<PAGE>
Institutional Money Market Fund
Statement of Assets and Liabilities
June 30, 2000 (Unaudited)
<TABLE>
----------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C>
Investment in Master Portfolio, at market value (Note 1) $ 10,435
--------------
Total Assets 10,435
--------------
LIABILITIES
Payables:
Distribution to shareholders 60
Accrued expenses 2
--------------
Total Liabilities 62
--------------
NET ASSETS $ 10,373
==============
Net assets consist of:
Paid-in capital 10,373
--------------
NET ASSETS $ 10,373
==============
Distributor Shares
Net Assets $ 5,185
==============
Shares Outstanding 5,185
==============
Net asset value and offering price per share $ 1.00
==============
Institutional Shares
Net Assets $ 5,188
==============
Shares Outstanding 5,188
==============
Net asset value and offering price per share $ 1.00
==============
----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Institutional Money Market Fund
Statement of Operations
For the Six Months Ended June 30, 2000 (Unaudited)
<TABLE>
-----------------------------------------------------------------------------------------------------------------------
<S> <C>
NET INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIO
Interest $ 315
Expenses (5)
-----------
Net investment income allocated from Master Portfolio 310
-----------
FUND EXPENSES (NOTE 2)
Distribution costs - Distributor Shares 2
-----------
Total fund expenses 2
-----------
Net investment income 308
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 308
===========
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Institutional Money Market Fund
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended
June 30, 2000 For the Period Ended
(Unaudited) December 31, 1999 *
-------------------------- --------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 308 $ 124
-------- --------
Net increase in net assets resulting from operations 308 124
-------- --------
Distributions to shareholders:
From net investment income
Distributor Shares (153) (62)
Institutional Shares (155) (62)
-------- --------
Total distributions to shareholders (308) (124)
-------- --------
Capital share transactions:
Distributor Shares
Proceeds from shares sold - 5,000
Reinvestment of dividends 123 62
-------- --------
Net increase in net assets resulting from capital share transactions 123 5,062
-------- --------
Institutional Shares
Proceeds from shares sold - 5,000
Reinvestment of dividends 126 62
-------- --------
Net increase in net assets resulting from capital share transactions 126 5,062
-------- --------
Increase in net assets 249 10,124
NET ASSETS:
Beginning of period 10,124 -
-------- --------
End of period $ 10,373 $ 10,124
======== ========
SHARES ISSUED AND REDEEMED:
Distributor Shares
Shares sold - 5,000
Shares issued in reinvestment of dividends 123 62
-------- --------
Net increase in shares outstanding 123 5,062
======== ========
Institutional Shares
Shares sold - 5,000
Shares issued in reinvestment of dividends 126 62
-------- --------
Net increase in shares outstanding 126 5,062
======== ========
</TABLE>
--------------------------------------------------------------------------------
* Period from August 1, 1999 (commencement of operations) to December 31,
1999.
The accompanying notes are an integral part of these financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
Institutional Money Market Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six
Months Ended
Jun. 30, 2000 Period Ended
(Unaudited) Dec. 31, 1999 *
---------------------------------- --------------------------------
Distributor Institutional Distributor Institutional
Shares Shares Shares Shares
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Income from investment operations:
Net investment income 0.03 0.03 0.02 0.02
------- ------- ------- -------
Total from investment operations 0.03 0.03 0.02 0.02
------- ------- ------- -------
Less distributions:
From net investment income (0.03) (0.03) (0.02) (0.02)
------- ------- ------- -------
Total distributions (0.03) (0.03) (0.02) (0.02)
------- ------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total return 3.02% 3.06% 2.22% 2.26%
======= ======= ======= =======
Ratios/Supplemental data:
Net assets, end of period (000s) $ 5 $ 5 $ 5 $ 5
Ratio of expenses to average net assets + 0.22% 0.12% 0.09% 0.07%
Ratio of net investment income to average net assets + 5.94% 6.04% 2.95% 2.97%
</TABLE>
--------------------------------------------------------------------------------
* Period from August 1, 1999 (commencement of operations) to December 31,
1999.
