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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08885
---------------------------------
Hewitt Series Trust
-------------------------------------------------------
(Exact name of registrant as specified in charter)
100 Half Day Road Lincolnshire, IL 60069
-----------------------------------------------------
(Address of principal executive offices) (Zip code)
Peter Ross 100 Half Day Road Lincolnshire, IL 60069
-------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 847-295-5000
----------------
Date of fiscal year end: December 31, 2003
-------------------
Date of reporting period: January 1, 2003 to December 31, 2003
-------------------------------------
Item 1. Reports to Stockholders.
(Annual Report is filed herewith)
HEWITT SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2003
HEWITT
INSTITUTIONAL
HEWITT MONEY MONEY MARKET
MARKET FUND FUND
--------------- ---------------
ASSETS
Investments:
In Money Market Master Portfolio
("Master Portfolio"), at value (Note 1) $ 90,139,604 $ 86,394,060
Receivables:
Due from Hewitt Associates LLC (Note 2) -- 1,425
--------------- ---------------
TOTAL ASSETS 90,139,604 86,395,485
--------------- ---------------
LIABILITIES
Payables:
Distribution to shareholders 15,353 50,606
Due to Hewitt Associates LLC (Note 2) 4,753 --
Accrued shareholder servicing fees 57,656 43,147
Distribution fees (Note 2) 57,656 --
Accrued expenses 28,634 53,943
--------------- ---------------
TOTAL LIABILITIES 164,052 147,696
--------------- ---------------
NET ASSETS $ 89,975,552 $ 86,247,789
=============== ===============
Net assets consist of:
Paid-in capital $ 89,972,588 $ 86,216,063
Undistributed net investment income 355 28,836
Undistributed net realized gain on
investments 2,609 2,890
--------------- ---------------
NET ASSETS $ 89,975,552 $ 86,247,789
=============== ===============
Shares outstanding 89,970,884 856,497
=============== ===============
Net asset value and offering price per share $ 1.00 $ 100.70
=============== ===============
The accompanying notes are an integral part of these financial statements.
1
HEWITT SERIES TRUST
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
HEWITT
INSTITUTIONAL
HEWITT MONEY MONEY MARKET
MARKET FUND FUND
--------------- ---------------
NET INVESTMENT INCOME ALLOCATED FROM MASTER
PORTFOLIO
Interest $ 1,117,268 $ 1,260,761
Expenses (89,359) (99,393)
--------------- ---------------
NET INVESTMENT INCOME ALLOCATED FROM MASTER
PORTFOLIO 1,027,909 1,161,368
--------------- ---------------
FUND EXPENSES (NOTE 2)
Advisory and administration fees 267,778 --
Administration fees -- 99,776
Shareholder servicing fees 223,148 198,639
Distribution costs 223,148 --
Fund accounting & transfer agent fees 81,990 81,975
Legal fees 25,009 27,009
Audit fees 13,910 13,910
Printing costs 14,200 14,200
Registration costs 115,015 --
Trustee fees 10,995 10,995
Other expenses 1,005 960
--------------- ---------------
TOTAL FUND EXPENSES 976,198 447,464
--------------- ---------------
Less:
Fees reimbursed by Hewitt Associates LLC
(Note 2) (217,590) (99,396)
--------------- ---------------
TOTAL NET EXPENSES 758,608 348,068
--------------- ---------------
NET INVESTMENT INCOME 269,301 813,300
--------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS ALLOCATED FROM MASTER PORTFOLIO
Net realized gain 2,609 2,890
--------------- ---------------
Net gain on investments 2,609 2,890
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 271,910 $ 816,190
=============== ===============
The accompanying notes are an integral part of these financial statements.
2
HEWITT SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS
HEWITT INSTITUTIONAL
HEWITT MONEY MARKET FUND MONEY MARKET FUND
--------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 269,301 $ 694,066 $ 813,300 $ 1,610,010
Net realized gain 2,609 251 2,890 390
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 271,910 694,317 816,190 1,610,400
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (269,301) (694,066) (814,988) (1,610,041)
------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (269,301) (694,066) (814,988) (1,610,041)
------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net capital share transactions (Note 3) 12,468,085 11,250,122 (27,945,553) 4,906,828
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 12,468,085 11,250,122 (27,945,553) 4,906,828
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 12,470,694 11,250,373 (27,944,351) 4,907,187
NET ASSETS:
Beginning of year 77,504,858 66,254,485 114,192,140 109,284,953
------------ ------------ ------------ ------------
END OF YEAR $ 89,975,552 $ 77,504,858 $ 86,247,789 $114,192,140
============ ============ ============ ============
UNDISTRIBUTED NET INVESTMENT INCOME
INCLUDED IN NET ASSETS AT END OF YEAR $ 355 $ 106 $ 28,836 $ 30,135
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
3
HEWITT SERIES TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
HEWITT MONEY MARKET FUND
PERIOD FROM
DEC. 4, 2000(A)
YEAR ENDED YEAR ENDED YEAR ENDED TO
DEC. 31, 2003 DEC. 31, 2002 DEC. 31, 2001 DEC. 31, 2000
------------- ------------- ------------- ---------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------- ------------- ------------- ---------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.00(b) 0.01 0.03 0.00(b)
------------- ------------- ------------- ---------------
Total from investment operations 0.00 0.01 0.03 0.00
------------- ------------- ------------- ---------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.00)(b) (0.01) (0.03) (0.00)(b)
------------- ------------- ------------- ---------------
TOTAL DISTRIBUTIONS (0.00) (0.01) (0.03) (0.00)
------------- ------------- ------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ============= ============= ===============
TOTAL RETURN 0.31% 0.98% 3.36% 0.47%(c)
============= ============= ============= ===============
Ratios/Supplemental data:
Net assets, end of period (000s) $ 89,976 $ 77,505 $ 66,254 $ 57,865
Ratio of expenses to average net
assets(1) 0.95% 0.95% 0.95% 0.95%(d)
Ratio of net investment income to
average net assets(2) 0.30% 0.98% 3.31% 5.77%(d)
- --------------------------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 1.19% 1.34% 1.36% 1.54%(d)
(2) Ratio of net investment income (loss)
to average net assets prior to waived
fees and reimbursed expenses 0.06% 0.59% 2.90% 5.18%(d)
- --------------------------------------------------------------------------------------------------------------
(a) Commencement of operations.
(b) Rounds to less than $0.01.
(c) Not annualized.
(d) Annualized.
The accompanying notes are an integral part of these financial statements.
