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 Small Cap 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 Small Cap 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 Small Cap Series
Annual Report, December 31, 2005
A Discussion With Your Fund's Portfolio Manager
Amid a volatile environment for small cap equities, Master Enhanced Small Cap
Series trailed the return of the S&P SmallCap 600 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, the Master Enhanced Small Cap
Series had a net total return of +7.45% (master level). For the same period, the
unmanaged Standard & Poor's (S&P) SmallCap 600 Index returned +7.68%. During the
period, the outperformance of our stock substitution strategies was outweighed
by the negative performance of our quantitative stock selection 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 confidence declined.
2
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 12-month period, small cap stocks, as measured by the S&P SmallCap
600 Index, lagged the +12.56% return of the S&P MidCap 400 Index but outpaced
the +4.91% return of the large-cap S&P 500 Index.
As expected, interest rates moved considerably during the period as the yield
curve flattened. The Federal Reserve Board 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
SmallCap 600 Index, we purchased and sold securities to maintain the portfolio's
objective of tracking the risks and return of the benchmark.
3
During the year, the Index 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, 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 Small Cap Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- -------------------------------------------------------------------------------------------------------------------------
Aerospace & Defense - 1.9% 11,200 AAR Corp. (d) $ 268,240
3,700 Armor Holdings, Inc. (d) 157,805
10,250 Ceradyne, Inc. (d) 448,950
8,900 Curtiss-Wright Corp. 485,940
10,300 DRS Technologies, Inc. 529,626
15,825 Engineered Support Systems, Inc. 658,953
9,100 Esterline Technologies Corp. (d) 338,429
12,600 GenCorp, Inc. (d) 223,650
9,400 Kaman Corp. Class A 185,086
14,125 Moog, Inc. Class A (d) 400,868
15,600 Teledyne Technologies, Inc. (d) 453,960
8,000 Triumph Group, Inc. (d) 292,880
------------
4,444,387
- -------------------------------------------------------------------------------------------------------------------------
Air Freight & Logistics - 0.5% 13,100 EGL, Inc. (d) 492,167
13,000 Forward Air Corp. 476,450
8,400 HUB Group, Inc. Class A (d) 296,940
------------
1,265,557
- -------------------------------------------------------------------------------------------------------------------------
Airlines - 0.5% 11,900 Mesa Air Group, Inc. (d) 124,474
34,500 Skywest, Inc. 926,670
------------
1,051,144
- -------------------------------------------------------------------------------------------------------------------------
Auto Components - 0.2% 7,800 Drew Industries, Inc. (d) 219,882
5,400 Midas, Inc. (d) 99,144
1,100 Standard Motor Products, Inc. 10,153
6,700 Superior Industries International, Inc. 149,142
------------
478,321
- -------------------------------------------------------------------------------------------------------------------------
Automobiles - 0.2% 2,100 Coachmen Industries, Inc. 24,801
7,000 Fleetwood Enterprises, Inc. (d) 86,450
12,300 Monaco Coach Corp. 163,590
4,200 Winnebago Industries, Inc. 139,776
------------
414,617
- -------------------------------------------------------------------------------------------------------------------------
Beverages - 0.2% 4,600 Hansen Natural Corp. (d) 365,700
- -------------------------------------------------------------------------------------------------------------------------
Biotechnology - 0.5% 4,500 Abgenix, Inc. (d) 96,795
9,000 Arqule, Inc. (d) 55,080
8,200 Cambrex Corp. 153,914
13,590 Chiron Corp. (d) 604,211
8,426 Enzo Biochem, Inc. (d) 104,651
24,900 Savient Pharmaceuticals, Inc. (d) 93,126
------------
1,107,777
- -------------------------------------------------------------------------------------------------------------------------
Building Products - 1.2% 8,100 Apogee Enterprises, Inc. 131,382
15,300 ElkCorp 514,998
23,500 Griffon Corp. (d) 559,535
21,200 Lennox International, Inc. 597,840
7,300 NCI Building Systems, Inc. (d) 310,104
6,000 Simpson Manufacturing Co., Inc. 218,100
7,700 Universal Forest Products, Inc. 425,425
------------
2,757,384
- -------------------------------------------------------------------------------------------------------------------------
Capital Markets - 0.5% 23,600 Investment Technology Group, Inc. (d) 836,384
8,200 Piper Jaffray Cos. (d) 331,280
4,100 SWS Group, Inc. 85,854
------------
1,253,518
- -------------------------------------------------------------------------------------------------------------------------
Chemicals - 1.1% 9,700 Arch Chemicals, Inc. 290,030
14,000 Georgia Gulf Corp. 425,880
23,700 H.B. Fuller Co. 760,059
6
Master Enhanced Small Cap Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- -------------------------------------------------------------------------------------------------------------------------
9,100 MacDermid, Inc. $ 253,890
2,200 Material Sciences Corp. (d) 31,020
9,400 OM Group, Inc. (d) 176,344
8,900 Omnova Solutions, Inc. (d) 42,720
3,700 Penford Corp. 45,140
29,600 PolyOne Corp. (d) 190,328
800 Quaker Chemical Corp. 15,384
9,600 Schulman A, Inc. 206,592
8,900 Wellman, Inc. 60,342
------------
2,497,729
- -------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 4.7% 11,300 Boston Private Financial Holdings, Inc. 343,746
