<PAGE>
THE STRONG
INDEX 500 FUND [Strong Logo]
- ---------------------------------
ANNUAL REPORT O FEBRUARY 28, 1999
[PICTURE OF STRONG FUNDS BUILDING]
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Strong Investor,
As I review this past year, I can't help but conclude that we are living in
one of the most remarkable eras in modern history. In many ways, it is a Golden
Age of prosperity, with constantly improving living standards, virtually full
employment, and enormous cultural vitality.
Our golden era is primarily driven by the spirit of capitalism, which has
resulted in real economic growth of better than 3%, negligible inflation, and
the lowest unemployment rates in a quarter of a century. Things have rarely
looked so good. My advice: Enjoy it, but remember that good times have a way of
disappearing. Almost overnight.
Not everything in the world is coming up roses. As the fighting in Kosovo
demonstrates, conflict still looms large in the world. Kosovo illustrates just
how delicate the balance is between individual nations and their economies. And
it serves as a constant reminder that everything in life--economies included--is
cyclical.
While the U.S. market has been strong, not every security has shared in the
good times. What we are experiencing today--to borrow a Wall Street phrase--is a
two-tiered market. That is, a market with big differences between the "have" and
"have not" stocks. Close to 70% of stocks out there are still down 20% or more
from their tops, while a precious small percentage are near their historical
highs.
In plain English, today's market has one piece that may be over-valued, and
another piece that appears to be undervalued.
A family's investment portfolio has to distinguish between a careful
strategy and just "playing the market." A serious investor needs to realize that
some stock valuations are at extreme highs and that diversification is more
important than ever. In addition to blue chip and other large-cap stocks, fixed
income products (like long-term bonds) are very attractive and provide an
excellent vehicle for diversifying a portfolio.
(And, although currently out of favor with investors, small- and mid-cap
stocks will rise again. If you buy the idea that markets are cyclical, these
stocks could be an excellent place to invest over the next few years).
Likewise, value investing--the art of buying undervalued companies--is also
out of favor. Value stocks have already been through a pretty severe correction,
and by investing in them now, you can help protect yourself when large-cap and
technology stocks retreat.
At Strong, we're in business to help you achieve your financial goals. Our
Strong Advisor program works with shareholders to build a long term investment
program through balance.
The markets are made up of millions of pieces of input--facts, opinions,
trends, tips, dreams, emotions, speculation, and an abundance of good
old-fashioned hunches. There is also a good deal of wisdom built into the
markets. Some of this wisdom gets distorted over the short-term. Long-term,
however, the essential truth of the investment process emerges. Our job is to
help you maneuver through the clutter and emotion in the marketplace and find
that truth.
Give us a call. We're here to help.
/s/ Dick
<PAGE>
THE STRONG
INDEX 500 FUND
----------
ANNUAL REPORT O FEBRUARY 28, 1999
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 .....................................5
Statements of Changes in Net Assets .........................6
Notes to Financial Statements ...............................7
Financial Highlights ........................................8
REPORT OF INDEPENDENT ACCOUNTANTS .............................9
FINANCIAL INFORMATION--
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
Portfolio of Investments ...................................10
Statement of Assets and Liabilities ........................16
Statement of Operations ....................................17
Statements of Changes in Net Assets ........................18
Notes to Financial Statements ..............................19
REPORT OF INDEPENDENT ACCOUNTANTS ............................22
<PAGE>
THE STRONG INDEX 500 FUND
- -------------------------
FUND HIGHLIGHTS
o The one-year total return ending February 28, 1999 of the Strong Index 500
Fund was 19.21%, versus the S&P 500 Stock Index(R) return of 19.74% for the
same period. (1)
o The one-, three-, and six-month performance returns for the Fund ending
February 28, 1999 were -3.17%, 6.56% and 29.90% respectively.(2)
o Since inception, the average annual return for the fund was 28.40%.
---------------------------
AVERAGE ANNUAL
TOTAL RETURN (2)
As of 2-28-99
1-year 19.21%
Since Inception 28.40%
(on 5-1-97)
---------------------------
FIVE LARGEST
STOCK HOLDINGS
AS OF 2-28-99
SECURITY % OF NET ASSETS
------------------------------------
Microsoft Corporation 3.40%
General Electric Company 2.99%
Intel Corporation 1.82%
Merck & Company, Inc. 1.77%
Wal-Mart Stores, Inc. 1.77%
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
MARKET
PERSPECTIVES
- --------------------------------------------------------------------------------
In the past year, the stocks of well-known, large companies led the stock market
to another year of strong gains. Investors, worried about economic weakness
outside of the U.S., sought a safe haven in the familiarity and sheer size
offered by U.S. blue chip companies. In addition to investors' flight to safety,
large caps also benefited from positive earnings announcements from corporate
giants like General Electric.
Since the performance of large-cap stocks figures quite prominently into the
performance of the S&P 500, it posted another year of solid returns, gaining
19.74% for the 12 months ended February 28. The Strong Index 500 Fund returned
19.21%.
The S&P 500 and the Fund were also beneficiaries of the powerful late-year rally
in technology and Internet stocks. Companies like AOL, Microsoft and Intel were
frequently upgraded by analysts and sought after by investors.
Investors continue to be rewarded by the strength of the U.S. economy. The
Federal Reserve successfully eased this summer's credit crunch and has once
again shepherded the economy into a good position. The latest economic
indicators show consumer confidence remaining buoyant. This is a key to the
continued health of our nation, as consumer spending accounts for approximately
two-thirds of the economy.
-----------------
IN THE PAST YEAR,
THE STOCKS OF
WELL-KNOWN,
LARGE COMPANIES LED THE STOCK MARKET
TO ANOTHER YEAR
OF STRONG GAINS.
-----------------
- --------------------------------------------------------------------------------
1 "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500",
and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed for use by Strong Equity Funds, Inc. The Strong Index 500 Fund is
not sponsored, endorsed, sold or promoted by Standard & Poor's, and
Standard & Poor's makes no representation regarding the advisability of
investing in the Product.
2 Average annual total return and total return measure change in the value of
an investment in the Fund, assuming reinvestment of all dividends and
capital gains. Average annual total return reflects annualized change while
total return reflects aggregate change, and is not annualized.
2
<PAGE>
While the market is at a lofty level, it has been supported by strong economic
growth with little or no sign of inflationary pressure. Investors have exhibited
confidence in the Federal Reserve's ability to continue to steer the economy
along this course.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 5-1-97 to 2-28-99
[Graph]
The Strong S&P 500 Lipper S&P 500
Index 500 Fund Stock Index (R)(3)+ Index Objective
Funds Index(3)+
-------------- ------------------- ---------------
4-97 10,000 10,000 10,000
6-97 11,110 11,122 11,117
9-97 11,930 11,955 11,945
12-97 12,262 12,298 12,282
3-98 13,948 14,014 13,982
6-98 14,392 14,476 14,433
9-98 12,957 13,036 12,997
12-98 15,709 15,812 15,762
2-99 15,821 15,962 15,897
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(R) ("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(R) 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.
- --------------------------------------------------------------------------------
3 The S&P 500 Stock Index(R) is an unmanaged index generally representative
of the U.S. stock market. 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 Inc.