+ Annualized for periods of less than one year. These ratios include expenses
charged to the Money Market Master Portfolio.
The accompanying notes are an integral part of these financial statements.
<PAGE>
INSTITUTIONAL MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Barclays Global Investors Funds, Inc. (the "Company") is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series investment company. The Company was established as a Maryland corporation
on October 15, 1992 commenced operations on July 2, 1993, and currently offers
the following funds: Asset Allocation, Bond Index, Institutional Money Market,
LifePath Income, LifePath 2010, LifePath 2020, LifePath 2030, LifePath 2040,
Money Market and S&P 500 Stock Funds.
These financial statements relate to the Institutional Money Market Fund
(the "Fund").
The Fund presently offers two classes of shares, Distributor Shares and
Institutional Shares. Shares of each class have identical interests in the
Master Portfolio and have the same rights, however, differ principally in their
respective distribution fees.
The following significant accounting policies are consistently followed by
the Company 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 Money Market Master Portfolio
(the "Master Portfolio"). 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 (less than .01% as
of June 30, 2000).
The method by which the Master Portfolio values its securities is discussed
in Note 1 of the Master Investment Portfolio's Notes to Financial Statements,
which are included elsewhere in this report.
The Fund seeks to maintain a constant net asset value of $1.00 per share.
There is no assurance that the Fund will meet this objective.
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
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.
DISTRIBUTIONS TO SHAREHOLDERS
Distribution to shareholders from net investment income of the Fund are
declared daily and distributed monthly. Distributions to shareholders from net
realized capital gains, if any, are declared and distributed annually, generally
in December.
<PAGE>
INSTITUTIONAL MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
FEDERAL INCOME TAXES
The Fund is treated as a separate entity for federal income tax purposes.
It is the policy of the 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 and to
distribute annually substantially all of its income and any gains (taking into
account capital loss carryforwards) sufficient to relieve it from all, or
substantially all, federal income and excise taxes. Accordingly, no provision
for federal taxes was required at June 30, 2000.
ALLOCATION OF OPERATING ACTIVITY
Investment income, common expenses and realized and unrealized gains and
losses are allocated among the classes of shares of the Fund based on the
relative net assets of each class.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
Investors Bank & Trust Company ("IBT") serves as the custodian and sub-
administrator of the Fund. 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 a Sub-Administrator
of the Fund.
Stephens Inc. ("Stephens") is the Fund's distributor. The Fund has adopted
a plan pursuant to Rule 12b-1 under the 1940 Act, which allows the Fund to pay
expenses relating to the distribution of its Distributor Shares. Under the plan,
Stephens is entitled to receive a fee for these services (expressed as a
percentage of the average daily net assets of the Fund's Distributor Shares) of
0.10% from the Fund. This fee is an expense of the Distributor Shares only and
is not borne by the Institutional Shares.
The Company has entered into administration services arrangements with BGI
and Stephens, as co-administrators, who have agreed jointly to provide general
administration services to the Fund, such as managing and coordinating third-
party service relationships. This fee is an "all-in" or "semi-unified" fee
and BGI and Stephens, in consideration thereof, have agreed to bear all of the
Fund's ordinary operating expenses, excluding, generally, advisory fees,
distribution fees and costs related to securities transactions. BGI and Stephens
may delegate certain of their administration duties to sub-administrators.
Under these arrangements, BGI and Stephens are entitled to receive for
these administration services a combined fee (expressed as a percentage of
average daily net assets) of 0.02% from the Fund.
Certain officers and directors of the Company are also officers of
Stephens. As of June 30, 2000, these officers of Stephens collectively owned
less than 1% of the outstanding shares of the Fund.
3. CAPITAL SHARE TRANSACTIONS
As of June 30, 2000, there were 21.3 billion shares of $.001 par value
capital stock authorized by the Company. Of these shares, the Fund was
authorized to issue 7 billion shares of $.001 par value capital stock.
Transactions in capital shares for the Fund are disclosed in detail in the
Statement of Changes in Net Assets.
