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MERCURY INDEX FUNDS INC
497, 2000-07-12

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Mercury Index Funds, Inc.

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This prospectus contains information you should know before investing, including information about risks. Please read it before you invest and keep it for future reference.

The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

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[GRAPHIC]
FUND FACTS
About Mercury Index Funds   2
Fees and Expenses   8
[GRAPHIC]
ABOUT THE DETAILS
How the Funds Invest   11
Investment Risks   16
Statement of Additional Information  23
[GRAPHIC]
ACCOUNT CHOICES
Pricing of Shares   24
How to Buy, Sell, Transfer and Exchange Shares   26
How Shares are Priced   30
Fee-Based Programs   31
Dividends and Taxes   31
[GRAPHIC]
THE MANAGEMENT TEAM
Management of the Funds   33
Master/Feeder Structure   34
[GRAPHIC]
TO LEARN MORE
Shareholder Reports   Back Cover
Statement of Additional Information   Back Cover

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Want to invest in large U.S. companies

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Are investing with long-term goals, such as retirement or funding a child’s education

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In seeking to match the performance of the S&P 500, are willing to accept the risk that the value of your investment may decline

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Are not looking for a significant amount of current income

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Want to invest in smaller capitalization U.S. companies and can accept the additional risk and volatility associated with stocks of these companies

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Are investing with long-term goals, such as retirement or funding a child’s education

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In seeking to match the performance of the Russell 2000, are willing to accept the risk that the value of your investment may decline

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Are not looking for a significant amount of current income

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In seeking to match the performance of the Aggregate Bond Index, are willing to accept a lower potential for capital appreciation

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Are looking for an investment that provides income

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Are looking for exposure to a variety of foreign markets and can accept the additional risk and volatility associated with foreign investing

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Are investing with long-term goals, such as retirement or funding a child’s education

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In seeking to match the performance of the EAFE Index, are willing to accept the risk that the value of your investment may decline

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Are not looking for a significant amount of current income

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Shareholder Fees (fees paid directly from your investment) (a):		Mercury S&P 500 Index Fund			Mercury Small Cap Index Fund			Mercury Aggregate Bond Index Fund			Mercury International Index Fund
Maximum Sales Charge (Load) imposed on purchases (as a percentage of offering price)		None			None			None			None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is lower)		None			None			None			None
Maximum Sales Charge (Load) imposed on Dividend Reinvestments		None			None			None			None
Redemption Fee(b)		0.25	%		0.50	%		0.25	%		0.50	%
Exchange Fee		None			None			None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)(c):
Management Fee(d)		0.05	%		0.08	%		0.06	%		0.01	%
Distribution and/or Service (12b-1) Fees(e)		None			None			None			None
Other Expenses (including transfer agency fees)(f)		0.525	%		0.57	%		0.55	%		0.67	%
Administrative Fees(g)		0.245	%		0.29	%		0.19	%		0.34	%
Total Other Expenses		0.77	%		0.86	%		0.74	%		1.01	%
Total Annual Fund Operating Expenses(h)		0.82	%		0.94	%		0.80	%		1.02	%

Shareholder Fees (fees paid directly from your investment) (a):		Mercury S&P 500 Index Fund			Mercury Small Cap Index Fund			Mercury Aggregate Bond Index Fund			Mercury International Index Fund
Maximum Sales Charge (Load) imposed on purchases (as a percentage of offering price)		None			None			None			None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, whichever is lower)		None			None			None			None
Maximum Sales Charge (Load) imposed on Dividend Reinvestments		None			None			None			None
Redemption Fee(b)		0.25	%		0.50	%		0.25	%		0.50	%
Exchange Fee		None			None			None			None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)(c):
Management Fee(d)		0.05	%		0.08	%		0.06	%		0.01	%
Distribution and/or Service (12b-1) Fees (e)		0.25	%		0.25	%		0.25	%		0.25	%
Other Expenses (including transfer agency fees)(f)		0.525	%		0.57	%		0.55	%		0.67	%
Administrative Fees(g)		0.245	%		0.29	%		0.19	%		0.34	%
Total Other Expenses		0.77	%		0.86	%		0.74	%		1.01	%
Total Annual Fund Operating Expenses(h)		1.07	%		1.19	%		1.05	%		1.27	%

(a)	In addition, certain securities dealers or other financial intermediaries may charge a fee to process a purchase or sale of shares.