4
HEWITT SERIES TRUST
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
HEWITT INSTITUTIONAL MONEY MARKET FUND
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DEC. 31, 2003 DEC. 31, 2002 DEC. 31, 2001 DEC. 31, 2000 DEC. 31, 1999(A)
------------- ------------- ------------- ------------- ----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 100.69 $ 100.70 $ 100.68 $ 100.52 $ 100.30
------------- ------------- ------------- ------------- ----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.82 1.49 3.86 5.73 3.90
Net realized and unrealized gain on
investments 0.00(e) 0.00(e) 0.02 0.13 0.22
------------- ------------- ------------- ------------- ----------------
Total from investment operations 0.82 1.49 3.88 5.86 4.12
------------- ------------- ------------- ------------- ----------------
LESS DISTRIBUTIONS FROM:
Net investment income (0.81) (1.50) (3.86) (5.70) (3.90)
------------- ------------- ------------- ------------- ----------------
TOTAL DISTRIBUTIONS (0.81) (1.50) (3.86) (5.70) (3.90)
------------- ------------- ------------- ------------- ----------------
NET ASSET VALUE, END OF PERIOD $ 100.70 $ 100.69 $ 100.70 $ 100.68 $ 100.52
============= ============= ============= ============= ================
TOTAL RETURN 0.82% 1.51% 3.93% 6.12% 4.18%(c)
============= ============= ============= ============= ================
Ratios/Supplemental data:
Net assets, end of period (000s) $ 86,248 $ 114,192 $ 109,285 $ 103,656 $ 43,068
Ratio of expenses to average net
assets(1) 0.45% 0.45% 0.45% 0.45% 0.44%(d)
Ratio of net investment income to
average net assets(2) 0.82% 1.48% 3.82% 6.05% 5.03%(d)
- -------------------------------------------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net
assets prior to waived fees and
reimbursed expenses 0.55% 0.59% 0.60% 0.59% 0.72%(d)
(2) Ratio of net investment income (loss)
to average net assets prior to waived
fees and reimbursed expenses 0.72% 1.34% 3.67% 5.91% 4.75%(d)
- -------------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED
FEB. 28, 1999(B)
----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 100.00
----------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 1.97
Net realized and unrealized gain on investments --
----------------
Total from investment operations 1.97
----------------
LESS DISTRIBUTIONS FROM:
Net investment income (1.67)
----------------
TOTAL DISTRIBUTIONS (1.67)
----------------
NET ASSET VALUE, END OF PERIOD $ 100.30
================
TOTAL RETURN 1.98%(c)
================
Ratios/Supplemental data:
Net assets, end of period (000s) $ 10,949
Ratio of expenses to average net assets(1) 0.45%(d)
Ratio of net investment income to average net
assets(2) 4.86%(d)
- ---------------------------------------------------------------------
(1) Ratio of expenses to average net assets prior
to waived fees and reimbursed expenses 1.62%(d)
(2) Ratio of net investment income (loss) to
average net assets prior to waived fees and
reimbursed expenses 3.69%(d)
- ---------------------------------------------------------------------
(a) For the ten months ended December 31, 1999. The Fund changed its fiscal
year from February 28 to December 31.
(b) For the period from October 1, 1998 (commencement of operations) to
February 28, 1999.
(c) Not annualized.
(d) Annualized.
(e) Rounds to less than $0.01.
The accompanying notes are an integral part of these financial statements.
5
HEWITT SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Hewitt Money Market Fund (the "Money Market Fund") and Hewitt Institutional
Money Market Fund, (the "Institutional Money Market Fund"), (each a "Fund",
collectively, the "Funds") are diversified series of Hewitt Series Trust (the
"Trust"), an open-end management investment company registered under the
Investment Company Act of 1940, as amended. The Trust was established as a
Delaware business trust organized pursuant to a Declaration of Trust on July 7,
1998.
Under the Funds' organizational documents, the officers and trustees are
indemnified against certain liabilities that may arise out of their duties to
the Funds. Additionally, in the normal course of business, the Funds enter into
contracts with service providers that contain general indemnification clauses.
The Funds' maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Funds that have not yet
occurred. However, based on experience, the Funds expect the risk of loss to be
remote.
The following significant accounting policies are consistently followed by
the Trust in the preparation of its financial statements, and such policies are
in conformity with accounting principles generally accepted in the United States
of America ("U.S. GAAP") for investment companies. The preparation of financial
statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
INVESTMENT POLICY AND SECURITY VALUATION
Each Fund invests substantially all of its assets in the Money Market
Master Portfolio (the "Master Portfolio"), a series of Master Investment
Portfolio ("MIP"). The Master Portfolio has the same investment objective as the
Funds. The value of each Fund's investment in the Master Portfolio reflects each
Fund's interest in the net assets of the Master Portfolio (1.91% and 1.83% for
the Money Market Fund and the Institutional Money Market Fund, respectively as
of December 31, 2003).
The method by which the Master Portfolio values its securities is discussed
in Note 1 of the Master Portfolio's Notes to Financial Statements, which are
included elsewhere in this report.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Each Fund records daily its proportionate interest in the net investment
income and realized and unrealized gains and losses of the Master Portfolio.
The performance of each Fund is directly affected by the performance of the
Master Portfolio. The financial statements of the Master Portfolio, including
the Schedule of Investments, are included elsewhere in this report and should be
read in conjunction with the corresponding Fund's financial statements.
FEDERAL INCOME TAXES
The Funds have elected and intends to qualify each year as a "regulated
investment company" under Subchapter M of the Internal Revenue Code. If so
qualified, the Funds will not be subject to federal income tax to the extent
they distribute their net income to shareholders.
6
HEWITT SERIES TRUST
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Each Fund is treated as a separate entity for federal income tax purposes.
It is the policy of the Trust that each Fund continue to qualify as a regulated
investment company by complying with the provisions of the Internal Revenue Code
of 1986, as amended (the "Code") applicable to regulated investment companies,
and to distribute substantially all of its investment company taxable income and
any net realized gains (after taking into account any capital loss
carryforwards) sufficient to relieve it from all, or substantially all, federal
income and excise taxes. Accordingly, no provision for federal taxes was
required at December 31, 2003.
As of December 31, 2003, the components of Distributable Earnings on a tax
basis were as follows: Undistributed Ordinary Income of $2,964 and $31,726 for
the Money Market Fund and the Institutional Money Market Fund, respectively.
The tax character of distributions paid during 2003 and 2002 for the Funds
were as follows: ordinary income of $269,301 and $694,066 for the Money Market
Fund, respectively, and ordinary income of $814,988 and $1,610,041 for the
Institutional Money Market Fund, respectively.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income of each Fund are
declared daily and distributed monthly. Distributions to shareholders from
capital gains, if any, are declared and distributed annually, generally in
December.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
Hewitt Associates LLC ("Hewitt Associates") provides advisory and
administrative services to the Money Market Fund. For these services, the Money
Market Fund pays Hewitt Associates a monthly fee calculated at an annual rate of
0.30% of the Money Market Fund's average daily net assets. Hewitt Associates has
agreed to waive its fees or absorb expenses of the Money Market Fund to the
extent necessary to assure that total ordinary operating expenses (excluding
interest, brokerage commissions and extraordinary expenses) of the Money Market
Fund, on an annual basis, do not exceed 0.95% of the average daily net assets of
the Money Market Fund. Hewitt Associates may not modify or terminate this waiver
agreement without approval of the Board of Trustees of the Trust. For the year
ended December 31, 2003, Hewitt Associates reimbursed the Money Market Fund
$217,590 for expenses related to this agreement.
