<PAGE> 1
As filed with the Securities and Exchange Commission
on February 20, 1996
Registration No. 33-16296; 811-8275
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Post-Effective Amendment No. 32 [X]
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 34 [X]
(Check appropriate box or boxes)
----------------------
OVERLAND EXPRESS FUNDS, INC.
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
----------------------
Registrant's Telephone Number, including Area Code: (800) 458-6589
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With a copy to:
Robert M. Kurucza, Esq.
Marco E. Adelfio, Esq.
Morrison & Foerster
2000 Pennsylvania Ave., N.W.
Washington, D.C. 20006
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing pursuant [ ] on _________ pursuant
to Rule 485(b), or to Rule 485(b), or
[ ] 60 Days after filing pursuant [ ] on February 19, 1996 pursuant
to Rule 485(a), or to Rule 485(a)
[ ] 75 days after filing pursuant [ ] on (date) pursuant
to paragraph (a)(2) paragraph (a)(2) of Rule 485
<PAGE> 2
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of shares of its Common
Stock, $.001 par value, under the Securities Act of 1933, pursuant to Rule
24f-2 under the Investment Company Act of 1940, as amended. The Rule 24f-2
Notice for the fiscal year ending December 31, 1995, will be filed with the
Securities and Exchange Commission on or about February 28, 1996.
This Post-Effective Amendment to the Registrant's Registration Statement also
has been executed by Master Investment Trust (another registered investment
company with separate series in which certain of the Registrant's series invest
substantially all of their assets) and by such company's trustees and principal
officers.
<PAGE> 3
EXPLANATORY NOTE
This Post-Effective Amendment No. 32 to the Registration Statement
(the "Amendment") of Overland Express Funds, Inc. (the "Company") is being
filed to add to the Company's Registration Statement the audited financial
statements dated December 31, 1995 and certain related financial information
pertaining to the Strategic Growth Fund (the "Fund"), and to make certain other
non-material changes. The Fund converted to master/feeder structure on
February 20, 1996 and invests substantially all of its assets in the Capital
Appreciation Master Portfolio of Master Investment Trust, a management
investment company organized as a Delaware business trust (SEC File No.
811-6415). This Amendment does not affect the Registration Statement for the
Company's Asset Allocation Fund, California Tax-Free Bond Fund, California
Tax-Free Money Market Fund, Money Market Fund, Municipal Income Fund, National
Tax-Free Institutional Money Market Fund, Overland Sweep Fund, Short-Term
Government-Corporate Income Fund, Short-Term Municipal Income Fund, U.S.
Government Income Fund, U.S. Treasury Money Market Fund and Variable Rate
Government Fund.
<PAGE> 4
Cross Reference Sheet
STRATEGIC GROWTH FUND
Form N-1A Item Number
<TABLE>
<CAPTION>
Part A Prospectus Captions
- ------ -------------------
<S> <C>
1 Cover Page
2 Prospectus Summary; Summary of Expenses
3 Financial Highlights
4 Management of the Fund and the Master Portfolio;
5 Investment Objectives and Policies; Additional Permitted Investment
Activities; Management of the Fund and the Master Portfolio;
Distribution Plans; Servicing Plan; Custodian and Transfer and
Dividend Disbursing Agent
6 Organization and Capital Stock
7 Determination of Net Asset Value; Purchase of Shares; Exchange
Privileges; Dividends and Distributions; Taxes
8 Redemption of Shares
9 Not Applicable
Part B Statement of Additional Information Captions
- ------ --------------------------------------------
10 Cover Page
11 Table of Contents
12 Introduction
13 Investment Restrictions; Portfolio Transactions
14 Management
15 Management
16 Management; Distribution Plans; Servicing Plan; Custodian and
Transfer and Dividend Disbursing Agent; Independent Auditors
17 Portfolio Transactions
18 Capital Stock; Other
19 Determination of Net Asset Value
20 Federal Income Tax
21 Distribution Plans
22 Calculation of Yield and Total Return
23 Financial Information
Part C Other Information
- ------ -----------------
24-32 Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Document.
</TABLE>
<PAGE> 5
LOGO
Telephone: (800) 552-9612
Overland Express Funds, Inc. (the "Company") is a professionally managed,
open-end, series investment company. This Prospectus contains information about
one of the funds in the Overland Express Funds -- the STRATEGIC GROWTH FUND (the
"Fund").
THE INVESTMENT OBJECTIVE OF THE STRATEGIC GROWTH FUND IS TO PROVIDE
INVESTORS WITH AN ABOVE-AVERAGE LEVEL OF CAPITAL APPRECIATION. IT SEEKS TO
ACHIEVE THIS OBJECTIVE BY INVESTING ALL OF ITS ASSETS IN THE CAPITAL
APPRECIATION MASTER PORTFOLIO (AT TIMES, THE "MASTER PORTFOLIO") OF MASTER
INVESTMENT TRUST (THE "TRUST"), AN OPEN-END MANAGEMENT INVESTMENT COMPANY,
RATHER THAN IN A PORTFOLIO OF SECURITIES. THE MASTER PORTFOLIO HAS THE SAME
INVESTMENT OBJECTIVE AS THE FUND. THEREFORE, THE FUND'S INVESTMENT EXPERIENCE
CORRESPONDS DIRECTLY WITH THE MASTER PORTFOLIO'S INVESTMENT EXPERIENCE. SHARES
OF THE MASTER PORTFOLIO MAY BE PURCHASED ONLY BY OTHER INVESTMENT COMPANIES OR
SIMILAR ACCREDITED INVESTORS.
The Master Portfolio seeks to achieve its investment objective through the
active management of a broadly diversified portfolio of equity securities of
companies expected to experience strong growth in revenues, earnings and assets.
This Prospectus describes two classes of shares of the Fund -- Class A Shares
and Class D Shares.
This Prospectus sets forth concisely the information you should know before
investing in the Fund and should be read and retained for future reference. A
Statement of Additional Information dated February 20, 1996, containing
additional and more detailed information about the Fund (the "SAI"), has been
filed with the Securities and Exchange Commission (the "SEC") and is hereby
incorporated by reference into this Prospectus. The SAI is available without
charge and can be obtained by writing the Company at P.O. Box 63084, San
Francisco, CA 94163 or by calling the Company at the telephone number printed
above.
------------------------
FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR ISSUED, ENDORSED OR
GUARANTEED BY, WELLS FARGO BANK, N.A. ("WELLS FARGO BANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENTAL AGENCY. AN INVESTMENT IN A FUND INVOLVES CERTAIN
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
WELLS FARGO BANK IS THE INVESTMENT ADVISER AND PROVIDES CERTAIN OTHER SERVICES
TO THE FUND AND THE MASTER PORTFOLIO, FOR WHICH IT IS COMPENSATED.
STEPHENS INC. ("STEPHENS"), WHICH IS NOT AFFILIATED WITH WELLS
FARGO BANK, IS THE SPONSOR AND DISTRIBUTOR FOR THE FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER
REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DATED FEBRUARY 20, 1996
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................................... ii
Summary of Expenses........................................................................ v
Financial Highlights....................................................................... vii
Investment Objective and Policies.......................................................... 1
Additional Permitted Investment Activities................................................. 3
Management of the Fund and the Master Portfolio............................................ 6
Determination of Net Asset Value........................................................... 12
Purchase of Shares......................................................................... 13
Exchange Privileges........................................................................ 19
Redemption of Shares....................................................................... 21
Distribution Plans......................................................................... 24
Servicing Plan............................................................................. 24
Dividends and Distributions................................................................ 24
Taxes...................................................................................... 25
Custodian and Transfer and Dividend Disbursing Agent....................................... 26
Organization and Capital Stock............................................................. 26
</TABLE>
i
<PAGE> 7
PROSPECTUS SUMMARY
The Company, as an open-end investment company, provides a convenient way
for you to invest in portfolios of securities selected and supervised by
professional management. The following provides information about the Fund and
the Master Portfolio.
Q. WHAT ARE THE INVESTMENT OBJECTIVES AND PERMISSIBLE INVESTMENTS OF THE
FUND AND THE MASTER PORTFOLIO?
A. The investment objective of the Strategic Growth Fund is to provide
investors with an above-average level of capital appreciation. The Fund
seeks to achieve this investment objective by investing all of its assets
in the Capital Appreciation Master Portfolio of the Trust, which is a
professionally managed, open-end series investment company. The Master
Portfolio has the same investment objective as the Fund. The Master
Portfolio seeks to achieve its investment objective through the active
management of a broadly diversified portfolio of equity securities of
companies expected to experience strong growth in revenues, earnings and
assets. The Fund and Master Portfolio are designed to provide
above-average capital growth for investors willing to assume above-average
risk. As with all mutual funds, there can be no assurance that the Fund or
Master Portfolio will achieve its investment objective.
The Master Portfolio invests primarily in common stocks that are expected
by Wells Fargo Bank to have above-average prospects for appreciation. In
pursuing its investment objective, the Master Portfolio may invest in the
common stocks of companies with small, or medium-sized capitalizations and
in securities acquired through initial public offerings. The Master
Portfolio also may temporarily invest in preferred stock or
investment-grade debt securities. In addition, the Master Portfolio may
purchase or sell options on securities and on indices of securities, may
purchase warrants, and may purchase privately issued securities that may
be resold only in accordance with Rule 144A under the Securities Act of
1933. See "Investment Objective and Policies" and "Additional Permitted
Investment Activities."
Q. WHO MANAGES MY INVESTMENTS?
A. Wells Fargo Bank, as the investment adviser of the Master Portfolio,
manages the investments of the Master Portfolio. The Company has not
retained the services of a separate investment adviser for the Fund
because the Fund invests all of its assets in the Master Portfolio. Wells
Fargo also provides the Fund and the Master Portfolio with transfer
agency, dividend disbursing agency and custodial services. Wells Fargo
Bank is entitled to receive a monthly advisory fee at the annual rate of
0.50% of the average daily net assets of the Master Portfolio. See
"Management of the Fund and the Master Portfolio -- Master/Feeder
Structure."
Q. WHO IS THE SPONSOR, ADMINISTRATOR AND DISTRIBUTOR?
A. Stephens serves as the sponsor, administrator and distributor for the
Company and the Trust. See "Management of the Fund and the Master
Portfolio."
Q. HOW MAY I PURCHASE SHARES?
A. Shares of the Fund may be purchased on any day the New York Stock Exchange
(the "Exchange") is open for trading. There is a maximum sales load of
4.50% (4.71% of the net amount invested) for purchasing Class A Shares of
the Fund. Class D Shares are subject to a
ii
<PAGE> 8
maximum contingent deferred sales charge of 1.00% of the lesser of net
asset value at purchase or net asset value at redemption. In most cases,
the minimum initial purchase amount for the Fund is $1,000. The minimum
initial purchase amount is $100 for shares purchased through the
Systematic Purchase Plan and $250 for shares purchased through qualified
retirement plans. The minimum subsequent purchase amount is $100 or more.
You may purchase shares of the Fund through Stephens, Wells Fargo Bank, as
transfer agent (the "Transfer Agent"), or any authorized broker/dealer or
financial institution. Purchases of shares of the Fund may be made by wire
directly to the Transfer Agent. The Strategic Growth Fund may pay the
Distributor a monthly fee at an annual rate of up to 0.25% of the Fund's
average daily net assets attributable to Class A Shares and a monthly fee
at an annual rate of up to 0.75% of the Fund's average daily net assets
attributable to Class D Shares to compensate the distributor for
distribution-related services provided by it or to reimburse it for other
distribution-related expenses. See "Purchase of Shares" and "Distribution
Plans." The Fund also may pay servicing agents a fee at an annual rate of
up to 0.25% of the Fund's average daily net assets attributable to Class D
Shares to compensate them for certain services. See "Servicing Plan."
Q. HOW WILL I RECEIVE DIVIDENDS?
A. Dividends on shares of the Fund are declared and paid annually and are
automatically reinvested in additional shares of the same class of the
Fund. You may elect to receive dividends by check. Any capital gains will
be distributed annually and may be reinvested in Fund shares of the same
class or paid by check at your election. All reinvestments of dividends
and/or capital gain distributions in shares of the Fund are effected at
the then current net asset value free of any sales load. In addition, you
may elect to reinvest Fund dividends and/or capital gain distributions in
shares of the same class of another fund in the Overland Express Funds
with which you have an established account that has met the applicable
minimum initial investment requirement. The Fund's net investment income
available for distribution to holders of the Fund's Class D Shares is
reduced by the amount of servicing fees payable to servicing agents under
the Servicing Plan (as defined below). See "Dividends and Distributions."
Q. HOW MAY I REDEEM SHARES?
A. On any day the Exchange is open, shares may be redeemed upon request to
Stephens or the Transfer Agent directly or through any authorized
broker/dealer or financial institution. Shares may be redeemed by a
request in good form in writing or through telephone direction. Proceeds
are payable by check. Accounts of less than the applicable minimum initial
purchase amount may be redeemed at the option of the Company. Except for
any contingent deferred sales charge which may be applicable upon
redemption of Class D Shares, the Company does not charge for redeeming
its shares. However, the Company reserves the right to impose charges for
wiring redemption proceeds. See "Redemption of Shares."
Q. WHAT ARE SOME OF THE POTENTIAL RISKS ASSOCIATED WITH AN INVESTMENT IN THE
FUND?
A. An investment in the Fund is not insured against loss of principal. The
Master Portfolio's investments are subject to market risk. Market risk is
the possibility that stock prices will decline over short or even extended
periods. The U.S. stock market experiences periods when
iii
<PAGE> 9
stock prices rise and periods when stock prices decline. In addition,
investments in the Fund and Master Portfolio are not bank deposits or
obligations of Wells Fargo Bank and are not insured by the Federal Deposit
Insurance Corporation ("FDIC"). Therefore, you should be prepared to
accept some risk with the money invested in the Fund. Given the relatively
novel nature of the master/feeder structure, accounting and operational
difficulties, although unlikely, could arise. The Fund was reorganized,
and the Master Portfolio was formed, in 1996 and, therefore, the Fund and
Master Portfolio have a limited operational history as a master/feeder
structure. As with all mutual funds, there can be no assurance that the
Fund or the Master Portfolio will achieve its investment objective.
Because the Master Portfolio engages in active portfolio management,
the Master Portfolio may experience relatively high turnover and
transaction (i.e., brokerage commission) costs. Portfolio turnover also
can generate short-term capital gains tax consequences. You should consult
your individual tax advisor with respect to your particular tax situation.
The Master Portfolio may invest a significant portion of its assets in
the securities of smaller and newer issuers. Investments in such companies
may present opportunities for capital appreciation because of high
potential earnings growth. However, such investments may present greater
risks than investments in larger-size companies with more established
operating histories, diverse product lines and financial capacity.
Securities of small and new companies generally trade less frequently or
in limited volume, or only in the over-the-counter market or on a regional
securities exchange. As a result, the prices of such securities may be
more volatile than those of larger, more established companies and, as a
group, these securities may suffer more severe price declines during
periods of generally declining equity prices. See "Investment Objective
and Policies" and "Additional Permitted Investment Activities."
Q. WHAT ARE DERIVATIVES AND DO THE FUND AND MASTER PORTFOLIO USE THEM?
A. Derivatives are financial instruments whose value is derived, at least in
part, from the price of another security or a specified asset, index or
rate. The Master Portfolio uses derivatives only to a limited extent in
ways that are incidental to its overall strategy of investing directly in
common stocks. For example, the Master Portfolio may, from time to time,
hold options, warrants or debt instruments that are convertible into (and
whose value is, therefore, "derived from") common stocks.
Q. WHAT STEPS ARE TAKEN TO CONTROL DERIVATIVES-RELATED RISKS?
A. Wells Fargo Bank, as investment adviser to the Master Portfolio, uses a
variety of internal risk management procedures to ensure that derivatives
use is consistent with the Fund's and the Master Portfolio's investment
objective, does not expose the Fund or the Master Portfolio to undue risks
and is closely monitored. These procedures include providing periodic
reports to the Boards of Directors and Trustees concerning the use of
derivatives. Derivatives use also is subject to broadly applicable
investment policies. For example, neither the Fund nor the Master
Portfolio may invest more than a specified percentage of its assets in
"illiquid securities," including those derivatives that do not have active
secondary markets. Nor may certain derivatives be used without
establishing adequate "cover" in compliance with SEC rules limiting the
use of leverage.
iv
<PAGE> 10
SUMMARY OF EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
STRATEGIC GROWTH
-------------------
CLASS A CLASS D
SHARES SHARES
------- -------
<S> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)......................................... 4.50% 0.00%
Maximum Deferred Sales Load* (as a percentage of the lesser of net asset value
at purchase or net asset value at redemption)
Redemption during year 1.................................................... 0.00% 1.00%
Redemption after year 1..................................................... 0.00% 0.00%
</TABLE>
ANNUAL FUND OPERATING EXPENSES**
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS D
SHARES SHARES
------- -------
<S> <C> <C>
Management Fees............................................................... 0.50% 0.50%
12b-1 Fees.................................................................... 0.25% 0.75%
Total Other Expenses:
Servicing Fees.............................................................. 0.00% 0.25%
Other Expenses (after any waivers or reimbursements)........................ 0.53% 0.52%
------- -------
Total Fund Operating Expenses (after any waivers or reimbursements)***........ 1.28% 2.02%
</TABLE>
EXAMPLES
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment in
Class A Shares of the Fund, assuming (1) a 5% annual return
and (2) redemption at the end of each time period
indicated.................................................... $ 57 $ 84 $ 112 $ 193
You would pay the following expenses on a $1,000 investment in
Class D Shares of the Fund, assuming (1) a 5% annual return
and (2) redemption at the end of each time period
indicated.................................................... $ 31 $ 63 $ 109 $ 235
You would pay the following expenses on the same investment in
Class D Shares of the Fund, assuming no redemption........... $ 21 $ 63 $ 109 $ 235
</TABLE>
- ------------
* See "Contingent Deferred Sales Charge."
** Other mutual funds may invest in the Master Portfolio. Such other funds'
expenses and, accordingly, investment returns may differ from those of the
corresponding Fund.
*** As further described in the Prospectus under the caption "Management of the
Fund and the Master Portfolio", Stephens and Wells Fargo Bank each has
agreed to waive or reimburse all or a portion of its respective fees in
circumstances where Fund expenses that are subject to limitations imposed
under state securities laws and regulations exceed such limitations. In
addition, Stephens and Wells Fargo Bank each may elect, in its sole
discretion, to otherwise waive its respective fees or reimburse expenses.
Any such waivers or reimbursements with respect to the Fund would reduce
the total expenses of the Fund. The percentages shown above with respect to
Class A Shares and Class D Shares under "Other Expenses" and "Total Fund
Operating Expenses" are based on amounts incurred during the most recent
fiscal year by the Fund as a "stand-alone" fund, prior to its conversion to
the master/feeder structure. The percentages shown under "Other Expenses"
and "Total Fund Operating Expenses" reflect
v
<PAGE> 11
voluntary fee waivers and expense reimbursements that are expected to
continue to reduce the Fund's expenses in the current fiscal year. Absent
waivers and reimbursements, "Other Expenses" and "Total Fund Operating
Expenses," with respect to the Class A Shares would have been 0.63% and
1.38%, respectively. Absent waivers and reimbursements, these percentages,
with respect to Class D Shares, would have been 0.59% and 2.09%,
respectively. Long-term shareholders of the Fund could pay more in
distribution related charges than the economic equivalent of the maximum
front-end sales charges applicable to mutual funds sold by members of the
National Association of Securities Dealers, Inc. ("NASD"). There can be no
assurance that voluntary fee waivers and reimbursements will continue.
------------------------
The purpose of the foregoing tables is to assist you in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The expenses and fees set forth include the Fund's proportionate
share of the expenses of the Master Portfolio. The figures are based on the 1995
actual expenses of the Class A and Class D shares of the Strategic Growth Fund,
the predecessor operating investment company series to the Master Portfolio
(referred to at times as the "Predecessor Fund"). There are no other sales
loads, redemption fees or exchange fees charged by the Fund. However, the
Company reserves the right to impose charges for wiring redemption proceeds. The
Examples should not be considered a representation of past or future expenses;
actual expenses may be greater or lesser than those shown. With regard to the
combined fees and expenses of the Fund and the Master Portfolio following
conversion to the master/feeder structure, the Board of Directors of the Company
has considered whether various costs and benefits of investing all of a Fund's
assets in the Master Portfolio rather than directly in portfolio securities
would be more or less than if the Fund invested in portfolio securities
directly. The Board of Directors has determined that the aggregate fees assessed
by the Fund and the Master Portfolio should be less than or approximately equal
to those expenses that would be incurred had the Fund invested directly in the
portfolio securities held by the Master Portfolio. See Prospectus sections under
"Management of the Fund and the Master Portfolio", "Distribution Plans" and
"Purchase of Shares" for more complete descriptions of the various costs and
expenses applicable to the Fund. In addition, if the Fund were to no longer
invest in the Master Portfolio, these expenses may change.
vi
<PAGE> 12
FINANCIAL HIGHLIGHTS
The following information has been derived from the Financial Highlights in
the Fund's 1995 financial statements. The audited financial statements for the
year ended December 31, 1995 are attached to the SAI and have been audited by
KPMG Peat Marwick LLP, independent auditors, whose report dated February 14,
1996 also is attached to the SAI. Because the Fund did not convert to
master/feeder structure until February 20, 1996, the financial highlights for
the periods presented refer only to the prior operating history of the Fund on a
stand-alone basis. This information should be read in conjunction with the
Fund's 1995 annual financial statements and the notes thereto. The SAI has been
incorporated by reference into this Prospectus.
STRATEGIC GROWTH FUND
FOR A CLASS A SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993(1)
------------ ------------ ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......................... $ 13.29 $ 13.20 $ 10.00
Income from Investment Operations:
Net Investment Loss........................................ (0.04) (0.11) (0.03)
Net Realized and Unrealized Gains on Investments........... 5.66 0.67 3.68
-------- -------- --------
Total from Investment Operations............................. 5.62 0.56 3.65
Less Distributions:
Dividends from Net Investment Income....................... 0.00 0.00 (0.03)
Distributions from Net Realized Capital Gains.............. (2.09) (0.33) (0.41)
Tax Return of Capital...................................... 0.00 (0.14) (0.01)
-------- -------- --------
Total Distributions.......................................... (2.09) (0.47) (0.45)
Net Asset Value, End of Period............................... $ 16.82 $ 13.29 $ 13.20
======== ======== ========
Total Return (not annualized)(2)............................. 42.51% 4.23% 36.56%
Ratios/Supplemental Data:
Net Assets, End of Period (000)............................ $ 59,016 $ 26,744 $ 25,413
Number of Shares Outstanding, End of Period (000).......... 3,508 2,013 1,926
Ratios to Average Net Assets (annualized):
Ratio of Expenses to Average Net Assets(3)................. 1.28% 1.20% 0.66%
Ratio of Net Investment Loss to Average Net Assets(4)...... (0.76)% (0.81)% (0.01)%
Portfolio Turnover........................................... 171% 149% 182%
- ------------
(1) The Strategic Growth Fund commenced operations on January
20, 1993.
(2) Total returns do not include any sales charges or
contingent deferred sales charges.
(3) Ratio of Expenses to Average Net Assets Prior to Waived
Fees and Reimbursed Expenses (not including expenses
incurred by the Master Portfolio)........................ 1.38% 1.55% 1.64%
(4) Ratio of Net Investment Income (Loss) to Average Net
Assets Prior to Waived Fees and Reimbursed Expenses (not
including expenses incurred by the Master Portfolio)..... (0.86)% (1.16)% (0.99)%
</TABLE>
vii
<PAGE> 13
STRATEGIC GROWTH FUND
FOR A CLASS D SHARE OUTSTANDING AS SHOWN
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993(1)
------------ ------------ ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period....................... $ 16.54 $ 16.55 $ 15.00
Income from Investment Operations:
Net Investment Loss...................................... (0.16) (0.24) (0.43)
Net Realized and Unrealized Capital Gains on
Investments............................................ 6.99 0.81 2.51
-------- -------- --------
Total from Investment Operations........................... 6.83 0.57 2.08
Less Distributions:
Dividends from Net Investment Income..................... 0.00 0.00 0.00
Distributions from Net Realized Capital Gains............ (2.58) (0.40) (0.53)
Tax Return of Capital.................................... 0.00 (0.18) 0.00
-------- -------- --------
Total Distributions........................................ (2.58) (0.58) (0.53)
Net Asset Value, End of Period............................. $ 20.79 $ 16.54 $ 16.55
======== ======== ========
Total Return (not annualized)(2)........................... 41.54% 3.46% 13.84%
Ratios/Supplemental Data:
Net Assets, End of Period (000).......................... $ 26,326 $ 15,335 $ 11,932
Number of Shares Outstanding, End of Period (000)........ 1,266 927 721
Ratios to Average Net Assets (annualized):
Ratio of Expenses to Average Net Assets(3)............... 2.02% 1.95% 0.61%
Ratio of Net Investment Loss to Average Net Assets(4).... (1.49)% (1.56)% (1.00)%
Portfolio Turnover......................................... 171% 149% 182%
- ------------
(1) This class commenced operations on July 1, 1993.
(2) Total returns do not include any sales charges or contingent
deferred sales charges.
(3) Ratio of Expenses to Average Net Assets Prior to Waived
Fees and Reimbursed Expenses (not including expenses
incurred by the Master Portfolio)...................... 2.09% 2.23% 2.14%
(4) Ratio of Net Investment Income (Loss) to Average Net
Assets Prior to Waived Fees and Reimbursed Expenses
(not including expenses incurred by the Master
Portfolio)............................................. (1.56)% (1.84)% (2.53)%
</TABLE>
viii
<PAGE> 14
INVESTMENT OBJECTIVE AND POLICIES
Set forth below is a description of the investment objective and related
policies of the Fund and the Master Portfolio. As with all mutual funds, there
can be no assurance that the Fund or Master Portfolio will achieve its
investment objective.
Investment Objective -- The Strategic Growth Fund seeks to achieve its
investment objective by investing all of its assets in the Capital Appreciation
Master Portfolio, which has the same investment objective as the Fund. The
investment objective of the Capital Appreciation Master Portfolio is to provide
investors with an above-average level of capital appreciation. It seeks to
achieve this objective through the active management of a broadly-diversified
portfolio of equity securities of companies expected to experience strong growth
in revenues, earnings and assets. The Master Portfolio is designed to provide
above-average capital growth for investors willing to assume above-average risk.
The Fund may withdraw its investment in the Master Portfolio only if the
Board of Directors of the Company determines that such action is in the best
interests of the Fund and its shareholders. Upon such withdrawal, the Company's
Board would consider alternative investments, including investing all of the
Fund's assets in another investment company with the same investment objective
as the Fund or hiring an investment adviser to manage the Fund's assets in
accordance with the investment policies described below with respect to the
Master Portfolio. The investment objective and policies of the Master Portfolio
are described in this section. For a description of the management and expenses
of the Master Portfolio, see the Prospectus section "Management of the Fund and
the Master Portfolio."
EQUITY SECURITIES
The Master Portfolio invests primarily in common stocks that Wells Fargo
Bank, as the Master Portfolio's investment adviser, believes have
better-than-average prospects for appreciation. These stocks may have some of
the following characteristics:
- Low or no dividends
- Smaller market capitalizations
- Less market liquidity
- Relatively short operating histories
- Aggressive capitalization structures (including high debt levels)
- Involvement in rapidly growing/changing industries and/or new
technologies
Under normal market conditions, the Master Portfolio will hold at least 20
common stock issues spread across multiple industry groups, with the majority of
these holdings consisting of established growth companies, turnaround or
acquisition candidates, or attractive larger capitalization companies.
Additionally, it is expected that the Master Portfolio will from time to
time acquire securities through initial public offerings, and will acquire and
hold common stocks of smaller and newer issuers. It is expected that no more
than 40% of the Master Portfolio's assets will be invested in these highly
aggressive issues at one time. There may be some additional risks associated
with investments
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in smaller and/or newer companies because their shares tend to be less liquid
than securities of larger companies. Further, shares of small and new companies
are generally more sensitive to purchase and sale transactions and changes in
the issuer's financial condition and, therefore, the prices of such stocks may
be more volatile than those of larger company stocks.
