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As filed with the Securities and Exchange Commission
on December 22, 1995
Registration No. 811-6415
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM N-1A
AMENDMENT NO. 7 TO THE
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
MASTER INVESTMENT TRUST
(formerly Cash Investment Trust)
(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) 643-9691
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 Avenue, N.W., Suite 5500
Washington, D.C. 20006-1812
This document contains a total of ___ pages.
The exhibit index begins on page ___.
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EXPLANATORY NOTE
This Amendment No. 7 to the Registration Statement is being filed to
register a new master portfolio of Master Investment Trust (the "Trust"), the
Capital Appreciation Master Portfolio. The Aggressive Growth Fund of Stagecoach
Funds, Inc. and the Strategic Growth Fund of Overland Express Funds, Inc. will
each invest substantially all of their assets in the Capital Appreciation Master
Portfolio.
This Amendment to the Registration Statement has been filed by the
Registrant pursuant to Section 8(b) of the Investment Company Act of 1940.
However, beneficial interests in the Registrant are not being registered under
the Securities Act of 1933 (the "1933 Act") because such interests will be
issued solely in private placement transactions that do not involve any "public
offering" within the meaning of Section 4(2) of the 1933 Act. Investments in
the Registrant may only be made by registered broker/dealers or by investment
companies, insurance company separate accounts, common commingled trust funds,
group trusts or similar organizations or entities that are "accredited
investors" within the meaning of Regulation D under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any beneficial interest in the Registrant.
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Cross Reference Sheet
Capital Appreciation Master Portfolio
Form N-1A Item Number
<TABLE>
<CAPTION>
Part A Prospectus Caption
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<S> <C>
4 General Description of Registrant; Investment Objectives; Additional Information About
Permitted Investment Activities of the Master Portfolios; Other Investment Policies
5 Management of the Master Portfolios; Master/Feeder Structure; Investment Adviser, Custodian and
Transfer Agent; Sponsor, Administrator and Placement Agent; Expenses
6 Organization and Interests; Dividends and Distributions; Purchase of Securities; Taxes
7 Purchase of Securities; Determination of Net Asset Value;
8 Redemption or Repurchase
9 Not Applicable
Part B Statement of Additional Information
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10 Cover Page
11 Table of Contents
12 Not Applicable
13 Investment Objectives and Policies; Investment Restrictions; Additional Permitted Investment
Activities
14 Management of the Trust
15 Control Persons and Principal Holders of Securities
16 Investment Advisory and other Services; Custodian and Transfer and Dividend Disbursing
Agent; Independent Auditors
17 Brokerage Allocation and Other Practices
18 Capital Stock and Other Securities
19 Purchase, Redemption and Pricing of Securities
20 Tax Status
21 Underwriters
22 Calculation of Performance Data
23 Financial Information
Part C Other Information
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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>
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MASTER INVESTMENT TRUST
PART A
DATED DECEMBER 22, 1995
Responses to Items 1 through 3 have been omitted pursuant to paragraph F.4. of
the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
General. Master Investment Trust (the "Trust") is a no-load,
diversified, open-end management investment company which was organized as a
business trust under the laws of Delaware on August 15, 1991. The Trust is a
"series fund", which is a mutual fund divided into separate portfolios. The
Trust currently offers five diversified portfolios: the Cash Investment Trust
Master Portfolio (the "CIT Master Portfolio"), the Short-Term Municipal Income
Master Portfolio (the "Municipal Income Master Portfolio"; formerly, the "1-3
Year Duration Municipal Income Master Portfolio"), the Short-Term
Government-Corporate Income Master Portfolio (formerly, the "1-3 Year Duration
Full Faith and Credit Government Income Master Portfolio"), the Tax-Free Money
Market Master Portfolio, and the Capital Appreciation Master Portfolio, (each a
"Master Portfolio", and collectively, the "Master Portfolios"). Each Master
Portfolio is treated as a separate entity for certain matters under the
Investment Company Act of 1940, as amended (the "1940 Act"), and for other
purposes. A shareholder of one Master Portfolio is not deemed to be a
shareholder of any other Master Portfolio. As described below, for certain
matters Trust shareholders vote together as a group; as to others they vote
separately by Master Portfolio. From time to time, other series may be
established and sold pursuant to other offering documents.
The primary investors in the Master Portfolios are the corresponding
funds of Overland Express Funds, Inc. ("Overland Express") and Stagecoach
Funds, Inc. ("Stagecoach Funds"). These include the Overland Sweep Fund, the
Short- Term Municipal Income Fund (formerly, the "1-3 Year Duration Municipal
Income Fund"), the Short-Term Government- Corporate Income Fund (formerly, the
"1-3 Year Duration Full Faith and Credit Government Income Fund"), the National
Tax-Free Institutional Money Market Fund, and the Strategic Growth Fund of
Overland Express and the National Tax-Free Money Market Mutual Fund and the
Aggressive Growth Fund of Stagecoach Funds (each a "Fund" and collectively, the
"Funds"). Each Fund invests all of its assets in the corresponding Master
Portfolio of the Trust, rather than in a portfolio of securities. Each Master
Portfolio has substantially the same investment objective as the corresponding
Fund or Funds. Therefore, each Fund's investment experience corresponds
directly with its Master Portfolio's investment experience. Shares of the
Master Portfolios may be purchased only by other investment companies or
similar accredited investors (as defined below).
Wells Fargo Bank, N.A. ("Wells Fargo Bank") serves as each Master
Portfolio's investment adviser. Stephens Inc. ("Stephens") serves as each
Master Portfolio's sponsor, administrator and placement agent. Beneficial
interests in the Trust are issued solely in private placement transactions that
do not involve any "public offering" within the meaning of Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act"). Investments in the Trust
may only be made
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by registered broker/dealers or by investment companies, insurance company
separate accounts, common or commingled trust funds, group trusts or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This registration statement, as amended, does
not constitute an offer to sell, or the solicitation of an offer to buy, any
"security" within the meaning of the 1933 Act.
A. INVESTMENT OBJECTIVES
1. CASH INVESTMENT TRUST MASTER PORTFOLIO
The investment objective of the CIT Master Portfolio is to provide its
investors with a high level of current income, while preserving capital and
liquidity. The CIT Master Portfolio seeks to achieve its investment objective
by investing only in U.S. dollar-denominated "Eligible Securities" with
remaining maturities not exceeding 397 days (13 months), as defined in Rule
2a-7 under the 1940 Act, and seeks to maintain a dollar-weighted average
portfolio maturity of 90 days or less. An Eligible Security is a security that
is determined to present minimal credit risks and is rated in one of the two
highest rating categories by the required number of nationally recognized
statistical rating organizations or, if unrated, is determined to be of
comparable quality to such rated securities. These determinations are made by
Wells Fargo Bank, as the Master Portfolio's investment adviser, under
guidelines adopted by the Trust's Board of Trustees, although in certain
instances, the Board of Trustees must approve or ratify the Master Portfolio's
investments. The Board of Trustees of the Trust (or Wells Fargo Bank under
authority delegated to it as investment adviser to the Master Portfolio)
determines on an ongoing basis that any Eligible Securities purchased present
minimal credit risks. The CIT Master Portfolio endeavors to maintain a stable
net asset value of $1.00 per share; however, there is no assurance that this
objective can be achieved.
The Eligible Securities in which the CIT Master Portfolio may invest are:
(i) obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government obligations");
(ii) negotiable certificates of deposit, fixed time deposits, bankers'
acceptances or other short-term obligations of U.S. 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 Federal Deposit
Insurance Corporation ("FDIC");
(iii) commercial paper rated at the date of purchase "P-1" by Moody's
Investors Service, Inc. ("Moody's") or "A- 1+" or "A-1" by
Standard & Poor's Corporation ("S&P");
(iv) commercial paper unrated at the date of purchase but secured by a
letter of credit from a U.S. bank that meets the above criteria
for investment;
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(v) certain floating- and variable-rate instruments (discussed below);
(vi) certain repurchase agreements (discussed below); and
(vii) short-term, U.S. dollar-denominated obligations of U.S. branches
of foreign banks that at the time of investment have more than $10
billion, or the equivalent in other currencies, in total assets.
2. SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO
The investment objective of the Municipal Income Master Portfolio is to
provide investors with a high level of income exempt from federal income tax,
while managing principal volatility. Wells Fargo Bank, as investment adviser
to the Municipal Income Master Portfolio, pursues the objective of the Master
Portfolio by investing (under normal market conditions) substantially all of
the assets of the Master Portfolio in the following types of municipal
obligations that pay interest which is exempt from federal income tax: bonds,
notes and commercial paper issued by or on behalf of states, territories, and
possessions of the United States, the District of Columbia, and their political
subdivisions, agencies instrumentalities and authorities, the interest on
which, in the opinion of counsel to the issuer or bond counsel is exempt from
federal income tax. These municipal obligations and the taxable investments
described below may bear interest at rates that are not fixed ("floating- and
variable-rate instruments"). The Municipal Income Master Portfolio seeks to
manage principal volatility by diversifying its assets among permissible
investments based, in part, on their duration, maturity or other
characteristics, that affect their sensitivity to changes in market interest
rates. There can, of course, be no assurance that the Master Portfolio will
achieve its investment objective.
As a fundamental policy, at least 80% of the net assets of the Municipal
Income Master Portfolio are invested (under normal market conditions) in
municipal obligations that pay interest which is exempt from federal income
tax. However, as a matter of general operating policy, the Municipal Income
Master Portfolio seeks to have substantially all of its assets invested in such
municipal obligations. The Municipal Income Master Portfolio's investment
adviser may rely either on the opinion of counsel to the issuer of the
municipal obligations or bond counsel or on IRS rulings regarding the tax
treatment of these obligations. In addition, the Municipal Income Master
Portfolio may invest 25% or more of its assets in municipal obligations that
are related in such a way that an economic, business or political development
or change affecting one such obligation could also affect the other
obligations. For example, the Municipal Income Master Portfolio may own
different municipal obligations which pay interest based on the revenues of
similar types of projects. The Municipal Income Master Portfolio may also
invest in certain U.S. government obligations and money market instruments.
The portfolio turnover rate of the Municipal Income Master Portfolio for
the fiscal period beginning June 3, 1994 (commencement of operations) and ended
December 31, 1994 was 8%. Portfolio turnover generally involves some expenses
to the Municipal Income Master Portfolio, including dealer mark-ups and other
transaction costs on the sale of securities and the
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reinvestment in other securities. A high portfolio turnover rate should not
result in the Municipal Income Master Portfolio paying substantially more
brokerage commissions, since most transactions in Municipal Obligations are
effected on a principal basis. Portfolio turnover can also generate capital
gains tax consequences.
3. SHORT-TERM GOVERNMENT-CORPORATE INCOME MASTER PORTFOLIO
The investment objective of the Short-Term Government-Corporate Income
Master Portfolio is to provide investors with current income while managing
principal volatility. The Master Portfolio seeks to achieve its investment
objective by investing in obligations issued by the U.S. Government, its
agencies and instrumentalities and investment-grade corporate obligations. The
investment-grade securities that the Master Portfolio may purchase include U.S.
Treasury bonds, notes and bills; obligations of the U.S. Government, its
agencies and instrumentalities, including government sponsored enterprises;
corporate bonds and notes, asset-backed securities and money market
instruments. The Master Portfolio seeks to manage principal volatility by
diversifying its assets among permissible investments based, in part, on their
duration, maturity or other characteristics that affect the sensitivity of such
investments to changes in market interest rates. There can, of course, be no
assurance that the Master Portfolio will achieve its investment objective.
The portfolio turnover rate for the Master Portfolio for the period
beginning September 19, 1994 (commencement of operations) and ended December
31, 1994 was 0%. Portfolio turnover generally involves some expenses to the
Master Portfolio including dealer mark-ups and other transaction 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 costs, since most transactions in government securities are
effected on a principal basis. Portfolio turnover can also generate capital
gains tax consequences.
The U.S. Treasury bonds in which the Master Portfolio invests typically
have maturities greater than 20 years; the U.S. Treasury notes in which the
Master Portfolio invests typically have maturities ranging from 2 to 10 years.
The U.S. Treasury bills in which the Master Portfolio invests generally have
maturities of up to 1 year and are issued on a discount basis.
4. TAX-FREE MONEY MARKET MASTER PORTFOLIO
The investment objective of the Tax-Free Money Market Master Portfolio is
to provide investors with a high level of income exempt from federal income
tax, while preserving capital and liquidity. The Master Portfolio seeks to
achieve its investment objective by investing in high-quality, short-term U.S.
dollar denominated money market instruments, primarily municipal obligations,
with remaining maturities not exceeding 13 months. The Tax-Free Money Market
Master Portfolio endeavors to maintain a stable net asset value of $1.00 per
share; however, there can be no assurance that this objective will be achieved
Wells Fargo Bank, as investment adviser to the Tax-Free Money Market
Master Portfolio, pursues the objective of the Master Portfolio by investing
(under normal market conditions)
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substantially all of the assets of the Master Portfolio in the following types
of municipal obligations that pay interest which is exempt from federal income
tax: Bonds, notes and commercial paper issued by or on behalf of states,
territories, and possessions of the United States (including the District of
Columbia), and their political subdivisions, agencies, instrumentalities
(including government-sponsored enterprises) and authorities, the interest on
which, in the opinion of counsel to the issuer or bond counsel, is exempt from
federal income tax. These municipal obligations and the taxable investments
described below may bear interest at rates that are not fixed (floating- and
variable-rate instruments).
The Master Portfolio may temporarily invest some of its assets in cash
reserves or certain high-quality, taxable money market instruments or may
engage in certain other investment activities as described in this Part A. The
Master Portfolio may elect to invest temporarily up to 20% of its net assets in
certain permitted taxable investments, which include cash reserves, U.S.
Government obligations, obligations of domestic banks, commercial paper,
taxable municipal obligations and repurchase agreements. The Master Portfolio
also may invest in U.S. dollar-denominated obligations of foreign banks and
foreign securities. Such temporary investments would most likely be made when
there is an unexpected or abnormal level of investor purchases or redemptions
of Interests in the Master Portfolio or because of unusual market conditions.
The income from these temporary investments and investment activities may be
subject to federal income tax. However, as stated above, Wells Fargo Bank
seeks to invest substantially all of the Master Portfolio's assets in
securities exempt from such tax. A more complete description of tax-free
municipal obligations, taxable money market instruments and other investment
activities is contained in the "Appendix -- Additional Investment Policies."
As a matter of fundamental policy, at least 80% of the net assets of the
Master Portfolio are invested (under normal market conditions) in municipal
obligations that pay interest which is exempt from federal income tax and is
not subject to the federal alternative minimum tax. However, as a matter of
general operating policy, the Master Portfolio seeks to have substantially all
of its assets invested in such municipal obligations. The Master Portfolio's
investment adviser may rely either on the opinion of counsel to the issuer of
the municipal obligations or on Internal Revenue Service ("IRS") rulings
regarding the tax treatment of these obligations. In addition, the Master
Portfolio may invest 25% or more of its assets in municipal obligations that
are related in such a way that an economic, business or political development
or change affecting one such obligation would also affect the other
obligations; for example, the Master Portfolio may own different municipal
obligations which pay interest based on the revenues of similar types of
projects.
5. CAPITAL APPRECIATION MASTER PORTFOLIO
The investment objective of the Capital Appreciation Master Portfolio is
to provide investors with an above- average level of capital appreciation. The
Capital Appreciation 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.
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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 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
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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 ("NRSOs"), such as Moody's, 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.
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).
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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 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.
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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 or 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.
B. ADDITIONAL INFORMATION ABOUT PERMITTED INVESTMENT ACTIVITIES OF THE
MASTER PORTFOLIOS
U.S. GOVERNMENT OBLIGATIONS
Certain of the debt instruments purchased by the Master Portfolios may be
obligations issued by the U.S. Government including U.S. Treasury bonds, notes
and bills and obligations issued or guaranteed by U.S. Government agencies or
instrumentalities, including government-sponsored enterprises ("U.S.
Government obligations"). U.S. Treasury bonds, notes and bills and certain of
the obligations of certain agencies and instrumentalities of the U.S.
Government (such as the obligations of the Federal Housing Administration,
Small Business Administration and the Farmers Home Administration and
Government National Mortgage Association) are supported by the full faith and
credit of the United States or U.S. Treasury guarantees; others, such as those
of the Export-Import Bank of the United States, are supported by the right of
the issuer or guarantor to borrow from the U.S. Treasury; still others, such as
those of the Financing Corporation are supported by the discretionary authority
of the U.S. Government to purchase certain obligations of the agency or
instrumentality; and others, such as those of the Student Loan Marketing
Association ("SLMA"), the Federal Farm Credit Bank, the Federal Home Loan Bank,
the Resolution Funding Corporation, the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation ("FHLMC"), are supported only by
the credit of the agency or instrumentality issuing or guaranteeing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States, the investor must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
which agency or instrumentality may be privately owned. There can be no
assurance that the U.S. Government would provide financial support to its
agencies or instrumentalities (including government-sponsored enterprises)
where it is not obligated to do so. Some of these instruments may be variable-
or floating-rate instruments. In addition, U.S. Government obligations are
subject to fluctuations in market value due to fluctuations in market interest
rates. As a general matter, the value of debt instruments, including U.S.
Government obligations, declines when market interest
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rates increase and rises when market interest rates decrease. Certain types of
U.S. Government obligations are subject to fluctuations in yield or value due
to their structure or contract terms.
The Tax-Free Money Market Master Portfolio may invest in various types of
U.S. Government obligations with remaining maturities of up to 13 months.
BONDS
Certain of the debt instruments purchased by the Municipal Income Master
Portfolio and the Government-Corporate Income Master Portfolio may be bonds. A
bond is an interest-bearing security issued by a company or governmental unit.
The issuer of a bond has a contractual obligation to pay interest at a stated
rate on specific dates and to repay principal (the bond's face value)
periodically or on a specified maturity date. An issuer may have the right to
redeem or "call" a bond before maturity, in which case the investor may have to
reinvest the proceeds at lower market rates.
