MERRILL LYNCH
S&P 500
INDEX FUND
Merrill Lynch
Index Funds, Inc.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
December 31, 1999
<PAGE>
Merrill Lynch S&P 500 Index Fund
Officers and Directors
Terry K. Glenn, President and Director
Jack B. Sunderland, Director
Stephen B. Swensrud, Director
J. Thomas Touchton, Director
Christopher G. Ayoub, Senior Vice President
Robert C. Doll, Senior Vice President
Gregory Mark Maunz, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Eric S. Mitofsky, Senior Vice President and
Portfolio Manager
Jeffrey B. Hewson, Vice President
Donald C. Burke, Vice President and Treasurer
Ira P. Shapiro, Secretary
Custodian
Merrill Lynch Trust Company
800 Scudders Mill Road
Plainsboro, NJ 08536
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Important Tax Information (unaudited)
Of the ordinary income distribution paid by Merrill Lynch S&P 500 Index Fund to
shareholders of record on December 8, 1999, 71.14% qualifies for the dividends
received deduction for corporations.
Additionally, the Fund paid a long-term capital gains distribution of $.085220
to shareholders of record on December 8, 1999. The entire long-term capital
gains distribution is subject to the 20% tax rate.
Please retain this information for your records.
<PAGE>
Merrill Lynch S&P 500 Index Fund, December 31, 1999
DEAR SHAREHOLDER
Fiscal Year in Review
The Standard & Poor's 500 (S&P 500) Composite Index had another extraordinary
year in 1999 with a total return of +21.04%. The backdrop of this strong
performance was a continued robust US economy, a global economic recovery, and
increasing bond yields and interest rates despite little evidence of actual
inflationary pressures. Topped off by a strong fourth-quarter rally, the Index
advanced for an unprecedented fifth consecutive year with annual returns in
excess of 20%. The last quarter of 1999 turned into a remarkable period for the
Index as it posted a total return of +14.88%, despite the narrowness of the
gains within the Index's universe of component stocks, which was centered around
its largest-capitalization growth stocks. In addition, 1999 became the
ninth-straight year in which the Index had a positive total return. For the
three-year and five-year periods ended December 31, 1999, the S&P 500 Index had
annual total returns of +27.56% and +28.54%, respectively.
The S&P 500 Index closed the first half of 1999 at an all-time high of 1,372.71
amid indications of a broadening out of recent return patterns in the market as
small and mid cap stocks posted strong returns in the year's second quarter. In
the second half of the year, although continued strong corporate earning was
coupled with still-tame inflationary data, the Index was mostly confined in a
trading range between 1,250 and 1,400. After the Index first surpassed the 1,400
level in July, the second half of the year began with three straight months of
negative returns. However, this was followed by three straight positive months,
with the market ending the year on a very strong note as the Index advanced by
more than 80 points in December to finish the year at an all-time high of
1,469.25. For the six and 12-month periods ended December 31, 1999, the S&P 500
Index posted total returns of +7.71% and +21.04%, respectively. For the year as
a whole, large-capitalization and growth stocks once again provided strong
leadership for the market, in particular the S&P technology sector, which led
all groups by outperforming the overall Index by 14.7 percentage points.
For the year ended December 31, 1999, Merrill Lynch S&P 500 Index Fund's Class A
and Class D Shares had total returns of +20.45% and +20.16%, respectively. The
S&P 500 Index had a total return of +21.04% during the same 12-month period.
(For complete performance information, see pages 4 and 5 of this report to
shareholders.)
The Fund invests all of its assets in Master S&P 500 Index Series (formerly
Merrill Lynch S&P 500 Index Series), which has the same investment objective as
the Fund. The principal investments of the Series are a fully replicating
portfolio of all 500 stocks in the Index. Incremental cash inflows are typically
invested through the use of S&P 500 futures contracts. At December 31, 1999, the
Series' equity portfolio was valued at $1.7 billion, which represented 97.9% of
net assets. In addition, the Series held a long position in S&P 500 futures
contracts. Through its holdings of equities and futures contracts, it is the
Series' goal to be 100% invested in the S&P 500 Index at all times.
A number of new equity positions were added to the Series during the second half
of 1999, as Standard & Poor's revised its list in response to merger and
acquisition activity involving constituents within the Index. This activity
continued at a rapid pace throughout the last half of 1999. During this time, we
added to the Series' portfolio: QUALCOMM Incorporated, ADC Telecommunications,
Inc., Allied Waste Industries, Inc., Conoco Inc. (Class B), Lexmark
International Group, Inc. (Class A), Tosco Corporation, Global Crossing Ltd.,
Bed Bath & Beyond Inc., Adaptec, Inc., Pinnacle West Capital Corporation, Analog
Devices, Inc., The Home Depot, Inc., T. Rowe Price Associates, Inc., Leggett &
Platt, Incorporated, El Paso Energy Corporation, Comverse Technology, Inc.,
Pactiv Corporation, Xilinx, Inc., Teradyne, Inc., Quintiles Transnational Corp.,
Molex Incorporated, Citrix Systems, Inc., Old Kent Financial Corporation,
Honeywell International Inc., Yahoo! Inc. and Transocean Sedco Forex Inc.
In Conclusion
We appreciate your investment in Merrill Lynch S&P 500 Index Fund, and we look
forward to assisting you with your investment needs in the months and years
ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President
/s/ Eric S. Mitofsky
Eric S. Mitofsky
Senior Vice President and
Portfolio Manager
February 14, 2000
================================================================================
To reduce shareholders' expenses, Merrill Lynch S&P 500 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.
================================================================================
2 & 3
<PAGE>
Merrill Lynch S&P 500 Index Fund, December 31, 1999
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 Investment Adviser
voluntarily waived a portion of its management fee. Without such waiver,
the Fund's performance would have been lower.
<TABLE>
<CAPTION>
==================================================================================================================
Recent Performance Results
3 Month 12 Month Since Inception
As of December 31, 1999 Total Return Total Return Total Return
==================================================================================================================
<S> <C> <C> <C>
ML S&P 500 Index Fund Class A Shares* +14.78% +20.45% +102.04%
- ------------------------------------------------------------------------------------------------------------------
ML S&P 500 Index Fund Class D Shares* +14.70 +20.16 +100.69
- ------------------------------------------------------------------------------------------------------------------
S&P 500 Index** +14.88 +21.04 +103.93
==================================================================================================================
</TABLE>
* Total investment returns are based on changes in net asset value for the
periods shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date. The Fund's
inception date is 4/03/97.
** This unmanaged broad-based Index is comprised of common stocks. Since
inception total return is from 4/03/97.
================================================================================
Average Annual Total Return
% Return
================================================================================
Class A Shares
================================================================================
Year Ended 12/31/99 +20.45%
- --------------------------------------------------------------------------------
Inception (4/03/97) through 12/31/99 +29.20
- --------------------------------------------------------------------------------
% Return
================================================================================
Class D Shares
================================================================================
Year Ended 12/31/99 +20.16%
- --------------------------------------------------------------------------------
Inception (4/03/97) through 12/31/99 +28.88
- --------------------------------------------------------------------------------
================================================================================
Total Return Based on a $10,000 Investment
ML S&P 500 Index Fund's Class Class A & Class D Shares--Total Return Based on a
$10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class A & Class
D Shares compared to growth of an investment in the Standard & Poor's 500 Index
Fund. Beginning and ending values are:
4/3/97** 12/99
ML S&P 500 Index Fund+--
Class A Shares* $10,000 $20,199
Class D Shares* $10,000 $20,074
S&P 500 Index++ $10,000 $20,393
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ The Fund invests all of its assets in Master S&P 500 Index Series of
Quantitative Master Series. Trust. The Trust's investments are allocated
among common stocks in approximately the same weightings as the S&P 500
Index.