Hewitt Associates provides administrative services to the Institutional
Money Market Fund at an annual rate of 0.10% of average daily net assets, but
has agreed to absorb such expenses of the Institutional Money Market Fund to the
extent necessary to assure that total ordinary operating expenses (excluding
interest, brokerage commissions and extraordinary expenses) of the Institutional
Money Market Fund, on an annual basis, do not exceed 0.45% of the average daily
net assets of the Institutional Money Market Fund. For the year ended December
31, 2003, Hewitt Associates reimbursed the Institutional Money Market Fund
$99,396 for expenses related to this agreement.
Hewitt Financial Services LLC ("Hewitt Services") serves as the Distributor
of the Money Market Fund. The Trust has adopted a plan pursuant to Rule 12b-1
under the Investment Company Act which allows the Money Market Fund to pay
expenses relating to the distribution of the Money Market Fund's shares. Under
the plan, the Money Market Fund pays a fee to Hewitt Services, calculated at an
annual rate of 0.25% of the average daily net assets of the Money Market Fund.
7
HEWITT SERIES TRUST
NOTES TO FINANCIAL STATEMENTS--CONTINUED
Hewitt Services also serves as the Shareholder Servicing Agent for the
Money Market Fund. As Shareholder Servicing Agent, Hewitt Services is
responsible for maintaining records showing the number of shares owned by
investors who have purchased shares through Hewitt Services. In addition, Hewitt
Services sends all shareholder communications relating to the Money Market Fund
to shareholders or arranges for these materials to be sent. For these services,
the Money Market Fund pays Hewitt Services a monthly fee calculated at an annual
rate of 0.25% of the average daily net assets of the Money Market Fund.
Hewitt Associates also serves as the Shareholder Servicing Agent for the
Institutional Money Market Fund. As Shareholder Servicing Agent, Hewitt
Associates is responsible for receiving on behalf of the Transfer Agent orders
by employee benefit plans to purchase and redeem shares. Hewitt Associates is
also responsible for maintaining records showing the number of Institutional
Money Market Shares allocable to individual participant accounts in those plans.
In addition, Hewitt Associates sends all shareholder communications relating to
the Fund to shareholders or arranges for these materials to be sent. For these
services, the Institutional Money Market Fund pays Hewitt Associates a monthly
fee calculated at an annual rate of 0.20% of average daily net assets of the
Institutional Money Market Fund. The Funds also reimburse each Shareholder
Servicing Agent for certain out-of-pocket expenses.
3. CAPITAL SHARE TRANSACTIONS
As of December 31, 2003, there was an unlimited number of shares of $0.001
par value capital stock authorized by each Fund. Transactions in capital shares
for each Fund is as follows:
HEWITT MONEY MARKET FUND
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
Shares Issued and Redeemed:
Shares sold 62,370,705 $ 62,370,705 47,715,653 $ 47,715,652
Shares issued in reinvestments of
dividends 294,161 294,161 652,953 652,953
Shares redeemed (50,196,781) (50,196,781) (37,118,483) (37,118,483)
------------- ------------- ------------- -------------
Net increase/(decrease) 12,468,085 $ 12,468,085 11,250,123 $ 11,250,122
============= ============= ============= =============
HEWITT INSTITUTIONAL MONEY MARKET FUND
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
Shares Issued and Redeemed:
Shares sold 3,934,566 $ 396,341,230 3,813,149 $ 384,187,479
Shares issued in reinvestments of
dividends 8,710 877,128 14,823 1,492,560
Shares redeemed (4,220,837) (425,163,911) (3,779,220) (380,773,211)
------------- ------------ ------------- -------------
Net increase/(decrease) (277,561) $ (27,945,553) 48,752 $ 4,906,828
============= ============= ============= =============
8
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of
Hewitt Series Trust:
In our opinion, the accompanying statements of assets and liabilities, and
the related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of the Hewitt Money Market Fund and Hewitt Institutional Money Market
Fund, the funds comprising Hewitt Series Trust (collectively the "Funds"), at
December 31, 2003, the results of each of their operations for the year then
ended, the changes in each of their net assets and each of their financial
highlights for the two years in the period then ended, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion of these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The financial highlights of the Funds for each of the periods ended from
February 28, 1999 through December 31, 2001 were audited by other auditors,
whose report dated February 11, 2002 expressed an unqualified opinion on those
highlights.
PricewaterhouseCoopers LLP
San Francisco, California
February 9, 2004
9
HEWITT SERIES TRUST
DIRECTORS AND OFFICERS INFORMATION LIST (UNAUDITED)
DISINTERESTED TRUSTEES*
PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS,
NAME, ADDRESS, AND AGE POSITION(S), DATE OF ELECTION DIRECTORSHIPS HELD
- ---------------------- ----------------------------- -----------------------
Don Hunt, age 65 Director, since July 7, 1998 President, ADA
860 N. Lakeshore Drive Financial Services,
Chicago, IL 60611 Inc. 1998 to 2000,
Chairman and Director,
ADA Business
Enterprises, Inc.,
Director, Vision III
Imaging, Inc.
John Oliverio, age 51 Director, since July 7, 1998 Chief Executive Officer
806 Ambriance and Director, Wheaton
Burr Ridge, IL 60521 Franciscan Services,
Inc., Executive Vice
President, Chief
Operating Officer and
Director, Wheaton
Franciscan Services,
Inc., Trustee, CCM
Advisors Funds (7),
Trustee, CCMA Select
Investment Trust (1),
Director, Franciscan
Ministries, Inc.,
Director, United Health
System, Director,
Affinity Health System,
Director, All Saints
Health System,
Director, Covenant
Healthcare System.
INTERESTED TRUSTEES** AND OFFICERS
PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS,
NAME, ADDRESS, AND AGE POSITION(S), DATE OF ELECTION DIRECTORSHIPS HELD
- ---------------------- ----------------------------- -----------------------
E. Scott Peterson, 50 Trustee**, since July 7, 1998 Consultant, Hewitt
Associates LLC
Stacy L. Schaus, 43 President, since July 7, 1998 Chief Operating
Officer, Hewitt
Financial Services LLC;
Director of Marketing,
Hewitt Financial
Services LLC 1994 to
1998; Consultant,
Hewitt Associates LLC
Peter E. Ross, 44 Secretary, since July 7, 1998 Assistant Secretary and
Chief Compliance
Officer, Hewitt
Financial Services LLC;
Assistant Secretary,
Hewitt Associates LLC;
Consultant and
Attorney, Hewitt
Associates LLC
Anthony P. Sartori, 43 Treasurer and Chief Financial Treasurer and Chief
Officer, since March, 2000 Financial Officer
Hewitt Financial
Services LLC; Accounts
Receivable Manager,
Hewitt Associates LLC
- ----------
Each Trustee oversees 2 funds within the fund complex.
* Disinterested Trustees are those Trustees who are not "interested persons"
of the Trust as defined in the Investment Company Act.
** Trustee who is an "interested person" of the Trust, as defined in the
Investment Company Act, because of his or her affiliation with Hewitt
Associates LLC, an affiliate of the distributor of the Fund's shares.
