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 S&P 500 Index Fund
Master S&P 500 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
S&P 500 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
S&P 500
Index Fund
Merrill Lynch Index Funds, Inc.
www.mlim.ml.com
Merrill Lynch S&P 500 Index Fund
Officers and
Directors/Trustees
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
Richard J. Vella, 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 S&P 500 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 as Class I Shares. At the same time, Class D Shares were
redesignated Class A Shares. Trading symbols have not been changed nor have
current eligibility rules or pricing structures. This redesignation of share
classes does not impact your investment in any way.
Investment Environment
The first quarter of 2003 brought negative returns and extreme volatility. The
U.S. markets lost ground consistently during the beginning of the quarter then
spiked on news of the start of war with Iraq. The downtrend returned after
investors realized that the conflict might last longer than anticipated,
potentially curbing business spending. Most indexes finished the first quarter
in negative territory. The second quarter of 2003 brought impressive gains and
what some are calling a "bull rally." The U.S. markets rose consistently over
the quarter, spurred by optimism that economic and profit growth will
accelerate. On June 16, 2003, the S&P 500 Index closed above the 1,000 mark (at
1,010.74) for the first time since June 20, 2002. Most indexes finished the
six-month period ended June 30, 2003 in positive territory, with the Dow Jones
Industrial Average closing at 8,985.44, up 7.72% for the period, and the S&P 500
Index closing at 974.50, up 10.76% for the period. The NASDAQ Composite Index
closed at 1,622.80, up an impressive 21.51%. Technology stocks have outperformed
the broader market on expectations that companies in that sector will be among
the first beneficiaries of an economic recovery.
Portfolio Matters
For the six months ended June 30, 2003, Merrill Lynch S&P 500 Index Fund's Class
A and Class I Shares had total returns of +11.44% and +11.62%, respectively,
compared to the unmanaged benchmark Standard & Poor's (S&P) 500 Index's total
return of +11.76%. (Complete performance information can be found on page 4 of
this report to shareholders.) The Fund met its objective of closely tracking the
return of its benchmark. Value outperformed growth for the period, with the S&P
500 Barra Value Index returning +12.29% compared to the S&P 500 Barra Growth
Index, which had a return of +11.25%.
The top year-to-date (as of June 30, 2003) sector performer was information
technology, up 17.40%, followed by consumer discretionary, up 16.94% and
utilities, up 15.03%. The worst year-to-date sectors were consumer staples, up
only 0.91%, telecommunications services, up 2.29% and materials, up 4.14%.
(Sector returns shown are measured by those sectors in S&P 500 Index.)
Market Review
Investor confidence remained shaken early in 2003 with threats of terrorism,
nuclear tensions in North Korea, and unexpectedly high unemployment. The war in
Iraq left investors with inconsistent views about the market, and trading was
reactionary to news from the front lines. However, markets rallied following the
resolution of military affairs in Iraq, and investors became increasingly
bullish about the outlook for equities. The rise was notable for all sectors and
countries. It has been encouraging to see that the SARS virus appears to have
been brought under control in Hong Kong, Singapore, China and, hopefully,
Taiwan.
Despite unstable markets, the Federal Reserve Board left interest rates
unchanged at 1.25% at its January 29 and March 18 meetings. After leaving the
rates unchanged again at its May 6 meeting, the Federal Reserve Board lowered
its target for the Federal Funds rate by 25 basis points (.25%) to 1% at its
June 25 meeting, bringing the rate to a 49-year low. The Federal Reserve Board
continues to use an accommodative stance of monetary policy, coupled with an
underlying growth in productivity, to provide ongoing support to economic
activity. The modest 25 basis point cut rather than the expected 50 basis point
cut leaves room for further Federal Reserve Board interest rate reductions in
the future. In response to the Federal Reserve Board's decision, financial
markets were initially disappointed, with long-term interest rates backing up
sharply and stock prices falling. This movement will likely be moderated by the
realization that the growth outlook will be strengthened.
Economic Outlook
Economic indicators for the current economy are ambiguous, but the economy may
strengthen and produce strong results for the second half of 2003. Many of the
geopolitical factors that may have exacerbated the slowdown in activity (war
fears, higher oil prices, poor weather and SARS) have been largely resolved.
While the economy is improving, the rate of change is only gradual. Data
indicates that further policy stimulus will hit the economy in the second half
of the year, but it is worth noting the lack of growth given the large cuts in
interest rates already seen. Additionally, a key factor is the concern about
whether consumers will continue to spend long enough to prop up the economy
until a corporate spending cycle emerges.
For the next quarter, the reaction by the economy to all the stimuli in the
pipeline and the extent of the recovery is still ambiguous. Lower withholding
taxes from paychecks and child tax credit checks position households on the
receiving end of at least $30 billion from tax relief. This, coupled with a
mortgage-refinancing wave continuing a high incentive to refinance, is
indicative of an increase in consumer spending in the third quarter putting the
economy on a recovery track. With that in mind, the portfolio is expected to
continue to meet its objectives.
In Conclusion
We appreciate your investment in Merrill Lynch S&P 500 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/ Richard J. Vella
Richard J. Vella
Vice President and
Senior Portfolio Manager
July 15, 2003
2 & 3
Merrill Lynch S&P 500 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, which offers 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 ex-dividend date. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. Dividends paid to each class of shares will
vary because of the different levels of account maintenance, distribution
and transfer agency fees applicable to each class, which are deducted from
the income available to be paid to shareholders. The Fund's Administrator
and the Series' Investment Adviser voluntarily waived a portion of their
administration fee and management fee, respectively. Without such waivers,
the Fund's performance would have been lower.
Recent
Performance
Results
6-Month 12-Month Since Inception
As of June 30, 2003 Total Return Total Return Total Return
=======================================================================================
ML S&P 500 Index Fund Class A Shares* +11.44% -0.32% +36.87%
- ---------------------------------------------------------------------------------------
ML S&P 500 Index Fund Class I Shares* +11.62 -0.06 +38.98
- ---------------------------------------------------------------------------------------
Standard & Poor's 500 Index** +11.76 +0.25 +42.20
=======================================================================================
* Total investment returns are based on changes in net asset value for the
periods shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date. The Fund's
inception date is 4/03/97.
** This unmanaged broad-based Index is comprised of common stocks. Since
inception total return is from 4/03/97.
Average Annual
Total Return
Class A Shares % Return
================================================================================
One Year Ended 6/30/03 -0.32%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/03 -2.23
- --------------------------------------------------------------------------------
Inception (4/03/97) through 6/30/03 +5.16
- --------------------------------------------------------------------------------
Class I Shares % Return
================================================================================
One Year Ended 6/30/03 -0.06%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/03 -1.98
- --------------------------------------------------------------------------------
Inception (4/03/97) through 6/30/03 +5.42
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
MERRILL LYNCH
S&P 500
INDEX FUND As of June 30, 2003
==================================================================================================================
Assets: Investment in Master S&P 500 Index Series, at value
(identified cost--$2,043,708,418) ......................... $ 1,944,824,722
Prepaid registration fees and expenses .................... 35,740
---------------
Total assets .............................................. 1,944,860,462
---------------
==================================================================================================================
Liabilities: Payables:
Administrative fees ..................................... $ 407,822
Distributor ............................................. 159,805
Other affiliates ........................................ 70,916 638,543
------------
Accrued expenses and other liabilities .................... 577,266
---------------
Total liabilities ......................................... 1,215,809
---------------
==================================================================================================================
Net Assets: Net assets ................................................ $ 1,943,644,653
===============
==================================================================================================================
Net Assets Class A Shares of Common Stock, $.0001 par value,
Consist of: 250,000,000 shares authorized ............................. $ 6,249
Class I Shares of Common Stock, $.0001 par value,
250,000,000 shares authorized ............................. 9,947
Paid-in capital in excess of par .......................... 2,207,609,556
Undistributed investment income--net ...................... $ 12,206,067
Accumulated realized capital losses on investments
from the Series--net ...................................... (177,303,470)
Unrealized depreciation on investments from the Series--net (98,883,696)
------------
Total accumulated losses--net ............................. (263,981,099)
---------------
Net assets ................................................ $ 1,943,644,653
===============
==================================================================================================================
Net Asset Class A--Based on net assets of $748,655,581
Value: and 62,490,247 shares outstanding ......................... $ 11.98
===============
Class I--Based on net assets of $1,194,989,072
and 99,466,008 shares outstanding ......................... $ 12.01
===============
==================================================================================================================
See Notes to Financial Statements.
