-----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, IEG6jE+6PVVVjBwm55bl+Lt6VrhvyLIDUYwNbGxliXFSfXUKNFcEbPx+2Wvrn6cK gM8jQ080KIU7ndskhBhayw== 0001193805-03-000148.txt : 20030228 0001193805-03-000148.hdr.sgml : 20030228 20030228144747 ACCESSION NUMBER: 0001193805-03-000148 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030228 EFFECTIVENESS DATE: 20030228 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: 03586251 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 e300117_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 Aggregate Bond Index Fund Master Aggregate Bond 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 Aggregate Bond 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 Aggregate Bond Index Fund Merrill Lynch Index Funds, Inc. www.mlim.ml.com Merrill Lynch Aggregate Bond Index 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 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 DEAR SHAREHOLDER Merrill Lynch Aggregate Bond Index Fund is designed for investors who have an investment objective of seeking to achieve investment returns that replicate the total return of investment-grade fixed income securities. As such, the Fund seeks to achieve its objective by replicating the total return, before expenses, of the unmanaged Lehman Brothers Aggregate Bond Index, a widely accepted investment performance benchmark comprised of U.S. government securities, U.S. government agency mortgage-backed securities (MBS) and investment-grade corporate bonds. It is the intent of the Fund to provide returns that are representative of the bond market as a whole, rather than to focus on or provide bias to any specific sector. The Fund seeks to achieve its objective by investing all of its assets in Master Aggregate Bond Index Series. Therefore, the Series' structure is dependent on the structure of the underlying benchmark. Sector weighting and security selection in the underlying benchmark are determined by the market representation that the sectors have in the overall market. Fiscal Year in Review As of December 31, 2002, the Lehman Brothers Aggregate Bond Index was comprised of 6,978 securities, emphasizing three major investment sectors: U.S. government and agency securities, U.S. government issued MBS, and investment-grade corporate bonds. The U.S. government and agency sector of the Index had 1,020 issues and comprised 34.78% of the benchmark. This represents an increase from 33.97% at the beginning of 2002. The MBS sector accounted for 38.96% of the Index and had 2,114 securities, including asset-backed and commercial mortgage-backed securities. This is a small decrease from 39.23% at the beginning of the period. Finally, there were 3,844 securities in the corporate sector, representing 26.26% of the benchmark, a slight decline from 26.80% at the beginning of 2002. In order to be eligible for inclusion in the Index, a security must meet minimum outstanding amount standards and be denominated in U.S. dollars. The unmanaged Lehman Brothers Aggregate Bond Index generated a total return of +10.25% for the year ended December 31, 2002, with government securities being the superior performer. This sector returned +11.50%, while the corporate and MBS sectors returned +10.52% and +8.75%, respectively. The year was highlighted with interest rates declining to levels not seen in decades as economic activity sputtered. The economy experienced a technical recession which, while mild, has emerged with continued weakness. At the end of the year, the Federal Reserve Board had lowered interest rates to 1.25% and mortgages were being originated at the 5.5% level. As a result of logistical constraints, it is not practical for us to fully replicate the 6,978 securities in the Index when attempting to duplicate the return of the benchmark Index. Therefore, we construct a proxy portfolio of far fewer securities as we seek to duplicate the return of the benchmark Index. The investments in the proxy portfolio are determined by stratified sampling techniques. Under this approach, securities are identified that ensure neutral Index exposure in all sectors and sub-sectors in the Index. Thus, for example, the MBS sector of the Series has the identical exposure to 30-year MBS, 15-year MBS and balloon MBS. Within these subsectors exposure to coupon (6%, 6.5%, 7%, etc.) and issuer are also matched to its Index counterpart, resulting in a sector that is anticipated to duplicate the return of the MBS Index with minimal deviation, referred to as tracking error. Currently, our exposure in the MBS sector attempts to achieve this objective with 47 positions. Minimizing tracking error in the U.S. government agency and corporate sectors is accomplished with a similar approach. The 40 positions in the U.S. government and agency sector are designed to match the investment characteristics of duration, yield, partial duration and convexity of its Index counterpart. As such, any change in interest rates and/or shape of the yield curve will have an identical effect on the return of this sector. Corporate bond sector management is identical to the approach of the U.S. government and agency sector in matching investment characteristics. However, the corporate sector is stratified further by matching credit rating and industry exposure. There are currently 295 issues in the Series' corporate bond sector. For the year ended December 31, 2002, the Fund's Class A and Class D Shares had total returns of +9.78% and +9.61%, respectively. (Complete performance information can be found on pages 4 and 5 of this report to shareholders). This compared to a total return of +10.25% for the unmanaged Lehman Brothers Aggregate Bond Index for the same period. At December 31, 2002, Master Aggregate Bond Index Series was comprised of 382 individual investments that in total, by sector and subsector, was designed to match the market's exposure and investment characteristics of the Lehman Brothers Aggregate Bond Index. Therefore, it is anticipated and expected that these identical exposures will result in minimal total return tracking error in seeking to match the return of the Index. In Conclusion We appreciate your investment in Merrill Lynch Aggregate Bond 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/Trustee /s/ Jeffrey B. Hewson Jeffrey B. Hewson Vice President and Co-Portfolio Manager /s/ Frank Viola Frank Viola Vice President and Co-Portfolio Manager February 4, 2003 2 & 3 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 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 payable 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, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. The Fund's Administrator voluntarily waived a portion of its administrative fee. Without such waiver, the Fund's performance would have been lower. Recent Performance Results
6-Month 12-Month Since Inception Standardized As of December 31, 2002 Total Return Total Return Total Return 30-Day Yield ================================================================================================================== ML Aggregate Bond Index Fund Class A Shares* +6.12% + 9.78% +54.92% 3.56% - ------------------------------------------------------------------------------------------------------------------ ML Aggregate Bond Index Fund Class D Shares* +6.08 + 9.61 +52.86 3.31 - ------------------------------------------------------------------------------------------------------------------ Lehman Brothers Aggregate Bond Index** +6.23 +10.25 +56.30 -- ==================================================================================================================
* 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 payable date. The Fund's inception date is 4/03/97. ** This unmanaged market-weighted Index is comprised of investment-grade corporate bonds (rated BBB or better), mortgages and U.S. Treasury and government agency issues with at least one year to maturity. 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 Lehman Brothers Aggregate Bond Index. Values are from April 3, 1997 to December 2002.
4/03/97** 12/97 12/98 12/99 12/00 12/01 12/02 ML Aggregate Bond Index Fund+--Class A Shares* $10,000 $10,949 $11,886 $11,724 $13,080 $14,109 $15,489 ML Aggregate Bond Index Fund+--Class D Shares* $10,000 $10,929 $11,835 $11,657 $12,960 $13,945 $15,285 4/30/97** 12/97 12/98 12/99 12/00 12/01 12/02 Lehman Brothers Aggregate Bond Index++ $10,000 $10,864 $11,808 $11,711 $13,072 $14,176 $15,630
* Assuming transaction costs and other operating expenses, including advisory fees. ** Commencement of operations. + The Fund invests all of its assets in Master Aggregate Bond Index Series of Quantitative Master Series Trust. The Trust may invest in a statistically selected sample of fixed income securities and other types of financial instruments. ++ This unmanaged market-weighted Index is comprised of U.S. government and agency securities, mortgage-backed securities issued by the Government National Mortgage Association, Freddie Mac or Fannie Mae and investment-grade (rated BBB or better) corporate bonds. The starting date for the Index in the Class A and Class D Shares graph is from 4/30/97. Past performance is not predictive of future performance. Average Annual Total Return % Return ================================================================================ Class A Shares ================================================================================ One Year Ended 12/31/02 +9.78% - -------------------------------------------------------------------------------- Five Years Ended 12/31/02 +7.19 - -------------------------------------------------------------------------------- Inception (4/03/97) through 12/31/02 +7.92 - -------------------------------------------------------------------------------- % Return ================================================================================ Class D Shares ================================================================================ One Year Ended 12/31/02 +9.61% - -------------------------------------------------------------------------------- Five Years Ended 12/31/02 +6.94 - -------------------------------------------------------------------------------- Inception (4/03/97) through 12/31/02 +7.67 - -------------------------------------------------------------------------------- 4 & 5 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 STATEMENT OF ASSETS AND LIABILITIES