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.
YOUR FUNDS APPROACH
THE STRONG INDEX 500 FUND IS DESIGNED TO PROVIDE INVESTORS WITH BROAD EXPOSURE
TO THE LARGE-CAPITALIZATION SECTOR OF THE U.S. MARKET BY REPLICATING, AS CLOSELY
AS PRACTICAL (BEFORE FEES AND EXPENSES), THE MARKET CAPITALIZATION-WEIGHTED
TOTAL RETURN OF THE STANDARD & POOR'S 500 STOCK INDEX(R) (S&P 500). (3) THE FUND
REPRESENTS MORE THAN 70% OF THE OVERALL U.S. STOCK MARKET CAPITALIZATION. THIS
ALLOWS INVESTORS WIDE DIVERSIFICATION, AND SERVES AS A COMPLEMENT TO ACTIVELY
MANAGED FUNDS.
- --------------------------------------------------------------------------------
MARKET HIGHLIGHTS
o Calendar year 1998 marked an unprecedented fourth straight year when the
S&P 500 posted 20%-plus returns, cumulatively rising 190% since the end of
1994.
o Investors seem to have faith in the ability of the Federal Reserve to
shepherd the recovery of global economies, as well as protect the U.S.
economy from slipping into a recession.
o As they became more confident in the Federal Reserve's ability to steer the
course of the U.S. economy, investors demonstrated a higher risk tolerance
within their portfolio.
3
<PAGE>
STRONG INDEX 500 FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1999
ASSETS:
Investment in S&P 500 Index Master Portfolio, at Value (Note 1) $138,790,069
Receivable for Fund Shares Sold 399,454
Due from SCMI 212,288
Other Assets 2,962
------------
Total Assets 139,404,773
LIABILITIES:
Payable for Fund Shares Redeemed 87,970
Due to SCMI 90,437
Accrued Operating Expenses and Other Liabilities 103,734
------------
Total Liabilities 282,141
------------
NET ASSETS $139,122,632
============
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $122,778,128
Undistributed Net Investment Income 216,489
Undistributed Net Realized Gain 1,241,825
Net Unrealized Appreciation on Investments 14,886,190
------------
Net Assets $139,122,632
============
Capital Shares Outstanding (Unlimited Number Authorized) 8,941,144
NET ASSET VALUE PER SHARE $15.56
======
See Notes to Financial Statements.
4
<PAGE>
STRONG INDEX 500 FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended February 28, 1999
NET INVESTMENT INCOME ALLOCATED FROM MASTER PORTFOLIO:
Dividend Income $ 1,014,624
Interest Income 226,984
Expenses (37,485)
-----------
Net Investment Income Allocated from Master Portfolio 1,204,123
EXPENSES:
Shareholder Servicing Costs (Note 3) 189,339
Transfer Agency Fees 180,571
Reports to Shareholders 52,283
Federal and State Registration Fees 47,548
Other 49,189
-----------
Total Expenses before Waivers 518,930
Voluntary Expense Waivers by SCMI (215,217)
-----------
Expenses, Net 303,713
-----------
NET INVESTMENT INCOME 900,410
REALIZED AND UNREALIZED GAIN ALLOCATED FROM MASTER PORTFOLIO:
Net Realized Gain on Investments 1,173,696
Change in Unrealized Appreciation/Depreciation on Investments 11,546,437
-----------
NET GAIN ALLOCATED FROM MASTER PORTFOLIO 12,720,133
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $13,620,543
===========
See Notes to Financial Statements.
5
<PAGE>
<TABLE>
STRONG INDEX 500 FUND
- ---------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Year Ended Period Ended
February 28, 1999 February 28, 1998
----------------- -----------------
(Note 1)
OPERATIONS:
<S> <C> <C>
Net Investment Income $ 900,410 $ 164,843
Net Realized Gain 1,173,696 88,899
Net Change in Unrealized Appreciation/Depreciation 11,546,437 3,339,753
------------ -----------
Net Increase in Net Assets Resulting from Operations 13,620,543 3,593,495
DISTRIBUTIONS:
From Net Investment Income (734,711) (114,053)
From Net Realized Gains (7,666) (13,104)
------------ -----------
Total Distributions (742,377) (127,157)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Proceeds from Shares Sold 120,131,919 32,320,505
Proceeds from Reinvestment of Distributions 722,710 123,613
Payment for Shares Redeemed (26,706,110) (3,814,509)
------------ -----------
Net Increase in Net Assets from Beneficial Interest Transactions 94,148,519 28,629,609
------------ -----------
TOTAL INCREASE IN NET ASSETS 107,026,685 32,095,947
NET ASSETS:
Beginning of Period 32,095,947 __
------------ -----------
End of Period $139,122,632 $32,095,947
============ ===========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 8,336,831 2,745,317
Issued in Reinvestment of Distributions 47,136 10,372
Redeemed (1,880,932) (317,580)
---------- ---------
Net Increase in Shares of the Fund 6,503,035 2,438,109
========== =========
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
STRONG INDEX 500 FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
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, as amended. 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.
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 3.76% in the net assets of
the Master Portfolio at February 28, 1999. 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 --
The Fund intends 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 year 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.
The Fund generally pays dividends from net investment income quarterly
and distributes any net capital gains that it realizes annually.
Dividends are declared on a quarterly basis.
(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 in these financial statements.
Actual results could differ from those estimates.
3. RELATED PARTY TRANSACTIONS
SCMI provides shareholder recordkeeping and related services to the Fund.
For these services, the Fund pays SCMI a fee at an annual rate of .25% of
the Fund's average daily net assets. Certain fees have been waived or
reimbursed by SCMI for the year ended February 28, 1999. 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,
1999, other shareholder expenses paid to SCMI and unaffiliated directors'
fees for the year then ended were $9,263, $2,643, and $1,500, respectively.
7
<PAGE>
<TABLE>
STRONG INDEX 500 FUND
- --------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<CAPTION>
Period Ended
--------------------
Feb. 28, Feb. 28,
Selected Per Share Data(a) 1999 1998(b)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $13.16 $10.00
Income From Investment Operations
Net Investment Income 0.13 0.11
Net Realized and Unrealized Gains on Investments 2.39 3.15
- --------------------------------------------------------------------------------------------------------
Total from Investment Operations 2.52 3.26
Less Distributions
From Net Investment Income (0.12) (0.09)
From Net Realized Gains (0.00) (0.01)
- --------------------------------------------------------------------------------------------------------
Total Distributions (0.12) (0.10)
- --------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $15.56 $13.16
========================================================================================================
Ratios and Supplemental Data
- --------------------------------------------------------------------------------------------------------
Total Return +19.2% +32.7%
Net Assets, End of Period (In Thousands) $139,123 $32,096
Ratio of Expenses to Average Net Assets 0.45% 0.44%*
Ratio of Expenses to Average Net Assets Without Waivers and Absorptions 0.73% 1.53%*
Ratio of Net Investment Income to Average Net Assets 1.18% 1.43%
Portfolio Turnover Rate (c) 11% 6%
* 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.
(c) This rate represents the portfolio turnover rate of the S&P 500 Index Master Portfolio.
