<PAGE>
MANAGERS DISCUSSION AND ANALYSIS
Hewitt Money Market Fund
<TABLE>
<S> <C>
PERFORMANCE AS OF 2/28/99 Thirty-Day Yield
- -------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Administrative Shares 4.61%
Institutional Shares 4.82%
</TABLE>
The thirty-day yield is an annualized yield for the period from February 1,
1999 to February 28, 1999. "Annualized yield" refers to the interest you would
earn if you held a share of the Fund for one year; the yield is prorated if you
hold a share for a shorter period of time. The yield reflects fluctuations in
interest rates on the Fund's investments and expenses for the Fund's adminis-
tration and management.
A fund's "net asset value," or NAV, is the market value of one share of a fund.
The NAV of Hewitt Money Market Fund's Administrative Shares increased from
$100.00 per share on October 1, 1998 (commencement of operations) to $100.02
per share on February 28, 1999. The NAV of Institutional Shares increased from
$100.00 per share on October 1, 1998 (commencement of operations) to $100.30
per share on February 28, 1999. "Net investment income" includes income from
dividends and interest on the Fund's investments after management and
administrative fees and other expenses have been deducted. Cumulative dividends
on net investment income were approximately $1.81 per share for Administrative
Shares and $1.67 per share for Institutional Shares during this period. Of
course, past performance is no guarantee of future results.
The Federal Reserve Board held short-term interest rates in place through
August, remaining cautious due to the threat of inflation. But by September the
devaluation of the Russian ruble and the ensuing troubles of a prominent fund
manager that had invested heavily in Russia created turmoil in the world
markets.
To help global financial markets stabilize themselves, the Federal Reserve
Board lowered interest rates three times in just seven weeks. The Master
Portfolio (1) began purchasing fixed income securities while short-term
interest rates declined.
As the new fiscal year begins, the Master Portfolio will continue to take
advantage of flexible, high-return investment opportunities within the money
market realm, while maintaining a conservative approach to portfolio
management.
(1) Hewitt Money Market Fund is a "feeder" fund in a "master-feeder" structure.
Instead of investing directly in the individual securities in the
portfolio, the feeder fund, which is offered to the public, holds an
interest in the Master Portfolio. It is the Master Portfolio that actually
invests in the individual securities. Barclays Global Fund Advisors (BGFA)
is the investment advisor for the Master Portfolio.
<PAGE>
HEWITT MONEY MARKET FUND
STATEMENT OF ASSETS & LIABILITIES
FEBRUARY 28, 1999
<TABLE>
<S> <C>
ASSETS
Investment:
Interest in Master Portfolio, at market value (Note 1)............. $56,750,335
Receivables:
Fund shares sold................................................. 268,365
Due from Hewitt Associates LLC (Note 2).......................... 20,754
-----------
Total Assets....................................................... 57,039,454
-----------
LIABILITIES
Payables:
Fund shares redeemed............................................. 101,545
Other accrued expenses........................................... 72,406
Distribution to shareholders..................................... 338
-----------
Total Liabilities.................................................. 174,289
-----------
TOTAL NET ASSETS................................................... $56,865,165
===========
Net assets consist of:
Paid-in capital.................................................. 56,865,165
-----------
TOTAL NET ASSETS................................................... $56,865,165
===========
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
PER SHARE
Administrative Shares
Net Assets......................................................... $45,915,779
Shares outstanding................................................. 459,061
Net asset value and offering price per share....................... $ 100.02
Institutional Shares
Net Assets......................................................... $10,949,386
Shares outstanding................................................. 109,169
Net asset value and offering price per share....................... $ 100.30
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
HEWITT MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the Period From October 1, 1998 (commencement of operations) to February
28, 1999
<TABLE>
<S> <C>
NET INVESTMENT INCOME
ALLOCATED FROM MASTER PORTFOLIO
Interest........................................................... $ 621,576
Expenses (Note 2).................................................. (11,934)
---------
Net Investment Income Allocated from Master Portfolio.............. 609,642
EXPENSES (Note 2)
Administration fees--Adminsitrative Shares......................... 9,243
Administration fees--Institutional Shares.......................... 2,386
Shareholder servicing fees--Administrative Shares.................. 23,108
Shareholder servicing fees--Institutional Shares................... 4,771
Distribution costs--Administrative Shares.......................... 23,108
Legal fees......................................................... 30,822
Fund accounting and transfer agent fees............................ 28,767
Printing costs..................................................... 16,439
Registration fees.................................................. 16,336
Audit fees......................................................... 13,410
Other expenses..................................................... 6,780
---------
Total Expenses....................................................... 175,170
Less :
