UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07899
811-07885
Name of Fund: S&P 500 Index Fund of Merrill Lynch Index Funds, Inc.
Master S&P 500 Index Series of Quantitative Master Series Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master
S&P 500 Index Series of Quantitative Master Series Trust, 800 Scudders
Mill Road, Plainsboro, NJ 08536. Mailing address: P.O. Box 9011,
Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 12/31/04
Date of reporting period: 01/01/04 - 12/31/04
Item 1 - Report to Stockholders
[LOGO] Merrill Lynch Investment Managers www.mlim.ml.com
Merrill Lynch
S&P 500 Index Fund
Merrill Lynch Index Funds, Inc.
Annual Report
December 31, 2004
[LOGO] Merrill Lynch Investment Managers
Merrill Lynch S&P 500 Index Fund
Portfolio Information as of December 31, 2004
Percent of
Sector Representation Total Investments
- --------------------------------------------------------------------------------
Financials ................................................. 19.3%
Information Technology ..................................... 15.0
Health Care ................................................ 11.8
Consumer Discretionary ..................................... 11.1
Industrials ................................................ 11.0
Consumer Staples ........................................... 9.8
Energy ..................................................... 6.7
Telecommunication Services ................................. 3.0
Materials .................................................. 2.9
Utilities .................................................. 2.7
Other* ..................................................... 6.7
- --------------------------------------------------------------------------------
* Includes portfolio holdings in short-term securities and warrants.
Important Tax Information
The following information is provided with respect to the ordinary income
distributions paid by Merrill Lynch S&P 500 Index Fund during the fiscal year
ended December 31, 2004:
================================================================================
Record Date July 21, 2004 December 16, 2004
Payable Date July 27, 2004 December 22, 2004
================================================================================
Qualified Dividend
Income for Individuals 100% 100%
- --------------------------------------------------------------------------------
Dividends Qualifying for the
Dividends Received Deduction
for Corporations 100% 100%
- --------------------------------------------------------------------------------
Please retain this information for your records.
2 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004
A Letter From the President and Chief Investment Officer
Dear Shareholder
The U.S. equity market ended 2004 in positive territory, although not without
some suspense along the way. Fixed income markets also performed well, with high
yield bond investors enjoying some of the greatest returns.
Over the past year, the equity market generally found support from a healthy
economic environment, above-average corporate earnings, increased capital
spending and still-low interest rates. Stalling the momentum somewhat throughout
the year was a contentious election, negligible inflation amid a rising federal
funds interest rate, record-high oil prices and the seemingly ever-present
worries over terrorism and the war in Iraq.
Still, the Standard & Poor's 500 Index posted a 12-month return of +10.88% and a
six-month return of +7.19% as of December 31, 2004. The fourth quarter of the
year proved to be the most telling, as the S&P 500 Index was up only 1.51%
year-to-date as of September 30, 2004. As the price of oil relaxed and election
uncertainties subsided, the market headed more convincingly upward in the last
quarter of the year.
Given the relatively positive environment for equities, the favorable
performance of the bond market came as somewhat of a surprise. The Lehman
Brothers Aggregate Bond Index posted a 12-month return of +4.34% and a six-month
return of +4.18% as of December 31, 2004. The tax-exempt market performed just
as well, with a 12-month return of +4.48% and a six-month return of +5.19%, as
measured by the Lehman Brothers Municipal Bond Index. Those comfortable with a
higher degree of risk benefited this past year, as the Credit Suisse First
Boston High Yield Index posted a 12-month return of +11.95% and a six-month
return of +9.26%. Interestingly, as the Federal Reserve Board began raising its
target short-term interest rate, long-term bond yields were little changed. In
fact, the yield on the 10-year Treasury was 4.24% at year-end compared to 4.27%
at December 31, 2003. The yield on the two-year Treasury climbed to 3.08% at
year-end 2004 from 1.84% a year earlier.
As always, our investment professionals are closely monitoring the markets, the
economy and the overall environment in an effort to make well-informed decisions
for the portfolios they manage. For the individual investor, the key to
investment success -- particularly during uncertain times -- is to maintain a
long-term perspective and adhere to the disciplines of asset allocation,
diversification and rebalancing. We encourage you to work with your financial
advisor to ensure these time-tested techniques are incorporated into your
investment plan.
We thank you for trusting Merrill Lynch Investment Managers with your investment
assets, and we look forward to serving you in the new year and beyond.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Chief Investment Officer
Merrill Lynch Investment Managers
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004 3
[LOGO] Merrill Lynch Investment Managers
A Discussion With Your Fund's Portfolio Managers
The Fund was able to meet its objective of closely replicating the returns
of the S&P 500 Index during the year, and provided a double-digit total return.
How did the Fund perform during the fiscal year?
For the 12-month period ended December 31, 2004, Merrill Lynch S&P 500 Index
Fund's Class A and Class I Shares had total returns of +10.22% and +10.55%,
respectively. For the same period, the Fund's benchmark, the Standard & Poor's
500 (S&P 500) Index, returned +10.88%. (Complete performance information can be
found on pages 6 and 7 of this report to shareholders.)
As the returns indicate, the Fund met its objective of closely tracking the
performance of the S&P 500 Index, a market-weighted index composed of 500 common
stocks issued by large-capitalization U.S. companies in a wide range of
businesses. The stocks included in the Index collectively represent a
substantial portion of all common stocks publicly traded in the United States.
As the value of the S&P 500 Index fluctuated during the past 12 months, the
Fund's performance generally tracked that of the Index. Throughout the period,
as changes were made to the composition of the S&P 500 Index, we purchased and
sold securities to maintain the Fund's objective of replicating the risks and
return of the benchmark.
As an index fund, the portfolio mirrors the composition of the S&P 500 Index, a
common measure of U.S. market performance for large cap stocks. What
developments affected the market for large cap stocks during the period?
The S&P 500 Index finished 2004 on a positive note, although it was not a
straight march upward. Index gains were modest in the first and second quarters
of the year, at +1.69% and +1.72%, respectively. The S&P 500 Index slid in the
third quarter, returning -1.87%, but experienced a strong bounce back in the
fourth quarter, with a return of +9.23%.
Economic news was mixed for much of the first three quarters before turning
generally positive in the fourth quarter. The first quarter was impacted
positively by good productivity and gross domestic product numbers, but clouded
by the railroad bombing in Madrid, Spain, which caused market volatility to
increase substantially.
Renewed fears of terrorist attacks cast the long shadow of geopolitical unrest
on equity markets around the world. The aura of uncertainty in the second
quarter was led by factors such as persistent violence in Iraq, record-high oil
prices and mixed, though slowly improving, U.S. economic data. As the second
quarter drew to a close, the drumbeat of presidential election drama gradually
swelled in the United States.
In the third quarter, the course of economic news slowly began to point toward a
strengthening economy. But despite better-than-expected corporate earnings and
the Federal Reserve Board (the Fed) Chairman Alan Greenspan's congressional
testimony that his outlook on economic growth remained constructive, a number of
uncertainties hampered the U.S. equity market. Election buildup, a shifting Fed
policy and higher oil prices fanned the flames of fear that the U.S. economy
would slow.
The fourth quarter, however, proved to be the breakout that investors were
looking for in the U.S. equity markets. Negative October headlines segued into
positive November and December news. As a result of moderating oil prices,
unwinding election uncertainties, reasonably good economic and earnings news,
and the beginning of the seasonally strong year-end period, the market
experienced a positive post-election bounce. As expected, the Fed continued to
raise the federal funds interest rate, which ended the year at 2.25%, more than
double where it started.
On December 31, 2004, the S&P 500 Index closed at 1,211.92 with a price return
of +8.99%. The Dow Jones Industrial Average closed at 10,783.01 with a price
return of +3.15%, while the Nasdaq Composite Index returned +8.59% with a
closing level of 2,175.44. European markets delivered comparable gains, with the
Financial Times Stock Exchange 100 Index closing at 4,814.30, representing a
return of +7.54% in sterling. In the meantime, the Morgan Stanley Capital
International World Index was up 12.84% in U.S. dollar terms, with a closing
level of 1,169.34 at December 31, 2004.
4 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004
Value-style investing outperformed the growth style for the year, as the S&P 500
Barra Value Index returned +15.70% versus the +6.13% return of the S&P 500 Barra
Growth Index. Small- and mid-capitalization stocks generally had better returns
than large-capitalization stocks in 2004, with the S&P SmallCap 600 Index
returning +22.65% and the S&P MidCap 400 Index returning +16.48%.
Turning to sector performance, all 10 S&P 500 sectors posted positive returns
for the year. The top performer was energy, which was up 28.77%, followed by
utilities and telecommunication services, with respective returns of +19.60% and
+15.98%. The worst performer for the year was health care, which was up only
..24%. Also at the bottom were information technology and consumer staples, with
respective one-year returns of +2.13% and +6.04%.
How would you characterize market conditions at the close of the period?
As 2004 came to an end, the economy and earnings growth were beginning to slow,
the Fed appeared poised to continue moving interest rates higher, legislative
progress was anticipated on many fronts in Washington, DC, and concerns remained
about the structural problems of debt and deficits as reflected by a significant
decline in the U.S. dollar.
The recent increase in equity prices to new cyclical highs has led to questions
about how much upside potential exists. Valuation levels, at least on an
absolute basis, are somewhat stretched, although the profit environment is still
strong enough to support the market. Equity prices could have fallen as a result
of the Fed's recent interest rate hike, but clearly have been benefiting from
recent declines in bond yields as well as from the declining dollar. Our opinion
is that until monetary tightening and/or rising bond yields begin to take their
toll, equities should continue to perform well. Having said that, we expect the
portfolio to continue to meet its objective of tracking the performance of the
S&P 500 Index.
Vincent J. Costa
Co-Portfolio Manager
Debra L. Jelilian
Co-Portfolio Manager
Jeffrey L. Russo
Co-Portfolio Manager
January 11, 2005
- --------------------------------------------------------------------------------
We are pleased to announce that the day-to-day management of Merrill Lynch S&P
500 Index Fund is now run by Vincent J. Costa, Director of Merrill Lynch
Investment Managers (MLIM) (Quantitative Investments) since 1999; Debra L.
Jelilian, Director of MLIM (Quantitative Investments) since 1999; and Jeffrey L.
Russo, Director of MLIM (Quantitative Investments) since 2004 and Vice President
of MLIM from 1999 to 2004.
- --------------------------------------------------------------------------------
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004 5
[LOGO] Merrill Lynch Investment Managers
Performance Data
About Fund Performance
Investors are able to purchase shares of the Fund, which offers two pricing
alternatives:
o Class A Shares do not incur an initial sales charge (front-end load) or
deferred sales charge and bear no ongoing distribution fee. In addition,
Class A Shares are subject to an ongoing account maintenance fee of .25%
per year.
o Class I Shares do not incur an initial sales charge (front-end load) or
deferred sales charge and bear no ongoing distribution or account
maintenance fees. Class I Shares are available only to eligible investors.
None of the past results shown should be considered a representation of future
performance. Current performance may be lower or higher than the performance
data quoted. Refer to www.mlim.ml.com to obtain performance data current to the
most recent month-end. Performance results do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. Figures shown in each of the following tables assume reinvestment of all
dividends and capital gain distributions, if any, at net asset value on the
ex-dividend date. Investment return and principal value of shares will fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the different
levels of account maintenance, distribution and transfer agency fees applicable
to each class, which are deducted from the income available to be paid to
shareholders.
Recent Performance Results
6-Month 12-Month Since Inception
As of December 31, 2004 Total Return Total Return Total Return
===============================================================================================
ML S&P 500 Index Fund Class A Shares* +6.92% +10.22% +73.29%
- -----------------------------------------------------------------------------------------------
ML S&P 500 Index Fund Class I Shares* +7.02 +10.55 +76.66
- -----------------------------------------------------------------------------------------------
S&P 500(R) Index ** +7.19 +10.88 +81.55
- -----------------------------------------------------------------------------------------------
* Cumulative total investment returns are based on changes in net asset
value for the periods shown, and assume reinvestment of all dividends and
capital gains distributions at net asset value on the ex-dividend date.
The Fund's inception date is 4/03/97.
** This unmanaged Index covers 500 industrial, utility, transportation and
financial companies of the U.S. markets (mostly NYSE issues), representing
about 75% of NYSE market capitalization and 30% of NYSE issues. Since
inception total return is from 4/03/97.
S&P 500 is a registered trademark of the McGraw-Hill Companies.
