<PAGE>
X.com U.S.A. Bond Fund
Semi-annual Report
The X.com U.S.A. Bond Fund tracks the Lehman Brothers Government/Corporate Bond
Index. The Fund invests in a representative sample of the securities that
comprise the Index in proportions that match their index weight. At the close of
the period, the Fund's portfolio was composed of 48.7% U.S. Treasury Bonds,
35.8% corporate bonds, and 15.5% U.S. agency securities.
Indicators of an overheated economy resurfaced in the first quarter of 2000. The
annualized GDP growth rate for the fourth quarter of 1999, initially reported at
6.9%, was later revised to 7.3%. The unemployment rate fell to 3.9% in April,
its lowest level in 30 years. In response, the Federal Reserve Board raised the
federal funds target rate three times in the first half of 2000. Combined with a
shortage in supply of long-term bonds, these rate hikes caused Treasury
securities with shorter maturities to carry higher yields than those with longer
maturities. This phenomenon, known as an inverted yield curve, had not been
witnessed since 1990.
Short-term rates moved in tandem with the federal funds target rate, which
increased by 1.00% (to 6.50%) in the first half of 2000. However, long bond
yields fell as a result of two significant policy changes instituted by the
Treasury. In January, the Treasury announced that it would buy back its long-
term bonds in an effort to reduce outstanding government debt. This was followed
by a February announcement that the Treasury would curtail further 30-year
Treasury bond auctions. In response to the impending reduced supply of long-term
Treasury bonds, long-term yields plunged, as evidenced by the 9.30% return on
the Lehman Brothers 20+ Year Treasury Index in the first quarter.
Bonds languished in April and May amid continued reports of rapid economic
growth. Specifically, the Employment Index, released on April 27, demonstrated a
first quarter rise of 1.4%, well above the anticipated 1.0%. For the month of
April, the Lehman Brothers Government/Corporate Bond Index lost 0.49%. On May
16, the Federal Reserve raised the federal funds rate target by 0.50%, its third
and largest increase in 2000. By month end, economic data demonstrated signs of
the Fed's intended slowdown. Bonds rallied in response, finishing the month flat
(-0.05%). June found more signs of a slowing economy, to which the bond market
responded favorably. The Lehman Brothers Government/Corporate Bond Index
returned 2.04% to finish the quarter up 1.45%.
The Fund will continue to pursue its objective of tracking the Lehman Brothers
Government/Corporate Bond Index as closely as possible.
<PAGE>
X.com U.S.A. Bond Fund
Statement of Assets and Liabilities
June 30, 2000 (Unaudited)
<TABLE>
<S> <C>
------------------------------------------------------------------------------------------------------------
ASSETS
Investments:
In Bond Index Master Portfolio ("Master Portfolio"), at market value (Note 1) $ 192,281
Receivables:
Due from X.com (Note 2) 6,430
----------
Total Assets 198,711
----------
LIABILITIES
Payables:
Distribution to shareholders 1,772
-----------
Total Liabilities 1,772
-----------
NET ASSETS $ 196,939
===========
Net assets consist of:
Paid-in capital 201,648
Undistributed net investment income 36
Undistributed net realized loss on investments (4,132)
Net unrealized depreciation of investments (613)
-----------
NET ASSETS $ 196,939
===========
Shares outstanding 20,150
===========
Net asset value and offering 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
For the Six Months Ended June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIO
Interest $ 9,054
Expenses (105)
----------
Net investment income allocated from Master Portfolio 8,949
----------
FUND EXPENSES (NOTE 2)
Management fees 422
----------
Total fund expenses 422
----------
Less:
Fees reimbursed by X.com (Note 2) (277)
----------
Total Net Expenses 145
----------
Net investment income 8,804
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM MASTER PORTFOLIO
Net realized loss (4,117)
Net change in unrealized appreciation 342
----------
Net loss on investments allocated from corresponding Master Portfolio (3,775)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,029
==========
--------------------------------------------------------------------------------------------------------
</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>
---------------------------------------------------------------------------------------------------------------------------------
For the Period
November 18, 1999
For the Six Months (commencement of
Ended June 30, 2000 operations) through
(Unaudited) December 31, 1999
-------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 8,804 $ 1,061
Net realized loss (4,117) (15)
Net change in unrealized appreciation (depreciation) 342 (955)
-------------------- -------------------
Net increase in net assets resulting from operations 5,029 91
-------------------- ------------------
Distributions to shareholders:
From net investment income (8,768) (1,091)
-------------------- ------------------
Total distributions to shareholders (8,768) (1,091)
-------------------- ------------------
Capital share transactions:
Proceeds from shares sold 650,147 352,556
Net asset value of shares issued in reinvestment of dividends and distributions 6,997 1,091
Cost of shares redeemed (690,164) (118,949)
-------------------- ------------------
Net increase (decrease) in net assets resulting from capital share transactions (33,020) 234,698
-------------------- ------------------
Increase (decrease) in net assets (36,759) 233,698
NET ASSETS:
Beginning of period 233,698 0
-------------------- ------------------
End of period (including undistributed net investment income of $36 and $0,
respectively) $ 196,939 $ 233,698
==================== ==================
