MERRILL LYNCH
SMALL CAP
INDEX FUND
Merrill Lynch
Index Funds, Inc.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
December 31, 1999
<PAGE>
Merrill Lynch Small Cap Index Fund
Officers and Directors
Terry K. Glenn, President and Director
Jack B. Sunderland, Director
Stephen B. Swensrud, Director
J. Thomas Touchton, Director
Christopher G. Ayoub, Senior Vice President
Robert C. Doll, Senior Vice President
Gregory Mark Maunz, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Eric S. Mitofsky, Senior Vice President and
Portfolio Manager
Jeffrey B. Hewson, Vice President
Donald C. Burke, Vice President and Treasurer
Ira P. Shapiro, Secretary
Custodian
Merrill Lynch Trust Company
800 Scudders Mill Road
Plainsboro, NJ 08536
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Important Tax Information
Of the ordinary income distribution paid by Merrill Lynch Small Cap Index Fund
to shareholders of record on December 8, 1999, 16.32% qualifies for the
dividends received deduction for corporations.
Additionally, the Fund paid a long-term capital gains distribution of $.187207
to shareholders of record on December 8, 1999. The entire long-term capital
gains distribution is subject to the 20% tax rate.
Please retain this information for your records.
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
DEAR SHAREHOLDER
Fiscal Year in Review
Small-capitalization stocks suffered through a dismal period in the first
quarter of 1999 with the Russell 2000 Index ending March at 397.63, a level it
had first attained nearly two years earlier in July 1997. However, the second
quarter of the year witnessed a dramatic reversal, as the Russell 2000 Index
rebounded strongly to post a strong +15.55% total return. Double-digit returns
in nearly every sector of the Russell 2000 Index contributed to this result, led
by the technology, energy, producer durables, and auto and transportation
groups. This momentum did not carry into the third quarter of 1999 as the
Russell 2000 Index declined by 30 points. However, similar to the small cap
rally in 1998, the year's fourth quarter witnessed a dramatic reversal as the
Russell 2000 Index rallied along with all major market indexes. Sharp rallies
for small cap stocks in November and December at last pushed the Russell 2000
Index past its previous all-time high established in April 1998. Powered by
explosive rallies in the Russell 2000 technology and healthcare sectors during
the year's fourth quarter, the Russell 2000 Index actually managed to produce a
total return for the year just slightly above that of the Standard & Poor's 500
(S&P 500) Index. Culminated by an extraordinary rally during the final week of
the year, the Russell 2000 Index advanced by more than 4.6%, thus breaking a
five-year run of outperformance by the S&P 500 Index, which prevailed in every
year since 1994.
For the year ended December 31, 1999, Merrill Lynch Small Cap Index Fund's Class
A and Class D Shares had total returns of +20.79% and +20.45%, respectively. The
Russell 2000 Index posted a total return of +21.26% for the same 12-month
period. (Complete performance information can be found on pages 3 and 4 of this
report to shareholders.)
Portfolio Matters
The investment objective of the Fund is to seek to replicate the return of the
Russell 2000 Index before expenses. The Fund seeks to achieve its objective by
investing all of its assets in Master Small Cap Index Series (formerly Merrill
Lynch Small Cap Index Series). There are two principal investments made by the
Series in its attempt to replicate the returns of the benchmark Russell 2000
Index. The primary investment of the Series is an underlying equity portfolio in
which most of the Series' assets are placed. In addition, the Series maintains a
long position in Russell 2000 futures contracts, which are used as a mechanism
to invest daily cash inflows. Futures can be sold more easily and with less cost
should the need for cash arise in the event of Fund redemptions. In addition,
futures are an efficient way to invest in the Russell 2000 Index since there are
a large number of stocks in the benchmark, many of which are illiquid. The use
of the underlying equity portfolio plus futures contracts allows the Series to
be as fully invested as possible. We invest in an "optimized" portfolio of
equities, which consists of stocks in the Russell 2000 Index that are
statistically selected to provide returns that are closely correlated with those
of the Russell 2000 Index as a whole. As of December 31, 1999, the Series had an
equity portfolio valued at $95.1 million and held a long position in Russell
2000 futures contracts.
In Conclusion
We thank you for your investment in Merrill Lynch Small Cap Index Fund, and we
look forward to assisting you with your investment needs in the months and years
ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President
/s/ Eric S. Mitofsky
Eric S. Mitofsky
Senior Vice President and
Portfolio Manager
February 16, 2000
================================================================================
To reduce shareholder expenses, Merrill Lynch Small Cap Index Fund will no
longer be printing and mailing quarterly reports to shareholders. We will
continue to provide you with reports on a semi-annual and annual basis.
================================================================================
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select Pricing(SM) System, which offers two pricing alternatives:
o Class A Shares do not incur a maximum initial sales charge (front-end
load) or deferred sales charge and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible investors.
o Class D Shares do not incur a maximum initial sales charge or deferred
sales charge and bear no ongoing distribution fee. In addition, Class D
Shares are subject to an ongoing account maintenance fee of 0.25%.
None of the past results shown should be considered a representation of
future performance. Figures shown in the "Recent Performance Results" and
"Average Annual Total Return" tables assume reinvestment of all dividends
and capital gains distributions at net asset value on the ex-dividend
date. Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the
different levels of account maintenance, distribution and transfer agency
fees applicable to each class, which are deducted from the income
available to be paid to shareholders. The Fund's Administrator and the
Series' Investment Adviser voluntarily waived a portion of their
administrative fee and management fee, respectively. Without such waiver,
the Fund's performance would have been lower.
Recent Performance Results
<TABLE>
<CAPTION>
3 Month 12 Month Since Inception
As of December 31, 1999 Total Return Total Return Total Return
=======================================================================================
<S> <C> <C> <C>
ML Small Cap Index Fund Class A Shares* +18.48% +20.79% +48.62%
- ---------------------------------------------------------------------------------------
ML Small Cap Index Fund Class D Shares* +18.49 +20.45 +47.59
- ---------------------------------------------------------------------------------------
Russell 2000 Index** +18.44 +21.26 +50.59
=======================================================================================
</TABLE>
* Total investment returns are based on changes in net asset value for the
periods shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date. The Fund's
inception date is 4/09/97.
** This unmanaged Index is comprised of approximately 2,000
smaller-capitalization common stocks from various industrial sectors.
Since inception total return is from 4/09/97.
2 & 3
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
PERFORMANCE DATA (concluded)
Total Return Based on a $10,000 Investment--Class A & Class D Shares
A line graph depicting the growth of an investment in the Fund's Class A Shares
and Class D Shares compared to growth of an investment in the Russell 2000 Small
Stock Index. Beginning and ending values are:
4/09/97** 12/99
ML Small Cap Index Fund+--
Class A Shares* $10,000 $14,862
ML Small Cap Index Fund+--
Class D Shares* $10,000 $14,759
Russell 2000 Small Stock Index++ $10,000 $15,058
* Assuming transaction costs and other operating expenses, including
advisory fees.
** Commencement of operations.
+ The Fund invests all of its assets in Merrill Lynch Small Cap Index Series
of Quantitative Master Series Trust. The Trust may invest in a
statistically selected sample of stocks included in the Russell 2000 Index
and other types of financial instruments.
++ This unmanaged index is comprised of approximately 2,000
smaller-capitalization common stocks from various industrial sectors. Past
performance is not predictive of future performance.
Average Annual Total Return
% Return
================================================================================
Class A Shares
================================================================================
Year Ended 12/31/99 +20.79%
- --------------------------------------------------------------------------------
Inception (4/09/97) through 12/31/99 +15.63
- --------------------------------------------------------------------------------
% Return
================================================================================
Class D Shares
================================================================================
Year Ended 12/31/99 +20.45%
- --------------------------------------------------------------------------------
Inception (4/09/97) through 12/31/99 +15.33
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
MERRILL LYNCH
SMALL CAP
INDEX FUND As of December 31, 1999
==================================================================================================================================
<C> <S> <C> <C
Assets: Investment in a Master Small Cap Index Series, at value (identified cost -- $68,240,494) $76,577,488
Deferred organization expenses ........................................................ 6,893
Prepaid registration fees and other assets ............................................ 30,946
-----------
Total assets .......................................................................... 76,615,327
-----------
==================================================================================================================================
Liabilities: Payables:
Administrator ...................................................................... $ 19,343
Distributor ........................................................................ 8,746 28,089
-----------
Accrued expenses and other liabilities ................................................ 36,524
-----------
Total liabilities ..................................................................... 64,613
-----------
==================================================================================================================================
Net Assets: Net assets ............................................................................ $76,550,714
===========
==================================================================================================================================
Net Assets Class A Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized ....... $ 263
Consist of: Class D Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized ....... 388
Paid-in capital in excess of par ...................................................... 67,079,587
Undistributed investment income -- net ................................................... 13,446
Undistributed realized capital gains on investments from the Series -- net ............. 1,120,036
Unrealized appreciation on investments from the Series -- net .......................... 8,336,994
-----------
Net assets ............................................................................ $76,550,714
===========
==================================================================================================================================
Net Asset Class A -- Based on net assets of $30,911,266 and 2,625,086 shares outstanding ........ $ 11.78
Value: ===========
Class D -- Based on net assets of $45,639,448 and 3,878,918 shares outstanding ........ $ 11.77
===========
==================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MERRILL LYNCH
SMALL CAP
INDEX FUND For the Year Ended December 31, 1999
=========================================================================================================================
<C> <S> <C> <C>
Investment Income: Investment income allocated from the Series ........................... $ 1,115,524
Expenses allocated from the Series .................................... 80,536
-----------
Net investment income from the Series ................................. 1,034,988
-----------
=========================================================================================================================
Expenses: Administration fee .................................................... $ 140,136
Account maintenance fee -- Class D .................................... 80,118
Printing and shareholder reports ...................................... 41,147
Transfer agent fees ................................................... 28,930
Professional fees ..................................................... 25,156
Amortization of organization expenses ................................. 3,063
Registration fees ..................................................... 2,974
Accounting services ................................................... 1,290
Other ................................................................. 1,661
-----------
Total expenses before reimbursement ................................... 324,475
Reimbursement of expenses ............................................. (47,563)
-----------
Total expenses after reimbursement .................................... 276,912
-----------
Investment income -- net .............................................. 758,076
-----------
=========================================================================================================================
Realized & Realized gain on investments from the Series -- net ................... 3,496,913
Unrealized Gain Change in unrealized appreciation on investments from the Series -- net 7,359,682
From the
Series -- Net: Net Increase in Net Assets Resulting from Operations .................. $11,614,671
===========
=========================================================================================================================
</TABLE>
See Notes to Financial Statements.
