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 Small Cap Index Fund
Master Small Cap 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
Small Cap Index Fund and Master Small Cap Index Series, 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 - 12/31/03
Item 1 - Report to Shareholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Merrill Lynch
Small Cap Index Fund
Merrill Lynch Index Funds, Inc.
Annual Report
December 31, 2003
[LOGO] Merrill Lynch Investment Managers
Merrill Lynch Small Cap Index Fund
Important Tax Information (unaudited)
The following information is provided with respect to the ordinary income
distributions paid by Merrill Lynch Small Cap Index Fund during the fiscal year
ended December 31, 2003:
================================================================================
Record Date/ July 16, 2003/ December 17, 2003/
Payable Date July 22, 2003 December 23, 2003
================================================================================
Qualified Dividend
Income for Individuals -- 100%
- --------------------------------------------------------------------------------
Dividends Qualifying for the
Dividends Received Deduction
for Corporations 100% 96.77%
- --------------------------------------------------------------------------------
Please retain this information for your records.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this website
http://www.icsdelivery.com/live and follow the instructions. When you visit this
site, you will obtain a personal identification number (PIN). You will need this
PIN should you wish to update your e-mail address, choose to discontinue this
service and/or make any other changes to the service. This service is not
available for certain retirement accounts at this time.
2 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
A Letter From the President
Dear Shareholder
In my 35 years in the asset management business, 2003 was among the more
memorable. The year, which opened with unrelenting economic uncertainty and a
dismal continuation of a three-year equity market slump, vigorously reversed
course in the months that followed. To be sure, 2003 came in like a lamb and
went out like a lion. Or, some might suggest, the year started as a bear and
ended as a bull.
Most notably, the U.S. stock market exceeded the expectations of even the
optimistic investor, with the Standard & Poor's 500 Index and the Nasdaq posting
respective 12-month returns of +28.68% and +50.01% as of December 31, 2003.
Gross domestic product (GDP) growth, which started the year at 1.4% in the first
quarter, grew a remarkable 8.2% in the third quarter -- the fastest rate of
growth in 20 years. GDP growth is expected to come in above 3% for the year.
Modest inflation and record low interest rates in 2003 also encouraged the
American consumer who, after carrying the economy on its own for some time,
finally was supported by a $350 billion tax cut, Federal spending on the war
effort and long-awaited capital expenditures by businesses. In addition,
corporate earnings for 2003 finished the year up 16.9%. As we begin a new year,
the events and efforts of 2003 leave us with a much stronger economy for 2004.
In closing, I wish to share one final note regarding the look of our shareholder
communications. Our portfolio manager commentaries have been trimmed and
organized in such a way that you can get the information you need at a glance,
in plain language. Today's markets can be confusing. We want to help you put it
all in perspective. The report's new size also allows us certain mailing
efficiencies. Any cost savings in production or postage are passed on to the
Fund and, ultimately, to Fund shareholders.
We thank you for trusting Merrill Lynch Investment Managers with your investment
assets, and we look forward to serving you in the New Year and beyond.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director/Trustee
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Manager
The Fund was able to meet its objective of closely replicating the returns
of the Russell 2000 Index during the fiscal year, as small cap stocks led a
dramatic equity market rally that continued virtually unabated throughout.
How did the Fund perform during the fiscal year?
For the 12-month period ended December 31, 2003, Merrill Lynch Small Cap Index
Fund's Class A and Class I Shares had total returns of +45.85% and +46.32%,
respectively. For the same period, the Fund's unmanaged benchmark, the Russell
2000 Index, returned +47.25%. (Complete performance information can be found on
pages 6 and 7 of this report to shareholders.)
The Fund met its objective of closely tracking the performance of the Russell
2000 Index, a market-weighted index composed of approximately 2,000 common
stocks issued by small-capitalization U.S. companies in a range of businesses.
As the U.S. stock market embarked on a strong rally during the reporting period,
small cap issues were among the leading performers. As a result, the Index
provided impressive returns, and the Fund benefited in kind.
Over the course of the year, as changes were made to the composition of the
Russell 2000 Index, we purchased and sold securities to maintain our objective
of seeking to replicate the risks and return of the benchmark.
As an index fund, the portfolio mirrors the composition of the Russell 2000
Index, a common measure of U.S. market performance for small cap stocks. What
developments affected the market for small cap stocks during the period?
The year 2003 marked the end of the longest and deepest equity bear market since
the Great Depression. Punctuated by better-than-expected corporate earnings due
to dramatic productivity increases and modest revenue growth, the equity market
recorded returns greater than most had anticipated. Despite an initial setback
related to the start of war in Iraq, the stock market quickly gained steam and
never had more than a 5% pullback through December 31, 2003. As is common after
a major bear market, the best performers during the upturn were low-quality,
high-beta and small-capitalization issues as well as those with earnings losses
and low prices.
For the 12 months ended December 31, 2003, the Standard & Poor's 500 Index
closed at 1,111.92, its high for the year, representing an increase of 232.10
points and a price return of +26.38%. The Dow Jones Industrial Average also
closed the year at a 12-month high of 10,453.92, up 2,112.29 points for a price
return of +25.32%. As technology stocks outperformed the broader market, the
Nasdaq closed the year at 2,003.37, up 667.86 points for a price return of
+50.01%.
Within the small cap universe, growth outperformed value for the year, with the
Russell 2000 Growth Index having a total return of +48.54% and the Russell 2000
Value Index having a total return of +46.03%. In terms of individual sectors,
all 12 Russell 2000 sectors posted positive price returns for the year. The top
performer was technology, which returned an impressive +65.64%, followed by
health care and producer durables, up 59.55% and 58.99%, respectively. Even the
worst performers in the Index posted double-digit positive returns for the year.
The lowest return of +28.15% came from consumer staples, followed by +32.65% for
utilities and +38.73% for the "other" category, which includes many
conglomerates.
4 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
How would you characterize market conditions at the close of the period?
Favorable liquidity conditions, stimulative fiscal policy and rising earnings
expectations spurred the equity bull market that we witnessed during the past
fiscal year. As we ended the period, the momentum from falling interest rates
and excess liquidity was beginning to pass. Higher confidence regarding the
sustainability of economic growth, along with waning deflation fears and a
declining dollar, are likely to cause interest rates to rise.
At the same time, economic growth, which long had been carried by the U.S.
consumer, was broadening to the rest of the U.S. economy and the world. Capital
spending has decisively turned from modest to more robust, job growth has begun,
and export markets are awakening. We believe corporate earnings growth is key
for the equity bull market to continue and the benchmark Russell 2000 Index to
maintain its positive bent. With all of this in mind, we expect the portfolio to
continue to meet its objective of tracking the performance of the Index.
Richard Vella
Vice President and Senior Portfolio Manager
January 8, 2004
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 5
[LOGO] Merrill Lynch Investment Managers
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 an 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 an initial sales charge (front-end load) or
deferred sales charge and bear no ongoing distribution or account
maintenance fees. Class I Shares are available only to eligible investors.
None of the past results shown should be considered a representation of future
performance. Current performance may be lower or higher than the performance
data quoted. Refer to www.mlim.ml.com to obtain more current performance
information. 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 administrative and management fees, respectively. Without such
waivers, the Fund's performance would have been lower.
Recent Performance Results
6-Month 12-Month Since Inception
As of December 31, 2003 Total Return Total Return Total Return
===========================================================================================
ML Small Cap Index Fund Class A Shares* +24.27% +45.85% +68.86%
- -------------------------------------------------------------------------------------------
ML Small Cap Index Fund Class I Shares* +24.39 +46.32 +71.65
- -------------------------------------------------------------------------------------------
Russell 2000 Index** +24.92 +47.25 +75.25
- -------------------------------------------------------------------------------------------
* 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 4/09/97.
** This unmanaged Index is comprised of approximately 2,000
smaller-capitalization common stocks from various industrial sectors.
Since inception total return is from 4/09/97.
6 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Performance Data (concluded)
Total Return Based on a $10,000 Investment--Class A & Class I Shares
A line graph depicting the growth of an investment in the Fund's Class A Shares
and Class I Shares compared to growth of an investment in the Russell 2000
Index. Values are from April 9, 1997 to December 2003.
4/09/97** 12/97 12/98 12/99 12/00 12/01 12/02 12/03
ML Small Cap Index
Fund+--Class A Shares* $10,000 $12,687 $12,253 $14,759 $14,382 $14,608 $11,577 $16,886
ML Small Cap Index
Fund+--Class I Shares* $10,000 $12,704 $12,304 $14,862 $14,504 $14,777 $11,731 $17,165
4/30/97** 12/97 12/98 12/99 12/00 12/01 12/02 12/03
Russell 2000 Index++ $10,000 $12,743 $12,419 $15,059 $14,604 $14,967 $11,901 $17,525
* Assuming transaction costs and other operating expenses, including
advisory fees.
** Commencement of operations.
+ The Fund invests all of its assets in Master Small Cap Index Series of
Quantitative Master Series Trust. The Series may invest in a statistically
selected sample of the stocks included in the Russell 2000 Index and other
types of financial instruments.
++ This unmanaged index is comprised of approximately 2,000
smaller-capitalization common stocks from various industrial sectors.
Past performance is not predictive of future performance.
Average Annual Total Return
Class A Shares % Return
================================================================================
One Year Ended 12/31/03 +45.85%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/03 + 6.62
- --------------------------------------------------------------------------------
Inception (4/09/97) through 12/31/03 + 8.10
- --------------------------------------------------------------------------------
Class I Shares % Return
================================================================================
One Year Ended 12/31/03 +46.32%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/03 + 6.89
- --------------------------------------------------------------------------------
Inception (4/09/97) through 12/31/03 + 8.36
- --------------------------------------------------------------------------------
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 7
[LOGO] Merrill Lynch Investment Managers
Statement of Assets and Liabilities Merrill Lynch Small Cap Index Fund
As of December 31, 2003
================================================================================================================================
Assets
- --------------------------------------------------------------------------------------------------------------------------------
Investment in Master Small Cap Index Series, at value
(identified cost--$87,982,937) ...................................... $ 101,490,535
Prepaid registration fees and other assets ........................... 24,390
-------------
Total assets ......................................................... 101,514,925
-------------
================================================================================================================================
Liabilities
- --------------------------------------------------------------------------------------------------------------------------------
Payables:
Distributor ....................................................... $ 10,987
Administrator ..................................................... 3,482 14,469
-------------
Accrued expenses ..................................................... 26,877
-------------
Total liabilities .................................................... 41,346
-------------
================================================================================================================================
Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Net assets ........................................................... $ 101,473,579
=============
================================================================================================================================
Net Assets Consist of
- --------------------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.0001 par value, 125,000,000 shares
authorized .......................................................... $ 417
Class I Shares of Common Stock, $.0001 par value, 125,000,000 shares
authorized .......................................................... 424
Paid-in capital in excess of par ..................................... 96,321,938
Undistributed investment income--net ................................. $ 29,692
Accumulated realized capital losses on investments allocated from
the Series--net ..................................................... (8,386,490)
Unrealized appreciation on investments allocated from the Series--net 13,507,598
-------------
Total accumulated earnings--net ...................................... 5,150,800
-------------
Net Assets ........................................................... $ 101,473,579
=============
================================================================================================================================
Net Asset Value
- --------------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $50,279,663 and 4,168,660 shares
outstanding ......................................................... $ 12.06
=============
Class I--Based on net assets of $51,193,916 and 4,243,566 shares
outstanding ......................................................... $ 12.06
=============
See Notes to Financial Statements.
8 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Statement of Operations Merrill Lynch Small Cap Index Fund
For the Year Ended December 31, 2003
================================================================================================================================
Investment Income Allocated from the Series--Net
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income allocated from the Series:
Dividends (net of $395 foreign withholding tax) ................... $ 849,276
Interest .......................................................... 56,314
Securities lending--net ........................................... 18,060
Expenses (net of $9,257 expense reimbursement) .................... (66,556)
-------------
Net investment income allocated from the Series ...................... 857,094
-------------
================================================================================================================================
Expenses
- --------------------------------------------------------------------------------------------------------------------------------
Administration fees .................................................. $ 221,030
Account maintenance fees--Class A .................................... 96,582
Printing and shareholder reports ..................................... 72,010
Transfer agent fees .................................................. 48,609
Registration fees .................................................... 29,691
Professional fees .................................................... 17,920
Directors' fees and expenses ......................................... 1,344
Other ................................................................ 23,037
-------------
Total expenses before waiver ......................................... 510,223
Waiver of expenses ................................................... (23,445)
-------------
Total expenses after waiver .......................................... 486,778
-------------
Investment income--net ............................................... 370,316
-------------
================================================================================================================================
Realized & Unrealized Gain (Loss) Allocated from the Series--Net
- --------------------------------------------------------------------------------------------------------------------------------
Realized loss on investments allocated from the Series--net .......... (429,263)
Change in unrealized appreciation/depreciation on investments
allocated from the Series--net ...................................... 29,599,592
-------------
Total realized and unrealized gain allocated from the Series--net .... 29,170,329
-------------
Net Increase in Net Assets Resulting from Operations ................. $ 29,540,645
=============
See Notes to Financial Statements.
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 9
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets Merrill Lynch Small Cap Index Fund
For the Year Ended
December 31,
-------------------------------
Increase (Decrease) in Net Assets: 2003 2002
================================================================================================================================
Operations
- --------------------------------------------------------------------------------------------------------------------------------
Investment income--net ............................................... $ 370,316 $ 520,655
Realized loss on investments allocated from the Series--net .......... (429,263) (4,827,332)
Change in unrealized appreciation/depreciation on investments
allocated from the Series--net ...................................... 29,599,592 (13,639,196)
-------------------------------
Net increase (decrease) in net assets resulting from operations ...... 29,540,645 (17,945,873)
-------------------------------
================================================================================================================================
Dividends to Shareholders
- --------------------------------------------------------------------------------------------------------------------------------
Investment income--net:
Class A ........................................................... (123,152) (230,528)
Class I ........................................................... (232,260) (302,173)
-------------------------------
Net decrease in net assets resulting from dividends to shareholders .. (355,412) (532,701)
-------------------------------
================================================================================================================================
Capital Share Transactions
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share transactions ... 7,042,747 2,902,479
-------------------------------
================================================================================================================================
Net Assets
- --------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets .............................. 36,227,980 (15,576,095)
Beginning of year .................................................... 65,245,599 80,821,694
-------------------------------
End of year* ......................................................... $ 101,473,579 $ 65,245,599
===============================
* Undistributed investment income--net ............................ $ 29,692 $ 14,788
===============================
See Notes to Financial Statements.
10 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Financial Highlights Merrill Lynch Small Cap Index Fund
Class A*
----------------------------------------------------------------
The following per share data and ratios have been derived For the Year Ended
from information provided in the financial statements. December 31,
----------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
=================================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ................. $ 8.29 $ 10.53 $ 10.45 $ 11.77 $ 10.27
----------------------------------------------------------------
Investment income--net ............................. .04@@ .05@@ .08@@ .14 .12
Realized and unrealized gain (loss) on investments
from the Series--net .............................. 3.76 (2.23) .08 (.43) 1.94
----------------------------------------------------------------
Total from investment operations ................... 3.80 (2.18) .16 (.29) 2.06
----------------------------------------------------------------
Less dividends and distributions:
Investment income--net .......................... (.03) (.06) (.08) (.14) (.12)
In excess of investment income--net ............. -- -- -- --@ --
Realized gain on investments from the Series--net -- -- -- (.76) (.44)
In excess of realized gain on investments
from the Series--net .............................. -- -- -- (.13) --
----------------------------------------------------------------
Total dividends and distributions .................. (.03) (.06) (.08) (1.03) (.56)
----------------------------------------------------------------
Net asset value, end of year ....................... $ 12.06 $ 8.29 $ 10.53 $ 10.45 $ 11.77
================================================================
=================================================================================================================================
Total Investment Return
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ................. 45.85% (20.75%) 1.57% (2.56%) 20.45%
================================================================
=================================================================================================================================
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver+ ........................... .85% .75% .75% .74% .74%
================================================================
Expenses+ .......................................... .88% .89% .88% .85% .86%
================================================================
Investment income--net ............................. .36% .56% .78% 1.26% 1.24%
================================================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) ............. $ 50,280 $ 34,308 $ 44,505 $ 64,056 $ 45,640
================================================================
Portfolio turnover of the Series ................... 28.57% 39.00% 48.50% 50.51% 51.20%
================================================================
* Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
+ Includes the Fund's share of the Series' allocated expenses.
@ Amount is less than $(.01) per share.
@@ Based on average shares outstanding.
See Notes to Financial Statements.
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 11
[LOGO] Merrill Lynch Investment Managers
Financial Highlights (concluded) Merrill Lynch Small Cap Index Fund
Class I*
----------------------------------------------------------------
The following per share data and ratios have been derived For the Year Ended
from information provided in the financial statements. December 31,
----------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
=================================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ................. $ 8.28 $ 10.53 $ 10.45 $ 11.78 $ 10.27
----------------------------------------------------------------
Investment income--net ............................. .06@@ .08@@ .10@@ .16 .15
Realized and unrealized gain (loss) on investments
from the Series--net .............................. 3.77 (2.25) .10 (.43) 1.94
----------------------------------------------------------------
Total from investment operations ................... 3.83 (2.17) .20 (.27) 2.09
----------------------------------------------------------------
Less dividends and distributions:
Investment income--net .......................... (.05) (.08) (.12) (.17) (.14)
In excess of investment income--net ............. -- -- -- --@ --
Realized gain on investments from the Series--net -- -- -- (.76) (.44)
In excess of realized gain on investments
from the Series--net .............................. -- -- -- (.13) --
----------------------------------------------------------------
Total dividends and distributions .................. (.05) (.08) (.12) (1.06) (.58)
----------------------------------------------------------------
Net asset value, end of year ....................... $ 12.06 $ 8.28 $ 10.53 $ 10.45 $ 11.78
================================================================
=================================================================================================================================
Total Investment Return
- ---------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ................. 46.32% (20.61%) 1.88% (2.41%) 20.79%
================================================================
=================================================================================================================================
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver+ ........................... .60% .50% .50% .49% .50%
================================================================
Expenses+ .......................................... .63% .64% .63% .60% .61%
================================================================
Investment income--net ............................. .61% .82% 1.02% 1.51% 1.50%
================================================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) ............. $ 51,194 $ 30,938 $ 36,317 $ 35,544 $ 30,911
================================================================
Portfolio turnover of the Series ................... 28.57% 39.00% 48.50% 50.51% 51.20%
================================================================
* Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
+ Includes the Fund's share of the Series' allocated expenses.
@ Amount is less than $(.01) per share.
@@ Based on average shares outstanding.
See Notes to Financial Statements.
12 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Notes to Financial Statements Merrill Lynch Small Cap Index Fund
1. Significant Accounting Policies:
Merrill Lynch Small Cap Index Fund (the "Fund") is part of Merrill Lynch Index
Funds, Inc. (the "Corporation"). The Fund is registered under the Investment
Company Act of 1940, as amended, as a non-diversified mutual fund. The Fund
seeks to achieve its investment objective by investing all of its assets in
Master Small Cap 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 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. The percentage of the Series owned by the
Fund at December 31, 2003 was 30.2%. The Fund offers two classes of shares.
Effective April 14, 2003, Class A Shares were redesignated Class I Shares and
Class D Shares were redesignated Class A Shares. The Fund's financial statements
and financial highlights contained within this report reflect the new share
class redesignation. Shares of Class A and Class I are sold without the
imposition of a front-end or deferred sales charge. Both classes of shares have
identical voting, dividend, liquidation and other rights and the same terms and
conditions, except that Class A Shares bear certain expenses related to the
account maintenance of such shares and have exclusive voting rights with respect
to matters relating to its account maintenance expenditures. Income, expenses
(other than expenses attributable to a specific class) and realized and
unrealized gains and losses on investments and foreign currency transactions 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 Series' income, expenses and realized and unrealized gains and
losses. In addition, the Fund accrues its own expenses.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders. Therefore,
no Federal income tax provision is required. Under the applicable foreign tax
law, a withholding tax may be imposed on interest, dividends and capital gains
at various rates.
(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 Administration 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 .29% of the Fund's average daily net assets for the performance
of administrative services (other than investment advice and related portfolio
activities) necessary for the operation of the Fund. For the year ended December
31, 2003, MLIM earned fees of $221,030, of which $23,445 were waived.
The Corporation has also entered into a Distribution Agreement and Distribution
Plan with FAM Distributors, Inc. ("FAMD" or the "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plan
adopted by the Corporation in accordance with Rule 12b-1 under the Investment
Company Act of 1940, the Fund pays the Distributor an ongoing account
maintenance fee. The fee is accrued daily and paid monthly at the annual rate of
..25% based upon the average daily net assets of Class A Shares.
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance services to the Fund. The ongoing account maintenance fee
compensates the Distributor and MLPF&S for providing account maintenance
services to Class A shareholders.