++ This unmanaged broad-based Index is comprised of common stocks.
4 & 5
<PAGE>
Merrill Lynch S&P 500 Index Fund, December 31, 1999
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MERRILL LYNCH
S&P 500
INDEX FUND As of December 31, 1999
====================================================================================================================================
<S> <C> <C> <C>
Assets: Investment in Master S&P 500 Index Series, at value (identified cost --
$1,216,805,199) ....................................................... $1,690,335,535
Deferred organization expenses .......................................... 9,822
Prepaid registration fees and other assets .............................. 11,112
--------------
Total assets ............................................................ 1,690,356,469
--------------
====================================================================================================================================
Liabilities: Payables:
Administrative fees .................................................. $ 348,632
Distributor .......................................................... 172,877 521,509
--------------
Accrued expenses ........................................................ 326,194
--------------
Total liabilities ....................................................... 847,703
--------------
====================================================================================================================================
Net Assets: Net assets .............................................................. $1,689,508,766
==============
====================================================================================================================================
Net Assets Class A Shares of Common Stock, $.0001 par value, 125,000,000 shares
Consist of: authorized ............................................................ $ 4,708
Class D Shares of Common Stock, $.0001 par value, 125,000,000 shares
authorized ............................................................ 4,673
Paid-in capital in excess of par ........................................ 1,247,894,960
Undistributed investment income -- net .................................. 20,132
Accumulated distributions in excess of realized capital gains on
investments from the Series -- net .................................... (19,286,254)
Accumulated realized capital losses on investments from the Series
-- net ................................................................ (12,659,789)
Unrealized appreciation on investments from the Series -- net ........... 473,530,336
--------------
Net assets .............................................................. $1,689,508,766
==============
====================================================================================================================================
Net Asset Class A -- Based on net assets of $848,590,567 and 47,080,489 shares
Value: outstanding ........................................................... $ 18.02
==============
Class D -- Based on net assets of $840,918,199 and 46,729,895 shares
outstanding ........................................................... $ 18.00
==============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MERRILL LYNCH
S&P 500
INDEX FUND For the Year Ended December 31, 1999
====================================================================================================================================
<S> <C> <C> <C>
Investment Income: Investment income allocated from the Series ............................. $ 20,588,974
Expenses allocated from the Series ...................................... 1,072,936
--------------
Net investment income from the Series ................................... 19,516,038
--------------
====================================================================================================================================
Expenses: Administration fee ...................................................... $ 3,188,914
Account maintenance fee -- Class D ...................................... 1,698,660
Transfer agent fees ..................................................... 888,805
Registration fees ....................................................... 252,706
Printing and shareholder reports ........................................ 117,649
Professional fees ....................................................... 41,675
Amortization of organization expenses ................................... 4,365
Accounting services ..................................................... 1,290
--------------
Total expenses .......................................................... 6,194,064
Reimbursement of expenses ............................................... (39,161)
--------------
Total expenses after reimbursement ...................................... 6,154,903
--------------
Investment income -- net ................................................ 13,361,135
--------------
====================================================================================================================================
Realized & Realized loss on investments from the Series -- net ..................... (12,925,029)
Unrealized Gain Change in unrealized appreciation on investments from the Series -- net.. 282,264,783
(Loss) from the --------------
Series -- Net: Net Increase in Net Assets Resulting from Operations .................... $ 282,700,889
==============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MERRILL LYNCH For the Year Ended December 31,
S&P 500 ---------------------------------
INDEX FUND Increase (Decrease) in Net Assets: 1999 1998
====================================================================================================================================
<S> <C> <C> <C>
Operations: Investment income -- net ................................................ $ 13,361,135 $ 10,753,894
Realized gain (loss) on investments from the Series -- net .............. (12,925,029) 38,594,938
Change in unrealized appreciation on investments from the Series
-- net ................................................................ 282,264,783 145,214,701
-------------- --------------
Net increase in net assets resulting from operations .................... 282,700,889 194,563,533
-------------- --------------
====================================================================================================================================
Dividends & Investment income -- net
Distributions to Class A ............................................................... (7,708,322) (6,818,554)
Shareholders: Class D ............................................................... (6,171,913) (3,415,559)
Realized gain on investments from the Series -- net
Class A ............................................................... -- (25,172,753)
Class D ............................................................... -- (15,177,398)
In excess of realized gain on investments from the Series -- net
Class A ............................................................... (9,542,324) --
Class D ............................................................... (9,743,930) --
-------------- --------------
Net decrease in net assets resulting from dividends and distributions
to shareholders ....................................................... (33,166,489) (50,584,264)
-------------- --------------
====================================================================================================================================
Capital Share Net increase in net assets derived from capital share transactions ...... 322,049,353 371,363,058
Transactions: -------------- --------------
====================================================================================================================================
Net Assets: Total increase in net assets ............................................ 571,583,753 515,342,327
Beginning of year ....................................................... 1,117,925,013 602,582,686
-------------- --------------
End of year* ............................................................ $1,689,508,766 $1,117,925,013
============== ==============
====================================================================================================================================
* Undistributed investment income -- net .................................. $ 20,132 $ 539,232
============== ==============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
6 & 7
<PAGE>
Merrill Lynch S&P 500 Index Fund, December 31, 1999
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A
--------------------------------------
The following per share data and ratios have been derived For the Year For the Period
MERRILL LYNCH from information provided in the financial statements. Ended Dec. 31, April 3,
S&P 500 --------------------- 1997+ to
INDEX FUND Increase (Decrease) in Net Asset Value: 1999 1998 Dec. 31, 1997
====================================================================================================================================
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ............................. $ 15.30 $ 12.55 $ 10.00
Operating -------- -------- --------
Performance: Investment income -- net ......................................... .18 .18 .11
Realized and unrealized gain on investments from the Series -- net 2.92 3.33 2.97
-------- -------- --------
Total from investment operations ................................. 3.10 3.51 3.08
-------- -------- --------
Less dividends and distributions:
Investment income -- net ....................................... (.17) (.16) (.11)
Realized gain on investments from the Series -- net ............ -- (.60) (.42)
In excess of realized gain on investments from the Series -- net (.21) -- --
-------- -------- --------
Total dividends and distributions ................................ (.38) (.76) (.53)
-------- -------- --------
Net asset value, end of period ................................... $ 18.02 $ 15.30 $ 12.55
======== ======== ========
====================================================================================================================================
Total Investment Based on net asset value per share ............................... 20.45% 28.24% 30.80%++
Return: ======== ======== ========
====================================================================================================================================
Ratios to Average Expenses, net of reimbursement++ ................................. .38% .39% .40%*
Net Assets: ======== ======== ========
Expenses++ ....................................................... .38% .40% .57%*
======== ======== ========
Investment income -- net ......................................... 1.03% 1.27% 1.71%*
======== ======== ========
====================================================================================================================================
Supplemental Data: Net assets, end of period (in thousands) ......................... $848,591 $682,669 $445,016
======== ======== ========
====================================================================================================================================
<CAPTION>
Class D
--------------------------------------
The following per share data and ratios have been derived For the Year For the Period
from information provided in the financial statements. Ended Dec. 31, April 3,
--------------------- 1997+ to
Increase (Decrease) in Net Asset Value: 1999 1998 Dec. 31, 1997
====================================================================================================================================
<S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ............................. $ 15.28 $ 12.54 $ 10.00
Operating -------- -------- --------
Performance: Investment income -- net ......................................... .13 .11 .11
Realized and unrealized gain on investments from the Series -- net 2.94 3.37 2.95
-------- -------- --------
Total from investment operations ................................. 3.07 3.48 3.06
-------- -------- --------
Less dividends and distributions:
Investment income -- net ....................................... (.14) (.14) (.10)
Realized gain on investments from the Series -- net ............ -- (.60) (.42)
In excess of realized gain on investments from the Series -- net (.21) -- --
-------- -------- --------
Total dividends and distributions ................................ (.35) (.74) (.52)
-------- -------- --------
Net asset value, end of period ................................... $ 18.00 $ 15.28 $ 12.54
======== ======== ========
====================================================================================================================================
Total Investment Based on net asset value per share ............................... 20.16% 27.95% 30.53%++
Return: ======== ======== ========
====================================================================================================================================
Ratios to Average Expenses, net of reimbursement++ ................................. .63% .64% .65%*
Net Assets: ======== ======== ========
Expenses++ ....................................................... .63% .65% .82%*
======== ======== ========
Investment income -- net ......................................... .77% 1.00% 1.47%*
======== ======== ========
====================================================================================================================================
Supplemental Data: Net assets, end of period (in thousands) ......................... $840,918 $435,256 $157,567
======== ======== ========
====================================================================================================================================
</TABLE>
+ Commencement of operations.
