-----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, Ia4fGHzt0OkC1XGT4LM+BXpr80q0eavdKCMcznR1MVuNHa0/my18UL1J8CQeKCU/ jVV84FdnEfzwAna8bYzkRw== 0001193805-07-000723.txt : 20070309 0001193805-07-000723.hdr.sgml : 20070309 20070309105327 ACCESSION NUMBER: 0001193805-07-000723 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070309 DATE AS OF CHANGE: 20070309 EFFECTIVENESS DATE: 20070309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACKROCK 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: 07682933 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 FORMER COMPANY: FORMER CONFORMED NAME: MERRILL LYNCH INDEX FUNDS INC DATE OF NAME CHANGE: 19961031 0001026144 S000003117 BlackRock S&P 500 Index Fund C000008449 Investor A C000008450 Institutional N-CSR 1 e601696_ncsr-brsp500index.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: BlackRock S&P 500 Index Fund of BlackRock 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, BlackRock S&P 500 Index Fund of BlackRock 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: 12/31/06 Date of reporting period: 01/01/06 - 12/31/06 Item 1 - Report to Stockholders ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED INCOME LIQUIDITY REAL ESTATE BlackRock S&P 500 BLACKROCK Index Fund OF BLACKROCK INDEX FUNDS, INC. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE BlackRock S&P 500 Index Fund Proxy Results During the six-month period ended December 31, 2006, BlackRock S&P 500 Index Fund of BlackRock Index Fund, Inc.'s shareholders voted on the following proposals, which were approved at a special shareholders' meeting on August 15, 2006. A description of the proposals and number of shares voted are as follows:
- -------------------------------------------------------------------------------------------------- Shares Voted Shares Voted Shares Voted For Against Abstain - -------------------------------------------------------------------------------------------------- To approve a new investment advisory agreement with BlackRock Advisors, Inc. 76,986,815 779,844 1,182,855 - -------------------------------------------------------------------------------------------------- To approve a contingent sub-advisory agreement with BlackRock Advisors, Inc. 77,005,036 796,019 1,148,460 - --------------------------------------------------------------------------------------------------
Important Tax Information The following information is provided with respect to the ordinary income distributions paid by BlackRock S&P 500 Index Fund of BlackRock Index Funds, Inc. during the fiscal year ended December 31, 2006:
- -------------------------------------------------------------------------------------------------------------------- Record Date July 13, 2006 December 14, 2006 Payable Date July 19, 2006 December 18, 2006 - -------------------------------------------------------------------------------------------------------------------- Qualified Dividend Income for Individuals ........................................ 100% 100% Dividends Qualifying for the Dividends Received Deduction for Corporations ....... 100% 100% - --------------------------------------------------------------------------------------------------------------------
2 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 A Letter to Shareholders Dear Shareholder As 2007 begins, we are able to look back on 2006 as a volatile, but ultimately, a positive year for most major markets. Returns for the annual and semi-annual periods ended December 31, 2006 were as follows:
Total Returns as of December 31, 2006 6-month 12-month ============================================================================================ U.S. equities (Standard & Poor's 500 Index) +12.74% +15.79% - -------------------------------------------------------------------------------------------- Small cap U.S. equities (Russell 2000 Index) + 9.38 +18.37 - -------------------------------------------------------------------------------------------- International equities (MSCI Europe, Australasia, Far East Index) +14.69 +26.34 - -------------------------------------------------------------------------------------------- Fixed income (Lehman Brothers Aggregate Bond Index) + 5.09 + 4.33 - -------------------------------------------------------------------------------------------- Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 4.55 + 4.84 - -------------------------------------------------------------------------------------------- High yield bonds (Credit Suisse High Yield Index) + 8.14 +11.92 - --------------------------------------------------------------------------------------------
After raising the target short-term interest rate 17 times between June 2004 and June 2006, the Federal Reserve Board (the Fed) finally opted to pause on August 8, 2006. This left the federal funds rate at 5.25%, where it remained through year-end. In interrupting its two-year interest rate-hiking campaign, the Fed acknowledged that economic growth is slowing, led by a downturn in the housing market, but has maintained a cautionary view on inflation. Overall, it was a good 12 months for U.S. equities, despite a significant correction in the middle of the year that was largely triggered by rising interest rates, inflation fears, elevated oil prices and geopolitical uncertainties. Nevertheless, strong corporate earnings, abundant liquidity and record merger-and-acquisition activity provided a solid backdrop for stocks. Many international equity markets (with the notable exception of Japan) performed even better, outpacing U.S. stocks for the fifth consecutive year. Strength was especially notable in European equities and select emerging markets. Bonds experienced a more modest annual return than stocks. Interest rates and bond yields moved higher for much of the year as bond prices, which move opposite of yields, declined. Prices began to improve in the summer as the economy showed signs of weakening and the Fed paused. Notably, the Treasury curve remained inverted for much of 2006. The 10-year Treasury yield ended December at 4.71%, well below the federal funds rate. As we begin a new year, investors are left with a few key questions: Will the U.S. economy achieve a soft landing, will the Fed reverse its prior policy and cut interest rates, and how might these outcomes impact the investment climate. As you navigate the uncertainties inherent in the financial markets, we encourage you to start the year by reviewing your investment goals with your financial professional and making portfolio changes, as needed. For more reflection on 2006 and our thoughts on the year ahead, please ask your financial professional for a copy of "What's Ahead in 2007: An Investment Perspective," or view it online at www.blackrock.com/funds. We thank you for trusting BlackRock with your investment assets, and we look forward to continuing to serve you in the new year and beyond. Sincerely, /s/ Robert C. Doll, Jr. Robert C. Doll, Jr. President and Director/Trustee BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 3 A Discussion With Your Fund's Portfolio Managers Amid a volatile investing environment, the Fund met its objective of closely tracking the performance of the benchmark S&P 500 Index during the 12-month period. How did the Fund perform during the fiscal year in light of the existing market conditions? For the 12-month period ended December 31, 2006, BlackRock S&P 500 Index Fund's (formerly Merrill Lynch S&P 500 Index Fund) Institutional and Investor A Shares had total returns of +15.49% and +15.18%, respectively. For the same period, the benchmark Standard & Poor's 500 (S&P 500) Index returned +15.79%. As the returns indicate, the Fund's performance was similar to that of the S&P 500 Index, 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. Following decent, but uninspiring, results in 2004 and 2005, U.S. equities surged forward in 2006, with the S&P 500 Index advancing 15.79% to close at 1,418. Small-cap stocks posted even stronger gains, with the Russell 2000 Index registering an 18.37% increase, thanks to exceptionally strong performance in the first few months of the year. Key highlights of the 12-month period included weaker economic growth triggered by a slowdown in the U.S. housing market; a long-awaited pause in the Federal Reserve Board's (the Fed) interest rate-hiking campaign; threats of higher inflation; and robust corporate earnings, which rose by double-digit percentages for an unprecedented fifth consecutive year. Amid these crosscurrents, financial markets were left to weather a high degree of volatility. At the outset, a burgeoning corporate sector, ample liquidity and record levels of merger-and-acquisition (M&A) activity provided a solid backdrop for equity markets. During the first few months of 2006, U.S. stocks were solidly on an upward trajectory, posting the best first quarter gains in several years. Of note, the S&P 500 Index advanced 4.21% in the quarter, marking its largest gain since the fourth quarter of 2004 (+9.23%) and its best first quarter since 1999 (+4.98%). Growth continued outside of the housing and auto sectors (capital spending in particular expanded at a brisk pace); private equity deals, M&A action and corporate buy-backs abounded in high volumes; and corporate cash flows held steady. Notwithstanding such broad-based strength, evidence of an economic slowdown mounted. By May, there was a striking shift in investor sentiment, triggered by a deceleration in consumer spending, rising energy prices, a slump in housing activity and uncertainty around Fed policy and the sustainability of economic growth. Stock market volatility took on a more negative spin and eventually resulted in the first double-digit correction for U.S. equity markets in nearly four years. The average U.S. stock fell by about 12%, with stocks outside the United States suffering even greater losses. The pullback could be attributed to several factors, not the least of which was that the lagged effects of higher interest rates and oil prices finally took their toll on both the economy and stock prices. Further, a resurgence of inflation fears prompted the Fed to continue its interest rate tightening campaign. Under the auspices of the new Chairman Ben Bernanke, the central bank ended the second quarter with its 17th consecutive 25 basis point interest rate hike since June 2004, bringing the target federal funds rate to 5.25%. As the second half of 2006 got underway, positive momentum returned to the market. The Fed made big news in August by finally ending its streak of interest rate increases. At the same time, commodity prices collapsed. After reaching an all-time high near $78 per barrel in July, crude oil ended the year at $61 per barrel. Stocks generally climbed back above the levels they reached prior to the market's earlier retrenchment. Most equity markets experienced one of their best third-quarter periods in several years, though there was a broad-based changing of the guard that favored larger-cap, higher-quality and more predictable stocks over small-cap, lower-quality and more cyclical securities (which dominated early in the year). Macroeconomic uncertainty persisted in the third quarter. Investors struggled with moderating economic activity -- real gross domestic product growth came in at 2.2%, compared to 2.6% in the second quarter and 5.6% in the first quarter. The magnitude of the housing downturn and its effect on the consumer sector was a significant wildcard. Weakness in the U.S. dollar was challenging the stability of currency markets. Moreover, tensions in the Middle East were heating up, and economic data offered a mixed outlook for inflation. Still, strong momentum continued in the equity markets during the year's final quarter. Key to investors' optimism were: a 4 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 strong labor market, where the unemployment rate reached a post-9/11 low and year-on-year average hourly salaries reached a post-9/11 high; receding risks of higher inflation and high oil prices; and finally, the pervasive strength in corporate fundamentals that included reasonably good investment levels, healthy balance sheets and profit margins. 2006 ended and the new year began with the world awash in liquidity, global economic growth still quite strong despite the U.S. slowdown, record-high corporate profitability, fairly low inflation and interest rates, and relatively strong investor confidence. Small and mid cap stocks performed quite well during the 12-month period, but relinquished their leadership to the large cap S&P 500 Index in the second half of the year. The S&P SmallCap 600 Index and the S&P MidCap 400 Index returned +15.12% and +10.32%, respectively, for the year, both behind the return of the S&P 500 Index. Within the S&P 500 Index, the value style of investing significantly outperformed the growth style for the period, with the S&P 500 Citigroup Value Index returning +20.80% versus the +11.00% return of the S&P 500 Citigroup Growth Index. Turning to sector performance, each of the 10 S&P 500 Index sectors posted positive returns for the annual period. The top performer was telecommunication services, which was up 32.13%, followed by energy and consumer discretionary, with respective returns of +22.22% and +17.23%. Information technology and healthcare were the weakest performers, with respective returns of +7.70% and +5.78%. What changes were made to the portfolio during the period? Throughout the period, as changes were made to the composition of the S&P 500 Index, we purchased and sold securities to maintain its objective of replicating the risks and return of the benchmark. How would you characterize the portfolio's position at the close of the period? Heading into 2007, we believe continued moderation in economic growth will put pressure on corporate earnings, which have been on a record run with five consecutive years of double-digit growth. Solid corporate fundamentals and balance sheet strength, alongside strong non-U.S. economic growth, should help corporate profits remain positive, but the rate of gain will likely slow noticeably as record-high profit margins will be difficult to sustain. Against this backdrop, the portfolio remains positioned to match the risk characteristics of its benchmark, whatever direction the market takes. Debra L. Jelilian Vice President and Co-Portfolio Manager Jeffrey L. Russo, CFA Vice President and Co-Portfolio Manager January 17, 2007 - -------------------------------------------------------------------------------- Effective October 2, 2006, the Fund's Class A and Class I Shares were redesignated Investor A and Institutional Shares, respectively. - -------------------------------------------------------------------------------- BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 5 Performance Data About Fund Performance Effective October 2, 2006, the Fund's Class A and Class I Shares were redesignated Investor A and Institutional Shares, respectively. The Fund has multiple classes of shares: o Institutional Shares do not incur an initial sales charge (front-end load) or deferred sales charge and bear no ongoing distribution or service fees. Institutional Shares are available only to eligible investors. o Investor A Shares do not incur an initial sales charge (front-end load) or deferred sales charge and bear no ongoing distribution fee. In addition, Investor A Shares are subject to an ongoing service fee of .25% per year. Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.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 service, 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, 2006 Total Return Total Return Total Return ================================================================================ Institutional Shares* +12.54% +15.49% +113.46% - -------------------------------------------------------------------------------- Investor A Shares* +12.38 +15.18 +108.35 - -------------------------------------------------------------------------------- S&P 500(R) Index ** +12.74 +15.79 +120.55 - -------------------------------------------------------------------------------- * 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 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 Performance Data (concluded) Total Return Based on a $10,000 Investment A line graph depicting the growth of an investment in the Fund's Institutional Shares and Investor A Shares compared to growth of an investment in the Standard & Poor's 500 Index. Values are from April 3, 1997 to December 2006. Institutional Investor A Standard & Poor's Shares*+ Shares*+ 500 Index++ 4/03/97** $10,000 $10,000 $10,000 12/97 $13,080 $13,053 $13,103 12/98 $16,774 $16,702 $16,848 12/99 $20,204 $20,069 $20,393 12/00 $18,299 $18,138 $18,537 12/01 $16,069 $15,873 $16,333 12/02 $12,451 $12,282 $12,724 12/03 $15,981 $15,723 $16,373 12/04 $17,666 $17,329 $18,155 12/05 $18,484 $18,089 $19,047 12/06 $21,346 $20,835 $22,055 * Assuming transaction costs, if any, 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 Institutional Shares Return ================================================================================ One Year Ended 12/31/06 +15.49% - -------------------------------------------------------------------------------- Five Years Ended 12/31/06 + 5.84 - -------------------------------------------------------------------------------- Inception (4/03/97) through 12/31/06 + 8.09 - -------------------------------------------------------------------------------- Investor A Shares Return ================================================================================ One Year Ended 12/31/06 +15.18% - -------------------------------------------------------------------------------- Five Years Ended 12/31/06 + 5.59 - -------------------------------------------------------------------------------- Inception (4/03/97) through 12/31/06 + 7.82 - -------------------------------------------------------------------------------- BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 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, 2006 and held through December 31, 2006) 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, 2006 to July 1, 2006 December 31, 2006 December 31, 2006 ================================================================================================================ Actual ================================================================================================================ Institutional $ 1,000 $1,125.40 $ 1.85 - ---------------------------------------------------------------------------------------------------------------- Investor A $ 1,000 $1,123.80 $ 3.18 ================================================================================================================ Hypothetical (5% annual return before expenses)** ================================================================================================================ Institutional $ 1,000 $1,023.15 $ 1.77 - ---------------------------------------------------------------------------------------------------------------- Investor A $ 1,000 $1,021.91 $ 3.02 - ----------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class (.35% for Institutional and .60% for Investor A), multiplied by the average account value over the period, multiplied by 182/365 (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 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 Statement of Assets and Liabilities BlackRock S&P 500 Index Fund As of December 31, 2006 =================================================================================================================================== Assets - ----------------------------------------------------------------------------------------------------------------------------------- Investment in Master S&P 500 Index Series (the "Series"), at value (identified cost -- $1,835,152,568) .................................. $ 2,670,162,331 Prepaid expenses ...................................................... 23,440 --------------- Total assets .......................................................... 2,670,185,771 --------------- =================================================================================================================================== Liabilities - ----------------------------------------------------------------------------------------------------------------------------------- Payables: Administrative fees ................................................ $ 520,415 Distributor ........................................................ 189,712 Other affiliates ................................................... 2,712 712,839 --------------- Accrued expenses and other liabilities ................................ 469,247 --------------- Total liabilities ..................................................... 1,182,086 --------------- =================================================================================================================================== Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Net assets ............................................................ $ 2,669,003,685 =============== =================================================================================================================================== Net Assets Consist of - ----------------------------------------------------------------------------------------------------------------------------------- Institutional Shares of Common Stock, $.0001 par value, 250,000,000 shares authorized .................................................... $ 9,766 Investor A Shares of Common Stock, $.0001 par value, 250,000,000 shares authorized ........................................................... 5,582 Paid-in capital in excess of par ...................................... 2,094,866,791 Undistributed investment income -- net ................................ $ 1,138,328 Accumulated realized capital losses allocated from the Series -- net .. (262,026,545) Unrealized appreciation allocated from the Series -- net .............. 835,009,763 --------------- Total accumulated earnings -- net ..................................... 574,121,546 --------------- Net Assets ............................................................ $ 2,669,003,685 =============== =================================================================================================================================== Net Asset Value - ----------------------------------------------------------------------------------------------------------------------------------- Institutional -- Based on net assets of $1,699,790,754 and 97,662,167 shares outstanding ................................................... $ 17.40 =============== Investor A -- Based on net assets of $969,212,931 and 55,816,119 shares outstanding .......................................................... $ 17.36 ===============