From time to time Wells Fargo Bank may determine that conditions in the
securities markets make pursuing the Master Portfolio's basic investment
strategy inconsistent with the best interests of the Master Portfolio's
investors. At such times, Wells Fargo Bank may use temporary alternative
strategies, primarily designed to reduce fluctuations in the value of the Master
Portfolio's assets. In implementing these temporary "defensive" strategies, the
Master Portfolio may invest in preferred stock or investment-grade debt
securities that are convertible into common stock and in money market
securities. It is expected that these temporary "defensive" investments will not
exceed 30% of the Master Portfolio's total assets.
The Master Portfolio pursues an active trading investment strategy, and the
length of time the Master Portfolio has held a particular security is not
generally a consideration in investment decisions. Accordingly, the Master
Portfolio's portfolio turnover rate may be higher than that of other funds that
do not pursue an active trading investment strategy. Portfolio turnover
generally involves some expense to the Master Portfolio, including brokerage
commissions or dealer mark-ups and other transactions costs on the sale of
securities and the reinvestment in other securities. Portfolio turnover also can
generate short-term capital gains tax consequences.
Though the Master Portfolio will hold a number of larger capitalization
stocks, under normal market conditions, and subject to the additional risks
described above, more than 50% of the Master Portfolio's total assets will be
invested in companies with smaller to medium capitalizations. The Master
Portfolio will invest primarily in companies with a market capitalization of $50
million or greater, but may invest in companies with a market capitalization
under $50 million if the investment adviser to the Master Portfolio believes
such investments to be in the best interests of the Master Portfolio. It is
currently expected that the majority of the Master Portfolio's investments will
be in companies with market capitalizations, at the time of acquisition, of up
to $750 million.
Under ordinary market conditions, at least 65% of the value of the total
assets of the Master Portfolio will be invested in common stocks and in
securities which are convertible into common stocks that Wells Fargo Bank, as
investment adviser, believes have better-than-average prospects for
appreciation. The Master Portfolio also may invest in convertible debt
securities. At most, 5% of the Master Portfolio's net assets will be invested in
convertible debt securities that are not either rated in the four highest rating
categories by one or more nationally recognized statistical rating organizations
("NRSROs"), such as Moody's Investor Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("S&P"), or unrated securities determined by Wells Fargo Bank
to be of comparable quality. Securities rated in the fourth lowest rating
category (i.e., rated "BBB" by S&P or "Baa" by Moody's) are regarded by S&P as
having an adequate capacity to pay interest and repay principal, but changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make such repayments. Moody's considers such securities as having
speculative characteristics.
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ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
PRIVATELY ISSUED SECURITIES (RULE 144A)
The Master Portfolio may invest in privately issued securities which may be
resold in accordance with Rule 144A under the Securities Act of 1933 ("Rule 144A
Securities"). Rule 144A Securities are restricted securities which are not
publicly traded. Accordingly, the liquidity of the market for specific Rule 144A
Securities may vary. Wells Fargo Bank, using guidelines approved by the Board of
Directors of the Company, will evaluate the liquidity characteristics of each
Rule 144A Security proposed for purchase by the Master Portfolio on a
case-by-case basis and will consider the following factors, among others, in
their evaluation: (1) the frequency of trades and quotes for the Rule 144A
Security; (2) the number of dealers willing to purchase or sell the Rule 144A
Security and the number of other potential purchasers; (3) dealer undertakings
to make a market in the Rule 144A Security; and (4) the nature of the Rule 144A
Security and the nature of the marketplace trades (e.g., the time needed to
dispose of the Rule 144A Security, the method of soliciting offers and the
mechanics of transfer). Privately issued securities that are determined by the
Master Portfolio's investment adviser to be "illiquid" will be subject to the
Master Portfolio's policy of not investing more than 15% of its net assets in
illiquid securities.
CORPORATE REORGANIZATIONS
The Master Portfolio may invest in securities for which a tender or
exchange offer has been made or announced, and in securities of companies for
which a merger, consolidation, liquidation or similar reorganization proposal
has been announced if, in the judgment of Wells Fargo Bank, there is a
reasonable prospect of capital appreciation significantly greater than the added
portfolio turnover expenses inherent in the short term nature of such
transactions. The principal risk associated with such investments is that such
offers or proposals may not be consummated within the time and under the terms
contemplated at the time of the investment, in which case, unless such offers or
proposals are replaced by equivalent or increased offers or proposals which are
consummated, the Master Portfolio may sustain a loss.
OPTIONS
The Master Portfolio may purchase or sell options on individual securities
and options on indices of securities as a means of achieving additional return
or of hedging the value of the Master Portfolio's portfolio. If the Master
Portfolio has sold an option, it may terminate its obligation by effecting a
closing purchase transaction. This is accomplished by purchasing an option of
the same series as the option previously sold. There can be no assurance that a
closing purchase transaction can be effected when the Master Portfolio so
desires.
The purchaser of an option risks a total loss of the premium paid for the
option if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unrecognized but
foregoes any capital appreciation in excess of the exercise price in the case of
a call option and may be required to pay a price in excess of current market
value in the case of a put option. Options
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purchased and sold other than on an exchange in private transactions also impose
on the Master Portfolio the credit risk that the counterparty will fail to honor
its obligations. All investments by the Master Portfolio in off-exchange options
will be treated as "illiquid" and will therefore be subject to the Master
Portfolio's policy of not investing more than 15% of its net assets in illiquid
securities. The Master Portfolio will establish a segregated account with its
Custodian in which it will maintain liquid assets in an amount at least equal in
value to the Master Portfolio's commitments under off-exchange options.
WARRANTS
The Master Portfolio may invest no more than 5% of its net assets at the
time of purchase in warrants (other than those that have been acquired in units
or attached to other securities) and not more than 2% of its net assets in
warrants which are not listed on the New York or American Stock Exchange.
Warrants represent rights to purchase securities at a specific price valid for a
specific period of time. The prices of warrants do not necessarily correlate
with the prices of the underlying securities. The Master Portfolio may only
purchase warrants on securities in which the Master Portfolio may invest
directly.
REPURCHASE AGREEMENTS
The Master Portfolio may enter into repurchase agreements wherein the
seller of a security to the Master Portfolio agrees to repurchase that security
from the Master Portfolio at a mutually agreed-upon time and price. The period
of maturity is usually quite short, often overnight or a few days, although it
may extend over a number of months. The Master Portfolio may enter into
repurchase agreements only with respect to obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities (including
government-sponsored enterprises) ("U.S. Government obligations") and other
securities that could otherwise be purchased by the Master Portfolio. All
repurchase agreements will be fully collateralized based on values that are
marked to market daily. If the seller defaults and the value of the underlying
securities has declined, the Master Portfolio may incur a loss. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the security,
the Master Portfolio's disposition of the security may be delayed or limited.
The Master Portfolio will only enter into repurchase agreements with registered
broker/dealers and commercial banks that meet guidelines established by the
Board of Directors and are not affiliated with the investment adviser. The
Master Portfolio may also participate in pooled repurchase agreement
transactions with other funds advised by Wells Fargo Bank.
INVESTMENT IN FOREIGN SECURITIES
The Master Portfolio may invest up to 25% of its assets in securities of
foreign governmental issuers that are denominated in and pay interest in U.S.
dollars and may also invest in securities of private issuers that are
denominated in and pay interest in U.S. dollars. These securities may take the
form of American Depositary Receipts ("ADRs") and European Depositary Receipts
("EDRs"). These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs are receipts
typically issued by a United States bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs,
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which are sometimes referred to as Continental Depositary Receipts ("CDRs"), are
receipts issued in Europe typically by non-United States banks and trust
companies that evidence ownership of either foreign or domestic securities.
Generally, ADRs in registered form are designed for use in the United States
securities markets and EDRs and CDRs in bearer form are designed for use in
Europe. Investments in foreign securities involve certain considerations that
are not typically associated with investing in domestic securities. There may be
less publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not generally subject to the same accounting,
auditing and financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain foreign countries,
interest may be withheld at the source under foreign income tax laws, and there
is a possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments that could adversely affect investments
in, the liquidity of, and the ability to enforce contractual obligations with
respect to, securities of issuers located in those countries.
MONEY MARKET INSTRUMENTS
The Master Portfolio may invest in the following types of money market
instruments that have remaining maturities not exceeding one year: (i) U.S.
Government obligations; (ii) negotiable certificates of deposit, bankers'
acceptances and fixed time deposits and other obligations of domestic banks
(including foreign branches) that have more than $1 billion in total assets at
the time of investment and are members of the Federal Reserve System or are
examined by the Comptroller of the Currency or whose deposits are insured by the
FDIC; and (iii) commercial paper rated at the date of purchase "P-1" by Moody's
or "A-1" or "A-1+" by S&P. The Master Portfolio also may invest in short-term
U.S. dollar-denominated obligations of foreign banks (including U.S. branches)
that at the time of investment: (i) have more than $10 billion, or the
equivalent in other currencies, in total assets; (ii) are among the 75 largest
foreign banks in the world as determined on the basis of assets; and (iii) have
branches or agencies in the United States.
OTHER INVESTMENT COMPANIES
The Master Portfolio may invest in shares of other open-end, management
investment companies, subject to the limitations of Section 12(d)(1) of the
Investment Company Act of 1940 (the "1940 Act"), and provided that (i) any such
purchases will be limited to temporary investments in shares of unaffiliated
investment companies and (ii) the investment adviser will waive its advisory
fees for that portion of the Master Portfolio's assets so invested, except when
such purchase is part of a plan of merger, consolidation, reorganization or
acquisition. Subject to the limitations of the 1940 Act, the Master Portfolio
may purchase shares of exchange-listed closed-end funds consistent with pursuing
its investment objective. The Master Portfolio does not intend to invest more
than 5% of its net assets in such securities during the coming year.
Notwithstanding any other investment policy or limitation (whether or not
fundamental), as a matter of fundamental policy, the Fund may invest all of its
assets in the securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies and
limitations as the Fund. A decision to so invest all of its assets may,
depending on the circumstances applicable at the time, require the approval of
shareholders.
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The investment objective of the Master Portfolio and the Fund, as set forth
in the second paragraph under the heading "Investment Objectives and Policies"
is fundamental; that is, the investment objective may not be changed without
approval by the vote of the holders of a majority of the outstanding voting
securities of the Master Portfolio or the Fund, as applicable, and, as described
under "Capital Stock" in the SAI. If the Trust's Board of Trustees determines,
however, that the Master Portfolio's investment objective can best be achieved
by a substantive change in a non-fundamental investment policy or strategy, the
Trust may make such change without shareholder approval, and the Company will
disclose any such material changes in the then current prospectus.
In addition, as matters of fundamental policy, the Master Portfolio may:
(i) not purchase securities of any issuer (except U.S. Government obligations)
if as a result, with respect to 75% of the Master Portfolio's assets, more than
5% of the value of the Master Portfolio's total assets would be invested in the
securities of such issuer or the Master Portfolio would own more than 10% of the
outstanding voting securities of such issuer; (ii) borrow from banks up to 10%
of the current value of its net assets for temporary purposes only in order to
meet redemptions, and these borrowings may be secured by the pledge of up to 10%
of the current value of its net assets (but investments may not be purchased
while any such outstanding borrowings exceed 5% of its net assets); (iii) make
loans of portfolio securities in accordance with its investment policies; and
(iv) not invest 25% or more of its assets (i.e., concentrate) in any particular
industry, except that the Master Portfolio may invest 25% or more of its assets
in U.S. Government obligations. With respect to fundamental investment policy
(iii) above, the Master Portfolio does not intend to make loans of its portfolio
securities during the coming year.
As a matter of non-fundamental policy, the Master Portfolio may invest up
to 15% of the current value of its net assets in illiquid securities. For this
purpose, illiquid securities include, among others, (a) securities that are
illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions on resale, (b) fixed time deposits that are subject to
withdrawal penalties and that have maturities of more than seven days, and (c)
repurchase agreements not terminable within seven days. Disposing of illiquid or
restricted securities may involve additional costs and require additional time.
MANAGEMENT OF THE FUND AND THE MASTER PORTFOLIO
The Company has retained the services of Stephens as administrator and
distributor for the Fund but has not retained the services of an investment
adviser for the Fund since the Company seeks to achieve the investment objective
of the Fund by investing all of the Fund's assets in the Master Portfolio of the
Trust. The Company's Board of Directors supervises the actions of the Fund's
administrator and distributor, as set forth below, and decides upon matters of
general policy. As noted above, the Fund may withdraw its investment in the
Master Portfolio only if the Board of Directors of the Company determines that
it is in the best interests of the Fund and its shareholders to do so. Upon any
such withdrawal, the Board of Directors of the Company would consider what
action might be taken, including the investment of all the assets of the Fund in
another pooled investment entity having the same investment objective as the
Fund or the hiring of an investment
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adviser to manage the Fund's assets in accordance with the investment policies
described above with respect to the Master Portfolio.
The Master Portfolio has retained the services of Wells Fargo Bank as
investment adviser and Stephens as administrator and distributor. The Board of
Trustees of the Trust is responsible for the general management of the Master
Portfolio and supervising the actions of Wells Fargo Bank and Stephens in these
capacities. Additional information regarding the Officers and Directors of the
Company and the Officers and Trustees of the Trust is included in the Fund's SAI
under "Management."
MASTER/FEEDER STRUCTURE
The Fund, a series of the Company which is an open-end management
investment company, invests all of its assets in the Master Portfolio of the
Trust which has the same investment objective as the Fund. See "Investment
Objective and Policies" for a description of the Fund's and Master Portfolio's
objectives and policies and "Management of the Fund and the Master Portfolio"
for a description of the Fund's and Master Portfolio's management. The Trust is
organized as a trust under the laws of the State of Delaware. See "Organization
and Capital Stock." In addition to selling its interests to the Fund, the Master
Portfolio may sell its interests to other mutual funds or accredited investors.
The expenses and, correspondingly, the returns of other investment options in
the Master Portfolio may differ from those of the Fund. Additional information
regarding the Fund's and the Master Portfolio's expenses is included under the
heading "Summary of Expenses."
The Board of Directors believes that, if other mutual funds or accredited
investors invest their assets in the Master Portfolio, certain economic
efficiencies may be realized with respect to the Master Portfolio. For example,
fixed expenses that otherwise would have been borne solely by the Fund would be
spread among a larger asset base provided by more than one fund investing in the
Master Portfolio. The Fund and other entities investing in the Master Portfolio
are each liable for all obligations of the Master Portfolio. However, the risk
of the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Trust itself is
unable to meet its obligations. Accordingly, the Company's Board of Directors
believes that the Fund and its shareholders will not be adversely affected by
investing Fund assets in the Master Portfolio. However, if a mutual fund or
other investor withdraws its investment from the Master Portfolio, the economic
efficiencies (e.g., spreading fixed expenses among a larger asset base) that the
Company's Board believes should be available through investment in the Master
Portfolio may not be fully achieved. In addition, given the relative novelty of
the master/feeder structure, accounting or operational difficulties, although
unlikely, could arise.
The investment objective and other fundamental policies of the Master
Portfolio cannot be changed without approval by the holders of a majority (as
defined in the 1940 Act) of the Master Portfolio's outstanding interests. See
"Investment Objectives and Policies." Whenever the Fund, as an interestholder of
the Master Portfolio is requested to vote on any matter submitted to
interestholders of the Master Portfolio, the Fund will hold a meeting of its
shareholders to consider such matters. The Fund will cast its votes in
proportion to the votes received from its shareholders. Shares for which the
Fund receives no voting instructions will be voted in the same proportion as the
votes received from the other Fund shareholders.
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Certain policies of the Master Portfolio which are non-fundamental may be
changed by vote of a majority of the Trust's Trustees without interestholder
approval. If the Master Portfolio's investment objective or fundamental or
nonfundamental policies are changed, the Fund may elect to change its objective
or policies to correspond to those of the Master Portfolio. The Fund may also
elect to redeem its interests in the Master Portfolio and either seek a new
investment company with a matching objective in which to invest or retain its
own investment adviser to manage the Fund's portfolio in accordance with its
objective. In the latter case, the Fund's inability to find a substitute
investment company in which to invest or equivalent management services could
adversely affect shareholders' investments in the Fund. The Fund will provide
shareholders with 30 days' written notice prior to the implementation of any
change in the investment objective of the Fund or the Master Portfolio, to the
extent possible. Information regarding additional options, if any, for
investment in the Master Portfolio is available from Stephens and may be
obtained by calling (800) 643-9691.
INVESTMENT ADVISER
Pursuant to an Investment Advisory Contract, the Master Portfolio is
advised by Wells Fargo Bank, 420 Montgomery Street, San Francisco, California
94105, a wholly owned subsidiary of Wells Fargo & Company. Wells Fargo Bank, one
of the largest banks in the United States, was founded in 1852 and is the oldest
bank in the western United States. As of December 31, 1995, various divisions of
Wells Fargo Bank managed more than $33 billion of assets of individuals, trusts,
estates and institutions. Wells Fargo Bank is the investment adviser to the
other separately managed series of the Company (other than those structured as
"feeder funds"), and acts as adviser or sub-adviser to six other registered
open-end management investment companies, each of which consists of several
separately managed investment portfolios.
Under the Investment Advisory Contract with the Master Portfolio, Wells
Fargo Bank has agreed to furnish to the Master Portfolio investment guidance and
policy direction in connection with the daily portfolio management of the Master
Portfolio. Pursuant to the Investment Advisory Contract, Wells Fargo Bank also
furnishes to the Board of Directors periodic reports on the investment strategy
and performance of the Master Portfolio.
Purchase and sale orders of the securities held by the Master Portfolio may
be combined with those of other accounts that Wells Fargo Bank manages, and for
which it has brokerage placement authority, in the interest of seeking the most
favorable overall net results. When Wells Fargo Bank determines that a
particular security should be bought or sold for the Master Portfolio and other
accounts managed by Wells Fargo Bank, Wells Fargo Bank undertakes to allocate
those transactions among the participants equitably. From time to time, the
Master Portfolio, to the extent consistent with its investment objective,
policies and restrictions, may invest in securities of companies with which
Wells Fargo Bank has a lending relationship.
For its services under the Investment Advisory Contract, Wells Fargo Bank
is entitled to a monthly advisory fee at the annual rate of 0.50% of the average
daily net assets of the Master Portfolio. From time to time Wells Fargo Bank may
waive such fees in whole or in part. Any waiver would reduce expenses of the
Master Portfolio and, accordingly, have a favorable impact on the yield or
return of the Master Portfolio and, in turn, the Fund. Prior to the Fund's
conversion to master/feeder structure, Wells Fargo Bank was entitled to receive
0.50% of the average daily net
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assets of the Fund as compensation for its services as investment adviser. For
the year ended December 31, 1995, Wells Fargo Bank was paid 0.50% of the average
daily net assets of the Fund as compensation for its services as investment
adviser.
Mr. Jon Hickman is primarily responsible for the day-to-day management of
the Capital Appreciation Master Portfolio and has performed such duties since
the inception of the Strategic Growth Fund, the Predecessor Fund to the Capital
Appreciation Master Portfolio. In addition, he also manages equity and balanced
portfolios for individuals and employee benefit plans. He has approximately ten
years of experience in the investment management field and is a member of Wells
Fargo's Equity Strategy Committee. Mr. Hickman has a B.A. and an M.B.A. in
finance from Brigham Young University and has been with Wells Fargo Bank since
the merger with Crocker National Bank in 1986.
Mr. Robert Bissell is also primarily responsible for the day-to-day
management of the Capital Appreciation Master Portfolio and has performed such
duties since the inception of the Strategic Growth Fund. Mr. Bissell joined
Wells Fargo Bank at the time of the merger with Crocker Bank and has been with
the combined organization for over 20 years. Prior to joining Wells Fargo Bank,
he was a vice president and investment counselor with M.H. Edie Investment
Counseling, where he managed institutional and high-net-worth portfolios. Mr.
Bissell holds a finance degree from the University of Virginia. He is a
chartered financial analyst and a member of the Los Angeles Society of Financial
Analysts.
Mr. Steve Enos assists Mr. Jon Hickman and Mr. Robert Bissell with the
management of the Capital Appreciation Master Portfolio. Mr. Enos is a member of
the Wells Fargo Growth Equity Team. He began his career with First Interstate
Bank, where he was assistant vice president and portfolio manager. Prior to
joining Wells Fargo Bank, he was a principal at Dolan Capital Management where
he managed both personal and pension portfolios. Mr. Enos received his
undergraduate degree in economics from the University of California at Davis.
Mr. Enos is a Chartered Financial Analyst and a member of the Association for
Investment Management and Research.
Ms. Sandra Thornton also assists Jon Hickman and Robert Bissell with the
management of the Capital Appreciation Master Portfolio. Ms. Thornton manages
equity portfolios and is a member of the Wells Fargo Growth Equity Team. Prior
to joining Wells Fargo in 1993, she worked in the research department of RCM
Capital Management. She obtained her license as a Certified Public Accountant
from the State of California while performing tax/financial planning services at
Price Waterhouse. She holds a B.A. from Albertus Magnus College and is a
Chartered Financial Analyst.
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Stephens, 111 Center Street, Little Rock, Arkansas 72201, has entered into
agreements with the Company and the Trust under which Stephens acts as
administrator for the Fund and the Master Portfolio. For these administrative
services, Stephens is entitled to receive from the Fund a monthly fee at the
annual rate of 0.15% of its average daily net assets; decreasing to 0.10% of the
average daily net assets of the Fund in excess of $200 million. From time to
time, Stephens may waive fees from the Fund in whole or in part. Any such waiver
will reduce expenses of the Fund and, accordingly, have a favorable impact on
the yield or return of the Fund. Under the agreement with the Trust, Stephens is
not entitled to receive a fee for providing administrative services to the
Master
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Portfolio so long as Stephens is entitled to be compensated for providing
administrative services to another mutual fund that invests all of its assets in
the Master Portfolio.
Under the respective Administration Agreements with the Fund and the Master
Portfolio, Stephens has agreed to provide as administrative services, among
other things, (i) general supervision of the operation of the Fund and the
Master Portfolio, including coordination of the services performed by the
various service providers, including the investment adviser (for the Master
Portfolio), transfer agent, custodian, independent auditors and legal counsel;
(ii) in connection with regulatory compliance, compilation of information for
documents such as reports to, and filings with, the SEC and state securities
commissions, and the preparation of proxy statements and shareholder reports for
the Fund and the Master Portfolio; and (iii) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Company's officers and Board of Directors and the Trust's Board of
Trustees. Stephens also furnishes office space and certain facilities required
for conducting the business of the Fund and the Master Portfolio and pays the
compensation of the directors, officers and employees of the Company and the
Trust who are affiliated with Stephens.
Stephens, as the principal underwriter of the Fund within the meaning of
the 1940 Act, has also entered into a Distribution Agreement with the Company
pursuant to which Stephens has the responsibility for distributing Class A
Shares and Class D Shares of the Fund. The Distribution Agreement provides that
Stephens shall act as agent for the Fund for the sale of its Class A Shares and
Class D Shares and may enter into selling agreements with broker/dealers or
financial institutions to market and make available Class A Shares and Class D
Shares to their respective customers.
Under the Distribution Agreement, Stephens is entitled to receive from the
Fund a monthly fee at an annual rate of up to 0.25% of the average daily net
assets of the Class A Shares of the Fund and a monthly fee at an annual rate of
up to 0.75% of the average daily net assets of the Class D Shares of the Fund.
The actual fee payable to Stephens is determined, within such limits, from time
to time by mutual agreement between the Company and Stephens, and may not exceed
the maximum amount payable under the Rules of Fair Practice of the NASD.
Stephens may enter into selling agreements with one or more selling agents under
which such agents may receive from Stephens compensation for sales support
services. Such compensation may include, but is not limited to, commissions or
other payments to such agents based on the average daily net assets of Fund
shares attributable to them. Services provided by selling agents in exchange for
commissions and other payments to selling agents are the principal sales support
services provided to the Fund. Stephens may retain any portion of the total
distribution fee payable under the Distribution Agreement to compensate it for
distribution-related services provided by it or to reimburse it for other
distribution-related expenses. Since the Distribution Agreement provides for
fees that are used by Stephens to pay for distribution services, a plan of
distribution for each class of shares (individually a "Plan," collectively the
"Plans") and the Distribution Agreement are approved and reviewed in accordance
with Rule 12b-1 under the 1940 Act, which regulates the manner in which an
investment company may, directly or indirectly, bear the expense of distributing
its shares. See Prospectus section captioned "Distribution Plans" for a more
complete description of the Plans.
Stephens serves as placement agent for the Master Portfolio for which it is
not compensated. Stephens is a full service broker/dealer and investment
advisory firm. Stephens and its predecessor
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have been providing securities and investment services for more than 60 years.
Additionally, they have been providing discretionary portfolio management
services since 1983. Stephens currently manages investment portfolios for
pension and profit sharing plans, individual investors, foundations, insurance
companies and university endowments.
SERVICING AGENTS
The Fund may enter into servicing agreements with one or more servicing
agents on behalf of Class D Shares of the Fund. Under such agreements, servicing
agents provide shareholder liaison services, which may include responding to
customer inquiries and providing information on shareholder investments, and
provide such other related services as the Fund or a Class D shareholder may
reasonably request. For these services, a servicing agent receives a fee which
will not exceed, on an annualized basis for the Fund's then current fiscal year,
0.25% of the average daily net assets of the Class D Shares of the Fund
represented by Class D Shares owned by investors with whom the servicing agent
maintains a servicing relationship, or an amount which equals the maximum amount
payable to the servicing agent under applicable laws, regulations or rules,
whichever is less.
FUND EXPENSES
The Master Portfolio's Investment Advisory Contract and the Administration
Agreements with the Master Portfolio and the Fund provide that, if in any fiscal
year, the total aggregate expenses of the Master Portfolio and the Fund incurred
by, or allocated to, the Master Portfolio and the Fund (excluding taxes,
interest, brokerage commissions and other portfolio transaction expenses,
expenditures that are capitalized in accordance with generally accepted
accounting principles, extraordinary expenses and amounts accrued or paid under
a Plan) exceed the most restrictive expense limitation applicable to a Fund
imposed by the securities laws or regulations of the states in which the Fund's
shares are registered for sale, Wells Fargo Bank and Stephens shall waive their
fees proportionately under the Investment Advisory Contract and the
Administration Agreements, respectively, for the fiscal year to the extent of
the excess, or reimburse the excess, but only to the extent of their respective
fees. The Investment Advisory Contract and the Administration Agreements further
provide that the total expenses shall be reviewed monthly so that, to the extent
the annualized expenses for such month exceed the most restrictive applicable
annual expense limitation, the monthly fees under the Investment Advisory
Contract and the Administration Agreements shall be reduced as necessary.
Currently, the most stringent applicable state expense ratio limitation is 2.50%
of the first $30 million of the Fund's average net assets for its current fiscal
year, 2% of the next $70 million of such assets, and 1.50% of such assets in
excess of $100 million.
Except for the expenses borne by Wells Fargo Bank and Stephens, the Company
and the Trust bear all costs of their respective operations, including the
compensation of the Company's directors and the Trust's trustees who are not
officers or employees of Wells Fargo Bank or Stephens or any of their
affiliates; advisory (in the case of the Master Portfolio), shareholder
servicing (in the case of the Fund), and administration fees; payments pursuant
to any Plans (in the case of the Fund); interest charges; taxes; fees and
expenses of independent auditors; legal counsel, transfer agent and dividend
disbursing agent; expenses of redeeming Fund shares or interests in the Master
Portfolio; expenses of preparing and printing prospectuses (except the expense
of printing and mailing
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<PAGE> 25
prospectuses used for promotional purposes, unless otherwise payable pursuant to
a Plan), shareholders' or investors' reports, notices, proxy statements and
reports to regulatory agencies; insurance premiums and certain expenses relating
to insurance coverage; trade association membership dues; brokerage and other
expenses connected with the execution of portfolio transactions; fees and
expenses of the custodian, including those of keeping books and accounts and
calculating the net asset value of the Fund and the Master Portfolio; expenses
of shareholders' or investors' meetings; expenses relating to the issuance,
registration and qualification of shares of the Fund; pricing services;
organizational expenses; and any extraordinary expenses. Expenses attributable
to the Fund and/or the Master Portfolio are charged against the respective
assets of the Fund and/or the Master Portfolio. A pro rata portion of the
expenses of the Company or Trust are charged against the assets of the Fund or
Master Portfolio as applicable.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for the Fund is determined by Wells Fargo Bank on
each day that the Exchange is open for trading as of the close of regular
trading on the Exchange (referred to hereafter as the "close of the Exchange"),
which is currently 4:00 p.m. New York time. The net asset value of a share of a
class of a Fund is the value of total net assets attributable to each class
divided by the number of outstanding shares of that class. The value of net
assets per class is determined daily by adjusting the net assets per class at
the beginning of the day by the value of each class's shareholder activity, net
investment income and net realized and unrealized gains or losses for that day.