MERRILL LYNCH AGGREGATE BOND INDEX FUND As of December 31, 2002 ==================================================================================================================================== Assets: Investment in Master Aggregate Bond Index Series, at value (identified cost--$402,010,376) .................................................. $422,584,450 Prepaid registration fees and other assets ....................................... 34,025 ------------ Total assets ..................................................................... 422,618,475 ------------ ==================================================================================================================================== Liabilities: Payables: Dividends to shareholders ...................................................... $ 450,298 Administrative fees ............................................................ 67,364 Distributor .................................................................... 12,675 530,337 ---------- Accrued expenses and other liabilities ........................................... 68,450 ------------ Total liabilities ................................................................ 598,787 ------------ ==================================================================================================================================== Net Assets: Net assets ....................................................................... $422,019,688 ============ ==================================================================================================================================== Net Assets Class A Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized .. $ 3,296 Consist of: Class D Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized .. 557 Paid-in capital in excess of par ................................................. 405,860,075 Accumulated distributions in excess of investment income--net .................... $ (232,244) Accumulated realized capital losses on investments from the Series--net .......... (4,186,070) Unrealized appreciation on investments from the Series--net ...................... 20,574,074 ---------- Total accumulated earnings--net .................................................. 16,155,760 ------------ Net assets ....................................................................... $422,019,688 ============ ==================================================================================================================================== Net Asset Class A--Based on net assets of $360,991,257 and 32,955,160 shares outstanding ... $ 10.95 Value: ============ Class D--Based on net assets of $61,028,431 and 5,570,290 shares outstanding ..... $ 10.96 ============ ====================================================================================================================================
See Notes to Financial Statements. STATEMENT OF OPERATIONS
MERRILL LYNCH AGGREGATE BOND INDEX FUND For the Year Ended December 31, 2002 ================================================================================================================================ Investment Income Net investment income allocated from the Series: From the Series--Net: Interest ........................................................... $ 23,398,919 Securities lending--net ............................................ 1,069 Expenses ........................................................... (336,343) ------------ Net investment income from the Series ................................ 23,063,645 ------------ ================================================================================================================================ Expenses: Administration fee ................................................... $ 807,482 Transfer agent fees .................................................. 255,905 Account maintenance fee--Class D ..................................... 147,152 Registration fees .................................................... 63,824 Printing and shareholder reports ..................................... 34,999 Professional fees .................................................... 18,723 Directors' fees and expenses ......................................... 6,535 Other ................................................................ 7,646 ------------ Total expenses before reimbursement .................................. 1,342,266 Reimbursement of expenses ............................................ (72,810) ------------ Total expenses after reimbursement ................................... 1,269,456 ------------ Investment income--net ............................................... 21,794,189 ------------ ================================================================================================================================ Realized & Realized gain on investments from the Series--net .................... 3,143,394 Unrealized Gain Change in unrealized appreciation on investments from the Series--net 15,125,614 From the ------------ Series--Net: Total realized and unrealized gain on investments from the Series--net 18,269,008 ------------ Net Increase in Net Assets Resulting from Operations ................. $ 40,063,197 ============ ================================================================================================================================
See Notes to Financial Statements. 6 & 7 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 STATEMENTS OF CHANGES IN NET ASSETS
For the MERRILL LYNCH Year Ended December 31, AGGREGATE BOND ------------------------------- INDEX FUND Increase (Decrease) in Net Assets: 2002 2001 ================================================================================================================================= Operations: Investment income--net .............................................. $ 21,794,189 $ 19,415,600 Realized gain on investments from the Series--net ................... 3,143,394 2,914,566 Change in unrealized appreciation on investments from the Series--net 15,125,614 2,745,616 ------------- ------------- Net increase in net assets resulting from operations ................ 40,063,197 25,075,782 ------------- ------------- ================================================================================================================================= Dividends to Investment income--net: Shareholders: Class A ........................................................... (18,820,545) (15,965,028) Class D ........................................................... (2,879,105) (3,500,554) ------------- ------------- Net decrease in net assets resulting from dividends to shareholders . (21,699,650) (19,465,582) ------------- ------------- ================================================================================================================================= Capital Share Net increase in net assets derived from capital share transactions .. 18,827,831 99,823,302 Transactions: ------------- ------------- ================================================================================================================================= Net Assets: Total increase in net assets ........................................ 37,191,378 105,433,502 Beginning of year ................................................... 384,828,310 279,394,808 ------------- ------------- End of year* ........................................................ $ 422,019,688 $ 384,828,310 ============= ============= ================================================================================================================================= *Accumulated distributions in excess of investment income--net ....... $ (232,244) $ (466,465) ============= ============= =================================================================================================================================
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS
Class A The following per share data and ratios have been -------------------------------------------------------- derived from information provided in the financial For the Year Ended MERRILL LYNCH statements. December 31, AGGREGATE BOND --------------------------------------------------------- INDEX FUND Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998 =================================================================================================================================== Per Share Net asset value, beginning of year ................. $ 10.50 $ 10.31 $ 9.85 $ 10.61 $ 10.42 Operating --------- --------- --------- --------- --------- Performance: Investment income--net ............................. .55* .61 .64 .62 .64 Realized and unrealized gain (loss) on investments from the Series--net ............................... .45 .19 .46 (.76) .23 --------- --------- --------- --------- --------- Total from investment operations ................... 1.00 .80 1.10 (.14) .87 --------- --------- --------- --------- --------- Less dividends and distributions: Investment income--net ........................... (.55) (.61) (.64) (.62) (.64) Realized gain on investments from the Series--net -- -- -- -- (.04) In excess of realized gain on investments from the Series--net ...................................... -- -- -- --+ -- --------- --------- --------- --------- --------- Total dividends and distributions .................. (.55) (.61) (.64) (.62) (.68) --------- --------- --------- --------- --------- Net asset value, end of year ....................... $ 10.95 $ 10.50 $ 10.31 $ 9.85 $ 10.61 ========= ========= ========= ========= ========= =================================================================================================================================== Total Investment Based on net asset value per share ................. 9.78% 7.87% 11.57% (1.36%) 8.56% Return: ========= ========= ========= ========= ========= =================================================================================================================================== Ratios to Average Expenses, net of reimbursement++ ................... .34% .35% .38% .35% .35% Net Assets: ========= ========= ========= ========= ========= Expenses++ ......................................... .36% .46% .45% .37% .40% ========= ========= ========= ========= ========= Investment income--net ............................. 