10
MONEY MARKET MASTER PORTFOLIO
DECEMBER 31, 2003
SCHEDULE OF INVESTMENTS
SECURITY FACE AMOUNT VALUE
- ------------------------------------------- --------------- ---------------
CERTIFICATES OF DEPOSIT--15.12%
ABN Amro Bank NV
1.40%, 10/21/04 $ 25,000,000 $ 24,997,987
Bank of America NA
1.10%, 03/15/04 100,000,000 100,000,000
BNP Paribas (New York)
1.10%, 01/20/04 50,000,000 50,000,000
1.25%, 10/07/04 65,000,000 64,997,504
Canadian Imperial Bank of Commerce
1.31%, 08/13/04 50,000,000 49,996,901
Citibank NA
1.09%, 02/23/04 100,000,000 100,000,000
1.10%, 01/22/04 25,000,000 25,000,000
Fortis Bank
1.39%, 09/08/04 20,000,000 19,998,625
Societe Generale
1.34%, 09/03/04 50,000,000 49,994,621
World Savings Bank FSB
1.05%, 03/18/04 80,000,000 79,994,843
1.06%, 02/12/04 100,000,000 99,996,771
1.07%, 02/25/04 50,000,000 49,997,716
---------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost: $714,974,968) 714,974,968
---------------
COMMERCIAL PAPER--27.80%
Amstel Funding Corp.
1.10%, 02/17/04 26,368,000 26,330,133
1.11%, 02/17/04 100,000,000 99,855,083
1.16%, 04/22/04 45,000,000 44,837,600
Banque Generale du Luxembourg
1.10%, 02/04/04 13,750,000 13,735,715
Citigroup Global Markets Holdings Inc.
1.07%, 01/06/04 30,000,000 29,995,542
Corporate Asset Funding Co. Inc.
1.09%, 02/04/04 $ 27,000,000 $ 26,972,205
1.10%, 01/08/04 50,000,000 49,989,306
1.10%, 01/09/04 25,000,000 24,993,889
1.10%, 01/20/04 50,000,000 49,970,972
1.11%, 01/08/04 50,000,000 49,989,209
CRC Funding LLC
1.09%, 01/06/04 50,000,000 49,992,431
1.11%, 01/12/04 50,000,000 49,983,042
DEPFA Bank PLC
1.11%, 02/11/04 100,000,000 99,874,153
Edison Asset Securitization Corp.
1.10%, 01/15/04 50,000,000 49,978,611
1.10%, 02/17/04 18,000,000 17,974,150
K2 USA LLC
1.13%, 06/07/04 30,000,000 29,851,217
Kitty Hawk Funding Corp.
1.10%, 01/20/04 33,000,000 32,980,841
Liberty Street Funding Corp.
1.10%, 02/17/04 17,938,000 17,912,239
1.11%, 01/29/04 17,887,000 17,871,558
1.11%, 02/11/04 14,559,000 14,540,595
Moat Funding LLC
1.09%, 01/08/04 100,000,000 99,978,806
1.10%, 01/07/04 50,000,000 49,990,833
Morgan Stanley
1.08%, 02/25/04 100,000,000 99,835,000
Nationwide Building Society
1.10%, 02/06/04 22,000,000 21,975,800
1.10%, 02/13/04 28,000,000 27,963,211
Ness LLC
1.05%, 01/15/04 22,254,000 22,244,914
Prudential Funding Corp.
1.10%, 01/15/04 50,000,000 49,978,611
11
MONEY MARKET MASTER PORTFOLIO
DECEMBER 31, 2003
SCHEDULE OF INVESTMENTS--CONTINUED
SECURITY FACE AMOUNT VALUE
- ------------------------------------------- --------------- ---------------
Receivables Capital Co. LLC
1.08%, 01/05/04 $ 70,230,000 $ 70,221,572
Special Purpose Accounts Receivable Corp.
1.11%, 01/13/04 50,000,000 49,981,500
Ticonderoga Funding LLC
1.10%, 01/05/04 25,000,000 24,996,945
---------------
TOTAL COMMERCIAL PAPER
(Cost: $1,314,795,683) 1,314,795,683
---------------
MEDIUM TERM NOTES--8.50%
Associates Corp. NA
6.20%, 01/26/04 7,000,000 7,023,094
Beta Finance Inc.
1.40%, 09/13/04(1) 40,000,000 40,000,000
1.41%, 11/03/04(1) 65,000,000 65,000,000
Citigroup Inc.
5.70%, 02/06/04 30,000,000 30,126,780
Daimler Chrysler Auto Trust
1.10%, 08/09/04(1) 22,847,233 22,847,233
General Electric Capital Corp.
5.38%, 04/23/04 19,250,000 19,506,971
Hyundai Auto Receivables Trust
1.11%, 11/15/04 33,383,576 33,383,576
K2 USA LLC
1.21%, 08/09/04(1) 24,000,000 23,972,279
Links Finance LLC
1.44%, 11/01/04 45,000,000 45,000,000
Merrill Lynch & Co. Inc.
5.35%, 06/15/04 17,914,000 18,259,050
Morgan Stanley
5.63%, 01/20/04 9,900,000 9,921,400
Nissan Auto Receivables Owner Trust
1.15%, 11/15/04 45,070,546 45,070,545
Sigma Finance Inc.
1.24%, 08/06/04(1) $ 10,000,000 $ 9,999,403
WFS Financial Owner Trust
1.13%, 08/20/04 32,019,814 32,019,814
---------------
TOTAL MEDIUM TERM NOTES
(Cost: $402,130,145) 402,130,145
---------------
TIME DEPOSITS--4.76%
ABN Amro Bank NV
1.14%, 07/06/04 25,000,000 25,000,000
ING Bank NV
0.99%, 01/02/04 200,000,000 200,000,000
---------------
TOTAL TIME DEPOSITS
(Cost: $225,000,000) 225,000,000
---------------
VARIABLE & FLOATING RATE NOTES--39.11%
American Express Centurion Bank
1.11%, 10/20/04 50,000,000 50,000,000
1.15%, 03/12/04 50,000,000 50,000,000
Associates Corp. NA
1.27%, 06/15/04 15,000,000 14,996,791
Beta Finance Inc.
1.09%, 01/23/04(1) 20,000,000 20,000,000
1.13%, 11/08/04(1) 30,000,000 29,995,500
Chase Manhattan Bank USA
1.10%, 06/30/04 20,000,000 20,000,000
Citigroup Global Markets Holdings Inc.
1.29%, 06/17/04 8,000,000 8,006,487
Dorada Finance Inc.
1.06%, 05/14/04(1) 30,000,000 29,999,451
1.09%, 01/27/04(1) 25,000,000 25,000,000
1.09%, 06/30/04(1) 25,000,000 24,992,500
1.12%, 03/15/04(1) 20,000,000 19,999,592
1.24%, 08/09/04(1) 35,000,000 34,994,750
First USA Bank
1.35%, 07/21/04 54,600,000 54,665,310
12
MONEY MARKET MASTER PORTFOLIO
DECEMBER 31, 2003
SCHEDULE OF INVESTMENTS--CONTINUED
SECURITY FACE AMOUNT VALUE
- ------------------------------------------- --------------- ---------------
GE Commercial Equipment Financing LLC
1.11%, 09/20/04 $ 43,386,246 $ 43,386,247
General Electric Capital Corp.