++ Includes the Fund's share of the Series' allocated
expenses.
++ Aggregate total investment return.
* Annualized.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
MERRILL LYNCH
S&P 500
INDEX FUND
1. Significant Accounting Policies:
Merrill Lynch S&P 500 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's financial
statements are prepared in accordance with generally accepted accounting
principles, which may require the use of management accruals and estimates. The
Fund seeks to achieve its investment objective by investing all of its assets in
the Master S&P 500 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
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 has 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.
(d) Prepaid registration fees and deferred organization expenses -- Prepaid
registration fees are charged to expense
8 & 9
<PAGE>
Merrill Lynch S&P 500 Index Fund, December 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
MERRILL LYNCH
S&P 500
INDEX FUND
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 .20% 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 .245%. For the year ended December 31, 1999, FAM
earned fees of $3,188,914, of which $39,161 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"), which is a wholly-owned
subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plan
adopted by the Corporation in accordance with Rule 12b-1 under the Investment
Company Act of 1940, the Fund pays the Distributor an ongoing account
maintenance fee. The fee is accrued daily and paid monthly at the annual rate of
.25% based upon the average daily net assets of Class D shares.
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance services to the Fund. The ongoing account maintenance fee
compensates the Distributor and MLPF&S for providing account main tenance
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 investments in the Series for the year
ended December 31, 1999 were $697,173,138 and $413,913,693, respectively.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$322,049,353 and $371,363,058 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 .......................... 43,531,071 $ 714,509,919
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 950,102 16,408,260
----------- -------------
Total issued ......................... 44,481,173 730,918,179
Shares redeemed ...................... (42,032,381) (704,821,899)
----------- -------------
Net increase ......................... 2,448,792 $ 26,096,280
=========== =============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended December 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 37,535,322 $ 523,733,579
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 2,106,793 30,969,855
----------- -------------
Total issued ......................... 39,642,115 554,703,434
Shares redeemed ...................... (30,483,660) (411,225,731)
----------- -------------
Net increase ......................... 9,158,455 $ 143,477,703
=========== =============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 34,981,106 $ 573,245,057
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 790,655 13,630,892
----------- -------------
Total issued ......................... 35,771,761 586,875,949
Shares redeemed ...................... (17,530,176) (290,922,876)
----------- -------------
Net increase ......................... 18,241,585 $ 295,953,073
=========== =============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended December 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .......................... 25,706,795 $ 363,953,608
Shares issued to shareholders
in reinvestment of dividends
and distributions .................... 1,037,731 15,244,271
----------- -------------
Total issued ......................... 26,744,526 379,197,879
Shares redeemed ...................... (10,821,319) (151,312,524)
----------- -------------
Net increase ......................... 15,923,207 $ 227,885,355
=========== =============
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Index Funds, Inc.:
We have audited the accompanying statement of assets and liabilities of Merrill
Lynch S&P 500 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 3, 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 S&P
500 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 S&P 500 Index Fund, December 31, 1999
SCHEDULE OF INVESTMENTS
Master S&P 500 Index Series
------------------------------------------------------------------------------
Shares
Issue Held Value
==============================================================================
Common Stocks
+ 3Com Corporation ............................... 46,345 $ 2,178,215
+ ADC Telecommunications, Inc. ................... 20,120 1,459,957
+ The AES Corporation ............................ 27,726 2,072,518
AFLAC Incorporated ............................. 35,776 1,688,180
ALLTEL Corporation ............................. 42,167 3,486,684
+ ALZA Corporation ............................... 13,672 473,393
+ AMR Corporation ................................ 19,891 1,332,697
AT&T Corp. ..................................... 429,203 21,782,052
Abbott Laboratories ............................ 206,494 7,498,313
+ Adaptec, Inc. .................................. 13,716 683,228
Adobe Systems Incorporated ..................... 16,145 1,085,751
Adolph Coors Company (Class B) ................. 4,971 260,977
+ Advanced Micro Devices, Inc. ................... 19,810 573,252
Aetna Inc. ..................................... 20,104 1,122,054
Air Products and Chemicals, Inc. ............... 30,801 1,033,759
Alberto-Culver Company (Class B) ............... 7,506 193,749
Albertson's, Inc. .............................. 56,892 1,834,767
Alcan Aluminum Ltd. ............................ 29,436 1,212,395
Alcoa Inc. ..................................... 49,216 4,084,928
Allegheny Technologies Incorporated ............ 12,567 281,972
Allergan Inc. .................................. 17,662 878,684
+ Allied Waste Industries, Inc. .................. 25,366 223,538
The Allstate Corporation ....................... 108,182 2,596,368
Amerada Hess Corporation ....................... 12,174 690,875
Ameren Corporation ............................. 18,431 603,615
+ America Online, Inc. ........................... 300,273 22,651,844
American Electric Power Company, Inc. .......... 26,023 835,989
American Express Company ....................... 60,132 9,996,945
American General Corporation ................... 33,193 2,518,519
American Greetings Corporation (Class A) ....... 8,666 204,734
American Home Products Corporation ............. 175,386 6,916,785
American International Group, Inc. ............. 207,962 22,485,891
+ Amgen Inc. ..................................... 137,248 8,243,458
AmSouth Bancorporation ......................... 52,531 1,014,505
Anadarko Petroleum Corporation ................. 17,147 585,141
+ Analog Devices, Inc. ........................... 23,434 2,179,362
+ Andrew Corporation ............................. 11,021 208,710
Anheuser-Busch Companies, Inc. ................. 62,498 4,429,546
Aon Corporation ................................ 34,514 1,380,560
Apache Corporation ............................. 15,323 565,993
+ Apple Computer, Inc. ........................... 21,649 2,225,788
+ Applied Materials, Inc. ........................ 50,829 6,439,399
Archer-Daniels-Midland Company ................. 81,716 995,914
Armstrong World Industries, Inc. ............... 5,389 179,858
Ashland Inc. ................................... 9,713 319,922
Associates First Capital Corporation (Class A) . 97,819 2,683,909
Atlantic Richfield Company (ARCO) .............. 43,382 3,752,543
Autodesk, Inc. ................................. 8,194 276,547
Automatic Data Processing, Inc. ................ 83,965 4,523,614
+ AutoZone, Inc. ................................. 19,390 626,539
