Shares			Amount
Shares sold		4,685		$	40,784
Reinvestment of dividends		—			—
Shares redeemed		(3,781	)		(33,566	)

Net increase in shares outstanding		904		$	7,218

For the 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	)


	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

American Beacon S&P 500 Index Fund^SM

Financial Highlights

(For a share outstanding throughout each period)


	Institutional Class
	Six Months ended June 30, 2012			Year Ended December 31,
	Six Months ended June 30, 2012			2011			2010			2009			2008			2007
	(unaudited)
Net asset value, beginning of period	$	17.05		$	17.07		$	15.15		$	12.21		$	19.85		$	19.19

Income from investment operations:
Net investment income:^A		0.16			0.34			0.29			0.30			0.35			0.39
Net gain (loss) from investments and futures transactions (both realized and unrealized)		1.46			(0.02	)		1.95			2.91			(7.64	)		0.65

Total income (loss) from investment operations		1.62			0.32			2.24			3.21			(7.29	)		1.04

Less distributions:
Dividends from net investment income		(0.09	)		(0.34	)		(0.32	)		(0.27	)		(0.35	)		(0.38	)
Tax return of capital		—			(0.00	)^DE		—			—			—			—

Total distributions		(0.09	)		(0.34	)		(0.32	)		(0.27	)		(0.35	)		(0.38	)

Net asset value, end of period	$	18.58		$	17.05		$	17.07		$	15.15		$	12.21		$	19.85

Total return ^B		9.46	%^C		1.92	%		14.96	%		26.70	%		(37.08	)%		5.39	%

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	460,976		$	422,337		$	381,592		$	316,975		$	224,583		$	271,746
Ratios to average net assets (annualized):^A
Net investment income		1.98	%		1.95	%		1.90	%		2.39	%		2.23	%		1.89	%
Expenses, including expenses allocated from the master portfolio		0.13	%		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 those net asset value may differ from the net asset value and returns for shareholder transactions.

^C	Not annualized.

^D	Amount represents less than $0.01 per share.

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

American Beacon S&P 500 Index Fund^SM

Financial Highlights

(For a share outstanding throughout each period)


Investor Class
Six Months ended June 30, 2012			Year Ended December 31,
Six Months ended June 30, 2012			2011			2010			2009			2008			2007
(unaudited)
$	16.82		$	16.88		$	15.00		$	12.06		$	19.60		$	18.97


	0.50			0.22			0.15			0.33			0.33			0.31
	1.06			0.02			1.99			2.80			(7.60	)		0.62

	1.56			0.24			2.14			3.13			(7.27	)		0.93


	(0.07	)		(0.30	)		(0.26	)		(0.19	)		(0.27	)		(0.30	)
	—			(0.00	)^DE		—			—			—			—

	(0.07	)		(0.30	)		(0.26	)		(0.19	)		(0.27	)		(0.30	)

$	18.30		$	16.82		$	16.88		$	15.00		$	12.06		$	19.60

	9.17	%^C		1.44	%		14.43	%		26.26	%		(37.35	)%		4.88	%


$	18,469		$	16,154		$	17,707		$	22,261		$	12,915		$	18,430

	1.50	%		1.44	%		1.42	%		2.01	%		1.73	%		1.38	%
	0.61	%		0.64	%		0.60	%		0.60	%		0.62	%		0.63	%

American Beacon Small Cap Index Fund^SM

Financial Highlights

(For a share outstanding throughout each period)


	Institutional Class
	Six Months ended June 30, 2012			Year Ended December 31,
	Six Months ended June 30, 2012			2011			2010			2009			2008			2007
	(unaudited)
Net asset value, beginning of period	$	11.86		$	12.64		$	10.06		$	8.00		$	13.51		$	14.89

Income from investment operations:
Net investment income^A		0.18			0.19			0.13			0.10			0.18			0.32
Net gain (loss) from investments and futures transactions (both realized and unrealized)		0.85			(0.76	)		2.59			2.08			(4.78	)		(0.53	)

Total income (loss) from investment operations		1.03			(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	)^BE		(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	$	12.89		$	11.86		$	12.64		$	10.06		$	8.00		$	13.51

Total return ^C		8.68	%^D		(4.54	)%		27.05	%		27.21	%		(33.58	)%		(1.63	)%

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	61,689		$	43,157		$	93,138		$	39,958		$	31,552		$	52,325
Ratios to average net assets (annualized):^A
Net investment income		1.27	%		1.04	%		1.21	%		1.18	%		1.54	%		1.49	%
Expenses, including expenses allocated from the master portfolio		0.20	%		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 those net asset value may differ from the net asset value and returns for shareholder transactions.

^D	Not annualized.

^E	Amount represents less than $0.01 per share.

American Beacon International Equity Index Fund^SM

Financial Highlights

(For a share outstanding throughout each period)


	Institutional Class
	Six Months ended June 30, 2012			Year Ended December 31,
	Six Months ended June 30, 2012			2011			2010			2009			2008			2007
	(unaudited)
Net asset value, beginning of period	$	8.36		$	9.87		$	9.38		$	7.46		$	13.37		$	12.76

Income from investment operations:
Net investment income^A		0.19			0.29			0.22			0.21			0.39			0.51
Net gain (loss) from investments, foreign currency and futures transactions (both realized and unrealized)		0.11			(1.51	)		0.49			1.93			(6.00	)		0.86

Total income (loss) from investment operations		0.30			(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	$	8.66		$	8.36		$	9.87		$	9.38		$	7.46		$	13.37

Total return ^C		3.84	%^D		(12.29	)%		7.57	%		28.72	%		(41.85	)%		10.68	%

Ratios and supplemental data:
Net assets, end of period (in thousands)	$	340,983		$	321,592		$	326,055		$	280,110		$	185,860		$	267,293
Ratios to average net assets (annualized):^A
Net investment income		4.59	%		3.26	%		2.66	%		2.66	%		3.58	%		2.96	%
Expenses, including expenses allocated from the master portfolio		0.24	%		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 those net asset value may differ from the net asset value and returns for shareholder transactions.

^D	Not annualized.

American Beacon Funds^SM

Disclosure Regarding the Board of Trustees’ Approval of the

Management Agreements of the Funds (Unaudited)

At its May 9, 2012 meeting, the Board of Trustees (“Board”) considered the renewal of the existing Management Agreement (the “Agreement”) between American Beacon Advisors, Inc. (the “Manager”) and the American Beacon Funds (“Beacon Trust”) on behalf of each of their series (collectively, the “Funds”). In preparation for the Board’s consideration to renew the Agreement, the Board and its Investment Committee undertook steps to gather and consider information furnished by the Manager and Lipper, Inc. (“Lipper”).

The Board, with the assistance of independent legal counsel, requested and received certain relevant information from the Manager.

In addition, the Board’s Investment Committee worked with Lipper to obtain relevant comparative information regarding the performance, fees and expenses of the Funds. The Investment Committee held a separate meeting on May 4, 2012 to consider the information provided by Lipper. Further, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board and Investment Committee meetings, as well as information specifically prepared in connection with the renewal process.

In connection with the Board’s consideration of the Management Agreement, the Trustees received and evaluated such information as they deemed necessary. The materials requested by the Board included, among other information, the following:

•

a description of any significant changes (actual or anticipated) to principal activities, personnel, services provided to the Funds, or any other area, including how these changes might affect the Funds;

•

a copy of the Manager’s most recent audited or unaudited financial statements, as well as Parts 1 and 2 of its Form ADV registration statement with the SEC;

•

a summary of any material pending or anticipated litigation or regulatory proceedings involving the Manager or its personnel, including the results of any recent regulatory examination or independent audit;

•

a comparison of the performance of that portion of Fund assets managed or to be managed by the Manager with the performance of other similar accounts managed by the Manager, including a discussion of relative performance versus a peer group average and any remedial measures if the Manager’s performance was materially below that of the peer group;

•

any actual or anticipated economies of scale in relation to the services the Manager provides or will provide to each Fund and whether the current fee rates charged or to be charged to each Fund reflects these economies of scale for the benefit of the Fund’s investors;

•

a copy of the Manager’s proxy voting policies and procedures and, if applicable, the name of the third party voting service used by the Manager;

•

an evaluation of any other benefits to the Manager or Funds as a result of their relationship, if any;

•

confirmation that the Manager’s financial condition would not impair its ability to provide high-quality advisory services to the Funds;

•

a description of the scope of portfolio management services provided or to be provided to the Funds, including whether such services differ from the services provided to other clients, including other registered investment companies, and any advantages or disadvantages that might accrue to the Funds due to the Manager’s involvement in other activities;

•

a description of the personnel who are or will be assigned primary responsibility for managing the Funds, including any changes during the past year, and a discussion of the adequacy of current and projected staffing levels to service the Funds;

•

a description of the Manager’s practices in monitoring the quality of portfolio holdings and in reviewing portfolio valuation;

•

a description of the Manager’s use of derivatives, short sells, leveraged trading strategies or other similar trading strategies for the Funds;

•

a discussion regarding the Manager’s participation in third-party and proprietary “soft dollar” arrangements, if any, or other brokerage allocation policies with respect to Fund transactions;

•

a discussion of the Manager’s methodology for obtaining best execution, including any plans to improve the quality of execution in the upcoming year, and the use of any affiliated broker-dealers;

•

a description of any actual or potential conflicts of interest anticipated in managing Fund assets;

•

a discussion of whether the Manager has identified any investment or operational matters that likely present a high risk in managing Fund assets;

•

a description of the Manager’s criteria for assessing counterparties and counterparty risk to the extent the Manager enters into transactions with counterparties on a Fund’s behalf;

•

a description of trade allocation procedures among accounts managed by the Manager;

•

a discussion of whether the Manager utilizes “commission recapture” or “directed brokerage” arrangements for the benefit of the Funds or “step-out” transactions;

•

a discussion of whether the Manager receives, or anticipates receiving, other compensation, including any payment for order flow or ECN liquidity rebates with respect to the Funds;

American Beacon Funds^SM

Disclosure Regarding the Board of Trustees’ Approval of the

Management Agreements of the Funds (Unaudited)

•

a certification by the Manager regarding the reasonable design of its compliance program;

•

a summary of the results of the Manager’s most recent annual review of its compliance program;

•

information regarding the Manager’s code of ethics, insider trading policy and disaster recovery plan, including a description of any material changes thereto and a related certification of compliance by the Manager;

•

a description of the Manager’s affiliation with any broker-dealer;

•

a discussion of any anticipated change in the Manager’s controlling persons; and

•

verification of the Manager’s insurance coverage with regards to the services provided to the Funds.

In addition to the foregoing, the Manager provided the following information specific to the renewal of the Management Agreement:

•

a comparison of the performance of each Fund to comparable investment companies and appropriate indices, including comments on the relative performance of, each Fund versus the respective peer group average;

•

a comparison of advisory fee rates and expense ratios for comparable mutual funds;

•

a profit/loss analysis of the Manager;

•

an analysis of any material complaints received from Fund shareholders;

•

a description of the Manager’s distribution activities with respect to promoting sales of Fund shares, including any revenue sharing practices;

•

a description of the Manager’s securities lending practices and the fees received from such practices;

•

a discussion of any rebate arrangements between the Manager and a service provider to the Funds pursuant to which the Manager receives direct or indirect benefits from the service provider;

•

a description of the portfolio turnover rate and average execution costs for each Fund; and

•

a description of how expenses that are not readily identifiable to a particular Fund are allocated.

In connection with the Management Agreement, the Board also obtained an analysis provided by Lipper that compared: (i) investment performance of each Fund versus comparable investment companies and appropriate indices; (ii) total Fund expenses of each Fund versus comparable mutual funds; and (iii) each Fund’s investment advisory fee rate versus comparable mutual funds. For each Fund with more than one class of shares, the class of shares used for comparative purposes was the class with the longest performance history, which in most cases was the Institutional Class. References below to each Fund’s Lipper peer group are to the group of comparable mutual funds included in the analysis provided by Lipper.

Provided below is an overview of the primary factors the Trustees considered at the Investment Committee meeting on May 4, 2012 at which the Trustees reviewed the investment performance of the Manager and the primary factors considered by the Board at its May 9, 2012 meeting at which the Board considered the renewal of the Management Agreement.

The Board did not identify any particular information that was most relevant to its consideration to renew the Management Agreement, and each Trustee may have afforded different weight to the various factors. Legal counsel to the independent Trustees provided the Board with a memorandum regarding its responsibilities pertaining to the renewal of the Management Agreement. The memorandum explained the regulatory requirements surrounding the Trustees’ process for evaluating investment advisors and the terms of the contracts. Based on its evaluation, the Board unanimously concluded that the terms of each Agreement were reasonable and fair and that the renewal of the Management Agreement was in the best interests of the Funds and their shareholders.

Considerations With Respect to the Renewal of the Management Agreement

In determining whether to renew the Management Agreement on behalf of the Funds, the Trustees considered the best interests of each Fund separately. While the Management Agreement for all of the Funds was considered at the May 9, 2012 meeting, the Board considered each Fund’s investment management relationship separately.

In each instance, the Board considered, among other things, the following factors: (1) the nature, extent and quality of the services provided; (2) the investment performance of a Fund; (3) the costs incurred by the Manager in rendering services to the Funds and its resulting profits or losses; (4) the extent to which economies of scale have been taken into account in setting each fee schedule; (5) whether fee levels reflect these economies of scale for the benefit of Fund investors; (6) comparisons of services and fee rates with contracts entered into by the Manager or their affiliates with other clients (such as pension funds and other institutional funds); and (7) any other benefits derived or anticipated to be derived by the Manager from their relationship with a Fund. The Trustees posed questions to various management personnel of the Manager regarding certain key aspects of the materials submitted in support of the renewal.

Nature, Extent and Quality of Services. With respect to the renewal of the Management Agreement, the Board considered, among other factors: each Fund’s long-term performance and the background and experience of key investment personnel at the Manager; the low cost structure of the Funds; the Manager’s culture of compliance and support for compliance operations that reduce risks to the Funds; the Manager’s commitment to enhance the Funds’ product line and increase assets in the Funds; the Manager’s high quality of services; the Manager’s commitment to training employees; and the Manager’s efforts to retain key employees and maintain staff levels.

Investment Performance. The Board evaluated the comparative information provided by Lipper and the Manager regarding each Fund’s investment performance relative to its benchmark index(es) and peer group. The Board considered the information provided by Lipper regarding its independent peer selection methodology to select all peer groups and universes. The Board also considered the

American Beacon Funds^SM

Disclosure Regarding the Board of Trustees’ Approval of the

Management Agreements of the Funds (Unaudited)

performance reports and discussions with management at Board and Committee meetings throughout the year. A discussion regarding the Board’s considerations with respect to each Fund’s performance appears below under “Additional Considerations and Conclusions with Respect to Each Fund.”

Costs of the Services Provided to the Funds and the Profits Realized by the Manager from its Relationship with the Funds. In analyzing the cost of services and profitability of the Manager, the Board considered the revenues earned and the expenses incurred by the Manager. The profits or losses were noted at both an aggregate level for all Funds and at an individual Fund level, with some Funds being profitable for the Manager and with the Manager sustaining losses with respect to other Funds. The Board also considered that the Management Agreement for the Beacon Trust stipulates that, to the extent that a Fund invests all of its investable assets in another registered investment company (i.e., is a “Feeder Fund”), the Fund will not pay the Manager a management fee. Although the Board noted that, in certain cases, the fee rates paid by other clients of the Manager are lower than the fee rates paid by the Funds, the difference reflects the greater level of responsibility and regulatory requirements associated with managing the Funds.

The Board also noted that the Manager proposed to continue the expense waivers and reimbursements for certain Funds and classes that were in place during the last fiscal year and to put in place new expense waivers and reimbursements for certain new classes of the Funds and new series of the Beacon Trust. The Board considered that the Manager receives service and administrative fees to compensate the Manager for providing administrative services to the Funds and to compensate third-party administrators and broker-dealers for services to Fund shareholders. In addition, the Board considered that the Manager receives management fees for overseeing the securities lending program on behalf of various Funds. The Board also noted that certain classes of the Funds maintain higher expense ratios in order to compensate third-party distributors.

Based on the foregoing information, the Board concluded that the profitability levels of the Manager were reasonable in light of the services performed by the Manager. A discussion regarding the Board’s considerations with respect to each Fund’s fee rates is set forth below under “Additional Considerations and Conclusions with Respect to Each Fund.”

Economies of Scale. The Board noted the Manager’s representation that many of the Funds benefit from economies of scale because comparably low fee rate levels are reflected in the current management and administration fee rates the Manager charges. The Board further noted the Manager’s representation that many of the Funds benefit from these comparably low fee rate levels despite not having yet reached an asset size at which economies of scale would traditionally be considered to exist, and the Manager’s belief that breakpoints are not appropriate at this time. Based on the foregoing information, the Board concluded that the Manager fee schedules for each Fund provides for a reasonable sharing of benefits from any economies of scale with the Funds.

Benefits Derived from the Relationship with the Funds. The Board considered the “fall-out” or ancillary benefits that accrue to the Manager as a result of the advisory relationships with the Funds, including greater exposure in the marketplace with respect to the Manager’s investment process and expanding the level of assets under management by the Manager.

In addition, the Manager noted that the Trusts also derive benefits from their association with the Manager. Specifically, the Board noted the Manager’s representation that it provides services to most Funds at a lower than industry average cost. The Board also considered that the Funds did not pay commissions to any affiliated broker-dealer of the Manager during the most recent fiscal year ended December 31, 2011.

Based on the foregoing information, the Board concluded that the potential benefits accruing to the Manager by virtue of its relationships with the Funds appear to be fair and reasonable.

Additional Considerations and Conclusions with Respect to Each Fund

The performance comparisons below were made versus each Fund’s Lipper peer universe median and/or benchmark index. References to the Lipper expense universe below are to the group of comparable mutual funds included in the analysis provided to the Trustees by Lipper. In reviewing the performance, the Trustees viewed longer-term performance over five years or longer as the most important consideration, because relative performance over shorter periods may be significantly impacted by market or economic events that do not reflect manager skill.

Additional Considerations and Conclusions with Respect to the American Beacon International Equity Index Fund

In considering the renewal of the Management Agreement for the American Beacon International Equity Index Fund, the Trustees considered the following additional factors: (1) the American Beacon International Equity Index Fund’s master portfolio outperformed the peer universe median for the one- and three-year periods ended March 31, 2012, but underperformed for the five-year period; and (2) the Fund’s expense ratio was ranked better than the median of its Lipper expense universe.

Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the American Beacon International Equity Index Fund and its shareholders would benefit from the Manager’s continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the American Beacon International Equity Index Fund.

Additional Considerations and Conclusions with Respect to the American Beacon S&P 500 Index Fund

In considering the renewal of the Management Agreement for the American Beacon S&P 500 Index Fund, the Trustees considered the following additional factors: (1) the American Beacon S&P 500 Index Fund’s master portfolio outperformed the peer universe median

American Beacon Funds^SM

Disclosure Regarding the Board of Trustees’ Approval of the

Management Agreements of the Funds (Unaudited)

for the one-, three- and five-year periods ended March 31, 2012; and (2) the Fund’s actual total expense ratio ranked better than the median of its Lipper expense group.

Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the American Beacon S&P 500 Index Fund and its shareholders would benefit from the Manager’s continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the American Beacon S&P 500 Index Fund.

Additional Considerations and Conclusions with Respect to the American Beacon Small Cap Index Fund

In considering the renewal of the Management Agreement for the American Beacon Small Cap Index Fund, the Trustees considered the following additional factors: (1) the American Beacon Small Cap Index Fund’s master portfolio outperformed the peer universe median for the three-year period ended March 31, 2012, but underperformed the peer universe median for the one- and five-year periods; and (2) the Fund’s expense ratio ranked better than the median of its Lipper expense universe.

Based on these and other considerations the Trustees (1) concluded that the fees paid to the Manager under the Management Agreement are fair and reasonable, (2) determined that the American Beacon Small Cap Index Fund and its shareholders would benefit from the Manager’s continued management of the Fund and (3) approved the renewal of the Management Agreement with respect to the American Beacon Small Cap Index Fund.

State Street Equity 500 Index Portfolio

Portfolio of Investments

June 30, 2012 (Unaudited)


	Shares		Market Value (000)
COMMON STOCKS – 98.2%
Consumer Discretionary – 11.3%
Abercrombie & Fitch Co. Class A		13,046	$	445
Amazon.com, Inc.^(a)		53,692		12,261
Apollo Group, Inc. Class A^(a)		18,029		652
AutoNation, Inc.^(a)		6,363		224
AutoZone, Inc.^(a)		4,064		1,492
Bed Bath & Beyond, Inc.^(a)		34,645		2,141
Best Buy Co., Inc.		42,119		883
Big Lots, Inc.^(a)		9,227		376
BorgWarner, Inc.^(a)		17,100		1,122
Cablevision Systems Corp.		35,600		473
CarMax, Inc.^(a)		34,000		882
Carnival Corp.		66,350		2,274
CBS Corp. Class B		95,203		3,121
Chipotle Mexican Grill, Inc.^(a)		4,700		1,786
Coach, Inc.		42,328		2,475
Comcast Corp. Class A		401,848		12,847
D.R. Horton, Inc.		40,376		742
Darden Restaurants, Inc.		18,088		916
DeVry, Inc.		10,400		322
Direct TV. Class A^(a)		95,977		4,686
Discovery Communications, Inc. Class A^(a)		37,100		2,003
Dollar Tree, Inc.^(a)		34,600		1,861
eBay, Inc.^(a)		171,103		7,188
Expedia, Inc.		14,357		690
Family Dollar Stores, Inc.		16,858		1,121
Ford Motor Co.		563,998		5,409
Fossil, Inc.^(a)		7,800		597
GameStop Corp. Class A		19,500		358
Gannett Co., Inc.		33,574		495
Gap, Inc.		47,898		1,310
Genuine Parts Co.		23,809		1,434
Goodyear Tire & Rubber Co.^(a)		34,957		413
H&R Block, Inc.		47,115		753
Harley-Davidson, Inc.		33,101		1,514
Harman International Industries, Inc.		9,721		385
Hasbro, Inc.		17,825		604
Home Depot, Inc.		227,512		12,056
Host Hotels & Resorts, Inc.		101,921		1,612
International Game Technology		47,919		755
Interpublic Group of Cos., Inc.		71,894		780
JC Penney Co., Inc.		21,810		508
Johnson Controls, Inc.		100,686		2,790
Kohl’s Corp.		36,633		1,666
Lennar Corp. Class A		25,931		802
Limited Brands, Inc.		35,867		1,525
Lowe’s Cos., Inc.		174,862		4,973
Macy’s, Inc.		59,723		2,051
Marriott International, Inc. Class A		40,450		1,586
Mattel, Inc.		50,676		1,644
McDonald’s Corp.		151,425		13,406
McGraw-Hill Cos., Inc.		40,666		1,830
NetFlix, Inc.^(a)		8,000		548
Newell Rubbermaid, Inc.		42,693		774
News Corp. Class A		309,909		6,908
NIKE, Inc. Class B		53,852		4,727
Nordstrom, Inc.		24,133		1,199
O’Reilly Automotive, Inc.^(a)		19,400		1,625


	Shares		Market Value (000)
Omnicom Group, Inc.		41,641	$	2,024
Priceline.com, Inc.^(a)		7,390		4,911
PulteGroup, Inc.^(a)		54,705		585
Ralph Lauren Corp.		9,815		1,375
Ross Stores, Inc.		34,500		2,155
Scripps Networks Interactive, Inc. Class A		13,135		747
Sears Holdings Corp.^(a)		5,374		321
Snap-on, Inc.		9,212		573
Stanley Black & Decker, Inc.		25,407		1,635
Staples, Inc.		101,833		1,329
Starbucks Corp.		112,861		6,018
Starwood Hotels & Resorts Worldwide, Inc.		29,347		1,557
Target Corp.		97,116		5,651
Tiffany & Co.		19,880		1,053
Time Warner Cable, Inc.		46,871		3,848
Time Warner, Inc.		144,391		5,559
TJX Cos., Inc.		111,812		4,800
TripAdvisor, Inc.^(a)		14,357		642
Urban Outfitters, Inc.^(a)		18,300		505
V.F. Corp.		12,793		1,707
Viacom, Inc. Class B		77,222		3,631
Walt Disney Co.		264,545		12,830
Washington Post Co. Class B		660		247
Whirlpool Corp.		11,361		695
Wyndham Worldwide Corp.		22,699		1,197
Wynn Resorts, Ltd.		11,500		1,193
Yum! Brands, Inc.		67,892		4,374

				211,182

Consumer Staples – 10.9%
Altria Group, Inc.		301,599		10,420
Archer-Daniels-Midland Co.		98,724		2,914
Avon Products, Inc.		67,660		1,097
Beam, Inc.		23,345		1,459
Brown-Forman Corp. Class B		14,255		1,381
Campbell Soup Co.		26,665		890
Clorox Co.		18,643		1,351
Coca-Cola Co.		335,011		26,195
Coca-Cola Enterprises, Inc.		46,401		1,301
Colgate-Palmolive Co.		70,501		7,339
ConAgra Foods, Inc.		59,575		1,545
Constellation Brands, Inc. Class A^(a)		23,026		623
Costco Wholesale Corp.		64,789		6,155
CVS Caremark Corp.		188,932		8,829
Dean Foods Co.^(a)		23,558		401
Dr Pepper Snapple Group, Inc.		32,000		1,400
Estee Lauder Cos., Inc. Class A		33,704		1,824
General Mills, Inc.		95,264		3,671
H.J. Heinz Co.		48,169		2,619
Hormel Foods Corp.		21,200		645
Kellogg Co.		37,035		1,827
Kimberly-Clark Corp.		58,500		4,901
Kraft Foods, Inc. Class A		260,709		10,069
Kroger Co.		83,976		1,947
Lorillard, Inc.		19,461		2,568
McCormick & Co., Inc.		20,753		1,259
Molson Coors Brewing Co. Class B		22,062		918
Monster Beverage Corp.^(a)		22,700		1,616

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Portfolio of Investments — (continued)

June 30, 2012 (Unaudited)


	Shares		Market Value (000)
COMMON STOCKS – (continued)
Consumer Staples – (continued)
PepsiCo, Inc.		231,254	$	16,340
Philip Morris International, Inc.		252,399		22,024
Procter & Gamble Co.		407,719		24,973
Reynolds American, Inc.		49,574		2,224
Safeway, Inc.		37,164		675
Sysco Corp.		85,409		2,546
The Hershey Co.		21,782		1,569
The J.M. Smucker Co.		16,460		1,243
Tyson Foods, Inc. Class A		44,235		833
Wal-Mart Stores, Inc.		256,502		17,883
Walgreen Co.		127,618		3,775
Whole Foods Market, Inc.		23,733		2,262

				203,511

Energy – 10.6%
Alpha Natural Resources, Inc.^(a)		35,600		310
Anadarko Petroleum Corp.		73,726		4,881
Apache Corp.		57,225		5,029
Baker Hughes, Inc.		64,573		2,654
Cabot Oil & Gas Corp.		32,600		1,284
Cameron International Corp.^(a)		36,000		1,538
Chesapeake Energy Corp.		97,082		1,806
Chevron Corp.^(b)		292,746		30,885
ConocoPhillips		188,730		10,546
Consol Energy, Inc.		34,973		1,058
Denbury Resources, Inc.^(a)		61,500		929
Devon Energy Corp.		59,651		3,459
Diamond Offshore Drilling, Inc.		10,200		603
EOG Resources, Inc.		39,917		3,597
EQT Corp.		23,300		1,250
ExxonMobil Corp.^(b)		693,147		59,313
FMC Technologies, Inc.^(a)		36,600		1,436
Halliburton Co.		138,234		3,924
Helmerich & Payne, Inc.		16,300		709
Hess Corp.		45,201		1,964
Kinder Morgan, Inc.		75,026		2,417
Marathon Oil Corp.		101,977		2,608
Marathon Petroleum Corp.		52,388		2,353
Murphy Oil Corp.		29,741		1,496
Nabors Industries, Ltd.^(a)		42,504		612
National Oilwell Varco, Inc.		62,457		4,025
Newfield Exploration Co.^(a)		20,600		604
Noble Corp.^(a)		39,400		1,282
Noble Energy, Inc.		26,610		2,257
Occidental Petroleum Corp.		119,644		10,262
Peabody Energy Corp.		39,324		964
Phillips 66^(a)		92,965		3,090
Pioneer Natural Resources Co.		18,100		1,597
QEP Resources, Inc.		27,068		811
Range Resources Corp.		23,400		1,448
Rowan Cos. PLC Class A^(a)		19,620		634
Schlumberger, Ltd.		198,158		12,862
Southwestern Energy Co.^(a)		50,800		1,622
Spectra Energy Corp.		97,598		2,836
Sunoco, Inc.		17,184		816
Tesoro Corp.^(a)		20,765		518
Valero Energy Corp.		84,209		2,034
Williams Cos., Inc.		88,668		2,555


	Shares		Market Value (000)
WPX Energy, Inc.^(a)		30,856	$	499

				197,377

Financials – 14.9%
ACE, Ltd.		50,500		3,744
AFLAC, Inc.		67,790		2,887
Allstate Corp.		72,806		2,555
American Express Co.		147,564		8,590
American International Group, Inc.^(a)		96,333		3,091
American Tower Corp. REIT		58,200		4,069
Ameriprise Financial, Inc.		34,007		1,777
Aon PLC		48,947		2,290
Apartment Investment & Management Co. Class A		17,052		461
Assurant, Inc.		14,131		492
AvalonBay Communities, Inc.		13,898		1,966
Bank of America Corp.		1,599,671		13,085
Bank of New York Mellon Corp.		177,785		3,902
BB&T Corp.		105,170		3,245
Berkshire Hathaway, Inc. Class B^(a)		260,103		21,674
BlackRock, Inc.		19,234		3,266
Boston Properties, Inc.		21,667		2,348
Capital One Financial Corp.		83,063		4,540
CBRE Group, Inc.^(a)		49,575		811
Charles Schwab Corp.		158,493		2,049
Chubb Corp.		39,975		2,911
Cincinnati Financial Corp.		25,114		956
Citigroup, Inc.		436,520		11,965
CME Group, Inc.		10,091		2,706
Comerica, Inc.		28,944		889
DDR Corp. REIT		1,532		22
Discover Financial Services		76,705		2,653
E*Trade Financial Corp.^(a)		35,531		286
Equity Residential		44,057		2,747
Federated Investors, Inc. Class B		14,870		325
Fifth Third Bancorp		133,016		1,782
First Horizon National Corp.		31,455		272
Franklin Resources, Inc.		21,480		2,384
Genworth Financial, Inc. Class A^(a)		72,151		408
Goldman Sachs Group, Inc.		72,734		6,972
Hartford Financial Services Group, Inc.		62,497		1,102
HCP, Inc.		60,000		2,649
Health Care REIT, Inc.		31,500		1,836
Hudson City Bancorp, Inc.		76,692		489
Huntington Bancshares, Inc.		127,456		816
IntercontinentalExchange, Inc.^(a)		11,180		1,520
Invesco, Ltd.		68,200		1,541
J.P. Morgan Chase & Co.		564,515		20,170
KeyCorp		132,775		1,028
Kimco Realty Corp.		62,669		1,193
Legg Mason, Inc.		18,042		476
Leucadia National Corp.		29,736		633
Lincoln National Corp.		42,592		932
Loews Corp.		45,931		1,879
M & T Bank Corp.		18,937		1,564
Marsh & McLennan Cos., Inc.		81,553		2,628
Mastercard, Inc. Class A		15,900		6,839
MetLife, Inc.		156,896		4,840
Moody’s Corp.		30,266		1,106
Morgan Stanley		228,230		3,330

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Portfolio of Investments — (continued)

June 30, 2012 (Unaudited)


	Shares		Market Value (000)
COMMON STOCKS – (continued)
Financials – (continued)
NASDAQ OMX Group, Inc.		18,400	$	417
Northern Trust Corp.		35,806		1,648
NYSE Euronext		40,200		1,028
Paychex, Inc.		46,338		1,456
People’s United Financial, Inc.		57,000		662
PNC Financial Services Group, Inc.		79,017		4,829
Principal Financial Group, Inc.		45,291		1,188
Progressive Corp.		92,901		1,935
ProLogis, Inc.		68,799		2,286
Prudential Financial, Inc.		69,239		3,353
Public Storage, Inc.		21,387		3,089
Regions Financial Corp.		201,489		1,360
Simon Property Group, Inc.		45,015		7,007
SLM Corp.		68,754		1,080
State Street Corp.^(c)		71,725		3,202
SunTrust Banks, Inc.		77,618		1,881
T. Rowe Price Group, Inc.		38,275		2,410
Torchmark Corp.		14,931		755
Total System Services, Inc.		21,275		509
Travelers Cos., Inc.		58,204		3,716
U.S. Bancorp		279,252		8,981
Unum Group		41,829		800
Ventas, Inc.		42,400		2,676
Visa, Inc. Class A		73,300		9,062
Vornado Realty Trust		27,714		2,327
Wells Fargo & Co.		789,749		26,409
Western Union Co.		93,285		1,571
XL Group PLC		44,468		936
Zions Bancorp.		30,453		591

				277,855

Health Care – 11.6%
Abbott Laboratories		232,306		14,977
Aetna, Inc.		51,350		1,991
Alexion Pharmaceuticals, Inc.^(a)		27,900		2,771
Allergan, Inc.		45,192		4,183
AmerisourceBergen Corp.		38,686		1,522
Amgen, Inc.		115,545		8,439
Baxter International, Inc.		80,661		4,287
Becton Dickinson and Co.		30,697		2,295
Biogen Idec, Inc.^(a)		34,931		5,043
Boston Scientific Corp.^(a)		219,034		1,242
Bristol-Myers Squibb Co.		248,616		8,938
C.R. Bard, Inc.		12,097		1,300
Cardinal Health, Inc.		50,757		2,132
CareFusion Corp.^(a)		33,878		870
Celgene Corp.^(a)		66,018		4,236
Cerner Corp.^(a)		21,200		1,752
CIGNA Corp.		43,496		1,914
Coventry Health Care, Inc.		21,903		696
Covidien PLC		72,400		3,873
DaVita, Inc.^(a)		14,600		1,434
Dentsply International, Inc.		20,800		786
Edwards Lifesciences Corp.^(a)		17,800		1,839
Eli Lilly & Co.		152,275		6,534
Express Scripts Holding Co.^(a)		119,214		6,656
Forest Laboratories, Inc.^(a)		39,802		1,393
Gilead Sciences, Inc.^(a)		113,499		5,820


