-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RlfLC7vBQFEesIWmDozBWU8igSZdf6vCIVv0kgLjq6QNk4mEKTEHlJ+lOgJvaQfm PlK6cCrd1WzoW4G55eoBdQ== 0001193805-03-000138.txt : 20030227 0001193805-03-000138.hdr.sgml : 20030227 20030227161206 ACCESSION NUMBER: 0001193805-03-000138 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030227 EFFECTIVENESS DATE: 20030227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH INDEX FUNDS INC CENTRAL INDEX KEY: 0001026144 IRS NUMBER: 223483675 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07899 FILM NUMBER: 03583630 BUSINESS ADDRESS: STREET 1: MERRILL LYNCH ASSET MANAGEMENT STREET 2: 800 SCUDDERS MILL ROAD CITY: PLAINSBORO STATE: NJ ZIP: 08536 BUSINESS PHONE: 6092820785 MAIL ADDRESS: STREET 1: MERRILL LYNCH ASSET MANAGEMENT STREET 2: 800 SCUDDERS MILL ROAD CITY: PLAINSBORO STATE: NJ ZIP: 08536 N-CSR 1 e300103_n-csr.txt ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-7899 Merrill Lynch International Index Fund Master International (Capitalization Weighted) Index Series - file # 811-7885 Address: P.O. Box 9011 Princeton, NJ 08543-9011 Name and address of agent for service: Terry K. Glenn, President, Merrill Lynch International Index Fund, 800 Scudders Mill Road, Plainsboro, NJ 08536. Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011 Registrant's telephone number, including area code: (609) 282-2800 Date of fiscal year end: 12/31/02 Date of reporting period: 01/01/02 - 12/31/02 Item 1 - Is shareholder report attached? - Y [LOGO] Merrill Lynch Investment Managers Annual Report December 31, 2002 Merrill Lynch International Index Fund Merrill Lynch Index Funds, Inc. www.mlim.ml.com Merrill Lynch International Index Fund Important Tax Information (unaudited) The following information summarizes all per share distributions paid by Merrill Lynch International Index Fund during the taxable year ended December 31, 2002:
========================================================================================================= Non-Qualifying Domestic Foreign Total Foreign Long-Term Record Payable Ordinary Source Ordinary Taxes Capital Date Date Income Income Income Paid Gains ========================================================================================================= Class A Shares: - --------------------------------------------------------------------------------------------------------- 3/12/2002 3/18/2002 $.000113 $.000096 $.000209 $.000042 $.009340 - --------------------------------------------------------------------------------------------------------- 12/17/2002 12/23/2002 $.030549 $.113693 $.144242 $.018884 -- ========================================================================================================= Class D Shares: - --------------------------------------------------------------------------------------------------------- 3/12/2002 3/18/2002 $.000111 $.000093 $.000204 $.000042 $.009340 - --------------------------------------------------------------------------------------------------------- 12/17/2002 12/23/2002 $.026845 $.099906 $.126751 $.018884 -- =========================================================================================================
The foreign taxes paid or withheld represent taxes incurred by the Fund on dividends received by the Fund from foreign sources. Foreign taxes paid or withheld should be included in taxable income with an offsetting deduction from gross income or as a credit for taxes paid to foreign governments. You should consult your tax adviser regarding the appropriate treatment of foreign taxes paid. Please retain this information for your records. Merrill Lynch International Index Fund, December 31, 2002 DEAR SHAREHOLDER Fiscal Year in Review For the year ended December 31, 2002, Merrill Lynch International Index Fund's Class A and Class D Shares had total returns of -16.06% and -16.21%, respectively. The Fund underperformed the total return of the unmanaged benchmark Morgan Stanley Capital International Europe, Australasia and Far East (MSCI EAFE) Capitalization Weighted Index of -15.94% for the same 12-month period. (Complete performance information can be found on pages 3 - 5 of this report to shareholders. References to markets of all countries/regions in this letter to shareholders correspond to those countries'/regions' weightings in the MSCI EAFE Index and are in U.S. dollar terms unless otherwise noted.) The year 2002 represented the third consecutive year whereby the MSCI EAFE posted a negative return. We saw negative results from most of the major international markets, expressed in their local currency terms, with the CAC40 Index closing down 1,560.67 points at 3063.91 or -33.75% and the FTSE 100 Index closing down 1,277 points at 3940.40 or -24.48%. In the Asian markets, the Hang Seng Index closed down 2,075.92 points at 9321.29 or -18.21% and the Nikkei 225 Index closed down 1,963.65 points at 8578.95 or -18.63%. The year 2002 was dismal for all countries in the MSCI EAFE Index, as only two of the 21 EAFE countries achieved positive returns. Top performers were New Zealand and Austria with returns of +20.03% and +14.36%, respectively. The worst performers included Germany, Sweden and Finland with returns of -34.06%, -31.47% and -31.23%, respectively. Negative returns from poor performers led to shrinking market capitalization, resulting in decreases in individual country weighting in the benchmark. Turning to specific stock sectors, returns were negative across all 10 EAFE sectors. The top performer was consumer staples at - -2.30%, followed by materials at -4.63% and energy at -5.09%. Worst performance for the year was in information technology at -39.43%, telecommunications at - -24.37% and financials at -21.43%. The first quarter of 2002 was quiet and uneventful relative to the rest of the year. Extreme market volatility took a turn for the worse late in the second quarter. The excessive volatility was mainly a result of the successive failure of high-profile companies and increased concerns about accounting standards. Although international markets experienced three weeks of consecutive gains in August, the markets lost ground for the next five following weeks and closed with negative returns for the third quarter. A significant rebound was seen in the fourth quarter with a total return of +6.46%. During the fourth quarter, 19 of the 21 EAFE countries posted positive returns, and returns were positive across all 10 EAFE sectors. Technology rebounded with telecommunications and information technology posting the best sector returns, at +24.59% and +9.43%, respectively. Better-than-estimated corporate earnings reports and the belief that corporate earnings had bottomed spurned an improvement in market conditions. The impressive fourth-quarter rally can also be partially attributed to the promise of fiscal stimulus from the Federal Reserve Board and the European Central Bank's lowering of interest rates late in 2002. After cutting interest rates 11 consecutive times in 2001, the Federal Reserve Board left interest rates unchanged at 1.75% until the fourth quarter of 2002. At its meeting on November 6, the Federal Reserve Board decided to lower its target rate by an unexpected 50 basis points (.50%) to 1.25%. Economic data indicated that greater uncertainty, in part attributable to heightened geopolitical risks, was inhibiting spending, production and employment. At its November 7 meeting, the Governing Council of the European Central Bank declined to match the half-point rate reduction by the Federal Reserve Board and left its rate unchanged at 3.25%. However, at its December 5 meeting, the European Central Bank cut interest rates by 50 basis points to 2.75%, reflecting the persistently high degree of uncertainty. Over time, the current accommodative stance of monetary policy, coupled with still robust underlying growth in productivity, should be sufficient to foster an improving business climate. However, considerable uncertainty persists about the extent and timing of the expected pickup in production and employment, owing in part to the emergence of heightened geopolitical risks. With the worst returns of the year in September 2002, and the MSCI EAFE at - -10.74% for the month, the fourth quarter of 2002 brought the positive returns that investors were hoping for, but not without volatility. October and November were significantly positive months, but December again gave way to negative returns. Looking forward to 2003, investor confidence remains shaken with the possibility of a military confrontation with Iraq, unanticipated high unemployment and disappointing holiday sales. Consumer confidence unexpectedly fell in December for the sixth time in seven months as unemployment threatened to undermine spending and economic growth early next year. At December 31, 2002, net assets of the Series were $167 million. The principal investments of Master International Index Series are in MSCI EAFE provisional stocks with index weightings of individual stocks in proportion to that of the Index. Incremental cash flows are typically invested through the use of index futures contracts of several major international indexes, which serve to provide an effective mechanism for maintaining equity exposure, while also keeping a pool of liquidity available. At December 31, 2002, the Series' equity portfolio was valued at $158 million, which represents approximately 95% of the Series' net assets. In addition, the Series held a long position in various international March 2003 futures contracts. Through its holding of equities and futures contracts, it is the Series' goal to be 100% invested in the countries represented by MSCI EAFE Index at all times. Additionally, significant changes were made in the MSCI EAFE Index in 2002. In response to those changes, shares were bought and sold accordingly in order to maintain index weightings in the Series in proportion to that of the benchmark. In Conclusion We appreciate your investment in Merrill Lynch International Index Fund, and we look forward to assisting you with your investment needs in the months and years ahead. Sincerely, /s/ Terry K. Glenn Terry K. Glenn President and Director February 10, 2003 PERFORMANCE DATA About Fund Performance Investors are able to purchase shares of the Fund through two pricing alternatives: o Class A Shares do not incur a maximum initial sales charge (front-end load) or deferred sales charge and bear no ongoing distribution or account maintenance fees. Class A Shares are available only to eligible investors. o Class D Shares do not incur a maximum initial sales charge or deferred sales charge and bear no ongoing distribution fee. In addition, Class D Shares are subject to an ongoing account maintenance fee of 0.25%. None of the past results shown should be considered a representation of future performance. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in each of the following tables assume reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of account maintenance and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. The Fund's Administrator and the Series' Investment Adviser waived a portion of their administrative fee and all of their management fee, respectively. In addition, the Investment Adviser reimbursed a portion of its other expenses. Without such waiver and reimbursement, the Fund's performance would have been lower. 2 & 3 Merrill Lynch International Index Fund, December 31, 2002 PERFORMANCE DATA (continued) Recent Performance Results
6-Month 12-Month Since Inception As of December 31, 2002 Total Return Total Return Total Return =================================================================================================== ML International Index Fund Class A Shares* -15.07% -16.06% - 4.49% - --------------------------------------------------------------------------------------------------- ML International Index Fund Class D Shares* -15.12 -16.21 - 5.82 - --------------------------------------------------------------------------------------------------- MSCI EAFE Index -- Cap Weighted** -14.55 -15.94 - 11.18 ===================================================================================================
* Total investment returns are based on changes in net asset values for the periods shown, and assume reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date. The Fund's inception date is 4/09/97. ** This unmanaged capitalization-weighted Index is comprised of equity securities of companies from various industrial sectors whose primary trading markets are located outside the United States and that are selected from among the larger-capitalization companies in such markets. Since inception total return is from 4/30/97. Total Return Based on a $10,000 Investment--Class A & Class D Shares A line graph depicting the growth of an investment in the Fund's Class A Shares and Class D Shares compared to growth of an investment in the MSCI EAFE (Cap Weighted) Index and MSCI EAFE (GDP Weighted) Index. Values are from April 30, 1997 to December 2002.
