[LOGO OF SMITH BARNEY MUTUAL FUND]
SMITH BARNEY
EAFE INDEX Fund
ANNUAL REPORT
DECEMBER 31, 1999
[LOGO OF SMITH BARNEY MUTUAL FUND]
NOT FDIC INSURED . NOT BANK GUARANTEED . MAY LOSE VALUE
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Smith Barney EAFE Index Fund
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WHAT'S INSIDE
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Letter from the Chairman of the Smith Barney EAFE Index Fund .................1
Smith Barney EAFE Index Fund
Statement of Assets and Liabilities......................................3
Statement of Operations..................................................4
Statement of Changes in Net Assets.......................................5
Notes to Financial Statements............................................6
Financial Highlights.....................................................8
Independent Auditors' Report.............................................9
International Index Master Portfolio
Schedule of Investments.................................................10
Statement of Assets and Liabilities.....................................20
Statement of Operations.................................................21
Statement of Changes in Net Assets......................................22
Notes to Financial Statements...........................................23
Independent Auditors' Report............................................28
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Shareholder Letter
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[PHOTO]
HEATH B. MCLENDON
Chairman
Dear Shareholder:
We are pleased to provide the first annual report for the Smith Barney EAFE
Index Fund ("Fund") for the period ended December 31, 1999. In this report we
summarize the period's prevailing economic and market conditions. A detailed
summary of performance and current holdings can be found in the appropriate
sections that follow. We hope you find this report to be useful and informative.
Performance and Strategy Update
The Fund began on October 18, 1999. It seeks to offer long-term capital growth
and diversification by approximating, before fees and expenses, the performance
of the Morgan Stanley Capital International Europe, Australasia and Far East
Index ("EAFE Index"). The EAFE Index is an unmanaged index of common stocks of
companies located in Europe, Australasia and the Far East.1
The Fund is a feeder fund in a master/feeder structure. Accordingly, the Fund
does not buy individual securities directly. Instead, it invests all of its
assets in the International Index Master Portfolio ("Master Portfolio"), a
series of Master Investment Portfolio ("MIP"), rather than directly in a
portfolio of securities. MIP is a registered open-end management investment
company. The Master Portfolio seeks to provide investment results that match as
closely as practicable, before fees and expenses, the performance of the EAFE
Index.
Since its inception on October 18, 1999, the Fund's Class A shares returned
15.20%. Barclay's Global Fund Advisors ("BGFA") is responsible for managing the
Fund.
The Master Portfolio invests in a sampling of securities that are selected and
weighted to result in investment characteristics comparable to, and performance
that will correlate with the performance of the EAFE Index. Under normal
conditions, the Master Portfolio invests at least 90% of its assets in common
stocks included in the EAFE Index, which represents the performance of foreign
stock markets.
The Master Portfolio follows an indexed or "passively managed" approach to
investing. BGFA does not evaluate individual companies to identify attractive
investment candidates. Instead, BGFA attempts to mirror the composition of the
EAFE Index as closely as possible by adjusting the Master Portfolio's portfolio
periodically to reflect the companies included in the index and their
weightings.2
International Markets Overview
International stock markets ended a strong 1999 with stellar performance in
December and the fourth quarter of 1999 as a whole. Y2K concerns in global
markets continued to ease and in fact no significant Y2K-related problems were
reported globally. This led to strong performance in emerging market stocks and
technology-related companies in mature markets that had previously suffered from
Y2K fears. In the United States, despite the negative influences of a tight
labor market and rising commodity prices, inflation has remained under control
due to Federal Reserve Board vigilance.
- -------------
1 Please note that the EAFE Index is unmanaged and is not subject to the same
management and trading expenses of a mutual fund.
2 The Master Portfolio does not mirror the EAFE Index exactly because, unlike
the EAFE Index, the Master Portfolio must maintain a portion of its assets
in cash and liquid securities to meet redemption requests and pay the
Master Portfolio's expenses.
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Smith Barney EAFE Index Fund 1
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Upward movement in many global markets was narrowly based in technology and
Internet-related companies. The strong price appreciations in many of these
companies have raised valuations significantly, so there is little room for
earnings disappointments.
After a very strong fourth quarter of 1999, international markets succumbed to
profit-taking in January. Stock market declines during the month were driven by
apprehension of the early February Federal Reserve meeting during which
short-term interest rates were increased.
We continue to believe that the outlook for international stock investing is
brighter than in many years. In our view, three factors may cause non-U.S.
markets to perform better than the U.S. stock market:
. International stocks are relatively inexpensive compared with their U.S.
counterparts.
. Resurgent economic growth in many economies could lead to strong corporate
earnings gains at a time when U.S. corporate earnings may be pressured.
. Great scope for corporate restructuring (either voluntarily or through
hostile acquisition) is now being realized overseas.
Thank you for your investment in the Smith Barney EAFE Index Fund. We look
forward to helping you pursue your financial goals in the new century.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman
February 22, 2000
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2 1999 Annual Report to Shareholders
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SMITH BARNEY EAFE INDEX FUND
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Statement of Assets and Liabilities December 31, 1999
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ASSETS:
Investment in Master Portfolio, at value (Note 1) $784,058
Receivable for Fund shares sold 29,600
Other assets 678
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Total Assets 814,336
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LIABILITIES:
Distribution fees payable 124
Management fees payable 93
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Total Liabilities 217
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Total Net Assets $814,119
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NET ASSETS:
Paid in capital $763,764
Accumulated net investment loss (323)
Accumulated net realized gain from investments 464
Net unrealized appreciation of investments 50,214
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Total Net Assets $814,119
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Shares Outstanding, Class A shares 70,666
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Net Asset Value, Class A shares (and redemption price) $11.52
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See Notes to Financial Statements.
