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 811-07885
Name of Fund: Master Enhanced S&P 500 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, Master Enhanced S&P 500 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: 12/31/05
Date of reporting period: 01/01/05 - 12/31/05
Item 1 - Report to Stockholders
Master Enhanced S&P 500 Series
Annual Report, December 31, 2005
A Discussion With Your Fund's Portfolio Manager
Amid a volatile investing environment, Master Enhanced S&P 500 Series managed to
outpace the return of the Standard & Poor's 500 Index for the year.
How did the portfolio perform during the fiscal year in light of the existing
market conditions?
For the 12-month period ended December 31, 2005, Master Enhanced S&P 500 Series
had a net total return of +5.66% (master level). For the same period, the
Standard & Poor's 500 (S&P 500) Index returned +4.91%. Performance benefited
from both our stock-selection and stock substitution strategies.
The U.S. equity markets exhibited substantial volatility over the 12-month
period, moving sideways for much of the year. The period got off to a rough
start after a very strong fourth quarter of 2004. Economically sensitive and
small-capitalization stocks fared the worst out of the gate. January 2005 was
characterized by mixed economic data, higher interest rates, disappointing
corporate earnings reports and climbing oil prices. In February, the market
reversed course and performed well, even as productivity growth slowed and oil
prices continued to climb. By March, however, stock prices resumed their
downward slide, hurt by a combination of a worse-than-expected trade deficit,
mixed economic news, continued high oil prices and rising interest rates.
1
In April, retail sales, payroll data, and consumer and business sentiment
weakened. For most of the month, equity markets were dogged by continuing
inflationary concerns, particularly as the price of oil climbed above $57 per
barrel. The month closed with the release of March data indicating a
particularly large jump in the Consumer Price Index, which worried investors
concerned about the prospect of higher interest rates. May brought the
announcement of slower-than-expected economic growth (with 3.1% gross domestic
product growth in the first quarter). But despite concerns about slower economic
activity, decelerating corporate profit growth and high oil prices,
first-quarter earnings reports remained strong, leading to a stock market rally.
June, however, brought a slowdown in the equity market as further worries about
a slower economy dampened markets.
July was an impressive month for equity performance. The market was able to
overcome the drag provided by a strong dollar, higher energy prices and a major
terrorist attack in London. That attack caused an immediate 4% drop in the S&P
500 Index. However, investors quickly rebounded, and the market losses were
recovered only one day later. August brought another reversal, as higher oil
prices continued to engender fears of economic weakness. In the aftermath of
Hurricane Katrina, the price of oil reached $70 per barrel. The market turned
slightly positive in September as improved profits in the energy sector offset
weakness in the retail, transportation, tourism and insurance sectors.
Stock prices slid again in October amid continued signs of a slower economy and
renewed concerns about inflation. Despite economic growth of 4.1% for the third
quarter of 2005, short-term interest rates rose, oil prices remained
historically high and consumer
2
confidence declined. In November, equities were resilient in the face of further
interest rate hikes, high energy prices and the strength of the U.S. dollar,
which cut into the profits of domestic companies that do business
internationally. Stock values rebounded as companies' strong productivity and
high profit margins led to solid earnings growth, and as oil prices fell to the
mid-$50 per barrel range. After nearly six weeks of stock market gains, equity
performance was uninspiring in December, with thin trading volumes causing
volatile movements in stock prices. Compounding the mixed results and leaving
investors uncertain about the direction of the economy in 2006 was the fact that
the yield curve inverted between the two-year and 10-year sectors at the end of
December. That is, 10-year bond yields fell below two-year yields. Such
inversions are historically a harbinger of an economic downturn.
For the full year, the S&P 500 Index's +4.91% return lagged the +12.56% return
of the S&P MidCap 400 Index and the +7.68% return of the S&P SmallCap 600 Index.
As expected, interest rates moved considerably during the period as the yield
curve flattened. The Federal Reserve continued its "measured" pace of monetary
tightening by raising the federal funds rate in 25 basis point increments eight
times in 2005. This brought the target short-term interest rate to 4.25% by
year-end.
What changes were made to the portfolio during the period?
Throughout the period, as changes were made to the composition of the S&P 500
Index, we purchased and sold securities to maintain the Series' objective of
tracking the risks and return of the benchmark.
3
During the year, the S&P 500 made the transition to a "free-float" or
"float-adjusted" methodology for calculating market capitalization. The
transition occurred in two phases taking place in March and then in September.
With the change, only the shares of company stock that are readily available in
the public market are used to calculate a company's market capitalization. Float
adjustment excludes shares that are closely held by other publicly traded
companies, control groups (majority shareholders retaining their majority) or
government agencies. Accordingly, the number of shares used to make index
calculations reflect only those shares that actually are available to investors,
not all of a company's outstanding shares. The value of a float-adjusted index
more accurately reflects the combined market value of companies available for
public trading. To maintain a tight tracking to the benchmark, we adjusted the
portfolio to be in line with the revised composition of the Index.
We continued to use our quantitative stock selection and stock substitution
strategies in an effort to generate returns above those offered by the Index.
The goal of our stock selection process is to use quantitative techniques to
determine whether a stock might outperform or underperform the market. We
analyze each security by using quantitative screens that provide signals that
ultimately inform our investment decisions. These signals may include earnings
quality, valuations, earnings surprises, additional equity issuance, short
interest and price momentum factors, among others.
We also apply stock substitution strategies opportunistically as a value-added
trading strategy. Our goal is to take advantage of temporary price strength in a
security that might
4
result from a corporate acquisition, corporate restructuring or index
composition change. We also might employ convertible bond substitution when
opportunities exist, taking a position in a company's convertible securities --
bonds that can be exchanged for shares of stock, in certain situations -- as a
cheaper alternative to buying its equity shares.
In November, we removed the portfolio's earnings surprise/earnings estimate
revision and positive price momentum signals, and instead established our
turn-of-the-year positions, which we intend to maintain through the first half
of January. The earnings surprise/earnings estimate revision signal will remain
off until the second quarter of 2006.
How would you characterize the portfolio's position at the close of the period?
We believe the portfolio remains positioned to match the risk characteristics of
its benchmark, regardless of the direction the market takes.