4 & 5
Merrill Lynch S&P 500 Index Fund, June 30, 2003
STATEMENT OF OPERATIONS
MERRILL LYNCH
S&P 500
INDEX FUND For the Six Months Ended June 30, 2003
===============================================================================================================================
Investment Income Net investment income allocated from the Series:
From the Series--Net: Dividends .......................................................... $ 15,017,959
Interest ........................................................... 297,414
Securities lending--net ............................................ 140,676
Expenses ........................................................... (337,122)
-------------
Net investment income from the Series ................................ 15,118,927
-------------
===============================================================================================================================
Expenses: Administration fees .................................................. $ 2,111,743
Account maintenance fees--Class A .................................... 833,980
Transfer agent fees .................................................. 478,496
Printing and shareholder reports ..................................... 56,404
Registration fees .................................................... 29,316
Professional fees .................................................... 21,533
Directors' fees and expenses ......................................... 10,772
Other ................................................................ 44,902
-----------
Total expenses ....................................................... 3,587,146
-------------
Investment income--net ............................................... 11,531,781
-------------
===============================================================================================================================
Realized & Unrealized Realized loss on investments from the Series--net .................... (9,714,269)
Gain (Loss) from Change in unrealized depreciation on investments from the Series--net 196,531,171
The Series--Net: -------------
Total realized and unrealized gain on investments from the Series--net 186,816,902
-------------
Net Increase in Net Assets Resulting from Operations ................. $ 198,348,683
=============
===============================================================================================================================
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
MERRILL LYNCH Months Ended Year Ended
S&P 500 June 30, December 31,
INDEX FUND Increase (Decrease) in Net Assets: 2003 2002
==============================================================================================================================
Operations: Investment income--net ............................................ $ 11,531,781 $ 20,576,419
Realized loss on investments from the Series--net ................. (9,714,269) (75,631,678)
Change in unrealized appreciation/depreciation
on investments from the Series--net ............................... 196,531,171 (403,025,960)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations ... 198,348,683 (458,081,219)
--------------- ---------------
==============================================================================================================================
Dividends to Investment income--net:
Shareholders: Class A ......................................................... -- (7,425,881)
Class I ......................................................... -- (13,196,193)
--------------- ---------------
Net decrease in net assets resulting from dividends to shareholders -- (20,622,074)
--------------- ---------------
==============================================================================================================================
Capital Share Net increase in net assets derived from capital share transactions 164,809,671 177,607,344
Transactions: --------------- ---------------
==============================================================================================================================
Net Assets: Total increase (decrease) in net assets ........................... 363,158,354 (301,095,949)
Beginning of period ............................................... 1,580,486,299 1,881,582,248
--------------- ---------------
End of period* .................................................... $ 1,943,644,653 $ 1,580,486,299
=============== ===============
==============================================================================================================================
* Undistributed investment income--net .............................. $ 12,206,067 $ 674,286
=============== ===============
==============================================================================================================================
See Notes to Financial Statements.
6 & 7
Merrill Lynch S&P 500 Index Fund, June 30, 2003
FINANCIAL HIGHLIGHTS
Class A@@
The following per share data and ratios have ---------------------------------------------------------------
been derived from information provided in For the Six For the Year Ended
MERRILL LYNCH the financial statements. Months Ended December 31,
S&P 500 June 30, --------------------------------------------------
INDEX FUND Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
==================================================================================================================================
Per Share Net asset value, beginning of period ........ $ 10.75 $ 14.05 $ 16.16 $ 18.00 $ 15.28
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net ...................... .06+ .13+ .10 .04 .13
Realized and unrealized gain (loss) on
investments and foreign currency transactions
from the Series--net ........................ 1.17 (3.31) (2.12) (1.77) 2.94
---------- ---------- ---------- ---------- ----------
Total from investment operations ............ 1.23 (3.18) (2.02) (1.73) 3.07
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net .................... -- (.12) (.09) (.10) (.14)
In excess of investment income--net ....... -- -- -- --++ --
Realized gain on investments from the
Series--net ............................... -- -- -- -- --
In excess of realized gain on investments
from the Series--net ...................... -- -- -- (.01) (.14)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions ........... -- (.12) (.09) (.11) (.35)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period .............. $ 11.98 $ 10.75 $ 14.05 $ 16.16 $ 18.00
========== ========== ========== ========== ==========
==================================================================================================================================
Total Investment Based on net asset value per share .......... 11.44%@ (22.62%) (12.49%) (9.62%) 20.16%
Return: ========== ========== ========== ========== ==========
==================================================================================================================================
Ratios to Average Expenses, net of reimbursement+++ ........... .61%* .61% .62% .63% .63%
Net Assets: ========== ========== ========== ========== ==========
Expenses+++ ................................. .61%* .61% .63% .65% .63%
========== ========== ========== ========== ==========
Investment income--net ...................... 1.18%* 1.03% .71% .60% .77%
========== ========== ========== ========== ==========
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) .... $ 748,656 $ 648,569 $ 772,750 $ 817,423 $ 840,918
Data: ========== ========== ========== ========== ==========
Portfolio turnover from the Series .......... 1.06% 4.59% 3.21% 9.71% 29.91%
========== ========== ========== ========== ==========
==================================================================================================================================
Class I@@@
The following per share data and ratios have ---------------------------------------------------------------
been derived from information provided in For the Six For the Year Ended
MERRILL LYNCH the financial statements. Months Ended December 31,
S&P 500 June 30, --------------------------------------------------
INDEX FUND Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
==================================================================================================================================
Per Share Net asset value, beginning of period ........ $ 10.76 $ 14.08 $ 16.18 $ 18.02 $ 15.30
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net ...................... .08+ .16+ .13 .13 .18
Realized and unrealized gain (loss) on
investments and foreign currency transactions
from the Series--net ........................ 1.17 (3.33) (2.10) (1.82) 2.92
---------- ---------- ---------- ---------- ----------
Total from investment operations ............ 1.25 (3.17) (1.97) (1.69) 3.10
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net .................... -- (.15) (.13) (.14) (.17)
In excess of investment income--net ....... -- -- -- --++ --
Realized gain on investments from the
Series--net ............................... -- -- -- -- --
In excess of realized gain on investments
from the Series--net ...................... -- -- -- (.01) (.21)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions ........... -- (.15) (.13) (.15) (.38)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period .............. $ 12.01 $ 10.76 $ 14.08 $ 16.18 $ 18.02
========== ========== ========== ========== ==========
==================================================================================================================================
Total Investment Based on net asset value per share .......... 11.62%@ (22.51%) (12.19%) (9.43%) 20.45%
Return: ========== ========== ========== ========== ==========
==================================================================================================================================
Ratios to Average Expenses, net of reimbursement+++ ........... .36%* .36% .37% .38% .38%
Net Assets: ========== ========== ========== ========== ==========
Expenses+++ ................................. .36%* .36% .38% .40% .38%
========== ========== ========== ========== ==========
Investment income--net ...................... 1.44%* 1.27% .97% .85% 1.03%
========== ========== ========== ========== ==========
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) .... $1,194,989 $ 931,917 $1,108,832 $ 896,356 $ 848,591
Data: ========== ========== ========== ========== ==========
Portfolio turnover from the Series .......... 1.06% 4.59% 3.21% 9.71% 29.91%
========== ========== ========== ========== ==========
==================================================================================================================================
* Annualized.
+ Based on average shares outstanding.
++ Amount is less than $.01 per share.
+++ Includes the Fund's share of the Series' allocated expenses.
@ 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 S&P 500 Index Fund, June 30, 2003
NOTES TO FINANCIAL STATEMENTS
MERRILL LYNCH
S&P 500
INDEX FUND
1. Significant Accounting Policies:
Merrill Lynch S&P 500 Index Fund (the "Fund") is part of Merrill Lynch Index
Funds, Inc. (the "Corporation"). The Fund is registered under the Investment
Company Act of 1940, as amended, as a non-diversified mutual fund. The Fund's
financial statements are prepared in conformity with 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 Fund seeks to achieve its investment
objective by investing all of its assets in Master S&P 500 Index Series (the
"Series") of Quantitative Master Series Trust, which has the same investment
objective as the Fund. The value of the Fund's investment in the Series reflects
the Fund's proportionate interest in the net assets of the Series. The
performance of the Fund is directly affected by the performance of the Series.