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Smith Barney EAFE Index Fund 3
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SMITH BARNEY EAFE INDEX FUND
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Statement of Operations For the Period Ended December 31, 1999(a)
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NET INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIO:
Dividend $ 208
Interest 184
Expenses (138)
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Net Investment Income Allocated From Master Portfolio 254
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EXPENSES:
Audit and legal 17,000
Shareholder communications 5,000
Trustees' fees 1,000
Shareholder servicing fees 500
Custody 250
Distribution plan fees (Note 2) 124
Administration fees (Note 2) 95
Miscellaneous expenses 10,825
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Total Expenses 34,794
Less: Administration fee waiver and expense reimbursement (Note 2) (34,420)
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Net Expenses 374
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Net Investment Loss (120)
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
ALLOCATED FROM MASTER PORTFOLIO (NOTE 1):
Net realized gain on sale of investments 137
Increase in net unrealized appreciation of investments 50,214
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Net Gain on Investments 50,351
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Increase in Net Assets From Operations $ 50,231
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(a) For the period from October 18, 1999 (commencement of operations) to
December 31, 1999.
See Notes to Financial Statements.
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4 1999 Annual Report to Shareholders
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SMITH BARNEY EAFE INDEX FUND
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Statement of Changes in Net Assets For the Period Ended December 31, 1999(a)
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OPERATIONS:
Net investment loss $ (120)
Net realized gain on sale of investments 137
Increase in net unrealized appreciation of investments 50,214
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Increase in Net Assets From Operations 50,231
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FUND SHARE TRANSACTIONS (NOTE 3):
Net proceeds from sale of shares 763,888
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Increase in Net Assets From Fund Share Transactions 763,888
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Increase in Net Assets 814,119
NET ASSETS:
Beginning of period --
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End of period* $ 814,119
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* Includes accumulated net investment loss of: $(323)
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(a) For the period from October 18, 1999 (commencement of operations) to
December 31, 1999.
See Notes to Financial Statements.
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Smith Barney EAFE Index Fund 5
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SMITH BARNEY EAFE INDEX FUND
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Notes to Financial Statements
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1. Significant Accounting Policies
The EAFE Index Fund ("Fund") is a separate series of Smith Barney Investment
Trust ("Trust"), a Massachusetts business trust. The Trust is registered under
the Investment Company Act of 1940, as amended, as an open-end, management
investment company. To achieve its investment objective, the Fund invests all of
its investable assets in the International Index Master Portfolio ("Master
Portfolio") a series of Master Investment Portfolio ("MIP"), a registered
open-end management investment company with the same investment objective of 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. As of December 31,
1999, the value of the Fund's investment in the Master Portfolio was 1.28% of
the outstanding interest of the Master Portfolio.
The financial statements of the Master Portfolio, including the portfolio of
investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
The significant accounting policies consistently followed by the Fund are in
conformity with generally accepted accounting principles and are as follows: (a)
valuation of securities by the Master Portfolio is discussed in Note 1 of the
Master Portfolio's Notes to Financial Statements, which are included elsewhere
in this report; (b) the Fund earns income, net of Master Portfolio expenses,
daily based on its investments in the Master Portfolio; (c) the Fund intends to
comply with the applicable provisions of the Internal Revenue Code of 1986, as
amended, pertaining to regulated investment companies and to make distributions
of taxable income sufficient to relieve it from substantially all Federal income
and excise taxes; (d) each fund bears a pro rata portion of the investment
advisory and administration fees paid by the Master Portfolio; (e) dividends and
distributions to shareholders are recorded on ex-dividend date; (f) all the net
investment income, realized and unrealized gain and loss of the Master Portfolio
is allocated pro rata, based on respective ownership interests, among the Fund
and the other investors in the Master Portfolio at the time of such
determination. Investment transactions are accounted for on the trade date
basis. Realized gains and losses are determined on the identified cost basis;
and (g) the character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. At December 31, 1999, reclassifications were made to the
Fund's capital accounts to reflect permanent book/tax differences and income and
gains available for distributions under income tax regulations. Accordingly, a
portion of accumulated net investment loss amounting to $124 was reclassified to
paid-in capital. Net investment income, net realized gains and net assets were
not affected by this change.
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6 1999 Annual Report to Shareholders
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SMITH BARNEY EAFE INDEX FUND
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Notes to Financial Statements (continued)
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2. Management Agreement and Other Transactions
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings, acts as the Fund's administrator. The Fund's management fee is
calculated at an annual rate of 0.40% of the Fund's average daily net assets.
This management fee includes an investment management and administration fee
payable by the Master Portfolio (0.25% of the Master Portfolio's average daily
net assets); and an administration fee payable by the Fund (0.15% of the Fund's
average daily net assets). This fee is calculated daily and paid monthly. For
the period ended December 31, 1999, SSBC waived all of its administration fees
and has agreed to reimburse expenses of $34,325.
Smith Barney Private Trust Company ("Private Trust"), another subsidiary of
Citigroup, became the Fund's transfer agent and PFPC Global Fund Services
("PFPC") acts as the Fund's sub-transfer agent. Private Trust receives account
fees and asset-based fees that vary according to the account size and type of
account. PFPC is responsible for shareholder recordkeeping and financial
processing for all shareholder accounts and is paid by Private Trust.
CFBDS, Inc. ("CFBDS") acts as the Fund's distributor. Salomon Smith Barney
("SSB"), another subsidiary of SSBH, as well as certain other broker-dealers,
continues to sell Fund shares to the public as a member of the selling group.
Pursuant to a Distribution Plan, the Fund pays a service fee with respect to its
Class A shares calculated at an annual rate of 0.20% of the average daily net
assets of the Fund.
Certain officers and a Trustee of the Fund are officers or directors of the
Administrator or its affiliates.
3. Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). The Fund
has the ability to issue multiple classes of shares. Transactions in shares of
beneficial interest were as follows:
Period Ended
December 31, 1999(a)
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Shares Amount
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Class A
Shares sold 70,666 $763,888
Shares reacquired -- --
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Net Increase 70,666 $763,888
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(a) For the period from October 18, 1999 (commencement of operations) to
December 31, 1999.
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Smith Barney EAFE Index Fund 7
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SMITH BARNEY EAFE INDEX FUND
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Financial Highlights
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For a share of capital stock outstanding throughout the period:
Class A Shares 1999(1)
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Net Asset Value, Beginning of Period $10.00
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Income From Operations:
Net investment loss(2) (0.00)*
Net realized and unrealized gain 1.52
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Total Income From Operations 1.52
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Net Asset Value, End of Period $11.52
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Total Return++ 15.20%
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Net Assets, End of Period (000's) $814
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Ratios to Average Net Assets+:
Expenses(2)(3)(4) 0.85%
Net investment loss (0.19)
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Portfolio Turnover Rate 39%
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(1) For the period from October 18, 1999 (commencement of operations) to
December 31, 1999.