Vincent J. Costa, CFA
Vice President and Portfolio Manager
January 23, 2006
5
Master Enhanced S&P 500 Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
Aerospace & Defense - 1.9% 30,300 Boeing Co. $ 2,128,272
18,100 Goodrich Corp. 743,910
29,200 Honeywell International, Inc. 1,087,700
2,700 L-3 Communications Holdings, Inc. 200,745
11,500 Lockheed Martin Corp. 731,745
15,800 Northrop Grumman Corp. 949,738
40,200 Raytheon Co. 1,614,030
43,300 United Technologies Corp. 2,420,903
-------------
9,877,043
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Air Freight & Logistics - 1.0% 12,500 FedEx Corp. 1,292,375
2,800 Ryder System, Inc. 114,856
46,300 United Parcel Service, Inc. Class B 3,479,445
-------------
4,886,676
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Airlines - 0.2% 67,900 Southwest Airlines Co. 1,115,597
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Auto Components - 0.1% 100 Dana Corp. 718
7,200 The Goodyear Tire & Rubber Co. (a) 125,136
6,000 Johnson Controls, Inc. 437,460
-------------
563,314
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Automobiles - 0.5% 142,400 Ford Motor Co. 1,099,328
24,100 Harley-Davidson, Inc. 1,240,909
-------------
2,340,237
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Beverages - 1.7% 1,500 Brown-Forman Corp. Class B 103,980
84,900 The Coca-Cola Co. (e) 3,422,319
21,000 Coca-Cola Enterprises, Inc. 402,570
13,100 Constellation Brands, Inc. Class A (a) 343,613
2,312 Molson Coors Brewing Co. Class B 154,881
12,200 Pepsi Bottling Group, Inc. 349,042
68,010 PepsiCo, Inc. 4,018,031
-------------
8,794,436
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Biotechnology - 1.7% 10,001 Abgenix, Inc. (a) 215,121
48,680 Amgen, Inc. (a) 3,838,905
6,400 Applera Corp. - Applied Biosystems Group 169,984
25,510 Biogen Idec, Inc. (a) 1,156,368
37,725 Chiron Corp. (a) 1,677,254
5,900 Genzyme Corp. (a) 417,602
16,400 Gilead Sciences, Inc. (a) 863,132
16,600 Medimmune, Inc. (a) 581,332
-------------
8,919,698
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Building Products - 0.3% 24,100 American Standard Cos., Inc. 962,795
15,800 Masco Corp. 477,002
-------------
1,439,797
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Capital Markets - 3.1% 28,640 Ameriprise Financial, Inc. 1,174,240
12,100 The Bear Stearns Cos., Inc. 1,397,913
86,100 The Charles Schwab Corp. 1,263,087
41,000 E*Trade Financial Corp. (a) 855,260
4,000 Franklin Resources, Inc. 376,040
16,900 Goldman Sachs Group, Inc. 2,158,299
2,300 Janus Capital Group, Inc. 42,849
9,449 Lehman Brothers Holdings, Inc. 1,211,078
6
Master Enhanced S&P 500 Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
23,000 Mellon Financial Corp. $ 787,750
37,700 Merrill Lynch & Co., Inc. (b) 2,553,421
40,700 Morgan Stanley 2,309,318
11,500 Northern Trust Corp. 595,930
17,000 State Street Corp. 942,480
3,700 T. Rowe Price Group, Inc. 266,511
3 UBS AG Registered 285
-------------
15,934,461
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Chemicals - 1.5% 8,000 Air Products & Chemicals, Inc. 473,520
200 Ashland, Inc. 11,580
35,294 The Dow Chemical Co. 1,546,583
58,000 E.I. du Pont de Nemours & Co. 2,465,000
300 Eastman Chemical Co. 15,477
9,500 Ecolab, Inc. 344,565
2,700 Engelhard Corp. 81,405
20,200 Monsanto Co. 1,566,106
8,100 PPG Industries, Inc. 468,990
12,000 Praxair, Inc. 635,520
4,500 Rohm & Haas Co. 217,890
-------------
7,826,636
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Commercial Banks - 5.0% 21,900 AmSouth Bancorp 573,999
25,625 BB&T Corp. (e) 1,073,944
148,299 Bank of America Corp. 6,843,999
10,300 Comerica, Inc. 584,628
9,218 Compass Bancshares, Inc. 445,137
22,734 Fifth Third Bancorp 857,526
5,200 First Horizon National Corp. 199,888
11,111 Huntington Bancshares, Inc. 263,886
14,800 KeyCorp 487,364
3,300 M&T Bank Corp. 359,865
13,200 Marshall & Ilsley Corp. 568,128
28,500 National City Corp. 956,745
15,202 PNC Financial Services Group, Inc. 939,940
24,595 Regions Financial Corp. 840,165
17,600 SunTrust Banks, Inc. 1,280,576
20,200 Synovus Financial Corp. 545,602
81,154 U.S. Bancorp 2,425,693
2,003 Unizan Financial Corp. 53,200
38,698 Wachovia Corp. 2,045,576
43,955 Wells Fargo & Co. 2,761,693
20,148 Westcorp 1,342,058
3,387 Zions Bancorporation 255,922
-------------
25,705,534
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Commercial Services & Supplies - 0.6% 4,600 Allied Waste Industries, Inc. (a) 40,204
4,800 Avery Dennison Corp. 265,296
77,300 Cendant Corp. 1,333,425
4,300 Cintas Corp. 177,074
3,900 Equifax, Inc. 148,278
16,950 Manpower, Inc. 788,175
3,800 Robert Half International, Inc. 143,982
-------------
2,896,434
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7
Master Enhanced S&P 500 Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
Communications Equipment - 2.9% 4,771 ADC Telecommunications, Inc. (a) $ 106,584
6,700 Andrew Corp. (a) 71,891
6,200 Avaya, Inc. (a) 66,154
23,800 Ciena Corp. (a) 70,686
291,600 Cisco Systems, Inc. (a) 4,992,192
8,300 Comverse Technology, Inc. (a) 220,697
88,500 Corning, Inc. (a) 1,739,910
25,900 Enterasys Networks, Inc. (a) 343,952
100 JDS Uniphase Corp. (a) 236
100 Lucent Technologies, Inc. (a) 266
125,203 Motorola, Inc. 2,828,336
80,900 QUALCOMM, Inc. 3,485,172
20,440 Scientific-Atlanta, Inc. 880,351
18,405 Tellabs, Inc. (a) 200,615
-------------
15,007,042
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Computers & Peripherals - 3.7% 41,800 Apple Computer, Inc. (a) 3,005,002
92,000 Dell, Inc. (a) 2,759,080
138,408 EMC Corp. (a) 1,885,117
139,710 Hewlett-Packard Co. 3,999,897
75,400 International Business Machines Corp. 6,197,880
2,100 Lexmark International, Inc. Class A (a) 94,143
3,600 NCR Corp. (a) 122,184
18,500 Network Appliance, Inc. (a) 499,500
112,200 Sun Microsystems, Inc. (a) 470,118
-------------
19,032,921
- ----------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 0.0% 3,300 Vulcan Materials Co. 223,575
- ----------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.9% 23,100 American Express Co. 1,188,726
12,644 Capital One Financial Corp. 1,092,442
9,146 Collegiate Funding Services LLC (a) 180,634
87,976 MBNA Corp. 2,388,548
-------------
4,850,350
- ----------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.1% 3,100 Ball Corp. 123,132
1,900 Bemis Co. 52,953
2,500 Sealed Air Corp. (a) 140,425
4,600 Temple-Inland, Inc. 206,310
-------------
522,820
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Distributors - 0.1% 10,100 Genuine Parts Co. 443,592
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Diversified Financial Services - 3.6% 19,600 CIT Group, Inc. 1,014,888
211,613 Citigroup, Inc. (e) 10,269,579
165,463 JPMorgan Chase & Co. 6,567,226
10,100 Principal Financial Group, Inc. 479,043
-------------
18,330,736
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Diversified Telecommunication 168,372 AT&T, Inc. 4,123,430
Services - 1.7% 13,800 BellSouth Corp. 373,980
8,000 Citizens Communications Co. 97,840
14,700 PanAmSat Holding Corp. 360,150
84,400 Qwest Communications International Inc. (a) 476,860
115,640 Verizon Communications, Inc. 3,483,077
-------------
8,915,337
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8