Net investment income is calculated each day for each class by attributing to
each class a pro rata share of daily income and common expenses, and by
assigning class-specific expenses to each class as appropriate. The net asset
value of each class is expected to fluctuate daily and is based on the net asset
value of the Capital Appreciation Master Portfolio in which the Fund invests.
The value of the assets of the Master Portfolio (other than debt
obligations maturing in 60 days or less) is determined as of the close of the
Exchange, which is currently 4:00 p.m. New York time. Except for debt
obligations with remaining maturities of 60 days or less, which are valued at
amortized cost, assets are valued at current market prices or, if such prices
are not readily available, at fair value as determined in good faith by the
Board of Trustees. Prices used for such valuations may be provided by
independent pricing services.
PERFORMANCE DATA
From time to time, the Company may advertise various total return
information with respect to a class of shares of the Fund. Total return
information is based on the historical earnings and performance of such class of
shares of the Fund and should not be considered representative of future
performance.
The total return of a class of shares of the Fund is calculated by
subtracting (i) the public offering price of the class of shares (which includes
the maximum sales charge for the class of shares) of one share at the beginning
of the period, from (ii) the net asset value of all shares of a class of shares
an investor would own at the end of the period for the share held at the
beginning of the period (assuming reinvestment of all dividends and capital gain
distributions), and dividing by (iii) the public offering price per share of a
class of shares at the beginning of the period. The
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<PAGE> 26
resulting percentage indicates the positive or negative rate of return that an
investor would have earned from reinvested dividends and capital gain
distributions and changes in share price during the period for the class of
shares. The Fund may also, at times, calculate total return of a class of shares
based on net asset value per share of a class of shares (rather than the public
offering price), in which case the figures would not reflect the effect of any
sales charges that would have been paid by an investor in the class of shares,
or by assuming that a sales charge other than the maximum sales charge
(reflecting the Volume Discounts set forth below) is assessed, provided that
total return data derived pursuant to the calculation described above are also
presented.
Because of differences in the fees and/or expenses borne by Class D Shares
of the Fund, the total return on such shares can be expected, at any given time,
to differ from the total return on Class A Shares. Performance information will
be computed separately for Class A Shares and Class D Shares. Additional
information about the performance of the Fund is contained in the Annual Report
for the Fund. The Annual Report may be obtained free of charge by calling the
Company at 800-552-9612.
PURCHASE OF SHARES
Shares of the Fund may be purchased on any day the Exchange is open for
trading through Stephens, the Transfer Agent, or any authorized broker/dealers
or financial institutions with which Stephens has entered into agreements. Such
broker/dealers or financial institutions are responsible for the prompt
transmission of purchase, exchange or redemption orders, and may independently
establish and charge additional fees to their clients for such services, other
than services related to purchase orders, which would reduce the clients'
overall yield or return. The Exchange is closed on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day (each, a "Holiday"). When any Holiday falls on a Saturday, the
Exchange usually is closed the preceding Friday, and when any Holiday falls on a
Sunday, the Exchange is closed the following Monday.
In most cases, the minimum initial purchase amount for the Fund is $1,000.
The minimum initial purchase amount is $100 for purchases through the Systematic
Purchase Plan and $250 for purchases through a retirement plan qualified under
the Internal Revenue Code of 1986, as amended (the "Code"). The minimum
subsequent purchase amount is $100. The minimum initial or subsequent purchase
amount requirements may be waived or lowered for investments effected on a group
basis by certain entities and their employees, such as pursuant to a payroll
deduction or other accumulation plan. The Company reserves the right to reject
any purchase order. All funds, net of sales loads, will be invested in full and
fractional shares. Checks will be accepted for the purchase of the Fund's
shares, subject to collection at full face value in U.S. dollars. Inquiries may
be directed to the Company at the telephone number on the front cover of the
Prospectus.
Shares of the Fund are offered continuously at the applicable offering
price (including any sales load) next determined after a purchase order is
received. Payment for shares purchased through a broker/dealer will not be due
from the broker/dealer until the settlement date, three business days after the
order is placed. It is the broker/dealer's responsibility to forward payment for
shares being purchased to the Fund promptly. Payment for orders placed directly
through the Transfer Agent must accompany the order.
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<PAGE> 27
------------------------
When payment for shares of the Fund through the Transfer Agent is by a
check that is drawn on any member bank of the Federal Reserve System, federal
funds normally become available to the Fund on the business day after the day
the check is deposited. Checks drawn on a non-member bank or a foreign bank may
take substantially longer to be converted into federal funds and, accordingly,
may delay execution of an order.
When shares of the Fund are purchased through a broker/dealer or financial
institution, Stephens reallows that portion of the sales load designated below
as the Dealer Allowance. Stephens has established a non-cash compensation
program, pursuant to which broker/dealers or financial institutions that sell
shares of the Fund may earn additional compensation in the form of trips to
sales seminars or vacation destinations, tickets to sporting events, theater or
other entertainment, opportunities to participate in golf or other outings and
gift certificates for meals or merchandise. If all sales charges are paid or
reallowed to a broker/dealer or financial institution, it may be deemed an
"underwriter" under the Securities Act of 1933. When shares are purchased
directly through the Transfer Agent and no broker/dealer or financial
institution is involved with the purchase, the entire sales load is paid to
Stephens.
Sales loads relating to orders for the purchase of Class A Shares in the
Fund are as follows:
<TABLE>
<CAPTION>
DEALER
SALES LOAD SALES LOAD ALLOWANCE
CLASS A SHARES AS % OF AS % OF NET AS % OF
- ------------------------------------------------------------ OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ------------------------------------------------------------ ---------- ----------- ---------
<S> <C> <C> <C>
Less than $100,000.......................................... 4.50% 4.71% 4.05%
$100,000 up to $199,999..................................... 4.00 4.17 3.60
$200,000 up to $399,999..................................... 3.50 3.63 3.15
$400,000 up to $599,999..................................... 2.50 2.56 2.25
$600,000 up to $799,999..................................... 2.00 2.04 1.80
$800,000 up to $999,999..................................... 1.00 1.01 0.90
$1,000,000 up to $2,499,999................................. 0.60 0.60 0.50
$2,500,000 up to $4,999,999................................. 0.40 0.40 0.40
$5,000,000 up to $8,999,999................................. 0.25 0.25 0.25
$9,000,000 and over......................................... 0.00 0.00 0.00
</TABLE>
Class D Shares are not subject to a front-end sales load. However, Class D
Shares which are redeemed within one year from the receipt of a purchase order
will be subject to a contingent deferred sales charge equal to 1% of the dollar
amount equal to the lesser of the net asset value at the time of purchase of the
shares being redeemed or the net asset value of such shares at the time of
redemption.
A selling agent or servicing agent and any other person entitled to receive
compensation for selling or servicing shares may receive different compensation
for selling or servicing Class A Shares as compared with Class D Shares.
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<PAGE> 28
REDUCED SALES CHARGE -- CLASS A SHARES
The above Volume Discounts are available to you based on the combined
dollar amount being invested in Class A Shares of the Fund or of Class A Shares
of one or more of the other portfolios of the Company which assess a sales load
(the "Load Funds"). Because Class D Shares are not subject to a front-end sales
charge, the amount of Class D Shares you hold is not considered in determining
any volume discount.
The Right of Accumulation allows you to combine the amount being invested
in Class A Shares of the Fund with the total net asset value of Class A Shares
in any of the Load Funds already owned in accordance with the above sales load
schedule to reduce the sales load. For example, if you own Class A Shares of the
Load Funds with an aggregate net asset value of $90,000 and invest an additional
$20,000 in the Class A Shares of the Fund, the sales load on the entire
additional amount would be 4.00% of the offering price. To obtain such discount,
you must provide sufficient information at the time of purchase to permit
verification that the purchase qualifies for the reduced sales load, and
confirmation of the order is subject to such verification. The Right of
Accumulation may be modified or discontinued at any time with respect to all
Class A Shares purchased thereafter.
A Letter of Intent allows you to purchase Class A Shares of the Fund over a
13-month period at reduced sales loads based on the total amount intended to be
purchased plus the total net asset value of Class A Shares in any of the Load
Funds already owned. Each investment made during the period receives the reduced
sales load applicable to the total amount of the intended investment. If such
amount is not invested within the period, you must pay the difference between
the sales loads applicable to the purchases made and the charges previously
paid.
You may Reinvest proceeds from a redemption of Class A Shares of the Fund
in the Class A Shares of the Fund or in Class A Shares of another of the
Company's investment portfolios that offers Class A Shares at net asset value,
without a sales load, within 120 days after such redemption. However, if the
other investment portfolio charges a sales load that is higher than the sales
load you have paid in connection with the Class A Shares you have redeemed, you
pay the difference. In addition, the Class A Shares of the other investment
portfolio to be acquired must be registered for sale in your state of residence.
The amount that may be so reinvested may not exceed the amount of the redemption
proceeds, and a written order for the purchase of the Class A Shares must be
received by the Fund or the Transfer Agent within 120 days after the effective
date of the redemption.
If you realized a gain on your redemption, the reinvestment will not alter
the amount of any federal capital gains tax payable on the gain. If you realized
a loss on your redemption, the reinvestment may cause some or all of such loss
on the redemption to be disallowed as a tax deduction, depending on the number
of Class A Shares purchased by reinvestment and the period of time that has
elapsed after the redemption, although for tax purposes, the amount disallowed
is added to the cost of the Class A Shares acquired upon the reinvestment.
Reductions in front-end sales loads apply to purchases by a single
"person," including an individual, members of a family unit, consisting of a
husband, wife, and children under the age of 21 purchasing securities for their
own account, or a trustee or other fiduciary purchasing for a single fiduciary
account or single trust estate.
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<PAGE> 29
Reductions in front-end sales loads also apply to purchases by individual
members of a "qualified group." The reductions are based on the aggregate dollar
amount of Class A Shares purchased by all members of the qualified group. For
purposes of this paragraph, a qualified group consists of a "company," as
defined in the 1940 Act, which has been in existence for more than six months
and which has a primary purpose other than acquiring shares of the Fund at a
reduced sales load, and the "related parties" of such company. For purposes of
this paragraph, a "related party" of a company is: (i) any individual or other
company who directly or indirectly owns, controls or has the power to vote five
percent or more of the outstanding voting securities of such company; (ii) any
other company of which such company directly or indirectly owns, controls or has
the power to vote five percent or more of its outstanding voting securities;
(iii) any other company under common control with such company; (iv) any
executive officer, director or partner of such company or of a related party;
and (v) any partnership of which such company is a partner.
Purchases may be made at net asset value, without a front-end sales charge,
to the extent that you are investing proceeds from a redemption of shares of
another open-end investment company for which you paid a front-end sales load
and such redemption occurred within thirty (30) days prior to the date of the
purchase order. You must notify the Fund and/or the transfer agent at the time
you place such purchase order of your eligibility for the waiver of front-end
sales charges and provide satisfactory evidence thereof (e.g., a confirmation of
the redemption and the load paid). Such purchases may not be made at net asset
value to the extent the proceeds are from a redemption of shares of another
open-end investment company that is affiliated with the Company on which you
paid a contingent deferred sales charge upon redemption.
Class A Shares of the Fund may be purchased at net asset value, without a
sales load, by Directors, officers and employees (and their spouses and children
under the age of 21) of the Company, Stephens, its affiliates and other
broker/dealers that have entered into agreements with Stephens to sell such
shares. Class A Shares of the Fund also may be purchased at a purchase price
equal to the net asset value of such shares, without a sales load, by present
and retired Directors, officers and employees (and their spouses and children
under the age of 21) of Wells Fargo Bank and its affiliates if Wells Fargo Bank
and/or the respective affiliates agree. Such shares also may be purchased at
such price by employee benefit and thrift plans for such persons and by any
investment advisory, trust or other fiduciary account (other than an individual
retirement account) that is maintained, managed or advised by Wells Fargo Bank
or Stephens or their affiliates. In addition, Class A Shares may be purchased at
net asset value by pension, profit sharing or other employee benefit plans
established under Section 401 of the Code.
Class A Shares of the Fund may be purchased at net asset value (without
payment of a sales load) by the following types of investors when the trades are
placed through an omnibus account maintained with the Fund by a broker/dealer:
trust companies; investment advisers and financial planners who charge a
management, consulting or other fee for their services and who place trades on
their own behalf or on behalf of their clients; and clients of such investment
advisers or financial planners who place trades on their own behalf if the
clients' accounts are linked to the master account of such investment adviser or
financial planner on the books and records of the broker/dealer.
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<PAGE> 30
By investing in the Fund, a shareholder appoints the Transfer Agent, as
agent, to establish an open account to which all shares purchased will be
credited, together with any dividends and capital gain distributions that are
paid in additional shares. See "Dividends and Distributions." Although most
shareholders elect not to receive stock certificates, certificates for full
shares of the Fund can be obtained on request. It is more complicated to redeem
shares held in certificated form, and the expedited redemption described below
is not available with respect to certificated shares.
CONTINGENT DEFERRED SALES CHARGE -- CLASS D SHARES
Class D Shares which are redeemed within one year of the receipt of a
purchase order for such shares will be subject to a contingent deferred sales
charge equal to 1.00% of an amount equal to the lesser of the net asset value at
the time of purchase for the Class D Shares being redeemed or the net asset
value of such shares at the time of redemption. Accordingly, a contingent
deferred sales charge will not be imposed on amounts representing increases in
net asset value above the net asset value at the time of purchase. In addition a
charge will not be assessed on Class D Shares purchased through reinvestment of
dividends or capital gains distributions. In determining whether a contingent
deferred sales charge is applicable to a redemption, Class D Shares are
considered redeemed on a first-in, first-out basis so that Class D Shares held
for a longer period of time are considered redeemed prior to more recently
acquired shares.
The contingent deferred sales charge is waived on redemptions of Class D
Shares (i) following the death or disability (as defined in the Code) of a
shareholder, (ii) to the extent that the redemption represents a minimum
required distribution from an individual retirement account or other retirement
plan to a shareholder who has reached age 70 1/2, (iii) effected pursuant to the
Company's right to liquidate a shareholder's account if the aggregate net asset
value of the shareholder's account is less than the minimum account size, or
(iv) in connection with the combination of the Company with any other registered
investment company by a merger, acquisition of assets, or by any other
reorganization transaction.
Investors who are entitled to purchase Class A Shares of the Fund at net
asset value without a sales load should not purchase Class D Shares. Other
investors, including those who are entitled to purchase Class A Shares of the
Fund at a reduced sales load, should compare the fees assessed on Class A Shares
against those assessed on Class D Shares (including potential contingent
deferred sales charges and higher Rule 12b-1 Fees) in light of the amount to be
invested and the anticipated time that the shares will be owned.
Shares of the Fund may be purchased by any of the methods described below.
INITIAL PURCHASE OF FUND SHARES BY WIRE
1. Telephone toll free (800) 572-7797. Give the name of the Fund, the class
of shares to be purchased, the name(s) in which the shares are to be registered,
the address, social security or tax identification number (where applicable) of
the person or entity in whose name(s) the shares are to be registered, dividend
payment election, amount to be wired, name of the wiring bank and name and
telephone number of the person to be contacted in connection with the order. An
account number will be assigned.
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<PAGE> 31
2. Instruct the wiring bank, which may charge a separate fee, to transmit
the specified amount in federal funds ($1,000 or more) to:
Wells Fargo Bank, N.A.
San Francisco, California
Bank Routing Number: 121000248
Wire Purchase Account Number: 4068-000462
Attention: Overland Express Strategic Growth Fund (designate Class A
or D)
Account Name(s): (name(s) in which to be registered)
Account Number: (as assigned by telephone)
3. A completed Account Application should be mailed, or sent by
telefacsimile with the original subsequently mailed, to the following address
immediately after the funds are wired and must be received and accepted by the
Transfer Agent before an account can be opened:
Wells Fargo Bank, N.A.
Overland Express Shareholder Services
P.O. Box 63084
San Francisco, California 94105
Telefacsimile: 1-415-781-4082
4. Share purchases are effected at the public offering price, or, in the
case of Class D Shares, at the net asset value, next determined after the
Account Application is received and accepted.
INITIAL PURCHASE OF FUND SHARES BY MAIL
1. Complete an Account Application. Indicate the services to be used.
2. Mail the Account Application and a check for $1,000 or more, payable to
"Overland Express Strategic Growth Fund (designate Class A or D)" to its mailing
address set forth above.
ADDITIONAL PURCHASES
Additional purchases of $100 or more may be made by instructing the Fund's
Transfer Agent to debit an approved account designated in your Account
Application, by wire by instructing the wiring bank to transmit the specified
amount as directed above for initial purchases, or by mail with a check payable
to "Overland Express Strategic Growth Fund (designate Class A or D)" to the
above address. Write the Fund account number on the check and include the
detachable stub from a Statement of Account or a letter providing the account
number.
SYSTEMATIC PURCHASE PLAN
The Company's Systematic Purchase Plan provides you with a convenient way
to establish and automatically add to your existing accounts on a monthly basis.
If you elect to participate in this plan you must specify an amount ($100 or
more) to be withdrawn automatically by the Transfer Agent on a monthly basis
from a designated bank account (provided your bank is a participant in the
automated clearing house system). The Transfer Agent withdraws and uses this
amount to purchase shares of the Fund on or about the fifth business day of each
month. There are no additional fees charged for participating in this plan.
18
<PAGE> 32
You may change the investment amount, suspend purchases or terminate the
election at any time by providing written notice to the Transfer Agent at least
five business days prior to any scheduled transaction. An election will be
terminated automatically if the designated bank account balance is insufficient
to make a scheduled withdrawal, or if either the designated bank account or your
account is closed.
PURCHASES THROUGH AUTHORIZED BROKER/DEALERS AND FINANCIAL INSTITUTIONS
Purchase orders for shares of the Fund placed through authorized
broker/dealers and financial institutions by the close of the Exchange on any
day that the Fund's shares are offered for sale, including orders for which
payment is to be made from free cash credit balances in securities accounts held
by a dealer, will be effective on the same day the order is placed if received
by the Transfer Agent before the close of business. Purchase orders that are
received by a dealer or financial institution after the close of the Exchange or
by the Transfer Agent after the close of business generally will be effective on
the next day that shares are offered. The broker/dealer or financial institution
is responsible for the prompt transmission of purchase orders to the Transfer
Agent. Payment for Fund shares is not due until settlement date. Broker/dealers
and financial institutions may benefit from temporary use of payments to the
Fund during the settlement period. A broker/dealer or financial institution that
is involved in a purchase transaction may charge separate account, service or
transaction fees. Financial institutions may be required to register as dealers
pursuant to applicable state securities laws, which may differ from federal law
and any interpretations expressed herein.
EXCHANGE PRIVILEGES
You may exchange Class A Shares of the Fund for shares of the same class of
the Company's other investment portfolios or for shares of the California
Tax-Free Money Market Fund, the Money Market Fund, the National Tax-Free
Institutional Money Market Fund or the U.S. Treasury Money Market Fund in an
identically registered account at respective net asset values, provided that, if
the other investment portfolio charges a sales load on the purchase of the class
of shares being exchanged that is higher than the sales load that you have paid
in connection with the shares you are exchanging, you pay the difference. Class
D Shares of the Fund may be exchanged for Class D Shares of one of the Company's
other investment portfolios that offer Class D Shares or for Class A Shares of
the Money Market Fund in an identically registered account at respective net
asset values. You are not charged a contingent deferred sales charge on
exchanges of Class D Shares for shares of the same class of another of the
Company's investment portfolios or for Class A Shares of the Money Market Fund.
If you exchange Class D Shares for shares of the same class of another
investment portfolio, or for Class A Shares of the Money Market Fund, the
remaining period of time (if any) that the contingent deferred sales charge is
in effect will be computed from the time of the initial purchase of the
previously held shares. Accordingly, if you exchange Class D Shares for Class A
Shares of the Money Market Fund, and redeem the shares of the Money Market Fund
within one year of the receipt of the purchase order for the exchanged Class D
Shares, you will have to pay a deferred sales charge equal to the contingent
deferred sales charge applicable to the previously exchanged Class D Shares. If
you exchange Class D Shares of an investment portfolio for Class A Shares of the
Money Market
19
<PAGE> 33
Fund, you may subsequently re-exchange the acquired Class A Shares only for
Class D Shares. If you re-exchange the Class A Shares of the Money Market Fund
for Class D Shares, the remaining period of time (if any) that the contingent
deferred sales charge is in effect will be computed from the time of your
initial purchase of Class D Shares. In addition, shares of the other investment
portfolio to be acquired must be registered for sale in your state of residence.
You should obtain, read and retain the Prospectus for the portfolio which you
desire to exchange into before submitting an exchange order.
You may exchange shares by writing the Transfer Agent as indicated below
under Redemption by Mail, or by calling the Transfer Agent or your authorized
broker/dealer or financial institution or servicing agent, unless you have
elected not to authorize telephone exchanges in the Account Application (in
which case you may subsequently authorize such telephone exchanges by completing
a Telephone Exchange Authorization Form and submitting it to the Transfer Agent
in advance of the first such exchange). Shares held in certificated form may not
be exchanged by telephone. The Transfer Agent's number for exchanges is (800)
572-7797.
Procedures applicable to redemption of the Fund's shares are also
applicable to exchanging shares, except that, with respect to an exchange
transaction between accounts registered in identical names, no signature
guarantee is required unless the amount being exchanged exceeds $25,000. The
Company reserves the right to limit the number of times shares may be exchanged
between investment portfolios, or to reject in whole or in part any exchange
request into a fund when management believes that such action would be in the
best interest of the Fund's other shareholders, such as when management believes
that such action would be appropriate to protect such fund against disruptions
in portfolio management resulting from frequent transactions by those seeking to
time market fluctuations. Any such rejection will be made by management on a
prospective basis only, upon notice to the shareholder given not later than 10
days following such shareholder's most recent exchange. The Company reserves the
right to modify or discontinue exchange privileges at any time. Under SEC rules,
60 days prior notice of any amendments or termination of exchange privileges
will be given to shareholders, except under certain extraordinary circumstances.
A capital gain or loss for tax purposes may be realized upon an exchange,
depending upon the cost or other basis of shares redeemed.
Telephone redemption or exchange privileges are made available to you
automatically upon opening an account, unless you decline such privileges. These
privileges authorize the Transfer Agent to act on telephone instructions from
any person representing himself or herself to be the investor and reasonably
believed by the Transfer Agent to be genuine. The Company will require the
Transfer Agent to employ reasonable procedures, such as requiring a form of
personal identification, to confirm that instructions are genuine. If the
Transfer Agent does not follow such procedures, the Company and the Transfer
Agent may be liable for any losses attributable to unauthorized or fraudulent
instructions. Neither the Company nor the Transfer Agent will be liable for
following telephone instructions reasonably believed to be genuine.
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<PAGE> 34
REDEMPTION OF SHARES
Shares may be redeemed at their next determined net asset value after
receipt of a request in proper form by the Transfer Agent directly or through
any authorized broker/dealer or financial institution.
Except for any contingent deferred sales charge which may be applicable
upon redemption of Class D Shares, as described under "Purchase of Shares," the
Company does not charge for redemption transactions. However, a broker/dealer or
financial institution that is involved in a redemption transaction may charge
separate account, service or transaction fees. On a day the Fund is open for
business, redemption orders received by an authorized broker/dealer or financial
institution before the close of the Exchange, and received by the Transfer Agent
before the close of business on the same day will be executed at the net asset
value per share determined at the close of the Exchange on that day. Redemption
orders received by authorized broker/dealers or financial institutions after the
close of the Exchange, or not received by the Transfer Agent prior to the close
of business, will be executed at the net asset value determined at the close of
the Exchange on the next business day.
Redemption proceeds, net of any contingent deferred sales charge applicable
with respect to Class D Shares, ordinarily will be remitted within seven days
after the order is received in proper form, except proceeds may be remitted over
a longer period to the extent permitted by the SEC under extraordinary
circumstances. If an expedited redemption is requested, redemption proceeds will
be distributed only if the check used for investment is deemed to be cleared for
payment by the your bank, currently considered by the Company to be a period of
15 days after investment. The proceeds, of course, may be more or less than
cost. Payment of redemption proceeds may be made in securities, subject to
regulation by some state securities commissions.
REDEMPTION BY MAIL
1. Write a letter of instruction. Indicate the dollar amount of or number
of shares to be redeemed. Refer to your Fund account number and provide either a
social security or a tax identification number (as applicable).
2. Sign the letter in exactly the same way the account is registered. If
there is more than one owner of the shares, all must sign.
3. If shares to be redeemed have a value of $5,000 or more, or redemption
proceeds are to be paid to someone other than you at your address of record, the
signature(s) must be guaranteed by an "eligible guarantor institution," which
includes a commercial bank that is a member of the Federal Deposit Insurance
Corporation, a trust company, a member firm of a domestic stock exchange, a
savings association, or a credit union that is authorized by its charter to
provide a signature guarantee. Signature guarantees by notaries public are not
acceptable. Further documentation will be requested from corporations,
administrators, executors, personal representatives, trustees or custodians.
4. If shares to be redeemed are held in certificated form, enclose the
certificates with the letter. Do not sign the certificates and for protection
use registered mail.
21
<PAGE> 35
5. Mail the letter to the Transfer Agent at the mailing address set forth
under "Purchase of Shares."
Unless other instructions are given in proper form, a check for the
proceeds of redemption, net of any contingent deferred sales charge applicable
with respect to Class D Shares, will be sent to your address of record.
SYSTEMATIC WITHDRAWAL PLAN
The Company's Systematic Withdrawal Plan provides a way for you to have
shares redeemed from your accounts and the proceeds, net of any contingent
deferred sales charge applicable with respect to Class D Shares, distributed to
you on a monthly basis. You may elect to participate in this plan if you have a
shareholder account valued at $10,000 or more as of the date of your election to
participate, and are not a participant in the Company's Systematic Purchase Plan
at any time while participating in this plan. To participate in the plan,
specify an amount ($100 or more) to be distributed by check to your address of
record or deposited in a designated bank account. The Transfer Agent redeems
sufficient shares and mails or deposits the proceeds of the redemption, net of
any contingent deferred sales charge applicable with respect to Class D Shares,
as instructed on or about the fifth business day prior to the end of each month.
There are no additional fees charged for participating in this plan.
You may change the withdrawal amount, suspend withdrawals or terminate the
election at any time by providing written notice to the Transfer Agent at least
five business days prior to a scheduled transaction. An election will be
terminated automatically if your account balance is insufficient to make a
scheduled withdrawal or if your account is closed.
EXPEDITED REDEMPTIONS
If shares are not held in certificated form, you may request an expedited
redemption of shares by letter or telephone (unless you have elected not to
authorize telephone redemptions on your Account Application or other form that
is on file with the Transfer Agent) on any day the Fund is open for business.
See "Exchange Privileges" for additional information regarding telephone
redemption privileges.
You may request expedited redemption by telephone by calling the Transfer
Agent at (800) 572-7797.
You may request expedited redemption by mail by mailing your expedited
redemption request to the Transfer Agent at the mailing address set forth under
"Purchase of Shares -- Initial Purchase of Fund Shares by Wire."
