-----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, OIVULjLRbHzKLQ3y/czGFYQbb4ZQwhiL/U78BFqLNT1RrK+7WuxO7aN6vDLX+DMa phmZ7ZqX3tFwr8uEENwnEw== 0001193805-06-000635.txt : 20060309 0001193805-06-000635.hdr.sgml : 20060309 20060309122216 ACCESSION NUMBER: 0001193805-06-000635 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: 06675265 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 S000003117 Merrill Lynch S&P 500 Index Fund C000008449 Class A C000008450 Class I N-CSR 1 e600217_ncsr-snp500index.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: S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. Master S&P 500 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, S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 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 S&P 500 Index Fund Of Merrill Lynch Index Funds, Inc. Annual Report December 31, 2005 Merrill Lynch S&P 500 Index Fund Important Tax Information The following information is provided with respect to the ordinary income distributions paid by Merrill Lynch S&P 500 Index Fund during the fiscal year ended December 31, 2005: ================================================================================ Record Date July 21, 2005 December 15, 2005 Payable Date July 27, 2005 December 21, 2005 ================================================================================ Qualified Dividend Income for Individuals 100% 100% - -------------------------------------------------------------------------------- Dividends Qualifying for the Dividends Received Deduction for Corporations 100% 100% - -------------------------------------------------------------------------------- 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 S&P 500 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 S&P 500 INDEX FUND DECEMBER 31, 2005 3 A Discussion With Your Fund's Portfolio Managers Amid a volatile investing environment, the Fund was able to meet its objective of closely replicating the returns of the S&P 500 Index during the year. How did the portfolio perform during the fiscal year in light of the existing market conditions? For the 12-month period ended December 31, 2005, Merrill Lynch S&P 500 Index Fund's Class A and Class I Shares had total returns of +4.38% and +4.63%, respectively. For the same period, the benchmark Standard & Poor's 500 (S&P 500) Index returned +4.91%. As the returns indicate, the Fund met its objective of closely tracking the performance of the S&P 500, a market-weighted index composed of 500 common stocks issued by large-capitalization companies in a wide range of businesses. The stocks included in the Index collectively represent a substantial portion of all common stocks publicly traded in the United States. As the value of the S&P 500 Index fluctuated during the past 12 months, the Fund's performance generally tracked that of the Index. The U.S. equity markets exhibited substantial volatility over the 12-month period, moving sideways for much of the year. The period got off to a rough start after a very strong fourth quarter of 2004. Economically sensitive and small-capitalization stocks fared the worst out of the gate. January 2005 was characterized by mixed economic data, higher interest rates, disappointing corporate earnings reports and climbing oil prices. In February, the market reversed course and performed well, even as productivity growth slowed and oil prices continued to climb. By March, however, stock prices resumed their downward slide, hurt by a combination of a worse-than-expected trade deficit, mixed economic news, continued-high oil prices and rising interest rates. In April, retail sales, payroll data, and consumer and business sentiment weakened. For most of the month, equity markets were dogged by continuing inflation concerns, particularly as the price of oil climbed above $57 per barrel. The month closed with the release of March data indicating a particularly large jump in the Consumer Price Index, which worried investors concerned about the prospect of higher interest rates. May brought the announcement of slower-than-expected economic growth (with 3.1% gross domestic product growth in the first quarter). But despite concerns about slower economic activity, decelerating corporate profit growth and high oil prices, first-quarter earnings reports remained strong, leading to a stock market rally. June, however, brought a slowdown in the equity market as further worries about a slower economy dampened markets. July was an impressive month for equity performance. The market was able to overcome the drag provided by a strong dollar, higher energy prices and a major terrorist attack in London. That attack caused an immediate 4% drop in the S&P 500 Index. However, investors quickly rebounded, and the market losses were recovered only one day later. August brought another reversal, as higher oil prices continued to engender fears of economic weakness. In the aftermath of Hurricane Katrina, the price of oil reached $70 per barrel. The market turned slightly positive in September as improved profits in the energy sector offset weakness in the retail, transportation, tourism and insurance sectors. Stock prices slid again in October amid continued signs of a slower economy and renewed concerns about inflation. Despite economic growth of 4.1% for the third quarter of 2005, short-term interest rates rose, oil prices remained historically high and consumer confidence declined. In November, equities were resilient in the face of further interest rate hikes, high energy prices and the strength of the U.S. dollar, which cut into the profits of domestic companies that do business internationally. Stock values rebounded as companies' strong productivity and high profit margins led to solid earnings growth, and as oil prices fell to the mid-$50-per-barrel range. After nearly six weeks of stock market gains, equity performance was uninspiring in December, with thin trading volumes causing volatile movements in stock prices. Compounding the mixed results and leaving investors uncertain about the direction of the economy in 2006 was the fact that the yield curve inverted between the two-year and 10-year sectors at the end of December. That is, 10-year bond yields fell below two-year yields. Such inversions are historically a harbinger of an economic downturn. For the full year, the S&P 500 Index's +4.91% return lagged the +12.56% return of the S&P MidCap 400 Index and the +7.68% return of the S&P SmallCap 600 Index. 4 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 As expected, interest rates moved considerably during the period as the yield curve flattened. The Federal Reserve Board continued its "measured" pace of monetary tightening by raising the federal funds rate in 25 basis point increments eight times in 2005. This brought the target short-term interest rate to 4.25% by year-end. What changes were made to the portfolio during the period? Throughout the year, as changes were made to the composition of the S&P 500 Index, the Fund purchased and sold securities to maintain its objective of replicating the risks and return of the benchmark. The S&P 500 Index made the transition to a "free-float" or "float-adjusted" methodology for calculating market capitalization. The transition occurred in two phases taking place in March and then September. With the change, only the shares of company stock that are readily available in the public market are used to calculate a company's market capitalization. Float adjustment excludes shares that are closely held by other publicly traded companies, control groups (majority shareholders retaining their majority) or government agencies. Accordingly, the number of shares used to make index calculations reflect only those shares that actually are available to investors, not all of a company's outstanding shares. The value of a float-adjusted index more accurately reflects the combined market value of companies available for public trading. To maintain a tight tracking to the benchmark, we adjusted the portfolio to be in line with the revised composition of the Index. How would you characterize the Fund's position at the close of the period? After several years of above-average growth, the economy and corporate earnings are likely to slow in 2006. Against this backdrop, the portfolio remains positioned to match the risk characteristics of its benchmark, whatever direction the market takes. Vincent J. Costa, CFA Vice President and Co-Portfolio Manager Debra L. Jelilian Vice President and Co-Portfolio Manager Jeffrey L. Russo, CFA Vice President and Co-Portfolio Manager January 9, 2006 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 5 Performance Data About Fund Performance Investors are able to purchase shares of the Fund, which offers 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 .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 ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of account maintenance, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. Recent Performance Results
6-Month 12-Month Since Inception As of December 31, 2005 Total Return Total Return Total Return ========================================================================================== ML S&P 500 Index Fund Class A Shares* +5.45% +4.38% +80.89% - ------------------------------------------------------------------------------------------ ML S&P 500 Index Fund Class I Shares* +5.55 +4.63 +84.84 - ------------------------------------------------------------------------------------------ S&P 500(R) Index ** +5.77 +4.91 +90.47 - ------------------------------------------------------------------------------------------
* Cumulative total investment returns are based on changes in net asset value for the periods shown, and assume reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date. The Fund's inception date is 4/03/97. ** This unmanaged Index covers 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE issues), representing about 75% of NYSE market capitalization and 30% of NYSE issues. Since inception total return is from 4/03/97. S&P 500 is a registered trademark of the McGraw-Hill Companies. 6 MERRILL LYNCH S&P 500 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 Standard & Poor's 500 Index. Values are from April 3, 1997 to December 2005. S&P 500 S&P 500 Index Fund+-- Index Fund+-- Standard & Poor's Class A Shares* Class I Shares* 500 Index++ 4/03/97** $10,000 $10,000 $10,000 12/97 $13,053 $13,080 $13,103 12/98 $16,702 $16,774 $16,848 12/99 $20,069 $20,204 $20,393 12/00 $18,138 $18,299 $18,537 12/01 $15,873 $16,069 $16,333 12/02 $12,282 $12,451 $12,724 12/03 $15,723 $15,981 $16,373 12/04 $17,329 $17,666 $18,155 12/05 $18,089 $18,484 $19,047 * Assuming transaction costs and other operating expenses, including advisory fees. ** Commencement of operations. + The Fund invests all of its assets in Master S&P 500 Index Series of Quantitative Master Series Trust. The Trust's investments are allocated among common stocks in approximately the same weightings as the S&P 500 Index. ++ This unmanaged Index covers 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly NYSE issues), representing about 75% of NYSE market capitalization and 30% of NYSE issues. Average Annual Total Return Class A Shares Return ================================================================================ One Year Ended 12/31/05 +4.38% - -------------------------------------------------------------------------------- Five Years Ended 12/31/05 -0.05 - -------------------------------------------------------------------------------- Inception (4/03/97) through 12/31/05 +7.01 - -------------------------------------------------------------------------------- Class I Shares Return ================================================================================ One Year Ended 12/31/05 +4.63% - -------------------------------------------------------------------------------- Five Years Ended 12/31/05 +0.20 - -------------------------------------------------------------------------------- Inception (4/03/97) through 12/31/05 +7.28 - -------------------------------------------------------------------------------- MERRILL LYNCH S&P 500 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 $1,054.50 $3.19 - --------------------------------------------------------------------------------------------------------- Class I $1,000 $1,055.50 $1.91 ========================================================================================================= Hypothetical (5% annual return before expenses)** ========================================================================================================= Class A $1,000 $1,021.99 $3.14 - --------------------------------------------------------------------------------------------------------- Class I $1,000 $1,023.24 $1.88 - ---------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class (.62% for Class A and .37% for Class I), multiplied by the average account value over the period, multiplied by 183/365 (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 S&P 500 INDEX FUND DECEMBER 31, 2005 Statement of Assets and Liabilities Merrill Lynch S&P 500 Index Fund As of December 31, 2005 =================================================================================================================================== Assets - ----------------------------------------------------------------------------------------------------------------------------------- Investment in Master S&P 500 Index Series (the "Series"), at value (identified cost--$1,941,908,907) ............................................ $ 2,441,915,313 Prepaid expenses ............................................................... 36,471 --------------- Total assets ................................................................... 2,441,951,784 --------------- =================================================================================================================================== Liabilities - ----------------------------------------------------------------------------------------------------------------------------------- Payables: Administrative fees ........................................................ $ 475,729 Distributor ................................................................ 192,801 668,530 --------------- Accrued expenses and other liabilities ......................................... 464,878 --------------- Total liabilities .............................................................. 1,133,408 --------------- =================================================================================================================================== Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Net assets ..................................................................... $ 2,440,818,376 =============== =================================================================================================================================== Net Assets Consist of - ----------------------------------------------------------------------------------------------------------------------------------- Class A Shares of Common Stock, $.0001 par value, 250,000,000 shares authorized $ 5,876 Class I Shares of Common Stock, $.0001 par value, 250,000,000 shares authorized 10,096 Paid-in capital in excess of par ............................................... 2,204,638,266 Undistributed investment income--net ........................................... $ 622,175 Accumulated realized capital losses allocated from the Series--net ............. (264,464,443) Unrealized appreciation allocated from the Series--net ......................... 500,006,406 --------------- Total accumulated earnings--net ................................................ 236,164,138 --------------- Net Assets ..................................................................... $ 2,440,818,376 =============== =================================================================================================================================== Net Asset Value - ----------------------------------------------------------------------------------------------------------------------------------- Class A--Based on net assets of $896,795,549 and 58,762,750 shares outstanding . $ 15.26 =============== Class I--Based on net assets of $1,544,022,827 and 100,955,076 shares outstanding $ 15.29 ===============
See Notes to Financial Statements. MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 9 Statement of Operations Merrill Lynch S&P 500 Index Fund For the Year Ended December 31, 2005 =================================================================================================================================== Investment Income - ----------------------------------------------------------------------------------------------------------------------------------- Net investment income allocated from the Series: Dividends .................................................................. $ 47,009,869 Interest from affiliates ................................................... 406,790 Securities lending ......................................................... 287,481 Expenses ................................................................... (830,733) --------------- Total income .................................................................. 46,873,407 --------------- =================================================================================================================================== Expenses - ----------------------------------------------------------------------------------------------------------------------------------- Administration fees ........................................................... $ 6,242,399 Account maintenance fees--Class A ............................................. 2,294,067 Transfer agent fees ........................................................... 1,560,689 Printing and shareholder reports .............................................. 125,183 Professional fees ............................................................. 66,200 Registration fees ............................................................. 39,673 Directors' fees and expenses .................................................. 28,479 Other ......................................................................... 144,337 --------------- Total expenses ................................................................ 10,501,027 --------------- Investment income--net ........................................................ 36,372,380 --------------- =================================================================================================================================== Realized & Unrealized Gain (Loss) Allocated from the Series--Net - ----------------------------------------------------------------------------------------------------------------------------------- Realized gain (loss) on: Investments--net ........................................................... (21,393,989) Futures contracts--net ..................................................... 644,383 (20,749,606) --------------- Change in unrealized appreciation/depreciation on investments and futures contracts--net .............................................................. 98,239,241 --------------- Total realized and unrealized gain--net ....................................... 77,489,635 --------------- Net Increase in Net Assets Resulting from Operations .......................... $ 113,862,015 ===============
See Notes to Financial Statements. 10 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 Statements of Changes in Net Assets Merrill Lynch S&P 500 Index Fund
For the Year Ended December 31, ---------------------------------- Increase (Decrease) in Net Assets: 2005 2004 =================================================================================================================================== Operations - ----------------------------------------------------------------------------------------------------------------------------------- Investment income--net ........................................................ $ 36,372,380 $ 38,728,843 Realized loss--net ............................................................ (20,749,606) (22,528,106) Change in unrealized appreciation/depreciation--net ........................... 98,239,241 228,800,431 ---------------------------------- Net increase in net assets resulting from operations .......................... 113,862,015 245,001,168 ---------------------------------- =================================================================================================================================== Dividends to Shareholders - ----------------------------------------------------------------------------------------------------------------------------------- Investment income--net: Class A .................................................................... (12,092,872) (12,456,120) Class I .................................................................... (24,385,969) (25,908,960) ---------------------------------- Net decrease in net assets resulting from dividends to shareholders ........... (36,478,841) (38,365,080) ---------------------------------- =================================================================================================================================== Capital Share Transactions - ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets derived from capital share transactions . (229,596,389) 77,228,211 ---------------------------------- =================================================================================================================================== Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets ....................................... (152,213,215) 283,864,299 Beginning of year ............................................................. 2,593,031,591 2,309,167,292 ---------------------------------- End of year* .................................................................. $ 2,440,818,376 $ 2,593,031,591 ================================== * Undistributed investment income--net ..................................... $ 622,175 $ 728,636 ==================================
See Notes to Financial Statements. MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 11 Financial Highlights Merrill Lynch S&P 500 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 ....... $ 14.81 $ 13.62 $ 10.75 $ 14.05 $ 16.16 -------------------------------------------------------------------- Investment income--net ................... .19+ .20+ .14+ .13+ .10 Realized and unrealized gain (loss)--net . .46 1.19 2.87 (3.31) (2.12) -------------------------------------------------------------------- Total from investment operations ......... .65 1.39 3.01 (3.18) (2.02) -------------------------------------------------------------------- Less dividends from investment income--net (.20) (.20) (.14) (.12) (.09) -------------------------------------------------------------------- Net asset value, end of year ............. $ 15.26 $ 14.81 $ 13.62 $ 10.75 $ 14.05 ==================================================================== ================================================================================================================================== Total Investment Return - ---------------------------------------------------------------------------------------------------------------------------------- Based on net asset value per share ....... 4.38% 10.22% 28.02% (22.62%) (12.49%) ==================================================================== ================================================================================================================================== Ratios to Average Net Assets* - ---------------------------------------------------------------------------------------------------------------------------------- Expenses, net of reimbursement ........... .60% .59% .61% .61% .62% ==================================================================== Expenses ................................. .60% .59% .61% .61% .63% ==================================================================== Investment income--net ................... 1.27% 1.42% 1.19% 1.03% .71% ==================================================================== ================================================================================================================================== Supplemental Data - ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) ... $ 896,796 $ 939,608 $ 880,875 $ 648,569 $ 772,750 ==================================================================== Portfolio turnover from the Series ....... 10.80% 5.84% 3.60% 4.59% 3.21% ====================================================================
* Includes the Fund's share of the Series' allocated expenses and investment income--net. + Based on average shares outstanding. See Notes to Financial Statements. 12 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 Financial Highlights (concluded) Merrill Lynch S&P 500 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 ....... $ 14.84 $ 13.64 $ 10.76 $ 14.08 $ 16.18 -------------------------------------------------------------------- Investment income--net ................... .23+ .24+ .17+ .16+ .13 Realized and unrealized gain (loss)--net . .46 1.19 2.88 (3.33) (2.10) -------------------------------------------------------------------- Total from investment operations ......... .69 1.43 3.05 (3.17) (1.97) -------------------------------------------------------------------- Less dividends from investment income--net (.24) (.23) (.17) (.15) (.13) -------------------------------------------------------------------- Net asset value, end of year ............. $ 15.29 $ 14.84 $ 13.64 $ 10.76 $ 14.08 ==================================================================== ================================================================================================================================== Total Investment Return - ---------------------------------------------------------------------------------------------------------------------------------- Based on net asset value per share ....... 4.63% 10.55% 28.35% (22.51%) (12.19%) ==================================================================== ================================================================================================================================== Ratios to Average Net Assets* - ---------------------------------------------------------------------------------------------------------------------------------- Expenses, net of reimbursement ........... .35% .34% .36% .36% .37% ==================================================================== Expenses ................................. .35% .34% .36% .36% .38% ==================================================================== Investment income--net ................... 1.52% 1.68% 1.44% 1.27% .97% ==================================================================== ================================================================================================================================== Supplemental Data - ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) ... $1,544,023 $1,653,423 $1,428,292 $ 931,917 $1,108,832 ==================================================================== Portfolio turnover from the Series ....... 10.80% 5.84% 3.60% 4.59% 3.21% ====================================================================