(b)

You will pay a Redemption Fee on your Fund shares if you redeem or exchange your shares within ninety days of your purchase. This fee will not apply to shares purchased through reinvested distributions or by investors that are qualified state tuition programs as defined in Section 529 of the Internal Revenue Code.

(c)	With respect to each Fund, fees and expenses include the expenses of both the Fund and the Fund’s pro rata share of the expenses of the Series in which it invests.

(d)

Paid by the Series. The Investment Adviser of the Series has entered into a contractual arrangement to provide that the management fee for the Series, when combined with administrative fees of certain funds that invest in the Series, will not exceed specific amounts. As a result of this contractual arrangement, the Investment Adviser of the S&P 500 Index Series, Small Cap Index Series and Aggregate Bond Index Series currently receives management fees of 0.005%, 0.01% and 0.01%, respectively. This arrangement has a one-year term and is renewable. The Investment Adviser has not entered into a similar arrangement with the Series in which the Mercury International Index Fund invests.

(e)	The Funds call the “Service Fee” an “Account Maintenance Fee.” Account Maintenance Fee is the term used elsewhere in this Prospectus and in all other materials.

(f)

Based on estimated amounts for the current fiscal year. The Transfer Agent is an affiliate of the Investment Adviser. Each Fund pays the Transfer Agent a fee for each shareholder account and reimburses it for out-of-pocket expenses. The fee ranges from $11.00 to $20.00 per account (depending on the level of services required) but is set at 0.10% for certain accounts, that participate in certain fee based programs. In addition, in connection with the Fund’s self-custody arrangements, each Series pays the Transfer Agent an annual fee at the annual rate of 0.05% of the Series’ average daily net assets for its services and the Transfer Agent is entitled to reimbursement for out-of-pocket expenses incurred by it under the Quantitative Master Series Trust Transfer Agency Agreement. The Investment Adviser or its affiliate provides accounting services to each Series at its cost.

(g)	Paid by the Funds.

(h)

The Investment Adviser has agreed to voluntarily waive management fees and/or reimburse expenses of the Fund and/or the corresponding Series in which it invests, except with respect to the Series in which the Mercury International Index Fund invests. The Total Annual Fund Operating Expenses shown in the table do not reflect any such voluntary management fee waivers and/or reimbursement of expenses because they may be discontinued by the Investment Adviser at any time without notice. After taking into account the fee levels described above and the voluntary fee waivers and/or expense reimbursements, net total annual Fund operating expenses will be as follows: 0.775% for Class I shares and 1.025% for Class A shares (Footnotes continued from previous page)

of the Mercury S&P 500 Index Fund; 0.87% for Class I shares and 1.12% for Class A shares of the Mercury Small Cap Index Fund; and 0.75% for Class I shares and 1.00% for Class A shares of the Mercury Aggregate Bond Index Fund.

		Mercury S&P 500 Index Fund		Mercury Small Cap Index Fund		Mercury Aggregate Bond Index Fund		Mercury International Index Fund
One Year		$  84		$  96		$  82		$104
Three Years		$262		$300		$255		$325

		Mercury S&P 500 Index Fund		Mercury Small Cap Index Fund		Mercury Aggregate Bond Index Fund		Mercury International Index Fund
One Year		$109		$121		$107		$129
Three Years		$340		$378		$334		$403

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U.S. government and government agency securities

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securities issued by supranational entities, such as the World Bank

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securities issued by foreign governments and U.S. and foreign corporations

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mortgage-backed securities

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If the transition to euro, or EMU as a whole, does not continue to proceed as planned.

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If a participating country withdraws from EMU.

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Leverage risk — the risk associated with certain types of investments or trading strategies that relatively small market movements may result in large changes in the value of an investment. Certain investments or trading strategies that involve leverage can result in losses that greatly exceed the amount originally invested.

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Credit risk — the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable to honor its financial obligation to a Fund.

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Currency risk — the risk that changes in the exchange rate between currencies will adversely affect the value (in U.S. dollar terms) of an investment.