Upon request, proceeds of expedited redemptions of $5,000 or more, net of
any contingent deferred sales charge applicable with respect to Class D Shares,
will be wired or credited to the bank indicated in your Account Application or
wired to an authorized broker/dealer or financial institution designated in your
Account Application. The Company reserves the right to impose charges for wiring
redemption proceeds. When proceeds of an expedited redemption are to be paid to
someone other than yourself, to an address other than that of record, or to a
bank, broker/dealer or other
22
<PAGE> 36
financial institution that has not been predesignated, the expedited redemption
request must be made by letter and the signature(s) on the letter must be
guaranteed, regardless of the amount of the redemption. If an expedited
redemption request is received by the Transfer Agent by the close of business on
any day the Fund is open for business, the redemption proceeds will be
transmitted to your bank or predesignated broker/dealer or financial institution
on the next business day (assuming the investment check has cleared as described
above), absent extraordinary circumstances. A check for proceeds of less than
$5,000 will be mailed to your address of record, except that, in the case of
investments in the Company that have been effected through broker/dealers, banks
and other institutions that have entered into special arrangements with the
Company, the full amount of the redemption proceeds may be transmitted by wire
or credited to a designated account.
REDEMPTIONS THROUGH AUTHORIZED BROKER/DEALERS AND FINANCIAL INSTITUTIONS
Redemption requests placed through authorized broker/dealers and financial
institutions by the close of the Exchange on any day that the Fund's shares are
offered for sale will be effective on the same day the request is placed if
received by the Transfer Agent before the close of business. Redemption requests
that are received by a dealer or financial institution after the close of the
Exchange or by the Transfer Agent after the close of business generally will be
effective on the next day that shares are offered. The broker/dealer or
financial institution is responsible for the prompt transmission of redemption
requests to the Transfer Agent. Unless you have made other arrangements, and
have informed the Transfer Agent of such arrangements, proceeds of redemptions
made through authorized broker/dealers and financial institutions will be
credited to your account with such broker/dealer or institution. You may request
a check from the broker/dealer or financial institution or may elect to retain
the redemption proceeds in your account. The broker/dealer or financial
institution may benefit from the use of the redemption proceeds prior to the
clearance of a check issued to you for such proceeds or prior to disbursement or
reinvestment of such proceeds on your behalf.
------------------------
The proceeds of redemption may be more or less than the amount invested
and, therefore, a redemption may result in a gain or loss for federal and state
income tax purposes.
Due to the high cost of maintaining small accounts, the Company reserves
the right to redeem accounts that fall below $1,000. Prior to such a redemption,
you will be notified in writing and permitted 30 days to make additional
investments to raise the account balance to the specified minimum.
23
<PAGE> 37
DISTRIBUTION PLANS
The Company's Board of Directors has adopted a Plan on behalf of each class
of shares of the Fund. Under the Plans and pursuant to the Distribution
Agreement, the Fund may pay certain distribution-related expenses. As discussed
above, under the Distribution Agreement, Stephens is entitled to receive from
the Fund, as compensation for distribution-related services, a monthly fee at
the annual rate of up to 0.25% of the average daily net assets of the Class A
Shares of the Fund and a monthly fee at the annual rate of up to 0.75% of the
average daily net assets of the Class D Shares of the Fund. Since the fee
payable to Stephens under the Distribution Agreement is based upon a percentage
of the average daily net assets of a class of shares of the Fund and not upon
the actual expenditures of Stephens, the expenses of Stephens (which may include
overhead expenses) may be more or less than the fees received by it under the
Distribution Agreement. All or a portion of these fees may be paid by Stephens
to broker-dealers or financial institutions who have entered into selling agent
agreements with Stephens, as compensation for sales support services.
SERVICING PLAN
The Company's Board of Directors has adopted a servicing plan ("Servicing
Plan") on behalf of the Class D Shares of the Fund. Pursuant to the Servicing
Plan the Fund may enter into servicing agreements with one or more servicing
agents (which may include Wells Fargo Bank and its affiliates) who agree to
provide administrative support services to their customers who are the record or
beneficial owners of Class D Shares. Such servicing agents will be compensated
at an annual rate of up to 0.25% of the average daily net asset value of the
Class D Shares held of record or beneficially by such customers.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to declare as a dividend substantially all of its net
investment income annually to shareholders of record at 4:00 p.m. (New York
time) on the day of declaration. Net capital gains of the Fund, if any, will be
distributed annually (or more frequently to the extent permitted to avoid
imposition of the 4% excise tax described in the SAI).
Dividends and/or capital gain distributions will have the effect of
reducing the net asset value per share by the amount distributed on the record
date. Although a distribution paid to an investor on newly issued shares shortly
after purchase would represent, in substance, a return of capital, the
distribution would consist of net investment income and, accordingly, would be
taxable as ordinary income.
Dividends and/or capital gain distributions paid by the Fund will be
invested in additional shares of the same class of the Fund at net asset value
(without any sales load) and credited to your account on the reinvestment date
or, at your election, paid by check. Dividend checks and Statements of Account
will be mailed approximately three business days after the payment date. In
addition, you may elect to reinvest Fund dividends and/or capital gain
distributions in shares of another fund in the Overland Express Funds with which
you have an established account that has met the applicable minimum initial
investment requirement.
24
<PAGE> 38
The Fund's net investment income available for distribution to the holders
of Class D Shares will be reduced by the amount of shareholder servicing fees
payable to shareholder servicing agents under the Servicing Plan and by the
incremental distribution fees payable under the Distribution Plan. There may be
certain other differences in fees (e.g., transfer agent fees) between Class A
Shares and Class D Shares that would affect their relative dividends.
TAXES
By complying with applicable provisions of the Code, the Fund will not be
subject to federal income taxes with respect to net investment income and net
realized capital gains distributed to its shareholders. Dividends from the
investment income (which includes net short-term capital gains, if any) declared
and paid by the Fund will be taxable as ordinary income to the Fund's
shareholders. Whether you take dividend payments in cash or have them
automatically reinvested in additional shares, they will be taxable. Generally,
dividends are taxable to shareholders at the time they are paid. However,
dividends declared payable in October, November and December and made payable to
shareholders of record in such a month are treated as paid and are thereby
taxable as of December 31, provided that such dividends are actually paid no
later than January 31 of the following year. You may be eligible to defer the
taxation of dividend and capital gain distributions on shares of a Fund which
are held under a qualified tax-sheltered retirement plan. The Fund intends to
pay out all its net investment income and net realized capital gains (if any)
for each year. Corporate shareholders may be eligible for the dividends-received
deduction on the dividends (excluding the net capital gain dividends) paid by
the Fund to the extent the Fund's income is derived from certain dividends
received from domestic corporations. In order to qualify for the
dividends-received deduction, a corporate shareholder must hold the Fund shares
paying the dividends upon which a dividend-received deduction is based for at
least 46 days.
Portions of the Fund's investment income may be subject to foreign taxes
withheld at the source; however, the Fund does not expect to be able to pass
through any portion of the foreign taxes to its shareholders.
The Fund will inform you of the amount and nature of such dividends and
capital gains. You should keep all statements you receive to assist in your
personal record keeping. The Company is required to withhold, subject to certain
exemptions, at a rate of 31% on dividends paid and redemption proceeds
(including proceeds from exchanges) paid or credited to individual shareholders
of the Fund if a correct Taxpayer Identification Number, certified when
required, is not on file with the Company or the Transfer Agent. In connection
with this withholding requirement, you will be asked to certify on your Account
Application that the social security or taxpayer identification number you
provide is correct and that you are not subject to 31% backup withholding for
previous underreporting to the IRS.
The Fund seeks to comply with the applicable provisions of the Code by
investing all of its assets in the Master Portfolio. The Trust intends to
qualify for federal income tax purposes as a partnership. As such, the Fund will
be deemed to own directly its proportionate share of the Trust's assets.
Therefore, any interest, dividends and gains or losses of a Master Portfolio
will be deemed to have been "passed through" to the Fund and other investors in
the Master Portfolio, regardless of whether
25
<PAGE> 39
such interest, dividends, gains or losses have been distributed by the Master
Portfolio or losses have been realized by the Fund and other investors.
Accordingly, if the Master Portfolio were to accrue but not distribute any
interest, dividends or gains, the Fund would be deemed to have realized and
recognized its proportionate share of interest, dividends, gains or losses
without receipt of any corresponding distribution. However, each Master
Portfolio will seek to minimize recognition by investors of interest, dividends,
gains or losses without a corresponding distribution.
Foreign shareholders may be subject to different tax treatment, including a
withholding tax. See "Federal Income Tax - Foreign Shareholders" in the SAI.
Further federal tax considerations are discussed in the SAI. You should
consult your individual tax advisor with respect to your particular tax
situation as well as the state and local tax status of investments in shares of
the Fund.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
Wells Fargo Bank has been retained to act as the custodian and transfer and
dividend disbursing agent for the Fund and the Master Portfolio. Wells Fargo
Bank's principal place of business is 420 Montgomery Street, San Francisco,
California 94105, and its transfer and dividend disbursing agency activities are
managed at 525 Market Street, San Francisco, California 94105.
ORGANIZATION AND CAPITAL STOCK
The Company, an open-end investment company, was incorporated in Maryland
on April 27, 1987. The authorized capital stock of the Company consists of
20,000,000,000 shares having a par value of $.001 per share. The Company
currently offers thirteen series of shares, each representing an interest in one
of the funds in the Overland Express Funds -- the Asset Allocation, California
Tax-Free Bond, California Tax-Free Money Market, Money Market, Municipal Income,
National Tax-Free Institutional Money Market, Overland Sweep, Short-Term
Government-Corporate Income, Short-Term Municipal Income, Strategic Growth, U.S.
Government Income, U.S. Treasury Money Market and Variable Rate Government
Funds. The Board of Directors may, in the future, authorize the issuance of
other series of capital stock representing shares of additional investment
portfolios or funds. All shares of the Company have equal voting rights and will
be voted in the aggregate, and not by series or class, except where voting by
series is required by law or where the matter involved affects only one series.
The Company may dispense with the annual meeting of shareholders in any fiscal
year in which it is not required by the 1940 Act to elect Directors; however,
shareholders are entitled to call a meeting of shareholders for purposes of
voting on removal of a director or directors. In addition, whenever the Fund is
requested to vote on matters pertaining to the Master Portfolio, the Company
will hold a meeting of the Fund's shareholders and will cast its vote as
instructed by Fund shareholders. The Directors of the Company will vote shares
for which they receive no voting instructions in the same proportion as the
shares for which they do receive voting instructions. A more detailed statement
of the voting rights of shareholders is contained in the SAI. All shares of the
Company, when issued, will be fully paid and nonassessable.
26
<PAGE> 40
The Trust was established on August 15, 1991, as a Delaware business trust.
The Trust's Declaration of Trust permits the Board of Trustees to issue
beneficial interests in the Trust to investors based on their proportionate
investments in the Trust. The Trust currently offers five series of beneficial
interests -- the Cash Investment Trust, Short-Term Government-Corporate Income,
Short-Term Municipal Income, Tax-Free Money Market and Capital Appreciation
Master Portfolios. The Trust is no longer offering interests of the 1-3 Year
Duration Government Income Master Portfolio.
27
<PAGE> 41
<TABLE>
<S> <C>
OVERLAND EXPRESS FUNDS, INC. STRATEGIC GROWTH FUND
ACCOUNT APPLICATION
C/O OVERLAND EXPRESS SHAREHOLDER SERVICES, WELLS FARGO BANK, N.A PAGE 1 OF 5
POST OFFICE BOX 63084, SAN FRANCISCO, CALIFORNIA 94163
FOR PERSONAL SERVICE PLEASE CALL
YOUR INVESTMENT SPECIALIST OR 1-800-572-7797
====================================================================================================================================
1. ACCOUNT REGISTRATION / / NEW ACCOUNT / / ADDITIONAL INVESTMENT OR CHANGE
TO ACCOUNT #
-------------
====================================================================================================================================
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
/ / INDIVIDUAL 1. Individual - -
USE LINE 1 --------------------------------- ------ ------ --------
First Name Initial Last Name Soc. Security No.
/ / JOINT OWNERS 2. Joint Owner
USE LINES 1 & 2 --------------------------------- (Only one Soc. Security No. is
First Name Initial Last Name required for Joint Owners)
Joint Tenancy with right of survivorship is presumed unless Tenancy in Common is indicated:
/ / Tenants in Common
/ / TRANSFER TO 3. Uniform
MINORS Transfer --------------------------------------------------------------------
USE LINE 3 to Minors Custodian's Name (only one) Minor's State
of Residence
- -
--------------------------------- ------ ------ --------
Minor's Name (only one) Minor's Soc. Security No.
/ / TRUST* 4. Trust Name
--------------------------------------------------------------------
USE LINE 4 Trustee(s)
--------------------------------------------------------------------
(If you would like Trustee's name included in registration.)
Trust ID Number
-----------------------------------------------
Please attach title page, the page(s) allowing investment in a mutual fund
("powers page") and signature page, and complete Section 7,
"Authorization for Trusts and Organizations."
/ / ORGANIZATION* 5. Organization Name -
USE LINE 5 ---------------------------------------- ---------- ---------------
*Complete "Authorization for Trusts and Tax I.D. No.
Organizations" (Section 7).
====================================================================================================================================
</TABLE>
ADDRESS:
Number and Street Apartment No.
-------------------------------------- -----------
City State Zip Code
---------------------------- -------------- --------------------
Telephone Numbers: (DAY) - - (EVENING) - -
-------- ------- ------- ------ ------ -------
(Area Code) (Area Code)
================================================================================
(CONTINUED)
<PAGE> 42
STRATEGIC GROWTH FUND
[LOGO] ACCOUNT APPLICATION
PAGE 2 OF 5
<TABLE>
<CAPTION>
======================================================================================
2. INVESTMENT INSTRUCTIONS (Minimum initial investment: $1,000.)
======================================================================================
<S> <C>
INVESTMENT AMOUNT: $
-----------------
TYPE OF ACCOUNT (CHOOSE ONE ONLY):
/ / Class A Shares, or
/ / Class D Shares (not available for
purchases of $9,000,000 or more)
Note: If no choice is indicated, Class A Shares will be selected.
METHOD OF PAYMENT: / / Debit bank account designated in Section 3.
/ / Check attached (payable to Overland Express
Strategic Growth Fund
(designate Class A or D)).
/ / Funds have been wired to my Overland Express Account #
======================================================================================
SETTLEMENT ARRANGEMENTS: (Check only one if applicable)
/ / Automatic debit/credit of an account with a bank that has been authorized
by the Transfer Agent. (If you check this box, your initial and/or
subsequent purchases and redemptions can be settled through the bank
account you designate in Section 3.) Please attach a voided check or
deposit slip and fill in bank account information in Section 3.
/ / Bank wire instructions. (If you check this box, redemptions can be
settled by wire through the bank account you designate below. Some banks
impose fees for wires; check with your bank to determine policy. The
Company reserves the right to impose a charge for wiring redemption
proceeds.) Please attach a voided check or deposit slip and fill in bank
account information in Section 3.
======================================================================================
SYSTEMATIC PURCHASE PLAN:
/ / I hereby authorize you to systematically withdraw from the bank account
designated in Section 3 the following amount to purchase shares of the
Fund. I understand and agree that the designated account will be debited
on or about the fifth business day of each month to effect the Fund
purchase and that such monthly investments shall continue until my
written notice to cancel has been received by you at least five (5)
business days prior to the next scheduled Fund purchase.
Monthly Investment Amount: $ (minimum $100)
--------------------
======================================================================================
SYSTEMATIC WITHDRAWAL PLAN:
/ / I hereby authorize you to systematically redeem a sufficient number of
shares from my Overland Express account and to distribute the amount
specified below by check to the registration address set forth in Section
1 or the bank account designated in Section 3. I understand and agree
that the redemption of shares and mailing or depositing of proceeds will
occur on or about the fifth business day prior to the end of each month
and that such monthly payments shall continue until my written notice to
cancel has been received by you at least five (5) business days prior to
the next scheduled withdrawal.
Monthly Withdrawal Amount: $ (minimum $100)
--------------------
/ / Mail check to registration set forth in Section 1.
/ / Distribute funds to bank account designated in Section 3.
======================================================================================
3. BANK ACCOUNT INFORMATION
======================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Bank Name
- --------------------------------------------------------------------------------
Address City State Zip
- --------------------------------------------------------------------------------
Bank Account Number Bank Routing Number
================================================================================
(CONTINUED)
<PAGE> 43
<TABLE>
<S> <C>
STRATEGIC GROWTH FUND
LOGO ACCOUNT APPLICATION
PAGE 3 OF 5
</TABLE>
4. REDUCED SALES CHARGES (If Applicable.)
- --------------------------------------------------------------------------------
LETTER OF INTENT -- CLASS A SHARES
I may qualify for a reduced sales charge based on the total amount I intend to
invest over a 13-month period (the "Period"), plus the value of any shares I
already own, by agreeing to this Letter of Intent (the "Letter"). Stephens
Inc. will hold in escrow shares registered in my name equal to 5% of the
amount invested. Dividends and distributions on the escrowed shares will be
paid to me or credited to my Account. Upon completion of the specified minimum
purchase within the Period, all shares held in escrow will be deposited in my
Account or delivered to me. I may include the combined asset value of shares
of any of the portfolios of the Overland Express Funds which assess a sales
charge ("Load Funds"), owned as of the date of the Letter toward the
completion of the total purchase. If the total amount invested within the
Period does not equal or exceed the specified minimum purchase, I will be
requested to pay the difference between the amount of the sales charge paid
and the amount of the sales charge applicable to the total purchases made. If,
within 20 days following the mailing of a written request, I have not paid
this additional sales charge to Stephens Inc., sufficient escrowed shares will
be redeemed for payment of the additional sales charge. Shares remaining in
escrow after this payment will be deposited in my Account. The intended
purchase amount may be increased at any time during the Period by filing a
revised Letter for the Period.
/ / I agree to the Letter of Intent set forth above. It is my intention to
invest over a 13-month period in the Load Funds an aggregate amount equal
to at least:
/ / $100,000 / / $200,000 / / $400,000 / / $600,000
/ / $800,000 / / $1,000,000 / / $2,500,000 / / $5,000,000 / / $9,000,000
Existing accounts must be identified in advance. If the value of currently
owned shares is to be applied towards completion of this Letter of Intent,
please list accounts below.
Account # Account #
------------------------ -----------------------
RIGHT OF ACCUMULATION -- CLASS A SHARES
/ / I qualify for reduced sales charges under the Right of Accumulation. The
value of shares presently held in the Overland Express accounts listed
below, combined with this investment, totals $100,000 or more.
Account # Account #
------------------------ -----------------------
- --------------------------------------------------------------------------------
5. TELEPHONE INSTRUCTIONS (Do NOT check this box if you wish to authorize
telephone instructions.)
- --------------------------------------------------------------------------------
/ / If this box is checked, you are NOT authorized to honor my telephone
instructions for purchase of additional Fund shares, redemptions of Fund
shares and exchanges of shares between Overland Express Funds. If this
box is not checked, I understand that telephone instructions will be
effected by debiting/crediting the account designated in Section 3 (if
approved) and that if a designated account has not been authorized and
approved, a check or wire transfer will be required for a purchase and a
check will be sent for a redemption.
- --------------------------------------------------------------------------------
6. DISTRIBUTIONS (Do NOT check boxes if you want reinvestment.)
- --------------------------------------------------------------------------------
All dividends and capital distributions will be automatically reinvested in
shares of the same class of the Fund unless otherwise indicated:
/ / Invest dividends in Account # of
------------------ --------------------------
Fund of the Overland Express Funds.
/ / Invest capital gain distributions in Account # of
------------------
Fund of the Overland Express Funds.
--------------------------
/ / Pay dividends by check and/or / / pay capital gains distributions by check
AND MAIL CHECKS TO:
/ / The registration address set / / The bank account designated
forth in Section 1. in Section 3.
(CONTINUED)
<PAGE> 44
<TABLE>
<S> <C>
STRATEGIC GROWTH FUND
[OVERLAND EXPRESS LOGO] ACCOUNT APPLICATION
PAGE 4 OF 5
</TABLE>
7. AUTHORIZATION FOR TRUSTS AND ORGANIZATIONS (If Applicable.)
- --------------------------------------------------------------------------------
CORPORATIONS, TRUSTS, PARTNERSHIPS OR OTHER ORGANIZATIONS MUST COMPLETE THIS
SECTION.
<TABLE>
<S> <C> <C> <C> <C>
Registered Owner is a: [ ] Trust [ ] Corporation, Incorporated Association
[ ] Partnership [ ] Other:
--------------------------------------------------------
(such as Non-Profit Organization, Religious Organization,
Sole Proprietorship, Investment Club, Non-incorporated
Association, etc.)
</TABLE>
The following named persons are currently officers/trustees/general
partners/other authorized signatories of the Registered Owner; this(these)
Authorized Person(s) is(are) currently authorized under the applicable
governing document to act with full power to sell, assign or transfer
securities of Overland Express Funds, Inc. for the Registered Owner and to
execute and deliver any instrument necessary to effectuate the authority
hereby conferred:
<TABLE>
<S> <C> <C>
Name Title Specimen Signature
---------------------------------- ---------------------------------- ----------------------------------
---------------------------------- ---------------------------------- ----------------------------------
---------------------------------- ---------------------------------- ----------------------------------
</TABLE>
Overland Express Funds, Inc., Stephens Inc. and Wells Fargo Bank, N.A. may,
without inquiry, act upon the instruction of ANY PERSON(S) purporting to be
(an) Authorized Person(s) as named in the Authorization Form last received
by you, and shall not be liable for any claims, expenses (including legal
fees) or losses resulting from acting upon any instructions reasonably
believed to be genuine.
FOR CORPORATIONS AND INCORPORATED ASSOCIATIONS:
I, , Secretary of the
-------------------------------------------
above-named Registered Owner, do hereby certify that at a meeting on
at which a quorum was present throughout, the Board of
-----------------
Directors of the corporation/the officers of the association duly adopted
a resolution, which is in full force and effect and in accordance with the
Registered Owner's charter and by-laws, which resolution: (1) empowered
the above-named Authorized Person(s) to effect securities transactions for
the Registered Owner on the terms described above; (2) authorized the
Secretary to certify, from time to time, the names and titles of the
officers of the Registered Owner and to notify you when changes in the
office occur; and (3) authorized the Secretary to certify that such a
resolution has been duly adopted and will remain in full force and effect
until you receive a duly executed amendment to the Authorization Form.
Witness my hand on behalf of the corporation/association on this
day of ,19
----------- --------------- --
<TABLE>
<S> <C>
------------------------------------------------
Secretary (Signature Guarantee or
Corporate Seal is Required)
FOR ALL OTHER ORGANIZATIONS:
------------------------------------------------
Certifying Trustee, General Partner, or Other
</TABLE>
(CONTINUED)
<PAGE> 45
<TABLE>
<S> <C>
STRATEGIC GROWTH FUND
LOGO ACCOUNT APPLICATION
PAGE 5 OF 5
---------------------------------------------------------------------------------------------------------------
8. SIGNATURE, TAX INFORMATION & CERTIFICATION
---------------------------------------------------------------------------------------------------------------
/ / U.S. CITIZEN OR RESIDENT
I understand that the Federal Government requires Overland Express Funds, Inc. to withhold and pay to
the Internal Revenue Service 31% from all interest, dividends, capital gains distributions and
proceeds from redemptions UNLESS I have provided a certified taxpayer identification (Social Security
or Employer Identification) number and certify in the Withholding Status below that I am NOT subject
to backup withholding. The taxpayer identification number I provided in Section 1 will be the number
under which any taxable earnings will be reported to the IRS.
WITHHOLDING STATUS: Unless I indicate that I am subject to backup withholding by checking the box
below, I certify that 1) I have NOT been notified by the IRS that I am subject to backup withholding
as a result of a failure to report all interest or dividends, OR 2) I have been notified by the IRS
that I am no longer subject to backup withholding: / / I am currently subject to backup withholding.
/ / NON-RESIDENT ALIEN (In order to claim this exemption, ALL owners on the account must be non-resident
aliens and sign below.)
I am not a U.S. citizen or resident (nor is this account held by a foreign corporation, partnership,
estate or trust) and my permanent address is:
Country:
--------------------------------------- ------------------
By signing below, I (we) certify, under penalties of perjury, that I (we) have full authority and legal
capacity to purchase shares of the Fund and affirm that I (we) have received a current prospectus and agree
to be bound by its terms and further certify that 1) the correct taxpayer identification number has been
provided in Section 1 of this Application and that the Withholding Status information, above, is correct OR
2) all owners are entitled to claim non-resident alien status. Investors should be aware that the failure to
check the box under "Telephone Instructions" above means that the telephone exchange and redemption
privileges will be provided. A shareholder would bear the risk of loss in the event of the fraudulent use of
the pre-authorized redemption or exchange privileges. Please see "Exchange Privileges" and "Redemption of
Shares" in the Prospectus for more information on these privileges.
X SIGNATURE GUARANTEE: NOT REQUIRED WHEN
---------------------------------------------------- ESTABLISHING NEW ACCOUNTS. Required only if
Individual (or Custodian) date establishing privileges in Block 2 on an
existing account. Signature Guarantee may be
X provided by an "eligible guarantor
---------------------------------------------------- institution," which includes a commercial bank,
Joint Owner (if any) date trust company, member firm of a domestic stock
exchange, savings association, or credit union
X that is authorized by its charter to provide a
---------------------------------------------------- signature guarantee.
Corporate Officer or Trustee date
AFFIX SIGNATURE GUARANTEE STAMP
---------------------------------------------------- ----------------------------------------------
Title of Corporate Officer or Trustee Signature Guaranteed By
---------------------------------------------------------------------------------------------------------------
</TABLE>
DEALER INFORMATION
<TABLE>
<S> <C> <C>
- --------------------------------------------- --------------------
Dealer Name Branch ID #
- --------------------------------------------- -------------------- -------------------
Representative's Last Name Rep ID # Rep Phone #
X
-----------------------------------------------------------------------------------------------------
Authorized signature of Broker/Dealer Title date
</TABLE>
<PAGE> 46
SPONSOR, ADMINISTRATOR AND DISTRIBUTOR
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
[OVERLAND EXPRESS LOGO]
TRANSFER AND DIVIDEND DISBURSING AGENT
AND CUSTODIAN
Wells Fargo Bank, N.A.
P.O. Box 63084
San Francisco, California 94105
LEGAL COUNSEL
Morrison & Foerster
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Three Embarcadero Center
San Francisco, California 94111
NOT FDIC INSURED
FOR MORE INFORMATION ABOUT THE FUND,
SIMPLY CALL (800) 552-9612,
OR WRITE:
OVERLAND EXPRESS FUNDS, INC.
C/O OVERLAND EXPRESS
SHAREHOLDER SERVICES
WELLS FARGO BANK, N.A.
P.O. BOX 63084
SAN FRANCISCO, CALIFORNIA 94105
[LOGO]
------------------------
PROSPECTUS
------------------------
Strategic Growth Fund
------------------------
February 20, 1996
[/R]
------------------------
NOT FDIC INSURED
83P 2/96
<PAGE> 47
OVERLAND EXPRESS FUNDS, INC.
STRATEGIC GROWTH FUND
Telephone: (800) 552-9612
STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 20, 1996
----------------------------------
Overland Express Funds, Inc. (the "Company") is a professionally
managed, open-end series investment company. This Statement of Additional
Information ("SAI") contains information about one of the Company's series --
the STRATEGIC GROWTH FUND (the "Fund"). The Fund offers two classes of shares
- -- Class A Shares and Class D Shares. This SAI relates to both classes of
shares. The investment objective of the Fund is described in the Prospectus
under the heading "Investment Objective and Policies." The Fund seeks to
achieve its investment objective by investing all of its assets in the Capital
Appreciation Master Portfolio (at times, the "Master Portfolio") of Master
Investment Trust (the "Trust"), which has the same investment objective as the
Fund. The Fund may withdraw its investment in the Capital Appreciation Master
Portfolio at any time, if the Board of Directors of the Company determines that
such action is in the best interests of the Fund and its shareholders. Upon
such withdrawal, the Company's Board would consider alternative investments,
including investing all of the Fund's assets in another investment company with
the same investment objective as the Fund or hiring an investment adviser to
manage the Fund's assets in accordance with the investment policies and
restrictions described in the Prospectus and below with respect to the Trust.
