UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-7899
811-7885
Name of Fund: Merrill Lynch Aggregate Bond Index Fund
Master Aggregate Bond Index Series
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President, Merrill Lynch
Aggregate Bond Index Fund, 800 Scudders Mill Road, Plainsboro, NJ 08536.
Mailing address: P.O. Box 9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 12/31/03
Date of reporting period: 01/01/03 - 06/30/03
Item 1 - Attach shareholder report
[LOGO] Merrill Lynch Investment Managers
Semi-Annual Report
June 30, 2003
Merrill Lynch
Aggregate Bond
Index Fund
Merrill Lynch Index Funds, Inc.
www.mlim.ml.com
Merrill Lynch Aggregate Bond Index Fund
Officers and
Directors
Terry K. Glenn, President and Director/Trustee
Donald W. Burton, Director/Trustee
M. Colyer Crum, Director/Trustee
Laurie Simon Hodrick, Director/Trustee
Fred G. Weiss, Director/Trustee
Robert C. Doll, Jr., Senior Vice President
Jeffrey B. Hewson, Vice President
Frank Viola, Vice President
Donald C. Burke, Vice President and Treasurer
Brian D. Stewart, Secretary
Custodian
Merrill Lynch Trust Company, FSB
1300 Merrill Lynch Drive
3rd Floor - MSC 0303
Pennington, NJ 08534
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
DEAR SHAREHOLDER
Effective April 14, 2003, the share class names for the Merrill Lynch family of
mutual funds were changed to be consistent with the standard share classes of
most other mutual fund families. As of that date, all Class A Shares were
redesignated Class I Shares. At the same time, Class D Shares were redesignated
Class A Shares. Trading symbols have not changed nor have current eligibility
rules or pricing structures. This redesignation of share classes does not impact
your investment in any way.
Merrill Lynch Aggregate Bond Index Fund is designed for investors who have an
investment objective of seeking to achieve investment returns that replicate the
total return of investment-grade fixed income securities. As such, the Fund
seeks to achieve its objective by replicating the total return, before expenses,
of the unmanaged Lehman Brothers Aggregate Bond Index, a widely accepted
investment performance benchmark comprised of U.S. government securities, U.S.
government agency mortgage-backed securities (MBS) and investment-grade
corporate bonds. It is the intent of the Fund to provide returns that are
representative of the bond market as a whole, rather than focus on or express
bias to any specific sector. The Fund seeks to achieve its objective by
investing all of its assets in Master Aggregate Bond Index Series. Therefore,
the Series' structure is dependent on the structure of the underlying benchmark.
Sector weighting and security selection in the underlying benchmark are
determined by the market representation that the sectors have in the overall
market.
Portfolio Matters
For the six months ended June 30, 2003, the Fund's Class A and Class I Shares
had total returns of +3.53% and +3.75%, respectively. (Complete performance
information can be found on pages 4 and 5 of this report to shareholders.) This
compared to a total return of +3.93% for the unmanaged benchmark Lehman Brothers
Aggregate Bond Index for the same period.
At June 30, 2003, the Lehman Brothers Aggregate Bond Index was comprised of
7,454 securities. Logistical constraints preclude us from replicating a
portfolio with all of the index positions. Therefore, we construct a proxy
portfolio, which seeks to duplicate the return of the benchmark. The investments
in the portfolio are determined by implementing stratified sampling techniques.
Under this approach, securities that are selected collectively mimic the
investment characteristics of the Index at the sector and sub-sector levels.
The Index is comprised of three major investment sectors: government and
agencies, agency guaranteed MBS, and investment-grade corporate bonds. The
government and agency sector is currently comprised of 1,064 securities and
accounts for 34.04% of the Index. In this area of the Series, we construct a
sector portfolio, as we seek to minimize variation of the duration and partial
duration attributes. This approach serves to ensure that price performance of
this sector of the Series and of the Index should be identical in the event of a
change of interest rates or a change in shape of the yield curve. We currently
seek to achieve these objectives with 40 positions.
The government guaranteed MBS sector of the Index had 2,420 issues including
minor holdings in commercial MBS and asset-backed securities. This sector
represents 38.50% of the Index. The measurement of duration in this sector is a
subjective procedure. Unlike non-callable bonds, MBS are effectively callable
beginning with the origination day of the underlying mortgage. The callable
events are referred to as prepayments. Prepayments resulting from mortgage
refinancing activity typically increase as interest rates decline and subside as
interest rates rise. As a result, it is not possible to determine the life of an
MBS upon issuance. Thus, it is not possible to accurately calculate the duration
of MBS. However, investment professionals estimate durations using prepayment
assumptions. Rather than matching estimated durations, we manage this sector by
matching product type. We seek to minimize any variation through MBS coupon,
term, guarantor and age. At June 30, 2003, there were 49 positions in the
Series' MBS sector.
The Series has 373 corporate securities. The Index counterpart has 3,970
positions and accounts for 27.46% of the Index. Since duration is determinable
in this sector, we use the same management techniques for the corporate sector
as we do for the government and agency sector, thus minimizing tracking error
related to interest rate and yield curve changes. This sector also includes
other investment attributes. The area has additional sub-sectors that are also
managed to its index counterpart. These include industrial, utility, financial
and sovereign sectors. In addition, we monitor credit rating exposure variation.
For the six-month period ended June 30, 2003, the benchmark Index generated a
total return of +3.93%. The corporate sector of the Index returned +7.32%, by
far the best-performing sector in the Index. The second-highest performer was
the government and agency sector, which returned +3.63%. The MBS sector was the
lowest-performer for the period. While the sharp decline in interest rates
permitted significant appreciation of non-callable bonds, it also sparked
unprecedented refinance activity in the MBS sector. This muted price performance
and escalated paydown losses in this sector as MBS returned +1.93% for the
period.
In Conclusion
We appreciate your investment in Merrill Lynch Aggregate Bond Index Fund, and we
look forward to assisting you with your investment needs in the months and years
ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director/Trustee
/s/ Jeffrey B. Hewson
Jeffrey B. Hewson
Vice President and
Co-Portfolio Manager
/s/ Frank Viola
Frank Viola
Vice President and
Co-Portfolio Manager
July 24, 2003
2 & 3
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
PERFORMANCE DATA
About Fund
Performance
Effective April 14, 2003, Class A Shares were redesignated Class I Shares and
Class D Shares were redesignated Class A Shares. Investors are able to purchase
shares of the Fund through two pricing alternatives:
o Class A Shares do not incur a maximum initial sales charge or deferred
sales charge and bear no ongoing distribution fee. In addition, Class A
Shares are subject to an ongoing account maintenance fee of 0.25%.
o Class I Shares do not incur a maximum initial sales charge (front-end
load) or deferred sales charge and bear no ongoing distribution or account
maintenance fees. Class I Shares are available only to eligible investors.
None of the past results shown should be considered a representation of
future performance. Performance results do not reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption
of fund shares. Figures shown in each of the following tables assume
reinvestment of all dividends and capital gains distributions at net asset
value on the payable date. Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost. Dividends paid to each class of shares will vary
because of the different levels of account maintenance, distribution and
transfer agency fees applicable to each class, which are deducted from the
income available to be paid to shareholders. The Fund's Administrator
voluntarily waived a portion of its administrative fee. Without such
waiver, the Fund's performance would have been lower.
Recent
Performance
Results
6-Month 12-Month Since Inception Standardized
As of June 30, 2003 Total Return Total Return Total Return 30-Day Yield
===========================================================================================================
ML Aggregate Bond Index Fund Class A Shares* +3.53% + 9.82% +58.25% 2.51%
- -----------------------------------------------------------------------------------------------------------
ML Aggregate Bond Index Fund Class I Shares* +3.75 +10.09 +60.72 2.76
- -----------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index** +3.93 +10.40 +64.29 --
===========================================================================================================
* Total investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date. The Fund's inception
date is 4/03/97.
** This unmanaged market-weighted Index is comprised of investment-grade
corporate bonds (rated BBB or better), mortgages and U.S. Treasury and
government agency issues with at least one year to maturity. Since
inception total return is from 4/03/97.
Average Annual
Total Return
Class A Shares % Return
================================================================================
One Year Ended 6/30/03 +9.82%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/03 +6.90
- --------------------------------------------------------------------------------
Inception (4/03/97) through 6/30/03 +7.63
- --------------------------------------------------------------------------------
Class I Shares % Return
================================================================================
One Year Ended 6/30/03 +10.09%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/03 + 7.17
- --------------------------------------------------------------------------------
Inception (4/03/97) through 6/30/03 + 7.90
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
MERRILL LYNCH
AGGREGATE BOND
INDEX FUND As of June 30, 2003
=================================================================================================================================
Assets: Investment in Master Aggregate Bond Index Series, at value
(identified cost--$441,784,075) ............................................... $ 468,124,567
Prepaid registration fees and other assets .................................... 34,026
-------------
Total assets .................................................................. 468,158,593
-------------
=================================================================================================================================
Liabilities: Payables:
Dividends to shareholders ................................................... $ 425,651
Administrative fees ......................................................... 61,999
Other affiliates ............................................................ 31,640
Distributor ................................................................. 14,227 533,517
-----------
Accrued expenses and other liabilities ........................................ 57,754
-------------
Total liabilities ............................................................. 591,271
-------------
=================================================================================================================================
Net Assets: Net assets .................................................................... $ 467,567,322
=============
=================================================================================================================================
Net Assets Class A Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized $ 636
Consist of: Class I Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized 3,564
Paid-in capital in excess of par .............................................. 444,055,179
Accumulated distributions in excess of investment income--net ................. $ (376,052)
Accumulated realized capital losses on investments from the Series--net ....... (2,456,497)
Unrealized appreciation on investments from the Series--net ................... 26,340,492
-----------
Total accumulated earnings--net ............................................... 23,507,943
-------------
Net assets .................................................................... $ 467,567,322
=============
=================================================================================================================================
Net Asset Class A--Based on net assets of $70,860,567 and 6,364,565 shares outstanding .. $ 11.13
Value: =============
Class I--Based on net assets of $396,706,755 and 35,635,842 shares outstanding $ 11.13
=============
=================================================================================================================================
See Notes to Financial Statements.