Most bonds bear interest income at a "coupon" rate that is fixed for the
life of the bond. The value of a fixed rate bond usually rises when market
interest rates fall, and falls when market interest rates rise. Accordingly, a
fixed rate bond's yield (income as a percent of the bond's current value) may
differ from its coupon rate as its value rises or falls.
Other types of bonds bear income at an interest rate that is adjusted
periodically. Because of their adjustable interest rates, the value of
"floating-rate" or "variable-rate" bonds fluctuates much less in response to
market interest rate movements than the value of fixed rate bonds. Also, the
Master Portfolios may treat some of these bonds as having a shorter maturity
for purposes of calculating the weighted average maturity of their investment
portfolios.
Bonds may be senior or subordinated obligations. Senior obligations
generally have the first claim on a corporation's earnings and assets and, in
the event of liquidation, are paid before subordinated debt. Bonds may be
unsecured (backed only by the issuer's general creditworthiness) or secured
(also backed by specified collateral).
ASSET-BACKED SECURITIES
The Short-Term Government-Corporate Income Master Portfolio may invest in
various types of asset-backed securities. Asset-backed securities are
typically backed by an underlying pool of assets (such as credit card or
automobile trade receivables or corporate loans or bonds) which provides the
interest and principal payments to investors. Credit quality depends primarily
on the quality of the underlying assets and the level of credit support, if
any, provided by the issuer. The underlying assets may be subject to
prepayment which can shorten the life of asset- backed securities and may lower
their return. The value of asset-backed securities may change because of
actual or perceived changes in the creditworthiness of the originator,
servicing agent, or of the financial institution providing the credit support.
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FLOATING- AND VARIABLE-RATE INSTRUMENTS
Certain of the debt instruments that the Master Portfolios may purchase
bear interest at rates that are not fixed, but float or vary with, for example,
changes in specified market rates or indices or at specified intervals. These
floating- and variable- rate instruments typically have maturities of more than
13 months but may carry a demand feature that would permit the holder to tender
them back to the issuer at par value prior to maturity. The Master Portfolios
may purchase certificates of participation in pools of floating- and variable-
rate instruments from banks or other financial institutions. With respect to
the pass-through tax status of these certificates, Wells Fargo Bank, as
investment adviser, may rely upon either the opinion of counsel or IRS rulings
regarding the tax-exempt status of these certificates.
Wells Fargo Bank, as investment adviser to the Master Portfolios,
monitors on an ongoing basis the ability of an issuer of a demand instrument to
pay principal and interest on demand. Events affecting the ability of the
issuer of a demand instrument to make payment when due may occur between the
time a Master Portfolio elects to demand payment and the time payment is due,
thereby affecting the Master Portfolio's ability to obtain payment at par.
Wells Fargo Bank, in accordance with guidelines approved by the Trust's Board
of Trustees, determines the liquidity of any instruments which have a demand
feature that is not exercisable within seven days, provided that an active
secondary market exists.
The Municipal Income Master Portfolio may invest in variable-rate
instruments with a maximum final maturity of up to 30 years, provided the
period remaining until the next readjustment of the instrument's interest rate,
or the period remaining until the principal amount can be recovered through
demand, is less than 5 years.
A Master Portfolio may, in accordance with policies of the Securities and
Exchange Commission ("Commission"), account for these instruments as maturing
at the next interest-rate readjustment date or the date at which such Master
Portfolio may tender the instrument back to the issuer, whichever is later.
The Tax-Free Money Market Master Portfolio may invest in floating- and
variable-rate obligations even if they carry stated maturities in excess of 13
months, upon compliance with certain conditions of Commission rules, in which
case such obligations may be treated in accordance with these conditions as
having maturities not exceeding 13 months.
LETTERS OF CREDIT
Certain of the debt obligations, certificates of participation,
commercial paper and other short-term obligations which the CIT Master
Portfolio and the Tax-Free Money Market Porfolio are permitted to purchase
may be backed by an unconditional and irrevocable letter of credit of a bank,
savings and loan association or insurance company which assumes the obligation
for payment of principal and interest in the event of default by the issuer.
Only banks, savings and loan associations and insurance companies that, in the
opinion of the investment adviser, are comparable in quality to issuers of
other permitted high-quality investments of the Master Portfolios may be
used for letter of credit-backed investments. Letters of credit issued by
domestic bank issuers will be considered to be obligations of domestic banks
excluded from each Master Portfolio's fundamental investment restriction and the
25% limitation regarding industry concentration.
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REPURCHASE AGREEMENTS
Each Master Portfolio may enter into repurchase agreements wherein the
seller of a security to such 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. Each Master Portfolio may
enter into repurchase agreements only with respect to obligations that could
otherwise be purchased by such Master Portfolio. All repurchase agreements
will be fully collateralized based on values that are marked to market daily.
While the maturities of the underlying securities in a repurchase agreement
transaction may be greater than 13 months, the term of any repurchase agreement
on behalf of a Master Portfolio will always be less than 13 months. If the
seller defaults and the value of the underlying securities has declined, a
Master Portfolio may incur a loss. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, a Master Portfolio's
disposition of the security may be delayed or limited. The Master Portfolios
enter into repurchase agreements only with registered broker/dealers and
commercial banks that meet guidelines established by the Board of Trustees of
the Trust and that are not affiliated with Wells Fargo Bank. The Master
Portfolios may enter into pooled repurchase agreement transactions with other
funds advised by Wells Fargo Bank.
The Municipal Income, Short-Term Government-Corporate Income, and Capital
Appreciation Master Porfolios may not enter into a repurchase agreement with a
maturity of more than seven days, if, as a result, more than 15% of the market
value of such Master Portfolio's total net assets will be invested in
repurchase agreements with maturities of more than seven days and securities
that are illiquid by virtue of the absence of a readily available market or
legal or contractual restrictions on resale. The CIT and Tax-Free Money Market
Master Portfolios may not enter into a repurchase agreement with a maturity of
more than seven days, if, as a result, more than 10% of the market value of the
Master Portfolio's total net assets will be invested in repurchase agreements
with maturities of more than seven days, restricted securities and illiquid
securities. A Master Portfolio will only enter into repurchase agreements with
registered broker/dealers that report to the New York Federal Reserve Bank or
their affiliates and commercial banks that meet guidelines established by the
Board of Trustees and are not affiliated with Wells Fargo Bank.
MUNICIPAL OBLIGATIONS - MUNICIPAL INCOME MASTER PORTFOLIO
This section describes certain instruments in which the Municipal Income
Master Portfolio may invest. Municipal obligations are issued by states and
municipalities to raise money for various public purposes, including general
purpose financing for state and local governments as well as financing for
specific projects or public facilities. Municipal obligations may be backed by
the full taxing power of a state or municipality, by the revenues from a
specific project or the credit of a private organization. In addition, certain
municipal obligations may be supported by letters of credit furnished by
domestic or foreign banks. Yields on municipal obligations generally depend on
a variety of factors, including: the general conditions of the municipal note
and municipal bond markets; the size and maturity of the particular offering;
the maturity of the obligations; and the rating of the issue or issuer.
Furthermore, any adverse economic conditions
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or developments affecting a particular state or municipality could impact the
municipal obligations issued by such entities. The two principal
classifications of municipal obligations are "general obligation" securities
and "revenue" securities. General obligation securities are secured by the
issuer's pledge of its full faith, credit, and taxing power for the payment of
principal and interest. Revenue securities are payable only from revenues
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise tax or other specific revenue source such
as the user of the facility being financed. Private activity bonds held by the
Municipal Income Master Portfolio are in most cases revenue securities and are
not payable from the unrestricted revenues of the issuer. Consequently, the
credit quality of private activity bonds is usually directly related to the
credit standing of the corporate user of the facility involved.
If a municipal obligation ceases to be rated or is downgraded below an
investment grade rating after purchase by the Municipal Income Master
Portfolio, the Municipal Income Master Portfolio may retain or dispose of such
security. In any event, the Municipal Income Master Portfolio does not intend
to purchase or retain any municipal security that is rated below the top four
ratings categories by a nationally recognized statistical rating organization
("NRSRO"), or, if unrated, is considered by the investment adviser to be of
comparable quality. Securities rated in the fourth highest category are
considered to have speculative characteristics. A description of ratings is
contained in the Appendix to the Statement of Additional Information.
Municipal obligations may include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation bonds is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which
created the issuer. An issuer's obligation to pay principal or interest on an
instrument may be backed by an unconditional bank letter or line of credit,
guarantee, or commitment to lend.
Municipal obligations may include variable- or floating-rate instruments
issued by industrial development authorities and other governmental entities.
While there may not be an active secondary market with respect to a particular
instrument purchased by the Municipal Income Master Portfolio, the Master
Portfolio may demand payment of the principal and accrued interest on the
instrument or may resell it to a third party as specified in the instruments.
The absence of an active secondary market, however, could make it difficult for
the Master Portfolio to dispose of the instrument if the issuer defaulted on
its payment obligation or during periods the Master Portfolio is not entitled
to exercise its demand rights, and the Master Portfolio could, for these or
other reasons, suffer a loss.
Municipal obligations also may include participations in privately
arranged loans to municipal borrowers, some of which may be referred to as
"municipal leases", and units of participation in trusts holding pools of
tax-exempt leases. Such loans in most cases are not backed by the taxing
authority of the issuers and may have limited marketability or may be
marketable only by virtue of a provision requiring repayment following demand
by the lender. Any such loans made by the Municipal Income Master Portfolio
may have a demand provision permitting the Municipal Income Master Portfolio to
require payment within seven days. Participations in such loans, however, may
not have such a demand provision and may not be
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otherwise marketable. To the extent these securities are illiquid, they will
be subject to the Master Portfolio's limitation on investments in illiquid
securities. As it deems appropriate, Wells Fargo Bank will establish
procedures to monitor the credit standing of each such municipal borrower,
including its ability to meet contractual payment obligations. The Municipal
Income Master Portfolio will not purchase any unrated municipal leases unless
the investment adviser, following procedures approved by the Trust's Board of
Trustees, determines that such leases are of comparable quality to municipal
obligations that are rated in the top four rating categories by an NRSRO.
Municipal participation interests, which give the purchaser an undivided
interest in one or more underlying municipal obligations, may be purchased from
financial institutions. To the extent that municipal participation interests
are considered to be "illiquid securities", such instruments are subject to the
Master Portfolio's limitation on the purchase of illiquid securities.
In addition, the Municipal Income Master Portfolio may acquire "stand-by
commitments" from banks or broker/dealers with respect to municipal obligations
held in its portfolios. Under a stand-by commitment, a dealer agrees to
purchase at the Master Portfolio's option specified municipal obligations at a
specified price. The Master Portfolio acquires stand-by commitments solely to
facilitate portfolio liquidity and without intending to exercise its rights
thereunder for trading purposes.
Certain of the securities in which the Municipal Income Master Portfolio
invests are purchased on a when-issued basis, in which case delivery and
payment normally take place within 120 days after the date of the commitment to
purchase. The Master Portfolio will make commitments to purchase securities on
a when-issued basis only with the intention of actually acquiring the
securities, but may sell them before the settlement date if it is deemed
advisable. When-issued securities are subject to market fluctuation, and no
income accrues to the purchaser during the period prior to issuance. The
purchase price and the interest rate that are received on debt securities are
fixed at the time the purchaser enters into the commitment. Purchasing a
security on a when-issued basis can involve a risk that the market price at the
time of delivery may be lower than the agreed-upon purchase price, in which
case there could be an unrealized loss at the time of delivery.
The Municipal Income Master Portfolio will establish a segregated account
in which it will maintain cash or liquid, high-grade debt securities in an
amount at least equal in value to its commitments to purchase when-issued
securities. If the value of these assets declines, the Master Portfolio will
place additional liquid assets in the account on a daily basis so that the
value of the assets in the account is equal to the amount of such commitments.
MUNICIPAL OBLIGATIONS - TAX-FREE MONEY MARKET MASTER PORTFOLIO
Subject to the maturity and other restrictions under Rule 2a-7, the
Tax-Free Money Market Master Portfolio may invest in Municipal Obligations.
Municipal bonds generally have a maturity at the time of issuance of up to 40
years. Medium-term municipal notes are generally issued in anticipation of the
receipt of tax funds, of the proceeds of bond placements, or of other
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revenues. The ability of an issuer to make payments on notes is therefore
especially dependent on such tax receipts, proceeds from bond sales or other
revenues, as the case may be. Municipal commercial paper is a debt obligation
with a stated maturity of 270 days or less that is issued to finance seasonal
working capital needs or as short-term financing in anticipation of longer-term
debt. From time to time, the Master Portfolio may invest 25% or more of the
current value of its total assets in certain "private activity bonds," such as
pollution control bonds; provided, however, that such investments will be made
only to the extent they are consistent with the Master Portfolio's fundamental
policy of investing, under normal circumstances, at least 80% of its net assets
in municipal obligations that are exempt from federal income tax and are not
subject to the federal alternative minimum tax.
The Master Portfolio may invest in the following municipal obligations
with remaining maturities not exceeding 13 months:
(i) long-term municipal bonds rated at the date of purchase
"Aa" or better by Moody's or "AA" or better by S&P;
(ii) municipal notes rated at the date of purchase "MIG1" or
"MIG2" (or "VMIG1" or "VMIG2" in the case of an issue
having a variable rate with a demand feature) by Moody's or
"SP-1+", "SP-1" or "SP-2" by S&P; and
(iii) short-term municipal commercial paper rated at the date of
purchase "P-1" by Moody's or "A-1+", "A- 1" or "A-2" by
S&P.
TAXABLE INVESTMENTS
Pending the investment of proceeds from the sale of shares of the
Tax-Free Money Market Master Portfolio or proceeds from sales of portfolio
securities or in anticipation of redemptions or to maintain a "defensive"
posture when, in the opinion of Wells Fargo Bank, as investment adviser, it is
advisable to do so because of market conditions, the Master Portfolio may elect
to invest temporarily up to 20% of the current value of its net assets in cash
reserves, including the following taxable high-quality money market
instruments: (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; (iii) commercial paper rated at the date of purchase "P-1"
by Moody's or "A-1+" or "A-1" by S&P; (iv) certain repurchase agreements; and
(v) high-quality municipal obligations, the income from which may or may not be
exempt from federal income tax.
Moreover, the Master Portfolio may invest temporarily more than 20% of
its total assets in such securities and in high-quality, short-term municipal
obligations the interest on which is not exempt from federal income tax to
maintain a temporary defensive posture or in an effort to improve after-tax
yield to the Master Portfolio's shareholders when, in the opinion of Wells
Fargo Bank, as investment adviser, it is advisable to do so because of unusual
market conditions.
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OTHER INVESTMENT COMPANIES
For temporary investments, the Tax-Free Money Market Master Portfolio and
the Capital Appreciation Master Portfolio also may invest in shares of other
open-end investment companies that invest exclusively in high-quality
short-term securities subject to the limits set forth under Section 12 of the
1940 Act, provided however, that any such company has a fundamental policy of
investing, under normal market conditions, at least 80% of its net assets in
obligations that are exempt from federal income tax and are not subject to the
federal alternative minimum tax. Such investment companies can be expected to
charge management fees and other operating expenses that would be in addition
to those charged to the Master Portfolios; however, the Master Portfolios'
investment advisers have undertaken to waive its advisory fees with respect to
that portion of the Master Portfolios' assets so invested, except when such
purchase is part of a plan of merger, consolidation, reorganization or
acquisition. Under Section 12(d)(1) the Master Portfolios, together with any
company or companies controlled by it, generally prohibited from owning more
than 3% of the total outstanding voting stock of any such investment company,
nor may the Master Portfolios, together with any such company or companies,
invest more than 5% of its assets in any one such investment company or invest
more than 10% of its assets in securities of all such investment companies
combined.
FOREIGN OBLIGATIONS
The Tax-Free Money Market Master Portfolio may invest up to 25% of its
total assets in high-quality, short-term (13 months or less) debt obligations
of foreign branches of U.S. banks or U.S. branches of foreign banks that are
denominated in and pay interest in U.S. dollars. The Capital Application
Master Portfolio may invest in securities of foreign governments and private
issues 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 or underlying securities issued by a foreign
corporation. EDRs, 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 obligations involve certain
considerations that are not typically associated with investing in domestic
obligations. 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 uniform 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.
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C. TEMPORARY INVESTMENTS OF THE SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO
The Short-Term Municipal Income Master Portfolio may elect to invest
temporarily up to 20% of its net assets in U.S. Government Obligations,
negotiable certificates of deposit, bankers acceptance 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; commercial paper rated at
the date of purchase "P-1" by Moody's or "A-1+" or "A-1" by Standard & Poor's
Corporation ("S&P"); high-quality taxable municipal obligations; shares of
taxable or tax-free money market mutual funds; and repurchase agreements.
Finally, the Short-Term Municipal Income Master Portfolio may invest
temporarily in shares of other open-end, management investment companies,
subject to the limitations of Sections 12(d)(1) of the 1940 Act. Purchases of
shares of other investment companies will be limited to temporary investments
in shares of unaffiliated investment companies, and the Master Portfolio's
investment adviser will waive its fee 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. Such temporary
investments would most likely be made for cash management purposes or when
there is an unexpected or abnormal level of investor purchases or redemptions
of shares of the Municipal Income Master Portfolio or because of unusual market
conditions. The income from these temporary investments and investment
activities may be subject to federal income tax. However, as stated above,
Wells Fargo Bank seeks to invest substantially all of the Short-Term Municipal
Income Master Portfolio's assets in securities exempt from such tax. A more
complete description of tax-free municipal obligations, taxable money market
instruments and other investment activities is contained in the section
entitled "Additional Information About Permitted Investment Activities of the
Master Portfolios".