See Notes to Financial Statements BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 9 Statement of Operations BlackRock S&P 500 Index Fund For the Year Ended December 31, 2006 =================================================================================================================================== Investment Income - ----------------------------------------------------------------------------------------------------------------------------------- Net investment income allocated from the Series: Dividends .......................................................... $ 47,256,633 Interest from affiliates ........................................... 1,026,543 Securities lending -- net .......................................... 316,825 Expenses ........................................................... (936,343) --------------- Total income .......................................................... 47,663,658 --------------- =================================================================================================================================== Expenses - ----------------------------------------------------------------------------------------------------------------------------------- Administration fees ................................................... $ 6,088,565 Service fees -- Investor A ............................................ 2,255,732 Transfer agent fees ................................................... 1,347,346 Printing and shareholder reports ...................................... 129,355 Licensing fees ........................................................ 75,505 Registration fees ..................................................... 61,436 Professional fees ..................................................... 30,639 Directors' fees and expenses .......................................... 21,213 Other ................................................................. 15,382 --------------- Total expenses ........................................................ 10,025,173 --------------- Investment income -- net .............................................. 37,638,485 --------------- =================================================================================================================================== Realized & Unrealized Gain (Loss) Allocated from the Series -- Net - ----------------------------------------------------------------------------------------------------------------------------------- Realized loss on investments, in-kind redemption and financial futures contracts -- net ..................................................... (12,644,618) Change in unrealized appreciation/depreciation on investments and financial futures contracts -- net ................................... 335,003,357 --------------- Total realized and unrealized gain -- net ............................. 322,358,739 --------------- Net Increase in Net Assets Resulting from Operations .................. $ 359,997,224 ===============
See Notes to Financial Statements. 10 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 Statements of Changes in Net Assets BlackRock S&P 500 Index Fund
For the Year Ended December 31, ----------------------------------- Increase (Decrease) in Net Assets: 2006 2005 =================================================================================================================================== Operations - ----------------------------------------------------------------------------------------------------------------------------------- Investment income -- net .............................................. $ 37,638,485 $ 36,372,380 Realized loss -- net .................................................. (12,644,618) (20,749,606) Change in unrealized appreciation/depreciation -- net ................. 335,003,357 98,239,241 ----------------------------------- Net increase in net assets resulting from operations .................. 359,997,224 113,862,015 ----------------------------------- =================================================================================================================================== Dividends to Shareholders - ----------------------------------------------------------------------------------------------------------------------------------- Investment income -- net: Institutional ...................................................... (25,275,471) (24,385,969) Investor A ......................................................... (11,846,861) (12,092,872) ----------------------------------- Net decrease in net assets resulting from dividends to shareholders ... (37,122,332) (36,478,841) ----------------------------------- =================================================================================================================================== Capital Share Transactions - ----------------------------------------------------------------------------------------------------------------------------------- Net decrease in net assets derived from capital share transactions ... (94,689,583) (229,596,389) ----------------------------------- =================================================================================================================================== Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets .............................. 228,185,309 (152,213,215) Beginning of year .................................................... 2,440,818,376 2,593,031,591 ----------------------------------- End of year* ......................................................... $ 2,669,003,685 $ 2,440,818,376 =================================== * Undistributed investment income -- net .......................... $ 1,138,328 $ 622,175 ===================================
See Notes to Financial Statements. BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 11 Financial Highlights BlackRock S&P 500 Index Fund
Institutional ------------------------------------------------------------------------------- The following per share data For the Year Ended and ratios have been derived December 31, from information provided in ------------------------------------------------------------------------------- the financial statements. 2006 2005 2004 2003 2002 ===================================================================================================================== Per Share Operating Performance - --------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year $ 15.29 $ 14.84 $ 13.64 $ 10.76 $ 14.08 ------------------------------------------------------------------------------- Investment income -- net** ....... .26 .23 .24 .17 .16 Realized and unrealized gain (loss) -- net .................. 2.11 .46 1.19 2.88 (3.33) ------------------------------------------------------------------------------- Total from investment operations . 2.37 .69 1.43 3.05 (3.17) ------------------------------------------------------------------------------- Less dividends from investment income -- net .................. (.26) (.24) (.23) (.17) (.15) ------------------------------------------------------------------------------- Net asset value, end of year ..... $ 17.40 $ 15.29 $ 14.84 $ 13.64 $ 10.76 =============================================================================== ===================================================================================================================== Total Investment Return - --------------------------------------------------------------------------------------------------------------------- Based on net asset value per share 15.49% 4.63% 10.55% 28.35% (22.51%) =============================================================================== ===================================================================================================================== Ratios to Average Net Assets* - --------------------------------------------------------------------------------------------------------------------- Expenses ......................... .35% .35% .34% .36% .36% =============================================================================== Investment income -- net ......... 1.61% 1.52% 1.68% 1.44% 1.27% =============================================================================== ===================================================================================================================== Supplemental Data - --------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) ................. $ 1,699,791 $ 1,544,023 $ 1,653,423 $ 1,428,292 $ 931,917 =============================================================================== Portfolio turnover from the Series 3.81% 10.80% 5.84% 3.60% 4.59% =============================================================================== Investor A ------------------------------------------------------------------------------- The following per share data For the Year Ended and ratios have been derived December 31, from information provided in ------------------------------------------------------------------------------- the financial statements. 2006 2005 2004 2003 2002 ===================================================================================================================== Per Share Operating Performance - --------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of year $ 15.26 $ 14.81 $ 13.62 $ 10.75 $ 14.05 ------------------------------------------------------------------------------- Investment income -- net** ....... .22 .19 .20 .14 .13 Realized and unrealized gain (loss) -- net .................. 2.10 .46 1.19 2.87 (3.31) ------------------------------------------------------------------------------- Total from investment operations . 2.32 .65 1.39 3.01 (3.18) ------------------------------------------------------------------------------- Less dividends from investment income -- net .................. (.22) (.20) (.20) (.14) (.12) ------------------------------------------------------------------------------- Net asset value, end of year ..... $ 17.36 $ 15.26 $ 14.81 $ 13.62 $ 10.75 =============================================================================== ===================================================================================================================== Total Investment Return - --------------------------------------------------------------------------------------------------------------------- Based on net asset value per share 15.18% 4.38% 10.22% 28.02% (22.62%) =============================================================================== ===================================================================================================================== Ratios to Average Net Assets* - --------------------------------------------------------------------------------------------------------------------- Expenses ......................... .60% .60% .59% .61% .61% =============================================================================== Investment income -- net ......... 1.36% 1.27% 1.42% 1.19% 1.03% =============================================================================== ===================================================================================================================== Supplemental Data - --------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) ................. $ 969,213 $ 896,796 $ 939,608 $ 880,875 $ 648,569 =============================================================================== Portfolio turnover from the Series 3.81% 10.80% 5.84% 3.60% 4.59% ===============================================================================
* 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 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 Notes to Financial Statements BlackRock S&P 500 Index Fund 1. Significant Accounting Policies: On September 29, 2006, Merrill Lynch S&P 500 Index Fund, a series of Merrill Lynch Index Funds, Inc. was renamed BlackRock S&P 500 Index Fund (the "Fund"), a series of BlackRock Index Funds, Inc. (the "Corporation"), respectively. The Fund is registered under the Investment Company Act of 1940, as amended, as a non-diversified investment company. 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 (the "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, 2006 was 95.0%. The Fund offers multiple classes of shares. Effective October 2, 2006, Class I and Class A Shares were redesignated Institutional and Investor A Shares, respectively. Institutional and Investor A Shares 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 Investor 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) Recent accounting pronouncements -- In July 2006, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109." FIN 48 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity including mutual funds before being measured and recognized in the financial statements. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. The impact on the Fund's financial statements, if any, is currently being assessed. In addition, in September 2006, Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the implications of FAS 157. At this time, its impact on the Fund's financial statements has not been determined. (h) 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, $15,082,516 has been reclassified between paid-in capital in excess of par and accumulated net realized capital losses allocated from the Series as a result of a permanent difference attributable to net losses 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. BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 13 Notes to Financial Statements (continued) BlackRock S&P 500 Index Fund 2. Transactions with Affiliates: On September 29, 2006, BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill Lynch") combined Merrill Lynch's investment management business, Merrill Lynch Investment Managers, L.P. ("MLIM") and its affiliates, with BlackRock, Inc., to create a new independent company. Merrill Lynch has a 49.8% economic interest and a 45% voting interest in the combined company and The PNC Financial Services Group, Inc. ("PNC"), has approximately a 34% economic and voting interest. The new company operates under the BlackRock name and is governed by a board of directors with a majority of independent members. On August 15, 2006, shareholders of the Fund approved a new Investment Advisory Agreement for the Trust on behalf of the Series with BlackRock Advisors, Inc., an indirect, wholly owned subsidiary of BlackRock, Inc. BlackRock Advisors, Inc. was recently reorganized into a limited liability company and renamed BlackRock Advisors, LLC. The new Investment Advisory Agreement became effective on September 29, 2006. Prior to September 29, 2006, Fund Asset Management, L.P. ("FAM") was the manager. The general partner of FAM is Princeton Services, Inc. ("PSI"), an indirect, wholly owned subsidiary of Merrill Lynch, which is the limited partner. The Corporation has entered into an Administration Agreement with BlackRock Advisors, LLC (the "Administrator"). 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. Prior to September 29, 2006, MLIM acted as the Fund's Administrator and was compensated at the same fee rate. The Administrator (and previously 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 ("service fees")) will not exceed .40%. This arrangement has a one-year term and is renewable. The Corporation has also entered into separate Distribution Agreements and Distribution Plans with FAM Distributors, Inc. ("FAMD") and BlackRock Distributors, Inc. ("BDI") (collectively, the "Distributor"). FAMD is a wholly owned subsidiary of Merrill Lynch Group, Inc. and BDI is an affiliate of BlackRock, Inc. Pursuant to the Distribution Plans adopted by the Corporation in accordance with Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor an ongoing service fee with respect to Investor A Shares. The fee is accrued daily and paid monthly at the annual rate of .25% based upon the average daily net assets of Investor A Shares. Pursuant to sub-agreements with each Distributor, broker-dealers including Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned subsidiary of Merrill Lynch, and an affiliate of the Distributor, also provide account maintenance services to the Fund. The ongoing service fee compensates the Distributors and each broker-dealer (including MLPF&S) for providing account maintenance services to Investor A shareholders. Effective September 29, 2006, PFPC Inc., an indirect, wholly owned subsidiary of PNC and an affiliate of the Administrator, became the Fund's transfer agent. Prior to September 29, 2006, the Fund's transfer agent was Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of Merrill Lynch. Prior to September 29, 2006, certain officers and/or directors of the Corporation were officers and/or directors of MLIM, PSI, FAMD, FDS, and/or Merrill Lynch. Commencing September 29, 2006, certain officers and/or directors of the Corporation are officers and/or directors of BlackRock, Inc. or its affiliates. 3. Capital Share Transactions: Net decrease in net assets derived from capital share transactions was $94,689,583 and $229,596,389 for the years ended December 31, 2006 and December 31, 2005, respectively. Transactions in capital shares for each class were as follows: - ------------------------------------------------------------------------------- Institutional Shares for the Year Dollar Ended December 31, 2006 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................ 28,896,398 $ 467,956,426 Shares issued to shareholders in reinvestment of dividends ............ 1,407,779 24,580,626 --------------------------------- Total issued ........................... 30,304,177 492,537,052 Shares redeemed ........................ (33,597,086) (542,308,997) --------------------------------- Net decrease ........................... (3,292,909) $ (49,771,945) ================================= 14 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 Notes to Financial Statements (concluded) BlackRock S&P 500 Index Fund - ------------------------------------------------------------------------------- Institutional 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) ================================= - ------------------------------------------------------------------------------- Investor A Shares for the Year Dollar Ended December 31, 2006 Shares Amount - ------------------------------------------------------------------------------- Shares sold ............................ 10,760,366 $ 174,132,500 Shares issued to shareholders in reinvestment of dividends ............ 622,994 10,846,759 --------------------------------- Total issued ........................... 11,383,360 184,979,259 Shares redeemed ........................ (14,329,991) (229,896,897) --------------------------------- Net decrease ........................... (2,946,631) $ (44,917,638) ================================= - ------------------------------------------------------------------------------- Investor 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) ================================= 4. Distributions to Shareholders: The tax character of distributions paid during the fiscal years ended December 31, 2006 and December 31, 2005 was as follows: - ------------------------------------------------------------------------------- 12/31/2006 12/31/2005 - ------------------------------------------------------------------------------- Distributions paid from: Ordinary income ...................... $ 37,122,332 $ 36,478,841 --------------------------------- Total taxable distributions ............ $ 37,122,332 $ 36,478,841 ================================= As of December 31, 2006, the components of accumulated earnings on a tax basis were as follows: - ----------------------------------------------------------------------------- Undistributed ordinary income -- net ................... $ 1,138,328 Undistributed long-term capital gains -- net ........... -- Total undistributed earnings -- net .................... 1,138,328 Capital loss carryforward .............................. (176,963,470)* Unrealized gains -- net ................................ 749,946,688** ------------- Total accumulated earnings -- net ...................... $ 574,121,546 ============= * On December 31, 2006, the Fund had a net capital loss carryforward of $176,963,470, 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, $28,402,088 expires in 2013 and $26,517,609 expires in 2014. 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 and the realization for tax purposes of unrealized gains/losses on certain futures contracts. BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 15 Report of Independent Registered BlackRock S&P 500 Index Fund Public Accounting Firm To the Shareholders and Board of Directors of BlackRock Index Funds, Inc.: We have audited the accompanying statement of assets and liabilities of BlackRock S&P 500 Index Fund (formerly Merrill Lynch S&P 500 Index Fund), one of the series constituting BlackRock Index Funds, Inc. (formerly Merrill Lynch Index Funds, Inc.) (the "Fund"), as of December 31, 2006, 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 BlackRock S&P 500 Index Fund of BlackRock Index Funds, Inc. as of December 31, 2006, 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. accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Princeton, New Jersey February 26, 2007 16 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 Portfolio Information Master S&P 500 Index Series As of December 31, 2006 S&P 500 Index Sector Percent of Representation for the Series Total Investments - -------------------------------------------------------------------------------- Financials ................................................. 19.6% Information Technology ..................................... 13.3 Health Care ................................................ 10.6 Industrials ................................................ 9.5 Consumer Discretionary ..................................... 9.4 Energy ..................................................... 8.6 Consumer Staples ........................................... 8.1 Utilities .................................................. 3.1 Telecommunication Services ................................. 3.1 Materials .................................................. 2.6 Other* ..................................................... 12.1 - -------------------------------------------------------------------------------- * 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 sector sub-classifications for reporting ease. Proxy Results During the six-month period ended December 31, 2006, Master S&P 500 Index Series of Quantitative Master Series Trust's interest holders voted on the following proposals, which were approved at a special interest holders' meeting on September 29, 2006. A description of the proposals and number of units of interest voted were as follows:
- ------------------------------------------------------------------------------------------------------------------- Units of Interest Units of Interest Units of Interest Voted For Voted Against Voted Abstain - ------------------------------------------------------------------------------------------------------------------- To approve a new investment advisory agreement with BlackRock Advisors, Inc. 1,353,245,051 13,176,252 19,234,419 - ------------------------------------------------------------------------------------------------------------------- To approve a contingent sub-advisory agreement with BlackRock Advisors, Inc. 1,353,472,435 13,498,166 18,685,121 - -------------------------------------------------------------------------------------------------------------------
BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 17 Summary Schedule of Investments as of December 31, 2006 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 800-441-7762 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 172,420 Boeing Co. $ 15,317,793 0.5% 220,196 United Technologies Corp. 13,766,654 0.5 Other Securities 36,749,611 1.3 ------------------------------- 65,834,058 2.3 - ------------------------------------------------------------------------------------------------------------------------------------ Air Freight & Logistics 234,300 United Parcel Service, Inc. Class B (e) 17,567,814 0.6 Other Securities 6,941,687 0.3 ------------------------------- 24,509,501 0.9 - ------------------------------------------------------------------------------------------------------------------------------------ Airlines Other Securities 2,512,403 0.1 - ------------------------------------------------------------------------------------------------------------------------------------ Auto Components Other Securities 4,403,127 0.1 - ------------------------------------------------------------------------------------------------------------------------------------ Automobiles Other Securities 10,625,820 0.4 - ------------------------------------------------------------------------------------------------------------------------------------ Beverages 441,928 The Coca-Cola Co. 21,323,026 0.8 357,388 PepsiCo, Inc. 22,354,619 0.8 Other Securities 14,163,750 0.5 ------------------------------- 57,841,395 2.1 - ------------------------------------------------------------------------------------------------------------------------------------ Biotechnology 253,747 Amgen, Inc. (a) 17,333,458 0.6 Other Securities 19,417,908 0.7 ------------------------------- 36,751,366 1.3 - ------------------------------------------------------------------------------------------------------------------------------------ Building Products Other Securities 4,738,274 0.2 - ------------------------------------------------------------------------------------------------------------------------------------ Capital Markets 94,300 Goldman Sachs Group, Inc. (e) 18,798,705 0.7 192,167 Merrill Lynch & Co., Inc. (b) 17,890,748 0.6 234,498 Morgan Stanley 19,095,172 0.7 Other Securities 51,336,074 1.8 ------------------------------- 107,120,699 3.8 - ------------------------------------------------------------------------------------------------------------------------------------ Chemicals Other Securities 42,365,316 1.5 - ------------------------------------------------------------------------------------------------------------------------------------ Commercial Banks 67,468 PNC Financial Services Group, Inc. (b)(e) 4,995,331 0.2 385,265 U.S. Bancorp (e) 13,942,740 0.5 420,718 Wachovia Corp. (e) 23,959,890 0.8 729,944 Wells Fargo & Co. 25,956,809 0.9 Other Securities 46,438,567 1.7 ------------------------------- 115,293,337 4.1 - ------------------------------------------------------------------------------------------------------------------------------------ Commercial Services & Supplies Other Securities 15,154,149 0.5 - ------------------------------------------------------------------------------------------------------------------------------------ Communications Equipment 1,323,271 Cisco Systems, Inc. (a)(e) 36,164,996 1.3 361,460 QUALCOMM, Inc. 13,659,573 0.5 Other Securities 24,823,392 0.9 ------------------------------- 74,647,961 2.7 - ------------------------------------------------------------------------------------------------------------------------------------ Computers & Peripherals 185,534 Apple Computer, Inc. (a) 15,740,705 0.6 599,517 Hewlett-Packard Co. 24,694,105 0.9 333,167 International Business Machines Corp. 32,367,174 1.1 Other Securities 31,816,714 1.1 ------------------------------- 104,618,698 3.7 - ------------------------------------------------------------------------------------------------------------------------------------ Construction & Engineering Other Securities 1,401,196 0.0 - ------------------------------------------------------------------------------------------------------------------------------------ Construction Materials Other Securities 1,855,546 0.1 - ------------------------------------------------------------------------------------------------------------------------------------ Consumer Finance 266,084 American Express Co. 16,143,316 0.6 Other Securities 11,220,810 0.4 ------------------------------- 27,364,126 1.0 - ------------------------------------------------------------------------------------------------------------------------------------ Containers & Packaging Other Securities 5,417,551 0.2 - ------------------------------------------------------------------------------------------------------------------------------------
18 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 Summary Schedule of Investments (continued) Master S&P 500 Index Series
Shares Percent of Industry Held Common Stocks Value Net Assets ==================================================================================================================================== Distributors Other Securities $ 1,741,345 0.1% - ------------------------------------------------------------------------------------------------------------------------------------ Diversified Consumer Services Other Securities 2,897,687 0.1 - ------------------------------------------------------------------------------------------------------------------------------------ Diversified Financial Services 983,934 Bank of America Corp. 52,532,236 1.9 1,071,936 Citigroup, Inc. 59,706,835 2.1 755,056 JPMorgan Chase & Co. 36,469,205 1.3 Other Securities 10,056,151 0.3 ------------------------------- 158,764,427 5.6 - ------------------------------------------------------------------------------------------------------------------------------------ Diversified Telecommunication 847,035 AT&T, Inc. (e) 30,281,501 1.1 Services 396,334 BellSouth Corp. 18,671,295 0.7 629,028 Verizon Communications, Inc. 23,425,003 0.8 Other Securities 8,152,341 0.3 ------------------------------- 80,530,140 2.9 - ------------------------------------------------------------------------------------------------------------------------------------ Electric Utilities Other Securities 43,390,706 1.5 - ------------------------------------------------------------------------------------------------------------------------------------ Electrical Equipment Other Securities 13,325,937 0.5 - ------------------------------------------------------------------------------------------------------------------------------------ Electronic Equipment & Instruments Other Securities 7,613,993 0.3 - ------------------------------------------------------------------------------------------------------------------------------------ Energy Equipment & Services 258,608 Schlumberger Ltd. (e) 16,333,681 0.6 Other Securities 31,526,781 1.1 ------------------------------- 47,860,462 1.7 - ------------------------------------------------------------------------------------------------------------------------------------ Food & Staples Retailing 536,855 Wal-Mart Stores, Inc. (e) 24,791,964 0.9 Other Securities 34,626,435 1.2 ------------------------------- 59,418,399 2.1 - ------------------------------------------------------------------------------------------------------------------------------------ Food Products Other Securities 30,104,958 1.1 - ------------------------------------------------------------------------------------------------------------------------------------ Gas Utilities Other Securities 2,316,281 0.1 - ------------------------------------------------------------------------------------------------------------------------------------ Health Care Equipment & Supplies 249,840 Medtronic, Inc. (e) 13,368,938 0.5 Other Securities 30,951,918 1.1 ------------------------------- 44,320,856 1.6 - ------------------------------------------------------------------------------------------------------------------------------------ Health Care Providers & Services 291,956 United Health Group, Inc. 15,686,796 0.5 Other Securities 52,641,491 1.9 ------------------------------- 68,328,287 2.4 - ------------------------------------------------------------------------------------------------------------------------------------ Health Care Technology Other Securities 1,223,959 0.0 - ------------------------------------------------------------------------------------------------------------------------------------ Hotels, Restaurants & Leisure Other Securities 44,414,686 1.6 - ------------------------------------------------------------------------------------------------------------------------------------ Household Durables Other Securities 17,784,989 0.6 - ------------------------------------------------------------------------------------------------------------------------------------ Household Products 692,764 The Procter & Gamble Co. 44,523,942 1.6 Other Securities 15,810,709 0.5 ------------------------------- 60,334,651 2.1 - ------------------------------------------------------------------------------------------------------------------------------------ IT Services Other Securities 31,430,580 1.1 - ------------------------------------------------------------------------------------------------------------------------------------ Independent Power Producers & Other Securities 11,950,050 0.4 Energy Traders - ------------------------------------------------------------------------------------------------------------------------------------ Industrial Conglomerates 163,288 3M Co. 12,725,034 0.4 2,242,081 General Electric Co. 83,427,834 3.0 445,125 Tyco International Ltd. 13,531,800 0.5 Other Securities 2,504,972 0.1 ------------------------------- 112,189,640 4.0 - ------------------------------------------------------------------------------------------------------------------------------------ Insurance 563,307 American International Group, Inc. 40,366,580 1.5 Other Securities 93,659,112 3.3 ------------------------------- 134,025,692 4.8 - ------------------------------------------------------------------------------------------------------------------------------------ Internet & Catalog Retail Other Securities 4,311,916 0.2 - ------------------------------------------------------------------------------------------------------------------------------------ Internet Software & Services 46,170 Google, Inc. Class A (a) 21,260,362 0.7 Other Securities 15,924,355 0.6 ------------------------------- 37,184,717 1.3 - ------------------------------------------------------------------------------------------------------------------------------------
BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 19 Summary Schedule of Investments (continued) Master S&P 500 Index Series
Shares Percent of Industry Held Common Stocks Value Net Assets ==================================================================================================================================== Leisure Equipment & Products Other Securities $ 5,267,690 0.2% - ------------------------------------------------------------------------------------------------------------------------------------ Life Sciences Tools & Services Other Securities 8,154,613 0.3 - ------------------------------------------------------------------------------------------------------------------------------------ Machinery Other Securities 39,937,407 1.4 - ------------------------------------------------------------------------------------------------------------------------------------ Media 403,943 Comcast Corp. Class A (a) 17,098,907 0.6 881,484 Time Warner, Inc. 19,198,722 0.7 461,947 Walt Disney Co. (e) 15,830,924 0.6 Other Securities 52,225,944 1.8 ------------------------------- 104,354,497 3.7 - ------------------------------------------------------------------------------------------------------------------------------------ Metals & Mining Other Securities 24,686,710 0.9 - ------------------------------------------------------------------------------------------------------------------------------------ Multi-Utilities Other Securities 39,273,916 1.4 - ------------------------------------------------------------------------------------------------------------------------------------ Multiline Retail Other Securities 32,596,939 1.2 - ------------------------------------------------------------------------------------------------------------------------------------ Office Electronics Other Securities 3,518,854 0.1 - ------------------------------------------------------------------------------------------------------------------------------------ Oil, Gas & Consumable Fuels 478,560 Chevron Corp. 35,188,517 1.3 359,960 ConocoPhillips 25,899,122 0.9 1,270,212 Exxon Mobil Corp. (d) 97,336,346 3.5 Other Securities 65,358,276 2.3 ------------------------------- 223,782,261 8.0 - ------------------------------------------------------------------------------------------------------------------------------------ Paper & Forest Products Other Securities 8,359,582 0.3 - ------------------------------------------------------------------------------------------------------------------------------------ Personal Products Other Securities 4,443,496 0.2 - ------------------------------------------------------------------------------------------------------------------------------------ Pharmaceuticals 331,217 Abbott Laboratories (e) 16,133,580 0.6 635,977 Johnson & Johnson 41,987,202 1.5 471,757 Merck & Co., Inc. 20,568,605 0.7 1,580,581 Pfizer, Inc. 40,937,048 1.5 291,699 Wyeth 14,853,313 0.5 Other Securities 40,777,005 1.4 ------------------------------- 175,256,753 6.2 - ------------------------------------------------------------------------------------------------------------------------------------ Real Estate Investment Other Securities 30,326,293 1.1 Trusts (REITs) - ------------------------------------------------------------------------------------------------------------------------------------ Real Estate Management Other Securities 2,851,398 0.1 & Development - ------------------------------------------------------------------------------------------------------------------------------------ Road & Rail Other Securities 19,068,706 0.7 - ------------------------------------------------------------------------------------------------------------------------------------ Semiconductors & Semiconductor 1,252,831 Intel Corp. 25,369,828 0.9 Equipment Other Securities 41,540,272 1.5 ------------------------------- 66,910,100 2.4 - ------------------------------------------------------------------------------------------------------------------------------------ Software 1,872,324 Microsoft Corp. (d) 55,907,595 2.0 874,285 Oracle Corp. (a) 14,985,245 0.5 Other Securities 23,054,439 0.8 ------------------------------- 93,947,279 3.3 - ------------------------------------------------------------------------------------------------------------------------------------ Specialty Retail 447,386 Home Depot, Inc. 17,967,022 0.6 Other Securities 38,228,047 1.4 ------------------------------- 56,195,069 2.0 - ------------------------------------------------------------------------------------------------------------------------------------ Textiles, Apparel & Luxury Goods Other Securities 10,940,948 0.4 - ------------------------------------------------------------------------------------------------------------------------------------ Thrifts & Mortgage Finance 212,773 Fannie Mae 12,636,588 0.5 Other Securities 28,310,033 1.0 ------------------------------- 40,946,621 1.5 - ------------------------------------------------------------------------------------------------------------------------------------ Tobacco 453,818 Altria Group, Inc. 38,946,661 1.4 Other Securities 4,444,698 0.1 ------------------------------- 43,391,359 1.5 - ------------------------------------------------------------------------------------------------------------------------------------ Trading Companies & Distributors Other Securities 1,262,067 0.0 - ------------------------------------------------------------------------------------------------------------------------------------ Wireless Telecommunication Services Other Securities 17,084,276 0.6 - ------------------------------------------------------------------------------------------------------------------------------------ Total Common Stocks (Cost -- $1,840,530,170) 2,770,475,715 98.6 ====================================================================================================================================
20 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 Summary Schedule of Investments (concluded) Master S&P 500 Index Series
Beneficial Percent of Interest Short-Term Securities Value Net Assets ==================================================================================================================================== $ 47,914,225 BlackRock Liquidity Series, LLC Cash Sweep Series, 5.26% (b)(c) $ 47,914,225 1.7% 335,341,800 BlackRock Liquidity Series, LLC Money Market Series, 5.29% (b)(c)(f) 335,341,800 11.9 - ------------------------------------------------------------------------------------------------------------------------------------ Total Short-Term Securities (Cost -- $383,256,025) 383,256,025 13.6 - ------------------------------------------------------------------------------------------------------------------------------------ Total Investments (Cost -- $2,223,786,195*) 3,153,731,740 112.2 Liabilities in Excess of Other Assets (343,098,483) (12.2) ------------------------------- Net Assets $2,810,633,257 100.0% ===============================
