<PAGE>
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THE STRONG
INDEX 500 FUND
ANNUAL REPORT o FEBRUARY 28, 1998
[PHOTO OF MAN, WOMAN AND CHILD WALKING]
[STRONG LOGO]
STRONG FUNDS
<PAGE>
8
EIGHT BASIC PRINCIPLES FOR SUCCESSFUL MUTUAL FUND INVESTING
These common-sense rules are followed by many successful investors. They make
sense for beginners, too. If you have a question on these principles, or would
like to discuss them with us, please contact us at 1-800-368-3863. We're here
24 hours a day, seven days a week to take your call.
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[PICTURE OF FOLDER LABELED INVESTMENTS]
1. HAVE A PLAN. Even a simple plan can help you take control of your financial
future. Review your plan once a year, or if your circumstances change.
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[PICTURE OF CLOCK]
2. START INVESTING AS SOON AS POSSIBLE. Make time a valuable ally. Let it put
the power of compounding to work for you, while helping to reduce your
potential investment risk.
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[PICTURE OF PIE CHART OF ASSET DIVERSIFICATION]
3. DIVERSIFY YOUR PORTFOLIO. By investing in different asset classes - stocks,
bonds, and cash - you help protect against poor performance in one type of
investment while including investments most likely to help you achieve your
important goals.
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[PICTURE OF MEMO REMINDER TO INVEST]
4. INVEST REGULARLY. Investing is a process, not a one-time event. By
investing regularly over the long term, you reduce the impact of short-term
market gyrations, and you attend to your long-term plan before you're tempted
to spend those assets on short-term needs.
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[PICTURE OF GRAPH SLOPING UPWARD]
5. MAINTAIN A LONG-TERM PERSPECTIVE. For most individuals, the best discipline
is staying invested as market conditions change. Reactive, emotional investment
decisions are all too often a source of regret - and of principal loss.
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[PICTURE OF PIE CHART OF ASSET DIVERSIFICATION EMPHASIZING STOCKS]
6. CONSIDER STOCKS TO HELP ACHIEVE MAJOR LONG-TERM GOALS. Over time, stocks
have provided the more powerful returns needed to help the value of your
investments stay well ahead of inflation.
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[PICTURE OF DOLLAR SIGN]
7. KEEP A COMFORTABLE AMOUNT OF CASH IN YOUR PORTFOLIO. To meet current needs,
including emergencies, use a money market fund or a bank account - not your
long-term investment assets.
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[PICTURE OF MAGNIFYING GLASS]
8. KNOW WHAT YOU'RE BUYING. Make sure you understand the potential risks and
rewards associated with each of your investments. Ask questions...request
information...make up your own mind. And choose a fund company that helps you
make informed investment decisions.
<PAGE>
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THE STRONG
INDEX 500 FUND
ANNUAL REPORT o FEBRUARY 28, 1998
TABLE OF CONTENTS
INVESTMENT REVIEW
The Strong Index 500 Fund................................................2
FINANCIAL INFORMATION--STRONG INDEX 500 FUND
Statement of Assets and Liabilities......................................4
Statement of Operations..................................................4
Statement of Changes in Net Assets.......................................5
Notes to Financial Statements............................................5
Financial Highlights.....................................................6
REPORT OF INDEPENDENT ACCOUNTANTS.............................................7
FINANCIAL INFORMATION--MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER
PORTFOLIO
Portfolio of Investments.................................................8
Statement of Assets and Liabilities.....................................14
Statement of Operations.................................................15
Statements of Changes in Net Assets.....................................16
Notes to Financial Statements...........................................17
REPORT OF INDEPENDENT ACCOUNTANTS............................................20
<PAGE>
THE STRONG INDEX 500 FUND
THE DOMESTIC STOCK MARKET ENJOYED ANOTHER OUTSTANDING YEAR, WITH THE CURRENT
SEVEN-YEAR RALLY ONE OF THE LONGEST-SUSTAINED RALLIES IN HISTORY.
The Strong Index 500 Fund seeks to replicate, as closely as practical (before
fees and expenses), the market capitalization-weighted total return of the
Standard & Poor's 500 (S&P 500) Index.* The Fund is designed to provide
investors with broad exposure to the large-capitalization sector of the U.S.
market. This allows investors wide diversification, and serves as a complement
to actively managed funds.
ANOTHER STRONG YEAR FOR STOCKS
The domestic stock market enjoyed another outstanding year, with the current
seven-year rally representing one of the longest-sustained rallies in history.
The fiscal year ended February 28, 1998 was one of historically high returns
for stocks, although the market experienced downturns as well. The most
noteworthy tumble was the one-day decline of more than 6% in the S&P 500 Index
in October of 1997. Investors tended to react positively to market dips
throughout the year, recognizing them as buying opportunities. In fact, the day
after the October plunge, the market rose 5.12%.
While volatility marked the fiscal year of the Strong Index 500 Fund, the
period ended with the market once again approaching record highs. The Strong
Index 500 Fund returned 32.71% for the 10-month period ended February 28, 1998.
As measured by the S&P 500 Index, the U.S. equity market returned 33.31% for
the same period.
LARGE CAPS, VALUE STOCKS LED THE MARKET
In a continuing trend from the previous year, the strong performance of a small
group of large-cap stocks led the market. Substantial increases in corporate
earnings--which rose an estimated 13.6% for the year--beat analysts'
expectations, instilling confidence in investors and driving the stock market
to new highs.
Within the intermediate and small-cap sectors, value stocks generally
outperformed growth stocks, especially during the second half of 1997. The
reasons for this were two-fold. Technology stocks--which
2
<PAGE>
typically dominate the intermediate- and small-growth sectors--often turned in
earnings disappointments, while a favorable interest rate environment
encouraged merger activity among regional banks and securities firms on the
value side. Communications services, telephone and utilities stocks were among
the best-performing sectors in the S&P 500 Index. Meanwhile, the basic
materials--the sector including companies that make basic products used in the
manufacturing of other goods--and technology sectors delivered the poorest
performance.
THE VALUE OF STOCKS IN YOUR PORTFOLIO
The market's historic gains over the past year demonstrated the return
potential that stocks can add to your portfolio. The accompanying instability
confirmed the importance of choosing stock funds for long-term investment
goals--those five or more years in the future.
Thank you for your investment in the Strong Index 500 Fund. We look forward to
continuing to help you meet your investment goals.
===============================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
===============================================================================
From 5-1-97 to 2-28-98
[GRAPH]
Lipper S & P 500
THE STRONG S & P 500 Index Objective
INDEX 500 FUND Index(R)* Funds Index*
4-97 10,000 10,000 10,000
5-97 10,640 10,645 10,644
6-97 11,110 11,122 11,117
7-97 11,991 12,007 12,001
8-97 11,320 11,334 11,327
9-97 11,930 11,955 11,943
10-97 11,538 11,555 11,550
11-97 12,060 12,090 12,065
12-97 12,262 12,298 12,270
1-98 12,393 12,434 12,407
2-98 13,271 13,331 13,295
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Standard & Poor' s 500 Stock Index(reg.tm) ("S&P 500") and the Lipper S&P 500
Index Objective Funds Index. Results include the reinvestment of all dividends
and capital gains distributions. Performance is historical and does not
represent future results. Investment returns and principal value vary, and you
may have a gain or loss when you sell shares.
+ The S&P 500 Index figure tracks the Strong Index 500 Fund and the Lipper S&P
500 Index figure so closely that its results are not discernible on the
graph.
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================================
TOTAL RETURN(1)
================================
As of 2-28-98
SINCE INCEPTION 32.71%
(on 5-1-97)
================================
* The S&P 500 Stock Index(reg.tm) is an unmanaged index generally
representative of the U.S. stock market, without regard to company size. The
Lipper S& P 500 Index Objective Funds Index is an equally-weighted
performance index of the largest qualifying funds in this Lipper category.