Avery Dennison Corporation ..................... 15,135 1,102,963
Avon Products, Inc. ............................ 32,547 1,074,051
The B.F. Goodrich Company ...................... 14,793 406,807
BB&T Corporation ............................... 44,456 1,216,983
+ BMC Software, Inc. ............................. 32,553 2,602,205
Baker Hughes Incorporated ...................... 44,253 932,079
Ball Corporation ............................... 4,091 161,083
Bank of America Corporation .................... 229,311 11,508,546
The Bank of New York Company, Inc. ............. 98,948 3,957,920
Bank One Corporation ........................... 154,050 4,939,228
Barrick Gold Corporation ....................... 52,960 936,730
Bausch & Lomb Incorporated ..................... 7,752 530,527
Baxter International Inc. ...................... 39,078 2,454,587
The Bear Stearns Companies Inc. ................ 16,008 684,342
Becton, Dickinson and Company .................. 33,651 900,164
+ Bed Bath & Beyond Inc. ......................... 18,793 653,057
Bell Atlantic Corporation ...................... 208,572 12,840,214
BellSouth Corporation .......................... 252,835 11,835,838
Bemis Company, Inc. ............................ 7,052 245,938
+ Best Buy Co., Inc. ............................. 27,572 1,383,770
Bestfoods ...................................... 37,467 1,969,359
+ Bethlehem Steel Corporation .................... 17,583 147,258
Biomet, Inc. ................................... 15,154 606,160
The Black & Decker Corporation ................. 11,667 609,601
The Boeing Company ............................. 125,529 5,217,299
Boise Cascade Corporation ...................... 7,679 310,999
+ Boston Scientific Corporation .................. 55,654 1,217,431
Briggs & Stratton Corporation .................. 3,136 168,168
Bristol-Myers Squibb Company ................... 266,452 17,102,888
Brown-Forman Corporation (Class B) ............. 9,202 526,814
Brunswick Corporation .......................... 12,334 274,431
Burlington Northern Santa Fe Corp. ............. 61,378 1,488,416
Burlington Resources Inc. ...................... 29,224 966,218
+ CBS Corporation ................................ 102,406 6,547,584
CIGNA Corporation .............................. 25,025 2,016,077
CMS Energy Corporation ......................... 15,555 485,122
C.R. Bard, Inc. ................................ 6,924 366,972
CSX Corporation ................................ 29,327 920,135
CVS Corporation ................................ 52,668 2,103,428
+ Cabletron Systems, Inc. ........................ 24,253 630,578
Campbell Soup Company .......................... 57,468 2,223,293
Capital One Financial Corporation .............. 26,485 1,276,246
Cardinal Health, Inc. .......................... 37,644 1,802,206
Carnival Corporation ........................... 82,865 3,961,983
Carolina Power & Light Company ................. 21,479 653,767
Caterpillar Inc. ............................... 47,758 2,247,611
+ Cendant Corporation ............................ 95,506 2,536,878
Centex Corporation ............................. 7,961 196,537
Central & South West Corporation ............... 28,563 571,260
CenturyTel, Inc. ............................... 18,773 889,371
+ Ceridian Corporation ........................... 19,457 419,542
Champion International Corporation ............. 12,882 797,879
The Charles Schwab Corporation ................. 110,139 4,226,584
The Chase Manhattan Corporation ................ 110,785 8,606,610
Chevron Corporation ............................ 88,150 7,635,994
The Chubb Corporation .......................... 23,632 1,330,777
Cincinnati Financial Corporation ............... 22,044 687,497
Cinergy Corp. .................................. 21,346 514,972
Circuit City Stores -- Circuit City Group ...... 27,314 1,230,837
+ Cisco Systems, Inc. ............................ 439,365 47,066,976
Citigroup Inc. ................................. 452,886 25,163,478
+ Citrix Systems, Inc. ........................... 12,037 1,480,551
+ Clear Channel Communications, Inc. ............. 45,434 4,054,984
The Clorox Company ............................. 31,800 1,601,925
The Coastal Corporation ........................ 28,730 1,018,119
The Coca-Cola Company .......................... 331,771 19,325,661
Coca-Cola Enterprises Inc. ..................... 57,187 1,150,888
Colgate-Palmolive Company ...................... 78,253 5,086,445
Columbia Energy Group .......................... 10,915 690,374
Columbia/HCA Healthcare Corporation ............ 75,660 2,217,784
Comcast Corporation (Class A) .................. 100,968 5,073,642
Comerica Incorporated .......................... 21,052 982,865
Compaq Computer Corporation .................... 228,346 6,179,614
Computer Associates International, Inc. ........ 72,403 5,063,685
+ Computer Sciences Corporation .................. 22,363 2,116,099
+ Compuware Corporation .......................... 48,056 1,790,086
+ Comverse Technology, Inc. ...................... 9,574 1,385,836
ConAgra, Inc. .................................. 66,121 1,491,855
Conoco Inc. (Class B) .......................... 84,119 2,092,460
Conseco, Inc. .................................. 43,939 785,410
Consolidated Edison, Inc. ...................... 29,688 1,024,236
Consolidated Natural Gas Company ............... 12,898 837,564
+ Consolidated Stores Corporation ................ 14,870 241,637
Constellation Energy Group ..................... 20,105 583,045
Cooper Industries, Inc. ........................ 12,648 511,453
Cooper Tire & Rubber Company ................... 10,209 158,878
Corning Incorporated ........................... 32,908 4,243,075
+ Costco Wholesale Corporation ................... 29,797 2,718,976
Countrywide Credit Industries, Inc. ............ 15,178 383,244
Crane Co. ...................................... 8,851 175,914
Crown Cork & Seal Company, Inc. ................ 16,369 366,256
Cummins Engine Company, Inc. ................... 5,561 268,666
DTE Energy Company ............................. 19,483 611,279
Dana Corporation ............................... 22,097 661,529
Danaher Corporation ............................ 19,156 924,277
Darden Restaurants, Inc. ....................... 17,652 319,942
Dayton Hudson Corporation ...................... 59,189 4,346,692
Deere & Company ................................ 31,389 1,361,498
+ Dell Computer Corporation ...................... 341,293 17,405,943
Delphi Automotive Systems Corporation .......... 75,892 1,195,299
Delta Air Lines, Inc. .......................... 17,847 889,004
Deluxe Corporation ............................. 9,860 270,534
Dillard's, Inc. (Class A) ...................... 14,391 290,518
Dollar General Corporation ..................... 35,727 812,789
Dominion Resources, Inc. ....................... 25,630 1,005,977
Dover Corporation .............................. 27,352 1,241,097
The Dow Chemical Company ....................... 29,456 3,936,058
Dow Jones & Company, Inc. ...................... 12,018 817,224
Duke Energy Corporation ........................ 49,079 2,460,085
The Dun & Bradstreet Corporation ............... 21,610 637,495
E.I. du Pont de Nemours and Company ............ 140,302 9,242,394
+ EMC Corporation ................................ 136,673 14,931,525
Eastern Enterprises ............................ 3,580 205,626
Eastman Chemical Company ....................... 10,533 502,292
Eastman Kodak Company .......................... 42,392 2,808,470
Eaton Corporation .............................. 9,886 717,971
Ecolab Inc. .................................... 17,453 682,849
Edison International ........................... 46,637 1,221,306
El Paso Energy Corporation ..................... 30,668 1,190,302
Electronic Data Systems Corporation ............ 63,236 4,232,860
