<PAGE> 1
MASTER INVESTMENT TRUST, SERIES I -- INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
MOODY'S/S&P MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- ----------- ------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSET BACKED SECURITIES -- 12.2%
AESOP Funding 1997-1 A1...... Aaa/AAA 6.22% 10/20/01 $2,000,000 $2,012,733
Citibank Credit Card Master
Trust I, Series 1997-6
(ZCB)....................... Aaa/AAA 5.04%* 08/15/06 2,000,000 1,341,832
Contimortgage Home Equity
Loan........................ Aaa/AAA 6.60% 10/15/11 2,000,000 2,019,386
Contimortgage Home Equity
Loan, Trust 1997-3 A5....... Aaa/AAA 7.01% 08/15/13 2,000,000 2,032,775
General Growth Properties.... Aaa/NR 6.60% 11/15/07 1,900,000 1,940,513
Standard Credit Card Master
Trust, Series 1995-3, Class
A........................... Aaa/AAA 7.85% 02/07/02 2,500,000 2,585,835
The Money Store Home Equity
Trust, Series 1996-B........ Aaa/AAA 7.38% 05/15/17 1,000,000 1,020,328
World Omni Automobile Lease,
Series 1997-A, Class A4..... Aaa/AAA 6.90% 06/25/03 2,250,000 2,308,279
----------
Total Asset Backed Securities
(Cost $15,142,461).......... 15,261,681
----------
CORPORATE BONDS -- 23.5%
Aetna Services Inc........... A2,A 6.75% 08/15/01 2,700,000 2,764,125
AON Corp..................... A3/AA- 7.40% 10/01/02 1,200,000 1,255,500
Bear Stearns & Company....... A2/A 6.13% 02/01/03 1,500,000 1,481,250
Capital One Bank............. Baa3/BBB- 7.00% 04/30/01 1,250,000 1,267,187
Enron Corp................... Baa2/BBB 6.45% 11/15/01 1,400,000 1,412,250
Federated Department Stores.. Baa2/BBB- 8.13% 10/15/02 1,220,000 1,308,450
Finova Capital Corp.
Corporate Note.............. Baa1/A- 6.63% 09/15/01 1,500,000 1,518,750
Ford Motor Credit Co......... A1/A 5.75% 01/25/01 2,000,000 1,987,500
General Motors Acceptance
Corp........................ A3/A 7.13% 05/01/01 3,950,000 4,058,625
General Motors Acceptance
Corp........................ A3/A 6.88% 07/15/01 2,000,000 2,042,500
Hartford Life Inc............ A2/A 6.90% 06/15/04 3,000,000 3,086,250
James River Corp............. Baa3/BBB- 8.38% 11/15/01 1,550,000 1,656,562
Korea Development Bank....... Ba1/BB+ 7.13% 09/17/01 1,875,000 1,741,406
PSE & G Capital Corp......... Baa2/BBB 6.74% 10/23/01 1,300,000 1,314,625
</TABLE>
- ---------------
See Notes to Financial Statements.
57
<PAGE> 2
<TABLE>
<CAPTION>
RATINGS
MOODY'S/S&P MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- ----------- ------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS -- (CONTINUED)
Time Warner, Inc............. Ba1/BBB- 7.95% 02/01/00 $1,400,000 $1,452,500
Williams COS, Inc............ Baa2/BBB- 6.13% 02/01/01 1,200,000 1,198,500
----------
Total Corporate Bonds (Cost
$29,269,452)................ 29,545,980
----------
MEDIUM TERM NOTES -- 13.2%
Associates Corp. of North
America..................... Aa3/AA- 6.75% 07/15/01 4,100,000 4,187,125
Banco Latinoamericano........ Baa2/NR 6.59% 10/16/01 1,500,000 1,492,500
Ikon Capital, Inc............ A3/A- 6.73% 06/15/01 1,300,000 1,319,500
Lehman Bros Holdings......... Baa1/A 6.90% 01/29/01 2,000,000 2,032,500
Mcdonnell Douglas Financial.. A3/AA 6.83% 05/21/01 4,000,000 4,095,000
Sears Roebuck Acceptance
Corp........................ A2/A- 7.00% 06/15/07 2,200,000 2,279,750
TCI Communications Inc....... Ba1/BBB- 6.38% 09/15/99 1,200,000 1,201,500
----------
Total Medium Term Notes (Cost
$16,312,589)................ 16,607,875
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 14.6%
Federal Home Loan Mortgage
Corp. Pool #160034.......... 8.50% 12/01/07 51,196 54,428
Federal Home Loan Mortgage
Corp. Pool #284343.......... 8.00% 12/01/16 7,771 8,164
Federal Home Loan Mortgage
Corp. Pool #297505.......... 8.00% 06/01/17 13,414 14,168
Federal Home Loan Mortgage
Corp. Pool #549837.......... 8.00% 07/01/10 155,752 164,464
Federal Home Loan Mortgage
Corp. CMO Ser #1501G........ 6.40% 05/15/18 2,300,000 2,309,278
Federal National Mortgage
Association Pool #131579.... 6.50% 07/01/04 99,395 98,370
Federal National Mortgage
Association Pool #286087.... 8.00% 06/01/24 621,522 646,577
Federal National Mortgage
Association 30/7 balloon
Pool #303528................ 6.00% 08/01/01 1,778,420 1,770,083
Government National Mortgage
Association TBA............. 7.00% 03/01/28 12,600,000 12,741,750
Government National Mortgage
Association Pool #136688.... 10.00% 09/15/15 11,505 12,630
</TABLE>
- ---------------
See Notes to Financial Statements.
58
<PAGE> 3
<TABLE>
<CAPTION>
RATINGS
MOODY'S/S&P MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- ----------- ------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- (CONTINUED)
Government National Mortgage
Association Pool #166744.... 10.00% 07/15/16 $ 256,519 $ 281,609
Government National Mortgage
Association Pool #209480.... 10.00% 07/15/17 77,955 85,580
Government National Mortgage
Association Pool #227082.... 10.00% 08/15/17 110,288 121,075
----------
Total U.S. Government Agency
Obligations (Cost
$18,129,845)................ 18,308,176
----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.2%
Vendee Mortgage Trust, Series
1998-1, Class 2, Interest
Only Obligation (Cost
$1,491,584)................. 0.455% 02/15/28 65,265,322 1,492,814
----------
U.S. TREASURY OBLIGATIONS -- 33.8%
U.S. TREASURY NOTES -- 32.6%
U.S. Treasury Note........... 6.00% 07/31/02 2,000,000 2,027,980
U.S. Treasury Note........... 6.00% 08/15/00 3,000,000 3,059,063
U.S. Treasury Note........... 7.00% 07/15/06 7,650,000 8,283,266
U.S. Treasury Note........... 7.75% 01/31/00 12,000,000 12,466,638
U.S. Treasury Note........... 6.25% 10/31/01 3,000,000 3,060,510
U.S. Treasury Note........... 6.25% 02/15/03 9,300,000 9,548,124
U.S. Treasury Note........... 6.25% 02/15/07 1,900,000 1,969,863
U.S. Treasury Note........... 5.88% 09/30/02 500,000 504,540
----------
40,919,984
----------
U.S. TREASURY STRIPS -- 1.3%
US Treasury Principal Only
Obligation.................. 5.93%* 11/15/09 3,100,000 1,569,747
----------
Total U.S. Treasury
Obligations (Cost
$41,949,890)................ 42,489,731
----------
</TABLE>
- ---------------
See Notes to Financial Statements.
59
<PAGE> 4
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- ------------
<S> <C> <C>
TEMPORARY INVESTMENTS -- 10.2%
Temporary Investment Cash Fund............................. 6,416,530 $ 6,416,530
Temporary Investment Fund.................................. 6,416,530 6,416,530
------------
Total Temporary Investments (Cost $12,833,060)............. 12,833,060
------------
TOTAL INVESTMENTS -- 108.7% (COST $135,128,881)(a).......... 136,539,317
LIABILITIES IN EXCESS OF OTHER ASSETS -- (8.7%)............. (10,972,757)
------------
NET ASSETS -- 100.0%........................................ $125,566,560
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $125,566,560.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............................... $1,672,536
Unrealized depreciation............................... (262,100)
----------
Net unrealized appreciation........................... $1,410,436
==========
</TABLE>
(ZCB) Zero Coupon Bond
* Rates shown are the effective yields at purchase date.
See Notes to Financial Statements.
60
<PAGE> 5
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $135,128,881)... $136,539,317
Receivable for securities sold............................ 8,226,906
Contribution receivable................................... 30,165
Interest receivable....................................... 1,299,764
Deferred organization costs............................... 10,366
Prepaid expenses.......................................... 4,739
------------
Total Assets................................................ 146,111,257
------------
LIABILITIES:
Withdrawal payable........................................ 46,857
Payable for securities purchased.......................... 20,409,214
Advisory fees payable..................................... 12,286
Audit fees payable........................................ 28,312
Fund accounting fees payable.............................. 7,395
Legal fees payable........................................ 9,234
Administration fees payable............................... 6,782
Other accrued expenses.................................... 24,617
------------
Total Liabilities........................................... 20,544,697
------------
NET ASSETS.................................................. $125,566,560
============
</TABLE>
- ---------------
See Notes to Financial Statements.