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 13
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded) Merrill Lynch Small Cap Index Fund
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 were
$7,042,747 and $2,902,479 for the years ended December 31, 2003 and December 31,
2002, respectively.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended December 31, 2003+ Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 992,110 $ 10,414,593
Shares issued to shareholders in
reinvestment of dividends .............. 8,807 103,032
-------------------------------
Total issued ............................. 1,000,917 10,517,625
Shares redeemed .......................... (972,744) (9,346,209)
-------------------------------
Net increase ............................. 28,173 $ 1,171,416
===============================
+ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended December 31, 2002+ Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 1,018,062 $ 9,600,650
Shares issued to shareholders in
reinvestment of dividends .............. 23,320 196,130
-------------------------------
Total issued ............................. 1,041,382 9,796,780
Shares redeemed .......................... (1,127,427) (10,394,147)
-------------------------------
Net decrease ............................. (86,045) $ (597,367)
===============================
+ Effective April 14, 2003, Class D Shares were redesignated Class A Shares.
- -------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended December 31, 2003+ Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 2,446,233 $ 25,029,944
Shares issued to shareholders in
reinvestment of dividends .............. 18,182 213,822
-------------------------------
Total issued ............................. 2,464,415 25,243,766
Shares redeemed .......................... (1,955,829) (19,372,435)
-------------------------------
Net increase ............................. 508,586 $ 5,871,331
===============================
+ 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 .............................. 2,701,708 $ 27,194,327
Shares issued to shareholders in
reinvestment of dividends .............. 34,007 284,695
-------------------------------
Total issued ............................. 2,735,715 27,479,022
Shares redeemed .......................... (2,449,219) (23,979,176)
-------------------------------
Net increase ............................. 286,496 $ 3,499,846
===============================
+ Effective April 14, 2003, Class A Shares were redesignated Class I Shares.
4. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years ended December
31, 2003 and December 31, 2002 was as follows:
- -------------------------------------------------------------------------------
12/31/2003 12/31/2002
- -------------------------------------------------------------------------------
Distributions paid from:
Ordinary income ........................ $ 355,412 $ 532,701
-------------------------------
Total taxable distributions .............. $ 355,412 $ 532,701
===============================
As of December 31, 2003, the components of accumulated earnings on a tax basis
were as follows:
- -----------------------------------------------------------------------------
Undistributed ordinary income--net ...................... $ 29,692
Undistributed long-term capital gains--net .............. --
------------
Total undistributed earnings--net ....................... 29,692
Capital loss carryforward ............................... (6,515,602)*
Unrealized gains--net ................................... 11,636,710**
------------
Total accumulated earnings--net ......................... $ 5,150,800
============
* On December 31, 2003, the Fund had a net capital loss carryforward of
$6,515,602, of which $2,530,472 expires in 2009 and $3,985,130 expires in
2010. This amount will be available to offset like amounts of any future
taxable gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales and the
realization for tax purposes of unrealized gains on certain futures
contracts.
14 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Independent Auditors' Report
To the Shareholders and Board of Directors of
Merrill Lynch Index Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of Merrill
Lynch Small Cap Index Fund, one of the series constituting Merrill Lynch Index
Funds, Inc. (the "Fund"), as of December 31, 2003, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Merrill Lynch Small Cap Index Fund of Merrill Lynch Index Funds, Inc. as of
December 31, 2003, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and its financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America.
Deloitte & Touche LLP
Princeton, New Jersey
February 13, 2004
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 15
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Advertising Agencies--0.4% 9,135 ADVO Systems, Inc. $ 290,128
12,800 + aQuantive, Inc. 131,200
11,200 + Catalina Marketing Corporation 225,792
328 Grey Global Group Inc. 224,040
6,133 + R.H. Donnelley Corporation 244,339
23,200 + ValueClick, Inc. 210,656
-----------
1,326,155
------------------------------------------------------------------------------------------------------------------------
Aerospace--0.3% 5,934 Curtiss-Wright Corporation 267,089
2,100 + Ducommun Incorporated 46,935
2,826 HEICO Corporation (Class A) 51,433
1,600 + MTC Technologies, Inc. 51,552
4,706 + Moog Inc. (Class A) 232,476
15,335 + Orbital Sciences Corporation 184,327
11,434 + Teledyne Technologies Incorporated 215,531
5,100 United Industrial Corporation 92,055
-----------
1,141,398
------------------------------------------------------------------------------------------------------------------------
Agriculture, Fishing & Ranching--0.1% 900 Alico, Inc. 31,284
11,778 Delta and Pine Land Company 299,161
2,700 + Virbac Corporation 13,500
-----------
343,945
------------------------------------------------------------------------------------------------------------------------
Air Transport--1.0% 11,568 + AAR Corp. 172,942
54,800 + AMR Corporation 709,660
23,420 + AirTran Holdings, Inc. 278,698
6,699 + Alaska Air Group, Inc. 182,816
12,000 + America West Holdings Corporation (Class B) 148,800
11,523 + Atlantic Coast Airlines Holdings, Inc. 114,078
8,700 + Aviall, Inc. 134,937
22,500 + Continental Airlines, Inc. (Class B) 366,075
11,095 + EGL, Inc. 194,828
7,700 + ExpressJet Holdings, Inc. 115,500
10,255 + Frontier Airlines, Inc. 146,236
2,944 + MAIR Holdings, Inc. 21,432
9,656 + Mesa Air Group, Inc. 120,893
21,200 + Northwest Airlines Corporation 267,544
8,785 + Offshore Logistics, Inc. 215,408
1,100 + Petroleum Helicopters, Inc. (Voting Shares) 26,070
16,700 SkyWest, Inc. 302,604
-----------
3,518,521
------------------------------------------------------------------------------------------------------------------------
Aluminum--0.0% 3,802 + Century Aluminum Company 72,276
------------------------------------------------------------------------------------------------------------------------
Auto Parts--After Market--0.2% 4,100 + Aftermarket Technology Corp. 56,252
3,000 + Keystone Automotive Industries, Inc. 76,080
5,900 + Raytech Corporation 19,588
3,500 + Sports Resorts International, Inc. 16,100
3,100 Standard Motor Products, Inc. 37,665
7,899 Superior Industries International, Inc. 343,764
5,300 + TBC Corporation 136,793
-----------
686,242
------------------------------------------------------------------------------------------------------------------------
Auto Parts--Original Equipment--0.3% 9,678 + Collins & Aikman Corporation 41,906
6,053 + Dura Automotive Systems, Inc. 77,297
2,273 Sauer-Danfoss, Inc. 36,823
3,687 + Stoneridge, Inc. 55,489
800 + Strattec Security Corporation 48,728
11,300 + Tenneco Automotive Inc. 75,597
16,771 + Tower Automotive, Inc. 114,546
45,400 Visteon Corporation 472,614
-----------
923,000
16 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Auto Trucks & Parts--0.3% 3,000 + A.S.V., Inc. $ 112,080
7,794 Modine Manufacturing Co. 210,282
9,526 Oshkosh Truck Corporation 486,112
9,045 + Wabash National Corporation 265,019
-----------
1,073,493
------------------------------------------------------------------------------------------------------------------------
Banks--Outside New York City-- 3,840 1st Source Corporation 82,598
6.9% 2,900 ABC Bancorp 46,313
9,118 AMCORE Financial, Inc. 246,368
2,421 Alabama National BanCorporation 127,224
5,300 Allegiant Bancorp, Inc. 148,665
1,300 American National Bankshares Inc. 34,424
1,500 + AmericanWest Bancorporation 34,200
2,447 Arrow Financial Corporation 67,953
1,045 BancFirst Corporation 61,344
500 BancTrust Financial Group, Inc. 8,005
3,986 Bank of Granite Corp. 86,815
1,600 Bank of the Ozarks, Inc. 36,016
4,013 Banner Corporation 100,927
7,593 Boston Private Financial Holdings, Inc. 188,610
2,200 Bryn Mawr Bank Corporation 53,878
1,500 C&F Financial Corporation 59,550
1,550 CB Bancshares, Inc. 97,030
2,500 CCBT Financial Companies Inc. 87,375
600 CNB Financial Corporation 25,248
9,829 CVB Financial Corp. 189,592
1,500 Camden National Corporation 45,540
2,477 Capital City Bank Group, Inc. 113,917
2,300 + Capital Corp of the West 91,172
1,700 Capitol Bancorp Ltd. 48,280
5,700 Cascade Bancorp 109,725
7,022 Cathay Bancorp, Inc. 390,985
300 Cavalry Bancorp, Inc. 5,271
3,800 Center Bancorp, Inc. 74,708
600 Center Financial Corporation 16,350
2,533 + Central Coast Bancorp 45,949
4,338 Central Pacific Financial Corp. 130,314
1,700 Century Bancorp, Inc. (Class A) 60,282
6,851 Chemical Financial Corporation 249,308
11,626 Chittenden Corporation 391,099
15,800 Citizens Banking Corporation 516,976
6,193 City Holding Company 216,755
2,199 CityBank 71,467
2,184 CoBiz Inc. 40,229
4,000 Columbia Bancorp 127,800
4,300 Columbia Bancorp (Oregon) 74,175
5,735 Columbia Banking System, Inc. 124,220
300 Commercial Bankshares, Inc. 10,068
3,600 Community Bank System, Inc. 176,400
2,200 Community Banks, Inc. 86,482
12,740 Community First Bankshares, Inc. 368,696
3,267 Community Trust Bancorp, Inc. 98,663
4,752 Corus Bankshares, Inc. 149,973
7,898 East West Bancorp, Inc. 423,965
500 Eastern Virginia Bankshares, Inc. 14,010
600 Exchange National Bancshares, Inc. 21,690
400 FLAG Financial Corporation 5,160
2,300 FNB Corporation (North Carolina) 48,714
1,800 FNB Corporation (Virginia) 53,460
1,785 Farmers Capital Bank Corporation 60,690
1,600 Financial Institutions, Inc. 45,168
1,924 First Bancorp 60,433
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 17
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Banks--Outside New York City 2,576 First Busey Corporation $ 69,552
(continued) 8,023 First Charter Corporation 156,850
2,100 First Citizens Banc Corp 59,325
1,747 First Citizens BancShares, Inc. (Class A) 212,313
16,534 First Commonwealth Financial Corporation 235,775
4,800 First Community Bancorp 173,472
2,794 First Community Bancshares, Inc. 92,649
2,416 First Essex Bancorp, Inc. 140,466
9,587 First Financial Bancorp 152,913
3,965 First Financial Bankshares, Inc. 165,340
4,244 First Financial Corporation 127,362
600 The First of Long Island Corporation 25,794
400 First M&F Corporation 15,160
4,546 First Merchants Corporation 116,014
2,230 First National Corporation 66,922
1,050 First Oak Brook Bancshares, Inc. 31,510
1,000 First South Bancorp, Inc. 36,500
3,300 First State Bancorporation 114,675
900 First United Corporation 21,933
2,835 Firstbank Corporation 88,339
200 Foothill Independent Bancorp 4,732
300 Franklin Financial Corporation 9,216
4,041 Frontier Financial Corporation 134,000
400 GB&T Bancshares, Inc. 9,452
1,935 German American Bancorp 33,862
4,760 Glacier Bancorp, Inc. 154,224
13,622 Gold Banc Corporation 191,525
18,000 Greater Bay Bancorp 512,640
205 Greater Community Bancorp 3,479
1,100 Greene County Bancshares, Inc. 25,608
3,927 Hancock Holding Company 214,296
1,500 Hanmi Financial Corporation 29,655
7,448 Harleysville National Corporation 224,185
3,300 Heartland Financial USA, Inc. 61,380
5,200 + Heritage Commerce Corp. 63,700
5,180 Humboldt Bancorp 90,754
300 IBT Bancorp, Inc. 17,769
3,745 Independent Bank Corporation (Massachusetts) 107,931
6,281 Independent Bank Corporation (Michigan) 178,129
4,874 Integra Bank Corporation 107,115
3,300 Interchange Financial Services Corporation 83,490
1 International Bancshares Corporation 47
6,048 Irwin Financial Corporation 189,907
400 LNB Bancorp, Inc. 8,120
2,700 LSB Bancshares, Inc. 46,980
3,598 Lakeland Bancorp, Inc. 57,784
1,600 Lakeland Financial Corporation 56,512
1,700 MASSBANK Corp. 72,420
8,250 MB Financial, Inc. 300,300
3,377 MBT Financial Corp. 55,754
2,450 Macatawa Bank Corporation 69,360
3,100 Main Street Banks, Inc. 82,150
1,911 MainSource Financial Group, Inc. 58,610
2,900 Mercantile Bank Corporation 105,850
1 Mercantile Bankshares Corporation 46
2,000 Merchants Bancshares, Inc. 61,100
7,450 Mid-State Bancshares 189,528
4,280 Midwest Banc Holdings, Inc. 95,230
2,029 NBC Capital Corporation 54,113
8,613 NBT Bancorp Inc. 184,663
3,800 Nara Bancorp, Inc. 103,740
18 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Banks--Outside New York City 500 National Bankshares, Inc. $ 25,120
(continued) 6,130 National Penn Bancshares, Inc. 196,896
100 Northern States Financial Corporation 2,890
1,800 Oak Hill Financial, Inc. 55,458
1,988 Old Second Bancorp, Inc. 98,406
2,541 Omega Financial Corporation 97,803
3,653 Oriental Financial Group Inc. 93,885
400 PAB Bankshares, Inc. 6,216
12,733 Pacific Capital Bancorp 468,829
2,100 Pacific Union Bank 53,613
4,500 Patriot Bank Corp. 128,745
2,080 Peapack-Gladstone Financial Corporation 64,480
1,661 PennRock Financial Services Corp. 51,624
1,540 Penns Woods Bancorp, Inc. 71,918
2,310 Peoples Bancorp Inc. 68,168
2,332 The Peoples Holding Company 76,956
2,850 PrivateBancorp, Inc. 129,732
5,600 Prosperity Bancshares, Inc. 126,112
8,414 Provident Bancshares Corporation 247,708
6,741 R & G Financial Corporation (Class B) 268,292
20,390 Republic Bancorp, Inc. 275,061
3,409 Republic Bancorp, Inc. (Class A) 66,612
3,034 Republic Bancshares, Inc. 95,480
2,250 Resource Bankshares Corporation 70,943
6,801 Riggs National Corporation 112,421
1,389 Royal Bancshares of Pennsylvania, Inc. 35,420
8,163 S&T Bancorp, Inc. 244,074
2,700 S.Y. Bancorp, Inc. 55,512
7,114 Sandy Spring Bancorp, Inc. 266,064
1,458 Santander BanCorp 35,502
3,555 Seacoast Banking Corporation of Florida 61,715
2,317 Second Bancorp, Incorporated 61,169
700 Security Bank Corporation 22,050
900 Shore Bancshares, Inc. 33,579
100 Sierra Bancorp 1,568
10,400 + Silicon Valley Bancshares 375,128
4,200 Simmons First National Corporation (Class A) 117,180
22,338 The South Financial Group, Inc. 622,337
2,730 Southern Financial Bancorp, Inc. 117,581
3,885 Southside Bancshares, Inc. 71,873
3,400 Southwest Bancorp, Inc. 60,792
10,024 Southwest Bancorporation of Texas, Inc. 389,432
1,965 State Bancorp, Inc. 47,671
500 State Financial Services Corporation 13,280
15,276 Sterling Bancshares, Inc. 203,629
5,250 Sterling Financial Corporation 145,688
3,400 Suffolk Bancorp 117,402
2,500 Summit Bancshares, Inc. 69,650
1,600 Sun Bancorp, Inc. 30,336
3,070 + Sun Bancorp, Inc. (New Jersey) 81,048
13,904 Susquehanna Bancshares, Inc. 347,739
100 Taylor Capital Group, Inc. 2,663
8,384 Texas Regional Bancshares, Inc. (Class A) 310,208
2,520 Tompkins Trustco, Inc. 116,046
1,700 TriCo Bancshares 53,652
2,845 Troy Financial Corporation 99,575
5,880 The Trust Company of New Jersey 233,318
26,116 TrustCo Bank Corp. NY 343,425
14,398 UCBH Holdings, Inc. 561,090
4,976 UMB Financial Corporation 236,559
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 19
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Banks--Outside New York City 3,448 U.S.B. Holding Co., Inc. $ 66,857
(concluded) 10,470 Umpqua Holdings Corporation 217,671
2,300 Union Bankshares Corporation 70,150
5,000 United Community Banks, Inc. 164,500
7,691 United National Bancorp 274,799
1,000 United Security Bancshares, Inc. 27,090
100 United Security Bancshares, Inc. (California) 2,728
6,519 Unizan Financial Corp. 132,010
4,400 + Virginia Commerce Bancorp, Inc. 140,932
2,200 Virginia Financial Group, Inc. 78,144
3,800 Washington Trust Bancorp, Inc. 99,560
2,205 Wayne Bancorp, Inc. 56,779
6,063 WesBanco, Inc. 167,884
3,500 West Bancorporation 60,550
3,400 West Coast Bancorp 72,556
1,980 + Western Sierra Bancorp 93,060
7,600 Wintrust Financial Corporation 342,760
1,000 Yadkin Valley Bank & Trust Company 17,100
3,600 Yardville National Bancorp 92,664
-----------
23,217,566
------------------------------------------------------------------------------------------------------------------------
Beverage--Brewers 2,200 + The Boston Beer Company, Inc. (Class A) 39,908
(Wineries)--0.1% 3,542 + The Robert Mondavi Corporation (Class A) 137,571
-----------
177,479
------------------------------------------------------------------------------------------------------------------------
Beverage--Soft Drinks--0.1% 687 Coca-Cola Bottling Co. Consolidated 36,748
171 Farmer Brothers Co. 53,224
1,011 + Green Mountain Coffee, Inc. 23,273
1,895 + National Beverage Corp. 30,889
4,600 + Peets Coffee & Tea Inc. 80,086
-----------
224,220
------------------------------------------------------------------------------------------------------------------------
Biotechnology--Research & 17,419 + ARIAD Pharmaceuticals, Inc. 129,772
Production--2.4% 27,900 + AVANT Immunotherapeutics, Inc. 76,446
8,000 + AVI BioPharma, Inc. 32,560
29,000 + Abgenix, Inc. 361,340
4,200 + Aclara Biosciences Inc. 15,330
9,500 + Aksys, Ltd. 83,885
6,687 + Albany Molecular Research, Inc. 100,439
5,580 + Alexion Pharmaceuticals, Inc. 94,972
10,600 + Alteon Inc. 16,642
7,113 + Antigenics Inc. 80,519
22,000 + Applera Corporation--Celera Genomics Group 306,020
5,800 + Arena Pharmaceuticals, Inc. 35,960
7,420 + ArthroCare Corporation 181,790
2,100 + BioReliance Corporation 100,422
10,624 + Cell Genesys, Inc. 137,475
9,831 + Cell Therapeutics, Inc. 85,530
6,100 + Ciphergen Biosystems, Inc. 68,564
17,557 + Corixa Corporation 106,044
11,367 + Cubist Pharmaceuticals, Inc. 138,223
12,900 + CuraGen Corporation 94,557
4,100 + DOV Pharmaceutical, Inc. 55,227
16,800 + deCODE GENETICS, INC. 137,592
3,924 + Digene Corporation 157,352
13,900 + Discovery Laboratories, Inc. 145,811
10,478 + Diversa Corporation 96,921
19,696 + Encysive Pharmaceuticals Inc. 176,279
13,500 + Enzon, Inc. 162,000
6,500 + Exact Sciences Corporation 65,780
13,418 + Exelixis, Inc. 94,999
20 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Biotechnology--Research & 2,500 + GTC Biotherapeutics, Inc. $ 7,975
Production (concluded) 9,539 + Gene Logic Inc. 49,507
1,800 + Genencor International Inc. 28,350
13,597 + Genta Incorporated 141,545
16,129 + Geron Corporation 160,806
13,109 + Immunomedics, Inc. 59,777
22,224 + Incyte Genomics, Inc. 152,012
6,600 + Integra LifeSciences Holdings 188,958
10,214 + InterMune Inc. 236,556
7,100 + Interpore International, Inc. 92,300
3,100 + Kensey Nash Corporation 72,075
3,500 + Kosan Biosciences, Inc. 34,510
7,605 + Lexicon Genetics Incorporated 44,793
7,712 + Martek Biosciences Corporation 501,049
7,001 + Maxygen Inc. 74,421
8,300 + Myriad Genetics, Inc. 106,738
10,123 + NPS Pharmaceuticals, Inc. 311,181
12,854 + Nabi Biopharmaceuticals 163,374
17,400 + Nuvelo, Inc. 60,378
13,000 + OSI Pharmaceuticals, Inc. 418,730
8,500 + Palatin Technologies, Inc. 21,250
39,055 + Peregrine Pharmaceuticals, Inc. 86,312
7,885 + Pharmacopeia, Inc. 112,046