Eli Lilly and Company .......................... 146,480 9,740,920
12 & 13
<PAGE>
Merrill Lynch S&P 500 Index Fund, December 31, 1999
SCHEDULE OF INVESTMENTS (continued)
Master S&P 500 Index Series (continued)
------------------------------------------------------------------------------
Shares
Issue Held Value
==============================================================================
Common Stocks (continued)
Emerson Electric Co. ........................... 58,364 $ 3,348,634
Engelhard Corporation .......................... 16,943 319,799
Enron Corp. .................................... 96,122 4,265,414
Entergy Corporation ............................ 33,155 853,741
Equifax Inc. ................................... 18,998 447,640
Exxon Mobil Corporation++ ...................... 463,886 37,371,816
+ FDX Corporation ................................ 40,104 1,641,757
+ FMC Corporation ................................ 4,109 235,497
FPL Group, Inc. ................................ 24,120 1,032,637
Federal Home Loan Mortgage Association ......... 93,377 4,394,555
Federal National Mortgage Association .......... 137,679 8,596,333
+ Federated Department Stores, Inc. .............. 28,200 1,425,862
Fifth Third Bancorp ............................ 41,465 3,042,494
First Data Corporation ......................... 56,290 2,775,801
First Union Corporation ........................ 132,675 4,353,398
Firstar Corporation ............................ 131,660 2,781,317
FirstEnergy Corp. .............................. 31,300 710,119
FleetBoston Financial Corporation .............. 122,980 4,281,241
Fleetwood Enterprises, Inc. .................... 4,386 90,461
Florida Progress Corporation ................... 13,215 559,160
Fluor Corporation .............................. 10,203 468,063
Ford Motor Company ............................. 162,245 8,669,967
Fort James Corporation ......................... 29,063 795,600
Fortune Brands, Inc. ........................... 22,040 728,697
Foster Wheeler Corporation ..................... 5,460 48,457
Franklin Resources, Inc. ....................... 33,867 1,085,861
+ Freeport-McMoRan Copper & Gold, Inc. (Class B) . 21,959 463,884
GPU, Inc. ...................................... 16,579 496,334
GTE Corporation ................................ 130,533 9,210,735
Gannett Co., Inc. .............................. 37,445 3,054,108
The Gap, Inc. .................................. 115,008 5,290,368
+ Gateway Inc. ................................... 42,517 3,063,881
General Dynamics Corporation ................... 26,995 1,423,986
General Electric Company ....................... 440,707 68,199,408
+ General Instrument Corporation ................. 23,331 1,983,135
General Mills, Inc. ............................ 40,812 1,459,029
General Motors Corporation ..................... 85,994 6,250,689
Genuine Parts Company .......................... 23,884 592,622
Georgia-Pacific Group .......................... 22,967 1,165,575
The Gillette Company ........................... 144,081 5,934,336
+ Global Crossing Ltd. ........................... 101,933 5,096,650
Golden West Financial Corporation .............. 21,708 727,218
The Goodyear Tire & Rubber Company ............. 21,004 592,050
The Great Atlantic & Pacific Tea Company, Inc. . 5,138 143,222
Great Lakes Chemical Corporation ............... 7,725 294,998
+ Guidant Corporation ............................ 41,285 1,940,395
H & R Block, Inc. .............................. 13,148 575,225
H.J. Heinz Company ............................. 48,138 1,916,494
+ HEALTHSOUTH Corporation ........................ 51,882 278,866
Halliburton Company ............................ 59,370 2,389,643
Harcourt General, Inc. ......................... 9,577 385,474
+ Harrah's Entertainment, Inc. ................... 17,266 456,470
The Hartford Financial Services Group, Inc. .... 29,768 1,410,259
Hasbro, Inc. ................................... 26,027 496,140
Hercules Incorporated .......................... 14,281 398,083
Hershey Foods Corporation ...................... 18,586 882,835
Hewlett-Packard Company ........................ 136,873 15,594,967
Hilton Hotels Corporation ...................... 49,540 476,822
The Home Depot, Inc. ........................... 309,256 21,203,399
Homestake Mining Company ....................... 34,959 273,117
Honeywell International Inc. ................... 106,330 6,133,912
Household International, Inc. .................. 63,150 2,352,338
+ Humana Inc. .................................... 22,549 184,620
Huntington Bancshares Incorporated ............. 30,861 736,806
+ Huttig Building Products, Inc. ................. 1 3
IKON Office Solutions, Inc. .................... 20,039 136,516
IMS Health Incorporated ........................ 41,361 1,124,502
ITT Industries, Inc. ........................... 11,847 396,134
Illinois Tool Works Inc. ....................... 40,375 2,727,836
+ Inco Limited ................................... 25,784 605,924
Ingersoll-Rand Company ......................... 21,972 1,209,833
Intel Corporation .............................. 448,767 36,939,134
International Business Machines Corporation .... 242,128 26,149,824
International Flavors & Fragrances Inc. ........ 14,118 532,954
International Paper Company .................... 55,657 3,141,142
The Interpublic Group of Companies, Inc. ....... 37,698 2,174,703
J.C. Penney Company, Inc. ...................... 34,954 696,895
J.P. Morgan & Co., Incorporated ................ 23,257 2,944,918
Jefferson -- Pilot Corporation ................. 14,067 960,073
Johnson & Johnson .............................. 186,781 17,393,981
Johnson Controls, Inc. ......................... 11,443 650,821
Jostens, Inc. .................................. 4,482 108,969
+ KLA-Tencor Corporation ......................... 12,082 1,345,633
Kansas City Southern Industries, Inc. .......... 14,868 1,109,524
Kaufman and Broad Home Corporation ............. 6,435 155,647
Kellogg Company ................................ 54,454 1,677,864
Kerr-McGee Corporation ......................... 11,628 720,936
KeyCorp ........................................ 60,083 1,329,336
Kimberly-Clark Corporation ..................... 73,117 4,770,884
+ Kmart Corporation .............................. 66,314 667,285
Knight Ridder, Inc. ............................ 11,275 670,862
+ Kohl's Corporation ............................. 21,924 1,582,639
+ The Kroger Co. ................................. 111,752 2,109,319
+ LSI Logic Corporation .......................... 19,977 1,348,447
Leggett & Platt, Incorporated .................. 26,365 565,200
Lehman Brothers Holdings, Inc. ................. 16,123 1,365,417
+ Lexmark International Group, Inc. (Class A) .... 17,156 1,552,618
The Limited, Inc. .............................. 28,808 1,247,746
Lincoln National Corporation ................... 26,256 1,050,240
Liz Claiborne, Inc. ............................ 7,941 298,780
Lockheed Martin Corporation .................... 53,137 1,162,372
Loews Corporation .............................. 14,245 864,493
Longs Drug Stores Corporation .................. 5,291 136,574
Louisiana-Pacific Corporation .................. 14,298 203,746
Lowe's Companies, Inc. ......................... 51,330 3,066,967
Lucent Technologies Inc. ....................... 420,841 31,484,167
MBIA, Inc. ..................................... 13,375 706,367
MBNA Corporation ............................... 107,696 2,934,716
+ MCI WorldCom Inc. .............................. 381,251 20,206,277
MGIC Investment Corporation .................... 14,199 854,602
Mallinckrodt Inc. .............................. 9,346 297,320
+ Manor Care, Inc. ............................... 13,841 221,456
Marriott International, Inc. (Class A) ......... 33,417 1,054,724
Marsh & McLennan Companies, Inc. ............... 35,836 3,429,057
Masco Corporation .............................. 60,042 1,523,566