(2) The administrator has agreed to waive all of its fees and reimburse
expenses of $34,325 for the period ended December 31, 1999. If such fees
were not waived or expenses reimbursed, the increase to net investment loss
per share and actual expense ratio would have been $0.49 and 55.46%
(annualized), respectively.
(3) As a result of an expense limitation, the expense ratio will not exceed
0.85%.
(4) This expense ratio includes expenses charged to the Master Portfolio.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
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8 1999 Annual Report to Shareholders
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SMITH BARNEY EAFE INDEX FUND
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Independent Auditors' Report
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To the Shareholders and Board of Trustees of
Smith Barney Investment Trust:
We have audited the accompanying statement of assets and liabilities of Smith
Barney EAFE Index Fund (a series of Smith Barney Investment Trust) as of
December 31, 1999, and the related statements of operations, changes in net
assets and financial highlights for the period from October 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 Smith
Barney EAFE Index Fund as of December 31, 1999, the results of its operations,
changes in its net assets, and its financial highlights for the period from
October 18, 1999 to December 31, 1999 in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
San Francisco, California
February 11, 2000
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Smith Barney EAFE Index Fund 9
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INTERNATIONAL INDEX MASTER PORTFOLIO
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Schedule of Investments December 31, 1999
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<TABLE>
<CAPTION>
SHARES SECURITY VALUE
============================================================================================
<S> <C> <C>
COMMON STOCKS -- 92.6%
Australia -- 2.1%
13,309 Amcor Ltd. $ 62,094
9,143 AMP Ltd. 100,635
3,660 Brambles Industries Ltd. 100,828
13,159 Broken Hill Proprietary Co., Ltd. 172,129
11,578 Coca-Cola Amatil Ltd. 31,499
12,284 Coles Myer Ltd. 63,210
21,861 Foster's Brewing Group Ltd. 62,479
4,064 Lend Lease Corp., Ltd. 56,719
7,300 National Australia Bank Ltd. 111,239
10,782 News Corp., Ltd. 104,291
4,769 Rio Tinto Ltd. 102,055
44,778 Telstra Corp., Ltd. 242,477
10,566 Westpac Banking Corp., Ltd. 72,605
14,139 WMC Ltd. 77,674
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1,359,934
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Austria -- 0.2%
1,209 Bank Austria AG 68,188
329 Oesterreichische Elektrizitaetswirtschafts AG Class A* 46,224
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114,412
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Belgium -- 1.0%
640 Colruyt NV 36,741
868 Delhaize "Le Lion" SA 65,391
64 Dolmen Computer Applications NV* 1,934
261 Electrabel SA 85,432
4,239 Fortis Class B 152,927
472 Groupe Bruxelles Lambert SA 95,075
1,573 KBC Bancassurance Holding NV 84,757
1 PetroFina SA 393
911 Solvay SA 75,236
275 Suez Lyonnaise des Eaux SA-- Strip Vvpr* 3
1,324 UCB SA 57,406
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655,295
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Denmark -- 0.8%
70 A/S Dampskibsselskabet Svendborg Class B 116,526
500 Danisco A/S 19,489
200 Den Danske Bank Group 21,925
90 D/S 1912 Class B 105,970
500 Novo-Nordisk A/S Class B 66,316
1,500 Tele Danmark A/S 111,451
600 Unidanmark A/S 42,225
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483,902
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Finland -- 2.7%
7,400 Nokia OYJ 1,341,525
4,300 Sonera Group OYJ 294,707
2,100 UPM-Kymmene OYJ 84,601
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1,720,833
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</TABLE>
See Notes to Financial Statements.
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10 1999 Annual Report to Shareholders
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INTERNATIONAL INDEX MASTER PORTFOLIO
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Schedule of Investments (continued) December 31, 1999
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<TABLE>
<CAPTION>
SHARES SECURITY VALUE
============================================================================================
<S> <C> <C>
France -- 9.1%
1,545 Accor SA $ 74,644
447 Air Liquide 74,823
1,139 Alcatel 261,549
4,882 Aventis SA 283,706
1,883 Axa UAP 262,471
2,428 Banque National de Paris 223,995
966 BIC SA 43,956
216 Bouygues SA 137,271
827 Canal Plus 120,356
493 Cap Gemini SA 125,124
2,465 Carrefour Supermarche SA 454,569
491 Compagnie de Saint Gobain 92,325
1,100 Compagnie Generale des Etablissements Michelin Class B 43,207
892 Dassault Systemes SA 58,125
290 Eridania Beghin-Say SA 31,193
139 Essilor International SA 43,118
521 Etablissements Economiques du Casino Guichard-Perrachon SA 59,661
5,961 France Telecom SA 788,276
289 Groupe Danone 68,110
642 Lafarge SA 74,746
954 Lagardere S.C.A. 51,884
329 L'OREAL 263,922
577 LVMH 258,427
690 Pernod Ricard 39,472
601 Pinault-Printemps-Redoute SA 158,588
370 PSA Peugeot Citroen 83,994
4,277 Sanofi-Synthelabo SA* 178,075
1,017 Schneider SA 79,842
418 SEITA 18,945
617 Societe Generale Class A 143,546
244 Sodexho Alliance SA 43,177
951 Suez Lyonnaise des Eaux SA 152,386
1,059 Thomson CSF 34,973
4,324 Total SA-- Series B 577,027
2,107 Usinor SA 39,577
578 Valeo SA 44,591
3,078 Vivendi 277,916
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5,767,567
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Germany -- 9.4%
450 Adidas AG 33,683
1,200 AGIV AG 21,634
1,295 Allianz AG 435,623
3,550 BASF AG 185,562
3,950 Bayer AG 187,773
1,000 Beiersdorf AG 67,479
1,650 Continental AG 33,153
5,800 DaimlerChrysler AG 449,793
3,338 Deutsche Bank AG-- Reg 281,523
2,520 Deutsche Lufthansa AG 59,643
17,881 Deutsche Telekom AG 1,257,911
</TABLE>
See Notes to Financial Statements.