Source of the S&P index data is Standard & Poor's Micropal. Source of the
Lipper index data is Lipper Analytical Services, Inc.
1 Total return is not annualized and measures aggregate change in the value of
an investment in the Fund, assuming reinvestment of dividends. Strong Capital
Management, Inc. has voluntarily waived portions of its fees or has
reimbursed expenses to the Fund, which has reduced operating expenses for
shareholders. Without this reduction, the Fund's return would have been
lower.
3
<PAGE>
STRONG INDEX 500 FUND
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STATEMENT OF ASSETS AND LIABILITIES
February 28, 1998
ASSETS:
Investment in S&P 500 Index Master Portfolio, at Value (Note 1) $31,987,008
Receivable for Fund Shares Sold 140,512
Other Assets 22,542
-----------
Total Assets 32,150,062
LIABILITIES:
Payable for Fund Shares Redeemed 11,835
Accrued Operating Expenses 42,280
-----------
Total Liabilities 54,115
-----------
NET ASSETS $32,095,947
===========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $28,629,609
Undistributed Net Investment Income 50,790
Undistributed Net Realized Gain 75,795
Net Unrealized Appreciation 3,339,753
-----------
Net Assets $32,095,947
===========
Capital Shares Outstanding (Unlimited Number Authorized) 2,438,109
NET ASSET VALUE PER SHARE $13.16
======
STRONG INDEX 500 FUND
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STATEMENT OF OPERATIONS
For the Period Ended February 28, 1998 (Note 1)
NET INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIO:
Dividend Income $ 180,647
Interest Income 35,558
Expenses (5,726)
----------
Total Income Allocated from Master Portfolio 210,479
EXPENSES:
Shareholder Servicing Costs (Note 3) 52,332
Audit Fees 12,457
Accounting Fees 11,728
Reports to Shareholders 13,598
Federal and State Registration Fees 62,912
Other 18,315
----------
Total Expenses before Waivers 171,342
Voluntary Expense Waivers by SCMI (125,706)
----------
Expenses, Net 45,636
----------
NET INVESTMENT INCOME 164,843
REALIZED AND UNREALIZED GAIN ALLOCATED FROM MASTER PORTFOLIO:
Net Realized Gain on Investments 88,899
Change in Unrealized Appreciation/Depreciation on Investments 3,339,753
----------
NET GAIN ALLOCATED FROM MASTER PORTFOLIO 3,428,652
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,593,495
==========
4
See notes to financial statements.
<PAGE>
STRONG INDEX 500 FUND
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STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED
FEBRUARY 28, 1998
-----------------
(NOTE 1)
OPERATIONS:
Net Investment Income $ 164,843
Net Realized Gain 88,899
Net Change in Unrealized Appreciation/Depreciation 3,339,753
-----------
Net Increase in Net Assets Resulting from Operations 3,593,495
DISTRIBUTIONS:
From Net Investment Income (114,053)
From Net Realized Gains (13,104)
-----------
Total Distributions (127,157)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Proceeds from Shares Sold 32,320,505
Proceeds from Reinvestment of Distributions 123,613
Payment for Shares Redeemed (3,814,509)
-----------
Increase in Net Assets from Beneficial Interest Transactions 28,629,609
-----------
TOTAL INCREASE IN NET ASSETS 32,095,947
NET ASSETS:
Beginning of Period --
-----------
End of Period $32,095,947
===========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 2,745,317
Issued in Reinvestment of Distributions 10,372
Redeemed (317,580)
---------
Net Increase in Shares of the Fund 2,438,109
=========
See notes to financial statements.
STRONG INDEX 500 FUND
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NOTES TO FINANCIAL STATEMENTS
February 28, 1998
1. ORGANIZATION
The Strong Index 500 Fund (the "Fund") commenced operations on May 1, 1997
and is a diversified series of the Strong Equity Funds, Inc., an open-end
management investment company registered under the Investment Company Act of
1940. The Fund invests all of its assets in the S&P 500 Index Master
Portfolio (the "Master Portfolio") of Master Investment Portfolio ("MIP"),
an open-end management investment company registered under the Investment
Company Act of 1940, rather than in a portfolio of securities. The Master
Portfolio has substantially the same investment objective as the Fund.
Barclays Global Fund Advisors serves as Investment Advisor for the Master
Portfolio. The financial statements of the Master Portfolio, including the
schedule of investments in securities, are contained elsewhere in this
report and should be read in conjunction with the Fund's financial
statements.
5
<PAGE>
STRONG INDEX 500 FUND
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 1998
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
(A) Security Valuation -- The value of the Fund's investment in the Master
Portfolio reflects the Fund's interest of 1.36% in the net assets of the
Master Portfolio. Valuation of securities by the Master Portfolio is
discussed in Note 1 of the Master Portfolio's Notes to Financial
Statements, which are included elsewhere in this report.
(B) Federal Income and Excise Taxes and Distributions to Shareholders -- It
is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders
in a manner which results in no tax cost to the Fund. Therefore, no
federal income or excise tax provision is required.
The character of distributions made during the period from net
investment income or net realized gains may differ from the
characterization for federal income tax purposes due to differences in
the recognition of income and expense items for financial statement and
tax purposes. Where appropriate, reclassifications between net asset
accounts are made for such differences that are permanent in nature.
(C) Accounting for Investments -- The Fund earns income, net of Master
Portfolio expenses, daily based on its investment in the Master
Portfolio. All the net investment income, realized and unrealized gain
or loss of the Master Portfolio is allocated pro rata, based on
respective ownership interests, among the Fund and the other investors
in the Master Portfolio at the time of such determination. Dividend
income and other distributions from portfolio securities are recorded on
the ex-dividend date. Interest income is accrued daily.
(D) Expenses -- The Fund bears all costs of its operations other than
expenses specifically assumed by Strong Capital Management, Inc.
("SCMI"), the Fund's shareholder servicing agent, transfer agent and
dividend-disbursing agent. Expenses incurred by the Master Portfolio
are allocated pro rata to the Fund.
(E) Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results could differ
from those estimates.
3. RELATED PARTY TRANSACTIONS
SCMI provides shareholder recordkeeping and related services to the Fund.
Fees for these services are based on contractually established rates for
each open and closed shareholder account. Certain fees have been waived or
reimbursed by SCMI for the period ended February 28, 1998. Waived or
reimbursed fees continue at the discretion of SCMI. In addition, SCMI is
compensated for certain other services related to costs incurred for reports
to shareholders. The amount receivable from SCMI at February 28, 1998,
other shareholder expenses paid to SCMI and unaffiliated directors' fees for
the period then ended were $47, $720, and $1,175, respectively.
<TABLE>
STRONG INDEX 500 FUND
- ----------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER-SHARE DATA (a)
-------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
--------------------------------------- -------------------------------------
<CAPTION>
Net Asset Net Realized Total Net Asset
Value, Net and Unrealized from From Net From Net Value
Beginning Investment Gains on Investment Investment Realized Total End of
of Period Income Investments Operations Income Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Feb. 28, 1998 (b) $10.00 $0.11 $3.15 $3.26 ($0.09) ($0.01) ($0.10) $13.16
</TABLE>
<TABLE>
RATIOS AND SUPPLEMENTAL DATA
----------------------------------------------------------------
<CAPTION>
Net Ratio of Ratio of Net
Assets, Ratio of Expenses to Investment
End of Expenses Average Net Income
Total Period (In to Average Assets Without to Average
Return Thousands) Net Assets Waivers Net Assets
<S> <C> <C> <C> <C> <C>
Feb. 28, 1998 (b) +32.7% $32,096 0.44%* 1.53%* 1.43%*
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) For the period from May 1, 1997 (inception) to February 28, 1998. Total return is not annualized.
</TABLE>
6
<PAGE>
STRONG INDEX 500 FUND
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Strong Equity Funds, Inc.