The financial statements of the Series, including the Schedule of Investments,
are included elsewhere in this report and should be read in conjunction with the
Fund's financial statements. The percentage of the Series owned by the Fund at
June 30, 2003 was 91.9%. The Fund offers multiple 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 their account maintenance expenditures. Income, expenses
(other than expenses attributable to a specific class) and realized and
unrealized gains and losses on investments are allocated daily to each class
based on its relative net assets. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments -- The Fund records its investment in the Series at
fair value. Valuation of securities held by the Series is discussed in Note 1a
of the Series' Notes to Financial Statements, which are included elsewhere in
this report.
(b) Investment income and expenses -- The Fund records daily its proportionate
share of the Fund's income, expenses and realized and unrealized gains and
losses. In addition, the Fund accrues its own expenses.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders. Therefore,
no Federal income tax provision is required.
(d) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(e) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(f) Investment transactions -- Investment transactions in the Series are
accounted for on a trade date basis.
2. Transactions with Affiliates:
The Corporation has entered into an Administrative Services Agreement with
Merrill Lynch Investment Managers, L.P. ("MLIM"). The general partner of MLIM is
Princeton Services, Inc. ("PSI"), 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 .245% of the Fund's average daily net assets for the
performance of administrative services (other than investment advice and related
portfolio activities) necessary for the operation of the Fund.
The Corporation has also entered into a Distribution Agreement and Distribution
Plan with FAM Distributors, Inc. ("FAMD" or the "Distributor"), which is 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
MLIM, PSI, FAMD, FDS, and/or ML & Co.
3. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$164,809,671 and $177,607,344 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 ...................... 10,313,959 $ 114,712,477
Shares redeemed .................. (8,179,659) (89,595,606)
------------- -------------
Net increase ..................... 2,134,300 $ 25,116,871
============= =============
- --------------------------------------------------------------------------------
+ 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 ............................ 22,596,862 $ 272,284,151
Shares issued to shareholders
in reinvestment of dividends ........... 607,598 6,669,539
------------- -------------
Total issued ........................... 23,204,460 278,953,690
Shares redeemed ........................ (17,841,183) (213,168,879)
------------- -------------
Net increase ........................... 5,363,277 $ 65,784,811
============= =============
- --------------------------------------------------------------------------------
+ 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 ...................... 28,336,282 $ 310,703,371
Shares redeemed .................. (15,459,671) (171,010,571)
------------- -------------
Net increase ..................... 12,876,611 $ 139,692,800
============= =============
- --------------------------------------------------------------------------------
+ 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 ............................ 41,888,936 $ 525,329,539
Shares issued to shareholders
in reinvestment of dividends ........... 1,168,621 12,824,616
------------- -------------
Total issued ........................... 43,057,557 538,154,155
Shares redeemed ........................ (35,244,780) (426,331,622)
------------- -------------
Net increase ........................... 7,812,777 $ 111,822,533
============= =============
- --------------------------------------------------------------------------------
+ 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
$92,600,903, of which $4,944,930 expires in 2008, $14,600,496 expires in 2009
and $73,055,477 expires in 2010. This amount will be available to offset like
amounts of any future taxable gains.
5. Subsequent Event:
The Fund paid an ordinary income dividend in the amount of $.004126 per share on
July 22, 2003 to shareholders of record on July 16, 2003.
10 & 11
Merrill Lynch S&P 500 Index Fund, June 30, 2003
SCHEDULE OF INVESTMENTS (in U.S. dollars)
Master S&P 500 Index Series
- ----------------------------------------------------------------------------------------------------------------------
Shares
Industry* Held Common Stocks Value
======================================================================================================================
Aerospace & Defense--1.7% 23,087 The B.F. Goodrich Company $ 484,827
193,720 The Boeing Company 6,648,470
47,248 General Dynamics Corporation 3,425,480
196,177 Honeywell International Inc. 5,267,352
104,970 Lockheed Martin Corporation 4,993,423
42,176 Northrop Grumman Corporation 3,639,367
94,574 Raytheon Company 3,105,810
108,148 United Technologies Corporation 7,660,123
-----------
35,224,852
- ----------------------------------------------------------------------------------------------------------------------
Air Freight & 69,608 FedEx Corp. 4,317,784
Logistics--1.0% 13,974 Ryder System, Inc. 358,014
259,200 United Parcel Service, Inc. (Class B) 16,511,040
-----------
21,186,838
- ----------------------------------------------------------------------------------------------------------------------
Airlines--0.2% 36,576 Delta Air Lines, Inc. 536,936
179,395 Southwest Airlines Co. 3,085,594
-----------
3,622,530
- ----------------------------------------------------------------------------------------------------------------------
Auto Components--0.2% 15,530 Cooper Tire & Rubber Company 273,173
29,545 Dana Corporation 341,540
129,125 Delphi Automotive Systems Corporation 1,114,349
40,393 The Goodyear Tire & Rubber Company 212,063
21,010 Johnson Controls, Inc. 1,798,456
27,726 Visteon Corporation 190,478
-----------
3,930,059
- ----------------------------------------------------------------------------------------------------------------------
Automobiles--0.6% 421,699 Ford Motor Company 4,634,472
129,139 General Motors Corporation 4,649,004
71,159 Harley-Davidson, Inc. 2,836,398
-----------
12,119,874
- ----------------------------------------------------------------------------------------------------------------------
Beverages--2.8% 10,783 Adolph Coors Company (Class B) 528,151
192,185 Anheuser-Busch Companies, Inc. 9,811,044
12,244 Brown-Forman Corporation (Class B) 962,623
567,428 The Coca-Cola Company 26,334,333
95,087 Coca-Cola Enterprises Inc. 1,725,829
62,422 The Pepsi Bottling Group, Inc. 1,249,688
395,788 PepsiCo, Inc. 17,612,566
-----------
58,224,234
- ----------------------------------------------------------------------------------------------------------------------
Biotechnology--1.3% 290,147 +Amgen Inc. 19,277,367
37,166 +Biogen, Inc. 1,412,308
44,734 +Chiron Corporation 1,955,771
50,580 +Genzyme Corporation 2,114,244
58,352 +MedImmune, Inc. 2,122,262
-----------
26,881,952
- ----------------------------------------------------------------------------------------------------------------------
Building Products--0.2% 15,600 +American Standard Companies, Inc. 1,153,308
104,779 Masco Corporation 2,498,979
-----------
3,652,287
- ----------------------------------------------------------------------------------------------------------------------
Capital Markets--3.4% 176,195 The Bank of New York Company, Inc. 5,065,606
22,811 The Bear Stearns Companies Inc. 1,651,973
311,068 The Charles Schwab Corporation 3,138,676
25,100 Federated Investors, Inc. (Class B) 688,242
58,086 Franklin Resources, Inc. 2,269,420
108,200 The Goldman Sachs Group, Inc. 9,061,750
474,155 J.P. Morgan Chase & Co. 16,206,618