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Smith Barney EAFE Index Fund 11
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INTERNATIONAL INDEX MASTER PORTFOLIO
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Schedule of Investments (continued) December 31, 1999
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SHARES SECURITY VALUE
================================================================================
Germany -- 9.4% (continued)
3,150 Dresdner Bank AG $ 174,489
550 Heidelberger Zement AG 42,653
2,350 HypoVereinsbank 160,469
950 Karstadt AG 38,214
1,000 Linde AG 55,192
1,300 MAN AG 48,771
3,000 Mannesmann AG 731,192
1,450 Merck KGaA 45,271
1,700 Metro AG 91,429
995 Muenchener Rueckversicherungs-Gesellschaft AG 253,535
1,725 Preussag AG 95,640
2,400 RWE AG 95,478
360 SAP AG 176,936
540 Schering AG 65,263
3,550 Siemens AG 454,074
3,700 Thyssen Krupp AG 114,589
2,500 Veba AG 122,117
3,900 Viag AG 71,487
1,950 Volkswagen AG 109,529
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5,960,105
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Hong Kong -- 2.0%
72,800 Cable & Wireless HKT Ltd. 210,246
27,000 Cathay Pacific Airways 48,106
14,000 Cheung Kong Ltd. 177,848
12,500 CLP Holdings Ltd. 57,568
11,600 Hang Seng Bank Ltd. 132,437
34,600 Hong Kong & China Gas Co., Ltd. 47,402
21,000 Hutchison Whampoa Ltd. 305,269
31,000 New World Development Co., Ltd. 69,787
15,000 Sun Hung Kai Properties Ltd. 156,300
15,000 Swire Pacific Ltd. Class A 88,571
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1,293,534
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Italy -- 4.0%
13,798 Alitalia SpA 32,865
5,917 Assicurazioni Generali 195,465
27,699 Banca Intesa SpA 112,425
35,304 Benetton Group SpA 81,069
6,022 Beni Stabili SPA 2,123
42,894 Enel SpA* 179,713
49,591 ENI SpA 272,701
3,294 Fiat SpA 94,053
9,557 Italgas SpA 36,191
9,818 Mediaset SpA 152,674
6,161 Mediobanca Banca SpA 62,857
27,812 Montedison SpA 45,517
31,103 Olivetti SpA* 90,062
20,465 Pirelli SpA 56,166
5,129 Riunione Adriatica di Sicurta SpA 51,450
6,772 San Paolo -- IMI SpA 92,008
See Notes to Financial Statements.
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12 1999 Annual Report to Shareholders
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INTERNATIONAL INDEX MASTER PORTFOLIO
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Schedule of Investments (continued) December 31, 1999
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SHARES SECURITY VALUE
================================================================================
Italy -- 4.0% (continued)
10,820 Telecom Italia Mobile SpA RNC $ 51,544
38,682 Telecom Italia Mobile SpA 432,051
6,138 Telecom Italia SpA RNC 37,401
21,848 Telecom Italia SpA 308,059
25,945 Unicredito Italiano SpA 127,517
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2,513,911
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Japan -- 25.5%
900 Acom Co., Ltd. 88,125
600 Advantest Corp. 158,466
6,000 Ajinomoto Co. 62,506
2,000 Alps Electric Co., Ltd. 30,500
18,000 Asahi Bank Ltd. 110,927
5,000 Asahi Breweries Ltd. 54,681
13,000 Asahi Chemical Industry Co., Ltd. 66,762
11,000 Asahi Glass Co., Ltd. 85,113
27,000 Bank of Tokyo-Mitsubishi Ltd. 376,094
5,000 Bridgestone Corp. 110,046
6,000 Canon Inc. 238,286
4 Central Japan Railway Co. 25,081
1,600 Credit Saison Co., Ltd. 27,859
5,000 Dai Nippon Printing Co., Ltd. 79,722
4,000 Daiichi Pharmaceutical Co., Ltd. 52,000
6,000 Daiwa House Industry Co., Ltd. 44,605
9,000 Daiwa Securities Co., Ltd. 140,771
6,000 Denso Corp. 143,206
23 East Japan Railway Co. 123,966
3,000 Eisai Co., Ltd. 57,664
1,600 Fanuc Ltd. 203,619
21,000 Fuji Bank Ltd. 203,981
3,000 Fuji Photo Film 109,459
12,000 Fujitsu Ltd. 547,002
8,000 Gunma Bank Ltd. 52,039
20,000 Hitachi Ltd. 320,846
6,000 Honda Motor Co., Ltd. 223,027
1,000 Hoya Corp. 78,744
17,000 Industrial Bank of Japan Ltd. 163,797
11,000 Itochu Corp. 54,769
2,000 Ito-Yokado Co., Ltd. 217,157
17,000 Japan Airlines Co., Ltd. 50,386
7 Japan Tobacco Inc. 53,546
11,000 Joyo Bank Ltd. 50,573
3,000 JUSCO Co., Ltd. 52,265
3,900 Kansai Electric Power Co., Inc 67,944
3,000 Kao Corp. 85,542
26,000 Kawasaki Steel Corp.* 46,543
6,000 Kinden Corp. 46,073
19,000 Kinki Nippon Railway Co., Ltd. 76,201
7,000 Kirin Brewery Co., Ltd. 73,609
11,000 Komatsu Ltd. 50,573
17,000 Kubota Corp. 65,020
See Notes to Financial Statements.
