MERRILL LYNCH
INTERNATIONAL
INDEX FUND
Merrill Lynch
Index Funds, Inc.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
June 30, 2000
<PAGE>
Merrill Lynch International 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, Jr., 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
<PAGE>
Merrill Lynch International Index Fund, June 30, 2000
DEAR SHAREHOLDER
Performance Results
On June 30, 2000, Merrill Lynch International Index Fund's Class A and Class D
Shares had net asset values of $14.37 and $14.36 per share, respectively. For
the first half of 2000, the Fund's Class A and Class D Shares had total returns
of -5.02% and -5.09%, respectively. The Fund's benchmark, the unmanaged Morgan
Stanley Capital International Europe, Australasia and Far East (MSCI EAFE) Gross
Domestic Product (GDP) Weighted Index, produced a total return of -3.42% for the
same period. (Complete performance information can be found on pages 3 and 4 of
this report to shareholders.)
Market Review
Moderate gains in several of the large markets around the world led to a gain of
0.86% for the MSCI EAFE GDP Weighted Index in the first quarter of 2000.
However, this momentum was not sustained into the year's second quarter, and by
June 30, 2000, the MSCI EAFE GDP Weighted Index had a decline of 3.42% for the
year to date. Of the major markets included in the MSCI EAFE Index, the MSCI
Japan Index posted a decline of 5.37% during the year's first half, while MSCI
Germany fell by 7.44% and MSCI United Kingdom Index dropped by 11.72%.
Among the MSCI EAFE Index's other large constituents only MSCI France, with a
return of +6.03%, and MSCI Italy, with a return a +3.94%, managed to produce
positive returns for this period, while the MSCI Sweden Index managed to top all
constituents during these six months as it gained 9.57% in US dollar terms. Many
of the MSCI EAFE Index's smaller constituents suffered double-digit declines
during the first half of the year, as the MSCI components of Belgium, Hong Kong,
Ireland, New Zealand and Singapore fell by 16.04%, 13.05%, 17.79%, 16.65% and
22.67%, respectively.
One of the factors that reduced the US dollar returns on both our European and
Japanese holdings was the impact of currency translations back to the US dollar,
which rallied against both the euro and the yen during the first six months of
2000. Introduced at the end of 1998 at a value of about $1.16, the euro ended
1999 at virtual parity with the US dollar. However, the euro continued to
decline in value throughout the first quarter, dropping through first the $1.00
level and then the $0.90 level by early May, before eventually bottoming out and
rallying in late May. The euro ended June at $0.9525, little changed from its
level at the end of March. The Japanese yen declined sharply during most of
January and February, but showed renewed strength through the end of March, and
ended the quarter largely unchanged compared with its level at year-end. Despite
an interim rally in the middle of the second quarter, the yen finished the month
of June at 106.12 relative to the US dollar compared with its level of 102.51
relative to the US dollar at 1999 year-end.
Portfolio Matters
Net assets in the Fund declined from $134.9 million at the end of 1999 to $119.1
million on June 30, 2000. This represents a reduction of 11.7% for the period.
Merrill Lynch International Index Fund invests all of its assets in Master
International (GDP Weighted) 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 that 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.
MSCI revises its set of GDP weights for the constituent countries on an annual
basis on June 30. In this year's annual event, of the Index's largest component
countries, the greatest increase in GDP weight (when compared with the 1999
structure) was the nearly four percentage point increase in the weight of Japan,
which now represents approximately 35% of the GDP Weighted Index. In addition,
there was a 0.50% increase in the weight of the United Kingdom (now 10.21% of
the Index). Offsetting these gains was the nearly two percentage point decline
in the weight of Germany (now 14.32%), and a one percentage point decline in the
weight of France (9.72%).
The Series revises its weighting scheme to maintain alignment with the MSCI EAFE
GDP Weighted Index through a combination of basket trades and futures trades in
the relevant countries. As a result of this year's rebalance, the Series
purchased an equity portfolio valued at $2.1 million in Japan, $1.1 million in
Australia, and a $3.5 million equity portfolio in the United Kingdom. On the
sell side, equity portfolios valued at approximately $3.9 million, $1.0 million
and $0.8 million were sold in France, Finland, and Sweden, respectively.
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 and Director
/s/ Eric S. Mitofsky
Eric S. Mitofsky
Senior Vice President and
Portfolio Manager
August 7, 2000
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.
2 & 3
<PAGE>
Merrill Lynch International Index Fund, June 30, 2000
PERFORMANCE DATA (concluded)
Recent Performance Results
<TABLE>
<CAPTION>
6 Month 12 Month Since Inception
As of June 30, 2000 Total Return Total Return Total Return
============================================================================================================
<S> <C> <C> <C>
ML International Index Fund Class A Shares* -5.02% +18.13% +69.92%
------------------------------------------------------------------------------------------------------------
ML International Index Fund Class D Shares* -5.09 +17.84 +68.67
------------------------------------------------------------------------------------------------------------
MSCI EAFE Index--GDP Weighted** -3.42 +19.76 +68.83
============================================================================================================
</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.
Average Annual Total Return
% Return
================================================================================
Class A Shares
================================================================================
Year Ended 6/30/00 +18.13%
================================================================================
Inception (4/09/97) through 6/30/00 +17.87
--------------------------------------------------------------------------------
% Return
================================================================================
Class D Shares
================================================================================
Year Ended 6/30/00 +17.84%
--------------------------------------------------------------------------------
Inception (4/09/97) through 6/30/00 +17.60
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MERRILL LYNCH
INTERNATIONAL
INDEX FUND As of June 30, 2000
====================================================================================================================================
<C> <S> <C>
Assets: Investment in Master International (GDP Weighted) Index Series, at value
(identified cost--$84,856,585) ........................................................................ $119,145,541
Deferred organization expenses ........................................................................ 9,312
Prepaid registration fees and other assets ............................................................ 11,547
------------
Total assets .......................................................................................... 119,166,400
------------
====================================================================================================================================
Liabilities: Payable to administrator .............................................................................. 22,265
Payable to distributor ................................................................................ 8,561
Accrued expenses and other liabilities ................................................................ 74,285
------------
Total liabilities ..................................................................................... 105,111
------------
====================================================================================================================================
Net Assets: Net assets ............................................................................................ $119,061,289
============
====================================================================================================================================
Net Assets Class A Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized ....................... $ 538
Consist of: Class D Shares of Common Stock, $.0001 par value, 125,000,000 shares authorized ....................... 291
Paid-in capital in excess of par ...................................................................... 78,099,067
Undistributed investment income--net .................................................................. 840,089
Undistributed realized capital gains on investments and foreign currency transactions from the
Series--net ........................................................................................... 5,832,348
Unrealized appreciation on investments and foreign currency transactions from the Series--net ......... 34,288,956
------------
Net assets ............................................................................................ $119,061,289
============
====================================================================================================================================
Net Asset Class A--Based on net assets of $77,311,625 and 5,378,780 shares outstanding .......................... $ 14.37
Value: ============
Class D--Based on net assets of $41,749,664 and 2,908,275 shares outstanding .......................... $ 14.36
============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MERRILL LYNCH
INTERNATIONAL
INDEX FUND For the Six Months Ended June 30, 2000
========================================================================================================================
<C> <S> <C> <C>
Investment Income: Investment income allocated from the Series (net of $128,800
foreign withholding tax) ............................................ $ 1,216,454
Expenses allocated from the Series .................................. (94,422)
------------
Net investment income from the Series ............................... 1,122,032
------------
========================================================================================================================
Expenses: Administration fee .................................................. $ 197,021
Account maintenance fee--Class D .................................... 44,145
Registration fees ................................................... 30,752
Printing and shareholder reports .................................... 24,831
Transfer agent fees ................................................. 20,457
Professional fees ................................................... 15,378
Amortization of organization expenses ............................... 6,394
------------
Total expenses before reimbursement ................................. 338,978
Reimbursement of expenses ........................................... (16,615)
------------
Total expenses after reimbursement .................................. 322,363
------------
Investment income--net .............................................. 799,669
------------
========================================================================================================================
Realized & Realized gain (loss) from the Series on:
Unrealized Gain Investments--net ................................................. 6,608,085
(Loss) from the Foreign currency transactions--net ............................... (1,243,833) 5,364,252
Series--Net: ------------
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions from the Series--net .............. (12,416,098)
------------
Net Decrease in Net Assets Resulting from Operations ................ $ (6,252,177)
============
========================================================================================================================
</TABLE>
See Notes to Financial Statements.
