-----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, JT9opuH2YGKAOvEkdUssqdtDcTOiZi/8UTZmNdgGzLJYhM1uWZZSb+xKnOKLWGyJ iFzltHj4zrG9CsogjiWRVA== 0001193805-06-000631.txt : 20060309 0001193805-06-000631.hdr.sgml : 20060309 20060309121332 ACCESSION NUMBER: 0001193805-06-000631 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20051231 FILED AS OF DATE: 20060309 DATE AS OF CHANGE: 20060309 EFFECTIVENESS DATE: 20060309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH INDEX FUNDS INC CENTRAL INDEX KEY: 0001026144 IRS NUMBER: 223483675 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07899 FILM NUMBER: 06675236 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 0001026144 S000003115 Merrill Lynch Aggregate Bond Index Fund C000008445 Class A C000008446 Class I N-CSR 1 e600214_ncsr-aggbond.txt ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-07899 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: 12/31/05 Date of reporting period: 01/01/05 - 12/31/05 Item 1 - Report to Stockholders Merrill Lynch Aggregate Bond Index Fund Of Merrill Lynch Index Funds, Inc. Annual Report December 31, 2005 Merrill Lynch Aggregate Bond Index Fund Important Tax Information The following information is provided with respect to the net investment income distributions paid monthly by Merrill Lynch Aggregate Bond Index Fund during the fiscal year ended December 31, 2005. - ----------------------------------------------------------------------------- Federal Obligation Interest ....................................... 9.42%* Interest-Related Dividends for Non-U.S. Residents: January 2005 .................................................... 64.89%** February - December 2005 ........................................ 92.82%** - ----------------------------------------------------------------------------- The following information is provided with respect to the distribution paid by the Fund to shareholders on August 24, 2005. - ----------------------------------------------------------------------------- Long-Term Capital Gains ......................................... $.004963 - ----------------------------------------------------------------------------- The following information is provided with respect to the distribution paid by the Fund to shareholders on December 30, 2005. - ----------------------------------------------------------------------------- Short-Term Capital Gains for Non-U.S. Residents ................. $.012017** Long-Term Capital Gains ......................................... $.024801 - ----------------------------------------------------------------------------- * 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 tax. ** Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations. 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. Electronic Delivery The Fund offers electronic delivery of communications to its shareholders. In order to receive this service, you must register 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. 2 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 A Letter From the President Dear Shareholder On balance, 2005 was a year of "muddling through" for the U.S. financial markets, as oil prices reached new record highs, the Federal Reserve Board (the Fed) increased the target federal funds rate from 2.25% to 4.25%, the housing market and the consumer finally showed some signs of slowing, and Hurricanes Katrina and Rita ravaged the Gulf Coast, causing yet untold economic damage. Although they struggled, stocks managed to post their third straight year of positive performance. The year was equally uncertain for fixed income markets, which were bemused by a flattening yield curve and a number of significant credit events that brought a slowdown in high yield market returns. Notably, the one-year results for the major asset classes -- stocks, bonds and cash -- were the closest they have been in more than 100 years. For the 12- and six-month periods ended December 31, 2005, most of the major market indexes managed to land in positive territory:
Total Returns as of December 31, 2005 6-month 12-month =========================================================================================== U.S. equities (Standard & Poor's 500 Index) + 5.77% + 4.91% - ------------------------------------------------------------------------------------------- Small-cap U.S. equities (Russell 2000 Index) + 5.88 + 4.55 - ------------------------------------------------------------------------------------------- International equities (MSCI Europe Australasia Far East Index) +14.88 +13.54 - ------------------------------------------------------------------------------------------- Fixed income (Lehman Brothers Aggregate Bond Index) - 0.08 + 2.43 - ------------------------------------------------------------------------------------------- Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 0.60 + 3.51 - ------------------------------------------------------------------------------------------- High yield bonds (Credit Suisse First Boston High Yield Index) + 1.48 + 2.26 - -------------------------------------------------------------------------------------------
In hindsight, these numbers are reasonably good given the headwinds facing the markets in 2005. U.S. equities found support in strong corporate earnings, low core inflation and healthy company balance sheets. Strength in the global economy and non-U.S. equity markets helped, as did robust dividend-distribution, share-buyback and merger-and-acquisition activity. International stocks had an excellent year, with many markets benefiting from strong economic statistics, trade surpluses and solid finances. In the U.S. bond market, long-term yields remained low and, at year-end, the Treasury curve appeared ready to invert. As 2006 begins, the largest question marks center on the Fed's future moves, the U.S. consumer's ability (or inability) to continue spending, the direction of the U.S. dollar following a year of appreciation and the potential for continued strong economic and corporate earnings growth. As you turn the calendar and consider how these factors might impact your investments, remember that the new year is a good time to meet with your financial advisor to review your financial goals, and to make portfolio changes where necessary. For investing insights and timely "food for thought" for investors, we also invite you to visit Shareholder magazine at www.mlim.ml.com/shareholdermagazine. As always, 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 Director/Trustee MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 3 A Discussion With Your Fund's Portfolio Manager We continue 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, 2005, Merrill Lynch Aggregate Bond Index Fund's Class A and Class I Shares had total returns of +1.83% and +2.09%, respectively. This compared to a return of +2.43% 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, a minimal margin of error in total return tracking is expected in seeking to match the return of the benchmark. This often will account for the variance in returns versus the Index. The Lehman Brothers Aggregate Bond Index is composed of three major investment sectors: U.S. 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 representation that each sector has in the overall market. For calendar year 2005, the government and agency sector of the Index was the best performer, posting a gain of 2.65%. As short-term interest rates climbed in 2005, investors grew more averse to riskier assets, prompting widening yield spreads in the credit sectors and resulting in superior relative performance for the government and agency sector. For the same period, the MBS sector gained 2.61%, virtually matching the performance of the government and agency sector. Although yield spreads on MBS widened versus U.S. Treasury securities of similar maturities, much of the move was offset by the yield advantage of MBS. The corporate credit sector was up 1.96% for the year. These returns were realized in an environment of rising short-term interest rates, as the Federal Reserve Board (the Fed) remained vigilant in its effort to combat inflation. The interest rate hikes, which began in mid 2004 when the target federal funds rate stood at a historic low of 1%, continued at a measured pace in 2005, culminating in a target short-term interest rate of 4.25% at year-end. While the federal funds rate was ratcheting up 200 basis points over the year, long-term interest rates, as measured by the 10-year U.S. Treasury note, were relatively stable. Over the past 12 months, yields on the 10-year Treasury ranged from a low of 3.89% on June 2 to a high of 4.66% on November 4. After flattening considerably over the course of the year, the yield curve had become slightly inverted by period-end. That is, the 4.39% yield on the 10-year Treasury was two basis points (.02%) lower than that of the two-year Treasury note. By comparison, the 4.24% yield on the 10-year Treasury at the beginning of the year was 116 basis points higher than that of the two-year note. 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 composed 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, 2005 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, 2005, the Lehman Brothers Aggregate Bond Index was composed of 6,453 securities, and the Series held 585 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, 2005, the government and agency sector of the Lehman Brothers Aggregate Bond Index was composed of 843 securities, accounting for 36.39% of the Index's total capitalization. This was in comparison to 695 issues representing 35.69% of the benchmark at December 31, 2004. The Series' position in this sector is designed to match the duration, yield and convexity of the Index. Therefore, any change in interest rates or the shape of the yield curve will have an identical effect on the sector's return. The MBS sector included 2,690 securities and comprised 40.20% of the Index at December 31, 2005, versus 2,272 securities representing 39.51% of the Index at December 31, 2004. The Fund's position in the MBS sector has the same exposure to 30-year, 15-year and balloon MBS as that of the Index. Within these subsectors, exposure to coupons and issuers also are matched to that of the Index in an effort to duplicate the return of the Index's MBS sector with minimal deviation. Within the corporate sector, there were 2,920 securities representing 23.41% of the Index at December 31, 2005, compared to 2,869 securities representing 24.80% of the Index as of December 31, 2004. As with the U.S. 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 continue 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 those of the broader market. Jeffrey B. Hewson Vice President and Portfolio Manager January 17, 2006 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 5 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 administrator voluntarily waived a portion of its administrative fee. Without such waiver, the Fund's performance would have been lower. Recent Performance Results
6-Month 12-Month Since Inception Standardized As of December 31, 2005 Total Return Total Return Total Return 30-Day Yield ================================================================================================================ ML Aggregate Bond Index Fund Class A Shares* -0.50% +1.83% +67.39% 4.29% - ---------------------------------------------------------------------------------------------------------------- ML Aggregate Bond Index Fund Class I Shares* -0.37 +2.09 +71.07 4.55 - ---------------------------------------------------------------------------------------------------------------- Lehman Brothers Aggregate Bond Index** -0.08 +2.43 +75.88 -- - ----------------------------------------------------------------------------------------------------------------
* 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, 2005 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 2005. ML Aggregate ML Aggregate Lehman Bond Index Fund+-- Bond Index Fund+-- Brothers Aggregate Class A Shares* Class I Shares* Bond Index++ 4/03/97** $10,000 $10,000 $10,000 12/97 $10,929 $10,949 $10,988 12/98 $11,832 $11,883 $11,943 12/99 $11,656 $11,724 $11,845 12/00 $12,961 $13,082 $13,222 12/01 $13,946 $14,112 $14,338 12/02 $15,286 $15,492 $15,808 12/03 $15,796 $16,063 $16,457 12/04 $16,438 $16,757 $17,171 12/05 $16,739 $17,107 $17,588 * 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 12/31/05 +1.83% - -------------------------------------------------------------------------------- Five Years Ended 12/31/05 +5.25 - -------------------------------------------------------------------------------- Inception (4/03/97) through 12/31/05 +6.07 - -------------------------------------------------------------------------------- Class I Shares Return ================================================================================ One Year Ended 12/31/05 +2.09% - -------------------------------------------------------------------------------- Five Years Ended 12/31/05 +5.51 - -------------------------------------------------------------------------------- Inception (4/03/97) through 12/31/05 +6.33 - -------------------------------------------------------------------------------- MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 7 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 12b-1 fees, and other Fund expenses. The following example (which is based on a hypothetical investment of $1,000 invested on July 1, 2005 and held through December 31, 2005) 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, 2005 to July 1, 2005 December 31, 2005 December 31, 2005 ========================================================================================================== Actual ========================================================================================================== Class A $1,000 $ 995.00 $3.05 - ---------------------------------------------------------------------------------------------------------- Class I $1,000 $ 996.30 $1.78 ========================================================================================================== Hypothetical (5% annual return before expenses)** ========================================================================================================== Class A $1,000 $1,022.44 $3.09 - ---------------------------------------------------------------------------------------------------------- Class I $1,000 $1,023.72 $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 186/365 (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 365. 8 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 Statement of Assets and Liabilities Merrill Lynch Aggregate Bond Index Fund As of December 31, 2005 ================================================================================================================================= Assets - --------------------------------------------------------------------------------------------------------------------------------- Investment in Master Aggregate Bond Index Series (the "Series"), at value (identified cost--$360,531,798) .............................................. $ 361,719,252 Prepaid expenses .............................................................. 17,662 ------------- Total assets .................................................................. 361,736,914 ------------- ================================================================================================================================= Liabilities - --------------------------------------------------------------------------------------------------------------------------------- Payables: Dividends and distributions to shareholders ................................ $ 649,724 Administrator .............................................................. 18,238 Distributor ................................................................ 6,493 674,455 ------------- Accrued expenses and other liabilities ........................................ 41,462 ------------- Total liabilities ............................................................. 715,917 ------------- ================================================================================================================================= Net Assets - --------------------------------------------------------------------------------------------------------------------------------- Net assets .................................................................... $ 361,020,997 ============= ================================================================================================================================= Net Assets Consist of - --------------------------------------------------------------------------------------------------------------------------------- Class A Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized $ 276 Class I Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized 3,159 Paid-in capital in excess of par .............................................. 360,902,093 Accumulated distributions in excess of investment income--net ................. $ (195,751) Accumulated realized capital losses allocated from the Series--net ............ (876,234) Unrealized appreciation allocated from the Series--net ........................ 1,187,454 ------------- Total accumulated earnings--net ............................................... 115,469 ------------- Net Assets .................................................................... $ 361,020,997 ============= ================================================================================================================================= Net Asset Value - --------------------------------------------------------------------------------------------------------------------------------- Class A--Based on net assets of $28,983,879 and 2,757,262 shares outstanding .. $ 10.51 ============= Class I--Based on net assets of $332,037,118 and 31,590,411 shares outstanding $ 10.51 =============