This SAI is not a prospectus and should be read in conjunction
with the Fund's Prospectus, dated February 20, 1996. All terms used in this
SAI that are defined in the Prospectus will have the meanings assigned in the
Prospectus. A copy of the Prospectus may be obtained without charge by writing
Stephens Inc., the Company's sponsor, administrator and distributor, at 111
Center Street, Little Rock, Arkansas 72201, or calling the Transfer Agent at
the telephone number indicated above.
----------------------------------
1
<PAGE> 48
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Servicing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Calculation of Yield and Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Determination of Net Asset Value.... . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Federal Income Tax... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Other.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Custodian and Transfer and Dividend Disbursing Agent . . . . . . . . . . . . . . . . . . 22
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
2
<PAGE> 49
INVESTMENT RESTRICTIONS
The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "Investment Objectives
and Policies." The Fund and the Master Portfolio are subject to the following
investment restrictions, all of which are fundamental policies. These
restrictions cannot be changed, as to either the Fund or the Master Portfolio,
without approval by the holders of a majority (as defined by the 1940 Act) of
the outstanding voting securities of the Fund or the Master Portfolio, as
appropriate. Whenever the Fund is requested to vote on a fundamental policy of
the Master Portfolio, the Fund will hold a meeting of Fund shareholders and it
will cast its votes as instructed by such shareholders.
Neither the Fund nor the Master Portfolio may:
(1) purchase the securities of issuers conducting their
principal business activity in the same industry if, immediately after the
purchase and as a result thereof, the value of the Fund's investments in that
industry would equal or exceed 25% of the current value of the Fund's total
assets, provided that there is no limitation with respect to investments in
securities issued or guaranteed by the United States Government, its agencies
or instrumentalities; and provided further, that the Fund may invest all its
assets in a diversified, open-end management investment company, or a series
thereof, with substantially the same investment objective, policies and
restrictions as such Fund, without regard to the limitations set forth in this
paragraph (1);
(2) purchase or sell real estate (other than securities secured
by real estate or interests therein or securities issued by companies that
invest in real estate or interests therein), commodities or commodity contracts
or interests in oil, gas, or other mineral exploration or development programs;
(3) purchase securities on margin (except for short-term
credits necessary for the clearance of transactions) or make short sales of
securities;
(4) underwrite securities of other issuers, except to the
extent that the purchase of permitted investments directly from the issuer
thereof or from an underwriter for an issuer and the later disposition of such
securities in accordance with the Fund's investment program may be deemed to be
an underwriting; and provided further, that the purchase by the Fund of
securities issued by a diversified, open-end management investment company, or
a series thereof, with substantially the same investment objective, policies
and restrictions as such Fund shall not constitute an underwriting for purposes
of this paragraph (4);
(5) make investments for the purpose of exercising control or
management; provided that the Fund may invest all its assets in a diversified,
open-end management company, or a series thereof, with substantially the same
investment objective, policies and restrictions as such Fund, without regard to
the limitations set forth in this paragraph (5);
3
<PAGE> 50
(6) issue senior securities, except that the Fund may borrow
from banks up to 10% of the current value of its net assets for temporary
purposes only in order to meet redemptions, and these borrowings may be secured
by the pledge of up to 10% of the current value of its net assets (but
investments may not be purchased while any such outstanding borrowings exceed
5% of its net assets);
(7) make loans of portfolio securities having a value that
exceeds 50% of the current value of its total assets, provided that, this
restriction does not apply to the purchase of fixed time deposits, repurchase
agreements, commercial paper and other types of debt instruments commonly sold
in a public or private offering; nor
(8) purchase securities of any issuer (except securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities) if, as
a result, with respect to 75% of its total assets, more than 5% of the value of
its total assets would be invested in the securities of any one issuer or, with
respect to 100% of its total assets, the Fund's ownership would be more than
10% of the outstanding voting securities of such issuer, provided that the Fund
may invest all its assets in a diversified, open-end management investment
company, or a series thereof, with substantially the same investment objective,
policies and restrictions as such Fund, without regard to the limitations set
forth in this paragraph (8).
With respect to fundamental investment policy (7), the Fund and
the Master Portfolio do not intend to loan their portfolio securities during
the coming year.
The Fund and the Master Portfolio are subject to the following
non-fundamental policies. These restrictions may be changed by a vote of a
majority of the Directors of the Company or the Trustees of the Trust, as the
case may be, at any time.
Neither the Fund nor the Master Portfolio may:
(1) purchase or retain securities of any issuer if the officers
or directors of the Fund or its Investment Adviser owning beneficially more
than one-half of one percent (0.5%) of the securities of the issuer together
own beneficially more than 5% of such securities;
(2) purchase or sell real estate limited partnership interests;
nor
(3) write, purchase or sell puts, calls or options or any
combination thereof, except to the extent described in the Prospectus and
except that the Master Portfolio may purchase securities with put rights in
order to maintain liquidity;
(4) invest in securities of issuers who, with their
predecessors, have been in existence less than three years, unless the
securities are fully guaranteed or insured by the
4
<PAGE> 51
U.S. Government if, by reason thereof, the value of its aggregate investment in
such securities will exceed 5% of its total assets;
(5) purchase securities of any issuer (except securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities) if, as
a result, more than 5% of the value of the Fund's total assets would be
invested in the securities of any one issuer; nor
(6) invest more than 15% of the Fund's net assets in illiquid
securities. For this purpose, illiquid securities include, among others, (a)
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale, (b) fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, and (c) repurchase agreements not terminable within seven days.
(7) In addition, as a matter of non-fundamental policy, the
Fund may invest in shares of other open-end, management investment companies,
subject to the limitations of Section 12(d)(1) of the Act, provided that any
such purchases will be limited to temporary investments in shares of
unaffiliated investment companies and the Investment Adviser will waive its
advisory fees for that portion of the Fund's assets so invested, except when
such purchase is part of a plan of merger, consolidation, reorganization or
acquisition. The Fund does not intend to invest more than 5% of its net assets
in such securities during the coming year. Notwithstanding any other
investment policy or limitation (whether or not fundamental), as a matter of
fundamental policy, the Fund may invest all of its assets in the securities of
a single open-end management investment company with substantially the same
fundamental investment objective, policies and limitations as the Fund. A
decision to so invest all of its assets may, depending on the circumstances
applicable at the time, require approval of shareholders.
MANAGEMENT
The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "Management of the Fund
and the Master Portfolio." The principal occupations during the past five
years of the directors and executive officers of the Company are listed below.
The address of each, unless otherwise indicated, is 111 Center Street, Little
Rock, Arkansas 72201. Directors deemed to be "interested persons" of the
Company for purposes of the Act are indicated by an asterisk.
<TABLE>
<CAPTION>
Principal Occupations
Name, Address and Age Position During Past 5 Years
- --------------------- -------- ---------------------
<S> <C> <C>
Jack S. Euphrat, 73 Director Private Investor.
415 Walsh Road
Atherton, CA 94027.
</TABLE>
5
<PAGE> 52
<TABLE>
<S> <C> <C>
*R. Greg Feltus, 44 Director, Senior Vice President
Chairman and of Stephens; Manager
President of Financial Services
Group; President of
Stephens
Insurance Services
Inc.; Senior Vice
President of Stephens
Sports Management
Inc.; and President of
Investor Brokerage
Insurance Inc.
Thomas S. Goho, 53 Director T.B. Rose Faculty
321 Beechcliff Court Fellow-Business,
Winston-Salem, NC 27104 Wake Forest University
Calloway School, of
Business and
Accountancy: Associate Professor of
Finance of the School of Business
and Accounting at Wake Forest
University since 1983.
*Zoe Ann Hines, 46 Director Senior Vice President
of Stephens and
Director of Brokerage
Accounting; and
Secretary of Stephens
Resource
Management.
*W. Rodney Hughes, 69 Director Private Investor.
31 Dellwood Court
San Rafael, CA 94901
Robert M. Joses, 77 Director Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
*J. Tucker Morse, 51 Director Private Investor; Real Estate
10 Legrae Street Developer; Chairman
Charleston, SC 29401 of Renaissance
Properties Ltd.;
President of Morse
Investment
Corporation; and Co-
Managing Partner of
Main Street Ventures.
</TABLE>
6
<PAGE> 53
<TABLE>
<S> <C>
Richard H. Blank, Jr., 39 Chief Associate of
Operating Financial Services
Officer, Group of Stephens;
Secretary and Director of Stephens
Treasurer Sports Management
Inc.; and Director of
Capo Inc.
</TABLE>
COMPENSATION TABLE
------------------
For the Fiscal Year Ended December 31, 1995
-------------------------------------------
<TABLE>
<CAPTION>
Total Compensation
Aggregate Compensation from Registrant
Name and Position from Registrant and Fund Complex
- ----------------- ---------------------- ------------------
<S> <C> <C>
Jack S. Euphrat $10,187.50 $39,750
Director
*R. Greg Feltus 0 0
Director
Thomas S. Goho 10,187.50 39,750
Director
*Zoe Ann Hines 0 0
Director
*W. Rodney Hughes 9,437.50 37,000
Director
Robert M. Joses 9,937.50 39,000
Director
*J. Tucker Morse 8,312.50 33,250
Director
</TABLE>
Directors of the Company are compensated annually by the Company
and by all the registrants in the fund complex for their services as indicated
in the Compensation Table above and also are reimbursed for all out-of-pocket
expenses relating to attendance at board meetings. Each of the Directors and
Officers of the Company serves in the identical capacity as Officers and
Directors of Stagecoach Funds, Inc. and Stagecoach Inc., and as Trustees and/or
Officers of Stagecoach Trust, Master Investment Portfolio, Life & Annuity
Trust, Master Investment Trust and Managed Series Investment Trust, each of
which are registered open-end management investment companies and each of which
is considered to be in the same "fund complex", as such term is defined in Form
N-1A under
7
<PAGE> 54
the 1940 Act, as the Company. The Directors are compensated by other Companies
and Trusts within the fund complex for their services as Directors/Trustees to
such Companies and Trusts. Currently the Directors do not receive any
retirement benefits or deferred compensation from the Company or any other
member of the fund complex.
As of the date of this Statement of Additional Information, the
Directors and Principal Officer of the Company as a group beneficially owned
less than 1% of the outstanding shares of the Company.
Investment Adviser. The Fund has not engaged an investment
adviser. The Master Portfolio (which has the same investment objective as the
Fund, and in which the Fund invests all its assets) is advised by Wells Fargo
Bank. The Advisory Contract provides that Wells Fargo Bank shall furnish to
the Master Portfolio investment guidance and policy direction in connection
with the daily portfolio management of the Master Portfolio. Pursuant to the
Advisory Contract, Wells Fargo Bank furnishes to the Board of Trustees of the
Trust periodic reports on the investment strategy and performance of the Master
Portfolio.
Wells Fargo Bank has agreed to provide to the Master Portfolio,
among other things, money market security and fixed-income research, analysis
and statistical and economic data and information concerning interest rate and
security market trends, portfolio composition, credit conditions and average
maturities of the Master Portfolio.
The Advisory Contract will continue in effect for more than two
years provided the continuance is approved annually (i) by the holders of a
majority of the Master Portfolio's outstanding voting securities or by the
Trust's Board of Trustees and (ii) by a majority of the Trustees of the Trust
who are not parties to the Advisory Contract or "interested persons" (as
defined in the Act) of any such party. The Advisory Contract may be terminated
on 60 days' written notice by either party and will terminate automatically if
assigned.
For the period from inception (January 20, 1993) to February 15,
1996, the Fund operated on a stand-alone basis, did not participate in a
master/feeder structure and retained the services of Wells Fargo Bank as
investment adviser for the Fund. From January 20, 1993 to December 31, 1993,
Wells Fargo Bank waived payment of all advisory fees of $68,217. For the year
ended December 31, 1994, the Fund incurred $197,689 in advisory fees payable to
Wells Fargo Bank, and $9,550 of such fees were waived. For the year ended
December 31, 1995, the Fund incurred $302,821 in advisory fees payable to
Wells Fargo Bank. Wells Fargo Bank did not waive any such fees.
Wells Fargo Bank also serves as Custodian and Transfer and
Dividend Disbursing Agent for both the Fund and the Master Portfolio. See
"Custodian and Transfer and Dividend Disbursing Agent."
8
<PAGE> 55
Morrison & Foerster, counsel to the Company and the Trust and
special counsel to Wells Fargo Bank, has advised the Company, the Trust and
Wells Fargo Bank that Wells Fargo Bank should be able to perform the services
contemplated by the Advisory Contract, the Agency Agreement, the Custodian
Agreement and the Prospectus, without violation of the Glass-Steagall Act.
Such counsel has pointed out, however, that there are no controlling judicial
or administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes and regulations relating to the permissible activities of banks
and their subsidiaries or affiliates, as well as future changes in federal or
state statutes and regulations and judicial or administrative decisions or
interpretations thereof, could prevent Wells Fargo Bank from continuing to
perform, in whole or in part, such services. If Wells Fargo Bank were
prohibited from performing any of such services, it is expected that new
agreements would be proposed with another entity or entities qualified to
perform such services.
Administrator and Distributor. The Company has retained Stephens
as administrator and distributor on behalf of the Fund. In addition, the Trust
has retained Stephens as administrator on behalf of the Master Portfolio.
Under the respective Administration Agreements with the Company and the Trust,
Stephens furnishes the Company and the Trust with office facilities, together
with those ordinary clerical and bookkeeping services that are not furnished by
Wells Fargo Bank. Stephens also has entered into a Distribution Agreement with
the Company pursuant to which Stephens has the responsibility of distributing
shares of the Fund.
For the period from inception to December 31, 1993, the Fund's
administrative fees totaled $20,483. For the year ended December 31, 1993, the
aggregate dollar amount of underwriting commissions paid to Stephens was
$3,604,377, and Stephens retained $3,457,989 of such commissions. For the same
period, Wells Fargo Securities Inc. ("WFSI"), a subsidiary of Wells Fargo Bank
and an affiliated broker-dealer of the Company, and its registered
representatives, received $146,388 of such commissions.
For the year ended December 31, 1994, the Fund's administrative
fees totaled $62,623. For the same period, the aggregate dollar amount of
underwriting commissions paid to Stephens was $1,408,759, and Stephens retained
$1,351,388 of such commissions. WFSI and its registered representatives
received $57,371 of such commissions for the year.
For the year ended December 31, 1995, the Fund's administrative
fees totaled $91,128. For the same period, the aggregate dollar amount of
underwriting commissions paid on sales/redemptions of the Company's shares
was $1,424,127, and Stephens retained $152,656 of such commissions. WFSI and
its registered representatives received $31,366 of such commissions for the
year.
9
<PAGE> 56
DISTRIBUTION PLANS
The following information supplements and should be read in
conjunction with the Prospectus section entitled "Distribution Plans." As
indicated in the Prospectus, the Fund, on behalf of each of its classes of
shares, has adopted a Plan under Section 12(b) of the Act and Rule 12b-1
thereunder (the "Rule"). The Plan for the Class A Shares was adopted by the
Board of Directors on October 21, 1992 and amended on October 26, 1993 and the
Plan for the Class D Shares was adopted on April 29, 1993; a majority of the
directors who were not "interested persons" (as defined in the Act) of the Fund
and who had no direct or indirect financial interest in the operation of the
Plan or in any agreement related to the Plan (the "Qualified Directors")
adopted the Plans.
Under the Plan and pursuant to the Distribution Agreement, the
Fund may pay the Distributor, as compensation for distribution-related
services, a monthly fee at an annual rate of up to 0.25% of the average daily
net assets attributable to Class A Shares and up to 0.75% of the average daily
net assets attributable to the Class D Shares of the Fund. The actual fee
payable to the Distributor is determined, within such limits, from time to time
by mutual agreement between the Company and the Distributor and will not exceed
the maximum sales charges payable by mutual funds sold by members of the
National Association of Securities Dealers, Inc. ("NASD") under the NASD Rules
of Fair Practice. The Distributor may enter into selling agreements with one
or more selling agents under which such agents may receive compensation for
distribution-related services from the Distributor, including, but not limited
to, commissions or other payments to such agents based on the average daily net
assets of Fund shares attributable to them. The Distributor may retain any
portion of the total distribution fee payable thereunder to compensate it for
distribution-related services provided by it or to reimburse it for other
distribution-related expenses.
The Plan will continue in effect from year to year if such
continuance is approved by a majority vote of both the directors of the Company
and the Qualified Directors. Agreements related to the Plan also must be
approved by such vote of the directors and the Qualified Directors. Such
agreements will terminate automatically if assigned, and may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
outstanding voting securities of the Fund. The Plan may not be amended to
increase materially the amounts payable thereunder without the approval of a
majority of the outstanding voting securities of the Fund, and no material
amendment to the Plan may be made except by a majority of both the directors of
the Company and the Qualified Directors.
The Plan requires that the Treasurer of the Fund shall provide to
the directors, and the directors shall review, at least quarterly, a written
report of the amounts expended (and purposes therefore) under the Plan. The
Rule also requires that the selection and nomination of directors who are not
"interested persons" of the Company be made by such disinterested directors.
10
<PAGE> 57
For the year ended December 31, 1995, the Class A Shares of the
Fund incurred $102,390 in fees under the Plan. For the same period, the Class
D Shares of the Fund incurred $148,475 in fees under the Plan.
SERVICING PLAN
As indicated in the Fund's Prospectus, the Fund has adopted a
Servicing Plan ("Servicing Plan") with respect to its Class D Shares. The
Board of Directors adopted the Servicing Plan on April 29, 1993. The Board of
Directors included a majority of the Directors who were not "interested
persons" (as defined in the Act) of the Fund and who had no direct or indirect
financial interest in the operation of the Servicing Plan or in any agreement
related to the Servicing Plan (the "Servicing Plan Qualified Directors").
Under the Servicing Plan and pursuant to the Servicing Agreements,
the Fund may pay one or more servicing agents, as compensation for performing
certain services, a fee at an annual rate of up to 0.25% of the average daily
net assets of the Fund attributable to its Class D Shares. The actual fee
payable to servicing agents is determined, within such limit, from time to time
by mutual agreement between the Company and each servicing agent and will not
exceed the maximum service fees payable by mutual funds sold by members of the
NASD under the NASD Rules of Fair Practice.
The Servicing Plan will continue in effect from year to year if
such continuance is approved by a majority vote of both the Directors of the
Company and the Servicing Plan Qualified Directors. Any form of Servicing
Agreement related to the Servicing Plan also must be approved by such vote of
the Directors and the Servicing Plan Qualified Directors. Servicing Agreements
will terminate automatically if assigned, and may be terminated at any time,
without payment of any penalty, by a vote of a majority of the outstanding
Class D Shares of the Fund. The Servicing Plan may not be amended to increase
materially the amount payable thereunder without the approval of a majority of
the outstanding Class D Shares of the Fund, and no material amendment to the
Servicing Plan may be made except by a majority of both the Directors of the
Company and the Qualified Directors.
The Servicing Plan requires that the Treasurer of the Company
shall provide to the Directors, and the Directors shall review, at least
quarterly, a written report of the amounts expended (and purposes therefor)
under the Servicing Plan.
For the year ended December 31, 1995, the Fund paid $49,492 in
servicing fees pursuant to the Plan for Class D Shares.
11
<PAGE> 58
CALCULATION OF YIELD AND TOTAL RETURN
The following information supplements and should be read in
conjunction with the sections in the Prospectus entitled "Determination of Net
Asset Value" and "Performance Data."
As indicated in the Prospectus, the Fund may advertise certain
total return information for a class of shares, computed in the manner
described in the Prospectus. As and to the extent required by the Commission,
an average annual compound rate of return ("T") will be computed by using the
redeemable value at the end of a specified period ("ERV") of a hypothetical
initial investment in a class of shares ("P") over a period of years ("n")
according to the following formula: P(1+T)n = ERV. In addition, as indicated
in the Prospectus, the Fund also may, at times, calculate total return for a
class of shares based on net asset value per share (rather than the public
offering price), in which case the figures would not reflect the effect of any
sales charges that would have been paid by an investor, or would be based on
the assumption that a sales charge other than the maximum sales charge
(reflecting a Volume Discount) was assessed, provided that total return data
derived pursuant to the calculation described above also are presented.
The average annual total returns on the Class A Shares for the
period from the Fund's commencement of operations (January 20, 1993) to
December 31, 1995, assuming a 4.50% sales load and no sales load, were 25.05%
and 27.01%, respectively. The average annual total return on the Class D
Shares of the Fund for the period from inception (July 1, 1993) to December 31,
1995 was 22.68%. The annual total returns on the Class A Shares of the Fund
for the one year ended December 31, 1995, assuming a 4.50% sales load and no
sales load, were 36.06% and 42.51%, respectively. The annual total return on
the Class D Shares of the Fund for the one year ended December 31, 1995 was
40.57%, assuming payment of the 1% CDSC.
From time to time and only to the extent the comparison is
appropriate for a class of shares of the Fund, the Company may quote the
performance or price-earning ratio of a class of shares of the Fund in
advertising and other types of literature as compared to the performance of the
1-Year Treasury Bill Rate, the S&P Index, the Dow Jones Industrial Average, the
Lehman Brothers 20+ Years Treasury Index, the Lehman Brothers 5-7 Year Treasury
Index, Donoghue's Money Fund Averages, Real Estate Investment Averages (as
reported by the National Association of Real Estate Investment Trusts), Gold
Investment Averages (provided by the World Gold Council), Bank Averages (which
is calculated from figures supplied by the U.S. League of Savings Institutions
based on effective annual rates of interest on both passbook and certificate
accounts), average annualized certificate of deposit rates (from the Federal
Reserve G-13 Statistical Releases or the Bank Rate Monitor), the Salomon One
Year Treasury Benchmark Index, the Consumer Price Index (as published by the
U.S. Bureau of Labor Statistics), Ten Year U.S. Government Bond Average, S&P's
Corporate Bond Yield Averages, Schabacter Investment Management Indices,
Salomon Brothers High Grade Bond Index, Lehman Brothers Long-Term High Quality
Government/Corporate Bond Index, other managed or
12
<PAGE> 59
unmanaged indices or performance data of bonds, stocks or government securities
(including data provided by Ibbotson Associates), or by other services,
companies, publications or persons who monitor mutual funds on overall
performance or other criteria. The S&P Index and the Dow Jones Industrial
Average are unmanaged indices of selected common stock prices. The performance
of a class of shares of the Fund also may be compared to the performance of
other mutual funds having similar objectives. This comparative performance
could be expressed as a ranking prepared by Lipper Analytical Services, Inc.,
CDA Investment Technologies, Inc., Bloomberg Financial Markets or Morningstar,
Inc., independent services which monitor the performance of mutual funds. The
performance of a class of shares of the Fund will be calculated by relating net
asset value per share at the beginning of a stated period to the net asset
value of the investment, assuming reinvestment of all gains distributions and
dividends paid, at the end of the period. Any such comparisons may be useful
to investors who wish to compare the class' past performance with that of its
competitors. Of course, past performance cannot be a guarantee of future
results. The Company also may include, from time to time, a reference to
certain marketing approaches of the Distributor, including, for example, a
reference to a potential shareholder being contacted by a selected broker or
dealer. General mutual fund statistics provided by the Investment Company
Institute may also be used.
In addition, the Company also may use, in advertisements and other
types of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; and (2) describing Wells Fargo Bank, and
its affiliates and predecessors, as one of the first investment managers to
advise investment accounts using asset allocation and index strategies. The
Company also may include in advertising and other types of literature
information and other data from reports and studies prepared by the Tax
Foundation, including information regarding federal and state tax levels and
the related "Tax Freedom Day."
The Company also may use the following information in
advertisements and other types of literature, only to the extent the
information is appropriate for a class of shares of the Fund: (i) the Consumer
Price Index may be used to assess the real rate of return from an investment in
a class of shares of the Fund; (ii) other government statistics, including, but
not limited to, The Survey of Current Business, may be used to illustrate
investment attributes of a class of shares of the Fund or the general economic,
business, investment, or financial environment in which the Fund operates;
(iii) the effect of tax-deferred compounding on the investment returns of a
class of shares of the Fund, or on returns in general, may be illustrated by
graphs, charts, etc., where such graphs or charts would compare, at various
points in time, the return from an investment in a class of shares of the Fund
(or returns in general) on a tax-deferred basis (assuming reinvestment of
capital gains and dividends and assuming one or more tax rates) with the return
on a taxable basis; and (iv) the sectors or industries in which the Fund
invests may be compared to relevant indices of stocks or surveys (e.g., S&P
Industry Surveys) to evaluate the historical performance or current or
potential value of a class of shares of the Fund with respect to the particular
industry or sector.
The Company may also disclose in advertising and other types of
literature, information and statements the distribution rate on the shares of
each class of the Fund. Distribution rate is the amount determined by dividing
the dollar amount per share of the most recent dividend by the most recent NAV
per share.
13
<PAGE> 60
The Company also may discuss in advertising and other types of
literature that the Fund has been assigned a rating by an NRSRO, such as S&P or
Moody's. Such rating would assess the creditworthiness of the investments held
by the Fund. The assigned rating would not be a recommendation to purchase,
sell or hold the Fund's shares since the rating would not comment on the market
price of the Fund's shares or the suitability of the Fund for a particular
investor. In addition, the assigned rating would be subject to change,
suspension or withdrawal as a result of changes in, or the inavailability of,
information relating to the Fund or its investments. The Company may compare
the performance of the Fund with other investments that are assigned ratings by
the NRSROs. Any such comparisons may be useful to investors who wish to
compare the Fund's past performance with other rated investments.
The Company also may disclose, in advertising and other types of
literature, information and statements that the Company's investment adviser,
Wells Fargo Bank, is listed in Nelson Publications' ("Nelson's") "Top 20"
performance rankings as published in the 1994 edition of "America's Best Money
Managers." The Nelson survey ranks the performance of money managers in over
30 asset/style categories and is based on analysis of performance composites
and surveys of institutional money managers. The Company may also disclose in
advertising and other types of sales literature the assets and categories of
assets under management by the Company's investment adviser and total amount of
assets order management by the Wells Fargo Investment Management Group ("IMG").
As of December 31, 1995, IMG had $30.1 billion in assets under management.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the Prospectus section entitled "Purchase of Shares."
Net asset value per share for each class of the Fund and net asset
value per unit of the Master Portfolio are each determined by Wells Fargo Bank
on each day the Exchange is open for trading as of the close of regular trading
on the Exchange, which is currently 4:00 p.m. New York time.
Securities of the Master Portfolio for which market quotations are
available are valued at latest prices. Any security for which the primary
market is an exchange is valued at the last sale price on such exchange on the
day of valuation or, if there was no sale on such day, the latest bid price
quoted on such day. In the case of other securities, including U.S. Government
securities but excluding money market instruments maturing in 60 days or less,
the valuations are based on latest quoted bid prices. Money market instruments
maturing in 60 days or less are valued at amortized cost. The assets of the
Master Portfolio other than money market instruments maturing in 60 days or
less are valued at latest quoted bid prices. Prices may be furnished by a
reputable independent pricing service approved by the Board of Trustees.
Prices provided by an independent pricing service may be determined without
exclusive reliance on quoted prices and may take into account appropriate
factors such as institutional-size trading in similar groups of securities,
yield,
14
<PAGE> 61
quality, coupon rate, maturity, type of issue, trading characteristics and
other market data. All other securities and other assets of the Master
Portfolio for which current market quotations are not readily available are
valued at fair value as determined in good faith by the Trust's Trustees and in
accordance with procedures adopted by the Trustees.
Expenses and fees, including advisory fees are accrued daily and
are taken into account for the purpose of determining the net asset value of
the Master Portfolio's interests and the Fund's shares.
PORTFOLIO TRANSACTIONS
Purchases and sales of securities by the Master Portfolio are
usually principal transactions. Portfolio securities normally are purchased or
sold from or to dealers serving as market makers for the securities at a net
price. The Master Portfolio also may purchase portfolio securities in
underwritten offerings and may purchase securities directly from the issuer.