61
<PAGE> 6
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Operations
For the Year ended February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest Income........................................... $ 8,481,415
-----------
EXPENSES:
Advisory fees............................................. 466,254
Administration fees....................................... 69,900
Fund accounting fees and expenses......................... 106,617
Amortization of organization costs........................ 13,870
Audit fees................................................ 30,586
Legal fees................................................ 13,877
Directors fees............................................ 19,305
Other operating expenses.................................. 20,874
-----------
Total Expenses.......................................... 741,283
Less: Fee waivers and reimbursements........................ (266,752)
-----------
Total Net Expenses.......................................... 474,531
-----------
NET INVESTMENT INCOME....................................... 8,006,884
-----------
REALIZED/UNREALIZED GAINS ON INVESTMENTS FROM MASTER
INVESTMENT TRUST, SERIES I -- INVESTMENT GRADE BOND
PORTFOLIO:
Net realized gains on investment transactions............. 128,505
Net change in unrealized appreciation on investments...... 2,039,776
-----------
Net realized/unrealized gains on investments.............. 2,168,281
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $10,175,165
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
62
<PAGE> 7
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
---------------------------
FEBRUARY 28, FEBRUARY 28,
1998 1997
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................................. $ 8,006,884 $ 5,575,868
Net realized gain (loss) on investment transactions... 128,505 (535,492)
Net change in unrealized appreciation/(depreciation)
on investments...................................... 2,039,776 (681,210)
------------ ------------
Change in net assets resulting from operations........ 10,175,165 4,359,166
------------ ------------
TRUST SHARE TRANSACTIONS:
Contributions......................................... 46,344,058 94,643,822
Withdrawals........................................... (70,109,582) (26,135,644)
------------ ------------
Change in net assets resulting from trust share
transactions.......................................... (23,765,524) 68,508,178
------------ ------------
Change in net assets.................................... (13,590,359) 72,867,344
NET ASSETS
Beginning of Year..................................... 139,156,919 66,289,575
------------ ------------
End of Year........................................... $125,566,560 $139,156,919
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
63
<PAGE> 8
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Master Investment Trust, Series I (the "Trust"), a Delaware business trust,
is registered under the Investment Company Act of 1940, as amended (the "Act"),
as an open-end management investment company. At February 28, 1998, the Trust
consisted of two portfolios. The accompanying financial statements and notes are
those of the Investment Grade Bond Portfolio (the "Portfolio") only.
The investment objective of the Investment Grade Bond Portfolio is to obtain
interest income and capital appreciation by investing in investment grade
intermediate and longer term bonds, including corporate and governmental fixed
income obligations and mortgage-backed securities.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, serves as the Portfolio's investment
adviser. Effective September 15, 1997, PFPC International, Ltd. ("PFPC"), a
wholly owned subsidiary of PNC Bank Corp., serves as administrator for the
Trust. The BISYS Group, Inc. through its wholly owned subsidiary, BISYS Fund
Services, Limited Partnership ("BISYS") served as the Portfolio's administrator
through September 15, 1997.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATIONS:
Securities for which market quotations are readily available (other than
debt securities with remaining maturities of 60 days or less) are valued at the
last reported sales price on the securities exchange on which such securities
are primarily traded or at the last reported sales price on the NASDAQ National
Securities Market. Securities not listed on an exchange or the NASDAQ National
Securities Market, or securities for which there were no transactions on the day
of valuation, are valued at the mean of the most recent bid and ask prices. Bid
price is used when no ask price is available. The Portfolio may use an indepen-
64
<PAGE> 9
dent pricing service, approved by the Board of Trustees, to value certain of
their securities. Such prices reflect market values which may be established
through the use of electronic data processing techniques and matrix systems.
Restricted securities and securities for which market quotations are not readily
available, if any, are valued at fair value using methods approved by the Board
of Trustees.
Debt securities with remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Securities transactions are accounted for on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Realized gains and losses on securities transactions are determined on
the identified cost basis.
EXPENSES:
Expenses directly attributable to a Portfolio are charged to that Portfolio,
while general Trust expenses are allocated among the respective portfolios of
the Trust.
FEDERAL INCOME TAXES:
The Portfolio will be treated as a partnership for Federal income tax
purposes. As such, each investor in the Portfolio will be taxed on their share
of that Portfolio's ordinary income and capital gains. It is intended that the
Portfolio will be managed in such a way that an investor will be able to satisfy
the requirements of the Internal Revenue Code applicable to regulated investment
companies.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolio has an Investment Advisory Agreement with Bank of America and
an Administration Agreement with PFPC. The Portfolio previously had an
Administration Agreement with BISYS.
As Adviser, Bank of America is responsible for managing the investment of
the assets of the Portfolio in conformity with the stated objectives and
policies of the Portfolio. Pursuant to the terms of the Investment Advisory
Agreement, Bank of America is entitled to a fee, which is accrued daily and
payable monthly, at an annual rate of 0.50% from March 1, 1997 through June 22,
1997, and 0.30% from June 23, 1997 through February 28, 1998 of the average
daily net assets of the Portfolio. For the year ended February 28, 1998, Bank of
America waived $248,915 in fees as Adviser of the Portfolio.
65
<PAGE> 10
As Administrator, PFPC assists in supervising the operations of the
Portfolio. Pursuant to the terms of the Administration Agreement, PFPC was
entitled to a fee which is accrued daily and payable monthly, at an annual rate
of 0.05% of the Portfolio's average daily net assets. For the period September
15, 1997 through February 28, 1998, PFPC waived $1,324 in fees as Administrator
of the portfolio. For the period March 1, 1997 through September 15, 1997, BISYS
waived $16,513 in fees earned as Administrator of the Portfolio.
For services provided to each of the portfolios constituting the Trust, each
Trustee receives an annual fee of $3,000 and a meeting fee of $500 per meeting.
For the year ended February 28, 1998, the Investment Grade Bond Portfolio
incurred legal expenses of $13,877, which was earned by a law firm, a partner of
which serves as Secretary of the Trust.
Certain officers of the Trust are affiliated with PFPC. Such persons are not
paid directly by the Trust for serving in these capacities.
NOTE 4 -- SECURITIES TRANSACTIONS
During the year ended February 28, 1998, the Portfolio purchased and sold
portfolio securities, excluding short-term securities, in the following amounts:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
U.S. Government...................................... $ 65,048,060 $102,258,719
Other................................................ 104,552,325 78,783,439
------------ ------------
Total................................................ $169,600,385 $181,042,158
============ ============
</TABLE>
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Investment Grade Bond Portfolio had the following concentrations by
industry sector at February 28, 1998 (as a percentage of total investments):
<TABLE>
<S> <C>
Asset-Backed Securities..................................... 11.1
Corporate Bonds............................................. 21.7
Medium Term Notes........................................... 12.2
Temporary Investments....................................... 9.4
Collateralized Mortgage Obligations......................... 1.1
U.S. Government Agency Obligations.......................... 13.4
U.S. Treasury Obligations................................... 31.1
-----
100.0%
=====
</TABLE>
66
<PAGE> 11
MASTER INVESTMENT TRUST SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1998 1997 1996 1995 1994*
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to average
net assets................... 0.35% 0.35% 0.18% 0.25% 0.41%**
Ratio of net investment income
to average net assets........ 5.99% 5.86% 6.47% 6.22% 4.93%**
Ratio of expenses to average
net assets(a)................ 0.55% 0.65% 0.68% 0.75% 0.91%**
Ratio of net investment income
to average net assets(a)..... 5.79% 5.56% 5.97% 5.72% 4.43%**
Portfolio Turnover............ 127% 83% 172% 240% 32%
</TABLE>
- ---------------
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
* For the period December 6, 1993 (commencement of operations) through February
28, 1994.
** Annualized.
See Notes to Financial Statements.
67
<PAGE> 12
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Trustees
and Investors of
Master Investment Trust, Series I
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of Master Investment Trust, Series
I -- Investment Grade Bond Portfolio (the "Portfolio") at February 28, 1998, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the supplementary data
for each of the periods presented, in conformity with generally accepted
accounting principles. These financial statements and supplementary data
(hereafter referred to as "financial statements") are the responsibility of the
Portfolio's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at February 28, 1998 by correspondence with the
custodian and brokers, and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse, LLP
1177 Avenue of the Americas
New York, New York
April 21, 1998
68
<PAGE> 13
For more information, complete the following form and mail it to:
Pacific Horizon Funds, Inc.
PO Box 8968
Wilmington, DE 19899-8968
......................................................................
First Name Last Name
......................................................................
Street Address
......................................................................
City State Zip Code
......................................................................
Area Code and Telephone Number
PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
[ ] A broker assisted me with the purchase of my Pacific Horizon Fund.
......................................................................
Name of Broker
......................................................................
Name of Brokerage Firm
[ ] I purchased my Pacific Horizon Fund without the assistance of a broker.
Please send me a free investing kit on the Pacific Horizon Fund(s) checked
below. The kit includes a prospectus, which has more complete information on
the Fund(s) such as charges and expenses. Read the prospectus carefully
before investing or sending money.
PACIFIC HORIZON FUNDS
<TABLE>
<S> <C>
[ ] International Equity Fund [ ] Intermediate Bond Fund
[ ] Aggressive Growth Fund [ ] U.S. Government Securities Fund
[ ] Blue Chip Fund [ ] Short-Term Government Fund
[ ] Capital Income Fund [ ] National Municipal Bond Fund
[ ] Asset Allocation Fund [ ] California Tax-Exempt Bond Fund
[ ] Corporate Bond Fund
Money Market Funds
[ ] Prime Fund [ ] Treasury Only Fund
[ ] Treasury Fund [ ] Tax-Exempt Money Fund
[ ] Government Fund [ ] California Tax-Exempt Money
Market Fund
</TABLE>
Additional Comments:
......................................................................