See Notes to Financial Statements. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 9 Statement of Operations Merrill Lynch Aggregate Bond Index Fund For the Year Ended December 31, 2005 ================================================================================================================================= Investment Income--Net - --------------------------------------------------------------------------------------------------------------------------------- Net investment income allocated from the Series: Interest ........................................................... $ 16,290,505 Securities lending--net ............................................ 20,317 Expenses ........................................................... (212,284) ------------- Total income .......................................................... 16,098,538 ------------- ================================================================================================================================= Expenses - --------------------------------------------------------------------------------------------------------------------------------- Administration fees ................................................... $ 693,071 Transfer agent fees--Class I .......................................... 338,915 Printing and shareholder reports ...................................... 93,259 Account maintenance fees--Class A ..................................... 80,410 Registration fees ..................................................... 42,846 Transfer agent fees--Class A .......................................... 32,255 Professional fees ..................................................... 10,461 Directors' fees and expenses .......................................... 4,854 Other ................................................................. 10,024 ------------- Total expenses before waiver .......................................... 1,306,095 Waiver of expenses .................................................... (164,375) ------------- Total expenses after waiver ........................................... 1,141,720 ------------- Investment income--net ................................................ 14,956,818 ------------- ================================================================================================================================= Realized & Unrealized Gain (Loss) Allocated From the Series--Net - --------------------------------------------------------------------------------------------------------------------------------- Realized gain (loss) on: Investments--net ................................................... 674,751 Swaps--net ......................................................... (152,051) 522,700 ------------- Change in unrealized appreciation on investments--net ................. (8,252,890) ------------- Total realized and unrealized loss--net ............................... (7,730,190) ------------- Net Increase in Net Assets Resulting from Operations .................. $ 7,226,628 =============
See Notes to Financial Statements. 10 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 Statements of Changes in Net Assets Merrill Lynch Aggregate Bond Index Fund
For the Year Ended December 31, ------------------------------- Increase (Decrease) in Net Assets: 2005 2004 ================================================================================================================================= Operations - --------------------------------------------------------------------------------------------------------------------------------- Investment income--net .............................................................. $ 14,956,818 $ 15,664,002 Realized gain--net .................................................................. 522,700 7,809,845 Change in unrealized appreciation--net .............................................. (8,252,890) (5,807,322) ------------------------------- Net increase in net assets resulting from operations ................................ 7,226,628 17,666,525 ------------------------------- ================================================================================================================================= Dividends & Distributions to Shareholders - --------------------------------------------------------------------------------------------------------------------------------- Investment income--net: Class A .......................................................................... (1,248,365) (2,164,103) Class I .......................................................................... (13,718,703) (13,823,831) Realized gain--net: Class A .......................................................................... (146,554) (698,074) Class I .......................................................................... (1,652,899) (5,123,432) ------------------------------- Net decrease in net assets resulting from dividends and distributions to shareholders (16,766,521) (21,809,440) ------------------------------- ================================================================================================================================= Capital Share Transactions - --------------------------------------------------------------------------------------------------------------------------------- Net decrease in net assets derived from capital share transactions .................. (26,930,863) (28,134,770) ------------------------------- ================================================================================================================================= Net Assets - --------------------------------------------------------------------------------------------------------------------------------- Total decrease in net assets ........................................................ (36,470,756) (32,277,685) Beginning of year ................................................................... 397,491,753 429,769,438 ------------------------------- End of year* ........................................................................ $ 361,020,997 $ 397,491,753 =============================== * Accumulated distributions in excess of investment income--net $ (195,751) $ (37,041) ===============================
See Notes to Financial Statements. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 11 Financial Highlights Merrill Lynch Aggregate Bond Index Fund
Class A ---------------------------------------------------------------------- For the Year Ended December 31, The following per share data and ratios have been derived ---------------------------------------------------------------------- from information provided in the financial statements. 2005 2004 2003 2002 2001 =================================================================================================================================== Per Share Operating Performance - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ..... $ 10.78 $ 10.91 $ 10.96 $ 10.50 $ 10.31 ---------------------------------------------------------------------- Investment income--net ................. .41* .39* .41* .52* .58 Realized and unrealized gain (loss)--net (.21) .04 (.05) .46 .19 ---------------------------------------------------------------------- Total from investment operations ....... .20 .43 .36 .98 .77 ---------------------------------------------------------------------- Less dividends and distributions: Investment income--net .............. (.42) (.40) (.41) (.52) (.58) Realized gain--net .................. (.05) (.16) -- -- -- ---------------------------------------------------------------------- Total dividends and distributions ...... (.47) (.56) (.41) (.52) (.58) ---------------------------------------------------------------------- Net asset value, end of year ........... $ 10.51 $ 10.78 $ 10.91 $ 10.96 $ 10.50 ====================================================================== =================================================================================================================================== Total Investment Return - ----------------------------------------------------------------------------------------------------------------------------------- Based on net asset value per share ..... 1.83% 4.05% 3.35% 9.61% 7.60% ====================================================================== =================================================================================================================================== Ratios to Average Net Assets** - ----------------------------------------------------------------------------------------------------------------------------------- Expenses, net of waiver ................ .60% .60% .60% .59% .60% ====================================================================== Expenses ............................... .64% .61% .62% .61% .71% ====================================================================== Investment income--net ................. 3.87% 3.60% 3.70% 4.91% 5.50% ====================================================================== =================================================================================================================================== Supplemental Data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) . $ 28,984 $ 47,466 $ 63,872 $ 61,029 $ 60,438 ====================================================================== Portfolio turnover of the Series ....... 147.39% 159.44% 136.76% 112.18% 144.23% ======================================================================
* Based on average shares outstanding. ** Includes the Fund's share of the Series' allocated expenses and/or investment income--net. See Notes to Financial Statements. 12 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 Financial Highlights (concluded) Merrill Lynch Aggregate Bond Index Fund
Class I ---------------------------------------------------------------------- For the Year Ended December 31, The following per share data and ratios have been derived ---------------------------------------------------------------------- from information provided in the financial statements. 2005 2004 2003 2002 2001 =================================================================================================================================== Per Share Operating Performance - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year ..... $ 10.78 $ 10.91 $ 10.95 $ 10.50 $ 10.31 ---------------------------------------------------------------------- Investment income--net ................. .44* .42* .43* .55* .61 Realized and unrealized gain (loss)--net (.22) .04 (.03) .45 .19 ---------------------------------------------------------------------- Total from investment operations ....... .22 .46 .40 1.00 .80 ---------------------------------------------------------------------- Less dividends and distributions: Investment income--net .............. (.44) (.43) (.44) (.55) (.61) Realized gain--net .................. (.05) (.16) -- -- -- ---------------------------------------------------------------------- Total dividends and distributions ...... (.49) (.59) (.44) (.55) (.61) ---------------------------------------------------------------------- Net asset value, end of year ........... $ 10.51 $ 10.78 $ 10.91 $ 10.95 $ 10.50 ====================================================================== =================================================================================================================================== Total Investment Return - ----------------------------------------------------------------------------------------------------------------------------------- Based on net asset value per share ..... 2.09% 4.31% 3.70% 9.78% 7.87% ====================================================================== =================================================================================================================================== Ratios to Average Net Assets** - ----------------------------------------------------------------------------------------------------------------------------------- Expenses, net of waiver ................ .35% .35% .35% .34% .35% ====================================================================== Expenses ............................... .39% .36% .37% .36% .46% ====================================================================== Investment income--net ................. 4.12% 3.85% 3.95% 5.16% 5.72% ====================================================================== =================================================================================================================================== Supplemental Data - ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) . $332,037 $350,026 $365,898 $360,991 $324,390 ====================================================================== Portfolio turnover of the Series ....... 147.39% 159.44% 136.76% 112.18% 144.23% ======================================================================
* Based on average shares outstanding. ** Includes the Fund's share of the Series' allocated expenses and/or investment income--net. See Notes to Financial Statements. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 13 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 strategies 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, 2005 was 36.0%. 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 1(a) 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 its 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) Reclassifications -- 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 $464,948 has been reclassified between accumulated net realized capital losses and paid-in capital in excess of par and $148,460 has been reclassified between accumulated distributions in excess of net investment income and accumulated realized capital losses as a result of permanent differences attributable to net gains realized on the distribution of securities not recognized for tax purposes, swap agreements, amortization methods on fixed income securities, and the reclassification of distributions. These reclassifications have no effect on net assets or net asset values per share. 2. Transactions with Affiliates: The Corporation has entered into an Administration Agreement with Merrill Lynch Investment Managers, L.P. ("MLIM"). The general partner of MLIM is Princeton Services, Inc. ("PSI"), 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. MLIM 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, 2005, MLIM earned fees of $693,071, of which $164,375 was waived. The Fund may pay a monthly investment advisory fee at an annual rate of .06% based upon the average daily value of the Fund's net assets. However, the Investment Adviser has entered into a contractual agreement with the Fund pursuant to which the investment advisory fee will not be charged to the Fund so long as the Fund remains invested in the Series. 14 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 Notes to Financial Statements (concluded) Merrill Lynch Aggregate Bond Index Fund As a result, the investment advisory fee has not been accrued and will not be payable by the Fund for the period covered by this report. The Corporation has also entered into a Distribution Agreement and Distribution Plan with FAM Distributors, Inc. ("FAMD" or the "Distributor"), a wholly-owned subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plan adopted by the Corporation in accordance with Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor an ongoing account maintenance fee. The fee is accrued daily and paid monthly at the annual rate of ..25% based upon the average daily net assets of Class A Shares. Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), an affiliate of MLIM, 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 MLIM, PSI, FAMD, FDS, and/or ML & Co. 3. Capital Share Transactions: Net decrease in net assets derived from capital share transactions was $26,930,863 and $28,134,770 for the years ended December 31, 2005 and December 31, 2004, respectively. Transactions in capital shares for each class were as follows: - ------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended December 31, 2005 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................ 773,702 $ 8,268,069 Shares issued to shareholders in reinvestment of dividends and distributions .................... 