4/03/97** 12/97 12/98 12/99 12/00 12/01 12/02 ML International Index Fund+--Class A Shares* $10,000 $10,845 $13,627 $17,891 $14,706 $11,405 $9,573 ML International Index Fund+--Class D Shares* $10,000 $10,822 $13,571 $17,771 $14,572 $11,279 $9,451 4/30/97** 12/97 12/98 12/99 12/00 12/01 12/02 MSCI EAFE (Cap Weighted) Index++ $10,000 $10,285 $12,342 $15,670 $13,450 $10,566 $8,882 MSCI EAFE (GDP Weighted) Index+++ $10,000 $10,531 $13,344 $17,481 $14,765 $11,488 $9,661
* Assuming transaction costs and other operating expenses, including administrative fees. ** The Fund commenced operations on April 9, 1997. For purposes of fair comparison of the Fund's performance relative to the Index, the line graph begins on April 30, 1997. + The Fund invests all of its assets in Master International (Capitalization Weighted) Index Series of Quantitative Master Series Trust. The Trust may invest in a statistically selected sample of the equity securities included in the Europe, Australasia and Far East Index and other types of financial instruments. ++ This unmanaged Capitalization weighted Index is comprised of equity securities of companies from various industrial sectors whose primary trading markets are located outside the United States and which are selected from among the larger-capitalization companies in such markets. The starting date for the Index in the graph is from 4/30/97. +++ This unmanaged gross domestic product-weighted Index is comprised of equity securities of companies from various industrial sectors whose primary trading markets are located outside the United States and which are selected from among the larger-capitalization companies in such markets. The starting date for the Index in the graph is from 4/30/97. Past performance is not predictive of future results. Average Annual Total Return % Return ================================================================================ Class A Shares ================================================================================ One Year Ended 12/31/02 - 16.06% - -------------------------------------------------------------------------------- Five Years Ended 12/31/02 - 2.51 - -------------------------------------------------------------------------------- Inception (4/09/97) through 12/31/02 - 0.80 - -------------------------------------------------------------------------------- % Return ================================================================================ Class D Shares ================================================================================ One Year Ended 12/31/02 - 16.21% - -------------------------------------------------------------------------------- Five Years Ended 12/31/02 - 2.74 - -------------------------------------------------------------------------------- Inception (4/09/97) through 12/31/02 - 1.04 - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES
MERRILL LYNCH INTERNATIONAL INDEX FUND As of December 31, 2002 =================================================================================================================================== Assets: Investment in Master International Index Series, at value (identified cost--$91,110,032) ................................................ $ 82,152,162 Prepaid registration fees and other assets .................................... 23,533 ------------- Total assets .................................................................. 82,175,695 ------------- =================================================================================================================================== Liabilities: Payables: Administrator ............................................................... $ 21,458 Distributor ................................................................. 13,247 Custodian fees .............................................................. 124 Distribution to shareholders ................................................ 121 34,950 ---------- Accrued expenses and other liabilities ........................................ 60,527 ------------- Total liabilities ............................................................. 95,477 ------------- =================================================================================================================================== Net Assets: Net assets .................................................................... $ 82,080,218 ============= =================================================================================================================================== Net Assets Class A Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized $ 279 Consist of: Class D Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized 883 Paid-in capital in excess of par .............................................. 100,621,582 Undistributed investment income--net .......................................... $ 87,476 Accumulated realized capital losses on investments and foreign currency transactions from the Series--net ............................................. (9,672,132) Unrealized depreciation on investments and foreign currency transactions from the Series--net .......................................................... (8,957,870) ---------- Total accumulated losses--net ................................................. (18,542,526) ------------- Net assets .................................................................... $ 82,080,218 ============= =================================================================================================================================== Net Asset Class A--Based on net assets of $19,770,311 and 2,791,865 shares outstanding .. $ 7.08 Value: ============= Class D--Based on net assets of $62,309,907 and 8,825,472 shares outstanding .. $ 7.06 ============= ===================================================================================================================================
See Notes to Financial Statements. 4 & 5 Merrill Lynch International Index Fund, December 31, 2002 STATEMENT OF OPERATIONS
MERRILL LYNCH INTERNATIONAL INDEX FUND For the Year Ended December 31, 2002 ============================================================================================================================ Investment Income Net investment income allocated from the Series: From the Series--Net: Dividends (net of $210,326 foreign withholding tax) ............ $ 1,800,081 Interest ....................................................... 42,078 Securities lending--net ........................................ 31,077 Expenses (net of $65,619 expense reimbursement) ................ (65,869) ------------ Net investment income from the Series ............................ 1,807,367 ------------ ============================================================================================================================ Expenses: Administration expense ........................................... $ 279,577 Account maintenance fee--Class D ................................. 147,509 Printing and shareholder reports ................................. 70,932 Transfer agent fees .............................................. 22,786 Registration fees ................................................ 19,793 Professional fees ................................................ 19,739 Directors' fees and expenses ..................................... 1,320 Other ............................................................ 6,859 ------------ Total expenses before reimbursement .............................. 568,515 Reimbursement of expenses ........................................ (4,741) ------------ Total expenses after reimbursement ............................... 563,774 ------------ Investment income--net ........................................... 1,243,593 ------------ ============================================================================================================================ Realized & Realized gain (loss) from the Series on: Unrealized Gain Investments--net ............................................... (5,530,239) (Loss) from the Foreign currency transactions--net ............................. 314,221 (5,216,018) series--Net: ------------ Change in unrealized appreciation/depreciation on investments and foreign currency transactions from the Series--net ............... (10,906,818) ------------ Total realized and unrealized loss on investments and foreign currency transactions--net ....................................... (16,122,836) ------------ Net Decrease in Net Assets Resulting from Operations ............. $(14,879,243) ============ ============================================================================================================================
See Notes to Financial Statements. STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended MERRILL LYNCH December 31, INTERNATIONAL ----------------------------- INDEX FUND Increase (Decrease) in Net Assets: 2002 2001 ============================================================================================================================ Operations:: Investment income--net ........................................... $ 1,243,593 $ 742,964 Realized loss on investments and foreign currency transactions from the Series--net ............................................. (5,216,018) (3,208,993) Change in unrealized appreciation/depreciation on investments and foreign currency transactions from the Series--net ........... (10,906,818) (17,400,348) ------------ ------------ Net decrease in net assets resulting from operations ............. (14,879,243) (19,866,377) ------------ ------------ ============================================================================================================================ Dividends & Investment income--net: Distributions to Class A ........................................................ (397,947) (315,238) Shareholders: Class D ........................................................ (1,068,837) (494,767) Realized gain on investments from the Series--net: Class A ........................................................ (28,225) (217,264) Class D ........................................................ (64,318) (281,747) ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders .................................... (1,559,327) (1,309,016) ------------ ------------ ============================================================================================================================ Capital Share Net increase in net assets derived from capital share transactions 19,315,936 16,367,869 Transactions: ------------ ------------ ============================================================================================================================ Net Assets: Total increase (decrease) in net assets .......................... 2,877,366 (4,807,524) Beginning of year ................................................ 79,202,852 84,010,376 ------------ ------------ End of year* ..................................................... $ 82,080,218 $ 79,202,852 ============ ============ ============================================================================================================================ *Undistributed (accumulated) investment income (loss)--net ........ $ 87,476 $ (2,980) ============ ============ ============================================================================================================================
See Notes to Financial Statements. 6 & 7 Merrill Lynch International Index Fund, December 31, 2002 FINANCIAL HIGHLIGHTS
Class A ------------------------------------------------------- The following per share data and ratios have been derived For the Year Ended MERRILL LYNCH from information provided in the financial statements. December 31, INTERNATIONAL ------------------------------------------------------- INDEX FUND Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998 =================================================================================================================================== Per Share Net asset value, beginning of year ................... $ 8.64 $ 11.36 $ 15.13 $ 12.04 $ 10.56 Operating -------- -------- -------- --------- --------- Performance: Investment income--net++ ............................. .14 .12 .14 .13 .15 Realized and unrealized gain (loss) on investments and foreign currency transactions from the Series--net (1.55) (2.67) (2.82) 3.59 2.52 -------- -------- -------- --------- --------- Total from investment operations ..................... (1.41) (2.55) (2.68) 3.72 2.67 -------- -------- -------- --------- --------- Less dividends and distributions: Investment income--net ............................. (.14) (.10) (.02) (.09) (.12) In excess of investment income--net ................ -- -- -- -- (.04) Realized gain on investments from the Series--net .. (.01) (.07) (.53) (.54) (1.03) In excess of realized gain on investments from the Series--net .................................... -- -- (.54) -- -- -------- -------- -------- --------- --------- Total dividends and distributions .................... (.15) (.17) (1.09) (.63) (1.19) -------- -------- -------- --------- --------- Net asset value, end of year ......................... $ 7.08 $ 8.64 $ 11.36 $ 15.13 $ 12.04 ======== ======== ======== ========= ========= =================================================================================================================================== Total Investment Based on net asset value per share ................... (16.06%) (22.45%) (17.80%) 31.29% 25.65% Return: ======== ======== ======== ========= ========= =================================================================================================================================== Ratios to Average Expenses, net of reimbursement+ ...................... .58% .64% .65% .64% .64% Net Assets: ======== ======== ======== ========= ========= Expenses+ ............................................ .67% .81% .71% .69% .76% ======== ======== ======== ========= ========= Investment income--net ............................... 1.72% 1.18% 1.02% 1.05% 1.26% ======== ======== ======== ========= ========= =================================================================================================================================== Supplemental Net assets, end of year (in thousands) ............... $ 19,770 $ 26,367 $ 37,387 $ 104,427 $ 118,692 Data: ======== ======== ======== ========= ========= =================================================================================================================================== Class D ------------------------------------------------------- The following per share data and ratios have been derived For the Year Ended from information provided in the financial statements. December 31, ------------------------------------------------------- Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998 =================================================================================================================================== Per Share Net asset value, beginning of year ................... $ 8.62 $ 11.33 $ 15.13 $ 12.05 $ 10.56 Operating -------- -------- -------- --------- --------- Performance: Investment income--net++ ............................. .11 .08 .09 .08 .13 Realized and unrealized gain (loss) on investments and foreign currency transactions from the Series--net (1.53) (2.64) (2.80) 3.61 2.51 -------- -------- -------- --------- --------- Total from investment operations ..................... (1.42) (2.56) (2.71) 3.69 2.64 -------- -------- -------- --------- --------- Less dividends and distributions: Investment income--net ............................. (.13) (.08) (.02) (.07) (.09) In excess of investment income--net ................ -- -- -- -- (.03) Realized gain on investments from the Series--net .. (.01) (.07) (.53) (.54) (1.03) In excess of realized gain on investments from the Series--net .................................... -- -- (.54) -- -- -------- -------- -------- --------- --------- Total dividends and distributions .................... (.14) (.15) (1.09) (.61) (1.15) -------- -------- -------- --------- --------- Net asset value, end of year ......................... $ 7.06 $ 8.62 $ 11.33 $ 15.13 $ 12.05 ======== ======== ======== ========= ========= =================================================================================================================================== Total Investment Based on net asset value per share ................... (16.21%) (22.60%) (18.00%) 30.95% 25.40% Return: ======== ======== ======== ========= ========= =================================================================================================================================== Ratios to Average Expenses, net of reimbursement+ ...................... .84% .89% .89% .89% .89% Net Assets: ======== ======== ======== ========= ========= Expenses+ ............................................ .92% 1.05% .96% .95% 1.02% ======== ======== ======== ========= ========= Investment income--net ............................... 1.43% .82% .67% .65% 1.14% ======== ======== ======== ========= ========= =================================================================================================================================== Supplemental Net assets, end of year (in thousands) ............... $ 62,310 $ 52,836 $ 46,623 $ 30,480 $ 14,802 Data: ======== ======== ======== ========= ========= ===================================================================================================================================
+ Includes the Fund's share of the GDP Series' and Series' allocated expenses. ++ Based on average shares outstanding. See Notes to Financial Statements. 8 & 9 Merrill Lynch International Index Fund, December 31, 2002 NOTES TO FINANCIAL STATEMENTS MERRILL LYNCH INTERNATIONAL INDEX FUND 1. Significant Accounting Policies: Merrill Lynch International Index Fund (the "Fund") is part of Merrill Lynch Index Funds, Inc. (the "Corporation"). The Fund is registered under the Investment Company Act of 1940 as a non-diversified mutual fund. The Fund seeks to achieve its investment objective by investing all of its assets in Master International Index Series (the "Series") of the Quantitative Master Series Trust, which has the same investment objective as the Fund. The value of the Fund's investment in the Series reflects the Fund's proportionate interest in the net assets of the Series. The performance of the Fund is directly affected by the performance of the Series. The financial statements of the Series, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The Fund's financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. The percentage of the Series owned by the Fund at December 31, 2002 was 49.2%. The Fund offers two classes of shares, Class A and Class D. Shares of Class A and Class D are sold without the imposition of a front-end or deferred sales charge. Both classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Class D Shares bear certain expenses related to the account maintenance of such shares and have exclusive voting rights with respect to matters relating to its account maintenance expenditures. The following is a summary of significant accounting policies followed by the Fund. (a) Valuation of investments -- The Fund records its investment in the Series at fair value. Valuation of securities held by the Series is discussed in Note 1a of the Series' Notes to Financial Statements, which are included elsewhere in this report. (b) Investment income and expenses -- The Fund records daily its proportionate share of the Series' income, expenses and realized and unrealized gains and losses. In addition, the Fund accrues its own expenses. (c) Income taxes -- It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. Therefore, no Federal income tax provision is required. Under the applicable foreign tax law, a withholding tax may be imposed on interest, dividends and capital gains at various rates. (d) Prepaid registration fees -- Prepaid registration fees are charged to expense as the related shares are issued. (e) Dividends and distributions -- Dividends and distributions paid by the Fund are recorded on the ex-dividend dates. Distributions in excess of net investment income and distributions in excess of realized capital gains are due primarily to differing tax treatments for post-October losses. (f) Investment transactions -- Investment transactions in the Series are accounted for on a trade date basis. (g) Reclassification -- Accounting principles generally accepted in the United States of America require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, the current year's permanent book/tax difference of $313,647 has been reclassified between accumulated net realized capital losses and accumulated net investment loss and $1,514,555 has been reclassified between paid-in capital in excess of par and accumulated net realized capital losses. These reclassifications have no effect on net assets or net asset values per share. 2. Transactions with Affiliates: The Corporation has entered into an Administration Agreement with Merrill Lynch Investment Managers, L.P. ("MLIM"). The general partner of MLIM is Princeton Services, Inc. ("PSI"), a wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. The Fund pays a monthly fee at an annual rate of .34% of the Fund's average daily net assets for the performance of administrative services (other than investment advice and related portfolio activities) necessary for the operation of the Fund. For the year ended December 31, 2002, MLIM earned fees of $279,577 of which $4,741 was waived. The Corporation has also entered into a Distribution Agreement and Distribution Plan with FAM Distributors, Inc. ("FAMD" or the "Distributor"), a wholly-owned subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plan adopted by the Corporation in accordance with Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor ongoing account maintenance fees. The fees are accrued daily and paid monthly at the annual rate of .25% based upon the average daily net assets of Class D Shares. Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account maintenance services to the Fund. The ongoing account maintenance fee compensates the Distributor and MLPF&S for providing account maintenance services to Class D shareholders. Financial Data Services, Inc. ("FDS"), an indirect, wholly-owned subsidiary of ML & Co., is the Fund's transfer agent. Certain officers and/or directors of the Fund are officers and/or directors of MLIM, PSI, FAMD, FDS, and/or ML & Co. 3. Investments: Increases and decreases in the Fund's investment in the Series for the year ended December 31, 2002 were $42,643,489 and $25,489,462, respectively. 4. Capital Share Transactions: Net increase in net assets derived from capital share transactions was $19,315,936 and $16,367,869 for the years ended December 31, 2002 and December 31, 2001, respectively. Transactions in capital shares for each class were as follows: - -------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended December 31, 2002 Shares Amount - -------------------------------------------------------------------------------- Shares sold ............................ 1,262,185 $ 10,249,011 Shares issued to shareholders in reinvestment of dividends and distributions ...................... 57,314 402,502 ------------ ------------ Total issued ........................... 1,319,499 10,651,513 Shares redeemed ........................ (1,579,132) (12,572,697) ------------ ------------ Net decrease ........................... (259,633) $ (1,921,184) ============ ============ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended December 31, 2001 Shares Amount - -------------------------------------------------------------------------------- Shares sold ............................ 1,248,549 $ 12,186,944 Shares issued to shareholders in reinvestment of dividends and distributions .......................... 53,445 495,962 ------------ ------------ Total issued ........................... 1,301,994 12,682,906 Shares redeemed ........................ (1,542,434) (14,951,099) ------------ ------------ Net decrease ........................... (240,440) $ (2,268,193) ============ ============ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class D Shares for the Year Dollar Ended December 31, 2002 Shares Amount - -------------------------------------------------------------------------------- Shares sold ............................ 4,396,623 $ 34,902,021 Shares issued to shareholders in reinvestment of dividends and distributions .......................... 157,663 1,101,783 ------------ ------------ Total issued ........................... 4,554,286 36,003,804 Shares redeemed ........................ (1,861,709) (14,766,684) ------------ ------------ Net increase ........................... 2,692,577 $ 21,237,120 ============ ============ - -------------------------------------------------------------------------------- 10 & 11 Merrill Lynch International Index Fund, December 31, 2002 NOTES TO FINANCIAL STATEMENTS (concluded) MERRILL LYNCH INTERNATIONAL INDEX FUND - -------------------------------------------------------------------------------- Class D Shares for the Year Dollar Ended December 31, 2001 Shares Amount - -------------------------------------------------------------------------------- Shares sold ............................ 3,034,565 $ 29,214,905 Shares issued to shareholders in reinvestment of dividends and distributions ...................... 81,043 740,547 ------------ ------------ Total issued ........................... 3,115,608 29,955,452 Shares redeemed ........................ (1,098,794) (11,319,390) ------------ ------------ Net increase ........................... 2,016,814 $ 18,636,062 ============ ============ - -------------------------------------------------------------------------------- 5. Distributions to Shareholders: The tax character of distributions paid during the fiscal years ended December 31, 2002 and December 31, 2001 was as follows: - -------------------------------------------------------------------------------- 12/31/2002 12/31/2001 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary income ...................... $ 1,468,777 $ 810,005 Net long-term capital gains .......... 90,550 499,011 ------------ ------------ Total taxable distributions ............ $ 1,559,327 $ 1,309,016 ============ ============ - -------------------------------------------------------------------------------- As of December 31, 2002, the components of accumulated losses on a tax basis were as follows: - ----------------------------------------------------------------------------- Undistributed ordinary income--net ...................... $ 196,180 Undistributed long-term capital gains--net .............. -- ------------ Total undistributed earnings--net ....................... 196,180 Capital loss carryforward ............................... (7,367,638)* Unrealized losses--net .................................. (11,371,068)** ------------ Total accumulated losses--net ........................... $(18,542,526) ============ - ----------------------------------------------------------------------------- * On December 31, 2002, the Fund had a net capital loss carryforward of $7,367,638, all of which expires in 2010. This amount will be available to offset like amounts of any future taxable gains. ** The difference between book-basis and tax-basis net unrealized losses is attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains (losses) on certain forward foreign currency contracts, the realization for tax purposes of unrealized gains on investments in passive foreign investment companies and other book/tax differences. INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders, Merrill Lynch International Index Fund (One of the series constituting Merrill Lynch Index Funds, Inc.): We have audited the accompanying statement of assets and liabilities of Merrill Lynch International Index Fund (one of the series constituting Merrill Lynch Index Funds, Inc.) as of December 31, 2002, the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the years presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Merrill Lynch International Index Fund as of December 31, 2002, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Princeton, New Jersey February 20, 2003 12 & 13 Merrill Lynch International Index Fund, December 31, 2002 SCHEDULE OF INVESTMENTS (in U.S. dollars)