The cost of executing the Master Portfolio's portfolio securities transactions
consists primarily of dealer spreads and underwriting commissions. Under the
1940 Act, persons affiliated with the Trust are prohibited from dealing with
the Trust as a principal in the purchase and sale of securities unless an
exemptive order or other relief allowing such transactions is obtained from the
SEC or an exemption is otherwise available. The Master Portfolio may purchase
securities from underwriting syndicates of which Stephens or Wells Fargo Bank
is a member under certain conditions in accordance with the provisions of a
rule adopted under the 1940 Act and in compliance with procedures adopted by
the Board of Trustees.
Wells Fargo Bank, as the Investment Adviser of the Master
Portfolio, may, in circumstances in which two or more brokers are in a position
to offer comparable results for the Master Portfolio's portfolio transaction,
give preference to a broker that has provided statistical or other research
services to Wells Fargo Bank. By allocating transactions in this manner, Wells
Fargo Bank is able to supplement its research and analysis with the views and
information of securities firms. Information so received is in addition to,
and not in lieu of, the services referred to be performed by Wells Fargo Bank
under the Advisory Contract, and the expenses of Wells Fargo Bank are not
necessarily reduced as a result of the receipt of this supplemental research
information. Furthermore, research services furnished by dealers through which
Wells Fargo Bank places securities transactions for the Master Portfolio may be
used by Wells Fargo Bank in servicing its other accounts, and not all of these
services may be used by Wells Fargo Bank in connection with advising the Master
Portfolio.
The Trust has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Trust's Board of Trustees, Wells Fargo Bank is
responsible for the Master Portfolio decisions and the placing of portfolio
transactions. In placing orders, it is the policy of the Company to obtain the
best results taking into account the dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's
15
<PAGE> 62
risk in positioning the securities involved. While Wells Fargo Bank generally
seeks reasonably competitive spreads or commissions, the Master Portfolio will
not necessarily be paying the lowest spread or commission available.
For the year ended December 31, 1995, the Fund paid brokerage
commissions in the amount of $190,359.
On December 31, 1995, the Fund owned securities of its "regular
brokers or dealers," as defined in the 1940 Act, or their parents, as follows:
$1,638,000 of Goldman Sachs & Co. Government Repurchase Agreement.
Portfolio Turnover. Portfolio turnover generally involves some
expenses to the Master Portfolio, including brokerage commissions or dealer
mark-ups and other transactions costs on the sale of securities and the
reinvestment in other securities. A high portfolio turnover rate should not
result in the Master Portfolio paying substantially more brokerage commissions,
since most transactions in government securities and municipal securities are
effected on a principal basis. Portfolio turnover also can generate short-term
capital gains tax consequences. The portfolio turnover rate will not be a
limiting factor when Wells Fargo Bank deems portfolio changes appropriate.
FEDERAL INCOME TAX
The following information supplements and should be read in
conjunction with the Prospectus sections entitled "Dividends and Distributions"
and "Taxes." The Prospectus describes generally the tax treatment of
distributions by the Company. This section of the SAI includes additional
information concerning federal income tax.
Qualification of the Fund as a regulated investment company under
the Code requires, among other things, that (i) the Fund derive (a) at least
90% of its annual gross income from interest, payments with respect to
securities loans, dividends and gains from the sale or other disposition of
securities or options thereon; (ii) the Fund derive less than 30% of its gross
income from gains from the sale or other disposition of securities or options
thereon held for less than three months; and (iii) the Fund diversify its
holdings so that, at the end of each quarter of the taxable year, (a) at least
50% of the market value of the Fund's assets is represented by cash, government
securities and other securities limited in respect of any one issuer to an
amount not greater than 5% of the Fund's assets and 10% of the outstanding
voting securities of such issuer, and (b) not more than 25% of the value of the
Fund's assets is invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. As a regulated investment
company, the Fund will not be subject to federal income tax on its net
investment income and net capital gains distributed to its shareholders,
provided that it distributes to its stockholders at least 90% of the sum of its
net investment income and net tax-exempt income earned in each year.
16
<PAGE> 63
A 4% nondeductible excise tax will be imposed on the Fund to the
extent it does not meet certain minimum distribution requirements by the end of
each calendar year. For this purpose, any income or gain retained by the Fund
that is subject to income tax will be considered to have been distributed by
year-end. In addition, dividends and distributions declared payable as of a
record date in October, November or December of any calendar year are deemed
under the Code to have been distributed by the Fund and received by the
shareholders on December 31 of that calendar year if the dividend is actually
paid no later than January 31 of the following year. Such dividends will,
accordingly, be subject to income tax for the year in which the record date
falls. The Fund intends to distribute substantially all of its net investment
income and net capital gains and, thus, expects to avoid the excise tax.
Income and dividends received by the Fund from sources within
foreign countries may be subject to withholding and other taxes (generally at
rates from 10% to 40%) imposed by such countries. Tax conventions between
certain countries and the United States may reduce or eliminate such taxes.
Because the Fund does not expect to hold more than 50% of the value of its
total assets in securities of foreign issuers, the Fund does not expect to be
eligible to elect to "pass through" foreign tax credits to shareholders.
The Master Portfolio will be treated as a non-publicly traded
partnership rather than as a regulated investment company or a corporation
under the Code. As a non-publicly traded partnership under the Code, any
interest, dividends and gains or losses of the Master Portfolio will be deemed
to have been "passed through" to the Fund and other investors in the Master
Portfolio, regardless of whether such interest, dividends or gains have been
distributed by the Master Portfolio or losses have been realized by the Fund
and other investors. Therefore, to the extent the Master Portfolio were to
accrue but not distribute any interest, dividends or gains, or accrue losses,
the Fund would be deemed to have realized and recognized its proportionate
share of interest, dividends, gains or losses without receipt of any
corresponding distribution. However, the Trust will seek to minimize
recognition by investors of interest, dividends, gains or losses without a
corresponding distribution.
Gains or losses on sales of portfolio securities by the Master
Portfolio will be long-term capital gains or losses if the securities have been
held by it for more than one year, except in certain cases including the case
where the Master Portfolio acquires a put or writes a call thereon. Other
gains or losses on the sale of securities will be short-term capital gains or
losses. To the extent that the Fund recognizes long-term capital gains, such
gains will be distributed at least annually. Such distributions will be
taxable to shareholders as long-term capital gains, regardless of how long a
shareholder has held Fund shares. Such distributions will be designated as
capital gain distributions in a written notice mailed by the Fund to
shareholders not later than 60 days after the close of the Fund's taxable year.
If a shareholder receives such a designated capital gain distribution (to be
treated by the shareholder as a long-term capital gain) with respect to any
Fund share and such Fund share is held for six months or less, then (unless
otherwise disallowed) any loss on the sale
17
<PAGE> 64
or exchange of that Fund share will be treated as a long-term capital loss to
the extent of the designated capital gain distribution. Gain recognized on the
disposition of a debt obligation (including tax-exempt obligations purchased
after April 30, 1993) purchased by the Master Portfolio at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent such accrued market discount had not been
previously included as taxable income during the period of time the Master
Portfolio held the debt obligation.
As of the printing of this SAI, the maximum individual tax rate
applicable to ordinary income is 39.6% (effective rates may be higher for some
individuals due to phase out of exemptions and eliminations of deductions); the
maximum individual marginal tax rate applicable to net capital gains is 28%;
and the maximum marginal corporate tax rate applicable to ordinary income and
net capital gains is 35% (except that to eliminate the benefit of lower
marginal corporate income tax rates, corporations which have taxable income in
excess of $100,000 for a taxable year will be required to pay an additional
amount of income tax up to $11,750 on taxable income exceeding $100,000 in a
taxable year and corporations which have taxable income in excess of
$15,000,000 for a taxable year will be required to pay an additional tax of up
to $100,000). Naturally, the amount of tax payable by an individual or
corporation will be affected by a combination of tax laws covering, for
example, deductions, credits, deferrals, exemptions, sources of income and
other matters.
If a shareholder exchanges or otherwise disposes of shares of the
Fund within 90 days of having acquired such shares and if, as a result of
having acquired those shares, the shareholder subsequently pays a reduced sales
charge for shares of the Fund or of a different fund, the sales charge
previously incurred in acquiring the Fund's shares shall not be taken into
account (to the extent such previous sales charges do not exceed the reduction
in sales charges) for the purpose of determining the amount of gain or loss on
the exchange, but will be treated as having been incurred in the acquisition of
such other shares.
Also, any loss realized on a redemption or exchange of shares of
the Fund will be disallowed to the extent that substantially identical shares
are reacquired within the 61-day period beginning 30 days before and ending 30
days after the shares are disposed of.
If, in the opinion of the Company, ownership of its shares has or
may become concentrated to an extent that could cause the Company to be deemed
a personal holding company within the meaning of the Code, the Company may
require the redemption of shares or reject any order for the purchase of shares
in an effort to prevent such concentration.
Foreign Shareholders. Under the Code, distributions of net
investment income by the Fund to a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or a lower treaty rate). Withholding will not apply if a
18
<PAGE> 65
dividend paid by the Fund to a foreign shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. Distributions of net long-term capital gains are not
subject to tax withholding, but in the case of a foreign shareholder who is a
nonresident alien individual, such distributions ordinarily will be subject to
U.S. income tax at a rate of 30% if the individual is physically present in the
U.S. for more than 182 days during the taxable year.
Other Matters. Investors should be aware that the investments to
be made by the Master Portfolio may involve sophisticated tax rules such as
marked to market rules that would result in income or gain recognition by the
Master Portfolio without corresponding current cash receipts. Although the
Master Portfolio will seek to avoid significant noncash income, such noncash
income could be recognized by the Master Portfolio, in which case the Master
Portfolio may distribute cash derived from other sources in order to meet the
minimum distribution requirements described above.
CAPITAL STOCK
The following information supplements and should be read in
conjunction with the section in the Prospectus entitled "Organization and
Capital Stock."
The Fund is comprised of two classes of shares, Class A Shares and
Class D Shares. With respect to matters that affect one class but not another,
shareholders vote as a class; for example, the approval of a Plan. Subject to
the foregoing, on any matter submitted to a vote of shareholders, all shares
then entitled to vote will be voted separately by portfolio unless otherwise
required by the Act, in which case all shares will be voted in the aggregate.
For example, a change in the Fund's fundamental investment policies would be
voted upon only by shareholders of the Fund and not shareholders of the
Company's other investment portfolios. Additionally, approval of an advisory
contract is a matter to be determined separately by the Fund. Approval by the
shareholders of one portfolio is effective as to that portfolio whether or not
sufficient votes are received from the shareholders of the other portfolios to
approve the proposal as to those portfolios. As used in the Prospectus and in
this Statement of Additional Information, the term "majority," when referring
to approvals to be obtained from shareholders of a class of the Fund, means the
vote of the lesser of (i) 67% of the shares of such class of the Fund
represented at a meeting if the holders of more than 50% of the outstanding
shares of such class of the Fund are present in person or by proxy, or (ii)
more than 50% of the outstanding shares of such class of the Fund. The term
"majority," when referring to the approvals to be obtained from shareholders of
the Company as a whole, means the vote of the lesser of (i) 67% of the
Company's shares represented at a meeting if the holders of more than 50% of
the Company's outstanding shares are present in person or by proxy, or (ii)
more than 50% of the Company's outstanding shares. Shareholders are entitled
to one vote for each full share held and fractional votes for fractional shares
held.
19
<PAGE> 66
The Company may dispense with annual meetings of shareholders in
any year in which it is not required to elect directors under the Act.
However, the Company undertakes to hold a special meeting of its shareholders
for the purpose of voting on the question of removal of a director or directors
if requested in writing of the holders of at least 10% of the Company's
outstanding voting securities, and to assist in communicating with other
shareholders as required by Section 16(c) of the Act.
Each share of a class of the Fund represents an equal proportional
interest in the Fund with each other share of the same class and is entitled to
such dividends and distributions out of the income earned on the assets
belonging to the Fund as are declared in the discretion of the Directors. In
the event of the liquidation or dissolution of the Company, shareholders of the
Fund are entitled to receive the assets attributable to the Fund that are
available for distribution, and a distribution of any general assets not
attributable to the Fund that are available for distribution in such manner and
on such basis as the Directors in their sole discretion may determine.
Shareholders are not entitled to any preemptive rights. All
shares, when issued, will be fully paid and non-assessable by the Company.
The Trust is a business trust organized under the laws of
Delaware. In accordance with Delaware law and in connection with the tax
treatment sought by the Trust, the Trust's Declaration of Trust provides that
its investors would be personally responsible for Trust liabilities and
obligations, but only to the extent the Trust property is insufficient to
satisfy such liabilities and obligations. The Declaration of Trust also
provides that the Trust shall maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Trust, its investors, Trustees, officers, employees and agents covering
possible tort and other liabilities, and that investors will be indemnified to
the extent they are held liable for a disproportionate share of Trust
obligations. Thus, the risk of an investor incurring financial loss on account
of investor liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
The Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the property
of the Trust and that the Trustees will not be liable for any action or failure
to act. However, nothing in the Declaration of Trust protects a Trustee
against any liability to which the Trustee would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of the Trustee's office.
The interests in the Master Portfolio have substantially identical
voting and other rights as those rights enumerated above for Fund shares. The
Trust also intends to dispense with annual meetings, but will hold a special
meeting and assist investor communications under the circumstances described
above with respect to the Company in accord with provisions under Section 16(c)
of the Act. Whenever the Fund is requested to vote on a matter with respect to
the Master Portfolio, the Fund will hold a meeting of Fund
20
<PAGE> 67
shareholders and will cast its votes as instructed by such shareholders. In a
situation where the Fund does not receive instruction from certain of its
shareholders on how to vote the corresponding shares of the Master Portfolio,
the Fund will vote such shares in the same proportion as the shares for which
the Fund does receive voting instructions.
As of December 31, 1995, the shareholders identified below were
known by the Company to own the indicated percentage of the outstanding Shares
of the Fund in the following capacities:
<TABLE>
<CAPTION>
Name and Address Percentage
of Shareholder of Class Capacity
- ---------------- ---------- --------
<S> <C> <C>
Class A Shares
- --------------
Merrill Lynch Pierce 26.07% Record
Fenner & Smith, Inc.
Trade House Account
P. O. Box 30561
New Brunswick, NJ 08989
Stephens Inc. 5.07% Record
For Exclusive Benefit
of Customers
P.O. Box 34127
Little Rock, AR 72203
Class D Shares
- --------------
Merrill Lynch Pierce 39.17% Record
Fenner & Smith, Inc.
Trade House Account
P. O. Box 30561
New Brunswick, NJ 08989
</TABLE>
OTHER
The Registration Statements of the Trust and the Company,
including the Fund's Prospectus, the SAI and the exhibits filed therewith, may
be examined at the office of the Commission in Washington, D.C. Statements
contained in the Prospectus or the SAI as to the contents of any contract or
other document referred to herein or in the Prospectus are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
21
<PAGE> 68
CUSTODIAN AND TRANSFER AND
DIVIDEND DISBURSING AGENT
The following information supplements and should be read in
conjunction with the section of the Prospectus entitled "Custodian and Transfer
and Dividend Disbursing Agent."
Wells Fargo Bank has been retained to act as Custodian and
Transfer and Dividend Disbursing Agent for the Fund and the Master Portfolio.
The Custodian, among other things, maintains a custody account or accounts in
the name of the Fund and the Master Portfolio, receives and delivers all assets
for the Fund and the Master Portfolio upon purchase and upon sale or maturity,
collects and receives all income and other payments and distributions on
account of the assets of the Fund and the Master Portfolio and pays all
expenses of the Fund and the Master Portfolio. For its services as Custodian,
Wells Fargo Bank receives an asset-based fee and transaction charges from the
Master Portfolio; and for its services as transfer and dividend disbursing
agent, it receives a base fee and per-account fees from the Fund.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP has been selected as the independent
auditors for the Company and the Trust. KPMG Peat Marwick LLP provides audit
services, tax return preparation and assistance and consultation in connection
with review of certain Securities & Exchange Commission filings. KPMG Peat
Marwick LLP's address is Three Embarcadero Center, San Francisco, California
94111.
FINANCIAL INFORMATION
The audited financial statements and portfolio of investments
contained in the Annual Report for the Company for the most recent fiscal year
are hereby attached to this SAI. The Annual Report will be sent free of charge
with this SAI to any shareholder who requests the SAI.
22
<PAGE> 69
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<S> <C> <C> <C>
COMMON STOCKS - 94.80%
ADVERTISING - 0.90%
25,000 HA-LO Industries inc+ $ 410,000 $ 768,750
BASIC INDUSTRIES - 0.17%
10,000 Cronos Group $ 100,000 $ 101,250
55,000 Quadrax Corp+ 212,492 46,406
------------ ------------
$ 312,492 $ 147,656
BIOTECHNOLOGY - 4.50%
10,000 Cephalon Inc+ $ 277,250 $ 407,500
30,000 Genzyme Corp - General Division+ 1,550,250 1,871,250
40,000 Genzyme Corp - Tissue Repair+ 601,250 635,000
35,000 Liposome Co Inc+ 426,103 700,000
25,000 Neurex Corp+ 112,500 228,125
------------ ------------
$ 2,967,353 $ 3,841,875
COMMERCIAL SERVICES - 2.20%
20,000 AccuStaff Inc+ $ 318,229 $ 880,000
11,000 Central Parking Corp+ 198,000 316,250
22,000 Sylvan Learning Systems Inc+ 562,625 654,500
86,000 Work Recovery Inc+ 367,812 21,500
------------ ------------
$ 1,446,666 $ 1,872,250
COMPUTER SOFTWARE - 16.90%
20,000 Adobe Systems Inc $ 1,270,195 $ 1,240,000
26,000 Avant! Corp+ 803,308 500,500
25,000 First Data Corp 1,608,075 1,671,875
48,500 IKOS Systems Inc+ 397,989 539,563
20,000 Imnet Systems Inc+ 364,750 480,000
33,000 LifeRate Systems Inc+ 259,875 367,125
45,000 Metatec Corp Class A+ 530,657 495,000
12,500 MetaTools Inc+ 312,500 325,000
10,000 Microsoft Corp+ 668,063 877,500
12,000 Minnesota Educational Computing Corp+ 360,469 300,000
48,000 Oracle Systems Corp+ 1,815,084 2,034,000
</TABLE>
1
<PAGE> 70
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<S> <C> <C> <C>
COMMON STOCKS - CONTINUED
COMPUTER SOFTWARE - CONTINUED
20,000 Phamis Inc+ 520,435 595,000
22,000 Premenos Tech Corp+ 562,709 580,250
100,000 Sanctuary Woods Multimedia+ 512,831 287,500
10,000 Software 2000 Inc+ 110,000 77,500
10,000 Syncronys Softcorp+ 127,078 28,750
20,000 Synopsys Inc+ 559,875 760,000
50,000 Veritas Software Corp+ 1,126,348 1,900,000
20,000 Verity Inc+ 326,850 885,000
40,000 Viasoft Inc+ 404,688 475,000
------------ ------------
$12,641,779 $ 14,419,563
COMPUTER SYSTEMS - 12.81%
5,000 3Com Corp+ $ 214,313 $ 233,125
45,000 Adaptec Inc+ 1,329,158 1,845,000
30,000 Cisco Systems Inc+ 1,054,875 2,238,750
19,000 Clarify Inc+ 442,875 570,000
60,000 Komag Inc+ 2,865,072 2,767,500
40,000 RadiSys Corp+ 517,500 470,000
15,000 Silicon Storage Technology Inc+ 135,000 198,750
36,000 Solectron Corp+ 851,938 1,588,500
22,500 Sync Research Inc+ 1,153,750 1,018,125
------------ ------------
$ 8,564,481 $ 10,929,750
ELECTRICAL EQUIPMENT - 2.12%
45,000 Interlink Electronics Inc+ $ 225,000 $ 292,500
32,000 Nokia Corp ADR Class A 1,197,215 1,244,000
50,000 Power (R F) Products Inc+ 348,463 275,000
------------ ------------
$ 1,770,678 $ 1,811,500
ENERGY & RELATED - 4.70%
28,200 Camco International Inc $ 703,960 $ 789,600
40,000 Digicon Inc+ 232,400 320,000
15,000 Ensco International Inc+ 250,367 345,000
15,000 Global Industries Ltd+ 389,375 450,000
</TABLE>
2
<PAGE> 71
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<S> <C> <C> <C>
COMMON STOCKS - CONTINUED
ENERGY & RELATED - CONTINUED
32,400 J Ray McDermott SA+ 700,762 579,150
15,000 Marine Drilling Co Inc+ 71,250 76,875
10,000 Petroleum Geo-Services ADR+ 244,167 250,000
10,000 Sonat Offshore Drilling Co 350,561 447,500
15,000 Sun Co Inc 469,950 410,625
17,500 Trigen Energy Corp 300,850 341,250
------------ ------------
$ 3,713,642 $ 4,010,000
ENTERTAINMENT & LEISURE - 3.19%
40,000 Family Golf Centers Inc+ $ 600,000 $ 730,000
30,000 Mirage Resorts Inc+ 971,405 1,035,000
8,000 Morrow Snowboards Inc+ 88,000 130,000
5,000 Mountasia Entertainment International Inc+ 24,063 24,063
19,500 Sports Club Inc+ 136,260 60,938
20,000 Station Casino Inc+ 293,750 292,500
45,000 Stratosphere Corp+ 378,617 444,375
------------ ------------
$ 2,492,095 $ 2,716,876
ENVIRONMENTAL CONTROL - 3.29%
55,000 Molten Metal Technology Inc+ $ 1,248,970 $ 1,794,375
15,000 Republic Industries Inc+ 349,107 541,875
25,000 U.S.A. Waste Services Inc+ 505,045 471,873
------------ ------------
$ 2,103,122 $ 2,808,123
FINANCE & RELATED - 4.76%
60,000 Capital One Financial Corp $ 1,655,226 $ 1,432,500
20,000 Cole Taylor Financial Group Inc 391,740 597,500
70,000 Envoy Corp (New)+ 414,846 1,211,875
20,000 NHP Inc+ 252,500 370,000
20,000 Oxford Corp Class A+ 534,709 450,000
------------ ------------
$ 3,249,021 $ 4,061,875
FOOD & RELATED - 1.75%
40,000 Garden Fresh Restaurant Corp+ $ 328,375 $ 260,000
</TABLE>
3
<PAGE> 72
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<S> <C> <C> <C>
COMMON STOCKS - CONTINUED
FOOD & RELATED - CONTINUED
30,000 General Nutrition Co Inc+ 378,750 690,000
10,000 NuCo2 Inc+ 126,040 130,000
30,000 Whole Foods Market Inc+ 566,125 416,250
------------ ------------
$ 1,399,290 $ 1,496,250
GENERAL BUSINESS & RELATED - 0.27%
12,500 LeCroy Corp+ $ 176,875 $ 231,250
HEALTHCARE - 8.28%
15,000 Coventry Corp+ $ 309,550 $ 309,375
40,000 Genesis Health Ventures Inc+ 909,602 1,460,000
60,000 Healthsouth Corp+ 1,229,949 1,747,500
25,000 Owen Healthcare Inc+ 454,375 690,625
40,000 Renal Treatment Centers+ 973,000 1,760,000
40,000 Value Health Inc+ 1,337,160 1,100,000
------------ ------------
$ 5,213,636 $ 7,067,500
MANUFACTURING PROCESSING - 1.50%
8,200 Intertape Polymer Group Inc+ $ 247,180 $ 257,275
25,000 Lydall Inc+ 371,040 568,750
25,000 Waters Corp+ 414,500 456,250
------------ ------------
$ 1,032,720 $ 1,282,275
MEDICAL EQUIPMENT & SUPPLIES - 6.57%
30,000 AVECOR Cardiovascular Inc+ $ 468,125 $ 532,500
50,000 Bioject Medical Technologies+ 229,063 93,750
40,000 Biomatrix Inc+ 347,292 670,000
50,000 CompuMed Inc+ 475,938 212,500
60,000 Endosonics Corp+ 553,906 907,500
40,000 Heart Technology Inc+ 777,569 1,315,000
35,000 ICU Medical Inc+ 465,000 595,000
30,000 InStent Inc+ 514,031 450,000
12,500 Life Med Sciences Inc+ 92,188 112,500
</TABLE>
4
<PAGE> 73
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<S> <C> <C> <C>
COMMON STOCKS - CONTINUED
MEDICAL EQUIPMENT & SUPPLIES - CONTINUED
32,500 Molecular Devices Corp+ 358,750 341,250
15,000 Sola International Inc+ 261,879 378,750
------------ ------------
$ 4,543,741 $ 5,608,750
PHARMACEUTICALS - 0.74%
16,000 Ergo Science Corp+ $ 144,000 $ 228,000
1,000 Fuisz Technologies Ltd+ 12,000 15,250
20,000 Medarex Inc+ 111,250 142,500
60,000 Seragen Inc+ 414,940 247,500
------------ ------------
$ 682,190 $ 633,250
RETAIL & RELATED - 2.70%
30,000 Barnes & Noble+ $ 875,857 $ 870,000
15,000 Concord Camera Corp+ 63,750 67,500
30,000 Corporate Express Inc+ 723,750 903,750
15,000 PetSmart Inc+ 383,125 465,000
------------ ------------
$ 2,046,482 $ 2,306,250
SEMICONDUCTORS - 5.00%
93,500 Integrated Device Technology Inc+ $ 2,335,108 $ 1,203,813
18,000 Intel Corp 904,125 1,021,500
40,000 OnTrak Systems Inc+ 991,438 580,000
15,000 S3 Inc+ 262,188 264,375
40,000 Semtech Corp+ 857,655 780,000
40,600 Tegal Corp+ 518,414 416,150
------------ ------------
$ 5,868,928 $ 4,265,838
TELECOMMUNICATIONS - 10.93%
65,000 Accom Inc+ $ 552,594 $ 422,500
25,000 AML Communications Inc+ 232,750 262,500
15,000 Anicom Inc+ 135,000 159,375
15,000 Arch Communications Group Inc+ 408,681 360,000
15,000 Cascade Communications Corp+ 1,218,005 1,278,750
15,000 Celeritek Inc+ 112,500 159,375
</TABLE>
5
<PAGE> 74
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME COST VALUE
<S> <C> <C> <C>
COMMON STOCKS - CONTINUED
TELECOMMUNICATIONS - CONTINUED
45,000 Comdial Corp+ 541,000 410,625
42,800 DSC Communications Corp+ 1,864,154 1,578,250
100,000 LCI International Inc+ 913,174 2,050,000
50,000 PanAmSat Corp+ 805,536 1,103,125
15,000 Premisys Communications Inc+ 674,063 840,000
20,000 WorldCom Inc+ 605,000 705,000
------------ ------------
$ 8,062,457 $ 9,329,500
TRANSPORTATION - 1.52%
20,000 Greenbrier Companies Inc $ 307,323 $ 242,500
40,000 Landair Services Inc+ 666,866 530,000
10,000 Marten Transportation Ltd+ 196,250 165,000
40,000 Mesa Airlines Inc+ 622,588 360,000
------------ ------------
$ 1,793,027 $ 1,297,500
TOTAL COMMON STOCKS $70,490,675 $ 80,906,581
</TABLE>
6
<PAGE> 75
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<S> <C> <C> <C> <C>
CORPORATE BONDS & NOTES - 1.47%
CONVERTIBLE CORPORATE BONDS - 1.47%
$ 240,000 First Financial Management Corp 5.00 % 12/15/99 $ 383,280
100,000 Genesis Health Ventures Inc 6.00 11/30/03 162,000
100,000 LDDS Communications Inc 5.00 08/15/03 105,000
800,000 Softkey International Inc 5.50 11/01/00 604,000
------------
TOTAL CORPORATE BONDS & NOTES $ 1,254,280
(Cost $1,215,624)
</TABLE>
7
<PAGE> 76
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SHARES SECURITY NAME VALUE
<S> <C> <C>
WARRANTS - 2.22%
50,000 Intel Corp expires 3/14/1998+
$ 1,337,500
3,000 Interlink Electronics Inc expires 06/07/1996+
3,188
100,000 Viacom Inc Class E expires 07/07/1999+
550,000
------------
TOTAL WARRANTS $ 1,890,688
(Cost $1,099,271)
</TABLE>
8
<PAGE> 77
STRATEGIC GROWTH FUND - DECEMBER 31, 1995
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
INTEREST MATURITY
PRINCIPAL SECURITY NAME RATE DATE VALUE
<S> <C> <C> <C> <C>
SHORT-TERM INSTRUMENTS - 1.92%
REPURCHASE AGREEMENTS - 1.92%
$ 1,638,000 Goldman Sachs Pooled Repurchase Agreement -
102% Collateralized by U.S. Government
Securities 5.75 01/02/96 $ 1,638,000
(Cost $1,638,000)
TOTAL INVESTMENTS IN SECURITIES
</TABLE>
<TABLE>
<S> <C> <C> <C>
(Cost $74,443,570)* (Notes 1 and 3) 100.41% 85,689,549
Other Assets and Liabilities, Net (0.41) (347,079)
--------- -------------
TOTAL NET ASSETS 100.00% $ 85,342,470
--------- -------------
--------- -------------
...............................................................................
