-----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, SUHzP/ivI3Y1p3IMGjyHg83LiOIOe77ctOnCrXwg0CNAU7DTr38BHZoBnC2r9Tur FmdRasGd4CXRfHhjqB0IBg== 0001193805-05-000751.txt : 20050404 0001193805-05-000751.hdr.sgml : 20050404 20050404161057 ACCESSION NUMBER: 0001193805-05-000751 CONFORMED SUBMISSION TYPE: N-CSR/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050404 DATE AS OF CHANGE: 20050404 EFFECTIVENESS DATE: 20050404 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/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-07899 FILM NUMBER: 05729982 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/A 1 e500378_ncsra-mlaggregate.txt AMENDED 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 811-07899 811-07885 Name of Fund: Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. Master Aggregate Bond Index Series of Quantitative Master Series Trust Fund Address: P.O. Box 9011 Princeton, NJ 08543-9011 Name and address of agent for service: Robert C. Doll, Jr., Chief Executive Officer, Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust, 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: 12/31/04 Date of reporting period: 01/01/04 - 12/31/04 Item 1 - Report to Stockholders [LOGO] Merrill Lynch Investment Managers www.mlim.ml.com Merrill Lynch Aggregate Bond Index Fund Of Merrill Lynch Index Funds, Inc. Annual Report December 31, 2004 [LOGO] Merrill Lynch Investment Managers Merrill Lynch Aggregate Bond Index Fund Important Tax Information Of the ordinary income distributions paid monthly by Merrill Lynch Aggregate Bond Index Fund, during the taxable year ended December 31, 2004, 8.07% was attributable to federal obligations. The law varies in each state as to whether and what percentage of dividend income attributable to federal obligations is exempt from state income tax. We recommend that you consult your tax adviser to determine if any portion of the dividends you received is exempt from state income taxes. Additionally, the Fund distributed long-term capital gains of $.041670 per share to shareholders of record on December 20, 2004. Please retain this information for your records. Availability of Quarterly Schedule of Investments The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 2 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 A Letter From the President and Chief Investment Officer Dear Shareholder The U.S. equity market ended 2004 in positive territory, although not without some suspense along the way. Fixed income markets also performed well, with high yield bond investors enjoying some of the greatest returns. Over the past year, the equity market generally found support from a healthy economic environment, above-average corporate earnings, increased capital spending and still-low interest rates. Stalling the momentum somewhat throughout the year was a contentious election, negligible inflation amid a rising federal funds interest rate, record-high oil prices and the seemingly ever-present worries over terrorism and the war in Iraq. Still, the Standard & Poor's 500 Index posted a 12-month return of +10.88% and a six-month return of +7.19% as of December 31, 2004. The fourth quarter of the year proved to be the most telling, as the S&P 500 Index was up only 1.51% year-to-date as of September 30, 2004. As the price of oil relaxed and election uncertainties subsided, the market headed more convincingly upward in the last quarter of the year. Given the relatively positive environment for equities, the favorable performance of the bond market came as somewhat of a surprise. The Lehman Brothers Aggregate Bond Index posted a 12-month return of +4.34% and a six-month return of +4.18% as of December 31, 2004. The tax-exempt market performed just as well, with a 12-month return of +4.48% and a six-month return of +5.19%, as measured by the Lehman Brothers Municipal Bond Index. Those comfortable with a higher degree of risk benefited this past year, as the Credit Suisse First Boston High Yield Index posted a 12-month return of +11.95% and a six-month return of +9.26%. Interestingly, as the Federal Reserve Board began raising its target short-term interest rate, long-term bond yields were little changed. In fact, the yield on the 10-year Treasury was 4.24% at year-end compared to 4.27% at December 31, 2003. The yield on the two-year Treasury climbed to 3.08% at year-end 2004 from 1.84% a year earlier. As always, our investment professionals are closely monitoring the markets, the economy and the overall environment in an effort to make well-informed decisions for the portfolios they manage. For the individual investor, the key to investment success -- particularly during uncertain times -- is to maintain a long-term perspective and adhere to the disciplines of asset allocation, diversification and rebalancing. We encourage you to work with your financial advisor to ensure these time-tested techniques are incorporated into your investment plan. We thank you for trusting Merrill Lynch Investment Managers with your investment assets, and we look forward to serving you in the new year and beyond. Sincerely, /s/ Robert C. Doll, Jr. Robert C. Doll, Jr. President and Chief Investment Officer Merrill Lynch Investment Managers MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 3 [LOGO] Merrill Lynch Investment Managers A Discussion With Your Fund's Portfolio Managers We continued to invest in a statistically selected sample of bonds correlated to the Lehman Brothers Aggregate Bond Index in an effort to offer investors returns consistent with the broader investment grade bond market. How did the Fund perform during the fiscal year in light of the existing market conditions? For the 12-month period ended December 31, 2004, Merrill Lynch Aggregate Bond Index Fund's Class A and Class I Shares had total returns of +4.05% and +4.31%, respectively. This compared to a return of +4.34% for the Fund's benchmark, the Lehman Brothers Aggregate Bond Index, for the same period. (Complete performance information can be found on pages 6 and 7 of this report to shareholders.) Although the Fund uses a stratified sampling approach to mimic the composition and performance of the Index, minimal total return tracking error is expected in seeking to replicate the return of the benchmark. This often will account for the variance in returns versus the Index. The Lehman Brothers Aggregate Bond Index is comprised of three major investment sectors: government and agency issues, agency-guaranteed mortgage-backed securities (MBS) and investment grade corporate bonds. Sector weighting and security selection in the Index are determined by the market representation that each sector has in the overall market. For calendar year 2004, the corporate bond sector of the Index was the best performer, with a return of +5.24%. As interest rates began to rise, along with prospects of an improving economy, corporate spreads tightened to their Treasury counterparts, lending support to the credit sector. For the same period, the MBS sector returned +4.70%, as spreads in this low duration sector tightened in sympathy with corporate bonds. The government and agency sector returned +3.48% for the year. These returns were realized in a range-bound trading environment, as economists and investors monitored the economic data and Federal Reserve Board (the Fed) language for signs of interest rate direction. Early in the period, the Fed appeared poised to keep interest rates at historic lows, pledging patience in its approach to rate increases in order to ensure the economy's strength. The tenor changed somewhat as inflation seemed imminent and the labor environment -- the primary economic weak point -- improved. On June 30, the Fed made its first move away from its accommodative policy stance, raising the target federal funds rate from 1% to 1.25%. Four additional rate increases totaling 100 basis points (1%) followed, bringing the federal funds rate to 2.25% at year-end. Over the past 12 months, yields on the 10-year Treasury note ranged from a low of 3.68% on March 16 to a high of 4.87% on June 14. Interestingly, the 10-year Treasury note closed the year at 4.24%, only three basis points lower than where it began. How was the portfolio managed during the year? The Fund seeks to replicate the total return, before expenses, of the unmanaged Lehman Brothers Aggregate Bond Index, a widely accepted investment performance benchmark comprised of dollar-denominated investment grade bonds of different types. Because it is not practical or logistically possible to create a portfolio with all of the Index positions, we construct a proxy portfolio (Master Aggregate Bond Index Series) of far fewer securities that seeks to duplicate the return of the benchmark. 4 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 The investments in the Series are determined by implementing stratified sampling techniques. Through this approach, we select securities that collectively mimic the investment characteristics of the Index at the sector and subsector levels. At December 31, 2004, the Lehman Brothers Aggregate Bond Index was comprised of 5,836 securities. The Series was comprised of 490 individual investments designed to match the market exposure and investment characteristics of the Index. What changes occurred in the Index, and the portfolio, during the year? In seeking to provide returns that are representative of the bond market as a whole, we track the sector and subsector weightings of our benchmark index rather than maintaining a bias to any specific area of the market. At December 31, 2004, the government and agency sector of the Lehman Brothers Aggregate Bond Index was comprised of 695 securities, accounting for 35.69% of the Index. This compared to 802 issues representing 33.73% of the benchmark at December 31, 2003. The portfolio's position in this sector is designed to match the duration, yield and convexity of its Index counterpart. As such, any change in interest rates or the shape of the yield curve should have an identical effect on the return of this sector. The MBS sector included 2,272 securities and accounted for 39.51% of the Index at December 31, 2004 versus 2,482 securities representing 39.91% of the Index at December 31, 2003. The MBS sector of the portfolio has the same exposure to 30-year, 15-year and balloon MBS as the Index. Within these subsectors, exposure to coupon and issuer also are matched to that of the Index in an effort to duplicate the return of the Index's MBS sector with minimal deviation. In the corporate sector, there were 2,869 securities representing 24.80% of the Index at December 31, 2004, compared to 3,482 securities representing 26.36% of the Index as of December 31, 2003. As with the government sector, we seek to match investment characteristics in the portfolio's corporate sector with those of the Index. However, in the corporate sector, we also seek to mirror the credit rating and industry exposure of the benchmark. How was the portfolio positioned at the close of the period? We continued to use our stratified sampling techniques to create a proxy portfolio of our benchmark and offer comparable returns. With that in mind, we expect the portfolio to continue to meet its objective of providing fixed income returns consistent with the broader market. Jeffrey B. Hewson Vice President and Portfolio Manager January 12, 2005 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 5 [LOGO] Merrill Lynch Investment Managers 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 an initial sales charge (front-end load) or deferred sales charge and bear no ongoing distribution fee. In addition, Class A Shares are subject to an ongoing account maintenance fee of 0.25% (per year). o Class I Shares do not incur an initial sales charge (front-end load) or deferred sales charge and bear no ongoing distribution or account maintenance fees. Class I Shares are available only to eligible investors. None of the past results shown should be considered a representation of future performance. Current performance may be lower or higher than the performance data quoted. Refer to www.mlim.ml.com to obtain performance data current to the most recent month-end. 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 gain distributions, if any, 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 adminis- trator 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, 2004 Total Return Total Return Total Return 30-Day Yield ================================================================================================================== ML Aggregate Bond Index Fund Class A Shares* +4.09% +4.05% +64.38% 3.64% - ------------------------------------------------------------------------------------------------------------------ ML Aggregate Bond Index Fund Class I Shares* +4.22 +4.31 +67.57 3.90 - ------------------------------------------------------------------------------------------------------------------ Lehman Brothers Aggregate Bond Index** +4.18 +4.34 +71.71 -- - ------------------------------------------------------------------------------------------------------------------
* Cumulative 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 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. Since inception total return is from 4/03/97. 6 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 Performance Data (concluded) Total Return Based on a $10,000 Investment--Class A & Class I Shares A line graph depicting the growth of an investment in the Fund's Class A Shares and Class I Shares compared to growth of an investment in the Lehman Brothers Aggregate Bond Index. Values are from April 3, 1997 to December 2004.
4/03/97** 12/97 12/98 12/99 12/00 12/01 12/02 12/03 12/04 ML Aggregate Bond Index Fund+--Class A Shares* $10,000 $10,929 $11,832 $11,656 $12,961 $13,946 $15,286 $15,798 $16,438 ML Aggregate Bond Index Fund+--Class I Shares* $10,000 $10,949 $11,883 $11,724 $13,082 $14,112 $15,492 $16,063 $16,757 4/30/97** 12/97 12/98 12/99 12/00 12/01 12/02 12/03 12/04 Lehman Brothers Aggregate Bond Index++ $10,000 $10,988 $11,943 $11,845 $13,222 $14,338 $15,808 $16,457 $17,171
* 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, mortgaged-backed securities issued by the Government National Mortgage Association, Freddie Mac or Fannie Mae and investment-grade (rated BBB or better) corporate bonds. Past performance is not predictive of future performance. Average Annual Total Return Class A Shares Return ================================================================================ One Year Ended 12/31/04 +4.05% - -------------------------------------------------------------------------------- Five Years Ended 12/31/04 +7.11 - -------------------------------------------------------------------------------- Inception (4/03/97) through 12/31/04 +6.63 - -------------------------------------------------------------------------------- Class I Shares Return ================================================================================ One Year Ended 12/31/04 +4.31% - -------------------------------------------------------------------------------- Five Years Ended 12/31/04 +7.40 - -------------------------------------------------------------------------------- Inception (4/03/97) through 12/31/04 +6.89 - -------------------------------------------------------------------------------- MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 7 [LOGO] Merrill Lynch Investment Managers Disclosure of Expenses Shareholders of this Fund may incur the following charges: (a) expenses related to transactions, including sales charges, redemption fees and exchange fees; and (b) operating expenses including advisory fees, distribution fees including 12(b)-1 fees, and other Fund expenses. The following example (which is based on a hypothetical investment of $1,000 invested on July 1, 2004 and held through December 31, 2004) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds. The first table below provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period." The second table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in this Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in other funds' shareholder reports. The expenses shown in the table are intended to highlight shareholders ongoing costs only and do not reflect any transactional expenses, such as sales charges, redemption fees or exchange fees. Therefore, the second table is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.
