MERRILL LYNCH
INTERNATIONAL
INDEX FUND
Merrill Lynch
Index Funds, Inc.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
December 31, 1999
<PAGE>
Merrill Lynch International Index Fund
Important Tax Information (unaudited)
The following information summarizes all per share distributions paid by Merrill
Lynch International Index Fund during the taxable year ended December 31, 1999:
<TABLE>
<CAPTION>
====================================================================================================
Non-Qualifying Foreign
Domestic Foreign Total Taxes Long-Term
Record Payable Ordinary Source Ordinary Paid or Capital
Date Date Income Income Income Withheld Gains*
====================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Class A
- ----------------------------------------------------------------------------------------------------
12/08/99 12/16/99 $.434388 $.166668 $.601056 $.029705 $.033718
====================================================================================================
Class D
- ----------------------------------------------------------------------------------------------------
12/08/99 12/16/99 $.415606 $.159462 $.575068 $.029705 $.033718
====================================================================================================
</TABLE>
* All of the long-term capital gains distributions paid by the Fund are
subject to the 20% tax rate.
The foreign taxes paid or withheld represent taxes incurred by the Fund on
dividends received by the Fund from foreign sources. Foreign taxes paid or
withheld should be included as foreign source income with an offsetting
deduction from gross income or as a credit for taxes paid to foreign
governments. You should consult your tax adviser regarding the appropriate
treatment of foreign taxes paid.
Please retain this information for your records.
<PAGE>
Merrill Lynch International Index Fund, December 31, 1999
DEAR SHAREHOLDER
Fiscal Year in Review
For the year ended December 31, 1999, Merrill Lynch International Index Fund's
Class A and Class D Shares had total returns of +31.29% and +30.95%,
respectively. This compares to the total return of the unmanaged benchmark
Morgan Stanley Capital International Europe, Australasia and Far East (MSCI
EAFE) Gross Domestic Product (GDP) Weighted Index of +31.00% for the same
12-month period. (Complete performance results can be found on pages 3 and 4 of
this report to shareholders.)
Merrill Lynch International Index Fund is benchmarked to the MSCI EAFE GDP
Weighted Index, with weights accorded to each of the component countries based
on each country's gross domestic product. Worldwide global economic recovery,
plus continuing strength in the US economy, helped produce double-digit gains in
most of the larger European markets, as well as an extraordinary year for the
Far East. Strong returns during the year in the Pacific Rim component of the
MSCI EAFE Index during 1999 combined with slightly more modest returns from the
European equity markets led the MSCI EAFE GDP Weighted Index to a total return
of +31.00%. In US dollar terms, the MSCI Pacific component had a price return of
+56.17% in 1999, while MSCI Europe Index posted a return of +14.12%. The MSCI
EAFE Index was led during the year by price returns posted by MSCI Finland
(+150.71%), MSCI Singapore (+97.08%) and MSCI Sweden (+77.76%). The
worst-performing countries during the year were the MSCI components of Belgium
and Ireland, which posted double-digit declines of 15.77% and 14.02%,
respectively. The other large European components of the Index fared somewhat
better, as MSCI Germany, MSCI France and MSCI United Kingdom gained 18.70%,
28.00% and 9.74%, respectively. Japan, the MSCI GDP Weighted Index's largest
component, posted an advance of +60.56% during the year. (References to markets
of all countries/regions in this letter to shareholders correspond to those
countries'/regions' weightings in the MSCI EAFE Index and are in US dollar terms
unless otherwise noted.)
One of the factors that reduced the US dollar returns of the Fund's European
holdings was the steady decline of the euro during the year. Introduced at the
end of 1998 at a value of about $1.16, the euro ended the year at virtual parity
with the US dollar. Thus, many of the extraordinary gains produced by the local
markets in Europe were diminished as a result of the negative effects of the
currency translation. Of the larger European markets, France, Italy and Spain
produced local price returns of +49.95%, +15.41% and +21.28%, respectively, for
the year. However, as a result of the euro's decline, these price returns were
reduced to +28.00%, -1.48% and +3.53% in US dollar terms, respectively. On the
contrary, the Japanese yen rose in value during the year from (Y)113.60 at the
end of 1998 to finish the year near its 52-week high of (Y)102.51, benefiting US
investors accordingly. In local currency terms, the MSCI Japan component had a
price return of +45.69% during the year, but a price return of +60.56% in US
dollar terms.
Merrill Lynch International Index Fund invests all of its assets in Master
International (GDP Weighted) Index Series (formerly Merrill Lynch International
Index Series), which has the same investment objective as the Fund. There are
two principal investments made by the Series in its attempt to replicate the
returns of the Index. The first is a statistically selected sample of stocks
designed to replicate the returns of the Index, with share quantities designed
to closely approximate each country's actual weight in the Index. In addition,
the Series is able to purchase futures contracts in several of the major foreign
markets which comprise the MSCI EAFE Index. These futures contracts provide an
efficient mechanism for maintaining equity exposure, while also keeping a pool
of liquidity available to meet potential Fund redemption activity. It is the
Series' goal to be as close as possible to 100% invested at all times.
In Conclusion
We appreciate your investment in Merrill Lynch International Index Fund, and we
look forward to serving 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 15, 2000
To reduce shareholders' expenses, Merrill Lynch International 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 International Index Fund Class A Shares* +17.88% +31.29% +78.91%
- --------------------------------------------------------------------------------------------
ML International Index Fund Class D Shares* +17.85 +30.95 +77.71
- --------------------------------------------------------------------------------------------
MSCI EAFE Index -- GDP Weighted** +17.54 +31.00 +74.81
============================================================================================
</TABLE>
* Total investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date. The Fund's
inception date is 4/09/97.
** This unmanaged gross domestic product-weighted Index is comprised of
equity securities of companies from various industrial sectors whose
primary trading markets are located outside the United States and which
are selected from among the larger-capitalization companies in such
markets. Since inception total return is from 4/30/97.
2 & 3
<PAGE>
Merrill Lynch International 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 MSCI EAFE GDP
Weighted Index. Beginning and ending values are:
4/30/97** 12/99
ML International Index Fund+--
Class A Shares* $10,000 $17,336
ML International Index Fund+--
Class D Shares* $10,000 $17,221
MSCI EAFE GDP Weighted Index+++ $10,000 $17,481
* Assuming transaction costs and other operating expenses, including
advisory fees.
** The Fund commenced operations on April 9, 1997. For purposes of fair
comparison of the Fund's performance relative to the Index, the line graph
begins on April 30, 1997.
+ The Fund invests all of its assets in Master International (GDP Weighted)
Index Series of Quantititative Master Series Trust. The Trust may invest
in a statistically selected sample of the equity securities included in
the Europe, Australia and Far East Index and other types of financial
instruments.