4 & 5
<PAGE>
Merrill Lynch International Index Fund, June 30, 2000
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MERRILL LYNCH For the Six For the
INTERNATIONAL Months Ended Year Ended
INDEX FUND Increase (Decrease) in Net Assets: June 30, 2000 Dec. 31, 1999
=============================================================================================================================
<C> <S> <C> <C>
Operations: Investment income--net ................................................ $ 799,669 $ 1,172,212
Realized gain on investments and foreign currency
transactions from the Series--net ..................................... 5,364,252 4,357,851
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions from the Series--net ................ (12,416,098) 26,777,556
------------- -------------
Net increase (decrease) in net assets resulting from operations ....... (6,252,177) 32,307,619
------------- -------------
=============================================================================================================================
Dividends & Investment income--net:
Distributions to Class A ............................................................. -- (595,052)
Shareholders: Class D ............................................................. -- (108,541)
Realized gain on investments from the Series--net:
Class A ............................................................. -- (3,549,106)
Class D ............................................................. -- (905,580)
------------- -------------
Net decrease in net assets resulting from dividends
and distributions to shareholders ..................................... -- (5,158,279)
------------- -------------
=============================================================================================================================
Capital Share Net decrease in net assets derived from capital share transactions .... (9,593,993) (25,736,000)
Transactions: ------------- -------------
=============================================================================================================================
Net Assets: Total increase (decrease) in net assets ............................... (15,846,170) 1,413,340
Beginning of period ................................................... 134,907,459 133,494,119
------------- -------------
End of period* ........................................................ $119,061,289 $134,907,459
============= =============
=============================================================================================================================
* Undistributed investment income--net .................................. $ 840,089 $ 40,420
============= =============
=============================================================================================================================
</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 Six For the Year Ended Dec. 31,++++
INTERNATIONAL from information provided in the financial statements. Months Ended --------------------------------
INDEX FUND Increase (Decrease) in Net Asset Value: June 30, 2000++++ 1999 1998
==================================================================================================================================
<C> <S> <C> <C> <C>
Per Share Net asset value, beginning of period ...................... $ 15.13 $ 12.04 $ 10.56
Operating ----------- ----------- -----------
Performance: Investment income--net .................................... .10 .13 .15
Realized and unrealized gain (loss) on investments and
foreign currency transactions from the Series--net ........ (.86) 3.59 2.52
----------- ----------- -----------
Total from investment operations .......................... (.76) 3.72 2.67
Less dividends and distributions:
Investment income--net .................................. -- (.09) (.12)
In excess of investment income--net ..................... -- -- (.04)
Realized gain on investments from the Series--net ....... -- (.54) (1.03)
----------- ----------- -----------
Total dividends and distributions ......................... -- (.63) (1.19)
----------- ----------- -----------
Net asset value, end of period ............................ $ 14.37 $ 15.13 $ 12.04
=========== =========== ===========
==================================================================================================================================
Total Investment Based on net asset value per share ........................ (5.02%)+++ 31.29% 25.65%
Return: =========== =========== ===========
==================================================================================================================================
Ratios to Average Expenses, net of reimbursement++ .......................... .64%* .64% .64%
Net Assets: =========== =========== ===========
Expenses++ ................................................ .68%* .69% .76%
=========== =========== ===========
Investment income--net .................................... 1.40%* 1.05% 1.26%
=========== =========== ===========
==================================================================================================================================
Supplemental Net assets, end of period (in thousands) .................. $ 77,311 $ 104,427 $ 118,692
Data: =========== =========== ===========
==================================================================================================================================
<CAPTION>
Class A
-----------------
MERRILL LYNCH The following per share data and ratios have been derived For the Period
INTERNATIONAL from information provided in the financial statements. April 9, 1997+ to
INDEX FUND Increase (Decrease) in Net Asset Value: Dec. 31, 1997
================================================================================================
<C> <S> <C>
Per Share Net asset value, beginning of period ...................... $ 10.00
Operating -----------
Performance: Investment income--net .................................... .10
Realized and unrealized gain (loss) on investments and
foreign currency transactions from the Series--net ........ .75
-----------
Total from investment operations .......................... .85
Less dividends and distributions:
Investment income--net .................................. (.12)
In excess of investment income--net ..................... (.02)
Realized gain on investments from the Series--net ....... (.15)
-----------
Total dividends and distributions ......................... (.29)
-----------
Net asset value, end of period ............................ $ 10.56
===========
================================================================================================
Total Investment Based on net asset value per share ........................ 8.45%+++
Return: ===========
================================================================================================
Ratios to Average Expenses, net of reimbursement++ .......................... .86%*
Net Assets: ===========
Expenses++ ................................................ 1.10%*
===========
Investment income--net .................................... 1.64%*
===========
================================================================================================
Supplemental Net assets, end of period (in thousands) .................. $ 115,190
Data: ===========
================================================================================================
<CAPTION>
Class D
---------------------------------------------------
MERRILL LYNCH The following per share data and ratios have been derived For the Six For the Year Ended Dec. 31,++++
INTERNATIONAL from information provided in the financial statements. Months Ended --------------------------------
INDEX FUND Increase (Decrease) in Net Asset Value: June 30, 2000++++ 1999 1998
===================================================================================================================================
<C> <S> <C> <C> <C>
Per Share Net asset value, beginning of period ...................... $ 15.13 $ 12.05 $ 10.56
Operating ---------- ---------- ----------
Performance: Investment income--net .................................... .10 .08 .13
Realized and unrealized gain (loss) on investments and
foreign currency transactions from the Series--net ........ (.87) 3.61 2.51
---------- ---------- ----------
Total from investment operations .......................... (.77) 3.69 2.64
---------- ---------- ----------
Less dividends and distributions:
Investment income--net .................................. -- (.07) (.09)
In excess of investment income--net ..................... -- -- (.03)
Realized gain on investments from the Series--net ....... -- (.54) (1.03)
---------- ---------- ----------
Total dividends and distributions ......................... -- (.61) (1.15)
---------- ---------- ----------
Net asset value, end of period ............................ $ 14.36 $ 15.13 $ 12.05
========== ========== ==========
===================================================================================================================================
Total Investment Based on net asset value per share ........................ (5.09%)+++ 30.95% 25.40%
Return: ========== ========== ==========
===================================================================================================================================
Ratios to Average Expenses, net of reimbursement++ .......................... .89%* .89% .89%
Net Assets: ========== ========== ==========
Expenses++ ................................................ .94%* .95% 1.02%
========== ========== ==========
Investment income--net .................................... 1.32%* .65% 1.14%
========== ========== ==========
===================================================================================================================================
Supplemental Net assets, end of period (in thousands) .................. $ 41,750 $ 30,480 $ 14,802
Data: ========== ========== ==========
===================================================================================================================================
<CAPTION>
Class D
-----------------
MERRILL LYNCH The following per share data and ratios have been derived For the Period
INTERNATIONAL from information provided in the financial statements. April 9, 1997+ to
INDEX FUND Increase (Decrease) in Net Asset Value: Dec. 31, 1997
=================================================================================================
<C> <S> <C>
Per Share Net asset value, beginning of period ...................... $ 10.00
Operating ----------
Performance: Investment income--net .................................... .15
Realized and unrealized gain (loss) on investments and
foreign currency transactions from the Series--net ........ .67
----------
Total from investment operations .......................... .82
----------
Less dividends and distributions:
Investment income--net .................................. (.10)
In excess of investment income--net ..................... (.01)
Realized gain on investments from the Series--net ....... (.15)
----------
Total dividends and distributions ......................... (.26)
----------
Net asset value, end of period ............................ $ 10.56
==========
=================================================================================================
Total Investment Based on net asset value per share ........................ 8.22%+++
Return: ==========
=================================================================================================
Ratios to Average Expenses, net of reimbursement++ .......................... 1.11%*
Net Assets: ==========
Expenses++ ................................................ 1.35%*
==========
Investment income--net .................................... 1.67%*
==========
=================================================================================================
Supplemental Net assets, end of period (in thousands) .................. $ 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.