6,200 + Progenics Pharmaceuticals, Inc. 116,932
8,200 + Regeneration Technologies, Inc. 89,872
13,300 + Repligen Corporation 58,121
17,667 + Savient Pharmaceuticals Inc. 81,445
3,900 + Seattle Genetics, Inc. 33,462
8,372 + Serologicals Corporation 155,719
966 + Sirna Therapeutics, Inc. 5,023
7,845 + Tanox, Inc. 116,498
15,532 + Telik, Inc. 357,391
4,600 + Third Wave Technologies 20,930
9,740 + Transkaryotic Therapies, Inc. 152,041
3,738 + Trimeris, Inc. 78,423
13,806 + Vicuron Pharmaceuticals Inc. 257,482
2,600 + Zymogentics, Inc. 40,300
-----------
8,026,733
------------------------------------------------------------------------------------------------------------------------
Building Materials--0.5% 2,000 Ameron International Corporation 69,380
6,000 Building Materials Holding Corporation 93,180
9,690 Hughes Supply, Inc. 480,818
5,312 LSI Industries Inc. 71,712
1,000 + Mestek, Inc. 19,260
5,868 + NCI Building Systems, Inc. 140,245
100 Noland Company 3,900
4,166 + Simpson Manufacturing Co., Inc. 211,883
6,645 Texas Industries, Inc. 245,865
1,709 + Trex Company, Inc. 64,908
5,265 Watsco, Inc. 119,673
-----------
1,520,824
------------------------------------------------------------------------------------------------------------------------
Building--Air Conditioning--0.2% 12,335 Lennox International Inc. 205,995
12,038 York International Corporation 442,998
-----------
648,993
------------------------------------------------------------------------------------------------------------------------
Building--Cement--0.0% 1,577 Centex Construction Products, Inc. 95,046
------------------------------------------------------------------------------------------------------------------------
Building--Heating & 1,700 + Aaon, Inc. 32,997
Plumbing--0.0%
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 21
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Building--Miscellaneous--0.1% 3,000 + Drew Industries Incorporated $ 83,400
8,047 + Griffon Corporation 163,032
-----------
246,432
------------------------------------------------------------------------------------------------------------------------
Building--Roofing & 6,351 ElkCorp 169,572
Wallboard--0.1% 11,700 + USG Corporation 193,869
-----------
363,441
------------------------------------------------------------------------------------------------------------------------
Cable Television Services--0.2% 85,900 + Charter Communications, Inc. (Class A) 345,318
6,698 + Crown Media Holdings, Inc. (Class A) 55,392
16,500 + Insight Communications Company, Inc. 170,115
12,894 + TiVo Inc. 95,416
-----------
666,241
------------------------------------------------------------------------------------------------------------------------
Casinos & Gambling--0.6% 4,100 + Ameristar Casinos, Inc. 100,327
7,425 + Argosy Gaming Company 192,976
10,491 + Aztar Corporation 236,047
12,315 Boyd Gaming Corporation 198,764
1,432 Churchill Downs Incorporated 51,840
2,378 Dover Downs Gaming & Entertainment, Inc. 22,496
4,775 + Isle of Capri Casinos, Inc. 102,519
8,400 + MTR Gaming Group, Inc. 86,520
14,800 + Magna Entertainment Corp. (Class A) 75,036
3,900 + Multimedia Games, Inc. 160,290
6,964 + Pinnacle Entertainment, Inc. 64,904
17,200 + Scientific Games Corporation 292,572
4,500 + Shuffle Master, Inc. 155,790
6,312 + WMS Industries Inc. 165,374
-----------
1,905,455
------------------------------------------------------------------------------------------------------------------------
Chemicals--1.3% 11,006 A. Schulman, Inc. 234,648
4,300 Aceto Corporation 109,822
11,400 Albemarle Corp. 341,658
5,556 Arch Chemicals, Inc. 142,567
6,400 + Cabot Microelectronics Corporation 313,600
10,701 Calgon Carbon Corporation 66,453
6,085 Cambrex Corporation 153,707
35,360 Crompton Corporation 253,531
4,264 + Energy Conversion Devices, Inc. 38,504
3,400 + Ethyl Corporation 74,358
7,937 Georgia Gulf Corporation 229,221
13,200 Great Lakes Chemical Corporation 358,908
29,100 + Hercules Incorporated 355,020
9,267 MacDermid, Inc. 317,302
3,541 + Medis Technologies Ltd. 37,889
22,840 Millennium Chemicals Inc. 289,611
2,434 NL Industries, Inc. 28,478
10,100 + OM Group, Inc. 264,519
2,000 Octel Corp. 39,380
10,195 + Omnova Solutions Inc. 48,936
25,167 + PolyOne Corporation 160,817
1,800 Quaker Chemical Corporation 55,350
1,655 Stepan Company 42,451
10,700 + Valence Technology, Inc. 40,125
23,000 + W.R. Grace & Co. 59,110
5,700 + Wilson Greatbatch Technologies, Inc. 240,939
-----------
4,296,904
22 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Coal--0.3% 17,000 Arch Coal, Inc. $ 529,890
19,300 Massey Energy Company 401,440
1,000 + Westmoreland Coal Company 17,500
-----------
948,830
------------------------------------------------------------------------------------------------------------------------
Commercial Information 10,958 + Arbitron Inc. 457,168
Services--0.4% 12,200 + Ask Jeeves, Inc. 221,064
152,400 + CMGI Inc. 271,272
6,561 + infoUSA Inc. 48,683
35,400 + LookSmart, Ltd. 54,870
400 + MarketWatch.com, Inc. 3,444
1,200 + Neoforma, Inc. 12,768
6,674 + ProQuest Company 196,549
5,853 + SOURCECORP, Incorporated 150,012
-----------
1,415,830
------------------------------------------------------------------------------------------------------------------------
Communications Technology--2.0% 11,300 + Aether Systems, Inc. 53,675
7,022 + Anaren Microwave, Inc. 99,151
9,272 + Anixter International Inc. 239,959
9,500 + Aspect Communications Corporation 149,720
18,178 + Avanex Corporation 90,708
2,359 Bel Fuse Inc. (Class B) 76,973
4,588 Black Box Corporation 211,369
15,400 + CSG Systems International, Inc. 192,346
1,572 + Catapult Communications Corporation 22,793
12,509 + Centillium Communications, Inc. 70,426
15,288 + CommScope, Inc. 249,653
5,050 + Comtech Telecommunications Corp. 145,794
118,600 + Corvis Corporation 201,620
8 + CycleLogic, Inc. 1
9,400 + Ditech Communications Corporation 179,540
8,713 + Echelon Corporation 97,063
60,000 + Enterasys Networks, Inc. 225,000
12,300 + Entrust Technologies Inc. 50,184
36,600 + Extreme Networks, Inc. 263,886
42,300 + Finisar Corporation 132,399
23,396 + Harmonic Inc. 169,621
6,329 + Ixia 74,049
2,600 + Inet Technologies, Inc. 31,200
12,600 + Infonet Services Corporation (Class B) 21,420
6,877 Inter-Tel Inc. 171,787
9,500 + InterVoice-Brite, Inc. 112,765
6,000 + j2 Global Communications, Inc. 148,620
3,700 + KVH Industries, Inc. 101,639
1,600 + LTC StorageNetworks, Inc. 0
15,680 + Net2Phone, Inc. 106,624
5,100 + Network Equipment Technologies, Inc. 56,100
14,768 + New Focus, Inc. 74,135
4,234 + Nuance Communications Inc. 32,348
30,719 + Oplink Communications, Inc. 73,418
16,183 + Optical Communication Products, Inc. 59,877
7,107 + Packeteer, Inc. 120,677
18,040 + REMEC, Inc. 151,716
8,908 + SeaChange International, Inc. 137,183
9,988 + Secure Computing Corporation 178,885
76,000 + Sonus Networks, Inc. 574,560
3,560 + Standard Microsystems Corporation 90,068
25,671 + Stratex Networks, Inc. 109,102
66,300 + Sycamore Networks, Inc. 347,412
4,620 TALX Corporation 106,399
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 23
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Communications Technology 23,000 + TIBCO Software Inc. $ 155,710
(concluded) 15,700 + Tekelec 244,135
17,886 Turnstone Systems, Inc. 2,057
4,300 + USinternetworking, Inc. 0
2,540 + Ulticom, Inc. 24,511
33,600 + Verso Technologies, Inc. 104,160
7,601 + ViaSat, Inc. 145,483
7,631 + WebEx Communications, Inc. 153,383
14,300 + Westell Technologies, Inc. 90,233
19,575 + Zhone Technologies, Inc. 96,309
-----------
6,817,846
------------------------------------------------------------------------------------------------------------------------
Computer Services--Software & 7,900 + @Road, Inc. 105,070
Systems--4.7% 4,916 + ANSYS, Inc. 195,165
13,400 + ActivCard Corp. 105,592
13,402 + Agile Software Corporation 132,680
34,300 + Akamai Technologies, Inc. 368,725
3,200 + Altiris, Inc. 116,736
13,095 + American Management Systems, Incorporated 197,342
600 + Ansoft Corporation 7,698
5,300 + Anteon International Corporation 191,065
79,500 + Ariba, Inc. 238,500
20,795 + Ascential Software Corporation 539,214
10,697 + AsianInfo Holdings, Inc. 71,456
12,808 + Aspen Technology, Inc. 131,410
21,967 + Borland Software Corporation 213,739
5,700 + BroadVision, Inc. 24,282
8,716 + CACI International Inc. (Class A) 423,772
15,902 + CIBER, Inc. 137,711
15,300 + Computer Horizons Corp. 60,129
6,100 + Concord Communications, Inc. 121,817
7,900 + Concur Technologies, Inc. 76,472
700 + Convera Corporation 2,387
4,711 + Datastream Systems, Inc. 36,981
13,164 + Dendrite International, Inc. 206,280
2,937 + Digimarc Corporation 39,062
8,300 + Digital River, Inc. 183,430
3,407 + Digitas Inc. 31,753
6,100 + eCollege.com 112,606
4,645 + EPIQ Systems, Inc. 79,569
18,980 + E.piphany, Inc. 136,846
15,339 + Electronics for Imaging, Inc. 399,121
5,630 + Embarcadero Technologies, Inc. 89,798
16,300 + Epicor Software Corporation 207,988
9,219 + F5 Networks, Inc. 231,397
24,659 + Gartner Group, Inc. (Class A) 278,893
1,900 + Group 1 Software, Inc. 33,478
13,706 + Hyperion Solutions Corporation 413,099
4,100 + iGATE Capital Corporation 32,185
19,200 + Informatica Corporation 197,760
2,100 Integral Systems, Inc. 45,192
6,800 + Interland, Inc. 44,404
11,500 + Internet Security Systems, Inc. 216,545
6,925 + Interwoven, Inc. 87,532
11,708 + JDA Software Group, Inc. 193,299
4,100 + Kana Software, Inc. 13,817
15,658 + Keane, Inc. 229,233
4,238 + Keynote Systems, Inc. 50,432
14,400 + Lawson Software, Inc. 118,512
14,400 + Lionbridge Technologies, Inc. 138,384
24 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Computer Services--Software & 3,100 + MAPICS, Inc. $ 40,579
Systems (continued) 5,030 + MRO Software, Inc. 67,704
7,300 + MSC.Software Corp. 68,985
12,400 + Macrovision Corporation 280,116
8,900 + Magma Design Automation, Inc. 207,726
7,739 + Manhattan Associates, Inc. 213,906
5,800 + ManTech International Corporation (Class A) 144,710
18,800 + Manugistics Group, Inc. 117,500
13,597 + MatrixOne, Inc. 83,758
22,900 + Mentor Graphics Corporation 332,966
8,956 + Mercury Computer Systems, Inc. 223,004
5,899 + Micros Systems, Inc. 255,781
17,500 + Micromuse, Inc. 120,750
3,800 + MicroStrategy Incorporated (Class A) 199,424
3,600 + Mobius Management Systems, Inc. 45,540
8,453 + NYFIX, Inc. 67,201
2,600 + Nassda Corporation 18,850
7,855 + Netegrity, Inc. 80,985
15,874 + NetIQ Corporation 210,331
3,685 + NetScout Systems, Inc. 28,006
4,500 + OPNET Technologies, Inc. 74,070
17,933 + Openwave Systems Inc. 197,263
13,300 + Opsware, Inc. 98,420
8,226 + PC-Tel, Inc. 87,278
3,200 + PDF Solutions, Inc. 47,680
1,877 + PEC Solutions, Inc. 31,815
5,257 + PalmSource, Inc. 114,550
67,500 + Parametric Technology Corporation 265,950
1,400 + Pegasystems Inc. 12,068
20,491 + Pinnacle Systems, Inc. 174,788
4,300 Pomeroy Computer Resources, Inc. 63,382
8,608 + Progress Software Corporation 176,120
9,800 + Puma Technology, Inc. 39,004
1,700 + QAD Inc. 20,842
12,000 + Quest Software, Inc. 170,400
11,223 + Rainbow Technologies, Inc. 126,371
15,800 + Retek Inc. 146,624
15,796 + Roxio, Inc. 75,663
9,400 + SAFLINK Corporation 25,286
7,197 + SERENA Software, Inc. 132,065
2,689 + SPSS Inc. 48,079
2,000 + SRA International, Inc. (Class A) 86,200
3,200 SS&C Technologies, Inc. 89,440
4,000 + SafeNet, Inc. 123,080
2,099 + Sanchez Computer Associates, Inc. 8,711
26,692 + Sapient Corporation 149,475
21,995 + ScanSoft, Inc. 117,013
14,927 + SeeBeyond Technology Corporation 64,037
10,900 + Sigma Designs, Inc. 82,077
16,041 + SonicWALL, Inc. 125,120
2,900 + Stellent, Inc. 28,536
12,400 + Support.com, Inc. 163,060
28,400 + Sybase, Inc. 584,472
7,561 + Sykes Enterprises, Incorporated 64,722
3,700 + Synplicity, Inc. 28,971
883 Syntel, Inc. 21,819
11,692 + Systems & Computer Technology Corporation 191,164
6,900 + Tier Technologies, Inc. (Class B) 56,373
10,585 + Transaction Systems Architects, Inc. (Class A) 239,539
7,208 + The TriZetto Group, Inc. 46,492
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 25
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Computer Services--Software & 10,500 + Tyler Technologies, Inc. $ 101,115
Systems (concluded) 8,100 + Vastera, Inc. 32,400
2,100 + Verint Systems Inc. 47,376
7,767 + Verity, Inc. 129,631
65,100 + Vignette Corporation 147,777
5,500 + Vitria Technology, Inc. 39,050
12,162 + WatchGuard Technologies, Inc. 70,783
14,420 + webMethods, Inc. 131,943
6,551 + Websense, Inc. 191,551
21,700 + Wind River Systems, Inc. 190,092
14,108 + Zoran Corporation 245,338
-----------
15,841,455
------------------------------------------------------------------------------------------------------------------------
Computer Technology--1.6% 34,500 + Adaptec, Inc. 304,635
19,534 + Advanced Digital Information Corporation 273,476
3,272 Analogic Corporation 134,152
4,700 + CompuCom Systems, Inc. 24,628
8,554 + Computer Network Technology Corporation 81,605
19,579 + Concurrent Computer Corporation 85,560
2,000 + Constellation 3D, Inc. 0
20,700 + Cray, Inc. 205,551
1,400 + CyberGuard Corporation 12,208
10,600 + Dot Hill Systems Corp. 160,590
10,209 + FalconStor Software, Inc. 89,227
5,000 + Fargo Electronics 63,600
11,882 + FileNET Corporation 321,765
71,600 + Gateway Inc. 329,360
8,017 + Hutchinson Technology Incorporated 246,443
14,166 + InFocus Corporation 137,127
7,600 + Innovex, Inc. 64,068
14,596 + Intergraph Corp. 349,136
15,003 Iomega Corporation 89,718
5,800 + Komag, Incorporated 84,854
18,674 + Lexar Media, Inc. 325,488
4,900 + Neoware Systems, Inc. 67,130
3,900 + Overland Storage, Inc. 73,320
13,094 + PalmOne, Inc. 153,855
31,000 + Perot Systems Corporation (Class A) 417,880
40,000 + Quantum Corporation--DLT & Storage Systems 124,800
15,600 + RSA Security Inc. 221,520
4,457 + Radiant Systems, Inc. 37,483
6,442 + RadiSys Corporation 108,612
31,347 + Safeguard Scientifics, Inc. 126,642
55,207 + Silicon Graphics, Inc. 75,634
100 + SimpleTech, Inc. 601
3,300 + Stratasys, Inc. 89,958
3,700 + Synaptics Incorporated 55,426
15,609 + UNOVA, Inc. 358,227
-----------
5,294,279
------------------------------------------------------------------------------------------------------------------------
Construction--0.3% 4,318 + EMCOR Group, Inc. 189,560
13,571 Granite Construction Incorporated 318,783
1,400 + Modtech Holdings, Inc. 11,774
3,000 + Perini Corporation 27,450
9,100 + Washington Group International, Inc. 309,127
-----------
856,694
26 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Consumer Electronics--0.9% 29,900 + Activision, Inc. $ 544,180
14,567 + Alloy, Inc. 75,894
4,453 + Atari, Inc. 18,703
32,200 + CNET Networks, Inc. 219,604
5,500 + eUniverse, Inc. 8,800
39,900 + EarthLink, Inc. 399,000
4,900 + FindWhat.com 91,875
7,500 + InfoSpace, Inc. 172,875
2,200 + Lifeline Systems, Inc. 41,800
17,074 + Midway Games Inc. 66,247
16,100 + NIC Inc. 129,283
3,800 + NetFlix Inc. 207,822
5,382 + Register.com, Inc. 28,256
5,900 + Sohu.com Inc. 177,059
13,625 + THQ Inc. 230,399
14,014 + Take-Two Interactive Software, Inc. 403,743
14,650 + United Online, Inc. 245,974
4,086 + Universal Electronics Inc. 52,056
-----------
3,113,570
------------------------------------------------------------------------------------------------------------------------
Consumer Products--0.8% 18,400 + American Greetings Corporation (Class A) 402,408
5,329 + The Boyds Collection, Ltd. 22,648
1,612 CSS Industries, Inc. 49,988
7,500 + Jarden Corp. 205,050
8,173 Matthews International Corporation (Class A) 241,839
8,963 The Nautilus Group, Inc. 125,930
13,600 Oakley, Inc. 188,224
6,376 + Playtex Products, Inc. 49,286
4,000 + RC2 Corporation 83,000
10,391 The Topps Company, Inc. 106,612
7,598 The Toro Company 352,547
17,474 Tupperware Corporation 302,999
3,400 + USANA Health Sciences, Inc. 104,040
10,983 + The Yankee Candle Company, Inc. 300,165
-----------
2,534,736
------------------------------------------------------------------------------------------------------------------------
Containers & Packaging-- 53,869 + Crown Holdings, Inc. 488,053
Metal & Glass--0.3% 3,775 Greif Bros. Corporation (Class A) 134,050
4,871 + Mobile Mini, Inc. 96,056
3,400 + Silgan Holdings Inc. 144,806
-----------
862,965
------------------------------------------------------------------------------------------------------------------------
Containers & Packaging-- 6,020 Myers Industries, Inc. 72,962
Paper & Plastic--0.0%
------------------------------------------------------------------------------------------------------------------------
Copper--0.1% 10,082 + Mueller Industries, Inc. 346,418
------------------------------------------------------------------------------------------------------------------------
Cosmetics--0.1% 772 + Del Laboratories, Inc. 19,294
5,993 + Elizabeth Arden, Inc. 119,381
2,000 Inter Parfums, Inc. 45,180
11,826 Nu Skin Enterprises, Inc. (Class A) 202,106
6,560 + Revlon, Inc. (Class A) 14,694
-----------
400,655
------------------------------------------------------------------------------------------------------------------------
Diversified Financial 6,300 + Euronet Worldwide, Inc. 113,400
Services--0.1% 8,800 + Rewards Network Inc. 93,808
5,000 + U.S.I. Holdings Corporation 65,250
-----------
272,458
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 27
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Diversified Materials & 12,060 Acuity Brands, Inc. $ 311,148
Processing--0.5% 6,516 + Armor Holdings, Inc. 171,436
4,657 Barnes Group Inc. 150,468
7,755 CLARCOR Inc. 341,995
6,662 + Hexcel Corporation 49,365
19,014 Olin Corporation 381,421
7,745 Tredegar Corporation 120,280
8,520 Valhi, Inc. 127,459
-----------
1,653,572
------------------------------------------------------------------------------------------------------------------------
Diversified Production--0.1% 15,152 Thomas & Betts Corporation 346,829
------------------------------------------------------------------------------------------------------------------------
Drug & Grocery Store 7,179 + 7-Eleven, Inc. 115,223
Chains--0.5% 432 Arden Group, Inc. (Class A) 33,480
14,007 Casey's General Stores, Inc. 247,364
6,528 + Duane Read Inc. 110,454
5,931 + The Great Atlantic & Pacific Tea Company, Inc. 49,820
4,664 Ingles Markets, Incorporated (Class A) 47,899
10,783 Longs Drug Stores Corporation 266,771
4,177 Nash-Finch Company 93,314
13,942 + Pathmark Stores, Inc. 105,959
12,069 Ruddick Corporation 216,035
2,629 + Smart & Final Inc. 26,500
3,400 Weis Markets, Inc. 123,420
10,029 + Wild Oats Markets, Inc. 129,675
-----------
1,565,914
------------------------------------------------------------------------------------------------------------------------
Drugs & Pharmaceuticals--2.7% 4,400 + aaiPharma Inc. 110,528
4,400 + Able Laboratories, Inc. 79,508
15,300 + Adolor Corporation 306,306
19,600 + Alkermes, Inc. 264,600
11,225 Alpharma, Inc. (Class A) 225,622
13,424 + Aphton Corporation 80,544
13,000 + AtheroGenics, Inc. 194,350
7,400 + Atrix Laboratories, Inc. 177,896
2,600 + Bentley Pharmaceuticals, Inc. 34,580
19,648 + BioMarin Pharmaceutical Inc. 152,645
16,372 + Biopure Corporation 38,965
1,910 + Bone Care International, Inc. 24,333
3,400 + Bradley Pharmaceuticals, Inc. 86,462
5,272 + CIMA Labs Inc. 171,973
10,200 + CV Therapeutics, Inc. 149,532
5,700 + Chattem, Inc. 102,030
3,700 + CollaGenex Pharmaceuticals, Inc. 41,477
9,104 + Columbia Laboratories, Inc. 57,355
11,802 + Connetics Corporation 214,324
4,100 D & K Healthcare Resources, Inc. 55,596
1,100 + Dendreon Corporation 8,866