4 & 5
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
STATEMENT OF OPERATIONS
MERRILL LYNCH
AGGREGATE BOND
INDEX FUND For the Six Months Ended June 30, 2003
============================================================================================================================
Investment Income Net investment income allocated from the Series:
From the Series--Net: Interest income from other investments ............................. $ 9,665,750
Interest income on swaps--net ...................................... 61,938
Securities lending--net ............................................ 548
Expenses ........................................................... (131,943)
------------
Net investment income from the Series ................................ 9,596,293
------------
============================================================================================================================
Expenses: Administration fee ................................................... $ 416,017
Transfer agent fees .................................................. 131,162
Account maintenance fee--Class A ..................................... 80,123
Printing and shareholder reports ..................................... 57,310
Registration fees .................................................... 24,999
Professional fees .................................................... 9,953
Directors' fees and expenses ......................................... 2,738
Other ................................................................ 3,641
---------
Total expenses before waiver ......................................... 725,943
Waiver of expenses ................................................... (16,414)
---------
Total expenses after waiver .......................................... 709,529
------------
Investment income--net ............................................... 8,886,764
------------
============================================================================================================================
Realized & Realized gain on investments from the Series--net .................... 1,729,573
Unrealized Gain Change in unrealized appreciation on investments from the Series--net 5,766,418
From the ------------
Series -- Net: Total realized and unrealized gain on investments from the Series--net 7,495,991
------------
Net Increase in Net Assets Resulting from Operations ................. $ 16,382,755
============
============================================================================================================================
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
MERRILL LYNCH Months Ended Year Ended
AGGREGATE BOND June 30, December 31,
INDEX FUND Increase (Decrease) in Net Assets: 2003 2002
=============================================================================================================================
Operations: Investment income--net .............................................. $ 8,886,764 $ 21,794,189
Realized gain on investments from the Series--net ................... 1,729,573 3,143,394
Change in unrealized appreciation on investments from the Series--net 5,766,418 15,125,614
------------- -------------
Net increase in net assets resulting from operations ................ 16,382,755 40,063,197
------------- -------------
=============================================================================================================================
Dividends to Investment income--net:
Shareholders: Class A ........................................................... (1,251,166) (2,879,105)
Class I ........................................................... (7,779,406) (18,820,545)
------------- -------------
Net decrease in net assets resulting from dividends to shareholders . (9,030,572) (21,699,650)
------------- -------------
=============================================================================================================================
Capital Share Net increase in net assets derived from capital share transactions .. 38,195,451 18,827,831
Transactions: ------------- -------------
=============================================================================================================================
Net Assets: Total increase in net assets ........................................ 45,547,634 37,191,378
Beginning of period ................................................. 422,019,688 384,828,310
------------- -------------
End of period* ...................................................... $ 467,567,322 $ 422,019,688
============= =============
=============================================================================================================================
* Accumulated distributions in excess of investment income--net ....... $ (376,052) $ (232,244)
============= =============
=============================================================================================================================
See Notes to Financial Statements.
6 & 7
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
FINANCIAL HIGHLIGHTS
Class A@@
-------------------------------------------------------------
The following per share data and ratios For the
have been derived from information provided Six Months
MERRILL LYNCH in the financial statements. Ended For the Year Ended December 31,
AGGREGATE BOND June 30, -----------------------------------------------
INDEX FUND Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
================================================================================================================================
Per Share Net asset value, beginning of period ...... $ 10.96 $ 10.50 $ 10.31 $ 9.86 $ 10.61
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .................... .21+++ .52+++ .58 .61 .58
Realized and unrealized gain (loss)
on investments from the Series--net ....... .17 .46 .19 .45 (.75)
--------- --------- --------- --------- ---------
Total from investment operations .......... .38 .98 .77 1.06 (.17)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net .................. (.21) (.52) (.58) (.61) (.58)
Realized gain on investments from
the Series--net ......................... -- -- -- -- --
In excess of realized gain on investments
from the Series--net .................... -- -- -- -- --+
--------- --------- --------- --------- ---------
Total dividends and distributions ......... (.21) (.52) (.58) (.61) (.58)
--------- --------- --------- --------- ---------
Net asset value, end of period ............ $ 11.13 $ 10.96 $ 10.50 $ 10.31 $ 9.86
========= ========= ========= ========= =========
================================================================================================================================
Total Investment Based on net asset value per share ........ 3.53%@ 9.61% 7.60% 11.18% (1.50%)
Return: ========= ========= ========= ========= =========
================================================================================================================================
Ratios to Average Expenses, net of waiver++ ................. .60%* .59% .60% .63% .60%
Net Assets: ========= ========= ========= ========= =========
Expenses++ ................................ .61%* .61% .71% .70% .62%
========= ========= ========= ========= =========
Investment income--net .................... 3.84%* 4.91% 5.50% 6.17% 5.81%
========= ========= ========= ========= =========
================================================================================================================================
Supplemental Net assets, end of period (in thousands) .. $ 70,860 $ 61,029 $ 60,438 $ 65,339 $ 79,743
Data: ========= ========= ========= ========= =========
Portfolio turnover of the Series .......... 79.41% 112.18% 144.23% 43.24% 61.82%
========= ========= ========= ========= =========
================================================================================================================================
Class I@@@
-------------------------------------------------------------
The following per share data and ratios For the
have been derived from information provided Six Months
in the financial statements. Ended For the Year Ended December 31,
June 30, -----------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
================================================================================================================================
Per Share Net asset value, beginning of period ...... $ 10.95 $ 10.50 $ 10.31 $ 9.85 $ 10.61
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .................... .22+++ .55+++ .61 .64 .62
Realized and unrealized gain (loss)
on investments from the Series--net ....... .19 .45 .19 .46 (.76)
--------- --------- --------- --------- ---------
Total from investment operations .......... .41 1.00 .80 1.10 (.14)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net .................. (.23) (.55) (.61) (.64) (.62)
Realized gain on investments from
the Series--net ......................... -- -- -- -- --
In excess of realized gain on investments
from the Series--net .................... -- -- -- -- --+
--------- --------- --------- --------- ---------
Total dividends and distributions ......... (.23) (.55) (.61) (.64) (.62)
--------- --------- --------- --------- ---------
Net asset value, end of period ............ $ 11.13 $ 10.95 $ 10.50 $ 10.31 $ 9.85
========= ========= ========= ========= =========
================================================================================================================================
Total Investment Based on net asset value per share ........ 3.75%@ 9.78% 7.87% 11.57% (1.36%)
Return: ========= ========= ========= ========= =========
================================================================================================================================
Ratios to Average Expenses, net of waiver++ ................. .35%* .34% .35% .38% .35%
Net Assets: ========= ========= ========= ========= =========
Expenses++ ................................ .36%* .36% .46% .45% .37%
========= ========= ========= ========= =========
Investment income--net .................... 4.10%* 5.16% 5.72% 6.41% 6.06%
========= ========= ========= ========= =========
================================================================================================================================
Supplemental Net assets, end of period (in thousands) .. $ 396,707 $ 360,991 $ 324,390 $ 214,056 $ 324,254
Data: ========= ========= ========= ========= =========
Portfolio turnover of the Series .......... 79.41% 112.18% 144.23% 43.24% 61.82%
========= ========= ========= ========= =========
================================================================================================================================
* Annualized.
+ Amount is less than $.01 per share.
++ Includes the Fund's share of the Series' allocated expenses.
+++ Based on average shares outstanding.
@ Aggregate total investment return.
@@ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
@@@ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
See Notes to Financial Statements.
8 & 9
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
NOTES TO FINANCIAL STATEMENTS
MERRILL LYNCH
AGGREGATE BOND
INDEX FUND
1. Significant Accounting Policies:
Merrill Lynch Aggregate Bond Index Fund (the "Fund") is part of Merrill Lynch
Index Funds, Inc. (the "Corporation"). The Fund is registered under the
Investment Company Act of 1940, as amended, as a non-diversified mutual fund.
The Fund seeks to achieve its investment objective by investing all of its
assets in the Master Aggregate Bond Index Series (the "Series") of the
Quantitative Master Series Trust, which has the same investment objective as the
Fund. The value of the Fund's investment in the Series reflects the Fund's
proportionate interest in the net assets of the Series. The performance of the
Fund is directly affected by the performance of the Series. The financial
statements of the Series, including the Schedule of Investments, are included
elsewhere in this report and should be read in conjunction with the Fund's
financial statements. The Fund's financial statements are prepared in conformity
with accounting principles generally accepted in the United States of America,
which may require the use of management accruals and estimates. These unaudited
financial statements reflect all adjustments, which are, in the opinion of
management, necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal, recurring nature. The
percentage of the Series owned by the Fund at June 30, 2003 was 60.4%. The Fund
offers two classes of shares. Effective April 14, 2003, Class A Shares were
redesignated Class I Shares and Class D Shares were redesignated Class A Shares.
The Fund's financial statements and financial highlights contained within this
report reflect the new share class redesignation. Shares of Class A and Class I
are sold without the imposition of a front-end or deferred sales charge. Both
classes of shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class A Shares bear certain
expenses related to the account maintenance of such shares and have exclusive
voting rights with respect to matters relating to its account maintenance
expenditures. The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments -- The Fund records its investment in the Series at
fair value. Valuation of securities held by the Series is discussed in Note 1a
of the Series' Notes to Financial Statements, which are included elsewhere in
this report.
(b) Investment income and expenses -- The Fund records daily its proportionate
share of the Series' income, expenses and realized and unrealized gains and
losses. In addition, the Fund accrues its own expenses.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders. Therefore,
no Federal income tax provision is required.
(d) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(e) Dividends and distributions -- Dividends from net investment income are
declared daily and paid monthly. Distributions of capital gains are recorded on
the ex-dividend dates.
(f) Investment transactions -- Investment transactions in the Series are
accounted for on a trade date basis.
2. Transactions with Affiliates:
The Corporation has entered into an Administrative Services Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is Princeton
Services, Inc. ("PSI"), a wholly-owned subsidiary of Merrill Lynch & Co., Inc.
("ML & Co."), which is the limited partner. The Fund pays a monthly fee at an
annual rate of .19% of the Fund's average daily net assets for the performance
of administrative services (other than investment advice and related portfolio
activities) necessary for the operation of the Fund. For the six months ended
June 30, 2003, FAM earned fees of $416,017, of which $16,414 was waived.
The Corporation has also entered into a Distribution Agreement and Distribution
Plan with FAM Distributors, Inc. ("FAMD" or the "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plan
adopted by the Corporation in accordance with Rule 12b-1 under the Investment
Company Act of 1940, the Fund pays the Distributor an ongoing account
maintenance fee. The fee is accrued daily and paid monthly at the annual rate of
..25% based upon the average daily net assets of Class A Shares.
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance services to the Fund. The ongoing account maintenance fee
compensates the Distributor and MLPF&S for providing account maintenance
services to Class A shareholders.
Financial Data Services, Inc. ("FDS"), an indirect, wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, FAMD, FDS, and/or ML & Co.
