UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07899
811-07885
Name of Fund: Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc.
Master Aggregate Bond Index Series of Quantitative Master Series
Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and
Master Aggregate Bond Index Series of Quantitative Master Series Trust,
800 Scudders Mill Road, Plainsboro, NJ 08536. Mailing address: P.O. Box
9011, Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 12/31/05
Date of reporting period: 01/01/05 - 12/31/05
Item 1 - Report to Stockholders
Merrill Lynch
Aggregate Bond Index Fund
Of Merrill Lynch Index Funds, Inc.
Annual Report
December 31, 2005
Merrill Lynch Aggregate Bond Index Fund
Important Tax Information
The following information is provided with respect to the net investment income
distributions paid monthly by Merrill Lynch Aggregate Bond Index Fund during the
fiscal year ended December 31, 2005.
- -----------------------------------------------------------------------------
Federal Obligation Interest ....................................... 9.42%*
Interest-Related Dividends for Non-U.S. Residents:
January 2005 .................................................... 64.89%**
February - December 2005 ........................................ 92.82%**
- -----------------------------------------------------------------------------
The following information is provided with respect to the distribution paid by
the Fund to shareholders on August 24, 2005.
- -----------------------------------------------------------------------------
Long-Term Capital Gains ......................................... $.004963
- -----------------------------------------------------------------------------
The following information is provided with respect to the distribution paid by
the Fund to shareholders on December 30, 2005.
- -----------------------------------------------------------------------------
Short-Term Capital Gains for Non-U.S. Residents ................. $.012017**
Long-Term Capital Gains ......................................... $.024801
- -----------------------------------------------------------------------------
* The law varies in each state as to whether and what percentage of dividend
income attributable to Federal obligations is exempt from state income
tax. We recommend that you consult your tax adviser to determine if any
portion of the dividends you received is exempt from state income tax.
** Represents the portion of the taxable ordinary income dividends eligible
for exemption from U.S. withholding tax for nonresident aliens and foreign
corporations.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this Web
site at http://www.icsdelivery.com/live and follow the instructions. When you
visit this site, you will obtain a personal identification number (PIN). You
will need this PIN should you wish to update your e-mail address, choose to
discontinue this service and/or make any other changes to the service. This
service is not available for certain retirement accounts at this time.
2 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
A Letter From the President
Dear Shareholder
On balance, 2005 was a year of "muddling through" for the U.S. financial
markets, as oil prices reached new record highs, the Federal Reserve Board (the
Fed) increased the target federal funds rate from 2.25% to 4.25%, the housing
market and the consumer finally showed some signs of slowing, and Hurricanes
Katrina and Rita ravaged the Gulf Coast, causing yet untold economic damage.
Although they struggled, stocks managed to post their third straight year of
positive performance. The year was equally uncertain for fixed income markets,
which were bemused by a flattening yield curve and a number of significant
credit events that brought a slowdown in high yield market returns. Notably, the
one-year results for the major asset classes -- stocks, bonds and cash -- were
the closest they have been in more than 100 years. For the 12- and six-month
periods ended December 31, 2005, most of the major market indexes managed to
land in positive territory:
Total Returns as of December 31, 2005 6-month 12-month
===========================================================================================
U.S. equities (Standard & Poor's 500 Index) + 5.77% + 4.91%
- -------------------------------------------------------------------------------------------
Small-cap U.S. equities (Russell 2000 Index) + 5.88 + 4.55
- -------------------------------------------------------------------------------------------
International equities (MSCI Europe Australasia Far East Index) +14.88 +13.54
- -------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) - 0.08 + 2.43
- -------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 0.60 + 3.51
- -------------------------------------------------------------------------------------------
High yield bonds (Credit Suisse First Boston High Yield Index) + 1.48 + 2.26
- -------------------------------------------------------------------------------------------
In hindsight, these numbers are reasonably good given the headwinds facing the
markets in 2005. U.S. equities found support in strong corporate earnings, low
core inflation and healthy company balance sheets. Strength in the global
economy and non-U.S. equity markets helped, as did robust dividend-distribution,
share-buyback and merger-and-acquisition activity. International stocks had an
excellent year, with many markets benefiting from strong economic statistics,
trade surpluses and solid finances. In the U.S. bond market, long-term yields
remained low and, at year-end, the Treasury curve appeared ready to invert.
As 2006 begins, the largest question marks center on the Fed's future moves, the
U.S. consumer's ability (or inability) to continue spending, the direction of
the U.S. dollar following a year of appreciation and the potential for continued
strong economic and corporate earnings growth. As you turn the calendar and
consider how these factors might impact your investments, remember that the new
year is a good time to meet with your financial advisor to review your financial
goals, and to make portfolio changes where necessary. For investing insights and
timely "food for thought" for investors, we also invite you to visit Shareholder
magazine at www.mlim.ml.com/shareholdermagazine.
As always, we thank you for trusting Merrill Lynch Investment Managers with your
investment assets, and we look forward to serving you in the new year and
beyond.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
President and Director/Trustee
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 3
A Discussion With Your Fund's Portfolio Manager
We continue to invest in a statistically selected sample of bonds
correlated to the Lehman Brothers Aggregate Bond Index in an effort to offer
investors returns consistent with the broader investment grade bond market.
How did the Fund perform during the fiscal year in light of the existing market
conditions?
For the 12-month period ended December 31, 2005, Merrill Lynch Aggregate Bond
Index Fund's Class A and Class I Shares had total returns of +1.83% and +2.09%,
respectively. This compared to a return of +2.43% for the Fund's benchmark, the
Lehman Brothers Aggregate Bond Index, for the same period. (Complete performance
information can be found on pages 6 and 7 of this report to shareholders.)
Although the Fund uses a stratified sampling approach to mimic the composition
and performance of the Index, a minimal margin of error in total return tracking
is expected in seeking to match the return of the benchmark. This often will
account for the variance in returns versus the Index.
The Lehman Brothers Aggregate Bond Index is composed of three major investment
sectors: U.S. government and agency issues, agency-guaranteed mortgage-backed
securities (MBS) and investment grade corporate bonds. Sector weighting and
security selection in the Index are determined by the representation that each
sector has in the overall market. For calendar year 2005, the government and
agency sector of the Index was the best performer, posting a gain of 2.65%. As
short-term interest rates climbed in 2005, investors grew more averse to riskier
assets, prompting widening yield spreads in the credit sectors and resulting in
superior relative performance for the government and agency sector. For the same
period, the MBS sector gained 2.61%, virtually matching the performance of the
government and agency sector. Although yield spreads on MBS widened versus U.S.
Treasury securities of similar maturities, much of the move was offset by the
yield advantage of MBS. The corporate credit sector was up 1.96% for the year.
These returns were realized in an environment of rising short-term interest
rates, as the Federal Reserve Board (the Fed) remained vigilant in its effort to
combat inflation. The interest rate hikes, which began in mid 2004 when the
target federal funds rate stood at a historic low of 1%, continued at a measured
pace in 2005, culminating in a target short-term interest rate of 4.25% at
year-end. While the federal funds rate was ratcheting up 200 basis points over
the year, long-term interest rates, as measured by the 10-year U.S. Treasury
note, were relatively stable. Over the past 12 months, yields on the 10-year
Treasury ranged from a low of 3.89% on June 2 to a high of 4.66% on November 4.
After flattening considerably over the course of the year, the yield curve had
become slightly inverted by period-end. That is, the 4.39% yield on the 10-year
Treasury was two basis points (.02%) lower than that of the two-year Treasury
note. By comparison, the 4.24% yield on the 10-year Treasury at the beginning of
the year was 116 basis points higher than that of the two-year note.
How was the portfolio managed during the year?
The Fund seeks to replicate the total return, before expenses, of the unmanaged
Lehman Brothers Aggregate Bond Index, a widely accepted investment performance
benchmark composed of dollar-denominated investment grade bonds of different
types. Because it is not practical or logistically possible to create a
portfolio with all of the Index positions, we construct a proxy portfolio
(Master Aggregate Bond Index Series) of far fewer securities that seeks to
duplicate the return of the benchmark.
4 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
The investments in the Series are determined by implementing stratified sampling
techniques. Through this approach, we select securities that collectively mimic
the investment characteristics of the Index at the sector and subsector levels.
At December 31, 2005, the Lehman Brothers Aggregate Bond Index was composed of
6,453 securities, and the Series held 585 individual investments designed to
match the market exposure and investment characteristics of the Index.
What changes occurred in the Index, and the portfolio, during the year?
In seeking to provide returns that are representative of the bond market as a
whole, we track the sector and subsector weightings of our benchmark index
rather than maintaining a bias to any specific area of the market.
At December 31, 2005, the government and agency sector of the Lehman Brothers
Aggregate Bond Index was composed of 843 securities, accounting for 36.39% of
the Index's total capitalization. This was in comparison to 695 issues
representing 35.69% of the benchmark at December 31, 2004. The Series' position
in this sector is designed to match the duration, yield and convexity of the
Index. Therefore, any change in interest rates or the shape of the yield curve
will have an identical effect on the sector's return.
The MBS sector included 2,690 securities and comprised 40.20% of the Index at
December 31, 2005, versus 2,272 securities representing 39.51% of the Index at
December 31, 2004. The Fund's position in the MBS sector has the same exposure
to 30-year, 15-year and balloon MBS as that of the Index. Within these
subsectors, exposure to coupons and issuers also are matched to that of the
Index in an effort to duplicate the return of the Index's MBS sector with
minimal deviation.
Within the corporate sector, there were 2,920 securities representing 23.41% of
the Index at December 31, 2005, compared to 2,869 securities representing 24.80%
of the Index as of December 31, 2004. As with the U.S. government sector, we
seek to match investment characteristics in the portfolio's corporate sector
with those of the Index. However, in the corporate sector, we also seek to
mirror the credit rating and industry exposure of the benchmark.
How was the portfolio positioned at the close of the period?
We continue to use our stratified sampling techniques to create a proxy
portfolio of our benchmark and offer comparable returns. With that in mind, we
expect the portfolio to continue to meet its objective of providing fixed income
returns consistent with those of the broader market.
Jeffrey B. Hewson
Vice President and Portfolio Manager
January 17, 2006
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 5
Performance Data
About Fund Performance
Investors are able to purchase shares of the Fund through two pricing
alternatives:
o Class A Shares do not incur an initial sales charge (front-end load) or
deferred sales charge and bear no ongoing distribution fee. In addition,
Class A Shares are subject to an ongoing account maintenance fee of 0.25%
(per year).
o Class I Shares do not incur an initial sales charge (front-end load) or
deferred sales charge and bear no ongoing distribution or account
maintenance fees. Class I Shares are available only to eligible investors.
None of the past results shown should be considered a representation of future
performance. Current performance may be lower or higher than the performance
data quoted. Refer to www.mlim.ml.com to obtain performance data current to the
most recent month-end. Performance results do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. Figures shown in each of the following tables assume reinvestment of all
dividends and capital gain distributions, if any, at net asset value on the
payable date. Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Dividends paid to each class of shares will vary because of the different levels
of account maintenance, distribution and transfer agency fees applicable to each
class, which are deducted from the income available to be paid to shareholders.
The Fund's administrator voluntarily waived a portion of its administrative fee.
Without such waiver, the Fund's performance would have been lower.
Recent Performance Results
6-Month 12-Month Since Inception Standardized
As of December 31, 2005 Total Return Total Return Total Return 30-Day Yield
================================================================================================================
ML Aggregate Bond Index Fund Class A Shares* -0.50% +1.83% +67.39% 4.29%
- ----------------------------------------------------------------------------------------------------------------
ML Aggregate Bond Index Fund Class I Shares* -0.37 +2.09 +71.07 4.55
- ----------------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index** -0.08 +2.43 +75.88 --
- ----------------------------------------------------------------------------------------------------------------
* Cumulative total investment returns are based on changes in net asset
values for the periods shown, and assume reinvestment of all dividends and
capital gains distributions at net asset value on the payable date. The
Fund's inception date is 4/03/97.
** This unmanaged market-weighted Index is comprised of U.S. government and
agency securities, mortgage-backed securities issued by the Government
National Mortgage Association, Freddie Mac or Fannie Mae and investment
grade (rated BBB or better) corporate bonds. Since inception total return
is from 4/03/97.
6 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
Performance Data (concluded)
Total Return Based on a $10,000 Investment--Class A & Class I Shares
A line graph depicting the growth of an investment in the Fund's Class A Shares
and Class I Shares compared to growth of an investment in the Lehman Brothers
Aggregate Bond Index. Values are from April 3, 1997 to December 2005.
ML Aggregate ML Aggregate Lehman
Bond Index Fund+-- Bond Index Fund+-- Brothers Aggregate
Class A Shares* Class I Shares* Bond Index++
4/03/97** $10,000 $10,000 $10,000
12/97 $10,929 $10,949 $10,988
12/98 $11,832 $11,883 $11,943
12/99 $11,656 $11,724 $11,845
12/00 $12,961 $13,082 $13,222
12/01 $13,946 $14,112 $14,338
12/02 $15,286 $15,492 $15,808
12/03 $15,796 $16,063 $16,457
12/04 $16,438 $16,757 $17,171
12/05 $16,739 $17,107 $17,588
* Assuming transaction costs and other operating expenses, including
advisory fees.
** Commencement of operations.
+ The Fund invests all of its assets in Master Aggregate Bond Index Series
of Quantitative Master Series Trust. The Trust may invest in a
statistically selected sample of fixed income securities and other types
of financial instruments.
++ This unmanaged market-weighted Index is comprised of U.S. government and
agency securities, mortgaged-backed securities issued by the Government
National Mortgage Association, Freddie Mac or Fannie Mae and investment
grade (rated BBB or better) corporate bonds.
Past performance is not predictive of future performance.
Average Annual Total Return
Class A Shares Return
================================================================================
One Year Ended 12/31/05 +1.83%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/05 +5.25
- --------------------------------------------------------------------------------
Inception (4/03/97) through 12/31/05 +6.07
- --------------------------------------------------------------------------------
Class I Shares Return
================================================================================
One Year Ended 12/31/05 +2.09%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/05 +5.51
- --------------------------------------------------------------------------------
Inception (4/03/97) through 12/31/05 +6.33
- --------------------------------------------------------------------------------
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 7
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses related
to transactions, including sales charges, redemption fees and exchange fees; and
(b) operating expenses including advisory fees, distribution fees including
12b-1 fees, and other Fund expenses. The following example (which is based on a
hypothetical investment of $1,000 invested on July 1, 2005 and held through
December 31, 2005) is intended to assist shareholders both in calculating
expenses based on an investment in the Fund and in comparing these expenses with
similar costs of investing in other mutual funds.
The first table below provides information about actual account values and
actual expenses. In order to estimate the expenses a shareholder paid during the
period covered by this report, shareholders can divide their account value by
$1,000 and then multiply the result by the number in the first line under the
heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses. In order to assist
shareholders in comparing the ongoing expenses of investing in this Fund and
other funds, compare the 5% hypothetical example with the 5% hypothetical
examples that appear in other funds' shareholder reports.
The expenses shown in the table are intended to highlight shareholders' ongoing
costs only and do not reflect any transactional expenses, such as sales charges,
redemption fees or exchange fees. Therefore, the second table is useful in
comparing ongoing expenses only, and will not help shareholders determine the
relative total expenses of owning different funds. If these transactional
expenses were included, shareholder expenses would have been higher.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value July 1, 2005 to
July 1, 2005 December 31, 2005 December 31, 2005
==========================================================================================================
Actual
==========================================================================================================
Class A $1,000 $ 995.00 $3.05
- ----------------------------------------------------------------------------------------------------------
Class I $1,000 $ 996.30 $1.78
==========================================================================================================
Hypothetical (5% annual return before expenses)**
==========================================================================================================
Class A $1,000 $1,022.44 $3.09
- ----------------------------------------------------------------------------------------------------------
Class I $1,000 $1,023.72 $1.80
- ----------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (.60% for Class A and .35% for Class I), multiplied by
the average account value over the period, multiplied by 186/365 (to
reflect the one-half year period shown). Because the Fund is a feeder
fund, the expense table example reflects the expenses of both the feeder
fund and the master series in which it invests.
** Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half year divided by 365.
8 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
Statement of Assets and Liabilities Merrill Lynch Aggregate Bond Index Fund
As of December 31, 2005
=================================================================================================================================
Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Investment in Master Aggregate Bond Index Series (the "Series"), at value
(identified cost--$360,531,798) .............................................. $ 361,719,252
Prepaid expenses .............................................................. 17,662
-------------
Total assets .................................................................. 361,736,914
-------------
=================================================================================================================================
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------------
Payables:
Dividends and distributions to shareholders ................................ $ 649,724
Administrator .............................................................. 18,238
Distributor ................................................................ 6,493 674,455
-------------
Accrued expenses and other liabilities ........................................ 41,462
-------------
Total liabilities ............................................................. 715,917
-------------
=================================================================================================================================
Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets .................................................................... $ 361,020,997
=============
=================================================================================================================================
Net Assets Consist of
- ---------------------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized $ 276
Class I Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized 3,159
Paid-in capital in excess of par .............................................. 360,902,093
Accumulated distributions in excess of investment income--net ................. $ (195,751)
Accumulated realized capital losses allocated from the Series--net ............ (876,234)
Unrealized appreciation allocated from the Series--net ........................ 1,187,454
-------------
Total accumulated earnings--net ............................................... 115,469
-------------
Net Assets .................................................................... $ 361,020,997
=============
=================================================================================================================================
Net Asset Value
- ---------------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $28,983,879 and 2,757,262 shares outstanding .. $ 10.51
=============
Class I--Based on net assets of $332,037,118 and 31,590,411 shares outstanding $ 10.51
=============
See Notes to Financial Statements.
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 9
Statement of Operations Merrill Lynch Aggregate Bond Index Fund
For the Year Ended December 31, 2005
=================================================================================================================================
Investment Income--Net
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income allocated from the Series:
Interest ........................................................... $ 16,290,505
Securities lending--net ............................................ 20,317
Expenses ........................................................... (212,284)
-------------
Total income .......................................................... 16,098,538
-------------
=================================================================================================================================
Expenses
- ---------------------------------------------------------------------------------------------------------------------------------
Administration fees ................................................... $ 693,071
Transfer agent fees--Class I .......................................... 338,915
Printing and shareholder reports ...................................... 93,259
Account maintenance fees--Class A ..................................... 80,410
Registration fees ..................................................... 42,846
Transfer agent fees--Class A .......................................... 32,255
Professional fees ..................................................... 10,461
Directors' fees and expenses .......................................... 4,854
Other ................................................................. 10,024
-------------
Total expenses before waiver .......................................... 1,306,095
Waiver of expenses .................................................... (164,375)
-------------
Total expenses after waiver ........................................... 1,141,720
-------------
Investment income--net ................................................ 14,956,818
-------------
=================================================================================================================================
Realized & Unrealized Gain (Loss) Allocated From the Series--Net
- ---------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net ................................................... 674,751
Swaps--net ......................................................... (152,051) 522,700
-------------
Change in unrealized appreciation on investments--net ................. (8,252,890)
-------------
Total realized and unrealized loss--net ............................... (7,730,190)
-------------
Net Increase in Net Assets Resulting from Operations .................. $ 7,226,628
=============
See Notes to Financial Statements.
10 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
Statements of Changes in Net Assets Merrill Lynch Aggregate Bond Index Fund
For the Year Ended
December 31,
-------------------------------
Increase (Decrease) in Net Assets: 2005 2004
=================================================================================================================================
Operations
- ---------------------------------------------------------------------------------------------------------------------------------
Investment income--net .............................................................. $ 14,956,818 $ 15,664,002
Realized gain--net .................................................................. 522,700 7,809,845
Change in unrealized appreciation--net .............................................. (8,252,890) (5,807,322)
-------------------------------
Net increase in net assets resulting from operations ................................ 7,226,628 17,666,525
-------------------------------
=================================================================================================================================
Dividends & Distributions to Shareholders
- ---------------------------------------------------------------------------------------------------------------------------------
Investment income--net:
Class A .......................................................................... (1,248,365) (2,164,103)
Class I .......................................................................... (13,718,703) (13,823,831)
Realized gain--net:
Class A .......................................................................... (146,554) (698,074)
Class I .......................................................................... (1,652,899) (5,123,432)
-------------------------------
Net decrease in net assets resulting from dividends and distributions to shareholders (16,766,521) (21,809,440)
-------------------------------
=================================================================================================================================
Capital Share Transactions
- ---------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets derived from capital share transactions .................. (26,930,863) (28,134,770)
-------------------------------
=================================================================================================================================
Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets ........................................................ (36,470,756) (32,277,685)
Beginning of year ................................................................... 397,491,753 429,769,438
-------------------------------
End of year* ........................................................................ $ 361,020,997 $ 397,491,753
===============================
* Accumulated distributions in excess of investment income--net $ (195,751) $ (37,041)
===============================
See Notes to Financial Statements.
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 11
Financial Highlights Merrill Lynch Aggregate Bond Index Fund
Class A
----------------------------------------------------------------------
For the Year Ended December 31,
The following per share data and ratios have been derived ----------------------------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ..... $ 10.78 $ 10.91 $ 10.96 $ 10.50 $ 10.31
----------------------------------------------------------------------
Investment income--net ................. .41* .39* .41* .52* .58
Realized and unrealized gain (loss)--net (.21) .04 (.05) .46 .19
----------------------------------------------------------------------
Total from investment operations ....... .20 .43 .36 .98 .77
----------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............. (.42) (.40) (.41) (.52) (.58)
Realized gain--net .................. (.05) (.16) -- -- --
----------------------------------------------------------------------
Total dividends and distributions ...... (.47) (.56) (.41) (.52) (.58)
----------------------------------------------------------------------
Net asset value, end of year ........... $ 10.51 $ 10.78 $ 10.91 $ 10.96 $ 10.50
======================================================================
===================================================================================================================================
Total Investment Return
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 1.83% 4.05% 3.35% 9.61% 7.60%
======================================================================
===================================================================================================================================
Ratios to Average Net Assets**
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver ................ .60% .60% .60% .59% .60%
======================================================================
Expenses ............................... .64% .61% .62% .61% .71%
======================================================================
Investment income--net ................. 3.87% 3.60% 3.70% 4.91% 5.50%
======================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) . $ 28,984 $ 47,466 $ 63,872 $ 61,029 $ 60,438
======================================================================
Portfolio turnover of the Series ....... 147.39% 159.44% 136.76% 112.18% 144.23%
======================================================================
* Based on average shares outstanding.
** Includes the Fund's share of the Series' allocated expenses and/or
investment income--net.
See Notes to Financial Statements.
12 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
Financial Highlights (concluded) Merrill Lynch Aggregate Bond Index Fund
Class I
----------------------------------------------------------------------
For the Year Ended December 31,
The following per share data and ratios have been derived ----------------------------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
===================================================================================================================================
Per Share Operating Performance
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ..... $ 10.78 $ 10.91 $ 10.95 $ 10.50 $ 10.31
----------------------------------------------------------------------
Investment income--net ................. .44* .42* .43* .55* .61
Realized and unrealized gain (loss)--net (.22) .04 (.03) .45 .19
----------------------------------------------------------------------
Total from investment operations ....... .22 .46 .40 1.00 .80
----------------------------------------------------------------------
Less dividends and distributions:
Investment income--net .............. (.44) (.43) (.44) (.55) (.61)
Realized gain--net .................. (.05) (.16) -- -- --
----------------------------------------------------------------------
Total dividends and distributions ...... (.49) (.59) (.44) (.55) (.61)
----------------------------------------------------------------------
Net asset value, end of year ........... $ 10.51 $ 10.78 $ 10.91 $ 10.95 $ 10.50
======================================================================
===================================================================================================================================
Total Investment Return
- -----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... 2.09% 4.31% 3.70% 9.78% 7.87%
======================================================================
===================================================================================================================================
Ratios to Average Net Assets**
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver ................ .35% .35% .35% .34% .35%
======================================================================
Expenses ............................... .39% .36% .37% .36% .46%
======================================================================
Investment income--net ................. 4.12% 3.85% 3.95% 5.16% 5.72%
======================================================================
===================================================================================================================================
Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) . $332,037 $350,026 $365,898 $360,991 $324,390
======================================================================
Portfolio turnover of the Series ....... 147.39% 159.44% 136.76% 112.18% 144.23%
======================================================================
* Based on average shares outstanding.
** Includes the Fund's share of the Series' allocated expenses and/or
investment income--net.
See Notes to Financial Statements.
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 13
Notes to Financial Statements Merrill Lynch Aggregate Bond Index Fund
1. Significant Accounting Policies:
Merrill Lynch Aggregate Bond Index Fund (the "Fund") is part of Merrill Lynch
Index Funds, Inc. (the "Corporation"). The Fund is registered under the
Investment Company Act of 1940, as amended, as a non-diversified mutual fund.
The Fund seeks to achieve its investment objective by investing all of its
assets in Master Aggregate Bond Index Series (the "Series") of the Quantitative
Master Series Trust, which has the same investment objective and strategies as
the Fund. The value of the Fund's investment in the Series reflects the Fund's
proportionate interest in the net assets of the Series. The performance of the
Fund is directly affected by the performance of the Series. The financial
statements of the Series, including the Schedule of Investments, are included
elsewhere in this report and should be read in conjunction with the Fund's
financial statements. The Fund's financial statements are prepared in conformity
with U.S. generally accepted accounting principles, which may require the use of
management accruals and estimates. Actual results may differ from these
estimates. The percentage of the Series owned by the Fund at December 31, 2005
was 36.0%. The Fund offers two classes of shares. Shares of Class A and Class I
are sold without the imposition of a front-end or deferred sales charge. Both
classes of shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class A Shares bear certain
expenses related to the account maintenance of such shares and have exclusive
voting rights with respect to matters relating to its account maintenance
expenditures. Income, expenses (other than expenses attributable to a specific
class) and realized and unrealized gains and losses are allocated daily to each
class based on its relative net assets. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments -- The Fund records its investment in the Series at
fair value. Valuation of securities held by the Series is discussed in Note 1(a)
of the Series' Notes to Financial Statements, which are included elsewhere in
this report.
(b) Investment income and expenses -- The Fund records daily its proportionate
share of the Series' income, expenses and realized and unrealized gains and
losses. In addition, the Fund accrues its own expenses.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(d) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(e) Dividends and distributions -- Dividends from net investment income are
declared daily and paid monthly. Distributions of capital gains are recorded on
the ex-dividend dates.
(f) Investment transactions -- Investment transactions in the Series are
accounted for on a trade date basis.
(g) Reclassifications -- U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the current
year $464,948 has been reclassified between accumulated net realized capital
losses and paid-in capital in excess of par and $148,460 has been reclassified
between accumulated distributions in excess of net investment income and
accumulated realized capital losses as a result of permanent differences
attributable to net gains realized on the distribution of securities not
recognized for tax purposes, swap agreements, amortization methods on fixed
income securities, and the reclassification of distributions. These
reclassifications have no effect on net assets or net asset values per share.
2. Transactions with Affiliates:
The Corporation has entered into an Administration Agreement with Merrill Lynch
Investment Managers, L.P. ("MLIM"). The general partner of MLIM is Princeton
Services, Inc. ("PSI"), an indirect, wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Fund pays a monthly
fee at an annual rate of .19% of the Fund's average daily net assets for the
performance of administrative services (other than investment advice and related
portfolio activities) necessary for the operation of the Fund. MLIM has entered
into a voluntary arrangement with the Fund under which expenses incurred by the
Fund (excluding account maintenance fees) will not exceed .35%. This arrangement
has a one-year term and is renewable. For the year ended December 31, 2005, MLIM
earned fees of $693,071, of which $164,375 was waived.
The Fund may pay a monthly investment advisory fee at an annual rate of .06%
based upon the average daily value of the Fund's net assets. However, the
Investment Adviser has entered into a contractual agreement with the Fund
pursuant to which the investment advisory fee will not be charged to the Fund so
long as the Fund remains invested in the Series.
14 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
Notes to Financial Statements (concluded)
Merrill Lynch Aggregate Bond Index Fund
As a result, the investment advisory fee has not been accrued and will not be
payable by the Fund for the period covered by this report.
The Corporation has also entered into a Distribution Agreement and Distribution
Plan with FAM Distributors, Inc. ("FAMD" or the "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plan
adopted by the Corporation in accordance with Rule 12b-1 under the Investment
Company Act of 1940, the Fund pays the Distributor an ongoing account
maintenance fee. The fee is accrued daily and paid monthly at the annual rate of
..25% based upon the average daily net assets of Class A Shares.
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), an affiliate of MLIM, also provides account
maintenance services to the Fund. The ongoing account maintenance fee
compensates the Distributor and MLPF&S for providing account maintenance
services to Class A shareholders.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
Certain officers and/or directors of the Fund are officers and/or directors of
MLIM, PSI, FAMD, FDS, and/or ML & Co.
3. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$26,930,863 and $28,134,770 for the years ended December 31, 2005 and December
31, 2004, respectively.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended December 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 773,702 $ 8,268,069
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 97,135 1,035,355
-------------------------------
Total issued ........................... 870,837 9,303,424
Shares redeemed ........................ (2,516,993) (26,960,665)
-------------------------------
Net decrease ........................... (1,646,156) $(17,657,241)
===============================
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended December 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 1,470,677 $ 16,082,715
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 221,172 2,402,740
-------------------------------
Total issued ........................... 1,691,849 18,485,455
Shares redeemed ........................ (3,141,603) (34,369,324)
-------------------------------
Net decrease ........................... (1,449,754) $(15,883,869)
===============================
- -------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended December 31, 2005 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 10,470,426 $ 111,757,534
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 1,020,713 10,862,316
-------------------------------
Total issued ........................... 11,491,139 122,619,850
Shares redeemed ........................ (12,376,169) (131,893,472)
-------------------------------
Net decrease ........................... (885,030) $ (9,273,622)
===============================
- -------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended December 31, 2004 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ............................ 13,214,147 $ 144,088,117
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 1,185,213 12,870,982
-------------------------------
Total issued ........................... 14,399,360 156,959,099
Shares redeemed ........................ (15,459,780) (169,210,000)
-------------------------------
Net decrease ........................... (1,060,420) $ (12,250,901)
===============================
4. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years ended December
31, 2005 and December 31, 2004 was as follows:
- --------------------------------------------------------------------------------
12/31/2005 12/31/2004
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income .......................... $15,757,158 $20,301,079
Net long-term capital gains .............. 1,009,363 1,508,361
-----------------------------
Total taxable distributions ................ $16,766,521 $21,809,440
=============================
As of December 31, 2005, the components of accumulated earnings on a tax basis
were as follows:
- ------------------------------------------------------------------------------
Undistributed ordinary income--net ......................... $ 118,873
Undistributed long-term capital gains--net ................. --
---------
Total undistributed earnings--net .......................... 118,873
Capital loss carryforward .................................. --
Unrealized losses--net ..................................... (3,404)*
---------
Total accumulated earnings--net ............................ $ 115,469
=========
* The difference between book-basis and tax-basis net unrealized losses is
attributable primarily to the tax deferral of losses on wash sales, the
tax deferral of losses on straddles, the difference between book and tax
amortization methods for premiums and discounts on fixed income securities
and the deferral of post-October capital losses for tax purposes.
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 15
Report of Independent Registered Public Accounting Firm
Merrill Lynch Aggregate Bond Index Fund
To the Shareholders and Board of Directors of Merrill Lynch Index Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of Merrill
Lynch Aggregate Bond Index Fund, one of the series constituting Merrill Lynch
Index Funds, Inc. (the "Fund"), 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 Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
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 Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Merrill Lynch Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. 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 23, 2006
16 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
Portfolio Information Master Aggregate Bond Index Series
As of December 31, 2005
Quality Ratings by Percent of
S&P/Moody's Total Investments
- --------------------------------------------------------------------------------
AAA/Aaa ................................................ 73.3%
AA/Aa .................................................. 4.3
A/A .................................................... 8.8
BBB/Baa ................................................ 5.9
Other* ................................................. 7.7
- --------------------------------------------------------------------------------
* Includes portfolio holdings in short-term investments.