6 & 7
<PAGE>
Merrill Lynch International Index Fund, June 30, 2000
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
accounting principles generally accepted in the United States of America, which
may require the use of management accruals and estimates. These unaudited
financial statements reflect all adjustments, which are, in the opinion of
management, necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature. 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.
(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.
(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 .34% 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. For the six months ended
June 30, 2000, FAM earned fees of $197,021, of which $16,615 was voluntarily
waived.
The Corporation has also entered into a Distribution Agreement and Distribution
Plan with FAM Distributors, Inc. ("FAMD" or the "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plan
adopted by the Corporation in accordance with Rule 12b-1 under the Investment
Company Act of 1940, the Fund pays the Distributor 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 Merrill Lynch & Co., Inc. ("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, FAMD, FDS, and/or ML & Co.
3. Investments:
Increases and decreases in the Fund's investment in the Series for the six
months ended June 30, 2000 were $44,992,581 and $55,149,387, respectively.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$9,593,993 and $25,736,000 for the six months ended June 30, 2000 and the year
ended December 31, 1999, respectively.
Transactions in capital shares for each class were as follows:
-------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended June 30, 2000 Shares Amount
-------------------------------------------------------------------------------
Shares sold ........................ 3,365,969 $ 48,944,576
Shares redeemed .................... (4,890,580) (71,491,282)
---------- ------------
Net decrease ....................... (1,524,611) $(22,546,706)
========== ============
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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 D Shares for the Six Months Dollar
Ended June 30, 2000 Shares Amount
-------------------------------------------------------------------------------
Shares sold ........................ 1,488,819 $ 21,571,236
Shares redeemed .................... (595,675) (8,618,523)
---------- ------------
Net increase ....................... 893,144 $ 12,952,713
========== ============
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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
========== ============
-------------------------------------------------------------------------------
8 & 9
<PAGE>
Merrill Lynch International Index Fund, June 30, 2000
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Master International (GDP Weighted) Index Series
---------------------------------------------------------------------------------
Shares
COUNTRY Investments Held Value
==========================================================================================================
<C> <S> <C> <C>
Australia AMP Limited 18,546 $ 189,295
Australian Gas Light Company Limited 10,962 65,487
+ Boral Limited 15,272 19,256
Brambles Industries Limited 4,812 148,316
Broken Hill Proprietary Company Limited 25,303 300,040
CSR Limited 19,403 54,054
Coca-Cola Amatil Limited 13,676 26,686
Coles Myer Limited 22,161 85,341
Commonwealth Bank of Australia 18,306 304,339
Foster's Brewing Group Limited 43,098 121,617
Lend Lease Corporation Limited 8,550 109,383
National Australia Bank Limited 21,028 352,218
The News Corporation Limited 29,036 400,964
The News Corporation Limited (Preferred) 30,608 370,573
Normandy Mining Limited 39,003 21,076
North Limited 3,698 8,770
Origin Energy Limited 224 217
Pacific Dunlop Limited 34,926 31,245
Rio Tinto Limited 5,104 84,637
Santos Limited 12,768 39,019
Schroders Property Fund 48,759 68,211
Smith (Howard) Limited 10,458 51,237
TABCORP Holdings Limited 11,108 64,025
Telstra Corporation Limited 108,780 442,812
WMC Limited 18,478 82,907
Westfield Trust 43,962 85,545
Westpac Banking Corporation Limited 27,034 195,586
---------------------------------------------------------------------------------
Total Investments in Australia (Cost--$3,353,447)--2.3% 3,722,856
==========================================================================================================
Austria Austria Tabakwerke AG 2,926 108,829
Austrian Airlines/Oesterreichische
Luftverkehrs AG 4,138 60,095
BWT AG 202 71,355
Bank Austria AG 13,192 645,191
Boehler-Uddeholm AG 1,471 51,680
Flughafen Wien AG 2,786 99,589
Generali Holding Vienna AG 923 149,087
Mayr-Melnhof Karton AG 1,543 73,290
OMV AG 3,184 277,749
Oesterreichische Elektrizitaetswirtschafts-
AG "Verbund" 'A' 3,662 377,367
RHI AG 2,505 61,329
VA Technologie AG 1,784 94,366
Wienerberger Baustoffindustrie AG 8,585 195,782
---------------------------------------------------------------------------------
Total Investments in Austria (Cost--$2,496,816)--1.4% 2,265,709
==========================================================================================================
Belgium Barco NV 516 58,120
Bekaert NV 934 48,437
Delhaize "Le Lion" SA 2,215 133,025
Electrabel SA 2,024 502,319
Fortis 'B' 26,717 780,621
Glaverbel SA 455 34,021
Groupe Bruxelles Lambert SA 898 225,105
KBC Bancassurance Holding 10,950 483,896
Solvay SA 3,211 217,004
UCB SA 5,464 201,550
Union Miniere SA 1,107 40,314
---------------------------------------------------------------------------------
Total Investments in Belgium (Cost--$2,650,429)--1.7% 2,724,412
==========================================================================================================
Denmark A/S Dampskibsselskabet Svendborg 'B' 19 281,982
Carlsberg A/S 'A' 2,197 64,930
D/S 1912 'B' 29 309,288
Danisco A/S 2,130 71,434
Den Danske Bank Group 1,652 199,537
FLS Industries A/S 'B' 2,244 34,601
+ Group 4 Falck A/S 532 85,723
+ ISS A/S 1,083 82,800
+ Navision Software A/S 802 33,492
Novo Nordisk A/S 'B' 2,052 350,684
SAS Danmark A/S 2,354 19,812
Tele Danmark A/S 5,836 394,446
Vestas Wind Systems A/S 2,824 104,144
William Demant A/S 2,640 78,361
---------------------------------------------------------------------------------
Total Investments in Denmark (Cost--$1,516,686)--1.3% 2,111,234
==========================================================================================================
Finland Metso Oyj 1,223 14,772
Nokia Oyj 22,538 1,154,783