25,900 + Durect Corporation 66,822
6,315 + Enzo Biochem, Inc. 113,102
11,517 + Esperion Therapeutics, Inc. 398,603
6,400 + First Horizon Pharmaceutical Corporation 71,680
10,036 + Guilford Pharmaceuticals Inc. 68,044
2,500 + Hi-Tech Pharmacal Co., Inc. 58,750
3,000 + Hollis-Eden Pharmaceuticals, Inc. 33,030
11,524 + ILEX Oncology, Inc. 244,885
13,027 + ImmunoGen, Inc. 65,786
9,500 + Impax Laboratories, Inc. 136,705
11,888 + Indevus Pharmaceuticals, Inc. 70,020
8,100 + Inspire Pharmaceuticals, Inc. 114,696
28 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Drugs & Pharmaceuticals 14,289 + Isis Pharmaceuticals, Inc. $ 92,878
(concluded) 9,600 + K-V Pharmaceutical Company (Class A) 244,800
5,866 + Kos Pharmaceuticals, Inc. 252,473
11,900 + La Jolla Pharmaceutical Company 51,051
1,800 + Lannett Company, Inc. 30,258
18,016 + Ligand Pharmaceuticals Incorporated (Class B) 264,655
10,702 + MGI Pharma, Inc. 440,387
23,200 + Medarex, Inc. 144,536
14,227 + The Medicines Company 419,127
13,900 + Nektar Therapeutics 189,179
4,045 + NeoPharm, Inc. 74,104
6,463 + Neose Technologies, Inc. 59,460
7,831 + Noven Pharmaceuticals, Inc. 119,110
10,000 + Onyx Pharmaceuticals, Inc. 282,300
7,800 + POZEN Inc. 79,560
20,017 + PRAECIS Pharmaceuticals Incorporated 128,909
4,800 + Pain Therapeutics, Inc. 33,360
6,400 + Penwest Pharmaceuticals Co. 110,592
23,015 Perrigo Company 361,796
12,200 + Priority Healthcare Corporation (Class B) 294,142
5,600 + Quidel Corporation 60,592
10,419 + Regeneron Pharmaceuticals, Inc. 153,263
78 + Rigel Pharmaceuticals, Inc. 1,490
3,700 + SFBC International, Inc. 98,272
5,100 + Salix Pharmaceuticals, Ltd. 115,617
11,900 + SciClone Pharmaceuticals, Inc. 80,682
10,682 + SuperGen, Inc. 117,502
18,995 + Tularik Inc. 306,769
6,746 + United Therapeutics Corporation 154,821
7,500 + VIVUS, Inc. 28,425
26,800 + Vertex Pharmaceuticals Incorporated 274,164
-----------
9,083,889
------------------------------------------------------------------------------------------------------------------------
Education Services--0.3% 4,602 + Bright Horizons Family Solutions, Inc. 193,284
19,700 + DigitalThink, Inc. 55,357
2,830 + Learning Tree International, Inc. 49,214
2,500 + The Princeton Review, Inc. 24,375
2,349 + Renaissance Learning, Inc. 56,564
3,692 Strayer Education, Inc. 401,800
12,028 + Sylvan Learning System, Inc. 346,286
-----------
1,126,880
------------------------------------------------------------------------------------------------------------------------
Electrical & Electronics--0.4% 11,286 + Benchmark Electronics, Inc. 392,866
6,400 + InVision Technologies, Inc. 214,848
3,200 + OSI Systems, Inc. 61,472
6,700 + Pemstar Inc. 22,043
12,261 + Plexus Corporation 210,521
8,032 + Power Integrations, Inc. 268,751
5,300 + TTM Technologies, Inc. 89,464
4,607 + Universal Display Corporation 62,978
-----------
1,322,943
------------------------------------------------------------------------------------------------------------------------
Electrical Equipment & 6,981 A.O. Smith Corporation 244,684
Components--0.7% 8,371 Baldor Electric Company 191,277
10,508 CTS Corporation 120,842
12,884 + Cable Design Technology 115,827
7,818 Cohu, Inc. 149,715
1,830 Franklin Electric Co., Inc. 110,697
16,390 + General Cable Corporation 133,578
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 29
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Electrical Equipment & 3,673 + The Genlyte Group Incorporated $ 214,430
Components 8,960 + Littelfuse Inc. 258,227
(concluded) 7,800 + MKS Instruments, Inc. 226,200
2,031 + Powell Industries, Inc. 38,894
19,400 + Power-One, Inc. 210,102
4,900 + Sonic Solutions 74,970
11,761 + Technitrol, Inc. 243,923
4,079 + Triumph Group, Inc. 148,476
-----------
2,481,842
------------------------------------------------------------------------------------------------------------------------
Electrical--Household 5,996 Applica Incorporated 45,570
Appliance--0.0% 2,900 + Emerson Radio Corp. 10,904
1,350 National Presto Industries, Inc. 48,803
1,500 + REX Stores Corporation 21,240
-----------
126,517
------------------------------------------------------------------------------------------------------------------------
Electronics--0.8% 3,986 + II-VI Incorporated 102,839
23,812 + Aeroflex Incorporated 278,362
9,863 Agilysys, Inc. 109,972
10,094 + Avid Technology, Inc. 484,512
2,532 BEI Technologies, Inc. 50,640
5,299 + Daktronics, Inc. 133,323
3,600 + Drexler Technology Corporation 49,212
4,100 + EMS Technologies, Inc. 84,214
11,266 + FLIR Systems, Inc. 411,209
21,500 + Kopin Corporation 144,265
30,279 + MRV Communications, Inc. 113,849
2,400 + Manufacturers' Services Limited 14,592
10,380 Methode Electronics 126,947
5,349 Park Electrochemical Corp. 141,695
7,058 + Read-Rite Corporation 35
3,304 + Research Frontiers Incorporated 30,694
4,400 Richardson Electronics, Ltd. 54,076
18,000 + Semtech Corporation 409,140
1,967 + Supertex, Inc. 37,570
-----------
2,777,146
------------------------------------------------------------------------------------------------------------------------
Electronics--Instruments Gauges & 7,682 + Itron, Inc. 141,042
Meters--0.1% 2,701 Keithley Instruments, Inc. 49,428
2,700 + Metrologic Instruments, Inc. 72,900
6,095 + Zygo Corporation 100,507
-----------
363,877
------------------------------------------------------------------------------------------------------------------------
Electronics--Medical 1,100 + Aspect Medical Systems, Inc. 12,551
Systems--0.6% 5,387 + Bruker BioSciences Corporation 24,511
9,300 + CTI Molecular Imaging, Inc. 157,263
3,600 + Candela Corporation 65,448
9,632 + CardioDynamics International Corporation 57,503
3,470 Datascope Corp. 124,399
5,200 + EPIX Medical, Inc. 84,656
9,300 + eResearch Technology, Inc. 236,406
5,472 + Haemonetics Corporation 130,726
9,000 + Hologic, Inc. 155,970
3,100 + I-STAT Corporation 47,430
11,681 + Intuitive Surgical, Inc. 199,628
4,451 + Luminex Corporation 41,750
6,088 + Possis Medical, Inc. 120,238
30 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Electronics--Medical 1,500 + Quality Systems, Inc. $ 66,885
Systems (concluded) 6,832 + TriPath Imaging, Inc. 53,290
11,486 + VISX, Incorporated 265,901
3,061 + Zoll Medical Corporation 108,604
-----------
1,953,159
------------------------------------------------------------------------------------------------------------------------
Electronics--Semiconductors/ 6,916 + Actel Corp. 166,676
Components--2.2% 9,241 + Alliance Semiconductor Corporation 65,704
6,600 + Artisan Components, Inc. 135,300
10,300 + CEVA, Inc. 107,120
14,151 + ChipPAC, Inc. 107,406
21,100 + Cirrus Logic, Inc. 161,837
89,000 + Conexant Systems, Inc. 442,330
9,683 + DSP Group, Inc. 241,204
3,150 + Diodes Incorporated 59,850
11,029 + ESS Technology, Inc. 187,603
14,327 + Exar Corporation 244,705
1,973 + Excel Technology, Inc. 64,833
11,000 + Genesis Microchip Incorporated 198,440
47,916 + GlobespanVirata, Inc. 281,746
8,738 + Integrated Silicon Solution, Inc. 136,924
3,593 + IXYS Corporation 33,595
35,200 + Lattice Semiconductor Corporation 340,736
16,700 + Micrel, Inc. 260,186
9,245 + Microsemi Corporation 227,242
27,300 + Mindspeed Technologies Inc. 187,005
5,300 + Monolithic System Technology, Inc. 45,315
12,100 + ON Semiconductor Corporation 78,045
7,400 + OmniVision Technologies, Inc. 408,850
4,993 + Pericom Semiconductor Corporation 53,225
10,864 + Pixelworks, Inc. 119,939
5,329 + Planar Systems Inc. 129,601
60,300 + RF Micro Devices, Inc. 606,015
4,088 + SBS Technologies, Inc. 60,134
7,561 + SIPEX Corporation 58,295
21,476 + Silicon Image, Inc. 155,271
24,458 + Silicon Storage Technology, Inc. 269,038
1,800 + Siliconix Incorporated 82,260
49,833 + Skyworks Solutions, Inc. 433,547
24,600 + Superconductor Technologies Inc. 137,268
5,356 + Three-Five Systems, Inc. 28,065
32,100 + Transmeta Corporation 109,140
41,236 + TriQuint Semiconductor, Inc. 291,539
2,700 + Virage Logic Corporation 27,459
63,800 + Vitesse Semiconductor Corporation 374,506
8,700 + White Electronic Designs Corporation 76,560
6,634 + Xicor, Inc. 75,230
-----------
7,269,744
------------------------------------------------------------------------------------------------------------------------
Electronics--Technology--0.9% 13,923 + Checkpoint Systems, Inc. 263,284
9,180 + Coherent, Inc. 218,484
4,652 Cubic Corporation 106,996
8,774 + DRS Technologies, Inc. 243,742
5,626 EDO Corporation 138,681
4,700 + Gerber Scientific, Inc. 37,412
5,100 + Herley Industries, Inc. 105,570
26,930 + Identix Incorporated 119,838
5,656 + Intermagnetics General Corporation 125,337
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 31
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Electronics--Technology 28,100 + Kemet Corp. $ 384,689
(concluded) 3,400 + ScanSource, Inc. 155,108
600 Sypris Solutions, Inc. 10,086
26,300 + The Titan Corporation 573,603
10,804 + Trimble Navigation Limited 402,341
-----------
2,885,171
------------------------------------------------------------------------------------------------------------------------
Energy--0.0% 4,517 Pacific Gulf Resources 226
------------------------------------------------------------------------------------------------------------------------
Energy Equipment--0.0% 8,500 + Global Power Equipment Group Inc. 56,780
10,900 + Plug Power Inc. 79,025
-----------
135,805
------------------------------------------------------------------------------------------------------------------------
` Energy--Miscellaneous--0.3% 9,726 + FuelCell Energy, Inc. 126,438
2,800 Holly Corporation 77,000
11,100 + KFx Inc. 83,805
6,600 + Matrix Service Company 119,790
2,279 Penn Virginia Corporation 126,826
6,991 + TETRA Technologies, Inc. 169,462
18,665 + Tesoro Petroleum Corporation 271,949
7,297 + Veritas DGC Inc. 76,473
-----------
1,051,743
------------------------------------------------------------------------------------------------------------------------
Engineering & Contracting 14,602 + Dycom Industries, Inc. 391,626
Services--0.2% 7,297 + Integrated Electrical Services, Inc. 67,497
20,700 + Quanta Services, Inc. 151,110
4,877 + URS Corporation 121,974
-----------
732,207
------------------------------------------------------------------------------------------------------------------------
Entertainment--0.4% 9,600 + AMC Entertainment Inc. 146,016
15,600 + Alliance Gaming Corporation 384,540
6,957 + Boca Resorts, Inc. (Class A) 104,077
300 + Carmike Cinemas, Inc. 10,455
4,340 Dover Motorsports, Inc. 15,190
4,755 + Gaylord Entertainment Company 141,937
18,707 + Hollywood Entertainment Corporation 257,221
3,272 + LodgeNet Entertainment Corporation 59,812
7,415 Movie Gallery, Inc. 138,512
3,355 Speedway Motorsports, Inc. 97,027
-----------
1,354,787
------------------------------------------------------------------------------------------------------------------------
Fertilizers--0.1% 38,300 IMC Global Inc. 380,319
------------------------------------------------------------------------------------------------------------------------
Finance Companies--0.1% 3,700 + Accredited Home Lenders Holding Company 113,220
2,849 + Credit Acceptance Corporation 43,590
8,200 + Saxon Capital, Inc. 171,790
2,500 + United PanAm Financial Corp. 41,775
5,700 + World Acceptance Corporation 113,487
-----------
483,862
32 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Financial Data Processing 10,300 + Advent Software, Inc. $ 179,529
Services & Systems--0.7% 3,906 + CCC Information Services Group Inc. 66,011
6,189 + CompuCredit Corporation 131,702
10,330 + Digital Insight Corporation 257,217
20,100 + E-LOAN, Inc. 59,898
16,388 + eFunds Corporation 284,332
7,423 + eSPEED, Inc. (Class A) 173,772
8,000 + Hypercom Corporation 38,080
10,400 + InteliData Technologies Corporation 17,160
6,743 + The InterCept Group, Inc. 76,128
2,200 + iPayment Holdings, Inc. 74,800
8,582 John H. Harland Company 234,289
9,249 + Kronos, Inc. 366,353
10,264 NDCHealth Corporation 262,964
1,100 + National Processing, Inc. 25,905
15,013 + PRG-Schultz International, Inc. 73,564
6,240 + Portal Software, Inc. 41,995
6,300 + Tradestation Group Inc. 55,818
-----------
2,419,517
------------------------------------------------------------------------------------------------------------------------
Financial Information 1,100 + Bankrate, Inc. 13,618
Services--0.1% 32,400 + HomeStore.com, Inc. 153,252
30,022 + S1 Corporation 241,677
5,700 + TheStreet.com, Inc. 23,484
400 Value Line, Inc. 19,960
-----------
451,991
------------------------------------------------------------------------------------------------------------------------
Financial Miscellaneous--0.7% 6,400 Advanta Corp. (Class B) 81,408
4,559 BARRA, Inc. 161,799
10,319 Cash America International, Inc. 218,556
6,207 + DVI, Inc. 248
300 + The Enstar Group, Inc. 14,115
2,400 + Federal Agricultural Mortgage Corporation 76,704
3,867 + Financial Federal Corporation 118,137
6,599 LandAmerica Financial Group, Inc. 344,864
1,700 Medallion Financial Corp. 16,133
10,300 + Metris Companies Inc. 45,732
9,750 New Century Financial Corporation 386,783
4,800 + Portfolio Recovery Associates, Inc. 127,440
1,000 Sanders Morris Harris Group Inc. 12,400
14,336 + Sotheby's Holdings, Inc. (Class A) 195,830
3,010 Sterling Bancorp 85,785
6,222 Stewart Information Services Corporation 252,302
2,376 + Triad Guaranty Inc. 119,632
3,347 + WFS Financial Inc. 142,114
2,291 WSFS Financial Corporation 102,751
-----------
2,502,733
------------------------------------------------------------------------------------------------------------------------
Foods--0.9% 5,634 + American Italian Pasta Company (Class A) 236,065
300 + Aurora Food Inc. 2
14,800 + Chiquita Brands International, Inc. 333,444
9,956 Flowers Foods, Inc. 256,865
8,157 + Hain Celestial Group, Inc. 189,324
2,800 + Horizon Organic Holding Corporation 67,060
8,344 + International Multifoods 150,192
13,228 Interstate Bakeries Corporation 188,234
1,900 + J & J Snack Foods Corp. 71,744
2,500 + John B. Sanfilippo & Son, Inc. 127,600
9,900 Lance, Inc. 148,797
5,300 + M&F Worldwide Corp. 70,808
1,063 + Maui Land & Pineapple Company, Inc. 36,759
16,714 + NBTY Inc. 448,938
2,700 Natures Sunshine Products, Inc. 22,815
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 33
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Foods (concluded) 300 + The Penn Traffic Company $ 9
3,069 Pilgrim's Pride Corporation 50,117
8,895 + Ralcorp Holdings, Inc. 278,947
1,787 Riviana Foods Inc. 48,946
1,600 Sanderson Farms, Inc. 64,480
12 Seaboard Corporation 3,384
14,557 Sensient Technologies Corporation 287,792
-----------
3,082,322
------------------------------------------------------------------------------------------------------------------------
Forest Products--0.5% 3,109 Deltic Timber Corporation 94,514
15,821 Longview Fibre Company 195,389
37,109 + Louisiana-Pacific Corporation 663,509
6,844 Pope & Talbot, Inc. 120,523
9,497 Potlatch Corporation 330,211
7,734 Universal Forest Products, Inc. 248,880
-----------
1,653,026
------------------------------------------------------------------------------------------------------------------------
Forms & Bulk Printing 3,500 Ennis Business Forms, Inc. 53,550
Services--0.1% 2,707 New England Business Services, Inc. 79,857
3,945 The Standard Register Company 66,394
-----------
199,801
------------------------------------------------------------------------------------------------------------------------
Funeral Parlors & 9,900 + Alderwoods Group, Inc. 93,258
Cemeteries--0.1% 27,024 + Stewart Enterprises, Inc. (Class A) 153,496
-----------
246,754
------------------------------------------------------------------------------------------------------------------------
Glass--0.0% 8,700 Apogee Enterprises, Inc. 98,745
------------------------------------------------------------------------------------------------------------------------
Gold--0.2% 71,100 + Coeur d'Alene Mines Corporation 410,958
6,600 Royal Gold, Inc. 138,138
-----------
549,096
------------------------------------------------------------------------------------------------------------------------
Health Care Facilities--0.5% 9,300 + American Healthways, Inc. 221,991
30,826 + Beverly Enterprises, Inc. 264,795
4,400 + Genesis HealthCare Corporation 100,232
4,200 + Kindred Healthcare, Inc. 218,316
12,900 + LifePoint Hospitals, Inc. 379,905
2,000 + National Healthcare Corporation 39,800
1,824 + Specialty Laboratories, Inc. 30,625
6,237 + Sunrise Assisted Living, Inc. 241,621
6,400 + United Surgical Partners International, Inc. 214,272
-----------
1,711,557
------------------------------------------------------------------------------------------------------------------------
Health Care Management 8,400 + AMERIGROUP Corporation 358,260
Services--1.0% 7,641 + Allscripts Healthcare Solutions, Inc. 40,650
2,600 + American Medical Security Group, Inc. 58,292
6,400 + AmSurg Corp. 242,496
7,700 + Centene Corporation 215,677
9,600 + Cerner Corporation 363,360
3,100 Computer Programs and Systems, Inc. 62,372
1,257 + CorVel Corporation 47,263
12,831 + Eclipsys Corporation 149,353
14,497 Hooper Holmes, Inc. 89,591
2,500 + IMPAC Medical Systems, Inc. 63,900
8,500 + MIM Corporation 59,755
2,196 + MedQuist Inc. 35,268
3,000 + Omnicell, Inc. 48,600
13,200 + Orthodontic Centers of America, Inc. 106,260
7,100 + Pediatrix Medical Group, Inc. 391,139
9,998 + Per-Se Technologies, Inc. 152,569
18,200 Select Medical Corporation 296,296
6,726 + Sierra Health Services, Inc. 184,629
22,623 + US Oncology, Inc. 243,423
34 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Health Care Management 3,400 + Vital Images, Inc. $ 60,656
Services (concluded) 11,800 + VitalWorks Inc. 52,156
-----------
3,321,965
------------------------------------------------------------------------------------------------------------------------
Health Care Services--0.6% 15,900 + Accredo Health, Incorporated 502,599
2,400 + Alliance Imaging, Inc. 8,880
5,100 + CHRONIMED Inc. 43,248
1,752 + Dynacq Healthcare, Inc. 13,455
9,590 + Gentiva Health Services, Inc. 121,218
4,600 Healthcare Services Group, Inc. 88,734
5,127 + IDX Systems Corporation 137,506
10,700 + Inveresk Research Group, Inc. 264,611
4,100 + LabOne, Inc. 133,127
3,600 + Matria Healthcare, Inc. 76,068
10,900 + Odyssey Healthcare, Inc. 318,934
13,636 + Province Healthcare Company 218,176
4,100 + VistaCare, Inc. (Class A) 144,115
-----------
2,070,671
------------------------------------------------------------------------------------------------------------------------
Homebuilding--0.5% 4,517 Beazer Homes USA, Inc. 441,130
1,900 + Dominion Homes, Inc. 57,627
4,100 M/I Schottenstein Homes, Inc. 160,105
2,300 + Meritage Corporation 152,513
1,300 + Orleans Homebuilders, Inc. 36,829
11,030 Standard Pacific Corp. 535,507
3,100 + Technical Olympic USA, Inc. 85,343
1,800 + William Lyon Homes, Inc. 112,986
-----------
1,582,040
------------------------------------------------------------------------------------------------------------------------
Hotel/Motel--0.2% 5,979 Choice Hotels International, Inc. 210,760
23,200 Extended Stay America, Inc. 335,936
5,179 Marcus Corporation 84,936
13,090 + Prime Hospitality Corp. 133,518
-----------
765,150
------------------------------------------------------------------------------------------------------------------------
Household Furnishings--0.3% 1,600 American Woodmark Corporation 88,080
2,400 Bassett Furniture Industries, Incorporated 39,600
10,300 + The Bombay Company, Inc. 83,842
2,300 + Department 56, Inc. 30,130