Master Enhanced S&P 500 Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 1.2% 10,500 Allegheny Energy, Inc. (a) $ 332,325
21,500 American Electric Power Co., Inc. 797,435
8,100 Cinergy Corp. 343,926
29,500 Edison International 1,286,495
25,459 Exelon Corp. 1,352,891
17,800 FPL Group, Inc. 739,768
22,000 PPL Corp. 646,800
18,100 The Southern Co. 624,993
-------------
6,124,633
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.4% 7,100 American Power Conversion Corp. 156,200
2,900 Cooper Industries Ltd. Class A 211,700
17,800 Emerson Electric Co. 1,329,660
4,100 Rockwell Automation, Inc. 242,556
-------------
1,940,116
- ----------------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & 13,076 Agilent Technologies, Inc. (a) 435,300
Instruments - 0.3% 7,100 Jabil Circuit, Inc. (a) 263,339
8,200 Molex, Inc. 212,790
22,900 Sanmina-SCI Corp. (a) 97,554
48,100 Solectron Corp. (a) 176,046
900 Symbol Technologies, Inc. 11,538
3,500 Tektronix, Inc. 98,735
-------------
1,295,302
- ----------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 1.3% 8,500 BJ Services Co. 311,695
10,700 Baker Hughes, Inc. 650,346
18,700 Halliburton Co. (e) 1,158,652
4,100 Nabors Industries Ltd. (a) 310,575
4,900 National Oilwell Varco, Inc. (a) 307,230
2,800 Noble Corp. 197,512
18,900 Rowan Cos., Inc. 673,596
22,100 Schlumberger Ltd. 2,147,015
10,700 Transocean, Inc. (a) 745,683
7,800 Weatherford International Ltd. (a) 282,360
-------------
6,784,664
- ----------------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 2.0% 9,000 Albertson's, Inc. 192,150
28,000 CVS Corp. 739,760
15,700 Costco Wholesale Corp. 776,679
64,100 The Kroger Co. (a) 1,210,208
7,200 SUPERVALU Inc. 233,856
24,000 SYSCO Corporation 745,200
45,500 Safeway, Inc. 1,076,530
102,500 Wal-Mart Stores, Inc. 4,797,000
5,400 Walgreen Co. 239,004
6,300 Whole Foods Market, Inc. 487,557
-------------
10,497,944
- ----------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.6% 7,600 Campbell Soup Co. 226,252
21,300 ConAgra Foods, Inc. 431,964
9,500 General Mills, Inc. 468,540
12,000 HJ Heinz Co. 404,640
2,900 The Hershey Co. 160,225
9,000 Kellogg Co. 388,980
9
Master Enhanced S&P 500 Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
3,500 McCormick & Co., Inc. $ 108,220
18,600 Tyson Foods, Inc. Class A 318,060
6,400 Wm. Wrigley Jr. Co. 425,536
-------------
2,932,417
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & 9,200 Animas Corp. (a) 222,180
Supplies - 1.9% 4,300 Bausch & Lomb, Inc. 291,970
22,500 Baxter International, Inc. 847,125
9,200 Becton Dickinson & Co. 552,736
10,200 Biomet, Inc. 373,014
3,400 CR Bard, Inc. 224,128
15,300 Fisher Scientific International (a) 946,458
13,100 Guidant Corp. 848,225
5,500 Hospira, Inc. (a) 235,290
53,100 Medtronic, Inc. 3,056,967
1,300 Millipore Corp. (a) 85,852
27,900 PerkinElmer, Inc. 657,324
12,200 St. Jude Medical, Inc. (a) 612,440
11,900 Stryker Corp. 528,717
11,400 Thermo Electron Corp. (a) 343,482
3,700 Waters Corp. (a) 139,860
-------------
9,965,768
- ----------------------------------------------------------------------------------------------------------------------------------
Health Care Providers & 46,900 Beverly Enterprises, Inc. (a) 547,323
Services - 3.3% 20,355 Cardinal Health, Inc. 1,399,406
9 Caremark Rx, Inc. (a) 466
11,300 Cigna Corp. 1,262,210
9,000 Coventry Health Care, Inc. (a) 512,640
7,400 Express Scripts, Inc. (a) 620,120
9,750 HCA, Inc. 492,375
17,500 Health Management Associates, Inc. Class A 384,300
16,700 Humana, Inc. (a) 907,311
32,700 IDX Systems Corp. (a) 1,436,184
9,300 IMS Health, Inc. 231,756
4,300 Laboratory Corp. of America Holdings (a) 231,555
1,800 Manor Care, Inc. 71,586
15,500 McKesson Corp. 799,645
16 Medco Health Solutions, Inc. (a) 893
4,500 Patterson Cos., Inc. (a) 150,300
5,700 Quest Diagnostics, Inc. 293,436
42,052 Renal Care Group, Inc. (a) 1,989,480
100 Tenet Healthcare Corp. (a) 766
58,913 UnitedHealth Group, Inc. 3,660,866
27,158 WellPoint, Inc. (a) 2,166,934
-------------
17,159,552
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Hotels, Restaurants & Leisure - 1.8% 14,027 Carnival Corp. 750,024
900 Darden Restaurants, Inc. 34,992
11,100 Dave & Buster's, Inc. (a) 195,471
8,100 Fairmount Hotels & Resorts, Inc. 343,521
17,900 Harrah's Entertainment, Inc. 1,276,091
34,700 Hilton Hotels Corp. 836,617
33,900 International Game Technology 1,043,442
10
Master Enhanced S&P 500 Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
30,330 La Quinta Corp. (a) $ 337,876
4,000 Marriott International, Inc. Class A 267,880
49,700 McDonald's Corp. 1,675,884
56,600 Starbucks Corp. (a) 1,698,566
5,840 Starwood Hotels & Resorts Worldwide, Inc. 372,942
1,400 Wendy's International, Inc. 77,364
7,700 Yum! Brands, Inc. 360,976
-------------
9,271,646
- ----------------------------------------------------------------------------------------------------------------------------------
Household Durables - 1.1% 4,490 Black & Decker Corp. 390,450
8,800 Centex Corp. 629,112
11,200 DR Horton, Inc. 400,176
8,500 Fortune Brands, Inc. 663,170
11,200 KB HOME 813,792
5,800 Leggett & Platt, Inc. 133,168
15,799 Lennar Corp. Class A 964,055
3,300 Maytag Corp. 62,106
43,400 Newell Rubbermaid, Inc. 1,032,052
8,800 Pulte Homes, Inc. 346,368
600 Snap-On, Inc. 22,536
3,200 The Stanley Works 153,728
100 Whirlpool Corp. 8,376
-------------
5,619,089
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Household Products - 1.7% 20,100 Colgate-Palmolive Co. 1,102,485
19,200 Kimberly-Clark Corp. 1,145,280
112,949 Procter & Gamble Co. 6,537,488
-------------
8,785,253
- ----------------------------------------------------------------------------------------------------------------------------------
IT Services - 1.3% 16,600 Affiliated Computer Services, Inc. Class A (a) 982,388
7,600 Anteon International Corp. (a) 413,060
42,500 Automatic Data Processing, Inc. 1,950,325
6 Cognizant Technology Solutions Corp. (a) 302
17,800 Computer Sciences Corp. (a) 901,392
16,000 Electronic Data Systems Corp. 384,640
26,955 First Data Corp. 1,159,335
3,350 Fiserv, Inc. (a) 144,955
9,700 Paychex, Inc. 369,764
3,400 Sabre Holdings Corp. Class A 81,974
14,100 Unisys Corp. (a) 82,203
-------------
6,470,338
- ----------------------------------------------------------------------------------------------------------------------------------
Independent Power Producers & 34,300 The AES Corp. (a) 542,969
Energy Traders - 0.5% 8,300 Constellation Energy Group, Inc. 478,080
30,988 Duke Energy Corp. 850,621
118,400 Dynegy, Inc. Class A (a) 573,056
-------------
2,444,726
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Industrial Conglomerates - 3.7% 9,800 3M Co. 759,500
438,500 General Electric Co. 15,369,425
4,700 Textron, Inc. 361,806
94,042 Tyco International Ltd. 2,714,052
-------------
19,204,783
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11
Master Enhanced S&P 500 Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
Insurance - 4.6% 28,200 ACE Ltd. $ 1,507,008
1,700 AMBAC Financial Group, Inc. 131,002
20,400 Aflac, Inc. 946,968
22,900 The Allstate Corp. 1,238,203
119,075 American International Group, Inc. 8,124,487
6,200 Chubb Corp. 605,430
5,677 Cincinnati Financial Corp. 253,648
4,830 Fidelity National Title Group, Inc. Class A 117,611