* The cost and unrealized appreciation (depreciation) of investments as of December 31, 2006 as computed for federal income tax purposes, were as follows: Aggregate cost ............................. $ 2,295,656,436 =============== Gross unrealized appreciation .............. $ 921,983,748 Gross unrealized depreciation .............. (63,908,444) --------------- Net unrealized appreciation ................ $ 858,075,304 =============== (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: -------------------------------------------------------------------------- Interest/ Purchase Sale Realized Dividend Affiliate Cost Cost Gain Income -------------------------------------------------------------------------- BlackRock Liquidity Series, LLC Cash Sweep Series $42,258,298+ -- -- $1,100,253 BlackRock Liquidity Series, LLC Money Market Series -- $ 227,100++ -- $ 342,181 Merrill Lynch & Co., Inc. -- $2,837,272 $ 872,498 $ 209,992 PNC Financial Services Group, Inc. -- $ 683,456 $ 75,399 $ 152,206 -------------------------------------------------------------------------- + Represents net purchase cost. ++ Represents net sale cost. (c) Represents the current yield as of December 31, 2006. (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. (f) Security was purchased with the cash proceeds from securities loans. 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, 2006 were as follows: -------------------------------------------------------------------------- Number of Expiration Face Unrealized Contracts Issue Date Value Appreciation -------------------------------------------------------------------------- 110 S&P 500 March Index 2007 $39,184,008 $96,992 -------------------------------------------------------------------------- o "Other Securities" represent issues that are not identified as the 50 largest holdings of the Series and issues not exceeding 1% of net assets. Some securities, or a portion of, in this category are out on loan. See Notes to Financial Statements. BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 21 Statement of Assets and Liabilities Master S&P 500 Index Series As of December 31, 2006 =================================================================================================================================== Assets - ----------------------------------------------------------------------------------------------------------------------------------- Investments in unaffiliated securities, at value (including securities loaned of $319,806,817) (identified cost -- $1,829,039,485) ............................................ $ 2,747,589,636 Investments in affiliated securities, at value (including securities loaned of $4,990,296) (identified cost -- $394,746,710) ............ 406,142,104 Cash ................................................................ 152,564 Receivables: Contributions .................................................... $ 15,246,194 Dividends ........................................................ 3,622,069 Securities sold .................................................. 397,257 Securities lending ............................................... 19,190 19,284,710 --------------- Prepaid expenses and other assets ................................... 38,673 --------------- Total assets ........................................................ 3,173,207,687 --------------- =================================================================================================================================== Liabilities - ----------------------------------------------------------------------------------------------------------------------------------- Collateral on securities loaned, at value ........................... 335,341,800 Payables: Withdrawals ...................................................... 26,774,274 Variation margin ................................................. 206,992 Other affiliates ................................................. 24,897 Investment adviser ............................................... 11,195 27,017,358 --------------- Accrued expenses .................................................... 215,272 --------------- Total liabilities ................................................... 362,574,430 --------------- =================================================================================================================================== Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Net assets .......................................................... $ 2,810,633,257 =============== =================================================================================================================================== Net Assets Consist of - ----------------------------------------------------------------------------------------------------------------------------------- Investors' capital .................................................. $ 1,880,590,720 Unrealized appreciation -- net ...................................... 930,042,537 --------------- Net Assets .......................................................... $ 2,810,633,257 ===============
See Notes to Financial Statements. 22 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 Statement of Operations Master S&P 500 Index Series For the Year Ended December 31, 2006 =================================================================================================================================== Investment Income - ----------------------------------------------------------------------------------------------------------------------------------- Dividends (including $362,198 from affiliates) ...................... $ 51,797,920 Interest from affiliates ............................................ 1,100,253 Securities lending -- net ........................................... 342,181 --------------- Total income ........................................................ 53,240,354 --------------- =================================================================================================================================== Expenses - ----------------------------------------------------------------------------------------------------------------------------------- Accounting services ................................................. $ 410,208 Professional fees ................................................... 206,341 Custodian fees ...................................................... 165,821 Investment advisory fees ............................................ 136,052 Trustees' fees and expenses ......................................... 22,412 Licensing fees ...................................................... 20,000 Printing and shareholder reports .................................... 2,889 Other ............................................................... 59,217 --------------- Total expenses ...................................................... 1,022,940 --------------- Investment income -- net ............................................ 52,217,414 --------------- =================================================================================================================================== Realized & Unrealized Gain (Loss) -- Net - ----------------------------------------------------------------------------------------------------------------------------------- Realized gain (loss) on: Investment -- net (including $947,897 from affiliates) ........... (2,140,277) In-kind redemption -- net ........................................ (16,386,872) Financial futures contracts -- net ............................... 3,173,210 (15,353,939) --------------- Change in unrealized appreciation/depreciation on: Investments -- net ............................................... 369,955,999 Financial futures contracts -- net ............................... 168,159 370,124,158 ----------------------------------- Total realized and unrealized gain -- net ........................... 354,770,219 --------------- Net Increase in Net Assets Resulting from Operations ................ $ 406,987,633 ===============
See Notes to Financial Statements. BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 23 Statements of Changes in Net Assets Master S&P 500 Index Series
For the Year Ended December 31, ----------------------------------- Increase (Decrease) in Net Assets: 2006 2005 =================================================================================================================================== Operations - ----------------------------------------------------------------------------------------------------------------------------------- Investment income -- net ............................................ $ 52,217,414 $ 55,659,094 Realized loss -- net ................................................ (15,353,939) (28,863,106) Change in unrealized appreciation/depreciation -- net ............... 370,124,158 121,726,035 ----------------------------------- Net increase in net assets resulting from operations ................ 406,987,633 148,522,023 ----------------------------------- =================================================================================================================================== Capital Transactions - ----------------------------------------------------------------------------------------------------------------------------------- Proceeds from contributions ......................................... 682,690,342 829,736,606 Fair value of withdrawals ........................................... (1,224,826,445) (970,867,967) ----------------------------------- Net decrease in net assets derived from capital transactions ........ (542,136,103) (141,131,361) ----------------------------------- =================================================================================================================================== Net Assets - ----------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets ............................. (135,148,470) 7,390,662 Beginning of year ................................................... 2,945,781,727 2,938,391,065 ----------------------------------- End of year ......................................................... $ 2,810,633,257 $ 2,945,781,727 ===================================
See Notes to Financial Statements. 24 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 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. 2006 2005 2004 2003 2002 ================================================================================================================================== Total Investment Return - ---------------------------------------------------------------------------------------------------------------------------------- Total investment return .............. 15.85% 4.96% 10.90% 28.70% (22.22%) ======================================================================= ================================================================================================================================== Ratios to Average Net Assets - ---------------------------------------------------------------------------------------------------------------------------------- Expenses ............................. .04% .03% .03% .04% .04% ======================================================================= Investment income -- net ............. 1.92% 1.84% 1.99% 1.76% 1.59% ======================================================================= ================================================================================================================================== Supplemental Data - ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (in thousands) $ 2,810,633 $ 2,945,782 $ 2,938,391 $ 2,474,596 $ 1,726,705 ======================================================================= Portfolio turnover ................... 3.81% 10.80% 5.84% 3.60% 4.59% =======================================================================
See Notes to Financial Statements. BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 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 Global 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") markets, NASDAQ Capital Market 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 markets are valued at the last available asked price. Portfolio securities that are traded both in the OTC markets and on a stock exchange are valued according to the broadest and most representative market. Options written or purchased are valued at the last sale price in the case of exchange-traded options. Options traded on the OTC market are valued at the last asked price (options written) or the last bid price (options purchased). Swap agreements are valued based upon quoted fair valuations received daily by the Series from a pricing service or counterparty. 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 BlackRock Advisors, LLC (the "Manager"), an indirect, wholly owned subsidiary of BlackRock, Inc., believes that this method no longer produces fair valuations. Valuation of other short-term investment vehicles is generally based on the net asset value of the underlying investment vehicle or amortized cost. 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 will generally be determined as of 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 Manager, 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 financial futures contracts. Financial 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 26 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 Notes to Financial Statements (continued) Master S&P 500 Index Series the contract. Such receipts or payments are known as variation margin and are recorded by the Series as unrealized gains or losses. When the contract is closed, the Series records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. o Options -- The Series may purchase and write call and put options. When the Series writes an option, an amount equal to the premium received by the Series is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Series enters into a closing transaction), the Series realizes a gain or loss on the option to the extent of the premiums received or paid (or a gain or loss to the extent that the cost of the closing transaction exceeds the premium paid or received). Written and purchased options are non-income producing investments. (c) Income taxes -- The Series is classified as a partnership for federal income tax purposes. As such, each investor in the Series is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Series. Therefore, no federal income tax provision is required. It is intended that the Series' assets will be managed so an investor in the Series can satisfy the requirements of Subchapter M of the Internal Revenue Code. (d) Security transactions and investment income -- Security transactions are accounted for on the date the securities are purchased or sold (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Interest income is recognized on the accrual basis. (e) 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. (f) Recent accounting pronouncements -- In July 2006, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109." FIN 48 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity, including mutual funds, before being measured and recognized in the financial statements. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. The impact on the Fund's financial statements, if any, is currently being assessed. In addition, in September 2006, Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), was issued and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the implications of FAS 157. At this time, its impact on the Fund's financial statements has not been determined. 2. Investment Advisory Agreement and Transactions with Affiliates: On September 29, 2006, BlackRock, Inc. and Merrill Lynch combined Merrill Lynch's investment management business, Merrill Lynch Investment Managers, L.P. ("MLIM"), and its affiliates, including Fund Asset Management, L.P. ("FAM"), BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 27 Notes to Financial Statements (concluded) Master S&P 500 Index Series with BlackRock, Inc. to create a new independent company. Merrill Lynch has a 49.8% economic interest and a 45% voting interest in the combined company and The PNC Financial Services Group, Inc. has approximately a 34% economic and voting interest. The new company operates under the BlackRock name and is governed by a board of directors with a majority of independent members. On September 29, 2006, shareholders of the Investors of the Series approved a new Investment Advisory Agreement for the Trust with the Manager. BlackRock Advisors, Inc. was recently reorganized into a limited liability company and renamed BlackRock Advisors, LLC. The new Investment Advisory Agreement between the Trust and the Manager became effective on September 29, 2006. Prior to September 29, 2006, FAM was the Trust's Manager. The general partner of FAM is Princeton Services, Inc. ("PSI"), an indirect, wholly owned subsidiary of Merrill Lynch, which is the limited partner. The Manager is responsible for the management of the Series' investments 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. In addition, the Manager has entered into a sub-advisory agreement with BlackRock Investment Management, LLC ("BIM"), an affiliate of the Manager, under which the Manager pays the Sub-Adviser for services it provides a monthly fee that is a percentage of the management fee paid by the Series to the Manager. 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 the Manager, or its affiliates. As of December 31, 2006, the Series lent securities with a value of $125,128,074 to MLPF&S or its affiliates. Pursuant to that order, the Trust has retained BIM as the securities lending agent for a fee based on a share of the returns on investment of cash collateral. Prior to September 29, 2006, BIM was organized as Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate of FAM, and MLIM, LLC was the Trust's securities lending agent. BIM 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 the Manager or in registered money market funds advised by the Manager or its affiliates. For the year ended December 31, 2006, BIM received $146,762 in securities lending agent fees. Merrill Lynch Trust Company ("MLTC"), a wholly owned subsidiary of Merrill Lynch, is the Series' custodian. For the year ended December 31, 2006, the Series reimbursed FAM and the Manager $46,244 and $12,366 respectively, for certain accounting services. In addition, MLPF&S received $7 in commissions on the execution of portfolio security transactions for the Series for the year ended December 31, 2006. Prior to September 29, 2006, certain officers and/or trustees of the Trust were officers and/or directors of FAM, PSI, Merrill Lynch, MLIM, MLTC, and/or MLIM, LLC. Commencing September 29, 2006, certain officers and/or trustees of the Trust are officers and/or directors of BlackRock, Inc. or its affiliates. 3. Investments: Purchases and sales (including in-kind redemptions), of investments excluding short-term securities, for the year ended December 31, 2006 were $103,280,875 and $640,871,714, respectively. 4. Short-Term Borrowings: The Trust, on behalf of the Series, along with certain other funds managed by the Manager and its affiliates (or 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. On November 22, 2006, the credit agreement was renewed for one year under substantially the same terms. The Series pays a commitment fee of .06% 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 .35% 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, 2006. 28 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 Report of Independent Registered Master S&P 500 Index Series Public Accounting Firm 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, 2006, 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, 2006, by correspondence with the custodian. 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, 2006, 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 accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Princeton, New Jersey February 26, 2007 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 29 Disclosure of Investment Advisory Agreement New BlackRock Investment Advisory Agreement -- Matters Considered by the Boards The following disclosure appeared in the June 30, 2006 Semi-Annual Report of the Fund and the Series and is the discussion referred to in "New BlackRock Sub-Advisory Agreement -- Matters Considered by the Boards" and "Approvals to Correct Fee Schedules" below. The term "Investment Adviser" as used herein refers to Fund Asset Management, L.P. Merrill Lynch S&P 500 Index Fund (the "Fund"), a series of Merrill Lynch Index Funds, Inc. (the "Corporation"), is a "feeder" fund that invests all of its assets in the Master S&P 500 Index Series (the "Series") of Quantitative Master Series Trust (the "Trust"), which has the same investment objectives and strategies as the Fund. All investments are made at the Series level. In connection with the Transaction between Merrill Lynch and BlackRock, the Board of Trustees of the Trust (the "trustees") considered a new investment advisory agreement between the Trust, on behalf of Series, and BlackRock Advisors, Inc. or its successor ("BlackRock Advisors"). If the Trust's New Investment Advisory Agreement is approved by shareholders, then that agreement will become effective upon the closing of the Transaction, which is expected in the third quarter of 2006. In addition, in connection with the Transaction, the Board of Directors of the Corporation (the "directors") considered a new investment advisory agreement (together with the new advisory agreement for the Trust, the "New Investment Advisory Agreements") between the Corporation on behalf of the Fund and BlackRock Advisors. If the Fund's New Investment Advisory Agreement is approved by shareholders, then that agreement will become effective upon the closing of the Transaction. Under a contractual arrangement between the Corporation on behalf of the Fund and BlackRock Advisors, however, no management/advisory fee will be charged to the Fund under the Fund's New Investment Advisory Agreement so long as the Fund remains invested in the Series. Each Board discussed the New Investment Advisory Agreements at telephonic and in-person meetings held during April and May 2006. Each Board, including the independent directors/trustees, approved the New Investment Advisory Agreements on May 8, 2006. To assist each Board in its consideration of the New Investment Advisory Agreements, BlackRock provided materials and information about BlackRock, including its financial condition and asset management capabilities and organization, and Merrill Lynch provided materials and information about the Transaction. The independent directors/trustees, through their independent legal counsel, also requested and received additional information from Merrill Lynch and BlackRock in connection with their consideration of the New Investment Advisory Agreements. The additional information was provided in advance of the May 2006 meeting. In addition, the independent directors/trustees consulted with their counsel and counsel for the Corporation and the Trust on numerous occasions, discussing, among other things, the legal standards and certain other considerations relevant to each Board's deliberations. At the Board meetings, each Board discussed with Merrill Lynch management and certain BlackRock representatives the Transaction, its strategic rationale and BlackRock's general plans and intentions regarding the Fund and the Series. At these Board meetings, representatives of Merrill Lynch and BlackRock made presentations to and responded to questions from each Board. Each Board also inquired about the plans for and anticipated roles and responsibilities of certain employees and officers of the Investment Adviser and certain affiliates being transferred to BlackRock in connection with the Transaction. The independent directors/trustees also conferred separately and with their counsel about the Transaction and other matters related to the Transaction on a number of occasions, including