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 17
Summary Schedule of Investments
Master Aggregate Bond Index Series (in U.S. dollars)
This summary schedule of investments is presented to help investors focus on the
Series' principal holdings. It includes the Series' 50 largest holdings and each
investment of any issuer that exceeds 1% of the Series' net assets. "Other
Securities" represent all issues not required to be disclosed under the rules
adopted by the Securities and Exchange Commission. A complete schedule of
investments is available without charge, upon request, by calling 800-637-3863
or on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Interest Maturity Percent of
Issue Face Amount Rate Date(s) Value Net Assets
====================================================================================================================================
Government & Agency Fannie Mae $32,545,000 2.625% 11/15/2006 $ 31,967,489 3.2%
Obligations 1,595,000 4.25 9/15/2007 1,581,983 0.2
32,205,000 5.75 2/15/2008 (d) 32,852,514 3.3
12,395,000 2.50 6/15/2008 11,762,198 1.2
13,025,000 3.25 8/15/2008 (d) 12,557,637 1.2
22,425,000 4.50 10/15/2008 (d) 22,300,609 2.2
26,455,000 6.625 9/15/2009 28,130,686 2.8
30,840,000 6.00 5/15/2011 32,617,525 3.2
8,330,000 4.375 3/15/2013 8,111,154 0.8
5,185,000 4.625 10/15/2014 5,123,895 0.5
3,685,000 5.25 - 7.25 6/15/2006 - 5/15/2030 4,124,917 0.4
-------------------------------------------------------------------------------------------------------------
Freddie Mac 24,610,000 4.875 3/15/2007 24,637,588 2.5
6,615,000 5.75 4/15/2008 6,757,441 0.7
15,905,000 4.125 7/12/2010 15,509,793 1.5
8,965,000 4.875 11/15/2013 9,007,404 0.9
12,110,000 4.75 11/17/2015 12,018,957 1.2
8,655,000 6.75 9/15/2029 10,703,673 1.1
5,005,000 4.375 - 7.18 6/27/2006 - 7/15/2032 5,441,770 0.5
-------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds 14,975,000 8.75 5/15/2017 20,563,715 2.0
8,625,000 8.50 2/15/2020 12,099,253 1.2
6,335,000 8.125 8/15/2021 8,790,060 0.9
8,610,000 6.25 8/15/2023 10,281,554 1.0
4,105,000 6.875 8/15/2025 5,286,468 0.5
3,510,000 6.375 8/15/2027 4,348,149 0.4
1,845,000 5.375 2/15/2031 2,072,453 0.2
-------------------------------------------------------------------------------------------------------------
U.S. Treasury Notes 7,335,000 3.00 11/15/2007 (d) 7,152,197 0.7
5,890,000 4.00 11/15/2012 5,763,229 0.6
4,660,000 2.625 - 3.625 11/15/2006 - 1/15/2010 4,556,232 0.5
-------------------------------------------------------------------------------------------------------------
Other Securities 1,554,633 0.2
-------------------------------------------------------------------------------------------------------------
Total Government & Agency Obligations (Cost--$356,303,214) 357,675,176 35.6
====================================================================================================================================
Government Agency Freddie Mac Mortgage 7,577,000 4.00 1/01/2021 (b) 7,219,457 0.7
Mortgage-Backed Participation Certificates 36,340,382 4.50 2/01/2011 - 1/15/2021 (b) 35,433,404 3.5
Obligations* 6,864,845 4.50 4/01/2034 - 12/01/2035 6,462,817 0.6
30,339,591 5.00 11/01/2017 - 2/15/2021 (b) 30,062,386 3.0
77,780,197 5.00 8/01/2035 - 2/15/2036 (b) 75,300,580 7.5
8,832,665 5.50 4/01/2014 - 7/01/2020 8,890,171 0.9
96,897,291 5.50 8/01/2035 - 2/15/2036 (b) 95,993,941 9.6
3,997,901 6.00 4/01/2016 - 10/01/2017 4,081,086 0.4
30,946,594 6.00 6/01/2033 - 2/15/2036 (b) 31,246,093 3.1
14,180,678 6.50 1/01/2026 - 1/15/2036 (b) 14,553,209 1.4
3,562,775 7.00 1/01/2020 - 11/01/2032 3,712,645 0.4
2,743,330 6.50 - 12.50 5/01/2007 - 9/01/2032 2,879,813 0.3
-------------------------------------------------------------------------------------------------------------
Ginnie Mae MBS Certificates 4,006,000 4.50 9/15/2035 3,844,508 0.4
9,482,000 5.00 1/15/2036 - 2/15/2036 (b) 9,353,925 0.9
9,415,354 5.50 1/15/2035 - 5/15/2035 9,480,084 0.9
9,762,179 6.00 4/20/2026 - 1/15/2036 (b) 10,000,337 1.0
4,790,848 6.50 - 9.50 4/15/2013 - 11/15/2034 5,033,102 0.5
-------------------------------------------------------------------------------------------------------------
Other Securities 3,662,190 0.4
-------------------------------------------------------------------------------------------------------------
Total Government Agency Mortgage-Backed Obligations (Cost--$358,878,023) 357,209,748 35.5
====================================================================================================================================
18 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
Summary Schedule of Investments (continued)
Master Aggregate Bond Index Series (in U.S. dollars)
Face Percent of
Amount Non-Government Agency Mortgage-Backed Securities* Value Net Assets
==============================================================================================================================
Collateralized $ 9,525,824 Residential Accredit Loans, Inc. Series 2005-QS12 Class A8,
Mortgage 4.729% due 8/25/2035 (c) $ 9,512,630 0.9%
Obligations
==============================================================================================================================
Commercial 8,869,429 CS First Boston Mortgage Securities Corp. Series 2004-FL1A
Mortgage-Backed Class A, 4.589% due 5/15/2014 (a)(c) 8,872,573 0.9
Securities 15,000,000 CS First Boston Mortgage Securities Corp. Series 2005-CN2A
Class A2, 4.52% due 11/15/2019 (a)(c) 14,999,940 1.5
9,193,350 Commercial Mortgage Pass-Through Certificates Series
2005-F10A Class A1, 4.469% due 4/15/2017 (a)(c) 9,192,303 0.9
20,000,000 Greenwich Capital Commercial Funding Corp. Series 2004-FL2A
Class A2, 4.578% due 11/05/2019 (c) 20,003,312 2.0
15,000,000 Greenwich Capital Commercial Funding Corp. Series 2005-FL3A
Class A2, 4.598% due 10/05/2007 (a)(c) 15,000,000 1.5
20,000,000 JPMorgan Chase Commercial Mortgage Securities Corp. Series
2004-FL1A Class A2, 4.55% due 4/16/2019 (c) 20,015,400 2.0
18,942,734 Lehman Brothers Floating Rate Commercial Mortgage Trust Series
2004-LLFA Class A2, 4.539% due 10/15/2017 (a)(c) 18,946,693 1.9
15,000,000 Wachovia Bank Commercial Mortgage Trust Series 2004-WL4A
Class A2, 4.539% due 10/15/2015 (a)(c) 15,007,418 1.5
---------------------------
122,037,639 12.2
==============================================================================================================================
Total Non-Government Agency Mortgage-Backed
Securities (Cost--$131,531,337) 131,550,269 13.1
==============================================================================================================================
==============================================================================================================================
Industry Fixed Income Securities
==============================================================================================================================
Aerospace & Defense Other Securities 7,454,023 0.8
- ------------------------------------------------------------------------------------------------------------------------------
Air Freight & Logistics Other Securities 118,591 0.0
- ------------------------------------------------------------------------------------------------------------------------------
Airlines Other Securities 791,728 0.1
- ------------------------------------------------------------------------------------------------------------------------------
Auto Components Other Securities 192,941 0.0
- ------------------------------------------------------------------------------------------------------------------------------
Automobiles Other Securities 2,872,307 0.3
- ------------------------------------------------------------------------------------------------------------------------------
Beverages Other Securities 2,910,525 0.3
- ------------------------------------------------------------------------------------------------------------------------------
Biotechnology Other Securities 443,483 0.1
- ------------------------------------------------------------------------------------------------------------------------------
Building Products Other Securities 279,606 0.0
- ------------------------------------------------------------------------------------------------------------------------------
Capital Markets Other Securities 17,238,480 1.7
- ------------------------------------------------------------------------------------------------------------------------------
Chemicals Other Securities 1,964,583 0.2
- ------------------------------------------------------------------------------------------------------------------------------
Commercial Banks Other Securities 29,460,406 2.9
- ------------------------------------------------------------------------------------------------------------------------------
Commercial Services & Other Securities 4,170,688 0.4
Supplies
- ------------------------------------------------------------------------------------------------------------------------------
Communications Equipment Other Securities 1,198,737 0.1
- ------------------------------------------------------------------------------------------------------------------------------
Computers & Peripherals Other Securities 2,043,815 0.2
- ------------------------------------------------------------------------------------------------------------------------------
Construction Materials Other Securities 351,914 0.0
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Finance Other Securities 7,723,931 0.8
- ------------------------------------------------------------------------------------------------------------------------------
Containers & Packaging Other Securities 342,294 0.0
- ------------------------------------------------------------------------------------------------------------------------------
Diversified Consumer Other Securities 313,361 0.0
Services
- ------------------------------------------------------------------------------------------------------------------------------
Diversified Financial Other Securities 17,048,754 1.7
Services
- ------------------------------------------------------------------------------------------------------------------------------
Diversified Other Securities 13,177,976 1.3
Telecommunication
Services
- ------------------------------------------------------------------------------------------------------------------------------
Electric Utilities Other Securities 6,748,452 0.7
- ------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment Other Securities 254,544 0.0
- ------------------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 19
Summary Schedule of Investments (continued)
Master Aggregate Bond Index Series (in U.S. dollars)
Percent of
Industry Fixed Income Securities Value Net Assets
==============================================================================================================================
Energy Equipment & Other Securities $ 382,100 0.1%
Services
- ------------------------------------------------------------------------------------------------------------------------------
Food & Staples Other Securities 3,919,379 0.4
Retailing
- ------------------------------------------------------------------------------------------------------------------------------
Food Products Other Securities 4,911,944 0.5
- ------------------------------------------------------------------------------------------------------------------------------
Gas Utilities Other Securities 1,332,247 0.1
- ------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & Other Securities 907,822 0.1
Supplies
- ------------------------------------------------------------------------------------------------------------------------------
Health Care Providers & Other Securities 1,004,055 0.1
Services
- ------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & Other Securities 1,889,992 0.2
Leisure
- ------------------------------------------------------------------------------------------------------------------------------
Household Durables Other Securities 2,733,699 0.3
- ------------------------------------------------------------------------------------------------------------------------------
Household Products Other Securities 1,817,643 0.2
- ------------------------------------------------------------------------------------------------------------------------------
IT Services Other Securities 444,535 0.1
- ------------------------------------------------------------------------------------------------------------------------------
Independent Power Other Securities 1,212,019 0.1
Producers & Energy Traders
- ------------------------------------------------------------------------------------------------------------------------------
Industrial Conglomerates Other Securities 1,650,730 0.2
- ------------------------------------------------------------------------------------------------------------------------------
Insurance Other Securities 9,854,136 1.0
- ------------------------------------------------------------------------------------------------------------------------------
Machinery Other Securities 3,415,419 0.3
- ------------------------------------------------------------------------------------------------------------------------------
Media Other Securities 11,583,885 1.2
- ------------------------------------------------------------------------------------------------------------------------------
Metals & Mining Other Securities 3,302,798 0.3
- ------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities Other Securities 5,704,026 0.6
- ------------------------------------------------------------------------------------------------------------------------------
Multiline Retail Other Securities 2,496,370 0.3
- ------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Other Securities 17,414,256 1.7
Fuels
- ------------------------------------------------------------------------------------------------------------------------------
Paper & Forest Products Other Securities 2,052,454 0.2
- ------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals Other Securities 3,820,213 0.4
- ------------------------------------------------------------------------------------------------------------------------------
Real Estate Other Securities 4,342,535 0.4
- ------------------------------------------------------------------------------------------------------------------------------
Road & Rail Other Securities 5,394,401 0.5
- ------------------------------------------------------------------------------------------------------------------------------
Software Other Securities 147,674 0.0
- ------------------------------------------------------------------------------------------------------------------------------
Specialty Retail Other Securities 1,252,801 0.1
- ------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage Finance Other Securities 4,010,711 0.4
- ------------------------------------------------------------------------------------------------------------------------------
Tobacco Other Securities 246,205 0.0
- ------------------------------------------------------------------------------------------------------------------------------
Wireless Other Securities 5,204,711 0.5
Telecommunication Services
- ------------------------------------------------------------------------------------------------------------------------------
Total Fixed Income Securities (Cost--$218,167,508) 219,549,899 21.9
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
Foreign Government Obligations
==============================================================================================================================
Other Securities 21,170,676 2.1
- ------------------------------------------------------------------------------------------------------------------------------
Total Foreign Government Obligations (Cost--$20,875,350) 21,170,676 2.1
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
Capital Trusts
==============================================================================================================================
Commercial Banks Other Securities 249,521 0.0
- ------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels Other Securities 83,325 0.0
- ------------------------------------------------------------------------------------------------------------------------------
Total Capital Trusts (Cost--$327,107) 332,846 0.0
- ------------------------------------------------------------------------------------------------------------------------------
20 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
Summary Schedule of Investments (concluded)
Master Aggregate Bond Index Series (in U.S. dollars)
Percent of
State Municipal Bonds Value Net Assets
==============================================================================================================================
Illinois Other Securities $ 691,404 0.1%
- ------------------------------------------------------------------------------------------------------------------------------
Texas Other Securities 1,040,333 0.1
- ------------------------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost--$1,678,073) 1,731,737 0.2
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
Face
Amount Short-Term Securities
==============================================================================================================================
Commercial Paper** $12,700,000 Atlantic Asset Securitization Corp., 4.31% due 1/17/2006 12,678,713 1.3
2,500,000 Atlantic Asset Securitization Corp., 4.33% due 1/12/2006 2,497,294 0.2
4,200,000 Chariot Funding LLC, 4.19% due 1/03/2006 4,200,000 0.4
18,200,000 DNB NOR Bank ASA, 4.25% due 1/11/2006 18,182,811 1.8
Other Securities 3,599,575 0.4
--------------------------
41,158,393 4.1
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
Beneficial
Interest
==============================================================================================================================
$50,141,250 Merrill Lynch Liquidity Series, LLC Money Market Series (e)(f) 50,141,250 5.0
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$91,299,643) 91,299,643 9.1
- ------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost--$1,179,060,255+) 1,180,519,994 117.5
Liabilities in Excess of Other Assets (175,936,928) (17.5)
--------------------------
Net Assets $1,004,583,066 100.0%
==========================
* Mortgage-Backed Securities are subject to principal paydowns. As a result
of prepayments or refinancing of the underlying mortgage instruments, the
average life may be substantially less than the original maturity.
** Commercial Paper is traded on a discount basis; the interest rates shown
reflect the discount rates paid at the time of purchase.
+ 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 ........................................ $1,179,554,701
==============
Gross unrealized appreciation ......................... $ 10,739,471
Gross unrealized depreciation ......................... (9,774,178)
--------------
Net unrealized appreciation ........................... $ 965,293
==============
(a) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(b) Represents or includes a "to-be-announced" transaction. The Series has
committed to purchasing securities for which all specific information is
not available at this time.
(c) Floating rate note.
(d) Security, or a portion of security, is on loan.
(e) Security was purchased with the cash proceeds from securities loans.
(f) 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:
--------------------------------------------------------------------------
Interest/
Net Dividend
Affiliate Activity Income
--------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC
Money Market Series $ 50,141,250 $44,641
Merrill Lynch Premier
Institutional Fund (12,139,250) $3,357
--------------------------------------------------------------------------
o "Other Securities" represent issues that are not identified as the 50
largest holdings of the Series and issues not exceeding 1% of net assets.
