E*TRADE PREMIER MONEY MARKET FUND
SEMIANNUAL REPORT
Dear E*TRADE Funds Shareholders,
We are writing to report the performance of the E*TRADE Premier Money Market
Fund (the "Fund") from inception through the end of the first half of 2000. We'd
also like to take this opportunity to thank all of you for investing in the
Fund.
The Fund commenced operations on April 7, 2000. This semiannual report contains
unaudited financial statements for a period of less than six months. Relying on
financial statements and reported operating results for such a period is subject
to inherent limitations resulting from the brevity of the period.
The Fund's investment objective is to provide investors with a high level of
income, while preserving capital and liquidity. The Fund seeks to achieve its
investment objective by investing in a master portfolio that, in turn, invests
in high quality, short-term investments. From the Fund's inception on April 7,
2000 through June 30, 2000, the Fund returned 1.37%, with a 7-day current yield
of 6.34% and a 7-day effective yield of 6.54% for the period ended June 30,
2000.*
Throughout the second quarter of 2000, the U.S. economy continued to appear
overheated. Although the pace of productivity was strong, the Federal Reserve
Board did not believe it was sufficient to keep up with demand. As a result, the
Federal Reserve raised interest rates by 0.50% on May 16th. Following the May
tightening, we saw tentative signs of slower growth in demand combined with
continued robust productivity gains. Based on this slowing, the Fed chose to
leave rates unchanged in June. The quarter closed with a 6.50% Federal Funds
rate, a 6.00% Discount Rate, and an expected slowdown in the second quarter
growth rate.
In anticipation of a rate increase in May, the Fund purchased a significant
portion of securities that would mature prior to the meeting date of the Federal
Reserve's Federal Open Market Committee (FOMC). In addition to investing in
these fixed-rate products, the Fund purchased variable-rate notes because of
their ability to quickly adjust to movements in short-term rates. Prior to the
May meeting, fears of aggressive tightening by the Federal Reserve led to a
steepening of the yield curve that exceeded our expectations of Federal Reserve
actions. In response to these unusual market conditions, the Fund took the
opportunity to purchase a modest amount of one-year securities at a
significantly inflated yield. Following the May rate hike, the Fund seized
another opportunity, extending heavily in the three and six month sector as the
higher yields on short-term debt reflected the possibility of two further rate
increases in the second half of 2000.
The Fund achieved favorable results due mainly due to the two factors mentioned
above. First of all, the Fund had a relatively high amount of cash on hand
leading into the May 16th FOMC meeting. This cash was then able to be reinvested
at rates reflecting the 0.50% increase. Secondly, after weak economic data
showed a low probability of a tightening by the Federal Reserve in June, the
Fund took advantage of higher yields offered for extending further out the yield
curve. This strategy of being liquid prior to the FOMC meeting, along with
well-timed extension, resulted in favorable investment results. As we look to
the next FOMC meeting, the only meeting scheduled for the third quarter, we will
monitor market developments to clarify whether the apparent slowdown in the
second quarter was an aberration or a true softening of economic growth. Once we
are confident the tightening cycle is coming to an end, the portfolio will be
extended in a manner that we believe will provide competitive returns, adequate
liquidity, and minimal credit risk.
You should remember that past performance is no guarantee of future returns and
the Fund may not be able to duplicate its performance. The Fund's unaudited
financial statements for the period from its inception on April 7, 2000 to June
30, 2000 are provided below. We hope you will find them useful for evaluating
and monitoring your investment. Thank you again for your continued participation
in the E*TRADE Premier Money Market Fund.
Sincerely, E*TRADE Funds
* An investment in the fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Funds seeks
to preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in the Fund.