4 & 5
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MERRILL LYNCH For the Year
SMALL CAP Ended December 31,
INDEX FUND ----------------------------
Increase (Decrease) in Net Assets: 1999 1998
===============================================================================================================================
<C> <S> <C> <C>
Operations: Investment income -- net .................................................... $ 758,076 $ 441,469
Realized gain on investments from the Series -- net ......................... 3,496,913 5,424,578
Change in unrealized appreciation on investments from the Series -- net ..... 7,359,682 (5,804,951)
------------ ------------
Net increase in net assets resulting from operations ........................ 11,614,671 61,096
------------ ------------
===============================================================================================================================
Dividends & Investment income -- net:
Distributions to Class A .................................................................. (341,771) (202,428)
Shareholders: Class D .................................................................. (402,859) (238,209)
In excess of investment income -- net:
Class A .................................................................. -- (8,064)
Class D .................................................................. -- (9,489)
Realized gain on investments from the Series -- net:
Class A .................................................................. (1,085,010) (2,123,929)
Class D .................................................................. (1,532,245) (3,230,457)
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders ........................................................... (3,361,885) (5,812,576)
------------ ------------
===============================================================================================================================
Capital Share Net increase (decrease) in net assets derived from capital share transactions 19,235,069 (10,441,939)
Transactions: ------------ ------------
===============================================================================================================================
Net Assets: Total increase (decrease) in net assets ..................................... 27,487,855 (16,193,419)
Beginning of year ........................................................... 49,062,859 65,256,278
------------ ------------
End of year* ................................................................ $ 76,550,714 $ 49,062,859
============ ============
*Undistributed investment income -- net ...................................... $ 13,446 $ --
============ ============
===============================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A
-----------------------------------------
MERRILL LYNCH The following per share data and ratios have been derived For the Year For the Period
SMALL CAP from information provided in the financial statements. Ended December 31, April 9, 1997+ to
INDEX FUND ------------------------- December 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997
===========================================================================================================================
<C> <S> <C> <C> <C>
Per Share Net asset value, beginning of period ...................... $ 10.27 $ 12.28 $ 10.00
Operating ---------- ---------- ----------
Performance: Investment income -- net .................................. .15 .13 .10
Realized and unrealized gain (loss) on investments from the
Series -- net ........................................... 1.94 (.59) 2.60
---------- ---------- ----------
Total from investment operations .......................... 2.09 (.46) 2.70
---------- ---------- ----------
Less dividends and distributions:
Investment income -- net ............................... (.14) (.13) (.10)
In excess of investment income -- net .................. -- (.01) --++
Realized gain on investments from the Series -- net .... (.44) (1.41) (.32)
---------- ---------- ----------
Total dividends and distributions ......................... (.58) (1.55) (.42)
---------- ---------- ----------
Net asset value, end of period ............................ $ 11.78 $ 10.27 $ 12.28
========== ========== ==========
===========================================================================================================================
Total Investment Based on net asset value per share ........................ 20.79% (3.14%) 27.04%+++
Return: ========== ========== ==========
===========================================================================================================================
Ratios to Average Expenses, net of reimbursement++ .......................... .50% .50% .52%*
Net Assets: ========== ========== ==========
Expenses++ ................................................ .61% .84% 1.00%*
========== ========== ==========
Investment income -- net .................................. 1.50% 1.14% 1.45%*
========== ========== ==========
===========================================================================================================================
Supplemental Net assets, end of period (in thousands) .................. $ 30,911 $ 18,122 $ 26,478
Data: ========== ========== ==========
===========================================================================================================================
<CAPTION>
Class D
-----------------------------------------
The following per share data and ratios have been derived For the Year For the Period
from information provided in the financial statements. Ended December 31, April 9, 1997+ to
------------------------- December 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997
===========================================================================================================================
<C> <S> <C> <C> <C>
Per Share Net asset value, beginning of period ...................... $ 10.27 $ 12.28 $ 10.00
Operating ---------- ---------- ----------
Performance: Investment income -- net .................................. .12 .11 .09
Realized and unrealized gain (loss) on investments from the
Series -- net ........................................... 1.94 (.60) 2.60
---------- ---------- ----------
Total from investment operations .......................... 2.06 (.49) 2.69
---------- ---------- ----------
Less dividends and distributions:
Investment income -- net ............................... (.12) (.11) (.09)
In excess of investment income -- net .................. -- --++ --++
Realized gain on investments from the Series -- net .... (.44) (1.41) (.32)
---------- ---------- ----------
Total dividends and distributions ......................... (.56) (1.52) (.41)
---------- ---------- ----------
Net asset value, end of period ............................ $ 11.77 $ 10.27 $ 12.28
========== ========== ==========
===========================================================================================================================
Total Investment Based on net asset value per share ........................ 20.45% (3.41%) 26.87%+++
Return: ========== ========== ==========
===========================================================================================================================
Ratios to Average Expenses, net of reimbursement++ .......................... .74% .75% .77%*
Net Assets: ========== ========== ==========
Expenses++ ................................................ .86% 1.09% 1.25%*
========== ========== ==========
Investment income -- net .................................. 1.24% .88% 1.20%*
========== ========== ==========
===========================================================================================================================
Supplemental Net assets, end of period (in thousands) .................. $ 45,640 $ 30,941 $ 38,778
Data: ========== ========== ==========
===========================================================================================================================
</TABLE>
* Annualized
+ Commencement of operations.
++ Includes the Fund's share of the Series' allocated expenses.
+++ Aggregate total investment return.
++ Amount is less than $.01 per share.
See Notes to Financial Statements.
6 & 7
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
NOTES TO FINANCIAL STATEMENTS
MERRILL LYNCH SMALL CAP INDEX FUND
1. Significant Accounting Policies:
Merrill Lynch Small Cap Index Fund (the "Fund") is part of Merrill Lynch Index
Funds, Inc. (the "Corporation"). The Fund is registered under the Investment
Company Act of 1940 as a non-diversified mutual fund. The Fund seeks to achieve
its investment objective by investing all of its assets in Master Small Cap
Index Series (the "Series") of the Quantitative Master Series Trust, which has
the same investment objective as the Fund. The value of the Fund's investment in
the Series reflects the Fund's proportionate interest in the net assets of the
Series. The performance of the Fund is directly affected by the performance of
the Series. The financial statements of the Series, including the Schedule of
Investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements. The Fund's financial
statements are prepared in accordance with generally accepted accounting
principles, which may require the use of management accruals and estimates. The
Fund offers two classes of shares, Class A and Class D. Shares of Class A and
Class D 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 D Shares bear
certain expenses related to the account maintenance of such shares and have
extensive voting rights with respect to matters relating to its account
maintenance expenditures. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments -- Valuation of securities is discussed in Note 1a
of the Series' Notes to Financial Statements, which are included elsewhere in
this report.
(b) Income -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Series, less all actual and accrued
expenses of the Fund determined in accordance with generally accepted accounting
principles.
(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 sub-stantially all of its taxable income to shareholders. There-fore,
no Federal income tax provision is required. Under the applicable foreign tax
law, a withholding tax may be imposed on interest, dividends and capital gains
at various rates.
(d) Prepaid registration fees and deferred organization expenses -- Prepaid
registration fees are charged to expense as the related shares are issued.
Deferred organization expenses are charged to expense on a straight-line basis
over a period not exceeding five years.
(e) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates. Distributions in excess of net investment
income are due primarily to differing tax treatments for post-October losses.
(f) Investment transactions -- Investment transactions are accounted for on a
trade date basis.
2. Transactions with Affiliates:
The Corporation has entered into an Administrative Services Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is Princeton
Services, Inc. ("PSI"), a wholly-owned subsidiary of Merrill Lynch & Co., Inc.
("ML & Co."), which is the limited partner. The Fund pays a monthly fee at an
annual rate of .22% 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. Effective August 2, 1999,
the annual rate has changed to .29%. For the year ended December 31, 1999, FAM
earned fees of $140,136, of which $47,563 were voluntarily waived.
The Corporation has also entered into a Distribution Agreement and Distribution
Plan with Merrill Lynch Funds Distributor, Inc. ("MLFD" or the "Distributor"), a