Fees reimbursed by Hewitt Associates LLC (Note 2).................. (106,174)
---------
Total Net Expenses................................................... 68,996
---------
NET INVESTMENT INCOME................................................ 540,646
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................. $ 540,646
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
HEWITT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the Period From October 1, 1998 (commencement of operations) to February
28, 1999
<TABLE>
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income......................................... $ 540,646
------------
Net increase in net assets resulting from operations............ 540,646
------------
Distributions to shareholders:
From net investment income
Administrative Shares....................................... (423,411)
Institutional Shares........................................ (117,235)
Capital share transactions:
Proceeds from shares sold--Administrative Shares.............. 59,583,039
Reinvestment of dividends--Administrative Shares.............. 423,168
Cost of shares redeemed--Administrative Shares................ (14,090,428)
------------
Net increase resulting from capital share transactions--
Administrative Shares.......................................... 45,915,779
------------
Proceeds from shares sold--Institutional Shares............... 19,171,866
Reinvestment of dividends--Institutional Shares............... 117,140
Cost of shares redeemed--Institutional Shares................. (8,339,620)
------------
Net increase resulting from capital share transactions--
Institutional Shares........................................... 10,949,386
------------
Increase in Net Assets.......................................... 56,865,165
NET ASSETS:
Beginning net assets............................................ 0
Ending net assets............................................... $ 56,865,165
============
SHARES ISSUED AND REDEEMED:
Administrative Shares
Shares sold................................................... 595,438
Shares issued in reinvestment of dividends and distributions.. 4,231
Shares redeemed............................................... (140,608)
------------
Net increase in shares outstanding.............................. 459,061
============
Institutional Shares
Shares sold................................................... 191,080
Shares issued in reinvestment of dividends and distributions.. 1,169
Shares redeemed............................................... (83,080)
------------
Net increase in shares outstanding.............................. 109,169
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
HEWITT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
For the Period from October 1, 1998 (commencement of operations) to February
28, 1999
<TABLE>
<CAPTION>
Administrative Institutional
Shares Shares
-------------- -------------
<S> <C> <C>
Net Assets Value, beginning of period............. $100.00 $100.00
Income from investment operations:
Net investment income........................... 1.83 1.97
Net realized gain on investments................ 0.00 0.00
------- -------
Total from investment operations.................. 1.83 1.97
Less distributions:
From net investment income...................... (1.81) (1.67)
From net realized gains......................... 0.00 0.00
------- -------
Total distributions............................... (1.81) (1.67)
------- -------
Net Asset Value, end of period.................... $100.02 $100.30
======= =======
Total Return (not annualized)..................... 1.84% 1.98%
Ratios/Supplemental data:
Net assets, end of period (000)................. $45,916 $10,949
Ratios to average net assets (*):
Ratio of expenses to average net assets (1)..... 0.75% 0.45%
Ratio of net investment income (loss) to average
net assets (2)................................. 4.52% 4.86%
- -------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior
to reimbursement of fees and
expenses (*)................................... 1.32% 1.62%
(2) Ratio of net investment income (loss) to
average net assets prior to reimbursement of
fees and expenses (*).......................... 3.95% 3.69%
- -------------------------------------------------------------------------------
(*) Annualized
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
HEWITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
1 Summary of Significant Accounting Policies
Hewitt Money Market Fund (the "Fund") is a series of Hewitt Series Trust
(the "Trust"), a diversified open-end management investment company registered
under the Investment Company Act of 1940, as amended. The Trust was established
as a Delaware business trust organized pursuant to a Declaration of Trust on
July 7, 1998. The investment objective of the Fund is to provide a high level
of income while preserving capital and liquidity by investing in high quality,
short-term investments. The Fund pursues its investment objective by investing
all of its assets in the Money Market Master Portfolio (the " Master
Portfolio"), a series of Master Investment Portfolio ("MIP"). The Master
Portfolio has the same investment objective and substantially the same
investment policies as the Fund. The performance of the Fund is directly
affected by the performance of the Master Portfolio. The financial statements
of the Master Portfolio, including the Portfolio of Investments, are included
elsewhere in this report and should be read in conjunction with the Fund's
financial statements. The Fund presently offers two classes of shares,
Administrative Shares and Institutional Shares. Shares of each class have
identical interests in the Master Portfolio and have the same rights, however,
differ principally in their respective distribution fees and shareholder
servicing fees.