Master International Index Series ------------------------------------------------------------------------------ Shares COUNTRY Investments Held Value ==================================================================================================== Australia AMP Diversified Property Trust 52,807 $ 77,610 AMP Limited 26,827 168,888 Amcor Limited 37,028 177,020 Australia and New Zealand Banking Group Ltd. 39,762 388,466 Australian Gas Light Company Limited 19,540 115,971 BHP Billiton Limited 121,993 697,247 BHP Steel Limited (a) 27,058 49,213 Boral Limited 19,286 47,241 Brambles Industries Limited 44,098 116,708 CSL Limited 3,407 41,439 CSR Limited 36,728 130,707 Coca-Cola Amatil Limited 15,213 45,145 Cochlear Limited 993 21,796 Coles Myer Limited 28,979 102,804 Commonwealth Bank of Australia 40,816 620,554 Computershare Limited 11,639 12,125 Foster's Brewing Group Limited 83,121 210,624 Gandel Retail Trust 112,770 86,996 General Property Trust 62,350 104,275 Insurance Australia Group Limited 3,988 6,153 James Hardie Industries NV 8,663 33,318 Lend Lease Corporation Limited 18,486 101,180 M.I.M. Holdings Limited 6,087 5,176 Macquarie Bank Limited 10,694 142,114 Macquarie Infrastructure Group 24,317 43,817 Mayne Nickless Limited 33,090 60,744 Mirvac Group 42,659 99,448 National Australia Bank Limited 45,179 807,729 Newcrest Mining Limited 20,996 85,125 The News Corporation Limited 52,643 340,305 The News Corporation Limited (Convertible Preferred) (ADR) (b) 760 17,214 The News Corporation Limited (Preferred) 55,648 299,253 OneSteel Limited 23,360 23,677 Orica Limited 5,805 34,322 Origin Energy Limited 1,339 2,797 Pacific Dunlop Limited (a) 7,344 31,016 Paperlinx Limited 377 1,081 Patrick Corporation Limited 5,500 40,571 QBE Insurance Group Limited 29,538 135,558 Rio Tinto Limited 6,391 122,178 Santos Limited 24,995 84,730 Southcorp Limited 8,843 22,906 Stockland Trust Group 46,236 125,491 Suncorp-Metway Limited 10,318 64,782 TABCORP Holdings Limited 19,869 119,155 Telstra Corporation Limited 52,103 129,386 WMC Limited 42,215 116,479 WMC Resources Limited (a) 42,215 100,315 Wesfarmers Limited 10,979 164,449 Westfield Holdings Limited 4,962 37,581 Westfield Trust 89,237 174,365 Westfield Trust (Units) (a) 3,698 7,080 Westpac Banking Corporation Limited 60,555 468,855 Woodside Petroleum Limited 6,460 45,034 Woolworths Limited 39,044 250,637 ------------------------------------------------------------------------------ Total Investments in Australia (Cost--$7,368,538)--4.5% 7,558,850 ==================================================================================================== Austria Boehler-Uddeholm AG 390 18,061 Flughafen Wien AG 1,446 48,558 Mayr-Melnhof Karton AG 911 67,398 OMV AG 329 32,309 Oesterreichische Elektrizitaetswirtschafts- AG "Verbund" 'A' 47 4,002 RHI AG (a) 53 409 Telekom Austria AG (a) 3,644 36,902 VA Technologie AG 458 7,450 Wienerberger Baustoffindustrie AG 122 2,170 ------------------------------------------------------------------------------ Total Investments in Austria (Cost--$199,801)--0.1% 217,259 ==================================================================================================== Belgium Agfa Gevaert NV 5,023 112,012 Barco NV (New Shares) 520 27,257 Bekaert NV 1,022 46,278 Colruyt NV 1,048 57,738 Compagnie Maritime Belge SA (CMB) 628 33,808 D'leteren SA 222 30,053 Delhaize "Le Lion" SA 592 11,008 Delhaize "Le Lion" SA (ADR) (b) 950 17,053 Dexia 17,437 216,470 Electrabel SA 908 220,586 Fortis 26,094 460,035 Groupe Bruxelles Lambert SA 2,091 85,599 Interbrew 2,492 58,840 KBC Bancassurance Holding 2,802 89,359 Solvay SA 1,416 97,627 Suez Lyonnaise des Eaux SA 4,785 50 UCB SA 4,104 129,202 Union Miniere SA 1,057 45,622 ------------------------------------------------------------------------------ Total Investments in Belgium (Cost--$1,996,100)--1.0% 1,738,597 ==================================================================================================== Denmark A/S Dampskibsselskabet Svendborg 'B' 11 111,890 A/S Det Ostasiatiske Kompagni (a) 555 12,859 Bang & Olufsen Holding A/S 'B' 464 9,374 Carlsberg A/S 'B' 285 12,542 Coloplast A/S 'B' 93 6,766 D/S 1912 'B' 7 49,150 Danisco A/S 2,482 84,330 Danske Bank 19,244 318,087 FLS Industries A/S 'B' (a) 1,417 11,311 Group 4 Falck A/S 2,132 45,029 H. Lundbeck A/S 502 13,333 ISS A/S (a) 527 18,985 NKT Holding A/S 820 8,573 Novo Nordisk A/S 'B' 10,122 292,432 Novozymes A/S 'B' 2,267 47,400 TDC A/S 3,905 94,889 Topdanmark A/S (a) 907 26,268 Vestas Wind Systems A/S 3,906 38,903 William Demant A/S (a) 1,530 32,963 ------------------------------------------------------------------------------ Total Investments in Denmark (Cost--$1,376,837)--0.7% 1,235,084 ==================================================================================================== Finland AvestaPolarit Oyj 28 192 Fortum Corporation, the IVO-Neste Group 10,540 69,129 Instrumentarium Corporation 3,019 120,960 Kone Corporation 'B' 201 6,035 Metso Oyj 4,366 47,191 Nokia Oyj 'A' (ADR) (b) 1,270 19,685 Nokia Oyj (Series A) 139,310 2,214,808 Outokumpu Oyj 447 3,893 Pohjola Group PLC 'D' 2,198 34,299 Rautaruukki Oyj 3,289 11,873 Sampo Insurance Company Ltd. 'A' 11,884 90,415 Stora Enso Oyj 'R' 22,459 236,863 TeliaSonera AB (a) 36,201 134,862 Tietoenator Oyj 3,005 40,995 UPM-Kymmene Oyj 5,708 183,293 Wartsila Oyj 'B' 154 1,943 ------------------------------------------------------------------------------ Total Investments in Finland (Cost--$3,650,720)--1.9% 3,216,436 ====================================================================================================
14 & 15 Merrill Lynch International Index Fund, December 31, 2002 SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master International Index Series (continued) ------------------------------------------------------------------------------ Shares COUNTRY Investments Held Value ==================================================================================================== France Accor SA 5,124 $ 155,184 Air Liquide 2,984 393,618 Alcatel 28,069 123,124 Alstom (a) 13,495 67,268 Altran Technologies SA 2,895 13,884 Arcelor (a) 10,996 135,239 Aventis SA 21,016 1,142,407 Axa 41,163 552,483 BNP Paribas SA 25,157 1,025,103 Bouygues SA 6,902 192,808 Business Objects SA (a) 718 10,571 Cap Gemini SA 1,211 27,679 Carrefour SA 14,567 648,611 Casino Guichard Perrachon (Warrants) (Class A) (d) 133 13 Casino Guichard Perrachon (Warrants) (Class B) (d) 133 161 Club Mediterranee SA (a) 143 3,436 Compagnie de Saint-Gobain 7,976 234,026 Compagnie Francaise d'Etudes et de Construction (Technip SA) 733 52,460 Compagnie Generale des Etablissements Michelin 'B' 3,065 105,691 Dassault Systemes SA 1,856 40,005 Essilor International SA 2,316 95,394 Etablissements Economiques du Casino Guichard-Perrachon SA 1,499 111,293 European Aeronautic Defence and Space Company 4,658 48,148 France Telecom SA 11,381 199,213 Groupe Danone 3,776 507,997 Imetal SA 298 37,652 L'Oreal SA 10,798 822,095 LVMH (Louis Vuitton Moet Hennessy) 6,541 268,731 Lafarge SA (Ordinary) 3,097 233,349 Lagardere S.C.A. 3,917 159,117 PSA Peugeot Citroen 5,716 233,097 Pechiney SA 'A' 1,951 68,464 Pernod Ricard 1,744 168,923 Pinault-Printemps-Redoute SA 2,228 163,898 Publicis SA 3,608 76,482 Renault SA 3,833 180,121 STMicroelectronics NV 17,662 346,225 Sagem SA (New Shares) 550 37,227 Sanofi-Synthelabo SA 11,420 698,077 Schneider SA 5,791 274,015 Societe BIC SA 1,954 67,360 Societe Generale 'A' 7,748 451,257 Societe Generale d'Entreprises SA 1,886 106,281 Societe Television Francaise 1 5,565 148,684 Sodexho Alliance SA 3,743 86,414 Suez SA (a) 24,765 429,848 Thomson CSF 2,214 58,619 Thomson Multimedia (a) 6,869 117,207 TotalFinaElf SA (a) 19,314 2,758,490 TotalFinaElf SA 'B' 939 133,027 TotalFinaElf SA 'STRIP' (a) 4,140 43 Unibail (Union du Credit-Bail Immobilier) 113 8,040 Valeo SA 3,198 100,344 Vivendi Universal SA 18,089 292,142 Vivendi Universal SA (ADR) (b) 6,053 97,272 ------------------------------------------------------------------------------ Total Investments in France (Cost--$15,418,567)--8.7% 14,508,317 ==================================================================================================== Germany Adidas-Salomon AG 1,302 112,448 Allianz AG (Registered Shares) 4,965 472,311 Altana AG 977 44,599 BASF AG 14,659 555,024 Bayer AG 22,263 477,769 Bayerische Hypo- und Vereinsbank AG 13,994 223,510 Beiersdorf AG 1,419 157,993 Buderus AG 2,231 51,507 Continental AG (a) 4,191 65,531 DaimlerChrysler AG 25,203 776,250 Deutsche Bank AG (Registered Shares) 15,269 703,422 Deutsche Lufthansa AG (Registered Shares) (a) 5,765 53,117 Deutsche Post AG (Registered Shares) 16,358 171,661 Deutsche Telekom AG (Registered Shares) (a) 62,044 797,585 Douglas Holding AG 1,160 20,487 E.On AG 16,199 653,620 Epcos AG (a) 2,386 24,713 Fresenius Medical Care AG 2,673 110,687 Gehe AG 1,654 64,395 Heidelberger Zement AG (Brussels) 1,174 41,406 Heidelberger Zement AG (Frankfurt) 35 1,304 Heidelberger Zement AG (VVPR) (a) 1,292 14 Henkel KGaA (Preferred) 1,908 121,237 Hugo Boss AG (Preferred) 1,830 19,262 Infineon Technologies AG (a) 10,701 78,495 Karstadt AG 1,640 28,397 Linde AG 3,341 122,712 MAN AG 3,990 55,060 Marschollek, Lautenschlaeger und Partner AG 3,609 35,600 Merck KGaA 2,378 63,385 Metro AG 1,873 44,716 Muenchener Rueckversicherungs- Gesellschaft AG (Registered Shares) 3,140 375,643 Porsche AG (Preferred) 359 149,187 Preussag AG 4,174 70,784 ProSieben Sat.1 Media AG (Preferred) 4,900 33,423 QIAGEN NV (a) 4,938 25,132 RWE AG 11,991 310,809 RWE AG (Preferred) 2,033 44,269 SAP AG (Systeme, Anwendungen, Produkte in der Datenverarbeitung) 5,574 441,743 Schering AG 4,520 196,609 Siemens AG 22,828 970,206 Siemens AG (ADR) (b) 860 36,232 Thyssen Krupp AG 9,157 102,340 Volkswagen AG 5,122 186,728 Volkswagen AG (Preferred) 2,741 71,910 WCM Beteiligungs- und Grundbesitz AG (a) 4,602 12,073 ------------------------------------------------------------------------------ Total Investments in Germany (Cost--$12,986,719)--5.5% 9,175,305 ==================================================================================================== Greece Alpha Credit Bank 7,965 96,290 Bank of Piraeus 1,959 12,417 Commercial Bank of Greece 1,938 29,408 EFG Eurobank Ergasias 4,179 49,117 Greek Organization of Football Prognostics 2,510 26,445 Hellenic Bottling Co. 3,612 50,110 Hellenic Telecommunications Organization SA (OTE) 14,796 162,722 Intracom SA 8,070 36,246 National Bank of Greece SA 3,698 52,312 Panafon Hellenic Telecom Co. 4,650 26,546 Titan Cement Company 1,341 51,449 Viohalco, Hellenic Copper and Aluminum Industry SA 4,057 16,178 ------------------------------------------------------------------------------ Total Investments in Greece (Cost--$809,855)--0.4% 609,240 ==================================================================================================== Hong Kong ASM Pacific Technology Limited 5,004 9,882 BOC Hong Kong (Holdings) Limited (a) 91,000 93,352 Bank of East Asia, Ltd. 34,339 58,785 CLP Holdings Limited 67,187 270,526 Cathay Pacific Airways 51,263 70,008 Cheung Kong (Holdings) Ltd. 38,735 252,078 Esprit Holdings Limited 16,000 26,877 Hang Seng Bank Limited 28,153 299,638 Henderson Land Development Company Limited 28,491 85,673 Hong Kong and China Gas Company Ltd. 102,240 131,759 Hong Kong Exchanges & Clearing Ltd. 42,000 52,780 Hongkong Electric Holdings Limited 55,500 210,303 Hutchison Whampoa Limited 64,989 406,681 Johnson Electric Holdings Limited 52,828 58,258 Li & Fung Limited 56,719 53,821 New World Development Company Ltd. 55,017 27,338 Pacific Century CyberWorks Limited (a) 170,979 26,968 QPL International Holdings Limited (Warrants) (d) 600 9 Shangri-La Asia Limited 24,734 16,334 Sino Land Company Limited 48,421 15,523 South China Morning Post Holdings Ltd. 34,025 14,180 Sun Hung Kai Properties Ltd. 31,324 185,171 Swire Pacific Limited 'A' 41,077 157,231 Television Broadcasts Ltd. 5,646 17,810 Wharf (Holdings) Ltd. 36,107 68,293 ------------------------------------------------------------------------------ Total Investments in Hong Kong (Cost--$3,435,544)--1.6% 2,609,278 ====================================================================================================
16 & 17 Merrill Lynch International Index Fund, December 31, 2002 SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master International Index Series (continued) ------------------------------------------------------------------------------ Shares COUNTRY Investments Held Value ==================================================================================================== Ireland Allied Irish Banks PLC 27,189 $ 366,923 Bank of Ireland 26,151 268,666 CRH PLC (Dublin) 14,200 175,092 CRH PLC (London) 936 11,590 DCC PLC 3,189 32,863 Elan Corporation PLC (a) 4,431 9,532 Elan Corporation PLC (ADR) (a)(b) 5,755 14,157 Greencore Group PLC 16,409 43,910 Independent News & Media PLC 17,224 28,016 Irish Life & Permanent PLC 11,194 120,994 Kerry Group PLC 'A' 4,710 63,019 Ryanair Holdings PLC (a) 27,680 193,165 Waterford Wedgwood PLC 25,516 13,120 ------------------------------------------------------------------------------ Total Investments in Ireland (Cost--$1,680,791)--0.8% 1,341,047 ==================================================================================================== Italy Alitalia SpA (a) 27,791 7,058 Alleanza Assicurazioni 13,965 105,808 Assicurazioni Generali 26,925 553,800 Autogrill SpA (a) 4,473 34,829 Autostrade--Concessioni e Costruzioni Autostrade SpA 29,026 288,760 Banca di Roma SpA 81,420 104,069 Banca Fideuram SpA 1,700 7,992 Banca Intesa SpA 13,658 22,502 Banca Nazionale del Lavoro (Ordinary) (a) 103,463 114,546 Banca Popolare di Milano (BPM) (a) 13,422 48,875 Benetton Group SpA 5,296 47,240 Bipop-Carire SpA (a) 48,440 22,621 Bulgari SpA 4,032 19,125 ENI SpA 73,694 1,171,617 ENI SpA (ADR) (b) 1,875 147,169 Enel SpA 56,734 295,302 Fiat SpA 5,647 45,926 Fiat SpA (Preferred) 4,334 19,784 Fiat SpA (RNC) 3,627 15,910 Gruppo Editoriale L'Espresso SpA 15,754 51,415 Intesa BCI SpA 114,210 240,902 Italcementi SpA 5,565 56,063 Italgas SpA 11,457 155,818 La Rinascente SpA 5,245 24,328 Luxottica Group SpA 1,412 18,626 Mediaset SpA 11,887 90,563 Mediobanca SpA 20,672 170,075 Mediolanum SpA 10,572 54,473 Mondadori (Arnoldo) Editore SpA 5,198 32,183 Parmalat Finanziaria SpA 22,512 53,627 Pirelli SpA 74,074 68,405 Riunione Adriatica di Sicurta SpA 15,464 188,244 San Paolo-IMI SpA 16,873 109,780 Seat Pagine Gialle SpA (a) 460 313 Snia SpA (a) 26,845 51,131 Snia SpA (Rights) (f) 26,845 1,141 Telecom Italia Mobile (TIM) SpA 122,323 558,391 Telecom Italia SpA 69,689 528,742 Telecom Italia SpA (Registered Shares) 55,725 281,278 Tiscali SpA (a) 9,266 41,618 Unicredito Italiano SpA 86,200 344,646 ------------------------------------------------------------------------------ Total Investments in Italy (Cost--$6,482,859)--3.7% 6,194,695 ==================================================================================================== Japan The 77 Bank, Ltd. 12,000 49,145 Acom Co., Ltd. 2,100 69,015 Advantest Corporation 800 35,864 Aiful Corporation 650 24,429 Ajinomoto Co., Inc. 22,000 229,696 Alps Electric Co., Ltd. 8,000 88,312 Amada Co., Ltd. 5,000 13,651 Anritsu Corp. 8,000 30,606 Aoyamma Trading Co., Ltd. 2,800 39,403 Asahi Breweries Limited 20,000 131,120 Asahi Chemical Industry Co., Ltd. 43,000 106,531 Asahi Glass Company, Limited 15,000 91,893 Asatsu-Dk Inc. 600 10,643 Autobacs Seven Co., Ltd. 1,300 26,565 Avex Inc. 300 3,633 The Bank of Fukuoka, Ltd. 5,000 20,056 The Bank of Yokohama, Ltd. 26,000 102,756 Benesse Corporation 2,000 22,415 Bridgestone Corp. 17,000 210,584 CSK Corporation 400 8,393 Canon, Inc. 23,000 866,352 Casio Computer Co., Ltd. 11,000 61,271 Central Japan Railway Company 31 193,048 The Chiba Bank, Ltd. 2,000 6,371 Chubu Electric Power Company, Incorporated 22,000 393,023 Chugai Pharmaceutical Co., Ltd. 8,900 84,748 Citizen Watch Co. 13,000 57,951 Credit Saison Co., Ltd. 6,500 110,917 Dai Nippon Printing Co., Ltd. 24,000 265,543 Daicel Chemical Industries, Ltd. 3,000 8,469 The Daiei, Inc. (a) 12,500 13,588 Daiichi Pharmaceutical Co., Ltd. 8,000 114,806 Daikin Industries, Ltd. 8,000 126,738 The Daimaru, Inc. 9,000 26,848 Dainippon Ink and Chemicals, Inc. 30,000 48,032 Dainippon Screen Mfg. Co., Ltd. (a) 8,000 27,909 Daito Trust Construction Co., Ltd. 2,000 44,240 Daiwa Bank Holdings, Inc. 152,000 83,256 Daiwa House Industry Co., Ltd. 15,000 84,436 Daiwa Securities Group Inc. 39,000 173,195 Denki Kagaku Kogyo Kabushiki Kaisha 3,000 6,547 Denso Corporation 17,600 288,760 Dowa Mining Co., Ltd. 4,000 16,853 East Japan Railway Company 102 506,261 Ebara Corporation 13,000 40,204 Eisai Company, Ltd. 6,000 134,743 Fanuc Ltd. 1,700 75,209 Fast Retailing Co., Ltd. 1,000 35,224 Fuji Machine Mfg. Co., Ltd. 600 5,663 Fuji Photo Film 11,000 358,726 Fuji Soft ABC Incorporated 900 14,220 Fuji Television Network, Incorporated 13 52,364 Fujikura Ltd. 16,000 38,021 Fujisawa Pharmaceutical Co., Ltd. 10,000 