6 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004
Performance Data (concluded)
Total Return Based on a $10,000 Investment--Class A & Class I Shares
A line graph depicting the growth of an investment in the Fund's Class A Shares
and Class I Shares compared to growth of an investment in the Standard & Poor's
500 Index. Values are from April 3, 1997 to December 2004.
4/03/97** 12/97 12/98 12/99 12/00 12/01 12/02 12/03 12/04
ML S&P 500 Index
Fund+--Class A Shares* $10,000 $13,053 $16,702 $20,069 $18,138 $15,873 $12,282 $15,723 $17,329
ML S&P 500 Index
Fund+--Class I Shares* $10,000 $13,080 $16,774 $20,204 $18,299 $16,069 $12,451 $15,981 $17,666
4/30/97** 12/97 12/98 12/99 12/00 12/01 12/02 12/03 12/04
Standard & Poor's 500 Index++ $10,000 $13,103 $16,848 $20,393 $18,537 $16,333 $12,724 $16,373 $18,155
* Assuming transaction costs and other operating expenses, including
advisory fees.
** Commencement of operations.
+ The Fund invests all of its assets in Master S&P 500 Index Series of
Quantitative Master Series Trust. The Trust's investments are allocated
among common stocks in approximately the same weightings as the S&P 500
Index.
++ This unmanaged Index covers 500 industrial, utility, transportation and
financial companies of the U.S. markets (mostly NYSE issues), representing
about 75% of NYSE market capitalization and 30% of NYSE issues.
Average Annual Total Return
Class A Shares Return
================================================================================
One Year Ended 12/31/04 +10.22%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/04 - 2.89
- --------------------------------------------------------------------------------
Inception (4/03/97) through 12/31/04 + 7.36
- --------------------------------------------------------------------------------
Class I Shares Return
================================================================================
One Year Ended 12/31/04 +10.55%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/04 - 2.65
- --------------------------------------------------------------------------------
Inception (4/03/97) through 12/31/04 + 7.62
- --------------------------------------------------------------------------------
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004 7
[LOGO] Merrill Lynch Investment Managers
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses related
to transactions, including sales charges, redemption fees and exchange fees; and
(b) operating expenses including advisory fees, distribution fees including
12(b)-1 fees, and other Fund expenses. The following example (which is based on
a hypothetical investment of $1,000 invested on July 1, 2004 and held through
December 31, 2004) is intended to assist shareholders both in calculating
expenses based on an investment in the Fund and in comparing these expenses with
similar costs of investing in other mutual funds.
The first table below provides information about actual account values and
actual expenses. In order to estimate the expenses a shareholder paid during the
period covered by this report, shareholders can divide their account value by
$1,000 and then multiply the result by the number in the first line under the
heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses. In order to assist
shareholders in comparing the ongoing expenses of investing in this Fund and
other funds, compare the 5% hypothetical example with the 5% hypothetical
examples that appear in other funds' shareholder reports.
The expenses shown in the table are intended to highlight shareholders ongoing
costs only and do not reflect any transactional expenses, such as sales charges,
redemption fees or exchange fees. Therefore, the second table is useful in
comparing ongoing expenses only, and will not help shareholders determine the
relative total expenses of owning different funds. If these transactional
expenses were included, shareholder expenses would have been higher.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value July 1, 2004 to
July 1, 2004 December 31, 2004 December 31, 2004
=========================================================================================================
Actual
=========================================================================================================
Class A $1,000 $1,069.20 $3.07
- ---------------------------------------------------------------------------------------------------------
Class I $1,000 $1,070.20 $1.77
=========================================================================================================
Hypothetical (5% annual return before expenses)**
=========================================================================================================
Class A $1,000 $1,022.17 $3.00
- ---------------------------------------------------------------------------------------------------------
Class I $1,000 $1,023.43 $1.73
- ---------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (.59% for Class A and .34% for Class I), multiplied by
the average account value over the period, multiplied by 184/366 (to
reflect the one-half year period shown). Because the Fund is a feeder
fund, the expense table example reflects the expenses of both the feeder
fund and the master series in which it invests.
** Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half year divided by 366.
8 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004
Statement of Assets and Liabilities Merrill Lynch S&P 500 Index Fund
As of December 31, 2004
============================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investment in Master S&P 500 Index Series (the "Series"),
at value (identified cost--$2,193,021,062) .................. $ 2,594,788,227
Prepaid expenses ............................................. 22,997
---------------
Total assets ................................................. 2,594,811,224
---------------
============================================================================================================================
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payables:
Administrative fees ....................................... $ 601,664
Distributor ............................................... 196,658 798,322
---------------
Accrued expenses and other liabilities ....................... 981,311
---------------
Total liabilities ............................................ 1,779,633
---------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets ................................................... $ 2,593,031,591
===============
============================================================================================================================
Net Assets Consist of
- ----------------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.0001 par value,
250,000,000 shares authorized ............................... $ 6,344
Class I Shares of Common Stock, $.0001 par value,
250,000,000 shares authorized ............................... 11,140
Paid-in capital in excess of par ............................. 2,395,780,378
Undistributed investment income--net ......................... $ 728,636
Accumulated realized capital losses allocated from the
Series--net ................................................. (205,262,072)
Unrealized appreciation allocated from the Series--net ....... 401,767,165
---------------
Total accumulated earnings--net .............................. 197,233,729
---------------
Net Assets ................................................... $ 2,593,031,591
===============
============================================================================================================================
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $939,608,240 and
63,438,426 shares outstanding ............................... $ 14.81
===============
Class I--Based on net assets of $1,653,423,351 and
111,403,226 shares outstanding .............................. $ 14.84
===============
See Notes to Financial Statements.
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004 9
[LOGO] Merrill Lynch Investment Managers
Statement of Operations Merrill Lynch S&P 500 Index Fund
For the Year Ended December 31, 2004
============================================================================================================================
Investment Income Allocated from the Series--Net
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income allocated from the Series:
Dividends (including $130,425 from affiliates) ............ $ 48,437,780
Interest from affiliates .................................. 762,861
Securities lending ........................................ 214,677
Expenses .................................................. (790,894)
---------------
Net investment income allocated from the Series .............. 48,624,424
---------------
============================================================================================================================
Expenses
- ----------------------------------------------------------------------------------------------------------------------------
Administration fees .......................................... $ 5,981,121
Account maintenance fees--Class A ............................ 2,261,109
Transfer agent fees .......................................... 1,247,555
Printing and shareholder reports ............................. 108,724
Registration fees ............................................ 81,703
Professional fees ............................................ 35,222
Directors' fees and expenses ................................. 29,324
Other ........................................................ 150,823
---------------
Total expenses ............................................... 9,895,581
---------------
Investment income--net ....................................... 38,728,843
---------------
============================================================================================================================
Realized & Unrealized Gain (Loss) Allocated from the Series--Net
- ----------------------------------------------------------------------------------------------------------------------------
Realized loss on investments (including $(136,380) from
affiliates) and futures contracts allocated from the
Series--net ................................................. (22,528,106)
Change in unrealized appreciation on investments (including
appreciation of $418,590 from affiliates) and futures
contracts allocated from the Series--net .................... 228,800,431
---------------
Total realized and unrealized gain allocated from the
Series--net ................................................. 206,272,325
---------------
Net Increase in Net Assets Resulting from Operations ......... $ 245,001,168
===============
See Notes to Financial Statements.
10 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004
Statements of Changes in Net Assets Merrill Lynch S&P 500 Index Fund
For the Year Ended
December 31,
-----------------------------------
Increase (Decrease) in Net Assets: 2004 2003
============================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------------------
Investment income--net ....................................... $ 38,728,843 $ 25,864,982
Realized gain (loss) allocated from the Series--net .......... (22,528,106) 2,266,529
Change in unrealized appreciation allocated from the
Series--net ................................................. 228,800,431 468,520,739
-----------------------------------
Net increase in net assets resulting from operations ......... 245,001,168 496,652,250
-----------------------------------
============================================================================================================================
Dividends to Shareholders
- ----------------------------------------------------------------------------------------------------------------------------
Investment income--net:
Class A ................................................... (12,456,120) (9,012,142)
Class I ................................................... (25,908,960) (17,162,253)
-----------------------------------
Net decrease in net assets resulting from dividends to
shareholders ................................................ (38,365,080) (26,174,395)
-----------------------------------
============================================================================================================================
Capital Share Transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net assets derived from capital share
transactions ................................................ 77,228,211 258,203,138
-----------------------------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ................................. 283,864,299 728,680,993
Beginning of year ............................................ 2,309,167,292 1,580,486,299
-----------------------------------
End of year* ................................................. $ 2,593,031,591 $ 2,309,167,292
===================================
* Undistributed investment income--net .................... $ 728,636 $ 364,873
===================================
See Notes to Financial Statements.
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004 11
[LOGO] Merrill Lynch Investment Managers
Financial Highlights Merrill Lynch S&P 500 Index Fund
The following per share data and ratios have been Class A
derived from information provided in the financial ----------------------------------------------------------------------
statements. For the Year Ended December 31,
----------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
===========================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ... $ 13.62 $ 10.75 $ 14.05 $ 16.16 $ 18.00
----------------------------------------------------------------------
Investment income--net ............... .20++ .14++ .13++ .10 .04
Realized and unrealized gain (loss)
allocated from the Series--net ...... 1.19 2.87 (3.31) (2.12) (1.77)
----------------------------------------------------------------------
Total from investment operations ..... 1.39 3.01 (3.18) (2.02) (1.73)
----------------------------------------------------------------------
Less dividends and distributions:
Investment income--net ............ (.20) (.14) (.12) (.09) (.10)
In excess of investment
income--net ...................... -- -- -- -- --+
In excess of realized gain
allocated from the Series--net ... -- -- -- -- (.01)
----------------------------------------------------------------------
Total dividends and distributions .... (.20) (.14) (.12) (.09) (.11)
----------------------------------------------------------------------
Net asset value, end of year ......... $ 14.81 $ 13.62 $ 10.75 $ 14.05 $ 16.16
======================================================================
===========================================================================================================================
Total Investment Return
- ---------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ... 10.22% 28.02% (22.62%) (12.49%) (9.62%)
======================================================================
===========================================================================================================================
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement* ...... .59% .61% .61% .62% .63%
======================================================================
Expenses* ............................ .59% .61% .61% .63% .65%
======================================================================
Investment income--net ............... 1.42% 1.19% 1.03% .71% .60%
======================================================================
===========================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) $ 939,608 $ 880,875 $ 648,569 $ 772,750 $ 817,423
======================================================================
Portfolio turnover from the Series ... 5.84% 3.60% 4.59% 3.21% 9.71%
======================================================================
* 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 S&P 500 INDEX FUND DECEMBER 31, 2004
Financial Highlights (concluded) Merrill Lynch S&P 500 Index Fund
The following per share data and ratios have been Class I
derived from information provided in the financial ----------------------------------------------------------------------
statements. For the Year Ended December 31,
----------------------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2004 2003 2002 2001 2000
===========================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ... $ 13.64 $ 10.76 $ 14.08 $ 16.18 $ 18.02
----------------------------------------------------------------------
Investment income--net ............... .24++ .17++ .16++ .13 .13
Realized and unrealized gain (loss)
allocated from the Series ........... 1.19 2.88 (3.33) (2.10) (1.82)
----------------------------------------------------------------------
Total from investment operations ..... 1.43 3.05 (3.17) (1.97) (1.69)
----------------------------------------------------------------------
Less dividends and distributions:
Investment income--net ............ (.23) (.17) (.15) (.13) (.14)
In excess of investment
income--net ...................... -- -- -- -- --+
In excess of realized gain
allocated from the Series--net ... -- -- -- -- (.01)
----------------------------------------------------------------------
Total dividends and distributions .... (.23) (.17) (.15) (.13) (.15)
----------------------------------------------------------------------
Net asset value, end of year ......... $ 14.84 $ 13.64 $ 10.76 $ 14.08 $ 16.18
======================================================================
===========================================================================================================================
Total Investment Return
- ---------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ... 10.55% 28.35% (22.51%) (12.19%) (9.43%)
======================================================================
===========================================================================================================================
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
Expenses, net of reimbursement* ...... .34% .36% .36% .37% .38%
======================================================================
Expenses* ............................ .34% .36% .36% .38% .40%
======================================================================
Investment income--net ............... 1.68% 1.44% 1.27% .97% .85%
======================================================================
===========================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) $ 1,653,423 $ 1,428,292 $ 931,917 $ 1,108,832 $ 896,356
======================================================================
Portfolio turnover from the Series ... 5.84% 3.60% 4.59% 3.21% 9.71%
======================================================================
* 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 S&P 500 INDEX FUND DECEMBER 31, 2004 13
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements Merrill Lynch S&P 500 Index Fund
1. Significant Accounting Policies:
Merrill Lynch S&P 500 Index Fund (the "Fund") is part of Merrill Lynch Index
Funds, Inc. (the "Corporation"). The Fund is registered under the Investment
Company Act of 1940, as amended, as a non-diversified mutual fund. The Fund's
financial statements are prepared in conformity with U.S. generally accepted
accounting principles, which may require the use of management accruals and
estimates. Actual results may differ from these estimates. The Fund seeks to
achieve its investment objective by investing all of its assets in Master S&P
500 Index Series (the "Series") of Quantitative Master Series Trust, which has
the same investment objective and strategies as the Fund. The value of the
Fund's investment in the Series reflects the Fund's proportionate interest in
the net assets of the Series. The performance of the Fund is directly affected
by the performance of the Series. The financial statements of the Series,
including the Schedule of Investments, are included elsewhere in this report and
should be read in conjunction with the Fund's financial statements. The
percentage of the Series owned by the Fund at December 31, 2004 was 88.3%. The
Fund offers multiple classes of shares. Shares of Class A and Class I are sold
without the imposition of a front-end or deferred sales charge. Both classes of
shares have identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class A Shares bear certain expenses
related to the account maintenance of such shares and have exclusive voting
rights with respect to matters relating to their account maintenance
expenditures. Income, expenses (other than expenses attributable to a specific
class) and realized and unrealized gains and losses on investments are allocated
daily to each class based on its relative net assets. The following is a summary
of significant accounting policies followed by the Fund.