</TABLE>
+ NON-INCOME EARNING SECURITIES.
* COST FOR FEDERAL INCOME TAX PURPOSES IS THE SAME AS FOR FINANCIAL
STATEMENT PURPOSES AND NET UNREALIZED APPRECIATION CONSISTS OF:
<TABLE>
<S> <C>
Gross Unrealized Appreciation 18,980,372
Gross Unrealized Depreciation (7,734,393)
-------------
NET UNREALIZED APPRECIATION $ 11,245,979
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 78
OVERLAND EXPRESS FUNDS, INC.
STRATEGIC GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
Investments:
In securities, at identified cost (Note 3) $74,443,570
- -----------------------------------------------------------------------
In securities, at market value $85,689,549
Cash 2,170
Receivables:
Dividends and interest 14,679
Fund shares sold 277,987
Organization expenses, net of amortization 35,626
Prepaid expenses 35,008
-----------
TOTAL ASSETS 86,055,019
LIABILITIES
Payables:
Investment securities purchased 468,750
Fund shares redeemed 44,362
Due to administrator 90,525
Due to advisor 93,585
Accrued expenses 15,327
-----------
TOTAL LIABILITIES 712,549
-----------
NET ASSETS $85,342,470
===========
NET ASSETS CONSIST OF:
Paid-in capital- Class A $50,306,393
Paid-in capital - Class D 22,955,679
Undistributed net investment loss (1,105,810)
Undistributed net realized gain on investments 1,940,229
Net unrealized appreciation of investments 11,245,979
-----------
NET ASSETS $85,342,470
===========
COMPUTATION OF NET ASSET VALUE
AND OFFERING PRICE :
Net assets - Class A $59,016,086
Shares outstanding - Class A 3,508,125
Net asset value and offering price - Class A $16.82
Maximum offering price per share - Class A $17.61(1)
Net assets - Class D $26,326,384
Shares outstanding - Class D 1,266,478
Net asset value and offering price - Class D $20.79
</TABLE>
- -----------------------------------------------------------------------
(1) Maximum offering price is computed as 100/95.5 of net asset value.
On investments of $100,000 or more the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
<PAGE> 79
OVERLAND EXPRESS FUNDS, INC.
STRATEGIC GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends $132,455
Interest 186,812
-----------
TOTAL INVESTMENT INCOME 319,267
EXPENSES (Note 2):
ADVISORY FEES 302,821
Administration fees 91,128
Custody fees 22,191
Distribution fees 250,865
Shareholder servicing fees 49,492
Portfolio accounting fees 63,554
Transfer Agency fees 56,926
Amortization of organization expenses 14,899
Legal and audit fees 29,255
Registration fees 43,014
Directors fees 5,000
Shareholder reports 35,206
Other 18,734
-----------
TOTAL EXPENSES 983,085
Less:
Waived Fees (Note 2) (57,496)
Net expenses 925,589
-----------
NET INVESTMENT LOSS (606,322)
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on sale of investments 10,895,873
Net change in unrealized appreciation of investm 8,601,611
-----------
NET GAIN ON INVESTMENTS 19,497,484
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $18,891,162
</TABLE>
- -----------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE> 80
OVERLAND EXPRESS FUNDS, INC.
STRATEGIC GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year For the Year
Ended Ended
Dec. 31, 1995 Dec. 31, 1994
------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS
Operations:
Net investment loss $(606,322) $(449,157)
Net realized gain on sale of investments 10,895,873 1,481,221
Net change in unrealized appreciation on investments 8,601,611 336,969
------------- -------------
NET INCREASE IN NET ASSETS 18,891,162 1,369,033
RESULTING FROM OPERATIONS
Distributions to shareholders:
From net realized capital gains - Class A (6,182,997) (655,929)
From net realized capital gains - Class D (2,772,646) (376,137)
From tax return of capital - Class A 0 (278,477)
From tax return of capital - Class D 0 (170,680)
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold - Class A 36,545,391 11,769,539
Net asset value of shares issued in reinvestment
of dividend distributions - Class A 4,705,176 403,346
Cost of shares redeemed -Class A (15,571,514) (10,877,764)
NET INCREASE IN NET ASSETS RESULTING
FROM CAPITAL SHARE TRANSACTIONS -CLASS A 25,679,053 1,295,121
Proceeds from shares sold - Class D 11,752,195 6,859,821
Net asset value of shares issued in reinvestment
of dividend distributions - Class D 1,754,560 175,834
Cost of shares redeemed - Class D (5,858,015) (3,485,125)
NET INCREASE IN NET ASSETS RESULTING
FROM CAPITAL SHARE TRANSACTIONS -CLASS D 7,648,740 3,550,530
------------- -------------
INCREASE IN NET ASSETS 43,263,312 4,733,461
NET ASSETS
Beginning net assets 42,079,158 37,345,697
------------- -------------
ENDING NET ASSETS $85,342,470 $42,079,158
============= =============
SHARES ISSUED AND REDEEMED
Shares sold - Class A 2,168,399 890,673
Shares issued in reinvestment of dividends and
distributions - Class A 292,301 30,559
Shares redeemed - Class A (965,246) (834,218)
NET INCREASE IN SHARES OUTSTANDING - CLASS A 1,495,454 87,014
Shares sold - Class D 552,068 410,160
Shares issued in reinvestment of dividends and
distributions - Class D 88,848 10,884
Shares redeemed - Class D (301,590) (214,855)
NET INCREASE IN SHARES OUTSTANDING - CLASS D 339,326 206,189
- ----------------------------------------------------------------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 81
OVERLAND EXPRESS FUNDS, INC.
STRATEGIC GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected Data for a Share Outstanding During Each Period are as Follows:
<TABLE>
<CAPTION>
Class A Class D
------- -------
From From
Year Year inception Year Year inception
ended ended on January ended ended on July 1,
Dec. 31, Dec. 31, 20, 1993 to Dec. 31, Dec. 31, 1993 to
1995 1994 Dec. 31, 1995 1994 Dec. 31,
1993 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.29 $13.20 $10.00 $16.54 $16.55 $15.00
Income from investment operations:
Net investment loss (0.04) (0.11) (0.03) (0.16) (0.24) (0.43)
Net realized and unrealized gains on 5.66 0.67 3.68 6.99 0.81 2.51
investments
--------------------------------------------------------------------
Total from investment operations 5.62 0.56 3.65 6.83 0.57 2.08
Less distributions:
Dividends from net investment income 0.00 0.00 (0.03) 0.00 0.00 0.00
Distributions from net realized capital gains (2.09) (0.33) (0.41) (2.58) (0.40) (0.53)
Tax return of capital 0.00 (0.14) (0.01) 0.00 (0.18) 0.00
--------------------------------------------------------------------
Total from distributions (2.09) (0.47) (0.45) (2.58) (0.58) (0.53)
--------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $16.82 $ 13.29 $13.20 $20.79 $16.54 $16.55
====================================================================
TOTAL RETURN (not annualized) (3) 42.51% 4.23% 36.56% 41.54% 3.46% 13.84%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $59,016 $26,744 $25,413 $26,326 $15,335 $11,932
Number of shares outstanding, end of 3,508 2,013 1,926 1,266 927 721
period (000)
Ratios to average net assets (annualized):
Ratio of expenses to average net assets(1) 1.28% 1.20% 0.66% 2.02% 1.95% 0.61%
Ratio of net investment loss to
average net assets(2) (0.76)% (0.81)% (0.01)% (1.49)% (1.56)% (1.00)%
Portfolio turnover 171% 149% 182% 171% 149% 182%
-----------------------------------------------------------------------------------------------------------------------
(1) Ratio of expenses to average net assets
prior to waived fees and reimbursed
expenses 1.38% 1.55% 1.64% 2.09% 2.23% 2.14%
(2) Ratio of net investment income to average
net assets prior to waived fees and
reimbursed expenses (0.86)% (1.16)% (0.99)% (1.56)% (1.84)% (2.53)%
</TABLE>
(3) Total returns do not include any sales charges.
The accompanying notes are an integral part of these financial statements.
<PAGE> 82
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Strategic Growth Fund (the "Fund") is a series of Overland Express
Funds, Inc. (the "Company") is registered under the Investment Company Act of
1940 (the "1940 Act"), as amended, as a diversified, open-end series investment
company. The Company commenced operations on April 7, 1988 and includes ten
separate diversified funds: the Asset Allocation Fund, the Money Market Fund,
the Municipal Income Fund, the Overland Sweep Fund, the Short-Term
Government-Corporate Income Fund, the Short-Term Municipal Income Fund, the
Strategic Growth Fund, the U.S. Government Income Fund, the U.S. Treasury Money
Market Fund, the Variable Rate Government Fund, and two non-diversified funds:
the California Tax-Free Bond Fund and the California Tax-Free Money Market
Fund. These financial statements represent the Strategic Growth Fund. These
Funds invest in a range of securities, generally including money market
instruments, equities and U.S. government securities.
The Fund commenced offering Class D shares on July 1, 1993. The two
classes of shares differ principally in their respective sales charges, service
fees, and distribution fees. Shareholders of each class also bear certain
expenses that pertain to that particular class. All shareholders bear the
common expenses of the Fund, and earn income from the portfolio, pro rata based
on the average daily net assets of each class, without distinction between
share classes. Dividends are declared separately for each class. Gains are
allocated to each class pro rata based upon net assets of each class on the
date of distribution. No class has preferential dividend rights. Differences
in per share dividend rates generally result from the relative weightings of
pro rata income and gain allocations and from differences in separate class
expenses, including distribution and service fees.
The following significant accounting policies are consistently followed by
the Company in the preparation of its financial statements, and such policies
are in conformity with generally accepted accounting principles for investment
companies.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
SECURITY VALUATION
Investments in securities for which the primary market is a national
securities exchange or the NASDAQ National Market System are stated at the last
reported sales price on the day of valuation. U.S. Government obligations are
valued at stated mean between the last reported bid and ask prices. In the
absence of any sale of such securities on the valuation date and in the case of
other securities, excluding debt securities maturing in 60 days or less, the
valuations are based on latest quoted bid prices. Debt securities maturing in
60 days or less are valued at amortized cost. Debt securities other than those
maturing in 60 days or less and other than U.S. government obligations are
valued at the latest quoted bid price. Securities for which quotations are not
readily available are valued at fair value as determined by policies set by the
Board of Directors.
<PAGE> 83
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
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 accrued daily. Realized gains or
losses are reported on the basis of identified cost of securities delivered.
Bond discounts are accreted and premiums are amortized as required by the
Internal Revenue Code.
REPURCHASE AGREEMENTS
Transactions involving purchases of securities under agreements to resell
("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 Fund's Portfolio of Investments. The
adviser to the Funds pools the Funds' cash and invests in repurchase agreements
entered into by the Funds. The prospectuses require that the cash investments
be fully collateralized based on values that are marked to market daily. The
collateral is 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 market value equal to or greater than the
resale price. The repurchase agreements held in the Funds at December 31, 1995
are collateralized by U.S. Treasury or federal agency obligations. The
repurchase agreements were entered into on December 29, 1995.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income of the Fund, if any,
are declared and distributed annually. Any dividends to shareholders from net
realized capital gains are declared and distributed annually.
FEDERAL INCOME TAXES
The Company's policy is to comply with the requirements of the Internal
Revenue Code that are applicable to regulated investment companies and to
distribute substantially all its net investment income and any net realized
capital gains to its shareholders. Therefore, no federal or state income tax
provision is required.
Due to the timing of dividend distributions and the differences in
accounting for income and realized gains (losses) for financial statement and
federal income tax purposes, the fiscal year in which amounts are distributed
may differ from the year in which the income and realized gains (losses) were
recorded by the portfolio. The differences between the income or gains
distributed on a book versus tax basis are shown as excess distributions of net
investment income and net realized gain on sales of investments in the
accompanying Statements of Changes in Net Assets.
On the Statement of Assets and Liabilities, as a result of book-to-tax
differences due to previous year tax returns of capital, reclassification
adjustments have been made to the Fund to decrease overdistributed net
investment income and paid-in-capital by $449,157.
<PAGE> 84
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
ORGANIZATION EXPENSES
Stephens Inc. ("Stephens"), the Funds' administrator, sponsor and
distributor, has incurred expenses in connection with the organization and
initial registration of the various funds. These expenses were charged to the
individual Funds and are being amortized by the Funds on a straightline basis
over 60 months from the date the Funds commenced operations.
2. AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into separate advisory contracts on behalf of the
Fund with Wells Fargo Bank, N.A. ("WFB"). Pursuant to the contract, WFB has
agreed to provide the Fund with investment guidance and policy direction in
connection with daily portfolio management. Under the contract WFB is entitled
to be paid a monthly advisory fee at the annual rate of 0.50% of the average
daily net assets of the Fund.
The Company has entered into contracts on behalf of the Fund with WFB
whereby WFB is responsible for providing custody and portfolio accounting
services for the Funds. For this service, WFB is entitled to an annual fee for
custody services at the annual rate of 0.0167% of the average daily net assets
of the Fund. For portfolio accounting services, WFB is entitled to a monthly
base fee from the Fund of $2,000 plus an annual fee of 0.07% of the first $50
million, 0.045% of the next $50 million and 0.02% of the remaining average
daily net assets.
The Company has entered into a contract on behalf of the Fund with WFB
whereby WFB provides transfer agent services for the Fund. Under the transfer
agency agreement, WFB is paid a per account fee and other related costs with a
minimum monthly fee of $3,000 per fund unless net assets of the fund are under
$20 million. For as long as the assets remain under $20 million the fund will
not be charged any transfer agency fees by WFB.
The Fund may enter into service agreements with one or more servicing
agents on behalf of Class D shares of the Fund. Under such agreements,
servicing agents have agreed to provide shareholder liaison services, including
responding to customer inquiries and providing information on their
investments, and to provide such other related services as the Fund or a Class
D shareholder may reasonably request. For these services, a servicing agent
receives a fee, on an annualized basis for the Fund's then-current fiscal year,
not to exceed 0.25% of the average daily net assets of the Class D shares of
the Fund. The Service fees for Class D for the year ended December 31, 1995
were $49,492.
The Company has entered into administration and distribution agreements on
behalf of the Fund with Stephens. Under the agreements, Stephens has agreed to
provide supervisory, administrative and distribution services to the Fund. For
providing supervisory and administrative services, the Fund has agreed to pay
Stephens a monthly fee at the annual rate of 0.15% of the Fund's average daily
net assets up to $200 million and 0.10% of the average daily net assets in
excess of $200 million.
<PAGE> 85
OVERLAND EXPRESS FUNDS, INC.
NOTES TO THE FINANCIAL STATEMENTS
The Company also has adopted separate distribution plans for Class A and D
shares pursuant to Rule 12b-1 under the 1940 Act, whereby on behalf of the
Fund, the Fund may pay Stephens, as compensation for distribution-related
services, a monthly fee at an annual rate of up to 0.25% of the average daily
net assets attributable to the Fund's Class A shares. The Class D Distribution
Plan of the Fund provides that the Fund may pay the Distributor a monthly fee
at an annual rate of up to 0.75% of the Fund's average daily net assets
attributable to Class D shares. Distribution fees, for Class A and Class D of
the Fund, for the year ended December 31, 1995 were $102,390 and $148,475
respectively.
For the year ended WFB has waived certain of its fees in the amount of
$57,496. Waived fees continue at the discretion of WFB.
Certain officers and directors of the Company are also officers of
Stephens. At December 31, 1995, Stephens owned 6,030 shares of the Strategic
Growth Fund.
Stephens has retained $1,424,127 as sales charges from the proceeds of
capital shares sold by the Company for the year ended December 31, 1995. Wells
Fargo Securities Inc., a subsidiary of WFB, received $31,366 as sales charges
from the proceeds of capital shares sold by the Company for the year ended
December 31, 1995.
3. INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, exclusive of short-term securities, for
the Strategic Growth Fund for the year ended December 31, 1995, were as
follows:
AGGREGATE PURCHASES
AND SALES OF:
- -------------------------------------------
SECURITIES OTHER THAN U.S. GOVERNMENT OBLIGATIONS:
<TABLE>
<S> <C>
Purchases at cost $122,483,641
Sales proceeds 100,543,477
</TABLE>
4. CAPITAL SHARES TRANSACTIONS
As of December 31, 1995, there were 20 billion shares of $.001 par value
capital stock authorized by the Company. As of December 31, 1995, the Fund was
authorized to issue 100 million shares of $.001 par value capital stock for
each class of shares. Transactions in capital shares for the years ended
December 31, 1995 and 1994 are disclosed in detail in the Statements of Changes
in Net Assets.
5. OVERLAND STRATEGIC GROWTH FUND CONVERSION TO MASTER-FEEDER STRUCTURE
The Company has received shareholder approval for a reorganization of the
Overland Express Strategic Growth Fund into a master-feeder structure. Under
this structure , the Fund will become a feeder fund and will invest all of its
assets in any corresponding, newly established Master Portfolio. The
reorganization will not result in any changes to the Fund's investment
objective. WFB has agreed to absorb the additional expenses for at least one
year after the reorganization.
<PAGE> 86
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OVERLAND EXPRESS FUNDS, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of the Strategic Growth Fund (one of
the funds comprising Overland Express Funds, Inc.) as of December 31, 1995, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended and
financial highlights for the periods indicated herein. These financial
statements and financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights 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 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 verification of securities owned as of
December 31, 1995, by examination and other appropriate audit procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our 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 Strategic Growth Fund of Overland Express Funds, Inc. as of
December 31, 1995, the results of its operations, the changes in its net assets
and its financial highlights for the periods indicated herein in conformity
with generally accepted accounting principles.
SAN FRANCISCO, CALIFORNIA
FEBRUARY 14, 1996
<PAGE> 87
PROXY VOTING RESULTS
A special shareholder meeting was held on January 30, 1996, to vote on the
following proposal for the Strategic Growth Fund. The proposal received the
required majority of votes and was adopted.
PROPOSAL 1.
To consider approval of the proposal to reorganize the Strategic Growth Fund
into a master/feeder structure, with amendments to certain fundamental
investment restrictions to permit the Strategic Growth Fund to invest all of
its assets in another investment company.
<TABLE>
<S> <C> <C>
For Against Abstain
2,138,338 119,480 133,942
</TABLE>
<PAGE> 88
OVERLAND EXPRESS FUNDS, INC.
FILE NO. 33-16296; 811-8275
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
The following audited financial statements for the Company's
Strategic Growth Fund are included in Part B, Item 23:
Portfolio of Investments - December 31, 1995
Statement of Assets and Liabilities - December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statement of Changes in Net Assets for the year ended December 31,
1995
Financial Highlights for the year ended December 31, 1995
Notes to Financial Statements - December 31, 1995
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
1 - Restated Articles of Incorporation, incorporated by
reference to Post-Effective Amendment No. 30 filed on
November 29, 1995.
2 - By-Laws (as amended), incorporated by reference to the
Registration Statement on Form N-1A filed on August 5,
1987.
3 - Not Applicable.
4 - Specimen Stock Certificates, incorporated by reference to
Post-Effective Amendment No. 21 filed on March 3, 1993.
5(a)(i) - Form of Amended Advisory Contract on behalf of the Asset
Allocation Fund, incorporated by reference to
Post-Effective Amendment No. 24 filed on April 29, 1994.
(ii) - Advisory Contract on behalf of the U.S. Government Income
Fund, incorporated by reference to Pre- Effective
Amendment No. 2 filed on April 4, 1988.
(iii) - Advisory Contract on behalf of the California Tax-Free
Money Market Fund, incorporated by reference to
Post-Effective Amendment No. 6 filed on August 2, 1989.
</TABLE>
C-1
<PAGE> 89
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
(iv) - Advisory Contract on behalf of the California Tax-Free
Bond Fund, incorporated by reference to Post-Effective
Amendment No. 6 filed on August 2, 1989.
(v) - Advisory Contract on behalf of the Money Market Fund,
incorporated by reference to Post-Effective Amendment No.
6 filed on August 2, 1989.
(vi) - Advisory Contract on behalf of the Variable Rate
Government Fund, incorporated by reference to
Post-Effective Amendment No. 8 filed on August 6, 1990.
(vii) - Advisory Contract on behalf of the Municipal Income Fund,
incorporated by reference to Post- Effective Amendment No.
16 filed on January 17, 1992.
(viii) - Advisory Contract on behalf of the U.S. Treasury Money
Market Fund, incorporated by reference to Post-Effective
Amendment No. 22 filed on May 28, 1993.
(ix) - Advisory Contract on behalf of the Strategic Growth Fund,
incorporated by reference to Post- Effective Amendment No.
22 filed on May 28, 1993.
(x) - Sub-Advisory Contract with Wells Fargo Nikko Investment
Advisors on behalf of the Asset Allocation Fund,
incorporated by reference to Post-Effective Amendment No.
30 filed on November 29, 1995.
5(b)(i) - Administration Agreement on behalf of the Asset Allocation
Fund, incorporated by reference to Pre- Effective
Amendment No. 2 filed on April 4, 1988.
(ii) - Administration Agreement on behalf of the U.S. Government
Income Fund, incorporated by reference to Pre-Effective
Amendment No. 2 filed on April 4, 1988.
(iii) - Administration Agreement on behalf of the California
Tax-Free Money Market Fund (as amended), incorporated by
reference to Pre-Effective Amendment No. 2 filed on April
4, 1988.
(iv) - Administration Agreement on behalf of the California
Tax-Free Bond Fund, incorporated by reference to
Post-Effective Amendment No. 3 filed on October 3, 1988.
(v) - Administration Agreement on behalf of the Money Market
Fund, incorporated by reference to Post- Effective
Amendment No. 6 filed on August 2, 1989.
(vi) - Administration Agreement on behalf of the Variable Rate
Government Fund, incorporated by reference to
Post-Effective Amendment No. 8 filed on August 6, 1990.
(vii) - Administration Agreement on behalf of the Municipal Income
Fund, incorporated by reference to Post- Effective
Amendment No. 16 filed on January 17, 1992.
</TABLE>
<PAGE> 90
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
(viii) - Administration Agreement on behalf of the Overland Sweep
Fund, Short-Term Municipal Income Fund (formerly, the 1-3
Year Duration Municipal Income Fund), 1-3 Year Duration
Government Income Fund (liquidated) and Short-Term
Government-Corporate Income Fund (formerly, the 1-3 Year
Duration Full Faith and Credit Government Income Fund),
incorporated by reference to Post-Effective Amendment No
30 filed on November 29, 1995.
(ix) - Administration Agreement on behalf of the U.S. Treasury
Money Market Fund, incorporated by reference to
Post-Effective Amendment No. 30 filed on November 29,
1995.
(x) - Administration Agreement on behalf of the Strategic Growth
Fund, incorporated by reference to Post- Effective
Amendment No. 22 filed on May 28, 1993.
(xi) - Form of Administration Agreement with Stephens Inc. on
behalf of the National Tax-Free Institutional Money Market
Fund, incorporated by reference to Post-Effective
Amendment No. 30 filed on November 29, 1995.
6(a)(i) - Distribution Agreement with Stephens Inc. (as amended),
incorporated by reference to Post-Effective Amendment No.
18 filed on April 30, 1992.
(a)(ii) - Distribution Agreement on behalf of the Overland Sweep
Fund, incorporated by reference to Post- Effective
Amendment No. 14 filed on August 20, 1991.
(a)(iii) - Addendum to Form of Distribution Agreement with Stephens
Inc., incorporated by reference to Post- Effective
Amendment No. 24 filed on April 29, 1994.
(a)(iv) - Amended and Restated Distribution Agreement with Stephens
Inc., incorporated by reference to Post- Effective
Amendment No. 31 filed on December 18, 1995.
(b) - Dealer Contract (as revised), incorporated by reference to
Post-Effective Amendment No. 13 filed on July 16, 1991.
7 - Not Applicable.
8(a) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of
the Asset Allocation Fund, incorporated by reference to
the Registration Statement on Form N-1A filed on August 5,
1987.
(b) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of
the U.S. Government Income Fund, incorporated by reference
to Post-Effective Amendment No. 9 filed on February 7,
1991.
(c) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of
the California Tax-Free Money Market Fund, incorporated by
reference to Post-Effective Amendment No. 9 filed on
February 7, 1991.
(d) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of
the California Tax-Free Bond Fund, incorporated by
reference to Post-Effective Amendment No. 9 filed on
February 7, 1991.
</TABLE>
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<PAGE> 91
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
(e) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of
the Money Market Fund, incorporated by reference to
Post-Effective Amendment No. 9 filed on February 7, 1991.
(f) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of
the Variable Rate Government Fund, incorporated by
reference to Post-Effective Amendment No. 9 filed on
February 7, 1991.
(g) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of
the Municipal Income Fund, incorporated by reference to
Post-Effective Amendment No. 16 filed on January 17, 1992.
(h) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of
the U.S. Treasury Money Market Fund, incorporated by
reference to Post-Effective Amendment No. 23 filed on
March 2, 1994.
(i) - Custody Agreement with Wells Fargo Bank, N.A. on behalf of
the Strategic Growth Fund, incorporated by reference to
Post-Effective Amendment No. 23 filed on March 2, 1994.
(j) - Custody Agreement on behalf of the Overland Sweep Fund,
the 1-3 Year Duration Municipal Income Fund, the 1-3 Year
Duration Government Income Fund and the 1-3 Year Duration
Full Faith and Credit Government Income Fund, incorporated
by reference to Post-Effective Amendment No. 30 filed on
November 29, 1995.
(k) - Form of Custody Agreement with Wells Fargo Bank, N.A. on
behalf of the National Tax-Free Institutional Money Market
Fund, incorporated by reference to Post-Effective
Amendment No. 30 filed on November 29, 1995.
9(a) - Agency Agreement between the Overland Sweep Fund, the 1-3
Year Duration Municipal Income Fund, the 1-3 Year Duration
Government Income Fund, the 1-3 Year Duration Full Faith
and Credit Government Income Fund and Wells Fargo Bank,
N.A., incorporated by reference to Post-Effective
Amendment No. 24 filed on April 29, 1994.
(a)(i) - Form of Agency Agreement with Wells Fargo Bank, N.A. on
behalf of the National Tax-Free Institutional Money Market
Fund, incorporated by reference to Post-Effective
Amendment No. 30 filed on November 29, 1995.
(b) - License Agreement between Wells Fargo Bank, N.A. and Wells
Fargo Investment Advisors (renamed Wells Fargo Nikko
Investment Advisors), previously filed.
(c)(i) - Shareholder Servicing Agreement on behalf of the Overland
Sweep Fund, incorporated by reference to Post-Effective
Amendment No. 22 filed on May 28, 1993.
(c)(ii) - Form of Servicing Agreement on behalf of Class D Shares,
incorporated by reference to Post- Effective Amendment No.
21 filed on March 3, 1993.
(d)(i) - Servicing Plan on behalf of the Class D Shares of the
Asset Allocation Fund, incorporated by reference to
Post-Effective Amendment No. 22 filed on May 28, 1993.
</TABLE>
<PAGE> 92
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
(d)(ii) - Servicing Plan on behalf of the Class D Shares of the U.S.
Government Income Fund, incorporated by reference to
Post-Effective Amendment No. 22 filed on May 28, 1993.
(d)(iii) - Servicing Plan on behalf of the Class D Shares of the
California Tax-Free Bond Fund, incorporated by reference
to Post-Effective Amendment No. 22 filed on May 28, 1993.