Expenses Paid Beginning Ending During the Period* Account Value Account Value July 1, 2004 to July 1, 2004 December 31, 2004 December 31, 2004 ========================================================================================================== Actual ========================================================================================================== Class A $1,000 $1,040.90 $3.11 - ---------------------------------------------------------------------------------------------------------- Class I $1,000 $1,042.20 $1.82 ========================================================================================================== Hypothetical (5% annual return before expenses)** ========================================================================================================== Class A $1,000 $1,022.36 $3.08 - ---------------------------------------------------------------------------------------------------------- Class I $1,000 $1,023.63 $1.80 - ----------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class (.60% for Class A and .35% for Class I), multiplied by the average account value over the period, multiplied by 186/366 (to reflect the one-half year period shown). Because the Fund is a feeder fund, the expense table example reflects the expenses of both the feeder fund and the master series in which it invests. ** Hypothetical 5% annual return before expenses is calculated by pro-rating the number of days in the most recent fiscal half-year divided by 366. 8 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 Statement of Assets and Liabilities Merrill Lynch Aggregate Bond Index Fund As of December 31, 2004 ============================================================================================================================== Assets - ------------------------------------------------------------------------------------------------------------------------------ Investment in Master Aggregate Bond Index Series (the "Series"), at value (identified cost--$390,650,655) ............... $ 400,090,999 Prepaid expenses ................................................... 21,404 ------------- Total assets ....................................................... 400,112,403 ------------- ============================================================================================================================== Liabilities - ------------------------------------------------------------------------------------------------------------------------------ Payables: Dividends and distributions to shareholders ..................... $ 2,468,326 Administrator ................................................... 71,651 Distributor ..................................................... 10,674 2,550,651 ------------- Accrued expenses and other liabilities ............................. 69,999 ------------- Total liabilities .................................................. 2,620,650 ------------- ============================================================================================================================== Net Assets - ------------------------------------------------------------------------------------------------------------------------------ Net assets ......................................................... $ 397,491,753 ============= ============================================================================================================================== Net Assets Consist of - ------------------------------------------------------------------------------------------------------------------------------ Class A Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized ..................................... $ 440 Class I Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized ..................................... 3,248 Paid-in capital in excess of par ................................... 387,367,755 Accumulated distributions in excess of investment income--net ...... $ (37,041) Undistributed realized capital gains allocated from the Series--net ....................................................... 717,007 Unrealized appreciation allocated from the Series--net ............. 9,440,344 ------------- Total accumulated earnings--net .................................... 10,120,310 ------------- Net Assets ......................................................... $ 397,491,753 ============= ============================================================================================================================== Net Asset Value - ------------------------------------------------------------------------------------------------------------------------------ Class A--Based on net assets of $47,465,627 and 4,403,418 shares outstanding ................................................ $ 10.78 ============= Class I--Based on net assets of $350,026,126 and 32,475,441 shares outstanding ................................................ $ 10.78 =============
See Notes to Financial Statements. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 9 [LOGO] Merrill Lynch Investment Managers Statement of Operations Merrill Lynch Aggregate Bond Index Fund For the Year Ended December 31, 2004 ============================================================================================================================== Investment Income Allocated from the Series--Net - ------------------------------------------------------------------------------------------------------------------------------ Net investment income allocated from the Series: Interest ........................................................ $ 17,171,208 Securities lending--net ......................................... 66,795 Expenses ........................................................ (231,778) ------------- Net investment income allocated from the Series .................... 17,006,225 ------------- ============================================================================================================================== Expenses - ------------------------------------------------------------------------------------------------------------------------------ Administration fees ................................................ $ 777,935 Transfer agent fees ................................................ 250,770 Account maintenance fees--Class A .................................. 147,038 Printing and shareholder reports ................................... 138,776 Registration fees .................................................. 35,591 Professional fees .................................................. 13,500 Directors' fees and expenses ....................................... 5,907 Other .............................................................. 16,221 ------------- Total expenses before waiver ....................................... 1,385,738 Waiver of expenses ................................................. (43,515) ------------- Total expenses after waiver ........................................ 1,342,223 ------------- Investment income--net ............................................. 15,664,002 ------------- ============================================================================================================================== Realized & Unrealized Gain (Loss) Allocated from the Series--Net - ------------------------------------------------------------------------------------------------------------------------------ Realized gain on investments, futures contracts and swaps allocated from the Series--net .................................... 7,809,845 Change in unrealized appreciation on investments allocated from the Series--net .............................................. (5,807,322) ------------- Total realized and unrealized gain allocated from the Series--net ....................................................... 2,002,523 ------------- Net Increase in Net Assets Resulting from Operations ............... $ 17,666,525 =============
See Notes to Financial Statements. 10 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 Statements of Changes in Net Assets Merrill Lynch Aggregate Bond Index Fund
For the Year Ended December 31, ------------------------------- Increase (Decrease) in Net Assets: 2004 2003 ============================================================================================================================== Operations - ------------------------------------------------------------------------------------------------------------------------------ Investment income--net ............................................. $ 15,664,002 $ 17,317,576 Realized gain allocated from the Series--net ....................... 7,809,845 3,656,667 Change in unrealized appreciation allocated from the Series--net ....................................................... (5,807,322) (5,518,907) ------------------------------- Net increase in net assets resulting from operations ............... 17,666,525 15,455,336 ------------------------------- ============================================================================================================================== Dividends & Distributions to Shareholders - ------------------------------------------------------------------------------------------------------------------------------ Investment income--net: Class A ......................................................... (2,164,103) (2,458,643) Class I ......................................................... (13,823,831) (15,084,612) Realized gain--net: Class A ......................................................... (698,074) -- Class I ......................................................... (5,123,432) -- ------------------------------- Net decrease in net assets resulting from dividends and distributions to shareholders ..................................... (21,809,440) (17,543,255) ------------------------------- ============================================================================================================================== Capital Share Transactions - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets derived from capital share transactions ................................................ (28,134,770) 9,837,669 ------------------------------- ============================================================================================================================== Net Assets - ------------------------------------------------------------------------------------------------------------------------------ Total increase (decrease) in net assets ............................ (32,277,685) 7,749,750 Beginning of year .................................................. 429,769,438 422,019,688 ------------------------------- End of year* ....................................................... $ 397,491,753 $ 429,769,438 =============================== * Accumulated distributions in excess of investment income--net . $ (37,041) $ (106,150) ===============================
See Notes to Financial Statements. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 11 [LOGO] Merrill Lynch Investment Managers Financial Highlights Merrill Lynch Aggregate Bond Index Fund
Class A ------------------------------------------------------------------- The following per share data and ratios have been derived For the Year Ended from information provided in the financial statements. December 31, ------------------------------------------------------------------- Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000 =================================================================================================================================== Per Share Operating Performance - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ... $ 10.91 $ 10.96 $ 10.50 $ 10.31 $ 9.86 ------------------------------------------------------------------- Investment income--net ............... .39** .41** .52** .58 .61 Realized and unrealized gain (loss) allocated from the Series--net ...... .04 (.05) .46 .19 .45 ------------------------------------------------------------------- Total from investment operations ..... .43 .36 .98 .77 1.06 ------------------------------------------------------------------- Less dividends and distributions: Investment income--net ............ (.40) (.41) (.52) (.58) (.61) Realized gain allocated from the Series--net ...................... (.16) -- -- -- -- ------------------------------------------------------------------- Total dividends and distributions .... (.56) (.41) (.52) (.58) (.61) ------------------------------------------------------------------- Net asset value, end of year ......... $ 10.78 $ 10.91 $ 10.96 $ 10.50 $ 10.31 =================================================================== =================================================================================================================================== Total Investment Return+ - ----------------------------------------------------------------------------------------------------------------------------------- Based on net asset value per share ... 4.05% 3.35% 9.61% 7.60% 11.18% =================================================================== =================================================================================================================================== Ratios to Average Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Expenses, net of waiver* ............. .60% .60% .59% .60% .63% =================================================================== Expenses* ............................ .61% .62% .61% .71% .70% =================================================================== Investment income--net ............... 3.60% 3.70% 4.91% 5.50% 6.17% =================================================================== =================================================================================================================================== Supplemental Data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) $ 47,466 $ 63,872 $ 61,029 $ 60,438 $ 65,339 =================================================================== Portfolio turnover of the Series ..... 159.44% 136.76% 112.18% 144.23% 43.24% ===================================================================
+ The Fund's administrator has agreed to waive a portion of its fees. Without such waiver, the Fund's performance would have been lower. * Includes the Fund's share of the Series' allocated expenses. ** Based on average shares outstanding. See Notes to Financial Statements. 12 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 Financial Highlights (concluded) Merrill Lynch Aggregate Bond Index Fund
Class I ------------------------------------------------------------------- The following per share data and ratios have been derived For the Year Ended from information provided in the financial statements. December 31, ------------------------------------------------------------------- Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000 =================================================================================================================================== Per Share Operating Performance - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ... $ 10.91 $ 10.95 $ 10.50 $ 10.31 $ 9.85 ------------------------------------------------------------------- Investment income--net ............... .42** .43** .55** .61 .64 Realized and unrealized gain (loss) allocated from the Series--net ...... .04 (.03) .45 .19 .46 ------------------------------------------------------------------- Total from investment operations ..... .46 .40 1.00 .80 1.10 ------------------------------------------------------------------- Less dividends and distributions: Investment income--net ............ (.43) (.44) (.55) (.61) (.64) Realized gain allocated from the Series--net ...................... (.16) -- -- -- -- ------------------------------------------------------------------- Total dividends and distributions .... (.59) (.44) (.55) (.61) (.64) ------------------------------------------------------------------- Net asset value, end of year ......... $ 10.78 $ 10.91 $ 10.95 $ 10.50 $ 10.31 =================================================================== =================================================================================================================================== Total Investment Return+ - ----------------------------------------------------------------------------------------------------------------------------------- Based on net asset value per share ... 4.31% 3.70% 9.78% 7.87% 11.57% =================================================================== =================================================================================================================================== Ratios to Average Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Expenses, net of waiver* ............. .35% .35% .34% .35% .38% =================================================================== Expenses* ............................ .36% .37% .36% .46% .45% =================================================================== Investment income--net ............... 3.85% 3.95% 5.16% 5.72% 6.41% =================================================================== =================================================================================================================================== Supplemental Data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) $350,026 $365,898 $360,991 $324,390 $214,056 =================================================================== Portfolio turnover of the Series ..... 159.44% 136.76% 112.18% 144.23% 43.24% ===================================================================
+ The Fund's administrator has agreed to waive a portion of its fees. Without such waiver, the Fund's performance would have been lower. * Includes the Fund's share of the Series' allocated expenses. ** Based on average shares outstanding. See Notes to Financial Statements. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 13 [LOGO] Merrill Lynch Investment Managers 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 amended, as a non-diversified mutual fund. The Fund seeks to achieve its investment objective by investing all of its assets in Master Aggregate Bond Index Series (the "Series") of the Quantitative Master Series Trust, which has the same investment objective and strategy 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 U.S. generally accepted accounting principles, which may require the use of management accruals and estimates. Actual results may differ from these estimates. The percentage of the Series owned by the Fund at December 31, 2004 was 47.6%. The Fund offers two classes of shares. Shares of Class A and Class I 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 A 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. Income, expenses (other than expenses attributable to a specific class) and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets. 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 -- U.S. generally accepted accounting principles require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, during the current year, $393,041 has been reclassified between undistributed net realized capital gains and accumulated distributions in excess of net investment income as a result of permanent differences attributable to swap agreements and amortization methods on fixed income securities. This reclassification has no effect on net assets or net asset values per share. 2. Transactions with Affiliates: The Corporation has entered into an Administration 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. 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. FAM has entered into a voluntary arrangement with the Fund under which expenses incurred by the Fund (excluding account maintenance fees) will not exceed .35%. This arrangement has a one-year term and is renewable. For the year ended December 31, 2004, FAM earned fees of $777,935, of which $43,515 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 14 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 Notes to Financial Statements (concluded) Merrill Lynch Aggregate Bond Index Fund is accrued daily and paid monthly at the annual rate of .25% based upon the average daily net assets of Class A 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 A shareholders. Financial Data Services, Inc. ("FDS"), a 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 FAM, PSI, FAMD, FDS, and/or ML & Co. 3. Capital Share Transactions: Net increase (decrease) in net assets derived from capital share transactions was ($28,134,770) and $9,837,669 for the years ended December 31, 2004 and December 31, 2003, respectively. Transactions in capital shares for each class were as follows: - ------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended December 31, 2004 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................ 