(a) Valuation of investments -- The Fund records its investment in the Series at
fair value. Valuation of securities held by the Series is discussed in Note 1a
of the Series' Notes to Financial Statements, which are included elsewhere in
this report.
(b) Investment income and expenses -- The Fund records daily its proportionate
share of the Series' income, expenses and realized and unrealized gains and
losses. In addition, the Fund accrues its own expenses.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders. Therefore,
no federal income tax provision is required.
(d) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(e) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(f) Investment transactions -- Investment transactions in the Series are
accounted for on a trade date basis.
2. Transactions with Affiliates:
The Corporation has entered into an Administrative Services Agreement with
Merrill Lynch Investment Managers, L.P. ("MLIM"). The general partner of MLIM is
Princeton Services, Inc. ("PSI"), an indirect, wholly-owned subsidiary of
Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. The Fund
pays a monthly fee at an annual rate of .245% of the Fund's average daily net
assets for the performance of administrative services (other than investment
advice and related portfolio activities) necessary for the operation of the
Fund. MLIM has entered into a voluntary arrangement with the Fund under which
the expenses incurred by each class of shares of the Fund (excluding account
maintenance fees) will not exceed .40%. This arrangement has a one-year term and
is renewable.
The Corporation has also entered into a Distribution Agreement and Distribution
Plan with FAM Distributors, Inc. ("FAMD" or the "Distributor"), which is an
indirect, wholly-owned subsidiary of Merrill Lynch Group, Inc. Pursuant to the
Distribution Plan adopted by the Corporation in accordance with Rule 12b-1 under
the Investment Company Act of 1940, the Fund pays the Distributor an ongoing
account maintenance fee. The fee is accrued daily and paid monthly at the annual
rate of .25% based upon the average daily net assets of Class A Shares.
14 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004
Notes to Financial Statements (concluded) Merrill Lynch S&P 500 Index Fund
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance services to the Fund. The ongoing account maintenance fee
compensates the Distributor and MLPF&S for providing account maintenance
services to Class A shareholders.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
Certain officers and/or directors of the Fund are officers and/or directors of
MLIM, PSI, FAMD, FDS, and/or ML & Co.
3. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$77,228,211 and $258,203,138 for the years ended December 31, 2004 and December
31, 2003, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended December 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 19,152,185 $ 266,604,093
Shares issued to shareholders in
reinvestment of dividends ........... 773,559 11,276,761
Shares redeemed ........................ (21,176,733) (295,567,495)
-------------------------------
Net decrease ........................... (1,250,989) $ (17,686,641)
===============================
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended December 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 21,676,776 $ 259,407,002
Shares issued to shareholders in
reinvestment of dividends ........... 613,120 8,148,224
-------------------------------
Total issued ........................... 22,289,896 267,555,226
Shares redeemed ........................ (17,956,428) (215,576,494)
-------------------------------
Net increase ........................... 4,333,468 $ 51,978,732
===============================
- --------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended December 31, 2004 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 38,557,248 $ 537,823,786
Shares issued to shareholders in
reinvestment of dividends ........... 1,718,853 25,111,714
Shares redeemed ........................ (33,555,631) (468,020,648)
-------------------------------
Net increase ........................... 6,720,470 $ 94,914,852
===============================
- --------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended December 31, 2003 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ............................ 46,212,278 $ 538,202,424
Shares issued to shareholders in
reinvestment of dividends ........... 1,237,260 16,488,003
-------------------------------
Total issued ........................... 47,449,538 554,690,427
Shares redeemed ........................ (29,356,179) (348,466,021)
-------------------------------
Net increase ........................... 18,093,359 $ 206,224,406
===============================
4. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years ended December
31, 2004 and December 31, 2003 was as follows:
- --------------------------------------------------------------------------------
12/31/2004 12/31/2003
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income ............................ $38,365,080 $26,174,395
---------------------------
Total taxable distributions ..................... $38,365,080 $26,174,395
===========================
As of December 31, 2004, the components of accumulated earnings on a tax basis
were as follows:
- -----------------------------------------------------------------------------
Undistributed ordinary income -- net .................... $ 728,636
Undistributed long-term capital gains -- net ............ --
-------------
Total undistributed earnings -- net ..................... 728,636
Capital loss carryforward ............................... (122,043,773)*
Unrealized gains -- net ................................. 318,548,866**
-------------
Total accumulated earnings -- net ....................... $ 197,233,729
=============
* On December 31, 2004, the Fund had a net capital loss carryforward of
$122,043,773, of which $4,944,930 expires in 2008, $14,600,496 expires in
2009, $73,055,477 expires in 2010, $7,823,922 expires in 2011 and
$21,618,948 expires in 2012. 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.
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004 15
[LOGO] Merrill Lynch Investment Managers
Report of Independent Registered Public Accounting Firm
Merrill Lynch S&P 500 Index Fund
To the Shareholders and Board of Directors of
Merrill Lynch Index Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of Merrill
Lynch S&P 500 Index Fund, one of the series constituting Merrill Lynch Index
Funds, Inc. (the "Fund"), as of December 31, 2004, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Merrill Lynch S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. as of
December 31, 2004, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and its financial highlights for each of the five years in the period then
ended, in conformity with U.S. generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
February 23, 2005
16 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004
Summary Schedule of Investments Master S&P 500 Index Series
This summary schedule of investments is presented to help investors focus on the
Series' principal holdings. It includes the Series' 50 largest holdings and each
investment of any issuer that exceeds 1% of the Series' net assets. "Other
Securities" represent all issues not required to be disclosed under the rules
adopted by the Securities and Exchange Commission. A complete schedule of
investments is available without charge, upon request, by calling 800-637-3863
or on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Shares Percent of
Industry* Held Common Stocks Value Net Assets
==========================================================================================================================
Aerospace & Defense 132,448 United Technologies Corp. $ 13,688,501 0.5%
Other Securities 45,528,533 1.5
-----------------------------
59,217,034 2.0
- --------------------------------------------------------------------------------------------------------------------------
Air Freight & Logistics 291,600 United Parcel Service, Inc. 24,920,136 0.9
Other Securities 8,396,546 0.3
-----------------------------
33,316,682 1.2
- --------------------------------------------------------------------------------------------------------------------------
Airlines Other Securities 3,788,051 0.1
- --------------------------------------------------------------------------------------------------------------------------
Auto Components Other Securities 6,446,963 0.1
- --------------------------------------------------------------------------------------------------------------------------
Automobiles Other Securities 17,587,526 0.6
- --------------------------------------------------------------------------------------------------------------------------
Beverages 629,328 The Coca-Cola Co. 26,198,925 0.9
439,388 PepsiCo, Inc. 22,936,054 0.8
Other Securities 17,118,373 0.6
-----------------------------
66,253,352 2.3
- --------------------------------------------------------------------------------------------------------------------------
Biotechnology 328,347 +Amgen, Inc. 21,063,460 0.7
Other Securities 17,512,778 0.6
-----------------------------
38,576,238 1.3
- --------------------------------------------------------------------------------------------------------------------------
Building Products Other Securities 6,518,535 0.2
- --------------------------------------------------------------------------------------------------------------------------
Capital Markets 243,567 Merrill Lynch & Co., Inc. (b) 14,558,000 0.5
285,198 Morgan Stanley 15,834,193 0.5
Other Securities 52,985,113 1.8
-----------------------------
83,377,306 2.8
- --------------------------------------------------------------------------------------------------------------------------
Chemicals Other Securities 48,485,491 1.7
- --------------------------------------------------------------------------------------------------------------------------
Commercial Banks 1,046,006 Bank of America Corp. 49,151,822 1.7
491,565 US Bancorp 15,395,816 0.5
417,826 Wachovia Corp. 21,977,648 0.8
438,322 Wells Fargo & Co. 27,241,712 0.9
Other Securities 61,082,199 2.0
-----------------------------
174,849,197 5.9
- --------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies Other Securities 29,610,514 1.0
- --------------------------------------------------------------------------------------------------------------------------
Communications Equipment 1,705,571 +Cisco Systems, Inc. (c) 32,917,520 1.1
422,160 +Qualcomm, Inc. 17,899,584 0.6
Other Securities 27,175,492 0.9
-----------------------------
77,992,596 2.6
- --------------------------------------------------------------------------------------------------------------------------
Computers & Peripherals 647,516 +Dell, Inc. (c) 27,286,324 0.9
790,017 Hewlett-Packard Co. 16,566,656 0.6
430,767 International Business Machines Corp. 42,465,011 1.4
Other Securities 29,531,085 1.0
-----------------------------
115,849,076 3.9
- --------------------------------------------------------------------------------------------------------------------------
Construction & Engineering Other Securities 1,186,192 0.0
- --------------------------------------------------------------------------------------------------------------------------
Construction Materials Other Securities 1,438,810 0.1
- --------------------------------------------------------------------------------------------------------------------------
Consumer Finance 328,784 American Express Co. (c) 18,533,554 0.6
Other Securities 21,741,291 0.7
-----------------------------
40,274,845 1.3
- --------------------------------------------------------------------------------------------------------------------------
Containers & Packaging Other Securities 5,280,663 0.2
- --------------------------------------------------------------------------------------------------------------------------
Distributors Other Securities 2,009,753 0.1
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004 17
[LOGO] Merrill Lynch Investment Managers
Summary Schedule of Investments (continued) Master S&P 500 Index Series
Shares Percent of
Industry* Held Common Stocks Value Net Assets
==========================================================================================================================
Diversified Financial Services 1,344,636 Citigroup, Inc. $ 64,784,562 2.2%
923,856 JPMorgan Chase & Co. 36,039,623 1.2
Other Securities 9,544,414 0.3
-----------------------------
110,368,599 3.7
- --------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 474,834 Bell South Corp. (c) 13,195,637 0.4
Services 859,405 SBC Communications, Inc. 22,146,867 0.8
718,028 Verizon Communications, Inc. 29,087,314 1.0
Other Securities 22,491,480 0.8
-----------------------------
86,921,298 3.0
- --------------------------------------------------------------------------------------------------------------------------
Electric Utilities Other Securities 58,753,283 2.0
- --------------------------------------------------------------------------------------------------------------------------
Electrical Equipment Other Securities 12,896,030 0.5
- --------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Instruments Other Securities 9,830,071 0.2
- --------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services Other Securities 28,705,005 1.0
- --------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing 1,101,155 Wal-Mart Stores, Inc. 58,163,007 2.0
Other Securities 36,213,723 1.2
-----------------------------
94,376,730 3.2
- --------------------------------------------------------------------------------------------------------------------------
Food Products Other Securities 38,479,621 1.3
- --------------------------------------------------------------------------------------------------------------------------
Gas Utilities Other Securities 3,927,823 0.1
- --------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies 313,640 Medtronic, Inc. 15,578,499 0.5
Other Securities 49,287,882 1.7
-----------------------------
64,866,381 2.2
- --------------------------------------------------------------------------------------------------------------------------
Health Care Providers & Services 169,178 UnitedHealth Group, Inc. 14,892,739 0.5
Other Securities 52,228,564 1.8
-----------------------------
67,121,303 2.3
- --------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure Other Securities 46,511,603 1.5
- --------------------------------------------------------------------------------------------------------------------------
Household Durables Other Securities 16,449,630 0.6
- --------------------------------------------------------------------------------------------------------------------------
Household Products 659,396 Procter & Gamble Co. 36,319,532 1.2
Other Securities 18,193,068 0.7
-----------------------------
54,512,600 1.9
- --------------------------------------------------------------------------------------------------------------------------
IT Services Other Securities 33,201,844 1.1
- --------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates 202,988 3M Co. 16,659,225 0.6
2,740,581 General Electric Co. 100,031,206 3.4
522,025 Tyco International Ltd. 18,657,174 0.6
Other Securities 2,665,213 0.1
-----------------------------
138,012,818 4.7
- --------------------------------------------------------------------------------------------------------------------------
Insurance 675,707 American International Group, Inc. 44,373,679 1.5
Other Securities 80,684,379 2.8
-----------------------------
125,058,058 4.3
- --------------------------------------------------------------------------------------------------------------------------
Internet & Catalog Retail 171,400 +eBay, Inc. (c) 19,930,392 0.7
- --------------------------------------------------------------------------------------------------------------------------
Internet Software & Services 352,860 Yahoo!, Inc. 13,295,765 0.5
- --------------------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products Other Securities 6,495,103 0.2
- --------------------------------------------------------------------------------------------------------------------------
Machinery Other Securities 43,940,612 1.6
- --------------------------------------------------------------------------------------------------------------------------
Media 459,943 +Comcast Corp. Class A (c) 15,306,903 0.5