25,300 Brookline Bancorp, Inc. 358,501
10,900 Central Pacific Financial Corp. 391,528
17,200 Chittenden Corp. 478,332
10,100 Community Bank System, Inc. 227,755
24,100 East-West Bancorp, Inc. 879,409
33,400 First BanCorp. 414,494
10,000 First Financial Bancorp 175,200
17,500 First Midwest Bancorp, Inc. 613,550
7,900 First Republic Bank 292,379
12,700 Glacier Bancorp, Inc. 381,635
15,900 Gold Banc Corp., Inc. 289,698
18,700 Hudson United Bancorp 779,416
3,300 Irwin Financial Corp. 70,686
8,100 Nara Bancorp, Inc. 144,018
1,000 PrivateBancorp, Inc. 35,570
8,700 Prosperity Bancshares, Inc. 250,038
12,000 Provident Bankshares Corp. 405,240
27,660 Republic Bancorp, Inc. 329,154
20,000 The South Financial Group, Inc. 550,800
12,115 Sterling Financial Corp. 302,633
17,100 Susquehanna Bancshares, Inc. 404,928
4,000 TrustCo Bank Corp. NY 49,680
35,000 UCBH Holdings, Inc. 625,800
16,052 Umpqua Holdings Corp. 457,964
13,600 United Bankshares, Inc. 479,264
25,300 Whitney Holding Corp. 697,268
8,700 Wintrust Financial Corp. 477,630
------------
10,906,316
- -------------------------------------------------------------------------------------------------------------------------
Commercial Services & Supplies - 3.3% 13,500 ABM Industries, Inc. 263,925
3,900 Administaff, Inc. 163,995
6,600 Angelica Corp. 109,164
18,800 Brady Corp. 680,184
9,700 Coinstar, Inc. (d) 221,451
11,800 Consolidated Graphics, Inc. (d) 558,612
7,400 G&K Services, Inc. Class A 290,450
6,300 Heidrick & Struggles International, Inc. (d) 201,915
13,200 John H. Harland Co. 496,320
32,600 Labor Ready, Inc. (d) 678,732
16,000 NCO Group, Inc. (d) 270,720
9,300 On Assignment, Inc. (d) 101,463
7,000 Portfolio Recovery Associates, Inc. (d) 325,080
8,200 School Specialty, Inc. (d) 298,808
6,400 Sourcecorp (d) 153,472
7
Master Enhanced Small Cap Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- -------------------------------------------------------------------------------------------------------------------------
24,800 Spherion Corp. (d) $ 248,248
41,500 Tetra Tech, Inc. (d) 650,305
20,700 United Stationers, Inc. (d) 1,003,950
7,300 Viad Corp. 214,109
3,300 Volt Information Sciences, Inc. (d) 62,766
8,850 Waste Connections, Inc. (d) 304,971
15,400 Watson Wyatt Worldwide, Inc. 429,660
------------
7,728,300
- -------------------------------------------------------------------------------------------------------------------------
Communications Equipment - 1.4% 1 Andrew Corp. (d) 11
7,800 Audiovox Corp. Class A (d) 108,108
10,800 Bel Fuse, Inc. 343,440
16,200 Belden CDT, Inc. 395,766
14,100 Black Box Corp. 668,058
5,600 Blue Coat Systems, Inc. (d) 256,032
6,900 Comtech Telecommunications Corp. (d) 210,726
4,900 Digi International, Inc. (d) 51,401
13,100 Ditech Communications Corp. (d) 109,385
11,800 Enterasys Networks, Inc. (d) 156,704
6,900 Inter-Tel, Inc. 135,033
11,600 Netgear, Inc. (d) 223,300
2,900 Network Equipment Technologies, Inc. (d) 12,760
5,110 Scientific-Atlanta, Inc. 220,088
19,000 Symmetricom, Inc. (d) 160,930
21,300 Tollgrade Communications, Inc. (d) 232,809
------------
3,284,551
- -------------------------------------------------------------------------------------------------------------------------
Computers & Peripherals - 1.1% 46,100 Adaptec, Inc. (d) 268,302
17,833 Avid Technology, Inc. (d) 976,535
10,500 Hutchinson Technology, Inc. (d) 298,725
11,200 Komag, Inc. (d) 388,192
12,300 Novatel Wireless, Inc. (d) 148,953
2,200 SBS Technologies, Inc. (d) 22,154
18,200 Synaptics, Inc. (d) 449,904
------------
2,552,765
- -------------------------------------------------------------------------------------------------------------------------
Construction & Engineering - 0.7% 6,400 EMCOR Group, Inc. (d) 432,192
8,900 Insituform Technologies, Inc. Class A (d) 172,393
23,500 The Shaw Group, Inc. (d) 683,615
8,800 URS Corp. (d) 330,968
------------
1,619,168
- -------------------------------------------------------------------------------------------------------------------------
Construction Materials - 1.2% 27,425 Florida Rock Industries, Inc. 1,345,470
23,800 Headwaters, Inc. (d) 843,472
11,300 Texas Industries, Inc. 563,192
------------
2,752,134
- -------------------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.3% 708 Capital One Financial Corp. 61,171
24,100 Cash America International, Inc. 558,879
4,100 Collegiate Funding Services LLC (d) 80,975
------------
701,025
- -------------------------------------------------------------------------------------------------------------------------
Containers & Packaging - 0.5% 14,200 Aptargroup, Inc. 741,240
7,400 Caraustar Industries, Inc. (d) 64,306
10,140 Myers Industries, Inc. 147,841
12,900 Rock-Tenn Co. Class A 176,085
------------
1,129,472
- -------------------------------------------------------------------------------------------------------------------------
Distributors - 0.4% 11,000 Brightpoint, Inc. (d) 305,030
9,000 Building Material Holding Corp. 613,890
------------
918,920
- -------------------------------------------------------------------------------------------------------------------------
8
Master Enhanced Small Cap Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- -------------------------------------------------------------------------------------------------------------------------
Diversified Consumer Services - 0.1% 3,900 CPI Corp. $ 72,969
3,900 Vertrue, Inc. (d) 137,787
------------
210,756
- -------------------------------------------------------------------------------------------------------------------------
Diversified Financial Services - 0.1% 5,800 Financial Federal Corp. 257,810