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Smith Barney EAFE Index Fund 13
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INTERNATIONAL INDEX MASTER PORTFOLIO
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Schedule of Investments (continued) December 31, 1999
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SHARES SECURITY VALUE
================================================================================
Japan -- 25.5% (continued)
7,000 Kuraray Co., Ltd. $ 70,869
1,200 Kyocera Corp. 311,063
3,000 Marui Co., Ltd. 44,781
11,000 Matsushita Electric Industrial Co., Ltd. 304,510
5,000 Minebea Co., Ltd. 85,738
17,000 Mitsubishi Chemical Corp. 59,866
11,000 Mitsubishi Corp. 84,897
17,000 Mitsubishi Electric Corp. 109,752
9,000 Mitsubishi Estate Co., Ltd. 87,773
25,000 Mitsubishi Heavy Industries Ltd. 83,390
9,000 Mitsubishi Trust & Banking Corp. 79,233
8,000 Mitsui Fudosan Co., Ltd. 54,153
13,000 Mitsui Marine & Fire Insurance Co., Ltd. 77,061
10,000 Mitsui & Co., Ltd. 69,940
2,000 Murata Manufacturing Co., Ltd. 469,529
10,000 NEC Corp. 238,188
7,000 NGK Insulators Ltd. 51,971
3,000 Nikon Corp. 88,037
900 Nintendo Co., Ltd. 149,486
12,000 Nippon Express Co., Ltd. 66,322
3,000 Nippon Meat Packers Inc. 38,883
18,000 Nippon Mitsubishi Oil Corp. 79,232
9,000 Nippon Paper Industries Co. 49,565
43,000 Nippon Steel Corp. 100,530
720 Nippon Telegraph & Telephone Corp. 1,232,515
17,000 Nippon Yusen Kabushiki Kaisha 69,510
29,000 Nissan Motor Co., Ltd.* 114,037
12,000 Nomura Securities Co., Ltd. 216,570
10,000 Obayashi Corp. 47,246
9,000 OJI Paper Co., Ltd. 54,142
3,000 Olympus Optical Co., Ltd. 42,404
500 Orix Corp. 112,589
19,000 Osaka Gas Co. 45,720
2,000 Pioneer Electronic Corp. 52,822
1,000 Rohm Co., Ltd. 410,838
26,000 Sakura Bank Ltd. 150,563
3,000 Sankyo Co., Ltd. 61,626
18,000 Sanyo Electric Co., Ltd. 73,071
3,000 Secom Co., Ltd. 330,138
8,000 Sekisui Chemical Co., Ltd. 35,450
8,000 Sekisui House Ltd. 70,821
6,000 Seventy Seven Bank Ltd. 62,858
7,000 Sharp Corp. 179,057
2,200 Shimano Inc. 38,736
12,000 Shimizu Corp. 39,676
3,000 Shin-Etsu Chemical Co., Ltd. 129,121
4,000 Shiseido Co. 58,300
6,000 Shizuoka Bank Ltd. 61,508
500 SMC Corp. 110,584
600 Softbank Corp. 574,000
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
14 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Japan -- 25.5% (continued)
2,400 Sony Corp. $ 711,337
13,000 Sumitomo Chemical Co., Ltd. 61,039
8,000 Sumitomo Corp. 77,550
6,000 Sumitomo Electric Industries 69,314
9,000 Sumitomo Marine & Fire Insurance Co., Ltd. 55,463
43,000 Sumitomo Metal Industries Ltd.* 32,388
2,000 Taisho Pharmaceutical Co., Ltd. 58,691
5,000 Takeda Chemical Industries 246,992
900 Takefuji Corp. 112,599
13,000 Teijin Ltd. 47,941
18,000 The Sumitomo Bank Ltd. 246,326
3,500 Tohoku Electric Power Co., Inc. 52,039
15,000 Tokai Bank Ltd. 94,493
10,000 Tokio Marine & Fire Insurance Co., Ltd. 116,893
5,900 Tokyo Electric Power Co., Inc. 158,134
1,000 Tokyo Electronics Ltd. 136,946
26,000 Tokyo Gas Co. 63,328
6,000 Toppan Printing Co., Ltd. 59,865
16,000 Toray Industries Inc. 61,978
19,000 Toshiba Corporation 144,968
2,000 Tostem Corp. 35,899
3,000 Toyo Seikan Kaisha Ltd. 43,432
22,000 Toyota Motor Corp. 1,065,244
1,200 Uni-Charm Corp. 69,138
4,000 Uny Co., Ltd. 39,088
2,000 Yamanouchi Pharmaceutical Co., Ltd. 69,843
3,000 Yamato Transport Co., Ltd. 116,209
- --------------------------------------------------------------------------------
16,244,903
- --------------------------------------------------------------------------------
Netherlands -- 5.3%
8,062 ABN AMRO Holding NV 201,367
3,776 Aegon NV 364,708
1,998 Akzo Nobel NV 100,212
921 ASM Lithography Holding NV* 102,313
5,202 Elsevier NV 62,137
1,052 Getronics NV 83,914
1,315 Hagemeyer NV 30,448
1,873 Heineken NV 91,339
4,977 ING Groep NV 300,455
3,356 Koninklijke Ahold NV 99,338
2,111 Koninklijke Philips Electonics NV 287,023
3,016 KPN NV 294,340
12,877 Royal Dutch Petroleum Co. 789,168
1,793 STMicroelectronics 275,929
3,479 TNT Post Group NV 99,685
2,845 Unilever NV 157,135
1,869 Wolters Kluwer NV 63,248
- --------------------------------------------------------------------------------
3,402,759
- --------------------------------------------------------------------------------
New Zealand -- 0.1%
19,400 Telecom Corp. of New Zealand Ltd. 91,229
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney EAFE Index Fund 15
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
============================================================================================
<S> <C> <C>
Norway -- 0.3%
3,600 Norsk Hydro ASA $ 151,039
- --------------------------------------------------------------------------------------------
Portugal -- 0.5%
6,505 Banco Comercial Portugues SA Class R 36,099
1,927 Banco Espirito Santo e Comercial de Lisboa SA 54,148
2,566 Brisa-- Auto Estradas de Portugal SA 19,693
2,376 EDP-- Electricidade de Portugal SA 41,470
1,587 Jeronimo Martins SGPS SA 40,598
10,730 Portugal Telecom SA 117,686
- --------------------------------------------------------------------------------------------
309,694
- --------------------------------------------------------------------------------------------
Singapore -- 1.0%
11,000 City Developments Ltd. 64,395
8,652 DBS Group Holdings Ltd. 141,819
10,350 Oversea-Chinese Banking Corp., Ltd. 95,079
8,000 Singapore Airlines Ltd. 90,783
3,000 Singapore Press Holdings Ltd. 65,026
35,000 Singapore Telecommunications Ltd. 72,289
9,392 United Overseas Bank Ltd. 82,896
- --------------------------------------------------------------------------------------------
612,287
- --------------------------------------------------------------------------------------------
Spain -- 2.7%
1,115 Acerinox SA 44,470
1,622 ACS Actividades de Construccion y Servicios SA 38,471
3,057 Argentaria Caja Postal y Banco Hipotecario de Espana SA 71,830
4,519 Autopistas Concesionaria Espanola SA 43,920
10,894 Banco Bilbao Vizcaya SA 155,143
22,756 Banco Santander Central Hispano SA 257,607
3,541 El Aguila SA* 28,887
4,743 Endesa SA 94,153
2,015 Fomento de Construcciones y Contratas SA 40,994
2,762 Gas Natural SDG SA 63,619
5,073 Iberdrola SA 70,304
8,980 Repsol SA 208,198
4,260 Sociedad General de Aguas de Barcelona SA 62,383