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Liquidity risk — the risk that certain securities may be difficult or impossible to sell at the time that a Fund would like or at the price that a Fund believes the security is currently worth.

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		Class I		Class A
Availability?		Limited to certain investors including:		Generally available through selected
		Ÿ Current Class I shareholders		securities dealers and other financial intermediaries.
		Ÿ Certain Retirement Plans
		Ÿ Participants of certain sponsored programs
		Ÿ Certain affiliates or customers of selected securities dealers and other financial intermediaries
Initial Sales Charge?		No. Entire purchase price is invested in shares of the Fund.		No. Entire purchase price is invested in shares of the Fund.
Deferred Sales Charge?		No.		No.
Account Maintenance and Distribution Fees?		No.		0.25% Account Maintenance Fee. No Distribution Fee.
Redemption Fee?		0.25% Redemption Fee for shares of the Mercury S&P 500 Index Fund and the Mercury Aggregate Bond Index Fund held less than ninety days. This redemption fee will not apply to shares purchased through reinvested distributions or by investors that are qualified state tuition programs as defined in Section 529 of the Internal Revenue Code.		0.25% Redemption Fee for shares of the Mercury S&P 500 Index Fund and the Mercury International Index Fund held less than ninety days. This redemption fee will not apply to shares purchased through reinvested distributions or by investors that are qualified state tuition programs as defined in Section 529 of the Internal Revenue Code.
		0.50% Redemption Fee for shares of the Mercury Small Cap Index Fund and the Mercury International Index Fund held less than ninety days. This redemption fee will not apply to shares purchased through reinvested distributions or by investors that are qualified state tuition programs as defined in Section 529 of the Internal Revenue Code.		0.50% Redemption Fee for shares of the Mercury Small Cap Index Fund and the Mercury International Index Fund held less than ninety days. This redemption fee will not apply to shares purchased through reinvested distributions or by investors that are qualified state tuition programs as defined in Section 529 of the Internal Revenue Code.

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If you want to		Your choices		Information important for you to know
Buy shares		First, select the share class appropriate for you		Refer to the pricing of shares table on page 25. Be sure to read this Prospectus carefully.
		Next, determine the amount of your investment		The minimum initial investment for a Fund is $1,000 for all accounts except:
				Ÿ   $250 for certain fee-based programs
				Ÿ   $100 for retirement plans
				(The minimums for initial investments may be waived or reduced under certain circumstances.)
		Have your financial consultant, securities dealer or other financial intermediary submit your purchase order		The price of your shares is based on the next calculation of net asset value after your order is placed. Any purchase orders placed prior to the close of business on the New York Stock Exchange (generally 4:00 p.m. Eastern time) will be priced at the net asset value determined that day. However, certain financial intermediaries may require submission of orders prior to that time.
				Purchase orders placed after that time will be priced at the net asset value determined on the next business day. A Fund may reject any order to buy shares and may suspend the sale of shares at any time. Certain securities dealers or other financial intermediaries may charge a fee to process a purchase.
		Or contact the Transfer Agent		To purchase shares directly, call the Transfer Agent at 1-888-763-2260 and request a purchase application. Mail the completed purchase application to the Transfer Agent at the address on the inside back cover of this Prospectus.
Add to your investment		Purchase additional shares		The minimum investment for additional purchases is generally $100 for all accounts except:
				Ÿ   $50 for certain fee-based programs
				Ÿ   $1 for retirement plans
				(The minimums for additional purchases may be waived under certain circumstances.)
		Acquire additional shares through the automatic dividend reinvestment plan		All dividends are automatically reinvested without a sales charge.
		Participate in the automatic investment plan		You may invest a specific amount in a Fund on a periodic basis through your securities dealer or other financial intermediary:
				Ÿ The current minimum for such automatic investments is $100. The minimum may be waived or revised under certain circumstances.