5.16% 5.72% 6.41% 6.06% 5.99% ========= ========= ========= ========= ========= =================================================================================================================================== Supplemental Net assets, end of year (in thousands) ............. $ 360,991 $ 324,390 $ 214,056 $ 324,254 $ 351,786 Data: ========= ========= ========= ========= ========= =================================================================================================================================== Class D The following per share data and ratios have been ---------------------------------------------------------- derived from information provided in the financial For the Year Ended statements. December 31, ---------------------------------------------------------- Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998 =================================================================================================================================== Per Share Net asset value, beginning of year ................. $ 10.50 $ 10.31 $ 9.86 $ 10.61 $ 10.42 Operating --------- --------- --------- --------- --------- Performance: Investment income--net ............................. .52* .58 .61 .58 .61 Realized and unrealized gain (loss) on investments from the Series--net ............................... .46 .19 .45 (.75) .23 --------- --------- --------- --------- --------- Total from investment operations ................... .98 .77 1.06 (.17) .84 --------- --------- --------- --------- --------- Less dividends and distributions: Investment income--net ........................... (.52) (.58) (.61) (.58) (.61) Realized gain on investments from the Series--net -- -- -- -- (.04) In excess of realized gain on investments from the Series--net ...................................... -- -- -- --+ -- --------- --------- --------- --------- --------- Total dividends and distributions .................. (.52) (.58) (.61) (.58) (.65) --------- --------- --------- --------- --------- Net asset value, end of year ....................... $ 10.96 $ 10.50 $ 10.31 $ 9.86 $ 10.61 ========= ========= ========= ========= ========= =================================================================================================================================== Total Investment Based on net asset value per share ................. 9.61% 7.60% 11.18% (1.50%) 8.29% Return: ========= ========= ========= ========= ========= =================================================================================================================================== Ratios to Average Expenses, net of reimbursement++ ................... .59% .60% .63% .60% .60% Net Assets: ========= ========= ========= ========= ========= Expenses++ ......................................... .61% .71% .70% .62% .65% ========= ========= ========= ========= ========= Investment income--net ............................. 4.91% 5.50% 6.17% 5.81% 5.75% ========= ========= ========= ========= ========= =================================================================================================================================== Supplemental Net assets, end of year (in thousands) ............. $ 61,029 $ 60,438 $ 65,339 $ 79,743 $ 81,603 Data: ========= ========= ========= ========= ========= ===================================================================================================================================
+ Amount is less than $.01 per share. ++ Includes the Fund's share of the Series' allocated expenses. * Based on average shares outstanding. See Notes to Financial Statements. 8 & 9 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 NOTES TO FINANCIAL STATEMENTS MERRILL LYNCH AGGREGATE BOND INDEX FUND 1. Significant Accounting Policies: Merrill Lynch Aggregate Bond 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 the Master Aggregate Bond 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 58.9%. 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. (d) Prepaid registration fees -- Prepaid registration fees are charged to expense as the related shares are issued. (e) Dividends and distributions -- Dividends from net investment income are declared daily and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. (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 $139,682 has been reclassified between accumulated net realized capital losses and accumulated net investment loss, $34,222 has been reclassified between accumulated net realized capital losses and paid-in capital in excess of par. Additionally, $636,168 has been reclassified between unrealized appreciation of investments from the Series and additional paid-in capital to reflect prior liquidation of certain partners' investments in the Series. 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 Services 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 .19% 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 $807,482, of which $72,810 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 an ongoing account maintenance fee. The fee is 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 $163,310,322 and $167,271,906, respectively. 4. Capital Share Transactions: Net increase in net assets derived from capital share transactions were $18,827,831 and $99,823,302 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 .......................... 22,467,900 $ 237,667,287 Shares issued to shareholders in reinvestment of dividends ......... 1,471,997 15,676,326 ------------- ------------- Total issued ......................... 23,939,897 253,343,613 Shares redeemed ...................... (21,884,225) (232,549,154) ------------- ------------- Net increase ......................... 2,055,672 $ 20,794,459 ============= ============= - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended December 31, 2001 Shares Amount - ------------------------------------------------------------------------------- Shares sold .......................... 18,529,179 $ 193,786,325 Shares issued to shareholders in reinvestment of dividends ......... 1,301,060 13,635,879 ------------- ------------- Total issued ......................... 19,830,239 207,422,204 Shares redeemed ...................... (9,692,116) (101,554,770) ------------- ------------- Net increase ......................... 10,138,123 $ 105,867,434 ============= ============= - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class D Shares for the Year Dollar Ended December 31, 2002 Shares Amount - ------------------------------------------------------------------------------- Shares sold .......................... 1,746,539 $ 18,629,821 Shares issued to shareholders in reinvestment of dividends ......... 222,051 2,365,502 ------------- ------------- Total issued ......................... 1,968,590 20,995,323 Shares redeemed ...................... (2,153,732) (22,961,951) ------------- ------------- Net decrease ......................... (185,142) $ (1,966,628) ============= ============= - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Class D Shares for the Year Dollar Ended December 31, 2001 Shares Amount - ------------------------------------------------------------------------------- Shares sold .......................... 1,428,693 $ 14,954,073 Shares issued to shareholders in reinvestment of dividends ......... 274,315 2,872,989 ------------- ------------- Total issued ......................... 1,703,008 17,827,062 Shares redeemed ...................... (2,283,050) (23,871,194) ------------- ------------- Net decrease ......................... (580,042) $ (6,044,132) ============= ============= - ------------------------------------------------------------------------------- 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 .................... $ 21,699,650 $ 19,465,582 ------------- ------------- Total taxable distributions .......... $ 21,699,650 $ 19,465,582 ============= ============= - ------------------------------------------------------------------------------- 10 & 11 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 NOTES TO FINANCIAL STATEMENTS (concluded) MERRILL LYNCH AGGREGATE BOND INDEX FUND As of December 31, 2002, the components of accumulated earnings on a tax basis were as follows: - ----------------------------------------------------------------------------- Undistributed ordinary income--net ...................... $ 149,956 Undistributed long-term capital gains--net .............. -- ------------ Total undistributed earnings--net ....................... 149,956 Capital loss carryforward ............................... (3,872,833)* Unrealized gains--net ................................... 19,878,637** ------------ Total accumulated earnings--net ......................... $(16,155,760) ============ - ----------------------------------------------------------------------------- * On December 31, 2002, the Fund had a net capital loss carryforward of $3,872,833, all of which expires in 2008. This amount will be available to offset like amounts of any future taxable gains. ** The difference between book-basis and tax-basis net unrealized gains is attributable primarily to the tax deferral of losses on wash sales, the tax deferral of losses on straddles and the difference between book and tax amortization methods for premiums and discounts on fixed income securities. INDEPENDENT AUDITORS' REPORT MERRILL LYNCH AGGREGATE BOND INDEX FUND The Board of Directors and Shareholders, Merrill Lynch Aggregate Bond 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 Aggregate Bond 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 years in the two-year 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 Fund'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. 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 Aggregate Bond Index Fund of the Merrill Lynch Index Funds, Inc. 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 SCHEDULE OF INVESTMENTS (in U.S. dollars)