The following significant accounting policies are consistently followed by
the Fund in the preparation of its financial statements, and such policies are
in conformity with generally accepted accounting principles for investment
companies. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Investment Policy and Security Valuation
The value of the Fund's investment in the Master Portfolio reflects the
Fund's interest in the net assets of the Master Portfolio. As of February 28,
1999, the value of the Fund's investment in the Master Portfolio was 21.61% of
the outstanding interests of the Master Portfolio. The Master Portfolio uses
the amortized cost method of valuation to determine the value of its portfolio
securities in accordance with Rule 2a-7 under the 1940 Act. The amortized cost
method, which involves valuing a security at its cost and amortizing any
discount or premium over the period until maturity, approximates market value.
Security Transactions and Income Recognition
Security transactions are accounted for by the Master Portfolio on the date
the securities are purchased or sold (trade date). Revenue is recognized by the
Master Portfolio as follows: Interest income is recognized on a daily accrual
basis. Realized gains and losses are reported on the basis of identified cost
of securities delivered. All net investment income and realized capital gains
and losses of the Master Portfolio are allocated as required by the Internal
Revenue Code of 1986, as amended (the "Code").
6
<PAGE>
HEWITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS--Continued
Federal Income Taxes
The Fund is treated as a separate entity for federal income tax purposes. It
is the policy of the Trust that the Fund continue to qualify as a regulated
investment company by complying with the provisions of the Code applicable to
regulated investment companies, as defined by the Code, and to make
distributions of substantially all of its investment company taxable income and
any net realized capital gains (after reduction for capital loss carryforwards)
sufficient to relieve it from all, or substantially all, federal income and
excise taxes. Accordingly, no provision for federal taxes was required at
February 28, 1999.
Dividends and Distributions to Shareholders
Dividends to shareholders from net investment income of the Fund are
declared and distributed monthly. Distributions to shareholders from any
capital gains are declared and distributed annually, generally in December.
2 Agreements and Other Transactions with Affiliates
Hewitt Associates LLC (the "Administrator") provides administrative services
to the Fund. Services provided by the Administrator include, but are not
limited to: managing the daily operations and business affairs of the Fund,
subject to the supervision of the Board of Trustees; overseeing the preparation
and maintenance of all documents and records required to be maintained by the
Fund; preparing or assisting in the preparation of regulatory filings,
prospectuses and shareholder reports; providing, at its own expense, the
services of its personnel to serve as officers of the Trust; and preparing and
disseminating material for meetings of the Board of Trustees and shareholders.
The Fund pays the Administrator a monthly fee calculated at an annual rate of
0.10% of the Fund's average daily net assets. The Administrator has agreed to
waive its fees or absorb expenses of the Fund to the extent necessary to assure
that total ordinary operating expenses on an annual basis does not exceed 0.45%
and 0.75% of the average daily net assets of the Fund attributable to
Institutional and Administrative Shares, respectively. The Administrator may
not modify or terminate this waiver agreement without approval of the Board of
Trustees of the Trust. For the period ended February 28, 1999, the
Administrator reimbursed the Fund $53,836 and $52,338 for expenses related to
Administrative Shares and Institutional Shares, respectively.