97,135 1,035,355 ------------------------------- Total issued ........................... 870,837 9,303,424 Shares redeemed ........................ (2,516,993) (26,960,665) ------------------------------- Net decrease ........................... (1,646,156) $(17,657,241) =============================== - ------------------------------------------------------------------------------- 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 I Shares for the Year Dollar Ended December 31, 2005 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................ 10,470,426 $ 111,757,534 Shares issued to shareholders in reinvestment of dividends and distributions .................... 1,020,713 10,862,316 ------------------------------- Total issued ........................... 11,491,139 122,619,850 Shares redeemed ........................ (12,376,169) (131,893,472) ------------------------------- Net decrease ........................... (885,030) $ (9,273,622) =============================== - ------------------------------------------------------------------------------- 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) =============================== 4. Distributions to Shareholders: The tax character of distributions paid during the fiscal years ended December 31, 2005 and December 31, 2004 was as follows: - -------------------------------------------------------------------------------- 12/31/2005 12/31/2004 - -------------------------------------------------------------------------------- Distributions paid from: Ordinary income .......................... $15,757,158 $20,301,079 Net long-term capital gains .............. 1,009,363 1,508,361 ----------------------------- Total taxable distributions ................ $16,766,521 $21,809,440 ============================= As of December 31, 2005, the components of accumulated earnings on a tax basis were as follows: - ------------------------------------------------------------------------------ Undistributed ordinary income--net ......................... $ 118,873 Undistributed long-term capital gains--net ................. -- --------- Total undistributed earnings--net .......................... 118,873 Capital loss carryforward .................................. -- Unrealized losses--net ..................................... (3,404)* --------- Total accumulated earnings--net ............................ $ 115,469 ========= * The difference between book-basis and tax-basis net unrealized losses is attributable primarily to the tax deferral of losses on wash sales, the tax deferral of losses on straddles, the difference between book and tax amortization methods for premiums and discounts on fixed income securities and the deferral of post-October capital losses for tax purposes. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 15 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, 2005, 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, 2005, 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, 2006 16 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 Portfolio Information Master Aggregate Bond Index Series As of December 31, 2005 Quality Ratings by Percent of S&P/Moody's Total Investments - -------------------------------------------------------------------------------- AAA/Aaa ................................................ 73.3% AA/Aa .................................................. 4.3 A/A .................................................... 8.8 BBB/Baa ................................................ 5.9 Other* ................................................. 7.7 - -------------------------------------------------------------------------------- * Includes portfolio holdings in short-term investments. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 17 Summary Schedule of Investments Master Aggregate Bond Index Series (in U.S. dollars) 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 Percent of Issue Face Amount Rate Date(s) Value Net Assets ==================================================================================================================================== Government & Agency Fannie Mae $32,545,000 2.625% 11/15/2006 $ 31,967,489 3.2% Obligations 1,595,000 4.25 9/15/2007 1,581,983 0.2 32,205,000 5.75 2/15/2008 (d) 32,852,514 3.3 12,395,000 2.50 6/15/2008 11,762,198 1.2 13,025,000 3.25 8/15/2008 (d) 12,557,637 1.2 22,425,000 4.50 10/15/2008 (d) 22,300,609 2.2 26,455,000 6.625 9/15/2009 28,130,686 2.8 30,840,000 6.00 5/15/2011 32,617,525 3.2 8,330,000 4.375 3/15/2013 8,111,154 0.8 5,185,000 4.625 10/15/2014 5,123,895 0.5 3,685,000 5.25 - 7.25 6/15/2006 - 5/15/2030 4,124,917 0.4 ------------------------------------------------------------------------------------------------------------- Freddie Mac 24,610,000 4.875 3/15/2007 24,637,588 2.5 6,615,000 5.75 4/15/2008 6,757,441 0.7 15,905,000 4.125 7/12/2010 15,509,793 1.5 8,965,000 4.875 11/15/2013 9,007,404 0.9 12,110,000 4.75 11/17/2015 12,018,957 1.2 8,655,000 6.75 9/15/2029 10,703,673 1.1 5,005,000 4.375 - 7.18 6/27/2006 - 7/15/2032 5,441,770 0.5 ------------------------------------------------------------------------------------------------------------- U.S. Treasury Bonds 14,975,000 8.75 5/15/2017 20,563,715 2.0 8,625,000 8.50 2/15/2020 12,099,253 1.2 6,335,000 8.125 8/15/2021 8,790,060 0.9 8,610,000 6.25 8/15/2023 10,281,554 1.0 4,105,000 6.875 8/15/2025 5,286,468 0.5 3,510,000 6.375 8/15/2027 4,348,149 0.4 1,845,000 5.375 2/15/2031 2,072,453 0.2 ------------------------------------------------------------------------------------------------------------- U.S. Treasury Notes 7,335,000 3.00 11/15/2007 (d) 7,152,197 0.7 5,890,000 4.00 11/15/2012 5,763,229 0.6 4,660,000 2.625 - 3.625 11/15/2006 - 1/15/2010 4,556,232 0.5 ------------------------------------------------------------------------------------------------------------- Other Securities 1,554,633 0.2 ------------------------------------------------------------------------------------------------------------- Total Government & Agency Obligations (Cost--$356,303,214) 357,675,176 35.6 ==================================================================================================================================== Government Agency Freddie Mac Mortgage 7,577,000 4.00 1/01/2021 (b) 7,219,457 0.7 Mortgage-Backed Participation Certificates 36,340,382 4.50 2/01/2011 - 1/15/2021 (b) 35,433,404 3.5 Obligations* 6,864,845 4.50 4/01/2034 - 12/01/2035 6,462,817 0.6 30,339,591 5.00 11/01/2017 - 2/15/2021 (b) 30,062,386 3.0 77,780,197 5.00 8/01/2035 - 2/15/2036 (b) 75,300,580 7.5 8,832,665 5.50 4/01/2014 - 7/01/2020 8,890,171 0.9 96,897,291 5.50 8/01/2035 - 2/15/2036 (b) 95,993,941 9.6 3,997,901 6.00 4/01/2016 - 10/01/2017 4,081,086 0.4 30,946,594 6.00 6/01/2033 - 2/15/2036 (b) 31,246,093 3.1 14,180,678 6.50 1/01/2026 - 1/15/2036 (b) 14,553,209 1.4 3,562,775 7.00 1/01/2020 - 11/01/2032 3,712,645 0.4 2,743,330 6.50 - 12.50 5/01/2007 - 9/01/2032 2,879,813 0.3 ------------------------------------------------------------------------------------------------------------- Ginnie Mae MBS Certificates 4,006,000 4.50 9/15/2035 3,844,508 0.4 9,482,000 5.00 1/15/2036 - 2/15/2036 (b) 9,353,925 0.9 9,415,354 5.50 1/15/2035 - 5/15/2035 9,480,084 0.9 9,762,179 6.00 4/20/2026 - 1/15/2036 (b) 10,000,337 1.0 4,790,848 6.50 - 9.50 4/15/2013 - 11/15/2034 5,033,102 0.5 ------------------------------------------------------------------------------------------------------------- Other Securities 3,662,190 0.4 ------------------------------------------------------------------------------------------------------------- Total Government Agency Mortgage-Backed Obligations (Cost--$358,878,023) 357,209,748 35.5 ====================================================================================================================================
18 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 Summary Schedule of Investments (continued) Master Aggregate Bond Index Series (in U.S. dollars)
Face Percent of Amount Non-Government Agency Mortgage-Backed Securities* Value Net Assets ============================================================================================================================== Collateralized $ 9,525,824 Residential Accredit Loans, Inc. Series 2005-QS12 Class A8, Mortgage 4.729% due 8/25/2035 (c) $ 9,512,630 0.9% Obligations ============================================================================================================================== Commercial 8,869,429 CS First Boston Mortgage Securities Corp. Series 2004-FL1A Mortgage-Backed Class A, 4.589% due 5/15/2014 (a)(c) 8,872,573 0.9 Securities 15,000,000 CS First Boston Mortgage Securities Corp. Series 2005-CN2A Class A2, 4.52% due 11/15/2019 (a)(c) 14,999,940 1.5 9,193,350 Commercial Mortgage Pass-Through Certificates Series 2005-F10A Class A1, 4.469% due 4/15/2017 (a)(c) 9,192,303 0.9 20,000,000 Greenwich Capital Commercial Funding Corp. Series 2004-FL2A Class A2, 4.578% due 11/05/2019 (c) 20,003,312 2.0 15,000,000 Greenwich Capital Commercial Funding Corp. Series 2005-FL3A Class A2, 4.598% due 10/05/2007 (a)(c) 15,000,000 1.5 20,000,000 JPMorgan Chase Commercial Mortgage Securities Corp. Series 2004-FL1A Class A2, 4.55% due 4/16/2019 (c) 20,015,400 2.0 18,942,734 Lehman Brothers Floating Rate Commercial Mortgage Trust Series 2004-LLFA Class A2, 4.539% due 10/15/2017 (a)(c) 18,946,693 1.9 15,000,000 Wachovia Bank Commercial Mortgage Trust Series 2004-WL4A Class A2, 4.539% due 10/15/2015 (a)(c) 15,007,418 1.5 --------------------------- 122,037,639 12.2 ============================================================================================================================== Total Non-Government Agency Mortgage-Backed Securities (Cost--$131,531,337) 131,550,269 13.1 ============================================================================================================================== ============================================================================================================================== Industry Fixed Income Securities ============================================================================================================================== Aerospace & Defense Other Securities 7,454,023 0.8 - ------------------------------------------------------------------------------------------------------------------------------ Air Freight & Logistics Other Securities 118,591 0.0 - ------------------------------------------------------------------------------------------------------------------------------ Airlines Other Securities 791,728 0.1 - ------------------------------------------------------------------------------------------------------------------------------ Auto Components Other Securities 192,941 0.0 - ------------------------------------------------------------------------------------------------------------------------------ Automobiles Other Securities 2,872,307 0.3 - ------------------------------------------------------------------------------------------------------------------------------ Beverages Other Securities 2,910,525 0.3 - ------------------------------------------------------------------------------------------------------------------------------ Biotechnology Other Securities 443,483 0.1 - ------------------------------------------------------------------------------------------------------------------------------ Building Products Other Securities 279,606 0.0 - ------------------------------------------------------------------------------------------------------------------------------ Capital Markets Other Securities 17,238,480 1.7 - ------------------------------------------------------------------------------------------------------------------------------ Chemicals Other Securities 1,964,583 0.2 - ------------------------------------------------------------------------------------------------------------------------------ Commercial Banks Other Securities 29,460,406 2.9 - ------------------------------------------------------------------------------------------------------------------------------ Commercial Services & Other Securities 4,170,688 0.4 Supplies - ------------------------------------------------------------------------------------------------------------------------------ Communications Equipment Other Securities 1,198,737 0.1 - ------------------------------------------------------------------------------------------------------------------------------ Computers & Peripherals Other Securities 2,043,815 0.2 - ------------------------------------------------------------------------------------------------------------------------------ Construction Materials Other Securities 351,914 0.0 - ------------------------------------------------------------------------------------------------------------------------------ Consumer Finance Other Securities 7,723,931 0.8 - ------------------------------------------------------------------------------------------------------------------------------ Containers & Packaging Other Securities 342,294 0.0 - ------------------------------------------------------------------------------------------------------------------------------ Diversified Consumer Other Securities 313,361 0.0 Services - ------------------------------------------------------------------------------------------------------------------------------ Diversified Financial Other Securities 17,048,754 1.7 Services - ------------------------------------------------------------------------------------------------------------------------------ Diversified Other Securities 13,177,976 1.3 Telecommunication Services - ------------------------------------------------------------------------------------------------------------------------------ Electric Utilities Other Securities 6,748,452 0.7 - ------------------------------------------------------------------------------------------------------------------------------ Electrical Equipment Other Securities 254,544 0.0 - ------------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 19 Summary Schedule of Investments (continued) Master Aggregate Bond Index Series (in U.S. dollars)
Percent of Industry Fixed Income Securities Value Net Assets ============================================================================================================================== Energy Equipment & Other Securities $ 382,100 0.1% Services - ------------------------------------------------------------------------------------------------------------------------------ Food & Staples Other Securities 3,919,379 0.4 Retailing - ------------------------------------------------------------------------------------------------------------------------------ Food Products Other Securities 4,911,944 0.5 - ------------------------------------------------------------------------------------------------------------------------------ Gas Utilities Other Securities 1,332,247 0.1 - ------------------------------------------------------------------------------------------------------------------------------ Health Care Equipment & Other Securities 907,822 0.1 Supplies - ------------------------------------------------------------------------------------------------------------------------------ Health Care Providers & Other Securities 1,004,055 0.1 Services - ------------------------------------------------------------------------------------------------------------------------------ Hotels, Restaurants & Other Securities 1,889,992 0.2 Leisure - ------------------------------------------------------------------------------------------------------------------------------ Household Durables Other Securities 2,733,699 0.3 - ------------------------------------------------------------------------------------------------------------------------------ Household Products Other Securities 1,817,643 0.2 - ------------------------------------------------------------------------------------------------------------------------------ IT Services Other Securities 444,535 0.1 - ------------------------------------------------------------------------------------------------------------------------------ Independent Power Other Securities 1,212,019 0.1 Producers & Energy Traders - ------------------------------------------------------------------------------------------------------------------------------ Industrial Conglomerates Other Securities 1,650,730 0.2 - ------------------------------------------------------------------------------------------------------------------------------ Insurance Other Securities 9,854,136 1.0 - ------------------------------------------------------------------------------------------------------------------------------ Machinery Other Securities 3,415,419 0.3 - ------------------------------------------------------------------------------------------------------------------------------ Media Other Securities 11,583,885 1.2 - ------------------------------------------------------------------------------------------------------------------------------ Metals & Mining Other Securities 3,302,798 0.3 - ------------------------------------------------------------------------------------------------------------------------------ Multi-Utilities