48,705 Janus Capital Group Inc. 798,762
55,878 Lehman Brothers Holdings, Inc. 3,714,769
103,216 Mellon Financial Corporation 2,864,244
214,267 Merrill Lynch & Co., Inc. (a) 10,001,984
250,498 Morgan Stanley 10,708,790
52,127 Northern Trust Corporation 2,178,387
76,523 State Street Corporation 3,015,006
28,124 T. Rowe Price Group Inc. 1,061,681
-----------
72,425,908
- ----------------------------------------------------------------------------------------------------------------------
Chemicals--1.4% 50,847 Air Products and Chemicals, Inc. 2,115,235
209,976 The Dow Chemical Company 6,500,857
229,473 E.I. du Pont de Nemours and Company 9,555,256
24,150 Eastman Chemical Company 764,831
60,514 Ecolab Inc. 1,549,158
24,097 Engelhard Corporation 596,883
10,035 Great Lakes Chemical Corporation 204,714
23,259 +Hercules Incorporated 230,264
21,596 International Flavors & Fragrances Inc. 689,560
54,477 Monsanto Company 1,178,882
37,487 PPG Industries, Inc. 1,902,090
39,123 Praxair, Inc. 2,351,292
44,803 Rohm and Haas Company 1,390,237
19,723 Sigma-Aldrich Corporation 1,068,592
-----------
30,097,851
- ----------------------------------------------------------------------------------------------------------------------
Commercial Banks--6.2% 80,903 AmSouth Bancorporation 1,766,922
128,500 BB&T Corporation 4,407,550
345,113 Bank of America Corporation 27,274,280
266,389 Bank One Corporation 9,904,343
51,795 Charter One Financial, Inc. 1,614,968
42,991 Comerica Incorporated 1,999,082
132,344 Fifth Third Bancorp 7,588,605
30,700 First Tennessee National Corporation 1,348,037
242,247 FleetBoston Financial Corporation 7,197,158
52,629 Huntington Bancshares Incorporated 1,027,318
97,410 KeyCorp 2,461,551
12 & 13
Merrill Lynch S&P 500 Index Fund, June 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master S&P 500 Index Series (continued)
- ----------------------------------------------------------------------------------------------------------------------
Shares
Industry* Held Common Stocks Value
======================================================================================================================
Commercial Banks 45,200 Marshall & Ilsley Corporation $ 1,382,216
(concluded) 140,902 National City Corporation 4,608,904
36,100 North Fork Bancorporation 1,229,566
67,068 PNC Bank Corp. 3,273,589
48,658 Regions Financial Corporation 1,643,667
79,044 SouthTrust Corporation 2,149,997
64,499 SunTrust Banks, Inc. 3,827,371
60,151 Synovus Financial Corp. 1,293,247
442,265 U.S. Bancorp 10,835,493
42,381 Union Planters Corporation 1,315,082
311,276 Wachovia Corporation 12,438,589
386,622 Wells Fargo & Co. 19,485,749
24,202 Zions Bancorporation 1,224,863
------------
131,298,147
- ----------------------------------------------------------------------------------------------------------------------
Commercial Services 42,078 +Allied Waste Industries, Inc. 422,884
& Supplies--1.0% 40,400 +Apollo Group, Inc. (Class A) 2,495,104
23,058 Avery Dennison Corporation 1,157,512
234,625 +Cendant Corporation 4,298,330
39,402 Cintas Corporation 1,396,407
13,636 Deluxe Corporation 610,893
29,202 Equifax Inc. 759,252
43,985 H & R Block, Inc. 1,902,351
31,739 +Monster Worldwide Inc. 626,210
53,982 Pitney Bowes Inc. 2,073,449
22,525 R.R. Donnelley & Sons Company 588,804
33,711 +Robert Half International Inc. 638,486
135,414 Waste Management, Inc. 3,262,123
------------
20,231,805
- ----------------------------------------------------------------------------------------------------------------------
Communications 163,055 +ADC Telecommunications, Inc. 379,592
Equipment--2.2% 20,339 +Andrew Corporation 187,119
70,782 +Avaya Inc. 457,252
131,695 +CIENA Corporation 683,497
1,616,971 +Cisco Systems, Inc. 26,987,246
50,843 +Comverse Technology, Inc. 764,170
276,575 +Corning Incorporated 2,043,889
345,487 +JDS Uniphase Corporation 1,212,659
901,258 +Lucent Technologies Inc. 1,829,554
526,469 Motorola, Inc. 4,964,603
181,880 QUALCOMM Inc. 6,502,210
39,194 Scientific-Atlanta, Inc. 934,385
88,687 +Tellabs, Inc. 582,674
------------
47,528,850
- ----------------------------------------------------------------------------------------------------------------------
Computers & 90,817 +Apple Computer, Inc. 1,736,421
Peripherals--3.9% 591,716 +Dell Computer Corporation 18,911,243
503,854 +EMC Corporation 5,275,351
61,098 +Gateway Inc. 223,008
703,117 Hewlett-Packard Company 14,976,392
400,667 International Business Machines Corporation 33,055,028
29,839 +Lexmark International Group, Inc. (Class A) 2,111,706
20,718 +NCR Corporation 530,795
78,621 +Network Appliance, Inc. 1,274,446
731,056 +Sun Microsystems, Inc. 3,362,858
------------
81,457,248
- ----------------------------------------------------------------------------------------------------------------------
Construction & 16,361 Fluor Corporation 550,384
Engineering--0.0% 11,755 +McDermott International, Inc. 74,409
------------
624,793
- ----------------------------------------------------------------------------------------------------------------------
Construction 20,647 Vulcan Materials Company 765,384
Materials--0.0%
- ----------------------------------------------------------------------------------------------------------------------
Consumer Finance--1.2% 300,784 American Express Company 12,575,779
54,667 Capital One Financial Corporation 2,688,523
292,372 MBNA Corporation 6,093,032
61,073 +Providian Financial Corporation 565,536
107,430 SLM Corporation 4,208,033
------------
26,130,903
- ----------------------------------------------------------------------------------------------------------------------
Containers & 13,180 Ball Corporation 599,822
Packaging--0.2% 12,268 Bemis Company, Inc. 574,142
35,625 +Pactiv Corporation 702,169
19,469 +Sealed Air Corporation 927,893
12,453 Temple-Inland, Inc. 534,358
------------
3,338,384
- ----------------------------------------------------------------------------------------------------------------------
Distributors--0.1% 36,414 Genuine Parts Company 1,165,612
- ----------------------------------------------------------------------------------------------------------------------
Diversified Financial 1,186,036 Citigroup Inc. 50,762,341
Services--2.6% 35,840 Moody's Corporation 1,889,126
70,000 The Principal Financial Group, Inc. 2,257,500
------------
54,908,967
- ----------------------------------------------------------------------------------------------------------------------
Diversified 70,837 ALLTEL Corporation 3,415,760
Telecommunication 179,392 AT&T Corp. 3,453,296
Services--3.3% 425,834 BellSouth Corporation 11,339,959
32,977 CenturyTel, Inc. 1,149,248
54,618 +Citizens Communications Company 704,026
367,745 +Qwest Communications International Inc. 1,757,821
765,405 SBC Communications Inc. 19,556,098
197,181 Sprint Corporation 2,839,406
633,628 Verizon Communications 24,996,625
------------
69,212,239
- ----------------------------------------------------------------------------------------------------------------------
14 & 15
Merrill Lynch S&P 500 Index Fund, June 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master S&P 500 Index Series (continued)
- ----------------------------------------------------------------------------------------------------------------------
Shares
Industry* Held Common Stocks Value
======================================================================================================================
Electric Utilities--2.3% 28,920 Allegheny Energy, Inc. $ 244,374
37,181 Ameren Corporation 1,639,682
90,720 American Electric Power Company, Inc. 2,706,178
33,214 CMS Energy Corporation 269,033
83,270 CenterPoint Energy, Inc. 678,651
37,428 Cinergy Corp. 1,376,976
51,425 Consolidated Edison, Inc. 2,225,674
31,749 Constellation Energy Group 1,088,991
38,738 DTE Energy Company 1,496,836
71,557 Dominion Resources, Inc. 4,598,968
75,099 +Edison International 1,233,877
51,155 Entergy Corporation 2,699,961
75,164 Exelon Corporation 4,495,559
42,707 FPL Group, Inc. 2,854,963
68,616 FirstEnergy Corp. 2,638,285
85,077 +PG&E Corporation 1,799,379