Mattel, Inc. ................................... 56,551 742,232
The May Department Stores Company .............. 44,883 1,447,477
Maytag Corporation ............................. 11,340 544,320
McDermott International, Inc. .................. 7,971 72,237
McDonald's Corporation ......................... 181,874 7,331,796
The McGraw-Hill Companies, Inc. ................ 26,340 1,623,202
McKesson HBOC, Inc. ............................ 37,852 854,036
The Mead Corporation ........................... 13,772 598,221
+ MediaOne Group, Inc. ........................... 82,202 6,314,141
Medtronic, Inc. ................................ 160,550 5,850,041
Mellon Financial Corporation ................... 68,323 2,327,252
Merck & Co., Inc. .............................. 313,966 21,055,345
Meredith Corporation ........................... 6,934 289,061
Merrill Lynch & Co., Inc.++ .................... 49,789 4,157,382
+ Micron Technology, Inc. ........................ 36,246 2,818,126
+ Microsoft Corporation++ ........................ 693,101 80,919,542
Milacron Inc. .................................. 4,988 76,691
Millipore Corporation .......................... 6,057 233,952
Minnesota Mining and Manufacturing Company (3M) 53,908 5,276,246
+ Mirage Resorts, Incorporated ................... 25,950 397,359
Molex Incorporated ............................. 21,058 1,193,725
Monsanto Company ............................... 85,278 3,038,029
Morgan Stanley Dean Witter & Co. ............... 74,812 10,679,413
Motorola, Inc. ................................. 81,814 12,047,112
NACCO Industries, Inc. (Class A) ............... 1,097 60,952
NICOR, Inc. .................................... 6,345 206,213
Nabisco Group Holdings Corp. ................... 43,808 465,460
National City Corporation ...................... 82,818 1,961,751
+ National Semiconductor Corporation ............. 23,039 986,357
National Service Industries, Inc. .............. 5,443 160,569
+ Navistar International Corporation ............. 8,541 404,630
+ Network Appliance, Inc. ........................ 20,060 1,666,234
New Century Energies, Inc. ..................... 15,490 470,509
The New York Times Company (Class A) ........... 23,003 1,130,022
Newell Rubbermaid Inc. ......................... 37,884 1,098,636
Newmont Mining Corporation ..................... 22,543 552,304
+ Nextel Communications, Inc. (Class A) .......... 48,816 5,034,150
+ Niagara Mohawk Holdings Inc. ................... 25,156 350,612
Nike, Inc. (Class B) ........................... 37,615 1,864,293
Nordstrom, Inc. ................................ 18,611 487,376
Norfolk Southern Corporation ................... 51,126 1,048,083
Nortel Networks Corporation .................... 179,401 18,119,501
Northern States Power Company .................. 20,793 405,464
Northern Trust Corporation ..................... 29,899 1,584,647
Northrop Grumman Corporation ................... 9,343 505,106
+ Novell, Inc. ................................... 44,738 1,786,724
Nucor Corporation .............................. 11,757 644,431
ONEOK, Inc. .................................... 4,247 106,706
Occidental Petroleum Corporation ............... 49,374 1,067,713
+ Office Depot, Inc. ............................. 44,216 483,613
Old Kent Financial Corporation ................. 15,830 559,986
Omnicom Group Inc. ............................. 23,881 2,388,100
+ Oracle Corporation ............................. 191,229 21,429,600
14 & 15
<PAGE>
Merrill Lynch S&P 500 Index Fund, December 31, 1999
SCHEDULE OF INVESTMENTS (continued)
Master S&P 500 Index Series (continued)
------------------------------------------------------------------------------
Shares
Issue Held Value
==============================================================================
Common Stocks (concluded)
Owens Corning .................................. 7,387 $ 142,661
+ Owens-Illinois, Inc. ........................... 20,165 505,385
PACCAR Inc. .................................... 10,513 465,857
PE Corp-PE Biosystems Group .................... 13,845 1,665,727
PECO Energy Company ............................ 24,955 867,186
PG&E Corporation ............................... 51,577 1,057,329
PNC Bank Corp. ................................. 39,490 1,757,305
PP&L Resources, Inc. ........................... 19,301 441,510
PPG Industries, Inc. ........................... 23,344 1,460,459
+ Pactiv Corporation ............................. 23,017 244,556
PaineWebber Group Inc. ......................... 19,170 744,036
Pall Corporation ............................... 16,700 360,094
+ Parametric Technology Corporation ............. 36,167 978,769
Parker-Hannifin Corporation ................... 15,043 771,894
Paychex, Inc. ................................. 33,140 1,325,600
Peoples Energy Corporation .................... 4,766 159,661
+ PeopleSoft, Inc. .............................. 36,058 768,486
The Pep Boys-Manny, Moe & Jack ................ 7,073 64,541
PepsiCo, Inc. ................................. 195,531 6,892,468
PerkinElmer, Inc. ............................. 6,171 257,254
Pfizer Inc .................................... 519,992 16,867,241
Pharmacia & Upjohn, Inc. ...................... 69,645 3,134,025
Phelps Dodge Corporation ...................... 10,876 730,052
Philip Morris Companies Inc. .................. 317,823 7,369,521
Phillips Petroleum Company .................... 34,021 1,598,987
Pinnacle West Capital Corporation ............. 11,372 347,557
Pitney Bowes Inc. ............................. 35,630 1,721,374
Placer Dome Inc. .............................. 43,736 470,162
Polaroid Corporation .......................... 5,935 111,652
Potlatch Corporation .......................... 3,885 173,368
Praxair, Inc. ................................. 21,350 1,074,172
The Procter & Gamble Company .................. 176,521 19,340,082
The Progressive Corporation ................... 9,823 718,307
Providian Financial Corporation ............... 19,082 1,737,655
Public Service Enterprise Group Incorporated .. 29,361 1,022,130
Pulte Corporation ............................. 5,807 130,658
+ QUALCOMM Incorporated ......................... 88,628 15,620,685
The Quaker Oats Company ....................... 18,005 1,181,578
+ Quintiles Transnational Corp. ................. 15,443 288,591
R.R. Donnelley & Sons Company ................. 16,984 421,415
Ralston-Ralston Purina Group .................. 43,442 1,210,946
Raytheon Company (Class B) .................... 45,440 1,207,000
+ Reebok International Ltd. ..................... 7,589 62,135
Regions Financial Corporation ................. 29,369 737,896
Reliant Energy, Inc. .......................... 39,715 908,481
Republic New York Corporation ................. 14,102 1,015,344
Reynolds Metals Company ....................... 8,462 648,401
Rite Aid Corporation .......................... 34,779 389,090
Rockwell International Corporation ............ 25,551 1,223,254
Rohm and Haas Company .......................... 29,401 1,196,253
+ Rowan Companies, Inc. .......................... 11,193 242,748
Royal Dutch Petroleum Company (NY Registered
Shares) ...................................... 288,025 17,407,511
Russell Corporation ............................ 4,487 75,157
Ryder System, Inc. ............................. 8,644 211,238
SAFECO Corporation ............................. 17,463 433,301
SBC Communications Inc. ........................ 458,221 22,338,274
SLM Holding Corporation ........................ 21,368 902,798
SUPERVALU INC .................................. 18,752 375,040
SYSCO Corporation .............................. 44,243 1,750,364
+ Safeway Inc. ................................... 68,343 2,430,448
Sara Lee Corporation ........................... 122,057 2,692,883
Schering-Plough Corporation .................... 197,328 8,324,775