Barclays Global Fund Advisors, Inc. ("BGFA") serves as the Master
Portfolio's investment advisor. For its services, BGFA is paid by the Master
Portfolio a fee calculated at an annual rate of 0.10% of the Master Portfolio's
average daily net assets. BGFA is an indirect subsidiary of Barclays Bank PLC.
Hewitt Services LLC (the "Distributor") serves as the Distributor of the
Fund's shares. The Trust has adopted a plan pursuant to Rule 12b-1 under the
Investment Company Act which allows the Fund to Pay expenses relating to the
distribution of Administrative Shares. Under the plan, the Fund pays a fee to
the Distributor, calculated at an annual rate of 0.25% of the average daily net
assets of the Fund attributable to Administrative Shares, as compensation for
services rendered in connection with the sale and distribution of
Administrative Shares. This fee is an expense of Administrative Shares only and
is not borne by Institutional Shares.
7
<PAGE>
HEWITT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS--Continued
Hewitt Associates LLC also serves as the shareholder servicing agent (the
"Shareholder Servicing Agent") for Institutional Shares. The Shareholder
Servicing Agent is responsible for receiving on behalf of the Fund's Transfer
Agent orders by employee benefit plans to purchase and redeem Institutional
Shares. The Shareholder Servicing Agent is also responsible for maintaining
records showing the number of Institutional Shares allocable to individual
participant accounts in those plans. In addition, the Shareholder Servicing
Agent sends all shareholder communications relating to the Fund to shareholders
and to plan participants or arranges for these materials to be sent. For these
services, the Fund pays Hewitt Associates LLC a monthly fee calculated at an
annual rate of 0.20% of the average daily net assets of the Fund attributable
to Institutional Shares. This fee is an expense of Institutional Shares only
and is not borne by Administrative Shares.
The Trust has retained the Distributor to serve as Shareholder Servicing
Agent for Administrative Shares. As Shareholder Servicing Agent, the
Distributor is responsible for maintaining records showing the number of
Administrative Shares owned by IRAs established through the Distributor and by
other investors who have purchased Administrative Shares through the
Distributor. In addition, the Distributor sends all shareholder communications
relating to the Fund to holders of Administrative Shares or arranges for these
materials to be sent. For these services, the Fund pays the Distributor a
monthly fee calculated at an annual rate of 0.25% of average daily net assets
of the Fund attributable only to Administrative Shares. This fee is an expense
of Administrative Shares only and is not borne by Institutional Shares. The
Fund also reimburses each Shareholder Servicing Agent for certain out-of-pocket
expenses.
8
<PAGE>
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
Hewitt Series Trust:
We have audited the accompanying statement of assets and liabilities of Hewitt
Money Market Fund (one of the series comprising Hewitt Series Trust) as of
February 28, 1999, and the related statements of operations, changes in net
assets and the financial highlights for the period from October 1, 1998
(commencement of operations) to February 28, 1999. These financial statements
and financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit 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 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Hewitt Money Market Fund as of February 28, 1999, the results of its
operations, the changes in its net assets and the financial highlights for the
period from October 31, 1998 to February 28, 1999, in conformity with generally
accepted accounting principles.
