<PAGE>
X-COM PREMIER S&P 500 FUND
ANNUAL REPORT
December 31, 1999
X.COM FUNDS
<PAGE>
Dear Shareholder:
Thank you for investing in X.com Funds.
This Annual Report covers the short period of time since X.com launched the
mutual funds on November 18, 1999. It is the first report of its kind for X.com
Funds.
The three mutual funds comprising X.com Funds are designed to be the first
building blocks of an individual's investment portfolio. Our choice of Barclays
Global Fund Advisors master/feeder fund structure provides you with the
expertise of one of the largest investment advisors in the world. The structure
and content of these master funds (in which our funds invest) is also outlined
in this annual report.
1999 was a year when stock prices soared (the S & P 500 Index gained 21.04/%)
while bond prices fell (the Lehman Brothers Government/Corporate Bond Index
declined 2.15%). This suggests that both market and sector diversification
remains a smart and prudent strategy to follow. Recognizing the importance of
diversification, X.com Funds will be offering additional investment choices
later this year. In the meantime, be sure to check out our site often as we
expand and improve the products and services offered to our customers.
Thanks again for choosing X.com Funds.
Elon Musk, Chairman
<PAGE>
X.com Premier S&P 500 Fund
Portfolio Manager Commentary - 4/th/ Quarter 1999
- -------------------------------------------------
The S&P 500 Index enjoyed a robust fourth quarter, driven largely by strong
performance in the technology sector. After dropping in the first two weeks of
the quarter amid inflationary fears, the index participated in technology-led
rallies in the second half of October and again in the second half of December,
gaining 14.88% for the quarter. Returns for the year were 21.04%.
The fourth quarter began with continued concerns of an overheated US economy.
Most notably, the Producer Price Index for September rose 1.1%, well above the
anticipated 0.5% increase. However, the following weeks witnessed more
encouraging economic news: third quarter Gross Domestic Product (GDP) grew at an
annual rate of 4.8%, in line with the 4.7% forecast. More importantly, the GDP
implicit price deflator, a measure of inflation, rose 0.9%, well below the
expected 1.2%. Also of significance, the Employment Cost Index (ECI) for the
third quarter rose 0.8%, below the forecasted 0.9%, indicating that low
unemployment rates have not translated into substantial wage increases. On
November 16, the Federal Open Market Committee increased the Federal Funds rate
by 0.25 to 5.5% and adopted a neutral bias, indicating that no additional
tightening was planned for the near term.
The technology sector was the most significant contributor to the market's
performance in the fourth quarter, returning 34.41%. In October, markets were
buoyed by Microsoft Corp's announced operating profits of 38 cents per share
versus expectations of 34 cents. This bullish news led the way to a rally in
the technology sector in the second half of the month. Qualcomm Inc., a
manufacturer of communications technologies and products, returned 62.5% in
November and 277.12% for the quarter after announcing that its net income for
the third quarter more than quadrupled. Yahoo! Inc., a global Internet media
company, was added to the S&P 500 after the close of trading on December 7. On
the following day the stock was up 7% and went on to gain 103% for the month of
December.
As the strength of the technology sector suggests, growth stocks sharply
outperformed value stocks in the fourth quarter: growth stocks gained 19.74%,
compared to 8.97% for value.
<PAGE>
X.com Premier S&P 500 Fund
Statement of Assets and Liabilities
December 31, 1999
===============================================================================
ASSETS
Investments:
Investment in Master Investment Portfolio -
S&P 500 Index Master Portfolio, at market value (Note 1).... $ 242,031
Receivables:
Fund shares sold................................................ 7,102
Due from X.com (Note 2)......................................... 8
-----------
Total Assets................................................ 249,141
-----------
LIABILITIES
Payables:
Fund shares redeemed............................................ 11,089
-----------
Total Liabilities........................................... 11,089
-----------
TOTAL NET ASSETS................................................ $ 238,052
===========
Net assets consist of:
Paid-in capital................................................. 228,701
Undistributed net investment income............................. 182
Undistributed net realized gain on investments.................. 97
Net unrealized appreciation of investments...................... 9,072
-----------
TOTAL NET ASSETS................................................ $ 238,052
===========
CAPITAL SHARES:
Net Assets...................................................... $ 238,052
Shares Outstanding.............................................. 20,713
Net Asset Value, Offering Price and Redemption Price per Share.. $ 11.49
===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
X.com Premier S&P 500 Fund
Statement of Operations
================================================================================
<TABLE>
<CAPTION>
Period from
November 18, 1999
(commencement of
operations) to
December 31, 1999
-----------------
<S> <C>
NET INVESTMENT INCOME:
ALLOCATED FROM MASTER INVESTMENT PORTFOLIO
Dividends................................................................... $ 83
Interest.................................................................... 26
Expenses (Note 2)........................................................... (4)
-----------------
Net Investment Income Allocated from
Master Investment Portfolio...................................................... 105
-----------------
OTHER INCOME:
Contribution from adviser (Note 2).......................................... 1
-----------------
EXPENSES (NOTE 2):
Management fees....................................................................... 18
-----------------
Total expenses.............................................................. 18
-----------------
Less:
Fees reimbursed by X.com (Note 2)................................................ (22)
-----------------
Net expenses................................................................ (4)
-----------------
NET INVESTMENT INCOME................................................................. 110
-----------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS ALLOCATED FROM
MASTER INVESTMENT PORTFOLIO
Net realized gain on sale of investments.............................................. 60
Net change in unrealized appreciation of investments.................................. 9,072
-----------------
Net Gain on Investments Allocated from
Master Investment Portfolio...................................................... 9,132
-----------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS....................................................................... $ 9,242
=================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
X.com Premier S&P 500 Fund
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Period from
November 18, 1999
(commencement of
operations) to
December 31, 1999
-----------------
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income.................................................. $ 110
Net realized gain on sale of investments............................... 60
Net change in unrealized appreciation of investments................... 9,072
-----------------
Net increase in net assets resulting from operations .................. 9,242
-----------------
Capital Share Transactions:
Net proceeds from sale of shares....................................... 307,436
Net asset value of shares issued to shareholders in reinvestment
of dividends and distributions.................................... -
Cost of shares redeemed................................................ (78,626)
-----------------
Net increase in net assets from capital share transactions............. 228,810
-----------------
Net Increase in Net Assets............................................. 238,052
NET ASSETS:
Beginning of period (November 18, 1999) ............................... -
-----------------
End of period (including undistributed net investment income of $182).. $ 238,052
=================
SHARE TRANSACTIONS:
Number of shares sold.................................................. 27,699
Number of shares issued through reinvestment of dividends
and distributions................................................. -
Number of shares redeemed.............................................. (6,986)
-----------------
Net increase in shares outstanding..................................... 20,713
=================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
X.com Premier S&P 500 Fund
Financial Highlights
================================================================================
<TABLE>
<CAPTION>
Period from
November 18, 1999
(commencement of
operations) to
December 31, 1999
-----------------
<S> <C>
For a Share Outstanding for the Period
Net Asset Value, beginning of period................................................... $ 11.01
-----------------
Income from investment operations:
Net investment income............................................................. 0.01
Net realized and unrealized gain on investments................................... 0.47
Total income from investment operations........................................... 0.48
-----------------
Less dividends and distributions to shareholders:
Dividends from net investment income.............................................. -
Distributions from net realized gains............................................. -
-----------------
Total dividends and distributions................................................. -
-----------------
Net asset value, end of period......................................................... $ 11.49
=================
Total return........................................................................... 4.36% *
Ratios / Supplemental Data:
Net assets, end of period (000s omitted).......................................... $ 238
Ratio of expenses to average net assets (1)....................................... 0.00% **
Ratio of net investment income to average net assets (2).......................... 1.40% **
- ---------------------------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior to
reimbursement of fees............................................................. 0.28% **
(2) Ratio of net investment income to average net
assets prior to reimbursement of fees............................................. 1.12% **
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
The accompanying notes are an integral part of these financial statements.
<PAGE>
X.COM PREMIER S&P 500 FUND
NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
X.com Premier S&P 500 Fund (the "Fund") is one of a diversified series of
X.com Funds (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 June 3, 1999.
The investment objective of the Premier S&P 500 Fund is to approximate as
closely as practicable, before fees and expenses, the capitalization-weighted
total rate of return of the Standard and Poor's 500 Composite Stock Price Index.
The following significant accounting policies are consistently followed by
the Trust 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 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 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 S&P 500 Index Master Portfolio
(a "Master Portfolio") a separate series of Master Investment Portfolio. 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 December 31, 1999,
the value of the Fund's investment in the Master Portfolio was 0.01% of the
outstanding interests of the S&P 500 Index Master Portfolio. Investments of the
Master Portfolio are valued at the last reported sale price on the primary
securities exchange or national securities market on which such securities are
traded. Securities not listed on an exchange or national securities market, or
securities in which there was no last reported sales price, are valued at the
most recent bid prices. Debt securities are generally traded in the over-the-
counter market and are valued at a price deemed best to reflect fair value as
quoted by dealers who make markets in those securities or by an independent
pricing source. U.S. Government obligations are valued at the last reported bid
price. Debt securities maturing in 60 days or less are valued at amortized
cost, which approximates market value. Any securities, restricted securities or
other assets for which market quotations are not readily available are valued at
fair value as determined in good faith in accordance with policies approved by
the Master Portfolios' Board of Trustees.
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: dividend income is recognized on the ex-dividend
date and interest income is recognized on a daily accrual basis. Realized gains
and losses are reported on the basis of identified cost of securities delivered.
Bond discounts and premiums are accreted or amortized, respectively, as required
by the Internal Revenue Code of 1986, as amended (the "Code"). All net
investment income and realized and unrealized capital gains and losses of the
Master Portfolio are allocated as required by the Code.
<PAGE>
The performance of the Fund is directly affected by the performance of the
corresponding 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.
Dividends and Distributions to Shareholders
Dividends to shareholders from net investment income of the Fund are
declared and distributed quarterly. Distributions to shareholders from any net
realized capital gains are declared and distributed annually, generally in
December.
Due to the timing of dividend distributions and the differences in
accounting for income and realized gains (losses) for financial statement and
federal income tax purposes, the fiscal year in which amounts are distributed
may differ from the year in which the income and realized gains (losses) were
recorded by the Fund.
Federal Income Taxes
The Fund is treated as a separate entity for federal income tax purposes.
It is the policy of each fund to continue to qualify as a regulated investment
company by complying with the provisions applicable to regulated investment
companies, as defined in the Code, and to 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 December 31, 1999.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
X.com Asset Management, Inc. ("XAM"), a wholly owned subsidiary of X.com
Corporation ("X.com") serves as the Funds' investment adviser. For both their
advisory and administrative services, XAM is paid a "unified" fee from the Fund
at an annual rate of 0.23% of the Fund's average daily net assets. Under this
agreement between the Trust and XAM, XAM assumes all ordinary recurring direct
costs of the Trust, such as custodian fees, director's fees, transfer agency
fees and accounting fees, and excludes, generally, advisory fees and costs
related to security transactions. XAM may delegate some of their administrative
duties to the administrator.
A fee waiver for the Fund is made pursuant to an expense limitation and
reimbursement agreement with XAM that is in effect for an initial term of one
year and will be renewed thereafter automatically for a one year term on an
annual basis. The agreement can be changed, terminated or not renewed by
either party only by giving 90 days' prior notice. XAM waived all fees incurred
totaling 0.28% of its average daily net assets, with XAM contributing to the
Premier S&P 500 Fund an additional 0.01% of its average daily net assets for the
period ended December 31, 1999.
X.com serves as the shareholder servicing agent for the Fund. X.com is also
responsible for maintaining the Fund's shareholder accounts.
Pursuant to an Investment Advisory Contract with the Master Portfolio,
Barclays Global Financial Advisors ("BGFA") provides investment guidance and
policy direction in connection with the management of the Master Portfolio's
assets. For its services, BGFA is entitled to receive 0.05% of the average
daily net assets of the S&P 500 Index Master Portfolio. The Fund bears a pro
rata portion of the investment advisory fees paid by the Master Portfolio.
<PAGE>
Investor's Bank & Trust Company (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; and preparing and
disseminating material for meetings of the Board of Trustees and shareholders.
XAM compensates the Administrator for services performed.