33,792 PPL Corporation 1,453,056
19,032 Pinnacle West Capital Corporation 712,748
55,426 Progress Energy, Inc. 2,433,201
52,064 Public Service Enterprise Group Incorporated 2,199,704
163,223 The Southern Company 5,086,029
52,896 TECO Energy, Inc. 634,223
77,922 TXU Corp. 1,749,349
90,402 Xcel Energy, Inc. 1,359,646
-----------
47,675,343
- ----------------------------------------------------------------------------------------------------------------------
Electrical Equipment--0.4% 45,244 American Power Conversion Corporation 705,354
21,452 Cooper Industries, Ltd. (Class A) 885,968
96,948 Emerson Electric Co. 4,954,043
13,968 +Power-One, Inc. 99,871
37,015 Rockwell Collins 911,679
37,615 Rockwell International Corporation 896,742
13,467 +Thomas & Betts Corporation 194,598
-----------
8,648,255
- ----------------------------------------------------------------------------------------------------------------------
Electronic 102,310 +Agilent Technologies, Inc. 2,000,161
Equipment & 40,664 +Jabil Circuit, Inc. 898,674
Instruments--0.4% 43,362 Molex Incorporated 1,170,340
26,184 PerkinElmer, Inc. 361,601
135,663 +Sanmina--SCI Corporation 856,034
161,412 +Solectron Corporation 603,681
48,311 Symbol Technologies, Inc. 628,526
19,536 +Tektronix, Inc. 421,978
37,257 +Thermo Electron Corporation 783,142
28,620 +Waters Corporation 833,701
-----------
8,557,838
- ----------------------------------------------------------------------------------------------------------------------
Energy Equipment & 40,900 +BJ Services Company 1,528,024
Service--0.8% 77,044 Baker Hughes Incorporated 2,586,367
104,704 Halliburton Company 2,408,192
36,715 +Nabors Industries, Ltd. 1,452,078
34,679 +Noble Corporation 1,189,490
29,372 +Rowan Companies, Inc. 657,933
133,254 Schlumberger Limited 6,338,893
65,641 +Transocean Inc. 1,442,133
-----------
17,603,110
- ----------------------------------------------------------------------------------------------------------------------
Food & Staples 85,466 Albertson's, Inc. 1,640,947
Retailing--3.8% 90,018 CVS Corporation 2,523,205
106,124 +Costco Wholesale Corporation 3,884,138
169,324 +The Kroger Co. 2,824,324
25,442 SUPERVALU Inc. 542,423
149,700 SYSCO Corporation 4,496,988
101,658 +Safeway Inc. 2,079,923
1,008,855 Wal-Mart Stores, Inc. 54,145,248
233,524 Walgreen Co. 7,029,072
29,980 Winn-Dixie Stores, Inc. 369,054
-----------
79,535,322
- ----------------------------------------------------------------------------------------------------------------------
Food Products--1.2% 148,434 Archer-Daniels-Midland Company 1,910,346
90,835 Campbell Soup Company 2,225,458
124,378 ConAgra, Inc. 2,935,321
85,160 General Mills, Inc. 4,037,436
80,936 H.J. Heinz Company 2,669,269
32,828 Hershey Foods Corporation 2,286,798
87,365 Kellogg Company 3,002,735
32,100 McCormick & Company Incorporated 873,120
179,041 Sara Lee Corporation 3,367,761
51,870 Wm. Wrigley Jr. Company 2,916,650
-----------
26,224,894
- ----------------------------------------------------------------------------------------------------------------------
Gas Utilities--0.3% 36,261 KeySpan Corporation 1,285,452
27,334 Kinder Morgan, Inc. 1,493,803
10,154 NICOR, Inc. 376,815
53,137 NiSource Inc. 1,009,603
8,304 Peoples Energy Corporation 356,159
44,838 Sempra Energy 1,279,228
-----------
5,801,060
- ----------------------------------------------------------------------------------------------------------------------
16 & 17
Merrill Lynch S&P 500 Index Fund, June 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master S&P 500 Index Series (continued)
- ----------------------------------------------------------------------------------------------------------------------
Shares
Industry* Held Common Stocks Value
======================================================================================================================
Health Care 44,155 Applera Corporation--Applied Biosystems Group $ 840,270
Equipment & 13,487 Bausch & Lomb Incorporated 505,763
Supplies--1.9% 137,627 Baxter International Inc. 3,578,302
61,295 Becton, Dickinson and Company 2,381,311
63,135 Biomet, Inc. 1,809,449
93,282 +Boston Scientific Corporation 5,699,530
12,009 C.R. Bard, Inc. 856,362
71,221 Guidant Corporation 3,161,500
280,940 Medtronic, Inc. 13,476,692
8,855 +Millipore Corporation 392,896
41,494 +St. Jude Medical, Inc. 2,385,905
43,155 Stryker Corporation 2,993,662
44,677 +Zimmer Holdings, Inc. 2,012,699
-----------
40,094,341
- ----------------------------------------------------------------------------------------------------------------------
Health Care 37,792 Aetna Inc. (New Shares) 2,275,078
Providers & Services--1.8% 27,643 AmerisourceBergen Corporation 1,917,042
31,880 +Anthem, Inc. 2,459,542
33,696 CIGNA Corporation 1,581,690
103,491 Cardinal Health, Inc. 6,654,471
117,906 HCA Inc. 3,777,708
53,600 Health Management Associates, Inc. (Class A) 988,920
31,604 +Humana Inc. 477,220
60,840 IMS Health Incorporated 1,094,512
20,704 +Manor Care, Inc. 517,807
63,584 McKesson HBOC, Inc. 2,272,492
24,000 +Quest Diagnostics Incorporated 1,531,200
25,086 +Quintiles Transnational Corp. 355,970
113,537 +Tenet Healthcare Corporation 1,322,706
135,318 UnitedHealth Group Incorporated 6,799,730
34,306 +WellPoint Health Networks Inc. 2,891,996
-----------
36,918,084
- ----------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants 138,580 Carnival Corporation 4,505,236
& Leisure--1.2% 39,607 Darden Restaurants, Inc. 751,741
28,830 +Harrah's Entertainment, Inc. 1,160,119
81,831 Hilton Hotels Corporation 1,046,618
21,030 International Game Technology 2,152,000
53,527 Marriott International, Inc. (Class A) 2,056,507
293,418 McDonald's Corporation 6,472,801
90,012 +Starbucks Corporation 2,207,094
51,168 Starwood Hotels & Resorts Worldwide, Inc. 1,462,893
26,972 Wendy's International, Inc. 781,379
67,334 +YUM! Brands, Inc. 1,990,393
-----------
24,586,781
- ----------------------------------------------------------------------------------------------------------------------
Household Durables--0.5% 13,816 +American Greetings Corporation (Class A) 271,346
21,842 The Black & Decker Corporation 949,035
16,534 Centex Corporation 1,286,180
33,515 Fortune Brands, Inc. 1,749,483
13,611 KB HOME 843,610
44,116 Leggett & Platt, Incorporated 904,378
16,203 Maytag Corporation 395,677
70,054 Newell Rubbermaid Inc. 1,961,512
14,093 Pulte Corporation 868,974
12,052 Snap-On Incorporated 349,870
18,643 The Stanley Works 514,547
13,433 Tupperware Corporation 192,898
19,160 Whirlpool Corporation 1,220,492
-----------
11,508,002
- ----------------------------------------------------------------------------------------------------------------------
Household Products--2.0% 53,398 The Clorox Company 2,277,425
123,981 Colgate-Palmolive Company 7,184,699
118,223 Kimberly-Clark Corporation 6,164,147
298,298 The Procter & Gamble Company 26,602,216
-----------
42,228,487
- ----------------------------------------------------------------------------------------------------------------------
IT Services--1.2% 137,780 Automatic Data Processing, Inc. 4,665,231
39,850 +Computer Sciences Corporation 1,519,082
116,439 +Concord EFS, Inc. 1,713,982
32,314 +Convergys Corporation 517,024
116,287 Electronic Data Systems Corporation 2,494,356
172,340 First Data Corporation 7,141,770
46,592 +Fiserv, Inc. 1,659,141
88,658 Paychex, Inc. 2,598,566
28,173 Sabre Holdings Corporation 694,464
63,500 +Sungard Data Systems Inc. 1,645,285
75,482 +Unisys Corporation 926,919
-----------
25,575,820
- ----------------------------------------------------------------------------------------------------------------------
Industrial 89,994 3M Co. 11,607,426
Conglomerates--4.1% 2,306,381 General Electric Company 66,147,007
31,114 Textron, Inc. 1,214,068
456,725 Tyco International Ltd. 8,668,641
-----------
87,637,142
- ----------------------------------------------------------------------------------------------------------------------
Insurance--4.4% 61,010 ACE Limited 2,092,033
118,299 AFLAC Incorporated 3,637,694
162,144 The Allstate Corporation 5,780,434