1,185,884 +Time Warner, Inc. 23,053,585 0.8
441,663 Viacom, Inc. Class B 16,072,117 0.5
532,847 Walt Disney Co. 14,813,147 0.5
Other Securities 47,631,504 1.6
-----------------------------
116,877,256 3.9
- --------------------------------------------------------------------------------------------------------------------------
Metals & Mining Other Securities 21,031,287 0.8
- --------------------------------------------------------------------------------------------------------------------------
Multi-Utilities & Unregulated Power Other Securities 22,635,202 0.8
- --------------------------------------------------------------------------------------------------------------------------
18 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004
Summary Schedule of Investments (continued) Master S&P 500 Index Series
Shares Percent of
Industry* Held Common Stocks Value Net Assets
==========================================================================================================================
Multiline Retail Other Securities $ 33,529,653 1.1%
- --------------------------------------------------------------------------------------------------------------------------
Office Electronics Other Securities 4,005,889 0.1
- --------------------------------------------------------------------------------------------------------------------------
Oil & Gas 552,300 ChevronTexaco Corp. 29,001,273 1.0
178,589 ConocoPhillips 15,506,883 0.5
1,670,712 Exxon Mobil Corp. (e) 85,640,697 2.9
Other Securities 50,922,280 1.8
-----------------------------
181,071,133 6.2
- --------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products Other Securities 14,375,520 0.5
- --------------------------------------------------------------------------------------------------------------------------
Personal Products Other Securities 17,339,016 0.6
- --------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 404,917 Abbott Laboratories 18,889,378 0.6
293,277 Eli Lilly & Co. 16,643,470 0.6
769,777 Johnson & Johnson 48,819,257 1.7
575,457 Merck & Co., Inc. 18,495,188 0.6
1,948,681 Pfizer, Inc. 52,400,032 1.8
345,899 Wyeth 14,731,838 0.5
Other Securities 30,830,941 1.0
-----------------------------
200,810,104 6.8
- --------------------------------------------------------------------------------------------------------------------------
Real Estate Other Securities 15,944,342 0.6
- --------------------------------------------------------------------------------------------------------------------------
Road & Rail Other Securities 15,220,661 0.6
- --------------------------------------------------------------------------------------------------------------------------
Semiconductors & 1,636,531 Intel Corp. 38,278,460 1.3
Semiconductor Equipment Other Securities 51,174,158 1.8
-----------------------------
89,452,618 3.1
- --------------------------------------------------------------------------------------------------------------------------
Software 2,822,124 Microsoft Corp. (e) 75,378,932 2.6
1,339,285 +Oracle Corp. 18,374,990 0.6
Other Securities 31,892,953 1.0
-----------------------------
125,646,875 4.2
- --------------------------------------------------------------------------------------------------------------------------
Specialty Retail 569,386 Home Depot, Inc. 24,335,558 0.8
Other Securities 46,166,663 1.6
-----------------------------
70,502,221 2.4
- --------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods Other Securities 13,413,363 0.4
- --------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance 251,073 Fannie Mae 17,878,908 0.6
Other Securities 36,796,703 1.3
-----------------------------
54,675,611 1.9
- --------------------------------------------------------------------------------------------------------------------------
Tobacco 532,618 Altria Group, Inc. 32,542,960 1.1
Other Securities 5,354,607 0.2
-----------------------------
37,897,567 1.3
- --------------------------------------------------------------------------------------------------------------------------
Trading Companies & Distributors Other Securities 1,495,286 0.1
- --------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services Other Securities 8,651,310 0.3
- --------------------------------------------------------------------------------------------------------------------------
Total Investments in Common Stocks
(Cost--$2,492,376,609) 2,930,288,307 99.7
==========================================================================================================================
Warrants (a)
==========================================================================================================================
Communications Equipment Other Securities 41,624 0.0
- --------------------------------------------------------------------------------------------------------------------------
Total Investments in Warrants
(Cost--$43,731) 41,624 0.0
==========================================================================================================================
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004 19
[LOGO] Merrill Lynch Investment Managers
Summary Schedule of Investments (concluded) Master S&P 500 Index Series
Percent of
Beneficial Interest Short-Term Securities Value Net Assets
==========================================================================================================================
$ 13,830,516 Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I (b) $ 13,830,516 0.5%
195,307,280 Merrill Lynch Liquidity Series, LLC
Money Market Series (b)(d) 195,307,280 6.6
- --------------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term
Securities (Cost--$209,137,796) 209,137,796 7.1
==========================================================================================================================
Total Investments (Cost--$2,701,558,136**) 3,139,467,727 106.8
Liabilities in Excess of Other Assets (201,076,662) (6.8)
--------------------------
Net Assets $2,938,391,065 100.0%
==========================
"Other Securities" represent issues that are not identified as the largest
50 holdings of the Series and issues not exceeding 1% of net assets.
* 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 industry sub-classifications for reporting ease. These industry
classifications are unaudited.
** The cost and unrealized appreciation/depreciation of investments as of
December 31, 2004, as computed for federal income tax purposes, were as
follows:
Aggregate cost ................................ $ 2,782,656,546
===============
Gross unrealized appreciation ................. $ 585,819,081
Gross unrealized depreciation ................. (229,007,900)
---------------
Net unrealized appreciation ................... $ 356,811,181
===============
+ Non-income producing security.
(a) 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.
(b) 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) were as follows:
--------------------------------------------------------------------------
Interest/
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 33,500 $ 147,707
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $(34,338,927) $ 844,463
Merrill Lynch Liquidity Series, LLC
Money Market Series $(16,953,033) $ 212,968
Merrill Lynch Premier
Institutional Fund (70,753,437) $ 25,152
--------------------------------------------------------------------------
(c) Security, or a portion of security, is on loan.
(d) Security was purchased with the cash proceeds from securities loans.
(e) All or a portion of security held as collateral in connection with open
financial futures contracts.
Financial futures contracts purchased as of December 31, 2004 were as
follows:
--------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Date Value Appreciation
--------------------------------------------------------------------------
40 S&P 500 March
Index 2005 $11,854,247 $282,753
--------------------------------------------------------------------------
See Notes to Financial Statements.
20 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004
Statement of Assets and Liabilities Master S&P 500 Index Series
As of December 31, 2004
============================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value
(including securities loaned of $188,922,252) (identified
cost--$2,481,584,236) ....................................... $ 2,915,771,931
Investments in affiliated securities, at value (identified
cost -$219,973,900) ......................................... 223,695,796
Receivables:
Dividends ................................................. $ 3,956,931
Contributions ............................................. 2,702,009
Interest from affiliates .................................. 39,746
Securities lending ........................................ 15,033
Securities sold ........................................... 12,490 6,726,209
---------------
Prepaid expenses ............................................. 16,459
---------------
Total assets ................................................. 3,146,210,395
---------------
============================================================================================================================
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value .................... 195,307,280
Payables:
Withdrawals ............................................... 11,945,472
Custodian bank ............................................ 121,381
Investment adviser ........................................ 13,916
Variation margin .......................................... 13,775
Securities purchased ...................................... 12,770
Other affiliates .......................................... 33,761 12,141,075
---------------
Accrued expenses and other liabilities ....................... 370,975
---------------
Total liabilities ............................................ 207,819,330
---------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets ................................................... $ 2,938,391,065
===============
============================================================================================================================
Net Assets Consist of
- ----------------------------------------------------------------------------------------------------------------------------
Investors' capital ........................................... $ 2,500,198,721
Unrealized appreciation--net ................................. 438,192,344
---------------
Net Assets ................................................... $ 2,938,391,065
===============
See Notes to Financial Statements.
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004 21
[LOGO] Merrill Lynch Investment Managers
Statement of Operations Master S&P 500 Index Series
For the Year Ended December 31, 2004
============================================================================================================================
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Dividends (including $147,707 from affiliates) ............... $ 54,162,066
Interest from affiliates ..................................... 844,463
Securities lending ........................................... 238,120
---------------
Total income ................................................. 55,244,649
---------------
============================================================================================================================
Expenses
- ----------------------------------------------------------------------------------------------------------------------------
Accounting services .......................................... $ 382,991
Professional fees ............................................ 144,970
Investment advisory fees ..................................... 136,071
Custodian fees ............................................... 116,587
Trustees' fees and expenses .................................. 24,269
Printing and shareholder reports ............................. 7,120
Other ........................................................ 69,094
---------------
Total expenses ............................................... 881,102
---------------
Investment income--net ....................................... 54,363,547
---------------
============================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- ----------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments (including $(192,845) from affiliates)--net ... (36,296,930)
Futures contracts--net .................................... 4,441,596 (31,855,334)
---------------
Change in unrealized appreciation on:
Investments (including appreciation of $482,413 from
affiliates)--net ......................................... 266,164,351
Futures contracts--net .................................... (2,478,347) 263,686,004
-----------------------------------
Total realized and unrealized gain--net ...................... 231,830,670
---------------
Net Increase in Net Assets Resulting from Operations ......... $ 286,194,217
===============
See Notes to Financial Statements.
22 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004
Statements of Changes in Net Assets Master S&P 500 Index Series
For the Year Ended
December 31,
-----------------------------------
Increase (Decrease) in Net Assets: 2004 2003
============================================================================================================================
Operations
- ----------------------------------------------------------------------------------------------------------------------------
Investment income--net ....................................... $ 54,363,547 $ 36,732,827
Realized gain (loss)--net .................................... (31,855,334) 6,988,294
Change in unrealized appreciation--net ....................... 263,686,004 502,365,410
-----------------------------------
Net increase in net assets resulting from operations ......... 286,194,217 546,086,531
-----------------------------------
============================================================================================================================
Capital Transactions
- ----------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions .................................. 1,018,136,288 818,978,064
Fair value of withdrawals .................................... (840,535,190) (617,173,500)
-----------------------------------
Net increase in net assets derived from capital transactions . 177,601,098 201,804,564
-----------------------------------
============================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ................................. 463,795,315 747,891,095
Beginning of year ............................................ 2,474,595,750 1,726,704,655
-----------------------------------
End of year .................................................. $ 2,938,391,065 $ 2,474,595,750
===================================
See Notes to Financial Statements.
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004 23
[LOGO] Merrill Lynch Investment Managers
Financial Highlights Master S&P 500 Index Series
The following ratios have been derived For the Year Ended December 31,
from information provided in the financial ----------------------------------------------------------------------
statements. 2004 2003 2002 2001 2000
===========================================================================================================================
Total Investment Return*
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return .............. 10.90% 28.70% (22.22%) (11.97%) --
======================================================================
===========================================================================================================================
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
Expenses ............................. .03% .04% .04% .05% .07%
======================================================================
Investment income--net ............... 1.99% 1.76% 1.59% 1.29% 1.16%
======================================================================
===========================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) $ 2,938,391 $ 2,474,596 $ 1,726,705 $ 1,893,497 $ 1,714,631
======================================================================
Portfolio turnover ................... 5.84% 3.60% 4.59% 3.21% 9.71%
======================================================================
* Total return is required to be disclosed for fiscal years beginning after
December 15, 2000.
See Notes to Financial Statements.