division of Princeton Funds Distributor, Inc. ("PFD"), which is 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 D Shares.
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance services to the Fund. The ongoing account maintenance fee
compensates the Distributor and MLPF&S for providing account maintenance
services to Class D shareholders.
Financial Data Services, Inc. ("FDS"), an indirect wholly-owned subsidiary of ML
& Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or directors of
FAM, PSI, PFD, FDS, and/or ML & Co.
3. Investments:
Increases and decreases in the Fund's investment in the Series for the year
ended December 31, 1999 were $38,966,050 and $23,366,991, respectively.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share transactions
were $19,235,069 and $(10,441,939) for the years ended December 31, 1999 and
December 31, 1998, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 2,628,319 $ 27,696,362
Shares issued to shareholders in reinvest-
ment of dividends and distributions .......... 118,208 1,282,561
---------- ------------
Total issued ................................. 2,746,527 28,978,923
Shares redeemed .............................. (1,885,509) (19,675,972)
---------- ------------
Net increase ................................. 861,018 $ 9,302,951
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended December 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 1,822,073 $ 21,518,635
Shares issued to shareholders in reinvest-
ment of dividends and distributions .......... 219,531 2,153,600
---------- ------------
Total issued ................................. 2,041,604 23,672,235
Shares redeemed .............................. (2,433,281) (29,828,044)
---------- ------------
Net decrease ................................. (391,677) $ (6,155,809)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 2,711,657 $ 28,801,963
Shares issued to shareholders in reinvest-
ment of dividends and distributions .......... 160,372 1,738,434
---------- ------------
Total issued ................................. 2,872,029 30,540,397
Shares redeemed .............................. (2,005,895) (20,608,279)
---------- ------------
Net increase ................................. 866,134 $ 9,932,118
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended December 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 2,397,589 $ 27,045,598
Shares issued to shareholders in reinvest-
ment of dividends and distributions .......... 302,281 2,965,374
---------- ------------
Total issued ................................. 2,699,870 30,010,972
Shares redeemed .............................. (2,845,324) (34,297,102)
---------- ------------
Net decrease ................................. (145,454) $ (4,286,130)
========== ============
- --------------------------------------------------------------------------------
8 & 9
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Small Cap Index Fund:
We have audited the accompanying statement of assets and liabilities of Merrill
Lynch Small Cap Index Fund (one of the series constituting Merrill Lynch Index
Funds, Inc.) as of December 31, 1999, the related statements of operations for
the year then ended and changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the two-year period then ended and the period April 9, 1997 (commencement of
operations) to December 31, 1997. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch Small
Cap Index Fund of Merrill Lynch Index Funds, Inc. as of December 31, 1999, the
results of its operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
February 22, 2000
SCHEDULE OF INVESTMENTS
Master Small Cap Index Series
- --------------------------------------------------------------------------------
Shares
Issue Held Value
================================================================================
COMMON STOCKS
1st Source Corporation 1,063 $ 26,575
+ 3Dfx Interactive, Inc. 2,768 27,161
+ 24/7 Media, Inc. 1,584 89,100
+ 99 Cents Only Stores 1,150 43,988
A. Schulman, Inc. 3,260 53,179
A.M. Castle & Company 2,000 23,750
A.O. Smith Corporation 2,122 46,419
AAR Corp. 3,674 65,902
ABM Industries, Inc. 1,933 39,385
+ ACTV, Inc. 3,752 171,419
+ ADVO Systems, Inc. 2,735 64,956
AGCO Corporation 6,682 89,789
AGL Resources Inc. 3,700 62,900
+ ALARIS Medical, Inc. 5,200 9,750
AMCOL International Corporation 3,504 56,502
AMCORE Financial, Inc. 3,700 88,800
AMETEK, Inc. 3,383 64,488
+ AMF Bowling, Inc. 6,700 20,937
+ ANADIGICS, Inc. 1,750 82,578
+ ANTEC Corporation 3,137 114,500
+ ATMI, Inc. 1,900 62,819
+ AVT Corporation 1,511 71,017
+ AXENT Technologies, Inc. 3,295 69,195
Aaron Rents, Inc. 2,659 47,197
+ Abgenix, Inc. 1,326 175,695
+ About.com, Inc. 484 43,439
+ Acceptance Insurance Companies Inc. 2,600 15,112
Ace Limited 1,736 28,972
+ Actel Corp. 2,535 60,840
+ Action Performance Companies, Inc. 1,735 19,952
+ Activision, Inc. 3,159 48,372
+ Actuate Corporation 3,036 130,168
+ Acuson Corporation 2,600 32,662
+ Adaptive Broadband Corporation 2,002 147,773
+ Adtran, Inc. 2,262 116,352
+ Advance Paradigm, Inc. 2,220 47,869
+ Advanced Digital Information Corporation 2,454 119,326
+ Advanced Energy Industries, Inc. 1,274 62,744
+ Advanced Fibre Communications, Inc. 7,719 344,943
+ Advanced Radio Telecom Corp. 3,222 77,328
Advanta Corp. 2,839 51,812
+ Advent Software, Inc. 1,536 98,976
+ Aerial Communications, Inc. 1,500 91,312
+ Aeroflex Incorporated 2,455 25,471
+ Affiliated Managers Group, Inc. 2,757 111,486
+ Affymetrix, Inc. 1,684 285,754
+ Aftermarket Technology Corp. 3,026 36,123
+ Agribrands International, Inc. 1,393 64,078
Air Express International Corporation 3,778 122,077
Airborne Freight Corporation 5,158 113,476
+ Airgas, Inc. 6,541 62,139
+ AirTran Holdings, Inc. 7,404 33,549
+ Alaska Air Group, Inc. 2,490 87,461
+ Albany International Corp. (Class A) 2,042 31,651
Albemarle 2,358 45,244
Alexander & Baldwin, Inc. 4,444 101,379
Alexandria Real Estate Equities, Inc. 1,665 52,968
Alfa Corporation 4,465 72,835
+ Algos Pharmaceutical Corporation 2,038 22,418
+ Alkermes, Inc. 2,609 128,167
+ Allaire Corporation 720 104,400
+ Alleghany Corporation 378 70,119
+ Allen Telecom Inc. 3,741 43,255
Alliance Bancorp 2,100 38,850
+ Alliant Techsystems Inc. 1,014 63,185
Allied Capital Corporation 6,341 116,120
+ Alpha Industries, Inc. 1,936 109,868
Alpharma, Inc. (Class A) 2,134 65,620
+ Alterra Healthcare Corporation 2,892 24,040
+ Amdocs Limited 753 25,978
+ Amerco 1,375 34,375
+ America Retirement Corporation 2,749 21,820
+ America West Holdings (Class B) 4,286 88,934
+ American Freightways Corporation 2,769 44,823
+ American Italian Pasta Company (Class A) 2,357 72,478
+ American Management Systems,
Incorporated 4,562 143,133
American States Water Company 1,581 56,916
+ American Xtal Technology, Inc. 1,923 33,532
+ AmeriCredit Corp. 6,707 124,079
+ AmeriSource Health Corporation (Class A) 5,042 76,575
AmerUs Life Holdings, Inc. (Class A) 1,659 38,157
+ Ames Department Stores, Inc. 3,194 92,027
+ Amkor Technology, Inc. 9,182 259,391
Amli Residential Properties Trust 2,255 45,523
+ Amphenol Corp. (Class A) 1,806 120,212
Analysts International Corporation 2,843 35,537
Anchor Bancorp, Inc. 3,212 48,581
+ Anchor Gaming 912 39,615
+ Ancor Communications, Incorporated 2,916 197,923
+ Andrew Corporation 8,657 163,942
+ Anixter International Inc. 3,053 62,968
+ AnnTaylor Stores Corporation 2,275 78,345
+ AnswerThink Consulting Group, Inc. 3,242 111,038
+ Apex Inc. 2,152 69,402
Applebee's International, Inc. 2,869 84,635
Applied Industrial Technologies, Inc. 2,650 44,056
Applied Power Inc. (Class A) 4,125 151,594
+ AppliedTheory Corporation 1,144 31,746
+ Apria Healthcare Group Inc. 5,869 105,275
AptarGroup, Inc. 3,471 87,209
Aquarion Company 1,542 57,054
+ Arcadia Financial Ltd. 5,455 24,207
Arch Chemicals, Inc. 2,614 54,731
Arch Coal, Inc. 2,000 22,625
+ Ardent Software, Inc. 1,858 72,462
Argonaut Group, Inc. 1,700 33,787
Arnold Industries, Inc. 2,951 41,498
Arrow International, Inc. 1,174 34,046
+ Artesyn Technologies, Inc. 3,740 78,072
Arthur J. Gallagher & Co. 1,764 114,219
Arvin Industries, Inc. 2,415 68,526
+ Ascent Entertainment Group, Inc. 4,490 56,967
+ Aspect Communications Corporation 5,361 209,749
+ Aspect Development, Inc. 2,616 179,196
+ Aspen Technology, Inc. 2,000 52,875
Associated Estates Realty Corporation 3,106 24,266
+ Astec Industries, Inc. 1,898 35,706
+ Asyst Technologies, Inc. 1,473 96,574
+ Atlas Air, Inc. 1,814 49,772
Atmos Energy Corporation 3,641 74,413
+ Atwood Oceanics, Inc. 1,302 50,290
10 & 11
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
SCHEDULE OF INVESTMENTS (continued)
Master Small Cap Index Series (continued)
- --------------------------------------------------------------------------------
Shares
Issue Held Value
================================================================================
COMMON STOCKS (continued)
Auspex Systems, Inc. 3,782 $ 38,765
Avado Brands, Inc. 3,402 14,352
+ Avant! Corporation 3,922 58,830
+ Aviation Sales Company 1,344 22,176
+ Avid Technology, Inc. 2,599 33,949
+ Aviron 1,644 25,996
+ Avis Rent A Car, Inc. 2,768 70,757
Avista Corporation 4,948 76,385
+ Aware, Inc. 1,947 70,822
+ Aztar Corporation 5,400 58,725
BRE Properties, Inc. 3,871 87,823
BT Financial Corporation 2,590 56,988
Baldor Electric Company 3,256 59,015
Baldwin & Lyons, Inc. (Class B) 2,012 44,515
+ Bally Total Fitness Holding Corporation 2,750 73,391
BancorpSouth, Inc. 5,745 93,715
BancWest Corporation 3,446 67,197
Bandag, Incorporated 1,429 35,725
Bank of Granite Corp. 1,979 42,548
Bank United Corp. (Class A) 2,233 60,849
BankAtlantic Bancorp, Inc. (Class B) 8,246 42,261
Banknorth Group, Inc. 2,841 75,997
Banta Corporation 2,743 61,889
Barnes Group Inc. 2,026 33,049
+ barnesandnoble.com inc. 3,131 44,421
+ Barr Laboratories, Inc. 1,400 43,925
+ Barrett Resources Corporation 3,043 89,578
Bassett Furniture Industries, Incorporated 2,001 31,141
+ Battle Mountain Gold Company 5,000 10,312
Bay View Capital Corporation 2,472 35,071
Bedford Property Investors, Inc. 3,090 52,723
Belden Inc. 2,459 51,639
+ Bell & Howell Company 1,961 62,384
+ Benchmark Electronics, Inc. 1,880 43,122
+ Beringer Wine Estates Holdings, Inc.
(Class B) 800 31,900
Berkley (W.R.) Corporation 1,500 31,312
Berry Petroleum Company (Class A) 3,069 46,419
+ Bethlehem Steel Corporation 13,423 112,418
+ Beverly Enterprises, Inc. 10,054 43,986
+ Beyond.com Corporation 2,523 19,711
+ Billing Concepts Corp. 5,194 33,761
+ BindView Development Corporation 2,054 102,058
Bindley Western Industries, Inc. 2,820 42,476
+ Biomatrix, Inc. 2,066 39,770
+ Bio-Rad Laboratories, Inc. (Class A) 1,400 32,725
+ Bio-Technology General Corp. 6,338 96,654
+ Black Box Corporation 2,056 137,752
Black Hills Corporation 2,175 48,258
Block Drug Company, Inc. (Class A) 1,524 46,863
+ Blount International, Inc. 4,100 65,344
Bob Evans Farms, Inc. 4,393 67,817
+ Boca Resorts, Inc. (Class A) 472 4,602
+ The Bombay Company, Inc. 5,392 24,264
+ Borders Group, Inc. 8,356 134,218
Bowne & Co., Inc. 4,089 55,201
+ Boyd Gaming Corporation 5,400 31,387
+ The Boyds Collection, Ltd. 6,121 42,464
Boykin Lodging Company 2,812 30,756
Bradley Real Estate, Inc. 3,093 53,934
Brandywine Realty Trust 4,162 68,153
+ Brightpoint, Inc. 1,352 17,745
+ BroadVision, Inc. 5,940 1,010,171
+ Brooks Automation, Inc. 1,524 49,625
Brown & Brown 1,224 46,894
Brown Shoe Company, Inc. 2,817 39,790
Brush Wellman, Inc. 2,608 43,847
+ Buckeye Technologies Inc. 2,722 40,490
+ Buffets, Inc. 5,207 52,070
+ Building One Services Corporation 3,118 29,426
Burlington Coat Factory Warehouse
Corporation 2,715 37,671
+ Burlington Industries, Inc. 6,806 27,224
Burnham Pacific Properties, Inc. 4,766 44,681
+ Burr-Brown Corp. 4,140 149,557
+ C-Cube Microsystems Inc. 4,234 263,566
C&D Technologies, Inc. 1,603 68,127