	Shares		Market Value (000)
Hospira, Inc.^(a)		25,303	$	885
Humana, Inc.		24,707		1,913
Intuitive Surgical, Inc.^(a)		5,800		3,212
Johnson & Johnson		406,349		27,453
Laboratory Corp. of America Holdings^(a)		14,322		1,326
Life Technologies Corp.^(a)		27,887		1,255
McKesson Corp.		34,355		3,221
Mead Johnson Nutrition Co.		29,418		2,368
Medtronic, Inc.		153,878		5,960
Merck & Co., Inc.		452,870		18,907
Mylan, Inc.^(a)		63,309		1,353
Patterson Cos., Inc.		12,894		444
Perrigo Co.		13,400		1,580
Pfizer, Inc.		1,108,511		25,496
Quest Diagnostics, Inc.		24,000		1,438
St. Jude Medical, Inc.		47,926		1,913
Stryker Corp.		49,289		2,716
Tenet Healthcare Corp.^(a)		73,370		384
UnitedHealth Group, Inc.		152,996		8,950
Varian Medical Systems, Inc.^(a)		16,160		982
Watson Pharmaceuticals, Inc.^(a)		19,646		1,454
WellPoint, Inc.		49,138		3,135
Zimmer Holdings, Inc.		26,652		1,715

				214,983

Industrials – 10.4%
3M Co.		102,972		9,226
Amphenol Corp. Class A		24,600		1,351
Avery Dennison Corp.		15,388		421
Boeing Co.		110,888		8,239
Caterpillar, Inc.		96,779		8,218
CH Robinson Worldwide, Inc.		23,961		1,402
Cintas Corp.		17,588		679
Cooper Industries PLC		22,900		1,561
CSX Corp.		153,214		3,426
Cummins, Inc.		28,058		2,719
Danaher Corp.		84,672		4,410
Deere & Co.		59,237		4,791
Dover Corp.		28,195		1,512
Eaton Corp.		49,190		1,949
Emerson Electric Co.		109,448		5,098
Equifax, Inc.		17,983		838
Expeditors International Washington, Inc.		30,720		1,190
Fastenal Co.		43,400		1,750
FedEx Corp.		47,100		4,315
First Solar, Inc.^(a)		8,070		122
Flir Systems, Inc.		23,500		458
Flowserve Corp.		8,400		964
Fluor Corp.		25,160		1,241
Fortune Brands Home & Security, Inc.^(a)		1,145		26
General Dynamics Corp.		53,861		3,553
General Electric Co.		1,566,733		32,651
Goodrich Corp.		18,845		2,391
Honeywell International, Inc.		115,581		6,454
Illinois Tool Works, Inc.		69,871		3,696
Ingersoll-Rand PLC		43,200		1,822
Iron Mountain, Inc.		23,600		778

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Portfolio of Investments — (continued)

June 30, 2012 (Unaudited)


	Shares		Market Value (000)
COMMON STOCKS – (continued)
Industrials – (continued)
Jacobs Engineering Group, Inc.^(a)		20,400	$	772
Joy Global, Inc.		15,000		851
L-3 Communications Holdings, Inc.		14,003		1,036
Leggett & Platt, Inc.		20,398		431
Lockheed Martin Corp.		38,852		3,383
Masco Corp.		57,123		792
Norfolk Southern Corp.		49,255		3,535
Northrop Grumman Corp.		37,911		2,418
PACCAR, Inc.		54,074		2,119
Pall Corp.		17,409		954
Parker Hannifin Corp.		22,703		1,745
Pitney Bowes, Inc.		29,727		445
Precision Castparts Corp.		21,407		3,521
Quanta Services, Inc.^(a)		31,200		751
R.R. Donnelley & Sons Co.		29,609		349
Raytheon Co.		48,482		2,744
Republic Services, Inc.		45,703		1,209
Robert Half International, Inc.		18,840		538
Rockwell Automation, Inc.		20,505		1,355
Rockwell Collins, Inc.		22,531		1,112
Roper Industries, Inc.		15,000		1,479
Ryder System, Inc.		7,921		285
Southwest Airlines Co.		115,986		1,069
Stericycle, Inc.^(a)		12,900		1,183
Textron, Inc.		40,939		1,018
Thermo Fisher Scientific, Inc.		53,924		2,799
Tyco International, Ltd.		68,400		3,615
Union Pacific Corp.		70,668		8,431
United Parcel Service, Inc. Class B		142,346		11,211
United Technologies Corp.		134,178		10,135
W.W. Grainger, Inc.		9,169		1,754
Waste Management, Inc.		69,639		2,326
Xylem, Inc.		28,692		722

				193,338

Information Technology – 18.1%
Accenture PLC Class A		97,000		5,829
Adobe Systems, Inc.^(a)		74,357		2,407
Advanced Micro Devices, Inc.^(a)		84,086		482
Agilent Technologies, Inc.		52,168		2,047
Akamai Technologies, Inc.^(a)		27,324		868
Altera Corp.		46,954		1,589
Analog Devices, Inc.		44,869		1,690
AOL, Inc.^(a)(d)		1		–
Apple, Inc.^(a)		138,584		80,933
Applied Materials, Inc.		192,207		2,203
Autodesk, Inc.^(a)		32,776		1,147
Automatic Data Processing, Inc.		72,417		4,031
BMC Software, Inc.^(a)		23,221		991
Broadcom Corp. Class A^(a)		71,559		2,419
CA, Inc.		52,999		1,436
Cisco Systems, Inc.		795,419		13,657
Citrix Systems, Inc.^(a)		28,167		2,364
Cognizant Technology Solutions Corp. Class A^(a)		45,884		2,753
Computer Sciences Corp.		23,144		574
Corning, Inc.		230,376		2,979
Dell, Inc.^(a)		216,150		2,706


	Shares		Market Value (000)
Dun & Bradstreet Corp.		7,100	$	505
Electronic Arts, Inc.^(a)		50,400		622
EMC Corp.^(a)		302,084		7,742
F5 Networks, Inc.^(a)		12,200		1,215
Fidelity National Information Services, Inc.		33,577		1,144
Fiserv, Inc.^(a)		21,052		1,520
Google, Inc. Class A^(a)		37,490		21,747
Harris Corp.		15,800		661
Hewlett-Packard Co.		290,416		5,840
Intel Corp.		743,456		19,813
International Business Machines Corp.		170,842		33,413
Intuit, Inc.		43,763		2,597
Jabil Circuit, Inc.		27,551		560
Juniper Networks, Inc.^(a)		78,593		1,282
KLA-Tencor Corp.		25,205		1,241
Lam Research Corp.^(a)		29,758		1,123
Lexmark International, Inc. Class A		10,042		267
Linear Technology Corp.		35,263		1,105
LSI Corp.^(a)		89,162		568
Microchip Technology, Inc.		29,389		972
Micron Technology, Inc.^(a)		147,162		929
Microsoft Corp.^(b)		1,105,935		33,831
Molex, Inc.		19,805		474
Motorola Solutions, Inc.		43,652		2,100
NetApp, Inc.^(a)		54,057		1,720
NVIDIA Corp.^(a)		93,456		1,292
Oracle Corp.		573,762		17,041
PerkinElmer, Inc.		15,618		403
QUALCOMM, Inc.		254,811		14,188
Red Hat, Inc.^(a)		27,500		1,553
SAIC, Inc.		42,900		520
Salesforce.com, Inc.^(a)		20,100		2,779
SanDisk Corp.^(a)		35,067		1,279
Seagate Technology PLC		56,100		1,387
Symantec Corp.^(a)		110,863		1,620
TE Connectivity, Ltd.		64,000		2,042
Teradata Corp.^(a)		24,120		1,737
Teradyne, Inc.^(a)		28,149		396
Texas Instruments, Inc.		169,599		4,866
VeriSign, Inc.^(a)		22,021		959
Waters Corp.^(a)		13,765		1,094
Western Digital Corp.^(a)		35,600		1,085
Xerox Corp.		191,401		1,506
Xilinx, Inc.		39,402		1,323
Yahoo!, Inc.^(a)		182,919		2,896

				336,062

Materials – 3.5%
Air Products & Chemicals, Inc.		31,909		2,576
Airgas, Inc.		10,400		874
Alcoa, Inc.		155,249		1,358
Allegheny Technologies, Inc.		17,228		549
Ball Corp.		22,024		904
Bemis Co., Inc.		14,462		453
CF Industries Holdings, Inc.		9,850		1,908
Cliffs Natural Resources, Inc.		22,200		1,094
Dow Chemical Co.		175,728		5,535
E.I. du Pont de Nemours & Co.		137,012		6,929

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Portfolio of Investments — (continued)

June 30, 2012 (Unaudited)


	Shares		Market Value (000)
COMMON STOCKS – (continued)
Materials – (continued)
Eastman Chemical Co.		20,708	$	1,043
Ecolab, Inc.		42,866		2,938
FMC Corp.		21,400		1,145
Freeport-McMoRan Copper & Gold, Inc. Class B		141,104		4,807
International Flavors & Fragrances, Inc.		13,031		714
International Paper Co.		64,111		1,853
MeadWestvaco Corp.		26,720		768
Monsanto Co.		79,455		6,577
Mosaic Co.		43,800		2,399
Newmont Mining Corp.		72,206		3,503
Nucor Corp.		46,454		1,761
Owens-Illinois, Inc.^(a)		24,000		460
Plum Creek Timber Co., Inc.		25,311		1,005
PPG Industries, Inc.		21,971		2,332
Praxair, Inc.		44,511		4,840
Sealed Air Corp.		28,792		445
Sherwin-Williams Co.		12,896		1,707
Sigma-Aldrich Corp.		17,234		1,274
Titanium Metals Corp.		10,800		122
United States Steel Corp.		21,478		442
Vulcan Materials Co.		18,961		753
Weyerhaeuser Co.		77,174		1,726

				64,794

Telecommunication Services – 3.2%
AT&T, Inc.		871,350		31,072
CenturyLink, Inc.		91,465		3,612
Crown Castle International Corp.^(a)		37,300		2,188
Frontier Communications Corp.		147,244		564
JDS Uniphase Corp.^(a)		32,523		358
MetroPCS Communications, Inc.^(a)		41,500		251
Sprint Nextel Corp.^(a)		426,865		1,392
Verizon Communications, Inc.		419,266		18,632
Windstream Corp.		87,813		848

				58,917

Utilities — 3.7%
AES Corp.^(a)		93,395		1,198
AGL Resources, Inc.		18,100		701
Ameren Corp.		37,560		1,260
American Electric Power Co., Inc.		70,752		2,823
CenterPoint Energy, Inc.		66,311		1,371
CMS Energy Corp.		37,956		892
Consolidated Edison, Inc.		43,152		2,684
Dominion Resources, Inc.		84,562		4,566
DTE Energy Co.		24,384		1,447
Duke Energy Corp.		197,720		4,559
Edison International		47,819		2,209
Entergy Corp.		25,698		1,745
Exelon Corp.		127,443		4,794
FirstEnergy Corp.		62,922		3,095
Integrys Energy Group, Inc.		11,616		661
NextEra Energy, Inc.		62,621		4,309
NiSource, Inc.		41,982		1,039
Northeast Utilities		47,260		1,834
NRG Energy, Inc.^(a)		36,700		637


	Shares		Market Value (000)
Oneok, Inc.		32,200	$	1,362
Pepco Holdings, Inc.		34,700		679
PG&E Corp.		61,726		2,794
Pinnacle West Capital Corp.		16,160		836
PPL Corp.		83,675		2,327
Progress Energy, Inc.		43,381		2,610
Public Service Enterprise Group, Inc.		74,324		2,416
SCANA Corp.		17,700		847
Sempra Energy		35,186		2,424
Southern Co.		129,843		6,012
TECO Energy, Inc.		34,951		631
Wisconsin Energy Corp.		35,200		1,393
Xcel Energy, Inc.		70,951		2,016

				68,171

TOTAL COMMON STOCKS (Cost $1,062,051)				1,826,190


	Par Amount
U.S. GOVERNMENT SECURITIES – 0.1%
U.S. Treasury Bill^(b)(e)(f) 0.09% due 07/12/12	$	400,000		400
U.S. Treasury Bill^(b)(e)(f) 0.07% due 08/09/12		360,000		360
U.S. Treasury Bill^(b)(e)(f) 0.08% due 09/06/12		1,465,000		1,465

TOTAL U.S. GOVERNMENT SECURITIES (Cost $2,225)				2,225

	Shares
MONEY MARKET FUND – 1.6%
State Street Institutional Liquid Reserves Fund 0.20%^(c)(g)		28,891,243		28,891

TOTAL MONEY MARKET FUND (Cost $28,891)				28,891

TOTAL INVESTMENTS^(h) – 99.9% (Cost $1,093,167)				1,857,306
Other Assets in Excess of Liabilities – 0.1%				1,875

NET ASSETS – 100.0%			$	1,859,181

^(a)	Non-income producing security.

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

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

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

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

^(f)	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)

^(g)	The rate shown is the annualized seven-day yield at period end.

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Portfolio of Investments — (continued)

June 30, 2012 (Unaudited)

^(h)	Unless otherwise indicated, the values of the securities of the Portfolio are determined based on Level 1 inputs. (Note 2)

PLC	= Public Limited Company

REIT	= Real Estate Investment Trust


	Number of Contracts		Notional Value (000)		Unrealized Appreciation (000)
Schedule of Futures Contracts S&P 500 Financial Futures Contracts (long) Expiration Date 09/2012		488	$	31,893	$	1,203

Total unrealized appreciation on open futures contracts purchased					$	1,203

Affiliates 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 Portfolio also invested in the State Street Institutional Liquid Reserves Fund. Transactions in all affiliates for the period ending June 30, 2012 were as follows:


Security Description	Number of shares held at 12/31/11		Shares purchased for the six months ended 6/30/12		Shares sold for the six months ended 6/30/12		Number of shares held at 6/30/12		Value at 6/30/12 (000)		Income earned for the six months ended 6/30/12 (000)		Realized loss on shares sold (000)
State Street Corp.		79,225		–		7,500		71,725	$	3,202	$	35	$	(13	)

State Street Institutional Liquid Reserves		–		79,493,508		50,602,265		28,891,243		28,891		11		–

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Statement of Assets and Liabilities

June 30, 2012 (Unaudited)

(Amounts in thousands)


Assets
Investments in unaffiliated issuers at market value (identified cost $1,061,932)	$	1,825,213
Investments in non-controlled affiliates at market value (identified cost $31,235) (Note 4)		32,093

Total investments at market value (identified cost $1,093,167)		1,857,306
Receivable for investment securities sold		1,602
Receivable for fund shares sold		62
Daily variation margin on futures contracts		830
Dividends and interest receivable		2,375

Total assets		1,862,175
Liabilities
Investment securities purchased		2,945
Management fees (Note 4)		49

Total liabilities		2,994

Net Assets	$	1,859,181

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Statement of Operations

Six Months Ended June 30, 2012 (Unaudited)

(Amounts in thousands)


Investment Income
Interest	$	26
Dividend income – unaffiliated issuers (net of foreign taxes withheld of $28)		19,797
Dividend income – non-controlled affiliated issuer		46

Total investment income		19,869

Expenses
Management fees (Note 4)		422

Total expenses		422

Net Investment Income	$	19,447

Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments – unaffiliated issuers	$	43,150
Investments – non-controlled affiliated issuer		(13	)
Futures contracts		1,888

		45,025
Net change in net unrealized appreciation (depreciation) on:
Investments		101,594
Futures contracts		1,064

		102,658

Net realized and unrealized gain		147,683

Net Increase in Net Assets Resulting from Operations	$	167,130

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Statements of Changes in Net Assets

(Amounts in thousands)


	For the Six Months Ended June 30, 2012 (Unaudited)			For the Year Ended December 31, 2011
Increase (Decrease) in Net Assets From Operations:
Net investment income	$	19,447		$	38,015
Net realized gain on investments and futures contracts		45,025			68,236
Net change in net unrealized appreciation (depreciation) on investments and futures contracts		102,658			(60,650	)

Net increase in net assets from operations		167,130			45,601

Capital Transactions
Contributions		65,969			279,791
Withdrawals		(199,446	)		(598,001	)

Net decrease in net assets from capital transactions		(133,477	)		(318,210	)

Net Increase (Decrease) in Net Assets		33,653			(272,609	)
Net Assets
Beginning of period		1,825,528			2,098,137

End of period	$	1,859,181		$	1,825,528

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:


	Six Months Ended 6/30/12 (Unaudited)			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)		1,859,181			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	%		0.045	%
Net investment income		2.07	%*		2.04	%		1.99	%		2.28	%		2.30	%		1.96	%
Portfolio turnover rate^(a)		2	%**		15	%		12	%		19	%		14	%		12	%
Total return^(b)		9.49	%**		2.03	%		15.08	%		26.50	%		(37.02	)%		5.49	%

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

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

*	Annualized.

**	Not annualized.

See Notes to Financial Statements.

State Street Equity 500 Index Portfolio

Notes to Financial Statements

June 30, 2012 (Unaudited)

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 ten 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 Limited Duration Bond Portfolio, the State Street Treasury Money Market Portfolio, the State Street Treasury Plus Money Market Portfolio and the State Street U.S. Government Money Market Portfolio. Information presented in these financial statements pertains only to the State Street Equity 500 Index Portfolio (the “Portfolio”).

At June 30, 2012, the following Portfolios were operational: the Portfolio, the State Street Money Market Portfolio, the State Street Tax Free Money Market 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.

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, establishes 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 those measurements and applies broadly to securities and other types of assets and liabilities. In

State Street Equity 500 Index Portfolio

Notes to Financial Statements — (continued)

June 30, 2012 (Unaudited)

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 June 30, 2012, 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	$	1,826,190	$	–	$	–	$	1,826,190
U.S. Government Securities		–		2,225		–		2,225
Money Market Fund		28,891		–		–		28,891

Total Investments		1,855,081		2,225		–		1,857,306
Other Assets:
Futures contracts		1,203		–		–		1,203

Total Assets	$	1,856,284	$	2,225	$	–	$	1,858,509

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.

There were no material transfers between levels for the six months ended June 30, 2012. The transfers that did occur were the result of fair value pricing using significant observable inputs for Level 2 securities.

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)

June 30, 2012 (Unaudited)

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 June 30, 2012, 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 June 30, 2012, the book cost of investments was $1,093,167,112 which approximates cost computed on a federal tax basis. The aggregate gross unrealized appreciation and gross unrealized depreciation was $820,573,872 and $56,435,427 respectively, resulting in net appreciation of $764,138,445 for all securities.

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)

June 30, 2012 (Unaudited)

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 June 30, 2012:

Asset

Derivatives⁽¹⁾ (amounts in thousands)


	Equity Contracts Risk	Total
Futures Contracts	$1,203	$	1,203

⁽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 six months ended June 30, 2012, were as follows:

Realized

Gain (Loss)⁽²⁾ (amounts in thousands)


	Equity Contracts Risk	Total
Futures Contracts	$1,888	$	1,888

Change

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


	Equity Contracts Risk	Total
Futures Contracts	$1,064	$	1,064

⁽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 June 30, 2012, was $39,404,891.

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.

Securities Transactions

For the six months ended June 30, 2012, purchases and sales of investment securities, excluding short-term investments, futures contracts, and contributions in-kind and fair value of withdrawals, aggregated to $33,906,713 and $123,700,231, respectively.

State Street Equity 500 Index Portfolio

Notes to Financial Statements — (continued)

June 30, 2012 (Unaudited)

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 June 30, 2012 is listed in the Portfolio of Investments.

Trustees’ Fees

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

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.

State Street Equity 500 Index Portfolio

General Information

June 30, 2012 (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 without charge, upon request, (i) 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 without charge, upon request, (i) 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.


Series Portfolio Information		Master Small Cap Index Series

As of June 30, 2012


Ten Largest Holdings	Percent of Long-Term Investments
Pharmacyclics, Inc.		0.3	%
Cepheid, Inc.		0.3
HMS Holdings Corp.		0.3
Questcor Pharmaceuticals, Inc.		0.3
Vivus, Inc.		0.3
athenahealth, Inc.		0.3
Woodward, Inc.		0.2
United Natural Foods, Inc.		0.2
Dril-Quip, Inc.		0.2
Hexcel Corp.		0.2


Sector Allocations	Percent of Long-Term Investments
Energy		19	%
Information Technology		17
Industrials		15
Consumer Discretionary		14
Health Care		13
Financials		9
Materials		5
Consumer Staples		4
Utilities		3
Telecommunication Services		1

For Series compliance purposes, the Series’ sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes, and/or as defined by Series management. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease.

Derivative Financial Instruments

Master Small Cap Index Series (the “Series”) may invest in various derivative financial instruments, including financial futures contracts as specified in Note 2 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market and/or equity risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument. The Series’ ability to use a

derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require the Series to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Series can realize on an investment or may cause the Series to hold an investment that it might otherwise sell. The Series’ investments in these instruments are discussed in detail in the Notes to Financial Statements.



42	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012

Schedule of Investments June 30, 2012 (Unaudited)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Advertising Agencies — 0.6%
Arbitron, Inc.		9,611	$	336,385
Constant Contact, Inc. (a)		11,041		197,413
Digital Domain Media Group, Inc. (a)(b)		3,914		24,502
Digital Generation, Inc. (a)		9,982		123,477
Harte-Hanks, Inc.		16,183		147,913
Marchex, Inc., Class B		8,461		30,544
MDC Partners, Inc., Class A		9,304		105,507
National CineMedia, Inc.		20,350		308,710
QuinStreet, Inc. (a)(b)		11,920		110,379
ReachLocal, Inc. (a)		3,732		41,052
Travelzoo, Inc. (a)		2,616		59,436
Valassis Communications, Inc. (a)(b)		15,548		338,169
ValueClick, Inc. (a)		29,362		481,243
Viad Corp.		7,369		147,380

				2,452,110

Aerospace — 1.3%
AAR Corp.		14,628		197,186
AeroVironment, Inc. (a)(b)		6,282		165,279
API Technologies Corp. (a)		11,670		42,946
Astronics Corp. (a)		3,820		107,877
Ceradyne, Inc.		8,816		226,130
CPI Aerostructures, Inc. (a)		2,027		22,297
Cubic Corp.		5,781		277,951
Curtiss-Wright Corp.		17,037		528,999
Esterline Technologies Corp. (a)		11,135		694,267
GenCorp, Inc. (a)(b)		21,687		141,182
Heico Corp.		19,138		756,334
Kaman Corp., Class A		9,581		296,436
Kratos Defense & Security Solutions, Inc. (a)		14,564		85,054
LMI Aerospace, Inc. (a)		3,269		56,815
Moog, Inc., Class A (a)		16,432		679,463
Orbital Sciences Corp. (a)(b)		21,399		276,475
SIFCO Industries, Inc.		896		20,590
Teledyne Technologies, Inc. (a)		13,355		823,336

				5,398,617

Agriculture, Fishing & Ranching — 0.4%
Alico, Inc.		1,268		38,725
The Andersons, Inc.		6,756		288,211
Cadiz, Inc. (a)		4,686		33,786
Cal-Maine Foods, Inc.		5,254		205,431
Calavo Growers, Inc.		4,326		110,659
Fresh Del Monte Produce, Inc.		13,833		324,661
Limoneira Co.		2,964		48,076
Pilgrims Pride Corp. (a)		22,090		157,943
Sanderson Farms, Inc.		8,342		382,230
Seaboard Corp. (a)		111		236,761

				1,826,483

Air Transport — 1.0%
Air Transport Services Group, Inc. (a)		19,325		100,490
Alaska Air Group, Inc. (a)		25,843		927,764
Allegiant Travel Co. (a)		5,443		379,268
Atlas Air Worldwide Holdings, Inc. (a)(b)		9,596		417,522
Bristow Group, Inc.		12,989		528,263
Hawaiian Holdings, Inc. (a)(b)		18,595		121,053
JetBlue Airways Corp. (a)		84,984		450,415
PHI, Inc. (a)		4,731		131,569
Republic Airways Holdings, Inc. (a)		17,614		97,758


Common Stocks	Shares		Value
Air Transport (concluded)
SkyWest, Inc.		18,526	$	120,975
Spirit Airlines, Inc. (a)		15,168		295,169
US Airways Group, Inc. (a)		59,000		786,470

				4,356,716

Alternative Energy — 0.1%
Ameresco, Inc., Class A (a)(b)		7,286		86,922
Amyris, Inc. (a)(b)		10,975		48,619
EnerNOC, Inc. (a)		8,784		63,596
Gevo, Inc. (a)		7,653		38,035
Green Plains Renewable Energy, Inc. (a)		9,012		56,235
Rex American Resources Corp. (a)		2,105		41,090
Solazyme, Inc. (a)(b)		11,962		166,272

				500,769

Aluminum — 0.1%
Century Aluminum Co. (a)		18,728		137,276
Kaiser Aluminum Corp.		6,996		362,673
Noranda Aluminum Holding Corp.		12,125		96,515

				596,464

Asset Management & Custodian — 1.0%
Apollo Investment Corp.		73,801		566,792
Arlington Asset Investment Corp.		3,045		66,107
Artio Global Investors, Inc.		11,319		39,616
Calamos Asset Management, Inc., Class A		7,024		80,425
Capital Southwest Corp.		1,077		110,759
CIFC Corp. (a)		2,391		17,622
Cohen & Steers, Inc.		6,723		232,011
Cowen Group, Inc., Class A (a)		31,730		84,402
Diamond Hill Investments Group, Inc.		975		76,333
Epoch Holding Corp.		5,819		132,557
Fifth Street Finance Corp.		30,024		299,639
Financial Engines, Inc. (a)		16,829		360,982
GAMCO Investors, Inc., Class A		2,341		103,917
Golub Capital BDC, Inc.		5,187		78,272
GSV Capital Corp. (a)		7,034		65,416
Harris & Harris Group, Inc. (a)(b)		11,222		42,644
Horizon Technology Finance Corp.		2,235		36,855
JMP Group, Inc.		5,900		36,462
KCAP Financial, Inc.		7,965		57,826
Manning & Napier, Inc.		4,960		70,581
MCG Capital Corp.		28,042		128,993
Medley Capital Corp.		6,259		75,358
MVC Capital, Inc.		8,725		112,989
National Financial Partners Corp. (a)		14,810		198,454
New Mountain Finance Corp.		3,094		43,904
NGP Capital Resources Co.		8,005		56,675
Oppenheimer Holdings, Inc.		3,687		57,960
Pzena Investment Management, Inc., Class A		3,623		16,050
Resource America, Inc., Class A		4,424		28,225
Solar Capital Ltd.		13,334		296,815
Solar Senior Capital Ltd.		3,424		57,865
TCP Capital Corp.		2,079		30,062
THL Credit, Inc.		4,344		58,514
TICC Capital Corp.		13,792		133,782
Virtus Investment Partners, Inc. (a)		2,208		178,848
Westwood Holdings Group, Inc.		2,414		89,946
WisdomTree Investments, Inc. (a)		21,294		139,901

				4,263,559

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	43

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Auto Parts — 0.6%
American Axle & Manufacturing Holdings, Inc. (a)		24,220	$	254,068
Amerigon, Inc. (a)		10,721		123,185
Dana Holding Corp.		53,668		687,487
Dorman Products, Inc. (a)		8,899		223,276
Exide Technologies (a)		28,214		94,799
Federal-Mogul Corp., Class A (a)		6,679		73,469
Fuel Systems Solutions, Inc. (a)		5,348		89,258
Meritor, Inc. (a)		35,008		182,742
Standard Motor Products, Inc.		7,224		101,714
Stoneridge, Inc. (a)		10,283		70,027
Superior Industries International, Inc.		8,371		137,033
Tenneco, Inc. (a)(b)		22,049		591,354
Tower International, Inc. (a)		2,074		21,777
U.S. Auto Parts Network, Inc. (a)		5,484		22,923

				2,673,112

Auto Services — 0.1%
Cooper Tire & Rubber Co.		22,640		397,106

Back Office Support, HR & Consulting — 2.0%
The Advisory Board Co. (a)(b)		12,471		618,437
Angie’s List, Inc. (a)		12,967		205,397
Barrett Business Services, Inc.		2,533		53,548
CBIZ, Inc. (a)		13,632		80,974
CDI Corp.		4,993		81,885
Convergys Corp. (a)		42,391		626,115
Corporate Executive Board Co.		12,176		497,755
CoStar Group, Inc. (a)(b)		9,659		784,311
CRA International, Inc. (a)		3,725		54,720
Dice Holdings, Inc. (a)(b)		16,612		155,987
ExlService Holdings, Inc. (a)		8,482		208,996
Forrester Research, Inc.		5,115		173,194
FTI Consulting, Inc. (a)		15,237		438,064
GP Strategies Corp. (a)		5,422		100,144
The Hackett Group, Inc. (a)		8,937		49,779
Heidrick & Struggles International, Inc.		6,537		114,397
Hudson Global, Inc. (a)		12,290		51,249
Huron Consulting Group, Inc. (a)(b)		8,318		263,265
ICF International, Inc. (a)(b)		7,219		172,101
Innodata Corp. (a)		8,073		55,219
Insperity, Inc.		8,266		223,595
Kelly Services, Inc., Class A		9,717		125,446
Kforce, Inc. (a)		10,444		140,576
Korn/Ferry International (a)		17,365		249,188
Liquidity Services, Inc. (a)		8,569		438,647
MAXIMUS, Inc.		12,333		638,233
Monster Worldwide, Inc. (a)		44,056		374,476
Navigant Consulting, Inc. (a)(b)		18,825		237,948
On Assignment, Inc. (a)(b)		15,632		249,487
PDI, Inc. (a)		3,589		29,573
PRGX Global, Inc. (a)		7,584		60,293
Resources Connection, Inc.		15,414		189,592
RPX Corp. (a)		7,660		109,921
ServiceSource International, Inc. (a)		18,036		249,799
SYKES Enterprises, Inc. (a)		14,185		226,393
TeleTech Holdings, Inc. (a)(b)		8,344		133,504
TrueBlue, Inc. (a)(b)		14,687		227,355
WageWorks, Inc. (a)		2,342		35,271

				8,724,834


Common Stocks	Shares		Value
Banks: Diversified — 6.5%
1st Source Corp.		5,438	$	122,899
1st United Bancorp, Inc. (a)		10,895		67,658
Access National Corp.		2,737		35,855
Alliance Financial Corp.		1,747		59,992
American National BankShares, Inc.		2,871		67,641
Ameris Bancorp (a)		8,706		109,696
Ames National Corp.		3,005		69,085
Arrow Financial Corp.		3,782		91,411
Bancfirst Corp.		2,388		100,081
Banco Latinoamericana De Comercio Exterior SA		10,329		221,350
The Bancorp, Inc. (a)		10,485		99,083
BancorpSouth, Inc.		34,400		499,488
Bank of Kentucky Financial Corp.		2,194		58,448
Bank of Marin Bancorp		1,988		73,576
Bank of the Ozarks, Inc.		10,680		321,254
Banner Corp.		6,655		145,811
Bar Harbor Bankshares		1,404		50,544
BBCN Bancorp, Inc. (a)		28,457		309,897
Berkshire Bancorp, Inc. (a)		1,560		13,728
Boston Private Financial Holdings, Inc.		28,521		254,693
Bridge Bancorp, Inc.		3,153		74,379
Bridge Capital Holdings (a)		3,450		55,718
Bryn Mawr Bank Corp.		4,243		89,400
C&F Financial Corp.		1,178		47,308
Camden National Corp.		2,846		104,221
Cape Bancorp, Inc. (a)		4,025		33,448
Capital Bank Corp. (a)		5,761		13,135
Capital City Bank Group, Inc.		4,185		30,843
Cardinal Financial Corp.		10,686		131,224
Cascade Bancorp (a)		2,186		12,963
Cathay General Bancorp		28,683		473,556
Center Bancorp, Inc.		4,487		50,479
Centerstate Banks, Inc.		11,094		79,322
Central Pacific Financial Corp. (a)		7,877		111,223
Century Bancorp, Inc., Class A		1,261		37,490
Chemical Financial Corp.		10,089		216,913
Citizens & Northern Corp.		4,522		86,144
Citizens Republic Bancorp, Inc. (a)		14,600		250,098
City Holding Co.		5,412		182,330
CNB Financial Corp.		4,621		75,369
CoBiz Financial, Inc.		12,874		80,591
Columbia Banking System, Inc.		14,488		272,664
Community Bank System, Inc.		14,407		390,718
Community Trust Bancorp, Inc.		5,149		172,440
Crescent Financial Bancshares, Inc. (a)		1,093		4,940
CVB Financial Corp.		32,191		375,025
Eagle Bancorp, Inc. (a)		6,185		97,414
Encore Bancshares, Inc. (a)		3,436		70,885
Enterprise Bancorp, Inc.		2,216		36,320
Enterprise Financial Services Corp.		6,480		71,021
EverBank Financial Corp. (a)		8,167		88,775
Farmers National Banc Corp.		6,826		42,526
Fidelity Southern Corp.		3,447		29,782
Financial Institutions, Inc.		5,130		86,594
First Bancorp, Inc.		3,295		56,015
First Bancorp, North Carolina		5,674		50,442
First Bancorp, Puerto Rico (a)		25,650		101,574
First Busey Corp.		27,305		131,883
First Commonwealth Financial Corp.		38,412		258,513
First Community Bancshares, Inc.		5,744		82,886
First Connecticut Bancorp, Inc.		6,562		88,587

See Notes to Financial Statements.