D. OTHER INVESTMENT POLICIES
Each Master Portfolio's investment objective and the classification of
each Master Portfolio as "diversified" may not be changed without the approval
of a majority vote of the Master Portfolio's investors.
As a matter of fundamental policy, the CIT Master Portfolio: (i) may
borrow from banks up to 10% of the current value of its net assets only for
temporary purposes 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 borrowing exceeds
5% of the Master Portfolio's net assets); and (ii) may not invest more than 25%
of its assets (i.e., concentrate) in any particular industry, excluding U.S.
Government obligations and obligations of domestic banks. (Foreign branches of
U.S. banks and U.S. branches of foreign banks are not domestic banks for
purposes of this exclusion.) As a matter of non-fundamental policy, the CIT
Master Portfolio may invest up to 10% of the current value of its net assets in
repurchase agreements having maturities of more than seven days, restricted
securities, illiquid securities, and fixed time deposits that are subject to
withdrawal penalties and that have maturities of more than seven days. If the
Trust's Board of Trustees determines,
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however, that the CIT Master Portfolio's investment objective can best be
achieved by a substantive change in a non- fundamental investment policy or
strategy, the CIT Master Portfolio may make such change without investor
approval and will make appropriate disclosure of any such material change in
the CIT Master Portfolio's prospectus.
As a matter of fundamental policy, each of the Municipal Income Master
Portfolio and the Short-Term Government- Corporate Income Master Portfolio may
borrow from banks up to 10% of the current value of its net assets only for
temporary purposes in order to meet redemptions, and these borrowings may be
secured by the pledge of up to 10% of the current value of such Master
Portfolio's net assets (but investments may not be purchased while any such
outstanding borrowing exceeds 5% of the respective Master Portfolio's net
assets). As a matter of fundamental policy, the Municipal Income Master
Portfolio and the Short-Term Government-Corporate Income Master Portfolio each
may not invest more than 25% of its assets (i.e., concentrate) in any
particular industry, excluding: (1) U.S. Government Obligations; and (2)
municipal obligations (for the purpose of this restriction, private activity
bonds and notes shall not be deemed municipal obligations if the payment of
principal and interest on such bonds or notes is the ultimate responsibility of
non-governmental issuers). As a matter of nonfundamental policy, the Municipal
Income and Short-Term Government- Corporate Income Master Portfolios may each
invest up to 15% of the current value of its net assets in securities that are
illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions on resale and fixed time deposits that are subject to
withdrawal penalties and that have maturities of more than seven days.
Disposing of illiquid securities may involve additional costs and require
additional time.
Except during temporary defensive periods, the Municipal Income Master
Portfolio and the Short-Term Government- Corporate Income Master Portfolio each
seeks to maintain an average weighted maturity of between 90 days and 2 years.
The maximum stated maturity of the Municipal Income Master Portfolio's
investments will not exceed 5 years for each individual security (though the
maximum stated maturity of certain variable-rate instruments purchased by the
Master Portfolio may be more than five years). The Short-Term
Government-Corporate Income Master Portfolio may invest in obligations of any
maturity.
As a matter of fundamental policy the Tax-Free Money Market Master
Portfolio may borrow from banks up to 10% of the current value of its net
assets only for temporary purposes 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
borrowing in excess of 5% of its net assets exists); (ii) may not make loans of
portfolio securities or other assets, except that loans for purpose of this
restriction will not include the purchase of fixed time deposits, repurchase
agreements, commercial paper and other short-term obligations, and other types
of debt instruments commonly sold in a public or private offering; and (iii)
may not 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 Master Portfolio's investments in that
industry would be 25% or more of the current value of the Master Portfolio's
total assets, provided that there is no limitation with respect to investments
in (a) municipal securities (for the purpose of this restriction, private
activity bonds shall not be
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deemed municipal securities if the payments of principal and interest on such
bonds is the ultimate responsibility of non-governmental users), (b) U.S.
Government obligations, and (c) certain obligations of domestic banks.
As a matter of non-fundamental policy, the Tax-Free Money Market Master
Portfolio may invest up to 10% of the current value of its net assets in
repurchase agreements having maturities of more than seven days, illiquid
securities, fixed time deposits that are subject to withdrawal penalties and
that have maturities of more than seven days, and restricted securities (which
are securities that must be registered under the Securities Act of 1933 before
they may be offered or sold to the public), unless a state imposes a lower
limit.
In addition, as matters of fundamental policy, the Capital Appreciation
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 Capital Appreciation 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 MASTER PORTFOLIOS
MASTER/FEEDER STRUCTURE
The Trust is organized as a business trust under the laws of the State of
Delaware. See "Capital Stock and Other Securities." The Overland Sweep,
Short-Term Municipal Income, Short-Term Government-Corporate Income, National
Tax-Free Institutional Money Market and Strategic Growth Funds of Overland
Express and the National Tax-Free Money Market Mutual and the Aggressive Growth
Funds of Stagecoach Funds, Inc., open-end management investment companies,
invest all of their respective assets in the corresponding Master Portfolio of
the Trust which has the same investment objective as the Fund. In addition to
selling its shares to the corresponding Fund, each Master Portfolio may sell
its shares to certain other mutual funds or
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other accredited investors. The expenses and, correspondingly, the returns of
other investment options in a Master Portfolio may differ from those of a Fund.
ITEM 5. MANAGEMENT OF THE TRUST.
The Trust's Board of Trustees provides broad supervision over the affairs
of each Master Portfolio of the Trust.
The Trust has retained the services of Wells Fargo Bank as investment
adviser to the five Master Portfolios of the Trust, and Stephens as sponsor,
administrator and placement agent. The Board of Trustees is responsible for
the general management of the five Master Portfolios of the Trust and
supervision of the actions of Wells Fargo Bank and Stephens in these
capacities. Additional information regarding the Officers and Trustees of the
Trust is included in Part B under "Management of the Trust."
INVESTMENT ADVISER -- Pursuant to separate Advisory Contracts, each Master
Portfolio of the Trust is advised by Wells Fargo Bank, 420 Montgomery Street,
San Francisco, California 94163, a wholly owned subsidiary of Wells Fargo &
Company. Wells Fargo Bank, one of the ten largest banks in the United States,
was founded in 1852 and is the oldest bank in the western United States. As of
October 31, 1995, Wells Fargo Bank provided investment advisory services for
approximately $33.9 billion of assets of individuals, trusts, estates and
institutions. Currently, Wells Fargo Bank is the investment adviser to seven
other registered open-end management investment companies, each of which
consists of several separately managed investment portfolios.
Under the Advisory Contracts, Wells Fargo Bank has agreed to furnish to
each Master Portfolio investment guidance and policy direction in connection
with the daily portfolio management of the Master Portfolios. Pursuant to the
Advisory Contracts, Wells Fargo Bank also furnishes to the Board of Trustees of
the Trust periodic reports on the investment strategy and performance of each
Master Portfolio.
Mr. Mark Kraschel, portfolio manager of the Short-Term
Government-Corporate Income Master Portfolio, has specialized in short-term
bond investment applications for over a decade. He joined Wells Fargo Bank in
1988 after five years in fixed-income management at First Boston Corporation.
Mr. Kraschel holds a B.S. in business administration from the University of
Oregon and an M.B.A. in finance from the University of San Francisco. Mr.
Kraschel assumed sole responsibility for management of the Short-Term
Government-Corporate Income Master Portfolio on February 1, 1995. Prior to
that time, Mr. Kraschel had co-managed the Master Portfolio since its inception
in May of 1994.
Ms. Laura L. Milner, portfolio co-manager of the Municipal Income Master
Portfolio, joined Wells Fargo Bank in 1988. Her background includes over seven
years experience specializing in short- and long-term municipal obligations
with Salomon Brothers. She is a member of the National Federation of Municipal
Analysts and its California chapter. Mr. David Klug, portfolio co-manager for
the Municipal Income Master Portfolio, has managed municipal
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<PAGE> 24
bond portfolios for Wells Fargo Bank for over nine years. Prior to joining
Wells Fargo Bank, he managed the municipal bond portfolio for a major property
and casualty insurance company. His investment experience exceeds 20 years and
includes all aspects of tax-exempt fixed-income investments. He holds an
M.B.A. from the University of Chicago and is a member of the National
Federation of Municipal Analysts and its California Chapter. Mr. Klug and Ms.
Milner have co- managed the Municipal Income Master Portfolio since its
inception in May 1994.
Mr. John Hickman is primarily responsible for the day-to-day management
of the Strategic Growth Fund and has performed such duties since the Fund's
inception. In addition, he also manages equity and balances 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 primarly responsible for the day-to-day
management of the Strategic Growth Fund and has performed such duties since the
Fund's inception. 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 porfolios. 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 Strategic growth Fund. 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 porfolio 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 is a Chartered
Financial Analyst and a member of the Association for Investment Management and
Research.
Ms. Sandra Thornton also assist Jon Hickman and Robert Bissell with the
management of the Strategic Growth Fund. 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.
Purchase and sale orders of the securities held by each Master Portfolio
may be combined with those of other accounts that Wells Fargo Bank manages or
advises, 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 a Master
Portfolio of the Trust and other accounts managed by Wells Fargo Bank, Wells
Fargo Bank undertakes to allocate those transactions among the participants
equitably. From time to time, each 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 Advisory Contracts, Wells Fargo Bank is
entitled to a monthly advisory fee at the annual rate of 0.25% of the average
daily net assets of the CIT Master Portfolio, 0.50% of the average daily net
assets of the Capital Appreciation Master Portfolio, 0.50% of the average daily
net assets of the Municipal Income Master Portfolio, 0.50% of the average daily
net assets of the Short-Term Government-Corporate Income Master Portfolio and
0.30% of the average daily net assets of the Tax-Free Money Market Master
Portfolio, respectively. From time to time, Wells Fargo Bank may waive such
fees in whole or in part. Any such waiver will reduce expenses of a Master
Portfolio accordingly and have a favorable impact on the yield of such Master
Portfolio of the Trust.
The CIT Master Portfolio paid 0.22% of its average daily net assets to
Wells Fargo Bank for advisory services during the year ended December 31, 1994.
Wells Fargo Bank waived all advisory fees paid to it by the Municipal Income
Master Portfolio for the period from June 3, 1994 (commencement of operations)
to December 31, 1994. Wells Fargo Bank waived all advisory fees paid to it by
the Short-Term Government-Corporate Income Master Portfolio for the period from
September 19, 1994 (commencement of operations) to December 31, 1994.
CUSTODIAN AND TRANSFER AGENT -- Wells Fargo Bank has been retained to act as
the custodian (the "Custodian") for each Master Portfolio of the Trust. Wells
Fargo Bank also is the Transfer and Dividend Disbursing Agent (the "Transfer
Agent") for each Master Portfolio of the Trust. Wells Fargo Bank performs
these services at 525 Market Street, San Francisco, California 94105.
SPONSOR, ADMINISTRATOR AND PLACEMENT AGENT -- Stephens, 111 Center Street,
Little Rock, Arkansas 72201, has entered into agreements under which Stephens
acts as administrator for each Master Portfolio of the Trust. For providing
administrative services to the CIT Master Portfolio, Stephens is entitled to
receive from the CIT Master Portfolio a monthly fee at the annual rate of
0.025% of the CIT Master Portfolio's average daily net assets. For providing
administrative services to the Tax-Free Money Market Master Portfolio, Stephens
is entitled to receive from the
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<PAGE> 25
Tax-Free Money Market Master Portfolio 0.05% of the Tax-Free Money Market
Master Portfolio's average daily net assets. The other Master Portfolios do
not pay a fee for administrative services. From time to time, Stephens may
waive fees from the CIT Master Portfolio and/or the Tax-Free Money Market
Master Portfolio in whole or in part. Any such waiver will reduce expenses of
the relevant Master Portfolio and, accordingly, have a favorable impact on the
yield or return of such Master Portfolio.
The Administration Agreements state that Stephens shall provide as
administrative services, among other things: (i) general supervision of the
operation of each Master Portfolio, including coordination of the services
performed by the investment adviser, transfer agent, custodian, independent
auditors and legal counsel; regulatory compliance, including the compilation of
information for documents such as reports to, and filings with, the Commission
and any state securities commissions; and preparation of proxy statements and
investor reports for each Master Portfolio; and (ii) general supervision
relative to the compilation of data required for the preparation of periodic
reports distributed to the Trust's officers and Board of Trustees. Stephens
also furnishes office space and certain facilities required for conducting each
Master Portfolio's business and pays the compensation of the trustees, officers
and employees of the Trust who are affiliated with Stephens.
Stephens is a full service broker/dealer and investment advisory firm.
Stephens and its predecessor have been providing securities and investment
services for more than 60 years, including 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. The Trust will not purchase securities
from Stephens, Wells Fargo Bank, or their respective affiliates, as principal,
without an exemptive order from the Commission.
PLACEMENT AGENT -- Stephens, located at 111 Center Street, Little Rock,
Arkansas 72201, serves as placement agent for each Master Portfolio's shares.
EXPENSES -- Each Master Portfolio's Advisory Contract and Administration
Agreement provide that if, in any fiscal year, the total aggregate expenses of
a Master Portfolio incurred by, or allocated to, the Master Portfolio and other
investment companies investing in a Master Portfolio (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
any distribution plan) exceed the most restrictive expense limitation
applicable to such investment companies imposed by the securities laws or
regulations of the states in which such investment companies' shares are
registered for sale, Wells Fargo Bank and Stephens shall waive their fees
proportionately under the Advisory Contract and Administration Agreement,
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 Advisory
Contracts and the Administration Agreements further provide that the total
expenses of each Master Portfolio 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 Advisory
Contract and the Administration Agreement of each Master Portfolio shall be
reduced
A-22
<PAGE> 26
as necessary. The most stringent applicable state restriction for investment
companies limits these expenses for any fiscal year to 2.50% of the first $30
million of an investment company's average net assets, 2% of the next $70
million of average net assets and 1.50% of the average net assets in excess of
$100 million.
Except for the expenses borne by Stephens and Wells Fargo Bank, each
Master Portfolio bears all costs of its operations, including the compensation
of its trustees who are not officers or employees of Stephens or Wells Fargo
Bank or any of their affiliates; advisory and administration fees; interest
charges; taxes; fees and expenses of independent auditors, legal counsel,
transfer agent and dividend disbursing agent; expenses of redeeming Interests
in a Master Portfolio of the Trust; expenses of preparing and printing any
prospectuses, investor 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 for keeping books and accounts and
calculating the net asset value of investments in a Master Portfolio of the
Trust; expenses of investor meetings; pricing services; organizational
expenses; and any extraordinary expenses. Expenses attributable to a
particular Master Portfolio are charged against the assets of that Master
Portfolio; other expenses of the Trust are allocated among the Master
Portfolios on the basis determined by the Board of Trustees, including, but not
limited to, proportionately in relation to the net assets of each Master
Portfolio.
Except as noted above and in "Investment Advisory and Other Services" of
Part B, the CIT Master Portfolio's service contractors bear all expenses in
connection with the performance of their services and the CIT Master Portfolio
bears the expenses incurred in its operations. For the year ended December 31,
1994 the CIT Master Portfolio's total expenses, prior to waiver or
reimbursement, were 4.12% of its average daily net assets. After waivers and
reimbursements, the CIT Master Portfolio's total expenses were 0.33% of its
average daily net assets.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
ORGANIZATION AND INTERESTS
The Trust is organized as a Business Trust under the laws of Delaware.
The Trust's Declaration of Trust permits the Board of Trustees to issue
beneficial interests in a Master Portfolio of the Trust, and to permit
investors to increase or decrease their holdings in the Master Portfolios of
the Trust. The Trust has no intention of holding annual meetings of investors
but will hold special meetings of investors when, in the judgment of the
Trustees, it is necessary or desirable to submit matters for an investor vote.
Investors are entitled to call a meeting of investors for purposes of voting on
removal of a Trustee or Trustees of the Trust.
Each investor is entitled to vote in proportion to the amount of the
investor's investment in a Master Portfolio of the Trust. As described below,
for certain matters interestholders vote together as a group; as to others,
they vote separately by Master Portfolio. Interests in a Master Portfolio of
the Trust may not be transferred, but an investor may withdraw all or any
portion of its investment at any time at net asset value. All Interests in the
Trust, when issued, will be fully
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<PAGE> 27
paid and nonassessable, and the Interests have no preemptive rights. A more
detailed statement of the rights of investors is contained in Part B.
As of the date of this Amendment to the Registration Statement, Overland
Sweep Fund, a fund of the Overland Express, owned at least 25% of the
outstanding Interests in the CIT Master Portfolio and, therefore could be
considered to be a controlling person of the CIT Master Portfolio for purposes
of the 1940 Act. Similarly, the Short-Term Municipal Income Fund and the
Short-Term Government-Corporate Income Fund, each a fund of Overland Express,
owned at least 25% of the outstanding Interests in the Municipal Income Master
Portfolio and the Short-Term Government-Corporate Income Master Portfolio,
respectively. Similarly, the Strategic Growth Fund (a fund of Overland
Express) and the Aggressive Growth Fund (a fund of Stagecoach Funds, Inc.)
owned at least 25% of the outstanding interests in the Capital Appreciation
Master Portfolio. Accordingly, each Fund could be considered to be a
controlling person of the respective Master Portfolio for purposes of the 1940
Act. As of the date of this Amendment, the Tax-Free Money Market Master
Portfolio had not commenced operations.
The Trust reserves the right, without the approval of interestholders, to
create and issue Interests in the Master Portfolios. Any Interests so created
in a Master Portfolio would participate equally in the earnings, dividends and
assets of the particular Master Portfolio. Interests in any new master
portfolio would participate equally in the earnings, dividends and assets of
the new master portfolio. The Trust currently offers four separate Master
Portfolios. The previously single Master Portfolio is now referred to as the
CIT Master Portfolio. The Trust also offers four other Master Portfolios --
the Capital Appreciation Master Portfolio, the Municipal Income Master
Portfolio, the Short-Term Government-Corporate Income Master Portfolio and the
Tax-Free Money Market Master Portfolio. The Trust no longer offers the 1-3
Year Duration Government Income Master Portfolio.