Nokia Oyj 'A' (ADR)* 1,270 63,421
Sampo Insurance Company Ltd. 'A' 467 19,026
Sonera Oyj 3,628 166,065
Tietoenator Oyj 483 16,182
UPM-Kymmene Oyj 1,680 41,872
---------------------------------------------------------------------------------
Total Investments in Finland (Cost--$466,020)--0.9% 1,476,121
==========================================================================================================
France Accor SA 3,113 128,108
Air Liquide 1,419 185,824
Alcatel 15,130 996,399
Aventis SA 10,688 783,270
Axa 5,341 844,781
Banque Nationale de Paris (BNP) 6,054 584,979
+ Bouygues SA 467 313,366
Canal Plus 1,718 289,850
Cap Gemini SA 1,653 292,352
Carrefour SA 9,452 648,745
Compagnie de Saint Gobain 1,236 167,772
Compagnie Generale des Etablissements
Michelin 'B' 2,143 69,044
Dassault Systemes SA 1,571 147,132
Eridania Beghin-Say SA 556 54,684
Etablissements Economiques du Casino
Guichard-Perrachon SA 1,296 120,508
France Telecom SA 13,886 1,948,748
Groupe Danone 2,085 277,817
Imetal SA 298 34,737
+ L'Oreal SA 927 805,980
+ LVMH (Louis Vuitton Moet Hennessy) 1,329 550,232
Lafarge SA (Ordinary) 1,508 117,669
Lagardere SCA 1,709 131,060
PSA Peugeot Citroen 653 131,578
Pechiney SA 'A' 1,178 49,347
Pernod Ricard 1,129 61,689
Pinault-Printemps-Redoute SA 1,631 363,821
STMicroelectronics NV 11,707 740,674
Sagem SA 145 170,688
Sanofi-Synthelabo SA 10,094 482,838
Schneider SA 2,285 159,899
Sidel SA 558 45,440
Societe BIC SA 1,012 49,766
Societe Generale 'A' 5,691 343,690
Sodexho Alliance 514 93,617
Suez Lyonnaise des Eaux SA 2,764 486,196
Suez Lyonnaise des Eaux SA 957 9
Thomson CSF 2,462 97,377
+ Total Fina Elf SA 1,480 231,111
Total Fina SA 4,140 40
Total Fina SA 'B' 8,631 1,328,752
Usinor SA 3,494 42,805
Valeo SA 1,255 67,370
Vivendi 8,100 717,843
---------------------------------------------------------------------------------
Total Investments in France (Cost--$8,232,672)--9.5% 15,157,607
==========================================================================================================
Germany Adidas-Salomon AG 1,267 70,371
Allianz AG (Registered Shares) 5,724 2,064,768
BASF AG 14,512 585,662
Bayer AG 31,900 1,250,083
Beiersdorf AG 2,109 181,952
Buderus AG 2,068 33,007
Continental AG 3,422 57,734
DaimlerChrysler AG (Registered Shares) 23,593 1,235,526
Deutsche Bank AG (Registered Shares) 14,381 1,188,321
Deutsche Lufthansa AG (Registered Shares) 9,196 213,418
Deutsche Telekom AG (Registered Shares) 71,070 4,074,037
Douglas Holding AG 989 28,726
Dresdner Bank AG 12,176 503,059
EM.TV & Merchandising AG 2,823 167,374
Fresenius Medical Care AG 2,068 165,569
Gehe AG 1,848 61,117
Heidelberger Zement AG 349 21,612
Heidelberger Zement AG 1,292 12
Heidelberger Zement AG 1,292 80,008
Hochtief AG 1,785 54,584
HypoVereinsbank 9,737 631,531
Kamps AG 1,913 61,432
Karstadt AG 2,864 74,950
Linde AG 2,930 118,246
MAN AG 3,316 100,638
Merck KGaA 4,184 134,361
Metro AG 6,659 236,119
Muenchener Rueckversicherungs-
Gesellschaft AG (Registered Shares) 4,136 1,304,409
Preussag AG 4,128 133,948
RWE AG 11,189 380,765
RWE AG (Preferred) 1,899 50,971
SAP AG (Systeme, Anwendungen,
Produkte in der Datenverarbeitung) 4,290 634,954
SAP AG (Systeme, Anwendungen,
Produkte in der Datenverarbeitung)
(Preferred) 3,048 565,371
+ SGL Carbon AG 540 36,054
</TABLE>
10 & 11
<PAGE>
Merrill Lynch International Index Fund, June 30, 2000
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
Master International (GDP Weighted) Index Series (continued)
----------------------------------------------------------------------------------
Shares
COUNTRY Investments Held Value
===========================================================================================================
<C> <S> <C> <C>
Germany Schering AG 4,770 $ 262,463
(concluded) Siemens AG 13,916 2,107,701
Thyssen Krupp AG 12,252 200,248
Veba AG 18,297 901,531
Volkswagen AG 7,278 276,905
Volkswagen AG (Preferred) 2,691 63,819
WCM Beteiligungs- und Grundbesitz AG 4,292 101,171
----------------------------------------------------------------------------------
Total Investments in Germany (Cost--$16,741,400)--12.7% 20,414,527
===========================================================================================================
Hong Kong CLP Holdings Limited 26,000 121,073
Hang Seng Bank Limited 17,900 169,349
Henderson Land Development Company
Limited 8,300 36,521
Hong Kong Telecom Limited 101,400 223,735
Hutchison Whampoa Limited 35,200 442,523
Li & Fung Limited 7,800 39,024
+ Pacific Century CyberWorks Limited 32,400 64,008
Sun Hung Kai Properties Ltd. 20,000 143,676
----------------------------------------------------------------------------------
Total Investments in Hong Kong (Cost--$940,210)--0.8% 1,239,909
===========================================================================================================
Ireland Allied Irish Banks PLC 22,111 198,603
CRH PLC 10,298 186,574
DCC PLC 1,624 14,431
eircom PLC 50,160 134,633
Fyffes PLC 4,290 4,441
Greencore Group PLC 15,903 42,685
Independent News & Media PLC 6,056 22,060
Independent News & Media PLC 6,056 22,060
Irish Life & Permanent PLC 4,983 42,178
Jefferson Smurfit Group PLC 27,525 47,494
Jurys Doyle Hotel Group PLC 283 1,696
Kerry Group PLC 'A' 2,608 34,225
+ Ryanair Holdings PLC 1,118 8,145
+ Ryanair Holdings PLC 7,174 52,265
----------------------------------------------------------------------------------
Total Investments in Ireland (Cost--$871,179)--0.5% 811,490
===========================================================================================================
Italy Assicurazioni Generali 35,240 1,212,740
Banca di Roma SpA 111,223 137,111
Banca Intesa SpA 129,421 581,855
Banca Popolare di Milano (BPM) 9,508 68,813
Benetton Group SpA 61,865 129,875
Beni Stabili 38,576 20,782
Bulgari SpA 9,792 131,413
ENI SpA 214,622 1,244,707
Enel SpA 194,069 863,200
Fiat SpA 10,366 270,083
Fiat SpA (Preferred) 4,101 67,027
Fiat SpA (RNC) 3,627 50,101
+ Immsi SpA 13,078 18,617
Italcementi SpA 7,228 68,248
Italgas SpA 19,763 87,714
Mediaset SpA 32,596 499,944
Mediobanca SpA 17,355 179,674
Olivetti SpA 129,188 471,829
Parmalat Finanziaria SpA 51,070 72,357
Pirelli SpA 62,873 166,044
Riunione Adriatica di Sicurta SpA 19,560 215,627
San Paolo-IMI SpA 38,696 689,577
Sirti SpA 13,078 21,876
Telecom Italia Mobile (TIM) SpA 45,044 227,554
Telecom Italia Mobile (TIM) SpA 175,887 1,804,076
Telecom Italia SpA 98,018 1,353,025
Telecom Italia SpA (Registered Shares) 25,877 172,400
Unicredito Italiano SpA 136,354 654,852
----------------------------------------------------------------------------------