24 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004
Notes to Financial Statements Master S&P 500 Index Series
1. Significant Accounting Policies:
Master S&P 500 Index Series (the "Series") is part of Quantitative Master Series
Trust (the "Trust"). The Trust is registered under the Investment Company Act of
1940, as amended, and is organized as a Delaware statutory trust. The
Declaration of Trust permits the Trustees to issue nontransferable interests in
the Series, subject to certain limitations. The Series' financial statements are
prepared in conformity with U.S. generally accepted accounting principles, which
may require the use of management accruals and estimates. Actual results may
differ from these estimates. The following is a summary of significant
accounting policies followed by the Series.
(a) Valuation of investments -- Equity securities that are held by the Series
that are traded on stock exchanges or the Nasdaq National Market are valued at
the last sale price or official close price on the exchange, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price for long positions, and at the last available 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 Trust
employs pricing services to provide certain securities prices for the Trust.
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 Trust, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are reviewed
by the officers of the Trust under the general supervision of the Trust's Board
of Trustees. Such valuations and procedures will be reviewed periodically by the
Board of Trustees of the Trust.
Generally, trading in foreign securities, as well as U.S. government securities
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 Trust's Board of Trustees or by the Investment
Adviser using a pricing service and/or procedures approved by the Trust's Board
of Trustees.
(b) Derivative financial instruments -- The Series may engage in various
portfolio investment strategies to provide liquidity or as a proxy for a direct
investment in securities underlying the Series' index. Losses may arise due to
changes in the value of the contract or if the counterparty does not perform
under the contract.
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004 25
[LOGO] Merrill Lynch Investment Managers
Notes to Financial Statements (continued) Master S&P 500 Index Series
o Financial futures contracts -- The Series may purchase or sell financial
futures contracts and options on such futures contracts. Futures contracts
are contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract, the
Series deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected. Pursuant to
the contract, the Series agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in value of the contract.
Such receipts or payments are known as variation margin and are recorded
by the Series as unrealized gains or losses. When the contract is closed,
the Series records a realized gain or loss equal to the difference between
the value of the contract at the time it was opened and the value at the
time it was closed.
o Options -- The Series may purchase and write call and put options. When
the Series writes an option, an amount equal to the premium received by
the Series is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked-to-market to reflect the
current market value of the option written. When a security is purchased
or sold through an exercise of an option, the related premium paid (or
received) is added to (or deducted from) the basis of the security
acquired or deducted from (or added to) the proceeds of the security sold.
When an option expires (or the Series enters into a closing transaction),
the Series realizes a gain or loss on the option to the extent of the
premiums received or paid (or a gain or loss to the extent that the cost
of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Foreign currency transactions -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into U.S. dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on investments.
(d) Income taxes -- The Series is classified as a partnership for federal income
tax purposes. As such, each investor in the Series is treated as owner of its
proportionate share of the net assets, income, expenses and realized and
unrealized gains and losses of the Series. Therefore, no federal income tax
provision is required. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends and capital gains at various rates. It is
intended that the Series' assets will be managed so an investor in the Series
can satisfy the requirements of subchapter M of the Internal Revenue Code.
(e) Security transactions and investment income -- Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis.
(f) Securities lending -- The Series may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities. 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.
26 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004
Notes to Financial Statements (concluded) Master S&P 500 Index Series
(g) Custodian bank -- The Fund 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 of FAM.
FAM is responsible for the management of the Series' portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Series. For such services, the Series pays a monthly
fee at an annual rate of .005% of the average daily value of the Series' net
assets.
The Trust has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., or its
affiliates. As of December 31, 2004, the Series lent securities with a value of
$24,987,449 to MLPF&S or its affiliates. Pursuant to that order, the Trust also
has retained Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate
of FAM, as the securities lending agent for a fee based on a share of the
returns on investment of cash collateral. MLIM, LLC may, on behalf of the Trust
and the Series, invest cash collateral received by the Series for such loans,
among other things, in a private investment company managed by MLIM, LLC or in
registered money market funds advised by FAM or its affiliates. For the year
ended December 31, 2004, MLIM, LLC received $103,892 in securities lending agent
fees from the Series.
Merrill Lynch Trust Company ("MLTC"), a wholly-owned subsidiary of ML & Co., is
the Series' custodian.
For the year ended December 31, 2004, the Series reimbursed FAM $52,238 for
certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or directors of
FAM, PSI, MLTC, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 2004 were $439,815,033 and $154,386,107, respectively.
4. Short-Term Borrowings:
The Trust, on behalf of the Series, along with certain other funds managed by
FAM and its affiliates, is a party to a $500,000,000 credit agreement with a
group of lenders. The Series may borrow under the credit agreement to fund
shareholder redemptions and for other lawful purposes other than for leverage.
The Series may borrow up to the maximum amount allowable under the Series'
current prospectus and statement of additional information, subject to various
other legal, regulatory or contractual limits. The Series pays a commitment fee
of .07% per annum based on the Series' pro rata share of the unused portion of
the credit agreement. Amounts borrowed under the credit agreement bear interest
at a rate equal to, at each Series' election, the federal funds rate plus .50%
or a base rate as defined in the credit agreement. The Series did not borrow
under the credit agreement during the year ended December 31, 2004. On November
26, 2004, the credit agreement was renewed for one year under substantially the
same terms.
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004 27
[LOGO] Merrill Lynch Investment Managers
Report of Independent Registered Public Accounting Firm
Master S&P 500 Index Series
To the Investors and Board of Trustees of
Quantitative Master Series Trust:
We have audited the accompanying statement of assets and liabilities, including
the summary schedule of investments, of Master S&P 500 Index Series, one of the
portfolios constituting the Quantitative Master Series Trust (the "Trust"), as
of December 31, 2004, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2004, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Master
S&P 500 Index Series of the Quantitative Master Series Trust as of December 31,
2004, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and its financial
highlights for each of the five years in the period then ended, in conformity
with U.S. generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
February 23, 2005
28 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004
Officers and Directors/Trustees
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length of Overseen by Held by
Held with Time Director/ Director/
Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Interested Director/Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Terry K. P.O. Box 9011 President 1999 to President and Chairman of the Merrill Lynch Invest- 124 Funds None
Glenn* Princeton, NJ and present ment Managers, L.P. ("MLIM")/Fund Asset 163 Portfolios
08543-9011 Director/ Management, L.P. ("FAM")-advised funds since
Age: 64 Trustee 1999; Chairman (Americas Region) of MLIM from
2000 to 2002; Executive Vice President of MLIM
and FAM (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 MLIM
or FAM acts as investment adviser. Mr. Glenn is an "interested person" as described in the Investment Company Act, of
the Fund/Trust based on his present and former positions with MLIM, FAM, 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/Trust 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 General Partner of The Burton Partnership, Limited 23 Funds ITC Delta-
Burton Princeton, NJ Trustee present Partnership (an Investment Partnership) since 42 Portfolios Com, Inc.,
08543-9095 1979; Managing General Partner of the South Knology,
Age: 60 Atlantic Venture Funds since 1983; Member of Inc.,
the Investment Advisory Committee of the Symbion, Inc.
Florida State Board of Administration since 2001.
- ------------------------------------------------------------------------------------------------------------------------------------
M. Colyer P.O. Box 9095 Director/ 2000 to James R. Williston Professor of Investment Manage- 24 Funds Cambridge
Crum Princeton, NJ Trustee present ment Emeritus, Harvard Business School since 1996; 43 Portfolios Bancorp
08543-9095 James R. Williston Professor of Investment Manage-
Age: 72 ment, Harvard Business School from 1971 to 1996.
- ------------------------------------------------------------------------------------------------------------------------------------
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 1998. 42 Portfolios
Hodrick 08543-9095
Age: 42
- ------------------------------------------------------------------------------------------------------------------------------------
David H. P.O. Box 9095 Director/ 2003 to Consultant with Putnam Investments from 1993 to 23 Funds None
Walsh Princeton, NJ Trustee present 2003 and employed in various capacities therewith 42 Portfolios
08543-9095 from 1973 to 1992; Director, The National Audubon
Age: 63 Society since 1998; Director, the American
Museum of Fly Fishing since 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
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- 42 Portfolios Pharma-
08543-9095 opment of Warner Lambert Co. from 1979 to 1997; ceuticals,
Age: 63 Director of Michael J. Fox Foundation for Parkinson's Inc.
Research since 2000; Director of BTG International
Plc (a global technology commercialization
company) since 2001.
------------------------------------------------------------------------------------------------------------------------
* 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.
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004 29
[LOGO] Merrill Lynch Investment Managers
Officers and Directors/Trustees (concluded)
Position(s) Length of
Held with Time
Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund/Trust Officers*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1997 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since 1999;
Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999 and Director
08543-9011 and and since 2004; Vice President of FAMD since 1999; Vice President of MLIM and FAM from
Age: 44 Treasurer 1999 to 1990 to 1997; Director of Taxation of MLIM from 1990 to 2001.
present
- ------------------------------------------------------------------------------------------------------------------------------------
Robert C. P.O. Box 9011 Senior Vice 1999 to President of MLIM/FAM-advised funds since 2005; President of MLIM and FAM since
Doll, Jr. Princeton, NJ President present 2001; Co-Head (Americas Region) thereof from 2000 to 2001 and Senior Vice President
08543-9011 from 1999 to 2001; President and Director of Princeton Services, Inc. since 2001;
Age: 50 President of Princeton Administrators, L.P. since 2001; Chief Investment Officer of
Oppenheimer Funds, Inc. from 1991 to 1999.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard J. 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: 48
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey P.O. Box 9011 Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President and
Hiller Princeton, NJ Compliance present Chief Compliance Officer of MLIM since 2004; Global Director of Compliance at
08543-9011 Officer Morgan Stanley Investment Management from 2002 to 2004; Managing Director and
Age: 53 Global Director of Compliance at Citigroup Asset Management from 2000 to 2002;
Chief Compliance Officer at Soros Fund Management in 2000; Chief Compliance Officer
at Prudential Financial from 1995 to 2000.
- ------------------------------------------------------------------------------------------------------------------------------------
Alice A. P.O. Box 9011 Secretary 2004 to Secretary of MLIM, FAM, FAMD and Princeton Services since 2004; Director (Legal
Pellegrino Princeton, NJ present Advisory) of MLIM since 2002; Vice President of MLIM from 1999 to 2002; Attorney
08543-9011 associated with MLIM since 1997.
Age: 44
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund/Trust serve at the pleasure of the Board of Directors/Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
Further information about the Fund's Officers and Directors/Trustees is available in the Fund's Statement of Additional
Information, which can be obtained without charge by calling 1-800-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
- --------------------------------------------------------------------------------
Effective January 1, 2005, Terry K. Glenn, President and Director/Trustee and M.
Colyer Crum, Director/Trustee of Merrill Lynch Index Funds, Inc. and
Quantitative Master Series Trust retired. The Fund's/Trust's Board of
Directors/Trustees wishes Mr. Glenn and Professor Crum well in their
retirements.
Effective January 1, 2005, Robert C. Doll, Jr. became Executive Vice President
and Chief Executive Officer of the Fund and the Trust.
- --------------------------------------------------------------------------------
30 MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at http://www.icsdelivery.com/live and follow the instructions. When you
visit this site, you will obtain a personal identification number (PIN). You
will need this PIN should you wish to update your e-mail address, choose to
discontinue this service and/or make any other changes to the service. This
service is not available for certain retirement accounts at this time.
MERRILL LYNCH S&P 500 INDEX FUND DECEMBER 31, 2004 31
[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)
at www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's
Web site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Merrill Lynch Index Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
#Index 4 -- 12/04
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) John F.
O'Brien (as of November 22, 2004), (5) David H. Walsh and (6) 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
S&P 500 Index Fund of Merrill Lynch Index Funds, Inc.
(a) Audit Fees - Fiscal Year Ending December 31, 2004 - $6,200
Fiscal Year Ending December 31, 2003 - $6,000
Master S&P 500 Index Series of Quantitative Master Series Trust
(a) Audit Fees - Fiscal Year Ending December 31, 2004 - $33,400
Fiscal Year Ending December 31, 2003 - $33,000
S&P 500 Index Fund of Merrill Lynch Index Funds, Inc.
(b) Audit-Related Fees - Fiscal Year Ending December 31, 2004 - $0
Fiscal Year Ending December 31, 2003 - $0
Master S&P 500 Index Series of Quantitative Master Series Trust
(b) Audit-Related Fees - Fiscal Year Ending December 31, 2004 - $0
Fiscal Year Ending December 31, 2003 - $12,000
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.
S&P 500 Index Fund of Merrill Lynch Index Funds, Inc.
(c) Tax Fees - Fiscal Year Ending December 31, 2004 - $5,200
Fiscal Year Ending December 31, 2003 - $6,900
The nature of the services include tax compliance, tax advice and tax
planning.
Master S&P 500 Index Series of Quantitative Master Series Trust
(c) Tax Fees - Fiscal Year Ending December 31, 2004 - $15,000
Fiscal Year Ending December 31, 2003 - $15,000
The nature of the services include tax compliance, tax advice and tax
planning.