44	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Banks: Diversified (continued)
First Financial Bancorp		21,402	$	342,004
First Financial Bankshares, Inc.		11,509		397,751
First Financial Corp.		4,114		119,306
First Interstate Bancsystem, Inc.		5,962		84,899
First Merchants Corp.		10,459		130,319
First Midwest Bancorp, Inc.		27,292		299,666
The First of Long Island Corp.		2,857		82,767
FirstMerit Corp.		40,008		660,932
FNB Corp.		50,924		553,544
FNB United Corp. (a)		3,661		47,556
German American Bancorp, Inc.		4,685		96,043
Glacier Bancorp, Inc.		26,248		406,582
Greene County Bancshares, Inc. (a)		4,663		7,741
Guaranty Bancorp (a)		27,981		59,040
Hancock Holding Co.		27,796		846,110
Hanmi Financial Corp. (a)		11,486		120,373
Heartland Financial USA, Inc.		5,331		127,944
Heritage Commerce Corp. (a)		7,558		49,127
Heritage Oaks Bancorp (a)		7,342		40,895
Home Bancshares, Inc.		8,097		247,606
Horizon Bancorp		1,376		36,189
Hudson Valley Holding Corp.		5,752		104,111
IBERIABANK Corp.		10,761		542,892
Independent Bank Corp./MA		7,912		231,110
International Bancshares Corp.		19,462		379,898
Investors Bancorp, Inc. (a)		16,080		242,647
Lakeland Bancorp, Inc.		9,872		103,853
Lakeland Financial Corp.		6,002		161,034
MainSource Financial Group, Inc.		7,414		87,708
MB Financial, Inc.		19,930		429,292
Mercantile Bank Corp. (a)		3,147		58,062
Merchants Bancshares, Inc.		1,899		52,317
Meridian Interstate Bancorp, Inc. (a)		3,177		44,224
Metro Bancorp, Inc. (a)		5,170		62,195
MetroCorp Bancshares, Inc. (a)		5,795		61,833
Middleburg Financial Corp.		1,940		32,980
Midsouth Bancorp, Inc.		3,082		43,395
NASB Financial, Inc. (a)		1,517		30,112
National Bankshares, Inc.		2,610		78,613
National Penn Bancshares, Inc.		45,063		431,253
NBT Bancorp, Inc.		12,177		262,901
Northrim BanCorp, Inc.		2,369		50,910
Old National Bancorp		34,555		415,006
Oriental Financial Group, Inc.		14,846		164,494
Pacific Capital Bancorp NA (a)		1,548		70,790
Pacific Continental Corp.		6,621		58,728
Pacific Mercantile Bancorp (a)		3,883		26,832
PacWest Bancorp		11,078		262,216
Park National Corp.		4,163		290,369
Park Sterling Corp. (a)		11,980		56,426
Peapack-Gladstone Financial Corp.		3,226		50,035
Penns Woods Bancorp, Inc.		1,432		57,008
Peoples Bancorp, Inc.		3,941		86,623
Pinnacle Financial Partners, Inc. (a)(b)		12,613		246,080
Preferred Bank (a)		4,288		57,288
PrivateBancorp, Inc.		22,008		324,838
Prosperity Bancshares, Inc.		17,295		726,909
Provident Financial Services, Inc.		21,916		336,411
Renasant Corp.		9,235		145,082
Republic Bancorp, Inc., Class A		3,616		80,456


Common Stocks	Shares		Value
Banks: Diversified (concluded)
Rockville Financial, Inc.		10,574	$	122,341
Roma Financial Corp.		2,794		23,805
S&T Bancorp, Inc.		10,573		195,283
Sandy Spring Bancorp, Inc.		8,833		158,994
SCBT Financial Corp.		5,523		194,686
Seacoast Banking Corp. of Florida (a)		26,489		39,998
Sierra Bancorp		4,407		43,629
Simmons First National Corp., Class A		6,273		145,847
Southside Bancshares, Inc.		6,351		142,770
Southwest Bancorp, Inc. (a)		7,138		67,169
State Bank Financial Corp. (a)		11,580		175,553
StellarOne Corp.		8,450		105,456
Sterling Bancorp		11,366		113,433
Sterling Financial Corp. (a)		9,792		184,971
Suffolk Bancorp (a)		3,558		46,147
Sun Bancorp, Inc. (a)		14,624		39,485
Susquehanna Bancshares, Inc.		68,408		704,602
SY Bancorp, Inc.		4,473		107,128
Taylor Capital Group, Inc. (a)		5,965		97,766
Texas Capital Bancshares, Inc. (a)(b)		13,821		558,230
Tompkins Trustco, Inc.		3,400		128,112
Towne Bank (b)		9,631		134,834
Trico Bancshares		5,870		90,398
TrustCo Bank Corp. NY		34,389		187,764
Trustmark Corp.		23,644		578,805
UMB Financial Corp.		11,782		603,592
Umpqua Holdings Corp.		40,806		537,007
Union First Market Bankshares Corp.		7,476		108,028
United Bankshares, Inc.		10,792		279,297
United Community Banks, Inc. (a)		15,149		129,827
Univest Corp. of Pennsylvania		6,215		102,734
Virginia Commerce Bancorp (a)		9,819		82,774
Washington Banking Co.		5,635		78,327
Washington Trust Bancorp, Inc.		5,279		128,702
Webster Financial Corp.		26,260		568,792
WesBanco, Inc.		8,575		182,305
West Bancorp., Inc.		5,788		55,044
West Coast Bancorp (a)		5,344		105,010
Westamerica Bancorp		10,178		480,300
Western Alliance Bancorp (a)(b)		25,502		238,699
Wilshire Bancorp, Inc. (a)(b)		22,595		123,821
Wintrust Financial Corp.		13,237		469,913

				27,882,051

Banks: Savings, Thrift & Mortgage Lending — 1.2%
Apollo Residential Mortgage, Inc.		8,837		170,377
Astoria Financial Corp.		31,689		310,552
Bank Mutual Corp.		17,027		75,089
BankFinancial Corp.		7,753		58,380
Beneficial Mutual Bancorp, Inc. (a)		12,083		104,276
Berkshire Hills Bancorp, Inc.		8,106		178,332
BofI Holding, Inc. (a)		3,596		71,057
Brookline Bancorp, Inc.		25,524		225,887
BSB Bancorp, Inc. (a)		2,972		37,893
Charter Financial Corp.		2,343		22,727
Clifton Savings Bancorp, Inc.		3,083		32,094
Dime Community Bancshares, Inc.		11,440		152,038
Doral Financial Corp. (a)		46,990		70,485
ESB Financial Corp.		3,845		50,754
ESSA Bancorp, Inc.		3,272		35,338
First Defiance Financial Corp.		3,604		61,700
First Federal Bancshares of Arkansas, Inc. (a)		1,280		10,368

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	45

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Banks: Savings, Thrift & Mortgage Lending (concluded)
First Financial Holdings, Inc.		6,136	$	65,778
First Financial Northwest, Inc. (a)		5,834		47,372
First Pactrust Bancorp, Inc.		3,882		46,041
Flushing Financial Corp.		11,262		153,501
Fox Chase Bancorp., Inc.		4,615		66,641
Franklin Financial Corp. (a)		5,201		85,556
Great Southern Bancorp, Inc.		3,776		104,142
Heritage Financial Corp.		5,717		83,754
Heritage Financial Group, Inc.		3,099		39,884
Hingham Institution for Savings		440		26,607
Home Bancorp, Inc. (a)		2,467		42,260
Home Federal Bancorp, Inc.		5,665		59,483
Home Loan Servicing Solutions Ltd.		4,964		66,518
HomeStreet, Inc. (a)		1,595		51,024
Kaiser Federal Financial Group, Inc.		3,234		47,799
Kearny Financial Corp.		5,524		53,528
Northfield Bancorp, Inc.		5,443		77,345
Northwest Bancshares, Inc.		35,560		416,408
OceanFirst Financial Corp.		5,268		75,648
Ocwen Financial Corp. (a)		39,149		735,218
OmniAmerican Bancorp, Inc. (a)		4,131		88,527
Oritani Financial Corp.		16,565		238,370
Peoples Federal Bancshares, Inc. (a)		2,162		36,105
Provident Financial Holdings, Inc.		3,494		40,286
Provident New York Bancorp		12,484		94,754
SI Financial Group, Inc.		3,810		43,815
Territorial Bancorp., Inc.		4,027		91,695
United Financial Bancorp, Inc.		5,730		82,397
ViewPoint Financial Group		12,291		192,231
Waterstone Financial, Inc. (a)		2,648		10,062
Westfield Financial, Inc.		9,735		71,065
WSFS Financial Corp.		2,755		111,330

				5,112,491

Beverage: Brewers & Distillers — 0.1%
Boston Beer Co., Inc., Class A (a)(b)		2,827		342,067
Central European Distribution Corp. (a)(b)		23,883		68,305
Craft Brew Alliance, Inc. (a)(b)		3,865		31,616

				441,988

Beverage: Soft Drinks — 0.2%
Coca-Cola Bottling Co. Consolidated		1,672		107,476
Farmer Bros. Co. (a)		2,437		19,399
Heckmann Corp. (a)(b)		48,554		164,112
National Beverage Corp. (a)		4,143		61,896
Peet’s Coffee & Tea, Inc. (a)		4,816		289,153

				642,036

Biotechnology — 3.7%
Accelrys, Inc. (a)		20,146		162,981
Acorda Therapeutics, Inc. (a)		14,543		342,633
Aegerion Pharmaceuticals, Inc. (a)		7,824		116,108
Affymax, Inc. (a)		13,134		169,166
Agenus, Inc. (a)		8,281		43,392
Alkermes Plc (a)		44,450		754,317
Allos Therapeutics, Inc. (a)		29,014		51,935
Alnylam Pharmaceuticals, Inc. (a)		16,833		196,441
AMAG Pharmaceuticals, Inc. (a)		7,747		119,304
Amicus Therapeutics, Inc. (a)		10,967		60,319
Arena Pharmaceuticals, Inc. (a)		71,660		715,167
Arqule, Inc. (a)		21,424		127,044


Common Stocks	Shares		Value
Biotechnology (continued)
Array Biopharma, Inc. (a)		32,354	$	112,268
Astex Pharmaceuticals (a)		33,634		70,295
AVEO Pharmaceuticals, Inc. (a)		14,115		171,638
BG Medicine, Inc. (a)		3,937		27,480
BioDelivery Sciences International, Inc. (a)		7,696		34,478
BioTime, Inc. (a)		11,094		51,032
Celldex Therapeutics, Inc. (a)		21,365		110,884
Cepheid, Inc. (a)		23,841		1,066,885
ChemoCentryx, Inc. (a)		1,990		29,850
Clovis Oncology, Inc. (a)		4,960		107,533
Codexis, Inc. (a)		9,372		35,051
Cornerstone Therapeutics, Inc. (a)		3,115		19,718
Coronado Biosciences, Inc. (a)		4,899		24,740
Cubist Pharmaceuticals, Inc. (a)(b)		22,993		871,665
Curis, Inc. (a)(b)		28,744		155,218
Cytori Therapeutics, Inc. (a)(b)		20,249		54,672
Dendreon Corp. (a)(b)		55,929		413,875
Discovery Laboratories, Inc. (a)		15,711		36,450
Dyax Corp. (a)		36,247		77,206
Dynavax Technologies Corp. (a)		63,377		273,789
Emergent Biosolutions, Inc. (a)		9,367		141,910
Enzon Pharmaceuticals, Inc. (a)		15,222		104,575
Exact Sciences Corp. (a)		20,790		222,869
Exelixis, Inc. (a)(b)		53,924		298,200
Furiex Pharmaceuticals, Inc. (a)		2,696		56,481
Genomic Health, Inc. (a)		5,830		194,722
Geron Corp. (a)		47,841		82,287
GTx, Inc. (a)		9,582		33,824
Halozyme Therapeutics, Inc. (a)		32,608		288,907
Harvard Bioscience, Inc. (a)		8,897		33,542
Horizon Pharma, Inc. (a)(b)		7,650		54,545
Idenix Pharmaceuticals, Inc. (a)		27,195		280,109
ImmunoCellular Therapeutics Ltd. (a)		14,449		54,184
ImmunoGen, Inc. (a)		28,091		471,367
Immunomedics, Inc. (a)		23,985		85,626
InterMune, Inc. (a)		23,759		283,920
Keryx Biopharmaceuticals, Inc. (a)(b)		25,988		46,778
Lexicon Genetics, Inc. (a)		72,248		162,558
Ligand Pharmaceuticals, Inc. (a)(b)		6,305		106,807
MannKind Corp. (a)(b)		40,916		93,698
Maxygen, Inc. (a)		9,927		59,165
Merrimack Pharmaceuticals, Inc. (a)		5,494		39,996
Momenta Pharmaceuticals, Inc. (a)(b)		16,998		229,813
Nektar Therapeutics (a)		41,631		335,962
Neurocrine Biosciences, Inc. (a)		24,054		190,267
NewLink Genetics Corp. (a)		4,601		68,923
Novavax, Inc. (a)		42,073		65,634
NPS Pharmaceuticals, Inc. (a)		31,262		269,166
Omeros Corp. (a)		8,159		81,590
OncoGenex Pharmaceutical, Inc. (a)		5,318		71,474
Oncothyreon, Inc. (a)		20,831		97,489
Opko Health, Inc. (a)(b)		38,894		178,912
Orexigen Therapeutics, Inc. (a)		21,988		121,814
Osiris Therapeutics, Inc. (a)(b)		6,021		66,050
Pacific Biosciences of California, Inc. (a)		13,447		29,180
PDL BioPharma, Inc.		50,680		336,008
Progenics Pharmaceuticals, Inc. (a)(b)		10,983		107,414
Raptor Pharmaceutical Corp. (a)(b)		17,707		98,982
Repligen Corp. (a)		11,160		47,988
Repros Therapeutics, Inc. (a)		5,398		49,014
Rigel Pharmaceuticals, Inc. (a)		25,984		241,651
RTI Biologics, Inc. (a)		20,283		76,264

See Notes to Financial Statements.



46	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Biotechnology (concluded)
Sangamo Biosciences, Inc. (a)		19,128	$	105,587
Seattle Genetics, Inc. (a)(b)		34,506		876,107
Sequenom, Inc. (a)		41,654		169,115
Sucampo Pharmaceuticals, Inc., Class A (a)		3,965		27,874
Sunesis Pharmaceuticals, Inc. (a)		9,943		28,536
Synageva BioPharma Corp. (a)		3,345		135,673
Synergy Pharmaceuticals, Inc. (a)		14,912		70,832
Synta Pharmaceuticals Corp. (a)		13,506		73,878
Targacept, Inc. (a)		9,905		42,592
Theravance, Inc. (a)(b)		22,031		489,529
Threshold Pharmaceuticals, Inc. (a)		16,413		121,456
Transcept Pharmaceuticals, Inc. (a)		4,579		28,390
Trius Therapeutics, Inc. (a)		8,965		51,638
Vanda Pharmaceuticals, Inc. (a)		10,145		44,638
Ventrus Biosciences, Inc. (a)		4,553		19,441
Verastem, Inc. (a)		2,299		23,450
ViroPharma, Inc. (a)		25,326		600,226
XOMA Corp. (a)		24,743		74,229
ZIOPHARM Oncology, Inc. (a)		24,243		144,246

				15,690,636

Building Materials — 0.9%
Acuity Brands, Inc.		15,375		782,741
BlueLinx Holdings, Inc. (a)		8,749		20,560
Builders FirstSource, Inc. (a)		16,309		77,305
Gibraltar Industries, Inc. (a)		11,102		115,239
Griffon Corp.		16,529		141,819
Headwaters, Inc. (a)		22,315		114,922
Louisiana-Pacific Corp. (a)(b)		49,983		543,815
LSI Industries, Inc.		7,011		49,918
NCI Building Systems, Inc. (a)		6,584		71,305
Patrick Industries, Inc. (a)		1,483		18,908
PGT, Inc. (a)		7,153		21,674
Quanex Building Products Corp.		13,382		239,270
Simpson Manufacturing Co., Inc.		14,545		429,223
Texas Industries, Inc.		8,204		320,038
Trex Co., Inc. (a)		5,077		152,767
Watsco, Inc.		10,686		788,627

				3,888,131

Building: Climate Control — 0.2%
Aaon, Inc.		6,718		126,634
Comfort Systems USA, Inc.		13,539		135,661
Interline Brands, Inc. (a)		11,580		290,311
Nortek, Inc. (a)		2,809		140,562

				693,168

Building: Roofing, Wallboard & Plumbing — 0.2%
Beacon Roofing Supply, Inc. (a)		17,041		429,774
USG Corp. (a)		26,935		513,112

				942,886

Cable Television Services — 0.1%
Knology, Inc. (a)(b)		11,335		222,959

Casinos & Gambling — 0.4%
Ameristar Casinos, Inc.		11,942		212,209
Boyd Gaming Corp. (a)		20,178		145,282
Caesars Entertainment Corp. (a)		13,403		152,794
Isle of Capri Casinos, Inc. (a)		7,400		45,658
Monarch Casino & Resort, Inc. (a)		3,155		28,837
MTR Gaming Group, Inc. (a)		8,235		39,116


Common Stocks	Shares		Value
Casinos & Gambling (concluded)
Multimedia Games Holding Co., Inc. (a)		9,984	$	139,776
Pinnacle Entertainment, Inc. (a)		22,689		218,268
Scientific Games Corp., Class A (a)(b)		20,554		175,737
Shuffle Master, Inc. (a)(b)		19,993		275,903
WMS Industries, Inc. (a)		20,002		399,040

				1,832,620

Cement — 0.1%
Eagle Materials, Inc.		16,464		614,766

Chemicals: Diversified — 1.0%
Aceto Corp.		9,754		88,079
American Vanguard Corp.		10,126		269,250
Chemtura Corp. (a)		35,849		519,810
Georgia Gulf Corp.		12,447		319,514
Hawkins, Inc.		3,314		126,529
Innophos Holdings, Inc.		7,926		447,502
KMG Chemicals, Inc.		2,831		54,582
Landec Corp. (a)		9,347		80,010
LSB Industries, Inc. (a)		6,814		210,621
Olin Corp.		29,097		607,836
OM Group, Inc. (a)(b)		11,754		223,326
Omnova Solutions, Inc. (a)		16,801		126,680
PolyOne Corp.		32,567		445,517
Sensient Technologies Corp.		18,137		666,172
TPC Group, Inc. (a)		4,690		173,295

				4,358,723

Chemicals: Specialty — 0.4%
Balchem Corp.		10,628		346,579
Calgon Carbon Corp. (a)		20,672		293,956
FutureFuel Corp.		7,001		73,580
GSE Holding, Inc. (a)		2,805		29,649
Innospec, Inc. (a)		8,389		248,398
Kraton Performance Polymers, Inc. (a)		11,712		256,610
Quaker Chemical Corp.		4,714		217,834
Stepan Co.		3,053		287,532
Zep, Inc.		8,027		110,211

				1,864,349

Coal — 0.3%
Arch Coal, Inc.		77,061		530,950
Cloud Peak Energy, Inc. (a)		22,145		374,472
Hallador Energy Co.		2,329		19,750
KiOR, Inc. Class A (a)(b)		9,593		85,857
Patriot Coal Corp. (a)(b)		33,802		41,239
Westmoreland Coal Co. (a)		3,936		31,685

				1,083,953

Commercial Finance & Mortgage Companies — 0.1%
Asta Funding, Inc.		4,104		38,454
Federal Agricultural Mortgage Corp., Class B		3,646		95,635
Medallion Financial Corp.		6,708		71,239
Nationstar Mortgage Holdings, Inc. (a)		7,025		151,178
NewStar Financial, Inc. (a)(b)		9,617		124,636
Walker & Dunlop, Inc. (a)		4,241		54,497

				535,639

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	47

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Commercial Services: Rental & Leasing — 0.5%
Aircastle Ltd.		21,320	$	256,906
CAI International, Inc. (a)		4,646		92,363
Electro Rent Corp.		6,862		111,370
H&E Equipment Services, Inc. (a)		10,447		157,018
Marlin Business Services, Inc.		2,995		49,088
McGrath RentCorp		9,001		238,527
MicroFinancial, Inc.		3,212		26,017
Mobile Mini, Inc. (a)		13,879		199,858
PHH Corp. (a)		20,580		359,738
SeaCube Container Leasing Ltd.		3,956		67,529
TAL International Group, Inc.		10,614		355,463
Willis Lease Finance Corp. (a)		1,851		22,804

				1,936,681

Commercial Vehicles & Parts — 0.2%
Accuride Corp. (a)		17,147		102,882
Commercial Vehicle Group, Inc. (a)		8,891		76,640
Miller Industries, Inc.		4,002		63,752
Modine Manufacturing Co. (a)		16,980		117,671
Rush Enterprises, Inc., Class A (a)(b)		12,056		197,116
Spartan Motors, Inc.		12,351		64,719
Sypris Solutions, Inc.		3,900		27,183
Wabash National Corp. (a)		24,858		164,560

				814,523

Communications Equipment — 0.0%
Envivio, Inc. (a)		2,876		18,435

Communications Technology — 2.4%
AboveNet, Inc. (a)		8,555		718,620
Adtran, Inc.		23,147		698,808
Ambient Corp. (a)		1,020		5,579
Anaren, Inc. (a)		5,387		105,585
Anixter International, Inc.		10,245		543,497
Aruba Networks, Inc. (a)		40,631		611,497
Aviat Networks, Inc. (a)		22,315		62,482
Bel Fuse, Inc.		3,850		67,799
Black Box Corp.		6,343		182,044
Calix, Inc. (a)		14,169		116,469
Ciena Corp. (a)		36,012		589,517
Comtech Telecommunications Corp.		6,902		197,259
Datalink Corp. (a)		5,534		52,850
Digi International, Inc. (a)		9,351		95,754
DigitalGlobe, Inc. (a)		13,145		199,278
Echelon Corp. (a)		13,803		48,034
Emulex Corp. (a)(b)		31,641		227,815
Extreme Networks, Inc. (a)(b)		34,288		117,951
Finisar Corp. (a)		33,171		496,238
GeoEye, Inc. (a)		5,482		84,861
Globecomm Systems, Inc. (a)		8,348		84,649
GSI Technology, Inc. (a)		7,453		35,327
Harmonic, Inc. (a)(b)		42,681		181,821
Infinera Corp. (a)		39,863		272,663
InterDigital, Inc.		16,113		475,495
Ixia (a)		15,319		184,134
KVH Industries, Inc. (a)		5,277		65,963
Loral Space & Communications Ltd.		3,992		268,861
NeoPhotonics Corp. (a)		7,002		34,590
NETGEAR, Inc. (a)(b)		13,804		476,376
Numerex Corp., Class A (a)		3,625		33,713
Oclaro, Inc. (a)		18,766		57,049
Oplink Communications, Inc. (a)		6,954		94,088


Common Stocks	Shares		Value
Communications Technology (concluded)
ParkerVision, Inc. (a)		27,708	$	65,945
PC-Tel, Inc.		6,585		42,605
Plantronics, Inc.		15,452		516,097
Procera Networks, Inc. (a)		7,011		170,437
QLogic Corp. (a)		35,414		484,818
SeaChange International, Inc. (a)		10,362		85,279
Shoretel, Inc. (a)		17,528		76,773
Sonus Networks, Inc. (a)(b)		77,209		165,999
Sycamore Networks, Inc. (a)		7,462		108,348
TeleNav, Inc. (a)		5,987		36,700
Tellabs, Inc.		133,030		442,990
Viasat, Inc. (a)(b)		13,629		514,767
Westell Technologies, Inc., Class A (a)		17,627		41,952

				10,239,376

Computer Services Software & Systems — 5.9%
ACI Worldwide, Inc. (a)(c)		14,440		638,392
The Active Network, Inc. (a)		14,087		216,799
Actuate Corp. (a)		17,905		124,082
Acxiom Corp. (a)		27,917		421,826
American Reprographics Co. (a)		13,179		66,290
American Software, Inc., Class A		8,526		67,782
Aspen Technology, Inc. (a)(b)		33,996		787,007
AVG Technologies NV (a)		2,860		37,209
Avid Technology, Inc. (a)		10,851		80,623
Aware, Inc.		4,205		27,122
Bankrate, Inc. (a)		16,837		309,632
Bazaarvoice, Inc. (a)		3,488		63,482
Blackbaud, Inc.		16,403		421,065
Blucora, Inc. (a)		14,619		180,106
Bottomline Technologies, Inc. (a)		12,706		229,343
Brightcove, Inc. (a)		2,222		33,886
BroadSoft, Inc. (a)(b)		9,992		289,368
CACI International, Inc., Class A (a)(b)		9,667		531,878
Callidus Software, Inc. (a)		12,596		62,728
Ciber, Inc. (a)		26,459		114,038
CommVault Systems, Inc. (a)		16,230		804,521
Computer Task Group, Inc. (a)		5,560		83,344
ComScore, Inc. (a)		12,893		212,219
Comverse Technology, Inc. (a)		79,509		462,742
Cornerstone OnDemand, Inc. (a)		12,276		292,292
CSG Systems International, Inc. (a)(b)		12,352		213,443
DealerTrack Holdings, Inc. (a)		15,426		464,477
Deltek, Inc. (a)(b)		7,918		91,770
Demand Media, Inc. (a)		10,935		122,472
Demandware, Inc. (a)		2,391		56,643
Digimarc Corp.		2,565		65,818
Digital River, Inc. (a)(b)		13,479		224,021
EarthLink, Inc.		38,846		289,014
EasyLink Services International Corp. Class A (a)		11,505		83,296
Ebix, Inc.		10,316		205,804
Envestnet, Inc. (a)		7,640		91,680
EPAM Systems, Inc. (a)		1,778		30,208
EPIQ Systems, Inc.		11,404		139,699
ePlus, Inc. (a)		1,436		46,455
ExactTarget, Inc. (a)		3,574		78,128
FalconStor Software, Inc. (a)		11,264		29,399
Guidance Software, Inc. (a)		5,189		49,347
Guidewire Software, Inc. (a)		7,036		197,852
ICG Group, Inc. (a)		13,629		126,068
iGate Corp. (a)		11,677		198,743
Imperva, Inc. (a)		3,536		101,908

See Notes to Financial Statements.



48	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Computer Services Software & Systems (continued)
Infoblox, Inc. (a)		2,814	$	64,525
Interactive Intelligence Group, Inc. (a)		5,332		150,416
Internap Network Services Corp. (a)		19,253		125,337
IntraLinks Holdings, Inc. (a)		13,288		58,201
JDA Software Group, Inc. (a)		15,450		458,710
Jive Software, Inc. (a)(b)		5,889		123,610
Kenexa Corp. (a)(b)		9,938		288,500
Keynote Systems, Inc.		5,690		84,496
The KEYW Holding Corp. (a)		6,671		66,977
KIT Digital, Inc. (a)(b)		17,497		75,062
Limelight Networks, Inc. (a)		21,822		63,938
Lionbridge Technologies, Inc. (a)		20,553		64,742
LivePerson, Inc. (a)		20,060		382,344
LogMeIn, Inc. (a)		8,007		244,374
Manhattan Associates, Inc. (a)		7,381		337,386
Mantech International Corp., Class A		8,428		197,805
Mattersight Corp. (a)		3,692		29,462
MeetMe, Inc. (a)(b)		6,866		16,135
Mentor Graphics Corp. (a)		33,852		507,780
Mercury Computer Systems, Inc. (a)		11,261		145,605
MicroStrategy, Inc., Class A (a)		3,095		401,917
Millennial Media, Inc. (a)		4,189		55,253
Moduslink Global Solutions, Inc. (a)		14,665		43,848
Monotype Imaging Holdings, Inc. (a)(b)		13,286		222,806
NetScout Systems, Inc. (a)		13,371		288,680
NIC, Inc.		23,539		298,945
OpenTable, Inc. (a)		8,212		369,622
Opnet Technologies, Inc.		5,433		144,463
Parametric Technology Corp. (a)		43,444		910,586
PDF Solutions, Inc. (a)		8,786		86,718
Pegasystems, Inc.		6,257		206,356
Perficient, Inc. (a)		11,696		131,346
Pervasive Software, Inc. (a)		4,751		35,585
Progress Software Corp. (a)		22,825		476,358
Proofpoint, Inc. (a)		2,291		38,832
PROS Holdings, Inc. (a)		7,945		133,635
QAD, Inc., Class A (a)		2,292		32,592
QLIK Technologies, Inc. (a)		31,011		685,963
Quest Software, Inc. (a)		20,384		567,694
RealNetworks, Inc.		8,047		69,526
RealPage, Inc. (a)		13,004		301,173
Responsys, Inc. (a)		13,031		157,936
Saba Software, Inc. (a)		10,915		101,291
Sapiens International Corp. NV (a)		4,966		17,878
Sapient Corp.		44,767		450,804
SciQuest, Inc. (a)		6,460		116,022
Sourcefire, Inc. (a)(b)		10,745		552,293
Spark Networks, Inc. (a)		4,230		21,827
SPS Commerce, Inc. (a)		3,852		117,024
SS&C Technologies Holdings, Inc. (a)		12,313		307,825
Support.com, Inc. (a)		17,729		56,556
Synacor, Inc. (a)		2,486		34,058
Synchronoss Technologies, Inc. (a)(b)		10,053		185,679
SYNNEX Corp. (a)		9,550		329,379
Syntel, Inc.		5,612		340,648
Tangoe, Inc. (a)		10,827		230,723
TechTarget, Inc. (a)		5,765		29,056
TNS, Inc. (a)		8,887		159,433
Tyler Technologies, Inc. (a)		10,939		441,389


Common Stocks	Shares		Value
Computer Services Software & Systems (concluded)
Ultimate Software Group, Inc. (a)		9,678	$	862,503
Unisys Corp. (a)		15,915		311,138
United Online, Inc.		33,226		140,214
Unwired Planet, Inc. (a)		28,985		66,666
VASCO Data Security International, Inc. (a)(b)		10,255		83,886
Verint Systems, Inc. (a)		7,909		233,395
VirnetX Holding Corp. (a)(b)		15,257		537,809
Virtusa Corp. (a)		6,762		90,273
Web.com Group, Inc. (a)		12,786		234,240
Websense, Inc. (a)		13,464		252,181
Yelp, Inc. (a)		3,078		69,963
Zillow, Inc. (a)(b)		1,148		44,347
Zix Corp. (a)		22,410		58,266

				25,086,026

Computer Technology — 0.5%
Cray, Inc. (a)		13,489		162,947
Imation Corp. (a)(b)		11,167		65,997
Immersion Corp. (a)		10,149		57,139
Insight Enterprises, Inc. (a)		16,128		271,434
Intermec, Inc. (a)		21,811		135,228
OCZ Technology Group, Inc. (a)(b)		24,493		129,813
PC Connection, Inc.		3,303		35,078
Quantum Corp. (a)		85,299		173,157
Radisys Corp. (a)		8,287		52,042
Safeguard Scientifics, Inc. (a)		7,539		116,704
Silicon Graphics International Corp. (a)		11,624		74,626
STEC, Inc. (a)		12,882		100,480
Stratasys, Inc. (a)		7,748		383,914
Super Micro Computer, Inc. (a)(b)		10,590		167,957
Synaptics, Inc. (a)		12,243		350,517
Telular Corp.		6,050		55,902

				2,332,935

Construction — 0.4%
Aegion Corp. (a)		14,269		255,272
EMCOR Group, Inc.		24,255		674,774
Granite Construction, Inc.		14,042		366,637
Great Lakes Dredge & Dock Corp.		21,529		153,287
Orion Marine Group, Inc. (a)		9,884		68,793
Primoris Services Corp.		10,887		130,644
Sterling Construction Co., Inc. (a)		5,946		60,768
Tutor Perini Corp. (a)		12,963		164,241

				1,874,416

Consumer Electronics — 0.2%
RealD, Inc. (a)		15,944		238,522
Skullcandy, Inc. (a)		5,881		83,216
TiVo, Inc. (a)(b)		45,289		374,540
Universal Electronics, Inc. (a)		5,332		70,222
VOXX International Corp. (a)		6,663		62,099
XO Group, Inc. (a)		9,595		85,108
Zagg, Inc. (a)(b)		9,271		101,147

				1,014,854

Consumer Lending — 0.8%
Asset Acceptance Capital Corp. (a)		5,891		40,059
Cash America International, Inc.		10,716		471,933
Credit Acceptance Corp. (a)		2,879		243,074
Encore Capital Group, Inc. (a)(b)		8,006		237,138
Ezcorp, Inc. (a)		17,493		410,386
First Cash Financial Services, Inc. (a)		10,448		419,696

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	49

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Consumer Lending (concluded)
The First Marblehead Corp. (a)		21,621	$	25,296
MGIC Investment Corp. (a)		68,553		197,433
MoneyGram International, Inc. (a)		7,865		114,829
Nelnet, Inc., Class A		8,754		201,342
Netspend Holdings, Inc. (a)		11,394		104,711
Nicholas Financial, Inc.		3,743		47,985
Portfolio Recovery Associates, Inc. (a)(b)		6,239		569,371
Regional Management Corp. (a)		1,788		29,412
Tree.com, Inc. (a)		2,308		26,403
World Acceptance Corp. (a)		4,026		264,911

				3,403,979

Consumer Services: Miscellaneous — 0.6%
Ancestry.com, Inc. (a)(b)		10,541		290,194
Coinstar, Inc. (a)		11,372		780,802
Collectors Universe, Inc.		1,955		28,699
Core-Mark Holdings Co., Inc.		4,149		199,733
Move, Inc. (a)		14,400		131,184
NutriSystem, Inc.		10,297		119,033
Sotheby’s		24,606		820,856
Steiner Leisure Ltd. (a)(b)		5,537		256,972

				2,627,473

Containers & Packaging — 0.2%
AEP Industries, Inc. (a)		1,521		66,240
Graphic Packaging Holding Co. (a)		60,822		334,521
Myers Industries, Inc.		12,188		209,146
UFP Technologies, Inc. (a)		1,976		33,394

				643,301

Copper — 0.0%
Revett Minerals, Inc. (a)		8,951		29,449

Cosmetics — 0.1%
Elizabeth Arden, Inc. (a)		9,164		355,655
Inter Parfums, Inc.		5,947		102,705
Revlon, Inc., Class A (a)		4,105		58,414

				516,774

Diversified Financial Services — 0.6%
California First National Bancorp		869		13,635
DFC Global Corp. (a)		16,028		295,396
Duff & Phelps Corp.		11,424		165,648
Edelman Financial Group, Inc.		7,538		65,581
Evercore Partners, Inc., Class A		10,392		243,069
FBR & Co. (a)		15,028		41,627
Fidus Investment Corp.		3,405		51,654
First California Financial Group, Inc. (a)		8,248		56,746
FX Alliance, Inc. (a)		2,229		35,017
Greenhill & Co., Inc.		10,564		376,607
Intersections, Inc.		3,336		52,876
Main Street Capital Corp.		8,733		211,339
MidwestOne Financial Group, Inc.		2,464		52,976
Piper Jaffray Cos. (a)(b)		5,938		139,127
Stifel Financial Corp. (a)		19,519		603,137
Triangle Capital Corp.		9,931		226,228

				2,630,663

Diversified Manufacturing Operations — 0.5%
A.M. Castle & Co. (a)		6,119		64,984
Barnes Group, Inc.		19,714		478,853
Federal Signal Corp. (a)		22,582		131,879
Lydall, Inc. (a)		6,268		84,743


Common Stocks	Shares		Value
Diversified Manufacturing Operations (concluded)
OSI Systems, Inc. (a)		7,221	$	457,378
Raven Industries, Inc.		6,589		458,529
Standex International Corp.		4,585		195,184
Trimas Corp. (a)		11,704		235,250

				2,106,800

Diversified Materials & Processing — 0.8%
Belden, Inc.		16,521		550,975
Cabot Microelectronics Corp.		8,555		249,892
Clarcor, Inc.		18,252		879,016
Encore Wire Corp.		6,801		182,131
Harbinger Group, Inc. (a)		14,833		115,549
Hexcel Corp. (a)(b)		36,191		933,366
Insteel Industries, Inc.		6,407		71,438
Koppers Holdings, Inc.		7,534		256,156
NL Industries, Inc.		2,455		30,614
Tredegar Corp.		8,766		127,633
Uranium Energy Corp. (a)		30,867		70,685

				3,467,455

Diversified Media — 0.1%
Belo Corp., Class A		33,998		218,947
EW Scripps Co. (a)		10,895		104,701

				323,648

Diversified Retail — 0.4%
The Bon-Ton Stores, Inc. (b)		4,617		36,059
Fred’s, Inc., Class A		13,346		204,060
Geeknet, Inc. (a)		1,617		32,049
Gordmans Stores, Inc. (a)		3,084		50,886
HSN, Inc.		13,789		556,386
Overstock.com, Inc. (a)(b)		4,195		28,987
PriceSmart, Inc.		6,615		446,579
Saks, Inc. (a)(b)		39,955		425,521
Tuesday Morning Corp. (a)		15,253		65,435
Winmark Corp.		832		48,714

				1,894,676

Drug & Grocery Store Chains — 0.7%
Arden Group, Inc., Class A		409		35,669
Casey’s General Stores, Inc.		13,849		816,952
Harris Teeter Supermarkets		15,944		653,544
Ingles Markets, Inc., Class A		4,596		73,674
Nash Finch Co.		4,411		94,748
The Pantry, Inc. (a)		8,440		124,068
PetMed Express, Inc.		7,384		89,789
Rite Aid Corp. (a)(b)		239,859		335,803
Spartan Stores, Inc.		7,853		142,375
SUPERVALU, Inc. (b)		77,120		399,482
Susser Holdings Corp. (a)		4,085		151,839
Village Super Market, Inc., Class A		3,065		99,858
Weis Markets, Inc.		4,034		179,594

				3,197,395

Education Services — 0.5%
American Public Education, Inc. (a)		6,542		209,344
Bridgepoint Education, Inc. (a)		6,297		137,275
Capella Education Co. (a)(b)		4,893		170,081
Career Education Corp. (a)		18,757		125,484
Corinthian Colleges, Inc. (a)		28,543		82,489
Education Management Corp. (a)		9,660		67,137
Franklin Covey Co. (a)		5,034		51,548
Grand Canyon Education, Inc. (a)		14,506		303,756
HealthStream, Inc. (a)		7,118		185,068

See Notes to Financial Statements.