* Includes the Fund's share of the Series' allocated expenses and investment income--net. + Based on average shares outstanding. See Notes to Financial Statements. MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 13 Notes to Financial Statements Merrill Lynch S&P 500 Index Fund 1. Significant Accounting Policies: Merrill Lynch S&P 500 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'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 Fund seeks to achieve its investment objective by investing all of its assets in Master S&P 500 Index Series (the "Series") of 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 percentage of the Series owned by the Fund at December 31, 2005 was 82.9%. The Fund offers multiple 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 their 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 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 and distributions paid by the Fund are recorded on the ex-dividend dates. (f) Investment transactions -- Investment transactions in the Series are accounted for on a trade date basis. (g) Reclassification -- U.S. generally accepted accounting principles require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, during the current year, $38,452,765 has been reclassified between accumulated realized capital losses on investments and paid-in capital in excess of par as a result of a permanent difference attributable to net gains realized on the distribution of securities not recognized for tax purposes. This reclassification has no effect on net assets or net asset values per share. 2. Transactions with Affiliates: The Corporation has entered into an Administrative Services 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 .245% 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 the expenses incurred by each class of shares of the Fund (excluding account maintenance fees) will not exceed .40%. This arrangement has a one-year term and is renewable. The Fund may pay a monthly investment advisory fee at an annual rate of .05% 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. 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. 14 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 Notes to Financial Statements (concluded) Merrill Lynch S&P 500 Index Fund The Corporation has also entered into a Distribution Agreement and Distribution Plan with FAM Distributors, Inc. ("FAMD" or the "Distributor"), which is an indirect, 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 increase (decrease) in net assets derived from capital share transactions was $(229,596,389) and $77,228,211 for the years ended December 31, 2005 and the year ended 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 .............................. 12,923,712 $ 191,625,954 Shares issued to shareholders in reinvestment of dividends .............. 711,901 11,022,539 -------------------------------- Total issued ............................. 13,635,613 202,648,493 Shares redeemed .......................... (18,311,289) (272,700,248) -------------------------------- Net decrease ............................. (4,675,676) $ (70,051,755) ================================ - ------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended December 31, 2004 Shares Amount - ------------------------------------------------------------------------------- Shares sold .............................. 19,152,185 $ 266,604,093 Shares issued to shareholders in reinvestment of dividends .............. 773,559 11,276,761 -------------------------------- Total issued ............................. 19,925,744 277,880,854 Shares redeemed .......................... (21,176,733) (295,567,495) -------------------------------- Net decrease ............................. (1,250,989) $ (17,686,641) ================================ - ------------------------------------------------------------------------------- Class I Shares for the Year Dollar Ended December 31, 2005 Shares Amount - ------------------------------------------------------------------------------- Shares sold .............................. 29,513,490 $ 437,446,074 Shares issued to shareholders in reinvestment of dividends .............. 1,521,707 23,608,528 -------------------------------- Total issued ............................. 31,035,197 461,054,602 Shares redeemed .......................... (41,483,347) (620,599,236) -------------------------------- Net decrease ............................. (10,448,150) $(159,544,634) ================================ - ------------------------------------------------------------------------------- Class I Shares for the Year Dollar Ended December 31, 2004 Shares Amount - ------------------------------------------------------------------------------- Shares sold .............................. 38,557,248 $ 537,823,786 Shares issued to shareholders in reinvestment of dividends .............. 1,718,853 25,111,714 -------------------------------- Total issued ............................. 40,276,101 562,935,500 Shares redeemed .......................... (33,555,631) (468,020,648) -------------------------------- Net increase ............................. 6,720,470 $ 94,914,852 ================================ 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 ........................ $ 36,478,841 $ 38,365,080 -------------------------------- Total taxable distributions .............. $ 36,478,841 $ 38,365,080 ================================ As of December 31, 2005, the components of accumulated earnings on a tax basis were as follows: - ----------------------------------------------------------------------------- Undistributed ordinary income--net ...................... $ 622,175 Undistributed long-term capital gains--net .............. -- ------------- Total undistributed earnings--net ....................... 622,175 Capital loss carryforward ............................... (150,445,859)* Unrealized gains--net ................................... 385,987,822** ------------- Total accumulated earnings--net ......................... $ 236,164,138 ============= * On December 31, 2005, the Fund had a net capital loss carryforward of $150,445,859, of which $4,944,930 expires in 2008, $14,600,496 expires in 2009, $73,055,477 expires in 2010, $7,823,922 expires in 2011, $21,618,948 expires in 2012 and $28,402,086 expires in 2013. This amount will be available to offset like amounts of any future taxable gains. ** The difference between book-basis and tax-basis net unrealized gains is attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains/losses on certain futures contracts and the deferral of post-October capital losses for tax purposes. MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 15 Report of Independent Registered Public Accounting Firm Merrill Lynch S&P 500 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 S&P 500 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 S&P 500 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 S&P 500 INDEX FUND DECEMBER 31, 2005 Portfolio Information Master S&P 500 Index Series As of December 31, 2005 S&P 500 Index Percent of Sector Representation Total Investments - -------------------------------------------------------------------------------- Financials .................................................. 19.1% Information Technology ...................................... 13.5 Health Care ................................................. 11.9 Industrials ................................................. 10.1 Consumer Discretionary ...................................... 9.8 Consumer Staples ............................................ 8.6 Energy ...................................................... 8.3 Utilities ................................................... 3.0 Materials ................................................... 2.7 Telecommunication Services .................................. 2.7 Other* ...................................................... 10.3 - -------------------------------------------------------------------------------- * Includes portfolio holdings in short-term investments. For Series compliance purposes, the Series' sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Series management. This definition may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease. MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 17 Summary Schedule of Investments Master S&P 500 Index Series This summary schedule of investments is presented to help investors focus on the Series' principal holdings. It includes the Series' 50 largest holdings and each investment of any issuer that exceeds 1% of the Series' net assets. "Other Securities" represent all issues not required to be disclosed under the rules adopted by the Securities and Exchange Commission. A complete schedule of investments is available without charge, upon request, by calling 800-637-3863 or on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Shares Percent of Industry Held Common Stocks Value Net Assets =================================================================================================================================== Aerospace & Defense 211,920 Boeing Co. $ 14,885,261 0.5% 267,396 United Technologies Corp. 14,950,110 0.5 Other Securities 36,226,001 1.2 ------------------------------ 66,061,372 2.2 - ----------------------------------------------------------------------------------------------------------------------------------- Air Freight & Logistics 289,700 United Parcel Service, Inc. Class B 21,770,955 0.7 Other Securities 8,516,191 0.3 ------------------------------ 30,287,146 1.0 - ----------------------------------------------------------------------------------------------------------------------------------- Airlines Other Securities 3,131,476 0.1 - ----------------------------------------------------------------------------------------------------------------------------------- Auto Components Other Securities 4,859,021 0.2 - ----------------------------------------------------------------------------------------------------------------------------------- Automobiles Other Securities 10,607,438 0.4 - ----------------------------------------------------------------------------------------------------------------------------------- Beverages 543,428 The Coca-Cola Co. 21,905,583 0.7 435,588 PepsiCo, Inc. 25,734,539 0.9 Other Securities 16,412,054 0.6 ------------------------------ 64,052,176 2.2 - ----------------------------------------------------------------------------------------------------------------------------------- Biotechnology 324,047 Amgen, Inc. (a) 25,554,346 0.9 Other Securities 20,145,329 0.7 ------------------------------ 45,699,675 1.6 - ----------------------------------------------------------------------------------------------------------------------------------- Building Products Other Securities 5,306,302 0.2 - ----------------------------------------------------------------------------------------------------------------------------------- Capital Markets 118,400 Goldman Sachs Group, Inc. 15,120,864 0.5 241,267 Merrill Lynch & Co., Inc. (b) 16,341,014 0.6 282,998 Morgan Stanley 16,057,307 0.5 Other Securities 46,480,248 1.6 ------------------------------ 93,999,433 3.2 - ----------------------------------------------------------------------------------------------------------------------------------- Chemicals Other Securities 45,863,837 1.6 - ----------------------------------------------------------------------------------------------------------------------------------- Commercial Banks 1,061,206 Bank of America Corp. 48,974,657 1.7 483,265 U.S. Bancorp 14,444,791 0.5 413,726 Wachovia Corp. (e) 21,869,556 0.7 439,022 Wells Fargo & Co. 27,583,752 0.9 Other Securities 56,087,250 1.9 ------------------------------ 168,960,006 5.7 - ----------------------------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies Other Securities 20,662,290 0.7 - ----------------------------------------------------------------------------------------------------------------------------------- Communications Equipment 1,612,771 Cisco Systems, Inc. (a) 27,610,640 0.9 652,769 Motorola, Inc. 14,746,052 0.5 431,660 QUALCOMM, Inc. 18,595,913 0.6 Other Securities 19,127,115 0.7 ------------------------------ 80,079,720 2.7 - ----------------------------------------------------------------------------------------------------------------------------------- Computers & Peripherals 220,334 Apple Computer, Inc. (a) 15,839,811 0.5 617,916 Dell, Inc. (a) 18,531,301 0.6 752,117 Hewlett-Packard Co. 21,533,110 0.7 414,667 International Business Machines Corp. 34,085,627 1.2 Other Securities 19,086,182 0.7 ------------------------------ 109,076,031 3.7 - ----------------------------------------------------------------------------------------------------------------------------------- Construction & Engineering Other Securities 1,557,639 0.1 - ----------------------------------------------------------------------------------------------------------------------------------- Construction Materials Other Securities 1,656,284 0.1 - ----------------------------------------------------------------------------------------------------------------------------------- Consumer Finance 325,984 American Express Co. 16,775,137 0.6 Other Securities 21,616,751 0.7 ------------------------------ 38,391,888 1.3