228,786 Fujitsu Limited 40,000 114,266 The Furukawa Electric Co., Ltd. 35,000 73,439 The Gunma Bank Ltd. 13,000 56,527 Hankyu Department Stores, Inc. 6,000 28,971 Hirose Electric Co., Ltd. 900 68,712 Hitachi Ltd. 87,000 333,572 The Hokuriku Bank, Ltd. (a) 5,000 6,741 Honda Motor Co., Ltd. 17,400 643,684 Hoya Corporation 2,400 168,063 ITOCHU Corporation 35,000 75,798 Isetan Company Ltd. 8,000 54,875 Ishihara Sangyo Kaisha, Ltd. (a) 11,000 11,309 Ishikawajima-Harima Heavy Industries Co., Ltd. 27,000 24,572 Ito-Yokado Co., Ltd. 9,000 265,442 JFE Holdings, Inc. (a) 9,100 110,501 JGC Corporation 4,000 22,381 JUSCO Co., Ltd. 9,000 213,112 Japan Airlines System Corporation (a) 28,000 59,695 Japan Tobacco, Inc. 25 167,271 The Joyo Bank, Ltd. 23,000 63,959 Kajima Corporation 29,000 64,759 Kaken Pharmaceutical Co., Ltd. 8,000 33,235 Kanebo, Ltd. (a) 7,000 6,666 Kaneka Corporation 13,000 69,563 Kansai Electric Power Company, Inc. 23,500 355,063 Kao Corporation 17,000 373,178 Kawasaki Heavy Industries Ltd. (a) 61,000 48,319 Kawasaki Kisen Kaisha, Ltd. 2,000 3,438 Keihin Electric Express Railway Co., Ltd. 15,000 68,257 Keio Electric Railway Co., Ltd. 2,000 10,601 Keyence Corporation 1,200 208,814 Kinden Corporation 9,000 33,218 Kinki Nippon Railway Co., Ltd. (a) 39,000 84,132 Kirin Brewery Company, Ltd. 23,000 146,330 Kokuyo Co., Ltd. 5,000 41,586 Komatsu Ltd. 25,000 81,529 Konami Co., Ltd. 2,600 60,032 Konica Corporation 7,000 50,788 Koyo Seiko Co. 12,000 53,291 Kubota Corporation 39,000 105,823 Kuraray Co., Ltd. 8,000 49,617 Kurita Water Industries Ltd. 3,000 30,210 Kyocera Corporation 4,200 244,561 Kyowa Hakko Kogyo Co., Ltd. 7,000 29,022 Kyushu Electric Power Company, Incorporated 7,100 103,865 Lawson Inc. 1,000 24,100 Mabuchi Motor Co., Ltd. 200 18,404 Marubeni Corporation 61,000 56,029 Marui Co., Ltd. 6,000 58,751 Matsushita Electric Industrial Company, Ltd. 60,000 591,556 Matsushita Electric Works, Ltd. 4,000 24,741 Meitec Corp. 500 12,219 Millea Holdings, Inc. 44 316,643 Minebea Company Ltd. 17,000 59,164 Mitsubishi Chemical Corporation 45,000 89,871 Mitsubishi Corporation 22,000 134,406 Mitsubishi Electric Corporation (a) 49,000 113,137 Mitsubishi Estate Company, Limited 19,000 144,738 Mitsubishi Gas Chemical Company, Inc. 18,000 25,027 Mitsubishi Heavy Industries, Ltd. 72,000 175,950
18 & 19 Merrill Lynch International Index Fund, December 31, 2002 SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master International Index Series (continued) ------------------------------------------------------------------------------ Shares COUNTRY Investments Held Value ==================================================================================================== Japan Mitsubishi Logistics Corp. 8,000 $ 39,033 (concluded) Mitsubishi Materials Corporation 35,000 38,342 Mitsubishi Tokyo Financial Group, Inc. 97 527,218 Mitsui & Co., Ltd. 47,000 219,415 Mitsui Chemicals Inc. 5,000 22,289 Mitsui Engineering & Shipbuilding Co., Ltd. (a) 15,000 10,870 Mitsui Fudosan Co., Ltd. 23,000 149,237 Mitsui Marine and Fire Insurance Company, Ltd. 38,000 174,838 Mitsui Mining & Smelting Co., Ltd. 20,000 46,178 Mitsui Trust Holdings, Inc. 22,000 35,780 Mitsukoshi, Ltd. 16,000 33,302 Mitsumi Electric Company, Ltd. 6,000 54,656 Mizuho Holdings, Inc. 200 187,073 Murata Manufacturing Co., Ltd. 6,800 266,453 NEC Corporation 33,000 123,468 NGK Insulators, Ltd. 13,000 70,987 NGK Spark Plug Co., Ltd. 9,000 58,246 NSK Limited 14,000 36,100 NTN Corporation 3,000 10,365 NTT Data Corporation 30 82,919 NTT DoCoMo, Inc. 534 985,472 Namco Ltd. 3,100 51,932 Nichirei Corporation 1,000 2,806 Nidec Corporation 1,800 112,244 The Nikko Securities Co., Ltd. 28,000 94,379 Nikon Corporation 10,000 75,166 Nintendo Company Ltd. 2,600 242,976 Nippon COMSYS Corporation 15,000 50,813 Nippon Express Co., Ltd. 24,000 94,042 Nippon Meat Packers, Inc. 10,000 99,857 Nippon Mining Holdings, Inc. 33,500 44,885 Nippon Mitsubishi Oil Corp. 54,000 244,813 Nippon Sheet Glass Company, Ltd. 23,000 41,283 Nippon Steel Corporation 198,000 231,920 Nippon Telegraph & Telephone Corporation (NTT) 143 519,365 Nippon Unipac Holding 22 95,475 Nippon Yusen Kabushiki Kaisha 46,000 155,052 Nissan Chemical Industries, Ltd. 1,000 3,741 Nissan Motor Co., Ltd. 60,900 475,212 Nisshinbo Industries Inc. 1,000 3,472 Nissin Food Products Co., Ltd. 2,800 62,526 Nitto Denko Corporation 5,800 165,198 The Nomura Securities Co., Ltd. 48,000 539,580 Noritake Co., Ltd. 8,000 22,786 Obayashi Corporation 25,000 55,616 Oji Paper Co., Ltd. 27,000 116,036 Olympus Optical Co., Ltd. 6,000 97,784 Omron Corporation 8,000 117,974 Onward Kashiyama Co., Ltd. 4,000 31,347 Oracle Corporation Japan 400 9,691 Oriental Land Co., Ltd 1,700 103,000 Orix Corporation 3,200 206,286 Osaka Gas Co. 54,000 133,328 Pioneer Corporation 6,800 127,496 Promise Co., Ltd. 2,200 78,419 Ricoh Co., Ltd. 21,000 344,544 Rohm Company Ltd. 2,800 356,518 SMC Corporation 2,200 206,522 Sankyo Company, Ltd. 13,000 163,116 Sanrio Company, Ltd. 300 1,492 Sanyo Electric Co., Ltd. 56,000 145,816 Secom Co., Ltd. 7,500 257,226 Sega Enterprises Ltd. (a) 4,800 47,325 Seino Transportation Co., Ltd. 13,000 76,136 Seiyu, Ltd. (a) 20,000 58,482 Sekisui Chemical Co., Ltd. 25,000 64,675 Sekisui House, Ltd. 12,000 84,941 Seven-Eleven Japan Co., Ltd. 10,000 305,048 Sharp Corporation 32,000 303,902 Shimamura Co., Ltd. 600 38,224 Shimano Inc. 3,500 53,088 Shimizu Corporation 16,000 40,044 Shin-Etsu Chemical Co., Ltd. 10,600 347,468 Shionogi & Co., Ltd. 8,000 113,120 Shiseido Company, Limited 15,000 195,037 The Shizuoka Bank, Ltd. 18,000 116,036 Showa Denko K.K. (a) 58,000 73,801 Showa Shell Sekiyu K.K. 6,000 41,662 Skylark Co., Ltd. 2,000 26,527 Snow Brand Milk Products Co., Ltd. (a) 500 725 Softbank Corp. 10,100 115,324 Sony Corporation 24,900 1,040,735 Sumitomo Chemical Co., Ltd. 32,000 126,468 Sumitomo Corporation 21,000 90,250 Sumitomo Electric Industries 14,000 90,722 Sumitomo Heavy Industries, Ltd. (a) 30,000 16,685 Sumitomo Metal Industries, Ltd. (a) 107,000 38,771 Sumitomo Metal Mining Co. 19,000 79,253 Sumitomo Mitsui Financial Group, Inc. 122 381,411 Sumitomo Osaka Cement Co., Ltd. 2,000 2,629 Sumitomo Realty & Development Co., Ltd. 17,000 69,192 The Sumitomo Trust and Banking Co., Ltd. 16,000 64,852 TDK Corporation 3,300 132,923 Taiheiyo Cement Corporation 10,000 12,640 Taisei Corporation 27,000 43,002 Taisho Pharmaceutical Company, Ltd. 4,000 58,819 Taiyo Yuden Co., Ltd. 6,000 63,605 Takara Shuzo Co., Ltd. 8,000 34,853 Takashimaya Co., Ltd. 19,000 74,450 Takeda Chemical Industries, Ltd. 22,000 919,525 Takefuji Corporation 3,020 174,324 Takuma Co., Ltd. 8,000 43,145 Teijin Limited 22,000 52,650 Terumo Corporation 7,600 105,159 Tobu Railway Co., Ltd. 6,000 15,927 Toda Corporation 3,000 5,031 Toho Co., Ltd. 5,000 47,990 Tohoku Electric Power Co., Inc. 16,900 248,793 Tokyo Broadcasting System, Inc. 4,000 50,291 Tokyo Electric Power 31,900 606,173 Tokyo Electron Limited 3,400 153,855 Tokyo Gas Co. 56,000 175,546 Tokyu Corporation 33,000 116,238 Toppan Printing Co., Ltd. 14,000 105,351 Toray Industries, Inc. 37,000 78,571 Toshiba Corporation (a) 79,000 247,645 Tosoh Corporation 3,000 7,230 Tostem Corporation 9,000 136,513 Toto Limited 16,000 59,189 Toyo Information Systems Co., Ltd. 400 5,905 Toyo Seikan Kaisha, Ltd. 5,000 59,619 Toyobo Co., Ltd. 2,000 2,612 Toyota Motor Corporation 71,600 1,924,699 Trans Cosmos Inc. 2,200 22,488 Trend Micro Incorporated (a) 4,000 68,425 UFJ Holdings, Inc. 121 122,356 Ube Industries, Ltd. 13,000 13,036 Uni-Charm Corporation 400 15,876 Uny Co., Ltd. 4,000 39,134 Wacoal Corp. 5,000 38,552 West Japan Railway Company 46 163,192 World Co., Ltd. 1,600 30,741 Yakult Honsha Co., Ltd. 2,000 22,786 Yamada Denki 600 12,665 Yamaha Corporation 6,000 55,465 Yamanouchi Pharmaceutical Co., Ltd. 7,000 202,916 Yamato Transport Co., Ltd. 15,000 195,921 Yamazaki Baking Co., Ltd. 7,000 39,226 The Yasuda Fire & Marine Insurance Co. Ltd. 17,000 99,275 Yokogawa Electric Corporation 8,000 49,684 ------------------------------------------------------------------------------ Total Investments in Japan (Cost--$39,693,087)--19.7% 32,881,074 ==================================================================================================== Netherlands ABN AMRO Holding NV 41,168 673,082 ASM Lithography Holding NV (a) 15,150 126,551 Aegon NV 38,967 501,336 Akzo Nobel NV 8,649 274,375 Buhrmann NV 6,946 30,323 Elsevier NV 14,552 177,905 Getronics NV (a) 25,492 15,516 Hagemeyer NV 2,945 21,324 Heineken NV 6,000 234,226 IHC Caland NV 926 48,879 ING Groep NV 49,607 840,209 KPN NV (a) 52,705 342,913 Koninklijke Ahold NV 17,283 219,455 Koninklijke Luchtvaart Maatschappij NV (KLM) 91 877 Koninklijke Numico NV 7,546 95,025 Koninklijke (Royal) Philips Electronics NV (a) 35,665 625,028 Oce NV 194 2,138 Royal Dutch Petroleum Company 63,112 2,778,337 TNT Post Group NV 10,581 171,552 Unilever NV 'A' 16,239 997,763 VNU NV 6,939 180,952 Vedior NV 'A' 7,677 43,826 Vendex KBB NV 1,228 13,338 Wolters Kluwer NV 'A' 10,798 188,102 ------------------------------------------------------------------------------ Total Investments in the Netherlands (Cost--$10,823,366)--5.2% 8,603,032 ====================================================================================================
20 & 21 Merrill Lynch International Index Fund, December 31, 2002 SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master International Index Series (continued) ------------------------------------------------------------------------------ Shares COUNTRY Investments Held Value ==================================================================================================== New Zealand Auckland International Airport Limited 16,200 $ 47,032 Carter Holt Harvey Limited 7,526 6,929 Contact Energy Limited 31,055 64,492 Fisher & Paykel Appliances Holdings Limited 1,098 5,801 Fisher & Paykel Industries Limited 1,054 5,210 Fletcher Building Limited 20,926 36,670 Fletcher Challenge Forests (a) 9,927 5,089 Fletcher Challenge Forests Ltd. (Preferred) (a) 18,827 9,651 Telecom Corporation of New Zealand Limited 61,683 146,167 The Warehouse Group Limited 16,257 62,250 ------------------------------------------------------------------------------ Total Investments in New Zealand (Cost--$323,397)--0.2% 389,291 ==================================================================================================== Norway Bergesen d.y. ASA 'A' 2,372 45,195 Bergesen d.y. ASA 'B' 300 4,850 DNB Holding ASA 1,308 6,155 Kvaerner ASA 'A' (a) 81,791 43,683 Merkantildata ASA (a) 10,407 7,811 Nera ASA (a) 6,500 7,037 Norsk Hydro ASA 5,649 253,185 Norske Skogindustrier ASA 3,089 43,697 Orkla ASA 'A' 2,153 36,672 SAS AB (a) 2,392 14,156 Schibsted ASA 3,568 37,082 Smedvig ASA 'A' 3,691 17,582 Smedvig ASA 'B' 600 2,434 Statoil ASA 6,904 58,299 Storebrand ASA (a) 18,604 69,821 Tandberg ASA 2,592 14,966 Telenor A/S (ADS) (c) 8,900 98,078 Tomra Systems ASA 2,598 16,913 ------------------------------------------------------------------------------ Total Investments in Norway (Cost--$1,008,964)--0.5% 777,616 ==================================================================================================== Portugal BPI-SGPS, SA (Registered Shares) 41,741 95,491 Banco Comercial Portugues, SA (BCP) (Registered Shares) 34,351 82,189 Banco Espirito Santo, SA (Registered Shares) 8,484 111,289 Brisa--Auto Estradas de Portugal, SA 11,704 64,850 Cimpor--Cimentos de Portugal, SGPS, SA 3,061 51,395 Eletricidade de Portugal, SA (EDP) 34,389 57,380 Jeronimo Martins SGPS, SA (a) 3,120 22,755 Portugal Telecom SA (Registered Shares) 17,658 121,374 Sonae, S.G.P.S., SA (a) 2,561 1,075 ------------------------------------------------------------------------------ Total Investments in Portugal (Cost--$762,373)--0.4% 607,798 ==================================================================================================== Singapore Capitaland Limited 33,833 21,652 Chartered Semiconductor Manufacturing Limited (a) 13,000 5,321 Chartered Semiconductor Manufacturing Limited (ADR) (a)(b) 1,120 4,413 City Developments Limited 20,535 49,251 Creative Technology Limited 5,907 41,889 Cycle & Carriage Ltd. 2,413 4,730 DBS Group Holdings Limited 26,751 169,652 Fraser & Neave Limited 4,263 19,171 Haw Par Corporation Ltd. 1,766 3,319 Hotel Properties Limited 6,676 3,580 Keppel Corporation Ltd. 33,914 72,345 Neptune Orient Lines Limited (a) 18,873 10,010 Oversea-Chinese Banking Corporation Ltd. 32,598 181,361 Overseas Union Enterprise Ltd. 2,631 8,874 Sembcorp Industries Limited 24,154 10,932 Singapore Airlines Limited 20,582 121,036 Singapore Food Industries Limited 4,974 2,007 Singapore Press Holdings Ltd. 5,792 60,775 Singapore Technologies Engineering Ltd. 56,213 53,474 Singapore Telecommunications, Ltd. 103,718 74,148 United Overseas Bank Ltd. 43,204 293,922 Venture Manufacturing (Singapore) Ltd. 11,000 88,152 ------------------------------------------------------------------------------ Total Investments in Singapore (Cost--$1,617,269)--0.8% 1,300,014 ==================================================================================================== South Africa SABMiller PLC 27,200 193,330 ------------------------------------------------------------------------------ Total Investments in South Africa (Cost--$194,019)--0.1% 193,330 ==================================================================================================== Spain ACS, Actividades de Construccion y Servicios, SA 1,897 61,015 Acerinox SA 2,745 100,792 Acesa Infraestructuras, SA (Rights) (g) 6,033 3,482 Altadis 8,775 200,192 Amadeus Global Travel Distribution SA 'A' 835 3,444 Autopistas, Concesionaria Espanola SA 6,033 68,375 Banco Bilbao Vizcaya, SA 83,773 801,752 Banco Santander Central Hispano SA 136,742 938,471 Corporacion Mapfre SA 7,932 64,343 Endesa SA 26,531 310,434 Fomento de Construcciones y Contratas SA 2,428 54,526 Gas Natural SDG, SA 'E' 6,184 117,265 Grupo Dragados SA 7,126 121,144 Iberdrola SA 20,100 281,591 Iberia Lineas Aereas de Espana SA 15,500 22,772 Industria de Disenso Textil, SA 5,665 133,819 Repsol-YPF, SA 27,151 359,002 Sociedad General de Aguas de Barcelona, SA 3,462 34,877 Sociedad General de Aguas de Barcelona, SA (New) (a) 34 333 Sol Melia, SA 5,365 21,225 TelePizza, SA (a) 7,245 5,702 Telefonica SA (a) 133,923 1,198,796 Telefonica, SA (ADR) (a)(b) 1,040 27,633 Terra Networks, SA (a) 12,990 54,663 Union Electrica Fenosa, SA 8,715 114,776 Zeltia, SA 6,228 35,423 ------------------------------------------------------------------------------ Total Investments in Spain (Cost--$5,261,572)--3.1% 5,135,847 ==================================================================================================== Sweden Assa Abloy AB 'B' 8,188 93,501 Atlas Copco AB 'A' 6,014 117,336 Billerud 277 3,020 Drott AB 'B' 1,400 15,585 Electrolux AB 'B' 9,442 148,999 Gambro AB 'B' 3,981 22,113 Hennes & Mauritz AB 'B' 16,531 318,732 Modern Times Group MTG AB 'B' (a) 2,810 22,735 Nordbanken Holding AB 81,914 361,000 OM Gruppen AB 1,010 4,822 SAS AB 1,680 9,873 SKF AB 'B' 4,117 106,784 Sandvik AB 5,478 122,281 Securitas AB 'B' 12,631 150,761 Skandia Forsakrings AB 26,306 70,042 Skandinaviska Enskilda Banken (SEB) 'A' 13,061 108,676 Skanska AB 'B' 11,713 68,558 Svenska Cellulosa AB (SCA) 'B' 7,546 254,614 Svenska Handelsbanken AB 14,010 186,515 Swedish Match AB 5,000 39,308 Tele2 AB 'B' (a) 3,784 100,101 Telefonaktiebolaget LM Ericsson (ADR) (a)(b) 1,407 9,483 Telefonaktiebolaget LM Ericsson AB 'B' (a) 430,925 301,682 Telia AB 28,554 107,488 Trelleborg AB (Class B) 358 2,897 Volvo AB 'A' 1,148 17,918 Volvo AB 'B' 8,230 134,124 WM-Data AB 'B' 4,275 3,729 ------------------------------------------------------------------------------ Total Investments in Sweden (Cost--$4,096,840)--1.7% 2,902,677 ====================================================================================================