We have audited the accompanying statement of assets and liabilities of the
Strong Index 500 Fund (one of the series comprising Strong Equity Funds, Inc.)
as of February 28, 1998 and the related statements of operations and changes in
net assets, and financial highlights for the period from May 1, 1997
(commencement of operations) to February 28, 1998. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
verification of securities owned as of February 28, 1998 through examination
and other appropriate audit procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Strong Index 500 Fund as of February 28, 1998, the results of its operations,
changes in its net assets, and financial highlights for the period from May 1,
1997 (commencement of operations) to February 28, 1998, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
San Francisco, California
April 3, 1998
7
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS February 28, 1998
SECURITY NAME SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCKS-91.51%
ADVERTISING-0.08%
Omnicom Group 42,337 $ 1,936,918
TOTAL ADVERTISING ------------
- VALUE $ 1,936,918
- COST $ 1,660,895
AEROSPACE & DEFENSE-1.81%
Allied Signal Inc 147,957 $ 6,297,420
Boeing Co 262,536 14,242,578
Briggs & Stratton Corp 7,221 319,981
General Dynamics Corp 16,508 1,432,069
Lockheed Martin Corp 51,027 5,954,213
Northrop Grumman Corp 17,541 2,438,199
Rockwell International Corp 55,155 3,336,878
Textron Inc. 43,126 3,231,755
United Technologies Corp 61,252 5,470,569
TOTAL AEROSPACE & DEFENSE ------------
- VALUE $ 42,723,662
- COST $ 24,707,149
AIRLINES-0.46%
AMR Corp^ 23,982 $ 3,035,222
Delta Air Lines Inc 19,361 2,189,003
FDX Corp^ 38,273 2,437,512
Southwest Airlines Co 57,437 1,647,724
USAirways Group Inc^ 23,940 1,515,701
TOTAL AIRLINES ------------
- VALUE $ 10,825,162
- COST $ 6,640,734
APPAREL-0.45%
CVS Corp 45,197 $ 3,347,403
Fruit of the Loom Inc Class A^ 19,372 622,326
Liz Claiborne Inc 18,288 914,400
Nike Inc Class B 76,344 3,349,593
Reebok International Ltd^ 14,464 451,096
Russell Corp 9,611 260,698
VF Corp 32,903 1,569,062
TOTAL APPAREL ------------
- VALUE $ 10,514,578
- COST $ 7,144,238
AUTO PARTS & EQUIPMENT-0.81%
Cooper Tire & Rubber Co 20,488 $ 472,505
Dana Corp 27,566 1,504,070
Deluxe Corp 21,446 730,504
Eaton Corp 20,145 1,935,179
Echlin Inc 16,440 831,248
Genuine Parts Co 46,867 1,734,079
Goodyear Tire & Rubber Co 41,056 2,837,996
Illinois Tool Works Inc 65,461 3,923,569
ITT Industries Inc 30,875 1,057,469
Navistar International Corp^ 19,735 599,451
PACCAR Inc 20,382 1,290,435
Pep Boys-Manny Moe & Jack 16,448 421,480
TRW Inc 32,352 1,773,294
TOTAL AUTO PARTS & EQUIPMENT ------------
- VALUE $ 19,111,279
- COST $ 12,238,777
AUTOMOBILES-1.59%
Chrysler Corp 175,615 $ 6,838,009
Ford Motor Co 315,212 17,829,179
General Motors Corp Class A 185,766 12,806,231
TOTAL AUTOMOBILES ------------
- VALUE $ 37,473,419
- COST $ 24,917,951
BANK & FINANCE-11.32%
Ahmanson (H F) & Co 28,689 $ 1,791,269
American Express Corp 122,370 11,020,948
Banc One Corp 169,602 9,582,519
Bank of New York Inc 98,769 5,784,160
BankAmerica Corp 182,142 14,116,005
BankBoston Corp 38,167 3,804,773
Bankers Trust Corp 25,925 3,065,631
BB&T Corp 35,905 2,228,354
Beneficial Corp 13,897 1,639,846
Chase Manhattan Bank 110,663 13,729,128
Citicorp 120,011 15,901,458
Comerica Inc 27,559 2,778,292
CoreStates Financial Corp 52,715 4,451,123
Countrywide Credit Industries Inc 28,287 1,257,004
Equifax Inc 39,294 1,412,128
Federal Home Loan Mortgage Corp 182,554 8,625,677
Federal National Mortgage Assoc 278,723 17,786,011
Fifth Third Bancorp 40,417 3,192,943
First Chicago NBD Corp 77,024 6,330,410
First Union Corp 164,900 8,688,169
Fleet Financial Group Inc 71,567 5,640,374
Golden West Financial 14,938 1,333,217
Green Tree Financial Inc 35,324 810,244
Household International Inc 28,100 3,649,488
Huntington Bancshares Inc 50,158 1,799,418
Keycorp 57,666 4,040,224
Lehman Brothers Holdings 27,966 1,763,606
MBNA Corp 131,438 4,707,123
Mellon Bank Corp 66,830 4,164,344
Mercantile Bancorp 34,164 1,900,373
Merrill Lynch & Co Inc 87,400 6,254,563
MGIC Investment Corp 30,000 2,210,625
Morgan (J P) & Co Inc 46,573 5,565,474
Morgan Stanley Dean Witter 155,569 10,841,222
National City Corp 55,976 3,652,434
NationsBank Corp 247,536 16,956,233
Northern Trust Corp 29,266 2,226,045
Norwest Corp 198,137 8,111,234
PNC Bank Corp 79,941 4,436,726
Republic New York Corp 14,338 1,734,898
Ryder System Inc 20,373 747,434
Schwab (Charles) Corp 69,699 2,631,137
State Street Boston Corp 42,163 2,606,200
Summit Bancorp 46,114 2,291,289
SunTrust Banks Inc 55,686 4,106,843
Synovus Financial Corp 41,911 1,472,092
U.S. Bancorp 64,392 7,409,105
Wachovia Corp 53,557 4,257,782
Washington Mutual Inc 67,525 4,532,616
Wells Fargo & Co 22,867 7,363,174
TOTAL BANK & FINANCE ------------
- VALUE $266,401,385
- COST $145,452,785
BASIC INDUSTRIES-1.42%
ASARCO Inc 11,078 $ 245,101
Avery-Dennison Corp 26,793 1,353,047
Baker Hughes Inc 44,381 1,816,847
Bemis Co 13,843 623,800
Boise Cascade Corp 14,753 491,459
Champion International Corp 25,239 1,288,766
Cyprus Amax Minerals 24,346 398,666
Dover Corp 58,447 2,257,515
Fort James Corp 54,624 2,478,564
Georgia-Pacific Corp 24,225 1,421,705
Harnischfeger Industries Inc 12,754 451,173
Homestake Mining Co 38,005 380,050
Ikon Office Solutions Inc 34,635 1,132,132
Inco Ltd 43,500 769,406
Louisiana-Pacific Corp 28,496 625,131
8
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS February 28, 1998
SECURITY NAME SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCKS (Continued)
Mead Corp 27,221 $ 930,618
Minnesota Mining & Manufacturing Co 107,344 9,157,785
NACCO Industries Inc Class A 2,128 276,773
Newmont Mining Corp 40,743 1,179,001
Potlatch Corp 7,498 324,757
Stone Container Corp^ 25,703 289,159
Union Camp Corp 18,244 1,090,079
Westvaco Corp 26,575 863,688
Weyerhauser Co 52,402 2,616,825
Willamette Industries Inc 28,899 1,067,457
TOTAL BASIC INDUSTRIES ------------
- VALUE $ 33,529,504
- COST $ 28,122,863
BEVERAGES-2.94%
Anheuser-Busch Inc 128,676 $ 6,031,688
Coca-Cola Co 649,617 44,620,568
Coors (Adolph) Co Class B 9,512 297,250