1.14%, 01/28/04 40,000,000 40,001,282
1.24%, 03/25/04(1) 43,500,000 43,511,449
1.27%, 04/22/04 38,000,000 38,015,796
Goldman Sachs Group Inc.
1.32%, 01/22/04 45,000,000 45,004,825
1.82%, 02/11/04 20,000,000 20,014,477
Granite Mortgages PLC
1.14%, 01/20/04 21,875,000 21,874,884
HBOS Treasury Services PLC
1.16%, 01/24/05(1) 50,000,000 50,000,000
Holmes Financing PLC
1.12%, 04/15/04 50,000,000 50,000,000
JP Morgan Securities Inc.
1.20%, 06/15/04(1) 100,000,000 100,000,000
K2 USA LLC
1.08%, 03/15/04(1) 15,000,000 15,000,000
1.10%, 02/06/04(1) 20,000,000 20,000,000
1.10%, 09/30/04(1) 30,000,000 29,996,599
1.13%, 11/08/04(1) 25,000,000 24,996,786
1.41%, 11/01/04(1) 35,000,000 34,998,534
Links Finance LLC
1.06%, 05/24/04(1) 20,000,000 19,998,000
1.07%, 03/18/04(1) 40,000,000 40,000,000
1.10%, 07/20/04(1) 40,000,000 39,995,595
1.11%, 06/21/04(1) 25,000,000 24,998,828
1.14%, 03/08/04(1) 25,000,000 25,000,000
Merrill Lynch & Co. Inc.
1.33%, 01/14/04 17,000,000 17,001,302
Metropolitan Life Insurance Co. Funding
Agreement
1.24%, 07/16/04(1) $ 25,000,000 $ 25,000,000
1.27%, 07/23/04(1) 50,000,000 50,000,000
Nationwide Building Society
1.17%, 12/28/04(1) 50,000,000 50,000,000
1.18%, 08/06/04 25,000,000 25,005,620
1.19%, 08/13/04 25,000,000 25,006,245
Permanent Financing PLC
1.13%, 03/10/04 78,000,000 78,000,000
1.13%, 12/10/04 60,000,000 60,000,000
Residential Mortgage Securities
1.21%, 06/09/04(1) 47,314,153 47,314,152
Sigma Finance Inc.
1.10%, 07/20/04(1) 65,000,000 64,991,867
1.12%, 11/15/04(1) 50,000,000 49,995,618
1.13%, 09/07/04(1) 50,000,000 49,993,132
Societe Generale
1.08%, 09/24/04 50,000,000 49,988,250
Strips III LLC
1.17%, 07/30/04(1) 27,985,413 27,985,413
Travelers Insurance Co. Funding Agreement
1.25%, 02/05/04(1) 50,000,000 50,000,000
1.27%, 08/19/04(1) 25,000,000 25,000,000
Winston Funding Ltd.
1.21%, 04/23/04(1) 45,000,000 45,000,000
---------------
TOTAL VARIABLE & FLOATING RATE NOTES
(Cost: $1,849,725,282) 1,849,725,282
---------------
13
MONEY MARKET MASTER PORTFOLIO
DECEMBER 31, 2003
SCHEDULE OF INVESTMENTS--CONTINUED
SECURITY FACE AMOUNT VALUE
- ------------------------------------------- --------------- ---------------
REPURCHASE AGREEMENTS--5.13%
Goldman Sachs Tri-Party Repurchase
Agreement, dated 12/31/03, due 01/02/04,
with a maturity value of $17,475,951 and
an effective yield of 0.98%.(2) $ 17,475,000 $ 17,475,000
Goldman Sachs Tri-Party Repurchase
Agreement, dated 12/31/03, due 01/02/04,
with a maturity value of $25,001,417 and
an effective yield of 1.02%.(2) 25,000,000 25,000,000
Lehman Brothers Tri-Party Repurchase
Agreement, dated 12/31/03, due 01/02/04,
with a maturity value of $75,003,750 and
an effective yield of 0.90%.(2) 75,000,000 75,000,000
Merrill Lynch Tri-Party Repurchase
Agreement, dated 12/31/03, due 01/02/04,
with a maturity value of $100,005,444 and
an effective yield of 0.98%.(2) $ 100,000,000 $ 100,000,000
Merrill Lynch Tri-Party Repurchase
Agreement, dated 12/31/03, due 01/02/04,
with a maturity value of $25,001,389 and
an effective yield of 1.00%.(2) 25,000,000 25,000,000
---------------
TOTAL REPURCHASE AGREEMENTS
(Cost: $242,475,000) 242,475,000
---------------
TOTAL INVESTMENTS IN SECURITIES--100.42%
(Cost $4,749,101,078) 4,749,101,078
---------------
Other Assets, Less Liabilities--(0.42)%
(20,091,885)
---------------
NET ASSETS--100.00% $ 4,729,009,193
===============
- ----------
(1) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(2) See Note 1 for collateral information.
The accompanying notes are an integral part of these financial statements.
14
MONEY MARKET MASTER PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2003
ASSETS
Investments in securities, at amortized cost which
approximates value (Note 1) $ 4,506,626,078
Repurchase agreements, at value and cost 242,475,000
---------------
TOTAL INVESTMENTS IN SECURITIES 4,749,101,078
Cash 713
Receivables:
Interest 5,673,196
---------------
TOTAL ASSETS 4,754,774,987
---------------
LIABILITIES
Payables:
Investment securities purchased 25,000,000
Advisory fees (Note 2) 765,794
---------------
TOTAL LIABILITIES 25,765,794
---------------
NET ASSETS $ 4,729,009,193
===============
The accompanying notes are an integral part of these financial statements.
15
MONEY MARKET MASTER PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
NET INVESTMENT INCOME
Interest $ 52,983,614
---------------
TOTAL INVESTMENT INCOME 52,983,614
---------------
EXPENSES (NOTE 2)
Advisory fees 4,247,387
---------------
TOTAL EXPENSES 4,247,387
---------------
NET INVESTMENT INCOME 48,736,227
---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on sale of investments 120,352
---------------
NET GAIN ON INVESTMENTS 120,352
---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 48,856,579
===============
The accompanying notes are an integral part of these financial statements.
16
MONEY MARKET MASTER PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
FOR FOR
THE YEAR ENDED THE YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income $ 48,736,227 $ 45,475,626
Net realized gain 120,352 8,083
----------------- -----------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 48,856,579 45,483,709
----------------- -----------------
Interestholder transactions:
Contributions 13,745,249,528 11,212,874,658
Withdrawals (12,953,858,697) (9,134,078,695)
----------------- -----------------
NET INCREASE IN NET ASSETS RESULTING
FROM INTERESTHOLDER TRANSACTIONS 791,390,831 2,078,795,963
----------------- -----------------
INCREASE IN NET ASSETS 840,247,410 2,124,279,672
NET ASSETS:
Beginning of year 3,888,761,783 1,764,482,111
----------------- -----------------
END OF YEAR $ 4,729,009,193 $ 3,888,761,783
================= =================
The accompanying notes are an integral part of these financial statements.