50	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Education Services (concluded)
K12, Inc. (a)(b)		9,697	$	225,940
Lincoln Educational Services Corp.		8,241		53,567
National American University Holdings, Inc.		3,637		15,639
Rosetta Stone, Inc. (a)		3,887		53,796
Strayer Education, Inc.		4,310		469,876
Universal Technical Institute, Inc.		7,781		105,121

				2,256,121

Electronic Components — 0.8%
3D Systems Corp. (a)		15,701		536,032
Acacia Research Corp. (a)		18,057		672,443
Checkpoint Systems, Inc. (a)		14,693		127,976
InvenSense, Inc. (a)		13,231		149,510
Kemet Corp. (a)		16,343		98,221
LeCroy Corp. (a)		6,144		87,613
Methode Electronics, Inc.		13,442		114,391
Multi-Fineline Electronix, Inc. (a)		3,156		77,764
Neonode, Inc. (a)		8,207		50,473
NVE Corp. (a)		1,746		93,848
Park Electrochemical Corp.		7,554		195,498
Rogers Corp. (a)(b)		5,903		233,818
ScanSource, Inc. (a)		10,013		306,798
TTM Technologies, Inc. (a)		19,284		181,463
Universal Display Corp. (a)(b)		14,434		518,758
Viasystems Group, Inc. (a)		1,387		23,579

				3,468,185

Electronic Entertainment — 0.1%
DTS, Inc. (a)		5,993		156,297
Glu Mobile, Inc. (a)(b)		19,725		109,474
Take-Two Interactive Software, Inc. (a)		28,392		268,588

				534,359

Electronics — 0.4%
Agilysys, Inc. (a)		5,382		46,662
American Science & Engineering, Inc.		3,241		182,954
Coherent, Inc. (a)		8,596		372,207
Daktronics, Inc.		13,157		90,915
II-VI, Inc. (a)(b)		19,099		318,380
iRobot Corp. (a)		9,970		220,835
Newport Corp. (a)(b)		13,875		166,778
Richardson Electronics Ltd.		5,014		61,823
Rofin-Sinar Technologies, Inc. (a)(b)		10,366		196,228
SRS Labs, Inc. (a)		4,136		37,224

				1,694,006

Energy Equipment — 0.2%
C&J Energy Services, Inc. (a)(b)		16,176		299,256
Capstone Turbine Corp. (a)(b)		108,560		109,646
Enphase Energy, Inc. (a)		2,848		17,715
First Solar, Inc. (a)		21,856		329,151
FuelCell Energy, Inc. (a)		55,296		55,849
Matador Resources Co. (a)		5,207		55,923
STR Holdings, Inc. (a)		10,777		49,143
SunPower Corp. (a)		14,405		69,288

				985,971

Engineering & Contracting Services — 0.5%
Argan, Inc.		3,580		50,048
Dycom Industries, Inc. (a)		12,237		227,731
Exponent, Inc. (a)(b)		4,864		256,965
Furmamite Corp. (a)		13,646		66,320


Common Stocks	Shares		Value
Engineering & Contracting Services (concluded)
Hill International, Inc. (a)		8,225	$	26,320
Layne Christensen Co. (a)		7,200		148,968
Mastec, Inc. (a)		21,185		318,622
Michael Baker Corp. (a)		3,134		81,766
Mistras Group, Inc. (a)		5,682		149,323
MYR Group, Inc. (a)		7,441		126,944
Tetra Tech, Inc. (a)(b)		23,052		601,196
VSE Corp.		1,460		34,733

				2,088,936

Entertainment — 0.3%
Ascent Capital Group, Inc., Class A (a)		5,165		267,289
Carmike Cinemas, Inc. (a)		6,454		94,551
Lions Gate Entertainment Corp. (a)		30,821		454,302
Live Nation Entertainment, Inc. (a)		50,870		466,987
Reading International, Inc., Class A (a)		5,901		31,924
Rentrak Corp. (a)		3,379		69,776
World Wrestling Entertainment, Inc.		9,950		77,809

				1,462,638

Environmental, Maintenance, & Security Service — 0.6%
ABM Industries, Inc.		19,524		381,889
The Brink’s Co.		17,162		397,815
G&K Services, Inc., Class A		6,844		213,464
The Geo Group, Inc. (a)		22,300		506,656
Healthcare Services Group, Inc.		24,427		473,395
Mac-Gray Corp.		4,336		61,094
Standard Parking Corp. (a)		5,623		121,007
Swisher Hygiene, Inc. (a)		40,786		103,189
Unifirst Corp.		5,262		335,453

				2,593,962

Fertilizers — 0.0%
Rentech, Inc. (a)		60,976		125,611

Financial Data & Systems — 0.8%
Advent Software, Inc. (a)		11,470		310,952
Cardtronics, Inc. (a)		16,032		484,327
Cass Information Systems, Inc.		3,372		135,723
Euronet Worldwide, Inc. (a)		18,435		315,607
Fair Isaac Corp.		12,461		526,851
Global Cash Access, Inc. (a)		14,592		105,208
Green Dot Corp., Class A (a)		8,738		193,284
Heartland Payment Systems, Inc.		14,096		424,008
Higher One Holdings, Inc. (a)(b)		11,672		142,632
Wright Express Corp. (a)(b)		14,122		871,610

				3,510,202

Foods — 1.4%
Annie’s, Inc. (a)		1,807		75,641
B&G Foods, Inc., Class A		17,588		467,841
The Chefs’ Warehouse, Inc. (a)		3,991		72,038
Chiquita Brands International, Inc. (a)		16,649		83,245
Diamond Foods, Inc. (b)		7,983		142,417
Dole Food Co., Inc. (a)(b)		13,007		114,201
The Hain Celestial Group, Inc. (a)		13,400		737,536
Inventure Foods, Inc. (a)		4,754		29,950
J&J Snack Foods Corp.		5,377		317,781
John B. Sanfilippo & Son, Inc. (a)		2,867		51,176
Lancaster Colony Corp.		6,708		477,677
Lifeway Foods, Inc.		1,611		16,706
Medifast, Inc. (a)		5,043		99,246
Natures Sunshine Prods, Inc.		4,128		62,333

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	51

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Foods (concluded)
Nutraceutical International Corp. (a)		3,125	$	47,656
Omega Protein Corp. (a)		6,953		51,174
Post Holdings, Inc. (a)		10,031		308,453
Roundy’s, Inc.		7,256		74,084
Schiff Nutrition International, Inc. (a)		4,872		87,452
Seneca Foods Corp. (a)		3,273		88,044
Smart Balance, Inc. (a)(b)		21,461		201,519
Snyders-Lance, Inc.		16,062		405,244
Synutra International, Inc. (a)(b)		6,336		34,214
Tootsie Roll Industries, Inc.		8,604		205,291
TreeHouse Foods, Inc. (a)		13,053		813,071
United Natural Foods, Inc. (a)		17,745		973,491
Westway Group, Inc. (a)		4,249		25,452

				6,062,933

Forest Products — 0.1%
Deltic Timber Corp.		3,950		240,871
Universal Forest Products, Inc.		7,164		279,253

				520,124

Forms & Bulk Printing Services — 0.3%
Consolidated Graphics, Inc. (a)		2,889		83,925
Deluxe Corp.		18,520		461,889
Ennis, Inc.		9,474		145,710
Innerworkings, Inc. (a)		11,561		156,420
Multi-Color Corp.		4,879		108,509
Quad/Graphics, Inc.		9,111		131,016
Schawk, Inc.		4,318		54,839

				1,142,308

Funeral Parlors & Cemeteries — 0.2%
Carriage Services, Inc.		5,699		47,416
Hillenbrand, Inc.		20,024		368,041
Matthews International Corp., Class A		10,219		332,015
Stewart Enterprises, Inc., Class A		27,170		193,994

				941,466

Gas Pipeline — 0.2%
Crosstex Energy, Inc.		14,968		209,552
SemGroup Corp. (a)		15,262		487,316

				696,868

Glass — 0.0%
Apogee Enterprises, Inc.		10,303		165,569

Gold — 0.3%
Coeur d’Alene Mines Corp. (a)		32,638		573,123
Gold Reserve, Inc. (a)		19,005		66,327
Gold Resource Corp.		10,842		281,784
Golden Star Resources Ltd. (a)		94,068		109,119
Midway Gold Corp. (a)		41,458		57,627
Vista Gold Corp. (a)		21,143		61,526

				1,149,506

Health Care Facilities — 0.7%
Amsurg Corp. (a)(b)		11,483		344,260
Assisted Living Concepts, Inc.		7,008		99,654
Capital Senior Living Corp. (a)		10,226		108,396
Emeritus Corp. (a)		11,150		187,654
The Ensign Group, Inc.		6,306		178,271
Five Star Quality Care, Inc. (a)		14,232		43,692
Hanger Orthopedic Group, Inc. (a)(b)		12,382		317,474
HealthSouth Corp. (a)		34,705		807,238


Common Stocks	Shares		Value
Health Care Facilities (concluded)
Integramed America, Inc. (a)		3,163	$	43,808
Kindred Healthcare, Inc. (a)		19,174		188,480
National Healthcare Corp.		3,820		172,779
Select Medical Holdings Corp. (a)(b)		12,715		128,549
Skilled Healthcare Group, Inc., Class A (a)		6,820		42,830
Sunrise Senior Living, Inc. (a)(b)		21,184		154,431
US Physical Therapy, Inc.		4,312		109,654
Vanguard Health Systems, Inc. (a)		11,504		102,271

				3,029,441

Health Care Management Services — 0.7%
Bioscript, Inc. (a)(b)		15,978		118,716
Centene Corp. (a)		18,718		564,535
Computer Programs & Systems, Inc.		4,018		229,910
Magellan Health Services, Inc. (a)		9,911		449,266
Metropolitan Health Networks, Inc. (a)(b)		16,061		153,704
Molina Healthcare, Inc. (a)		10,890		255,479
National Research Corp.		911		47,691
Triple-S Management Corp. (a)(b)		7,079		129,404
Universal American Corp. (a)		13,668		143,924
WellCare Health Plans, Inc. (a)(b)		15,659		829,927

				2,922,556

Health Care Services — 1.6%
Acadia Healthcare Co., Inc. (a)		8,354		146,529
Accretive Health, Inc. (a)		20,487		224,537
Air Methods Corp. (a)		4,663		458,140
Almost Family, Inc. (a)		3,043		67,981
Amedisys, Inc. (a)		10,933		136,116
AMN Healthcare Services, Inc. (a)		14,828		87,930
athenahealth, Inc. (a)		13,023		1,031,031
Chemed Corp.		6,977		421,690
Chindex International, Inc. (a)		4,102		40,200
Corvel Corp. (a)		2,255		110,495
Cross Country Healthcare, Inc. (a)		9,935		43,416
ePocrates, Inc. (a)		6,671		53,501
ExamWorks Group, Inc. (a)		10,600		140,238
Gentiva Health Services, Inc. (a)		11,086		76,826
Greenway Medical Technologies (a)		2,873		46,859
Healthways, Inc. (a)		12,061		96,247
HMS Holdings Corp. (a)(b)		31,226		1,040,138
IPC The Hospitalist Co., Inc. (a)		6,014		272,554
LHC Group, Inc. (a)		5,792		98,232
Medidata Solutions, Inc. (a)(b)		8,066		263,516
Mediware Information Systems (a)		1,263		18,440
MModal, Inc. (a)		14,285		185,419
MWI Veterinary Supply, Inc. (a)(b)		4,620		474,797
Omnicell, Inc. (a)		12,193		178,505
PharMerica Corp. (a)(b)		10,677		116,593
Quality Systems, Inc.		14,375		395,456
Sun Healthcare Group, Inc. (a)		9,302		77,858
Team Health Holdings, Inc. (a)		10,296		248,031
WebMD Health Corp., Class A (a)		18,427		377,938

				6,929,213

Health Care: Miscellaneous — 0.1%
MedAssets, Inc. (a)(b)		21,147		284,427
The Providence Service Corp. (a)		4,779		65,520

				349,947

See Notes to Financial Statements.



52	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Home Building — 0.5%
Beazer Homes USA, Inc. (a)		36,841	$	119,733
Hovnanian Enterprises, Inc., Class A (a)		36,334		105,369
KB Home		28,036		274,753
M/I Homes, Inc. (a)		6,871		119,006
MDC Holdings, Inc.		13,908		454,374
Meritage Homes Corp. (a)(b)		10,291		349,276
Ryland Group, Inc.		16,211		414,677
Standard-Pacific Corp. (a)		39,515		244,598

				2,081,786

Hotel/Motel — 0.2%
Gaylord Entertainment Co. (a)		11,297		435,613
Marcus Corp.		7,145		98,315
Morgans Hotel Group Co. (a)		7,923		37,238
Orient Express Hotels Ltd., Class A (a)		35,187		294,515
Red Lion Hotels Corp. (a)		5,011		43,345

				909,026

Household Appliances — 0.0%
National Presto Industries, Inc. (b)		1,746		121,818

Household Equipment & Products — 0.2%
American Greetings Corp., Class A		12,750		186,405
Blyth, Inc.		3,786		130,844
Central Garden & Pet Co., Class A (a)		14,048		152,983
CSS Industries, Inc.		3,494		71,802
Helen of Troy Ltd. (a)(b)		11,514		390,209
Libbey, Inc. (a)		7,450		114,506

				1,046,749

Household Furnishings — 0.3%
American Woodmark Corp. (a)		3,517		60,141
Bassett Furniture Industries, Inc.		4,056		41,817
Ethan Allen Interiors, Inc.		8,795		175,284
Flexsteel Industries, Inc.		1,615		31,945
Hooker Furniture Corp.		3,892		45,887
Kirkland’s, Inc. (a)		5,275		59,344
La-Z-Boy, Inc. (a)		18,828		231,396
Lifetime Brands, Inc.		3,523		43,932
Sealy Corp. (a)(b)		18,698		34,591
Select Comfort Corp. (a)		20,639		431,768

				1,156,105

Insurance: Life — 0.5%
American Equity Investment Life Holding Co.		21,765		239,633
Citizens, Inc. (a)		14,149		137,953
CNO Financial Group, Inc.		77,068		601,130
FBL Financial Group, Inc., Class A		3,699		103,609
Independence Holding Co.		2,982		29,373
Kansas City Life Insurance Co.		1,480		52,081
National Western Life Insurance Co., Class A		796		112,968
The Phoenix Cos., Inc. (a)		42,792		79,165
Presidential Life Corp.		7,955		78,198
Primerica, Inc.		17,058		455,960
Symetra Financial Corp.		28,109		354,736

				2,244,806

Insurance: Multi-Line — 0.5%
Alterra Capital Holdings Ltd.		31,176		727,959
Crawford & Co., Class B		9,788		40,033
Eastern Insurance Holdings, Inc.		2,378		40,426
eHealth, Inc. (a)		7,271		117,136
Flagstone Reinsurance Holdings SA (b)		19,489		156,107


Common Stocks	Shares		Value
Insurance: Multi-Line (concluded)
Fortegra Financial Corp. (a)		2,531	$	20,248
Horace Mann Educators Corp.		14,431		252,254
Maiden Holdings Ltd.		18,173		157,742
Pico Holdings, Inc. (a)(b)		8,263		185,174
Platinum Underwriters Holdings Ltd.		12,650		481,965

				2,179,044

Insurance: Property-Casualty — 1.3%
American Safety Insurance Holdings Ltd. (a)		3,287		61,631
Amerisafe, Inc. (a)(b)		6,593		171,088
AmTrust Financial Services, Inc.		8,896		264,300
Argo Group International Holdings Ltd. (b)		9,371		274,289
Baldwin & Lyons, Inc., Class B		3,324		77,250
Donegal Group, Inc., Class A		2,845		37,782
EMC Insurance Group, Inc.		1,700		34,340
Employers Holdings, Inc.		10,430		188,157
Enstar Group Ltd. (a)		3,060		302,756
First American Financial Corp.		38,589		654,470
Global Indemnity Plc (a)		4,189		84,827
Greenlight Capital Re Ltd. (a)(b)		10,204		259,386
Hallmark Financial Services, Inc. (a)		5,168		40,310
Hilltop Holdings, Inc. (a)		14,444		148,918
Homeowners Choice, Inc.		2,638		46,429
Infinity Property & Casualty Corp.		4,294		247,635
Investors Title Co.		437		24,878
Meadowbrook Insurance Group, Inc.		18,366		161,437
Montpelier Re Holdings Ltd.		18,231		388,138
National Interstate Corp.		2,302		61,210
Navigators Group, Inc. (a)(b)		3,629		181,632
OneBeacon Insurance Group Ltd.		8,302		108,092
Radian Group, Inc. (b)		48,526		159,651
RLI Corp.		7,712		525,958
Safety Insurance Group, Inc.		4,622		187,838
SeaBright Holdings, Inc.		7,094		63,066
Selective Insurance Group, Inc.		19,956		347,434
State Auto Financial Corp.		5,406		75,954
Stewart Information Services Corp.		6,677		102,492
Tower Group, Inc.		12,660		264,214
United Fire Group, Inc.		7,354		156,861
Universal Insurance Holdings, Inc.		6,858		23,386

				5,725,809

International Trade & Diversified Logistic — 0.0%
Global Sources Ltd. (a)		6,913		45,626

Leisure Time — 1.2%
Black Diamond, Inc. (a)		7,582		71,650
Bluegreen Corp. (a)		5,206		25,822
Callaway Golf Co.		23,631		139,659
Churchill Downs, Inc.		4,729		278,018
International Speedway Corp., Class A		10,058		263,318
Interval Leisure Group, Inc.		14,103		268,098
Johnson Outdoors, Inc. (a)		2,043		42,086
Life Time Fitness, Inc. (a)		15,575		724,393
Marriott Vacations Worldwide Corp. (a)		9,668		299,515
Orbitz Worldwide, Inc. (a)		8,598		31,383
Pool Corp.		17,240		697,530
Premier Exhibitions, Inc. (a)		9,307		25,129
Six Flags Entertainment Corp.		14,424		781,492
Smith & Wesson Holding Corp. (a)		23,626		196,332
Speedway Motorsports, Inc.		4,229		71,512
Steinway Musical Instruments, Inc. (a)		2,492		61,054

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	53

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Leisure Time (concluded)
Sturm Ruger & Co., Inc.		6,967	$	279,725
Town Sports International Holdings, Inc. (a)		8,424		111,955
Vail Resorts, Inc.		13,082		655,147
West Marine, Inc. (a)		5,484		64,437

				5,088,255

Luxury Items — 0.0%
Movado Group, Inc.		6,414		160,478

Machinery: Agricultural — 0.2%
Alamo Group, Inc.		2,514		78,864
Lindsay Manufacturing Co.		4,616		299,578
Titan International, Inc.		15,348		376,487
Titan Machinery, Inc. (a)		6,144		186,593

				941,522

Machinery: Construction & Handling — 0.1%
Astec Industries, Inc. (a)		7,278		223,289
Douglas Dynamics, Inc.		8,027		114,385
NACCO Industries, Inc., Class A		2,003		232,848

				570,522

Machinery: Engines — 0.1%
Briggs & Stratton Corp.		17,679		309,206

Machinery: Industrial — 1.3%
Actuant Corp., Class A		24,810		673,839
Altra Holdings, Inc.		9,779		154,313
Applied Industrial Technologies, Inc.		15,336		565,132
Chart Industries, Inc. (a)		10,870		747,421
Columbus McKinnon Corp. (a)		7,032		106,113
DXP Enterprises, Inc. (a)		3,203		132,892
EnPro Industries, Inc. (a)		7,462		278,855
Flow International Corp. (a)		17,526		55,207
Graham Corp.		3,629		67,572
Hardinge, Inc.		4,196		38,184
John Bean Technologies Corp.		10,468		142,051
Kadant, Inc. (a)		4,242		99,475
Middleby Corp. (a)		6,801		677,448
MTS Systems Corp.		5,842		225,209
Omega Flex, Inc. (a)		998		11,886
Proto Labs, Inc. (a)		1,825		52,487
Sauer-Danfoss, Inc.		4,252		148,522
Tennant Co.		6,849		273,617
Twin Disc, Inc.		3,137		58,003
Woodward, Inc.		25,127		991,009

				5,499,235

Machinery: Specialty — 0.1%
Albany International Corp., Class A		10,014		187,362
Cascade Corp.		3,349		157,570
Hurco Cos., Inc. (a)		2,286		46,840

				391,772

Manufactured Housing — 0.0%
Cavco Industries, Inc. (a)		2,504		128,405

Medical & Dental Instruments & Supplies — 2.6%
Abiomed, Inc. (a)		12,156		277,400
Align Technology, Inc. (a)(b)		26,112		873,707
Alphatec Holdings, Inc. (a)		19,744		36,329
AngioDynamics, Inc. (a)		8,858		106,385
Anika Therapeutics, Inc. (a)		4,286		58,247
Antares Pharma, Inc. (a)		33,195		120,830


Common Stocks	Shares		Value
Medical & Dental Instruments & Supplies (concluded)
AtriCure, Inc. (a)(b)		5,296	$	50,895
Atrion Corp.		573		117,453
Biolase Technology, Inc. (a)		1		1
Cantel Medical Corp.		7,709		210,070
Cardiovascular Systems, Inc. (a)		6,047		59,200
Cerus Corp. (a)		19,896		66,055
Conceptus, Inc. (a)(b)		11,401		225,968
CONMED Corp.		10,269		284,143
CryoLife, Inc. (a)		9,953		52,054
Derma Sciences, Inc. (a)		3,339		31,787
Endologix, Inc. (a)(b)		20,130		310,807
Exactech, Inc. (a)		3,135		52,574
Hansen Medical, Inc. (a)(b)		19,953		45,293
Heartware International, Inc. (a)(b)		5,132		455,722
ICU Medical, Inc. (a)(b)		4,541		242,399
Insulet Corp. (a)		17,355		370,876
Integra LifeSciences Holdings Corp. (a)		7,071		262,900
Invacare Corp.		11,531		177,923
Landauer, Inc.		3,428		196,527
MAKO Surgical Corp. (a)(b)		13,138		336,464
Medtox Scientific, Inc. (a)		2,724		73,439
Meridian Bioscience, Inc.		14,984		306,573
Merit Medical Systems, Inc. (a)(b)		15,255		210,672
Navidea Biopharmaceuticals, Inc. (a)		35,108		130,602
Neogen Corp. (a)(b)		8,550		395,010
NuVasive, Inc. (a)		15,686		397,797
OraSure Technologies, Inc. (a)		17,513		196,846
Orthofix International NV (a)(b)		6,792		280,170
Owens & Minor, Inc.		23,068		706,573
PSS World Medical, Inc. (a)		18,315		384,432
Quidel Corp. (a)		10,294		161,410
Rochester Medical Corp. (a)		3,786		40,737
Rockwell Medical Technologies, Inc. (a)		7,562		70,402
Staar Surgical Co. (a)(b)		13,251		102,960
Steris Corp.		20,997		658,676
SurModics, Inc. (a)		5,558		96,153
Symmetry Medical, Inc. (a)(b)		13,271		113,865
Tornier NV (a)		5,493		123,153
Unilife Corp. (a)		26,933		91,034
Utah Medical Products, Inc.		1,157		38,794
Vascular Solutions, Inc. (a)		5,971		74,996
Volcano Corp. (a)		19,347		554,292
West Pharmaceutical Services, Inc.		12,304		621,229
Wright Medical Group, Inc. (a)		14,283		304,942
Young Innovations, Inc.		2,009		69,290

				11,226,056

Medical Equipment — 1.1%
Abaxis, Inc. (a)		7,891		291,967
Accuray, Inc. (a)(b)		25,916		177,266
Affymetrix, Inc. (a)		25,638		120,242
Analogic Corp.		4,450		275,900
ArthroCare Corp. (a)		10,043		294,059
Cyberonics, Inc. (a)(b)		10,006		449,670
Cynosure, Inc., Class A (a)		3,549		75,061
DexCom, Inc. (a)(b)		24,915		322,898
EnteroMedics, Inc. (a)		9,275		31,999
Fluidigm Corp. (a)		7,427		111,702
Greatbatch, Inc. (a)(b)		8,557		194,330
Haemonetics Corp. (a)		9,200		681,812
IRIS International, Inc. (a)		5,803		65,574

See Notes to Financial Statements.



54	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Medical Equipment (concluded)
Luminex Corp. (a)		15,133	$	370,607
Masimo Corp. (a)		18,138		405,929
Merge Healthcare, Inc. (a)		21,505		61,504
Natus Medical, Inc. (a)		10,690		124,218
NxStage Medical, Inc. (a)(b)		17,883		299,719
Palomar Medical Technologies, Inc. (a)		7,064		60,044
Solta Medical, Inc. (a)		22,469		65,834
Spectranetic Corp. (a)		12,486		142,590
Zeltiq Aesthetics, Inc. (a)		6,154		34,462

				4,657,387

Medical Services — 0.2%
Bio-Reference Labs, Inc. (a)		8,933		234,759
eResearch Technology, Inc. (a)		17,958		143,485
Parexel International Corp. (a)		21,762		614,341

				992,585

Metal Fabricating — 0.7%
Ampco-Pittsburgh Corp.		3,106		56,933
Compx International, Inc.		465		5,859
Dynamic Materials Corp.		4,890		84,744
The Eastern Co.		2,231		36,031
Haynes International, Inc.		4,466		227,498
Kaydon Corp.		11,657		249,343
L.B. Foster Co., Class A		3,297		94,327
Metals USA Holdings Corp. (a)		4,253		67,665
Mueller Industries, Inc.		9,858		419,852
Mueller Water Products, Inc., Series A		56,991		197,189
NN, Inc. (a)		6,202		63,322
Northwest Pipe Co. (a)		3,391		82,266
RBC Bearings, Inc. (a)		8,055		381,001
Rexnord Corp. (a)		10,443		209,278
RTI International Metals, Inc. (a)		11,003		248,998
Worthington Industries, Inc.		18,991		388,746

				2,813,052

Metals & Minerals: Diversified — 0.6%
AMCOL International Corp.		9,166		259,490
General Moly, Inc. (a)		24,542		77,062
Globe Specialty Metals, Inc.		22,335		299,959
Hecla Mining Co.		103,635		492,266
Materion Corp.		7,405		170,537
McEwen Mining, Inc. (a)		71,565		215,411
Minerals Technologies, Inc.		6,441		410,807
Oil-Dri Corp. of America		1,750		38,325
Paramount Gold and Silver Corp. (a)(b)		47,416		113,798
SunCoke Energy, Inc. (a)		25,417		372,359
United States Lime & Minerals, Inc. (a)		635		29,635
Uranerz Energy Corp. (a)(b)		24,947		36,173
US Antimony Corp. (a)		19,562		79,031
US Silica Holdings, Inc. (a)		4,353		49,015

				2,643,868

Miscellaneous Consumer Staples — 0.1%
Spectrum Brands Holdings, Inc. (a)		8,340		271,634

Office Supplies & Equipment — 0.6%
ACCO Brands Corp. (a)		41,079		424,757
AT Cross Co., Class A (a)		3,489		34,436
Electronics for Imaging, Inc. (a)(b)		16,849		273,796
Herman Miller, Inc.		21,161		391,902
HNI Corp.		16,551		426,188


Common Stocks	Shares		Value
Office Supplies & Equipment (concluded)
Kimball International, Inc., Class B		11,838	$	91,153
Knoll, Inc.		17,379		233,226
Steelcase, Inc., Class A		27,676		249,914
United Stationers, Inc.		14,763		397,863

				2,523,235

Offshore Drilling & Other Services — 0.1%
Hercules Offshore, Inc. (a)(b)		57,601		203,908
Vantage Drilling Co. (a)		69,497		104,245

				308,153

Oil Well Equipment & Services — 1.5%
Basic Energy Services, Inc. (a)		11,190		115,481
Bolt Technology Corp.		3,084		46,291
Cal Dive International, Inc. (a)		34,880		101,152
Dawson Geophysical Co. (a)		2,906		69,221
Dril-Quip, Inc. (a)(b)		14,600		957,614
Edgen Group, Inc. (a)		5,390		40,533
Exterran Holdings, Inc. (a)(b)		23,548		300,237
Flotek Industries, Inc. (a)		18,044		168,531
Forbes Energy Services Ltd. (a)		5,263		24,736
Forum Energy Technologies, Inc. (a)		8,053		158,564
Global Geophysical Services, Inc. (a)		7,038		43,073
Gulf Island Fabrication, Inc.		5,229		147,510
Helix Energy Solutions Group, Inc. (a)		38,384		629,881
Hornbeck Offshore Services, Inc. (a)		12,834		497,703
ION Geophysical Corp. (a)		47,977		316,168
Key Energy Services, Inc. (a)(b)		54,864		416,966
Lufkin Industries, Inc.		12,206		663,030
Matrix Service Co. (a)		9,460		107,371
Mitcham Industries, Inc. (a)		4,652		78,944
Natural Gas Services Group, Inc. (a)		4,461		66,112
Newpark Resources, Inc. (a)		32,635		192,546
OYO Geospace Corp. (a)		2,317		208,507
Parker Drilling Co. (a)		42,732		192,721
Pioneer Drilling Co. (a)		22,459		178,998
RigNet, Inc. (a)		4,422		76,899
Tesco Corp. (a)		11,030		132,360
Tetra Technologies, Inc. (a)		28,190		200,995
TGC Industries, Inc. (a)		5,320		51,657
Union Drilling, Inc. (a)		4,914		22,015
Willbros Group, Inc. (a)		14,188		91,654