Pepsico Inc 398,515 14,570,705
Seagrams Co Ltd 96,397 3,663,086
TOTAL BEVERAGES ------------
- VALUE $ 69,183,297
- COST $ 40,155,182
BROADCASTING-0.56%
Clear Channel Communications Inc^ 25,730 $ 2,331,781
Kingworld Productions 19,410 518,004
Tele-Communications Inc Class A^ 133,232 3,872,055
Tribune Co 32,265 2,083,109
Viacom Inc Class B^ 92,674 4,448,352
TOTAL BROADCASTING ------------
- VALUE $ 13,253,301
- COST $ 9,038,898
BUILDING MATERIALS & SERVICES-0.46%
Cooper Industries Inc 31,846 $ 1,787,357
Corning Inc 60,683 2,465,247
Owens Corning Fiberglass Corp 13,949 430,675
Owens Illinois Inc^ 36,870 1,414,886
PPG Industries Inc 46,621 3,021,624
Snap-On Inc 15,913 676,303
Stanley Works 23,332 1,115,561
TOTAL BUILDING MATERIALS & SERVICES ------------
- VALUE $ 10,911,653
- COST $ 8,363,337
BUSINESS SERVICES-0.50%
Cendant Corp^ 207,751 $ 7,790,663
Ecolab Inc 33,614 968,503
Waste Management Inc 119,636 2,990,900
TOTAL BUSINESS SERVICES ------------
- VALUE $ 11,750,066
- COST $ 9,118,841
CHEMICALS-2.27%
Air Products & Chemicals Inc 28,782 $ 2,415,889
Clorox Co 27,169 2,384,080
Dow Chemical Co 59,483 5,442,695
Du Pont (E I) De Nemours 297,243 18,224,711
Eastman Chemical Co 20,458 1,339,999
FMC Corp^ 9,677 700,373
Goodrich (B F) Co 18,792 931,379
Grace (W R) Co 19,454 1,632,920
Great Lakes Chemical Corp 15,593 758,210
Hercules Inc 25,794 1,246,173
International Flavor & Fragrances 28,466 1,309,436
Monsanto Co 155,720 7,922,255
Morton International Inc 34,697 1,147,170
Nalco Chemical Co 17,318 697,050
Praxair Inc 41,305 1,974,895
Rohm & Haas Co 16,182 1,649,553
Rubbermaid Inc 39,017 1,131,493
Sigma-Aldrich Corp 26,117 1,031,622
Solutia Inc 40 1,093
Union Carbide Corp 32,337 1,501,649
TOTAL CHEMICALS ------------
- VALUE $ 53,442,645
- COST $ 35,619,976
COMPUTER SOFTWARE-4.02%
3Com Corp^ 90,895 $ 3,249,496
Adobe Systems Inc 19,112 844,512
Autodesk Inc 12,462 590,387
Automatic Data Processing 76,719 4,684,654
Bay Networks Inc^ 55,499 1,880,029
Computer Associates International Inc 143,388 6,757,160
Computer Sciences Corp^ 20,361 2,131,542
First Data Corp 112,291 3,817,894
HBO & Co 55,444 3,000,907
Microsoft Corp 633,838 53,717,771
Novell Inc^ 90,911 955,984
Oracle Systems Corp 257,321 6,336,530
Parametric Technology Corp^ 33,420 2,023,999
Siebel Systems Inc^ 63 3,875
Sun Microsystems Inc^ 98,328 4,682,871
TOTAL COMPUTER SOFTWARE ------------
- VALUE $ 94,677,611
- COST $ 48,884,164
COMPUTER SYSTEMS-4.41%
Apple Computer Inc^ 33,211 $ 784,610
Cabletron Systems Inc^ 40,984 635,252
Ceridian Corp^ 19,887 925,988
Cisco Systems Inc 264,291 17,410,170
Cognizant Corp 43,295 2,162,044
Compaq Computer Corp 397,644 12,749,461
Data General Corp^ 12,086 249,274
Dell Computer Corp 85,701 11,987,427
Digital Equipment Corp^ 39,767 2,264,234
EMC Corp 130,191 4,979,806
Harris Corp 20,770 1,052,779
Hewlett-Packard Co 273,248 18,307,616
International Business Machine Corp 255,395 26,672,815
Seagate Technology Inc^ 64,163 1,559,963
Shared Medical System Corp 6,473 494,780
Silicon Graphics Inc^ 49,004 738,123
Unisys Corp^ 46,158 825,074
TOTAL COMPUTER SYSTEMS ------------
- VALUE $103,799,416
- COST $ 50,361,066
CONTAINER & PACKAGING-0.38%
Ball Corp 7,728 $ 252,126
Crown Cork & Seal Co 33,676 1,818,504
International Paper Co 79,322 3,698,388
Temple-Inland Inc 14,831 884,298
Tenneco Inc 44,683 1,837,588
Tupperware Corp 15,976 429,355
TOTAL CONTAINER & PACKAGING ------------
- VALUE $ 8,920,259
- COST $ 8,116,244
ELECTRICAL EQUIPMENT-3.49%
Aeroquip-Vickers Inc 7,398 $ 429,546
General Electric Co 859,585 66,832,734
Grainger (W W) Inc 13,299 1,287,509
Masco Corp 43,365 2,357,972
Motorola Inc 156,768 8,739,816
National Service Industries Inc 11,858 657,378
9
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS February 28, 1998
SECURITY NAME SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCKS (Continued)
Raychem Corp 22,638 $ 983,338
Thomas & Betts Corp 14,272 809,044
TOTAL ELECTRICAL EQUIPMENT ------------
- VALUE $ 82,097,337
- COST $ 44,322,769
ELECTRONICS-3.93%
Advanced Micro Devices^ 36,698 $ 860,109
AMP Inc 57,688 2,549,089
Applied Materials Inc 95,671 3,521,889
CBS Corp 184,643 5,712,393
Commscope Inc^ 1 13
EG&G Inc 11,885 320,152
Emerson Electric Co 116,324 7,422,925
General Instrument Corp^ 38,429 641,284
General Signal Corp 13,133 533,528
Honeywell Inc 33,372 2,644,731
Intel Corp 429,675 38,536,477
Johnson Controls Inc 21,802 1,211,374
KLA Instruments Corp^ 22,193 1,024,345
LSI Logic Corp^ 36,948 875,206
Micron Technology Inc^ 55,504 1,842,039
National Semiconductor^ 42,842 1,022,853
Perkin-Elmer Corp 12,600 922,163
Pitney Bowes Inc 76,078 3,566,156
Raytheon Co Class B 88,987 5,233,548
Tektronix Inc 13,312 594,026
Texas Instruments Inc 102,420 5,927,558
Xerox Corp 85,633 7,594,577
TOTAL ELECTRONICS ------------
- VALUE $ 92,556,435
- COST $ 51,371,987
ENERGY & RELATED-7.63%
Amerada Hess Corp 24,041 $ 1,425,932
Amoco Corp 127,810 10,863,850
Anadarko Petroleum Corp 15,583 1,005,104
Apache Corp 25,075 852,550
Ashland Inc 19,675 1,095,652
Atlantic Richfield Corp 84,157 6,543,207
Burlington Resources Inc 46,294 2,071,657
Chevron Corp 172,547 13,997,875
Coastal Corp 27,791 1,768,202
Columbia Gas System Inc 14,426 1,100,884
Consolidated Natural Gas Co 25,005 1,437,788
Dresser Industries Inc 45,995 2,055,402
Eastern Enterprises 5,145 227,988
Enron Corp 83,480 3,923,560
Exxon Corp 647,734 41,374,009
Halliburton Co 68,566 3,188,319
Helmerich & Payne Inc 12,938 374,393
Kerr-McGee Corp 12,407 839,023
Mobil Corp 205,997 14,921,908
NICOR Inc 12,498 513,980
Occidental Petroleum Corp 88,595 2,264,710
ONEOK Inc 8,162 285,670
Oryx Energy Co^ 27,427 697,674
Pacific Enterprises Co 21,738 789,361
Pennzoil Co 12,445 833,037
Peoples Energy Corp 9,090 328,376
Phillips Petroleum Co 69,051 3,383,499
Rowan Co Inc^ 22,529 635,036
Royal Dutch Petroleum Corp 563,184 30,587,931
Schlumberger Ltd 130,065 9,803,649
Sonat Offshore Drilling Co 28,879 1,245,407
Sun Co Inc 18,879 753,980
Texaco Inc 143,934 8,033,316
Union Pacific Resources Group 66,581 1,489,750
Unocal Corp 64,530 2,431,974
USX-Marathon Group 75,641 2,614,342
Western Atlas Inc 14,345 1,089,323
Williams Co Inc 83,988 2,745,358