......................................................................
......................................................................
......................................................................
......................................................................
......................................................................
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 14
Bulk Rate
U.S. Postage
PAID
New York, NY
Permit No. 8048
LOGO
Provident Distributor, Inc., Distributor
TFI-0011 4/98
<PAGE> 15
MASTER INVESTMENT TRUST, SERIES 1 --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS -- 98.1%
AEROSPACE -- 2.0%
Goodrich (B.F.) Co..................................... 46,800 $ 2,319,525
General Dynamics Corp.................................. 36,800 3,192,400
United Technologies Corp............................... 100,800 9,002,700
------------
14,514,625
------------
AIRLINES -- 0.7%
AMR Corp.**............................................ 42,000 5,315,625
------------
AUTOMOTIVE -- 2.4%
Dana Corp.............................................. 58,700 3,202,819
Ford Motor Co.......................................... 179,900 10,175,594
General Motors Corp.................................... 59,500 4,101,781
------------
17,480,194
------------
BEVERAGES -- 2.9%
Anheuser-Busch Cos., Inc............................... 56,100 2,629,687
Coca-Cola Co........................................... 168,900 11,601,319
PepsiCo, Inc........................................... 169,100 6,182,719
------------
20,413,725
------------
BUILDING MATERIALS -- 0.5%
Centex Corp............................................ 48,500 3,543,531
------------
CHEMICALS -- 2.5%
Dow Chemical Co........................................ 63,600 5,819,400
Dupont, (E.I.) de Nemours & Co......................... 143,900 8,822,869
P.P.G. Industries, Inc................................. 45,100 2,923,044
------------
17,565,313
------------
COMPUTERS -- 5.2%
Compaq Computer Corp................................... 345,300 11,071,181
Dell Computer Corp.**.................................. 119,600 16,729,050
EMC Corp.**............................................ 130,700 4,999,275
Sun Microsystems, Inc.**............................... 95,900 4,567,238
------------
37,366,744
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
46
<PAGE> 16
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
COMPUTER SERVICES & SOFTWARE -- 4.2%
HBO & Co............................................... 126,300 $ 6,835,988
Microsoft Corp.**...................................... 278,200 23,577,450
------------
30,413,438
------------
COSMETICS & TOILETRIES -- 3.8%
Avon Products, Inc..................................... 59,000 4,155,812
Clorox Co.............................................. 58,400 5,124,600
Kimberly-Clark Corp.................................... 157,000 8,742,938
Procter & Gamble Co.................................... 111,700 9,487,519
------------
27,510,869
------------
ELECTRICAL EQUIPMENT -- 2.8%
General Electric Co.................................... 258,400 20,090,600
------------
ENTERTAINMENT & LEISURE -- 2.6%
Brunswick Corp......................................... 77,000 2,444,750
King World Productions, Inc............................ 56,700 1,513,181
Time Warner, Inc....................................... 35,800 2,416,500
Walt Disney Co......................................... 108,378 12,131,562
------------
18,505,993
------------
FINANCIAL -- BANK & TRUST -- 9.7%
BankBoston Corp........................................ 51,200 5,104,000
Bankers Trust New York Corp............................ 61,400 7,260,550
Chase Manhattan Corp................................... 36,000 4,466,250
Citicorp............................................... 47,600 6,307,000
Comerica, Inc.......................................... 51,500 5,191,844
First Union Corp....................................... 81,400 4,288,762
Fleet Financial Group, Inc............................. 135,000 10,639,687
Mellon Bank Corp....................................... 141,200 8,798,525
National City Corp..................................... 32,600 2,127,150
NationsBank Corp....................................... 134,306 9,199,961
State Street Corp...................................... 106,300 6,570,669
------------
69,954,398
------------
FINANCIAL SERVICES -- 3.0%
Morgan Stanley Dean Witter Discover & Co............... 176,500 12,299,844
Travelers Group, Inc................................... 171,000 9,533,250
------------
21,833,094
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
47
<PAGE> 17
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
FOOD -- 2.4%
Campbell Soup Co....................................... 112,200 $ 6,514,613
Quaker Oats Co......................................... 92,900 5,004,987
Pioneer Hi-Bred International, Inc..................... 27,800 2,884,250
Sysco Corp............................................. 60,900 2,866,106
------------
17,269,956
------------
HOSPITAL MANAGEMENT -- 1.2%
Tenet Healthcare Corp.................................. 221,900 8,279,644
------------
HOTELS & MOTELS -- 0.6%
Marriott International, Inc............................ 56,000 4,242,000
------------
INSURANCE -- 3.7%
Allstate Corp.......................................... 97,397 9,082,270
American General Corp.................................. 96,800 5,626,500
Conseco, Inc........................................... 166,200 7,801,013
SunAmerica, Inc........................................ 96,900 4,390,781
------------
26,900,564
------------
MACHINERY & EQUIPMENT -- 1.2%
Case Corp.............................................. 31,600 2,055,975
Ingersoll Rand Co...................................... 73,300 3,490,912
Parker Hannifin Corp................................... 58,500 2,727,563
------------
8,274,450
------------
MEDICAL SUPPLIES & EQUIPMENT -- 2.9%
Abbott Laboratories.................................... 78,100 5,842,856
Biomet, Inc............................................ 129,100 3,848,794
Guidant Corp........................................... 49,500 3,610,406
Johnson & Johnson Co................................... 97,600 7,368,800
------------
20,670,856
------------
METALS & MINING -- 1.2%
Aluminum Company of America............................ 41,200 3,023,050
Owens-Illinois, Inc.**................................. 65,000 2,494,375
USX-U.S. Steel Group, Inc.............................. 95,400 3,350,925
------------
8,868,350
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
48
<PAGE> 18
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
MULTI-INDUSTRY -- 2.4%
Dover Corp............................................. 129,000 $ 4,982,625
Rockwell International Corp............................ 77,800 4,706,900
Tyco International Ltd................................. 148,200 7,521,150
------------
17,210,675
------------
OIL (DOMESTIC) -- 1.6%
Pennzoil Co............................................ 40,600 2,717,662
Phillips Petroleum Co.................................. 83,200 4,076,800
USX -- Marathon Group................................ 135,200 4,672,850
------------
11,467,312
------------
OIL (INTERNATIONAL) -- 5.0%
Chevron Corp........................................... 111,500 9,045,437
Exxon Corp............................................. 269,500 17,214,313
Mobil Corp............................................. 134,300 9,728,356
------------
35,988,106
------------
PAPER & FOREST PRODUCTS -- 0.7%
Fort James Corp........................................ 113,100 5,131,912
------------
PHARMACEUTICALS -- 7.8%
Bristol-Meyers Squibb Co............................... 115,700 11,591,694
Lilly, (Eli) & Co...................................... 55,600 3,659,175
Merck & Co., Inc....................................... 116,800 14,899,300
Pfizer, Inc............................................ 134,200 11,876,700
Schering-Plough Corp................................... 182,600 13,889,012
------------
55,915,881
------------
PRINTING & PUBLISHING -- 1.0%
McGraw-Hill Cos., Inc.................................. 44,200 3,342,625
New York Times Co...................................... 53,700 3,513,994
------------
6,856,619
------------
RETAIL (FOOD & DRUG) -- 0.7%
Kroger Co.**........................................... 117,500 4,964,375
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
49
<PAGE> 19
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
RETAIL & MERCHANDISING -- 5.6%
Albertson's, Inc....................................... 40,500 $ 1,895,906
Cendant Corp.**........................................ 150,100 5,628,750
Dayton Hudson Corp..................................... 84,300 6,517,444
Home Depot, Inc........................................ 212,600 13,566,538
TJX Companies, Inc..................................... 237,000 9,154,125
VF Corp................................................ 69,800 3,328,588
------------
40,091,351
------------
SEMI-CONDUCTORS/INSTRUMENTATION -- 2.3%
Harris Corp............................................ 100,500 5,094,094
Intel Corp............................................. 65,800 5,901,437
Thomas & Betts Corp.................................... 96,400 5,464,675
------------
16,460,206
------------
TRANSPORTATION -- 0.4%
Burlington Northern Santa Fe........................... 28,600 2,849,275
------------
TOBACCO -- 1.5%
Philip Morris Cos., Inc................................ 246,000 10,685,625
------------
TELECOMMUNICATIONS -- 3.0%
Cisco Systems, Inc.**.................................. 135,150 8,903,006
Lucent Technologies, Inc............................... 67,100 7,271,963
Tellabs, Inc.**........................................ 87,700 5,294,888
------------
21,469,857
------------
UTILITIES -- ELECTRIC -- 2.4%
FPL Group, Inc......................................... 150,700 8,750,019
GPU, Inc............................................... 204,400 8,214,325
------------
16,964,344
------------
UTILITIES -- GAS -- 1.6%
Coastal Corp........................................... 66,500 4,231,063
Schlumberger, Ltd...................................... 98,100 7,394,287
------------
11,625,350
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
50
<PAGE> 20
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
UTILITIES -- TELEPHONE -- 6.6%
Ameritech Corp......................................... 171,600 $ 7,153,575
AT&T Corp.............................................. 210,000 12,783,750
Bell Atlantic Corp..................................... 80,321 7,208,810
BellSouth Corp......................................... 142,400 8,686,400
U.S. WEST Communications Group......................... 107,800 5,612,337
WorldCom, Inc.**....................................... 148,300 5,663,206
------------
47,108,078
------------
TOTAL COMMON STOCKS (Cost $520,347,273)................. 703,802,935
------------
SHORT-TERM INVESTMENTS -- 1.9%
Temporary Investment Fund (Cost $13,659,984)........... 13,659,984 13,659,984
------------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PRINCIPAL
RATE DATE AMOUNT
----- -------- ----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 0.1%
U.S. Treasury Bill* (Cost $981,710)... 5.065% 07/09/98 $1,000,000 981,725
------------
TOTAL INVESTMENTS -- 100.1%
(COST $534,988,967) (a).............. 718,444,644
LIABILITIES IN EXCESS OF ASSETS -- (0.1%) 208,955
------------
NET ASSETS -- 100.0%................... $718,653,599
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $718,653,599.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................ $184,302,444
Unrealized depreciation................................ (846,767)
------------
Net unrealized appreciation............................ $183,455,677
============
</TABLE>
* Effective Yield
** Non-income producing security
SCHEDULE OF OPEN FINANCIAL FUTURES CONTRACTS PURCHASED
<TABLE>
<CAPTION>
NET
UNREALIZED
NUMBER DEPRECIATION
EXPIRATION OF CONTRACT OF
DATE CONTRACTS CONTRACTS VALUE CONTRACTS
- ---------- --------- --------- -------- ------------
<S> <C> <C> <C> <C>
S&P 500 -- March
3/20/98 22 1998 $5,777,750 $ (8,800)
</TABLE>
See Notes to Financial Statements.