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.
o Swaps outstanding as of December 31, 2005 were as follows:
--------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
--------------------------------------------------------------------------
Receive (pay) a variable return based
on the change in the since inception
return of the Lehman Brothers CMBS
Investment Grade Index and pay a floating
rate based on 1-month LIBOR plus 0.20%
Broker, Morgan Stanley Capital Services, Inc.
Expires March 2006 $40,000,000 --
--------------------------------------------------------------------------
See Notes to Financial Statements.
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 21
Statement of Assets and Liabilities Master Aggregate Bond Index Series
As of December 31, 2005
==================================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (including securities loaned
of $48,545,490) (identified cost--$1,128,919,005) .......................... $1,130,378,744
Investments in affiliated securities, at value (identified cost--$50,141,250) 50,141,250
Cash ........................................................................ 164,571
Receivables:
Interest ................................................................. $ 10,172,354
Securities sold .......................................................... 2,267,708
Contributions ............................................................ 1,103,996
Swaps .................................................................... 146,582
Paydowns ................................................................. 94,759
Securities lending ....................................................... 2,047 13,787,446
--------------
Prepaid expenses and other assets ........................................... 3,157
--------------
Total assets ................................................................ 1,194,475,168
--------------
==================================================================================================================================
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ................................... 50,141,250
Payables:
Securities purchased ..................................................... 139,345,120
Withdrawals .............................................................. 304,361
Other affiliates ......................................................... 8,766
Investment adviser ....................................................... 7,921 139,666,168
--------------
Accrued expenses ............................................................ 84,684
--------------
Total liabilities ........................................................... 189,892,102
--------------
==================================================================================================================================
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets .................................................................. $1,004,583,066
--------------
==================================================================================================================================
Net Assets Consist of
- ----------------------------------------------------------------------------------------------------------------------------------
Investors' capital .......................................................... $1,003,123,327
Unrealized appreciation--net ................................................ 1,459,739
--------------
Net Assets .................................................................. $1,004,583,066
==============
See Notes to Financial Statements.
22 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
Statement of Operations Master Aggregate Bond Index Series
For the Year Ended December 31, 2005
==================================================================================================================================
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------------
Interest ............................................................... $ 38,893,014
Securities lending--net ................................................ 47,998
--------------
Total income ........................................................... 38,941,012
--------------
==================================================================================================================================
Expenses
- ----------------------------------------------------------------------------------------------------------------------------------
Professional fees ...................................................... $ 146,690
Accounting services .................................................... 114,518
Custodian fees ......................................................... 99,899
Investment advisory fees ............................................... 87,098
Pricing fees ........................................................... 20,513
Printing and shareholder reports ....................................... 10,473
Trustees' fees and expenses ............................................ 7,995
Other .................................................................. 19,171
--------------
Total expenses ......................................................... 506,357
--------------
Investment income--net ................................................. 38,434,655
--------------
==================================================================================================================================
Realized & Unrealized Loss--Net
- ----------------------------------------------------------------------------------------------------------------------------------
Realized loss on:
Investments--net .................................................... (1,665,780)
Swaps--net .......................................................... (351,189) (2,016,969)
--------------
Change in unrealized appreciation on investments--net .................. (14,667,377)
--------------
Total realized and unrealized loss--net ................................ (16,684,346)
--------------
Net Increase in Net Assets Resulting from Operations ................... $ 21,750,309
==============
See Notes to Financial Statements.
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 23
Statements of Changes in Net Assets Master Aggregate Bond Index Series
For the Year Ended
December 31,
----------------------------------
Increase (Decrease) in Net Assets: 2005 2004
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ..................................................... $ 38,434,655 $ 36,473,418
Realized gain (loss)--net .................................................. (2,016,969) 8,731,790
Change in unrealized appreciation--net ..................................... (14,667,377) (5,490,473)
----------------------------------
Net increase in net assets resulting from operations ....................... 21,750,309 39,714,735
----------------------------------
===================================================================================================================================
Capital Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions ................................................ 353,608,983 160,170,832
Fair value of withdrawals .................................................. (210,997,412) (242,691,266)
----------------------------------
Net increase (decrease) in net assets derived from capital transactions .... 142,611,571 (82,520,434)
----------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets .................................... 164,361,880 (42,805,699)
Beginning of year .......................................................... 840,221,186 883,026,885
----------------------------------
End of year ................................................................ $ 1,004,583,066 $ 840,221,186
==================================
See Notes to Financial Statements.
24 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
Financial Highlights Master Aggregate Bond Index Series
For the Year Ended December 31,
The following ratios have been derived ------------------------------------------------------------------
from information provided in the financial statements. 2005 2004 2003 2002 2001
==================================================================================================================================
Total Investment Return
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment return .............. 2.48% 4.58% 3.92% 10.13% 8.07%
==================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses ............................. .06% .06% .06% .08% .13%
==================================================================
Investment income--net ............... 4.41% 4.13% 4.22% 5.37% 5.93%
==================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) $1,004,583 $ 840,221 $ 883,027 $ 716,568 $ 466,151
==================================================================
Portfolio turnover ................... 147.39% 159.44% 136.76% 112.18% 144.23%
==================================================================
See Notes to Financial Statements.
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 25
Notes to Financial Statements Master Aggregate Bond Index Series
1. Significant Accounting Policies:
Master Aggregate Bond Index 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 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 -- Debt securities are traded primarily in the
over-the-counter ("OTC") markets and are valued at the last available bid price
in the OTC market or on the basis of values obtained by a pricing service.
Pricing services use valuation matrixes that incorporate both dealer supplied
valuations and valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of the Trust under the general direction
of the Board of Trustees. Such valuations and procedures will be reviewed
periodically by the Board of Trustees of the Trust. Financial futures contracts
and options thereon, which are traded on exchanges, are valued at their closing
prices as of the close of such exchanges. Options written or purchased are
valued at the last sale price in the case of exchange-traded options. In the
case of options traded in the OTC market, valuation is the last asked price
(options written) or the last bid price (options purchased). Swap agreements are
valued based upon quoted fair valuations received daily by the Series from a
pricing service or counterparty. Short-term investments with a remaining
maturity of 60 days or less are valued at amortized cost, which approximates
market value, under which method the investment is valued at cost and any
premium or discount is amortized on a straight line basis to maturity.
Repurchase agreements are valued at cost plus accrued interest. Investments in
open-end investment companies are valued at their net asset value each business
day. Securities and other 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.
Equity securities that are held by the Series, which 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 OTC market, Nasdaq Small Cap or Bulletin Board are
valued at the last available bid price 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.
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 value of such securities used in computing the
net assets of the Series are determined as of such times. Foreign currency
exchange rates also are generally determined prior to the close of business on
the NYSE. Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and the
close of business on the NYSE that may not be reflected in the computation of
the Series' net assets. If events (for example, a company announcement, market
volatility or a natural disaster) occur during such periods that are expected to
materially affect the value of such securities, those securities may be valued
at their fair value as determined in good faith by the Trust's Board of Trustees
or by the Investment Adviser using a pricing service and/or procedures approved
by the Trust's Board of Trustees.
(b) Derivative financial instruments -- The Series may engage in various
portfolio investment techniques 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.
26 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
Notes to Financial Statements (continued) Master Aggregate Bond Index Series
o Financial futures contracts -- The Series may purchase or sell financial
futures contracts and options on such futures contracts. Futures contracts
are contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract, the
Series deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected. Pursuant to
the contract, the Series agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in the 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.
o Swaps -- The Series may enter into swap agreements, which are OTC
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.
(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. 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. Interest income is recognized on the accrual basis. The
Series amortizes all premiums and discounts on debt securities.
(e) Dollar rolls -- The Series may sell securities for delivery in the current
month and simultaneously contract to repurchase substantially similar (same
type, coupon and maturity) securities on a specific future date.
(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
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 27
Notes to Financial Statements (concluded) Master Aggregate Bond Index Series
Series receives cash collateral, it may invest such collateral and retain the
amount earned on such investments, 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 average daily value of the Series' net
assets.
The Trust has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM. Pursuant to that
order, the Series 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 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 $20,989 in securities lending
agent fees.
For the year ended December 31, 2005, the Series reimbursed FAM $18,835 for
certain accounting services.
Merrill Lynch Trust Company ("MLTC"), a wholly-owned subsidiary of ML & Co., is
the Series' custodian.
Certain officers and/or trustees of the Series are officers and/or directors of
FAM, PSI, MLTC, ML & Co., and/or MLIM, LLC.
3. Investments:
Purchases and sales (including paydowns) of investments, excluding short-term
securities, for the year ended December 31, 2005 were $1,592,053,301 and
$1,378,963,896, 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.
28 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
Report of Independent Registered Public Accounting Firm
Master Aggregate Bond Index Series
To the Investors and Board of Trustees of Quantitative Master Series Trust:
We have audited the accompanying statement of assets and liabilities, including
the summary schedule of investments, of Master Aggregate Bond Index 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 the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 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
Aggregate Bond Index 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 23, 2006
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 29
Officers and Directors/Trustees
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length of Overseen by Held by
Held with Time Director/ Director/
Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Interested Director/Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Robert C. P.O. Box 9011 President 2005 to President of MLIM/FAM-advised funds since 2005; 131 Funds None
Doll, Jr.* Princeton, NJ and present President of MLIM and FAM since 2001; Co-Head 177 Portfolios
08543-9011 Director/ (Americas Region) thereof from 2000 to 2001 and
Age: 51 Trustee 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 acts as 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.
Directors/Trustees serve until their resignation, removal or death, or until December 31 of the year in which they
turn 72. As Fund President, Mr. Doll serves at the pleasure of the Board of Directors/Trustees.
====================================================================================================================================
Independent Directors/Trustees*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald W. P.O. Box 9095 Director/ 2002 to General Partner of The Burton Partnership, Limited 23 Funds Knology, Inc.,
Burton Princeton, NJ Trustee present Partnership (an investment partnership) since 1979; 42 Portfolios (telecommuni-
08543-9095 Managing General Partner of The South Atlantic cations) and
Age: 61 Venture Funds since 1983; Member of the Investment Symbion, Inc.,
Advisory Council of the Florida State Board of (health care)
Administration since 2001.
- ------------------------------------------------------------------------------------------------------------------------------------
Laurie P.O. Box 9095 Director/ 1999 to Professor of Finance and Economics, Graduate 23 Funds None
Simon Princeton, NJ Trustee present School of Business, Columbia University since 1998. 42 Portfolios
Hodrick 08543-9095
Age: 43
- ------------------------------------------------------------------------------------------------------------------------------------
John P.O. Box 9095 Director/ 2005 to President and Chief Executive Officer of Allmerica 23 Funds ABIOMED
Francis Princeton, NJ Trustee present Financial Corporation (financial services holding 42 Portfolios (medical
O'Brien 08543-9095 company) from 1995 to 2002 and Director from1995 device
Age: 62 to 2003; President of Allmerica Investment manufacturer),
Management Co., Inc. (investment adviser) from Cabot
1989 to 2002, Director from 1989 to 2002 and Corporation
Chairman of the Board from 1989 to 1990; (chemicals),
President, Chief Executive Officer and Director of LKQ
First Allmerica Financial Life Insurance Company Corporation
from 1989 to 2002 and Director of various other (auto parts
Allmerica Financial companies until 2002; Director manufacturing)
since 1989, Member of the Governance Nominating and TJX Com-
Committee since 2004, Member of the Compensation panies, Inc.
Committee of ABIOMED since 1989 and Member of the (retailer)
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.
- ------------------------------------------------------------------------------------------------------------------------------------
David H. P.O. Box 9095 Director/ 2003 to Consultant with Putnam Investments from 1993 23 Funds None
Walsh Princeton, NJ Trustee present to 2003 and employed in various capacities 42 Portfolios
08543-9095 therewith from 1973 to 1992; Director, The National
Age: 64 Audubon Society since 1998; Director, The American
Museum of Fly Fishing since 1997.
30 MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005
Officers and Directors/Trustees (concluded)
Number of
Portfolios in Other Public
Fund Complex Directorships
Position(s) Length of Overseen by Held by
Held with Time Director/ Director/
Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years Trustee Trustee
====================================================================================================================================
Independent Directors/Trustees* (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
Fred G. P.O. Box 9095 Director/ 1998 to Managing Director of FGW Advisors, Inc. since 1997; 23 Funds Watson
Weiss** Princeton, NJ Trustee present Vice President, Planning, Investment and Devel- 42 Portfolios Pharma-
08543-9095 opment of Warner Lambert Co. from 1979 to 1997; ceuticals,
Age: 64 Director of the Michael J. Fox Foundation for Inc., (pharma-
Parkinson's Research since 2000; Director of ceutical
BTG International Plc (a global technology company)
commercialization company) since 2001.
------------------------------------------------------------------------------------------------------------------------
* Directors/Trustees serve until their resignation, removal or death, or until December 31 of the year in which they
turn 72.
** Chairman of the Board and the Audit Committee.
Position(s) Length of
Held with Time
Name Address & Age Fund/Trust Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund/Trust Officers*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1997 to First Vice President of MLIM and FAM since 1997 and Treasurer thereof since 1999;
Burke Princeton, NJ President present Senior Vice President and Treasurer of Princeton Services since 1999 and Director
08543-9011 and and since 2004; Vice President of FAM Distributors, Inc. ("FAMD") since 1999 and
Age: 45 Treasurer 1999 to Director since 2004; Vice President of MLIM and FAM from 1990 to 1997; Director of
present Taxation of MLIM from 1990 to 2001; Vice President, Treasurer and Secretary of the
IQ Funds since 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey P.O. Box 9011 Vice 1999 to Director (Global Fixed Income) of MLIM since 1998; Vice President of MLIM from
B. Hewson Princeton, NJ President present 1989 to 1998.
08543-9011
Age: 54
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey P.O. Box 9011 Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice President and
Hiller Princeton, NJ Compliance present Chief Compliance Officer of MLIM (Americas Region) since 2004; Chief Compliance
08543-9011 Officer Officer of the IQ Funds since 2004; Global Director of Compliance at Morgan Stanley
Age: 54 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 Commission's Division of
Enforcement in Washington, D.C. from 1990 to 1995.
- ------------------------------------------------------------------------------------------------------------------------------------
Alice A. P.O. Box 9011 Secretary 2004 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM from 1999 to
Pellegrino Princeton, NJ present 2002; Attorney associated with MLIM since 1997; Secretary of MLIM, FAM, FAMD and
08543-9011 Princeton Services since 2004.
Age: 45
- ------------------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund/Trust serve at the pleasure of the Board of Directors/Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
Further information about the Fund's Officers and Directors/Trustees is available in the Fund's Statement of Additional
Information, which can be obtained without charge by calling 1-800-637-3863.
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian
Merrill Lynch Trust Company, FSB
1300 Merrill Lynch Drive
3rd Floor -- MSC 0303
Pennington, NJ 08534
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
MERRILL LYNCH AGGREGATE BOND INDEX FUND DECEMBER 31, 2005 31
[LOGO] Merrill Lynch Investment Managers
www.mlim.ml.com
- --------------------------------------------------------------------------------
Mercury Advisors
A Division of Merrill Lynch Investment Managers
www.mercury.ml.com
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-637-3863; (2) at
www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's Web
site at http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the most recent
12-month period ended June 30 is available (1) at www.mutualfunds.ml.com and (2)
on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Merrill Lynch Index Funds, Inc.
Box 9011
Princeton, NJ
08543-9011
#Index 1 -- 12/05
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
Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc.
(a) Audit Fees - Fiscal Year Ending December 31, 2005 - $6,500
Fiscal Year Ending December 31, 2004 - $6,200
(b) Audit-Related Fees - Fiscal Year Ending December 31, 2005 - $19,000
Fiscal Year Ending December 31, 2004 - $0
The nature of the services include assurance and related services
reasonably related to the performance of the audit of financial
statements not included in Audit Fees.