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
STRONG INDEX 500 FUND
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Shareholders of
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, 1999, the related statement of operations for the year then
ended and the statements of changes in net assets and financial highlights for
the year then ended and 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 based on our audits.
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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Strong Index 500 Fund as of
February 28, 1999, the results of its operations for the year then ended and the
changes in its net assets, and the financial highlights for the year then ended
and for the period from May 1, 1997 (commencement of operations) to February 28,
1998, in conformity with generally accepted accounting principles.
KPMG LLP
San Francisco, California
April 2, 1999
9
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments February 28,1999
Security Name Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS-94.09%
ADVERTISING-0.11%
Omnicom Group 57,919 $ 3,837,134
-----------
TOTAL ADVERTISING
- VALUE $ 3,837,134
- COST $ 2,634,965
AEROSPACE & DEFENSE-1.26%
Allied Signal Inc 192,506 $ 7,964,936
Boeing Co 343,307 12,208,855
Briggs & Stratton Corp 8,142 397,431
General Dynamics Corp 43,650 2,638,097
Lockheed Martin Corp 134,914 5,084,571
Northrop Grumman Corp 23,400 1,458,113
Rockwell International Corp 65,783 2,923,232
Textron Inc 54,530 4,253,340
United Technologies Corp 77,458 9,595,110
-----------
TOTAL AEROSPACE & DEFENSE
- VALUE $46,523,685
- COST $38,060,675
AIRLINES-0.44%
AMR Corp+ 62,790 $ 3,480,921
Delta Air Lines Inc 49,124 2,987,353
FDX Corp+ 50,668 4,838,794
Southwest Airlines Co 115,120 3,467,990
USAirways Group Inc+ 30,167 1,429,162
-----------
TOTAL AIRLINES
- VALUE $16,204,220
- COST $11,258,700
APPAREL-0.24%
Fruit of the Loom Inc Class A+ 25,177 $ 319,433
Liz Claiborne Inc 22,371 753,623
Nike Inc Class B 98,482 5,281,097
Reebok International Ltd+ 19,551 315,260
Russell Corp 12,682 247,299
VF Corp 41,207 1,983,087
-----------
TOTAL APPAREL
- VALUE $ 8,899,799
- COST $ 7,514,952
AUTO PARTS & EQUIPMENT-1.58%
Cooper Tire & Rubber Co 26,221 $ 517,865
Dana Corp 56,874 2,146,994
Deluxe Corp 27,778 940,980
Eaton Corp 24,588 1,705,793
Genuine Parts Co 61,946 1,854,509
Goodyear Tire & Rubber Co 53,526 2,475,578
Illinois Tool Works Inc 85,931 5,907,756
ITT Industries Inc 35,831 1,399,648
Navistar International Corp+ 23,101 993,343
PACCAR Inc 26,968 1,129,285
The Pep Boys--Manny Moe & Jack 18,351 334,906
TRW Inc 41,140 1,943,865
-----------
TOTAL AUTO PARTS & EQUIPMENT
- VALUE $21,350,522
- COST $17,929,784
AUTOMOBILES-1.17%
Ford Motor Co 415,523 $24,645,708
General Motors Corp Class A 224,829 18,562,444
-----------
TOTAL AUTOMOBILES
- VALUE $43,208,152
- COST $27,144,553
BANK & FINANCE-11.72%
American Express Corp 155,306 $16,850,701
Associates First Capital Corp 248,230 10,084,344
Bank of New York Inc 261,426 9,133,571
Bank One Corp 402,126 21,614,273
BankAmerica Corp 594,466 38,826,061
BankBoston Corp 100,964 4,082,732
Bankers Trust Corp 32,808 2,854,296
BB&T Corp 100,653 3,812,232
Bear Stearns Co Inc 40,609 1,738,573
Capital One Financial Corp 22,567 2,880,113
Chase Manhattan 290,441 23,126,365
Citigroup Inc 780,319 45,843,741
Comerica Inc 53,405 3,538,081
Countrywide Credit Industries Inc 38,182 1,446,143
Equifax Inc 50,701 1,913,963
Federal Home Loan Mortgage Corp 233,058 13,721,290
Federal National Mortgage Assoc 356,191 24,933,370
Fifth Third Bancorp 91,514 6,045,644
First Union Corp 340,327 18,143,683
Firstar Corp 78,982 6,614,743
Fleet Financial Group Inc 195,298 8,385,608
Franklin Resources Inc 87,168 2,773,032
Golden West Financial 19,567 1,838,075
Household International Inc 165,381 6,718,603
Huntington Bancshares Inc 72,615 2,305,526
Keycorp 155,917 5,028,323
Lehman Brothers Holdings 39,943 2,116,979
MBNA Corp 274,917 6,666,737
Mellon Bank Corp 89,735 6,068,329
Mercantile Bancorp 53,608 2,445,865
Merrill Lynch & Co Inc 121,536 9,327,888
MGIC Investment Corp 37,612 1,281,159
Morgan (J P) & Co Inc 59,963 6,682,127
Morgan Stanley Dean Witter 198,350 17,950,675
National City Corp 113,728 7,946,744
Northern Trust Corp 38,174 3,411,801
PNC Bank Corp 103,389 5,382,690
Regions Financial Corp 75,659 2,875,042
Republic New York Corp 36,945 1,674,070
Ryder System Inc 24,801 669,627
Schwab (Charles) Corp 137,785 10,273,594
SLM Holding Corp 56,989 2,443,403
State Street Boston Corp 55,235 4,235,834
Summit Bancorp 59,690 2,305,526
SunTrust Banks Inc 109,269 7,423,463
Synovus Financial Corp 91,259 2,173,105
U.S. Bancorp 249,395 8,058,576
Union Planters Corp 46,322 2,093,175
Wachovia Corp 69,778 5,935,491
Washington Mutual Inc 204,080 8,163,200
Wells Fargo & Co 555,500 20,414,625
-----------
TOTAL BANK & FINANCE
- VALUE $432,272,811
- COST $302,099,858
10
<PAGE>
-------------------------------------------------------------------------------
Portfolio of Investments (continued) February 28,1999
Security Name Shares Value
-------------------------------------------------------------------------------
BASIC INDUSTRIES-1.20%
Alcoa Inc 129,230 $ 5,233,815