S&P 500 Index Fund of Merrill Lynch Index Funds, Inc.
(d) All Other Fees - Fiscal Year Ending December 31, 2004 - $0
Fiscal Year Ending December 31, 2003 - $0
Master S&P 500 Index Series of Quantitative Master Series Trust
(d) All Other Fees - Fiscal Year Ending December 31, 2004 - $0
Fiscal Year Ending December 31, 2003 - $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to the
registrant's affiliated service providers that relate directly to the
operations and the financial reporting of the registrant. Certain of
these non-audit services that the Committee believes are a) consistent
with the SEC's auditor independence rules and b) routine and recurring
services that will not impair the independence of the independent
accountants may be approved by the Committee without consideration on a
specific case-by-case basis ("general pre-approval"). However, such
services will only be deemed pre-approved provided that any individual
project does not exceed $5,000 attributable to the registrant or
$50,000 for all of the registrants the Committee oversees. Any proposed
services exceeding the pre-approved cost levels will require specific
pre-approval by the Committee, as will any other services not subject
to general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending December 31, 2004 - $11,926,355
Fiscal Year Ending December 31, 2003 - $18,621,495
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $945,000, 0%
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
DETAILED SCHEDULE OF INVESTMENTS
To the Investors and Board of Trustees of Quantitative Master Series Trust:
We have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the financial statements of Master
S&P 500 Index Series (the "Series"), one of the portfolios constituting the
Quantitative Master Series Trust (the "Trust") as of December 31, 2004, and for
the year then ended and have issued our report thereon dated February 23, 2005,
which report and financial statements are included in Item 1 of this Certified
Shareholder Report on Form N-CSR. Our audit also included the Series' schedule
of investments (the "Schedule") as of December 31, 2004 appearing in Item 6 of
this Form N-CSR. This Schedule is the responsibility of the Trust's management.
Our responsibility is to express an opinion based on our audit. In our opinion,
the Schedule referred to above, when considered in relation to the basic
financial statements taken as a whole of the Series referred to above, presents
fairly, in all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
February 23, 2005
Master S&P 500 Index Series
Schedule of Investments as of December 31, 2004
Industry* Shares Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------------
Aerospace & Defense - 2.0% 217,320 Boeing Co. $ 11,250,656
51,648 General Dynamics Corp. 5,402,381
28,687 Goodrich Corp. 936,344
221,677 Honeywell International, Inc. 7,849,583
29,474 L-3 Communications Holdings, Inc. 2,158,676
118,970 Lockheed Martin Corp. 6,608,784
92,552 Northrop Grumman Corp.(c) 5,031,127
115,174 Raytheon Co.(c) 4,472,206
46,115 Rockwell Collins, Inc. 1,818,776
132,448 United Technologies Corp. 13,688,501
---------------
59,217,034
- -----------------------------------------------------------------------------------------------------------------------------------
Air Freight & Logistics - 1.2% 77,408 FedEx Corp. 7,623,914
16,174 Ryder System, Inc. 772,632
291,600 United Parcel Service, Inc. 24,920,136
---------------
33,316,682
- -----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.1% 60,476 + Delta Air Lines, Inc.(c) 452,360
204,895 Southwest Airlines Co. 3,335,691
---------------
3,788,051
- -----------------------------------------------------------------------------------------------------------------------------------
Auto Components - 0.1% 19,530 Cooper Tire & Rubber Co. 420,871
38,845 Dana Corp. 673,184
146,225 Delphi Corp.(c) 1,318,949
42,493 + The Goodyear Tire & Rubber Co. 622,947
48,820 Johnson Controls, Inc. 3,097,141
32,126 Visteon Corp. 313,871
---------------
6,446,963
- -----------------------------------------------------------------------------------------------------------------------------------
Automobiles - 0.6% 473,999 Ford Motor Co.(c) 6,939,345
149,706 General Motors Corp.(c) 5,997,222
76,559 Harley-Davidson, Inc. 4,650,959
---------------
17,587,526
- -----------------------------------------------------------------------------------------------------------------------------------
Beverages - 2.3% 9,583 Adolph Coors Co. Class B 725,146
207,685 Anheuser-Busch Cos., Inc. 10,535,860
31,988 Brown-Forman Corp. Class B 1,557,176
629,328 The Coca-Cola Co. 26,198,925
118,287 Coca-Cola Enterprises, Inc. 2,466,284
67,822 Pepsi Bottling Group, Inc. 1,833,907
439,388 PepsiCo, Inc. 22,936,054
---------------
66,253,352
- -----------------------------------------------------------------------------------------------------------------------------------
Biotechnology - 1.3% 328,347 + Amgen, Inc. 21,063,460
53,155 Applera Corp. - Applied Biosystems Group 1,111,471
87,740 + Biogen Idec, Inc.(c) 5,844,361
46,234 + Chiron Corp. 1,540,979
59,080 + Genzyme Corp. 3,430,776
111,700 + Gilead Sciences, Inc. 3,908,383
61,852 + Medimmune, Inc. 1,676,808
---------------
38,576,238
- -----------------------------------------------------------------------------------------------------------------------------------
Building Products - 0.2% 55,400 + American Standard Cos., Inc. 2,289,128
115,779 Masco Corp. 4,229,407
---------------
6,518,535
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 2.8% 195,895 The Bank of New York Co., Inc. 6,546,811
26,411 The Bear Stearns Cos., Inc. 2,702,109
354,368 The Charles Schwab Corp. 4,238,241
94,400 + E*Trade Financial Corp. 1,411,280
26,000 Federated Investors, Inc. Class B 790,400
65,586 Franklin Resources, Inc. 4,568,065
125,400 Goldman Sachs Group, Inc. 13,046,616
61,905 Janus Capital Group, Inc. 1,040,623
70,378 Lehman Brothers Holdings, Inc. 6,156,667
108,816 Mellon Financial Corp. 3,385,266
243,567 Merrill Lynch & Co., Inc.(b) 14,558,000
285,198 Morgan Stanley 15,834,193
57,027 Northern Trust Corp. 2,770,372
87,023 State Street Corp.(c) 4,274,570
33,024 T. Rowe Price Group, Inc. 2,054,093
---------------
83,377,306
- -----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 1.7% 58,547 Air Products & Chemicals, Inc. 3,393,970
242,376 The Dow Chemical Co. 12,000,036
258,173 EI Du Pont de Nemours & Co. 12,663,386
19,950 Eastman Chemical Co. 1,151,713
67,114 Ecolab, Inc. 2,357,715
31,997 Engelhard Corp. 981,348
11,835 Great Lakes Chemical Corp. 337,179
26,859 + Hercules, Inc. 398,856
24,096 International Flavors & Fragrances, Inc. 1,032,273
68,577 Monsanto Co. 3,809,452
44,587 PPG Industries, Inc. 3,039,050
84,246 Praxair, Inc. 3,719,461
55,003 Rohm & Haas Co.(c) 2,432,783
19,323 Sigma-Aldrich Corp. 1,168,269
---------------
48,485,491
- -----------------------------------------------------------------------------------------------------------------------------------
Master S&P 500 Index Series
Schedule of Investments as of December 31, 2004 (continued)
Industry* Shares Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 5.9% 92,503 AmSouth Bancorp $ 2,395,828
145,700 BB&T Corp.(c) 6,126,685
1,046,006 Bank of America Corp. 49,151,822
44,491 Comerica, Inc. 2,714,841
33,902 Compass Bancshares, Inc. 1,650,010
145,356 Fifth Third Bancorp(c) 6,872,432
32,000 First Horizon National Corp. 1,379,520
60,329 Huntington Bancshares, Inc. 1,494,953
105,710 Keycorp 3,583,569
30,800 M&T Bank Corp. 3,321,472
58,300 Marshall & Ilsley Corp. 2,576,860
177,056 National City Corp. 6,648,453
122,292 North Fork Bancorporation, Inc. 3,528,124
73,268 PNC Financial Services Group, Inc. 4,208,514
121,054 Regions Financial Corp. 4,308,312
88,599 SunTrust Banks, Inc. 6,545,694
75,651 Synovus Financial Corp. 2,162,106
491,565 US Bancorp 15,395,816
417,826 Wachovia Corp. 21,977,648
438,322 Wells Fargo & Co. 27,241,712
23,002 Zions Bancorporation 1,564,826
---------------
174,849,197
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 1.0% 69,278 + Allied Waste Industries, Inc. 642,900
52,600 + Apollo Group, Inc. Class A 4,245,346
28,058 Avery Dennison Corp. 1,682,638
268,925 Cendant Corp. 6,287,466
41,002 Cintas Corp. 1,798,348
36,102 Equifax, Inc. 1,014,466
49,185 H&R Block, Inc. 2,410,065
30,239 + Monster Worldwide, Inc. 1,017,240
60,782 Pitney Bowes, Inc. 2,812,991
51,995 RR Donnelley & Sons Co. 1,834,904
44,711 Robert Half International, Inc. 1,315,845
151,914 Waste Management, Inc. 4,548,305
---------------
29,610,514
- -----------------------------------------------------------------------------------------------------------------------------------
Communications Equipment - 2.6% 196,155 + ADC Telecommunications, Inc. 525,695
46,939 + Andrew Corp. 639,779
105,682 + Avaya, Inc.(c) 1,817,730
145,995 + Ciena Corp. 487,623
1,705,571 + Cisco Systems, Inc.(c) 32,917,520
55,743 + Comverse Technology, Inc. 1,362,916
352,675 + Corning, Inc.(c) 4,150,985
375,287 + JDS Uniphase Corp. 1,189,660
1,117,758 + Lucent Technologies, Inc.(c) 4,202,770
612,769 Motorola, Inc. 10,539,627
422,160 + Qualcomm, Inc. 17,899,584
40,194 Scientific-Atlanta, Inc.(c) 1,326,804
108,487 + Tellabs, Inc. 931,903
---------------
77,992,596
- -----------------------------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 3.9% 103,917 + Apple Computer, Inc. 6,692,255
647,516 + Dell, Inc.(c) 27,286,324
623,654 + EMC Corp. 9,273,735
82,998 + Gateway, Inc. 498,818
790,017 Hewlett-Packard Co. 16,566,656
430,767 International Business Machines Corp. 42,465,011
33,639 + Lexmark International, Inc. Class A 2,859,315
24,118 + NCR Corp. 1,669,689
91,421 + Network Appliance, Inc. 3,037,006
25,208 + QLogic Corp. 925,890
850,256 + Sun Microsystems, Inc. 4,574,377
---------------
115,849,076
- -----------------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.0% 21,761 Fluor Corp. 1,186,192
- -----------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.1% 26,347 Vulcan Materials Co. 1,438,810
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - 1.3% 328,784 American Express Co.(c) 18,533,554
60,167 Capital One Financial Corp. 5,066,663
328,972 MBNA Corp. 9,273,721
75,173 + Providian Financial Corp. 1,238,099
115,430 SLM Corp.(c) 6,162,808
---------------
40,274,845
- -----------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.2% 29,560 Ball Corp. 1,300,049
27,636 Bemis Co. 803,931
40,425 + Pactiv Corp. 1,022,348
22,269 + Sealed Air Corp. 1,186,270
14,153 Temple-Inland, Inc. 968,065
---------------
5,280,663
- -----------------------------------------------------------------------------------------------------------------------------------
Distributors - 0.1% 45,614 Genuine Parts Co. 2,009,753
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 3.7% 60,100 CIT Group, Inc. 2,753,782
1,344,636 Citigroup, Inc. 64,784,562
923,856 JPMorgan Chase & Co. 36,039,623
39,440 Moody's Corp. 3,425,364
Master S&P 500 Index Series
Schedule of Investments as of December 31, 2004 (continued)
Industry* Shares Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services 82,200 Principal Financial Group $ 3,365,268
(concluded) ---------------
110,368,599
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication Services - 3.0% 213,092 AT&T Corp.(c) 4,061,534
79,937 Alltel Corp. 4,697,098
474,834 BellSouth Corp.(c) 13,195,637
36,877 CenturyTel, Inc. 1,308,027
77,118 Citizens Communications Co. 1,063,457
465,645 + Qwest Communications International 2,067,464
859,405 SBC Communications, Inc. 22,146,867
374,000 Sprint Corp. 9,293,900