<PAGE>
Independent Auditors' Report
- ----------------------------
To the Shareholders and Board of Trustees of
X.com Funds:
We have audited the accompanying statement of assets and liabilities of X.com
Premier S&P 500 Fund (one series of X.com Funds) as of December 31, 1999 and the
related statements of operations, changes in net assets and financial highlights
for the period from November 18, 1999 (commencement of operations) to December
31, 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 X.com
Premier S&P 500 Fund as of December 31, 1999, the results of its operations,
changes in its net assets, and its financial highlights for the period from
November 18, 1999 to December 31, 1999 in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
San Francisco, California
February 11, 2000
9
<PAGE>
MASTER INVESTMENT PORTFOLIO--S&P 500 INDEX
MASTER PORTFOLIO--DECEMBER 31, 1999
Portfolio of Investments
<TABLE>
<CAPTION>
Security Name Shares Value
<S> <C> <C> <C>
COMMON STOCKS--96.26%
ADVERTISING--0.27%
Interpublic Group Co Inc 107,383 6,194,657
Omnicom Group 67,509 6,750,900
-----------------
TOTAL ADVERTISING
- VALUE $12,945,557
- COST $6,043,792
AEROSPACE / DEFENSE--1.18%
Boeing Co 356,357 14,811,088
General Dynamics Corp 71,266 3,759,281
Goodrich (B F) Co 34,653 952,957
Honeywell International Inc 299,106 17,254,677
Lockheed Martin Corp 151,413 3,312,159
Northrop Grumman Corp 26,579 1,436,927
Raytheon Co Class B 129,063 3,428,236
United Technologies Corp 182,808 11,882,520
-----------------
TOTAL AEROSPACE / DEFENSE
- VALUE $56,837,845
- COST $50,908,685
AIRLINES--0.22%
AMR Corp + 57,567 3,856,989
Delta Air Lines Inc 53,167 2,648,381
Southwest Airlines Co 193,037 3,124,786
USAirways Group Inc + 28,465 912,659
-----------------
TOTAL AIRLINES
- VALUE $10,542,815
- COST $9,589,571
APPAREL--0.17%
Liz Claiborne Inc 24,271 913,196
Nike Inc Class B 107,232 5,314,686
Reebok International Ltd + 22,146 181,320
Russell Corp 13,707 229,592
VF Corp 46,290 1,388,700
-----------------
TOTAL APPAREL
- VALUE $8,027,494
- COST $8,026,371
AUTO MANUFACTURERS--0.93%
Ford Motor Co 458,260 24,488,269
General Motors Corp Class A 243,639 17,709,510
Navistar International Corp + 25,666 1,215,927
PACCAR Inc 30,273 1,341,472
-----------------
TOTAL AUTO MANUFACTURERS
- VALUE $44,755,178
- COST $31,543,211
AUTO PARTS & EQUIPMENT--0.20%
Cooper Tire & Rubber Co 29,617 460,915
Dana Corp 64,030 1,916,898
Delphi Automotive Systems Corp 216,361 3,407,686
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Goodyear Tire & Rubber Co 60,125 1,694,773
TRW Inc 46,477 2,413,899
-----------------
TOTAL AUTO PARTS & EQUIPMENT
- VALUE $9,894,171
- COST $11,608,581
BANKS--4.96%
Amsouth Bancorp 133,902 2,585,982
Bank of New York Co Inc 279,156 11,166,240
Bank One Corp 437,601 14,030,582
BankAmerica Corp 647,205 32,481,601
BB&T Corp 120,484 3,298,250
Chase Manhattan Corp 313,185 24,330,560
Comerica Inc 59,938 2,798,355
Fifth Third Bancorp 109,658 8,046,156
First Union Corp 362,892 11,907,394
Firstar Corp 374,181 7,904,574
FleetBoston Financial Corp 349,568 12,169,336
Golden West Financial 63,654 2,132,409
Huntington Bancshares Inc 88,677 2,117,163
KeyCorp 171,409 3,792,424
Mellon Financial Corp 195,583 6,662,046
Morgan (J P) & Co Inc 66,489 8,419,170
National City Corp 235,464 5,577,554
Northern Trust Corp 85,146 4,512,738
Old Kent Financial Corp 34,400 1,216,900
PNC Bank Corp 114,295 5,086,127
Regions Financial Corp 85,833 2,156,554
Republic New York Corp 40,184 2,893,248
SouthTrust Corp 63,289 2,393,115
State Street Boston Corp 61,542 4,496,412
Summit Bancorp 66,056 2,022,965
SunTrust Banks Inc 122,242 8,411,778
Synovus Financial Corp 103,581 2,058,672
U.S. Bancorp 278,309 6,627,233
Union Planters Corp 53,845 2,123,512
Wachovia Corp 77,040 5,238,720
Washington Mutual Inc 220,472 5,732,272
Wells Fargo & Co 623,474 25,211,730
-----------------
TOTAL BANKS
- VALUE $239,601,772
- COST $226,819,971
BEVERAGES--1.91%
Anheuser-Busch Inc 177,324 12,567,839
Brown-Forman Corp Class B 26,460 1,514,835
Coca-Cola Co 934,391 54,428,276
Coca-Cola Enterprises Co 162,898 3,278,322
Coors (Adolph) Co Class B 14,382 755,055
Diageo PLC ADR (UK) 17 544
Pepsico Inc 553,554 19,512,779
-----------------
TOTAL BEVERAGES
- VALUE $92,057,650
- COST $80,351,664
BIOTECHNOLOGY--0.66%
Amgen Inc + 386,562 23,217,880
Monsanto Co 240,552 8,569,739
-----------------
TOTAL BIOTECHNOLOGY
- VALUE $31,787,619
- COST $15,323,757
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
BUILDING MATERIALS--0.13%
Armstrong World Industries Inc 15,543 518,748
Masco Corp 156,883 3,980,906
Owens Corning Fiberglas Corp 20,986 405,292
Vulcan Materials Co 32,120 1,282,793
-----------
TOTAL BUILDING MATERIALS
- VALUE $ 6,187,739
- COST $ 6,873,934
CHEMICALS--1.20%
Air Products & Chemicals Inc 87,959 2,952,124
Ashland Inc 28,437 936,644
Dow Chemical Co 83,558 11,165,438
Du Pont (E I) de Nemours 394,057 25,958,505
Eastman Chemical Co 30,282 1,444,073
Engelhard Corp 48,653 918,325
Grace (W R) Co + 27,178 377,095
Great Lakes Chemical Corp 22,691 866,513
Hercules Inc 38,616 1,076,421
Praxair Inc 60,801 3,059,050
Rohm & Haas Co 81,296 3,307,731
Sherwin Williams Co 65,777 1,381,317
Sigma-Aldrich Corp 39,041 1,173,670
Union Carbide Corp 51,017 3,405,385
-----------
TOTAL CHEMICALS
- VALUE $58,022,291
- COST $47,443,341
COMMERCIAL SERVICES--0.49%
Block (H R) Inc 37,527 1,641,806
Cendant Corp + 274,479 7,290,848
Deluxe Corp 30,074 825,155
Donnelley (R R) & Sons Co 49,915 1,238,516
Dun & Bradstreet Corp 62,396 1,840,682
Ecolab Inc 50,020 1,957,033
Equifax Inc 55,846 1,315,871
McKesson HBOC Inc 105,816 2,387,474
Paychex Inc 94,001 3,760,040
Quintiles Transnational Corp + 25,800 482,137
Service Corp International 101,954 707,306
-----------
TOTAL COMMERCIAL SERVICES
- VALUE $23,446,868
- COST $28,439,975
COMPUTERS--9.58%
3Com Corp + 133,118 6,256,546
Adaptec Inc + 31,300 1,561,087
Apple Computer Inc + 60,296 6,199,183
Cabletron Systems Inc + 62,807 1,632,982
Ceridian Corp + 55,853 1,204,330
Cisco Systems Inc + 1,229,986 131,762,250
Compaq Computer Corp 644,412 17,439,400
Computer Sciences Corp + 61,031 5,775,058
Dell Computer Corp + 961,746 49,049,046
Electronic Data Systems Corp 179,898 12,041,922
EMC Corp + 383,629 41,911,468
Gateway Inc + 119,048 8,578,897
Hewlett-Packard Co 383,434 43,687,511
International Business Machine Corp 681,649 73,618,092
Lexmark International Group Class A + 44,975 4,070,237
Network Appliance Inc + 53,250 4,423,078
Seagate Technology Inc + 79,776 3,714,570
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Silicon Graphics Inc + 73,128 717,569
Sun Microsystems Inc + 585,786 45,361,803
Unisys Corp + 108,675 3,470,808
------------
TOTAL COMPUTERS
- VALUE $462,475,837
- COST $176,115,888
COSMETICS / PERSONAL CARE--2.16%
Alberto-Culver Co Class B 21,777 562,119
Avon Products Inc 96,143 3,172,719
Colgate-Palmolive Co 221,134 14,373,710
Gillette Co 408,333 16,818,215
International Flavor & Fragrances Inc 40,998 1,547,674
Kimberly-Clark Corp 202,091 13,186,438
Procter & Gamble Co 497,231 54,477,871
------------
TOTAL COSMETICS / PERSONAL CARE
- VALUE $104,138,746
- COST $ 68,964,678
DISTRIBUTION / WHOLESALE--0.19%
Costco Wholesale Corp + 83,938 7,659,342
Genuine Parts Co 69,138 1,715,489
------------
TOTAL DISTRIBUTION / WHOLESALE
- VALUE $ 9,374,831
- COST $ 5,792,322
DIVERSIFIED FINANCIAL SERVICES--4.91%
American Express Corp 169,847 28,237,064
Associates First Capital Corp 276,610 7,589,487
Bear Stearns Co Inc 47,199 2,017,757
Capital One Financial Corp 75,490 3,637,674
Citigroup Inc 1,275,154 70,850,744
Countrywide Credit Industries Inc 43,374 1,095,193
Federal Home Loan Mortgage Corporation 263,711 12,410,899
Federal National Mortgage Association 388,233 24,240,298
Franklin Resources Inc 96,631 3,098,231
Household International Inc 181,216 6,750,296
Lehman Brothers Holdings 45,325 3,838,461
MBNA Corp 304,775 8,305,119
Merrill Lynch & Co Inc 140,237 11,709,789
Morgan Stanley Dean Witter 211,367 30,172,639
Paine Webber Group Inc 55,154 2,140,665
Price (T Rowe) & Associates 35,000 1,292,812
Providian Financial Corp 54,109 4,927,301
Schwab (Charles) Corp 310,318 11,908,453
SLM Holding Corp 61,684 2,606,149
------------
TOTAL DIVERSIFIED FINANCIAL SERVICES
- VALUE $236,829,031
- COST $143,235,527
ELECTRIC--1.56%
AES Corp + 73,105 5,464,599
Ameren Corp 52,966 1,734,636
American Electric Power Inc 74,389 2,389,747
Carolina Power & Light Co 59,226 1,802,691
Central & South West Corp 82,182 1,643,640
Cinergy Corp 61,411 1,481,540
CMS Energy Corp 43,993 1,372,032
Consolidated Edison Inc 84,720 2,922,840
Constellation Energy Group 57,860 1,677,940
Dominion Resources Inc 73,506 2,885,110
DTE Energy Co 56,010 1,757,314
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Duke Energy Corp 138,806 6,957,651
Edison International 132,874 3,479,638
Entergy Corp 94,882 2,443,211
FirstEnergy Corp 90,161 2,045,528
Florida Progress Corp 37,858 1,601,867
FPL Group Inc 68,706 2,941,476
GPU Inc 48,607 1,455,172
New Century Energies Inc 44,293 1,345,400
Niagra Mohawk Holdings Inc + 72,680 1,012,978
Northern States Power Co 58,795 1,146,502
PECO Energy Co 71,748 2,493,243
PG&E Corp 147,012 3,013,746
Pinnacle West Capital Corp 23,500 718,219
PP & L Resources Inc 59,377 1,358,249
Public Service Enterprise Group 84,063 2,926,443
Reliant Energy Inc 112,934 2,583,365
Southern Co 260,050 6,111,175
Texas Utilities Co 105,661 3,757,569
Unicom Corp 83,448 2,795,508
-----------
TOTAL ELECTRIC
- VALUE $75,319,029
- COST $77,602,095
ELECTRICAL COMPONENTS & EQUIPMENT--0.25%
Emerson Electric Co 165,032 9,468,711
Molex Inc 50,600 2,868,387
-----------
TOTAL ELECTRICAL COMPONENTS & EQUIPMENT
- VALUE $12,337,098
- COST $10,607,048
ELECTRONICS--0.66%
Analog Devices Inc + 59,990 5,579,070
Johnson Controls Inc 32,858 1,868,799
Millipore Corp 17,225 665,316
Parker Hannifin Corp 41,831 2,146,453
PE Corp-PE Biosystems Group 38,586 4,642,378
PerkinElmer Inc 17,648 735,701
Solectron Corp + 106,352 10,116,734
Tektronix Inc 18,410 715,689
Teradyne Inc + 56,740 3,744,840
Thermo Electron Corp + 61,303 919,545
Thomas & Betts Corp 21,793 694,652
-----------
TOTAL ELECTRONICS
- VALUE $31,829,177
- COST $20,085,745
ENGINEERING & CONSTRUCTION--0.03%
Fluor Corp 29,408 1,349,107
Foster Wheeler Corp 15,952 141,574
-----------
TOTAL ENGINEERING & CONSTRUCTION
- VALUE $ 1,490,681
- COST $ 1,940,013
ENTERTAINMENT--0.05%
Harrah's Entertainment Inc + 48,115 1,272,040
Mirage Resorts Inc + 73,225 1,121,258
-----------
TOTAL ENTERTAINMENT
- VALUE $ 2,393,298
- COST $ 2,764,549
ENVIRONMENTAL CONTROL--0.09%
Allied Waste Industries Inc + 50,915 448,688
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Waste Management Inc 234,418 4,029,059
-----------
TOTAL ENVIRONMENTAL CONTROL
- VALUE $ 4,477,747
- COST $12,258,279
FOOD--1.92%
Albertson's Inc 160,326 5,170,514
Archer-Daniels-Midland Co 236,583 2,883,355
Bestfoods 106,212 5,582,768
Campbell Soup Co 165,111 6,387,732
ConAgra Inc 186,381 4,205,221
General Mills Inc 116,686 4,171,524
Great Atlantic & Pacific Tea Co 14,838 413,609
Heinz (H J) Co 136,452 5,432,495
Hershey Foods Corp 53,535 2,542,913
Kellogg Co 154,449 4,758,960
Kroger Co + 316,160 5,967,520
Nabisco Group Holdings Corp 125,413 1,332,513
Quaker Oats Co 51,208 3,360,525
Ralston-Purina Group 123,746 3,449,420
Safeway Inc + 190,959 6,790,979
Sara Lee Corp 343,377 7,575,755
Super Value Inc 46,279 925,580
Sysco Corp 126,212 4,993,262
Unilever NV 216,889 11,806,895
Winn-Dixie Stores Inc 57,358 1,373,007
Wrigley (W M) Jr Co 44,437 3,685,494
-----------
TOTAL FOOD
- VALUE $92,810,041
- COST $95,478,258
FOREST PRODUCTS & PAPER--0.65%
Boise Cascade Corp 22,043 892,742
Champion International Corp 36,981 2,290,511
Fort James Corp 85,028 2,327,642
Georgia-Pacific Corp 65,839 3,341,329
International Paper Co 157,147 8,868,984
Louisiana-Pacific Corp 41,771 595,237
Mead Corp 39,296 1,706,920
Potlatch Corp 11,371 507,431
Temple-Inland Inc 21,587 1,423,393
Westvaco Corp 38,863 1,267,905
Weyerhauser Co 83,345 5,985,213
Willamette Industries Inc 42,972 1,995,512
-----------
TOTAL FOREST PRODUCTS & PAPER
- VALUE $31,202,819
- COST $24,681,546
GAS--0.07%
Eastern Enterprises 8,432 484,313
NICOR Inc 18,445 599,463
ONEOK Inc 12,234 307,379
Peoples Energy Corp 13,909 465,952
Sempra Energy 92,729 1,611,166
-----------
TOTAL GAS
- VALUE $ 3,468,273
- COST $ 3,873,551
HAND / MACHINE TOOLS--0.11%
Black & Decker Corp 33,627 1,757,011
Grainger (W W) Inc 36,123 1,727,131
Milacron Inc 14,859 228,457
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Snap-On Inc 23,453 622,970
Stanley Works 34,452 1,037,867
------------
TOTAL HAND / MACHINE TOOLS
- VALUE $ 5,373,436
- COST $ 4,908,947
HEALTH CARE--2.24%
Allergan Inc 50,800 2,527,300
Bard (C R) Inc 19,978 1,058,834
Bausch & Lomb Inc 21,821 1,493,375
Baxter International Inc 110,721 6,954,663
Becton Dickinson & Co 96,061 2,569,632
Biomet Inc 43,468 1,738,720
Boston Scientific Corp + 152,221 3,329,834
Columbia/HCA Healthcare Corp 214,786 6,295,915
Guidant Corp + 115,111 5,410,217
Healthsouth Corp + 160,259 861,392
Humana Inc + 64,704 529,764
Johnson & Johnson 520,147 48,438,689
Mallinckrodt Group Inc 27,624 878,789
Manor Care Inc + 42,886 686,176
Medtronics Inc 444,856 16,209,441
St Jude Medical Inc + 32,653 1,002,039