ASARCO Inc 13,913 196,521
Avery-Dennison Corp 40,033 2,149,272
Baker Hughes Inc 111,342 2,004,156
Bemis Co 18,037 614,385
Boise Cascade Corp 19,443 603,948
Champion International Corp 32,971 1,219,927
Cyprus Amax Minerals 31,793 357,671
Dover Corp 76,799 2,611,166
Fort James Corp 75,901 2,267,542
Georgia-Pacific Corp 30,400 2,226,800
Harnischfeger Industries Inc 16,712 128,474
Homestake Mining Co 80,453 739,162
Ikon Office Solutions Inc 47,200 666,700
Inco Ltd 57,458 725,407
Louisiana-Pacific Corp 37,482 688,732
Mead Corp 35,487 1,080,136
Minnesota Mining & Manufacturing Co 137,901 10,213,293
NACCO Industries Inc Class A 2,652 233,376
Newmont Mining Corp 56,513 974,849
Potlatch Corp 10,034 348,054
Sealed Air Corp+ 28,555 1,449,166
Union Camp Corp 23,854 1,595,236
Westvaco Corp 35,127 785,967
Weyerhauser Co 68,329 3,809,342
Willamette Industries Inc 38,139 1,389,690
-----------
TOTAL BASIC INDUSTRIES
- VALUE $ 44,312,787
- COST $ 44,415,464
BEVERAGES-2.63%
Anheuser-Busch Inc 164,223 $ 12,593,851
Coca-Cola Co 846,537 54,125,459
Coca-Cola Enterprises Co 134,742 4,177,002
Coors (Adolph) Co Class B 12,691 755,908
Diageo PLC ADR (UK) 17 769
Pepsico Inc 503,992 18,962,699
Seagrams Co Ltd 135,567 6,286,920
-----------
TOTAL BEVERAGES
- VALUE $ 96,902,608
- COST $ 71,102,447
BROADCASTING-1.15%
Clear Channel Communications Inc+ 90,201 $ 5,412,060
Kingworld Productions+ 25,313 669,212
MediaOne Group Inc+ 208,464 11,361,288
Tele-Communications Inc Class A+ 184,800 11,607,750
Tribune Co 40,831 2,707,606
Viacom Inc Class B+ 119,572 10,567,176
-----------
TOTAL BROADCASTING
- VALUE $ 42,325,092
- COST $ 23,130,804
BUILDING MATERIALS & SERVICES-0.39%
Cooper Industries Inc 35,732 $ 1,563,275
Corning Inc 79,569 4,256,942
Danaher Corp 45,577 2,199,090
Owens Corning Fiberglass Corp 18,462 587,322
Owens Illinois Inc+ 53,386 1,277,927
PPG Industries Inc 61,000 3,175,813
Snap-On Inc 20,427 577,063
Stanley Works 30,760 747,853
-----------
TOTAL BUILDING MATERIALS & SERVICES
- VALUE $ 14,385,285
- COST $ 13,739,756
BUSINESS SERVICES-0.30%
Cendant Corp+ 293,228 $ 4,856,589
Dun & Bradstreet Corp 57,548 1,971,019
Ecolab Inc 44,444 1,772,205
Paychex Inc 56,349 2,387,789
-----------
TOTAL BUSINESS SERVICES
- VALUE $ 10,987,602
- COST $ 11,922,176
CHEMICALS-1.65%
Air Products & Chemicals Inc 79,694 $ 2,560,170
Clorox Co 37,729 4,463,812
Dow Chemical Co 76,172 7,493,421
Du Pont (E I) De Nemours 386,722 19,843,673
Eastman Chemical Co 27,144 1,280,858
FMC Corp+ 11,492 588,247
Goodrich (B F) Co 25,061 855,207
Grace (W R) Co+ 25,678 345,048
Great Lakes Chemical Corp 20,478 797,362
Hercules Inc 33,917 939,077
International Flavor & Fragrances 36,598 1,507,380
Monsanto Co 215,235 9,806,645
Morton International Inc 38,600 1,394,425
Nalco Chemical Co 22,680 637,875
Praxair Inc 54,319 1,897,770
Rohm & Haas Co 57,360 1,792,500
Rubbermaid Inc 51,667 1,708,240
Sigma-Aldrich Corp 34,800 917,850
Union Carbide Corp 45,779 2,014,276
-----------
TOTAL CHEMICALS
- VALUE $ 60,843,836
- COST $ 52,893,054
COMPUTER SOFTWARE-6.62%
3Com Corp+ 123,240 $ 3,874,358
Adobe Systems Inc 22,666 912,307
America Online Inc 314,684 27,987,208
Autodesk Inc 16,038 643,525
Automatic Data Processing 207,611 8,252,537
BMC Software Inc+ 73,630 3,009,626
Ceridian Corp+ 24,613 1,762,906
Computer Associates International Inc 184,958 7,768,236
Computer Sciences Corp 54,243 3,613,940
Compuware Corp+ 62,899 3,518,413
Electronic Data Systems Corp 169,350 7,874,775
First Data Corp 152,158 5,820,044
IMS Health Inc 110,162 3,910,751
Microsoft Corp+ 856,349 128,559,394
Novell Inc+ 121,091 2,346,138
Oracle Systems Corp+ 333,857 18,654,260
Parametric Technology Corp+ 92,386 1,420,435
Peoplesoft Inc+ 79,743 1,505,149
Sun Microsystems Inc+ 130,760 12,724,583
-----------
TOTAL COMPUTER SOFTWARE
- VALUE $244,158,585
- COST $143,456,022
COMPUTER SYSTEMS-5.91%
Apple Computer Inc+ 46,096 $ 1,604,717
Cabletron Systems Inc+ 55,039 447,192
Cisco Systems Inc+ 542,249 53,038,730
Compaq Computer Corp 583,999 20,585,965
Data General Corp+ 17,039 235,351
Dell Computer Corp+ 437,319 35,040,185
11
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
------------------------------------------------------------------------------
Portfolio of Investments (continued) February 28, 1999
Security Name Shares Value
------------------------------------------------------------------------------
EMC Corp+ 172,440 $ 17,653,545
Gateway 2000 Inc+ 53,600 3,896,050
Harris Corp 27,659 860,886
Hewlett-Packard Co 356,248 23,668,227
International Business Machine Corp 320,521 54,488,570
Seagate Technology Inc+ 84,281 2,438,881
Shared Medical System Corp 9,110 464,610
Silicon Graphics Inc+ 64,542 1,028,638
Unisys Corp+ 87,169 2,598,726
-----------
TOTAL COMPUTER SYSTEMS
- VALUE $218,050,273
- COST $108,943,260
CONTAINER & PACKAGING-0.25%
Ball Corp 10,353 $ 433,532
Crown Cork & Seal Co 42,146 1,169,552
International Paper Co 105,240 4,420,080
Temple-Inland Inc 19,218 1,151,879
Tenneco Inc 58,722 1,757,990
Tupperware Corp 19,961 349,318
-----------
TOTAL CONTAINER & PACKAGING
- VALUE $ 9,282,351
- COST $ 10,520,804
ELECTRICAL EQUIPMENT-3.64%
Aeroquip-Vickers Inc 9,543 $ 540,372
General Electric Co 1,125,405 112,892,189