SHARES ISSUED AND REDEEMED:
Shares sold 66,128 35,896
Shares issued in reinvestment of dividends and distributions 717 111
Shares redeemed (70,617) (12,085)
-------------------- ------------------
Net increase (decrease) in shares outstanding (3,772) 23,922
==================== ==================
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
X.com U.S.A. Bond Fund
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Period From
Six Nov. 18, 1999
Months Ended (Commencement
Jun. 30, 2000 of Operations) to
(Unaudited) Dec. 31, 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.77 $ 10.06
------------- ----------------
Income from investment operations:
Net investment income 0.36 0.18
Net realized and unrealized gain (loss) on investments 0.00 (0.29)
------------- ----------------
Total from investment operations 0.36 (0.11)
------------- ----------------
Less distributions:
From net investment income (0.36) (0.18)
------------- ----------------
Total distributions (0.36) (0.18)
------------- ----------------
Net asset value, end of period $ 9.77 $ 9.77
============= ================
Total return + 3.72% ++ (1.99)% ++
============= ================
Ratios/Supplemental data:
Net assets, end of period (000s) $ 197 $ 234
Ratio of expenses to average net assets 1 0.19% + 0.19% +
Ratio of net investment income to average net assets 2 6.68% + 6.83% +
--------------------------------------------------------------------------------------------------------
1 Ratio of expenses to average net assets prior to waived
fees and reimbursed expenses 0.40% + 0.40% +
2 Ratio of net investment income (loss) to average net assets
prior to waived fees and reimbursed expenses 6.47% + 6.62% +
+ Annualized.
++ Not Annualized.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
X.COM U.S.A. BOND FUND
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
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 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 invests all of its assets in the Bond Index Master Portfolio (the
"Master Portfolio") a separate series of Master Investment Portfolio ("MIP").
The Master Portfolio has the same investment objective as the Fund. The value
of the Fund's investment in the Master Portfolio reflects the Fund's interest in
the net assets of the Master Portfolio (0.05% as of June 30, 2000).
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 method by which the MIP values its securities is discussed in Note 1 of
the Master Portfolio's Notes to the Financial Statements, which are included
elsewhere in this report.
Security Transactions and Income Recognition
The Fund records daily, its proportionate interest in the net investment
income and realized and unrealized capital gains and losses of the Master
Portfolio.
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 Schedule 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 monthly. Distributions to shareholders from any net realized
capital gains are declared and distributed annually, generally in December.
Such distributions to shareholders are recorded on the ex-dividend date.
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.
<PAGE>
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 Internal Revenue Code of 1986, as amended (the
"Code"), and to distribute annually all of its investment company taxable income
and any net capital gains (taking into account any capital loss carryforwards)
sufficient to relieve it from all, or substantially all, federal income and
excise taxes. Accordingly, no provision for federal taxes was required at June
30, 2000.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
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 June 30, 2000.
X.com serves as the shareholder servicing agent for the Fund. X.com is also
responsible for maintaining the Fund's shareholder accounts.
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>
BOND INDEX MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
-------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES--32.11%
AEROSPACE/DEFENSE--0.78%
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lockheed Martin Corp.
8.20%, 12/01/09 $1,500,000 $1,514,256
Raytheon Co.
7.38%, 07/15/25 1,000,000 849,275
United Technologies Corp.
6.63%, 11/15/04 1,000,000 978,128
-------------------------------------------------------------------------------------------------------------------
3,341,659
-------------------------------------------------------------------------------------------------------------------
AUTO MANUFACTURERS--1.34%
-------------------------------------------------------------------------------------------------------------------
Chrysler Corp.
7.45%, 03/01/27 1,500,000 1,436,962
Ford Motor Co.
6.38%, 02/01/29 1,000,000 816,214
8.88%, 04/01/06 1,500,000 1,591,153
General Motors Corp.
6.25%, 05/01/05 1,000,000 954,049
7.40%, 09/01/25 1,000,000 936,020
-------------------------------------------------------------------------------------------------------------------
5,734,398
-------------------------------------------------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT--0.43%
-------------------------------------------------------------------------------------------------------------------
Delphi Automotive Systems Corp.
6.50%, 05/01/09 1,000,000 898,612
Goodyear Tire & Rubber Co.
6.63%, 12/01/06 1,000,000 939,357
-------------------------------------------------------------------------------------------------------------------
1,837,969
-------------------------------------------------------------------------------------------------------------------
BANKS--5.13%
-------------------------------------------------------------------------------------------------------------------
ABN Amro Bank NV
7.30%, 12/01/26 500,000 440,665
Bank of New York Co. Inc.
6.50%, 12/01/03 1,000,000 968,576
Bank of Tokyo-Mitsubishi Ltd.