				6,297,470

Oil: Crude Producers — 2.8%
Abraxas Petroleum Corp. (a)		29,959		95,569
Apco Oil and Gas International, Inc.		3,277		59,150
Approach Resources, Inc. (a)		10,525		268,808
ATP Oil & Gas Corp. (a)(b)		16,266		54,979
Berry Petroleum Co., Class A		19,027		754,611
Bill Barrett Corp. (a)		17,470		374,207
Bonanza Creek Energy, Inc. (a)		3,576		59,469
BPZ Resources, Inc. (a)(b)		38,015		96,178
Callon Petroleum Co. (a)		14,454		61,574
Carrizo Oil & Gas, Inc. (a)		14,373		337,909
Ceres, Inc. (a)		2,155		19,503
Clayton Williams Energy, Inc. (a)		2,155		104,259
Comstock Resources, Inc. (a)(b)		17,474		286,923
Contango Oil & Gas Co. (a)(b)		4,624		273,741
CREDO Petroleum Corp. (a)		2,469		35,726
Crimson Exploration, Inc. (a)		7,654		35,132
Endeavour International Corp. (a)		13,795		115,878
Energy Partners Ltd. (a)		10,098		170,656

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	55

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Oil: Crude Producers (concluded)
Energy XXI Bermuda Ltd.		28,666	$	896,959
Evolution Petroleum Corp. (a)(b)		6,014		50,157
Forest Oil Corp. (a)(b)		42,763		313,453
FX Energy, Inc. (a)		19,236		114,454
Gastar Exploration Ltd. (a)		21,333		41,173
GeoResources, Inc. (a)		7,709		282,226
Goodrich Petroleum Corp. (a)		9,431		130,714
Gulfport Energy Corp. (a)		20,230		417,345
Halcon Resources Corp. (a)(b)		25,640		242,042
Harvest Natural Resources, Inc. (a)		13,640		116,622
Isramco, Inc. (a)		368		40,480
Kodiak Oil & Gas Corp. (a)		95,776		786,321
Magnum Hunter Resources Corp. (a)		53,590		224,006
McMoRan Exploration Co. (a)(b)		36,872		467,168
Midstates Petroleum Co., Inc. (a)		8,709		84,564
Northern Oil and Gas, Inc. (a)		23,074		367,800
Oasis Petroleum, Inc. (a)		29,018		701,655
Panhandle Oil & Gas, Inc.		2,507		75,561
PDC Energy, Inc. (a)		10,876		266,680
Penn Virginia Corp.		16,644		122,167
Petroquest Energy, Inc. (a)		20,561		102,805
Quicksilver Resources, Inc. (a)		42,522		230,469
Resolute Energy Corp. (a)		17,494		167,418
Rex Energy Corp. (a)		15,696		175,952
Rosetta Resources, Inc. (a)		19,220		704,221
Sanchez Energy Corp. (a)		4,206		87,485
Saratoga Resources, Inc. (a)		6,533		38,414
Stone Energy Corp. (a)		17,977		455,537
Swift Energy Co. (a)(b)		15,563		289,627
Synergy Resources Corp. (a)		14,099		43,425
Triangle Petroleum Corp. (a)		16,128		89,994
Vaalco Energy, Inc. (a)(b)		21,055		181,705
Venoco, Inc. (a)(b)		10,694		107,047
Voyager Oil & Gas, Inc. (a)		17,195		30,263
W&T Offshore, Inc.		12,628		193,208
Warren Resources, Inc. (a)		26,247		62,993
ZaZa Energy Corp. (a)		9,051		40,911

				11,947,293

Oil: Integrated — 0.1%
Targa Resources, Inc.		10,533		449,759

Oil: Refining & Marketing — 0.3%
Adams Resources & Energy, Inc.		790		33,117
Alon USA Energy, Inc.		3,653		30,904
Arabian American Development Co. (a)		7,377		71,483
Clean Energy Fuels Corp. (a)(b)		24,081		373,256
CVR Energy, Inc. (a)		6,080		161,606
Delek US Holdings, Inc.		6,257		110,061
Miller Energy Resources, Inc. (a)		10,744		53,720
Renewable Energy Group, Inc. (a)		2,649		19,682
Western Refining, Inc.		20,888		465,176

				1,319,005

Paints & Coatings — 0.2%
Chase Corp.		2,279		30,083
Ferro Corp. (a)		31,438		150,902
H.B. Fuller Co.		18,135		556,745

				737,730


Common Stocks	Shares		Value
Paper — 0.6%
Boise, Inc.		36,515	$	240,269
Buckeye Technologies, Inc.		14,360		409,116
Clearwater Paper Corp. (a)(b)		8,490		289,679
Kapstone Paper and Packaging Corp. (a)(b)		14,662		232,393
Neenah Paper, Inc.		5,746		153,361
P.H. Glatfelter Co.		15,591		255,225
Resolute Forest Products (a)		29,326		339,595
Schweitzer-Mauduit International, Inc.		5,669		386,285
Wausau Paper Corp.		16,055		156,215

				2,462,138

Personal Care — 0.1%
Female Health Co.		7,147		41,953
Orchids Paper Products Co.		2,070		36,597
PhotoMedex, Inc. (a)		4,758		57,810
USANA Health Sciences, Inc. (a)		2,168		89,148
WD-40 Co.		5,789		288,350

				513,858

Pharmaceuticals — 2.5%
Achillion Pharmaceuticals, Inc. (a)(b)		19,362		120,044
Acura Pharmaceuticals, Inc. (a)(b)		4,423		13,888
Akorn, Inc. (a)(b)		20,675		326,045
Ampio Pharmaceuticals, Inc. (a)(b)		7,986		40,569
Anacor Pharmaceuticals, Inc. (a)		5,190		33,683
Auxilium Pharmaceuticals, Inc. (a)(b)		17,564		472,296
Avanir Pharmaceuticals, Inc. (a)		49,334		193,389
BioCryst Pharmaceuticals, Inc. (a)		17,888		71,194
Biospecifics Technologies (a)		1,794		33,691
Cadence Pharmaceuticals, Inc. (a)		21,772		77,726
Cambrex Corp. (a)		10,755		101,205
Cempra, Inc. (a)		1,556		14,564
Corcept Therapeutics, Inc. (a)		15,898		71,382
Cumberland Pharmaceuticals, Inc. (a)		4,221		27,268
Depomed, Inc. (a)(b)		20,233		115,126
Dusa Pharmaceuticals, Inc. (a)		8,177		42,684
Endocyte, Inc. (a)		10,765		88,488
Hi-Tech Pharmacal Co., Inc. (a)		3,888		125,971
Impax Laboratories, Inc. (a)		24,333		493,230
Infinity Pharmaceuticals, Inc. (a)		7,075		95,937
Ironwood Pharmaceuticals, Inc. (a)		27,269		375,767
Isis Pharmaceuticals, Inc. (a)		36,381		436,572
Jazz Pharmaceuticals Plc (a)		15,098		679,561
Lannett Co., Inc. (a)		5,664		24,015
MAP Pharmaceuticals, Inc. (a)		9,065		135,794
The Medicines Co. (a)		20,019		459,236
Medicis Pharmaceutical Corp., Class A		20,871		712,745
Obagi Medical Products, Inc. (a)		6,791		103,699
Optimer Pharmaceuticals, Inc. (a)(b)		17,077		265,035
Pacira Pharmaceuticals, Inc. (a)		6,713		107,677
Pain Therapeutics, Inc. (a)		13,691		64,211
Par Pharmaceutical Cos., Inc. (a)		13,343		482,216
Pernix Therapeutics Holdings, Inc. (a)		3,265		23,802
Pharmacyclics, Inc. (a)		19,780		1,080,186
Pozen, Inc. (a)		9,738		60,765
Prestige Brands Holdings, Inc. (a)(b)		18,252		288,564
Questcor Pharmaceuticals, Inc. (a)(b)		19,536		1,040,097
Sagent Pharmaceuticals, Inc. (a)		3,404		61,544
Santarus, Inc. (a)		19,913		141,183
Sciclone Pharmaceuticals, Inc. (a)(b)		20,643		144,707
SIGA Technologies, Inc. (a)(b)		12,574		36,087
Spectrum Pharmaceuticals, Inc. (a)(b)		21,625		336,485

See Notes to Financial Statements.



56	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Pharmaceuticals (concluded)
Supernus Pharmaceuticals, Inc. (a)		1,181	$	11,054
Vical, Inc. (a)		27,622		99,439
Vivus, Inc. (a)		36,236		1,034,175
Xenoport, Inc. (a)		12,970		78,339
Zogenix, Inc. (a)		13,220		32,786

				10,874,121

Plastics — 0.1%
A. Schulman, Inc.		10,738		213,150
Spartech Corp. (a)		11,031		57,030

				270,180

Power Transmission Equipment — 0.2%
Advanced Energy Industries, Inc. (a)		14,500		194,590
Generac Holdings, Inc. (a)		9,001		216,564
Global Power Equipment Group, Inc.		6,228		136,020
Maxwell Technologies, Inc. (a)		10,604		69,562
Powell Industries, Inc. (a)		3,243		121,159
Power-One, Inc. (a)		24,372		110,161
Vicor Corp.		7,078		49,121

				897,177

Precious Metals & Minerals — 0.1%
Golden Minerals Co. (a)(b)		10,446		47,112
Horsehead Holding Corp. (a)		15,917		158,533
Stillwater Mining Co. (a)		42,072		359,295

				564,940

Printing & Copying Services — 0.1%
Casella Waste Systems, Inc. (a)		9,392		54,943
Cenveo, Inc. (a)		19,755		38,127
VistaPrint NV (a)(b)		13,436		433,983

				527,053

Producer Durables: Miscellaneous — 0.1%
Blount International, Inc. (a)(b)		17,740		259,891
Park-Ohio Holdings Corp. (a)		3,143		59,811

				319,702

Production Technology Equipment — 1.3%
ATMI, Inc. (a)(b)		11,598		238,571
Axcelis Technologies, Inc. (a)		39,525		47,430
Brooks Automation, Inc.		24,099		227,495
Cognex Corp.		15,573		492,885
Cohu, Inc.		8,837		89,784
Cymer, Inc. (a)		11,240		662,598
Electro Scientific Industries, Inc.		8,308		98,201
Entegris, Inc. (a)		49,919		426,308
FEI Co. (a)		13,788		659,618
FSI International, Inc. (a)		14,366		51,574
GSI Group, Inc. (a)		10,597		121,442
Intevac, Inc. (a)		8,438		63,454
LTX-Credence Corp. (a)		17,964		120,359
Mattson Technology, Inc. (a)		21,235		37,161
MKS Instruments, Inc.		19,095		552,418
Nanometrics, Inc. (a)		8,540		131,174
Photronics, Inc. (a)		21,994		134,163
Rudolph Technologies, Inc. (a)		11,670		101,762
Tessera Technologies, Inc.		18,860		289,878
Ultra Clean Holdings, Inc. (a)		8,612		55,375
Ultratech, Inc. (a)(b)		9,525		300,038
Veeco Instruments, Inc. (a)		14,122		485,232

				5,386,920


Common Stocks	Shares		Value
Publishing — 0.3%
Courier Corp.		3,747	$	49,648
Daily Journal Corp. (a)		338		28,994
The Dolan Co. (a)		11,060		74,434
Journal Communications, Inc., Class A (a)		15,838		81,724
Martha Stewart Living Omnimedia, Inc., Class A		9,730		33,082
McClatchy Co., Class A (a)(b)		21,082		46,380
Meredith Corp. (b)		13,167		420,554
The New York Times Co., Class A (a)		49,507		386,154
Scholastic Corp.		9,424		265,380
Value Line, Inc.		449		5,339

				1,391,689

Radio & TV Broadcasters — 0.2%
Beasley Broadcasting Group, Inc., Class A (a)		1,542		9,082
Central European Media Enterprises Ltd. (a)		13,348		67,808
Crown Media Holdings, Inc., Class A (a)		11,921		20,862
Cumulus Media, Inc., Class A (a)		20,374		61,326
Dial Global, Inc. (a)(b)		1,630		5,412
Entercom Communications Corp. (a)		8,906		53,614
Entravision Communications Corp., Class A		19,001		22,991
Fisher Communications, Inc. (a)		3,207		95,921
Lin TV Corp., Class A (a)		10,816		32,664
Nexstar Broadcasting Group, Inc., Class A (a)		4,121		27,776
Outdoor Channel Holdings, Inc.		5,513		40,300
Saga Communications, Inc. (a)		1,295		48,058
Salem Communications Corp., Class A		3,658		20,009
Sinclair Broadcast Group, Inc., Class A		18,301		165,807

				671,630

Railroad Equipment — 0.1%
American Railcar Industries, Inc. (a)		3,415		92,547
Freightcar America, Inc.		4,352		99,965
Greenbrier Cos., Inc. (a)		8,307		146,037

				338,549

Railroads — 0.2%
Genesee & Wyoming, Inc., Class A (a)		14,719		777,752
Railamerica, Inc. (a)		6,896		166,883

				944,635

Real Estate — 0.2%
AV Homes, Inc. (a)		3,584		52,255
Consolidated-Tomoka Land Co.		1,503		43,256
Forestar Group, Inc. (a)		12,662		162,200
Griffin Land & Nurseries, Inc.		987		27,626
HFF, Inc., Class A (a)(b)		11,927		166,262
Kennedy-Wilson Holdings, Inc.		12,746		178,572
Market Leader, Inc. (a)		8,020		40,742
Tejon Ranch Co. (a)		4,789		137,061
Thomas Properties Group, Inc.		11,701		63,653

				871,627

Real Estate Investment Trusts (REITs) — 7.3%
Acadia Realty Trust (b)		15,972		370,231
AG Mortgage Investment Trust, Inc.		5,727		123,073
Agree Realty Corp.		4,186		92,636
Alexander’s, Inc.		760		327,644
American Assets Trust, Inc.		12,017		291,412
American Capital Mortgage Investment Corp.		13,182		314,786
American Realty Capital Trust, Inc.		57,650		629,538
Anworth Mortgage Asset Corp. (b)		50,348		354,953
Apollo Commercial Real Estate Finance, Inc.		6,383		102,575
Ares Commercial Real Estate Corp.		2,778		48,559
ARMOUR Residential REIT, Inc.		64,672		459,818

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	57

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) (continued)
Ashford Hospitality Trust, Inc. (b)		19,434	$	163,829
Associated Estates Realty Corp. (b)		15,468		231,247
Campus Crest Communities, Inc.		11,269		117,085
CapLease, Inc. (b)		24,111		100,061
Capstead Mortgage Corp. (b)		34,247		476,376
Cedar Realty Trust, Inc.		21,979		110,994
Chatham Lodging Trust		5,025		71,757
Chesapeake Lodging Trust		11,683		201,181
Colonial Properties Trust (b)		32,010		708,701
Colony Financial, Inc.		11,980		207,254
Coresite Realty Corp.		7,471		192,901
Cousins Properties, Inc.		33,355		258,501
CreXus Investment Corp. (b)		24,413		248,280
CubeSmart		44,879		523,738
CYS Investments, Inc.		42,425		584,192
DCT Industrial Trust, Inc.		90,028		567,176
DiamondRock Hospitality Co.		61,160		623,832
Dupont Fabros Technology, Inc.		22,305		637,031
Dynex Capital Corp. (b)		19,699		204,476
Eastgroup Properties, Inc. (b)		10,370		552,721
Education Realty Trust, Inc.		34,569		383,025
Entertainment Properties Trust (b)		17,054		701,090
Equity One, Inc.		20,045		424,954
Excel Trust, Inc.		12,222		146,175
FelCor Lodging Trust, Inc. (a)		45,244		212,647
First Industrial Realty Trust, Inc. (a)		32,262		407,146
First Potomac Realty Trust (b)		18,538		218,192
Franklin Street Properties Corp. (b)		26,442		279,756
Getty Realty Corp.		9,381		179,646
Gladstone Commercial Corp.		4,013		66,857
Glimcher Realty Trust (b)		50,762		518,788
Government Properties Income Trust		13,520		305,822
Gramercy Capital Corp. (a)		16,688		41,720
Gyrodyne Co. of America, Inc. (a)		428		48,925
Healthcare Realty Trust, Inc.		28,386		676,722
Hersha Hospitality Trust (b)		62,705		331,082
Highwoods Properties, Inc.		24,583		827,218
Hudson Pacific Properties, Inc.		13,026		226,783
Inland Real Estate Corp. (b)		27,939		234,129
InvesCo. Mortgage Capital, Inc.		42,041		771,032
Investors Real Estate Trust		31,190		246,401
iStar Financial, Inc. (a)		30,666		197,796
Kite Realty Group Trust (b)		20,311		101,352
LaSalle Hotel Properties (b)		31,172		908,352
Lexington Corporate Properties Trust		43,305		366,793
LTC Properties, Inc. (b)		11,112		403,143
Medical Properties Trust, Inc.		49,495		476,142
Mission West Properties, Inc.		6,688		57,651
Monmouth Real Estate Investment Corp., Class A		14,727		172,600
National Health Investors, Inc. (b)		8,935		454,970
New York Mortgage Trust, Inc.		6,336		44,732
NorthStar Realty Finance Corp.		48,790		254,684
Omega Healthcare Investors, Inc.		38,571		867,848
One Liberty Properties, Inc.		4,251		80,046
Parkway Properties, Inc.		5,774		66,055
Pebblebrook Hotel Trust		19,088		444,941
Pennsylvania Real Estate Investment Trust (b)		20,374		305,203
PennyMac Mortgage Investment Trust (d)		15,032		296,581
Potlatch Corp.		14,685		469,039
PS Business Parks, Inc.		6,703		453,927
RAIT Financial Trust		18,264		84,380


Common Stocks	Shares		Value
Real Estate Investment Trusts (REITs) (concluded)
Ramco-Gershenson Properties Trust		16,758	$	210,648
Redwood Trust, Inc.		28,735		358,613
Resource Capital Corp.		30,878		164,580
Retail Opportunity Investments Corp.		18,246		220,047
RLJ Lodging Trust		38,832		704,024
Rouse Properties, Inc. (a)		8,028		108,779
Sabra Healthcare REIT, Inc.		13,506		231,088
Saul Centers, Inc.		2,736		117,292
Select Income REIT (a)		3,332		79,168
Sovran Self Storage, Inc.		10,570		529,451
STAG Industrial, Inc.		8,717		127,094
Starwood Property Trust, Inc.		42,287		901,136
Strategic Hotel Capital, Inc. (a)(b)		65,943		425,992
Summit Hotel Properties, Inc.		11,093		92,848
Sun Communities, Inc.		9,648		426,828
Sunstone Hotel Investors, Inc. (a)(b)		43,334		476,241
Terreno Realty Corp.		4,792		72,407
Two Harbors Investment Corp.		78,036		808,453
UMH Properties, Inc.		4,826		51,783
Universal Health Realty Income Trust		4,057		168,487
Urstadt Biddle Properties, Inc., Class A (b)		8,239		162,885
Walter Investment Management Corp.		10,393		243,612
Washington Real Estate Investment Trust		24,151		687,096
Western Asset Mortgage Capital Corp. (a)		2,898		56,482
Whitestone REIT		3,707		51,194
Winthrop Realty Trust		10,620		129,139

				31,256,270

Recreational Vehicles & Boats — 0.3%
Arctic Cat, Inc. (a)		4,611		168,578
Brunswick Corp.		32,459		721,239
Drew Industries, Inc. (a)		6,992		194,727
Marine Products Corp.		3,777		22,964
Winnebago Industries, Inc. (a)		10,613		108,147

				1,215,655

Rental & Leasing Services: Consumer — 0.6%
Amerco, Inc.		3,147		283,136
Avis Budget Group, Inc. (a)		38,580		586,416
Dollar Thrifty Automotive Group, Inc. (a)(b)		10,191		825,063
Rent-A-Center, Inc.		21,568		727,704
Zipcar, Inc. (a)(b)		9,738		114,227

				2,536,546

Restaurants — 1.7%
AFC Enterprises, Inc. (a)(b)		8,838		204,511
Benihana, Inc.		3,871		62,362
Biglari Holdings, Inc. (a)		437		168,852
BJ’s Restaurants, Inc. (a)(b)		8,906		338,428
Bob Evans Farms, Inc.		10,598		426,040
Bravo Brio Restaurant Group, Inc. (a)		7,061		125,898
Buffalo Wild Wings, Inc. (a)(b)		6,745		584,387
Caribou Coffee Co., Inc. (a)		7,663		98,929
Carrols Restaurant Group, Inc. (a)		5,580		33,145
CEC Entertainment, Inc.		6,631		241,170
The Cheesecake Factory, Inc. (a)		19,622		627,119
Cracker Barrel Old Country Store, Inc.		6,990		438,972
Denny’s Corp. (a)(b)		34,863		154,792
DineEquity, Inc. (a)(b)		5,569		248,600
Domino’s Pizza, Inc.		21,031		650,068
Einstein Noah Restaurant Group, Inc.		2,253		39,563
Ellie Mae, Inc. (a)		7,874		141,732
Fiesta Restaurant Group, Inc. (a)		5,841		77,276

See Notes to Financial Statements.



58	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Restaurants (concluded)
Frisch’s Restaurants, Inc.		1,105	$	31,316
Ignite Restaurant Group, Inc. (a)		2,386		43,210
Jack in the Box, Inc. (a)		16,044		447,307
Jamba, Inc. (a)		24,483		47,987
Krispy Kreme Doughnuts, Inc. (a)		21,605		138,056
Luby’s, Inc. (a)		7,239		48,501
Nathan’s Famous, Inc. (a)		942		27,789
P.F. Chang’s China Bistro, Inc.		7,739		398,326
Papa John’s International, Inc. (a)		6,525		310,394
Red Robin Gourmet Burgers, Inc. (a)		5,330		162,618
Ruby Tuesday, Inc. (a)		23,295		158,639
Ruth’s Hospitality Group, Inc. (a)		12,915		85,239
Sonic Corp. (a)(b)		22,027		220,711
Texas Roadhouse, Inc., Class A		22,681		418,011

				7,199,948

Scientific Instruments: Control & Filter — 0.7%
Brady Corp.		17,814		490,063
CIRCOR International, Inc.		6,309		215,074
Energy Recovery, Inc. (a)		15,535		37,284
ESCO Technologies, Inc.		9,705		353,650
The Gorman-Rupp Co.		5,515		164,347
Mine Safety Appliances Co.		10,032		403,688
PMFG, Inc. (a)		7,618		59,496
Robbins & Myers, Inc.		13,996		585,313
Sun Hydraulics, Inc.		7,514		182,515
Thermon Group Holdings, Inc. (a)		5,352		110,840
Watts Water Technologies, Inc., Class A		10,765		358,905

				2,961,175

Scientific Instruments: Electrical — 0.7%
A.O. Smith Corp.		14,149		691,745
A123 Systems, Inc. (a)(b)		38,895		49,008
American Superconductor Corp. (a)(b)		14,228		66,872
AZZ, Inc.		4,583		280,754
Coleman Cable, Inc.		3,087		26,826
EnerSys (a)		17,424		611,060
Franklin Electric Co., Inc.		8,508		435,014
Houston Wire & Cable Co.		6,479		70,815
Littelfuse, Inc.		7,874		447,952
Preformed Line Products Co.		866		50,150
Taser International, Inc. (a)(b)		20,217		105,937

				2,836,133

Scientific Instruments: Gauges & Meters — 0.2%
Badger Meter, Inc.		5,275		198,076
Faro Technologies, Inc. (a)		6,152		258,876
Measurement Specialties, Inc. (a)		5,489		178,448
Mesa Laboratories, Inc.		933		43,375
Vishay Precision Group, Inc. (a)		4,463		62,259
Zygo Corp. (a)		5,922		105,767

				846,801

Scientific Instruments: Pollution Control — 0.3%
ADA-ES, Inc. (a)		3,285		83,340
Ceco Environmental Corp.		2,559		20,216
Darling International, Inc. (a)		42,726		704,552
EnergySolutions, Inc. (a)		28,379		47,961
Heritage-Crystal Clean, Inc. (a)		2,799		45,764
Met-Pro Corp.		5,220		48,076
Metalico, Inc. (a)		14,497		31,893


Common Stocks	Shares		Value
Scientific Instruments: Pollution Control (concluded)
Team, Inc. (a)		7,236	$	225,618
TRC Cos., Inc. (a)		5,660		34,413
US Ecology, Inc.		6,674		118,397

				1,360,230

Securities Brokerage & Services — 0.4%
BGC Partners, Inc.		35,884		210,639
FXCM, Inc.		7,485		88,024
Gain Capital Holdings, Inc.		5,506		27,475
GFI Group, Inc.		25,369		90,314
Gladstone Investment Corp.		8,184		60,480
International FCStone, Inc. (a)		5,001		96,769
Investment Technology Group, Inc. (a)		14,134		130,033
KBW, Inc.		12,616		207,533
Knight Capital Group, Inc., Class A (a)		35,693		426,174
Ladenburg Thalmann Financial Services, Inc. (a)		37,924		58,403
MarketAxess Holdings, Inc.		13,283		353,859
SWS Group, Inc. (a)		10,722		57,148

				1,806,851

Semiconductors & Components — 2.4%
Aeroflex Holding Corp. (a)		7,092		42,907
Alpha & Omega Semiconductor Ltd. (a)		6,168		56,437
Amkor Technology, Inc. (a)		28,992		141,481
Anadigics, Inc. (a)(b)		25,661		46,446
Applied Micro Circuits Corp. (a)		22,612		129,341
Audience, Inc. (a)		2,184		42,108
AuthenTec, Inc. (a)		16,220		70,233
AXT, Inc. (a)		11,698		46,207
Cavium, Inc. (a)(b)		18,061		505,708
Ceva, Inc. (a)		8,435		148,540
Cirrus Logic, Inc. (a)		23,443		700,477
Diodes, Inc. (a)		12,904		242,208
DSP Group, Inc. (a)		6,828		43,290
Entropic Communications, Inc. (a)		32,010		180,536
Exar Corp. (a)		13,491		110,087
Formfactor, Inc. (a)(b)		18,010		116,525
GT Advanced Technologies, Inc. (a)		42,941		226,728
Hittite Microwave Corp. (a)(b)		11,443		584,966
Inphi Corp. (a)		8,497		80,552
Integrated Device Technology, Inc. (a)(b)		51,692		290,509
Integrated Silicon Solutions, Inc. (a)		9,925		100,143
Intermolecular, Inc. (a)		5,047		39,114
International Rectifier Corp. (a)		25,114		502,029
Intersil Corp., Class A		46,282		492,903
IXYS Corp. (a)		8,905		99,469
Kopin Corp. (a)		24,233		83,362
Lattice Semiconductor Corp. (a)(b)		42,844		161,522
M/A-COM Technology Solutions Holdings, Inc. (a)		2,205		40,792
MaxLinear, Inc., Class A (a)		7,910		39,234
MEMC Electronic Materials, Inc. (a)		83,755		181,748
Micrel, Inc.		17,658		168,281
Microsemi Corp. (a)		32,273		596,728
Mindspeed Technologies, Inc. (a)		13,407		32,981
MIPS Technologies, Inc. (a)		17,426		116,231
Monolithic Power Systems, Inc. (a)(b)		11,098		220,517
MoSys, Inc. (a)		11,903		38,566
Omnivision Technologies, Inc. (a)(b)		19,019		254,094
Pericom Semiconductor Corp. (a)		8,555		76,995
PLX Technology, Inc. (a)		16,324		103,657
Power Integrations, Inc.		10,324		385,085
QuickLogic Corp. (a)		14,127		35,459

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	59

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Semiconductors & Components (concluded)
Rambus, Inc. (a)		40,069	$	229,996
RF Micro Devices, Inc. (a)(b)		101,089		429,628
Rubicon Technology, Inc. (a)		6,232		63,566
Semtech Corp. (a)		23,802		578,865
Sigma Designs, Inc. (a)		11,944		76,203
Silicon Image, Inc. (a)(b)		30,244		125,210
Spansion, Inc., Class A (a)		17,516		192,326
Standard Microsystems Corp. (a)		8,390		309,507
Supertex, Inc. (a)		3,773		71,121
TriQuint Semiconductor, Inc. (a)		61,235		336,792
Volterra Semiconductor Corp. (a)(b)		9,224		216,303

				10,203,713

Shipping — 0.4%
Frontline Ltd. (b)		18,772		85,600
GasLog Ltd. (a)		8,631		87,605
Genco Shipping & Trading Ltd. (a)		11,338		34,581
Gulfmark Offshore, Inc., Class A (a)		9,745		331,720
International Shipholding Corp.		1,965		37,060
Knightsbridge Tankers Ltd.		8,849		72,031
Nordic American Tankers Ltd. (b)		19,234		261,005
Overseas Shipholding Group, Inc.		8,984		99,812
Rand Logistics, Inc. (a)		6,313		53,660
Scorpio Tankers, Inc. (a)		13,600		86,904
Ship Finance International Ltd.		16,468		257,395
Teekay Tankers Ltd., Class A		22,923		104,529

				1,511,902

Specialty Retail — 3.3%
1-800-FLOWERS.COM, Inc., Class A (a)		9,406		32,827
Aéropostale, Inc. (a)		29,524		526,413
America’s Car-Mart, Inc. (a)		2,907		112,937
ANN, Inc. (a)(b)		17,716		451,581
Asbury Automotive Group, Inc. (a)		10,124		239,838
Barnes & Noble, Inc. (a)		10,367		170,641
bebe Stores, Inc.		13,378		78,529
Big 5 Sporting Goods Corp.		6,045		45,700
Blue Nile, Inc. (a)(b)		5,011		148,877
Body Central Corp. (a)		5,890		53,010
Brown Shoe Co., Inc.		15,577		201,099
The Buckle, Inc. (b)		10,084		399,024
Cabela’s, Inc., Class A (a)(b)		16,951		640,917
CafePress, Inc. (a)		1,697		25,251
Casual Male Retail Group, Inc. (a)		15,090		54,777
The Cato Corp., Class A		9,957		303,290
The Children’s Place Retail Stores, Inc. (a)		8,809		438,952
Citi Trends, Inc. (a)		5,457		84,256
Collective Brands, Inc. (a)		22,117		473,746
Conn’s, Inc. (a)		5,684		84,123
Destination Maternity Corp.		4,852		104,803
Express, Inc. (a)		32,489		590,325
The Finish Line, Inc., Class A		18,437		385,518
Francesca’s Holdings Corp. (a)(b)		12,636		341,298
Genesco, Inc. (a)		8,893		534,914
Group 1 Automotive, Inc.		8,324		379,658
Haverty Furniture Cos., Inc.		6,939		77,509
hhgregg, Inc. (a)(b)		5,680		64,241
Hibbett Sports, Inc. (a)(b)		9,590		553,439
Hot Topic, Inc.		15,345		148,693
Jos. A. Bank Clothiers, Inc. (a)(b)		10,103		428,973
Lithia Motors, Inc., Class A		7,903		182,164


Common Stocks	Shares		Value
Specialty Retail (concluded)
Lumber Liquidators Holdings, Inc. (a)		10,002	$	337,968
MarineMax, Inc. (a)		7,464		70,983
Mattress Firm Holding Corp. (a)		4,005		121,391
The Men’s Wearhouse, Inc.		18,494		520,421
Monro Muffler, Inc.		11,230		373,285
New York & Co. (a)		9,930		34,556
Office Depot, Inc. (a)(b)		103,054		222,597
OfficeMax, Inc. (a)		31,392		158,843
Orchard Supply Hardware Stores Corp., Class A (a)		668		11,109
Penske Automotive Group, Inc.		15,424		327,606
The Pep Boys — Manny, Moe & Jack		19,195		190,030
Perfumania Holdings, Inc. (a)		1,822		15,104
Pier 1 Imports, Inc.		35,316		580,242
RadioShack Corp.		36,013		138,290
Regis Corp.		20,924		375,795
Rue21, Inc. (a)		5,612		141,647
Shoe Carnival, Inc.		5,189		111,512
Shutterfly, Inc. (a)		13,022		399,645
Sonic Automotive, Inc.		14,646		200,211
Stage Stores, Inc.		11,112		203,572
Stamps.com, Inc. (a)		5,195		128,161
Stein Mart, Inc. (a)		10,037		79,794
Systemax, Inc. (a)		4,002		47,304
The Talbots, Inc. (a)		25,440		64,109
Teavana Holdings, Inc. (a)		3,204		43,350
Tilly’s, Inc. Class A (a)		3,325		53,366
Vitamin Shoppe, Inc. (a)(b)		10,692		587,312
The Wet Seal, Inc., Class A (a)		32,870		103,869
Zumiez, Inc. (a)		7,962		315,295

				14,314,690

Steel — 0.2%
AK Steel Holding Corp.		40,175		235,827
Carbonite, Inc. (a)		4,167		37,253
Handy & Harman Ltd. (a)		1,905		25,680
Olympic Steel, Inc.		3,248		53,332
Schnitzer Steel Industries, Inc., Class A		9,168		256,887
Shiloh Industries, Inc.		2,150		24,725
TMS International Corp. (a)		4,574		45,603
Universal Stainless & Alloy Products, Inc. (a)		2,489		102,298

				781,605

Synthetic Fibers & Chemicals — 0.0%
Zoltek Cos., Inc. (a)		9,911		89,496

Technology: Miscellaneous — 0.3%
Acorn Energy, Inc.		6,525		54,288
Benchmark Electronics, Inc. (a)		20,927		291,932
CTS Corp.		12,470		117,467
Fabrinet (a)		8,017		100,613
Key Tronic Corp. (a)		3,837		31,617
Pendrell Corp. (a)		56,537		63,322
Plexus Corp. (a)		12,721		358,732
Sanmina-SCI Corp. (a)(b)		29,616		242,555
Vocus, Inc. (a)(b)		7,501		139,519

				1,400,045

Telecommunications Equipment — 0.2%
Arris Group, Inc. (a)		41,026		570,672
Brightpoint, Inc. (a)		25,052		135,531
CalAmp Corp. (a)		10,470		76,745
Symmetricom, Inc. (a)		15,042		90,102

See Notes to Financial Statements.