- -------------------------------------------------------------------------------------------------------------------------
Diversified Telecommunication 31 Commonwealth Telephone Enterprises, Inc. 1,047
Services - 0.2% 14,400 General Communication Inc. Class A (d) 148,752
6,000 PanAmSat Holding Corp. 147,000
14,065 Teleglobe Intl Holdings Ltd. (d) 62,027
------------
358,826
- -------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.7% 4,566 Allete, Inc. 200,904
900 Central Vermont Public Service Corp. 16,209
18,100 Cleco Corp. 377,385
19,600 El Paso Electric Co. (d) 412,384
4,000 Green Mountain Power Corp. 115,080
14,300 Unisource Energy Corp. 446,160
------------
1,568,122
- -------------------------------------------------------------------------------------------------------------------------
Electrical Equipment - 1.6% 18,700 AO Smith Corp. 656,370
16,400 Acuity Brands, Inc. 521,520
4 American Superconductor Corp. (d) 31
16,300 Artesyn Technologies, Inc. (d) 167,890
9,200 Baldor Electric Co. 235,980
12,200 Magnetek, Inc. (d) 39,650
10,300 Regal-Beloit Corp. 364,620
37,100 Roper Industries, Inc. 1,465,821
5,200 Vicor Corp. 82,212
3,300 Woodward Governor Co. 283,833
------------
3,817,927
- -------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Instruments - 3.5% 28,900 Aeroflex, Inc. (d) 310,675
26,000 Agilysys, Inc. 473,720
13,200 Anixter International, Inc. 516,384
7,700 Bell Microproducts, Inc. (d) 58,905
27,900 Benchmark Electronics, Inc. (d) 938,277
11,900 CTS Corp. 131,614
3,800 Checkpoint Systems, Inc. (d) 93,670
19,400 Cognex Corp. 583,746
12,800 Coherent, Inc. (d) 379,904
4,400 Daktronics, Inc. 130,108
9,400 Electro Scientific Industries, Inc. (d) 227,010
18,900 Flir Systems, Inc. (d) 422,037
5,600 Gerber Scientific, Inc. (d) 53,592
8,000 Global Imaging Systems, Inc. (d) 277,040
16,000 Itron, Inc. (d) 640,640
3,100 Keithley Instruments, Inc. 43,338
9,300 MTS Systems Corp. 322,152
6,800 Mercury Computer Systems, Inc. (d) 140,284
6,000 Park Electrochemical Corp. 155,880
33,900 Paxar Corp. (d) 665,457
4,700 Photon Dynamics, Inc. (d) 85,916
6,200 Radisys Corp. (d) 107,508
9
Master Enhanced Small Cap Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- -------------------------------------------------------------------------------------------------------------------------
5,200 Rogers Corp. (d) $ 203,736
500 Scansource, Inc. (d) 27,340
16,600 Technitrol, Inc. 283,860
23,100 Trimble Navigation Ltd. (d) 819,819
------------
8,092,612
- -------------------------------------------------------------------------------------------------------------------------
Energy Equipment & Services - 3.3% 4,600 Atwood Oceanics, Inc. (d) 358,938
7,050 CARBO Ceramics, Inc. 398,466
30,200 Cal Dive International, Inc. (d) 1,083,878
2,000 Dril-Quip, Inc. (d) 94,400
7,100 Hydril Co. (d) 444,460
11,200 Lone Star Technologies Inc. (d) 578,592
5,400 Lufkin Industries, Inc. 269,298
17,600 Maverick Tube Corp. (d) 701,536
9,000 NS Group, Inc. (d) 376,290
9,600 Oceaneering International, Inc. (d) 477,888
21,400 Offshore Logistics, Inc. (d) 624,880
3,300 SEACOR Holdings, Inc. (d) 224,730
14,175 Tetra Technologies, Inc. (d) 432,621
18,700 Unit Corp. (d) 1,029,061
14,300 Veritas DGC, Inc. (d) 507,507
400 W-H Energy Services, Inc. (d) 13,232
------------
7,615,777
- -------------------------------------------------------------------------------------------------------------------------
Food & Staples Retailing - 0.9% 18,100 Casey's General Stores, Inc. 448,880
6,100 Great Atlantic & Pacific Tea Co. (d) 193,858
9,500 Longs Drug Stores Corp. 345,705
4,000 Nash Finch Co. 101,920
15,200 Performance Food Group Co. (d) 431,224
18,400 United Natural Foods, Inc. (d) 485,760
------------
2,007,347
- -------------------------------------------------------------------------------------------------------------------------
Food Products - 1.2% 2,100 American Italian Pasta Co. Class A 14,280
28,600 Corn Products International, Inc. 683,254
12,700 Delta & Pine Land Co. 292,227
7,600 Flowers Foods, Inc. 209,456
15,200 Hain Celestial Group, Inc. (d) 321,632
2,800 J&J Snack Foods Corp. 166,348
12,300 Lance, Inc. 229,149
5,700 Peet's Coffee & Tea, Inc. (d) 172,995
12,200 Ralcorp Holdings, Inc. (d) 486,902
13,300 TreeHouse Foods, Inc. (d) 248,976
------------
2,825,219
- -------------------------------------------------------------------------------------------------------------------------
Gas Utilities - 2.5% 33,200 Atmos Energy Corp. 868,512
4,700 Cascade Natural Gas Corp. 91,697
22,500 Energen Corp. 817,200
8,700 The Laclede Group, Inc. 254,127
11,200 New Jersey Resources Corp. 469,168
11,300 Northwest Natural Gas Co. 386,234
32,800 Piedmont Natural Gas Co. 792,448
30,805 Southern Union Co. (d) 727,922
3,000 Southwest Gas Corp. 79,200
11,700 South Jersey Industries, Inc. 340,938
44,800 UGI Corp. 922,880
------------
5,750,326
- -------------------------------------------------------------------------------------------------------------------------
10
Master Enhanced Small Cap Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- -------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Supplies - 5.4% 26,200 American Medical Systems Holdings, Inc. (d) $ 467,146
5,600 Analogic Corp. 267,960
4,200 Animas Corp. (d) 101,430
8,900 Arthrocare Corp. (d) 375,046
2,400 Biosite, Inc. (d) 135,096
12,100 Conmed Corp. (d) 286,286
18,079 Cooper Cos., Inc. 927,453
7,700 Cyberonics, Inc. (d) 248,710
7,600 DJ Orthopedics, Inc. (d) 209,608
3,300 Datascope Corp. 109,065
10,700 Diagnostic Products Corp. 519,485
7,200 Dionex Corp. (d) 353,376
7,200 Greatbatch, Inc. (d) 187,272