26,566 Ambac Financial Group, Inc. 1,759,998
600,907 American International Group, Inc. 33,158,048
65,185 Aon Corporation 1,569,655
41,153 The Chubb Corporation 2,469,180
33,811 Cincinnati Financial Corporation 1,254,050
68,325 The Hartford Financial Services Group, Inc. 3,440,847
18 & 19
Merrill Lynch S&P 500 Index Fund, June 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master S&P 500 Index Series (continued)
- ----------------------------------------------------------------------------------------------------------------------
Shares
Industry* Held Common Stocks Value
======================================================================================================================
Insurance 32,736 Jefferson--Pilot Corporation $ 1,357,235
(concluded) 64,542 John Hancock Financial Services, Inc. 1,983,376
40,919 Lincoln National Corporation 1,457,944
41,790 Loews Corporation 1,976,249
33,245 MBIA, Inc. 1,620,694
123,398 Marsh & McLennan Companies, Inc. 6,301,936
173,942 MetLife, Inc. 4,926,037
50,140 The Progressive Corporation 3,665,234
131,300 Prudential Financial, Inc. 4,418,245
31,922 SAFECO Corporation 1,126,208
50,111 The St. Paul Companies, Inc. 1,829,553
26,756 Torchmark Corporation 996,661
231,879 Travelers Property Casualty Corp. (Class B) 3,656,732
59,267 UnumProvident Corporation 794,770
32,505 XL Capital Ltd. (Class A) 2,697,915
-----------
93,970,728
- ----------------------------------------------------------------------------------------------------------------------
Internet & Catalog 73,100 +eBay Inc. 7,615,558
Retail--0.4%
- ----------------------------------------------------------------------------------------------------------------------
Internet Software & 135,299 +Yahoo! Inc. 4,432,395
Services--0.2%
- ----------------------------------------------------------------------------------------------------------------------
Leisure Equipment & 20,764 Brunswick Corporation 519,515
Products--0.2% 73,053 Eastman Kodak Company 1,998,000
35,094 Hasbro, Inc. 613,794
95,134 Mattel, Inc. 1,799,935
-----------
4,931,244
- ----------------------------------------------------------------------------------------------------------------------
Machinery--1.2% 80,444 Caterpillar Inc. 4,477,513
12,188 Crane Co. 275,814
13,409 Cummins Engine Company, Inc. 481,249
35,225 Danaher Corporation 2,397,061
56,098 Deere & Company 2,563,679
41,559 Dover Corporation 1,245,108
17,175 Eaton Corporation 1,350,127
19,996 ITT Industries, Inc. 1,308,938
67,921 Illinois Tool Works Inc. 4,472,598
35,998 Ingersoll-Rand Company (Class A) 1,703,425
19,658 +Navistar International Corporation 641,441
28,916 PACCAR Inc. 1,953,565
28,103 Pall Corporation 632,318
27,188 Parker-Hannifin Corporation 1,141,624
-----------
24,644,460
- ----------------------------------------------------------------------------------------------------------------------
Media--4.1% 1,035,984 +AOL Time Warner Inc. 16,668,983
140,204 +Clear Channel Communications, Inc. 5,943,248
391,543 +Comcast Corporation (Class A) 11,816,768
126,605 +Comcast Corporation (Special Class A) 3,650,022
18,719 Dow Jones & Company, Inc. 805,479
61,779 Gannett Co., Inc. 4,745,245
88,286 The Interpublic Group of Companies, Inc. 1,181,267
17,751 Knight Ridder, Inc. 1,223,576
46,008 The McGraw-Hill Companies, Inc. 2,852,496
11,421 Meredith Corporation 502,524
34,747 The New York Times Company (Class A) 1,580,989
43,797 Omnicom Group Inc. 3,140,245
66,542 Tribune Company 3,213,979
52,771 +Univision Communications Inc. (Class A) 1,604,238
404,563 +Viacom, Inc. (Class B) 17,663,221
470,747 The Walt Disney Company 9,297,253
-----------
85,889,533
- ----------------------------------------------------------------------------------------------------------------------
Metals & Mining--0.5% 193,345 Alcoa Inc. 4,930,298
15,528 Allegheny Technologies Incorporated 102,485
40,434 Freeport-McMoRan Copper & Gold, Inc. (Class B) 990,633
95,886 Newmont Mining Corporation 3,112,460
18,016 Nucor Corporation 880,082
21,688 +Phelps Dodge Corporation 831,518
23,722 United States Steel Corporation 388,329
19,767 Worthington Industries, Inc. 264,878
-----------
11,500,683
- ----------------------------------------------------------------------------------------------------------------------
Multi-Utilities & 141,160 +The AES Corporation 896,366
Unregulated Power--0.4% 105,360 +Calpine Corporation 695,376
208,319 Duke Energy Corporation 4,155,964
113,571 +Dynegy Inc. (Class A) 476,998
152,115 El Paso Corporation 1,229,089
135,730 +Mirant Corporation 393,617
900 +Progress Energy, Inc. 81
119,286 The Williams Companies, Inc. 942,359
-----------
8,789,850
- ----------------------------------------------------------------------------------------------------------------------
Multiline Retail--1.1% 24,295 +Big Lots, Inc. 365,397
19,564 Dillard's, Inc. (Class A) 263,527
69,550 Dollar General Corporation 1,269,983
35,164 Family Dollar Stores, Inc. 1,341,507
48,467 Federated Department Stores, Inc. 1,786,009
69,998 J.C. Penney Company, Inc. 1,179,466
78,109 +Kohl's Corporation 4,013,240
62,628 The May Department Stores Company 1,394,099
27,036 Nordstrom, Inc. 527,743
74,718 Sears, Roebuck & Co. 2,513,514
209,835 Target Corporation 7,940,156
-----------
22,594,641
- ----------------------------------------------------------------------------------------------------------------------
20 & 21
Merrill Lynch S&P 500 Index Fund, June 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S. dollars)
Master S&P 500 Index Series (continued)
- ----------------------------------------------------------------------------------------------------------------------
Shares
Industry* Held Common Stocks Value
======================================================================================================================
Office Electronics--0.1% 180,102 +Xerox Corporation $ 1,907,280
- ----------------------------------------------------------------------------------------------------------------------
Oil & Gas--4.8% 20,767 Amerada Hess Corporation 1,021,321
57,361 Anadarko Petroleum Corporation 2,550,844
37,221 Apache Corporation 2,421,598
14,158 Ashland Inc. 434,367
46,818 Burlington Resources Inc. 2,531,449
246,150 ChevronTexaco Corporation 17,772,030
156,389 ConocoPhillips 8,570,117
52,679 Devon Energy Corporation 2,813,059
26,370 EOG Resources, Inc. 1,103,321
1,538,812 Exxon Mobil Corporation++ 55,258,739
25,465 Kerr-McGee Corporation 1,140,832
63,947 Marathon Oil Corporation 1,685,003
83,929 Occidental Petroleum Corporation 2,815,818
22,785 Sunoco, Inc. 859,906
54,074 Unocal Corporation 1,551,383
------------
102,529,787
- ----------------------------------------------------------------------------------------------------------------------
Paper & Forest 13,424 Boise Cascade Corporation 320,834
Products--0.4% 52,367 Georgia-Pacific Group 992,355
111,562 International Paper Company 3,986,110
18,528 +Louisiana-Pacific Corporation 200,844
41,072 MeadWestvaco Corporation 1,014,478
50,461 Weyerhaeuser Company 2,724,894
------------
9,239,515
- ----------------------------------------------------------------------------------------------------------------------
Personal Products--0.5% 10,828 Alberto-Culver Company (Class B) 553,311
53,580 Avon Products, Inc. 3,332,676
238,901 The Gillette Company 7,611,386
------------
11,497,373
- ----------------------------------------------------------------------------------------------------------------------
Pharmaceuticals--9.6% 359,617 Abbott Laboratories 15,736,840
31,164 Allergan Inc. 2,402,744
446,561 Bristol-Myers Squibb Company 12,124,131
258,877 Eli Lilly and Company 17,854,747
83,064 +Forest Laboratories, Inc. 4,547,754
683,977 Johnson & Johnson 35,361,611
48,655 +King Pharmaceuticals, Inc. 718,148
516,557 Merck & Co., Inc. 31,277,526
1,818,881 Pfizer Inc. 62,114,786
335,625 Schering-Plough Corporation 6,242,625
27,981 +Watson Pharmaceuticals, Inc. 1,129,593
305,899 Wyeth 13,933,699
------------
203,444,204