Master Aggregate Bond Index Series --------------------------------------------------------------------------------------------------------- Face Interest Maturity Issue Amount Rate Date(s) Value ================================================================================================================================== U.S. Government & Fannie Mae $ 290,000 5.45% 10/10/2003 $ 299,243 Agency Obligations-- 210,000 6.85 4/05/2004 223,909 35.2% 29,225,000 3.50 9/15/2004 30,128,637 3,000,000 3.875 3/15/2005 3,134,172 21,625,000 5.75 2/15/2008 24,229,320 8,900,000 6.625 11/15/2010 10,449,668 1,240,000 7.25 5/15/2030 1,559,822 ================================================================================================================================== Financing Corp. 670,000 9.80 11/30/2017 1,003,388 ================================================================================================================================== Freddie Mac 16,845,000 5.75 7/15/2003 17,248,269 1,245,000 7.18 6/27/2006 1,446,298 14,560,000 4.875 3/15/2007 15,731,949 8,655,000 6.75 9/15/2029 10,249,563 1,680,000 6.25 7/15/2032 1,903,148 ================================================================================================================================== Tennessee Valley Authority, Series E 1,915,000 6.25 12/15/2017 2,161,315 ================================================================================================================================== United States Treasury Bonds 765,000 8.75 11/15/2008 812,783 15,820,000 8.75 5/15/2017 22,872,255 250,000 8.875 8/15/2017 365,381 1,875,000 8.125 8/15/2019 2,611,671 7,800,000 8.50 2/15/2020 11,243,879 1,560,000 8.125 8/15/2021 2,195,335 5,180,000 6.25 8/15/2023 6,085,692 3,450,000 6.375 8/15/2027 4,146,738 830,000 5.375 2/15/2031 904,829 ================================================================================================================================== United States Treasury Notes 4,335,000 4.75 2/15/2004 4,504,676 7,450,000 5.25 5/15/2004 7,847,234 5,615,000 6.00 8/15/2004 6,029,106 7,815,000 5.875 11/15/2004 8,440,505 2,735,000 6.75 5/15/2005 3,049,205 18,735,000 5.75 11/15/2005 20,710,231 9,175,000 5.875 11/15/2005 10,174,213 595,000 3.25 8/15/2007 609,736 10,095,000 3.00 11/15/2007 10,216,453 2,050,000 5.75 8/15/2010 2,357,020 6,925,000 4.00 11/15/2012 7,022,926 ================================================================================================================================== Total Investments in U.S. Government & Agency Obligations (Cost--$239,645,808)--35.2% 251,968,569 ==================================================================================================================================
12 & 13 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master Aggregate Bond Index Series (continued) --------------------------------------------------------------------------------------------------------- Face Interest Maturity Issue Amount Rate Date(s) Value ================================================================================================================================== U.S. Government Agency Fannie Mae $ 737,394 5.50% 6/01/2011-2/01/2014 $ 772,143 Mortgage-Backed 2,885,812 6.00 2/01/2013-6/01/2015 3,031,798 Obligations**--36.8% 5,898,000 6.00 TBA(1) 6,106,441 2,300,000 6.00 TBA(1) 2,405,168 2,601,327 6.50 1/01/2013-5/01/2016 2,755,583 6,929,106 6.50 12/01/2025-1/01/2030 7,226,045 2,796,190 7.00 4/01/2027-3/01/2031 2,948,009 2,115,675 7.50 10/01/2027-5/01/2032 2,248,354 54,382 8.00 9/01/2015 58,750 3,493,793 8.00 11/01/2029-9/01/2031 3,764,092 121,375 8.50 5/01/2030-1/01/2031 130,399 193,007 9.50 7/01/2017 215,008 80,598 10.00 10/01/2018-5/01/2022 91,799 34,890 10.50 12/01/2016 39,502 ================================================================================================================================== Freddie Mac--Gold Program 7,950,000 5.00 TBA(1) 8,163,799 496,155 5.50 11/01/2017 515,204 14,316,000 5.50 TBA(1) 14,867,409 10,040,164 5.50 TBA(1) 10,250,656 13,095,509 6.00 4/01/2016-10/01/2017 13,714,048 41,104,000 6.00 TBA(1) 42,569,522 2,634,038 6.50 4/01/2015-3/01/2017 2,784,485 43,750,341 6.50 1/01/2026-9/01/2032 45,596,170 2,230,000 6.50 TBA(1) 2,350,362 16,385,000 6.50 TBA(1) 17,051,624 2,068,769 7.00 1/01/2011-6/01/2016 2,202,272 18,983,847 7.00 9/01/2025-7/01/2032 19,966,046 700,000 7.00 TBA(1) 742,547 900,000 7.00 TBA(1) 943,295 685,843 7.50 5/01/2007-4/01/2016 731,151 7,284,859 7.50 1/01/2023-9/01/2032 7,756,668 2,052,417 8.00 6/01/2024-3/01/2032 2,208,225 260,094 8.50 5/01/2028-8/01/2030 279,892 24,879 9.00 9/01/2014 27,278 390,079 9.50 2/01/2019 434,245 149,601 10.00 3/01/2010-9/01/2017 167,361 103,315 10.50 4/01/2016 115,928 51,974 11.00 9/01/2016-3/01/2018 58,834 16,928 11.50 8/01/2015 19,281 45,347 12.50 2/01/2014 53,738 ================================================================================================================================== Government National Mortgage Corporation 2,567,674 6.00 4/20/2026-10/15/2032 2,677,314 4,544,000 6.00 TBA(1) 4,738,220 208,087 6.50 2/15/2014-5/15/2014 221,035 14,061,795 6.50 4/15/2026-5/15/2032 14,772,198 115,477 7.00 4/15/2013 123,884 9,207,868 7.00 7/15/2027-9/15/2031 9,769,852 3,223,453 7.50 3/15/2024-11/15/2031 3,443,886 1,914,973 8.00 12/15/2022-6/15/2031 2,077,026 376,401 8.50 11/15/2017-3/15/2031 410,536 352,788 9.00 11/15/2016-11/15/2024 392,375 28,306 9.50 9/15/2021 31,870 50,531 12.00 2/15/2015 59,785 ================================================================================================================================== Total U.S. Government Agency Mortgage-Backed Obligations (Cost--$257,938,664)--36.8% 264,081,112 ================================================================================================================================== S&P Moody's Face INDUSTRIES Ratings+ Ratings+ Amount Corporate Bonds & Notes ================================================================================================================================== Banking--2.5% A- A2 $ 465,000 BB&T Corporation, 6.50% due 8/01/2011 525,184 Bank of America Corp.: A+ Aa2 1,900,000 5.875% due 2/15/2009 2,084,891 A+ Aa2 410,000 4.875% due 9/15/2012 414,424 A+ Aa3 325,000 The Bank of New York, 5.20% due 7/01/2007 349,854 Bank One Corp.: A Aa3 700,000 6.875% due 8/01/2006 786,899 A- A1 378,000 8% due 4/29/2027 474,587 A A2 535,000 Corp Andina de Fomento, 6.875% due 3/15/2012 560,866 A+ A1 400,000 Deutsche Bank Financial, 7.50% due 4/25/2009 464,939 A A1 765,000 FleetBoston Financial Corp., 7.25% due 9/15/2005 847,068 A A1 615,000 HSBC Holding PLC, 7.50% due 7/15/2009 728,272 Inter-American Development Bank: AAA Aaa 1,290,000 4.375% due 9/20/2012 1,310,938 AAA Aaa 1,000,000 6.80% due 10/15/2025 1,190,467 International Bank for Reconstruction and Development: AAA Aaa 1,865,000 4.75% due 4/30/2004 1,948,117 AAA Aaa 250,000 3.50% due 10/22/2004 257,738 A+ Aa3 395,000 Marshall & Ilsley Bank, 4.125% due 9/04/2007 407,858 A A2 722,000 Mellon Financial Co., 6.875% due 3/01/2003 727,899 A+ Aa3 595,000 National City Bank of Indiana, 4% due 9/28/2007 609,586 A- A2 350,000 Regions Financial Corporation, 6.375% due 5/15/2012 390,342 A+ Aa3 610,000 Suntrust Bank, 5.45% due 12/01/2017 602,375 A Aa3 700,000 U.S. Bancorp, 1.56% due 9/16/2005 700,441 A+ Aa2 470,000 Wachovia Bank NA, 4.85% due 7/30/2007 500,390 Washington Mutual Inc.: BBB+ A3 600,000 7.50% due 8/15/2006 674,677 BBB Baa1 90,000 8.25% due 4/01/2010 107,190 A+ Aa2 250,000 Wells Fargo Bank NA, 6.45% due 2/01/2011 280,648 Wells Fargo & Co.: A+ Aa2 600,000 7.25% due 8/24/2005 673,513 A+ Aa2 400,000 5.125% due 2/15/2007 429,606 ----------- 18,048,769 ==================================================================================================================================
14 & 15 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master Aggregate Bond Index Series (continued) -------------------------------------------------------------------------------------------------------------- S&P Moody's Face INDUSTRIES Ratings+ Ratings+ Amount Corporate Bonds & Notes Value ==================================================================================================================================== Financial Services-- A+ A2 $ 400,000 AXA Financial Inc., 7.75% due 8/01/2010 $ 452,618 8.1% A+ A1 400,000 American Express Corporation, 6.875% due 11/01/2005 447,090 A+ A1 235,000 American General Finance, 5.875% due 7/14/2006 252,967 A+ A2 600,000 American Honda Finance, 1.65% due 10/03/2005 (a) 599,426 A A2 600,000 Bear Stearns Companies, Inc., 7.625% due 2/01/2005 662,726 A+ A3 200,000 Boeing Capital Corporation, 7.10% due 9/27/2005 216,643 CIT Group Inc.: A A2 660,000 5.625% due 5/17/2004 678,496 A A2 450,000 6.50% due 2/07/2006 473,903 BBB- Baa2 420,000 Capital One Bank, 6.875% due 2/01/2006 406,330 A+ A2 265,000 Caterpillar Financial Services Corporation, 4.875% due 6/15/2007 281,882 A+ Aa2 90,000 Citicorp, 6.375% due 11/15/2008 100,710 Citigroup Inc.: AA- Aa1 1,400,000 5.70% due 2/06/2004 1,456,220 AA- Aa1 155,000 5.75% due 5/10/2006 168,265 A+ Aa2 565,000 7.25% due 10/01/2010 655,891 AA- Aa1 125,000 6.50% due 1/18/2011 140,250 AA- Aa1 35,000 6% due 2/21/2012 38,409 Commercial Credit Co.: AA- Aa1 500,000 6.75% due 7/01/2007 559,439 AA- Aa1 450,000 10% due 5/15/2009 571,843 A- A3 3,220,000 Core Investment Grade Trust, 4.727% due 11/30/2007 3,285,688 A A3 2,005,000 Countrywide Home Loans, Inc., 5.625% due 7/15/2009 2,121,579 A+ Aa3 500,000 Credit Suisse First Boston Inc., 5.875% due 8/01/2006 535,489 A+ A1 140,000 Diageo Capital PLC, 3.50% due 11/19/2007 140,713 A- Baa1 450,000 Equifax Inc., 4.95% due 11/01/2007 (a) 457,874 A- A2 100,000 FPL Group Capital Inc., 7.625% due 9/15/2006 112,012 Ford Motor Credit Company: BBB A3 1,890,000 6.875% due 2/01/2006 1,893,311 BBB A3 200,000 7.25% due 10/25/2011 194,335 AAA Aaa 1,760,000 General Electric Capital Corp., 6.75% due 3/15/2032 1,945,838 General Motors Acceptance Corp.: BBB A2 674,000 6.85% due 6/17/2004 701,924 BBB A2 692,000 7.75% due 1/19/2010 724,448 BBB A2 140,000 6.875% due 9/15/2011 139,616 BBB A2 970,000 7% due 2/01/2012 974,109 BBB A2 1,298,000 8% due 11/01/2031 1,305,068 Goldman Sachs Group, Inc.: A+ Aa3 800,000 7.625% due 8/17/2005 902,208 A+ Aa3 890,000 6.875% due 1/15/2011 993,454 A+ Aa3 135,000 6.60% due 1/15/2012 149,174 International Lease Finance Corporation: AA- A1 570,000 4.75% due 1/18/2005 584,109 AA- A1 650,000 4.375% due 12/15/2005 657,769 AA- A1 236,000 5.625% due 6/01/2007 247,070 A A2 1,285,000 J.P. Morgan Chase & Company, 6.625% due 3/15/2012 1,392,704 AAA Aaa 700,000 KFW