<PAGE>
MONEY MARKET MASTER PORTFOLIO
JUNE 30, 2000 (UNAUDITED)
SCHEDULE OF INVESTMENTS
Security Principal Value
---------------------------------------------------------------------------
BANKERS' ACCEPTANCES--0.78%
---------------------------------------------------------------------------
Toronto-Dominion Bank
6.63%, 12/13/00 2,948,667 2,859,064
---------------------------------------------------------------------------
TOTAL BANKERS' ACCEPTANCES
(Cost: $2,859,064) 2,859,064
---------------------------------------------------------------------------
Security Principal Value
---------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT--11.84%
---------------------------------------------------------------------------
Bank of America NA
6.72%, 09/13/00 5,000,000 5,000,465
Banque National de Paris
6.99%, 05/02/01 3,500,000 3,499,723
Bayerische Hypo-Und Vereinsbank AG
6.63%, 08/21/00 5,000,000 5,000,062
6.72%, 09/14/00 5,000,000 5,000,141
7.00%, 05/02/01 3,500,000 3,499,447
Bayerische Landesbank
5.93%, 10/02/00 5,000,000 4,986,400
Deutsche Bank AG
6.66%, 03/08/01 5,000,000 4,998,699
6.70%, 03/14/01 6,500,000 6,497,837
Societe Generale
6.90%, 03/29/01 5,000,000 4,998,593
---------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost: $43,481,367) 43,481,367
---------------------------------------------------------------------------
Security Principal Value
---------------------------------------------------------------------------
COMMERCIAL PAPER--59.21%
---------------------------------------------------------------------------
Accor BNP
6.58%, 08/16/00 5,000,000 4,957,961
6.62%, 07/18/00 3,935,000 3,922,699
Alpine Securitization Corp.
6.55%, 07/18/00 2,609,000 2,600,930
6.85%, 07/14/00 10,000,000 9,975,264
Associates Corp. of North America
6.95%, 07/03/00 5,000,000 4,998,069
Atlantis One Funding Corp.
6.58%, 07/13/00 5,000,000 4,989,033
Barton Capital Corp.
6.61%, 09/12/00 5,000,000 4,932,982
6.62%, 07/18/00 4,000,000 3,987,496
6.62%, 08/24/00 3,000,000 2,970,210
British Telecommunications
6.28%, 10/12/00 5,000,000 4,910,161
Centric Capital Corp.
6.63%, 07/25/00 3,000,000 2,986,740
<PAGE>
Corporate Asset Funding Co.
6.19%, 07/10/00 5,000,000 4,992,262
6.52%, 07/12/00 3,000,000 2,994,023
Countrywide Home Loans Inc.
6.57%, 07/10/00 3,000,000 2,995,072
6.75%, 07/20/00 5,000,000 4,982,188
Falcon Asset Securitization Corp.
6.55%, 07/03/00 1,085,000 1,084,605
6.55%, 07/25/00 5,000,000 4,978,167
Fayette Funding Corp.
6.77%, 07/21/00 5,000,000 4,981,194
Forrestal Funding Corp.
6.60%, 08/11/00 5,000,000 4,962,417
General Electric Capital Corp.
6.54%, 07/28/00 5,000,000 4,975,475
6.60%, 09/06/00 1,745,000 1,723,566
6.62%, 09/11/00 1,200,000 1,184,112
6.62%, 09/12/00 1,200,000 1,183,892
General Motors Acceptance Corp.
7.10%, 07/03/00 10,000,000 9,996,056
Goldman Sachs Group Inc.
6.61%, 09/11/00 5,000,000 4,933,900
Greenwich Funding Corp.
6.60%, 07/17/00 5,000,000 4,985,333
6.68%, 08/23/00 3,180,000 3,148,727
International Securitization Corp.
6.62%, 07/11/00 4,000,000 3,992,645
Intrepid Funding
6.06%, 08/07/00 4,000,000 3,975,086
Kitty Hawk Funding Corp.
6.61%, 09/11/00 5,000,000 4,933,900
Koch Industries Inc.
7.00%, 07/05/00 8,000,000 7,993,778
Lexington Parker Capital Corp.
6.19%, 07/11/00 5,000,000 4,991,403
6.56%, 07/10/00 2,154,000 2,150,468
6.61%, 09/01/00 2,514,000 2,485,381
6.70%, 08/24/00 3,000,000 2,969,850
Liberty Street Funding Corp.