18 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 Summary Schedule of Investments (continued) Master S&P 500 Index Series
Shares Percent of Industry Held Common Stocks Value Net Assets =================================================================================================================================== Containers & Packaging Other Securities $ 5,354,450 0.2% - ----------------------------------------------------------------------------------------------------------------------------------- Distributors Other Securities 1,871,607 0.1 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Consumer Services Other Securities 4,753,177 0.2 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services 1,328,236 Citigroup, Inc. 64,459,293 2.2 926,456 JPMorgan Chase & Co. 36,771,039 1.2 Other Securities 10,673,986 0.4 ------------------------------ 111,904,318 3.8 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 1,025,535 AT&T, Inc. 25,115,352 0.8 Services 736,228 Verizon Communications, Inc. 22,175,187 0.8 Other Securities 17,610,778 0.6 ------------------------------ 64,901,317 2.2 - ----------------------------------------------------------------------------------------------------------------------------------- Electric Utilities Other Securities 46,241,955 1.6 - ----------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment Other Securities 13,171,757 0.4 - ----------------------------------------------------------------------------------------------------------------------------------- Electronic Equipment & Other Securities 9,389,930 0.3 Instruments - ----------------------------------------------------------------------------------------------------------------------------------- Energy Equipment & Services 151,754 Schlumberger Ltd. 14,742,901 0.5 Other Securities 35,367,450 1.2 ------------------------------ 50,110,351 1.7 - ----------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing 655,855 Wal-Mart Stores, Inc. (e) 30,694,014 1.0 Other Securities 40,171,567 1.4 ------------------------------ 70,865,581 2.4 - ----------------------------------------------------------------------------------------------------------------------------------- Food Products Other Securities 30,860,401 1.0 - ----------------------------------------------------------------------------------------------------------------------------------- Gas Utilities Other Securities 730,648 0.0 - ----------------------------------------------------------------------------------------------------------------------------------- Health Care Equipment & 317,540 Medtronic, Inc. (e) 18,280,778 0.6 Supplies Other Securities 44,523,498 1.5 ------------------------------ 62,804,276 2.1 - ----------------------------------------------------------------------------------------------------------------------------------- Health Care Providers & 361,656 UnitedHealth Group, Inc. 22,473,304 0.8 Services Other Securities 72,015,313 2.4 ------------------------------ 94,488,617 3.2 - ----------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure Other Securities 45,890,668 1.6 - ----------------------------------------------------------------------------------------------------------------------------------- Household Durables Other Securities 22,440,736 0.8 - ----------------------------------------------------------------------------------------------------------------------------------- Household Products 879,964 Procter & Gamble Co. 50,932,316 1.7 Other Securities 17,659,364 0.6 ------------------------------ 68,591,680 2.3 - ----------------------------------------------------------------------------------------------------------------------------------- IT Services Other Securities 30,492,574 1.0 - ----------------------------------------------------------------------------------------------------------------------------------- Independent Power Producers & Other Securities 18,923,418 0.6 Energy Traders - ----------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates 199,488 3M Co. 15,460,320 0.5 2,774,181 General Electric Co. 97,235,044 3.3 535,025 Tyco International Ltd. 15,440,821 0.5 Other Securities 2,595,304 0.1 ------------------------------ 130,731,489 4.4 - ----------------------------------------------------------------------------------------------------------------------------------- Insurance 681,507 American International Group, Inc. 46,499,223 1.6 Other Securities 97,346,260 3.3 ------------------------------ 143,845,483 4.9 - ----------------------------------------------------------------------------------------------------------------------------------- Internet & Catalog Retail Other Securities 16,360,690 0.6 - ----------------------------------------------------------------------------------------------------------------------------------- Internet Software & Services Other Securities 12,782,867 0.4 - ----------------------------------------------------------------------------------------------------------------------------------- Leisure Equipment & Products Other Securities 5,243,977 0.2 - ----------------------------------------------------------------------------------------------------------------------------------- Machinery Other Securities 42,143,447 1.4 - -----------------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 19 Summary Schedule of Investments (continued) Master S&P 500 Index Series
Shares Percent of Industry Held Common Stocks Value Net Assets =================================================================================================================================== Media 1,224,184 Time Warner, Inc. (e) $ 21,349,769 0.7% Other Securities 77,574,869 2.7 ------------------------------ 98,924,638 3.4 - ----------------------------------------------------------------------------------------------------------------------------------- Metals & Mining Other Securities 24,639,854 0.8 - ----------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities Other Securities 32,685,521 1.1 - ----------------------------------------------------------------------------------------------------------------------------------- Multiline Retail Other Securities 33,796,150 1.1 - ----------------------------------------------------------------------------------------------------------------------------------- Office Electronics Other Securities 3,532,144 0.1 - ----------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels 589,460 Chevron Corp. 33,463,644 1.2 368,178 ConocoPhillips 21,420,596 0.7 1,633,712 Exxon Mobil Corp. (d) 91,765,603 3.1 Other Securities 77,455,808 2.6 ------------------------------ 224,105,651 7.6 - ----------------------------------------------------------------------------------------------------------------------------------- Paper & Forest Products Other Securities 10,554,325 0.4 - ----------------------------------------------------------------------------------------------------------------------------------- Personal Products Other Securities 4,186,352 0.1 - ----------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals 407,317 Abbott Laboratories 16,060,509 0.5 298,477 Eli Lilly & Co. (e) 16,890,813 0.6 786,577 Johnson & Johnson 47,273,278 1.6 574,057 Merck & Co., Inc. 18,260,753 0.6 1,935,481 Pfizer, Inc. 45,135,417 1.5 352,399 Wyeth 16,235,022 0.6 Other Securities 30,101,238 1.0 ------------------------------ 189,957,030 6.4 - ----------------------------------------------------------------------------------------------------------------------------------- Real Estate Other Securities 22,614,685 0.8 - ----------------------------------------------------------------------------------------------------------------------------------- Road & Rail Other Securities 19,542,532 0.7 - ----------------------------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 1,582,831 Intel Corp. 39,507,462 1.3 Equipment 426,272 Texas Instruments, Inc. 13,670,543 0.5 Other Securities 42,581,401 1.5 ------------------------------ 95,759,406 3.3 - ----------------------------------------------------------------------------------------------------------------------------------- Software 2,403,324 Microsoft Corp. (d) 62,846,923 2.1 Other Securities 41,763,685 1.4 ------------------------------ 104,610,608 3.5 - ----------------------------------------------------------------------------------------------------------------------------------- Specialty Retail 557,686 Home Depot, Inc. (e) 22,575,129 0.8 201,540 Lowe's Cos., Inc. (e) 13,434,656 0.5 Other Securities 30,364,412 1.0 ------------------------------ 66,374,197 2.3 - ----------------------------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Other Securities 11,464,299 0.4 Goods - ----------------------------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage Finance Other Securities 48,499,408 1.6 - ----------------------------------------------------------------------------------------------------------------------------------- Tobacco 546,718 Altria Group, Inc. 40,850,769 1.4 Other Securities 4,105,025 0.1 ------------------------------ 44,955,794 1.5 - ----------------------------------------------------------------------------------------------------------------------------------- Trading Companies & Other Securities 1,482,079 0.1 Distributors - ----------------------------------------------------------------------------------------------------------------------------------- Wireless Telecommunication 775,515 Sprint Nextel Corp. 18,116,030 0.6 Services Other Securities 6,564,735 0.2 ------------------------------ 24,680,765 0.8 - ----------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks (Cost--$2,397,523,040) 2,957,512,586 100.4 ===================================================================================================================================
20 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 Summary Schedule of Investments (concluded) Master S&P 500 Index Series
Beneficial Percent of Interest Short-Term Securities Value Net Asset =================================================================================================================================== $ 5,655,927 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I (b) $ 5,655,927 0.2% 335,568,900 Merrill Lynch Liquidity Series, LLC Money Market Series (b)(c) 335,568,900 11.4 - ----------------------------------------------------------------------------------------------------------------------------------- Total Short-Term Securities (Cost--$341,224,827) 341,224,827 11.6 =================================================================================================================================== Total Investments (Cost--$2,738,747,867*) 3,298,737,413 112.0 Liabilities in Excess of Other Assets (352,955,686) (12.0) ------------------------------- Net Assets $2,945,781,727 100.0% ===============================
* 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 ........................................ $2,824,974,688 ============== Gross unrealized appreciation ......................... $ 680,614,727 Gross unrealized depreciation ......................... (206,852,002) -------------- Net unrealized appreciation ........................... $ 473,762,725 ============== (a) Non-income producing security. (b) 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: -------------------------------------------------------------------------- Dividend/ Net Interest Affiliate Activity Income -------------------------------------------------------------------------- Merrill Lynch & Co. (2,300) $192,551 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I $ (8,174,589) $484,157 Merrill Lynch Liquidity Series, LLC Money Market Series $140,261,620 $342,485 -------------------------------------------------------------------------- (c) Security was purchased with the cash proceeds from securities loans. (d) All or a portion of security held as collateral in connection with open financial futures contracts. (e) Security, or a portion of security, is on loan. o "Other Securities" represent issues that are not identified as the largest 50 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 Financial futures contracts purchased as of December 31, 2005 were as follows: -------------------------------------------------------------------------- Number of Expiration Face Unrealized Contracts Issue Date Value Depreciation -------------------------------------------------------------------------- 43 S&P 500 March Index 2006 $13,560,267 $(71,167) -------------------------------------------------------------------------- See Notes to Financial Statements. MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 21 Statement of Assets and Liabilities Master S&P 500 Index Series As of December 31, 2005 =================================================================================================================================== Assets - ----------------------------------------------------------------------------------------------------------------------------------- Investments in unaffiliated securities, at value (including securities loaned of $323,644,778) (identified cost--$2,386,617,807) .......................... $ 2,941,171,572 Investments in affiliated securities, at value (identified cost--$352,130,060) 357,565,841 Cash ......................................................................... 