17
MONEY MARKET MASTER PORTFOLIO
NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Master Investment Portfolio ("MIP") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company organized as a Delaware statutory trust. As of December 31,
2003, MIP offered the following separate portfolios: Asset Allocation, Bond
Index, Extended Index, International Index, LifePath Retirement (formerly
LifePath Income), LifePath 2010, LifePath 2020, LifePath 2030, LifePath 2040,
Money Market, Prime Money Market, Russell 2000 Index, S&P 500 Index and U.S.
Equity Index Master Portfolios.
These financial statements relate only to the Money Market Master Portfolio
(the "Master Portfolio").
Under the Master Portfolio's organizational documents, the officers and
trustees are indemnified against certain liabilities that may arise out of their
duties to the Master Portfolio. Additionally, in the normal course of business,
the Master Portfolio enters into contracts with service providers that contain
general indemnification clauses. The Master Portfolio's maximum exposure under
these arrangements is unknown as this would involve future claims that may be
made against the Master Portfolio that have not yet occurred. However, based on
experience, the Master Portfolio expects the risk of loss to be remote.
The following is a summary of significant accounting policies which are
consistently followed by MIP in the preparation of its financial statements.
Such policies are in conformity with accounting principles generally accepted in
the United States of America ("U.S. GAAP") for investment companies. The
preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
SECURITY VALUATION
The Master Portfolio uses the amortized cost method of valuation to
determine the value of its portfolio securities in accordance with Rule 2a-7
under the 1940 Act. The amortized cost method, which involves valuing a security
at its cost and accreting or amortizing any discount or premium, respectively,
over the period until maturity, approximates market value.
SECURITY TRANSACTIONS AND INCOME RECOGNITION
Security transactions are accounted for on trade date. Interest income is
accrued daily. Realized gains and losses on investment transactions are
determined using the specific identification method. The Master Portfolio
amortizes premium and accretes discount using a constant yield to maturity
method.
FEDERAL INCOME TAXES
In general, MIP believes that the Master Portfolio has and will continue to
be operated in a manner so as to qualify it as a non-publicly traded partnership
for federal income tax purposes. Provided that the Master Portfolio so
qualifies, it will not be subject to any federal income tax on its income and
gain (if any). However, each interestholder in such a Master Portfolio will be
taxed on its distributive share of the Master Portfolio's taxable income in
determining its federal income tax liability. As a non-publicly traded
partnership for federal income tax
18
MONEY MARKET MASTER PORTFOLIO
NOTES TO THE FINANCIAL STATEMENTS--CONTINUED
purposes, the Master Portfolio will be deemed to have "passed through" to its
interestholders any interest, dividends, gains or losses of the Master Portfolio
for such purposes. The determination of its distributive share will be made in
accordance with the Internal Revenue Code of 1986, as amended (the "Code"), and
regulations promulgated thereunder.
It is intended that the Master Portfolio's assets, income and distributions
will be managed in such a way that an entity electing and qualifying as a
"regulated investment company" under the Code can continue to qualify by
investing substantially all of its assets through the Master Portfolio, provided
that the regulated investment company meets other requirements for such
qualifications not within the control of the Master Portfolio (e.g.,
distributing at least 90% of the regulated investment company's "investment
company taxable income" annually).
REPURCHASE AGREEMENTS
Each Master Portfolio may enter into repurchase agreements with banks and
securities dealers. These transactions involve the purchase of securities with a
simultaneous commitment to resell the securities to the bank or the dealer at an
agreed-upon date and price. A repurchase agreement is accounted for as an
investment by the Master Portfolio, collateralized by securities, which are
delivered to the Master Portfolio's custodian, or to an agent bank under a
tri-party agreement. The securities are marked-to-market daily and additional
securities are acquired as needed, to ensure that their value equals or exceeds
the repurchase price plus accrued interest.
The repurchase agreements held by the Master Portfolio at December 31, 2003
were fully collateralized by U.S. Government and Agency obligations as follows:
AGGREGATE
MARKET
REPURCHASE AGREEMENT INTEREST RATE(S) MATURITY DATE(S) VALUE
- ------------------------- ---------------- ---------------- --------------
Goldman Sachs Tri-Party 5.00 - 7.00% 11/1/16 - 7/1/33 $ 17,823,670
Goldman Sachs Tri-Party 5.00 - 7.00 11/1/16 - 7/1/33 25,500,831
Lehman Brothers Tri-Party 3.60 - 5.75 1/1/23 - 1/1/34 76,499,092
Merrill Lynch Tri-Party 3.21 - 7.38 7/1/23 - 7/1/34 25,500,663
Merrill Lynch Tri-Party 3.16 - 5.74 8/1/22 - 2/1/35 101,993,875
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to an Investment Advisory Contract with the Master Portfolio,
Barclays Global Fund Advisors ("BGFA") provides investment guidance and policy
direction in connection with the management of the Master Portfolio's assets.
BGFA is a California corporation indirectly owned by Barclays Bank PLC. BGFA is
entitled to receive 0.10% of the average daily net assets of the Master
Portfolio, as compensation for advisory services.
Investors Bank & Trust Company ("IBT") serves as the custodian and
sub-administrator of the Master Portfolio. IBT will not be entitled to receive
fees for its custodial services so long as it is entitled to receive a separate
fee from Barclays Global Investors, N.A. ("BGI") for its services as
sub-administrator of the Master Portfolio.
SEI Investments Distribution Company ("SEI") is the sponsor and placement
agent for the Master Portfolio. SEI does not receive any fee from the Master
Portfolio for acting as placement agent. Prior to April 1, 2003, Stephens Inc.
served as sponsor and placement agent for the Master Portfolio.
19
MONEY MARKET MASTER PORTFOLIO
NOTES TO THE FINANCIAL STATEMENTS--CONTINUED
MIP has entered into an administration services arrangement with BGI who
has agreed to provide general administration services, such as managing and
coordinating third-party service relationships, to the Master Portfolio. BGI is
not entitled to compensation for providing administration services to the Master
Portfolio, for so long as BGI is entitled to compensation for providing
administration services to corresponding feeder funds that invest substantially
all of their assets in the Master Portfolio, or BGI (or an affiliate) receives
advisory fees from the Master Portfolio. BGI may delegate certain of its
administration duties to sub-administrators. Prior to April 1, 2003, BGI and
Stephens Inc. jointly served as co-administrators for the Master Portfolio.
Certain officers and trustees of MIP are also officers or employees of BGI.
As of December 31, 2003, these officers or employees of BGI collectively owned
less than 1% of MIP's outstanding beneficial interests.
3. INVESTMENT PORTFOLIO TRANSACTIONS
At December 31, 2003, the Master Portfolio's cost of investments for
federal income tax purposes was the same as for financial statement purposes.