<PAGE>
MONEY MARKET MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANKERS' ACCEPTANCES--0.78%
----------------------------------------------------------------------------------------------------------
Toronto-Dominion Bank
6.63%, 12/13/00 $2,948,667 $ 2,859,064
----------------------------------------------------------------------------------------------------------
TOTAL BANKERS' ACCEPTANCES
(Cost: $2,859,064) 2,859,064
----------------------------------------------------------------------------------------------------------
Security Principal Value
----------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT--11.84%
----------------------------------------------------------------------------------------------------------
Bank of America NA
6.72%, 09/13/00 5,000,000 5,000,465
Banque National de Paris
6.99%, 05/02/01 3,500,000 3,499,723
Bayerische Hypo-Und Vereinsbank AG
6.63%, 08/21/00 5,000,000 5,000,062
6.72%, 09/14/00 5,000,000 5,000,141
7.00%, 05/02/01 3,500,000 3,499,447
Bayerische Landesbank
5.93%, 10/02/00 5,000,000 4,986,400
Deutsche Bank AG
6.66%, 03/08/01 5,000,000 4,998,699
6.70%, 03/14/01 6,500,000 6,497,837
Societe Generale
6.90%, 03/29/01 5,000,000 4,998,593
----------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost: $43,481,367) 43,481,367
----------------------------------------------------------------------------------------------------------
Security Principal Value
----------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER--59.21%
----------------------------------------------------------------------------------------------------------
Accor BNP
6.58%, 08/16/00 5,000,000 4,957,961
6.62%, 07/18/00 3,935,000 3,922,699
Alpine Securitization Corp.
6.55%, 07/18/00 2,609,000 2,600,930
6.85%, 07/14/00 10,000,000 9,975,264
Associates Corp. of North America
6.95%, 07/03/00 5,000,000 4,998,069
Atlantis One Funding Corp.
6.58%, 07/13/00 5,000,000 4,989,033
Barton Capital Corp.
6.61%, 09/12/00 5,000,000 4,932,982
6.62%, 07/18/00 4,000,000 3,987,496
6.62%, 08/24/00 3,000,000 2,970,210
British Telecommunications
6.28%, 10/12/00 5,000,000 4,910,161
Centric Capital Corp.
6.63%, 07/25/00 3,000,000 2,986,740
Corporate Asset Funding Co.
6.19%, 07/10/00 5,000,000 4,992,262
6.52%, 07/12/00 3,000,000 2,994,023
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
MONEY MARKET MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Countrywide Home Loans Inc.
6.57%, 07/10/00 $ 3,000,000 $2,995,072
6.75%, 07/20/00 5,000,000 4,982,188
Falcon Asset Securitization Corp.
6.55%, 07/03/00 1,085,000 1,084,605
6.55%, 07/25/00 5,000,000 4,978,167
Fayette Funding Corp.
6.77%, 07/21/00 5,000,000 4,981,194
Forrestal Funding Corp.
6.60%, 08/11/00 5,000,000 4,962,417
General Electric Capital Corp.
6.54%, 07/28/00 5,000,000 4,975,475
6.60%, 09/06/00 1,745,000 1,723,566
6.62%, 09/11/00 1,200,000 1,184,112
6.62%, 09/12/00 1,200,000 1,183,892
General Motors Acceptance Corp.
7.10%, 07/03/00 10,000,000 9,996,056
Goldman Sachs Group Inc.
6.61%, 09/11/00 5,000,000 4,933,900
Greenwich Funding Corp.
6.60%, 07/17/00 5,000,000 4,985,333
6.68%, 08/23/00 3,180,000 3,148,727
International Securitization Corp.
6.62%, 07/11/00 4,000,000 3,992,645
Intrepid Funding
6.06%, 08/07/00 4,000,000 3,975,086
Kitty Hawk Funding Corp.
6.61%, 09/11/00 5,000,000 4,933,900
Koch Industries Inc.
7.00%, 07/05/00 8,000,000 7,993,778
Lexington Parker Capital Corp.