9,600 Haemonetics Corp. (d) 469,056
18,200 Hologic, Inc. (d) 690,144
5,700 ICU Medical, Inc. (d) 223,497
13,100 Idexx Laboratories, Inc. (d) 942,938
28,850 Immucor, Inc. (d) 673,936
8,925 Intermagnetics General Corp. (d) 284,707
13,000 Invacare Corp. 409,370
7,600 Laserscope (d) 170,696
14,600 Mentor Corp. 672,768
28,500 Merit Medical Systems, Inc. (d) 345,990
8,459 PolyMedica Corp. 283,123
8,000 Possis Medical, Inc. (d) 79,600
29,000 Resmed, Inc. (d) 1,110,990
25,200 Respironics, Inc. (d) 934,164
15,200 Sybron Dental Specialties, Inc. (d) 605,112
19,500 Theragenics Corp. (d) 58,890
13,000 Viasys Healthcare, Inc. (d) 334,100
1,000 Vital Signs, Inc. 42,820
------------
12,519,834
- -------------------------------------------------------------------------------------------------------------------------
Health Care Providers & Services - 4.8% 24,500 AMERIGROUP Corp. (d) 476,770
2,600 Amedisys, Inc. (d) 109,824
6,300 American Healthways, Inc. (d) 285,075
12,150 Amsurg Corp. (d) 277,749
21,200 Beverly Enterprises, Inc. (d) 247,404
26,900 Centene Corp. (d) 707,201
9,600 Cerner Corp. (d) 872,736
9,600 Chemed Corp. 476,928
5,800 Cross Country Healthcare, Inc. (d) 103,124
3,900 CryoLife, Inc. (d) 13,026
29,600 Dendrite International, Inc. (d) 426,536
6,900 Gentiva Health Services, Inc. (d) 101,706
27,300 Hooper Holmes, Inc. 69,615
14,800 IDX Systems Corp. (d) 650,016
7,700 LCA-Vision, Inc. 365,827
17 LifePoint Hospitals, Inc. (d) 638
15,000 NDCHealth Corp. 288,450
16,750 Odyssey HealthCare, Inc. (d) 312,220
16,300 Owens & Minor, Inc. 448,739
10,900 Pediatrix Medical Group, Inc. (d) 965,413
27,400 Pharmaceutical Product Development, Inc. 1,697,430
11
Master Enhanced Small Cap Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- -------------------------------------------------------------------------------------------------------------------------
6,900 RehabCare Group, Inc. (d) $ 139,380
18,100 Renal Care Group, Inc. (d) 856,311
6,500 SFBC International, Inc. (d) 104,065
6,600 Sierra Health Services, Inc. (d) 527,736
12,900 Sunrise Senior Living, Inc. (d) 434,859
8,800 United Surgical Partners International, Inc. (d) 282,920
------------
11,241,698
- -------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Leisure - 3.0% 12,800 Aztar Corp. (d) 388,992
9,500 Bally Total Fitness Holding Corp. (d) 59,660
16,100 CEC Entertainment, Inc. (d) 548,044
5,100 Dave & Buster's, Inc. (d) 89,811
8,300 IHOP Corp. 389,353
16,200 Jack in the Box, Inc. (d) 565,866
13,680 La Quinta Corp. (d) 152,395
6,700 Landry's Restaurants, Inc. 178,957
7,400 Lone Star Steakhouse & Saloon, Inc. 175,676
7,200 Marcus Corp. 169,200
11,000 Multimedia Games, Inc. (d) 101,750
9,600 PF Chang's China Bistro, Inc. (d) 476,448
18,500 Panera Bread Co. Class A (d) 1,215,080
5,000 Papa John's International, Inc. (d) 296,550
14,800 Pinnacle Entertainment, Inc. (d) 365,708
15,850 Rare Hospitality International, Inc. (d) 481,682
6,800 Red Robin Gourmet Burgers, Inc. (d) 346,528
12,750 Shuffle Master, Inc. (d) 320,535
17,300 Sonic Corp. (d) 510,350
11,400 The Steak n Shake Co. (d) 193,230
------------
7,025,815
- -------------------------------------------------------------------------------------------------------------------------
Household Durables - 2.3% 5,600 Bassett Furniture Industries, Inc. 103,600
16,200 Champion Enterprises, Inc. (d) 220,644
10,200 Ethan Allen Interiors, Inc. 372,606
100 Fedders Corp. 172
15,200 Interface, Inc. Class A (d) 124,944
8,800 Lenox Group, Inc. (d) 116,512
4,200 M/I Homes, Inc. 170,604
13,948 MDC Holdings, Inc. 864,497
9,900 Meritage Homes Corp. (d) 622,908
2,271 NVR, Inc. (d) 1,594,242
2,900 Russ Berrie & Co., Inc. 33,118
1,400 Skyline Corp. 50,960
29,300 Standard-Pacific Corp. 1,078,240
------------
5,353,047
- -------------------------------------------------------------------------------------------------------------------------
Household Products - 0.3% 28,800 Spectrum Brands, Inc. (d) 584,928
4,800 WD-40 Co. 126,048
------------
710,976
- -------------------------------------------------------------------------------------------------------------------------
IT Services - 2.2% 3,500 Anteon International Corp. (d) 190,225
19,100 CACI International, Inc. Class A (d) 1,095,958
22,000 Carreker Corp. (d) 109,780
22,500 Ciber, Inc. (d) 148,500
16,300 eFunds Corp. (d) 382,072
10,000 Gevity HR, Inc. 257,200
12
Master Enhanced Small Cap Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- -------------------------------------------------------------------------------------------------------------------------
36,900 Global Payments, Inc. $ 1,719,909
7,300 Intrado, Inc. (d) 168,046
6,400 iPayment, Inc. (d) 265,728
19,700 Keane, Inc. (d) 216,897
7,800 MAXIMUS, Inc. 286,182
5,700 Mantech International Corp. Class A (d) 158,802
7,200 Pegasus Solutions, Inc. (d) 64,584
------------
5,063,883
- -------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates - 0.1% 4,500 Standex International Corp. 124,920
7,400 Tredegar Corp. 95,386
------------
220,306
- -------------------------------------------------------------------------------------------------------------------------
Insurance - 2.3% 10,300 Delphi Financial Group Class A 473,903
5,400 Hilb Rogal & Hobbs Co. 207,954
6,800 Infinity Property & Casualty Corp. 253,028
2,400 LandAmerica Financial Group, Inc. 149,760
4,200 Philadelphia Consolidated Holding Co. (d) 406,098
5,600 Presidential Life Corp. 106,624
14,000 ProAssurance Corp. (d) 680,960
7,600 RLI Corp. 379,012
3,400 Selective Insurance Group 180,540
6,300 Stewart Information Services Corp. 306,621
34,900 UICI 1,239,299
5,700 United Fire & Casualty Co. 230,451