3,278 Tabacalera SA Class A 46,880
18,830 Telefonica SA* 470,323
2,610 Union Electrica Fenosa SA 45,581
- --------------------------------------------------------------------------------------------
1,742,763
- --------------------------------------------------------------------------------------------
Sweden -- 2.5%
1,371 Atlas Copco AB Class A 40,561
2,300 Electrolux AB Class B 57,899
3,250 ForeningsSparbanken AB 47,789
4,900 Hennes & Mauritz AB 164,275
800 NetCom AB Class B* 56,276
1,690 Sandvik AB Class A 52,980
3,200 Securitas AB Class B 57,970
3,300 Skandia Forsakrings AB 99,765
4,600 Skandinaviska Enskilda Banken Class A 46,536
2,000 Skanska AB Class B 74,579
1,633 Svenska Cellulosa AB Class B 48,408
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
16 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
Sweden -- 2.5% (continued)
3,900 Svenska Handelsbanken AB Class A $ 49,089
10,800 Telefonaktiebolaget LM Ericsson Class B 694,930
1,300 Volvo AB Class A 32,878
2,100 Volvo AB Class B 54,347
700 WM-Data AB Class B 43,313
- --------------------------------------------------------------------------------
1,621,595
- --------------------------------------------------------------------------------
Switzerland -- 5.2%
2,434 ABB Ltd. 297,715
170 Adecco SA 132,395
130 Alusuisse Lonza Group AG 95,855
1,650 Credit Suisse Group 327,990
50 Holderbank Financiere Glarus AG Class B 68,459
200 Nestle SA 366,411
390 Novartis AG -- Registered Shares 572,679
400 Roche Holding AG 474,815
80 Roche Holding AG -- Genusschein 130,637
85 Schweizerische Rueckversicherungs -- Gesellschaft 174,623
480 Swisscom AG 194,146
1,240 UBS AG 334,883
290 Zurich Allied AG 165,381
- --------------------------------------------------------------------------------
3,335,989
- --------------------------------------------------------------------------------
United Kingdom -- 18.1%
7,724 Abbey National PLC 123,488
10,042 Allied Zurich PLC 118,303
5,648 Anglian Water PLC 51,533
10,326 AstraZeneca Group PLC 428,229
8,191 BAA PLC 57,541
8,798 Barclay's PLC 253,186
9,707 Bass PLC 120,783
19,772 BG Group PLC 127,722
10,660 Blue Circle Industries PLC 61,930
4,460 BOC Group PLC 95,793
6,439 Boots Co., PLC 62,599
113,914 BP Amoco PLC 1,145,155
18,426 British Aerospace PLC 122,000
9,194 British Airways PLC 59,983
17,520 British American Tobacco PLC 99,521
6,198 British Land Co., PLC 41,038
10,938 British Sky Broadcasting Group PLC 176,021
37,544 British Telecommunications PLC 917,335
13,078 Cadbury Schweppes PLC 78,989
9,082 Carlton Communications PLC 88,440
30,100 Centrica PLC 85,309
8,141 CGU PLC 131,141
6,377 Compass Group PLC 87,535
26,119 Corus Group PLC 67,909
18,870 Diageo PLC 151,756
8,265 EMI Group PLC 81,085
5,759 GKN PLC 90,678
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney EAFE Index Fund 17
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
United Kingdom -- 18.1% (continued)
19,968 Glaxo Wellcome PLC $ 564,314
14,395 Granada Group PLC 145,873
8,221 Great Universal Stores PLC 48,060
13,330 Halifax PLC 147,780
6,654 Hanson PLC 55,770
8,301 Hays PLC 132,177
20,628 Hilton Group PLC 66,043
48,440 HSBC Holdings PLC 675,094
6,385 Imperial Chemical Industries PLC 67,590
23,986 Invensys PLC 130,537
11,853 J. Sainsbury PLC 66,852
9,816 Kingfisher PLC 108,903
4,622 Land Securities PLC 51,801
32,566 Legal & General Group PLC 88,615
30,051 Lloyds TSB Group PLC 375,863
15,732 Marconi PLC 278,320
18,614 Marks & Spencer PLC 88,601
4,973 Misys PLC 77,499
10,120 National Grid Group PLC 76,975
9,202 National Power PLC 53,274
4,195 Pearson PLC 135,762
6,331 Peninsular & Orient Steam Navigation Co. 105,614
4,229 Provident Financial PLC 47,806
11,393 Prudential Corp., PLC 224,464
3,840 Railtrack Group PLC 64,493
15,380 Rank Group PLC 48,681
9,067 Reed International PLC 67,867
20,364 Rentokil Initial PLC 74,241
9,327 Reuters Group PLC 127,954
7,207 Rio Tinto PLC 173,998
6,640 Royal Bank of Scotland Group PLC 117,738
2,406 Schroders PLC 48,413
11,125 Scottish Power PLC 84,260
31,894 SmithKline Beecham PLC 406,897
4,815 Smiths Industries PLC 71,926
18,678 Stagecoach Holdings PLC 48,111
7,013 Tate & Lyle PLC 45,075
41,688 Tesco PLC 126,736
4,284 Thames Water PLC 53,409
6,991 TI Group PLC 53,627
15,447 Unilever PLC 113,627
5,728 United Utilities PLC 59,525
178,222 Vodafone AirTouch PLC 882,858
7,599 Williams PLC 34,575
7,514 Wolseley PLC 57,608
- --------------------------------------------------------------------------------
11,500,208
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost -- $47,268,940) 58,881,959
================================================================================
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
18 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Schedule of Investments (continued) December 31, 1999
- --------------------------------------------------------------------------------
SHARES SECURITY VALUE
================================================================================
PREFERRED STOCKS -- 0.4%
Australia -- 0.1%
11,310 News Corp., Ltd. $ 96,527
- --------------------------------------------------------------------------------
Germany -- 0.3%
250 SAP AG -- Vorzug 150,821
915 Volkswagen AG 28,798
- --------------------------------------------------------------------------------
179,619
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost -- $212,678) 276,146
================================================================================
PRINCIPAL SECURITY VALUE
================================================================================
CORPORATE BONDS -- 0.0%
United Kingdom -- 0.0%
$ 2,000 BG Transco Holdings PLC, 7.00% due 12/16/2024 31
2,000 BG Transco Holdings PLC, 7.06% due 12/14/2009 33
2,000 BG Transco Holdings PLC, 4.19% due 12/14/2022 32
2,039 British Aerospace PLC, 7.45% due 11/30/2003* 34
- --------------------------------------------------------------------------------
130
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(Cost -- $0) 130
================================================================================
SHORT-TERM INSTRUMENTS -- 6.4%
U.S. Treasury Bills -- 6.4%
4,116,000 U.S. Treasury Bills, 5.07% due 1/27/2000**+ 4,100,676