718,028 Verizon Communications, Inc. 29,087,314
---------------
86,921,298
- -----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 2.0% 35,520 + Allegheny Energy, Inc. 700,099
44,481 Ameren Corp. 2,230,277
103,120 American Electric Power Co., Inc.(c) 3,541,141
83,470 Centerpoint Energy, Inc.(c) 943,211
44,628 Cinergy Corp. 1,857,864
62,125 Consolidated Edison, Inc.(c) 2,717,969
40,638 DTE Energy Co.(c) 1,752,717
84,899 Edison International 2,719,315
60,755 Entergy Corp. 4,106,430
170,728 Exelon Corp. 7,523,983
48,007 FPL Group, Inc. 3,588,523
85,216 FirstEnergy Corp. 3,366,884
108,677 + PG&E Corp. 3,616,771
43,732 PPL Corp. 2,330,041
23,532 Pinnacle West Capital Corp. 1,045,056
63,726 Progress Energy, Inc. 2,882,964
190,523 The Southern Co. 6,386,331
50,996 TECO Energy, Inc. 782,279
73,722 TXU Corp. 4,759,492
104,502 Xcel Energy, Inc. 1,901,936
---------------
58,753,283
- -----------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.5% 51,744 American Power Conversion Corp. 1,107,322
24,252 Cooper Industries Ltd. Class A 1,646,468
108,748 Emerson Electric Co. 7,623,235
19,568 + Power-One, Inc. 174,547
47,315 Rockwell Automation, Inc. 2,344,458
---------------
12,896,030
- -----------------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Instruments - 0.2% 125,710 + Agilent Technologies, Inc. 3,029,611
46,264 + Jabil Circuit, Inc. 1,183,433
49,062 Molex, Inc. 1,471,860
139,563 + Sanmina-SCI Corp. 1,182,099
224,412 + Solectron Corp. 1,196,116
61,211 Symbol Technologies, Inc. 1,058,950
23,436 Tektronix, Inc. 708,002
---------------
9,830,071
- -----------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 1.0% 49,000 BJ Services Co. 2,280,460
86,944 Baker Hughes, Inc.(c) 3,709,900
113,204 Halliburton Co. 4,442,125
40,515 + Nabors Industries Ltd. 2,078,014
40,079 + Noble Corp. 1,993,529
27,272 + Rowan Cos., Inc. 706,345
151,454 Schlumberger Ltd.(c) 10,139,845
79,141 + Transocean, Inc. 3,354,787
---------------
28,705,005
- -----------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 3.2% 101,166 Albertson's, Inc. 2,415,844
103,318 CVS Corp. 4,656,542
121,724 Costco Wholesale Corp. 5,892,659
193,324 + The Kroger Co. 3,390,903
113,258 + Safeway, Inc. 2,235,713
32,242 Supervalu, Inc. 1,112,994
165,800 Sysco Corp.(c) 6,328,586
1,101,155 Wal-Mart Stores, Inc. 58,163,007
265,324 Walgreen Co.(c) 10,180,482
---------------
94,376,730
- -----------------------------------------------------------------------------------------------------------------------------------
Food Products - 1.3% 168,034 Archer-Daniels-Midland Co. 3,748,838
105,835 Campbell Soup Co.(c) 3,163,408
140,278 ConAgra Foods, Inc. 4,131,187
105,660 General Mills, Inc.(c) 5,252,359
90,436 HJ Heinz Co. 3,526,100
64,156 Hershey Foods Corp. 3,563,224
106,065 Kellogg Co. 4,736,863
35,600 McCormick & Co., Inc. 1,374,160
204,841 Sara Lee Corp. 4,944,862
58,370 WM Wrigley Jr Co. 4,038,620
---------------
38,479,621
- -----------------------------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% 41,461 KeySpan Corp. 1,635,636
64,037 NiSource, Inc. 1,458,763
11,254 Nicor, Inc. 415,723
Master S&P 500 Index Series
Schedule of Investments as of December 31, 2004 (continued)
Industry* Shares Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------------
Gas Utilities 9,504 Peoples Energy Corp. $ 417,701
(concluded) ---------------
3,927,823
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 2.2% 13,787 Bausch & Lomb, Inc. 888,710
153,327 Baxter International, Inc. 5,295,915
65,795 Becton Dickinson & Co. 3,737,156
68,735 Biomet, Inc. 2,982,412
216,364 + Boston Scientific Corp.(c) 7,691,740
27,218 CR Bard, Inc. 1,741,408
29,700 + Fisher Scientific International 1,852,686
81,621 Guidant Corp. 5,884,874
40,411 + Hospira, Inc. 1,353,768
313,640 Medtronic, Inc. 15,578,499
11,255 + Millipore Corp. 560,612
28,484 PerkinElmer, Inc. 640,605
91,788 + St. Jude Medical, Inc. 3,848,671
103,610 Stryker Corp. 4,999,183
43,557 + Thermo Electron Corp. 1,314,986
31,320 + Waters Corp. 1,465,463
62,777 + Zimmer Holdings, Inc. 5,029,693
---------------
64,866,381
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care Providers & Services - 2.3% 41,892 Aetna, Inc. New Shares 5,226,027
33,243 AmerisourceBergen Corp. 1,950,699
111,591 Cardinal Health, Inc. 6,489,017
119,935 + Caremark Rx, Inc.(c) 4,729,037
34,996 Cigna Corp. 2,854,624
22,800 + Express Scripts, Inc. 1,742,832
108,896 HCA, Inc. 4,351,484
63,100 Health Management Associates, Inc. Class A 1,433,632
42,204 + Humana, Inc. 1,253,037
62,540 IMS Health, Inc. 1,451,553
36,000 + Laboratory Corp. of America Holdings 1,793,520
23,404 Manor Care, Inc. 829,204
72,384 McKesson Corp. 2,277,201
70,601 + Medco Health Solutions, Inc. 2,937,002
26,100 Quest Diagnostics 2,493,855
122,337 + Tenet Healthcare Corp. 1,343,260
169,178 UnitedHealth Group, Inc. 14,892,739
78,892 + WellPoint, Inc. 9,072,580
---------------
67,121,303
- -----------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 1.5% 159,980 Carnival Corp.(c) 9,219,647
42,707 Darden Restaurants, Inc. 1,184,692
29,130 Harrah's Entertainment, Inc. 1,948,506
98,731 Hilton Hotels Corp. 2,245,143
92,720 International Game Technology(c) 3,187,714
62,027 Marriott International, Inc. Class A 3,906,460
325,718 McDonald's Corp. 10,442,519
103,112 + Starbucks Corp.(c) 6,430,064
53,668 Starwood Hotels & Resorts Worldwide, Inc. 3,134,211
31,572 Wendy's International, Inc. 1,239,517
75,734 Yum! Brands, Inc. 3,573,130
---------------
46,511,603
- -----------------------------------------------------------------------------------------------------------------------------------
Household Durables - 0.6% 20,542 Black & Decker Corp. 1,814,475
31,668 Centex Corp. 1,886,779
38,115 Fortune Brands, Inc. 2,941,716
12,111 KB Home 1,264,388
50,316 Leggett & Platt, Inc. 1,430,484
20,603 Maytag Corp. 434,723
70,554 Newell Rubbermaid, Inc. 1,706,701
32,586 Pulte Homes, Inc. 2,078,987
15,352 Snap-On, Inc. 527,495
21,043 The Stanley Works 1,030,897
19,260 Whirlpool Corp. 1,332,985
---------------
16,449,630
- -----------------------------------------------------------------------------------------------------------------------------------
Household Products - 1.9% 40,298 Clorox Co. 2,374,761
144,381 Colgate-Palmolive Co. 7,386,532
128,123 Kimberly-Clark Corp. 8,431,775
659,396 Procter & Gamble Co. 36,319,532
---------------
54,512,600
- -----------------------------------------------------------------------------------------------------------------------------------
IT Services - 1.1% 33,300 + Affiliated Computer Services, Inc. Class A 2,004,327
151,480 Automatic Data Processing, Inc. 6,718,138
46,350 + Computer Sciences Corp. 2,612,749
37,814 + Convergys Corp. 566,832
125,787 Electronic Data Systems Corp. 2,905,680
217,000 First Data Corp. 9,231,180
50,092 + Fiserv, Inc.(c) 2,013,197
98,058 Paychex, Inc.(c) 3,341,817
36,073 Sabre Holdings Corp. Class A 799,378
75,300 + Sungard Data Systems, Inc. 2,133,249
85,982 + Unisys Corp. 875,297
---------------
33,201,844
- -----------------------------------------------------------------------------------------------------------------------------------
Master S&P 500 Index Series
Schedule of Investments as of December 31, 2004 (continued)
Industry* Shares Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 4.7% 202,988 3M Co. $ 16,659,225
2,740,581 General Electric Co. 100,031,206
36,114 Textron, Inc. 2,665,213
522,025 Tyco International Ltd. 18,657,174
---------------
138,012,818
- -----------------------------------------------------------------------------------------------------------------------------------
Insurance - 4.3% 67,910 ACE Ltd. 2,903,152
27,666 AMBAC Financial Group, Inc. 2,272,209
80,285 AON Corp. 1,915,600
131,499 Aflac, Inc. 5,238,920
183,744 The Allstate Corp. 9,503,240
675,707 American International Group, Inc. 44,373,679
48,953 Chubb Corp. 3,764,486
44,001 Cincinnati Financial Corp. 1,947,484
75,225 Hartford Financial Services Group, Inc. 5,213,845
35,536 Jefferson-Pilot Corp. 1,846,451
46,919 Lincoln National Corp. 2,190,179
47,590 Loews Corp. 3,345,577
38,045 MBIA, Inc. 2,407,488
141,798 Marsh & McLennan Cos., Inc.(c) 4,665,154
192,442 Metlife, Inc. 7,795,825
51,000 The Progressive Corp. 4,326,840
137,300 Prudential Financial, Inc. 7,546,008
32,822 Safeco Corp. 1,714,621
172,827 The St. Paul Travelers Cos., Inc. 6,406,697
29,356 Torchmark Corp. 1,677,402
69,467 UnumProvident Corp. 1,246,238
35,505 XL Capital Ltd. Class A 2,756,963
---------------
125,058,058
- -----------------------------------------------------------------------------------------------------------------------------------
Internet & Catalog Retail - 0.7% 171,400 + eBay, Inc.(c) 19,930,392
- -----------------------------------------------------------------------------------------------------------------------------------
Internet Software & Services - 0.5% 352,860 + Yahoo!, Inc. 13,295,765
- -----------------------------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products - 0.2% 24,364 Brunswick Corp. 1,206,018
73,853 Eastman Kodak Co. 2,381,759
45,694 Hasbro, Inc. 885,550
103,734 Mattel, Inc. 2,021,776
---------------
6,495,103
- -----------------------------------------------------------------------------------------------------------------------------------
Machinery - 1.6% 88,844 Caterpillar, Inc. 8,663,178
11,109 Cummins, Inc. 930,823
78,350 Danaher Corp. 4,498,073
64,498 Deere & Co. 4,798,651
53,059 Dover Corp. 2,225,294
37,150 Eaton Corp. 2,688,174
24,096 ITT Industries, Inc. 2,034,907
78,721 Illinois Tool Works, Inc. 7,295,862
40,798 Ingersoll-Rand Co. Class A 3,276,079
18,658 + Navistar International Corp. 820,579
44,874 Paccar, Inc. 3,611,460
32,203 Pall Corp. 932,277
28,588 Parker Hannifin Corp. 2,165,255
---------------
43,940,612
- -----------------------------------------------------------------------------------------------------------------------------------
Media - 3.9% 170,854 Clear Channel Communications, Inc.(c) 5,721,900
459,943 + Comcast Corp. Class A(c) 15,306,903
119,705 + Comcast Corp. Special Class A(c) 3,931,112
21,019 Dow Jones & Co., Inc. 905,078
69,479 Gannett Co., Inc. 5,676,434
104,486 + Interpublic Group of Cos., Inc. 1,400,112
20,751 Knight-Ridder, Inc. 1,389,072
49,308 The McGraw-Hill Cos., Inc. 4,513,654
13,021 Meredith Corp. 705,738
38,347 New York Times Co. Class A 1,564,558
627,700 News Corp. Class A 11,712,882
51,097 Omnicom Group 4,308,499
1,185,884 + Time Warner, Inc. 23,053,585
80,342 Tribune Co. 3,385,612
82,571 + Univision Communications, Inc. Class A 2,416,853
441,663 Viacom, Inc. Class B 16,072,117
532,847 Walt Disney Co. 14,813,147
---------------
116,877,256
- -----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.8% 224,645 Alcoa, Inc. 7,058,346
22,028 Allegheny Technologies, Inc. 477,347
51,334 Freeport-McMoRan Copper & Gold, Inc. Class B 1,962,499
121,886 Newmont Mining Corp. 5,412,957
41,232 Nucor Corp. 2,158,083
24,188 Phelps Dodge Corp. 2,392,677
30,622 United States Steel Corp. 1,569,378
---------------
21,031,287
- -----------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities & Unregulated Power - 0.8% 154,760 + The AES Corp. 2,115,569
34,414 + CMS Energy Corp. 359,626
115,660 + Calpine Corp.(c) 455,700
44,449 Constellation Energy Group, Inc. 1,942,866
88,153 Dominion Resources, Inc. 5,971,484
Master S&P 500 Index Series
Schedule of Investments as of December 31, 2004 (continued)
Industry* Shares Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities & Unregulated Power 242,219 Duke Energy Corp.(c) $ 6,135,407
(concluded) 112,671 + Dynegy, Inc. Class A 520,540
900 Progress Energy, Inc. 108