+ CB Richard Ellis Services Inc. 2,477 30,653
CBL & Associates Properties, Inc. 2,333 48,118
CBRL Group, Inc. 6,003 58,248
+ CCC Information Services Group Inc. 3,487 59,715
+ CDI Corp. 1,546 37,297
+ CDnow, Inc. 2,089 20,629
+ CEC Entertainment Inc. 3,088 87,622
CFS Bancorp, Inc. 1,715 15,971
CFW Communications Company 2,193 76,207
CH Energy Group, Inc. 1,300 42,900
C.H. Robinson Worldwide, Inc. 4,608 183,168
+ CIBER, Inc. 4,925 135,437
+ CIRCOR International, Inc. 789 8,137
CKE Restaurants, Inc. 5,656 33,229
CLARCOR Inc. 3,348 60,264
CMP Group Inc. 3,023 83,321
+ CONMED Corporation 2,062 53,354
+ COR Therapeutics, Inc. 4,090 109,919
+ CORT Business Services Corporation 2,073 36,148
CPI Corp. 1,568 35,378
+ CSK Auto Corporation 2,407 42,122
+ CSS Industries, Inc. 1,300 27,787
CT Communications, Inc. 1,260 70,560
CTS Corporation 2,934 221,150
+ CUNO Incorporated 2,300 47,617
CVB Financial Corp. 1,855 42,897
+ Cable Design Technology 3,116 71,668
Cabot Industrial Trust 4,531 83,257
Cabot Oil & Gas Corporation (Class A) 2,968 47,673
+ Cadiz Inc. 4,976 47,272
Calgon Carbon Corporation 5,322 31,599
California Water Service Group 1,858 56,321
Callaway Golf Company 8,073 142,791
Cambrex Corporation 2,606 89,744
+ Cambridge Technology Partners, Inc. 5,522 144,952
Camden Property Trust 3,600 98,550
+ Canadaigu Brands, Inc. (Class A) 1,473 75,123
Capitol Federal Financial 7,145 69,664
+ CapRock Communications Corp. 3,741 121,349
Capstead Mortgage Corporation 4,900 20,519
Caraustar Industries, Inc. 2,570 61,680
+ Career Education Corporation 1,378 52,881
+ Caremark Rx, Inc. 7,570 38,323
+ Carmike Cinemas, Inc. (Class A) 1,700 13,281
Carolina First Corporation 2,952 53,874
Carpenter Technology Corporation 2,210 60,637
+ Carrier Access Corporation 1,113 74,919
Carter-Wallace, Inc. 2,510 45,023
Casey's General Stores, Inc. 5,989 62,510
Cash America International, Inc. 3,867 37,703
+ Castle & Cooke, Inc. 3,000 38,062
+ Catalytica, Inc. 6,184 83,870
Cathay Bancorp, Inc. 710 29,110
The Cato Corporation (Class A) 2,653 33,494
+ Celera Genomics 2,813 419,137
+ Celgene Corporation 2,299 160,930
+ CellNet Data Systems, Inc. 5,763 6,483
+ Centennial Bancorp 3,178 34,163
Center Trust, Inc. 3,780 36,619
CenterPoint Properties Corporation 2,263 81,185
+ Century Business Services, Inc. 6,643 56,050
+ Cephalon, Inc. 3,318 114,678
+ Cerner Corporation 3,124 61,504
+ Champion Enterprises, Inc. 4,517 38,677
+ Championship Auto Racing Teams, Inc. 1,462 33,626
Charles E. Smith Residential Realty, Inc. 2,114 74,783
+ Charming Shoppes, Inc. 12,362 81,898
Charter Municipal Mortgage Acceptance
Company 4,036 47,423
Chateau Communities, Inc. 2,254 58,463
+ Chattem, Inc. 1,320 25,080
+ Checkpoint Systems, Inc. 3,956 40,302
+ The Cheesecake Factory Incorporated 2,165 75,775
Chelsea GCA Realty, Inc. 1,707 50,783
Chemed Corporation 1,641 46,974
ChemFirst Inc. 2,432 53,200
Chemical Financial Corporation 1,832 58,395
Chesapeake Corporation 2,024 61,732
Chicago Title Corporation 1,282 59,293
+ The Children's Place Retail Stores, Inc. 2,131 35,028
Chiquita Brands International, Inc. 4,910 23,322
+ ChiRex Inc. 1,739 25,433
Chittenden Corporation 2,521 74,685
+ Choice Hotels International, Inc. 6,162 105,524
+ ChoicePoint Inc. 3,130 129,504
Church & Dwight Co., Inc. 3,798 101,359
Churchill Downs Incorporated 1,300 29,331
Circle International Group, Inc. 1,653 36,779
+ Cirrus Logic, Inc. 6,959 92,642
+ Citadel Communications Corporation 2,189 142,011
Citizens Banking Corporation 4,441 99,367
City Holding Company 2,179 30,506
+ Clarify Inc. 2,388 300,888
Cleco Corporation 2,445 78,393
Cleveland-Cliffs Inc. 1,540 47,932
Coachmen Industries, Inc. 2,499 37,797
+ Cognex Corporation 3,749 146,211
+ Coherent, Inc. 3,036 81,213
Cohu, Inc. 2,600 80,600
+ Coinstar, Inc. 2,034 28,476
+ Coldwater Creek Inc. 1,200 24,600
Collins & Aikman Corporation 8,119 46,684
Colonial Properties Trust 2,900 67,244
+ Columbia Laboratories, Inc. 3,716 27,870
+ Com21, Inc. 2,229 50,013
12 & 13
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
SCHEDULE OF INVESTMENTS (continued)
Master Small Cap Index Series (continued)
- --------------------------------------------------------------------------------
Shares
Issue Held Value
================================================================================
COMMON STOCKS (continued)
Commerce Bancorp, Inc. 2,512 $ 101,579
The Commerce Group, Inc. 2,255 58,912
Commercial Metals Company 2,092 70,997
Commercial Net Lease Realty 3,941 39,164
+ CommNet Cellular Inc. 2,500 80,312
Commonwealth Bancorp, Inc. 2,648 44,023
+ Commonwealth Telephone Enterprises, Inc. 1,268 67,045
+ CommScope, Inc. 5,003 201,683
Community First Bankshares, Inc. 4,626 72,859
Community Trust Bancorp, Inc. 827 16,540
+ Complete Business Solutions, Inc. 2,870 72,109
+ CompUSA Inc. 10,461 53,613
+ Computer Network Technology Corporation 2,923 67,046
Computer Task Group, Incorporated 2,136 31,639
+ Concentric Network Corporation 4,524 139,396
+ Concord Communications, Inc. 1,632 72,420
+ Concur Technologies, Inc. 1,759 51,011
+ Concurrent Computer Corporation 6,579 122,945
Connecticut Energy Corporation 1,395 54,231
Conning Corporation 2,484 20,493
+ Consolidated Freightways Corporation 3,400 26,987
+ Consolidated Graphics, Inc. 1,543 23,049
+ Consolidated Products, Inc. 3,636 36,809
Cooper Companies, Inc. 1,586 47,778
+ Copart, Inc. 2,328 101,268
+ Corixa Corporation 2,262 38,454
Corn Products International, Inc. 3,914 128,183
Cornerstone Realty Income Trust, Inc. 5,015 48,896
+ The Corporate Executive Board Company 1,137 63,530
+ Cost Plus, Inc. 2,542 90,559
+ Coulter Pharmaceutical, Inc. 2,088 47,371
Cousins Properties, Inc. 2,647 89,833
Crawford & Company (Class B) 4,122 56,162
+ Credence Systems Corporation 2,384 206,216
+ Cree, Inc. 2,746 234,440
Cross Timbers Oil Company 5,416 49,082
Crown American Realty Trust 6,084 33,462
+ Cumulus Media Inc. (Class A) 2,254 114,390
+ Cybex Computer Products Corporation 1,467 59,413
+ Cymer, Inc. 3,075 141,450
+ Cypress Semiconductor Corporation 10,961 354,862
+ Cytec Industries Inc. 4,445 102,791
+ Cytyc Corporation 2,105 128,537
D.R. Horton, Inc. 5,055 69,822
+ The DII Group, Inc. 3,182 225,823
+ DSP Group, Inc. 1,406 130,758
Dain Rauscher Corporation 1,386 64,449
Dallas Semiconductor Corporation 2,860 184,291
+ Dal-Tile International Inc. 6,119 61,955
+ Data Broadcasting Corporation 4,165 34,361
+ Data Transmission Network Corporation 1,512 26,082
Datascope Corp. 2,020 80,800
+ Datastream Systems, Inc. 2,363 58,041
+ Dave & Buster's, Inc. 1,855 15,188
+ Del Monte Foods Company 5,754 70,846
+ Delco Remy International, Inc. 3,856 31,812
+ Delphi Financial Group, Inc. (Class A) 1,578 47,340
Delta and Pine Land Company 4,075 70,803
Deltic Timber Corporation 1,804 39,462
+ Dendrite International, Inc. 3,267 110,670
+ Department 56, Inc. 2,077 46,992
Developers Diversified Realty Corporation 5,863 75,486
The Dexter Corporation 2,256 89,676
+ Digital Microwave Corporation 7,157 167,742
+ Digital River, Inc. 1,828 60,895
Dime Community Bancshares 2,300 42,550
+ Dionex Corporation 2,452 100,992
+ Documentum, Inc. 1,916 114,720
+ Dollar Thrifty Automotive Group, Inc. 2,938 70,328
Donaldson Company, Inc. 4,107 98,825
Doral Financial Corporation 3,660 45,064
+ DoubleClick Inc. 1 152
Downey Financial Corp. 1,995 40,274
+ The Dress Barn, Inc. 2,620 43,557
Dreyer's Grand Ice Cream, Inc. 2,450 41,650
+ Duane Read Inc. 2,131 58,736
Duff & Phelps Credit Rating Co. 669 59,499
+ Dura Automotive Systems, Inc. 1,974 34,422
+ Dura Pharmaceuticals, Inc. 4,837 67,416
+ Duramed Pharmaceuticals, Inc. 2,801 19,957
+ Dycom Industries, Inc. 2,858 125,931
E.W. Blanch Holdings, Inc. 1,375 84,219
+ Eagle USA Airfreight, Inc. 1,983 85,517
The Earthgrains Company 4,524 72,949
+ EarthWeb Inc. 830 41,759
Eastern Enterprises 2,100 120,619
Eastern Utilities Associates 1,656 50,197
EastGroup Properties, Inc. 2,679 49,561
Eaton Vance Corp. 3,249 123,462
+ Eclipsys Corporation 3,989 102,218
+ Education Management Corporation 2,495 34,930
+ El Paso Electric Company 7,887 77,391
Elcor Corporation 2,569 77,391
+ Electro Scientific Industries, Inc. 1,557 113,661
+ Electroglas, Inc. 2,571 65,239
+ Emmis Communications Corporation
(Class A) 1,791 223,231
Empire District Electric Company 2,010 45,476
+ Emulex Corporation 3,618 407,025
Energen Corporation 3,390 61,232
Enesco Group Inc. 2,328 25,753
Enhance Financial Services Group Inc. 2,524 41,015
+ Entercom Communications Corp. 2,287 150,942
+ EntreMed, Inc. 1,633 41,846
+ Entrust Technologies Inc. 1,828 109,566
+ Enzo Biochem, Inc. 2,738 123,381
+ Enzon, Inc. 4,081 177,013
+ Epicor Software Corporation 3,600 18,225
Equitable Resources, Inc. 3,052 101,860
Equity Inns Inc. 5,304 35,802
Essex Property Trust, Inc. 1,808 61,472
+ Esterline Technologies Corporation 2,895 33,473
+ Etec Systems, Inc. 2,275 102,091
Ethan Allen Interiors Inc. 4,387 140,658
E'Town Corporation 1,100 68,475
Exide Corporation 2,591 21,538
+ Extended Stay America, Inc. 8,137 62,045
F&M Bancorp 442 8,950
F&M National Corporation 2,678 73,812
F.N.B. Corporation 1,653 36,469
+ F.Y.I. Incorporated 1,646 55,964
FBL Financial Group, Inc. (Class A) 1,535 30,700
+ FPIC Insurance Group, Inc. 1,530 25,532
+ FSI International, Inc. 3,498 40,227
FactSet Research Systems Inc. 1,209 96,267
Fair, Isaac and Company, Incorporated 1,648 87,344
+ Fairfield Communities, Inc. 4,972 53,449
+ Family Golf Centers, Inc. 1,677 2,358
Farmers Capital Bank Corporation 1,382 41,633
Federal Realty Investment Trust 3,852 72,466
Federal Signal Corporation 4,542 72,956
Ferro Corporation 3,526 77,572
Fidelity National Financial, Inc. 2,675 38,453
+ FileNET Corporation 3,921 99,985
The First American Financial Corporation 5,630 70,023
First Charter Corporation 2,310 34,361
First Citizens BancShares, Inc. (Class A) 800 55,800
First Commerce BancShares, Inc. (Class B) 1,457 28,685
First Commonwealth Financial Corporation 7,046 84,552
First Financial Bancorp 3,605 77,057
First Financial Bankshares, Inc. 1,605 49,354
+ First Health Group Corp. 5,245 140,959
First Industrial Realty Trust, Inc. 3,048 83,629
First Merchants Corporation 2,020 53,025
First Midwest Bancorp, Inc. 3,496 92,644
+ First Republic Bank 1,443 33,910
First Sentinel Bancorp Inc. 5,876 45,906
+ First Sierra Financial, Inc. 2,158 36,956
First United Bancshares, Inc. 2,956 39,536
First Washington Bancorp, Inc. 2,265 33,409
Firstbank Corp. 2,317 48,078
+ FirstFed Financial Corp. 2,909 40,908
+ Fisher Scientific International Inc. 2,900 104,762
+ FlashNet Communications, Inc. 1,461 9,040
Fleetwood Enterprises, Inc. 3,043 62,762
Fleming Companies, Inc. 4,374 44,833
Florida East Coast Industries, Inc. 3,166 132,180
Florida Rock Industries, Inc. 1,965 67,670
Flowserve Corporation 3,869 65,773
+ Footstar, Inc. 2,499 76,219
Foremost Corporation of America 2,003 56,835
Forest City Enterprises, Inc. (Class A) 900 25,200
+ Forest Oil Corporation 4,009 52,869
+ Fossil, Inc. 1,707 39,474
Foster Wheeler Corporation 4,129 36,645
+ Franklin Covey Co. 3,230 24,225
Franklin Electric Co., Inc. 669 46,955
Freedom Securities Corporation 2,355 26,494
+ Friedman, Billings, Ramsey Group, Inc.
(Class A) 3,286 25,877
+ Fritz Companies, Inc. 2,954 31,017
Frontier Financial Corporation 1,984 39,680
Frontier Insurance Group, Inc. 3,392 11,660
+ Furniture Brands International, Inc. 5,266 115,852
G & K Services, Inc. (Class A) 2,036 65,915
GBC Bancorp 2,001 38,644
+ GC Companies, Inc. 900 23,287
+ GTECH Holdings Corporation 3,894 85,668
14 & 15
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
SCHEDULE OF INVESTMENTS (continued)
Master Small Cap Index Series (continued)
- --------------------------------------------------------------------------------
Shares
Issue Held Value