9,700 Genworth Financial, Inc. Class A 335,426
10,000 Hartford Financial Services Group, Inc. 858,900
6,100 Jefferson-Pilot Corp. 347,273
7,379 Lincoln National Corp. 391,308
2,400 MBIA, Inc. 144,384
42 Manulife Financial Corp. 2,470
17,500 Marsh & McLennan Cos., Inc. 555,800
27,000 Metlife, Inc. 1,323,000
6,400 The Progressive Corp. 747,392
18,000 Prudential Financial, Inc. 1,317,420
47,929 The St. Paul Travelers Cos., Inc. (e) 2,140,988
28,100 UICI 997,831
19,400 XL Capital Ltd. Class A 1,307,172
-------------
23,393,721
- ----------------------------------------------------------------------------------------------------------------------------------
Internet & Catalog Retail - 0.5% 58,705 eBay, Inc. (a) 2,538,991
- ----------------------------------------------------------------------------------------------------------------------------------
Internet Software & Services - 0.6% 1,500 Google, Inc. Class A (a) 622,290
66,832 Yahoo!, Inc. (a) 2,618,478
-------------
3,240,768
- ----------------------------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products - 0.0% 2,800 Brunswick Corp. 113,848
4,700 Hasbro, Inc. 94,846
-------------
208,694
- ----------------------------------------------------------------------------------------------------------------------------------
Machinery - 1.5% 24,800 Caterpillar, Inc. 1,432,696
1,900 Cummins, Inc. 170,487
6,100 Danaher Corp. 340,258
7,400 Deere & Co. 504,014
6,700 Dover Corp. 271,283
19,000 Eaton Corp. 1,274,710
9,300 Illinois Tool Works, Inc. 818,307
6,600 Joy Global, Inc. 264,000
3,900 Navistar International Corp. (a) 111,618
19,400 PACCAR, Inc. 1,343,062
3,000 Pall Corp. 80,580
17,800 Parker Hannifin Corp. 1,174,088
-------------
7,785,103
- ----------------------------------------------------------------------------------------------------------------------------------
Media - 2.7% 54,657 Comcast Corp. Class A (a) 1,418,896
37,000 Comcast Corp. Special Class A (a) 950,530
7,200 EW Scripps Co. Class A 345,744
12,500 Gannett Co., Inc. 757,125
5,400 Interpublic Group of Cos., Inc. (a) 52,110
5,900 Knight-Ridder, Inc. 373,470
300 News Corp. Class A 4,665
8,200 Omnicom Group 698,066
12
Master Enhanced S&P 500 Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
240,825 Time Warner, Inc. $ 4,199,988
30,000 Univision Communications, Inc. Class A (a) 881,700
80,397 Viacom, Inc. Class B (a) 2,620,942
55,900 Walt Disney Co. 1,339,923
1 Washington Post Class B 765
-------------
13,643,924
- ----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.8% 30,300 Alcoa, Inc. 895,971
200 Allegheny Technologies, Inc. 7,216
5,600 Barrick Gold Corp. 156,072
5,100 Freeport-McMoRan Copper & Gold, Inc. Class B 274,380
4,000 Newmont Mining Corp. 213,600
15,400 Nucor Corp. 1,027,488
7,700 Phelps Dodge Corp. 1,107,799
16,600 Placer Dome, Inc. 380,638
-------------
4,063,164
- ----------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities - 1.2% 7,100 Ameren Corp. 363,804
6,000 CMS Energy Corp. (a) 87,060
66,600 Centerpoint Energy, Inc. 855,810
14,800 Dominion Resources, Inc. 1,142,560
15 NiSource, Inc. 313
37,500 PG&E Corp. 1,392,000
13,400 Public Service Enterprise Group, Inc. 870,598
30,000 Sempra Energy 1,345,200
5,200 TECO Energy, Inc. 89,336
-------------
6,146,681
- ----------------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 1.1% 1,400 Big Lots, Inc. (a) 16,814
15,600 Dollar General Corp. 297,492
8,200 Family Dollar Stores, Inc. 203,278
20,435 Federated Department Stores 1,355,454
7,000 JC Penney Co., Inc. 389,200
25,500 Kohl's Corp. (a) 1,239,300
9,000 Nordstrom, Inc. 336,600
33,000 Target Corp. 1,814,010
-------------
5,652,148
- ----------------------------------------------------------------------------------------------------------------------------------
Office Electronics - 0.1% 39,400 Xerox Corp. (a) 577,210
- ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 7.3% 1,900 Amerada Hess Corp. 240,958
7,600 Anadarko Petroleum Corp. 720,100
13,600 Apache Corp. 931,872
14,900 Burlington Resources, Inc. 1,284,380
88,502 Chevron Corp. 5,024,259
57,202 ConocoPhillips 3,328,012
18,290 Devon Energy Corp. 1,143,857
19,000 EOG Resources, Inc. 1,394,030
23,700 El Paso Corp. 288,192
270,800 Exxon Mobil Corp. 15,210,836
5,399 Kerr-McGee Corp. 490,553
3,600 Kinder Morgan, Inc. 331,020
25,636 Marathon Oil Corp. 1,563,027
3,800 Murphy Oil Corp. 205,162
16,514 Occidental Petroleum Corp. 1,319,138
13
Master Enhanced S&P 500 Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
10,300 Sunoco, Inc. $ 807,314
31,446 Valero Energy Corp. 1,622,614
3,300 Vintage Petroleum, Inc. 175,989
29,000 Williams Cos., Inc. 671,930
11,699 XTO Energy, Inc. 514,054
-------------
37,267,297
- ----------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.3% 14,300 International Paper Co. 480,623
4,600 Louisiana-Pacific Corp. 126,362
7,400 MeadWestvaco Corp. 207,422
9,000 Weyerhaeuser Co. 597,060
-------------
1,411,467
- ----------------------------------------------------------------------------------------------------------------------------------
Personal Products - 0.1% 17,800 Avon Products, Inc. 508,190
- ----------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 5.4% 34,200 Abbott Laboratories 1,348,506
5,400 Allergan, Inc. 582,984
11,700 Bristol-Myers Squibb Co. 268,866
19,000 Eli Lilly & Co. 1,075,210
17,000 Forest Laboratories, Inc. (a) 691,560
124,586 Johnson & Johnson 7,487,619
40,400 King Pharmaceuticals, Inc. (a) 683,568
112,102 Merck & Co., Inc. (e) 3,565,965
14,900 Mylan Laboratories 297,404
308,840 Pfizer, Inc. 7,202,149
68,000 Schering-Plough Corp. 1,417,800
7,800 Watson Pharmaceuticals, Inc. (a) 253,578
58,600 Wyeth 2,699,702
-------------
27,574,911
- ----------------------------------------------------------------------------------------------------------------------------------
Real Estate - 0.9% 17,600 AMLI Residential Properties Trust 669,680
7,100 Archstone-Smith Trust 297,419
12,800 Arden Realty, Inc. 573,824
11,500 Centerpoint Properties Trust 569,020
18,800 Equity Office Properties Trust 570,204
5,700 Plum Creek Timber Co., Inc. 205,485
8,700 Prologis 406,464
4,400 Public Storage, Inc. 297,968
6,600 Simon Property Group, Inc. 505,758
5,600 Vornado Realty Trust 467,432
-------------
4,563,254
- ----------------------------------------------------------------------------------------------------------------------------------
Road & Rail - 0.9% 12,500 Burlington Northern Santa Fe Corp. 885,250
8,900 CSX Corp. 451,853
31,100 Norfolk Southern Corp. 1,394,213
21,600 Union Pacific Corp. 1,739,016
-------------
4,470,332
- ----------------------------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor 12,700 Advanced Micro Devices, Inc. (a) 388,620
Equipment - 3.1% 7,400 Altera Corp. (a) 137,122
15,000 Analog Devices, Inc. 538,050
109,800 Applied Materials, Inc. 1,969,812
24,800 Applied Micro Circuits Corp. (a) 63,736
9,300 Broadcom Corp. Class A (a) 438,495
16,800 Freescale Semiconductor, Inc. Class B (a) 422,856
282,100 Intel Corp. 7,041,216
14
Master Enhanced S&P 500 Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
4,800 Kla-Tencor Corp. $ 236,784
16,100 LSI Logic Corp. (a) 128,800
14,400 Linear Technology Corp. 519,408