KPMG LLP
San Francisco, California
April 2, 1999
<PAGE>
MASTER INVESTMENT PORTFOLIO--MONEY MARKET MASTER PORTFOLIO
FEBRUARY 28, 1999
Portfolio of Investments
<TABLE>
<CAPTION>
Yield to Maturity
Principal Security Name Maturity Date Value
--------- ------------------------------------- -------- -------- ------------
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT--19.42%
$ 5,000,000 Abbey National Treasury Service 5.04% 02/08/00 $ 4,998,172
5,000,000 ABN Amro Bank NV 5.14% 02/22/00 4,998,099
3,000,000 Bayerische Hypo-Und Vereinsbank AG 5.23% 03/01/00 3,000,290
5,000,000 Canadian Imperial Bank of Commerce 5.71% 04/01/99 5,001,951
10,000,000 FCC National Bank 4.98% 06/15/99 10,000,000
7,000,000 Morgan Guaranty Trust Co 5.13% 05/10/99 7,000,000
7,000,000 Nationsbank NA 5.06% 05/17/99 7,000,000
5,000,000 Toronto-Dominion Bank 5.00% 06/21/99 5,000,000
4,000,000 Toronto-Dominion Bank 5.08% 12/29/99 4,001,912
------------
TOTAL CERTIFICATES OF DEPOSIT $ 51,000,424
COMMERCIAL PAPER--70.25%
3,119,000 Alpine Securitization Corp 4.87% 03/04/99 3,116,890
6,876,000 Alpine Securitization Corp 4.88% 04/13/99 6,834,056
6,000,000 Amsterdam Funding Corp 4.90% 04/13/99 5,963,250
4,000,000 Atlantis One Funding Corp 4.98% 03/25/99 3,985,613
5,000,000 Atlantis One Funding Corp 4.85% 06/14/99 4,927,924
3,000,000 Atlantis One Funding Corp 4.89% 08/25/99 2,927,058
7,000,000 Banco Mercantile Del Norte 4.82% 09/27/99 6,801,309
10,000,000 Corporate Receivables Corp 4.90% 04/14/99 9,937,389
10,000,000 Den Danske Corp 4.87% 06/14/99 9,855,401
4,000,000 First National Bank Chicago 5.75% 05/08/99 3,999,630
8,500,000 General Electric Capital Corp 4.93% 06/08/99 8,382,433
10,000,000 General Electric Capital Services Inc 4.94% 05/13/99 9,897,083
10,000,000 General Electric Co 5.00% 04/12/99 9,938,889
12,318,000 General Motors Acceptance Corp 4.87% 03/01/99 12,314,667
8,000,000 Mont Blanc Capital Corp 4.86% 03/26/99 7,970,840
10,000,000 Monte Rosa Capital Corp 4.84% 03/15/99 9,978,489
10,000,000 National Bank Of Canada 4.88% 06/14/99 9,855,045
5,000,000 Nationsbank NA 4.95% 10/06/99 5,000,000
5,000,000 Nordbanken NA 4.86% 04/07/99 4,973,675
3,353,000 Park Avenue Receivables Corp 4.85% 03/25/99 3,341,255
8,000,000 Thames Asset Global Securitization 4.85% 04/15/99 7,949,345
10,000,000 Twin Towers Inc 4.87% 03/01/99 9,997,294
4,000,000 Variable Funding Capital Corp 4.86% 03/10/99 3,994,060
5,000,000 WCP Funding Corp 4.90% 03/11/99 4,991,833
3,000,000 Windmill Funding Corp 4.84% 04/19/99 2,979,430
4,611,000 Windmill Funding Corp 4.90% 04/01/99 4,590,289
------------
TOTAL COMMERCIAL PAPER $174,503,147
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
MASTER INVESTMENT PORTFOLIO--MONEY MARKET MASTER PORTFOLIO
FEBRUARY 28, 1999
Portfolio of Investments
<TABLE>
<CAPTION>
Yield to Maturity
Principal Security Name Maturity Date Value
--------- -------------------------------------------------------- -------- -------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES--1.90%
$ 5,000,000 Federal Home Loan Bank 4.95 % 02/17/00 $ 4,997,666
------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $ 4,997,666
VARIABLE & FLOATING RATE NOTES--9.14%
7,000,000 Bank One NA 5.03 % 04/26/99 7,002,075
10,000,000 Household Financing Corp 5.27 % 04/19/99 10,000,000
7,000,000 Wachovia Bank NA 4.80 % 05/14/99 6,998,993
------------
TOTAL VARIABLE & FLOATING RATE NOTES $ 24,001,068
REPURCHASE AGREEMENTS--3.81%
10,007,000 Merrill Lynch & Co. Inc. Repurchase Agreement 4.85 % 03/01/99
dated 2/26/99 with a maturity value of $10,010,121
collateralized by Federal Home Loan Corp. obligations
with rates ranging from 6.13% to 7.43%, maturity dates
ranging from 04/01/17 to 07/01/37, and an aggregate
market value of $6,941,059, Federal National
Mortgage Association obligations with rates ranging from
5.94% to 7.64%, maturity dates ranging from 01/01/07 to
6/01/27, and an aggregate market value of $3,269,264. 10,007,000
773 Morgan Stanley Triparty Repurchase Agreement 4.53 % 03/01/99
dated 2/26/99 with a maturity value of 773
collateralized by U.S. Treasury Notes with
a rate of 6.25%, a maturity date of 8/31/00,
and a market value of $10,173. 773
------------
TOTAL REPURCHASE AGREEMENTS $ 10,007,773
TOTAL INVESTMENT IN SECURITIES
(Cost $264,510,078) ** (Notes 1) 100.71 % $264,510,078
Other Assets and Liabilities (0.71)% (1,863,757)
------ ------------
TOTAL NET ASSETS 100.00 % $262,646,321
====== ============
</TABLE>
- --------
**Cost for federal income tax purposes is the same as for financial statement
purposes.