If you want to		Your choices		Information important for you to know
Transfer shares to another securities dealer or other financial intermediary		Transfer to a participating securities dealer or other financial intermediary		To transfer your Fund shares to another securities dealer or other financial intermediary, an authorized agreement must be in place between the Distributor and each of the transferring and receiving securities dealer or other financial interiediary. Certain shareholder services may not be available for the transferred shares. You may only purchase additional shares of funds previously owned before the transfer. All future trading of these assets must be coordinated by the receiving firm.
		Transfer to a non-participating securities dealer or other financial intermediary		You must either: Ÿ   Transfer your shares to an account with the Transfer Agent; or Ÿ   Sell your shares.
Sell your shares		Have your financial consultant, securities dealer or other financial intermediary submit your sales order		The price of your shares is based on the next calculation of net asset value after your order is placed. For your redemption request to be priced at the net asset value on the day of your request, you must submit your request to your financial intermediary prior to that day’s close of business on the New York Stock Exchange (generally, at 4:00 p.m. Eastern time). However, certain financial intermediaries may require submission of orders prior to that time. Any redemption request placed after that time will be priced at the net asset value at the close of business on the next business day.
				Certain securities dealers or financial intermediaries may charge a fee to process a sale of shares. No processing fee is charged if you sell shares directly through the Transfer Agent. The fees charged by other securities dealers or other financial intermediaries may be higher or lower.
				A Fund may reject an order to sell shares under certain circumstances.
		Sell through the Transfer Agent		You may sell shares held at the Transfer Agent by writing to the Transfer Agent at the address on the inside back cover of this Prospectus. All shareholders on the account must sign the letter. A signature guarantee will generally be required but may be waived in certain limited circumstances. You can obtain a signature guarantee from a bank, securities dealer, securities broker, credit union, savings association, national securities exchange and registered securities association. A notary public seal will not be acceptable. Depending on the type of account and/or type of distribution, certain additional documentation may be required. The Transfer Agent will normally mail redemption proceeds within seven days following receipt of a properly completed request. If you make a redemption request before the Fund has collected payment for the purchase of shares, the Fund or the Transfer Agent may delay mailing your proceeds. This delay usually will not exceed ten days.

If you want to		Your choices		Information important for you to know
Sell shares systematically		Participate in a Fund’s Systematic Withdrawal Plan		You can choose to receive systematic payments from your Fund account either by check or through direct deposit to your bank account on a monthly or quarterly basis. You can generally arrange through your selected dealer or other financial intermediary for systematic sales of shares of a fixed dollar amount on a monthly, bi-monthly, quarterly, semi-annual or annual basis, subject to certain conditions. You must have dividends automatically reinvested. Ask your financial consultant or other financial intermediary for details.
Exchange your shares		Select the Fund into which you want to exchange. Be sure to read that fund’s prospectus.		If you are a participant in certain fee-based programs or retirement plans, you can exchange your shares of a Fund for shares of another Fund.
				Although there is currently no limit on the number of exchanges that you can make, the exchange privilege may be modified or terminated at any time in the future.

Because of the high cost of maintaining smaller shareholder accounts, the Funds may redeem the shares in your account if the net asset value of your account falls below $500 due to redemptions you have made. You will be notified that the value of your account is less than $500 before the Funds make an involuntary redemption. You will then have 60 days to make an additional investment to bring the value of your account to at least $500 before the Funds take any action. This involuntary redemption does not apply to retirement plans or Uniform Gifts or Transfers to Minors Act accounts.

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Fund		Management Fee (a)			Administrative Fee			Total Management and Administrative Fee
Mercury S&P 500 Index      Fund		0.05	%		0.245	%		0.295	%
Mercury Small Cap Index      Fund		0.08	%		0.29	%		0.37	%
Mercury Aggregate Bond      Index Fund		0.06	%		0.19	%		0.25	%
Mercury International      Index Fund		0.01	%		0.34	%		0.35	%

(a)

Paid by the Series. The Investment Adviser of the Series has entered into a contractual arrangement to provide that the management fee for the Series, when combined with administrative fees of certain funds that invest in the Series, will not exceed specific amounts. As a result of this contractual arrangement, the Investment Adviser of the S&P 500 Index Series, Small Cap Index Series and Aggregate Bond Index Series currently receives management fees of 0.005%, 0.01% and 0.01%, respectively. This arrangement has a one-year term and is renewable. The Investment Adviser has not entered into a similar arrangement with the Series in which the Mercury International Index Fund invests.

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Prospectus

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M E R C U R Y

ASSET MANAGEMENT

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Mercury Index Funds, Inc.