9,000 Maxim Integrated Products, Inc. 326,160
25,300 Micron Technology, Inc. (a) 336,743
9,200 National Semiconductor Corp. 239,016
5,700 Novellus Systems, Inc. (a) 137,484
7,800 Nvidia Corp. (a) 285,168
88,600 Texas Instruments, Inc. 2,841,402
-------------
16,050,872
- ----------------------------------------------------------------------------------------------------------------------------------
Software - 3.6% 25,600 Adobe Systems, Inc. 946,176
6,800 Autodesk, Inc. 292,060
8,900 BMC Software, Inc. (a) 182,361
26,209 Captiva Software Corp (a) 583,150
7,200 Citrix Systems, Inc. (a) 207,216
5 Computer Associates International, Inc. 141
15,900 Compuware Corp. (a) 142,623
9,700 Electronic Arts, Inc. (a) 507,407
4,500 Intuit, Inc. (a) 239,850
5,900 Micromuse, Inc. (a) 58,351
408,700 Microsoft Corp. (e) 10,687,505
15,700 Novell, Inc. (a) 138,631
143,300 Oracle Corp. (a) 1,749,693
11,300 Parametric Technology Corp. (a) 68,930
28,164 Serena Software, Inc. (a) 660,164
65,500 Siebel Systems, Inc. 692,990
74,262 Symantec Corp. (a) 1,299,585
-------------
18,456,833
- ----------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 2.2% 7,900 Bed Bath & Beyond, Inc. (a) 285,585
28,500 Best Buy Co., Inc. 1,239,180
6,400 Circuit City Stores, Inc. 144,576
52,700 The Gap, Inc. 929,628
85,800 Home Depot, Inc. 3,473,184
43,774 Limited Brands 978,349
29,600 Lowe's Cos., Inc. 1,973,136
12,700 Office Depot, Inc. (a) 398,780
4,400 OfficeMax, Inc. 111,584
7,200 RadioShack Corp. 151,416
22,750 Staples, Inc. 516,653
21,300 TJX Cos., Inc. 494,799
19,200 Tiffany & Co. 735,168
-------------
11,432,038
- ----------------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury 27,500 Coach, Inc. (a) 916,850
Goods - 0.6% 6,600 Jones Apparel Group, Inc. 202,752
5,900 Liz Claiborne, Inc. 211,338
5,500 Nike, Inc. Class B 477,345
14,100 Reebok International Ltd. 821,043
4,800 VF Corp. 265,632
-------------
2,894,960
- ----------------------------------------------------------------------------------------------------------------------------------
15
Master Enhanced S&P 500 Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- ----------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - 1.6% 42,800 Countrywide Financial Corp. $ 1,463,332
51,600 Fannie Mae 2,518,596
25,620 Freddie Mac 1,674,267
11,400 Independence Community Bank Corp. 452,922
4,700 MGIC Investment Corp. 309,354
12,100 Sovereign Bancorp, Inc. 261,602
39,355 Washington Mutual, Inc. 1,711,943
-------------
8,392,016
- ----------------------------------------------------------------------------------------------------------------------------------
Tobacco - 1.3% 85,900 Altria Group, Inc. 6,418,448
- ----------------------------------------------------------------------------------------------------------------------------------
Trading Companies & 4,100 WW Grainger, Inc. 291,510
Distributors - 0.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication 29,900 Alamosa Holdings, Inc. (a) 556,439
Services - 0.7% 14,633 Alltel Corp. 923,342
79,349 Sprint Nextel Corp. 1,853,593
-------------
3,333,374
- ----------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks
(Cost - $413,434,957) - 92.9% 476,438,373
- ----------------------------------------------------------------------------------------------------------------------------------
Exchange-Traded Funds
- ----------------------------------------------------------------------------------------------------------------------------------
2,680 SPDR Trust Series 1 333,419
- ----------------------------------------------------------------------------------------------------------------------------------
Total Exchange-Traded Funds
(Cost - $339,910) - 0.1% 333,419
- ----------------------------------------------------------------------------------------------------------------------------------
Preferred Stocks
- ----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 0.1% 1,716 Amerada Hess Corp., 7% (d) 185,465
3,924 Valero Energy Corp., 2% (d) 401,229
- ----------------------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks
(Cost - $250,909) - 0.1% 586,694
- ----------------------------------------------------------------------------------------------------------------------------------
Face
Amount Fixed Income Securities
- ----------------------------------------------------------------------------------------------------------------------------------
Biotechnology - 0.1% $ 475,000 Genzyme Corp., 1.25% due 12/01/2023 (d) 536,156
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.1% 291,000 Tyco International Group SA, 3.125%
due 1/15/2023 (d) 396,487
- ----------------------------------------------------------------------------------------------------------------------------------
Total Fixed Income Securities
(Cost - $932,099) - 0.2% 932,643
- ----------------------------------------------------------------------------------------------------------------------------------
Beneficial
Interest Short-Term Securities
- ----------------------------------------------------------------------------------------------------------------------------------
$31,391,542 Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I (b) 31,391,542
19,315,100 Merrill Lynch Liquidity Series, LLC
Money Market Series (b)(c) 19,315,100
- ----------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost - $50,706,642) - 9.9% 50,706,642
- ----------------------------------------------------------------------------------------------------------------------------------
Number of
Contracts Options Purchased
- ----------------------------------------------------------------------------------------------------------------------------------
Put Options Purchased - 0.0% 50 Knight-Ridder, Inc., expiring January 2006 at USD 60 1,250
- ----------------------------------------------------------------------------------------------------------------------------------
Total Options Purchased
(Premiums Paid - $8,900) - 0.0% 1,250
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investments
(Cost - $465,673,417*) - 103.2% 528,999,021
Liabilities in Excess of Other Assets - (3.2%) (16,298,493)
-------------
Net Assets - 100.0% $ 512,700,528
=============
16
Master Enhanced S&P 500 Series
Schedule of Investments as of December 31, 2005
* The cost and unrealized appreciation (depreciation) of investments as of
December 31, 2005, as computed for federal income tax purposes, were as
follows:
Aggregate cost $ 475,882,874
=============
Gross unrealized appreciation $ 58,773,549
Gross unrealized depreciation (5,657,402)
-------------
Net unrealized appreciation $ 53,116,147
=============
(a) Non-income producing security.
(b) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net Dividend/
Affiliate Activity Interest Income
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 36,300 $ 23,904
Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I $14,682,938 $ 792,076
Merrill Lynch Liquidity Series, LLC
Money Market Series $19,315,100 $ 17,236
--------------------------------------------------------------------------
(c) Security was purchased with the cash proceeds from securities loans.
(d) Convertible security.
(e) Security, or a portion of security, is on loan.