Schlumberger Limited ........................... 73,856 4,154,400
Scientific-Atlanta, Inc. ....................... 10,552 586,955
+ Seagate Technology, Inc. ....................... 27,980 1,302,819
The Seagram Company Ltd. ....................... 58,199 2,615,318
+ Sealed Air Corporation ......................... 11,219 581,284
Sears, Roebuck & Co. ........................... 50,767 1,545,221
+ Sempra Energy .................................. 32,284 560,935
Service Corporation International .............. 36,544 253,524
Shared Medical Systems Corporation ............. 3,582 182,458
The Sherwin-Williams Company ................... 22,281 467,901
Sigma-Aldrich Corporation ...................... 13,534 406,866
+ Silicon Graphics, Inc. ......................... 24,689 242,261
Snap-On Incorporated ........................... 7,860 208,781
+ Solectron Corporation .......................... 39,387 3,746,688
The Southern Company ........................... 90,411 2,124,659
SouthTrust Corporation ......................... 22,546 852,521
Southwest Airlines Co. ......................... 67,756 1,096,800
Springs Industries, Inc. (Class A) ............. 2,413 96,369
Sprint Corp. (FON Group) ....................... 117,053 7,879,130
+ Sprint Corp. (PCS Group) ....................... 57,885 5,933,213
+ St. Jude Medical, Inc. ......................... 11,303 346,861
The St. Paul Companies, Inc. ................... 30,493 1,027,233
The Stanley Works .............................. 12,012 361,862
+ Staples, Inc. .................................. 62,385 1,294,489
State Street Corporation ....................... 21,488 1,569,967
Summit Bancorp ................................ 23,475 718,922
+ Sun Microsystems, Inc. ........................ 209,826 16,248,401
SunTrust Banks, Inc. .......................... 42,978 2,957,424
Sunoco, Inc. .................................. 12,119 284,797
Synovus Financial Corp. ....................... 37,584 746,982
T. Rowe Price Associates, Inc. ................ 16,072 593,660
The TJX Companies, Inc. ....................... 41,650 851,222
TRW Inc. ...................................... 16,314 847,308
Tandy Corporation ............................. 26,004 1,279,072
Tektronix, Inc. ............................... 6,316 245,535
+ Tellabs, Inc. ................................. 54,034 3,468,307
Temple-Inland, Inc. ........................... 7,489 493,806
+ Tenet Healthcare Corporation .................. 41,812 982,582
+ Teradyne, Inc. ................................ 22,969 1,515,954
Texaco Inc. ................................... 74,288 4,034,767
Texas Instruments Incorporated ................ 107,725 10,435,859
Texas Utilities Company ....................... 37,127 1,320,329
Textron, Inc. ................................. 19,979 1,532,140
+ Thermo Electron Corporation ................... 21,275 319,125
Thomas & Betts Corporation .................... 7,766 247,541
Time Warner Inc. .............................. 172,807 12,517,707
The Times Mirror Company (Class A) ............ 8,047 539,149
The Timken Company ............................ 8,361 170,878
Torchmark Corporation ......................... 17,668 513,476
Tosco Corporation ............................. 19,333 525,616
+ Toys 'R' Us, Inc. ............................. 32,878 470,566
Transocean Sedco Forex Inc. ................... 27,728 934,105
Tribune Company ............................... 31,896 1,756,274
+ Tricon Global Restaurants, Inc. ............... 20,623 796,563
Tupperware Corporation ........................ 7,776 131,706
Tyco International Ltd. ....................... 226,829 8,817,977
U S WEST, Inc. ................................ 67,910 4,889,520
+ US Airways Group, Inc. ........................ 9,633 308,858
U.S. Bancorp .................................. 97,739 2,327,410
UST Inc. ...................................... 22,981 578,834
USX-Marathon Group ............................ 41,736 1,030,358
USX-U.S. Steel Group .......................... 11,873 391,809
Unicom Corporation ............................ 29,259 980,177
Unilever NV (NY Registered Shares) ............ 76,775 4,179,439
Union Carbide Corporation ..................... 17,980 1,200,165
Union Pacific Corporation ..................... 33,382 1,456,290
Union Pacific Resources Group Inc. ............ 33,895 432,161
Union Planters Corporation .................... 18,943 747,065
+ Unisys Corporation ............................ 41,627 1,329,462
United HealthCare Corporation ................. 22,801 1,211,303
United Technologies Corporation ............... 64,305 4,179,825
Unocal Corporation ............................ 32,562 1,092,862
UnumProvident Corporation ..................... 32,241 1,033,727
V. F. Corporation ............................. 15,866 475,980
+ Viacom, Inc. (Class B) ........................ 93,620 5,658,159
Vulcan Materials Company ...................... 13,463 537,679
+ W.R. Grace & Co. .............................. 9,642 133,783
W.W. Grainger, Inc. ........................... 12,573 601,147
Wachovia Corporation .......................... 27,215 1,850,620
Wal-Mart Stores, Inc. ......................... 597,748 41,319,331
Walgreen Co. .................................. 134,789 3,942,578
The Walt Disney Company ....................... 277,015 8,102,689
Warner-Lambert Company ........................ 115,336 9,450,344
Washington Mutual, Inc. ....................... 77,544 2,016,144
Waste Management, Inc. ........................ 83,229 1,430,498
+ Watson Pharmaceuticals, Inc. .................. 12,887 461,516
+ Wellpoint Health Networks Inc. ................ 8,548 563,634
Wells Fargo Company ........................... 220,595 8,920,310
Wendy's International, Inc. ................... 16,061 331,258
Westvaco Corporation .......................... 13,473 439,557
Weyerhaeuser Company .......................... 31,545 2,265,325
Whirlpool Corporation ......................... 9,997 650,430
Willamette Industries, Inc. ................... 14,998 696,470
The Williams Companies, Inc. .................. 58,429 1,785,736
Winn-Dixie Stores, Inc. ....................... 20,007 478,918
Wm. Wrigley Jr. Company ....................... 15,550 1,289,678
Worthington Industries, Inc. .................. 11,970 197,505
Xerox Corporation ............................. 89,229 2,024,383
+ Xilinx, Inc. .................................. 42,828 1,947,336
+ Yahoo! Inc. ................................... 35,359 15,299,397
- --------------------------------------------------------------------------------
Total Common Stocks (Cost -- $1,181,489,357) -- 97.9% 1,654,548,485
================================================================================
16 & 17
<PAGE>
Merrill Lynch S&P 500 Index Fund, December 31, 1999
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
Master S&P 500 Index Series (concluded)
- -----------------------------------------------------------------------------------------------
Face
Amount Short-Term Obligations Value
===============================================================================================
<S> <C> <C>
Commercial Paper*
$25,000,000 Associates First Capital Corp., 4.05% due 1/03/2000 $ 24,994,375
11,138,000 General Motors Acceptance Corp., 5% due 1/03/2000 11,134,906
===============================================================================================
Total Short-Term Obligations (Cost -- $36,129,281) -- 2.1% 36,129,281
===============================================================================================
Total Investments (Cost -- $1,217,618,638) -- 100.0% 1,690,677,766
Variation Margin on Financial Futures Contracts** -- 0.0% 84,776
Liabilities in Excess of Other Assets -- (0.0%) (426,804)
--------------
Net Assets -- 100.0% $1,690,335,738
==============
===============================================================================================
</TABLE>
+ Non-income producing security.