================================================================================
TOTAL SHORT-TERM INSTRUMENTS
(Cost -- $4,101,067) 4,100,676
================================================================================
TOTAL INVESTMENTS -- 99.4%
(Cost -- $51,582,685)++ 63,258,911
================================================================================
OTHER ASSETS LESS LIABILITIES -- 0.6% 363,742
================================================================================
TOTAL NET ASSETS -- 100.0% $63,622,653
================================================================================
ADR American Depositary Receipt
* Non-income producing security.
** These U.S. Treasury Bills are held in segregated accounts in connection
with the Master Portfolio's holdings of CAC 40 Index, DAX Index, FTSE 100
Index, OMX Index and NIKKEI 300 Index futures contracts (See Note 1).
+ Yield to Maturity.
++ Cost for federal income tax purposes is $51,693,321 and net unrealized
appreciation consists of:
Gross Unrealized Appreciation $13,869,666
Gross Unrealized Depreciation (2,304,076)
-----------
Net Unrealized Appreciation $11,565,590
===========
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney EAFE Index Fund 19
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities December 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments:
In securities, at market value (Cost -- $51,582,685) (Note 1) $63,258,911
Cash 559
Cash denominated in foreign currencies (Cost -- $177,684) 174,044
Unrealized gain on forward foreign currency exchange contracts 9,938
Receivables:
Dividends and interest 54,184
Receivable for daily variation margin on open financial futures contracts 372,573
- ---------------------------------------------------------------------------------------------------
Total Assets 63,870,209
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased 172,365
Due to BGI (Note 2) 32,362
Unrealized loss on forward currency exchange contracts 42,829
- ---------------------------------------------------------------------------------------------------
Total Liabilities 247,556
- ---------------------------------------------------------------------------------------------------
Total Net Assets $63,622,653
===================================================================================================
</TABLE>
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
20 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Operations For the Period Ended December 31, 1999(a)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
Dividends (b) $ 96,637
Interest 41,851
- -------------------------------------------------------------------------------------------------------
Total Investment Income 138,488
- -------------------------------------------------------------------------------------------------------
EXPENSES (NOTE 2):
Advisory fees 19,417
Administration fees 12,945
- -------------------------------------------------------------------------------------------------------
Total Expenses 32,362
- -------------------------------------------------------------------------------------------------------
Net Investment Income 106,126
- -------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on sale of investments (91,015)
Net realized gain on sale of futures and forward currency exchange contracts 123,322
Net change in unrealized appreciation of investments 11,676,226
Net change in unrealized appreciation of futures and forward foreign currency
exchange contracts 122,882
- -------------------------------------------------------------------------------------------------------
Net Gain on Investments 11,831,415
- -------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations $ 11,937,541
=======================================================================================================
</TABLE>
(a) For the period from October 1, 1999 (commencement of operations) to
December 31, 1999.
(b) Net of foreign withholding tax of $82,939.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Smith Barney EAFE Index Fund 21
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets For the Period Ended December 31, 1999(a)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INCREASE IN NET ASSETS:
<S> <C>
Operations:
Net investment income $ 106,126
Net realized gain 32,307
Net change in unrealized appreciation 11,799,108
- -----------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations 11,937,541
- -----------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Beneficial Interest Transactions 51,685,112
- -----------------------------------------------------------------------------------------------
Increase in Net Assets 63,622,653
NET ASSETS:
Beginning net assets --
- -----------------------------------------------------------------------------------------------
Ending net assets $63,622,653
===============================================================================================
</TABLE>
(a) For the period from October 1, 1999 (commencement of operations) to December
31, 1999.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
22 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notes to 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. International Index Master Portfolio
commenced operations on October 1, 1999 with the transfer of $43,637,140 in
securities from the Vantagepoint Overseas Equity Index Fund, of the Vantagepoint
Funds. These financial statements relate to International 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.
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").
- --------------------------------------------------------------------------------
Smith Barney EAFE Index Fund 23
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
The accounting records of the Master Portfolio are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at the prevailing rates of exchange
at the end of each day. Purchases and sales of securities, income receipts and
expense payments are translated into U.S. dollars at the prevailing exchange
rate on the respective date of the transactions.
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 corresponding 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.