Financial futures contracts purchased as of December 31, 2005 were as
follows:
--------------------------------------------------------------------------
Number of Expiration Unrealized
Contracts Issue Date Face Value Depreciation
--------------------------------------------------------------------------
157 S&P 500 Index March 2006 $49,925,748 $ (674,848)
--------------------------------------------------------------------------
For Series compliance purposes, the Series' industry classifications refer
to any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Series management. This definition may not apply for purposes
of this report, which may combine industry sub-classifications for
reporting ease. Industries are shown as a percent of net assets. These
industry classifications are unaudited.
Percent of
Total
Sector Representation Investments
--------------------------------------------------------------------------
Financials 19.2%
Information Technology 15.1
Health Care 12.1
Consumer Discretionary 10.3
Industrials 10.3
Energy 8.4
Consumer Staples 7.2
Utilities 2.8
Materials 2.7
Telecommunication Services 2.3
Other* 9.6
--------------------------------------------------------------------------
*Includes portfolio holdings in short-term investments and options. For
Series compliance purposes, the Series' sector classifications refer to
any one or more of the sector sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Series management. This definition may not apply for purposes
of this report, which may combine sector sub-classifications for reporting
ease. Sectors are shown as a percent of net assets. These sector
classifications are unaudited.
See Notes to Financial Statements.
17
Master Enhanced S&P 500 Series
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 2005
===================================================================================================================================
Assets: Investments in unaffiliated securities, at value (including securities loaned
of $18,267,254) (identified cost-$412,826,019) ................................ $ 475,737,708
Investments in affiliated securities, at value (identified cost-$52,838,498) .. 53,260,063
Cash on deposit for financial futures contracts ............................... 3,055,500
Options purchased, at value (cost - $8,900) ................................... 1,250
Cash .......................................................................... 454,872
Receivables:
Securities sold ......................................................... $ 60,712,532
Dividends ............................................................... 647,133
Interest ................................................................ 4,666
Securities lending ...................................................... 1,433 61,365,764
------------
Prepaid expenses .............................................................. 4,610
-------------
Total assets .................................................................. 593,879,767
-------------
===================================================================================================================================
Liabilities: Collateral on securities loaned, at value ..................................... 19,315,100
Payables:
Securities purchased .................................................... 61,491,473
Variation margin ........................................................ 210,271
Withdrawals ............................................................. 121,779
Other affiliates ........................................................ 5,517
Investment adviser ...................................................... 3,984 61,833,024
------------
Accrued expenses .............................................................. 31,115
-------------
Total liabilities ............................................................. 81,179,239
-------------
===================================================================================================================================
Net Assets: Net assets .................................................................... $ 512,700,528
=============
===================================================================================================================================
Net Assets Investors' capital ............................................................ $ 450,049,772
Consist of: Unrealized appreciation-net ................................................... 62,650,756
-------------
Net assets .................................................................... $ 512,700,528
=============
===================================================================================================================================
See Notes to Financial Statements.
18
Master Enhanced S&P 500 Series
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2005
===========================================================================================================================
Investment Dividends (including $23,904 from affiliates)
Income: (net of $1,799 foreign withholding tax) ............................ $ 8,523,849
Interest (including $792,076 from affiliates) ...................... 801,489
Securities lending-net ............................................. 17,236
------------
Total income ....................................................... 9,342,574
------------
===========================================================================================================================
Expenses: Professional fees .................................................. $ 81,772
Accounting services ................................................ 75,295
Custodian fees ..................................................... 63,630
Investment advisory fees ........................................... 50,519
Printing and shareholder reports ................................... 10,259
Trustees' fees and expenses ........................................ 4,832
Pricing fees ....................................................... 357
Other .............................................................. 15,410
------------
Total expenses ..................................................... 302,074
------------
Investment income-net .............................................. 9,040,500
------------
===========================================================================================================================
Realized & Realized gain on:
Unrealized Gain Investments (including $17,997 from affiliates)-net ............. 19,808,952
(Loss)-Net Future contracts-net ............................................ 1,469,435
Options written ................................................. 168,960 21,447,347
------------
Change in unrealized appreciation/depreciation on:
Investments-net ................................................. 1,756,660
Future contracts-net ............................................ (1,196,795) 559,865
------------ ------------
Total realized and unrealized gain-net ............................. 22,007,212
------------
Net Increase in Net Assets Resulting from Operations ............... $ 31,047,712
============
===========================================================================================================================
See Notes to Financial Statements.
19
Master Enhanced S&P 500 Series
STATEMENTS OF CHANGES IN NET ASSETS
For the
Year Ended
December 31,
---------------------------------
Increase (Decrease) in Net Assets: 2005 2004
==============================================================================================================================
Operations: Investment income-net ............................................ $ 9,040,500 $ 7,238,401
Realized gain-net ................................................ 21,447,347 19,701,538
Change in unrealized appreciation/depreciation-net ............... 559,865 16,987,675
------------- -------------
Net increase in net assets resulting from operations ............. 31,047,712 43,927,614
------------- -------------
==============================================================================================================================
Capital Proceeds from contributions ...................................... 172,703,936 171,647,163
Transactions: Fair value of withdrawals ........................................ (37,325,571) (138,774,854)
------------- -------------
Net increase in net assets derived from capital transactions ..... 135,378,365 32,872,309
------------- -------------
==============================================================================================================================
Net Assets: Total increase in net assets ..................................... 166,426,077 76,799,923
Beginning of year ................................................ 346,274,451 269,474,528
------------- -------------
End of year ...................................................... $ 512,700,528 $ 346,274,451
============= =============
==============================================================================================================================
See Notes to Financial Statements.
20
Master Enhanced S&P 500 Series
FINANCIAL HIGHLIGHTS
The following ratios have For the Year Ended December 31,
been derived from information provided --------------------------------------------------------------
in the financial statements. 2005 2004 2003 2002 2001
=================================================================================================================================
Total Investment 5.66% 11.51% 27.63% (21.61%) (11.67%)
Return: ======== ======== ======== ======== ========
=================================================================================================================================
Ratios to Expenses, net of reimbursement ................ .06% .06% .09% .08% .08%
Average Net ======== ======== ======== ======== =======
Assets: Expenses ...................................... .06% .06% .09% .18% .20%
======== ======== ======== ======== =======
Investment income-net ......................... 1.79% 1.99% 1.70% 1.59% 1.36%
======== ======== ======== ======== =======
=================================================================================================================================
Supplemental Net assets, end of year (in thousands) ........ $512,701 $346,274 $269,475 $159,592 $ 74,073
Data: ======== ======== ======== ======== =======
Portfolio turnover ............................ 177.41% 119.58% 78.62% 101.85% 136.32%
======== ======== ======== ======== =======
=================================================================================================================================
See Notes to Financial Statements.
21
Master Enhanced S&P 500 Series
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Master Enhanced S&P 500 Series (the "Series"), a non-diversified investment
company, is part of Quantitative Master Series Trust (the "Trust"). The Trust is
registered under the Investment Company Act of 1940, as amended, and is
organized as a Delaware statutory trust. The Declaration of Trust permits the
Trustees to issue nontransferable interest 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 asked
price for short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Trustees of the Trust.
Long positions traded in the over-the-counter ("OTC") 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 asked 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 asked
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 based upon quoted fair valuations
received daily by the Fund from a pricing service or counterparty. Financial
futures contracts and options thereon, which are traded on exchanges, are valued
at their last sale price as of the close of such exchanges. Obligations with
remaining maturities of 60 days or less are valued at amortized cost unless the
Investment Adviser believes that this method no longer produces fair valuations.
Repurchase agreements are valued at cost plus accrued interest. The Series
employs pricing services to provide certain securities prices for the Series.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Board of Trustees of the Trust, including valuations furnished by the
pricing services retained by the Series, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are reviewed
by the officers of the Trust under the general supervision of the Trust's Board
of Trustees. Such valuations and procedures will be reviewed periodically by the
Board of Trustees of the Trust.