3. Capital Share Transactions:
Net increase in net assets derived from capital share transactions were
$38,195,451 and $18,827,831 for the six months ended June 30, 2003 and the year
ended December 31, 2002, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended June 30, 2003+ Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 1,867,383 $ 20,501,579
Shares issued to shareholders
in reinvestment of dividends ........... 89,064 981,907
------------ ------------
Total issued ........................... 1,956,447 21,483,486
Shares redeemed ........................ (1,162,172) (12,783,314)
------------ ------------
Net increase ........................... 794,275 $ 8,700,172
============ ============
- --------------------------------------------------------------------------------
+ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended December 31, 2002+ Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 1,746,539 $ 18,629,821
Shares issued to shareholders
in reinvestment of dividends ........... 222,051 2,365,502
------------ ------------
Total issued ........................... 1,968,590 20,995,323
Shares redeemed ........................ (2,153,732) (22,961,951)
------------ ------------
Net decrease ........................... (185,142) $ (1,966,628)
============ ============
- --------------------------------------------------------------------------------
+ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
- --------------------------------------------------------------------------------
Class I Shares for the Six Months Dollar
Ended June 30, 2003+ Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 7,241,077 $ 79,645,760
Shares issued to shareholders
in reinvestment of dividends ........... 513,035 5,650,397
------------ ------------
Total issued ........................... 7,754,112 85,296,157
Shares redeemed ........................ (5,073,430) (55,800,878)
------------ ------------
Net increase ........................... 2,680,682 $ 29,495,279
============ ============
- --------------------------------------------------------------------------------
+ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
- --------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended December 31, 2002+ Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 22,467,900 $ 237,667,287
Shares issued to shareholders
in reinvestment of dividends ........... 1,471,997 15,676,326
------------- -------------
Total issued ........................... 23,939,897 253,343,613
Shares redeemed ........................ (21,884,225) (232,549,154)
------------- -------------
Net increase ........................... 2,055,672 $ 20,794,459
============= =============
- --------------------------------------------------------------------------------
+ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
4. Capital Loss Carryforward:
On December 31, 2002, the Fund had a net capital loss carryforward of
$3,872,833, all of which expires in 2008. This amount will be available to
offset like amounts of any future taxable gains.
10 & 11
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
SCHEDULE OF INVESTMENTS (in U.S. dollars)
Master Aggregate Bond Index Series
----------------------------------------------------------------------------------------------------------
Face Interest Maturity
Issue Amount Rate Date(s) Value
===================================================================================================================================
U.S. Government & Fannie Mae $ 290,000 5.45 % 10/10/2003 $ 293,546
Agency Obligations-- 210,000 6.85 4/05/2004 219,152
33.3% 29,225,000 3.50 9/15/2004 30,050,314
3,000,000 3.875 3/15/2005 3,131,874
28,075,000 5.75 2/15/2008 32,032,677
13,980,000 6.625 11/15/2010 16,900,450
1,340,000 7.25 5/15/2030 1,766,007
==========================================================================================================
Financing Corp. 670,000 9.80 11/30/2017 1,048,035
==========================================================================================================
Freddie Mac 6,500,000 5.75 7/15/2003 6,511,986
1,245,000 7.18 6/27/2006 1,438,798
14,560,000 4.875 3/15/2007 15,965,258
8,655,000 6.75 9/15/2029 10,723,692
1,480,000 6.25 7/15/2032 1,741,405
==========================================================================================================
Tennessee Valley Authority, Series E 1,915,000 6.25 12/15/2017 2,288,538
==========================================================================================================
United States Treasury Bonds 765,000 8.75 11/15/2008 786,665
15,820,000 8.75 5/15/2017 23,679,946
250,000 8.875 8/15/2017 378,203
1,875,000 8.125 8/15/2019 2,711,792
7,800,000 8.50 2/15/2020 11,681,413
1,660,000 8.125 8/15/2021 2,427,362
5,490,000 6.25 8/15/2023 6,724,822
3,700,000 6.375 8/15/2027 4,634,972
830,000 5.375 2/15/2031 934,626
==========================================================================================================
United States Treasury Notes 4,875,000 5.25 5/15/2004 5,053,625
5,615,000 6.00 8/15/2004 5,924,263
7,815,000 5.875 11/15/2004 8,317,176
2,735,000 6.75 5/15/2005 3,012,025
25,125,000 5.75 11/15/2005 27,652,223
9,175,000 5.875 11/15/2005 10,124,401
595,000 3.25 8/15/2007 620,962
9,970,000 3.00 11/15/2007 10,283,895
2,050,000 5.75 8/15/2010 2,399,541
6,690,000 4.00 11/15/2012 6,961,520
===================================================================================================================================
Total Investments in U.S. Government & Agency Obligations (Cost--$242,258,390)--33.3% 258,421,164
===================================================================================================================================
U.S. Government Fannie Mae 574,204 5.50 6/01/2011-2/01/2014 599,503
Agency Mortgage- 2,023,442 6.00 2/01/2013-6/01/2015 2,116,261
Backed Obligations**-- 4,718,970 6.00 11/01/2032 4,906,015
35.2% 1,652,771 6.50 1/01/2013-5/01/2016 1,745,411
4,002,774 6.50 12/01/2025-1/01/2030 4,180,002
1,705,221 7.00 4/01/2027-3/01/2031 1,799,152
1,346,030 7.50 10/01/2027-5/01/2032 1,431,163
36,608 8.00 9/01/2015 39,289
2,469,651 8.00 11/01/2029-9/01/2031 2,660,091
78,414 8.50 5/01/2030-1/01/2031 84,346
154,709 9.50 7/01/2017 172,073
66,315 10.00 10/01/2018-5/01/2022 75,676
28,301 10.50 12/01/2016 32,007
==========================================================================================================
Freddie Mac--Gold Program 6,950,000 4.50 7/01/2018-9/01/2018 7,067,220
22,750,000 5.00 7/15/2018-9/15/2018 23,461,625
4,450,000 5.00 7/15/2033-9/15/2033 4,496,939
13,202,425 5.50 5/01/2017-7/15/2018 13,692,964
29,800,000 5.50 7/15/2033-9/15/2033 30,675,028
11,751,629 6.00 4/01/2016-7/15/2018 12,222,141
43,394,001 6.00 10/01/2032-4/01/2033 44,993,138
3,337,548 6.50 4/01/2015-5/01/2017 3,505,875
38,916,899 6.50 1/01/2026-9/01/2032 40,503,240
1,941,459 7.00 1/01/2011-7/01/2017 2,062,699
16,623,590 7.00 1/01/2020-7/15/2033 17,438,680
467,167 7.50 5/01/2007-4/01/2016 498,202
4,490,196 7.50 1/01/2023-9/01/2032 4,776,189
1,438,515 8.00 6/01/2024-3/01/2032 1,547,004
177,515 8.50 5/01/2028-8/01/2030 191,359
21,975 9.00 9/01/2014 24,131
382,501 9.50 2/01/2019 425,415
115,348 10.00 3/01/2010-9/01/2017 129,093
88,165 10.50 4/01/2016 98,763
35,958 11.00 9/01/2016-3/01/2018 40,856
11,622 11.50 8/01/2015 13,210
38,187 12.50 2/01/2014 45,008
==========================================================================================================
Government National Mortgage Corporation 13,300,000 5.50 7/15/2033-8/15/2033 13,822,816
8,600,750 6.00 4/20/2026-1/15/2033 9,019,353
178,471 6.50 2/15/2014-5/15/2014 189,641
10,600,162 6.50 4/15/2026-5/15/2032 11,130,308
92,128 7.00 4/15/2013 98,890
5,916,865 7.00 7/15/2027-10/15/2031 6,253,608
2,214,523 7.50 3/15/2024-11/15/2031 2,356,847
1,278,714 8.00 12/15/2022-6/15/2031 1,383,325
302,116 8.50 11/15/2017-3/15/2031 327,334
274,502 9.00 11/15/2016-11/15/2024 305,777
16,920 9.50 9/15/2021 19,079
===================================================================================================================================
Total U.S. Government Agency Mortgage-Backed Obligations (Cost--$268,677,265)--35.2% 272,656,746
===================================================================================================================================
12 & 13
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master Aggregate Bond Index Series (continued)
----------------------------------------------------------------------------------------------------------
S&P Moody's Face
INDUSTRIES+ Ratings Ratings Amount Corporate Bonds & Notes Value
===================================================================================================================================
Banking--2.8% A- A3 $ 125,000 Aristar Inc., 7.375% due 9/01/2004 $ 133,441
A- A2 465,000 BB&T Corporation, 6.50% due 8/01/2011 545,370
Bank of America Corp.:
A+ Aa2 1,900,000 5.875% due 2/15/2009 2,161,068
A+ Aa2 410,000 4.875% due 9/15/2012 432,700
A+ Aa2 350,000 4.875% due 1/15/2013 369,216
A+ Aa3 325,000 The Bank of New York, 5.20% due 7/01/2007 356,857
Bank One Corp.:
A Aa3 700,000 6.875% due 8/01/2006 797,381
A- A1 378,000 8% due 4/29/2027 496,490
A+ Aa2 90,000 Citicorp, 6.375% due 11/15/2008 103,463
A- A3 600,000 Comerica Inc., 4.80% due 5/01/2015 609,718
A+ A1 400,000 Deutsche Bank Financial, 7.50% due 4/25/2009 480,354
A Aa3 870,000 First Union Corporation, 7.55% due 8/18/2005 975,851
BB+ Baa3 300,000 Firstbank Puerto Rico, 7.625% due 12/20/2005 315,392
FleetBoston Financial Corp.:
A A1 765,000 7.25% due 9/15/2005 853,732
A A1 700,000 4.20% due 11/30/2007 736,270
A A1 750,000 3.85% due 2/15/2008 778,367
A+ A1 230,000 Golden West Financial Corporation, 4.75% due 10/01/2012 239,723
A A1 615,000 HSBC Holding PLC, 7.50% due 7/15/2009 749,431
MBNA America Bank NA:
BBB+ Baa1 500,000 6.875% due 7/15/2004 (a) 525,769
BBB+ Baa1 25,000 7.75% due 9/15/2005 27,868
BBB+ Baa1 110,000 6.50% due 6/20/2006 121,361
BBB Baa2 545,000 7.125% due 11/15/2012 638,475