Total Investments in Italy (Cost--$6,684,661)--7.2% 11,481,121
===========================================================================================================
Japan The 77 Bank, Ltd. 12,000 96,177
Acom Co., Ltd. 3,100 261,349
Advantest Corporation 2,000 447,049
Ajinomoto Co., Inc. 16,000 205,661
Alps Electric Co., Ltd. 5,000 93,096
Aoyamma Trading Co., Ltd. 2,600 37,597
The Asahi Bank, Ltd. 61,000 257,133
Asahi Breweries Limited 15,000 179,906
Asahi Chemical Industry Co., Ltd. 37,000 262,275
Asahi Glass Company, Limited 27,000 302,396
Autobacs Seven Co., Ltd. 1,300 43,372
The Bank of Tokyo-Mitsubishi, Ltd. 97,000 1,174,396
The Bank of Yokohama, Ltd. 28,000 125,703
Benesse Corporation 2,400 166,722
Bridgestone Corp. 18,000 381,929
CSK Corporation 2,200 68,201
Canon, Inc. 18,000 898,256
Casio Computer Co., Ltd. 9,000 101,224
Central Japan Railway Company 49 277,870
The Chiba Bank, Ltd. 3,000 11,880
Chugai Pharmaceutical Co., Ltd. 8,000 151,600
The Chuo Trust & Banking Co., Ltd. 15,000 65,498
Citizen Watch Co. 9,000 87,104
Cosmo Oil Co., Ltd. 37,000 68,191
Credit Saison Co., Ltd. 4,600 106,951
Dai Nippon Printing Co., Ltd. 16,000 282,633
The Daiei, Inc. 19,000 71,471
The Daimaru, Inc. 12,000 42,191
Dainippon Ink and Chemicals, Inc. 23,000 108,473
+ Dainippon Screen Mfg. Co., Ltd. 5,000 47,682
Daiwa House Industry Co., Ltd. 13,000 95,099
Daiwa Securities Group Inc. 28,000 370,493
Denso Corporation 19,000 463,305
East Japan Railway Company 79 459,940
Ebara Corporation 11,000 149,397
Eisai Company, Ltd. 7,000 224,942
Fanuc Ltd. 5,000 509,900
The Fuji Bank, Limited 72,000 548,481
Fuji Photo Film 11,000 451,207
Fujikura Ltd. 12,000 79,958
Fujitsu Limited 40,000 1,387,458
The Furukawa Electric Co., Ltd. 14,000 293,086
The Gunma Bank Ltd. 20,000 103,398
Hankyu Department Stores, Inc. 9,000 48,145
Hirose Electric Co., Ltd. 900 140,438
Hitachi Ltd. 69,000 997,779
Honda Motor Co., Ltd. 20,000 682,387
Hoya Corporation 3,000 269,363
The Industrial Bank of Japan, Limited 56,000 425,538
Isetan Company Ltd. 7,000 86,007
Ito-Yokado Co., Ltd. 8,000 482,397
Itochu Corporation 31,000 156,751
JUSCO Co., Ltd. 7,000 132,980
Japan Airlines Company, Ltd. (JAL) 43,000 163,782
Japan Energy Corp. 59,000 63,570
Japan Tobacco, Inc. 43 378,366
The Joyo Bank, Ltd. 26,000 100,260
Kajima Corporation 28,000 89,448
Kaneka Corporation 13,000 143,632
Kansai Electric Power Company, Inc. 19,200 344,422
Kao Corporation 13,000 398,091
+ Kawasaki Heavy Industries Ltd. 41,000 62,776
Kawasaki Steel Corporation 78,000 112,055
Keihin Electric Express Railway Co., Ltd. 40,000 150,844
Kinden Corporation 11,000 69,241
Kirin Brewery Company, Ltd. 23,000 288,030
Kokuyo Co., Ltd. 4,000 65,744
Komatsu Ltd. 28,000 197,420
Konami Co., Ltd. 2,600 164,642
Kubota Corporation 40,000 145,551
Kurita Water Industries Ltd. 4,000 88,276
Kyocera Corporation 3,900 663,116
Maeda Road Construction Co., Ltd. 12,000 56,481
Marubeni Corporation 35,000 120,741
Marui Co., Ltd. 8,000 153,490
Matsushita Electric Industrial
Company, Ltd. 42,000 1,091,631
Minebea Company Ltd. 11,000 138,273
Mitsubishi Chemical Corporation 50,000 205,567
Mitsubishi Corporation 32,000 290,043
Mitsubishi Electric Corporation 45,000 488,257
Mitsubishi Estate Company, Limited 27,000 318,473
Mitsubishi Heavy Industries, Ltd. 79,000 350,929
Mitsubishi Logistics Corp. 6,000 54,440
Mitsubishi Materials Corporation 27,000 110,751
Mitsubishi Trust & Banking Corp. 28,000 217,797
Mitsui & Co., Ltd. 33,000 252,635
Mitsui Fudosan Co., Ltd. 17,000 184,774
Mitsui Marine and Fire Insurance
Company, Ltd. 19,000 91,584
Mitsui Mining & Smelting Co., Ltd. 13,000 98,908
Mitsukoshi, Ltd. 14,000 62,190
Murata Manufacturing Co., Ltd. 5,000 719,248
Mycal Corporation 13,000 44,601
NEC Corporation 34,000 1,070,082
NSK Limited 14,000 123,057
Namco Ltd. 2,000 72,208
Nichiei Co., Ltd. 2,500 41,113
Nidec Corporation 1,300 113,038
Nikon Corporation 7,000 260,007
Nintendo Company Ltd. 3,000 525,117
Nippon COMSYS Corporation 5,000 106,564
Nippon Express Co., Ltd. 26,000 159,974
Nippon Light Metal Co., Ltd. 35,000 34,734
Nippon Meat Packers, Inc. 8,000 117,197
Nippon Mitsubishi Oil Corp. 41,000 188,328
</TABLE>
12 & 13
<PAGE>
Merrill Lynch International Index Fund, June 30, 2000
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
Master International (GDP Weighted) Index Series (continued)
--------------------------------------------------------------------------------------
Shares
COUNTRY Investments Held Value
===============================================================================================================
<C> <S> <C> <C>
Japan Nippon Paper Industries Co. Ltd. 21,000 $ 143,698
(concluded) Nippon Steel Corporation 145,000 305,609
Nippon Telegraph & Telephone
Corporation (NTT) 263 3,504,844
Nippon Yusen Kabushiki Kaisha 34,000 163,886
+ Nissan Motor Co., Ltd. 85,000 502,103
Nissin Food Products Co., Ltd. 4,600 117,386
Nitto Denko Corporation 4,000 154,624
The Nomura Securities Co., Ltd. 41,000 1,005,576
Noritake Co., Ltd. 12,000 67,029
Obayashi Corporation 20,000 88,654
Oji Paper Co., Ltd. 23,000 158,688
Omron Corporation 6,000 163,319
Oriental Land Co., Ltd 2,300 235,424
Orix Corporation 1,700 251,453
Osaka Gas Co. 54,000 155,664
Pioneer Corporation 4,000 156,136
Promise Co., Ltd. 2,700 213,846
Rohm Company Ltd. 2,400 703,180
SMC Corporation 1,600 301,687
The Sakura Bank, Ltd. 87,000 602,722
Sankyo Company, Ltd. 10,000 226,360
Sanyo Electric Co., Ltd. 41,000 369,680
Secom Co., Ltd. 5,000 366,240
+ Sega Enterprises Ltd. 3,400 52,379
Seino Transportation Co., Ltd. 13,000 65,611
Sekisui Chemical Co., Ltd. 18,000 69,411
Sekisui House, Ltd. 18,000 166,892
Sharp Corporation 24,000 425,311
Shimamura Co., Ltd. 800 93,682
Shimano Inc. 3,800 91,584
Shimizu Corporation 24,000 68,730
Shin-Etsu Chemical Co., Ltd. 9,000 457,634
Shiseido Company, Limited 12,000 186,003
The Shizuoka Bank, Ltd. 19,000 161,618
Sho-Bond Corporation 3,700 55,183
Softbank Corp. 6,800 925,476
Sony Corporation 19,000 1,777,799
The Sumitomo Bank, Ltd. 65,000 798,639
Sumitomo Chemical Co., Ltd. 38,000 229,139
Sumitomo Corporation 22,000 248,060
Sumitomo Electric Industries 17,000 292,103
Sumitomo Heavy Industries, Ltd. 21,000 70,460
The Sumitomo Marine & Fire Insurance
Co., Ltd. 16,000 93,304
+ Sumitomo Metal Industries, Ltd. 96,000 66,235
Taisho Pharmaceutical Company, Ltd. 8,000 287,321
Taiyo Yuden Co., Ltd. 3,000 188,271
Takara Shuzo Co., Ltd. 5,000 124,994
Takashimaya Co., Ltd. 9,000 84,041
Takeda Chemical Industries, Ltd. 18,000 1,184,065