6.64%, 09/19/00 5,000,000 4,926,222
6.68%, 08/21/00 4,000,000 3,962,147
Moat Funding LLC
6.64%, 09/20/00 5,000,000 4,925,356
6.70%, 08/23/00 3,000,000 2,970,408
6.70%, 12/12/00 5,000,000 4,847,389
Moriarty LLC
6.35%, 09/25/00 2,000,000 1,969,661
6.56%, 07/10/00 5,000,000 4,991,800
6.70%, 12/15/00 5,000,000 4,844,597
Prudential Funding Corp.
6.31%, 10/23/00 5,000,000 4,900,092
Quincy Capital Corp.
6.55%, 07/25/00 5,907,000 5,881,206
6.56%, 07/14/00 1,726,000 1,721,911
Silver Tower US Funding LLC
6.63%, 09/25/00 5,000,000 4,920,808
<PAGE>
Variable Funding Capital Corp.
6.60%, 07/18/00 5,000,000 4,984,417
Windmill Funding Corp.
6.62%, 07/10/00 5,000,000 4,991,725
6.95%, 07/03/00 7,836,000 7,832,974
---------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost: $217,495,758) 217,495,758
---------------------------------------------------------------------------
Security Principal Value
---------------------------------------------------------------------------
MEDIUM TERM NOTES--4.90%
---------------------------------------------------------------------------
AmeriCredit Corp.
6.89%, 06/05/01 8,000,000 8,000,000
Associates Automobile 2000-1 "A-1"
6.85%, 06/15/01 5,000,000 5,000,000
Ford Credit Auto Owner Trust 2000-C "A-2"
6.82%, 06/15/01 5,000,000 5,000,000
---------------------------------------------------------------------------
TOTAL MEDIUM TERM NOTES
(Cost: $18,000,000) 18,000,000
---------------------------------------------------------------------------
Security Principal Value
---------------------------------------------------------------------------
VARIABLE & FLOATING RATE NOTES--22.95%
---------------------------------------------------------------------------
Associates Manufactured Housing Certificates
6.88%, 10/16/00 4,569,784 4,569,784
Bank of America
6.65%, 04/27/01 5,000,000 5,000,000
Bayerische Landesbank
6.59%, 02/28/01 5,000,000 4,998,382
CIT Equipment Collateral
6.64%, 03/20/01 10,000,000 10,000,000
Countrywide Home Loans Inc.
7.15%, 08/28/00 4,715,000 4,717,276
First Union National Bank
6.65%, 05/29/01 5,000,000 5,000,000
Ford Motor Credit Co.
6.45%, 07/16/01 10,000,000 10,014,745
6.74%, 08/18/00 7,000,000 6,999,087
National City Bank
6.63%, 10/04/00 8,000,000 7,997,508
Norwest Financial Inc.
6.64%, 09/07/00 5,000,000 4,999,451
Sigma Finance Inc.
6.90%, 09/15/00 5,000,000 5,000,000
SMM Trust 2000-B "A-1"
6.81%, 12/15/00 5,000,000 5,000,000
SMM Trust 2000-E
6.67%, 03/14/01 5,000,000 5,000,000
Special Purpose Accounts Receivable Corp.
6.65%, 01/05/01 5,000,000 5,000,000
---------------------------------------------------------------------------
TOTAL VARIABLE & FLOATING RATE NOTES
(Cost: $84,296,233) 84,296,233
---------------------------------------------------------------------------
Security Principal Value
---------------------------------------------------------------------------
<PAGE>
REPURCHASE AGREEMENTS--0.00%
---------------------------------------------------------------------------
Morgan Stanley Tri Party Repurchase
Agreement, dated 6/30/00, due 7/03/00,
with a maturity value of $451
and an effective yield of 6.30%. 451 451
---------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost: $451) 451
---------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 99.68%
(Cost $366,132,873)* $366,132,873
---------------------------------------------------------------------------
Other Assets, Less Liabilities -- 0.32 % 1,220,874
---------------------------------------------------------------------------
NET ASSETS - 100.00% $367,353,747
===========================================================================
---------------------------------------------------------------------------
* Cost for income tax purposes is the same as for financial statement
purposes.