1,470,677 $ 16,082,715 Shares issued to shareholders in reinvestment of dividends and distributions ................... 221,172 2,402,740 ------------------------------- Total issued ........................... 1,691,849 18,485,455 Shares redeemed ........................ (3,141,603) (34,369,324) ------------------------------- Net decrease ........................... (1,449,754) $ (15,883,869) =============================== - ------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended December 31, 2003 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................ 2,487,650 $ 27,213,151 Shares issued to shareholders in reinvestment of dividends ........ 184,332 2,017,562 ------------------------------- Total issued ........................... 2,671,982 29,230,713 Shares redeemed ........................ (2,389,100) (26,075,348) ------------------------------- Net increase ........................... 282,882 $ 3,155,365 =============================== - ------------------------------------------------------------------------------- Class I Shares for the Year Dollar Ended December 31, 2004 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................ 13,214,147 $ 144,088,117 Shares issued to shareholders in reinvestment of dividends and distributions ................... 1,185,213 12,870,982 ------------------------------- Total issued ........................... 14,399,360 156,959,099 Shares redeemed ........................ (15,459,780) (169,210,000) ------------------------------- Net decrease ........................... (1,060,420) $ (12,250,901) =============================== - ------------------------------------------------------------------------------- Class I Shares for the Year Dollar Ended December 31, 2003 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................ 10,665,367 $ 116,847,001 Shares issued to shareholders in reinvestment of dividends ........ 1,030,875 11,278,131 ------------------------------- Total issued ........................... 11,696,242 128,125,132 Shares redeemed ........................ (11,115,541) (121,442,828) ------------------------------- Net increase ........................... 580,701 $ 6,682,304 =============================== 4. Distributions to Shareholders: The tax character of distributions paid during the fiscal years ended December 31, 2004 and December 31, 2003 was as follows: - -------------------------------------------------------------------------------- 12/31/2004 12/31/2003 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary income ..................... $20,301,079 $17,543,255 Net long-term capital gains ......... 1,508,361 -- ------------------------------ Total taxable distributions .............. $21,809,440 $17,543,255 ============================== As of December 31, 2004, the components of accumulated earnings on a tax basis were as follows: - ------------------------------------------------------------------------------- Undistributed ordinary income--net ........................ $ 726,780 Undistributed long-term capital gains--net ................ 554,224 ----------- Total undistributed earnings--net ......................... 1,281,004 Capital loss carryforward ................................. -- Unrealized gains--net ..................................... 8,839,306* ----------- Total accumulated earnings--net ........................... $10,120,310 =========== * 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 premium and discounts on fixed income securities. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 15 [LOGO] Merrill Lynch Investment Managers Report of Independent Registered Public Accounting Firm Merrill Lynch Aggregate Bond Index Fund To the Shareholders and Board of Directors of 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. (the "Fund"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Merrill Lynch Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. as of December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. Deloitte & Touche LLP Princeton, New Jersey February 23, 2005 16 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 Summary Schedule of Investments Master Aggregate Bond Index Series This summary schedule of investments is presented to help investors focus on the Series' principal holdings. It includes the Series' 50 largest holdings and each investment of any issuer that exceeds 1% of the Series' net assets. "Other Securities" represent all issues not required to be disclosed under the rules adopted by the Securities and Exchange Commission. A complete schedule of investments is available without charge, upon request, by calling 800-637-3863 or on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Interest Maturity Value Percent of Issue Face Amount Rate Date(s) (in U.S. dollars) Net Assets ================================================================================================================================== Government & Fannie Mae $ 8,625,000 3.875% 3/15/2005 $ 8,648,124 1.0% Agency 15,790,000 5.25 6/15/2006 16,255,694 1.9 Obligations 31,785,000 2.625 11/15/2006 31,439,497 3.7 30,155,000 5.75 2/15/2008 32,120,865 3.8 11,260,000 2.50 6/15/2008 (c) 10,861,970 1.3 14,880,000 6.625 9/15/2009 16,614,621 2.0 29,055,000 6.625 11/15/2010 32,835,404 3.9 3,970,000 4.376 3/15/2013 3,959,138 0.5 2,340,000 4.625 - 7.25 10/15/2014 - 5/15/2030 2,713,974 0.3 ------------------------------------------------------------------------------------------------------------- Freddie Mac 7,640,000 4.875 3/15/2007 7,888,361 0.9 2,000,000 5.75 4/15/2008 2,135,698 0.3 8,750,000 4.875 11/15/2013 (c) 8,997,817 1.1 8,655,000 6.75 9/15/2029 10,466,673 1.3 4,330,000 5.75 - 7.18 6/27/2006 - 7/15/2032 4,821,862 0.7 ------------------------------------------------------------------------------------------------------------- U.S. Treasury Bonds 6,390,000 4.00 11/15/2012 6,379,265 0.8 14,665,000 8.75 5/15/2017 20,548,759 2.5 8,370,000 8.50 2/15/2020 11,812,815 1.4 6,080,000 8.125 8/15/2021 8,418,423 1.0 7,340,000 6.25 8/15/2023 8,593,246 1.0 3,075,000 6.375 8/15/2027 3,692,402 0.4 405,000 5.375 - 5.75 8/15/2010 - 2/15/2031 441,573 0.0 ------------------------------------------------------------------------------------------------------------- U.S. Treasury Notes 27,135,000 5.75 11/15/2005 27,830,334 3.3 2,790,000 5.875 11/15/2005 2,864,220 0.3 7,645,000 3.00 11/15/2007 7,597,815 0.9 2,865,000 3.625 5/15/2013 2,776,251 0.3 ------------------------------------------------------------------------------------------------------------- Other Securities 1,567,261 0.2 ------------------------------------------------------------------------------------------------------------- Total Government & Agency Obligations (Cost--$286,607,376) 292,282,062 34.8 ================================================================================================================================== Government Agency Freddie Mac Mortgage 8,208,310 4.00 5/01/2019 - 1/01/2020 (f) 8,029,893 1.0 Mortgage-Backed Participation Certificates 31,173,272 4.50 2/01/2011 - 7/01/2019 (f) 31,153,431 3.7 Obligations* 26,954,308 5.00 11/01/2017 - 2/15/2020 (f) 27,392,429 3.3 47,631,658 5.00 4/01/2034 - 6/01/2034 47,332,518 5.6 8,821,027 5.50 8/01/2017 - 1/15/2020 (f) 9,121,146 1.1 68,601,000 5.50 2/15/2035 (f) 69,501,388 8.3 4,268,193 6.00 4/01/2016 - 10/01/2017 4,470,819 0.5 38,367,128 6.00 6/01/2033 - 9/01/2034 39,651,831 4.7 16,322,441 6.50 1/01/2026 - 9/01/2032 17,141,085 2.0 5,456,996 7.00 1/01/2020 - 11/01/2032 5,787,258 0.7 6,112,871 4.50 - 12.50 5/01/2007 - 6/01/2034 6,326,135 0.7 ------------------------------------------------------------------------------------------------------------- Ginnie Mae MBS Certificates 4,520,000 4.50 2/15/2035 (f) 4,397,110 0.5 5,600,000 5.00 1/15/2035 (f) 5,598,253 0.7 12,237,890 5.50 8/15/2033 - 1/15/2035 (f) 12,508,277 1.5 3,771,114 6.00 4/20/2026 - 4/15/2033 3,911,765 0.5 3,646,415 6.50 4/15/2026 - 5/15/2032 3,842,551 0.5 3,575,719 6.50 - 9.50 4/15/2013 - 3/15/2032 3,836,740 0.4 ------------------------------------------------------------------------------------------------------------- Other Securities 5,565,793 0.7 ------------------------------------------------------------------------------------------------------------- Total Government Agency Mortgage-Backed Obligations (Cost--$303,424,913) 305,568,422 36.4 =============================================================================================================
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 17 [LOGO] Merrill Lynch Investment Managers Summary Schedule of Investments (continued) Master Aggregate Bond Index Series
Face Value Percent of Amount Non-Government Agency Mortgage-Backed Securities* (in U.S. dollars) Net Assets ========================================================================================================================== Commercial $19,190,206 CS First Boston Mortgage Securities Corp. Series Mortgage-Backed 2004-FL1A Class A, 2.70% due 5/15/2014 (a)(b) $ 19,206,126 2.3% Securities 20,000,000 Greenwich Capital Commercial Funding Corp. Series 2004-FL2A Class A2, 2.58% due 11/05/2019 (b) 20,006,250 2.4 20,000,000 JPMorgan Chase Commercial Mortgage Securities Corp. Series 2004-FL1A Class A2, 2.587% due 4/16/2019 (b) 20,032,280 2.4 20,000,000 Lehman Brothers Floating Rate Commercial Mortgage Trust Series 2004-LLFA Class A2, 2.65% due 10/15/2017 (a)(b) 20,044,622 2.3 15,000,000 Wachovia Bank Commercial Mortgage Trust Series 2004-WL4A Class A2, 2.65% due 10/15/2015 (a)(b) 15,021,051 1.8 - -------------------------------------------------------------------------------------------------------------------------- Total Non-Government Agency Mortgage-Backed Securities (Cost--$94,190,206) 94,310,329 11.2 ========================================================================================================================== ========================================================================================================================== Industry+ Fixed Income Securities ========================================================================================================================== Banking 2,200,000 Bank of America Corp., 5.875% due 2/15/2009 2,361,841 0.3 Other Securities 19,876,353 2.4 --------------------------- 22,238,194 2.7 - -------------------------------------------------------------------------------------------------------------------------- Financial Services Other Securities 32,960,811 3.9 - -------------------------------------------------------------------------------------------------------------------------- Financial Services-- 2,015,000 HSBC Finance Corp., 5.875% due 2/01/2009 2,153,203 0.3 Consumer Other Securities 1,764,960 0.2 --------------------------- 3,918,163 0.5 - -------------------------------------------------------------------------------------------------------------------------- Foreign Government 2,240,000 Canada Government International Bond, 5.25% due 11/05/2008 2,368,081 0.3 Obligations Mexico Government International Bond: 1,920,000 9.875% due 2/01/2010 2,359,680 0.3 2,625,000 6.375% due 1/16/2013 2,795,625 0.3 3,000,000 Province of Ontario, 6% due 2/21/2006 3,094,041 0.4 Other Securities 8,882,602 1.0 --------------------------- 19,500,029 2.3 - -------------------------------------------------------------------------------------------------------------------------- Industrial-- Other Securities 10,805,458 1.3 Consumer Goods - -------------------------------------------------------------------------------------------------------------------------- Industrial--Energy Other Securities 9,622,464 1.1 - -------------------------------------------------------------------------------------------------------------------------- Industrial-- 2,205,000 General Electric Capital Corp., 6.75% due 3/15/2032 2,580,842 0.3 Manufacturing Other Securities 22,504,392 2.7 --------------------------- 25,085,234 3.0 - -------------------------------------------------------------------------------------------------------------------------- Industrial--Other Other Securities 15,993,338 1.9 - -------------------------------------------------------------------------------------------------------------------------- Industrial--Services Other Securities 23,177,083 2.8 - -------------------------------------------------------------------------------------------------------------------------- Utilities--Communications Other Securities 15,109,263 1.8 - -------------------------------------------------------------------------------------------------------------------------- Utilities--Electric & Gas Other Securities 10,795,687 1.3 - -------------------------------------------------------------------------------------------------------------------------- Yankee Corporates Other Securities 13,896,381 1.6 - -------------------------------------------------------------------------------------------------------------------------- Total Fixed Income Securities (Cost--$194,965,000) 203,102,105 24.2 ========================================================================================================================== Capital Trusts ========================================================================================================================== Banking Other Securities 256,326 0.0 - -------------------------------------------------------------------------------------------------------------------------- Yankee Corporates Other Securities 83,362 0.0 - -------------------------------------------------------------------------------------------------------------------------- Total Capital Trusts (Cost--$327,290) 339,688 0.0 ==========================================================================================================================
18 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 Summary Schedule of Investments (concluded) Master Aggregate Bond Index Series
Value Percent of State Municipal Bonds (in U.S. dollars) Net Assets ========================================================================================================================== Illinois Other Securities $ 672,399 0.1% - -------------------------------------------------------------------------------------------------------------------------- Texas Other Securities 253,147 0.0 - -------------------------------------------------------------------------------------------------------------------------- Total Municipal Bonds (Cost--$886,251) 925,546 0.1 ========================================================================================================================== Face Amount Short-Term Securities ========================================================================================================================== U.S. Government $16,800,000 Federal Home Loan Banks, 1% due 1/03/2005 16,800,000 2.0 Agency Obligations** - -------------------------------------------------------------------------------------------------------------------------- Shares Held ========================================================================================================================== 12,139,250 Merrill Lynch Premier Institutional Fund (d)(e) 12,139,250 1.4 - -------------------------------------------------------------------------------------------------------------------------- Total Investments in Short-Term Securities (Cost--$28,939,250) 28,939,250 3.4 ========================================================================================================================== Total Investments (Cost--$909,340,286***) 925,467,402 110.1 Liabilities in Excess of Other Assets (85,246,216) (10.1) --------------------------- Net Assets $840,221,186 100.0% ===========================
"Other Securities" represent issues that are not identified as the largest 50 holdings of the Series and issues not exceeding 1% of net assets. + For Series compliance purposes, "Industry" means any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Series management. This definition may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease. These industry classifications are unaudited. * Mortgage-Backed Securities 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. ** Certain U.S. Government Agency Obligations are traded on a discount basis; the interest rate shown reflects the discount rate paid at the time of purchase by the Series. *** The cost and unrealized appreciation/depreciation of investments as of December 31, 2004, as computed for federal income tax purposes, were as follows: Aggregate cost ....................................... $909,781,793 ============ Gross unrealized appreciation ........................ $ 17,285,769 Gross unrealized depreciation ........................ (1,600,160) ---------- Net unrealized appreciation .......................... $ 15,685,609 ============ (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) Security, or a portion of security, is on loan. (d) Investments in companies considered to be an affiliate of the Series (such companies are defined as "Affiliated Companies" in Section 2(a)(3) of the Investment Company Act of 1940) were as follows: -------------------------------------------------------------------------- Interest/ Net Dividend Affiliate Activity Income -------------------------------------------------------------------------- Merrill Lynch Liquidity Series, LLC Money Market Series -- $ 4,150 Merrill Lynch Premier Institutional Fund (113,997,750) $139,299 -------------------------------------------------------------------------- (e) Security was purchased with the cash proceeds from securities loans. (f) 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. Swaps outstanding as of December 31, 2004 were as follows: -------------------------------------------------------------------------- Notional Unrealized Amount Appreciation -------------------------------------------------------------------------- Receive (pay) a variable return based on the change in the Lehman Brothers CMBS Investment Grade Index Total Return and pay a floating rate based on 1-month USD LIBOR, minus .20% Broker, JPMorgan Chase Bank Expires March 2005 $26,000,000 -- -------------------------------------------------------------------------- See Notes to Financial Statements. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 19 [LOGO] Merrill Lynch Investment Managers Statement of Assets and Liabilities Master Aggregate Bond Index Series As of December 31, 2004 ============================================================================================================================== Assets - ------------------------------------------------------------------------------------------------------------------------------ Investments in unaffiliated securities, at value (including securities loaned of $11,896,070) (identified cost--$897,201,036) ............................................... $ 913,328,152 Investments in affiliated securities, at value (identified cost--$12,139,250) ................................................ 12,139,250 Cash ............................................................... 16,778,531 Receivables: Securities sold ................................................. $ 75,088,157 Interest ........................................................ 7,958,644 Contributions ................................................... 1,482,484 Swaps ........................................................... 150,367 Securities lending .............................................. 6,466 Paydowns ........................................................ 3,486 84,689,604 ------------- Prepaid expenses ................................................... 2,707 ------------- Total assets ....................................................... 1,026,938,244 ------------- ============================================================================================================================== Liabilities - ------------------------------------------------------------------------------------------------------------------------------ Collateral on securities loaned, at value .......................... 12,139,250 Payables: Securities purchased ............................................ 174,101,760 Withdrawals ..................................................... 379,786 Other affiliates ................................................ 17,375 Investment adviser .............................................. 8,098 174,507,019 ------------- Accrued expenses and other liabilities ............................. 70,789 ------------- Total liabilities .................................................. 186,717,058 ------------- ============================================================================================================================== Net Assets - ------------------------------------------------------------------------------------------------------------------------------ Net assets ......................................................... $ 840,221,186 ------------- ============================================================================================================================== Net Assets Consist of - ------------------------------------------------------------------------------------------------------------------------------ Investors' capital ................................................. $ 824,094,070 Unrealized appreciation--net ....................................... 16,127,116 ------------- Net Assets ......................................................... $ 840,221,186 =============