Tenet Healthcare Corp + 119,123 2,799,391
United Healthcare Corp 66,303 3,522,347
Wellpoint Health Networks + 25,355 1,671,845
------------
TOTAL HEALTH CARE
- VALUE $107,978,363
- COST $ 84,180,983
HOLDING COMPANIES-DIVERSIFIED--0.15%
Seagrams Co Ltd 164,437 7,389,388
------------
TOTAL HOLDING COMPANIES-DIVERSIFIED
- VALUE $ 7,389,388
- COST $ 6,502,451
HOME BUILDERS--0.03%
Centex Corp 23,215 573,120
Fleetwood Enterprises Inc 13,708 282,728
Kaufman & Broad Home Corp 17,979 434,867
Pulte Corp 17,087 384,458
------------
TOTAL HOME BUILDERS
- VALUE $ 1,675,173
- COST $ 1,648,851
HOME FURNISHINGS--0.10%
Leggett & Platt Inc 56,700 1,215,506
Maytag Corp 33,811 1,622,928
Whirlpool Corp 29,131 1,895,336
------------
TOTAL HOME FURNISHINGS
- VALUE $ 4,733,770
- COST $ 4,062,818
HOUSEHOLD PRODUCTS / WARES--0.30%
American Greetings Corp Class A 26,270 620,629
Avery-Dennison Corp 43,633 3,179,755
Clorox Co 90,052 4,536,370
Fortune Brands Inc 64,148 2,120,893
Jostens Inc 13,796 335,415
Newell Rubbermaid Inc 107,840 3,127,360
Tupperware Corp 22,621 383,143
------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
TOTAL HOUSEHOLD PRODUCTS / WARES
- VALUE $ 14,303,565
- COST $ 12,785,042
INSURANCE--2.91%
Aetna Inc 54,289 3,030,005
AFLAC Corp 101,382 4,783,963
Allstate Corp 303,349 7,280,376
American General Corp 94,773 7,190,901
American International Group Inc 585,625 63,320,703
Aon Corp 98,022 3,920,860
Chubb Corp 63,769 3,590,992
CIGNA Corp 70,827 5,706,000
Cincinnati Financial Corp 63,644 1,984,897
Conseco Inc 123,646 2,210,172
Hartford Financial Services Group 86,412 4,093,769
Jefferson-Pilot Corp 40,464 2,761,668
Lincoln National Corp 76,197 3,047,880
Loews Corp 41,313 2,507,183
Marsh & McLennan Companies Inc 100,335 9,600,805
MBIA Inc 38,539 2,035,341
MGIC Investment Corp 41,931 2,523,722
Progressive Corp Ohio 28,125 2,056,641
SAFECO Corp 51,422 1,279,122
St Paul Cos 86,993 2,930,577
Torchmark Corp 51,586 1,499,218
UNUMProvident Corp 91,610 2,937,246
------------
TOTAL INSURANCE
- VALUE $140,292,041
- COST $108,341,003
IRON / STEEL--0.09%
Allegheny Technologies Inc 37,270 836,246
Bethlehem Steel Corp + 50,451 422,527
Nucor Corp 33,724 1,848,497
USX - U.S. Steel Group 34,183 1,128,039
------------
TOTAL IRON / STEEL
- VALUE $ 4,235,309
- COST $ 4,772,269
LEISURE TIME--0.25%
Brunswick Corp 35,682 793,925
Carnival Corp Class A 232,789 11,130,224
------------
TOTAL LEISURE TIME
- VALUE $ 11,924,149
- COST $ 11,133,423
LODGING--0.08%
Hilton Hotels Corp 100,112 963,578
Marriott International 95,283 3,007,370
------------
TOTAL LODGING
- VALUE $ 3,970,948
- COST $ 3,919,019
MACHINERY--0.46%
Briggs & Stratton Corp 9,122 489,167
Caterpillar Inc 135,328 6,368,874
Cummins Engine Co Inc 15,900 768,169
Deere & Co 89,327 3,874,559
Dover Corp 79,663 3,614,709
Ingersoll-Rand Co 63,286 3,484,685
McDermott International Inc 23,106 209,398
NACCO Industries Inc Class A 3,027 168,188
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Rockwell International Corp 73,145 3,501,817
------------------
TOTAL MACHINERY
- VALUE $ 22,479,566
- COST $ 18,440,998
MANUFACTURERS--5.74%
Cooper Industries Inc 36,420 1,472,734
Corning Inc 92,903 11,978,681
Crane Co 26,543 527,542
Danaher Corp 51,856 2,502,052
Eastman Kodak Co 120,341 7,972,591
Eaton Corp 27,696 2,011,422
FMC Corp + 12,392 710,217
General Electric Co 1,239,186 191,764,034
Illinois Tool Works Inc 107,786 7,282,292
ITT Industries Inc 34,073 1,139,316
Minnesota Mining & Manufacturing Co 152,721 14,947,568
National Service Industries Inc 15,998 471,941
Pall Corp 48,399 1,043,603
Polaroid Corp 17,470 328,654
PPG Industries Inc 66,344 4,150,647
Textron Inc 57,334 4,396,801
Tyco International Ltd 633,078 24,610,907
------------------
TOTAL MANUFACTURERS
- VALUE $ 277,311,002
- COST $ 143,990,320
MEDIA--3.40%
CBS Corp + 288,983 18,476,851
Clear Channel Communications Inc + 127,745 11,401,241
Comcast Corp Class A 284,258 14,372,795
Disney (Walt) Co 781,324 22,853,727
Dow Jones & Co Inc 34,936 2,375,648
Gannett Co Inc 106,280 8,668,463
Knight-Ridder Inc 30,498 1,814,631
McGraw-Hill Inc 75,095 4,627,729
MediaOne Group Inc + 229,855 17,655,737
Meredith Corp 20,197 841,962
New York Times Co Class A 66,704 3,276,834
Time Warner Inc 487,770 35,332,839
Times Mirror Co Class A 23,181 1,553,127
Tribune Co 90,382 4,976,659
Viacom Inc Class B + 264,159 15,965,110
------------------
TOTAL MEDIA
- VALUE $ 164,193,353
- COST $ 91,189,951
METAL FABRICATE / HARDWARE--0.02%
Timken Co 24,501 500,739
Worthington Industries Inc 36,040 596,913
------------------
TOTAL METAL FABRICATE / HARDWARE
- VALUE $ 1,097,652
- COST $ 1,172,632
METALS-DIVERSIFIED--0.47%
Alcan Aluminum Ltd 86,465 3,561,277
Alcoa Inc 139,199 11,553,517
Freeport McMoRan Inc + 63,424 1,339,832
Inco Ltd + 70,437 1,655,270
Phelps Dodge Corp 22,901 1,537,230
Placer Dome Inc 120,056 1,290,602
Reynolds Metals Co 24,353 1,866,049
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
------------------
TOTAL METALS-DIVERSIFIED
- VALUE $ 22,803,777
- COST $ 15,205,426
MINING--0.10%
Barrick Gold Corp 147,998 2,617,715
Homestake Mining Co 92,085 719,414
Newmont Mining Corp 64,155 1,571,798
------------------
TOTAL MINING
- VALUE $ 4,908,927
- COST $ 6,518,262
OFFICE / BUSINESS EQUIPMENT--0.22%
Pitney Bowes Inc 102,053 4,930,436
Xerox Corp 252,366 5,725,554
-------------------
TOTAL OFFICE / BUSINESS EQUIPMENT
- VALUE $ 10,655,990
- COST $ 13,290,457
OIL & GAS PRODUCERS--4.87%
Amerada Hess Corp 34,891 1,980,064
Anadarko Petroleum Corp 46,745 1,595,173
Apache Corp 41,497 1,532,795
Atlantic Richfield Corp 122,330 10,581,545
Burlington Resources Inc 70,978 2,346,710
Chevron Corp 248,501 21,526,399
Coastal Corp 81,860 2,900,914
Conoco Inc Class B 238,785 5,939,776
Exxon Mobil Corp 1,305,075 105,140,105
Helmerich & Payne Inc 19,470 424,689
Kerr-McGee Corp 32,874 2,038,188
Occidental Petroleum Corp 133,734 2,891,998
Phillips Petroleum Co 96,587 4,539,589
Rowan Co Inc + 32,475 704,302
Royal Dutch Petroleum Corp 811,574 49,049,504
Sunoco Inc 35,137 825,720
Texaco Inc 206,300 11,204,669
Tosco Corp 43,600 1,185,375
Transocean Sedco Forex Inc 40,219 1,354,873
Union Pacific Resources Group 97,483 1,242,908
Unocal Corp 92,813 3,115,036
USX - Marathon Group 118,377 2,922,432
------------------
TOTAL OIL & GAS PRODUCERS
- VALUE $ 235,042,764
- COST $ 170,481,951
OIL & GAS SERVICES--0.44%
Baker Hughes Inc 126,058 2,655,097
Halliburton Co 167,918 6,758,700
Schlumberger Ltd 207,742 11,685,488
------------------
TOTAL OIL & GAS SERVICES
- VALUE $ 21,099,285
- COST $ 18,232,858
PACKAGING & CONTAINERS--0.13%
Ball Corp 11,780 463,838
Bemis Co 20,358 709,985
Crown Cork & Seal Co 47,391 1,060,374
Owens Illinois Inc + 60,369 1,512,998
Pactiv Corp + 65,875 699,922
Sealed Air Corp + 32,207 1,668,725
------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
TOTAL PACKAGING & CONTAINERS
- VALUE $ 6,115,842
- COST $ 9,121,867
PHARMACEUTICALS--5.99%
Abbott Laboratories 576,420 20,931,251
ALZA Corp + 37,839 1,310,175
American Home Products Corp 494,953 19,519,709
Bristol-Myers Squibb Co 750,938 48,200,833
Cardinal Health Inc 103,852 4,971,915
Lilly (Eli) & Co 413,744 27,513,976
Merck & Co Inc 884,208 59,297,199
Pfizer Inc 1,465,296 47,530,539
Pharmacia & Upjohn Inc 192,356 8,656,020
Schering-Plough Corp 556,114 23,461,059
Warner Lambert Co 323,703 26,523,415
Watson Pharmaceutical Inc + 35,421 1,268,515
------------
TOTAL PHARMACEUTICALS
- VALUE $289,184,606
- COST $213,451,375
PIPELINES--0.51%
Columbia Energy Group 32,122 2,031,717
Consolidated Natural Gas Co 36,891 2,395,609
El Paso Energy Corp 77,357 3,002,419
Enron Corp 271,020 12,026,513
Williams Co Inc 165,460 5,056,871
------------
TOTAL PIPELINES
- VALUE $ 24,513,129
- COST $ 17,444,082
RETAIL--6.40%
AutoZone Inc + 57,606 1,861,381
Bed Bath & Beyond Inc + 41,600 1,445,600
Best Buy Co Inc + 77,898 3,909,506
Circuit City Stores Inc 77,063 3,472,651
Consolidated Stores Corp + 42,302 687,408
CVS Corp 149,244 5,960,432
Darden Restaurants Inc 51,880 940,325
Dayton-Hudson Corp 167,774 12,320,903
Dillards Inc Class A 41,422 836,207
Dollar General Corp 85,424 1,943,396
Federated Department Stores Inc + 79,767 4,033,219
Gap Inc 325,148 14,956,808
Harcourt General Inc 27,581 1,110,135
Home Depot Inc 862,041 59,103,686
IKON Office Solutions Inc 53,983 367,759
Kmart Corp + 190,809 1,920,016
Kohls Corp + 62,134 4,485,298
Limited Inc 81,938 3,548,940
Longs Drug Stores Corp 15,054 388,581
Lowe's Co Inc 142,840 8,534,690
May Department Stores Co 127,673 4,117,454
McDonald's Corp 513,168 20,687,085
Nordstrom Inc 54,615 1,430,230
Office Depot Inc + 138,149 1,511,005
Penney (J C) Co Inc 101,249 2,018,652
Pep Boys (The) - Manny Moe & Jack 20,775 189,572
Rite Aid Corp 100,031 1,119,097
Sears Roebuck & Co 145,124 4,417,212
Staples Inc + 177,729 3,687,877
Tandy Corp 73,625 3,621,430
TJX Companies Inc 122,203 2,497,524
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Toys R Us Inc + 96,075 1,375,073
Tricon Global Restaurants + 59,032 2,280,111
Wal-Mart Stores Inc 1,681,610 116,241,291
Walgreen Co 380,778 11,137,757
Wendy's International Inc 47,843 986,762
------------
TOTAL RETAIL
- VALUE $309,145,073
- COST $172,421,820
SEMICONDUCTORS--3.62%
Advanced Micro Devices Inc + 55,827 1,615,494
Applied Materials Inc + 142,318 18,029,912
Intel Corp 1,255,365 103,332,232
KLA Instruments Corp + 33,748 3,758,684
LSI Logic Corp + 55,154 3,722,895
Micron Technology Inc + 95,676 7,438,779
National Semiconductor + 64,381 2,756,312
Texas Instruments Inc 298,263 28,894,228
Xilinx Inc + 111,400 5,065,224
-------------------
TOTAL SEMICONDUCTORS
- VALUE $174,613,760
- COST $ 75,366,825
SOFTWARE--9.57%
Adobe Systems Inc 46,726 3,142,324
America Online Inc + 838,542 63,257,512
Autodesk Inc 20,332 686,205
Automatic Data Processing 234,757 12,647,533
BMC Software Inc + 90,534 7,237,062
Citrix Systems Inc + 30,070 3,698,610
Computer Associates International Inc 203,896 14,259,977
Compuware Corp + 136,195 5,073,264
First Data Corp 161,323 7,955,240
IMS Health Inc 119,883 3,259,319
Microsoft Corp + 1,943,474 226,900,590
Novell Inc + 128,514 5,132,528
Oracle Corp + 538,861 60,386,111
Parametric Technology Corp + 103,203 2,792,931
PeopleSoft Inc + 90,560 1,930,060
Shared Medical System Corp 10,340 526,694
Yahoo! Inc + 99,540 43,069,714
------------
TOTAL SOFTWARE
- VALUE $461,955,674
- COST $206,608,210
TELECOMMUNICATION EQUIPMENT--4.97%
ADC Telecommunications + 49,901 3,620,941
Andrew Corp + 32,217 610,109
Comverse Technology Inc + 23,500 3,401,625
General Instrument Corp + 65,466 5,564,610
Lucent Technologies Inc 1,176,833 88,041,819
Motorola Inc 229,918 33,855,426
Nortel Networks Corp 502,367 50,739,067
QUALCOMM Inc + 245,196 43,185,146
Scientific-Atlanta Inc 28,973 1,611,623
Tellabs Inc + 148,663 9,542,306
------------
TOTAL TELECOMMUNICATION EQUIPMENT
- VALUE $240,172,672
- COST $ 85,508,910
TELECOMMUNICATIONS--0.93%
Global Crossing Ltd + 283,449 14,172,450
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
NEXTEL Communications Class A + 133,682 13,785,956
Sprint Corp (PCS Group) + 164,107 16,820,957
--------------
TOTAL TELECOMMUNICATIONS
- VALUE $ 44,779,363
- COST $ 15,127,390
TELEPHONE--6.71%
Alltel Corp 114,284 9,449,858
AT&T Corp 1,208,638 61,338,379
Bell Atlantic Corp 587,785 36,185,514
BellSouth Corp 713,419 33,396,927
CenturyTel Inc 52,469 2,485,719
GTE Corp 368,665 26,013,924
MCI WorldCom Inc + 1,063,259 56,419,154
SBC Communications Inc 1,290,288 62,901,540
Sprint Corp 328,630 22,120,907
U.S. West Inc 191,430 13,782,960
--------------
TOTAL TELEPHONE
- VALUE $ 324,094,882
- COST $ 209,737,582
TEXTILES--0.01%
Springs Industries Inc Class A 7,142 285,234
--------------
TOTAL TEXTILES
- VALUE $ 285,234
- COST $ 288,318
TOBACCO--0.47%
Philip Morris Co Inc 899,120 20,848,345
UST Inc 67,406 1,697,789
--------------
TOTAL TOBACCO
- VALUE $ 22,546,134
- COST $ 33,540,360
TOYS / GAMES / HOBBIES--0.07%
Hasbro Inc 75,412 1,437,541
Mattel Inc 159,572 2,094,383
--------------
TOTAL TOYS / GAMES / HOBBIES
- VALUE $ 3,531,924
- COST $ 5,755,424
TRANSPORTATION--0.45%
Burlington Northern Santa Fe Corp 177,184 4,296,712
CSX Corp 83,427 2,617,522
FDX Corp + 113,457 4,644,646
Kansas City Southern Industries Inc 41,791 3,118,653
Norfolk Southern Corp 145,750 2,987,875
Union Pacific Corp 94,580 4,126,053
--------------
TOTAL TRANSPORTATION
- VALUE $ 21,791,461
- COST $ 23,262,453
TRUCKING & LEASING--0.01%
Ryder System Inc 26,060 636,841
--------------
TOTAL TRUCKING & LEASING
- VALUE $ 636,841
- COST $ 724,416
--------------
TOTAL COMMON STOCKS
- VALUE $4,647,088,660
- COST $2,955,509,045
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Interest Maturity
Principal Security Name Rate Date Value
<S> <C> <C> <C> <C>
SHORT TERM INSTRUMENTS--4.67%
CASH EQUIVALENTS--1.02%
44,072,532 Goldman Sachs Financial Square Prime
Obligation Fund ++ 5.40% 01/03/00 44,072,532
5,100,000 Investors Bank & Trust Depositary Receipt ++ 5.53% 01/03/00 5,100,000
--------------
$ 49,172,532
REPURCHASE AGREEMENTS--3.33%
160,459,092 Morgan Stanley Tri-party Repurchase Agreement 160,459,092
dated 12/31/99, due 01/03/00 with a maturity
value of $160,491,184 and an effective yield
of 2.40%, collateralized by U.S. Treasury
Notes with a rate of 6.25%, a maturity of
04/30/01 and market value of $163,671,231.