4,736 Haverty Furniture Companies, Inc. 94,057
300 Hooker Furniture Corporation 12,240
2,300 + Kirkland's, Inc. 40,618
4,588 Libbey, Inc. 130,666
8,300 Oneida Ltd. 48,887
7,500 + Select Comfort Corporation 185,700
3,200 Stanley Furniture Company, Inc. 100,800
-----------
854,620
------------------------------------------------------------------------------------------------------------------------
Identification Control & 6,112 + Advanced Energy Industries, Inc. 159,218
Filter Devices--0.9% 11,367 + Artesyn Technologies, Inc. 96,847
16,141 + Asyst Technologies, Inc. 280,046
6,394 C&D Technologies, Inc. 122,573
4,631 + CUNO Incorporated 208,534
4,566 + ESCO Technologies Inc. 199,306
15,100 + Flowserve Corporation 315,288
1,400 The Gorman-Rupp Company 36,960
9,681 IDEX Corporation 402,633
1,842 Mine Safety Appliances Company 146,457
11,182 + Paxar Corporation 149,839
3,212 Robbins & Myers, Inc. 60,996
8,621 Roper Industries, Inc. 424,670
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 35
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Identification Control & 8,127 + Veeco Instruments Inc. $ 229,181
Filter Devices 5,796 + Vicor Corporation 66,132
(concluded) 4,336 Watts Industries, Inc. (Class A) 96,259
6,117 X-Rite, Incorporated 69,244
-----------
3,064,183
------------------------------------------------------------------------------------------------------------------------
Insurance--Life--0.5% 13,500 AmerUs Group Co. 472,095
6,586 + Citizens, Inc. 62,105
7,170 Delphi Financial Group, Inc. (Class A) 258,120
3,800 Financial Industries Corporation 53,580
4,480 Great American Financial Resources, Inc. 72,666
1,142 Kansas City Life Insurance Company 54,234
662 + National Western Life Insurance Company (Class A) 102,511
32,400 The Phoenix Companies, Inc. 390,096
7,293 Presidential Life Corporation 95,976
10,100 + Universal American Financial Corp. 100,091
-----------
1,661,474
------------------------------------------------------------------------------------------------------------------------
Insurance--Multiline--0.5% 10,240 Alfa Corporation 131,686
16,000 + Allmerica Financial Corporation 492,320
3,086 + CNA Surety Corporation 29,348
6,309 Crawford & Company (Class B) 44,542
100 EMC Insurance Group, Inc. 2,114
2,425 FBL Financial Group, Inc. (Class A) 62,565
4,400 + HealthExtras, Inc. 58,960
9,206 Hilb, Rogal and Hamilton Company 295,236
17,868 Horace Mann Educators Corporation 249,616
1,000 Independence Holding Company 23,750
3,297 + PICO Holdings, Inc. 51,664
4,700 Penn-America Group, Inc. 62,369
11,339 + UICI 150,582
4,437 Zenith National Insurance Corp. 144,424
-----------
1,799,176
------------------------------------------------------------------------------------------------------------------------
Insurance--Property 7,200 21st Century Insurance Group 99,000
Casualty--0.9% 4,471 + American Physicians Capital, Inc. 82,266
11,666 + Argonaut Group, Inc. 181,290
2,432 Baldwin & Lyons, Inc. (Class B) 68,242
6,845 The Commerce Group, Inc. 270,377
4,500 Donegal Group Inc. (Class A) 99,090
20,961 Fremont General Corporation 354,451
9,462 Harleysville Group Inc. 188,199
4,900 Infinity Property & Casualty Corporation 161,945
1,858 The Midland Company 43,886
1,400 NYMAGIC, Inc. 38,388
1,100 + The Navigators Group, Inc. 33,957
19,815 + Ohio Casualty Corporation 343,988
13,606 PMA Capital Corporation (Class A) 69,663
4,956 + Philadelphia Consolidated Holding Corp. 242,001
7,123 + ProAssurance Corporation 229,004
4,954 RLI Corp. 185,577
1,300 Safety Insurance Group, Inc. 22,243
9,711 Selective Insurance Group, Inc. 314,248
2,812 State Auto Financial Corporation 65,773
1,500 United Fire & Casualty Company 60,540
-----------
3,154,128
------------------------------------------------------------------------------------------------------------------------
Investment Management 7,700 + Affiliated Managers Group, Inc. 535,843
Companies--0.3% 2,796 Gabelli Asset Management Inc. (Class A) 111,281
5,100 Gladstone Capital Corporation 113,985
7,300 MCG Capital Corporation 142,350
-----------
903,459
36 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Jewelry--Watches & 7,655 + Fossil, Inc. $ 214,417
Gemstones--0.1% 9,800 Friedman's Inc. (Class A) 65,758
1,800 Movado Group, Inc. 50,814
-----------
330,989
------------------------------------------------------------------------------------------------------------------------
Leisure Time--0.5% 6,000 Action Performance Companies, Inc. 117,600
9,341 + Bally Total Fitness Holding Corporation 65,387
19,400 Callaway Golf Company 326,890
8,300 + K2 Inc. 126,243
12,278 + Penn National Gaming, Inc. 283,376
10,409 + SCP Pool Corporation 340,166
28,500 + Six Flags, Inc. 214,320
2,600 + Steinway Musical Instruments, Inc. 64,220
6,578 Sturm, Ruger & Company, Inc. 74,792
7,656 + Vail Resorts, Inc. 130,152
2,900 + West Marine, Inc. 80,649
-----------
1,823,795
------------------------------------------------------------------------------------------------------------------------
Machine Tools--0.1% 9,392 Lincoln Electric Holdings, Inc. 232,358
------------------------------------------------------------------------------------------------------------------------
Machinery & Engineering--0.0% 6,707 Applied Industrial Technologies, Inc. 160,029
------------------------------------------------------------------------------------------------------------------------
Machinery--Agricultural--0.0% 500 Alamo Group Inc. 7,630
3,613 Lindsay Manufacturing Co. 91,228
-----------
98,858
------------------------------------------------------------------------------------------------------------------------
Machinery--Construction & 4,717 + Astec Industries, Inc. 57,878
Handling--0.3% 9,511 The Manitowoc Co., Inc. 296,743
1,387 NACCO Industries, Inc. (Class A) 124,109
9,424 Stewart & Stevenson Services, Inc. 132,407
13,343 + Terex Corporation 380,009
-----------
991,146
------------------------------------------------------------------------------------------------------------------------
Machinery--Engines--0.1% 7,459 Briggs & Stratton Corporation 502,737
------------------------------------------------------------------------------------------------------------------------
Machinery--Industrial/ 7,800 + Actuant Corporation (Class A) 282,360
Specialty--0.8% 4,300 + EnPro Industries, Inc. 59,985
8,957 + Gardner Denver Inc. 213,804
16,900 Joy Global Inc. 441,935
2,770 + Kadant Inc. 59,970
11,503 Kennametal Inc. 457,244
10,672 Milacron Inc. 44,502
9,210 Nordson Corporation 318,021
5,928 Tecumseh Products Company (Class A) 287,093
2,637 Tennant Company 114,182
2,999 Thomas Industries Inc. 103,945
2,793 Woodward Governor Company 158,726
-----------
2,541,767
------------------------------------------------------------------------------------------------------------------------
Machinery--Oil Well Equipment & 4,068 CARBO Ceramics Inc. 208,485
Service--0.7% 12,837 + Cal Dive International, Inc. 309,500
1,688 + Dril-Quip, Inc. 27,514
24,300 + Global Industries, Ltd. 125,145
4,217 + Gulf Island Fabrication, Inc. 71,816
14,300 + Hanover Compressor Company 159,445
10,685 + Horizon Offshore, Inc. 47,014
4,300 + Hydril Company 102,899
13,646 + Input/Output, Inc. 61,543
2,600 Lufkin Industries, Inc. 74,854
22,420 + Newpark Resources, Inc. 107,392
7,004 + Oceaneering International, Inc. 196,112
5,700 + Oil States International, Inc. 79,458
29,181 + Parker Drilling Company 74,412
3,200 RPC, Inc. 35,168
5,208 + SEACOR SMIT Inc. 218,892
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 37
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Machinery--Oil Well Equipment & 12,305 + Superior Energy Services, Inc. $ 115,667
Service (concluded) 4,726 + Universal Compression Holdings, Inc. 123,632
10,457 + W-H Energy Services, Inc. 169,403
-----------
2,308,351
------------------------------------------------------------------------------------------------------------------------
Machinery--Specialty--0.3% 4,200 + Applied Films Corporation 138,684
1,900 Cascade Corporation 42,370
6,225 Engineered Support Systems, Inc. 342,748
9,461 Helix Technology Corporation 194,707
12,498 JLG Industries, Inc. 190,345
3,441 + Semitool, Inc. 36,891
-----------
945,745
------------------------------------------------------------------------------------------------------------------------
Manufactured Housing--0.1% 16,227 + Champion Enterprises, Inc. 113,589
4,105 + Palm Harbor Homes, Inc. 73,356
1,501 Skyline Corporation 52,340
-----------
239,285
------------------------------------------------------------------------------------------------------------------------
Manufacturing--0.2% 17,359 Federal Signal Corporation 304,130
12,064 + Rayovac Corporation 252,741
3,331 Standex International Corporation 93,268
-----------
650,139
------------------------------------------------------------------------------------------------------------------------
Medical & Dental Instruments & 4,000 + ALARIS Medical, Inc. 60,840
Supplies--3.3% 8,200 + Advanced Medical Optics, Inc. 161,130
7,550 + Advanced Neuromodulation Systems, Inc. 347,149
13,300 + Align Technology, Inc. 219,716
6,500 + American Medical Systems Holdings, Inc. 141,700
6,008 Arrow International, Inc. 150,080
6,600 + BioLase Technology, Inc. 109,560
4,049 + Biosite Diagnostics Incorporated 117,219
12,028 + CONMED Corporation 286,266
900 + Cantel Medical Corp. 14,571
16,200 + Cardiac Science, Inc. 64,638
10,900 + Cepheid, Inc. 104,422
5,825 + Cerus Corporation 26,445
2,900 + Cholestech Corporation 22,127
2,713 + Closure Medical Corporation 92,052
6,800 + Conceptus, Inc. 72,216
9,384 + Cooper Companies, Inc. 442,268
6,028 + CryoLife, Inc. 34,842
7,069 + Cyberonics, Inc. 226,279
37,600 + Cytyc Corporation 517,376
1,500 + DJ Orthopedics Incorporated 40,200
14,700 + Dade Behring Holdings Inc. 525,378
6,400 Diagnostic Products Corporation 293,824
1,500 + Exactech, Inc. 22,125
16,900 + Gen-Probe Incorporated 616,343
4,150 + ICU Medical, Inc. 142,262
6,176 + IGEN International, Inc. 363,828
9,040 + INAMED Corporation 434,462
6,750 + Immucor, Inc. 137,632
8,122 Invacare Corp. 327,885
3,740 + Inverness Medical Innovations, Inc. 81,457
5,500 + Kyphon Inc. 136,565
1,978 Landauer, Inc. 80,663
5,000 + Laserscope 77,950
3,600 + Medical Action Industries Inc. 67,356
14,144 Mentor Corporation 340,305
4,600 Meridian Bioscience, Inc. 47,978
8,310 + Merit Medical Systems, Inc. 184,981
4,437 + Molecular Devices Corporation 84,259
3,000 + Novoste Corporation 14,370
38 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Medical & Dental Instruments & 5,914 + Ocular Sciences, Inc. $ 169,791
Supplies (concluded) 9,459 + OraSure Technologies, Inc. 75,294
13,600 + OrthoLogic Corp. 83,368
7,000 + Osteotech, Inc. 61,600
11,998 Owens & Minor, Inc. 262,876
25,973 + PSS World Medical, Inc. 313,494
5,114 PolyMedica Corporation 134,549
500 + Retractable Technologies, Inc. 3,010
7,500 + STAAR Surgical Company 84,450
12,700 + Sola International Inc. 238,760
4,915 + SonoSite, Inc. 105,378
5,363 + SurModics, Inc. 128,176
15,500 + Sybron Dental Specialties, Inc. 435,550
4,000 + Synovis Life Technologies, Inc. 81,360
12,829 + Techne Corporation 484,680
6,932 + Theragenics Corporation 37,918
7,200 + Therasense, Inc. 146,160
14,847 + Thoratec Laboratories Corporation 193,159
3,080 + Ventana Medical Systems, Inc. 121,352
8,500 + Viasys Healthcare Inc. 175,100
2,424 Vital Signs, Inc. 79,265
3,638 West Pharmaceutical Services, Inc. 123,328
5,000 + Wright Medical Group, Inc. 152,200
600 Young Innovations, Inc. 21,600
-----------
10,943,137
------------------------------------------------------------------------------------------------------------------------
Medical Services--0.4% 19,291 + Covance Inc. 516,999
5,100 + Curative Health Services, Inc. 70,380
100 + Deltagen, Inc. 2
4,800 + Hanger Orthopedic Group, Inc. 74,736
5,181 + Option Care, Inc. 55,333
8,097 + PAREXEL International Corporation 131,657
5,795 + RehabCare Group, Inc. 123,202
3,750 + U.S. Physical Therapy, Inc. 58,988
8,800 + VCA Antech, Inc. 272,624
-----------
1,303,921
------------------------------------------------------------------------------------------------------------------------
Metal Fabricating--0.6% 2,400 CIRCOR International, Inc. 57,840
7,778 Commercial Metals Company 236,451
2,600 + Encore Wire Corporation 46,046
9,226 Kaydon Corp. 238,400
7,958 + Lone Star Technology 127,169
4,000 Material Sciences Corporation 40,440
12,363 + Maverick Tube Corporation 237,988
5,065 NN, Inc. 63,768
4,055 + NS Group, Inc. 39,334
2,456 Penn Engineering & Manufacturing Corp. 46,738
15 Precision Castparts Corp. 681
5,005 Quanex Corporation 230,731
4,813 + RTI International Metals, Inc. 81,195
7,047 Reliance Steel & Aluminum Co. 234,031
5,093 Ryerson Tull, Inc. 58,315
17,500 + The Shaw Group Inc. 238,350
3,658 Valmont Industries, Inc. 84,683
-----------
2,062,160
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 39
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Metals & Minerals-- 7,673 AMCOL International Corporation $ 155,762
Miscellaneous--0.5% 5,711 + Brush Engineered Materials Inc. 87,435
3,659 + Cleveland-Cliffs Inc. 186,426
25,644 + GrafTech International Ltd. 346,194
37,300 + Hecla Mining Company 309,217
13,600 + Liquidmetal Technologies 38,624
6,853 Minerals Technologies, Inc. 406,040
9,864 + Stillwater Mining Company 94,398
19,886 + SureBeam Corporation (Class A) 4,773
-----------
1,628,869
------------------------------------------------------------------------------------------------------------------------
Milling--Fruit & 11,289 Corn Products International, Inc. 388,906
Grain Processing--0.1%
------------------------------------------------------------------------------------------------------------------------
Miscellaneous Health Care--0.1% 8,800 + NeighborCare, Inc. 173,800
------------------------------------------------------------------------------------------------------------------------
Miscellaneous Materials & 2,900 + Ceradyne, Inc. 98,774
Commodities--0.2% 3,000 + Lydall, Inc. 30,570
7,279 + Symyx Technologies 149,583
37,759 USEC Inc. 317,176
5,689 WD-40 Company 201,163
-----------
797,266
------------------------------------------------------------------------------------------------------------------------
Miscellaneous Materials & 8,738 + Insituform Technologies, Inc. (Class A) 144,177
Processing--0.1% 4,555 + Rogers Corporation 200,967
-----------
345,144
------------------------------------------------------------------------------------------------------------------------
Multi-Sector Companies--0.4% 10,300 + FMC Corporation 351,539
9,771 GenCorp Inc. 105,234
24,450 + Jacuzzi Brands, Inc. 173,351
6,794 Kaman Corp. (Class A) 86,488
2,900 Raven Industries, Inc. 85,550
1,165 + Sequa Corporation (Class A) 57,085
11,050 Trinity Industries, Inc. 340,782
1,800 United Capital Corp. 37,296
7,402 Walter Industries, Inc. 98,817
-----------
1,336,142
------------------------------------------------------------------------------------------------------------------------
Office Furniture & Business 900 + General Binding Corporation 16,200
Equipment--0.1% 4,924 + Imagistics International Inc. 184,650
7,974 Kimball International (Class B) 123,996
11,340 + Presstek, Inc. 82,442
-----------
407,288
------------------------------------------------------------------------------------------------------------------------
Offshore Drilling--0.0% 3,827 + Atwood Oceanics, Inc. 122,234
------------------------------------------------------------------------------------------------------------------------
Oil--Crude Producers--2.0% 3,701 Berry Petroleum Company (Class A) 74,945
7,974 Cabot Oil & Gas Corporation (Class A) 234,037
13,100 + Cimarex Energy Co. 349,639
1,900 + Clayton Williams Energy, Inc. 55,233
10,057 + Comstock Resources, Inc. 194,100
13,470 + Denbury Resources Inc. 187,368
4,400 + Encore Acquisition Company 108,460
9,300 + Energy Partners, Ltd. 129,270
11,392 + Evergreen Resources, Inc. 370,354
13,200 + Forest Oil Corporation 377,124
8,715 Frontier Oil Corporation 150,072
62,943 + Grey Wolf, Inc. 235,407
15,000 + Harvest Natural Resources, Inc. 149,250
3,383 + The Houston Exploration Company 123,547
20,772 + Magnum Hunter Resources, Inc. 197,542
5,000 + McMoRan Exploration Co. 93,750
13,311 + The Meridian Resource Corporation 79,067
6,411 + Nuevo Energy Company 154,954
10,357 Patina Oil & Gas Corporation 507,389
40 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Oil--Crude Producers 7,000 + Petroleum Development Corporation $ 165,900
(concluded) 10,687 + Plains Exploration & Production Company 164,473
8,450 + Plains Resources Inc. 135,623
2,843 + Prima Energy Corporation 99,960
6,010 + Quicksilver Resources Inc. 194,123
20,637 Range Resources Corporation 195,020
6,920 + Remington Oil & Gas Corporation 136,255
4,349 Resource America, Inc. (Class A) 65,235
8,926 St. Mary Land & Exploration Company 254,391
11,387 + Spinnaker Exploration Company 367,458
8,178 + Stone Energy Corporation 347,156
8,117 + Swift Energy Company 136,771
12,915 + Tom Brown, Inc. 416,509
11,408 + Unit Corporation 268,658
15,183 Vintage Petroleum, Inc. 182,651
-----------
6,901,691
------------------------------------------------------------------------------------------------------------------------
Oil--Integrated Domestic--0.0% 9,200 + KCS Energy, Inc. 97,060
------------------------------------------------------------------------------------------------------------------------
Oil--Integrated International--0.0% 500 + PetroCorp Incorporated 6,730
------------------------------------------------------------------------------------------------------------------------
Paints & Coatings--0.2% 12,776 Ferro Corporation 347,635
8,940 H.B. Fuller Company 265,876
1,217 + Kronos Worldwide, Inc. 27,017
-----------
640,528
------------------------------------------------------------------------------------------------------------------------
Paper--0.3% 7,326 Albany International Corp. (Class A) 248,351
6,998 + Buckeye Technologies Inc. 70,330
10,974 + Caraustar Industries, Inc. 151,441
4,192 Chesapeake Corporation 111,004
7,801 P.H. Glatfelter Company 97,122
5,880 Rock-Tenn Company (Class A) 101,489
11,442 Wausau-Mosinee Paper Corporation 154,696
-----------
934,433
------------------------------------------------------------------------------------------------------------------------
Photography--0.0% 3,698 CPI Corp. 74,737
9,274 + Concord Camera Corp. 85,785
-----------
160,521
------------------------------------------------------------------------------------------------------------------------
Plastics--0.1% 5,247 Brady Corporation 213,815
5,854 Spartech Corporation 144,243
-----------
358,058
------------------------------------------------------------------------------------------------------------------------
Pollution Control & 2,100 BHA Group Holdings, Inc. 52,815
Environmental Services--0.2% 13,600 + Darling International Inc. 37,536
300 + Duratek, Inc. 3,912
1,000 + Gundle/SLT Environmental, Inc. 20,760
9,546 + Headwaters Incorporated 187,293
6,567 + Ionics, Inc. 209,159
2,500 + TRC Companies, Inc. 52,650
-----------
564,125
------------------------------------------------------------------------------------------------------------------------
Power Transmission Equipment--0.1% 7,251 Regal-Beloit Corporation 159,522
2,611 Woodhead Industries, Inc. 44,126
-----------
203,648
------------------------------------------------------------------------------------------------------------------------