See Notes to Financial Statements. 20 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 Statement of Operations Master Aggregate Bond Index Series For the Year Ended December 31, 2004 ============================================================================================================================== Investment Income - ------------------------------------------------------------------------------------------------------------------------------ Interest ........................................................... $ 36,826,917 Securities lending--net ............................................ 143,449 ------------- Total income ....................................................... 36,970,366 ------------- ============================================================================================================================== Expenses - ------------------------------------------------------------------------------------------------------------------------------ Professional fees .................................................. $ 140,975 Accounting services ................................................ 130,865 Investment advisory fees ........................................... 88,065 Custodian fees ..................................................... 81,640 Pricing fees ....................................................... 21,054 Trustees' fees and expenses ........................................ 8,985 Printing and shareholder reports ................................... 2,901 Other .............................................................. 22,463 ------------- Total expenses ..................................................... 496,948 ------------- Investment income--net ............................................. 36,473,418 ------------- ============================================================================================================================== Realized & Unrealized Gain (Loss)--Net - ------------------------------------------------------------------------------------------------------------------------------ Realized gain (loss) on: Investments--net ................................................ 7,999,257 Futures contracts and swaps--net ................................ 732,533 8,731,790 ------------- Change in unrealized appreciation on investments--net .............. (5,490,473) ------------- Total realized and unrealized gain--net ............................ 3,241,317 ------------- Net Increase in Net Assets Resulting from Operations ............... $ 39,714,735 =============
See Notes to Financial Statements. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 21 [LOGO] Merrill Lynch Investment Managers Statements of Changes in Net Assets Master Aggregate Bond Index Series
For the Year Ended December 31, ------------------------------- Increase (Decrease) in Net Assets: 2004 2003 ============================================================================================================================== Operations - ------------------------------------------------------------------------------------------------------------------------------ Investment income--net ............................................. $ 36,473,418 $ 33,979,325 Realized gain--net ................................................. 8,731,790 2,279,499 Change in unrealized appreciation--net ............................. (5,490,473) (5,378,419) ------------------------------- Net increase in net assets resulting from operations ............... 39,714,735 30,880,405 ------------------------------- ============================================================================================================================== Capital Transactions - ------------------------------------------------------------------------------------------------------------------------------ Proceeds from contributions ........................................ 160,170,832 357,719,192 Fair value of withdrawals .......................................... (242,691,266) (222,140,755) ------------------------------- Net increase (decrease) in net assets derived from capital transactions .............................................. (82,520,434) 135,578,437 ------------------------------- ============================================================================================================================== Net Assets - ------------------------------------------------------------------------------------------------------------------------------ Total increase (decrease) in net assets ............................ (42,805,699) 166,458,842 Beginning of year .................................................. 883,026,885 716,568,043 ------------------------------- End of year ........................................................ $ 840,221,186 $ 883,026,885 ===============================
See Notes to Financial Statements. 22 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 Financial Highlights Master Aggregate Bond Index Series
For the Year Ended December 31, The following ratios have been derived ------------------------------------------------------------------ from information provided in the financial statements. 2004 2003 2002 2001 2000 =================================================================================================================================== Total Investment Return* - ----------------------------------------------------------------------------------------------------------------------------------- Total investment return .............. 4.58% 3.92% 10.13% 8.07% -- =================================================================== =================================================================================================================================== Ratios to Average Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Expenses ............................. .06% .06% .08% .13% .14% =================================================================== Investment income--net ............... 4.13% 4.22% 5.37% 5.93% 6.62% =================================================================== =================================================================================================================================== Supplemental Data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) $840,221 $883,027 $716,568 $466,151 $308,345 =================================================================== Portfolio turnover ................... 159.44% 136.76% 112.18% 144.23% 43.24% ===================================================================
* Total return is required to be disclosed for fiscal years beginning after December 15, 2000. See Notes to Financial Statements. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 23 [LOGO] Merrill Lynch Investment Managers 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, as amended, and is organized as a Delaware statutory 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 U.S. generally accepted accounting principles, which may require the use of management accruals and estimates. Actual results may differ from these estimates. The following is a summary of significant accounting policies followed by the Series. (a) Valuation of investments -- Debt securities are traded primarily in the over-the-counter markets and are valued at the last available bid price in the over-the-counter market or on the basis of values obtained by a pricing service. Pricing services use valuation matrixes that incorporate both dealer-supplied valuations and valuation models. The procedures of the pricing service and its valuations are reviewed by the officers of the Trust under the general direction of the Board of Trustees. Such valuations and procedures will be reviewed periodically by the Board of Trustees of the Trust. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their closing prices as of the close of such exchanges. Options written or purchased are valued at the last sales price in the case of exchange-traded options. In the case of options traded in the over-the-counter ("OTC") market, valuation is the last asked price (options written) or the last bid price (options purchased). Swap agreements are valued by quoted fair valuations received daily by the Series from the counterparty. Short-term investments with a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value, under which method the investment is valued at cost and any premium or discount is amortized on a straight line basis to maturity. Repurchase agreements are valued at cost plus accrued interest. Investments in open-end investment companies are valued at their net asset value each business day. Securities and other assets for which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of the Board of Trustees of the Trust. Equity securities that are held by the Series, which are traded on stock exchanges or the Nasdaq National Market, are valued at the last sale price or official close price on the exchange, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price for long positions, and at the last available ask price for short positions. In cases where equity securities are traded on more than one exchange, the securities are valued on the exchange designated as the primary market by or under the authority of the Board of Trustees of the Trust. Long positions traded in the OTC market, Nasdaq Small Cap or Bulletin Board are valued at the last available bid price obtained from one or more dealers or pricing services approved by the Board of Trustees of the Trust. Short positions traded in the OTC market are valued at the last available asked price. Portfolio securities that are traded both in the OTC market and on a stock exchange are valued according to the broadest and most representative market. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of business on the New York Stock Exchange ("NYSE"). The value of such securities used in computing the net asset value of the Series' shares are determined as of such times. Foreign currency exchange rates also are generally determined prior to the close of business on the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of business on the NYSE that may not be reflected in the computation of the Series' net asset value. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such securities, those securities may be valued at their fair value as determined in good faith by the Trust's Board of Trustees or by the Investment Adviser using a pricing service and/or procedures approved by the Trust's Board of Trustees. (b) Derivative financial instruments -- The Series may engage in various portfolio investment techniques to provide liquidity or as a proxy for a direct investment in securities underlying the Series' index. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. 24 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 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. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. 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 may purchase and write call and put options. When the Series writes an option, an amount equal to the premium received by the Series is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Series enters into a closing transaction), the Series realizes a gain or loss on the option to the extent of the premiums received or paid (or a gain or loss to the extent that the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. o Swaps -- The Series may enter into swap agreements, which are over-the-counter contracts in which the Fund and a counterparty agree to make periodic net payments on a specified notional amount. The net payments can be made for a set period of time or may be triggered by a predetermined credit event. The net periodic payments may be based on a fixed or variable interest rate; the change in market value of a specified security, basket of securities, or index; or the return generated by a security. (c) Income taxes -- The Series is classified as a partnership for federal income tax purposes. As such, each investor in the Series is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Series. Therefore, no federal income tax provision is required. It is intended that the Series' assets will be managed so an investor in the Series can satisfy the requirements of subchapter M of the Internal Revenue Code. (d) 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. The Series amortizes all premiums and discounts on debt securities. (e) 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. (f) Securities lending -- The Series may lend securities to financial institutions that provide cash or securities issued or guaranteed by the U.S. government as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Series and any additional required collateral is delivered to the Series on the next business day. 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. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 25 [LOGO] Merrill Lynch Investment Managers Notes to Financial Statements (concluded) Master Aggregate Bond Index Series 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. As of December 31, 2004, the Series lent securities with a value of $9,839,430 to MLPF&S or its affiliates. Pursuant to that order, the Series also has retained Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate of FAM, as the securities lending agent for a fee based on a share of the returns on investment of cash collateral. MLIM, LLC 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 MLIM, LLC or in registered money market funds advised by FAM or its affiliates. For the year ended December 31, 2004, MLIM, LLC received $60,677 in securities lending agent fees. For the year ended December 31, 2004, the Series reimbursed FAM $18,523 for certain accounting services. Merrill Lynch Trust Company ("MLTC"), a wholly-owned subsidiary of ML & Co., is the Series' custodian. Certain officers and/or trustees of the Series are officers and/or directors of FAM, PSI, MLTC, and/or ML & Co. 3. Investments: Purchases and sales (including paydowns) of investments, excluding short-term securities, for the year ended December 31, 2004 were $1,438,310,520 and $1,403,573,816, respectively. 4. Short-Term Borrowings: The Trust, on behalf of the Series, along with certain other funds managed by FAM and its affiliates, is a party to a $500,000,000 credit agreement with a group of lenders. 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 .07% 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 Series' election, the federal funds rate plus .50% or a base rate as defined in the credit agreement. The Series did not borrow under the credit agreement during the year ended December 31, 2004. On November 26, 2004, the credit agreement was renewed for one year under substantially the same terms. 26 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 Report of Independent Registered Public Accounting Firm Master Aggregate Bond Index Series To the Investors and Board of Trustees of Quantitative Master Series Trust: We have audited the accompanying statement of assets and liabilities, including the summary schedule of investments, of Master Aggregate Bond Index Series, one of the portfolios constituting the Quantitative Master Series Trust (the "Trust"), as of December 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Master Aggregate Bond Index Series of the Quantitative Master Series Trust as of December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. Deloitte & Touche LLP Princeton, New Jersey February 23, 2005 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 27 [LOGO] Merrill Lynch Investment Managers Officers and Directors/Trustees
Number of Portfolios in Other Public Fund Complex Directorships Position(s) Length of Overseen by Held by Held with Time Director/ Director/ Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years Trustee Trustee ==================================================================================================================================== Interested Director/Trustee - ------------------------------------------------------------------------------------------------------------------------------------ Terry K. P.O. Box 9011 President 1999 to President and Chairman of the Merrill Lynch Invest- 124 Funds None Glenn* Princeton, NJ and present ment Managers, L.P. ("MLIM")/Fund Asset 163 Portfolios 08543-9011 Director/ Management, L.P. ("FAM")-advised funds since Age: 64 Trustee 1999; Chairman (Americas Region) of MLIM from 2000 to 2002; Executive Vice President of MLIM and FAM (which terms as used herein include their corporate predecessors) from 1983 to 2002; President of FAM Distributors, Inc. ("FAMD") from 1986 to 2002 and Director thereof from 1991 to 2002; Executive Vice President and Director of Princeton Services, Inc. ("Princeton Services") from 1993 to 2002; President of Princeton Administrators, L.P. from 1989 to 2002; 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 MLIM or FAM acts as investment adviser. Mr. Glenn is an "interested person" as described in the Investment Company Act, of the Fund based on his present and former positions with MLIM, FAM, FAMD, Princeton Services and 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. ==================================================================================================================================== Independent Directors/Trustees* - ------------------------------------------------------------------------------------------------------------------------------------ Donald W. P.O. Box 9095 Director/ 2002 to General Partner of The Burton Partnership, Limited 23 Funds ITC Delta- Burton Princeton, NJ Trustee present Partnership (an investment Partnership) since 1979; 42 Portfolios Com, Inc., 08543-9095 Managing General Partner of the South Atlantic Knology, Age: 60 Venture Funds since 1983; Member of the Investment Inc., Advisory Committee of the Florida State Board of Symbion, Inc. Administration since 2001. - ------------------------------------------------------------------------------------------------------------------------------------ M. Colyer P.O. Box 9095 Director/ 2000 to James R. Williston Professor of Investment 24 Funds Cambridge Crum Princeton, NJ Trustee present Management Emeritus, Harvard Business 43 Portfolios Bancorp 08543-9095 School since 1996; James R. Williston Professor Age: 72 of Investment Management, Harvard Business School from 1971 to 1996. - ------------------------------------------------------------------------------------------------------------------------------------ Laurie P.O. Box 9095 Director/ 2000 to Professor of Finance and Economics, Graduate 23 Funds None Simon Princeton, NJ Trustee present School of Business, Columbia University since 1998. 42 Portfolios Hodrick 08543-9095 Age: 42 - ------------------------------------------------------------------------------------------------------------------------------------ David H. P.O. Box 9095 Director/ 2003 to Consultant with Putnam Investments from 1993 23 Funds None Walsh Princeton, NJ Trustee present to 2003 and employed in various capacities 42 Portfolios 08543-9095 therewith from 1973 to 1992; Director, The National Age: 63 Audubon Society since 1998; Director, The American Museum of Fly Fishing since 1997. - ------------------------------------------------------------------------------------------------------------------------------------ Fred G. P.O. Box 9095 Director/ 2000 to Managing Director of FGW Advisors, Inc. since 1997; 23 Funds Watson Weiss Princeton, NJ Trustee present Vice President, Planning, Investment and Devel- 42 Portfolios Pharma 08543-9095 opment of Warner Lambert Co. from 1979 to 1997; ceuticals, Age: 63 Director of the Michael J. Fox Foundation for Inc. Parkinson's Research since 2000; Director of BTG International Plc (a global technology commercialization company) since 2001. ------------------------------------------------------------------------------------------------------------------------ * 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.