4. FINANCIAL HIGHLIGHTS
Financial highlights for the Master Portfolio were as follows:
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, FEBRUARY 28,
2003 2002 2001 2000 1999(1) 1999(2)
------------ ------------ ------------ ------------ ------------ ------------
Ratio of expenses to
average net assets(3) 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%
Ratio of net investment
income to average net assets(3) 1.15% 1.80% 3.66% 6.43% 5.23% 5.17%
Total return 1.16% 1.84% 4.23% 6.52% 4.44%(4) 2.61%(4)
- ----------
(1) For the ten months ended December 31, 1999. The Master Portfolio changed
its fiscal year-end from February 28 to December 31.
(2) For the period from September 1, 1998 (commencement of operations) to
February 28, 1999.
(3) Annualized for periods of less than one year.
(4) Not annualized.
20
REPORT OF INDEPENDENT AUDITORS
To the Interestholders and Board of Trustees of
Master Investment Portfolio:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets present fairly, in all material respects, the
financial position of the Money Market Master Portfolio, a portfolio of Master
Investment Portfolio (the "Portfolio"), at December 31, 2003, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and its financial highlights for each of
the three years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
The financial highlights of the Portfolio for each of the periods ended
from February 28, 1999 through December 31, 2000 were audited by other auditors,
whose report dated February 9, 2001 expressed an unqualified opinion on those
highlights.
PricewaterhouseCoopers LLP
San Francisco, California
February 9, 2004
21
MASTER INVESTMENT PORTFOLIO
TRUSTEES INFORMATION--UNAUDITED
The Board of Trustees has responsibility for the overall management and
operations of the Master Portfolio. Each Trustee serves until he or she resigns,
retires, or his or her successor is elected and qualified. Each Officer serves
until his or her successor is chosen and qualified.
Master Investment Portfolio ("MIP"), Barclays Global Investors Funds ("BGIF"),
iShares Trust and iShares, Inc. are considered to be members of the same fund
complex, as defined in Form N-1A under the 1940 Act. Each Trustee of MIP also
serves as a Trustee for BGIF and oversees 25 portfolios within the fund complex.
In addition, Lee T. Kranefuss and Richard K. Lyons each serves as a Trustee for
iShares Trust and as a Director for iShares, Inc. and oversees 109 portfolios
within the fund complex.
Unless otherwise noted in the tables below, the address for each Trustee is 45
Fremont Street, San Francisco, CA 94105. Additional information about the Master
Portfolio's Trustees may be found in Part B of the Master Portfolio's
Registration Statement, which is available without charge upon request by
calling toll-free 1-877-244-1544.
INTERESTED TRUSTEES AND OFFICERS
POSITION(S), LENGTH PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE OF SERVICE DURING PAST FIVE YEARS
- ------------------------ ---------------------- ------------------------------
Lee T. Kranefuss,* 42 Trustee since November Chief Executive Officer of the
16, 2001, President Intermediary Investor and
and Chief Executive Exchange Traded Products
Officer Business of Barclays Global
Investors, N.A. ("BGI")
Michael A. Latham, 38 Secretary, Treasurer Chief Operating Officer of the
and Chief Financial Intermediary Investor and
Officer Exchange Traded Products
Business of BGI (since 2003);
Director of Mutual Fund
Delivery in the U.S.
Individual Investor Business
of BGI (2000-2003); Head of
Operations, BGI Europe
(1997-2000)
OTHER PUBLIC COMPANY
AND INVESTMENT COMPANY
NAME, ADDRESS AND AGE DIRECTORSHIPS
- ------------------------ ----------------------
Lee T. Kranefuss,* 42 Director, iShares Inc.
(since June 18, 2003);
Trustee, iShares Trust
(since June 18, 2003).
Michael A. Latham, 38 None.
INDEPENDENT TRUSTEES
POSITION(S), LENGTH PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE OF SERVICE DURING PAST FIVE YEARS
- ------------------------ ---------------------- ------------------------------
Mary G. F. Bitterman, 59 Trustee since November Director, Osher Lifelong
16, 2001 Learning Institutes, the
Bernard Osher Foundation;
President and Chief Executive
Officer of The James Irvine
Foundation (non-profit
foundation); President and
Chief Executive Officer of
KQED, Inc. (public television
and radio) from 1993-2002.
Jack S. Euphrat, 81 Trustee since October Private Investor
20, 1993
W. Rodney Hughes, 77 Trustee since October Private Investor
20, 1993
Richard K. Lyons, 42 Trustee since November Professor, University of
16, 2001 California, Berkeley: Haas
School of Business; Member,
Council of Foreign Relations
Leo Soong, 57 Trustee since February President of Trinity Products
9, 2000 LLC (beverages); Managing
Director of CG Roxane LLC
(water company); Co-Founder of
Crystal Geyser Water Co.
(President through 1999).
OTHER PUBLIC COMPANY
AND INVESTMENT COMPANY
NAME, ADDRESS AND AGE DIRECTORSHIPS
- ------------------------ ----------------------
Mary G. F. Bitterman, 59 Director, Pacific
Century Financial
Corporation/Bank of
Hawaii.
Jack S. Euphrat, 81 None.
W. Rodney Hughes, 77 None.
Richard K. Lyons, 42 Director, Matthews
Asian Funds (oversees
6 portfolios);
Director, iShares Inc.
(since 2001); Trustee,
iShares Trust (since
2001).
Leo Soong, 57 Chairman of the
California Automobile
Association
* Lee T. Kranefuss is deemed to be an "interested person" of the Trust
because he serves as Chief Executive Officer of the Intermediary Investor
and Exchange Traded Products Business of BGI, the administrator of the
Master Portfolio and the parent company of BGFA, the investment advisor of
the Master Portfolio.
22
TABLE OF CONTENTS
Page
----
HEWITT SERIES TRUST
Statements of Assets and Liabilities 1
Statements of Operations 2
Statements of Changes in Net Assets 3
Financial Highlights 4
Notes to Financial Statements 6
Report of Independent Auditors 9
Directors Information 10
MASTER INVESTMENT PORTFOLIO
Schedule of Investments 11
Statement of Assets and Liabilities 15
Statement of Operations 16
Statements of Changes in Net Assets 17
Notes to the Financial Statements 18
Report of Independent Auditors 21
Trustees Information 22
[GRAPHIC]
Hewitt Series Trust
Hewitt Money Market Fund
Hewitt Institutional
Money Market Fund
ANNUAL REPORT
DECEMBER 31, 2003
Item 2. Code of Ethics.
(a) Registrant has adopted a code of ethics that applies to its principal
executive officer and senior financial officers (the "Code").
(b) No disclosures are required by this Item 2(b).
(c) During the period covered by the report, registrant did not make any
amendments to the provisions of the Code.
(d) During the period covered by the report, registrant did not grant any
waivers, including implicit waivers, from the provisions of the Code.
(e) Not applicable.
(f) A copy of the Code is filed as Exhibit (a)(1) to this Form N-CSR.
Item 3. Audit Committee Financial Expert.