Printing & Copying Services--0.1% 10,482 Bowne & Co., Inc. 142,136
8,960 + Mail-Well, Inc. 41,306
2,300 Schawk, Inc. 31,349
-----------
214,791
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 41
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Production Technology 11,357 + ATMI, Inc. $ 262,801
Equipment--1.6% 37,900 + Axcelis Technologies, Inc. 387,338
11,188 + Brooks Automation, Inc. 270,414
10,656 Cognex Corporation 300,925
19,168 + Credence Systems Corporation 252,251
11,700 + Cymer, Inc. 540,423
5,531 + Dionex Corporation 254,537
4,808 + DuPont Photomasks, Inc. 116,065
8,761 + Electro Scientific Industries, Inc. 208,512
14,900 + Entegris Inc. 191,465
5,290 + Esterline Technologies Corporation 141,084
8,655 + FEI Company 194,737
17,156 + Kulicke and Soffa Industries 246,703
17,203 + LTX Corporation 258,561
7,500 MTS Systems Corporation 144,225
7,899 + Mattson Technology, Inc. 96,526
11,000 + Mykrolis Corporation 176,880
5,062 + Photon Dynamics, Inc. 203,695
8,979 + Photronics, Inc. 178,862
4,300 + Rofin-Sinar Technologies, Inc. 148,608
4,173 + Rudolph Technologies, Inc. 102,405
7,290 + Ultratech Stepper, Inc. 214,107
8,942 + Varian Semiconductor Equipment Associates, Inc. 390,676
-----------
5,281,800
------------------------------------------------------------------------------------------------------------------------
Publishing--Miscellaneous--0.3% 4,381 Advanced Marketing Services, Inc. 49,943
8,394 Banta Corporation 339,957
1,000 + Cross Media Marketing Corporation 1
2,600 + Consolidated Graphics, Inc. 82,108
1,200 Courier Corporation 46,165
4,818 + Information Holdings Inc. 106,478
5,182 + Martha Stewart Living Omnimedia, Inc. (Class A) 51,043
4,300 Thomas Nelson, Inc. 83,119
40,200 + PRIMEDIA Inc. 113,766
3,707 + Playboy Enterprises, Inc. 59,905
-----------
932,485
------------------------------------------------------------------------------------------------------------------------
Publishing--Newspapers--0.2% 19,729 Hollinger International Inc. 308,167
9,233 + Journal Register Co. 191,123
1,855 Pulitzer Inc. 100,170
-----------
599,460
------------------------------------------------------------------------------------------------------------------------
Radio & TV Broadcasters--0.6% 1,200 + Acme Communications, Inc. 10,548
2,733 + Beasley Broadcast Group, Inc. (Class A) 44,903
15,300 + Cumulus Media Inc. (Class A) 336,600
3,600 + Digital Generation Systems, Inc. 8,064
14,000 + Emmis Communications Corporation (Class A) 378,700
1,100 + Fisher Communications, Inc. 56,100
10,300 Gray Television, Inc. 155,736
4,554 The Liberty Corporation 205,795
7,200 + Lin TV Corp. (Class A) 185,832
9,368 + Paxson Communications Corporation 36,067
1,300 + Pegasus Communications Corporation 36,504
7,771 + Regent Communications, Inc. 49,346
8,033 + Saga Communications, Inc. (Class A) 148,851
2,683 + Salem Communications Corporation (Class A) 72,763
12,464 + Sinclair Broadcast Group, Inc. (Class A) 185,963
11,184 + Spanish Broadcasting System, Inc. (Class A) 117,432
6,300 + Shop At Home, Inc. 24,696
2,568 World Wrestling Federation Entertainment, Inc. 33,641
4,408 + Young Broadcasting Inc. (Class A) 88,336
-----------
2,175,877
42 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Railroad Equipment--0.1% 500 + The Greenbrier Companies, Inc. $ 8,375
12,139 Wabtec Corporation 206,849
-----------
215,224
------------------------------------------------------------------------------------------------------------------------
Railroads--0.2% 5,181 Florida East Coast Industries, Inc. 171,491
2,600 + Genesee & Wyoming Inc. (Class A) 81,900
19,476 + Kansas City Southern Industries, Inc. 278,896
7,802 + RailAmerica, Inc. 92,064
-----------
624,351
------------------------------------------------------------------------------------------------------------------------
Real Estate--0.2% 2,800 Brookfield Homes Corporation 72,156
2,100 Consolidated-Tomoka Land Co. 68,670
9,608 + Jones Lang Lasalle Inc. 199,174
900 + Reading International, Inc. (Class A) 5,328
200 + Tarragon Realty Investors Inc. 3,302
1,315 + Tejon Ranch Co. 53,928
7,178 + Trammell Crow Company 95,109
5,800 + WCI Communities, Inc. 119,538
-----------
617,205
------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts--5.1% 6,601 Acadia Realty Trust 82,512
367 + Alexander's, Inc. 45,750
6,656 Alexandria Real Estate Equities, Inc. 385,382
7,597 American Home Mortgage Investment Corp. 171,008
2,800 American Land Lease, Inc. 55,860
3,600 American Mortgage Acceptance Company 58,680
6,440 Amli Residential Properties Trust 172,592
14,600 Anthracite Capital, Inc. 161,622
14,200 Anworth Mortgage Asset Corporation 197,806
9,800 Associated Estates Realty Corporation 71,638
1,300 + Avatar Holdings Inc. 48,022
6,599 Bedford Property Investors, Inc. 188,929
7,832 Boykin Lodging Company 71,663
11,247 Brandywine Realty Trust 301,082
4,900 + CRIIMI MAE, Inc. 51,107
8,950 + Capital Automotive 286,400
5,400 Capstead Mortgage Corporation 90,612
5,406 Colonial Properties Trust 214,078
11,575 Commercial Net Lease Realty 206,035
16,903 Cornerstone Realty Income Trust, Inc. 148,070
8,600 Corporate Office Properties Trust 180,600
3,300 Correctional Properties Trust 95,040
8,327 EastGroup Properties, Inc. 269,628
5,580 Entertainment Properties Trust 193,682
12,740 Equity Inns Inc. 115,297
7,400 Equity One, Inc. 124,912
6,395 Essex Property Trust, Inc. 410,687
16,970 FelCor Lodging Trust Inc. 188,028
13,700 First Industrial Realty Trust, Inc. 462,375
9,282 Gables Residential Trust 322,457
5,400 Getty Realty Corporation 141,210
7,239 Glenborough Realty Trust Incorporated 144,418
9,856 Glimcher Realty Trust 220,577
8,427 Great Lakes REIT, Inc. 132,304
16,869 Health Care REIT, Inc. 607,284
4,600 Heritage Property Investment Trust 130,870
16,000 Highwoods Properties, Inc. 406,400
12,120 Home Properties of New York, Inc. 489,527
15,500 Impac Mortgage Holdings, Inc. 282,255
7,692 Innkeepers USA Trust 64,382
8,400 Investors Real Estate Trust 83,160
10,004 Keystone Property Trust 220,988
7,278 Kilroy Realty Corporation 238,355
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 43
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Real Estate Investment Trusts 5,948 Koger Equity, Inc. $ 124,492
(concluded) 5,300 Kramont Realty Trust 95,930
3,700 LTC Properties 54,538
38,800 + La Quinta Corporation 248,708
9,820 LaSalle Hotel Properties 182,161
15,342 Lexington Corporate Properties Trust 309,755
16,000 MFA Mortgage Investments, Inc. 156,000
5,294 Manufactured Home Communities, Inc. 199,319
15,258 + Meristar Hospitality Corp. 99,330
4,229 Mid-America Apartment Communities, Inc. 142,010
4,200 Mission West Properties Inc. 54,390
8,429 National Health Investors, Inc. 209,714
1,800 National Health Realty, Inc. 35,460
20,659 Nationwide Health Properties, Inc. 403,883
7,300 Newcastle Investment Corporation 197,830
8,600 Novastar Financial, Inc. 369,456
2,200 OMEGA Healthcare Investors, Inc. 20,526
3,208 PS Business Parks, Inc. 132,362
5,304 Parkway Properties, Inc. 220,646
10,232 Pennsylvania Real Estate Investment Trust 371,422
11,186 Post Properties, Inc. 312,313
9,950 Prentiss Properties Trust 328,251
6,100 + Price Legacy Corporation 23,241
9,300 RAIT Investment Trust 238,080
4,700 Ramco-Gershenson Properties Trust 133,010
17,600 Reckson Associates Realty Corporation 427,680
4,595 Redwood Trust, Inc. 233,656
13,632 SL Green Realty Corp. 559,594
2,422 Saul Centers, Inc. 69,439
12,814 Senior Housing Properties Trust 220,785
5,600 Sizeler Property Investors, Inc. 59,976
3,904 Sovran Self Storage, Inc. 145,034
7,719 Summit Properties Inc. 185,410
5,243 Sun Communities, Inc. 202,904
1,861 Tanger Factory Outlet Centers, Inc. 75,743
12,708 Taubman Centers, Inc. 261,785
4,063 Town & Country Trust 102,997
9,200 U.S. Restaurant Properties, Inc. 156,768
300 United Mobile Homes, Inc. 5,103
2,427 Universal Health Realty Income Trust 73,053
5,500 Urstadt Biddle Properties (Class A) 77,825
23,405 Ventas, Inc. 514,910
11,565 Washington Real Estate Investment Trust 337,698
5,455 Winston Hotels, Inc. 55,641
-----------
16,962,112
------------------------------------------------------------------------------------------------------------------------
Recreational Vehicles & 5,643 Arctic Cat Inc. 139,382
Boats--0.3% 3,107 Coachmen Industries, Inc. 56,268
11,699 + Fleetwood Enterprises, Inc. 120,032
500 Marine Products Corp. 9,400
7,924 + Monaco Coach Corporation 188,591
5,442 Thor Industries, Inc. 305,949
3,595 Winnebago Industries, Inc. 247,156
-----------
1,066,778
------------------------------------------------------------------------------------------------------------------------
Rental & Leasing Services-- 3,353 + Electro Rent Corporation 44,729
Commercial--0.3% 16,600 GATX Corporation 464,468
2,105 McGrath Rentcorp 57,361
20,300 + United Rentals, Inc. 390,978
-----------
957,536
44 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Rental & Leasing Services-- 7,462 Aaron Rents, Inc. $ 150,210
Consumer--0.1% 7,195 + Dollar Thrifty Automotive Group, Inc. 186,638
12,478 + Rent-Way, Inc. 102,195
4,258 + WESCO International, Inc. 37,683
-----------
476,726
------------------------------------------------------------------------------------------------------------------------
Restaurants--1.2% 11,080 Bob Evans Farms, Inc. 359,657
6,900 + CEC Entertainment Inc. 326,991
12,900 + CKE Restaurants, Inc. 82,431
7,000 + California Pizza Kitchen, Inc. 140,910
4,200 + Chicago Pizza & Brewery, Inc. 62,664
2,000 + Dave & Buster's, Inc. 25,360
5,348 IHOP Corp. 205,791
9,518 + Jack in the Box Inc. 203,304
6,696 Landry's Restaurants, Inc. 172,221
7,154 Lone Star Steakhouse & Saloon, Inc. 165,830
8,084 + O'Charley's Inc. 145,108
9,208 + P.F. Chang's China Bistro, Inc. 468,503
9,700 + Panera Bread Company (Class A) 383,441
4,748 + Papa John's International, Inc. 158,488
10,877 + RARE Hospitality International, Inc. 265,834
3,600 + Red Robin Gourmet Burgers 109,584
13,300 + Ryan's Family Steak Houses, Inc. 201,362
14,576 + Sonic Corp. 446,317
5,428 + The Steak `n Shake Company 96,890
10,450 Triarc Companies, Inc. (Class B) 112,651
-----------
4,133,337
------------------------------------------------------------------------------------------------------------------------
Retail--4.2% 1,600 + 1-800 CONTACTS, INC. 33,600
7,824 + 1-800-FLOWERS.COM, Inc. 86,533
4,000 + A.C. Moore Arts & Crafts, Inc. 77,040
7,900 + Aeropostale, Inc. 216,618
17,900 + American Eagle Outfitters, Inc. 293,560
2,100 + America's Car-Mart, Inc. 56,532
14,541 + AnnTaylor Stores Corporation 567,099
2,300 + Asbury Automotive Group Inc. 41,193
22,700 + BJ's Wholesale Club, Inc. 521,192
2,240 + bebe stores, inc. 58,218
5,300 + Big 5 Sporting Goods Corporation 111,035
1,700 Blair Corporation 41,378
5,300 + Blue Rhino Corporation 73,617
5,100 + Brookstone, Inc. 108,681
5,579 Brown Shoe Company, Inc. 211,611
1,249 The Buckle, Inc. 27,665
5,592 Burlington Coat Factory Warehouse Corporation 118,327
10,434 + CSK Auto Corporation 195,846
12,200 + Casual Male Retail Group, Inc. 84,668
5,197 The Cato Corporation (Class A) 106,538
4,800 + Central Garden & Pet Company 134,544
5,000 + Charlotte Russe Holding Inc. 69,300
33,040 + Charming Shoppes, Inc. 178,416
4,485 + The Children's Place Retail Stores, Inc. 119,884
10,928 Christopher & Banks Corporation 213,424
2,020 + Coldwater Creek Inc. 22,220
3,100 + Cole National Corporation (Class A) 62,000
7,476 + Cost Plus, Inc. 306,516
500 Deb Shops, Inc. 10,750
4,500 + Dick's Sporting Goods, Inc. 218,970
21,700 Dillard's, Inc. (Class A) 357,182
5,945 + The Dress Barn, Inc. 89,116
9,700 + Drugstore.com, Inc. 53,447
5,131 + Electronics Boutique Holdings Corp. 117,449
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 45
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Retail 800 + Finlay Enterprises, Inc. $ 11,304
(concluded) 14,235 Fred's, Inc. 441,000
11,769 + FreeMarkets, Inc. 78,735
4,800 + GSI Commerce, Inc. 46,853
3,600 + Galyan's Trading Company 43,344
8,000 + GameStop Corporation 123,280
8,338 + Genesco Inc. 126,154
3,300 + GenesisIntermedia, Inc. 0
5,300 + Global Imaging Systems, Inc. 168,275
7,100 Goody's Family Clothing, Inc. 66,456
5,032 + Group 1 Automotive, Inc. 182,108
5,139 + Guitar Center, Inc. 167,429
8,858 + The Gymboree Corporation 152,623
6,500 Hancock Fabrics, Inc. 94,120
7,561 Handleman Company 155,227
4,200 + Hibbett Sporting Goods, Inc. 125,160
14,381 + Hot Topic, Inc. 423,664
13,898 + Insight Enterprises, Inc. 261,282
6,779 + InterTAN, Inc. 68,603
5,662 + J. Jill Group Inc. 71,964
5,405 + Jo-Ann Stores, Inc. 110,262
2,100 + Jos. A. Bank Clothiers, Inc. 72,849
1,547 Lawson Products, Inc. 51,329
16,518 + Linens `n Things, Inc. 496,861
3,200 Lithia Motors, Inc. 80,672
1,000 + MarineMax, Inc. 19,430
10,361 + The Men's Wearhouse, Inc. 259,129
2,100 + Mothers Work, Inc. 51,240
4,000 + Overstock.com, Inc. 79,440
1,059 + PC Connection, Inc. 8,864
10,800 + PETCO Animal Supplies, Inc. 328,860
23,928 + Pacific Sunwear of California, Inc. 505,359
2,500 + The Pantry, Inc. 56,750
2,900 + Party City Corporation 36,801
20,000 + Payless ShoeSource, Inc. 268,000
7,516 + Priceline.com Incorporated 134,536
6,000 + Restoration Hardware, Inc. 28,500
2,847 Russ Berrie and Company, Inc. 96,513
6,054 + School Specialty, Inc. 205,897
3,600 + Sharper Image Corporation 117,540
8,898 + ShopKo Stores, Inc. 135,695
7,900 Sonic Automotive, Inc. 181,068
5,926 + The Sports Authority, Inc. 227,558
5,700 + Stage Stores, Inc. 159,030
11,407 + Stamps.com Inc. 70,723
5,824 + Stein Mart, Inc. 47,990
14,666 + Too Inc. 247,562
10,000 + Tractor Supply Company 388,900
5,030 + Trans World Entertainment Corporation 35,814
5,190 + Tuesday Morning Corporation 156,998
10,530 + Tweeter Home Entertainment Group, Inc. 99,509
4,219 + Ultimate Electronics, Inc. 32,191
4,131 United Auto Group, Inc. 129,300
6,890 + United Natural Foods, Inc. 247,420
9,200 + Urban Outfitters, Inc. 340,860
5,856 + ValueVision International, Inc. (Class A) 97,795
7,075 + The Wet Seal, Inc. (Class A) 69,972
3,400 + Whitehall Jewelers, Inc. 33,558
5,199 + Wilsons The Leather Experts Inc. 18,145
8,300 + Zale Corporation 441,560
-----------
13,962,230
46 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Savings & Loan--2.9% 6,537 Anchor Bancorp, Inc. $ 162,771
3,241 BSB Bancorp, Inc. 128,019
14,738 Bank Mutual Corporation 167,866
17,442 BankAtlantic Bancorp, Inc. (Class A) 331,398
9,573 + BankUnited Financial Corporation (Class A) 246,888
19,714 Bay View Capital Corporation 42,188
2,400 Berkshire Hills Bancorp, Inc. 86,880
20,787 Brookline Bancorp, Inc. 318,873
3,000 CFS Bancorp, Inc. 44,520
2,600 Camco Financial Corporation 45,058
500 Charter Financial Corporation 18,635
1,800 Citizens First Bancorp, Inc. 41,040
4,300 Citizens South Banking Corporation 59,985
1,232 Coastal Bancorp, Inc. 50,648
3,213 Coastal Financial Corporation 56,677
4,000 + Commercial Capital Bancorp, Inc. 85,640
13,127 Commercial Federal Corporation 350,622
4,100 Connecticut Bancshares, Inc. 211,314
5,266 Dime Community Bancshares 161,982
600 ESB Financial Corporation 9,834
2,400 EverTrust Financial Group Inc. 76,416
400 FFLC Bancorp, Inc. 11,500
400 FMS Financial Corporation 7,200
4,148 Fidelity Bankshares, Inc 130,247
1,600 First Defiance Financial Corp. 42,640
5,212 First Federal Capital Corp. 117,374
300 First Federal Financial Corporation of Kentucky 7,545
4,026 First Financial Holdings, Inc. 125,853
3,388 First Indiana Corporation 63,525
25,118 First Niagara Financial Group, Inc. 374,509
2,900 First Place Financial Corp. 56,637
4,200 First Republic Bank 150,360
5,967 First Sentinel Bancorp Inc. 125,665
6,000 FirstFed America Bancorp, Inc. 156,180
4,800 + FirstFed Financial Corp. 208,800
9,550 Flagstar Bancorp, Inc. 204,561
1,400 FloridaFirst Bancorp, Inc. 46,340
5,775 Flushing Financial Corporation 105,567
2,100 GA Financial, Inc. 72,933
1,539 Great Southern Bancorp, Inc. 71,363
6,817 Harbor Florida Bancshares, Inc. 202,533
2,400 + Hawthorne Financial Corporation 67,152
600 Heritage Financial Corporation 13,128
4,600 Horizon Financial Corp. 80,546
4,000 Hudson River Bancorp, Inc. 156,120
2,700 IBERIABANK Corporation 159,300
1,400 + ITLA Capital Corporation 70,140
3,100 Klamath First Bancorp, Inc. 82,274
6,630 + Local Financial Corp. 138,169
11,060 MAF Bancorp, Inc. 463,414
2,300 MutualFirst Financial Inc. 58,282
300 NASB Financial Inc. 12,393
15,411 Net.B@nk, Inc. 205,737
3,467 Northwest Bancorp, Inc. 74,055
2,796 OceanFirst Financial Corp. 75,939
7,965 + Ocwen Financial Corporation 70,570
4,541 PFF Bancorp, Inc. 164,747
1,300 Parkvale Financial Corporation 34,905
900 Partners Trust Financial Group, Inc. 30,600
1,900 PennFed Financial Services, Inc. 63,650
900 Provident Bancorp, Inc. 42,300
700 Provident Financial Holdings, Inc. 25,389
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 47
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Savings & Loan 16,700 Provident Financial Services, Inc. $ 315,630
(concluded) 1,600 Quaker City Bancorp, Inc. 74,480
9,602 Seacoast Financial Services Corporation 263,191
2,300 Sound Federal Bancorp, Inc. 35,857
20,184 Staten Island Bancorp, Inc. 454,140
4,640 + Sterling Financial Corporation 158,827
8,500 + TierOne Corporation 195,160
9,273 United Community Financial Corp. 105,805
26,809 W Holding Company, Inc. 498,912
1,600 Warwick Community Bancorp, Inc. 55,040
11,230 Waypoint Financial Corp. 243,579
7,836 Westcorp 286,406
400 Westfield Financial, Inc. 9,504
4,600 Willow Grove Bankcorp, Inc. 81,696
-----------
9,845,623
------------------------------------------------------------------------------------------------------------------------
Scientific Equipment & 14,035 + Newport Corporation 231,999
Suppliers--0.2% 10,135 + Varian Inc. 422,934
-----------
654,933
------------------------------------------------------------------------------------------------------------------------
Securities Brokerage & 14,845 Charter Municipal Mortgage Acceptance Company 313,675
Services--0.4% 3,600 First Albany Companies Inc. 50,544
14,900 + Investment Technology Group, Inc. 240,635
24,700 + Knight Trading Group, Inc. 361,608
8,361 + NCO Group, Inc. 190,380
4,304 SWS Group, Inc. 76,611
6,328 + SoundView Technology Group, Inc. 98,021
-----------
1,331,474
------------------------------------------------------------------------------------------------------------------------
Services--Commercial--2.9% 4,863 + 4Kids Entertainment, Inc. 126,535
11,670 ABM Industries, Inc. 203,175
3,805 + AMN Healthcare Services, Inc. 65,294
7,738 + APAC Customer Services Inc. 20,119
6,661 + Administaff, Inc. 115,768
3,700 + The Advisory Board Company 129,167
600 Ambassadors Group, Inc. 14,094
200 Ambassadors International, Inc. 2,500
4,400 Angelica Corporation 96,800
10,400 + autobytel.com inc. 94,432
16,200 The Brink's Company 366,282
6,201 CDI Corp. 203,083
3,978 + Casella Waste Systems, Inc. 54,459
5,285 Central Parking Corporation 78,905
19,533 + Century Business Services, Inc. 87,313
2,800 + Charles River Associates Incorporated 89,572
5,600 + Clark, Inc. 107,744
3,600 + Clean Harbors, Inc. 32,076
8,092 + Coinstar, Inc. 146,142
19,900 + Copart, Inc. 328,350
5,800 + Cornell Companies, Inc. 79,170
12,094 + Corrections Corporation of America 348,670
5,950 + CoStar Group Inc. 247,996
8,000 + Cross Country Healthcare, Inc. 119,360
10,500 + Exult Inc. 74,760
100 + FTD, Inc. (Class A) 2,464
12,341 + FTI Consulting, Inc. 288,409
4,874 + First Consulting Group, Inc. 27,441
4,181 + Forrester Research, Inc. 74,714
5,577 G & K Services, Inc. (Class A) 204,955
4,900 Gevity HR, Inc. 108,976