Other Securities 5,704,026 0.6 - ------------------------------------------------------------------------------------------------------------------------------ Multiline Retail Other Securities 2,496,370 0.3 - ------------------------------------------------------------------------------------------------------------------------------ Oil, Gas & Consumable Other Securities 17,414,256 1.7 Fuels - ------------------------------------------------------------------------------------------------------------------------------ Paper & Forest Products Other Securities 2,052,454 0.2 - ------------------------------------------------------------------------------------------------------------------------------ Pharmaceuticals Other Securities 3,820,213 0.4 - ------------------------------------------------------------------------------------------------------------------------------ Real Estate Other Securities 4,342,535 0.4 - ------------------------------------------------------------------------------------------------------------------------------ Road & Rail Other Securities 5,394,401 0.5 - ------------------------------------------------------------------------------------------------------------------------------ Software Other Securities 147,674 0.0 - ------------------------------------------------------------------------------------------------------------------------------ Specialty Retail Other Securities 1,252,801 0.1 - ------------------------------------------------------------------------------------------------------------------------------ Thrifts & Mortgage Finance Other Securities 4,010,711 0.4 - ------------------------------------------------------------------------------------------------------------------------------ Tobacco Other Securities 246,205 0.0 - ------------------------------------------------------------------------------------------------------------------------------ Wireless Other Securities 5,204,711 0.5 Telecommunication Services - ------------------------------------------------------------------------------------------------------------------------------ Total Fixed Income Securities (Cost--$218,167,508) 219,549,899 21.9 - ------------------------------------------------------------------------------------------------------------------------------ ============================================================================================================================== Foreign Government Obligations ============================================================================================================================== Other Securities 21,170,676 2.1 - ------------------------------------------------------------------------------------------------------------------------------ Total Foreign Government Obligations (Cost--$20,875,350) 21,170,676 2.1 - ------------------------------------------------------------------------------------------------------------------------------ ============================================================================================================================== Capital Trusts ============================================================================================================================== Commercial Banks Other Securities 249,521 0.0 - ------------------------------------------------------------------------------------------------------------------------------ Oil, Gas & Consumable Fuels Other Securities 83,325 0.0 - ------------------------------------------------------------------------------------------------------------------------------ Total Capital Trusts (Cost--$327,107) 332,846 0.0 - ------------------------------------------------------------------------------------------------------------------------------
20 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 Summary Schedule of Investments (concluded) Master Aggregate Bond Index Series (in U.S. dollars)
Percent of State Municipal Bonds Value Net Assets ============================================================================================================================== Illinois Other Securities $ 691,404 0.1% - ------------------------------------------------------------------------------------------------------------------------------ Texas Other Securities 1,040,333 0.1 - ------------------------------------------------------------------------------------------------------------------------------ Total Municipal Bonds (Cost--$1,678,073) 1,731,737 0.2 - ------------------------------------------------------------------------------------------------------------------------------ ============================================================================================================================== Face Amount Short-Term Securities ============================================================================================================================== Commercial Paper** $12,700,000 Atlantic Asset Securitization Corp., 4.31% due 1/17/2006 12,678,713 1.3 2,500,000 Atlantic Asset Securitization Corp., 4.33% due 1/12/2006 2,497,294 0.2 4,200,000 Chariot Funding LLC, 4.19% due 1/03/2006 4,200,000 0.4 18,200,000 DNB NOR Bank ASA, 4.25% due 1/11/2006 18,182,811 1.8 Other Securities 3,599,575 0.4 -------------------------- 41,158,393 4.1 - ------------------------------------------------------------------------------------------------------------------------------ ============================================================================================================================== Beneficial Interest ============================================================================================================================== $50,141,250 Merrill Lynch Liquidity Series, LLC Money Market Series (e)(f) 50,141,250 5.0 - ------------------------------------------------------------------------------------------------------------------------------ Total Short-Term Securities (Cost--$91,299,643) 91,299,643 9.1 - ------------------------------------------------------------------------------------------------------------------------------ Total Investments (Cost--$1,179,060,255+) 1,180,519,994 117.5 Liabilities in Excess of Other Assets (175,936,928) (17.5) -------------------------- Net Assets $1,004,583,066 100.0% ==========================
* Mortgage-Backed Securities are subject to principal paydowns. As a result of prepayments or refinancing of the underlying mortgage instruments, the average life may be substantially less than the original maturity. ** Commercial Paper is traded on a discount basis; the interest rates shown reflect the discount rates paid at the time of purchase. + The cost and unrealized appreciation (depreciation) of investments as of December 31, 2005, as computed for federal income tax purposes, were as follows: Aggregate cost ........................................ $1,179,554,701 ============== Gross unrealized appreciation ......................... $ 10,739,471 Gross unrealized depreciation ......................... (9,774,178) -------------- Net unrealized appreciation ........................... $ 965,293 ============== (a) The security may be offered and sold to "qualified institutional buyers" under Rule 144A of the Securities Act of 1933. (b) Represents or includes a "to-be-announced" transaction. The Series has committed to purchasing securities for which all specific information is not available at this time. (c) Floating rate note. (d) Security, or a portion of security, is on loan. (e) Security was purchased with the cash proceeds from securities loans. (f) Investments in companies considered to be an affiliate of the Series, for purposes of 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 $ 50,141,250 $44,641 Merrill Lynch Premier Institutional Fund (12,139,250) $3,357 -------------------------------------------------------------------------- o "Other Securities" represent issues that are not identified as the 50 largest holdings of the Series and issues not exceeding 1% of net assets. o For Series compliance purposes, the Series' industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Series' management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percent of net assets. These industry classifications are unaudited. o Swaps outstanding as of December 31, 2005 were as follows: -------------------------------------------------------------------------- Notional Unrealized Amount Appreciation -------------------------------------------------------------------------- Receive (pay) a variable return based on the change in the since inception return of the Lehman Brothers CMBS Investment Grade Index and pay a floating rate based on 1-month LIBOR plus 0.20% Broker, Morgan Stanley Capital Services, Inc. Expires March 2006 $40,000,000 -- -------------------------------------------------------------------------- See Notes to Financial Statements. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 21 Statement of Assets and Liabilities Master Aggregate Bond Index Series As of December 31, 2005 ================================================================================================================================== Assets - ---------------------------------------------------------------------------------------------------------------------------------- Investments in unaffiliated securities, at value (including securities loaned of $48,545,490) (identified cost--$1,128,919,005) .......................... $1,130,378,744 Investments in affiliated securities, at value (identified cost--$50,141,250) 50,141,250 Cash ........................................................................ 164,571 Receivables: Interest ................................................................. $ 10,172,354 Securities sold .......................................................... 2,267,708 Contributions ............................................................ 1,103,996 Swaps .................................................................... 146,582 Paydowns ................................................................. 94,759 Securities lending ....................................................... 2,047 13,787,446 -------------- Prepaid expenses and other assets ........................................... 3,157 -------------- Total assets ................................................................ 1,194,475,168 -------------- ================================================================================================================================== Liabilities - ---------------------------------------------------------------------------------------------------------------------------------- Collateral on securities loaned, at value ................................... 50,141,250 Payables: Securities purchased ..................................................... 139,345,120 Withdrawals .............................................................. 304,361 Other affiliates ......................................................... 8,766 Investment adviser ....................................................... 7,921 139,666,168 -------------- Accrued expenses ............................................................ 84,684 -------------- Total liabilities ........................................................... 189,892,102 -------------- ================================================================================================================================== Net Assets - ---------------------------------------------------------------------------------------------------------------------------------- Net assets .................................................................. $1,004,583,066 -------------- ================================================================================================================================== Net Assets Consist of - ---------------------------------------------------------------------------------------------------------------------------------- Investors' capital .......................................................... $1,003,123,327 Unrealized appreciation--net ................................................ 1,459,739 -------------- Net Assets .................................................................. $1,004,583,066 ==============
See Notes to Financial Statements. 22 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 Statement of Operations Master Aggregate Bond Index Series For the Year Ended December 31, 2005 ================================================================================================================================== Investment Income - ---------------------------------------------------------------------------------------------------------------------------------- Interest ............................................................... $ 38,893,014 Securities lending--net ................................................ 47,998 -------------- Total income ........................................................... 38,941,012 -------------- ================================================================================================================================== Expenses - ---------------------------------------------------------------------------------------------------------------------------------- Professional fees ...................................................... $ 146,690 Accounting services .................................................... 114,518 Custodian fees ......................................................... 99,899 Investment advisory fees ............................................... 87,098 Pricing fees ........................................................... 20,513 Printing and shareholder reports ....................................... 10,473 Trustees' fees and expenses ............................................ 7,995 Other .................................................................. 19,171 -------------- Total expenses ......................................................... 506,357 -------------- Investment income--net ................................................. 38,434,655 -------------- ================================================================================================================================== Realized & Unrealized Loss--Net - ---------------------------------------------------------------------------------------------------------------------------------- Realized loss on: Investments--net .................................................... (1,665,780) Swaps--net .......................................................... (351,189) (2,016,969) -------------- Change in unrealized appreciation on investments--net .................. (14,667,377) -------------- Total realized and unrealized loss--net ................................ (16,684,346) -------------- Net Increase in Net Assets Resulting from Operations ................... $ 21,750,309 ==============
See Notes to Financial Statements. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 23 Statements of Changes in Net Assets Master Aggregate Bond Index Series
For the Year Ended December 31, ---------------------------------- Increase (Decrease) in Net Assets: 2005 2004 =================================================================================================================================== Operations - ----------------------------------------------------------------------------------------------------------------------------------- Investment income--net ..................................................... $ 38,434,655 $ 36,473,418 Realized gain (loss)--net .................................................. (2,016,969) 8,731,790 Change in unrealized appreciation--net ..................................... (14,667,377) (5,490,473) ---------------------------------- Net increase in net assets resulting from operations ....................... 21,750,309 39,714,735 ---------------------------------- =================================================================================================================================== Capital Transactions - ----------------------------------------------------------------------------------------------------------------------------------- Proceeds from contributions ................................................ 353,608,983 160,170,832 Fair value of withdrawals .................................................. (210,997,412) (242,691,266) ---------------------------------- Net increase (decrease) in net assets derived from capital transactions .... 142,611,571 (82,520,434) ---------------------------------- =================================================================================================================================== Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets .................................... 164,361,880 (42,805,699) Beginning of year .......................................................... 840,221,186 883,026,885 ---------------------------------- End of year ................................................................ $ 1,004,583,066 $ 840,221,186 ==================================