in connection with the April and May 2006 meetings. After the presentations and after reviewing the written materials provided, the independent directors/ trustees met in executive sessions with their counsel to consider the New Investment Advisory Agreements. In connection with each Board's review of the New Investment Advisory Agreements, Merrill Lynch and/or BlackRock advised the Board about a variety of matters. The advice included the following, among other matters: o that there is not expected to be any diminution in the nature, quality and extent of services provided to the Fund and Series and their shareholders by BlackRock Advisors, including compliance services; o that operation of New BlackRock as an independent investment management firm will enhance its ability to attract and retain talented professionals; o that the Fund and the Series should benefit from having access to BlackRock's state of the art technology and risk 30 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 management analytic tools, including investment tools, provided under the BlackRock Solutions(R) brand name; o that BlackRock has no present intention to alter any applicable expense waivers or reimbursements currently in effect and, while it reserves the right to do so in the future, it would seek the approval of the Boards before making any changes; o that BlackRock and Merrill Lynch will enter into an agreement, for an initial three-year period and automatically renewable from year to year thereafter, in connection with the Transaction under which Merrill Lynch-affiliated broker-dealers will continue to offer the Fund as an investment product; o that BlackRock Advisors will have substantially the same access to the Merrill Lynch sales force when distributing shares of the Fund as is currently provided to the Investment Adviser and that other arrangements between the Investment Adviser and Merrill Lynch sales channels will be preserved; o that the Fund will have access to BlackRock's network of third party brokers, retirement plan platforms and registered investment advisers; o that in connection with the Transaction, Merrill Lynch and BlackRock have agreed to conduct, and use reasonable best efforts to cause their respective affiliates to conduct, their respective businesses in compliance with the conditions of Section 15(f) of the Investment Company Act of 1940 Act (the "1940 Act") in relation to any public funds advised by BlackRock or the Investment Adviser (or its affiliates), respectively; and o that Merrill Lynch and BlackRock would derive benefits from the Transaction and that, as a result, they have a different financial interest in the matters that were being considered than do Fund or Series shareholders. Each Board considered the information provided by Merrill Lynch and BlackRock above, and, among other factors, the following: o the potential benefits to Fund and the Series shareholders from being part of a combined fund family with BlackRock-sponsored funds, including possible economies of scale and access to investment opportunities; o the potential for expanding distribution of Fund shares through improved access to third party distribution; o the reputation, financial strength and resources of BlackRock and its investment advisory subsidiaries and the anticipated financial strength and resources of New BlackRock; o the compliance policies and procedures of BlackRock Advisors; o the terms and conditions of the New Investment Advisory Agreements, including the fact that neither the schedule of the total advisory and administrative fees for the Fund nor the schedule of the total advisory fees of the Series will increase by virtue of either New Investment Advisory Agreement, but will remain the same; o that each Board had earlier performed a full annual review of the investment advisory agreements currently in effect for the Series and Fund (the "Current Investment Advisory Agreements") as required by the 1940 Act and has determined that the Investment Adviser has the capabilities, resources and personnel necessary to provide the advisory and administrative services currently provided to the Fund and the Series; and that the advisory and/or management fees paid by the Series, taking into account any applicable agreed-upon fee waivers and breakpoints, represent reasonable compensation to the Investment Adviser in light of the services provided, the costs to the Investment Adviser of providing those services, economies of scale, the fees and other expenses paid by similar funds (including information provided by Lipper Inc. ["Lipper"]), and such other matters as the Board has considered relevant in the exercise of its reasonable judgment; and o that Merrill Lynch agreed to pay all expenses of the Fund and the Series in connection with each Board's consideration of the New Investment Advisory Agreements and related agreements and all costs of shareholder approval of the New Investment Advisory Agreements and as a result neither the Fund nor the Series would bear any costs in obtaining shareholder approval of the New Investment Advisory Agreements. Certain of these considerations are discussed in more detail below. In its review of the New Investment Advisory Agreements, each Board assessed the nature, scope and quality of the services to be provided to the Fund and the Series by the personnel of BlackRock Advisors and its affiliates, including administrative services, shareholder services, oversight of BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 31 Disclosure of Investment Advisory Agreement (continued) fund accounting, marketing services and assistance in meeting legal and regulatory requirements. In its review of the New Investment Advisory Agreements, each Board also considered a range of information in connection with its oversight of the services to be provided by BlackRock Advisors and its affiliates. Among the matters considered were: (a) fees (in addition to management fees) to be paid to BlackRock Advisors and its affiliates by the Fund and the Series; (b) operating expenses of the Fund and the Series paid to third parties; (c) the resources devoted to and compliance reports relating to the investment objectives, policies and restrictions of the Fund and the Series, and their compliance with their Codes of Ethics and BlackRock Advisors' compliance policies and procedures; and (d) the nature, cost and character of non-investment management services to be provided by BlackRock Advisors and its affiliates. In the period prior to the Board meetings to consider approval or renewal of the Current Investment Advisory Agreements, each Board had requested and received materials specifically relating to the Current Investment Advisory Agreements. These materials included (a) information compiled by Lipper on the fees and expenses and the investment performance of the Fund and the Series as compared to a comparable group of funds as classified by Lipper; (b) a discussion by the portfolio management team for the Series on investment strategies used by the Series during its most recent fiscal year; (c) information on the profitability to the Investment Adviser of the Current Investment Advisory Agreements and other payments received by the Investment Adviser and its affiliates from the Fund and the Series; and (d) information provided by the Investment Adviser concerning services related to the valuation and pricing of portfolio holdings of the Series, allocation of brokerage fees, portfolio turnover statistics, and direct and indirect benefits to the Investment Adviser and its affiliates from their relationship with the Fund and the Series. In its deliberations, each Board considered information received in connection with its most recent approval of the Current Investment Advisory Agreements, in addition to information provided by BlackRock and BlackRock Advisors in connection with its evaluation of the terms and conditions of the New Investment Advisory Agreements. The directors/ trustees did not identify any particular information that was all-important or controlling, and each director/trustee attributed different weights to the various factors. Each Board, including a majority of the independent directors/trustees, concluded that the terms of the New Investment Advisory Agreements are appropriate, that the fees to be paid are reasonable in light of the services to be provided to the Fund and the Series, and that the New Investment Advisory Agreements should be approved and recommended to shareholders. Nature, Quality and Extent of Services Provided -- Each Board reviewed the nature, extent and quality of services provided by the Investment Adviser, including the investment advisory services and the resulting performance of the Fund and the Series, as well as the nature, quality and extent of services expected to be provided by BlackRock Advisors. Each Board focused primarily on the Investment Adviser's investment advisory services and the investment performance of the Fund and the Series, but also considered certain areas in which both the Investment Adviser and the Fund/Series receive services as part of the Merrill Lynch complex. Each Board compared the performance of the Fund and the Series -- both including and excluding the effects of fees and expenses - -- to the performance of a comparable group of funds, and the performance of a relevant index or combination of indexes. While each Board reviews performance data at least quarterly, consistent with the Investment Adviser's investment goals, the Board attaches more importance to performance over relatively long periods of time, typically three to five years. In evaluating the nature, quality and extent of the services to be provided by BlackRock Advisors under the New Investment Advisory Agreements, each Board considered, among other things, the expected impact of the Transaction on the operations, facilities, organization and personnel of BlackRock Advisors and how it would affect the Fund and the Series; the ability of BlackRock Advisors to perform its duties after the Transaction; and any anticipated changes to the current investment and other practices of the Fund and the Series. Each Board was given information with respect to the potential benefits to the Fund and the Series and their shareholders from having access to BlackRock's state of the art technology and risk management analytic tools, including the investment tools provided under the BlackRock Solutions brand name. Each Board was advised that, as a result of Merrill Lynch's equity interest in BlackRock after the Transaction, the Fund and the Series will continue to be subject to restrictions concerning certain transactions involving Merrill Lynch affiliates (for example, transactions with a Merrill Lynch broker-dealer acting as principal) absent revised or new regulatory relief. Each Board was advised that a revision of existing regulatory relief with respect to these restrictions was being sought from 32 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 the Securities and Exchange Commission and was advised of the possibility of receipt of such revised regulatory relief. There can be no assurance that such relief will be obtained. Based on its review of the materials provided and the assurances they had received from the management of Merrill Lynch and of BlackRock, each Board determined that the nature and quality of services to be provided to the Fund and the Series under each New Investment Advisory Agreement were expected to be as good or better than that provided under the Current Investment Advisory Agreement of the Series. It was noted, however, that it is expected that there will be changes in personnel following the Transaction and the combination of the operations of the Investment Adviser and its affiliates with those of BlackRock. Each Board noted that if current portfolio managers or other personnel cease to be available, the Board would consider all available options, which could include seeking the investment advisory or other services of BlackRock affiliates. Accordingly, each Board concluded that, overall, it was satisfied at the present time with assurances from BlackRock and BlackRock Advisors as to the expected nature, extent and quality of the services to be provided to the Fund/Series under the New Investment Advisory Agreement of the Series. Costs of Services Provided and Profitability -- It was noted that, in conjunction with the recent review of the Current Investment Advisory Agreement of the Series, each Board had received, among other things, a report from Lipper comparing the fees, expenses and performance of the Fund and the Series to those of a peer group selected by Lipper, and information as to the fees charged by the Investment Adviser or its affiliates to other registered investment company clients for investment management services. Each Board reviewed the contractual management fee rate and actual management fee rate of the Fund/Series as a percentage of total assets at common asset levels -- the actual rate includes advisory and the effects of any fee waivers and, for the Fund, administrative service fees -- compared to the other funds in its Lipper category. They also compared the total expenses of the Fund and the Series to those of other comparable funds. The information showed that the Fund and the Series had fees and expenses within the range of fees and expenses of comparable funds. Each Board considered the services to be provided by and the fees to be charged by BlackRock Advisors to other funds with similar investment mandates and noted that the fees charged by BlackRock Advisors in those cases, including fee waivers and expense reimbursements, were generally comparable to those for the Fund and the Series. Each Board concluded that the management fee and fee rate and overall expense ratio of the Fund and the Series are reasonable compared to those of other comparable funds. In evaluating the costs of the services to be provided by BlackRock Advisors under the New Investment Advisory Agreements, each Board considered, among other things, whether advisory and administrative fees or other expenses would change as a result of the Transaction. Based on its review of the materials provided and the fact that each New Investment Advisory Agreement, as well as a new administrative agreement between the Corporation on behalf of the Fund and BlackRock Advisors as administrator, is substantially similar to its corresponding current agreement in all material respects, including the rate of compensation, each Board determined that the Transaction should not increase the total fees payable, including any fee waivers and expense reimbursements, for advisory and administrative services. Each Board noted that it was not possible to predict with certainty New BlackRock's future profitability from its relationship with the Fund and the Series. Each Board discussed with BlackRock Advisors its general methodology to be used in determining New BlackRock's profitability with respect to its relationship with the Fund and the Series. Each Board noted that it expects to receive profitability information from New BlackRock on at least an annual basis and thus be in a position to evaluate whether any adjustments in fees and/or fee breakpoints of the Fund or Series would be appropriate. Fees and Economies of Scale -- Each Board considered the extent to which economies of scale might be realized as the assets of the Fund and the Series increase and whether there should be changes in the management fee rate or structure in order to enable the Fund and the Series to participate in these economies of scale. Each Board determined that changes were not currently necessary and that the Fund and the Series appropriately participated in these economies of scale. In reviewing the Transaction, each Board considered, among other things, whether advisory and administrative fees or other expenses would change as a result of the Transaction. Based on the fact that the New Investment Advisory Agreements and the new administrative agreement are substantially similar to the Current Investment Advisory Agreements and the current administrative agreement in all material respects, including the rates of compensation, each Board determined that as a result of the Transaction, neither the total advisory and administrative fees of the Fund nor the BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 33 Disclosure of Investment Advisory Agreement (concluded) total advisory fees of the Series would be higher than the fees under the Current Investment Advisory Agreements and administrative agreement. Each Board noted that in conjunction with its most recent deliberations concerning the Current Investment Advisory Agreements, the Board had determined that the total fees for advisory and administrative services for the Fund and the total fees for advisory services for the Series were reasonable in light of the services provided. It was noted that in conjunction with the recent review of the Current Investment Advisory Agreement of the Series, each Board had received, among other things, a report from Lipper comparing the fees, expenses and performance to those of a peer group selected by Lipper, and information as to the fees charged by the Investment Adviser to other registered investment company clients for investment management services. Each Board concluded that, because the rate for advisory services for the Series and the rates for advisory and administrative services for the Fund would be no higher than current fee rates, the proposed management fee structures, including any fee waivers, were reasonable and that no additional changes were currently necessary. Fall-Out Benefits -- In evaluating the fall-out benefits to be received by BlackRock Advisors under each New Investment Advisory Agreement, each Board considered whether the Transaction would have an impact on the fall-out benefits received by the Investment Adviser by virtue of the Current Investment Advisory Agreements. Based on its review of the materials provided, including materials received in connection with their most recent approval of each Current Investment Advisory Agreement, and its discussions with management of the Investment Adviser and BlackRock, each Board determined that those benefits could include increased ability for BlackRock to distribute shares of its funds and other investment products and to obtain research services using portfolio transaction brokerage commissions. The Fund's Board also considered possible benefits stemming from the proposal that PFPC Financial Services, an affiliate of BlackRock, serve as transfer agent for the Fund following the Transaction. Each Board noted that any benefits were difficult to quantify with certainty at this time, and indicated that they would continue to evaluate them going forward. Investment Performance -- Each Board considered investment performance for the Fund and the Series. Each Board compared the performance of the Fund and the Series -- both including and excluding the effects of fees and expenses -- to the performance of a comparable group of funds, and the performance of a relevant index or combination of indexes. The comparative information received from Lipper showed Series performance at various levels within the range of performance of comparable funds over different time periods. While each Board reviews performance data at least quarterly, consistent with the Investment Adviser's investment goals, the Board attaches more importance over relatively long periods of time, typically three to five years. Each Board believed the performance of the Fund and the Series was satisfactory. Also, each Board took into account the investment performance of funds currently advised by BlackRock Advisors. Each Board considered comparative information from Lipper which showed that the performance of the funds advised by BlackRock Advisors was within the range of performance of comparable funds over different time periods. Each Board noted BlackRock's considerable investment management experience and capabilities, but was unable to predict what effect, if any, consummation of the Transaction would have on the future performance of the Fund and the Series. Conclusion -- After the independent directors of the Corporation, on behalf of the Fund, and trustees of the Trust, on behalf of the Series, deliberated in executive session, each entire Board, including the independent directors/trustees, approved the New Investment Advisory Agreements, concluding that the advisory fee rates were reasonable in relation to the services provided and that the New Investment Advisory Agreements were in the best interests of the shareholders. In approving the New Investment Advisory Agreements, each Board noted that it anticipated reviewing the continuance of the agreements in advance of the expiration of the initial two-year period. Contingent BlackRock Sub-Advisory Agreements -- Matters Considered by the Boards At the telephonic and in-person meetings held during April and May 2006 at which each Board discussed and approved the New Investment Advisory Agreements, the Board of Directors of Merrill Lynch Index Funds, Inc. on behalf of the Fund, including the independent directors, and the Board of Trustees of the Trust on behalf of the Series, including the independent trustees, also discussed and approved contingent sub-advisory agreements (the "Contingent Sub-Advisory Agreements") between the Investment Adviser and BlackRock Advisors (the "BlackRock Sub-Adviser"). The Contingent Sub-Advisory Agreements are intended to ensure that the Fund and the Series operate with efficient portfolio management services until the closing of the Transaction, in the event that the Boards deem it necessary and in the best interests of the Fund and its shareholders, or the Series and its shareholders, that the 34 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 BlackRock Sub-Adviser assist in managing the operations of the Fund or the Series during the interim period until the closing of the Transaction. If