U.S. TREASURY BILLS--0.32%
15,750,000 U.S. Treasury Bills 5.04% * 03/23/00 15,572,534
+++
TOTAL SHORT TERM INSTRUMENTS
- VALUE $ 225,204,158
- COST $ 225,192,218
TOTAL INVESTMENTS IN SECURITIES
(Cost $3,180,701,263) ** (Notes 1 and 3) 100.93% $4,872,292,818
Other Assets and Liabilities, Net (0.93)% (44,767,792)
------------ --------------
TOTAL NET ASSETS 100.00% $4,827,525,026
============ ==============
- -----------------------------------------------------------------------------------------------------------------------------------
+ Non-income earning securities.
++ Represents investment of collateral received from securities lending transactions. See Note 4.
+++ These U.S. Treasury Bills are held in segregated accounts in connection with the Master Portfolio's holdings of
S&P 500 futures contracts. See Note 1.
* Yield to Maturity.
** Cost for federal income tax purposes is $3,183,525,561 and net unrealized appreciation consists of:
Gross Unrealized Appreciation $ 1,830,907,457
Gross Unrealized Depreciation $ (142,140,200)
---------------
Net Unrealized Appreciation $ 1,688,767,257
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
S&P 500 Index Master Portfolio
Statement of Assets and Liabilities
December 31, 1999
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments:
In securities, at market value (Cost $3,180,701,263) (Note 1)........................ $ 4,872,292,818
Receivables:
Dividends and interest............................................................... 4,418,560
Receivable for daily variation margin on open financial futures contracts............ 413,112
---------------
Total Assets.................................................................. 4,877,124,490
---------------
LIABILITIES
Payables:
Collateral for securities loaned (Note 4)............................................ 49,172,532
Due to Bank.......................................................................... 4,859
Due to BGI (Note 2).................................................................. 422,073
---------------
Total Liabilities............................................................. 49,599,464
---------------
TOTAL NET ASSETS..................................................................... $ 4,827,525,026
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
S&P 500 Index Master Portfolio
Statements of Operations
================================================================================
<TABLE>
<CAPTION>
For the Period Ended For the Year Ended
December 31, 1999* February 28, 1999
-------------------- ------------------
<S> <C> <C>
NET INVESTMENT INCOME:
Dividends (1)............................................................... $ 44,329,664 $ 36,647,898
Interest (2)................................................................ 9,795,587 8,379,792
----------------- ----------------
Total Investment Income................................................... 54,125,251 45,027,690
----------------- ----------------
EXPENSES (NOTE 2):
Advisory fees............................................................... 1,821,793 1,353,414
----------------- ----------------
Total Expenses............................................................ 1,821,793 1,353,414
----------------- ----------------
NET INVESTMENT INCOME........................................................ 52,303,458 43,674,276
----------------- ----------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on sale of investments.................................... 147,202,745 143,991,139
Net realized gain on sale of futures contracts.............................. 23,076,772 37,982,701
Net change in unrealized appreciation of investments........................ 549,246,681 265,023,900
Net change in unrealized appreciation (depreciation) of futures contracts... 12,849,150 (14,225,550)
----------------- ----------------
Net Gain on Investments...................................................... 732,375,348 432,772,190
----------------- ----------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................................................ $ 784,678,806 $ 476,446,466
================= ================
- ---------------------------------------------------------------------------------------------------------------------------
(1) Net of foreign withholding tax of..................................... $ 28,773 $ 5,288
(2) Interest income includes securities lending income of................. $ 272,312 $ 78,935
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* For the ten months ended December 31, 1999. The Master Portfolio
changed its fiscal year end from February 28 to December 31
The accompanying notes are an integral part of these financial statements.
<PAGE>
S&P 500 Index Master Portfolio
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
For the Period Ended For the Period Ended For the Period Ended
December 31, 1999* February 28, 1999 February 28, 1998
-------------------- -------------------- --------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.............................. $ 52,303,458 $ 43,674,276 $ 35,530,147
Net realized gain.................................. 170,279,517 181,973,840 71,368,439
Net change in unrealized appreciation.............. 562,095,831 250,798,350 463,085,650
--------------------- --------------------- ---------------------
Net increase in net assets resulting from operations..... 784,678,806 476,446,466 569,984,236
--------------------- --------------------- ---------------------
Net increase in net assets resulting from
beneficial interest transactions................... 355,753,442 856,583,098 299,742,532
--------------------- --------------------- ---------------------
Increase in Net Assets................................... 1,140,432,248 1,333,029,564 869,726,768
NET ASSETS:
Beginning net assets..................................... 3,687,092,778 2,354,063,214 1,484,336,446
--------------------- --------------------- ---------------------
Ending net assets........................................ $ 4,827,525,026 $ 3,687,092,778 $ 2,354,063,214
===================== ===================== =====================
</TABLE>
* For the ten months ended December 31, 1999 The Master Portfolio changed
its fiscal year end from February 28 to December 31.
The accompanying notes are an integral part of these financial statements.
<PAGE>
S&P 500 INDEX 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 March 1, 1994. MIP currently issues the following
separate portfolios (the "Master Portfolios"), the Asset Allocation, Bond Index,
LifePath Income (formerly "LifePath 2000"), LifePath 2010, LifePath 2020,
LifePath 2030, LifePath 2040, Money Market, S&P 500 Index, Extended Index,
International Index and U.S. Equity Index Master Portfolios. These financial
statements relate to S&P 500 Index 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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Effective February 10, 1999, the Board of Trustees of MIP approved a change
in fiscal year-end of the Master Portfolio from February 28 to December 31.
Accordingly, the financial statements are presented for the ten-month period
ended December 31, 1999.
Security Valuation
The equity securities of the Master Portfolio are valued at the last
reported sale price on the primary securities exchange or national securities
market on which such securities are traded. Securities not listed on an exchange
or national securities market, or securities in which there was no last reported
sales price, are valued at the most recent bid prices. Debt securities are
generally traded in the over-the-counter market and are valued at a price deemed
best to reflect fair value as quoted by dealers who make markets in those
securities or by an independent pricing source. U.S. Government obligations are
valued at the last reported bid price. Debt securities maturing in 60 days or
less are valued at amortized cost, which approximates market value. Any
securities, restricted securities or other assets for which market quotations
are not readily available, are valued at fair value as determined in good faith
in accordance with policies approved by MIP's Board of Trustees.
Security Transactions and Income Recognition
Security transactions are accounted for on the date the securities are
purchased or sold (trade date). Dividend income is recognized on the ex-dividend
date, and interest income is recognized on a daily accrual basis. Realized gains
or losses are reported on the basis of identified cost of securities delivered.
Bond discounts and premiums are accreted or amortized, respectively, under
provisions of the Internal Revenue Code of 1986, as amended (the "Code").
<PAGE>
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, each investor in the Master Portfolio will be taxed on its
allocable share of the partnership's income and capital gains for the 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
the Master Portfolio will be able to satisfy the requirements of Subchapter M of
the Code, assuming that the regulated investment company invested all of its
assets in the Master Portfolio.
Futures Contracts
The Master Portfolio may purchase long futures contracts to gain exposure
to market changes as this may be more efficient or cost effective than actually
buying the securities. A futures contract is an agreement between two parties to
buy and sell a security at a set price on a future date and is exchange traded.
Upon entering into a futures contract, the Master Portfolio is required to
pledge to the broker an amount of cash, U.S. Government securities or other
high-quality debt securities equal to the minimum "initial margin" requirements
of the exchange. Pursuant to the contract, the Master Portfolio agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Master Portfolio as unrealized gains
or losses. When the contract is closed, the Master Portfolio records a gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed. Pursuant to regulations
and/or published positions of the Securities and Exchange Commission, the Master
Portfolio is required to segregate cash, U.S. Government securities or high
quality, liquid debt instruments in connection with long futures transactions in
an amount generally equal to the entire futures contract amount. Risks of
entering into futures contracts include the possibility that there may be an
illiquid market and that a change in the value of the contracts may not
correlate with changes in the value of the underlying securities. As of December
31, 1999, the Master Portfolio had the following open long futures contracts
outstanding:
<TABLE>
<CAPTION>
S&P 500 Index Master Portfolio
Number of Expiration Notional Net Unrealized
Contracts Type Date Contract Value Appreciation
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
484 S&P 500 Index 03/17/00 $ 179,588,200 $ 9,872,575
</TABLE>
The S&P 500 Index Master Portfolio has pledged to brokers U.S. Treasury
Bills for initial margin requirements with a par value of $15,750,000.
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 Portfolio 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 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 102% of market value. The
repurchase agreements entered into on December 31, 1999 by the Master Portfolio
are collateralized by U.S. Government securities.
<PAGE>
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 0.05% of the average daily net assets of the S&P 500
Index 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
December 31, 1999, these officers of Stephens collectively owned less than 1% of
the Master Portfolio's outstanding beneficial interests.
3. Investment Portfolio Transactions
Purchases and sales of investments, exclusive of short-term securities, for
the Master Portfolio were as follows:
S&P 500 Index
Master Portfolio
-----------------------------------
Aggregate Purchases Period ended Year ended
and Sales of: Dec. 31, 1999* Feb. 28, 1999
------------------- -------------- ---------------
Purchases at cost $ 751,345,661 $ 1,187,951,471
Sales proceeds 269,734,128 275,613,257
* For the ten months ended December 31, 1999. The Master Portfolio changed
its fiscal year end from February 28 to December 31.
<PAGE>
4. Portfolio Securities Loaned
As of December 31, 1999, the Master Portfolio had loaned securities which
were collateralized by money market mutual funds. The Master Portfolio receives
transaction fees for providing services in connection with the securities
lending program. The risk to the Master Portfolio of securities lending are that
the borrower may not provide additional collateral when required or return the
securities when due. The value of the securities on loan and the value of the
related collateral were as follows:
<TABLE>
<CAPTION>
Value of Value of
Securities Collateral
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
S&P 500 Index Master Portfolio $ 47,645,223 $ 49,172,532
</TABLE>
5. Financial Highlights
The ratios of expenses and net investment income to average net assets and
portfolio turnover rates (excluding short-term securities) for the Master
Portfolio are as follows:
<TABLE>
<CAPTION>
For the For the For the
Period Ended Year Ended Year Ended
December 31, February 28, February 28,
S&P 500 Index Master Portfolio 1999 * 1999 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ratio of expenses to average net assets + 0.05% 0.05% 0.05%
Ratio of net investment income to average net assets + 1.44% 1.61% 1.89%
Portfolio turnover 7% 11% 6%
</TABLE>
* For the ten months ended December 31, 1999. The Master Portfolio changed
its fiscal year end from February 28 to December 31.
+ Annualized for period of less than one year.
<PAGE>
Independent Auditors' Report
- ----------------------------
To the Interestholders and Board of Trustees of
Master Investment Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of S&P 500 Index Master Portfolio (a portfolio of
Master Investment Portfolio) as of December 31, 1999, and the related statements
of operations for the ten-month period then ended and the year ended February
28, 1999 and the statements of changes in net assets for the ten-month period
then ended and each of the years in the two-year period ended 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements 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 December 31, 1999 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of S&P 500 Index Master Portfolio
as of December 31, 1999, the results of its operations and the changes in its
net assets for the periods indicated above in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
San Francisco, California
February 11, 2000
<PAGE>
X.COM U.S.A. BOND FUND
ANNUAL REPORT
December 31, 1999
X.COM FUNDS
<PAGE>
Dear Shareholder:
Thank you for investing in X.com Funds.
This Annual Report covers the short period of time since X.com launched the
mutual funds on November 18, 1999. It is the first report of its kind for X.com
Funds.
The three mutual funds comprising X.com Funds are designed to be the first
building blocks of an individual's investment portfolio. Our choice of Barclays
Global Fund Advisors master/feeder fund structure provides you with the
expertise of one of the largest investment advisors in the world. The structure
and content of these master funds (in which our funds invest) is also outlined
in this annual report.
1999 was a year when stock prices soared (the S & P 500 Index gained 21.04/%)
while bond prices fell (the Lehman Brothers Government/Corporate Bond Index
declined 2.15%). This suggests that both market and sector diversification
remains a smart and prudent strategy to follow. Recognizing the importance of
diversification, X.com Funds will be offering additional investment choices
later this year. In the meantime, be sure to check out our site often as we
expand and improve the products and services offered to our customers.
Thanks again for choosing X.com Funds.
Elon Musk, Chairman
<PAGE>
X.com U.S.A. Bond Fund
Portfolio Manager Commentary - 4/th/ Quarter 1999
- -------------------------------------------------
The bond market suffered a bleak fourth quarter. Yields moved higher as strong
economic figures rekindled inflation fears. The Lehman Brothers
Government/Corporate Bond Index fell 0.41% for the quarter, declining 2.15% for
the year.
The quarter opened poorly, as T-bond prices dropped more than a point on October
1 in response to higher-than-expected manufacturing reports. Yields continued
to climb during the month, reaching their highest levels since September of
1997. News of the highest monthly Producer Price Index increase in nine years
caused a brief rally, due to a flight to quality from plunging stock prices.
During the first half of November, bonds rallied, but this was to be short-
lived. On November 16, the Federal Reserve Board raised short-term rates 0.25%,
bringing the Federal Funds rate to 5.5% and the discount rate to 5.0%. This was
the third rate hike of the year, amounting to a cumulative 0.75% and exactly
reversing the three rate cuts effected in 1998. In response, bonds fell during
the second half of the month.
December brought the ninth monthly decline in bond prices for 1999. In a
reversal of 1998, all major sectors - Agency, Corporate, Mortgage-backed, and
Asset-backed - outperformed U.S. Treasury bonds for the month as well as the
year. Yields of U.S. Treasuries continued to rise as ongoing strength in the
U.S. economy, as well as recoveries in Asian and European countries, renewed
fears of inflation.