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE PREMIER MONEY MARKET FUND
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments:
In Money Market Master Portfolio ("Master Portfolio"),
at market value (Note 1) $ 80,460,194
--------------------
Total Assets 80,460,194
--------------------
LIABILITIES
Payables:
Accrued administration fee (Note 2) 22,527
Distribution to shareholders 186,555
Due to E*TRADE Asset Management, Inc. (Note 2) 1,566
Accrued expenses 1,833
--------------------
Total Liabilities 212,481
--------------------
NET ASSETS $ 80,247,713
====================
NET ASSETS CONSIST OF:
Paid-in capital 80,247,713
--------------------
NET ASSETS $ 80,247,713
====================
Shares outstanding 80,247,713
====================
Net asset value and offering price per share $ 1.00
====================
--------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE PREMIER MONEY MARKET FUND
STATEMENTS OF OPERATIONS
FOR THE PERIOD APRIL 07, 2000 (COMMENCEMENT OF OPERATIONS)
THROUGH JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
NET INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIO
Interest $ 564,616
Expenses (8,907)
--------------------
Net investment income allocated from Master Portfolio 555,709
--------------------
FUND EXPENSES (Note 2)
Administration fees 23,838
Advisory fees 1,652
Trustee fees 1,652
--------------------
Total fund expenses 27,142
--------------------
Less:
Waived Trustee fees (Note 2) (1,652)
--------------------
Total Net Expenses 25,490
--------------------
Net investment income 530,219
--------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 530,219
====================
--------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE PREMIER MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
FOR THE PERIOD APRIL 7,
2000 (COMMENCEMENT OF
OPERATIONS) TO JUNE 30,
2000 (UNAUDITED)
-----------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 530,219
--------------------
Net increase in net assets resulting from operations 530,219
--------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (530,219)
--------------------
Total distributions to shareholders (530,219)
--------------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 98,839,211
Net asset value of shares issued in reinvestment of
dividends and distributions 285,792
Cost of shares redeemed (18,877,290)
--------------------
Net increase in net assets resulting from
capital share transactions 80,247,713
--------------------
Increase in net assets 80,247,713
NET ASSETS:
Beginning of period 0
--------------------
End of period $ 80,247,713
====================
SHARES ISSUED AND REDEEMED:
Shares sold 98,839,211
Shares issued in reinvestment of
dividends and distributions 285,792
Shares redeemed (18,877,290)
--------------------
Net increase in shares outstanding 80,247,713
====================
--------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
E*TRADE PREMIER MONEY MARKET FUND
--------------------------------------------------------------------------------
PERIOD FROM
APR. 7, 2000
(COMMENCEMENT
OF OPERATIONS) TO
JUN. 30, 2000
(UNAUDITED) *
--------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD * $ 1.00
-------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.01
-------------
TOTAL FROM INVESTMENT OPERATIONS 0.01
-------------
LESS DISTRIBUTIONS:
From net investment income (0.01)
-------------
TOTAL DISTRIBUTIONS (0.01)
-------------
NET ASSET VALUE, END OF PERIOD $ 1.00
=============
TOTAL RETURN 1.37% ++
=============
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s) $80,248
Ratio of expenses to average net assets + 0.42% +++
Ratio of net investment income to
average net assets + 6.21%
--------------------------------------------------------------------------------
+ Annualized
++ For the period April 7, 2000 to June 30, 2000 and not indicative of a
full year's operating results or future returns.
+++ The Investment Adviser has voluntarily agreed to pay the non-affiliated
Trustee expenses for the Fund for the period January 1, 2000 through May
9, 2000. Even though such action had been taken, total annualized
operating expenses as a percentage of average net assets would have
remained unchanged.
* Per share amounts and ratios reflect income and expenses assuming
inclusion of Fund's proportionate share of the income and expenses of
the Money Market Master Portfolio.