++ This unmanaged gross domestic product-weighted Index is comprised of
equity securities of companies from various industrial sectors whose
primary trading markets are located outside the United States and which
are selected from among the larger-capitalization companies in such
markets.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return
================================================================================
Class A Shares
================================================================================
Year Ended 12/31/99 +31.29%
- --------------------------------------------------------------------------------
Inception (4/09/97) through 12/31/99 +23.76
- --------------------------------------------------------------------------------
% Return
================================================================================
Class D Shares
================================================================================
Year Ended 12/31/99 +30.95%
- --------------------------------------------------------------------------------
Inception (4/09/97) through 12/31/99 +23.46
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MERRILL LYNCH
INTERNATIONAL
INDEX FUND As of December 31, 1999
===================================================================================================================================
<C> <S> <C>
Assets: Investment in Master International (GDP Weighted) Index Series, at value
(identified cost -- $88,275,142) .................................................................... $134,980,196
Deferred organization expenses ...................................................................... 9,312
Prepaid registration fees and other assets .......................................................... 11,547
------------
Total assets ........................................................................................ 135,001,055
------------
===================================================================================================================================
Liabilities: Payable to administrator ............................................................................ 21,591
Payable to distributor .............................................................................. 5,511
Accrued expenses and other liabilities .............................................................. 66,494
------------
Total liabilities ................................................................................... 93,596
------------
===================================================================================================================================
Net Assets: Net assets .......................................................................................... $134,907,459
============
===================================================================================================================================
Net Assets Class A Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized ..................... $ 690
Consist of: Class D Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized ..................... 202
Paid-in capital in excess of par .................................................................... 87,692,997
Undistributed investment income -- net .............................................................. 40,420
Undistributed realized capital gains on investments and foreign currency transactions from
the Series -- net ................................................................................... 468,096
Unrealized appreciation on investments and foreign currency transactions from the Series -- net ..... 46,705,054
------------
Net assets .......................................................................................... $134,907,459
============
===================================================================================================================================
Net Asset Class A -- Based on net assets of $104,426,822 and 6,903,391 shares outstanding ..................... $ 15.13
Value: ============
Class D -- Based on net assets of $30,480,637 and 2,015,131 shares outstanding ...................... $ 15.13
============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
4 & 5
<PAGE>
Merrill Lynch International Index Fund, December 31, 1999
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MERRILL LYNCH
INTERNATIONAL
INDEX FUND For the Year Ended December 31, 1999
====================================================================================================================================
<C> <S> <C> <C>
Investment Income: Investment income allocated from the Series (net of $244,886 foreign
withholding tax) ................................................................. $ 1,970,118
Expenses allocated from the Series ............................................... 261,010
-----------
Net investment income from the Series ............................................ 1,709,108
-----------
====================================================================================================================================
Expenses: Administration fee ............................................................... $ 325,775
Transfer agent fees .............................................................. 90,872
Printing and shareholder reports ................................................. 53,569
Account maintenance fee -- Class D ............................................... 43,825
Registration fees ................................................................ 27,173
Professional fees ................................................................ 20,511
Accounting services .............................................................. 14,723
Amortization of organization expenses ............................................ 4,139
-----------
Total expenses before reimbursement .............................................. 580,587
Reimbursement of expenses ........................................................ (43,691)
-----------
Total expenses after reimbursement ............................................... 536,896
-----------
Investment income -- net ......................................................... 1,172,212
-----------
====================================================================================================================================
Realized & Unreal- Realized gain (loss) from the Series on:
ized Gain (Loss) from Investments -- net ............................................................ 4,942,823
The Series -- Net: Foreign currency transactions -- net .......................................... (584,972) 4,357,851
-----------
Change in unrealized appreciation on investments and foreign currency transactions
from the Series -- net ........................................................... 26,777,556
-----------
Net realized and unrealized gain on investments and foreign currency transactions
from the Series .................................................................. 31,135,407
-----------
Net Increase in Net Assets Resulting from Operations ............................. $32,307,619
===========
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MERRILL LYNCH For the Year Ended December 31,
INTERNATIONAL -------------------------------
INDEX FUND Increase (Decrease) in Net Assets: 1999 1998
====================================================================================================================================
<S> <C> <C>
Operations: Investment income -- net ..................................................... $ 1,172,212 $ 1,422,489
Realized gain on investments and foreign currency transactions from
the Series -- net ............................................................ 4,357,851 11,017,899
Change in unrealized appreciation on investments and foreign currency
transactions from the Series -- net .......................................... 26,777,556 19,554,453
------------ ------------
Net increase in net assets resulting from operations ......................... 32,307,619 31,994,841
------------ ------------
====================================================================================================================================
Dividends & Investment income -- net:
Distributions to Class A ................................................................... (595,052) (1,103,767)
Shareholders: Class D ................................................................... (108,541) (108,053)
In excess of investment income -- net:
Class A ................................................................... -- (351,648)
Class D ................................................................... -- (34,425)
Realized gain on investments from the Series -- net:
Class A ................................................................... (3,549,106) (9,430,008)
Class D ................................................................... (905,580) (1,190,493)
------------ ------------
Net decrease in net assets resulting from dividends and distributions to
shareholders ................................................................. (5,158,279) (12,218,394)
------------ ------------
====================================================================================================================================
Capital Share Net decrease in net assets derived from capital share transactions ........... (25,736,000) (22,007,983)
Transactions: ------------ ------------
====================================================================================================================================
Net Assets: Total increase (decrease) in net assets ...................................... 1,413,340 (2,231,536)
Beginning of year ............................................................ 133,494,119 135,725,655
------------ ------------
End of year* ................................................................. $134,907,459 $133,494,119
============ ============
====================================================================================================================================
* Undistributed (accumulated distributions in excess of) investment
income -- net ................................................................ $ 40,420 $ (428,199)
============ ============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
6 & 7
<PAGE>
Merrill Lynch International Index Fund, December 31, 1999
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A
-------------------------------------------
For the
The following per share data and ratios have been derived Year Ended For the Period
MERRILL LYNCH from information provided in the financial statements. December 31,++++ April 9, 1997+ to
INTERNATIONAL ------------------------ December 31,
INDEX FUND Increase (Decrease) in Net Asset Value: 1999 1998 1997
====================================================================================================================================
<C> <S> <C> <C> <C>
Per Share Net asset value, beginning of period ............................. $ 12.04 $ 10.56 $ 10.00
Operating ---------- ---------- ----------
Performance: Investment income -- net ......................................... .13 .15 .10
Realized and unrealized gain on investments and foreign currency
transactions from the Series -- net .............................. 3.59 2.52 .75
---------- ---------- ----------
Total from investment operations ................................. 3.72 2.67 .85
---------- ---------- ----------
Less dividends and distributions:
Investment income -- net ...................................... (.09) (.12) (.12)
In excess of investment income -- net ......................... -- (.04) (.02)
Realized gain on investments from the Series -- net ........... (.54) (1.03) (.15)
---------- ---------- ----------
Total dividends and distributions ................................ (.63) (1.19) (.29)
---------- ---------- ----------
Net asset value, end of period ................................... $ 15.13 $ 12.04 $ 10.56
========== ========== ==========
====================================================================================================================================
Total Investment Based on net asset value per share ............................... 31.29% 25.65% 8.45%**
Return: ========== ========== ==========
====================================================================================================================================
Ratios to Average Expenses, net of reimbursement++ ................................. .64% .64% .86%*
Net Assets: ========== ========== ==========
Expenses++ ....................................................... .69% .76% 1.10%*
========== ========== ==========
Investment income -- net ......................................... 1.05% 1.26% 1.64%*
========== ========== ==========
====================================================================================================================================
Supplemental Net assets, end of period (in thousands) ......................... $ 104,427 $ 118,692 $ 115,190
Data: ========== ========== ==========
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class D
-------------------------------------------
For the
The following per share data and ratios have been derived Year Ended For the Period
MERRILL LYNCH from information provided in the financial statements. December 31,++++ April 9, 1997+ to
INTERNATIONAL ------------------------ December 31,
INDEX FUND Increase (Decrease) in Net Asset Value: 1999 1998 1997
====================================================================================================================================
<C> <S> <C> <C> <C>
Per Share Net asset value, beginning of period ............................. $ 12.05 $ 10.56 $ 10.00
Operating ---------- ---------- ----------
Performance: Investment income -- net ......................................... .08 .13 .15
Realized and unrealized gain on investments and foreign currency
transactions from the Series -- net .............................. 3.61 2.51 .67
---------- ---------- ----------
Total from investment operations ................................. 3.69 2.64 .82
---------- ---------- ----------
Less dividends and distributions:
Investment income -- net ...................................... (.07) (.09) (.10)
In excess of investment income -- net ......................... -- (.03) (.01)
Realized gain on investments from the Series -- net ........... (.54) (1.03) (.15)
---------- ---------- ----------
Total dividends and distributions ................................ (.61) (1.15) (.26)
---------- ---------- ----------
Net asset value, end of period ................................... $ 15.13 $ 12.05 $ 10.56
========== ========== ==========
====================================================================================================================================
Total Investment Based on net asset value per share ............................... 30.95% 25.40% 8.22%**
Return: ========== ========== ==========
====================================================================================================================================
Ratios to Average Expenses, net of reimbursement++ ................................. .89% .89% 1.11%*
Net Assets: ========== ========== ==========
Expenses++ ....................................................... .95% 1.02% 1.35%*
========== ========== ==========
Investment income -- net ......................................... .65% 1.14% 1.67%*
========== ========== ==========
====================================================================================================================================
Supplemental Net assets, end of period (in thousands) ......................... $ 30,480 $ 14,802 $ 20,536
Data: ========== ========== ==========
====================================================================================================================================
</TABLE>
* Annualized.