See Notes to Financial Statements. 24 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 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. 2005 2004 2003 2002 2001 ================================================================================================================================== Total Investment Return - ---------------------------------------------------------------------------------------------------------------------------------- Total investment return .............. 2.48% 4.58% 3.92% 10.13% 8.07% ================================================================== ================================================================================================================================== Ratios to Average Net Assets - ---------------------------------------------------------------------------------------------------------------------------------- Expenses ............................. .06% .06% .06% .08% .13% ================================================================== Investment income--net ............... 4.41% 4.13% 4.22% 5.37% 5.93% ================================================================== ================================================================================================================================== Supplemental Data - ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) $1,004,583 $ 840,221 $ 883,027 $ 716,568 $ 466,151 ================================================================== Portfolio turnover ................... 147.39% 159.44% 136.76% 112.18% 144.23% ==================================================================
See Notes to Financial Statements. MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 25 Notes to Financial Statements Master Aggregate Bond Index Series 1. Significant Accounting Policies: Master Aggregate Bond Index Series (the "Series"), a non-diversified investment company, 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 ("OTC") markets and are valued at the last available bid price in the OTC 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 sale price in the case of exchange-traded options. In the case of options traded in the OTC market, valuation is the last asked price (options written) or the last bid price (options purchased). Swap agreements are valued based upon quoted fair valuations received daily by the Series from a pricing service or 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 asked 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 as well as U.S. government securities, money market instruments and certain fixed income 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 assets of the Series 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 assets. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such 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. 26 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 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 OTC contracts in which the Series 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. These periodic payments received or made by the Series are recorded in the accompanying Statement of Operations as realized gains or losses, respectively. Gains or losses are also realized upon termination of the swap agreements. Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). Risks include changes in the returns of the underlying instruments, failure of the counterparties to perform under the contracts' terms and the possible lack of liquidity with respect to the swap agreements. (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 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 27 Notes to Financial Statements (concluded) Master Aggregate Bond Index Series 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. 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"), an affiliate of FAM. 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, 2005, MLIM, LLC received $20,989 in securities lending agent fees. For the year ended December 31, 2005, the Series reimbursed FAM $18,835 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, ML & Co., and/or MLIM, LLC. 3. Investments: Purchases and sales (including paydowns) of investments, excluding short-term securities, for the year ended December 31, 2005 were $1,592,053,301 and $1,378,963,896, 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, 2005. On November 23, 2005, the credit agreement was renewed for one year under substantially the same terms. 28 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 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, 2005, 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. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust'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, 2005, 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, 2005, 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, 2006 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 29 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 - ------------------------------------------------------------------------------------------------------------------------------------ Robert C. P.O. Box 9011 President 2005 to President of MLIM/FAM-advised funds since 2005; 131 Funds None Doll, Jr.* Princeton, NJ and present President of MLIM and FAM since 2001; Co-Head 177 Portfolios 08543-9011 Director/ (Americas Region) thereof from 2000 to 2001 and Age: 51 Trustee Senior Vice President from 1999 to 2001; President and Director of Princeton Services, Inc. ("Princeton Services") since 2001; President of Princeton Administrators, L.P. ("Princeton Administrators") since 2001; Chief Investment Officer of Oppenheimer- Funds, Inc. in 1999 and Executive Vice President thereof from 1991 to 1999. ------------------------------------------------------------------------------------------------------------------------ * Mr. Doll 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. Doll is an "interested person," as described in the Investment Company Act, of the Fund based on his current positions with MLIM, FAM, Princeton Services and Princeton Administrators. 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. Doll 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 Knology, Inc., Burton Princeton, NJ Trustee present Partnership (an investment partnership) since 1979; 42 Portfolios (telecommuni- 08543-9095 Managing General Partner of The South Atlantic cations) and Age: 61 Venture Funds since 1983; Member of the Investment Symbion, Inc., Advisory Council of the Florida State Board of (health care) Administration since 2001. - ------------------------------------------------------------------------------------------------------------------------------------ Laurie P.O. Box 9095 Director/ 1999 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: 43 - ------------------------------------------------------------------------------------------------------------------------------------ John P.O. Box 9095 Director/ 2005 to President and Chief Executive Officer of Allmerica 23 Funds ABIOMED Francis Princeton, NJ Trustee present Financial Corporation (financial services holding 42 Portfolios (medical O'Brien 08543-9095 company) from 1995 to 2002 and Director from1995 device Age: 62 to 2003; President of Allmerica Investment manufacturer), Management Co., Inc. (investment adviser) from Cabot 1989 to 2002, Director from 1989 to 2002 and Corporation Chairman of the Board from 1989 to 1990; (chemicals), President, Chief Executive Officer and Director of LKQ First Allmerica Financial Life Insurance Company Corporation from 1989 to 2002 and Director of various other (auto parts Allmerica Financial companies until 2002; Director manufacturing) since 1989, Member of the Governance Nominating and TJX Com- Committee since 2004, Member of the Compensation panies, Inc. Committee of ABIOMED since 1989 and Member of the (retailer) Audit Committee of ABIOMED from 1990 to 2004; Director and member of the Governance and Nomination Committee of Cabot Corporation and Member of the Audit Committee since 1990; Director and Member of the Audit Committee and Compensation Committee of LKQ Corporation since 2003; Lead Director of TJX Companies, Inc. since 1999; Trustee of the Woods Hole Oceanographic Institute since 2003. - ------------------------------------------------------------------------------------------------------------------------------------ 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: 64 Audubon Society since 1998; Director, The American Museum of Fly Fishing since 1997.
30 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 Officers and Directors/Trustees (concluded)
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 ==================================================================================================================================== Independent Directors/Trustees* (concluded) - ------------------------------------------------------------------------------------------------------------------------------------ Fred G. P.O. Box 9095 Director/ 1998 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: 64 Director of the Michael J. Fox Foundation for Inc., (pharma- Parkinson's Research since 2000; Director of ceutical BTG International Plc (a global technology company) commercialization company) since 2001. ------------------------------------------------------------------------------------------------------------------------ * Directors/Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. ** Chairman of the Board and the Audit Committee. 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 FAM Distributors, Inc. ("FAMD") since 1999 and Age: 45 Treasurer 1999 to Director since 2004; Vice President of MLIM and FAM from 1990 to 1997; Director of present Taxation of MLIM from 1990 to 2001; Vice President, Treasurer and Secretary of the IQ Funds since 2004. - ------------------------------------------------------------------------------------------------------------------------------------ Jeffrey P.O. Box 9011 Vice 1999 to Director (Global Fixed Income) of MLIM since 1998; Vice President of MLIM from B. Hewson Princeton, NJ President present 1989 to 1998. 08543-9011 Age: 54 - ------------------------------------------------------------------------------------------------------------------------------------ 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 (Americas Region) since 2004; Chief Compliance 08543-9011 Officer Officer of the IQ Funds since 2004; Global Director of Compliance at Morgan Stanley Age: 54 Investment Management from 2002 to 2004; Managing Director and 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; Senior Counsel in the Commission's Division of Enforcement in Washington, D.C. from 1990 to 1995. - ------------------------------------------------------------------------------------------------------------------------------------ Alice A. P.O. Box 9011 Secretary 2004 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM from 1999 to Pellegrino Princeton, NJ present 2002; Attorney associated with MLIM since 1997; Secretary of MLIM, FAM, FAMD and 08543-9011 Princeton Services since 2004. Age: 45 - ------------------------------------------------------------------------------------------------------------------------------------ * 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 1-800-637-3863. - ------------------------------------------------------------------------------------------------------------------------------------
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 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 31 [LOGO] Merrill Lynch Investment Managers www.mlim.ml.com - -------------------------------------------------------------------------------- Mercury Advisors A Division of Merrill Lynch Investment Managers www.mercury.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 1-800-637-3863; (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 -- 12/05 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) Laurie Simon Hodrick, (3) John F. O'Brien, (4) David H. Walsh and (5) Fred G. Weiss. The registrant's board of directors has determined that Laurie Simon Hodrick qualifies as a financial expert 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. 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, 2005 - $6,500 Fiscal Year Ending December 31, 2004 - $6,200 (b) Audit-Related Fees - Fiscal Year Ending December 31, 2005 - $19,000 Fiscal Year Ending December 31, 2004 - $0 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. (c) Tax Fees - Fiscal Year Ending December 31, 2005 - $5,700 Fiscal Year Ending December 31, 2004 - $5,200 The nature of the services include tax compliance, tax advice and tax planning. (d) All Other Fees - Fiscal Year Ending December 31, 2005 - $0 Fiscal Year Ending December 31, 2004 - $0 Master Aggregate Bond Index Series of Quantitative Master Series Trust (a) Audit Fees - Fiscal Year Ending December 31, 2005 - $42,500 Fiscal Year Ending December 31, 2004 - $40,500 (b) Audit-Related Fees - Fiscal Year Ending December 31, 2005 - $0 Fiscal Year Ending December 31, 2004 - $0 (c) Tax Fees - Fiscal Year Ending December 31, 2005 - $21,600 Fiscal Year Ending December 31, 2004 - $20,000 The nature of the services include tax compliance, tax advice and tax planning. (d) All Other Fees - Fiscal Year Ending December 31, 2005 - $0 Fiscal Year Ending December 31, 2004 - $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, 2005 - $5,577,771 Fiscal Year Ending December 31, 2004 - $11,926,355 (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) - $1,227,000, 0% Item 5 - Audit Committee of Listed Registrants - Not Applicable Item 6 - Schedule of Investments Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Interest Maturity Issue Amount Rate Date(s) Value - ------------------------------------------------------------------------------------------------------------------------------ Government & Agency Fannie Mae $ 2,345,000 5.25 % 6/15/2006 $ 2,351,545 Obligations - 35.6% 32,545,000 2.625 11/15/2006 31,967,489 1,595,000 4.25 9/15/2007 1,581,983 32,205,000 5.75 2/15/2008 (d) 32,852,514 12,395,000 2.50 6/15/2008 11,762,198 13,025,000 3.25 8/15/2008 (d) 12,557,637 22,425,000 4.50 10/15/2008 (d) 22,300,609 26,455,000 6.625 9/15/2009 28,130,686 30,840,000 6.00 5/15/2011 32,617,525 8,330,000 4.375 3/15/2013 8,111,154 5,185,000 4.625 10/15/2014 5,123,895 1,340,000 7.25 5/15/2030 1,773,372 ------------------------------------------------------------------------------------------------------- Freddie Mac 1,245,000 7.18 6/27/2006 1,260,520 24,610,000 4.875 3/15/2007 24,637,588 6,615,000 5.75 4/15/2008 6,757,441 15,905,000 4.125 7/12/2010 15,509,793 1,460,000 6.00 6/15/2011 1,545,375 8,965,000 4.875 11/15/2013 9,007,404 455,000 4.375 7/17/2015 439,932 12,110,000 4.75 11/17/2015 12,018,957 8,655,000 6.75 9/15/2029 10,703,673 1,845,000 6.25 7/15/2032 2,195,943 ------------------------------------------------------------------------------------------------------- Tennessee Valley 1,390,000 6.25 12/15/2017 1,554,633 Authority Series E ------------------------------------------------------------------------------------------------------- U.S. Treasury Bonds 14,975,000 8.75 5/15/2017 20,563,715 8,625,000 8.50 2/15/2020 12,099,253 6,335,000 8.125 8/15/2021 8,790,060 8,610,000 6.25 8/15/2023 10,281,554 4,105,000 6.875 8/15/2025 5,286,468 3,510,000 6.375 8/15/2027 4,348,149 1,845,000 5.375 2/15/2031 2,072,453 ------------------------------------------------------------------------------------------------------- U.S. Treasury Notes 1,990,000 2.625 11/15/2006 1,959,449 7,335,000 3.00 11/15/2007 (d) 7,152,197 2,670,000 3.625 1/15/2010 2,596,783 5,890,000 4.00 11/15/2012 5,763,229 ------------------------------------------------------------------------------------------------------- Total Government & Agency Obligations (Cost - $356,303,214) - 35.6% 357,675,176 - ------------------------------------------------------------------------------------------------------------------------------ Government Agency Fannie Mae Guaranteed 553,869 5.50 6/01/2011 - 2/01/2019 557,758 Mortgage-Backed Pass-Through 691,725 6.00 2/01/2013 - 6/01/2015 706,896 Obligations* - 35.5% Certificates 484,240 6.50 1/01/2013 - 5/01/2016 498,104 864,830 6.50 12/01/2025 - 1/01/2030 890,792 326,011 7.00 4/01/2027 - 3/01/2031 340,765 250,324 7.50 10/01/2027 - 5/01/2032 262,562 12,218 8.00 9/01/2015 13,047 251,093 8.00 11/01/2029 - 9/01/2031 268,225 22,954 8.50 5/01/2030 - 1/01/2031 24,846 53,554 9.50 7/01/2017 58,823