6.19%, 07/11/00 5,000,000 4,991,403
6.56%, 07/10/00 2,154,000 2,150,468
6.61%, 09/01/00 2,514,000 2,485,381
6.70%, 08/24/00 3,000,000 2,969,850
Liberty Street Funding Corp.
6.64%, 09/19/00 5,000,000 4,926,222
6.68%, 08/21/00 4,000,000 3,962,147
Moat Funding LLC
6.64%, 09/20/00 5,000,000 4,925,356
6.70%, 08/23/00 3,000,000 2,970,408
6.70%, 12/12/00 5,000,000 4,847,389
Moriarty LLC
6.35%, 09/25/00 2,000,000 1,969,661
6.56%, 07/10/00 5,000,000 4,991,800
6.70%, 12/15/00 5,000,000 4,844,597
Prudential Funding Corp.
6.31%, 10/23/00 5,000,000 4,900,092
Quincy Capital Corp.
6.55%, 07/25/00 5,907,000 5,881,206
6.56%, 07/14/00 1,726,000 1,721,911
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
MONEY MARKET MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Silver Tower US Funding LLC
6.63%, 09/25/00 $ 5,000,000 $ 4,920,808
Variable Funding Capital Corp.
6.60%, 07/18/00 5,000,000 4,984,417
Windmill Funding Corp.
6.62%, 07/10/00 5,000,000 4,991,725
6.95%, 07/03/00 7,836,000 7,832,974
-----------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost: $217,495,758) 217,495,758
-----------------------------------------------------------------------------------------------------
Security Principal Value
-----------------------------------------------------------------------------------------------------
MEDIUM TERM NOTES--4.90%
-----------------------------------------------------------------------------------------------------
AmeriCredit Corp.
6.89%, 06/05/01 8,000,000 8,000,000
Associates Automobile 2000-1 "A-1"
6.85%, 06/15/01 5,000,000 5,000,000
Ford Credit Auto Owner Trust 2000-C "A-2"
6.82%, 06/15/01 5,000,000 5,000,000
-----------------------------------------------------------------------------------------------------
TOTAL MEDIUM TERM NOTES
(Cost: $18,000,000) 18,000,000
-----------------------------------------------------------------------------------------------------
Security Principal Value
-----------------------------------------------------------------------------------------------------
VARIABLE & FLOATING RATE NOTES--22.95%
-----------------------------------------------------------------------------------------------------
Associates Manufactured Housing Certificates
6.88%, 10/16/00 4,569,784 4,569,784
Bank of America
6.65%, 04/27/01 5,000,000 5,000,000
Bayerische Landesbank
6.59%, 02/28/01 5,000,000 4,998,382
CIT Equipment Collateral
6.64%, 03/20/01 10,000,000 10,000,000
Countrywide Home Loans Inc.
7.15%, 08/28/00 4,715,000 4,717,276
First Union National Bank
6.65%, 05/29/01 5,000,000 5,000,000
Ford Motor Credit Co.
6.45%, 07/16/01 10,000,000 10,014,745
6.74%, 08/18/00 7,000,000 6,999,087
National City Bank
6.63%, 10/04/00 8,000,000 7,997,508
Norwest Financial Inc.
6.64%, 09/07/00 5,000,000 4,999,451
Sigma Finance Inc.
6.90%, 09/15/00 5,000,000 5,000,000
SMM Trust 2000-B "A-1"
6.81%, 12/15/00 5,000,000 5,000,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
MONEY MARKET MASTER PORTFOLIO
JUNE 30, 2000 (Unaudited)
Schedule of Investments
<TABLE>
<CAPTION>
Security Principal Value
------------------------------------------------------------------------------------------------------
<S> <C> <C>
SMM Trust 2000-E
6.67%, 03/14/01 $5,000,000 $ 5,000,000
Special Purpose Accounts Receivable Corp.