+ Commencement of operations.
++ Includes the Fund's share of the Series' allocated expenses.
** Aggregate total investment return.
++++ Based on average shares outstanding.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
MERRILL LYNCH
INTERNATIONAL
INDEX FUND
1. Significant Accounting Policies:
Merrill Lynch International 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
International (GDP Weighted) 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 exclusive 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.
8 & 9
<PAGE>
Merrill Lynch International Index Fund, December 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
MERRILL LYNCH
INTERNATIONAL
INDEX FUND
(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 substantially all of its taxable income to shareholders. 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) 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 foreign currency
transactions.
(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 .24% 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 was changed to .34%. For the year ended December 31, 1999, FAM
earned fees of $325,775, of which $43,691 was voluntarily waived.
The Corporation has also entered into a Distribution Agreement and Distribution
Plan with Merrill Lynch Funds Distributor ("MLFD" or the "Distributor"), a
division of Princeton Funds Distributor, Inc. ("PFD"), 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 ongoing account maintenance fees. The fees
are 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 $28,636,348 and $60,070,109, respectively.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$25,736,000 and $22,007,983 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 .................................... 3,366,864 $ 43,345,148
Shares issued to shareholders
in reinvestment of dividends
and distributions .............................. 281,148 3,983,860
---------- ------------
Total issued ................................... 3,648,012 47,329,008
Shares redeemed ................................ (6,602,765) (84,086,774)
---------- ------------
Net decrease ................................... (2,954,753) $(36,757,766)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended December 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................... 5,652,758 $ 64,794,136
Shares issued to shareholders
in reinvestment of dividends
and distributions .............................. 910,386 10,606,003
---------- ------------
Total issued ................................... 6,563,144 75,400,139
Shares redeemed ................................ (7,618,229) (89,230,079)
---------- ------------
Net decrease ................................... (1,055,085) $(13,829,940)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................... 1,909,685 $ 24,861,116
Shares issued to shareholders
in reinvestment of dividends
and distributions .............................. 63,860 904,888
---------- ------------
Total issued ................................... 1,973,545 25,766,004
Shares redeemed ................................ (1,187,165) (14,744,238)
---------- ------------
Net increase ................................... 786,380 $ 11,021,766
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended December 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................... 444,487 $ 5,440,002
Shares issued to shareholders
in reinvestment of dividends
and distributions .............................. 98,508 1,148,598
---------- ------------
Total issued ................................... 542,995 6,588,600
Shares redeemed ................................ (1,258,899) (14,766,643)
---------- ------------
Net decrease ................................... (715,904) $ (8,178,043)
========== ============
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch International Index Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Merrill
Lynch International 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
International 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
10 & 11
<PAGE>
Merrill Lynch International Index Fund, December 31, 1999
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (in US dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Master International (GDP Weighted) Index Series
------------------------------------------------------------------------------
Shares
COUNTRY Investments Held Value
================================================================================================
<S> <C> <C> <C>
Australia AMP Limited 11,700 $ 128,721
Australian Gas Light Company Limited 10,962 64,063
Boral Limited 448 691
Broken Hill Proprietary Company Limited 23,564 308,091
CSR Limited 14,020 33,910
Coca-Cola Amatil Limited 18,079 49,164
Coca-Cola Beverages PLC 12,871 24,400
Coles Myer Limited 21,360 109,861
Foster's Brewing Group Limited 57,662 164,721
National Australia Bank Limited 23,358 355,771
The News Corporation Limited 31,249 302,122
The News Corporation Limited (Preferred) 25,400 216,682
Normandy Mining Limited 23,312 16,458
North Limited 3,698 8,678
Pacific Dunlop Limited 36,248 51,087
Pioneer International Limited 14,867 44,608
Rio Tinto Limited 6,324 135,269
Santos Limited 6,498 17,628
Schroders Property Fund 33,654 51,699
Smith (Howard) Limited 12,800 87,021
TABCORP Holdings Limited 17,659 119,062
WMC Limited 22,214 121,979
Westpac Banking Corporation Limited 30,322 208,264
------------------------------------------------------------------------------
Total Investments in Australia (Cost -- $2,144,740) -- 1.5% 2,619,950
================================================================================================
Austria Austria Tabakwerke AG 2,532 122,387
Austrian Airlines/Osterreichische
Luftverkehrs AG 3,376 63,913
Bank Austria AG 9,793 552,247
Flughafen Wien AG 2,495 86,704
Generali Holding Vienna AG 767 128,561
Mayr-Melnhof Karton AG 1,950 90,328
OMV AG 2,633 255,863
+ Oesterreichische Elektrizitaetswirtschafts-
AG "Verbund" 'A' 2,674 375,634
VA Technologie AG 1,494 98,542
Wienerberger Baustoffindustrie AG 3,260 70,876
------------------------------------------------------------------------------
Total Investments in Austria (Cost -- $1,985,985) -- 1.1% 1,845,055
================================================================================================
Belgium Barco NV 640 89,583
Bekaert NV 1,590 88,222
Delhaize "Le Lion" SA 2,720 204,880
Electrabel SA 1,370 448,367
Fortis 'B' 13,620 491,283
Glaverbel SA 650 56,095
Groupe Bruxelles Lambert SA 910 183,274
KBC Bancassurance Holding 4,609 248,308
Solvay SA 2,580 213,041
UCB SA 347 15,043
Union Miniere SA 1,160 45,089
------------------------------------------------------------------------------
Total Investments in Belgium (Cost -- $1,756,486) -- 1.2% 2,083,185
================================================================================================
Denmark A/S Dampskibsselskabet Svendborg 'B' 21 349,673
D/S 1912 'B' 30 353,328
Danisco A/S 2,130 83,044
Den Danske Bank Group 1,502 164,700
Falck A/S 500 52,458
+ ISS International Service System A/S 'B' 1,100 74,009
Novo Nordisk A/S 'B' 2,190 290,541
Tele Danmark A/S 6,400 475,653
Unidanmark A/S 'A' 2,045 143,958
William Demant A/S 500 47,381
------------------------------------------------------------------------------
Total Investments in Denmark (Cost -- $1,346,317) -- 1.2% 2,034,745
================================================================================================
Finland Kesko Oyj 'B' 3,331 42,264
+ MeritaNordbanken Oyj 10,373 61,002
Nokia Oyj 11,200 2,030,112
Outokumpu Oyj 2,845 40,252
Sampo Insurance Company Ltd. 'A' 1,249 43,644
UPM-Kymmene Oyj 2,905 117,013
------------------------------------------------------------------------------