16,100 + Harris Interactive Inc. 133,630
6,058 + Heidrick & Struggles International, Inc. 132,064
3,600 + Hudson Highland Group, Inc. 85,860
48 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Services--Commercial 1,600 + ICT Group, Inc. $ 18,800
(concluded) 2,665 + Insurance Auto Auctions, Inc. 34,778
5,268 Kelly Services, Inc. (Class A) 150,349
9,868 + Korn/Ferry International 131,639
12,600 + Kroll Inc. 327,600
14,822 + Labor Ready, Inc. 194,168
9,691 + Lightbridge, Inc. 88,188
4,904 + MAXIMUS, Inc. 191,894
28,305 + MPS Group, Inc. 264,652
5,200 + Medical Staffing Network Holdings, Inc. 56,940
3,054 + MemberWorks Incorporated 82,977
14,892 + Metro One Telecommunications, Inc. 38,719
5,342 + Midas Group, Inc. 76,391
3,900 + Monro Muffler Brake, Inc. 78,039
13,623 + Navigant Consulting, Inc. 256,930
5,111 + Navigant International, Inc. 70,787
1,417 + NetRatings, Inc. 16,196
2,421 + PDI, Inc. 64,907
9,439 + Pegasus Systems, Inc. 98,826
14,410 The Pep Boys--Manny, Moe & Jack 329,557
4,948 + Pre-Paid Legal Services, Inc. 129,242
21,700 + Raindance Communications, Inc. 59,675
6,516 + Resources Connection, Inc. 177,952
3,915 + Right Management Consultants, Inc. 73,054
6,168 Rollins, Inc. 139,088
2,986 Roto-Rooter, Inc. 137,655
4,700 + SM&A 54,990
5,500 + The Source Information Management Company 58,410
18,329 + Spherion Corporation 179,441
2,640 StarTek, Inc. 107,686
13,089 + TeleTech Holdings, Inc. 147,906
15,831 + Tetra Tech, Inc. 393,559
1,600 UniFirst Corporation 37,936
1,559 + Volt Information Sciences, Inc. 35,233
2,700 + Wackenhut Corrections Corporation 61,560
10,012 + Waste Connections, Inc. 378,153
9,025 + Watson Wyatt & Company Holdings 217,954
13,413 + Wireless Facilities, Inc. 199,317
4,800 World Fuel Services Corporation 162,960
-----------
9,614,387
------------------------------------------------------------------------------------------------------------------------
Shipping--0.3% 13,092 Alexander & Baldwin, Inc. 441,069
4,100 + GulfMark Offshore, Inc. 57,400
5,730 + Kirby Corporation 199,862
600 Maritrans Inc. 10,026
5,598 Overseas Shipholding Group, Inc. 190,612
1,700 + Seabulk International, Inc. 13,804
-----------
912,773
------------------------------------------------------------------------------------------------------------------------
Shoes--0.3% 1,792 Kenneth Cole Productions, Inc. (Class A) 52,685
4,833 + The Finish Line, Inc. 144,845
8,896 K-Swiss Inc. (Class A) 214,038
5,000 + Maxwell Shoe Company Inc. (Class A) 84,850
1,200 + Shoe Carnival, Inc. 21,360
5,855 + Skechers U.S.A., Inc. (Class A) 47,718
4,412 + Steve Madden, Ltd. 90,005
11,635 The Stride Rite Corporation 132,406
7,183 + Vans, Inc. 81,958
150 Weyco Group, Inc. 5,047
12,572 Wolverine World Wide, Inc. 256,217
-----------
1,131,129
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 49
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Steel--0.4% 37,727 + AK Steel Holding Corporation $ 192,408
26,300 Allegheny Technologies Incorporated 347,686
6,326 Carpenter Technology Corporation 187,060
2,623 Gibraltar Steel Corporation 65,968
3,400 Schnitzer Steel Industries, Inc. (Class A) 205,700
13,697 + Steel Dynamics, Inc. 321,743
-----------
1,320,565
------------------------------------------------------------------------------------------------------------------------
Synthetic Fibers--0.0% 13,218 Wellman, Inc. 134,956
------------------------------------------------------------------------------------------------------------------------
Telecommunications 50,004 + Andrew Corporation 575,546
Equipment--0.7% 3,500 Applied Signal Technology, Inc. 80,535
18,000 + Arris Group Inc. 130,320
4,085 + Audiovox Corporation (Class A) 52,451
7,069 Belden Inc. 149,085
11,634 + C-COR.net Corp. 129,486
5,400 + MasTec, Inc. 79,974
300 + OmniSky Corporation 0
11,910 + Plantronics, Inc. 388,862
23,777 + Powerwave Technologies, Inc. 181,894
43,534 + Proxim Corporation (Class A) 72,702
8,700 + SBA Communications Corporation 32,886
6,080 SpectraLink Corporation 116,554
8,300 + SymmetriCom, Inc. 60,424
20,576 + Terayon Communication Systems, Inc. 92,592
4,241 + Tollgrade Communications, Inc. 74,345
7,900 + WilTel Communications Group, Inc. 0
-----------
2,217,656
------------------------------------------------------------------------------------------------------------------------
Textile Products--0.1% 8,900 + DHB Capital Group Inc. 62,300
13,421 + Interface, Inc. 74,218
13,672 + Unifi, Inc. 88,184
-----------
224,702
------------------------------------------------------------------------------------------------------------------------
Textiles Apparel 2,900 Cherokee Inc. 65,946
Manufacturers--0.5% 1,600 + Perry Ellis International, Inc. 41,248
1,185 + Guess?, Inc. 14,303
1,700 + Hampshire Group, Limited 53,329
9,282 Kellwood Co. 380,562
3,502 OshKosh B'Gosh, Inc. (Class A) 75,153
5,042 Oxford Industries, Inc. 170,823
7,754 Phillips-Van Heusen Corporation 137,556
15,950 + Quiksilver, Inc. 282,794
7,017 Russell Corporation 123,219
13,100 + Warnaco Group, Inc. 208,945
-----------
1,553,878
------------------------------------------------------------------------------------------------------------------------
Tires & Rubber--0.3% 6,074 Bandag, Incorporated 250,249
23,800 Cooper Tire & Rubber Company 508,844
45,700 + The Goodyear Tire & Rubber Company 359,202
-----------
1,118,295
------------------------------------------------------------------------------------------------------------------------
Tobacco--0.2% 13,055 DIMON Incorporated 88,121
4,620 Schweitzer-Manduit International, Inc. 137,584
3,000 Standard Commercial Corporation 60,210
10,300 + Star Scientific, Inc. 18,952
8,756 Universal Corporation 386,753
7,809 Vector Group Ltd. 127,443
-----------
819,063
------------------------------------------------------------------------------------------------------------------------
Toys--0.0% 8,561 + JAKKS Pacific, Inc. 112,663
50 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Transportation-- 6,500 + Pacer International, Inc. $ 131,430
Miscellaneous--0.1% 2,300 Quixote Corporation 56,143
5,581 + SCS Transportation, Inc. 98,114
1,800 + U.S. Xpress Enterprises, Inc. (Class A) 22,050
-----------
307,737
------------------------------------------------------------------------------------------------------------------------
Truckers--0.7% 6,941 Arkansas Best Corporation 217,878
3,800 + Covenant Transport, Inc. (Class A) 72,238
4,588 + Forward Air Corporation 126,170
9,528 Heartland Express, Inc. 230,482
6,850 + Knight Transportation, Inc. 175,703
10,408 + Landstar System, Inc. 395,920
3,700 + Old Dominion Freight Line, Inc. 126,096
1,000 + P.A.M. Transportation Services, Inc. 21,330
9,602 USF Corporation 328,292
14,977 + Yellow Roadway Corporation 541,718
-----------
2,235,827
------------------------------------------------------------------------------------------------------------------------
Utilities--Cable Television & 15,800 + Mediacom Communications Corporation 136,986
Radio--0.0%
------------------------------------------------------------------------------------------------------------------------
Utilities--Electrical--1.5% 43,600 + Allegheny Energy, Inc. 556,336
15,175 Avista Corporation 274,971
9,300 Black Hills Corporation 277,419
4,689 CH Energy Group, Inc. 219,914
52,900 + CMS Energy Corporation 450,708
3,603 Central Vermont Public Service Corporation 84,670
14,267 Cleco Corporation 256,521
18,208 + El Paso Electric Company 243,077
7,668 Empire District Electric Company 168,159
13,500 IDAcorp Inc. 403,920
4,545 MGE Energy, Inc. 143,213
6,986 Otter Tail Company 186,736
13,819 PNM Resources Inc. 388,314
44,977 + Sierra Pacific Resources 330,131
4,600 UIL Holdings Corporation 207,460
10,383 UniSource Energy Corporation 256,045
23,200 Westar Energy, Inc. 469,800
-----------
4,917,394
------------------------------------------------------------------------------------------------------------------------
Utilities--Gas Distributors--0.9% 17,338 Atmos Energy Corporation 421,313
3,522 Cascade Natural Gas Corporation 74,279
2,600 Chesapeake Utilities Corporation 67,730
12,792 Energen Corporation 524,856
2,000 EnergySouth, Inc. 70,000
4,948 The Laclede Group, Inc. 141,265
7,283 NUI Corporation 117,402
8,574 New Jersey Resources Corporation 330,185
9,299 Northwest Natural Gas Company 285,944
8,387 SEMCO Energy, Inc. 41,096
4,766 South Jersey Industries, Inc. 193,023
17,802 + Southern Union Company 327,557
8,490 Southwest Gas Corporation 190,601
9,924 + Southwestern Energy Company 237,184
-----------
3,022,435
------------------------------------------------------------------------------------------------------------------------
Utilities--Gas Pipelines--0.0% 5,431 + TransMontaigne Inc. 35,030
------------------------------------------------------------------------------------------------------------------------
Utilities--Miscellaneous--0.1% 54,900 + Aquila, Inc. 186,111
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 51
[LOGO] Merrill Lynch Investment Managers
Schedule of Investments (continued) Master Small Cap Index Series
Value
Industry@ Shares Held Common Stocks (in U.S. dollars)
========================================================================================================================
Utilities--Telecommunications--0.9% 6,921 + Boston Communications Group, Inc. $ 64,296
3,955 CT Communications, Inc. 53,392
1,526 + Centennial Communications Corp. 8,027
65,200 + Cincinnati Bell Inc. 329,260
7,933 + Commonwealth Telephone Enterprises, Inc. 299,471
5,200 D&E Communications, Inc. 75,452
6,800 + Dobson Communications Corporation (Class A) 44,676
11,339 + General Communication, Inc. (Class A) 98,649
3,992 + Golden Telecom, Inc. 110,778
3,599 Hickory Tech Corporation 41,209
400 + Hungarian Telephone and Cable Corp. 3,944
6,600 + Intrado Inc. 144,870
26,100 + McLeod USA Incorporated (Class A) 38,628
4,600 + NII Holdings Inc. (Class B) 343,298
4,321 North Pittsburgh Systems, Inc. 81,710
16,100 + PTEK Holdings, Inc. 141,841
13,104 + Price Communications Corporation 179,918
17,500 + Primus Telecommunications Group, Incorporated 178,150
22,100 + RCN Corporation 17,680
600 Shenandoah Telecommunications Company 30,756
3,800 SureWest Communications 153,596
10,033 + TALK America Holdings, Inc. 115,580
13,700 + Time Warner Telecom Inc. (Class A) 138,781
4,400 + Triton PCS Holdings, Inc. (Class A) 24,552
900 Warwick Valley Telephone Company 26,631
23,100 + Western Wireless Corporation (Class A) 424,116
-----------
3,169,261
------------------------------------------------------------------------------------------------------------------------
Utilities--Water--0.2% 3,785 American States Water Company 94,625
8,096 California Water Service Group 221,830
2,489 Connecticut Water Service, Inc. 68,821
3,182 Middlesex Water Company 64,595
658 SJW Corp. 58,727
5,495 Southwest Water Company 88,195
-----------
596,793
------------------------------------------------------------------------------------------------------------------------
Wholesale & International Trade--0.0% 2,800 + Central European Distribution Corporation 88,480
------------------------------------------------------------------------------------------------------------------------
Wholesalers--0.1% 9,649 + United Stationers, Inc. 394,837
------------------------------------------------------------------------------------------------------------------------
Total Common Stocks
(Cost--$250,557,213)--87.3% 292,978,660
========================================================================================================================
52 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Schedule of Investments (concluded) Master Small Cap Index Series
Value
Industry@ Shares Held Warrants (c) (in U.S. dollars)
========================================================================================================================
Telephone--0.0% 221 Focal Communications Corporation $ 0
------------------------------------------------------------------------------------------------------------------------
Total Warrants (Cost--$0)--0.0% 0
========================================================================================================================
========================================================================================================================
Beneficial Interest/
Shares Held Short-Term Securities
========================================================================================================================
$40,191,529 Merrill Lynch Liquidity Series, LLC Cash Sweep
Series I (a) 40,191,529
$ 6,838,126 Merrill Lynch Liquidity Series, LLC Money Market
Series (a)(b) 6,838,126
2,279,374 Merrill Lynch Premier Instututional Fund (a)(b) 2,279,374
------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost--$49,309,029)--14.7% 49,309,029
========================================================================================================================
Total Investments (Cost--$299,866,242)--102.0% 342,287,689
Variation Margin on Financial Futures Contracts--(0.2%) (d) (518,714)
Liabilities in Excess of Other Assets--(1.8%) (6,109,510)
------------
Net Assets--100.0% $335,659,465
============
(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:
--------------------------------------------------------------------------
Interest/
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I $37,274,469 $170,348
Merrill Lynch Liquidity Series, LLC
Money Market Series $ 4,053,691 $ 34,641
Merrill Lynch Premier Institutional Fund (189,841) $ 19,286
--------------------------------------------------------------------------
(b) Security was purchased with the cash proceeds from securities loans.
(c) Warrants entitle the Series to purchase a predetermined number of shares
of common stock and are non-income producing. The purchase price and
number of shares are subject to adjustment under certain conditions until
the expiration date.
(d) Financial futures contracts purchased as of December 31, 2003 were as
follows:
--------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Date Value Gains
--------------------------------------------------------------------------
153 Russell 2000 March 2004 $40,821,244 $1,804,556
--------------------------------------------------------------------------
Total Unrealized Gains--Net $1,804,556
==========
+ Non-income producing security.
@ 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. These
industry classifications are unaudited.
See Notes to Financial Statements.
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 53
[LOGO] Merrill Lynch Investment Managers
Statement of Assets and Liabilities Master Small Cap Index Series
As of December 31, 2003
============================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at value (including securities loaned of $8,501,179)
(identified cost--$299,866,242) ................................. $ 342,287,689
Cash on deposit for financial futures contracts .................. 2,086,000
Receivables:
Contributions ................................................. $ 2,346,439
Securities sold ............................................... 452,437
Dividends ..................................................... 317,639
Interest ...................................................... 31,778
Securities lending--net ....................................... 5,377 3,153,670
-------------
Prepaid expenses and other assets ................................ 1,228
-------------
Total assets ..................................................... 347,528,587
-------------
============================================================================================================================
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ........................ 9,117,500
Payables:
Withdrawals ................................................... 1,797,393
Variation margin .............................................. 518,714
Custodian bank ................................................ 418,315
Securities purchased .......................................... 6,183
Other affiliates .............................................. 2,573 2,743,178
-------------
Accrued expenses ................................................. 8,444
-------------
Total liabilities ................................................ 11,869,122
-------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets ....................................................... $ 335,659,465
=============
============================================================================================================================
Net Assets Consist of
- ----------------------------------------------------------------------------------------------------------------------------
Investors' capital ............................................... $ 291,433,462
Unrealized appreciation on investments--net ...................... 44,226,003
-------------
Net Assets ....................................................... $ 335,659,465
=============
See Notes to Financial Statements.
54 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Statement of Operations Master Small Cap Index Series
For the Year Ended December 31, 2003
============================================================================================================================
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Dividends (net of $1,168 foreign withholding tax) ................ $ 2,538,493
Interest ......................................................... 170,468
Securities lending--net .......................................... 53,927
-------------
Total income ..................................................... 2,762,888
-------------
============================================================================================================================
Expenses
- ----------------------------------------------------------------------------------------------------------------------------
Professional fees ................................................ $ 116,519
Accounting services .............................................. 38,444
Custodian fees ................................................... 34,720
Investment advisory fees ......................................... 22,670
Trustees' fees and expenses ...................................... 3,016
Printing and shareholder reports ................................. 2,381
Other ............................................................ 6,007
-------------
Total expenses before waiver and reimbursement ................... 223,757
Waiver and reimbursement of expenses ............................. (26,092)
-------------
Total expenses after waiver and reimbursement .................... 197,665
-------------
Investment income--net ........................................... 2,565,223
-------------
============================================================================================================================
Realized & Unrealized Gain on Investments--Net
- ----------------------------------------------------------------------------------------------------------------------------
Realized gain on investments--net ................................ 459,569
Change in unrealized appreciation/depreciation on investments--net 85,865,588
-------------
Total realized and unrealized gain on investments--net ........... 86,325,157
-------------
Net Increase in Net Assets Resulting from Operations ............. $ 88,890,380
=============
See Notes to Financial Statements.