(c) Tax Fees - Fiscal Year Ending December 31, 2005 - $5,700
Fiscal Year Ending December 31, 2004 - $5,200
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
Master Aggregate Bond Index Series of Quantitative Master Series Trust
(a) Audit Fees - Fiscal Year Ending December 31, 2005 - $42,500
Fiscal Year Ending December 31, 2004 - $40,500
(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 - $21,600
Fiscal Year Ending December 31, 2004 - $20,000
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
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face Interest Maturity
Issue Amount Rate Date(s) Value
- ------------------------------------------------------------------------------------------------------------------------------
Government & Agency Fannie Mae $ 2,345,000 5.25 % 6/15/2006 $ 2,351,545
Obligations - 35.6% 32,545,000 2.625 11/15/2006 31,967,489
1,595,000 4.25 9/15/2007 1,581,983
32,205,000 5.75 2/15/2008 (d) 32,852,514
12,395,000 2.50 6/15/2008 11,762,198
13,025,000 3.25 8/15/2008 (d) 12,557,637
22,425,000 4.50 10/15/2008 (d) 22,300,609
26,455,000 6.625 9/15/2009 28,130,686
30,840,000 6.00 5/15/2011 32,617,525
8,330,000 4.375 3/15/2013 8,111,154
5,185,000 4.625 10/15/2014 5,123,895
1,340,000 7.25 5/15/2030 1,773,372
-------------------------------------------------------------------------------------------------------
Freddie Mac 1,245,000 7.18 6/27/2006 1,260,520
24,610,000 4.875 3/15/2007 24,637,588
6,615,000 5.75 4/15/2008 6,757,441
15,905,000 4.125 7/12/2010 15,509,793
1,460,000 6.00 6/15/2011 1,545,375
8,965,000 4.875 11/15/2013 9,007,404
455,000 4.375 7/17/2015 439,932
12,110,000 4.75 11/17/2015 12,018,957
8,655,000 6.75 9/15/2029 10,703,673
1,845,000 6.25 7/15/2032 2,195,943
-------------------------------------------------------------------------------------------------------
Tennessee Valley 1,390,000 6.25 12/15/2017 1,554,633
Authority Series E
-------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds 14,975,000 8.75 5/15/2017 20,563,715
8,625,000 8.50 2/15/2020 12,099,253
6,335,000 8.125 8/15/2021 8,790,060
8,610,000 6.25 8/15/2023 10,281,554
4,105,000 6.875 8/15/2025 5,286,468
3,510,000 6.375 8/15/2027 4,348,149
1,845,000 5.375 2/15/2031 2,072,453
-------------------------------------------------------------------------------------------------------
U.S. Treasury Notes 1,990,000 2.625 11/15/2006 1,959,449
7,335,000 3.00 11/15/2007 (d) 7,152,197
2,670,000 3.625 1/15/2010 2,596,783
5,890,000 4.00 11/15/2012 5,763,229
-------------------------------------------------------------------------------------------------------
Total Government & Agency Obligations (Cost - $356,303,214) - 35.6% 357,675,176
- ------------------------------------------------------------------------------------------------------------------------------
Government Agency Fannie Mae Guaranteed 553,869 5.50 6/01/2011 - 2/01/2019 557,758
Mortgage-Backed Pass-Through 691,725 6.00 2/01/2013 - 6/01/2015 706,896
Obligations* - 35.5% Certificates 484,240 6.50 1/01/2013 - 5/01/2016 498,104
864,830 6.50 12/01/2025 - 1/01/2030 890,792
326,011 7.00 4/01/2027 - 3/01/2031 340,765
250,324 7.50 10/01/2027 - 5/01/2032 262,562
12,218 8.00 9/01/2015 13,047
251,093 8.00 11/01/2029 - 9/01/2031 268,225
22,954 8.50 5/01/2030 - 1/01/2031 24,846
53,554 9.50 7/01/2017 58,823
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face Interest Maturity
Issue Amount Rate Date(s) Value
- ------------------------------------------------------------------------------------------------------------------------------
$ 26,066 10.00 % 10/01/2018 - 5/01/2022 $ 28,810
10,729 10.50 12/01/2016 11,562
- ------------------------------------------------------------------------------------------------------------------------------
Freddie Mac Mortgage 7,577,000 4.00 1/01/2021 (g) 7,219,457
Participation 36,340,382 4.50 2/01/2011 - 1/15/2021 (g) 35,433,404
Certificates 6,864,845 4.50 4/01/2034 - 12/01/2035 6,462,817
30,339,591 5.00 11/01/2017 - 2/15/2021 (g) 30,062,386
77,780,197 5.00 8/01/2035 - 2/15/2036 (g) 75,300,580
8,832,665 5.50 4/01/2014 - 7/01/2020 8,890,171
96,897,291 5.50 8/01/2035 - 2/15/2036 (g) 95,993,941
3,997,901 6.00 4/01/2016 - 10/01/2017 4,081,086
30,946,594 6.00 6/01/2033 - 2/15/2036 (g) 31,246,093
662,596 6.50 4/01/2015 - 5/01/2017 680,918
14,180,678 6.50 1/01/2026 - 1/15/2036 (g) 14,553,209
426,767 7.00 1/01/2011 - 7/01/2017 442,679
3,562,775 7.00 1/01/2020 - 11/01/2032 3,712,645
152,684 7.50 5/01/2007 - 4/01/2016 159,655
739,777 7.50 1/01/2023 - 9/01/2032 777,126
394,646 8.00 11/01/2024 - 3/01/2032 421,291
46,452 8.50 5/01/2028 - 8/01/2030 50,344
9,012 9.00 9/01/2014 9,650
193,844 9.50 2/01/2019 211,353
45,091 10.00 3/01/2010 - 9/01/2017 47,940
31,962 10.50 4/01/2016 34,084
10,911 11.00 9/01/2016 12,158
5,626 11.50 8/01/2015 6,131
23,962 12.50 2/01/2014 26,484
-------------------------------------------------------------------------------------------------------
Ginnie Mae MBS 4,006,000 4.50 9/15/2035 3,844,508
Certificates 9,482,000 5.00 1/15/2036 - 2/15/2036 (g) 9,353,925
9,415,354 5.50 1/15/2035 - 5/15/2035 9,480,084
9,762,179 6.00 4/20/2026 - 1/15/2036 (g) 10,000,337
47,123 6.50 2/15/2014 - 5/15/2014 48,686
2,374,664 6.50 4/15/2026 - 11/15/2034 2,482,197
28,468 7.00 4/15/2013 29,712
1,362,086 7.00 7/15/2027 - 10/15/2031 1,430,871
507,139 7.50 3/15/2024 - 3/15/2032 534,019
284,384 8.00 12/15/2022 - 6/15/2031 304,524
101,625 8.50 11/15/2017 - 3/15/2031 109,903
78,220 9.00 4/15/2018 - 11/15/2024 85,277
7,139 9.50 9/15/2021 7,913
-------------------------------------------------------------------------------------------------------
Total Government Agency Mortgage-Backed Obligations (Cost - $358,878,023) - 35.5% 357,209,748
- ------------------------------------------------------------------------------------------------------------------------------
Face
Amount Non-Government Agency Mortgage-Backed Securities*
- -----------------------------------------------------------------------------------------------------------------------------------
Collateralized Mortgage 9,525,824 Residential Accredit Loans, Inc. Series 2005-QS12 Class A8, 4.729% due
Obligations - 0.9% 8/25/2035 (c) 9,512,630
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial Mortgage- 8,869,429 CS First Boston Mortgage Securities Corp. Series 2004-FL1A Class A,
Backed Securities - 12.2% 4.589% due 5/15/2014 (a)(c) 8,872,573
15,000,000 CS First Boston Mortgage Securities Corp. Series 2005-CN2A Class A2,
4.52% due 11/15/2019 (a)(c) 14,999,940
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face
Amount Non-Government Agency Mortgage-Backed Securities* Value
- -----------------------------------------------------------------------------------------------------------------------------------
$ 9,193,350 Commercial Mortgage Pass-Through Certificates
Series 2005-F10A Class A1, 4.469% due 4/15/2017 (a)(c) $ 9,192,303
20,000,000 Greenwich Capital Commercial Funding Corp.
Series 2004-FL2A Class A2, 4.578% due 11/05/2019 (c) 20,003,312
15,000,000 Greenwich Capital Commercial Funding Corp.
Series 2005-FL3A Class A2, 4.598% due 10/05/2007 (a)(c) 15,000,000
20,000,000 JPMorgan Chase Commercial Mortgage Securities Corp.
Series 2004-FL1A Class A2, 4.55% due 4/16/2019 (c) 20,015,400
18,942,734 Lehman Brothers Floating Rate Commercial Mortgage Trust
Series 2004-LLFA Class A2, 4.539% due 10/15/2017 (a)(c) 18,946,693
15,000,000 Wachovia Bank Commercial Mortgage Trust
Series 2004-WL4A Class A2, 4.539% due 10/15/2015 (a)(c) 15,007,418
--------------
122,037,639
- -----------------------------------------------------------------------------------------------------------------------------------
Total Non-Government Agency Mortgage-Backed Securities
(Cost - $131,531,337) - 13.1% 131,550,269
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Industry Fixed Income Securities
- -----------------------------------------------------------------------------------------------------------------------------------
Aerospace & 200,000 BAE Systems Holdings, Inc., 4.75% due 8/15/2010 (a) 196,419
Defense - 0.8% 1,000,000 Boeing Capital Corp., 5.75% due 2/15/2007 1,009,164
1,000,000 Boeing Capital Corp., 7.375% due 9/27/2010 1,100,362
540,000 General Dynamics Corp., 3% due 5/15/2008 517,451
400,000 Goodrich Corp., 7.625% due 12/15/2012 453,697
300,000 Honeywell International, Inc., 6.125% due 11/01/2011 316,661
450,000 Lockheed Martin Corp., 8.50% due 12/01/2029 613,336
587,000 Northrop Grumman Corp., 7.125% due 2/15/2011 639,650
21,000 Raytheon Co., 6.15% due 11/01/2008 21,794
350,000 Raytheon Co., 6.75% due 3/15/2018 391,099
150,000 Rockwell Collins, Inc., 4.75% due 12/01/2013 148,847
600,000 United Technologies Corp., 4.875% due 11/01/2006 601,460
1,355,000 United Technologies Corp., 6.35% due 3/01/2011 1,444,083
--------------
7,454,023
- -----------------------------------------------------------------------------------------------------------------------------------
Air Freight & 90,000 United Parcel Service, Inc., 8.375% due 4/01/2020 118,591
Logistics - 0.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Airlines - 0.1% 540,000 Continental Airlines, Inc. Series 2002-1, 6.563% due 8/15/2013 558,293
250,000 Southwest Airlines Co., 5.125% due 3/01/2017 233,435
--------------
791,728
- -----------------------------------------------------------------------------------------------------------------------------------
Auto Components - 0.0% 200,000 Johnson Controls, Inc., 4.875% due 9/15/2013 192,941
- -----------------------------------------------------------------------------------------------------------------------------------
Automobiles - 0.3% 1,100,000 DaimlerChrysler NA Holding Corp., 4.05% due 6/04/2008 1,070,844
280,000 DaimlerChrysler NA Holding Corp., 7.30% due 1/15/2012 302,122
600,000 DaimlerChrysler NA Holding Corp., 6.50% due 11/15/2013 628,229
600,000 DaimlerChrysler NA Holding Corp., 8.50% due 1/18/2031 726,010
150,000 Harley-Davidson, Inc., 3.625% due 12/15/2008 (a) 145,102
--------------
2,872,307
- -----------------------------------------------------------------------------------------------------------------------------------
Beverages - 0.3% 135,000 Anheuser-Busch Cos., Inc., 4.625% due 2/01/2015 130,956
160,000 Anheuser-Busch Cos., Inc., 5.95% due 1/15/2033 170,536
140,000 Anheuser-Busch Cos., Inc., 6% due 11/01/2041 148,604
645,000 Coca-Cola Enterprises, Inc., 6.75% due 9/15/2028 733,244
140,000 Diageo Capital Plc, 3.50% due 11/19/2007 136,358
550,000 Diageo Finance B.V., 5.30% due 10/28/2015 554,435
500,000 Miller Brewing Co., 5.50% due 8/15/2013 (a) 509,653
155,000 Pepsi Bottling Group, Inc. Series B, 7% due 3/01/2029 185,913
92,000 Pepsi Bottling Holdings, Inc., 5.625% due 2/17/2009 (a) 94,144
250,000 PepsiAmericas, Inc., 5% due 5/15/2017 246,682
--------------
2,910,525
- -----------------------------------------------------------------------------------------------------------------------------------
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face
Industry Amount Fixed Income Securities Value
- -----------------------------------------------------------------------------------------------------------------------------------
Biotechnology - 0.1% $ 275,000 Amgen, Inc., 4% due 11/18/2009 $ 266,671
180,000 Genentech, Inc., 4.40% due 7/15/2010 176,812
--------------
443,483
- -----------------------------------------------------------------------------------------------------------------------------------
Building Products - 0.0% 250,000 Masco Corp., 4.80% due 6/15/2015 233,041
45,000 Masco Corp., 6.50% due 8/15/2032 46,565
--------------
279,606
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Markets - 1.7% 365,000 The Bank of New York Co., Inc., 5.20% due 7/01/2007 366,811
1,100,000 The Bear Stearns Cos., Inc., 3.25% due 3/25/2009 1,043,348
525,000 The Bear Stearns Cos., Inc., 4.65% due 7/02/2018 488,870
775,000 Credit Suisse First Boston USA, Inc., 5.75% due 4/15/2007 783,078
1,000,000 Credit Suisse First Boston USA, Inc., 4.625% due 1/15/2008 995,228
800,000 Credit Suisse First Boston USA, Inc., 6.50% due 1/15/2012 855,823
625,000 Credit Suisse First Boston USA, Inc., 5.125% due 1/15/2014 622,631
150,000 Credit Suisse First Boston USA, Inc., 5.125% due 8/15/2015 148,550
255,000 Credit Suisse First Boston USA, Inc., 7.125% due 7/15/2032 308,391
70,000 Goldman Sachs Group, Inc., 4.125% due 1/15/2008 68,925
1,000,000 Goldman Sachs Group, Inc., 3.875% due 1/15/2009 970,757
1,900,000 Goldman Sachs Group, Inc., 6.60% due 1/15/2012 2,040,959
400,000 Goldman Sachs Group, Inc., 5.25% due 4/01/2013 400,566
525,000 Goldman Sachs Group, Inc., 5.125% due 1/15/2015 519,063
730,000 Goldman Sachs Group, Inc., 6.125% due 2/15/2033 766,149
600,000 Lehman Brothers Holdings, Inc., 7% due 2/01/2008 624,602
245,000 Lehman Brothers Holdings, Inc., 7.875% due 8/15/2010 273,298
725,000 Lehman Brothers Holdings, Inc., 6.625% due 1/18/2012 782,759
400,000 Lehman Brothers Holdings, Inc., 4.80% due 3/13/2014 390,557
500,000 Mellon Funding Corp., 5% due 12/01/2014 498,315
1,060,000 Morgan Stanley, 5.80% due 4/01/2007 1,070,805
600,000 Morgan Stanley, 4.25% due 5/15/2010 579,974
845,000 Morgan Stanley, 6.60% due 4/01/2012 908,263
1,250,000 Morgan Stanley, 4.75% due 4/01/2014 1,198,834
200,000 Morgan Stanley, 5.375% due 10/15/2015 200,194
150,000 Morgan Stanley, 7.25% due 4/01/2032 180,038
150,000 State Street Bank & Trust Co., 5.30% due 1/15/2016 151,692
--------------
17,238,480
- -----------------------------------------------------------------------------------------------------------------------------------
Chemicals - 0.2% 170,000 Albemarle Corp., 5.10% due 2/01/2015 164,362
400,000 Lubrizol Corp., 5.50% due 10/01/2014 401,063
150,000 Lubrizol Corp., 6.50% due 10/01/2034 156,605
345,000 Potash Corp. of Saskatchewan Inc., 7.75% due 5/31/2011 384,629
235,000 Praxair, Inc., 6.50% due 3/01/2008 242,613
70,000 Praxair, Inc., 3.95% due 6/01/2013 65,515
44,000 Rohm & Haas Co., 7.40% due 7/15/2009 47,468
200,000 Rohm & Haas Co., 7.85% due 7/15/2029 257,500
250,000 Yara International ASA, 5.25% due 12/15/2014 (a) 244,828
--------------
1,964,583
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 2.9% 825,000 BB&T Corp., 6.50% due 8/01/2011 884,693
430,000 Bank One Corp., 6.875% due 8/01/2006 434,638
200,000 Bank One Corp., 2.625% due 6/30/2008 189,515
295,000 Bank One Corp., 5.90% due 11/15/2011 306,787
378,000 Bank One Corp., 8% due 4/29/2027 477,315