15,150 Zenith National Insurance Corp. 698,718
------------
5,312,968
- -------------------------------------------------------------------------------------------------------------------------
Internet & Catalog Retail - 0.1% 3,800 Insight Enterprises, Inc. (d) 74,518
6,400 The J. Jill Group, Inc. (d) 121,792
5,000 Provide Commerce, Inc. (d) 165,550
------------
361,860
- -------------------------------------------------------------------------------------------------------------------------
Internet Software & Services - 0.8% 12,500 Digital Insight Corp. (d) 400,250
9,800 Infospace, Inc. (d) 253,036
9,100 j2 Global Communications, Inc. (d) 388,934
11,900 MIVA, Inc. (d) 58,905
14,300 WebEx Communications, Inc. (d) 309,309
5,500 Websense, Inc. (d) 361,020
------------
1,771,454
- -------------------------------------------------------------------------------------------------------------------------
Leisure Equipment & Products - 1.4% 12,400 Arctic Cat, Inc. 248,744
11,000 Jakks Pacific, Inc. (d) 230,340
23,400 K2, Inc. (d) 236,574
6,500 MarineMax, Inc. (d) 205,205
7,200 Meade Instruments Corp. (d) 19,656
11,500 Nautilus, Inc. 214,590
25,400 Polaris Industries, Inc. 1,275,080
23,300 SCP Pool Corp. 867,226
------------
3,297,415
- -------------------------------------------------------------------------------------------------------------------------
Machinery - 4.2% 5,500 ASV, Inc. (d) 137,390
11,600 Albany International Corp. Class A 419,456
5,500 Astec Industries, Inc. (d) 179,630
19,800 Briggs & Stratton Corp. 768,042
19,400 Clarcor, Inc. 576,374
17,800 EnPro Industries, Inc. (d) 479,710
13
Master Enhanced Small Cap Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- -------------------------------------------------------------------------------------------------------------------------
11,900 Gardner Denver, Inc. (d) $ 586,670
20,900 IDEX Corp. 859,199
20,900 JLG Industries, Inc. 954,294
9,700 Kaydon Corp. 311,758
2,700 Lindsay Manufacturing Co. 51,921
6,300 Lydall, Inc. (d) 51,345
11,300 Manitowoc Co. 567,486
28,600 Mueller Industries, Inc. 784,212
30,800 Oshkosh Truck Corp. 1,373,372
9,500 Robbins & Myers, Inc. 193,325
14,200 Stewart & Stevenson Services Inc. 300,046
18,000 Toro Co. 787,860
12,000 Valmont Industries, Inc. 401,520
700 Wabash National Corp. 13,335
------------
9,796,945
- -------------------------------------------------------------------------------------------------------------------------
Marine - 0.2% 9,300 Kirby Corp. (d) 485,181
- -------------------------------------------------------------------------------------------------------------------------
Media - 0.4% 3,100 4Kids Entertainment, Inc. (d) 48,639
11,050 Advo, Inc. 311,389
11,700 Arbitron, Inc. 444,366
300 CCE Spinco, Inc. 3,930
3,500 Liberty Corp. 163,835
------------
972,159
- -------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 2.4% 3,990 AM Castle & Co. (d) 87,142
9,000 AMCOL International Corp. 184,680
11,389 Aleris International, Inc. (d) 367,181
8,900 Carpenter Technology Corp. 627,183
9,400 Century Aluminum Co. (d) 246,374
7,900 Chaparral Steel Co. (d) 238,975
9,000 Cleveland-Cliffs, Inc. 797,130
33,000 Commercial Metals Co. 1,238,820
10,350 Quanex Corp. 517,190
8,200 RTI International Metals, Inc. (d) 311,190
11,300 Reliance Steel & Aluminum Co. 690,656
8,600 Ryerson, Inc. 209,152
------------
5,515,673
- -------------------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.2% 17,200 Avista Corp. 304,612
2,300 CH Energy Group, Inc. 105,570
------------
410,182
- -------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.1% 21,200 Fred's, Inc. 344,924
- -------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels - 3.6% 20,100 Cabot Oil & Gas Corp. Class A 906,510
24,099 Cimarex Energy Co. 1,036,498
23,000 Frontier Oil Corp. 863,190
32,100 Massey Energy Co. 1,215,627
6,600 Penn Virginia Corp. 378,840
14,300 Petroleum Development Corp. (d) 476,762
8,000 Remington Oil & Gas Corp. (d) 292,000
21,400 St. Mary Land & Exploration Co. 787,734
11,100 Stone Energy Corp. (d) 505,383
11,700 Swift Energy Co. (d) 527,319
23,500 Vintage Petroleum, Inc. 1,253,255
3,500 World Fuel Services Corp. 118,020
------------
8,361,138
- -------------------------------------------------------------------------------------------------------------------------
14
Master Enhanced Small Cap Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- -------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products - 0.2% 600 Buckeye Technologies, Inc. (d) $ 4,830
3,700 Deltic Timber Corp. 191,882
1,200 Pope & Talbot, Inc. 9,996
6,100 Schweitzer-Mauduit International, Inc. 151,158
16,600 Wausau Paper Corp. 196,710
------------
554,576
- -------------------------------------------------------------------------------------------------------------------------
Personal Products - 0.3% 20,900 NBTY, Inc. (d) 339,625
25,500 Playtex Products, Inc. (d) 348,585
3,400 USANA Health Sciences, Inc. (d) 130,424
------------
818,634
- -------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.9% 17,100 Alpharma, Inc. Class A 487,521
3,200 Bradley Pharmaceuticals, Inc. (d) 30,400
4,100 CNS, Inc. 89,831
11,600 Connetics Corp. (d) 167,620
20,000 Impax Laboratories, Inc. (d) 214,000
21,300 MGI Pharma, Inc. (d) 365,508
23,600 Medicis Pharmaceutical Corp. Class A 756,380
------------
2,111,260
- -------------------------------------------------------------------------------------------------------------------------
Real Estate - 2.8% 7,800 AMLI Residential Properties Trust 296,790
5,800 Arden Realty, Inc. 260,014
5,200 Centerpoint Properties Trust 257,296