Total Investments in Finland (Cost -- $400,090) -- 1.4% 2,334,287
================================================================================================
France Accor SA 3,610 174,384
Air Liquide 1,833 306,777
Alcatel 3,184 731,034
Aventis SA 6,856 398,360
Aventis SA (ADR)* 3,000 170,625
Axa 6,050 843,181
Banque Nationale de Paris (BNP) 7,812 720,588
Banque Nationale de Paris (BNP)
(Warrants) (a) 1,950 8,994
Bouygues SA 570 362,188
Canal Plus 856 124,558
Carrefour SA 6,585 1,214,153
Compagnie de Saint Gobain 1,631 306,639
Compagnie Generale des Etablissements
Michelin 'B' 2,924 114,834
Eridania Beghin-Say SA 609 65,496
France Telecom SA 17,496 2,313,305
Groupe Danone 1,292 304,444
Imetal SA 416 61,999
L'Oreal SA 1,160 930,408
LVMH (Louis Vuitton Moet Hennessy) 1,632 730,831
Lafarge SA (Ordinary) 1,906 221,876
Lagardere SCA 2,179 118,490
<CAPTION>
- ------------------------------------------------------------------------------------------------
Shares Held/
Investments Face Amount Value
================================================================================================
<S> <C> <C> <C>
PSA Peugeot Citroen 948 215,175
Pernod Ricard 1,496 85,568
Pinault-Printemps-Redoute SA 2,156 568,826
Rallye (Convertible):
3% due 1/01/2003 (euro) 537 38,935
4.50% due 1/01/2005 (euro) 537 78,410
Sagem SA 300 208,449
+ Sanofi-Synthelabo SA 11,000 457,923
Schneider SA 2,645 207,621
Sidel SA 766 79,065
Societe BIC SA 1,440 65,515
Societe Generale 'A' 1,711 398,008
Sodexho Alliance 800 141,544
Suez Lyonnaise des Eaux SA 3,754 602,213
Suez Lyonnaise des Eaux SA 957 10
Thomson CSF 3,000 99,059
Total Fina SA 4,140 42
Total Fina SA 'B' 13,276 1,771,383
Usinor SA 4,992 93,753
Valeo SA 1,699 131,054
Vivendi 920 82,408
Vivendi 9,812 885,803
------------------------------------------------------------------------------
Total Investments in France (Cost -- $8,692,747) -- 9.7% 16,433,928
================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------
Shares
COUNTRY Investments Held Value
================================================================================================
<S> <C> <C> <C>
Germany Adidas-Salomon AG 1,267 95,052
Allianz AG (Registered Shares) 5,710 1,917,615
BASF AG 16,149 829,364
Bayer AG 20,131 952,780
Beiersdorf AG 2,232 149,827
Buderus AG 520 8,797
Continental AG 4,500 89,950
DaimlerChrysler AG 19,312 1,501,323
Degussa-Huels AG 1,815 76,215
Deutsche Bank AG (Registered Shares) 14,650 1,237,001
Deutsche Lufthansa AG (Registered Shares) 11,108 258,391
Deutsche Telekom AG 52,268 3,721,215
Dresdner Bank AG 12,843 698,377
Friedrich Grohe AG (Preferred) 167 49,946
Heidelberger Zement AG 2,642 207,544
Heidelberger Zement AG 1,293 117
Hochtief AG 1,785 66,507
HypoVereinsbank 9,814 670,047
Karstadt AG 2,540 101,800
Linde AG 2,930 160,213
MAN AG 4,100 154,001
Mannesmann AG 8,637 2,083,041
Merck KGaA 4,315 133,832
Metro AG 6,049 325,277
Muenchener Rueckversicherungs-
Gesellschaft AG (Registered Shares) 4,500 1,141,032
Preussag AG 4,593 255,771
RWE AG 9,250 362,344
RWE AG (Preferred) 2,628 80,980
SAP AG (Systeme, Anwendungen,
Produkte in der Datenverarbeitung) 1,397 687,915
SAP AG (Systeme, Anwendungen,
Produkte in der Datenverarbeitung)
(Preferred) 1,000 602,186
+ SGL Carbon AG 678 45,061
Schering AG 2,028 245,064
Siemens AG 13,808 1,756,158
Thyssen Krupp AG 12,000 365,541
Veba AG 11,569 562,112
Viag AG 15,678 287,337
Volkswagen AG 8,200 462,002
Volkswagen AG (Preferred) 2,200 70,450
------------------------------------------------------------------------------
Total Investments in Germany (Cost -- $14,260,578) -- 13.2% 22,412,185
================================================================================================
</TABLE>
12 & 13
<PAGE>
Merrill Lynch International Index Fund, December 31, 1999
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Master International (GDP Weighted) Index Series (continued)
------------------------------------------------------------------------------
Shares
COUNTRY Investments Held Value
================================================================================================
<S> <C> <C> <C>
Hong Kong CLP Holdings Limited 26,000 $ 119,748
Cheung Kong (Holdings) Ltd. 29,000 367,490
Hang Seng Bank Limited 18,400 210,086
Hong Kong Telecom Limited 101,400 292,864
Hutchison Whampoa Limited 40,000 581,500
Sun Hung Kai Properties Ltd. 23,000 239,676
------------------------------------------------------------------------------
Total Investments in Hong Kong (Cost -- $1,105,708) -- 1.1% 1,811,364
================================================================================================
Ireland Allied Irish Banks PLC 23,100 263,322
CRH PLC 14,000 301,697
eircom PLC 48,300 210,603
Greencore Group PLC 29,000 89,069
Jefferson Smurfit Group PLC 42,000 126,882
------------------------------------------------------------------------------
Total Investments in Ireland (Cost -- $813,463) -- 0.6% 991,573
================================================================================================
Italy Assicurazioni Generali 43,091 1,423,278
Banca Commerciale Italiana 63,550 345,572
Banca Intesa SpA 33,100 134,327
Banca Popolare di Milano (BPM) 13,000 101,193
Benetton Group SpA 75,022 172,248
+ Beni Stabili 50,711 17,873
Bulgari SpA 12,327 110,727
Burgo (Cartiere) SpA 10,471 68,960
ENI SpA 218,846 1,203,263
Fiat SpA 12,820 365,991
Fiat SpA (Preferred) 5,100 73,697
Fiat SpA (RNC) 4,220 62,043
Italcementi SpA 8,887 107,391
Italgas SpA 21,974 83,201
Mediaset SpA 38,007 590,936
Mediobanca SpA 22,300 227,480
Montedison SpA 113,724 186,095
+ Olivetti SpA 113,726 329,251
Parmalat Finanziaria SpA 78,966 100,989
Pirelli SpA 78,100 214,312
Riunione Adriatica di Sicurta SpA 16,300 163,483
San Paolo-IMI SpA 50,711 688,880
Sirti SpA 13,078 46,752
Telecom Italia Mobile (TIM) SpA 61,047 290,774
Telecom Italia Mobile (TIM) SpA 172,818 1,929,967
Telecom Italia SpA 112,020 1,579,258
Telecom Italia SpA (Registered) 35,844 218,374
Unicredito Italiano SpA 108,200 531,712
Unione Immobiliare SpA 175,600 81,341
------------------------------------------------------------------------------
Total Investments in Italy (Cost -- $6,523,541) -- 6.7% 11,449,368
================================================================================================
Japan The 77 Bank, Ltd. 11,000 115,285
Acom Co., Ltd. 3,100 303,660
Advantest Corporation 2,100 554,849
Ajinomoto Co., Inc. 17,000 177,170
Alps Electric Co., Ltd. 5,000 76,279
Aoyamma Trading Co., Ltd. 2,000 42,861
The Asahi Bank, Ltd. 57,000 351,404
Asahi Breweries Limited 12,000 131,285
Asahi Chemical Industry Co., Ltd. 39,000 200,362
Asahi Glass Company, Limited 33,000 255,436
Autobacs Seven Co., Ltd. 1,300 42,617
The Bank of Tokyo-Mitsubishi, Ltd. 94,000 1,309,874
The Bank of Yokohama, Ltd. 29,000 133,663
Bridgestone Corp. 19,000 418,338
CSK Corporation 1,300 211,175
Canon, Inc. 18,000 715,138
Casio Computer Co., Ltd. 10,000 83,178
The Chiba Bank, Ltd. 7,000 38,771
Chugai Pharmaceutical Co., Ltd. 11,000 118,945
Citizen Watch Co. 10,000 63,607
Cosmo Oil Co., Ltd. 31,000 46,414
Credit Saison Co., Ltd. 3,700 64,449
Dai Nippon Printing Co., Ltd. 16,000 255,211
The Daiei, Inc. 19,000 75,301
The Daimaru, Inc. 14,000 47,402
Dainippon Ink and Chemicals, Inc. 28,000 83,022
+ Dainippon Screen Mfg. Co., Ltd. 5,000 29,846
Daiwa House Industry Co., Ltd. 14,000 104,120
Daiwa Securities Group Inc. 28,000 438,125
Denso Corporation 10,000 238,771
East Japan Railway Company 78 420,570
Ebara Corporation 13,000 145,024
Eisai Company, Ltd. 8,000 153,831
Fanuc Ltd. 5,100 649,291
The Fuji Bank, Limited 70,000 680,204
Fuji Photo Film 11,000 401,507
Fujikura Ltd. 7,000 27,811
Fujitsu Limited 39,000 1,778,452
The Gunma Bank Ltd. 12,000 78,090
Hankyu Department Stores, Inc. 2,000 10,569