- ----------------------------------------------------------------------------------------------------------------------
Real Estate--0.4% 21,100 Apartment Investment & Management Company (Class A) 730,060
92,764 Equity Office Properties Trust 2,505,556
67,140 Equity Residential Properties Trust 1,742,283
36,900 Plum Creek Timber Company Inc. 957,555
42,400 Simon Property Group, Inc. 1,654,872
------------
7,590,326
- ----------------------------------------------------------------------------------------------------------------------
Road & Rail--0.4% 85,894 Burlington Northern Santa Fe Corp. 2,442,825
49,278 CSX Corporation 1,482,775
81,942 Norfolk Southern Corporation 1,573,286
58,576 Union Pacific Corporation 3,398,580
------------
8,897,466
- ----------------------------------------------------------------------------------------------------------------------
Semiconductors & 88,547 +Advanced Micro Devices, Inc. 567,586
Semiconductor 88,190 +Altera Corporation 1,446,316
Equipment--3.2% 81,216 +Analog Devices, Inc. 2,827,941
381,476 +Applied Materials, Inc. 6,050,209
62,867 +Applied Micro Circuits Corporation 380,345
69,081 +Broadcom Corporation (Class A) 1,720,808
1,505,331 Intel Corporation 31,286,800
46,937 +KLA-Tencor Corporation 2,182,101
72,666 +LSI Logic Corporation 514,475
72,899 Linear Technology Corporation 2,348,077
74,760 Maxim Integrated Products, Inc. 2,556,044
130,868 +Micron Technology, Inc. 1,521,995
41,620 +NVIDIA Corporation 957,676
41,586 +National Semiconductor Corporation 820,076
37,800 +Novellus Systems, Inc. 1,384,274
48,454 +PMC--Sierra, Inc. 568,365
24,108 +QLogic Corporation 1,165,140
41,332 +Teradyne, Inc. 715,457
398,372 Texas Instruments Incorporated 7,011,347
77,693 +Xilinx, Inc. 1,966,410
------------
67,991,442
- ----------------------------------------------------------------------------------------------------------------------
Software--4.6% 55,425 Adobe Systems Incorporated 1,777,480
31,664 Autodesk, Inc. 511,690
50,020 +BMC Software, Inc. 816,827
43,605 +Citrix Systems, Inc. 887,798
133,212 Computer Associates International, Inc. 2,967,963
74,749 +Compuware Corporation 431,302
33,500 +Electronic Arts Inc. 2,478,665
47,552 +Intuit Inc. 2,117,491
22,527 +Mercury Interactive Corporation 869,767
2,474,924 Microsoft Corporation++ 63,382,804
84,824 +Novell, Inc. 261,258
1,207,885 +Oracle Corporation 14,518,778
22 & 23
Merrill Lynch S&P 500 Index Fund, June 30, 2003
SCHEDULE OF INVESTMENTS (concluded) (in U.S. dollars)
Master S&P 500 Index Series (concluded)
- ----------------------------------------------------------------------------------------------------------------------
Shares
Industry* Held Common Stocks Value
======================================================================================================================
Software 60,965 +Parametric Technology Corporation $ 185,943
(concluded) 79,722 +PeopleSoft, Inc. 1,402,310
122,337 +Siebel Systems, Inc. 1,167,095
33,000 +Symantec Corporation 1,447,380
96,481 +VERITAS Software Corporation 2,766,110
--------------
97,990,661
- ----------------------------------------------------------------------------------------------------------------------
Specialty Retail--2.3% 65,800 +AutoNation, Inc. 1,034,376
22,777 +AutoZone, Inc. 1,730,369
68,724 +Bed, Bath & Beyond Inc. 2,667,178
74,246 +Best Buy Co., Inc. 3,260,884
63,523 Circuit City Stores--Circuit City Group 559,002
202,293 The Gap, Inc. 3,795,017
532,186 The Home Depot, Inc. 17,626,000
109,644 The Limited, Inc. 1,699,482
179,640 Lowe's Companies, Inc. 7,715,538
65,658 +Office Depot, Inc. 952,698
40,398 RadioShack Corporation 1,062,871
33,192 The Sherwin-Williams Company 892,201
111,134 +Staples, Inc. 2,039,309
117,648 The TJX Companies, Inc. 2,216,488
33,401 Tiffany & Co. 1,091,545
49,097 +Toys 'R' Us, Inc. 595,056
--------------
48,938,014
- ----------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & 34,560 +Jones Apparel Group, Inc. 1,011,226
Luxury Goods--0.3% 20,638 Liz Claiborne, Inc. 727,490
60,810 Nike, Inc. (Class B) 3,252,727
17,287 +Reebok International Ltd. 581,362
23,167 V. F. Corporation 786,983
--------------
6,359,788
- ----------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage 30,078 Countrywide Credit Industries, Inc. 2,092,526
Finance--1.8% 225,773 Fannie Mae 15,226,131
158,403 Freddie Mac 8,042,120
35,148 Golden West Financial Corporation 2,812,191
25,280 MGIC Investment Corporation 1,179,059
216,598 Washington Mutual, Inc. 8,945,497
--------------
38,297,524
- ----------------------------------------------------------------------------------------------------------------------
Tobacco--1.1% 466,418 Altria Group, Inc. 21,194,034
24,400 R.J. Reynolds Tobacco Holdings, Inc. 907,924
35,535 UST Inc. 1,244,791
--------------
23,346,749
- ----------------------------------------------------------------------------------------------------------------------
Trading Companies & 19,145 W. W. Grainger, Inc. 895,220
Distributors--0.0%
- ----------------------------------------------------------------------------------------------------------------------
Wireless 608,947 +AT&T Wireless Services Inc. 4,999,455
Telecommunication 235,077 +Nextel Communications, Inc. (Class A) 4,250,192
Services--0.5% 218,339 +Sprint Corp. (PCS Group) 1,255,449
--------------
10,505,096
- ----------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost--$2,183,885,203)--97.9% 2,070,422,733
======================================================================================================================
Shares Held/
Beneficial Interest Short-Term Securities
======================================================================================================================
$ 64,695,710 Merrill Lynch Liquidity Series, LLC Cash Sweep Series I (a) 64,695,710
$230,113,882 Merrill Lynch Liquidity Series, LLC Money Market Series (a)(b) 230,113,882
153,409,253 Merrill Lynch Premier Institutional Fund (a)(b) 153,409,253
- ----------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$448,218,845)--21.2% 448,218,845
======================================================================================================================
Total Investments (Cost--$2,632,104,048)--119.1% 2,518,641,578
Variation Margin on Financial Futures Contracts**--0.0% (8,512)
Liabilities in Excess of Other Assets--(19.1%) (403,347,951)
--------------
Net Assets--100.0% $2,115,285,115
==============
======================================================================================================================
+ Non-income producing security.
++ All or a portion of security held as collateral in connection with open
financial futures contracts.
* For Series compliance purposes, "Industry" means any one or more of the
industry sub-classifications used by one or more widely recognized market
indexes or ratings group indexes, and/or as defined by Series management.
This definition may not apply for purposes of this report, which may
combine such industry sub-classifications for reporting ease.
** Financial futures contracts purchased as of June 30, 2003 were as follows:
--------------------------------------------------------------------------
Number of Expiration
Contracts Issue Date Value
--------------------------------------------------------------------------
195 S&P 500 Stock Index September 2003 $47,448,375
--------------------------------------------------------------------------
Total Financial Futures Contracts Purchased
(Contract Price--$48,326,725) $47,448,375
===========
--------------------------------------------------------------------------
(a) 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 & Co., Inc. 37,800 $ 60,405
Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I $ 41,934,795 $ 321,993
Merrill Lynch Liquidity Series,
LLC Money Market Series $ (61,532,849) $ 91,516
Merrill Lynch Premier Institutional Fund (105,220,886) $ 61,872
--------------------------------------------------------------------------
(b) Security was purchased with the cash proceeds from securities loans.
See Notes to Financial Statements.