================================================================================
COMMON STOCKS (continued)
Gables Residential Trust 2,531 60,744
+ Gaylord Container Corporation (Class A) 7,089 48,294
Gaylord Entertainment Company 1,872 56,043
+ Geltex Pharmaceuticals, Inc. 1,960 25,112
GenCorp Inc. 3,387 33,447
General Cable Corporation 3,522 26,635
General Electric Company 401 62,055
+ Genesco Inc. 3,404 44,252
+ GenRad, Inc. 3,262 52,600
Gentek, Inc. 2,663 27,795
The Geon Company 2,166 70,395
Georgia Gulf Corporation 3,382 102,940
Gerber Scientific, Inc. 2,509 55,041
+ Getty Images, Inc. 2,914 142,422
+ Gilead Sciences, Inc. 4,868 263,481
+ Glenayre Technologies, Inc. 2,100 23,756
Glenborough Realty Trust Incorporated 3,250 43,469
Glimcher Realty Trust 3,148 40,530
+ Global Industrial Technologies, Inc. 3,900 50,212
+ Global Industries, Ltd. 6,209 53,553
+ Go2Net, Inc. 2,167 188,529
Golf Trust of America, Inc. 1,761 29,827
Graco Inc. 1,629 58,440
+ The Grand Union Company 3,988 40,378
Granite Construction Incorporated 1,904 35,105
Gray Communications Systems, Inc. 2,550 45,103
The Great Atlantic & Pacific Tea
Company, Inc. 1,755 48,921
Great Lakes REIT, Inc. 3,202 46,029
+ Great Plains Software, Inc. 1,225 91,569
Greater Bay Bancorp 1,795 76,961
+ Greif Bros. Corporation (Class A) 2,428 72,233
+ Griffon Corporation 4,762 37,203
+ Group 1 Automotive, Inc. 2,216 30,885
+ Group Maintenance America Corp. 3,919 41,884
+ Guilford Pharmaceuticals Inc. 2,681 45,577
+ Guitar Center, Inc. 2,798 28,155
+ The Gymboree Corporation 3,835 21,572
H.B. Fuller Company 1,355 75,795
+ HA-LO Industries, Inc. 3,800 28,500
+ HNC Software Inc. 2,707 286,265
+ HS Resources, Inc. 3,033 52,319
HSB Group, Inc. 3,056 103,331
+ Hadco Corporation 1,555 79,305
+ Haemonetics Corporation 3,180 75,724
+ The Hain Food Group, Inc. 1,842 41,215
Hancock Holding Company 1,202 46,577
+ Handleman Company 4,804 64,253
+ Hanger Orthopedic Group, Inc. 2,768 27,680
+ Hanover Compressor Company 3,168 119,592
+ Harbinger Corporation 4,598 146,274
Harleysville National Corporation 454 14,755
Harman International Industries,
Incorporated 1,863 104,561
+ Harmonic Inc. 2,846 270,192
Harsco Corporation 3,606 114,490
Haverty Furniture Companies, Inc. 2,693 33,999
Hawaiian Electric Industries, Inc. 2,671 77,125
+ Hayes Lemmerz International, Inc. 1,990 34,701
Health Care Property Investors, Inc. 5,123 122,312
Health Care REIT, Inc. 3,130 47,341
Healthcare Realty Trust, Inc. 4,024 62,875
+ Healtheon Corporation 995 37,312
+ Heidrick & Struggles International, Inc. 2,065 87,246
Helix Technology Corporation 2,707 121,307
Helmerich & Payne, Inc. 4,542 99,072
+ Hemispherx Biopharma, Inc. 3,792 37,683
+ Henry Schein, Inc. 2,613 34,786
+ Hexcel Corporation 2,558 14,229
+ hi/fn, inc. 688 26,617
Hilb, Rogal and Hamilton Company 2,082 58,816
+ Hollywood Entertainment Corporation 3,723 53,983
+ Hollywood Park, Inc. 2,879 64,598
Home Properties of New York, Inc. 2,208 60,582
Hooper Holmes, Inc. 3,446 88,734
Horace Mann Educators Corporation 3,916 76,851
Hospitality Properties Trust 4,290 81,778
Hudson United Bancorp 3,582 91,565
Hughes Supply, Inc. 2,229 48,063
+ Human Genome Sciences, Inc. 2,443 372,863
Hussmann International, Inc. 5,316 80,072
+ Hutchinson Technology Incorporated 2,798 59,457
+ Hyperion Solutions Corporation 3,479 151,336
+ ICG Communications, Inc. 5,291 98,876
IDAcorp Inc. 2,966 79,526
+ IDEC Pharmaceuticals Corporation 4,390 431,317
IDEX Corporation 2,995 90,973
+ IDEXX Laboratories, Inc. 4,262 68,725
+ IDT Corporation 2,329 43,960
+ IDX Systems Corporation 1,658 51,813
+ IGEN International, Inc. 1,344 39,984
+ IHOP Corp. 2,670 44,556
IMCO Recycling Inc. 2,643 33,368
+ IPC Communications, Inc. 994 70,574
IRT Property Company 6,421 50,164
+ ISS Group, Inc. 2,661 189,264
+ The IT Group, Inc. 3,271 30,052
+ ITC(delta) DeltaCom, Inc. 4,719 130,362
+ ITT Educational Services, Inc. 1,893 29,223
+ IVEX Packaging Corporation 2,877 28,770
+ Identix Incorporated 3,624 32,843
+ Imation Corp. 4,406 147,876
+ Imclone Systems 2,862 113,407
+ Imperial Bancorp 3,845 92,761
Imperial Credit Commercial Mortgage
Investment Corp. 5,097 57,978
+ Imperial Credit Industries, Inc. 3,755 23,469
+ In Focus Systems, Inc. 2,912 67,522
+ InaCom Corp. 4,900 35,831
+ Incyte Pharmaceuticals, Inc. 2,738 164,280
Independence Community Bank Corp. 7,306 91,325
Independent Bank Corp. 3,100 38,750
Indiana Energy, Inc. 2,550 45,263
IndyMac Mortgage Holdings, Inc. 7,964 101,541
+ InfoCure Corporation 3,208 100,050
+ Informatica Corporation 979 104,141
+ Information Resources, Inc. 4,393 40,635
+ Informix Corporation 14,900 169,488
+ infoUSA Inc. 3,973 55,374
+ Inhale Therapeutic Systems 1,883 80,145
Innkeepers USA Trust 5,180 42,411
+ Insight Enterprises, Inc. 2,514 102,131
+ Insignia Financial Group, Inc. 2,950 25,628
+ Insituform Technologies, Inc. (Class A) 3,500 98,875
+ Integrated Device Technology, Inc. 8,785 254,765
+ Integrated Electrical Services, Inc. 3,396 34,172
+ Integrated Health Services, Inc. 3,900 351
+ Integrated Systems 2,745 92,129
+ InterDigital Communications Corporation 2,000 150,000
+ Intergraph Corp. 5,509 25,823
+ Interim Services 6,512 161,172
+ Intermedia Communications Inc. 5,114 198,487
International Bancshares Corporation 1,381 61,109
+ International Home Foods, Inc. 2,592 45,036
International Multifoods 2,465 32,661
+ International Rectifier Corp. 5,690 147,940
Inter-Tel Inc. 2,441 61,025
+ InterVoice, Inc. 3,722 86,537
+ InterVu Inc. 1,119 117,495
Interwest Bancorp Inc. 2,153 41,445
Invacare Corp. 2,901 58,201
Investors Financial Services 1,815 83,490
+ Iomega Corporation 5,400 18,225
+ Ionics, Inc. 1,959 55,097
+ Iron Mountain Incorporated 2,811 110,507
+ Isis Pharmaceuticals 3,961 24,756
+ iTurf Inc. (Class A) 1,381 17,176
+ iVillage Inc. 1,589 32,177
J.B. Hunt Transport Services, Inc. 2,687 37,198
The J. M. Smucker Company (Class A) 2,862 55,809
+ JDA Software Group, Inc. 3,210 52,564
JDN Realty Corporation 3,656 58,953
JLG Industries, Inc. 5,109 81,425
JSB Financial, Inc. 933 48,399
Jack Henry & Associates, Inc. 1,710 91,806
+ Jack in the Box Inc. 4,657 96,342
+ Jacobs Engineering Group Inc. 2,517 81,803
Jefferies Group, Inc. 2,485 54,670
+ Jo-Ann Stores Inc. 2,528 28,440
John H. Harland Company 4,080 74,715
The John Nuveen Company (Class A) 1,241 44,754
+ Jones Lang Lasalle Inc. 1,181 14,024
Jones Pharmaceuticals, Inc. 3,963 171,895
Jostens, Inc. 4,251 103,352
+ Journal Register Co. 5,138 79,318
+ Just for Feet, Inc. 2,520 1,575
Kaman Corp. (Class A) 4,080 52,530
Kaufman and Broad Home Corporation 4,538 109,763
Kaydon Corp. 3,320 89,018
Kellwood Co. 3,253 63,230
Kelly's Services, Inc. (Class A) 2,021 50,778
+ Kemet Corp. 4,039 182,007
Kennametal Inc. 2,814 94,621
+ Kent Electronics Corporation 3,181 72,368
+ Key Energy Services, Inc. 6,492 33,677
Kilroy Realty Corporation 3,097 68,134
Kimball International (Class B) 4,385 72,353
+ King Pharmaceuticals, Inc. 2,511 140,773
+ Kirby Corporation 2,582 52,931
Koger Equity, Inc. 3,351 56,548
+ Komag, Incorporated 3,000 9,375
+ Kopin Corporation 3,052 128,184
16 & 17
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
SCHEDULE OF INVESTMENTS (continued)
Master Small Cap Index Series (continued)
- --------------------------------------------------------------------------------
Shares
Issue Held Value
================================================================================
COMMON STOCKS (continued)
+ Korn/Ferry International 2,992 $ 108,834
+ Kronos, Inc. 1,573 94,380
+ Kulicke and Soffa Industries 2,581 109,854
+ Kv Pharmaceutical Co. (Class B) 1,995 42,768
The L.S. Starrett Company (Class A) 1,479 33,185
+ LAM Research Corp. 4,111 458,633
LNR Property Corp. 3,143 62,467
LTC Properties 4,666 39,369
The LTV Corporation 10,989 45,330
+ LTX Corporation 4,357 97,488
La-Z-Boy Inc. 5,766 96,941
+ Labor Ready, Inc. 4,508 54,660
Laclede Gas Company 2,464 53,284
Lance, Inc. 3,045 30,450
LandAmerica Financial Group, Inc. 1,629 29,933
Landauer, Inc. 1,529 33,447
+ Landry's Seafood Restaurants 3,699 32,135
+ Land's End, Inc. 1,565 54,384
+ Landstar System, Inc. 1,507 64,518
+ Laser Vision Centers, Inc. 2,974 31,413
+ Lason, Inc. 1,738 19,118
+ Lattice Semiconductor Corporation 4,612 217,341
+ Leap Wireless International, Inc. 2,585 202,923
Lee Enterprises, Incorporated 4,440 141,803
Lennar Corporation 4,484 72,865
Leucadia National Corporation 3,668 84,823
Lexington Corporate Properties Trust 4,429 40,691
Libbey, Inc. 1,727 49,651
The Liberty Corporation 1,610 67,922
Liberty Financial Companies, Inc. 1,038 23,809
+ LifePoint Hospitals, Inc. 3,970 46,896
+ Ligand Pharmaceuticals Incorporated
(Class B) 5,494 70,735
Lilly Industries, Inc. (Class A) 3,497 46,991
Lincoln Electric Holdings, Inc. 3,505 72,072
Lindsay Manufacturing Co. 2,332 42,559
+ The Liposome Company, Inc. 4,373 53,364
+ Littelfuse Inc. 2,518 61,101
+ Local Financial Corp. 4,272 44,055
+ Lone Star Steakhouse & Saloon, Inc. 4,505 40,193
+ Lone Star Technology 3,260 90,873
Longview Fibre Company 5,534 78,860
+ Louis Dreyfus Natural Gas Corp. 2,173 39,386
Luby's Cafeterias Inc. 3,089 35,137
+ Lydall, Inc. 2,591 17,165
M.A. Hanna Company 4,963 54,283
MAF Bancorp, Inc. 2,390 50,041
+ MAPICS INC. 2,999 37,862
+ MAXIMUS, Inc. 1,416 48,056
MDC Holdings, Inc. 2,600 40,788
MDU Resources Group 4,533 90,660
+ MEMC Electronic Materials, Inc. 3,816 46,746
+ MGC Communications, Inc. 2,103 106,727
MGI Properties, Inc. 3,754 19,709
+ MIPS Technologies, Inc. (Class A) 1,394 72,488
+ MMC Networks, Inc. 3,409 117,184
MMI Companies, Inc. 2,796 24,116
The MONY Group Inc. 4,493 131,139
+ MRV Communications, Inc. 2,914 183,218
+ MSC Industrial Direct Co., Inc. (Class A) 3,307 43,818
+ MTI Technology Corporation 3,358 123,826
MacDermid, Inc. 1,718 70,545
Macerich Company 3,300 68,681
+ Macrovision Corporation 1,712 125,832
Madison Gas & Electric Co. 2,423 48,763
+ Magnetek, Inc. 3,812 29,305
+ Mail-Well, Inc. 4,195 56,633
The Manitowoc Co., Inc. 2,989 101,626
Manu Home Communications 2,900 70,506
+ Manugistics Group, Inc. 2,627 84,885
Marcus Corporation 3,801 51,076
+ Marine Drilling Co., Inc. 5,861 131,506
Mark IV 4,873 86,191
+ Markel Corporation 340 52,700
MascoTech, Inc. 3,956 50,192
+ MasTec, Inc. 2,287 101,772
+ Mastech Corp. 3,958 97,961
Mathews International Corp. (Class A) 2,188 60,170
+ Maxtor Corporation 4,841 35,097
+ Medical Assurance, Inc. 2,976 63,054
+ Medicis Pharmaceutical (Class A) 3,186 135,604
+ MedQuist Inc. 3,903 100,746
Medtris Companies Inc. 4,132 147,461
+ MemberWorks Incorporated 1,603 53,099
+ The Men's Warehouse, Inc. 3,129 91,914
+ Mentor Corporation 2,300 59,369
Mentor Graphics Corporation 7,750 102,203
Merchants New York Bancorp, Inc. 3,236 55,417
+ Mercury Interactive Corp. 4,034 435,420
Meristar Hospitality Corp. 5,473 87,568
+ MessageMedia, Inc. 3,256 45,788
+ Metamor Worldwide, Inc. 3,723 108,432
Methode Electronics 3,986 128,050
+ Metricom, Inc. 1,000 78,625
+ Metromedia International Group, Inc. 6,688 31,768
+ Mettler-Toledo International 4,035 154,087
Michael Foods, Inc. 1,818 44,768
+ Michaels Stores, Inc. 2,867 81,710
+ Micrel, Inc. 3,016 171,724
+ Micro Warehouse, Inc. 4,192 77,552
+ Micromuse, Inc. 1,248 212,160
+ Micron Electronics, Inc. 4,210 46,836
+ Micros Systems, Inc. 2,000 148,000
+ MicroStrategy Incorporated 4,192 880,320
+ Mid Atlantic Medical Services, Inc. 5,747 47,772
Mid-America Apartment Communities, Inc. 2,240 50,680
Midas Group, Inc. 2,585 56,547
Mid-State Bancshares 1,553 49,502
+ Midway Games Inc. 3,567 85,385
+ Midwest Express Holdings 1,731 55,176
Milacron Inc. 3,648 56,088
+ Millennium Pharmaceuticals, Inc. 3,874 472,628
Mills Corp. 2,400 42,900
Minerals Technologies, Inc. 1,913 76,640
Mississippi Chemical 4,017 24,855
Mitchell Energy & Development Corp.