Registrant's board of trustees has determined that John Oliverio, a member of
its audit committee, qualifies as an "audit committee financial expert," as such
term is defined in Instruction 2(b) to Item 3 of Form N-CSR. Mr. Oliverio is an
independent trustee.
Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as a result of being designated or identified as an audit committee
financial expert. The designation or identification of a person as an audit
committee financial expert does not impose on such person any duties,
obligations, or liabilities that are greater than the duties, obligations, and
liabilities imposed on such person as a member of the audit committee and board
of trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees
$18,600 and $19,500 are the aggregate fees billed in each of the last two fiscal
years for professional services rendered by the principal accountant to the
registrant for the audit of the registrant's annual financial statements or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those fiscal years.
(b) Audit-Related Fees
$0 and $0 are the aggregate fees billed in each of the last two fiscal years for
assurance and related services rendered by the principal accountant to the
registrant that are reasonably related to the performance of the audit of the
registrant's financial statements and are not reported under paragraph (a) of
this Item 4.
$0 and $1,046,500 are the aggregate fees billed in each of the last two fiscal
years for assurance and related services rendered by the principal accountant to
the registrant's investment adviser and any entity controlling, controlled by or
under common control with the investment adviser that provides ongoing services
to the registrant (the "investment adviser") that are reasonably related to the
performance of the audit of the registrant's financial statements, are not
reported under paragraph (a) of this Item 4 and were
required to be pre-approved by the audit committee as described in paragraph
(e)(1) of this Item 4. These fees were for advisory services to Hewitt
Associates Inc. for Section 404 of the Sarbanes-Oxley Act of 2002.
(c) Tax Fees
$7,400 and $7,800 are the aggregate fees billed in each of the last two fiscal
years for professional services rendered by the principal accountant to the
registrant for tax compliance, tax advice and tax planning. These fees were for
review of the registrant's tax returns.
$0 and $87,200 are the aggregate fees billed in each of the last two fiscal
years for professional services rendered by the principal accountant to the
investment adviser for tax compliance, tax advice and tax planning and were
required to be pre-approved by the audit committee as described in paragraph
(e)(1) of this Item 4. These fees related to services provided to Cyborg
Systems, Inc involving a pre-acquisition (by Hewitt Associates Inc.) IRS audit
and also Cyborg's 2002 tax return filings. These services were contracted for
prior to the acquisition by Hewitt Associates Inc. and performed and billed
subsequent to the acquisition.
(d) All Other Fees
$0 and $0 are the aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant to the registrant,
other than the services reported in paragraphs (a)-(c) of this Item 4.
$0 and $75,000 are the aggregate fees billed in each of the last two fiscal
years for products and services provided by the principal accountant to the
investment adviser, other than the services reported in paragraphs (a)-(c) of
this Item 4, that were required to be pre-approved by the audit committee as
described in paragraph (e)(1) of this Item 4. These fees were for a licensing
agreement allowing Hewitt Associates Inc. to access a PricewaterhouseCoopers LLP
owned Saratoga Institute database of human capital metrics.
(e) (1) Registrant's audit committee meets with the principal accountants and
management to review and pre-approve all audit services to be provided by the
principal accountants.
The audit committee shall pre-approve all non-audit services to be provided by
the principal accountants to the registrant; provided that the pre-approval
requirement is waived for non-audit services if: (i) the aggregate amount of all
non-audit services provided to the Trust is less than 5% of the total fees paid
by the Trust to its independent auditors during the fiscal year in which the
non-audit services are provided; (ii) the services were not recognized by
management at the time of the engagement as non-audit services; and (iii) such
services are promptly brought to the attention of the audit committee by
management and the audit committee approves them (which may be by delegation)
prior to the completion of the audit.
The audit committee shall pre-approve all non-audit services to be provided by
the principal accountants to the investment adviser, or any entity controlling,
controlled by, or under common control with the investment adviser, where the
nature of the services provided have a direct impact on the operations or
financial reporting of the registrant; provided that the pre-approval
requirement is waived for non-audit services if (i) the aggregate amount of all
non-audit services provided is less than 5% of the total fees paid by the Trust,
Hewitt and any entity controlling, controlled by, or under common control with
Hewitt that provides ongoing services to the Trust to its independent auditors
during the fiscal year in which the non-audit services are provided that would
have to be pre-approved; (ii) the services were not recognized by management at
the time of the engagement as non-audit services; and (iii) such services are
promptly brought to the attention of the Committee by management and the
Committee approves them (which may be by delegation) prior to the completion of
the audit.
(2) 100% of the services provided to the registrant described in paragraphs
(b)-(d) of this Item 4 were pre-approved by the audit committee pursuant to
paragraph (e)(1) of this Item 4. For 2002, pre-approval by the audit committee
was not applicable. For 2003, 0% of the services provided to the investment
adviser
described in paragraphs (b)-(d) of this Item 4 were pre-approved by the audit
committee pursuant to paragraph (e)(1) of this Item 4.
(f) No disclosures are required by this Item 4(f).
(g) $7,400 and $7,800 are the aggregate non-audit fees billed in each of the
last two fiscal years for services rendered by the principal accountant to the
registrant. $0 and $1,208,700 are the aggregate non-audit fees billed in each of
the last two fiscal years for services rendered by the principal accountant to
the investment adviser.
(h) No disclosures are required by this Item 4(h).
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved]
Item 9. Controls and Procedures.
(a) Based on an evaluation of the disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940, the "Disclosure
Controls") as of a date within 90 days prior to the filing date (the "Filing
Date") of this Form N-CSR (the "Report"), the Disclosure Controls are
effectively designed to ensure that information required to be disclosed by the
registrant in the Report is recorded, processed, summarized and reported by the
Filing Date, including ensuring that information required to be disclosed in the
Report is accumulated and communicated to the registrant's management, including
the registrant's principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the registrant's most recent fiscal year that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a) (1) Code of Ethics for Principal Executive And Senior Financial Officers
(as referenced in Item 2 above), attached hereto as Exhibit (a)(1)
(2) Certifications pursuant to Rule 30a-2 under the Investment Company Act
of 1940 (17 CFR 270.30a-2), attached hereto as Exhibits (a)(2)(i) and
(a)(2)(ii)
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, attached hereto as Exhibit (b)
Hewitt Series Trust
N-CSR Filing dated 12/31/2003
Item 77Q3
Section (a)(i): The principal [executive/financial] officer has concluded that,
based on their evaluation, the disclosure controls and procedures of the Hewitt
Series Trust are reasonably designed to achieve the purposes described in the
attached certification, Section (a)(iii).
Section (a)(ii): There were no significant changes in the Hewitt Series Trust
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.
Section (a)(iii): Certifications of the President and Chief Financial Officer of
Hewitt Series Trust are attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Hewitt Series Trust
By: /s/ Stacy L. Schaus
----------------------
Stacy L. Schaus
President
Date March 5, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities, and on the
dates indicated.
By: /s/ Stacy L. Schaus
----------------------
Stacy L. Schaus
President
Date March 5, 2004
By: /s/ Anthony P. Sartori
----------------------
Anthony P. Sartori
Treasurer and Chief Financial Officer
Date March 5, 2004