Generally, trading in foreign securities, as well as U.S. government securities,
money market instruments and certain fixed income securities is substantially
completed each day at various times prior to the close of business on the New
York Stock Exchange ("NYSE"). The values of such securities used in computing
the net assets of the Series are determined as of such times. Foreign currency
exchange rates 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.
22
NOTES TO FINANCIAL STATEMENTS (continued)
(b) Derivative financial instruments - The Series may engage in various
portfolio investment strategies to provide liquidity or as a proxy for a direct
investment in securities underlying the Series' index. Losses may arise due to
changes in the value of the contract or if the counterparty does not perform
under the contract.
o Financial futures contracts - The Series may purchase or sell
financial futures contracts and options on such futures contracts as
a proxy for a direct investment in securities underlying the Series'
index. 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 Swaps - The Series may enter into swap agreements, which are
over-the-counter contracts in which the Series and a counterparty
agree to make periodic net payments on a specified notional amount.
The net payments can be made for a set period of time or may be
triggered by a predetermined credit event. The net periodic payments
may be based on a fixed or variable interest rate; the change in
market value of a specified security, basket of securities, or
index; or the return generated by a security. These periodic
payments received or made by the Series are recorded in the
accompanying Statement of Operations as realized gains or losses,
respectively. Gains or losses are also realized upon termination of
the swap agreements. Swaps are marked-to-market daily and changes in
value are recorded as unrealized appreciation (depreciation). Risks
include changes in the returns of the underlying instruments,
failure of the counterparties to perform under the contracts' terms
and the possible lack of liquidity with respect to the swap
agreements.
o Options - The Series may purchase and write covered 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 the cost
of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
o Forward foreign exchange contracts - The Series may enter into
forward foreign exchange contracts as a hedge against either
specific transactions or portfolio positions. The contract is
marked-to-market daily and the change in market value is recorded by
the Series as an unrealized gain or loss. When the contract is
closed, the Series records a realized gain or loss equal to the
difference between the value at the time it was opened and the value
at the time it was closed.
o Foreign currency options and futures - The Series may also purchase
or sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as
a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-U.S. dollar-denominated securities owned by the
Series, sold by the Series but not yet delivered, or committed or
anticipated to be purchased by the Series.
23
NOTES TO FINANCIAL STATEMENTS (continued)
(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.
The Fund invests in foreign securities, which may involve a number of risk
factors and special considerations not present with investments in securities of
U.S. corporations.
(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
recorded on the dates the transactions are entered into (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.
Dividends from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Series has determined the ex-dividend date.
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.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Series' portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Series. For such services, the Series pays a monthly
fee at an annual rate of .01% of the Series' average daily net assets.
24
NOTES TO FINANCIAL STATEMENTS (continued)
The Trust has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM, or its affiliates.
As of December 31, 2005, the Series lent securities with a value of $5,297,290
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, 2005, MLIM, LLC received $7,504 in securities lending agent
fees from the Series.
For the year ended December 31, 2005, the Series reimbursed FAM $15,455 for
certain accounting services.
In addition, MLPF&S received $5,931 in commissions on the execution of portfolio
security transactions for the Series for the year ended December 31, 2005.
Certain officers and/or trustees of the Trust are officers and/or directors of
FAM, PSI, ML & Co., and/or MLIM, LLC.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 2005 were $964,716,235 and $836,002,215, respectively.
Transactions in call options written for the year ended December 31, 2005 were
as follows:
- -------------------------------------------------------------------------------
Number of Premiums
Call Options Written Contracts Received
- -------------------------------------------------------------------------------
Outstanding call options written,
beginning of year .......................... -- --
Options written .............................. 1,285 $ 48,804
Options expired .............................. (835) (28,009)
Options exercised ............................ (199) (10,697)
Options closed ............................... (251) (10,098)
---------------------------
Outstanding call options written,
end of year ................................ -- $ --
===========================
- -------------------------------------------------------------------------------
Transactions in put options written for the year ended December 31, 2005 were as
follows:
- -------------------------------------------------------------------------------
Number of Premiums
Put Options Written Contracts Received
- -------------------------------------------------------------------------------
Outstanding put options written,
beginning of year .......................... -- --
Options written .............................. 4,689 $ 199,630
Options expired .............................. (3,799) (133,842)
Options exercised ............................ (120) (9,320)
Options closed ............................... (770) (56,468)
---------------------------
Outstanding put options written,
end of year ................................ -- $ --
===========================
- -------------------------------------------------------------------------------
25
NOTES TO FINANCIAL STATEMENTS (concluded)
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, 2005. On November
23, 2005 the credit agreement was renewed for one year under substantially the
same terms.
26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Investors and Board of Trustees of Quantitative Master Series Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Master Enhanced S&P 500 Series, one of the
portfolios constituting the Quantitative Master Series Trust (the "Trust"), as
of December 31, 2005, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Trust
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Trust's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting 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, 2005, 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
Enhanced S&P 500 Series of the Quantitative Master Series Trust as of December
31, 2005, 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 24, 2006
27
Officers and Trustees
Number of
Portfolios in Other Public
Position(s) Length Fund Complex Directorships
Held with Of Time Overseen by Held by
Name Address & Age Trust Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Interested Trustees
====================================================================================================================================
Robert C. P.O. Box 9011 President 2005 to President of the MLIM/FAM-advised funds since 131 Funds None
Doll, Jr.* Princeton, NJ and Trustee present 2005; President of MLIM and FAM since 2001; 177 Portfolios
08543-9011 Co-Head (Americas Region) thereof from 2000 to
Age: 51 2001 and Senior Vice President from 1999 to
2001; President and Director of Princeton
Services, Inc. ("Princeton Services") since
2001; President of Princeton Administrators,
L.P. ("Princeton Administrators") since 2001;
Chief Investment Officer of OppenheimerFunds,
Inc. in 1999 and Executive Vice President
thereof from 1991 to 1999.
* Mr. Doll is a director, trustee or member of an advisory board of certain other investment companies for which
MLIM or FAM act as an investment adviser. Mr. Doll is an "interested person," as described in the Investment
Company Act, of the Fund based on his current positions with MLIM, FAM, Princeton Services and Princeton
Administrators. Trustees serve until their resignation, removal or death, or until December 31 of the year in
which they turn 72. As Trust President, Mr. Doll serves at the pleasure of the Board of Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
Donald W. P.O. Box 9095 Trustee 2002 to General Partner of The Burton Partnership, 23 Funds Knology, Inc.,
Burton Princeton, NJ present Limited partnership (an Investment Partnership) 42 Portfolios (telecommun-
08543-9095 since 1979; Managing General Partner of The ications)
Age: 61 South Atlantic Venture Funds, since 1983; Symbion, Inc.
Member of the Investment Advisory Council of (healthcare)
the Florida State Board of Administration since
2001.
- ------------------------------------------------------------------------------------------------------------------------------------
Laurie P.O. Box 9095 Trustee 2000 to Professor of Finance and Economics, Graduate 23 Funds None
Simon Princeton, NJ present School of Business, Columbia University since 42 Portfolios
Hodrick 08543-9095 1998.
Age: 43
- ------------------------------------------------------------------------------------------------------------------------------------
John P.O. Box 9095 Trustee 2005 to President and Chief Executive Officer of 23 Funds ABIOMED (medical
Francis Princeton, NJ present Allmerica Financial Corporation (financial 42 Portfolios device
O'Brien 08543-9095 services holding company) from 1995 to 2002 and manufacturer),
Age: 62 Director from 1995 to 2003; President of Cabot
Allmerica Investment Management Co., Inc. Corporation
(investment adviser) from 1989 to 2002; (chemicals), LKQ
Director from 1989 to 2002 and Chairman of the Corporation
Board from 1989 to 1990; President, Chief (auto parts
Executive Officer and Director of First manufacturing)
Allmerica Financial Life Insurance Company from and TJX
1989 to 2002 and Director of various other Companies, Inc.