TOTAL ENERGY & RELATED ------------
- VALUE $179,593,676
- COST $121,008,495
ENGINEERING & CONSTRUCTION-0.16%
Armstrong World Industries Inc 10,534 $ 826,919
Centex Corp 7,811 570,691
Fleetwood Enterprises Inc 9,367 439,078
Fluor Corp 21,847 1,028,174
Foster Wheeler Corp 10,443 279,350
Kaufman & Broad Home Corp 10,087 261,001
Pulte Corp 5,772 262,626
TOTAL ENGINEERING & CONSTRUCTION ------------
- VALUE $ 3,667,839
- COST $ 3,016,295
ENTERTAINMENT & LEISURE-1.80%
Brunswick Corp 25,876 $ 821,563
Disney (Walt) Co 177,301 19,846,631
Harrah's Entertainment Inc^ 26,552 559,252
Hasbro Inc 33,158 1,204,050
Mattel Inc 76,274 3,227,344
Mirage Resorts Inc^ 47,100 1,077,413
Polaroid Corp 11,845 542,649
Time Warner Inc 146,874 9,913,995
U.S. West Media Group^ 159,360 5,129,400
TOTAL ENTERTAINMENT & LEISURE ------------
- VALUE $ 42,322,297
- COST $ 25,541,039
ENVIRONMENTAL CONTROL-0.09%
Browning-Ferris Industries Inc 51,936 $ 1,730,118
Safety-Kleen Corp 15,096 404,762
TOTAL ENVIRONMENTAL CONTROL ------------
- VALUE $ 2,134,880
- COST $ 1,882,353
FOOD & RELATED-3.82%
Albertson's Inc 64,876 $ 3,037,008
American Stores Co 71,596 1,803,324
Archer-Daniels-Midland Co 146,284 3,282,247
Bestfoods 37,723 3,975,061
Brown-Forman Corp Class B 17,999 998,945
Campbell Soup Co 120,243 6,981,609
ConAgra Inc 123,966 3,718,980
Darden Restaurants Inc 40,045 540,608
General Mills Inc 41,722 3,001,376
Giant Food Inc Class A 15,508 563,134
Great Atlantic & Pacific Tea Co 10,001 304,405
Harcourt General Inc 18,454 996,516
Heinz (H J) Co 96,413 5,429,257
Hershey Foods Corp 37,525 2,502,448
Kellogg Co 107,719 4,591,522
Kroger Co 66,920 2,827,370
McDonald's Corp 180,756 9,896,391
Pioneer Hi Bred International Inc 17,240 1,788,650
Quaker Oats Co 36,235 1,952,161
Ralston-Purina Group 27,935 2,833,657
Sara Lee Corp 125,893 7,112,955
Super Value Inc 16,647 792,813
Sysco Corp 45,436 2,138,332
Tricon Global Restaurants^ 39,836 1,130,347
Unilever NV (Netherlands) 168,125 10,812,539
UST Inc 48,324 1,712,482
Wendy's International Inc 34,356 745,096
10
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS February 28, 1998
SECURITY NAME SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCKS (Continued)
Winn-Dixie Stores Inc 39,108 $ 2,109,388
Wrigley (W M) Jr Co 30,450 2,325,619
TOTAL FOOD & RELATED ------------
- VALUE $ 89,904,240
- COST $ 54,996,781
FURNITURE & APPLIANCES-0.10%
Maytag Corp 25,627 $ 1,153,215
Whirlpool Corp 19,727 1,318,010
TOTAL FURNITURE & APPLIANCE ------------
- VALUE $ 2,471,225
- COST $ 1,582,602
HEALTHCARE-0.38%
Cardinal Health Inc 28,657 $ 2,346,292
Healthsouth Corp 102,984 2,780,568
St Jude Medical Inc 23,924 873,226
United Healthcare Corp 49,298 2,991,772
TOTAL HEALTHCARE ------------
- VALUE $ 8,991,858
- COST $ 7,142,916
HOSPITAL & MEDICAL SUPPLIES-2.42%
Bard (C R) Inc 14,767 $ 514,999
Bausch & Lomb Inc 14,327 642,029
Baxter International Inc 73,607 4,167,996
Becton Dickinson & Co 32,100 2,042,363
Biomet Inc 29,288 873,149
Boston Scientific Corp^ 51,053 3,050,417
Columbia/HCA Healthcare Corp 170,255 4,618,156
Guidant Corp 38,821 2,831,507
Johnson & Johnson 353,200 26,666,600
Mallinckrodt Group Inc 18,984 736,817
Manor Care Inc 16,592 623,237
Medtronic Inc 123,031 6,536,022
Tenet Healthcare Corp^ 80,233 2,993,694
United States Surgical 19,892 609,193
TOTAL HOSPITAL & MEDICAL SUPPLIES ------------
- VALUE $ 56,906,179
- COST $ 33,056,681
HOUSEHOLD PRODUCTS-2.68%
Alberto-Culver Co Class B 14,662 $ 446,275
Avon Products Inc 34,698 2,444,040
Colgate-Palmolive Co 77,571 6,297,796
Gillette Co 147,079 15,866,147
Kimberly-Clark Corp 144,401 8,041,331
Procter & Gamble Co 353,017 29,984,381
TOTAL HOUSEHOLD PRODUCTS ------------
- VALUE $ 63,079,970
- COST $ 31,989,395
INSURANCE-4.59%
Aetna Inc 39,016 $ 3,409,023
Allstate Corp 112,685 10,507,876
American General Corp 64,587 3,754,119
American International Group Inc 184,269 22,146,831
Aon Corp 43,876 2,624,333
Chubb Corp 45,245 3,611,117
CIGNA Corp 19,441 3,713,231
Cincinnati Financial Corp 14,388 1,942,380
Conseco Inc 49,401 2,318,759
General Re Corp 20,788 4,427,844
Hartford Financial Services Group 30,996 3,045,357
Humana Inc^ 43,069 1,095,568
Jefferson-Pilot Corp 18,548 1,555,714
Lincoln National Corp 26,850 2,248,688
Loews Corp 30,132 3,022,616
Marsh & McLennan Companies Inc 44,599 3,866,176
MBIA Inc 25,738 1,883,700
Progressive Corp Ohio 19,004 2,202,089
Providian Financial Corp 24,970 1,417,048
SAFECO Corp 36,970 1,938,614
St Paul Co 21,980 1,947,978
Sunamerica Inc 51,210 2,320,453
Torchmark Corp 36,760 1,711,638
Transamerica Corp 16,467 1,917,376
Travelers Inc 301,238 16,793,995
UNUM Corp 36,917 1,898,918
USF & G Corp 29,547 722,055
TOTAL INSURANCE ------------
- VALUE $108,043,496
- COST $ 61,096,280
LODGING-0.19%
Hilton Hotels Corp 65,639 $ 1,956,863
Marriott International 33,437 2,532,853
TOTAL LODGING ------------
- VALUE $ 4,489,716
- COST $ 2,610,030
MACHINERY-0.80%
Black & Decker Corp 24,925 $ 1,255,597
Case Corp 19,696 1,281,471
Caterpillar Inc 98,064 5,356,746
Cincinnati Milacron Inc 10,134 312,887
Cummins Engine Co Inc 9,921 574,178
Deere & Co 66,206 3,715,812
Ingersoll-Rand Co 43,512 2,072,259
McDermott International Inc 14,610 575,269
Pall Corp 33,139 693,848
Parker Hannifin Corp 29,088 1,356,228
Thermo Electron Corp^ 39,675 1,626,675
TOTAL MACHINERY ------------
- VALUE $ 18,820,970
- COST $ 12,378,066
MANUFACTURING-0.30%
Tyco International Ltd 139,755 $ 7,092,566
TOTAL MANUFACTURING ------------
- VALUE $ 7,092,566
- COST $ 5,245,389
METAL FABRICATORS-0.74%
Alcan Aluminum Ltd 59,595 $ 1,851,170
Allegheny Teledyne Inc 45,864 1,244,061
Aluminum Co of America 45,242 3,319,632
Armco Inc^ 28,242 150,036
Barrick Gold Corp 97,902 1,890,732
Battle Mountain Gold Co 59,027 354,162
Bethlehem Steel Corp^ 28,582 303,684
Crane Co 11,886 582,390
Engelhard Corp 37,602 681,536
Freeport McMoRan Inc 51,811 780,403
Inland Steel Industries Inc 12,330 254,306
Nucor Corp 23,052 1,187,178
Phelps Dodge Corp 16,366 1,039,241
Placer Dome Inc 62,389 803,258
Reynolds Metals Co 19,385 1,207,928
Timken Co 16,384 528,384
USX-U.S. Steel Group 22,390 786,449
Worthington Industries Inc 24,983 427,834
TOTAL METAL FABRICATORS ------------