60	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Telecommunications Equipment (concluded)
Tessco Technologies, Inc.		1,969	$	43,417
Ubiquiti Networks, Inc. (a)		3,821		54,449
Vocera Communications, Inc. (a)		2,432		65,153

				1,036,069

Textile Products — 0.1%
Culp, Inc.		3,111		31,888
Interface, Inc.		21,276		289,992
Unifi, Inc. (a)		5,123		58,043

				379,923

Textiles, Apparel & Shoes — 1.3%
Cherokee, Inc.		3,029		42,194
Columbia Sportswear Co.		4,438		237,966
Crocs, Inc. (a)(b)		32,670		527,620
Delta Apparel, Inc. (a)		2,516		34,369
Fifth & Pacific Cos., Inc. (a)		39,514		423,985
G-III Apparel Group Ltd. (a)		6,028		142,803
Iconix Brand Group, Inc. (a)		25,725		449,416
The Jones Group, Inc.		29,826		285,136
K-Swiss, Inc., Class A (a)		9,250		28,490
Kenneth Cole Productions, Inc., Class A (a)		2,893		43,540
Maidenform Brands, Inc. (a)(b)		8,523		169,778
Oxford Industries, Inc.		5,091		227,568
Perry Ellis International, Inc. (a)		4,345		90,159
Quiksilver, Inc. (a)		47,403		110,449
R.G. Barry Corp.		3,050		41,449
Skechers U.S.A., Inc., Class A (a)		13,748		280,047
Steven Madden Ltd. (a)		14,267		452,977
True Religion Apparel, Inc.		9,366		271,427
Tumi Holdings, Inc. (a)		7,829		137,007
Vera Bradley, Inc. (a)		7,308		154,053
The Warnaco Group, Inc. (a)		14,901		634,485
Weyco Group, Inc.		2,396		55,539
Wolverine World Wide, Inc.		17,674		685,398

				5,525,855

Tobacco — 0.3%
Alliance One International, Inc. (a)		31,632		109,447
Star Scientific, Inc. (a)(b)		53,007		241,712
Universal Corp.		8,440		391,025
Vector Group Ltd.		19,200		326,784

				1,068,968

Toys — 0.1%
Jakks Pacific, Inc.		7,956		127,376
Leapfrog Enterprises, Inc. (a)		18,385		188,630

				316,006

Transportation Miscellaneous — 0.3%
Echo Global Logistics, Inc. (a)		5,344		101,857
HUB Group, Inc., Class A (a)		13,464		487,397
Odyssey Marine Exploration, Inc. (a)		26,541		99,263
Pacer International, Inc. (a)		12,845		69,620
Textainer Group Holdings Ltd.		4,480		165,312
Wesco Aircraft Holdings, Inc. (a)		6,420		81,727
XPO Logistics, Inc. (a)		6,417		107,805

				1,112,981


Common Stocks	Shares		Value
Truckers — 0.7%
Arkansas Best Corp.		9,228	$	116,273
Celadon Group, Inc.		7,297		119,525
Forward Air Corp.		10,573		341,191
Heartland Express, Inc.		17,419		249,266
Knight Transportation, Inc.		21,019		336,094
Marten Transport Ltd.		5,652		120,161
Old Dominion Freight Line, Inc. (a)(b)		17,262		747,272
Patriot Transportation Holding, Inc. (a)		2,318		54,542
Quality Distribution, Inc. (a)		7,743		85,870
Roadrunner Transportation Systems, Inc. (a)		4,628		78,167
Saia, Inc. (a)		5,822		127,444
Swift Transportation Co. (a)		28,671		270,941
Universal Truckload Services, Inc.		1,956		29,584
Werner Enterprises, Inc.		16,063		383,745

				3,060,075

Utilities: Electrical — 2.2%
Allete, Inc.		13,862		579,432
American DG Energy, Inc. (a)		8,737		19,833
Atlantic Power Corp. (a)		41,313		529,219
Avista Corp.		21,332		569,564
Black Hills Corp.		16,026		515,556
CH Energy Group, Inc.		5,433		356,894
Cleco Corp.		22,149		926,493
El Paso Electric Co.		14,543		482,246
The Empire District Electric Co.		15,298		322,788
Genie Energy Ltd.		5,472		42,517
GenOn Energy, Inc. (a)		280,670		479,946
IDACORP, Inc.		18,200		765,856
MGE Energy, Inc.		8,409		397,746
NorthWestern Corp.		13,239		485,871
Otter Tail Corp.		13,149		300,718
Pike Electric Corp. (a)		6,230		48,096
PNM Resources, Inc.		28,921		565,116
Portland General Electric Co.		27,427		731,204
UIL Holdings Corp.		18,416		660,398
Unitil Corp.		4,975		131,837
UNS Energy Corp.		14,619		561,516

				9,472,846

Utilities: Gas Distributors — 1.1%
Chesapeake Utilities Corp.		3,484		152,321
Delta Natural Gas Co., Inc.		2,466		53,586
The Laclede Group, Inc.		8,197		326,323
New Jersey Resources Corp.		15,118		659,296
Northwest Natural Gas Co.		9,752		464,195
Piedmont Natural Gas Co.		26,100		840,159
South Jersey Industries, Inc.		11,054		563,422
Southwest Gas Corp.		16,776		732,272
WGL Holdings, Inc.		18,754		745,472

				4,537,046

Utilities: Miscellaneous — 0.0%
Ormat Technologies, Inc.		6,484		138,693

Utilities: Telecommunications — 0.8%
8x8, Inc. (a)		25,720		108,024
Atlantic Tele-Network, Inc.		3,287		110,870
Boingo Wireless, Inc. (a)		5,806		67,466
Cbeyond Communications, Inc. (a)		9,922		67,172
Cincinnati Bell, Inc. (a)(b)		71,683		266,661
Cogent Communications Group, Inc. (a)(b)		17,058		328,366
Consolidated Communications Holdings, Inc.		10,955		162,134

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	61

Schedule of Investments (continued)

Master Small Cap Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Utilities: Telecommunications (concluded)
Fairpoint Communications, Inc. (a)(b)		7,640	$	46,986
General Communication, Inc., Class A (a)		13,412		111,454
Hawaiian Telcom HoldCo, Inc. (a)		3,713		72,441
HickoryTech Corp.		4,881		54,228
IDT Corp., Class B		5,591		54,848
inContact, Inc. (a)		11,518		57,705
Ipass, Inc. (a)		18,879		44,932
Iridium Communications, Inc. (a)		17,990		161,190
j2 Global, Inc.		16,868		445,653
Leap Wireless International, Inc. (a)		19,538		125,629
Lumos Networks Corp.		5,567		52,608
magicJack VocalTec Ltd. (a)		5,499		104,481
Neutral Tandem, Inc. (a)(b)		10,231		134,845
NTELOS Holdings Corp.		5,474		103,185
ORBCOMM, Inc. (a)		13,138		42,830
Premiere Global Services, Inc. (a)		18,214		152,815
Primus Telecommunications Group, Inc.		4,401		68,524
Shenandoah Telecom Co.		8,644		117,645
SureWest Communications		5,249		110,596
Towerstream Corp. (a)(b)		17,428		72,326
USA Mobility, Inc.		8,134		104,603
Vonage Holdings Corp. (a)		49,566		99,628

				3,449,845

Utilities: Water — 0.3%
American States Water Co.		6,858		271,440
Artesian Resources Corp., Class A		2,719		58,567
California Water Service Group		15,248		281,631
Connecticut Water Service, Inc.		3,159		91,548
Consolidated Water Co., Inc.		5,252		43,539
Middlesex Water Co.		5,715		108,585
SJW Corp.		5,127		123,099
York Water Co.		4,663		83,421

				1,061,830

Total Common Stocks — 97.0%				416,087,754


Investment Companies
Asset Management & Custodian — 0.3%
BlackRock Kelso Capital Corp. (d)		24,999		243,990
Firsthand Technology Value Fund, Inc.		3,107		54,870
Gladstone Capital Corp.		7,787		61,439
Hercules Technology Growth Capital, Inc.		18,120		205,481
Pennantpark Investment Corp.		20,525		212,434
Prospect Capital Corp.		44,406		505,784

				1,283,998

Total Investment Companies — 0.3%				1,283,998


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

Total Other Interests — 0.0%				129


Rights	Shares		Value
Banks: Diversified — 0.0%
Hampton Roads Bankshares, Inc.		3,134	$	2,526
Hampton Roads Bankshares, Inc.		3,134		2,273

Total Rights — 0.0%				4,799


Warrants (f)
Oil: Crude Producers — 0.0%
Magnum Hunter Resources Corp. (Expires 10/17/13)		5,700		—

Total Warrants — 0.0%				—

Total Long-Term Investments (Cost — $324,924,427) — 97.3%				417,376,680


Short-Term Securities
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15%, (d)(g)		10,485,505		10,485,505


	Beneficial Interest (000)
BlackRock Liquidity Series LLC, Money Market Series, 0.26% (d)(g)(h)	$	45,686		45,685,912

Total Short-Term Securities (Cost — $56,171,417) — 13.1%				56,171,417

Total Investments (Cost — $381,095,844*) — 110.4%				473,548,097
Liabilities in Excess of Other Assets — (10.4)%				(44,795,159	)

Net Assets — 100.0%			$	428,752,938

*	As of June 30, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	392,668,669

Gross unrealized appreciation	$	104,932,468
Gross unrealized depreciation		(24,053,040	)

Net unrealized appreciation	$	80,879,428

(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.

See Notes to Financial Statements.



62	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012


Schedule of Investments (concluded)		Master Small Cap Index Series

(d)	Investments in companies considered to be an affiliate of the Series during the period, 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, 2011		Shares Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at June 30, 2012		Value at June 30, 2012		Realized Gain/Loss			Income
BlackRock Kelso Capital Corp.		34,792		—			(9,793	)		24,999	$	243,990	$	(2,773	)	$	11,997
BlackRock Liquidity Funds, TempFund, Institutional Class		7,771,176		2,714,329	¹		—			10,485,505	$	10,485,505		—		$	4,665
BlackRock Liquidity Series LLC, Money Market Series	$	58,201,803		—		$	(12,515,891	)¹	$	45,685,912	$	45,685,912		—		$	390,363
PennyMac Mortgage Investment Trust		13,158		9,786			(7,912	)		15,032	$	296,581	$	(2,530	)	$	5,409

¹	Represents net shares/beneficial interest purchased (sold).

(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.

•

Financial futures contracts purchased as of June 30, 2012 were as follows:


Contracts	Issue	Exchange	Expiration	Notional Value	Unrealized Appreciation
158	Russell 2000 EMINI	ICE Futures US Indices	September 2012	$12,567,320	$622,842

•

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 to valuation techniques 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 into or out of an assigned level within the disclosure hierarchy. In accordance with the Series’ policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. 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 is not necessarily an indication of the risks associated with 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 Series’ investments and derivative financial instruments categorized in the disclosure hierarchy as of June 30, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks¹	$	416,087,754		—		—	$	416,087,754
Investment Companies		1,283,998		—		—		1,283,998
Other Interests		—	$	129		—		129
Rights		—		4,799		—		4,799
Short-Term Securities		10,485,505		45,685,912		—		56,171,417

Total	$	427,857,257	$	45,690,840		—	$	473,548,097

¹	See above Schedule of Investments for values in each industry.


	Level 1		Level 2		Level 3		Total
Derivative Financial Instruments²
Assets:
Equity contracts	$	622,842		—		—	$	622,842

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

Certain of the Series’ assets and liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of June 30, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:


	Level 1		Level 2			Level 3		Total
Assets:
Cash	$	60,140		—			—	$	60,140
Cash pledged as collateral for financial futures contracts		773,000		—			—		773,000
Liabilities:
Collateral on securities loaned at value		—	$	(45,685,912	)		—		(45,685,912	)

Total	$	833,140	$	(45,685,912	)		—	$	(44,852,772	)

There were no transfers between levels during the period ended June 30, 2012.

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	63


Statement of Assets and Liabilities		Master Small Cap Index Series

June 30, 2012 (Unaudited)


Assets
Investments at value — unaffiliated (including securities loaned of $44,448,485) (cost — $324,445,960)	$	416,836,109
Investments at value — affiliated (cost — $56,649,884)		56,711,988
Cash		60,140
Cash pledged as collateral for financial futures contracts		773,000
Investments sold receivable		1,755,210
Dividends receivable		438,619
Variation margin receivable		374,931
Securities lending income receivable — affiliated		106,884
Receivable from advisor		5,187
Prepaid expenses		3,978

Total assets		477,066,046

Liabilities
Collateral on securities loaned at value		45,685,912
Investments purchased payable		769,320
Other affiliates payable		4,528
Withdrawals payable to investor		1,843,716
Other accrued expenses payable		9,632

Total liabilities		48,313,108

Net Assets	$	428,752,938

Net Assets Consist of
Investors’ capital	$	335,677,818
Net unrealized appreciation/depreciation		93,075,120

Net Assets	$	428,752,938

See Notes to Financial Statements.



64	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012


Statement of Operations		Master Small Cap Index Series

Six Months Ended June 30, 2012 (Unaudited)


Investment Income
Dividends — unaffiliated	$	3,709,510
Foreign taxes withheld		(5,214	)
Dividends — affiliated		22,071
Securities lending — affiliated		390,363

Total income		4,116,730

Expenses
Investment advisory		26,574
Custodian		98,753
Accounting services		61,544
Professional		34,069
Printing		7,065
Directors		4,640
Miscellaneous		42,869

Total expenses		275,514
Less fees waived and/or reimbursed by advisor		(62,950	)

Total expenses after fees waived and/or reimbursed		212,564

Net investment income		3,904,166

Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		2,534,545
Investments — affiliated		(5,303	)
Financial futures contracts		(642,089	)
Foreign currency transactions		(38	)

		1,887,115

Net change in unrealized appreciation/depreciation on:
Investments		43,637,674
Financial futures contracts		629,917
Foreign currency transactions		11

		44,267,602

Total realized and unrealized gain		46,154,717

Net Increase in Net Assets Resulting from Operations	$	50,058,883

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	65


Statements of Changes in Net Assets		Master Small Cap Index Series


Increase (Decrease) in Net Assets:	Six Months Ended June 30, 2012 (Unaudited)			Year Ended December 31, 2011
Operations
Net investment income	$	3,904,166		$	6,404,899
Net realized gain		1,887,115			7,096,266
Net change in unrealized appreciation/depreciation		44,267,602			(46,200,359	)

Net increase (decrease) in net assets resulting from operations		50,058,883			(32,699,194	)

Capital Transactions
Proceeds from contributions		237,917,333			449,939,216
Value of withdrawals		(388,276,855	)		(226,358,426	)

Net increase (decrease) in net assets derived from capital transactions		(150,359,522	)		223,580,790

Net Assets
Total increase (decrease) in net assets		(100,300,639	)		190,881,596
Beginning of period		529,053,577			338,171,981

End of period	$	428,752,938		$	529,053,577

See Notes to Financial Statements.



66	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012


Financial Highlights		Master Small Cap Index Series


	Six Months Ended June 30, 2012 (Unaudited)
				Year Ended December 31,
				2011			2010			2009			2008			2007
Total Investment Return
Total Investment return		8.69	%¹		(4.30	)%		27.19	%		27.37	%		(33.57	)%		(1.46	)%

Ratios to Average Net Assets
Total expenses		0.10	%²		0.09	%		0.12	%		0.09	%		0.08	%		0.06	%

Total expenses after fees waived and/or reimbursed and fees paid indirectly		0.08	%²		0.07	%		0.08	%		0.07	%		0.07	%		0.06	%

Net investment income		1.47	%²		1.46	%		1.27	%		1.27	%		1.60	%		1.69	%

Supplemental Data
Net assets, end of period (000)	$	428,753		$	529,054		$	338,172		$	229,637		$	344,720		$	630,394

Portfolio turnover		39	%		31	%		42	%		43	%		42	%		26	%

¹	Aggregate total investment return.

²	Annualized.

See Notes to Financial Statements.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	67


Notes to Financial Statements (Unaudited)		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 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 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 annually by the Board. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Series for all financial instruments.

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 price. If no bid price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security. Financial futures contracts traded on exchanges are valued at their last sale price. Investments in open-end 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 by the Global Valuation Committee, or its delegate, 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 Global Valuation Committee, or its delegate, 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. These factors include but are not limited to (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and/or default rates. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches, including regular due diligence of the Series’ pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

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.



68	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012


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

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 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 six months ended June 30, 2012, 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 December 2011, the Financial Accounting Standards Board issued guidance that will expand 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 or similar agreements, which are eligible for offset in the Statement of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. 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/or 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, financial 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



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	69


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

the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Series as unrealized 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.

Derivative Financial Instruments Categorized by Risk Exposure:

¹	Includes cumulative appreciation/depreciation on financial futures contracts as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.


The Effect of Derivative Financial Instruments in the Statement of Operations Six Months Ended June 30, 2012
	Net Realized Loss From
Equity contracts:
Financial futures contracts	$	(642,089	)


	Net Change in Unrealized Appreciation/Depreciation on
Equity contracts:
Financial futures contracts	$	629,917

For the six months ended June 30, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:


Financial futures contracts:
Average number of contracts purchased		238
Average notional value of contracts purchased	$	19,402,705

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”) is the largest stockholder and an affiliate for 1940 Act purposes of BlackRock, Inc. (“BlackRock”).

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 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. This amount is included in fees waived and/or reimbursed by advisor in the Statement of Operations. For the six months ended June 30, 2012, the amount waived was $5,205.

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.

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 expenses 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, 2013 unless approved by the Board, including the majority of the Independent directors. For the six months ended June 30, 2012, the Series waived and/or reimbursed $57,745, which is included in fees waived and/or reimbursed by advisor in the Statement of Operations.

For the six months ended June 30, 2012, the Series reimbursed the Manager $1,570 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. As securities lending agent, BIM is responsible for all transaction fees and all other operational costs relating to securities lending activities, other than extraordinary expenses. BIM does not receive any fees for managing the cash collateral. 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, if any. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The Series retains 65% of securities



70	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012


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

lending income and pays a fee to BIM equal to 35% of such income. The share of income earned by the Series is shown as securities lending — affiliated in the Statement of Operations. For the six months ended June 30, 2012, BIM received $210,195 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.

4. Investments:

Purchases and sales of investments, excluding short-term securities, for the six months ended June 30, 2012, were $205,208,066 and $356,781,613, 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. The Series may borrow under the credit agreement to fund shareholder redemptions. Effective November 2011 to November 2012, the credit agreement has 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 six months ended June 30, 2012.

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 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.

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.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	71

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement

The Board of Directors (the “Board,” and the members of which are referred to as “Board Members”) of Quantitative Master Series LLC (the “Master LLC”) met on April 17, 2012 and May 15–16, 2012 to consider the approval of the Master LLC’s investment advisory agreement (the “Advisory Agreement”) with BlackRock Advisors, LLC (the “Manager”), the Master LLC’s investment advisor, on behalf of the Master Small Cap Index Series (the “Master Portfolio”), a series of the Master LLC. The Board also considered the approval of the sub-advisory agreement (the “Sub-Advisory Agreement”) between the Manager and BlackRock Investment Management, LLC (the “Sub-Advisor”), with respect to the Master Portfolio. The Manager and the Sub-Advisor are referred to herein as “BlackRock.” The Advisory Agreement and the Sub-Advisory Agreement are referred to herein as the “Agreements.”

Activities and Composition of the Board

The Board consists of fourteen individuals, twelve of whom are not “interested persons” of the Master LLC as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Master LLC and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Co-Chairs of the Board are each Independent Board Members. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight and Contract Committee and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee, which also has one interested Board Member).

The Agreements

Pursuant to the 1940 Act, the Board is required to consider the continuation of the Agreements on an annual basis. The Board has four quarterly meetings per year, each extending over two days, and a fifth meeting to consider specific information surrounding the consideration of renewing the Agreements. In connection with this process, the Board assessed, among other things, the nature, scope and quality of the services provided to the Master Portfolio by BlackRock, its personnel and its affiliates, including investment management, administrative and shareholder services, oversight of fund accounting and custody, marketing services, risk oversight, compliance and assistance in meeting applicable legal and regulatory requirements.

The Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to the Master Portfolio and its shareholders. Among the matters the Board considered were: (a) investment performance of an affiliated feeder fund that invests all of its investable assets in the Master Portfolio (the “representative feeder fund”) for one-, three- and five-year periods, as applicable, against peer funds, and applicable benchmarks, if any, as well as senior management’s and portfolio managers’ analysis of the reasons for any over performance or underperformance against its peers and/or benchmark, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Master Portfolio for services, such as marketing and distribution, call center and fund accounting; (c) Master Portfolio operating expenses and how BlackRock allocates expenses to the Master Portfolio; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Master Portfolio’s investment objective, policies and restrictions; (e) the Master LLC’s compliance with its Code of Ethics and other compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) the use of brokerage commissions and execution quality of portfolio transactions; (j) BlackRock’s implementation of the Master LLC’s valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment objectives across the open-end fund, exchange traded fund (“ETF”), closed-end fund and institutional account product channels, as applicable; (l) BlackRock’s compensation methodology for its investment professionals and the incentives it creates; and (m) periodic updates on BlackRock’s business.

The Board has engaged in an ongoing strategic review with BlackRock of opportunities to consolidate funds and of BlackRock’s commitment to investment performance. In addition, the Board requested, to the extent reasonably possible, an analysis of the risk and return relative to selected funds in peer groups. BlackRock provides information to the Board in response to specific questions. These questions covered issues such as profitability, investment performance and management fee levels. The Board considered the importance of: (i) managing fixed income assets with a view toward preservation of capital; (ii) portfolio managers’ investments in the funds they manage; (iii) BlackRock’s controls surrounding the coding of quantitative investment models; and (iv) BlackRock’s oversight of relationships with third party service providers.



72	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (continued)

Board Considerations in Approving the Agreements

The Approval Process: Prior to the April 17, 2012 meeting, the Board requested and received materials specifically relating to the Agreements. The Board is engaged in a process with its independent legal counsel and BlackRock to review periodically the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April meeting included (a) information independently compiled and prepared by Lipper, Inc. (“Lipper”) on fees and expenses of the Master Portfolio and the representative feeder fund, as applicable, and the investment performance of the representative feeder fund as compared with a peer group of funds as determined by Lipper (collectively, “Peers”), as well as the gross investment performance of the representative feeder fund as compared with its benchmark; (b) information on the profitability of the Agreements to BlackRock and a discussion of fallout benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees (a combination of the advisory fee and the administration fee, if any) charged to other clients, such as institutional clients, ETFs and closed-end funds, under similar investment mandates, as well as the performance of such other clients, as applicable; (d) the existence, impact and sharing of economies of scale; (e) a summary of aggregate amounts paid by the Master Portfolio to BlackRock; and (f) if applicable, a comparison of management fees to similar BlackRock open-end funds, as classified by Lipper.

At an in-person meeting held on April 17, 2012, the Board reviewed materials relating to its consideration of the Agreements. As a result of the discussions that occurred during the April 17, 2012 meeting, and as a culmination of the Board’s year-long deliberative process, the Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the May 15–16, 2012 Board meeting.

At an in-person meeting held on May 15–16, 2012, the Board, including all the Independent Board Members, unanimously approved the continuation of the Advisory Agreement between the Manager and the Master LLC with respect to the Master Portfolio and the Sub-Advisory Agreement between the Manager and the Sub-Advisor, with respect to the Master Portfolio, each for a one-year term ending June 30, 2013. In approving the continuation of the Agreements, the Board considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Master Portfolio and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with the Master Portfolio; (d) economies of scale; (e) fall-out benefits to BlackRock as a result of its relationship with the Master Portfolio; and (f) other factors deemed relevant by the Board Members.

The Board also considered other matters it deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to securities lending, services related to the valuation and pricing of portfolio holdings of the Master Portfolio, direct and indirect benefits to BlackRock and its affiliates from their relationship with the Master Portfolio and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as controlling, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of the Master Portfolio. Throughout the year, the Board compared the representative feeder fund’s performance to the performance of a comparable group of mutual funds and/or the performance of a relevant benchmark, if any. The Board met with BlackRock’s senior management personnel responsible for investment operations, including the senior investment officers. The Board also reviewed the materials provided by the portfolio management team discussing the performance of the representative feeder fund and the Master Portfolio’s investment objective, strategies and outlook.

The Board considered, among other factors, the number, education and experience of BlackRock’s investment personnel generally and the Master Portfolio’s portfolio management team, investments by portfolio managers in the funds they manage, BlackRock’s portfolio trading capabilities, BlackRock’s use of technology, BlackRock’s commitment to compliance, BlackRock’s credit analysis capabilities, BlackRock’s risk analysis and oversight capabilities and BlackRock’s approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board engaged in a review of BlackRock’s compensation structure with respect to the Master Portfolio’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services provided to the Master Portfolio. BlackRock and its affiliates provide the Master Portfolio with certain administrative, shareholder and other services (in addition to any such services provided to the Master Portfolio by third parties) and officers and other personnel as are necessary for the operations of the Master Portfolio. In particular, BlackRock and its affiliates provide the Master Portfolio with the following administrative services, including,



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	73

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (continued)

among others: (i) preparing disclosure documents, such as the prospectus, the statement of additional information and periodic shareholder reports; (ii) assisting with daily accounting and pricing; (iii) overseeing and coordinating the activities of other service providers; (iv) organizing Board meetings and preparing the materials for such Board meetings; (v) providing legal and compliance support; and (vi) performing other administrative functions necessary for the operation of the Master Portfolio, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Board reviewed the structure and duties of BlackRock’s fund administration, accounting, legal and compliance departments and consisdered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Master Portfolio and BlackRock:

The Board, including the Independent Board Members, also reviewed and considered the performance history of the Master Portfolio. The Board noted that the Master Portfolio’s investment results correspond directly to the investment results of the representative feeder fund. In preparation for the April 17, 2012 meeting, the Board worked with its independent counsel, BlackRock and Lipper to develop a template for, and was provided with, reports independently prepared by Lipper, which included a comprehensive analysis of the representative feeder fund’s performance. The Board also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s rankings. In connection with its review, the Board received and reviewed information regarding the investment performance of the representative feeder fund as compared to funds in the representative feeder fund’s applicable Lipper category and the gross investment performance of the representative feeder fund as compared with its benchmark. The Board was provided with a description of the methodology used by Lipper to select peer funds and periodically meets with Lipper representatives to review their methodology. The Board and the Board’s Performance Oversight and Contract Committee regularly review, and meet with Master Portfolio management to discuss, the performance of the Master Portfolio and the representative feeder fund, as applicable, throughout the year.

The Board noted that the representative feeder fund’s gross performance, as agreed upon by the Board, was within tolerance of its benchmark index during the one-year period reported. Also, the representative feeder fund’s gross performance exceeded its benchmark index during the three-and five-year periods reported. Based on its discussions with BlackRock and the Board’s review of the representative feeder fund’s investment performance compared to its Lipper Peer Group, the methodology used by Lipper to select peer funds, and other relevant information provided by BlackRock, the Board noted that the representative feeder fund’s gross investment performance as compared to its benchmark index provided a more meaningful comparison of the representative feeder fund’s relative performance.

C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Master Portfolio: The Board, including the Independent Board Members, reviewed the Master Portfolio’s/representative feeder fund’s contractual management fee rate compared with the other funds in the representative feeder fund’s Lipper category. It also compared the representative feeder fund’s total expense ratio, as well as the Master Portfolio’s/representative feeder fund’s actual management fee rate, to those of other funds in the representative feeder fund’s Lipper category. The Board considered the services provided and the fees charged by BlackRock to other types of clients with similar investment mandates, including separately managed institutional accounts.

The Board received and reviewed statements relating to BlackRock’s financial condition and profitability with respect to the services it provided the Master Portfolio. The Board was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Master Portfolio. The Board reviewed BlackRock’s profitability with respect to the Master Portfolio and other funds the Board currently oversees for the year ended December 31, 2011 compared to available aggregate profitability data provided for the years ended December 31, 2010 and December 31, 2009. The Board reviewed BlackRock’s profitability with respect to other fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, expense allocations and business mix, and the difficulty of comparing profitability as a result of those factors.

The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board considered BlackRock’s operating margin, in general, compared to the operating margin for leading investment management firms whose operations include advising open-end funds, among other product types. In addition, the Board considered, among other things, certain third party data comparing BlackRock’s operating margin with that of other publicly-traded asset management firms. The Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management and the relative product mix.



74	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (concluded)

In addition, the Board considered the cost of the services provided to the Master Portfolio by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management and distribution of the Master Portfolio and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Board reviewed BlackRock’s methodology in allocating its costs to the management of the Master Portfolio. The Board also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreements and to continue to provide the high quality of services that is expected by the Board.

The Board noted that the Master Portfolio’s/representative feeder fund’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was lower than or equal to the median contractual management fee ratio paid by the representative feeder fund’s Peers, in each case before taking into account any expense reimbursements or fee waivers. The Board also noted that BlackRock has contractually agreed to waive fees and/or reimburse expenses in order to limit, to a specified amount, the Master Portfolio’s total operating expenses as a percentage of the Master Portfolio’s average daily net assets.

D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of the Master Portfolio increase, as well as the existence of expense caps. The Board also considered the extent to which the Master Portfolio benefits from such economies and whether there should be changes in the advisory fee rate or structure in order to enable the Master Portfolio to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the asset level of the Master Portfolio. In its consideration, the Board took into account the existence of expense caps and further considered the continuation and/or implementation, as applicable, of such caps.

E. Other Factors Deemed Relevant by the Board Members: The Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from their respective relationships with the Master Portfolio, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to

the Master Portfolio, including for administrative, distribution, securities lending and cash management services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Board further noted that it had considered the investment by BlackRock’s funds in ETFs without any offset against the management fees payable by the funds to BlackRock.

In connection with its consideration of the Agreements, the Board also received information regarding BlackRock’s brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

Conclusion

The Board of the Master LLC, including all the Independent Board Members, unanimously approved the continuation of the Advisory Agreement between the Manager and the Master LLC, with respect to the Master Portfolio, for a one-year term ending June 30, 2013 and the Sub-Advisory Agreement between the Manager and the Sub-Advisor, with respect to the Master Portfolio, for a one-year term ending June 30, 2013. Based upon its evaluation of all of the aforementioned factors in their totality, the Board, including the Independent Board Members, was satisfied that the terms of the Agreements were fair and reasonable and in the best interest of the Master Portfolio and its shareholders. In arriving at its decision to approve the Agreements, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for the Master Portfolio reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.



MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012	75


Officers and Directors		Master Small Cap Index Series

Ronald W. Forbes, Co-Chairman of the Board and Director

Rodney D. Johnson, Co-Chairman of the Board and Director

Paul L. Audet, Director

David O. Beim, Director

Henry Gabbay, Director

Dr. Matina S. Horner, Director

Herbert I. London, Director

Ian A. MacKinnon, Director¹

Cynthia A. Montgomery, Director

Joseph P . Platt, Director

Robert C. Robb, Jr., Director

Toby Rosenblatt, Director

Kenneth L. Urish, Director

Frederick W. Winter, Director

John M. Perlowski, President and Chief Executive Officer

Brendan Kyne, Vice President

Neal Andrews, Chief Financial Officer

Jay Fife, Treasurer

Brian Kindelan, Chief Compliance Officer and

Anti-Money Laundering Officer

Benjamin Archibald, Secretary²

Investment Advisor

BlackRock Advisors, LLC

Wilmington, DE 19809

Sub-Advisor

BlackRock Investment Management, LLC

Princeton, NJ 08540

Custodian and Accounting Agent

State Street Bank and Trust Company

Boston, MA 02110

Legal Counsel

Sidley Austin LLP

New York, NY 10019

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Boston, MA 02116

¹	Effective May 15, 2012, Ian A. MacKinnon became a Director of the Master LLC.

²	Effective May 16, 2012, Ira P. Shapiro resigned as Secretary of the Master LLC and Benjamin Archibald became Secretary of the Master LLC.



76	MASTER SMALL CAP INDEX SERIES	JUNE 30, 2012


Series Portfolio Information		Master International Index Series

As of June 30, 2012


Ten Largest Holdings	Percent of Long-Term Investments
Nestlé SA, Registered Shares		2	%
HSBC Holdings Plc		2
Vodafone Group Plc		1
Novartis AG, Registered Shares		1
BP Plc		1
Royal Dutch Shell Plc, Class A		1
Roche Holding AG		1
GlaxoSmithKline Plc		1
Toyota Motor Corp.		1
BHP Billiton Ltd.		1


Geographic Allocations	Percent of Long-Term Investments
United Kingdom		23	%
Japan		22
France		9
Australia		9
Switzerland		8
Germany		8
Sweden		3
Hong Kong		3
Spain		3
Netherlands		3
Italy		2
Singapore		2
Other¹		5

¹	Other includes a 1% or less investment in each of the following countries:

Denmark, Belgium, Norway, Finland, Israel, Ireland, Austria, Portugal, New Zealand, Greece and China.