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Interest Maturity Issue Amount Rate Date(s) Value - ------------------------------------------------------------------------------------------------------------------------------ $ 26,066 10.00 % 10/01/2018 - 5/01/2022 $ 28,810 10,729 10.50 12/01/2016 11,562 - ------------------------------------------------------------------------------------------------------------------------------ Freddie Mac Mortgage 7,577,000 4.00 1/01/2021 (g) 7,219,457 Participation 36,340,382 4.50 2/01/2011 - 1/15/2021 (g) 35,433,404 Certificates 6,864,845 4.50 4/01/2034 - 12/01/2035 6,462,817 30,339,591 5.00 11/01/2017 - 2/15/2021 (g) 30,062,386 77,780,197 5.00 8/01/2035 - 2/15/2036 (g) 75,300,580 8,832,665 5.50 4/01/2014 - 7/01/2020 8,890,171 96,897,291 5.50 8/01/2035 - 2/15/2036 (g) 95,993,941 3,997,901 6.00 4/01/2016 - 10/01/2017 4,081,086 30,946,594 6.00 6/01/2033 - 2/15/2036 (g) 31,246,093 662,596 6.50 4/01/2015 - 5/01/2017 680,918 14,180,678 6.50 1/01/2026 - 1/15/2036 (g) 14,553,209 426,767 7.00 1/01/2011 - 7/01/2017 442,679 3,562,775 7.00 1/01/2020 - 11/01/2032 3,712,645 152,684 7.50 5/01/2007 - 4/01/2016 159,655 739,777 7.50 1/01/2023 - 9/01/2032 777,126 394,646 8.00 11/01/2024 - 3/01/2032 421,291 46,452 8.50 5/01/2028 - 8/01/2030 50,344 9,012 9.00 9/01/2014 9,650 193,844 9.50 2/01/2019 211,353 45,091 10.00 3/01/2010 - 9/01/2017 47,940 31,962 10.50 4/01/2016 34,084 10,911 11.00 9/01/2016 12,158 5,626 11.50 8/01/2015 6,131 23,962 12.50 2/01/2014 26,484 ------------------------------------------------------------------------------------------------------- Ginnie Mae MBS 4,006,000 4.50 9/15/2035 3,844,508 Certificates 9,482,000 5.00 1/15/2036 - 2/15/2036 (g) 9,353,925 9,415,354 5.50 1/15/2035 - 5/15/2035 9,480,084 9,762,179 6.00 4/20/2026 - 1/15/2036 (g) 10,000,337 47,123 6.50 2/15/2014 - 5/15/2014 48,686 2,374,664 6.50 4/15/2026 - 11/15/2034 2,482,197 28,468 7.00 4/15/2013 29,712 1,362,086 7.00 7/15/2027 - 10/15/2031 1,430,871 507,139 7.50 3/15/2024 - 3/15/2032 534,019 284,384 8.00 12/15/2022 - 6/15/2031 304,524 101,625 8.50 11/15/2017 - 3/15/2031 109,903 78,220 9.00 4/15/2018 - 11/15/2024 85,277 7,139 9.50 9/15/2021 7,913 ------------------------------------------------------------------------------------------------------- Total Government Agency Mortgage-Backed Obligations (Cost - $358,878,023) - 35.5% 357,209,748 - ------------------------------------------------------------------------------------------------------------------------------ Face Amount Non-Government Agency Mortgage-Backed Securities* - ----------------------------------------------------------------------------------------------------------------------------------- Collateralized Mortgage 9,525,824 Residential Accredit Loans, Inc. Series 2005-QS12 Class A8, 4.729% due Obligations - 0.9% 8/25/2035 (c) 9,512,630 - ----------------------------------------------------------------------------------------------------------------------------------- Commercial Mortgage- 8,869,429 CS First Boston Mortgage Securities Corp. Series 2004-FL1A Class A, Backed Securities - 12.2% 4.589% due 5/15/2014 (a)(c) 8,872,573 15,000,000 CS First Boston Mortgage Securities Corp. Series 2005-CN2A Class A2, 4.52% due 11/15/2019 (a)(c) 14,999,940
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Amount Non-Government Agency Mortgage-Backed Securities* Value - ----------------------------------------------------------------------------------------------------------------------------------- $ 9,193,350 Commercial Mortgage Pass-Through Certificates Series 2005-F10A Class A1, 4.469% due 4/15/2017 (a)(c) $ 9,192,303 20,000,000 Greenwich Capital Commercial Funding Corp. Series 2004-FL2A Class A2, 4.578% due 11/05/2019 (c) 20,003,312 15,000,000 Greenwich Capital Commercial Funding Corp. Series 2005-FL3A Class A2, 4.598% due 10/05/2007 (a)(c) 15,000,000 20,000,000 JPMorgan Chase Commercial Mortgage Securities Corp. Series 2004-FL1A Class A2, 4.55% due 4/16/2019 (c) 20,015,400 18,942,734 Lehman Brothers Floating Rate Commercial Mortgage Trust Series 2004-LLFA Class A2, 4.539% due 10/15/2017 (a)(c) 18,946,693 15,000,000 Wachovia Bank Commercial Mortgage Trust Series 2004-WL4A Class A2, 4.539% due 10/15/2015 (a)(c) 15,007,418 -------------- 122,037,639 - ----------------------------------------------------------------------------------------------------------------------------------- Total Non-Government Agency Mortgage-Backed Securities (Cost - $131,531,337) - 13.1% 131,550,269 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Industry Fixed Income Securities - ----------------------------------------------------------------------------------------------------------------------------------- Aerospace & 200,000 BAE Systems Holdings, Inc., 4.75% due 8/15/2010 (a) 196,419 Defense - 0.8% 1,000,000 Boeing Capital Corp., 5.75% due 2/15/2007 1,009,164 1,000,000 Boeing Capital Corp., 7.375% due 9/27/2010 1,100,362 540,000 General Dynamics Corp., 3% due 5/15/2008 517,451 400,000 Goodrich Corp., 7.625% due 12/15/2012 453,697 300,000 Honeywell International, Inc., 6.125% due 11/01/2011 316,661 450,000 Lockheed Martin Corp., 8.50% due 12/01/2029 613,336 587,000 Northrop Grumman Corp., 7.125% due 2/15/2011 639,650 21,000 Raytheon Co., 6.15% due 11/01/2008 21,794 350,000 Raytheon Co., 6.75% due 3/15/2018 391,099 150,000 Rockwell Collins, Inc., 4.75% due 12/01/2013 148,847 600,000 United Technologies Corp., 4.875% due 11/01/2006 601,460 1,355,000 United Technologies Corp., 6.35% due 3/01/2011 1,444,083 -------------- 7,454,023 - ----------------------------------------------------------------------------------------------------------------------------------- Air Freight & 90,000 United Parcel Service, Inc., 8.375% due 4/01/2020 118,591 Logistics - 0.0% - ----------------------------------------------------------------------------------------------------------------------------------- Airlines - 0.1% 540,000 Continental Airlines, Inc. Series 2002-1, 6.563% due 8/15/2013 558,293 250,000 Southwest Airlines Co., 5.125% due 3/01/2017 233,435 -------------- 791,728 - ----------------------------------------------------------------------------------------------------------------------------------- Auto Components - 0.0% 200,000 Johnson Controls, Inc., 4.875% due 9/15/2013 192,941 - ----------------------------------------------------------------------------------------------------------------------------------- Automobiles - 0.3% 1,100,000 DaimlerChrysler NA Holding Corp., 4.05% due 6/04/2008 1,070,844 280,000 DaimlerChrysler NA Holding Corp., 7.30% due 1/15/2012 302,122 600,000 DaimlerChrysler NA Holding Corp., 6.50% due 11/15/2013 628,229 600,000 DaimlerChrysler NA Holding Corp., 8.50% due 1/18/2031 726,010 150,000 Harley-Davidson, Inc., 3.625% due 12/15/2008 (a) 145,102 -------------- 2,872,307 - ----------------------------------------------------------------------------------------------------------------------------------- Beverages - 0.3% 135,000 Anheuser-Busch Cos., Inc., 4.625% due 2/01/2015 130,956 160,000 Anheuser-Busch Cos., Inc., 5.95% due 1/15/2033 170,536 140,000 Anheuser-Busch Cos., Inc., 6% due 11/01/2041 148,604 645,000 Coca-Cola Enterprises, Inc., 6.75% due 9/15/2028 733,244 140,000 Diageo Capital Plc, 3.50% due 11/19/2007 136,358 550,000 Diageo Finance B.V., 5.30% due 10/28/2015 554,435 500,000 Miller Brewing Co., 5.50% due 8/15/2013 (a) 509,653 155,000 Pepsi Bottling Group, Inc. Series B, 7% due 3/01/2029 185,913 92,000 Pepsi Bottling Holdings, Inc., 5.625% due 2/17/2009 (a) 94,144 250,000 PepsiAmericas, Inc., 5% due 5/15/2017 246,682 -------------- 2,910,525 - -----------------------------------------------------------------------------------------------------------------------------------
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Industry Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- Biotechnology - 0.1% $ 275,000 Amgen, Inc., 4% due 11/18/2009 $ 266,671 180,000 Genentech, Inc., 4.40% due 7/15/2010 176,812 -------------- 443,483 - ----------------------------------------------------------------------------------------------------------------------------------- Building Products - 0.0% 250,000 Masco Corp., 4.80% due 6/15/2015 233,041 45,000 Masco Corp., 6.50% due 8/15/2032 46,565 -------------- 279,606 - ----------------------------------------------------------------------------------------------------------------------------------- Capital Markets - 1.7% 365,000 The Bank of New York Co., Inc., 5.20% due 7/01/2007 366,811 1,100,000 The Bear Stearns Cos., Inc., 3.25% due 3/25/2009 1,043,348 525,000 The Bear Stearns Cos., Inc., 4.65% due 7/02/2018 488,870 775,000 Credit Suisse First Boston USA, Inc., 5.75% due 4/15/2007 783,078 1,000,000 Credit Suisse First Boston USA, Inc., 4.625% due 1/15/2008 995,228 800,000 Credit Suisse First Boston USA, Inc., 6.50% due 1/15/2012 855,823 625,000 Credit Suisse First Boston USA, Inc., 5.125% due 1/15/2014 622,631 150,000 Credit Suisse First Boston USA, Inc., 5.125% due 8/15/2015 148,550 255,000 Credit Suisse First Boston USA, Inc., 7.125% due 7/15/2032 308,391 70,000 Goldman Sachs Group, Inc., 4.125% due 1/15/2008 68,925 1,000,000 Goldman Sachs Group, Inc., 3.875% due 1/15/2009 970,757 1,900,000 Goldman Sachs Group, Inc., 6.60% due 1/15/2012 2,040,959 400,000 Goldman Sachs Group, Inc., 5.25% due 4/01/2013 400,566 525,000 Goldman Sachs Group, Inc., 5.125% due 1/15/2015 519,063 730,000 Goldman Sachs Group, Inc., 6.125% due 2/15/2033 766,149 600,000 Lehman Brothers Holdings, Inc., 7% due 2/01/2008 624,602 245,000 Lehman Brothers Holdings, Inc., 7.875% due 8/15/2010 273,298 725,000 Lehman Brothers Holdings, Inc., 6.625% due 1/18/2012 782,759 400,000 Lehman Brothers Holdings, Inc., 4.80% due 3/13/2014 390,557 500,000 Mellon Funding Corp., 5% due 12/01/2014 498,315 1,060,000 Morgan Stanley, 5.80% due 4/01/2007 1,070,805 600,000 Morgan Stanley, 4.25% due 5/15/2010 579,974 845,000 Morgan Stanley, 6.60% due 4/01/2012 908,263 1,250,000 Morgan Stanley, 4.75% due 4/01/2014 1,198,834 200,000 Morgan Stanley, 5.375% due 10/15/2015 200,194 150,000 Morgan Stanley, 7.25% due 4/01/2032 180,038 150,000 State Street Bank & Trust Co., 5.30% due 1/15/2016 151,692 -------------- 17,238,480 - ----------------------------------------------------------------------------------------------------------------------------------- Chemicals - 0.2% 170,000 Albemarle Corp., 5.10% due 2/01/2015 164,362 400,000 Lubrizol Corp., 5.50% due 10/01/2014 401,063 150,000 Lubrizol Corp., 6.50% due 10/01/2034 156,605 345,000 Potash Corp. of Saskatchewan Inc., 7.75% due 5/31/2011 384,629 235,000 Praxair, Inc., 6.50% due 3/01/2008 242,613 70,000 Praxair, Inc., 3.95% due 6/01/2013 65,515 44,000 Rohm & Haas Co., 7.40% due 7/15/2009 47,468 200,000 Rohm & Haas Co., 7.85% due 7/15/2029 257,500 250,000 Yara International ASA, 5.25% due 12/15/2014 (a) 244,828 -------------- 1,964,583 - ----------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 2.9% 825,000 BB&T Corp., 6.50% due 8/01/2011 884,693 430,000 Bank One Corp., 6.875% due 8/01/2006 434,638 200,000 Bank One Corp., 2.625% due 6/30/2008 189,515 295,000 Bank One Corp., 5.90% due 11/15/2011 306,787 378,000 Bank One Corp., 8% due 4/29/2027 477,315
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Industry Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- $ 113,000 Bank of America Corp., 6.60% due 5/15/2010 $ 120,302 1,700,000 Bank of America Corp., 4.50% due 8/01/2010 1,670,578 410,000 Bank of America Corp., 4.875% due 9/15/2012 407,152 1,100,000 Bank of America Corp., 4.875% due 1/15/2013 1,087,859 400,000 Bank of America Corp., 4.75% due 8/01/2015 387,933 400,000 Comerica, Inc., 4.80% due 5/01/2015 387,886 535,000 Corporacion Andina de Fomento, 6.875% due 3/15/2012 582,004 460,000 Deutsche Bank Financial, Inc., 7.50% due 4/25/2009 494,420 500,000 Eksportfinans A/S, 4.75% due 12/15/2008 500,843 700,000 FleetBoston Financial Corp., 4.20% due 11/30/2007 693,715 1,200,000 HSBC Bank USA NA, 5.875% due 11/01/2034 1,210,733 500,000 HSBC Finance Corp., 4.75% due 4/15/2010 492,596 530,000 KFW International Finance, 4.75% due 1/24/2007 529,156 1,000,000 KFW International Finance, 5.125% due 5/13/2009 1,015,003 485,000 Key Bank National Association, 5% due 7/17/2007 484,941 250,000 Key Bank National Association, 4.95% due 9/15/2015 243,837 600,000 KfW - Kreditanstalt fuer Wiederaufbau, 3.25% due 3/30/2009 576,048 600,000 KfW - Kreditanstalt fuer Wiederaufbau, 4.125% due 10/15/2014 579,572 600,000 KfW - Kreditanstalt fuer Wiederaufbau, 4.375% due 7/21/2015 585,308 1,000,000 Korea Development Bank, 4.75% due 7/20/2009 991,411 395,000 M&I Marshall & Ilsley Bank, 4.125% due 9/04/2007 390,617 500,000 M&T Bank Corp., 3.85% due 4/01/2013 (a)(c) 488,480 570,000 National Australia Bank Ltd. Series A, 8.60% due 5/19/2010 648,805 600,000 National City Bank, 4.50% due 3/15/2010 590,509 295,000 National City Bank of Indiana, 4% due 9/28/2007 290,928 500,000 PNC Funding Corp., 4.20% due 3/10/2008 492,581 200,000 Popular North America, Inc., 4.70% due 6/30/2009 196,476 350,000 Regions Financial Corp., 6.375% due 5/15/2012 374,895 1,065,000 Royal Bank of Scotland Group Plc, 5.05% due 1/08/2015 1,057,304 200,000 Santander Central Hispano Issuances Ltd., 7.625% due 9/14/2010 221,501 450,000 Sovereign Bank, 5.125% due 3/15/2013 441,721 400,000 Synovus Financial Corp., 4.875% due 2/15/2013 392,880 485,000 U.S. Bancorp, 5.10% due 7/15/2007 486,915 250,000 U.S. Bancorp Series N, 3.95% due 8/23/2007 246,760 500,000 U.S. Bank N.A., 6.30% due 2/04/2014 539,474 400,000 UnionBanCal Corp., 5.25% due 12/16/2013 398,713 525,000 Wachovia Bank NA, 4.85% due 7/30/2007 524,862 275,000 Wachovia Bank NA, 4.875% due 2/01/2015 268,185 895,000 Wachovia Corp., 5.625% due 12/15/2008 915,416 1,870,000 Wachovia Corp., 3.625% due 2/17/2009 1,803,593 150,000 Wachovia Corp., 5.25% due 8/01/2014 150,199 1,800,000 Wells Fargo & Co., 3.125% due 4/01/2009 1,705,046 250,000 Wells Fargo & Co., 5.125% due 9/15/2016 248,064 450,000 Wells Fargo & Co., 5.375% due 2/07/2035 443,650 450,000 Wells Fargo Bank NA, 6.45% due 2/01/2011 479,580 350,000 Westpac Banking Corp., 4.625% due 6/01/2018 329,007 -------------- 29,460,406 - ----------------------------------------------------------------------------------------------------------------------------------- Commercial Services & 300,000 Aramark Services, Inc., 6.375% due 2/15/2008 306,836 Supplies - 0.4% 815,000 Cendant Corp., 6.875% due 8/15/2006 823,365 1,000,000 International Lease Finance Corp., 5% due 4/15/2010 994,645
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Industry Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- $ 385,000 Pitney Bowes, Inc., 4.75% due 5/15/2018 $ 365,616 250,000 RR Donnelley & Sons Co., 4.95% due 5/15/2010 (a) 243,771 80,000 Science Applications International Corp., 5.50% due 7/01/2033 76,089 1,250,000 Waste Management, Inc., 7.375% due 8/01/2010 1,360,366 -------------- 4,170,688 - ----------------------------------------------------------------------------------------------------------------------------------- Communications 615,000 Alltel Corp., 7% due 7/01/2012 676,158 Equipment - 0.1% 500,000 Harris Corp., 6.35% due 2/01/2028 522,579 -------------- 1,198,737 - ----------------------------------------------------------------------------------------------------------------------------------- Computers & 200,000 Dell, Inc., 7.10% due 4/15/2028 238,469 Peripherals - 0.2% 335,000 Hewlett-Packard Co., 3.625% due 3/15/2008 326,158 395,000 International Business Machines Corp., 6.45% due 8/01/2007 404,469 500,000 International Business Machines Corp., 4.75% due 11/29/2012 495,967 550,000 International Business Machines Corp., 5.875% due 11/29/2032 578,752 -------------- 2,043,815 - ----------------------------------------------------------------------------------------------------------------------------------- Construction 355,000 Hanson Australia Funding Ltd., 5.25% due 3/15/2013 351,914 Materials - 0.0% - ----------------------------------------------------------------------------------------------------------------------------------- Consumer Finance - 0.8% 535,000 American Express Co., 3.75% due 11/20/2007 525,164 235,000 American General Finance Corp., 5.875% due 7/14/2006 236,393 175,000 American General Finance Corp. Series H, 5.375% due 10/01/2012 175,890 570,000 Capital One Bank, 6.875% due 2/01/2006 570,920 1,600,000 Capital One Bank, 4.875% due 5/15/2008 1,593,488 150,000 CitiFinancial,10% due 5/15/2009 172,500 1,015,000 HSBC Finance Corp., 5.875% due 2/01/2009 1,037,301 750,000 HSBC Finance Corp., 7% due 5/15/2012 820,403 350,000 HSBC Finance Corp., 4.75% due 7/15/2013 338,164 1,000,000 MBNA America Bank NA, 4.625% due 8/03/2009 992,186 225,000 MBNA America Bank NA, 7.125% due 11/15/2012 251,528 1,000,000 SLM Corp., 5.375% due 5/15/2014 1,009,994 -------------- 7,723,931 - ----------------------------------------------------------------------------------------------------------------------------------- Containers & 200,000 Sealed Air Corp., 5.375% due 4/15/2008 (a) 200,751 Packaging - 0.0% 135,000 Sealed Air Corp., 6.95% due 5/15/2009 (a) 141,543 -------------- 342,294 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Consumer 300,000 J Paul Getty Trust Series 2003, 5.875% due 10/01/2033 313,361 Services - 0.0% - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Financial 730,000 Brascan Corp., 5.75% due 3/01/2010 741,344 Services - 1.7% 250,000 CIT Group Co. of Canada, 5.20% due 6/01/2015 (a) 247,103 800,000 CIT Group, Inc., 5.75% due 9/28/2007 811,130 400,000 CIT Group, Inc., 5.50% due 11/30/2007 403,928 640,000 CIT Group, Inc., 4.125% due 11/03/2009 618,659 300,000 CIT Group, Inc., 5% due 2/13/2014 293,446 90,000 Citicorp, 6.375% due 11/15/2008 93,716 1,000,000 Citigroup, Inc., 3.625% due 2/09/2009 962,746 125,000 Citigroup, Inc., 6.50% due 1/18/2011 133,188 991,000 Citigroup, Inc., 5% due 9/15/2014 975,496 540,000 Citigroup, Inc., 6.625% due 6/15/2032 610,193 175,000 Citigroup, Inc., 6% due 10/31/2033 183,018 575,000 Citigroup, Inc., 5.85% due 12/11/2034 598,828 1,025,000 General Electric Capital Corp., 5.375% due 3/15/2007 1,031,438 2,155,000 General Electric Capital Corp., 6.75% due 3/15/2032 2,529,649