All consideration received by the Trust for Interests in a Master
Portfolio and all assets in which such consideration is invested belong to that
Master Portfolio (subject only to the rights of creditors of the Trust) and are
subject to the liabilities related thereto. The income attributable to, and
the expenses of, one Master Portfolio are treated separately from those of the
other Master Portfolios.
Interests in the Master Portfolios are not deposits or obligations of, or
guaranteed or endorsed by, any bank, and are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency. Master Portfolios Interests involve certain investment risks,
including the possible loss of principal. The price and investment return of
each interest in a Master Portfolio will fluctuate and are not guaranteed.
DIVIDENDS AND DISTRIBUTIONS
CIT MASTER PORTFOLIO -- The Net Income (as defined below) of the CIT
Master Portfolio is allocated daily to all investors of record as of 12:00 Noon
(New York time) on each day that Wells Fargo Bank is open (a "Bank Business
Day"). Currently, Wells Fargo Bank is closed on New Year's Day, Martin Luther
King's Day (the third Monday in January), President's
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<PAGE> 28
Day (the third Monday in February), Memorial Day (the last Monday in May),
Independence Day, Labor Day, Columbus Day (the second Monday in October),
Veteran's Day, Thanksgiving Day, and Christmas Day (each, a "Bank Holiday") and
also on Saturdays and Sundays. Net Income for a Saturday, Sunday or Bank
Holiday is allocated to investors of record as of 12:00 Noon (New York time) on
the previous Bank Business Day.
The Net Income of the CIT Master Portfolio (from the time of the
immediately preceding determination thereof) consists of (i) all income
accrued, less the amortization of any premium, on the assets of the CIT Master
Portfolio, less (ii) all actual and accrued expenses of the CIT Master
Portfolio determined in accordance with generally accepted accounting
principles. Interest income includes discount earned (including both original
issue and market discount) on discount paper accrued ratably to the date of
maturity and any net realized short-term gains or losses on the assets of the
CIT Master Portfolio.
Dividends and any capital gain distributions paid by the CIT Master
Portfolio will be reinvested in additional Interests in that Master Portfolio
at net asset value and credited to an investor's account on the payment date.
OTHER MASTER PORTFOLIOS -- The net investment income of the Capital
Appreciation Master Portfolio, the Municipal Income Master Portfolio, the
Short-Term Government-Corporate Income Master Portfolio and the Tax-Free Money
Market Master Portfolio is allocated daily to all investors of record in such
Master Portfolios as of 4:00 p.m. (New York time) on any day the New York Stock
Exchange is open (a "Business Day"). Currently, the Exchange is closed on New
Year's Day, Presidents' Day (the third Monday in February), Good Friday,
Memorial Day (the last Monday in May), Independence Day, Labor Day, Veterans
Day, Thanksgiving Day and Christmas Day (each, a "Holiday") and Saturdays and
Sundays. Net investment income for a Saturday, Sunday or Holiday is allocated
to investors of record as of 4:00 p.m. (New York time) on the preceding
business day.
Dividends and any capital gains distributions paid by a Master Portfolio
will be reinvested in the investor's interest in that Master Portfolio of the
Trust at net asset value and credited to the investor's account on the payment
date.
TAXES
Based on the method of operation of the Trust, the Trust believes that it
will qualify for federal income tax purposes as a partnership. The Trust
therefore believes that it will not be subject to any federal income tax on its
income and any net capital gains. However, each investor in a Master Portfolio
of the Trust will be taxed on its allocable share of that Master Portfolio's
ordinary income and any capital gain in determining its federal income tax
liability. The determination of such share will be made in accordance with the
Internal Revenue Code of 1986, as amended, ("Code") and regulations promulgated
thereunder.
It is intended that each Master Portfolio's assets, income and
distributions be managed in such a way that a regulated investment company
investing in a Master Portfolio will be able to
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<PAGE> 29
satisfy the requirements of Subchapter M of the Code, assuming that the
investment company invested all of its assets in that Master Portfolio of the
Trust.
__________________
Investor inquiries should be directed to the Master Investment Trust, 111
Center Street, Little Rock, Arkansas 72201.
ITEM 7. PURCHASE OF SECURITIES.
Interests in the CIT Master Portfolio may be purchased on any Bank
Business Day. Interests in the Capital Appreciation Master Portfolio, the
Municipal Income Master Portfolio, Short-Term Government-Corporate Income
Master Portfolio and Tax-Free Money Market Master Portfolio may be purchased on
any Business Day.
The Trust is a no-load, open-end management investment company which was
organized as a business trust under the laws of Delaware on August 15, 1991.
The Trust is composed of five Master Portfolios: the Capital Appreciation
Master Portfolio, the CIT Master Portfolio, the Short-Term Municipal Income
Master Portfolio, the Tax-Free Money Market Master Portfolio and the Short-Term
Government-Corporate Income Master Portfolio, each of which are diversified
investment portfolios. Beneficial interests in the Trust are issued solely in
private placement transactions that do not involve any "public offering" within
the meaning of Section 4(2) of the 1933 Act. Investments in the Trust may only
be made by registered broker/dealers or by investment companies, insurance
company separate accounts, common or commingled trust funds, group trusts or
similar organizations or entities that are "accredited investors" within the
meaning of Regulation D under the 1933 Act. This Amendment to the registration
statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any "security" within the meaning of the 1933 Act.
There is no minimum initial or subsequent purchase amount required for
investment in a Master Portfolio. The Trust reserves the right to reject any
purchase order. If accepted by the Trust, investments in a Master Portfolio
may be made in exchange for securities that are eligible for acquisition by
such Master Portfolio as described in this Part A. All dividends, interest,
subscription, or other rights pertaining to such securities shall become the
property of the Master Portfolio of the Trust and must be delivered to the
Trust by the investor upon receipt from the issuer.
A Master Portfolio will not accept securities in exchange for Interests
unless: (1) such securities are, at the time of the exchange, eligible for
purchase by that Master Portfolio; (2) the investor represents and agrees that
all securities offered to be exchanged are not subject to any restrictions upon
their sale by the Master Portfolio under the Securities Act of 1933 or under
the laws of the country in which the principal market for such securities
exists, or otherwise; (3) the value of any such security (except U.S.
Government securities) being exchanged together with any other securities of
the same issuer owned by a Master Portfolio will not exceed 5% of the net
assets of the Master Portfolio of the Trust immediately after the transaction;
and (4) such
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<PAGE> 30
securities are consistent with the Master Portfolio's investment objective and
policies, as applied by Wells Fargo Bank.
Interests in a Master Portfolio are offered continuously at the net asset
value next determined after a purchase order is effective without a sales load.
Purchase orders for Interests in the CIT Master Portfolio are effected if
received by 12:00 Noon (New York time) on any Bank Business Day. Purchase
orders for Interests in the Municipal Income Master Portfolio, the Short-Term
Government-Corporate Income Master Portfolio and the Tax-Free Money Market
Master Portfolio are effected if received by 4:00 p.m. (New York time) on any
Business Day.
DETERMINATION OF NET ASSET VALUE
CIT AND TAX-FREE MONEY MARKET MASTER PORTFOLIOS-- The net asset value of
the CIT Master Portfolio is determined as of 12:00 noon (New York time) on each
Bank Business Day. The net asset value of the Tax-Free Money Market Master
Portfolio is determined as of 9:00 a.m. (Pacific time) on each Business Day.
It is anticipated that the net asset value of an interest in the CIT Master
Portfolio or the Tax-Free Money Market Master Portfolio will remain stable at
$1.00 per share, although no assurance can be given that each Master Portfolio
will maintain a stable net asset value on a continuing basis.
The CIT Master Portfolio and the Tax-Free Money Market Master Portfolio
each uses the amortized cost method to value its portfolio securities. The
amortized cost method involves valuing a security at its cost and amortizing
any discount or premium over the period until maturity, generally without
regard to the impact of fluctuating interest rates on the market value of the
security.
The exclusive placement agent for both the CIT Master Portfolio and the
Tax-Free Money Market Master Portfolio is Stephens, which receives no
additional compensation for placement agent services provided to each Master
Portfolio.
OTHER MASTER PORTFOLIOS -- The net asset value of the Capital
Appreciation Master Portfolio, the Municipal Income Master Portfolio and the
Short-Term Government-Corporate Income Master Portfolio is determined on each
Business Day. The net asset value per interest in each of these Master
Portfolios is determined by dividing the value of the total assets of the
Master Portfolio less the Master Portfolio's liabilities by the total number of
outstanding Interests.
The value of assets of each of these Master Portfolios (other than debt
obligations maturing in 60 days or less) is determined at the close of regular
trading on 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 valuation may be provided
by independent pricing services.
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<PAGE> 31
ITEM 8. REDEMPTION OR REPURCHASE.
An investor in a Master Portfolio may withdraw all or a portion of its
investment at any time at the net asset value next determined after a
withdrawal request in proper form is furnished by the investor to the Trust.
The Master Portfolios do not charge for redemption transactions. The proceeds
of a withdrawal are paid by the Trust in federal funds normally on the Business
Day or Bank Business Day, as applicable, the withdrawal is effected, and in the
case of the Tax-Free Money Market Master Portfolio, on the following Business
Day, but in any event within seven days. At a Master Portfolio's option,
payment of redemption proceeds may be made in securities, subject to regulation
by some state securities commissions. Investments in a Master Portfolio of the
Trust may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds postponed
during any period in which the Exchange is closed (other than weekends or
Holidays) or trading on the Exchange is restricted, or, to the extent otherwise
permitted by the Act, if an emergency exists.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
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<PAGE> 32
MASTER INVESTMENT TRUST
TELEPHONE: (800) 643-9691
PART B
DATED DECEMBER 22, 1995
------------------------
ITEM 10. COVER PAGE.
Master Investment Trust (the "Trust") is a registered, open-end,
management investment company. The Trust is a "series fund", which is a mutual
fund divided into separate portfolios. By this offering document the Trust is
offering five diversified portfolios: the Cash Investment Trust Master
Portfolio (the "CIT Master Portfolio"), the Short-Term Municipal Income Master
Portfolio, (formerly, the 1-3 Year Duration Municipal Income Master Portfolio),
the Short-Term Government-Corporate Income Master Portfolio, the Tax-Free Money
Market Master Portfolio, and the Capital Appreciation Master Portfolio (each a
"Master Portfolio" and collectively the "Master Portfolios"). This Part B
should be read in conjunction with the Trust's Part A, also dated December 22,
1995. All terms used in this Part B that are defined in Part A have the
meanings assigned in Part A. A copy of Part A may be obtained without charge
by writing Stephens Inc. ("Stephens"), the Trust's sponsor, administrator and
placement agent, at 111 Center Street, Little Rock, Arkansas 72201, or calling
Stephens at the telephone number indicated above.
The Trust's Registration Statement, as amended, including the Trust's
Part A, the Part B and any exhibits filed therewith, may be examined at the
office of the Securities and Exchange Commission ("SEC") in Washington, D.C.
Statements contained in the Trust's Part A or Part B as to the contents of any
contract or other document referred to herein or in the Part A are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or other document filed as exhibits to the Trust's Registration
Statements, each such statement being qualified in all respects by such
reference.
B-1
<PAGE> 33
ITEM 11. TABLE OF CONTENTS.
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
Item 12. General Information and History B-3
Item 13. Investment Objectives and Policies B-3
Item 14. Management of the Trust B-18
Item 15. Control Persons and Principal Holders
of Securities B-21
Item 16. Investment Advisory and Other Services B-21
Item 17. Brokerage Allocation and Other
Practices B-23
Item 18. Capital Stock and Other Securities B-25
Item 19. Purchase, Redemption and Pricing of
Securities B-26
Item 20. Tax Status B-28
Item 21. Underwriters B-28
Item 22. Calculation of Performance Data B-29
Item 23. Financial Information B-30
Appendix B-31
</TABLE>
B-2
<PAGE> 34
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.
The following information supplements and should be read in
conjunction with Item 4 in Part A.
A. CAPITAL APPRECIATION MASTER PORTFOLIO
As discussed in Part A, 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.
INVESTMENT RESTRICTIONS
As a matter of fundamental investment policy, the Capital Appreciation
Master Portfolio may not:
(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 Master Portfolio's investments in that
industry would equal or exceed 25% of the current value of the Master
Portfolio's total assets, provided that there is no limitation with respect to
investments in securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities;
(2) purchase or sell real estate or real estate limited
partnerships (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 Master Portfolio's investment program may be deemed to
be an underwriting;
(5) make investments for the purpose of exercising control or
management;
(6) issue senior securities except that the Master Portfolio 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
B-3
<PAGE> 35
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 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 Master Portfolio's ownership would be more than
10% of the outstanding voting securities of such issuer.
With respect to fundamental investment policy (7), the Master Portfolio does
not intend to loan its portfolio securities during the coming year.
The Capital Appreciation Master Portfolio is subject to the following
non-fundamental investment policies. These restrictions may be changed by a
vote of a majority of the Trustees of the Trust at any time. The Master
Portfolio may not:
(1) purchase or retain securities of any issuer if the officers or
directors/trustees of the Master Portfolio or its investment adviser owning
beneficially more than one-half of one percent (0.5%) of the securities of the
issuer together owned beneficially more than 5% of such securities;
(2) purchase or sell real estate limited partnership interests;
(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 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 Master Portfolio's total assets would
be invested in the securities of any one issuer; nor
(6) invest more than 15% of the Master Portfolio'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.
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(7) In addition, as a matter of non-fundamental investment policy,
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
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 Master Portfolio's assets so
invested, except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition. 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 investment policy, the Master
Portfolio 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 Master Portfolio.
B. CASH INVESTMENT TRUST MASTER PORTFOLIO
As described in Part A, the investment objective of the CIT Master
Portfolio is to provide its investors with a high level of current income,
while preserving capital and liquidity. The CIT Master Portfolio seeks to
achieve its investment objective by investing in high-quality, short-term
instruments. There can, of course, be no assurance that the CIT Master
Portfolio will achieve its investment objective. The investment objective of
the CIT Master Portfolio may not be changed without the approval of the
investors in the Master Portfolio.
INVESTMENT RESTRICTIONS
The CIT Master Portfolio is subject to the following investment
restrictions, all of which are fundamental policies. The CIT Master Portfolio
may not:
(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 CIT Master Portfolio's investments in
that industry would exceed 25% of the current value of its respective total
assets, provided that there is no limitation with respect to investments in (i)
obligations of the United States Government, its agencies or instrumentalities,
and (ii) obligations of domestic banks (for purposes of this restriction,
domestic bank obligations do not include obligations of U.S. branches of
foreign banks or obligations of foreign branches of U.S. banks);
(2) purchase or sell real estate or real estate limited
partnership interests (other than money market 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;
(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
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later disposition of such securities in accordance with the Master Portfolio's
investment program may be deemed to be an underwriting;
(5) make investments for the purpose of exercising control or
management;
(6) issue senior securities, except that the CIT Master Portfolio
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 borrowing exceeds 5% of
the Master Portfolio's net assets);
(7) write, purchase or sell puts, calls, warrants or options or
any combination thereof, except that the CIT Master Portfolio may purchase
securities with put rights in order to maintain liquidity; or
(8) make loans of portfolio securities or other assets, except
that loans for purposes of this restriction will not include the purchase of
fixed time deposits, repurchase agreements, commercial paper and other
short-term obligations, and other types of debt instruments commonly sold in a
public or private offering.
The CIT Master Portfolio is subject to the following non-fundamental
policies.
The CIT Master Portfolio may not:
(1) purchase or retain securities of any issuer if the officers,
directors or trustees of the Trust or the CIT Master Portfolio's investment
adviser owning beneficially more than one-half of one percent (0.5%) of the
securities of the issuer together owned beneficially more than 5% of such
securities;
(2) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs;
(3) 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 U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence at
least three years, or the securities are backed by the assets and revenues of
any of the foregoing if, by reason thereof, the value of the CIT Master
Portfolio's aggregate investments in such securities will exceed 5% of its
total assets; or
(4) invest more than 10% of the current value of its net assets in
repurchase agreements maturing in more than seven days, fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days, restricted securities (which are securities that must be registered
under the Securities Act of 1933 before they may be offered or sold to the
public), and illiquid securities.
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As provided in Rule 2a-7 under the Act, the CIT Master Portfolio may
only purchase "Eligible Securities" (as defined in Rule 2a-7) and may purchase
such securities only if, immediately after such purchase, the CIT Master
Portfolio would have no more than 5% of its total assets in "First Tier
Securities" (as defined in Rule 2a-7) of any one issuer, excluding government
securities and except as otherwise permitted for temporary purposes and for
certain guarantees and unconditional puts; the CIT Master Portfolio would own
no more than 10% of the voting securities of any one issuer; the CIT Master
Portfolio would have no more than 5% of its total assets in "Second Tier
Securities" (as defined in Rule 2a-7); and the CIT Master Portfolio would have
no more than the greater of $1 million or 1% of its total assets in Second Tier
Securities of any one issuer.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Foreign Obligations. The CIT Master Portfolio may invest a portion of
its assets (no more than 5%) in obligations of foreign branches of U.S. banks
or U.S. branches of foreign banks that are denominated in and pay interest in
U.S. dollars. Investments in foreign obligations involve certain
considerations that are not typically associated with investing in domestic
obligations. 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
government 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.