28 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 Officers and Directors/Trustees (concluded)
Position(s) Length of Held with 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 MLIM and FAM since 1997 and Treasurer thereof since 1999; Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999 and Director 08543-9011 and and since 2004; Vice President of FAMD since 1999; Vice President of MLIM and FAM from Age: 44 Treasurer 1999 to 1990 to 1997; Director of Taxation of MLIM from 1990 to 2001. present - ------------------------------------------------------------------------------------------------------------------------------------ Robert C. P.O. Box 9011 Senior Vice 1999 to President of MLIM/FAM-advised funds since 2005; President of MLIM and FAM since Doll, Jr. Princeton, NJ President present 2001; Co-Head (Americas Region) thereof from 2000 to 2001 and Senior Vice President 08543-9011 from 1999 to 2001; President and Director of Princeton Services, Inc. since 2001; Age: 50 President of Princeton Administrators, L.P. since 2001; Chief Investment Officer of Oppenheimer Funds, Inc. 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 from Hewson Princeton, NJ President present 1994 to 2000. 08543-9011 Age: 53 - ------------------------------------------------------------------------------------------------------------------------------------ Jeffrey P.O. Box 9011 Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President and Hiller Princeton, NJ Compliance present Chief Compliance Officer of MLIM since 2004; Global Director of Compliance at 08543-9011 Officer Morgan Stanley Investment Management from 2002 to 2004; Managing Director and Age: 53 Global Director of Compliance at Citigroup Asset Management from 2000 to 2002; Chief Compliance Officer at Soros Fund Management in 2000; Chief Compliance Officer at Prudential Financial from 1995 to 2000. - ------------------------------------------------------------------------------------------------------------------------------------ Alice A. P.O. Box 9011 Secretary 2004 to Secretary of MLIM, FAM, FAMD and Princeton Services since 2004; Director (Legal Pellegrino Princeton, NJ present Advisory) of MLIM since 2002; Vice President of MLIM from 1999 to 2002; Attorney 08543-9011 associated with MLIM since 1997. Age: 44 ------------------------------------------------------------------------------------------------------------------------ * Officers of the Fund/Trust serve at the pleasure of the Board of Directors/Trustees. - ------------------------------------------------------------------------------------------------------------------------------------ Further information about the Fund's Officers and Directors/Trustees is available in the Fund's Statement of Additional Information, which can be obtained without charge by calling 1-800-MER-FUND. - ------------------------------------------------------------------------------------------------------------------------------------
Custodian Merrill Lynch Trust Company, FSB 1300 Merrill Lynch Drive 3rd Floor -- MSC 0303 Pennington, NJ 08534 Transfer Agent Financial Data Services, Inc. 4800 Deer Lake Drive East Jacksonville, FL 32246-6484 800-637-3863 - -------------------------------------------------------------------------------- Effective January 1, 2005, Terry K. Glenn, President and Director/Trustee and M. Colyer Crum, Director/ Trustee of Merrill Lynch Index Funds, Inc. and Quantitative Master Series Trust retired. The Fund's/Trust's Board of Directors/Trustees wishes Mr. Glenn and Professor Crum well in their retirements. Effective January 1, 2005, Robert C. Doll, Jr. became Executive Vice President and Chief Executive Officer of the Fund and the Trust. - -------------------------------------------------------------------------------- MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 29 [LOGO] Merrill Lynch Investment Managers Portfolio Information The quality ratings of securities in the Series as of December 31, 2004 were as follows: ================================================================================ Percent of S&P Rating/Moody's Rating Total Investments - -------------------------------------------------------------------------------- AAA/Aaa ............................................... 76.2% AA/Aa ................................................. 4.6 A/A ................................................... 8.2 BBB/Baa ............................................... 7.8 Other* ................................................ 3.2 - -------------------------------------------------------------------------------- * Includes investments in short-term securities. 30 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 Electronic Delivery The Fund offers electronic delivery of communications to its shareholders. In order to receive this service, you must regis-ter your account and provide us with e-mail information. To sign up for this service, simply access this Web site at http://www.icsdelivery.com/live and follow the instructions. When you visit this site, you will obtain a personal identification number (PIN). You will need this PIN should you wish to update your e-mail address, choose to discontinue this service and/or make any other changes to the service. This service is not available for certain retirement accounts at this time. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2004 31 [LOGO] Merrill Lynch Investment Managers www.mlim.ml.com 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. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2) at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's Web site at http://www.sec.gov. Information about how the Fund voted proxies relating to securities held in the Fund's portfolio during the most recent 12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2) on the Securities and Exchange Commission's Web site at http://www.sec.gov. Merrill Lynch Index Funds, Inc. Box 9011 Princeton, NJ 08543-9011 #Index 1 -- 12/04 Item 2 - Code of Ethics - The registrant has adopted 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 and principal accounting officer, or persons performing similar functions. A copy of the code of ethics is available without charge upon request by calling toll-free 1-800-MER-FUND (1-800-637-3863). Item 3 - Audit Committee Financial Expert - The registrant's board of directors has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent: (1) Donald W. Burton, (2) M. Colyer Crum, (3) Laurie Simon Hodrick, (4) John F. O'Brien (as of November 22, 2004), (5) David H. Walsh and (6) Fred G. Weiss. The registrant's board of directors has determined that Laurie Simon Hodrick and M. Colyer Crum qualify as financial experts pursuant to Item 3(c)(4) of Form N-CSR. Ms. Hodrick has a thorough understanding of generally accepted accounting principals, financial statements, and internal controls and procedures for financial reporting. Ms. Hodrick earned a Ph.D. in economics and has taught courses in finance for over 15 years. Her M.B.A.-level course centers around the evaluation and analysis of firms' corporate financial statements. She has also taught in financial analysts' training programs. Ms. Hodrick has also worked with several prominent corporations in connection with the analysis of financial forecasts and projections and analysis of the financial statements of those companies, serving on the Financial Advisory Council of one of these major corporations. She has also served as the Treasurer and Finance Chair of a 501(c)(3) organization. Ms. Hodrick has published a number of articles in leading economic and financial journals and is the associate editor of two leading finance journals. M. Colyer Crum also possesses a thorough understanding of generally accepted accounting principals, financial statements, and internal controls and procedures for financial reporting through a combination of education and experience. Professor Crum was a professor of investment management at the Harvard Business School for 25 years. The courses taught by Professor Crum place a heavy emphasis on the analysis of underlying company financial statements with respect to stock selection and the analysis of credit risk in making loans. Professor Crum has also served on a number of boards of directors and has served on the audit committees, and in some cases chaired the audit committee, for several major corporations and financial institutions. For two such organizations, Professor Crum has performed extensive investment analysis of financial statements in connection with investment management decisions. From these experiences, he has gained significant experience with the establishment of reserves and accounting policies, differences between U.S. GAAP and Canadian GAAP and executive compensation issues. Item 4 - Principal Accountant Fees and Services Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. (a) Audit Fees - Fiscal Year Ending December 31, 2004 - $6,200 Fiscal Year Ending December 31, 2003 - $6,000 Master Aggregate Bond Index Series of Quantitative Master Series Trust (a) Audit Fees - Fiscal Year Ending December 31, 2004 - $40,500 Fiscal Year Ending December 31, 2003 - $40,000 Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. (b) Audit-Related Fees - Fiscal Year Ending December 31, 2004 - $0 Fiscal Year Ending December 31, 2003 - $0 Master Aggregate Bond Index Series of Quantitative Master Series Trust (b) Audit-Related Fees - Fiscal Year Ending December 31, 2004 - $0 Fiscal Year Ending December 31, 2003 - $12,000 The nature of the services include assurance and related services reasonably related to the performance of the audit of financial statements not included in Audit Fees. Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. (c) Tax Fees - Fiscal Year Ending December 31, 2004 - $5,200 Fiscal Year Ending December 31, 2003 - $8,900 The nature of the services include tax compliance, tax advice and tax planning. Master Aggregate Bond Index Series of Quantitative Master Series Trust (c) Tax Fees - Fiscal Year Ending December 31, 2004 - $20,000 Fiscal Year Ending December 31, 2003 - $15,000 The nature of the services include tax compliance, tax advice and tax planning. Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. (d) All Other Fees - Fiscal Year Ending December 31, 2004 - $0 Fiscal Year Ending December 31, 2003 - $0 Master Aggregate Bond Index Series of Quantitative Master Series Trust (d) All Other Fees - Fiscal Year Ending December 31, 2004 - $0 Fiscal Year Ending December 31, 2003 - $0 (e)(1) The registrant's audit committee (the "Committee") has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the registrant's affiliated service providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are a) consistent with the SEC's auditor independence rules and b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis ("general pre-approval"). However, such services will only be deemed pre-approved provided that any individual project does not exceed $5,000 attributable to the registrant or $50,000 for all of the registrants the Committee oversees. Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. (e)(2) 0% (f) Not Applicable (g) Fiscal Year Ending December 31, 2004 - $11,926,355 Fiscal Year Ending December 31, 2003 - $18,621,495 (h) The registrant's audit committee has considered and determined that the provision of non-audit services that were rendered to the registrant's 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. Regulation S-X Rule 2-01(c)(7)(ii) - $945,000, 0% Item 5 - Audit Committee of Listed Registrants - Not Applicable Item 6 - Schedule of Investments REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON DETAILED SCHEDULE OF INVESTMENTS To the Investors and Board of Trustees of Quantitative Master Series Trust: We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of Master Aggregate Bond Index Series (the "Series"), one of the portfolios constituting the Quantitative Master Series Trust (the "Trust") as of December 31, 2004, and for the year then ended and have issued our report thereon dated February , 2005, which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR. Our audit also included the Series' schedule of investments (the "Schedule") as of December 31, 2004 appearing in Item 6 of this Form N-CSR. This Schedule is the responsibility of the Trust's management. Our responsibility is to express an opinion based on our audit. In our opinion, the Schedule referred to above, when considered in relation to the basic financial statements taken as a whole of the Series referred to above, presents fairly, in all material respects, the information set forth therein. DELOITTE & TOUCHE LLP February 23, 2005 Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2004 (in U.S. dollars)