Grainger (W W) Inc 32,777 1,458,577
Masco Corp 117,773 3,091,541
Motorola Inc 206,187 14,484,637
National Service Industries Inc 14,501 465,845
Raychem Corp 27,372 624,424
Thomas & Betts Corp 19,170 799,149
-----------
TOTAL ELECTRICAL EQUIPMENT
- VALUE $134,356,734
- COST $ 81,035,083
ELECTRONICS-4.21%
Advanced Micro Devices+ 49,200 $ 879,450
AMP Inc 75,272 4,003,530
Applied Materials Inc+ 127,012 7,065,043
CBS Corp 242,601 8,945,912
Commscope Inc+ 2 37
EG&G Inc 15,572 412,658
Emerson Electric Co 151,371 8,694,372
General Instrument Corp+ 57,035 1,668,274
Honeywell Inc 43,416 3,036,407
Intel Corp 572,559 68,671,295
Johnson Controls Inc 29,137 1,791,926
KLA Instruments Corp+ 29,751 1,541,474
LSI Logic Corp+ 48,795 1,265,620
Micron Technology Inc+ 81,074 4,671,867
National Semiconductor+ 57,040 598,920
Perkin-Elmer Corp 16,968 1,607,718
Pitney Bowes Inc 93,675 5,919,089
Raytheon Co Class B 115,852 6,190,841
Solectron Corp+ 80,786 3,610,124
Tektronix Inc 16,446 320,697
Texas Instruments Inc 133,869 11,939,441
Xerox Corp 225,150 12,425,466
-----------
TOTAL ELECTRONICS
- VALUE $155,260,161
- COST $ 97,237,656
ENERGY & RELATED-5.30%
Amerada Hess Corp 31,121 $ 1,412,115
Anadarko Petroleum Corp 41,399 1,138,473
Apache Corp 33,296 663,839
Ashland Inc 26,196 1,165,722
Atlantic Richfield Corp 110,377 6,029,344
Burlington Resources Inc 61,090 1,977,789
Chevron Corp 224,051 17,223,921
Coastal Corp 73,165 2,341,280
Columbia Gas System Inc 28,684 1,448,542
Consolidated Natural Gas Co 33,003 1,813,102
Eastern Enterprises 7,388 283,976
Enron Corp 113,724 7,392,060
Exxon Corp 835,005 55,580,020
Halliburton Co 151,220 4,271,965
Helmerich & Payne Inc 17,480 285,143
Kerr-McGee Corp 16,339 466,683
Mobil Corp 267,901 22,286,014
NICOR Inc 16,447 628,070
Occidental Petroleum Corp 119,175 1,795,073
ONEOK Inc 10,777 290,305
Oryx Energy Co+ 33,958 352,314
Peoples Energy Corp 12,371 419,841
Phillips Petroleum Co 87,600 3,389,025
Rowan Co Inc+ 29,327 252,945
Royal Dutch Petroleum Corp 736,514 32,314,552
Schlumberger Ltd 187,581 9,109,402
Sonat Offshore Drilling Co 37,778 956,256
Sunoco Inc 32,283 982,614
Texaco Inc 183,685 8,552,833
Union Pacific Resources Group 86,976 777,348
Unocal Corp 83,202 2,345,256
USX--Marathon Group 105,082 2,173,884
Williams Co Inc 147,098 5,442,626
-----------
TOTAL ENERGY & RELATED
- VALUE $195,562,332
- COST $167,611,434
ENGINEERING & CONSTRUCTION-0.10%
Armstrong World Industries Inc 13,698 $ 673,770
Centex Corp 20,576 757,454
Fleetwood Enterprises Inc 12,106 392,688
Fluor Corp 26,114 918,898
Foster Wheeler Corp 14,070 175,875
Kaufman & Broad Home Corp 15,755 354,488
Pulte Corp 15,093 363,175
-----------
TOTAL ENGINEERING & CONSTRUCTION
- VALUE $ 3,636,348
- COST $ 4,042,600
ENTERTAINMENT & LEISURE-1.61%
Brunswick Corp 33,178 $ 707,106
Disney (Walt) Co 703,705 24,761,620
Harrah's Entertainment Inc+ 42,245 704,963
Hasbro Inc 45,095 1,668,515
Mattel Inc 99,077 2,613,156
Mirage Resorts Inc+ 62,181 1,212,530
Polaroid Corp 15,445 368,749
Time Warner Inc 421,441 27,182,945
-----------
TOTAL ENTERTAINMENT & LEISURE
- VALUE $ 59,219,584
- COST $ 39,209,547
ENVIRONMENTAL CONTROL-0.31%
Browning-Ferris Industries Inc 59,799 $ 1,883,669
Waste Management Inc 197,408 9,648,316
-----------
TOTAL ENVIRONMENTAL CONTROL
- VALUE $ 11,531,985
- COST $ 11,502,357
12
<PAGE>
------------------------------------------------------------------------------
Portfolio of Investments (continued) February 28, 1999
Security Name Shares Value
------------------------------------------------------------------------------
FOOD & RELATED-3.68%
Albertson's Inc 84,309 $ 4,805,613
American Stores Co 94,382 3,185,393
Archer-Daniels-Midland Co 204,137 3,087,572
Bestfoods 98,199 4,609,216
Brown-Forman Corp Class B 23,697 1,562,521
Campbell Soup Co 153,980 6,188,055
ConAgra Inc 168,216 5,067,507
Darden Restaurants Inc 47,983 1,055,626
General Mills Inc 52,628 4,246,422
Great Atlantic & Pacific Tea Co 13,066 412,396
Heinz (H J) Co 124,425 6,773,386
Hershey Foods Corp 49,207 3,063,136
Kellogg Co 139,304 5,154,248
Kroger Co+ 88,017 5,693,600
McDonald's Corp 232,442 19,757,570
Pioneer Hi Bred International Inc 83,214 1,950,328
Quaker Oats Co 46,919 2,562,950
Ralston-Purina Group 107,455 2,894,569
RJR Nabisco Holdings Corp 111,721 3,051,380
Safeway Inc+ 167,144 9,652,566
Sara Lee Corp 313,894 8,533,993
Super Value Inc 41,447 997,318
Sysco Corp 114,911 3,246,236
Tricon Global Restaurants+ 52,553 3,258,286
Unilever NV (Netherlands) 219,882 15,927,702
UST Inc 63,844 1,887,388
Wendy's International Inc 43,018 1,029,743
Winn-Dixie Stores Inc 51,099 2,238,775
Wrigley (W M) Jr Co 39,970 3,717,210
-----------
TOTAL FOOD & RELATED
- VALUE $135,610,705
- COST $100,122,282
FURNITURE & APPLIANCES-0.08%
Maytag Corp 30,981 $ 1,736,872
Whirlpool Corp 26,133 1,136,786
-----------
TOTAL FURNITURE & APPLIANCES
- VALUE $ 2,873,658
- COST $ 2,362,234
HEALTHCARE-0.52%
Cardinal Health Inc 89,203 $ 6,439,342
HCR Manor Care Inc+ 37,755 844,768
Healthsouth Corp+ 145,697 1,693,728
McKesson HBOC Inc 93,203 6,337,804
St Jude Medical Inc+ 28,759 722,570
United Healthcare Corp 64,042 3,158,071
-----------
TOTAL HEALTHCARE
- VALUE $ 19,196,283
- COST $ 20,182,826