8.40%, 04/15/10 1,000,000 1,009,258
Bank One Corp.
6.40%, 08/01/02 1,000,000 981,848
8.10%, 03/01/02 1,000,000 1,010,368
BankAmerica Corp.
6.25%, 04/01/08 1,870,000 1,706,506
Chase Manhattan Corp.
5.75%, 04/15/04 1,000,000 943,821
Dresdner Bank AG
6.63%, 09/15/05 1,000,000 952,590
First Union Capital Corp.
8.04%, 12/01/26 2,000,000 1,757,366
</TABLE>
The accompanying notes are an integral part of these finanicial statements.
<PAGE>
BOND INDEX MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First Union Corp.
6.63%, 07/15/05 $ 500,000 $ 476,246
International Bank of Reconstruction & Development
6.38%, 07/21/05 1,000,000 972,468
KeyCorp
6.75%, 03/15/06 1,500,000 1,427,616
KFW International Finance Inc.
7.63%, 02/15/04 3,500,000 3,553,105
8.00%, 02/15/10 250,000 263,723
Korea Development Bank
7.13%, 04/22/04 1,000,000 966,942
7.38%, 09/17/04 1,000,000 973,768
Mellon Capital II
8.00%, 01/15/27 1,000,000 904,086
NationsBank Corp.
7.75%, 08/15/15 1,000,000 972,288
Skandinaviska Enskilda Banken
6.88%, 02/15/09 500,000 464,045
Swiss Bank Corp.
7.38%, 07/15/15 1,200,000 1,144,871
-------------------------------------------------------------------------------------------------------------------
21,890,156
-------------------------------------------------------------------------------------------------------------------
BEVERAGES--0.96%
-------------------------------------------------------------------------------------------------------------------
Anheuser-Busch Companies Inc.
9.00%, 12/01/09 1,500,000 1,659,628
Coca-Cola Enterprises
8.00%, 09/15/22 1,000,000 1,006,749
Diageo PLC
6.13%, 08/15/05 1,000,000 947,168
J Seagram & Sons Ltd.
7.50%, 12/15/18 500,000 471,975
-------------------------------------------------------------------------------------------------------------------
4,085,520
-------------------------------------------------------------------------------------------------------------------
CHEMICALS--0.12%
-------------------------------------------------------------------------------------------------------------------
Dow Chemical Co.
8.63%, 04/01/06 500,000 530,582
-------------------------------------------------------------------------------------------------------------------
530,582
-------------------------------------------------------------------------------------------------------------------
COMPUTERS--0.67%
-------------------------------------------------------------------------------------------------------------------
International Business Machines Corp.
5.63%, 04/12/04 3,000,000 2,858,523
-------------------------------------------------------------------------------------------------------------------
2,858,523
-------------------------------------------------------------------------------------------------------------------
COSMETICS / PERSONAL CARE--0.23%
-------------------------------------------------------------------------------------------------------------------
Procter & Gamble Co.
6.88%, 09/15/09 1,000,000 974,525
-------------------------------------------------------------------------------------------------------------------
974,525
-------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these finanicial statements.
<PAGE>
BOND INDEX MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
------------------------------------------------------------------------------------------
<S> <C> <C>
DIVERSIFIED FINANCIAL SERVICES--6.73%
------------------------------------------------------------------------------------------
American General Finance Corp.
6.38%, 03/01/03 $1,000,000 $ 974,076
Associates Corp. NA
6.25%, 11/01/08 1,500,000 1,344,702
6.95%, 11/01/18 1,000,000 879,737
Bear Stearns Companies Inc.
6.75%, 04/15/03 1,000,000 976,664
CIT Group Holdings
6.63%, 06/15/05 1,000,000 944,645
Citigroup Inc.
7.88%, 05/15/25 1,000,000 991,369
Countrywide Funding Corp.
6.88%, 09/15/05 1,000,000 948,225
Ford Motor Credit Co.
6.50%, 02/28/02 3,400,000 3,352,359
7.50%, 06/15/03 1,000,000 995,563
General Motors Acceptance Corp.
7.13%, 05/01/03 4,500,000 4,463,856
Household Finance Corp.
6.00%, 05/01/04 2,000,000 1,884,770
6.70%, 06/15/02 1,000,000 981,061
Lehman Brothers Inc.
7.63%, 06/01/06 2,500,000 2,435,450
Merrill Lynch & Co. Inc.
6.00%, 02/17/09 3,000,000 2,654,319
6.38%, 10/15/08 1,000,000 910,705
Morgan Stanley Dean Witter & Co.
7.13%, 01/15/03 1,000,000 993,347
8.00%, 06/15/10 1,000,000 1,009,857
Norwest Financial Inc.
5.38%, 09/30/03 1,000,000 942,224
Pemex Finance Ltd.