(Class A) 2,897 63,915
Modine Manufacturing Co. 2,564 64,100
+ Molecular Devices Corporation 1,420 73,840
+ Monaco Coach Corporation 2,266 57,925
+ Moog Inc. (Class A) 316 8,532
Morgan Keenan, Inc. 3,309 55,633
+ Mpath Interactive, Inc. 1,740 46,328
+ Mueller Industries, Inc. 3,806 137,968
+ Multex.com Inc. 1,522 57,265
+ Musicland Stores Corporation 3,835 32,358
Myers Industries, Inc. 2,061 32,461
NACCO Industries, Inc. (Class A) 778 43,228
+ NBC Internet, Inc. (Class A) 1,022 78,950
+ NBTY Inc. 6,301 72,855
+ NCI Building Systems, Inc. 2,420 44,770
+ NCO Group, Inc. 1,207 36,361
+ NFO Worldwide, Inc. 2,740 61,308
NL Industries, Inc. 2,815 42,401
NSTAR 799 32,360
NUI Corporation 1,978 52,170
+ NVIDIA Corporation 1,889 88,665
+ NVR, Inc. 1,275 60,881
+ Nabors Industries, Inc. 1 26
National Bancorp of Alaska, Inc. 1,186 33,282
National City Bancshares, Inc. 1,229 30,879
National Computer Systems, Inc. 3,502 131,763
+ National Discount Brokers Group, Inc. 1,312 34,604
+ National Equipment Services, Inc. 3,567 22,294
National Health Investors, Inc. 2,797 41,605
+ National Instruments Corporation 2,807 107,368
National Penn Bancshares, Inc. 2,592 65,124
+ National RV Holding, Inc. 1,501 28,894
National Steel Corp. 3,721 27,675
+ National-Oilwell, Inc. 5,169 81,089
Nationwide Health Properties, Inc. 5,075 69,781
Natures Sunshine Products, Inc. 2,717 21,736
+ Nautica Enterprises, Inc. 4,069 46,031
+ Navigant Consulting, Inc. 4,061 44,163
+ Net.B@nk, Inc. 2,450 45,784
+ Network Equipment Technologies, Inc. 3,086 36,453
+ Network Peripherals Inc. 1,000 47,250
New England Business Services, Inc. 2,100 51,319
New Jersey Resources Corporation 1,411 55,117
+ Newfield Exploration Company 3,862 103,309
+ Newpark Resources, Inc. 7,549 46,238
Newport News Shipbuilding Inc. 3,500 96,250
Nordson Corporation 1,549 74,739
Northwest Natural Gas Company 2,170 47,604
Northwestern Corporation 2,388 52,536
+ Novoste Corporation 1,832 30,228
+ Nuevo Energy Company 2,214 41,513
+ OEA, Inc. 1,697 8,273
OM Group, Inc. 2,293 78,965
OMEGA Healthcare Investors, Inc. 2,710 34,383
ONEOK, Inc. 3,052 76,682
+ Oak Industries Inc. 2,127 225,728
+ Oceaneering International, Inc. 2,627 39,241
OceanFirst Financial Corp. 2,625 45,445
+ OfficeMax, Inc. 6,038 33,209
+ Offshore Logistics, Inc. 2,882 27,019
Ohio Casualty Corporation 4,924 79,092
Olin Corporation 4,151 82,242
Olsten Corporation 7,606 86,043
Omega Financial Corporation 1,697 49,213
+ Omnipoint Corporation 3,424 413,020
Omnova Solutions Inc. 3,387 26,249
18 & 19
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
SCHEDULE OF INVESTMENTS (continued)
Master Small Cap Index Series (continued)
- --------------------------------------------------------------------------------
Shares
Issue Held Value
================================================================================
COMMON STOCKS (continued)
+ On Assignment, Inc. 1,988 $ 59,392
One Valley Bancorp, Inc. 3,421 104,768
Oneida Ltd. 1,849 40,216
+ OneMain.com, Inc. 2,299 34,485
+ Open Market, Inc. 3,406 153,696
Optical Coating Laboratory, Inc. 1,336 395,456
+ Orbital Sciences Corporation 3,979 73,860
Oregon Steel Mills, Inc. 3,793 30,107
+ O'Reilly Automotive, Inc. 3,850 82,775
+ Organogenesis Inc. 3,881 33,716
Oriental Financial Group Inc. 1,880 41,478
+ Orthodontic Centers of America, Inc. 4,499 53,707
OshKosh B'Gosh, Inc. (Class A) 2,546 53,625
Oshkosh Truck Corporation 1,531 44,877
+ Osteotech, Inc. 1,950 26,081
Otter Tail Power Company 1,411 52,913
Overseas Shipholding Group, Inc. 3,685 54,584
Owens & Minor, Inc. 3,990 35,661
P.H. Glatfelter Company 2,854 41,561
+ PAREXEL International Corporation 3,113 36,772
+ P-Com, Inc. 6,600 58,369
+ PETCO Animal Supplies, Inc. 2,000 29,750
+ PETsMART, Inc. 2,200 12,650
PFF Bancorp, Inc. 2,124 41,153
+ PICO Holdings, Inc. 2,100 25,856
+ PLX Technology, Inc. 1,598 30,262
PMA Capital Corporation (Class A) 2,841 56,465
+ PRI Automation, Inc. 2,085 139,956
PS Business Parks, Inc. 3,119 70,957
+ PSINet Inc. 606 37,442
Pacific Capital Bancorp 2,505 77,029
+ Pacific Gateway Exchange, Inc. 1,766 30,132
Pacific Gulf Properties, Inc. 2,453 49,673
+ Pacific Sunwear of California, Inc. 3,367 108,375
+ PairGain Technologies, Inc. 7,466 105,924
+ Palm Harbor Homes, Inc. 2,266 40,788
+ Papa John's International, Inc. 2,337 60,908
Park Electrochemical Corp. 1,340 35,594
Park National Corporation 672 64,512
+ Parker Drilling Company 1,651 5,263
Parkway Properties, Inc. 1,516 43,680
+ PathoGenesis Corporation 2,037 43,668
+ Patterson Dental Company 2,580 109,973
+ Patterson Energy, Inc. 3,879 50,427
+ Paxar Corporation 5,235 44,170
+ Paxson Communications Corporation 3,627 43,297
+ Pegasus Communications Corporation 1,463 140,448
+ Pegasus Systems, Inc. 1,672 100,843
+ Pegasystems Inc. 3,916 44,055
Pennzoil-Quaker State Company 7,778 79,238
Penton Media, Inc. 2,446 58,704
+ PeopleSoft, Inc. 3,058 65,179
The Pep Boys-Manny, Moe & Jack 4,983 45,470
+ Peregrine Systems, Inc. 2,905 240,026
+ Performance Food Group Company 1,781 43,412
PerkinElmer, Inc. 4,521 188,469
+ Perrigo Company 6,686 53,488
+ Personnel Group of America, Inc. 4,166 42,181
+ Pervasive Software Inc. 2,102 35,603
+ Pharmaceutical Product Development, Inc. 2,274 27,004
+ Pharmacyclics, Inc. 1,570 64,763
Philadelphia Suburban Corporation 3,228 66,779
Phillips-Van Heusen Corporation 4,169 34,655
Phoenix Investment Partners, Ltd. 6,142 49,904
+ Phoenix Technologies Ltd. 3,396 53,699
+ Photronics, Inc. 2,355 67,412
+ PictureTel Corporation 5,713 24,637
Piedmont Natural Gas Company, Inc. 2,481 75,050
Pier 1 Imports, Inc. 10,759 68,589
+ Pinnacle Holdings Inc. 2,769 117,336
+ Pinnacle Systems, Inc. 2,134 86,827
+ The Pioneer Group, Inc. 3,138 49,424
+ Pioneer Natural Resources Company 10,476 93,629
Pioneer-Standard Electronics, Inc. 3,564 51,455
Pittson BAX Group 3,506 37,251
Pittston Brink's Group 4,044 88,968
Pittway Corporation 1,200 54,075
+ Plantronics, Inc. 1,869 133,750
+ Playboy Enterprises, Inc. 2,442 59,371
+ Playtex Products, Inc. 3,129 48,108
+ Plexus Corporation 1,883 82,852
Pogo Producing Company 4,369 89,565
Polaris Industries, Inc. 2,646 95,918
Polaroid Corporation 4,584 86,237
+ Policy Management Systems Corporation 3,748 95,808
+ Polycom, Inc. 2,416 153,869
Polymer Group, Inc. 3,898 71,139
Potlatch Corporation 2,047 91,347
+ Power Integrations, Inc. 2,526 121,090
+ Powertel, Inc. 2,795 280,548
+ Powerwave Technologies, Inc. 1,652 96,436
Precision Castparts Corp. 2,299 60,349
Premier Bancshares, Inc. 3,138 42,755
+ Premiere Technologies, Inc. 4,400 30,800
Prentiss Properties Trust 3,973 83,433
+ Pre-Paid Legal Services, Inc. 2,460 59,040
Presidential Life Corporation 2,845 52,277
+ Preview Travel, Inc. 1,646 85,798
+ Price Communications Corporation 5,314 147,796
+ Pride International, Inc. 5,835 85,337
+ Primark Corporation 2,460 68,419
+ Prime Hospitality Corp. 5,971 52,619
Prime Retail, Inc. 5,550 31,219
Primex Technologies, Inc. 2,000 41,500
+ Primus Telecommunications Group,
Incorporated 2,722 104,117
+ Priority Healthcare Corporation (Class B) 598 17,305
+ ProBusiness Services, Inc. 1,726 62,136
+ The Profit Recovery Group International,
Inc. 3,451 91,667
+ Progress Software Corporation 2,359 133,873
+ Protein Design Labs, Inc. 2,150 150,500
Provident Bancshares Corporation 3,430 59,382
+ Proxicom, Inc. 1,138 141,468
+ Proxim, Inc. 1,337 147,070
+ ProxyMed, Inc. 2,579 25,145
Public Service Company of New Mexico 4,040 65,650
Public Service Company of North Carolina,
Incorporated 2,664 86,081
Pulte Corporation 2,808 63,180
+ QRS Corporation 1,294 134,980
+ QuadraMed Corporation 3,070 26,767
Quanex Corporation 2,386 60,843
+ Quanta Services, Inc. 3,168 89,496
Quebecor Printing Inc. 3,866 86,019
Queens County Bancorp Inc. 2,250 61,031
+ Quest Diagnostics Incorporated 3,177 97,097
+ Quiksilver, Inc. 2,704 41,912
+ Quorum Health Group, Inc. 7,660 71,334
R.H. Donnelley Corporation 3,878 73,197
+ REMEC, Inc. 2,697 68,774
RFS Hotel Investors, Inc. 3,725 38,880
RGS Energy Group Inc. 3,576 73,532
RLI Corp. 1,169 39,746
+ RSA Security Inc. 4,058 314,495
Radian Group Inc. 3,402 162,446
+ Ralcorp Holdings, Inc. 3,398 67,748
+ Rare Medium Group, Inc. 4,356 148,649
Raymond James Financial, Inc. 4,206 78,600
Rayonier Inc. 2,423 117,061
+ Rayovac Corporation 3,149 59,437
Realty Income Corporation 2,862 59,029
Reckson Associates Realty Corporation 4,383 89,852
Reckson Associates Realty Corporation 555 12,626
+ Reebok International Ltd. 5,343 43,746
Regal-Beloit Corporation 2,725 56,203
Regency Realty Corporation 3,000 60,000
+ Regeneron Pharmaceuticals, Inc. 3,122 39,806
Regis Corporation 3,402 64,213
Reliance Bancorp, Inc. 1,400 48,300
Reliance Group Holdings, Inc. 4,985 33,337
Reliance Steel & Aluminum Co. 2,332 54,656
+ Remedy Corporation 2,738 129,713
+ Renaissance Worldwide, Inc. 2,700 19,913
+ Renal Care Group, Inc. 4,827 112,831
+ Rent A Center Inc. 2,145 42,498
+ Rent-Way, Inc. 2,347 43,860
Republic Bancorp Inc. 6,443 78,222
Republic Security Financial Corporation 6,601 47,238
+ Res-Care, Inc. 2,171 27,680
+ ResMed Inc. 1,752 73,146
Resource America, Inc. (Class A) 2,830 22,286
+ Respironics, Inc. 3,843 30,624
+ Rexall Sundown, Inc. 3,646 37,599
Richmond County Financial Corp. 3,443 62,189
Riggs National Corporation 2,028 26,744
+ Risk Capital Holdings, Inc. 2,700 34,088
Rock-Tenn Company (Class A) 2,594 38,262
+ Rogers Corporation 1,234 47,201
Rollins Truck Leasing Corp. 6,575 78,489
Rollins, Inc. 3,412 51,180
+ Romac International, Inc. 5,000 67,188
Roper Industries, Inc. 3,333 126,029
Ruby Tuesday, Inc. 3,721 67,676
Ruddick Corporation 3,620 56,110
Russell Corporation 3,363 56,330
+ Ryan's Family Steak Houses, Inc. 5,210 44,122
Ryerson Tull, Inc. 2,109 40,994
The Ryland Group, Inc. 1,904 43,911
S&T Bancorp, Inc. 2,698 62,560
+ S1 Corporation 2,833 221,328
+ S3 Incorporated 6,248 72,243
+ SAGA Systems, Inc. 3,872 77,198
+ SCM Microsystems, Inc. 1,491 95,331
20 & 21
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
SCHEDULE OF INVESTMENTS (continued)
Master Small Cap Index Series (continued)
- --------------------------------------------------------------------------------
Shares
Issue Held Value
================================================================================
COMMON STOCKS (continued)
SCPIE Holdings Inc. 1,494 $ 47,995
+ SEACOR SMIT Inc. 1,394 72,140
+ SICOR Inc. 6,445 49,949
SIGCORP, Inc. 1,927 43,839
+ SIPEX Corporation 2,323 57,059
SL Green Realty Corp. 2,721 59,182
+ SLI, Inc. 1,817 24,643
+ SPS Technologies, Inc. 1,487 47,491
+ SS&C Technologies, Inc. 2,589 16,829
+ STAR Telecommunications, Inc. 4,748 37,539
+ STERIS Corporation 6,981 71,992
+ SVI Holdings, Inc. 3,722 44,664
+ Sabratek Corporation 857 69
+ Safeskin Corporation 4,886 59,243
+ Salton, Inc. 1,205 40,292
+ Sanchez Computer Associates, Inc. 1,492 61,452
+ SanDisk Corporation 2,261 217,621
+ SangStat Medical Corporation 2,259 67,205
+ Sawtek Inc. 2,761 183,779
+ Scholastic Corporation 1,433 89,115
+ School Specialty, Inc. 2,655 40,157
Schweitzer-Manduit International, Inc. 2,157 28,985
+ Scott Technologies, Inc. 1,954 36,882
+ The Scotts Company (Class A) 2,087 84,002
Seacoast Financial Services Corporation 4,129 42,064
+ Security Capital Group Incorporated
(Class B) 3,189 39,863
+ Seitel, Inc. 3,016 20,358
Selective Insurance Group, Inc. 3,313 56,942
+ Semtech Corporation 3,336 173,889
+ Sensormatic Electronics Corporation 7,452 129,944
+ Sequa Corporation (Class A) 1,124 60,626
+ Serologicals Corporation 2,969 17,814