June 9, 2000

As Revised June 29, 2000

		Page
Investment Objectives and Policies		2
Mercury S&P 500 Index Fund		2
Mercury Small Cap Index Fund		2
Mercury Aggregate Bond Index Fund		3
Mercury International Index Fund		4
About Indexing and Management of the Funds		5
Other Investment Policies, Practices and Risk Factors		5
Portfolio Strategies Involving Options, Futures, Swaps, Indexed Instruments and Foreign Exchange                 Transactions		12
Risk Factors in Derivatives		15
Additional Information Concerning the Indices		16
Investment Restrictions		18
Portfolio Turnover		20
Management of the Funds		20
Directors and Officers		20
Compensation of Directors/Trustees		22
Administration Arrangements		23
Management and Advisory Arrangements		24
Code of Ethics		26
Purchase of Shares		26
Account Maintenance Plan		27
Redemption of Shares		28
Redemption		28
Repurchase		29
Redemption Fee		29
Portfolio Transactions and Brokerage		29
Pricing of Shares		31
Determination of Net Asset Value		31
Shareholder Services		32
Investment Account		32
Automatic Investment Plan		33
Automatic Dividend Reinvestment Plan		33
Systematic Withdrawal Plan		33
Retirement and Education Savings Plans		34
Exchange Privilege		34
Fee-Based Programs		35
Dividends and Taxes		35
Dividends		35
Taxes		35
Tax Treatment of Options and Futures Transactions		37
Special Rules for Certain Foreign Currency Transactions		37
The Series		38
Performance Data		38
General Information		40
Description of Shares		40
Computation of Offering Price Per Share		40
Independent Auditors		41
Custodian		41
Transfer Agent		41
Legal Counsel		42
Reports to Shareholders		42
Additional Information		42
Financial Statements		42
Independent Auditors’ Report		43
Statements of Assets and Liabilities		44
Appendix
Ratings of Fixed Income Securities		A-1

1.  Make any investment inconsistent with the Fund’s classification as a non-diversified company under the Investment Company Act.

2.   Invest more than 25% of its total assets, taken at market value, in the securities of issuers in any particular industry (excluding the U.S. Government and its agencies and instrumentalities); provided, that in replicating the weighting of a particular industry in its target index, a Fund may invest more than 25% of its total assets in securities of issuers in that industry.

3.  Make investments for the purpose of exercising control or management.

4.   Purchase or sell real estate, except that, to the extent permitted by law, a Fund may invest in securities directly or indirectly secured by real estate or interests therein or issued by companies which invest in real estate or interests therein.

5.  Make loans to other persons, except that the acquisition of bonds, debentures or other corporate debt securities and investment in government obligations, commercial paper, pass-through instruments, certificates of deposit, bankers’ acceptances, repurchase agreements or any similar instruments shall not be deemed to be the making of a loan, and except further that a Fund may lend its portfolio securities, provided that the lending of portfolio securities may be made only in accordance with applicable law and the guidelines set forth in the Fund’s Registration Statement, as it may be amended from time to time.

6.   Issue senior securities to the extent such issuance would violate applicable law.

7.   Borrow money, except that (i) a Fund may borrow from banks (as defined in the Investment Company Act) in amounts up to 33 1 /3% of its total assets (including the amount borrowed), (ii) a Fund may borrow up to an additional 5% of its total assets for temporary purposes, (iii) a Fund may obtain such short term credit as may be necessary for the clearance of purchases and sales of portfolio securities, and (iv) a Fund may purchase securities on margin to the extent permitted by applicable law. A Fund may not pledge its assets other than to secure such borrowings or, to the extent permitted by the Fund’s investment policies as set forth in its Registration Statement, as it may be amended from time to time, in connection with hedging transactions, short sales, when issued and forward commitment transactions and similar investment strategies.

8.   Underwrite securities of other issuers except insofar as a Fund technically may be deemed an underwriter under the Securities Act in selling portfolio securities.

9.   Purchase or sell commodities or contracts on commodities, except to the extent that a Fund may do so in accordance with applicable law and the Fund’s Registration Statement, as it may be amended from time to time, and without registering as a commodity pool operator under the Commodity Exchange Act.