158,171 Receivables: Securities sold ........................................................... $ 30,392,116 Dividends ................................................................. 4,384,062 Contributions ............................................................. 2,260,621 Security lending .......................................................... 26,271 37,063,070 --------------- Prepaid expenses ............................................................. 23,277 --------------- Total assets ................................................................. 3,335,981,931 --------------- =================================================================================================================================== Liabilities - ----------------------------------------------------------------------------------------------------------------------------------- Collateral on securities loaned, at value .................................... 335,568,900 Payables: Withdrawals ............................................................... 50,530,323 Securities purchased ...................................................... 3,799,145 Variation margin .......................................................... 33,938 Other affiliates .......................................................... 32,256 Investment adviser ........................................................ 11,671 54,407,333 --------------- Accrued expenses and other liabilities ....................................... 223,971 --------------- Total liabilities ............................................................ 390,200,204 --------------- =================================================================================================================================== Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Net assets ................................................................... $ 2,945,781,727 =============== =================================================================================================================================== Net Assets Consist of - ----------------------------------------------------------------------------------------------------------------------------------- Investors' capital ........................................................... $ 2,385,863,348 Unrealized appreciation--net ................................................. 559,918,379 --------------- Net Assets ................................................................... $ 2,945,781,727 ===============
See Notes to Financial Statements. 22 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 Statement of Operations Master S&P 500 Index Series For the Year Ended December 31, 2005 =================================================================================================================================== Investment Income - ----------------------------------------------------------------------------------------------------------------------------------- Dividends (including $192,551 from affiliates) ........................ $ 55,817,902 Interest from affiliates .............................................. 484,157 Securities lending .................................................... 342,485 --------------- Total income .......................................................... 56,644,544 --------------- =================================================================================================================================== Expenses - ----------------------------------------------------------------------------------------------------------------------------------- Accounting services ................................................... $ 423,819 Investment advisory fees .............................................. 151,287 Professional fees ..................................................... 145,417 Custodian fees ........................................................ 125,174 Printing and shareholder reports ...................................... 36,879 Trustees' fees and expenses ........................................... 25,379 Other ................................................................. 77,495 --------------- Total expenses ........................................................ 985,450 --------------- Investment income--net ................................................ 55,659,094 --------------- =================================================================================================================================== Realized & Unrealized Gain (Loss)--Net - ----------------------------------------------------------------------------------------------------------------------------------- Realized gain (loss) on: Investments (including $262,619 from affiliates)--net .............. (73,164,162) In-kind redemption--net ............................................ 43,525,535 Futures contracts--net ............................................. 775,521 (28,863,106) --------------- Change in unrealized appreciation/depreciation--net: Investments--net ................................................... 122,079,955 Futures contracts--net ............................................. (353,920) 121,726,035 ---------------------------------- Total realized and unrealized gain--net ............................... 92,862,929 --------------- Net Increase in Net Assets Resulting from Operations .................. $ 148,522,023 ===============
See Notes to Financial Statements. MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 23 Statements of Changes in Net Assets Master S&P 500 Index Series
For the Year Ended December 31, ---------------------------------- Increase (Decrease) in Net Assets: 2005 2004 =================================================================================================================================== Operations - ----------------------------------------------------------------------------------------------------------------------------------- Investment income--net ................................................ $ 55,659,094 $ 54,363,547 Realized loss--net .................................................... (28,863,106) (31,855,334) Change in unrealized appreciation/depreciation--net ................... 121,726,035 263,686,004 ---------------------------------- Net increase in net assets resulting from operations .................. 148,522,023 286,194,217 ---------------------------------- =================================================================================================================================== Capital Transactions - ----------------------------------------------------------------------------------------------------------------------------------- Proceeds from contributions ........................................... 829,736,606 1,018,136,288 Fair value of withdrawals ............................................. (970,867,967) (840,535,190) ---------------------------------- Net increase (decrease) in net assets derived from capital transactions (141,131,361) 177,601,098 ---------------------------------- =================================================================================================================================== Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Total increase in net assets .......................................... 7,390,662 463,795,315 Beginning of year ..................................................... 2,938,391,065 2,474,595,750 ---------------------------------- End of year ........................................................... $ 2,945,781,727 $ 2,938,391,065 ==================================
See Notes to Financial Statements. 24 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 Financial Highlights Master S&P 500 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 .............. 4.96% 10.90% 28.70% (22.22%) (11.97%) ================================================================== ================================================================================================================================== Ratios to Average Net Assets - ---------------------------------------------------------------------------------------------------------------------------------- Expenses ............................. .03% .03% .04% .04% .05% ================================================================== Investment income--net ............... 1.84% 1.99% 1.76% 1.59% 1.29% ================================================================== ================================================================================================================================== Supplemental Data - ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) $2,945,782 $2,938,391 $2,474,596 $1,726,705 $1,893,497 ================================================================== Portfolio turnover ................... 10.80% 5.84% 3.60% 4.59% 3.21% ==================================================================
See Notes to Financial Statements. MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 25 Notes to Financial Statements Master S&P 500 Index Series 1. Significant Accounting Policies: Master S&P 500 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 -- Equity securities that are held by the Series that 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 over-the-counter ("OTC") market, Nasdaq Small Cap or Bulletin Board are valued at the last available bid price or yield equivalent 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. Options written are valued at the last sale price in the case of exchange-traded options or, in the case of options traded in the OTC market, the last asked price. Options purchased are valued at their last sale price in the case of exchange-traded options or, in the case of options traded in the OTC market, the last bid price. Swap agreements are valued based upon quoted fair valuations received daily by the Series from a pricing service or counter party. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their last sale price as of the close of such exchanges. Obligations with remaining maturities of 60 days or less are valued at amortized cost unless the Investment Adviser believes that this method no longer produces fair valuations. Repurchase agreements are valued at cost plus accrued interest. The Series employs pricing services to provide certain securities prices for the Series. Securities and 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, including valuations furnished by the pricing services retained by the Series, which may use a matrix system for valuations. The procedures of a pricing service and its valuations are reviewed by the officers of the Trust under the general supervision of the Trust's Board of Trustees. Such valuations and procedures will be reviewed periodically by the Board of Trustees of the Trust. 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 values 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 strategies to provide liquidity or as a proxy for a direct investment in securities underlying the Series' index. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. o Financial futures contracts -- The Series may purchase or sell financial futures contracts and options on such futures contracts. 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 value of the contract. Such receipts or payments are known as variation margin and are recorded by the Series as unrealized gains 26 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 Notes to Financial Statements (continued) Master S&P 500 Index Series 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. (c) Foreign currency transactions -- Transactions denominated in foreign currencies are recorded at the exchange rate prevailing when recognized. Assets and liabilities denominated in foreign currencies are valued at the exchange rate at the end of the period. Foreign currency transactions are the result of settling (realized) or valuing (unrealized) assets or liabilities expressed in foreign currencies into US dollars. Realized and unrealized gains or losses from investments include the effects of foreign exchange rates on investments. The Fund invests in foreign securities, which may involve a number of risk factors and special considerations not present with investments in securities of U.S. corporations. (d) Income taxes -- The Series is classified as a partnership for federal income tax purposes. As such, each investor in the Series is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Series. Therefore, no federal income tax provision is required. Under the applicable foreign tax law, a withholding tax may be imposed on interest, dividends and capital gains at various rates. It is intended that the Series' assets will be managed so an investor in the Series can satisfy the requirements of Subchapter M of the Internal Revenue Code. (e) Security transactions and investment income -- Security transactions are accounted for on the date the securities are purchased or sold (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Interest income is recognized on the accrual basis. (f) Securities lending -- The Series may lend securities to financial institutions that provide cash or securities issued or guaranteed by the U.S. government as collateral, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Series and any additional required collateral is delivered to the Series on the next business day. Where the Series receives securities as collateral for the loaned securities, it collects a fee from the borrower. The Series typically receives the income on the loaned securities but does not receive the income on the collateral. Where the Series receives cash collateral, it may invest such collateral and retain the amount earned on such investment, net of any amount rebated to the borrower. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within five business days. The Series may pay reasonable finder's, lending agent, administrative and custodial fees in connection with its loans. In the event that the borrower defaults on its obligation to return borrowed securities because of insolvency or for any other reason, the Series 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 of FAM. 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 .005% of the average daily value of the Series' net assets. MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2005 27 Notes to Financial Statements (concluded) Master S&P 500 Index Series 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, or its affiliates. As of December 31,2005, the Series lent securities with a value of $141,342,548 to MLPF&S or its affiliates. Pursuant to that order, the Trust 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 Trust and 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 $148,027 in securities lending agent fees from the Series. Merrill Lynch Trust Company ("MLTC"), a wholly-owned subsidiary of ML & Co., is the Series' custodian. For the year ended December 31, 2005, the Series reimbursed FAM $71,733 for certain accounting services. Certain officers and/or trustees of the Trust are officers and/or directors of FAM, PSI, MLTC, FAMD, FDS, ML & Co., and/or MLIM, LLC. 3. Investments: Purchases and sales of investments, excluding short-term securities and including proceeds from an in-kind redemption, for the year ended December 31, 2005 were $323,885,684 and $388,757,576 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 S&P 500 INDEX FUND DECEMBER 31, 2005 Report of Independent Registered Public Accounting Firm Master S&P 500 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 S&P 500 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 S&P 500 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 S&P 500 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 the 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 defined 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 from device manuf- Age: 62 1995 to 2003; President of Allmerica Investment acturer), Management Co., Inc. (investment adviser) from Cabot Corpor- 1989 to 2002, Director from 1989 to 2002 and ation (chem- Chairman of the Board from 1989 to 1990; President, icals), LKQ Chief Executive Officer and Director of First Corporation Allmerica Financial Life Insurance Company from 1989 (auto parts to 2002 and Director of various other Allmerica manufact- Financial companies until 2002; Director since 1989, uring) and Member of the Governance Nominating Committee TJX Com- since 2004, Member of the Compensation panies, Inc. Committee of ABIOMED since 1989 and Member of (retailer) the 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 Age: 64 National Audubon Society since 1998; Director, The American Museum of Fly Fishing since 1997.
30 MERRILL LYNCH S&P 500 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 Associates 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 Michael J. Fox Foundation for Parkinson's Inc. (pharma- Research since 2000; Director of BTG International ceutical PLC (a global technology commercialization company) 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. - ------------------------------------------------------------------------------------------------------------------------------------ Vincent J. P.O. Box 9011 Vice 2005 to Managing Director of MLIM since 2005; Director of MLIM from 1999 to 2005. Costa Princeton, NJ President present 08543-9011 Age: 43 - ------------------------------------------------------------------------------------------------------------------------------------ Debra L. P.O. Box 9011 Vice 2005 to Director of MLIM since 1999. Jelilian Princeton, NJ President present 08543-9011 Age: 38 - ------------------------------------------------------------------------------------------------------------------------------------ Jeffrey L. P.O. Box 9011 Vice 2005 to Director of MLIM since 2004; Vice President of MLIM from 1994 to 2004. Russo Princeton, NJ President present 08543-9011 Age: 38 - ------------------------------------------------------------------------------------------------------------------------------------ Jeffrey P.O. Box 9011 Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President Hiller Princeton, NJ Compliance present and Chief Compliance Officer of MLIM (Americas Region) since 2004; Chief 08543-9011 Officer Compliance Officer of the IQ Funds since 2004; Global Director of Compliance at Age: 54 Morgan Stanley 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 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 S&P 500 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 4 -- 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 S&P 500 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 S&P 500 Index Series of Quantitative Master Series Trust (a) Audit Fees - Fiscal Year Ending December 31, 2005 - $35,500 Fiscal Year Ending December 31, 2004 - $33,400 (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 - $16,200 Fiscal Year Ending December 31, 2004 - $15,000 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 S&P 500 Index Series Schedule of Investments as of December 31, 2005
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- Aerospace & Defense - 2.2% 211,920 Boeing Co. $ 14,885,261 53,748 General Dynamics Corp. (e) 6,129,959 34,987 Goodrich Corp. 1,437,966 228,077 Honeywell International, Inc. 8,495,868 30,574 L-3 Communications Holdings, Inc. 2,273,177 88,870 Lockheed Martin Corp. 5,654,798 95,952 Northrop Grumman Corp. 5,767,675 111,274 Raytheon Co. 4,467,651 43,015 Rockwell Collins, Inc. 1,998,907 267,396 United Technologies Corp. 14,950,110 -------------- 66,061,372 - ----------------------------------------------------------------------------------------------------------------------------------- Air Freight & Logistics - 1.0% 76,508 FedEx Corp. (e) 7,910,162 14,774 Ryder System, Inc. 606,029 289,700 United Parcel Service, Inc. Class B 21,770,955 -------------- 30,287,146 - ----------------------------------------------------------------------------------------------------------------------------------- Airlines - 0.1% 190,595 Southwest Airlines Co. 3,131,476 - ----------------------------------------------------------------------------------------------------------------------------------- Auto Components - 0.2% 17,930 Cooper Tire & Rubber Co. 274,688 36,845 Dana Corp. 264,547 55,493 The Goodyear Tire & Rubber Co. (a)(e) 964,468 46,020 Johnson Controls, Inc. 3,355,318 -------------- 4,859,021 - ----------------------------------------------------------------------------------------------------------------------------------- Automobiles - 0.4% 507,399 Ford Motor Co. (e) 3,917,120 155,306 General Motors Corp. (e) 3,016,043 71,359 Harley-Davidson, Inc. (e) 3,674,275 -------------- 10,607,438 - ----------------------------------------------------------------------------------------------------------------------------------- Beverages - 2.2% 207,285 Anheuser-Busch Cos., Inc. 8,904,964 25,988 Brown-Forman Corp. Class B 1,801,488 543,428 The Coca-Cola Co. 21,905,583 92,887 Coca-Cola Enterprises, Inc. 1,780,644 53,000 Constellation Brands, Inc. Class A (a) 1,390,190 18,183 Molson Coors Brewing Co. Class B 1,218,079 46,022 Pepsi Bottling Group, Inc. 1,316,689 435,588 PepsiCo, Inc. 25,734,539 -------------- 64,052,176 - ----------------------------------------------------------------------------------------------------------------------------------- Biotechnology - 1.6% 324,047 Amgen, Inc. (a) 25,554,346 49,555 Applera Corp. - Applied Biosystems Group 1,316,181 87,540 Biogen Idec, Inc. (a) 3,968,188 33,734 Chiron Corp. (a) 1,499,814 67,880 Genzyme Corp. (a) 4,804,546 116,500 Gilead Sciences, Inc. (a) 6,131,395 69,252 Medimmune, Inc. (a) 2,425,205 -------------- 45,699,675 - ----------------------------------------------------------------------------------------------------------------------------------- Building Products - 0.2% 51,300 American Standard Cos., Inc. 2,049,435 107,879 Masco Corp. 3,256,867 -------------- 5,306,302 - ----------------------------------------------------------------------------------------------------------------------------------- Capital Markets - 3.2% 65,776 Ameriprise Financial, Inc. 2,696,816 203,795 The Bank of New York Co., Inc. 6,490,871 27,111 The Bear Stearns Cos., Inc. 3,132,134 286,068 The Charles Schwab Corp. 4,196,618 88,100 E*Trade Financial Corp. (a) 1,837,766 24,100 Federated Investors, Inc. Class B 892,664 42,286 Franklin Resources, Inc. 3,975,307 118,400 Goldman Sachs Group, Inc. 15,120,864
Master S&P 500 Index Series Schedule of Investments as of December 31, 2005
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 57,505 Janus Capital Group, Inc. $ 1,071,318 67,878 Lehman Brothers Holdings, Inc. 8,699,923 101,116 Mellon Financial Corp. 3,463,223 241,267 Merrill Lynch & Co., Inc. (b) 16,341,014 282,998 Morgan Stanley 16,057,307 54,627 Northern Trust Corp. 2,830,771 89,823 State Street Corp. 4,979,787 30,724 T. Rowe Price Group, Inc. 2,213,050 -------------- 93,999,433 - ----------------------------------------------------------------------------------------------------------------------------------- Chemicals - 1.6% 54,247 Air Products & Chemicals, Inc. 3,210,880 19,758 Ashland, Inc. 1,143,988 249,076 The Dow Chemical Co. 10,914,510 239,373 E.I. du Pont de Nemours & Co. 10,173,353 22,850 Eastman Chemical Co. (e) 1,178,832 56,814 Ecolab, Inc. 2,060,644 29,897 Engelhard Corp. 901,395 24,859 Hercules, Inc. (a) 280,907 22,196 International Flavors & Fragrances, Inc. 743,566 69,577 Monsanto Co. 5,394,305 41,587 PPG Industries, Inc. 2,407,887 79,146 Praxair, Inc. 4,191,572 44,203 Rohm & Haas Co. (e) 2,140,309 17,723 Sigma-Aldrich Corp. 1,121,689 -------------- 45,863,837 - ----------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 5.7% 86,203 AmSouth Bancorp 2,259,381 137,200 BB&T Corp. (e) 5,750,052 1,061,206 Bank of America Corp. 48,974,657 48,791 Comerica, Inc. 2,769,377 31,502 Compass Bancshares, Inc. 1,521,232 142,856 Fifth Third Bancorp (e) 5,388,528 38,800 First Horizon National Corp. 1,491,472 56,029 Huntington Bancshares, Inc. 1,330,689 105,110 KeyCorp 3,461,272 23,800 M&T Bank Corp. 2,595,390 54,000 Marshall & Ilsley Corp. 2,324,160 153,856 National City Corp. (e) 5,164,946 114,792 North Fork Bancorporation, Inc. 3,140,709 78,468 PNC Financial Services Group, Inc. 4,851,676 112,454 Regions Financial Corp. 3,841,429 91,499 SunTrust Banks, Inc. (e) 6,657,467 71,451 Synovus Financial Corp. 1,929,891 483,265 U.S. Bancorp 14,444,791 413,726 Wachovia Corp. (e) 21,869,556 439,022 Wells Fargo & Co. 27,583,752 21,302 Zions Bancorporation 1,609,579 -------------- 168,960,006 - ----------------------------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.7% 64,578 Allied Waste Industries, Inc. (a) 564,412 26,058 Avery Dennison Corp. 1,440,226 265,025 Cendant Corp. 4,571,681 42,202 Cintas Corp. 1,737,878 33,702 Equifax, Inc. 1,281,350 28,139 Monster Worldwide, Inc. (a) 1,148,634 56,482 Pitney Bowes, Inc. 2,386,364
Master S&P 500 Index Series Schedule of Investments as of December 31, 2005
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 48,595 RR Donnelley & Sons Co. $ 1,662,435 41,711 Robert Half International, Inc. 1,580,430 141,314 Waste Management, Inc. 4,288,880 -------------- 20,662,290 - ----------------------------------------------------------------------------------------------------------------------------------- Communications Equipment - 2.7% 26,065 ADC Telecommunications, Inc. (a) 582,292 43,639 Andrew Corp. (a) 468,246 114,782 Avaya, Inc. (a) 1,224,724 135,695 Ciena Corp. (a) 403,014 1,612,771 Cisco Systems, Inc. (a) 27,610,640 51,443 Comverse Technology, Inc. (a) 1,367,869 396,675 Corning, Inc. (a) 7,798,631 34 Enterasys Networks, Inc. (a) 452 502,687 JDS Uniphase Corp. (a) 1,186,341 1,141,958 Lucent Technologies, Inc. (a)(e) 3,037,608 652,769 Motorola, Inc. 14,746,052 431,660 QUALCOMN, Inc. 18,595,913 37,394 Scientific-Atlanta, Inc. 1,610,560 132,787 Tellabs, Inc. (a) 1,447,378 -------------- 80,079,720 - ----------------------------------------------------------------------------------------------------------------------------------- Computers & Peripherals - 3.7% 220,334 Apple Computer, Inc. (a) 15,839,811 617,916 Dell, Inc. (a) 18,531,301 622,854 EMC Corp. (a) 8,483,271 76,498 Gateway, Inc. (a) 192,010 752,117 Hewlett-Packard Co. 21,533,110 414,667 International Business Machines Corp. 34,085,627 34,339 Lexmark International, Inc. Class A (a)(e) 1,539,417 44,736 NCR Corp. (a) 1,518,340 104,521 Network Appliance, Inc. (a) 2,822,067 26,208 QLogic Corp. (a) 852,022 878,056 Sun Microsystems, Inc. (a) 3,679,055 -------------- 109,076,031 - ----------------------------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.1% 20,161 Fluor Corp. 1,557,639 - ----------------------------------------------------------------------------------------------------------------------------------- Construction Materials - 0.1% 24,447 Vulcan Materials Co. 1,656,284 - ----------------------------------------------------------------------------------------------------------------------------------- Consumer Finance - 1.3% 325,984 American Express Co. 16,775,137 76,167 Capital One Financial Corp. (e) 6,580,829 325,272 MBNA Corp. 8,831,135 112,630 SLM Corp. 6,204,787 -------------- 38,391,888 - ----------------------------------------------------------------------------------------------------------------------------------- Containers & Packaging - 0.2% 27,560 Ball Corp. 1,094,683 25,636 Bemis Co. 714,475 37,625 Pactiv Corp. (a) 827,750 20,669 Sealed Air Corp. (a) 1,160,978 34,706 Temple-Inland, Inc. 1,556,564 -------------- 5,354,450 - ----------------------------------------------------------------------------------------------------------------------------------- Distributors - 0.1% 42,614 Genuine Parts Co. 1,871,607 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Consumer Services - 0.2% 41,800 Apollo Group, Inc. Class A (a)(e) 2,527,228 90,670 H&R Block, Inc. 2,225,949 -------------- 4,753,177 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 3.8% 54,100 CIT Group, Inc. 2,801,298 1,328,236 Citigroup, Inc. 64,459,293 926,456 JPMorgan Chase & Co. 36,771,039 69,180 Moody's Corp. 4,249,036