51
<PAGE> 21
MASTER INVESTMENT TRUST, SERIES I -- BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $534,988,967).... $718,444,644
Dividend Receivable....................................... 1,112,451
Interest Receivable....................................... 49,102
Receivable for investment securities sold................. 590,540
Contribution receivable................................... 1,351,365
Deferred organization costs............................... 10,435
Prepaid expenses.......................................... 19,203
------------
Total Assets................................................ 721,577,741
------------
LIABILITIES
Payable for investment securities purchased............... 1,357,368
Withdrawal payable........................................ 1,129,421
Variation margin payable on futures contract.............. 8,800
Advisory fees payable..................................... 266,512
Administration fees payable............................... 26,877
Audit fees payable........................................ 23,384
Fund accounting fees and expense payable.................. 15,620
Custodian fees payable.................................... 7,672
Legal fees payable........................................ 15,683
Other accrued expenses.................................... 72,805
------------
Total Liabilities........................................... 2,924,142
------------
NET ASSETS, FEBRUARY 28, 1998............................... $718,653,599
============
</TABLE>
- ---------------
See Notes to Financial Statements.
52
<PAGE> 22
MASTER INVESTMENT TRUST, SERIES I -- BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Operations
For the year ended February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income........................................... $ 9,601,047
Interest income........................................... 843,207
------------
Total income............................................ 10,444,254
------------
Expenses
Advisory fees............................................. 3,362,041
Administration fees....................................... 296,792
Fund accounting fees and expenses......................... 251,346
Audit fees................................................ 19,948
Custodian fees and expenses............................... 84,065
Legal fees................................................ 45,756
Trustees' fees............................................ 48,198
Amortization of organization costs........................ 13,870
Other expenses............................................ 22,035
------------
Total Expenses.......................................... 4,144,051
Less: Fee waivers and expense reimbursements................ (279,641)
------------
Total Net Expenses.......................................... 3,864,410
------------
NET INVESTMENT INCOME....................................... 6,579,844
------------
NET REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions and future
contracts............................................... 60,514,587
Net change in unrealized appreciation on investments and
futures................................................. 111,253,126
------------
Net realized/unrealized gains on investments and futures.... 171,767,713
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $178,347,557
============
</TABLE>
- ---------------
See Notes to Financial Statements.
53
<PAGE> 23
MASTER INVESTMENT TRUST, SERIES I -- BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28,
1998 1997
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.............................. $ 6,579,844 $ 5,845,867
Net realized gains on investment transactions and
future contracts................................. 60,514,587 62,491,398
Net change in unrealized appreciation on
investments and futures.......................... 111,253,126 26,358,970
------------ ------------
Change in net assets resulting from operations....... 178,347,557 94,696,235
------------ ------------
TRUST SHARE TRANSACTIONS:
Contributions...................................... 188,684,069 176,422,520
Withdrawals........................................ (124,944,597) (70,074,459)
------------ ------------
Change in net assets from trust share transactions... 63,739,472 106,348,061
------------ ------------
Change in net assets................................. 242,087,029 201,044,296
NET ASSETS
Beginning of year.................................. 476,566,570 275,522,274
------------ ------------
End of year........................................ $718,653,599 $476,566,570
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
54
<PAGE> 24
MASTER INVESTMENT TRUST, SERIES I -- BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Master Investment Trust, Series I (the "Trust"), a Delaware business trust,
is registered under the Investment Company Act of 1940, as amended (the "Act"),
as an open-end management investment company. At February 28, 1998, the Trust
consisted of two portfolios. The accompanying financial statements and notes are
those of the Blue Chip Portfolio (the "Portfolio") only.
The investment objective of the Portfolio is long term capital appreciation
through investments in blue chip stocks.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, served as the Portfolio's investment
adviser. Effective September 15, 1997, PFPC International, Ltd. ("PFPC"), a
wholly owned subsidiary of PNC Bank Corp., serves as administrator for the
Trust. The BISYS Group, Inc. ("BISYS"), through its wholly owned subsidiary,
BISYS Fund Services, Limited Partnership served as the Portfolio's administrator
through September 15, 1997.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATIONS:
Securities for which market quotations are readily available (other than
debt securities with remaining maturities of 60 days or less) are valued at the
last reported sales price on the securities exchange on which such securities
are primarily traded or at the last reported sales price on the NASDAQ National
Securities Market. Securities not listed on an exchange or the NASDAQ National
Securities Market, or securities for which there were no transactions on the day
of valuation, are valued at the mean of the most recent bid and ask prices. Bid
price is used when no ask price is available. The Portfolio may use an
independent pricing service, approved by the Board of Trustees, to value certain
of its securities. Such prices reflect market values which may be established
through
55
<PAGE> 25
the use of electronic data processing techniques and matrix systems. Restricted
securities and securities for which market quotations are not readily available,
if any, are valued at fair value using methods approved by the Board of
Trustees.
Debt securities with remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value.
FUTURES:
A futures contract is an agreement to purchase or sell a specified quantity
of an underlying instrument at a specified future date or to make or receive a
cash payment based on the value of a securities index. The price at which the
purchase and sale will take place is fixed when the Portfolio enters into the
contract. Upon entering into such a contract the Portfolio is required to pledge
to the broker an amount of cash and/or securities equal to the minimum "initial
margin" requirements of the exchange. Pursuant to the contract, the Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Portfolio as unrealized gains or
losses. When the contract is closed, the Portfolio records a realized 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 when it was closed. The Portfolio invests
in futures contracts solely for the purpose of hedging its existing portfolio
securities, or securities the Portfolio intends to purchase, against
fluctuations in value caused by changes in prevailing market interest rates. The
use of futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the underlying
hedged assets, and the possible inability of counterparties to meet the terms of
their contracts. The summary of open financial futures contracts at February 28,
1998 is included in the Portfolio's Schedule of Investments which is included
elsewhere in this report.
SECURITIES TRANSACTIONS AND RELATED INCOME:
Securities transactions are accounted for on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Dividend income is recorded on the ex-dividend date. Realized gains and
losses on securities transactions are determined on the identified cost basis.
EXPENSES:
Expenses directly attributable to a Portfolio are charged to that Portfolio,
while general Trust expenses are allocated among the respective portfolios of
the Trust.
56
<PAGE> 26
FEDERAL INCOME TAXES:
The Portfolio will be treated as a partnership for Federal income tax
purposes. As such, each investor in the Portfolio will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that the
Portfolio will be managed in such a way that an investor will be able to satisfy
the requirements of the Internal Revenue Code applicable to regulated investment
companies.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolio has an Investment Advisory Agreement with Bank of America and
an Administration Agreement with PFPC.
As Adviser, Bank of America is responsible for managing the investment of
the assets of the Portfolio in conformity with the stated objectives and
policies of the Portfolio. Pursuant to the terms of the Investment Advisory
Agreement, Bank of America is entitled to a fee, which is accrued daily and
payable monthly, at an annual rate of 0.75% from March 1, 1997 through June 22,
1997, and 0.50% from June 23, 1997 through February 28, 1998 of the average
daily net assets of the Portfolio. For the year ended February 28, 1998, Bank of
America waived $262,519 in fees as Adviser of the Portfolio.
As Administrator, PFPC assists in supervising the operations of the
Portfolio. Pursuant to the terms of the Administration Agreement, PFPC is
entitled to a fee which is accrued daily and payable monthly, at an annual rate
of 0.05% of the Portfolio's average daily net assets. For the period March 1,
1997 through September 15, 1997 BISYS waived $17,122 in fees earned as
Administrator of the Portfolio.
For services provided to each of the portfolios constituting the Trust, each
Trustee receives an annual fee of $3,000 and a meeting fee of $500.
For the year ended February 28, 1998, the Portfolio incurred legal expenses
of $45,756, which were earned by a law firm, a partner of which serves as
Secretary of the Trust.
Certain officers of the Trust are affiliated with PFPC. Such persons are not
paid directly by the Trust for serving in these capacities.