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Industry Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- $ 1,000,000 General Electric Capital Corp. Series A, 4.875% due 10/21/2010 $ 997,784 800,000 HSBC Finance Corp., 4.75% due 5/15/2009 791,272 400,000 JPMorgan Chase & Co., 3.50% due 3/15/2009 383,511 500,000 JPMorgan Chase & Co., 4.50% due 11/15/2010 488,880 1,445,000 JPMorgan Chase & Co., 6.625% due 3/15/2012 1,557,142 1,000,000 JPMorgan Chase & Co., 5.125% due 9/15/2014 989,911 400,000 JPMorgan Chase & Co., 5.15% due 10/01/2015 394,329 390,000 Nissan Motor Acceptance Corp., 4.625% due 3/08/2010 (a) 381,083 430,000 Toyota Motor Credit Corp., 4.25% due 3/15/2010 421,511 375,000 UFJ Finance Aruba AEC, 6.75% due 7/15/2013 409,449 -------------- 17,048,754 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified 700,000 AT&T, Inc., 5.30% due 11/15/2010 702,121 Telecommunication 900,000 Ameritech Capital Funding, 6.45% due 1/15/2018 939,918 Services - 1.3% 800,000 BellSouth Corp., 5% due 10/15/2006 801,088 614,000 BellSouth Corp., 6% due 10/15/2011 638,279 500,000 BellSouth Corp., 5.20% due 9/15/2014 497,337 170,000 BellSouth Corp., 6.55% due 6/15/2034 181,077 350,000 BellSouth Corp., 6% due 11/15/2034 349,682 1,295,000 British Telecommunications Plc, 8.375% due 12/15/2010 1,474,177 200,000 British Telecommunications Plc, 8.875% due 12/15/2030 267,588 800,000 Deutsche Telekom International Finance BV, 3.875% due 7/22/2008 781,373 150,000 Deutsche Telekom International Finance BV, 8.50% due 6/15/2010 170,066 450,000 Deutsche Telekom International Finance BV, 8.75% due 6/15/2030 572,341 400,000 France Telecom SA, 8.50% due 3/01/2031 533,704 1,100,000 GTE Corp., 6.84% due 4/15/2018 1,179,735 255,000 GTE Corp., 6.94% due 4/15/2028 272,900 490,000 Royal KPN NV, 8% due 10/01/2010 538,142 500,000 SBC Communications, Inc., 5.10% due 9/15/2014 488,441 150,000 SBC Communications, Inc., 6.45% due 6/15/2034 156,086 200,000 Tele-Communications-TCI Group, 9.80% due 2/01/2012 241,279 750,000 Telecom Italia Capital SA, 5.25% due 11/15/2013 735,956 200,000 Telecom Italia Capital SA, 4.95% due 9/30/2014 191,018 200,000 Telecom Italia Capital SA, 6% due 9/30/2034 192,671 250,000 Telefonos de Mexico SA de CV, 4.75% due 1/27/2010 245,600 575,000 Verizon Global Funding Corp., 4.90% due 9/15/2015 556,603 315,000 Verizon Global Funding Corp., 7.75% due 12/01/2030 374,427 100,000 Verizon Global Funding Corp., 5.85% due 9/15/2035 96,367 -------------- 13,177,976 - ----------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 0.7% 200,000 American Electric Power Co., Inc., 5.25% due 6/01/2015 199,315 235,000 Arizona Public Service Co., 5.50% due 9/01/2035 222,327 610,000 Carolina Power & Light Co., 5.95% due 3/01/2009 625,657 280,000 Commonwealth Edison Co., 6.95% due 7/15/2018 298,201 375,000 Consolidated Edison Co. of New York Series 03-C, 5.10% due 6/15/2033 351,550 125,000 Entergy Mississippi, Inc., 5.15% due 2/01/2013 120,654 170,000 FPL Group Capital, Inc., 7.625% due 9/15/2006 173,095 700,000 FirstEnergy Corp. Series B, 6.45% due 11/15/2011 741,998
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Industry Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- $ 305,000 Florida Power & Light Co., 5.40% due 9/01/2035 $ 297,665 160,000 Georgia Power Co. Series K, 5.125% due 11/15/2012 161,176 160,000 Hydro Quebec Series GF, 8.875% due 3/01/2026 232,721 200,000 Ohio Power Co. Series G, 6.60% due 2/15/2033 220,370 200,000 PacifiCorp, 5.25% due 6/15/2035 188,961 200,000 Pacific Gas & Electric Co., 6.05% due 3/01/2034 206,992 350,000 Pepco Holdings Inc, 6.45% due 8/15/2012 368,275 235,000 Progress Energy, Inc., 7.10% due 3/01/2011 253,546 150,000 Public Service Co. of New Mexico, 4.40% due 9/15/2008 146,891 150,000 Southern California Edison Co., 6% due 1/15/2034 158,741 125,000 Southern California Edison Co., 5.55% due 1/15/2036 124,346 1,030,000 TXU Electric Delivery Co., 6.375% due 5/01/2012 1,086,131 300,000 Westar Energy, Inc., 5.10% due 7/15/2020 286,766 280,000 Wisconsin Electric Power, 5.625% due 5/15/2033 283,074 -------------- 6,748,452 - ----------------------------------------------------------------------------------------------------------------------------------- Electrical 250,000 Cooper Industries, Inc., 5.50% due 11/01/2009 254,544 Equipment - 0.0% - ----------------------------------------------------------------------------------------------------------------------------------- Energy Equipment & 150,000 Halliburton Co., 5.50% due 10/15/2010 153,204 Services - 0.1% 225,000 Nabors Industries, Inc., 5.375% due 8/15/2012 228,896 -------------- 382,100 - ----------------------------------------------------------------------------------------------------------------------------------- Food & Staples 200,000 CVS Corp., 4% due 9/15/2009 192,356 Retailing - 0.4% 160,000 The Kroger Co., 7.625% due 9/15/2006 162,419 525,000 The Kroger Co., 7.50% due 4/01/2031 586,097 85,000 The Kroger Co. Series B, 7.70% due 6/01/2029 94,425 390,000 SUPERVALU, Inc., 7.50% due 5/15/2012 416,991 1,735,000 Wal-Mart Stores, Inc., 6.875% due 8/10/2009 1,846,521 125,000 Wal-Mart Stores, Inc., 7.55% due 2/15/2030 159,499 475,000 Wal-Mart Stores, Inc., 5.25% due 9/01/2035 461,071 -------------- 3,919,379 - ----------------------------------------------------------------------------------------------------------------------------------- Food Products - 0.5% 285,000 Archer-Daniels-Midland Co., 5.935% due 10/01/2032 296,509 100,000 Bunge Ltd. Finance Corp., 5.10% due 7/15/2015 (a) 96,752 200,000 Campbell Soup Co., 4.875% due 10/01/2013 195,605 200,000 ConAgra Foods, Inc., 7% due 10/01/2028 217,283 370,000 ConAgra Foods, Inc., 8.25% due 9/15/2030 457,006 400,000 General Mills Inc., 6% due 2/15/2012 418,619 500,000 Kellogg Co., 2.875% due 6/01/2008 476,384 225,000 Kraft Foods, Inc., 4.625% due 11/01/2006 224,293 260,000 Kraft Foods, Inc., 5.625% due 11/01/2011 266,759 1,000,000 Kraft Foods, Inc. Series A, 4.125% due 11/12/2009 967,658 110,000 SYSCO Corp., 5.375% due 9/21/2035 107,674 170,000 Sara Lee Corp., 6.25% due 9/15/2011 175,120 180,000 Sara Lee Corp., 6.125% due 11/01/2032 168,261 565,000 Unilever Capital Corp., 7.125% due 11/01/2010 615,199 235,000 WM Wrigley Jr Co., 4.65% due 7/15/2015 228,822 -------------- 4,911,944 - ----------------------------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 200,000 AGL Capital Corp., 4.45% due 4/15/2013 192,316 300,000 Atmos Energy Corp., 7.375% due 5/15/2011 329,324 300,000 Australian Gas Light Co. Ltd., 5.30% due 9/25/2015 (a) 298,489 250,000 KeySpan Corp., 5.803% due 4/01/2035 259,220 260,000 Nisource Finance Corp., 5.25% due 9/15/2017 252,898 -------------- 1,332,247 - -----------------------------------------------------------------------------------------------------------------------------------
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Industry Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- Face Industry Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- Health Care Equipment & $ 320,000 Baxter International, Inc., 4.625% due 3/15/2015 $ 305,538 Supplies - 0.1% 425,000 Boston Scientific Corp., 5.45% due 6/15/2014 421,022 185,000 Medtronic, Inc., 4.375% due 9/15/2010 (a) 181,262 -------------- 907,822 - ----------------------------------------------------------------------------------------------------------------------------------- Health Care Providers & 300,000 Quest Diagnostics, Inc., 5.45% due 11/01/2015 (a) 302,244 Services - 0.1% 375,000 UnitedHealth Group, Inc., 3.30% due 1/30/2008 363,474 340,000 UnitedHealth Group, Inc., 5% due 8/15/2014 338,337 -------------- 1,004,055 - ----------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & 380,000 Carnival Corp., 3.75% due 11/15/2007 371,459 Leisure - 0.2% 225,000 Carnival Corp., 6.15% due 4/15/2008 230,416 700,000 Harrah's Operating Co., Inc., 5.50% due 7/01/2010 699,719 225,000 Harrah's Operating Co., Inc., 5.75% due 10/01/2017 218,992 350,000 Yum! Brands, Inc., 7.65% due 5/15/2008 369,406 -------------- 1,889,992 - ----------------------------------------------------------------------------------------------------------------------------------- Household Durables - 0.3% 360,000 Black & Decker Corp., 4.75% due 11/01/2014 338,898 390,000 Centex Corp., 7.875% due 2/01/2011 428,159 815,000 Fortune Brands, Inc., 2.875% due 12/01/2006 797,578 200,000 Lennar Corp., 5.95% due 3/01/2013 201,300 100,000 MDC Holdings, Inc., 5.50% due 5/15/2013 96,872 110,000 Pulte Homes, Inc., 7.875% due 8/01/2011 120,843 350,000 Pulte Homes, Inc., 5.25% due 1/15/2014 334,095 75,000 The Stanley Works, 4.90% due 11/01/2012 74,580 325,000 Toll Brothers Finance Corp., 6.875% due 11/15/2012 341,374 -------------- 2,733,699 - ----------------------------------------------------------------------------------------------------------------------------------- Household Products - 0.2% 490,000 Clorox Co., 4.20% due 1/15/2010 474,810 294,000 Kimberly-Clark Corp., 7.10% due 8/01/2007 304,176 180,000 Procter & Gamble Co., 4.95% due 8/15/2014 180,413 600,000 Procter & Gamble Co., 4.85% due 12/15/2015 593,017 250,000 Procter & Gamble Co., 5.80% due 8/15/2034 265,227 -------------- 1,817,643 - ----------------------------------------------------------------------------------------------------------------------------------- IT Services - 0.1% 435,000 First Data Corp., 6.375% due 12/15/2007 444,535 - ----------------------------------------------------------------------------------------------------------------------------------- Independent Power 1,150,000 Duke Energy Corp., 6.25% due 1/15/2012 1,212,019 Producers & Energy Traders - 0.1% - ----------------------------------------------------------------------------------------------------------------------------------- Industrial 425,000 General Electric Co., 5% due 2/01/2013 424,779 Conglomerates - 0.2% 300,000 Tyco International Group SA, 6.125% due 1/15/2009 306,614 900,000 Tyco International Group SA, 6% due 11/15/2013 919,337 -------------- 1,650,730 - ----------------------------------------------------------------------------------------------------------------------------------- Insurance - 1.0% 710,000 AXA Financial, Inc., 7.75% due 8/01/2010 786,181 330,000 Ace INA Holdings Inc., 8.30% due 8/15/2006 336,697 350,000 Ace INA Holdings Inc., 5.875% due 6/15/2014 362,053 250,000 The Allstate Corp., 5.375% due 12/01/2006 250,758 400,000 The Allstate Corp., 6.125% due 2/15/2012 421,558 350,000 The Allstate Corp., 5% due 8/15/2014 346,399 325,000 American General Corp., 7.50% due 7/15/2025 398,164 450,000 Berkshire Hathaway Finance Corp., 4.125% due 1/15/2010 437,281 500,000 Berkshire Hathaway Finance Corp., 4.85% due 1/15/2015 491,346 300,000 Hartford Life, Inc., 7.375% due 3/01/2031 366,683 200,000 Infinity Property & Casualty Corp. Series B, 5.50% due 2/18/2014 194,883 275,000 John Hancock Financial Services, Inc., 5.625% due 12/01/2008 280,442 1,000,000 Marsh & McLennan Cos., Inc., 5.15% due 9/15/2010 993,350
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Industry Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- $ 175,000 Marsh & McLennan Cos., Inc., 6.25% due 3/15/2012 $ 182,324 500,000 Marsh & McLennan Cos., Inc., 5.75% due 9/15/2015 504,018 150,000 Metlife, Inc., 6.125% due 12/01/2011 158,949 625,000 Metlife, Inc., 5% due 11/24/2013 618,357 200,000 Metlife, Inc., 5.70% due 6/15/2035 200,741 500,000 Monumental Global Funding II, 4.375% due 7/30/2009 (a) 489,426 145,000 New York Life Insurance Co., 5.875% due 5/15/2033 (a) 151,346 425,000 The Progressive Corp., 6.25% due 12/01/2032 463,767 500,000 Prudential Financial, Inc., 5.10% due 9/20/2014 497,665 100,000 RLI Corp., 5.95% due 1/15/2014 99,470 150,000 SunAmerica, Inc., 5.60% due 7/31/2097 147,996 250,000 Travelers Property Casualty Corp., 6.375% due 3/15/2033 266,218 350,000 W.R. Berkley Corp., 5.125% due 9/30/2010 347,651 60,000 Western & Southern Financial Group, Inc., 5.75% due 7/15/2033 (a) 60,413 -------------- 9,854,136 - ----------------------------------------------------------------------------------------------------------------------------------- Machinery - 0.3% 265,000 Caterpillar Financial Services Corp., 4.875% due 6/15/2007 264,842 500,000 Caterpillar Financial Services Corp., 5.05% due 12/01/2010 501,057 300,000 Caterpillar Financial Services Corp., 4.60% due 1/15/2014 292,147 1,000,000 Caterpillar, Inc., 6.55% due 5/01/2011 1,078,980 720,000 Deere & Co., 7.85% due 5/15/2010 803,027 230,000 Deere & Co., 6.95% due 4/25/2014 259,324 220,000 Dover Corp., 4.875% due 10/15/2015 216,042 -------------- 3,415,419 - ----------------------------------------------------------------------------------------------------------------------------------- Media - 1.2% 255,000 British Sky Broadcasting Plc, 8.20% due 7/15/2009 278,702 200,000 COX Enterprises, Inc., 4.375% due 5/01/2008 (a) 195,299 575,000 Clear Channel Communications, Inc., 4.90% due 5/15/2015 519,960 100,000 Clear Channel Communications, Inc., 7.25% due 10/15/2027 102,803 450,000 Comcast Cable Communications, 8.875% due 5/01/2017 553,638 215,000 Comcast Corp., 5.85% due 1/15/2010 219,024 570,000 Comcast Corp., 7.05% due 3/15/2033 615,363 150,000 Comcast Corp., 6.50% due 11/15/2035 152,858 235,000 Cox Communications, Inc., 7.125% due 10/01/2012 251,797 450,000 Cox Communications, Inc., 6.80% due 8/01/2028 464,753 375,000 Gannett Co., Inc., 5.50% due 4/01/2007 376,639 200,000 IAC/InterActiveCorp, 7% due 1/15/2013 205,776 665,000 News America, Inc., 7.25% due 5/18/2018 741,172 340,000 News America, Inc., 7.28% due 6/30/2028 371,749 1,700,000 Reed Elsevier Capital, Inc., 6.125% due 8/01/2006 1,709,994 345,000 The Thomson Corp., 5.75% due 2/01/2008 349,903 325,000 The Thomson Corp., 4.25% due 8/15/2009 316,521 352,000 Time Warner Companies, Inc., 6.875% due 6/15/2018 373,447 1,510,000 Time Warner, Inc., 6.875% due 5/01/2012 1,607,365 400,000 Time Warner, Inc., 7.70% due 5/01/2032 449,864 200,000 Univision Communications, Inc., 7.85% due 7/15/2011 220,094 1,000,000 Viacom, Inc., 5.625% due 5/01/2007 1,005,323 375,000 Walt Disney Co., 6.375% due 3/01/2012 396,644 100,000 Walt Disney Co. Series B, 6.20% due 6/20/2014 105,197 -------------- 11,583,885 - -----------------------------------------------------------------------------------------------------------------------------------
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Industry Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.3% $ 840,000 Alcan, Inc., 6.45% due 3/15/2011 $ 886,089 150,000 Alcan, Inc., 5.75% due 6/01/2035 146,051 150,000 Alcoa, Inc., 6% due 1/15/2012 157,079 400,000 Alcoa, Inc., 5.375% due 1/15/2013 406,154 365,000 BHP Finance USA Ltd., 6.42% due 3/01/2026 409,103 200,000 Barrick Gold Finance, Inc., 4.875% due 11/15/2014 193,591 120,000 Corporacion Nacional del Cobre de Chile - CODELCO, 6.375% due 11/30/2012 (a) 129,047 300,000 Inco Ltd., 7.75% due 5/15/2012 334,811 100,000 Newmont Mining Corp., 5.875% due 4/01/2035 98,682 150,000 Teck Cominco Ltd., 6.125% due 10/01/2035 148,343 400,000 Textron Financial Corp. Series E, 4.125% due 3/03/2008 393,848 -------------- 3,302,798 - ----------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 0.6% 270,000 AmerenEnergy Generating Co. Series F, 7.95% due 6/01/2032 341,606 180,000 Baltimore Gas & Electric, 5.20% due 6/15/2033 166,502 300,000 CenterPoint Energy Resources Corp. Series B, 7.875% due 4/01/2013 343,077 115,000 Cincinnati Gas & Electric, 5.70% due 9/15/2012 118,036 250,000 Dominion Resources, Inc., 4.125% due 2/15/2008 245,364 410,000 Dominion Resources, Inc., 6.30% due 3/15/2033 417,155 180,000 Dominion Resources, Inc., 5.95% due 6/15/2035 175,696 541,000 Dominion Resources, Inc. Series A, 8.125% due 6/15/2010 601,310 300,000 FirstEnergy Corp., 7.375% due 11/15/2031 353,991 200,000 New York State Electric & Gas Corp., 5.75% due 5/01/2023 198,984 400,000 PSEG Power LLC, 5.50% due 12/01/2015 397,087 400,000 Pacific Gas & Electric Co., 3.60% due 3/01/2009 383,853 250,000 Pacific Gas & Electric Co., 4.20% due 3/01/2011 239,712 500,000 Pacific Gas & Electric Co., 4.80% due 3/01/2014 487,264 745,000 Public Service Electric & Gas, 5.125% due 9/01/2012 746,155 170,000 South Carolina Electric & Gas, 6.70% due 2/01/2011 183,138 290,000 Southern Power Co. Series B, 6.25% due 7/15/2012 305,096 -------------- 5,704,026 - ----------------------------------------------------------------------------------------------------------------------------------- Multiline Retail - 0.3% 25,000 Federated Department Stores, 6.625% due 9/01/2008 25,909 135,000 Federated Department Stores, 6.30% due 4/01/2009 139,217 270,000 Federated Department Stores, 6.625% due 4/01/2011 286,689 235,000 Kohl's Corp., 6.30% due 3/01/2011 247,425 600,000 The May Department Stores Co., 5.75% due 7/15/2014 611,725 888,000 Target Corp.,10% due 1/01/2011 1,066,709 100,000 Target Corp., 6.75% due 1/01/2028 118,696 -------------- 2,496,370 - ----------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 300,000 Amerada Hess Corp., 7.30% due 8/15/2031 347,185 Fuels - 1.7% 390,000 Anadarko Finance Co. Series B, 6.75% due 5/01/2011 421,954 60,000 Anadarko Finance Co. Series B, 7.50% due 5/01/2031 73,537 500,000 Apache Corporation, 6.25% due 4/15/2012 537,288 390,000 Atlantic Richfield Co., 5.90% due 4/15/2009 404,742 730,000 Burlington Resources Finance Co., 6.50% due 12/01/2011 788,031 525,000 Canadian Natural Resources Ltd., 4.90% due 12/01/2014 513,642 330,000 Chevron Phillips Chemical Co. LLC, 5.375% due 6/15/2007 331,083 425,000 ChevronTexaco Capital Co., 3.50% due 9/17/2007 416,341 565,000 ChevronTexaco Capital Co., 3.375% due 2/15/2008 549,685 125,000 Colonial Pipeline Co., 7.63% due 4/15/2032 (a) 163,963 845,000 ConocoPhillips, 4.75% due 10/15/2012 839,827 375,000 ConocoPhillips, 5.90% due 10/15/2032 402,462