Unrated Securities. The CIT Master Portfolio may purchase instruments
that are not rated if, in the opinion of Wells Fargo Bank, N.A. ("Wells Fargo
Bank"), such obligations are comparable in quality to other high-quality
investments that are permitted for purchase by the CIT Master Portfolio, if
they are purchased in accordance with the CIT Master Portfolio's procedures
adopted by the Board of Trustees of the Trust in accordance with Rule 2a-7
under the Act. In this regard, Rule 2a-7 requires the Trust's Board of
Trustees to pre-approve or ratify purchases of unrated securities. After
purchase by the CIT Master Portfolio, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the CIT Master
Portfolio. Neither event will require an immediate sale of such security by
the CIT Master Portfolio provided that, when a security ceases to be rated, the
Board of Trustees of the Trust determines that such security presents minimal
credit risks and, provided further that, when a security rating is downgraded
below the eligible quality for investment or no longer presents minimal credit
risks, the Board finds that the sale of such security would not be in the CIT
Master Portfolio's best interest. To the extent the ratings given by Moody's
or S&P may change as a result of changes in such organizations or their rating
systems, the Trust will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in Part A and
in this Part B. The ratings of Moody's and S&P are more fully described in the
Appendix to Part B.
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C. SHORT-TERM MUNICIPAL INCOME MASTER PORTFOLIO AND SHORT-TERM
GOVERNMENT-CORPORATE INCOME MASTER PORTFOLIO
INVESTMENT RESTRICTIONS
As described in Part A, the investment objective of the Short-Term
Government-Corporate Income Master Portfolio is to provide investors with
current income while managing principal volatility. The Master Portfolio seeks
to achieve its investment objective by investing in obligations issued by the
U.S. Government, its agencies and instrumentalities and investment-grade
corporate obligations.
As described in Part A, the investment objective of the Short-Term
Municipal Income Master Portfolio is to provide investors with a high level of
income exempt from federal income tax, while managing principal volatility.
The Short-Term Municipal Income Master Portfolio seeks to achieve its
investment objective by investing (under normal market conditions)
substantially all of the assets of the Master Portfolio in the following types
of municipal obligations that pay interest which is exempt from federal income
tax: bonds, notes and commercial paper issued by or on behalf of states,
territories, and possessions of the United States, the District of Columbia,
and their political subdivisions, agencies instrumentalities and authorities,
the interest on which, in the opinion of counsel to the issuer or bond counsel
is exempt from federal income tax.
The Short-Term Municipal Income Master Portfolio and the Short-Term
Government-Corporate Income Master Portfolio are subject to the following
investment restrictions, all of which are fundamental policies. The investment
restrictions of each such Master Portfolio cannot be changed without approval
by the holders of a majority (as defined in the 1940 Act) of the outstanding
voting securities of such Master Portfolio, as the case may be. The Short-Term
Municipal Income Master Portfolio and the Short-Term Government-Corporate
Income Master Portfolio may not:
(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 such Master Portfolio's investments in that
industry would exceed 25% of the current value of the Master Portfolio's total
assets, provided that there is no limitation with respect to: (1) investments
in securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and (2) municipal securities (for the purpose of this
restriction, private activity bonds and notes shall not be deemed municipal
securities if the payment of principal and interest on such bonds or notes is
the ultimate responsibility of non-governmental issuers); and provided further
that there is no limitation with respect to investments by the Master Portfolio
in securities issued by registered investment companies;
(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;
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<PAGE> 40
(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 Master Portfolio's investment program may be deemed to
be an underwriting;
(5) make investments for the purpose of exercising control or
management;
(6) purchase puts, calls, straddles, spreads, or any combination
thereof, except that each Master Portfolio may purchase securities with put
rights in order to maintain liquidity;
(7) issue senior securities, except that each Master Portfolio 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 by a Master Portfolio while any such
outstanding borrowing exceeds 5% of its net assets);
(8) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities) if, as a
result, with respect to 75% of the total assets, more than 5% of the value of
each Master Portfolio's total assets would be invested in the securities of any
one issuer or such Master Portfolio would own more than 10% of the outstanding
voting securities of such issuer; or
(9) lend their portfolio securities having a value that exceeds
50% of the current value of their total assets, provided that, for purposes of
this restriction, loans will not include the purchase of fixed time deposits,
repurchase agreements, commercial paper and other types of debt instruments
commonly sold in a public or private offering. The Master Portfolios do not
intend to make loans of their portfolio securities during the coming year.
The Short-Term Municipal Income Master Portfolio and the Short-Term
Government-Corporate Income Master Portfolio are subject to the following
non-fundamental policies. These restrictions may be changed by vote of a
majority of the Trustees of the Trust at any time. The Short-Term Municipal
Income Master Portfolio and the Short-Term Government-Corporate Income Master
Portfolio may not:
(1) invest more than 5% of their net assets at the time of
purchase in warrants, or more than 2% of their net assets in warrants which are
not listed on the New York or American Stock Exchange;
(2) purchase or retain securities of any issuer if the officers,
directors or trustees of the Company, the Trust or the investment adviser
owning beneficially more than one-half of one
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<PAGE> 41
percent (0.5%) of the securities of the issuer together own beneficially more
than 5% of such securities;
(3) invest in securities of issuers who, with their predecessors,
have been in existence less than three years, unless the securities are
guaranteed or insured by the U.S. Government, or a state or municipality, or an
agency or instrumentality thereof, if, by reason thereof, the value of a Master
Portfolio's aggregate investment in such securities will exceed 5% of its total
assets;
(4) write, purchase or sell options;
(5) invest more than 15% of the current value of their net assets
in repurchase agreements maturing in more than seven days, fixed time deposits
that are subject to withdrawal penalties and that have maturities of more than
seven days and other illiquid securities;
(6) purchase, hold or deal in real estate limited partnerships; or
(7) engage in any short sales other than short sales against the
box.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
The following information supplements and should be read in
conjunction with the sections in Part A entitled "Investment Objectives and
Policies" and "Additional Information About Permitted Investment Activities."
When-Issued Securities. The Short-Term Municipal Income Master
Portfolio and the Short-Term Government- Corporate Income Master Portfolio may
purchase securities on a when-issued basis, in which case, delivery and payment
normally take place within 120 days after the date of the commitment to
purchase. The Short-Term Government-Corporate Income Master Portfolio does not
intend to invest more than 5% of its net assets in when-issued securities
during the coming year. The Master Portfolios make commitments to purchase
securities on a when-issued basis only with the intention of actually acquiring
the securities, but may sell such securities before the settlement date if it
is deemed advisable. When-issued securities are subject to market fluctuation,
and no income accrues to the purchaser during the period prior to issuance.
The purchase price and the interest rate that will be received on debt
securities are fixed at the time the purchaser enters into the commitment.
Purchasing a security on a when-issued basis can involve a risk that the market
price at the time of delivery may be lower than the agreed-upon purchase price,
in which case there could be an unrealized loss at the time of delivery.
Each Master Portfolio has established a segregated account in which
the Master Portfolio maintains liquid assets in an amount at least equal in
value to the Master Portfolio's commitments to purchase when-issued securities.
If the value of these assets declines, the Master Portfolio will place
additional liquid assets in the account on a daily basis so that the value of
the assets in the account is equal to the amount of such commitments.
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Municipal Bonds. As discussed in Part A, the two principal
classifications of municipal bonds in which the Short-Term Municipal Income
Master Portfolio may invest are "general obligation" and "revenue" bonds.
Municipal bonds are debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as bridges, highways, housing, hospitals, mass transportation, schools, streets
and water and sewer works. Other public purposes for which municipal bonds may
be issued include the refunding of outstanding obligations and obtaining funds
for general operating expenses or to loan to other public institutions and
facilities. Industrial development bonds are a specific type of revenue bond
backed by the credit and security of a private user. Certain types of
industrial development bonds are issued by or on behalf of public authorities
to obtain funds to provide privately-operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit, port or
parking facilities, air or water pollution control facilities and certain local
facilities for water supply, gas, electricity, or sewage or solid waste
disposal. Assessment bonds, wherein a specially created district or project
area levies a tax (generally on its taxable property) to pay for an improvement
or project may be considered a variant of either category. There are, of
course, other variations in the types of municipal bonds, both within a
particular classification and between classifications, depending on numerous
factors. Subject to its investment objective and policies, the Short-Term
Municipal Income Master Portfolio is not limited with respect to which category
of municipal bonds it may acquire.
Municipal Notes. The Short-Term Municipal Income Master Portfolio may
invest in municipal notes. Municipal notes include, but are not limited to,
tax anticipation notes ("TANs"), bond anticipation notes ("BANs"), revenue
anticipation notes ("RANs") and construction loan notes. Notes sold as interim
financing in anticipation of collection of taxes, a bond sale or receipt of
other revenues are usually general obligations of the issuer.
TANs. An uncertainty in a municipal issuer's capacity to raise taxes
as a result of such things as a decline in its tax base or a rise in
delinquencies could adversely affect the issuer's ability to meet its
obligations on outstanding TANs. Furthermore, some municipal issuers mix
various tax proceeds into a general fund that is used to meet obligations other
than those of the outstanding TANs. Use of such a general fund to meet various
obligations could affect the likelihood of making payments on TANs.
BANs. The ability of a municipal issuer to meet its obligations on
its BANs is primarily dependent on the issuer's adequate access to the longer
term municipal bond market and the likelihood that the proceeds of such bond
sales will be used to pay the principal of, and interest on, BANs.
RANs. A decline in the receipt of certain revenues, such as
anticipated revenues from another level of government, could adversely affect
an issuer's ability to meet its obligations on outstanding RANs. In addition,
the possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal of, and
interest on, RANs.
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The values of outstanding municipal securities will vary as a result
of changing market evaluations of the ability of the issuers of such securities
to meet interest and principal payments (i.e., credit risk). Such values will
also change in response to changes in the interest rates payable on new issues
of municipal securities (i.e., market risk). Should such interest rates rise,
the value of outstanding securities, including those held in the portfolio of
the Short-Term Municipal Income Master Portfolio, will decline and (if
purchased at par value) they would sell at a discount. If interest rates fall,
the values of outstanding securities will generally increase and (if purchased
at par value) they would sell at a premium. Changes in the value of municipal
securities held by the Short-Term Municipal Income Master Portfolio arising
from these or other factors will cause changes in the net asset value per share
of the Short-Term Municipal Income Master Portfolio.
D. TAX-FREE MONEY MARKET MASTER PORTFOLIO
As described in Part A, the investment objective of the Tax-Free Money
Market Master Portfolio is to provide investors with a high level of income
exempt from federal income tax, while preserving capital and liquidity. The
Master Portfolio seeks to achieve its investment objective by investing in
high-quality, short-term U.S. dollar denominated money market instruments,
primarily municipal obligations, with remaining maturities not exceeding 13
months. There can, of course, be no assurance that the Tax-Free Money Market
Master Portfolio will achieve its investment objective. The investment
objective of the Tax-Free Money Market Master Portfolio may not be changed
without the approval of the investors in such Master Portfolio.
INVESTMENT RESTRICTIONS
The Tax-Free Money Market Master Portfolio is subject to the following
investment restrictions, all of which are fundamental policies. The Tax-Free
Money Market Master Portfolio may not:
(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 Master Portfolio's investments in that
industry would be 25% or more of the current value of the Master Portfolio's
total assets, provided that there is no limitation with respect to investments
in (i) municipal securities (for the purpose of this restriction, private
activity bonds and notes shall not be deemed municipal securities if the
payment of principal and interest on such bonds or notes is the ultimate
responsibility of non-governmental entities), (ii) obligations of the United
States Government, its agencies or instrumentalities (including
government-sponsored enterprises), and (iii) the obligations of domestic banks
(for the purpose of this restriction, domestic bank obligations do not include
obligations of U.S. branches of foreign banks or obligations of foreign
branches of U.S. banks);
(2) purchase or sell real estate or real estate limited
partnerships (other than municipal obligations and other 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
(including futures contracts) except that the Master Portfolio may purchase
securities of an issuer
B-12
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which invests or deals in commodities and commodity contracts and except that
the Master Portfolio may enter into futures and options contracts in accordance
with its investment policies;
(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 municipal securities or other 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 Master Portfolio's
investment program may be deemed to be an underwriting;
(5) make investments for the purpose of exercising control or
management;
(6) issue senior securities, except that the Master Portfolio 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 borrowing in
excess of 5% of its net assets exists);
(7) write, purchase or sell puts, calls, options, warrants or
combinations thereof, except that the Master Portfolio may purchase securities
with put rights in order to maintain liquidity;
(8) purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities,
including government-sponsored enterprises) if, as a result, with respect to
75% of its total assets, more than 5% of the value of the Master Portfolio's
total assets would be invested in the securities of any one issuer or, with
respect to 100% of its total assets the Master Portfolio's ownership would be
more than 10% of the outstanding voting securities of such issuer; or
(9) make loans except that the Master Portfolio may purchase or
hold debt instruments, lend its portfolio securities or enter into repurchase
agreement transactions in accordance with its investment policies.
With regard to fundamental investment restriction number (1) above,
the Master Portfolio intends to reserve freedom of action to have in excess of
25% of the value of its total assets invested in obligations of the banking
industry. Regarding this fundamental concentration policy, the Master
Portfolio may hold in excess of 25% of the value of its assets in obligations
of the banking industry to the extent that the Master Portfolio holds
obligations with such credit enhancements as letters of credit issued by
domestic bank issuers, which will be considered to be obligations of domestic
banks. The SEC staff's position is that the exclusion with respect to banks
may only be applied to domestic banks. For this purpose, the staff also takes
the position that U.S. branches of foreign banks and foreign branches of
domestic banks may, if certain conditions are met, be treated as "domestic
banks". The Trust currently intends to consider only obligations of "domestic
banks" to be within the exclusion with respect to bank obligations.
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Fundamental investment restriction number (8), above, is less
restrictive than Rule 2a-7 of the 1940 Act. Nonetheless, it is the operating
policy of the Master Portfolio to comply with Rule 2a-7's diversification
requirements.
The Tax-Free Money Market Master Portfolio is subject to the following
non-fundamental policies. The Tax-Free Money Market Master Portfolio may not:
(1) purchase or retain securities of any issuer if the officers or
Trustees of the Trust or the investment adviser owning beneficially more than
one-half of one percent (0.5%) of the securities of the issuer together owned
beneficially more than 5% of such securities;
(2) purchase interests, leases, or limited partnership interests
in oil, gas, or other mineral exploration or development programs;
(3) purchase 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 U.S. Government, a state, commonwealth,
possession, territory, the District of Columbia or by an entity in existence at
least three years, or the securities are backed by the assets and revenues of
any of the foregoing if, by reason thereof, the value of its aggregate
investments in such securities will exceed 5% of its total assets; and
(4) purchase securities of unseasoned issuers, including their
predecessors, which have been in operation for less than three years, and
equity securities of issuers which are not readily marketable if by reason
thereof the value of the Master Portfolio's aggregate investment in such
classes of securities will exceed 5% of its total assets.
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 1940 Act, provided that any such purchases will be limited to temporary
investments in shares of unaffiliated investment companies. However, 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. In addition, these
unaffiliated investment companies must have a fundamental investment policy of
investing at least 80% of their net assets in obligations that are exempt from
federal income tax and are not subject to the federal alternative minimum tax.
In addition, the Master Portfolio reserves the right to invest up to
10%, of the current value of its net assets in fixed time deposits that are
subject to withdrawal penalties and that have maturities of more than seven
days, repurchase agreements maturing in more than seven days or other illiquid
securities and restricted securities. However, as long as the shares of an
investment company investing in the Master Portfolio are registered for sale in
a state that imposes a lower limit on the percentage of an investment company's
assets that may be so invested, the Master Portfolio will comply with such
lower limit. The Master Portfolio presently is limited to investing 10% of its
net assets in such securities due to limits applicable in several states.
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Furthermore, the Master Portfolio may not purchase or sell real estate
limited partnership interests. The Master Portfolio does not currently intend
to make loans of its portfolio securities.
ADDITIONAL PERMITTED INVESTMENT ACTIVITIES
Unrated and Downgraded Investments. The Tax-Free Money Market
Master Portfolio may purchase instruments that are not rated if, in the opinion
of the investment adviser, such obligations are of comparable quality to other
rated investments that are permitted to be purchased by the Master Portfolio.
The Master Portfolio may purchase unrated instruments only if they are
purchased in accordance with the Master Portfolio's procedures adopted by the
Master Trust's Board of Trustees in accordance with Rule 2a-7 under the 1940
Act. After purchase a security may cease to be rated or its rating may be
reduced below the minimum required for purchase by the Master Portfolio. In
the event that a portfolio security ceases to be an "Eligible Security" or no
longer "presents minimal credit risks", immediate sale of such security is not
required, provided that the Board of Trustees has determined that disposal of
the portfolio security would not be in the best interests of the Master
Portfolio. To the extent the ratings given by Moody's or S&P may change as a
result of changes in such organizations or their rating systems, the Master
Portfolio will attempt to use comparable ratings as standards for investments
in accordance with the investment policies contained in its Part A and in this
SAI. The ratings of Moody's and S&P are more fully described in the SAI
Appendix.
Letters of Credit. Certain of the debt obligations (including
municipal securities, certificates of participation, commercial paper and other
short-term obligations) which the Master Portfolio may purchase may be backed
by an unconditional and irrevocable letter of credit of a bank, savings and
loan association or insurance company which assumes the obligation for payment
of principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies which, in the opinion of
Wells Fargo Bank, are of comparable quality to issuers of other permitted
investments of the Master Portfolio may be used for letter of credit-backed
investments, provided that the Trust's Board approves or ratifies such
investments. For purposes of the Master Portfolio's fundamental policy on
concentrations, letters of credit issued by domestic bank issuers will be
considered to be obligations of domestic banks excluded from the 25% limitation
regarding industry concentration (see fundamental investment restriction number
(1) above).