+ Shire Pharmaceuticals Group PLC (ADR)(a) 2,814 81,949
+ ShopKo Stores, Inc. 3,181 73,163
+ Shorewood Packaging Corporation 2,741 51,908
Shurgard Storage Centers, Inc. (Class A) 2,636 61,122
+ Sierra Health Services, Inc. 3,209 21,460
Sierra Pacific Resources 1,871 32,392
+ Silgan Holdings Inc. 1,554 20,785
+ Silicon Valley Bancshares 2,332 115,434
+ Silicon Valley Group, Inc. 690 12,248
+ Siliconix Incorporated 370 48,655
Simmons First National Corporation
(Class A) 515 12,875
Simpson Industries, Inc. 3,444 38,745
+ Simpson Manufacturing Co., Inc. 1,093 47,819
+ Sinclair Broadcast Group, Inc. (Class A) 2,821 34,425
+ Sirius Satellite Radio Inc. 1,796 79,922
Sky Financial Group, Inc. 6,491 130,631
Skyline Corporation 1,525 35,838
SkyWest, Inc. 2,479 69,412
+ Smithfield Foods, Inc. 4,991 119,784
+ SoftNet Systems, Inc. 2,042 51,305
+ Sola International Inc. 2,724 37,796
+ Solectron Corporation 1,547 147,158
+ Sonic Corp. 2,342 66,747
South Jersey Industries, Inc. 1,486 42,258
Southern Peru Limited 4,359 67,292
+ Southern Union Company 4,992 95,472
+ Southwest Bancorporation of Texas, Inc. 3,841 76,100
Southwest Gas Corporation 2,621 60,283
Southwest Securities Group, Inc. 1,379 37,750
Southwestern Energy Company 4,019 26,375
Sovran Self Storage, Inc. 2,108 39,920
Spartech Corporation 1,780 57,405
+ SpeedFam-IPEC, Inc. 3,217 41,620
+ SportsLine USA, Inc. 1,932 96,842
Springs Industries, Inc. (Class A) 1,325 52,917
+ Spyglass, Inc. 2,105 79,826
St. Mary Land & Exploration Company 1,541 38,140
+ Staff Leasing, Inc. 2,522 23,959
Standard Pacific Corp. 3,562 39,182
The Standard Register Company 1,163 22,533
Starwood Financial Inc. 1,026 17,378
Staten Island Bancorp, Inc. 4,835 87,030
+ Station Casinos, Inc. 2,896 64,979
+ Steel Dynamics, Inc. 4,782 76,213
+ Steinway Musical Instruments, Inc. 1,565 31,691
Sterling Bancshares, Inc. 4,646 51,977
Stewart & Stevenson Services, Inc. 3,307 39,167
+ Stillwater Mining Company 4,334 138,146
Stone & Webster, Incorporated 1,200 20,175
+ Stone Energy Corporation 1,769 63,021
Storage USA, Inc. 2,662 80,526
The Stride Rite Corporation 5,850 38,025
Sturm, Ruger & Company, Inc. 3,060 27,158
+ Suiza Foods Corporation 3,483 138,014
Summit Properties Inc. 2,587 46,243
+ Summit Technology, Inc. 5,034 58,835
Sun Communities, Inc. 1,962 63,152
+ Sunbeam Corporation 9,898 41,448
+ Sunglass Hut International, Inc. 5,371 60,424
+ Sunrise Assisted Living, Inc. 2,070 28,463
+ Sunrise Medical Inc. 3,953 24,459
+ Sunrise Technologies International, Inc. 3,600 42,525
+ Sunterra Corporation 4,120 47,380
Superior Industries International, Inc. 2,449 65,664
+ Superior National Insurance Group, Inc. 2,558 19,345
+ Superior Trust Inc. (Preferred) 252 8,442
Susquehanna Bancshares, Inc. 4,625 73,422
+ Swift Energy Company 2,700 31,050
+ Swift Transportation Co., Inc. 4,419 77,885
+ Sybase, Inc. 9,166 155,822
+ Sykes Enterprises, Incorporated 2,526 110,828
+ Syncor International Corporation 1,275 37,134
+ Syntroleum Corporation 3,953 31,871
+ Systemax Inc. 4,437 37,715
+ Systems & Computer Technology
Corporation 3,837 62,351
+ TALK.com, Inc. 4,499 79,857
+ THQ Inc. 2,238 51,894
TJ International, Inc. 2,165 90,659
TNP Enterprises, Inc. 1,408 58,080
+ TSI International Software Ltd. 1,741 98,584
The Talbots, Inc. 1,522 67,919
Taubman Centers, Inc. 3,769 40,517
+ Techne Corporation 2,813 154,891
Technitrol, Inc. 1,947 86,642
+ Technology Solutions Company 4,932 161,523
+ Tekelec 3,248 73,080
Tektronix, Inc. 4,630 179,991
+ Telebanc Financial Corporation 3,600 93,150
+ TeleTech Holdings, Inc. 2,886 97,267
Tennant Company 1,404 45,981
+ Terayon Communication Systems, Inc. 1,605 100,814
+ Terex Corporation 2,937 81,502
+ Tesoro Petroleum Corporation 3,682 42,573
+ Tetra Tech, Inc. 4,290 65,959
Texas Industries, Inc. 2,324 98,915
Texas Regional Bancshares, Inc. (Class A) 2,118 61,422
+ theglobe.com, inc. 1,820 15,243
+ Theragenics Corporation 3,246 29,417
+ Thermo Cardiosystems Inc. 2,160 14,175
Thomas Industries Inc. 2,889 59,044
The Timken Company 4,656 95,157
+ The Titan Corporation 4,861 229,075
+ Toll Brothers, Inc. 3,188 59,377
+ Tom Brown, Inc. 3,561 47,628
+ The Topps Company, Inc. 5,781 59,978
The Toro Company 1,645 61,379
+ Total Renal Care Holdings, Inc. 8,201 54,844
+ Tower Automotive, Inc. 4,285 66,150
Town & Country Trust 2,764 49,579
+ Trammell Crow Company 3,139 36,491
+ Trans World Airlines, Inc. 5,000 14,063
+ Trans World Entertainment Corporation 3,853 40,457
+ Transaction Systems Architects, Inc.
(Class A) 3,418 95,704
+ Transkaryotic Therapies, Inc. 2,125 81,813
+ TransMontaigne Inc. 3,580 25,060
+ TranSwitch Corporation 2,761 200,345
Tredegar Corporation 2,293 47,436
Trenwick Group Inc. 1,761 29,827
+ Triad Guaranty Inc. 2,030 46,183
+ Triad Hospitals, Inc. 3,728 56,386
Triangle Bancorp, Inc. 3,891 75,388
+ Triangle Pharmaceuticals, Inc. 3,095 39,655
+ Triarc Companies, Inc. 2,231 40,995
+ TriQuint Semiconductor, Inc. 1,644 182,895
+ Trimble Navigation Limited 3,378 73,049
Trinity Industries, Inc. 3,738 106,299
+ Triumph Group, Inc. 1,513 36,596
True North Communications Inc. 4,556 203,596
TrustCo Bank Corp NY 4,954 65,641
The Trust Company of New Jersey 2,294 52,475
+ Tuboscope Inc. 4,701 74,628
Tupperware Corporation 5,654 95,765
+ Tut Systems, Inc. 1,475 79,097
+ Twinlab Corporation 2,861 22,709
+ Tyler Technologies, Inc. 6,135 33,743
+ U.S. Franchise Systems, Inc. 2,136 9,612
+ U.S. Home Corporation 1,434 36,657
+ UCAR International Inc. 4,720 84,075
UGI Corporation 3,200 65,400
+ UICI 4,093 43,232
UMB Financial Corporation 1,941 73,273
+ UNOVA, Inc. 4,480 58,240
+ URS Corporation 1,856 40,252
+ US Oncology, Inc. 7,365 36,365
22 & 23
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
SCHEDULE OF INVESTMENTS (concluded)
Master Small Cap Index Series (concluded)
- --------------------------------------------------------------------------------
Shares
Issue Held Value
================================================================================
COMMON STOCKS (concluded)
USBANCORP, Inc. 2,644 $ 31,067
USEC Inc. 9,171 64,197
USFreightways Corporation 2,956 141,519
+ USinternetworking, Inc. 1,956 136,676
UST Corp. 4,185 132,874
+ Ultratech Stepper, Inc. 2,910 46,924
+ Unifi, Inc. 6,653 81,915
UniFirst Corporation 2,319 29,277
UniSource Energy Corporation 4,093 45,790
+ Unistar Financial Service Corp. 1,300 1,300
United Asset Management Corporation 5,012 93,035
United Bankshares, Inc. 4,619 110,279
United Community Financial Corp. 4,128 41,022
United Dominion Realty Trust, Inc. 9,546 94,267
The United Illuminating Company 1,723 88,519
United National Bancorp 755 16,752
+ United Stationers, Inc. 3,453 98,626
United Television, Inc. 307 42,942
United Water Resources Inc. 2,934 100,306
Universal Corporation 2,835 64,673
Universal Foods Corporation 5,090 103,709
Urban Shopping Centers, Inc. 1,308 35,480
+ Vail Resorts, Inc. 2,995 53,723
Valero Energy Corporation 5,111 101,581
Valmont Industries, Inc. 2,844 45,682
+ ValueVision International, Inc. (Class A) 3,097 177,497
+ Varco International, Inc. 6,153 62,684
+ Varian Inc. 3,660 82,350
+ Varian Medical Systems, Inc. 3,074 91,644
+ Varian Semiconductor Equipment
Associates, Inc. 3,327 113,118
+ Veeco Instruments Inc. 1,001 46,859
+ Ventana Medical Systems, Inc. 1,806 44,924
+ Veritas DGC Inc. 2,739 38,346
+ Verity, Inc. 3,450 146,841
+ Vertex Pharmaceuticals Incorporated 2,870 100,450
+ VerticalNet, Inc. 3,704 607,456
+ Veterinary Centers of America, Inc. 3,097 39,874
+ Viatel, Inc. 1,468 78,722
+ Vical Incorporated 2,408 72,090
+ Vicor Corporation 2,196 88,938
Vintage Petroleum, Inc. 4,973 59,987
+ Visio Corporation 2,969 141,028
+ Visual Networks, Inc. 2,365 187,426
+ Vlasic Foods International Inc. 3,622 20,600
W.H. Brady Co. 2,324 78,871
+ W.R. Grace & Co. 6,716 93,184
WD-40 Company 2,161 47,812
+ WESCO International, Inc. 3,374 29,944
W Holding Company, Inc. 5,070 52,601
WICOR, Inc. 3,280 95,735
+ WMS Industries Inc. 2,894 37,984
WPS Resources Corporation 2,160 54,270
Wabash National Corporation 2,828 42,420
The Wackenhut Corporation (Class A) 2,143 32,011
+ Wackenhut Corrections Corporation 2,155 25,187
Walden Residential Properties, Inc. 2,962 64,053
Wallace Computer Services, Inc. 4,059 67,481
Walter Industries, Inc. 4,485 48,494
Washington Federal, Inc. 4,419 87,275
Washington Gas Light Company 4,200 115,500
Washington Real Estate Investment Trust 3,987 59,805
+ Waste Connections, Inc. 1,856 26,796
Watsco, Inc. 2,700 31,219
Watts Industries, Inc. (Class A) 1,996 29,441
Wausau-Mosinee Paper Corporation 5,436 63,533
+ Wave Systems Corp. (Class A) 4,380 52,286
+ Wavo Corp. 3,842 14,888
+ WebLink Wireless, Inc. 5,359 83,065
Webster Financial Corporation 3,465 81,644
+ WebTrends Corporation 785 63,585
Weingarten Realty Investors 2,104 81,925
Wellman, Inc. 3,730 69,471
+ Wellsford Real Properties Inc. 4,971 42,254
Werner Enterprises, Inc. 3,634 51,103
WesBanco, Inc. 1,966 51,116
+ Wesley Jessen VisionCare, Inc. 2,099 79,500
West Coast Bancorp 2,910 39,285
West Pharmaceuticial Services, Inc. 1,554 48,077
+ Western Digital Corporation 10,549 44,174
Western Properties Trust 5,022 48,023
Westfield America, Inc. 2,278 28,048
Westinghouse Air Brake Co. 5,008 88,892
+ Westwood One, Inc. 3,875 294,500
+ The Wet Seal, Inc. (Class A) 1,687 20,666
White Mountains Insurance Group Inc. 474 57,117
Whitney Holding Corporation 2,359 87,430
+ Whole Foods Market, Inc. 2,792 129,479
+ Wild Oats Markets, Inc. 2,200 48,813
+ Wind River Systems, Inc. 3,831 140,789
+ Windmere-Durable Holdings, Inc. 2,701 45,917
Winnebago Industries, Inc. 2,038 40,887
+ Wisconsin Central Transportation
Corporation 5,497 73,866
+ Wolverine Tube, Inc. 1,995 28,179
Wolverine World Wide, Inc. 5,292 57,881
+ World Access, Inc. 5,135 98,849
+ WorldGate Communications, Inc. 1,000 47,563
Worthington Industries, Inc. 7,598 125,367
Wynn's International, Inc. 2,816 39,776
+ XTRA Corporation 1,600 68,200
+ Xircom, Inc. 2,376 178,200
Yankee Energy System, Inc. 1,454 63,885
+ Yellow Corporation 3,325 55,902
+ Young Broadcasting Inc. (Class A) 1,100 56,100
+ Zebra Technologies Corporation (Class A) 2,630 153,855
Zenith National Insurance Corp. 797 16,438
+ Ziff-Davis Inc.--ZDNet 1,782 37,422
+ ZixIt Corporation 1,775 70,334
-------------------------------------------------------------------
Total Common Stocks (Cost -- $83,840,802) -- 82.8% 95,051,790
================================================================================
<TABLE>
<CAPTION>
SHORT-TERM Face
OBLIGATIONS Amount Issue
=============================================================================================
<C> <C> <S> <C>
Commercial $5,000,000 American Home Products, Inc., 4.50% due 1/03/2000 4,998,750
Paper* 5,000,000 Associates First Capital Corp., 4% due 1/03/2000 4,998,889
5,000,000 The CIT Group Holdings, Inc., 4.75% due 1/03/2000 4,998,680
4,288,000 General Motors Acceptance Corp., 5% due 1/03/2000 4,286,809
=============================================================================================
Total Short-Term Obligations (Cost -- $19,283,128) -- 16.8% 19,283,128
=============================================================================================
Total Investments (Cost -- $103,123,930) -- 99.6% 114,334,918
Variation Margin on Financial Futures Contracts** -- 0.3% 384,000
Other Assets Less Liabilities -- 0.1% 80,243
------------
Net Assets -- 100.0% $114,799,161
============
=============================================================================================
</TABLE>
(a) American Depositary Receipt (ADR).