The accompanying notes are an integral part of these financial statements.
<PAGE>
E*TRADE PREMIER MONEY MARKET FUND
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2000 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
E*TRADE Premier Money Market Fund (the "Fund") is a diversified series
of E*TRADE Funds (the "Trust"), an open-end series management investment
company registered under the Investment Company Act of 1940, as amended.
The Trust is organized as a Delaware business trust and was formed on
November 4, 1998. As of June 30, 2000 the Trust offered eight series: the
E*TRADE Bond Index Fund, the E*TRADE E-Commerce Index Fund, the E*TRADE
Extended Market Index Fund, the E*TRADE Global Titans Index Fund, the
E*TRADE International Index Fund, the E*TRADE Premier Money Market Fund,
the E*TRADE S&P 500 Index Fund and the E*TRADE Technology Index Fund. These
financial statements contain the E*TRADE Premier Money Market Fund.
The Fund's investment objective is to provide investors with a high
level of income, while preserving capital and liquidity.
The following is a summary of significant accounting policies which
are consistently followed by the Fund in the preparation of its financial
statements, and which are in conformity with generally accepted accounting
principles for investment companies. The preparation of financial
statements in conformity with accounting principles accepted in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of 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.
PRINCIPLES OF ACCOUNTING
The Fund uses the accrual method of accounting for financial reporting
purposes.
INVESTMENT POLICY AND SECURITY VALUATION
The Fund is a "feeder" fund in a "master-feeder" structure. Instead of
investing directly in individual securities, a feeder fund, which is
offered to the public, invests all of its assets in a master portfolio that
has substantially the same investment objective as the feeder fund. It is
the master portfolio that actually invests in the individual securities.
The Fund pursues its investment objective by investing all of its assets in
the Money Market Master Portfolio (the "Master Portfolio"), a separate
series of the Master Investment Portfolio ("MIP"), a registered open-end
management investment company. 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 June 30, 2000 the value of the Fund's investment in
the Master Portfolio was 22% of the outstanding interests of the Master
Portfolio.
The Fund's investment in the Master Portfolio is valued at the net asset
value of the Master Portfolio's shares held by the Fund. 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 accreting or amortizing any discount or premium, respectively,
over the period until maturity, approximates market value.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
<PAGE>
Security transactions are accounted for by the Master Portfolio on the
date 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 or losses are reported on the basis of
identified cost of securities delivered. The premiums are amortized and
discounts are accreted on a straight line basis to maturity. All net
investment income and realized and unrealized capital gains and losses of
the Master Portfolio are allocated as required by the Internal Revenue Code
of 1986, as amended (the "Code").
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
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income of the Fund are
declared daily and distributed monthly. Distributions are reinvested in
additional shares of the Fund unless the shareholder elects to receive them
in cash. Such distributions to shareholders are recorded on the ex-dividend
date.
Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing treatments for foreign currency
transactions, market discount, losses deferred to wash sales and excise tax
regulations. Permanent book and tax basis differences relating to
shareholder distributions will result in reclassifications to paid-in
capital and may impact net investment income per share. Undistributed net
investment income may include temporary book and tax basis differences
which will reverse in a subsequent period. Any taxable income or gain
remaining at fiscal year end is distributed in the following year.
FEDERAL INCOME TAXES
The Fund is treated as a separate entity from each other series of the
Trust for federal income tax purposes. The Fund intends to qualify as a
regulated investment company under Subchapter M of the Code. If so
qualified, the Fund must distribute annually all of its investment company
taxable income and any net capital gains (taking into account 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 June 30, 2000.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
E*TRADE Asset Management, Inc. (the "Investment Advisor"), a wholly
owned subsidiary of E*TRADE Group, Inc. ("E*TRADE Group"), serves as the
investment advisor for the Fund pursuant to an investment advisory
agreement ("Advisory Agreement"). For its service as investment advisor,
the Investment Advisor is paid by the Fund at an annual rate of 0.02% of
the Fund's average daily net assets.