17,000 Colonial Properties Trust 713,660
4,100 Commercial Net Lease Realty 83,517
1,100 Eastgroup Properties Inc. 49,676
9,400 Entertainment Properties Trust 383,050
9,300 Essex Property Trust, Inc. 857,460
10,900 Kilroy Realty Corp. 674,710
18,400 Lexington Corporate Properties Trust 391,920
23,022 New Century Financial Corp. 830,404
2,900 Parkway Properties, Inc. 116,406
20,200 Shurgard Storage Centers, Inc. 1,145,542
5,500 Sovran Self Storage, Inc. 258,335
7,300 The Town & Country Trust 246,813
------------
6,565,593
- -------------------------------------------------------------------------------------------------------------------------
Road & Rail - 1.1% 8,900 Arkansas Best Corp. 388,752
19,500 Heartland Express, Inc. 395,655
27,700 Kansas City Southern (d) 676,711
6,075 Knight Transportation, Inc. 125,935
25,300 Landstar System, Inc. 1,056,022
------------
2,643,075
- -------------------------------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor 15,500 ATMI, Inc. (d) 433,535
Equipment - 2.6% 6,900 Actel Corp. (d) 87,837
8,800 Advanced Energy Industries, Inc. (d) 104,104
41,200 Axcelis Technologies, Inc. (d) 196,524
27,014 Brooks Automation, Inc. (d) 338,485
13,300 Cymer, Inc. (d) 472,283
9,500 DSP Group, Inc. (d) 238,070
3,800 ESS Technology, Inc. (d) 13,034
14,400 Exar Corp. (d) 180,288
15
Master Enhanced Small Cap Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- -------------------------------------------------------------------------------------------------------------------------
11,100 FEI Co. (d) $ 212,787
22,700 Kopin Corp. (d) 121,445
16,900 Kulicke & Soffa Industries, Inc. (d) 149,396
24,000 Microsemi Corp. (d) 663,840
11,300 Pericom Semiconductor Corp. (d) 90,061
17,000 Photronics, Inc. (d) 256,020
27,200 Power Integrations, Inc. (d) 647,632
24,600 Skyworks Solutions, Inc. (d) 125,214
13,600 Standard Microsystems Corp. (d) 390,184
10,600 Supertex, Inc. (d) 469,050
7,800 Ultratech, Inc. (d) 128,076
14,100 Varian Semiconductor Equipment Associates, Inc. (d) 619,413
10,900 Veeco Instruments, Inc. (d) 188,897
------------
6,126,175
- -------------------------------------------------------------------------------------------------------------------------
Software - 4.1% 9,400 Altiris, Inc. (d) 158,766
11,900 Ansys, Inc. (d) 508,011
12,300 Captaris, Inc. (d) 45,387
11,797 Captiva Software Corp (d) 262,483
5,600 EPIQ Systems, Inc. (d) 103,824
13,700 Factset Research Systems, Inc. 563,892
15,100 Filenet Corp. (d) 390,335
24,300 Hyperion Solutions Corp. (d) 870,426
16,030 Internet Security Systems Inc. (d) 335,829
9,400 JDA Software Group, Inc. (d) 159,894
12,300 Kronos, Inc. (d) 514,878
11,500 MRO Software, Inc. (d) 161,460
23,800 Manhattan Associates, Inc. (d) 487,424
8,500 Mapinfo Corp. (d) 107,185
2,600 Micromuse, Inc. (d) 25,714
14,600 Micros Systems, Inc. (d) 705,472
7,200 Midway Games, Inc. (d) 136,584
18,800 Napster Inc. (d) 66,176
9,400 Open Solutions, Inc. (d) 215,448
4,400 Phoenix Technologies Ltd. (d) 27,544
14,400 Progress Software Corp. (d) 408,672
3,100 Quality Systems, Inc. 237,956
9,300 Radiant Systems, Inc. (d) 113,088
12,400 Secure Computing Corp. (d) 152,024
30,300 Serena Software, Inc. (d) 710,232
12,000 Siebel Systems, Inc. 126,960
7,600 Sonic Solutions, Inc. (d) 114,836
38,600 THQ, Inc. (d) 920,610
28,250 Take-Two Interactive Software, Inc. (d) 500,025
7,800 Talx Corp. 356,538
------------
9,487,673
- -------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 4.4% 15,800 Aaron Rents, Inc. 333,064
5,500 Burlington Coat Factory Warehouse Corp. 221,155
29,150 The Cato Corp. Class A 625,267
8,800 The Children's Place Retail Stores, Inc. (d) 434,896
12,350 Christopher & Banks Corp. 231,933
7,200 Cost Plus, Inc. (d) 123,480
7,300 Dress Barn, Inc. (d) 281,853
16
Master Enhanced Small Cap Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- -------------------------------------------------------------------------------------------------------------------------
18,100 The Finish Line, Inc. Class A $ 315,302
16,300 Genesco, Inc. (d) 632,277
8,700 Group 1 Automotive, Inc. (d) 273,441
15,400 Guitar Center, Inc. (d) 770,154
12,900 Gymboree Corp. (d) 301,860
3,400 HOT Topic, Inc. (d) 48,450
20,000 Haverty Furniture Cos., Inc. 257,800
14,850 Hibbett Sporting Goods, Inc. (d) 422,928
9,570 Jo-Ann Stores, Inc. (d) 112,926
4,600 Jos. A. Bank Clothiers, Inc. (d) 199,686
20,500 Linens 'N Things, Inc. (d) 545,300
23,300 Men's Wearhouse, Inc. (d) 685,952
10,400 Movie Gallery, Inc. 58,344
19,200 PEP Boys-Manny, Moe & Jack 285,888
4,400 Select Comfort Corp. (d) 120,340
26,500 Sonic Automotive, Inc. 590,420
11,250 Stage Stores, Inc. 335,025
22,300 Stein Mart, Inc. 404,745
14,100 Too, Inc. (d) 397,761
12,700 Tractor Supply Co. (d) 672,338
17,800 Zale Corp. (d) 447,670
------------
10,130,255
- -------------------------------------------------------------------------------------------------------------------------
Textiles, Apparel & Luxury Goods - 2.0% 19,100 Ashworth, Inc. (d) 161,395
7,500 Brown Shoe Co., Inc. 318,225
7,700 Fossil, Inc. (d) 165,627
12,900 K-Swiss, Inc. Class A 418,476
9,300 Kellwood Co. 222,084
4,800 Oxford Industries, Inc. 262,560
25,100 Phillips-Van Heusen Corp. 813,240
70,800 Quiksilver, Inc. (d) 979,872
6,300 Reebok International Ltd. 366,849
13,600 Russell Corp. 183,056
10,700 Stride Rite Corp. 145,092
23,550 Wolverine World Wide, Inc. 528,933
------------
4,565,409
- -------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance - 1.5% 5,900 Anchor Bancorp Wisconsin, Inc. 179,006
14,800 BankAtlantic Bancorp, Inc. Class A 207,200
7,300 Dime Community Bancshares, Inc. 106,653
9,000 Downey Financial Corp. 615,510