Takefuji Corporation 3,200 387,430
Terumo Corporation 5,000 169,652
Toho Co., Ltd. 700 119,484
Tohoku Electric Power Co., Inc. 12,600 170,294
The Tokai Bank Ltd. 49,000 242,210
The Tokio Marine & Fire Insurance
Co. Ltd. 30,000 347,054
Tokyo Broadcasting System, Inc. 4,000 173,149
Tokyo Dome Corporation 16,000 72,738
Tokyo Electric Power 27,200 664,543
Tokyo Electron Limited 4,000 548,934
Tokyo Gas Co. 63,000 177,440
Tokyu Corporation 37,000 183,243
Toppan Printing Co., Ltd. 15,000 159,066
Toray Industries, Inc. 40,000 162,563
Toshiba Corporation 67,000 757,989
Tostem Corporation 6,000 98,105
Toto Limited 12,000 92,321
Toyo Seikan Kaisha, Ltd. 6,000 112,282
Toyota Motor Corporation 77,000 3,515,051
Trans Cosmos Inc. 400 60,186
Uny Co., Ltd. 6,000 83,077
Wacoal Corp. 13,000 132,697
Yamaha Corporation 6,000 65,725
Yamanouchi Pharmaceutical Co., Ltd. 8,000 437,786
Yamato Transport Co., Ltd. 10,000 249,043
Yamazaki Baking Co., Ltd. 10,000 98,294
Yokogawa Electric Corporation 8,000 80,147
--------------------------------------------------------------------------------------
Total Investments in Japan (Cost--$38,492,640)--33.8% 54,116,189
===============================================================================================================
Netherlands ABN AMRO Holding NV 11,973 294,508
+ ASM Lithography Holding NV 3,284 141,725
Aegon NV 10,170 363,344
Akzo Nobel NV 2,774 118,332
Buhrmann NV 695 19,953
Elsevier NV 6,224 75,713
Getronics NV 2,498 38,673
Hagemeyer NV 965 26,715
Heineken NV 2,747 167,871
ING Groep NV 7,539 511,663
KPN NV 7,446 334,403
Koninklijke Ahold NV 5,772 170,584
Koninklijke (Royal) Philips Electronics NV 11,028 522,229
Royal Dutch Petroleum Company 16,984 1,059,884
TNT Post Group NV 3,900 105,614
Unilever NV 'A' 4,777 220,032
Wolters Kluwer NV 'A' 2,666 71,302
--------------------------------------------------------------------------------------
Total Investments in the Netherlands (Cost--$3,073,921)--2.6% 4,242,545
===============================================================================================================
New Zealand Brierley Investments Limited 96,737 15,029
Carter Holt Harvey Limited 57,331 49,934
Fletcher Challenge Building 11,230 11,949
Fletcher Challenge Energy 11,412 37,341
Fletcher Challenge Paper 22,856 26,256
Lion Nathan Limited 21,222 47,559
Telecom Corporation of New Zealand
Limited 56,532 198,284
--------------------------------------------------------------------------------------
Total Investments in New Zealand (Cost--$517,303)--0.2% 386,352
===============================================================================================================
Norway Bergesen d.y. ASA 'A' 2,962 60,989
Christiania Bank Og Kreditkasse 30,022 161,917
Den Norske Bank ASA 29,765 123,967
Elkem ASA 2,226 41,928
+ Kvaerner ASA 'A' 2,096 22,069
Kvaerner ASA 'A' (Rights) (b) 1,075 604
+ Merkantildata ASA 5,388 27,798
Norsk Hydro ASA 10,681 449,847
Norske Skogindustrier ASA 'A' 1,622 46,491
Orkla ASA 'A' 8,553 163,101
+ Petroleum Geo-Services 4,106 70,373
Schibsted ASA 2,570 47,806
Smedvig ASA 'A' 1,271 23,048
Storebrand ASA 10,875 78,881
Tomra Systems ASA 3,272 87,085
--------------------------------------------------------------------------------------
Total Investments in Norway (Cost--$1,304,254)--0.9% 1,405,904
===============================================================================================================
Portugal BPI-SGPS, SA (Registered Shares) 13,259 47,027
Banco Comercial Portugues, SA (BCP)
(Registered Shares) 24,848 129,815
Banco Espirito Santo, SA
(Registered Shares) 3,283 80,880
Brisa-Auto Estradas de Portugal, SA 7,648 66,129
Cimpor-Cimentos de Portugal, SGPS, SA 3,888 74,541
EDP--Eletricidade de Portugal, SA 14,650 267,107
Jeronimo Martins SGPS, SA 2,400 39,709
Portucel Industrial-Empresa Produtora
de Celulose, SA 2,373 14,445
Portugal Telecom SA (Registered Shares) 25,347 285,740
Sonae, S.G.P.S., SA 8,845 63,757
--------------------------------------------------------------------------------------
Total Investments in Portugal (Cost--$1,153,133)--0.7% 1,069,150
===============================================================================================================
</TABLE>
14 & 15
<PAGE>
Merrill Lynch International Index Fund, June 30, 2000
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
Master International (GDP Weighted) Index Series (continued)
---------------------------------------------------------------------------------------------
Shares
COUNTRY Investments Held Value
======================================================================================================================
<C> <S> <C> <C>
Singapore + Chartered Semiconductor Manufacturing
Limited (ADR)* 900 $ 81,450
City Developments Limited 9,900 38,363
Creative Technology Limited 900 21,706
DBS Group Holdings Limited 13,000 166,917
DBS Land Limited 21,300 27,595
Keppel Corporation Ltd. 12,000 25,957
Oversea-Chinese Banking Corporation Ltd. 13,080 90,024
Sembcorp Industries Limited 18,000 19,572
Singapore Airlines Limited 12,200 120,659
Singapore Press Holdings Ltd. 4,000 62,464
Singapore Technologies Engineering Ltd. 28,000 41,134
Singapore Telecommunications, Ltd. 58,000 84,870
United Overseas Bank Ltd. 10,672 69,748
Venture Manufacturing (Singapore) Ltd. 3,000 30,538
---------------------------------------------------------------------------------------------
Total Investments in Singapore (Cost--$739,993)--0.5% 880,997
======================================================================================================================
Spain Acerinox SA 1,265 36,743
Altadis 7,707 118,872
Autopistas, Concesionaria Espanola SA 7,394 64,571
Autopistas, Concesionaria Espanola SA
(Rights) (d) 7,394 3,190
Banco Bilbao Vizcaya, SA 52,807 792,215
Banco Santander Central Hispano, SA 66,497 704,371
Corporacion Financiera Alba, SA 1,783 47,173
Corporacion Mapfre 2,220 28,240
Endesa SA 19,414 377,602
Fomento de Construcciones y Contratas SA 2,979 56,542
Gas Natural SDG, SA 'E' 8,274 149,111
Grupo Dragados SA 5,310 38,227
Iberdrola SA 16,794 217,333
Repsol-YPF, SA 21,991 439,530
Sociedad General de Aguas de Barcelona, SA 3,562 47,803
Sol Melia, SA 3,904 43,786
+ Telefonica SA 74,735 1,611,922
Union Electrica Fenosa, SA 5,625 102,181
---------------------------------------------------------------------------------------------
Total Investments in Spain (Cost--$3,075,211)--3.0% 4,879,412
======================================================================================================================