(a)   Purchase securities of other investment companies, except to the extent such purchases are permitted by applicable law. As a matter of policy, however, a Fund will not purchase shares of any registered open-end investment company or registered unit investment trust, in reliance on Section 12(d)(1)(F) or (G) (the “fund of funds” provisions) of the Investment Company Act, at any time the Fund’s shares are owned by another investment company that is part of the same group of investment companies as the Fund.

(b)   Invest in securities that cannot be readily resold because of legal or contractual restrictions or that cannot otherwise be marketed, redeemed or put to the issuer or a third party, if at the time of acquisition more than 15% of its net assets would be invested in such securities. This restriction shall not apply to securities that mature within seven days or securities that the Directors have otherwise determined to be liquid pursuant to applicable law. Securities purchased in accordance with Rule 144A under the Securities Act (which are restricted securities that can be resold to qualified institutional buyers, but not to the general public) and determined to be liquid by the Directors are not subject to the limitations set forth in this investment restriction.

(c)   Make any additional investments if the amount of its borrowings exceeds 5% of its total assets. Borrowings do not include the use of investment techniques that may be deemed to create leverage, including, but not limited to, such techniques as dollar rolls, when-issued securities, options and futures.

(1)	Interested person, as defined in the Investment Company Act, of the Corporation.

(2)	Such Director or officer is a director, trustee or officer of other investment companies for which FAM or its affiliates act as investment adviser.

(3)	Became Director on March 30, 2000.

Name of Director/Trustee		Aggregate Compensation From Trust		Pension or Retirement Benefits Accrued as Part of Trust Expenses		Total Compensation from Trust and FAM and Affiliates Advised Funds Paid to Directors/Trustees(1)
Jack B. Sunderland		$8,000		None		$137,100
Stephen B. Swensrud		$8,000		None		$199,083
J. Thomas Touchton		$8,000		None		$137,100

(1)

The Directors/Trustees serve on the boards of FAM and Affiliates-Advised Funds as follows: Mr. Sunderland (21 registered investment companies consisting of 46 portfolios); Mr. Swensrud (26 registered investment companies consisting of 72 portfolios); Mr. Touchton (21 registered investment companies consisting of 40 portfolios).

Name of Fund		Administration Fee
Mercury S&P 500 Index Fund		0.245	%
Mercury Small Cap Index Fund		0.29	%
Mercury Aggregate Bond Index Fund		0.19	%
Mercury International Index Fund		0.34	%

Name of Series		Contractual Management Fee			Management Fee Net of Fee Waiver
Master S&P 500 Index Series		0.05	%		0.005%
Master Small Cap Index Series		0.08	%		0.01%
Master Aggregate Bond Index Series		0.06	%		0.01%
Master International (Capitalization Weighted) Index Series		0.01	%		0.01%

		Class I		Class A
Net Assets		$13,081		$13,074
Number of Shares Outstanding		1,250		1,250
Net Asset Value Per Share (net assets divided by      number of shares outstanding)		$  10.46		$  10.46
Offering Price		$  10.46		$  10.46

		Class I		Class A
Net Assets		$11,783		$11,776
Number of Shares Outstanding		1,250		1,250
Net Asset Value Per Share (net assets divided by      number of shares outstanding)		$    9.43		$    9.42
Offering Price		$    9.43		$    9.42

		Class I		Class A
Net Assets		$12,691		$12,688
Number of Shares Outstanding		1,265		1,265
Net Asset Value Per Share (net assets divided by      number of shares outstanding)		$  10.03		$  10.03
Offering Price		$  10.03		$  10.03

		Class I		Class A
Net Assets		$12,216		$12,209
Number of Shares Outstanding		1,250		1,250
Net Asset Value Per Share (net assets divided by      number of shares outstanding)		$    9.77		$    9.77
Offering Price		$    9.77		$    9.77