Face Interest Maturity Issue Amount Rate Date(s) Value - ------------------------------------------------------------------------------------------------------------------------------------ Government & Fannie Mae $ 8,625,000 3.875 % 3/15/2005 $ 8,648,124 Agency Obligations - 15,790,000 5.25 6/15/2006 16,255,694 34.8% 31,785,000 2.625 11/15/2006 31,439,497 30,155,000 5.75 2/15/2008 32,120,865 11,260,000 2.50 6/15/2008 (d) 10,861,970 14,880,000 6.625 9/15/2009 16,614,621 29,055,000 6.625 11/15/2010 32,835,404 3,970,000 4.376 3/15/2013 3,959,138 1,000,000 4.625 10/15/2014 1,000,751 1,340,000 7.25 5/15/2030 1,713,223 -------------------------------------------------------------------------------------------------------------- Freddie Mac 1,245,000 7.18 6/27/2006 1,318,565 7,640,000 4.875 3/15/2007 7,888,361 2,000,000 5.75 4/15/2008 2,135,698 1,240,000 6.625 9/15/2009 1,386,743 8,750,000 4.875 11/15/2013 (d) 8,997,817 8,655,000 6.75 9/15/2029 10,466,673 1,845,000 6.25 7/15/2032 2,116,554 -------------------------------------------------------------------------------------------------------------- Tennessee Valley Authority 1,390,000 6.25 12/15/2017 1,567,261 -------------------------------------------------------------------------------------------------------------- U.S. Treasury Bonds 185,000 5.75 8/15/2010 203,681 6,390,000 4.00 11/15/2012 6,379,265 14,665,000 8.75 5/15/2017 20,548,759 8,370,000 8.50 2/15/2020 11,812,815 6,080,000 8.125 8/15/2021 8,418,423 7,340,000 6.25 8/15/2023 8,593,246 3,075,000 6.375 8/15/2027 3,692,402 220,000 5.375 2/15/2031 237,892 -------------------------------------------------------------------------------------------------------------- U.S. Treasury Notes 27,135,000 5.75 11/15/2005 27,830,334 2,790,000 5.875 11/15/2005 2,864,220 7,645,000 3.00 11/15/2007 7,597,815 2,865,000 3.625 5/15/2013 2,776,251 -------------------------------------------------------------------------------------------------------------- Total Government & Agency Obligations (Cost - $286,607,376) - 34.8% 292,282,062 - ------------------------------------------------------------------------------------------------------------------------------------ Government Agency Fannie Mae Guaranteed 750,278 5.50 6/01/2011 - 2/01/2019 776,346 Mortgage-Backed Pass-Through Certificates 972,361 6.00 2/01/2013 - 6/01/2015 1,020,898 Obligations* - 36.4% 687,187 6.50 1/01/2013 - 5/01/2016 729,289 1,418,268 6.50 12/01/2025 - 1/01/2030 1,490,333 473,590 7.00 4/01/2027 - 3/01/2031 502,865 412,687 7.50 10/01/2027 - 5/01/2032 442,453 16,334 8.00 9/01/2015 17,372 376,526 8.00 11/01/2029 - 9/01/2031 408,527 33,446 8.50 5/01/2030 - 1/01/2031 36,423 74,350 9.50 7/01/2017 83,772 36,232 10.00 10/01/2018 - 5/01/2022 40,205 15,755 10.50 12/01/2016 17,310 -------------------------------------------------------------------------------------------------------------- Freddie Mac Mortgage 8,208,310 4.00 5/01/2019 - 1/01/2020 (g) 8,029,893 Participation Certificates 31,173,272 4.50 2/01/2011 - 7/01/2019 (g) 31,153,431 2,180,274 4.50 4/01/2034 - 6/01/2034 2,107,086 26,954,308 5.00 11/01/2017 - 2/15/2020 (g) 27,392,429 47,631,658 5.00 4/01/2034 - 6/01/2034 47,332,518 8,821,027 5.50 8/01/2017 - 1/15/2020 (g) 9,121,146 68,601,000 5.50 2/15/2035 (g) 69,501,388 4,268,193 6.00 4/01/2016 - 10/01/2017 4,470,819 38,367,128 6.00 6/01/2033 - 9/01/2034 39,651,831 901,258 6.50 4/01/2015 - 5/01/2017 954,407 16,322,441 6.50 1/01/2026 - 9/01/2032 17,141,085 637,281 7.00 1/01/2011 - 7/01/2017 675,557 5,456,996 7.00 1/01/2020 - 11/01/2032 5,787,258 216,940 7.50 5/01/2007 - 4/01/2016 229,836 1,181,218 7.50 1/01/2023 - 9/01/2032 1,267,173 518,054 8.00 11/01/2024 - 3/01/2032 562,529 70,273 8.50 5/01/2028 - 8/01/2030 76,971 16,149 9.00 9/01/2014 17,730 219,899 9.50 2/01/2019 246,301 65,615 10.00 3/01/2010 - 9/01/2017 71,230 52,060 10.50 4/01/2016 56,784 15,049 11.00 9/01/2016 - 3/01/2018 16,716 7,044 11.50 8/01/2015 7,836 31,757 12.50 2/01/2014 35,979 -------------------------------------------------------------------------------------------------------------- Ginnie Mae MBS Certificates 4,520,000 4.50 2/15/2035 (g) 4,397,110 5,600,000 5.00 1/15/2035 (g) 5,598,253 12,237,890 5.50 8/15/2033 - 1/15/2035 (g) 12,508,277 3,771,114 6.00 4/20/2026 - 4/15/2033 3,911,765 69,354 6.50 2/15/2014 - 5/15/2014 73,983 3,646,415 6.50 4/15/2026 - 5/15/2032 3,842,551 31,303 7.00 4/15/2013 33,355 1,925,610 7.00 7/15/2027 - 10/15/2031 2,048,296 858,483 7.50 3/15/2024 - 3/15/2032 923,067 413,989 8.00 12/15/2022 - 6/15/2031 450,549 120,104 8.50 11/15/2017 - 3/15/2031 131,440 143,986 9.00 4/15/2018 - 11/15/2024 161,491 12,893 9.50 9/15/2021 14,559 -------------------------------------------------------------------------------------------------------------- Total Government Agency Mortgage-Backed Obligations (Cost - $303,424,913) - 36.4% 305,568,422 --------------------------------------------------------------------------------------------------------------
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2004 (continued) (in U.S. dollars)
- ----------------------------------------------------------------------------------------------------------------------------------- Face Amount Non-Government Agency Mortgage-Backed Securities* Value - ----------------------------------------------------------------------------------------------------------------------------------- Commercial $ 19,190,206 CS First Boston Mortgage Securities Corp. Series 2004-FL1A Class A, Mortgage-Backed 2.70% due 5/15/2014 (a)(c) $ 19,206,126 Securities - 11.2% 20,000,000 Greenwich Capital Commercial Funding Corp. Series 2004-FL2A Class A2, 2.58% due 11/05/2019 (c) 20,006,250 20,000,000 JPMorgan Chase Commercial Mortgage Securities Corp. Series 2004-FL1A Class A2, 2.587% due 4/16/2019 (c) 20,032,280 20,000,000 Lehman Brothers Floating Rate Commercial Mortgage Trust Series 2004-LLFA Class A2, 2.65% due 10/15/2017 (a)(c) 20,044,622 15,000,000 Wachovia Bank Commercial Mortgage Trust Series 2004-WL4A Class A2, 2.65% due 10/15/2015 (a)(c) 15,021,051 - ----------------------------------------------------------------------------------------------------------------------------------- Total Non-Government Agency Mortgage-Backed Securities 94,310,329 (Cost - $94,190,206) - 11.2% - ----------------------------------------------------------------------------------------------------------------------------------- Industry+ Fixed Income Securities - ----------------------------------------------------------------------------------------------------------------------------------- Banking - 2.7% 525,000 BB&T Corp., 6.50% due 8/01/2011 585,595 Bank One Corp.: 830,000 6.875% due 8/01/2006 875,848 378,000 8% due 4/29/2027 480,735 Bank of America Corp.: 2,200,000 5.875% due 2/15/2009 2,361,841 113,000 6.60% due 5/15/2010 125,498 410,000 4.875% due 9/15/2012 418,715 350,000 4.875% due 1/15/2013 356,081 365,000 The Bank of New York Co., Inc., 5.20% due 7/01/2007 379,475 90,000 Citicorp, 6.375% due 11/15/2008 97,981 665,000 Comerica, Inc., 4.80% due 5/01/2015 650,675 460,000 Deutsche Bank Financial, Inc., 7.50% due 4/25/2009 522,397 300,000 FirstBank Puerto Rico, 7.625% due 12/20/2005 306,457 700,000 FleetBoston Financial Corp., 4.20% due 11/30/2007 712,186 230,000 Golden West Financial Corp., 4.75% due 10/01/2012 231,094 765,000 HSBC Holdings Plc, 7.50% due 7/15/2009 872,394 600,000 KfW - Kreditanstalt fuer Wiederaufbau, 4.125% due 10/15/2014 586,029 395,000 M&I Marshall & Ilsley Bank, 4.125% due 9/04/2007 402,556 500,000 M&T Bank Corp., 3.85% due 4/01/2013 (c) 494,771 MBNA America Bank NA: 25,000 7.75% due 9/15/2005 25,763 110,000 6.50% due 6/20/2006 114,794 675,000 7.125% due 11/15/2012 767,815 500,000 Mellon Funding Corp., 5% due 12/01/2014 505,558 295,000 National City Bank of Indiana, 4% due 9/28/2007 298,328 350,000 Old Regions Financial Corp., 6.375% due 5/15/2012 385,861 200,000 Popular North America, Inc., 4.70% due 6/30/2009 203,927 1,065,000 Royal Bank of Scotland Group Plc, 5.05% due 1/08/2015 1,076,434 450,000 Sovereign Bank, 5.125% due 3/15/2013 450,502 400,000 Synovus Financial Corp., 4.875% due 2/15/2013 399,251 485,000 US Bancorp, 5.10% due 7/15/2007 501,627 500,000 US Bank NA, 6.30% due 2/04/2014 554,458 400,000 UnionBanCal Corp., 5.25% due 12/16/2013 405,401 525,000 Wachovia Bank NA, 4.85% due 7/30/2007 544,384 Wachovia Corp.: 195,000 5.625% due 12/15/2008 207,493 1,770,000 3.625% due 2/17/2009 1,749,622 275,000 Washington Mutual Bank FA, 5.125% due 1/15/2015 273,132 145,000 Washington Mutual Financial Corp., 6.875% due 5/15/2011 164,413 Washington Mutual, Inc.: 600,000 7.50% due 8/15/2006 637,409 90,000 8.25% due 4/01/2010 105,294 Wells Fargo & Co.: 400,000 5.125% due 2/15/2007 413,788 1,200,000 3.125% due 4/01/2009 1,163,062 450,000 Wells Fargo Bank NA, 6.45% due 2/01/2011 500,429 350,000 Westpac Banking Corp., 4.625% due 6/01/2018 329,121 ------------- 22,238,194 - ----------------------------------------------------------------------------------------------------------------------------------- Financial 400,000 AXA Financial, Inc., 7.75% due 8/01/2010 466,330 Services - 3.9% 330,000 Ace INA Holdings, Inc., 8.30% due 8/15/2006 352,784 The Allstate Corp.: 250,000 5.375% due 12/01/2006 258,252 350,000 5% due 8/15/2014 352,289 295,000 American Express Co., 6.875% due 11/01/2005 303,824 325,000 American General Corp., 7.50% due 7/15/2025 399,067 235,000 American General Finance Corp., 5.875% due 7/14/2006 243,654 215,000 AvalonBay Communities, Inc., 6.625% due 9/15/2011 237,946 The Bear Stearns Cos., Inc.: 125,000 7.625% due 2/01/2005 125,445 250,000 6.875% due 10/01/2005 256,985 1,100,000 3.25% due 3/25/2009 1,068,094 CIT Group, Inc.: 450,000 6.50% due 2/07/2006 465,817 300,000 5% due 2/13/2014 299,508 Capital One Bank: 570,000 6.875% due 2/01/2006 591,307 600,000 4.875% due 5/15/2008 616,211
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2004 (continued) (in U.S. dollars)
- ----------------------------------------------------------------------------------------------------------------------------------- Industry+ Face Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- Financial Services CitiFinancial: (concluded) $ 500,000 6.75% due 7/01/2007 $ 538,246 450,000 10% due 5/15/2009 553,677 Citigroup, Inc.: 1,000,000 5.75% due 5/10/2006 1,032,656 125,000 6.50% due 1/18/2011 139,582 666,000 5% due 9/15/2014 (a) 669,213 740,000 6.625% due 6/15/2032 828,807 740,000 Countrywide Home Loans, Inc., 5.625% due 7/15/2009 783,898 Credit Suisse First Boston USA, Inc.: 1,000,000 5.875% due 8/01/2006 1,039,311 775,000 5.75% due 4/15/2007 812,319 250,000 4.625% due 1/15/2008 256,175 800,000 6.50% due 1/15/2012 890,386 530,000 Developers Diversified Realty Corp., 6.625% due 1/15/2008 564,769 EOP Operating LP: 200,000 6.75% due 2/15/2012 222,639 145,000 7.25% due 6/15/2028 164,265 25,000 7.50% due 4/19/2029 28,979 Goldman Sachs Group, Inc.: 70,000 4.125% due 1/15/2008 70,880 1,000,000 3.875% due 1/15/2009 997,735 1,625,000 6.60% due 1/15/2012 1,813,563 800,000 5.25% due 4/01/2013 820,363 405,000 6.125% due 2/15/2033 420,743 300,000 Hartford Life, Inc., 7.375% due 3/01/2031 358,119 200,000 Infinity Property & Casualty Corp. Series B, 5.50% due 2/18/2014 197,592 International Lease Finance Corp.: 650,000 4.375% due 12/15/2005 656,214 386,000 5.625% due 6/01/2007 403,321 JPMorgan Chase & Co.: 200,000 5.625% due 8/15/2006 207,198 400,000 3.50% due 3/15/2009 391,908 1,445,000 6.625% due 3/15/2012 1,617,413 400,000 5.125% due 9/15/2014 402,624 275,000 John Hancock Financial Services, Inc., 5.625% due 12/01/2008 292,074 Lehman Brothers Holdings, Inc.: 450,000 6.25% due 5/15/2006 468,331 600,000 7% due 2/01/2008 655,553 245,000 7.875% due 8/15/2010 287,567 725,000 6.625% due 1/18/2012 810,686 275,000 Liberty Property-LP, 7.25% due 3/15/2011 311,189 175,000 Marsh & McLennan Cos., Inc., 6.25% due 3/15/2012 183,124 150,000 Metlife, Inc., 6.125% due 12/01/2011 163,017 Morgan Stanley: 1,060,000 5.80% due 4/01/2007 1,111,275 845,000 6.60% due 4/01/2012 942,443 1,250,000 4.75% due 4/01/2014 1,218,010 145,000 New York Life Insurance Co., 5.875% due 5/15/2033 (a) 150,023 750,000 Old Duke Realty LP, 5.25% due 1/15/2010 774,436 265,000 Principal Life Global Funding I, 6.25% due 2/15/2012 (a) 289,675 425,000 The Progressive Corp., 6.25% due 12/01/2032 455,617 1,000,000 SLM Corp., 5.375% due 5/15/2014 1,032,731 150,000 SunAmerica, Inc., 5.60% due 7/31/2097 142,545 500,000 Travelers Property Casualty Corp., 6.375% due 3/15/2033 513,560 240,000 Westfield Capital Corp. Ltd., 5.125% due 11/15/2014 (a) 238,847 ------------- 32,960,811 - ----------------------------------------------------------------------------------------------------------------------------------- Financial Services - HSBC Finance Corp.: Consumer - 0.5% 2,015,000 5.875% due 2/01/2009 2,153,203 750,000 7% due 5/15/2012 856,483 350,000 4.75% due 7/15/2013 347,287 500,000 Monumental Global Funding II, 4.375% due 7/30/2009 (a) 502,101 60,000 Western & Southern Financial Group, Inc., 5.75% due 7/15/2033(a) 59,089 ------------- 3,918,163 - ----------------------------------------------------------------------------------------------------------------------------------- Foreign Government 2,240,000 Canada Government International Bond, 5.25% due 11/05/2008 2,368,081 Obligations - 2.3% 500,000 China Government International Bond, 7.30% due 12/15/2008 562,223 1,120,000 Finland Government International Bond, 5.875% due 2/27/2006 1,156,873 Italy Government International Bond: 900,000 5.25% due 4/05/2006 924,954 1,050,000 4.375% due 10/25/2006 1,068,216 450,000 6% due 2/22/2011 492,668 900,000 6.875% due 9/27/2023 1,072,445 Mexico Government International Bond: 1,920,000 9.875% due 2/01/2010 2,359,680 2,625,000 6.375% due 1/16/2013 2,795,625 1,025,000 Petroleos Mexicanos, 8.85% due 9/15/2007 1,151,587 445,000 Province of British Columbia, 4.625% due 10/03/2006 455,549 1,120,000 Province of Manitoba, 5.50% due 10/01/2008 1,185,430 3,000,000 Province of Ontario, 6% due 2/21/2006 3,094,041 625,000 Province of Quebec, 7.50% due 9/15/2029 812,657 ------------- 19,500,029 - -----------------------------------------------------------------------------------------------------------------------------------
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2004 (continued) (in U.S. dollars)