shareholders approve the Contingent Sub-Advisory Agreements, they will take effect only upon recommendation from the Investment Adviser and upon subsequent approval of the Boards in the period up to the closing of the Transaction. The effectiveness of each Contingent Sub-Advisory Agreement, therefore, would be contingent on further Board approval after shareholders approve it. Pursuant to each Contingent Sub-Advisory Agreement, the BlackRock Sub-Adviser would receive a monthly fee from the Investment Adviser equal to 50% of the advisory fee received by the Adviser. The Investment Adviser would pay the BlackRock Sub-Adviser out of its own resources. There would be no increase in Fund or Series expenses as a result of either Contingent Sub-Advisory Agreement. In making its approval at the May in-person meeting, each Board considered the Contingent Sub-Advisory Agreements in conjunction with the New Investment Advisory Agreements and reviewed the same information and factors discussed above. Each Board also considered in conjunction with the Contingent Sub-Advisory Agreements the necessity of ensuring that the Fund and the Series operate with effective management services until the closing of the Transaction. In reviewing the sub-advisory fee rate provided in each Contingent Sub-Advisory Agreement, each Board took note of the fact that both the Investment Adviser and the BlackRock Sub-Adviser would have significant responsibilities under their respective advisory agreements. The Investment Adviser would remain responsible for oversight of the operations and administration of the Fund/Series and the BlackRock Sub-Adviser would provide advisory services to the Fund/Series under each Contingent Sub-Advisory Agreement. Each Board also took into account the expected short duration of the term of any Contingent Sub-Advisory Agreement and the fact that total advisory fees paid by the Fund and the Series would not increase as a result of either Contingent Sub-Advisory Agreement. Under all of the circumstances, each Board concluded that it was a reasonable allocation of fees for the BlackRock Sub-Adviser to receive 50% of the advisory fee paid by the Fund or Series to the Investment Adviser. After the independent directors/trustees deliberated in executive session, each entire Board, including the independent directors/trustees, approved each Contingent Sub-Advisory Agreement, concluding that the advisory fee was reasonable in relation to the services provided and that the Contingent Sub-Advisory Agreement was in the best interests of shareholders. BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 35 Disclosure of Sub-Advisory Agreement New BlackRock Sub-Advisory Agreement -- Matters Considered by the Boards At an in-person meeting held on August 16-17, 2006, the Board of Directors of BlackRock Index Funds, Inc. (the "Corporation") and the Board of Trustees of Quantitative Master Series Trust (the "Trust"), including the independent directors/trustees, discussed and approved the sub-advisory agreement with respect to the Series between BlackRock Advisors, LLC (previously organized as BlackRock Advisors, Inc.) ("BlackRock Advisors") and BlackRock Investment Management, LLC, an affiliate (the "Sub-Adviser") (the "BlackRock Sub-Advisory Agreement"). The BlackRock Sub-Advisory Agreement became effective on September 29, 2006, at the same time the new investment advisory agreement with BlackRock Advisors became effective. Pursuant to the BlackRock Sub-Advisory Agreement, the Sub-Adviser receives a monthly fee from BlackRock Advisors at an annual rate equal to 74% of the advisory fee received by BlackRock Advisors from the Series. BlackRock Advisors pays the Sub-Adviser out of its own resources, and there is no increase in Fund or Series expenses as a result of the BlackRock Sub-Advisory Agreement. In approving the BlackRock Sub-Advisory Agreement at the August in-person meeting, the Boards reviewed their considerations in connection with their approval of the New Investment Advisory Agreement in May 2006. The Boards relied on the same information and considered the same factors as those discussed above in connection with the approval of the New Investment Advisory Agreement. In reviewing the sub-advisory fee rate provided for in the BlackRock Sub-Advisory Agreement, the Boards noted the fact that both BlackRock Advisors and the Sub-Adviser have significant responsibilities under their respective advisory agreements. Under the New Investment Advisory Agreement, BlackRock Advisors remains responsible for the overall management of the Fund and the Series and for oversight of the Fund's and the Series' operations and administration. Under the BlackRock Sub-Advisory Agreement, the Sub-Adviser provides advisory services to the Series and is responsible for the day-to-day management of the Series' portfolio. The Boards also took into account the fact that there is no increase in total advisory fees paid by the Fund or the Series as a result of the BlackRock Sub-Advisory Agreement. Based on its considerations, each Board concluded that it was a reasonable allocation of fees for the Sub-Adviser to receive a fee at an annual rate equal to 74% of the advisory fee paid by the Series to BlackRock Advisors. After the independent directors/trustees deliberated in executive session, the entire Board of the Corporation and the entire Board of the Trust, including the independent directors/trustees, approved the BlackRock Sub-Advisory Agreement, concluding that the sub-advisory fee was reasonable in relation to the services provided and that the BlackRock Sub-Advisory Agreement was in the best interests of Fund shareholders. Approvals to Correct Fee Schedules As discussed above, at a meeting on May 8, 2006, the Boards, including the independent directors/trustees, approved the New Investment Advisory Agreement between BlackRock Advisors and the Trust on behalf of the Series. The New Investment Advisory Agreement as approved by the Board contained an advisory fee schedule for the Series that was the same as the fee schedule set forth in the investment advisory agreements in effect for the Series and the Fund at that time (the "Current Investment Advisory Agreements"). At a shareholder meeting on August 15, 2006, the shareholders of the Fund approved a new investment advisory agreement between BlackRock Advisors and the Trust on behalf of the Series, but in a form that contained an incorrect advisory fee schedule for the Series. The proxy statement sent to Fund shareholders in connection with the shareholder meeting (the "Proxy Statement") stated in several places that the advisory fees payable by the Series under the New Investment Advisory Agreement would be the same as the fees payable under the Series' Current Investment Advisory Agreements. However, subsequent to the shareholder meeting, it was discovered that the advisory fee schedule for the Series was incorrectly presented in an appendix in the Proxy Statement as lower than the fee schedule then in effect. At a September 22, 2006 meeting, the Board of the Trust considered ratification and approval of an investment advisory agreement between BlackRock Advisors and the Trust on behalf of the Series in the form approved by shareholders with the lower, incorrect advisory fee schedule. After discussion, the Trustees, and separately the non-interested trustees present in person at the meeting, ratified and approved an investment advisory agreement on behalf of the Series with the lower fee schedule that was approved by shareholders. 36 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 The Boards also discussed the BlackRock Sub-Advisory Agreement between BlackRock Advisors and BlackRock Investment Management, LLC with respect to the Series. The Boards reviewed and reaffirmed their considerations in connection with their approval of the BlackRock Sub-Advisory Agreement at the August 16-17, 2006 meeting. The Directors/Trustees, and separately the non-interested directors/trustees present, in person, at the meeting, then ratified and approved the BlackRock Sub-Advisory Agreement with respect to the Series as previously approved at the August 16-17, 2006 meeting. BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 37 Officers and Directors/Trustees
Number of Funds and 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 Vice Chairman and Director of BlackRock, Inc., 122 Funds None Doll, Jr.* Princeton, NJ and present Global Chief Investment Officer for Equities, 168 Portfolios 08543-9011 Director/ Chairman of the BlackRock Retail Operating Age: 52 Trustee Committee, and member of the BlackRock Executive Committee since 2006; President of the funds advised by Merrill Lynch Investment Managers, L.P. ("MLIM") and its affiliates ("MLIM/FAM-advised funds") from 2005 to 2006 and Chief Investment Officer thereof from 2001 to 2006; President of MLIM and Fund Asset Management, L.P. ("FAM") from 2001 to 2006; Co-Head (Americas Region) thereof from 2000 to 2001 and Senior Vice President from 1999 to 2001; President and Director of Princeton Services, Inc. ("Princeton Services") and President of Princeton Administrators, L.P. ("Princeton Administrators") from 2001 to 2006; Chief Investment Officer of OppenheimerFunds, 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 BlackRock Advisors, LLC and its affiliates act as investment adviser. Mr. Doll is an "interested person," as described in the Investment Company Act, of the Fund based on his positions with BlackRock, Inc. and its affiliates. 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 Director, Ruckleshaus Institute and Haub School of 21 Funds Knology, Inc. Burton Princeton, NJ Trustee present Natural Resources at the University of Wyoming 38 Portfolios (telecommuni- 08543-9095 since 2006; General Partner of The Burton cations), Age: 62 Partnership, Limited Partnership (an investment Symbion, Inc. partnership) since 1979; Managing General (health care), Partner of The South Atlantic Venture Funds and Capital since 1983; Member of the Investment Advisory Southwest Council of the Florida State Board of Administration (financial) since 2001. - ------------------------------------------------------------------------------------------------------------------------------------
38 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 Officers and Directors/Trustees (continued)
Number of Funds and 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) - ------------------------------------------------------------------------------------------------------------------------------------ John P.O. Box 9095 Director/ 2005 to President and Chief Executive Officer of Allmerica 21 Funds Cabot Francis Princeton, NJ Trustee present Financial Corporation (financial services holding 38 Portfolios Corporation O'Brien 08543-9095 company) from 1995 to 2002 and Director from (chemicals), Age: 63 1995 to 2003; President of Allmerica Investment LKQ Corpora- Management Co., Inc. (investment adviser) from tion (auto 1989 to 2002, Director from 1989 to 2002 and parts Chairman of the Board from 1989 to 1990; President, manufacturing) Chief Executive Officer and Director of First and TJX Com- Allmerica Financial Life Insurance Company from 1989 panies, Inc. to 2002 and Director of various other Allmerica (retailer) Financial companies until 2002; Director from 1989 to 2006, Member of the Governance Nominating Committee from 2004 to 2006, Member of the Compensation Committee from 1989 to 2006 and Member of the Audit Committee from 1990 to 2004 of ABIOMED; Director, Member of the Governance and Nomination Committee and Member of the Audit Committee of Cabot Corporation since 1990; Director and Member of the Audit Committee and Compensation Committee of LKQ Corporation since 2003; Lead Director of TJX Companies, Inc. since 1996; Trustee of the Woods Hole Oceanographic Institute since 2003; Director, Ameresco, Inc. since 2006; Director, Boston Lyric Opera since 2002. - ------------------------------------------------------------------------------------------------------------------------------------ David H. P.O. Box 9095 Director/ 2003 to Consultant with Putnam Investments from 1993 21 Funds None Walsh Princeton, NJ Trustee present to 2003, and employed in various capacities 38 Portfolios 08543-9095 therewith from 1973 to 1992; Director, Age: 65 Massachusetts Audubon Society from 1990 to 1997; Director, The National Audubon Society from 1998 to 2005; Director, The American Museum of Fly Fishing since 1997. - ------------------------------------------------------------------------------------------------------------------------------------ Fred G. P.O. Box 9095 Director/ 1998 to Managing Director of FGW Associates since 1997; 21 Funds Watson Weiss ** Princeton, NJ Trustee present Vice President, Planning, Investment and Devel- 38 Portfolios Pharma- 08543-9095 opment of Warner Lambert Co. from 1979 to 1997; ceuticals, Age: 65 Director of the Michael J. Fox Foundation for Inc. (pharma- Parkinson's Research since 2000; Director of BTG ceutical International Plc (a global technology company) commercialization company) since 2001. ------------------------------------------------------------------------------------------------------------------------ * Directors/Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. ** Chairman of the Board of Directors/Trustees 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 Managing Director of BlackRock, Inc. since 2006; Managing Director of Merrill Lynch Burke Princeton, NJ President present Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P. ("FAM") in 2006; 08543-9011 and and 1999 First Vice President of MLIM and FAM from 1997 to 2005 and Treasurer thereof from Age: 46 Treasurer to 1999 to 2006; Vice President of MLIM and FAM from 1990 to 1997. present - ------------------------------------------------------------------------------------------------------------------------------------ Debra L. P.O. Box 9011 Vice 2005 to Director of BlackRock, Inc. since 2006; Director of MLIM from 1999 to 2006. Jelilian Princeton, NJ President present 08543-9011 Age: 39 - ------------------------------------------------------------------------------------------------------------------------------------
BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 39 Officers and Directors/Trustees (concluded)
Position(s) Length of Held with Time Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years ==================================================================================================================================== Fund/Trust Officers* (concluded) - ------------------------------------------------------------------------------------------------------------------------------------ Jeffrey L. P.O. Box 9011 Vice 2005 to Director of BlackRock, Inc. since 2006; Director of MLIM from 2004 to 2006; Vice Russo Princeton, NJ President present President of MLIM from 1994 to 2004. 08543-9011 Age: 39 - ------------------------------------------------------------------------------------------------------------------------------------ Jeffrey P.O. Box 9011 Fund Chief 2004 to Managing Director of BlackRock, Inc. and Fund Chief Compliance Officer since 2006; Hiller Princeton, NJ Compliance present Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President and 08543-9011 Officer Chief Compliance Officer of MLIM (Americas Region) from 2004 to 2006; Chief Age: 55 Compliance Officer of the IQ Funds since 2004; Global Director of Compliance at 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 Securities and Exchange Commission's Division of Enforcement in Washington, D.C. from 1990 to 1995. - ------------------------------------------------------------------------------------------------------------------------------------ Alice A. P.O. Box 9011 Secretary 2004 to Director of BlackRock, Inc. since 2006; Director (Legal Advisory) of MLIM from 2002 Pellegrino Princeton, NJ present to 2006; Vice President of MLIM from 1999 to 2002; Attorney associated with MLIM 08543-9011 from 1997 to 2006; Secretary of MLIM, FAM, FAM Distributors, Inc. and Princeton Age: 46 Services from 2004 to 2006. ------------------------------------------------------------------------------------------------------------------------ * 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 1-800-441-7762. - ------------------------------------------------------------------------------------------------------------------------------------
Custodian Merrill Lynch Trust Company, FSB 1300 Merrill Lynch Drive 3rd Floor -- MSC 0303 Pennington, NJ 08534 Transfer Agent PFPC Inc. Wilmington, DE 19809 40 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 BlackRock Funds BlackRock Privacy Principles BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, "Clients") and to safeguarding their nonpublic personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties. If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations. BlackRock obtains or verifies personal nonpublic information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our Web sites. BlackRock does not sell or disclose to nonaffiliated third parties any nonpublic personal information about its Clients, except as permitted by law or as is necessary to service Client accounts. These nonaffiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose. We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to nonpublic personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the nonpublic personal information of its Clients, including procedures relating to the proper storage and disposal of such information. Availability of Additional Information Electronic copies of most financial reports and prospectuses are available on the Fund's Web site or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Fund's electronic delivery program. To enroll: Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages: Please contact your financial advisor. Please note that not all investment advisers, banks or brokerages may offer this service. Shareholders Who Hold Accounts Directly with BlackRock: 1) Access the BlackRock Web site at http://www.blackrock.com/edelivery 2) Select eDelivery under the More Information section 3) Log into your account The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called "householding" and it is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact the Fund at (800) 441-7762. BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 41 BlackRock Funds (concluded) Availability of Additional Information (concluded) Availability of Proxy Voting Policies and Procedures The Fund has delegated proxy voting responsibilities to BlackRock and its affiliates, subject to the general oversight of the Fund's Board of Directors. A description of the policies and procedures that BlackRock and its affiliates use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, on our Web site at www.blackrock.com, by calling (800) 441-7762, or on the Web site of the Securities and Exchange Commission (the "Commission") at http://www.sec.gov. Availability of Proxy Voting Record Information on how proxies relating to the Fund's voting securities were voted (if any) by BlackRock during the most recent 12-month period ended June 30 is available, upon request and without charge, on our Web site at www.blackrock.com, by calling (800) 441-7762 or on the Web site of the Commission at http://www.sec.gov. Availability of Quarterly Portfolio Schedule The Fund files its complete schedule of portfolio holdings for the first and third quarters of its fiscal year with the Commission on Form N-Q. The Fund's Forms N-Q are available on the Commission's Web site at http://www.sec.gov and may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information regarding the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. The Fund's Forms N-Q may also be obtained upon request, without charge, by calling (800) 441-7762. Shareholder Privileges Account Information Call us at (800) 441-7762 8:00 AM - 6:00 PM EST to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at www.blackrock.com. Automatic Investment Plans Investor Class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock portfolios. Systematic Withdrawal Plans Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock portfolios, as long as their account is at least $10,000. Retirement Plans Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans. 42 BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 A World-Class Mutual Fund Family BlackRock now offers an expanded lineup of open-end mutual funds. Our range includes more than 85 funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing. Equity Portfolios BlackRock All-Cap Global Resources Portfolio BlackRock Aurora Portfolio BlackRock Asset Allocation Portfolio+ BlackRock Balanced Capital Fund+ BlackRock Basic Value Fund BlackRock Developing Capital Markets Fund BlackRock Equity Dividend Fund BlackRock EuroFund BlackRock Focus Twenty Fund BlackRock Focus Value Fund BlackRock Fundamental Growth Fund BlackRock Global Allocation Fund+ BlackRock Global Dynamic Equity Fund BlackRock Global Financial Services Fund BlackRock Global Growth Fund BlackRock Global Opportunities Portfolio BlackRock Global Resources Portfolio* BlackRock Global Science & Technology Opportunities Portfolio BlackRock Global SmallCap Fund BlackRock Global Technology Fund BlackRock Global Value Fund BlackRock Healthcare Fund BlackRock Health Sciences Opportunities Portfolio BlackRock Index Equity Portfolio* BlackRock International Fund BlackRock International Index Fund BlackRock International Opportunities Portfolio* BlackRock International Value Fund BlackRock Investment Trust BlackRock Large Cap Core Fund BlackRock Large Cap Growth Fund BlackRock Large Cap Value Fund BlackRock Latin America Fund BlackRock Capital Appreciation Portfolio BlackRock Mid-Cap Growth Equity Portfolio BlackRock Mid-Cap Value Equity Portfolio BlackRock Mid Cap Value Opportunities Fund BlackRock Natural Resources Trust BlackRock Pacific Fund BlackRock Small Cap Core Equity Portfolio BlackRock Small Cap Growth Equity Portfolio BlackRock Small Cap Growth Fund II BlackRock Small Cap Index Fund BlackRock Small Cap Value Equity Portfolio* BlackRock Small/Mid-Cap Growth Portfolio BlackRock S&P 500 Index Fund BlackRock U.S. Opportunities Portfolio BlackRock Utilities and Telecommunications Fund BlackRock Value Opportunities Fund Fixed Income Portfolios BlackRock Bond Fund BlackRock Enhanced Income Portfolio BlackRock GNMA Portfolio BlackRock Government Income Portfolio BlackRock High Income Fund BlackRock High Yield Bond Portfolio BlackRock Inflation Protected Bond Portfolio BlackRock Intermediate Bond Portfolio BlackRock Intermediate Bond Portfolio II BlackRock Intermediate Government Bond Portfolio BlackRock International Bond Portfolio BlackRock Low Duration Bond Portfolio BlackRock Managed Income Portfolio BlackRock Real Investment Fund BlackRock Short-Term Bond Fund BlackRock Total Return Portfolio BlackRock Total Return Portfolio II BlackRock World Income Fund Municipal Bond Portfolios BlackRock AMT-Free Municipal Bond Portfolio BlackRock California Insured Municipal Bond Fund BlackRock Delaware Municipal Bond Portfolio BlackRock Florida Municipal Bond Fund BlackRock High Yield Municipal Fund BlackRock Intermediate Municipal Fund BlackRock Kentucky Municipal Bond Portfolio BlackRock Municipal Insured Fund BlackRock National Municipal Fund BlackRock New Jersey Municipal Bond Fund BlackRock New York Municipal Bond Fund BlackRock Ohio Municipal Bond Portfolio BlackRock Pennsylvania Municipal Bond Fund BlackRock Short-Term Municipal Fund Money Market Portfolios BlackRock Money Market Portfolio BlackRock Municipal Money Market Portfolio@ BlackRock NC Municipal MM Portfolio@ BlackRock NJ Municipal MM Portfolio@ BlackRock OH Municipal MM Portfolio@ BlackRock PA Municipal MM Portfolio@ BlackRock Summit Cash Reserves Fund* BlackRock U.S. Treasury MM Portfolio BlackRock VA Municipal MM Portfolio@ * See the prospectus for information on specific limitations on investments in the fund. + Mixed asset fund. @ Tax-exempt fund. BlackRock mutual funds are distributed by BlackRock Distributors, Inc. and certain funds are also distributed by FAM Distributors, Inc. You should consider the investment objectives, risks, charges and expenses of the funds under consideration carefully before investing. Each fund's prospectus contains this and other information and is available at www.blackrock.com or by calling 800-882-0052 or from your financial advisor. The prospectus should be read carefully before investing. BLACKROCK S&P 500 INDEX FUND DECEMBER 31, 2006 43 This report is transmitted to shareholders only. It 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 1-800-441-7762; (2) at www.blackrock.