A- A3 500,000 M & T Bank, 3.85% due 4/01/2013 (b) 510,092
A+ Aa3 395,000 Marshall & Ilsley Bank, 4.125% due 9/04/2007 412,912
A+ A1 461,000 Mellon Bank NA, 7% due 3/15/2006 522,839
A+ Aa3 595,000 National City Bank of Indiana, 4% due 9/28/2007 619,385
A Aa3 113,000 NationsBank Corp., 6.60% due 5/15/2010 131,625
A- A2 350,000 Regions Financial Corporation, 6.375% due 5/15/2012 404,724
BBB- Baa3 450,000 Sovereign Bank, 5.125% due 3/15/2013 464,729
A+ Aa3 610,000 Suntrust Bank, 5.45% due 12/01/2017 669,026
A- A3 400,000 Synovus Financial, 4.875% due 2/15/2013 419,109
A Aa3 700,000 U.S. Bancorp, 1.269% due 9/16/2005 700,342
A+ Aa2 470,000 Wachovia Bank NA, 4.85% due 7/30/2007 507,858
A Aa3 1,050,000 Wachovia Corporation, 4.95% due 11/01/2006 1,143,258
A- A3 600,000 Washington Mutual Finance Corporation, 8.25% due 6/15/2005 669,760
Washington Mutual Inc.:
BBB+ A3 600,000 7.50% due 8/15/2006 694,331
BBB Baa1 90,000 8.25% due 4/01/2010 113,355
A+ Aa2 250,000 Wells Fargo Bank, 6.45% due 2/01/2011 294,757
Wells Fargo & Co.:
A+ Aa2 600,000 7.25% due 8/24/2005 670,307
A+ Aa2 400,000 5.125% due 2/15/2007 437,590
-----------
21,834,296
===================================================================================================================================
Financial Services-- BBB+ A3 330,000 ACE INA Holdings, 8.30% due 8/15/2006 383,965
4.4% A+ A1 250,000 Allstate Corporation, 5.375% due 12/01/2006 273,895
A+ A1 400,000 American Express Corporation, 6.875% due 11/01/2005 445,814
AAA Aaa 500,000 American General Corporation, 7.50% due 7/15/2025 623,043
A+ A1 235,000 American General Finance, 5.875% due 7/14/2006 259,304
BBB+ Baa1 215,000 Avalonbay Communities, 6.625% due 9/15/2011 244,907
A A3 400,000 AXA Financial Inc., 7.75% due 8/01/2010 487,265
Bear Stearns Companies, Inc.:
A A2 600,000 7.625% due 2/01/2005 656,469
A A2 250,000 6.875% due 10/01/2005 276,947
CIT Group Inc.:
A A2 660,000 5.625% due 5/17/2004 681,765
A A2 450,000 6.50% due 2/07/2006 491,849
Capital One Bank:
BBB- Baa2 420,000 6.875% due 2/01/2006 450,676
BBB- Baa2 600,000 4.875% due 5/15/2008 612,305
BB+ Baa3 450,000 6.50% due 6/13/2013 445,780
Citigroup Inc.:
AA- Aa1 500,000 5.70% due 2/06/2004 513,415
AA- Aa1 2,655,000 5.75% due 5/10/2006 2,931,054
A+ Aa2 565,000 7.25% due 10/01/2010 684,563
AA- Aa1 125,000 6.50% due 1/18/2011 146,246
A+ Aa2 600,000 6.625% due 6/15/2032 693,329
Commercial Credit Co.:
AA- Aa1 500,000 6.75% due 7/01/2007 573,327
AA- Aa1 450,000 10% due 5/15/2009 593,251
A A3 2,005,000 CountryWide Home Loans, Inc., 5.625% due 7/15/2009 2,229,201
Credit Suisse First Boston Inc.:
A+ Aa3 1,000,000 5.875% due 8/01/2006 1,106,154
A+ Aa3 600,000 6.50% due 1/15/2012 688,534
BBB Baa3 530,000 Developers Divers Realty, 6.625% due 1/15/2008 575,168
BBB+ Baa1 750,000 Duke Realty Corporation, 5.25% due 1/15/2010 800,551
EOP Operating LP:
BBB+ Baa1 200,000 6.75% due 2/15/2012 227,800
BBB+ Baa1 145,000 7.25% due 6/15/2028 162,206
BBB+ Baa1 25,000 7.50% due 4/19/2029 28,797
14 & 15
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master Aggregate Bond Index Series (continued)
----------------------------------------------------------------------------------------------------------
S&P Moody's Face
INDUSTRIES+ Ratings Ratings Amount Corporate Bonds & Notes Value
===================================================================================================================================
Financial Services Goldman Sachs Group, Inc.:
(concluded) A+ Aa3 $ 800,000 7.625% due 8/17/2005 $ 901,516
A+ Aa3 420,000 4.125% due 1/15/2008 441,358
A+ Aa3 890,000 6.875% due 1/15/2011 1,050,154
A+ Aa3 135,000 6.60% due 1/15/2012 156,867
A+ Aa3 250,000 6.125% due 2/15/2033 268,094
A- A3 400,000 Hartford Life Inc., 7.375% due 3/01/2031 473,753
BBB- Baa3 375,000 Highwoods Realty LP, 8% due 12/01/2003 384,708
International Lease Finance Corporation:
AA- A1 650,000 4.375% due 12/15/2005 676,894
AA- A1 236,000 5.625% due 6/01/2007 256,660
A A3 470,000 John Hancock Financial Services, 5.625% due 12/01/2008 522,248
A A2 1,285,000 J. P. Morgan Chase & Company, 6.625% due 3/15/2012 1,482,465
Lehman Brothers Holdings, Inc.:
A A2 800,000 6.625% due 4/01/2004 831,617
A A2 600,000 7% due 2/01/2008 699,470
A A2 245,000 7.875% due 8/15/2010 301,072
A A2 425,000 6.625% due 1/18/2012 498,260
BBB Baa2 500,000 Liberty Property LP, 7.25% due 3/15/2011 590,163
Marsh & McLennan Companies Inc.:
AA- A2 210,000 6.625% due 6/15/2004 220,284
AA- A2 575,000 6.25% due 3/15/2012 655,434
A A2 400,000 MetLife Inc., 6.125% due 12/01/2011 455,944
A+ Aa3 750,000 Morgan Stanley, Dean Witter, 6.60% due 4/01/2012 866,539
AA- Aa3 400,000 New York Life Insurance, 5.875% due 5/15/2033 (a) 419,794
AA Aa3 265,000 Principal Life Global, 6.25% due 2/15/2012 (a) 299,768
A+ A1 375,000 Progressive Corporation, 6.25% due 12/01/2032 417,515
BBB+ Baa1 500,000 Prologis Trust, 7% due 10/01/2003 507,419
A- A3 440,000 Prudential Financial Inc., 3.75% due 5/01/2008 453,112
BBB Baa2 585,000 Shurgard Storage Centers, 5.875% due 3/15/2013 626,983
BBB Baa2 500,000 Simon Debartolo, 6.75% due 7/15/2004 523,607
AAA Aaa 150,000 SunAmerica Inc., 5.60% due 7/31/2097 140,568
A- A2 450,000 Travelers Property Casualty, 6.375% due 3/15/2033 491,826
-----------
33,901,672
===================================================================================================================================
Financial Services-- Household Finance Corporation:
Consumer--0.4% A A1 1,800,000 5.875% due 2/01/2009 2,006,766
A A1 750,000 7% due 5/15/2012 887,737
-----------
2,894,503
===================================================================================================================================
Foreign Government AAA Aaa 2,000,000 Canada Government Bond, 5.25% due 11/05/2008 2,257,750
Obligations--1.9% BBB A3 500,000 People's Republic of China, 7.30% due 12/15/2008 605,838
BBB- Baa1 1,025,000 Petroleos Mexicanos, 8.85% due 9/15/2007 1,204,375
AA- Aa2 400,000 Province of British Columbia, 4.625% due 10/03/2006 432,213
AA- Aa2 1,000,000 Province of Manitoba, 5.50% due 10/01/2008 1,126,898
AA Aa2 750,000 Province of Ontario, 5.50% due 10/01/2008 847,122
A+ A1 900,000 Province of Quebec, 7.50% due 9/15/2029 1,199,492
A+ Aa3 603,000 Province of Saskatchewan, 8% due 7/15/2004 643,903
AAA Aaa 1,000,000 Republic of Finland, 5.875% due 2/27/2006 1,104,882
Republic of Italy:
AA Aa2 700,000 5.25% due 4/05/2006 759,300
AA Aa2 1,050,000 4.375% due 10/25/2006 1,125,298
United Mexican States:
BBB- Baa2 1,950,000 9.875% due 2/01/2010 2,500,875
BBB- Baa2 900,000 6.375% due 1/16/2013 954,000
-----------
14,761,946
===================================================================================================================================
Industrial--Consumer BBB Baa1 60,000 Albertson's Inc., 7.50% due 2/15/2011 70,096
Goods--1.2% A+ A1 350,000 Anheuser-Busch Companies Inc., 6% due 11/01/2041 381,995
A A2 500,000 Brown-Forman Corporation, 3% due 3/15/2008 501,950
A A2 855,000 Coca-Cola Enterprises, 6.75% due 9/15/2028 1,012,842
Conagra Foods Inc.:
BBB+ Baa1 200,000 7% due 10/01/2028 234,551
BBB+ Baa1 300,000 8.25% due 9/15/2030 402,484
A+ A2 140,000 Diageo Capital PLC, 3.50% due 11/19/2007 144,083
BBB+ Baa2 850,000 General Mills Inc., 6% due 2/15/2012 959,614
BBB Baa2 515,000 International Paper Company, 8.125% due 7/08/2005 574,169
BBB Baa2 567,000 Kellogg Company, 6% due 4/01/2006 625,072
AA- Aa2 294,000 Kimberly-Clark Corporation, 7.10% due 8/01/2007 344,120
BBB+ A3 155,000 Kraft Foods Inc., 4.625% due 11/01/2006 164,623
Kroger Company:
BBB Baa3 160,000 7.625% due 9/15/2006 182,465
BBB Baa3 85,000 7.70% due 6/01/2029 102,335
BBB Baa3 250,000 7.50% due 4/01/2031 296,509
A- A3 500,000 Nabisco, Inc., 6.375% due 2/01/2005 529,971
A A1 92,000 Pepsi Bottling Holdings Inc., 5.625% due 2/17/2009 (a) 103,181
A A1 500,000 PepsiCo Inc., 4.50% due 9/15/2004 519,654
BB+ Ba1 270,000 RJ Reynolds Tobacco Holdings, 6.50% due 6/01/2007 270,474
BBB Baa2 300,000 Safeway Inc., 6.15% due 3/01/2006 324,784
BBB Baa2 290,000 Sappi Papier Holdings AG, 6.75% due 6/15/2012 (a) 331,197
A+ A3 120,000 Sara Lee Corporation, 6.25% due 9/15/2011 138,881
Sealed Air Corporation:
BBB Baa3 400,000 5.375% due 4/15/2008 419,795
BBB Baa3 135,000 6.95% due 5/15/2009 (a) 149,124
BBB Baa3 390,000 SuperValu Inc., 7.50% due 5/15/2012 444,671
-----------
9,228,640
===================================================================================================================================
16 & 17
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master Aggregate Bond Index Series (continued)
----------------------------------------------------------------------------------------------------------
S&P Moody's Face
INDUSTRIES+ Ratings Ratings Amount Corporate Bonds & Notes Value
===================================================================================================================================
Industrial--Energy-- Anadarko Finance Company:
1.6% BBB+ Baa1 $ 390,000 6.75% due 5/01/2011 $ 457,116
BBB+ Baa1 190,000 7.50% due 5/01/2031 238,676
Apache Corporation:
A- A3 270,000 6.25% due 4/15/2012 314,384
A- A3 190,000 7.625% due 7/01/2019 236,774
AA+ Aa1 350,000 Atlantic Richfield, 5.90% due 4/15/2009 401,819
A- A3 550,000 Atmos Energy Corporation, 5.125% due 1/15/2013 584,289
BBB+ Baa1 330,000 Chevron Phillips Chemical Company, 5.375% due 6/15/2007 355,956
AA Aa2 150,000 ChevronTexaco Capital Company, 3.50% due 9/17/2007 155,883
A A2 325,000 Colonial Pipeline, 7.63% due 4/15/2032 (a) 424,441
Conoco Inc.:
A- A3 800,000 5.90% due 4/15/2004 827,510
A- A3 320,000 6.35% due 4/15/2009 374,027
A- A3 75,000 6.95% due 4/15/2029 90,237
A- A3 1,400,000 ConocoPhillips, 4.75% due 10/15/2012 1,479,565
Consolidated Natural Gas:
BBB+ A3 500,000 5.375% due 11/01/2006 542,068
BBB+ A3 75,000 6.25% due 11/01/2011 86,120
Duke Energy Corporation:
A- A3 300,000 3.75% due 3/05/2008 (a) 308,799
BBB+ Baa1 550,000 6.25% due 1/15/2012 616,328
BBB Baa2 350,000 Enterprise Products Operations, 6.875% due 3/01/2033 (a) 396,407