- ----------------------------------------------------------------------------------------------------------------------------------- Industry+ Face Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- Industrial - Consumer $ 60,000 Albertson's, Inc., 7.50% due 2/15/2011 $ 69,491 Goods - 1.3% Anheuser-Busch Cos., Inc.: 160,000 5.95% due 1/15/2033 172,633 140,000 6% due 11/01/2041 148,450 600,000 Campbell Soup Co., 4.875% due 10/01/2013 608,699 200,000 Cia Brasileira de Bebidas, 8.75% due 9/15/2013 233,000 490,000 Clorox Co., 4.20% due 1/15/2010 (a) 492,486 470,000 Coca-Cola Enterprises, Inc., 6.75% due 9/15/2028 543,108 ConAgra Foods, Inc.: 200,000 7% due 10/01/2028 232,707 370,000 8.25% due 9/15/2030 492,099 140,000 Diageo Capital Plc, 3.50% due 11/19/2007 139,534 500,000 The Dial Corp., 6.50% due 9/15/2008 540,654 500,000 Fortune Brands, Inc., 2.875% due 12/01/2006 495,315 1,432,000 Kellogg Co. Series B, 6% due 4/01/2006 1,476,422 294,000 Kimberly-Clark Corp., 7.10% due 8/01/2007 320,513 Kraft Foods, Inc.: 225,000 4.625% due 11/01/2006 229,639 260,000 5.625% due 11/01/2011 275,325 The Kroger Co.: 160,000 7.625% due 9/15/2006 170,662 250,000 7.50% due 4/01/2031 298,837 85,000 Series B, 7.70% due 6/01/2029 102,513 500,000 Miller Brewing Co., 5.50% due 8/15/2013 (a) 522,623 155,000 Pepsi Bottling Group, Inc. Series B, 7% due 3/01/2029 186,801 92,000 Pepsi Bottling Holdings, Inc., 5.625% due 2/17/2009 (a) 98,082 180,000 Procter & Gamble Co., 4.95% due 8/15/2014 184,050 300,000 Safeway, Inc., 6.15% due 3/01/2006 309,439 290,000 Sappi Papier Holding AG, 6.75% due 6/15/2012 (a) 322,222 520,000 Sara Lee Corp., 6.25% due 9/15/2011 576,178 Sealed Air Corp.: 200,000 5.375% due 4/15/2008 207,802 135,000 6.95% due 5/15/2009 (a) 147,613 700,000 Staples, Inc., 7.125% due 8/15/2007 753,366 390,000 Supervalu, Inc., 7.50% due 5/15/2012 455,195 ------------- 10,805,458 - ----------------------------------------------------------------------------------------------------------------------------------- Industrial - Anadarko Finance Co. Series B: Energy - 1.1% 390,000 6.75% due 5/01/2011 439,225 60,000 7.50% due 5/01/2031 74,337 190,000 Apache Corp., 7.625% due 7/01/2019 235,378 390,000 Atlantic Richfield Co., 5.90% due 4/15/2009 420,573 150,000 Atmos Energy Corp., 5.125% due 1/15/2013 152,844 330,000 Chevron Phillips Chemical Co. LLC, 5.375% due 6/15/2007 342,068 165,000 ChevronTexaco Capital Co., 3.375% due 2/15/2008 164,240 125,000 Colonial Pipeline Co., 7.63% due 4/15/2032 (a) 161,011 420,000 ConocoPhillips, 4.75% due 10/15/2012 428,224 505,000 ConocoPhillips Holding Co., 6.95% due 4/15/2029 596,332 75,000 Consolidated Natural Gas Co. Series C, 6.25% due 11/01/2011 82,322 Duke Energy Corp.: 400,000 3.75% due 3/05/2008 399,546 1,150,000 6.25% due 1/15/2012 1,253,679 300,000 Halliburton Co., 3.45% due 1/26/2007 (a)(c) 300,108 600,000 Kinder Morgan Energy Partners LP, 6.75% due 3/15/2011 669,858 475,000 Kinder Morgan, Inc., 6.50% due 9/01/2012 522,108 350,000 Motiva Enterprises LLC, 5.20% due 9/15/2012 (a) 360,442 100,000 Murphy Oil Corp., 6.375% due 5/01/2012 109,662 225,000 Nabors Industries, Inc., 5.375% due 8/15/2012 235,172 480,000 Nisource Finance Corp., 7.625% due 11/15/2005 497,485 745,000 Ocean Energy, Inc., 7.25% due 10/01/2011 849,095 500,000 Panhandle Eastern Pipe Line Series B, 2.75% due 3/15/2007 489,587 300,000 Valero Energy Corp., 6.875% due 4/15/2012 340,273 500,000 XTO Energy, Inc., 4.90% due 2/01/2014 498,895 ------------- 9,622,464 - ----------------------------------------------------------------------------------------------------------------------------------- Industrial - 340,000 Alcan, Inc., 6.45% due 3/15/2011 378,011 Manufacturing - 3.0% 150,000 Alcoa, Inc., 6% due 1/15/2012 163,862 320,000 Baxter International, Inc., 4.625% due 3/15/2015 308,259 360,000 Black & Decker Corp., 4.75% due 11/01/2014 (a) 354,420 Caterpillar Financial Services Corp.: 265,000 4.875% due 6/15/2007 273,173 300,000 4.60% due 1/15/2014 296,429 390,000 Centex Corp., 7.875% due 2/01/2011 455,559 250,000 Cooper Industries, Inc., 5.50% due 11/01/2009 264,478 DaimlerChrysler NA Holding Corp.: 930,000 6.40% due 5/15/2006 967,472 280,000 7.30% due 1/15/2012 317,871 600,000 8.50% due 1/18/2031 749,671 720,000 Deere & Co., 7.85% due 5/15/2010 843,065 270,000 Domtar, Inc., 7.875% due 10/15/2011 311,597 335,000 Emerson Electric Co., 7.875% due 6/01/2005 342,018 2,105,000 Ford Motor Co., 7.45% due 7/16/2031 2,117,078
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2004 (continued) (in U.S. dollars)
- ----------------------------------------------------------------------------------------------------------------------------------- Industry+ Face Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- Industrial - Manufacturing Ford Motor Credit Co.: (concluded) $ 400,000 7.375% due 10/28/2009 $ 431,467 500,000 7% due 10/01/2013 530,066 2,205,000 General Electric Capital Corp., 6.75% due 3/15/2032 2,580,842 325,000 General Electric Co., 5% due 2/01/2013 333,439 General Motors Acceptance Corp.: 500,000 6.125% due 9/15/2006 512,591 500,000 5.125% due 5/09/2008 499,214 472,000 7.75% due 1/19/2010 506,605 885,000 7% due 2/01/2012 911,853 1,653,000 8% due 11/01/2031 1,699,094 355,000 Hanson Australia Funding Ltd., 5.25% due 3/15/2013 361,669 150,000 Harley-Davidson, Inc., 3.625% due 12/15/2008 (a) 148,848 515,000 Honeywell International, Inc., 6.125% due 11/01/2011 567,234 International Business Machines Corp.: 395,000 6.45% due 8/01/2007 422,447 200,000 4.75% due 11/29/2012 204,215 450,000 5.875% due 11/29/2032 475,895 400,000 Johnson Controls, Inc., 4.875% due 9/15/2013 405,206 116,000 Kern River Funding Corp., 4.893% due 4/30/2018 (a) 118,094 125,000 Lear Corp., 5.75% due 8/01/2014 (a) 126,184 200,000 Lennar Corp., 5.95% due 3/01/2013 211,800 450,000 Lockheed Martin Corp., 8.50% due 12/01/2029 615,724 100,000 MDC Holdings, Inc., 5.50% due 5/15/2013 101,532 325,000 Martin Marietta Corp., 7.375% due 4/15/2013 381,217 45,000 Masco Corp., 6.50% due 8/15/2032 49,439 Newell Rubbermaid, Inc.: 250,000 4.625% due 12/15/2009 252,357 300,000 4% due 5/01/2010 291,121 385,000 Pitney Bowes, Inc., 4.75% due 5/15/2018 373,490 110,000 Pulte Homes, Inc., 7.875% due 8/01/2011 127,609 Raytheon Co.: 21,000 6.15% due 11/01/2008 22,578 200,000 8.30% due 3/01/2010 236,999 350,000 6.75% due 3/15/2018 396,334 150,000 Rockwell Collins, Inc., 4.75% due 12/01/2013 150,101 75,000 The Stanley Works, 4.90% due 11/01/2012 76,291 870,000 Textron Financial Corp., 2.75% due 6/01/2006 859,550 325,000 Toll Brothers Finance Corp., 6.875% due 11/15/2012 362,225 Tyco International Group SA: 300,000 6.125% due 1/15/2009 323,712 600,000 6% due 11/15/2013 653,677 Weyerhaeuser Co.: 442,000 5.95% due 11/01/2008 473,321 125,000 7.375% due 3/15/2032 148,231 ------------- 25,085,234 - ----------------------------------------------------------------------------------------------------------------------------------- Industrial - Other - 1.9% 441,000 Abbott Laboratories, 5.625% due 7/01/2006 455,938 275,000 Amgen, Inc., 4% due 11/18/2009 (a) 274,147 285,000 Archer-Daniels-Midland Co., 5.935% due 10/01/2032 301,666 560,000 AstraZeneca Plc, 5.40% due 6/01/2014 588,759 200,000 BRE Properties, 5.95% due 3/15/2007 208,407 360,000 Barrick Gold Finance, Inc., 4.875% due 11/15/2014 358,692 125,000 Boston Scientific Corp., 5.45% due 6/15/2014 129,856 830,000 Burlington Northern Santa Fe Corp., 6.75% due 7/15/2011 938,327 490,000 CSX Corp., 6.75% due 3/15/2011 548,451 400,000 Centerpoint Properties Trust, 4.75% due 8/01/2010 403,154 Continental Airlines, Inc.: 540,000 Series 2002-1, 6.563% due 8/15/2013 574,102 249,877 Series 2003-RJ, 7.875% due 7/02/2018 241,166 480,000 The Dow Chemical Co., 5.75% due 11/15/2009 513,450 290,000 Eli Lilly & Co., 7.125% due 6/01/2025 350,499 540,000 General Dynamics Corp., 3% due 5/15/2008 527,885 400,000 HRPT Properties Trust, 5.75% due 2/15/2014 410,811 500,000 Harris Corp., 6.35% due 2/01/2028 529,273 700,000 ICI North America, 8.875% due 11/15/2006 764,102 550,000 Inversiones CMPC SA, 4.875% due 6/18/2013 (a) 537,260 1,800,000 J Paul Getty Trust Series 2003, 5.875% due 10/01/2033 1,878,718 235,000 New Plan Excel Realty Trust, 5.875% due 6/15/2007 244,655 Norfolk Southern Corp.: 675,000 6.75% due 2/15/2011 760,708 220,000 7.25% due 2/15/2031 263,927 587,000 Northrop Grumman Corp., 7.125% due 2/15/2011 673,649 Pfizer, Inc.: 420,000 5.625% due 2/01/2006 431,290 500,000 4.50% due 2/15/2014 494,460 Praxair, Inc.: 235,000 6.50% due 3/01/2008 254,179 135,000 6.375% due 4/01/2012 150,718 70,000 3.95% due 6/01/2013 66,516 240,000 Rohm & Haas Co., 7.40% due 7/15/2009 272,616 200,000 Rock-Tenn Co., 5.625% due 3/15/2013 202,666
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2004 (continued) (in U.S. dollars)
- ----------------------------------------------------------------------------------------------------------------------------------- Industry+ Face Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- Industrial - Other $ 1,080,000 Union Pacific Corp., 5.75% due 10/15/2007 $ 1,136,395 (concluded) 455,000 United Technologies Corp., 6.35% due 3/01/2011 506,896 ------------- 15,993,338 - ----------------------------------------------------------------------------------------------------------------------------------- Industrial - 600,000 Aramark Services, Inc., 6.375% due 2/15/2008 641,918 Services - 2.8% 255,000 British Sky Broadcasting Plc, 8.20% due 7/15/2009 294,758 350,000 COX Communications, Inc., 7.125% due 10/01/2012 392,302 200,000 CVS Corp., 4% due 9/15/2009 199,060 Carnival Corp.: 380,000 3.75% due 11/15/2007 380,448 225,000 6.15% due 4/15/2008 240,994 300,000 Celulosa Arauco y Constitucion SA, 5.125% due 7/09/2013 297,106 Cendant Corp.: 815,000 6.875% due 8/15/2006 857,433 300,000 7.375% due 1/15/2013 347,050 100,000 Clear Channel Communications, Inc., 7.25% due 10/15/2027 110,438 450,000 Comcast Cable Communications, 8.875% due 5/01/2017 590,441 Comcast Corp.: 550,000 5.85% due 1/15/2010 589,582 570,000 7.05% due 3/15/2033 652,210 Federated Department Stores: 25,000 6.625% due 9/01/2008 27,216 135,000 6.30% due 4/01/2009 146,104 270,000 6.625% due 4/01/2011 301,889 435,000 First Data Corp., 6.375% due 12/15/2007 468,466 470,000 Fiserv, Inc., 4% due 4/15/2008 471,582 375,000 Gannett Co., Inc., 5.50% due 4/01/2007 390,937 400,000 Harrah's Operating Co., Inc., 5.50% due 7/01/2010 414,050 335,000 Hewlett-Packard Co., 3.625% due 3/15/2008 333,348 352,000 Historic TW, Inc., 6.875% due 6/15/2018 398,020 200,000 IAC/InterActiveCorp, 7% due 1/15/2013 220,614 235,000 Kohl's Corp., 6.30% due 3/01/2011 257,460 Liberty Media Corp.: 285,000 7.875% due 7/15/2009 317,621 330,000 5.70% due 5/15/2013 327,445 450,000 Limited Brands, Inc., 6.125% due 12/01/2012 480,510 Lowe's Cos., Inc.: 250,000 6.875% due 2/15/2028 294,871 65,000 6.50% due 3/15/2029 73,631 News America, Inc.: 365,000 7.25% due 5/18/2018 420,820 340,000 7.28% due 6/30/2028 388,559 300,000 Norske Skogindustrier ASA, 6.125% due 10/15/2015 (a) 310,938 100,000 RLI Corp., 5.95% due 1/15/2014 99,973 1,700,000 Reed Elsevier Capital, Inc., 6.125% due 8/01/2006 1,762,587 80,000 Science Applications International Corp., 5.50% due 7/01/2033 76,889 Target Corp.: 888,000 10% due 1/01/2011 1,132,145 100,000 6.75% due 1/01/2028 115,620 200,000 Tele-Communications-TCI Group, 9.80% due 2/01/2012 257,799 The Thomson Corp.: 345,000 5.75% due 2/01/2008 363,341 325,000 4.25% due 8/15/2009 325,568 Time Warner, Inc.: 1,510,000 6.875% due 5/01/2012 1,719,673 400,000 7.70% due 5/01/2032 489,247 90,000 United Parcel Service, Inc., 8.375% due 4/01/2020 120,721 200,000 Univision Communications, Inc., 7.85% due 7/15/2011 235,971 1,000,000 Viacom, Inc., 5.625% due 5/01/2007 1,045,501 350,000 WR Berkley Corp., 5.125% due 9/30/2010 353,888 1,235,000 Wal-Mart Stores, Inc., 6.875% due 8/10/2009 1,386,770 1,250,000 Waste Management, Inc., 7.375% due 8/01/2010 1,432,816 600,000 Wyeth, 5.50% due 2/01/2014 620,753 ------------- 24,820,374 - ----------------------------------------------------------------------------------------------------------------------------------- Utilities - 825,000 AT&T Wireless Services, Inc., 8.75% due 3/01/2031 1,112,358 Communications - 1.8% 315,000 Alltel Corp., 7% due 7/01/2012 362,716 900,000 Ameritech Capital Funding, 6.45% due 1/15/2018 978,402 BellSouth Corp.: 800,000 5% due 10/15/2006 822,530 964,000 6% due 10/15/2011 1,050,703 500,000 5.20% due 9/15/2014 509,611 170,000 6.55% due 6/15/2034 185,240 1,295,000 British Telecommunications Plc, 8.375% due 12/15/2010 1,555,112 400,000 CenturyTel, Inc. Series L, 7.875% due 8/15/2012 470,726 Deutsche Telekom International Finance BV: 800,000 3.875% due 7/22/2008 798,622 384,000 5.25% due 7/22/2013 394,985 450,000 8.75% due 6/15/2030 594,206 400,000 France Telecom SA, 9.25% due 3/01/2031 542,237 GTE Corp.: 1,100,000 6.84% due 4/15/2018 1,216,967 255,000 6.94% due 4/15/2028 284,003 790,000 Royal KPN NV, 8% due 10/01/2010 932,468
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2004 (continued) (in U.S. dollars)
- ----------------------------------------------------------------------------------------------------------------------------------- Industry+ Face Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- Utilities - Communications Sprint Capital Corp.: (concluded) $ 1,091,000 8.375% due 3/15/2012 $ 1,328,993 400,000 8.75% due 3/15/2032 532,924 750,000 Telecom Italia Capital SA, 5.25% due 11/15/2013 758,051 425,000 Verizon Global Funding Corp., 7.375% due 9/01/2012 500,134 85,000 Verizon New York, Inc. Series A, 6.875% due 4/01/2012 95,411 80,000 Verizon Wireless Capital LLC, 5.375% due 12/15/2006 82,864 ------------- 15,109,263 - ----------------------------------------------------------------------------------------------------------------------------------- Utilities - Electric & 200,000 AGL Capital Corp., 4.45% due 4/15/2013 193,942 Gas - 1.3% 270,000 AmerenEnergy Generating Co. Series F, 7.95% due 6/01/2032 337,188 300,000 Australian Gas Light Co. Ltd., 5.30% due 9/25/2015 (a) 303,721 180,000 Baltimore Gas & Electric, 5.20% due 6/15/2033 167,301 115,000 Cincinnati Gas & Electric, 5.70% due 9/15/2012 121,835 500,000 Commonwealth Edison Co., 6.95% due 7/15/2018 575,425 135,000 Conectiv Series B, 5.30% due 6/01/2005 136,096 375,000 Consolidated Edison Co. of New York Series 03-C, 5.10% due 6/15/2033 352,824 Dominion Resources, Inc.: 185,000 6.30% due 3/15/2033 192,379 541,000 Series A, 8.125% due 6/15/2010 636,774 125,000 Entergy Mississippi, Inc., 5.15% due 2/01/2013 125,371 120,000 Exelon Corp., 6.75% due 5/01/2011 134,235 170,000 FPL Group Capital, Inc., 7.625% due 9/15/2006 181,589 170,000 Florida Power & Light Co., 6.875% due 12/01/2005 175,739 160,000 Georgia Power Co. Series K, 5.125% due 11/15/2012 165,085 510,000 Midamerican Energy Holdings Co., 5.875% due 10/01/2012 540,417 200,000 New York State Electric & Gas Corp., 5.75% due 5/01/2023 204,453 200,000 Ohio Power Co. Series G, 6.60% due 2/15/2033 223,723 200,000 Pepco Holdings, Inc., 4% due 5/15/2010 196,442 210,000 Plains All American Pipeline LP, 5.625% due 12/15/2013 216,008 635,000 Progress Energy, Inc., 7.10% due 3/01/2011 713,894 350,000 Public Service Co. of New Mexico, 4.40% due 9/15/2008 352,926 745,000 Public Service Electric & Gas, 5.125% due 9/01/2012 770,585 170,000 South