57
<PAGE> 27
NOTE 4 -- SECURITIES TRANSACTIONS
During the year ended February 28, 1998, the Portfolio purchased and sold
portfolio securities, excluding short-term securities, in the following amounts:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Total Common Stocks.................................. $482,735,581 $401,896,003
</TABLE>
58
<PAGE> 28
MASTER INVESTMENT TRUST SERIES I -- BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1998 1997 1996 1995 1994*
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to
average net assets........ 0.65% 0.62% 0.31% 0.17% 0.27%**
Ratio of net investment
income to average net
assets.................... 1.11% 1.62% 2.16% 2.30% 1.97%**
Ratio of expenses to
average net assets(a)..... 0.70% 0.90% 0.90% 0.97% 1.07%**
Ratio of net investment
income to average net
assets(a)................. 1.06% 1.34% 1.57% 1.50% 1.17%**
Portfolio Turnover......... 67% 91% 108% 44% 86%
Average Commission rate
paid(b)................... $0.0530 $0.0530 -- -- --
</TABLE>
- ---------------
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(b) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged.
* For the period December 6, 1993 (commencement of operations) through
February 28, 1994.
** Annualized.
- ---------------
See Notes to Financial Statements.
59
<PAGE> 29
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees
and Investors of
Master Investment Trust, Series I
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of Master Investment Trust, Series I -- Blue
Chip Portfolio (the "Portfolio") at February 28, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the supplementary data for each of
the periods presented, in conformity with generally accepted accounting
principles. These financial statements and supplementary data (hereafter
referred to as "financial statements") are the responsibility of the Portfolio's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at February 28, 1998 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York
April 21, 1998
60
<PAGE> 30
For more information, complete the following form and mail it to:
Pacific Horizon Funds, Inc.
PO Box 8968
Wilmington, DE 19899-8968
................................................................................
First Name Last Name
................................................................................
Street Address
................................................................................
City State Zip Code
................................................................................
Area Code and Telephone Number
PLEASE CHECK ONE OF THE TWO BOXES BELOW SO WE CAN BETTER MEET YOUR NEED FOR
SERVICE.
[ ] A broker assisted me with the purchase of my Pacific Horizon Fund.
................................................................................
Name of Broker
................................................................................
Name of Brokerage Firm
[ ] I purchased my Pacific Horizon Fund without the assistance of a broker.
Please send me a free investing kit on the Pacific Horizon Fund(s) checked
below. The kit includes a prospectus, which has more complete information on
the Fund(s) such as charges and expenses. Read the prospectus carefully
before investing or sending money.
PACIFIC HORIZON FUNDS
<TABLE>
<S> <C>
[ ] International Equity Fund [ ] Intermediate Bond Fund
[ ] Aggressive Growth Fund [ ] U.S. Government Securities Fund
[ ] Blue Chip Fund [ ] Short-Term Government Fund
[ ] Capital Income Fund [ ] National Municipal Bond Fund
[ ] Asset Allocation Fund [ ] California Tax-Exempt Bond Fund
[ ] Corporate Bond Fund
Money Market Funds
[ ] Prime Fund [ ] Treasury Only Fund
[ ] Treasury Fund [ ] Tax-Exempt Money Fund
[ ] Government Fund [ ] California Tax-Exempt Money Market Fund
</TABLE>
Additional Comments:
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
<PAGE> 31
Bulk Rate
U.S. Postage
PAID
New York, NY
Permit No. 8048
LOGO
Provident Distributor, Inc., Distributor
GRW-0069 10/98
<PAGE> 32
MASTER INVESTMENT TRUST, SERIES I --
BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS -- 98.1%
AEROSPACE -- 2.0%
Goodrich (B.F.) Co..................................... 46,800 $ 2,319,525
General Dynamics Corp.................................. 36,800 3,192,400
United Technologies Corp............................... 100,800 9,002,700
------------
14,514,625
------------
AIRLINES -- 0.7%
AMR Corp.**............................................ 42,000 5,315,625
------------
AUTOMOTIVE -- 2.4%
Dana Corp.............................................. 58,700 3,202,819
Ford Motor Co.......................................... 179,900 10,175,594
General Motors Corp.................................... 59,500 4,101,781
------------
17,480,194
------------
BEVERAGES -- 2.9%
Anheuser-Busch Cos., Inc............................... 56,100 2,629,687
Coca-Cola Co........................................... 168,900 11,601,319
PepsiCo, Inc........................................... 169,100 6,182,719
------------
20,413,725
------------
BUILDING MATERIALS -- 0.5%
Centex Corp............................................ 48,500 3,543,531
------------
CHEMICALS -- 2.5%
Dow Chemical Co........................................ 63,600 5,819,400
Dupont, (E.I.) de Nemours & Co......................... 143,900 8,822,869
P.P.G. Industries, Inc................................. 45,100 2,923,044
------------
17,565,313
------------
COMPUTERS -- 5.2%
Compaq Computer Corp................................... 345,300 11,071,181
Dell Computer Corp.**.................................. 119,600 16,729,050
EMC Corp.**............................................ 130,700 4,999,275
Sun Microsystems, Inc.**............................... 95,900 4,567,238
------------
37,366,744
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
59
<PAGE> 33
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
COMPUTER SERVICES & SOFTWARE -- 4.2%
HBO & Co............................................... 126,300 $ 6,835,988
Microsoft Corp.**...................................... 278,200 23,577,450
------------
30,413,438
------------
COSMETICS & TOILETRIES -- 3.8%
Avon Products, Inc..................................... 59,000 4,155,812
Clorox Co.............................................. 58,400 5,124,600
Kimberly-Clark Corp.................................... 157,000 8,742,938
Procter & Gamble Co.................................... 111,700 9,487,519
------------
27,510,869
------------
ELECTRICAL EQUIPMENT -- 2.8%
General Electric Co.................................... 258,400 20,090,600
------------
ENTERTAINMENT & LEISURE -- 2.6%
Brunswick Corp......................................... 77,000 2,444,750
King World Productions, Inc............................ 56,700 1,513,181
Time Warner, Inc....................................... 35,800 2,416,500
Walt Disney Co......................................... 108,378 12,131,562
------------
18,505,993
------------
FINANCIAL -- BANK & TRUST -- 9.7%
BankBoston Corp........................................ 51,200 5,104,000
Bankers Trust New York Corp............................ 61,400 7,260,550
Chase Manhattan Corp................................... 36,000 4,466,250
Citicorp............................................... 47,600 6,307,000
Comerica, Inc.......................................... 51,500 5,191,844
First Union Corp....................................... 81,400 4,288,762
Fleet Financial Group, Inc............................. 135,000 10,639,687
Mellon Bank Corp....................................... 141,200 8,798,525
National City Corp..................................... 32,600 2,127,150
NationsBank Corp....................................... 134,306 9,199,961
State Street Corp...................................... 106,300 6,570,669
------------
69,954,398
------------
FINANCIAL SERVICES -- 3.0%
Morgan Stanley Dean Witter Discover & Co............... 176,500 12,299,844
Travelers Group, Inc................................... 171,000 9,533,250
------------
21,833,094
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
60
<PAGE> 34
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
FOOD -- 2.4%
Campbell Soup Co....................................... 112,200 $ 6,514,613
Quaker Oats Co......................................... 92,900 5,004,987
Pioneer Hi-Bred International, Inc..................... 27,800 2,884,250
Sysco Corp............................................. 60,900 2,866,106
------------
17,269,956
------------
HOSPITAL MANAGEMENT -- 1.2%
Tenet Healthcare Corp.................................. 221,900 8,279,644
------------
HOTELS & MOTELS -- 0.6%
Marriott International, Inc............................ 56,000 4,242,000
------------
INSURANCE -- 3.7%
Allstate Corp.......................................... 97,397 9,082,270
American General Corp.................................. 96,800 5,626,500
Conseco, Inc........................................... 166,200 7,801,013
SunAmerica, Inc........................................ 96,900 4,390,781
------------
26,900,564
------------
MACHINERY & EQUIPMENT -- 1.2%
Case Corp.............................................. 31,600 2,055,975
Ingersoll Rand Co...................................... 73,300 3,490,912
Parker Hannifin Corp................................... 58,500 2,727,563
------------
8,274,450
------------
MEDICAL SUPPLIES & EQUIPMENT -- 2.9%
Abbott Laboratories.................................... 78,100 5,842,856
Biomet, Inc............................................ 129,100 3,848,794
Guidant Corp........................................... 49,500 3,610,406
Johnson & Johnson Co................................... 97,600 7,368,800
------------
20,670,856
------------
METALS & MINING -- 1.2%
Aluminum Company of America............................ 41,200 3,023,050
Owens-Illinois, Inc.**................................. 65,000 2,494,375
USX-U.S. Steel Group, Inc.............................. 95,400 3,350,925
------------
8,868,350
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
61
<PAGE> 35
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
MULTI-INDUSTRY -- 2.4%
Dover Corp............................................. 129,000 $ 4,982,625
Rockwell International Corp............................ 77,800 4,706,900
Tyco International Ltd................................. 148,200 7,521,150
------------
17,210,675
------------
OIL (DOMESTIC) -- 1.6%
Pennzoil Co............................................ 40,600 2,717,662
Phillips Petroleum Co.................................. 83,200 4,076,800
USX -- Marathon Group.................................. 135,200 4,672,850
------------
11,467,312
------------
OIL (INTERNATIONAL) -- 5.0%
Chevron Corp........................................... 111,500 9,045,437
Exxon Corp............................................. 269,500 17,214,313
Mobil Corp............................................. 134,300 9,728,356
------------
35,988,106
------------
PAPER & FOREST PRODUCTS -- 0.7%
Fort James Corp........................................ 113,100 5,131,912
------------
PHARMACEUTICALS -- 7.8%
Bristol-Meyers Squibb Co............................... 115,700 11,591,694
Lilly, (Eli) & Co...................................... 55,600 3,659,175
Merck & Co., Inc....................................... 116,800 14,899,300
Pfizer, Inc............................................ 134,200 11,876,700
Schering-Plough Corp................................... 182,600 13,889,012
------------
55,915,881
------------
PRINTING & PUBLISHING -- 1.0%
McGraw-Hill Cos., Inc.................................. 44,200 3,342,625
New York Times Co...................................... 53,700 3,513,994
------------
6,856,619
------------
RETAIL (FOOD & DRUG) -- 0.7%
Kroger Co.**........................................... 117,500 4,964,375
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
62
<PAGE> 36
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
RETAIL & MERCHANDISING -- 5.6%
Albertson's, Inc....................................... 40,500 $ 1,895,906
Cendant Corp.**........................................ 150,100 5,628,750
Dayton Hudson Corp..................................... 84,300 6,517,444
Home Depot, Inc........................................ 212,600 13,566,538
TJX Companies, Inc..................................... 237,000 9,154,125
VF Corp................................................ 69,800 3,328,588
------------
40,091,351
------------
SEMI-CONDUCTORS/INSTRUMENTATION -- 2.3%
Harris Corp............................................ 100,500 5,094,094
Intel Corp............................................. 65,800 5,901,437
Thomas & Betts Corp.................................... 96,400 5,464,675
------------
16,460,206
------------
TRANSPORTATION -- 0.4%
Burlington Northern Santa Fe........................... 28,600 2,849,275
------------
TOBACCO -- 1.5%
Philip Morris Cos., Inc................................ 246,000 10,685,625
------------
TELECOMMUNICATIONS -- 3.0%
Cisco Systems, Inc.**.................................. 135,150 8,903,006
Lucent Technologies, Inc............................... 67,100 7,271,963
Tellabs, Inc.**........................................ 87,700 5,294,888
------------
21,469,857
------------
UTILITIES -- ELECTRIC -- 2.4%
FPL Group, Inc......................................... 150,700 8,750,019
GPU, Inc............................................... 204,400 8,214,325
------------
16,964,344
------------
UTILITIES -- GAS -- 1.6%
Coastal Corp........................................... 66,500 4,231,063
Schlumberger, Ltd...................................... 98,100 7,394,287
------------
11,625,350
------------
</TABLE>
- ---------------
See Notes to Financial Statements.