9,300 Fidelity Bankshares, Inc. 304,110
5,800 FirstFed Financial Corp. (d) 316,216
14,300 Flagstar Bancorp, Inc. 205,920
9,500 Franklin Bank Corp. (d) 170,905
26,900 Fremont General Corp. 624,887
5,200 Independence Community Bank Corp. 206,596
10,600 MAF Bancorp, Inc. 438,628
------------
3,375,631
- -------------------------------------------------------------------------------------------------------------------------
Tobacco - 0.1% 35,400 Alliance One International, Inc. 138,060
- -------------------------------------------------------------------------------------------------------------------------
Trading Companies & Distributors - 0.9% 11,850 Applied Industrial Technologies, Inc. 399,226
17,700 Hughes Supply, Inc. 634,545
1,800 Lawson Products, Inc. 67,932
15,900 Watsco, Inc. 950,979
------------
2,052,682
- -------------------------------------------------------------------------------------------------------------------------
17
Master Enhanced Small Cap Series
Schedule of Investments as of December 31, 2005
Shares
Industry Held Common Stocks Value
- -------------------------------------------------------------------------------------------------------------------------
Water Utilities - 0.1% 6,900 American States Water Co. $ 212,520
- -------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunication Services - 0.1% 13,620 Alamosa Holdings, Inc. (d) 253,468
- -------------------------------------------------------------------------------------------------------------------------
Total Common Stocks
(Cost - $162,486,149) - 89.4% 207,533,976
- -------------------------------------------------------------------------------------------------------------------------
Exchange -Traded Funds
- -------------------------------------------------------------------------------------------------------------------------
27,405 iShares S&P SmallCap 600 Index Fund 1,583,187
- -------------------------------------------------------------------------------------------------------------------------
Total Exchange-Traded Funds
(Cost - $1,509,717) - 0.7% 1,583,187
- -------------------------------------------------------------------------------------------------------------------------
Face
Amount Fixed Income Securities
- -------------------------------------------------------------------------------------------------------------------------
Electronic Equipment & Instruments - 0.1% $ 250,000 Flir Systems, Inc., 3% due 6/01/2023 (a) 293,437
- -------------------------------------------------------------------------------------------------------------------------
Insurance - 0.4% 300,000 LandAmerica Financial Group, Inc., 3.25%
due 5/15/2034 (a)(b) 377,625
650,000 Selective Insurance Group, 1.616% due 9/24/2032 (a) 451,750
------------
829,375
- -------------------------------------------------------------------------------------------------------------------------
Total Fixed Income Securities
(Cost - $1,037,334) - 0.5% 1,122,812
=========================================================================================================================
Beneficial
Interest Short-Term Securities
- -------------------------------------------------------------------------------------------------------------------------
$21,829,891 Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I (c) 21,829,891
- -------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost - $21,829,891) - 9.4% 21,829,891
- -------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost - $186,863,091*) - 100.0% 232,069,866
Other Assets Less Liabilities - 0.0% 111,448
------------
Net Assets - 100.0% $232,181,314
============
* 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 $ 187,344,521
=============
Gross unrealized appreciation $ 48,535,068
Gross unrealized depreciation (3,809,723)
-------------
Net unrealized appreciation $ 44,725,345
=============
(a) Convertible security.
(b) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(c) Investments in companies considered to be an affiliate of the Series, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
---------------------------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
---------------------------------------------------------------------------------------------
Merrill Lynch Liquidity Series LLC, Cash Sweep Series I $17,091,955 $ 224,700
---------------------------------------------------------------------------------------------
(d) Non-income producing security.
o 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.
18
Master Enhanced Small Cap Series
Schedule of Investments as of December 31, 2005
o Financial futures contracts purchased as of December 31, 2005 were as
follows:
Number of Expiration Unrealized
Contracts Issue Date Face Value Depreciation
-----------------------------------------------------------------------------------------
89 Russell 2000 Index March 2006 $ 30,693,100 $ (508,750)
-----------------------------------------------------------------------------------------
Percent of
Total
Sector Representation (unaudited) Investments
--------------------------------------------------------------------------
Industrials 16.3%
Information Technology 15.8
Consumer Discretionary 14.7
Financial Services 12.6
Health Care 11.6
Energy 6.9
Materials 5.4
Utilities 3.4
Consumer Staples 3.0
Telecommunication Services 0.2
Other** 10.1
--------------------------------------------------------------------------
** Includes portfolio holdings in short-term investments and exchange-traded
funds.
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.
See Notes to Financial Statements.