9.69%, 08/15/09 1,000,000 1,054,260
------------------------------------------------------------------------------------------
28,737,189
------------------------------------------------------------------------------------------
ELECTRIC--2.75%
------------------------------------------------------------------------------------------
Duke Energy Corp.
6.00%, 12/01/28 2,000,000 1,584,084
Enersis SA
7.40%, 12/01/16 1,000,000 865,807
Houston Lighting & Power Co.
6.50%, 04/21/03 4,000,000 3,895,036
Korea Electric Power Corp.
6.38%, 12/01/03 1,000,000 942,709
Niagara Mohawk Power Corp.
7.38%, 07/01/03 756,098 743,943
7.63%, 10/01/05 529,268 520,085
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOND INDEX MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
------------------------------------------------------------------------------------------
<S> <C> <C>
Northern States Power Co.
6.50%, 03/01/28 $1,500,000 $ 1,281,182
Texas Utilities Co.
6.38%, 01/01/08 1,000,000 899,864
Virginia Electric & Power Co.
7.38%, 07/01/02 1,000,000 1,002,482
------------------------------------------------------------------------------------------
11,735,192
------------------------------------------------------------------------------------------
FOOD--0.74%
------------------------------------------------------------------------------------------
Albertson's Inc.
6.63%, 06/01/28 1,000,000 825,305
Archer-Daniels-Midland Co.
8.38%, 04/15/17 500,000 517,726
Fred Meyer Inc.
7.45%, 03/01/08 1,000,000 956,417
Kroger Co.
7.00%, 05/01/18 1,000,000 872,229
------------------------------------------------------------------------------------------
3,171,677
------------------------------------------------------------------------------------------
HEALTH CARE--0.47%
------------------------------------------------------------------------------------------
Baxter International Inc.
7.63%, 11/15/02 1,000,000 1,008,335
Becton Dickinson & Co.
7.15%, 10/01/09 1,000,000 982,357
------------------------------------------------------------------------------------------
1,990,692
------------------------------------------------------------------------------------------
INSURANCE--0.22%
------------------------------------------------------------------------------------------
Aetna Services Inc.
7.13%, 08/15/06 1,000,000 948,474
------------------------------------------------------------------------------------------
948,474
------------------------------------------------------------------------------------------
MACHINERY-CONSTRUCTION & MINING--0.23%
------------------------------------------------------------------------------------------
Caterpillar Inc.
7.25%, 09/15/09 1,000,000 980,888
------------------------------------------------------------------------------------------
980,888
------------------------------------------------------------------------------------------
MANUFACTURERS--0.20%
------------------------------------------------------------------------------------------
Tyco International Group
6.88%, 01/15/29 1,000,000 855,130
------------------------------------------------------------------------------------------
855,130
------------------------------------------------------------------------------------------
MEDIA--2.45%
------------------------------------------------------------------------------------------
Comcast Cable Communications
8.38%, 05/01/07 2,000,000 2,038,628
Disney (Walt) Co.
5.13%, 12/15/03 2,000,000 1,874,334
6.75%, 03/30/06 500,000 489,414
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOND INDEX MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
------------------------------------------------------------------------------------------
<S> <C> <C>
Time Warner Entertainment Co.
8.38%, 03/15/23 $2,500,000 $ 2,554,110
Viacom Inc.
7.75%, 06/01/05 3,500,000 3,524,392
------------------------------------------------------------------------------------------
10,480,878
------------------------------------------------------------------------------------------
MULTI-NATIONAL--0.73%
------------------------------------------------------------------------------------------
African Development Bank
7.75%, 12/15/01 500,000 503,946
Asian Development Bank
6.75%, 06/11/07 1,000,000 977,674
Inter-American Development Bank
5.75%, 02/26/08 1,000,000 918,784
8.40%, 09/01/09 200,000 216,477
8.50%, 03/15/11 450,000 495,393
------------------------------------------------------------------------------------------
3,112,274
------------------------------------------------------------------------------------------
OIL & GAS PRODUCERS--1.13%
------------------------------------------------------------------------------------------
Amoco Canada
7.25%, 12/01/02 1,000,000 1,002,726
Conoco Inc.
5.90%, 04/15/04 2,000,000 1,905,182
Kerr-McGee Corp.
6.63%, 10/15/07 1,120,000 1,042,383
Phillips 66 Capital Trust II
8.00%, 01/15/37 1,000,000 861,060
------------------------------------------------------------------------------------------
4,811,351
------------------------------------------------------------------------------------------
PHARMACEUTICALS--0.23%
------------------------------------------------------------------------------------------
American Home Products Corp.
6.50%, 10/15/02 1,000,000 989,941
------------------------------------------------------------------------------------------
989,941
------------------------------------------------------------------------------------------
PIPELINES--0.23%
------------------------------------------------------------------------------------------
Sonat Inc.