- VALUE $ 17,392,384
- COST $ 17,690,811
PHARMACEUTICALS-7.75%
Abbott Laboratories 200,946 $ 15,033,273
Allergan Inc 16,964 593,740
ALZA Corp 22,458 839,368
American Home Products Corp 170,621 15,995,719
Amgen Inc 68,960 3,663,500
11
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS February 28, 1998
SECURITY NAME SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCKS (Continued)
Bristol-Myers Squibb Co 261,158 $ 26,164,767
Lilly (Eli) & Co 291,414 19,178,684
Merck & Co Inc 314,738 40,148,766
Millipore Corp 11,199 423,462
Pfizer Inc 339,698 30,063,273
Pharmacia and Upjohn Inc 133,081 5,265,017
Schering-Plough Corp 192,304 14,627,123
Warner Lambert Co 71,499 10,456,729
TOTAL PHARMACEUTICALS ------------
- VALUE $182,453,421
- COST $ 79,680,841
PUBLISHING-0.90%
American Greetings Corp Class A 20,181 $ 920,758
Comcast Corp Class A 91,564 3,204,740
Donnelley (R R) & Sons Co 38,117 1,510,386
Dow Jones & Co Inc 25,306 1,300,096
Gannett Co Inc 74,407 4,803,902
Harland (John H) Co 8,028 121,925
Interpublic Group Co Inc 32,965 1,796,565
Knight-Ridder Inc 23,576 1,326,150
McGraw-Hill Inc 25,874 1,956,721
Meredith Corp 13,772 591,335
Moore Corp Ltd 25,004 392,250
New York Times Co Class A 25,228 1,650,857
Times Mirror Co Class A 24,933 1,534,938
TOTAL PUBLISHING ------------
- VALUE $ 21,110,623
- COST $ 12,168,588
RETAIL & RELATED-4.37%
AutoZone Inc^ 39,755 $ 1,202,589
Charming Shoppes Inc^ 27,559 123,153
Circuit City Stores Inc 25,972 1,003,169
Consolidated Stores Corp 28,130 1,156,846
Costco Co Inc^ 55,768 2,725,661
Dayton-Hudson Corp 57,171 4,420,033
Dillards Inc Class A 29,182 1,039,609
Eastman Kodak Co 85,254 5,594,794
Federated Department Stores Inc^ 55,014 2,578,781
Gap Inc 105,525 4,715,649
Home Depot Inc 192,163 12,262,402
Jostens Inc 10,241 240,664
K Mart Corp^ 127,938 1,711,171
Limited Inc 71,363 2,069,527
Longs Drug Stores Corp 10,198 323,149
Lowe's Co Inc 45,663 2,668,432
May Department Stores Co 61,249 3,720,877
Mercantile Stores Co Inc 9,529 627,127
Newell Co 41,753 1,915,419
Nordstrom Inc 20,625 1,182,714
Penney (J C) Co Inc 65,544 4,633,142
Rite Aid Corp 65,328 2,114,994
Sears Roebuck & Co 102,865 5,458,274
Sherwin Williams Co 45,424 1,518,865
Tandy Corp 27,564 1,226,598
TJX Companies Inc 42,864 1,655,622
Toys R Us Inc^ 74,935 1,967,044
Walgreen Co 129,115 4,736,907
WalMart Stores Inc 591,950 27,414,684
Woolworth (F W) Co^ 35,159 835,026
TOTAL RETAIL & RELATED ------------
- VALUE $102,842,922
- COST $ 63,631,937
SERVICES-0.31%
Block (H R) Inc 27,119 $ 1,276,288
Dun & Bradstreet Corp 44,697 1,497,350
Public Service Enterprise Group 60,856 1,962,606
Service Corp International 66,070 2,502,401
TOTAL SERVICES ------------
- VALUE $ 7,238,645
- COST $ 5,233,433
TELECOMMUNICATIONS-7.49%
Airtouch Communications^ 132,391 $ 5,949,321
Alltel Corp 48,569 2,218,996
Ameritech Corp 287,544 11,986,991
Andrew Corp 23,422 647,019
AT & T Corp 426,607 25,969,701
Bell Atlantic Corp 204,039 18,312,500
BellSouth Corp 260,510 15,891,110
DSC Communications Corp^ 30,628 601,075
Frontier Corp 42,733 1,183,170
GTE Corp 251,527 13,613,899
Lucent Technologies Inc 168,549 18,266,498
MCI Communications Corp 182,971 8,748,301
Northern Telecom Ltd 137,618 7,336,760
SBC Communication Inc 240,788 18,209,593
Scientific-Atlanta Inc 20,762 363,335
Sprint Corp 112,789 7,444,074
Tellabs Inc^ 47,606 2,874,212
U.S. West Inc 126,720 6,597,360
WorldCom Inc^ 265,884 10,153,445
TOTAL TELECOMMUNICATIONS ------------
- VALUE $176,367,360
- COST $108,367,544
TEXTILES-0.01%
Springs Industries Inc Class A 5,196 $ 290,651
TOTAL TEXTILES ------------
- VALUE $ 290,651
- COST $ 206,327
TOBACCO-1.25%
Fortune Brands Inc 45,033 $ 1,787,247
Philip Morris Co Inc 636,812 27,661,521
TOTAL TOBACCO ------------
- VALUE $ 29,448,768
- COST $ 18,370,348
TRANSPORTATION-0.65%
Burlington Northern Santa Fe 40,980 $ 4,082,633
CSX Corp 57,240 3,201,863
Laidlaw Inc Class B 85,585 1,257,030
Norfolk Southern Corp 98,957 3,407,832
Union Pacific Corp 64,883 3,309,033
TOTAL TRANSPORTATION ------------
- VALUE $ 15,258,391
- COST $ 11,803,273
UTILITIES-2.18%
Ameren Corp^ 35,889 $ 1,379,483
American Electric Power Inc 49,769 2,388,912
Baltimore Gas & Electric Co 38,427 1,212,852
Carolina Power & Light Co 39,392 1,644,616
Central & South West Corp 55,816 1,496,567
Cinergy Corp 41,340 1,439,149
Consolidated Edison Inc 61,693 2,621,953
Dominion Resources Inc 48,932 1,951,164
DTE Energy Co 38,058 1,398,632
Duke Power Co 94,389 5,244,489
Edison International 103,249 2,852,254
Entergy Corp 63,842 1,847,428
FirstEnergy Corp 60,461 1,749,590
FPL Group Inc 47,714 2,770,394
GPU Inc 33,330 1,339,449
Houston Industries Inc 74,799 1,935,424
Niagara Mohawk Power Corp^ 37,361 478,688
12
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS February 28, 1998
SECURITY NAME SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCKS (Continued)
Northern States Power Co 19,497 $ 1,071,117
Pacificorp 77,802 1,881,836
PECO Energy Co 57,994 1,145,382
PG & E Corp 115,071 3,473,706
PP & L Resources Inc 43,728 978,414
Southern Co 181,091 4,470,684
Texas Utilities Co 64,525 2,609,227
Unicom Corp 56,841 1,822,465
TOTAL UTILITIES --------------
- VALUE $ 51,203,875
- COST $ 41,994,418
TOTAL COMMON STOCKS
- VALUE $2,154,233,879
- COST $1,276,931,698
INTEREST MATURITY PRINCIPAL/
SECURITY NAME RATE DATE SHARES VALUE
- ------------------------------------------------------------------------------
SHORT TERM INSTRUMENTS-12.59%
CASH EQUIVALENTS-3.43%
Dreyfus Institutional Money
Market Fund^^ 22,301,077 $ 22,301,077
Janus Institutional Money
Market Fund^^ 42,700,000 42,700,000
Merrimac Cash Fund-
Premium Class^^ 15,800,000 15,800,000
--------------
$ 80,801,077
REPURCHASE AGREEMENTS-0.81%
Goldman Sachs Repurchase Agreements,
dated 2/27/98, due 3/2/98, with a maturity
value of $19,008,974 and an effective
yield of 5.6675%, Collateralized by
Federal Home Loan Mortgage
Corporation obligations with rates
ranging from 7.00% to 8.00%, with
maturity dates ranging from 7/1/10 to
6/1/17 and with an aggregate market
value of $19,380,000.^^ $19,000,000 $ 19,000,000
--------------
U.S. TREASURY BILLS-8.35%
U.S. Treasury Bills 4.48%* 03/12/98 3,566,000 3,559,938