Carolina Electric & Gas, 6.70% due 2/01/2011 190,467 1,150,000 Southern California Edison Co., 8% due 2/15/2007 1,252,328 385,000 Southern California Gas Co., 4.80% due 10/01/2012 391,018 590,000 Southern Power Co. Series B, 6.25% due 7/15/2012 644,791 150,000 TGT Pipeline LLC, 5.20% due 6/01/2018 143,435 530,000 TXU Electric Delivery Co., 6.375% due 5/01/2012 584,522 300,000 Texas Gas Transmission Corp., 4.60% due 6/01/2015 286,360 280,000 Wisconsin Electric Power, 5.625% due 5/15/2033 284,814 ------------- 10,795,687 - ----------------------------------------------------------------------------------------------------------------------------------- Yankee Corporates - 1.6% 105,000 BHP Billiton Finance USA Ltd., 4.80% due 4/15/2013 106,380 365,000 BHP Finance USA Ltd., 6.42% due 3/01/2026 400,646 730,000 Brascan Corp., 5.75% due 3/01/2010 772,382 730,000 Burlington Resources Finance Co., 6.50% due 12/01/2011 817,228 500,000 Canadian National Railway Co., 6.375% due 10/15/2011 555,342 525,000 Canadian Natural Resources Ltd., 4.90% due 12/01/2014 522,250 535,000 Corp Andina de Fomento, 6.875% due 3/15/2012 601,227 120,000 Corp Nacional del Cobre de Chile - CODELCO, 6.375% due 11/30/2012 (a) 132,410 600,000 EnCana Corp., 4.75% due 10/15/2013 595,414 160,000 Hydro Quebec Series GF, 8.875% due 3/01/2026 232,908 300,000 Inco Ltd., 7.75% due 5/15/2012 355,195 1,000,000 Inter-American Development Bank, 6.80% due 10/15/2025 1,194,556 530,000 KFW International Finance, 4.75% due 1/24/2007 546,510 Korea Development Bank: 610,000 4.25% due 11/13/2007 615,461 1,000,000 4.75% due 7/20/2009 1,018,905 570,000 National Australia Bank Ltd. Series A, 8.60% due 5/19/2010 676,992 400,000 Nexen, Inc., 5.05% due 11/20/2013 397,240 165,000 Noranda, Inc., 7% due 7/15/2005 168,294 950,000 Norsk Hydro ASA, 6.36% due 1/15/2009 1,032,372 Pemex Project Funding Master Trust: 805,000 9.125% due 10/13/2010 965,195 40,000 8.625% due 2/01/2022 46,540 345,000 Potash Corp. of Saskatchewan, 7.75% due 5/31/2011 406,397 200,000 Santander Central Hispano Issuances Ltd., 7.625% due 9/14/2010 233,079 565,000 Unilever Capital Corp., 7.125% due 11/01/2010 649,875 Vodafone Group Plc: 530,000 7.75% due 2/15/2010 615,042 185,000 7.875% due 2/15/2030 238,541 ------------- 13,896,381 - ----------------------------------------------------------------------------------------------------------------------------------- Total Fixed Income Securities (Cost - $194,965,000) - 24.2% 204,745,396 - ----------------------------------------------------------------------------------------------------------------------------------- Capital Trusts - ----------------------------------------------------------------------------------------------------------------------------------- Banking - 0.0% 250,000 HBOS Plc, 5.375% (a)(b)(c) 256,326 - ----------------------------------------------------------------------------------------------------------------------------------- Yankee Corporates - 0.0% 75,000 Pemex Project Funding Master Trust, 7.375% due 12/15/2014 83,362 - ----------------------------------------------------------------------------------------------------------------------------------- Total Capital Trusts (Cost - $327,290) - 0.0% 339,688 ===================================================================================================================================
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2004 (concluded) (in U.S. dollars)
- ----------------------------------------------------------------------------------------------------------------------------------- Face Amount Value - ----------------------------------------------------------------------------------------------------------------------------------- State Municipal Bonds - ----------------------------------------------------------------------------------------------------------------------------------- Illinois - 0.1% $ 700,000 Illinois State, GO, 5.10% due 6/01/2033 $ 672,399 - ----------------------------------------------------------------------------------------------------------------------------------- Texas - 0.0% 250,000 Harris County, Texas, Industrial Development Corporation, Solid Waste Disposal Revenue Bonds (Deer Park Refining LP), 5.683% due 3/01/2023 253,147 - ----------------------------------------------------------------------------------------------------------------------------------- Total Municipal Bonds (Cost - $886,251) - 0.1% 925,546 =================================================================================================================================== Short-Term Securities - ----------------------------------------------------------------------------------------------------------------------------------- U.S. Government Agency Obligations** 16,800,000 Federal Home Loan Banks, 1% due 1/03/2005 16,800,000 - ----------------------------------------------------------------------------------------------------------------------------------- Shares Held -------------------------------------------------------------------------------------------- 12,139,250 Merrill Lynch Premier Institutional Fund (e)(f) 12,139,250 -------------------------------------------------------------------------------------------- Total Investments in Short-Term Securities (Cost - $28,939,250) - 3.4% 28,939,250 -------------------------------------------------------------------------------------------- Total Investments (Cost - $909,340,286***) - 110.1% 925,467,402 Liabilities in Excess of Other Assets - (10.1%) (85,246,216) ------------- Net Assets - 100.0% $ 840,221,186 =============
+ For Series compliance purposes, "Industry" means any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Series' management. This definition may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease. These industry classifications are unaudited. * Mortgage-Backed Securities 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. ** Certain U.S. Government Agency Obligations are traded on a discount basis; the interest rate shown reflects the discount rate paid at the time of purchase by the Series. *** The cost and unrealized appreciation/depreciation of investments as of December 31, 2004, as computed for federal income tax purposes, were as follows: Aggregate cost $ 909,781,793 ============= Gross unrealized appreciation $ 17,285,769 Gross unrealized depreciation (1,600,160) ------------- Net unrealized appreciation $ 15,685,609 ============= (a) The security may be offered and sold to "qualified institutional buyers" under Rule 144A of the Securities Act of 1933. (b) The security is a perpetual bond and has no definite maturity date. (c) Floating rate note. (d) Security, or a portion of security, is on loan. (e) Investments in companies considered to be an affiliate of the Series (such companies are defined as "Affiliated Companies" in Section 2(a)(3) of the Investment Company Act of 1940) were as follows:
-------------------------------------------------------------------------------------------------------------- Affiliate Net Activity Interest/Dividend Income -------------------------------------------------------------------------------------------------------------- Merrill Lynch Liquidity Series, LLC Money Market Series - $ 4,150 Merrill Lynch Premier Institutional Fund (113,997,750) $ 139,299 --------------------------------------------------------------------------------------------------------------
(f) Security was purchased with the cash proceeds from securities loans. (g) Represents or includes a "to-be-announced" (TBA) transaction. The Series has committed to purchase securities for which all specific information is not availble at this time. Swaps outstanding as of December 31, 2004 were as follows:
---------------------------------------------------------------------------------------------------------------------- Notional Unrealized Amount Appreciation ---------------------------------------------------------------------------------------------------------------------- Receive (pay) a variable return based on the change in the Lehman Brothers CMBS Investment Grade Index Total Return and pay a floating rate based on 1-month USD LIBOR, minus .20% Broker, JPMorgan Chase Bank Expires March 2005 $26,000,000 - ----------------------------------------------------------------------------------------------------------------------
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies - Not Applicable Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not Applicable Item 9 - Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers - Not Applicable Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable Item 11 - Controls and Procedures 11(a) - The registrant's certifying officers have reasonably designed such disclosure controls and procedures to ensure material information relating to the registrant is made known to us by others particularly during the period in which this report is being prepared. The registrant's certifying officers have determined that the registrant's disclosure controls and procedures are effective based on our evaluation of these controls and procedures as of a date within 90 days prior to the filing date of this report. 11(b) - There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the second fiscal half-year of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12 - Exhibits attached hereto 12(a)(1) - Code of Ethics - See Item 2 12(a)(2) - Certifications - Attached hereto 12(a)(3) - Not Applicable 12(b) - Certifications - 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. Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust By: /s/ Robert C. Doll, Jr. --------------------------------- Robert C. Doll, Jr., Chief Executive Officer of Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust Date: February 24, 2005 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/ Robert C. Doll, Jr. --------------------------------- Robert C. Doll, Jr., Chief Executive Officer of Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust Date: February 24, 2005 By: /s/ Donald C. Burke --------------------------------- Donald C. Burke, Chief Financial Officer of Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust Date: February 24, 2005 EX-99.CERT 2 e500378_ex99-cert.txt CERTIFICATION PURSUANT TO SECTION 302 EX-99. CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - -------------------------------------------------------------------------------- I, Robert C. Doll, Jr., Chief Executive Officer of Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust, certify that: 1. I have reviewed this report on Form N-CSR of Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust; 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; 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 registrants as of, and for, the periods presented in this report; 4. The registrants' other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrants and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrants' disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrants' internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants' internal control over financial reporting; and 5. The registrants' other certifying officer(s) and I have disclosed to the registrants' auditors and the audit committees of the registrants' boards of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal control over financial reporting. Date: March 30, 2005 /s/ Robert C. Doll, Jr. ----------------------- Robert C. Doll, Jr., Chief Executive Officer of Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust EX-99. CERT CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - -------------------------------------------------------------------------------- I, Donald C. Burke, Chief Financial Officer of Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust, certify that: 1. I have reviewed this report on Form N-CSR of Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust; 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; 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 registrants as of, and for, the periods presented in this report; 4. The registrants' other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrants and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrants' disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrants' internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants' internal control over financial reporting; and 5. The registrants' other certifying officer(s) and I have disclosed to the registrants' auditors and the audit committees of the registrants' boards of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants' internal control over financial reporting. Date: March 30, 2005 /s/ Donald C. Burke ------------------- Donald C. Burke, Chief Financial Officer of Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust EX-99.1350 CERT 3 e500378_ex99-1350cert.txt CERTIFICATION PURSUANT TO SECTION 906 Exhibit 99.1350CERT Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Robert C. Doll, Jr., Chief Executive Officer of Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust (together, 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, 2005 /s/ Robert C. Doll, Jr. -------------------------------------- Robert C. Doll, Jr., Chief Executive Officer of Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust and will be retained by Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust and furnished to the Securities and Exchange Commission or its staff upon request. Exhibit 99.1350CERT Certification Pursuant to Section 906 of the Sarbanes Oxley Act I, Donald C. Burke, Chief Financial Officer of Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust (together, 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, 2005 /s/ Donald C. Burke -------------------------------------- Donald C. Burke, Chief Financial Officer of Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust and will be retained by Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master Aggregate Bond Index Series of Quantitative Master Series Trust and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----