7.63%, 07/15/11 1,000,000 977,437
------------------------------------------------------------------------------------------
977,437
------------------------------------------------------------------------------------------
REAL ESTATE--0.22%
------------------------------------------------------------------------------------------
EOP Operating LP
6.38%, 02/15/03 1,000,000 960,189
------------------------------------------------------------------------------------------
960,189
------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--0.22%
------------------------------------------------------------------------------------------
Prologis Trust
7.10%, 04/15/08 1,000,000 917,672
------------------------------------------------------------------------------------------
917,672
------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOND INDEX MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
------------------------------------------------------------------------------------------
<S> <C> <C>
RETAIL--0.86%
------------------------------------------------------------------------------------------
Penney (J.C.) Company Inc.
8.25%, 08/15/22 $2,000,000 $ 1,546,500
Wal-Mart Stores Inc.
8.50%, 09/15/24 2,000,000 2,120,314
------------------------------------------------------------------------------------------
3,666,814
------------------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT--0.23%
------------------------------------------------------------------------------------------
Motorola Inc.
7.50%, 05/15/25 1,000,000 993,539
------------------------------------------------------------------------------------------
993,539
------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--0.30%
------------------------------------------------------------------------------------------
Bell Telephone Canada
9.50%, 10/15/10 250,000 282,887
MCI Communications Corp.
6.13%, 04/15/02 1,000,000 976,450
------------------------------------------------------------------------------------------
1,259,337
------------------------------------------------------------------------------------------
TELEPHONE--3.46%
------------------------------------------------------------------------------------------
AT&T Corp.
6.00%, 03/15/09 1,500,000 1,337,459
6.50%, 09/15/02 2,000,000 1,966,454
Deutsche Telekom International Finance
8.25%, 06/15/30 1,000,000 1,016,900
New York Telephone Co.
6.00%, 04/15/08 500,000 446,364
7.00%, 12/01/33 2,305,000 2,013,418
Sprint Capital Corp.
6.13%, 11/15/08 4,000,000 3,564,100
U.S. West Capital Funding Inc.
6.13%, 07/15/02 1,000,000 978,346
US West Communications Inc.
7.63%, 06/09/03 1,000,000 998,124
WorldCom Inc.
6.25%, 08/15/03 1,000,000 964,058
7.55%, 04/01/04 1,500,000 1,497,951
------------------------------------------------------------------------------------------
14,783,174
------------------------------------------------------------------------------------------
TOBACCO--0.10%
------------------------------------------------------------------------------------------
Imperial Tobacco Group PLC
7.13%, 04/01/09 500,000 444,723
------------------------------------------------------------------------------------------
444,723
------------------------------------------------------------------------------------------
TRANSPORTATION--0.95%
------------------------------------------------------------------------------------------
Canadian National Railway Co.
6.45%, 07/15/00 1,300,000 1,209,667
CSX Corp.
7.90%, 05/01/17 1,000,000 949,723
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BOND INDEX MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Norfolk Southern Corp.
7.80%, 05/15/27 $1,000,000 $ 961,520
Union Pacific Corp.
6.79%, 11/09/07 1,000,000 934,546
--------------------------------------------------------------------------------------------------------------------------
4,055,456
--------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES
(Cost: $145,481,917) 137,125,359
--------------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT BONDS &
NOTES++--2.91%
--------------------------------------------------------------------------------------------------------------------------
British Columbia (Province of)
6.50%, 01/15/26 1,000,000 885,352
Chile (Republic of)
6.88%, 04/28/09 1,000,000 923,734
Corp. Andina de Fomento
7.75%, 03/01/04 2,000,000 1,979,770
Hydro Quebec
8.40%, 01/15/22 2,000,000 2,114,198
Mexico Government International Bond
9.88%, 01/15/07 1,000,000 1,030,000
11.50%, 05/15/26 1,000,000 1,202,500
New Brunswick (Province of)
7.63%, 06/29/04 1,200,000 1,211,714
Ontario (Province of)
7.63%, 06/22/04 750,000 758,552
7.75%, 06/04/02 2,300,000 2,323,653
--------------------------------------------------------------------------------------------------------------------------
TOTAL FOREIGN GOVERNMENT BONDS & NOTES
(Cost: $13,073,301) 12,429,473
--------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS--62.08%
U.S. GOVERNMENT AGENCY BONDS AND NOTES--
14.93%
--------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank
5.02%, 02/11/02 3,500,000 3,400,470
5.13%, 09/15/03 2,500,000 2,369,662
5.40%, 01/15/03 1,500,000 1,446,433
5.50%, 01/21/03 1,000,000 966,323
5.95%, 07/28/08 3,500,000 3,238,665
6.09%, 06/02/06 2,500,000 2,384,147
6.13%, 08/15/03 1,000,000 975,206
6.61%, 06/09/04 3,000,000 2,930,100
</TABLE>
The accompanying notes are an integral part of these finanicial statements.