<PAGE>
X.com U.S.A. Bond Fund
Statement of Assets and Liabilities
December 31, 1999
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments:
Investment in Master Investment Portfolio -
Bond Index Master Portfolio, at market value (Note 1)...................... $ 233,225
Receivables:
Fund shares sold.................................................................. 490
---------
Total Assets............................................................... 233,715
---------
LIABILITIES
Payables:
Due to X.com (Note 2)............................................................. 17
---------
Total Liabilities.......................................................... 17
---------
TOTAL NET ASSETS.................................................................. $ 233,698
=========
Net assets consist of:
Paid-in capital................................................................... 234,668
Undistributed net realized loss on investments.................................... (15)
Net unrealized depreciation of investments........................................ (955)
---------
TOTAL NET ASSETS.................................................................. $ 233,698
=========
CAPITAL SHARES:
Net Assets........................................................................ $ 233,698
Shares Outstanding................................................................ 23,922
Net Asset Value, Offering Price and Redemption Price per Share.................... $ 9.77
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
X.com U.S.A Bond Fund
Statement of Operations
===============================================================================
<TABLE>
<CAPTION>
Period from
November 18, 1999
(commencement of
operations) to
December 31, 1999
------------------
<S> <C>
NET INVESTMENT INCOME:
ALLOCATED FROM MASTER INVESTMENT PORTFOLIO
Interest............................................................... $ 1,081
Expenses (Note 2)...................................................... (9)
-----------------
Net Investment Income Allocated from
Master Investment Portfolio................................................. 1,072
-----------------
EXPENSES (NOTE 2):
Management fees................................................................... 35
-----------------
Total expenses.......................................................... 35
-----------------
Less:
Fees reimbursed by X com (Note2)............................................ (24)
-----------------
Net expenses............................................................ 11
-----------------
NET INVESTMENT INCOME............................................................. 1,061
-----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM
MASTER INVESTMENT PORTFOLIO
Net realized loss on sale of investments.......................................... (15)
Net change in unrealized depreciation of investments.............................. (955)
-----------------
Net Loss on Investments Allocated from
Master Investment Portfolio................................................. (970)
-----------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................................................. $ 91
=================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
X.com U.S.A. Bond Fund
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Period from
November 18, 1999
(commencement of
operations) to
December 31, 1999
-----------------
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income.................................................. $ 1,061
Net realized gain on sale of investments............................... (15)
Net change in unrealized depreciation of investments................... (955)
-----------------
Net decrease in net assets resulting from operations................... 91
-----------------
Dividends and Distributions to Shareholders from:
Net investment income.................................................. (1,091)
-----------------
Total dividends and distributions to shareholders...................... (1,091)
-----------------
Capital Share Transactions:
Net proceeds from sale of shares....................................... 352,556
Net asset value of shares issued to shareholders in reinvestment
of dividends and distributions.................................... 1,091
Cost of shares redeemed................................................ (118,949)
-----------------
Net increase in net assets from capital share transactions............. 234,698
-----------------
Net Increase in Net Assets............................................. 233,698
NET ASSETS:
Beginning of period (November 18, 1999)................................ -
-----------------
End of period.......................................................... $ 233,698
=================
SHARE TRANSACTIONS:
Number of shares sold.................................................. 35,896
Number of shares issued through reinvestment of dividends
and distributions................................................. 111
Number of shares redeemed.............................................. (12,085)
-----------------
Net increase in shares outstanding..................................... 23,922
=================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
X.com U.S.A. Bond Fund
Financial Highlights
================================================================================
<TABLE>
<CAPTION>
Period from
November 18, 1999
(commencement of
operations) to
December 31, 1999
-----------------
<S> <C>
For a Share Outstanding for the Period
Net Asset Value, beginning of period................................... $ 10.06
-----------------
Income from investment operations:
Net investment income............................................. 0.18
Net realized and unrealized loss on investments................... (0.29)
-----------------
Total income from investment operations........................... (0.11)
-----------------
Less dividends and distributions to shareholders:
Dividends from net investment income.............................. (0.18)
-----------------
Total dividends and distributions................................. (0.18)
-----------------
Net asset value, end of period......................................... $ 9.77
=================
Total return........................................................... -1.99% *
Ratios / Supplemental Data:
Net assets, end of period (000s omitted).......................... $ 234
Ratio of expenses to average net assets (1)....................... 0.19% **
Ratio of net investment income to average net assets (2).......... 6.83% **
- ------------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior to
reimbursement of fees............................................. 0.40% **
(2) Ratio of net investment income to average net
assets prior to reimbursement of fees............................. 6.62% **
- ------------------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
The accompanying notes are an integral part of these financial statements.
<PAGE>
X.COM U.S.A. BOND FUND
NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
X.com U.S.A. Bond Fund (the "Fund") is one of a diversified series of X.com
Funds (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 June 3, 1999.
The investment objective of the U.S.A. Bond Fund is to approximate as
closely as practicable, before fees and expenses, the total rate of return of
the U.S. market for issued and outstanding U.S. government and high grade
corporate bonds as measured by the Lehman Brothers Government/Corporate Bond
Index.
The following significant accounting policies are consistently followed by
the Trust 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 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 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 Bond Index Master Portfolio (a
"Master Portfolio") a separate series of the Master Investment Portfolio. 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 December 31, 1999,
the value of the Fund's investment in the Master Portfolio was 0.05% of the
outstanding interests of the Bond Index Master Portfolio. Debt securities held
by the Master Portfolio are generally traded in the over-the-counter market and
are valued at a price deemed best to reflect fair value as quoted by dealers who
make markets in those securities or by an independent pricing source. U.S.
Government obligations are valued at the last reported bid price. Debt
securities maturing in 60 days or less are valued at amortized cost, which
approximates market value. Any securities, restricted securities or other
assets for which market quotations are not readily available are valued at fair
value as determined in good faith in accordance with policies approved by the
Master Portfolios' Board of Trustees.
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). Interest income is
recognized on a daily accrual basis. Realized gains and losses are reported on
the basis of identified cost of securities delivered. Bond discounts and
premiums are accreted or amortized, respectively, as required by the Internal
Revenue Code of 1986, as amended (the "Code"). All net investment income and
realized and unrealized capital gains and losses of the Master Portfolio are
allocated as required by the Code.
The performance of the Fund is directly affected by the performance of the
corresponding 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.
<PAGE>
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 net
realized capital gains are declared and distributed annually, generally in
December.
Due to the timing of dividend distributions and the differences in
accounting for income and realized gains (losses) for financial statement and
federal income tax purposes, the fiscal year in which amounts are distributed
may differ from the year in which the income and realized gains (losses) were
recorded by the Fund.
Federal Income Taxes
The Fund is treated as a separate entity for federal income tax purposes.
It is the policy of each fund to continue to qualify as a regulated investment
company by complying with the provisions applicable to regulated investment
companies, as defined in the Code, and to 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 December 31, 1999.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
X.com Asset Management, Inc. ("XAM"), a wholly owned subsidiary of X.com
Corporation ("X.com") serves as the Funds' investment adviser. For both their
advisory and administrative services, XAM is paid a "unified" fee from the Fund
at an annual rate of 0.32% of the Fund's average daily net assets. Under this
agreement between the Trust and XAM, XAM assumes all ordinary recurring direct
costs of the Trust, such as custodian fees, director's fees, transfer agency
fees and accounting fees, and excludes, generally, advisory fees and costs
related to security transactions. XAM may delegate some of their administrative
duties to the administrator.
A fee waiver for the Fund is made pursuant to an expense limitation and
reimbursement agreement with XAM that is in effect for an initial term of one
year and will be renewed thereafter automatically for a one year term on an
annual basis. The agreement can be changed, terminated or not renewed by
either party only by giving 90 days' prior notice. XAM waived expenses totaling
0.21% of its average daily net assets for the period ended December 31, 1999.
X.com serves as the shareholder servicing agent for the Fund. X.com is also
responsible for maintaining the Fund's shareholder accounts.
Pursuant to an Investment Advisory Contract with the Master Portfolio,
Barclays Global Financial Advisors ("BGFA") provides investment guidance and
policy direction in connection with the management of the Master Portfolio's
assets. For its services, BGFA is entitled to receive 0.08% of the average
daily net assets of the Bond Index Master Portfolio.
Investor's Bank & Trust Company (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; and preparing and
disseminating material for meetings of the Board of Trustees and shareholders.
XAM compensates the Administrator for services performed.
<PAGE>
Independent Auditors' Report
- ----------------------------
To the Shareholders and Board of Trustees of
X.com Funds:
We have audited the accompanying statement of assets and liabilities of X.com
U.S.A. Bond Fund (one series of X.com Funds) as of December 31, 1999 and the
related statements of operations, changes in net assets and financial highlights
for the period from November 18, 1999 (commencement of operations) to December
31, 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 X.com
U.S.A. Bond Fund as of December 31, 1999, the results of its operations, changes
in its net assets, and its financial highlights for the period from November 18,
1999 to December 31, 1999 in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
San Francisco, California
February 11, 2000
<PAGE>
MASTER INVESTMENT PORTFOLIO--BOND INDEX
MASTER PORTFOLIO--DECEMBER 31, 1999
Portfolio of Investments
<TABLE>
<CAPTION>
Interest Maturity
Principal Security Name Rate Date Value
<S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES--30.16%
AEROSPACE / DEFENSE--1.04%
2,800,000 Raytheon Co 5.95% 03/15/01 2,761,503
1,000,000 Raytheon Co 7.38% 07/15/25 864,220
1,000,000 United Technologies Corp 6.63% 11/15/04 978,610
------------
$ 4,604,333
AUTO MANUFACTURERS--0.91%
1,500,000 Chrysler Corp 7.45% 03/01/27 1,456,089
1,000,000 Ford Motor Co 7.25% 10/01/08 985,732
1,500,000 Ford Motor Co 8.88% 04/01/06 1,606,360
------------
$ 4,048,181
AUTO PARTS & EQUIPMENT--0.41%
1,000,000 Delphi Automotive Systems Corp 6.50% 05/01/09 909,872
1,000,000 Goodyear Tire & Rubber Co 6.63% 12/01/06 935,503
------------
$ 1,845,375
BANKS--4.05%
500,000 ABN Amro Bank NV 7.30% 12/01/26 456,279
1,000,000 Bank of New York Co Inc 6.50% 12/01/03 969,276
1,000,000 Bank One Corp 8.10% 03/01/02 1,017,743
1,870,000 BankAmerica Corp 6.25% 04/01/08 1,720,000
1,000,000 Chase Manhattan Corp 5.75% 04/15/04 946,695
1,000,000 Dresdner Bank AG 6.63% 09/15/05 954,492
500,000 First Union Corp 6.63% 07/15/05 479,686
1,500,000 KeyCorp 6.75% 03/15/06 1,436,391
3,500,000 KFW International Finance Inc 7.63% 02/15/04 3,580,843