Pursuant to an investment advisory contract with the Master Portfolio,
Barclays Global Fund Advisors ("BGFA") provides investment advisory
services in connection with the management of the Master Portfolio's
assets. For its services, BGFA is entitled to receive a fee from the Master
Portfolio at an annual rate equal to 0.10% of the average daily net assets
of the Master Portfolio. The Fund records daily its proportionate share of
the Master Portfolio's advisory fees, described above, in addition to
income, expenses and realized and unrealized gains and losses.
The Investment Advisor also provides administrative services to the
Fund, pursuant to an administrative services agreement ("Administrative
Agreement"). Services provided by the
<PAGE>
Investment Advisor acting as administrator include, but are not limited to:
coordinating the services performed by the transfer and dividend disbursing
agent, custodian, sub-administrator, shareholder servicing agent,
independent auditors and legal counsel; preparing and supervising the
preparation of periodic reports to the Fund's shareholders; generally
supervising regulatory compliance matters; providing, at its own expense,
the services of its personnel to serve as officers of the Trust; monitoring
and reviewing the Fund's contracted services and expenditures; and
reporting to the Board of Trustees concerning its activities pursuant to
the Administrative Agreement. The Fund pays the Investment Advisor a
monthly fee calculated at an annual rate of 0.30% of its average daily net
assets for its services as administrator of the Fund.
PFPC Inc. ("PFPC") serves as the transfer agent and dividend disbursing
agent for the Fund. Investors Bank & Trust Company ("IBT") serves as
sub-administrator, accounting services agent and custodian for the Fund.
E*TRADE Securities, Inc., a wholly owned subsidiary of E*TRADE Group,
serves as the shareholder servicing agent (the "Shareholder Servicing
Agent") for the Fund. The Shareholder Servicing Agent provides personal
services to the Fund's shareholders and maintains the Fund's shareholder
accounts. E*TRADE Securities, Inc. also serves as the principal underwriter
of the Fund. Such services were provided at no cost to the Fund. Effective
May 9, 2000, the trustees fees and expenses are no longer a direct expense
of the Fund, but rather those expenses are paid by the Investment Advisor
pursuant to the Administrative Agreement.
<PAGE>
MONEY MARKET MASTER PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments at market value (Cost: $366,132,873) (Note 1) $ 366,132,873
Receivables:
Interest 1,322,821
----------------
Total Assets 367,455,694
----------------
LIABILITIES
Payables:
Due to BGI (Note 2) 101,947
----------------
Total Liabilities 101,947
----------------
NET ASSETS $ 367,353,747
================
--------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
MONEY MARKET MASTER PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
NET INVESTMENT INCOME
Interest $ 8,855,215
----------------
Total investment income 8,855,215
----------------
EXPENSES (NOTE 2)
Advisory fees 141,718
----------------
Total expenses 141,718
----------------
Net investment income 8,713,497
----------------
Net realized gain on sale of investments 22
----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 8,713,519
================
--------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
MONEY MARKET MASTER PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months For the Period Ended For the Period Ended
Ended June 30, 2000 December 31, 1999 * February 28, 1999 **
(Unaudited)
------------------- -------------------- --------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 8,713,497 $ 9,767,206 $ 5,411,548
Net realized gain 22 4,552 -
------------------- -------------------- --------------------
Net increase (decrease) in net assets
resulting from operations 8,713,519 9,771,758 5,411,548
------------------- -------------------- --------------------
INTERESTHOLDER TRANSACTIONS:
Contributions 514,970,795 343,767,992 257,234,773
Withdrawals (401,803,829) (370,712,809) -
------------------- -------------------- --------------------
Net increase (decrease) in net assets
resulting from interestholder transactions 113,166,966 (26,944,817) 257,234,773
------------------- -------------------- --------------------
Increase (decrease) in net assets 121,880,485 (17,173,059) 262,646,321
NET ASSETS:
Beginning of period 245,473,262 262,646,321 -
------------------- -------------------- --------------------
End of period $ 367,353,747 $ 245,473,262 $ 262,646,321
=================== ==================== ====================
--------------------------------------------------------------------------------
<FN>
* For the ten months ended December 31, 1999. The Master Porfolio changed
its fiscal year end from February 28 to December 31.