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face
Industry Amount Fixed Income Securities Value
- -----------------------------------------------------------------------------------------------------------------------------------
$ 113,000 Bank of America Corp., 6.60% due 5/15/2010 $ 120,302
1,700,000 Bank of America Corp., 4.50% due 8/01/2010 1,670,578
410,000 Bank of America Corp., 4.875% due 9/15/2012 407,152
1,100,000 Bank of America Corp., 4.875% due 1/15/2013 1,087,859
400,000 Bank of America Corp., 4.75% due 8/01/2015 387,933
400,000 Comerica, Inc., 4.80% due 5/01/2015 387,886
535,000 Corporacion Andina de Fomento, 6.875% due 3/15/2012 582,004
460,000 Deutsche Bank Financial, Inc., 7.50% due 4/25/2009 494,420
500,000 Eksportfinans A/S, 4.75% due 12/15/2008 500,843
700,000 FleetBoston Financial Corp., 4.20% due 11/30/2007 693,715
1,200,000 HSBC Bank USA NA, 5.875% due 11/01/2034 1,210,733
500,000 HSBC Finance Corp., 4.75% due 4/15/2010 492,596
530,000 KFW International Finance, 4.75% due 1/24/2007 529,156
1,000,000 KFW International Finance, 5.125% due 5/13/2009 1,015,003
485,000 Key Bank National Association, 5% due 7/17/2007 484,941
250,000 Key Bank National Association, 4.95% due 9/15/2015 243,837
600,000 KfW - Kreditanstalt fuer Wiederaufbau, 3.25% due 3/30/2009 576,048
600,000 KfW - Kreditanstalt fuer Wiederaufbau, 4.125% due 10/15/2014 579,572
600,000 KfW - Kreditanstalt fuer Wiederaufbau, 4.375% due 7/21/2015 585,308
1,000,000 Korea Development Bank, 4.75% due 7/20/2009 991,411
395,000 M&I Marshall & Ilsley Bank, 4.125% due 9/04/2007 390,617
500,000 M&T Bank Corp., 3.85% due 4/01/2013 (a)(c) 488,480
570,000 National Australia Bank Ltd. Series A, 8.60% due 5/19/2010 648,805
600,000 National City Bank, 4.50% due 3/15/2010 590,509
295,000 National City Bank of Indiana, 4% due 9/28/2007 290,928
500,000 PNC Funding Corp., 4.20% due 3/10/2008 492,581
200,000 Popular North America, Inc., 4.70% due 6/30/2009 196,476
350,000 Regions Financial Corp., 6.375% due 5/15/2012 374,895
1,065,000 Royal Bank of Scotland Group Plc, 5.05% due 1/08/2015 1,057,304
200,000 Santander Central Hispano Issuances Ltd., 7.625% due 9/14/2010 221,501
450,000 Sovereign Bank, 5.125% due 3/15/2013 441,721
400,000 Synovus Financial Corp., 4.875% due 2/15/2013 392,880
485,000 U.S. Bancorp, 5.10% due 7/15/2007 486,915
250,000 U.S. Bancorp Series N, 3.95% due 8/23/2007 246,760
500,000 U.S. Bank N.A., 6.30% due 2/04/2014 539,474
400,000 UnionBanCal Corp., 5.25% due 12/16/2013 398,713
525,000 Wachovia Bank NA, 4.85% due 7/30/2007 524,862
275,000 Wachovia Bank NA, 4.875% due 2/01/2015 268,185
895,000 Wachovia Corp., 5.625% due 12/15/2008 915,416
1,870,000 Wachovia Corp., 3.625% due 2/17/2009 1,803,593
150,000 Wachovia Corp., 5.25% due 8/01/2014 150,199
1,800,000 Wells Fargo & Co., 3.125% due 4/01/2009 1,705,046
250,000 Wells Fargo & Co., 5.125% due 9/15/2016 248,064
450,000 Wells Fargo & Co., 5.375% due 2/07/2035 443,650
450,000 Wells Fargo Bank NA, 6.45% due 2/01/2011 479,580
350,000 Westpac Banking Corp., 4.625% due 6/01/2018 329,007
--------------
29,460,406
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial Services & 300,000 Aramark Services, Inc., 6.375% due 2/15/2008 306,836
Supplies - 0.4% 815,000 Cendant Corp., 6.875% due 8/15/2006 823,365
1,000,000 International Lease Finance Corp., 5% due 4/15/2010 994,645
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face
Industry Amount Fixed Income Securities Value
- -----------------------------------------------------------------------------------------------------------------------------------
$ 385,000 Pitney Bowes, Inc., 4.75% due 5/15/2018 $ 365,616
250,000 RR Donnelley & Sons Co., 4.95% due 5/15/2010 (a) 243,771
80,000 Science Applications International Corp., 5.50% due 7/01/2033 76,089
1,250,000 Waste Management, Inc., 7.375% due 8/01/2010 1,360,366
--------------
4,170,688
- -----------------------------------------------------------------------------------------------------------------------------------
Communications 615,000 Alltel Corp., 7% due 7/01/2012 676,158
Equipment - 0.1% 500,000 Harris Corp., 6.35% due 2/01/2028 522,579
--------------
1,198,737
- -----------------------------------------------------------------------------------------------------------------------------------
Computers & 200,000 Dell, Inc., 7.10% due 4/15/2028 238,469
Peripherals - 0.2% 335,000 Hewlett-Packard Co., 3.625% due 3/15/2008 326,158
395,000 International Business Machines Corp., 6.45% due 8/01/2007 404,469
500,000 International Business Machines Corp., 4.75% due 11/29/2012 495,967
550,000 International Business Machines Corp., 5.875% due 11/29/2032 578,752
--------------
2,043,815
- -----------------------------------------------------------------------------------------------------------------------------------
Construction 355,000 Hanson Australia Funding Ltd., 5.25% due 3/15/2013 351,914
Materials - 0.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Finance - 0.8% 535,000 American Express Co., 3.75% due 11/20/2007 525,164
235,000 American General Finance Corp., 5.875% due 7/14/2006 236,393
175,000 American General Finance Corp. Series H, 5.375% due 10/01/2012 175,890
570,000 Capital One Bank, 6.875% due 2/01/2006 570,920
1,600,000 Capital One Bank, 4.875% due 5/15/2008 1,593,488
150,000 CitiFinancial,10% due 5/15/2009 172,500
1,015,000 HSBC Finance Corp., 5.875% due 2/01/2009 1,037,301
750,000 HSBC Finance Corp., 7% due 5/15/2012 820,403
350,000 HSBC Finance Corp., 4.75% due 7/15/2013 338,164
1,000,000 MBNA America Bank NA, 4.625% due 8/03/2009 992,186
225,000 MBNA America Bank NA, 7.125% due 11/15/2012 251,528
1,000,000 SLM Corp., 5.375% due 5/15/2014 1,009,994
--------------
7,723,931
- -----------------------------------------------------------------------------------------------------------------------------------
Containers & 200,000 Sealed Air Corp., 5.375% due 4/15/2008 (a) 200,751
Packaging - 0.0% 135,000 Sealed Air Corp., 6.95% due 5/15/2009 (a) 141,543
--------------
342,294
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Consumer 300,000 J Paul Getty Trust Series 2003, 5.875% due 10/01/2033 313,361
Services - 0.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified Financial 730,000 Brascan Corp., 5.75% due 3/01/2010 741,344
Services - 1.7% 250,000 CIT Group Co. of Canada, 5.20% due 6/01/2015 (a) 247,103
800,000 CIT Group, Inc., 5.75% due 9/28/2007 811,130
400,000 CIT Group, Inc., 5.50% due 11/30/2007 403,928
640,000 CIT Group, Inc., 4.125% due 11/03/2009 618,659
300,000 CIT Group, Inc., 5% due 2/13/2014 293,446
90,000 Citicorp, 6.375% due 11/15/2008 93,716
1,000,000 Citigroup, Inc., 3.625% due 2/09/2009 962,746
125,000 Citigroup, Inc., 6.50% due 1/18/2011 133,188
991,000 Citigroup, Inc., 5% due 9/15/2014 975,496
540,000 Citigroup, Inc., 6.625% due 6/15/2032 610,193
175,000 Citigroup, Inc., 6% due 10/31/2033 183,018
575,000 Citigroup, Inc., 5.85% due 12/11/2034 598,828
1,025,000 General Electric Capital Corp., 5.375% due 3/15/2007 1,031,438
2,155,000 General Electric Capital Corp., 6.75% due 3/15/2032 2,529,649
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face
Industry Amount Fixed Income Securities Value
- -----------------------------------------------------------------------------------------------------------------------------------
$ 1,000,000 General Electric Capital Corp. Series A, 4.875% due 10/21/2010 $ 997,784
800,000 HSBC Finance Corp., 4.75% due 5/15/2009 791,272
400,000 JPMorgan Chase & Co., 3.50% due 3/15/2009 383,511
500,000 JPMorgan Chase & Co., 4.50% due 11/15/2010 488,880
1,445,000 JPMorgan Chase & Co., 6.625% due 3/15/2012 1,557,142
1,000,000 JPMorgan Chase & Co., 5.125% due 9/15/2014 989,911
400,000 JPMorgan Chase & Co., 5.15% due 10/01/2015 394,329
390,000 Nissan Motor Acceptance Corp., 4.625% due 3/08/2010 (a) 381,083
430,000 Toyota Motor Credit Corp., 4.25% due 3/15/2010 421,511
375,000 UFJ Finance Aruba AEC, 6.75% due 7/15/2013 409,449
--------------
17,048,754
- -----------------------------------------------------------------------------------------------------------------------------------
Diversified 700,000 AT&T, Inc., 5.30% due 11/15/2010 702,121
Telecommunication 900,000 Ameritech Capital Funding, 6.45% due 1/15/2018 939,918
Services - 1.3% 800,000 BellSouth Corp., 5% due 10/15/2006 801,088
614,000 BellSouth Corp., 6% due 10/15/2011 638,279
500,000 BellSouth Corp., 5.20% due 9/15/2014 497,337
170,000 BellSouth Corp., 6.55% due 6/15/2034 181,077
350,000 BellSouth Corp., 6% due 11/15/2034 349,682
1,295,000 British Telecommunications Plc, 8.375% due 12/15/2010 1,474,177
200,000 British Telecommunications Plc, 8.875% due 12/15/2030 267,588
800,000 Deutsche Telekom International Finance BV, 3.875% due 7/22/2008 781,373
150,000 Deutsche Telekom International Finance BV, 8.50% due 6/15/2010 170,066
450,000 Deutsche Telekom International Finance BV, 8.75% due 6/15/2030 572,341
400,000 France Telecom SA, 8.50% due 3/01/2031 533,704
1,100,000 GTE Corp., 6.84% due 4/15/2018 1,179,735
255,000 GTE Corp., 6.94% due 4/15/2028 272,900
490,000 Royal KPN NV, 8% due 10/01/2010 538,142
500,000 SBC Communications, Inc., 5.10% due 9/15/2014 488,441
150,000 SBC Communications, Inc., 6.45% due 6/15/2034 156,086
200,000 Tele-Communications-TCI Group, 9.80% due 2/01/2012 241,279
750,000 Telecom Italia Capital SA, 5.25% due 11/15/2013 735,956
200,000 Telecom Italia Capital SA, 4.95% due 9/30/2014 191,018
200,000 Telecom Italia Capital SA, 6% due 9/30/2034 192,671
250,000 Telefonos de Mexico SA de CV, 4.75% due 1/27/2010 245,600
575,000 Verizon Global Funding Corp., 4.90% due 9/15/2015 556,603
315,000 Verizon Global Funding Corp., 7.75% due 12/01/2030 374,427
100,000 Verizon Global Funding Corp., 5.85% due 9/15/2035 96,367
--------------
13,177,976
- -----------------------------------------------------------------------------------------------------------------------------------
Electric Utilities - 0.7% 200,000 American Electric Power Co., Inc., 5.25% due 6/01/2015 199,315
235,000 Arizona Public Service Co., 5.50% due 9/01/2035 222,327
610,000 Carolina Power & Light Co., 5.95% due 3/01/2009 625,657
280,000 Commonwealth Edison Co., 6.95% due 7/15/2018 298,201
375,000 Consolidated Edison Co. of New York Series 03-C,
5.10% due 6/15/2033 351,550
125,000 Entergy Mississippi, Inc., 5.15% due 2/01/2013 120,654
170,000 FPL Group Capital, Inc., 7.625% due 9/15/2006 173,095
700,000 FirstEnergy Corp. Series B, 6.45% due 11/15/2011 741,998
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face
Industry Amount Fixed Income Securities Value
- -----------------------------------------------------------------------------------------------------------------------------------
$ 305,000 Florida Power & Light Co., 5.40% due 9/01/2035 $ 297,665
160,000 Georgia Power Co. Series K, 5.125% due 11/15/2012 161,176
160,000 Hydro Quebec Series GF, 8.875% due 3/01/2026 232,721
200,000 Ohio Power Co. Series G, 6.60% due 2/15/2033 220,370
200,000 PacifiCorp, 5.25% due 6/15/2035 188,961
200,000 Pacific Gas & Electric Co., 6.05% due 3/01/2034 206,992
350,000 Pepco Holdings Inc, 6.45% due 8/15/2012 368,275
235,000 Progress Energy, Inc., 7.10% due 3/01/2011 253,546
150,000 Public Service Co. of New Mexico, 4.40% due 9/15/2008 146,891
150,000 Southern California Edison Co., 6% due 1/15/2034 158,741
125,000 Southern California Edison Co., 5.55% due 1/15/2036 124,346
1,030,000 TXU Electric Delivery Co., 6.375% due 5/01/2012 1,086,131
300,000 Westar Energy, Inc., 5.10% due 7/15/2020 286,766
280,000 Wisconsin Electric Power, 5.625% due 5/15/2033 283,074
--------------
6,748,452
- -----------------------------------------------------------------------------------------------------------------------------------
Electrical 250,000 Cooper Industries, Inc., 5.50% due 11/01/2009 254,544
Equipment - 0.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Energy Equipment & 150,000 Halliburton Co., 5.50% due 10/15/2010 153,204
Services - 0.1% 225,000 Nabors Industries, Inc., 5.375% due 8/15/2012 228,896
--------------
382,100
- -----------------------------------------------------------------------------------------------------------------------------------
Food & Staples 200,000 CVS Corp., 4% due 9/15/2009 192,356
Retailing - 0.4% 160,000 The Kroger Co., 7.625% due 9/15/2006 162,419
525,000 The Kroger Co., 7.50% due 4/01/2031 586,097
85,000 The Kroger Co. Series B, 7.70% due 6/01/2029 94,425
390,000 SUPERVALU, Inc., 7.50% due 5/15/2012 416,991
1,735,000 Wal-Mart Stores, Inc., 6.875% due 8/10/2009 1,846,521
125,000 Wal-Mart Stores, Inc., 7.55% due 2/15/2030 159,499
475,000 Wal-Mart Stores, Inc., 5.25% due 9/01/2035 461,071
--------------
3,919,379
- -----------------------------------------------------------------------------------------------------------------------------------
Food Products - 0.5% 285,000 Archer-Daniels-Midland Co., 5.935% due 10/01/2032 296,509
100,000 Bunge Ltd. Finance Corp., 5.10% due 7/15/2015 (a) 96,752
200,000 Campbell Soup Co., 4.875% due 10/01/2013 195,605
200,000 ConAgra Foods, Inc., 7% due 10/01/2028 217,283
370,000 ConAgra Foods, Inc., 8.25% due 9/15/2030 457,006
400,000 General Mills Inc., 6% due 2/15/2012 418,619
500,000 Kellogg Co., 2.875% due 6/01/2008 476,384
225,000 Kraft Foods, Inc., 4.625% due 11/01/2006 224,293
260,000 Kraft Foods, Inc., 5.625% due 11/01/2011 266,759
1,000,000 Kraft Foods, Inc. Series A, 4.125% due 11/12/2009 967,658
110,000 SYSCO Corp., 5.375% due 9/21/2035 107,674
170,000 Sara Lee Corp., 6.25% due 9/15/2011 175,120
180,000 Sara Lee Corp., 6.125% due 11/01/2032 168,261
565,000 Unilever Capital Corp., 7.125% due 11/01/2010 615,199
235,000 WM Wrigley Jr Co., 4.65% due 7/15/2015 228,822
--------------
4,911,944
- -----------------------------------------------------------------------------------------------------------------------------------
Gas Utilities - 0.1% 200,000 AGL Capital Corp., 4.45% due 4/15/2013 192,316
300,000 Atmos Energy Corp., 7.375% due 5/15/2011 329,324
300,000 Australian Gas Light Co. Ltd., 5.30% due 9/25/2015 (a) 298,489
250,000 KeySpan Corp., 5.803% due 4/01/2035 259,220
260,000 Nisource Finance Corp., 5.25% due 9/15/2017 252,898
--------------
1,332,247
- -----------------------------------------------------------------------------------------------------------------------------------
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face