		Mercury S&P 500 Index Fund			Mercury Small Cap Index Fund			Mercury Aggregate Bond Index Fund			Mercury International Index Fund
ASSETS
Investments in Quantitative Master Series Trust                 (Note 1)*		$  26,181			$  23,583			$  25,421			$  24,452
Prepaid Registration Fees (Note 1c)		79,201			79,201			79,201			79,201
Prepaid Offering Costs (Note 1c)		80,712			80,712			80,712			80,712
Other assets		10,820			10,823			11,734			10,823
Total assets		196,914			194,319			197,068			195,188
LIABILITIES
Payables:
Dividends to Shareholders		—			—			$        31			—
Administrative fees		$        13			$        15			10			$        17
Distributor		6			6			7			6
Accrued expenses and other liabilities		170,740			170,739			171,641			170,740
Total liabilities		170,759			170,760			171,689			170,763
NET ASSETS		$  26,155			$  23,559			$  25,379			$  24,425
NET ASSETS CONSIST OF:
Class I Shares of Common Stock, $.0001 par value,                 125,000,000 shares authorized		—	†		—	†		—	†		—	†
Class A Shares of Common Stock, $.0001 par value,                 125,000,000 shares authorized		—	†		—	†		—	†		—	†
Paid-in capital in excess of par		$  25,000			$  25,000			$  25,315			$  25,000
Undistributed investment income—net		35			59			—			76
Accumulated realized capital gains/losses on                 investments from the Series—net		(110	)		803			(352	)		(42	)
Unrealized appreciation/depreciation on investments                 from the Series—net		1,230			(2,303	)		416			(609	)
NET ASSETS		$  26,155			$  23,559			$  25,379			$  24,425
NET ASSET VALUE:
Class I:
Net Assets		$  13,081			$  11,783			$  12,691			$  12,216
Shares outstanding		1,250			1,250			1,265			1,250
Net Asset Value		$    10.46			$      9.43			$    10.03			$      9.77
Class A:
Net Assets		$  13,074			$  11,776			$  12,688			$  12,209
Shares outstanding		1,250			1,250			1,265			1,250
Net Asset Value		$    10.46			$      9.42			$    10.03			$      9.77
* Identified Cost		$  24,951			$  25,886			$  25,005			$  25,061

Aaa

Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edge.” Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.

Aa

Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities.

A

Bonds that are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.

Baa

Bonds that are rated Baa are considered as medium grade obligations; i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.

Ba

Bonds that are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate, and therefore not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.

B

Bonds that are rated B generally lack characteristics of desirable investments. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.

Caa

Bonds that are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.

Ca

Bonds that are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.

C

Bonds that are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.

—Leading market positions in well established industries

—High rates of return on funds employed

—Conservative capitalization structures with moderate reliance on debt and ample asset protection

—Broad margins in earnings coverage of fixed financial charges and high internal cash generation

—Well established access to a range of financial markets and assured sources of alternate liquidity

aaa

An issue that is rated “aaa” is considered to be a top-quality preferred stock. This rating indicates good asset protection and the least risk of dividend impairment within the universe of preferred stocks.

aa

An issue that is rated “aa” is considered a high-grade preferred stock. This rating indicates that there is reasonable assurance that earnings and asset protection will remain relatively well maintained in the foreseeable future.

a

An issue that is rated “a” is considered to be an upper-medium grade preferred stock. While risks are judged to be somewhat greater than in the “aaa” and “aa” classifications, earnings and asset protection are, nevertheless, expected to be maintained at adequate levels.

baa

An issue that is rated “baa” is considered to be medium grade, neither highly protected nor poorly secured. Earnings and asset protection appear adequate at present but may be questionable over any great length of time.

ba

An issue that is rated “ba” is considered to have speculative elements and its future cannot be considered well assured. Earnings and asset protection may be very moderate and not well safeguarded during adverse periods. Uncertainty of position characterizes preferred stocks in this class.

b

An issue that is rated “b” generally lacks the characteristics of a desirable investment. Assurance of dividend payments and maintenance of other terms of the issue over any long period of time may be small.

caa

An issue that is rated “caa” is likely to be in arrears on dividend payments. This rating designation does not purport to indicate the future status of payments.

ca

An issue that is rated “ca” is speculative in a high degree and is likely to be in arrears on dividends with little likelihood of eventual payment.

c

This is the lowest rated class of preferred or preference stock. Issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.

AAA

Debt rated AAA has the highest rating assigned by Standard & Poor’s. Capacity to pay interest and repay principal is extremely strong.