Sweden Atlas Copco AB 'A' 2,700 52,332
Electrolux AB 'B' 4,516 70,281
ForeningsSparbanken AB 5,960 87,657
Hennes & Mauritz AB 'B' 8,695 182,406
+ NetCom AB 'B' 1,200 89,066
Nordbanken Holding AB 5,430 41,169
+ Nordic Baltic Holding AB 26,678 195,396
Sandvik AB 3,390 71,503
Securitas AB 'B' 4,050 86,347
Skandia Forsakrings AB 10,600 281,587
Skandinaviska Enskilda Banken (SEB) 'A' 8,188 97,554
Skanska AB 'B' 1,553 55,331
Svenska Cellulosa AB (SCA) 'B' 3,070 58,628
Svenska Handelsbanken AB 7,850 114,559
Telefonaktiebolaget LM Ericsson AB 'B' 74,748 1,487,120
Telefonaktiebolaget LM Ericsson (ADR)* 4,735 94,700
+ Telia AB 11,000 104,093
Volvo AB 'B' 4,889 106,743
Volvo AB 'B' (Rights) (c) 5,549 4,871
---------------------------------------------------------------------------------------------
Total Investments in Sweden (Cost--$1,628,739)--2.1% 3,281,343
======================================================================================================================
Switzerland ABB Ltd. 1,631 195,838
Adecco SA (Registered Shares) 80 68,188
Credit Suisse Group (Registered Shares) 1,268 253,039
+ Givaudan (Registered Shares) 39 11,908
Nestle SA (Registered Shares) 212 425,669
Novartis AG (Registered Shares) 339 538,697
Roche Holding AG (Bearer) 6 63,668
Roche Holding AG (Genuss) 35 341,799
Schweizerische Rueckversicherungs-
Gesellschaft (Registered Shares) 79 161,537
The Swatch Group AG (Registered Shares) 161 42,129
Swisscom AG (Registered Shares) 369 128,212
UBS AG (Registered Shares) 2,007 294,984
Zurich Allied AG 242 119,951
---------------------------------------------------------------------------------------------
Total Investments in Switzerland (Cost--$2,036,637)--1.7% 2,645,619
======================================================================================================================
United Kingdom 3i Group PLC 5,412 111,346
+ ARM Holdings PLC 6,996 74,986
Abbey National PLC 11,616 138,925
Allied Zurich PLC 11,582 137,028
Amvescap PLC 5,115 82,082
Arjo Wiggins Appleton PLC 7,872 30,628
AstraZeneca Group PLC 13,275 619,993
BG Group PLC 26,339 170,265
BOC Group PLC 6,647 95,597
BP Amoco PLC 109,570 1,051,667
BP Amoco PLC (ADR)* 11,477 649,168
Barclays PLC 10,886 270,772
Bass PLC 9,467 106,487
Boots Company PLC 10,517 80,086
British Aerospace PLC 23,384 145,852
British Airways PLC 10,652 61,279
British American Tobacco PLC 18,831 125,721
+ British Sky Broadcasting Group PLC
("BSkyB") 14,013 274,088
British Telecommunications PLC 48,153 622,556
Burmah Castrol PLC 4,515 113,875
CGU PLC 16,360 272,441
Cadbury Schweppes PLC 20,343 133,660
Carlton Communications PLC 6,676 85,908
+ Celltech Group PLC 2,068 40,074
Centrica PLC 29,469 98,372
Compass Group PLC 6,381 84,092
Diageo PLC 28,660 257,293
Dixons Group PLC 15,800 64,344
EMI Group PLC 6,895 62,630
Electrocomponents PLC 5,456 55,754
GKN PLC 7,196 91,837
Glaxo Wellcome PLC 26,908 784,983
Granada Group PLC 16,184 161,706
The Great Universal Stores PLC 11,011 70,846
HSBC Holdings PLC 60,741 694,726
Halifax PLC 17,326 166,297
Hanson PLC 9,685 68,472
Hays PLC 15,150 84,518
Imperial Chemical Industries PLC 7,845 62,292
Invensys PLC 29,851 112,075
J Sainsbury PLC 18,588 84,421
Kingfisher PLC 10,954 99,748
Legal & General Group PLC 44,364 103,766
Lloyds TSB Group PLC 39,706 375,092
Logica PLC 3,071 72,713
Marconi PLC 20,353 264,987
Marks & Spencer PLC 27,749 97,566
Misys PLC 4,999 42,229
National Grid Group PLC 12,812 101,054
National Power PLC 11,835 75,431
Pearson PLC 4,901 155,812
The Peninsular and Oriental Steam
Navigation Company 7,397 63,382
Prudential Corporation PLC 14,627 214,352
Psion PLC 3,659 35,397
Railtrack Group PLC 4,665 72,495
Rank Group PLC 18,679 43,266
Reed International PLC 10,319 89,826
Rentokil Initial PLC 25,517 57,945
Reuters Group PLC 10,649 181,690
Rio Tinto PLC (Registered Shares) 8,385 137,096
Royal Bank of Scotland Group PLC 19,256 322,417
SEMA Group PLC 3,928 55,898
The Sage Group PLC 9,509 77,017
ScottishPower PLC 13,706 116,197
ScottishPower PLC (ADR)* 4,023 134,519
SmithKline Beecham PLC 41,759 546,844
Tesco PLC 53,997 167,988
Unilever PLC 24,944 151,051
Vodafone AirTouch PLC 352,000 1,422,823
Vodafone AirTouch PLC (ADR)* 9,600 397,800
WPP Group PLC 6,116 89,349
---------------------------------------------------------------------------------------------
Total Investments in the United Kingdom (Cost--$11,475,361)--8.9% 14,264,892
======================================================================================================================
</TABLE>
16 & 17
<PAGE>
Merrill Lynch International Index Fund, June 30, 2000
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
Master International (GDP Weighted) Index Series (concluded)
------------------------------------------------------------------------------------------------
SHORT-TERM Face
SECURITIES Amount Issue Value
======================================================================================================================
<C> <C> <S> <C>
Commercial $4,000,000 Gannett Company, 6.55% due 7/18/2000 $ 3,987,628
Paper** 5,338,000 General Motors Acceptance Corp., 7.13% due 7/03/2000 5,335,886
------------
9,323,514
======================================================================================================================
US Government 1,400,000 Federal Home Loan Banks, 6.41% due 7/21/2000 (a) 1,395,014
Agency Obligations** 4,000,000 Federal Home Loan Mortgage Corporation, 6.42% due 7/11/2000 3,992,867
------------
5,387,881
======================================================================================================================
Total Investments in Short-Term Securities 14,711,395
(Cost--$14,711,395)--9.2%
======================================================================================================================
Total Investments (Cost--$122,162,107)--101.9% 163,288,784
Variation Margin on Financial Futures Contracts***--0.1% 116,273
Unrealized Depreciation on Forward Foreign Exchange Contracts--Net****--(0.1%) (83,398)
Liabilities in Excess of Other Assets--(1.9%) (3,008,474)
------------
Net Assets--100.0% $160,313,185
============
======================================================================================================================
</TABLE>
+ Non-income producing security.
(a) Security held as collateral in connection with open financial futures
contracts.
(b) The rights may be exercised until July 12, 2000.
(c) The rights may be exercised until July 7, 2000.
(d) The rights may be exercised until July 5, 2000.