6.65%, 01/05/01 5,000,000 5,000,000
------------------------------------------------------------------------------------------------------
TOTAL VARIABLE & FLOATING RATE NOTES
(Cost: $84,296,233) 84,296,233
------------------------------------------------------------------------------------------------------
Security Principal Value
------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--0.00%
------------------------------------------------------------------------------------------------------
Morgan Stanley Tri Party Repurchase Agreement, dated 6/30/00, due
7/03/00, with a maturity value of $451 and an effective yield of 6.30%. 451 451
------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost: $451) 451
------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 99.68%
(Cost $366,132,873)* $366,132,873
------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 0.32 % 1,220,874
------------------------------------------------------------------------------------------------------
NET ASSETS - 100.00% $367,353,747
======================================================================================================
----------------------------------------------------------------------------------------------------------
* Cost for income tax purposes is the same as for financial statement
purposes.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Money Market Master Portfolio
Statement of Assets and Liabilities
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments at market value (Cost: $366,132,873) (Note 1) $ 366,132,873
Receivables:
Interest 1,322,821
-------------
Total Assets 367,455,694
-------------
LIABILITIES
Payables:
Due to BGI (Note 2) 101,947
-------------
Total Liabilities 101,947
-------------
NET ASSETS $ 367,353,747
=============
--------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
Money Market Master Portfolio
Statement of Operations
For the Six Months Ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
NET INVESTMENT INCOME
Interest $ 8,855,215
------------
Total investment income 8,855,215
------------
EXPENSES (NOTE 2)
Advisory fees 141,718
------------
Total expenses 141,718
------------
Net investment income 8,713,497
------------
Net realized gain on sale of investments 22
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 8,713,519
============
--------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
Money Market Master Portfolio
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months
Ended June 30, 2000 For the Period Ended For the Period Ended
(Unaudited) December 31, 1999 * February 28, 1999 **
------------------- -------------------- --------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 8,713,497 $ 9,767,206 $ 5,411,548
Net realized gain 22 4,552 -
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting from operations 8,713,519 9,771,758 5,411,548
------------------- -------------------- --------------------
Interestholder transactions:
Contributions 514,970,795 343,767,992 257,234,773
Withdrawals (401,803,829) (370,712,809) -
------------------- -------------------- --------------------
Net increase (decrease) in net assets resulting from
interestholder transactions 113,166,966 (26,944,817) 257,234,773
------------------- -------------------- --------------------
Increase (decrease) in net assets 121,880,485 (17,173,059) 262,646,321
NET ASSETS:
Beginning of period 245,473,262 262,646,321 -
------------------- -------------------- --------------------
End of period $ 367,353,747 $ 245,473,262 $ 262,646,321
=================== ==================== ====================
</TABLE>
--------------------------------------------------------------------------------
* For the ten months ended December 31, 1999. The Master Porfolio changed its
fiscal year end from February 28 to December 31.
** For the period from September 1, 1998 (commencement of operations) to
February 28, 1999.
The accompanying notes are an integral part of these financial statements.
<PAGE>
MONEY MARKET MASTER PORTFOLIO
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Master Investment Portfolio ("MIP") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. MIP was organized on October 20, 1993 as a Delaware
business trust pursuant to an Agreement and Declaration of Trust dated May 14,
1993, and had no operations prior to March 1, 1994. MIP currently issues the
following separate portfolios: Asset Allocation, Bond Index, Extended Index,
International Index, LifePath Income, LifePath 2010, LifePath 2020, LifePath
2030, LifePath 2040, Money Market, S&P 500 Index and U.S. Equity Index Master
Portfolios.
These financial statements relate to the Money Market Master Portfolio (the
"Master Portfolio").
The following is a summary of significant accounting policies which are
consistently followed by the MIP in the preparation of its financial statements,
and which are in conformity with generally accepted accounting principles for
investment companies. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
SECURITY VALUATION
The Master Portfolio uses the amortized cost method of valuation to determine
the value of its portfolio securities in accordance with Rule 2a-7 under the
1940 Act. The amortized cost method, which involves valuing a security at its
cost and accreting or amortizing any discount or premium, respectively, over the
period until maturity, approximates market value.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on the date securities are purchased
or sold (trade date). Interest income is recognized on a daily accrual basis.
Realized gains or losses are reported on the basis of identified cost of
securities delivered. The Master Portfolio amortizes premium and accretes
discount on a straight-line basis to maturity.