Loans of Portfolio Securities. The Tax-Free Money Market Master
Portfolio may lend securities from its portfolio to brokers, dealers and
financial institutions (but not individuals) if cash, U.S. Government
obligations or other high-quality debt obligations equal to at least 100% of
the current market value of the securities loaned (including accrued interest
thereon) plus the interest payable to such Master Portfolio with respect to the
loan is maintained with the Master Portfolio. In determining whether or not to
lend a security to a particular broker, dealer or financial institution, the
Master Portfolio's investment adviser considers all relevant facts and
circumstances, including the size, creditworthiness and reputation of the
broker, dealer, or financial institution. Any loans of portfolio securities
are fully collateralized based on values that are marked to market daily. The
Master Portfolio will not enter into any portfolio security
B-15
<PAGE> 47
lending arrangement having a duration longer than one year. Any securities
that the Master Portfolio receives as collateral do not become part of the
Master Portfolio's portfolio at the time of the loan and, in the event of a
default by the borrower, the Master Portfolio will, if permitted by law,
dispose of such collateral except for such part thereof that is a security in
which the Master Portfolio is permitted to invest. During the time securities
are on loan, the borrower will pay the Master Portfolio any accrued income on
those securities, and the Master Portfolio may invest the cash collateral and
earn income or receive an agreed-upon fee from a borrower that has delivered
cash-equivalent collateral. The Master Portfolio will not lend securities
having a value that exceeds one-third of the current value of its total assets.
Loans of securities by the Master Portfolio are subject to termination at the
Master Portfolio's or the borrower's option. The Master Portfolio may pay
reasonable administrative and custodial fees in connection with a securities
loan and may pay a negotiated portion of the interest or fee earned with
respect to the collateral to the borrower or the placing broker. Borrowers and
placing brokers are not permitted to be affiliated, directly or indirectly,
with the Trust, the investment adviser or the Distributor.
Foreign Obligations. The Tax-Free Money Market and the Capital
Appreciation Master Portfolios may each invest in foreign obligations as
described in Part A. Investments in foreign obligations involve certain
considerations that are not typically associated with investing in domestic
obligations. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not generally
subject to uniform accounting, auditing and financial reporting standards or
governmental supervision comparable to those applicable to 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 of 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. The Tax-Free
Money Market Master Portfolio may not invest 25% or more of its assets in
foreign obligations.
Obligations of foreign banks and foreign branches of U.S. banks
involve somewhat different investment risks from those affecting obligations of
U.S. banks, including the possibilities that liquidity could be impaired
because of future political and economic developments, that the obligations may
be less marketable than comparable obligations of U.S. banks, that a foreign
jurisdiction might impose withholding taxes on interest income payable on those
obligations, that foreign deposits may be seized or nationalized, that foreign
governmental restrictions (such as foreign exchange controls) may be adopted
which might adversely affect the payment of principal and interest on those
obligations and that the selection of those obligations may be more difficult
because there may be less publicly available information concerning foreign
banks or the accounting, auditing and financial reporting standards, practices
and requirements applicable to foreign banks may differ from those applicable
to U.S. banks. In that connection, foreign banks are not subject to
examination by any U.S. Government agency or instrumentality.
Municipal Bonds. The Tax-Free Money Market Master Portfolio may
invest in municipal bonds. The two principal classifications of municipal
bonds are "general obligation" and "revenue" bonds. Municipal bonds are debt
obligations issued to obtain funds for various public purposes, including the
construction of a wide range of public facilities such as bridges, highways,
B-16
<PAGE> 48
housing, hospitals, mass transportation, schools, streets, and water and sewer
works. Other purposes for which municipal bonds may be issued include the
refunding of outstanding obligations and obtaining funds for general operating
expenses or to loan to other public institutions and facilities. Industrial
development bonds are a specific type of revenue bond backed by the credit and
security of a private user. Certain types of industrial development bonds are
issued by or on behalf of public authorities to obtain funds to provide
privately-operated housing facilities, sports facilities, convention or trade
show facilities, airport, mass transit, port or parking facilities, air or
water pollution control facilities and certain local facilities for water
supply, gas, electricity, or sewage or solid waste disposal. The Master
Portfolio may not invest 25% or more of its assets in industrial development
bonds. Assessment bonds, wherein a specially created district or project area
levies a tax (generally on its taxable property) to pay for an improvement or
project may be considered a variant of either category. There are, of course,
other variations in the types of municipal bonds, both within a particular
classification and between classifications, depending on numerous factors.
Municipal Notes. Municipal notes include, but are not limited to, tax
anticipation notes ("TANs"), bond anticipation notes ("BANs"), revenue
anticipation notes ("RANs") and construction loan notes. Notes sold as interim
financing in anticipation of collection of taxes, a bond sale or receipt of
other revenues are usually general obligations of the issuer.
TANs. An uncertainty in a municipal issuer's capacity to raise taxes
as a result of a decline in its tax base or a rise in delinquencies could
adversely affect the issuer's ability to meet its obligations on outstanding
TANs. Furthermore, some municipal issuers mix various tax proceeds into a
general fund that is used to meet obligations other than those of the
outstanding TANs. Use of such a general fund to meet various obligations could
affect the likelihood of making payments on TANs.
BANs. The ability of a municipal issuer to meet its obligations on
its BANs is primarily dependent on the issuer's adequate access to the longer
term municipal bond market and the likelihood that the proceeds of such bond
sales will be used to pay the principal of, and interest on, BANs.
RANs. A decline in the receipt of certain revenues, such as
anticipated revenues from another level of government, could adversely affect
an issuer's ability to meet its obligations on outstanding RANs. In addition,
the possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal of, and
interest on, RANs.
The values of outstanding municipal securities will vary as a result
of changing market evaluations of the ability of their issuers to meet the
interest and principal payments (i.e., credit risk). Such values also will
change in response to changes in the interest rates payable on new issues of
municipal securities (i.e., market risk). Should such interest rates rise, the
value of outstanding securities, including those held in a Master Portfolio's
portfolio, will decline and (if purchased at par value) they would sell at a
discount. If interests rates fall, the value of outstanding securities will
generally increase and (if purchased at par value) they would sell at a
B-17
<PAGE> 49
premium. Changes in the value of municipal securities held in a Master
Portfolio's portfolio arising from these or other factors will cause changes in
the net asset value per share of the Master Portfolio.
ITEM 14. MANAGEMENT OF THE TRUST.
The following information supplements and should be read in
conjunction with the Section in Part A entitled "Management of the Trust".
Trustees and Officer. The principal occupations during the past five
years of the Trustees and principal executive officer of the Trust are listed
below. The address of each, unless otherwise indicated, is 111 Center Street,
Little Rock, Arkansas 72201. Trustees deemed to be "interested persons" of
the Trust for purposes of the Investment Company Act of 1940 (the "1940 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 Trustee Private Investor.
415 Walsh Road
Atherton, CA 94027.
*R. Greg Feltus, 44 Trustee, 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
Investors Brokerage
Insurance Inc.
</TABLE>
B-18
<PAGE> 50
<TABLE>
<S> <C> <C>
Thomas S. Goho, 53 Trustee T.B. Rose Faculty Fellow-
321 Beechcliff Court Business, Wake Forest
Winston-Salem, NC 27104 University, Calloway School
of Business and Accountancy;
Associate Professor
School of Business
and Accounting at
Wake Forest
University since
1983.
*Zoe Ann Hines, 46 Trustee Senior Vice President
of Stephens and
Director of Brokerage
Accounting; and
Secretary of Stephens
Resource Management.
*W. Rodney Hughes, 69 Trustee Private Investor.
31 Dellwood Court
San Rafael, CA 94901
Robert M. Joses, 77 Trustee Private Investor.
47 Dowitcher Way
San Rafael, CA 94901
*J. Tucker Morse, 51 Trustee 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.
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>
B-19
<PAGE> 51
COMPENSATION TABLE
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE COMPENSATION FROM REGISTRANT
NAME AND POSITION FROM REGISTRANT AND FUND COMPLEX
- - ----------------- ---------------------- ------------------
<S> <C> <C>
Jack S. Euphrat $0 $34,188
Trustee
*R. Greg Feltus 0 0
Trustee
Thomas S. Goho 0 34,188
Trustee
*Zoe Ann Hines 0 0
Trustee
*W. Rodney Hughes 0 32,188
Trustee
Robert M. Joses 0 34,188
Trustee
*J. Tucker Morse 0 32,188
Trustee
</TABLE>
Trustees of the Trust who are officers or employees of Stephens or
Wells Fargo Bank are not compensated by the Trust for their services but are
reimbursed for all out-of-pocket expenses relating to attendance at board
meetings. Trustees who are affiliated with Stephens or Wells Fargo Bank also
do not receive compensation from the Trust and also are reimbursed for all
out-of-pocket expenses relating to attendance at board meetings. Each of the
Officers and Trustees of the Trust serves in the identical capacity as Officers
and Directors of Overland Express Funds, Inc., Stagecoach Funds, Inc. and
Stagecoach Inc., and as Trustees and/or Officers of Stagecoach Trust, Master
Investment Portfolio, Life & Annuity 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 the 1940 Act, as the Trust. The Trustees are
compensated annually by other Companies and Trusts within the fund complex for
their services as Directors/Trustees to such Companies and Trusts. Currently,
the Trustees do not receive any compensation from the Trust (although they are
reimbursed for out-of-pocket expenses) and do not receive any retirement
benefits or deferred compensation from the Trust or fund complex.
B-20
<PAGE> 52
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of the date of this Part B, the Overland Sweep, Short-Term
Municipal Income and Short-Term Government-Corporate Income Funds of Overland
Express Funds, Inc. owned at least 25% of the outstanding interests in the CIT,
Short-Term Municipal Income and Short-Term Government-Corporate Income Master
Portfolios, respectively. Therefore, each fund could be considered to be a
controlling person of the respective Master Portfolio for purposes of the 1940
Act. As of the date of this Part B, the Tax-Free Money Market and Capital
Appreciation Master Portfolios had not yet commenced operations. Overland
Express Funds, Inc. is a Maryland corporation and a registered open-end
management investment company.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
INVESTMENT ADVISER -- Pursuant to separate advisory contracts ("Investment
Advisory Contracts"), each Master Portfolios is advised by Wells Fargo Bank.
Each Investment Advisory Contract provides that Wells Fargo Bank has agreed to
furnish to each Master Portfolio investment guidance and policy direction in
connection with the daily portfolio management of such Master Portfolio.
Pursuant to the Investment Advisory Contracts, Wells Fargo Bank furnishes the
Board of Trustees with periodic reports on the investment strategy and
performance of each Master Portfolio.
Wells Fargo Bank has agreed to provide to each Master Portfolio, among
other things, money market 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
investments of each Master Portfolio.
Each Investment Advisory Contract will continue in effect for more than
two years from the effective date provided the continuance is approved annually
(i) by the holders of a majority of each Master Portfolio's outstanding
proportionate interests or by the Board of Trustees of the Trust and (ii) by a
majority of the Trustees of the Trust who are not parties to the Investment
Advisory Contract or "interested persons" (as defined in the Act) of any such
party. The Investment Advisory Contracts may be terminated on 60 days' written
notice by either party and terminates automatically by its terms if assigned.
For the year ended December 31, 1992, the CIT Master Portfolio paid
$37,736 in advisory fees to Wells Fargo Bank; $192,532 in advisory fees were
waived for that year. For the year ended December 31, 1993, the CIT Master
Portfolio paid $861,200 in advisory fees to Wells Fargo Bank; Wells Fargo Bank
did not waive any fees during this year. For the year ended December 31, 1994,
the CIT Master Portfolio paid $1,426,685 in advisory fees to Wells Fargo Bank;
$181,344 in advisory fees were waived by Wells Fargo Bank during the same
period.
For the period from June 3, 1994 (commencement of operations) to
December 31, 1994, Wells Fargo Bank voluntarily waived payment of all advisory
fees of $7,879 payable to it by the Short-Term Municipal Income Master
Portfolio. For the period from September 19, 1994 (commencement of operations)
to December 31, 1994, Wells Fargo Bank voluntarily waived
B-21
<PAGE> 53
payment of all advisory fees of $131 payable to it by the Short-Term
Government-Corporate Income Master Portfolio.
Under the Investment Advisory Contract for the Tax-Free Money Market
Master Portfolio, Wells Fargo Bank is entitled to receive advisory fees of
0.30% of such Master Portfolio's average net assets. Under the Investment
Advisory Contract for the Capital Appreciation Master Portfolio, Wells Fargo
Bank is entitled to receive advisory fees of 0.50% of such Master Portfolio's
average net assets.
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 and each Master Portfolio that Wells Fargo Bank should be able to perform
the services contemplated by the Investment Advisory Contracts, the Agency
Agreements and the Custody Agreements 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 or entered into with another entity or
entities qualified to perform such services.
ADMINISTRATOR -- Each Master Portfolio of the Trust has retained Stephens to
serve as administrator on behalf of each Master Portfolio. Under the
Administration Agreement, Stephens, in connection therewith, furnishes each
Master Portfolio of the Trust with office facilities, together with those
ordinary clerical and bookkeeping services that are not being furnished by
Wells Fargo Bank.
For the year ended December 31, 1992, Stephens waived payment of all
administrative fees payable by the CIT Master Portfolio. For the year ended
December 31, 1993, the CIT Master Portfolio paid Stephens $86,120 in
administrative fees. For the year ended December 31, 1994, the CIT Master
Portfolio paid Stephens $142,669 in administrative fees. The Short-Term
Municipal Income , Short-Term Government-Corporate Income, Tax-Free Money
Market and Capital Appreciation Master Portfolios are not charged
administrative fees so long as Stephens is entitled to administrative fees
payable by a feeder fund that invests substantially all of its assets in the
applicable Master Portfolio.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT -- Wells Fargo Bank has
been retained to act as Custodian and Transfer and Dividend Disbursing Agent
for each Master Portfolio of the Trust. The Custodian, among other things,
maintains a custody account or accounts in the name of each Master Portfolio;
receives and delivers all assets for each 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 each Master Portfolio and pays all
expenses of each Master Portfolio. For its services as Custodian, the Trust
has agreed to pay
B-22
<PAGE> 54
Wells Fargo Bank an annual fee of .0167% of the average daily net assets of
each Master Portfolio plus certain fees on a transaction basis. For the year
ended December 31, 1994, the CIT Master Portfolio paid Wells Fargo Bank $87,232
for its services as custodian. For the period from June 3, 1994 (commencement
of operations) to December 31, 1994, Wells Fargo Bank waived all of the
custodian fees payable to it by the Short-Term Municipal Income Master
Portfolio. For the period from September 19, 1994 (commencement of operations)
to December 31, 1994, Wells Fargo Bank waived all of the custodian fees payable
to it by the Short-Term Government-Corporate Income Master Portfolio. For its
services as Transfer and Dividend Disbursing Agent, Wells Fargo Bank is
entitled to receive a fee of 0.05% of each Master Portfolio's average daily net
assets.
INDEPENDENT AUDITORS -- KPMG Peat Marwick LLP has been selected as the
independent auditors for the Master Portfolios of the Trust. KPMG Peat Marwick
LLP provides audit services, tax return preparation and assistance and
consultation in connection with review of certain SEC filings. KPMG Peat
Marwick LLP's address is Three Embarcadero Center, San Francisco, California
94111.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
None of the Master Portfolios of the Trust has an 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 each Master Portfolio's
investment decisions and the placing of portfolio transactions. In placing
orders, it is the policy of each Master Portfolio 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 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.
As to the Capital Appreciation Master Portfolio, purchases and sales of
equity securities on a securities exchange are effected through brokers who
charge a negotiated commission for their services. Commission rates are
established pursuant to negotiations with the broker based on the quality and
quantity of execution services provided by the broker in light of generally
prevailing rates. Orders may be directed to any broker including, to the
extent and in the manner permitted by applicable law, Stephens or Wells Fargo
Securities Inc. In the over-the-counter-market, securities are generally
traded on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security usually
includes a profit to the dealer. In underwritten offerings, securities are
purchased at a fixed price that includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
Debt securities normally are purchased or sold from or to dealers
serving as market makers for the securities at a net price. A Master Portfolio
also may purchase portfolio securities in underwritten offerings or directly
from an issuer. Generally debt obligations are traded on a net
B-23
<PAGE> 55
basis and do not involve brokerage commissions. The cost of executing the
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 is obtained from the SEC or an exemption
is otherwise available. A 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 Master
Portfolio's Board of Trustees.
Except for the portfolio securities of the Capital Appreciation Master
Portfolio, purchases and sales of the investment securities of the Master
Portfolios usually are principal transactions. Securities of each Master
Portfolio normally are purchased or sold from or to dealers serving as market
makers for the securities at a net price. Each Master Portfolio also may
purchase portfolio securities in underwritten offerings and may purchase
securities directly from the issuer. Generally, taxable money market
securities are traded on a net basis and do not involve brokerage commissions.
The cost of executing securities transactions of the Master Portfolios consists
primarily of dealer spreads and underwriting commissions.
Wells Fargo Bank, as the investment adviser to the Master Portfolios,
may, in circumstances in which two or more dealers are in a position to offer
comparable results for a portfolio transaction, give preference to a dealer
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 required to be performed by Wells Fargo Bank under the
Investment Advisory Contracts, 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 Portfolios 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 Portfolios.
As of June 30, 1995, the Master Portfolios owned securities of their
"regular brokers or dealers" or their parents, as defined in the 1940 Act as
follows: the CIT Master Portfolio and the Short-Term Government-Corporate
Income Master Portfolio had entered into a Goldman Sachs Pooled Repurchase
Agreement in amounts of $26,159,000 and $16,600, respectively. As of the same
date, the Capital Appreciation Master Portfolio's predecessor fund, the
Strategic Growth Fund of Overland Express Funds, Inc. (the "Predecessor Fund")
also had entered into the Goldman Sachs Pooled Repurchase Agreement in an
amount of $2,582,000.
PORTFOLIO TURNOVER -- For the period beginning June 3, 1994 (commencement of
operations) to December 31, 1994, the portfolio turnover rate for the
Short-Term Municipal Income Master Portfolio was 0%. For the period beginning
September 19, 1994 (commencement of operations) to December 31, 1994, the
portfolio turnover rate for the Short-Term Government-Corporate Income Master
Portfolio Master Portfolio was 8%. For the period ended December 31, 1993, the
B-24
<PAGE> 56
year ended December 31, 1994 and the six-month period ended June 30, 1995, the
portfolio turnover rates for the Class A shares of the Predecessor Fund to the
Capital Appreciation Master Portfolio were 182%, 149% and 97%, respectively,
and for the same periods for the Predecessor Fund's Class D shares also were
182%, 149% and 97%, respectively.