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
MASTER INVESTMENT PORTFOLIO--MONEY MARKET MASTER PORTFOLIO
STATEMENT OF ASSETS & LIABILITIES
February 28, 1999
<TABLE>
<S> <C>
ASSETS
Investments:
In securities, at market value (see cost below) (Note 1).......... $264,510,078
Receivables:
Dividends and interest.......................................... 1,075,020
Due from BGI.................................................... 63,692
------------
Total Assets...................................................... 265,648,790
------------
LIABILITIES
Payables:
Investment securities purchased................................. 3,002,469
------------
Total Liabilities................................................. 3,002,469
------------
TOTAL NET ASSETS.................................................. $262,646,321
============
INVESTMENTS AT COST............................................... $264,510,078
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
MASTER INVESTMENT PORTFOLIO--MONEY MARKET MASTER PORTFOLIO
STATEMENT OF OPERATIONS
For the Period From September 1, 1998 (commencement of operations) to February
28, 1999
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Interest.......................................................... $5,516,159
----------
Total Investment Income........................................... 5,516,159
EXPENSES (NOTE 2)
Advisory fees..................................................... 104,611
----------
Total Expenses...................................................... 104,611
----------
NET INVESTMENT INCOME .............................................. 5,411,548
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $5,411,548
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
MASTER INVESTMENT PORTFOLIO--MONEY MARKET MASTER PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the Period From September 1, 1998 (commencement of operations) to February
28, 1999
<TABLE>
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income.......................................... $ 5,411,548
------------
Net increase in net assets resulting from operations............. 5,411,548
------------
Net increase in net assets resulting from beneficial interest
transactions.................................................... 257,234,773
------------
Increase in Net Assets........................................... 262,646,321
NET ASSETS:
Beginning net assets............................................. $ 0
Ending net assets................................................ $262,646,321
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
MASTER INVESTMENT PORTFOLIO
NOTES TO THE FINANCIAL STATEMENTS
1. Significant Accounting Policies
Master Investment Portfolio ("MIP") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. MIP was organized on October 20, 1993 as a Delaware
business trust pursuant to an Agreement and Declaration of Trust dated May 14,
1993, and had no operations prior to May 26, 1994. MIP currently issues, the
following separate portfolios (the "Master Portfolios"), Asset Allocation, Bond
Index, Extended Index, U.S. Equity Index, LifePath 2000, LifePath 2010,
LifePath 2020, LifePath 2030, LifePath 2040, Money Market, S&P 500 Index and
U.S. Treasury Allocation Master Portfolios. The Money Market Master Portfolio
commenced operations on September 1, 1998. These financial statements contain
the Money Market Master Portfolio (the "Master Portfolio").
The following significant accounting policies are consistently followed by
MIP in the preparation of its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Security Valuation
The Master Portfolio uses the amortized cost method of valuation to
determine the value of its portfolio securities in accordance with Rule 2a-7
under the 1940 Act. The amortized cost method, which involves valuing a
security at its cost and amortizing any discount or premium over the period
until maturity, approximates market value.
Security Transactions and Income Recognition
Interest income is recognized on a daily accrual basis. Realized gains or
losses are reported on the basis of identified cost of securities delivered.