Derivative Financial Instruments

Master International Index Series (the “Series”) may invest in various derivative financial instruments, including financial futures contracts and foreign currency exchange contracts as specified in Note 2 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market, equity and/or foreign currency exchange rate risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the

transaction or illiquidity of the derivative financial instrument. The Series’ ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require the Series to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Series can realize on an investment or may cause the Series to hold an investment that it might otherwise sell. The Series’ investments in these instruments are discussed in detail in the Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012	77


Schedule of Investments June 30, 2012 (Unaudited)		Master International Index Series
		(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Australia — 8.6%
AGL Energy Ltd.		30,851	$	468,834
Alumina Ltd.		146,647		120,280
Amcor Ltd.		69,862		509,999
AMP Ltd.		167,166		665,206
APA Group		36,466		187,197
Asciano Ltd.		55,634		249,886
ASX Ltd.		10,341		317,426
Australia & New Zealand Banking Group Ltd.		155,905		3,551,531
Bendigo and Adelaide Bank Ltd.		22,401		171,188
BGP Holdings Plc		783,183		10
BHP Billiton Ltd.		187,762		6,115,841
Boral Ltd.		44,756		136,403
Brambles Ltd.		91,218		578,531
Caltex Australia Ltd.		8,111		113,285
Campbell Brothers Ltd.		3,991		223,743
Centro Retail Australia		71,415		144,946
CFS Retail Property Trust		118,698		236,909
Coca-Cola Amatil Ltd.		33,592		461,635
Cochlear Ltd.		3,229		219,291
Commonwealth Bank of Australia		92,051		5,041,138
Computershare Ltd.		26,450		202,173
Crown Ltd.		22,707		198,568
CSL Ltd.		30,126		1,221,961
Dexus Property Group		262,155		250,857
Echo Entertainment Group Ltd.		44,808		197,559
Fairfax Media Ltd.		134,235		77,001
Fortescue Metals Group Ltd.		80,474		411,192
Goodman Group		88,604		335,494
GPT Group		86,063		291,113
Harvey Norman Holdings Ltd.		31,404		63,145
Iluka Resources Ltd.		24,820		292,934
Incitec Pivot Ltd.		96,701		285,687
Insurance Australia Group Ltd.		122,826		440,530
Leighton Holdings Ltd.		9,101		153,292
Lend Lease Group		32,227		239,675
Lynas Corp. Ltd. (a)		102,974		91,135
Macquarie Group Ltd.		19,096		515,666
Metcash Ltd.		43,575		150,959
Mirvac Group		202,249		265,751
National Australia Bank Ltd.		130,253		3,172,647
Newcrest Mining Ltd.		44,518		1,035,982
Orica Ltd.		21,424		545,707
Origin Energy Ltd.		63,558		800,447
OZ Minerals Ltd.		17,695		144,368
Qantas Airways Ltd. (a)		66,688		74,086
QBE Insurance Group Ltd.		67,036		926,486
QR National Ltd.		101,196		354,483
Ramsay Health Care Ltd.		7,893		183,396
Rio Tinto Ltd.		25,492		1,496,556
Santos Ltd.		55,273		608,749
Sims Metal Management Ltd.		9,960		98,642


Common Stocks	Shares		Value
Australia (concluded)
Sonic Healthcare Ltd.		21,930	$	286,824
SP AusNet		98,475		103,203
Stockland		136,668		433,771
Suncorp Group Ltd.		75,536		631,184
Sydney Airport		19,838		59,124
Tabcorp Holdings Ltd.		42,827		129,149
Tatts Group Ltd.		76,039		204,903
Telstra Corp. Ltd.		254,465		964,146
Toll Holdings Ltd.		40,393		166,082
Transurban Group		77,290		451,452
Wesfarmers Ltd.		58,850		1,811,497
Westfield Group		127,542		1,248,812
Westfield Retail Trust		171,114		501,909
Westpac Banking Corp.		177,737		3,881,103
Whitehaven Coal, Ltd.		25,486		109,567
Woodside Petroleum Ltd.		37,420		1,199,162
Woolworths Ltd.		71,620		1,971,566
WorleyParsons Ltd.		11,768		305,576

				49,098,550

Austria — 0.3%
Andritz AG		4,142		213,001
Erste Group Bank AG (a)		12,249		232,625
Immoeast AG NPV		30,711		—
IMMOFINANZ AG (a)		52,467		166,945
OMV AG		8,396		264,051
Raiffeisen Bank Holding AG		2,936		96,125
Telekom Austria AG		19,807		194,681
Verbund AG		4,091		93,712
Vienna Insurance Group AG		2,307		93,258
Voestalpine AG		6,546		173,858

				1,528,256

Belgium — 1.1%
Ageas		132,992		264,105
Anheuser-Busch InBev NV		46,793		3,689,216
Belgacom SA		8,989		255,622
Colruyt SA		4,551		203,036
Delhaize Group SA		6,073		222,465
Groupe Bruxelles Lambert SA		4,785		324,803
KBC Groep NV		9,727		205,701
Mobistar SA		1,776		60,773
Solvay SA		3,504		345,955
Telenet Group Holding NV		3,176		138,974
UCB SA		6,303		318,398
Umicore SA		6,728		311,070

				6,340,118

China — 0.0%
Foxconn International Holdings Ltd. (a)		130,313		47,607

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.



78	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012

Schedule of Investments (continued)

Master International Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Denmark — 1.1%
A.P. Moller — Maersk A/S, Class A		32	$	199,181
A.P. Moller — Maersk A/S, Class B		76		498,372
Carlsberg A/S, Class B		6,304		497,592
Coloplast A/S, Class B		1,340		240,942
Danske Bank A/S (a)		38,368		533,485
DSV A/S		11,286		223,779
Novo-Nordisk A/S, Class B		23,774		3,448,104
Novozymes A/S		14,035		363,947
TDC A/S		28,035		194,834
Tryg A/S		1,473		82,804
William Demant Holding A/S (a)		1,570		141,124

				6,424,164

Finland — 0.7%
Elisa Oyj		8,497		171,106
Fortum Oyj		26,165		496,884
Kesko Oyj, Class B		3,492		91,287
Kone Oyj, Class B		9,163		553,383
Metso Oyj		7,602		262,110
Neste Oil Oyj		7,701		86,659
Nokia Oyj		219,511		447,801
Nokian Renkaat Oyj		6,562		249,271
Orion Oyj Class B		5,772		109,325
Pohjola Bank Plc		8,200		95,692
Sampo Oyj		24,651		639,566
Stora Enso Oyj, Class R		31,176		191,938
UPM-Kymmene Oyj		31,108		351,911
Wartsila Oyj, Class B		9,878		323,623

				4,070,556

France — 8.9%
Accor SA		8,767		274,734
Aeroports de Paris		1,802		136,296
Air Liquide SA		18,224		2,083,522
Alcatel-Lucent (a)		138,441		227,858
Alstom SA		12,192		385,736
Arcelor Mittal		54,212		829,416
Arkema SA		3,528		231,325
AtoS		3,252		194,479
AXA SA		102,580		1,371,362
BNP Paribas SA		56,474		2,177,337
Bouygues SA		11,198		300,483
Bureau Veritas SA		3,238		288,054
Cap Gemini SA		8,779		323,117
Carrefour SA		33,858		625,201
Casino Guichard-Perrachon SA		3,265		286,989
Christian Dior SA		3,217		442,424
CNP Assurances SA (a)		8,926		109,022
Compagnie de Saint-Gobain		23,451		866,495
Compagnie Générale d’Optique Essilor International SA		11,901		1,105,599
Compagnie Générale de Géophysique — Veritas (a)		7,737		200,115
Compagnie Générale des Etablissements Michelin, Class B		10,539		689,528
Credit Agricole SA (a)		59,680		263,334
Danone SA		33,607		2,088,559
Dassault Systèmes SA		3,616		339,259
Edenred SA		9,905		280,800
EDP SA		14,243		316,900
Eurazeo		1,598		61,536
European Aeronautic Defence and Space Co. NV		23,960		850,357
Eutelsat Communications SA		7,882		242,464


Common Stocks	Shares		Value
France (concluded)
Foncière Des Regions		1,362	$	97,926
France Telecom SA		108,484		1,426,389
GDF Suez		72,471		1,728,275
Gecina SA		1,318		117,496
Groupe Eurotunnel SA		32,609		265,055
ICADE		1,401		105,958
Iliad SA		1,291		186,943
Imerys SA		2,041		104,051
JC Decaux SA		3,995		88,100
Klepierre		5,699		187,291
L’Oreal SA		14,057		1,644,743
Lafarge SA		11,026		492,401
Lagardere SCA		6,667		186,100
Legrand SA		13,684		464,423
LVMH Moët Hennessy Louis Vuitton SA		14,823		2,255,908
Natixis		55,575		149,700
Pernod Ricard SA		12,289		1,314,088
Peugeot SA (a)		13,963		137,703
PPR SA		4,454		634,835
Publicis Groupe SA		8,605		393,537
Remy Cointreau SA		1,248		137,112
Renault SA		11,329		452,395
Rexel SA		5,976		102,075
Safran SA		13,211		490,609
Sanofi		70,260		5,318,738
Schneider Electric SA		30,291		1,683,685
Scor SE		9,273		224,801
SES SA		16,261		384,471
Société BIC SA		1,614		166,726
Société Générale SA (a)		40,445		948,418
Sodexo		5,567		433,463
Suez Environnement SA		16,733		179,921
Technip SA		5,831		607,683
Thales SA		5,485		181,218
Total SA		123,595		5,562,872
Unibail-Rodamco SE		5,366		988,471
Vallourec SA		5,883		240,386
Veolia Environnement SA		19,237		243,601
Vinci SA		26,553		1,240,957
Vivendi SA		74,826		1,390,332
Wendel SA		1,975		146,248
Zodiac Aerospace		1,936		196,939

				50,894,344

Germany — 7.8%
Adidas AG		12,205		874,828
Allianz SE		26,521		2,667,609
Axel Springer AG		2,378		102,168
BASF SE		53,496		3,719,811
Bayer AG, Registered Shares		48,203		3,473,472
Bayerische Motoren Werke AG		19,365		1,401,403
Bayerische Motoren Werke AG, Preference Shares		3,137		154,744
Beiersdorf AG		5,934		384,686
Brenntag AG		2,655		293,822
Celesio AG		5,109		83,626
Commerzbank AG (a)		215,111		365,353
Continental AG		4,726		393,963
Daimler AG		52,886		2,376,664
Deutsche Bank AG		54,313		1,960,332
Deutsche Boerse AG		11,460		618,279
Deutsche Post AG		49,471		875,313
Deutsche Telekom AG		164,234		1,799,910
E.ON AG		105,221		2,273,733

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012	79

Schedule of Investments (continued)

Master International Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Germany (concluded)
Fraport AG Frankfurt Airport Services Worldwide		2,208	$	118,888
Fresenius Medical Care AG & Co. KGaA		12,278		867,173
Fresenius SE & Co. KGAA		7,172		742,572
GEA Group AG		10,382		276,710
Hannover Rueckversicherung AG		3,417		203,545
HeidelbergCement AG		8,314		399,149
Henkel & Co. KGaA		7,668		425,511
Henkel & Co. KGaA, Preference Shares		10,418		692,232
Hochtief AG (a)		1,911		92,634
Hugo Boss AG		1,154		114,330
Infineon Technologies AG		64,031		433,375
K+S AG		10,168		465,500
Kabel Deutschland Holding AG (a)		5,288		329,547
Lanxess AG		4,929		311,929
Linde AG		9,996		1,556,783
Lufthansa Airlines		13,760		159,076
MAN SE		2,519		257,633
Merck KGaA		3,822		381,689
Metro AG		7,745		225,845
Muenchener Rueckversicherungs AG		10,494		1,480,746
Porsche Automobil Holding SE, Preference Shares		9,028		449,086
ProSieben Sat.1 Media AG, Preference Shares		5,286		118,497
RWE AG		28,460		1,163,858
RWE AG, Non-Voting Preference Shares		2,343		87,002
Salzgitter AG		2,347		96,615
SAP AG		53,635		3,176,017
Siemens AG, Registered Shares		47,910		4,025,736
Suedzucker AG		3,982		141,263
ThyssenKrupp AG		22,790		371,241
United Internet AG		5,330		91,628
Volkswagen AG		1,750		264,448
Volkswagen AG, Preference Shares		8,461		1,340,458
Wacker Chemie AG		940		64,756

				44,745,188

Greece — 0.1%
Coca-Cola Hellenic Bottling Co. SA (a)		11,991		212,445
OPAP SA		13,417		83,978

				296,423

Hong Kong — 3.0%
AIA Group Ltd.		595,000		2,055,164
ASM Pacific Technology Ltd.		11,904		152,161
Bank of East Asia Ltd.		80,132		288,813
BOC Hong Kong Holdings Ltd.		217,400		669,256
Cathay Pacific Airways Ltd.		71,263		115,534
Cheung Kong Holdings Ltd.		80,835		998,013
Cheung Kong Infrastructure Holdings Ltd.		28,500		172,533
CLP Holdings Ltd.		105,687		898,218
First Pacific Co. Ltd.		128,000		132,768
Galaxy Entertainment Group Ltd. (a)		83,000		208,816
Hang Lung Group Ltd.		52,000		321,524
Hang Lung Properties Ltd.		132,000		451,522
Hang Seng Bank Ltd.		44,953		618,013
Henderson Land Development Co., Ltd.		55,491		308,498
Hong Kong & China Gas Ltd.		306,295		650,662
Hong Kong Exchanges & Clearing Ltd.		60,027		863,715
Hopewell Holdings Ltd.		34,349		98,334
Hutchison Whampoa Ltd.		123,176		1,068,416
Hysan Development Co. Ltd.		37,791		144,052
Kerry Properties Ltd.		43,000		185,036
Li & Fung Ltd.		333,980		646,669


Common Stocks	Shares		Value
Hong Kong (concluded)
Lifestyle International Holdings Ltd.		26,966	$	59,420
Link REIT		132,914		544,796
MGM China Holdings Ltd.		52,400		80,348
MTR Corp.		82,500		283,210
New World Development Co., Ltd.		212,226		250,078
NWS Holdings Ltd.		81,500		119,199
Orient Overseas International Ltd.		12,557		61,586
PCCW Ltd.		240,000		88,512
Power Assets Holdings Ltd.		81,500		611,591
Sands China Ltd.		142,200		457,461
Shangri-La Asia Ltd.		91,905		176,533
Sino Land Co., Ltd.		173,263		263,094
SJM Holdings Ltd.		110,000		206,115
Sun Hung Kai Properties Ltd.		91,324		1,085,745
Swire Pacific Ltd., Class A		39,577		460,314
Wharf Holdings Ltd.		89,357		496,910
Wheelock & Co., Ltd.		55,000		208,990
Wing Hang Bank Ltd.		10,500		102,099
Wynn Macau Ltd.		92,000		217,093
Yue Yuen Industrial Holdings Ltd.		44,785		140,807

				16,961,618

Ireland — 0.3%
Anglo Irish Bank Corp. Plc		62,641		1
CRH Plc New		42,101		806,576
Elan Corp. Plc (a)		29,579		433,793
James Hardie Industries SE		24,675		203,444
Kerry Group Plc		8,571		375,747
Ryanair Holdings Plc (a)		10,891		55,229

				1,874,790

Israel — 0.6%
Bank Hapoalim BM		63,064		194,494
Bank Leumi Le-Israel BM (a)		75,051		183,354
Bezeq The Israeli Telecommunication Corp. Ltd.		106,656		113,478
Delek Group, Ltd.		296		44,073
Elbit Systems Ltd.		1,528		52,613
Israel Chemicals Ltd.		26,258		290,528
The Israel Corp. Ltd.		136		76,910
Mizrahi Tefahot Bank Ltd. (a)		7,472		58,297
Nice Systems Ltd. (a)		3,650		133,658
Teva Pharmaceutical Industries Ltd.		54,983		2,167,291

				3,314,696

Italy — 2.2%
Assicurazioni Generali SpA		68,252		925,417
Atlantia SpA		19,660		250,931
Autogrill SpA		6,158		55,872
Banca Monte dei Paschi di Siena SpA (a)		353,823		88,211
Banco Popolare SC (a)		105,991		142,311
Enel Green Power SpA		105,171		166,659
Enel SpA		382,618		1,235,418
Eni SpA		140,156		2,977,634
Exor SpA		3,851		82,789
Fiat Industrial SpA		49,324		485,498
Fiat SpA (a)		49,943		251,802
Finmeccanica SpA (a)		24,315		98,315
Intesa Sanpaolo SpA		589,511		839,019
Intesa Sanpaolo SpA, Risparmio Shares		56,017		63,778
Luxottica Group SpA		6,926		241,844
Mediaset SpA		42,584		74,580
Mediobanca SpA		31,051		136,936

See Notes to Financial Statements.



80	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012

Schedule of Investments (continued)

Master International Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Italy (concluded)
Pirelli & C SpA		14,294	$	150,756
Prysmian SpA		12,241		182,587
Saipem SpA		15,514		690,905
Snam SpA		95,008		425,647
Telecom Italia SpA		553,628		547,063
Telecom Italia SpA Risparmio Shares		358,743		290,714
Tenaris SA		27,838		489,556
Terna Rete Elettrica Nazionale SpA		76,453		276,267
UniCredit SpA (a)		236,541		896,870
Unione di Banche Italiane ScpA		48,776		159,361

				12,226,740

Japan — 21.5%
ABC-Mart, Inc.		1,600		59,865
Advantest Corp.		9,000		140,692
Aeon Co., Ltd.		35,400		441,192
Aeon Credit Service Co. Ltd.		4,500		83,473
Aeon Mall Co., Ltd.		4,400		93,757
Air Water, Inc.		9,000		109,124
Aisin Seiki Co. Ltd.		11,300		377,735
Ajinomoto Co., Inc.		38,000		528,869
Alfresa Holdings Corp.		2,500		132,806
All Nippon Airways Co. Ltd.		50,000		141,653
Amada Co. Ltd.		21,000		124,253
Aozora Bank Ltd.		35,000		83,348
Asahi Glass Co. Ltd.		58,100		391,954
Asahi Group Holdings Ltd.		22,800		489,843
Asahi Kasei Corp.		75,000		406,546
Asics Corp.		9,000		114,170
Astellas Pharma, Inc.		26,000		1,134,607
The Bank of Kyoto Ltd.		19,000		143,959
The Bank of Yokohama Ltd.		72,000		340,425
Benesse Holdings, Inc.		3,800		170,139
Bridgestone Corp.		38,100		874,932
Brother Industries Ltd.		14,200		162,576
Canon, Inc.		66,100		2,638,085
Casio Computer Co. Ltd.		12,100		79,340
Central Japan Railway Co.		88		693,076
The Chiba Bank Ltd.		43,000		258,284
Chiyoda Corp.		9,000		110,271
Chubu Electric Power Co., Inc.		37,900		614,573
Chugai Pharmaceutical Co. Ltd.		12,800		242,653
The Chugoku Bank Ltd.		10,000		130,320
The Chugoku Electric Power Co., Inc.		17,000		280,377
Citizen Holdings Co. Ltd.		15,800		92,664
Coca-Cola West Co. Ltd.		3,900		68,002
Cosmo Oil Co. Ltd.		30,000		76,358
Credit Saison Co., Ltd.		9,500		211,223
Dai Nippon Printing Co., Ltd.		32,000		250,686
The Dai-ichi Life Insurance Co., Ltd.		491		568,646
Daicel Corp.		16,000		98,425
Daido Steel Co. Ltd.		17,000		105,936
Daihatsu Motor Co. Ltd.		11,000		192,579
Daiichi Sankyo Co. Ltd.		39,500		666,043
Daikin Industries Ltd.		13,800		388,640
Dainippon Sumitomo Pharma Co. Ltd.		9,600		98,086
Daito Trust Construction Co. Ltd.		4,300		407,606
Daiwa House Industry Co. Ltd.		30,000		425,547
Daiwa Securities Group Inc.		99,000		373,104
Dena Co. Ltd.		6,400		168,458


Common Stocks	Shares		Value
Japan (continued)
Denki Kagaku Kogyo KK		29,000	$	101,376
Denso Corp.		28,400		970,456
Dentsu, Inc.		10,713		317,541
East Japan Railway Co.		19,849		1,246,343
Eisai Co., Ltd.		14,800		648,106
Electric Power Development Co., Ltd.		7,000		183,955
FamilyMart Co. Ltd.		3,300		151,038
FANUC Ltd.		11,100		1,824,629
Fast Retailing Co. Ltd.		3,100		620,284
Fuji Electric Co., Ltd.		31,800		77,572
FUJIFILM Holdings Corp.		27,300		517,231
Fuji Heavy Industries Ltd.		34,000		275,470
Fujitsu Ltd.		110,000		526,428
Fukuoka Financial Group, Inc.		46,000		179,627
Furukawa Electric Co. Ltd.		38,000		89,880
Gree, Inc. (a)		5,600		111,398
GS Yuasa Corp.		21,000		96,011
The Gunma Bank Ltd.		23,000		108,821
The Hachijuni Bank Ltd.		25,000		129,954
Hakuhodo DY Holdings, Inc.		1,400		92,905
Hamamatsu Photonics KK		4,000		135,703
Hankyu Hanshin Holdings, Inc.		66,000		333,300
Hino Motors Ltd.		14,000		101,330
Hirose Electric Co. Ltd.		1,700		168,284
Hisamitsu Pharmaceutical Co., Inc.		3,700		182,094
Hitachi Chemical Co. Ltd.		6,300		99,252
Hitachi Construction Machinery Co. Ltd.		6,500		122,760
Hitachi High-Technologies Corp.		3,700		91,109
Hitachi Ltd.		263,000		1,621,616
Hitachi Metals Ltd.		10,000		119,341
Hokkaido Electric Power Co., Inc.		11,000		142,164
Hokuriku Electric Power Co.		10,100		157,276
Honda Motor Co. Ltd.		95,000		3,315,076
Hoya Corp.		25,600		563,968
Ibiden Co. Ltd.		7,300		132,234
Idemitsu Kosan Co. Ltd.		1,300		116,612
IHI Corp.		79,000		168,980
Inpex Corp.		128		718,912
Isetan Mitsukoshi Holdings Ltd.		20,205		214,665
Isuzu Motors Ltd.		70,000		374,947
ITOCHU Corp.		88,000		924,938
Itochu Techno-Solutions Corp.		1,300		62,743
The Iyo Bank Ltd.		15,000		119,788
J. Front Retailing Co. Ltd.		28,600		143,759
Japan Petroleum Exploration Co.		1,600		60,919
Japan Prime Realty Investment Corp.		41		115,405
Japan Real Estate Investment Corp.		31		284,231
Japan Retail Fund Investment Corp.		113		179,247
The Japan Steel Works Ltd.		19,000		104,903
Japan Tobacco, Inc.		52,400		1,552,383
JFE Holdings, Inc.		27,200		455,249
JGC Corp.		12,000		347,896
The Joyo Bank Ltd.		39,000		177,461
JS Group Corp.		15,800		333,446
JSR Corp.		10,700		185,662
JTEKT Corp.		13,400		138,739
Jupiter Telecommunications Co. Ltd.		119		121,330
JX Holdings, Inc.		131,460		677,546
Kajima Corp.		50,800		149,145
Kamigumi Co. Ltd.		13,000		103,416
Kaneka Corp.		17,000		94,018
The Kansai Electric Power Co., Inc.		44,100		528,870

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012	81

Schedule of Investments (continued)

Master International Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Japan (continued)
Kansai Paint Co. Ltd.		13,000	$	139,306
Kao Corp.		30,700		846,657
Kawasaki Heavy Industries Ltd.		84,000		230,366
Kawasaki Kisen Kaisha Ltd. (a)		44,000		87,399
KDDI Corp.		157		1,012,792
Keikyu Corp.		27,000		245,656
Keio Corp.		34,000		246,431
Keisei Electric Railway Co. Ltd.		15,000		126,713
Keyence Corp.		2,692		665,928
Kikkoman Corp.		10,000		123,613
Kinden Corp.		7,000		45,846
Kintetsu Corp.		96,000		382,750
Kirin Holdings Co. Ltd.		51,000		601,088
Kobe Steel Ltd.		149,000		179,239
Koito Manufacturing Co., Ltd.		6,000		84,071
Komatsu Ltd.		54,300		1,296,213
Konami Corp.		6,100		138,219
Konica Minolta Holdings, Inc.		28,500		224,522
Kubota Corp.		64,000		591,449
Kuraray Co. Ltd.		20,500		265,669
Kurita Water Industries Ltd.		6,800		157,291
Kyocera Corp.		9,000		778,859
Kyowa Hakko Kirin Co. Ltd.		15,000		154,487
Kyushu Electric Power Co., Inc.		24,500		290,650
Lawson, Inc.		3,400		237,767
Mabuchi Motor Co. Ltd.		1,300		51,821
Makita Corp.		6,400		224,509
Marubeni Corp.		97,000		646,301
Marui Group Co. Ltd.		13,400		102,487
Maruichi Steel Tube Ltd.		2,700		58,115
Mazda Motor Corp. (a)		154,400		210,254
McDonald’s Holdings Co. Japan Ltd.		4,000		112,585
Medipal Holdings Corp.		8,800		124,653
Meiji Holdings Co. Ltd.		3,593		164,992
Miraca Holdings, Inc.		3,300		137,011
Mitsubishi Chemical Holdings Corp.		80,000		352,663
Mitsubishi Corp.		82,200		1,661,614
Mitsubishi Electric Corp.		113,000		945,411
Mitsubishi Estate Co. Ltd.		73,000		1,309,678
Mitsubishi Gas Chemical Co., Inc.		23,000		130,755
Mitsubishi Heavy Industries Ltd.		178,200		724,412
Mitsubishi Logistics Corp.		7,000		74,016
Mitsubishi Materials Corp.		67,000		194,292
Mitsubishi Motors Corp. (a)		230,000		231,929
Mitsubishi Tanabe Pharma Corp.		12,700		182,621
Mitsubishi UFJ Financial Group, Inc.		742,474		3,557,100
Mitsubishi UFJ Lease & Finance Co. Ltd.		3,500		145,585
Mitsui & Co. Ltd.		101,700		1,511,246
Mitsui Chemicals, Inc.		49,000		122,705
Mitsui Fudosan Co. Ltd.		49,000		950,739
Mitsui OSK Lines Ltd.		62,000		223,501
Mizuho Financial Group, Inc.		1,333,264		2,252,207
MS&AD Insurance Group Holdings		29,770		520,835
Murata Manufacturing Co. Ltd.		11,900		625,947
Nabtesco Corp.		5,700		127,133
Namco Bandai Holdings, Inc.		9,900		135,765
NEC Corp. (a)		157,000		244,290
Nexon Co., Ltd. (a)		6,000		117,459
NGK Insulators Ltd.		16,000		177,176
NGK Spark Plug Co. Ltd.		10,000		132,085
NHK Spring Co. Ltd.		8,800		95,030


Common Stocks	Shares		Value
Japan (continued)
Nidec Corp.		6,400	$	486,616
Nikon Corp.		20,100		611,858
Nintendo Co. Ltd.		6,200		724,042
Nippon Building Fund, Inc.		35		338,403
Nippon Electric Glass Co., Ltd.		20,500		122,437
Nippon Express Co., Ltd.		48,000		198,211
Nippon Meat Packers, Inc.		10,000		132,366
Nippon Paper Group, Inc.		5,894		93,569
Nippon Steel Corp.		299,000		678,182
Nippon Telegraph & Telephone Corp.		25,476		1,187,959
Nippon Yusen KK		96,000		253,905
The Nishi-Nippon City Bank Ltd.		41,000		99,544
Nissan Motor Co. Ltd.		145,500		1,381,629
Nisshin Seifun Group, Inc.		10,500		122,926
Nisshin Steel Co. Ltd.		38,000		53,337
Nissin Foods Holdings Co. Ltd.		3,500		133,095
Nitori Holdings Co. Ltd.		1,950		184,390
Nitto Denko Corp.		9,710		416,022
NKSJ Holdings, Inc.		22,075		469,929
NOK Corp.		6,200		132,377
Nomura Holdings, Inc.		212,600		794,813
Nomura Real Estate Holdings, Inc.		5,700		104,380
Nomura Real Estate Office Fund, Inc.		16		90,260
Nomura Research Institute Ltd.		6,100		134,234
NSK Ltd.		26,000		168,467
NTN Corp.		25,000		78,698
NTT Data Corp.		75		230,194
NTT DoCoMo, Inc.		893		1,485,954
NTT Urban Development Corp.		66		53,396
Obayashi Corp.		39,000		171,262
Odakyu Electric Railway Co. Ltd.		36,000		357,923
OJI Paper Co. Ltd.		46,000		176,250
Olympus Corp. (a)		13,000		210,659
Omron Corp.		12,100		256,418
Ono Pharmaceutical Co. Ltd.		4,900		307,913
Oracle Corp. Japan		2,200		94,694
Oriental Land Co., Ltd.		2,900		331,597
ORIX Corp.		6,170		575,018
Osaka Gas Co., Ltd.		111,000		465,059
Otsuka Corp.		900		76,620
Otsuka Holdings Co., Ltd.		21,000		644,600
Panasonic Corp.		128,900		1,053,733
Rakuten, Inc.		42,800		442,495
Resona Holdings, Inc.		111,356		458,740
Ricoh Co. Ltd.		37,000		312,264
Rinnai Corp.		1,800		124,203
Rohm Co. Ltd.		5,500		211,939
Sankyo Co. Ltd.		2,800		136,638
Sanrio Co. Ltd.		2,700		98,437
Santen Pharmaceutical Co. Ltd.		4,400		180,817
SBI Holdings, Inc.		1,344		99,870
Secom Co., Ltd.		12,400		568,653
Sega Sammy Holdings, Inc.		11,332		230,510
Seiko Epson Corp.		7,800		79,155
Sekisui Chemical Co. Ltd.		25,000		232,269
Sekisui House Ltd.		32,000		302,145
Seven & I Holdings Co., Ltd.		43,800		1,320,366
Seven Bank Ltd.		28,800		73,958
Sharp Corp.		57,000		290,412
Shikoku Electric Power Co. Inc.		10,200		216,825
Shimadzu Corp.		14,000		121,142
Shimamura Co. Ltd.		1,300		150,222

See Notes to Financial Statements.