- --------------------------------------------------------------------------------
24 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
As of December 31, 1999, the Master Portfolio had the following open long
futures contracts outstanding:
<TABLE>
<CAPTION>
International Index Master Portfolio
Number of Expiration Notional Net Unrealized
Contracts Type Date Contract Value Appreciation
=================================================================================================================
<C> <S> <C> <C> <C>
9 CAC 40 Index March 2000 $543,461 $ 27,055
2 DAX Index March 2000 352,193 43,643
11 FTSE 100 Index March 2000 767,470 28,822
15 OMX Index January 2000 211,590 23,260
31 NIKKEI 300 Index March 2000 976,140 32,993
=================================================================================================================
Total International Index $155,773
=================================================================================================================
</TABLE>
The International Index Master Portfolio has pledged to brokers U.S. Treasury
Bills for initial margin requirements with a par value of $95,000.
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.
Forward Foreign Currency Contracts
A forward foreign currency exchange contract is an agreement to pay or receive
specific amounts of a currency at a future date in exchange for another currency
at an agreed upon exchange rate. The Master Portfolio may use forward foreign
currency exchange contracts to hedge certain foreign currency assets and
liabilities. Contracts are recorded at market value and marked to market daily.
Risks of entering into forward foreign currency exchange 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. The amount at risk for such forward foreign currency exchange
contracts may exceed the amount reflected in the financial statements.
- --------------------------------------------------------------------------------
Smith Barney EAFE Index Fund 25
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
As of December 31, 1999, the Master Portfolio had the following open forward
foreign currency exchange contracts outstanding:
<TABLE>
<CAPTION>
International Index Master Portfolio
Exchange Foreign Currency U.S. Dollar Value Net Unrealized
Currency Date Cost/Proceeds December 31, 1999 Gain/(Loss)
==========================================================================================================================
<S> <C> <C> <C> <C>
Purchase Contracts
Euro Dollar 2/8/00 $564,740 $538,415 $(26,325)
2/8/00 317,000 316,738 (262)
British Pound 2/8/00 523,812 513,601 (10,211)
2/8/00 51,795 50,786 (1,009)
2/8/00 554,000 553,602 (398)
Japanese Yen 2/8/00 438,265 443,305 5,040
2/8/00 520,739 520,175 (564)
Swedish Krone 2/8/00 93,511 89,762 (3,749)
2/8/00 95,281 95,279 (2)
- --------------------------------------------------------------------------------------------------------------------------
Net Unrealized Loss on Purchase Contracts (37,480)
- --------------------------------------------------------------------------------------------------------------------------
Sale Contracts
Euro Dollar 2/8/00 96,476 91,979 4,497
Japanese Yen 2/8/00 26,938 27,247 (309)
Swedish Krone 2/8/00 10,007 9,606 401
- --------------------------------------------------------------------------------------------------------------------------
Net Unrealized Gain on Sale Contracts 4,589
- --------------------------------------------------------------------------------------------------------------------------
Net Unrealized Loss on Forward
Foreign Currency Contracts $(32,891)
==========================================================================================================================
</TABLE>
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 0.15% of the average daily net assets of the International
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 entitled to
receive a fee at an annual rate of 0.10% of the first $1 billion, and 0.07%
thereafter, of the average daily net assets of 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.
- --------------------------------------------------------------------------------
26 1999 Annual Report to Shareholders
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
3. Investment Portfolio Transactions
Purchases and sales of investments, exclusive of short-term securities, for the
Master Portfolio were as follows:
International Index Master Portfolio
=======================================================================
Period Ended
Aggregate Purchases and Sales of: December 31, 1999*
-----------------------------------------------------------------------
Purchases at cost $61,394,283**
Sales proceeds 46,825,175
* For the period from October 1, 1999 (commencement of operations) to
December 31, 1999.
** This includes the transfer of $43,637,140 in securities from Vantagepoint
Overseas Equity Index Fund of the Vantagepoint Funds (See Note 1).
4. Financial Highlights
The ratios of expenses and net investment income to average net assets and
portfolio turnover rate (excluding short-term securities) for the Master
Portfolio are as follows:
Period Ended
International Index Master Portfolio December 31, 1999+
==========================================================================
Ratio of expenses to average net assets++ 0.25%
Ratio of net investment income to average net assets++ 0.16%
Portfolio turnover 39%
+ For the period from October 1, 1999 (commencement of operations) to
December 31, 1999.
++ Annualized for period of less than one year.
- --------------------------------------------------------------------------------
Smith Barney EAFE Index Fund 27
<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 schedule of investments, of International Index Master Portfolio (a
portfolio of Master Investment Portfolio) as of December 31, 1999, and the
related statements of operations and the changes in net assets for the period
from October 1, 1999 (commencement of operations) to December 31, 1999. These
financial statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of 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
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of International Index Master
Portfolio as of December 31, 1999, the results of its operations and the changes
in its net assets for the period from October 1, 1999 to December 31, 1999 in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
San Francisco, California
February 11, 2000
- --------------------------------------------------------------------------------
28 1999 Annual Report to Shareholders
<PAGE>
Smith Barney
EAFE Index Fund
Trustees
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
Burt N. Dorsett
Elliot S. Jaffe
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon, Chairman
Cornelius C. Rose, Jr.
Officers
Heath B. McLendon
President and Chief Executive Officer
Lewis E. Daidone
Senior Vice President and Treasurer
Irving P. David
Controller
Christina T. Sydor
Secretary
Investment Administrator
SSB Citi Fund Management LLC
Distributor
CFBDS, Inc.
Custodian
Investors Bank and Trust Company
Transfer Agent
Smith Barney Private Trust Company
388 Greenwich Street, 22nd Floor
New York, New York 10013
Sub-Transfer Agent
PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
This report is submitted for the general information of shareholders of Smith
Barney EAFE Index Fund. It is not for distribution to prospective investors
unless accompanied by a current Prospectus for the Fund, which contains
information concerning the Fund's investment policies and expenses as well as
other pertinent information.
[LOGO OF SALOMON SMITH BARNEY]
Smith Barney
EAFE Index Fund
Smith Barney Mutual Funds
388 Greenwich Street, MF-2
New York, New York 10013
www.smithbarney.com/mutualfunds
FD01826 2/00