Kinder Morgan Energy:
BBB+ Baa1 840,000 6.75% due 3/15/2011 976,781
BBB Baa2 425,000 6.50% due 9/01/2012 487,177
A+ A1 350,000 Motiva Enterprises LLC, 5.20% due 9/15/2012 (a) 370,257
A- Baa1 100,000 Murphy Oil Corporation, 6.375% due 5/01/2012 115,260
A- A3 225,000 Nabors Industries Inc., 5.375% due 8/15/2012 244,310
BBB Baa3 430,000 NiSource Finance Corporation, 7.625% due 11/15/2005 470,141
BBB- Baa3 450,000 Ocean Energy Inc., 7.25% due 10/01/2011 536,806
A- A3 650,000 Phillips Petroleum Company, 8.50% due 5/25/2005 732,191
AA Aa3 250,000 Texaco Capital Inc., 8.625% due 6/30/2010 330,486
BBB Baa3 300,000 Valero Energy Corporation, 6.875% due 4/15/2012 340,072
-----------
12,493,880
===================================================================================================================================
Industrial-- BB+ Ba1 450,000 Abitibi Consolidated Inc., 8.55% due 8/01/2010 504,071
Manufacturing--3.7% A- A2 340,000 Alcan Inc., 6.45% due 3/15/2011 393,561
A- A2 400,000 Alcoa Inc., 6% due 1/15/2012 450,571
A+ A2 600,000 American Honda Finance, 1.548% due 10/03/2005 (a) 602,381
A A3 320,000 Baxter International Inc., 4.625% due 3/15/2015 (a) 324,460
A A3 200,000 Boeing Capital Corporation, 7.10% due 9/27/2005 220,603
A A2 265,000 Caterpillar Financial Services Corporation, 4.875% due 6/15/2007 287,417
Centex Corporation:
BBB Baa2 390,000 7.875% due 2/01/2011 471,773
BBB Baa2 45,000 7.50% due 1/15/2012 53,494
A- A3 450,000 Cooper Industries Inc., 5.50% due 11/01/2009 499,985
DaimlerChrysler NA Holdings:
BBB+ A3 1,370,000 6.40% due 5/15/2006 1,496,091
BBB+ A3 250,000 7.30% due 1/15/2012 281,948
BBB+ A3 310,000 8.50% due 1/18/2031 365,138
A- A3 635,000 Deere & Co., 7.85% due 5/15/2010 782,255
BBB- Baa2 500,000 Delphi Auto Systems Corporation, 6.55% due 6/15/2006 536,459
BBB- Baa3 270,000 Domtar Inc., 7.875% due 10/15/2011 329,683
A A2 335,000 Emerson Electric Company, 7.875% due 6/01/2005 373,589
BBB Baa1 1,600,000 Ford Motor Company, 7.45% due 7/16/2031 1,465,704
Ford Motor Credit Company:
BBB A3 1,890,000 6.875% due 2/01/2006 2,004,534
BBB A3 200,000 7.25% due 10/25/2011 205,615
AAA Aaa 1,760,000 General Electric Capital Corporation, 6.75% due 3/15/2032 2,058,434
General Motors Acceptance Corp.:
BBB A3 674,000 6.85% due 6/17/2004 701,091
BBB A3 692,000 7.75% due 1/19/2010 744,745
BBB A3 140,000 6.875% due 9/15/2011 140,467
BBB A3 970,000 7% due 2/01/2012 975,925
BBB A3 998,000 8% due 11/01/2031 979,203
AAA Aaa 400,000 General Electric Company, 5% due 2/01/2013 422,503
BBB+ Baa1 500,000 Hanson Australia Funding, 5.25% due 3/15/2013 512,181
BBB Baa2 1,000,000 Hertz Corp., 7% due 1/15/2028 835,722
A A2 205,000 Honeywell International, 6.125% due 11/01/2011 233,558
IBM Corporation:
A+ A1 335,000 6.45% due 8/01/2007 381,524
A+ A1 200,000 4.75% due 11/29/2012 210,213
BBB- Ba1 550,000 IOS Capital LLC, 7.25% due 6/30/2008 537,625
A- A3 125,000 Kern River Funding Corporation, 4.893% due 4/30/2018 (a) 128,612
BBB- Baa3 200,000 Lennar Corporation, 5.95% due 3/01/2013 218,895
Lockheed Martin Corporation:
BBB Baa2 300,000 7.25% due 5/15/2006 341,653
BBB Baa2 135,000 7.75% due 5/01/2026 168,432
BBB Baa2 350,000 8.50% due 12/01/2029 475,718
BB+ Baa3 250,000 MDC Holdings Inc., 5.50% due 5/15/2013 252,068
BBB Baa2 325,000 Martin Marietta Corp., 7.375% due 4/15/2013 393,672
Masco Corporation:
BBB+ Baa1 365,000 6% due 5/03/2004 377,825
BBB+ Baa1 45,000 6.50% due 8/15/2032 49,945
Newell Rubbermaid Inc.:
BBB+ Baa1 250,000 4.625% due 12/15/2009 264,902
BBB+ Baa1 300,000 4% due 5/01/2010 305,690
AA Aa3 350,000 Pitney Bowes Inc., 4.75% due 5/15/2018 357,093
18 & 19
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master Aggregate Bond Index Series (continued)
----------------------------------------------------------------------------------------------------------
S&P Moody's Face
INDUSTRIES+ Ratings Ratings Amount Corporate Bonds & Notes Value
===================================================================================================================================
Industrial-- Pulte Homes Inc.:
Manufacturing BBB- Baa3 $ 110,000 7.875% due 8/01/2011 $ 133,567
(concluded) BBB- Baa3 105,000 6.25% due 2/15/2013 116,484
Raytheon Company:
BBB- Baa3 160,000 8.20% due 3/01/2006 184,601
BBB- Baa3 35,000 6.15% due 11/01/2008 39,575
BBB- Baa3 550,000 8.30% due 3/01/2010 675,689
BBB- Baa3 350,000 6.75% due 3/15/2018 403,346
A- A3 400,000 Science Applications International, 5.50% due 7/01/2033 (a) 375,998
A A2 225,000 Stanley Works, 4.90% due 11/01/2012 (a) 234,743
A- A3 870,000 Textron Financial Corporation, 2.75% due 6/01/2006 868,718
BBB- Baa3 400,000 Timken Company, 6.75% due 8/21/2006 445,841
BBB- Baa3 325,000 Toll Brothers Inc., 6.875% due 11/15/2012 (a) 372,466
BBB Baa2 310,000 Visteon Corp., 8.25% due 8/01/2010 336,849
BBB Baa2 740,000 Weyerhaeuser Company, 5.95% due 11/01/2008 827,942
-----------
28,732,847
===================================================================================================================================
Industrial--Other-- AA Aa3 396,000 Abbott Laboratories, 5.625% due 7/01/2006 438,463
2.4% A+ A1 255,000 Archer-Daniels-Midland, 5.935% due 10/01/2032 272,179
BBB Baa2 200,000 BRE Properties, 5.95% due 3/15/2007 219,137
BB+ Ba1 475,000 Bowater Canada Finance, 7.95% due 11/15/2011 503,767
BBB+ Baa2 1,075,000 Burlington Northern Santa Fe, 6.75% due 7/15/2011 1,258,659
BBB Baa2 435,000 CSX Corporation, 6.75% due 3/15/2011 506,454
AAA Aaa 1,140,000 Continental Airlines, 6.563% due 2/15/2012 1,247,827
A- A3 430,000 Dow Chemical, 5.75% due 11/15/2009 470,267
AA Aa3 600,000 Eli Lilly & Company, 7.125% due 6/01/2025 758,951
A A2 850,000 General Dynamics Corporation, 3% due 5/15/2008 855,353
BBB- Ba1 500,000 HCA Inc., 6.30% due 10/01/2012 511,179
BBB Baa2 500,000 Harris Corporation, 6.35% due 2/01/2028 540,755
BBB+ Baa2 350,000 Health Care Properties Investors Inc., 6.45% due 6/25/2012 380,825
BBB Baa2 700,000 ICI North America, 8.875% due 11/15/2006 826,457
A- Baa2 550,000 Inversiones CMPC SA, 4.875% due 6/18/2013 (a) 543,373
NR* A3 2,208,000 Morgan Stanley TRACERS, 5.838% due 3/01/2007 (a)(b)(c) 2,428,535
BBB Baa2 235,000 New Plan Excel Realty Trust, 5.875% due 6/15/2007 251,828
Norfolk Southern Corporation:
BBB Baa1 575,000 6.75% due 2/15/2011 671,583
BBB Baa1 220,000 7.25% due 2/15/2031 262,732
BBB- Baa3 237,000 Northrop Grumman Corporation, 7.125% due 2/15/2011 283,907
AAA Aaa 850,000 Pfizer Inc., 5.625% due 2/01/2006 932,928
BBB+ Baa2 170,000 Placer Dome Inc., 6.375% due 3/01/2033 (a) 178,354
Praxair Inc.:
A- A3 235,000 6.50% due 3/01/2008 272,476
A- A3 135,000 6.375% due 4/01/2012 157,232
BBB- Baa3 715,000 Rock-Tenn Company, 5.625% due 3/15/2013 744,485
A Baa1 400,000 Southwest Airlines Co., 8% due 3/01/2005 434,700
Tenet Healthcare Corporation:
BB Ba3 250,000 7.375% due 2/01/2013 241,250
BB Ba3 170,000 6.875% due 11/15/2035 (f) 149,600
Union Pacific Corp.:
BBB Baa3 150,000 6.34% due 11/25/2003 152,608
BBB Baa3 950,000 5.75% due 10/15/2007 1,054,585
A+ A2 625,000 United Technology Corporation, 6.35% due 3/01/2011 724,673
A- Baa1 100,000 Wellpoint Health Network, 6.375% due 6/15/2006 112,141
-----------
18,387,263
===================================================================================================================================
Industrial-- BBB+ Baa1 1,675,000 AOL Time Warner Inc., 6.875% due 5/01/2012 1,912,207
Services--3.3% BBB- Baa3 600,000 Aramark Services Inc., 6.375% due 2/15/2008 659,496
A- A3 225,000 Carnival Corporation, 6.15% due 4/15/2008 248,223
BBB Baa1 950,000 Cendant Corporation, 6.875% due 8/15/2006 1,062,620
Citizens Communications Company:
BBB Baa2 1,500,000 8.50% due 5/15/2006 1,739,717
BBB Baa2 275,000 7.625% due 8/15/2008 326,643
BBB- Baa3 400,000 Clear Channel Communications, 7.25% due 10/15/2027 456,328
BBB Baa3 450,000 Comcast Cable Communications, 8.875% due 5/01/2017 601,972
Comcast Corporation:
BBB Baa3 550,000 5.85% due 1/15/2010 605,164
BBB Baa3 500,000 7.05% due 3/15/2033 555,324
BBB Baa2 350,000 Cox Communications Inc., 7.125% due 10/01/2012 417,947
Dayton Hudson Corp.:
A+ A2 888,000 10% due 1/01/2011 1,223,541
A+ A2 100,000 6.75% due 1/01/2028 116,038
Federated Department Stores:
BBB+ Baa1 25,000 6.625% due 9/01/2008 28,573
BBB+ Baa1 135,000 6.30% due 4/01/2009 152,828
BBB+ Baa1 270,000 6.625% due 4/01/2011 310,292
A+ A1 835,000 First Data Corporation, 6.375% due 12/15/2007 956,807
BBB+ Baa2 470,000 Fiserv Inc., 4% due 4/15/2008 (a) 484,007
A A2 515,000 Gannett Company Inc., 5.50% due 4/01/2007 566,528
A- A3 550,000 Hewlett-Packard Company, 3.625% due 3/15/2008 564,460
A- A3 235,000 Kohl's Corporation, 6.30% due 3/01/2011 272,287
Liberty Media Corporation:
BBB- Baa3 810,000 7.875% due 7/15/2009 948,873
BBB- Baa3 500,000 5.70% due 5/15/2013 508,260
BBB+ Baa1 450,000 Limited Brands Inc., 6.125% due 12/01/2012 497,216
Lowe's Companies Inc.:
A A3 215,000 6.875% due 2/15/2028 252,327
A A3 65,000 6.50% due 3/15/2029 73,714
BBB Ba1 360,000 Manor Care Inc., 6.25% due 5/01/2013 (a) 372,600
News America Inc.:
BBB- Baa3 550,000 7.25% due 5/18/2018 655,114
BBB- Baa3 250,000 7.28% due 6/30/2028 283,385
A- A3 2,100,000 Reed Elsevier Capital, 6.125% due 8/01/2006 2,344,217
20 & 21
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master Aggregate Bond Index Series (continued)
----------------------------------------------------------------------------------------------------------
S&P Moody's Face
INDUSTRIES+ Ratings Ratings Amount Corporate Bonds & Notes Value
===================================================================================================================================
Industrial-- BBB- Ba2 $ 250,000 Rogers Cable Inc., 6.25% due 6/15/2013 (a) $ 249,375
Services BBB Baa1 500,000 Sears Discover Credit Corp., 9.14% due 3/13/2012 592,805
(concluded) BBB Baa1 205,000 Sears Roebuck Acceptance Corporation, 7% due 6/01/2032 229,302
BBB Baa3 200,000 Tele-Communications Inc., 9.80% due 2/01/2012 264,936
Time Warner Inc.:
BBB+ Baa1 870,000 7.75% due 6/15/2005 955,231