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 55
[LOGO] Merrill Lynch Investment Managers
Statements of Changes in Net Assets Master Small Cap Index Series
For the Year Ended
December 31,
-------------------------------
Increase (Decrease) in Net Assets: 2003 2002
============================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------------------
Investment income--net ........................................... $ 2,565,223 $ 2,405,288
Realized gain (loss) on investments--net ......................... 459,569 (12,560,901)
Change in unrealized appreciation/depreciation on investments--net 85,865,588 (35,615,150)
-------------------------------
Net increase (decrease) in net assets resulting from operations .. 88,890,380 (45,770,763)
-------------------------------
============================================================================================================================
Capital Transactions
- ----------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions ...................................... 87,919,756 105,968,467
Fair value of withdrawals ........................................ (23,066,142) (61,250,024)
-------------------------------
Net increase in net assets derived from capital transactions ..... 64,853,614 44,718,443
-------------------------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets .......................... 153,743,994 (1,052,320)
Beginning of year ................................................ 181,915,471 182,967,791
-------------------------------
End of year ...................................................... $ 335,659,465 $ 181,915,471
===============================
See Notes to Financial Statements.
56 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Financial Highlights Master Small Cap Index Series
For the Year Ended
December 31,
The following ratios have been derived ---------------------------------------------------------------
from information provided in the financial statements. 2003 2002 2001 2000+ 1999+
==================================================================================================================================
Total Investment Return
- ----------------------------------------------------------------------------------------------------------------------------------
47.11% (20.19%) 2.37% -- --
===============================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver and reimbursement .09% .08% .08% .09% .14%
===============================================================
Expenses ................................ .10% .14% .13% .13% .17%
===============================================================
Investment income--net .................. 1.13% 1.26% 1.45% 1.90% 1.83%
===============================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) .. $335,659 $181,915 $182,968 $169,244 $114,799
===============================================================
Portfolio turnover ...................... 28.57% 39.00% 48.50% 50.51% 51.20%
===============================================================
+ Total return is required to be disclosed for fiscal years beginning after
December 15, 2000.
See Notes to Financial Statements.
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 57
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements Master Small Cap Index Series
1. Significant Accounting Policies:
Master Small Cap 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 Trust, 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. The following is a summary of significant accounting policies
followed by the Series.
(a) Valuation of investments -- Equity securities that are held by the Series
that are traded on stock exchanges or the Nasdaq National Market are valued at
the last sale price or official close price on the exchange, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions, and at the last available ask
price for short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Trustees of the Trust.
Long positions traded in the over-the-counter ("OTC") market, Nasdaq Small Cap
or Bulletin Board are valued at the last available bid price or yield equivalent
obtained from one or more dealers or pricing services approved by the Board of
Trustees of the Trust. Short positions traded in the OTC market are valued at
the last available ask price. Portfolio securities that are traded both in the
OTC market and on a stock exchange are valued according to the broadest and most
representative market.
Options written are valued at the last sale price in the case of exchange-traded
options or, in the case of options traded in the OTC market, the last ask price.
Options purchased are valued at their last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC market, the
last bid price. Swap agreements are valued daily based upon quotations from
market makers. Financial futures contracts and options thereon, which are traded
on exchanges, are valued at their last sale price as of the close of such
exchanges. Obligations with remaining maturities of 60 days or less are valued
at amortized cost unless the Investment Adviser believes that this method no
longer produces fair valuations.
Repurchase agreements are valued at cost plus accrued interest. The Series
employs pricing services to provide certain securities prices for the Series.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Trustees of the Trust, including valuations furnished by the
pricing services retained by the Series, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are reviewed
by the officers of the Series under the general supervision by the Board of
Trustees of the Trust. Such valuations and procedures will be reviewed
periodically by the Board of Trustees of the Trust.
Generally, trading in foreign securities, as well as U.S. government securities
and money market instruments, is substantially completed each day at various
times prior to the close of business on the New York Stock Exchange ("NYSE").
The values of such securities used in computing the net assets of the Series are
determined as of such times. Foreign currency exchange rates also are generally
determined prior to the close of business on the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of business on the
NYSE that may not be reflected in the computation of the Series' net assets. If
events (for example, a company announcement, market volatility or a natural
disaster) occur during such periods that are expected to materially affect the
value of such securities, those securities may be valued at their fair value as
determined in good faith by the Board of Trustees of the Trust 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 both to increase the return of the Series and to
hedge, or protect, its exposure to interest rate movements and movements in the
securities markets. Losses may arise due to changes in the value of the contract
or if the counterparty does not perform under the contract.
o Financial futures contracts -- The Series may purchase or sell financial
futures contracts and options on such futures contracts. Futures contracts
are contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract, the
Series deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected. Pursuant to
the contract, the Series agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in value of the contract.
Such receipts or payments are known as variation
58 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Notes to Financial Statements (continued) Master Small Cap Index Series
margin and are recorded by the Series as unrealized gains or losses. When
the contract is closed, the Series records a realized gain or loss equal
to the difference between the value of the contract at the time it was
opened and the value at the time it was closed.
o Options -- The Series may purchase and write call and put options. When
the Series writes an option, an amount equal to the premium received by
the Series is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked to market to reflect the
current market value of the option written. When a security is purchased
or sold through an exercise of an option, the related premium paid (or
received) is added to (or deducted from) the basis of the security
acquired or deducted from (or added to) the proceeds of the security sold.
When an option expires (or the Series enters into a closing transaction),
the Series realizes a gain or loss on the option to the extent of the
premiums received or paid (or a gain or loss to the extent that the cost
of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes -- The Series is classified as a partnership for Federal income
tax purposes. As such, each investor in the Series is treated as owner of its
proportionate share of the net assets, income, expenses and realized and
unrealized gains and losses of the Series. Therefore, no Federal income tax
provision is required. 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.
(d) Security transactions and investment income -- Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis.
(e) Securities lending -- The Series may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities. The
market value of the loaned securities is determined at the close of business of
the Series and any additional required collateral is delivered to the Series on
the next business day. Where the Series receives securities as collateral for
the loaned securities, it collects a fee from the borrower. The Series typically
receives the income on the loaned securities but does not receive the income on
the collateral. Where the Series receives cash collateral, it may invest such
collateral and retain the amount earned on such investment, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities within five
business days. The Series may pay reasonable finder's, lending agent,
administrative and custodial fees in connection with its loans. In the event
that the borrower defaults on its obligation to return borrowed securities
because of insolvency or for any other reason, the Series could experience
delays and costs in gaining access to the collateral. The Series also could
suffer a loss where the value of the collateral falls below the market value of
the borrowed securities, in the event of borrower default or in the event of
losses on investments made with cash collateral.
(f) Custodian bank -- The Series recorded an amount payable to the custodian
bank reflecting an overnight overdraft, which resulted from management estimates
of available cash.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Series' portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Series. For such services, the Series pays a monthly
fee at an annual rate of .01% of the average daily value of the Series' net
assets. FAM has entered into a contractual arrangement with the Series under
which the expenses incurred by the Series will not exceed .09%. Effective
January 1, 2003, the limit increased from .08% to .09%. This arrangement expires
December 31, 2004 and is renewable. FAM earned fees of $22,670, all of which
were waived. In addition, FAM reimbursed the Series for additional expenses of
$3,422.
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 59
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (concluded) Master Small Cap Index Series
Merrill Lynch Trust Company, an indirect, wholly-owned Subsidiary of ML & Co.,
is the Series' Custodian.
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") or its affiliates. As of December 31,
2003, the Series lent securities with a value of $397,133 to MLPF&S or its
affiliates. Pursuant to that order, the Trust also has retained Merrill Lynch
Investment Managers, LLC ("MLIM, LLC"), an affiliate of FAM, as the securities
lending agent for a fee based on a share of the returns on investment of cash
collateral. MLIM, LLC may, on behalf of the Trust and the Series, invest cash
collateral received by the Series for such loans, among other things, in a
private investment company managed by MLIM, LLC or in registered money market
Series advised by FAM or its affiliates. For the year ended December 31, 2003,
MLIM, LLC received $20,831 in securities lending agent fees from the Series.
For the year ended December 31, 2003, the Series reimbursed FAM $4,577 for
certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 2003 were $100,145,506 and $60,224,191, respectively.
Net realized gains (losses) for the year ended December 31, 2003 and net
unrealized gains as of December 31, 2003 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains
- --------------------------------------------------------------------------------
Long-term investments ................... $(3,404,071) $42,421,447
Financial futures contracts ............. 3,863,640 1,804,556
-------------------------------
Total ................................... $ 459,569 $44,226,003
===============================
As of December 31, 2003, net unrealized appreciation for Federal income tax
purposes aggregated $39,217,195, of which $62,897,826 related to appreciated
securities and $23,680,631 related to depreciated securities. At December 31,
2003, the aggregate cost of investments for Federal income tax purposes was
$303,070,494.
4. Short-Term Borrowings:
The Series, along with certain other Series 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 Series
shareholder redemptions and for other lawful purposes other than for leverage.
The Series may borrow up to the maximum amount allowable under the Fund's
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 28, 2003, the credit
agreement was renewed for one year under the same terms. The Series did not
borrow under the credit agreement during the year ended December 31, 2003.
60 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Independent Auditors' Report Master Small Cap Index Series
To the Investors and Board of Trustees of
Quantitative Master Series Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Master Small Cap Index Series one of the
portfolios constituting Quantitative Master Series Trust (the "Trust") as of
December 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2003, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Master
Small Cap Index Series of the Quantitative Master Series Trust as of December
31, 2003, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and its
financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Princeton, New Jersey
February 13, 2004
MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003 61
[LOGO] Merrill Lynch Investment Managers
Officers and Directors/Trustees (unaudited)
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length Overseen by Held by
Held with of Time Director/ Director/
Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Interested Director/Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Terry K. P.O. Box 9011 President 1999 to President and Chairman of the Merrill Lynch 120 Funds None
Glenn* Princeton, NJ and present Investment Managers, L.P. ("MLIM")/Fund Asset 160 Portfolios
08543-9011 Director/ and Management, L.P. ("FAM")--Advised Funds since
Age: 63 Trustee 1997 to 1999; Chairman (Americas Region) of MLIM from
present 2000 to 2002; Executive Vice President of FAM and
MLIM(which terms as used herein include their
corporate predecessors) from 1983 to 2002; President
of FAM Distributors, Inc. ("FAMD") from 1986 to 2002
and Director thereof from 1991 to 2002; Executive
Vice President and Director of Princeton Services,
Inc. ("Princeton Services") from 1993 to 2002;
President of Princeton Administrators, L.P. from
1989 to 2002; Director of Financial Data Services,
Inc. since 1985.
------------------------------------------------------------------------------------------------------------------------
* Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which FAM or
MLIM acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment Company Act, of
the Fund/Trust based on his former positions with FAM, MLIM, FAMD, Princeton Services and Princeton Administrators,
L.P. The Director's/Trustee's term is unlimited. Directors/Trustees serve until their resignation, removal or death,
or until December 31 of the year in which they turn 72. As Fund President, Mr. Glenn serves at the pleasure of the
Board of Directors/Trustees.
====================================================================================================================================
Independent Directors/Trustees*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald W. P.O. Box 9095 Director/ 2002 to Manager of The Burton Partnership, Limited 23 Funds ITC Delta-
Burton Princeton, NJ Trustee present Partnership since 1979; Managing General Partner 36 Portfolios Com, Inc.,
08543-9095 of the South Atlantic Venture Funds, Limited ITC Financial
Age: 59 Partnerships and Chairman of South Atlantic Services,
Private Equity Fund IV, Limited Partnership since Knology,
1983; Member of the Investment Advisory Council Inc.,
of the Florida State Board of Administration Pri-Care,
since 2001. Inc.,
Symbion, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
M. Colyer P.O. Box 9095 Director/ 2000 to James R. Williston Professor of Investment 24 Funds Cambridge
Crum Princeton, NJ Trustee present Management Emeritus, Harvard Business 37 Portfolios Bancorp
08543-9095 School since 1996; Chairman and Director of
Age: 71 Phaeton International, Ltd. from 1985 to present;
Director of Cambridge Bancorp since 1969.
- ------------------------------------------------------------------------------------------------------------------------------------
Laurie P.O. Box 9095 Director/ 2000 to Professor of Finance and Economics, Graduate 23 Funds None
Simon Princeton, NJ Trustee present School of Business, Columbia University since 36 Portfolios
Hodrick 08543-9095 1998; Associate Professor of Finance and
Age: 41 Economics, Graduate School of Business,
Columbia University from 1996 to 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
David H. P.O. Box 9095 Director/ 2003 to Consultant with Putnam Investments since 1993 23 Funds None
Walsh Princeton, NJ Trustee present and employed in various capacities therewith from 36 Portfolios
08543-9095 1971 to 1992; Director of the National Audubon
Age: 62 Society since 2000; Director of the American Museum
of Fly Fishing since 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
62 MERRILL LYNCH SMALL CAP INDEX FUND DECEMBER 31, 2003
Officers and Directors/Trustees (unaudited)(concluded)
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length Overseen by Held by
Held with of Time Director/ Director/
Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Independent Directors/Trustees* (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
Fred G. P.O. Box 9095 Director/ 2000 to Managing Director of FGW Associates since 1997; 23 Funds Watson
Weiss Princeton, NJ Trustee present Vice President, Planning, Investment and Devel- 36 Portfolios Pharma-
08543-9095 opment of Warner Lambert Co. from 1979 to 1997; ceuticals,
Age: 62 Director of BTG International, PLC since 2001; Inc.
Director of KIMC Investments, Inc. since 2003;
Director of Osmotica Holding Corp. AVV since 2003.
------------------------------------------------------------------------------------------------------------------------
* The Director's/Trustee's term is unlimited. Directors/Trustees serve until their resignation, removal or death, or
until December 31 of the in which they turn 72.
- ------------------------------------------------------------------------------------------------------------------------------------
Position(s) Length
Held with of Time
Name Address & Age Fund/Trust Served* Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund/Trust Officers
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1997 to First Vice President of FAM and MLIM since 1997 and Treasurer thereof since 1999;
Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999; Vice
08543-9011 and and President of FAMD since 1999; Director of MLIM Taxation since 1990.
Age: 43 Treasurer 1999 to
present
- ------------------------------------------------------------------------------------------------------------------------------------
Robert C. P.O. Box 9011 Senior Vice 1999 to President of MLIM and member of the Executive Management Committee of ML & Co.,
Doll, Jr. Princeton, NJ President present Inc. since 2001; Global Chief Investment Officer and Senior Portfolio Manager of
08543-9011 MLIM since 1999; Chief Investment Officer of Equities at Oppenheimer Funds, Inc.
Age: 49 from 1990 to 1999 and Chief Investment Officer thereof from 1998 to 1999; Executive
Vice President of Oppenheimer Funds, Inc. from 1991 to 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard P.O. Box 9011 Vice 1999 to Managing Director and Head of Global Index and Enhanced Index products for Merrill
Vella Princeton, NJ President present Lynch Quantitative Advisors since 1999; Managing Director and Head of the Global
08543-9011 Index and Enhanced Index business at Bankers Trust from 1984 to 1999.
Age: 46
- ------------------------------------------------------------------------------------------------------------------------------------
Brian D. P.O. Box 9011 Secretary 2003 to Vice President (Legal Advisory) of MLIM since 2002; Attorney with Reed Smith from
Stewart Princeton, NJ present 2001 to 2002; Attorney with Saul Ewing from 1999 to 2001.
08543-9011
Age: 34
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund/Trust serve at the pleasure of the Board of Directors/Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
Further information about the Fund's Officers and Directors is available in the Fund's Statement of Additional
Information, which can be obtained without charge by calling 1-800-MER-FUND.
- ------------------------------------------------------------------------------------------------------------------------------------
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 SMALL CAP INDEX FUND DECEMBER 31, 2003 63
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-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
#Index 3 -- 12/03
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of the
end of the period covered by this report, that applies to the
registrant's principal executive officer, principal financial officer
and principal accounting officer, or persons performing similar
functions. A copy of the code of ethics is available without charge
upon request by calling toll-free 1-800-MER-FUND (1-800-637-3863).
Item 3 - Audit Committee Financial Expert - The registrant's board of directors
has determined that (i) the registrant has the following audit
committee financial experts serving on its audit committee and (ii)
each audit committee financial expert is independent: (1) Donald W.
Burton, (2) M. Colyer Crum, (3) Laurie Simon Hodrick, (4) David H.
Walsh and (5) Fred G. Weiss.
The registrant's board of directors has determined that Laurie Simon
Hodrick and M. Colyer Crum qualify as financial experts pursuant to
Item 3(c)(4) of Form N-CSR.
Ms. Hodrick has a thorough understanding of generally accepted
accounting principals, financial statements, and internal controls and
procedures for financial reporting. Ms. Hodrick earned a Ph.D. in
economics and has taught courses in finance for over 15 years. Her
M.B.A.-level course centers around the evaluation and analysis of
firms' corporate financial statements. She has also taught in financial
analysts' training programs. Ms. Hodrick has also worked with several
prominent corporations in connection with the analysis of financial
forecasts and projections and analysis of the financial statements of
those companies, serving on the Financial Advisory Council of one of
these major corporations. She has also served as the Treasurer and
Finance Chair of a 501(c)(3) organization. Ms. Hodrick has published a
number of articles in leading economic and financial journals and is
the associate editor of two leading finance journals.
M. Colyer Crum also possesses a thorough understanding of generally
accepted accounting principals, financial statements, and internal
controls and procedures for financial reporting through a combination
of education and experience. Professor Crum was a professor of
investment management at the Harvard Business School for 25 years. The
courses taught by Professor Crum place a heavy emphasis on the analysis
of underlying company financial statements with respect to stock
selection and the analysis of credit risk in making loans. Professor
Crum has also served on a number of boards of directors and has served
on the audit committees, and in some cases chaired the audit committee,
for several major corporations and financial institutions. For two such
organizations, Professor Crum has performed extensive investment
analysis of financial statements in connection with investment
management decisions. From these experiences, he has gained significant
experience with the establishment of reserves and accounting policies,
differences between U.S. GAAP and Canadian GAAP and executive
compensation issues.
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - 2003 -- $46,400 2002 -- $48,900
(b) Audit-Related Fees - 2003 -- $12,300 2002 -- $22,500
The nature of the services include assurance
and related services reasonably related to the
performance of the audit of financial
statements not included in Audit Fees above.
(c) Tax Fees - 2003 -- $19,200 2002 -- $24,400
The nature of the services include tax compliance, tax
advice and tax planning.
(d) All Other Fees - 2003 -- $0 2002 -- $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of
services. Audit, audit-related and tax compliance services
provided to the registrant on an annual basis require specific
pre-approval by the Committee. The Committee also must approve
other non-audit services provided to the registrant and those
non-audit services provided to the registrant's affiliated
service providers that relate directly to the operations and the
financial reporting of the registrant. Certain of these
non-audit services that the Committee believes are a) consistent
with the SEC's auditor independence rules and b) routine and
recurring services that will not impair the independence of the
independent accountants may be approved by the Committee without
consideration on a specific case-by-case basis ("general
pre-approval"). However, such services will only be deemed
pre-approved provided that any individual project does not
exceed $5,000 attributable to the registrant or $50,000 for the
project as a whole. Any proposed services exceeding the
pre-approved cost levels will require specific pre-approval by
the Committee, as will any other services not subject to general
pre-approval (e.g., unanticipated but permissible services). The
Committee is informed of each service approved subject to
general pre-approval at the next regularly scheduled in-person
board meeting.
(e)(2) 0%
(f) N/A
(g) 2003 -- $18,690,437 2002 -- $17,012,158
(h) The registrant's audit committee has considered that the provision
of non-audit services that were rendered to the registrant's
investment adviser and any entity controlling, controlled by, or
under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is
compatible with maintaining the principal accountant's
independence.
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Reserved
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Reserved
Item 9 - Controls and Procedures
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.
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 attached hereto
10(a) - Not Applicable
10(b) - 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 Small Cap Index Fund and Master Small Cap Index Series
By: /s/ Terry K. Glenn
---------------------------------
Terry K. Glenn,
President of
Merrill Lynch Small Cap Index Fund and Master Small Cap Index Series
Date: February 23, 2004
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 Small Cap Index Fund and Master Small Cap Index Series
Date: February 23, 2004
By: /s/ Donald C. Burke
---------------------------------
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Small Cap Index Fund and Master Small Cap Index Series
Date: February 23, 2004