61,164 Public Service Enterprise Group, Inc.(c) 3,166,460
53,638 Sempra Energy 1,967,442
---------------
22,635,202
- -----------------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 1.1% 29,895 + Big Lots, Inc. 362,626
21,964 Dillard's, Inc. Class A 590,173
82,550 Dollar General Corp. 1,714,563
43,664 Family Dollar Stores, Inc. 1,363,627
46,867 Federated Department Stores 2,708,444
80,198 JC Penney Co. Inc. Holding Co. 3,320,197
88,609 + Kohl's Corp. 4,356,904
75,928 The May Department Stores Co. 2,232,283
35,836 Nordstrom, Inc. 1,674,616
59,518 Sears Roebuck and Co. 3,037,203
234,335 Target Corp. 12,169,017
---------------
33,529,653
- -----------------------------------------------------------------------------------------------------------------------------------
Office Electronics - 0.1% 235,502 + Xerox Corp. 4,005,889
- -----------------------------------------------------------------------------------------------------------------------------------
Oil & Gas - 6.2% 23,767 Amerada Hess Corp. 1,957,925
64,861 Anadarko Petroleum Corp. 4,203,641
84,242 Apache Corp. 4,260,118
18,458 Ashland, Inc. 1,077,578
102,136 Burlington Resources, Inc. 4,442,916
552,300 ChevronTexaco Corp. 29,001,273
178,589 ConocoPhillips 15,506,883
125,494 Devon Energy Corp. 4,884,226
30,670 EOG Resources, Inc. 2,188,611
157,815 El Paso Corp. 1,641,276
1,670,712 Exxon Mobil Corp.(e) 85,640,697
39,365 Kerr-McGee Corp. 2,274,903
32,634 Kinder Morgan, Inc. 2,386,524
88,747 Marathon Oil Corp. 3,337,775
101,029 Occidental Petroleum Corp. 5,896,052
19,585 Sunoco, Inc. 1,600,290
68,474 Unocal Corp.(c) 2,960,816
66,600 Valero Energy Corp. 3,023,640
135,686 Williams Cos., Inc. 2,210,325
72,800 XTO Energy, Inc. 2,575,664
---------------
181,071,133
- -----------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.5% 65,467 Georgia-Pacific Corp. 2,453,703
125,462 International Paper Co. 5,269,404
28,528 Louisiana-Pacific Corp. 762,839
52,672 MeadWestvaco Corp. 1,785,054
61,061 Weyerhaeuser Co. 4,104,520
---------------
14,375,520
- -----------------------------------------------------------------------------------------------------------------------------------
Personal Products - 0.6% 19,992 Alberto-Culver Co. Class B 971,011
122,560 Avon Products, Inc. 4,743,072
259,601 The Gillette Co. 11,624,933
---------------
17,339,016
- -----------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 6.8% 404,917 Abbott Laboratories 18,889,378
33,564 Allergan, Inc. 2,721,033
504,461 Bristol-Myers Squibb Co.(c) 12,924,291
293,277 Eli Lilly & Co. 16,643,470
96,064 + Forest Laboratories, Inc. 4,309,431
769,777 Johnson & Johnson 48,819,257
60,855 + King Pharmaceuticals, Inc. 754,602
575,457 Merck & Co., Inc. 18,495,188
68,700 Mylan Laboratories(c) 1,214,616
1,948,681 Pfizer, Inc. 52,400,032
381,825 Schering-Plough Corp. 7,972,506
28,481 + Watson Pharmaceuticals, Inc. 934,462
345,899 Wyeth 14,731,838
---------------
200,810,104
- -----------------------------------------------------------------------------------------------------------------------------------
Real Estate - 0.6% 23,100 Apartment Investment & Management Co. Class A 890,274
48,100 Archstone-Smith Trust 1,842,230
103,964 Equity Office Properties Trust 3,027,432
72,740 Equity Residential 2,631,733
47,500 Plum Creek Timber Co., Inc. 1,825,900
45,900 Prologis 1,988,847
57,800 Simon Property Group, Inc.(c) 3,737,926
---------------
15,944,342
- -----------------------------------------------------------------------------------------------------------------------------------
Road & Rail - 0.6% 97,294 Burlington Northern Santa Fe Corp. 4,602,979
55,078 CSX Corp. 2,207,526
102,542 Norfolk Southern Corp. 3,710,995
69,876 Union Pacific Corp. 4,699,161
---------------
15,220,661
- -----------------------------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor Equipment- 92,847 + Advanced Micro Devices, Inc. 2,044,491
3.1% 96,890 + Altera Corp. 2,005,623
96,416 Analog Devices, Inc. 3,559,679
Master S&P 500 Index Series
Schedule of Investments as of December 31, 2004 (continued)
Industry* Shares Held Common Stocks Value
- -----------------------------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor Equipment 439,876 + Applied Materials, Inc. $ 7,521,880
(concluded) 81,267 + Applied Micro Circuits Corp. 342,134
80,481 + Broadcom Corp. Class A(c) 2,597,927
11,200 + Freescale Semiconductor, Inc. Class A 199,584
89,658 + Freescale Semiconductor, Inc. Class B 1,646,121
1,636,531 Intel Corp. 38,278,460
55,737 + Kla-Tencor Corp. 2,596,229
97,966 + LSI Logic Corp. 536,854
86,999 Linear Technology Corp. 3,372,081
84,260 Maxim Integrated Products, Inc. 3,571,781
158,568 + Micron Technology, Inc. 1,958,315
97,072 National Semiconductor Corp. 1,742,442
40,800 + Novellus Systems, Inc. 1,137,912
53,120 + Nvidia Corp. 1,251,507
45,954 + PMC - Sierra, Inc. 516,983
49,832 + Teradyne, Inc. 850,632
448,972 Texas Instruments, Inc.(c) 11,053,691
89,993 Xilinx, Inc. 2,668,292
---------------
89,452,618
- -----------------------------------------------------------------------------------------------------------------------------------
Software - 4.2% 62,025 Adobe Systems, Inc. 3,891,448
58,328 Autodesk, Inc. 2,213,548
58,520 + BMC Software, Inc. 1,088,472
45,305 + Citrix Systems, Inc. 1,111,332
151,712 Computer Associates International, Inc.(c) 4,712,175
94,049 + Compuware Corp. 608,497
78,800 + Electronic Arts, Inc. 4,860,384
49,252 + Intuit, Inc. 2,167,581
28,227 + Mercury Interactive Corp. 1,285,740
2,822,124 Microsoft Corp.(e) 75,378,932
100,324 + Novell, Inc. 677,187
1,339,285 + Oracle Corp. 18,374,990
68,265 + Parametric Technology Corp. 402,081
130,537 + Siebel Systems, Inc. 1,370,638
163,200 + Symantec Corp. 4,204,032
115,581 + Veritas Software Corp. 3,299,838
---------------
125,646,875
- -----------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 2.4% 71,100 + Autonation, Inc. 1,365,831
21,677 + Autozone, Inc. 1,979,327
77,924 + Bed Bath & Beyond, Inc. 3,103,713
84,246 Best Buy Co., Inc. 5,005,897
51,023 Circuit City Stores, Inc. 798,000
232,693 The Gap, Inc. 4,914,476
569,386 Home Depot, Inc. 24,335,558
201,840 Lowe's Cos., Inc.(c) 11,623,966
98,094 Limited Brands, Inc. 2,258,124
81,658 + Office Depot, Inc. 1,417,583
22,624 OfficeMax, Inc. 709,941
42,398 RadioShack Corp. 1,394,046
37,792 The Sherwin-Williams Co. 1,686,657
129,734 + Staples, Inc. 4,373,333
130,548 TJX Cos., Inc.(c) 3,280,671
37,501 Tiffany & Co. 1,198,907
51,597 + Toys R US, Inc. 1,056,191
---------------
70,502,221
- -----------------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 0.4% 48,300 + Coach, Inc. 2,724,120
33,260 Jones Apparel Group, Inc. 1,216,318
26,238 Liz Claiborne, Inc. 1,107,506
67,210 Nike, Inc. Class B 6,095,275
15,387 Reebok International Ltd. 677,028
28,767 VF Corp. 1,593,116
---------------
13,413,363
- -----------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - 1.9% 145,110 Countrywide Financial Corp. 5,370,521
251,073 Fannie Mae 17,878,908
178,203 Freddie Mac 13,133,561
78,496 Golden West Financial Corp. 4,821,224
25,280 MGIC Investment Corp. 1,742,045
94,000 Sovereign Bancorp, Inc. 2,119,700
227,286 Washington Mutual, Inc. 9,609,652
---------------
54,675,611
- -----------------------------------------------------------------------------------------------------------------------------------
Tobacco - 1.3% 532,618 Altria Group, Inc. 32,542,960
41,600 Reynolds American, Inc. 3,269,760
43,335 UST, Inc. 2,084,847
---------------
37,897,567
- -----------------------------------------------------------------------------------------------------------------------------------
Trading Companies & Distributors - 0.1% 22,445 WW Grainger, Inc. 1,495,286
- -----------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 0.3% 288,377 + Nextel Communications, Inc. Class A 8,651,310
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments in Common Stocks
(Cost - $2,492,376,609) -- 99.7% 2,930,288,307
- -----------------------------------------------------------------------------------------------------------------------------------
Warrants(a)
- -----------------------------------------------------------------------------------------------------------------------------------
Communications Equipment - 0.0% Lucent Technologies, Inc. 41,624
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments in Warrants
(Cost - $43,731) -- 0.0% 41,624
- -----------------------------------------------------------------------------------------------------------------------------------
Master S&P 500 Index Series
Schedule of Investments as of December 31, 2004 (concluded)
Beneficial Interest Short-Term Securities Value
- -----------------------------------------------------------------------------------------------------------------------------------
$ 13,830,516 Merrill Lynch Liquidity Series, LLC Cash Sweep
Series I(b) $ 13,830,516
195,307,280 Merrill Lynch Liquidity Series, LLC Money Market
Series(b)(d) 195,307,280
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term Securities
(Cost - $209,137,796) -- 7.1% 209,137,796
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost - $2,701,558,136**) - 106.8 % 3,139,467,727
Liabilities in Excess of Other Assets - (6.8%) (201,076,662)
---------------
Net Assets - 100.0% $ 2,938,391,065
===============
* 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 industry sub-classifications for reporting ease. These industry
classifications are unaudited.
** The cost and unrealized appreciation/depreciation of investments as of
December 31, 2004, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 2,782,656,546
===============
Gross unrealized appreciation $ 585,819,081
Gross unrealized depreciation (229,007,900)
---------------
Net unrealized appreciation $ 356,811,181
===============
+ Non-income producing security.
(a) 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.
(b) 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) were as follows:
Interest/
Affiliate Net Activity Dividend Income
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 33,500 $ 147,707
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $(34,338,927) $ 844,463
Merrill Lynch Liquidity Series, LLC
Money Market Series $(16,953,033) $ 212,968
Merrill Lynch Premier Institutional Fund (70,753,437) $ 25,152
--------------------------------------------------------------------------
(c) Security, or a portion of security, is on loan.
(d) Security was purchased with the cash proceeds from securities loans.
(e) All or a portion of security held as collateral in connection with open
financial futures contracts.
Financial futures contracts purchased as of December 31, 2004 were as
follows:
Number of Expiration Face Unrealized
Contracts Issue Date Value Appreciation
--------------------------------------------------------------------------
40 S&P 500 Index March 2005 $ 11,854,247 $282,753
--------------------------------------------------------------------------
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the second fiscal half-year of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500 Index
Series of Quantitative Master Series Trust
By: /s/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500
Index Series of Quantitative Master Series Trust
Date: February 24, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500
Index Series of Quantitative Master Series Trust
Date: February 24, 2005
By: /s/ Donald C. Burke
-----------------------
Donald C. Burke,
Chief Financial Officer of
S&P 500 Index Fund of Merrill Lynch Index Funds, Inc. and Master S&P 500
Index Series of Quantitative Master Series Trust
Date: February 24, 2005