Hirose Electric Co., Ltd. 1,200 269,028
Hitachi Ltd. 68,000 1,091,301
Honda Motor Co., Ltd. 20,000 743,713
Hoya Corporation 2,000 157,550
The Industrial Bank of Japan, Limited 53,000 510,862
Isetan Company Ltd. 6,000 44,036
Ito-Yokado Co., Ltd. 8,000 868,970
+ Itochu Corporation 34,000 169,351
JUSCO Co., Ltd. 7,000 121,998
Japan Airlines Company, Ltd. (JAL) 45,000 133,428
Japan Energy Corp. 58,000 52,784
Japan Tobacco, Inc. 9 68,872
The Joyo Bank, Ltd. 21,000 96,585
Kajima Corporation 27,000 80,585
Kaneka Corporation 14,000 179,058
Kansai Electric Power Company, Inc. 18,000 313,710
Kao Corporation 14,000 399,354
Kawasaki Heavy Industries Ltd. 38,000 50,572
+ Kawasaki Steel Corporation 74,000 132,518
Keihin Electric Express Railway Co., Ltd. 49,000 167,825
Kinden Corporation 9,000 69,136
Kirin Brewery Company, Ltd. 23,000 241,951
Kokuyo Co., Ltd. 4,000 53,234
Komatsu Ltd. 28,000 128,780
Konami Co., Ltd. 1,900 339,319
Kubota Corporation 46,000 176,005
Kurita Water Industries Ltd. 2,000 31,784
Kyocera Corporation 4,200 1,089,148
Marubeni Corporation 42,000 176,319
Marui Co., Ltd. 9,000 134,397
Matsushita Electric Industrial
Company, Ltd. 41,000 1,135,434
Minebea Company Ltd. 10,000 171,543
Mitsubishi Chemical Corporation 52,000 183,188
Mitsubishi Corporation 32,000 247,069
Mitsubishi Electric Corporation 50,000 322,928
Mitsubishi Estate Company, Limited 27,000 263,421
Mitsubishi Heavy Industries, Ltd. 78,000 260,280
Mitsubishi Logistics Corp. 3,000 19,141
Mitsubishi Materials Corporation 37,000 90,518
Mitsubishi Trust & Banking Corp. 27,000 237,792
Mitsui & Co., Ltd. 34,000 237,890
Mitsui Fudosan Co., Ltd. 18,000 121,891
Mitsui Marine and Fire Insurance
Company, Ltd. 18,000 106,742
Mitsui Mining & Smelting Co., Ltd. 12,000 56,718
The Mitsui Trust & Banking Co., Ltd. 30,000 67,815
+ Mitsukoshi, Ltd. 11,000 38,751
Murata Manufacturing Co., Ltd. 5,000 1,174,283
Mycal Corporation 13,000 56,610
NEC Corporation 34,000 810,158
NSK Limited 16,000 109,443
Namco Ltd. 1,300 84,216
Nikon Corporation 9,000 264,214
Nintendo Company Ltd. 500 83,081
Nippon COMSYS Corporation 5,000 103,728
Nippon Express Co., Ltd. 26,000 143,752
Nippon Light Metal Co., Ltd. 29,000 26,960
Nippon Mitsubishi Oil Corp. 37,000 162,932
Nippon Paper Industries Co. Ltd. 24,000 132,224
Nippon Steel Corporation 143,000 334,446
Nippon Telegraph & Telephone
Corporation (NTT) 256 4,383,990
Nippon Yusen Kabushiki Kaisha 36,000 147,255
+ Nissan Motor Co., Ltd. 58,000 228,163
Nissin Food Products Co., Ltd. 3,000 70,604
The Nomura Securities Co., Ltd. 38,000 686,075
Noritake Co., Ltd. 2,000 7,065
Obayashi Corporation 19,000 89,803
Oji Paper Co., Ltd. 25,000 150,455
Omron Corporation 7,000 161,317
Orix Corporation 1,400 315,373
Osaka Gas Co. 57,000 137,215
Pioneer Corporation 5,000 132,107
Rohm Company Ltd. 2,000 821,998
SMC Corporation 1,600 354,007
The Sakura Bank, Ltd. 84,000 486,623
Sankyo Company, Ltd. 10,000 205,500
Sanyo Electric Co., Ltd. 48,000 194,931
Secom Co., Ltd. 4,000 440,356
+ Sega Enterprises Ltd. 3,800 120,853
Seino Transportation Co., Ltd. 13,000 68,950
</TABLE>
14 & 15
<PAGE>
Merrill Lynch International Index Fund, December 31, 1999
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Master International (GDP Weighted) Index Series (continued)
------------------------------------------------------------------------------
Shares
COUNTRY Investments Held Value
================================================================================================
<S> <C> <C> <C>
Japan Sekisui Chemical Co., Ltd. 16,000 $ 70,927
(concluded) Sekisui House, Ltd. 19,000 168,265
Sharp Corporation 25,000 639,740
Shimano Inc. 3,700 65,173
Shimizu Corporation 22,000 72,766
Shin-Etsu Chemical Co., Ltd. 10,000 430,571
Shiseido Company, Limited 11,000 160,388
The Shizuoka Bank, Ltd. 16,000 164,087
Softbank Corporation 1,600 1,531,265
Sony Corporation 8,788 2,605,699
The Sumitomo Bank, Ltd. 63,000 862,482
Sumitomo Chemical Co., Ltd. 40,000 187,885
Sumitomo Corporation 24,000 232,743
Sumitomo Electric Industries 20,000 231,138
Sumitomo Heavy Industries, Ltd. 24,000 65,760
The Sumitomo Marine & Fire
Insurance Co., Ltd. 17,000 104,805
Sumitomo Metal Industries, Ltd. 82,000 61,787
Taisho Pharmaceutical Company, Ltd. 7,000 205,500
Taiyo Yuden Co., Ltd. 2,000 118,603
Takara Shuzo Co., Ltd. 2,000 31,530
Takashimaya Co., Ltd. 9,000 62,002
Takeda Chemical Industries, Ltd. 18,000 889,520
Takefuji Corporation 200 25,032
Toho Co., Ltd. 1,100 160,818
Tohoku Electric Power Co., Inc. 11,900 177,004
The Tokai Bank Ltd. 46,000 289,891
The Tokio Marine & Fire
Insurance Co. Ltd. 30,000 350,817
Tokyo Broadcasting System, Inc. 5,000 169,292
Tokyo Dome Corporation 3,000 14,385
Tokyo Electric Power 25,500 683,726
Tokyo Electron Limited 3,000 410,999
Tokyo Gas Co. 64,000 155,945
Tokyu Corporation 31,000 75,536
Toppan Printing Co., Ltd. 16,000 159,703
Toray Industries, Inc. 40,000 155,005
Tostem Corporation 6,000 107,740
Toto Limited 10,000 60,476
Toyo Seikan Kaisha, Ltd. 6,000 86,897
Toyota Motor Corporation 76,000 3,681,378
Uny Co., Ltd. 5,000 48,880
Wacoal Corp. 12,000 105,568
Yamaha Corporation 7,000 45,484
Yamanouchi Pharmaceutical Co., Ltd. 8,000 279,479
Yamato Transport Co., Ltd. 11,000 426,265
Yamazaki Baking Co., Ltd. 9,000 97,671
Yokogawa Electric Corporation 11,000 77,610
------------------------------------------------------------------------------
Total Investments in Japan (Cost -- $32,084,189) -- 30.8% 52,222,125
================================================================================================
Netherlands ABN AMRO Holding NV 14,056 351,029
+ ASM Lithography Holding NV 575 63,866
Aegon NV 1,440 139,063
Akzo Nobel NV 3,081 154,508
Elsevier NV 7,863 93,908
Heineken NV 3,411 166,317
ING Groep NV 8,370 505,209
KPN NV 4,288 418,416
Koninklijke Ahold NV 6,363 188,317
Koninklijke (Royal) Philips Electronics NV 3,496 475,264
Royal Dutch Petroleum Company 17,450 1,069,265
TNT Post Group NV 4,305 123,335
Unilever NV 'A' 5,803 320,464
Wolters Kluwer NV 'A' 3,447 116,630
------------------------------------------------------------------------------
Total Investments in the Netherlands (Cost -- $2,866,218) -- 2.5% 4,185,591
================================================================================================
New Zealand Brierley Investments Limited 96,737 20,195
Carter Holt Harvey Limited 57,331 74,803
Fletcher Challenge Building 11,230 16,528
Fletcher Challenge Energy 11,412 29,780
Fletcher Challenge Paper 22,856 15,984
Lion Nathan Limited 21,222 49,287
Telecom Corporation of New
Zealand Limited 56,532 265,536
------------------------------------------------------------------------------
Total Investments in New Zealand (Cost -- $517,303) -- 0.3% 472,113
================================================================================================
Norway Christiania Bank Og Kreditkasse 30,022 148,160
Den Norske Bank ASA 33,476 137,601
Dyno ASA 4,107 102,624
Elkem ASA 4,019 92,893
+ Kvaerner ASA 1,996 42,144
Merkantildata ASA 5,893 71,417
+ NCL Holdings ASA 11,553 49,942
Norsk Hydro ASA 11,251 472,306
Orkla ASA 'A' 6,900 118,966
+ Petroleum Geo-Services 3,700 66,104
+ Storebrand ASA 15,200 115,842
Tomra Systems ASA 4,266 72,486
------------------------------------------------------------------------------
Total Investments in Norway (Cost -- $1,316,024) -- 0.9% 1,490,485
================================================================================================
Portugal Banco Comercial Portugues, SA (BCP)
(Registered Shares) 32,500 180,329
Banco Espirito Santo, SA
(Registered Shares) 4,950 139,072
Cimpor-Cimentos de Portugal, SGPS, SA 3,750 62,308
EDP -- Electricidade de Portugal, SA 13,200 230,357
Jeronimo Martins SGPS, SA 2,400 61,387