U.S. Treasury Bills 4.85%* 03/26/98 9,445,000 9,409,940
U.S. Treasury Bills 5.13%* 03/05/98 19,218,000 19,204,509
U.S. Treasury Bills 5.13%* 04/09/98 3,600,000 3,579,840
U.S. Treasury Bills 5.15%* 04/02/98 12,835,000 12,775,356
U.S. Treasury Bills 5.34%* 04/30/98 50,398,000 49,965,081
U.S. Treasury Bills 5.37%* 04/23/98 78,733,000 78,144,235
U.S. Treasury Bills 5.38%* 04/16/98 20,174,000 20,042,869
--------------
$ 196,681,768
--------------
TOTAL SHORT TERM INSTRUMENTS
- VALUE $ 296,482,845
- COST $ 296,464,052
TOTAL INVESTMENTS IN SECURITIES
(Cost $1,573,395,750)**(Notes 1 and 3) 104.11% $2,450,716,724
--------------
Other Assets and Liabilities, Net (4.11%) (96,653,510)
------- --------------
TOTAL NET ASSETS 100.00% $2,354,063,214
======= ==============
^ Non-income earning securities.
^^ Represents investment of collateral received from securities lending
transactions. See Note 4.
* Yield to Maturity.
** Cost for federal income tax purposes is $1,573,923,035 and net unrealized
appreciation consists of:
Gross Unrealized Appreciation $891,354,790
Gross Unrealized Depreciation (14,561,101)
------------
NET UNREALIZED APPRECIATION $876,793,689
============
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
February 28, 1998
ASSETS
INVESTMENTS:
In securities, at market value (see cost below) (Note 1) $2,450,716,724
Cash 142,954
RECEIVABLES:
Dividends and interest 3,572,330
--------------
TOTAL ASSETS 2,454,432,008
LIABILITIES
PAYABLES:
Variation margin on futures contracts 287,325
Investment securities purchased 35,342
Collateral for securities loaned (Note 4) 99,801,077
Due to BGI (Note 2) 245,050
--------------
TOTAL LIABILITIES 100,368,794
--------------
TOTAL NET ASSETS $2,354,063,214
==============
INVESTMENTS AT COST $1,573,395,750
==============
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended February 28, 1998
INVESTMENT INCOME
Dividends $ 30,149,685
Interest* 6,319,513
------------
TOTAL INVESTMENT INCOME 36,469,198
EXPENSES (NOTE 2)
Advisory fees 939,051
------------
TOTAL EXPENSES 939,051
------------
NET EXPENSES 939,051
------------
NET INVESTMENT INCOME (LOSS) 35,530,147
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on sale of investments 52,551,777
Net realized gain (loss) on sale of futures contracts 18,816,662
Net change in unrealized appreciation (depreciation) of
investments 452,651,075
Net change in unrealized appreciation (depreciation) of futures
contracts 10,434,575
------------
NET GAIN (LOSS) ON INVESTMENTS 534,454,089
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $569,984,236
============
* Interest income includes security lending income of: $52,216
=======
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- ------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the For the
Year Ended Year Ended
February 28, 1998 February 28, 1997
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income $ 35,530,147 $ 26,709,655
Net realized gain (loss) on sale of
investments 52,551,777 10,656,049
Net realized gain on sale of futures
contracts 18,816,662 12,210,399
Net change in unrealized appreciation
(depreciation) of investments 452,651,075 229,538,430
Net change in unrealized appreciation
(depreciation) of futures contracts 10,434,575 160,200
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 569,984,236 279,274,733
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM BENEFICIAL INTEREST
TRANSACTIONS 299,742,532 274,728,651
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS 869,726,768 554,003,384
NET ASSETS:
Beginning net assets $1,484,336,446 $ 930,333,062
-------------- --------------
ENDING NET ASSETS $2,354,063,214 $1,484,336,446
============== ==============
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- ------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
February 28, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
Master Investment Portfolio ("MIP") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. MIP was organized on October 20, 1993 as a Delaware
business trust pursuant to an Agreement and Declaration of Trust dated May 14,
1993, and had no operations prior to May 26, 1994. MIP currently issues, the
following separate portfolios (the "Master Portfolios"), the Asset Allocation,
Bond Index, LifePath 2000, LifePath 2010, LifePath 2020, LifePath 2030,
LifePath 2040, S&P 500 Index and U.S. Treasury Allocation Master Portfolios.
These financial statements present the operations of only one of the Master
Portfolios, the S&P 500 Index Master Portfolio.
The following significant accounting policies are consistently followed by
MIP in the preparation of its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
SECURITY VALUATION
The equity securities of the Master Portfolio are valued at the last
reported sale price on the primary securities exchange or national securities
market on which such securities are traded. Securities not listed on an
exchange or national securities market, or securities in which there was no
last reported sales price, are valued at the most recent bid prices. Debt
securities are generally traded in the over-the-counter market and are valued
at a price deemed best to reflect fair value as quoted by dealers who make
markets in those securities or by an independent pricing source. U.S.
Government obligations are valued at the last reported bid price. Debt
securities maturing in 60 days or less are valued at amortized cost, which
approximates market value. Any securities, restricted securities or other
assets for which market quotations are not readily available, are valued at
fair value as determined in good faith in accordance with policies approved by
MIP's Board of Trustees.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on the date the securities are
purchased or sold (trade date). Dividend income is recognized on the
ex-dividend date, and interest income is recognized on a daily accrual basis.
Realized gains or losses are reported on the basis of identified cost of
securities delivered. Bond discounts and premiums are amortized under
provisions of the Internal Revenue Code of 1986, as amended (the "Code").