63
<PAGE> 37
<TABLE>
<CAPTION>
VALUE
DESCRIPTION SHARES (NOTE 2)
----------- ---------- ------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
UTILITIES -- TELEPHONE -- 6.6%
Ameritech Corp......................................... 171,600 $ 7,153,575
AT&T Corp.............................................. 210,000 12,783,750
Bell Atlantic Corp..................................... 80,321 7,208,810
BellSouth Corp......................................... 142,400 8,686,400
U.S. WEST Communications Group......................... 107,800 5,612,337
WorldCom, Inc.**....................................... 148,300 5,663,206
------------
47,108,078
------------
TOTAL COMMON STOCKS (Cost $520,347,273)................. 703,802,935
------------
SHORT-TERM INVESTMENTS -- 1.9%
Temporary Investment Fund (Cost $13,659,984)........... 13,659,984 13,659,984
------------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PRINCIPAL
RATE DATE AMOUNT
----- -------- ----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 0.1%
U.S. Treasury Bill* (Cost $981,710)... 5.065% 07/09/98 $1,000,000 981,725
------------
TOTAL INVESTMENTS -- 100.1%
(COST $534,988,967) (a).............. 718,444,644
LIABILITIES IN EXCESS OF ASSETS -- (0.1%) 208,955
------------
NET ASSETS -- 100.0%................... $718,653,599
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $718,653,599.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................ $184,302,444
Unrealized depreciation................................ (846,767)
------------
Net unrealized appreciation............................ $183,455,677
============
</TABLE>
* Effective Yield
** Non-income producing security
SCHEDULE OF OPEN FINANCIAL FUTURES CONTRACTS PURCHASED
<TABLE>
<CAPTION>
NET
UNREALIZED
NUMBER DEPRECIATION
EXPIRATION OF CONTRACT OF
DATE CONTRACTS CONTRACTS VALUE CONTRACTS
- ---------- --------- --------- -------- ------------
<S> <C> <C> <C> <C>
S&P 500 -- March
3/20/98 22 1998 $5,777,750 $ (8,800)
</TABLE>
See Notes to Financial Statements.
64
<PAGE> 38
MASTER INVESTMENT TRUST, SERIES I -- INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATINGS
MOODY'S/S&P MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- ----------- ------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSET BACKED SECURITIES -- 12.2%
AESOP Funding 1997-1 A1...... Aaa/AAA 6.22% 10/20/01 $2,000,000 $2,012,733
Citibank Credit Card Master
Trust I, Series 1997-6
(ZCB)....................... Aaa/AAA 5.04%* 08/15/06 2,000,000 1,341,832
Contimortgage Home Equity
Loan........................ Aaa/AAA 6.60% 10/15/11 2,000,000 2,019,386
Contimortgage Home Equity
Loan, Trust 1997-3 A5....... Aaa/AAA 7.01% 08/15/13 2,000,000 2,032,775
General Growth Properties.... Aaa/NR 6.60% 11/15/07 1,900,000 1,940,513
Standard Credit Card Master
Trust, Series 1995-3, Class
A........................... Aaa/AAA 7.85% 02/07/02 2,500,000 2,585,835
The Money Store Home Equity
Trust, Series 1996-B........ Aaa/AAA 7.38% 05/15/17 1,000,000 1,020,328
World Omni Automobile Lease,
Series 1997-A, Class A4..... Aaa/AAA 6.90% 06/25/03 2,250,000 2,308,279
----------
Total Asset Backed Securities
(Cost $15,142,461).......... 15,261,681
----------
CORPORATE BONDS -- 23.5%
Aetna Services Inc........... A2,A 6.75% 08/15/01 2,700,000 2,764,125
AON Corp..................... A3/AA- 7.40% 10/01/02 1,200,000 1,255,500
Bear Stearns & Company....... A2/A 6.13% 02/01/03 1,500,000 1,481,250
Capital One Bank............. Baa3/BBB- 7.00% 04/30/01 1,250,000 1,267,187
Enron Corp................... Baa2/BBB 6.45% 11/15/01 1,400,000 1,412,250
Federated Department Stores.. Baa2/BBB- 8.13% 10/15/02 1,220,000 1,308,450
Finova Capital Corp.
Corporate Note.............. Baa1/A- 6.63% 09/15/01 1,500,000 1,518,750
Ford Motor Credit Co......... A1/A 5.75% 01/25/01 2,000,000 1,987,500
General Motors Acceptance
Corp........................ A3/A 7.13% 05/01/01 3,950,000 4,058,625
General Motors Acceptance
Corp........................ A3/A 6.88% 07/15/01 2,000,000 2,042,500
Hartford Life Inc............ A2/A 6.90% 06/15/04 3,000,000 3,086,250
James River Corp............. Baa3/BBB- 8.38% 11/15/01 1,550,000 1,656,562
Korea Development Bank....... Ba1/BB+ 7.13% 09/17/01 1,875,000 1,741,406
PSE & G Capital Corp......... Baa2/BBB 6.74% 10/23/01 1,300,000 1,314,625
</TABLE>
- ---------------
See Notes to Financial Statements.
65
<PAGE> 39
<TABLE>
<CAPTION>
RATINGS
MOODY'S/S&P MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- ----------- ------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS -- (CONTINUED)
Time Warner, Inc............. Ba1/BBB- 7.95% 02/01/00 $1,400,000 $1,452,500
Williams COS, Inc............ Baa2/BBB- 6.13% 02/01/01 1,200,000 1,198,500
----------
Total Corporate Bonds (Cost
$29,269,452)................ 29,545,980
----------
MEDIUM TERM NOTES -- 13.2%
Associates Corp. of North
America..................... Aa3/AA- 6.75% 07/15/01 4,100,000 4,187,125
Banco Latinoamericano........ Baa2/NR 6.59% 10/16/01 1,500,000 1,492,500
Ikon Capital, Inc............ A3/A- 6.73% 06/15/01 1,300,000 1,319,500
Lehman Bros Holdings......... Baa1/A 6.90% 01/29/01 2,000,000 2,032,500
Mcdonnell Douglas Financial.. A3/AA 6.83% 05/21/01 4,000,000 4,095,000
Sears Roebuck Acceptance
Corp........................ A2/A- 7.00% 06/15/07 2,200,000 2,279,750
TCI Communications Inc....... Ba1/BBB- 6.38% 09/15/99 1,200,000 1,201,500
----------
Total Medium Term Notes (Cost
$16,312,589)................ 16,607,875
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 14.6%
Federal Home Loan Mortgage
Corp. Pool #160034.......... 8.50% 12/01/07 51,196 54,428
Federal Home Loan Mortgage
Corp. Pool #284343.......... 8.00% 12/01/16 7,771 8,164
Federal Home Loan Mortgage
Corp. Pool #297505.......... 8.00% 06/01/17 13,414 14,168
Federal Home Loan Mortgage
Corp. Pool #549837.......... 8.00% 07/01/10 155,752 164,464
Federal Home Loan Mortgage
Corp. CMO Ser #1501G........ 6.40% 05/15/18 2,300,000 2,309,278
Federal National Mortgage
Association Pool #131579.... 6.50% 07/01/04 99,395 98,370
Federal National Mortgage
Association Pool #286087.... 8.00% 06/01/24 621,522 646,577
Federal National Mortgage
Association 30/7 balloon
Pool #303528................ 6.00% 08/01/01 1,778,420 1,770,083
Government National Mortgage
Association TBA............. 7.00% 03/01/28 12,600,000 12,741,750
Government National Mortgage
Association Pool #136688.... 10.00% 09/15/15 11,505 12,630
</TABLE>
- ---------------
See Notes to Financial Statements.