** For the period from September 1, 1998 (commencement of operations) to
February 28, 1999.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
MONEY MARKET MASTER PORTFOLIO
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
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 March 1, 1994. MIP currently issues the following
separate portfolios: Asset Allocation, Bond Index, Extended Index, International
Index, LifePath Income, LifePath 2010, LifePath 2020, LifePath 2030, LifePath
2040, Money Market, S&P 500 Index and U.S. Equity Index Master Portfolios.
These financial statements relate to the Money Market Master Portfolio (the
"Master Portfolio").
The following is a summary of significant accounting policies which are
consistently followed by the MIP in the preparation of its financial statements,
and which 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.
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 accreting or amortizing any discount or premium, respectively,
over the period until maturity, approximates market value.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on the date securities are
purchased or sold (trade date). Interest income is recognized on a daily accrual
basis. Realized gains or losses are reported on the basis of identified cost of
securities delivered. The Master Portfolio amortizes premium and accretes
discount on a straight-line basis to maturity.
FEDERAL INCOME TAXES
MIP believes that the Master Portfolio has and will continue to be operated
in a manner so as to qualify it as a partnership for federal income tax
purposes. Provided that the Master Portfolio so qualifies, it will not be
subject to any federal income tax on its income and gain (if any). However, each
investor in the Master Portfolio will be taxed on its distributive share of the
Master Portfolio's taxable income in determining its federal income tax
liability. As a partnership for federal income tax purposes, the Master
Portfolio will be deemed to have "passed through" to interestholders any
interest, dividends, gains or losses for such purposes. The determination of
such share will be made in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations promulgated thereunder.
It is intended that the Master Portfolio's assets, income and distributions
will be managed in such a way that an entity electing and qualifying as a
"regulated investment company" under the Code can continue to so qualify by
investing substantially all of its assets through the Master Portfolio, provided
that the regulated investment company meets other requirements for such
qualifications not within the control of the Master Portfolio (e.g.,
distributing at least 90% of the regulated investment company's "investment
company taxable income" annually).
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 Portfolio's Schedule of Investments. The advisor to the Master
Portfolio 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
<PAGE>
bank under a tri-party agreement. It is the advisor's responsibility to value
collateral daily and to obtain additional collateral as necessary to maintain
the value at equal to or greater than the repurchase price.
The repurchase agreement entered into on June 30, 2000 by the Master
Portfolio is fully collateralized by U.S. Government obligations with a rate of
5.625%, a maturity date of 02/15/06 and an aggregate market value of $9,910.
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 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.
The MIP has entered into administration services arrangements with BGI and
Stephens, as co-administrators, who have agreed jointly to provide general
administration services to the Master Portfolio, such as managing and
coordinating third-party service relationships. BGI and Stephens are not
entitled to compensation for providing administration services to the Master
Portfolio. BGI and Stephens may delegate certain of their administration duties
to sub-administrators.
Certain officers and trustees of MIP are also officers of Stephens. As of
June 30, 2000, these officers of Stephens collectively owned less than 1% of the
Master Portfolio's outstanding beneficial interests.
3. FINANCIAL HIGHLIGHTS
The ratios of expenses to average net assets and net investment income to
average net assets for the Master Portfolio are as follows:
<TABLE>
<CAPTION>
SIX FOR THE FOR THE
MONTHS ENDED PERIOD ENDED PERIOD ENDED
JUNE 30, 2000 DECEMBER 31, FEBRUARY 28,
(UNAUDITED) 1999 * 1999 **
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ratio of expenses to average net assets + 0.10% 0.10% 0.10%
Ratio of net investment income to average net assets + 6.16% 5.23% 5.17%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
* For the ten months ended December 31, 1999. The Master Portfolio changed
its fiscal year-end from February 28 to December 31.
** For the period from September 1, 1998 (commencement of operations) to
February 28,1999.
+ Annualized for period of less than one year.