Allmerica Financial companies until 2002; (retailer)
Director since 1989, Member of the Governance
Nominating Committee since 2004, Member of the
Compensation Committee of ABIOMED since 1989
and Member of the Audit Committee of ABIOMED
from 1990 to 2004; Director and Member of the
Governance and Nomination Committee of Cabot
Corporation and Member of the Audit Committee
since 1990; Director and Member of the Audit
Committee and Compensation Committee of LKQ
Corporation since 2003; Lead Director of TJX
Companies, Inc. since 1999; Trustee of the
Woods Hole Oceanographic Institute since 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
28
Officers and Trustees (continued)
Number of
Portfolios in
Position(s) Length Fund Complex Other Public
Held with Of Time Overseen by Directorships
Name Address & Age Trust Served Principal Occupation(s) During Past 5 Years Trustee Held by Trustee
====================================================================================================================================
Interested Trustees (concluded)
====================================================================================================================================
David H. P.O. Box 9095 Trustee 2003 to Consultant with Putnam Investments from 1993 to 23 Funds None
Walsh Princeton, NJ present 2003 and employed in various capacities 42 Portfolios
08543-9095 therewith from 1973 to 1992; Director, The
Age: 64 National Audubon Society from 1998 to 2005;
Director, The American Museum of Fly Fishing
since 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
Fred G. P.O. Box 9095 Trustee 2000 to Managing Director of FGW Associates since 1997; 23 Funds Watson
Weiss Princeton, NJ present Vice President, Planning, Investment and 42 Portfolios Pharmaceuticals,
08543-9095 Development of Warner Lambert Co. from 1979 to Inc.
Age: 64 1997; Director of Michael J. Fox Foundation for (pharmaceutical
Parkinson's Research since 2000; Director of company)
BTG International, Plc (a global technology
commercialization company) since 2001.
- ------------------------------------------------------------------------------------------------------------------------------------
* Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
====================================================================================================================================
Trust Officers
====================================================================================================================================
Donald C. P.O. Box 9011 Vice 1997 to First Vice President of MLIM and FAM since 1997
Burke Princeton, NJ President present and Treasurer thereof since 1999; Senior Vice
08543-9011 and and 1999 President and Treasurer of Princeton Services
Age: 45 Treasurer to since 1999 and Director since 2004; Vice
present President of FAM Distributors, Inc. ("FAMD")
since 1999 and Director since 2004; Vice
President of MLIM and FAM from 1990 to 1997;
Director of Taxation of MLIM from 1990 to 2001;
Vice President, Treasurer and Secretary of the
IQ Funds since 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Vincent J. P.O. Box 9011 Vice 2005 to Managing Director of MLIM since 2005; Director
Costa Princeton, NJ President present of MLIM from 1999 to 2005.
08543-9011
Age: 43
- ------------------------------------------------------------------------------------------------------------------------------------
Debra L. P.O. Box 9011 Vice 2005 to Director of MLIM since 1999.
Jelilian Princeton, NJ President present
08543-9011
Age: 38
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey L. P.O. Box 9011 Vice 2005 to Director of MLIM since 2004; Vice President of
Russo Princeton, NJ President present MLIM from 1994 to 2004.
08543-9011
Age: 38
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey P.O Box 9011 Chief 2004 to Chief Compliance Officer of the
Hiller Princeton, NJ Compliance present MLIM/FAM-advised funds and First Vice President
08534 Officer and Chief Compliance Officer of MLIM (Americas
Age: 54 Region) since 2004; Chief Compliance Officer of
the IQ Funds since 2004; Global Director of
Compliance at Morgan Stanley Investment
Management from 2002 to 2004; Managing Director
and Global Director of Compliance at Citigroup
Asset Management from 2000 to 2002; Chief
Compliance Officer at Soros Fund Management in
2000; Chief Compliance Officer at Prudential
Financial from 1995 to 2000; Senior Counsel in
the Division of Enforcement in Washington, D.C.
from 1990 to 1995.
- ------------------------------------------------------------------------------------------------------------------------------------
29
Officers and Trustees (concluded)
Position(s) Length
Held with Of Time
Name Address & Age Trust Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Trust Officers (concluded)
====================================================================================================================================
Alice A. P.O. Box 9011 Secretary 2004 to Director (Legal Advisory) of MLIM since 2002;
Pellegrino Princeton, NJ present Vice President of MLIM from 1999 to 2002;
08543-9011 Attorney associated with MLIM since 1997;
Age: 45 Secretary of MLIM, FAM, FAMD and Princeton
Services since 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
* Officers of the Trust serve at the pleasure of the Board of Trustees.
Further information about the Trust's Officers and Trustees is available in the Trust's Statement of Additional
Information, which can be obtained without charge by calling 1-800-637-3863.
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian
JPMorgan Chase Bank
3 Chase MetroTech Center
Brooklyn, NY 11245
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
Availability of Quarterly Schedule of Investments
The Series 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 Series' Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Series' 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.
A description of the policies and procedures that the Series uses to determine
how to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 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 Series voted proxies
relating to securities held in the Series' 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.
30
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) Laurie Simon Hodrick, (3) John F. O'Brien, (4) David H.
Walsh and (5) Fred G. Weiss.
The registrant's board of directors has determined that Laurie Simon
Hodrick qualifies as a financial expert pursuant to Item 3(c)(4) of
Form N-CSR.
Ms. Hodrick has a thorough understanding of generally accepted
accounting principals, financial statements, and internal controls and
procedures for financial reporting. Ms. Hodrick earned a Ph.D. in
economics and has taught courses in finance for over 15 years. Her
M.B.A.-level course centers around the evaluation and analysis of
firms' corporate financial statements. She has also taught in financial
analysts' training programs. Ms. Hodrick has also worked with several
prominent corporations in connection with the analysis of financial
forecasts and projections and analysis of the financial statements of
those companies, serving on the Financial Advisory Council of one of
these major corporations. She has also served as the Treasurer and
Finance Chair of a 501(c)(3) organization. Ms. Hodrick has published a
number of articles in leading economic and financial journals and is
the associate editor of two leading finance journals.
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending December 31, 2005 - $33,000
Fiscal Year Ending December 31, 2004 - $31,300
(b) Audit-Related Fees - Fiscal Year Ending December 31, 2005 - $0
Fiscal Year Ending December 31, 2004 - $0
(c) Tax Fees - Fiscal Year Ending December 31, 2005 - $8,700
Fiscal Year Ending December 31, 2004 - $8,000
The nature of the services include tax compliance, tax advice and tax
planning.
(d) All Other Fees - Fiscal Year Ending December 31, 2005 - $0
Fiscal Year Ending December 31, 2004 - $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, 2005 - $5,577,771
Fiscal Year Ending December 31, 2004 - $11,926,355
(h) The registrant's audit committee has considered and determined that
the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $1,227,000, 0%
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
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.
Master Enhanced S&P 500 Series of Quantitative Master Series Trust
By: /s/ Robert C. Doll, Jr.
--------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Master Enhanced S&P 500 Series of Quantitative Master Series Trust
Date: February 21, 2006
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
Master Enhanced S&P 500 Series of Quantitative Master Series Trust
Date: February 21, 2006
By: /s/ Donald C. Burke
--------------------------
Donald C. Burke,
Chief Financial Officer of
Master Enhanced S&P 500 Series of Quantitative Master Series Trust
Date: February 21, 2006