Master S&P 500 Index Series Schedule of Investments as of December 31, 2005
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 76,400 Principal Financial Group, Inc. $ 3,623,652 -------------- 111,904,318 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 1,025,535 AT&T, Inc. 25,115,352 Services - 2.2% 472,834 BellSouth Corp. (e) 12,813,801 34,377 CenturyTel, Inc. 1,139,941 98,918 Citizens Communications Co. 1,209,767 433,145 Qwest Communications International Inc. (a) 2,447,269 736,228 Verizon Communications, Inc. 22,175,187 -------------- 64,901,317 - ----------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 1.6% 37,520 Allegheny Energy, Inc. (a) 1,187,508 107,520 American Electric Power Co., Inc. 3,987,917 52,028 Cinergy Corp. 2,209,109 80,999 Edison International 3,532,366 59,055 Entergy Corp. 4,054,126 177,228 Exelon Corp. 9,417,896 110,714 FPL Group, Inc. 4,601,274 81,316 FirstEnergy Corp. 3,983,671 90,764 PPL Corp. (e) 2,668,462 21,732 Pinnacle West Capital Corp. 898,618 72,426 Progress Energy, Inc. (e) 3,180,950 188,823 The Southern Co. 6,520,058 -------------- 46,241,955 - ----------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.4% 48,144 American Power Conversion Corp. 1,059,168 22,352 Cooper Industries Ltd. Class A 1,631,696 105,448 Emerson Electric Co. 7,876,966 44,015 Rockwell Automation, Inc. 2,603,927 -------------- 13,171,757 - ----------------------------------------------------------------------------------------------------------------------------------- Electronic Equipment & 113,554 Agilent Technologies, Inc. (a) 3,780,213 Instruments - 0.3% 43,164 Jabil Circuit, Inc. (a) 1,600,953 45,562 Molex, Inc. 1,182,334 156,763 Sanmina-SCI Corp. (a) 667,810 215,312 Solectron Corp. (a) 788,042 59,300 Symbol Technologies, Inc. 760,226 21,636 Tektronix, Inc. 610,352 -------------- 9,389,930 - ----------------------------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 1.7% 91,700 BJ Services Co. 3,362,639 84,644 Baker Hughes, Inc. 5,144,662 130,504 Halliburton Co. 8,086,028 37,815 Nabors Industries Ltd. (a)(e) 2,864,486 42,536 National Oilwell Varco, Inc. (a) 2,667,007 40,579 Noble Corp. (e) 2,862,443 35,672 Rowan Cos., Inc. 1,271,350 151,754 Schlumberger Ltd. 14,742,901 82,241 Transocean, Inc. (a)(e) 5,731,375 93,300 Weatherford International Ltd. (a)(e) 3,377,460 -------------- 50,110,351 - ----------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 2.4% 91,166 Albertson's, Inc. 1,946,394 210,136 CVS Corp. 5,551,793 126,424 Costco Wholesale Corp. 6,254,195 180,724 The Kroger Co. (a) 3,412,069 109,758 Safeway, Inc. 2,596,874 30,042 SUPERVALU Inc. 975,764 158,300 SYSCO Corporation 4,915,215
Master S&P 500 Index Series Schedule of Investments as of December 31, 2005
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 263,524 Walgreen Co. (e) $ 11,663,572 655,855 Wal-Mart Stores, Inc. (e) 30,694,014 36,900 Whole Foods Market, Inc. 2,855,691 -------------- 70,865,581 - ----------------------------------------------------------------------------------------------------------------------------------- Food Products - 1.0% 163,334 Archer-Daniels-Midland Co. (e) 4,027,816 59,035 Campbell Soup Co. 1,757,472 130,378 ConAgra Foods, Inc. (e) 2,644,066 86,960 General Mills, Inc. 4,288,867 84,136 HJ Heinz Co. 2,837,066 51,656 The Hershey Co. 2,853,994 74,365 Kellogg Co. (e) 3,214,055 33,200 McCormick & Co., Inc. 1,026,544 191,141 Sara Lee Corp. 3,612,565 67,200 Tyson Foods, Inc. Class A 1,149,120 51,870 Wm. Wrigley Jr. Co. (e) 3,448,836 -------------- 30,860,401 - ----------------------------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.0% 10,554 Nicor, Inc. 414,878 9,004 Peoples Energy Corp. 315,770 -------------- 730,648 - ----------------------------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 2.1% 12,987 Bausch & Lomb, Inc. 881,817 159,927 Baxter International, Inc. 6,021,252 61,295 Becton Dickinson & Co. 3,682,604 68,235 Biomet, Inc. (e) 2,495,354 163,464 Boston Scientific Corp. (a) 4,003,233 30,918 CR Bard, Inc. 2,038,115 35,700 Fisher Scientific International (a) 2,208,402 85,121 Guidant Corp. 5,511,585 37,611 Hospira, Inc. (a) 1,608,999 317,540 Medtronic, Inc. (e) 18,280,778 10,555 Millipore Corp. (a) 697,052 26,484 PerkinElmer, Inc. 623,963 91,888 St. Jude Medical, Inc. (a) 4,612,778 81,310 Stryker Corp. 3,612,603 40,757 Thermo Electron Corp. (a) 1,228,008 29,220 Waters Corp. (a) 1,104,516 62,177 Zimmer Holdings, Inc. (a) 4,193,217 -------------- 62,804,276 - ----------------------------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 3.2% 78,084 Aetna, Inc. New Shares 7,364,102 60,286 AmerisourceBergen Corp. 2,495,840 108,291 Cardinal Health, Inc. (e) 7,445,006 114,435 Caremark Rx, Inc. (a) 5,926,589 35,196 Cigna Corp. 3,931,393 46,500 Coventry Health Care, Inc. (a) 2,648,640 36,000 Express Scripts, Inc. (a) 3,016,800 100,696 HCA, Inc. 5,085,148 69,200 Health Management Associates, Inc. Class A 1,519,632 39,404 Humana, Inc. (a) 2,140,819 58,140 IMS Health, Inc. 1,448,849 33,600 Laboratory Corp. of America Holdings (a) 1,809,360 21,604 Manor Care, Inc. 859,191 78,384 McKesson Corp. 4,043,831 80,901 Medco Health Solutions, Inc. (a) 4,514,276 36,700 Patterson Cos., Inc. (a) 1,225,780
Master S&P 500 Index Series Schedule of Investments as of December 31, 2005
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 48,500 Quest Diagnostics, Inc. $ 2,496,780 113,737 Tenet Healthcare Corp. (a) 871,225 361,656 UnitedHealth Group, Inc. 22,473,304 165,084 WellPoint, Inc. (a) 13,172,052 -------------- 94,488,617 - ----------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 1.6% 119,380 Carnival Corp. (e) 6,383,249 39,907 Darden Restaurants, Inc. 1,551,584 50,530 Harrah's Entertainment, Inc. (e) 3,602,284 96,131 Hilton Hotels Corp. 2,317,718 90,420 International Game Technology (e) 2,783,128 47,727 Marriott International, Inc. Class A 3,196,277 324,418 McDonald's Corp. 10,939,375 210,424 Starbucks Corp. (a) 6,314,824 55,868 Starwood Hotels & Resorts Worldwide, Inc. 3,567,730 34,972 Wendy's International, Inc. 1,932,553 70,434 Yum! Brands, Inc. 3,301,946 -------------- 45,890,668 - ----------------------------------------------------------------------------------------------------------------------------------- Household Durables - 0.8% 22,342 Black & Decker Corp. 1,942,860 36,268 Centex Corp. 2,592,799 69,400 DR Horton, Inc. 2,479,662 35,615 Fortune Brands, Inc. 2,778,682 22,822 KB HOME 1,658,247 46,816 Leggett & Platt, Inc. 1,074,895 39,522 Lennar Corp. Class A (e) 2,411,632 19,003 Maytag Corp. 357,636 65,854 Newell Rubbermaid, Inc. 1,566,008 60,972 Pulte Homes, Inc. 2,399,858 14,352 Snap-On, Inc. 539,061 19,443 The Stanley Works 934,042 20,360 Whirlpool Corp. 1,705,354 -------------- 22,440,736 - ----------------------------------------------------------------------------------------------------------------------------------- Household Products - 2.3% 42,198 Clorox Co. 2,400,644 139,181 Colgate-Palmolive Co. 7,634,078 127,823 Kimberly-Clark Corp. 7,624,642 879,964 Procter & Gamble Co. 50,932,316 -------------- 68,591,680 - ----------------------------------------------------------------------------------------------------------------------------------- IT Services - 1.0% 34,000 Affiliated Computer Services, Inc. Class A (a) 2,012,120 146,180 Automatic Data Processing, Inc. 6,708,200 43,650 Computer Sciences Corp. (a) 2,210,436 35,314 Convergys Corp. (a) 559,727 128,787 Electronic Data Systems Corp. (e) 3,096,039 206,400 First Data Corp. 8,877,264 50,492 Fiserv, Inc. (a) 2,184,789 93,558 Paychex, Inc. (e) 3,566,431 33,673 Sabre Holdings Corp. Class A 811,856 79,882 Unisys Corp. (a) 465,712 -------------- 30,492,574 - ----------------------------------------------------------------------------------------------------------------------------------- Independent Power Producers & 161,760 The AES Corp. (a)(e) 2,560,661 Energy Traders - 0.6% 49,149 Constellation Energy Group, Inc. 2,830,982 234,519 Duke Energy Corp. (e) 6,437,547 104,771 Dynegy, Inc. Class A (a) 507,092 131,244 TXU Corp. 6,587,136 -------------- 18,923,418
Master S&P 500 Index Series Schedule of Investments as of December 31, 2005
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 4.4% 199,488 3M Co. $ 15,460,320 2,774,181 General Electric Co. 97,235,044 33,714 Textron, Inc. 2,595,304 535,025 Tyco International Ltd. 15,440,821 -------------- 130,731,489 - ----------------------------------------------------------------------------------------------------------------------------------- Insurance - 4.9% 77,010 ACE Ltd. 4,115,414 25,666 AMBAC Financial Group, Inc. 1,977,822 78,085 AON Corp. (e) 2,807,156 125,799 Aflac, Inc. (e) 5,839,590 175,944 The Allstate Corp. 9,513,292 681,507 American International Group, Inc. 46,499,223 50,953 Chubb Corp. 4,975,560 43,091 Cincinnati Financial Corp. 1,925,306 92,300 Genworth Financial, Inc. Class A 3,191,734 77,325 Hartford Financial Services Group, Inc. 6,641,444 33,136 Jefferson-Pilot Corp. 1,886,432 51,219 Lincoln National Corp. 2,716,144 38,890 Loews Corp. 3,688,717 39,845 MBIA, Inc. 2,397,075 137,398 Marsh & McLennan Cos., Inc. 4,363,760 193,742 Metlife, Inc. 9,493,358 49,700 The Progressive Corp. 5,803,966 132,000 Prudential Financial, Inc. 9,661,080 35,122 Safeco Corp. 1,984,393 180,427 The St. Paul Travelers Cos., Inc. (e) 8,059,674 27,356 Torchmark Corp. 1,520,994 76,667 UnumProvident Corp. 1,744,174 45,105 XL Capital Ltd. Class A 3,039,175 -------------- 143,845,483 - ----------------------------------------------------------------------------------------------------------------------------------- Internet & Catalog Retail - 0.6% 74,100 Amazon.com, Inc. (a)(e) 3,493,815 297,500 eBay, Inc. (a)(e) 12,866,875 -------------- 16,360,690 - ----------------------------------------------------------------------------------------------------------------------------------- Internet Software & Services - 0.4% 326,260 Yahoo!, Inc. (a) 12,782,867 - ----------------------------------------------------------------------------------------------------------------------------------- Leisure Equipment & Products - 0.2% 22,464 Brunswick Corp. 913,386 83,053 Eastman Kodak Co. 1,943,440 42,694 Hasbro, Inc. 861,565 96,434 Mattel, Inc. 1,525,586 -------------- 5,243,977 - ----------------------------------------------------------------------------------------------------------------------------------- Machinery - 1.4% 181,588 Caterpillar, Inc. (e) 10,490,339 14,409 Cummins, Inc. 1,292,920 68,250 Danaher Corp. 3,806,985 67,098 Deere & Co. 4,570,045 49,459 Dover Corp. 2,002,595 41,950 Eaton Corp. 2,814,426 22,196 ITT Industries, Inc. 2,282,193 57,221 Illinois Tool Works, Inc. 5,034,876 89,496 Ingersoll-Rand Co. Class A 3,612,954 17,258 Navistar International Corp. (a) 493,924 41,874 Paccar, Inc. 2,898,937 30,003 Pall Corp. 805,881 30,888 Parker Hannifin Corp. 2,037,372 -------------- 42,143,447
Master S&P 500 Index Series Schedule of Investments as of December 31, 2005
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- Media - 3.4% 145,054 Clear Channel Communications, Inc. (e) $ 4,561,958 469,343 Comcast Corp. Class A (a)(e) 12,184,144 104,405 Comcast Corp. Special Class A (a) 2,682,164 19,419 Dow Jones & Co., Inc. 689,180 21,700 EW Scripps Co. Class A 1,042,034 67,479 Gannett Co., Inc. 4,087,203 97,186 Interpublic Group of Cos., Inc. (a) 937,845 19,151 Knight-Ridder, Inc. 1,212,258 92,516 The McGraw-Hill Cos., Inc. 4,776,601 12,221 Meredith Corp. 639,647 35,847 New York Times Co. Class A 948,153 656,900 News Corp. Class A (e) 10,214,795 49,797 Omnicom Group 4,239,219 1,224,184 Time Warner, Inc. (e) 21,349,769 74,542 Tribune Co. 2,255,641 65,871 Univision Communications, Inc. Class A (a) 1,935,949 410,163 Viacom, Inc. Class B (a) 13,371,314 492,147 Walt Disney Co. 11,796,764 -------------- 98,924,638 - ----------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.8% 225,245 Alcoa, Inc. 6,660,495 20,428 Allegheny Technologies, Inc. 737,042 52,134 Freeport-McMoRan Copper & Gold, Inc. Class B 2,804,809 111,386 Newmont Mining Corp. (e) 5,948,012 44,032 Nucor Corp. 2,937,815 27,488 Phelps Dodge Corp. 3,954,699 33,222 United States Steel Corp. 1,596,982 -------------- 24,639,854 - ----------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 1.1% 48,381 Ameren Corp. (e) 2,479,042 66,414 CMS Energy Corp. (a) 963,667 76,570 Centerpoint Energy, Inc. 983,925 70,825 Consolidated Edison, Inc. (e) 3,281,322 40,538 DTE Energy Co. (e) 1,750,836 93,953 Dominion Resources, Inc. 7,253,172 38,661 KeySpan Corp. 1,379,811 59,637 NiSource, Inc. 1,244,028 98,477 PG&E Corp. 3,655,466 900 Progress Energy, Inc. (a)(e) 58 66,864 Public Service Enterprise Group, Inc. (e) 4,344,154 61,138 Sempra Energy 2,741,428 47,396 TECO Energy, Inc. 814,263 97,202 Xcel Energy, Inc. (e) 1,794,349 -------------- 32,685,521 - ----------------------------------------------------------------------------------------------------------------------------------- Multiline Retail - 1.1% 27,795 Big Lots, Inc. (a) 333,818 20,364 Dillard's, Inc. Class A 505,434 76,650 Dollar General Corp. 1,461,716 47,964 Family Dollar Stores, Inc. 1,189,028 73,140 Federated Department Stores 4,851,376 64,798 JC Penney Co., Inc. 3,602,769 87,109 Kohl's Corp. (a) 4,233,497