Portfolio turnover generally involves some expense to a Master
Portfolio, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and the reinvestment in other
securities. To the extent the Master Portfolios invest in government and
municipal securities, a high portfolio turnover rate should not result in the
Master Portfolios paying substantially more brokerage commissions, since most
transactions in government securities and municipal securities are effected on
a principal basis. In addition, a high portfolio turnover rate should not
adversely affect the CIT or Tax-Free Money Market Master Portfolios that
generally consist of obligations with relatively short maturities because
portfolio transactions for these Master Portfolios ordinarily are made directly
with principals on a net basis and, consequently, neither Master Portfolio
typically incurs brokerage expenses.
Portfolio turnover also can generate short-term capital gains tax
consequences. The portfolio turnover rate is not a limiting factor when Wells
Fargo Bank deems portfolio changes appropriate.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
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, its Declaration of Trust provides that investors will be personally
responsible for liabilities and obligations of each Master Portfolio of the
Trust, but only to the extent the Trust property is insufficient to satisfy
such liabilities and obligations. The Declaration of Trust also provides for
the Trustees to maintain appropriate insurance (for example, fidelity bonding
and errors and omissions insurance) for the protection of the Trust, the
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 a Master Portfolio's
obligations. Thus, the risk of an investor incurring financial loss on account
of personal liability is limited to circumstances in which the investor's
liability is disproportionate to its investment and inadequate insurance
exists.
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. 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.
As used in Part A and Part B, the term "majority," when referring to
approvals to be obtained from investors in each Master Portfolio of the Trust,
means the vote of the lesser of (i) 67% of the Master Portfolio's outstanding
proportionate interests represented at a meeting if the holders of more than
50% of the Master Portfolio's outstanding proportionate interests are
B-25
<PAGE> 57
present in person or by proxy, or (ii) more than 50% of the Master Portfolio's
outstanding proportionate interests.
The Trust may dispense with annual meetings of investors in any year in
which it is not required to elect Trustees under the 1940 Act. However, the
Trust is required to hold a special meeting of its investors for the purpose of
voting on the question of removal of a Trustee or Trustees if requested in
writing by the holders of at least 10% of the Master Portfolios of the Trust's
outstanding proportionate interests, and to assist in communicating with other
investors as required by Section 16(c) of the 1940 Act.
A Master Portfolio of the Trust may enter into a merger or
consolidation, or sell all or substantially all of its assets, if approved by
the vote of two-thirds of its investors (with the vote of each being in
proportion to their respective percentages of the beneficial interests in the
Trust), except that if the Trustees of the Trust recommend such sale of assets,
the approval by vote of a majority of the investors of a Master Portfolio (with
the vote of each being in proportion to their respective percentages of the
beneficial interests in the Master Portfolio) will be sufficient. A Master
Portfolio of the Trust may also be terminated (i) upon liquidation and
distribution of its assets, if approved by the vote of two-thirds of its
investors (with the vote of each being in proportion to the amount of their
investment) or (ii) by the Trustees of the Trust by written notice to the
Master Portfolio's investors. In the event of the liquidation or dissolution
of a Master Portfolio, investors are entitled to receive their pro rata share
of all assets available for distribution.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.
Beneficial interests in the Trust are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act").
Investments in a Master Portfolio of the Trust may only be made by registered
broker/dealers or by investment companies, insurance company separate accounts,
common or commingled trust funds, group trusts or similar organizations or
entities that are "accredited investors" within the meaning of Regulation D
under the 1933 Act. This registration statement does not constitute an offer
to sell, or the solicitation of an offer to buy, any "security" within the
meaning of the 1933 Act.
Net asset value per interest of the CIT Master Portfolio of the Trust is
determined by the Custodian of the Trust on each Bank Business Day. Net asset
value per interest of the Capital Appreciation Master Portfolio, the Short-Term
Government-Corporate Income Master Portfolio, the Short-Term Municipal Income
Master Portfolio and the Tax-Free Money Market Master Portfolio is determined
by the Custodian of the Trust on each Business Day.
CIT MASTER PORTFOLIO AND THE TAX-FREE MONEY MARKET MASTER PORTFOLIO -- As
indicated in Part A, the CIT Master Portfolio and the Tax-Free Money Market
Master Portfolio each uses the amortized cost method to determine the value of
its portfolio securities pursuant to Rule 2a-7 under the Act. The amortized
cost method involves valuing a security at its cost and amortizing any discount
or premium over the period until maturity, regardless of the impact of
fluctuating
B-26
<PAGE> 58
interest rates on the market value of the security. While this method provides
certainty in valuation, it may result in periods during which the value, as
determined by amortized cost, is higher or lower than the price that the Master
Portfolio would receive if the security were sold. During these periods the
yield to investors may differ somewhat from that which could be obtained from a
similar fund that uses a method of valuation based upon market prices. Thus,
during periods of declining interest rates, if the use of the amortized cost
method resulted in a lower value of the Master Portfolio's portfolio on a
particular day, a prospective investor in the Master Portfolio would be able to
obtain a somewhat higher yield than would result from investment in a fund
using solely market values, and existing Master Portfolio investors would
receive correspondingly less income. The converse would apply during periods
of rising interest rates.
Rule 2a-7 provides that, in order to value its portfolio using the
amortized cost method, the Master Portfolio must maintain a dollar-weighted
average portfolio maturity of 90 days or less, purchase securities having
remaining maturities (as defined in Rule 2a-7) of thirteen months or less, and
invest only in Eligible Securities determined by the Board of Trustees to
present minimal credit risks. The maturity of an instrument is generally
deemed to be the period remaining until the date when the principal amount
thereof is due or the date on which the instrument is to be redeemed. However,
Rule 2a-7 provides that the maturity of an instrument may be deemed shorter in
the case of certain instruments, including certain variable- and floating-rate
instruments subject to demand features. Pursuant to the Rule, the Board has
established procedures designed to stabilize, to the extent reasonably
possible, the Master Portfolio's net asset value. Such procedures include
review of a Master Portfolio's holdings by the Board of Trustees at such
intervals as it may deem appropriate to determine whether the Master
Portfolio's net asset value calculated by using available market quotations
deviates within 1/2 of the 1% of the value based on amortized cost. The extent
of any deviation is examined by the Board of Trustees. If such deviation
exceeds 1/2 of 1%, the Board promptly considers what action, if any, will be
initiated. In the event the Board determines that a deviation exists that may
result in material dilution or other unfair results to investors, the Board
will take such corrective action as it regards as necessary and appropriate,
including the sale of portfolio instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity, withholding
dividends or establishing a net asset value by using available market
quotations.
OTHER MASTER PORTFOLIOS -- The net asset value of the Capital Appreciation
Master Portfolio, the Short-Term Municipal Income Master Portfolio and the
Short-Term Government-Corporate Income Master Portfolio is determined on each
Business Day.
The net asset value per interest for these Master Portfolios is
determined by dividing the value of the total assets of a Master Portfolio less
the Master Portfolio's liabilities by the total number of outstanding
interests. The value of assets of these Master Portfolios (other than debt
obligations maturing in 60 days or less) is determined at the close of regular
trading on the New York Stock 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
B-27
<PAGE> 59
good faith by the Board of Trustees. The valuation may be provided by
independent pricing services.
ITEM 20. TAX STATUS.
Under the anticipated method of operation of the Master Portfolios of
the Trust, none of the Master Portfolios will be subject to any income tax.
However each investor in a Master Portfolio will be taxed on its share (as
determined in accordance with the governing instruments of the Trust) of a
Master Portfolio's ordinary income and capital gain in determining the
investor's income tax liability. The determination of such share will be made
in accordance with the Internal Revenue Code of 1986, as amended, ("Code") and
regulations promulgated thereunder. Each Master Portfolio's taxable year-end
is December 31. Although, as described above, the Master Portfolios will not
be subject to federal income tax, each will file appropriate income tax
returns.
It is intended that each Master Portfolio's assets, income and
distributions will be managed in such a way that a regulated investment company
investing in a Master Portfolio of the Trust will be able to satisfy the
requirements of Subchapter M of the Code, assuming that the investment company
invested all of its assets in a Master Portfolio. The Trust will be treated as
a non-publicly traded partnership rather than 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 a Master Portfolio of the
Trust will be deemed to have been "passed through" to investors in such Master
Portfolio, regardless of whether such interest, dividends or gains have been
distributed by the Master Portfolio or losses have been realized by the
investors. Accordingly, if a Master Portfolio were to accrue but not
distribute any interest, dividends or gains, an investor 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.
Investors' capital accounts will be adjusted on a daily basis to reflect
additional investments or withdrawals and any increase or decrease in net asset
value. For purposes of determining fair market value of the CIT Master
Portfolio's and the Tax-Free Money Market Master Portfolio's assets, such
Master Portfolios use the amortized cost method of valuation under Rule 2a-7
under the Act. The investments of other Master Portfolios are valued each
business day using available market quotations or at fair value as determined
by one or more independent primary services (collectively the "Service")
approved by the Trust's Board of Trustees. The Service may use available
market quotations, employ electronic data processing techniques and/or a matrix
system to determine valuations. The Service's procedures are reviewed by the
Trust's officers under the general supervision of the Trust's Board of
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 a
Master Portfolio's shares.
ITEM 21. UNDERWRITERS.
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<PAGE> 60
The distributor and exclusive placement agent for the Master Portfolios
is Stephens, which receives no additional compensation for serving in this
capacity. Registered broker/dealers and investment companies, insurance
company separate accounts, common and commingled trust funds, group trusts and
similar organizations and entities which constitute accredited investors, as
defined in the regulations adopted under the 1933 Act, may continuously invest
in a Master Portfolio of the Trust.
ITEM 22. CALCULATIONS OF PERFORMANCE DATA.
Not applicable.
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<PAGE> 61
ITEM 23. FINANCIAL INFORMATION.
KPMG Peat Marwick LLP has been selected as the independent auditors for
the Trust. KPMG Peat Marwick LLP provides audit services, tax return
preparation and assistance and consultation in connection with review of
certain SEC filings. KPMG Peat Marwick LLP's address is Three Embarcadero
Center, San Francisco, California 94111.
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<PAGE> 62
APPENDIX
The following is a description of the ratings given by Moody's and S&P
to corporate and municipal bonds, municipal notes, and corporate and municipal
commercial paper.
Corporate and Municipal Bonds
Moody's: The four highest ratings for corporate and municipal bonds are
"Aaa," "Aa," "A" and "Baa." Bonds rated "Aaa" are judged to be of the "best
quality" and carry the smallest amount of investment risk. Bonds rated "Aa"
are of "high quality by all standards," but margins of protection or other
elements make long-term risks appear somewhat greater than "Aaa" rated bonds.
Bonds rated "A" possess many favorable investment attributes and are considered
to be upper medium grade obligations. Bonds rated "Baa" are considered to be
medium grade obligations; interest payments and principal security appear
adequate for the present, but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds
have speculative characteristics as well. Moody's applies numerical modifiers:
1, 2 and 3 in each rating category from "Aa" through "Baa" in its rating
system. The modifier 1 indicates that the security ranks in the higher end of
its category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end.
S&P: The four highest ratings for corporate and municipal bonds are
"AAA," "AA," "A" and "BBB." Bonds rated "AAA" have the highest ratings
assigned by S&P and have an extremely strong capacity to pay interest and repay
principal. Bonds rated "AA" have a "very strong capacity to pay interest and
repay principal" and differ "from the highest rated issued only in small
degree." Bonds rated "A" have a "strong capacity" to pay interest and repay
principal, but are "somewhat more susceptible" to adverse effects of changes in
economic conditions or other circumstances than bonds in higher rated
categories. Bonds rated "BBB" are regarded 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. The ratings from "AA" to "BBB" may be modified by the addition of
a plus or minus sign to show relative standing within the category.
Municipal Notes
Moody's: The highest ratings for state and municipal short-term
obligations are "MIG 1," "MIG 2," and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG
3" in the case of an issue having a variable rate demand feature). Notes rated
"MIG 1" or "VMIG 1" are judged to be of the "best quality." Notes rated "MIG
2" or "VMIG 2" are of "high quality," with margins of protections "ample
although not as large as in the preceding group." Notes rated "MIG 3" or "VMIG
3" are of "favorable quality," with all security elements accounted for, but
lacking the strength of the preceding grades.
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<PAGE> 63
S&P: The "SP-1" rating reflects a "very strong or strong capacity to
pay principal and interest." Notes issued with "overwhelming safety
characteristics" will be rated "SP-1+." The "SP-2" rating reflects a
"satisfactory capacity" to pay principal and interest.
Corporate and Municipal Commercial Paper
Moody's: The highest rating for corporate and municipal commercial
paper is "P-1" (Prime-1). Issuers rated "P- 1" have a "superior capacity for
repayment of short-term promissory obligations." Issuers rated "P-2" (Prime-2)
"have a strong capacity for repayment of short-term promissory obligations,"
but earnings trends, while sound, will be subject to more variation.
S&P: The "A-1" rating for corporate and municipal commercial paper
indicates that the "degree of safety regarding timely payment is either
overwhelming or very strong." Commercial paper with "overwhelming safety
characteristics" will be rated "A-1+." Commercial paper with a strong capacity
for timely payments on issues will be rated "A-2."
Corporate Notes
S&P: The two highest ratings for corporate notes are "SP-1" and "SP-2."
The "SP-1" rating reflects a "very strong or strong capacity to pay principal
and interest." Notes issued with "overwhelming safety characteristics" will be
rated "SP-1+." The "SP-2" rating reflects a "satisfactory capacity" to pay
principal and interest.
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<PAGE> 64
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Not Applicable
(b) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C> <C>
1(a) - Declaration of Trust, incorporated by reference to the Registration
Statement on Form N-1A filed on September 24, 1991.
(b) - Certificate of Amendment to the Declaration of Trust, incorporated by
reference to Amendment No. 3 filed on May 2, 1994.
(c) - Amendment to the Declaration of Trust, incorporated by reference to
Amendment No. 6 filed on November 29, 1995.
2 - By-Laws, incorporated by reference to the Registration Statement on
Form N-1A filed on September 24, 1991.
3 - Not Applicable.
4 - Not Applicable.
5(a)(i) - Amended Advisory Contract with Wells Fargo Bank, N.A. on behalf of the
Cash Investment Trust Master Portfolio, incorporated by reference to
Amendment No. 3 filed on May 2, 1994.
</TABLE>
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<PAGE> 65
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C> <C> <C>
(ii) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the 1-3 Year
Duration Municipal Income Master Portfolio (now known as the "Short-
Term Municipal Income Master Portfolio"), incorporated by reference to
Amendment No. 6 filed on November 29, 1995.
(iii) - Advisory Contract with Wells Fargo Bank, N.A. on behalf of the 1-3 Year
Duration Full Faith and Credit Government Income Master Portfolio (now
known as the "Short-Term Government-Corporate Income Master Portfolio"),
incorporated by reference to Amendment No. 6 filed on November 29, 1995.
(iv) - Form of Investment Advisory Contract with Wells Fargo Bank, N.A. on
behalf of the Tax-Free Money Market Master Portfolio, incorporated by
reference to Amendment No. 6 filed on November 29, 1995.
(v) - Form of Investment Advisory Contract with Wells Fargo Bank, N.A. on behalf
of the Capital Appreciation Master Portfolio, filed herewith.
(b) - Amended Administration Agreement with Stephens Inc. on behalf of the
Master Portfolios, incorporated by reference to Amendment No. 3 filed
on May 2, 1994.
6 - Amended Placement Agency Agreement, incorporated by reference to
Amendment No. 3 filed on May 2, 1994.
7 - Not Applicable.
8(a) - Custody Agreement with Wells Fargo Bank, N.A., incorporated by
reference to Amendment No. 3 filed on May 2, 1994.
8(b) - Amendment No. 1 to the Custody Agreement with Wells Fargo Bank, N.A.,
filed herewith.
9 - Amended Agency Agreement with Wells Fargo Bank, N.A., incorporated by
reference to Amendment No. 3 filed on May 2, 1994.
10 - Not Applicable.
11 - Not Applicable.
12 - Not Applicable.
13 - Investment Letter, incorporated by reference to the Registration
Statement on Form N-1A filed on September 24, 1991.
14 - Not Applicable.
15 - Not Applicable.
16 - Not Applicable.
17 - Not Applicable.
</TABLE>
Item 25. Persons Controlled by or under Common Control with Registrant.
No person is controlled by or under common control with Registrant.
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<PAGE> 66
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of November 28, 1995, the number of record holders of each
Master Portfolio of the Registrant was as follows:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Cash Investment Trust Master Portfolio 2
Short-Term Municipal Income Master Portfolio 2
Short-Term Government-Corporate Income Master Portfolio 2
Tax-Free Money Market Master Portfolio 0
</TABLE>
Item 27. Indemnification.
Article V of the Registrant's Declaration of Trust limits the
liability and, in certain instances, provides for mandatory indemnification of
the Registrant's trustees, officers, employees, agents and holders of
beneficial interests in the Trust and its four Master Portfolios. In
addition, the Trustees are empowered under Section 3.9 of the Registrant's
Declaration of Trust to obtain such insurance policies as they deem necessary.
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 the
five Master Portfolios of the Registrant and to several other registered
open-end management investment companies. Wells Fargo Bank's business is
that of a national 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.
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<PAGE> 67
<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
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
</TABLE>
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<PAGE> 68
<TABLE>
<S> <C>
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
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
</TABLE>
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<PAGE> 69
<TABLE>
<S> <C>
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
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
</TABLE>
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<PAGE> 70
<TABLE>
<S> <C>
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
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>
C-7
<PAGE> 71
Item 29. Principal Underwriters.