<PAGE>
BOND INDEX MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Mortgage Corporation
5.00%, 01/15/04 $ 5,000,000 $ 4,684,635
5.13%, 10/15/08 3,400,000 2,960,557
5.50%, 05/15/02 1,000,000 975,654
5.63%, 02/20/04 1,000,000 952,856
5.75%, 04/15/08 1,000,000 916,906
5.75%, 03/15/09 500,000 453,973
5.90%, 05/04/04 3,500,000 3,353,994
6.30%, 06/01/04 1,000,000 968,547
6.75%, 09/15/29 1,000,000 956,254
7.00%, 02/15/03 2,000,000 2,001,206
Federal National Mortgage Association
0.00%, 06/01/17 1,000,000 300,160
5.13%, 02/13/04 3,104,000 2,916,202
5.25%, 01/15/09 1,000,000 877,546
5.38%, 03/15/02 1,000,000 975,727
5.75%, 06/15/05 1,000,000 947,584
5.88%, 04/23/04 600,000 574,733
6.00%, 05/15/08 1,000,000 930,731
6.26%, 02/25/09 5,000,000 4,637,785
6.38%, 06/15/09 394,000 373,382
6.45%, 02/14/02 1,000,000 991,375
6.80%, 01/10/03 1,400,000 1,394,924
7.13%, 03/15/07 1,000,000 1,002,920
7.13%, 01/15/30 887,000 889,193
7.55%, 04/22/02 3,000,000 3,031,776
Financing Corp.
8.60%, 09/26/19 2,150,000 2,461,490
9.65%, 11/02/18 500,000 623,792
9.80%, 04/06/18 1,285,000 1,616,020
Tennessee Valley Authority
6.00%, 03/15/13 1,000,000 898,201
6.13%, 07/15/03 500,000 483,771
6.25%, 12/15/17 600,000 539,140
6.88%, 12/15/43 1,000,000 875,000
7.13%, 05/01/30 450,000 450,540
-------------------------------------------------------------------------------------------------------------------------
63,727,580
-------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES--47.15%
-------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds
5.25%, 02/15/29 700,000 621,032
5.50%, 08/15/28 2,800,000 2,568,126
6.00%, 02/15/26 1,200,000 1,173,000
6.13%, 11/15/27 1,600,000 1,595,000
6.13%, 08/15/29 800,000 808,500
6.25%, 05/15/30 1,200,000 1,259,626
6.50%, 11/15/26 1,500,000 1,564,687
6.63%, 02/15/27 1,000,000 1,060,313
7.13%, 02/15/23 5,200,000 5,768,750
7.25%, 05/15/16 4,100,000 4,511,283
</TABLE>
The accompanying notes are an integral part of these finanicial statements.
<PAGE>
BOND INDEX MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
7.50%, 11/15/16 $ 500,000 $ 563,125
7.63%, 02/15/07 500,000 508,125
7.63%, 02/15/25 5,300,000 6,250,687
7.88%, 02/15/21 2,500,000 2,968,750
8.00%, 11/15/21 7,100,000 8,568,812
8.13%, 08/15/19 5,250,000 6,332,812
8.75%, 05/15/17 1,600,000 2,011,000
8.75%, 05/15/20 3,100,000 3,970,908
8.75%, 08/15/20 2,100,000 2,693,907
9.13%, 05/15/09 1,000,000 1,088,125
9.13%, 05/15/18 1,500,000 1,957,032
9.38%, 02/15/06 1,300,000 1,486,469
9.88%, 11/15/15 1,500,000 2,032,500
10.63%, 11/15/12 2,100,000 2,584,313
11.25%, 02/15/15 1,250,000 1,839,844
11.75%, 11/15/14 500,000 689,375
12.00%, 08/15/13 1,100,000 1,486,375
12.75%, 11/15/10 500,000 640,625
13.25%, 05/15/14 1,500,000 2,190,000
U.S. Treasury Notes
4.25%, 11/15/03 1,500,000 1,407,188
4.75%, 02/15/04 2,100,000 1,996,313
4.75%, 11/15/08 6,700,000 6,084,438
5.25%, 05/15/04 3,700,000 3,569,346
5.38%, 06/30/03 2,250,000 2,191,642
5.50%, 07/31/01 4,100,000 4,057,721
5.50%, 08/31/01 2,000,000 1,976,250
5.50%, 01/31/03 2,100,000 2,056,032
5.50%, 03/31/03 3,000,000 2,932,500
5.50%, 05/31/03 1,450,000 1,417,375
5.50%, 02/15/08 1,200,000 1,149,000
5.50%, 05/15/09 500,000 478,125
5.63%, 09/30/01 2,500,000 2,473,438
5.63%, 05/15/08 3,300,000 3,182,438
5.75%, 06/30/01 3,000,000 2,978,439
5.75%, 11/30/02 1,600,000 1,576,501
5.75%, 04/30/03 1,000,000 984,688
5.75%, 08/15/03 5,000,000 4,914,065
5.88%, 11/30/01 850,000 842,563
5.88%, 09/30/02 1,700,000 1,680,345
5.88%, 02/15/04 1,000,000 986,250
5.88%, 11/15/04 1,000,000 985,000
5.88%, 11/15/05 2,500,000 2,457,033
6.00%, 08/15/09 2,800,000 2,777,250
6.13%, 12/31/01 1,200,000 1,193,250
6.13%, 08/15/07 3,300,000 3,280,408
6.25%, 10/31/01 2,800,000 2,790,376
6.25%, 01/31/02 1,000,000 996,250
6.25%, 02/28/02 7,000,000 6,973,750
6.25%, 06/30/02 3,000,000 2,989,689
</TABLE>
The accompanying notes are an integral part of these finanicial statements.