22 & 23 Merrill Lynch International Index Fund, December 31, 2002 SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master International Index Series (continued) ------------------------------------------------------------------------------ Shares COUNTRY Investments Held Value ==================================================================================================== Switzerland ABB Ltd. (a) 43,465 $ 123,539 Adecco SA (Registered Shares) 4,777 187,252 Centerpulse AG (Registered Shares) (a) 286 49,849 Ciba Specialty Chemicals AG (Registered Shares) 2,833 197,513 Clariant AG (Registered Shares) 1,294 20,682 Compagnie Financiere Richemont AG 'A' 15,784 294,516 Credit Suisse Group 39,676 860,837 Givaudan (Registered Shares) 345 154,697 Holcim Ltd. 'B' 844 153,210 Kudelski SA (Bearer) (a) 1,763 23,907 Logitech International SA (Registered Shares) (a) 269 8,025 Lonza Group AG (Registered Shares) 1,733 105,281 Nestle SA (Registered Shares) 11,973 2,537,130 Novartis AG (Registered Shares) 84,368 3,078,300 Roche Holding AG 20,727 1,444,309 Roche Holding AG (Bearer) 1,511 191,238 SGS Societe Generale de Surveillance Holding SA 'R' 62 18,653 Serono SA 'B' 291 155,949 Sulzer AG (Registered Shares) 133 18,083 Swatch Group AG 'B' 449 37,344 Swatch Group AG (Registered Shares) 2,276 38,518 Swiss Re (Registered Shares) 8,702 570,819 Swisscom AG (Registered Shares) 988 286,175 Syngenta AG 2,268 131,304 Synthes-Stratec Inc. 55 33,731 UBS AG (Registered Shares) 36,646 1,781,016 Unaxis Holding AG 'R' 136 9,098 Zurich Financial Services AG 5,067 472,729 ------------------------------------------------------------------------------ Total Investments in Switzerland (Cost--$14,282,596)--7.8% 12,983,704 ==================================================================================================== United Kingdom 3i Group PLC 23,991 214,358 AMEC PLC 18,532 42,738 ARM Holdings PLC (a) 33,823 26,137 AVIVA PLC 67,201 479,268 AWG PLC (a) 2,706 18,885 Aegis Group PLC 75,089 94,593 Amvescap PLC 9,940 63,690 Associated British Ports Holdings PLC 5,600 36,017 AstraZeneca Group PLC 50,921 1,819,905 BAA PLC 38,222 310,129 BAE Systems PLC 74,318 148,359 BBA Group PLC 5,728 17,037 BG Group PLC 91,368 394,210 BICC PLC 30,308 70,506 BOC Group PLC 18,186 259,985 BP Amoco PLC 646,961 4,447,387 BP Amoco PLC (ADR) (b) 3,849 156,462 BPB PLC 8,834 34,986 BT Group PLC 247,475 776,900 BT Group PLC (ADR) (b) 900 28,197 Barclays PLC 190,431 1,180,313 Barratt Developments PLC 546 3,437 Billiton PLC 78,487 419,187 Boots Company PLC 20,529 193,671 Brambles Industries PLC 31,990 78,281 British Airways PLC (a) 16,342 35,517 British American Tobacco PLC 53,717 536,602 The British Land Company PLC 23,225 169,002 British Sky Broadcasting Group PLC ("BSkyB") (a) 40,058 412,087 Bunzl PLC 5,197 31,793 Cable & Wireless PLC 48,379 34,854 Cadbury Schweppes PLC 70,284 437,891 Canary Wharf Group PLC 11,328 42,948 Capita Group PLC 29,810 118,778 Carlton Communications PLC 38,415 83,026 Celltech Group PLC (a) 14,811 82,263 Centrica PLC 123,844 340,934 Chubb PLC 13,844 19,557 Close Brothers Group PLC 2,797 25,036 Compass Group PLC 62,507 332,079 Corus Group PLC (a) 93,588 41,057 Daily Mail and General Trust 'A' 3,119 29,199 Diageo PLC 100,407 1,091,105 Dixons Group PLC 43,124 100,667 EMI Group PLC 37,723 84,415 Electrocomponents PLC 12,308 56,868 FKI PLC 9,108 12,903 FirstGroup PLC 6,151 23,320 GKN PLC 21,805 70,470 George Wimpey PLC 21,841 93,530 Glaxo Wellcome PLC 800 29,968 GlaxoSmithKline PLC (ADR) (b) 182,044 3,493,426 Granada PLC 45,137 57,951 The Great Universal Stores PLC 35,771 332,281 HBOS PLC 112,477 1,186,053 HSBC Holdings PLC 286,910 3,170,919 Hammerson PLC 6,585 50,144 Hanson PLC 28,353 125,982 Hays PLC 68,298 101,981 Hilton Group PLC 69,991 188,173 IMI PLC 11,268 47,618 Imperial Chemical Industries PLC 21,892 81,060 Imperial Tobacco Group PLC 18,261 310,153 International Power PLC (a) 62,528 96,386 Invensys PLC 127,264 108,075 J Sainsbury PLC 31,443 141,103 Johnson Matthey PLC 3,020 38,895 Kidde PLC 1,460 1,663 Kingfisher PLC 67,466 241,665 Land Securities Group PLC 18,331 231,661 Legal & General Group PLC 161,396 249,438 Lloyds TSB Group PLC 150,675 1,081,870 Lloyds TSB Group PLC (ADR) (b) 2,530 72,333 Logica PLC 45,320 109,441 Man Group PLC 8,780 125,377 Marks & Spence Group PLC 79,407 402,688 Misys PLC 27,041 76,619 National Grid Group PLC 85,172 625,946 Next PLC 6,382 75,671 Nycomed Amersham PLC 27,874 249,501 Ocean Group PLC 9,717 107,627 P & O Princess Cruises PLC 14,072 97,641 Pearson PLC 18,799 173,870 The Peninsular and Oriental Steam Navigation Company 11,523 30,516 Pilkington PLC 53,235 49,708 Provident Financial PLC 7,073 67,638 Prudential Corporation PLC 61,060 431,539 RMC Group PLC 7,554 44,632 Rank Group PLC 29,178 125,185 Reckitt Benckiser PLC 13,225 256,556 Reed Elsevier PLC 38,661 331,119 Rentokil Initial PLC 66,396 235,160 Reuters Group PLC 40,508 115,755 Rexam PLC 16,452 112,301 Rio Tinto PLC (Registered Shares) 32,203 642,861 Rolls-Royce PLC 74,522 128,371 Royal & Sun Alliance Insurance Group PLC 72,384 140,711 Royal Bank of Scotland Group PLC 83,854 2,008,749 Safeway PLC 38,721 132,934 The Sage Group PLC 45,501 97,425 Schroders PLC 4,105 33,770 Scottish & Newcastle PLC 16,039 119,681 Scottish and Southern Energy PLC 29,957 327,949 ScottishPower PLC 50,102 292,390 ScottishPower PLC (ADR) (b) 993 22,760 Serco Group PLC 2,405 5,929 Seton Scholl Healthcare Group PLC 3,902 16,097 Severn Trent PLC 15,680 175,188 Shell Transport & Trading Company 299,741 1,973,642 Signet Group PLC 79,661 87,207 Six Continents PLC 23,524 190,114 Slough Estates PLC 473 2,581 Smith & Nephew PLC 20,742 127,059 Smiths Industries PLC 13,554 151,762 Stagecoach Holdings PLC 18,574 8,821 TI Automotive Limited 'A' (a) 1,025 0 Tate & Lyle PLC 8,252 41,847 Taylor Woodrow PLC 1,561 4,260 Tesco PLC 227,534 710,636 Unilever PLC 84,717 806,041 United Business Media PLC 19,481 90,951 United Utilities PLC 10,623 106,716 Vodafone Group PLC 1,946,961 3,549,722 Vodafone Group PLC (ADR) (b) 12,490 226,319 WPP Group PLC 27,847 212,723 Whitbread PLC 1,813 15,790 Wolseley PLC 17,741 148,947 ------------------------------------------------------------------------------ Total Investments in the United Kingdom (Cost--$49,987,800)--26.1% 43,503,780 ==================================================================================================== United States Datacraft Asia Limited 29,000 18,995 I Shares MSCI EAFE Index Fund 2,000 198,020 ------------------------------------------------------------------------------ Total Investments in the United States (Cost--$300,860)--0.1% 217,015 ====================================================================================================
24 & 25 Merrill Lynch International Index Fund, December 31, 2002 SCHEDULE OF INVESTMENTS (concluded) (in U.S. dollars)
Master International Index Series (concluded) ------------------------------------------------------------------------------ Partnership Interest Short-Term Securities Value ==================================================================================================== $4,089,074 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I (e) $ 4,089,074 ------------------------------------------------------------------------------ Total Investments in Short-Term Securities (Cost--$4,089,074)--2.5% 4,089,074 ==================================================================================================== Total Investments (Cost--$187,847,548)--97.1% 161,988,360 Variation Margin on Financial Futures Contracts--(0.1%)* (160,203) Unrealized Appreciation on Forward Foreign Exchange Contracts--0.1%** 180,871 Other Assets Less Liabilities--2.9% 4,811,304 ------------ Net Assets--100.0% $166,820,332 ============ ====================================================================================================
(a) Non-income producing security. (b) American Depositary Receipts (ADR). (c) American Depositary Shares (ADS). (d) Warrants entitle the Series to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date. (e) Investments in companies considered to be an affiliate of the Series (such companies are defined as "Affiliated Companies" in Section 2 (a)(3) of the Investment Company Act of 1940) are as follows: -------------------------------------------------------------------------- Net Net Interest Affiliate Activity Cost Income -------------------------------------------------------------------------- Merrill Lynch Liquidity Series, $4,089,074 $4,089,074 $3,242 LLC Cash Sweep Series I -------------------------------------------------------------------------- (f) The rights may be exercised until 1/16/2003. (g) The rights may be exercised until 1/10/2003. * Financial futures contracts purchased as of December 31, 2002 were as follows: -------------------------------------------------------------------------- Number of Expiration Contracts Issue Exchange Date Value -------------------------------------------------------------------------- 2 Hang Seng Index SIMEX January 2003 $ 119,089 6 All Ordinaries SFE March 2003 253,817 126 EURO DJ EURO March 2003 3,166,774 35 FTSE LIFFE March 2003 2,203,993 30 TOPIX Tokyo March 2003 2,109,632 -------------------------------------------------------------------------- Total Financial Futures Contracts Purchased (Total Contract Price--$7,972,872) $7,853,305 ========== -------------------------------------------------------------------------- ** Forward foreign exchange contracts as of December 31, 2002 were as follows: Foreign Currency Expiration Unrealized Purchased Date Appreciation -------------------------------------------------------------------------- CHF 865,000 January 2003 $ 29,421 (euro) 2,168,000 January 2003 91,420 (pound) 1,145,000 January 2003 30,762 (Y) 144,200,000 January 2003 29,353 -------------------------------------------------------------------------- Total Unrealized Appreciation on Forward Foreign Exchange Contracts--Net (US$ Commitment--$5,777,125) $180,871 ======== -------------------------------------------------------------------------- See Notes to Financial Statements. STATEMENT OF ASSETS AND LIABILITIES
MASTER INTERNATIONAL INDEX SERIES As of December 31, 2002 =================================================================================================================================== Assets: Investments, at value (including securities loaned of $10,254,352) (identified cost--$187,847,548) ............................................. $ 161,988,360 Investments held as collateral for loaned securities, at value .............. 10,759,412 Cash on deposit for financial futures contracts ............................. 2,246,172 Unrealized appreciation on forward foreign exchange contracts ............... 180,871 Foreign cash (Cost--$1,530,897) ............................................. 1,576,207 Receivables: Contributions ............................................................. $ 1,001,882 Dividends ................................................................. 253,109 Investment adviser ........................................................ 74,443 Interest .................................................................. 2,768 1,332,202 ----------- Prepaid expenses and other assets ........................................... 1,266 ------------- Total assets ................................................................ 178,084,490 ------------- =================================================================================================================================== Liabilities: Collateral on securities loaned, at value ................................... 10,759,412 Payables: Withdrawals ............................................................... 240,174 Variation margin .......................................................... 160,203 400,377 ----------- Accrued expenses and other liabilities ...................................... 104,369 ------------- Total liabilities ........................................................... 11,264,158 ------------- =================================================================================================================================== Net Assets: Net assets .................................................................. $ 166,820,332 ============= =================================================================================================================================== Net Assets Investors' capital .......................................................... $ 192,559,011 Consist of: Unrealized depreciation on investments and foreign currency transactions--net (25,738,679) ------------- Net assets .................................................................. $ 166,820,332 ============= ===================================================================================================================================
See Notes to Financial Statements. 26 & 27 Merrill Lynch International Index Fund, December 31, 2002 STATEMENT OF OPERATIONS
MASTER INTERNATIONAL INDEX SERIES For the Year Ended December 31, 2002 =============================================================================================================================== Investment Income: Dividends (net of $496,996 foreign withholding tax) ............... $ 4,237,066 Interest .......................................................... 100,081 Securities lending--net ........................................... 73,306 ------------- Total income ...................................................... 4,410,453 ------------- =============================================================================================================================== Expenses: Custodian fees .................................................... $ 129,232 Professional fees ................................................. 111,541 Accounting services ............................................... 36,989 Investment advisory fees .......................................... 19,219 Trustees' fees and expenses ....................................... 2,383 Printing and shareholder reports .................................. 527 Other ............................................................. 4,036 ------------- Total expenses before reimbursement ............................... 303,927 Reimbursement of expenses ......................................... (150,080) ------------- Total expenses after reimbursement ................................ 153,847 ------------- Investment income--net ............................................ 4,256,606 ------------- =============================================================================================================================== Realized & Realized gain (loss) from: Unrealized Gain Investments--net ................................................ (16,194,189) (Loss) on Foreign currency transactions--net .............................. 696,258 (15,497,931) Investments & ------------- Foreign Currency Change in unrealized appreciation/depreciation on: Transactions--Net: Investments--net ................................................ (23,288,813) Foreign currency transactions--net .............................. 266,025 (23,022,788) ------------- ------------- Total realized and unrealized loss on investments and foreign currency transactions--net ........................................ (38,520,719) ------------- Net Decrease in Net Assets Resulting from Operations .............. $ (34,264,113) ============= ===============================================================================================================================