250,000 KFW International Finance Inc 8.00% 02/15/10 263,977
1,000,000 Korea Development Bank 7.38% 09/17/04 981,839
500,000 Skandinaviska Enskilda 6.88% 02/15/09 462,820
1,200,000 Swiss Bank Corp 7.38% 07/15/15 1,151,563
4,000,000 Westdeutsche NY 6.05% 01/15/09 3,577,540
------------
$17,999,144
BEVERAGES--0.92%
1,500,000 Anheuser-Busch Companies 9.00% 12/01/09 1,675,315
1,000,000 Coca-Cola Enterprises 8.00% 09/15/22 1,006,282
1,000,000 Diageo PLC 6.13% 08/15/05 946,108
500,000 J Seagram & Sons 7.50% 12/15/18 472,541
------------
$ 4,100,246
CHEMICALS--0.23%
500,000 Dow Chemical Co 8.63% 04/01/06 527,218
500,000 ICI Wilmington 8.75% 05/01/01 509,524
------------
$ 1,036,742
COMMERCIAL SERVICES--0.17%
1,000,000 Service Corp International 6.00% 12/15/05 743,191
COSMETICS / PERSONAL CARE--0.22%
1,000,000 Procter & Gamble Co 6.88% 09/15/09 977,869
DIVERSIFIED FINANCIAL SERVICES--7.20%
2,500,000 Associates Corp NA 6.25% 11/01/08 2,303,360
1,000,000 Associates Corp NA 6.95% 11/01/18 925,652
1,000,000 AT&T Capital Corp 6.25% 05/15/01 989,514
1,000,000 CIT Group Holdings 6.63% 06/15/05 965,372
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
1,000,000 Citigroup Inc 7.88% 05/15/25 1,003,818
1,000,000 Countrywide Funding Corp 6.88% 09/15/05 969,087
2,000,000 First Union Capital Corp 8.04% 12/01/26 1,859,078
3,400,000 Ford Motor Credit Co 6.50% 02/28/02 3,367,996
3,500,000 General Motors Acceptance Corp 5.80% 04/09/01 3,461,724
1,000,000 General Motors Acceptance Corp 7.13% 05/01/03 996,564
2,000,000 Household Finance Corp 6.00% 05/01/04 1,899,078
1,000,000 Household Finance Corp 6.70% 06/15/02 987,032
2,500,000 Lehman Brothers Inc 7.63% 06/01/06 2,469,757
1,000,000 Mellon Capital II 8.00% 01/15/27 940,602
3,000,000 Mellon Financial 6.00% 03/01/04 2,862,543
4,000,000 Merrill Lynch & Co Inc 6.00% 02/17/09 3,585,396
1,000,000 Merrill Lynch & Co Inc 6.38% 10/15/08 921,966
1,500,000 Morgan Stanley Group Inc 6.70% 05/01/01 1,498,313
------------
$32,006,852
ELECTRIC--2.44%
2,000,000 Duke Energy Corp 6.00% 12/01/28 1,574,154
1,000,000 Enersis SA 7.40% 12/01/16 870,792
4,000,000 Houston Lighting & Power Co 6.50% 04/21/03 3,906,836
756,098 Niagra Mohawk Power 7.38% 07/01/03 753,095
529,268 Niagra Mohawk Power 7.63% 10/01/05 529,999
1,500,000 Northern States Power Co 6.50% 03/01/28 1,279,197
1,000,000 Texas Utilities Co 6.38% 01/01/08 911,974
1,000,000 Virginia Electric & Power Co 7.38% 07/01/02 1,002,385
------------
$10,828,432
FOOD--0.54%
500,000 Archer-Daniels-Midland Co 8.38% 04/15/17 528,658
1,000,000 Fred Meyer Inc 7.45% 03/01/08 971,367
1,000,000 Kroger Co 7.00% 05/01/18 890,811
------------
$ 2,390,836
HEALTH CARE--0.45%
1,000,000 Baxter International Inc 7.63% 11/15/02 1,012,695
1,000,000 Becton Dickinson & Co 7.15% 10/01/09 971,185
------------
$ 1,983,880
INSURANCE--0.21%
1,000,000 Aetna Services Inc 7.13% 08/15/06 959,504
MANUFACTURERS--0.57%
3,000,000 Tyco International Group 6.88% 01/15/29 2,555,040
MEDIA--2.85%
2,000,000 Comcast Cable Communications 8.38% 05/01/07 2,067,354
2,000,000 Disney (Walt) Co 5.13% 12/15/03 1,871,194
500,000 Disney (Walt) Co 6.75% 03/30/06 488,713
2,500,000 Time Warner Entertainment 8.38% 03/15/23 2,607,173
2,000,000 Time Warner Entertainment 9.63% 05/01/02 2,105,236
3,500,000 Viacom Inc 7.75% 06/01/05 3,538,035
------------
$12,677,705
MULTI-NATIONAL--0.48%
500,000 African Development Bank 7.75% 12/15/01 509,530
1,000,000 Inter-American Development Bank 5.75% 02/26/08 918,131
200,000 Inter-American Development Bank 8.40% 09/01/09 217,477
450,000 Inter-American Development Bank 8.50% 03/15/11 495,644
------------
$ 2,140,782
OIL & GAS PRODUCERS--1.10%
1,000,000 Amoco Canada 7.25% 12/01/02 1,005,860
2,000,000 Conoco Inc 5.90% 04/15/04 1,912,600
1,120,000 Kerr-McGee Corp 6.63% 10/15/07 1,026,778
1,000,000 Phillips 66 Capital Trust II 8.00% 01/15/37 945,752
------------
$ 4,890,990
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
PHARMACEUTICALS--0.22%
1,000,000 American Home Products Corp 6.50% 10/15/02 987,090
REAL ESTATE--0.22%
1,000,000 EOP Operating LP 6.38% 02/15/03 963,255
REITS--0.42%
1,000,000 Avalon Bay Communities 7.50% 08/01/09 953,724
1,000,000 Prologis Trust 7.10% 04/15/08 925,585
------------------
$1,879,309
RETAIL--1.41%
2,000,000 Penney (J C) Co Inc 8.25% 08/15/22 1,779,520
1,500,000 Saks Inc 7.50% 12/01/10 1,368,510
1,000,000 Wal-Mart Stores Inc 7.25% 06/01/13 983,673
2,000,000 Wal-Mart Stores Inc 8.50% 09/15/24 2,119,344
------------------
$6,251,047
TELECOMMUNICATION EQUIPMENT--0.55%
2,500,000 Motorola Inc 7.50% 05/15/25 2,433,963
TELECOMMUNICATIONS--0.29%
250,000 Bell Telephone Canada 9.50% 10/15/10 283,680
1,000,000 Cable & Wireless Communications 6.63% 03/06/05 990,293
------------------
$1,273,973
TELEPHONE--2.23%
1,500,000 AT&T Corp 6.00% 03/15/09 1,351,875
500,000 New York Telephone Co 6.00% 04/15/08 450,741
2,305,000 New York Telephone Co 7.00% 12/01/33 1,979,995
4,000,000 Sprint Capital Corp 6.13% 11/15/08 3,626,416
1,000,000 US West Communications 6.38% 10/15/02 982,204
1,500,000 Worldcom Inc 7.55% 04/01/04 1,519,638
------------------
$9,910,869
TOBACCO--0.10%
500,000 Imperial Tobacco Group PLC 7.13% 04/01/09 451,717
TRANSPORTATION--0.93%
1,300,000 Canadian National Railway Co 6.45% 07/15/00 1,197,040
1,000,000 Norfolk Southern Corp 7.80% 05/15/27 976,376
1,000,000 Stagecoach Holdings PLC 8.63% 11/15/09 1,001,250
1,000,000 Union Pacific Corp 6.79% 11/09/07 943,760
------------------
$4,118,426
------------------
TOTAL CORPORATE BONDS & NOTES
- VALUE $134,058,751
- COST $143,226,413
<CAPTION>
Interest Maturity
Principal Security Name Rate Date Value
<S> <C> <C> <C>
FOREIGN GOVERNMENT BONDS &
NOTES++--2.42%
1,000,000 British Columbia (Province of) 6.50% 01/15/26 885,630
1,000,000 Chile (Republic of) 6.88% 04/28/09 926,946
2,000,000 Corp Andina De Fomento 7.75% 03/01/04 2,000,384
2,000,000 Hydro Quebec 8.40% 01/15/22 2,115,220
1,200,000 New Brunswick 7.63% 06/29/04 1,218,768
750,000 Ontario (Province of) 7.63% 06/22/04 765,097
2,300,000 Ontario (Province of) 7.75% 06/04/02 2,339,560
500,000 Victoria (Province of) 8.45% 10/01/01 514,012
------------------
TOTAL FOREIGN GOVERNMENT BONDS & NOTES
- VALUE $10,765,617
- COST $11,316,145
<CAPTION>
Interest Maturity
Principal Security Name Rate Date Value
<S> <C> <C> <C>
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES--14.04%
5,500,000 Federal Home Loan Bank 5.02% 02/11/02 5,331,562
1,500,000 Federal Home Loan Bank 5.40% 01/15/03 1,447,340
1,000,000 Federal Home Loan Bank 5.50% 01/21/03 967,355
2,500,000 Federal Home Loan Bank 6.09% 06/02/06 2,383,593
5,000,000 Federal Home Loan Mortgage Corporation 5.00% 01/15/04 4,675,700
3,400,000 Federal Home Loan Mortgage Corporation 5.13% 10/15/08 2,971,801
3,000,000 Federal Home Loan Mortgage Corporation 5.25% 02/16/01 2,960,889
2,000,000 Federal Home Loan Mortgage Corporation 5.38% 03/01/01 1,975,288
1,000,000 Federal Home Loan Mortgage Corporation 5.50% 05/15/02 975,370
1,000,000 Federal Home Loan Mortgage Corporation 5.63% 02/20/04 952,178
1,000,000 Federal Home Loan Mortgage Corporation 5.75% 07/15/03 967,533
500,000 Federal Home Loan Mortgage Corporation 5.75% 03/15/09 455,564
3,500,000 Federal Home Loan Mortgage Corporation 5.90% 05/04/04 3,355,135
1,000,000 Federal Home Loan Mortgage Corporation 6.13% 08/15/03 978,185
1,000,000 Federal Home Loan Mortgage Corporation 6.30% 06/01/04 969,431
1,000,000 Federal National Mortgage Association 0.00% 06/01/17 282,963
2,104,000 Federal National Mortgage Association 5.13% 02/13/04 1,974,139
1,000,000 Federal National Mortgage Association 5.25% 01/15/09 880,552
1,000,000 Federal National Mortgage Association 5.38% 03/15/02 975,733
2,000,000 Federal National Mortgage Association 5.38% 01/16/01 1,979,760
1,000,000 Federal National Mortgage Association 5.75% 06/15/05 949,313
3,500,000 Federal National Mortgage Association 5.75% 02/15/08 3,222,597
600,000 Federal National Mortgage Association 5.88% 04/23/04 573,496
1,000,000 Federal National Mortgage Association 6.09% 09/27/27 857,493
5,000,000 Federal National Mortgage Association 6.26% 02/25/09 4,639,850
394,000 Federal National Mortgage Association 6.38% 06/15/09 375,449
1,000,000 Federal National Mortgage Association 6.45% 02/14/02 993,242
1,400,000 Federal National Mortgage Association 6.80% 01/10/03 1,403,986
3,000,000 Federal National Mortgage Association 7.55% 04/22/02 3,058,797
2,150,000 Financing Corp 8.60% 09/26/19 2,446,304
500,000 Financing Corp 9.65% 11/02/18 621,049
1,285,000 Financing Corp 9.80% 04/06/18 1,609,460
500,000 Tennessee Valley Authority 6.13% 07/15/03 484,915
2,600,000 Tennessee Valley Authority 6.25% 12/15/17 2,347,922
1,500,000 Tennessee Valley Authority 6.88% 12/15/43 1,344,375
------------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES
- VALUE $62,388,319
- COST $65,326,331
<CAPTION>
Interest Maturity
Principal Security Name Rate Date Value
<C> <C> <C> <C>
U.S. TREASURY SECURITIES--50.34%
700,000 U.S. Treasury Bonds 5.25% 02/15/29 579,032
2,800,000 U.S. Treasury Bonds 5.50% 08/15/28 2,389,626
1,200,000 U.S. Treasury Bonds 6.00% 02/15/26 1,097,626
1,600,000 U.S. Treasury Bonds 6.13% 11/15/27 1,488,000
800,000 U.S. Treasury Bonds 6.13% 08/15/29 762,750
1,500,000 U.S. Treasury Bonds 6.50% 11/15/26 1,462,032
1,000,000 U.S. Treasury Bonds 6.63% 02/15/27 990,313
5,200,000 U.S. Treasury Bonds 7.13% 02/15/23 5,414,500
4,100,000 U.S. Treasury Bonds 7.25% 05/15/16 4,285,783
500,000 U.S. Treasury Bonds 7.50% 11/15/16 534,844
500,000 U.S. Treasury Bonds 7.63% 02/15/07 509,062
7,300,000 U.S. Treasury Bonds 7.63% 02/15/25 8,089,312
2,500,000 U.S. Treasury Bonds 7.88% 02/15/21 2,793,750
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
7,100,000 U.S. Treasury Bonds 8.00% 11/15/21 8,054,062
9,250,000 U.S. Treasury Bonds 8.13% 08/15/19 10,539,219
300,000 U.S. Treasury Bonds 8.25% 05/15/05 302,531
1,600,000 U.S. Treasury Bonds 8.75% 05/15/17 1,910,000
3,100,000 U.S. Treasury Bonds 8.75% 05/15/20 3,751,970
2,100,000 U.S. Treasury Bonds 8.75% 08/15/20 2,544,282
1,000,000 U.S. Treasury Bonds 9.13% 05/15/09 1,091,563
1,500,000 U.S. Treasury Bonds 9.13% 05/15/18 1,858,594
2,300,000 U.S. Treasury Bonds 9.38% 02/15/06 2,624,875
2,100,000 U.S. Treasury Bonds 10.38% 11/15/12 2,551,500
2,250,000 U.S. Treasury Bonds 11.25% 02/15/15 3,179,531
500,000 U.S. Treasury Bonds 11.75% 11/15/14 676,094
1,100,000 U.S. Treasury Bonds 12.00% 08/15/13 1,468,157
500,000 U.S. Treasury Bonds 12.75% 11/15/10 646,250
2,000,000 U.S. Treasury Bonds 13.25% 05/15/14 2,881,876
10,000,000 U.S. Treasury Notes 4.50% 01/31/01 9,834,380
5,500,000 U.S. Treasury Notes 4.63% 12/31/00 5,420,937
8,700,000 U.S. Treasury Notes 4.75% 11/15/08 7,675,036
500,000 U.S. Treasury Notes 5.25% 05/31/01 493,750
1,000,000 U.S. Treasury Notes 5.50% 07/31/01 989,688
2,000,000 U.S. Treasury Notes 5.50% 08/31/01 1,976,250
2,100,000 U.S. Treasury Notes 5.50% 01/31/03 2,050,125
1,450,000 U.S. Treasury Notes 5.50% 05/31/03 1,411,031
1,200,000 U.S. Treasury Notes 5.50% 02/15/08 1,124,250
500,000 U.S. Treasury Notes 5.50% 05/15/09 465,781
1,000,000 U.S. Treasury Notes 5.63% 02/28/01 994,063
3,300,000 U.S. Treasury Notes 5.63% 05/15/08 3,104,062
1,600,000 U.S. Treasury Notes 5.75% 11/30/02 1,575,501
1,000,000 U.S. Treasury Notes 5.75% 04/30/03 981,563
8,000,000 U.S. Treasury Notes 5.75% 08/15/03 7,832,504
850,000 U.S. Treasury Notes 5.88% 11/30/01 844,688
1,700,000 U.S. Treasury Notes 5.88% 09/30/02 1,681,938
1,000,000 U.S. Treasury Notes 5.88% 02/15/04 983,438
2,500,000 U.S. Treasury Notes 5.88% 11/15/05 2,427,345
1,600,000 U.S. Treasury Notes 6.00% 08/15/09 1,550,000
1,200,000 U.S. Treasury Notes 6.13% 12/31/01 1,197,376
3,300,000 U.S. Treasury Notes 6.13% 08/15/07 3,216,470
2,800,000 U.S. Treasury Notes 6.25% 10/31/01 2,800,000
1,000,000 U.S. Treasury Notes 6.25% 01/31/02 1,000,000
7,000,000 U.S. Treasury Notes 6.25% 02/28/02 6,997,816
3,000,000 U.S. Treasury Notes 6.25% 06/30/02 2,998,125
10,800,000 U.S. Treasury Notes 6.25% 02/15/03 10,766,250
8,700,000 U.S. Treasury Notes 6.38% 03/31/01 8,719,036
2,000,000 U.S. Treasury Notes 6.38% 09/30/01 2,003,750
4,700,000 U.S. Treasury Notes 6.38% 08/15/02 4,708,813
2,250,000 U.S. Treasury Notes 6.50% 05/31/01 2,259,142
3,000,000 U.S. Treasury Notes 6.50% 05/15/05 3,000,939
3,000,000 U.S. Treasury Notes 6.50% 08/15/05 3,000,000
1,400,000 U.S. Treasury Notes 6.50% 10/15/06 1,396,063
2,000,000 U.S. Treasury Notes 6.63% 06/30/01 2,011,876
3,000,000 U.S. Treasury Notes 6.88% 05/15/06 3,052,500
1,900,000 U.S. Treasury Notes 7.00% 07/15/06 1,946,313
11,050,000 U.S. Treasury Notes 7.25% 08/15/04 11,402,219
8,200,000 U.S. Treasury Notes 7.50% 11/15/01 8,379,375
3,000,000 U.S. Treasury Notes 7.50% 05/15/02 3,079,689
1,300,000 U.S. Treasury Notes 7.50% 02/15/05 1,356,063
4,300,000 U.S. Treasury Notes 7.88% 08/15/01 4,404,813
3,000,000 U.S. Treasury Notes 7.88% 11/15/04 3,173,439
2,900,000 U.S. Treasury Notes 8.00% 05/15/01 2,966,158
-------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
TOTAL U.S. TREASURY SECURITIES
- VALUE $ 223,729,689
- COST $ 235,125,106
Interest Maturity
Principal Security Name Rate Date Value
SHORT TERM INSTRUMENTS--8.20%
CASH EQUIVALENTS--6.86%
18,785,950 Goldman Sachs Financial Square Prime + 5.40% 01/03/00 18,785,950
Obligation Fund
11,700,000 Investors Bank & Trust Depositary Receipt + 5.53% 01/03/00 11,700,000
-------------
$ 30,485,950
REPURCHASE AGREEMENTS--1.34%
5,927,275 Morgan Stanley Tri-party Repurchase Agreement 5,927,275
dated 12/31/99, due 01/03/00 with a maturity
value of $5,928,460, and an effective yield
of 2.40% collateralized by U.S. Treasury
Notes with a rate of 6.375%, a maturity of
03/31/01 and market value of $6,045,821.
TOTAL SHORT TERM INSTRUMENTS
- VALUE $ 36,413,225
- COST $ 36,413,225
TOTAL INVESTMENTS IN SECURITIES
(Cost $491,407,220) * (Notes 1 and 3) 105.16 % $ 467,355,601
Other Assets and Liabilities, Net (5.16)% (22,911,688)
----------- -------------
TOTAL NET ASSETS 100.00 % $ 444,443,913
=========== =============
- -----------------------------------------------------------------------------------------------------------------------------------
+ Represents investment of collateral received from securities
lending transactions. See Note 4.
++ Investment is denominated in U.S. Dollars.