<PAGE>
BOND INDEX MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
6.25%, 02/15/03 $ 3,800,000 $ 3,789,314
6.38%, 09/30/01 2,000,000 1,996,250
6.38%, 08/15/02 4,700,000 4,692,659
6.50%, 05/15/05 3,000,000 3,032,814
6.50%, 08/15/05 3,000,000 3,031,875
6.50%, 10/15/06 1,400,000 1,415,750
6.50%, 02/15/10 1,800,000 1,861,313
6.63%, 06/30/01 2,000,000 2,003,126
6.63%, 04/30/02 2,800,000 2,807,000
6.63%, 05/15/07 1,000,000 1,020,625
6.88%, 05/15/06 3,000,000 3,087,189
7.00%, 07/15/06 1,900,000 1,968,282
7.25%, 08/15/04 8,950,000 9,249,270
7.50%, 11/15/01 5,200,000 5,266,628
7.50%, 05/15/02 3,000,000 3,055,314
7.50%, 02/15/05 1,300,000 1,363,375
7.88%, 08/15/01 4,300,000 4,363,158
7.88%, 11/15/04 3,000,000 3,175,314
--------------------------------------------------------------------------------------------------------------
201,350,020
--------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS
(Cost: $272,485,675) 265,077,600
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
SHORT TERM INSTRUMENTS--5.17%
--------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation Discount Note
6.42%, 07/05/00 + 4,247,333 4,247,333
Goldman Sachs Financial Square Prime Obligation Fund
6.57%, 07/03/00 + 10,834,855 10,834,855
Short Term Investment Company Liquid Assets Portfolio
6.67%, 07/03/00 + 7,000,000 7,000,000
--------------------------------------------------------------------------------------------------------------
TOTAL SHORT TERM INSTRUMENTS
(Cost: $22,082,188) 22,082,188
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these finanicial statements.
<PAGE>
BOND INDEX MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS--1.28%
------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Tri Party Repurchase Agreement, dated
6/30/00, due 7/03/00, with a maturity value of $5,455,424
and an effective yield of 6.30%. $5,452,562 $ 5,452,562
------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost: $5,452,562) 5,452,562
------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 103.55%
(Cost $458,575,643) 442,167,182
------------------------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities -- (3.55%) (15,164,127)
------------------------------------------------------------------------------------------------------------------------
NET ASSETS -- 100.00% $427,003,055
========================================================================================================================
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Represents investment of collateral received from securities lending
transactions. See Note 4.
++ Investments are denominated in U.S. Dollars.
The accompanying notes are an integral part of these finanicial statements.
<PAGE>
Bond Index Master Portfolio
Statement of Assets and Liabilities
June 30, 2000 (Unaudited)
<TABLE>
-----------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments at market value (Cost: $458,575,643) (Note 1) $ 442,167,182
Receivables:
Investment securities sold 1,040,573
Interest 7,003,802
--------------
Total Assets 450,211,557
LIABILITIES --------------
Payables:
Investment securities purchased 999,310
Collateral for securities loaned (Note 4) 22,082,188
Due to BGI (Note 2) 127,004
--------------
Total Liabilities 23,208,502
--------------
NET ASSETS $ 427,003,055
==============
-----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Bond Index Master Portfolio
Statement of Operations
For the Six Months Ended June 30, 2000 (Unaudited)
<TABLE>
<S> <C>
----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME
Interest (Includes securities lending income of $17,733) $ 15,090,875
--------------
Total investment income 15,090,875
--------------
EXPENSES (NOTE 2)
Advisory fees 176,216
--------------
Total expenses 176,216
--------------
Net investment income 14,914,659
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on sale of investments (6,196,688)
Net change in unrealized appreciation (depreciation) of investments 7,643,158
--------------
Net gain on investments 1,446,470
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 16,361,129
==============
----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Bond Index Master Portfolio
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
For the Six
Months Ended
June 30, 2000 For the Period Ended For the Year Ended
(Unaudited) December 31, 1999 * February 28, 1999
--------------- -------------------- ----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 14,914,659 $ 22,243,983 $ 7,063,037
Net realized gain (loss) (6,196,688) (2,713,060) 419,676
Net change in unrealized appreciation (depreciation) 7,643,158 (22,407,564) (4,365,016)
---------------- ---------------- ---------------
Net increase (decrease) in net assets resulting from operations 16,361,129 (2,876,641) 3,117,697
---------------- ---------------- ---------------
Interestholder transactions:
Contributions 83,224,962 524,489,703 357,368,335
Withdrawals (117,026,949) (478,897,035) (51,992,277)
---------------- ---------------- ---------------
Net increase (decrease) in net assets resulting from interestholder (33,801,987) 45,592,668 305,376,058
transactions
---------------- ---------------- ---------------
Increase (decrease) in net assets (17,440,858) 42,716,027 308,493,755
NET ASSETS:
Beginning of period 444,443,913 401,727,886 93,234,131
---------------- ---------------- ---------------
End of period $ 427,003,055 $ 444,443,913 $ 401,727,886
================ ================ ===============
---------------------------------------------------------------------------------------------------------------------------------
</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
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
1. Significant Accounting Policies
Master Investment Portfolio (''MIP'') is registered under the Investment
Company Act of 1940, as amended (the ''1940 Act''), as an open-end management
investment company. MIP was organized on October 20, 1993 as a Delaware
business trust pursuant to an Agreement and Declaration of Trust dated May 14,
1993, and had no operations prior to March 1, 1994. MIP currently issues the
following separate portfolios: Asset Allocation, Bond Index, Extended Index,
International Index, LifePath Income, LifePath 2010, LifePath 2020, LifePath
2030, LifePath 2040, Money Market, S&P 500 Index and U.S. Equity Index Master
Portfolios.