Master S&P 500 Index Series Schedule of Investments as of December 31, 2005
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 63,172 Nordstrom, Inc. $ 2,362,633 24,407 Sears Holdings Corp. (a)(e) 2,819,741 226,235 Target Corp. (e) 12,436,138 -------------- 33,796,150 - ----------------------------------------------------------------------------------------------------------------------------------- Office Electronics - 0.1% 241,102 Xerox Corp. (a) 3,532,144 - ----------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 7.6% 19,867 Amerada Hess Corp. 2,519,533 61,261 Anadarko Petroleum Corp. 5,804,480 82,642 Apache Corp. 5,662,630 96,636 Burlington Resources, Inc. (e) 8,330,023 589,460 Chevron Corp. 33,463,644 368,178 ConocoPhillips 21,420,596 116,994 Devon Energy Corp. 7,316,805 64,140 EOG Resources, Inc. (e) 4,705,952 159,715 El Paso Corp. 1,942,134 1,633,712 Exxon Mobil Corp. (d) 91,765,603 33,534 Kerr-McGee Corp. 3,046,899 31,134 Kinder Morgan, Inc. 2,862,771 99,272 Marathon Oil Corp. 6,052,614 45,800 Murphy Oil Corp. 2,472,742 103,529 Occidental Petroleum Corp. 8,269,897 38,170 Sunoco, Inc. 2,991,765 158,600 Valero Energy Corp. 8,183,760 143,486 Williams Cos., Inc. 3,324,571 90,333 XTO Energy, Inc. 3,969,232 -------------- 224,105,651 - ----------------------------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.4% 124,262 International Paper Co. 4,176,446 36,128 Louisiana-Pacific Corp. 992,436 49,272 MeadWestvaco Corp. 1,381,094 60,361 Weyerhaeuser Co. 4,004,349 -------------- 10,554,325 - ----------------------------------------------------------------------------------------------------------------------------------- Personal Products - 0.1% 18,392 Alberto-Culver Co. Class B 841,434 117,160 Avon Products, Inc. 3,344,918 -------------- 4,186,352 - ----------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 6.4% 407,317 Abbott Laboratories 16,060,509 36,064 Allergan, Inc. 3,893,469 501,261 Bristol-Myers Squibb Co. 11,518,978 298,477 Eli Lilly & Co. (e) 16,890,813 89,664 Forest Laboratories, Inc. (a) 3,647,532 786,577 Johnson & Johnson 47,273,278 56,555 King Pharmaceuticals, Inc. (a) 956,911 574,057 Merck & Co., Inc. 18,260,753 64,500 Mylan Laboratories 1,287,420 1,935,481 Pfizer, Inc. 45,135,417 380,625 Schering-Plough Corp. 7,936,031 26,481 Watson Pharmaceuticals, Inc. (a) 860,897 352,399 Wyeth 16,235,022 -------------- 189,957,030 - ----------------------------------------------------------------------------------------------------------------------------------- Real Estate - 0.8% 21,400 Apartment Investment & Management Co. Class A 810,418 51,000 Archstone-Smith Trust 2,136,390 97,364 Equity Office Properties Trust 2,953,050 80,340 Equity Residential 3,142,901 44,000 Plum Creek Timber Co., Inc. 1,586,200 70,500 Prologis 3,293,760
Master S&P 500 Index Series Schedule of Investments as of December 31, 2005
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 26,400 Public Storage, Inc. $ 1,787,808 52,300 Simon Property Group, Inc. (e) 4,007,749 34,700 Vornado Realty Trust 2,896,409 -------------- 22,614,685 - ----------------------------------------------------------------------------------------------------------------------------------- Road & Rail - 0.7% 93,494 Burlington Northern Santa Fe Corp. 6,621,245 52,878 CSX Corp. 2,684,616 99,442 Norfolk Southern Corp. 4,457,985 71,776 Union Pacific Corp. (e) 5,778,686 -------------- 19,542,532 - ----------------------------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 108,447 Advanced Micro Devices, Inc. (a)(e) 3,318,478 Equipment - 3.3% 97,590 Altera Corp. (a) 1,808,343 92,116 Analog Devices, Inc. 3,304,201 410,376 Applied Materials, Inc. 7,362,145 75,467 Applied Micro Circuits Corp. (a) 193,950 78,381 Broadcom Corp. Class A (a) 3,695,664 100,458 Freescale Semiconductor, Inc. Class B (a) 2,528,528 1,582,831 Intel Corp. 39,507,462 56,537 Kla-Tencor Corp. 2,788,970 91,166 LSI Logic Corp. (a) 729,328 81,799 Linear Technology Corp. 2,950,490 90,460 Maxim Integrated Products, Inc. (e) 3,278,270 150,068 Micron Technology, Inc. (a) 1,997,405 89,972 National Semiconductor Corp. (e) 2,337,473 43,500 Novellus Systems, Inc. (a) 1,049,220 49,720 Nvidia Corp. (a) 1,817,763 42,954 PMC-Sierra, Inc. (a) 331,175 46,332 Teradyne, Inc. (a) 675,057 426,272 Texas Instruments, Inc. 13,670,543 95,793 Xilinx, Inc. (e) 2,414,941 -------------- 95,759,406 - ----------------------------------------------------------------------------------------------------------------------------------- Software - 3.5% 149,850 Adobe Systems, Inc. 5,538,456 60,728 Autodesk, Inc. 2,608,268 54,220 BMC Software, Inc. (a) 1,110,968 42,305 Citrix Systems, Inc. (a) 1,217,538 128,012 Computer Associates International, Inc. 3,608,658 87,649 Compuware Corp. (a) 786,212 81,100 Electronic Arts, Inc. (a) 4,242,341 49,452 Intuit, Inc. (a) 2,635,792 25,827 Mercury Interactive Corp. (a) 717,732 2,403,324 Microsoft Corp. (d) 62,846,923 93,324 Novell, Inc. (a) 824,051 976,285 Oracle Corp. (a) 11,920,440 63,665 Parametric Technology Corp. (a) 388,357 122,337 Siebel Systems, Inc. 1,294,325 278,317 Symantec Corp. (a) 4,870,547 -------------- 104,610,608 - ----------------------------------------------------------------------------------------------------------------------------------- Specialty Retail - 2.3% 58,800 AutoNation, Inc. (a) 1,277,724 16,977 AutoZone, Inc. (a) 1,557,640 81,024 Bed Bath & Beyond, Inc. (a) 2,929,018 110,569 Best Buy Co., Inc. (e) 4,807,540 47,423 Circuit City Stores, Inc. 1,071,286 160,813 The Gap, Inc. 2,836,741
Master S&P 500 Index Series Schedule of Investments as of December 31, 2005
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 557,686 Home Depot, Inc. (e) $ 22,575,129 91,294 Limited Brands 2,040,421 201,540 Lowe's Cos., Inc. (e) 13,434,656 78,158 Office Depot, Inc. (a) 2,454,161 24,524 OfficeMax, Inc. 621,929 39,598 RadioShack Corp. 832,746 35,292 The Sherwin-Williams Co. 1,602,963 183,451 Staples, Inc. 4,166,172 121,648 TJX Cos., Inc. 2,825,883 35,001 Tiffany & Co. 1,340,188 -------------- 66,374,197 - ----------------------------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.4% 94,800 Coach, Inc. (a) 3,160,632 30,860 Jones Apparel Group, Inc. 948,019 24,338 Liz Claiborne, Inc. 871,787 46,310 Nike, Inc. Class B 4,019,245 16,887 Reebok International Ltd. 983,330 26,767 VF Corp. 1,481,286 -------------- 11,464,299 - ----------------------------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage Finance - 1.6% 150,910 Countrywide Financial Corp. 5,159,613 258,273 Fannie Mae 12,606,305 177,703 Freddie Mac (e) 11,612,891 71,596 Golden West Financial Corp. (e) 4,725,336 23,380 MGIC Investment Corp. 1,538,872 87,600 Sovereign Bancorp, Inc. 1,893,912 252,011 Washington Mutual, Inc. (e) 10,962,479 -------------- 48,499,408 - ----------------------------------------------------------------------------------------------------------------------------------- Tobacco - 1.5% 546,718 Altria Group, Inc. 40,850,769 25,700 Reynolds American, Inc. 2,449,981 40,535 UST, Inc. 1,655,044 -------------- 44,955,794 - ----------------------------------------------------------------------------------------------------------------------------------- Trading Companies & Distributors - 0.1% 20,845 WW Grainger, Inc. 1,482,079 - ----------------------------------------------------------------------------------------------------------------------------------- Wireless Telecommunication 104,037 Alltel Corp. 6,564,735 Services - 0.8% 775,515 Sprint Nextel Corp. 18,116,030 -------------- 24,680,765 - ----------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks (Cost - $2,397,523,040) - 100.4% 2,957,512,586 - ----------------------------------------------------------------------------------------------------------------------------------- Beneficial Interest Short - Term Securities - ----------------------------------------------------------------------------------------------------------------------------------- $ 5,655,927 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I (b) 5,655,927 335,568,900 Merrill Lynch Liquidity Series, LLC Money Market Series (b)(c) 335,568,900 - ----------------------------------------------------------------------------------------------------------------------------------- Total Short-Term Securities 341,224,827 (Cost - $341,224,827) - 11.6% - ----------------------------------------------------------------------------------------------------------------------------------- Total Investments (Cost - $2,738,747,867*) - 112.0% 3,298,737,413 Liabilities in Excess of Other Assets - (12.0%) (352,955,686) -------------- Net Assets - 100.0% $2,945,781,727 ==============
Master S&P 500 Index Series Schedule of Investments as of December 31, 2005 * 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 $ 2,824,974,688 =============== Gross unrealized appreciation $ 680,614,727 Gross unrealized depreciation (206,852,002) --------------- Net unrealized appreciation $ 473,762,725 =============== (a) Non-income producing security. (b) 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:
---------------------------------------------------------------------------------------------------- Dividend/Interest Affiliate Net Activity Income ---------------------------------------------------------------------------------------------------- Merrill Lynch & Co. (2,300) $ 192,551 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I $ (8,174,589) $ 484,157 Merrill Lynch Liquidity Series, LLC Money Market Series $ 140,261,620 $ 342,485 ----------------------------------------------------------------------------------------------------
(c) Security was purchased with the cash proceeds from securities loans. (d) All or a portion of security held as collateral in connection with open financial futures contracts. (e) Security, or a portion of security, is on loan. 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 Financial futures contracts purchased as of December 31, 2005 were as follows: -------------------------------------------------------------------------- Number of Expiration Face Unrealized Contracts Issue Date Value Depreciation -------------------------------------------------------------------------- 43 S&P 500 Index March 2006 $ 13,560,267 $ (71,167) -------------------------------------------------------------------------- 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 S&P 500 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. S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust By: /s/ Robert C. Doll, Jr. -------------------------- Robert C. Doll, Jr., Chief Executive Officer of S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 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 S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust Date: February 21, 2006 By: /s/ Donald C. Burke -------------------------- Donald C. Burke, Chief Financial Officer of S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust Date: February 21, 2006 EX-99.CERT 2 e600217_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 S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust, certify that: 1. I have reviewed this report on Form N-CSR of S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 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 S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 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 S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust, certify that: 1. I have reviewed this report on Form N-CSR of S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 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 S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust EX-99.1350 CERT 3 e600217_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 S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 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 S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 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 S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust and will be retained by S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 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 S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 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 S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 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 S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust and will be retained by S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----