BBB+ Baa1 352,000 6.875% due 6/15/2018 395,885
BBB- Baa3 715,000 USA Interactive, 7% due 1/15/2013 823,540
AAA Aaa 500,000 United Parcel Service, 8.375% due 4/01/2020 665,185
BB+ Baa3 500,000 Univision Communication Inc., 7.85% due 7/15/2011 595,141
A- A3 635,000 Viacom Inc., 7.75% due 6/01/2005 707,227
AA Aa2 450,000 Wal-Mart Stores, Inc., 6.875% due 8/10/2009 541,601
BBB Baa3 375,000 Waste Management Inc., 6.50% due 5/15/2004 383,804
-----------
25,600,740
===================================================================================================================================
Utilities-- BBB Baa2 400,000 AT&T Corporation, 7.80% due 11/15/2011 457,245
Communications-- BBB Baa2 990,000 AT&T Wireless Services Inc., 8.75% due 3/01/2031 1,223,704
2.2% A A2 315,000 Alltel Corporation, 7% due 7/01/2012 382,346
A+ A1 800,000 Ameritech Capital Funding, 6.45% due 1/15/2018 929,884
A+ A1 459,000 BellSouth Corporation, 6% due 10/15/2011 524,545
A- Baa1 855,000 British Telecom PLC, 8.375% due 12/15/2010 1,081,301
BBB+ Baa2 400,000 CenturyTel Inc., 7.875% due 8/15/2012 504,812
Deutsche Telekom International Finance:
BBB+ Baa3 1,400,000 8.25% due 6/15/2005 1,561,179
BBB+ Baa3 710,000 8.50% due 6/15/2010 872,149
BBB+ Baa3 300,000 8.75% due 6/15/2030 382,227
France Telecom:
BBB Baa3 700,000 9.25% due 3/01/2011 880,996
BBB Baa3 500,000 10% due 3/01/2031 691,868
GTE Corporation:
A+ A3 800,000 6.84% due 4/15/2018 945,055
A+ A3 220,000 6.94% due 4/15/2028 249,668
BBB+ Baa1 700,000 Koninklijke (KPN) NV, 8% due 10/01/2010 866,574
BBB Baa2 675,000 Motorola Inc., 7.625% due 11/15/2010 793,125
Sprint Capital Corporation:
BBB- Baa3 1,925,000 8.375% due 3/15/2012 2,304,835
BBB- Baa3 300,000 6.90% due 5/01/2019 314,234
Verizon Global Funding Corporation:
A+ A2 1,000,000 6.75% due 12/01/2005 1,115,861
A+ A2 650,000 7.375% due 9/01/2012 792,808
A+ A2 85,000 Verizon New York Inc., 6.875% due 4/01/2012 100,059
-----------
16,974,475
===================================================================================================================================
Utilities--Gas & BBB+ Baa1 600,000 AGL Capital Corporation, 4.45% due 4/15/2013 600,906
Electric--1.9% A- Baa2 270,000 AmerenEnergy Generating, 7.95% due 6/01/2032 343,178
BBB Baa3 1,100,000 American Electric Power, 6.125% due 5/15/2006 1,205,767
BBB+ A2 500,000 Baltimore Gas & Electric, 5.20% due 6/15/2033 478,118
BBB Baa1 115,000 Cincinnati Gas & Electric Company, 5.70% due 9/15/2012 126,346
BBB+ Baa1 500,000 Commonwealth Edison Company, 6.95% due 7/15/2018 609,107
BBB Baa1 135,000 Conectiv Inc., .30% due 6/01/2005 140,626
Consolidated Edison Company of New York:
NR* A1 275,000 4.875% due 2/01/2013 289,949
A A1 500,000 5.10% due 6/15/2033 475,700
BBB+ Baa1 595,000 Constellation Energy Group, 6.125% due 9/01/2009 669,155
Consumers Energy (a):
BBB- Baa3 445,000 4.25% due 4/15/2008 460,165
BBB- Baa3 400,000 4% due 5/15/2010 398,714
Dominion Resources Inc.:
BBB+ Baa1 481,000 8.125% due 6/15/2010 596,053
BBB+ Baa1 325,000 6.30% due 3/15/2033 343,222
BBB+ Baa2 475,000 Entergy Mississippi Inc., 5.15% due 2/01/2013 490,136
BBB+ Baa2 50,000 Exelon Corporation, 6.75% due 5/01/2011 57,849
BBB- Baa2 825,000 FirstEnergy Corp., 6.45% due 11/15/2011 905,322
A Aa3 470,000 Florida Power and Light, 6.875% due 12/01/2005 524,695
A- A2 100,000 FPL Group Capital Inc., 7.625% due 9/15/2006 115,535
A A2 160,000 Georgia Power Company, 5.125% due 11/15/2012 171,612
BBB- Baa3 510,000 MidAmerican Energy Holdings, 5.875% due 10/01/2012 559,327
BBB Baa2 200,000 New York State Electric & Gas, 5.75% due 5/01/2023 203,111
BBB Baa1 475,000 Oncor Electric Delivery, 6.375% due 5/01/2012 542,233
BBB A3 200,000 Ohio Power Company, 6.60% due 2/15/2033 (a) 223,221
BBB Baa1 200,000 Pepco Holdings Inc., 4% due 5/15/2010 199,908
BBB Baa2 560,000 Progress Energy Inc., 7.10% due 3/01/2011 651,452
A- A3 670,000 Public Service Electric & Gas, 5.125% due 9/01/2012 715,363
A- A1 170,000 South Carolina Electric & Gas, 6.70% due 2/01/2011 199,879
A+ A1 700,000 Southern California Gas Company, 4.80% due 10/01/2012 735,694
BBB+ Baa1 490,000 Southern Power Company, 6.25% due 7/15/2012 554,621
BBB Baa2 150,000 TGT Pipeline LLC, 5.20% due 6/01/2018 (a) 149,529
BBB+ Baa1 300,000 Texas Gas Transmission, 4.60% due 6/01/2015 (a) 299,169
A- A1 277,000 Union Electric Company, 5.25% due 9/01/2012 300,889
A- Aa3 250,000 Wisconsin Electric Power, 5.625% due 5/15/2033 258,412
-----------
14,594,963
===================================================================================================================================
Yankee-- A A2 365,000 BHP Finance USA Limited, 6.42% due 3/01/2026 407,810
Corporate--2.2% A- A2 200,000 BSCH Issuances Ltd., 7.625% due 9/14/2010 247,969
A- Baa3 730,000 Brascan Corporation, 5.75% due 3/01/2010 777,000
BBB+ Baa1 650,000 Burlington Resources Finance, 6.50% due 12/01/2011 759,503
BBB+ Baa1 500,000 Canadian National Railways, 6.375% due 10/15/2011 581,843
A- A2 120,000 Codelco Inc., 6.375% due 11/30/2012 (a) 132,162
A A2 535,000 Corp Andina de Fomento, 6.875% due 3/15/2012 609,065
A+ A1 1,000,000 Hydro-Quebec, 8.875% due 3/01/2026 1,491,645
Inter-American Development Bank:
AAA Aaa 750,000 5.75% due 2/26/2008 857,553
AAA NR* 1,000,000 6.80% due 10/15/2025 1,241,250
22 & 23
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
SCHEDULE OF INVESTMENTS (concluded) (in U.S. dollars)
Master Aggregate Bond Index Series (concluded)
----------------------------------------------------------------------------------------------------------
S&P Moody's Face
INDUSTRIES+ Ratings Ratings Amount Corporate Bonds & Notes Value
===================================================================================================================================
Yankee-- International Bank for Reconstruction and Development:
Corporate AAA Aaa $1,865,000 4.75% due 4/30/2004 $ 1,920,780
(concluded) AAA Aaa 250,000 3.50% due 10/22/2004 257,549
AAA Aaa 700,000 KFW International Finance, 4.75% due 1/24/2007 759,772
A- A3 550,000 Korea Development Bank, 4.25% due 11/13/2007 567,879
AA- A1 500,000 National Australia Bank Ltd., 8.60% due 5/19/2010 646,334
BBB- Baa3 1,165,000 Noranda Inc., 7% due 7/15/2005 1,233,187
A A2 950,000 Norsk Hydro A/S, 6.36% due 1/15/2009 1,093,942
Pemex Project Funding Master Trust:
BBB- Baa1 905,000 9.125% due 10/13/2010 1,095,050
BBB- Baa1 400,000 7.375% due 12/15/2014 438,000
BBB- Baa1 40,000 8.625% due 2/01/2022 45,700
BBB+ Baa2 345,000 Potash Corporation of Saskatchewan, 7.75% due 5/31/2011 424,062
A+ A1 500,000 Unilever Capital Corporation, 7.125% due 11/01/2010 605,785
Vodafone Group PLC:
A A2 530,000 7.75% due 2/15/2010 652,128
A A2 100,000 7.875% due 2/15/2030 128,823
A+ A1 350,000 Westpac Banking Corporation, 4.625% due 6/01/2018 347,557
------------
17,322,348
===================================================================================================================================
Total Investments in Corporate Bonds & Notes (Cost--$200,909,649)--28.0% 216,727,573
===================================================================================================================================
Short-Term Securities
===================================================================================================================================
Repurchase Morgan Stanley & Co., Inc.:
Agreements***-- 10,025,000 purchased on 6/30/2003 to yield 1.12% to 7/01/2003,
13.4% repurchase price $10,025,312, collaterized by FHLM,
6% due 10/01/2008 10,025,000
375,000 purchased on 6/30/2003 to yield 1.12% to 7/01/2003,
repurchase price $375,012, collaterized by FHLM,
4.50% due 5/01/2013 375,000
93,600,000 purchased on 6/30/2003 to yield 1.12% to 7/01/2003,
repurchase price $93,602,912, collaterized by FHLM,
5% due 2/01/2018 93,600,000
------------
104,000,000
===================================================================================================================================
Beneficial Interest/
Shares Held
===================================================================================================================================
Other--3.4% $15,651,000 Merrill Lynch Liquidity Series, LLC Money Market Series (d)(e) 15,651,000
10,434,000 Merrill Lynch Premier Institutional Fund (d)(e) 10,434,000
------------
26,085,000
===================================================================================================================================
Total Investments in Short-Term Securities (Cost--$130,085,000)--16.8% 130,085,000
===================================================================================================================================
Total Investments (Cost--$841,930,304)--113.3% 877,890,483
Unrealized Appreciation on Swaps****--0.1% 479,230
Liabilities in Excess of Other Assets--(13.4%) (103,675,360)
------------
Net Assets--100.0% $774,694,353
============
===================================================================================================================================
+ For Fund compliance purposes, "Industries" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Series management.
This definition may not apply for purposes of this report, which may
combine such industry sub-classifications for reporting ease.
* Not Rated.
** Mortgage-Backed Obligations are subject to principal paydowns as a result
of prepayments or refinancing of the underlying mortgage instruments. As a
result, the average life may be substantially less than the original
maturity.
*** Repurchase Agreements are fully collateralized by U.S. Government Agency
Obligations.
**** Swaps entered into as of June 30, 2003 were as follows:
--------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
--------------------------------------------------------------------------
Receive a price return equal to Lehman
Brothers CMBS Investment Grade Index
Total Return and pay floating rate based
on 1-month USD LIBOR, minus .40% 17,000,000 $479,230
Broker, Deutsche Bank AG
Expires, October 2003