HOSPITAL & MEDICAL SUPPLIES-2.25%
Bard (C R) Inc 18,549 $ 1,045,700
Bausch & Lomb Inc 19,217 1,159,025
Baxter International Inc 97,977 6,895,131
Becton Dickinson & Co 84,666 2,836,311
Biomet Inc 38,788 1,423,035
Boston Scientific Corp+ 135,132 3,580,998
Columbia/HCA Healthcare Corp 221,945 3,967,267
Guidant Corp 103,493 5,899,101
Johnson & Johnson 461,767 39,423,358
Mallinckrodt Group Inc 24,539 759,175
Medtronic Inc 196,643 13,887,912
Tenet Healthcare Corp+ 106,214 2,091,088
-----------
TOTAL HOSPITAL & MEDICAL SUPPLIES
- VALUE $ 82,968,101
- COST $ 57,433,800
HOUSEHOLD PRODUCTS-2.24%
Alberto-Culver Co Class B 19,190 $ 460,560
Avon Products Inc 90,256 3,756,906
Colgate-Palmolive Co 100,709 8,547,676
Gillette Co 381,016 20,431,983
Kimberly-Clark Corp 186,212 8,798,517
Procter & Gamble Co 455,589 40,775,216
-----------
TOTAL HOUSEHOLD PRODUCTS
- VALUE $ 82,770,858
- COST $ 55,587,829
INSURANCE-3.53%
Aetna Inc 49,127 $ 3,638,468
Allstate Corp 281,770 10,566,375
American General Corp 86,598 6,343,304
American International Group Inc 424,311 48,344,935
Aon Corp 58,340 3,438,414
Chubb Corp 56,055 3,349,286
CIGNA Corp 70,968 5,570,988
Cincinnati Financial Corp 57,248 2,007,258
Conseco Inc 108,091 3,235,974
Hartford Financial Services Group 80,323 4,342,462
Humana Inc+ 57,061 998,568
Jefferson-Pilot Corp 36,517 2,476,309
Lincoln National Corp 34,772 3,292,474
Loews Corp 39,241 3,068,156
Marsh & McLennan Companies Inc 88,410 6,260,533
MBIA Inc 34,142 2,101,867
Progressive Corp Ohio 24,869 3,195,667
Provident Co Inc 46,552 1,524,578
Providian Financial Corp 48,734 4,976,960
SAFECO Corp 46,961 1,887,245
St Paul Co 80,403 2,603,047
Torchmark Corp 48,346 1,607,505
Transamerica Corp 43,074 3,125,557
UNUM Corp 47,632 2,131,532
-----------
TOTAL INSURANCE
- VALUE $130,087,462
- COST $ 89,312,996
LODGING-0.12%
Hilton Hotels Corp 88,402 $ 1,397,857
Marriott International 86,020 3,096,720
-----------
TOTAL LODGING
- VALUE $ 4,494,577
- COST $ 3,326,589
MACHINERY-0.47%
Black & Decker Corp 30,387 $ 1,481,366
Case Corp 25,321 493,760
Caterpillar Inc 123,375 5,621,273
Cummins Engine Co Inc 13,957 572,237
Deere & Co 82,050 2,682,009
Ingersoll-Rand Co 56,608 2,688,880
McDermott International Inc 20,687 412,447
Milacron Inc 13,417 238,990
Pall Corp 42,864 908,181
Parker Hannifin Corp 37,462 1,390,777
Thermo Electron Corp+ 54,991 759,563
-----------
TOTAL MACHINERY
- VALUE $ 17,249,483
- COST $ 17,374,354
13
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
------------------------------------------------------------------------------
Portfolio of Investments (continued) February 28, 1999
Security Name Shares Value
------------------------------------------------------------------------------
MANUFACTURING-0.45%
Tyco International Ltd 221,393 $ 16,479,941
-----------
TOTAL MANUFACTURING
- VALUE $ 16,479,941
- COST $ 10,700,373
METAL FABRICATORS-0.38%
Alcan Aluminum Ltd 78,438 $ 1,907,024
Allegheny Teledyne Inc 67,656 1,395,405
Barrick Gold Corp 128,281 2,268,970
Battle Mountain Gold Co 79,036 266,747
Bethlehem Steel Corp+ 44,531 392,429
Crane Co 23,789 652,711
Engelhard Corp 49,415 880,205
Freeport McMoRan Inc+ 57,328 541,033
Nucor Corp 30,207 1,346,099
Phelps Dodge Corp 19,923 966,266
Placer Dome Inc 85,533 935,517
Reynolds Metals Co 22,303 953,453
Timken Co 21,647 382,881
USX - U.S. Steel Group 30,103 761,982
Worthington Industries Inc 32,184 408,335
-----------
TOTAL METAL FABRICATORS
- VALUE $ 14,059,057
- COST $ 18,280,519
PHARMACEUTICALS-8.94%
Abbott Laboratories 521,291 24,207,451
Allergan Inc 22,471 1,831,387
ALZA Corp+ 29,771 1,561,117
American Home Products Corp 452,762 26,939,339
Amgen Inc+ 87,480 10,924,065
Bristol-Myers Squibb Co 341,187 42,968,238
Lilly (Eli) & Co 377,695 35,762,995
Merck & Co Inc 818,164 66,884,907
Millipore Corp 15,193 423,505
Pfizer Inc 445,648 58,797,683
Pharmacia and Upjohn Inc 174,381 9,503,765
Schering-Plough Corp 504,749 28,234,397
SouthTrust Corp 48,400 1,939,025
Warner Lambert Co 281,974 19,473,829
-----------
TOTAL PHARMACEUTICALS
- VALUE $329,451,703
- COST $170,732,360
PUBLISHING-0.86%
American Greetings Corp Class A 24,374 $ 577,359
Comcast Corp Class A 126,962 9,006,367
Donnelley (R R) & Sons Co 46,729 1,600,468
Dow Jones & Co Inc 32,341 1,520,027
Gannett Co Inc 96,778 6,145,403
Interpublic Group Co Inc 47,523 3,555,315
Knight-Ridder Inc 27,073 1,358,726
McGraw-Hill Inc 33,795 3,698,440
Meredith Corp 17,996 607,365
Moore Corp Ltd 30,496 320,208
New York Times Co Class A 62,857 1,948,567
Times Mirror Co Class A 27,381 1,528,202
-----------
TOTAL PUBLISHING
- VALUE $ 31,866,447
- COST $ 20,546,989
RETAIL & RELATED-5.88%
AutoZone Inc+ 52,665 $ 1,843,261
Circuit City Stores Inc 34,270 1,859,148
Consolidated Stores Corp+ 37,242 938,033
Costco Co Inc+ 74,466 5,980,551
CVS Corp 133,591 7,080,323
Dayton-Hudson Corp 151,216 9,460,451
Dillards Inc Class A 36,888 917,589
Dollar General Corp 63,330 1,895,942
Eastman Kodak Co 111,359 7,370,574
Federated Department Stores Inc+ 70,575 2,686,261
Fred Myer Inc+ 52,741 3,388,609
Gap Inc 199,195 12,885,427
Harcourt General Inc 24,402 1,117,917
Home Depot Inc 506,355 30,223,064
Jostens Inc 12,489 292,711
K Mart Corp+ 169,360 2,963,800