(d)(iv) - Servicing Plan on behalf of the Class D Shares of the
Variable Rate Government Fund, incorporated by reference
to Post-Effective Amendment No. 22 filed on May 28, 1993.
(d)(v) - Servicing Plan on behalf of the Class D Shares of the
Municipal Income Fund, incorporated by reference to
Post-Effective Amendment No. 22 filed on May 28, 1993.
(d)(vi) - Servicing Plan on behalf of the Class D Shares of the
Strategic Growth Fund, incorporated by reference to
Post-Effective Amendment No. 22 filed on May 28, 1993.
10 - Opinion and Consent of Counsel, filed herewith.
11 - Consent of Auditors - KPMG Peat Marwick, LLP, filed
herewith.
12(a) - None.
13 - Investment Letter, incorporated by reference to
Pre-Effective Amendment No. 2 filed on April 4, 1988.
14 - Not Applicable.
15(a) - Amended Distribution Plan on behalf of the Class A Shares
of the Asset Allocation Fund, incorporated by reference to
Post-Effective Amendment No. 22 filed on May 28, 1993.
(b) - Amended Distribution Plan on behalf of the Class A Shares
of the U.S. Government Income Fund, incorporated by
reference to Post-Effective Amendment No. 22 filed on May
28, 1993.
(c) - Distribution Plan on behalf of the California Tax-Free
Money Market Fund, incorporated by reference to
Pre-Effective Amendment No. 2 filed on April 4, 1988.
(d) - Amended Distribution Plan on behalf of the Class A Shares
of the California Tax-Free Bond Fund, incorporated by
reference to Post-Effective Amendment No. 22 filed on May
28, 1993.
(e) - Amended Distribution Plan on behalf of the Class A Shares
of the Money Market Fund, incorporated by reference to
Post-Effective Amendment No. 24 filed on April 29, 1994.
</TABLE>
C-5
<PAGE> 93
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
(f) - Amended Distribution Plan on behalf of the Class A Shares
of the Variable Rate Government Fund, incorporated by
reference to Post-Effective Amendment No. 22 filed on May
28, 1993.
(g) - Amended Distribution Plan on behalf of the Class A Shares
of the Municipal Income Fund, incorporated by reference to
Post-Effective Amendment No. 22 filed on May 28, 1993.
(h) - Distribution Plan on behalf of the Overland Sweep Fund,
incorporated by reference to Post-Effective Amendment No.
14 filed on August 20, 1991.
(i) - Amended Distribution Plan on behalf of the Class A Shares
of the U.S. Treasury Money Market Fund, incorporated by
reference to Post-Effective Amendment No. 24 filed on
April 29, 1994.
(j) - Amended Distribution Plan on behalf of the Class A Shares
of the Strategic Growth Fund, incorporated by reference to
Post-Effective Amendment No. 22 filed on May 28, 1993.
(k) - Distribution Plan on behalf of the Class D Shares of the
Asset Allocation Fund, incorporated by reference to
Post-Effective Amendment No. 23 filed on March 2, 1994.
(l) - Distribution Plan on behalf of the Class D Shares of the
California Tax-Free Bond Fund, incorporated by reference
to Post-Effective Amendment No. 23 filed on March 2, 1994.
(m) - Distribution Plan on behalf of the Class D Shares of the
Municipal Income Fund, incorporated by reference to
Post-Effective Amendment No. 23 filed on March 2, 1994.
(n) - Distribution Plan on behalf of the Class D Shares of the
Strategic Growth Fund, incorporated by reference to
Post-Effective Amendment No. 23 filed on March 2, 1994.
(o) - Distribution Plan on behalf of the Class D Shares of the
U.S. Government Income Fund ,incorporated by reference to
Post-Effective Amendment No. 23 filed on March 2, 1994.
(p) - Distribution Plan on behalf of the Class D Shares of the
Variable Rate Government Fund ,incorporated by reference
to Post-Effective Amendment No. 23 filed on March 2, 1994.
(q) - Distribution Plan on behalf of the Short-Term Municipal
Income Fund (formerly, the 1-3 Year Duration Municipal
Income Fund), incorporated by reference to Post-Effective
Amendment No. 24 filed on April 29, 1994.
(r) - Distribution Plan of the Short-Term Government-Corporate
Income Fund (formerly, the 1-3 Year Duration Full Faith
and Credit Government Income Fund), incorporated by
reference to Post-Effective Amendment No. 24 filed on
April 29, 1994.
</TABLE>
C-6
<PAGE> 94
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
16(a) - Schedules for Computation of Performance Quotations,
incorporated by reference to Post-Effective Amendment No.
3 filed on October 3, 1988.
(b) - Schedule of Computation of Performance data, incorporated
by reference to Post Effective Amendment No. 29 filed on
May 1, 1995.
17 - Powers of Attorney, incorporated by reference to
Post-Effective Amendment No. 14 to the Registration
Statement filed on August 20, 1991.
18 - Rule 18f-3 Multi-Class Plan, incorporated by reference to
Post-Effective Amendment No. 28 to the Registration
Statement filed on April 4, 1995.
27.1A - Financial Data Schedule - Strategic Growth Fund Class A,
filed herewith.
27.1D - Financial Data Schedule - Strategic Growth Fund Class D,
filed herewith.
</TABLE>
Item 25. Persons Controlled by or under Common Control with Registrant.
As of February 20, 1996, the Strategic Growth Fund owned
approximately 99% of the outstanding beneficial interests of the Capital
Appreciation Master Portfolio of Master Investment Trust and, as such, could be
considered a "controlling person" (as such term is defined in the 1940 Act) of
the Capital Appreciation Master Portfolio.
Item 26. Number of Holders of Securities.
As of December 31, 1995, the number of record holders of each
class of securities of the Registrant was as follows:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
- -------------- ------------------------
<S> <C>
Asset Allocation Fund
Class A 1,043
Class D 396
California Tax-Free Bond Fund
Class A 3,922
Class D 61
California Tax-Free Money Market Fund 1,787
Money Market Fund
Class A 1,374
Institutional Class 291
Municipal Income Fund
Class A 1,182
Class D 250
Overland Sweep Fund 2,297
Short-Term Municipal Income Fund 27
Short-Term Government-Corporate Income Fund 10
</TABLE>
C-7
<PAGE> 95
<TABLE>
<S> <C>
Strategic Growth Fund
Class A 5,008
Class D 1,021
U.S. Government Income Fund
Class A 570
Class D 60
U.S. Treasury Money Market Fund
Class A 665
Institutional Class 83
Variable Rate Government Fund
Class A 1,425
Class D 84
National Tax-Free Institutional Money Market Fund 1
</TABLE>
27. Indemnification.
Section 4 of Article VI of the Registrant's Articles of
Incorporation provides:
To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, no person who is or was
a director or officer of this Corporation shall be personally
liable to the Corporation or its stockholders for money damages.
No amendment of the charter of the Corporation or repeal of any of
its provisions shall limit or eliminate the benefits provided to
any person who is or was a director or officer under this
provision with respect to any act or omission which occurred prior
to such amendment or repeal. The rights of indemnification under
this provision shall neither be exclusive of, nor be deemed in
limitation of, any right to which any person may otherwise be
entitled or permitted by contract or otherwise. This Section 4
shall not protect any person who is or was a director or officer
of the Corporation against any liability to the Corporation or its
stockholders to which he or she would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or
her office.
Item 28. Business and Other Connections of Investment Adviser.
Wells Fargo Bank, N.A. ("Wells Fargo Bank"), a wholly owned
subsidiary of Wells Fargo & Company, serves as investment adviser to all of the
Registrant's investment portfolios, other than the National Tax-Free
Institutional Money Market Fund, Overland Sweep Fund, Short-Term Municipal
Income Fund, Short-Term Government-Corporate Income Fund and Strategic Growth
Fund, which currently do not retain an investment adviser, and to certain other
registered open-end management investment companies. Wells Fargo Bank's
business is that of a national
C-8
<PAGE> 96
banking association with respect to which it conducts a variety of commercial
banking and trust activities.
To the knowledge of Registrant, none of the directors or executive
officers of Wells Fargo Bank, except those set forth below, is or has been at
any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
executive officers also hold various positions with and engage in business for
Wells Fargo & Company. Set forth below are the names and principal businesses
of the directors and executive officers of Wells Fargo Bank who are or during
the past two fiscal years have been engaged in any other business, profession,
vocation or employment of a substantial nature for their own account or in the
capacity of director, officer, employee, partner or trustee. All the directors
of Wells Fargo Bank also serve as directors of Wells Fargo & Company.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) and Address(es)
at Wells Fargo Bank During at Least the Last Two Fiscal Years
------------------- ------------------------------------------
<S> <C>
H. Jesse Arnelle Senior Partner of Arnelle & Hastie
Director 455 Market Street
San Francisco, CA 94105
Director of FPL Group, Inc.
700 Universe Blvd.
P.O. Box 14000
North Palm Beach, FL 33408
William R. Breuner General Partner in Breuner Associates, Breuner Properties and
Director Breuner-Pavarnick Real Estate Developers. Retired Chairman of
the Board of Directors of John Breuner Co.
2300 Clayton Road, Suite 1570
Concord, CA 94520
Vice Chairman of the California State Railroad
Museum Foundation.
111 I Street
Old Sacramento, CA 95814
William S. Davila President and Director of The Vons Companies, Inc.
Director 618 Michillinda Avenue
Arcadia, CA 91007
Officer of Western Association of Food Chains
825 Colorado Blvd. #203
Los Angeles, CA 90041
</TABLE>
C-9
<PAGE> 97
<TABLE>
<S> <C>
Rayburn S. Dezember Director of CalMat Co.
Director 3200 San Fernando Road
Los Angeles, CA 90065
Director of Tejon Ranch Co.
P.O. Box 1000
Lebec, CA 93243
Director of Turner Casting Corp.
P.O. Box 1099
Cudahy, CA 90201
Director of The Bakersfield Californian
P.O. Box 440
1707 I Street
Bakersfield, CA 93302
Director of Kern County Economic Development Corp.
P.O. Box 1229
2700 M Street, Suite 225
Bakersfield, CA 93301
Chairman of the Board of Trustees of Whittier College
13406 East Philadelphia Avenue
P.O. Box 634
Whittier, CA 90608
Paul Hazen Chairman of the Board of Directors of
Chairman of the Wells Fargo & Company
Board of Directors 420 Montgomery Street
San Francisco, CA 94105
Director of Pacific Telesis Group
130 Kearny Street
San Francisco, CA 94108
Director of Phelps Dodge Corp.
2600 North Central Avenue
Phoenix, AZ 85004
Director of Safeway Inc.
Fourth and Jackson Streets
Oakland, CA 94660
Robert K. Jaedicke Accounting Professor and Dean Emeritus of
Director Graduate School of Business, Stanford University
MBA Admissions Office
Stanford, CA 94305
Director of Homestake Mining Co.
650 California Street
San Francisco, CA 94108
</TABLE>
C-10
<PAGE> 98
<TABLE>
<S> <C>
Director of California Water Service Company
1720 North First Street
San Jose, CA 95112
Director of Boise Cascade Corp.
1111 West Jefferson Street
P.O. Box 50
Boise, ID 83728
Director of Enron Corp.
1400 Smith Street
Houston, TX 77002
Director of GenCorp, Inc.
175 Ghent Road
Fairlawn, OH 44333
Paul A. Miller Chairman of Executive Committee and Director of
Director Pacific Enterprises
633 West Fifth Street
Los Angeles, CA 90071
Trustee of Mutual Life Insurance Company of New York
1740 Broadway
New York, NY 10019
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Trustee of University of Southern California
University Park TGF 200
665 Exposition Blvd.
Los Angeles, CA 90089
Ellen M. Newman President of Ellen Newman Associates
Director 323 Geary Street, Suite 507
San Francisco, CA 94102
Chair of Board of Trustees of
University of California at San Francisco Foundation
250 Executive Park Blvd., Suite 2000
San Francisco, CA 94143
Director of American Conservatory Theater
30 Grant Avenue
San Francisco, CA 94108
Director of California Chamber of Commerce
1201 K Street, 12th Floor
Sacramento, CA 95814
</TABLE>
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<PAGE> 99
<TABLE>
<S> <C>
Philip J. Quigley Chairman, Chief Executive Officer and
Director Director of Pacific Telesis Group
130 Kearney Street, Rm. 3700
San Francisco, CA 94108
Director of Varian Associates
3050 Hansen Way
P.O. Box 10800
Palo Alto, CA 94303
Carl E. Reichardt Chairman and Chief Executive Officer of the
Director Board of Directors of Wells Fargo & Company
420 Montgomery Street
San Francisco, CA 94105
Director of Ford Motor Company
The American Road
Dearborn, MI 48121
Director of Hospital Corporation of America,
HCA-Hospital Corp. of America
One Park Plaza
Nashville, TN 37203
Director of Pacific Gas and Electric Company
77 Beale Street
San Francisco, CA 94105
Director of Newhall Management Corporation
23823 Valencia Blvd.
Valencia, CA 91355
Donald B. Rice President, Chief Operating Officer and Director of
Director Teledyne, Inc.
2049 Century Park East
Los Angeles, CA 90067
Director of Vulcan Materials Company
One Metroplex Drive
Birmingham, AL 35209
Retired Secretary of the Air Force
Susan G. Swenson President and Chief Executive Officer of Cellular One
Director 651 Gateway Blvd.
San Francisco, CA 94080
Chang-Lin Tien Chancellor of University of California at Berkeley
Director UC at Berkeley
Berkeley, CA 94720
</TABLE>
C-12
<PAGE> 100
<TABLE>
<S> <C>
John A. Young President, Director and Chief Executive Officer of
Director Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304
Director of Chevron Corporation
225 Bush Street
San Francisco, CA 94104
William F. Zuendt Director of 3Com Corp.
President 5400 Bayfront Plaza
P.O. Box 58145
Santa Clara, CA 95052
Director of MasterCard International
888 Seventh Avenue
New York, NY 10106
Trustee of Golden Gate University
536 Mission Street
San Francisco, CA 94163
</TABLE>
BZW Barclays Global Fund Advisors ("BGFA"), a wholly-owned
subsidiary of BZW Barclays Global Investors, N.A. ("BGI", formerly, Wells Fargo
Institutional Trust Company), serves as sub-adviser to the Asset Allocation
Fund of the Company and as adviser or sub-adviser to certain other open-end
management investment companies.
The directors and officers of BGFA consist primarily of persons
who during the past two years have been active in the investment management
business of the former sub-adviser to the Asset Allocation Fund, Wells Fargo
Nikko Investment Advisors ("WFNIA") and, in some cases, the service business of
BGI. With the exception of Irving Cohen, each of the directors and executive
officers of BGFA will also have substantial responsibilities as directors
and/or officers of BGI. To the knowledge of the Registrant, except as set
forth below, none of the directors or executive officers of BGFA is or has been
at any time during the past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature.
<TABLE>
<CAPTION>
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
--------------------- --------------------------------
<S> <C>
Frederick L.A. Grauer Chairman and Director of WFNIA and WFITC+
Chairman, Director
Donald L. Luskin Chief Executive Officer of WFNIA's Defined Contribution Group+
Vice Chairman & Director
</TABLE>
C-13
<PAGE> 101
<TABLE>
<S> <C>
Irving Cohen Chief Financial Officer and Chief Operating Officer of Barclays Bank PLC,
Director New York Branch and Chief Operating Officer of Barclays Group, Inc.
(USA)*: previously Chief Financial Officer of Barclays de Zoete Wedd
Securities Inc. (1994)*
Andrea M. Zolberti Chief Financial Officer of WFNIA and WFITC+
Chief Financial Officer
Vincent J. Bencivenga Previously Vice President at State Street Bank & Trust Company++
Chief Fiduciary Officer
</TABLE>
* 222 Broadway, New York, New York, 10038.
+ 45 Fremont Street, San Francisco, California 94105.
++ One Financial Center, Boston, Massachusetts 02111.
Prior to January 1, 1996, WFNIA served as the sub-adviser to the
Asset Allocation Fund of the Company and as adviser or sub-adviser to various
other open-end management investment companies. For additional information,
see "Advisory, Administration and Distribution Arrangements" in the Prospectus
describing the Asset Allocation Fund and "Management" in the Statement of
Additional Information of such Fund. For information as to the business,
profession, vocation or employment of a substantial nature of each of the
officers and management committees of WFNIA, reference is made to WFNIA's Form
ADV and Schedules A and D filed under the Investment Advisers Act of 1940, File
No. 801-36479, incorporated herein by reference.
Item 29. Principal Underwriters.
(a) Stephens Inc., distributor for the Registrant, does not
presently act as investment adviser for any other registered investment
companies, but does act as principal underwriter for Stagecoach Funds, Inc.,
Stagecoach Inc., and Stagecoach Trust; and is the exclusive placement agent for
Master Investment Trust, Managed Series Investment Trust, Life & Annuity Trust
and Master Investment Portfolio, which are registered open-end management
investment companies, and has acted as principal underwriter for the Liberty
Term Trust, Inc., Nations Government Income Term Trust 2003, Inc., Nations
Government Income Term Trust 2004, Inc. and the Managed Balanced Target
Maturity Fund, Inc., which are closed-end management investment companies, and
Nations Fund Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc. and the
Capitol Mutual Funds, which are open-end management investment companies.
(b) Information with respect to each director and officer of
the principal underwriter is incorporated by reference to Form ADV and
Schedules A and D filed by Stephens Inc. with the Securities and Exchange
Commission pursuant to The Investment Advisers Act of 1940 (file no.
501-15510).
(c) Not applicable.
C-14
<PAGE> 102
Item 30. Location of Accounts and Records.
(a) The Registrant maintains accounts, books and other
documents required by Section 31(a) of the Investment Company Act of 1940 and
the rules thereunder (collectively, "Records") at the offices of Stephens Inc.,
111 Center Street, Little Rock, Arkansas 72201.
(b) Wells Fargo Bank maintains all Records relating to its
services as investment adviser and custodian and transfer and dividend
disbursing agent at 525 Market Street, San Francisco, California 94105.
(c) WFNIA and Wells Fargo Institutional Trust Company, N.A.
maintain all Records relating to their services as sub-adviser and custodian,
respectively, to the Asset Allocation Fund for the period prior to January 1,
1996, at 45 Fremont Street, San Francisco, California 94105.
(d) BGFA maintains all Records relating to its services as
sub-adviser to the Asset Allocation Fund for the period beginning January 1,
1996 at 45 Fremont Street, San Francisco, California 94105.
(e) Stephens maintains all Records relating to its services as
sponsor, administrator and distributor at 111 Center Street, Little Rock,
Arkansas 72201.
Item 31. Management Services.
Other than as set forth under the captions "Management of the Fund
and the Master Portfolio" in the Prospectus constituting Part A of this
Registration Statement and "Management" in the Statement of Additional
Information constituting Part B of this Registration Statement, the Registrant
is not a party to any management-related service contract.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant
to the provisions set forth above in response to Item 27,
or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in
such Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any
action, suit or
C-15
<PAGE> 103
proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
(d) Registrant undertakes to hold a special meeting of its
shareholders for the purpose of voting on the question of
removal of a director or directors if requested in writing
by the holders of at least 10W of the Company's outstanding
voting securities, and to assist in communicating with
other shareholders as required by Section 16(c) of the
Investment Company Act of 1940.
(e) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of its most current
annual report to shareholders, upon request and without
charge.
C-16
<PAGE> 104
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to its Registration Statement on Form N-1A
to be signed on its behalf by the undersigned, thereto duly authorized in the
City of Little Rock, State of Arkansas on the 19th day of February, 1996.
OVERLAND EXPRESS FUNDS, INC.
By /s/ Richard H. Blank, Jr.
-------------------------------------
(Richard H. Blank, Jr.)
Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-1A has been signed below by the following
persons in the capacities and on the date indicated:
Signature Title
--------- -----
/s/ R. Greg Feltus Director, Chairman and President
------------------------------------ (Principal Executive Officer)
(R. Greg Feltus)
/s/ Richard H. Blank, Jr. Secretary and Treasurer (Chief
------------------------------------ Operating Officer)
(Richard H. Blank, Jr.)
/s/ Jack S. Euphrat Director
------------------------------------
(Jack S. Euphrat)
/s/ Thomas S. Goho Director
------------------------------------
(Thomas S. Goho)
/s/ Zoe Ann Hines Director
------------------------------------
(Zoe Ann Hines)
/s/ W. Rodney Hughes Director
------------------------------------
(W. Rodney Hughes)
/s/ Robert M. Joses Director
------------------------------------
(Robert M. Joses)
/s/ J. Tucker Morse Director
------------------------------------
(J. Tucker Morse)
*By: /s/ Richard H. Blank, Jr.
------------------------------------
(Richard H. Blank, Jr.)
As Attorney-in-Fact
<PAGE> 105
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to the Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereto duly authorized in the City of Little Rock, State of
Arkansas on the 19th day of February, 1996.
MASTER INVESTMENT TRUST
By /s/ Richard H. Blank, Jr.
-------------------------------------
(Richard H. Blank, Jr., Secretary)
Signature Title
--------- -----
/s/ R. Greg Feltus Trustee, Chairman and President
------------------------------------ (Principal Executive Officer)
(R. Greg Feltus)
/s/ Richard H. Blank, Jr. Secretary and Treasurer (Chief
------------------------------------ Operating Officer)
(Richard H. Blank, Jr.)
/s/ Jack S. Euphrat Trustee
------------------------------------
(Jack S. Euphrat)
/s/ Thomas S. Goho Trustee
------------------------------------
(Thomas S. Goho)
/s/ Zoe Ann Hines Trustee
------------------------------------
(Zoe Ann Hines)
/s/ W. Rodney Hughes Trustee
------------------------------------
(W. Rodney Hughes)
/s/ Robert M. Joses Trustee
------------------------------------
(Robert M. Joses)
/s/ J. Tucker Morse Trustee
------------------------------------
(J. Tucker Morse)
*By: /s/ Richard H. Blank, Jr.
------------------------------------
(Richard H. Blank, Jr.)
As Attorney-in-Fact
<PAGE> 106
OVERLAND EXPRESS FUNDS, INC.
SEC FILE NOS. 33-16296; 811-8275
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
EX-27.1A - Financial Data Schedule - Strategic Growth Fund Class A
EX-27.1D - Financial Data Schedule - Strategic Growth Fund Class D
EX-99.B10 - Opinion and Consent of Counsel
EX-99.B11 - Consent of Auditors - KPMG Peat Marwick LLP
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 121
<NAME> STRATEGIC GROWTH FUND CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 74,443,570
<INVESTMENTS-AT-VALUE> 85,689,549
<RECEIVABLES> 292,666
<ASSETS-OTHER> 72,804
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 86,055,019
<PAYABLE-FOR-SECURITIES> 468,750
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 243,799
<TOTAL-LIABILITIES> 712,549
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,306,393
<SHARES-COMMON-STOCK> 3,508,125
<SHARES-COMMON-PRIOR> 2,012,671
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,105,810
<ACCUMULATED-NET-GAINS> 1,940,229
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,245,979
<NET-ASSETS> 59,016,086
<DIVIDEND-INCOME> 132,455
<INTEREST-INCOME> 186,812
<OTHER-INCOME> 0
<EXPENSES-NET> (925,589)
<NET-INVESTMENT-INCOME> (606,322)
<REALIZED-GAINS-CURRENT> 10,895,873
<APPREC-INCREASE-CURRENT> 8,601,611
<NET-CHANGE-FROM-OPS> 18,891,162
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (6,182,997)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,168,399
<NUMBER-OF-SHARES-REDEEMED> 965,246
<SHARES-REINVESTED> 292,301
<NET-CHANGE-IN-ASSETS> 43,263,312
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 32,912
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 302,821
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 983,085
<AVERAGE-NET-ASSETS> 60,870,385
<PER-SHARE-NAV-BEGIN> 13.29
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> 5.66
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.09)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.82
<EXPENSE-RATIO> 1.28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 124
<NAME> STRATEGIC GROWTH FUND CLASS D
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 74,443,570
<INVESTMENTS-AT-VALUE> 85,689,549
<RECEIVABLES> 292,666
<ASSETS-OTHER> 72,804
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 86,055,019
<PAYABLE-FOR-SECURITIES> 468,750
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 243,799
<TOTAL-LIABILITIES> 712,549
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,955,679
<SHARES-COMMON-STOCK> 1,266,478
<SHARES-COMMON-PRIOR> 927,153
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,105,810
<ACCUMULATED-NET-GAINS> 1,940,229
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,245,979
<NET-ASSETS> 26,326,384
<DIVIDEND-INCOME> 132,455
<INTEREST-INCOME> 186,812
<OTHER-INCOME> 0
<EXPENSES-NET> (925,589)
<NET-INVESTMENT-INCOME> (606,322)
<REALIZED-GAINS-CURRENT> 10,895,873
<APPREC-INCREASE-CURRENT> 8,601,611
<NET-CHANGE-FROM-OPS> 18,891,162
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (2,772,646)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 552,068
<NUMBER-OF-SHARES-REDEEMED> 301,590
<SHARES-REINVESTED> 88,848
<NET-CHANGE-IN-ASSETS> 43,263,312
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 32,912
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 302,821
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 983,085
<AVERAGE-NET-ASSETS> 60,870,385
<PER-SHARE-NAV-BEGIN> 16.54
<PER-SHARE-NII> (0.16)
<PER-SHARE-GAIN-APPREC> 6.99
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (2.58)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.79
<EXPENSE-RATIO> 2.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
Exhibit 99.B10
February 20, 1996
(202) 887-1500
Overland Express Funds, Inc.
111 Center Street
Little Rock, Arkansas 72201
Re: Shares of Common Stock of the
Strategic Growth Fund of Overland Express Funds, Inc.
Ladies/Gentlemen:
We refer to Post-Effective Amendment No. 32 and Amendment No. 34
to the Registration Statement on Form N-1A (SEC File Nos. 33-16296 and
811-8275) (the "Registration Statement") of Overland Express Funds, Inc.(the
"Company") relating to the registration of an indefinite number of shares of
common stock of the Strategic Growth Fund of the Company (collectively, the
"Shares").
We have been requested by the Company to furnish this opinion as
Exhibit 10 to the Registration Statement.
We have examined such records, documents, instruments,
certificates of public officials and of the Company, made such inquiries of the
Company, and examined such questions of law as we have deemed necessary for the
purpose of rendering the opinion set forth herein. We have also verified with
the Company's transfer agent the maximum number of shares issued by the Company
during fiscal year 1995. We have assumed the genuineness of all signatures and
the authenticity of all items submitted to us as originals and the conformity
with originals of all items submitted to us as copies.
<PAGE> 2
Based upon and subject to the foregoing, we are of the opinion
that:
The issuance and sale of the Shares by the Company have been duly
and validly authorized by all appropriate action, and assuming delivery by sale
or in accord with the Fund's dividend reinvestment plan in accordance with the
description set forth in the Registration Statement, as amended, the Shares
will be legally issued, fully paid and nonassessable by the Company.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we hereby consent to the use of our name and to the
reference to our firm under the caption "Legal Counsel" in the Prospectus and
the description of advice rendered by our firm under the heading "Management"
in the Statement of Additional Information, both of which are included as part
of the Registration Statement.
Very truly yours,
/s/ MORRISON & FOERSTER
MORRISON & FOERSTER
<PAGE> 1
Exhibit 99.B11
Independent Auditors' Consent
The Board of Directors and Shareholders
Overland Express Funds, Inc.:
We consent to the inclusion in the Overland Express Funds, Inc.
Post-Effective Amendment No. 32 to the Registration Statement Number 33-16296
on Form N-1A under the Securities Act of 1933 and Amendment No. 34 to the
Registration Statement Number 811-8275 on Form N-1A under the Investment
Company Act of 1940 of our report dated February 14, 1996, on the financial
statements and financial highlights of the Strategic Growth Fund (one of the
funds comprising Overland Express Funds, Inc.) for the year ended December 31,
1995, which report has been included in the Statement of Additional
Information.
We also consent to the reference to our firm under the heading
"Financial Highlights" in the prospectus, and "Independent Auditors" in the
Statement of Additional Information.
/s/ KPMG Peat Marwick LLP
San Francisco, California
February 19, 1996