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.blackrock.com and (2) on the Securities and Exchange Commission's Web site at http://www.sec.gov. BlackRock Index Funds, Inc. P.O. Box 9011 Princeton, NJ 08543-9011 BLACKROCK #Index 4-12/06 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 at www.blackrock.com. 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 (resigned as of May 1, 2006), (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 BlackRock S&P 500 Index Fund of BlackRock Index Funds, Inc. (a) Audit Fees - Fiscal Year Ending December 31, 2006 - $6,500 Fiscal Year Ending December 31, 2005 - $6,500 (b) Audit-Related Fees - Fiscal Year Ending December 31, 2006 - $0 Fiscal Year Ending December 31, 2005 - $0 (c) Tax Fees - Fiscal Year Ending December 31, 2006 - $6,000 Fiscal Year Ending December 31, 2005 - $5,700 The nature of the services include tax compliance, tax advice and tax planning. (d) All Other Fees - Fiscal Year Ending December 31, 2006 - $0 Fiscal Year Ending December 31, 2005 - $0 Master S&P 500 Index Series of Quantitative Master Series Trust (a) Audit Fees - Fiscal Year Ending December 31, 2006 - $35,500 Fiscal Year Ending December 31, 2005 - $35,500 (b) Audit-Related Fees - Fiscal Year Ending December 31, 2006 - $24,000 Fiscal Year Ending December 31, 2005 - $21,600 The nature of the services relate to 17f-2 custody counts. (c) Tax Fees - Fiscal Year Ending December 31, 2006 - $17,000 Fiscal Year Ending December 31, 2005 - $16,200 The nature of the services include tax compliance, tax advice and tax planning. (d) All Other Fees - Fiscal Year Ending December 31, 2006 - $0 Fiscal Year Ending December 31, 2005 - $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, 2006 - $3,071,450 Fiscal Year Ending December 31, 2005 - $5,577,771 (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) - $1,739,500, 0% Item 5 - Audit Committee of Listed Registrants - Not Applicable Item 6 - Schedule of Investments - Attached hereto Master S&P 500 Index Series of Quantitative Master Series Trust Schedule of Investments as of December 31, 2006
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- Aerospace & Defense - 2.3% 172,420 Boeing Co. $ 15,317,793 83,996 General Dynamics Corp. 6,245,103 30,187 Goodrich Corp. 1,375,018 171,677 Honeywell International, Inc. 7,766,667 23,874 L-3 Communications Holdings, Inc. 1,952,416 73,870 Lockheed Martin Corp. 6,801,211 76,952 Northrop Grumman Corp. 5,209,650 95,774 Raytheon Co. 5,056,867 37,015 Rockwell Collins, Inc. 2,342,679 220,196 United Technologies Corp. 13,766,654 --------------- 65,834,058 - ----------------------------------------------------------------------------------------------------------------------------------- Air Freight & Logistics - 0.9% 63,908 FedEx Corp. 6,941,687 234,300 United Parcel Service, Inc. Class B (e) 17,567,814 --------------- 24,509,501 - ----------------------------------------------------------------------------------------------------------------------------------- Airlines - 0.1% 163,995 Southwest Airlines Co. 2,512,403 - ----------------------------------------------------------------------------------------------------------------------------------- Auto Components - 0.1% 47,593 The Goodyear Tire & Rubber Co. (a)(e) 998,977 39,620 Johnson Controls, Inc. 3,404,150 --------------- 4,403,127 - ----------------------------------------------------------------------------------------------------------------------------------- Automobiles - 0.4% 393,999 Ford Motor Co. (e) 2,958,932 125,106 General Motors Corp. 3,843,256 54,259 Harley-Davidson, Inc. 3,823,632 --------------- 10,625,820 - ----------------------------------------------------------------------------------------------------------------------------------- Beverages - 2.1% 161,185 Anheuser-Busch Cos., Inc. 7,930,302 20,588 Brown-Forman Corp. Class B 1,363,749 441,928 The Coca-Cola Co. 21,323,026 71,587 Coca-Cola Enterprises, Inc. 1,461,807 45,500 Constellation Brands, Inc. Class A (a) 1,320,410 12,783 Molson Coors Brewing Co. Class B 977,133 35,922 Pepsi Bottling Group, Inc. 1,110,349 357,388 PepsiCo, Inc. 22,354,619 --------------- 57,841,395 - ----------------------------------------------------------------------------------------------------------------------------------- Biotechnology - 1.3% 253,747 Amgen, Inc. (a) 17,333,458 75,340 Biogen Idec, Inc. (a) 3,705,975 75,336 Celgene Corp. (a) 4,334,080 54,080 Genzyme Corp. (a) 3,330,246 95,600 Gilead Sciences, Inc. (a) 6,207,308 56,852 Medimmune, Inc. (a) 1,840,299 --------------- 36,751,366 - ----------------------------------------------------------------------------------------------------------------------------------- Building Products - 0.2% 42,900 American Standard Cos., Inc. 1,966,965 92,779 Masco Corp. (e) 2,771,309 --------------- 4,738,274 - ----------------------------------------------------------------------------------------------------------------------------------- Capital Markets - 3.8% 56,776 Ameriprise Financial, Inc. 3,094,292 162,495 The Bank of New York Co., Inc. 6,397,428 24,311 The Bear Stearns Cos., Inc. 3,957,345 235,268 The Charles Schwab Corp. 4,550,083
Master S&P 500 Index Series of Quantitative Master Series Trust Schedule of Investments as of December 31, 2006
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 86,100 E*Trade Financial Corp. (a) $ 1,930,362 20,700 Federated Investors, Inc. Class B 699,246 35,786 Franklin Resources, Inc. 3,942,544 94,300 Goldman Sachs Group, Inc. (e) 18,798,705 49,505 Janus Capital Group, Inc. 1,068,813 29,900 Legg Mason, Inc. 2,841,995 115,556 Lehman Brothers Holdings, Inc. 9,027,235 87,016 Mellon Financial Corp. (e) 3,667,724 192,167 Merrill Lynch & Co., Inc. (b) 17,890,748 234,498 Morgan Stanley 19,095,172 44,727 Northern Trust Corp. 2,714,482 76,023 State Street Corp. 5,126,991 52,948 T. Rowe Price Group, Inc. 2,317,534 --------------- 107,120,699 - ----------------------------------------------------------------------------------------------------------------------------------- Chemicals - 1.5% 46,547 Air Products & Chemicals, Inc. 3,271,323 16,858 Ashland, Inc. 1,166,236 207,976 The Dow Chemical Co. 8,306,561 193,173 E.I. du Pont de Nemours & Co. 9,409,457 19,550 Eastman Chemical Co. 1,159,511 44,814 Ecolab, Inc. 2,025,593 21,359 Hercules, Inc. (a) 412,442 19,096 International Flavors & Fragrances, Inc. 938,759 119,554 Monsanto Co. 6,280,172 35,787 PPG Industries, Inc. 2,297,883 68,146 Praxair, Inc. 4,043,102 36,603 Rohm & Haas Co. 1,871,145 15,223 Sigma-Aldrich Corp. 1,183,132 --------------- 42,365,316 - ----------------------------------------------------------------------------------------------------------------------------------- Commercial Banks - 4.1% 118,100 BB&T Corp. (e) 5,188,133 39,691 Comerica, Inc. 2,329,068 34,300 Commerce Bancorp, Inc. 1,209,761 27,002 Compass Bancshares, Inc. 1,610,669 123,056 Fifth Third Bancorp (e) 5,036,682 33,100 First Horizon National Corp. 1,382,918 54,029 Huntington Bancshares, Inc. (e) 1,283,189 90,510 KeyCorp 3,442,095 19,100 M&T Bank Corp. 2,333,256 49,500 Marshall & Ilsley Corp. (e) 2,381,445 123,456 National City Corp. (e) 4,513,551 67,468 PNC Financial Services Group, Inc. (b)(e) 4,995,331 155,823 Regions Financial Corp. 5,827,780 75,599 SunTrust Banks, Inc. 6,384,336 61,351 Synovus Financial Corp. 1,891,451 385,265 U.S. Bancorp (e) 13,942,740 420,718 Wachovia Corp. (e) 23,959,890 729,944 Wells Fargo & Co. 25,956,809 19,702 Zions Bancorp. 1,624,233 --------------- 115,293,337
Master S&P 500 Index Series of Quantitative Master Series Trust Schedule of Investments as of December 31, 2006
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- Commercial Services & Supplies - 0.5% 55,678 Allied Waste Industries, Inc. (a) $ 684,283 22,458 Avery Dennison Corp. 1,525,572 35,002 Cintas Corp. 1,389,929 29,002 Equifax, Inc. 1,177,481 24,239 Monster Worldwide, Inc. (a) 1,130,507 48,482 Pitney Bowes, Inc. 2,239,384 41,795 RR Donnelley & Sons Co. 1,485,394 35,811 Robert Half International, Inc. 1,329,304 114,014 Waste Management, Inc. 4,192,295 --------------- 15,154,149 - ----------------------------------------------------------------------------------------------------------------------------------- Communications Equipment - 2.7% 22,465 ADC Telecommunications, Inc. (a) 326,417 98,682 Avaya, Inc. (a) 1,379,574 16,670 Ciena Corp. (a) 461,926 1,323,271 Cisco Systems, Inc. (a)(e) 36,164,996 44,143 Comverse Technology, Inc. (a) 931,859 341,475 Corning, Inc. (a) 6,388,997 42,923 JDS Uniphase Corp. (a) 715,097 128,700 Juniper Networks, Inc. (a) 2,437,578 538,369 Motorola, Inc. 11,068,867 361,460 QUALCOMM, Inc. 13,659,573 108,487 Tellabs, Inc. (a) 1,113,077 --------------- 74,647,961 - ----------------------------------------------------------------------------------------------------------------------------------- Computers & Peripherals - 3.7% 185,534 Apple Computer, Inc. (a) 15,740,705 484,616 Dell, Inc. (a) 12,159,015 496,354 EMC Corp. (a)(e) 6,551,873 599,517 Hewlett-Packard Co. 24,694,105 333,167 International Business Machines Corp. 32,367,174 20,439 Lexmark International, Inc. Class A (a) 1,496,135 38,536 NCR Corp. (a) 1,647,799 84,921 Network Appliance, Inc. (a) 3,335,697 42,016 QLogic Corp. (a) 920,991 40,000 Sandisk Corp. (a) 1,721,200 735,056 Sun Microsystems, Inc. (a) 3,984,004 --------------- 104,618,698 - ----------------------------------------------------------------------------------------------------------------------------------- Construction & Engineering - 0.0% 17,161 Fluor Corp. 1,401,196 - ----------------------------------------------------------------------------------------------------------------------------------- Construction Materials - 0.1% 20,647 Vulcan Materials Co. 1,855,546 - ----------------------------------------------------------------------------------------------------------------------------------- Consumer Finance - 1.0% 266,084 American Express Co. 16,143,316 87,767 Capital One Financial Corp. 6,742,261 91,830 SLM Corp. 4,478,549 --------------- 27,364,126 - ----------------------------------------------------------------------------------------------------------------------------------- Containers & Packaging - 0.2% 23,760 Ball Corp. 1,035,936 22,136 Bemis Co. 752,181 32,425 Pactiv Corp. (a) 1,157,248 17,869 Sealed Air Corp. 1,160,055 28,506 Temple-Inland, Inc. 1,312,131 --------------- 5,417,551
Master S&P 500 Index Series of Quantitative Master Series Trust Schedule of Investments as of December 31, 2006
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- Distributors - 0.1% 36,714 Genuine Parts Co. $ 1,741,345 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Consumer Services - 0.1% 28,200 Apollo Group, Inc. Class A (a) 1,098,954 78,070 H&R Block, Inc. (e) 1,798,733 --------------- 2,897,687 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Financial Services - 5.6% 983,934 Bank of America Corp. 52,532,236 46,500 CIT Group, Inc. 2,593,305 7,300 Chicago Mercantile Exchange Holdings, Inc. 3,721,175 1,071,936 Citigroup, Inc. 59,706,835 755,056 JPMorgan Chase & Co. 36,469,205 54,180 Moody's Corp. 3,741,671 --------------- 158,764,427 - ----------------------------------------------------------------------------------------------------------------------------------- Diversified Telecommunication 847,035 AT&T, Inc. (e) 30,281,501 Services - 2.9% 396,334 BellSouth Corp. 18,671,295 27,377 CenturyTel, Inc. 1,195,280 85,318 Citizens Communications Co. 1,226,020 28,475 Embarq Corp. 1,496,646 348,445 Qwest Communications International Inc. (a) 2,916,485 629,028 Verizon Communications, Inc. 23,425,003 92,680 Windstream Corp. 1,317,910 --------------- 80,530,140 - ----------------------------------------------------------------------------------------------------------------------------------- Electric Utilities - 1.5% 32,320 Allegheny Energy, Inc. (a) 1,483,811 92,320 American Electric Power Co., Inc. 3,930,986 69,699 Edison International 3,169,911 41,755 Entergy Corp. 3,854,822 148,528 Exelon Corp. 9,192,398 93,214 FPL Group, Inc. 5,072,706 66,616 FirstEnergy Corp. 4,016,945 78,164 PPL Corp. 2,801,398 18,732 Pinnacle West Capital Corp. 949,525 60,626 Progress Energy, Inc. 2,975,524 161,223 The Southern Co. 5,942,680 --------------- 43,390,706 - ----------------------------------------------------------------------------------------------------------------------------------- Electrical Equipment - 0.5% 41,544 American Power Conversion Corp. 1,270,831 19,152 Cooper Industries Ltd. Class A 1,731,915 181,696 Emerson Electric Co. 8,007,343 37,915 Rockwell Automation, Inc. 2,315,848 --------------- 13,325,937 - ----------------------------------------------------------------------------------------------------------------------------------- Electronic Equipment & Instruments - 0.3% 93,554 Agilent Technologies, Inc. (a) 3,260,357 34,764 Jabil Circuit, Inc. 853,456 35,762 Molex, Inc. (e) 1,131,152 134,863 Sanmina-SCI Corp. (a) 465,277 185,312 Solectron Corp. (a) 596,705 51,100 Symbol Technologies, Inc. 763,434 18,636 Tektronix, Inc. 543,612 --------------- 7,613,993
Master S&P 500 Index Series of Quantitative Master Series Trust Schedule of Investments as of December 31, 2006
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- Energy Equipment & Services - 1.7% 63,700 BJ Services Co. $ 1,867,684 70,044 Baker Hughes, Inc. (e) 5,229,485 224,008 Halliburton Co. 6,955,448 61,530 Nabors Industries Ltd. (a) 1,832,364 36,636 National Oilwell Varco, Inc. (a) 2,241,390 26,579 Noble Corp. (e) 2,023,991 27,772 Rowan Cos., Inc. 922,030 258,608 Schlumberger Ltd. (e) 16,333,681 42,600 Smith International, Inc. 1,749,582 66,541 Transocean, Inc. (a)(e) 5,382,502 79,500 Weatherford International Ltd. (a) 3,322,305 --------------- 47,860,462 - ----------------------------------------------------------------------------------------------------------------------------------- Food & Staples Retailing - 2.1% 180,936 CVS Corp. 5,592,732 97,224 Costco Wholesale Corp. 5,140,233 155,624 The Kroger Co. 3,590,246 39,332 SUPERVALU Inc. 1,406,119 127,100 SYSCO Corp. (e) 4,672,196 90,458 Safeway, Inc. 3,126,228 536,855 Wal-Mart Stores, Inc. (e) 24,791,964 213,424 Walgreen Co. 9,794,027 27,800 Whole Foods Market, Inc. 1,304,654 --------------- 59,418,399 - ----------------------------------------------------------------------------------------------------------------------------------- Food Products - 1.1% 140,634 Archer Daniels Midland Co. 4,494,663 47,135 Campbell Soup Co. 1,833,080 103,378 ConAgra Foods, Inc. 2,791,206 30,500 Dean Foods Co. (a) 1,289,540 71,760 General Mills, Inc. 4,133,376 65,836 HJ Heinz Co. 2,963,278 43,256 The Hershey Co. (e) 2,154,149 57,965 Kellogg Co. (e) 2,901,728 28,600 McCormick & Co., Inc. 1,102,816 164,541 Sara Lee Corp. 2,802,133 58,000 Tyson Foods, Inc. Class A 954,100 51,912 Wm. Wrigley Jr. Co. (e) 2,684,889 --------------- 30,104,958 - ----------------------------------------------------------------------------------------------------------------------------------- Gas Utilities - 0.1% 9,054 Nicor, Inc. 423,727 7,804 Peoples Energy Corp. 347,824 18,600 Questar Corp. 1,544,730 --------------- 2,316,281 - ----------------------------------------------------------------------------------------------------------------------------------- Health Care Equipment & Supplies - 1.6% 9,287 Bausch & Lomb, Inc. 483,481 136,627 Baxter International, Inc. 6,338,127 52,795 Becton Dickinson & Co. 3,703,569 58,635 Biomet, Inc. 2,419,866 256,971 Boston Scientific Corp. (a) 4,414,762 25,218 CR Bard, Inc. (e) 2,092,337 32,411 Hospira, Inc. (a) 1,088,361 249,840 Medtronic, Inc. (e) 13,368,938 73,788 St. Jude Medical, Inc. (a) 2,697,689
Master S&P 500 Index Series of Quantitative Master Series Trust Schedule of Investments as of December 31, 2006
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 67,610 Stryker Corp. $ 3,725,987 50,877 Zimmer Holdings, Inc. (a) 3,987,739 --------------- 44,320,856 - ----------------------------------------------------------------------------------------------------------------------------------- Health Care Providers & Services - 2.4% 118,468 Aetna, Inc. 5,115,448 48,286 AmerisourceBergen Corp. 2,170,939 91,591 Cardinal Health, Inc. 5,901,208 94,135 Caremark Rx, Inc. 5,376,050 22,796 Cigna Corp. 2,999,270 37,900 Coventry Health Care, Inc. (a) 1,896,895 27,400 Express Scripts, Inc. (a) 1,961,840 59,400 Health Management Associates, Inc. Class A 1,253,934 33,104 Humana, Inc. (a) 1,830,982 28,900 Laboratory Corp. of America Holdings (a) 2,123,283 13,504 Manor Care, Inc. 633,608 67,484 McKesson Corp. 3,421,439 66,501 Medco Health Solutions, Inc. (a) 3,553,813 31,600 Patterson Cos., Inc. (a) 1,122,116 38,500 Quest Diagnostics, Inc. (e) 2,040,500 97,737 Tenet Healthcare Corp. (a) 681,227 291,956 UnitedHealth Group, Inc. 15,686,796 134,184 WellPoint, Inc. (a) 10,558,939 --------------- 68,328,287 - ----------------------------------------------------------------------------------------------------------------------------------- Health Care Technology - 0.0% 44,540 IMS Health, Inc. (e) 1,223,959 - ----------------------------------------------------------------------------------------------------------------------------------- Hotels, Restaurants & Leisure - 1.6% 91,680 Carnival Corp. 4,496,904 33,007 Darden Restaurants, Inc. 1,325,891 36,830 Harrah's Entertainment, Inc. 3,046,578 79,031 Hilton Hotels Corp. 2,758,182 77,920 International Game Technology (e) 3,599,904 76,554 Marriott International, Inc. Class A 3,653,157 264,218 McDonald's Corp. 11,712,784 158,624 Starbucks Corp. (a) 5,618,462 43,468 Starwood Hotels & Resorts Worldwide, Inc. 2,716,750 22,072 Wendy's International, Inc. 730,362 45,625 Wyndham Worldwide Corp. (a) 1,460,913 56,034 Yum! Brands, Inc. 3,294,799 --------------- 44,414,686 - ----------------------------------------------------------------------------------------------------------------------------------- Household Durables - 0.6% 13,742 Black & Decker Corp. 1,098,948 28,468 Centex Corp. 1,601,894 59,600 DR Horton, Inc. 1,578,804 30,715 Fortune Brands, Inc. (e) 2,622,754 14,900 Harman International Industries, Inc. 1,488,659 14,522 KB Home 744,688 40,316 Leggett & Platt, Inc. 963,552 33,322 Lennar Corp. Class A 1,748,072 56,754 Newell Rubbermaid, Inc. 1,643,028 50,072 Pulte Homes, Inc. 1,658,385 12,252 Snap-On, Inc. 583,685
Master S&P 500 Index Series of Quantitative Master Series Trust Schedule of Investments as of December 31, 2006