International Finance, 4.75% due 1/24/2007 752,133 Lehman Brothers Holdings, Inc.: A A2 800,000 6.625% due 4/01/2004 843,388 A A2 350,000 7% due 2/01/2008 395,695 A A2 245,000 7.875% due 8/15/2010 289,884 A A2 425,000 6.625% due 1/18/2012 470,403 NR* Baa3 1,512,000 Lehman Brothers, TRAINS-BBB-5-02, 6.539% due 8/15/2008 (a)(b)(c) 1,556,997 BBB Baa2 500,000 Liberty Property LP, 7.25% due 3/15/2011 547,362 MBNA America Bank NA: BBB+ Baa1 500,000 6.875% due 7/15/2004 (a) 520,110 BBB+ Baa1 25,000 7.75% due 9/15/2005 27,437 BBB+ Baa1 110,000 6.50% due 6/20/2006 116,388 BBB Baa2 545,000 7.125% due 11/15/2012 570,348 Morgan Stanley, Dean Witter, Discover & Co.: A+ Aa3 1,300,000 7.125% due 1/15/2003 1,301,834 A+ Aa3 450,000 6.60% due 4/01/2012 498,743 NR* A3 16,650,000 Morgan Stanley, TRACERS, 5.878% due 3/01/2007 (a)(b)(d) 17,741,074 AA Aa3 265,000 Principal Life Global, 6.25% due 2/15/2012 (a) 280,898 BBB+ Baa1 500,000 ProLogis Trust, 7% due 10/01/2003 514,087 AA- Aa1 1,000,000 Salomon Smith Barney Holdings, Inc., 6.25% due 5/15/2003 1,016,684 BBB Baa2 500,000 Simon Debartolo, 6.75% due 7/15/2004 527,280 AA Aa3 250,000 Texaco Capital Inc., 8.625% due 6/30/2010 314,947 Verizon Global Funding Corporation: A+ A2 1,000,000 6.75% due 12/01/2005 1,104,907 A+ A2 650,000 7.375% due 9/01/2012 747,850 ----------- 57,760,049 ==================================================================================================================================== Financial Services-- A- A2 330,000 ACE INA Holdings, 8.30% due 8/15/2006 373,253 Consumer--2.7% A+ A1 250,000 Allstate Corporation, 5.375% due 12/01/2006 266,274 A- A3 125,000 Aristar Inc., 7.375% due 9/01/2004 134,771 BBB+ Baa1 215,000 Avalonbay Communities, 6.625% due 9/15/2011 229,271 A+ A1 730,000 Golden West Financial Corporation, 4.75% due 10/01/2012 734,040 A- A2 400,000 Hartford Life Inc., 7.375% due 3/01/2031 445,462 Household Finance Corporation: A- A2 1,800,000 5.875% due 2/01/2009 1,847,531 A- A2 1,250,000 7% due 5/15/2012 1,369,111 A A3 470,000 John Hancock Financial Services, 5.625% due 12/01/2008 492,761 AA- A2 210,000 Marsh & McLennan Companies Inc., 6.625% due 6/15/2004 224,297 A A2 400,000 MetLife Inc., 6.125% due 12/01/2011 431,745 A- Baa3 500,000 Provident Companies Inc., 7% due 7/15/2018 443,442 NR* NR* 12,000,000 Security Life of Denver, 4.66% due 3/31/2003 12,418,840 ----------- 19,410,798 ====================================================================================================================================
16 & 17 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master Aggregate Bond Index Series (continued) -------------------------------------------------------------------------------------------------------------- S&P Moody's Face INDUSTRIES Ratings+ Ratings+ Amount Corporate Bonds & Notes Value ==================================================================================================================================== Foreign Government AAA Aaa $2,000,000 Canada Government Bond, 5.25% due 11/05/2008 $ 2,210,364 Obligations--1.7% AA- Aa2 400,000 Province of British Columbia, 4.625% due 10/03/2006 424,517 AA- Aa3 1,000,000 Province of Manitoba, 5.50% due 10/01/2008 1,107,230 Province of Ontario: AA Aa2 328,000 7.375% due 1/27/2003 329,159 AA Aa2 750,000 5.50% due 10/01/2008 829,189 A+ Aa3 603,000 Province of Saskatchewan, 8% due 7/15/2004 656,135 A+ A1 1,500,000 Quebec Province, 7.50% due 9/15/2029 1,870,722 AAA Aaa 1,000,000 Republic of Finland, 5.875% due 2/27/2006 1,095,203 AA Aa2 1,050,000 Republic of Italy, 4.375% due 10/25/2006 1,107,904 BBB- Baa2 1,950,000 United Mexican States, 9.875% due 2/01/2010 2,393,820 ----------- 12,024,243 ==================================================================================================================================== Industrial--Consumer BBB+ Baa1 60,000 Albertson's Inc., 7.50% due 2/15/2011 69,031 Goods--1.3% A+ A1 350,000 Anheuser-Busch Companies, Inc., 6% due 11/01/2041 369,728 A A2 855,000 Coca-Cola Enterprises, 6.75% due 9/15/2028 954,087 BBB+ Baa1 350,000 Conagra Foods Inc., 6.75% due 9/15/2011 398,006 BBB Baa2 515,000 International Paper Company, 8.125% due 7/08/2005 576,438 BBB Baa2 567,000 Kellogg Company, 6% due 4/01/2006 614,590 AA Aa2 294,000 Kimberly-Clark Corporation, 7.10% due 8/01/2007 342,646 A- A2 360,000 Kraft Foods Inc., 4.625% due 11/01/2006 378,488 Kroger Company: BBB- Baa3 160,000 7.625% due 9/15/2006 179,200 BBB- Baa3 550,000 6.80% due 4/01/2011 602,887 BBB- Baa3 200,000 6.20% due 6/15/2012 213,535 BBB- Baa3 85,000 7.70% due 6/01/2029 97,194 BBB- Baa3 250,000 7.50% due 4/01/2031 279,647 A A2 500,000 Nabisco, Inc., 6.375% due 2/01/2005 539,986 A A1 92,000 Pepsi Bottling Holdings Inc., 5.625% due 2/17/2009 (a) 100,252 A A1 500,000 PepsiCo Inc., 4.50% due 9/15/2004 519,665 Philip Morris Companies, Inc.: A- A2 340,000 6.375% due 2/01/2006 365,247 A- A2 365,000 6.95% due 6/01/2006 398,507 BBB- Baa2 270,000 RJ Reynolds Tobacco Holdings, 6.50% due 6/01/2007 281,697 Safeway Inc.: BBB Baa2 300,000 6.15% due 3/01/2006 324,911 BBB Baa2 80,000 5.80% due 8/15/2012 83,712 BBB Baa2 324,000 7.25% due 2/01/2031 366,605 BBB Baa2 290,000 Sappi Papier Holdings AG, 6.75% due 6/15/2012 (a) 317,840 A+ A3 420,000 Sara Lee Corporation, 6.25% due 9/15/2011 471,053 BBB Baa3 390,000 SuperValu Inc., 7.50% due 5/15/2012 420,380 BBB Baa3 250,000 Tyson Foods, Inc., 6.625% due 10/01/2004 265,815 ----------- 9,531,147 ==================================================================================================================================== Industrial--Energy-- Anadarko Finance Company: 1.5% BBB+ Baa1 390,000 6.75% due 5/01/2011 439,442 BBB+ Baa1 190,000 7.50% due 5/01/2031 225,921 Apache Corporation: A- A3 270,000 6.25% due 4/15/2012 302,656 A- A3 190,000 7.625% due 7/01/2019 225,589 AA+ Aa1 350,000 Atlantic Richfield, 5.90% due 4/15/2009 389,623 BBB+ Baa1 330,000 Chevron Phillips Chemical Company, 5.375% due 6/15/2007 345,826 AA Aa2 150,000 ChevronTexaco Capital Company, 3.50% due 9/17/2007 152,692 BB- Ba2 785,000 The Coastal Corporation, 6.50% due 6/01/2008 588,750 A A2 325,000 Colonial Pipeline, 7.63% due 4/15/2032 (a) 387,890 Conoco Inc.: A- A3 800,000 5.90% due 4/15/2004 837,435 A- A3 320,000 6.35% due 4/15/2009 359,444 A- A3 75,000 6.95% due 4/15/2029 85,004 Consolidated Natural Gas: BBB+ A3 500,000 5.375% due 11/01/2006 528,543 NR* A3 75,000 6.25% due 11/01/2011 81,168 A A3 550,000 Duke Energy Corporation, 6.25% due 1/15/2012 574,018 BBB- Baa2 825,000 FirstEnergy Corp., 6.45% due 11/15/2011 820,745 Kinder Morgan Energy: BBB+ Baa1 840,000 6.75% due 3/15/2011 912,450 BBB Baa2 425,000 6.50% due 9/01/2012 444,155 A+ A1 350,000 Motiva Enterprises LLC, 5.20% due 9/15/2012 (a) 349,416 A- Baa1 100,000 Murphy Oil Corporation, 6.375% due 5/01/2012 109,900 A- A3 225,000 Nabors Industries Inc., 5.375% due 8/15/2012 230,501 BBB Baa3 430,000 NiSource Finance Corporation, 7.625% due 11/15/2005 449,117 BBB- Baa3 450,000 Ocean Energy Inc., 7.25% due 10/01/2011 513,128 A- A3 650,000 Phillips Petroleum Company, 8.50% due 5/25/2005 739,127 A- Baa2 290,000 Transocean Sedco Forex, 6.50% due 4/15/2003 292,952 BBB Baa2 300,000 Valero Energy Corporation, 6.875% due 4/15/2012 312,422 ----------- 10,697,914 ==================================================================================================================================== Industrial-- BBB- Ba1 450,000 Abitibi Consolidated Inc., 8.55% due 8/01/2010 499,441 Manufacturing--1.9% A- A2 340,000 Alcan Inc., 6.45% due 3/15/2011 379,795 A A2 400,000 Alcoa Inc., 6% due 1/15/2012 440,356 Centex Corporation: BBB Baa2 90,000 7.875% due 2/01/2011 101,400 BBB Baa2 45,000 7.50% due 1/15/2012 50,048 A- A3 450,000 Cooper Industries Inc., 5.50% due 11/01/2009 469,012
18 & 19 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master Aggregate Bond Index Series (continued) -------------------------------------------------------------------------------------------------------------- S&P Moody's Face INDUSTRIES Ratings+ Ratings+ Amount Corporate Bonds & Notes Value ==================================================================================================================================== Industrial-- DaimlerChrysler NA Holdings: Manufacturing BBB+ A3 $1,370,000 6.40% due 5/15/2006 $ 1,476,804 (concluded) BBB+ A3 250,000 7.30% due 1/15/2012 280,537 BBB+ A3 10,000 8.50% due 1/18/2031 12,307 A- A3 635,000 Deere & Co., 7.85% due 5/15/2010 759,703 BBB Baa2 500,000 Delphi Auto Systems Corporation, 6.55% due 6/15/2006 527,193 BBB- Baa3 270,000 Domtar Inc., 7.875% due 10/15/2011 315,565 Emerson Electric Company: A A2 335,000 7.875% due 6/01/2005 376,472 A A2 525,000 6% due 8/15/2032 533,010 BBB Baa1 1,600,000 Ford Motor Company, 7.45% due 7/16/2031 1,391,790 A A2 205,000 Honeywell International, 6.125% due 11/01/2011 222,639 IBM Corporation: A+ A1 335,000 6.45% due 8/01/2007 379,107 A+ A1 200,000 4.75% due 11/29/2012 200,774 Lockheed Martin Corp.: BBB Baa2 300,000 7.25% due 5/15/2006 337,863 BBB Baa2 135,000 7.75% due 5/01/2026 164,048 BBB Baa2 350,000 8.50% due 12/01/2029 469,575 BBB Baa2 325,000 Martin Marietta Corp., 7.375% due 4/15/2013 381,250 Masco Corporation: BBB+ Baa1 365,000 6% due 5/03/2004 381,024 BBB+ Baa1 45,000 6.50% due 8/15/2032 46,259 BBB+ Baa1 250,000 Newell Rubbermaid Inc., 4.625% due 12/15/2009 255,029 Raytheon Company: BBB- Baa3 160,000 8.20% due 3/01/2006 179,764 BBB- Baa3 35,000 6.15% due 11/01/2008 37,759 BBB- Baa3 550,000 8.30% due 3/01/2010 653,754 BBB- Baa3 350,000 6.75% due 3/15/2018 366,783 A A2 225,000 Stanley Works, 4.90% due 11/01/2012 (a) 229,736 BBB- Baa3 325,000 Toll Brothers Inc., 6.875% due 11/15/2012 (a) 334,697 BBB Baa2 310,000 Visteon Corp., 8.25% due 8/01/2010 328,926 BBB Baa2 740,000 Weyerhaeuser Company, 5.95% due 11/01/2008 789,946 ----------- 13,372,366 ==================================================================================================================================== Industrial--Other-- AA Aa3 396,000 Abbott Laboratories, 5.625% due 7/01/2006 432,920 1.3% A+ A1 255,000 Archer-Daniels-Midland, 5.935% due 10/01/2032 254,439 BBB Baa2 200,000 BRE Properties, 5.95% due 3/15/2007 210,744 BBB+ Baa2 500,000 Burlington Northern Santa Fe, 6.75% due 7/15/2011 567,550 BBB Baa2 360,000 CSX Corporation, 6.75% due 3/15/2011 401,887 AAA Aaa 1,140,000 Continental Airlines, 