Portugal Telecom SA (Registered Shares) 30,000 328,986
------------------------------------------------------------------------------
Total Investments in Portugal (Cost -- $1,061,338) -- 0.6% 1,002,439
================================================================================================
Singapore City Developments Limited 14,900 87,252
Creative Technology Limited 1,600 29,021
DBS Land Limited 40,300 79,390
Keppel Corporation Ltd. 22,000 57,610
Oversea-Chinese Banking
Corporation Ltd. 10,080 92,627
Singapore Airlines Limited 14,200 161,189
Singapore Telecommunications, Ltd. 119,000 245,862
United Overseas Bank Ltd. 12,672 111,879
------------------------------------------------------------------------------
Total Investments in Singapore (Cost -- $477,560) -- 0.5% 864,830
================================================================================================
Spain Acerinox SA 2,096 83,583
Altadis 4,769 67,810
Altadis 6,000 85,796
Argentina, Caja Postal y Banco
Hipotecario de Espana, SA 12,543 294,677
Autopistas, Concesionaria Espanola SA 9,800 95,232
Banco Bilbao Vizcaya, SA 47,207 672,180
Banco Santander Central Hispano, SA 78,560 889,196
Corporacion Financiera Alba, SA 3,135 107,210
Endesa SA 23,217 460,810
Fomento de Construcciones y
Contratas SA 3,936 80,064
Gas Natural SDG, SA 'E' 9,882 227,583
Iberdrola SA 20,081 278,249
Repsol-YPF, SA 25,200 584,165
+ Telefonica SA 68,834 1,719,033
Union Electrica Fenosa, SA 7,409 129,371
------------------------------------------------------------------------------
Total Investments in Spain (Cost -- $3,183,884) -- 3.4% 5,774,959
================================================================================================
Sweden Drott AB 'B' 2,700 30,834
Electrolux AB 'B' 5,700 143,607
Hennes & Mauritz AB 'B' 10,400 348,952
Skandia Forsakrings AB 7,400 223,899
Skandinaviska Enskilda Banken (Rights) 8,400 10,384
Skandinaviska Enskilda Banken (SEB) 'A' 8,400 85,048
Skanska AB 'B' 2,700 100,765
Svenska Cellulosa AB (SCA) 'B' 4,800 142,406
Svenska Handelsbanken AB 10,200 128,491
Telefonaktiebolaget LM Ericsson 'B' 20,900 1,345,927
Volvo AB 'B' 5,200 134,683
------------------------------------------------------------------------------
Total Investments in Sweden (Cost -- $1,076,067) -- 1.6% 2,694,996
================================================================================================
Switzerland + ABB Ltd. 1,199 146,702
Credit Suisse Group (Registered Shares) 1,320 262,474
Nestle SA (Registered Shares) 235 430,668
Novartis AG (Registered Shares) 360 528,793
Roche Holding AG 40 474,964
Schweizerische Rueckversicherungs-
Gesellschaft (Registered Shares) 83 170,568
Swisscom AG (Registered Shares) 400 161,840
UBS AG (Registered Shares) 1,044 282,038
Zurich Allied AG 258 147,178
------------------------------------------------------------------------------
Total Investments in Switzerland (Cost -- $1,951,888) -- 1.5% 2,605,225
================================================================================================
</TABLE>
16 & 17
<PAGE>
Merrill Lynch International Index Fund, December 31, 1999
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Master International (GDP Weighted) Index Series (concluded)
------------------------------------------------------------------------------
Shares Held/
COUNTRY Investments Face Amount Value
================================================================================================
<S> <C> <C> <C>
United Kingdom + ARM Holdings PLC 1,100 $ 74,168
Abbey National PLC 12,240 195,602
Allied Zurich PLC 16,150 190,176
Amvescap PLC 900 10,460
Arjo Wiggins Appleton PLC 1,800 6,538
AstraZeneca Group PLC 13,100 543,029
BG Group PLC 31,939 206,222
BG Transco Holdings PLC:
7.057% due 12/14/2009 (c) (pound) 4,000 6,502
4.188% due 2/14/2022 (c) (pound) 4,000 6,471
7% due 12/16/2024 (pound) 4,000 6,272
BP Amoco PLC 116,500 1,170,638
Barclays PLC 10,873 312,762
Bass PLC 8,986 111,763
Boots Company PLC 10,674 103,723
British Aerospace PLC 29,701 196,568
British Aerospace PLC,
7.45% due 11/30/2003 (pound) 3,783 5,954
British Airways PLC 10,652 69,466
British American Tobacco PLC 16,150 91,699
+ British Sky Broadcasting Group PLC
("BSkyB") 14,734 237,004
British Telecommunications PLC 45,706 1,116,271
Burmah Castrol PLC 10,059 183,481
CGU PLC 1,400 22,542
Cadbury Schweppes PLC 21,952 132,527
Carlton Communications PLC 11,125 108,287
Centrica PLC 11,200 31,729
Compass Group PLC 1,400 19,209
Diageo PLC 25,066 201,498
Dixons Group PLC 1,400 33,650
EMI Group PLC 9,111 89,345
Electrocomponents PLC 1,400 15,491
GKN PLC 1,900 29,903
Glaxo Wellcome PLC 25,669 725,111
<CAPTION>
------------------------------------------------------------------------------
Shares
COUNTRY Investments Held Value
================================================================================================
<S> <C> <C> <C>
Granada Group PLC 16,024 $ 162,308
The Great Universal Stores PLC 11,247 65,721
HSBC Holdings PLC 57,835 805,673
Halifax PLC 10,100 111,923
Hays PLC 2,100 33,424
Imperial Chemical Industries PLC 9,109 96,383
Invensys PLC 22,901 124,578
J Sainsbury PLC 20,186 113,800
Kingfisher PLC 11,300 125,312
Legal & General Group PLC 8,400 22,847
Lloyds TSB Group PLC 38,319 479,063
Logica PLC 1,600 41,245
Marconi PLC 27,934 493,973
Marks & Spencer PLC 28,472 135,466
Misys PLC 2,400 37,385
National Grid Group PLC 19,850 150,917
National Power PLC 15,200 87,961
Pearson PLC 6,502 210,330
The Peninsular and Oriental Steam
Navigation Company 8,023 133,781
Prudential Corporation PLC 17,243 339,571
Railtrack Group PLC 5,259 88,286
Rank Group PLC 14,326 45,325
Reed International PLC 15,000 112,227
Rentokil Initial PLC 6,600 24,051
Reuters Group PLC 12,733 174,603
Rio Tinto PLC (Registered Shares) 12,391 299,023
Royal Bank of Scotland Group PLC 7,384 130,873
SEMA Group PLC 1,900 34,166
ScottishPower PLC 14,100 106,744
ScottishPower PLC (ADR)* 4,023 112,657
SmithKline Beecham PLC 40,302 513,938
Tesco PLC 62,981 191,382
Unilever PLC 25,712 189,052
Vodafone AirTouch PLC 188,280 932,279
------------------------------------------------------------------------------
Total Investments in the United Kingdom
(Cost -- $9,126,768) -- 7.6% 12,980,328
================================================================================================
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM Face
SECURITIES Amount Issue
===============================================================================================================
<S> <C> <C> <C>
Commercial $6,803,000 General Motors Acceptance Corp., 5% due 1/03/2000 6,801,110
Paper** -----------------------------------------------------------------------------------------------
Total Investments in Commercial Paper (Cost -- $6,801,110) -- 4.0% 6,801,110
===============================================================================================================
US Government
Agency Federal Home Loan Banks:
Obligations** 4,500,000 5.67% due 1/12/2000 4,492,204
5,800,000 5.75% due 1/19/2000 5,783,385
300,000 5.72% due 1/28/2000 (b) 298,713
2,000,000 5.75% due 2/04/2000 1,989,139
Federal Home Loan Mortgage Corporation (b):
400,000 5.59% due 1/12/2000 399,317
150,000 5.66% due 1/13/2000 149,717
75,000 5.62% due 1/27/2000 74,696
400,000 Federal National Mortgage Association, 5.07% due 1/28/2000 (b) 398,479
-----------------------------------------------------------------------------------------------
Total Investments in US Government Agency Obligations
(Cost -- $13,585,650) -- 8.0% 13,585,650
===============================================================================================================
Total Investments in Short-Term Securities (Cost --
$20,386,760) -- 12.0% 20,386,760