66
<PAGE> 40
<TABLE>
<CAPTION>
RATINGS
MOODY'S/S&P MATURITY PRINCIPAL VALUE
DESCRIPTION (UNAUDITED) RATE DATE AMOUNT (NOTE 2)
----------- ----------- ------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- (CONTINUED)
Government National Mortgage
Association Pool #166744.... 10.00% 07/15/16 $ 256,519 $ 281,609
Government National Mortgage
Association Pool #209480.... 10.00% 07/15/17 77,955 85,580
Government National Mortgage
Association Pool #227082.... 10.00% 08/15/17 110,288 121,075
----------
Total U.S. Government Agency
Obligations (Cost
$18,129,845)................ 18,308,176
----------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.2%
Vendee Mortgage Trust, Series
1998-1, Class 2, Interest
Only Obligation (Cost
$1,491,584)................. 0.455% 02/15/28 65,265,322 1,492,814
----------
U.S. TREASURY OBLIGATIONS -- 33.8%
U.S. TREASURY NOTES -- 32.6%
U.S. Treasury Note........... 6.00% 07/31/02 2,000,000 2,027,980
U.S. Treasury Note........... 6.00% 08/15/00 3,000,000 3,059,063
U.S. Treasury Note........... 7.00% 07/15/06 7,650,000 8,283,266
U.S. Treasury Note........... 7.75% 01/31/00 12,000,000 12,466,638
U.S. Treasury Note........... 6.25% 10/31/01 3,000,000 3,060,510
U.S. Treasury Note........... 6.25% 02/15/03 9,300,000 9,548,124
U.S. Treasury Note........... 6.25% 02/15/07 1,900,000 1,969,863
U.S. Treasury Note........... 5.88% 09/30/02 500,000 504,540
----------
40,919,984
----------
U.S. TREASURY STRIPS -- 1.3%
US Treasury Principal Only
Obligation.................. 5.93%* 11/15/09 3,100,000 1,569,747
----------
Total U.S. Treasury
Obligations (Cost
$41,949,890)................ 42,489,731
----------
</TABLE>
- ---------------
See Notes to Financial Statements.
67
<PAGE> 41
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- ------------
<S> <C> <C>
TEMPORARY INVESTMENTS -- 10.2%
Temporary Investment Cash Fund............................. 6,416,530 $ 6,416,530
Temporary Investment Fund.................................. 6,416,530 6,416,530
------------
Total Temporary Investments (Cost $12,833,060)............. 12,833,060
------------
TOTAL INVESTMENTS -- 108.7% (COST $135,128,881)(a).......... 136,539,317
LIABILITIES IN EXCESS OF OTHER ASSETS -- (8.7%)............. (10,972,757)
------------
NET ASSETS -- 100.0%........................................ $125,566,560
============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $125,566,560.
(a) Represents cost for federal income tax and book purposes and differs from
value by net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............................... $1,672,536
Unrealized depreciation............................... (262,100)
----------
Net unrealized appreciation........................... $1,410,436
==========
</TABLE>
(ZCB) Zero Coupon Bond
* Rates shown are the effective yields at purchase date.
See Notes to Financial Statements.
68
<PAGE> 42
MASTER INVESTMENT TRUST, SERIES I -- BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in securities, at value (cost $534,988,967).... $718,444,644
Dividend Receivable....................................... 1,112,451
Interest Receivable....................................... 49,102
Receivable for investment securities sold................. 590,540
Contribution receivable................................... 1,351,365
Deferred organization costs............................... 10,435
Prepaid expenses.......................................... 19,203
------------
Total Assets................................................ 721,577,741
------------
LIABILITIES
Payable for investment securities purchased............... 1,357,368
Withdrawal payable........................................ 1,129,421
Variation margin payable on futures contract.............. 8,800
Advisory fees payable..................................... 266,512
Administration fees payable............................... 26,877
Audit fees payable........................................ 23,384
Fund accounting fees and expense payable.................. 15,620
Custodian fees payable.................................... 7,672
Legal fees payable........................................ 15,683
Other accrued expenses.................................... 72,805
------------
Total Liabilities........................................... 2,924,142
------------
NET ASSETS, FEBRUARY 28, 1998............................... $718,653,599
============
</TABLE>
- ---------------
See Notes to Financial Statements.
69
<PAGE> 43
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost $135,128,881)... $136,539,317
Receivable for securities sold............................ 8,226,906
Contribution receivable................................... 30,165
Interest receivable....................................... 1,299,764
Deferred organization costs............................... 10,366
Prepaid expenses.......................................... 4,739
------------
Total Assets................................................ 146,111,257
------------
LIABILITIES:
Withdrawal payable........................................ 46,857
Payable for securities purchased.......................... 20,409,214
Advisory fees payable..................................... 12,286
Audit fees payable........................................ 28,312
Fund accounting fees payable.............................. 7,395
Legal fees payable........................................ 9,234
Administration fees payable............................... 6,782
Other accrued expenses.................................... 24,617
------------
Total Liabilities........................................... 20,544,697
------------
NET ASSETS.................................................. $125,566,560
============
</TABLE>
- ---------------
See Notes to Financial Statements.
70
<PAGE> 44
MASTER INVESTMENT TRUST, SERIES I -- BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Operations
For the year ended February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income........................................... $ 9,601,047
Interest income........................................... 843,207
------------
Total income............................................ 10,444,254
------------
Expenses
Advisory fees............................................. 3,362,041
Administration fees....................................... 296,792
Fund accounting fees and expenses......................... 251,346
Audit fees................................................ 19,948
Custodian fees and expenses............................... 84,065
Legal fees................................................ 45,756
Trustees' fees............................................ 48,198
Amortization of organization costs........................ 13,870
Other expenses............................................ 22,035
------------
Total Expenses.......................................... 4,144,051
Less: Fee waivers and expense reimbursements................ (279,641)
------------
Total Net Expenses.......................................... 3,864,410
------------
NET INVESTMENT INCOME....................................... 6,579,844
------------
NET REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions and future
contracts............................................... 60,514,587
Net change in unrealized appreciation on investments and
futures................................................. 111,253,126
------------
Net realized/unrealized gains on investments and futures.... 171,767,713
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $178,347,557
============
</TABLE>
- ---------------
See Notes to Financial Statements.
71
<PAGE> 45
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statement of Operations
For the Year ended February 28, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest Income........................................... $ 8,481,415
-----------
EXPENSES:
Advisory fees............................................. 466,254
Administration fees....................................... 69,900
Fund accounting fees and expenses......................... 106,617
Amortization of organization costs........................ 13,870
Audit fees................................................ 30,586
Legal fees................................................ 13,877
Directors fees............................................ 19,305
Other operating expenses.................................. 20,874
-----------
Total Expenses.......................................... 741,283
Less: Fee waivers and reimbursements........................ (266,752)
-----------
Total Net Expenses.......................................... 474,531
-----------
NET INVESTMENT INCOME....................................... 8,006,884
-----------
REALIZED/UNREALIZED GAINS ON INVESTMENTS FROM MASTER
INVESTMENT TRUST, SERIES I -- INVESTMENT GRADE BOND
PORTFOLIO:
Net realized gains on investment transactions............. 128,505
Net change in unrealized appreciation on investments...... 2,039,776
-----------
Net realized/unrealized gains on investments.............. 2,168,281
-----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $10,175,165
===========
</TABLE>
- ---------------
See Notes to Financial Statements.
72
<PAGE> 46
MASTER INVESTMENT TRUST, SERIES I -- BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28,
1998 1997
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.............................. $ 6,579,844 $ 5,845,867
Net realized gains on investment transactions and
future contracts................................. 60,514,587 62,491,398
Net change in unrealized appreciation on
investments and futures.......................... 111,253,126 26,358,970
------------ ------------
Change in net assets resulting from operations....... 178,347,557 94,696,235
------------ ------------
TRUST SHARE TRANSACTIONS:
Contributions...................................... 188,684,069 176,422,520
Withdrawals........................................ (124,944,597) (70,074,459)
------------ ------------
Change in net assets from trust share transactions... 63,739,472 106,348,061
------------ ------------
Change in net assets................................. 242,087,029 201,044,296
NET ASSETS
Beginning of year.................................. 476,566,570 275,522,274
------------ ------------
End of year........................................ $718,653,599 $476,566,570
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
73
<PAGE> 47
MASTER INVESTMENT TRUST, SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
---------------------------
FEBRUARY 28, FEBRUARY 28,
1998 1997
------------ ------------
<S> <C> <C>
INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................................. $ 8,006,884 $ 5,575,868
Net realized gain (loss) on investment transactions... 128,505 (535,492)
Net change in unrealized appreciation/(depreciation)
on investments...................................... 2,039,776 (681,210)
------------ ------------
Change in net assets resulting from operations........ 10,175,165 4,359,166
------------ ------------
TRUST SHARE TRANSACTIONS:
Contributions......................................... 46,344,058 94,643,822
Withdrawals........................................... (70,109,582) (26,135,644)
------------ ------------
Change in net assets resulting from trust share
transactions.......................................... (23,765,524) 68,508,178
------------ ------------
Change in net assets.................................... (13,590,359) 72,867,344
NET ASSETS
Beginning of Year..................................... 139,156,919 66,289,575
------------ ------------
End of Year........................................... $125,566,560 $139,156,919
============ ============
</TABLE>
- ---------------
See Notes to Financial Statements.