Kohls Corp+ 54,470 3,758,430
Limited Inc 78,359 2,781,745
Longs Drug Stores Corp 13,249 479,448
Lowe's Co Inc 121,059 7,180,312
May Department Stores Co 80,227 4,753,450
Newell Co 55,487 2,358,198
Nordstrom Inc 51,241 2,062,450
Penney (J C) Co Inc 86,954 3,141,213
Rite Aid Corp 88,890 3,677,824
Sears Roebuck & Co 131,764 5,352,913
Sherwin Williams Co 59,275 1,426,305
Staples Inc+ 160,014 4,705,420
Tandy Corp 34,018 1,892,251
TJX Companies Inc 110,837 3,165,782
Toys R Us Inc+ 90,058 1,272,069
Walgreen Co 342,734 10,967,488
WalMart Stores Inc 773,745 66,832,224
-----------
TOTAL RETAIL & RELATED
- VALUE $216,711,183
- COST $129,837,297
SERVICES-0.16%
Block (H R) Inc 34,686 $ 1,573,877
Public Service Enterprise Group 78,639 2,988,282
Service Corp International 88,888 1,366,653
-----------
TOTAL SERVICES
- VALUE $ 928,812
- COST $ 980,052
TELECOMMUNICATIONS-10.11%
Airtouch Communications+ 196,513 $ 17,894,965
Alltel Corp 94,192 5,639,746
Ameritech Corp 378,946 24,773,595
Andrew Corp+ 29,958 453,115
Ascend Communications Inc+ 74,376 5,722,304
AT & T Corp 620,398 50,950,209
Bell Atlantic Corp 533,223 30,626,996
BellSouth Corp 671,663 31,064,414
Frontier Corp 58,504 2,102,488
GTE Corp 331,566 21,510,344
Lucent Technologies Inc 451,742 45,880,047
MCI WorldCom Inc+ 629,764 51,955,530
NEXTEL Communications Class A+ 98,965 2,975,135
Northern Telecom Ltd 223,972 13,004,398
SBC Communication Inc 671,763 35,519,469
Scientific-Atlanta Inc 25,911 840,488
Sprint Corp 147,924 12,693,728
Sprint Corp (PCS Group)+ 144,169 4,613,408
Tellabs Inc+ 66,814 5,349,296
U.S. West Inc 172,767 9,210,641
-----------
TOTAL TELECOMMUNICATIONS
- VALUE $372,780,316
- COST $216,959,379
14
<PAGE>
------------------------------------------------------------------------------
Portfolio of Investments (continued) February 28, 1999
Interest Maturity Principal/
Security Name Rate Date Shares Value
------------------------------------------------------------------------------
TEXTILES-0.01%
Springs Industries Inc Class A 6,323 $ 210,240
-------------
TOTAL TEXTILES
- VALUE $ 210,240
- COST $ 257,099
TOBACCO-0.94%
Fortune Brands Inc 58,969 $ 1,776,441
Philip Morris Co Inc 836,135 32,713,782
-------------
TOTAL TOBACCO
- VALUE $ 34,490,223
- COST $ 29,258,140
TRANSPORTATION-0.70%
Burlington Northern Santa Fe 161,139 $ 5,337,729
Carnival Corp Class A 204,207 9,087,212
CSX Corp 75,064 2,946,262
Laidlaw Inc Class B 113,589 873,215
Norfolk Southern Corp 130,297 3,656,460
Whitman Corp 78,000 1,209,000
Union Pacific Corp 84,967 3,982,828
-------------
TOTAL TRANSPORTATION
- VALUE $ 25,883,706
- COST $ 25,297,077
UTILITIES-1.98%
AES Corp+ 61,496 $ 2,286,883
Ameren Corp 47,237 1,762,531
American Electric Power Inc 65,829 2,740,132
Baltimore Gas & Electric Co 51,369 1,316,331
Carolina Power & Light Co 52,116 2,078,126
Central & South West Corp 73,169 1,815,506
Cinergy Corp 54,690 1,596,264
Consolidated Edison Inc 80,152 3,747,106
Dominion Resources Inc 67,261 2,597,956
DTE Energy Co 49,909 1,971,406
Duke Power Co 124,394 7,074,909
Edison International 121,202 3,090,651
Entergy Corp 84,706 2,392,945
FirstEnergy Corp 80,784 2,362,932
FPL Group Inc 62,169 3,197,818
GPU Inc 44,040 1,756,095
New Century Energies Inc 39,002 1,582,019
Niagara Mohawk Power Corp+ 64,631 945,228
Northern States Power Co 51,821 1,337,630
Pacificorp 102,402 1,836,836
PECO Energy Co 76,965 2,727,447
PG & E Corp 131,627 4,146,251
PP & L Resources Inc 52,270 1,332,885
Reliant Energy Inc 97,893 2,624,756
Sempra Energy 82,745 1,737,645
Southern Co 239,654 6,006,328
Texas Utilities Co 96,745 4,105,616
Unicom Corp 74,743 2,658,048
-------------
TOTAL UTILITIES
- VALUE $ 72,828,280
- COST $ 65,757,726
TOTAL COMMON STOCKS
- VALUE $3,469,052,921
- COST $2,326,715,872
SHORT TERM INSTRUMENTS-10.45%
CASH EQUIVALENTS-2.24%
Dreyfus Institutional Money Market
Fund++ $ 937,119 $ 937,119
Janus International Money Market
Fund++ 63,300,000 63,300,000
Merrimac Cash Fund-Premium Class++ 18,500,000 18,500,000
-------------
$ 82,737,119
U.S. TREASURY BILLS-0.46%
U.S. Treasury Bills 3.57** 3/25/99 16,850,000 $ 16,804,938
-------------
REPURCHASE AGREEMENTS-7.75%
Morgan Stanley Triparty Repurchase
Agreement dated 2/26/99 due 3/1/99
with a maturity value of $286,086,410
and an effective yield of 4.85%
collateralized by U.S. Treasury Bonds
with rates ranging from 9.875% to
12.00%, maturity dates ranging from
05/15/03 to 11/15/15, and aggregate
market value of $105,479,493, U.S.
Treasury Notes with rates ranging
from 6.00% to 6.50%, maturity dates
ranging from 08/31/01 to 08/15/19
and an aggregate market value of
110,650,813 and U.S.Treasury Bills,
with a yield to maturity of 4.49%,
a maturity date of 05/23/99, and a
market value of $75,568,681 285,978,454 $ 285,978,454
-------------
TOTAL SHORT TERM INSTRUMENTS
- VALUE $ 385,520,511
- COST $ 385,512,686
TOTAL INVESTMENTS IN SECURITIES
(Cost $2,712,228,558) * (Notes 1 and 3) 104.54% $3,854,573,432
Other Assets and Liabilities, Net (4.54)% (167,480,654)
------ --------------
TOTAL NET ASSETS 100.00% $3,687,092,778
====== ==============
+ Non-income earning securities.
++ Represents collateral received from securities lending transactions. See
Note 4.