--------------------------------------------------------------------------
(a) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(b) Floating rate note.
(c) Tradable Custodial Receipts (TRACERS).
(d) Investments in companies considered to be an affiliate of the Series (such
companies are defined as "Affiliated Companies" in Section 2(a)(3) of the
Investment Company Act of 1940) are as follows:
--------------------------------------------------------------------------
Net Dividend/Interest
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series, $15,347,574 $624
LLC Money Market Series
Merrill Lynch Premier
Institutional Fund 10,164,842 $324
--------------------------------------------------------------------------
(e) Security was purchased with the cash proceeds from securities loans.
(f) Restricted securities as to the resale. The value of the Fund's investment
in restricted securities was approximately $150,000, representing .02% of
net assets:
--------------------------------------------------------------------------
Acquisition
Issue Date Cash Value
--------------------------------------------------------------------------
Tenet Healthcare Corporation, 11/27/2002 $142,523 $149,600
6.875% due 11/15/2031
--------------------------------------------------------------------------
Total $142,523 $149,600
--------------------------------------------------------------------------
See Notes to Financial Statements.
24 & 25
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
STATEMENT OF ASSETS AND LIABILITIES
MASTER
AGGREGATE BOND
INDEX SERIES As of June 30, 2003
========================================================================================================================
Assets: Investments, at value (including securities loaned of $25,458,030)
(identified cost--$841,930,304) .................................. $877,890,483
Unrealized appreciation on swaps--net ............................ 479,230
Receivables:
Interest ....................................................... $ 7,666,903
Paydowns ....................................................... 1,311,847
Contributions .................................................. 1,094,420
Securities sold ................................................ 636,946 10,710,116
-----------
Prepaid expenses ................................................. 67,363
------------
Total assets ..................................................... 889,147,192
------------
========================================================================================================================
Liabilities: Collateral on securities loaned, at value ........................ 26,085,000
Payables:
Securities purchased ........................................... 84,268,711
Custodian bank ................................................. 3,631,956
Withdrawals .................................................... 452,526
Investment adviser ............................................. 6,145
Other affiliates ............................................... 4,279 88,363,617
-----------
Accrued expenses and other liabilities ........................... 4,222
------------
Total liabilities ................................................ 114,452,839
------------
========================================================================================================================
Net Assets: Net assets ....................................................... $774,694,353
============
========================================================================================================================
Net Assets Investors' capital ............................................... $738,254,944
Consist of: Unrealized appreciation on investments--net ...................... 36,439,409
------------
Net assets ....................................................... $774,694,353
============
========================================================================================================================
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
MASTER
AGGREGATE BOND
INDEX SERIES For the Six Months Ended June 30, 2003
==========================================================================================================
Investment Income: Interest ............................................. $16,238,111
Interest income on swaps--net ........................ 102,612
Securities lending--net .............................. 948
-----------
Total income ......................................... 16,341,671
-----------
==========================================================================================================
Expenses: Professional fees .................................... $ 68,785
Accounting services .................................. 63,624
Custodian fees ....................................... 40,453
Investment advisory fees ............................. 36,868
Trustees' fees and expenses .......................... 3,834
Printing and shareholder reports ..................... 2,392
Other ................................................ 5,472
--------
Total expenses ....................................... 221,428
-----------
Investment income--net ............................... 16,120,243
-----------
==========================================================================================================
Realized & Realized gain from investments--net .................. 2,916,139
Unrealized Gain on Change in unrealized appreciation on investments--net 9,443,401
Investments -- Net: -----------
Total realized and unrealized gain on investments--net 12,359,540
-----------
Net Increase in Net Assets Resulting from Operations . $28,479,783
===========
==========================================================================================================
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
MASTER Months Ended Year Ended
AGGREGATE BOND June 30, December 31,
INDEX SERIES Increase (Decrease) in Net Assets: 2003 2002
===================================================================================================================
Operations: Investment income--net ..................................... $ 16,120,243 $ 28,432,807
Realized gain on investments--net .......................... 2,916,139 3,541,654
Change in unrealized appreciation on investments--net ...... 9,443,401 20,353,079
------------- -------------
Net increase in net assets resulting from operations ....... 28,479,783 52,327,540
------------- -------------
===================================================================================================================
Capital Proceeds from contributions ................................ 181,730,110 414,370,731
Transactions: Fair value of withdrawals .................................. (152,083,583) (216,281,419)
------------- -------------
Net increase in net assets derived from capital transactions 29,646,527 198,089,312
------------- -------------
===================================================================================================================
Net Assets: Total increase in net assets ............................... 58,126,310 250,416,852
Beginning of period ........................................ 716,568,043 466,151,191
------------- -------------
End of period .............................................. $ 774,694,353 $ 716,568,043
============= =============
===================================================================================================================
See Notes to Financial Statements.
26 & 27
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
FINANCIAL HIGHLIGHTS
For the Six For the Year Ended
MASTER The following ratios have been derived Months Ended December 31,
AGGREGATE BOND from information provided in the June 30, -----------------------------------------------------
INDEX SERIES financial statements. 2003 2002 2001 2000 1999
===================================================================================================================================
Total Investment 3.86%+ 10.13% 8.07% -- --
Return:** =========== =========== =========== =========== ===========
===================================================================================================================================
Ratios to Average Expenses ............................... .06%* .08% .13% .14% .10%
Net Assets: =========== =========== =========== =========== ===========
Investment income--net ................. 4.37%* 5.37% 5.93% 6.62% 6.30%
=========== =========== =========== =========== ===========
===================================================================================================================================
Supplemental Net assets, end of period (in thousands) $ 774,694 $ 716,568 $ 466,151 $ 308,345 $ 406,148
Data: =========== =========== =========== =========== ===========
Portfolio turnover ..................... 79.41% 112.18% 144.23% 43.24% 61.82%
=========== =========== =========== =========== ===========
===================================================================================================================================
* Annualized.
** Total return is required to be disclosed for fiscal years beginning after
December 15, 2000.
+ Aggregate total investment return.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
MASTER
AGGREGATE BOND
INDEX SERIES
1. Significant Accounting Policies:
Master Aggregate Bond Index Series (the "Series") is part of Quantitative Master
Series Trust (the "Trust"). The Trust is registered under the Investment Company
Act of 1940, 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 accounting principles generally accepted in the
United States of America, which may require the use of management accruals and
estimates. These unaudited financial statements reflect all adjustments, which
are, in the opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a normal,
recurring nature. The following is a summary of significant accounting policies
followed by the Series.