Federal Income Taxes
The Master Portfolio intends to qualify as a partnership for federal income
tax purposes. The Master Portfolio therefore believes that it will not be
subject to any federal income tax on its income and net realized capital gains
(if any). However, an investor in the Master Portfolio will be taxed on its
allocable share of the partnership's income and capital gains for purposes of
determining its federal income tax liability. The determination of such share
will be made in accordance with the applicable sections of the Code.
It is intended that the Master Portfolio's assets, income and allocations
will be managed in such a way that a regulated investment company investing in
a Master Portfolio will be able to satisfy the requirements of Subchapter M of
the Code, assuming that the investment company invested all of its assets in
the Master Portfolio.
15
<PAGE>
MASTER INVESTMENT PORTFOLIO
NOTES TO THE FINANCIAL STATEMENTS--(Continued)
Repurchase Agreements
Transactions involving purchases of securities under agreements to resell
such securities at a specified price and time ("repurchase agreements") are
treated as collateralized financing transactions and are recorded at their
contracted resale amounts. These repurchase agreements, if any, are detailed in
the Master's Portfolio of Investments. The advisor to the Master Portfolios may
pool the Master Portfolio's cash and invest in repurchase agreements entered
into by the other Master Portfolios. The Master Portfolio's prospectus requires
that the cash investments be fully collateralized based on values that are
marked to market daily. The collateral is generally held by an agent bank under
a tri-party agreement. It is the adviser's responsibility to value collateral
daily and to obtain additional collateral as necessary to maintain the value at
equal to or greater than 102% of market value. The repurchase agreements
entered into as of February 28, 1999, are collateralized by U.S. Government
Securities.
2. Agreements and Other Transactions with Affiliates
Pursuant to an Investment Advisory Contract with the Master Portfolio,
Barclays Global Fund Advisors ("BGFA") provides investment guidance and policy
direction in connection with the management of the Master Portfolio's assets.
BGFA is entitled to receive 0.10% of the average daily net assets of the Master
Portfolio as compensation for its advisory services. BGFA is an indirect
subsidiary of Barclays Bank PLC.
Investors Bank & Trust Company ("IBT") serves as the custodian to the Master
Portfolio. IBT will not be entitled to receive fees for its custodial services
so long as it is entitled to receive a separate fee from Barclays Global
Investors, N.A. ("BGI") for its services as Sub-Administrator of the Master
Portfolio.
Stephens Inc. ("Stephens") is the sponsor and placement agent for the Master
Portfolio. Certain officers and directors of MIP are also officers of Stephens.
As of February 28, 1999, these officers of Stephens indirectly collectively
owned less than 1% of the Master Portfolios' outstanding beneficial interest.
16
<PAGE>
Independent Auditors' Report
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To the Shareholders and Board of Trustees
Master Investment Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of the Money Market Master Portfolio
(one of the portfolios comprising Master Investment Portfolio) as of February
28, 1999, and the related statements of operations and changes in net assets
for the period from September 1, 1998 (commencement of operations) to February
28, 1999. These financial statements are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 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 as of February 28, 1999 by
correspondence with the custodian. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Money Market Master
Portfolio of Master Investment Portfolio as of February 28, 1999, the results
of its operations and the changes in its net assets for the period from
September 1, 1998 to February 28, 1999 in conformity with generally accepted
accounting principles.
KPMG LLP
San Francisco, California
April 2, 1999
<PAGE>
TABLE OF CONTENTS
Page
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HEWITT MONEY MARKET FUND
Manager's Discussion and Analysis........ 1
Statement of Assets and Liabilities...... 2
Statement of Operations.................. 3
Statement of Changes in Net Assets....... 4
Financial Highlights..................... 5
Notes to Financial Statements............ 6
Independent Auditors' Report............. 9
MASTER INVESTMENT PORTFOLIO
Portfolio of Investments................. 10
Statement of Assets and Liabilities...... 12
Statement of Operations.................. 13
Statement of Changes in Net Assets....... 14
Notes to Financial Statements............ 15
Independent Auditors' Report............. 17
[GRAPHIC]
Hewitt
Money Market
Fund
Annual Report
February 28, 1999