6.563% due 2/15/2012 1,218,474 EOP Operating LP: BBB+ Baa1 200,000 6.75% due 2/15/2012 214,910 BBB+ Baa1 145,000 7.25% due 6/15/2028 146,849 BBB+ Baa1 25,000 7.50% due 4/19/2029 26,057 AA Aa3 600,000 Eli Lilly & Company, 7.125% due 6/01/2025 708,217 BBB- Ba1 500,000 HCA Inc., 6.30% due 10/01/2012 504,270 BBB+ Baa2 350,000 Health Care Properties Investors Inc., 6.45% due 6/25/2012 352,596 BBB- Baa3 375,000 Highwoods Realty LP, 8% due 12/01/2003 392,280 BBB- Ba1 450,000 Hilton Hotels Corporation, 7.625% due 12/01/2012 454,433 BBB Baa2 235,000 New Plan Excel Realty Trust, 5.875% due 6/15/2007 246,137 BBB- Baa3 237,000 Northrop Grumman Corporation, 7.125% due 2/15/2011 269,373 Praxair Inc.: BBB+ A3 235,000 6.50% due 3/01/2008 264,895 BBB+ A3 135,000 6.375% due 4/01/2012 150,915 A Baa1 400,000 Southwest Airlines Co., 8% due 3/01/2005 442,610 BBB- Baa3 170,000 Tenet Healthcare Corporation, 6.875% due 11/15/2031 145,350 Union Pacific Corp.: BBB Baa3 150,000 6.34% due 11/25/2003 155,368 NR* Baa3 250,000 5.75% due 10/15/2007 273,602 United Technology Corporation: A+ A2 675,000 6.35% due 3/01/2011 760,448 A+ A2 300,000 6.10% due 5/15/2012 335,430 A- Baa1 100,000 Wellpoint Health Network, 6.375% due 6/15/2006 109,091 ----------- 9,038,845 ==================================================================================================================================== Industrial-- BBB+ Baa1 375,000 AOL Time Warner Inc., 6.875% due 5/01/2012 396,039 Services--2.1% BBB- Baa3 400,000 Aramark Services Inc., 6.375% due 2/15/2008 414,141 BBB Baa1 200,000 Cendant Corporation, 6.875% due 8/15/2006 207,532 BBB Baa3 450,000 Comcast Cable Communications, 8.875% due 5/01/2017 524,289 Dayton Hudson Corp.: A+ A2 888,000 10% due 1/01/2011 1,189,222 A+ A2 100,000 6.75% due 1/01/2028 111,458 Federated Department Stores: BBB+ Baa1 25,000 6.625% due 9/01/2008 27,692 BBB+ Baa1 135,000 6.30% due 4/01/2009 144,048 BBB+ Baa1 270,000 6.625% due 4/01/2011 294,916 A+ A1 835,000 First Data Corporation, 6.375% due 12/15/2007 948,322 A A2 515,000 Gannett Company Inc., 5.50% due 4/01/2007 560,059
20 & 21 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars) Master Aggregate Bond Index Series (continued)
Master Aggregate Bond Index Series (continued) -------------------------------------------------------------------------------------------------------------- S&P Moody's Face INDUSTRIES Ratings+ Ratings+ Amount Corporate Bonds & Notes Value ==================================================================================================================================== Industrial-- BBB Baa2 $1,000,000 Hertz Corp., 7% due 1/15/2028 $ 794,083 Services A- A3 235,000 Kohl's Corporation, 6.30% due 3/01/2011 260,540 (concluded) BBB- Baa3 635,000 Liberty Media Corporation, 7.875% due 7/15/2009 688,667 BBB+ Baa1 450,000 Limited Brands Inc., 6.125% due 12/01/2012 473,688 Lowe's Companies Inc.: A A3 215,000 6.875% due 2/15/2028 239,492 A A3 65,000 6.50% due 3/15/2029 69,527 BBB- Baa3 550,000 News America Inc., 7.25% due 5/18/2018 542,759 NR* Baa1 500,000 Sears Discover Credit Corp., 9.14% due 3/13/2012 520,471 Sears Roebuck Acceptance Corporation: A- Baa1 500,000 6% due 3/20/2003 500,270 A- Baa1 205,000 7% due 6/01/2032 171,850 Tele-Communications Inc.: BBB Baa3 1,275,000 8.25% due 1/15/2003 1,275,374 BBB Baa3 200,000 9.80% due 2/01/2012 240,405 Time Warner Inc.: BBB+ Baa1 870,000 7.75% due 6/15/2005 926,950 BBB+ Baa1 352,000 6.875% due 6/15/2018 351,946 BBB- Baa3 715,000 USA Interactive, 7% due 1/15/2013 (a) 739,327 AAA Aaa 500,000 United Parcel Service, 8.375% due 4/01/2020 650,896 A- A3 635,000 Viacom Inc., 7.75% due 6/01/2005 711,424 AA Aa2 900,000 Wal-Mart Stores, Inc., 6.875% due 8/10/2009 1,060,171 BBB NR* 375,000 Waste Management Inc., 6.50% due 5/15/2004 386,701 ----------- 15,422,259 ==================================================================================================================================== Utilities-- BBB Baa3 770,000 AT&T Broadband Corporation, 8.375% due 3/15/2013 874,659 Communications-- BBB+ Baa2 76,000 AT&T Corporation, 6% due 3/15/2009 75,891 1.7% BBB Baa2 790,000 AT&T Wireless Services Inc., 8.75% due 3/01/2031 774,200 A A2 315,000 Alltel Corporation, 7% due 7/01/2012 363,024 AA- Aa3 800,000 Ameritech Capital Funding, 6.45% due 1/15/2018 866,860 A+ Aa3 959,000 BellSouth Corporation, 6% due 10/15/2011 1,051,624 A- Baa1 855,000 British Telecom PLC, 8.375% due 12/15/2010 1,025,058 BBB+ Baa2 400,000 CenturyTel Inc., 7.875% due 8/15/2012 (a) 473,429 BBB Baa2 275,000 Citizens Communications Company, 7.625% due 8/15/2008 304,470 BBB- Baa3 710,000 Clear Channel Communications, 7.65% due 9/15/2010 804,325 BBB Baa2 350,000 Cox Communications Inc., 7.125% due 10/01/2012 388,757 Deutsche Telekom International Finance: BBB+ Baa1 400,000 8.25% due 6/15/2005 437,362 BBB+ Baa1 660,000 8.50% due 6/15/2010 760,144 BBB- Baa3 300,000 France Telecom, 10% due 3/01/2031 365,200 GTE Corporation: A+ A3 800,000 6.84% due 4/15/2018 830,870 A+ A3 220,000 6.94% due 4/15/2028 230,836 Sprint Capital Corporation: BBB- Baa3 1,100,000 5.70% due 11/15/2003 1,094,500 BBB- Baa3 675,000 8.375% due 3/15/2012 671,625 A+ A2 450,000 Verizon New York Inc., 6.875% due 4/01/2012 505,525 ----------- 11,898,359 ==================================================================================================================================== Utilities--Gas & BBB+ Baa2 270,000 AmerenEnergy Generating, 7.95% due 6/01/2032 298,499 Electric--1.3% BBB Baa1 815,000 Cincinnati Gas & Electric Company, 5.70% due 9/15/2012 835,415 BBB+ Baa1 500,000 Commonwealth Edison Company, 6.95% due 7/15/2018 550,141 BBB Baa1 135,000 Conectiv Inc., 5.30% due 6/01/2005 140,558 A+ A1 750,000 Consolidated Edison Company of New York, 4.875% due 2/01/2013 760,399 BBB+ Baa1 595,000 Constellation Energy Group, 6.125% due 9/01/2009 608,430 BBB+ Baa1 481,000 Dominion Resources Inc., 8.125% due 6/15/2010 559,596 BBB+ Baa2 450,000 Exelon Corporation, 6.75% due 5/01/2011 492,572 A Aa3 470,000 Florida Power and Light, 6.875% due 12/01/2005 524,079 A A2 160,000 Georgia Power Company, 5.125% due 11/15/2012 165,565 BBB Baa2 170,000 Houston Lighting and Power, 8.75% due 3/01/2022 176,743 BBB- Baa3 510,000 Mid-American Energy Holdings, 5.875% due 10/01/2012 (a) 517,003 BBB Baa1 475,000 Oncor Electric Delivery, 6.375% due 5/01/2012 (a) 489,232 BBB Baa1 560,000 Progress Energy Inc., 7.10% due 3/01/2011 617,174 A- A3 670,000 Public Service Electric & Gas, 5.125% due 9/01/2012 689,236 A- A1 170,000 South Carolina Electric & Gas, 6.70% due 2/01/2011 192,830 A+ A1 700,000 Southern California Gas Company, 4.80% due 10/01/2012 704,955 BBB+ Baa1 740,000 Southern Power Company, 6.25% due 7/15/2012 781,828 A+ Aa3 277,000 Union Electric Company, 5.25% due 9/01/2012 290,227 ----------- 9,394,482 ==================================================================================================================================== Yankee--Corporate-- A A2 365,000 BHP Finance USA Limited, 6.42% due 3/01/2026 386,947 1.0% A- A2 200,000 BSCH Issuances Ltd., 7.625% due 9/14/2010 227,486 BBB+ Baa2 500,000 Canadian National Railways, 6.375% due 10/15/2011 557,479 A- A2 220,000 Codelco Inc., 6.375% due 11/30/2012 (a) 230,595 A+ A1 1,000,000 Hydro-Quebec, 8.875% due 3/01/2026 1,415,536 Korea Development Bank: A- A3 500,000 7.125% due 4/22/2004 531,515 A- A3 800,000 4.25% due 11/13/2007 812,267 A A2 400,000 Norsk Hydro A/S, 6.36% due 1/15/2009 433,917 Pemex Project Funding Master Trust: BBB- Baa1 905,000 9.125% due 10/13/2010 1,036,225 BBB- Baa1 40,000 8.625% due 2/01/2022 42,200 BBB+ Baa2 345,000 Potash Corporation of Saskatchewan, 7.75% due 5/31/2011 402,190 A+ A1 500,000 Unilever Capital Corporation, 7.125% due 11/01/2010 590,150 A A2 530,000 Vodafone Group PLC, 7.75% due 2/15/2010 625,074 ----------- 7,291,581 ==================================================================================================================================== Total Investments in Corporate Bonds & Notes (Cost--$185,360,013)--27.1% 193,890,812 ====================================================================================================================================
22 & 23 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 SCHEDULE OF INVESTMENTS (concluded) (in U.S. dollars)
Master Aggregate Bond Index Series (concluded) ---------------------------------------------------------------------------------------------------------- Face Amount Short-Term Securities Value ==================================================================================================================================== Repurchase Morgan Stanley & Co., Inc.: Agreements***-- $57,835,000 purchased on 12/31/2002 to yield 1.17% to 7/01/2016 $ 57,835,000 13.6% 29,885,000 purchased on 12/31/2002 to yield 1.17% to 9/01/2032 29,885,000 9,880,000 purchased on 12/31/2002 to yield 1.17% to 12/01/2032 9,880,000 ==================================================================================================================================== Total Investments in Short-Term Securities (Cost--$97,600,000)--13.6% 97,600,000 ==================================================================================================================================== Total Investments (Cost--$780,544,485)--112.7% 807,540,493 Liabilities in Excess of Other Assets--(12.7%) (90,972,450) ------------ Net Assets--100.0% $716,568,043 ============ ====================================================================================================================================
* Not Rated. ** Mortgage-Backed Obligations are subject to principal paydowns as a result of prepayments or refinancing of the underlying mortgage instruments. As a result, the average life may be substantially less than the original maturity. *** Repurchase Agreements are fully collateralized by U.S. Government Agency Obligations. + Ratings of issues shown are unaudited. (a) The security may be offered and sold to "qualified institutional buyers" under Rule 144A of the Securities Act of 1933. (b) Floating rate note. (c) Target Return Index Securities (TRAINS). (d) Traded Custody Receipts (TRACERS). (1) Represents or includes a "to-be-announced" (TBA) transaction. The Series has committed to purchase securities for which all specific information is not available at this time. See Notes to Financial Statements. STATEMENT OF ASSETS AND LIABILITIES