See Notes to Financial Statements. STATEMENTS OF CHANGES IN NET ASSETS
For the MASTER Year Ended December 31, INTERNATIONAL ------------------------------- INDEX SERIES Increase (Decrease) in Net Assets: 2002 2001 =============================================================================================================================== Operations: Investment income--net ............................................ $ 4,256,606 $ 441,463 Realized loss on investments and foreign currency transactions--net (15,497,931) (3,668,274) Change in unrealized appreciation/depreciation on investments and foreign currency transactions--net ................................ (23,022,788) (878,430) ------------- ------------- Net decrease in net assets resulting from operations .............. (34,264,113) (4,105,241) ------------- ------------- =============================================================================================================================== Capital Proceeds from contributions ....................................... 85,092,571 203,141,807 Transactions: Fair value of withdrawals ......................................... (79,519,958) (19,287,925) ------------- ------------- Increase in net assets derived from net capital contributions ..... 5,572,613 183,853,882 ------------- ------------- =============================================================================================================================== Net Assets: Total increase (decrease) in net assets ........................... (28,691,500) 179,748,641 Beginning of year ................................................. 195,511,832 15,763,191 ------------- ------------- End of year ....................................................... $ 166,820,332 $ 195,511,832 ============= ============= ===============================================================================================================================
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS
For the Period For the Year Ended December 30, MASTER December 31, 1999+ to INTERNATIONAL The following ratios have been derived from -------------------------------------- December 31, INDEX SERIES FUND information provided in the financial statements. 2002 2001 2000 1999 =============================================================================================================================== Total Investment (15.81%) (21.77%) -- -- Return:** ========== ========== ========== ========== =============================================================================================================================== Ratios to Average Expenses, net of reimbursement ................ .08% .08% .08% .08%* Net Assets: ========== ========== ========== ========== Expenses ...................................... .16% .39% 1.34% .63%* ========== ========== ========== ========== Investment income--net ........................ 2.21% 1.20% 1.55% 2.14%* ========== ========== ========== ========== =============================================================================================================================== Supplemental Net assets, end of period (in thousands) ...... $ 166,820 $ 195,512 $ 15,763 $ 10,054 Data: ========== ========== ========== ========== Portfolio turnover ............................ 19.52% 30.19% 5.89% .00% ========== ========== ========== ========== ===============================================================================================================================
* Annualized. ** Total return is required to be disclosed for fiscal years beginning after December 15, 2000. + Commencement of operations. See Notes to Financial Statements. 28 & 29 Merrill Lynch International Index Fund, December 31, 2002 NOTES TO FINANCIAL STATEMENTS MASTER INTERNATIONAL INDEX SERIES 1. Significant Accounting Policies: Master International Index Series (the "Series") is part of Quantitative Master Series Trust (the "Trust"). The Trust is registered under the Investment Company Act of 1940 and is organized as a Delaware business trust. The Declaration of Trust permits the Trustees to issue nontransferable interests in the Series, subject to certain limitations. The Series' financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. The following is a summary of significant accounting policies followed by the Series. (a) Valuation of investments -- Portfolio securities that are traded on stock exchanges are valued at the last sale price as of the close of business on the day the securities are being valued or, lacking any sales, at the closing bid price. Securities traded in the over-the-counter market are valued at the last quoted bid price at the close of trading on the New York Stock Exchange on each day by brokers that make markets in the securities. Securities traded in the NASDAQ National Market System are valued at the last sale price prior to the time of valuation. Portfolio securities that are traded both in the over-the-counter market and on a stock exchange are valued according to the broadest and most representative market. Options written or purchased are valued at the last sale price in the case of exchange-traded options. In the case of options traded in the over-the-counter market, valuation is the last asked price (options written) or the last bid price (options purchased). Short-term securities are valued at amortized cost, which approximates market value. Other investments, including futures contracts and related options, are stated at market value. Securities and assets for which market quotations are not readily available are valued at fair market value, as determined in good faith by or under the direction of the Trust's Board of Trustees. (b) Derivative financial instruments -- The Series may engage in various portfolio investment strategies to provide liquidity or as a proxy for a direct investment in securities underlying the Series' index. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. o Financial futures contracts -- The Series may purchase or sell financial futures contracts and options on such futures contracts as a proxy for a direct investment in securities underlying the Series' index. Upon entering into a contract, the Series deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Series agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Series as unrealized gains or losses. When the contract is closed, the Series records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. o Options -- The Series is authorized to purchase and write call and put options. When the Series writes an option, an amount equal to the premium received by the Series is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Series enters into a closing transaction), the Series realizes a gain or loss on the option to the extent of the premiums received or paid (or a gain or loss to the extent that the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. o Forward foreign exchange contracts -- The Series is authorized to enter into forward foreign exchange contracts as a hedge against either specific transactions or portfolio positions. 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. o Foreign currency options and futures -- The Series may also purchase or sell listed or over-the-counter foreign currency options, foreign currency futures and related options on foreign currency futures as a short or long hedge against possible variations in foreign exchange rates. Such transactions may be effected with respect to hedges on non-U.S. dollar denominated securities owned by the Series, sold by the Series but not yet delivered, or committed or anticipated to be purchased by the Series. (c) Foreign currency transactions -- Transactions denominated in foreign currencies are recorded at the exchange rate prevailing when recognized. Assets and liabilities denominated in foreign currencies are valued at the exchange rate at the end of the period. Foreign currency transactions are the result of settling (realized) or valuing (unrealized) assets or liabilities expressed in foreign currencies into U.S. dollars. Realized and unrealized gains or losses from investments include the effects of foreign exchange rates on investments. (d) Income taxes -- The Series is classified as a partnership for Federal income tax purposes. As such, each investor in the Series is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Series. Accordingly, as a "pass through" entity, the Series pays no income dividends or capital gains distributions. Therefore, no Federal income tax provision is required. Under the applicable foreign tax law, a withholding tax may be imposed on interest, dividends and capital gains at various rates. It is intended that the Series assets will be managed so an investor in the Series can satisfy the requirements of subchapter M of the Internal Revenue Code. (e) Security transactions and investment income -- Security transactions are accounted for on the date the securities are purchased or sold (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Series has determined the ex-dividend date. Interest income is recognized on the accrual basis. (f) Securities lending -- The Series may lend securities to financial institutions that provide cash or securities issued or guaranteed by the U.S. government as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. Where the Series receives securities as collateral for the loaned securities, it collects a fee from the borrower. The Series typically receives the income on the loaned securities but does not receive the income on the collateral. Where the Series receives cash collateral, it may invest such collateral and retain the amount earned on such investment, net of any amount rebated to the borrower. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within five business days. The Series may pay reasonable finder's, lending agent, administrative and custodial fees in connection with its loans. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Series also could suffer a loss where the value of the collateral falls below the market value of the borrowed securities, in the event of borrower default or in the event of losses on investments made with cash collateral. 2. Investment Advisory Agreement and Transactions with Affiliates: The Trust has entered into an Investment Advisory Agreement with Fund Asset Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc. ("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. FAM 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 a monthly fee at an annual rate of .01% of the average daily value of the Series' net assets. 30 & 31 Merrill Lynch International Index Fund, December 31, 2002 NOTES TO FINANCIAL STATEMENTS (concluded) MASTER INTERNATIONAL INDEX SERIES FAM has entered into a contractual arrangement with the Series under which the expenses incurred by the Series will not exceed .08%. Effective January 1, 2003, the limit was increased from .08% to .12%. This arrangement expires December 31, 2003 and is renewable. FAM reimbursed the Fund for additional expenses of $150,080. For the year ended December 31, 2002, the Series reimbursed FAM $3,694 for certain accounting services. Certain officers and/or trustees of the Series are officers and/or directors of FAM, PSI, and/or ML & Co. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the year ended December 31, 2002 were $42,697,582 and $36,357,796, respectively. Net realized gains (losses) for the year ended December 31, 2002 and unrealized gains (losses) as of December 31, 2002 were as follows: - ------------------------------------------------------------------------------- Realized Unrealized Gains (Losses) Gains (Losses) - ------------------------------------------------------------------------------- Investments: Long-term ............................ $(14,698,445) $(25,859,188) Short-term ........................... (89) -- Financial futures contracts .......... (1,495,655) (119,567) ------------ ------------ Total investments ...................... (16,194,189) (25,978,755) ------------ ------------ Currency transactions: Forward foreign exchange contracts .......................... 313,552 180,871 Foreign currency transactions ........ 382,706 59,205 ------------ ------------ Total currency transactions ............ 696,258 240,076 ------------ ------------ Total .................................. $(15,497,931) $(25,738,679) ============ ============ - ------------------------------------------------------------------------------- Included in long-term net realized gains (losses) for the year ended December 31, 2002 are net losses of $3,344,151, resulting from an in-kind withdrawal in the amount of $10,628,060 from the Series. As of December 31, 2002, net unrealized depreciation for Federal income tax purposes aggregated $28,567,017, of which $8,328,004 related to appreciated securities and $36,895,021 related to depreciated securities. At December 31, 2002, the aggregate cost of investments for Federal income tax purposes was $190,555,377. 4. Short-Term Borrowings: The Series, along with certain other funds managed by FAM and its affiliates, renewed and amended a credit agreement with Bank One, N.A. and certain other lenders. Effective November 29, 2002, in conjunction with the renewal for one year at the same terms, the total commitment was reduced from $1,000,000,000 to $500,000,000. The Series may borrow under the credit agreement to fund partner withdrawals and for other lawful purposes other than for leverage. The Series may borrow up to the maximum amount allowable under the Series' current prospectus and statement of additional information, subject to various other legal, regulatory or contractual limits. The Series pays a commitment fee of ..09% per annum based on the Series' pro rata share of the unused portion of the facility. Amounts borrowed under the credit agreement bear interest at a rate equal to, at each fund's election, the Federal Funds rate plus .50% or a base rate as determined by Bank One, N.A. The Series did not borrow under the credit agreement during the year ended December 31, 2002. INDEPENDENT AUDITORS' REPORT The Board of Trustees and Investors, Master International Index Series (One of the series constituting Quantitative Master Series Trust): We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Master International Index Series as of December 31, 2002, the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the years presented. These financial statements and the financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at December 31, 2002 by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Master International Index Series of Quantitative Master Series Trust as of December 31, 2002, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Princeton, New Jersey February 20, 2003 32 & 33 Merrill Lynch International Index Fund, December 31, 2002 OFFICERS AND DIRECTORS/TRUSTEES