19
STATEMENT OF ASSETS AND LIABILITIES
Master Enhanced Small Cap Series
As of December 31, 2005
- ----------------------------------------------------------------------------------------------------------------------------------
Assets: Investments in unaffiliated securities, at value (identified cost-$165,033,200) $ 210,239,975
Investments in affiliated securities, at value (identified cost-$21,829,891) .. 21,829,891
Cash .......................................................................... 500,954
Cash on deposit for financial futures contracts ............................... 1,228,500
Receivables:
Securities sold ...................................................... $ 214,781
Dividends ............................................................ 206,816
Contributions ........................................................ 11,634
Interest ............................................................. 4,700 437,931
-----------
Prepaid expenses .............................................................. 580
-------------
Total assets .................................................................. 234,237,831
-------------
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities: Payables:
Securities purchased ................................................... 1,786,427
Withdrawals ............................................................ 164,064
Variation margin ....................................................... 82,200
Other affiliates ....................................................... 2,398
Investment adviser ..................................................... 1,811 2,036,900
-----------
Accrued expenses .............................................................. 19,617
-------------
Total liabilities ............................................................. 2,056,517
-------------
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets: Net assets .................................................................... $ 232,181,314
=============
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets Investors' capital ............................................................ $ 187,483,289
Consist of: Unrealized appreciation-net ................................................... 44,698,025
-------------
Net assets .................................................................... $ 232,181,314
=============
- ----------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
20
STATEMENT OF OPERATIONS
Master Enhanced Small Cap Series
For the Year Ended December 31, 2005
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Dividends (net of $819 foreign withholding tax) ...................... $ 2,315,017
Income: Interest (including $224,700 from affiliates) ........................ 266,749
------------
Total income ......................................................... 2,581,766
------------
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses: Professional fees .................................................... $ 46,989
Custodian fees ....................................................... 36,679
Accounting services .................................................. 33,375
Investment advisory fees ............................................. 22,082
Printing and shareholder reports ..................................... 7,478
Trustees' fees and expenses .......................................... 2,638
Pricing fees ......................................................... 512
Other ................................................................ 8,684
------------
Total expenses ....................................................... 158,437
------------
Investment income-net ................................................ 2,423,329
------------
- -----------------------------------------------------------------------------------------------------------------------------------
Realized & Realized gain on:
Unrealized Gain (Loss) Investment-net ................................................... 21,209,589
- -Net: Futures contracts-net ............................................ 727,994 21,937,583
------------
Change in unrealized appreciation/depreciation on:
Investment-net ................................................... (7,748,588)
Futures contracts-net ............................................ (603,525) (8,352,113)
-------------------------------
Total realized and unrealized gain-net ............................... 13,585,470
------------
Net Increase in Net Assets Resulting from Operations ................. $ 16,008,799
============
- -----------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
21
STATEMENTS OF CHANGES IN NET ASSETS Master Enhanced Small Cap Series
For the
Year Ended
December 31,
----------------------------------
Increase (Decrease) in Net Assets: 2005 2004
- ---------------------------------------------------------------------------------------------------------------------------------
Operations: Investment income-net .................................................. $ 2,423,329 $ 2,004,477
Realized gain-net ...................................................... 21,937,583 19,882,086
Change in unrealized appreciation/depreciation-net ..................... (8,352,113) 17,687,606
------------- -------------
Net increase in net assets resulting from operations ................... 16,008,799 39,574,169
------------- -------------
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capital Proceeds from contributions ............................................ 39,523,028 52,144,887
Transactions: Fair value of withdrawals .............................................. (45,115,732) (36,970,871)
------------- -------------
Net increase (decrease) in net assets derived from capital transactions (5,592,704) 15,174,016
------------- -------------
- ---------------------------------------------------------------------------------------------------------------------------------
Net Assets: Total increase in net assets ........................................... 10,416,095 54,748,185
Beginning of year ...................................................... 221,765,219 167,017,034
------------- -------------
End of year ............................................................ $ 232,181,314 $ 221,765,219
============= =============
- ---------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
22
Master Enhanced Small Cap Series
FINANCIAL HIGHLIGHTS
For the
Year Ended For the Period
The following ratios have December 31, December 10, 2002+
been derived from information provided ---------------------------------------- to December 31,
in the financial statements. 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment
Return: Total investment return ................... 7.45% 22.50% 40.06% (1.90%)++
========= ========= ======== =========
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Expenses .................................. 07% 07% .11% .06% *
Average Net ========= ========= ======== =========
Assets: Investment income-net ..................... 1.10% 1.07% .80% 1.33% *
========= ========= ======== =========
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Net assets, end of period (in thousands) .. $ 232,181 $ 221,765 $167,017 $ 118,808
Data: ========= ========= ======== =========
Portfolio turnover ........................ 120.53% 111.89% 88.79% 9.91%
========= ========= ======== =========
- ------------------------------------------------------------------------------------------------------------------------------------
* Annualized.
+ Commencement of operations.
++ Aggregate total investment return.
See Notes to Financial Statements.
23
Master Enhanced Small Cap Series
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Master Enhanced Small Cap 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 interests in the Trust, 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 Series 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 Board of Trustees of the Trust.
24
Master Enhanced Small Cap Series
NOTES TO FINANCIAL STATEMENTS (continued)
(b) Derivative financial instruments - The Series may engage in various
portfolio investment strategies both to increase the return of the portfolio and
to hedge, or protect, its exposure to interest rate movements and movements in
the securities markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
o Financial futures contracts - The Series may purchase or sell financial
futures contracts and options on such futures contracts. Futures contracts
are contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract, the
Series deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected. Pursuant to
the contract, the Series agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in value of the contract.
Such receipts or payments are known as variation margin and are recorded
by the Series as unrealized gains or losses. When the contract is closed,
the Series records a realized gain or loss equal to the difference between
the value of the contract at the time it was opened and the value at the
time it was closed.
o Options - The Series may purchase and write call and put options. When the
Series writes an option, an amount equal to the premium received by the
Series is reflected as an asset and an equivalent liability. The amount of
the liability is subsequently marked-to-market to reflect the current
market value of the option written. When a security is purchased or sold
through an exercise of an option, the related premium paid (or received)
is added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When an
option expires (or the Series enters into a closing transaction), the
Series realizes a gain or loss on the option to the extent of the premiums
received or paid (or a gain or loss to the extent that the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes - The Series is classified as a partnership for federal income
tax purposes. As such, each investor in the Series is treated as owner of its
proportionate share of the net assets, income, expenses and realized and
unrealized gains and losses of the Series. Therefore, no federal income tax
provision is required. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends and capital gains at various rates. It is
intended that the Series' assets will be managed so an investor in the Series
can satisfy the requirements of Subchapter M of the Internal Revenue Code.
(d) Security transactions and investment income - Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Series amortizes all
premiums and discounts on debt securities.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Series' portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Series. For such services, the Series pays a monthly
fee at an annual rate of .01% of the average daily value of the Series' net
assets.
For the year ended December 31, 2005, the Series reimbursed FAM $4,967 for
certain accounting services.
25
Master Enhanced Small Cap Series
NOTES TO FINANCIAL STATEMENTS (concluded)
In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of
FAM, received $1,952 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 Series are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 2005 were $259,154,030 and $279,003,078, 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, 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 Small Cap 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 respective
periods 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 Small Cap 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 respective periods 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 Oppenheimer-Funds,
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 (telecommuni-
08543-9095 since 1979; Managing General Partner of The cations)
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 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 (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 President and Treasurer of Princeton Services
Age: 45 Treasurer 1999 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 - $32,000
Fiscal Year Ending December 31, 2004 - $30,700
(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 - $5,500
Fiscal Year Ending December 31, 2004 - $5,000
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 Small Cap Series of Quantitative Master Series Trust
By: /s/ Robert C. Doll, Jr.
-------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Master Enhanced Small Cap 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 Small Cap Series of Quantitative Master Series Trust
Date: February 21, 2006
By: /s/ Donald C. Burke
-------------------------------
Donald C. Burke,
Chief Financial Officer of
Master Enhanced Small Cap Series of Quantitative Master Series Trust
Date: February 21, 2006