++ Portion of securities held as collateral for open financial
futures contracts.
++ An affiliate of the Series.
* Commercial Paper is traded on a discount basis; the
interest rates shown reflect the discount rates paid at the
time of purchase by the Series.
** Financial futures contracts purchased as of December 31,
1999 were as follows:
--------------------------------------------------------------------------
Number of Expiration
Contracts Issue Date Value
--------------------------------------------------------------------------
98 S&P 500 Stock Index March 2000 $36,362,900
--------------------------------------------------------------------------
Total Financial Futures Contracts Purchased
(Total Contract Price -- $35,891,605) $36,362,900
===========
--------------------------------------------------------------------------
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
MASTER
S&P 500
INDEX SERIES As of December 31, 1999
=======================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $1,217,618,638) $1,690,677,766
Cash .................................................... 67,949
Receivables:
Contributions ......................................... $ 5,434,303
Dividends ............................................. 1,434,729
Securities sold ....................................... 141,384
Variation margin ...................................... 84,776 7,095,192
--------------
Deferred organization expenses .......................... 2,704
Prepaid expense ......................................... 217,737
--------------
Total assets ............................................ 1,698,061,348
--------------
=======================================================================================================================
Liabilities: Payables:
Withdrawals ........................................... 7,003,858
Securities purchased .................................. 510,164
Investment adviser .................................... 7,726 7,521,748
--------------
Accrued expenses and other liabilities .................. 203,862
--------------
Total liabilities ....................................... 7,725,610
--------------
=======================================================================================================================
Net Assets: Net assets .............................................. $1,690,335,738
==============
=======================================================================================================================
Net Assets Partners' capital ....................................... $1,216,805,316
Consist of: Unrealized appreciation on investments -- net ........... 473,530,422
--------------
Net assets .............................................. $1,690,335,738
==============
=======================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
MASTER
S&P 500
INDEX SERIES For the Year Ended December 31, 1999
=======================================================================================================================
<S> <C> <C> <C>
Investment Dividends (net of $190,201 foreign withholding tax) ..... $ 18,406,346
Income: Interest and discount earned ............................ 2,120,491
Other ................................................... 62,139
--------------
Total income ............................................ 20,588,976
--------------
=======================================================================================================================
Expenses: Investment advisory fees ................................ $ 479,793
Accounting services ..................................... 374,872
Custodian fees .......................................... 135,447
Professional fees ....................................... 55,838
Pricing fees ............................................ 5,497
Trustees' fees and expenses ............................. 4,647
Amortization of organization expenses ................... 3,117
Other ................................................... 13,725
--------------
Total expenses .......................................... 1,072,936
--------------
Investment income -- net ................................ 19,516,040
--------------
=======================================================================================================================
Realized & Realized loss from investments -- net ................... (12,925,031)
Unrealized Gain Change in unrealized appreciation on investments -- net.. 282,264,818
(Loss) On Invest- --------------
ments -- Net: Net Increase in Net Assets Resulting from Operations .... $ 288,855,827
==============
=======================================================================================================================
</TABLE>
See Notes to Financial Statements.
18 & 19
<PAGE>
Merrill Lynch S&P 500 Index Fund, December 31, 1999
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended
MASTER December 31,
S&P 500 ----------------------------------
INDEX SERIES Increase (Decrease) in Net Assets: 1999 1998
=======================================================================================================================
<S> <C> <C> <C>
Operations: Investment income -- net ................................ $ 19,516,040 $ 14,156,369
Realized gain (loss) on investments -- net .............. (12,925,031) 38,594,945
Change in unrealized appreciation on investments -- net.. 282,264,818 145,214,729
-------------- --------------
Net increase in net assets resulting from operations .... 288,855,827 197,966,043
-------------- --------------
=======================================================================================================================
Net Capital Increase in net assets derived from net capital
Contributions: contributions ......................................... 283,259,445 317,453,922
-------------- --------------
=======================================================================================================================
Net Assets: Total increase in net assets ............................ 572,115,272 515,419,965
Beginning of year ....................................... 1,118,220,466 602,800,501
-------------- --------------
End of year ............................................. $1,690,335,738 $1,118,220,466
============== ==============
=======================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Year Ended
MASTER December 31, For the Period
S&P 500 The following ratios have been derived from --------------------------- April 3, 1997+ to
INDEX SERIES information provided in the financial statements. 1999 1998 Dec. 31, 1997
====================================================================================================================================
<S> <C> <C> <C> <C>
Ratios to Average Expenses, net of reimbursement ........................ .07% .10% .12%*
Net Assets: ========== ========== ========
Expenses .............................................. .07% .10% .17%*
========== ========== ========
Investment income -- net .............................. 1.33% 1.56% 1.99%*
========== ========== ========
====================================================================================================================================
Supplemental Net assets, end of period (in thousands)............... $1,690,336 $1,118,220 $602,801
Data: ========== ========== ========
Portfolio turnover .................................... 29.91% 25.97% 24.31%
========== ========== ========
====================================================================================================================================
</TABLE>
* Annualized.
+ Commencement of operations.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
MASTER
S&P 500
INDEX SERIES
1. Significant Accounting Policies:
Master S&P 500 Index Series (the "Series") (formerly Merrill Lynch S&P 500 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). Other investments,
including futures contracts and related options, are stated at market value.
Short-term securities are valued at amortized cost, which approximates 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
20 & 21
<PAGE>
Merrill Lynch S&P 500 Index Fund, December 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
MASTER
S&P 500
INDEX SERIES
that the cost of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes -- The Series is classified as a partnership for Federal income
tax purposes. As a partnership for Federal income tax purposes, the Series will
not incur Federal income tax liability. Items of partnership income, gain, loss
and deduction will pass through to investors as partners in the Series.
Therefore, no Federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends and
capital gains at various rates.
(d) Security transactions and investment income -- Security transactions are
accounted for on the date the securities are purchased or sold (the trade
dates). Dividend income is recorded on the ex-dividend dates. Interest income
(including amortization of discount) is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on the
identified cost basis.
(e) Deferred organization expenses -- Deferred organization expenses are charged
to expense on a straight-line basis over a period not exceeding five years.
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 .05% of the average daily value of the Series' net
assets. Effective August 2, 1999, the annual rate was changed to .005%.
Merrill Lynch Trust Company, an indirect wholly-owned subsidiary of ML & Co., is
the Series' custodian.
Accounting services are provided to the Series by FAM at cost.
Certain officers and/or trustees of the Series are officers and/or directors of
FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended December 31, 1999 were $728,470,387 and $424,501,607, respectively.
Net realized gains (losses) for the year ended December 31, 1999 and net
unrealized gains as of December 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains
- --------------------------------------------------------------------------------
Long-term investments ............... $(18,831,959) $473,059,127
Financial futures contracts ......... 5,906,928 471,295
------------ ------------
Total ............................... $(12,925,031) $473,530,422
============ ============
- --------------------------------------------------------------------------------
As of December 31, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $440,892,107, of which $515,427,362 related to appreciated
securities and $74,535,255 related to depreciated securities. At December 31,
1999, the aggregate cost of investments for Federal income tax purposes was
$1,249,785,659.
4. Loaned Securities:
At December 31, 1999, the Series held US Treasury notes having an aggregate
value of approximately $4,417,000 as collateral for portfolio securities loaned
having a market value of approximately $5,791,000.
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Investors,
Master S&P 500 Index Series
(formerly Merrill Lynch S&P 500 Index Series):
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Master S&P 500 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 3, 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 S&P 500 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
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 4 -- 12/99
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