(a) Valuation of investments -- Portfolio securities that are traded on stock
exchanges or the Nasdaq National Market are valued at the last sale price or
official closing price as of the close of business on the day the securities are
being valued, or lacking any sales, at the closing bid price for long positions,
and at the last available ask price for short positions. Securities traded in
the over-the-counter market are valued at the most recent bid prices as obtained
from one or more dealers that make markets in the securities. Portfolio
securities that are traded both in the over-the-counter market and on a stock
exchange are valued according to the broadest and most representative market,
and it is expected that for debt securities this ordinarily will be the
over-the-counter market. Short-term securities are valued at amortized cost,
which approximates market value. Options written or purchased are valued at the
last sale price in the case of exchange-traded options. In the case of options
traded in the over-the-counter market, valuation is the last asked price
(options written) or the last bid price (options purchased). Financial futures
contracts and options thereon, which are traded on exchanges, are valued at
their closing price at the close of such exchanges. 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 a pricing service retained by the
Trust which may use a matrix system for valuations. Occasionally, events
affecting the values of securities and other assets may occur between the times
at which valuations of such securities are determined (that is, close of the
market on which such securities trade) and the close of business on the NYSE. If
events (for example, company announcement, natural disasters, market volatility)
occur during such periods that are expected to materially affect the value for
such securities, those securities may be valued at their fair market value as
determined in good faith by the Trust's Board of Trustees or by the investment
adviser using a pricing service and/or procedures approved by the Board of
Trustees of the Trust.
(b) Repurchase agreements -- The Series invests in securities pursuant to
repurchase agreements. Under such agreements, the counterparty agrees to
repurchase the security at a mutually agreed upon time and price. The Series
takes possession of the underlying securities, marks to market such securities
and, if necessary, receives additional securities daily to ensure that the
contract is fully collateralized. If the counterparty defaults and the fair
value of the collateral declines, liquidation of the collateral by the Series
may be delayed or limited.
(c) Derivative financial instruments -- The Series may engage in various
portfolio investment techniques to provide liquidity or as a proxy for a direct
investment in securities underlying the Series' index. Losses may arise due to
changes in the value of the contract or if the counterparty does not perform
under the contract.
o Financial futures contracts -- The Series may purchase or sell financial
futures contracts and options on such futures contracts. Upon entering into a
contract, the Series deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected. Pursuant to the
contract, the Series agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in the value of the contract. Such receipts
or payments are known as variation margin and are recorded by the Series as
unrealized gains or losses. When the contract is closed, the Series records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
o Options -- The Series is authorized to purchase and write call and put
options. When the Series writes an option, an amount equal to the premium
received by the Series is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked to market to reflect the current
market value of the option written. When a security is purchased or sold through
an exercise of an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from (or added to)
the proceeds of the security sold. When an option expires (or the Series enters
into a closing transaction), the Series realizes a gain or loss on the option to
the extent of the premiums received or paid (or a gain or loss to the extent
that the cost of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(d) Income taxes -- The Series is classified as a partnership for Federal income
tax purposes. As such, each investor in the Series is treated as owner of its
proportionate share of the net assets, income, expenses and realized and
unrealized gains and losses of the Series. 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.
(e) Security transactions and investment income -- Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Realized gains and losses on security transactions are determined on the
identified cost basis. Interest income is recognized on the accrual basis. The
Series amortizes all premiums and discounts on debt securities.
(f) Dollar rolls -- The Series may sell securities for delivery in the current
month and simultaneously contract to
28 & 29
Merrill Lynch Aggregate Bond Index Fund, June 30, 2003
NOTES TO FINANCIAL STATEMENTS (concluded)
MASTER
AGGREGATE BOND
INDEX SERIES
repurchase substantially similar (same type, coupon and maturity) securities on
a specific future date. As of June 30, 2003, no dollar rolls were in effect.
(g) Securities lending -- The Series may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities. The
market value of the loaned securities is determined at the close of business of
the Series and any additional required collateral is delivered to the Series on
the next business day. Where the Series receives securities as collateral for
the loaned securities, it collects a fee from the borrower. The Series typically
receives the income on the loaned securities but does not receive the income on
the collateral. Where the Series receives cash collateral, it may invest such
collateral and retain the amount earned on such investments, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities within five
business days. The Series may pay reasonable finder's, lending agent,
administrative and custodial fees in connection with its loans. In the event
that the borrower defaults on its obligation to return borrowed securities
because of insolvency or for any other reason, the Series could experience
delays and costs in gaining access to the collateral. The Series also could
suffer a loss where the value of the collateral falls below the market value of
the borrowed securities, in the event of borrower default or in the event of
losses on investments made with cash collateral.
(h) Custodian bank -- The Series recorded an amount payable to the Custodian
Bank reflecting an overnight overdraft which resulted from management estimates
of available cash.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Series' portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Series. For such services, the Series pays a monthly
fee at an annual rate of .01% of the average daily value of the Series' net
assets.
The Trust has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., or its
affiliates. Pursuant to that order, the Series also has retained Merrill Lynch
Investment Managers, LLC ("MLIM, LLC"), an affiliate of FAM, as the securities
lending agent for a fee based on a share of the returns on investment of cash
collateral. MLIM, LLC may, on behalf of the Series, invest cash collateral
received by the Series for such loans, among other things, in a private
investment company managed by MLIM, LLC or in registered money market funds
advised by FAM or its affiliates. For the six months ended June 30, 2003, MLIM,
LLC received $463 in securities lending agent fees.
Merrill Lynch Trust Company, an indirect, wholly-owned subsidiary of ML & Co.,
is the Series' custodian.
For the six months ended June 30, 2003, the Series reimbursed FAM $7,765 for
certain accounting services.
Certain officers and/or trustees of the Series are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 2003 were $600,577,693 and $572,567,772, respectively.
Net realized gains for the six months ended June 30, 2003 and net unrealized
gains as of June 30, 2003 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments ................ $ 2,916,139 $35,960,179
Swap contracts ....................... -- 479,230
----------- -----------
Total ................................ $ 2,916,139 $36,439,409
=========== ===========
- --------------------------------------------------------------------------------
As of June 30, 2003, net unrealized appreciation for Federal income tax purposes
aggregated $35,289,520, of which $35,860,798 related to appreciated securities
and $571,278 related to depreciated securities. At June 30, 2003, the aggregate
cost of investments for Federal income tax purposes was $842,600,963.
4. Short-Term Borrowings:
The Series, along with certain other funds managed by FAM and its affiliates, is
a party to a $500,000,000 credit agreement with Bank One, N.A. and certain other
lenders. The Series may borrow under the credit agreement to fund shareholder
redemptions and for other lawful purposes other than for leverage. The Series
may borrow up to the maximum amount allowable under the Series' current
prospectus and statement of additional information, subject to various other
legal, regulatory or contractual limits. The Series pays a commitment fee of
..09% per annum based on the Series' pro rata share of the unused portion of the
credit agreement. Amounts borrowed under the credit agreement bear interest at a
rate equal to, at each fund's election, the Federal Funds rate plus .50% or a
base rate as determined by Bank One, N.A. On November 29, 2002, the credit
agreement was renewed for one year under the same terms, except that the
commitment was reduced from $1,000,000,000 to $500,000,000. The Series did not
borrow under the credit agreement during the six months ended June 30, 2003.
30 & 31
[LOGO] Merrill Lynch Investment Managers
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2)
on www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
website at http://www.sec.gov.
Merrill Lynch Index Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
[RECYCLED LOGO] Printed on post-consumer recycled paper #Index 1--6/03
Item 2 - Did registrant adopt a code of ethics, as of the end of the period
covered by this report, that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party? If not, why not? Briefly describe any amendments or
waivers that occurred during the period. State here if code of
ethics/amendments/waivers are on website and give website address-.
State here if fund will send code of ethics to shareholders without
charge upon request-- N/A (annual requirement only and not required to
be answered until the registrant's fiscal year-end on or after July 15,
2003)
Item 3 - Did the registrant's board of directors determine that the registrant
either: (i) has at least one audit committee financial expert serving
on its audit committee; or (ii) does not have an audit committee
financial expert serving on its audit committee? If yes, disclose name
of financial expert and whether he/she is "independent," (fund may, but
is not required, to disclose name/independence of more than one
financial expert) If no, explain why not. -N/A (annual requirement only
and not required to be answered until the registrant's fiscal year-end
on or after July 15, 2003)
Item 4 - Disclose annually only (not answered until December 15, 2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by
the principal accountant for the audit of the
registrant's annual financial statements or services
that are normally provided by the accountant in
connection with statutory and regulatory filings or
engagements for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of the
last two fiscal years for assurance and
related services by the principal accountant
that are reasonably related to the performance
of the audit of the registrant's financial
statements and are not reported under
paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising
the fees disclosed under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last two
fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and
tax planning. Registrants shall describe the nature of
the services comprising the fees disclosed under this
category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the last
two fiscal years for products and services
provided by the principal accountant, other than
the services reported in paragraphs (a) through
(c) of this Item. Registrants shall describe the
nature of the services comprising the fees
disclosed under this category. N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by
the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended on
the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant for each
of the last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Item 5 - If the registrant is a listed issuer as defined in Rule 10A-3 under the
Exchange Act, state whether or not the registrant has a
separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d) under
the Exchange Act regarding an exemption from the listing standards for
audit committees. N/A
(Listed issuers must be in compliance with the new listing rules by the
earlier of their first annual shareholders meeting after January 2004,
or October 31, 2004 (annual requirement))
Item 6 - Reserved
Item 7 - For closed-end funds that contain voting securities in their portfolio,
describe the policies and procedures that it uses to determine how to
vote proxies relating to those portfolio securities. N/A
Item 8 -- Reserved
Item 9(a) - 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.
Item 9(b) -- There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and
material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or
amendments/waivers is on website or offered to shareholders upon request
without charge. N/A.
10(b) - Attach certifications pursuant to Section 302 of the Sarbanes-Oxley Act.
Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Merrill Lynch Aggregate Bond Index Fund
By: /s/ Terry K. Glenn
-------------------------------
Terry K. Glenn,
President of
Merrill Lynch Aggregate Bond Index Fund
Date: August 21, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
By: /s/ Terry K. Glenn
-------------------------------
Terry K. Glenn,
President of
Merrill Lynch Aggregate Bond Index Fund
Date: August 21, 2003
By: /s/ Donald C. Burke
-------------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Aggregate Bond Index Fund
Date: August 21, 2003
Attached hereto as a furnished exhibit are the certifications pursuant
to Section 906 of the Sarbanes-Oxley Act.