* Cost for federal income tax purposes is $491,526,454 and net
unrealized depreciation consists of:
Gross Unrealized Appreciation $ 10,369
Gross Unrealized Depreciation $ (24,181,222)
---------------
Net Unrealized Depreciation $ (24,170,853)
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Bond Index Master Portfolio
Statement of Assets and Liabilities
December 31, 1999
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments:
In securities, at market value (Cost $491,407,220) (Note 1).......................... $ 467,355,601
Receivables:
Interest............................................................................. 7,643,636
-------------------
Total Assets.................................................................. 474,999,237
-------------------
LIABILITIES
Payables:
Collateral for securities loaned (Note 4)............................................ 30,485,950
Due to BGI (Note 2).................................................................. 69,374
-------------------
Total Liabilities............................................................. 30,555,324
-------------------
TOTAL NET ASSETS..................................................................... $ 444,443,913
===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Bond Index Master Portfolio
Statements of Operations
================================================================================
<TABLE>
<CAPTION>
For the Period Ended For the Year Ended
December 31, 1999 * February 28, 1999
--------------------- ------------------
<S> <C> <C>
NET INVESTMENT INCOME:
Interest (1)................................................................. $ 22,521,833 $ 7,152,613
--------------------- ------------------
Total Investment Income................................................. 22,521,833 7,152,613
--------------------- ------------------
EXPENSES (NOTE 2):
Advisory fees................................................................ 277,850 89,576
--------------------- ------------------
Total Expenses.......................................................... 277,850 89,576
--------------------- ------------------
NET INVESTMENT INCOME......................................................... 22,243,983 7,063,037
--------------------- ------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on sale of investments............................... (2,713,060) 419,676
Net change in unrealized depreciation of investments.......................... (22,407,564) (4,365,016)
--------------------- ------------------
Net Loss on Investments........................................................ (25,120,624) (3,945,340)
--------------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............... $ (2,876,641) $ 3,117,697
===================== ==================
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Interest income includes securities lending income of................ $ 49,933 $ 24,075
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* For the ten months ended December 31, 1999. The Master Portfolio
changed its fiscal year end from February 28 to December 31.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Bond Index Master Portfolio
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
For the Period Ended For the Year Ended For the Year Ended
December 31, 1999 * February 28, 1999 February 28, 1998
-------------------- ------------------- ------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income......................................... $ 22,243,983 $ 7,063,037 $ 12,426,184
Net realized gain (loss) on sale of investments............... (2,713,060) 419,676 3,123,379
Net change in unrealized appreciation (depreciation)
of investments.............................................. (22,407,564) (4,365,016) 3,034,137
------------------- ------------------ -----------------
Net increase (decrease) in net assets resulting from operations.. (2,876,641) 3,117,697 18,583,700
------------------- ------------------ -----------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions............................ 45,592,668 305,376,058 (146,679,073)
------------------- ------------------ -----------------
Increase (Decrease) in Net Assets................................ 42,716,027 308,493,755 (128,095,373)
NET ASSETS:
Beginning net assets............................................. 401,727,886 93,234,131 221,329,504
------------------- ------------------ -----------------
Ending net assets................................................ $ 444,443,913 $ 401,727,886 $ 93,234,131
=================== ================== =================
</TABLE>
* For the ten months ended December 31, 1999. The Master Portfolio changed
its fiscal year end from February 28 to December 31.
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOND INDEX 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 March 1, 1994. MIP currently issues the following
separate portfolios (the "Master Portfolios"), the Asset Allocation, Bond Index,
LifePath Income (formerly "LifePath 2000"), LifePath 2010, LifePath 2020,
LifePath 2030, LifePath 2040, Money Market, S&P 500 Index, Extended Index,
International Index and U.S. Equity Index Master Portfolios. These financial
statements relate to Bond Index 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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Effective February 10, 1999, the Board of Trustees of MIP approved a change
in fiscal year-end of the Master Portfolio from February 28 to December 31.
Accordingly, the financial statements are presented for the ten-month period
ended December 31, 1999.
Security Valuation
Debt securities of the Master Portfolio are generally traded in the over-
the-counter market and are valued at a price deemed best to reflect fair value
as quoted by dealers who make markets in those securities or by an independent
pricing source. U.S. Government obligations are valued at the last reported bid
price. Debt securities maturing in 60 days or less are valued at amortized cost,
which approximates market value. Any securities, restricted securities or other
assets for which market quotations are not readily available, are valued at fair
value as determined in good faith in accordance with policies approved by MIP's
Board of Trustees.
Security Transactions and Income Recognition
Security transactions are accounted for on the date the 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. Bond discounts and premiums are accreted or amortized,
respectively, under provisions of the Internal Revenue Code of 1986, as amended
(the "Code").
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, each investor in the Master Portfolio will be taxed on its
allocable share of the partnership's income and capital gains for the 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.
<PAGE>
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
the Master Portfolio will be able to satisfy the requirements of Subchapter M of
the Code, assuming that the regulated investment company invested all of its
assets in the Master Portfolio.
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 Portfolio 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 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 102% of market value. The
repurchase agreements entered into on December 31, 1999 by the Master Portfolio
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 0.08% of the average daily net assets of the Bond
Index 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
December 31, 1999, these officers of Stephens collectively owned less than 1% of
the Master Portfolio's outstanding beneficial interests.
<PAGE>
3. Investment Portfolio Transactions
Purchases and sales of investments, exclusive of short-term securities, for
the Master Portfolio were as follows:
<TABLE>
<CAPTION>
Bond Index
Master Portfolio
------------------------------------
Aggregate Purchases Period ended Year ended
and Sales of: Dec. 31, 1999* Feb. 28, 1999
---------------------- ----------------- -----------------
<S> <C> <C>
U.S. GOVERNMENT
OBLIGATIONS:
Purchases at cost $ 117,198,084 $ 212,693,399
Sales proceeds 81,492,202 31,894,221
OTHER SECURITIES:
Purchases at cost $ 48,301,376 $ 109,813,822
Sales proceeds 20,740,434 2,543,045
</TABLE>
* For the ten months ended December 31, 1999. The Master Portfolio changed
its fiscal year end from February 28 to December 31.
4. Portfolio Securities Loaned
As of December 31, 1999, the Master Portfolio had loaned securities which
were collateralized by money market mutual funds. The Master Portfolio receives
transaction fees for providing services in connection with the securities
lending program. The risks to the Master Portfolio of securities lending are
that the borrower may not provide additional collateral when required or return
the securities when due. The value of the securities on loan and the value of
the related collateral were as follows:
<TABLE>
<CAPTION>
Value of Value of
Securities Collateral
- --------------------------------------------------------------------------------
<S> <C> <C>
Bond Index Master Portfolio $29,562,869 $30,485,950
</TABLE>
5. Financial Highlights
The ratios of expenses and net investment income to average net assets and
portfolio turnover rates (excluding short-term securities) for the Master
Portfolio are as follows:
<TABLE>
<CAPTION>
For the For the For the
Period Ended Year Ended Year Ended
December 31, February 28, February 28,
Bond Index Master Portfolio 1999 * 1999 1998
- --------------------------------------------------------- ----------------- ----------------- ----------------
<S> <C> <C> <C>
Ratio of expenses to average net assets + 0.08% 0.08% 0.08%
Ratio of net investment income to average net assets + 6.44% 6.31% 6.73%
Portfolio turnover 25% 28% 59%
</TABLE>
* For the ten months ended December 31, 1999. The Master Portfolio changed
its fiscal year end from February 28 to December 31.
+ Annualized for period of less than one year.
<PAGE>
Independent Auditors' Report
- ----------------------------
To the Interestholders and Board of Trustees of
Master Investment Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Bond Index Master Portfolio (one portfolio of
Master Investment Portfolio) as of December 31, 1999, and the related statements
of operations for the ten-month period then ended and the year ended February
28, 1999 and the statements of changes in net assets for the ten-month period
then ended and for each of the years in the two-year period ended 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements 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 December 31, 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
audits provide 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 Bond Index Master Portfolio as
of December 31, 1999, the results of its operations and the changes in its net
assets for the periods indicated above in conformity with generally accepted
accounting principles.
KPMG LLP
San Francisco, California
February 11, 2000
<PAGE>
X.COM U.S.A. MONEY MARKET FUND
ANNUAL REPORT
December 31, 1999
X.COM FUNDS
<PAGE>
Dear Shareholder:
Thank you for investing in X.com Funds.
This Annual Report covers the short period of time since X.com launched the
mutual funds on November 18, 1999. It is the first report of its kind for X.com
Funds.
The three mutual funds comprising X.com Funds are designed to be the first
building blocks of an individual's investment portfolio. Our choice of Barclays
Global Fund Advisors master/feeder fund structure provides you with the
expertise of one of the largest investment advisors in the world. The structure
and content of these master funds (in which our funds invest) is also outlined
in this annual report.
1999 was a year when stock prices soared (the S & P 500 Index gained 21.04/%)
while bond prices fell (the Lehman Brothers Government/Corporate Bond Index
declined 2.15%). This suggests that both market and sector diversification
remains a smart and prudent strategy to follow. Recognizing the importance of
diversification, X.com Funds will be offering additional investment choices
later this year. In the meantime, be sure to check out our site often as we
expand and improve the products and services offered to our customers.
Thanks again for choosing X.com Funds.
Elon Musk, Chairman
<PAGE>
X.com U.S.A. Money Market Fund
Portfolio Manager Commentary - 4/th/ Quarter 1999
- -------------------------------------------------
Concerns about inflation continued to color the economic landscape during the
fourth quarter. Signs of a strong economy appeared through the quarter, leading
to a third hike in the Federal Funds rate in November and concerns of further
interest rate tightening.
In the first two weeks of October, interest rates reacted to news that the
Producer Price Index rose 1.1% in September, sharply exceeding expectations of a
0.5% increase. The second half of the month, however, brought evidence of a
healthy economy. A Gross Domestic Product growth rate of 4.8% was in line with
the expected 4.7%, and favorable wage growth figures quelled fears that lower
unemployment rates would result in higher inflation. Bond markets staged a brief
rally at month end in response.
On November 16, the Federal Reserve Board (the "Fed") raised the Federal Funds
rate by 0.25%. This increase, the third of the year, effectively erased the
three rate cuts implemented in 1998. Inflation fears were reignited in December
with the release of higher-than-expected retail sales figures. The Fed did not
hike rates further, but that inaction was viewed as an effort to retain
liquidity at year-end in light of Y2K concerns.
The Fund's fourth quarter performance was helped in part by Y2K preparation that
had begun during the summer. In anticipation of the uncertainties surrounding
the Year 2000, many corporations issued short-term debt to raise liquidity. This
excess supply of debt drove prices down and yields up. Because the Master
Investment Portfolio in which the Fund invests had a relatively high amount of
cash on hand, it was able to take advantage of this phenomenon and buy debt at
unusually low prices. The Fund's performance relative to its peer group reflects
this opportunity.
<PAGE>
X.com U.S.A. Money Market Fund
Statement of Assets and Liabilities
December 31, 1999
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments:
Investment in Master Investment Portfolio -
Money Market Master Portfolio, at value (Note 1).......... $ 1,195,942
Receivables:
Fund shares sold................................................. 2,032
------------
Total Assets.............................................. 1,197,974
------------
LIABILITIES
Payables:
Fund shares redeemed............................................. 1,642
Due to X.com (Note 2)............................................ 162
------------
Total Liabilities......................................... 1,804
------------
TOTAL NET ASSETS................................................. $ 1,196,170
============
Net assets consist of:
Paid-in capital.................................................. 1,196,170
------------
TOTAL NET ASSETS................................................. $ 1,196,170
============
CAPITAL SHARES:
Net Assets....................................................... $ 1,196,170
Shares Outstanding............................................... 1,196,170
Net Asset Value, Offering Price and Redemption Price per Share... $ 1.00
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
X.com U.S.A. Money Market Fund
Statement of Operations
================================================================================
<TABLE>
<CAPTION>
Period from
November 18, 1999
(commencement of
operations) to
December 31, 1999
-----------------
<S> <C>
NET INVESTMENT INCOME:
ALLOCATED FROM MASTER INVESTMENT PORTFOLIO
Interest.................................................................. $ 2,507
Expenses (Note 2)......................................................... (42)
-----------------
Net Investment Income Allocated from
Master Investment Portfolio.................................................... 2,465
-----------------
EXPENSES (NOTE 2):
Management fees..................................................................... 195
-----------------
Total expenses............................................................ 195
-----------------
Less:
Fees reimbursed by X.com (Note 2).............................................. (40)
-----------------
Net expenses.............................................................. 155
-----------------
NET INVESTMENT INCOME............................................................... 2,310
-----------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS..................................................................... $ 2,310
=================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
X.com U.S.A. Money Market Fund
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Period from
November 18, 1999
(commencement of
operations) to
December 31, 1999
-----------------
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income................................................. $ 2,310
-----------------
Net increase in net assets resulting from operations.................. 2,310
-----------------
Dividends and Distributions to Shareholders from:
Net investment income................................................. (2,310)
-----------------
Total dividends and distributions to shareholders..................... (2,310)
-----------------
Capital Share Transactions:
Net proceeds from sale of shares...................................... 1,254,052
Net asset value of shares issued to shareholders in reinvestment
of dividends and distributions................................... 2,310
Cost of shares redeemed............................................... (60,192)
-----------------
Net increase in net assets from capital share transactions............ 1,196,170
-----------------
Net Increase in Net Assets............................................ 1,196,170
NET ASSETS:
Beginning of period (November 18, 1999)............................... -
-----------------
End of period......................................................... $ 1,196,170
=================
SHARE TRANSACTIONS:
Number of shares sold................................................. 1,254,052
Number of shares issued through reinvestment of dividends and
distributions.................................................... 2,310
Number of shares redeemed............................................. (60,192)
-----------------
Net increase in shares outstanding.................................... 1,196,170
=================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
X.com U.S.A. Money Market Fund
Financial Highlights
================================================================================
<TABLE>
<CAPTION>
Period from
November 18, 1999
(commencement of
operations) to
December 31, 1999
-----------------
<S> <C>
For a Share Outstanding for the Period
Net Asset Value, beginning of period........................... $ 1.00
-----------------
Income from investment operations:
Net investment income..................................... 0.01
Net realized and unrealized gain on investments........... -
-----------------
Total income from investment operations................... 0.01
-----------------
Less dividends and distributions to shareholders:
Dividends from net investment income...................... (0.01)
Distributions from net realized gains..................... -
-----------------
Total dividends and distributions......................... (0.01)
-----------------
Net asset value, end of period................................. $ 1.00
=================
Total return................................................... 0.65% *
Ratios / Supplemental Data:
Net assets, end of period (000s omitted) ................. $ 1,196
Ratio of expenses to average net assets (1)............... 0.50% **
Ratio of net investment income to average net assets (2).. 5.92% **
- ---------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior to
reimbursement of fees..................................... 0.60% **
(2) Ratio of net investment income to average net
assets prior to reimbursement of fees..................... 5.82% **
- ---------------------------------------------------------------------------------------
</TABLE>
* Not annualized.
** Annualized.
The accompanying notes are an integral part of these financial statements.
<PAGE>
X.COM U.S.A. MONEY MARKET FUND
NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
X.com U.S.A. Money Market Fund (the "Fund") is one of a diversified series
of X.com Funds (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 June 3, 1999.
The investment objective of the U.S.A. Money Market Fund is to provide a
high level of income while preserving capital and liquidity.
The following significant accounting policies are consistently followed by
the Trust 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 comformity 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 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 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 (a
"Master Portfolio") a separate series of the Master Investment Portfolio. 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 December 31, 1999, the
value of the Fund's investment in the Master Portfolio was 0.49% of the
outstanding interests of the Money Market Master Portfolio.
The Money Market Master Investment Portfolio uses the amortized cost method
to value its portfolio securities; the Fund seeks to maintain a constant net
asset value of $1.00 per share. There is no assurance that the Fund will meet
this objective. 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 by the Master Portfolio on the date
the securities are purchased or sold (trade date). 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 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
corresponding 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.