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 16,743 The Stanley Works $ 842,005 14,581 Whirlpool Corp. 1,210,515 --------------- 17,784,989 - ----------------------------------------------------------------------------------------------------------------------------------- Household Products - 2.1% 36,298 Clorox Co. 2,328,517 107,581 Colgate-Palmolive Co. 7,018,584 95,123 Kimberly-Clark Corp. 6,463,608 692,764 The Procter & Gamble Co. 44,523,942 --------------- 60,334,651 - ----------------------------------------------------------------------------------------------------------------------------------- IT Services - 1.1% 22,700 Affiliated Computer Services, Inc. Class A (a) 1,108,668 125,780 Automatic Data Processing, Inc. (e) 6,194,665 29,700 Cognizant Technology Solutions Corp. (a) 2,291,652 37,650 Computer Sciences Corp. (a) 2,009,381 30,514 Convergys Corp. (a) 725,623 110,887 Electronic Data Systems Corp. 3,054,937 35,400 Fidelity National Information Services, Inc. 1,419,186 163,600 First Data Corp. 4,175,072 42,992 Fiserv, Inc. (a) 2,253,641 77,558 Paychex, Inc. 3,066,643 28,973 Sabre Holdings Corp. Class A 923,949 68,782 Unisys Corp. (a) 539,251 163,600 The Western Union Co. 3,667,912 --------------- 31,430,580 - ----------------------------------------------------------------------------------------------------------------------------------- Independent Power Producers & 139,260 The AES Corp. (a) 3,069,291 Energy Traders - 0.4% 42,349 Constellation Energy Group, Inc. 2,916,576 92,666 Dynegy, Inc. Class A (a) 670,902 97,644 TXU Corp. 5,293,281 --------------- 11,950,050 - ----------------------------------------------------------------------------------------------------------------------------------- Industrial Conglomerates - 4.0% 163,288 3M Co. 12,725,034 2,242,081 General Electric Co. 83,427,834 26,714 Textron, Inc. 2,504,972 445,125 Tyco International Ltd. 13,531,800 --------------- 112,189,640 - ----------------------------------------------------------------------------------------------------------------------------------- Insurance - 4.8% 66,210 ACE Ltd. 4,010,340 22,166 AMBAC Financial Group, Inc. 1,974,326 67,285 AON Corp. (e) 2,377,852 108,399 Aflac, Inc. 4,986,354 132,344 The Allstate Corp. 8,616,918 563,307 American International Group, Inc. 40,366,580 86,806 Chubb Corp. 4,592,905 37,091 Cincinnati Financial Corp. 1,680,593 91,000 Genworth Financial, Inc. Class A 3,113,110 65,325 Hartford Financial Services Group, Inc. (e) 6,095,476 66,416 Lincoln National Corp. 4,410,022 94,670 Loews Corp. 3,925,965 33,445 MBIA, Inc. 2,443,492 118,298 Marsh & McLennan Cos., Inc. 3,627,017 166,642 MetLife, Inc. (e) 9,833,544
Master S&P 500 Index Series of Quantitative Master Series Trust Schedule of Investments as of December 31, 2006
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 63,400 Principal Financial Group, Inc. $ 3,721,580 171,000 The Progressive Corp. 4,141,620 102,400 Prudential Financial, Inc. 8,792,064 29,822 Safeco Corp. 1,865,366 149,927 The St. Paul Travelers Cos., Inc. 8,049,581 23,556 Torchmark Corp. 1,501,931 65,967 UnumProvident Corp. 1,370,794 35,105 XL Capital Ltd. Class A 2,528,262 --------------- 134,025,692 - ----------------------------------------------------------------------------------------------------------------------------------- Internet & Catalog Retail - 0.2% 63,600 Amazon.com, Inc. (a)(e) 2,509,656 48,500 IAC/InterActiveCorp (a) 1,802,260 --------------- 4,311,916 - ----------------------------------------------------------------------------------------------------------------------------------- Internet Software & Services - 1.3% 249,500 eBay, Inc. (a)(e) 7,502,465 46,170 Google, Inc. Class A (a) 21,260,362 58,400 VeriSign, Inc. (a) 1,404,520 274,760 Yahoo!, Inc. (a) 7,017,370 --------------- 37,184,717 - ----------------------------------------------------------------------------------------------------------------------------------- Leisure Equipment & Products - 0.2% 19,264 Brunswick Corp. 614,522 68,653 Eastman Kodak Co. (e) 1,771,247 36,794 Hasbro, Inc. 1,002,637 82,934 Mattel, Inc. 1,879,284 --------------- 5,267,690 - ----------------------------------------------------------------------------------------------------------------------------------- Life Sciences Tools & Services - 0.3% 42,755 Applera Corp. - Applied Biosystems Group 1,568,681 9,055 Millipore Corp. (a) 603,063 22,784 PerkinElmer, Inc. 506,488 93,757 Thermo Electron Corp. (a) 4,246,255 25,120 Waters Corp. (a) 1,230,126 --------------- 8,154,613 - ----------------------------------------------------------------------------------------------------------------------------------- Machinery - 1.4% 140,988 Caterpillar, Inc. 8,646,794 9,909 Cummins, Inc. 1,171,046 52,550 Danaher Corp. (e) 3,806,722 47,998 Deere & Co. 4,563,170 42,659 Dover Corp. 2,091,144 35,750 Eaton Corp. 2,686,255 38,292 ITT Corp. 2,175,751 85,842 Illinois Tool Works, Inc. (e) 3,965,042 75,396 Ingersoll-Rand Co. Class A 2,950,246 53,961 PACCAR, Inc. (e) 3,502,069 25,903 Pall Corp. 894,949 26,588 Parker Hannifin Corp. 2,044,085 22,300 Terex Corp. (a) 1,440,134 --------------- 39,937,407 - ----------------------------------------------------------------------------------------------------------------------------------- Media - 3.7% 159,781 CBS Corp. Class B 4,981,972 115,954 Clear Channel Communications, Inc. 4,121,005 403,943 Comcast Corp. Class A (a) 17,098,907 49,905 Comcast Corp. Special Class A (a)(e) 2,090,021
Master S&P 500 Index Series of Quantitative Master Series Trust Schedule of Investments as of December 31, 2006
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 169,100 The DIRECTV Group, Inc. (a) $ 4,217,354 16,719 Dow Jones & Co., Inc. (e) 635,322 18,700 EW Scripps Co. Class A 933,878 47,179 Gannett Co., Inc. 2,852,442 84,930 Interpublic Group of Cos., Inc. (a) 1,039,543 79,716 The McGraw-Hill Cos., Inc. 5,422,282 10,421 Meredith Corp. 587,223 30,847 New York Times Co. Class A (e) 751,433 519,200 News Corp. Class A (e) 11,152,416 34,797 Omnicom Group 3,637,678 881,484 Time Warner, Inc. 19,198,722 40,942 Tribune Co. 1,260,195 54,371 Univision Communications, Inc. Class A (a) 1,925,821 161,281 Viacom, Inc. Class B (a) 6,617,359 461,947 Walt Disney Co. (e) 15,830,924 --------------- 104,354,497 - ----------------------------------------------------------------------------------------------------------------------------------- Metals & Mining - 0.9% 186,445 Alcoa, Inc. 5,595,214 20,628 Allegheny Technologies, Inc. 1,870,547 40,134 Freeport-McMoRan Copper & Gold, Inc. Class B 2,236,668 92,686 Newmont Mining Corp. 4,184,773 68,664 Nucor Corp. 3,753,174 42,776 Phelps Dodge Corp. 5,121,143 26,322 United States Steel Corp. 1,925,191 --------------- 24,686,710 - ----------------------------------------------------------------------------------------------------------------------------------- Multi-Utilities - 1.4% 41,781 Ameren Corp. 2,244,893 57,314 CMS Energy Corp. (a) 957,144 65,870 Centerpoint Energy, Inc. 1,092,125 47,725 Consolidated Edison, Inc. 2,294,141 34,838 DTE Energy Co. (e) 1,686,508 72,953 Dominion Resources, Inc. 6,116,380 271,546 Duke Energy Corp. 9,018,043 33,261 KeySpan Corp. 1,369,688 51,337 NiSource, Inc. 1,237,222 81,277 PG&E Corp. (e) 3,846,840 900 Progress Energy, Inc. (a)(e) 279 57,664 Public Service Enterprise Group, Inc. 3,827,736 52,638 Sempra Energy 2,949,834 40,796 TECO Energy, Inc. 702,915 83,702 Xcel Energy, Inc. 1,930,168 --------------- 39,273,916 - ----------------------------------------------------------------------------------------------------------------------------------- Multiline Retail - 1.2% 23,995 Big Lots, Inc. (a) 549,965 17,564 Dillard's, Inc. Class A 614,213 65,950 Dollar General Corp. 1,059,157 39,464 Family Dollar Stores, Inc. 1,157,479 114,780 Federated Department Stores (e) 4,376,561 49,998 JC Penney Co., Inc. 3,867,845 70,309 Kohl's Corp. (a) 4,811,245 51,572 Nordstrom, Inc. 2,544,562
Master S&P 500 Index Series of Quantitative Master Series Trust Schedule of Investments as of December 31, 2006
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 19,307 Sears Holdings Corp. (a) $ 3,242,225 181,835 Target Corp. (e) 10,373,687 --------------- 32,596,939 - ----------------------------------------------------------------------------------------------------------------------------------- Office Electronics - 0.1% 207,602 Xerox Corp. (a) 3,518,854 - ----------------------------------------------------------------------------------------------------------------------------------- Oil, Gas & Consumable Fuels - 8.0% 96,322 Anadarko Petroleum Corp. 4,191,933 67,342 Apache Corp. 4,478,916 78,500 Chesapeake Energy Corp. (e) 2,280,425 478,560 Chevron Corp. 35,188,517 359,960 ConocoPhillips 25,899,122 38,800 Consol Energy, Inc. 1,246,644 99,094 Devon Energy Corp. 6,647,226 55,340 EOG Resources, Inc. 3,455,983 144,615 El Paso Corp. 2,209,717 1,270,212 Exxon Mobil Corp. (d) 97,336,346 48,501 Hess Corp. (e) 2,404,195 25,134 Kinder Morgan, Inc. 2,657,921 75,572 Marathon Oil Corp. 6,990,410 39,400 Murphy Oil Corp. 2,003,490 183,658 Occidental Petroleum Corp. (e) 8,968,020 58,600 Peabody Energy Corp. 2,368,026 26,270 Sunoco, Inc. 1,638,197 135,400 Valero Energy Corp. 6,927,064 123,586 Williams Cos., Inc. (e) 3,228,066 77,833 XTO Energy, Inc. 3,662,043 --------------- 223,782,261 - ----------------------------------------------------------------------------------------------------------------------------------- Paper & Forest Products - 0.3% 106,062 International Paper Co. (e) 3,616,714 42,472 MeadWestvaco Corp. 1,276,708 49,061 Weyerhaeuser Co. 3,466,160 --------------- 8,359,582 - ----------------------------------------------------------------------------------------------------------------------------------- Personal Products - 0.2% 100,760 Avon Products, Inc. 3,329,110 27,300 The Estee Lauder Cos., Inc. Class A 1,114,386 --------------- 4,443,496 - ----------------------------------------------------------------------------------------------------------------------------------- Pharmaceuticals - 6.2% 331,217 Abbott Laboratories (e) 16,133,580 31,264 Allergan, Inc. (e) 3,743,551 22,000 Barr Pharmaceuticals, Inc. (a) 1,102,640 419,661 Bristol-Myers Squibb Co. 11,045,478 217,377 Eli Lilly & Co. 11,325,342 67,064 Forest Laboratories, Inc. (a) 3,393,438 635,977 Johnson & Johnson 41,987,202 48,555 King Pharmaceuticals, Inc. (a) 772,996 471,757 Merck & Co., Inc. 20,568,605 53,000 Mylan Laboratories 1,057,880 1,580,581 Pfizer, Inc. 40,937,048 327,525 Schering-Plough Corp. 7,742,691 22,781 Watson Pharmaceuticals, Inc. (a) 592,989 291,699 Wyeth 14,853,313 --------------- 175,256,753 - -----------------------------------------------------------------------------------------------------------------------------------
Master S&P 500 Index Series of Quantitative Master Series Trust Schedule of Investments as of December 31, 2006
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts 18,500 Apartment Investment & Management (REITs) - 1.1% Co. Class A $ 1,036,370 43,800 Archstone-Smith Trust 2,549,598 22,200 Boston Properties, Inc. 2,483,736 71,764 Equity Office Properties Trust 3,456,872 68,240 Equity Residential 3,463,180 43,600 Kimco Realty Corp. 1,959,820 37,900 Plum Creek Timber Co., Inc. 1,510,315 57,600 ProLogis 3,500,352 25,300 Public Storage, Inc. 2,466,750 45,000 Simon Property Group, Inc. (e) 4,558,050 27,500 Vornado Realty Trust 3,341,250 --------------- 30,326,293 - ----------------------------------------------------------------------------------------------------------------------------------- Real Estate Management & 40,000 CB Richard Ellis Group, Inc. (a) 1,328,000 Development - 0.1% 50,244 Realogy Corp. (a) 1,523,398 --------------- 2,851,398 - ----------------------------------------------------------------------------------------------------------------------------------- Road & Rail - 0.7% 75,794 Burlington Northern Santa Fe Corp. (e) 5,594,355 90,956 CSX Corp. 3,131,615 87,442 Norfolk Southern Corp. 4,397,458 12,674 Ryder System, Inc. 647,134 57,576 Union Pacific Corp. 5,298,144 --------------- 19,068,706 - ----------------------------------------------------------------------------------------------------------------------------------- Semiconductors & Semiconductor 110,147 Advanced Micro Devices, Inc. (a) 2,241,492 Equipment - 2.4% 83,890 Altera Corp. (a) 1,650,955 79,316 Analog Devices, Inc. 2,607,117 291,176 Applied Materials, Inc. 5,372,197 96,421 Broadcom Corp. Class A (a) 3,115,363 1,252,831 Intel Corp. 25,369,828 38,937 Kla-Tencor Corp. 1,937,116 78,566 LSI Logic Corp. (a) 707,094 57,499 Linear Technology Corp. 1,743,370 63,860 Maxim Integrated Products, Inc. 1,955,393 149,568 Micron Technology, Inc. (a) 2,087,969 71,672 National Semiconductor Corp. 1,626,954 32,500 Novellus Systems, Inc. (a) 1,118,650 80,540 Nvidia Corp. (a) 2,980,785 36,954 PMC-Sierra, Inc. (a) 247,961 39,832 Teradyne, Inc. (a) 595,887 339,772 Texas Instruments, Inc. 9,785,434 74,193 Xilinx, Inc. (e) 1,766,535 --------------- 66,910,100 - ----------------------------------------------------------------------------------------------------------------------------------- Software - 3.3% 126,050 Adobe Systems, Inc. (a)(e) 5,183,176 52,328 Autodesk, Inc. (a) 2,117,191 46,520 BMC Software, Inc. (a) 1,497,944 105,612 CA, Inc. (e) 2,392,112 36,405 Citrix Systems, Inc. (a) 984,755 75,449 Compuware Corp. (a) 628,490
Master S&P 500 Index Series of Quantitative Master Series Trust Schedule of Investments as of December 31, 2006
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- 63,300 Electronic Arts, Inc. (a) $ 3,187,788 68,304 Intuit, Inc. (a) 2,083,955 1,872,324 Microsoft Corp. (d) 55,907,595 80,324 Novell, Inc. (a) 498,009 874,285 Oracle Corp. (a) 14,985,245 214,917 Symantec Corp. (a)(e) 4,481,019 --------------- 93,947,279 - ----------------------------------------------------------------------------------------------------------------------------------- Specialty Retail - 2.0% 41,732 AutoNation, Inc. (a) 889,726 13,777 AutoZone, Inc. (a) 1,592,070 55,624 Bed, Bath & Beyond, Inc. (a) 2,119,274 88,369 Best Buy Co., Inc. 4,346,871 36,323 Circuit City Stores, Inc. 689,411 122,813 The Gap, Inc. 2,394,854 447,386 Home Depot, Inc. 17,967,022 78,594 Limited Brands 2,274,510 327,380 Lowe's Cos., Inc. 10,197,887 65,458 Office Depot, Inc. (a) 2,498,532 18,724 OfficeMax, Inc. 929,647 34,098 RadioShack Corp. 572,164 21,192 The Sherwin-Williams Co. 1,347,387 157,851 Staples, Inc. 4,214,622 104,348 TJX Cos., Inc. 2,976,005 30,201 Tiffany & Co. 1,185,087 --------------- 56,195,069 - ----------------------------------------------------------------------------------------------------------------------------------- Textiles, Apparel & Luxury Goods - 0.4% 81,400 Coach, Inc. (a) 3,496,944 26,560 Jones Apparel Group, Inc. 887,901 20,938 Liz Claiborne, Inc. 909,965 38,310 Nike, Inc. Class B 3,793,839 22,567 VF Corp. 1,852,299 --------------- 10,940,948 - ----------------------------------------------------------------------------------------------------------------------------------- Thrifts & Mortgage Finance - 1.5% 129,910 Countrywide Financial Corp. 5,514,680 212,773 Fannie Mae 12,636,588 146,003 Freddie Mac (e) 9,913,604 17,880 MGIC Investment Corp. 1,118,215 78,985 Sovereign Bancorp, Inc. 2,005,429 214,511 Washington Mutual, Inc. 9,758,105 --------------- 40,946,621 - ----------------------------------------------------------------------------------------------------------------------------------- Tobacco - 1.5% 453,818 Altria Group, Inc. 38,946,661 36,300 Reynolds American, Inc. 2,376,561 35,535 UST, Inc. 2,068,137 --------------- 43,391,359 - ----------------------------------------------------------------------------------------------------------------------------------- Trading Companies & Distributors - 0.0% 18,045 WW Grainger, Inc. 1,262,067 - -----------------------------------------------------------------------------------------------------------------------------------
Master S&P 500 Index Series of Quantitative Master Series Trust Schedule of Investments as of December 31, 2006
Shares Industry Held Common Stocks Value - ----------------------------------------------------------------------------------------------------------------------------------- Wireless Telecommunication Services - 79,737 Alltel Corp. $ 4,822,494 0.6% 649,115 Sprint Nextel Corp. 12,261,782 --------------- 17,084,276 - ----------------------------------------------------------------------------------------------------------------------------------- Total Common Stocks (Cost - $1,840,530,170) - 98.6% 2,770,475,715 - ----------------------------------------------------------------------------------------------------------------------------------- Beneficial Interest Short-Term Securities - ----------------------------------------------------------------------------------------------------------------------------------- $ 47,914,225 BlackRock Liquidity Series, LLC Cash Sweep Series, 5.26% (b)(c) 47,914,225 335,341,800 BlackRock Liquidity Series, LLC Money Market Series, 5.29% (b)(c)(f) 335,341,800 - ----------------------------------------------------------------------------------------------------------------------------------- Total Short-Term Securities (Cost - $383,256,025) - 13.6% 383,256,025 - ----------------------------------------------------------------------------------------------------------------------------------- Total Investments (Cost - $2,223,786,195*) - 112.2% 3,153,731,740 Liabilities in Excess of Other Assets - (12.2%) (343,098,483) --------------- Net Assets - 100.0% $ 2,810,633,257 ===============
* The cost and unrealized appreciation (depreciation) of investments as of December 31, 2006 as computed for federal income tax purposes, were as follows: Aggregate cost $ 2,295,656,436 =============== Gross unrealized appreciation $ 921,983,748 Gross unrealized depreciation (63,908,444) --------------- Net unrealized appreciation $ 858,075,304 =============== (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:
-------------------------------------------------------------------------------------------------------------------------- Affiliate Purchase Cost Sale Cost Realized Gain Income -------------------------------------------------------------------------------------------------------------------------- BlackRock Liquidity Series, LLC Cash Sweep Series $ 42,258,298* $ -- -- $ 1,100,253 BlackRock Liquidity Series, LLC Money Market Series -- $ 227,100** -- $ 342,181 Merrill Lynch & Co., Inc. -- $ 2,837,272 $ 872,498 $ 209,992 PNC Financial Services Group, Inc. -- $ 683,456 $ 475,399 $ 152,206 --------------------------------------------------------------------------------------------------------------------------
* Represents net purchase cost. ** Represents net sale cost. (c) Represents the current yield as of December 31, 2006. (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. (f) Security was purchased with the cash proceeds from securities loans. 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, 2006 were as follows:
------------------------------------------------------------------------------------------- Unrealized Number of Contracts Issue Expiration Date Face Value Appreciation ------------------------------------------------------------------------------------------- 110 S&P 500 Index March 2007 $ 39,184,008 $ 96,992 -------------------------------------------------------------------------------------------
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, 2006, and for the year then ended and have issued our report thereon dated February 26, 2007 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, 2006 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 26, 2007 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) - As of September 29, 2006, with the conclusion of the combination of Merrill Lynch's asset management business with BlackRock, the registrant was migrated to BlackRock's trading and compliance monitoring systems, and various personnel changes occurred. In conjunction with these business improvements, there were no changes in the registrants internal control over financial reporting (as defined in Rule 30a-3(d) under Act (17 CFR 270.30a-3(d)) that occurred during the last fiscal half-year of the period covered by this report that has materially affected, or is reasonably likely to 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. BlackRock S&P 500 Index Fund of BlackRock 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 BlackRock S&P 500 Index Fund of BlackRock Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust Date: February 20, 2007 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 BlackRock S&P 500 Index Fund of BlackRock Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust Date: February 20, 2007 By: /s/ Donald C. Burke ------------------------------------ Donald C. Burke, Chief Financial Officer of BlackRock S&P 500 Index Fund of BlackRock Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust Date: February 20, 2007 EX-99.CERT 2 e601696_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 BlackRock S&P 500 Index Fund of BlackRock 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 BlackRock S&P 500 Index Fund of BlackRock 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 20, 2007 /s/ Robert C. Doll, Jr. -------------------------------- Robert C. Doll, Jr., Chief Executive Officer of BlackRock S&P 500 Index Fund of BlackRock 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 BlackRock S&P 500 Index Fund of BlackRock 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 BlackRock S&P 500 Index Fund of BlackRock 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 20, 2007 /s/ Donald C. Burke -------------------------------- Donald C. Burke, Chief Financial Officer of BlackRock S&P 500 Index Fund of BlackRock Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust EX-99.1350CERT 3 e601696_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 BlackRock S&P 500 Index Fund of BlackRock 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 20, 2007 /s/ Robert C. Doll, Jr. -------------------------------- Robert C. Doll, Jr., Chief Executive Officer of BlackRock S&P 500 Index Fund of BlackRock 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 BlackRock S&P 500 Index Fund of BlackRock Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust and will be retained by BlackRock S&P 500 Index Fund of BlackRock 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 BlackRock S&P 500 Index Fund of BlackRock 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 20, 2007 /s/ Donald C. Burke -------------------------------- Donald C. Burke, Chief Financial Officer of BlackRock S&P 500 Index Fund of BlackRock 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 BlackRock S&P 500 Index Fund of BlackRock Index Funds, Inc. and Master S&P 500 Index Series of Quantitative Master Series Trust and will be retained by BlackRock S&P 500 Index Fund of BlackRock 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-----