FEDERAL INCOME TAXES
MIP believes that the Master Portfolio has and will continue to be operated
in a manner so as to qualify it as a partnership for federal income tax
purposes. Provided that the Master Portfolio so qualifies, it will not be
subject to any federal income tax on its income and gain (if any). However, each
investor in the Master Portfolio will be taxed on its distributive share of the
Master Portfolio's taxable income in determining its federal income tax
liability. As a partnership for federal income tax purposes, the Master
Portfolio will be deemed to have "passed through" to interestholders any
interest, dividends, gains or losses for such purposes. The determination of
such share will be made in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations promulgated thereunder.
It is intended that the Master Portfolio's assets, income and distributions
will be managed in such a way that an entity electing and qualifying as a
"regulated investment company" under the Code can continue to so qualify by
investing substantially all of its assets through the Master Portfolio, provided
that the regulated investment company meets other requirements for such
qualifications not within the control of the Master Portfolio (e.g.,
distributing at least 90% of the regulated investment company's "investment
company taxable income" annually).
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell
such securities at a specified price and time ("repurchase agreements") are
treated as collateralized financing transactions and are recorded at their
contracted resale amounts. These repurchase agreements, if any, are detailed in
the Master Portfolio's Schedule of Investments. The advisor to the Master
Portfolio may pool the Master Portfolio's cash and invest in repurchase
agreements entered into by the other Master Portfolios. The Master Portfolio's
prospectus requires that the cash investments be fully collateralized based on
values that are marked to market daily. The collateral is generally held by an
agent
<PAGE>
bank under a tri-party agreement. It is the advisor's responsibility to value
collateral daily and to obtain additional collateral as necessary to maintain
the value at equal to or greater than the repurchase price.
The repurchase agreement entered into on June 30, 2000 by the Master
Portfolio is fully collateralized by U.S. Government obligations with a rate of
5.625%, a maturity date of 02/15/06 and an aggregate market value of $9,910.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an Investment Advisory Contract with the Master Portfolio,
Barclays Global Fund Advisors ("BGFA") provides investment guidance and policy
direction in connection with the management of the Master Portfolio's assets.
BGFA is entitled to receive 0.10% of the average daily net assets of the Master
Portfolio, as compensation for advisory services. BGFA is an indirect
subsidiary of Barclays Bank PLC.
Investors Bank & Trust Company ("IBT") serves as the custodian to the Master
Portfolio. IBT will not be entitled to receive fees for its custodial services
so long as it is entitled to receive a separate fee from Barclays Global
Investors, N.A. ("BGI") for its services as Sub-Administrator of the Master
Portfolio.
Stephens Inc. ("Stephens"), is the sponsor and placement agent for the Master
Portfolio.
The MIP has entered into administration services arrangements with BGI and
Stephens, as co-administrators, who have agreed jointly to provide general
administration services to the Master Portfolio, such as managing and
coordinating third-party service relationships. BGI and Stephens are not
entitled to compensation for providing administration services to the Master
Portfolio. BGI and Stephens may delegate certain of their administration duties
to sub-administrators.
Certain officers and trustees of MIP are also officers of Stephens. As of
June 30, 2000, these officers of Stephens collectively owned less than 1% of the
Master Portfolio's outstanding beneficial interests.
3. FINANCIAL HIGHLIGHTS
The ratios of expenses to average net assets and net investment income to
average net assets for the Master Portfolio are as follows:
<TABLE>
<CAPTION>
Six For the For the
Months Ended Period Ended Period Ended
June 30, 2000 December 31, February 28,
(Unaudited) 1999 * 1999 **
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ratio of expenses to average net assets + 0.10% 0.10% 0.10%
Ratio of net investment income to average net assets + 6.16% 5.23% 5.17%
---------------------------------------------------------------------------------------------------------------------
</TABLE>
* For the ten months ended December 31, 1999. The Master Portfolio changed
its fiscal year-end from February 28 to December 31.
** For the period from September 1, 1998 (commencement of operations) to
February 28, 1999.
+ Annualized for period of less than one year.