Industry Amount Fixed Income Securities Value
- -----------------------------------------------------------------------------------------------------------------------------------
Face
Industry Amount Fixed Income Securities Value
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care Equipment & $ 320,000 Baxter International, Inc., 4.625% due 3/15/2015 $ 305,538
Supplies - 0.1% 425,000 Boston Scientific Corp., 5.45% due 6/15/2014 421,022
185,000 Medtronic, Inc., 4.375% due 9/15/2010 (a) 181,262
--------------
907,822
- -----------------------------------------------------------------------------------------------------------------------------------
Health Care Providers & 300,000 Quest Diagnostics, Inc., 5.45% due 11/01/2015 (a) 302,244
Services - 0.1% 375,000 UnitedHealth Group, Inc., 3.30% due 1/30/2008 363,474
340,000 UnitedHealth Group, Inc., 5% due 8/15/2014 338,337
--------------
1,004,055
- -----------------------------------------------------------------------------------------------------------------------------------
Hotels, Restaurants & 380,000 Carnival Corp., 3.75% due 11/15/2007 371,459
Leisure - 0.2% 225,000 Carnival Corp., 6.15% due 4/15/2008 230,416
700,000 Harrah's Operating Co., Inc., 5.50% due 7/01/2010 699,719
225,000 Harrah's Operating Co., Inc., 5.75% due 10/01/2017 218,992
350,000 Yum! Brands, Inc., 7.65% due 5/15/2008 369,406
--------------
1,889,992
- -----------------------------------------------------------------------------------------------------------------------------------
Household Durables - 0.3% 360,000 Black & Decker Corp., 4.75% due 11/01/2014 338,898
390,000 Centex Corp., 7.875% due 2/01/2011 428,159
815,000 Fortune Brands, Inc., 2.875% due 12/01/2006 797,578
200,000 Lennar Corp., 5.95% due 3/01/2013 201,300
100,000 MDC Holdings, Inc., 5.50% due 5/15/2013 96,872
110,000 Pulte Homes, Inc., 7.875% due 8/01/2011 120,843
350,000 Pulte Homes, Inc., 5.25% due 1/15/2014 334,095
75,000 The Stanley Works, 4.90% due 11/01/2012 74,580
325,000 Toll Brothers Finance Corp., 6.875% due 11/15/2012 341,374
--------------
2,733,699
- -----------------------------------------------------------------------------------------------------------------------------------
Household Products - 0.2% 490,000 Clorox Co., 4.20% due 1/15/2010 474,810
294,000 Kimberly-Clark Corp., 7.10% due 8/01/2007 304,176
180,000 Procter & Gamble Co., 4.95% due 8/15/2014 180,413
600,000 Procter & Gamble Co., 4.85% due 12/15/2015 593,017
250,000 Procter & Gamble Co., 5.80% due 8/15/2034 265,227
--------------
1,817,643
- -----------------------------------------------------------------------------------------------------------------------------------
IT Services - 0.1% 435,000 First Data Corp., 6.375% due 12/15/2007 444,535
- -----------------------------------------------------------------------------------------------------------------------------------
Independent Power 1,150,000 Duke Energy Corp., 6.25% due 1/15/2012 1,212,019
Producers & Energy
Traders - 0.1%
- -----------------------------------------------------------------------------------------------------------------------------------
Industrial 425,000 General Electric Co., 5% due 2/01/2013 424,779
Conglomerates - 0.2% 300,000 Tyco International Group SA, 6.125% due 1/15/2009 306,614
900,000 Tyco International Group SA, 6% due 11/15/2013 919,337
--------------
1,650,730
- -----------------------------------------------------------------------------------------------------------------------------------
Insurance - 1.0% 710,000 AXA Financial, Inc., 7.75% due 8/01/2010 786,181
330,000 Ace INA Holdings Inc., 8.30% due 8/15/2006 336,697
350,000 Ace INA Holdings Inc., 5.875% due 6/15/2014 362,053
250,000 The Allstate Corp., 5.375% due 12/01/2006 250,758
400,000 The Allstate Corp., 6.125% due 2/15/2012 421,558
350,000 The Allstate Corp., 5% due 8/15/2014 346,399
325,000 American General Corp., 7.50% due 7/15/2025 398,164
450,000 Berkshire Hathaway Finance Corp., 4.125% due 1/15/2010 437,281
500,000 Berkshire Hathaway Finance Corp., 4.85% due 1/15/2015 491,346
300,000 Hartford Life, Inc., 7.375% due 3/01/2031 366,683
200,000 Infinity Property & Casualty Corp. Series B, 5.50% due 2/18/2014 194,883
275,000 John Hancock Financial Services, Inc., 5.625% due 12/01/2008 280,442
1,000,000 Marsh & McLennan Cos., Inc., 5.15% due 9/15/2010 993,350
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face
Industry Amount Fixed Income Securities Value
- -----------------------------------------------------------------------------------------------------------------------------------
$ 175,000 Marsh & McLennan Cos., Inc., 6.25% due 3/15/2012 $ 182,324
500,000 Marsh & McLennan Cos., Inc., 5.75% due 9/15/2015 504,018
150,000 Metlife, Inc., 6.125% due 12/01/2011 158,949
625,000 Metlife, Inc., 5% due 11/24/2013 618,357
200,000 Metlife, Inc., 5.70% due 6/15/2035 200,741
500,000 Monumental Global Funding II, 4.375% due 7/30/2009 (a) 489,426
145,000 New York Life Insurance Co., 5.875% due 5/15/2033 (a) 151,346
425,000 The Progressive Corp., 6.25% due 12/01/2032 463,767
500,000 Prudential Financial, Inc., 5.10% due 9/20/2014 497,665
100,000 RLI Corp., 5.95% due 1/15/2014 99,470
150,000 SunAmerica, Inc., 5.60% due 7/31/2097 147,996
250,000 Travelers Property Casualty Corp., 6.375% due 3/15/2033 266,218
350,000 W.R. Berkley Corp., 5.125% due 9/30/2010 347,651
60,000 Western & Southern Financial Group, Inc., 5.75% due 7/15/2033 (a) 60,413
--------------
9,854,136
- -----------------------------------------------------------------------------------------------------------------------------------
Machinery - 0.3% 265,000 Caterpillar Financial Services Corp., 4.875% due 6/15/2007 264,842
500,000 Caterpillar Financial Services Corp., 5.05% due 12/01/2010 501,057
300,000 Caterpillar Financial Services Corp., 4.60% due 1/15/2014 292,147
1,000,000 Caterpillar, Inc., 6.55% due 5/01/2011 1,078,980
720,000 Deere & Co., 7.85% due 5/15/2010 803,027
230,000 Deere & Co., 6.95% due 4/25/2014 259,324
220,000 Dover Corp., 4.875% due 10/15/2015 216,042
--------------
3,415,419
- -----------------------------------------------------------------------------------------------------------------------------------
Media - 1.2% 255,000 British Sky Broadcasting Plc, 8.20% due 7/15/2009 278,702
200,000 COX Enterprises, Inc., 4.375% due 5/01/2008 (a) 195,299
575,000 Clear Channel Communications, Inc., 4.90% due 5/15/2015 519,960
100,000 Clear Channel Communications, Inc., 7.25% due 10/15/2027 102,803
450,000 Comcast Cable Communications, 8.875% due 5/01/2017 553,638
215,000 Comcast Corp., 5.85% due 1/15/2010 219,024
570,000 Comcast Corp., 7.05% due 3/15/2033 615,363
150,000 Comcast Corp., 6.50% due 11/15/2035 152,858
235,000 Cox Communications, Inc., 7.125% due 10/01/2012 251,797
450,000 Cox Communications, Inc., 6.80% due 8/01/2028 464,753
375,000 Gannett Co., Inc., 5.50% due 4/01/2007 376,639
200,000 IAC/InterActiveCorp, 7% due 1/15/2013 205,776
665,000 News America, Inc., 7.25% due 5/18/2018 741,172
340,000 News America, Inc., 7.28% due 6/30/2028 371,749
1,700,000 Reed Elsevier Capital, Inc., 6.125% due 8/01/2006 1,709,994
345,000 The Thomson Corp., 5.75% due 2/01/2008 349,903
325,000 The Thomson Corp., 4.25% due 8/15/2009 316,521
352,000 Time Warner Companies, Inc., 6.875% due 6/15/2018 373,447
1,510,000 Time Warner, Inc., 6.875% due 5/01/2012 1,607,365
400,000 Time Warner, Inc., 7.70% due 5/01/2032 449,864
200,000 Univision Communications, Inc., 7.85% due 7/15/2011 220,094
1,000,000 Viacom, Inc., 5.625% due 5/01/2007 1,005,323
375,000 Walt Disney Co., 6.375% due 3/01/2012 396,644
100,000 Walt Disney Co. Series B, 6.20% due 6/20/2014 105,197
--------------
11,583,885
- -----------------------------------------------------------------------------------------------------------------------------------
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face
Industry Amount Fixed Income Securities Value
- -----------------------------------------------------------------------------------------------------------------------------------
Metals & Mining - 0.3% $ 840,000 Alcan, Inc., 6.45% due 3/15/2011 $ 886,089
150,000 Alcan, Inc., 5.75% due 6/01/2035 146,051
150,000 Alcoa, Inc., 6% due 1/15/2012 157,079
400,000 Alcoa, Inc., 5.375% due 1/15/2013 406,154
365,000 BHP Finance USA Ltd., 6.42% due 3/01/2026 409,103
200,000 Barrick Gold Finance, Inc., 4.875% due 11/15/2014 193,591
120,000 Corporacion Nacional del Cobre de Chile - CODELCO, 6.375% due
11/30/2012 (a) 129,047
300,000 Inco Ltd., 7.75% due 5/15/2012 334,811
100,000 Newmont Mining Corp., 5.875% due 4/01/2035 98,682
150,000 Teck Cominco Ltd., 6.125% due 10/01/2035 148,343
400,000 Textron Financial Corp. Series E, 4.125% due 3/03/2008 393,848
--------------
3,302,798
- -----------------------------------------------------------------------------------------------------------------------------------
Multi-Utilities - 0.6% 270,000 AmerenEnergy Generating Co. Series F, 7.95% due 6/01/2032 341,606
180,000 Baltimore Gas & Electric, 5.20% due 6/15/2033 166,502
300,000 CenterPoint Energy Resources Corp. Series B, 7.875% due 4/01/2013 343,077
115,000 Cincinnati Gas & Electric, 5.70% due 9/15/2012 118,036
250,000 Dominion Resources, Inc., 4.125% due 2/15/2008 245,364
410,000 Dominion Resources, Inc., 6.30% due 3/15/2033 417,155
180,000 Dominion Resources, Inc., 5.95% due 6/15/2035 175,696
541,000 Dominion Resources, Inc. Series A, 8.125% due 6/15/2010 601,310
300,000 FirstEnergy Corp., 7.375% due 11/15/2031 353,991
200,000 New York State Electric & Gas Corp., 5.75% due 5/01/2023 198,984
400,000 PSEG Power LLC, 5.50% due 12/01/2015 397,087
400,000 Pacific Gas & Electric Co., 3.60% due 3/01/2009 383,853
250,000 Pacific Gas & Electric Co., 4.20% due 3/01/2011 239,712
500,000 Pacific Gas & Electric Co., 4.80% due 3/01/2014 487,264
745,000 Public Service Electric & Gas, 5.125% due 9/01/2012 746,155
170,000 South Carolina Electric & Gas, 6.70% due 2/01/2011 183,138
290,000 Southern Power Co. Series B, 6.25% due 7/15/2012 305,096
--------------
5,704,026
- -----------------------------------------------------------------------------------------------------------------------------------
Multiline Retail - 0.3% 25,000 Federated Department Stores, 6.625% due 9/01/2008 25,909
135,000 Federated Department Stores, 6.30% due 4/01/2009 139,217
270,000 Federated Department Stores, 6.625% due 4/01/2011 286,689
235,000 Kohl's Corp., 6.30% due 3/01/2011 247,425
600,000 The May Department Stores Co., 5.75% due 7/15/2014 611,725
888,000 Target Corp.,10% due 1/01/2011 1,066,709
100,000 Target Corp., 6.75% due 1/01/2028 118,696
--------------
2,496,370
- -----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 300,000 Amerada Hess Corp., 7.30% due 8/15/2031 347,185
Fuels - 1.7% 390,000 Anadarko Finance Co. Series B, 6.75% due 5/01/2011 421,954
60,000 Anadarko Finance Co. Series B, 7.50% due 5/01/2031 73,537
500,000 Apache Corporation, 6.25% due 4/15/2012 537,288
390,000 Atlantic Richfield Co., 5.90% due 4/15/2009 404,742
730,000 Burlington Resources Finance Co., 6.50% due 12/01/2011 788,031
525,000 Canadian Natural Resources Ltd., 4.90% due 12/01/2014 513,642
330,000 Chevron Phillips Chemical Co. LLC, 5.375% due 6/15/2007 331,083
425,000 ChevronTexaco Capital Co., 3.50% due 9/17/2007 416,341
565,000 ChevronTexaco Capital Co., 3.375% due 2/15/2008 549,685
125,000 Colonial Pipeline Co., 7.63% due 4/15/2032 (a) 163,963
845,000 ConocoPhillips, 4.75% due 10/15/2012 839,827
375,000 ConocoPhillips, 5.90% due 10/15/2032 402,462
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face
Industry Amount Fixed Income Securities Value
- -----------------------------------------------------------------------------------------------------------------------------------
$ 505,000 Conoco Phillips Holding Co., 6.95% due 4/15/2029 $ 609,486
475,000 Consolidated Natural Gas Co. Series C, 6.25% due 11/01/2011 497,406
150,000 Devon Energy Corp., 7.95% due 4/15/2032 193,450
600,000 EnCana Corp., 4.75% due 10/15/2013 586,385
500,000 Enterprise Products Operating LP, 5.60% due 10/15/2014 499,609
200,000 Enterprise Products Operating LP, 6.65% due 10/15/2034 (a) 206,512
110,958 Kern River Funding Corp., 4.893% due 4/30/2018 (a) 108,755
250,000 Kinder Morgan Energy Partners LP, 5.35% due 8/15/2007 250,624
425,000 Kinder Morgan Energy Partners LP, 6.75% due 3/15/2011 452,661
200,000 Kinder Morgan, Inc., 6.50% due 9/01/2012 211,877
125,000 Marathon Oil Corp., 6.80% due 3/15/2032 144,138
760,000 Midamerican Energy Holdings Co., 5.875% due 10/01/2012 784,596
150,000 Motiva Enterprises LLC, 5.20% due 9/15/2012 (a) 151,206
100,000 Murphy Oil Corp., 6.375% due 5/01/2012 106,493
400,000 Nexen, Inc., 5.05% due 11/20/2013 394,262
950,000 Norsk Hydro ASA, 6.36% due 1/15/2009 988,383
745,000 Ocean Energy, Inc., 7.25% due 10/01/2011 822,733
200,000 PTT PCL, 5.875% due 8/03/2035 (a) 192,641
1,025,000 Pemex Project Funding Master Trust, 8.85% due 9/15/2007 (a) 1,086,500
405,000 Pemex Project Funding Master Trust, 9.125% due 10/13/2010 466,155
40,000 Pemex Project Funding Master Trust, 8.625% due 2/01/2022 49,300
150,000 Pemex Project Funding Master Trust, 6.625% due 6/15/2035 (a) 150,375
200,000 Petro-Canada, 5.95% due 5/15/2035 202,886
210,000 Plains All American Pipeline LP, 5.625% due 12/15/2013 212,623
150,000 TGT Pipeline LLC, 5.20% due 6/01/2018 144,678
300,000 Texas Gas Transmission Corp., 4.60% due 6/01/2015 283,526
200,000 Transocean, Inc., 7.50% due 4/15/2031 251,991
750,000 Valero Energy Corp., 6.875% due 4/15/2012 817,226
175,000 XTO Energy, Inc., 4.90% due 2/01/2014 170,892
600,000 XTO Energy, Inc., 5% due 1/31/2015 587,147
--------------
17,414,256
- -----------------------------------------------------------------------------------------------------------------------------------
Paper & Forest 300,000 Celulosa Arauco y Constitucion SA, 5.125% due 7/09/2013 290,002
Products - 0.2% 300,000 International Paper Co., 5.30% due 4/01/2015 288,944
150,000 Inversiones CMPC SA, 4.875% due 6/18/2013 (a) 144,362
290,000 Sappi Papier Holding AG, 6.75% due 6/15/2012 (a) 276,952
200,000 Westvaco Corp., 8.20% due 1/15/2030 234,239
242,000 Weyerhaeuser Co., 5.95% due 11/01/2008 246,888
250,000 Weyerhaeuser Co., 6.75% due 3/15/2012 265,347
275,000 Weyerhaeuser Co., 7.375% due 3/15/2032 305,720
--------------
2,052,454
- -----------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.4% 350,000 Abbott Laboratories, 3.50% due 2/17/2009 337,364