<PAGE>
Dividends and Distributions to Shareholders
Dividends to shareholders from net investment income of the Fund are
declared daily and distributed monthly. Distributions to shareholders from any
net realized capital gains are declared and distributed annually, generally in
December.
Due to the timing of dividend distributions and the differences in
accounting for income and realized gains (losses) for financial statement and
federal income tax purposes, the fiscal year in which amounts are distributed
may differ from the year in which the income and realized gains (losses) were
recorded by the Fund.
Federal Income Taxes
The Fund is treated as a separate entity for federal income tax purposes.
It is the policy of each fund to continue to qualify as a regulated investment
company by complying with the provisions applicable to regulated investment
companies, as defined in the Code, and to 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 December 31, 1999.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
X.com Asset Management, Inc. ("XAM"), a wholly owned subsidiary of X.com
Corporation ("X.com") serves as the Funds' investment adviser. For both their
advisory and administrative services, XAM is paid a "unified" fee from the Fund
at an annual rate of 0.50% of the Fund's average daily net assets. Under this
agreement between the Trust and XAM, XAM assumes all ordinary recurring direct
costs of the Trust, such as custodian fees, director's fees, transfer agency
fees and accounting fees, and excludes, generally, advisory fees and costs
related to security transactions. XAM may delegate some of their administrative
duties to the administrator.
A fee waiver for the Fund is made pursuant to an expense limitation and
reimbursement agreement with XAM that is in effect for an initial term of one
year and will be renewed thereafter automatically for a one year term on an
annual basis. The agreement can be changed, terminated or not renewed by
either party only by giving 90 days' prior notice. XAM waived expenses totaling
0.10% of the Fund's average daily net assets for the period ended December 31,
1999.
X.com serves as the shareholder servicing agent for the Fund. X.com is also
responsible for maintaining the Fund's shareholder accounts.
Pursuant to an Investment Advisory Contract with the Master Portfolio,
Barclays Global Financial Advisors ("BGFA") provides investment guidance and
policy direction in connection with the management of the Master Portfolio's
assets. For its services, BGFA is entitled to receive 0.10% of the average
daily net assets of the Money Market Master Portfolio. The Fund bears a pro
rata portion of the investment advisory fees paid by the Master Portfolio.
Investor's Bank & Trust Company (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; and preparing and
disseminating material for meetings of the Board of Trustees and shareholders.
XAM compensates the Administrator for services performed.
<PAGE>
Independent Auditors' Report
- ----------------------------
To the Shareholders and Board of Trustees of
X.com Funds:
We have audited the accompanying statement of assets and liabilities of X.com
U.S.A. Money Market Fund (one series of X.com Funds) as of December 31, 1999 and
the related statements of operations, changes in net assets and financial
highlights for the period from November 18, 1999 (commencement of operations) to
December 31, 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 X.com
U.S.A. Money Market Fund as of December 31, 1999, the results of its operations,
changes in its net assets, and its financial highlights for the period from
November 18, 1999 to December 31, 1999 in conformity with generally accepted
accounting principles.
KPMG LLP
San Francisco, California
February 11, 2000
<PAGE>
MASTER INVESTMENT PORTFOLIO--MONEY MARKET
MASTER PORTFOLIO--DECEMBER 31, 1999
Portfolio of Investments
<TABLE>
<CAPTION>
Yield to Maturity
Principal Security Name Maturity Date Value
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT--13.85%
5,000,000 Abbey National Treasury Service 5.04% 02/08/00 4,999,997
5,000,000 ABN Amro Bank NV 5.14% 02/22/00 4,999,725
3,000,000 American Express Centurion 5.97% 02/03/00 3,000,000
10,000,000 Bank of Montreal 5.09% 04/14/00 9,998,902
3,000,000 Bayerische Hypo-Und Vereinsbank AG 5.23% 03/01/00 3,000,048
5,000,000 Chase Manhattan Bank 5.18% 03/15/00 4,999,414
3,000,000 Credit Suisse First Boston 5.60% 06/04/00 3,000,000
-----------
TOTAL CERTIFICATES OF DEPOSIT $33,998,086
Yield to Maturity
Principal Security Name Maturity Date Value
COMMERCIAL PAPER--52.39%
3,000,000 Accor BNP 6.12% 02/04/00 2,982,660
1,195,000 Atlantis One Funding Corp 5.93% 03/23/00 1,178,859
8,096,000 BMW US Capital Corp 5.00% 01/03/00 8,093,751
3,528,000 Countrywide Home Loans Inc 6.12% 02/15/00 3,501,011
6,000,000 Countrywide Home Loans Inc 6.55% 02/03/00 5,963,975
9,000,000 Dorada Finance Inc 5.82% 03/08/00 8,902,515
5,000,000 Edison Asset Securization 5.86% 02/11/00 4,966,659
4,270,000 Enterprises Funding Corp 6.50% 01/14/00 4,259,977
2,977,000 Falcon Asset Securization 5.85% 02/18/00 2,953,779
5,000,000 Falcon Asset Securization 5.86% 02/08/00 4,969,072
2,184,000 Forrestal Funding 6.17% 01/18/00 2,177,637
4,166,000 Forrestal Funding 6.22% 01/18/00 4,153,763
3,000,000 General Electric Capital Corp 5.95% 03/16/00 2,962,812
2,100,000 General Electric Capital Corp 6.00% 02/07/00 2,087,050
3,000,000 General Electric Financial Assurance Holding 5.93% 04/10/00 2,950,584
8,000,000 Greenwich Funding Corp 5.85% 02/10/00 7,948,000
3,000,000 International Securitization Corp 6.20% 01/27/00 2,986,567
2,000,000 International Securitization Corp 6.85% 01/18/00 1,993,531
5,000,000 Intrepid Funding 5.88% 04/12/00 4,916,700
1,500,000 Kitty Hawk Funding Corp 5.86% 02/15/00 1,489,013
2,000,000 Lexington Parker Capital Corp 6.10% 01/28/00 1,990,850
8,000,000 Lexington Parker Capital Corp 6.59% 02/07/00 8,000,000
2,296,000 Liberty Street Funding Corp 5.93% 03/15/00 2,268,013
2,000,000 Liberty Street Funding Corp 5.95% 02/07/00 1,987,770
2,000,000 Liberty Street Funding Corp 6.09% 02/17/00 1,984,098
8,000,000 Merrill Lynch & Co Inc 6.15% 02/02/00 7,956,267
4,300,000 Monte Rosa Capital Corp 5.87% 02/04/00 4,276,161
2,000,000 Monte Rosa Capital Corp 5.95% 03/21/00 1,973,556
2,204,000 Monte Rosa Capital Corp 6.00% 03/20/00 2,174,980
2,000,000 Moriarty LLC 6.17% 01/26/00 1,991,431
1,258,000 Silver Tower US Funding LLC 5.90% 02/07/00 1,250,371
2,000,000 Special Purpose Accounts Receviable Corp 5.86% 02/10/00 1,986,978
2,000,000 Thames Asset Global Securitization No. 1 Inc 6.00% 01/18/00 1,994,333
3,000,000 Thames Asset Global Securitization No. 1 Inc 6.02% 02/15/00 2,977,425
3,000,000 Transportadora de Gas del Sur SA 6.00% 03/31/00 2,955,000
1,411,000 Variable Funding Capital Corp 7.00% 01/18/00 1,406,336
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
------------
TOTAL COMMERCIAL PAPER $128,611,484
Yield to Maturity
Principal Security Name Maturity Date Value
MEDIUM TERM NOTES--4.89%
7,000,000 Morgan Guaranty Trust Co 5.36% 04/05/00 7,000,000
5,000,000 SNB Key Bank Bank Notes 5.60% 06/16/00 4,998,464
------------
TOTAL MEDIUM TERM NOTES $11,998,464
Yield to Maturity
Principal Security Name Maturity Date Value
TIME DEPOSITS--5.30%
8,000,000 Bayerische Hypo-Und Vereinsbank AG 5.50% 01/03/00 8,000,000
5,000,000 Canadian Imperial Bank of Commerce 5.00% 01/03/00 5,000,000
------------
TOTAL TIME DEPOSITS $13,000,000
Yield to Maturity
Principal Security Name Maturity Date Value
U.S. GOVERNMENT AGENCY SECURITIES--2.04%
5,000,000 Federal Home Loan Bank 4.95% 02/17/00 4,999,693
------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES $4,999,693
Yield to Maturity
Principal Security Name Maturity Date Value
VARIABLE & FLOATING RATE NOTES--20.69%
4,818,056 Associates Manufactured Housing Certificates 6.69% 10/16/00 4,818,056
7,000,000 Ford Motor Credit Co 5.74% 08/18/00 6,995,629
10,000,000 GMAC Mortgage Corp 6.48% 01/04/00 9,994,603
8,000,000 National City Bank 6.46% 10/04/00 7,992,734
5,000,000 Norwest Financial Inc 6.49% 09/07/00 4,997,984
5,000,000 Sigma Finance Inc 5.90% 09/14/00 5,000,000
4,000,000 Sigma Finance Inc 5.99% 03/29/00 3,999,807
7,000,000 Special Purpose Accounts Receivable Corp 6.57% 02/07/00 7,000,000
------------
TOTAL VARIABLE & FLOATING RATE NOTES $50,798,813
Principal Security Name Value
REPURCHASE AGREEMENTS--0.00%
643 Morgan Stanley Tri-party Repurchase Agreement dated 643
12/31/99, due 01/03/00 with a 43 and an effective
yield of 2.40%, collateralized by U.S. Treasury Note
with a rate of 6.25%, a maturity of 04/30/01 and
market value of $10,129.
------------
TOTAL REPURCHASE AGREEMENTS $643
TOTAL INVESTMENTS IN SECURITIES 99.16% $243,407,183
(Cost $243,407,183) * (Note 1)
Other Assets and Liabilities 0.84 % 2,066,079
---------- ------------
TOTAL NET ASSETS 100.00% $245,473,262
========== ============
</TABLE>
- --------------------------------------------------------------------------------
* 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>
Money Market Master Portfolio
Statement of Assets and Liabilities
December 31, 1999
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments:
In securities, at market value (Cost $243,407,183) (Note 1)........................ $ 243,407,183
Receivables:
Interest........................................................................... 2,140,308
-------------
Total Assets................................................................ 245,547,491
-------------
LIABILITIES
Payables:
Due to BGI (Note 2)................................................................ 74,229
-------------
Total Liabilities........................................................... 74,229
-------------
TOTAL NET ASSETS................................................................... $ 245,473,262
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Money Market Master Portfolio
Statements of Operations
================================================================================
<TABLE>
<CAPTION>
For the Period Ended For the Period Ended
December 31, 1999* December 31, 1999**
-------------------- --------------------
<S> <C> <C>
NET INVESTMENT INCOME:
Interest.................................................................... $ 9,956,770 $ 5,516,159
-------------------- --------------------
Total Investment Income................................................ 9,956,770 5,516,159
-------------------- --------------------
EXPENSES (NOTE 2):
Advisory fees............................................................... 189,564 104,611
-------------------- --------------------
Total Expenses......................................................... 189,564 104,611
-------------------- --------------------
NET INVESTMENT INCOME........................................................ 9,767,206 5,411,548
-------------------- --------------------
NET REALIZED GAIN ON INVESTMENTS
Net realized gain on sale of investments.................................... 4,552 -
-------------------- --------------------
Net Gain on Investments...................................................... 4,552 -
-------------------- --------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................................................. $ 9,771,758 $ 5,411,548
==================== ====================
</TABLE>
* For the ten months ended December 31, 1999 The Master Portfolio
changed its fiscal year end from February 28 to December 31.
** Period from September 1, 1998 (commencement of operations) to February
28, 1999.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Money Market Master Portfolio
Statements of Changes in Net Assets
===============================================================================
<TABLE>
<CAPTION>
For the Period Ended For the Period Ended
December 31, 1999 * February 28, 1999 **
-------------------- --------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.......................................... $ 9,767,206 $ 5,411,548
Net realized gain on sale of investments....................... 4,552 -
--------------------- --------------------
Net increase in net assets resulting from operations................. 9,771,758 5,411,548
--------------------- --------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions............................... (26,944,817) 257,234,773
--------------------- --------------------
Increase (Decrease) in Net Assets.................................... (17,173,059) 262,646,321
NET ASSETS:
Beginning net assets................................................. 262,646,321 -
--------------------- --------------------
Ending net assets.................................................... $ 245,473,262 $ 262,646,321
===================== ====================
</TABLE>
* For the ten months ended December 31, 1999. The Master Portfolio changed its
fiscal year end from February 28 to December 31.
** Period from September 1, 1998 (commencement of operations) to February 28,
1999.
The accompanying notes are an integral part of these financial statements.
<PAGE>
MONEY MARKET MASTER 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 March 1, 1994. MIP currently issues the following
separate portfolios (the "Master Portfolios"), the Asset Allocation, Bond Index,
LifePath Income (formerly "LifePath 2000"), LifePath 2010, LifePath 2020,
LifePath 2030, LifePath 2040, Money Market, S&P 500 Index, Extended Index,
International Index and U.S. Equity Index Master Portfolios. These financial
statements relate only to the Money Market Master Portfolio (the "Master
Portfolio"). The Money Market Master Portfolio commenced operations on September
1, 1998, with the transfer of $170,362,016 in securities from Money Market Fund,
of MasterWorks Funds Inc. (now Barclays Global Investors Funds Inc.).
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Effective February 10, 1999, the Board of Trustees of MIP approved a change
in fiscal year-end of the Master Portfolio from February 28 to December 31.
Accordingly, the financial statements are presented for the ten-month period
ended December 31, 1999.
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.
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, each investor in the Master Portfolio will be taxed on its
allocable share of the partnership's income and capital gains for the purposes
of determining its federal income tax liability. The determination of such share
will be made in accordance with the applicable sections of the Internal Revenue
Code of 1986, as amended (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
the Master Portfolio will be able to satisfy the requirements of Subchapter M of
the Code, assuming that the regulated investment company invested all of its
assets in the Master Portfolio.
<PAGE>
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 Portfolio 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 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 102% of market value. The
repurchase agreements entered into on December 31, 1999 by the Master Portfolio
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 each Master Portfolio's assets.
BGFA is entitled to receive 0.10% of the average daily net assets of the Money
Market 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
December 31, 1999, these officers of Stephens collectively owned less than 1% of
the Master Portfolio's outstanding beneficial interests.
3. Financial Highlights
The ratios of expenses and net investment income to average net assets for
the Master Portfolio are as follows:
<TABLE>
<CAPTION>
For the For the
Period Ended Period Ended
December 31, February 28,
Money Market Master Portfolio 1999 * 1999 **
--------------------------------------------------------------------------------------------
<S> <C> <C>
Ratio of expenses to average net assets + 0.10% 0.10%
Ratio of net investment income to average net assets + 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.
<PAGE>
Independent Auditors' Report
- ----------------------------
To the Interestholders and Board of Trustees of
Master Investment Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Money Market Master Portfolio (one portfolio of
Master Investment Portfolio) as of December 31, 1999, and the related statements
of operations, and changes in net assets, for the ten-month period then ended
and the period from September 1, 1999 (commencement of operation) 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements 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 December 31, 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
audits provide 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 as of December 31, 1999, the results of its operations and the changes
in its net assets for the periods indicated above in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
San Francisco, California
February 11, 2000