These financial statements relate to Bond Index Master Portfolio (the "Master
Portfolio").
The following is a summary of significant accounting policies which are
consistently followed by the MIP in the preparation of its financial statements,
and which are in conformity with generally accepted accounting principles for
investment companies. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Security Valuation
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
MIP believes that the Master Portfolio has and will continue to be operated
in a manner so as to qualify it as a partnership for federal income tax
purposes. Provided that the Master Portfolio so qualifies, it will not be
subject to any federal income tax on its income and gain (if any). However, each
investor in the Master Portfolio will be taxed on its distributive share of the
Master Portfolio's taxable income in determining its federal income tax
liability. As a partnership for federal income tax purposes, the Master
Portfolio will be deemed to have "passed through" to interestholders any
interest, dividends, gains or losses for such purposes. The determination of
such share will be made in accordance with the Code, and regulations promulgated
thereunder.
It is intended that the Master Portfolio's assets, income and distributions
will be managed in such a way that an entity electing and qualifying as a
"regulated investment company" under the Code can continue to so qualify by
investing substantially all of its assets through the Master Portfolio, provided
that the regulated investment company meets other requirements for such
qualifications not within the control of the Master Portfolio (e.g.,
distributing at least 90% of the regulated investment company's "investment
company taxable income" annually).
Repurchase Agreements
Transactions involving purchases of securities under agreements to resell
such securities at a specified price and time ("repurchase agreements") are
treated as collateralized financing transactions and are recorded at their
contracted resale amounts. These repurchase agreements, if any, are detailed in
the Master Portfolio's Schedule of Investments. The advisor to the Master
Portfolio may pool the Master
<PAGE>
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 the repurchase price.
The repurchase agreement entered into on June 30, 2000 by the Master
Portfolio is fully collateralized by U.S. Government obligations with a rate of
6.50%, a maturity date of 08/15/05 and an aggregate market value of $5,565,975.
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
June 30, 2000, 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 for the six months ended June 30, 2000 were as follows:
U.S. GOVERNMENT OBLIGATIONS:
Purchases at cost $ 52,931,514
Sales proceeds 77,259,287
OTHER SECURITIES:
Purchases at cost $ 42,950,493
Sales proceeds 36,707,378
At June 30, 2000 the Master Portfolio's aggregate unrealized appreciation and
depreciation based on cost for federal income tax purposes were as follows:
Tax Unrealized Unrealized Net Unrealized
Cost Appreciation Depreciation Depreciation
------------------------------------------------------------------------------
$ 458,575,643 $ 1,419,317 $ (17,827,778) $ (16,408,461)
<PAGE>
4. Portfolio Securities Loaned
As of June 30, 2000, the Master Portfolio had loaned securities which were
collateralized by U.S. Government Agency obligations and 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 at June 30, 2000 was $21,525,993 and the value of the related
collateral was $22,082,188.
5. Financial Highlights
The ratios of expenses to average net assets, net investment income to
average net assets and portfolio turnover rates (excluding short-term
securities) for the Master Portfolio are as follows:
<TABLE>
<CAPTION>
Six Months For the For the
Ended June Period Ended Year Ended
30, 2000 December 31, February 28,
(Unaudited) 1999 * 1999
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ratio of expenses to average net + 0.08% 0.08% 0.08%
assets
Ratio of net investment income to + 6.77% 6.44% 6.31%
average net assets
Portfolio turnover rate 22% 25% 28%
------------------------------------------------------------------------------------------
</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.