===============================================================================================================
Total Investments (Cost -- $113,077,654) -- 99.4% 168,695,491
Variation Margin on Financial Futures Contracts *** -- 0.0% 5,224
Unrealized Depreciation on Forward Foreign Exchange Contracts -- Net**** -- 0.0% (17,151)
Other Assets Less Liabilities -- 0.6% 1,012,797
------------
Net Assets -- 100.0% $169,696,361
============
===============================================================================================================
</TABLE>
+ Non-income producing security.
(a) Warrants entitle the Series to purchase a predetermined number of shares
of common stock and are non-income producing. The purchase price and
number of shares are subject to adjustment under certain conditions until
the expiration date.
(b) Security held as collateral in connection with open financial futures
contracts.
(c) Floating rate note.
* American Depositary Receipts (ADR).
** Commercial Paper and certain US Government Agency Obligations are 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:
**** Forward foreign exchange contracts as of December 31, 1999 were as
follows:
- --------------------------------------------------------------------------------
Number of Expiration
Contracts Issue Exchange Date Value
- --------------------------------------------------------------------------------
15 CAC MATIF January 2000 $ 905,545
6 IBEX 35 MEFF January 2000 709,331
30 OMX OMLX January 2000 425,639
29 DTB DAX March 2000 5,130,237
7 FTSE LIFFE March 2000 788,359
23 CAC MATIF March 2000 1,395,219
7 MIB 30 MSE March 2000 1,528,540
279 Nikkei 300 OSAKA March 2000 8,799,462
14 All Ordinaries SFE March 2000 717,959
- --------------------------------------------------------------------------------
Total Financial Futures Contracts Purchased
(Total Contract Price -- $19,167,330) $20,400,291
===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Foreign Unrealized
Currency Expiration Appreciation
Purchased Date (Depreciation)
- --------------------------------------------------------------------------------
A$ 840,000 January 2000 $ 14,750
(euro) 5,900,000 January 2000 (27)
(pound) 250,000 January 2000 3,125
Skr 1,300,000 January 2000 (59)
(yen) 653,000,000 January 2000 (33,891)
- --------------------------------------------------------------------------------
Total (US$ Commitment -- $13,481,325) $ (16,102)
---------
- --------------------------------------------------------------------------------
Foreign
Currency
Sold
- --------------------------------------------------------------------------------
(pound) 80,000 January 2000 $ (1,049)
- --------------------------------------------------------------------------------
Total (US$ Commitment -- $128,096) $ (1,049)
---------
- --------------------------------------------------------------------------------
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts -- Net $ (17,151)
=========
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
18 & 19
<PAGE>
Merrill Lynch International Index Fund, December 31, 1999
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MASTER
INTERNATIONAL
(GDP WEIGHTED)
INDEX SERIES As of December 31, 1999
=================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $113,077,654) ........ $168,695,491
Foreign cash ................................................... 332,602
Receivables:
Contributions ............................................... $ 1,552,692
Dividends ................................................... 227,861
Securities sold ............................................. 149,671
Investment adviser .......................................... 22,214
Variation margin ............................................ 5,224
Interest .................................................... 127 1,957,789
-----------
Deferred organization expenses ................................. 5,909
Other assets ................................................... 144,077
------------
Total assets ................................................... 171,135,868
------------
=================================================================================================================
Liabilities: Unrealized depreciation on forward foreign exchange contracts .. 17,151
Payables:
Securities purchased ........................................ 659,216
Withdrawals ................................................. 368,226
Custodian bank .............................................. 348,304 1,375,746
-----------
Accrued expenses and other liabilities ......................... 46,610
------------
Total liabilities .............................................. 1,439,507
------------
=================================================================================================================
Net Assets: Net assets ..................................................... $169,696,361
============
=================================================================================================================
Net Assets Partners' capital .............................................. $112,858,378
Consist of: Unrealized appreciation on investments and foreign
currency transactions -- net ................................. 56,837,983
------------
Net assets ..................................................... $169,696,361
============
=================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MASTER
INTERNATIONAL
(GDP WEIGHTED)
INDEX SERIES For the Year Ended December 31, 1999
================================================================================================================
<S> <C> <C> <C>
Investment Income: Dividends (net of $295,330 foreign withholding tax) ..... $ 2,131,591
Interest and discount earned ............................ 254,412
------------
Total income ............................................ 2,386,003
------------
================================================================================================================
Expenses: Custodian fees .......................................... $ 120,377
Investment advisory fees ................................ 106,636
Professional fees ....................................... 65,442
Pricing fees ............................................ 25,177
Accounting services ..................................... 9,258
Amortization of organization expenses ................... 2,627
Trustees' fees and expenses ............................. 1,480
Other ................................................... 12,066
-----------
Total expenses before reimbursement ..................... 343,063
Reimbursement of expenses ............................... (26,206)
-----------
Total expenses after reimbursement ...................... 316,857
------------
Investment income -- net ................................ 2,069,146
------------
================================================================================================================
Realized & Realized gain (loss) from:
Unrealized Gain Investments -- net ................................... 5,697,824
(Loss) on Foreign currency transactions -- net ................. (706,136) 4,991,688
Investments & -----------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions -- Net: Investments -- net ................................... 34,526,024
Foreign currency transactions -- net ................. (41,484) 34,484,540
----------- ------------
Net realized and unrealized gain on investments and
foreign currency transactions ........................ 39,476,228
------------
Net Increase in Net Assets Resulting from Operations .... $ 41,545,374
============
================================================================================================================
</TABLE>
See Notes to Financial Statements.