MASTER AGGREGATE BOND INDEX SERIES As of December 31, 2002 ======================================================================================================================== Assets: Investments, at value (including securities loaned of $552,450) (identified cost--$780,544,485) ............................... $807,540,493 Investments held as collateral for loaned securities, at value 572,584 Receivables: Contributions ............................................... $ 45,704,795 Securities sold ............................................. 31,522,825 Interest .................................................... 7,559,749 Loaned securities income .................................... 91 84,787,460 ------------ Prepaid expenses and other assets ............................. 19,861 ------------ Total assets .................................................. 892,920,398 ------------ ======================================================================================================================== Liabilities: Collateral on securities loaned, at value ..................... 572,584 Payables: Securities purchased ........................................ 169,921,378 Custodian bank .............................................. 3,355,232 Withdrawals ................................................. 2,338,804 Investment adviser .......................................... 5,517 175,620,931 ------------ Accrued expenses and other liabilities ........................ 158,840 ------------ Total liabilities ............................................. 176,352,355 ------------ ======================================================================================================================== Net Assets: Net assets .................................................... $716,568,043 ============ ======================================================================================================================== Net Assets Investors' capital ............................................ $689,572,035 Consist of: Unrealized appreciation on investments--net ................... 26,996,008 ------------ Net assets .................................................... $716,568,043 ============ ========================================================================================================================
See Notes to Financial Statements. 24 & 25 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 STATEMENT OF OPERATIONS
MASTER AGGREGATE BOND INDEX SERIES For the Year Ended December 31, 2002 ======================================================================================================================== Investment Income: Interest ................................................... $ 28,848,909 Securities lending--net .................................... 1,336 ------------- Total income ............................................... 28,850,245 ------------- ======================================================================================================================== Expenses: Professional fees .......................................... $ 151,746 Accounting services ........................................ 116,498 Custodian fees ............................................. 63,414 Investment advisory fees ................................... 52,943 Pricing fees ............................................... 10,598 Trustees' fees and expenses ................................ 7,496 Printing and shareholder reports ........................... 1,256 Other ...................................................... 13,487 ------------- Total expenses ............................................. 417,438 ------------- Investment income--net ..................................... 28,432,807 ------------- ======================================================================================================================== Realized & Realized gain from investments--net ........................ 3,541,654 Unrealized Gain on Change in unrealized appreciation on investments--net ...... 20,353,079 Investments--Net: ------------- Total realized and unrealized gain on investments--net ..... 23,894,733 ------------- Net Increase in Net Assets Resulting from Operations ....... $ 52,327,540 ============= ========================================================================================================================
See Notes to Financial Statements. STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended MASTER December 31, AGGREGATE BOND ------------------------------- INDEX SERIES Increase in Net Assets: 2002 2001 ======================================================================================================================== Operations: Investment income--net ..................................... $ 28,432,807 $ 24,638,002 Realized gain on investments--net .......................... 3,541,654 3,530,237 Change in unrealized appreciation on investments--net ...... 20,353,079 3,620,323 ------------- ------------- Net increase in net assets resulting from operations ....... 52,327,540 31,788,562 ------------- ------------- ======================================================================================================================== Capital Proceeds from contributions ................................ 414,370,731 297,187,588 Transactions: Fair value of withdrawals .................................. (216,281,419) (171,169,747) ------------- ------------- Net increase in net assets derived from capital transactions 198,089,312 126,017,841 ------------- ------------- ======================================================================================================================== Net Assets: Total increase in net assets ............................... 250,416,852 157,806,403 Beginning of year .......................................... 466,151,191 308,344,788 ------------- ------------- End of year ................................................ $ 716,568,043 $ 466,151,191 ============= ============= ========================================================================================================================
See Notes to Financial Statements. 26 & 27 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 FINANCIAL HIGHLIGHTS
For the Year Ended MASTER December 31, AGGREGATE BOND The following ratios have been derived from --------------------------------------------------------- INDEX SERIES information provided in the financial statements. 2002 2001 2000 1999 1998 =================================================================================================================================== Total Investment 10.13% 8.07% -- -- -- Return:* ========= ========= ========= ========= ========= =================================================================================================================================== Ratios to Average Expenses, net of reimbursement ............. .08% .13% .14% .10% .12% Net Assets: ========= ========= ========= ========= ========= Expenses ................................... .08% .13% .14% .10% .13% ========= ========= ========= ========= ========= Investment income--net ..................... 5.37% 5.93% 6.62% 6.30% 6.20% ========= ========= ========= ========= ========= =================================================================================================================================== Supplemental Net assets, end of year (in thousands) ..... $ 716,568 $ 466,151 $ 308,345 $ 406,148 $ 434,935 Data: ========= ========= ========= ========= ========= Portfolio turnover ......................... 112.18% 144.23% 43.24% 61.82% 27.89% ========= ========= ========= ========= ========= ===================================================================================================================================
* Total return is required to be disclosed for fiscal years beginning after December 15, 2000. See Notes to Financial Statements. NOTES TO FINANCIAL STATEMENTS MASTER AGGREGATE BOND INDEX SERIES 1. Significant Accounting Policies: Master Aggregate Bond 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. 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). Other investments, including futures contracts and related options, are stated at market value. Short-term securities are valued at amortized cost, which approximates 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) Repurchase agreements -- The Series invests in securities pursuant to repurchase agreements. Under such agreements, the counterparty agrees to repurchase the security at a mutually agreed upon time and price. The Series takes possession of the underlying securities, marks to market such securities and, if necessary, receives additional securities daily to ensure that the contract is fully collateralized. If the counterparty defaults and the fair value of the collateral declines, liquidation of the collateral by the Series may be delayed or limited. (c) Derivative financial instruments -- The Series may engage in various portfolio investment strategies to increase or decrease the level of risk to which the Series is exposed more quickly and efficiently than transactions in other types of instruments. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. 28 & 29 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 NOTES TO FINANCIAL STATEMENTS (continued) MASTER AGGREGATE BOND INDEX SERIES 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 the 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. (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. It is intended that the Trust's assets will be managed so an investor in the Trust 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. Interest income is recognized on the accrual basis. (f) Dollar rolls -- The Series may sell securities for delivery in the current month and simultaneously contract to repurchase substantially similar (same type, coupon and maturity) securities on a specific future date. (g) 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 investments, 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 could experience delays and costs in gaining access to the collateral. 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. (h) Custodian bank -- The Series recorded an amount payable to the Custodian Bank reflecting an overnight overdraft which resulted from management estimates of available cash. 