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Industry Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- $ 505,000 Conoco Phillips Holding Co., 6.95% due 4/15/2029 $ 609,486 475,000 Consolidated Natural Gas Co. Series C, 6.25% due 11/01/2011 497,406 150,000 Devon Energy Corp., 7.95% due 4/15/2032 193,450 600,000 EnCana Corp., 4.75% due 10/15/2013 586,385 500,000 Enterprise Products Operating LP, 5.60% due 10/15/2014 499,609 200,000 Enterprise Products Operating LP, 6.65% due 10/15/2034 (a) 206,512 110,958 Kern River Funding Corp., 4.893% due 4/30/2018 (a) 108,755 250,000 Kinder Morgan Energy Partners LP, 5.35% due 8/15/2007 250,624 425,000 Kinder Morgan Energy Partners LP, 6.75% due 3/15/2011 452,661 200,000 Kinder Morgan, Inc., 6.50% due 9/01/2012 211,877 125,000 Marathon Oil Corp., 6.80% due 3/15/2032 144,138 760,000 Midamerican Energy Holdings Co., 5.875% due 10/01/2012 784,596 150,000 Motiva Enterprises LLC, 5.20% due 9/15/2012 (a) 151,206 100,000 Murphy Oil Corp., 6.375% due 5/01/2012 106,493 400,000 Nexen, Inc., 5.05% due 11/20/2013 394,262 950,000 Norsk Hydro ASA, 6.36% due 1/15/2009 988,383 745,000 Ocean Energy, Inc., 7.25% due 10/01/2011 822,733 200,000 PTT PCL, 5.875% due 8/03/2035 (a) 192,641 1,025,000 Pemex Project Funding Master Trust, 8.85% due 9/15/2007 (a) 1,086,500 405,000 Pemex Project Funding Master Trust, 9.125% due 10/13/2010 466,155 40,000 Pemex Project Funding Master Trust, 8.625% due 2/01/2022 49,300 150,000 Pemex Project Funding Master Trust, 6.625% due 6/15/2035 (a) 150,375 200,000 Petro-Canada, 5.95% due 5/15/2035 202,886 210,000 Plains All American Pipeline LP, 5.625% due 12/15/2013 212,623 150,000 TGT Pipeline LLC, 5.20% due 6/01/2018 144,678 300,000 Texas Gas Transmission Corp., 4.60% due 6/01/2015 283,526 200,000 Transocean, Inc., 7.50% due 4/15/2031 251,991 750,000 Valero Energy Corp., 6.875% due 4/15/2012 817,226 175,000 XTO Energy, Inc., 4.90% due 2/01/2014 170,892 600,000 XTO Energy, Inc., 5% due 1/31/2015 587,147 -------------- 17,414,256 - ----------------------------------------------------------------------------------------------------------------------------------- Paper & Forest 300,000 Celulosa Arauco y Constitucion SA, 5.125% due 7/09/2013 290,002 Products - 0.2% 300,000 International Paper Co., 5.30% due 4/01/2015 288,944 150,000 Inversiones CMPC SA, 4.875% due 6/18/2013 (a) 144,362 290,000 Sappi Papier Holding AG, 6.75% due 6/15/2012 (a) 276,952 200,000 Westvaco Corp., 8.20% due 1/15/2030 234,239 242,000 Weyerhaeuser Co., 5.95% due 11/01/2008 246,888 250,000 Weyerhaeuser Co., 6.75% due 3/15/2012 265,347 275,000 Weyerhaeuser Co., 7.375% due 3/15/2032 305,720 -------------- 2,052,454 - ----------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 0.4% 350,000 Abbott Laboratories, 3.50% due 2/17/2009 337,364 560,000 AstraZeneca Group Plc, 5.40% due 6/01/2014 577,284 290,000 Eli Lilly & Co., 7.125% due 6/01/2025 348,992 300,000 Johnson & Johnson, 4.95% due 5/15/2033 292,518 500,000 Pfizer, Inc., 4.50% due 2/15/2014 489,340 250,000 Pfizer, Inc., 4.65% due 3/01/2018 237,709 1,300,000 Wyeth, 5.50% due 2/01/2014 1,316,839 200,000 Wyeth, 6.50% due 2/01/2034 220,167 -------------- 3,820,213 - -----------------------------------------------------------------------------------------------------------------------------------
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Industry Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- Real Estate - 0.4% $ 215,000 AvalonBay Communities, Inc., 6.625% due 9/15/2011 $ 230,008 200,000 BRE Properties, 5.95% due 3/15/2007 201,709 195,000 Brandywine Operating Partnership LP, 5.625% due 12/15/2010 195,145 400,000 Centerpoint Properties Trust, 4.75% due 8/01/2010 388,862 530,000 Developers Diversified Realty Corp., 6.625% due 1/15/2008 544,163 450,000 Duke Realty LP, 5.25% due 1/15/2010 450,834 200,000 EOP Operating LP, 6.75% due 2/15/2012 212,247 145,000 EOP Operating LP, 7.25% due 6/15/2028 160,305 25,000 EOP Operating LP, 7.50% due 4/19/2029 28,171 400,000 ERP Operating LP, 5.25% due 9/15/2014 398,163 400,000 HRPT Properties Trust, 5.75% due 2/15/2014 401,183 275,000 Liberty Property-LP, 7.25% due 3/15/2011 298,824 350,000 Prologis, 5.625% due 11/15/2015 (a) 352,097 250,000 Simon Property Group LP, 4.60% due 6/15/2010 243,713 240,000 Westfield Capital Corp. Ltd., 5.125% due 11/15/2014 (a) 237,111 -------------- 4,342,535 - ----------------------------------------------------------------------------------------------------------------------------------- Road & Rail - 0.5% 830,000 Burlington Northern Santa Fe Corp., 6.75% due 7/15/2011 895,455 490,000 CSX Corp., 6.75% due 3/15/2011 525,104 600,000 CSX Corp., 5.50% due 8/01/2013 612,719 500,000 Canadian National Railway Co., 6.375% due 10/15/2011 532,614 675,000 Norfolk Southern Corp., 6.75% due 2/15/2011 728,170 250,000 Norfolk Southern Corp., 5.257% due 9/17/2014 252,311 105,000 Norfolk Southern Corp., 5.59% due 5/17/2025 104,899 315,000 Norfolk Southern Corp., 7.25% due 2/15/2031 382,097 275,000 TTX Co., 4.90% due 3/01/2015 (a) 266,115 1,080,000 Union Pacific Corp., 5.75% due 10/15/2007 1,094,917 -------------- 5,394,401 - ----------------------------------------------------------------------------------------------------------------------------------- Software - 0.0% 150,000 Computer Associates International, Inc., 5.625% due 12/01/2014 (a) 147,674 - ----------------------------------------------------------------------------------------------------------------------------------- Specialty Retail - 0.1% 65,000 Lowe's Cos., Inc., 6.50% due 3/15/2029 73,861 450,000 Ltd. Brands, 6.125% due 12/01/2012 455,939 700,000 Staples, Inc., 7.125% due 8/15/2007 723,001 -------------- 1,252,801 - ----------------------------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage 700,000 Countrywide Financial Corp. Series A, 4.50% due 6/15/2010 679,477 Finance - 0.4% 740,000 Countrywide Home Loans, Inc., 5.625% due 7/15/2009 751,194 230,000 Golden West Financial Corp., 4.75% due 10/01/2012 225,463 300,000 Residential Capital Corp., 6.375% due 6/30/2010 304,835 400,000 Washington Mutual Bank FA, 5.65% due 8/15/2014 405,072 275,000 Washington Mutual Bank FA, 5.125% due 1/15/2015 268,688 145,000 Washington Mutual Financial Corp., 6.875% due 5/15/2011 157,203 400,000 Washington Mutual, Inc., 7.50% due 8/15/2006 406,072 435,000 Washington Mutual, Inc., 4.20% due 1/15/2010 421,187 90,000 Washington Mutual, Inc., 8.25% due 4/01/2010 100,212 300,000 Washington Mutual, Inc., 5.25% due 9/15/2017 291,308 -------------- 4,010,711 - ----------------------------------------------------------------------------------------------------------------------------------- Tobacco - 0.0% 225,000 Altria Group Inc., 7% due 11/04/2013 246,205 - ----------------------------------------------------------------------------------------------------------------------------------- Wireless 575,000 AT&T Wireless Services, Inc., 8.75% due 3/01/2031 761,770 Telecommunication 550,000 America Movil SA de CV, 6.375% due 3/01/2035 542,465 Services - 0.5% 400,000 Sprint Capital Corp., 6.375% due 5/01/2009 415,159 400,000 Sprint Capital Corp., 8.375% due 3/15/2012 463,585 200,000 Sprint Capital Corp., 6.90% due 5/01/2019 220,278 225,000 Sprint Capital Corp., 6.875% due 11/15/2028 245,855
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Amount Fixed Income Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- $ 600,000 Sprint Capital Corp., 8.75% due 3/15/2032 $ 796,248 525,000 Verizon Wireless Capital LLC, 5.375% due 12/15/2006 526,729 530,000 Vodafone Group Plc, 7.75% due 2/15/2010 580,491 185,000 Vodafone Group Plc, 7.875% due 2/15/2030 230,943 400,000 Vodafone Group Plc, 6.25% due 11/30/2032 421,188 -------------- 5,204,711 - ----------------------------------------------------------------------------------------------------------------------------------- Total Fixed Income Securities (Cost - $218,167,508) - 21.9% 219,549,899 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Foreign Government Obligations - ----------------------------------------------------------------------------------------------------------------------------------- 1,990,000 Canadian Government International Bond, 5.25% due 11/05/2008 2,035,165 350,000 Chile Government International Bond, 5.50% due 1/15/2013 357,525 500,000 China Government International Bond, 7.30% due 12/15/2008 533,359 625,000 Export-Import Bank of Korea, 5.125% due 3/16/2015 620,387 1,120,000 Finland Government International Bond, 5.875% due 2/27/2006 1,122,401 1,000,000 Inter-American Development Bank, 6.80% due 10/15/2025 1,193,887 550,000 Italy Government International Bond, 4.375% due 10/25/2006 548,720 675,000 Italy Government International Bond, 4% due 6/16/2008 663,952 450,000 Italy Government International Bond, 6% due 2/22/2011 476,576 770,000 Italy Government International Bond, 4.50% due 1/21/2015 746,821 1,050,000 Italy Government International Bond, 6.875% due 9/27/2023 1,252,517 525,000 Italy Government International Bond, 5.375% due 6/15/2033 534,775 1,520,000 Mexico Government International Bond, 9.875% due 2/01/2010 1,782,960 1,925,000 Mexico Government International Bond, 6.375% due 1/16/2013 2,045,313 1,180,000 Mexico Government International Bond, 6.75% due 9/27/2034 1,290,625 220,000 Poland Government International Bond, 5% due 10/19/2015 219,175 445,000 Province of British Columbia, 4.625% due 10/03/2006 444,871 1,120,000 Province of Manitoba Canada, 5.50% due 10/01/2008 1,142,485 1,000,000 Province of Ontario, 6% due 2/21/2006 1,001,880 1,100,000 Province of Ontario, 3.125% due 5/02/2008 1,058,820 350,000 Province of Quebec, 4.875% due 5/05/2014 350,666 950,000 Province of Quebec, 4.60% due 5/26/2015 926,892 625,000 Province of Quebec, 7.50% due 9/15/2029 820,904 - ----------------------------------------------------------------------------------------------------------------------------------- Total Foreign Government Obligations (Cost - $20,875,350) - 2.1% 21,170,676 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Industry Capital Trusts - ----------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 0.0% 250,000 HBOS Plc, 5.375% (a)(b)(c) 249,521 - ----------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable 75,000 Pemex Project Funding Master Trust, 7.375% due 12/15/2014 83,325 Fuels - 0.0% - ----------------------------------------------------------------------------------------------------------------------------------- Total Capital Trusts (Cost - $327,107) - 0.0% 332,846 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- State Municipal Bonds - ----------------------------------------------------------------------------------------------------------------------------------- Illinois - 0.1% 700,000 Illinois State, GO, 5.10% due 6/01/2033 691,404 - ----------------------------------------------------------------------------------------------------------------------------------- Texas - 0.1% 1,040,000 Dallas, Texas, GO, Series C, 5.25% due 2/15/2024 1,040,333 - ----------------------------------------------------------------------------------------------------------------------------------- Total Municipal Bonds (Cost - $1,678,073) - 0.2% 1,731,737 - -----------------------------------------------------------------------------------------------------------------------------------
Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005
Face Amount Short-Term Securities Value - ----------------------------------------------------------------------------------------------------------------------------------- Commercial Paper** $ 2,500,000 Atlantic Asset Securitization Corp., 4.33% due 1/12/2006 $ 2,497,294 12,700,000 Atlantic Asset Securitization Corp., 4.31% due 1/17/2006 12,678,713 4,200,000 Chariot Funding LLC, 4.19% due 1/03/2006 4,200,000 18,200,000 DNB NOR Bank ASA, 4.25% due 1/11/2006 18,182,811 3,600,000 Prudential Funding, LLC, 4.25% due 1/04/2006 3,599,575 -------------- 41,158,393 - ----------------------------------------------------------------------------------------------------------------------------------- Beneficial Interest - ----------------------------------------------------------------------------------------------------------------------------------- $ 50,141,250 Merrill Lynch Liquidity Series, LLC Money Market Series (e)(f) 50,141,250 - ----------------------------------------------------------------------------------------------------------------------------------- Total Short-Term Securities (Cost - $91,299,643) - 9.1% 91,299,643 - ----------------------------------------------------------------------------------------------------------------------------------- Total Investments (Cost - $1,179,060,255+) - 117.5% 1,180,519,994 Liabilities in Excess of Other Assets - (17.5%) (175,936,928) -------------- Net Assets - 100.0% $1,004,583,066 ==============
* Mortgage-Backed Securities are subject to principal paydowns. As a result of prepayments or refinancing of the underlying mortgage instruments, the average life may be substantially less than the original maturity. ** Commercial Paper is traded on a discount basis; the interest rates shown reflect the discount rates paid at the time of purchase. + The cost and unrealized appreciation (depreciation) of investments as of December 31, 2005, as computed for federal income tax purposes, were as follows: Aggregate cost $ 1,179,554,701 =============== Gross unrealized appreciation $ 10,739,471 Gross unrealized depreciation (9,774,178) --------------- Net unrealized appreciation $ 965,293 =============== (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) Security was purchased with the cash proceeds from securities loans. (f) Investments in companies considered to be an affiliate of the Series, for purposes of 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 $ 50,141,250 $44,641 Merrill Lynch Premier Institutional Fund (12,139,250) $ 3,357 --------------------------------------------------------------------------------------------------------------
(g) Represents or includes a "to-be-announced" transaction. The Series has committed to purchasing securities for which all specific information is not available at this time. o For Series compliance purposes, the Series' industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Series' management. This definition may not apply for purposes of this report, which may combine industry sub-classifications for reporting ease. Industries are shown as a percent of net assets. These industry classifications are unaudited. Master Aggregate Bond Index Series Schedule of Investments as of December 31, 2005 o Swaps outstanding as of December 31, 2005 were as follows:
-------------------------------------------------------------------------------------------------------------- Notional Unrealized Amount Appreciation -------------------------------------------------------------------------------------------------------------- Receive (pay) a variable return based on the change in the since inception return of the Lehman Brothers CMBS Investment Grade Index and pay a floating rate based on 1-month LIBOR plus 0.20% Broker, Morgan Stanley Capital Services, Inc. Expires March 2006 $ 40,000,000 -- --------------------------------------------------------------------------------------------------------------
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, 2005, and for the year then ended and have issued our report thereon dated February 23, 2006 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 in securities (the "Schedule") as of December 31, 2005 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 Princeton, New Jersey February 23, 2006 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 21, 2006 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 21, 2006 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 21, 2006 EX-99.CERT 2 e600214_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: February 21, 2006 /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: February 21, 2006 /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 e600214_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 21, 2006 /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 21, 2006 /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-----