* Cost for federal income tax purposes is $2,713,771,575 and net unrealized
appreciation consists of:
Gross Unrealized Appreciation $1,196,082,998
Gross Unrealized Depreciation (55,281,141)
--------------
NET UNREALIZED APPRECIATION $1,140,801,857
==============
** Yield to maturity
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
February 28, 1999
ASSETS
Investments:
In securities, at market value (see cost below) (Note 1) $3,854,573,432
Receivables:
Beneficial interests sold 184,800,000
Dividends and interest 3,990,156
--------------
Total Assets 4,043,363,588
LIABILITIES
Payables:
Variation margin on futures contracts 1,533,119
Investment securities purchased 271,774,548
Collateral for securities loaned (Note 4) 82,737,119
Due to BGI (Note 2) 226,024
--------------
Total Liabilities 356,270,810
--------------
TOTAL NET ASSETS $3,687,092,778
==============
INVESTMENTS AT COST $2,712,228,558
==============
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
<TABLE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- -------------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF OPERATIONS
For the Year Ended February 28, 1999
INVESTMENT INCOME
<S> <C>
Dividends+ $ 36,647,898
Interest++ 8,379,792
------------
Total Investment Income 45,027,690
EXPENSES (NOTE 2)
Advisory fees 1,353,414
------------
Total Expenses 1,353,414
------------
NET INVESTMENT INCOME (LOSS) 43,674,276
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on sale of investments 143,991,139
Net realized gain (loss) on sale of futures contracts 37,982,701
Net change in unrealized appreciation (depreciation)of investments 265,023,900
Net change in unrealized appreciation (depreciation) of futures contracts (14,225,550)
------------
Net Gain (Loss) on Investments 432,772,190
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $476,446,466
============
+Net of foreign withholding tax of: $ 5,288
++ Interest income includes security lending income of: $ 78,935
The accompanying notes are an integral part of these financial statements.
17
</TABLE>
<PAGE>
<TABLE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the For the
Year Ended Year Ended
February 28, 1999 February 28, 1998
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
<S> <C> <C>
Net investment income $ 43,674,276 $ 35,530,147
Net realized gain (loss) on sale of investments 143,991,139 52,551,777
Net realized gain on sale of futures contracts 37,982,701 18,816,662
Net change in unrealized appreciation (depreciation) of investments 265,023,900 452,651,075
Net change in unrealized appreciation (depreciation) of futures contracts (14,225,550) 10,434,575
-------------- --------------
Net increase (decrease) in net assets resulting from operations 476,446,466 569,984,236
Net increase (decrease) in net assets resulting from beneficial
interest transactions 856,583,098 299,742,532
-------------- --------------
Increase (decrease)in Net Assets 1,333,029,564 869,726,768
NET ASSETS:
Beginning net assets $2,354,063,214 $1,484,336,446
-------------- --------------
ENDING NET ASSETS $3,687,092,778 $2,354,063,214
============== ==============
The accompanying notes are an integral part of these financial statements.
</TABLE>
18
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
February 28, 1999
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"), Asset Allocation, Bond Index,
Extended Index, LifePath 2000, LifePath 2010, LifePath 2020, LifePath 2030,
LifePath 2040, Money Market, S&P 500 Index, U.S. Equity Index and U.S. Treasury
Allocation Master Portfolios. These financial statements contain S&P 500 Index
Master Portfolio (the "Master Portfolio").
The following significant accounting policies are consistently followed by
MIP in the preparation of its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
SECURITY VALUATION
The equity securities of the Master Portfolio are valued at the last
reported sale price on the primary securities exchange or national securities
market on which such securities are traded. Securities not listed on an exchange
or national securities market, or securities in which there was no last reported
sales price, are valued at the most recent bid prices. Debt securities are
generally traded in the over-the-counter market and are valued at a price deemed
best to reflect fair value as quoted by dealers who make markets in those
securities or by an independent pricing source. U.S. Government obligations are
valued at the last reported bid price. Debt securities maturing in 60 days or
less are valued at amortized cost, which approximates market value. Any
securities, restricted securities or other assets for which market quotations
are not readily available, are valued at fair value as determined in good faith
in accordance with policies approved by MIP's Board of Trustees.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on the date the securities are
purchased or sold (trade date). Dividend income is recognized on the ex-dividend
date, and interest income is recognized on a daily accrual basis. Realized gains
or losses are reported on the basis of identified cost of securities delivered.
Bond discounts and premiums are 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
19
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (continued)
February 28, 1999
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, 1999, the S&P 500 Index Master Portfolio had open
long futures contracts outstanding:
S&P 500 Index Master Portfolio
NUMBER OF EXPIRATION NOTIONAL NET UNREALIZED
CONTRACTS TYPE DATE CONTRACT VALUE DEPRECIATION
978 S&P 500 Index March 1999 $302,079,750 $(2,976,575)
The S&P 500 Index Master Portfolio has pledged to brokers U.S.
Treasury Bills for initial margin requirements with a par value of $9,828,900.
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, 1999 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 the Master Portfolio.
Stephens Inc. ("Stephens") is the Fund's co-administrator, sponsor and
placement agent for the Master Portfolio. Certain officers and directors of MIP
are also officers of Stephens. As of February 28, 1999, 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, 1999 is as follows:
AGGREGATE PURCHASES S&P 500 INDEX
AND SALES OF: MASTER PORTFOLIO
Purchases at cost $1,187,951,471
Sales proceeds 275,613,257
20
<PAGE>
- --------------------------------------------------------------------------------
4. PORTFOLIO SECURITIES LOANED
As of February 28, 1999, the S&P 500 Index Master Portfolio had loaned
securities which were collateralized by cash. The Master Portfolio receives
transaction fees for providing services in connection with the securities
lending program. The risks to the Portfolio of securities lending is that the
borrower may not provide additional collateral when required or return the
securities when due. 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 $80,346,100 $82,737,119
4. FINANCIAL HIGHLIGHTS
<TABLE>
The portfolio turnover rates, excluding short-term securities, for the S&P 500
Index Master Portfolio is as follows:
<CAPTION>
FOR THE
PERIOD FROM
FOR THE FOR THE FOR THE FOR THE MAY 26,1994
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED (COMMENCEMENT
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 29, OF OPERATIONS) TO
1999 1998 1997 1996 FEBRUARY 28,1995
<S> <C> <C> <C> <C> <C>
S&P 500 Index Master Portfolio 11% 6% 4% 2% 5%
21
</TABLE>
<PAGE>
MASTER INVESTMENT PORTFOLIO - S&P 500 INDEX MASTER PORTFOLIO
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
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 S&P 500 Index Master Investment Portfolio (one
of the portfolios comprising Master Investment Portfolio) as of February 28,
1999, 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 four-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, 1999 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 S&P
500 Index Master Portfolio of Master Investment Portfolio as of February 28,
1999, the results of its operations, the changes in its net assets and its
financial highlights for the periods indicated herein, except as noted above, in
conformity with generally accepted accounting principles.
KPMG LLP
San Francisco, California
April 2, 1999
22
<PAGE>
NOTES
- --------------------------------------------------------------------------------
23
<PAGE>
NOTES
- --------------------------------------------------------------------------------
24
<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
Dana J. Russart, Treasurer
INVESTMENT ADVISOR
Barclays Global Fund Advisors
45 Fremont Street, San Francisco, California 94105
CUSTODIAN
Investors Bank & Trust Company
89 South Street, Boston, Massachusettes 02111
AUDITOR
KPMG Peat Marwick LLP
Three Embarcardero 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.strongfunds.com
[STRONG LOGO]
STRONG FUNDS
P.O. Box 2936 o Milwaukee, Wisconsin 53201
Strong Investments, Inc. 11141C99 AINDEX