24 & 25
Merrill Lynch S&P 500 Index Fund, June 30, 2003
STATEMENT OF ASSETS AND LIABILITIES
MASTER
S&P 500
INDEX SERIES As of June 30, 2003
=========================================================================================================================
Assets: Investments, at value (including securities loaned of $373,007,281)
(identified cost--$2,632,104,048) ................................. $ 2,518,641,578
Cash .............................................................. 1,046,002
Receivables:
Securities sold ................................................. $ 4,512,985
Dividends ....................................................... 2,631,036
Contributions ................................................... 1,467,967
Interest ........................................................ 56,805 8,668,793
-----------
Prepaid expenses and other assets ................................. 52,437
---------------
Total assets ...................................................... 2,528,408,810
---------------
=========================================================================================================================
Liabilities: Collateral on securities loaned, at value ......................... 383,523,135
Payables:
Securities purchased ............................................ 22,090,265
Withdrawals ..................................................... 7,419,453
Other affiliates ................................................ 11,085
Investment adviser .............................................. 9,058
Variation margin ................................................ 8,512 29,538,373
-----------
Accrued expenses and other liabilities ............................ 62,187
---------------
Total liabilities ................................................. 413,123,695
---------------
=========================================================================================================================
Net Assets: Net assets ........................................................ $ 2,115,285,115
===============
=========================================================================================================================
Net Assets Investors' capital ................................................ $ 2,229,625,935
Consist of: Unrealized depreciation on investments--net ....................... (114,340,820)
---------------
Net assets ........................................................ $ 2,115,285,115
===============
=========================================================================================================================
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
MASTER
S&P 500
INDEX SERIES For the Six Months Ended June 30, 2003
=============================================================================================================
Investment Dividends ............................................ $ 16,359,455
Income: Interest ............................................. 324,073
Securities lending--net .............................. 153,388
-------------
Total income ......................................... 16,836,916
-------------
=============================================================================================================
Expenses: Accounting services .................................. $ 163,296
Professional fees .................................... 72,669
Investment advisory fees ............................. 46,970
Custodian fees ....................................... 39,084
Trustees' fees and expenses .......................... 10,298
Printing and shareholder reports ..................... 8,416
Other ................................................ 26,517
---------
Total expenses ....................................... 367,250
-------------
Investment income--net ............................... 16,469,666
-------------
=============================================================================================================
Realized & Unrealized Realized loss on investments--net .................... (10,585,698)
Gain (Loss) on Change in unrealized depreciation on investments--net 213,518,250
Investments -- Net: -------------
Total realized and unrealized gain on investments--net 202,932,552
-------------
Net Increase in Net Assets Resulting from Operations . $ 219,402,218
=============
=============================================================================================================
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
MASTER Months Ended Year Ended
S&P 500 June 30, December 31,
INDEX SERIES Increase (Decrease) in Net Assets: 2003 2002
==========================================================================================================================
Operations: Investment income--net ........................................... $ 16,469,666 $ 29,710,172
Realized loss on investments--net ................................ (10,585,698) (82,782,120)
Change in unrealized appreciation/depreciation on investments--net 213,518,250 (435,785,828)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations .. 219,402,218 (488,857,776)
--------------- ---------------
==========================================================================================================================
Capital Proceeds from contributions ...................................... 443,602,944 589,333,536
Transactions: Fair value of withdrawals ........................................ (274,424,702) (267,267,758)
--------------- ---------------
Net increase in net assets derived from capital transactions ..... 169,178,242 322,065,778
--------------- ---------------
==========================================================================================================================
Net Assets: Total increase (decrease) in net assets .......................... 388,580,460 (166,791,998)
Beginning of period .............................................. 1,726,704,655 1,893,496,653
--------------- ---------------
End of period .................................................... $ 2,115,285,115 $ 1,726,704,655
=============== ===============
==========================================================================================================================
See Notes to Financial Statements.
26 & 27
Merrill Lynch S&P 500 Index Fund, June 30, 2003
FINANCIAL HIGHLIGHTS
For the Six
MASTER The following ratios have been derived Months Ended For the Year Ended December 31,
S&P 500 from information provided in the June 30, ----------------------------------------------------
INDEX SERIES financial statements. 2003 2002 2001 2000 1999
==================================================================================================================================
Total Investment 11.80%+ (22.22%) (11.97%) -- --
Return:** ========== =========== ========== ========== ==========
==================================================================================================================================
Ratios to Average Expenses ............................... .04%* .04% .05% .07% .07%
Net Assets: ========== =========== ========== ========== ==========
Investment income--net ................. 1.75%* 1.59% 1.29% 1.16% 1.33%
========== =========== ========== ========== ==========
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) $2,115,285 $ 1,726,705 $1,893,497 $1,714,631 $1,690,336
Data: ========== =========== ========== ========== ==========
Portfolio turnover ..................... 1.06% 4.59% 3.21% 9.71% 29.91%
========== =========== ========== ========== ==========
==================================================================================================================================
* 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
S&P 500
INDEX SERIES
1. Significant Accounting Policies:
Master S&P 500 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 on the exchange on which such securities are traded, as
of the close of business on the day the securities are being valued or, lacking
any sales, at the last available bid price for long positions, and at the last
available ask price for short positions. Securities traded in the
over-the-counter market are valued at the last available bid price prior to the
time of valuation. In cases where securities are traded on more than one
exchange, the securities are valued on the exchange designated by or under the
authority of the Board of Trustees as the primary market. 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. 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). Short-term securities are valued at amortized cost, which
approximates market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets for which
market quotations are not available are valued at fair value as determined in
good faith by or under the direction of the Trust's Board of Trustees.
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) Derivative financial instruments -- The Series may engage in various
portfolio investment strategies to provide liquidity or as a proxy for a direct
investment in securities underlying the Series' index. Losses may arise due to
changes in the value of the contract or if the counterparty does not perform
under the contract.
o Financial futures contracts -- The Series may purchase or sell financial
futures contracts and options on such futures contracts. Upon entering into a
contract, the Series deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected. Pursuant to the
contract, the Series agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Series as
unrealized gains 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.
(c) Foreign currency transactions -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into U.S. dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on 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. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends and capital gains at various rates. It is
intended that the Series' assets will be managed so an investor in the Series
can satisfy the requirements of subchapter M of the Internal Revenue Code.
(e) Security transactions and investment income -- Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis.
(f) Securities lending -- The Series may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities.
28 & 29
Merrill Lynch S&P 500 Index Fund, June 30, 2003
NOTES TO FINANCIAL STATEMENTS (concluded)
MASTER
S&P 500
INDEX SERIES
The market value of the loaned securities is determined at the close of business
of the Series and any additional required collateral is delivered to the Series
on the next business day. Where the Series receives securities as collateral for
the loaned securities, it collects a fee from the borrower. The Series typically
receives the income on the loaned securities but does not receive the income on
the collateral. Where the Series receives cash collateral, it may invest such
collateral and retain the amount earned on such investment, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities within five
business days. The Series may pay reasonable finder's, lending agent,
administrative and custodial fees in connection with its loans. In the event
that the borrower defaults on its obligation to return borrowed securities
because of insolvency or for any other reason, the Series could experience
delays and costs in gaining access to the collateral. The Series also could
suffer a loss where the value of the collateral falls below the market value of
the borrowed securities, in the event of borrower default or in the event of
losses on investments made with cash collateral.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Series' portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Series. For such services, the Series pays a monthly
fee at an annual rate of .005% of the average daily value of the Series' net
assets.
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 Trust also has retained Merrill Lynch
Investment Managers, LLC ("MLIM, LLC"), an affiliate of FAM, as the securities
lending agent for a fee based on a share of the returns on investment of cash
collateral. MLIM, LLC may, on behalf of the Trust and the Series, invest cash
collateral received by the Series for such loans, among other things, in a
private investment company managed by MLIM, LLC or in registered money market
funds advised by FAM or its affiliates. As of June 30, 2003, the Series lent
securities with a value of $66,283,314 to MLPF&S or its affiliates. For the six
months ended June 30, 2003, MLIM, LLC received $59,693 in securities lending
agent fees from the Series.
In addition, MLPF&S received $14 in commissions on the execution of portfolio
security transactions for the Series for the six months ended June 30, 2003.
Merrill Lynch Trust Company ("MLTC"), an indirect, wholly-owned subsidiary of ML
& Co., is the Series' custodian.
For the six months ended June 30, 2003, the Series reimbursed FAM $19,896 for
certain accounting services.
Certain officers and/or trustees of the Series are officers and/or directors of
FAM, PSI, MLTC, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 2003 were $200,960,407 and $19,288,012, respectively.
Net realized gains (losses) for the six months ended June 30, 2003 and net
unrealized losses as of June 30, 2003 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Losses
- --------------------------------------------------------------------------------
Long-term investments ................ $ (13,023,861) $(113,462,470)
Financial futures contracts .......... 2,438,163 (878,350)
------------- -------------
Total ................................ $ (10,585,698) $(114,340,820)
============= =============
- --------------------------------------------------------------------------------
As of June 30, 2003, net unrealized depreciation for Federal income tax purposes
aggregated $188,893,236, of which $193,316,908 related to appreciated securities
and $382,210,144 related to depreciated securities. At June 30, 2003, the
aggregate cost of investments for Federal income tax purposes was
$2,707,534,814.
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 4--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 S&P 500 Index Fund
By: /s/ Terry K. Glenn
-----------------------------
Terry K. Glenn,
President of
Merrill Lynch S&P 500 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 S&P 500 Index Fund
Date: August 21, 2003
By: /s/ Donald C. Burke
-----------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch S&P 500 Index Fund
Date: August 21, 2003
Attached hereto as a furnished exhibit are the certifications pursuant
to Section 906 of the Sarbanes-Oxley Act.