* 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 June 30, 2000 were as follows:
--------------------------------------------------------------------------------
Number of Expiration
Contracts Issue Exchange Date Value
--------------------------------------------------------------------------------
4 Hang Seng HKFE July 2000 $ 416,656
2 CAC MATIF July 2000 124,004
16 IBEX 35 MEFF July 2000 1,610,065
24 OMX OMLX July 2000 358,287
12 DTB DAX September 2000 1,998,681
22 FTSE LIFFE September 2000 2,117,250
6 MIB 30 MSE September 2000 1,353,466
22 All Ordinaries SFE September 2000 1,104,586
16 TOPIX Tokyo September 2000 2,406,692
--------------------------------------------------------------------------------
Total Financial Futures Contracts Purchased
(Total Contract Price--$11,620,048) $11,489,687
===========
--------------------------------------------------------------------------------
**** Forward foreign exchange contracts as of June 30, 2000 were as follows:
--------------------------------------------------------------------------------
Foreign Unrealized
Currency Expiration Appreciation
Purchased Date (Depreciation)
--------------------------------------------------------------------------------
A$ 1,200,000 July 2000 $ 8,646
(euro) 8,500,000 July 2000 (39,652)
(pound) 1,600,000 July 2000 (15,744)
Skr 1,300,000 July 2000 (2,347)
(yen) 250,000,000 July 2000 (18,243)
--------------------------------------------------------------------------------
Total (US$ Commitment--$13,878,225) (67,340)
---------
--------------------------------------------------------------------------------
Foreign
Currency
Sold
--------------------------------------------------------------------------------
(euro) 2,800,000 July 2000 (16,058)
--------------------------------------------------------------------------------
Total (US$ Commitment--$2,669,520) (16,058)
---------
--------------------------------------------------------------------------------
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts--Net $(83,398)
=========
--------------------------------------------------------------------------------
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MASTER
INTERNATIONAL
(GDP WEIGHTED)
INDEX SERIES As of June 30, 2000
==============================================================================================================================
<C> <S> <C> <C>
Assets: Investments, at value (identified cost--$122,162,107) ............................. $163,288,784
Cash .............................................................................. 7,264
Foreign cash ...................................................................... 166,920
Receivables:
Securities sold ................................................................. $5,174,925
Contributions ................................................................... 497,187
Dividends ....................................................................... 461,083
Variation margin ................................................................ 116,273
Investment adviser .............................................................. 30,182
Interest ........................................................................ 37 6,279,687
----------
Deferred organization expenses .................................................... 5,909
Other assets ...................................................................... 34,501
------------
Total assets ...................................................................... 169,783,065
-----------
==============================================================================================================================
Liabilities: Unrealized depreciation on forward foreign exchange contracts ..................... 83,398
Payables:
Securities purchased ............................................................ 9,245,747
Withdrawals ..................................................................... 67,591 9,313,338
----------
Accrued expenses and other liabilities ............................................ 73,144
------------
Total liabilities ................................................................. 9,469,880
------------
==============================================================================================================================
Net Assets: Net assets ........................................................................ $160,313,185
============
==============================================================================================================================
Net Assets Partners' capital ................................................................. $119,381,312
Consist of: Unrealized appreciation on investments and foreign currency transactions--net ..... 40,931,873
------------
Net assets ........................................................................ $160,313,185
============
==============================================================================================================================
</TABLE>
See Notes to Financial Statements.
18 & 19
<PAGE>
Merrill Lynch International Index Fund, June 30, 2000
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MASTER
INTERNATIONAL
(GDP WEIGHTED)
INDEX SERIES For the Six Months Ended June 30, 2000
=============================================================================================================
<C> <S> <C> <C>
Investment Income: Dividends (net of $174,835 foreign withholding tax) ...... $ 1,172,865
Interest and discount earned ............................. 469,062
------------
Total income ............................................. 1,641,927
------------
=============================================================================================================
Expenses: Custodian fees ........................................... $ 75,607
Accounting services ...................................... 25,363
Professional fees ........................................ 23,678
Investment advisory fees ................................. 7,744
Amortization of organization expenses .................... 2,393
Trustees' fees and expenses .............................. 731
Pricing fees ............................................. 546
Other .................................................... 773
------------
Total expenses before reimbursement ...................... 136,835
Reimbursement of expenses ................................ (10,798)
------------
Total expenses after reimbursement ....................... 126,037
------------
Investment income--net ................................... 1,515,890
------------
=============================================================================================================
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net ....................................... 8,800,439
(Loss) on Foreign currency transactions--net ..................... (1,677,699) 7,122,740
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net: Investments--net ....................................... (15,854,482)
Foreign currency transactions--net ..................... (51,628) (15,906,110)
------------ ------------
Net Decrease in Net Assets Resulting from Operations ..... $ (7,267,480)
============
=============================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MASTER
INTERNATIONAL For the Six For the
(GDP WEIGHTED) Months Ended Year Ended
INDEX SERIES Increase (Decrease) in Net Assets: June 30, 2000 Dec. 31, 1999
============================================================================================================================
<C> <S> <C> <C>
Operations: Investment income--net .................................................. $ 1,515,890 $ 2,069,146
Realized gain on investments and foreign currency transactions--net ..... 7,122,740 4,991,688
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net ...................................... (15,906,110) 34,484,540
------------- -------------
Net increase (decrease) in net assets resulting from operations ......... (7,267,480) 41,545,374
------------- -------------
============================================================================================================================
Net Capital
Contributions: Decrease in net assets derived from net capital contributions ........... (2,115,696) (23,369,248)
------------- -------------
============================================================================================================================
Net Assets: Total increase (decrease) in net assets ................................. (9,383,176) 18,176,126
Beginning of period ..................................................... 169,696,361 151,520,235
------------- -------------
End of period ........................................................... $ 160,313,185 $ 169,696,361
============= =============
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MASTER
INTERNATIONAL
(GDP WEIGHTED) The following ratios have been derived from For the Six For the Year Ended Dec. 31, For the Period
Months Ended -------------------------- April 9, 1997+ to
INDEX SERIES information provided in the financial statements. June 30, 2000 1999 1998 Dec. 31, 1997
====================================================================================================================================
<C> <S> <C> <C> <C> <C>
Ratios to Average Expenses, net of reimbursement ............... .16%* .22% .26% .33%*
Net Assets: ============ ============ ============ ============
Expenses ..................................... .18%* .24% .33% .36%*
============ ============ ============ ============
Investment income--net ....................... 1.95%* 1.43% 1.66% 1.99%*
============ ============ ============ ============
====================================================================================================================================
Supplemental Net assets, end of period (in thousands) ..... $ 160,313 $ 169,696 $ 151,520 $ 143,418
Data: ============ ============ ============ ============
Portfolio turnover ........................... 26.67% 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") is part of
Quantitative Master Series Trust (the "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
accounting principles generally accepted in the United States of America, which
may require the use of management accruals and estimates. These unaudited
financial statements reflect all adjustments, which are, in the opinion of
management, necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature. 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
20 & 21
<PAGE>
Merrill Lynch International Index Fund, June 30, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
MASTER INTERNATIONAL (GDP WEIGHTED) INDEX SERIES
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.
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 denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into 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 .01% of the average daily value of the Series' net
assets. For the six months ended June 30, 2000, FAM earned fees of $7,744, all
of which was voluntarily waived. FAM also reimbursed the Series for additional
expenses of $3,054.
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 six
months ended June 30, 2000 were $44,606,227 and $37,271,241, respectively.
Net realized gains (losses) for the six months ended June 30, 2000 and net
unrealized gains (losses) as of June 30, 2000 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains (Losses)
--------------------------------------------------------------------------------
Investments:
Long-term ............................. $ 7,433,761 $ 41,126,677
Short-term ............................ (606) --
Financial futures contracts ........... 1,367,284 (130,361)
----------- ------------
Total investments ....................... 8,800,439 40,996,316
----------- ------------
Currency transactions:
Forward foreign exchange
contracts ........................... -- (83,398)
Foreign currency transactions ......... (1,677,699) 18,955
----------- ------------
Total currency transactions ............. (1,677,699) (64,443)
----------- ------------
Total ................................... $ 7,122,740 $ 40,931,873
=========== ============
--------------------------------------------------------------------------------
As of June 30, 2000, net unrealized appreciation for Federal income tax purposes
aggregated $41,126,677, of which $48,589,892 related to appreciated securities
and $7,463,215 related to depreciated securities. At June 30, 2000, the
aggregate cost of investments for Federal income tax purposes was $122,162,107.
4. Short-Term Borrowings:
On December 3, 1999, the Series, along with certain other funds managed by FAM,
entered into a one-year, unsecured $1,000,000,000 credit agreement with The Bank
of New York and certain other institutions party thereto. The funds may borrow
money for temporary or emergency purposes to fund shareholder redemptions. The
agreement bears interest at the Federal Funds rate plus .50%. The Series did not
borrow from the facility during the six months ended June 30, 2000.
22 & 23
<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--6/00
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