20 & 21
<PAGE>
Merrill Lynch International Index Fund, December 31, 1999
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MASTER For the Year Ended
INTERNATIONAL December 31,
(GDP WEIGHTED) --------------------------------
INDEX SERIES Increase (Decrease) in Net Assets: 1999 1998
===================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income -- net .................................................. $ 2,069,146 $ 2,151,038
Realized gain on investments and foreign currency transactions -- net ..... 4,991,688 11,405,413
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions -- net ............................................. 34,484,540 21,936,836
------------ ------------
Net increase in net assets resulting from operations ...................... 41,545,374 35,493,287
------------ ------------
===================================================================================================================================
Net Capital Decrease in net assets derived from net capital contributions ............. (23,369,248) (27,390,852)
Contributions: ------------ ------------
===================================================================================================================================
Net Assets: Total increase in net assets .............................................. 18,176,126 8,102,435
Beginning of year ......................................................... 151,520,235 143,417,800
------------ ------------
End of year ............................................................... $169,696,361 $151,520,235
============ ============
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MASTER For the Year Ended For the Period
INTERNATIONAL December 31, April 9, 1997+ to
(GDP WEIGHTED) The following ratios have been derived from -------------------------- December 31,
INDEX SERIES information provided in the financial statements. 1999 1998 1997
============================================================================================================================
<S> <C> <C> <C> <C>
Ratios to Average Expenses, net of reimbursement ....................... .22% .26% .33%*
Net Assets: ========== ========== ==========
Expenses ............................................. .24% .33% .36%*
========== ========== ==========
Investment income -- net ............................. 1.43% 1.66% 1.99%*
========== ========== ==========
============================================================================================================================
Supplemental Net assets, end of period (in thousands) ............. $ 169,696 $ 151,520 $ 143,418
Data: ========== ========== ==========
Portfolio turnover ................................... 6.43% 34.63% 14.79%
========== ========== ==========
============================================================================================================================
</TABLE>
+ Commencement of operations.
* Annualized.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
MASTER
INTERNATIONAL
(GDP WEIGHTED)
INDEX SERIES
1. Significant Accounting Policies:
Master International (GDP Weighted) Index Series (the "Series") (formerly
Merrill Lynch International 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
22 & 23
<PAGE>
Merrill Lynch International Index Fund, December 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
MASTER
INTERNATIONAL
(GDP WEIGHTED)
INDEX SERIES
amount equal to the premium received by the Series is reflected as an asset and
an equivalent liability. The amount of the liability is subsequently marked to
market to reflect the current market value of the option written. When a
security is purchased or sold through an exercise of an option, the related
premium paid (or received) is added to (or deducted from) the basis of the
security acquired or deducted from (or added to) the proceeds of the security
sold. When an option expires (or the Series enters into a closing transaction),
the Series realizes a gain or loss on the option to the extent of the premiums
received or paid (or a gain or loss to the extent that the cost of the closing
transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
o Forward foreign exchange contracts -- The Series is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are not entered on the
Series' records. However, the effect on operations is recorded from the date the
Series enters into such contracts.
o Foreign currency options and futures -- The Series may also purchase or sell
listed or over-the-counter foreign currency options, foreign currency futures
and related options on foreign currency futures as a short or long hedge against
possible variations in foreign exchange rates. Such transactions may be effected
with respect to hedges on non-US dollar denominated securities owned by the
Series, sold by the Series but not yet delivered, or committed or anticipated to
be purchased by the Series.
(c) Foreign currency transactions -- Transactions denom-inated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(d) Income taxes -- The Series is classified as a partnership for Federal income
tax purposes. As 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.
(e) 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. Dividends from
foreign securities where the ex-dividend date may have passed are subsequently
recorded when the Series has determined the ex-dividend date. Interest income
(including amortization of discount) is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on the
identified cost basis.
(f) Deferred organization expenses -- Deferred organization expenses are charged
to expense on a straight-line basis over a period not exceeding five years.
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 .11% 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 $106,636, of which $26,206 was
voluntarily waived.
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 $8,940,870 and $45,134,912, respectively.
Net realized gains (losses) for the year ended December 31, 1999 and net
unrealized gains (losses) as of December 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains (Losses)
- --------------------------------------------------------------------------------
Investments:
Long-term ................................ $4,016,869 $55,617,837
Financial futures contracts .............. 1,680,955 1,232,961
---------- -----------
Total investments ........................... 5,697,824 56,850,798
---------- -----------
Currency transactions:
Foreign currency
transactions ........................... (459,143) 4,336
Forward foreign exchange
contracts .............................. (246,993) (17,151)
---------- -----------
Total currency transactions ................. (706,136) (12,815)
---------- -----------
Total ....................................... $4,991,688 $56,837,983
========== ===========
- --------------------------------------------------------------------------------
As of December 31, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $54,868,011, of which $59,287,592 related to appreciated
securities and $4,419,581 related to depreciated securities. At December 31,
1999, the aggregate cost of investments for Federal income tax purposes was
$113,827,480.
4. Loaned Securities:
At December 31, 1999, the Series held US Treasury notes having an aggregate
value of approximately $2,177,000 as collateral for portfolio securities loaned
having a market value of approximately $2,088,000.
24 & 25
<PAGE>
Merrill Lynch International Index Fund, December 31, 1999
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Investors, Master International (GDP Weighted) Index
Series (formerly Merrill Lynch International Index Series):
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Master International (GDP Weighted) 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 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 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 International
(GDP Weighted) 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
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
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
26 & 27
<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 2 -- 12/99
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