FEDERAL INCOME TAXES
The Master Portfolio intends to qualify as a partnership for federal income
tax purposes. The Master Portfolio therefore believes that it will not be
subject to any federal income tax on its income and net realized capital gains
(if any). However, each investor in the Master Portfolio will be taxed on its
allocable share of the partnership's income and capital gains for purposes of
determining its federal income tax liability. The determination of such share
will be made in accordance with the applicable sections of the Code.
It is intended that the Master Portfolio's assets, income and allocations
will be managed in such a way that a regulated investment company investing in
the Master Portfolio will be able to satisfy the requirements of Subchapter M
of the Code, assuming that the investment company invested all of its assets
in the corresponding Master Portfolio.
FUTURES CONTRACTS
The S&P 500 Index Master Portfolio may purchase futures contracts to gain
exposure to market changes as this may be more efficient or cost effective
than actually buying the securities. A futures contract is an agreement
between two parties to buy and sell a security at a set price on a future date
and is exchange traded. Upon entering into a futures contract, the S&P 500
Index Master Portfolio is required to pledge to the broker an amount of cash,
U.S. Government securities or other high-quality debt securities equal to the
minimum "initial margin" requirements of the exchange. Pursuant to the
contract, the Master Portfolio agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in the value of the contract.
Such receipts or payments are known as "variation margin" and are recorded by
the Master Portfolio as unrealized gains or losses. When the contract is
closed, the Master Portfolio records a gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at
the time it was closed. Pursuant to regulations and/or published positions of
the Securities and Exchange Commission, the Master Portfolio is required to
segregate cash, U.S. Government obligations or high quality, liquid debt
instruments in connection with futures transactions in an amount generally
equal to the entire futures
17
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- ------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
February 28, 1998
contract amount. Risks of entering into futures contracts include the
possibility that there may be an illiquid market and that a change in the
value of the contracts may not correlate with changes in the value of the
underlying securities. As of February 28, 1998, the S&P 500 Index Master
Portfolio had open long futures contracts outstanding:
S&P 500 Index Master Portfolio
Expiration Notional Net Unrealized
Number of Contracts Type Date Contract Value Depreciation
747 S&P 500 Index March 1998 $196,180,875 $11,248,975
The S&P 500 Index Master Portfolio has pledged to brokers U.S. Treasury
Bills for initial margin requirements with a par value of $7,507,350.
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell
such securities at a specified price and time ("repurchase agreements") are
treated as collateralized financing transactions and are recorded at their
contracted resale amounts. These repurchase agreements, if any, are detailed
in the Master Portfolio's Portfolio of Investments. The adviser to the Master
Portfolio may pool its cash and invest in repurchase agreements entered into
by the other Master Portfolios. The Master Portfolio's prospectus requires
that the cash investments be fully collateralized based on values that are
marked to market daily. The collateral is generally held by an agent bank
under a tri-party agreement. It is the adviser's responsibility to value
collateral daily and to obtain additional collateral as necessary to maintain
the value at equal to or greater than 102% of market value. The repurchase
agreements entered into on February 28, 1998 by the Master Portfolio is
collateralized by U.S. Government Securities.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an Investment Advisory Contract with each Master Portfolio,
Barclays Global Fund Advisors ("BGFA") provides investment guidance and policy
direction in connection with the management of each Master Portfolio's assets.
BGFA is entitled to receive 0.05% of the average daily net assets of the S&P
500 Index Master Portfolio as compensation for advisory services. BFGA is an
indirect subsidiary of Barclays Bank PLC.
Investors Bank & Trust Company ("IBT") serves as the custodian to each
Master Portfolio. IBT will not be entitled to receive fees for its custodial
services so long as it is entitled to receive a separate fee from Barclays
Global Investors, N.A. ("BGI") for its services as Sub-Administrator of each
Master Portfolio.
Stephens Inc. ("Stephens") is the Funds' co-administrator, sponsor and
placement agent for the Master Portfolios. Certain officers and directors of
MIP are also officers of Stephens. As of February 28, 1998, these officers of
Stephens indirectly collectively owned less than 1% of the Master Portfolio's
outstanding beneficial interest.
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities, for
the S&P 500 Index Master Portfolio for the year ended February 28, 1998 is as
follows:
Aggregate Purchases S&P 500 Index
and Sales of: Master Portfolio
U.S. GOVERNMENT
OBLIGATIONS:
Purchases at cost $ 0
Sales proceeds 0
OTHER SECURITIES:
Purchases at cost 363,453,227
Sales proceeds 100,644,795
18
<PAGE>
- ------------------------------------------------------------------------------
4. PORTFOLIO SECURITIES LOANED
As of February 28, 1998, the S&P 500 Index Master Portfolio had loaned
securities which were collateralized by cash. Each Master Portfolio receives
transaction fees for providing services in connection with the securities
lending program. The value of the securities on loan and the value of the
related collateral were as follows:
Securities Collateral
S&P 500 Index Master Portfolio $97,218,674 $99,801,077
5. FINANCIAL HIGHLIGHTS
The portfolio turnover rates, excluding short-term securities, for the S&P
500 Index Master Portfolio is as follows:
<TABLE>
<CAPTION>
For the
Period from
For the For the For the May 26, 1994
Year Ended Year Ended Year Ended (commencement
February 28, February 28, February 29, of operations) to
1998 1997 1996 February 28, 1995
<S> <C> <C> <C> <C>
S&P 500 Index Master Portfolio 6% 4% 2% 5%
</TABLE>
The average commission rates paid by the S&P 500 Index Master Portfolio is
as follows:
For the For the
Year Ended Year Ended
February 28, 1998 February 28, 1997
S&P 500 Index Master Portfolio $0.0319 $0.0625
19
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- ------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
MASTER INVESTMENT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the S&P 500 Index Master Portfolio (one of the
portfolios comprising Master Investment Portfolio) as of February 28, 1998, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the years in the three-year period
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. All periods indicated in Note 5 ending prior to March 1, 1995, were
audited by other auditors whose report dated April 20, 1995, expressed an
unqualified opinion on this information.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of February 28, 1998 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
S&P 500 Index Master Portfolio of Master Investment Portfolio as of February
28, 1998, the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated herein, except as noted above,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
San Francisco, California
April 3, 1998
20
<PAGE>
DIRECTORS
Richard S. Strong
Willie D. Davis
Stanley Kritzik
Marvin E. Nevins
William F. Vogt
OFFICERS
Richard S. Strong, Chairman of the Board
Mary F. Hoppa, Vice President
Thomas P. Lemke, Vice President
John S. Weitzer, Vice President
Stephen J. Shenkenberg, Vice President and Secretary
John A. Flanagan, Treasurer
INVESTMENT ADVISOR
Barclays Global Fund Advisors
45 Fremont Street, San Francisco, California 94105
CUSTODIAN
Investors Bank & Trust Company
89 South Street, Boston, Massachusetts 02111
AUDITOR
KPMG Peat Marwick LLP
Three Embarcadero Center, San Francisco, California 94111
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
<PAGE>
For a prospectus containing more complete information, including management
fees and expenses, please call 1-800-368-1030. Please read it carefully before
investing or sending money. This report does not constitute an offer for the
sale of securities. Strong Funds are offered for sale by prospectus only.
[PICTURE OF TELEPHONE]
To order a free prospectus kit,
CALL 1-800-368-1030
To learn more about our funds,
discuss an existing account,
or conduct a transaction,
CALL 1-800-368-3863
-------------------
If you are a
Financial Professional,
CALL 1-800-368-1683
[PICTURE OF STRONG WEB SITE ON COMPUTER]
Strong On-line
www.strong-funds.com
[STRONG LOGO]
STRONG FUNDS
P.O. Box 2936 o Milwaukee, Wisconsin 53201
Strong Funds Distributors, Inc. 7555D98 98AIND