82	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012

Schedule of Investments (continued)

Master International Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Japan (continued)
Shimano, Inc.		4,200	$	275,364
Shimizu Corp.		36,000		124,896
Shin-Etsu Chemical Co. Ltd.		23,900		1,316,125
Shinsei Bank Ltd.		93,000		113,144
Shionogi & Co. Ltd.		17,800		242,023
Shiseido Co. Ltd.		20,600		325,059
The Shizuoka Bank Ltd.		32,000		329,254
Showa Denko KK		81,000		157,369
Showa Shell Sekiyu KK		10,900		66,915
SMC Corp.		3,100		537,471
Softbank Corp.		51,800		1,928,185
Sojitz Corp.		75,200		124,422
Sony Corp.		58,800		840,796
Sony Financial Holdings, Inc.		10,500		171,378
Square Enix Holdings Co. Ltd.		3,500		55,127
Stanley Electric Co., Ltd.		8,700		135,109
Sumco Corp. (a)		7,000		63,676
Sumitomo Chemical Co. Ltd.		85,000		261,278
Sumitomo Corp.		65,900		922,060
Sumitomo Electric Industries Ltd.		44,400		553,263
Sumitomo Heavy Industries Ltd.		33,000		148,597
Sumitomo Metal Industries Ltd.		199,000		328,271
Sumitomo Metal Mining Co., Ltd.		30,000		338,073
Sumitomo Mitsui Financial Group, Inc.		78,450		2,591,589
Sumitomo Mitsui Trust Holdings, Inc.		183,820		549,368
Sumitomo Realty & Development Co. Ltd.		21,000		516,524
Sumitomo Rubber Industries Ltd.		10,300		134,157
Suruga Bank Ltd.		11,000		112,664
Suzuken Co. Ltd.		4,200		141,777
Suzuki Motor Corp.		21,000		431,190
Sysmex Corp.		4,300		170,056
T&D Holdings, Inc.		34,300		365,394
Taiheiyo Cement Corp.		63,000		144,663
Taisei Corp.		62,000		166,179
Taisho Pharmaceutical Holdings Co. Ltd.		2,000		169,133
Taiyo Nippon Sanso Corp.		13,000		75,955
Takashimaya Co., Ltd.		16,000		122,977
Takeda Pharmaceutical Co., Ltd.		46,100		2,093,025
TDK Corp.		7,100		289,030
Teijin Ltd.		56,000		170,473
Terumo Corp.		9,000		369,870
THK Co., Ltd.		7,200		136,115
Tobu Railway Co. Ltd.		60,000		315,442
Toho Co. Ltd.		6,800		117,640
Toho Gas Co. Ltd.		23,000		142,744
Tohoku Electric Power Co., Inc. (a)		26,900		270,285
Tokio Marine Holdings, Inc.		42,300		1,061,438
The Tokyo Electric Power Co., Inc. (a)		86,000		166,461
Tokyo Electron Ltd.		9,900		464,260
Tokyo Gas Co. Ltd.		144,000		735,986
Tokyu Corp.		65,000		305,975
Tokyu Land Corp.		26,000		129,058
TonenGeneral Sekiyu KK		17,000		151,158
Toppan Printing Co., Ltd.		33,000		220,433
Toray Industries, Inc.		86,700		591,196
Toshiba Corp.		235,000		894,494
Tosoh Corp.		30,000		81,816
Toto Ltd.		15,000		111,847
Toyo Seikan Kaisha Ltd.		9,100		110,439
Toyo Suisan Kaisha Ltd.		5,000		133,335
Toyoda Gosei Co. Ltd.		4,100		94,517


Common Stocks	Shares		Value
Japan (concluded)
Toyota Boshoku Corp.		3,400	$	41,319
Toyota Industries Corp.		9,300		266,639
Toyota Motor Corp.		160,700		6,486,207
Toyota Tsusho Corp.		12,100		231,298
Trend Micro, Inc.		6,300		185,600
Tsumura & Co.		3,600		95,338
Ube Industries Ltd.		61,000		141,885
Uni-charm Corp.		6,700		381,372
Ushio, Inc.		6,300		78,086
USS Co., Ltd.		1,320		142,430
West Japan Railway Co.		10,000		411,380
Yahoo Japan Corp.		829		268,399
Yakult Honsha Co., Ltd.		5,500		215,385
Yamada Denki Co. Ltd.		5,180		265,207
Yamaguchi Financial Group, Inc.		12,000		105,830
Yamaha Corp.		9,100		93,645
Yamaha Motor Co., Ltd.		16,800		160,870
Yamato Holdings Co. Ltd.		21,500		346,187
Yamato Kogyo Co. Ltd.		2,300		64,051
Yamazaki Baking Co. Ltd.		7,000		91,668
Yaskawa Electric Corp.		13,000		99,043
Yokogawa Electric Corp.		11,100		114,756

				123,353,657

Netherlands — 2.5%
Aegon NV		101,405		470,274
Akzo Nobel NV		13,739		646,620
ASML Holding NV		24,584		1,262,537
Corio NV		3,656		160,964
DE Master Blenders 1753 NV (a)		34,896		393,473
Delta Lloyd NV		6,149		85,512
Fugro NV		4,091		248,155
Gemalto NV		4,535		325,719
Heineken Holding NV		6,005		268,969
Heineken NV		13,537		705,909
ING Groep NV (a)		224,129		1,502,582
Koninklijke Ahold NV		61,400		760,580
Koninklijke Boskalis Westminster NV		4,247		140,142
Koninklijke DSM NV		9,096		448,428
Koninklijke KPN NV		82,875		792,450
Koninklijke Philips Electronics NV		61,801		1,217,829
Koninklijke Vopak NV		4,128		264,777
QIAGEN NV (a)		13,330		223,205
Randstad Holding NV		7,165		211,273
Reed Elsevier NV		40,583		462,989
SBM Offshore NV (a)		10,303		142,781
STMicroelectronics NV		38,200		207,872
TNT Express NV		19,470		228,392
Unilever NV		94,962		3,172,246
Wolters Kluwer NV		17,920		284,921

				14,628,599

New Zealand — 0.1%
Auckland International Airport Ltd.		55,663		109,170
Contact Energy Ltd. (a)		21,676		83,869
Fletcher Building Ltd.		40,681		192,554
SKYCITY Entertainment Group Ltd.		34,663		94,693
Telecom Corp. of New Zealand Ltd.		109,451		208,405

				688,691

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012	83

Schedule of Investments (continued)

Master International Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Norway — 0.8%
Aker Solutions ASA		9,879	$	140,176
DnB NOR ASA		57,475		571,501
Gjensidige Forsikring ASA		12,018		140,023
Norsk Hydro ASA		55,191		248,894
Orkla ASA		45,662		331,366
Seadrill Ltd.		20,360		726,149
Statoil ASA		65,273		1,556,664
Telenor ASA		42,353		708,070
Veripos, Inc. (a)		1,665		524
Yara International ASA		11,034		482,867

				4,906,234

Portugal — 0.2%
Banco Espirito Santo SA (a)		126,038		86,176
EDP-Energias de Portugal SA		113,722		269,022
Galp Energia SGPS SA		13,843		175,500
Jeronimo Martins SGPS SA		13,123		221,868
Portugal Telecom SGPS SA		35,281		154,518

				907,084

Singapore — 1.9%
Ascendas Real Estate Investment Trust		113,962		194,413
CapitaLand Ltd.		151,749		327,194
CapitaMall Trust		139,700		211,602
CapitaMalls Asia Ltd.		82,000		102,282
City Developments Ltd.		28,535		254,358
ComfortDelGro Corp. Ltd.		112,816		138,151
Cosco Corp. Singapore Ltd.		59,002		46,341
DBS Group Holdings Ltd.		106,407		1,175,339
Fraser and Neave Ltd.		54,096		301,221
Genting Singapore Plc		360,227		404,675
Global Logistic Properties Ltd. (a)		120,000		199,771
Golden Agri-Resources Ltd.		396,251		211,627
Hutchison Port Holdings Trust		311,000		222,306
Jardine Cycle & Carriage Ltd.		5,721		210,854
Keppel Corp. Ltd.		83,577		684,706
Keppel Land Ltd.		45,000		115,801
Neptune Orient Lines Ltd. (a)		54,350		47,964
Noble Group Ltd.		217,840		194,646
Olam International Ltd.		96,900		140,345
Oversea-Chinese Banking Corp., Ltd.		150,914		1,055,324
SembCorp Industries Ltd.		58,590		239,813
Sembcorp Marine Ltd.		47,197		180,158
Singapore Airlines Ltd.		32,009		263,947
Singapore Exchange Ltd.		51,000		256,216
Singapore Press Holdings Ltd.		84,316		260,464
Singapore Technologies Engineering Ltd.		91,213		224,864
Singapore Telecommunications Ltd.		464,132		1,215,451
StarHub Ltd.		34,157		92,580
United Overseas Bank Ltd.		73,572		1,092,510
UOL Group Ltd.		27,457		107,629
Wilmar International Ltd.		113,670		327,752
Yangzijiang Shipbuilding Holdings Ltd.		115,183		92,372

				10,592,676


Common Stocks	Shares		Value
Spain — 2.6%
Abertis Infraestructuras SA		21,778	$	294,275
Acciona SA		1,202		71,854
Acerinox SA		5,990		67,130
ACS Actividades de Construccion y Servicios SA		8,554		183,231
Amadeus IT Holding SA		17,981		380,949
Banco Bilbao Vizcaya Argentaria SA		275,148		1,964,929
Banco de Sabadell SA		128,412		249,380
Banco Popular Espanol SA		62,304		140,927
Banco Santander SA		544,627		3,602,845
Bankia SA (a)		42,306		49,503
Caixa Bank		46,156		150,275
Distribuidora Internacional de Alimentacion SA (a)		34,701		163,155
Enagas SA		10,111		184,487
Ferrovial SA		23,419		264,110
Gas Natural SDG SA		20,675		265,460
Grifols SA (a)		8,917		225,905
Iberdrola SA		226,676		1,070,186
Inditex SA		12,702		1,312,944
International Consolidated Airlines Group SA (a)		55,746		139,866
Mapfre SA		46,264		94,117
Red Electrica Corp. SA		6,428		280,553
Repsol YPF SA		46,435		746,447
Telefonica SA		239,542		3,153,196
Zardoya Otis SA		8,817		98,017

				15,153,741

Sweden — 3.1%
Alfa Laval AB		19,872		340,502
Assa Abloy AB, Class B		19,127		534,141
Atlas Copco AB, Class A		39,244		844,561
Atlas Copco AB, Class B		23,026		438,764
Boliden AB		16,235		226,540
Electrolux AB, Class B		14,295		284,477
Elekta AB -B Shares		5,234		239,171
Getinge AB, Class B		11,770		292,067
Hennes & Mauritz AB, Class B		55,511		1,992,507
Hexagon AB, Class B		14,088		241,819
Holmen AB, Class B		3,172		86,365
Husqvarna AB, Class B		22,345		105,390
Industrivarden AB, Class C		7,073		91,128
Investment AB, Class B		11,686		234,565
Investor AB, Class B		26,846		512,576
Lundin Petroleum AB (a)		12,681		237,393
Millicom International Cellular SA		3,719		350,984
Modern Times Group AB, Class B		2,538		117,474
Nordea Bank AB		152,739		1,316,295
Ratos AB, Class B		11,513		109,321
Sandvik AB		58,696		752,759
Scania AB, Class B		18,981		325,281
Securitas AB, Class B		18,817		146,314
Skandinaviska Enskilda Banken AB, Class A		83,151		540,021
Skanska AB, Class B		21,746		333,247
SKF AB		23,110		455,544
SSAB AB, Class A		9,336		77,597
Svenska Cellulosa AB -B Shares		34,085		511,392
Svenska Handelsbanken AB, Class A		28,632		941,299
Swedbank AB		47,952		755,434
Swedish Match AB		12,554		505,996
Tele2 AB, Class B		18,872		292,410
Telefonaktiebolaget LM Ericsson		176,139		1,611,623
TeliaSonera AB		126,797		810,071
Volvo AB, Class B		81,040		926,571

				17,581,599

See Notes to Financial Statements.



84	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012

Schedule of Investments (continued)

Master International Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Switzerland — 8.3%
ABB Ltd. (a)		128,044	$	2,090,728
Actelion Ltd. (a)		6,526		268,429
Adecco SA (a)		7,857		349,399
Aryzta AG (a)		5,156		256,638
Baloise Holding AG		2,827		186,767
Banque Cantonale Vaudoise		165		87,444
Barry Callebaut AG (a)		109		99,163
Cie Financière Richemont SA		30,515		1,675,571
Crédit Suisse Group AG		67,521		1,235,434
GAM Holdings AG (a)		10,359		115,650
Geberit AG (a)		2,179		429,869
Givaudan SA (a)		490		480,918
Holcim Ltd. (a)		13,440		744,649
Julius Baer Group Ltd. (a)		12,206		442,549
Kuehne & Nagel International AG		3,195		338,488
Lindt & Spruengli AG (a)		50		154,526
Lindt & Spruengli AG (a)		6		220,345
Lonza Group AG (a)		3,021		125,689
Nestlé SA		192,240		11,472,474
Novartis AG		134,168		7,501,509
Pargesa Holding SA		1,624		96,685
Partners Group Holding AG		802		142,638
Roche Holding AG		40,914		7,067,195
Schindler Holding AG Participation Certificates		2,878		321,780
Schindler Holding AG		1,294		145,927
SGS SA		322		603,740
Sika AG		128		247,171
Sonova Holding AG (a)		2,920		282,436
Straumann Holding AG		534		78,541
Sulzer AG		1,441		170,848
The Swatch Group Ltd., Bearer Shares		1,808		714,596
The Swatch Group Ltd., Registered Shares		2,609		181,512
Swiss Life Holding AG (a)		1,713		161,455
Swiss Prime Site AG (a)		2,786		232,383
Swiss Re AG (a)		20,433		1,288,132
Swisscom AG		1,373		553,155
Syngenta AG		5,530		1,893,057
Transocean Ltd.		20,532		920,729
UBS AG (a)		212,363		2,485,108
Zurich Financial Services AG		8,614		1,947,832

				47,811,159

United Kingdom — 22.9%
3i Group Plc		58,349		180,422
Aberdeen Asset Management Plc		48,658		198,184
Admiral Group Plc		11,978		223,440
Aggreko Plc		15,682		509,989
AMEC Plc		19,614		309,204
Anglo American Plc		77,233		2,538,289
Antofagasta Plc		23,311		398,755
ARM Holdings Plc		79,507		629,903
Associated British Foods Plc		21,028		423,112
AstraZeneca Plc		74,535		3,330,794
Aviva Plc		170,130		728,488
Babcock International Group Plc		21,177		283,630
BAE Systems Plc		189,566		859,422
Balfour Beatty Plc		38,825		181,540
Barclays Plc		676,999		1,729,902
BG Group Plc		197,662		4,046,433
BHP Billiton Plc		123,083		3,498,319
BP Plc		1,105,280		7,381,279


Common Stocks	Shares		Value
United Kingdom (continued)
British American Tobacco Plc		114,632	$	5,827,890
British Land Co. Plc		49,769		398,525
British Sky Broadcasting Group Plc		65,095		709,659
BT Group Plc		455,180		1,508,252
Bunzl Plc		18,941		309,586
Burberry Group Plc		25,755		536,239
The Capita Group Plc		37,752		387,925
Capital Shopping Centres Group Plc		33,607		169,778
Carnival Plc		10,602		362,488
Centrica Plc		302,630		1,513,139
Cobham Plc		63,727		232,165
Compass Group Plc		110,571		1,160,667
Croda International Plc		7,734		274,791
Diageo Plc		145,641		3,753,895
Eurasian Natural Resources Corp. Plc		15,477		101,012
Evraz PLC		18,434		75,599
Experian Plc		58,733		828,614
Fresnillo Plc		10,693		244,933
G4S Plc		82,885		362,249
GKN Plc		88,685		251,438
GlaxoSmithKline Plc		294,018		6,678,335
Glencore International Plc		81,678		378,757
Hammerson Plc		42,208		293,142
HSBC Holdings Plc		1,048,694		9,240,923
ICAP Plc		31,016		164,175
IMI Plc		18,341		239,608
Imperial Tobacco Group Plc		58,451		2,252,015
Inmarsat Plc		26,926		207,794
Intercontinental Hotels Group Plc		17,120		412,156
International Power Plc		89,651		586,199
Intertek Group Plc		9,417		394,533
Invensys Plc		48,803		170,091
Investec Plc		32,280		188,440
ITV Plc		211,024		253,924
J Sainsbury Plc		72,023		340,391
Johnson Matthey Plc		12,668		439,324
Kazakhmys Plc		12,773		144,818
Kingfisher Plc		138,641		625,412
Land Securities Group Plc		45,775		530,347
Legal & General Group Plc		344,346		688,441
Lloyds Banking Group Plc (a)		2,398,455		1,171,667
London Stock Exchange Group Plc		9,945		156,999
Lonmin Plc		9,743		118,519
Man Group Plc		110,643		132,392
Marks & Spencer Group Plc		93,384		476,225
Meggitt Plc		46,083		278,850
National Grid Plc		207,831		2,202,600
Next Plc		9,847		494,439
Old Mutual Plc		284,888		677,538
Pearson Plc		47,704		946,531
Petrofac Ltd.		15,334		334,700
Prudential Plc		149,008		1,727,751
Randgold Resources Ltd.		5,013		450,079
Reckitt Benckiser Group Plc		38,340		2,026,537
Reed Elsevier Plc		71,492		573,019
Resolution Ltd.		81,914		251,980
Rexam Plc		51,740		341,480
Rio Tinto Plc		78,595		3,735,122
Rolls-Royce Holdings Plc (a)		109,536		1,476,299
Royal Bank of Scotland Group PLC (a)		119,299		404,106
Royal Dutch Shell Plc, Class B		154,951		5,411,467
Royal Dutch Shell Plc, Class A		213,644		7,198,299

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012	85

Schedule of Investments (continued)

Master International Index Series

(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
United Kingdom (concluded)
RSA Insurance Group Plc		209,071	$	354,917
SABMiller Plc		55,718		2,235,475
The Sage Group Plc		77,382		336,788
Schroders Plc		6,791		142,345
Segro Plc		44,570		151,850
Serco Group Plc		29,485		247,616
Severn Trent Plc		13,645		353,720
Shire Plc		32,783		943,164
Smith & Nephew Plc		52,625		526,380
Smiths Group Plc		23,105		366,939
SSE Plc		54,603		1,191,192
Standard Chartered Plc		138,854		3,016,322
Standard Life Plc		138,838		508,346
Subsea 7 SA		16,655		329,604
Tate & Lyle Plc		26,690		271,062
Tesco Plc		468,098		2,274,874
Tui Travel Plc		24,035		63,897
Tullow Oil Plc		52,545		1,214,450
Unilever Plc		74,907		2,514,909
United Utilities Group Plc		40,087		424,649
Vedanta Resources Plc		5,847		83,808
Vodafone Group Plc		2,906,307		8,168,919
The Weir Group Plc		12,496		300,276
Whitbread Plc		10,471		332,926
WM Morrison Supermarkets Plc		137,532		573,890
Wolseley Plc		16,706		622,677
WPP Plc		73,635		893,910
Xstrata Plc		121,315		1,525,343

				131,245,621

Total Common Stocks — 98.6%				564,692,111

Rights
Spain — 0.0%
Zardoya Otis SA (Expires 7/05/12) (a)		8,817		4,764

Total Rights — 0.0%				4,764

Total Long-Term Investments
(Cost — $503,441,178) — 98.6%				564,696,875

Short-Term Securities
BlackRock Liquidity Funds, TempCash, Institutional Class, 0.15% (b)(c)		808,932		808,932

Total Short-Term Securities
(Cost — $808,932) — 0.1%				808,932

Total Investments (Cost — $504,250,110) — 98.7%				565,505,807
Other Assets Less Liabilities — 1.3%				7,542,965

Net Assets — 100.0%			$	573,048,772

*	As of June 30, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	555,790,452

Gross unrealized appreciation	$	122,439,679
Gross unrealized depreciation		(112,724,324	)

Net unrealized appreciation	$	9,715,355

(a)	Non-income producing security.

(b)	Investments in companies considered to be an affiliate of the Series during the period, 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, 2011		Net Activity			Shares Held at June 30, 2012		Income
BlackRock Liquidity Funds, TempCash, Institutional Class		1,969,251		(1,160,319	)		808,932	$	2,691

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

—	Financial futures contracts purchased as of June 30, 2012 were as follows:


Contracts	Index	Exchange	Expiration	Notional Value		Unrealized Appreciation
59	DJ Euro Stoxx 50 Index	Eurex	September 2012	$	1,683,683	$	87,345
10	E-Mini MSCI EAFE Index	Chicago Mercantile	September 2012	$	711,900		38,275
19	FTSE 100 Index	Euronext LIFFE	September 2012	$	1,643,472		27,409
21	Nikkei 225 Index	Singapore	September 2012	$	1,178,927		52,840
6	SPI 200 Index	Australian Securities Exchange	September 2012	$	622,851		160

Total						$	206,029

—	Foreign currency exchange contracts as of June 30, 2012 were as follows:

Currency
Purchased

Currency
Sold

Counterparty

Settlement
Date

Unrealized
Appreciation
(Depreciation)

USD 539,121

AUD

527,000

HSBC
Bank Ltd.

7/02/12

(263

)

USD 519,549

CHF

493,000

HSBC
Bank Ltd.

7/02/12

137

USD 68,279

DKK

401,000

HSBC
Bank Ltd.

7/02/12

USD 1,329,090

EUR

1,050,000

HSBC
Bank Ltd.

7/02/12

316

USD 1,529,093

GBP

975,000

HSBC
Bank Ltd.

7/02/12

2,095

USD 36,522

ILS

143,000

HSBC
Bank Ltd.

7/02/12

(49

)

USD 1,813,241

JPY

144,751,000

HSBC
Bank Ltd.

7/02/12

2,382

USD 45,935

NOK

274,000

HSBC
Bank Ltd.

7/02/12

(126

)

USD 188,295

SEK

1,303,000

HSBC
Bank Ltd.

7/02/12

(70

)

USD 108,850

SGD

138,000

HSBC
Bank Ltd.

7/02/12

(90

)

USD 181,889

HKD

1,411,000

HSBC
Bank Ltd.

7/03/12

Total

4,364

See Notes to Financial Statements.



86	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012


Schedule of Investments (concluded)		Master International Index Series

•

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets and liabilities

•

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Series’ policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instruments and is not necessarily an indication of the risks associated with 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 Series’ investments and derivative financial instruments categorized in the disclosure hierarchy as of June 30, 2012:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Australia		—	$	49,098,540	$	10	$	49,098,550
Austria		—		1,528,256		—		1,528,256
Belgium	$	60,773		6,279,345		—		6,340,118
China		—		47,607		—		47,607
Denmark		—		6,424,164		—		6,424,164
Finland		—		4,070,556		—		4,070,556
France		—		50,894,344		—		50,894,344
Germany		—		44,745,188		—		44,745,188
Greece		212,445		83,978		—		296,423
Hong Kong		—		16,961,618		—		16,961,618
Ireland		—		1,874,789		1		1,874,790
Israel		—		3,314,696		—		3,314,696
Italy		—		12,226,740		—		12,226,740
Japan		121,330		123,232,327		—		123,353,657
Netherlands		393,473		14,235,126		—		14,628,599
New Zealand		—		688,691		—		688,691
Norway		—		4,905,710		524		4,906,234
Portugal		—		907,084		—		907,084
Singapore		—		10,592,676		—		10,592,676
Spain		13,970		15,139,771		—		15,153,741


	Level 1		Level 2			Level 3		Total
Assets:
Investments (concluded):
Long-Term Investments:
Common Stocks:
Sweden		—	$	17,581,599			—	$	17,581,599
Switzerland		—		47,811,159			—		47,811,159
United Kingdom	$	586,199		130,659,422			—		131,245,621
Rights		4,764		—			—		4,764
Short-Term Securities		808,932		—			—		808,932

Total	$	2,201,886	$	563,303,386		$	535	$	565,505,807


	Level 1		Level 2			Level 3		Total
Derivative Financial Instruments¹
Assets:
Equity contracts	$	206,029		—			—	$	206,029
Foreign currency exchange contracts		—	$	4,962			—		4,962
Liabilities:
Foreign currency exchange contracts		—		(598	)		—		(598	)

Total	$	206,029	$	4,364			—	$	210,393

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.

Certain of the Series’ assets and liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of June 30. 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:


	Level 1		Level 2			Level 3		Total
Assets:
Cash pledged as collateral for financial futures contracts	$	822,000		—			—	$	822,000
Foreign currency at value		9,334,888		—			—		9,334,888
Liabilities:
Bank overdraft		—	$	(180,216	)		—		(180,216	)

Total	$	10,156,888	$	(180,216	)		—	$	9,976,672

There were no transfers between levels during the period ended June 30, 2012.

Certain of the Series’ investments are categorized as Level 3 and were valued utilizing transaction prices or third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in the unobservable inputs could result in a significantly lower or higher value in such Level 3 investments.

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012	87

Statement of Assets and Liabilities

Master International Index Series

June 30, 2012 (Unaudited)


Assets
Investments at value – unaffiliated (cost – $503,441,178)	$	564,696,875
Investments at value – affiliated (cost – $808,932)		808,932
Cash pledged as collateral for financial futures contracts		822,000
Foreign currency at value (cost – $9,263,352)		9,334,888
Dividends receivable		4,661,609
Variation margin receivable		334,253
Investments sold receivable		17,779
Unrealized appreciation on foreign currency exchange contracts		4,962
Prepaid expenses		8,146

Total assets		580,689,444

Liabilities
Bank overdraft		180,216
Withdrawals payable to investors		6,806,774
Investments purchased payable		391,061
Investment advisory fees payable		4,245
Other affiliates payable		4,235
Unrealized depreciation on foreign currency exchange contracts		598
Directors’ fees payable		242
Other accrued expenses payable		253,301

Total liabilities		7,640,672

Net Assets	$	573,048,772

Net Assets Consist of
Investors’ capital	$	511,393,882
Net unrealized appreciation/depreciation		61,654,890

Net Assets	$	573,048,772

See Notes to Financial Statements.



88	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012

Statement of Operations

Master International Index Series

Six Months Ended June 30, 2012 (Unaudited)


Investment Income
Dividends – unaffiliated	$	17,380,603
Foreign taxes withheld		(1,206,496	)
Dividends – affiliated		2,691

Total income		16,176,798

Expenses
Investment advisory		36,249
Accounting services		110,670
Custodian		106,058
Professional		74,862
Directors		10,788
Printing		7,650
Miscellaneous		20,097

Total expenses		366,374
Less fees waived by advisor		(8,348	)

Total expenses after fees waived		358,026

Net investment income		15,818,772

Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		(55,888,499	)
Financial futures contracts		844,251
Foreign currency transactions		(383,141	)

		(55,427,389	)

Net change in unrealized appreciation/depreciation on:
Investments		96,324,702
Financial futures contracts		149,419
Foreign currency transactions		55,641

		96,529,762

Total realized and unrealized gain		41,102,373

Net Increase in Net Assets Resulting from Operations	$	56,921,145

See Notes to Financial Statements.



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012	89


Statements of Changes in Net Assets		Master International Index Series


Increase (Decrease) in Net Assets:	Six Months Ended June 30, 2012 (Unaudited)			Year Ended December 31, 2011
Operations
Net investment income	$	15,818,772		$	31,591,898
Net realized loss		(55,427,389	)		(26,277,530	)
Net change in unrealized appreciation/depreciation		96,529,762			(123,722,751	)

Net increase (decrease) in net assets resulting from operations		56,921,145			(118,408,383	)

Capital Share Transactions
Proceeds from contributions		111,044,199			277,608,631
Value of withdrawals		(450,697,490	)		(226,119,685	)

Net increase (decrease) in net assets derived from capital share transactions		(339,653,291	)		51,488,946

Net Assets
Total decrease in net assets		(282,732,146	)		(66,919,437	)
Beginning of period		855,780,918			922,700,355

End of period	$	573,048,772		$	855,780,918


Financial Highlights		Master International Index Series


	Six Months
	Ended
	June 30,
	2012			Year Ended December 31,
	(Unaudited)			2011			2010			2009			2008			2007
Total Investment Return
Total investment return		3.98	%¹		(12.34	)%		7.66	%		28.99	%		(41.94	)%		10.80	%

Ratios to Average Net Assets
Total expenses		0.10	%²		0.08	%		0.11	%		0.09	%		0.11	%		0.10	%

Total expenses after fees waived and paid indirectly		0.10	%²		0.08	%		0.10	%		0.09	%		0.10	%		0.09	%

Net investment income		4.34	%²		3.38	%		2.73	%		2.98	%		3.54	%		2.86	%

Supplemental Data
Net assets, end of period (000)	$	573,049		$	855,781		$	922,700		$	749,280		$	706,119		$	1,143,172

Portfolio turnover		4	%		6	%		8	%		30	%		30	%		30	%

¹	Aggregate total investment return.

²	Annualized.

See Notes to Financial Statements.



90	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012


Notes to Financial Statements (Unaudited)		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 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:

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.

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.

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 by the Global Valuation Committee, or its delegate, 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 Global Valuation Committee, or its delegate, 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. These factors include but are not limited to (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and/or default rates. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches, including regular due diligence of the Series’ pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

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 affect the value of such instruments materially, those instruments may be Fair Value Assets and valued at their fair value, as determined in good faith by the Global Valuation Committee 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 over the counter (“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



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012	91


Notes to Financial Statements (continued)		Master International Index Series

foreign currency, the Series’ investments denominated in that currency will lose value because that 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.

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 and foreign currency exchange 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 some issuers, some dividend income received from a real estate investment trust may be designated as a reduction of cost of the related investment and/or realized gain.

Recent Accounting Standard: In December 2011, the Financial Accounting Standards Board issued guidance that will expand 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 or similar agreements which are eligible for offset in the Statement of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. 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.

2. Derivative Financial Instruments:

The Series engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Series and/or to economically hedge, or protect, its exposure to certain risks such as equity risk or 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 counterparties. 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



92	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012


Notes to Financial Statements (continued)		Master International Index Series

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 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 their 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 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, financial 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 variation margin 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 the counterparty to the contract does not perform its obligations under the agreement.

Derivative Instruments Categorized by Risk Exposure:


Fair Value of Derivative Instruments as of June 30, 2012
	Asset Derivatives
	Statement of Assets and Liabilities Location	Value
Equity contracts	Net unrealized appreciation¹	$	206,029
Foreign currency exchange contracts	Unrealized appreciation on foreign currency exchange contracts	$	4,962

	Liability Derivatives
	Statement of Assets and Liabilities Location	Value
Foreign currency exchange contracts	Unrealized depreciation on foreign currency exchange contracts	$	(598	)

1	Includes cumulative appreciation/depreciation on financial futures contracts as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.


The Effect of Financial Derivative Instruments in the Statement of Operations Six Months Ended June 30, 2012
	Net Realized Gain (Loss) From
	Financial Futures Contracts		Foreign Currency Transactions
Equity contracts	$	844,251		—
Foreign currency exchange contracts		—	$	(273,047	)

	Net Change in Unrealized Appreciation/Depreciation on
	Financial Futures Contracts		Foreign Currency Transactions
Equity contracts	$	149,419		—
Foreign currency exchange contracts		—	$	(29,005	)



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012	93


Notes to Financial Statements (continued)		Master International Index Series

For the six months ended June 30, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:


Financial futures contracts:
Average number of contracts purchased		172
Average number of contracts sold		35
Average notional value of contracts purchased	$	8,438,412
Average notional value of contracts sold	$	1,124,509
Foreign currency exchange contracts:
Average number of contracts – US dollars purchased		6
Average US dollar amounts purchased	$	3,179,932

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”) is the largest stockholder and an affiliate, for 1940 Act purposes, of BlackRock, Inc. (“BlackRock”).

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 Series’ average daily net assets.

The Manager contractually agreed to waive and/or reimburse fees or expenses, excluding interest expense, dividend expense, acquired fund fees and expenses and certain other Series expenses, in order to limit expenses. The expense limitation as a percentage of average daily net assets is 0.12%. The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to May 1, 2013 unless approved by the Board, including a majority of the independent directors.

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. This amount is shown as 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 six months ended June 30, 2012, the Series reimbursed the Manager $4,330 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 six months ended June 30, 2012, were $24,714,552 and $341,904,200, 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. The Series may borrow under the credit agreement to fund shareholder redemptions. Effective November 2011 to November 2012, the credit agreement has the following terms: a commitment fee of 0.65% 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 six months ended June 30, 2012.

6. Concentration, Market and Credit Risk:



94	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012


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 its 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.

The Series invests a significant portion of its assets in securities of issuers located in Europe or with significant exposure to European issuers or countries. The European financial markets have recently experienced volatility and adverse trends due to concerns about economic downturns in, or rising government debt levels of several European countries, including Greece, Ireland, Italy, Portugal and Spain. As of June 30, 2012, these events have adversely affected the exchange rate of the Euro and may continue to spread to other countries in Europe, including countries that do not use the Euro. These events may affect the value and liquidity of certain of the Series’ investments.

As of June 30, 2012, the Series had the following industry classifications:


Industry	Percent of Long-Term Investments
Commercial Banks		12	%
Pharmaceuticals		9
Oil, Gas & Consumable Fuels		7
Other¹		72

1	All other industries held were less than 5% of long-term investments.

7. Subsequent Events:



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012	95

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement

The Board of Directors (the “Board,” and the members of which are referred to as “Board Members”) of Quantitative Master Series LLC (the “Master LLC”) met on April 17, 2012 and May 15–16, 2012 to consider the approval of the Master LLC’s investment advisory agreement (the “Advisory Agreement”) with BlackRock Advisors, LLC (the “Manager”), the Master LLC’s investment advisor, on behalf of the Master International Index Series (the “Master Portfolio”), a series of the Master LLC. The Board also considered the approval of the sub-advisory agreement (the “Sub-Advisory Agreement”) between the Manager and BlackRock Investment Management, LLC (the “Sub-Advisor”), with respect to the Master Portfolio. The Manager and the Sub-Advisor are referred to herein as “BlackRock.” The Advisory Agreement and the Sub-Advisory Agreement are referred to herein as the “Agreements.”

Activities and Composition of the Board

The Agreements

The Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to the Master Portfolio and its shareholders. Among the matters the Board considered were: (a) investment performance of an affiliated feeder fund that invests all of its investable assets in the Master Portfolio (the “representative feeder fund”) for one-, three- and five-year periods, as applicable, against peer funds, and applicable benchmarks, if any, as well as senior management’s and portfolio managers’ analysis of the reasons for any over performance or underperformance against its peers and/or benchmark, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Master Portfolio for services, such as marketing and distribution, call center and fund accounting; (c) the Master Portfolio’s operating expenses and how BlackRock allocates expenses to the Master Portfolio; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Master Portfolio’s investment objective, policies and restrictions; (e) the Master LLC’s compliance with its Code of Ethics and other compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) the use of brokerage commissions and execution quality of portfolio transactions; (j) BlackRock’s implementation of the Master LLC’s valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment objectives across the open-end fund, exchange traded fund (“ETF”), closed-end fund and institutional account product channels, as applicable; (l) BlackRock’s compensation methodology for its investment professionals and the incentives it creates; and (m) periodic updates on BlackRock’s business.



96	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (continued)

Board Considerations in Approving the Agreements



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012	97

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (continued)

among others: (i) preparing disclosure documents, such as the prospectus, the statement of additional information and periodic shareholder reports; (ii) assisting with daily accounting and pricing; (iii) overseeing and coordinating the activities of other service providers; (iv) organizing Board meetings and preparing the materials for such Board meetings; (v) providing legal and compliance support; and (vi) performing other administrative functions necessary for the operation of the Master Portfolio, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Board reviewed the structure and duties of BlackRock’s fund administration, accounting, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Master Portfolio and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of the Master Portfolio. The Board noted that the Master Portfolio’s investment results correspond directly to the investment results of the representative feeder fund. In preparation for the April 17, 2012 meeting, the Board worked with its independent counsel, BlackRock and Lipper to develop a template for, and was provided with, reports independently prepared by Lipper, which included a comprehensive analysis of the representative feeder fund’s performance. The Board also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s rankings. In connection with its review, the Board received and reviewed information regarding the investment performance of the representative feeder fund as compared to funds in the representative feeder fund’s applicable Lipper category and the gross investment performance of the representative feeder fund as compared with its benchmark. The Board was provided with a description of the methodology used by Lipper to select peer funds and periodically meets with Lipper representatives to review their methodology. The Board and the Board’s Performance Oversight and Contract Committee regularly review, and meet with Master Portfolio management to discuss, the performance of the Master Portfolio and the representative feeder fund, as applicable, throughout the year.

The Board noted that the representative feeder fund’s gross performance, as agreed upon by the Board, was within tolerance of its benchmark index during the one-year period reported. Also, the representative feeder fund’s gross performance was below its benchmark index during the three-year period reported, but exceeded it over the five-year period reported. Based on its discussions with BlackRock and the Board’s review of the representative feeder fund’s investment performance compared to its Lipper Peer Group, the methodology used by Lipper to select peer funds, and other relevant information provided by BlackRock, the Board noted that the representative feeder fund’s gross investment performance as compared to its benchmark index provided a more meaningful comparison of the representative feeder fund’s relative performance.



98	MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (concluded)

D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of the Master Portfolio increase, as well as the existence of expense caps. The Board also considered the extent to which the Master Portfolio benefits from such economies and whether there should be changes in the advisory fee rate or structure in order to enable the Master Portfolio and the Fund to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the asset level of the Master Portfolio. In its consideration, the Board took into account the existence of expense caps and further considered the continuation and/or implementation, as applicable, of such caps.

Conclusion



MASTER INTERNATIONAL INDEX SERIES	JUNE 30, 2012	99

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101

LOGO

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To obtain more information about the Fund:




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




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



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 Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Section, 100 F Street, NE, Washington, D.C. 20549-1520. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling (202) 551-8090. 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.

SAR 6/12

ITEM 2. CODE OF ETHICS.

The Trust did not amend the code of ethics that applies to its principal executive and financial officers (the “Code”) nor did it grant any waivers to the provisions of the Code during the period covered by the shareholder report presented in Item 1.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable.

ITEM 6. SCHEDULE OF INVESTMENTS.

The schedules of investments for each series of the Trust are included in the shareholder report presented in Item 1.

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: September 7, 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: September 7, 2012


By		/s/ Melinda G. Heika
		Melinda G. Heika
		Treasurer

Date: September 7, 2012