(a) Stephens Inc., placement agent for the Registrant, does not
presently act as investment adviser for any other registered investment
companies, but does act as principal underwriter for Overland Express Funds,
Inc., Stagecoach Inc., Stagecoach Trust and Stagecoach Funds, Inc. and is the
exclusive placement agent for Master Investment Portfolio, Managed Series
Investment Trust and Life & Annuity Trust, each of which is a registered series
management investment company 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 Funds, Inc., Nations Fund Portfolio, 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 (SEC File No.
501-15510).
(c) Not applicable.
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are maintained at one or more of the following offices: Master Investment
Trust maintains those accounts, books and other documents required by Rule
31a-1(b) (4) and (d), and Rule 31a-2(a)(3) and (c) at 111 Center Street, Little
Rock, Arkansas 72201; Wells Fargo Bank maintains all other accounts, books or
other documents required by Rule 31a-1, 31a-2 and 31a-3 at 525 Market Street,
San Francisco, California 94163; and copies of most of such documents also are
maintained by Master Investment Trust.
Item 31. Management Services.
Other than as set forth under the captions "Items 5 Management of
the Trust" in Part A of this Registration Statement and "Item 16 Investment
Advisory and Other Services" in Part B of this Registration Statement,
Registrant is not a party to any management-related service contract.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
C-8
<PAGE> 72
(c) Registrant undertakes to hold a special meeting of its
shareholders for the purpose of voting on the question of
removal of a trustee or trustees if requested in writing by
the holders of at least 10% of each Master Portfolio, the
outstanding voting securities of Master Investment Trust
and to assist in communicating with other shareholders as
required by Section 16(c) of the Investment Company Act of
1940.
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<PAGE> 73
SIGNATURES
Pursuant to the requirements of the Investment Company Act of
1940, the Registrant has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Little Rock, State of Arkansas on the 21st day of
December, 1995.
MASTER INVESTMENT TRUST
By: /s/ R. Greg Feltus
---------------------------
R. Greg Feltus, President
<TABLE>
<CAPTION>
Signature Title
- - --------- -----
<S> <C>
/s/ R. Greg Feltus Chairman, President
- - ------------------------------- and Trustee
(R. Greg Feltus)
/s/ Richard H. Blank, Jr. Chief Operating Officer,
- - ------------------------------- Secretary and Treasurer
(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/ R. Greg Feltus
---------------------------
R. Greg Feltus
As Attorney-in-Fact
</TABLE>
<PAGE> 74
Master Investment Trust
File No. 811-6415
Amendment No. 7 to the
Registration Statement on Form N-1A
Under the Investment Company Act of 1940
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------ -----------
<S> <C>
99.B5(a)(v) Form of Investment Advisory Contract on behalf of the Capital
Appreciation Master Portfolio
99.B8(b) Amendment No. 1 to the Custody Agreement with Wells Fargo Bank, N.A.
</TABLE>
<PAGE> 1
EX-99.5(a)(v)
FORM OF INVESTMENT ADVISORY CONTRACT
MASTER INVESTMENT TRUST
111 Center Street
Little Rock, Arkansas 72201
December ___, 1995
Wells Fargo Bank, N.A.
420 Montgomery Street
San Francisco, California 94163
Dear Sirs:
This will confirm the agreement between the undersigned (the
"Trust") on behalf of the CAPITAL APPRECIATION MASTER PORTFOLIO (the "Master
Portfolio") and Wells Fargo Bank, N.A. (the "Adviser") as follows:
1. The Trust is a registered open-end management investment
company currently consisting of four investment portfolios, but which may from
time to time consist of a greater or lesser number of investment portfolios
(the "Master Portfolios"). The Capital Appreciation Master Portfolio is one of
the five Master Portfolios. The Trust proposes to engage in the business of
investing and reinvesting the assets of the Master Portfolio in the manner and
in accordance with the investment objective and restrictions specified in the
Trust's Registration Statement, as amended from time to time (the "Registration
Statement"), filed by the Trust under the Investment Company Act of 1940 (the
"Act"). Copies of the Registration Statement have been furnished to the
Adviser. Any amendments to the Registration Statement shall be furnished to
the Adviser promptly.
2. The Trust is engaging the Adviser to manage the investing and
reinvesting of the Master Portfolio's assets and to provide the advisory
services specified elsewhere in this contract to the Master Portfolio, subject
to the overall supervision of the Board of Trustees of the Trust. Pursuant to
an administration agreement between the Trust and an administrator (the
"Administrator") on behalf of the Master Portfolios, the Trust has engaged the
Administrator to provide the administrative services specified therein.
3. (a) The Adviser shall make investments for the account of the
Master Portfolio in accordance with the Adviser's best judgment and consistent
with the investment objective and restrictions set forth in the Trust's
Registration Statement, the Act and the provisions of the Internal Revenue Code
of 1986, as amended, relating to regulated investment companies, subject to
policy decisions adopted by the Trust's Board of Trustees. The Adviser shall
advise the Trust's officers and Board of Trustees, at such times as the Trust's
Board of Trustees may specify, of investments made for the Master Portfolio and
shall, when requested by the Trust's officers or Board of Trustees, supply the
reasons for making particular investments.
<PAGE> 2
(b) The Adviser shall provide to the Master Portfolio
investment guidance and policy direction in connection with its daily
management of the Master Portfolio's assets, including oral and written
research, analysis, advice, statistical and economic data and information and
judgments, and shall furnish to the Trust's Board of Trustees periodic reports
on the investment strategy and performance of the Master Portfolio and such
additional reports and information as the Trust's Board of Trustees and
officers shall reasonably request.
(c) The Adviser shall pay the costs of printing and
distributing all materials relating to the Master Portfolio prepared by it, or
prepared at its request, other than such costs relating to proxy statements,
Part As, reports for holders of beneficial interests ("Interests") of the
Master Portfolio ("Holders") and other materials distributed to existing or
prospective Holders on behalf of the Master Portfolio.
(d) The Adviser shall, at its expense, employ or associate
with itself such persons as the Adviser believes appropriate to assist it in
performing its obligations under this contract.
4. The Company understands that the Adviser, in rendering its
services to the Fund hereunder, may delegate certain advisory responsibilities
hereunder to a sub-adviser (the "Sub-Adviser"), provided that the Adviser shall
continue to supervise and monitor the performance of the duties delegated to
the Sub-Adviser and provided that any such delegation will not relieve the
Adviser of its duties and obligations under this Contract. The Adviser will
not seek to amend any such Sub-Advisory Contract to materially alter the
obligations of the parties unless the Adviser gives the Company at least 60
days' prior written notice thereof.
5. Except as provided in the Trust's advisory contracts and
administration agreement, the Trust shall bear all costs of its operations,
including the compensation of its trustees who are not affiliated with the
Adviser, the Administrator or any of their affiliates; advisory and
administration fees; governmental fees; interest charges; taxes; fees and
expenses of its independent auditors, legal counsel, transfer agent and
dividend disbursing agent; expenses of redeeming Interests; expenses of
preparing and printing Part As, Holders' reports, notices, proxy statements and
reports to regulatory agencies; travel expenses of trustees, officers and
employees; office supplies; insurance premiums and certain expenses relating to
insurance coverage; trade association membership dues; brokerage and other
expenses connected with the execution of portfolio securities transactions;
fees and expenses of any custodian, including those for keeping books and
accounts and calculating the net asset value per share of the Master Portfolio;
expenses of Holders' meetings; expenses relating to the issuance, and any
registration and qualification of, Interests of the Master Portfolio; pricing
services, if any; organizational expenses; and any extraordinary expenses.
Expenses attributable to one or more, but not all, of the Master Portfolios are
to be charged against the assets of the relevant Master Portfolios. General
expenses of the Trust are allocated among the Master Portfolios in a manner
proportionate to the net assets of each Master Portfolio, on a transactional
basis or on such other basis as the Board of Trustees deems equitable.
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6. The Adviser shall give the Trust and the Master Portfolio the
benefit of the Adviser's best judgment and efforts in rendering services under
this contract. As an inducement to the Adviser's undertaking to render these
services, the Trust agrees that the Adviser shall not be liable under this
contract for any mistake in judgment or in any other event whatsoever except
for lack of good faith, provided that nothing in this contract shall be deemed
to protect or purport to protect the Adviser against any liability to the Trust
or its Holders to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of the
Adviser's duties under this contract or by reason of reckless disregard of its
obligations and duties hereunder.
7. In consideration of the services to be rendered by the
adviser under this contract, the Master Portfolio shall pay the adviser a
monthly fee on the first business day of each month, at the annual rate of
0.50% of the average daily value (as determined on each day that such value is
determined for the Master Portfolio at the time set forth in the registration
statement for determining net asset value per share) of the Master Portfolio's
net assets during the preceding month. If the fee payable to the Adviser
pursuant to this paragraph 7 begins to accrue after the beginning of any month
or if this contract terminates before the end of any month, the fee for the
period from the effective date to the end of that month or from the beginning
of that month to the termination date, respectively, shall be prorated
according to the proportion that the period bears to the full month in which
the effectiveness or termination occurs. For purposes of calculating each such
monthly fee, the value of the Master Portfolio's net assets shall be computed
in the manner specified in the Registration Statement and the Trust's
Declaration of Trust for the computation of the value of the Master Portfolio's
net assets in connection with the determination of the net asset value of
Master Portfolio Interests.
8. If in any fiscal year the total expenses of the Master
Portfolio or any registered investment company investing in the Master
Portfolio ("Investing Company") incurred by, or allocated to, the Master
Portfolio or any Investing Company, excluding taxes, interest, brokerage
commissions and other portfolio transaction expenses, other expenditures that
are capitalized in accordance with generally accepted accounting principles,
extraordinary expenses and amounts accrued or paid under any Rule 12b-1 Plan,
but including the fees provided for in paragraph 7 and those provided for
pursuant to the Master Portfolio's and/or Investing Company's administration
agreement ("includable expenses"), exceed the most restrictive expense
limitation applicable to the Master Portfolio and/or Investing Company imposed
by state securities laws or regulations thereunder, as these limitations may be
raised or lowered from time to time, the Adviser shall waive or reimburse that
portion of the excess derived by multiplying the excess by a fraction, the
numerator of which shall be the percentage at which the excess portion
attributable to the fee payable pursuant to this contract is calculated under
paragraph 7 hereof, and the denominator of which shall be the sum of such
percentage plus the percentage at which the excess portion attributable to the
fee payable pursuant to the Master Portfolio's and/or Investing Company's
administration agreement is calculated (the "Applicable Ratio"), but only to
the extent of the fee hereunder for the fiscal year. If the fees payable under
this contract and/or the Master Portfolio's and/or Investing Company's
administration agreement contributing to such excess portion are calculated at
more than one percentage rate, the Applicable Ratio shall be calculated
separately on the basis of, and applied separately to, the portions of the fees
calculated at the different rates.
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At the end of each month of the Master Portfolio's fiscal year, the Master
Portfolio shall review the includable expenses accrued during that fiscal year
to the end of the period and shall estimate the contemplated includable
expenses for the balance of that fiscal year. If as a result of that review
and estimation it appears likely that the includable expenses will exceed the
limitations referred to in this paragraph 8 for a fiscal year with respect to
the Master Portfolio, the monthly fee set forth in paragraph 7 payable to the
Adviser for such month shall be reduced, subject to a later adjustment, by an
amount equal to the Applicable Ratio times the pro rata portion (prorated on
the basis of the remaining months of the fiscal year, including the month just
ended) of the amount by which the includable expenses for the fiscal year are
expected to exceed the limitations provided for in this paragraph 8. For
purposes of computing the excess, if any, over the most restrictive applicable
expense limitation, the value of the Master Portfolio's net assets shall be
computed in the manner specified in the last sentence of paragraph 7, and any
reimbursements required to be made by the Adviser shall be made once a year
promptly after the end of the Master Portfolio's fiscal year.
9. This contract shall become effective on its execution date
and shall thereafter continue in effect, provided that this contract shall
continue in effect for a period of more than two years from the date hereof
only so long as the continuance is specifically approved at least annually (a)
by the vote of a majority of the Master Portfolio's outstanding voting
securities (as defined in the Act) or by the Trust's Board of Trustees and (b)
by the vote, cast in person at a meeting called for the purpose, of a majority
of the Trust's trustees who are not parties to this contract or "interested
persons" (as defined in the Act) of any such party. This contract may be
terminated at any time by the Trust or the Master Portfolio, without the
payment of any penalty, by a vote of a majority of the Master Portfolio's
outstanding voting securities (as defined in the Act) or by a vote of a
majority of the Trust's entire Board of Trustees on 60 days' written notice to
the Adviser or by the Adviser, at any time after the second anniversary of the
effective date of this contract on 60 days' written notice to the Trust. This
contract shall terminate automatically in the event of its assignment (as
defined in the Act).
10. Except to the extent necessary to perform the Adviser's
obligations under this contract, nothing herein shall be deemed to limit or
restrict the right of the Adviser, or any affiliate of the Adviser, or any
employee of the Adviser, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of
a similar or dissimilar nature, or to render services of any kind to any other
corporation, firm, individual or association.
11. Pursuant to Article V of the Trust's Declaration of Trust, no
Trustee, officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever, in his or her official or individual capacity to
any person, other than to the Trust or its Holders, in connection with Trust
property or the affairs of the Trust, save only that arising from his or her
bad faith, willful misfeasance, gross negligence or reckless disregard of his
or her duty to such person; and all such persons shall look solely to the Trust
property (which may include any applicable insurance) for satisfaction of
claims of any nature against a Trustee, officer, employee or agent of the Trust
arising in connection with the affairs of the Trust. Each Holder shall be
jointly and severally liable (with rights of contribution inter se in
proportion to their respective Interests in the Trust) for the liabilities and
obligations of the Trust in the event that the Trust fails to satisfy such
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liabilities and obligations; provided, however, that, to the extent assets are
available in the Trust, the Trust shall indemnify and hold each Holder harmless
from and against any claim or liability to which such Holder may become subject
by reason of his or her being or having been a Holder to the extent that such
claim or liability imposes on the Holder an obligation or liability which, when
compared to the obligations and liabilities imposed on other Holders, is
greater than his or her interest (proportionate share), and shall reimburse
such Holder for all legal and other expenses reasonably incurred by him or her
in connection with any such claim or liability. The rights accruing to a
Holder under Section 5.1 of the Trust's Declaration of Trust shall not exclude
any other right to which such Holder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Holder in any appropriate situation even though not specifically
provided herein. Notwithstanding the indemnification procedure described
above, it is intended that each Holder shall remain jointly and severally
liable to the creditors as a legal matter.
In addition, no Trustee, officer, employee or agent of the Trust
shall be liable to the Trust, Holders, or to any Trustee, officer, employee, or
agent thereof for any action or failure to act (including, without limitation,
the failure to compel in any way any former or acting Trustee to redress any
breach of trust) except for his or her own bad faith, willful misfeasance,
gross negligence or reckless disregard of his or her duties.
12. This contract shall be governed by and construed in
accordance with the laws of the State of California.
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If the foregoing correctly sets forth the agreement between the
Trust and the Adviser, please so indicate by signing and returning to the Trust
the enclosed copy hereof.
Very truly yours,
MASTER INVESTMENT TRUST,
on behalf of the
Capital Appreciation Master Portfolio
By:_______________________________
Name:_____________________________
Title:____________________________
ACCEPTED as of the date
set forth above:
WELLS FARGO BANK, N.A.
By:______________________________
Name:____________________________
Title:___________________________
By:______________________________
Name:____________________________
Title:___________________________
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EX - 99.8(b)
AMENDMENT NO. 1 TO THE CUSTODY AGREEMENT
Master Investment Trust
This Amendment, dated as of February 2, 1995, is entered into
between MASTER INVESTMENT TRUST, an open- end investment company (the "Trust"),
on behalf of its Master Portfolios (collectively, the "Master Series") and
WELLS FARGO BANK, N.A. ("Wells Fargo").
WHEREAS, the Trust, on behalf of the Master Series, and Wells
Fargo have entered into a Custody Agreement dated as of the 4th day of May,
1994 (the "Custody Agreement"), under which the Trust appointed Wells Fargo to
act as custodian to the Master Series; and
WHEREAS, the Trust and Wells Fargo have agreed that it would
be beneficial for the Master Series if Wells Fargo could maintain each Master
Series' Securities from time to time with certain sub-custodians and
depositories in addition to the sub-custodians and depositories already
permitted by the Custody Agreement.
NOW THEREFORE, the parties hereto, in consideration of the
mutual promises contained herein and contained in the Custody Agreement and
intending to be legally bound, hereby agree as follows:
1. The following paragraph replaces Paragraph 5 of Article I
of the Custody Agreement:
5. "Depository" shall mean The Depository Trust Company ("DTC"),
Participants Trust Company ("PTC"), and any other clearing agency registered
with the Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934, its successor(s) and its nominee(s), provided the
Custodian has received a certified copy of a resolution of the Board of
Trustees specifically approving deposits in DTC, PTC or such other clearing
agency. The term "Depository" shall further mean and include any person
authorized to act as a depository pursuant to Section 17, Rule 17f-4 or Rule
17f-5 thereunder, under the Investment Company Act of 1940, its successor(s)
and its nominee(s), specifically identified in a certified copy of a resolution
of the Board of Trustees specifically approving deposits therein by the
Custodian.
Except to the extent amended by this Amendment, the Custody
Agreement shall remain unchanged and in full force and effect, and is hereby
ratified and confirmed in all respects as supplemented hereby.
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to the Custody Agreement to be executed as of the date above-written
by their respective representatives thereunto duly authorized.
MASTER INVESTMENT TRUST
By: /s/Richard H. Blank, Jr.
Name: Richard H. Blank, Jr.
Title: Chief Operating Officer
WELLS FARGO BANK, N.A.
By: /s/Vito P. Limotone
Name: Vito P. Limotone
Title: Senior Vice President
2