AA

Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest-rated issues only in small degree.

A

Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories.

BBB

Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than for debt in higher-rated categories.

Debt rated BB, B, CCC, CC and C is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.

BB

Debt rated BB has less near-term vulnerability to default than other speculative grade debt. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to inadequate capacity to meet timely interest and principal payment. The BB rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BBB-rating.

B

Debt rated B has a greater vulnerability to default but presently has the capacity to meet interest payments and principal repayments. Adverse business, financial or economic conditions would likely impair capacity or willingness to pay interest and repay principal. The B rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BB or BB-rating.

CCC

Debt rated CCC has a current identifiable vulnerability to default, and is dependent upon favorable business, financial and economic conditions to meet timely payments of interest and repayments of principal. In the event of adverse business, financial or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category is also used for debt subordinated to senior debt that is assigned an actual or implied B or B-rating.

CC

The rating CC is typically applied to debt subordinated to senior debt which is assigned an actual or implied CCC rating.

C

The rating C is typically applied to debt subordinated to senior debt which is assigned an actual or implied CCC-debt rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed but debt service payments are continued.

CI

The rating CI is reserved for income bonds on which no interest is being paid.

D

Debt rated D is in default. The D rating is assigned on the day an interest or principal payment is missed. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized.

L

The letter “L” indicates that the rating pertains to the principal amount of those bonds to the extent that the underlying deposit collateral is insured by the Federal Savings & Loan Insurance Corp. or the Federal Deposit Insurance Corp. and interest is adequately collateralized.

*

Continuance of the rating is contingent upon Standard & Poor’s receipt of an executed copy of the escrow agreement or closing documentation confirming investments and cash flows.

NR

Indicates that no rating has been requested, that there is insufficient information on which to base a rating or that Standard & Poor’s does not rate a particular type of obligation as a matter of policy.

A

Issues assigned this highest rating are regarded as having the greatest capacity for timely payment. Issues in this category are delineated with the numbers 1, 2 and 3 to indicate the relative degree of safety.

A-1

This designation indicates that the degree of safety regarding timely payment is either overwhelming or very strong. Those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign designation.

A-2

Capacity for timely payment on issues with this designation is strong. However, the relative degree of safety is not as high as for issues designated “A-l.”

A-3

Issues carrying this designation have a satisfactory capacity for timely payment. They are however, somewhat more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.

B

Issues rated “B” are regarded as having only adequate capacity for timely payment. However, such capacity may be damaged by changing conditions or short-term adversities.

C

This rating is assigned to short-term debt obligations with a doubtful capacity for payment.

D

This rating indicates that the issue is either in default or is expected to be in default upon maturity.

I.

Likelihood of payment—capacity and willingness of the issuer to meet the timely payment of preferred stock dividends and any applicable sinking fund requirements in accordance with the terms of the obligation.

II.

Nature of, and provisions of, the issue.

III.

Relative position of the issue in the event of bankruptcy, reorganization, or other arrangements affecting creditors’ rights.

AAA

This is the highest rating that may be assigned by Standard & Poor’s to a preferred stock issue and indicates an extremely strong capacity to pay the preferred stock obligations.

AA

A preferred stock issue rated “AA” also qualifies as a high-quality fixed income security. The capacity to pay preferred stock obligations is very strong, although not as overwhelming as for issues rated “AAA.”

A

An issue rated “A” is backed by a sound capacity to pay the preferred stock obligations, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions.

BBB

An issue rated “BBB” is regarded as backed by an adequate capacity to pay the preferred stock obligations. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to make payments for a preferred stock in this category than for issues in the “A” category.

BB

Preferred stock rated “BB,” “B,” and “CCC” are regarded, on balance, as predominantly speculative with respect to the issuer’s capacity to pay preferred stock obligations. “BB” indicates the lowest degree of speculation and “CCC” the highest degree of speculation. While such issues will likely have some quality and protection characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.

CC

The rating “CC” is reserved for a preferred stock issue in arrears on dividends or sinking fund payments but that is currently paying.

C

A preferred stock rated “C” is a non-paying issue.

D

A preferred stock rated “D” is a non-paying issue with the issuer in default on debt instruments.