74
<PAGE> 48
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
Master Investment Trust, Series I (the "Trust"), a Delaware business trust,
is registered under the Investment Company Act of 1940, as amended (the "Act"),
as an open-end management investment company. At February 28, 1998, the Trust
consisted of two portfolios; the Blue Chip Portfolio (the "Blue Chip Portfolio")
and Investment Grade Bond Portfolio (the "Bond Portfolio") (collectively the
"Portfolios").
The investment objective of the Blue Chip Portfolio is long term capital
appreciation through investments in blue chip stocks. The investment objective
of the Investment Grade Bond Portfolio is to obtain interest income and capital
appreciation by investing in investment grade intermediate and longer term
bonds, including corporate and Government fixed income obligations and mortgage
backed securities.
Bank of America National Trust and Savings Association ("Bank of America"),
a subsidiary of BankAmerica Corporation, served as the Portfolio's investment
adviser. Effective September 15, 1997, PFPC, a wholly owned subsidiary of PNC
Bank Corp., serves as administrator for the Trust. The BISYS Group, Inc. through
its wholly owned subsidiary, BISYS Fund Services, Limited Partnership ("BISYS")
served as the Portfolio's administrator through September 15, 1997.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATIONS:
Securities for which market quotations are readily available (other than
debt securities with remaining maturities of 60 days or less) are valued at the
last reported sales price on the securities exchange on which such securities
are
- ---------------
See Notes to Financial Statements.
75
<PAGE> 49
primarily traded or at the last reported sales price on the NASDAQ National
Securities Market. Securities not listed on an exchange or the NASDAQ National
Securities Market, or securities for which there were no transactions on the day
of valuation, are valued at the mean of the most recent bid and ask prices. Bid
price is used when no ask price is available. The Portfolio may use an
independent pricing service, approved by the Board of Trustees, to value certain
of its securities. Such prices reflect market values which may be established
through the use of electronic data processing techniques and matrix systems.
Restricted securities and securities for which market quotations are not readily
available, if any, are valued at fair value using methods approved by the Board
of Trustees.
Debt securities with remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value.
FUTURES:
A futures contract is an agreement to purchase or sell a specified quantity
of an underlying instrument at a specified future date or to make or receive a
cash payment based on the value of a securities index. The price at which the
purchase and sale will take place is fixed when the Portfolio enters into the
contract. Upon entering into such a contract the Portfolio is required to pledge
to the broker an amount of cash and/or securities equal to the minimum "initial
margin" requirements of the exchange. Pursuant to the contract, the Portfolio
agrees to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin" and are recorded by the Portfolio as unrealized gains or
losses. When the contract is closed, the Portfolio records a realized 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 when it was closed. The Portfolio invests
in futures contracts solely for the purpose of hedging its existing portfolio
securities, or securities the Portfolio intends to purchase, against
fluctuations in value caused by changes in prevailing market interest rates. The
use of futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates and the underlying
hedged assets, and the possible inability of counterparts to meet the terms of
their contracts. The summary of open financial futures contracts at February 28,
1998 is included in the Blue Chip Portfolio's Schedule of Investments which is
included elsewhere in this report.
- ---------------
See Notes to Financial Statements.
76
<PAGE> 50
SECURITIES TRANSACTIONS AND RELATED INCOME:
Securities transactions are accounted for on a trade date basis. Interest
income, including accretion of discount and amortization of premium, is accrued
daily. Dividend income is recorded on the ex-dividend date. Realized gains and
losses on securities transactions are determined on the identified cost basis.
EXPENSES:
Expenses directly attributable to a Portfolio are charged to that Portfolio,
while general Trust expenses are allocated among the respective portfolios of
the Trust.
FEDERAL INCOME TAXES:
The Portfolios will be treated as a partnership for Federal income tax
purposes. As such, each investor in the Portfolios will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that the
Portfolios will be managed in such a way that an investor will be able to
satisfy the requirements of the Internal Revenue Code applicable to regulated
investment companies.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolios have an Investment Advisory Agreement with Bank of America
and had an Administration Agreement with PFPC. The Portfolio previously had an
Administration Agreement with BISYS.
As Adviser, Bank of America is responsible for managing the investment of
the assets of the Portfolio in conformity with the stated objectives and
policies of the Portfolio. Pursuant to the terms of the Investment Advisory
Agreement, Bank of America is entitled to a fee, which is accrued daily and
payable monthly, at an annual rate of 0.50% from March 1, 1997 through June 22,
1997, and 0.30% from June 23, 1997 through February 28, 1998 of the average
daily net assets of the Portfolios. For the year ended February 28, 1998, Bank
of America waived $262,519, and $248,915 in fees as Adviser of the Blue Chip
Portfolio and the Bond Portfolio.
As Administrator, BISYS assists in supervising the operations of the
Portfolio. Pursuant to the terms of the Administration Agreement, PFPC is
entitled to a fee which is accrued daily and payable monthly, at an annual rate
of 0.05% of the Portfolio's average daily net assets. For the year ended
February 28, 1998,
- ---------------
See Notes to Financial Statements.
77
<PAGE> 51
the administrators waived $17,122 and $17,837 in fees as Administrator of the
Blue Chip Portfolio and Bond Portfolio.
For services provided to the portfolios constituting the Trust, each Trustee
receives an annual fee of $3,000 and a meeting fee of $500.
For the year ended February 28, 1998, the Blue Chip Portfolio and Bond
Portfolio incurred legal expenses of $45,756 and $13,877, which were earned by a
law firm, a partner of which serves as Secretary of the Trust.
Certain officers of the Trust are affiliated with PFPC. Such persons are not
paid directly by the Trust for serving in these capacities.
NOTE 4 -- SECURITIES TRANSACTIONS
During the year ended February 28, 1998, each Portfolio purchased and sold
portfolio securities, excluding short-term securities, in the following amounts:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Blue Chip Portfolio
Common Stocks...................................... $482,735,581 $401,896,003
Bond Portfolio
U.S. Government.................................... $ 65,048,060 $102,258,719
Other.............................................. 104,552,325 78,783,439
------------ ------------
Total............................................ $169,600,385 $181,042,158
============ ============
</TABLE>
NOTE 5 -- CONCENTRATION OF CREDIT RISK
The Investment Grade Bond Portfolio had the following concentrations by
industry sector at February 28, 1998 (as a percentage of total investments):
<TABLE>
<S> <C>
Asset-Backed Securities..................................... 11.1
Corporate Bonds............................................. 21.7
Medium Term Notes........................................... 12.2
Temporary Investments....................................... 9.4
Collateralized Mortgage Obligations......................... 1.1
U.S. Government Agency Obligations.......................... 13.4
U.S. Treasury Notes......................................... 31.1
-----
100.0%
=====
</TABLE>
- ---------------
See Notes to Financial Statements.
78
<PAGE> 52
MASTER INVESTMENT TRUST SERIES I -- BLUE CHIP PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1998 1997 1996 1995 1994*
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to
average net assets........ 0.65% 0.62% 0.31% 0.17% 0.27%**
Ratio of net investment
income to average net
assets.................... 1.11% 1.62% 2.16% 2.30% 1.97%**
Ratio of expenses to
average net assets(a)..... 0.70% 0.90% 0.90% 0.97% 1.07%**
Ratio of net investment
income to average net
assets(a)................. 1.06% 1.34% 1.57% 1.50% 1.17%**
Portfolio Turnover......... 67% 91% 108% 44% 86%
Average Commission rate
paid(b)................... $0.0530 $0.0530 -- -- --
</TABLE>
- ---------------
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
(b) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged.
* For the period December 6, 1993 (commencement of operations) through February
28, 1994.
** Annualized.
- ---------------
See Notes to Financial Statements.
79
<PAGE> 53
MASTER INVESTMENT TRUST SERIES I --
INVESTMENT GRADE BOND PORTFOLIO
- --------------------------------------------------------------------------------
Supplementary Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28,
1998 1997 1996 1995 1994*
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ratio of expenses to average
net assets................... 0.35% 0.35% 0.18% 0.25% 0.41%**
Ratio of net investment income
to average net assets........ 5.99% 5.86% 6.47% 6.22% 4.93%**
Ratio of expenses to average
net assets(a)................ 0.55% 0.65% 0.68% 0.75% 0.91%**
Ratio of net investment income
to average net assets(a)..... 5.79% 5.56% 5.97% 5.72% 4.43%**
Portfolio Turnover............ 127% 83% 172% 240% 32%
</TABLE>
- ---------------
(a) During the period, certain fees were voluntarily reduced and expenses
reimbursed. If such voluntary fee reductions and expense reimbursements had
not occurred, the ratios would have been as indicated.
* For the period December 6, 1993 (commencement of operations) through February
28, 1994.
** Annualized.
See Notes to Financial Statements.
80
<PAGE> 54
MASTER INVESTMENT TRUST, SERIES I
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees
and Investors of
Master Investment Trust, Series I
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of Master Investment Trust, Series I, Blue Chip
Portfolio and Investment Grade Bond Portfolio (the "Portfolios") at February 28,
1998, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period then
ended, and their supplementary data for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and supplementary data (hereafter referred to as "financial
statements") are the responsibility of the Portfolios' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
February 28, 1998 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
April 21, 1998
81