+ Non-income producing security.
* Commercial Paper is traded on a discount basis; the interest rates
shown reflect the discount rates paid at the time of purchase by
the Series.
** Financial futures contracts purchased as of December 31, 1999 were
as follows:
- --------------------------------------------------------------------------------
Number of Expiration
Contracts Issue Date Value
- --------------------------------------------------------------------------------
80 Russell 2000 March 2000 $20,398,000
- --------------------------------------------------------------------------------
(Total Contract Price -- $18,976,246) $20,398,000
===========
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
24 & 25
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MASTER
SMALL CAP
INDEX SERIES As of December 31, 1999
====================================================================================================
<C> <S> <C> <C>
Assets: Investments, at value (identified cost -- $103,123,930) $114,334,918
Cash on deposit for financial futures contracts ....... 920,000
Receivables:
Contributions ...................................... $ 500,645
Variation margin ................................... 384,000
Securities sold .................................... 204,002
Dividends .......................................... 107,440
Investment adviser ................................. 9,157 1,205,244
------------
Deferred organization expenses ........................ 2,933
Prepaid expenses and other assets ..................... 31,211
------------
Total assets .......................................... 116,494,306
------------
====================================================================================================
Liabilities: Payables:
Withdrawals ........................................ 849,917
Custodian bank ..................................... 610,771
Securities purchased ............................... 185,001 1,645,689
------------
Accrued expenses and other liabilities ................ 49,456
------------
Total liabilities ..................................... 1,695,145
------------
====================================================================================================
Net Assets: Net assets ............................................ $114,799,161
============
====================================================================================================
Net Assets Partners' capital ..................................... $102,166,419
Consist of: Unrealized appreciation on investments -- net ......... 12,632,742
------------
Net assets ............................................ $114,799,161
============
====================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MASTER
SMALL CAP
INDEX SERIES For the Year Ended December 31, 1999
=======================================================================================================================
<C> <S> <C> <C>
Investment Income: Dividends (net of $235 foreign withholding tax) .................... $ 1,015,721
Interest and discount earned ....................................... 776,195
-----------
Total income ....................................................... 1,791,916
-----------
=======================================================================================================================
Expenses: Professional fees .................................................. $ 73,981
Investment advisory fees ........................................... 46,744
Custodian fees ..................................................... 31,227
Amortization of organization expenses .............................. 1,304
Trustees' fees and expenses ........................................ 1,055
Accounting services ................................................ 321
Other .............................................................. 654
-----------
Total expenses before reimbursement ................................ 155,286
Reimbursement of expenses .......................................... (23,839)
-----------
Total expenses after reimbursement ................................. 131,447
-----------
Investment income -- net ........................................... 1,660,469
-----------
=======================================================================================================================
Realized & Realized gain from investments -- net .............................. 4,277,316
Unrealized Gain on Change in unrealized appreciation/depreciation on investments -- net 12,859,318
Investments -- Net: -----------
Net Increase in Net Assets Resulting from Operations ............... $18,797,103
===========
=======================================================================================================================
</TABLE>
See Notes to Financial Statements.
26 & 27
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MASTER For the Year
SMALL CAP Ended December 31,
INDEX SERIES ---------------------------
Increase (Decrease) in Net Assets: 1999 1998
=======================================================================================================================
<C> <S> <C> <C>
Operations: Investment income -- net ............................................... $ 1,660,469 $ 1,124,877
Realized gain on investments -- net .................................... 4,277,316 6,658,814
Change in unrealized appreciation/depreciation on investments -- net ... 12,859,318 (7,991,435)
------------ ------------
Net increase (decrease) in net assets resulting from operations ........ 18,797,103 (207,744)
------------ ------------
=======================================================================================================================
Net Capital Increase (decrease) in net assets derived from net capital contributions 12,171,403 (11,706,710)
Contributions: ------------ ------------
=======================================================================================================================
Net Assets: Total increase (decrease) in net assets ................................ 30,968,506 (11,914,454)
Beginning of year ...................................................... 83,830,655 95,745,109
------------ ------------
End of year* ........................................................... $114,799,161 $ 83,830,655
============ ============
*Undistributed investment income -- net ................................. $ 3,594,481 $ 1,934,012
============ ============
=======================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Year For the Period
MASTER The following ratios have been Ended December 31, April 9, 1997+ to
SMALL CAP derived from information provided in ------------------ December 31,
INDEX SERIES the financial statements. 1999 1998 1997
=====================================================================================================
<C> <S> <C> <C> <C>
Ratios to Average Expenses, net of reimbursement ......... .14% .17% .18%*
Net Assets: ========== ========== ==========
Expenses ............................... .17% .28% .29%*
========== ========== ==========
Investment income -- net ............... 1.83% 1.46% 1.78%*
========== ========== ==========
=====================================================================================================
Supplemental Net assets, end of period (in thousands) $ 114,799 $ 83,831 $ 95,745
Data: ========== ========== ==========
Portfolio turnover ..................... 51.20% 48.16% 16.45%
========== ========== ==========
=====================================================================================================
</TABLE>
* Annualized.
+ Commencement of operations.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
MASTER
SMALL CAP
INDEX SERIES
1. Significant Accounting Policies:
Master Small Cap Index Series (the "Series") (formerly Merrill Lynch Small Cap
Index Series) is part of Quantitative Master Series Trust (the "Trust")
(formerly Merrill Lynch Index Trust). The Trust is registered under the
Investment Company Act of 1940 and is organized as a Delaware business trust.
The Series' financial statements are prepared in accordance with generally
accepted accounting principles, which may require the use of management accruals
and estimates. The following is a summary of significant accounting policies
followed by the Series.
(a) Valuation of investments -- Portfolio securities that are traded on stock
exchanges are valued at the last sale price as of the close of business on the
day the securities are being valued or, lacking any sales, at the closing bid
price. Securities traded in the over-the-counter market are valued at the last
quoted bid price at the close of trading on the New York Stock Exchange on each
day by brokers that make markets in the securities. Securities traded in the
NASDAQ National Market System are valued at the last sale price prior to the
time of valuation. Portfolio securities that are traded both in the
over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market. 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 over-the-counter market, valuation is the last asked price
(options written) or the last bid price (options purchased). Short-term
securities are valued at amortized cost, which approximates market value. Other
investments, including futures contracts and related options, are stated at
market value. Securities and assets for which market quotations are not readily
available are valued at fair market value, as determined in good faith by or
under the direction of the Trust's Board of Trustees.
(b) Derivative financial instruments -- The Series may engage in various
portfolio investment techniques to provide liquidity, or in connection with the
Series' arbitrage strategies. Losses may arise due to changes in the value of
the contract or if the counterparty does not perform under the contract.
o Financial futures contracts -- The Series may purchase or sell financial
futures contracts and options on such futures contracts as a proxy for a direct
investment in securities underlying the Series' index. Upon entering into a
contract, the Series deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected. Pursuant to the
contract, the Series agrees to receive from or pay to the broker an amount of
cash equal to the daily fluctuation in value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Series as
unrealized gains or losses. When the contract is closed, the Series records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
o Options -- The Series is authorized to 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.
28 & 29
<PAGE>
Merrill Lynch Small Cap Index Fund, December 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
MASTER
SMALL CAP
INDEX SERIES
(c) Income taxes -- The Series is classified as a partnership for Federal income
tax purposes. As a partnership for Federal income tax purposes, the Series will
not incur Federal income tax liability. Items of partnership income, gain, loss
and deduction will pass through to investors as partners in the Series.
Therefore, no Federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends and
capital gains at various rates.
(d) Security transactions and investment income -- Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Dividend income is recorded on the ex-dividend dates. Interest income
(including amortization of discount) is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on the
identified cost basis.
(e) Deferred organization expenses -- Deferred organization expenses are charged
to expense on a straight-line basis over a period not exceeding five years.
(f) Custodian bank -- The Series recorded an amount payable to the custodian
bank reflecting an overnight overdraft.
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 .08% of the average daily value of the Series' net
assets. Effective August 2, 1999, the annual rate was changed to .01%. For the
year ended December 31, 1999, FAM earned fees of $46,744, of which $23,839 were
voluntarily waived.
Merrill Lynch Trust Company, an indirect wholly-owned subsidiary of ML & Co., is
the Series' custodian.
Accounting services are provided to the Series by FAM at cost.
Certain officers and/or trustees of the Series are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 1999 were $44,306,190 and $38,966,636, respectively.
Net realized gains for the year ended December 31, 1999 and net unrealized gains
as of December 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains
- --------------------------------------------------------------------------------
Long-term investments ........................... $2,704,207 $11,210,988
Financial futures contracts ..................... 1,573,109 1,421,754
---------- -----------
Total ........................................... $4,277,316 $12,632,742
========== ===========
- --------------------------------------------------------------------------------
As of December 31, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $11,104,529, of which $23,641,082 related to appreciated
securities and $12,536,553 related to depreciated securities. At December 31,
1999, the aggregate cost of investments for Federal income tax purposes was
$103,230,389.
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Investors,
Master Small Cap Index Series (formerly Merrill Lynch Small Cap Index Series):
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Master Small Cap Index Series (one of the series
constituting Quantitative Master Series Trust (formerly Merrill Lynch Index
Trust)) as of December 31, 1999, the related statements of operations for the
year then ended, changes in net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the years in the
two-year period and for the period April 9, 1997 (commencement of operations) to
December 31, 1997. These financial statements and the financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and the financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1999 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Master Small Cap
Index Series of Quantitative Master Series Trust as of December 31, 1999, the
results of its operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
February 22, 2000
30 & 31
<PAGE>
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.
Merrill Lynch
Index Funds, Inc.
Box 9011
Princeton, NJ
08543-9011 Index 3 -- 12/99
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