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. The Trust has received an exemptive order from the Securities and Exchange Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., or its affiliates. Pursuant to that order, the Trust also has retained Merrill Lynch Investment Advisors, LLC ("MLIA"), an affiliate of FAM, as the securities lending agent for a fee based on a share of the returns on investment of cash collateral. MLIA may, on behalf of the Series, invest cash collateral received by the Series for such loans, among other things, in a private investment company managed by MLIA or in registered money market funds advised by FAM or its affiliates. As of December 31, 2002, cash collateral of $303,426 was invested in the Money Market Series of the Merrill Lynch Liquidity Series, LLC and $269,158 was invested in the Merrill Lynch Premier Institutional Fund. For the year ended December 31, 2002, MLIA received $565 in securities lending agent fees for the Series. During the year ended December 31, 2002, the Series paid Merrill Lynch Security Pricing Service, an affiliate of MLPF&S, $14,360 for security price quotations to compute the net asset value of the Series. Merrill Lynch Trust Company, an indirect, wholly-owned subsidiary of ML & Co., is the Series' custodian. For the year ended December 31, 2002, the Series reimbursed FAM $13,588 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 $817,084,764 and $589,673,965, respectively. Net realized gains (losses) for the year ended December 31, 2002 and net unrealized gains as of December 31, 2002 were as follows: - -------------------------------------------------------------------------------- Realized Unrealized Gains (Losses) Gains - -------------------------------------------------------------------------------- Long-term investments ................... $ 3,984,070 $26,996,008 Financial futures contracts ............. (442,416) -- ----------- ----------- Total ................................... $ 3,541,654 $26,996,008 =========== =========== - -------------------------------------------------------------------------------- As of December 31, 2002, net unrealized appreciation for Federal income tax purposes aggregated $26,253,323, of which $27,131,593 related to appreciated securities and $878,270 30 & 31 Merrill Lynch Aggregate Bond Index Fund, December 31, 2002 NOTES TO FINANCIAL STATEMENTS (concluded) MASTER AGGREGATE BOND INDEX SERIES related to depreciated securities. At December 31, 2002, the aggregate cost of investments for Federal income tax purposes was $781,287,170. 4. Short-Term Borrowings: The Series, along with certain other funds managed by FAM and its affiliates, is a party to 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 shareholder redemptions and for other lawful purposes other than for leverage. The Series may borrow up to the maximum amount allowable under the Series' current prospectus and statement of additional information, subject to various other legal, regulatory or contractual limits. The Series pays a commitment fee of .09% per annum based on the Series' pro rata share of the unused portion of the credit agreement. 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 MASTER AGGREGATE BOND INDEX SERIES The Board of Trustees and Investors, Master Aggregate Bond 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 Aggregate Bond Index Series (one of the series constituting Quantitative Master Series Trust) as of December 31, 2002, the related statements of operations for the year then ended and changes in net assets for each of the years in the two-year 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 Aggregate Bond Index Series of the 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 Aggregate Bond Index Fund, December 31, 2002 OFFICERS AND DIRECTORS/TRUSTEES
Number of Other Portfolios in Directorships Position(s) Length Fund Complex Held by Held with of Time Overseen by Director/ Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years Director/Trustee Trustee ==================================================================================================================================== Interested Director/Trustee ==================================================================================================================================== Terry K. P.O. Box 9011 President 1999 to Chairman, Americas Region since 2001 and 117 Funds None Glenn* Princeton, NJ and present Executive Vice President since 1983 of Fund 162 Portfolios 08543-9011 Director/ and 1997 Asset Management, L.P. ("FAM") and Merrill Lynch Age: 62 Trustee to present Investment Managers, L.P. ("MLIM"); President 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 Portfolios in Directorships Position(s) Length Fund Complex Held by Held with of Time Overseen by Director/ Name Address & Age Fund/Trust Served* Principal Occupation(s) During Past 5 Years Director/Trustee Trustee ==================================================================================================================================== Independent Directors/Trustees ==================================================================================================================================== Donald W. P.O. Box 9095 Director/ 2002 to General Partner of The Burton Partnership, 23 Funds ITC Delta- Burton Princeton, NJ Trustee present Limited Partnership since 1979; Managing General 34 Portfolios Com, Inc.; 08543-9095 Partner of the South Atlantic Venture Fund II and ITC Holding Age: 58 III, Limited Partnerships and Chairman of South Company, Atlantic Private Equity Fund IV, Limited Partner- Inc.; ship since 1983; Member of the Investment Knology, Advisory Council of the Florida State Board Inc.; Main- of Administration since 2001. Bancorp, N.A.; Pri- Care, Inc.; Symbion, Inc. ==================================================================================================================================== M. Colyer P.O. Box 9095 Director/ 1997 to James R. Williston Professor of Investment 23 Funds Cambridge Crum 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/ 1997 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. P.O. Box 9095 Director/ 2000 to Managing Director of FGW Associates since 1997. 23 Funds Watson Weiss Princeton, NJ Trustee present 34 Portfolios Pharma- 08543-9095 ceuticals, Age: 61 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 in which they turn 72. ==================================================================================================================================== Position(s) Length Held with of Time Name Address & Age Fund/Trust Served* Principal Occupation(s) During Past 5 Years ==================================================================================================================================== Fund/Trust Officers ==================================================================================================================================== Donald C. P.O. Box 9011 Vice 1997 to First Vice President of FAM and MLIM since 1997 and Treasurer thereof Burke 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 Age: 49 from 1999 to 2001; Chief Investment Officer of Oppenheimer Funds, Inc. from 1987 to 1999 and Executive Vice President from 1991 to 1999. ==================================================================================================================================== Jeffrey B. P.O. Box 9011 Vice 1999 to Director (Global Fixed Income) of MLIM since 2000; Vice President of MLIM Hewson Princeton, NJ President present from 1989 to 2000. 08543-9011 Age: 51 ==================================================================================================================================== Frank P.O. Box 9011 Vice 2002 to Managing Director of MLIM and head of the Global Fixed Income Viola Princeton, NJ President present Structured Asset Team since 2002; Director (Global Fixed Income) of MLIM 08543-9011 from 2000 to 2002 and Vice President from 1996 to 2000. Age: 38 ==================================================================================================================================== Stephen M. P.O. Box 9011 Secretary 2002 to Vice President (Legal Advisory) of MLIM since 2000; Associate with Benham 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. - -------------------------------------------------------------------------------- Effective January 1, 2003, J. Thomas Touchton, Director/Trustee of Merrill Lynch Aggregate Bond Index Fund, retired. The Fund's Board of Directors/Trustees wishes Mr. Touchton well in his retirement. - -------------------------------------------------------------------------------- 34 & 35 [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 1--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 Aggregate Bond Index Fund By: /s/ Terry K. Glenn --------------------------- Terry K. Glenn, President of Merrill Lynch Aggregate Bond 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 Aggregate Bond Index Fund Date: February 24, 2003 By: /s/ Donald C. Burke --------------------------- Donald C. Burke Chief Financial Officer of Merrill Lynch Aggregate Bond Index Fund Date: February 24, 2003 EX-99.CERT 3 e300117_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 Aggregate Bond Index Fund, certify that: 1. I have reviewed this report on Form N-CSR of Merrill Lynch Aggregate Bond Index Fund and Master Aggregate Bond 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 Aggregate Bond 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 Aggregate Bond Index Fund, certify that: 1. I have reviewed this report on Form N-CSR of Merrill Lynch Aggregate Bond Index Fund and Master Aggregate Bond 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 Aggregate Bond Index Fund EX-99.1 4 e300117_ex99-1.txt CERTIFICATION PURSUANT 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 Aggregate Bond 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 Aggregate Bond Index Fund Exhibit 99.1 Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Terry K. Glenn, President of Merrill Lynch Aggregate Bond 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 Aggregate Bond Index Fund -----END PRIVACY-ENHANCED MESSAGE-----