560,000 AstraZeneca Group Plc, 5.40% due 6/01/2014 577,284
290,000 Eli Lilly & Co., 7.125% due 6/01/2025 348,992
300,000 Johnson & Johnson, 4.95% due 5/15/2033 292,518
500,000 Pfizer, Inc., 4.50% due 2/15/2014 489,340
250,000 Pfizer, Inc., 4.65% due 3/01/2018 237,709
1,300,000 Wyeth, 5.50% due 2/01/2014 1,316,839
200,000 Wyeth, 6.50% due 2/01/2034 220,167
--------------
3,820,213
- -----------------------------------------------------------------------------------------------------------------------------------
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face
Industry Amount Fixed Income Securities Value
- -----------------------------------------------------------------------------------------------------------------------------------
Real Estate - 0.4% $ 215,000 AvalonBay Communities, Inc., 6.625% due 9/15/2011 $ 230,008
200,000 BRE Properties, 5.95% due 3/15/2007 201,709
195,000 Brandywine Operating Partnership LP, 5.625% due 12/15/2010 195,145
400,000 Centerpoint Properties Trust, 4.75% due 8/01/2010 388,862
530,000 Developers Diversified Realty Corp., 6.625% due 1/15/2008 544,163
450,000 Duke Realty LP, 5.25% due 1/15/2010 450,834
200,000 EOP Operating LP, 6.75% due 2/15/2012 212,247
145,000 EOP Operating LP, 7.25% due 6/15/2028 160,305
25,000 EOP Operating LP, 7.50% due 4/19/2029 28,171
400,000 ERP Operating LP, 5.25% due 9/15/2014 398,163
400,000 HRPT Properties Trust, 5.75% due 2/15/2014 401,183
275,000 Liberty Property-LP, 7.25% due 3/15/2011 298,824
350,000 Prologis, 5.625% due 11/15/2015 (a) 352,097
250,000 Simon Property Group LP, 4.60% due 6/15/2010 243,713
240,000 Westfield Capital Corp. Ltd., 5.125% due 11/15/2014 (a) 237,111
--------------
4,342,535
- -----------------------------------------------------------------------------------------------------------------------------------
Road & Rail - 0.5% 830,000 Burlington Northern Santa Fe Corp., 6.75% due 7/15/2011 895,455
490,000 CSX Corp., 6.75% due 3/15/2011 525,104
600,000 CSX Corp., 5.50% due 8/01/2013 612,719
500,000 Canadian National Railway Co., 6.375% due 10/15/2011 532,614
675,000 Norfolk Southern Corp., 6.75% due 2/15/2011 728,170
250,000 Norfolk Southern Corp., 5.257% due 9/17/2014 252,311
105,000 Norfolk Southern Corp., 5.59% due 5/17/2025 104,899
315,000 Norfolk Southern Corp., 7.25% due 2/15/2031 382,097
275,000 TTX Co., 4.90% due 3/01/2015 (a) 266,115
1,080,000 Union Pacific Corp., 5.75% due 10/15/2007 1,094,917
--------------
5,394,401
- -----------------------------------------------------------------------------------------------------------------------------------
Software - 0.0% 150,000 Computer Associates International, Inc., 5.625% due 12/01/2014 (a) 147,674
- -----------------------------------------------------------------------------------------------------------------------------------
Specialty Retail - 0.1% 65,000 Lowe's Cos., Inc., 6.50% due 3/15/2029 73,861
450,000 Ltd. Brands, 6.125% due 12/01/2012 455,939
700,000 Staples, Inc., 7.125% due 8/15/2007 723,001
--------------
1,252,801
- -----------------------------------------------------------------------------------------------------------------------------------
Thrifts & Mortgage 700,000 Countrywide Financial Corp. Series A, 4.50% due 6/15/2010 679,477
Finance - 0.4% 740,000 Countrywide Home Loans, Inc., 5.625% due 7/15/2009 751,194
230,000 Golden West Financial Corp., 4.75% due 10/01/2012 225,463
300,000 Residential Capital Corp., 6.375% due 6/30/2010 304,835
400,000 Washington Mutual Bank FA, 5.65% due 8/15/2014 405,072
275,000 Washington Mutual Bank FA, 5.125% due 1/15/2015 268,688
145,000 Washington Mutual Financial Corp., 6.875% due 5/15/2011 157,203
400,000 Washington Mutual, Inc., 7.50% due 8/15/2006 406,072
435,000 Washington Mutual, Inc., 4.20% due 1/15/2010 421,187
90,000 Washington Mutual, Inc., 8.25% due 4/01/2010 100,212
300,000 Washington Mutual, Inc., 5.25% due 9/15/2017 291,308
--------------
4,010,711
- -----------------------------------------------------------------------------------------------------------------------------------
Tobacco - 0.0% 225,000 Altria Group Inc., 7% due 11/04/2013 246,205
- -----------------------------------------------------------------------------------------------------------------------------------
Wireless 575,000 AT&T Wireless Services, Inc., 8.75% due 3/01/2031 761,770
Telecommunication 550,000 America Movil SA de CV, 6.375% due 3/01/2035 542,465
Services - 0.5% 400,000 Sprint Capital Corp., 6.375% due 5/01/2009 415,159
400,000 Sprint Capital Corp., 8.375% due 3/15/2012 463,585
200,000 Sprint Capital Corp., 6.90% due 5/01/2019 220,278
225,000 Sprint Capital Corp., 6.875% due 11/15/2028 245,855
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face
Amount Fixed Income Securities Value
- -----------------------------------------------------------------------------------------------------------------------------------
$ 600,000 Sprint Capital Corp., 8.75% due 3/15/2032 $ 796,248
525,000 Verizon Wireless Capital LLC, 5.375% due 12/15/2006 526,729
530,000 Vodafone Group Plc, 7.75% due 2/15/2010 580,491
185,000 Vodafone Group Plc, 7.875% due 2/15/2030 230,943
400,000 Vodafone Group Plc, 6.25% due 11/30/2032 421,188
--------------
5,204,711
- -----------------------------------------------------------------------------------------------------------------------------------
Total Fixed Income Securities
(Cost - $218,167,508) - 21.9% 219,549,899
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign Government Obligations
- -----------------------------------------------------------------------------------------------------------------------------------
1,990,000 Canadian Government International Bond, 5.25% due 11/05/2008 2,035,165
350,000 Chile Government International Bond, 5.50% due 1/15/2013 357,525
500,000 China Government International Bond, 7.30% due 12/15/2008 533,359
625,000 Export-Import Bank of Korea, 5.125% due 3/16/2015 620,387
1,120,000 Finland Government International Bond, 5.875% due 2/27/2006 1,122,401
1,000,000 Inter-American Development Bank, 6.80% due 10/15/2025 1,193,887
550,000 Italy Government International Bond, 4.375% due 10/25/2006 548,720
675,000 Italy Government International Bond, 4% due 6/16/2008 663,952
450,000 Italy Government International Bond, 6% due 2/22/2011 476,576
770,000 Italy Government International Bond, 4.50% due 1/21/2015 746,821
1,050,000 Italy Government International Bond, 6.875% due 9/27/2023 1,252,517
525,000 Italy Government International Bond, 5.375% due 6/15/2033 534,775
1,520,000 Mexico Government International Bond, 9.875% due 2/01/2010 1,782,960
1,925,000 Mexico Government International Bond, 6.375% due 1/16/2013 2,045,313
1,180,000 Mexico Government International Bond, 6.75% due 9/27/2034 1,290,625
220,000 Poland Government International Bond, 5% due 10/19/2015 219,175
445,000 Province of British Columbia, 4.625% due 10/03/2006 444,871
1,120,000 Province of Manitoba Canada, 5.50% due 10/01/2008 1,142,485
1,000,000 Province of Ontario, 6% due 2/21/2006 1,001,880
1,100,000 Province of Ontario, 3.125% due 5/02/2008 1,058,820
350,000 Province of Quebec, 4.875% due 5/05/2014 350,666
950,000 Province of Quebec, 4.60% due 5/26/2015 926,892
625,000 Province of Quebec, 7.50% due 9/15/2029 820,904
- -----------------------------------------------------------------------------------------------------------------------------------
Total Foreign Government Obligations
(Cost - $20,875,350) - 2.1% 21,170,676
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Industry Capital Trusts
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial Banks - 0.0% 250,000 HBOS Plc, 5.375% (a)(b)(c) 249,521
- -----------------------------------------------------------------------------------------------------------------------------------
Oil, Gas & Consumable 75,000 Pemex Project Funding Master Trust, 7.375% due 12/15/2014 83,325
Fuels - 0.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Total Capital Trusts (Cost - $327,107) - 0.0% 332,846
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
State Municipal Bonds
- -----------------------------------------------------------------------------------------------------------------------------------
Illinois - 0.1% 700,000 Illinois State, GO, 5.10% due 6/01/2033 691,404
- -----------------------------------------------------------------------------------------------------------------------------------
Texas - 0.1% 1,040,000 Dallas, Texas, GO, Series C, 5.25% due 2/15/2024 1,040,333
- -----------------------------------------------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost - $1,678,073) - 0.2% 1,731,737
- -----------------------------------------------------------------------------------------------------------------------------------
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
Face
Amount Short-Term Securities Value
- -----------------------------------------------------------------------------------------------------------------------------------
Commercial Paper** $ 2,500,000 Atlantic Asset Securitization Corp., 4.33% due 1/12/2006 $ 2,497,294
12,700,000 Atlantic Asset Securitization Corp., 4.31% due 1/17/2006 12,678,713
4,200,000 Chariot Funding LLC, 4.19% due 1/03/2006 4,200,000
18,200,000 DNB NOR Bank ASA, 4.25% due 1/11/2006 18,182,811
3,600,000 Prudential Funding, LLC, 4.25% due 1/04/2006 3,599,575
--------------
41,158,393
- -----------------------------------------------------------------------------------------------------------------------------------
Beneficial
Interest
- -----------------------------------------------------------------------------------------------------------------------------------
$ 50,141,250 Merrill Lynch Liquidity Series, LLC
Money Market Series (e)(f) 50,141,250
- -----------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost - $91,299,643) - 9.1% 91,299,643
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost - $1,179,060,255+) - 117.5% 1,180,519,994
Liabilities in Excess of Other Assets - (17.5%) (175,936,928)
--------------
Net Assets - 100.0% $1,004,583,066
==============
* Mortgage-Backed Securities are subject to principal paydowns. As a result
of prepayments or refinancing of the underlying mortgage instruments, the
average life may be substantially less than the original maturity.
** Commercial Paper is traded on a discount basis; the interest rates shown
reflect the discount rates paid at the time of purchase.
+ 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 $ 1,179,554,701
===============
Gross unrealized appreciation $ 10,739,471
Gross unrealized depreciation (9,774,178)
---------------
Net unrealized appreciation $ 965,293
===============
(a) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(b) The security is a perpetual bond and has no definite maturity date.
(c) Floating rate note.
(d) Security, or a portion of security, is on loan.
(e) Security was purchased with the cash proceeds from securities loans.
(f) 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:
--------------------------------------------------------------------------------------------------------------
Affiliate Net Activity Interest/Dividend Income
--------------------------------------------------------------------------------------------------------------
Merrill Lynch Liquidity Series, LLC Money Market Series $ 50,141,250 $44,641
Merrill Lynch Premier Institutional Fund (12,139,250) $ 3,357
--------------------------------------------------------------------------------------------------------------
(g) Represents or includes a "to-be-announced" transaction. The Series has
committed to purchasing securities for which all specific information is
not available at this time.
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.
Master Aggregate Bond Index Series
Schedule of Investments as of December 31, 2005
o Swaps outstanding as of December 31, 2005 were as follows:
--------------------------------------------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
--------------------------------------------------------------------------------------------------------------
Receive (pay) a variable return based on the change in the since
inception return of the Lehman Brothers CMBS Investment
Grade Index and pay a floating rate based on 1-month LIBOR plus 0.20%
Broker, Morgan Stanley Capital Services, Inc.
Expires March 2006 $ 40,000,000 --
--------------------------------------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON DETAILED SCHEDULE OF
INVESTMENTS
To the Investors and Board of Trustees of Quantitative Master Series Trust:
We have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the financial statements of Master
Aggregate Bond Index Series (the "Series"), one of the portfolios constituting
the Quantitative Master Series Trust (the "Trust"), as of December 31, 2005, and
for the year then ended and have issued our report thereon dated February 23,
2006 which report and financial statements are included in Item 1 of this
Certified Shareholder Report on Form N-CSR. Our audit also included the Series'
schedule of investments in securities (the "Schedule") as of December 31, 2005
appearing in Item 6 of this Form N-CSR. This Schedule is the responsibility of
the Trust's management. Our responsibility is to express an opinion based on our
audit. In our opinion, the Schedule referred to above, when considered in
relation to the basic financial statements taken as a whole of the Series
referred to above, presents fairly, in all material respects, the information
set forth therein.
Deloitte & Touche LLP
Princeton, New Jersey
February 23, 2006
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.
Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master
Aggregate Bond Index Series of Quantitative Master Series Trust
By: /s/ Robert C. Doll, Jr.
-----------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master
Aggregate Bond Index 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
Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master
Aggregate Bond Index Series of Quantitative Master Series Trust
Date: February 21, 2006
By: /s/ Donald C. Burke
-----------------------------
Donald C. Burke,
Chief Financial Officer of
Aggregate Bond Index Fund of Merrill Lynch Index Funds, Inc. and Master
Aggregate Bond Index Series of Quantitative Master Series Trust
Date: February 21, 2006