Number of Other Position(s) Portfolios in Directorships Held Length Fund Complex Held by with Fund of Time Overseen by Director/ Name Address & Age /Trust Served Principal Occupation(s) During Past 5 Years Director/Trustee Trustee ==================================================================================================================================== Interested Director/Trustee ==================================================================================================================================== Terry K. Glenn* P.O. Box 9011 President 2000 to Chairman, Americas Region since 2001 and 117 Funds None Princeton, NJ and present Executive Vice President since 1983 of Fund 162 Portfolios 08543-9011 Director/ and 1997 Asset Management ("FAM") and Merrill Lynch Age: 62 Trustee to Investment Managers, L.P. ("MLIM"); President present of Merrill Lynch Mutual Funds since 1999; President of FAM Distributors, Inc. ("FAMD") since 1986 and Director thereof since 1991; Executive Vice President and Director of Princeton Services, Inc. ("Princeton Services") since 1993; President of Princeton Administrators, L.P. since 1988; Director of Financial Data Services, Inc. since 1985. ==================================================================================================================== * Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which FAM or MLIM act as investment advisers. Mr. Glenn is an "interested person," as described in the Investment Company Act, of each Fund based on his positions as Chairman (Americas Region) and Executive Vice President of FAM and MLIM; President of FAMD; Executive Vice President of Princeton Services; and President of Princeton Administrators, L.P. The Director's/Trustee's term is unlimited. Directors/Trustees serve until their resignation, removal, or death, or until December 31 of the year in which they turn 72. As Fund President, Mr. Glenn serves at the pleasure of the Board of Directors/Trustees. ==================================================================================================================================== Number of Other Position(s) Portfolios in Directorships Held Length Fund Complex Held by with Fund of Time Overseen by Director/ Name Address & Age /Trust Served* Principal Occupation(s) During Past 5 Years Director/Trustee Trustee ==================================================================================================================================== Independent Directors/Trustees ==================================================================================================================================== Donald W. Burton P.O. Box 9095 Director/ 2002 to General Partner of The Burton Partnership, 23 Funds ITC Delta- Princeton, NJ Trustee present Limited Partnership since 1979; Managing 34 Portfolios Com, Inc.; 08543-9095 General Partner of the South Atlantic ITC Holding Age: 58 Venture Fund II and III, Limited Partnerships Company, and Chairman of South Atlantic Private Equity Inc.; Fund IV, Limited Partnership since 1983; Knology, Member of the Investment Advisory Council of Inc.; Main- the Florida State Board of Administration Bancorp, since 2001. N.A.; Pri- Care, Inc.; Symbion, Inc. ==================================================================================================================================== M. Colyer Crum P.O. Box 9095 Director/ 2000 to James R. Williston Professor of Investment 23 Funds Cambridge Princeton, NJ Trustee present Management Emeritus, Harvard Business School 34 Portfolios Bancorp 08543-9095 since 1996. Age: 70 ==================================================================================================================================== Laurie Simon P.O. Box 9095 Director/ 2000 to Professor of Finance and Economics, Graduate 23 Funds None Hodrick Princeton, NJ Trustee present School of Business, Columbia University since 34 Portfolios 08543-9095 1998; Associate Professor of Finance and Age: 40 Economics, Graduate School of Business, Columbia University from 1996 to 1998. ==================================================================================================================================== J. Thomas P.O. Box 9095 Director/ 2000 to Managing Partner of The Witt Touchton Company 23 Funds TECO Touchton Princeton, NJ Trustee present and its predecessor, The Witt Co., since 1972; 34 Portfolios Energy, Inc. 08543-9095 Trustee Emeritus of Washington and Lee Age: 64 University. ==================================================================================================================================== Fred G. Weiss P.O. Box 9095 Director/ 2000 to Managing Director of FGW Associates since 1997; 23 Funds Watson Princeton, NJ Trustee present Vice President, Planning, Investment and 34 Portfolios Pharma- 08543-9095 Development of Warner Lambert Co. from 1979 ceuticals, Age: 61 to 1997. Inc. ==================================================================================================================== * The Director's/Trustee's term is unlimited. Directors/Trustees serve until their resignation, removal or death, or until December 31, of the year which they turn 72. ==================================================================================================================================== Position(s) Held Length with Fund of Time Name Address & Age /Trust Served* Principal Occupation(s) During Past 5 Years ==================================================================================================================================== Fund/Trust Officers ==================================================================================================================================== Donald C. Burke P.O. Box 9011 Vice 1997 to First Vice President of FAM and MLIM since 1997 and Treasurer thereof Princeton, NJ President present since 1999; Senior Vice President and Treasurer of Princeton Services 08543-9011 and and 1999 since 1999; Vice President of FAMD since 1999; Director of MLIM Taxation Age: 42 Treasurer to present since 1990. ==================================================================================================================================== Robert C. P.O. Box 9011 Senior 1999 to President and Global Chief Investment Officer of MLIM and member of the Doll, Jr. Princeton, NJ Vice present Executive Management Committee of ML & Co., Inc. since 2001; Chief 08543-9011 President Investment Officer, Senior Vice President and Co-Head of MLIM Americas from Age: 49 1999 to 2001; Chief Investment Officer of Oppenheimer Funds, Inc. from 1987 to 1999 and Executive Vice President from 1991 to 1999. ==================================================================================================================================== Richard Vella P.O. Box 9011 Senior 1999 to Senior Portfolio Manager and Head of Global Index and Enhanced Index Princeton, NJ Vice present products for Merrill Lynch Quantitative Advisors since 1999; Managing 08543-9011 President Director and Head of the Global Index and Enhanced Index business at Age: 46 Bankers Trust from 1984 to 1999. ==================================================================================================================================== Stephen M. Benham P.O. Box 9011 Secretary 2002 to Vice President (Legal Advisory) of MLIM since 2000; Associate with Princeton, NJ present Kirkpatrick & Lockhart LLP from 1997 to 2000. 08543-9011 Age: 43 ==================================================================================================================== * Officers of the Fund serve at the pleasure of the Board of Directors/Trustees. ====================================================================================================================================
Further information about the Fund's Officers and Directors/Trustees is available in the Fund's Statement of Additional Information, which can be obtained without charge by calling 1-800-MER-FUND. Custodian Merrill Lynch Trust Company 800 Scudders Mill Road Plainsboro, NJ 08536 Transfer Agent Financial Data Services, Inc. 4800 Deer Lake Drive East Jacksonville, FL 32246-6484 800-637-3863 Effective January 1, 2003, J. Thomas Touchton, Director/Trustee of Merrill Lynch International Index Fund, retired. The Fund's Board of Directors/Trustees wishes Mr. Touchton well in his retirement. 34 & 25 [LOGO] Merrill Lynch Investment Managers [GRAPHICS OMITTED] This report is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless accompanied or preceded by the Fund's current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change. Merrill Lynch Index Funds, Inc. Box 9011 Princeton, NJ 08543-9011 [RECYCLED LOGO] Printed on post-consumer recycled paper #Index 2--12/02 Item 2 - Did registrant adopt a code of ethics, as of the end of the period covered by this report, that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party? If not, why not? Briefly describe any amendments or waivers that occurred during the period. State here if code of ethics/amendments/waivers are on website and give website address-. State here if fund will send code of ethics to shareholders without charge upon request-- N/A (not answered until July 15, 2003 and only annually for funds) Item 3 - Did the registrant's board of directors determine that the registrant either: (i) has at least one audit committee financial expert serving on its audit committee; or (ii) does not have an audit committee financial expert serving on its audit committee? If yes, disclose name of financial expert and whether he/she is "independent," (fund may, but is not required, to disclose name/independence of more than one financial expert) If no, explain why not. -N/A (not answered until July 15, 2003 and only annually for funds) Item 4 - Disclose annually only (not answered until December 15, 2003) (a) Audit Fees - Disclose aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. N/A. (b) Audit-Related Fees - Disclose aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. N/A. (c) Tax Fees - Disclose aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Registrants shall describe the nature of the services comprising the fees disclosed under this category. N/A. (d) All Other Fees - Disclose aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. N/A. (e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. N/A. (e)(2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. N/A. (f) If greater than 50%, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. N/A. (g) Disclose the aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant. N/A. (h) Disclose whether the registrant's audit committee has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. N/A. Items 5-6 - Reserved Item 7 - For closed-end funds that contain voting securities in their portfolio, describe the policies and procedures that it uses to determine how to vote proxies relating to those portfolio securities. N/A. Item 8 -- Reserved Item 9(a) - Disclose the conclusions of the registrant's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, about the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Act (17 CFR 270.30a-2(c))) based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph. N/A. Item 9(b) -- There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Item 10 - Exhibits 10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or amendments/waivers is on website or offered to shareholders upon request without charge. N/A. 10(b) - Attach certifications (4 in total pursuant to Sections 302 and 906 for CEO/CFO). Attached hereto. 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. Merrill Lynch International Index Fund By: /s/ Terry K. Glenn -------------------------------------- Terry K. Glenn, President of Merrill Lynch International Index Fund Date: February 24, 2003 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/ Terry K. Glenn -------------------------------------- Terry K. Glenn, President of Merrill Lynch International Index Fund Date: February 24, 2003 By: /s/ Donald C. Burke -------------------------------------- Donald C. Burke Chief Financial Officer of Merrill Lynch International Index Fund Date: February 24, 2003 EX-99.CERT 3 e300103_ex-cert.txt CERTIFICATION EX-99. CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - -------------------------------------------------------------------------------- I, Donald C. Burke, Chief Financial Officer of Merrill Lynch International Index Fund, certify that: 1. I have reviewed this report on Form N-CSR of Merrill Lynch International Index Fund and Master International (Capitalization Weighted) Index Series; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report. Date: February 24, 2003 /s/ Donald C. Burke -------------------------------------- Donald C. Burke, Chief Financial Officer of Merrill Lynch International Index Fund EX-99. CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - -------------------------------------------------------------------------------- I, Terry K. Glenn, President of Merrill Lynch International Index Fund, certify that: 1. I have reviewed this report on Form N-CSR of Merrill Lynch International Index Fund and Master International (Capitalization Weighted) Index Series; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report. Date: February 24, 2003 /s/ Terry K. Glenn -------------------------------------- Terry K. Glenn, President of Merrill Lynch International Index Fund EX-99.1 4 e300103_ex99-1.txt CERTIFICATION PUSUANT TO SECTION 906 Exhibit 99.1 Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Donald C. Burke, Chief Financial Officer of Merrill Lynch International Index Fund (the "Fund"), certify that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: February 24, 2003 /s/ Donald C. Burke -------------------------------------- Donald C. Burke, Chief Financial Officer of Merrill Lynch International Index Fund Exhibit 99.1 Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Terry K. Glenn, President of Merrill Lynch International Index Fund (the "Fund"), certify that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: February 24, 2003 /s/ Terry K. Glenn -------------------------------------- Terry K. Glenn, President of Merrill Lynch International Index Fund -----END PRIVACY-ENHANCED MESSAGE-----